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Business News Archives for 2019-06


The U.S. lead M&A globally in the second quarter of 2019 as companies seized on strong equity and debt capital markets to agree on mega combinations. Among the top deals were the $121B agreed merger of United Technologies with Raytheon, AbbVie's $63B agreement to acquire Allergan, and Occidental Petroleum's $38B deal to buy Anadarko Petroleum.  U.S. M&A totaled $466B in Q2, down just 3% from a year ago, while deal-making in Europe plunged 54% to $152B and Asia M&A dived 49% to $132B. (SA)

 

All 18 banks – including Deutsche Bank AG which repeatedly failed past exams – passed the Federal Reserve stress tests, with many of the largest lenders in the U.S. announcing increased payouts to shareholders in the wake of the results. The total from dividends and buybacks will hit $173 billion, a record high amount for the group. Shares in Deutsche Bank gained more than 4% in German trading, while JPMorgan Chase & Co., Bank of America Corp. and Goldman Sachs Group Inc. all showed pre-market rises of around 2%. (Bloomberg)

 

Nike reported earnings after the bell yesterday – shares initially fell on the news after-hours, but have now turned higher. The largest company based in Oregon earned 62 cents a share in its fourth quarter ended May 31, slightly missing analyst expectations.  Nike said strong sales growth was offset by higher expenses and higher taxes.  Nike earned $989 million in the quarter, on total revenue of $10.2 billion, 4 percent higher than the same period last year. It was the first time Nike cracked the $10 billion mark for quarterly sales. (Oregonian)

 

With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.



Ahead of their G20 meeting in Osaka, President Xi plans to present President Trump with a set of terms the U.S. should meet before China is ready to settle their market-rattling trade confrontation, WSJ reports. Among the preconditions, Beijing is insisting that Washington remove its ban on the sale of American technology to Huawei and also wants the U.S. to lift all punitive tariffs. The nation additionally wants the Trump administration to drop efforts to get China to buy even more U.S. exports than Beijing said it would when the two leaders last met in December. (SA)

 

Wall Street’s biggest banks did well when the first round of the Federal Reserve stress test results were released last week. The second round of those tests is due today, including the Comprehensive Capital Analysis and Review (CCAR), which will set out how much the banks can return to investors in dividends and buybacks. Analysts are predicting a higher payout than last year due to the promising first round results. (Bloomberg)

 

After getting the green light from U.S. regulatory authorities last month, IBM is expected to win unconditional EU approval today for its largest ever takeover, a $33B bid for open-source provider Red Hat.  The deal would expand the firm's subscription-based software offerings to counter slowing software sales and waning demand for mainframe servers. It would also help IBM catch up with Amazon, Alphabet, and Microsoft in the fast-growing cloud computing business.

 

With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.



Stronger-than-expected earnings from Micron Technologies helped boost investor sentiment overnight as the semiconductor maker stuck to its forecast of a second half rebound in the memory chip market, and resumed shipments to Huawei, sending shares up 10% premarket. Qualcomm and Intel have also started shipping some components to the blacklisted Chinese tech giant.  Even when businesses have headquarters in the U.S. they may be able through ownership of overseas subsidiaries and operations to classify their technology as foreign.  This one is likely to play out in the courts… (SA)

 

New orders for key U.S.-made capital goods rose more than expected in May and shipments increased solidly, suggesting some stabilizing in business spending on equipment after it fell early in the year.  The Commerce Department said on Wednesday orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, increased 0.4% last month and 2.3% year-on-year amid increases in demand for machinery, and computers and electronic products. (CNBC)

 

Drive.ai, a self-driving startup that was once valued at $200M – spare change to Tim Cook -- has been scooped up by Apple as well as dozens of its engineers. The deal confirms that Apple hasn't given up its autonomous driving project, called Project Titan, which has gone through its own struggles. Drive.ai talked with multiple possible acquirers, but only Apple was left as a possible suitor. 

 

With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.



The US dollar continues to lose ground this morning amid rising expectations of rate cuts by the Federal Reserve, boosting other major currencies ahead of speeches by several fed officials this week. Markets are pricing in at least a 40 per cent chance of two rate cuts before the end of this year, according to Fed fund futures.  As a result, major currencies have been buoyed despite global central banks beginning to signal the start of a fresh easing cycle.  Markets are watching closely as Jerome Powell is set to discuss the US economy at an event at the Council on Foreign Relations in New York today. (FT)

 

Pharmaceutical maker AbbVie has agreed to buy Allergan, the Irish-domiciled maker of Botox, in a $63bn deal that is the sector’s latest blockbuster transaction driven by the need to replenish drug pipelines.  AbbVie is betting the acquisition will improve its offering as Humira, the world’s best-selling treatment for inflammatory diseases, is set to face competition from generic versions as the drug goes off patent in the US. The deal will see AbbVie pay $188.24 for each share of Allergan, and the offer values Allergan at a 45 per cent premium to its closing price a day earlier. (FT)

 

President Donald Trump’s announcement of sanctions on Iran’s supreme leader, Ayatollah Ali Khamenei, seem to be a tactic aimed at annoying Iranians rather than doing any real damage to the country’s already battered economy. If that was the idea, it has been a complete success, with state media saying the move has permanently closed the diplomatic path. Oil, which had risen strongly on tensions in the region, was broadly unchanged this morning as traders do not see much escalation in the latest diplomatic wrangling, while looking for more details on a possible output deal from OPEC.  (Bloomberg)

 

With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.



Cutting its profit forecast for the third time in a year, Mercedes parent Daimler has warned investors that Q2 earnings will take a "high three-digit-million" hit due to higher-than-anticipated financial fallout of alleged diesel emissions manipulation. Shares fell the most in over four months on the news, sliding as much as 4% in European trading overnight. The profit warning comes at a highly politically sensitive moment, with the new Daimler CEO meeting Chancellor Angela Merkel in Berlin this week to discuss the future of the German car industry and the transition to electric vehicles. (SA)

 

Two senators from opposing sides of the aisle will introduce legislation today to call on tech giants to disclose the value of their users' data, Axios reports. Sens. Mark Warner and Josh Hawley will bring forward the DASHBOARD act (Designing Accounting Safeguards to Help Broaden Oversight and Regulations on Data), calling on major platforms like Facebook, Google, Amazon, and Twitter to disclose to users the types of data collected, how it is used, and to provide an assessment of the value of that data once every 90 days. (SA)

 

The G20 event, which begins on Friday in Osaka, is expected to include a meeting between Presidents Donald Trump and Xi Jinping on its sidelines. Hopes abound that such a top-level encounter could produce a breakthrough in the trade dispute between the world’s two biggest economies. The US has threatened to apply tariffs on another $300bn in Chinese goods if a deal is not reached. (FT)

 

With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.



Shares of Slack Technologies soared nearly 50% in their public trading debut on Thursday, valuing the company at more than $23B. The strong performance helped validate the unusual direct listing model the company used to go public, as well as underscoring investor demand for business software makers. Revenues for Slack soared more than 80% to $400M in 2018, but it reported losses from operations of $143.85M. The app has more than 90M users, but so far has only around 100K paid customers. (FT)

 

Dividend-focused bank investors should be paying attention this afternoon to the first round of the Fed's annual stress tests on 18 of the largest U.S. financial institutions. The quantitative part will show the impact of hypothetical scenarios on banks' capital levels, with a consensus that most lenders will pass the exam. A second round next week will say whether any firm failed because of either insufficient capital or on qualitative grounds. (SA)

 

Looks like GE could be the surprise winner of the Paris Air Show: Marking its highest close in four months, General Electric closed up 2.8% to $10.63/share on Thursday after emerging as the surprise winner at the Paris Air Show. Its International joint venture with Safran tallied a total of $55B in orders, including more than 1,150 LEAP engines. (WSJ)

 

With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.



As the Fed spreads its dovish wings, the yield on the benchmark 10-year Treasury dropped below 2% overnight for the first time since November 2016. The FOMC left interest rates unchanged at its monetary policy meeting on Wednesday, dropped the word "patient" from its statement and said it would "act as appropriate" to sustain the economy.  Free money for everyone.  (Bloomberg)

 

The latest high-profile company to go public in 2019 is Slack Technologies, which will begin trading this morning on the NYSE through a direct listing. The method allows a firm to simply float its existing stock onto a public exchange. Valued at about $15.7B, the NYSE has set a reference price for Slack at $26/share, which will be used by market makers to build an order book to open trading. More firms may follow suit if the direct scheme is successful, with the workplace-messaging app being only the second big tech company after Spotify to bypass the traditional IPO process. (SA)

 

In earnings news, business software maker Oracle claimed headway in shifting its applications to the cloud as it reported stronger than expected revenues and earnings in its latest quarter.  Oracle reported revenue of $11.1bn, up 1 per cent from a year before, despite a three percentage point headwind caused by the rise of the US dollar. (FT)

 

With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.
 



Episode 4 of FOMC Season 2019 airs this morning 11pm PST and it looks like the Fed is backed into a corner. A failure now to suggest a rate cut later this year - or a pivot back to even a neutral stance - could cause a violent selloff by markets, but if Jerome Powell does flag the plans, he will be accused of caving to President Trump, who has been relentless in excoriating the Fed and demanded that it reverse rate hikes made last year. More drama? Asked by reporters outside the White House yesterday if he wanted to demote Powell, Trump said "let's see what he does." (SA)

 

Amazon is leasing another 15 737-800 cargo aircraft made by Boeing through a partnership with General Electric Capital Aviation Services.  The aircraft will be in addition to the five Boeing 737-800s already leased from GECAS, announced earlier this year. By 2021, Amazon Air will have a portfolio of 70 aircraft flying in their dedicated air network. (WSJ)

 

Adobe on Tuesday reported upbeat quarterly results driven by strength in its digital media unit, but delivered a soft outlook for the current quarter. The California-based company said revenues rose 25 per cent year-on-year to a record $2.74bn. Revenues in its largest division, digital media, which includes its creative cloud tools and photo-editing app Photoshop, rose 22 per cent from a year ago to $1.89bn.  (FT)

 

With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.



Stocks rose slightly on Monday, led by gains in tech, as investors looked ahead to a crucial Federal Reserve meeting this week.
 
While other economic signs may be weakening, Americans are still confident about their job prospects.  A recent New York Federal Reserve consumer expectations survey showed that workers’ confidence for finding a new job after losing their current position was at 61.5% in May — an increase from 59.3% in April and the highest since the central bank started keeping track in June 2013.
 
The nation’s homebuilders reported solid confidence in the housing market in June, but levels dropped slightly due to concerns over trade issues, the high costs of construction and the lack of skilled labor.  Builder confidence dipped to 64, that’s down from 66 in May.  Sentiment has remained in the low 60s for the past five months. Anything above 50 is considered positive.
 
Wall Street analysts are eagerly anticipating Facebook’s possible unveil of its long-awaited cryptocurrency payments plan on Tuesday. According to various reports the company is preparing to finally reveal what it calls Project Libra with partners including Visa and Mastercard.
 
With Northwest Quadrant Wealth Management I’m Tyler Simones



Wall Street futures suggest modest gains at the open as investors adopt a cautious stance on risk heading into this week's Fed gathering. While market expectations point to an interest rate cut this year, most observers expect rates to stay unchanged at this meeting, although eyes will be on the wording of Jerome Powell's policy statement, as well as the dot plot. Bets on central bank action have underpinned stocks in recent weeks, even as manufacturing data continues to suggest that the U.S.-China trade dispute is having knock-on effects across the globe. (SA)

 

Shares in online pet supply retailer Chewy jumped about 60 per cent on their trading debut, giving the company a market capitalization of around $15bn as investors show a strong appetite for selected new listings.  The pop placed it towards the higher end of first-day performances for companies that have IPO’d this year. Some companies that listed last week, such as Fiverr, Revolve Group and CrowdStrike had first-day gains between 70 per cent and 90 per cent. (FT)

 

India will impose higher retaliatory tariffs on 28 U.S. products including almonds, apples and walnuts from Sunday, following Washington's decision to strip the country of preferential access to the American market. New Delhi initially issued an order in June last year to raise import taxes as high as 120% on a slew of U.S. items, incensed by Washington's refusal to exempt it from higher steel and aluminum tariffs, but repeatedly delayed the decision as the two nations engaged in trade talks. U.S.-India bilateral trade reached $142B in 2018, a seven-fold increase since 2001.

 

With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.



U.S. stocks rose yesterday as investors mostly shrugged off a spate of geopolitical concerns. Meanwhile, oil prices reversed steep declines earlier this week amid reports of a suspected attack on tankers in the Gulf of Oman.

 

The number of people who applied for jobless benefits in early June edged up to a five-week high, but not enough to signal any deterioration in a robust labor market that’s fueling the longest economic expansion in U.S. history.  Initial jobless claimed rose by 3,000 to 222,000, which is close to a 46-year low.

 

A pair of lawsuits filed in Washington and California allege Amazon’s Alexa keeps voiceprints of children without their parents’ consent.   These suits which allege that the devices are breaking the law in at least eight states by recording children who use the smart speakers without consent.  Shares of Amazon traded lower on the news.

 

And the punches keep coming for Facebook.  Amid ongoing controversy over its use of its user’s private information, Facebook has been kicked out of an index tracking companies that abide behind socially responsible practices.  S&P Dow Jones Indices announced Thursday that the social network no longer will be part of the S&P 500 ESG Index.  Shares of Facebook are lower on that news.
 
With Northwest Quadrant Wealth Management, I'm Tyler Simones.



US Stocks traded lower yesterday to break a 6-day winning streak as investors digest more signs of growing global economic stimulus.

 

The index of small-business optimism from the National Federation of Independent Business rose to 105.0 in May.  Six of ten survey components increased, three were unchanged, and only one fell in May. Nearly two-thirds, reported hiring or trying to hire, a 5-point increase from April, but 54% reported “few or no qualified applicants for the positions they were trying to fill”.

 

The wholesale cost of goods and services barely rose in May, reflecting easing inflationary pressures in the U.S. amid slower economic growth and fading gasoline prices.  The producer price index edged up 0.1% last month, matching forecast.  More notably, the increase in wholesale prices over the past year slowed to 1.8% from 2.2%, and down sharply from a recent high of 3.1% last summer.

 

NASA has opened the International Space Station to tourists and companies are already buying rides to fly so-called “private astronauts” up to the laboratory in the sky for a visit.  For approximately $52 million per person, you can purchase a seat to fly with SpaceX.  Bigelow Aerospace, a company that is developing space stations that expand, announced that its subsidiary Bigelow Space Operations has “paid substantial sums as deposits and reservation fees” to SpaceX for four launches to the space station.
 
With Northwest Quadrant Wealth Management, I'm Tyler Simones



U.S. stocks extended their gains from last week yesterday after President Donald Trump decided not to impose tariffs on imports from Mexico, cooling tensions on one front of a multi-pronged trade war. 

 

China extended its gold-buying spree, adding to reserves for a sixth straight month, as the protracted trade war with the U.S. hurts growth expectations and boosts demand for a portfolio diversifier.  The People’s Bank of China increased its bullion reserves by 15.86 tons.  The rise reflects the government’s “determined diversification” away from dollar assets.

 

Shares of cloud software giant Salesforce dropped sharply yesterday after it announced it would buy big data firm Tableau, a Seattle-based company that specializes in data visualization, for $15.3 billion in stock.  Tableau is a leading analytics platform that will help Salesforce augment its current product offerings, which include tools to help companies with sales, marketing and customer service.

 

FedEx is dropping a contract for air shipment of packages for Amazon within the United States, reducing its ties with the online retail giant that is already expanding its own delivery business.  FedEx said that they will not renew the contract for domestic FedEx Express handling of Amazon shipments when the deal expires June 30.  It's "a strategic decision" that will let FedEx focus on thousands of other retailers including Target, Walgreens and Walmart.
 
With Northwest Quadrant Wealth Management, I'm Tyler Simones



US Stocks snapped a 6 week losing streak last week and had their best week of the year.  The S&P 500 rose 4.7% after weak economic data pointed to the Federal Reserve cutting interest rates at some point this year.
 
After deciding to exit escalators and air conditioners, United Technologies Corp. is doubling down on the aerospace market with an all-stock deal to merge with defense contractor Raytheon.  The combined company, valued at more than $100 billion after planned spinoffs, would be the world's second-largest aerospace-and-defense company by sales behind Boeing Co., with annual revenue of about $74 billion this year. It will make everything from engines and seats for jetliners and F-35 jet fighters, to Patriot missile launchers and space suits for astronauts.


Finance ministers and central bank chiefs from the Group of 20 major economies wrapped up a meeting in Japan yesterday with a pledge to use all the policies they can to protect global growth.  The G-20 finance leaders said in a joint communique that risks from trade and geopolitical tensions were "intensifying."


Japanese data reaffirmed the world's third-largest economy grew in the first quarter of 2019, while underscoring signs of weakness amid a global trade war.  Japan's economy expanded an annualized 2.2% during the January-March quarter, following 1.6% growth in the previous three months.

 

With Northwest Quadrant Wealth Management, I'm Tyler Simones



The US economy added a weaker-than-expected 75,000 jobs in May, although the unemployment rate remains at its lowest level in half a century.  Non-farm payrolls rose by 75,000 last month, from April’s downwardly revised 224,000 (previously 263,000), the Department of Labor revealed on Friday, and ahead of the median 185,000 predicted by economists.  The unemployment rate was unchanged at 3.6 per cent, matching its lowest level since 1969. (FT)

 

Elliott Management has agreed a deal to acquire bookstore chain Barnes & Noble for $6.50 a share, in an all-cash transaction valued at $683m including debt. Barnes & Noble once towered over the industry and became known for its big-box bookstores in a rapid expansion during the 1980s and 1990s, as independent booksellers declined. But, its subsequent struggles to deal with the disruption of ecommerce have left the company vulnerable to a lowball takeover. Even after the rally on Thursday, the shares are still down more than 82 per cent from a 2006 peak, when they were worth nearly $32.  (WSJ)

 

Talks between the U.S. and Mexico are set to continue into a third day in a bid to reach an agreement that would stop the imposition of 5% tariffs on American imports from its southern neighbor on Monday. Mexican Foreign Minister Marcelo Ebrard confirmed that his government has offered to send about 6,000 national guard troops to Mexico’s southern border with Guatemala to help stem migration, while Vice President Mike Pence said it is still the U.S. plan to go ahead with the tariffs.

 

With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.



Stocks advanced yesterday, trading near session highs in afternoon action, after a volatile morning that saw benchmarks flipping between gains and losses as investors digested a round of conflicting economic data that showed strength in the U.S. services sector but signaled a potential weakening of the labor market.


A periodic examination of the US economy done by the Fed known as the Beige Book was released yesterday and it was a bit more upbeat compared to the previous report. The U.S. economy expanded at “a modest pace overall” from April to mid-May, but growth was partly held in check by labor shortages and worries over tariffs on China, the Federal Reserve said.  The Fed also left the door open to cut interest rates later in the year.


The service side of the U.S. economy that employs the vast majority of Americans grew faster in May and executives said they were “mostly optimistic” despite worries about trade tariffs and a shortage of skilled workers.  An index of service-oriented companies such as banks, restaurants and computer developers rose to 56.9% last month from a two-and-a-half-year low of 55.5% in April.


The price of Crude Oil has officially entered a bear market, falling 22% since reaching a high in April.  A combination of rising U.S. inventories, trade war concerns and economic fears are trumping the supply-side factors.
 
With Northwest Quadrant Wealth Management, I’m Tyler Simones



The President may finally get the rate cut he has been demanding as top Fed officials began warning this week that the global trade war may force them to respond. Chair Jerome Powell made a subtle move in that direction on Tuesday, dropping his standard reference to the Fed being "patient," and said it is prepared to "act as appropriate to sustain the expansion" amid intensifying trade tensions. (SA)

 

It’s not just Apple with China-related woes… Samsung Electronics is cutting production and laying off workers at its only remaining smartphone plant in China as it continues to shift production to lower-cost Asia locations. The world's biggest smartphone maker has only about 1% market share in the country, down from about 20% in 2013. The intervening years have seen a bout of anti-South Korean sentiment following a diplomatic spat, as well as a shift to local champions like Huawei at a time of deteriorating Sino-U.S. relations. (WSJ)

 

The labor market unexpectedly ground to a near halt in May, with the latest data showing the private sector adding the least number of jobs in over nine years.  Non-farm private employers added just 27,000 jobs last month, according to a report from payroll processor ADP. The figure, which followed a strong April, badly missed expectations for a gain of 185,000 and marks the weakest monthly gain since March 2010. (FT)

 

With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.



The House Judiciary Committee unveiled a sweeping "top-to-bottom" review of unnamed tech companies late Monday as reports surfaced of a dual effort from the DOJ and the FTC to tackle the perceived dominance and potential abuses of Big Tech. Shares yesterday plummeted in response: Facebook -7.5%, Alphabet -6.1%, Amazon -4.6% and Apple was down -1%, erasing more than $133bn in market cap combined. "The growth of monopoly power across our economy is one of the most pressing economic and political challenges we face today," said David Cicilline, who chairs the Antitrust Subcommittee, adding that "market power in digital markets presents a whole new set of dangers." (SA)

 

Mexican officials have arrived for talks in Washington to find a way to avoid crippling bilateral trade tariffs triggered by the President;s demands to curb illegal migration. Marcelo Ebrard, foreign minister, said the task of “convincing, conversing, persuading” lay ahead as he prepared to meet secretary of state Mike Pompeo tomorrow. (FT)

 

James Bullard, head of the St Louis Fed and a voting member of the committee that sets interest rates in the US, said a drop in the cost of borrowing might be “warranted soon”, marking the first time a Federal Reserve official has explicitly said a rate cut may be needed this year.  Today’s opening remarks by Chair Jerome Powell at a policy conference in Chicago be very closely watched for any pushback against the rising consensus. (Bloomberg)

 

With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.



Treasury yields added to their steep decline from May, with the benchmark 10-year treasury note falling below the 2.10 per cent mark for the first time since September 2017 as tariff threats against Mexico further rattled investors who are already on edge over renewed US-Chinese trade tensions. Growing fears that Washington’s disputes with its biggest trading partners will hobble global economic growth have intensified expectations that the Federal Reserve will cut interest rates sharply this year.  Markets are now pricing in greater than an 80% chance of at least one rate cute this year.  (FT)


Private Equity firm Blackstone is buying a network of U.S. industrial warehouses from Singapore-based GLP for $18.7B, in the largest private real-estate transaction ever. It's a big bet on the continued explosion of e-commerce and delivery as global investors spend billions of dollars to acquire logistics assets. Blackstone outbid real-estate company Prologis for the 179M-square-foot portfolio, nearly doubling the size of its U.S. industrial footprint. (SA)


Trust-busting is back -- Amazon could face heightened antitrust scrutiny under a new agreement between the government's twin antitrust agencies that puts it under closer watch by the Federal Trade Commission, this according to The Washington Post . The move would divvy up competition oversight of two of the country's top tech companies, with the U.S. Justice Department having more jurisdiction over Google and paving the way for an antitrust investigation of the search-and-advertising giant.  (SA)

 

With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.


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