DAILY MARKET REPORTS
- A rise in technology shares lifted Wall Street on Thursday, as China sounded hopeful of a resolution to the long-standing trade dispute with the United States, easing investor fears of the risk of a recession.
- China’s commerce ministry said both sides are discussing the next round of talks scheduled in September and hoped U.S. officials could cancel the planned additional tariffs to avoid an escalation, boosting sentiment and driving global stocks higher.
- U.S. President Donald Trump said in a radio interview that trade talks were scheduled for Thursday, “at a different level”.
- A number of companies, including Best Buy and Abercrombie & Fitch, that reported results earlier in the day warned of the impact from tariffs on their sales.
- U.S. GDP rose at an annual rate of 2% in the second quarter, compared with the previous estimate of a 2.1% rise.
- The government said consumers spent more than previously estimated in the April to June period, but the housing sector, exports and inventory investment were more of a drag than initially thought.
- Meanwhile, U.S. jobless claims rose slightly to 215,000 last week, though the figure remains at a historically low level.
US FINANCIAL MARKET
Best Buy’s annual sales outlook misses estimates as tariffs loom
- Best Buy forecast annual same-store sales below analysts’ estimates on Thursday, citing new U.S. tariffs set to be imposed on Chinese imports, such as phones, video game consoles and other electronics.
- Revenue rose to $9.54 billion from $9.38 billion, a touch below expectations of $9.56 billion.
- Best Buy’s overall same-store sales rose 1.6% in the second quarter, missing analysts’ estimates of a 2.15% increase.
- Best Buy reported net income of $238 million compared with $244 million a year earlier.
- Best Buy raised its earnings forecast for the year to $5.60 to $5.75 per share from a previous estimate $5.45 to $5.60 per share.
- The company narrowed its full-year same-store sales forecast to a rise of 0.7% to 1.7%, from 0.5% to 2.5%. Analysts had expected a 2% increase.
Box beats estimates but leaves profit outlook unchanged, shares drop
- Box, a cloud content management platform provider, reported better-than-expected quarterly revenue on Wednesday, but shares fell 8% in extended trading as investors were disappointed after the company reiterated its full-year earnings outlook.
- Second-quarter revenue rose 16.4% to $172.55 million, above analysts’ expectation of $169.53 million.
- Box’s customer retention rate fell to 106% in the second quarter, from 107% in the first quarter.
- Net loss narrowed to $36.2 million in the quarter, from $38.1 million a year earlier.
- The company reaffirmed its full-year earnings per share outlook in the range of $0.00 to $0.02, while marginally raising the lower end of its sales forecast by $2 million to $690 million, but keeping the top end unchanged at $692 million.
Abercrombie & Fitch cuts full-year sales forecast on tariff impact
- Abercrombie & Fitch cut its full-year sales forecast on Thursday after missing Wall Street estimates in the second quarter, as the apparel maker grapples with the impact of increased U.S. tariffs on Chinese goods.
- Net sales slipped to $841.1 million from $842.4 million, below Wall Street expectations of $852.5 million for the second quarter.
- Same store sales were flat in the quarter, compared to 3% growth in the same period a year ago.
- Abercrombie & Fitch posted a loss of $31.1 million in the quarter, compared to a loss of $3.8 million a year ago, as the company booked $45 million in charges for store closures.
Amazon Holds Talks with Indonesian Ride-Hailing Startup Gojek
- Amazon and Indonesian ride-hailing startup Gojek Group have held preliminary talks on a partnership, according to people familiar with the matter, which could expand the online retail giant’s services into a populous new market.
- The companies have discussed an arrangement by which Amazon would make a sizable investment in Gojek and tap into the Jakarta-based company’s delivery infrastructure in Indonesia, one of the people said.
- An Amazon spokeswoman said the company doesn’t comment on “rumors and speculation.” A spokesman for Gojek didn’t immediately respond to a request for comment.
Apple Tightens Privacy Rules on Siri Recordings After Backlash
- Apple said it will no longer automatically save audio recordings of customers’ interactions with voice-driven virtual assistant Siri, the latest step as technology companies try to ease privacy concerns.
- “We realize we haven’t been fully living up to our high ideals, and for that we apologize,” Apple wrote in a blog post.
- The company had temporarily suspended the practice of using contractors to listen to and grade Siri voice recordings, following a report in British newspaper the Guardian that Apple contractors regularly listened to customers’ confidential information, such as medical information.
Alphabet Dips Its Toe into Infrastructure Investing
- The white-hot world of infrastructure investing has attracted a notable new entrant: Alphabet.
- The technology giant is teaming up with its subsidiary, Sidewalk Labs, and Ontario Teachers’ Pension Plan to launch an infrastructure holding company that is being spun out of Sidewalk.
- Sidewalk Infrastructure Partners, as the new firm will be known, will focus on investing in what the group calls technology–enabled infrastructure, the partners said.
- It will typically be investing in projects that require more than $100 million of equity.
Juul Introduces Checkout System to Combat Underage Purchases
- E-cigarette startup Juul Labs, facing blame for a surge in teenage vaping, is offering more than $100 million in incentives to retailers to install a new electronic age-verification system intended to curb illegal sales to minors.
- The modification to point-of-sale software blocks each Juul purchase until the shopper’s driver’s license or other government identification has been scanned.
- It also limits each purchase to a maximum of one vaporizer and four refill packs.
- So far, Juul said, Cumberland Farms, QuikTrip and other chains representing 40,000 outlets have agreed to adopt the system.
US ECONOMY & POLITICS
U.S. Economic Growth Revised to 2% in Second Quarter; Corporate Profits Rose
- The U.S. economy slowed in the second quarter, but the strongest growth in consumer spending in 4-1/2 years amid a strong labor market could further temper financial market expectations of a recession.
- Gross domestic product (GDP) increased at a 2.0% annualized rate, the Commerce Department said in its second reading of second-quarter GDP on Thursday.
- That was a downward revision from the 2.1% pace estimated last month.
- The economy grew at a 3.1% rate in the first quarter.
- Consumer spending grew 4.7%, topping all forecasts with the biggest gain since 2014.
- The composition of the revision showed that personal consumption expenditures (PCE) contributed 3.1 percentage points to GDP growth.
- Government spending contributed 0.77 point.
- Net exports subtracted 0.72 point while nonresidential fixed investment remained a slight drag.
- Housing contracted for a sixth-straight quarter with an even bigger drag. Residential investment shrank at a 2.9% pace.
- The economic expansion, now in its 11th year, is under threat from the Trump administration’s year-long trade war with China, which has undercut business investment and manufacturing.
U.S. weekly jobless claims increase slightly
- The number of Americans filing applications for unemployment benefits rose moderately, pointing to sustained labor market strength despite slowing economic growth.
- Initial claims for state unemployment benefits increased 4,000 to a seasonally adjusted 215,000 for the week ended Aug. 24, the Labor Department said on Thursday.
- Thursday’s claims report also showed the number of people receiving benefits after an initial week of aid increased 22,000 to 1.70 million for the week ended Aug. 17.
U.S. pending home sales fall in July despite lower mortgage rates
- Contracts to buy previously owned homes unexpectedly fell in July, according to a report on Thursday from the National Association of Realtors that suggested households might be holding back due to heightened concerns about the economy.
- The NAR’s pending home sales index dropped 2.5% last month to 105.6.
- Economists polled by Reuters had forecast pending home sales would be flat during the month.
Trump says US and China resume trade talks Thursday ‘at a different level’
- President Donald Trump said the U.S. and China are set to have trade talks on Thursday “at a different level.”
- “There’s a talk scheduled for today at a different level,” Trump said in an interview with Fox News Radio without elaborating on what “a different level” means.
- Trump said on Monday China in recent phone conversations expressed its desire for a deal and the two sides will get back to the negotiating table.
- However, China repeatedly said it is not aware of the calls Trump mentioned.
Beijing Says China, U.S. Still in Touch on Trade Dispute, September Talks
- Beijing and Washington remain “in effective communication” about their continuing trade dispute, China’s Ministry of Commerce said, adding that the two sides are still discussing whether to proceed with talks previously scheduled for September.
- In a weekly briefing, Gao Feng, spokesman for the Chinese commerce ministry, said Beijing hopes to prioritize discussions about removing the latest tariffs unveiled by U.S. President Trump last week, in order to prevent a further escalation of the trade war.
- “If China were to head to the U.S. for negotiations, the two sides should work together to create conditions for the talks to achieve progress,” Mr. Gao said.
Younger Workers Report Biggest Gains in Happiness with Pay
- American workers under 35 report being happier with their paychecks than people over 55 for the first time since at least 2011, according to a new report from the Conference Board, which polls U.S. employees about workplace satisfaction.
- Overall, the share of workers satisfied with their paychecks rose to 46.4% in 2018, from 43% in 2017, an increase that mirrors federal data showing that wage growth accelerated in 2018.
- The biggest leap came from millennials and Generation Z, whose enthusiasm for their compensation shot from 36% in 2017 to nearly 46% a year later.
- Despite the moment on salary perceptions, no age group reported that a majority of people were content with their pay.
- But, in all, nearly 54% of U.S. workers said they were satisfied with their jobs in 2018, the highest share reported in more than two decades, said the Conference Board, which has been polling about workplace satisfaction since 1987.
Kirsten Gillibrand Drops Out of Presidential Contest
- New York Sen. Kirsten Gillibrand said she was ending her campaign for president Wednesday.
- Ms. Gillibrand didn’t make it onto the debate stage in September.
- Candidates needed to have 130,000 donors and hit 2% in at least four preapproved polls.
September Debate Will Be a Royal Rumble of Top Tier Democratic Contenders
- The Democratic presidential debate next month will be the first time the entire slate of top-tier contenders share the same stage, a Royal Rumble featuring the four candidates most likely to face President Trump in the November 2020 general election.
- It is one night only; strict qualification requirements having limited the field of debate contenders to 10.
- Making the cut are: former Vice President Joe Biden, Sen. Cory Booker, Mayor Pete Buttigieg, former Housing and Urban Development Secretary Julián Castro, Sen. Kamala Harris, Sen. Amy Klobuchar, Rep. Beto O’Rourke, Sen. Bernie Sanders, Sen. Elizabeth Warren and entrepreneur Andrew Yang.
- It’s the third debate so far this cycle and will take place in Houston hosted by ABC News and Univision.
Republican Sen. Isakson of Georgia to Leave Office
- Republican Sen. Johnny Isakson of Georgia announced he will resign at the end of the year due to his poor health, setting the stage for two Senate races in the state in 2020.
- Mr. Isakson’s resignation on Dec. 31 will come three years before his Senate term expires in 2022.
- Republican Gov. Brian Kemp will name Mr. Isakson’s replacement as an interim senator, according to the state’s constitution.
- In 2020, Georgia will hold a special election to choose a candidate to serve out the remaining two years of Mr. Isakson’s term.
- In 2022, the state will hold elections again to fill the Senate seat for a full six-year term.
EUROPE & WORLD
German inflation eases, joblessness rises as economy sputters
- German inflation slowed in August and unemployment rose, data showed on Thursday, adding to signs that Europe’s largest economy is running out of steam and cementing expectations of a new European Central Bank stimulus package next month.
- Consumer prices, harmonized with inflation data from other European Union countries (HICP), rose 1.0% year-on-year after an increase of 1.1% in July, the Federal Statistics Office said.
- The August reading undershot a forecast for 1.2%, was the lowest level since November 2016, and marked a fourth month running well below the ECB’s target of close to but below 2% for the euro zone as a whole.
- Separate German Labour Office data showed seasonally adjusted unemployment rose 4,000 on the month in August, eroding a pillar of growth that has helped support an economy whose traditionally powerful export engine is sputtering and that could well slip into recession in the current quarter.
China Studying Tech Companies’ Exposure to U.S. Suppliers
- China is studying technology companies’ reliance on American suppliers, according to people familiar with the matter, an apparent attempt to assess their ability to withstand further trade-war shocks, even as Beijing prepares to roll out a retaliatory blacklist of foreign businesses.
- The interagency effort, which involves officials canvassing domestic companies, has taken place over the past few months as the trade war has intensified.
- A Chinese official last week reiterated plans to release “in the near future” an “unreliable-entity list” of foreign businesses and individuals that would face restrictions in their dealings with Chinese counterparts.
- The list, which was first floated by Beijing in May, is an apparent planned response to Washington’s attempts to shut out telecommunications giant Huawei.
- The survey of domestic companies is part of China’s longer-term goal of weaning itself off dependence on U.S. technology as a divide widens between the world’s two largest economies.
Aramco Proposes Two-Stage IPO, Shunning London, Hong Kong
- Saudi Arabian Oil Co. is considering a plan to split the world’s largest IPO into two stages, debuting a portion of its shares on the Saudi stock exchange later this year, and following up with an international offering in 2020 or 2021.
- The company is leaning toward Tokyo as the venue for the second phase of its proposed plan, the advisers and officials said, as political uncertainty in the U.K. and China reduces the appeal of London and Hong Kong’s markets.
- Saudi Arabia’s state oil giant, also known as Aramco, revived plans to sell 5% of its stock in an initial public offering earlier this month aimed at funding Saudi Arabia’s efforts to diversify its economy beyond oil.
Hong Kong Police Ban Huge Rally Aimed at China’s Liaison Office
- Police banned a Saturday rally and march planned by the organizers of the biggest turnouts in three months of protests, raising concerns that the city is dialing back on freedom of assembly rights and setting the stage for new, bitter clashes.
- In a letter of objection to the Civil Human Rights Front—which has organized three marches that by its estimates drew one million to two million people—police said they were blocking the protest due to concerns about violence after protesters threw Molotov cocktails and set fires during or after demonstrations in previous weeks.
- The ban raises the specter that without a legal avenue for a peaceful gathering, violence will escalate as a political deadlock grips the city.
- The protests are heading into their 13th weekend.
TODAY in HISTORY
- The S.S.R. tested their first atomic bomb. (1949)
- The Beatles played their last major live concert at Candlestick Park, California. (1966)
- The Supreme Soviet, the parliament of the U.S.S.R., suspended all activities of the Communist Party, bringing an end to the institution. (1991)
This information has been prepared from sources believed to be reliable, but no representation is being made as to its accuracy or completeness. The information provided should be used only as general information and is not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in the material may not develop as predicted. All indices, such as the S&P 500, are unmanaged and may not be invested into directly. Sources: Reuters, Bloomberg, the Wall Street Journal.
Content posted by third parties on this site is screened in order to protect clients’ privacy and comply with regulatory requirements. Content containing sensitive personal information, inappropriate language, information about specific investments, misleading information, information about other companies or websites, or information related to litigation will be removed. Content posted by third-parties on this site remains the responsibility of the party posting the content and is not adopted or endorsed by Pence Wealth Management or LPL Financial. Any opinions or statements posted by third parties are their own and may not be representative of the experience of others and are not indicative of future performance or success. Third party content on this site does not reflect the views of LPL Financial and have not been reviewed by LPL Financial as to accuracy or completeness.