DAILY MARKET REPORTS
- U.S. stocks resumed their climb Thursday, led higher by shares of financial firms.
- JPMorgan Chase shares added 1.6% in recent trading, while Citigroup added 1.9%. Shares of Wells Fargo gained 1%. All three banks report earnings Friday.
- Companies in the S&P 500 are projected to grow first-quarter earnings by 17% from the year-earlier period, according to FactSet.
- Financial stocks, which are expected to get a trading boost from the recent volatility, as well as benefit from higher interest rates, are projected to see a 20% bump.
- Economic data on Thursday also helped the positive sentiment. New applications for U.S. unemployment benefits fell last week, pointing to sustained labor market strength.
- Delta Air Lines jumped more than 2 percent after the U.S. carrier reported a rise in quarterly revenue, boosted by higher average fares and passenger traffic.
- Bed Bath & Beyond shares dived more than 17 percent after the company’s full-year profit forecast missed estimates.
US FINANCIAL MARKET
BlackRock sails to higher profit despite market churn
- BlackRock, the world’s largest asset manager, reported first-quarter profit that exceeded Wall Street estimates on Thursday, benefiting despite higher volatility in global markets.
- BlackRock said its iShares family of exchange-traded funds (ETFs) added $34.65 billion in new money in the quarter, down from $64.48 billion a year earlier.
- Total revenue rose 15.9 percent to $3.6 billion from the same quarter in 2017, while expenses rose just 9.8 percent to $2.2 billion. Assets under management were $6.32 trillion on March 31.
- Overall, the New York-based company’s net income rose to $1.09 billion, in the quarter from $859 million a year earlier.
Delta Air Lines’ revenue soars, but profit burdened by fuel, storms
- U.S. carrier Delta Air Lines reported a 9.5 percent rise in quarterly revenue on Thursday, boosted by higher average fares and passenger traffic.
- Total operating revenue for the first quarter rose to $9.97 billion from $9.10 billion, and the carrier forecast total unit revenue – a key metric which compares sales with flight capacity – would increase 3 percent to 5 percent in the second quarter.
- In the March quarter, Delta said operating expenses had swelled by $817 million from the last quarter, driven primarily by increases in fuel and labor costs, and a higher depreciation expense.
- Net income fell to $547 million in the first quarter ended March 31 from $561 million a year earlier. Higher costs, including a spike in fuel prices and a $44 million negative impact from severe winter storms, weighed on its bottom line.
- Despite this increase, Delta said it is still on track to reach its target goal of flat to 2 percent growth in full year unit costs.
Drug retailer Rite Aid’s upbeat forecast lifts shares
- Drug retailer Rite Aid on Thursday forecast a full-year profit largely above estimates as it expects reimbursement rates to rise this year and its deal with Walgreens to help it secure better generic drug prices.
- For the fourth quarter, the company’s revenue fell to $5.39 billion from $5.90 billion, hurt by a decline in reimbursement rates and prescription volumes. Analysts on average had expected $5.57 billion.
- Retail pharmacy sales fell about 10 percent in the quarter, while pharmacy services revenue dropped 4.3 percent.
- The company posted net loss from continuing operations of $483.7 million for the quarter, compared with a loss of $25.1 million, a year earlier.
- The loss includes $325 million of income tax expense related mainly to the revaluation of the company’s deferred tax assets in connection with the new U.S. tax law.
Bed Bath & Beyond shares crater on weak 2018 forecast
- Bed Bath & Beyond issued 2018 earnings per share guidance in the low to mid-$2 range.
- Wall Street expected the retailer to earn $2.76 a share in fiscal 2018.
- The retailer beat analysts fourth-quarter expectations on the top and bottom line.
- Shares of the retailer plummeted Thursday morning.
- The company reported revenue of $3.72 billion, compared with expectations of $3.68 billion.
Tesla Blames Driver in Fatal Car Crash
- Tesla defended its semiautonomous Autopilot system in the wake of a fatal crash last month, blaming the incident on the driver after his family hired a lawyer to explore legal options.
- Earlier on Wednesday, San Francisco-based Minami Tamaki LLP announced in a statement that the family had retained its services and plans to file a wrongful-death lawsuit.
- Tesla more explicitly assigned blame to the driver. “The crash happened on a clear day with several hundred feet of visibility ahead, which means that the only way for this accident to have occurred is if Mr. Huang wasn’t paying attention to the road, despite the car providing multiple warnings to do so,” a Tesla spokesman said in a statement.
- Investigators for the National Highway Traffic Safety Administration and the National Transportation Safety Board are probing the crash.
Facebook’s Zuckerberg unscathed by congressional grilling, stock rises
- Facebook Chief Executive Mark Zuckerberg fielded 10 hours of questions over two days from nearly 100 U.S. lawmakers and emerged largely unscathed and considerably richer.
- He parried questions of how much control people have over their data on the world’s largest social media network without a major gaffe, while avoiding being cornered into supporting new government regulation.
GE Explores Hybrid Deals, Spinoffs in Strategic Review
- As its strategic review stretches into a ninth month, General Electric is exploring a public offering for one of its divisions and discussing hybrid deals with public companies to combine assets, according to people familiar with the matter.
- Rather than straight asset sales, the hybrid deals would leave GE shareholders with stakes in multiple public companies.
- The possibilities include spinning off a division to investors or combining a division with a smaller public company in a way that avoids a big tax bill.
- GE Transportation could be a model, according to some of the people. GE is now unlikely to sell the business and is preparing for an initial public offering or spinoff of the division, which makes diesel freight locomotives.
Pentagon stops accepting Lockheed F-35 jets over repair cost dispute
- The U.S. Department of Defense has stopped accepting most deliveries of F-35 jets from Lockheed Martin because of a dispute over who will cover costs for fixing a production error, three people familiar with the matter said.
- Last year, the Pentagon stopped accepting F-35s for 30 days after discovering corrosion where panels were fastened to the airframe, an issue that affected more than 200 of the stealthy jets.
- But deliveries were paused again over a dispute as to who will pay for what will likely be a complex logistical fix that could require technicians to travel widely to mend aircraft based around the world.
- Because neither party caught the issue at the time each is pointing the finger at the other to pay for the fix.
- When the Pentagon stops taking delivery of F-35s, foreign customers can also be affected. So far at least two foreign governments have stopped accepting F-35s as a result of this issue, two of the sources said.
Walmart close to buying majority of India’s Flipkart
- Walmart is likely to reach a deal to buy a majority stake in Indian e-commerce player Flipkart by the end of June in what could be the U.S. retail giant’s biggest acquisition of an online business.
- Reuters reported last week that Walmart completed its due diligence on Flipkart and had made a proposal to buy 51 percent or more of the Indian company for between $10 billion to $12 billion.
UK takeover panel rules Disney must offer to buy all of Sky
- Britain’s takeover regulator ruled on Thursday that Walt Disney must make an offer for the whole of Sky if it succeeds in buying Twenty-First Century Fox assets, including its 39 percent stake in the European pay-TV company.
- The Takeover Panel also said Disney must match Fox’s 10.75 pounds-a-share offer for the shares in Sky it does not already own.
- Disney had said it did not believe it should be required to make a bid for the whole of Sky in line with Fox’s existing offer if it bought the Fox assets.
- The Takeover Panel, however, said it considered that securing control of Sky might reasonably be considered to be a significant purpose of Disney’s acquiring control of Fox, and it must make an offer within 28 days of buying the Fox assets.
- The Panel’s ruling will not stand if Fox has already acquired 100 percent of Sky by the time Disney buys the Fox assets, or if Comcast Corp or any other third party has acquired a stake of more than 50 percent in Sky.
Amazon’s Rivals Fear They Will Lose Out on Pentagon’s Cloud-Computing Contract
- The Defense Department will release a revised list of requirements in the coming days for a hotly contested, multibillion-dollar contract to move the Pentagon’s data into the cloud, and it says it won’t give in on a central demand: awarding the business to a single winner.
- Some computing companies vying for the cloud contract have been fighting to prevent the department from awarding the work to a single vendor, fearing that would guarantee Amazon.com the business.
ESPN+ streaming service launches Disney’s digital drive
- Walt Disney on Thursday debuted its new ESPN+ digital subscription service, the first consumer offering in the traditional media company’s push to become a leader in streaming entertainment.
- The service will carry more than 10,000 live sporting events that are not shown on television, as well as exclusive on-demand programing such as a new documentary about controversial college basketball coach Bobby Knight.
- The service is offered as an add-on inside a newly designed ESPN mobile app or through ESPN.com. It costs $4.99 a month, or $49.99 per year.
- ESPN and other cable networks have been losing pay TV subscribers as audiences rapidly migrate to online services such as Netflix. Disney is trying to adapt to the switch by developing its own streaming offerings.
US ECONOMY & POLITIC
U.S. Weekly Jobless Claims Hold Below 300,000 for Longest Streak on Record
- Initial jobless claims, a proxy for layoffs across the U.S., decreased by 9,000 to a seasonally adjusted 233,000 in the week ended April 7, the Labor Department said Thursday.
- This means claims have now held below 300,000 for 162 consecutive weeks, cementing the longest streak for weekly records dating back to 1967.
- The four-week moving average of initial claims, a more-stable measure, increased last week to 230,000.
- Thursday’s report showed the number of claims workers made for longer than a week increased by 53,000 to 1,871,000 in the week ended March 31.
Fed Minutes Signal Greater Confidence in Reaching 2% Inflation
- Federal Reserve officials at their meeting last month expressed greater confidence inflation would rise to their 2% target over the coming year, a development that could affect how much they raise interest rates in coming years.
- They also debated the costs and benefits of allowing the economy to run hot and discussed how they might need to later raise rates to a level that would deliberately slow growth.
- The minutes highlight just how much Fed officials’ outlook has changed since last fall, when surprisingly slow inflation raised questions about the need for continued rate increases.
- After holding its benchmark federal-funds rate near zero for seven years, the Fed has raised it six times since late 2015, most recently last month to a range between 1.5% and 1.75%.
- Officials also penciled in two more quarter-percentage-point rate increases in 2018 and three such moves in 2019.
Lawmakers to Hear From Pompeo, Mattis in Midst of Syria Crisis
- Two of the Trump administration’s most senior national security officials go before lawmakers Thursday in the midst of high-level U.S. planning for a possible military strike against Syria in retaliation for an alleged chemical weapons attack.
- Secretary of State-nominee Mike Pompeo faces the Senate Foreign Relations Committee for his confirmation hearing.
- At about the same time Thursday morning, Defense Secretary Jim Mattis goes before the House Armed Services Committee to answer questions about the Pentagon’s $654 billion 2018 budget, which resulted from last month’s $1.3 trillion budget deal.
OMB Will Review More Tax Rules
- The Trump administration ended an internal dispute and the result will shape regulations under last year’s tax law, giving the Office of Management and Budget more involvement and authority in the process.
- Under the agreement, OMB will review significant Treasury tax rules, especially when they create novel policy issues or potential conflicts with other agencies.
- That is a departure from the past 35 years, when Treasury’s tax regulations were largely exempt from the cost-benefit analysis and other scrutiny from OMB’s Office of Information and Regulatory Affairs.
- Treasury and the Internal Revenue Service have a long list of regulations to issue under the new tax law, and businesses are clamoring for them to move quickly.
- Without regulations, companies have a harder time calculating their projected tax bills and making plans.
EUROPE & WORLD
Key Safety Systems completes deal to acquire air-bag maker Takata
- Auto components maker Key Safety Systems completed on Wednesday a $1.6 billion deal to acquire air-bag maker Takata, whose faulty inflators triggered the auto industry’s biggest recall and have been linked to at least 22 deaths around the world.
- After more than a decade of recalls, lawsuits and a criminal investigation which drove Takata to bankruptcy, the deal ensures the company will be able to continue producing replacement inflators before winding itself down, which may take years.
SoftBank among investors for $25 billion FIFA plan
- Japanese conglomerate SoftBank is part of a consortium of investors that are planning a $25 billion move to create international tournaments for soccer’s governing body FIFA, the Financial Times has reported.
- The report said the group, which includes investors from the United States, Saudi Arabia and China, were discussing proposals to expand the Club World Cup along with the creation of a new league competition for national teams.
- The Club World Cup is an annual competition that sees seven clubs, usually winners of their continental tournaments, compete in a knock-out event.
- The report said FIFA would have a 51 percent stake in the venture.
BA Parent Mulls Bid for Norwegian Air, as Trans-Atlantic Budget Travel Booms
- British Airways parent IAG SA has built a small stake in Norwegian Air Shuttle AS A and is considering a full takeover—doubling down on the booming market for trans-Atlantic budget travel.
- The likes of Southwest Airlines and Ryanair have upended short-haul travel in the U.S. and Europe over past decades by offering rock bottom fares, partly by stripping out amenities like assigned seats and free check-in luggage allowances.
OPEC’s Output Fell in March, While U.S. Shale Steamed Ahead
- OPEC said Thursday its crude oil output fell last month amid compliance with the oil cartel’s agreement to cut production, even as the world’s total oil supply continued to rise on the back of burgeoning U.S. shale growth.
- Total crude output declined by 201,000 barrels a day in March to average 31.96 million barrels a day.
- The drop was mainly attributable to lower production in Angola, Venezuela, Algeria and Saudi Arabia.
GSK slims portfolio with sale of rare disease gene therapy drugs
- GlaxoSmithKline is divesting its rare disease gene therapy drugs to private biotech company Orchard Therapeutics as Chief Executive Emma Walmsley makes good on her promise to prune the drugmaker’s pharmaceuticals portfolio.
TODAY in HISTORY
- The Civil War began when Fort Sumter was attacked. (1861)
- President Franklin Roosevelt died. (1945)
- The first space shuttle, Columbia, took its first test flight. (1981)
- Arkansas federal judge Susan Webber Wright found President Clinton in contempt of court for lying about his relationship with Monica Lewinsky. (1999)
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