US FINANCIAL MARKET

Wall Street slumps as surge in virus cases clouds recovery outlook – Reuters, 10/28/20

• Wall Street main indexes slumped on Wednesday as a surge in coronavirus cases in the United States and Europe dashed hopes of a quick global economic recovery.
• Shares of hotels, airlines and other companies sensitive to COVID-19-related curbs dropped with Wynn Resorts down 2% and the S&P 500 airlines index declining 3%. The energy index lost about 3% as oil prices fell on fears of lower fuel demand.
• New cases and hospitalizations set records in the U.S. Midwest, while concerns over a national lockdown in France and tighter restrictions in Germany sapped investor appetite for risk.
• A spiraling pandemic and a failure to reach a deal on a fresh round of U.S. fiscal stimulus before Nov. 3 elections have wiped off all of blue-chip Dow’s gains for October and pushed the benchmark S&P 500 to near four-week lows.
• Wall Street’s fear gauge jumped to its highest level in nearly two-months, also on concerns over a delay in counting the huge volume of mail-in ballots, meaning a winner might not be declared the night of Nov. 3, when polls close.
• Democratic challenger Biden leads President Donald Trump nationally by 10 percentage points, according to the Reuters/Ipsos poll, but the competition is tighter in swing states, which will decide the victor.
• Microsoft’s quarterly results surpassed analysts’ targets, benefiting from a pandemic-driven shift to working from home and online learning. Its shares, however, fell 2.6% after rising 35% so far this year.
• General Electric jumped 8.6% after it reported a surprise quarterly profit and a positive cash flow on the back of cost cuts and improvements in its power and renewable energy businesses.
• Boeing slipped 1.9% as it reported its fourth straight quarterly loss.
• Of the 170 S&P 500 companies that have reported third-quarter earnings so far, about 84% have topped expectations, according to Refinitiv data. Profit on average is expected to fall 16.4% from a year earlier.

Germany and France prepare new lockdowns as COVID sweeps Europe – Reuters, 10/28/20

• Germany and France were preparing to announce restrictions approaching the level of last spring’s blanket lockdowns on Wednesday as COVID deaths across Europe rose almost 40% in a week, while financial markets tumbled on fears of the likely economic costs.
• German Chancellor Angela Merkel was due to meet state premiers in a conference call to discuss closing restaurants and bars but keeping schools and nurseries open, while allowing people to go out in public only with members of their own household.
• In France, which has seen more than 50,000 new cases a day, President Emmanuel Macron will give a televised address in the evening and is expected to announce further curbs on movement following the curfew measures introduced across much of the country last week.
• News television BFM TV reported that the government was considering a month-long lockdown from midnight on Thursday, but there was no confirmation from Macron’s office.
• Italy, which pledged more than 5 billion euros ($5.9 billion) in new support measures for businesses hit by the latest restrictions, has seen repeated clashes between police and protesters in cities from Naples to Turin as well as bitter criticism from restaurant owners and business groups.
• Germany’s BGA, a lobby group for the services sector, said restaurant closures would inflict a “death blow” on many businesses and called instead for tighter measures to restrict contagion in people’s homes.
• The latest figures from the World Health Organization on Tuesday showed Europe reported 1.3 million new cases in the past seven days, nearly half the 2.9 million reported worldwide, with over 11,700 deaths, a 37% jump over the previous week.

Microsoft cloud business gathers steam as pandemic boosts growth – Reuters, 10/27/20

• Microsoft’s cloud computing business slightly re-accelerated and its Teams messaging and collaboration software won new users, as a pandemic-driven shift to working from home and online learning drove quarterly results ahead of investor targets.
• The company’s revenue rose 12% to $37.2 billion in the quarter ended Sept. 30, beating analysts’ estimates of $35.72 billion.
• Revenue from its personal computing division, which includes Windows software and Xbox gaming consoles, rose 6% to $11.8 billion.
• Microsoft said revenue in its “Intelligent Cloud” segment rose 20% to $13 billion in the most recent quarter.
• Analysts had expected revenue of $12.7 billion, according to IBES data from Refinitiv.
• Revenue growth for Azure, the company’s flagship cloud computing business, was 48%, up 1 percentage point from the previous quarter and ahead of Wall Street estimates of 43.45%, according to consensus data from Visible Alpha.
• Daily users of its Teams messaging and collaboration software have risen to 115 million from 75 million in April, the company said.
• Net income rose to $13.89 billion, or $1.82 per share, from $10.68 billion, or $1.38 per share, a year earlier.
• Analysts had expected a profit of $1.54 per share.

Boeing Cutting More Jobs in Response to Pandemic – Wall Street Journal, 10/28/20

• Boeing said it is reviewing jet production levels and plans to shed another 7,000 jobs by the end of next year in response to the mounting toll on the global airline industry from a fresh global surge in coronavirus cases.
• Boeing’s sales fell 29% in the latest quarter from a year ago and the company burned through $4.8 billion in cash, further evidence of the mounting financial cost from the MAX crisis and fallout from the coronavirus pandemic.
• Boeing handed over just 28 planes to customers in the September quarter compared with 62 a year earlier, and has become more reliant on its defense business to drive revenue and profit.
• Boeing’s commercial jetliner arm reported a loss of $1.4 billion in the quarter as sales fell 56%.
• The defense business produced a profit of $628 million, down 2% from a year ago, but executives said they were watching a potential slowdown.
• The plans came as the U.S. aerospace giant on Wednesday reported a third-quarter loss of $466 million and said it is focused on preserving cash ahead of the expected return to service of the 737 MAX as soon as next month, ending a protracted world-wide grounding after two crashes took 346 lives.
• The company expects to end next year with around 130,000 employees, having started 2020 with a workforce of 160,000, with the cuts including some layoffs.
• Boeing maintained its existing guidance to gradually increase MAX production through next year and reduce output of the 787 Dreamliner when it moves all assembly to South Carolina.
• However, Boeing executives said it could reduce output further if airlines are unable to take delivery because of a lack of demand or financing.

Mastercard shares fall as profit drops on virus-led travel slowdown – Reuters, 10/28/20

• Mastercard’s quarterly profit missed analyst estimates on Wednesday as the COVID-19 pandemic led to a slowdown in global travel and related spending, sending the payment processor’s shares more than 4% lower.
• Mastercard reported a 36% drop in cross-border volume on a local currency basis in the reported quarter.
• Gross dollar volume (GDV), the dollar value of transactions processed, rose 1% to $1.6 trillion.
• Cross-border volumes have continued to fall since the quarter ended, with all first three weeks of October clocking declines of more than 30%, according to an investor presentation.
• Mastercard’s total operating expenses fell 4% to $1.7 billion in the quarter.
• Net income fell 28% to $1.5 billion, or $1.51 per share, in the third quarter ended Sept. 30.

UPS tops profit target but shares sink on e-commerce margin squeeze – Reuters, 10/28/20

• United Parcel Service beat profit expectations on Wednesday, but shares sank 5.7% as investors fretted over a margin squeeze from pandemic-fueled e-commerce deliveries.
• Revenue jumped 15.9% to $21.24 billion.
• Third-quarter average daily volume jumped 13.8% the key UPS domestic segment, which has been inundated with residential deliveries of everything from exercise equipment to snacks.
• Operating profit in the company’s domestic package unit fell 8.8% during the third quarter after it made more deliveries to far-flung – and less profitable – residential addresses and invested in expanding and speeding up service.
• Net income increased 11.8% to $1.96 billion, or $2.24 per share, during the quarter.

GE’s Cost Cuts Offset Troubles in Aviation Unit – Wall Street Journal, 10/28/20

• The troubled aviation industry continued to weigh on General Electric, which reported another quarter of shrinking revenue, but the conglomerate posted a smaller loss and was able to generate cash from its industrial operations.
• Overall, GE reported revenue of $19.42 billion, down 17% from a year ago.
• Excluding its stake in the Baker Hughes oil business and other assets it sold, industrial revenue fell 12% to $17.88 billion.
• GE’s aviation revenue fell to $4.92 billion in the third quarter from $8.11 billion a year ago. New orders dropped 54% from a year ago. The segment’s profit plunged 79% to $356 million.
• GE’s power unit, which makes turbines for power plants, reported revenue rose 3% to $4.03 billion and swung to a profit of $150 million.
• The renewable energy unit, which mostly makes wind turbines, basically broke even on a 2% rise in revenue to $4.53 billion.
• While orders for new equipment fell in several of its key businesses, the company said it generated $514 million in industrial free-cash flow in the quarter ended Sept. 30.
• On that basis, the company also predicted it would generate $2.5 billion in cash in the fourth quarter.
• The company had a net loss of $1.14 billion, before preferred stock dividends, compared with a loss of $9.42 billion a year ago when it booked hefty accounting charges on the Baker Hughes investment.

Anthem quarterly profit beats on deferred healthcare due to pandemic – Reuters, 10/28/20

• U.S. health insurer Anthem beat quarterly profit estimates on Wednesday, helped by lower medical costs as customers delayed non-essential medical care due to the COVID-19 pandemic.
• Sales grew nearly 17% to $31.16 billion, beating estimates of $29.81 billion.
• Operating revenue from Anthem’s top-earning business segment, which sells government-backed Medicare and Medicaid plans, jumped nearly 14% to $18.1 billion.
• Anthem’s pharmacy benefits business IngenioRx recorded operating revenue of $5.58 billion, compared with $1.92 billion a year ago.
• The company’s benefit-expense ratio, the share of premiums paid for medical services, improved to 86.8% in the third quarter from 87.2% a year earlier. Analysts on average had expected 86.9%, according to Refinitiv IBES estimates.
• Excluding items, the company earned $4.20 per share in the quarter ended Sept. 30, ahead of the average analysts’ estimate of $4.15.

General Dynamics third quarter profit drops amid aerospace headwinds, but margins rise – Reuters, 10/28/20

• Defense contractor General Dynamics reported an 8.7% fall in third-quarter earnings on Wednesday, sending its shares down as the coronavirus crisis continues to hit aerospace sales.
• Revenue at the Reston, Virginia-based company fell 3.4% to $9.4 billion.
• Revenue at the aerospace unit fell 20.8% to $1.95 billion compared with a year ago.
• Profit margins at the unit also fell to 14.3% from 15.8% in the same period last year.
• The Gulfstream business jet maker delivered 32 planes to customers, six fewer than the same period a year ago.
• Pandemic-related lockdowns have hindered deliveries of the jets since early in the year.
• The marine systems unit, which makes ships and submarines for the U.S. Navy, saw revenue up 7.6% compared with a year earlier.
• General Dynamics’ total order backlog at the end of the third quarter 2020 was $81.5 billion, up 21% from the year-ago quarter as the U.S. Department of Defense continues to place orders with U.S. defense contractors.
• Earnings fell to $287 million, or $2.90 per share, in the third quarter ended Sept. 27, from $291 million, or $3.14 per share, a year earlier.

Boston Scientific reports loss as COVID-19 slams demand for medical devices – Reuters, 10/28/20

• Boston Scientific swung to a loss in the third quarter from profit a year ago, as demand for its medical devices was hurt by the ongoing COVID-19 pandemic.
• Net sales fell 1.8% to $2.66 billion.
• The Marlborough, Massachusetts-based company said on Wednesday its sales of medical devices dropped 3.7% to $2.58 billion.
• Net loss attributable to Boston Scientific was $169 million, or 12 cents per share, in the quarter ended Sept 30, compared with net earnings of $126 million, or 9 cents per share, last year.

Visa’s Planned Purchase of Plaid Faces Antitrust Scrutiny at the Justice Department – Wall Street Journal, 10/27/20

• Visa’s $5.3 billion deal to buy a key player in the financial-technology space is in jeopardy because of antitrust concerns, according to people familiar with the matter.
• The Justice Department could decide soon whether it will sue to block Visa’s acquisition of Plaid Inc., a firm that provides the technological infrastructure underpinning an array of next-generation financial apps.
• After spending the better part of the year scrutinizing the deal, the department is concerned it could limit nascent competition in the payments sector, people familiar with the matter said.
• The Justice Department has been making preparations for potential litigation, including lining up potential witnesses for a trial, some of the people said. No final decision has been made.

Apple Faces Antitrust Complaint in France Over Privacy Changes in iPhones – Wall Street Journal, 10/28/20

• Advertising companies and publishers have filed a complaint against Apple with France’s competition authority, arguing that privacy changes the smartphone maker plans to roll out are anticompetitive.
• Starting in early 2021, Apple’s operating software will require apps to get opt-in permission from users to collect their advertising identifier, a key number used to deliver targeted ads and check how ad campaigns performed.
• The companies behind the complaint, brought through a group of trade associations, say few users will agree to be tracked, making it harder for companies from game-makers to news publishers to sell personalized ads and tough for the middlemen in those transactions.
• The case is one of the first legal challenges to online-privacy measures on antitrust grounds.