US FINANCIAL MARKET
- U.S. stocks fell on Thursday as investors shifted their focus to earnings of heavyweight companies such as IBM.
- The dollar fell as relief over a U.S. budget deal gave way to worries over the effects of the 16-day government shutdown and prospects of a re-run early next year.
- IBM’s shares opened 7% lower. The company reported that its hardware revenue fell 17% in the quarter. Overall revenue dropped 4% to $23.7 billion, below Wall Street analysts’ expectations of $24.74 billion. Quarterly net income rose 6% to $4.0 billion, above estimates.
- Goldman Sachs’ third-quarter revenue plunged 20%. Net income was $1.43 billion down 2% from $1.46 billion a year earlier.
- Verizon posted stronger- than-expected third-quarter earnings and revenue on strong wireless growth. Verizon Wireless added 927,000 net retail subscribers in the quarter. Verizon reported a profit of $2.2 billion, compared with $1.59 billion a year ago. Revenue rose 4.4% to $30.28 billion from $29.01 billion.
- American Express posted a better-than-expected 9% rise in quarterly profit as spending by corporate card users began to pick up after more than a year of sluggish growth. Net profit rose to $1.37 billion, above analysts’ expectations. Total revenue, net of interest expense, rose 6% to $8.30 billion, beating average Wall Street estimates for the first time in five quarters.
- Kinder Morgan Energy Partners, the largest U.S. pipeline company, said that its profit in the third quarter rose sharply and distributions rose 7%, helped by acquisitions. Quarterly distribution rose to $1.35 per unit, slightly above Wall Street expectations for $1.34 per share. The company’s year-ago distribution was $1.26. Net income was $697 million, up from $383 million a year earlier. The company’s distributable cash flow rose 22% from a year earlier to $544 million.
- PPG Industries reported third quarter net sales of $3.98 billion, up 17% versus the prior year. Third quarter adjusted net income from continuing operations was $353 million (or $2.44 per share), up 31%. Analysts forecast earnings of $2.34 per share on revenue of $3.96 billion.
- Union Pacific said that it expected its freight rates to rise more slowly in 2014 than this year, sending its shares down more than 3%. The companies have suffered from a slump in coal shipment volumes as demand for natural gas has increased. Coal volumes fell 7%. The company earned $1.15 billion, up from $1 billion a year earlier. Revenue rose 4% to $5.6 billion, compared with analysts’ estimates of $5.58 billion. Shipments rose 8% for automotive products and 9% for industrial products.
- CSX earnings rise despite coal woes. It reported third-quarter earnings of 46 cents per share, beating the consensus estimate of 42 cents and improving from the year-ago figure of 44 cents. Coal revenues were down 9% year over year. In other products, the improvement in volume was driven by better performing Waste and Equipment (up 33%), Chemicals (up 12%), Metals (up 5%) and Forest Products (up 5%).
- American Airlines parent AMR Corp reported improved third-quarter results. Quarterly revenue rose 6% to $6.8 billion. Passenger revenue per available seat mile, or unit revenue, rose 3.4%. Operating costs fell about 4%, as expenses tied to salaries fell 13%.
- Blackstone, the largest publicly listed alternative asset manager, third-quarter earnings increased by 3%. Total assets under management hit a record $248 billion as of the end of September, up 21% year-on-year.
- Nestlé’s pricing strategy helps lift sales in tough markets. Overall sales rose to 68.4 billion Swiss francs ($74.7 billion), lagging a 69.3 billion franc estimate in the Reuters poll. Nestlé’s operating profit margin was 15.1%, against Unilever’s 14% and 13.3% at Danone.
- EBay gave a disappointing holiday forecast, saying the U.S. economic environment, including consumer confidence, had deteriorated in part because of the shutdown of the U.S. government. CEO Bob Swan told investors that industry growth rates for e-commerce had shrunk to about 13% in the third quarter, from about 16% in the previous quarter. EBay expects revenue of between $4.5 billion and $4.6 billion for the fourth quarter, ending December 31, compared with the $4.64 billion estimated by analysts. PayPal, eBay’s online payments division, reported that total payments volume rose 24.7% to $43.8 billion.
- Twitter has hired an advertising executive from Google to head its retail division.
- South Korea’s LG Display warned that fourth-quarter profit will not match the third due to falling TV panel prices.
- Harley-Davidson is recalling more than 29,000 motorcycles because of a problem with their hydraulic clutch system.
- Flamboyant billionaire Mark Cuban was cleared by a Texas jury of using a private tip to avoid a big loss on his 2004 sale of Internet company shares.
- Top Analyst Upgrades and Downgrades:
- CSX was downgraded at RBC Capital to sector perform from outperform. CSX was also downgraded at BMO Capital to market perform from outperform.
- Norfolk Southern was downgraded at RBC Capital to sector perform from outperform.
- IBM was downgraded at UBS to neutral from buy. $186 price target.
- Clorox was downgraded at Morgan Stanley to underweight from equal-weight.
US ECONOMY & POLITICS
- Congress ends US government shutdown, avoids default. The 2-1/2 week partial shutdown of the federal government ended on Wednesday night after the U.S. Congress passed an 11th hour deal to temporarily fund the government through mid-January and to raise the country’s borrowing authority until February 7.
- Initial claims for state unemployment benefits fell 15,000 to a seasonally adjusted 358,000. A Labor Department analyst said claims in California, which has experienced technical problems during a conversion to a new computer system, remained at similar levels as in the prior week. The four-week moving average for new claims rose 11,750 to 336,500.
- The Philly Fed manufacturing survey for October was stronger than expected. It declined less than expected to 19.8 in October (vs. consensus +15.0), from 22.3 in September.
- Dallas Fed President Richard Fisher told reporters that he is seeing signs of the United States re-entering a “housing bubble,” and warned about the U.S. central bank’s ongoing purchases of mortgage-based bonds.
- Americans in October were the most pessimistic about the nation’s economic prospects in almost two years as concern mounted that continued political gridlock will hurt the expansion. The monthly Bloomberg Consumer Comfort Index expectations gauge plunged in October.
EUROPE & WORLD
- U.K. retail sales rose more than economists forecast in September as an increase in furniture demand led a rebound from a slump the previous month. Sales including fuel increased 0.6% from August. Britain’s recovery is strengthening and unemployment is falling, lifting consumer confidence.
- China’s exporters face a difficult time in coming months as demand from emerging markets slows, the Chinese trade ministry warned.
- Japan’s economy will remain on track as the government prepares a 5 trillion yen ($50.6 billion) stimulus package to offset the drag from a sales tax increase scheduled for next April, a Reuters poll showed. The world’s third-largest economy is forecast to grow 2.8% in the fiscal year to March 2014. Growth is expected to slow to 0.9% in the following fiscal year. The Nikkei is expected to gain almost 50% this year, marking its biggest annual rise in more than four decades.
TODAY in HISTORY
- Mobster Al Capone was convicted of income tax evasion for which he was sentenced to 11 years in prison (1931)
- Albert Einstein arrived in the United States as a refugee from Nazi Germany (1933)
- An earthquake measuring 7.1 in magnitude killed 67 and injured over 3,000 in San Francisco (1989)
- John Paul II was elected pope (1978)
- Mother Teresa was awarded the Nobel Peace Prize for her work with the poor in Calcutta, India (1979)
Sources: Reuters, Yahoo Finance, Google Finance, Bloomberg, CNN Money.
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.