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WALL STREET ADVANCES ON SIGNS OF NORTH KOREA TALKS

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US FINANCIAL MARKET
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DAILY MARKET REPORTS

  • U.S. stocks opened higher on Tuesday on signs of easing tensions in the Korean Peninsula and mounting pressure against potentially damaging metals tariffs proposed by President Donald Trump.
  • The market is recovering from a bout of concern over the possibility of a global trade war following remarks by Trump last week, however top Republicans urged Trump late Monday not to go ahead with the tariffs.
  • North Korea is willing to hold talks with the United States on denuclearization and will suspend nuclear tests while those talks are underway, the South stated after a delegation returned from the North after meeting leader Kim Jong Un.
  • FRB of Dallas President Robert Kaplan told CNBC the base case on interest rate hikes has not changed and remains at three for the year, adding that the United States is either at or beyond full employment now.
  • The Reserve Bank of Australia kept interest rates on hold Tuesday and signaled it had no plans to adjust policy settings soon.
  • Six of the 11 major S&P sectors were higher, led by gains in information technology and energy.
  • Target shares slipped 2.3 percent after the big-box retailer reported lower-than-expected profit for the holiday quarter.

US FINANCIAL MARKET

Target profit misses estimates in the holiday quarter, outlook disappoints

  • Target missed profit estimates for the holiday quarter as it invested to compete better online and in stores and its financial outlook disappointed some investors, sending shares lower in premarket trading.
  • Sales grew 10 percent to $22.77 billion, topping the average estimate of $22.53 billion, helped by an additional week in the fourth quarter.
  • The retailer’s quarterly comparable sales growth of 3.6 percent beat analyst expectations of 3.1 percent, and was its strongest performance since the first quarter of 2012, thanks to higher customer traffic at both stores and online.
  • Online sales during the quarter surged 29 percent and contributed 1.8 percentage points to overall comparable sales. The company enjoyed a fourth straight annual increase of more than 25 percent for online sales in the year through Feb. 3.
  • Looking forward, the company expects only modest comparable sales growth in the low single digits for the first quarter, with analysts expecting 2.36 percent.

3M Appoints Michael Roman CEO, Inge Thulin to Become Executive Chairman

  • 3M said Chief Executive Inge Thulin will step down from that position in the summer as the company splits its CEO and chairmanship roles.
  • Mr. Thulin will become executive chairman, and Chief Operating Officer Michael Roman take over as chief executive on July 1, a move that puts two company veterans at the helm.
  • In his roughly three-decade career at 3M, Mr. Roman has led the company’s industrial division, its largest business group, which accounts for one-third of global sales and has served as the company’s chief strategist.

CVS Readies $44 Billion Bond Sale

  • Pharmacy chain CVS plans to sell about $44 billion of bonds to help pay for its $69 billion acquisition of health insurer Aetna Inc. —the largest corporate bond sale in more than two years.
  • Regulators aren’t expected to pass judgment on the Aetna purchase until late this year but CVS plans to raise its acquisition financing in a single day to avoid the risk that interest rates rise before then.
  • CVS will sell bonds with repayment dates ranging from about two years to 30 years and the 30-year portion would remain outstanding even if regulators reject the deal, which would force CVS to buy back most of the debt.
  • The bonds and loans CVS is borrowing for the acquisition would increase its debt load to around 4.5 times EBITDA, from 3.2 times in June.

UnitedHealth Will Pass Drug Rebates Directly to Some Consumers

  • UnitedHealth’s insurance arm will change how it handles some rebates it gets from drugmakers, passing them on to individuals who take the medicines amid pressure to reduce costs and bolster transparency around pharmaceuticals.
  • The move by the biggest U.S. insurer, which will affect only a limited slice of customers, spotlights a broader debate over spending on drugs and the industry’s opaque system of discounts and rebates.
  • UnitedHealth said that starting next year, the plans that its UnitedHealthcare unit insures for employers will redirect the “overwhelming majority” of the rebate sums to the individuals taking the affected drugs.
  • The change for around 7.5 million covered people, will reduce costs for individuals by amounts ranging from a few dollars to more than a thousand dollars per prescription, UnitedHealth said.

Chevron in talks to sell stake in Canada LNG project – sources

  • Chevron is exploring options including the sale of a minority stake in its Canadian liquefied natural gas (LNG) project as it pushes ahead, three people familiar with the matter told Reuters.
  • Kitimat, the project in British Columbia, a 50/50 joint venture with Australia’s Woodside Petroleum has a 20-year, 10 million-metric-ton-per-year export license for LNG and is expected to cost tens of billions of dollars to build.
  • Among the parties in talks with Chevron for a possible stake in Kitimat LNG are Petroliam Nasional, or Petronas, which scrapped its own $36 billion LNG project in British Columbia last year due to challenging market conditions.
  • Chevron acquired its 50 percent stake in Kitimat in early 2013 from EOG Resources and Encana.

Nordstrom rejects initial take-private offer by family group

  • Nordstrom said it had rejected an indicative take-private offer from its founding family group worth about $8.4 billion, a 2.2 percent discount to the U.S. department store operator’s market value as of the end of trading on Monday.
  • The fact that the family group’s cash offer of $50 per share was lower than the $51.90 closing price on Monday illustrates the challenges of orchestrating a bid that will appeal to shareholders as well as the investment banks financing the bid.
  • The family group is now working on a new offer, according to a source familiar with the matter who requested not to be identified discussing confidential deliberations.

Ryanair to use ‘pretty much all’ of Boeing 737 buying options

  • Ryanair expects to exercise “pretty much all” of the options it has to buy Boeing’s 737 MAX 200 jets, according to chief executive Michael O’Leary.
  • Ryanair has options to buy 100 of the planes, which it expects will lower its fuel consumption and offers a greater number of seats.
  • The Ireland-based company was the launch customer for the 196-passenger jet in 2014.

U.S. energy storage market to nearly triple this year: report

  • U.S. deployments of energy storage systems will nearly triple this year thanks to sharply lower costs and state policies that support the case for installing batteries in homes, businesses and along the power grid.
  • That forecasted growth of 186 percent to 1,233 megawatt-hours of storage from 431 MWh compares with the 27 percent increase in 2017, according to a report by GTM Research published on Tuesday.
  • Storage system costs have fallen by roughly two thirds in the last five years. In addition, more states are mandating utilities procure storage systems.
  • The market for energy storage is still small, generating just $300 million in value last year, the report said.
  • Batteries have long held the promise of solving the intermittent nature of renewable energy sources such as wind and solar, so their development is closely watched by investors, regulators and power companies.

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US ECONOMY & POLITIC

North Korea Says It Is Open to Talks With U.S. About Abandoning Nuclear Weapons

  • North Korean leader Kim Jong Un told a visiting South Korean delegation that he was willing to hold talks with the U.S. about giving up nuclear weapons and normalizing relations with Washington, officials in Seoul said Tuesday.
  • During meetings in Pyongyang, Mr. Kim, who has conducted a series of missile launches over the past year, signaled a “clear intent to pursue denuclearization” if the security of North Korea and his regime are guaranteed
  • Previous rounds of negotiations with North Korea, some lasting years, have all failed to persuade Pyongyang to change course as it has worked to advance its ability to strike the U.S. with nuclear weapons.
  • Senior U.S. officials have expressed doubts about the opening as a propaganda ploy meant to drive a wedge between Seoul and Washington, but have publicly said they support South Korean efforts to bring Pyongyang to the negotiating table.

US factory orders post biggest drop in six months

  • New orders for U.S.-made goods recorded their biggest decline in six months in January and business spending on equipment appeared to be slowing after strong growth in 2017.
  • Factory goods orders dropped 1.4 percent amid a broad decrease in demand, the largest drop since July 2017 and ended five straight months of increases.
  • December’s report was revised to show orders rising 1.8 percent instead of the previously reported 1.7 percent increase.
  • Core capital goods shipments increased 0.7 percent in December. Business spending on equipment is cooling after growing by a robust 4.8 percent in 2017.

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EUROPE & WORLD

Global Inflation Stalled in January

  • Inflation in the world’s largest economies was unchanged for a third straight month in January, while it fell in rich countries, according to figures released by the Organization for Economic Cooperation and Development.
  • It said consumer prices across the Group of 20 largest economies, which account for most of the world’s economic activity, were 2.5% higher in January than a year earlier. That annual rate of inflation was the same as in November and December.
  • The OECD said that across its 35 members the annual rate of inflation dipped slightly to 2.2% in January from 2.3% December, having also fallen in the earlier month.
  • The drop in inflation was largely confined to the eurozone, while inflation accelerated in Japan, which has long suffered from sluggish price increases.

Kobe Steel admits data fraud went on nearly five decades, CEO to quit

  • Kobe Steel admitted its data fraud has been going on nearly five decades and also revealed new cases of cheating, highlighting the challenges facing the 112-year-old company mired in compliance failures and malfeasance.
  • Kobe Steel admitted last year to supplying products with falsified specifications to about 500 customers, throwing global supply chains into turmoil.
  • Japan’s third-biggest steelmaker said its CEO will step down to take responsibility for the widespread data fraud scandal that came to light last year, although doubts remain over its corporate culture and the possibility of future fines.
  • Kobe Steel also announced the resignation of Executive Vice President Akira Kaneko and temporary pay cuts for up to 80 percent of all internal directors and executive officers.

Lego Struggles to Pick Itself Up

  • Lego, the Danish maker of tiny plastic bricks, reported a sharp fall in earnings as it continued to struggle in North America and Europe, underscoring the challenge its new chief executive faces in turning the company’s fortunes around.
  • Lego revenue for 2017 fell 7.7% to 35.0 billion Danish kroner ($5.8 billion).
  • Net income declined to 7.81 billion kroner from 9.44 billion kroner in 2016, while operating profit fell 17% to 10.36 billion kroner.
  • While sales in North America and Europe fell during the year, Lego said revenue in China grew in the high double digits in 2017.
  • Analysts attributed much of Lego’s slowdown in the U.S. to a drop-off in sales to adult buyers who typically swoop in to buy toys tied to movies shortly after their release.

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TODAY in HISTORY

  • The Alamo fell to Mexican forces. (1836)
  • The former British colonies of Togoland and the Gold Coast united to form independent Ghana. (1957)
  • Walter Cronkite, “the most trusted man in America,” retired from the CBS Evening News and was replaced by Dan Rather. (1981)

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