DAILY MARKET REPORTS
- U.S. stocks opened slightly higher on Friday, as hopes that the United States and China would start new trade talks calmed investor worries and technology stocks rose.
- Stocks have risen in the past week, reversing the declines from the prior week, as investors attempt to assess the potential impact of new trade agreements on supply chains and the global economy.
- The latest boost for stocks appeared to come from news the Trump administration is giving Beijing another chance to try to stave off new tariffs on $200 billion in Chinese exports, asking top officials for a fresh round of trade talks later this month.
- Consumer companies declined Friday after U.S. retail sales data showed American consumers reined in their spending in August, taking a breather after very strong sales growth in July.
- The data comes as U.S. wages rose in August, with private-sector hourly wages growing 2.9% from a year earlier, the fastest pace since mid-2009.
- Weighing on utilities was NiSource, which tumbled 10% after fire investigators said they suspected the company’s unit Columbia Gas was linked to a series of gas explosions in Boston suburbs on Thursday.
US FINANCIAL MARKET
Adobe quarterly results beat estimates
- Adobe Systems beat analysts’ estimates for quarterly profit and revenue, helped by strong performance of its digital media business, including Creative Cloud products.
- Revenue rose 24.4% to $2.29 billion, ahead of expectations of $2.25 billion.
- Revenue from Adobe’s digital media business was $1.61 billion, above the analysts’ average estimate of $1.59 billion.
- The company’s net income rose to $666.3 million in the third quarter from $419.6 million a year earlier.
- The company expects current-quarter revenue of $2.42 billion and adjusted earnings of $1.87 per share.
- Analysts, on average, estimated revenue of $2.42 billion and adjusted earnings of $1.86 per share.
Sears Reports Widening Losses and Tumbling Sales
- Sears reported a 25.6% fall in second-quarter sales on Thursday, as the company shut more stores to combat declining foot traffic in brick-and-mortar outlets.
- Total revenue plunged by more than $1 billion to $3.18 billion for the quarter, compared with a year earlier.
- Sales excluding newly opened or closed stores fell 4.0% at Sears and 3.7% at Kmart locations. Overall, the company hasn’t posted a quarterly gain since 2011.
- Sears has closed 384 stores since last year and is struggling to attract shoppers to its remaining Sears and Kmart locations.
- The company lost $508 million for the period, compared with a $250 million loss a year ago.
Goldman Sachs’ Next CEO Names New Finance Chief, President
- Goldman Sachs’s incoming chief executive is installing investment bankers in the Wall Street firm’s senior-most roles, capping a power shift away from a trading business that has struggled to make money since the financial crisis.
- David Solomon, who takes over as Goldman’s CEO on Oct. 1, on Thursday tapped as his deputy John Waldron, who will be the firm’s president and chief operating officer.
- Stephen Scherr will take over as finance chief, succeeding Martin Chavez the company said.
- Mr. Chavez will return to Goldman’s trading division as a co-head, leaving the CFO job after 18 months in which Goldman stumbled in the Federal Reserve’s annual stress tests and disappointed investors by reducing its stock buyback.
Gas explosions drive thousands out of homes in Boston suburbs
- Some 8,000 people were driven from their homes in the Boston suburbs by a series of gas explosions, and it was unclear on Friday when they could go back.
- The blasts killed at least one person, injured 12 more and destroyed dozens of homes and other buildings in Andover, North Andover and Lawrence on Thursday.
- Some 70 fires, explosions or investigations of gas odor had been reported, Massachusetts State Police said.
- Investigators said the explosions were because of “over-pressurization of a gas main” that belongs to Columbia Gas of Massachusetts, a NiSource subsidiary.
Wells Fargo sees total expenses dropping by $3 billion by 2020: CFO
- CFO John Shrewsberry said the bank was on track to reach its target of $53.5 to $54.5 billion by the end of 2018.
- He sees expenses in the range of $50.0 billion to $51.0 billion in 2020.
- The outlook excludes remediation and penalty costs associated with the widespread regulatory and legal problems at the bank.
- For the current quarter, the company expects approximately $200 million in costs from ongoing efforts to repay customers who were overcharged for various services.
More States to Join Justice Department’s Discussion on Social Media Concerns
- The Justice Department is inviting a bipartisan group of 24 state attorneys general to discuss concerns over social media platforms, after receiving an “increased level of interest” from the AGs, an official said.
- That is more than previously expected for the meeting scheduled for later this month and is likely to fuel worries among the big internet companies.
- Several Trump administration agencies, including the Federal Trade Commission, are examining the industry, and President Trump himself recently railed against the internet giants and has attacked behemoths like Amazon.com and Google.
China’s Dalian Wanda trims AMC exposure with Silver Lake deal
- AMC Entertainment said it bought back 24 million shares from its top investor Dalian Wanda Group and issued $600 million worth of convertible notes to private equity firm Silver Lake.
- After the transaction, Wanda now owns about 38% of AMC shares, down from its previous majority stake of about 60%.
- As part of the deal, Silver Lake will get a seat on AMC’s board and a two-year right of first refusal on certain future transfers of AMC’s shares by Wanda.
US ECONOMY & POLITIC
U.S. Retail Sales Rose in August
- Sales at retail stores and restaurants rose 0.1% from the prior month to a seasonally adjusted $509 billion in August, well below the 0.4% increase economists had expected.
- Still, revised data showed retail sales rose 0.7% in July, up from an initially reported 0.5% increase.
- The overall weakness in August was largely due to a drop in auto sales, down 0.8% from the prior month.
- Sales at nonstore retailers, such as purchases made online, rose 0.7% and were up 10.4% from August last year.
- Compared with August a year earlier, sales grew 6.6%.
US business inventories increase solidly in July
- U.S. business inventories rose solidly in July, boosted by a larger than initially estimated increase in the stock of motor vehicles.
- The Commerce Department said business inventories increased 0.6% after edging up 0.1% in June, in line with forecasts.
- Retail inventories increased 0.5% in July instead of rising 0.4% as reported in an advance estimate published last month.
- Motor vehicle inventories jumped 1.2% in July rather than 1.0% as reported last month.
- Business sales rose 0.2% in July after increasing 0.3% in June.
U.S. auto sector output boosts industrial production
- Industrial production rose 0.4% last month after an upwardly revised 0.4% increase in July.
- Economists had forecast industrial production rising 0.3% last month after a previously reported 0.3% increase in July.
- Manufacturing output rose 0.2% last month, powered by a 4.0% rise in motor vehicles and parts.
- But excluding motor vehicles and parts, U.S. manufacturing production was unchanged, with production falling for computers and electronic products as well as for electrical equipment and appliances.
- With overall industrial production rising, capacity utilization, a measure of how fully firms are using their resources, rose last month to 78.1% from 77.9%.
U.S. import prices post largest drop in more than one-and-a-half years
- U.S. import prices recorded their biggest drop in more than 1-1/2 years in August amid declines in the cost of fuels and a range of other goods, suggesting a strong dollar was curbing imported inflation pressures.
- The Labor Department said import prices fell 0.6% last month, the largest decline since January 2016 and following a downwardly revised 0.1% dip in July.
- Import prices were previously reported to have been unchanged in July, while Economists had forecast import prices falling 0.2% in August.
- In the 12 months through August, import prices rose 3.7%, slowing after surging 4.9% in July.
- Prices for goods imported from China slipped 0.1% in August for a second straight month.
Consumer sentiment hits 100.8 in September, vs. 96.6 estimate
- The University of Michigan’s Surveys of Consumers said sentiment hit 100.8 in September, up from 96.2 in August.
- Economists expected the preliminary read on September consumer sentiment to reach 96.6.
Hurricane Florence Threat Remains ‘Catastrophic,’ Forecasters Warn
- After days of anticipation and evacuations, Hurricane Florence began battering the North Carolina coast while plunging tens of thousands of people into darkness.
- Florence, now a Category 1 storm, could potentially dump up to 40 inches of rain on parts of North Carolina while whipping up a damaging surge in coastal waterways.
- Early Friday, the National Hurricane Center said Florence was about to make landfall in North Carolina, with maximum sustained winds of 90 miles an hour.
- The total amount of property at risk from Florence, including homes, commercial buildings, industrial buildings, and automobiles, is almost $2 trillion, according to risk-assessment agency Karen Clark & Company.
Lawmakers Reach Deal to Avoid Shutdown Drama Before Midterms
- Lawmakers reached a bipartisan deal on Thursday to keep the government open until after the midterm elections, while also passing the first tranche of spending bills and sending them to President Trump’s desk.
- House and Senate negotiators also announced that they had reached a deal on a short-term spending bill that would fund the rest of the government through Dec. 7.
- Congress is expected to pass the spending patch with the second package of spending bills later this month.
- The bill would give members of the military a 2.6% pay raise, the largest such pay raise in nine years, and help combat the opioid epidemic by providing $6.7 billion for programs that fight, treat and stop substance abuse.
U.S. Budget Deficit Widened in August, Treasury Says
- The government ran a $214 billion deficit last month, compared with a $107.7 billion budget gap in August 2017, due to a 30% rise in government outlays, the Treasury Department said Thursday.
- The spending increase reflected some accounting shifts and calendar quirks and not actual spending changes. Adjusting for these changes, the government said the deficit was $152 billion in August—still 41% larger than in the year-earlier period.
- The budget gap totaled $898 billion in the first 11 months of the 2018 fiscal year, 33% larger than at the same point in fiscal 2017.
- The Treasury said gross corporate taxes have fallen 20% so far this fiscal year, while individual income-tax receipts are up 1%.
House Republicans Move to Extend Individuals’ Tax Cuts
- House Republicans advanced a measure to lock in last year’s tax cuts on individuals beyond their scheduled expiration date at the end of 2025, moving to build on their biggest legislative victory ahead of the midterm elections.
- Limits on tax breaks would get extended, too, including the $10,000 cap on the deduction of state and local taxes and the repeal of the deduction for personal exemptions.
- Republicans pointed to data showing that middle-income families would see the biggest decrease in their federal tax bills on a percentage basis.
- Households making between $40,000 and $50,000 would get an 8.1% tax cut in 2026, according to the Joint Committee on Taxation.
Feinstein Relays Allegation About Kavanaugh to FBI
- Sen. Dianne Feinstein has reported to the FBI an allegation concerning Supreme Court nominee Brett Kavanaugh that appeared to be connected to an incident of potential sexual abuse when he was a teenager.
- Mrs. Feinstein, the top Democrat on the Senate Judiciary Committee, said Thursday she had “received information from an individual concerning the nomination of Brett Kavanaugh to the Supreme Court” and referred it to investigative authorities.
- A spokesman for Judiciary Committee Chairman Chuck Grassley said Mr. Grassley was aware of Mrs. Feinstein’s referral but hadn’t seen the letter and didn’t plan to change the committee’s vote on Kavanaugh’s nomination, scheduled for Sept. 20.
Trump Ex-Campaign Chairman Paul Manafort Reaches Deal to Plead Guilty
- Paul Manafort reached a deal to plead guilty to two criminal charges Friday, according to court documents, a move that heads off a second criminal trial for the former Trump campaign chairman.
- Mr. Manafort, who becomes the fifth associate of President Trump to plead guilty in connection with special counsel Robert Mueller’s investigation, is expected to admit to conspiracy against the U.S. and conspiracy to obstruct justice.
- Mr. Manafort, unlike others charged by the special counsel, has taken something of a defiant approach until now about Mr. Mueller’s investigation.
EUROPE & WORLD
Canada PM says he wants a good NAFTA deal soon, hazy on deadline
- Canadian Prime Minister Justin Trudeau said on Thursday he wanted a good NAFTA deal as soon as possible but did not answer directly when asked if he agreed with Washington that the end of September was the final deadline for talks.
- Canada and the United States are struggling to settle differences over access to the Canadian dairy market and how to resolve trade disputes.
- U.S. trade laws dictate that there is an Oct. 1 deadline to produce the text of a pact that all three nations can sign before the current Mexican government leaves office on Nov. 30.
Takeda gets China’s approval for $62 billion Shire purchase
- Takeda Pharmaceutical said on Friday China approved its purchase of Shire, the latest regulator to clear the $62 billion deal and bring the Japanese group closer to becoming a global top 10 drugmaker.
- The acquisition, which will be the largest overseas purchase by a Japanese company, has already received unconditional clearance from U.S. and Brazilian regulators and awaits approval from Japan and the European Union.
- Takeda expects the deal to close in the first half of 2019.
Russia Raises Interest Rates to Boost Ruble
- Russia’s central bank raised interest rates Friday, moving to defend the ruble as global investors question the outlook for emerging-market economies and the possibility of fresh U.S. sanctions.
- The Bank of Russia raised its key interest rate to 7.5% from 7.25%, ending a series of cuts that brought it down from a peak of 17% at the end of 2014 that was introduced in the wake of earlier sanctions imposed on the country by the U.S. and Europe.
- The Bank of Russia’s move comes a day after the Central Bank of Turkey announced a sharp rise in its key policy rate, and follows similar moves in Argentina, Indonesia, and other developing economies.
TODAY in HISTORY
- President McKinley died of gunshot wounds inflicted by an assassin. Vice President Theodore Roosevelt succeeded him. (1901)
- Congress passed the Selective Service Act, providing for the first peacetime draft in U.S. history. (1940)
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