DAILY MARKET REPORTS
- U.S. stocks opened little changed Wednesday, as investors weighed continued worries about tighter financial conditions and geopolitical tensions against strong earnings results from Macy’s.
- Macy’s shares surged 7.7% after the department store exceeded same-store sales expectations in the most recent quarter and lifted its targets for the 2018 fiscal year.
- Other retailers such as Kohl’s and Nordstrom were also among the S&P 500’s best performers.
- Analysts were also tracking the latest geopolitical news amid fresh doubts about President Donald Trump’s planned summit with North Korea and trade talks with China.
- North Korea threw next month’s summit between Kim Jong Un and President Donald Trump into doubt, threatening weeks of diplomatic progress by saying it may reconsider if Washington insists it unilaterally gives up its nuclear weapons.
- Cisco is scheduled to report after the market closes Wednesday, while Walmart and J.C. Penney are on tap for early Thursday.
US FINANCIAL MARKET
Macy’s shares surge after same-store sales, profit trounce estimates
- Macy’s said stellar performance at its businesses helped push quarterly same-store sales and profit well above Wall Street estimates, signaling that the company was keeping up in a fiercely competitive retail landscape.
- Macy’s shares surged after the company also raised its full-year profit forecast and issued a comparable sales growth guidance that topped estimates.
- First-quarter same-store sales rose 4.2%, easily beating Wall Street’s 1.4% average estimate, as sales rose at its Bloomingdale’s, Bluemercury and its own Macy’s stores. This was the second straight quarter of same-store sales growth.
- Net sales rose 3.6% to $5.54 billion in the quarter compared to estimates of $5.36 billion.
- Net income nearly doubled to $139 million in the first quarter.
Prime Perks: Amazon Dangles Discounts for Whole Foods Shoppers
- Amazon.com is offering new discounts for Prime members shopping at its Whole Foods grocery stores, adding another perk to its membership program after a 20% price hike.
- The online retail giant said it would knock 10% off already discounted items and each week cut prices on other products throughout the store.
- The new deals are available immediately at Florida stores and will be rolling out to its more than 460 stores nationwide this summer.
Tesla plans six-day stoppage at factory for assembly line fixes
- Tesla will pause production at its California factory for six days at the end of the May to work on fixes to its assembly line for its new Model 3 sedan, sources inside the company told Reuters.
- The car maker previously warned of 10 days of temporary shutdowns this quarter as the company addresses manufacturing problems that have delayed volume production of the Model 3 sedan, which is seen as crucial to Tesla’s long-term profitability.
- Two sources confirmed to Reuters that the next stoppage on the general assembly line at the Fremont, California, plant was scheduled for May 26-31.
Tesla loses two top executives at energy unit: Bloomberg
- Tesla’s energy unit has lost two major executives, Bloomberg reported on Tuesday, citing people familiar with the matter.
- Arch Padmanabhan, the product director for Tesla’s stationary storage unit, and Bob Rudd, a former SolarCity vice president who led North American commercial and utility sales, have both left the company, according to the report.
- Tesla declined to comment on the report.
Redstone family says special CBS dividend would be invalid
- National Amusements, the movie theater company owned by the Redstone family that controls CBS and Viacom, said in a court filing on Wednesday that a proposed CBS dividend diluting its voting power would be invalid.
- CBS said on Monday that a special committee of its board directors was planning to issue a special dividend in the form of stock that would reduce National Amusements’ voting control over the company from 80% to 17%.
- In a filing, National Amusements said it offered to enter into a standstill with CBS if the latter dropped its plan for the special dividend, but CBS declined.
Top Novartis lawyer exits over Trump attorney deal error
- Novartis’ top lawyer Felix Ehrat is leaving the Swiss drugmaker, saying a $1.2 million contract he co-signed with U.S. President Donald Trump’s personal attorney was a mistake.
- Novartis ended the $100,000-per-month contract, signed in early 2017 by Ehrat and former Novartis Chief Executive Joe Jimenez, this year.
- It was part of efforts to learn more about how the Trump administration might approach U.S. healthcare, Novartis said.
- U.S. lawmakers have demanded Novartis and AT&T, which also made payments to Cohen’s firm, provide details and Ron Wyden, the top Democrat on the Senate Finance Committee, has initiated an investigation.
Disney Considers Letting Pixar Co-Founder John Lasseter Return
- Executives at Walt Disney have discussed bringing animation guru John Lasseter back to the company in a new role that would reduce his managerial power but allow him to retain creative influence.
- Those discussions come as the end of Mr. Lasseter’s six-month leave, taken following accusations of unwelcome hugging and other touching, approaches on May 21.
- The entertainment giant faces a tricky situation in deciding what to do about Mr. Lasseter, a predicament facing many companies in the #MeToo era as they deal with executives whose infractions they didn’t consider severe enough to warrant termination.
Maduro seizes Kellogg plant after it leaves Venezuela due to crisis
- U.S.-based cereal maker Kellogg on Tuesday pulled out of Venezuela due to the country’s deep economic crisis, and an angry President Nicolas Maduro said its units would be taken over and given to workers.
- Kellogg confirmed later on Tuesday that its manufacturing plant had been seized by the leftist government, the latest company to jump ship amid Venezuela’s tough business climate.
- Kellogg did not specify the difficulties it was facing in Venezuela, but companies have typically been struggling to find raw materials due to product shortages and currency controls that crimp imports.
- Other multinational companies that have given up on the OPEC country, abandoning assets or selling them cheap, include Clorox, Kimberly-Clark, General Mills, General Motors and Harvest Natural Resources.
ConocoPhillips ‘not close’ to recouping $2 billion from PDVSA
- U.S. oil producer ConocoPhillips is far from collecting the full value of a $2 billion arbitration award against Venezuelan state oil company PDVSA, Conoco’s chief executive said on Tuesday.
- Conoco has won court orders allowing the company to begin seizing PDVSA assets in efforts to collect on an award by the International Chamber of Commerce (ICC) over the 2007 nationalization of its projects in Venezuela.
- While Conoco started seizing assets this month, Chief Executive Officer Ryan Lance is telegraphing that the company intends to escalate its campaign against PDVSA across the globe as it works to recoup losses.
- Conoco has filed with courts in the United States, Hong Kong, the United Kingdom and throughout the Caribbean in an attempt to begin the legal process of seizing additional PDVSA assets, Lance said.
Southwest Airlines raises dividend by 28% on tax reform gains
- Southwest Airlines said on Wednesday it raised its dividend by 28%, citing strong results and savings from tax reforms.
- The fourth-largest U.S. airline will now pay 16 cents per share, up from 12.5 cents.
- The company also authorized a new $2 billion share repurchase program.
US ECONOMY & POLITIC
U.S. Industrial Production Rose 0.7% in April
- Industrial output—reflecting everything produced by factories, mines and utilities—rose a seasonally adjusted 0.7% in April from a month earlier.
- That marked the third straight month of higher production. Production increased broadly across all sectors and has risen 3.5% over the past year.
- Capacity utilization—reflecting how much industries are producing, relative to their potential output—rose 0.4%age point last month to 78.0%, the highest level in three years.
- Economists expected production to rise 0.6% and capacity utilization to hit 78.4% last month.
U.S. Housing Starts Dropped in April
- Housing starts fell 3.7% in April from the prior month to a seasonally adjusted annual rate of 1.287 million.
- Residential building permits, which can signal how much construction is in the pipeline, dropped 1.8% to an annual pace of 1.352 million last month.
- Economists had expected a 1.4% decrease for starts and a 0.3% decline for permits in April.
U.S. agencies moving forward with proposing fuel economy revisions
- The Trump administration is moving ahead with plans to submit a series of options for softening fuel efficiency standards to the White House for approval in the coming week, two officials briefed on the matter Tuesday said.
- The U.S. Transportation Department has drafted a proposal likely to be made public this month that would freeze vehicle requirements at 2020 levels through 2026.
- The freeze is the preferred option, but is one of many options in the proposal set to be made public in the first week of June.
- California and 16 other states covering about 40% of the U.S. population sued earlier this month to block the Trump administration’s efforts to weaken the fuel efficiency requirements.
Trump says China has ‘much to give’ in trade negotiations
- U.S. President Donald Trump said on Wednesday that “nothing has happened” with China’s ZTE and that Beijing has “much to give” Washington on trade.
- Trump on Monday had defended his decision to revisit penalties on ZTE for flouting U.S. sanctions on trade with Iran, in part by saying it was reflective of the larger trade deal the United States is negotiating with China.
- U.S. lawmakers on Tuesday rejected any plan by Trump to ease restrictions on ZTE, calling the telecommunications firm a security threat and vowing not to abandon legislation clamping down on the company.
CIA Nominee Wins Panel Endorsement, Clearing Way for Confirmation
- The Senate Intelligence Committee on Wednesday recommended Gina Haspel as the next director of the Central Intelligence Agency, clearing the path for her confirmation by the full Senate.
- The intelligence committee approved in a 10-5 vote to advance Ms. Haspel’s nomination to be the first woman to lead the agency, forwarding it to the full Senate.
- Republican leaders in the Senate are hoping to confirm her this week, though the vote could slip into next week.
- She has the support of at least five Democrats, all but assuring her confirmation.
EUROPE & WORLD
Japan’s Longest Stretch of Economic Growth in 28 Years Ends
- Japan’s economy contracted in the first three months of 2018 due to weak private consumption and business investment, putting the brakes on the nation’s longest growth streak in 28 years, government data showed.
- The world’s third-largest economy shrank at an annualized pace of 0.6% in the January-March period, compared with revised 0.6% growth in the final quarter of 2017. The contraction was the first since the final quarter of 2015.
- Private consumption, which accounts for about 60% of GDP, stayed flat in the latest quarter after heavy snow in January and February caused people to stay home, while higher fresh-food and energy prices made consumers reluctant to spend.
- Overall cash wages rose 2.1% from a year earlier in March—their fastest pace since June 2003, according to recent data released by the labor ministry.
Canada Government ready to indemnify Kinder Morgan pipeline project
- The Canadian government is prepared to financially shield Kinder Morgan Canada’s proposed Trans Mountain pipeline expansion against unnecessary delays that are politically motivated.
- Finance Minister Bill Morneau told a news conference that if Kinder Morgan decided to walk away from the project, which the provincial government of British Columbia opposes, the indemnification would stay in place in case another company took over.
- Although the federal government has approved the pipeline that would carry Alberta crude to the Pacific coast, the project faces opposition in British Columbia, as well as from environmentalists and some indigenous groups.
- Kinder Morgan Canada has given the government a deadline of May 31 to provide the assurances the company needs to go ahead.
Congo receives first doses of Ebola vaccine amid outbreak
- The first batch of 4,000 experimental Ebola vaccines to combat an outbreak suspected to have killed 20 people arrived in Congo’s capital Kinshasa on Wednesday, said a Reuters witness at the airport.
- The vaccine, developed by Merck, is still not licensed but proved effective during limited trials in West Africa in the biggest ever outbreak of Ebola, which killed 11,300 people in Guinea, Liberia and Sierra Leone from 2014-2016.
- Health workers have recorded two confirmed cases, 22 probable cases and 17 suspected cases of Ebola in three health zones of Congo’s Equateur province, and identified 432 people who may have had contact with the disease.
- The WHO is worried about the disease reaching the city of Mbandaka with a population of about 1 million people, which would make the outbreak far harder to tackle.
North Korea Wavers on U.S. Summit, Accentuating the Gap Over Nuclear Weapons
- North Korea’s warnings that it would cancel a June summit if Washington insists on rapid disarmament highlight the depth of the division between the two sides in denuclearization talks.
- The harshly worded North Korean statement, and another broadside criticizing military exercises under way in South Korea, came after weeks of discussions between the two sides that appeared to be gaining momentum.
- In remarks early Wednesday to reporters, White House press secretary Sarah Sanders said the White House wasn’t surprised by the threat.
TODAY in HISTORY
- Marie Antoinette married the future King Louis XVI of France. (1770)
- Japanese climber Junko Tabei became the first woman to summit Mount Everest. (1975)
- Queen Elizabeth II became the first British monarch to address the United States Congress. (1991)
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