DAILY MARKET REPORTS
- U.S. stocks pared some earlier losses in premarket trading after the Trump administration said Friday it would put off for 180 days a final decision on whether to impose broad tariffs on automobile and auto-part imports.
- On Thursday, China’s Commerce Ministry contradicted comments from Treasury Secretary Steven Mnuchin that U.S. negotiators will hold further talks in Beijing at “some point in the near future.”
- A Chinese spokesman said China “doesn’t have a grasp on the U.S. side’s plans to come to China for negotiations.” He then said the U.S.’s escalation of tariffs had “severely hampered” talks.
- Investors also worried that Beijing could target U.S. tech companies in China after President Trump signed an executive order banning Chinese telecommunications firms.
- In Friday’s action, shares of Deere fell 3.7% after the company lowered its guidance for profit and equipment sales for the current fiscal year as its customers continue to face headwinds in the agriculture industry.
US FINANCIAL MARKET
Deere blames escalating trade war for worsening outlook
- Deere on Friday missed quarterly profit estimates for the fifth-straight quarter and cut its full-year outlook, as an escalating U.S.-China trade war threatens to further hit farm incomes and demand for Deere’s equipment.
- Net sales rose 5.4% to $10.27 billion, and were above the Wall Street’s estimate of $10.19 billion.
- Net income fell 6.1% to $1.14 billion in the second quarter, missing analysts’ per share profit estimates.
- Deere, which gets nearly 60% of its sales from the United States and Canada, said it now expects full year equipment sales to rise by 5%, compared with a 7% rise, it had previously expected.
- The company lowered its fiscal 2019 profit outlook to $3.3 billion, from its prior forecast of $3.6 billion.
Pinterest shares plummet on disappointing 2019 revenue forecast
- Pinterest on Thursday forecast 2019 revenue broadly in line with Wall Street targets, disappointing investors who had expected more from the freshly public, high flying stock, and sending its shares down 16%.
- Total revenue rose about 54% to $201.9 million, beating estimates of $200.6 million.
- The company added 291 million monthly active users in the first quarter, above estimates of 289.3 million, while ARPU globally rose 26% to 73 cents.
- Net loss narrowed to $41.4 million in the quarter from $52.7 million a year earlier.
- The company expects full-year revenue between $1.055 billion and $1.08 billion, the midpoint of which is slightly above analysts’ estimate of $1.06 billion, driven by average revenue per user (ARPU) in the United States.
Nvidia revenue forecast beats as demand for gaming chip rises
- Nvidia forecast second-quarter revenue above Wall Street estimates on Thursday, as it expects sales of its graphics chip to benefit from a recovery in the gaming market.
- Total revenue fell to $2.22 billion, but was still above analysts’ estimates of $2.20 billion.
- Revenue from its gaming chip business rose 11% to $1.05 billion in the fourth quarter, beating estimates of $933.5 million.
- However, revenue from its data center business fell to $634 billion, missing analysts’ estimate of $663.7 million.
- Nvidia’s net income fell to $394 million in the first quarter, from $1.24 billion a year earlier.
- The company forecast revenue of $2.55 billion, plus or minus 2%, for the current quarter, above expectations of $2.53 billion.
Chip gear maker Applied Materials results beat estimates, shares rise
- Applied Materials forecast third-quarter profit and revenue above estimates and reported better-than-expected quarterly results on Thursday, allaying investor concerns about slowing semiconductor demand.
- Net sales fell 22.7% to $3.54 billion in the second quarter, but were above estimates of $3.48 billion.
- The company’s adjusted net income fell to $660 million in the second quarter, from $1.24 billion a year earlier.
- Applied Materials forecast third-quarter revenue at about $3.525 billion, above estimates of $3.51 billion.
- It forecast earnings per share of 67 cents to 75 cents, the midpoint of which is above analysts’ estimate of 69 cents.
Microsoft, Sony to Partner on Cloud Technology for Gaming Services
- Microsoft and Sony are teaming up to work on cloud and game-streaming technologies, an unusual partnership between two longtime videogame rivals as they face new threats from some of tech’s biggest names.
- Through the partnership, Sony is considering using Microsoft’s Azure cloud service for streaming its game content. And also calls for potential collaboration between the two involving Microsoft’s artificial intelligence and Sony’s image-sensor chips.
- Google in March made its biggest foray into the industry by introducing what has long been considered the Holy Grail of gaming: a streaming internet service called Stadia where anyone, anywhere can start playing high-end games, with no pricey hardware required.
Tesla’s Autopilot Was Engaged in Fatal Florida Crash, Investigators Find
- Tesla’s driver-assistance feature was active and the driver’s hands weren’t detected on the wheel during a fatal crash in March, a finding that could amp up scrutiny of the Autopilot system as the company pushes for more automation in its vehicles.
- Data taken from a Model 3 compact sedan that crashed in Florida showed the driver hadn’t touched the steering wheel in the seconds leading up to the incident and made no effort to avoid the collision, according to the NTSB’s preliminary investigation.
- In the latest crash, the Model 3 on March 1 was headed southbound on a divided highway in Delray Beach, Fla., when a tractor trailer pulled across its lanes in an attempt to make a turn.
Hewlett Packard Enterprise to Buy Supercomputer Maker Cray
- Hewlett Packard Enterprise on Friday said it agreed to buy supercomputer maker Cray for $35 a share in cash in a deal valued at about $1.3 billion, net of cash.
- HPE said it expects to complete the acquisition by the first quarter of its 2020 fiscal year.
- HPE said it expects the acquisition will add to adjusted operating profit and earnings in the first full year.
- The company said integration costs associated with the deal will be absorbed within its fiscal 2020 free cash flow outlook, which remains unchanged at $1.9 billion to $2.1 billion.
Amazon squares up to Uber with backing for UK food app Deliveroo
- Amazon has taken a stake in British online food delivery company Deliveroo, leading a $575 million fundraising to pit itself against Uber Eats in the global race to dominate the market for takeaway meals.
- The online giants are betting the takeaway market will expand as it branches out from fast, unhealthy meals to nutritious dishes, and that they have the scale to beat smaller rivals which are still largely sacrificing profits to grow.
- Headquartered in London, Deliveroo uses 60,000 riders dressed in black and teal jackets to deliver meals from more than 80,000 restaurants and takeaway outlets in 14 countries including France, Germany, Hong Kong, Singapore and Kuwait.
- Deliveroo did not give a figure for Amazon’s contribution. It has now raised $1.53 billion to date, helped by existing investors T. Rowe Price, Fidelity Management and Research Co, and Greenoaks.
Boeing completes 737 MAX software update, working on pilot training plan
- Boeing said on Thursday it had completed a software update for its 737 MAX jets, which have been grounded worldwide since March after they were involved in two fatal crashes.
- The planemaker said it was in the process of submitting a plan on pilot training to the U.S. Federal Aviation Administration (FAA) and would work with the regulator to schedule its certification test flight.
- It is unclear when the 737 MAX aircraft will return to service, but U.S. airlines have said they hope the jets will fly this summer.
US ECONOMY & POLITICS
White House Puts Off Final Decision on Auto Tariffs for 180 Days
- The Trump administration said Friday it would put off for 180 days a final decision on whether to impose broad tariffs on automobile and auto-part imports.
- Mr. Trump was facing a deadline Saturday on whether to impose the tariffs following a report from the Commerce Department about the national-security risks of vehicle imports.
- The decision comes after the Commerce Department report concluded that U.S. auto research and development and manufacturing are “vital to national security,” raising the potential for tariffs on imports from some of America’s closest allies.
- The White House said Friday morning that negotiations over imported automobiles and certain automobile parts would continue with the EU, Japan and “any other country the Trade Representative deems appropriate.”
U.S. Consumer Sentiment Jumps to 15-Year High
- U.S. consumer sentiment jumped to the strongest level since 2004 on a surge in economic expectations following an unexpectedly strong report on first quarter growth.
- The University of Michigan’s preliminary sentiment index rose to 102.4 in May, topping all estimates in a Bloomberg survey of economists who had projected the gauge would hold at 97.2.
- All of the gain was in the expectations index, which also climbed to a 15-year high, while the gauge of current conditions ticked up, the report Friday showed.
U.S. Farmers, Wanting a Trade Deal, Brace for Aid Package They Fear Will Fall Short
- Stalled trade talks between Beijing and Washington are exacerbating a slump in the U.S. Farm Belt, and many farmers don’t believe an aid package being assembled by the Trump administration will be enough to compensate for the economic damage.
- The U.S. Department of Agriculture, in the absence of a deal, is cobbling together a farm relief program that will total somewhere between $15 billion and $20 billion, according to Agriculture Secretary Sonny Perdue.
- This is the second such aid package since the trade fight began.
- Many farmers doubt the scale of that aid package is anywhere near sufficient to make up for a trade spat that has shut them out of a lucrative Chinese market of 1.4 billion consumers.
Trump’s Border Wall Faces First Court Challenge in California
- President Trump’s unilateral bid to pay for construction of a southern border wall faces its first court test Friday, in a challenge brought by Democratic-led states, environmental groups and border communities.
- U.S. District Judge Haywood Gilliam in Oakland, Calif., an Obama appointee, will consider requests by the challengers for an injunction that would prohibit the president from spending money on the wall without congressional permission.
- Friday’s hearing, the first of several slated around the country, centers on lawsuits filed by California and 19 other states, the Sierra Club and a group representing southern border communities.
EUROPE & WORLD
Baidu swings to net loss for first time since listing, shares fall
- Chinese search engine operator Baidu booked its first quarterly loss since at listing in 2005 and forecast quarterly revenue below market estimates, saying a “challenging marketing environment” is sapping income from advertisers.
- Baidu added that its revenue came in at RMB24.1 billion ($3.59 billion), which marked a 15% increase compared to the year-ago quarter, topping what Wall Street called for.
- Revenue from online marketing services, a key contributor to overall sales, rose nearly 3%, falling slightly short of estimates.
- Baidu reported a net loss of 327 million yuan ($47.51 million), versus profit of 6.69 billion yuan in the same period a year prior. The loss was its first since going public in 2005.
- Baidu forecast second-quarter revenue of 25.1 billion yuan to 26.6 billion yuan.
- That compared with the 29.30 billion yuan average analyst estimate.
IQiyi grows top line but widens losses
- iQiyi reported mixed results that included revenue that surged considerably thanks to the company’s subscriber base gaining more than 50%, yet the three-month period saw the company tally in a loss that was much wider than a year ago.
- The China-based online video platform said that for its first quarter of the current fiscal year, it posted revenue of RMB 7 billion marking a 43% increase year-over-year and in line with estimates.
- iQiyi’s subscriber base gained roughly 58% when compared to the year-ago quarter to about 96.8 million subscribers, out of which roughly 98.6% were paying members.
- The company’s results included a net loss of RMB 1.8 billion ($270.3 million), which is several times wider than its year-ago loss of RMB 395.7 million.
- The wider loss was affected by the higher costs associated with producing original content weighed on the bottom line.
Hopes of Brexit Breakthrough Dashed as Bipartisan Talks Collapse
- The U.K.’s main opposition Labour Party on Friday pulled the plug on Brexit talks with the government, dashing hopes for a formal bipartisan solution to break the logjam in Parliament over the terms of Britain’s withdrawal from the European Union.
- The decision means the country’s path out of the EU remains unclear almost three years after voters chose to exit from the bloc in a 2016 referendum.
- In a letter to Prime Minister Theresa May, Labour leader Jeremy Corbyn said talks about finding a compromise plan that could win majority support from lawmakers on both sides of the political aisle “have now gone as far as they can.”
- He added the party has also grown increasingly concerned that any deal reached risks being torn up by Mrs. May’s successor as Conservative Party leader and prime minister.
Intelligence Suggests U.S., Iran Misread Each Other, Stoking Tensions
- Intelligence collected by the U.S. government shows Iran’s leaders believe the U.S. planned to attack them, prompting preparation by Tehran for possible counterstrikes, according to one interpretation of the information.
- That view of the intelligence could explain why Iranian forces and their allies took action that was seen as threatening to U.S. forces in Iraq and elsewhere, prompting a U.S. military buildup in the region and a drawdown of U.S. diplomats in Iraq.
- Meanwhile, administration officials said President Trump told aides including his acting defense chief that he didn’t want a military conflict with Iran, a development indicating tensions in the U.S.-Iran standoff may be easing.
Samsung to spend more than $14 billion in second phase of China chip plant: Xinhua
- South Korean tech giant Samsung will spend more than $14 billion in the second phase of investment in its memory chip plant in Xian, China, China’s official Xinhua news agency reported on Friday citing a Samsung executive.
- Xinhua, citing Samsung Vice President Ji Hyun-ki, said the second phase of investment in the Xian plant will be completed in July this year and start production in the first quarter of 2020.
After Huawei blow, China says U.S. must show sincerity for talks
- The United States must show sincerity if it is to hold meaningful trade talks, China said on Friday, after U.S. President Donald Trump dramatically raised the stakes with a potentially devastating blow to Chinese tech giant Huawei.
- China has yet to say whether or how it will retaliate against the latest escalation in trade tension, although state media has taken an increasingly strident tone, with the ruling Communist Party’s People’s Daily publishing a front-page commentary that evoked the patriotic spirit of past wars.
- China’s currency slid to its weakest in almost five months, although losses were capped after sources told Reuters that the central bank would ensure the yuan did not weaken past the key 7-per-dollar level in the immediate term.
BP faces investor push to beef up fight against climate change
- BP will face pressure at a meeting next week to set tougher targets to combat climate change, the latest signal from investors that they want the oil and gas industry to do more to clean up its act.
- After BP’s 2018 carbon emissions rose to their highest in six years, the major is being lobbied by activists and an increasing number of shareholders to ensure its operations are in line with goals set by the Paris climate deal to curb global warming.
- BP has already backed a resolution being put to investors on Tuesday for it to be more transparent about its emissions, link executive pay to reducing emissions from BP’s operations and show how future investments meet Paris goals.
- The motion, proposed by BP and a group of 58 shareholders holding 10% of its shares, known as Climate Action 100+, is expected to pass at BP’s annual meeting in Aberdeen.
TODAY in HISTORY
- The New York Stock Exchange was established when a group of 24 brokers and merchants met by a tree on what is now Wall Street and signed the Buttonwood Agreement. (1792)
- The Supreme Court ruled unanimously against segregation in schools in Brown v. Board of Education.(1954)
- Televised Watergate hearings opened, headed by North Carolina senator Sam Ervin. (1973)
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