DAILY MARKET REPORTS
- Stocks rallied amid growing hopes that the U.S. and China can negotiate a trade truce as high-level talks progress into a second day.
- Optimism on trade helped spur a rally in global stocks, reversing some losses from earlier in the week and putting the S&P 500 on track to snap three straight weeks of declines.
- Elsewhere, equities rallied throughout Asia, with shares in Hong Kong getting an extra lift as protesters discussed scaling back vandalism ahead of demonstrations this weekend.
- Crude oil prices gained after an Iranian tanker near the Saudi Arabian coast suffered damage Friday in what the ship’s owner suggested may have been a missile attack.
- The British pound added 1.4% against the dollar, having posted its largest one-day jump since March on Thursday following signs of progress in the Brexit talks between the U.K. and Ireland.
US FINANCIAL MARKET
Earnings Season May Not Be as Bad as Investors Think
- Third-quarter earnings may not be as bad as investors fear.
- With less than a week to go before earnings season kicks off in earnest with results from major U.S. banks, analysts estimate companies in the S&P 500 will report a 4.5% drop in profits from the year-earlier period, according to FactSet.
- That would mark the third straight quarter of contraction and the longest such streak since 2016—on the face of it, a troubling sign for the bull market.
- Yet Credit Suisse says those estimates look far too pessimistic.
- During the last round of earnings reports, for instance, 75% of companies in the S&P 500 beat analysts’ earnings estimates, and the S&P 500 ultimately reported a 0.1% drop in earnings—far less than June 30 estimates of a 2.7% decline.
Uber to Acquire Chilean Grocery Startup Walmart Failed to Buy
- Uber has reached a deal to buy a majority stake in grocery-delivery company Cornershop, as the company continues to expand its reach beyond the core ride-hailing business.
- Uber didn’t disclose how much it would pay for the stake.
- Walmart announced its intention more than a year ago to purchase Cornershop outright for $225 million and re-sell it to its Mexican subsidiary, only to have Mexican regulators oppose it in June for antitrust reasons.
IAC/InterActive Moves Forward With Match Spinoff
- IAC/InterActive is moving forward with a spinoff of Match Group after turning the owner of the Tinder online dating app into one of the best-performing internet stocks.
- The New York media and internet holding company said in its proposal to a special committee of Match’s board that it intends to distribute its roughly 83% stake in the company to IAC’s stockholders.
- Match has been one of the star performers in IAC’s portfolio of companies.
- The shares have gained more than sixfold since its initial public offering in 2015.
- In the second quarter, Match accounted for 41% of IAC’s total $1.19 billion in revenue.
Investors Approve UTC-Raytheon Merger
- Shareholders backed the creation of one of the world’s largest aerospace companies on Friday, voting in favor of the $135 billion combination of United Technologies and Raytheon.
- The merger plan announced in June overcame initial opposition from some activists and other investors skeptical about combining two companies with different growth paths in the defense and commercial-aerospace businesses.
- The proposed deal is still subject to regulatory approval.
- Raytheon shareholders will receive 2.3348 shares in the new company for every share they currently own. UTC shareholders will own about 57% of the combined entity and UTC will appoint eight of the 15 directors.
Why Ethiopia’s Leader Is Winning International Kudos
- Since taking power last year, Ethiopian Prime Minister Abiy Ahmed has been on a drive to open up Africa’s second-most-populous nation.
- He has scrapped bans on opposition and rebel groups, purged allegedly corrupt officials and ended two decades of acrimony with neighboring Eritrea — an initiative that won him the 2019 Nobel Peace Prize.
- He has also put out the welcome mat for foreign capital in an effort to maintain growth in one of the world’s fastest-expanding economies. But he still confronts stumbling blocks, including ethnic unrest and opposition from factions within the ruling party.
US ECONOMY & POLITICS
U.S. Consumer Sentiment Unexpectedly Rises to Three-Month High
- The University of Michigan’s preliminary sentiment index advanced to a three-month high of 96 from September’s 93.2, data showed Friday.
Trump Says Day One of U.S.-China Trade Talks Went Very Well
- The U.S. and China have both appeared willing to work toward a partial deal, and leave the more controversial issues for later discussions.
- The talks between Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are expected to resume Friday, Trump told reporters as he left the White House.
- It’s the first senior-level in-person talks since late July to try and end an 18-month trade war that is taking a toll on the global economy and U.S. manufacturing.
Social Security Benefits to Rise 1.6% in 2020
- Seniors and other Americans receiving Social Security will see a 1.6% increase in benefits next year, the Social Security Administration said on Thursday.
- The 2020 cost-of-living increase is smaller than this year’s 2.8% boost and will translate into a $24 increase in retirees’ average monthly benefit.
- The administration also announced the maximum amount of earnings subject to the Social Security tax in 2020 will increase to $137,700 from $132,900, a 3.6% increase.
EUROPE & WORLD
Brexit Optimism Boosts U.K. Pound, Bank Stocks
- Signs of optimism that the U.K. could reach a divorce deal with the European Union drove the pound and U.K bank stocks sharply higher Friday.
- Investors attributed the sharp rise to positive remarks from European Council President Donald Tusk.
- He said that the U.K. prime minister and his Irish counterpart “saw for the first time a pathway to a deal”.
- “I have received promising signals from the [Irish] taoiseach that a deal is still possible,’’ Mr. Tusk said Friday.
- Sterling climbed 1.7% against the U.S. dollar.
Oil Prices Climb After Iranian Tanker Damaged in Possible Strike
- Oil prices climbed Friday after an Iranian tanker near the Saudi Arabian coast suffered damage in what the ship’s owner suggested may have been a missile attack.
India Factory Output Unexpectedly Declines First Time in 2 Years
- India’s factory output contracted for the first time in more than two years in August, as a sharp fall in capital goods and consumer durables production weighed on activity.
- The index of industrial production fell 1.1% in August, data released by the Ministry of Statistics showed Friday.
- That compares with an estimate for a 1.7% expansion.
TODAY in HISTORY
- A letter from Albert Einstein was delivered to President Franklin D. Roosevelt concerning the possibility of atomic weapons. 1939
- The first staffed Apollo mission, Apollo 7, was launched with astronauts Wally Schirra, Donn Fulton Eisele, and R. Walter Cunningham aboard. 1968
- Space shuttle Challenger astronaut, Kathryn Sullivan, became the first American woman to walk in space. 1984
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