DAILY MARKET REPORTS
- U.S. stocks swung sharply in another volatile session Thursday on signs a manufacturing slowdown has spread to other parts of the economy.
- A flood of disappointing economic data this week has raised expectations for further easing by the Fed to support growth.
- The Institute for Supply Management (ISM) said its nonmanufacturing index hit a three-year low, further spooking investors after reports showed U.S. factory activity contracted and the pace of job creation in the private sector slowed in September.
- The services sector had previously been considered a bright spot in the economy, overshadowing signs of weakness in the manufacturing space.
- But cracks started to emerge last week after data showed consumer spending cooled in August.
- Federal-funds futures show traders are betting there’s a 53% chance of the Fed lowering its benchmark short-term interest rate by a quarter percentage point twice by the end of the year, according to the CME Group.
- That’s up from 39% Wednesday and 19% a week ago.
US FINANCIAL MARKET
U.S. to Impose Tariffs on EU Goods After WTO’s Airbus Ruling
- The U.S. plans to swiftly impose tariffs on $7.5 billion in aircraft, food products and other goods from the European Union after the World Trade Organization authorized the levies Wednesday, citing the EU’s subsidies to Airbus.
- The Office of the U.S. Trade Representative said it would impose the tariffs starting Oct. 18, with 10% levies on jetliners and 25% duties on other products including Irish and Scotch whiskies, cheeses and hand tools.
- The U.S. was authorized to impose tariffs of up to 100% on $7.5 billion of goods by the WTO in what has been a 15-year battle over support programs for Airbus and U.S. aerospace rival Boeing.
- Washington is able to move quickly because it had previously published a list of up to $21 billion of European goods that were candidates for tariffs. Brussels has a $20 billion list of U.S. exports to target.
- Europe could consider imposing tariffs before pursuing a broader settlement and even before the WTO rules on its case against Boeing, according to EU diplomats.
- To avoid doing nothing until that WTO ruling, the EU is considering revoking a settlement with the U.S. from 2006 over tax exemptions for international sales structures used by Boeing and other U.S. companies known as foreign-sales corporations.
Tesla Sets Record for Car Deliveries, but Challenges Remain
- Electric car company Tesla said on Wednesday its deliveries rose less than 2% in the third quarter, missing Wall Street estimates and sending its shares down nearly 6% in trading after the bell.
- Total deliveries came in at a record 97,000 units for the quarter, but was below analysts’ estimates of 97,477 vehicles.
- The company has set a target to deliver 360,000 to 400,000 vehicles in 2019, which means that it needs to deliver at least 104,800 vehicles in its final quarter to meet the low end of its full-year forecast.
- Deliveries of the two high-priced models fell 1.4% to 17,400 from the second quarter and came in below analysts’ estimates of 18,829 vehicles.
- The company also delivered 79,600 Model 3 sedans in the third quarter, beating estimates of 79,470, but the pace of growth was just 2.6% from the previous quarter.
Cannabis Investment Weighs on Constellation’s Latest Results
- Constellation Brands swung to a loss as the company continued to struggle with its big investment in cannabis.
- Net sales rose to $2.34 billion from $2.30 billion, in line with the average analyst estimate, according to IBES data from Refinitiv.
- Beer sales rose 7% from a year earlier to $1.64 billion, while wine and spirits sales declined by 9% to $703.6 million.
- Including losses of $484 million related to Canopy, net loss was $525.2 million compared with a profit of $1.15 billion a year earlier.
- Constellation said it expects full-year per-share earnings to be between 55 cents and 75 cents, compared with its previous guidance of between $4.95 and $5.25.
- Excluding results from Canopy, the company boosted its adjusted-earnings guidance to between $9 a share and $9.20 a share from between $8.65 a share and $8.95 a share.
PepsiCo Revenue Climbs but Profit Drops on Higher Expenses
- PepsiCo beat third-quarter profit estimates and forecast upbeat revenue growth for 2019 on Thursday, as aggressive advertising and a focus on healthier products spurred demand for its beverages and snacks in North America.
- Net revenue rose 4.3% to $17.19 billion in the three months ended Sept. 7, beating analysts’ estimates of $16.93 billion.
- The company said organic revenue growth, which strips out currency swings and acquisitions, was up 4.3% in the period.
- Net income fell to $2.1 billion in the third quarter, compared with $2.5 billion a year earlier.
- The company is now guiding to either meet or beat its expectations for organic revenue growth of 4% for the year.
GoPro cuts second-half outlook citing Hero8 shipment issues
- GoPro on Wednesday cut its revenue and profit forecasts for the rest of the year, hit by a delay in production of its latest Hero8 Black cameras, triggering a 19% drop in its shares.
- The company, which launched two new cameras including a ramped up version of its “HERO” line on Tuesday, said it would ship the cameras in the fourth quarter instead of the third quarter as planned earlier.
- The company expects revenue in the second half to be between $680 million and $715 million, or up 6% to 9% from a year earlier. It had previously forecast growth of 9% to 12%.
- GoPro also lowered its adjusted profit to 33 cents to 39 cents a share from 37 cents to 49 cents a share.
Microsoft Is Making Smartphones Again, With Help from Google
- Microsoft is returning to the smartphone game and plans a suite of new wireless computing devices, including two with dual screens that fold together like a book.
- At a New York media event Wednesday, the company surprised onlookers when it disclosed plans to re-enter the smartphone business by the 2020 holiday season with a foldable, dual-screen device called the Surface Duo.
- The Surface Duo will run on Google’s Android operating system and feature the Google Play Store.
- The coming Surface Neo foldable tablet, also due in late 2020, supports a magnetically attached keyboard and pen, both of which charge wirelessly when connected to the device.
- At the event, Microsoft also showed off expected updates to its Surface laptops and tablets, due out in the coming months.
Troubles with Tesla’s automated parking feature summon safety regulators
- U.S. regulators are looking into parking lot crashes involving Tesla cars driving themselves to their owners using the company’s Smart Summon feature, the National Highway Traffic Safety Administration (NHTSA) said on Wednesday.
- Several users have posted videos on social media of Tesla vehicles that appear to have been in near accidents. One posted a video of a Tesla striking a garage wall and another of a Tesla being struck by a vehicle backing up.
- A Tesla software update last week added its Smart Summon feature for some customers. When the car is within 200 feet and in their line of sight, they use a phone app to summon the vehicle in a parking lot.
Retail trade group sees holiday sales rising 3.8% to 4.2% this year, citing ‘uncertainty over trade’
- Holiday retail sales in November and December — excluding automobiles, gasoline and restaurants — are expected to increase between 3.8% and 4.2% this year, reaching between $727.9 billion and $730.7 billion, the National Retail Federation said.
- It said it’s expecting online and other non-store sales in 2019, which are included in its total forecast, to climb between 11% and 14%, amounting to between $162.6 billion and $166.9 billion.
- The retail trade group cited “uncertainty over trade” as being a potential drag on the season this year, as the U.S. and China are set to resume trade talks later this month
- The group said holiday retail sales have increased an average of 3.7% over the past five years.
Facebook, in Fresh Blow in Europe, Must Remove More Content if Ordered
- The European Union’s top court gave judges in the bloc broader power to order the removal of Facebook posts, dealing a fresh blow to the U.S. tech giant as it faces growing regulatory headwinds on both sides of the Atlantic.
- The EU’s Court of Justice said Thursday that a judge in one of the bloc’s member states can order social-media companies to scan for and remove posts that are identical—or in some cases merely “equivalent”—to content that has been ruled illegal.
- The court also said that nothing in EU law stops judges from ordering social-media companies to apply such orders globally, provided they do so “within the framework of the relevant international law.”
New Uber App to Pair Gig Workers with Employers
- Uber Technologies is launching an app aimed at pairing businesses with temporary workers in an effort to bring in more revenue as the company struggles to turn a profit.
- The Uber Works app, launching in Chicago on Friday, will match workers such as chefs and cleaners with companies looking to fill a temporary opening, the company said late Wednesday.
- The app enables users to sift through jobs by location, pay and skills, Uber said, adding that it spent the past year testing it.
Uber Copter Will Now Fly You Over City Gridlock
- The company has opened up its helicopter service between lower Manhattan and JFK Airport to any Uber user.
- Regular Uber users have a four-hour window, from 2 p.m. to 6 p.m., in which to book an Uber Copter during weekday rush hours. A one-way ride costs from $200 to $225 per person.
- The company is using Uber Copter as a test run for its goal of creating an aerial ride-sharing network of eVTOL aircraft, electric vehicles that offer vertical takeoff and landing.
US ECONOMY & POLITICS
Services survey shows economy is weaker than expected amid slowdown fears
- The services sector continued its expansion in September but at a considerably slower pace than expected, according to the ISM Non-Manufacturing Index released Thursday.
- The closely watched measure came in at 52.6, compared with an expected reading of 55.3 from economists.
- New orders plunged to 53.7, 6.6 points lower than the August reading, while employment slipped from 53.1 to 50.4, its worst February 2014.
- ISM officials said the overall weakness arose from fears over tariffs, labor resources and the general direction of the economy.
U.S. factory orders dip in August; core capital goods revised down
- New orders for U.S.-made goods slipped in August and business spending on equipment was much weaker than initially thought, the latest indications that manufacturing was in a slump.
- Factory goods orders dipped 0.1% after surging by an unrevised 1.4% in July, the Commerce Department said on Thursday.
- Economists had forecast factory orders would fall 0.2% in August.
- Factory orders edged down 0.1% compared to August 2018.
- The Commerce Department also said August orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans on equipment, fell 0.4% instead of the 0.2% drop reported last month.
U.S. weekly jobless claims rise slightly; layoffs still low
- The number of Americans filing applications for unemployment benefits rose marginally last week, suggesting the labor market remains strong even as employers are becoming more cautious about hiring workers.
- Initial claims for state unemployment benefits increased 4,000 to a seasonally adjusted 219,000 for the week ended Sept. 28.
- Economists had forecast claims would increase to 215,000 in the latest week.
- The number of people receiving benefits after an initial week of aid fell 5,000 to 1.65 million for the week ended Sept. 21, the lowest level since October 2018.
Optimism about the economy falls to three-year low, CNBC All-America Economic Survey finds
- Americans’ attitudes toward the economy took a sharp turn downward in the third quarter, according to the CNBC All-America Economic Survey, with just 23% believing the economy will improve in the next year, the lowest level in three years.
- Views on the current state of the economy (compared with the outlook) slid only modestly, with 48% of the public rating the economy as excellent or good, down from 51% in May, and 49% rating the economy as fair or poor, up just a point.
- But with only 23% expecting economy to improve and 32% believing it will get worse, the poll marks the first time in the Trump presidency that economic pessimism outstrips optimism.
Trump to Target Medicare-for-All Proposals in Re-Election Campaign
- President Trump is expected to attack Medicare for All proposals in a speech Thursday while laying out his own vision for health care, part of an effort to challenge Democratic presidential candidates calling for a federal system.
- Trump is planning to sign an executive order calling for initiatives to reduce fraud and bolster privatized Medicare plans.
- Agencies will take action to expand savings accounts where seniors make tax-free withdrawals to pay for care.
- The order will also direct them to accelerate the time it takes for the government to pay for newly approved medical therapies.
- It will also call for broadening the role of nurse practitioners, and reviewing the enrollment process for Medicare to make sure traditional Medicare isn’t promoted over private Medicare plans, they said.
- Mr. Trump’s executive order on Medicare is also an effort to try to show the president is focused on the entire health-care system rather than the ACA and coverage issues, White House officials said Thursday.
EUROPE & WORLD
Services Stumble Threatens Sharper Global Slowdown
- Activity in the eurozone’s services sector slowed more sharply than first estimated in September, according to surveys of purchasing managers, suggesting a manufacturing downturn is spreading to other parts of the economy.
- Data firm IHS Markit said Thursday its composite purchasing managers index for the eurozone—an aggregate measure of activity among manufacturers and service providers—fell to 50.1 in September from 51.9 in August.
- Services account for 73% of economic activity in the eurozone, a smaller share than in the U.S., where they account for four-fifths of output.
- The composite PMI for Germany fell to 48.5 in September from 51.7 in August, pointing to an economic contraction. It was the lowest reading in almost seven years.
- Services activity also declined in the U.K., where providers face uncertainty about the timing and terms of the country’s exit from the European Union, and the prospect of a general election.
- A similar survey for Japan also released Thursday pointed to a less sharp slowdown in services activity, with the PMI for that sector falling to 52.8 from 53.3.
Hong Kong to Invoke Emergency Powers to Ban Masks at Protests
- Hong Kong’s cabinet will meet Friday to invoke emergency powers to tackle spiraling protests and lawlessness, starting with a ban on people wearing masks that are used to protect themselves from tear gas or hide their identities, people familiar with the plan said.
- The city’s leader, Chief Executive Carrie Lam called the special meeting of her executive council to propose the ban, which, if agreed, would become law Friday, one of the people said.
- The measure is almost certain to be approved as the cabinet comprises mostly pro-government figures.
TODAY in HISTORY
- President Lincoln declared the last Thursday in November as Thanksgiving Day. (1863)
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