US FINANCIAL MARKET
U.S. Stocks Slide Amid Uncertainty Over Trade Deal
- The S&P 500 fell Thursday on skepticism about a U.S.-China trade truce, knocking the index from its highest level ever.
- Concerns over ongoing trade tensions—a constant overhang for the market all year—resurfaced overnight after Bloomberg reported that Chinese officials doubt they will be able to reach a long-term trade deal with the U.S., sending stock futures lower.
- President Trump attempted to assuage those worries, tweeting just prior to the market’s open that the two countries are working together to find a new site to sign the “phase one” trade pact after the previous meeting in Chile was abruptly canceled.
- Meanwhile, strong gains from shares of Facebook and Apple helped to keep the market from sliding further into the red.
- Facebook jumped 2.4% after the social-media giant’s quarterly profit and sales exceeded Wall Street’s expectations.
- Apple ticked up 1.1% after it reported growth in gadgets and services that helped offset a decline in iPhone sales.
- Kraft Heinz shares rose 12% after the food company beat forecasts for its quarterly profit.
- The pan-continental Stoxx Europe 600 declined 0.2%, while the Shanghai Composite slid 0.4% following data showing Chinese manufacturing activity fell to an eight-month low in October.
Apple Revenue Rises Even as iPhone Sales Decline
- Apple forecast sales for the holiday quarter that topped expectations, with Chief Executive Tim Cook saying that new iPhone 11 models were off to “a very, very good start” as sales of AirPods, Apple Watches and streaming services continue to rise.
- Apple said its revenue for the fiscal fourth quarter was $64.04 billion, compared with analyst expectations of $62.99 billion.
- The company’s core iPhone business had a 9% decline in sales for September, an improvement from the 15% decline reported over the three previous quarters.
- The company said sales of its services business rose 18% to $12.51 billion in the quarter, topping estimates of $12.15 billion.
- Growth also accelerated in Apple’s wearables business, with sales rising 54% to $6.5 billion in the September period behind the continued popularity of AirPods, topping analyst estimates of $12.15 billion and $6 billion.
- Profit fell 3% to $13.69 billion, topping expectations and grew on a per share basis due to Apple’s buyback program, but marked the first time since Tim Cook took over in 2011 that Apple’s profit has declined in all four quarters of a fiscal year.
- Apple said it expects $85.5 billion to $89.5 billion in sales for its fiscal first quarter that ends in December, with a midpoint of $87.5 billion that is above analyst expectations of $86.9 billion.
Facebook Reports Growth in Revenue, Users
- Facebook reported better-than-expected quarterly revenue and a rise in profit as growth in expenses slowed from a year earlier and the number of users ticked higher, assuaging investor fears of fallout from fierce scrutiny by regulators and lawmakers.
- Third-quarter revenue rose 29% compared with a year ago to $17.65 billion, beating analysts’ average estimate of $17.37 billion.
- The company said it has 1.62 billion daily active users of the platform, up 9% from just under 1.5 billion a year ago, with most of the new users outside the U.S., Canada and Europe.
- Monthly active users rose to 2.45 billion, in line with estimates while average revenue per user rose to $7.26, up 19% from $6.09 a year earlier.
- The world’s largest social media company reported $6.09 billion in profit, analysts expected $5.47 billion.
Starbucks beats same-restaurant sales estimates on digital push
- Starbucks beat quarterly sales estimates on Wednesday, as the world’s largest coffee chain’s loyalty program and new delivery options boosted demand and helped fend off competition, especially in the United States and China.
- Total net revenue rose 7% to $6.75 billion, beating the average analyst estimate of $6.68 billion.
- Starbucks’s rewards program’s active U.S. membership jumped 15% to 17.6 million in the fourth quarter, and sales at locations open for at least 13 months rose 5% in the fourth quarter, beating analysts’ average forecast of 3.95%.
- Net earnings rose to $802.9 million, from $755.8 million a year earlier.
- Starbucks estimated fiscal 2020 global comparable sales would rise 3% to 4%, while analysts had expected a 3.3% increase.
Lyft Raises Guidance, Reports Increased Revenue
- Ride-hailing company Lyft blew past Wall Street estimates for third-quarter revenue on Wednesday, but promotional costs rose as it battled Uber to attract more customers.
- Lyft said Wednesday revenue climbed 63% in the quarter to $955.6 million. Analysts had projected revenue of $915 million.
- Lyft said it had more than 22 million active riders in the third quarter, a 28% increase over the same quarter a year ago.
- It earned an average of $42.82 per active rider, up 27% from the $33.63 it brought in per rider last year.
- The company’s net loss widened to $463.5 million in the period, compared with a loss of $249.2 million in the year-earlier quarter.
- Lyft attributed the bigger loss to $246.1 million in stock-based compensation and related taxes, tied to the company’s March initial public offering.
Kraft Heinz Beats Profit Expectations as Sales Slide
- Sales of Kraft Heinz’s beleaguered products fell more than anticipated in the third quarter, but the food maker beat profit expectations after a year of weak results and strategic turmoil.
- The company reported $6.08 billion in sales for the third quarter, a drop of about 5% from a year earlier.
- Comparable sales, or those excluding currency fluctuations, mergers and divestitures, weakened 1.1% globally.
- Kraft Heinz said comparable sales for the third quarter dropped 1.6% in the U.S., its biggest market.
- Kraft Heinz reported a quarterly profit of $899 million, up from $619 million last year, thanks to the divestiture of its Canadian cheese business.
Altria Cuts Value of Juul Stake by $4.5 Billion
- Altria Group wrote down its investment in Juul Labs by more than a third and now holds it at a price that values the e-cigarette maker at about $24 billion.
- The U.S. tobacco company bought a 35% stake in the fast-growing e-cigarette rival for $12.8 billion last year, hoping to make up for falling sales of traditional cigarettes.
- Revenue for the quarter was flat at $6.86 billion compared to a year ago, while smokeable product volumes were down 6.5% from a year ago.
- The company reported a net loss of $2.60 billion in the third quarter, from a profit of $1.94 billion a year ago thanks to the markdown on Juul and a $636 million paper loss on the company’s investment in Chronos.
Estee Lauder cuts profit forecast, blames HK and China
- Estee Lauder cut its forecast for full-year profit on Thursday, citing an array of political and economic risks including ongoing protests in Hong Kong, Brexit and slowing growth in China.
- Overall, net sales climbed 11% to $3.90 billion, analysts on average had expected a revenue of $3.85 billion.
- Without giving a figure, the company said net sales from Hong Kong, which makes up just under 4% of its global business, had fallen in the first quarter.
- Net income increased 19% to $595 million, compared to $502 million in the same period a year ago – beating estimates.
- The company now expects 2020 adjusted profit between $5.85 and $5.93 per share, down from a prior range of $5.90 to $5.98.
Bristol-Myers posts better-than-expected results, Opdivo growth slows
- U.S. drugmaker Bristol-Myers Squibb reported higher-than-expected third-quarter profit on Thursday, helped by strong sales of blood thinner Eliquis, even as growth of its blockbuster cancer treatment Opdivo slowed.
- Revenue in the quarter rose 6% from a year ago to $6 billion, also topping Wall Street expectations of $5.89 billion.
- Sales of cancer immunotherapy Opdivo rose only 1% from a year ago to $1.82 billion, roughly in-line with expectations.
- Eliquis sales rose 22% to $1.93 billion, while analysts were estimating $1.85 billion.
- Bristol-Myers, posted net earnings of $1.35 billion in the quarter, down from $1.9 billion last year.
- The company raised both ends of its full-year adjusted earnings forecast range by 5 cents and now expects a profit of $4.25 to $4.35 per share. Analysts had been estimating the company will earn $4.28 a share in 2019.
Cigna raises 2019 forecast as Express Scripts buyout powers profit beat
- Cigna raised its full-year earnings target on Thursday, after reporting a better-than-expected quarterly profit boosted by its acquisition of pharmacy benefits manager Express Scripts last year.
- Total revenue more than tripled to $38.56 billion.
- Cigna’s $52 billion acquisition of Express Scripts helped amplify sales at its health services unit to $24.88 billion in the third quarter from $1.11 billion a year earlier.
- As Cigna added more customers and raised premiums on health plans sold to self-insured customers and large employers, revenue from its U.S. health insurance business rose nearly 12% to $9.15 billion in the quarter.
- Net income rose to $1.35 billion in the quarter, from $772 million a year earlier.
- Cigna also raised its forecast for 2019 adjusted income from operations to between $16.80 and $17 per share, from a prior range of $16.60 to $16.90. Analysts were expecting $16.81 per share.
DuPont profit edges past estimates on higher product prices, lower costs
- Industrial materials maker DuPont’s adjusted quarterly profit edged past analysts’ estimates on Thursday as higher prices for some of its products and lower costs lifted margins.
- Net sales fell 4.5% to $5.43 billion, as volumes were hurt by weak electronics and automotive demand.
- Operating core earnings margins improved 20 basis points, while cost of sales declined 4.5%.
- Net income stood at $367 million, compared to $73 million on a proforma basis in the same period last year.
- Dupont, which had raised its full-year profit forecast in August, narrowed its estimate for proforma adjusted earnings per share to between $3.77 and $3.82, from its prior forecast of $3.75 and $3.85 per share.
Western Digital announces CEO succession plan, signals lean second-quarter
- Hard-drive maker Western Digital said on Wednesday its second-quarter profit would come in sharply below analysts’ expectations and that its chief executive officer would retire soon, sending its shares down 10%.
- Western Digital posted a revenue of $4.04 billion, down 20% but beating analysts’ expectations of $3.93 billion.
- The company posted a loss of $276 million, compared to a profit of $511 million a year ago due to a steep drop in memory pricing.
- However, Western Digital forecast its second-quarter operating expenses to be between $750 million and $770 million on an adjusted basis, compared with analysts’ expectations of $741.8 million.
- The hard-drive manufacturer also forecast its second-quarter revenue in the range of $4.1 billion to $4.3 billion, compared with analysts’ expectations of $4.22 billion.
‘Dragons’ drive Zynga’s third quarter, ‘GoT’ casino game boosts forecast
- Zynga topped Wall Street estimates for quarterly bookings on Wednesday, driven by continued strength of its acquired mobile titles “Empires & Puzzles” and “Merge Dragons!”.
- The game-maker reported bookings of $395 million for the third-quarter, above analysts’ average estimate of $384.4 million.
- However, Zynga’s average daily active users were 20 million, below expectations of 21.53 million.
- Net income, which includes a one-time gain of $314 million, rose to $230.1 million, from $10.2 million a year earlier.
- It forecast current-quarter bookings of $415 million, beating estimates of $396 million.
Apache reorganizes operations as oil prices remain weak
- Apache reported a bigger-than-expected quarterly loss on Wednesday as the U.S. oil and gas producer battled lower crude prices and a decline in output, and the company said it had begun reorganizing its operations to save costs.
- Revenue plunged 25.5% to $1.48 billion as total production dropped 5.4% to 450,644 barrels of oil equivalent per day, hit by temporary delays in its Permian operations which are expected to continue into the current quarter as well.
- Average price per barrel of oil fell 15.2%, while gas prices dropped 35.2% per thousand cubic feet in the third quarter.
- The company’s net loss came in at $170 million, in the third quarter, compared with a profit of $81 million a year earlier.
Spirit AeroSystems profit falls short due to 787 Dreamliner charge
- Spirit AeroSystems on Thursday posted a lower-than-expected quarterly profit, hurt by a $33 million charge because of lower production on Boeing’s 787 Dreamliner aircraft.
- Total revenue rose about 6% to $1.92 billion. Analysts on average expected revenue of $1.98 billion.
- The company’s net income fell to $131 million in the third quarter, from $169 million a year earlier.
Corteva posts smaller-than-expected loss, North America seed volumes rise
- Pesticides and seeds producer Corteva posted a smaller-than-expected quarterly loss on Thursday as seed sales jumped after historic floods in the U.S. Midwest delayed the spring planting season.
- Net sales fell 2% to $1.91 billion, missing estimates of $2.0 billion, while organic sales stayed flat compared to a year earlier.
- The producer of soy and corn seeds said total volumes rose 3%, even as it faced challenges from an ongoing U.S.-China trade war that has cut U.S. exports of soybeans to top buyer China.
- Net loss narrowed to $527 million, from $5.34 billion a year ago which included a $4.5 billion goodwill impairment charge.
- The company now expects full-year core earnings at the bottom end of its prior forecast of $1.9 billion to $2.05 billion, largely due to a weaker Brazilian real.
- The company tightened its 2019 earnings per share forecast to between $1.20 and $1.26 from an earlier estimate of $1.06 to $1.31.
Carlyle’s Profit Rises in Latest Quarter
- Carlyle Group posted a stronger profit in the latest quarter as the private-equity firm was helped by gains in investment income and fees.
- The firm’s total revenue for the period rose to $786.6 million from $679.1 million a year earlier.
- Assets under management (AUM) rose 4% year-over-year to $221.8 billion.
- Carlyle reported net income in the third quarter of $92.2 million, compared with $17.5 million a year ago.
Apollo quarterly earnings flat, slightly missing analyst estimates
- Apollo Global Management reported flat third-quarter earnings on Thursday, slightly missing analysts’ expectations, as declines in its private equity and real estate businesses offset strong growth in its credit investments unit.
- Apollo’s total assets under management (AUM) grew to $322.7 billion, from $311.9 billion three months earlier.
- Apollo said its third-quarter after-tax distributable earnings per share came in at 54 cents, unchanged from a year earlier, and lower than the average analyst forecast of 57 cents.
Dunkin’ Brands profit beats on lower expenses, raises annual forecast
- Dunkin’ Brands reporting a better-than-expected quarterly profit on lower costs on Thursday and raised its forecast for 2019, betting on investments to improve delivery and add new menu items to boost growth.
- Revenues increased 1.7% to $355.9 million, compared to $350.0 million in the same period a year ago.
- Comparable sales at Dunkin’s U.S. stores grew 1.5% in the third-quarter, below estimates of a 1.7% rise.
- Net income rose to $72.4 million, from $66.1 million a year earlier.
- The company now expects adjusted earnings between $3.10 to $3.12 per share for fiscal 2019, better than its prior estimate of $3.02 to $3.05.
US ECONOMY & POLITICS
U.S. Consumer Spending Rose in September
- Personal-consumption expenditures (PCE), or household spending, increased a seasonally adjusted 0.2% in September from August, the Commerce Department said Thursday.
- Data for August was revised up to show consumer spending climbing 0.2% instead of the previously reported 0.1% rise.
- Thursday’s report showed incomes grew 0.3% last month.
U.S. labor costs rise in third quarter
- The Employment Cost Index, the broadest measure of labor costs, increased 0.7% after rising 0.6% in the second quarter, raising the year-on-year rate of gain in the ECI to 2.8%.
- Labor costs advanced 2.7% on a year-on-year basis in the second quarter.
- In the third quarter, wages and salaries, which account for 70% of employment costs, increased 0.9% after rising 0.7% in the prior period.
- Wages and salaries were up 2.9% in the 12 months through September, matching June’s gain.
U.S. Inflation Remains Soft in September
- The Federal Reserve’s preferred inflation gauge, the personal-consumption expenditures (PCE) price index, fell a seasonally adjusted 0.01% last month from August, its weakest monthly reading since January.
- Compared with September 2018, the index was up 1.33%, well below the Fed’s 2% target.
- An index of so-called core prices, which excludes volatile food and energy components, rose 0.05% last month from August and was up 1.67% on the year.
Fed Cuts Rate for Third Time This Year, Signals Pause
- The Federal Reserve cut interest rates for the third time this year but signaled it wouldn’t reduce them further unless the economy slowed sharply.
- “The current stance of [interest-rate] policy is likely to remain appropriate” as long as the economy expands moderately and the labor market stays strong, Fed Chairman Jerome Powell said at a news conference Wednesday after the conclusion of a two-day meeting. He didn’t rule out additional cuts if that favorable outlook faltered.
- The Fed’s policy statement also signaled a higher hurdle for rate reductions after the latest move, which will drop the central bank’s benchmark federal-funds rate by one-quarter point to a range between 1.5% and 1.75%.
- The committee voted 8-2 to lower its benchmark rate. The two dissenters preferred to hold rates steady.
Trump says U.S., China to announce new venue to ink trade deal soon
- U.S. President Donald Trump said on Thursday the United States and China would soon announce a new site where he and Chinese President Xi Jinping will sign a “Phase One” trade deal after Chile canceled a planned summit set for mid-November.
- Chile’s decision to cancel the Nov. 16-17 Asia-Pacific Economic Cooperation summit in Chile threw a wrench in plans for Trump and Xi to sign a deal on the sidelines.
- Trump offered no specifics on when a new meeting might be set but the White House said on Wednesday it expected to finalize a deal “within the same time frame.”
EUROPE & WORLD
Chinese Manufacturing Slumps to Eight-Month Low
- Chinese manufacturing activity fell to an eight-month low in October, an official gauge showed, raising another warning signal as hopes for a U.S.-China trade truce were dealt a further blow.
- China’s official gauge of factory activity, the manufacturing purchasing managers index, dropped to 49.3 in October from 49.8 in September, the National Bureau of Statistics said Thursday.
- Economists were expecting factory activity to have held steady this month, partly due to easing trade tensions between China and the U.S.
- The index has stayed below the 50 mark, which separates expansion from contraction, for six straight months, indicating worsening business sentiment despite the government’s efforts to spur economic growth.
Fiat Chrysler third-quarter operating profit tops expectations on North America
- Fiat Chrysler on Thursday posted higher than expected operating earnings for the third quarter, lifted by its North-American business, as the carmaker heads to a merger with French rival PSA.
- Net revenue was €27.3 billion, down 1% from the third-quarter last year.
- Fiat Chrysler said that third-quarter adjusted operating profit, which strips out one-time items, was €2 billion, up 5% from a year earlier when a charge related to a federal emissions-cheating lawsuit dented earnings.
- Adjusted operating profit in North America, which has in recent years driven the bulk of the company’s global earnings, was €2 billion, up about 4% over the prior-year quarter and resulting in a record margin of 10.6% in the region.
- The company affirmed financial guidance for full-year 2019 of more than €6.7 billion in adjusted operating profit, an improvement over the prior year.
- Fiat Chrysler also issued 2020 financial guidance Thursday, expecting to report adjusted operating profit of more than €7 billion and earnings per share of at least €2.80. The company expects to end next year with more than €2 billion in free cash flow.
Samsung’s Earnings Fall Sharply, Dragged Down by Chip Slump
- Samsung Electronics warned of a smaller mobile business profit on Thursday as its rival Apple gave a positive iPhone sales outlook, dampening hopes new models will help the world’s largest smartphone vendor finally get back on a growth track.
- Revenue fell 5.3% to 62 trillion won, in line with its earlier estimates.
- The world’s largest memory chipmaker said September-quarter operating profit fell by 56% to 7.8 trillion won ($6.7 billion), slightly above the 7.7 trillion won estimate the company released earlier.
- The semiconductor business reported operating profit of 3.1 trillion won, less than a quarter of its take in the same period last year amid oversupply and falling global demand for electronics.
- The company’s display business recorded a 6.3% increase in operating profit to 1.17 trillion won.
- The mobile business posted a 32% rise in operating profit to 2.9 trillion won ($2.5 billion) in the third quarter, the highest since the first quarter of 2018.
- But Samsung warned that fourth-quarter mobile earnings would decline as marketing costs rise and sales of flagship models soften from their post-launch peaks.
Japan’s Panasonic profit drops on trade war, Tesla battery business in red
- Panasonic on Thursday reported a 12% drop in its second-quarter operating profit, hurt by the ongoing Sino-U.S. trade war and its battery business with Tesla staying in the red.
- Still, the company’s earnings of 83.9 billion yen ($772.06 million) was 33% higher than analysts’ average, thanks to its housing and home appliances businesses posting solid profits.
- Panasonic’s automotive business, which includes car batteries, recorded an operating loss of 12.7 billion yen compared with a 7.1 billion yen loss in the year-ago quarter.
- The company maintained its profit forecast for the year through March at 300 billion yen, compared with an average estimate of 293.94 billion yen from 19 analysts.
Japanese drugmaker Takeda cuts full-year loss forecast
- Takeda trimmed its full-year loss forecast on strong sales of its core drugs and progress in its consolidation with Shire.
- Sales increased 89% to 1.66 trillion yen, while operating profit slid 45% to 40.4 billion yen from a year earlier.
- Operating loss for the full year ending March 2020 will be 110 billion yen ($1.02 billion), compared with its previous estimate for a loss of 166 billion yen and an average estimate of a 102.99 billion yen loss.
Shell Casts Doubt on Investor Pledge Amid Weaker Oil Prices
- Royal Dutch Shell warned on Thursday that uncertain economic conditions could slow its $25 billion share buyback program, the world’s largest, after its third-quarter profits easily beat expectations on strong oil and gas trading.
- Oil and gas production in the quarter fell by 1% from a year earlier to 3.6 million barrels of oil equivalent per day.
- Net income, based on a current cost of supplies, fell 15% to $4.8 billion from a year earlier but topped the $3.91 billion expected.
Hong Kong Protests Force City into Recession With ‘No Recovery in Sight’
- Hong Kong’s economy shrank 3.2% in the July-to-September quarter from the period just before, according to data released Thursday.
- That is the worst quarter-to-quarter drop since 2009. On a year-over-year basis, the economy shrank 2.9%.
- The gloom risks becoming self-reinforcing: 46% of respondents to a recent American Chamber of Commerce poll said they were pessimistic about Hong Kong’s long-term prospects.
TODAY in HISTORY
- A heavy snowfall trapped the Donner Party in the Sierra Nevada mountains. (1846)
- Work on the Mount Rushmore monument was completed. (1941)
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