US FINANCIAL MARKET
TRADE OPTIMISM, EARNINGS POWER WALL STREET TO FRESH RECORD HIGH
- Wall Street’s main indexes hit fresh record highs on Friday, led by gains in technology stocks as upbeat comments related to U.S.-China trade talks and solid earnings from semiconductor industry bellwether Applied Materials brightened sentiment.
- Shares in Applied Materials jumped 9.2% and pushed the Philadelphia Semiconductor index to an all-time high after the chip gear maker forecast first-quarter results above estimates.
- But Nvidia fell 3.3% as the company said it expects its gaming chip business to be impacted by seasonal weakness in the fourth quarter.
- Data showed U.S. retail sales rebounded in October, but consumers cut back on purchases of big-ticket household items and clothing, which could temper expectations for a strong holiday shopping season.
- White House economic adviser Lawrence Kudlow indicated progress toward a potential trade deal with China this week, while Federal Reserve Chairman Jerome Powell expressed optimism over the economy.
- In Hong Kong, the Hang Seng Index was flat Friday but ended the week down 4.8%, its worst week since early August, after antigovernment protests in the Chinese territory turned more violent with some of the worst clashes in six months of unrest.
Applied Materials expects strong first quarter on 5G rollout
- Applied Materials forecast first-quarter revenue and profit above Wall Street estimates on Thursday, as the chip gear maker expects more clients to upgrade their equipment ahead of the 5G rollout in key markets.
- Revenue fell marginally to $3.75 billion in the quarter ended Oct. 27, but beat analysts’ estimates of $3.68 billion.
- Revenue from semiconductor systems, which supplies gears for chip makers, rose 2.5% to $2.30 billion, edging past estimates of $2.23 billion.
- Sales from China, its largest market, rose 5.5% to $1.20 billion in the fourth quarter, contributing 32% to the overall revenue.
- The company forecast first-quarter revenue to be about $4.10 billion, plus or minus $150 million, above estimates of $3.71 billion.
- It expects adjusted profit to be in the range of 87 cents and 95 cents per share, above market expectations of 74 cents.
Nvidia follows Intel to predict strong growth in data center business
- Nvidia on Thursday joined rival Intel to predict strong demand for chips used in data centers after its third-quarter revenue and profit beat market expectations.
- Total revenue fell 5% to $3.01 billion, but was above expectations of $2.91 billion, while gross margin improved to 63.6% from 60.4% a year ago.
- In the reported quarter, revenue from gaming business fell 6% to $1.66 billion, but beat analysts’ estimate of $1.54 billion.
- Net income of $899 million was down 27% year over year but ahead of estimates on a per share basis.
- The company expects fourth-quarter revenue of $2.95 billion, plus or minus 2%, while analysts were expecting $3.06 billion.
J.C. Penney’s Shares Climb After Third-Quarter Results
- J.C. Penney boosted part of its financial outlook for this fiscal year and reported better-than-expected third-quarter results, sending shares up in premarket trading.
- In the third quarter, net sales were $2.38 billion, 10% lower than a year earlier. Those results missed estimates of $2.44 billion.
- Sales at stores open for more than a year fell 9.3% compared with expectations of a 7.74% slide.
- Penney had a net loss for the third quarter of $93 million compared with a $151 million loss a year earlier.
- Penney said it expects adjusted earnings before interest, taxes, depreciation and amortization to be over $475 million this fiscal year. It had been expecting between $440 million and $475 million.
- It maintained its full-year forecast for comparable store sales.
Netflix’s Content Chief Says ‘Nothing Has Changed’ With Disney+ Launch
- Netflix Chief Content Officer Ted Sarandos said “nothing has changed” with the launch of Disney’s new streaming service, expressing optimism that his company is prepared to weather competition from rivals because of its investments in original programming.
- Mr. Sarandos said with most of the major Hollywood players emerging as competitors, it’s unlikely they will want to keep offering programming to Netflix.
- He said he envisions a world where Netflix will have to rely solely on its own content, which is why the company has invested so aggressively in originals.
- Disney, which had been one of Netflix’s biggest suppliers of both original and library content, has indicated it will no longer sell shows to Netflix, instead focusing on Disney+ and Hulu, which it also controls.
Google to Restrict User Information It Gives Advertisers
- Google said its ad exchange would stop telling advertisers what categories of websites users are visiting, a concession to European data-protection authorities that have said the company’s real-time ad auctions violate European Union privacy laws.
- The changes will affect the process behind the electronic auction that happens in milliseconds to determine which ads show up when users load a website.
- In that time, hundreds of potential bidders can find out information about users, including their location, the unique number associated with their mobile device and even whether they have been reading about a disease, religion or politics.
- After the changes, which take effect in February, advertisers will still have access to data such as locations and unique device numbers, but no longer the contextual category describing the website on which the ad would appear.
Visa discloses FTC probe on debit transactions
- Visa on Thursday said the Federal Trade Commission (FTC) has initiated an inquiry into whether the payments processor’s actions prohibited merchants from using other debit payment networks.
- Bloomberg Law reported on Wednesday the regulator was investigating whether Visa and rival Mastercard blocked retailers from routing card transactions over alternative networks such as Pulse, NYCE and Star.
- Visa in a regulatory filing said it received a letter from the FTC on Nov. 4, and the company is cooperating with the bureau.
Amazon challenges Pentagon’s $10-billion cloud award to Microsoft
- Amazon.com on Thursday said it is contesting the Pentagon’s award of an up to $10 billion cloud computing deal to Microsoft, expressing concern that politics got in the way of a fair contracting process.
- In a company-wide meeting on Thursday, Amazon Web Services’ CEO Andy Jassy said it would be challenging for a U.S. agency to award a contract objectively when the president is disparaging one of the contestants, according to an Amazon spokesman.
- A challenge to the Defense Department’s award announced last month was widely expected by legal experts, analysts and consultants, especially after Trump publicly derided Amazon’s bid for the high-stakes contract.
- Amazon was considered a favorite for the contract, part of a broader digital modernization process of the Pentagon, before Microsoft emerged as the surprise winner.
Tesla Makes Some Improvements in Consumer Reports’ Latest Reliability Ranks
- After tumbling in the rankings last year, electric car maker Tesla rebounded slightly in Consumer Reports’ latest automobile reliability survey, with the organization restoring its recommended rating to two models: the Model 3 and Model S.
- While Tesla still ranks in the bottom third of all major car makers, reliability has improved, particularly on the Model 3, as the company has increased production and ironed out earlier manufacturing issues according to Consumer Reports.
- Tesla moved up four slots in this year’s rankings to no. 23 out of 30 brands.
- The Model X, however, continued to struggle, ranking among the least reliable models in the annual survey released Thursday.
US ECONOMY & POLITICS
U.S. Retail Sales Rebounded in October
- U.S. retail sales rebounded in October, but consumers cut back on purchases of big-ticket household items and clothing, which could temper expectations for a strong holiday shopping season.
- Retail sales increased 0.3% last month, lifted by motor vehicle purchases and higher gasoline prices, reversing September’s unrevised 0.3% drop, which was the first decline in seven months.
- Economists had forecast retail sales gaining 0.2% in October.
- Compared to October last year, retail sales advanced 3.1%.
- Sales at U.S. nonstore retailers—a proxy for purchases made online—were robust in October, rising 0.9% from the previous month and 14.3% from the prior year, the Commerce Department’s report showed.
Manufacturing Woes Deepen
- The Federal Reserve said on Friday industrial production declined 0.8% last month after an upwardly revised 0.3% decline in September. It was the largest decline since May of 2018.
- Economists had forecast production falling 0.4% last month after a previously reported 0.4% percent drop in September.
- Other data on Friday from the Federal Reserve showed manufacturing output tumbling 0.6% in October, the most since May 2018, after dropping 0.5% in September.
- Output at factories was weighed down by an 11.1% plunge in motor vehicle production because of a 40-day strike by workers at General Motors.
- Excluding auto production, manufacturing output slipped 0.1% last month.
Automakers around world await Trump tariff decision
- Automakers around the world are awaiting a decision from U.S. President Donald Trump on whether he will impose up to 25% tariffs on U.S. car and auto part imports after a 180-day review period elapsed this week.
- Officials from major automakers told Reuters they believe Trump will not impose new levies on vehicles from the European Union, Japan or elsewhere amid a trade war with China.
- Trump could make an announcement on Friday, but nothing is final until he signs off, administration officials say.
- A delay on tariffs could push the issue back to the middle of the 2020 presidential campaign and experts say it could be harder for Trump to impose a hefty tariff on a major consumer product close to an election.
Huawei, ZTE ‘cannot be trusted’ and pose security threat: U.S. attorney general
- Huawei and ZTE “cannot be trusted,” U.S. Attorney General William Barr said, labeling the firms a security threat as he backed a proposal to bar U.S. rural wireless carriers from tapping an $8.5 billion government fund to purchase from them.
- The Federal Communications Commission will vote on Nov. 22 and is proposing requiring the carriers to remove and replace equipment from the companies.
- Barr said in a letter to the FCC released on Thursday that “their own track record, as well as the practices of the Chinese government, demonstrate that Huawei and ZTE cannot be trusted.”
Deal on U.S.-Mexico-Canada Trade Pact Takes Shape, Pelosi Says
- House Speaker Nancy Pelosi said that Democrats were moving toward a deal with the Trump administration on a new trade accord with Canada and Mexico, but progressive members of her caucus are holding out for more protections for U.S. labor and stronger enforcement provisions.
- When the caucus met later Thursday, moderate freshman Democrats, many facing tough races next year, pushed for approval of the U.S.-Mexico-Canada Agreement, or USMCA.
- They said they rallied in force to show Mrs. Pelosi she would have the support to bring the measure to the House floor, even if it divided the caucus.
- The trade pact, if endorsed by Democrats and enacted by Congress, would replace the North American Free Trade Agreement and could be one of the few legislative accomplishments for this Congress.
Powell Signals Optimism on Economy but Cites Trade Uncertainties
- Federal Reserve Chairman Jerome Powell said the central bank was optimistic its interest-rate cuts this year would buoy the U.S. economy against lingering headwinds, including trade uncertainty and a slowdown in global growth.
- Mr. Powell largely repeated his view expressed Wednesday before a separate congressional panel that Fed officials believe their current policy stance will be appropriate so long as the economy grows moderately and the labor market remains strong.
- Asked if that meant the Fed planned to hold steady its benchmark interest rate through the next year, Mr. Powell said, “I wouldn’t say that at all.”
- If new data prompted a reassessment of the outlook, the Fed would “act appropriately,” he said on Wednesday.
EUROPE & WORLD
China’s JD.com beats quarterly revenue estimates, shares rise
- China’s JD.com beat analysts’ estimates for quarterly revenue on Friday, boosted by stronger sales in its core e-commerce business, sending its shares up nearly 7% before the bell.
- Total revenue rose 28.7% to 134.8 billion yuan ($19.27 billion) in the quarter. Analysts had expected 128.6 billion yuan.
- Net service revenue rose 47% to 16 billion yuan in the third quarter.
- Net product revenue rose nearly 27% to 118.85 billion yuan.
- Net income fell to 612.3 million yuan from 3 billion yuan.
- The company forecast net revenue between 163 billion yuan and 168 billion yuan in the fourth quarter.
- Analysts had expected revenue of 163.54 billion yuan.
Hong Kong confirms economy fell into recession amid protests, trade war
- Hong Kong sank into recession for the first time in a decade in the third quarter, government data confirmed on Friday, weighed down by increasingly violent anti-government protests and the escalating U.S.-China trade war.
- The economy shrank by 3.2% in July-September from the previous quarter on a seasonally adjusted basis, revised government data showed, in line with a preliminary reading.
- It revised down its forecast for full-year growth to a contraction of 1.3% versus an earlier estimate of 0-1% growth. That would mark the first annual decline since 2009.
Hong Kong’s Week of Rage Boils Over: ‘All Day All Night We Are Gonna Fight’
- Antigovernment protesters and police shocked Hong Kong with some of the ugliest incidents in nearly six months of unrest this week, leaving the city’s leaders scrambling for a way to restore order under increasing pressure from Beijing.
- A 70-year-old man died Thursday night after being hit in the head with a brick during a clash a day earlier.
- A 15-year-old boy was in critical condition on Wednesday, after appearing to be hit in the head by a tear-gas canister.
- On Thursday in Brazil, Chinese President Xi Jinping urged a tough police response to the protests.
- The Chinese government will “firmly support the Hong Kong police in strictly enforcing the law and firmly support the Hong Kong judicial bodies in severely punishing the violent criminals in accordance with the law,” Mr. Xi said.
China Lifts 4-Year Ban on U.S. Chicken
- China has agreed to lift a more than four-year-old ban on U.S. poultry imports, both governments said, in what a U.S. industry group said could lead to sales of about $2 billion of poultry.
- American poultry had been banned in China since 2015 following an outbreak of avian influenza, and the two sides have discussed lifting the ban as part of the trade negotiations between Beijing and Washington.
- The lifting of the ban is effective immediately, China’s General Administration of Customs said.
TODAY in HISTORY
- The Continental Congress approved the Articles of Confederation, the precursor to the U.S. Constitution. (1777)
- About 250,000 protesters against the Vietnam War, the largest war protest ever, converged peacefully on Washington, DC. (1969)
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