DAILY MARKET REPORTS
- U.S. equity indexes slid at the open as traders studied the outlook for a trade deal between China and the Trump administration.
- Data Monday heightened investors’ worries about the health of the global economy.
- Factory orders in Germany slipped more than expected in August, while confidence among eurozone investors fell to the lowest level in six years.
- Wall Street logged a choppy start to October as concerns fueled by a contraction in U.S. factory activity and weaker-than-expected services sector data were countered by rising bets of a third interest rate cut this year by the Federal Reserve.
- Traders see a 74% chance of a rate cut at the central bank’s policy meeting later this month, up from about 40% a week ago.
- Investors will now turn to the third-quarter earnings season, which kicks off next week with U.S. banks reporting, for more clarity on the impact of the trade war on Corporate America.
- Analysts expect the lowest quarterly profit performance since 2016, with S&P 500 earnings seen falling nearly 4% from a year earlier, based on FactSet data.
- Among individual stocks, General Motors fell 0.9% after negotiations between the firm and the United Auto Workers union broke down over the weekend.
- PayPal said it was withdrawing from the group of companies Facebook assembled to launch a global cryptocurrrency-based payments network.
US FINANCIAL MARKET
Dim Earnings Outlook Poses Peril for Stocks
- The outlook for third-quarter corporate profits is darkening, a threat to further derail a stock market that is already off to the worst start to a quarter since 2016.
- Dozens of companies have tried to temper investor expectations ahead of coming reports, saying earnings will come in lower than analysts had expected.
- Analysts expect earnings for companies in the S&P 500 to fall about 4% for the third quarter, according to FactSet data, in what would mark the biggest year-over-year drop since 2016.
- Data last week showed domestic factory activity hit a 10-year low in September, while the services sector expanded at the slowest pace in three years. Friday’s jobs report eased some of those fears, showing that the U.S. labor market is a relative bright spot, with unemployment hitting a 50-year low.
Talks between UAW and GM take ‘turn for the worse’: union official
- GM made an offer to the union that basically repeated one the UAW had previously rejected.
- GM said in a statement that it was committed to negotiating “around the clock” to reach a deal.
- The GM strike began on Sept. 16 with its 48,000 UAW members seeking higher pay, greater job security, a bigger share of the automaker’s profit and protection of healthcare benefits. The sides have been meeting daily.
- Analysts estimate the strike has cost GM over $1 billion, while LMC Automotive estimated on Thursday that GM has lost production of 118,000 vehicles through Oct. 2.
PayPal Bails on Facebook-Led Libra Cryptocurrency Dream
- “PayPal has made the decision to forgo further participation in the Libra Association at this time and to continue to focus on advancing our existing mission and business priorities as we strive to democratize access to financial services for underserved populations,” the payments company said in a statement.
- Several founding members of the Facebook-led project have been wavering over whether to fully embrace the effort because they’re concerned about maintaining positive relationships with regulators who have reservations about the initiative.
- The Libra Association, the group of companies Facebook has assembled to oversee the cryptocurrency, has 28 founding members including Visa, MasterCard, and eBay.
GE to Freeze Pensions for 20,000 Workers
- GE said it was freezing its pension plan for about 20,000 U.S. workers and offering pension buyouts to 100,000 former employees, as the conglomerate looks for ways to pare its debt.
- GE’s traditional pension plans, which were underfunded by $27 billion as of the end of 2018, are one of the company’s biggest liabilities.
- The company said it would contribute up to $5 billion in cash to the pension plan next year to meet funding requirements.
- GE contributed $6 billion to shore up the plan last year.
- The company said the changes would cut its pension deficit by up to $8 billion and its net debt by up to $6 billion. On Monday, it said moves in the past month will cut debt by $9 billion to $11 billion. The company has been selling assets, including its locomotive business, to reduce the roughly $100 billion in debt it had at the start of 2019.
- GE’s main pension plan covered about 243,000 retirees and beneficiaries, 144,500 vested former employees and approximately 43,000 active employees as of the end of 2018.
Harley struggles to fire up new generation of riders with electric bike debut
- Harley is betting on electric motorcycles to attract the next generation of younger and more environmentally conscious riders to reverse declining U.S. sales.
- But as Harley ships its first “LiveWire” bikes – priced at $29,799 – to dealers, there is little evidence the 116-year-old brand is catching on with new young customers.
- The problem lies mostly with this “super-premium” product’s price. The bike costs nearly as much as a Tesla Model 3, and aims for a market that does not really exist: young, “green” and affluent first-time motorcyclists.
American Railroads Are in a Recession with No End in Sight
- This year’s railroad slump is getting worse as a slowdown in manufacturing threatens broader weakness in the U.S. economy.
- There’s no bottom in sight as the decline in carloads for large U.S. railroads widened to 5.5% in the third quarter, the biggest drop in three years.
- The rail downturn underscores the damage from the U.S.-China trade war, which is making shippers more cautious and crimping freight — validating earlier warnings from railroad executives.
Disney’s New Streaming Service Gets Favorable Reviews From the Dutch
- Disney is testing its flagship streaming service, called Disney+, with a free trial in the Netherlands to gauge consumer response and iron out any technical kinks before it launches in the U.S. and other countries on Nov. 12.
- Interviews with a small number of Disney+’s first users found general enthusiasm for the service and the library of programming it provides, despite some minor technical issues.
- The service is expected by many in Hollywood and on Wall Street to pose a direct threat to Netflix, which dominates the streaming marketplace with more than 150 million global subscribers.
- Disney+ will cost $6.99 a month at launch, or about half the price of Netflix Inc.’s most popular option.
US ECONOMY & POLITICS
Trump Wins Reprieve in N.Y. Demand for His Financial Records
- A federal appeals court granted President Donald Trump a last-minute reprieve in his effort to block a New York subpoena for his tax records, delaying a federal judge’s ruling from taking effect that would have forced his accounting firm to hand the records to the Manhattan district attorney beginning Monday afternoon.
- The U.S. Second Circuit Court of Appeals in New York granted an emergency stay, after U.S. District Judge Victor Marrero earlier in the day rejected Trump’s request for an injunction blocking the subpoena for the records.
White House confirms U.S.-China trade talks starting Thursday
- Top U.S. officials will welcome a high-ranking Chinese delegation starting Oct. 10 for the latest round of trade talks aimed at easing tensions between the world’s two largest economies.
EUROPE & WORLD
U.S. Begins Pullback from Northern Syria, Clearing Way for Turkish Offensive
- Washington and Ankara have been trying for months to work out a deal to create a kind of buffer zone along the Turkey-Syria border.
- The president is seeking more than $26 billion in aid to build houses for about 2 million Syrian refugees he hopes to resettle. That would alleviate the burden on Turkey’s economy — and the criticism Erdogan has faced at home — at a time when a possible Syrian government offensive on the last rebel bastion of Idlib fuels fears of another wave of refugees heading north.
- 3.7 million Syrian refugees are currently residing in Turkey.
- The U.S. has about 1,000 troops in Syria, where they have focused primarily on working with the Kurdish-led forces on counterterrorism operations aimed at preventing a resurgence of Islamic State.
- After the collapse of the caliphate, the Kurds captured the fighters and their families, guarding them in prisons and camps.
HSBC Plans Job Cuts as Interim CEO Seeks to Make his Mark
- HSBC is planning further job cuts to its 238,000 workforce.
- The cuts are in addition to around 5,000 job cuts that were announced earlier this year. Up to 8,000 jobs would leave the bank under plans to sell its French retail banking unit.
- HSBC said in August it would pay around $650 million to $700 million in severance costs this year, to save around the same amount annually going forward.
Nobel Prize in Medicine Awarded to U.S. and British Scientists
- A trio of U.S. and British scientists has won this year’s Nobel Prize in Physiology or Medicine for discovering how cells sense and adapt to the amount of oxygen available—findings that open the door to new ways of tackling anemia and cancer, among other diseases.
- Americans William Kaelin of the Dana-Farber Cancer Institute in Boston, Gregg Semenza of Baltimore’s Johns Hopkins Medicine, and Peter Ratcliffe of the Francis Crick Institute in London received this year’s award for physiology or medicine, the Nobel Assembly at the Karolinska Institute said Monday in a statement.
TODAY in HISTORY
- The Stamp Act Congress convened in New York to draw up colonial grievances against England. 1765
- The Republic of East Germany was formed. 1949
- The Motion Picture Association of America adopted its film-rating system, ranging from “G” for general audiences to “X” for adults only. 1968
- California governor Gray Davis was recalled and former bodybuilder and actor Arnold Schwarzenegger was elected in his place. 2003
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