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STOCKS WAVER AHEAD OF FED DECISION

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US FINANCIAL MARKET | US ECONOMY & POLITICS
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US FINANCIAL MARKET

STOCKS WAVER AHEAD OF FED DECISION

  • U.S. stocks were little changed as investors awaited the Federal Reserve’s decision on interest rates.
  • Investors have high expectations that the Fed will cut its benchmark rate by a quarter of a percentage point to between 1.5% and 1.75%, but there is less clarity on how the central bank proceeds after that.
  • U.S. economic growth slowed less than expected in the third quarter as declining business investment was offset by resilient consumer spending and a rebound in exports, further allaying financial market fears of a recession.
  • Nearly half of the S&P 500 companies have posted quarterly results so far, of which 77.1% have beaten profit estimates.
  • Still, analysts are expecting a 1.9% drop in third-quarter earnings, according to Refinitiv data.
  • General Electric jumped 10% after the conglomerate beat quarterly profit estimates and raised its cash forecast for the year.
  • Yum Brands slid 9.8% after it missed quarterly profit expectations, hit by a write down in the value of its investment in delivery company GrubHub and unrelenting troubles at its Pizza Hut chain.
  • In the U.K., major stock indexes slipped after lawmakers agreed to hold an early election on Dec. 12 in an attempt to break the stalemate over Brexit.

GE Posts Loss on Restructuring Charges but Raises Cash-Flow Goals

  • General Electric posted a $1.3 billion loss in the third quarter, but beat estimates, helped by higher prices for aircraft parts and a strong healthcare business, and vowed to deliver $1 billion more cash this year than it had previously forecast.
  • Total revenue fell slightly to $23.36 billion from $23.39 billion.
  • The aviation division, which makes jet engines, had $8.11 billion in third-quarter revenue and generated $1.72 billion in profits.
  • The health-care unit, which makes hospital equipment and had $4.92 billion in quarterly revenue, delivered a $974 million profit.
  • The power division, which had been GE’s biggest in terms of revenue, quarterly revenue fell 14% from a year ago to $3.93 billion, but the division narrowed its losses to $144 million.
  • The company’s loss from continuing operations attributable to shareholders was $1.33 billion in the quarter ended Sept. 30, compared with a loss of $22.96 billion a year earlier.
  • The company said it now expects full-year industrial free cash flow to be between $0 and $2 billion, compared with its earlier forecast of negative $1 billion to positive $1 billion.

Yum’s Profit Pressured by Investment in GrubHub

  • Yum Brands marked down the value of its investment in GrubHub, a move that hurt the restaurant chain’s third-quarter profit but doesn’t reflect the recent major selloff in shares of the delivery service.
  • Total revenue slipped 4% from the year earlier, to $1.34 billion, the company said, in line with expectations from analysts.
  • Sales from restaurants open over a year missed expectations, growing 3% in the third quarter, below the estimate of 3.3% rise.
  • Same-store sales at Pizza Hut were flat in the reported quarter, compared with the growth of 1.46% forecast by analysts.
  • KFC same-store sales rose 3%, also missing expectations.
  • Taco Bell was a bright spot, with sales at established restaurants rising 4%, compared with the estimated growth of 3.5%.
  • Yum, reported quarterly net income fell to $255 million, from $454 million in the same quarter last year.
  • It recorded a pre-tax investment expense of $60 million related to the change in fair value of its investment in GrubHub, which resulted in a 15-cent impact on earnings.

AMD revenue forecast falls short despite data center strength

  • Advanced Micro Devices fell short of Wall Street estimates for quarterly revenue and forecast fourth-quarter sales below expectations on Tuesday, even as the U.S. chipmaker beat targets for its closely watched data center business.
  • Third-quarter revenue, rose 9% to $1.80 billion, but fell short of estimates of $1.81 billion.
  • Sales at AMD’s computing and graphics segment, which includes graphic chip sales to data centers, jumped 36% to $1.28 billion, ahead of the $1.13 billion estimated.
  • But a 27% drop in sales in AMD’s enterprise, embedded and semi-custom segment – which missed estimates – capped the gains, impacted by lower demand for Microsoft’s Xbox and Sony’s PlayStation in anticipation for new versions of the consoles.
  • Net income increased to $120 million, up from $102 million in the same period a year ago, beating estimates.
  • AMD expects fourth-quarter revenue of about $2.1 billion, plus or minus $50 million, while analysts were expecting $2.15 billion.

Mattel Resolves Accounting Probe, Easing Debt Squeeze

  • Mattel reported a surprise jump in quarterly revenue on Tuesday as newer models energized demand for its flagship Barbie brand, while the launch of dolls based on Korean pop-sensation BTS lifted international sales.
  • Sales rose 3% to $1.48 billion, primarily from a 10% increase in the international segment as sales in the U.S. stalled.
  • Analysts expected revenue of $1.43 billion.
  • Barbie sales rose 10%, while Hot Wheels sales rose 25%. Fisher-Price sales fell 3%, while American Girl, a high-end doll line and retail chain, posted a 15% sales decline.
  • Mattel posted earnings of $70.6 million in the third quarter, compared with $6.3 million in the same period a year ago.

Higher Prices and Volumes Boost Mondelez

  • Ritz crackers-owner Mondelez International raised its 2019 sales forecast on Tuesday after reporting a 1.1% rise in third-quarter revenue, driven by higher demand in emerging markets where Mondelez has been ramping up investment.
  • Net revenue rose to $6.36 billion in the quarter from $6.29 billion a year earlier, just beating analysts’ estimate of $6.34 billion.
  • Comparable sales rose 4.2% in the company’s latest quarter.
  • Mondelez reported third-quarter earnings of $1.42 billion, up from $1.19 billion a year earlier.
  • Mondelez said it expects full-year organic net revenue growth of over 3.5%, up from its previous forecast of over 3% growth.
  • Mondelez also said it now expects adjusted earnings per share growth of 5% to 7% on a constant-currency basis.

Molson Coors to Cut Jobs as It Seeks to Move Beyond Beer

  • Molson Coors Brewing plans on cutting hundreds of jobs as it tries to reinvent its business and move beyond just selling beer.
  • Net sales at Molson fell to $2.8 billion during the quarter, down 3.2% compared with the same period last year, and down 2% in constant currencies.
  • Brand volumes—or sales volumes of its brands to external customers—dropped 2.4% in the third quarter.
  • The company posted a loss of $403 million, compared with a profit of $338 million in the same period a year ago.
  • The maker of Coors Light and Miller Lite said Wednesday it expects to cut between 400 and 500 positions as part of a broader restructuring that will also include the company dropping the word “Brewing” from its name.

Higher Bakken output helps Hess post smaller loss, raise production view

  • Hess reported a smaller-than-expected quarterly loss and raised its full-year production forecast on Wednesday, owing to higher output at the U.S. oil and gas producer’s assets in the Bakken shale.
  • Production from Bakken rose 38% to 163,000 barrels of oil equivalent per day (boe/d) in the quarter, helping net production, excluding Libya, rise about 4% to 290,000 boe/d.
  • Adjusted net loss was $98 million in the third quarter, compared with a profit of $29 million a year earlier.
  • The company raised its annual net production expectation, excluding Libya, to about 285,000 boe/d, from the prior range of 275,000 boe/d to 280,000 boe/d.

EA’s forecast hit by delay in basketball game launch, shares slip

  • Electronic Arts has postponed the release of its basketball game NBA Live to coincide it with the launch of new gaming consoles next year, the video game publisher said on Tuesday.
  • On an adjusted basis, revenue rose 4.5% to $1.28 billion, beating analysts’ expectation of $1.25 billion.
  • Net income rose to $854 million compared to $255 million a year ago, thanks to a $1.08 billion income tax benefit
  • The company expects adjusted revenue for the current quarter to be about $1.94 billion, edging past estimates of $1.93 billion.
  • For the full year, EA expects adjusted revenue of about $5.13 billion, below estimates of $5.19 billion.

Amgen posts higher biosimilar sales, ends neuroscience program

  • Amgen said competition for its older drugs sent third-quarter revenue down 3%, but biosimilar sales were strong and the quarterly results were ahead of Wall Street estimates.
  • Amgen’s revenue for the quarter declined to $5.74 billion from $5.9 billion a year ago, which was slightly better than analysts’ estimates of $5.64 billion.
  • Amgen, which has launched its own biosimilar versions of several drugs sold by rival companies, said sales of those products rose to $173 million from $82 million in the previous quarter.
  • Net income rose 6% to $1.97 billion, compared to $1.86 billion a year ago, beating estimates.
  • The company now expects full-year adjusted earnings of $14.20 to $14.45 per share on revenue of $22.8 billion to $23 billion, up from $13.75 to $14.30 per share on revenue of $22.4 billion to $22.9 billion.

California fire threatens PG&E’s plan to raise $14 billion

  • A wildfire raging in California threatens to destroy more than homes and businesses – it could also undermine bankrupt PG&E’s plan to raise $14 billion to finance the crisis-stricken utility’s turnaround plan.
  • In Sonoma County north of San Francisco, the Kincade Fire has burned more than 75,000 acres in PG&E’s service area since breaking out on Oct. 23, forcing evacuation orders for some 180,000 people.
  • The fire has destroyed 124 structures and more than 90,000 are threatened amid strong winds and dry weather, according to CalFire, California’s fire-fighting agency.
  • Any fire this year caused by PG&E that destroys more than 500 homes or commercial structures would trigger a clause in the financing agreement that would allow investors to back out.

Facebook agrees to pay UK fine over Cambridge Analytica scandal

  • Facebook has agreed to pay a 500,000 pound ($644,000) fine for breaches of data protection law related to the harvesting of data by consultancy Cambridge Analytica, Britain’s information rights regulator said on Wednesday.
  • The fine may be small for a company worth $540 billion, but it is the maximum the Information Commissioner’s Office (ICO) could issue and represents the first move by a regulator to punish Facebook over the Cambridge Analytica scandal.
  • The ICO issued the fine last year after it said data from at least 1 million British users had been among the information harvested by the researcher and used for political purposes.

Amazon pumps in more than $600 million into India units

  • Amazon has invested around 45 billion rupees ($634.20 million) into its Indian subsidiaries as the Seattle-based e-commerce giant ramps up operations in one of its fastest growing markets.
  • Documents filed with the Registrar of Companies showed that Amazon had pumped the money into its retail, food and payments units.
  • Founder Jeff Bezos has committed to spending more than $5 billion for the Indian market, where Amazon is locked in a battle with Walmart-owned Flipkart.

AT&T Lays Out Price, Show Lineup for HBO Max

  • AT&T played it safe with its new streaming service HBO Max by selling it for $14.99 a month, the same price it currently offers for HBO, and making it free for current HBO customers.
  • The online service, which will launch next May, is essentially a supersize version of HBO.
  • Besides HBO programs, it will have hit shows and movies from the Warner Bros. library as well as new content including shows from prolific TV producer Greg Berlanti and actress-producer Mindy Kaling.

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US ECONOMY & POLITICS

U.S. Economy Grew at 1.9% Rate in Third Quarter

  • U.S. economic growth slowed less than expected in the third quarter as declining business investment was offset by resilient consumer spending and a rebound in exports, further allaying financial market fears of a recession.
  • Gross domestic product (GDP) rose at an annual rate of 1.9% from July through.
  • Economists expected a 1.6% growth reading for the third quarter.
  • Consumer spending moderated to a 2.9% annual rate in the third quarter, from a 4.6% rate in the second.
  • Nonresidential fixed investment—which reflects business spending on software, research and development, equipment and structures—fell at a 3.0% rate. That was marked by a sharp 15.3% drop in spending on structures.
  • Trade was broadly neutral in the third quarter, as net exports subtracted a mild 0.08 percentage point from the quarter’s 1.9% GDP growth rate.
  • The pace of exports picked up to a 0.7% annual rate after a decline in the second quarter, while the rate of imports rose by a greater amount, a 1.2% rate, as Americans stepped up purchases of foreign goods.
  • Inventories were also a slight drag on growth, with nonfarm inventories trimming 0.07 percentage point from growth, after a steep decline in the second quarter.
  • Total government expenditures were up at a 2.0% annual rate in the third quarter.

U.S. Private Sector Added 125,000 Jobs in October

  • Private employers in the U.S. nonfarm sector added more jobs in October than economists expected, according to the ADP National Employment Report.
  • The nonfarm private sector added 125,000 jobs this month, according to the report.
  • Economists were expecting 100,000 new jobs.
  • The service-producing sector drove the increase, accounting for 138,000 new jobs, while the good-producing sector lost 13,000 jobs.

Chile Cancels Summit Where Trump Had Hoped to Sign China Accord

  • Chile’s biggest social unrest in a generation forced the government to cancel next month’s APEC summit in Santiago where President Donald Trump was expected to sign a preliminary trade accord with China.
  • Trump had said he expected to ink a “phase one” deal with his counterpart, Xi Jinping, at the Nov. 16-17 Asia-Pacific Economic Cooperation forum in Santiago.
  • Chile also canceled the United Nations climate change conference, known as COP25, scheduled for December in Santiago, President Sebastian Pinera said.

Bolton Expressed Concerns About Giuliani in Ukraine, Adviser to Testify

  • National security adviser John Bolton warned U.S. diplomats in June that Rudy Giuliani, President Trump’s personal attorney, could pose an obstacle to improving the White House’s relations with Ukraine, according to prepared testimony by a State Department official.
  • Christopher Anderson, who served as special adviser for Ukraine negotiations for two years until July 2019, is set to testify to House impeachment investigators on Wednesday that Mr. Bolton, in a June 13 meeting, supported “increased senior White House engagement” with Ukraine.
  • But Mr. Bolton, who left his post last month, expressed concern that Mr. Giuliani “was a key voice with the President on Ukraine,” which could hamper efforts to strengthen the relationship, according to a copy of Mr. Anderson’s opening statement reviewed by The Wall Street Journal.

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EUROPE & WORLD

U.K. Parliament Authorizes December General Election

  • British lawmakers voted overwhelmingly to hold a December election, a roll of the dice by parties across the political spectrum to try to either cancel or deliver Brexit after years of wrangling in Parliament.
  • After a day of legislative maneuvering on Tuesday, lawmakers approved a law triggering an election on Dec. 12.
  • The decision paves the way for one of the most unpredictable and divisive national ballots Britain has seen in a generation.

Sony in record second quarter profit, image sensor demand offsets slide in gaming earnings

  • Sony on Wednesday said operating profit jumped 16% in its strongest-ever result for a second quarter, as robust sales of image sensors offset a tumble in earnings from its gaming division.
  • Sony’s operating income came in at 279 billion yen ($2.6 billion) for the July-September quarter, 19% higher than an analyst consensus estimate.
  • Profits for its sensor division surged 59% to 76.4 billion yen, a record for any quarter.
  • Gaming profits slid 28% to 90.6 billion yen as contributions from big gaming hits last year, such as “Marvel’s Spider-Man”, waned and sales for its mainstay PlayStation 4 console, now six years old, fell.
  • It lifted its annual profit forecast to 840 billion yen from an earlier estimate of 810 billion yen, a tad under a consensus estimate of 848 billion yen and below last year’s record of 894 billion yen.

Airbus cuts delivery goal on Hamburg plant snags

  • Airbus cut its full-year delivery goal as the planemaker struggles with production delays at a recently expanded German plant.
  • Europe’s largest aerospace group expects to deliver “around 860” airliners in 2019 instead of the 880-890 previously targeted, the company said as it posted 1.6 billion euros ($1.78 billion) in adjusted operating income for the third quarter.
  • The adjusted operating profit figure rose 2% year-on-year as quarterly revenue fell 1% to 15.3 billion euros and net income rose 3% to 989 million. The group also trimmed its 2019 free cash flow goal to reflect the revised delivery outlook.
  • The situation “will become much more difficult” if tariffs continue to impact planes delivered in the latter half of 2020 and beyond, Chief Executive Guillaume Faury said

VW lowers 2019 sales outlook as demand cools

  • Volkswagen lowered its full-year sales outlook on Wednesday, warning of slowing demand even as nine-month adjusted operating profit jumped 11.2% on increased demand for SUVs as well as Skoda and Porsche cars.
  • The German carmaker said a slowdown in global demand would result in 2019 vehicle deliveries being in line with last year’s figures, adjusting its previous forecast for a slight rise.
  • Third-quarter adjusted operating profit jumped 37% to 4.82 billion euros.
  • Revenue for its passenger cars division is still expected to rise 5% this year and the company reiterated that it expects an operating profit margin for the passenger cars division and the group to be in the range of 6.5% to 7.5% for the full year.

Bayer says U.S. glyphosate plaintiffs more than double since July

  • Germany’s Bayer is now facing 42,700 U.S. plaintiffs blaming its glyphosate-based weedkillers for their cancer, more than twice the tally in July and potentially raising any future settlement.
  • Bayer revealed the spike in claims as it reported a 7.5% rise in third-quarter adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to 2.3 billion euros ($2.6 billion), in line with market expectations.
  • The company is now expecting 11.5 billion euros in full-year EBITDA, down from 12.2 billion euros estimated in July.

Deutsche Bank posts third-quarter loss on restructuring, weakness in trading

  • Deutsche Bank posted an 832 million euro ($924 million) third-quarter loss on Wednesday hurt by restructuring costs and weakness in fixed income trading, sending shares in Germany’s biggest lender down more than 7%.
  • Revenue fell 15% to 5.3 billion euros, short of a 5.6 billion euros expected by analysts, according to Refinitiv Eikon data.
  • Revenue at Deutsche’s cash-cow bond-trading division fell 13%, underscoring continued weakness at its investment bank.

Fiat Chrysler and Peugeot in talks over potential $50 billion tie-up

  • Talks between Fiat Chrysler and Peugeot owner PSA over a potential tie-up that could create a $50 billion car giant gathered pace on Wednesday, with one source saying a deal could be announced as early as Thursday.
  • The two groups said in separate statements they were holding discussions aimed at creating one of the world’s leading auto makers, better placed to tackle a host of costly technological and regulatory challenges facing the global auto industry.
  • A Fiat Chrysler Automobiles (FCA) spokesperson declined to comment on a timeline.

Huawei tightens China market hold with 42% share at expense of iPhones: Canalys

  • Huawei Technologies captured a record 42% of China’s smartphone market in the third quarter as local consumers rallied behind it after U.S. sanctions, leaving Apple to languish towards the bottom of the pile, market data showed.
  • Apple’s market share in China slipped to 5% from 7% in the year-ago quarter, according to a report that market research firm Canalys released on Wednesday.
  • Huawei, the world’s No. 2 maker of smartphones, was all but banned by the United States in May from doing business with American companies, significantly disrupting its ability to source key parts.
  • The company was then granted a reprieve until November but the blacklisting pushed up patriotic purchases of its smartphones in China, helping it more than offset a shipments slump in the global market.

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TODAY in HISTORY

  • The English parliament passed the Act of Supremacy, making King Henry VIII head of the English church. (1534)
  • George C. Marshall won the Nobel Peace Prize for originating the Marshall Plan. (1953)

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