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U.S. STOCKS INCH HIGHER AS TRADE CONCERNS EASE

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DAILY MARKET REPORTS

  • U.S. stocks rose on Thursday as fears of a global trade war eased after President Donald Trump promised great flexibility toward the United States’ “real friends” as he prepared to impose hefty import tariffs.
  • Trump’s tariffs plan may include “potential carve-outs for Mexico and Canada based on national security, and possibly other countries as well”.
  • A Labor Department report showed initial jobless claims rebounded from a more than 48-year low last week, but the trend continued to point to robust labor market conditions.
  • Elsewhere, the European Central Bank left interest rates unchanged but dropped a pledge to accelerate its bond purchases if the economy deteriorates.
  • Express Scripts was among the top boosts to the S&P 500, rising 14% after health insurer Cigna agreed to buy the pharmacy benefits manager for $54-billion deal.
  • Kroger fell 9% after the supermarket chain issued a disappointing full-year profit forecast.
  • Costco missed estimates for quarterly profit and same-store sales.

US FINANCIAL MARKET

Costco reports 10.8 percent rise in quarterly revenue

  • Costco Wholesale reported a 10.8 percent rise in quarterly revenue on Wednesday, fueled by higher membership fees.
  • Total comparable-store sales, excluding impact of fuel and currency fluctuations, rose 5.4 percent in the second quarter, while analysts on average had estimated a 5.6 percent rise.
  • Total revenue rose to $33.00 billion from $29.77 billion.
  • Net income rose to $701 million in the quarter, from $515 million a year earlier.
  • The company had a $74 million gain in the reported quarter, related to changes in the U.S. tax law.

Supermarket chain Kroger’s forecast disappoints, shares down

  • Kroger’s full-year profit forecast came in largely below estimates as the supermarket chain spends more on its online operations and cuts prices to snatch customers away from Walmart and Amazon.com, sending its shares down as much as 7 percent.
  • Sales rose 12.4 percent to $31.03 billion the fourth quarter, slightly above analysts’ expectation of $30.83 billion.
  • Identical same-store sales in the fourth quarter rose 1.5 percent, slightly above the estimate of 1.45 percent.
  • Net income rose to $854 million, from $506 million a year earlier.

American Eagle Outfitters tops same-store estimates

  • American Eagle Outfitters reported better-than-expected comparable store sales for the holiday shopping quarter, helped by robust demand for its Aerie line of lingerie, and forecast current-quarter profit above expectations.
  • American Eagle’s comparable sales rose 8 percent in the fourth quarter, beating analysts’ average estimate of a 7.34 percent rise.
  • Net income rose to $93.96 million from $54.62 million a year earlier.
  • Net revenue rose 12 percent to $1.23 billion, above analysts’ expectation of $1.21 billion.
  • Same-store sales for the Aerie brand jumped 34%.

Truck maker Navistar raises 2018 forecast amid strong demand

  • Net loss widened to $73 million from $62 million.
  • The company’s total revenue rose nearly 15 percent to $1.91 billion.
  • Navistar said revenue in the truck business, the company’s biggest, jumped 21.8 percent to $1.25 billion in the first quarter.
  • Orders for Class 8 semi-trucks in North America jumped more than 76 percent in February.

Health insurer Cigna to buy Express Scripts for about $54 billion

  • U.S. health insurer Cigna said it would buy pharmacy benefits manager Express Scripts for about $54 billion, a tie-up that reflects pressure on healthcare companies to grow bigger to cut costs.
  • The move follows the $69-billion merger of insurer Aetna and CVS Health, announced last December.
  • The transaction is valued at $67 billion, including about $15 billion in Express Scripts’ debt, the company said.
  • Cigna’s offer consists of $48.75 in cash and 0.2434 shares of stock of the combined company for each Express Scripts share, amounting to $96.03 per share. That represents a premium of nearly 31 percent to Express Scripts’ Wednesday closing price.

Snap to lay off about 100 engineers

  • Snap is laying off nearly 10 percent of its engineering team, or about 100 people, CNBC reported on Wednesday.
  • The layoffs would be Snap’s largest yet and the first to affect its engineers, CNBC said.
  • Business news website Cheddar, which earlier reported the layoffs on Wednesday, said the cuts would be announced internally within a week.

Netflix CEO says the company will see $15 billion in revenue this year

  • Netflix posted $11.7 billion in revenue for 2017 and has not previously issued full-year revenue guidance for 2018.
  • The company had only issued guidance for operating margin.
  • The company has said it will invest more heavily in content and marketing in the coming year, as it faces increasing pressure from relative newcomers in streaming, Apple, Amazon and Hulu.

Lockheed Asks Pentagon to Pay More Now to Save More Later on F-35 Jets

  • Lockheed has a plan to cut the daunting cost of its F-35 combat jet.
  • Lockheed wants to persuade lawmakers and the Pentagon to buy hundreds of the jets in a single, multiyear contract in the early 2020s to harvest economies of scale from increased production, said Jeff Babione, the Lockheed executive in charge of the F-35 program.
  • The F-35 fleet would replace most U.S. jet fighters over the next 30 years at a cost of more than $400 billion. U.S. allies plan to buy up to 500 more.
  • Lockheed and its partners have already cut the average price of the F-35A model used by the U.S. Air Force to around $95 million, from $122 million five years ago. They aim to reduce this to roughly $80 million by the end of the decade.

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US ECONOMY & POLITIC

U.S. weekly jobless claims back off 48-year low

  • The number of Americans filing for unemployment benefits rebounded last week from a more than 48-year low, but the trend continued to point to robust labor market conditions.
  • Initial claims for state unemployment benefits increased 21,000 to a seasonally adjusted 231,000 for the week ended March 3, the Labor Department said. Claims dropped to 210,000 in the prior week, which was the lowest level since December 1969.
  • Economists had forecast claims rising to 220,000 in the latest week.
  • The four-week moving average of initial claims, viewed as a better measure of labor market trends as it irons out week-to-week volatility, rose 2,000 to 222,500 last week.
  • The claims report also showed the number of people receiving benefits after an initial week of aid decreased 64,000 to 1.87 million in the week ended Feb. 24.

Trump promises U.S. friends ‘flexibility’ as trade war warnings rise

  • President Donald Trump promised to show great flexibility and cooperation toward the United States’ “real friends” as he prepared to impose import tariffs that have provoked warnings of a trade war from Europe and China.
  • A White House official also said on Wednesday night that Trump planned to offer Canada and Mexico – fellow signatories of the North American Free Trade Agreement (NAFTA) – the possibility of a 30-day exemption from the tariffs.
  • Trump had been expected later in the day to sign a proclamation imposing 25 percent tariffs on steel imports and 10 percent on aluminum, but this could slide into Friday.

Foreign banks carved out of Senate regulatory relief bill

  • Foreign banks have been excluded from a key provision relaxing oversight of small and mid-sized lenders under a modified version of a U.S. Senate bill that aims to ease rules introduced following the 2007-2009 global financial crisis.
  • The amended version of the bill, released on Wednesday, includes a new section that explicitly preserves the Federal Reserve’s ability to strictly regulate the U.S. operations of large foreign banks like Deutsche Bank and Banco Santander alongside the country’s largest institutions.
  • The Senate is currently considering the bipartisan bill that would mark the first rewrite of the 2010 Dodd-Frank Act.  It is expected to be passed by the Senate this week.
  • The amended bill says the higher threshold should not apply to any foreign banking organizations with global assets above $100 billion or limit the Fed’s ability to regulate those banks as it has in the past.

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EUROPE & WORLD

ECB drops pledge to increase bond buys, if needed

  • The European Central Bank (ECB) reaffirmed its ultra-easy policy stance on Thursday but dropped a promise to increase bond purchases if needed, taking another small step in dialing back its extraordinary stimulus measures.
  • With Thursday’s decision, the ECB’s rate on bank overnight deposits, currently its primary interest rate tool, remains at -0.40 percent.
  • The main refinancing rate, which determines the cost of credit in the economy, is unchanged at 0.00 percent while the rate on the marginal lending facility — the emergency overnight borrowing rate for banks — remains at 0.25 percent.
  • Bond purchases will also continue at 30 billion euros per month at least until September.

German industrial orders plunge in ‘horrible start’ to year

  • Contracts for German-made goods fell by 3.9 percent on the month in January after a downwardly revised leap of 3.0 percent in December. The reading was the weakest since January 2017.
  • Industrial orders rose 8.2 percent on the year in January, the ministry said, adding that surveys are suggesting the global recovery will continue.
  • Foreign demand fell by 4.6 percent on the month in January, driven by a decline in orders of nearly 6 percent from other euro zone countries.
  • Orders for capital goods dropped 5 percent, demand for intermediate goods fell 3.3 percent, while manufacturers of consumer goods registered a rise in orders of 2.4 percent.

Pacific Trade Pact Sets Sail Without the U.S. on Board

  • Japan, Canada, Mexico and eight other Pacific nations are set to sign a new version of the Trans-Pacific Partnership, or TPP, on Thursday.
  • The goal of the pact is to open borders to more trade in the rapidly growing Asia-Pacific region and to set international standards, which many see as crucial to managing the encroaching dominance of China, the second-biggest economy in the region.
  • The 11-member bloc, formally called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership will have less than half of the economic impact of the original, according to economists who back the TPP, which also includes Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam.
  • The pact will eventually eliminate most tariffs among the 11 countries, and it will also set rules on intellectual property, labor and the environment that will have help modernize economies such as Vietnam’s.

Embraer profit misses estimates on defense, business jet writedowns

  • Brazilian planemaker Embraer booked an 82% drop in quarterly profit on Thursday, missing analysts’ estimates and its own annual profit targets amid weaker commercial jet deliveries and write-downs on defense programs and executive jets.
  • Full-year earnings before interest, taxes, depreciation and amortization totaled $645 million, well short of an annual target of at least $770 million.
  • Including depreciation and amortization, operating profit of $329 million also missed a minimum target of $450 million.
  • Net income of $35 million in the quarter missed an average forecast of $137 million of analysts.
  • The company narrowed its 2018 revenue outlook by $200 million to between $5.4 billion and $5.9 billion, compared to $5.84 billion last year.

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TODAY in HISTORY

  • A peaceful settlement of Delaware Indians were massacred by militia at Gnadenhutten in Ohio. (1782)
  • Russia’s February Revolution, which eventually led to the overthrow the czarist government, began. (1917)
  • Phyllis Mae Daley, the first African-American nurse to serve in World War II, received her U.S. Navy commission. (1945)
  • The Supreme Court ruled that religious instruction in public schools violated the Constitution. (1948)
  • First U.S. combat troops arrived in Vietnam. (1965)
  • President Reagan called the USSR an “Evil Empire.” (1983)

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, Wall Street Journal.

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