DAILY MARKET REPORTS
- U.S. stocks dropped on Tuesday, as skepticism over chances of a breakthrough in the U.S.-China trade talks weighed on industrial and technology companies, while banks fell as flattening U.S. bond yield curves raised fears of a slowing economy.
- Investors initially cheered the 90-day cease fire on trade the U.S. and China agreed to over the weekend as a sign tensions were easing, sparking a rally that sent the Dow industrials up more than 280 points on Monday.
- But differing public announcements following the meeting and the announcement that U.S. Trade Representative Robert Lighthizer, a China hard-liner, would lead negotiations with Beijing, raised skepticism among some investors about the deal.
- Adding to the volatility: U.S. government bond yields, which move in the opposite direction of prices, fell further as investors also worried about the pace of U.S. growth.
- The move marked a further narrowing in the spread between U.S. 10-year and two-year Treasuries to the slimmest gap in more than a decade as investors signaled their lingering concerns over slowing economic growth.
- Toll Brother dropped 8.3% after the luxury home builder reported its first fall in quarterly orders in more than four years on rising interest rates and higher home prices.
- Dollar General fell 5% after lowering its full-year profit and sales forecasts, hit by higher costs related to hurricanes.
US FINANCIAL MARKET
Toll Brothers orders fall for the first time in more than four years
- U.S. luxury home builder Toll Brothers reported its first fall in quarterly orders in more than four years, hit by rising interest rates and higher home prices.
- Revenue surged 21.1% to $2.46 billion, above the Wall Street’s expectation of $2.35 billion.
- Toll, whose homes can cost upwards of $2 million, said orders, a key indicator of future revenue, dropped 13.3% to 1,715 units in the quarter, against the 6.5% rise expected by analysts.
- Toll’s net income rose to $311 million in the quarter, beating analysts’ consensus estimate.
Dollar General cuts full-year forecast, warns of tariff hit
- Dollar General cut its full-year profit and sales forecasts and warned that proposed tariffs on Chinese imports could begin to have a greater impact on its business and customers.
- Net sales rose 8.7% to $6.42 billion, beating analysts’ estimate of $6.38 billion.
- Same-store sales at the retail chain rose 2.8% for the quarter, topping the 2.43% increase forecast by analysts.
- Net income rose to $334.14 million, from $252.53 million a year earlier.
- The company cut its full-year profit forecast to $5.85 to $6.05 per share from the prior forecast of $5.95 to $6.15 per share, falling well below analysts’ average estimate of $6.11.
Federal Judge Voices Concerns About Justice Dept. Approval of CVS-Aetna Deal
- A federal judge sharply questioned the Justice Department’s decision to green-light CVS Health’s nearly $70 billion acquisition of Aetna, and said he may order CVS to halt its integration of Aetna’s assets while he considers the merger’s implications.
- It is highly unusual for a judge to make such an announcement, since Justice Department antitrust enforcers had approved the deal in October under the condition the companies sell Aetna’s Medicare drug business to preserve competition.
- Among other things, Judge Leon cited objections by the American Medical Association, which argued the merger would substantially reduce competition in health care to the detriment of patients.
Kroger to Sell Groceries in Walgreens Stores
- Kroger plans to sell groceries in branded sections of Walgreens Boots Alliance stores, as both retailers look for ways to keep customers loyal to their products.
- The first “Kroger Express” sections will open by early next year in 13 Walgreens stores near the grocer’s Cincinnati headquarters.
- The companies said they would add more of the 4,000-square-foot displays of produce, Home Chef meal kits and other products if customers take to them.
Visa, Mastercard propose merchants’ tourist card fee cut to end EU probe
- Visa and Mastercard have offered to cut merchants’ charges for non-EU credit and debit cards by at least 40% to end an EU antitrust investigation, part of a decades-long crackdown by the European Commission against such fees.
- The EU competition enforcer said interchange fees in which the merchant’s bank pays a charge to the cardholder’s bank which then subsequently passes on the cost to the merchant, result in higher consumer prices.
- Third parties have a month to provide feedback before the Commission decides whether to accept the offer or demand a bigger fee reduction.
Airbus, Lockheed join forces to pursue U.S. military refueling orders
- Europe’s Airbus is teaming up with a new U.S. partner, Lockheed Martin, to try to crack the U.S. military air tanker market nearly eight years after losing out to rival Boeing in a bitter battle to supply refueling planes to the U.S. Air Force.
- The agreement marks Airbus’s first major foray into the huge U.S. military market since its failed 2012 bid to merge with Britain’s BAE Systems and its large U.S. unit.
- The U.S. Air Force re-ran the competition and Boeing ultimately won a $49 billion contract in 2011 to build 179 767-based tankers for the U.S. Air Force, but it has missed deadlines on the resulting KC-46A program and piled up some $3 billion in costs.
GM moves to challenge Ford in U.S. commercial fleet sales
- General Motors is intensifying its attack on rival Ford’s lead in sales to U.S. commercial fleets to prop up profit margins amid weakening consumer demand, according to executives at the No. 1 U.S. automaker.
- The need for automakers to bolster U.S. sales and keep plants humming was highlighted last week when GM slated five North American factories for closure, including two making the type of sedan that has fallen out of favor with American consumers.
- GM is counting on new medium-duty Silverados – outfitted as tow trucks, utility bucket trucks and delivery trucks – to lift demand for its light-duty trucks and cars.
US ECONOMY & POLITICS
Trump Names Lighthizer to Run U.S.-China Negotiations
- President Trump named a China hard-liner to lead negotiations with Beijing, indicating the U.S. will pursue a tough stance in what is bound to be contentious talks over a trade dispute that has sent shivers through global markets.
- Mr. Lighthizer opposed China joining the WTO in 2001 and persuaded the president to ditch potential deals with Beijing over the past two years, and has been pressing for more tariffs on China as a way to build leverage over Beijing.
- The remarks came as a surprise to a Chinese leadership that had maneuvered for months to deal with Treasury Secretary Steven Mnuchin, who had led initial rounds of talks, but failed to resolve the dispute over the past year.
McConnell Predicts Lawmakers Will Avoid Government Shutdown
- Senate Majority Leader Mitch McConnell predicted lawmakers would avert a government shutdown when a proposed stopgap measure expires later this month, saying neither party wants the political blame for a lapse in funding.
- The biggest point of contention remains Mr. Trump’s demand that Congress approve $5 billion to build more of a wall along the southern border.
- Democrats have balked at the $5 billion figure, but Senate Minority Leader Chuck Schumer (D., N.Y.) said last week that Senate Democrats would support $1.6 billion in border security that was included in a bipartisan Senate bill.
Trump, After Boosting U.S. Military Budget, Says It Is Too High
- President Trump said Monday that U.S. military spending was “Crazy!”, an apparent shift from his earlier calls for budget increases to rebuild what he labeled a depleted force.
- In August, the Senate approved a $716 billion defense budget for the fiscal year 2019, an $82 billion hike from the previous year.
- The Pentagon had expected the budget would rise the following fiscal year, 2020, to $733 billion.
- But with the budget deficit growing, Mr. Trump said in October that agencies should trim their 2020 budgets by 5%.
- He specified less than a 5% cut for the Defense Department, however. “We know what the new budget is for the Defense Department. It will probably be $700 billion,” a 2.3% cut, in fiscal 2020.
CIA Director Gina Haspel to Brief Senators Tuesday on Saudi Journalist’s Death
- Central Intelligence Agency Director Gina Haspel will brief Senate leaders Tuesday morning on what the spy agency knows about Saudi journalist Jamal Khashoggi’s death at the hands of Saudi operatives, people familiar with the matter said.
- According to a highly classified CIA assessment, Saudi Crown Prince Mohammed bin Salman sent at least 11 messages to his closest adviser, who oversaw the team that killed Mr. Khashoggi, in the hours before and after the journalist’s death on Oct. 2.
- Bipartisan opposition to President Trump’s Saudi policy is increasing among lawmakers, who are angered by civilian casualties in Yemen caused by Saudi-led airstrikes and by the death of Mr. Khashoggi, a U.S. resident and Washington Post columnist.
Mike Flynn Tuesday Report Expected to Shed Light on Mueller Probe
- A new filing is expected to detail how Trump adviser Mike Flynn has been helping federal investigators since pleading guilty, potentially providing a window into the probe into Russian election interference and any links to the president’s campaign.
- In a memo, the special counsel is scheduled to report what sentence it is seeking for Mr. Flynn, who pleaded guilty to making false statements about the content of his calls with Moscow’s ambassador a month before President Trump’s inauguration.
- Mr. Flynn faces as long as six months in prison, but he could receive a reduced sentence, including probation with no jail time, depending on the nature and extent of his help.
- The new filing is expected to provide an explanation of how Mr. Flynn has helped Mr. Mueller’s team.
EUROPE & WORLD
EU Court Throws Wrench into Fraught Brexit Debate
- Theresa May’s attempt to push her Brexit deal through a critical vote next week was further complicated by a court opinion saying the U.K. doesn’t need to seek permission from other members in order to reverse its decision to leave the EU.
- The European Court of Justice’s opinion, which requires confirmation in a final court ruling, says the U.K. can unilaterally stop the process of leaving the EU, something that Brussels and the U.K. government had sought to oppose.
- The British Parliament is set to vote on Dec. 11 on whether to ratify the Brexit deal that Prime Minister May spent nearly two years hammering out.
- Her government is bracing for a defeat in the Brexit vote with a shortfall of between 50 to 100 votes, analysts say. If there is a landslide defeat, the prime minister could face a vote of no confidence or even resign
France’s Macron Blinks in Standoff With Yellow Vests
- French President Emmanuel Macron delayed a planned tax increase on fuel, handing a victory to a grass-roots protest movement that has massed across France to challenge his agenda.
- Faced with another weekend of destructive protests by the “gilets jaunes”—or yellow vests—Prime Minister Édouard Philippe told a news conference Tuesday the tax hike would be pushed back six months.
- The protests have become a test of Mr. Macron’s resolve to forge ahead with his broader agenda, particularly his pro-business overhaul of the French economy.
Apple assembler Foxconn considering iPhone factory in Vietnam: state media
- Apple’s biggest iPhone assembler, Foxconn, is considering setting up a factory in Vietnam to mitigate any impact of an ongoing trade war between the United States and China, Vietnamese state media reported.
- The report comes after several executives singled out Vietnam and neighboring Thailand as preferred destinations should they need to shelter operations from the trade war, braving hurdles such a lack of skilled labor and inadequate infrastructure.
- “Foxconn Group and the Hanoi People’s Committee are working together to open an iPhone manufacturing facility in Vietnam to negate the impacts of the U.S.-China trade war,” the Vietnam Investment Review reported on Monday.
TODAY in HISTORY
- George Washington delivered his farewell address to his officers at Fraunces Tavern in New York City. (1783)
- The Senate approved S. participation in the United Nations. (1945)
- Dianne Feinstein became San Francisco’s first female mayor. (1978)
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