DAILY MARKET REPORTS
- U.S. stocks rose on Thursday as upbeat earnings from Walmart and Cisco, and robust domestic economic data helped investors overlook worries about the ongoing trade war between the United States and China.
- Walmart rose 3.3% after it reported its best first-quarter same-store sales growth in nine years.
- The big box retailer also said prices for shoppers will rise due to higher tariffs on Chinese imports.
- Fellow Dow component Cisco gained 5.2% on an upbeat sales forecast and after the network gear maker said minimal sales exposure to China and changes to its supply chains have helped cushion the impact from trade dispute.
- The Commerce Department said U.S. homebuilding increased more than expected in April, suggesting declining mortgage rates were starting to provide some support to the struggling housing market.
- Another report showed the number of Americans seeking unemployment benefits fell more than expected last week, pointing to sustained labor market strength that should underpin the economy as growth slows.
- President Trump signed an executive order Wednesday allowing the U.S. to ban telecommunications network equipment, a move officials said targeted Chinese technology companies Huawei and ZTE.
- The Philadelphia Semiconductor index fell 1.61%, dragged down by losses in Huawei suppliers.
US FINANCIAL MARKET
Walmart Extends Streak of Sales Growth
- Walmart said its sales rose during the first quarter, adding to over four years of sales increases as the retail behemoth grabs market share from struggling competitors and grows online.
- Total revenue was up 1% at $123.9 billion but lower than analysts’ estimates of $125.03 billion dragged down by currency impact and lower international sales. Excluding currency, revenue was up 2.5% at $125.8 billion.
- Sales at Walmart’s U.S. stores open at least a year rose 3.4%, excluding fuel, in the quarter. Analysts estimated growth of 3.1%.
- Online sales rose 37%, slowing from the previous quarter’s 43% increase but stronger than online sales growth at most of its brick-and-mortar rivals. The company has forecast a 35% increase in online sales this year.
- Net income increased 80% to $3.8 billion, compared to $2.1 billion a year ago.
- Last year had a $1.8 billion charge while this year had a $837 million benefit.
Cisco’s Revenue Rises as Investors Weigh Possible Tariff Effects
- Cisco Systems reported better-than-expected quarterly earnings and gave an upbeat sales forecast for the current period, saying that minimal sales exposure to China and changes to its supply chains have helped cushion the blow of U.S.-China trade dispute.
- Total revenue rose about 4% to $12.96 billion, beating estimates of $12.89 billion.
- Net income rose to $3.04 billion in the third quarter, from $2.69 billion a year earlier.
- The company forecast fourth-quarter revenue growth of 4.5% to 6.5%, implying $13.33 billion at the mid-point, and adjusted profit of 80 cents to 82 cents per share. Analysts were expecting a profit of 81 cents per share and revenue of $13.29 billion.
WeWork parent loses $264 million in quarter, sales to corporate customers rise
- The We Company, parent of flexible workspace operator WeWork, said on Wednesday losses narrowed slightly in the first quarter from a year earlier to $264 million as revenue continues to double annually and its customer base surged.
- Revenues rose to $728.3 million in the first three months of the year and, based on the pace in March, the company estimated yearly revenue of $3.02 billion.
- Memberships in the first quarter climbed to 466,000 from 219,000 a year ago as enterprise clients representing companies with at least 1,000 employees rose to 175,000, or 40% of WeWork’s customer base.
- Adjusted operating earnings, or EBITDA, were a negative $220 million, roughly double the prior year’s negative $107 million.
- We Company’s net losses improved to $264 million from $274 million a year earlier.
PG&E Caused Fire That Killed 85, California Concludes
- California investigators found that PG&E’s equipment sparked the deadliest wildfire in state history, putting additional pressure on a company already facing billions of dollars in fire-related liability costs.
- The findings—which end months of speculation about the utility’s role in the massive wildfire—raise the likelihood that PG&E could face billions of dollars in liability costs related to its role in the November fire.
- PG&E said in a statement that while it had not had time to review the investigators’ report, the finding that transmission lines were the first point of ignition in the Camp Fire was consistent with its prior statements.
Goldman to Acquire Boutique Wealth Manager For $750 Million
- Goldman Sachs is buying boutique wealth-management firm United Capital Financial Advisers for $750 million in cash, striking its biggest deal in two decades as it accelerates a push away from Wall Street into lower-octane businesses.
- United, whose 220 financial advisers manage $25 billion in assets, will slot into Goldman’s existing wealth-management business, which skews toward billionaires.
- Goldman’s new chief executive, David Solomon, is pushing the firm to be more diversified and dependable, less a Wall Street powerhouse and more a financial supermarket modeled after JPMorgan Chase.
Tesla Investor T. Rowe Sells Most of Its Shares in Car Maker
- T. Rowe Price Associates sold roughly 81% of its shares of Tesla over the first three months of the year, marking a sharp retreat for a firm that for years had been one of the electric-car maker’s biggest investors.
- The fund manager held 1.7 million Tesla shares as of March 31, down from 8.9 million shares at the end of 2018, according to a Wednesday filing with the Securities and Exchange Commission.
Trade group to hold meeting of airlines affected by Boeing’s grounded 737 MAX
- A trade group is inviting airlines that use Boeing 737 MAX jets to meet next week to discuss challenges they face as a result of the grounding of the airline model involved in two fatal crashes, as they prepare to reintroduce the planes into operation.
- The International Air Transport Association (IATA) said it would convene a meeting in Montreal, Canada on May 23 and invite airlines that have the Boeing 737 MAX in their fleet or on order.
- May 23 is also the same day the U.S. FAA is planning a meeting in Fort Worth, Texas, with air regulators from around the world to update them on reviews of Boeing’s planned software update and new pilot training.
US ECONOMY & POLITICS
U.S. Targets Huawei as It Seeks to Revive China Trade Talks
- President Trump signed an executive order that would let the U.S. ban telecommunications gear from “foreign adversaries,” underscoring tensions with China even as the U.S. said it would likely resume trade talks soon in Beijing.
- The developments came amid other actions from the Trump administration on Wednesday possibly suggesting it was seeking to push aside other trade issues and zero in on the disputes with Beijing that have unsettled financial markets.
- Along with the executive order, the Commerce Department said it would add China’s Huawei to a list of entities engaged in activities that are contrary to U.S. interests.
- That could restrict sales or transfers of American technology to Huawei by requiring a government license—a potential body blow to the company, which relies on some U.S. tech companies for chips.
U.S. Jobless Claims Fell Last Week
- Initial jobless claims, a proxy for layoffs across the U.S., were a seasonally adjusted 212,000 in the week ended May 11, the Labor Department said Thursday.
- Economists surveyed by The Wall Street Journal expected 220,000 new claims last week.
- The report also showed the number of claims workers made for longer than a week decreased by 28,000 to 1,660,000.
Home Building in the U.S. Rose in April
- So-called housing starts rose 5.7% in April from the prior month to a seasonally adjusted annual rate of 1.235 million.
- Residential building permits, which can signal how much construction is in the pipeline, climbed 0.6% from March to an annual pace of 1.296 million in April, the first monthly increase since December.
- Economists had expected a 5.4% gain for starts and a 1.7% increase for permits last month.
- Starts were down 7.2% in the first four months of 2019 compared with the same period a year earlier.
New York City Mayor Bill de Blasio Announces Candidacy for President
- New York City Mayor Bill de Blasio launched a long-shot run for the Democratic presidential nomination in a campaign video released Thursday, touting his progressive beliefs and experience running the nation’s largest city.
- Mr. de Blasio becomes the 23rd person to join the race for the Democratic nomination in the 2020 election.
- A recent Monmouth Iowa poll found de Blasio had the second-highest unfavourability rating among national Democratic voters.
Trump to Launch Fresh Immigration Overhaul Bid
- President Trump will make a fresh bid Thursday to remake U.S. immigration policy, proposing an expansion of skills-based visas offset by new restrictions on family members’ immigration—a proposal likely to ignite a dispute over issues that divide political parties and the country.
- Mr. Trump is set to unveil an immigration plan devised in part by son-in-law and senior adviser Jared Kushner that incorporates several ideas that have been gaining currency in Republican circles.
- Chief among them: a bill crafted by conservative Republicans that would establish a visa system prioritizing immigrants based on criteria such as education, English-language ability and high-paying job offers.
- The proposal also would eliminate the diversity-visa lottery long derided by Mr. Trump as well as immigration routes for family members such as siblings. Moreover, it would limit the number of refugees offered permanent residency to 50,000 a year.
EUROPE & WORLD
China has cut its holdings of US debt to the lowest level in two years amid trade tensions
- The largest foreign owner of U.S. debt reduced the level by just shy of $20.5 billion, a slight decrease that brought the total holdings down to $1.12 trillion.
- China’s share of total U.S. debt compared to other global government declined to 17.3%, the lowest since June 2006.
- Foreign government ownership of U.S. debt hit a fresh record of $6.47 trillion, up 4% from a year ago, as the government’s total debt continues to swell and now has topped $22 trillion.
China slams U.S. blacklisting of Huawei as trade tensions rise
- China on Thursday slammed a decision by the U.S. government to put telecom equipment giant Huawei on a blacklist and said it will take steps to protect its companies, in a further test of ties as the economic heavyweights clash over trade.
- China is strongly against other countries imposing unilateral sanctions on Chinese entities, a Commerce Ministry spokesman said, stressing that the United States should avoid further damaging Sino-U.S. trade relations.
- The crackdown on Huawei came as Treasury Secretary Steven Mnuchin said he would visit China soon for more trade talks.
Huawei’s $105 billion business at stake after U.S. broadside
- The latest U.S. broadside against Huawei that puts the Chinese firm on an exports blacklist threatens to rattle the global tech supply chain, linked closely to the $105 billion business of the world’s top supplier of telecoms network equipment.
- Out of $70 billion Huawei spent for component procurement in 2018, some $11 billion went to U.S. firms including Qualcomm, Intel and Micron Technology, and they could see that revenue disappear.
- “This is going to be very messy,” a China-based source at a U.S. tech company said.
- It will be tough for Huawei too, the person said, noting none of its U.S. suppliers “can be replaced by Chinese ones, not within a few years, at least. By then, they are already dead”.
Apple supplier Japan Display cannot promise return to profit, bailout worries stay
- Cash-strapped Japan Display warned it cannot guarantee a return to profit this year as demand for smartphone screens stays weak, and turned in yet another quarterly loss, casting doubt over its proposed bailout deal with a Chinese-Taiwanese group.
- Japan Display’s net loss was 98.6 billion yen, versus a 147 billion yen loss a year earlier, its ninth consecutive quarterly loss.
- Japan Display’s results will be closely watched by its Chinese-Taiwanese suitors, who delayed an up to 80 billion yen investment this week to reassess the company’s prospects.
TODAY in HISTORY
- Marie Antoinette married the future King Louis XVI of France. (1770)
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