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  • U.S. stocks rose in choppy trading on Thursday, as strong July retail sales data and Walmart’s upbeat results eased some fears about the economy slipping into recession, but a slump in shares of network gear maker Cisco limited gains.
  • The Commerce Department said retail sales rose 0.7% in July, well above expectations of a 0.3% rise, as consumers bought a range of goods even as they cut back on motor vehicle purchases.
  • Cisco dropped 6.2% and was the biggest drag on all three major indexes, after the Dow component blamed the bruising U.S.-China trade war for poor quarterly forecasts.
  • Walmart shares rose 5.3% after the retailer reported second-quarter U.S. comparable sales that beat estimates and boosted its earnings forecast for the year.
  • Industrial stocks were the biggest drag on Wall Street, pressured by a 7.8% fall in shares of General Electric after a whistleblower in the Bernard Madoff Ponzi scheme case alleged that company financial filings masked the depths of its problems.


Walmart Continues Run of Sales Growth, Raises Forecasts

  • Walmart said sales rose in the second quarter and it raised its profit forecasts for the year, extending the retail giant’s multiyear streak of growth as it takes market share from struggling competitors and expands online.
  • Total revenue was up 1.8% to $130.4 billion, beating analysts’ estimates for $130.1 billion.
  • Sales at U.S. stores open at least a year rose 2.8%, excluding fuel, in the quarter ended July 31.
  • Analysts estimated growth of 2.07%, according to IBES data from Refinitiv.
  • Online sales surged 37%, in line with the previous quarter’s increase and higher than the company’s expectation of 35%.
  • Net income rose to $3.61 billion compared with a net loss of $861 million a year earlier.
  • Walmart now expects U.S. comparable sales to rise at the upper end of a 2.5% to 3% range for the full year, an improvement from an earlier prediction of sales falling somewhere in that range.
  • For fiscal 2020, it’s now calling for adjusted earnings per share to range between a slight decrease to a slight increase, compared with a prior forecast that was calling for a low-single-digit percentage decline.

Tariffs, China sales weigh on Cisco outlook, shares slide

  • Cisco Systems said on Wednesday that impending U.S. tariffs and Chinese customers shunning the networking company’s gear were weighing on its business, and it forecast sales and profit below Wall Street targets.
  • Total revenue rose 4.5% to $13.43 billion and beat the average analyst estimate of $13.39 billion.
  • Cisco said sales in China fell 25% and that the country’s state-owned enterprises were no longer taking bids from Cisco.
  • Net income fell to $2.21 billion in the fourth quarter, above estimates.
  • Cisco estimated first-quarter revenue in a range of $13.07 billion to $13.33 billion, while analysts expect $13.40 billion.
  • It estimated adjusted earnings of 80 cents to 82 cents per share in the first quarter of 2020, below analysts’ forecast of 83 cents.

J.C. Penney shares surge as loss halves, sales still falling

  • J.C. Penney posted a smaller-than-expected quarterly loss on Thursday, as the struggling department store operator’s efforts to cut costs and shutter unprofitable businesses paid off, sending its shares up 12%.
  • Revenue for the quarter fell 7.4% to $2.62 billion from $2.8 billion a year earlier, lower than analyst expectations of $2.69 billion.
  • Sales at Penney stores open for at least a year were down 9%, worse than an expected drop of 5.2% percent.
  • The department store chain reported a net loss of $48 million, narrower than its loss of $101 million a year earlier.
  • Penney forecast comparable sales drop in 2019 between 7% and 8%, worse than current analysts’ expectations.

Corteva forecasts higher revenue growth for 2020 and beyond

  • Corteva raised its sales growth forecast for 2020 and beyond to a range of 4% to 6%, citing expectations of higher pesticide sales.
  • The company, which had earlier forecast overall revenue growth of 3% to 5%, also raised its revenue growth forecast for its crop protection business to a range of 5% to 7% from a range of 3.5% to 6.5%.
  • Corteva also provided full-year operating earnings forecast of between $1.06 and $1.31 per share, while affirming its net sales and adjusted core earnings forecast for 2019.

Tapestry shares tumble as Kate Spade sales weaken

  • Tapestry forecast a surprise fall in first-quarter revenue and profit on Thursday, as the high-end fashion house struggles to turn around its Kate Spade business, sending its shares down 10% to their lowest in a decade.
  • Net sales rose to $1.51 billion from $1.48 billion, but fell short of estimate of $1.53 billion.
  • Global same-store sales at Kate Spade fell 6% in the fourth quarter, while analysts had expected a 1.4% rise.
  • Tapestry’s net income fell to $148.9 million in the fourth quarter, from $211.7 million a year earlier when the company recorded a one-time benefit from the U.S. tax reform.
  • Tapestry said it expects first-quarter revenue and profit for fiscal 2020 to be lower than last year. Analysts were expecting a 10.7% rise in earnings per share and a 4.2% increase in revenue.

GE Is New Target of Madoff Whistleblower

  • An accounting expert who raised red flags about Bernie Madoff ’s Ponzi scheme has a new target: General Electric.
  • In a research report posted online Thursday, Harry Markopolos alleges the struggling conglomerate has masked the depths of its problems, resulting in inaccurate and fraudulent financial filings with regulators.
  • Mr. Markopolos said, in an interview ahead of the report’s release, his group found GE’s insurance unit will need to bolster its reserves by $18.5 billion in cash and faulted the way the company is accounting for its oil-and-gas business.
  • All told, he said, the accounting problems amount to $38 billion, or 40% of the conglomerate’s market value.
  • The report, which numbers more than 170 pages and was reviewed by The Wall Street Journal, is a mixture of detailed financial analysis and sweeping claims.

Earnings Outlook for S&P 500 Companies Looks Bleak

  • Investors counting on a corporate earnings rebound in the second half of the year are risking disappointment.
  • Wall Street analysts have cut their third-quarter profit estimates in recent weeks, painting a bleak picture for investors already grappling with a simmering trade war, pockets of economic weakness and ominous signs from the bond market.
  • Analysts’ revisions show the S&P 500 faces a 3.15% contraction in third-quarter earnings from a year ago, according to FactSet.
  • And for the fourth quarter, the S&P 500 is now on track to increase profits by less than 4%, down from the nearly 10% growth rate analysts expected at the beginning of the year.
  • At best, earnings across the companies in the S&P 500 will grow 1.5% this year, FactSet projects, far short of estimates for growth of more than 6% that analysts initially forecast in January.
  • Worse, a few analysts predict earnings could end up contracting for 2019 as a whole.

Boeing delays delivery of ultra-long-range version of 777X

  • Boeing has pushed back the entry into service of an ultra-long-range version of its forthcoming 777X widebody, the U.S. planemaker said on Wednesday, as it grapples with fallout from the 737 MAX crisis and engine issues with the 777X.
  • The fresh delay comes as the grounding of Boeing’s money-spinning 737 MAX single-aisle entered a sixth month in August, and as the planemaker faces engine-related delays on the 777X widebody that have pushed the first flight of the 777-9 into 2020.
  • The delay in the slower-selling, longer-range 777-8 will hamper Boeing’s ability to provide a plane in line with the schedule for Qantas Airways’s plan for 21-hour non-stop Sydney-London flights.
  • The Australian airline had hoped for first deliveries of the planes in 2022 and the launch of the world’s longest commercial flight in 2023.

UPS Ventures Invests in Self-Driving Trucking Startup

  • United Parcel Service’s venture-capital division, UPS Ventures, has acquired a minority stake in self-driving trucking startup TuSimple Inc., signaling the delivery company’s continued push into autonomous driving.
  • In addition, UPS will expand a partnership it began with TuSimple earlier in March for the startup to carry truckloads of goods between Phoenix and Tucson, Ariz., said UPS Ventures Managing Partner Todd Lewis.
  • Mr. Lewis said the collaboration with TuSimple is intended to help UPS figure out how it could implement fully autonomous trucks in its freight network.

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U.S. Retail Sales Increased in July

  • Retail sales, a measure of purchases at stores climbed a seasonally adjusted 0.7% in July from a month earlier, well above economists’ expectations, the Commerce Department said Thursday.
  • A 2.8% increase in sales at online retailers and gains at electronic stores, restaurants and gasoline stations fueled the increase.
  • Excluding autos, retail sales were up a robust 1.0% in July.
  • Compared to July last year, retail sales increased 3.4%.
  • Excluding automobiles, gasoline, building materials and food services, retail sales jumped 1.0% last month after advancing by an unrevised 0.7% in June.

Factory Output Dropped 0.2% in July

  • Industrial production, a measure of factory, mining and utility output, declined a seasonally adjusted 0.2% in July from the prior month, the Federal Reserve said Thursday. Economists had expected a 0.1% increase last month.
  • June industrial production was revised to an increase of 0.2% from an earlier flat reading.
  • Capacity utilization, which reflects how much industries are producing compared with what they could potentially produce, dropped by 0.3 percentage point to 77.5% in July. Economists had expected 77.8%.

Trump Ties Trade Deal to China Action in Hong Kong, Suggests Meeting with Xi

  • President Trump suggested a “personal meeting” with China’s President Xi Jinping to discuss the escalating crisis in Hong Kong and warned China it must respond “humanely” to the protests if it wants to strike a trade deal.
  • Mr. Trump’s statement via Twitter marked a shift in tone in his public statements regarding the situation in Hong Kong and for the first time linked the administration’s fragile trade talks with Beijing to the protests.
  • The Wednesday evening tweets came amid growing concern within the administration that China would respond with military force to the antigovernment protests that have shut down Hong Kong’s major international airport for the past two days.
  • Fears over a potentially violent crackdown have prompted concern among lawmakers from both parties, some of whom have been unequivocal in their support for the protesters.

U.S. Arranges Secret Talks Between Israel, U.A.E. Over Iran

  • Israel and the United Arab Emirates held secret meetings arranged by the U.S. in recent months to share information and coordinate efforts to counter what they see as the increasing threat posed by Iran, according to U.S. officials.
  • The meetings were convened the State Department’s top official for Iran, and are the latest sign of a steady thaw between Israel and Gulf Arab nations, largely due to their shared antipathy toward Tehran and its attempts to spread its regional influence.
  • A first meeting took place this spring and a second was held more recently, a U.S. official said. The exact dates and locations of the unpublicized meetings couldn’t be learned.

Hickenlooper Plans to End Democratic Presidential Campaign

  • Former Colorado Gov. John Hickenlooper plans to drop out of the 2020 presidential race on Thursday, as he considers launching a Senate campaign in his home state, according to a person familiar with his plans.
  • Mr. Hickenlooper, a one-time brewpub owner, governor and Denver mayor, has struggled to gain traction throughout his 2020 campaign and is unlikely to qualify for the September primary debates.
  • But if he decides to seek the seat of Republican Sen. Cory Gardner, Democrats could gain a formidable candidate in a battleground state central to the party’s quest to regain a Senate majority in 2021.
  • The 67-year-old Mr. Hickenlooper has campaigned as a centrist Democrat, urging the party to avoid embracing the socialism label and an expansion of government-centered policies that might push more moderate voters to President Trump.

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China Renews Vow to Retaliate Against Planned U.S. Tariffs

  • China renewed its vow to retaliate against planned U.S. tariffs slated to take effect in the coming weeks, though it didn’t specify how it would hit back.
  • The terse message, issued Thursday by the State Council’s Customs Tariff Commission, came in spite of President Trump’s surprise statement Tuesday that he would postpone imposition of some of the planned tariffs on $300 billion of Chinese goods.
  • The U.S. proposal on Aug. 1 to levy new tariffs “severely violated” a consensus reached between Mr. Trump and Xi Jinping during their summit meetings this past year in Argentina and Japan, an unnamed official was quoted by the commission.
  • The threatened new tariffs by the U.S. “deviated from the right track of resolving differences through dialogue,” the Chinese official said. “China would have no choice but to take necessary countermeasures.”

Alibaba results beat estimates on cloud, e-commerce growth

  • China’s Alibaba reported better-than-expected quarterly revenue and profit on Thursday, aided by growth in its e-commerce and cloud computing businesses.
  • Alibaba’s revenue rose 42% to 114.92 billion yuan ($16.3 billion) in its first quarter from 80.92 billion yuan, a year earlier.
  • Analysts had expected revenue of 111.73 billion yuan.
  • Revenues at its cloud computing business rose 66% to 7.79 billion yuan, while those at its core commerce business rose 44% to 99.54 billion yuan.
  • Alibaba’s quarterly net profit more than doubled to 21.2 billion yuan, largely because of an exceptional charge related to compensation that increased expenses in the year-earlier quarter.

Lenovo warns of price hikes to absorb U.S. tariffs, shares slide

  • China’s Lenovo, the world’s largest PC maker, warned it will have to raise product prices if U.S. tariffs increase, sending its shares tumbling 6.5% to two-month lows.
  • Revenue rose to $12.51 billion, in line with expectations.
  • Revenue from personal computer and smart devices group grew 12%, while its mobile business group recorded a 9% fall.
  • Its PC and smart devices business generates more than three quarters of the group’s total revenue, which rose 5%.
  • Net profit rose to $162 million in the quarter, compared with an average estimate of $154 million.

Maersk warns trade war could hurt container business

  • A.P. Moller-Maersk warned a trade war between the United States and China could curb container traffic this year after the world’s largest container shipping company beat second-quarter profit expectations.
  • Earnings before interest, tax, depreciation and amortization (EBITDA) grew 17% to $1.36 billion, topping the $1.24 billion forecast by analysts.
  • Maersk benefited from higher container freight rates, larger volumes and lower costs and said it still expects EBITDA for the full year to total $5 billion. Analysts on average expect EBITDA of $5.4 billion for 2019.
  • Maersk said the escalating trade dispute between Washington and Beijing could limit growth in global container traffic to the lower end of its 1% to 3% guidance range this year, after growth of around 2% between April and June.

WTO quarterly trade growth indicator drops from May

  • The World Trade Organization (WTO) said on Thursday that its latest economic barometer showed that the growth in merchandise trade was likely to weaken further in the third quarter.
  • Its quarterly trade growth indicator showed growth in global goods trade was likely to weaken, with a reading of 95.7.
  • In its previous quarterly report in May, the WTO said that growth was likely to remain weak, with a reading of 96.3.
  • A score of below 100 in the indicator, a composite measure of seven drivers of trade, signals below-trend growth.

Samsung Tests How 5G Can Improve Chip-Making

  • Samsung Electronics is testing how fifth-generation wireless networks can speed up connections at its chip-making factory in Austin, Texas, a pilot that aims to prove 5G is more than a buzzword.
  • The company has teamed up with AT&T’s communications division to develop a customized 5G network to experiment with how it could be used in chip manufacturing.
  • Chip-making uses a lot of water and toxic chemicals; 5G could help chip factories cut waste and alert workers to safety hazards.
  • Sensors on pumps and valves could also stream data about water usage over 5G networks so the facility can improve the efficiency of its water usage in real time and reduce waste.

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  • The Indian Independence Bill created the two independent states of India and Pakistan. (1947)
  • A car bomb in Omagh, Northern Ireland, killed 29 people. It was the deadliest act of violence in more than 30 years of “Troubles.” (1998)

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