DAILY MARKET REPORTS
- U.S. stocks rose on Friday led by bank stocks as a stronger-than-expected jobs report for May locked in expectations of an interest rate hike by the Federal Reserve this month.
- Nonfarm payrolls increased by 223,000 jobs in May while the average hourly earnings rose 0.3% after edging up 0.1% in April.
- The data showed a drop in the unemployment rate to an 18-year low of 3.8%.
- Markets got a reprieve overnight as Italy’s anti-establishment parties revived coalition plans, removing the risk of a repeat vote dominated by debate over the country’s future in the euro zone.
- However, investors are keeping an eye out on developments around trade after Washington on Thursday imposed steel and aluminum tariffs on Canada, Mexico and EU.
- Canada and Mexico retaliated with duties on U.S. goods ranging from orange juice to pork. The European Union was looking to tax bourbon whiskey and Harley motorcycles after on the countries.
US FINANCIAL MARKET
Price cuts, freight costs pressure Costco’s margins
- Warehouse club operator Costco Wholesale reported third-quarter results that topped analysts’ estimates, but price cuts and higher freight costs weighed on its gross margins.
- Sales at established stores, excluding fluctuations in gas prices and currencies, rose 7% in the reported quarter, beating analysts’ estimate of a 5.4% rise.
- Total revenue rose 12.1% to $32.36 billion, also beating estimates.
- Costco’s moves to invest heavily in its online and delivery services helped drive a 14% growth in revenue from membership fees and a 35.5% rise in e-commerce sales in the third quarter.
- Gross margins slipped 46 basis points to 11.05% as the company also stepped up efforts to provide same-day and two-day delivery through delivery service provider Instacart and invested in packaging equipment.
- Net income rose to $750 million in the quarter, from $700 million a year earlier.
Lululemon shares hit record as first-quarter profit beats expectations
- Canadian athletic apparel maker Lululemon Athletica posted first-quarter profit that beat expectations on Thursday as revenue jumped 25%, sending the company’s shares to an all-time high in after-hours trade.
- Revenue increased to $649.7 million, up from $520.3 million a year ago. Analysts had expected $617.7 million.
- A 62% increase in revenues from its direct-to-consumer business, which includes online sales, helped drive earnings to $75 million in the quarter, up from $31 million a year earlier.
GameStop same-store sales miss estimates, shares fall
- GameStop on Thursday reported first-quarter same-store sales that missed analysts’ estimates due to a drop in sales of video game hardware and software at its outlets.
- GameStop said its comparable store sales fell 5.3% in the latest quarter.
- Analysts on average had expected a 4.2% drop in same store sales.
- Net sales fell 5.5% to $1.93 billion.
- The company’s net income fell to $28.2 million, from $59 million a year earlier.
May auto sales mixed for U.S. carmakers
- Fiat Chrysler said its U.S. sales in May climbed 11% to 214,294, on the strength of retail deliveries to individual customers.
- The automaker said retail deliveries of 167,785 vehicles were the highest since July 2005.
- Ford said retail sales were 163,796, while total sales, including those to fleet customers, rose 0.7% to 242,824.
- General Motors, the No. 1 U.S. automaker, is no longer reporting monthly sales.
- Industry analysts estimated GM sales rose about 10% in May.
- The seasonally adjusted annual sales rate in May was estimated at 17 million, according to analysts polled by Reuters.
US ECONOMY & POLITIC
Unemployment Rate Falls to 18-Year Low; Solid Hiring in May
- The unemployment rate fell to an 18-year low in May and employers steadily added jobs, signs of enduring strength for the labor market.
- U.S. nonfarm payrolls rose a seasonally adjusted 223,000 in May, the Labor Department said Friday.
- The unemployment rate ticked down to 3.8%, matching April 2000 as the lowest reading since 1969.
- Wages in May improved modestly, growing 2.7% from a year earlier.
- Revised figures show employers added 159,000 jobs in April and 155,000 in March, a net upward revision of 15,000.
ISM manufacturing index hits 58.7 in May; construction spending up 1.8% in April
- The ISM manufacturing index jumped to 58.7 in May from 57.3 in April.
- Economists expected manufacturing growth to hit 58.4 last month.
- May also marked the 21st consecutive month of expansion for the manufacturing sector, the data showed.
- A reading above 50 for the index indicates expansion in the manufacturing sector, and a reading below 50 signals contraction.
- The Commerce Department said construction spending surged 1.8%, the largest increase since January 2016, after an unrevised 1.7% decline in March.
- Economists had forecast construction spending rebounding 0.8% in April.
EPA Gives $30 Million-Plus in Ethanol Credits to Oil Refiners, Angers Corn Growers
- The Trump administration is giving two oil refiners tens of millions of dollars’ worth of retroactive biofuels credits, unprecedented help for refining operations that is refueling a fierce conflict between energy companies and corn growers.
- Tensions between the two industries have been building since well before Mr. Trump became president, the result of a 2005 law that requires refineries to blend about 10% plant-based ethanol into the fuel they produce, or buy credits from rivals to cover their blending obligations.
- Congress created the mandate hoping to reduce carbon emissions and wean the U.S. from foreign crude at a time when oil prices had begun to soar.
- The decision hands the equivalent of more than $30 million to HollyFrontier and Sinclair Oil, after a federal court’s 2017 ruling that the Obama administration had improperly denied requests the companies had made for economic hardship help in 2015.
- The most recent credits, awarded months ago and first reported Thursday by Reuters, are the first publicly known retroactive waivers. They mark the latest twist in a conflict that has brewed for years and peaked with about a half-dozen White House meetings since Mr. Trump became president.
U.S., China Trade Negotiators Haggling Over Purchases of American Goods
- U.S. and Chinese trade negotiators are haggling over how to get Beijing to carry out recent promises to purchase more American farm and energy products, with Washington pushing for long-term contracts that Chinese officials are reluctant to commit to.
- During the latest round of talks that started in Beijing Thursday, Trump administration officials have pressed their Chinese peers to commit to multiyear purchase agreements, according to people with knowledge of the exchanges from both sides.
- Chinese officials have been reluctant to get locked into long-term commitments, these people said. Beijing wants “control and leverage,” one of them said.
- The U.S. team, is scheduled to make a recommendation late Friday to Commerce Secretary Wilbur Ross on whether he should travel to Beijing this weekend as planned to lead the negotiations, according to the people.
California Gubernatorial Primary Eyed for Its Impact on House Races
- Primary voters head to the polls in California on Tuesday to eliminate all but two of 27 contestants vying to replace outgoing Democratic Gov. Jerry Brown, in a race that could have broader implications for congressional contests here.
- Given Democrats’ overwhelming statewide advantage in voter registration, experts expect a Democrat to prevail in November. However, the state’s quirky top-two primary system could send two Democrats to a runoff, leaving the GOP with no statewide standard-bearer.
- That in turn could damp Republican turnout as the GOP seeks to hold several U.S. House seats here, while setting the stage for a bitter battle between different factions of California Democrats.
- Polls have consistently shown Lt. Gov. Gavin Newsom, a Democrat and former San Francisco mayor, with a comfortable lead. Recent polls show Republican businessman John Cox in second place.
EUROPE & WORLD
Canada to impose tariffs on U.S., challenge at WTO
- Canada will impose retaliatory tariffs on C$16.6 billion ($12.8 billion) worth of U.S. exports and challenge U.S. steel and aluminum tariffs under the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO).
- The Canadian tariffs are set to go into effect on July 1 and stay in place until the United States lifts its own measures, officials said, hours after the United States said it would impose tariffs on aluminum and steel imports from Canada, Mexico and the European Union.
- The Canadian government released two lists of U.S. products, proposing a 25% tariff on the first list and 10% on the second.
- The list included steel and aluminum in various forms, but also orange juice, maple syrup, whiskey, toilet paper and a wide variety of other products. It largely spares U.S. farmers. Among the few proposed agricultural targets are farm chemicals and cucumbers.
U.S. allies hit back at Washington’s steel, aluminum tariffs
- Mexico and the European Union retaliated against U.S. tariffs on steel and aluminum with levies on billions of dollars of U.S. goods from orange juice and whiskey to blue jeans and Harley-Davidson motorcycles.
- The EU took the U.S. to the WTO to challenge the legality of the new tariffs and the Trump administration’s national-security justification. Brussels lodged an eight-page list at the international trade body of goods it would hit with retaliatory measures.
- They run the gamut from big motorcycles like the Harleys, built on the home turf of House Speaker Paul Ryan, to “canoes”, “manicure or pedicure preparations” and even “sinks and washbasins, of stainless steel”.
- EU members have so far given broad support to a European Commission plan to set duties on 2.8 billion euros ($3.4 billion) of U.S. exports. EU exports subject to U.S. duties are worth 6.4 billion euros ($7.5 billion).
- Mexico announced what it described as “equivalent” measures on a wide range of U.S. farm and industrial products, including pork legs, apples, grapes, cheese, steel and other goods.
Spain’s Mariano Rajoy Ousted From Power After Corruption Scandal
- Spanish lawmakers voted to oust Prime Minister Mariano Rajoy, ushering in a center-left government whose new leader pledged to enact a moderate, pro-European agenda unlikely to knock Spain’s robust economic recovery off course.
- Spain’s parliament voted 180 to 169, with one abstention, to remove Mr. Rajoy, cutting short the second term of one of Europe’s longest-serving leaders currently in power.
- The center-left Socialist Party had called the no-confidence vote last week and proposed its leader to replace Mr. Rajoy.
- Socialist Party leader Pedro Sánchez, who becomes prime minister immediately, announced his policy goals include bolstering social policies to address unemployment and poverty levels, both of which remain high despite Spain’s strong growth.
- However, the new premier will lead a minority government that is likely to struggle to pass legislation and has already promised to call parliamentary elections ahead of the current 2020 deadline.
Italy’s Conte sworn in as PM of anti-establishment government
- Italy’s president swore in Giuseppe Conte on Friday as prime minister of Western Europe’s first anti-establishment government whose aim is to cut taxes, boost welfare spending and overhaul European Union rules on budgets and immigration.
- Conte, a 53-year-old law professor, must now win confidence votes in parliament next week. The parties backing Conte — the far-right League and the radical 5-Star Movement — have solid majorities in both houses.
BMW says may source more U.S. steel its auto plant after tariff move
- BMW said it may increase the amount of steel it sources locally for its U.S. plant after Washington imposed tariffs on imports of steel and aluminum from the European Union.
- The German carmaker’s plant at Spartanburg, South Carolina, is its largest in the world, and sources more than 70% of its steel locally.
- “We have a target to increase the U.S. percentage, which is dependent on the availability of appropriate specification and quality,” BMW said in a statement.
Fiat Chrysler aims to double profits, pay dividends in new plan
- Fiat Chrysler expects to at least double adjusted operating profits and return to an investment grade rating and dividends under a new plan to 2022, helped by strong growth from its Jeep SUV brand and an expansions of its premium product portfolio.
- Outlining its next five-year strategy, the world’s seventh-largest carmaker said it targets adjusted earnings before interest and tax of between 13-16 billion euros in 2022, up from 6.6 billion euros last year, while margins are expected to rise to between 9-11% from 6.3% in 2017.
- The carmakers expects sales to grow by around 7% each year on average. It targets a dividend payout ratio of around 20% throughout the plan, expecting to pay out a total of around 6 billion euros over the next five years.
Toyota sheds some manufacturing to focus on new car technology
- Toyota said it was planning to transfer some its parts manufacturing operations to its main supplier Denso to free up resources to compete more effectively on new vehicle technologies.
- Toyota said it would consolidate core electronics component operations of within Denso from late next year, adding that Denso would take over mass production of electronic parts used in its vehicles from 2022.
- Toyota is shedding some of its in-house parts production as it looks beyond making conventional vehicles to develop new technologies including electric cars, self-driving vehicles, ride-sharing and other mobility services.
- Toyota said that consolidating development and mass production of components which control electric cars and automated driving functions would eliminate operational overlap, helping it to shift resources to new technologies.
TODAY in HISTORY
- The first issue of Action Comics, featuring Superman, was published. (1938)
- General Charles De Gaulle became the premier of France. (1958)
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