US FINANCIAL MARKET
S&P 500 TICKS HIGHER ON FRESH TRADE OPTIMISM
- The S&P 500 edged higher Wednesday after upbeat economic data and optimistic comments from President Trump on progress in the trade talks between China and the U.S.
- Traders were encouraged by economic reports that showed a bit more growth than expected. Third-quarter gross domestic product (GDP) was revised to 2.1% from 1.9%, and the October durable-goods orders report rose more than expected. Jobless claims for last week fell.
- Mr. Trump stoked hopes that negotiations may be advancing between the world’s two largest economies when he said Tuesday that the U.S. and China were in the “final throes of a very important deal.”
- But the president also offered support for pro-democracy parties in Hong Kong in his comments to reporters.
- In recent weeks, investors have struggled to gauge which of the issues -—ranging from support for Hong Kong protesters to intellectual property rights protection and purchases of agricultural products—between the two countries may ultimately hold sway and determine the outcome of the trade talks.
- Meanwhile, shares in Deere fell 4% after it said it expected sales to fall in its agriculture-and-turf and construction-and-forestry segments in fiscal 2020 as lingering trade tensions have made farmers more reluctant to invest in new machinery.
- Dell Technologies fell 4.2% after the computer maker cut its revenue guidance and cited a shortage of chips from Intel.
Deere warns of lower profits in 2020 on lingering trade tensions
- Deere & Co. on Wednesday warned of lower earnings next year after reporting a fall in quarterly profits, hurt by trade tensions as well as poor weather in the U.S. farm belt that has slowed equipment purchases by farmers.
- Fourth-quarter sales rose 5.1% to $9.9 billion, ahead of the $8.47 billion analysts had projected.
- Net income fell 8% to $722 million compared to $785 million in the same period a year ago.
- The world’s largest seller of farm machinery on Wednesday guided for sales in the agriculture-and-turf segment to decline 5% to 10% for the full year, and for those of the construction-and-forestry segment to fall 10% to 15%.
- Deere expects net income of $2.7 billion to $3.1 billion next year, lower than $3.25 billion in 2019 and below estimates of $3.5 billion for 2020.
Dell cuts full-year revenue forecast on PC chip shortage
- Dell cut its full-year revenue forecast on Tuesday as its PC business grapples with a shortage of chips from Intel, sending its shares down nearly 5% in extended trading.
- The company reported total revenue of $22.84 billion for the latest quarter, narrowly missing estimates of $23.04 billion.
- Dell’s PC business had a strong quarter, with sales rising 4.6% to $11.41 billion and mirroring upbeat results from rival HP, which also reported earnings on Tuesday.
- Revenue from Dell’s server and networking unit dropped 16% to $4.24 billion, while sales in its VMware unit rose 11.4%.
- Dell’s net income was $552 million, compared with a loss of $895 million a year earlier.
- Dell cut its FY2020 revenue forecast to between $91.5 billion and $92.2 billion from between $92.7 billion and $94.2 billion.
HP Earnings Slide as Printing Business Continues to Struggle
- HP posted lower fiscal fourth-quarter earnings as its printing business remained weak, helping to spur an increasingly acrimonious takeover approach from rival Xerox.
- Total revenue rose marginally to $15.41 billion, above analysts’ expectations of $15.25 billion.
- Revenue from its personal systems unit rose 3.6% to $10.43 billion in the fourth quarter, beating estimates of $10.29 billion.
- Sales from HP’s printer division, however, fell 6% to $4.98 billion.
- Net income fell to $388 million in the quarter, from $1.45 billion a year earlier.
BAT says U.S vaping slowdown will curb growth of e-cig business
- World No.2 tobacco maker British American Tobacco said on Wednesday a slowdown in the U.S. vaping market would lead to lower revenue growth in its vaping arm even as it gained market share in its traditional cigarettes business
- U.S. vaping products make up 17% of BAT’s new categories and generate 0.8% of total group revenue, according to Jefferies.
- BAT sells the Vuse e-cigarette in the United States, a product it acquired after buying U.S. rival Reynolds American for $49 billion in 2017.
- BAT on Wednesday also forecast overall revenue to now grow in the upper half of its 3%-5% long term forecast range, benefiting from stronger pricing and market share gains in its traditional cigarettes business.
Boeing Faces New Obstacle in Returning 737 MAX Jets to Service
- In the latest hurdle confronting Boeing’s bid to get its grounded 737 MAX fleet back in the air, federal regulators now intend to inspect and sign off on every jet individually before delivery to airlines.
- The move, spelled out Tuesday by the Federal Aviation Administration in a letter to the plane maker, signals that resuming MAX flights will be more complicated and perhaps time-consuming than previously projected.
- The FAA stripped Boeing of longstanding authority to perform such routine, pre-delivery safety checks and signoffs of MAX planes on its own, amounting to another public pushback by the agency against company pressure to accelerate the reinstatement.
- Even if Boeing receives the FAA’s signoff on software fixes to flight-control computers and begins a trickle of MAX deliveries in December, it is expected to take additional weeks for the FAA and foreign regulators to complete associated changes in pilot training.
Amid 737 MAX Crisis, Foreign Regulators Raise Scrutiny of Boeing’s Next Jet
- European and Middle Eastern regulators will conduct independent certification reviews of Boeing ’s next new aircraft, breaking from longstanding practice to apply what they say are lessons learned from the 737 MAX crisis.
- The European Union Aviation Safety Agency said in a statement it is performing a “concurrent validation” of the FAA’s certification of Boeing’s 777X, a new variant of the company’s popular wide-body jet.
- The national regulator in the United Arab Emirates, meanwhile, also plans to separately scrutinize the certification process of the 777X, according to people familiar with the matter.
- Historically, certification of U.S.-built planes received less foreign scrutiny than is now envisioned by European and Emirati regulators.
Federal Prosecutors Launch Criminal Probe of Opioid Makers, Distributors
- Federal prosecutors have opened a criminal investigation into whether pharmaceutical companies intentionally allowed opioid painkillers to flood communities, employing laws normally used to go after drug dealers.
- The investigation, if it results in criminal charges, could become the largest prosecution yet of drug companies alleged to have contributed to the opioid epidemic, escalating the legal troubles of businesses that already face complex, multibillion-dollar civil litigation in courts across the country.
- At least six companies have said in regulatory filings that they received grand-jury subpoenas from the U.S. attorney’s office in the Eastern District of New York: drugmakers Teva Pharmaceutical Industries, Mallinckrodt, Johnson & Johnson and Amneal Pharmaceuticals and distributors AmerisourceBergen and McKesson.
- The probe is in its early stages and prosecutors are expected to subpoena additional companies in the coming months.
US ECONOMY & POLITICS
U.S. third-quarter GDP growth raised; business investment stabilizing
- U.S. economic growth picked up slightly in the third quarter, rather than slowing as initially reported, and there are signs the downturn in business investment could be drawing to a close.
- Gross domestic product (GDP) increased at a 2.1% annualized rate, the Commerce Department said in its second estimate of third-quarter GDP on Wednesday. That was up from the 1.9% pace estimated last month.
- Economists had forecast third-quarter GDP growth would be unrevised at 1.9%.
- Business investment dropped at a 2.7% rate in the third quarter, rather than contracting at a 3.0% pace as previously reported.
- Personal-consumption expenditures (PCE) rose at an unrevised 2.9% annual rate in the third quarter, compared with 4.6% in the second quarter.
- Private, nonfarm inventory investment added 0.15 percentage point to the quarter’s 2.1% GDP growth rate, an upward revision from a previous estimate of a 0.07 percentage-point drag.
- Net exports, a measure of trade, subtracted 0.11 percentage point from growth.
U.S. core capital goods orders post biggest gain in nine months
- New orders for key U.S.-made capital goods increased by the most in nine months in October and shipments rebounded, suggesting some stabilization in business investment after it contracted for two straight quarters.
- Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, surged 1.2% last month, the largest gain since January.
- Economists had forecast core capital goods orders would drop 0.3% in October.
- Data for September was revised slightly up to show core capital goods orders declining 0.5% instead of decreasing 0.6% as previously reported.
- Core capital goods orders accelerated 0.9% on a year-on-year basis. Shipments of core capital goods increased 0.8% last month.
- Core capital goods shipments fell by a revised 0.8% in September. They were previously reported to have decreased 0.7%.
U.S. Consumer Spending Rose 0.3% in October
- U.S. households increased spending in October but much of that rise was due to higher outlays on electricity and gas.
- Households pared back their goods purchases, a sign of caution among consumers as the holiday season gets underway.
- Personal-consumption expenditures, or household spending, increased a seasonally adjusted 0.3% in October from September.
- Household incomes were flat overall in October, the report said, but wages and salaries grew at a seasonally adjusted annual rate of 0.4% on the month, up from 0.1% in September.
- Economists had expected consumer spending to rise 0.3% and personal income to rise 0.3%.
- The price index for personal consumption expenditures, the Federal Reserve’s preferred gauge for inflation, rose 1.3% year-over-year in October, the same rate as in September.
- The closely watched core PCE index, which excludes volatile food and energy prices, moved up 1.6 % on a year-over-year basis in October.
U.S. jobless claims tumble to 213,000 just before Thanksgiving, back near post recession low
- The number of people who applied for unemployment benefits fell sharply in the week before the U.S. Thanksgiving holiday, putting jobless claims back near historic lows and reflecting the persistent strength in the U.S. labor market.
- Initial jobless claims declined by 15,000 to 213,000 in the seven days ended Nov. 23, the government said Wednesday.
- Economists had forecast new claims to total 220,000 after seasonal adjustments.
- The number of people already collecting unemployment benefits, known as continuing claims, declined by 57,000 to 1.64 million.
U.S. pending home sales slip in October: NAR
- Contracts to buy previously owned U.S. homes fell unexpectedly in October, with new contract signings down in three of the four U.S. regions.
- The National Association of Realtors said its pending home sales index, based on contracts signed last month, decreased 1.7% to a reading of 106.7.
- Economists had forecast pending home sales rising 0.8% last month.
- Compared with one year ago, pending sales were up 4.4%.
Trump Was Briefed on Whistleblower Complaint Before Ukraine Aid Released
- President Trump was briefed about the whistleblower complaint prompted by his dealings with Kyiv before the White House lifted a hold on more than $391 million in aid to Ukraine, according to people familiar with the matter.
- The president was briefed about the complaint in August by White House counsel Pat Cipollone and John Eisenberg, an attorney with the White House National Security Council, the people said.
- The August briefing Mr. Trump received from the White House lawyers, which was earlier reported by the New York Times, indicates Mr. Trump was aware of the whistleblower complaint before he ordered the hold on aid lifted.
- Mr. Trump said at an Oct. 2 news conference that he lifted the aid after a request from Sen. Rob Portman (R., Ohio).
Trump Says U.S. to Designate Mexican Drug Cartels as Terrorists
- President Trump said the U.S. plans to designate Mexican drug cartels as foreign terrorist organizations, a move that would expand the potential scope of U.S. action through tougher legislation and stiffer penalties.
- Mexican officials criticized the idea as opening the door to more direct U.S. intervention in their affairs.
- The State Department has the authority to designate an entity as a foreign terrorist organization, or FTO. To meet the criteria, the group must be foreign, have the capability to engage in terrorist activities and present a threat to U.S. national security.
- The U.S. designated the Revolutionary Armed Forces of Colombia, or FARC, as a foreign terrorist organization in 1997 for the murder of three U.S. missionaries in Colombia, as well as for kidnappings and assassinations.
- Since 2006, more than 250,000 people have been killed, according to Mexican government figures, most in the bitter internecine war between cartels for control of drug routes and territory.
EUROPE & WORLD
Xiaomi growth slows in third quarter as China smartphone demand wanes
- Chinese smartphone maker Xiaomi posted its slowest-ever quarterly revenue growth as the country’s smartphone market grapples with a protracted lull in sales and larger rival Huawei increases its share of the market.
- Total revenue rose 5.5% to 53.66 billion yuan from the same period last year, largely in line with analysts’ expectations.
- Revenues at Xiaomi’s smartphone business fell 8% to 32.3 billion yuan in the quarter.
- The company sold about 32.1 million phones during the period, roughly one million units fewer than a year earlier.
- Excluding one-time items, Xiaomi earned 3.47 billion yuan, versus 2.89 billion yuan a year ago.
Beijing Questions Hong Kong Vote, Claiming Sabotage
- China broke a period of relative silence after a decisive loss by Beijing’s allies in Hong Kong’s local elections, blaming the result on foreign interference and offering few signs the landslide victory by pro-democracy candidates is prompting any change in its Hong Kong strategy.
- China, speaking through state media, decried the election as a sabotage campaign orchestrated by antiestablishment forces, but it offered little evidence to back its claim.
- It hewed to earlier rhetoric that other countries, particularly the U.S., were interfering with China’s domestic affairs.
- Initially, reports in China’s state media Monday had been muted on the election, noting that voting had taken place but making no reference to the results.
- The change in tone Tuesday suggested to some political analysts that Beijing had expected a more positive outcome, and it raises questions over the quality of information the central government is relying upon.
- Foreign Ministry spokesman Geng Shuang didn’t offer any hints of a concrete response in prepared remarks on Tuesday, but he was quoted criticizing U.S. lawmakers, including Democratic House Speaker Rep. Nancy Pelosi and Republican Sen. Marco Rubio, for praising the election results, urging them to focus instead on unresolved issues in the U.S.
TODAY in HISTORY
- Alfred Nobel signed his last will, which established the Nobel Prize. (1895)
- Gerald R. Ford was confirmed by the Senate to become vice president, succeeding Spiro T. Agnew. (1973)
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