US FINANCIAL MARKET
U.S. STOCKS CLIMB AS CHINA CALLS FOR BETTER COMMUNICATION ON TRADE
- U.S. stocks inched higher Friday as Chinese President Xi Jinping called for Beijing and Washington to strengthen communications, prompting cautious optimism on trade negotiations.
- The U.S. and China are at a critical juncture and should avoid misunderstandings while pushing relations in the “right direction,” Mr. Xi said Friday during a meeting with former Secretary of State Henry Kissinger, according to state media.
- China wants to work toward an initial deal on the basis of “mutual respect and equality,” he said in a rare set of remarks about the trade negotiations between the world’s two largest economies.
- But Trump, speaking Friday on Fox News Channel’s “Fox & Friends,” said he had made clear to Xi that “this can’t be an even deal” because of China’s trade surplus with the United States.
- Shares of Nordstrom jumped 7.5% after the department-store chain’s third-quarter profit beat Wall Street’s expectations.
- Tesla fell 6.2% after the electric-vehicle maker unveiled its new pickup truck, dubbed the “Cybertruck.”
Nordstrom bucks trend of grim retail forecasts; share jump 8%
- Nordstrom raised its 2019 forecast, unlike many competitors, and reported third-quarter profit above expectations on Thursday as it sold more off-price clothing and kept inventories in check, sending the retailer’s shares up about 8% in extended trading.
- Total revenue fell 2% to $3.67 billion in the third quarter ended Nov. 2, in line with the analysts’ average estimate.
- Net sales at its off-price stores rose 1.2% in the third quarter and digital sales climbed about 7% and now represent 34% of the company total sales from 31% in the same quarter last year.
- Net income rose to $126 million, from $67 million a year ago.
- The company also raised the lower-end of its full-year profit to $3.30 to $3.50 per share from the prior forecast of $3.25 to $3.50 per share and said the impact of U.S. tariffs would not be significant for the year.
Gap’s quarterly profit beats; says working on plan to split Old Navy
- Gap edged past lowered expectations for quarterly profit on Thursday and reiterated its plan to separate Old Navy from the namesake brand, days after the retailer cut its annual forecast and replaced longtime chief executive officer.
- Net sales fell 2.2% to $4 billion in the third quarter, but beat the analysts’ average estimate of $3.96 billion.
- Net income during the period fell to $140 million, from $266 million a year ago.
- Gap expects total same-store sales for the fiscal year to be down mid-single digits, compared with a prior outlook of down low single digits. Net sales should decline at a low single digit pace
J.M. Smucker cuts full-year forecast on weak pet food demand
- J.M. Smucker cut its forecast for full-year profit and sales on Friday after missing Wall Street expectations for quarterly revenue that was dented by weakness in its pet foods business.
- Net sales fell to $1.96 billion from $2.02 billion in the quarter. Analysts had expected sales of $1.97 billion.
- Sales in the Pet Food segment, Smucker’s biggest, fell 2% in the second quarter, while analysts had projected a 0.8% rise.
- Net income rose to $211.2 million from $188.5 million a year earlier.
- The company now expects to earn between $8.10 and $8.30 per share on an adjusted basis in fiscal 2020, compared with its prior forecast range of $8.35 to $8.55.
- Smucker also forecast full-year net sales to fall 3%, lower than its previous guidance of a decline of 1% to flat.
Splunk’s Earnings & Revenues Surpass Estimates
- Revenues soared 30.2% year over year to $626.3 million and beat the Zacks Consensus Estimate by 4%.
- The year-over-year upside was driven by greater utilization of Splunk’s products by existing customers and new customer wins.
- License revenues (59.7% of revenues) were $373.7 million, up 33.6% year over year.
- Maintenance & service revenues (40.3% of revenues) rose 25.5% to $252.7 million.
- Cloud revenues soared 78% from the year-ago quarter to $80 million on the back of increased utilization of cloud-based services.
- Splunk stated that 92% of software bookings were either term or cloud.
- Remaining performance obligation (RPO) was $1.45 billion, up 52% year over year.
- RPO bookings grew 42% year over year to $839 million.
- Splunk also said it added 450 new enterprise customers in the reported quarter.
- Operating profit was $105.5 million, up 61.3% from the year-ago quarter.
- Operating margin expanded 320 bps on a year-over-year basis to 16.8%.
Shattered glass: Futuristic design questioned after Tesla Cybertruck launch
- Tesla’s launch of its futuristic Cybertruck pickup suffered a setback when its “armored glass” windows shattered but it was the overall look of the car that worried Wall Street on Friday, sending the company’s shares down 6% on Friday.
- The entry-level, $39,900 rear-wheel drive model would have a range of more than 250 miles.
- The top-end model with so-called tri-motor and all-wheel drive would be able to drive more than 500 miles on a single charge and cost $69,900, according to the company.
- It would also have the acceleration of a sports car, going from zero to 60 in 2.9 seconds, Mr. Musk said.
- Critics online also made fun of the space-craft style look.
- Customers can order the truck with a deposit of just $100, though production “nears in late 2021,” Tesla said on its website.
Facebook Weighs Steps to Curb Narrowly Targeted Political Ads
- Facebook is discussing increasing the minimum number of people who can be targeted in political ads on its platform from 100 to a few thousand, according to people familiar with the matter.
- The potential move is part of an effort to make it less easy for advertisers to microtarget, which has been criticized as enabling political actors to single out groups for misleading or false ads that aren’t seen by the broader public.
- Facebook has sought feedback from large Republican and Democratic political ad buyers about boosting the minimum number of people who are targeted in political ads as well as other ideas, one of the people familiar with the matter said.
- The discussions picked up around the time Facebook Chief Executive Mark Zuckerberg testified on Capitol Hill about a month ago about the company’s plans for a new cryptocurrency.
WeWork to Cut Around 17% of Workforce
- Troubled office-space startup WeWork said it would shed around 2,400 jobs following its botched initial public offering in an effort to reduce mounting losses.
- The job cuts, which represent about 17% of its workforce, began around the globe weeks ago and spread this week to employees in the U.S., the company said.
- The layoffs were initially delayed from taking place earlier this month because WeWork couldn’t afford the severance costs, people familiar with the matter have said.
Microsoft granted license to export ‘mass-market’ software to Huawei
- Microsoft said on Thursday it had been granted a license from the U.S. government to export software to Huawei, most likely for the company’s Windows operating system.
- Microsoft declined to comment beyond its statement on which products had been approved, and the Commerce Department declined to comment.
- Huawei has been anxiously awaiting a license for Alphabet’s Google to supply its mobile services to new models.
- Without access to Google services such as its Play Store for apps, Huawei phones will become harder to sell to consumers outside of China.
- Google declined to comment on Thursday.
US ECONOMY & POLITICS
U.S. factory and services activity quicken in November: Markit
- U.S. manufacturing output accelerated in November to its fastest pace in seven months and services activity also picked up more than expected, a survey of purchasing managers showed on Friday in a sign of the continued resilience of the U.S. economy in the face of the U.S.-China trade war and other headwinds.
- IHS Markit said its “flash” purchasing managers index (PMI) for manufacturing rose to 52.2 in November from a final reading of 51.3 in October, while its preliminary services PMI increased to 51.6 this month from 50.6 last month.
- Markit’s flash composite index, a blend of the two, rose to 51.9 from 50.9 in October and reaching its highest level since July.
US consumer sentiment comes in higher than expected for November
- Consumer sentiment unexpectedly rose in November, according to data released Friday by the University of Michigan.
- The university’s index of consumer sentiment climbed to 96.8 from 95.5 last month.
- Economists expected consumer sentiment to dip to 94.9 for November.
- An index reflecting consumer expectations moving forward also rose to 87.3 from 84.2 in October.
Trump says deal with China is ‘potentially very close’
- U.S. President Donald Trump said on Friday that a trade deal with China is “potentially very close” and that he stands with both the people of Hong Kong and Chinese President Xi Jinping amid massive protests in Hong Kong.
- Trump, speaking on Fox News Channel’s “Fox & Friends,” said he had made clear to Xi that “this can’t be an even deal” because of China’s trade surplus with the United States.
- “We have to stand with Hong Kong but I’m also standing with President Xi,” said Trump.
Xi Jinping Calls for U.S.-China Cooperation at ‘Critical Juncture’
- Chinese President Xi Jinping said China and the U.S. should strengthen communication on strategic issues, according to state media, which didn’t report any direct comments by the leader on the two countries’ trade war.
- Washington and Beijing should seek common ground while putting aside differences, Mr. Xi said Friday during a meeting with former Secretary of State Henry Kissinger, according to China Central Television.
- Mr. Xi was referring to efforts by negotiators to strike a partial deal that would leave more difficult issues for later.
- However, Mr. Xi told some visitors at the Great Hall on Friday, “We want to work for a ‘phase one’ agreement on the basis of mutual respect and equality,” according to Reuters citing a pool report.
- “When necessary we will fight back, but we have been working actively to try not to have a trade war.
- We did not initiate this trade war, and this is not something we want,” he said.
- As part of phase one, Beijing has been pressing Washington to roll back existing tariffs as well as those set to take effect Dec. 15.
U.S. senators urge Trump administration to halt Huawei license approvals
- A bipartisan group of 15 U.S. senators urged the Commerce Department to suspend issuing licenses to U.S. firms that conduct business with China’s Huawei Technologies Co, saying it could threaten U.S. security.
- In a letter on Thursday to President Donald Trump, the senators said the administration should halt issuing licenses until the administration provides Congress “a report outlining specific criteria for determining whether or not the approval of any license poses a national security threat.”
- The letter, signed by Senate Democratic Leader Chuck Schumer and Republican Senator Tom Cotton, demands congressional leaders “be notified prior to the issuance of any licenses to U.S. firms to sell components to Huawei and its affiliates.”
- It was also signed by Republicans Ben Sasse, John Cornyn, Josh Hawley and Rick Scott and Democrats Elizabeth Warren, Richard Blumenthal, Ron Wyden and Cory Booker.
- A U.S. official said on Wednesday that of roughly 300 license requests, about half have been processed, with roughly half of those – or one-quarter – approved and another quarter have received notices of intent to deny.
Trump Signs Spending Bill That Avoids Government Shutdown
- President Trump signed a short-term spending bill Thursday, hours before the government was set to run out of money, as disagreements on border-wall funding have again stymied progress on the full-year funding bills.
- Earlier in the day, the Senate approved the stopgap measure, which keeps the government funded through Dec. 20.
- The House passed the bill Tuesday.
- The bill also provides for a 3.1% pay increase for military personnel, sets funding aside for conducting the decennial census and extends funding for a number of health-care programs.
House Democrats see progress on U.S.-Mexico-Canada trade deal, passage possible this year
- U.S. House Democrats said on Thursday they ironed out some differences with the White House over a trade agreement with Canada and Mexico, and Congress could still vote on the deal – one of President Donald Trump’s top priorities – this year.
- House of Representatives Speaker Nancy Pelosi said the two sides made progress during her more than hour-long meeting with U.S. Trade Representative Robert Lighthizer and House Ways and Means Committee Chairman Richard Neal.
- The USMCA deal, which will replace the $1 trillion North American Free Trade Agreement, or NAFTA, faces opposition from labor unions that worry it will not protect U.S. jobs.
Michael Bloomberg Files Paperwork to Create Campaign Apparatus
- Billionaire Michael Bloomberg filed paperwork with the Federal Election Commission Thursday that would allow him to enter the Democratic presidential race, which an aide said was part of the former New York City mayor’s preparations for a potential bid and didn’t reflect his final decision.
- Mr. Bloomberg, who has been considering a run for the last two weeks, filed for a new presidential campaign committee, Mike Bloomberg 2020, Inc., according to the filing.
- He has also begun filing paperwork to appear on primary ballots in states with early deadlines.
EUROPE & WORLD
Global Economy to Stagnate if Trade Uncertainty Persists, OECD Warns
- The global economy is at risk of settling into a low-growth rut without urgent action to roll back recently erected obstacles to trade and greater investment in tackling climate change, the Organization for Economic Cooperation and Development said Thursday.
- In its quarterly report on the outlook for the global economy, the Paris-based research body said it continues to expect that world output of goods and services will increase this year at the slowest pace since the financial crisis.
- The OECD lowered its forecast for global economic growth in 2020 to 2.9% from the 3% it expected in September.
- That would mark an unchanged pace of expansion from 2019, and only a modest acceleration in 2021.
- This time last year, the OECD had expected growth of 3.5% in each year.
- The OECD expects U.S. economic growth to slow to 2% next year and in 2021, from 2.3% this year.
Slowing Business Activity Sounds Alarm for Global Economy
- Business activity in some of the world’s largest economies remains sluggish as 2019 draws to a close, amid signs that a long slowdown in manufacturing is spreading to the services sector.
- Surveys of purchasing managers published Friday show that declines in factory activity in Japan and Europe are becoming less severe, although service providers reported less buoyant growth than in earlier months.
- Data company IHS Markit said its composite Purchasing Managers Index (PMI) for the eurozone—a measure of activity in businesses—fell to 50.3 in November from 50.6 in October, indicating the currency area’s economy was close to stagnation.
- A similar survey of Japanese businesses pointed to a decline in activity during November, which was partly due to severe weather and an October increase in the sales tax.
- In the U.K., the survey of purchasing managers recorded the sharpest decline in business activity since July 2016, the month after Britons voted to leave the EU.
Millions of Hong Kongers to Take to the Streets Again—This Time to Vote
- Voters head to the polls here Sunday for scheduled district elections that may offer residents a political outlet to vent frustrations after months of violent clashes between protesters and police.
- More than four million registered voters can take part in the semiautonomous city’s most representative and democratic election and—for the first time—all 452 elected seats for District Councils will be contested.
- Many candidates are young people entering political life for the first time and provide challenges against established rivals allied to the government and Beijing.
- By some estimates, pro-democrats will need to approximately double the seats they currently have to gain an overall majority.
- If that happens, they would be able to exert greater influence over the mostly pro-Beijing committee members who elect the city’s leader, next scheduled to occur in 2022.
TODAY in HISTORY
- President Franklin Roosevelt, British prime minister Winston Churchill, and Chinese leader Chiang Kai-shek met in Cairo to discuss measures for defeating Japan. (1943)
- President John F. Kennedy was assassinated while riding in a motorcade in Dallas. (1963)
- Margaret Thatcher announced her resignation as prime minister of the United Kingdom. (1990)
This information has been prepared from sources believed to be reliable, but no representation is being made as to its accuracy or completeness. The information provided should be used only as general information and is not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in the material may not develop as predicted. All indices, such as the S&P 500, are unmanaged and may not be invested into directly. Sources: Reuters, Bloomberg, the Wall Street Journal.
Content posted by third parties on this site is screened in order to protect clients’ privacy and comply with regulatory requirements. Content containing sensitive personal information, inappropriate language, information about specific investments, misleading information, information about other companies or websites, or information related to litigation will be removed. Content posted by third-parties on this site remains the responsibility of the party posting the content and is not adopted or endorsed by Pence Wealth Management or LPL Financial. Any opinions or statements posted by third parties are their own and may not be representative of the experience of others and are not indicative of future performance or success. Third party content on this site does not reflect the views of LPL Financial and have not been reviewed by LPL Financial as to accuracy or completeness.