US FINANCIAL MARKET
WALL STREET TREADS WATER AS TRADE-FUELED RALLY PAUSES
- Wall Street halted a record run on Friday as U.S. President Donald Trump contradicted reports that the United States and China would roll back existing tariffs.
- The S&P 500 and Dow Jones indexes had closed at all-time highs on Thursday after officials said both countries had agreed to roll back tariffs on each other’s goods in a “phase one” trade deal if it is completed.
- But Trump said on Friday he had not agreed to roll back the tariffs, although Beijing would like him to do so.
- Of the 430 S&P 500 companies that have reported results so far, nearly three quarters have beaten profit estimates.
- Those numbers, to some extent, reflect significantly lowered analysts’ forecasts.
- Walt Disney gained 3.96% as its popular theme parks and a remake of “The Lion King” lifted earnings, and the company also spent less than it had projected on its online streaming service, Disney+.
- Activision Blizzard fell 1.36% after the video game publisher forecast fourth-quarter adjusted revenue below estimates, as it faces stiff competition from online and free-to-play games.
- Gap tumbled 8.14% after it said Chief Executive Art Peck would leave the company, a surprise exit in the middle of a restructuring. The apparel retailer also slashed its full-year earnings forecast.
Walt Disney Thrives at Box Office, but Focus Turns to Streaming
- Walt Disney’s hit movies, led by “The Lion King” and “Toy Story 4,” once again helped drive strong quarterly results.
- But the company is largely looking beyond the theater for its future, focusing instead on reasons for folks to stay home.
- Overall revenue rose 34% to $19.10 billion, edging past analysts’ average estimate of $19.05 billion.
- Disney is trying to transition from a cable TV leader to a powerhouse in the crowded streaming video market dominated by Netflix. The family-friendly digital entertainment service, Disney+, is set to debut on Tuesday.
- Disney+ will initially stream in the United States, Canada and the Netherlands.
- On Nov. 19, it will debut in Australia and New Zealand, followed by several countries in western Europe on March 31.
- The Disney+ app will be accessible via a wide range of smart TVs, mobile phones and streaming devices, including Amazon’s Fire TV devices and Samsung and LG products.
- Disney’s direct-to-consumer and international unit, which also includes ESPN+ and Hulu, reported an operating loss of $740 million, up from $340 million the previous year, but less than the $900 million that Disney had forecast.
- For the just-ended quarter, the theme parks and consumer products unit reported a 17% rise in operating income to $1.4 billion.
- The movie studio benefited from remakes of “The Lion King” and “Aladdin” plus Pixar sequel “Toy Story 4.” Profit at the division jumped 79% to nearly $1.1 billion.
- The company’s media networks division posted a 3% decrease in operating income to $1.8 billion, Disney said. Sports network ESPN experienced higher programming, production and marketing costs and now has 3.5 million subscribers.
- Overall, Disney’s profit slumped by more than half to $1.05 billion, hurt by a sharp rise in costs stemming in part from the Disney+ production costs, but estimates on a per share basis.
Activision forecasts fourth-quarter adjusted revenue below estimates
- Activision Blizzard forecast fourth-quarter adjusted revenue below estimates, as the video game publisher faces stiff competition from online, free-to-play games.
- Activision reported adjusted revenue of $1.21 billion for the third quarter. Analysts had expected revenue of $1.17 billion.
- The company’s net income fell to $204 million in the quarter, from $260 million a year earlier.
- The company expects current-quarter adjusted revenue of $2.65 billion, missing analysts’ average estimate of $2.75 billion.
Take-Two’s holiday sales forecast overshadows quarterly beat
- Videogame publisher Take-Two Interactive Software forecast holiday-quarter revenue below expectations, as console-based titles face stiff competition from online free-to-play games that attract a more younger audience.
- On an adjusted basis, Take-Two reported a revenue of $950.5 million in the second quarter, beating estimates of $925.6 million.
- Net income rose to $71.8 million from $25.4 million a year earlier.
- The company forecast third-quarter revenue between $860.0 million and $910.0 million, below estimates of $928.1 million.
- For the full year, the company expects adjusted revenue between $2.75 billion and $2.85 billion, compared to estimates of $2.80 billion.
Zillow quarterly revenue beats as it sells more homes
- Zillow Group beat analysts’ estimates for third-quarter revenue on Thursday, as the real estate website operator sold more homes and more real estate agents advertised on its platform, sending its shares up 10% in after-market trading.
- The company’s revenue more than doubled to $745.2 million, beating analysts’ estimates of $717.5 million.
- Revenue from the company’s homes segment, which buys and sells houses, rose to $384.6 million from $11,018 a year earlier, as it expands its Zillow Offers program.
- Zillow, famous for Zestimates that gives the market value of a house based on property data, said more than 80,000 homeowners requested an offer for homes from its platform in the reported quarter.
- Net loss widened to $64.6 million from $492,000 a year earlier, but significantly beat estimates of a $90.3 million loss.
- Including the expected $1.25 billion from the flipping business, Zillow expects revenue to total $2.59 billion to $2.62 billion for the year, ahead of analysts’ expected $2.53 billion.
Dropbox tops revenue, profit estimates on higher subscriber additions
- Dropbox beat analysts’ estimates for third-quarter revenue and profit on Thursday, as the online file hosting company signed up more individual and business customers to its platform.
- Revenue rose 19% to $428.20 million in the third quarter, beating analysts’ estimates of $423.48 million.
- Dropbox ended with 14 million subscribers, up from 12.3 million a year earlier and ahead of estimates of 13.89 million.
- Average revenue per user rose to $123.15, beating Refinitiv estimates of $122.82.
- However, net loss widened to $17 million in the quarter, from $5.8 million a year earlier.
GoPro quarterly revenue beats on ‘Hero’ camera demand, shares rise
- GoPro beat analysts’ estimates for third-quarter revenue on Thursday, boosted by demand for its new Hero camera, sending its shares up 11% in after-market trading.
- The action-camera maker’s revenue fell about 54% to $131.2 million, beating estimates of $126.4 million.
- The company’s net loss widened to $74.8 million in the third quarter, from $27.1 million a year earlier.
Gap CEO exiting as forecast cut casts doubt on turnaround
- Gap said on Thursday Chief Executive Officer Art Peck will leave the company, a surprise exit in the middle of a restructuring that comes as the apparel retailer slashed its full-year earnings forecast, sending its shares down 7%.
- Earlier this year, Gap said it will separate its better-performing Old Navy brand and shutter about 230 stores of its namesake apparel business, a process likely to be completed by 2020.
- The company estimated a 4% drop in third-quarter same-store sales, with declines across all its key brands including Old Navy.
- Gap also now expects full-year adjusted earnings per share of $1.70 to $1.75, down from its previous forecast of $2.05 to $2.15.
Indonesia’s Lion Air finds cracks in two 737 NGs with fewer flights than FAA safety directive
- Lion Air has found structural cracks in two Boeing 737 NG planes with fewer flights than a U.S. Federal Aviation Administration (FAA) threshold for checks, Indonesia’s aviation safety regulator said on Friday.
- The discovery could make it more likely the FAA will require airline operators to inspect 737 NGs with fewer than 22,600 cycles, which had not been mandated previously.
- The Lion Air jets with cracks had fewer than 22,000 cycles and are now grounded for repairs, a spokesman for the airline said.
- Boeing did not respond to an immediate request for comment. The manufacturer last week said that just over 1,000 planes globally had met the threshold for inspections to date, and of those fewer than 5% had issues.
PG&E Plan to Pay Insurance Claims in Cash Hurts Bankruptcy Talks
- An $11 billion settlement of insurance claims tied to PG&E’s alleged responsibility for California wildfires is emerging as an impediment to a potentially broader deal to end the utility’s bankruptcy, according to people familiar with the matter.
- In September, the company signed a settlement proposal that would pay $11 billion in cash compensation for what insurers paid out for damages caused by wildfires linked to PG&E equipment.
- If approved by the court overseeing PG&E’s bankruptcy, the deal could tie up much of the free cash the company will have as it exits bankruptcy.
- And, people who lost homes and loved ones to blazes that have been linked to the utility’s aged equipment are more likely to receive shares in the restructured company as compensation, rather than cash.
T-Mobile to Offer $15 Monthly Cellphone Plan
- T-Mobile opened a new front in the cellphone pricing wars, unveiling a monthly data plan that starts at $15 as the company responds to critics that its planned merger with Sprint will lessen competition.
- The No. 3 carrier by subscribers said Thursday it would sell phone plans with 2 gigabytes of high-speed data for $15 a month, one of the lowest entry-level prices from a major U.S. provider, if its Sprint takeover is allowed to proceed.
- In addition to offering the $15 prepaid plan, T-Mobile said it would also offer free in-home internet for some low-income and rural households with children, as well as free wireless service to first responders.
- It plans to offer free internet to 10 million households with children, a move that amounts to a $10 billion commitment by the combined company.
WhatsApp adds shopping catalog feature, courting e-commerce
- Facebook on Thursday launched a catalog feature for its WhatsApp messaging app, it said in a blog post, building out the service’s e-commerce tools as it moves slowly toward monetizing the app it bought in 2014 for $19 billion.
- The move comes after Facebook added a shopping feature to Instagram in March that lets users click a “checkout” option on items tagged for sale and pay for them directly within the app.
- The new WhatsApp tool stops short of that, as transactions still occur elsewhere. But small businesses, the main users of the free WhatsApp Business app, can now display a “mobile storefront” showcasing their wares with images and prices.
GE unit orders 25 Airbus jets including 12 Rolls-powered A330neo: sources
- Leasing giant GECAS, the aircraft leasing subsidiary of General Electric, has ordered 25 Airbus aircraft including a rare purchase of jets powered by GE’s rival engine maker Rolls-Royce, two people familiar with the matter said.
- The order includes 12 Airbus A330neo jets, for which Rolls-Royce is the sole engine supplier, and 13 A321XLR long-distance narrow-body jets.
- If confirmed, the decision by the world’s second largest leasing company to invest in the A330neo would be a key endorsement for the A330neo program which has been clawing its way back from a period of weak sales and some cancellations.
US ECONOMY & POLITICS
U.S. wholesale inventories revised lower, sales flat
- U.S. wholesale inventories fell more than initially estimated in September to post their biggest decline in nearly two years, suggesting inventory investment could continue to weigh on economic growth.
- The Commerce Department said on Friday wholesale inventories fell 0.4% in September, instead of the previously reported 0.3% decline, after having risen 0.1% in August.
- Inventories were up 4.8% on a year-on-year basis in September.
- Sales at wholesalers were unchanged in September after falling 0.1% in August.
- At September’s sales pace it would take wholesalers 1.36 months to clear shelves, unchanged from August.
Trump says has not agreed to roll back tariffs on China
- President Donald Trump told reporters he has not agreed to roll back tariffs on China but that Beijing would like him to do so.
- The Chinese Commerce Ministry, without laying out a timetable, said the two countries had agreed to cancel the tariffs in phases.
- A U.S. official, speaking on condition of anonymity, confirmed the rollback would be part of the first phase of a trade agreement that is still being put to paper for Trump and President Xi Jinping to sign.
- But the comment was soon shrouded in doubt after Reuters reported the plan faced stiff internal opposition in the U.S. administration.
JPMorgan Deal Shows Possible Path to Smaller Fannie and Freddie
- A recent move by JPMorgan Chase to shed risk on some of its mortgage loans is stirring hope that the tactic could help reduce the government’s role in the $11 trillion mortgage market.
- JPMorgan last month became the first U.S. bank to issue credit-risk transfers tied to a pool of mortgages.
- The bondlike instruments have been embraced by the government-controlled mortgage guarantors Fannie Mae and Freddie Mac since their introduction in 2013.
- In essence, JPMorgan has bought a type of insurance on loans it had already made to borrowers with high credit scores. That, in turn, should allow it to hold less capital against those loans.
- The deal is notable because some analysts think that a new market for credit-risk transfers issued by banks could make it at least a little more likely that banks would hold mortgages rather than selling them to Fannie and Freddie.
- By extension, such an outcome would make taxpayers less exposed to mortgage defaults.
New Law Will Tighten Controls on Tech Exports—Once Government Sorts Out the Fine Print
- The Commerce Department is coming under fire for putting off fixes to the way the government restricts the sale of U.S. technology overseas, with critics saying the delay could allow sensitive military tech to slip through to China.
- Congress passed a law last year that called for tougher restrictions on the types of cutting-edge technology U.S. companies can sell abroad; the Commerce Department has yet to write the wording that would implement the new rules.
- The rules will call for some investors in emerging and foundational technology in the U.S. to undergo a national-security review conducted by the U.S. Treasury’s Committee on Foreign Investment in the U.S.
Michael Bloomberg Preparing to Enter 2020 Democratic Race
- Billionaire Michael Bloomberg is taking steps to enter the 2020 race for the Democratic presidential nomination, one of his advisers said, months after the former New York City mayor said he wouldn’t run.
- Mr. Bloomberg is preparing a possible bid out of concern that the current candidates may not be able to defeat President Trump, his adviser Howard Wolfson said.
- People familiar with Mr. Bloomberg’s plans said he hasn’t made a final decision about whether to run.
EUROPE & WORLD
Honda cuts profit, sales outlook to four-year low; unveils $915 million buyback
- Honda slashed its annual profit and global sales outlook to a four-year low, citing a firmer yen and bleak business in both India and its main market of North America, even as it unveiled plans to buy back $915 million shares.
- The company cut its outlook for global group auto sales to 4,975,000 vehicles, versus a previous forecast of 5,110,000, for the current financial year.
- Japan’s third-largest automaker now expects an operating income of 690 billion yen for the year to March, lowest since the year-ended March 2016, from 770 billion yen previously.
Alibaba Readies Up to $15 Billion Hong Kong Listing
- Alibaba is aiming to raise $10 billion to $15 billion with a new listing in Hong Kong this month, according to people familiar with the matter, reviving the planned offering even as the city’s political climate remains unstable.
- The online-retailing giant, which is already listed in New York and is China’s most valuable company by market capitalization, plans to launch the share sale after its Nov. 11 “Singles Day” shopping festival, the Chinese equivalent of Black Friday.
- Alibaba expects to seek approval from Hong Kong’s stock exchange next week and launch the share sale shortly afterward, the people said.
Death of a Student Riles Protesters, Puts Hong Kong on Alert
- A university student died after being comatose for days from injuries sustained near the scene of a clash between police and protesters, sparking fresh anger that has fueled antigovernment demonstrations and unrest for five months.
- Chow Tsz-lok, a 22-year-old student at the Hong Kong University of Science and Technology, reportedly fell down a level in a multistory parking garage early Monday morning, sustaining brain injuries that left him in a coma.
TODAY in HISTORY
- Montana became the 41st state. (1889)
- John F. Kennedy defeated Richard M. Nixon for the presidency of the United States. (1960)
This information has been prepared from sources believed to be reliable, but no representation is being made as to its accuracy or completeness. The information provided should be used only as general information and is not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in the material may not develop as predicted. All indices, such as the S&P 500, are unmanaged and may not be invested into directly. Sources: Reuters, Bloomberg, the Wall Street Journal.
Content posted by third parties on this site is screened in order to protect clients’ privacy and comply with regulatory requirements. Content containing sensitive personal information, inappropriate language, information about specific investments, misleading information, information about other companies or websites, or information related to litigation will be removed. Content posted by third-parties on this site remains the responsibility of the party posting the content and is not adopted or endorsed by Pence Wealth Management or LPL Financial. Any opinions or statements posted by third parties are their own and may not be representative of the experience of others and are not indicative of future performance or success. Third party content on this site does not reflect the views of LPL Financial and have not been reviewed by LPL Financial as to accuracy or completeness.