News Archive

Fidelity Investments considers dropping AmEx, BofA as partners: Bloomberg

Mutual fund provider Fidelity Investments is considering dropping American Express Co (AXP.N) and Bank of America Corp (BAC.N) to find new partners and better terms, Bloomberg reported, citing people familiar with the matter.

Visa Inc (V.N) and MasterCard Inc (MA.N) are in talks with Fidelity to replace AmEx, Bloomberg cited the sources as saying.

Warehouse club retailer Costco Wholesale Corp (COST.O) said on Feb. 12 that it would end a 16-year-old agreement of accepting AmEx credit cards at U.S. stores from next year, which threatened a near 8 percent of worldwide annual spending on AmEx cards.

A day after which, Bloomberg reported citing a published report that AmEx was also ending its co-branded card deal with JetBlue Airways Corp (JBLU.O).

The discussions, which may replace BofA with another issuer as well, are fluid and may fall apart, Bloomberg wrote.

BofA and Visa declined to comment, while Fidelity Investments and AmEx were not available for comments outside regular business hours.

Up to Wednesday’s close of $16.06, BofA shares had fallen 10 percent this year.

AmEx shares have fallen nearly 19 percent to $75.63 this year, through its Wednesday close on the New York Stock Exchange.

(Reporting by Anet Josline Pinto in Bengaluru; Editing by Lisa Shumaker)

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Gap to end ‘on-call’ shifts for workers

Apparel retailer Gap Inc (GPS.N) said it would end on-call shifts at all of its stores and improve scheduling policies to provide employees with at least 10-14 days’ notice.

The decision follows an inquiry by New York State attorney general Eric Schneiderman’s office into the legality of on-call shifts at 13 retailers, including Gap, Target Corp (TGT.N), JC Penney Co Inc (JCP.N), Abercrombie Fitch Co (ANF.N) and TJX Cos Inc (TJX.N).

On-call shifts require workers to be on call for shifts that may be canceled with little notice. The system allows retailers to adjust staffing based on store traffic forecasts made by scheduling software. Companies can then reduce over-staffing and under-staffing.

Each of Gap’s five brands were aligned to phase out on-call shifts by the end of September and had committed to phase in the new schedules by early 2016, Gap spokeswoman Laura Wilkinson said in an email.

When Schneiderman began the inquiry in April he said on-call shifts might violate New York law which calls for employees to be paid for at least four hours at the basic minimum hourly wage for any scheduled shift they report for.

“I commend Gap for taking an important step to make their employees’ schedules fairer and more predictable,” Schneiderman said in a statement on Wednesday, which made no further comment on the findings of the inquiry. (

Abercrombie Fitch said this month that it would end the practice for all workers paid by the hour, while lingerie retailer Victoria’s Secret, owned by L Brands Inc (LB.N) said in June it would end on-call shifts for workers.

(Reporting by Ramkumar Iyer in Bengaluru; Editing by Andrew Hay)

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Britain’s Sainsbury’s boosts pay on shop floor

LONDON British supermarket chain Sainsbury’s (SBRY.L) will hand its 137,000 non-management store staff their highest pay increase in more than a decade this month, it said on Thursday, lifting its basic pay above the recently announced national living wage.

Sainsbury’s, locked in a price war with Tesco (TSCO.L), Asda (WMT.N) and Morrisons (MRW.L) as the so-called Big Four seek to claw back shoppers lost to discounters Aldi [ALDIEI.UL] and Lidl [LIDUK.UL], will increase its basic hourly rate by 4 percent to 7.36 pounds ($11.48) from Aug. 30.

British finance minister George Osborne last month announced a compulsory living wage for workers aged over 25, starting at 7.20 pounds an hour from next April, rising to 9.35 pounds by 2020.

Sainsbury’s, which axed 800 jobs earlier this year as part of a 500 million pound cost-cutting exercise to free cash for reinvestment in the business, said its new pay rate would also apply to around 40,000 staff under the age of 25.

Market leader Tesco pays an hourly rate of 7.39 pounds but, unlike Sainsbury’s, it does not pay staff for breaks.

In June Sainsbury’s posted a sixth straight quarter of falling underlying sales but expressed confidence that its strategy was working.

($1 = 0.6413 pounds)

(Reporting by Neil Maidment; Editing by David Goodman)

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Ackman says Pershing Square down for the year after markets drop

BOSTON Billionaire investor William Ackman, one of last year’s best performing hedge fund managers, is now losing money after the recent market plunge wiped out a double-digit gain.

The shift of fortunes shows how much tumbling markets, sparked by sharp declines in Chinese stock prices, have

hurt the world’s most prominent investors.

“At the date of this report, the year to date investment performance has been erased, and the Company is at a loss position for the year,” Ackman’s Pershing Square Capital Management said in its interim financial statement released to investors on Wednesday afternoon.

Only three weeks ago the New York-based manager had told clients, including state pension funds in Massachusetts and New Jersey, that the fund was up 10.1 percent for the year through the end of July.

Ackman is one of the first major money managers to tell his investors how the market turmoil has hit his firm, but he did not say how much money the fund has lost this year.

He and other hedge fund managers are expected to release monthly performance numbers next week.

Despite the sharp market moves, Pershing Square, which holds only a small number of investments at a time, has “made no meaningful recent changes to (our) current portfolio holdings,” Ackman said in the financial statement.

Lower commodity prices or economic weakness in China are unlikely to have a “material impact on the intrinsic value of the portfolio,” Ackman added.

Instead, he expects demand for cookies, industrial gases, specialty pharmaceutical products, and animal health products made by companies in his portfolio such as Mondelez International Inc (MDLZ.O), Air Products and Chemicals Inc (APD.N), Valeant Pharmaceuticals International Inc (VRX.TO) and Zoetis Inc (ZTS.N) to remain “robust over the long-term.”

In the first six months of the year, Allergan, Valeant, Nomad Foods and Mondelez were the fund’s biggest winners. Meanwhile Herbalife Ltd (HLF.N), which he has made a $1 billion short bet against, cost the fund 3.7 percent in returns.

Due to recent strong returns, the fund’s size had swelled to roughly $20 billion, but that is set to shrink in light of the latest drop. Ackman did not put a number on that decline.

Last year Pershing Square gained 40.4 percent in value while the Standard Poor’s 500 index rose 13.7 percent.

(Reporting by Svea Herbst-Bayliss; Editing by Bill Rigby)

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Wall Street is for sale

NEW YORK During more than a week of stock market sell-offs, investors have been exhorted to use declines to pick up bargains – and with a 7.7 percent drop on the SP 500 since August 17, stocks have certainly gotten less expensive.

To determine how cheap they are, investment pros look at yields, earnings and more. By several of those metrics, the bottom line is this: U.S. stocks are not wildly expensive, but they are not the screaming bargains that might pull value-minded investors back into the market.

“We are not getting to a point where it’s attractive, it’s just not as expensive,” said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut.

That is because investors are willing to pay more for companies that are expecting strong earnings growth. But with Chinese demand weakening, oil prices slipping and the dollar remaining strong even after slipping a bit in the last few days, analyst expectations now are that SP 500 earnings will fall 3.3 percent from a year ago in the third quarter, according to Thomson Reuters data.

And that makes even less-expensive stocks still pricey.

Here are a few ways to look at stock prices now.

Earnings – Even after Wednesday’s buying spree, the SP 500 stock index was selling at roughly 15.8 times its expected earnings for the next 12 months. That is lower than this year’s peak of 17.8 but not far from the average of about 16 since January 2000, and well above the 10.5 percent hit during the last market correction in August 2011.

“Low interest rates have juiced equity valuations to levels more consistent with a rapidly growing global economy than one still stuck in first gear,” Nicholas Colas, chief market strategist at Convergex in New York, wrote in an overnight note to clients.

On a 14-times earnings scenario, a multiple more in line with slow earnings growth, the SP 500 should be closer to 1,700 – more than 10 percent lower than Wednesday’s close – a level that would drag the index into a bear market.

Dividend yields – For some, the argument that there is no other asset besides stocks to invest in due to rock bottom yields in U.S. government debt continues to hold. The SP 500’s dividend yield of 2.57 percent recently ticked above the 10-year yield according to data from Thomson Reuters Datastream and Fathom Consulting.

This was the case on and off since the start of 2015 until April, and the norm between late 2011 and mid 2013 – a period of strong gains for the stock index. But it has only happened one other time in the last 20 years, between December 2008 and April 2009.

Earnings yield – At above 6 percent, the earnings yield on the SP 500 compares favorably with the 10-year Treasury note yield, now just under 2.2 percent. Analysts say that when the earnings yield is more than twice the yield of the Treasury benchmark it historically augurs gains for stocks.

(Reporting by Rodrigo Campos; editing by Linda Stern and John Pickering)

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Wal-Mart to stop selling AR-15, other semi-automatic rifles

Wal-Mart Stores Inc (WMT.N), the United States’ top seller of guns and ammunition, said on Wednesday it would stop selling the AR-15 and other semi-automatic rifles stores because of sluggish demand and focus instead on “hunting and sportsman firearms”.

Company spokesman Kory Lundberg said the decision was not related to high-profile incidents involving the rifles, including the school shooting in Newtown, Connecticut, in 2012.

“This is done solely on what customer demand was,” said Lundberg, confirming a report by business news website Quartz. “We are instead focusing on hunting and sportsman firearms.”

Lundberg said Wal-Mart, the world’s largest retailer, would stop selling a class of rifle called the modern sports rifle (MSR), which includes the semi-automatic AR-15. He said that class of rifle was sold in fewer than a third of its roughly 4,500 U.S. stores.

The decision is part of a regular “reset” of its sporting goods department for the fall, Lundberg said.

The announcement came on the same day two television journalists were shot and killed in Virginia in an incident that is likely to stoke the debate about gun ownership in the United States and heighten scrutiny of retailers selling guns.

Other large retailers of rifles include Dick’s Sporting Goods (DKS.N) and Cabela’s (CAB.N). No one at either company could be reached for comment regarding Wal-Mart’s decision.

Wal-Mart recently came under pressure from New York City’s Trinity Church, an investor that was pushing for tighter oversight of its sale of guns with high-capacity magazines.

In April a federal court ruled in Wal-Mart’s favor and vacated an injunction that would have required a vote on the issue at the company’s annual shareholders’ meeting in June.

The National Shooting Sports Foundation said demand for sporting rifles is strong.

“Modern Sporting Rifles are extremely popular with an estimated 10 million of them in the hands of Americans since 1990. Walmart’s decision was based on what its management sees as best for their business,” Michael Bazinet, a spokesman for the trade association, said in an email.

(Reporting by Nathan Layne; Editing Bill Rigby, Toni Reinhold)

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Market turmoil makes September rate hike ‘less compelling’: Fed’s Dudley

NEW YORK A Federal Reserve interest rate hike next month seems less appropriate given the threat posed to the U.S. economy by recent market turmoil, an influential Fed official said on Wednesday in the clearest sign that fears of a Chinese slowdown are influencing U.S. monetary policy.

New York Fed President William Dudley said the prospect of a September rate hike “seems less compelling” than it was only weeks ago. However he warned about overreacting to “short-term” market moves, and left the door ajar to raising rates when the U.S. central bank holds a policy meeting on Sept. 16-17.

Dudley’s comments, which briefly clipped the dollar and helped lift bonds and stocks, come a day before many of the world’s top central bankers gather at an annual conference in Jackson Hole, Wyoming, to which investors will look for clues on how the turmoil may be rattling policy plans.

The comments were unprompted and made at a press briefing on the regional economy, suggesting they were a deliberate message from the broader Federal Reserve after a sharp two-day selloff in Asian, European and U.S. stocks.

The volatile selloff was brought on by weak Chinese economic data and concerns that authorities there are losing control of markets. Dudley said it threatens to crimp global growth and create financial conditions unsuitable for the Fed to soon hike rates for the first time in nearly a decade.

“At this moment, the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago,” Dudley, a close ally of Fed Chair Janet Yellen, said of the policy-making Federal Open Market Committee.

But an initial rate hike “could become more compelling by the time of the meeting as we get additional information on how the U.S. economy is performing and (on) international financial market developments, all of which are important to shaping the U.S. economic outlook,” he told reporters.

The market turmoil has called into question the Fed’s long-telegraphed plans to raise rates from near zero this year and possibly as soon as next month. Investors and economists have predicted the Fed would delay the move until December or even next year, citing the rising dollar and falling oil prices, which has held U.S. inflation below target.

On Wednesday, traders closed out bets of an imminent Fed tightening, lifting the yield on 30-year Treasuries to its highest level in more than two weeks.

“This is a resounding signal that the probability of the September rate hike has diminished considerably, as Dudley acknowledged the external risks,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Pittsburgh.


Dudley, a dovish policymaker, was more direct in his warning than was Atlanta Fed President Dennis Lockhart, who on Monday said only that the rate hike was likely to come “sometime this year.” Two weeks earlier Lockhart said he was “very disposed” to move in September.

While the U.S. labor market has been strong, prompting many Fed officials to consider hiking rates in September, inflation has been weak with little sign of rebounding.

Dudley said he wanted to see more U.S. economic data, and also how markets behave in coming weeks, before making a final judgment on the timing of policy tightening.

“International developments have increased the downside risks to U.S. economic growth somewhat,” he said, with China’s slowdown and falling commodity prices straining emerging markets and raising the possibility of slower global growth and less demand for U.S. goods and services.

The volatility has tightened financial conditions and widened credit spreads, he said, adding inflation remains “well below” the Fed’s 2 percent target due to year-long moves in oil and the dollar, which he said should be transitory.

“It’s important not to overreact to short-term market developments because it’s unclear whether this will just be a temporary adjustment or something more persistent” that will affect U.S. growth and inflation, Dudley said.

Only a “large and prolonged” stock market drop could potentially weigh on Americans’ willingness to spend, he added.

Asked about the possibility of a fourth round of stimulative bond-buying, or quantitative easing, Dudley appeared to chuckle and said the Fed is “a long way from” that. He added the market turmoil “is not a U.S. problem” and was sparked by “developments abroad.”

Keith Berlin, director of global fixed income and credit at Fund Evaluation Group in Cincinnati, Ohio, said “markets have awakened to the realization that China’s growth story is not what it once was.” He added that the risk of a Fed policy mistake is now “materially higher than it was just a few weeks ago.”

(Reporting by Jonathan Spicer; Additional reporting by Gertrude Chavez, Sam Forgione, and Richard Leong in New York; Editing by Meredith Mazzilli)

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Ten automakers are sued in U.S. over ‘deadly’ keyless ignitions

Ten of the world’s biggest automakers were sued on Wednesday by U.S. consumers who claim they concealed the risks of carbon monoxide poisoning in more than 5 million vehicles equipped with keyless ignitions, leading to 13 deaths.

According to the complaint filed in Los Angeles federal court, carbon monoxide is emitted when drivers leave their vehicles running after taking their electronic key fobs with them, under the mistaken belief that the engines will shut off.

The 28 named plaintiffs said this can injure or have “deadly” results for people who inhale the colorless and odorless gas, including when vehicles are left in garages attached to homes. They also said the defect reduces their vehicles’ resale values.

A keyless ignition lets a driver start a vehicle by pushing an on-off button, instead of inserting a key, once the vehicle senses the presence of a nearby electronic fob.

The defendants include BMW (BMWG.DE), including Mini; Daimler’s (DAIGn.DE) Mercedes Benz; Fiat Chrysler (FCHA.MI); Ford Motor Co (F.N); General Motors Co (GM.N); and Honda (7267.T), including Acura.

Also named as defendants were Hyundai (005380.KS), including Kia; Nissan (7201.T), including Infiniti; Toyota (7203.T), including Lexus; and Volkswagen (VOWG_p.DE), including Bentley.

The lawsuit is the latest seeking to hold the automotive industry liable for defects that could make driving unsafe, such as Takata (7312.T) airbags and ignition switches on GM vehicles.

It claimed that the 10 automakers have long known about the risks of keyless ignitions, which have been available in the United States since at least 2003, yet deceived drivers by marketing their vehicles as safe.


The plaintiffs said the automakers could have averted the 13 deaths, and many more injuries, by installing an inexpensive feature to automatically turn off unattended engines, and that GM and Ford even took steps to patent a shut-off feature.

They also said 27 complaints have been lodged with the National Highway Traffic Safety Administration since 2009 over keyless ignitions.

“The automakers had actual knowledge of the dangerous carbon

monoxide poisoning consequences of vehicles with keyless fobs that lack an automatic shut-off,” the complaint said.

Unintentional carbon monoxide poisoning kills about 430 people a year in the United States, according to the Centers for Disease Control and Prevention.

The lawsuit seeks class-action status, and an injunction requiring automakers to install automatic shut-off features on all existing and future vehicles sold with keyless ignitions. It also seeks compensatory and punitive damages.

Ford said it takes customer safety “very seriously,” and that its keyless ignition system has proven “safe and reliable.”

BMW, Fiat Chrysler and Toyota declined to comment. None of the other automakers had an immediate comment.

Lawyers for the plaintiffs declined to comment. A U.S. Department of Transportation spokesman declined to comment on the NHTSA’s behalf.

The lawsuit was filed in the same court where Toyota defended against lawsuits claiming that its vehicles accelerated unintentionally.

U.S. District Judge James Selna in July 2013 approved a $1.6 billion settlement to resolve claims that Toyotas lost value because of that defect. It is unclear whether he will be assigned the keyless ignition case.

The case is Draeger et al v. Toyota Motor Sales USA Inc et al, U.S. District Court, Central District of California, No. 15-06491.

(Reporting by Jonathan Stempel in New York; Additional reporting by Jessica Dye in New York and Bernie Woodall in Detroit; Editing by Bernard Orr and Matthew Lewis)

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Ackman’s Pershing Square down for the year after market turbulence

BOSTON Billionaire investor William Ackman’s hedge fund Pershing Square Capital Mangement is posting a loss for the year after the recent market decline, it told investors on Wednesday.

“At the date of this report, the year to date investment performance has been erased, and the Company is at a loss position for the year,” the hedge fund said in its interim financial statement.

The fund had been up 10.1 percent for the year through the end of July.

(Reporting by Svea Herbst-Bayliss; editing by Richard Valdmanis.)

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