DAILY MARKET REPORTS
- U.S. stock indexes were little changed on Monday as investors weighed an escalating trade dispute between the United States and China and a mixed bag of corporate results.
- China proposed a set of differentiated tariffs on $60 billion worth of U.S. imports last week, retaliating to the Trump administration’s plans of 25% tariffs on $200 billion worth of Chinese imports.
- Chinese state media launched a personal attack on President Donald Trump’s trade policies on Monday, saying his trade “extortion” would not work.
- Praxair dropped 5.2% after its $86 billion merger with German industrial gases group Linde was thrown into doubt by more demands from U.S. antitrust regulators.
- Berkshire Hathaway rose 3.6% after the Warren Buffett-led conglomerate reported a 67% surge in quarterly operating profit.
- Newell Brands dropped 7% after the Sharpie pen maker reported quarterly sales below estimates on Monday and cut its full-year forecast.
- PepsiCo rose 1.3% after the company said Chief Executive Officer Indra Nooyi would step down in October.
- Of the more than 400 S&P 500 companies that have reported so far, 78.6% have topped earnings estimates. That is well above the average of 72% for the past four quarters.
US FINANCIAL MARKET
- Berkshire Hathaway, the conglomerate run by billionaire Warren Buffett, on Saturday said quarterly operating profit rose 67%, as insurance underwriting rebounded and several business units benefited from a growing economy.
- Results easily topped analyst forecasts. Underwriting profit at the Geico unit more than quintupled, the BNSF railroad benefited from demand to ship products, and the Berkshire Hathaway Automotive car dealership financed more vehicle purchases.
- Insurance underwriting profit totaled $943 million, compared with a year earlier $22 million loss. BNSF profit surged 37% to $1.31 billion, as economic growth led to more shipments of consumer goods, and demand for fertilizer, grain, petroleum products, plastics, sand, and steel.
- Operating profit rose to $6.89 billion from $4.12 billion a year earlier.
- Net income rose to $12.01 billion from $4.26 billion a year earlier.
Tyson Foods Reports Higher Profit as Sales Tick Up
- Tyson Foods reported that its third-quarter profit rose from a year ago, a week after the company announced it was trimming its outlook for the year because of factors like commodity market volatility and tariffs.
- Net sales were $10.05 billion, up 2% from $9.85 billion, which came in under estimates from analysts. Sales volumes rose for the company’s beef and prepared food segments, but fell in its pork and chicken segments.
- Average prices rose 1.8%, helped by an increase in prices for prepared foods and chicken, but hurt by declines in the prices of beef and pork. During the third quarter, pork prices fell 7.4% on average, the most of all of the segments. Tyson tied that decline to “increased availability of live cattle supply and lower livestock costs.”
- Earnings rose 21% to $541 million, up from $447 million.
Newell Brands Lowers Guidance Following Divestitures, Decline in Sales
- Newell Brands lowered its earnings guidance for the year and reported a decline in both sales and profit in the second quarter, as the company continues efforts to refocus its operations by selling some of its major brands.
- Net sales at Newell fell 13% in the second quarter from the comparable quarter a year earlier to $2.2 billion.
- The company said Toys “R” Us stores in the U.S. being liquidated led to “significant volume declines” in its baby division.
- Including discontinued operations, net sales were $3.73 billion, down 8%. Core sales, which account for impacts from things like divestitures and foreign currency fluctuations, fell 6.2%.
- Newell reported earnings of $131.7 million down 41% from $223 million a year earlier but beat estimates from analysts.
- The maker of Rubbermaid containers, Yankee Candle and Sharpie markers said it now expects sales to be between $8.7 billion and $9 billion in 2018, down from its previous guidance of between $14.4 billion and $14.8 billion.
Cardinal Health posts a fourth-quarter loss
- Cardinal Health reported a fourth-quarter loss compared to a year-ago profit, as the U.S. drug distributor was hit by an asset-impairment charge of $1.35 billion.
- Revenue rose to $35.35 billion from $32.97 billion.
- Net loss was $1.17 billion in the quarter, compared to a profit of $274 million a year earlier as distribution and SG&A expenses surged 29% in the quarter in addition to the impairment.
Jacobs Engineering Earnings and Revenues Beat Estimates
- Jacobs Engineering posted revenues of $4.2 billion for the quarter, surpassing estimates of $4.0 billion. This rose 66% compared to year-ago revenues of $2.51 billion.
- The company’s backlog increased to $27.2 billion, compared to $18.6 billion a year ago.
- Jacobs’ bottom line came in at $150.2 million, up 42% from $89.03 million in last year’s third quarter and over 13% above consensus.
Henry Schein’s Earnings Beat
- Henry Schein reported net sales of $3.33 billion in the second quarter, up 8.7% year over year and marginally ahead of expectations of $3.33 billion.
- Dental sales of $1.6 billion increased by 8.4%. Animal Health sales of $985.9 million increased by 10.6%. Medical sales of $614.0 million increased by 7.5%. The majority of sale increases were due to increases in local currencies.
- Net income increased to $141.2 million compared to $136.1 million a year ago. This was ahead of consensus.
- The company now expects EPS in the range of $4.06-$4.14, in comparison to the previously announced range of $4.03-$4.14, reflecting 13-15% growth from the 2017 adjusted EPS figure of $3.60.
SeaWorld Entertainment Reports Second Quarter and First Half 2018 Results
- Total revenue increased by $18.2 million, or 4.9%, to $391.9 million from the second quarter of 2017.
- Attendance increased by 0.3 million, or 4.8%, to 6.4 million guests.
- Year to date, attendance at the theme park increased 8% to 9.6 million guests compared to the same period in 2017.
- Net income was $22.7 million, compared to a net loss of $175.9 million in the second quarter of 2017.
PepsiCo veteran Ramon Laguarta to replace Indra Nooyi as CEO
- PepsiCo said Indra Nooyi would step down as its longtime chief executive officer, handing over the reins to company veteran Ramon Laguarta, who has vast international experience spanning several continents.
- Laguarta starts on Oct. 3 and will be PepsiCo’s sixth CEO in its 53-year history. He takes over as the beverage maker navigates a shrinking global soda market and evolving snacks sector, and spends more to stay up against rivals eating into market share.
- Laguarta, 54, was named the president of the company in September of last year and was tipped to succeed Nooyi. He also formerly led PepsiCo’s Eastern European operations.
Wells Fargo faces tax credit probes, new problems with mortgage borrowers
- Wells Fargo is facing government probes into its use of low-income housing tax credits and has also set aside $8 million to compensate borrowers who were incorrectly denied mortgage modifications under a federal assistance program.
- The new disclosures add to Wells Fargo’s numerous regulatory penalties, private lawsuits and remediation efforts. Most stem from a sales practices scandal that has touched on all of the bank’s major business units.
- The $8 million accrual is intended for roughly 625 borrowers who should have qualified for a loan modification under a program the Treasury Department set up in 2009 to help Americans who were struggling to make mortgage payments.
- An error in Wells Fargo’s underwriting tool improperly excluded those borrowers, 400 of whom eventually had their homes foreclosed upon, the bank said.
Oil gains after monthly Saudi output unexpectedly drops
- Oil rose on Monday after Saudi crude production unexpectedly fell in July and U.S. drilling appeared to slow, although the price is still almost 10% below its 2018 high of more than $80 a barrel.
- Saudi Arabia pumped around 10.29 million barrels per day (bpd) of crude in July, two OPEC sources said on Friday, down about 200,000 bpd from a month earlier.
- That came despite a pledge by the Saudis and top producer Russia in June to raise output from July, with Saudi Arabia promising a “measurable” supply boost.
Facebook to Banks: Give Us Your Data, We’ll Give You Our Users
- The social media giant has asked large U.S. banks to share detailed financial information about their customers, including card transactions and checking account balances, as part of an effort to offer new services to users.
- Facebook increasingly wants to be a platform where people buy and sell goods and services, besides connecting with friends. The company over the past year asked JPMorgan Chase, Wells Fargo, Citigroup and U.S. Bancorp to discuss potential offerings it could host for bank customers on Facebook Messenger, said people familiar with the matter.
- Data privacy is a sticking point in the banks’ conversations with Facebook. The talks are taking place as Facebook faces several investigations over its ties to political analytics firm Cambridge Analytica.
- Facebook has talked about a feature that would show its users their checking-account balances, the people said. It has also pitched fraud alerts
MoviePass Slashes Offering to Three Films a Month
- Short on cash, battered by investors and pronounced dead by critics recently, MoviePass will soon begin limiting customers to three movies a month, a major change from its current allowance of one a day.
- MoviePass Chief Executive Mitch Lowe said in an interview that the new policy, which takes effect Aug. 15, will reduce the company’s cash burn rate by more than 60% and make its attempted transition to profitability “more manageable.”
- Helios bought MoviePass a year ago and slashed the price to $9.95 a month for one film a day; it had previously cost $40 to $50 a month.
- Eager to preserve cash, MoviePass on July 27 stopped allowing its users at most theaters to see that weekend’s most popular film, “Mission: Impossible—Fallout.” The following Monday, MoviePass said it was raising its price to $14.95 a month and blocking customers from seeing new releases during their first two weeks on the big screen.
US ECONOMY & POLITIC
- Through July, U.S. employers added an average of 215,000 jobs a month to payrolls. That is a marked acceleration from the 184,000 jobs added on average during the first seven months last year and well above the 165,000 average monthly employment growth economists predicted for 2018 when asked in January.
- One big reason is after shedding an average of 6,000 jobs a month during the first seven months of 2017, retailers added an average of 12,000 each month this year. An increase in consumer spending, driven by rising incomes and strong confidence, is causing some retailers to expand.
- Manufacturers have mostly been shedding jobs since the late 1970s, but employment in the sector has increased since the recession ended in 2009, and growth accelerated over the past year.
- The pace of factory hiring more than doubled this year compared with the first seven months of 2017.
Senators Signal Concerns Over China’s Global Investments
- Several U.S. senators are pressing the Trump administration to detail what it is doing to deal with Beijing’s financing of international infrastructure projects that have left many countries indebted to China and potentially in need of bailouts.
- In a letter to Treasury Secretary Steven Mnuchin and Secretary of State Mike Pompeo, the senators asked how they will push the International Monetary Fund to address problems arising from China’s investment plan, the “Belt and Road Initiative.”
- About 70 countries are hosting projects funded under China’s plan, with many of them in deep debt distress. Sri Lanka has already asked for an IMF bailout, and Pakistan is expected to request one this fall after indebtedness stemming in part from a $62 billion project to upgrade Pakistan’s infrastructure.
- Mr. Pompeo has already raised the concern that a new IMF bailout of Pakistan would in effect repay Chinese bondholders or China itself. Mr. Mnuchin has also raised concerns and sought to enlist the IMF to do more about the program.
At least 40 shot and four killed in a night of Chicago gun violence
- At least 40 people were shot in Chicago over the weekend during the seven hours from midnight Saturday to early Sunday morning, with four fatalities, a stark violent streak in a city where authorities say gun violence has been decreasing this year.
- Police said gunmen targeted a block party, a gathering after a funeral, and other gatherings on a night where thousands of people gathered for a downtown concert.
- Local media reported that the brunt of the violence happened in the city’s West Side, where 25 people were shot in separate attacks.
- The Chicago Tribune, which has been tracking shooting statistics, reported earlier this month that shootings in the city have declined, with 533 fewer shootings as of Aug. 1 than the same time in 2017.
U.S. sees sanctions having a significant impact on Iran economy: U.S. officials
- The Trump administration will aggressively enforce economic sanctions that it is re-imposing on Iran this week and expects the measures to have a significant impact on the Iranian economy, senior U.S. administration officials said on Monday.
- The officials added that Trump was ready to meet with Iran’s leaders at any time in an effort to forge a new agreement with Tehran after President Donald Trump withdrew from a 2015 nuclear deal in May.
- Some of the sanctions will come back on Tuesday at 12:01 a.m. EDT. The United States also plans to re-introduce potentially more damaging sanctions on Iranian oil in November.
EUROPE & WORLD
- HSBC said higher costs weighed on first-half profit as it embraces ambitious growth plans and steps up investment in technology and its expanding China business.
- Expenses were 7% higher in the first half of 2018 than a year earlier, helped by a revenue increase of 4% to $27.29 billion.
- Net profit for the first half rose to $7.17 billion from $7 billion on lucrative fees from money managing, particularly in Hong Kong, and for the quarter rose to $4.09 billion, up from $3.87 billion in the same three months of 2017.
- The bank saw higher deposits from retail customers and strong sales of wealth management products in Hong Kong, which helped push the revenue contribution of the unit rose to nearly 30% of first-half profits, up from 27.5% a year earlier.
SoftBank’s Operating Profit Jumps 49%, Boosted by Vision Fund
- SoftBank’s quarterly operating profit rose 49%, lifted by rising valuations on investments in startups such as Indian e-commerce company Flipkart and U.S. shared-office firm WeWork.
- SoftBank’s $92 billion Vision Fund and a $6 billion affiliate together earned a quarterly profit of ¥240 billion ($2.16 billion), double what the fund made in the same quarter last year, the company said.
- That and a one-time gain from the sale of a majority stake in the Chinese operations of U.K. chip designer ARM brought the Japanese conglomerate’s overall quarterly operating profit to ¥715 billion, despite a profit fall at U.S. wireless subsidiary Sprint.
- One contributor to the Vision Fund’s performance was SoftBank’s agreement to sell its 20% stake in Flipkart to Walmart for about $4 billion, which is 60% more than what the company paid for it earlier.
- The Vision Fund, which is backed by the sovereign-wealth funds of Saudi Arabia and Abu Dhabi, and an affiliate called the Delta Fund invested $32 billion in 30 companies as of June. Those investments are now valued at $37.5 billion, SoftBank said.
Linde shares drop as Praxair merger hits U.S. antitrust hurdle
- Shares in Linde dropped as much as 10% on Monday after the German industrial gases group’s planned $86 billion merger with U.S. rival Praxair was thrown into doubt by more demands from U.S. antitrust regulators.
- The U.S. Federal Trade Commission (FTC) is asking for more assets to be sold than previously anticipated and also wants prospective buyers to meet certain other requirements, Linde said in a statement on Sunday.
- Analysts said the deal was still likely to go ahead, but the risk of it falling apart had risen and, with more forced sell-offs, the benefits had diminished.
Venezuela arrests six over drone explosions during Maduro speech
- Venezuelan authorities said on Sunday they have detained six people over drone explosions the day before at a rally led by President Nicolas Maduro, as his critics warned the socialist leader would use the incident to crack down on adversaries.
- The suspects launched two drones laden with explosives over an outdoor rally Maduro was holding in Caracas to commemorate the National Guard. One was “diverted” by security forces while the second fell on its own and hit an apartment building
- The president later described the attack, which injured seven soldiers, as an assassination attempt.
- The arrests suggest the attack was less a military uprising than an assault led by groups linked to anti-Maduro street protesters, dubbed “The Resistance,” who have led two waves of violent demonstrations that left hundreds dead.
Iranians Protest Economic Woes as New U.S. Sanctions Loom
- Thousands of protesters have taken to Iran’s streets in recent days in the biggest wave of unrest since January, calling for financial help and regime change as the U.S. prepares to impose new sanctions on the country.
- Protesters in cities and towns across Iran focused on high prices and a lack of jobs, blaming Iranian leaders—but not the U.S.—for the economic problems. The unrest over the past week underlines growing political trouble for a regime that has struggled to find a response to months of economic turmoil.
- “Death to inflation! Death to unemployment!” crowds chanted in one video shared recently on social media, adapting the “Death to America!” refrain popularized in the 1980s by Iran’s first Supreme Leader, Ayatollah Ruhollah Khomeini.
- In a country where the wealthy and well-connected enjoy fast cars and luxury hotels and the underclass toils to afford rice, bread, and sugar, the social fabric is being strained by the economic threat posed by new U.S. sanctions that are set to go into place on Tuesday just after midnight U.S. Eastern time.
Haier sees costs spike at GE arm amid steel tariffs, U.S.-China trade spat
- China’s Haier said rising steel prices amid hefty U.S. import tariffs was driving up costs for its business in America, and warned that consumers stood most to lose from a mounting trade spat between the world’s top two economies.
- GE Appliances, which Haier bought in 2016 from General Electric, has already raised its prices twice this year to cope with rising costs, said Haier’s overseas managing director, Li Pan.
- Haier’s comments add to a growing clamor of voices from companies worldwide warning about the impact of U.S. metal tariffs. Home appliance maker Whirlpool and automakers such as General Motors and Ford have all flagged that steel costs have hit or could impact their bottom lines.
Tourists flee Indonesia’s Lombok island after earthquake kills 98
- Rescuers used diggers and heavy machinery to clear debris and search for survivors on Monday after a magnitude 6.9 earthquake killed at least 98 people on Indonesia’s resort island of Lombok, prompting an exodus of tourists.
- The National Disaster Mitigation Agency (BNPB) said it expected the death toll to rise once the rubble of more than 13,000 flattened and damaged houses were cleared away after the second powerful quake in a week.
- Officials said more than 2,000 people had been evacuated from the three Gili islands off the northwest coast of Lombok, where fears of another tsunami spread among tourists.
TODAY in HISTORY
- The Holy Roman Empire ended with the abdication of Emperor Francis II. (1806)
- Gertrude Ederle became the first U.S. woman to swim across the English Channel. (1926)
- The first atomic bomb used in warfare was dropped on Hiroshima, Japan. (1945)
- President Johnson signed the Voting Rights Act of 1965, which outlawed the poll taxes and literacy tests that had restricted black voter registration in the South. (1965)
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