News Archive


Fed likely to keep rates steady as it awaits Trump economic plan


WASHINGTON The U.S. Federal Reserve is expected to keep interest rates unchanged on Wednesday in its first policy decision since President Donald Trump took office, as the central bank awaits greater clarity on his economic policies.

Trump has promised a large infrastructure spending program, tax cuts, a rollback of regulations and a renegotiation of trade deals but has offered few details or a timeline for their roll out since his victory in the Nov. 8 election.

The central bank’s latest policy decision is scheduled to be released at 2 p.m. EST (1900 GMT) on Wednesday at the conclusion of a two-day meeting. Fed Chair Janet Yellen is not due to hold a press conference.

The policy decision will come a week after Yellen underscored that the U.S. economy is near full employment and warned of a “nasty surprise” on inflation if the Fed is too slow with its rate hikes.

Economists polled by Reuters have all but ruled out a rate increase at this week’s meeting. Investors next see an interest rate rise in June, according to Fed futures data compiled by the CME Group.

The Fed raised its benchmark interest rate at its last policy meeting in December, the second such move in a decade, to a target range between 0.50 percent and 0.75 percent. It forecast a further three rate increases this year.

WAIT-AND-SEE MODE

Despite encouraging U.S. economic data, Fed policymakers are currently hampered in assessing how quickly inflation might rise until they have more information on Trump’s economic plans.

“At the moment there’s incredible uncertainty surrounding fiscal policy and the potential for stimulus and the composition of that,” said Paul Ashworth, an economist at Capital Economics. “The Fed can’t react until it knows what to react to.”

With the U.S. economy already bumping up against full employment, Trump’s promises on fiscal stimulus and tax reform could quickly spur higher inflation as would imposing tariffs on Mexican imports.

That may cause Fed policymakers to raise rates faster.

Other policies, such as an immigration crackdown, go against what the Fed argues the U.S. economy needs to grow over the long term.

U.S. stocks fell on Monday after Trump curtailed travel and immigration to the United States from seven predominantly Muslim countries.

The SP 500 index is still up roughly 6 percent since Trump’s victory and the robustness of the domestic economy makes the United States increasingly divergent from Japan, the euro zone and Britain, none of which are expected to raise rates anytime soon.

The Fed will likely only make minor tweaks in its policy statement on Wednesday to reflect a string of positive recent economic reports.

“Changes to the … statement should be mostly upbeat,” Roberto Perli, an economist at Cornerstone Macro LLC, said in a note to clients.

The U.S. unemployment rate is 4.7 percent and business investment has improved, despite a slowdown in fourth-quarter economic growth caused mostly by a widening trade deficit. Consumer spending, which accounts for more than two-thirds of the nation’s economic activity, rose solidly in December, according to Commerce Department data released on Monday.

In the same report, the Fed’s closely-watched inflation gauge also edged up to 1.7 percent.

(Reporting by Lindsay Dunsmuir; Editing by Paul Simao)

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Exclusive: Peanuts, home of Snoopy and Charlie Brown, up for sale


U.S. brand management company Iconix Brand Group Inc (ICON.O) is exploring a sale of its majority stake in Peanuts Worldwide LLC, which owns the rights to cartoon strip characters Snoopy and Charlie Brown, according to people familiar with the matter.

The move comes three months after U.S. insurance company MetLife Inc (MET.N) dropped the Peanuts characters it had been using as mascots for more than 30 years – a blow to debt-burdened Iconix.

The characters, which include Lucy, Peppermint Patty and Pigpen, have attracted the interest of Chinese companies as well as other investors keen to snap up U.S. media and licensing assets, the people said this week.

Created by Charles Schulz and licensed in over 100 countries, the characters generate about $30 million in 12-month earnings before interest, taxes, depreciation and amortization, the people added. They declined to comment on the expected deal valuation.

Besides Peanuts, Iconix is also looking to sell its Strawberry Shortcake brand, which is based on a character that rose to fame in the 1980s as a doll for young girls, the people said. They asked not to be identified because the matter is confidential.

The New York-based company is working with investment bank Guggenheim Partners LLC on an auction process to sell the brands, the people added, cautioning that there was no certainty that any deal would occur.

Iconix, which has a market capitalization of $553 million, did not respond to a request for comment, while Guggenheim declined to comment.

While MetLife will stop flying blimps featuring Snoopy this year, Peanuts has agreements with brands such as chocolate maker Nestle SA (NESN.S), stationary company Hallmark Cards Inc, and retailer Zara, according to a regulatory filing by Iconix.

In 2015, Twenty-First Century Fox Inc (FOXA.O) released The Peanuts Movie, which was nominated for a Golden Globe award and grossed $246 million worldwide, according to Box Office Mojo, a website that tracks the revenue that movies generate.

Peanuts’ largest international market is Japan, where a new Snoopy museum opened last year, according to the Iconix filing. The company renewed a long-standing contract to air the popular Peanuts holiday TV specials on U.S. network ABC in 2014 for five years.

Initially called “Li’l Folks”, the comic strip was renamed “Peanuts” in 1950, when it became syndicated in seven newspapers, according to the Charles M Schulz Museum website. Schulz passed away in 2000.

Iconix, which also owns clothing brand Joe Boxer and outdoor wear brand London Fog, purchased an 80 percent stake in Peanuts in 2010 from U.S. media company E.W. Scripps Co (SSP.N) in a deal valued at $175 million.

The remaining 20 percent in the company is owned by Charles M. Schulz Creative Associates, which is controlled by the Schulz family.

Iconix sold another flagship brand, the Sharper Image, last year to its biggest licensee, ThreeSixty Group Inc, for $100 million. The transaction was used to pay down some of Iconix’s debt, which totaled $1.29 billion as of the end of September.

Last year, Iconix said it would help develop and produce a new animated series based on Strawberry Shortcake. Iconix acquired the brand about two years ago for $105 million from greeting cards maker American Greetings Corp.

(Reporting by Liana B. Baker in San Francisco and Jessica DiNapoli in New York; Editing by Edwina Gibbs)

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Elliott turns up CEO pressure blending activism with buyouts


NEW YORK/SAN FRANCISCO Eight days after Elliott Management disclosed a 7.6 percent stake in LifeLock Inc (LOCK.N), managers of the more than $30 billion hedge fund met with executives at the consumer protection company.

Activist investors such as Elliott usually use these initial meetings to lay out a broad plan on how to boost the stock price.

But when LifeLock’s managers sat down with Elliott last June, the leader of its new private equity team revealed that Elliott was interested in buying the entire company, according to a December securities filing. Just like that, the auction for LifeLock began.

In the end, the winning bid came from Symantec Corp (SYMC.O), which also counts Elliott among its major shareholders. LifeLock’s $2.3 billion sale agreement in November handed Elliott an 80 percent return on its five-month investment.

The deal shows how the hedge fund is rewriting the activist investor playbook, ramping up its ability to act both as an engaged shareholder and a potential buyer of the whole company.

Over the past few decades, activists have primarily focused on buying minority stakes and pushing for changes, which include leadership changes, cash allocation and exploring the sale of the company.

Elliott’s private equity push promises greater rewards, but also involves bigger risks. Owning the majority of a company that fails to live up to its potential can hurt the fund’s bottom line and its reputation far more than a minority stake that underperforms. It also creates potential confusion for CEOs and boards wondering which hat Elliott is wearing when it shows up among shareholders.

The multi-strategy fund, which also invests in other assets, such as currencies, commodities and government bonds, is alone with its hybrid approach, for now, thanks mainly to its size and resources.

Even the largest activists have half or less of Elliott’s capital and usually a dozen or so investment professionals compared with more than 150 that work for Elliott.

Elliott’s strategy is paying off for the fund, whose founder Paul Singer has built a reputation as one of the world’s toughest investors, adept at applying relentless pressure on targets that include national governments and some of the largest companies in the world.

BLURRING THE LINE

Of the 15 companies Elliott has targeted with a more than 5 percent stake since 2015, ten have inked $40 billion worth of deals – including two spin-offs. Activist investor Carl Icahn has disclosed nine similar filings in the same period that included two sales and two spin-offs.

Elliott made an average return of around 30 percent on the deals, according to a Reuters analysis of filings and research firm 13D Monitor (tmsnrt.rs/2iRamAo). That compares to a 6 percent return from activist funds over a similar period, according to Hedge Fund Research.

Still, some investors in public companies may feel uncomfortable blurring the line between the roles of a minority shareholder and a private equity investor, analysts say.

“It’s a conflict because as a shareholder, your goal is to get the maximum return on your investment. As a private equity buyer, you want the best possible price,” said Charles Elson, a University of Delaware corporate governance professor who also sits on the board of restaurant chain Bob Evans Farms Inc (BOBE.O).

As a director, he would always wonder if Elliott’s interest was as a shareholder or a buyer, Elson said.

“There is no conflict in these situations, because it is the company’s board of directors, not Elliott, that decides whether to sell the company and who to sell it to,” an Elliott spokesman said in an emailed statement.

Michael Stark, the founder of CrossLink Capital and major LifeLock shareholder, said he had no issue with Elliott acting both as an investor and a bidder, though he was slightly disappointed with the final price Symantec paid.

“We got the bottom end of a fair price,” Stark said. “As long as shareholders were fairly represented by the board and management team, I’m okay with that.”

Some activist investors have made buyout bids in the past, but not in a systematic manner.

Starboard Value, an activist fund with more than $4 billion in assets, offered in 2014 to buy 3-D technology maker RealD, which sold the following year to private equity. Icahn Enterprises bought auto service and parts chain Pep Boys for $1 billion in early 2016 and is trying to buy Federal Mogul Holdings Corp, another auto parts maker.

Advisors to activists told Reuters that several activist funds were considering expanding into private equity but are still assessing whether to make such a move.

BUILD UP

Last year, New York-based Elliott expanded its tech-focused private equity practice, adding professionals, naming it Evergreen Coast Capital Corp and opening an office in Silicon Valley.

Unlike in the past, when it would occasionally bid for majority stakes, the fund now has a dedicated team chasing buyouts of whole companies.

Last June, Evergreen teamed up with Francisco Partners to buy Dell’s software assets for more than $2 billion, but Elliott has yet to emerge as the sole owner of any of public companies it offered to buy.

While that might raise doubts about Evergreen’s credibility as a potential majority owner, merely having a takeover offer in hand has allowed Elliott to fast-track what typically would be months of trench warfare between activists and reluctant boards.

Directors have a fiduciary duty to shareholders to explore a credible takeover proposal and launching an auction is one way to find out its worth.

“When you commit to buying a company as a private equity owner, you’re putting your money where your mouth is,” said Keith Gottfried, a partner at law firm Morgan Lewis who specializes in defending companies from activists.

The establishment of a dedicated buyout team follows a gradual effort that started with the launch of Elliott’s tech investing arm, overseen by Jesse Cohn, who joined the fund in 2004 from Morgan Stanley as a 24-year old.

Cohn, who now oversees Evergreen and Elliott’s U.S. activist investments, has developed close relationships with Silicon Valley and Wall Street firms, helping Elliott to strike deals where the fund would keep its stakes in companies going private. (tmsnrt.rs/2je93zI)

These roll-over stakes allowed Elliot to benefit from the premium a sale would usually command, and later share profits with the private equity firm once it was ready to offload the revamped company.

But buyout firms grew reluctant to share the spoils with Elliott. Its latest setback came in early 2015 when buyout firm Thoma Bravo bought software developer Riverbed Technology for $3.5 billion in a sale Elliott helped trigger, but then did not let the fund stay on as a minority investor.

After that snub, Elliott’s top executives, including Singer, co-chief investment officer Jon Pollock and Cohn began laying the ground for Evergreen, which would give Elliott more independence in seeking its own private equity deals. Elliott’s investments, including ones made by Evergreen, come from the same general pool of capital shared across the firm, a person familiar with the matter said.

Rich McBee, chief executive of business telecommunications company Mitel Communications (MITL.O), in which Elliott has owned shares for nearly a decade, said he valued the regular contacts and Elliott’s readiness to offer strategic suggestions.

“They don’t come with an idea that they have not fully investigated or vetted and talked with a lot of people about,” McBee told Reuters in an interview. “It’s not a random walk with them.”

(Reporting by Michael Flaherty in New York and Liana B. Baker in San Francisco; Editing by Greg Roumeliotis and Tomasz Janowski)

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How Toyota, Target, Best Buy are fighting back against Republican border tax push


WASHINGTON Days before a group of Republican lawmakers were due to discuss their party’s controversial proposal to tax all imports, Toyota Motor Corp sent an urgent message to its U.S. dealers – tell the politicians the tax would seriously hurt car buyers.

Some of Toyota’s 1,500 dealers heeded the call and contacted members of the House of Representatives’ tax-writing Ways and Means Committee, urging them to rethink their proposal, according to people familiar with the effort.

Imposing a 20 percent tax on imports would force consumers to pay potentially thousands of dollars more for vehicles, they warned.

The Japanese automaker’s mobilization of its army of dealers underscores the growing alarm among some of the world’s largest companies that sell imported goods in the United States. They fear a big tax on imports would hurt their sales and profits and put them at a disadvantage to rivals more reliant on U.S.-made products.

“Cost is going to go up, as a result demand is going to go down. As a result, we’re not going to able to employ as many as people as we do today. That’s my biggest fear,” Toyota’s North America CEO Jim Lentz said in an interview.

Toyota dealers employ more than 97,000 people in the United States.

While companies and industry groups frequently lobby Congress, the threat of an import tax has mobilized an unusually broad swath of firms at home and abroad. That lobbying effort is taking place largely out of the public eye partly to avoid potential conflict with President Donald Trump, who has attacked companies for manufacturing abroad for U.S. consumers.

Earlier this month Trump targeted Toyota, threatening to impose a hefty fee on the world’s largest automaker if it builds its Corolla cars for the U.S. market at a plant in Mexico.

The White House said last week that a border tax is one option under review to pay for a wall with Mexico, although what exactly Trump is planning to do is still not clear. He has pledged to impose a “big border tax” on Mexican imports.

The plan proposed by House Republicans would cut corporate income tax to 20 percent from 35 percent, exclude export revenue from taxable income and impose the 20 percent tax on imports.

Companies that rely heavily on imports say a border tax will outweigh the benefit of a lower headline corporate tax.

As car dealers are reaching out to members of Congress in their districts, Toyota and other automakers are lobbying lawmakers in states where they have large manufacturing plants and employ thousands of workers.

The No. 3 vehicle seller in the United States behind General Motors Co and Ford Motor Co, Toyota imports about 1.2 million vehicles to the U.S. market annually, half of its 2.4 million U.S. sales. It employs 40,000 people directly.

BABY SUPPLIES AND BEER

Toyota and the automakers are not alone in this lobbying effort.

Target Corp’s chief executive, Brian Cornell, traveled to Washington to meet members of the House Ways and Means Committee. He told them an import tax could impact consumers’ ability to buy essential goods, such as baby supplies that are made overseas and imported to the United States, according to a person familiar with the talks. Target spokeswoman Dustee Jenkins confirmed the visit.

The largest U.S. electronics retailer, Best Buy, headquartered down the road from Minneapolis-based Target, has circulated a flyer to lawmakers. It cites an analyst forecast that a 20 percent tax would wipe out the company’s projected annual net income of $1 billion and turn it into a $2 billion loss.

The flyer, a copy of which was seen by Reuters, argues that foreign Internet sellers like China’s Alibaba.com would be able to avoid the tax by making sales online and shipping to U.S. consumers directly, “undercutting U.S. businesses.”

Company officials have been handing out the flyer to lawmakers and their staff on Capitol Hill, Best Buy spokesman Jeff Shelman confirmed.

Constellation Brands, which brews Corona and Modelo in Mexico, has been pushing lawmakers to exempt products like Mexican beer in any border tax “because it’s inherently a Mexican product,” CEO Rob Sands said on an earnings call.

But if that effort fails, Constellation is prepared to buy more raw materials from the United States instead of Mexico, Sands said.

Koch Industries [KCHIN.UL], the second-largest private U.S. company according to Forbes, said in a statement a border tax would have a “devastating” impact on consumers. The company, owned by Republican donors Charles and David Koch, includes oil refining and manufacturing interests.

Tim Phillips, the president of Americans for Prosperity, a conservative political group founded by the billionaire brothers, told Reuters the powerful group has started to educate its network of activists about the tax, so they can lobby against it. AFP says it has two million activists.

LOVE AND HATE

Not everyone in corporate America is worried about a new border tax.

Several aerospace companies including Boeing Co, United Technologies Corp and Raytheon Co said in earnings calls last week that a border tax could be positive for net exporters like them.

“We see the aerospace sector as fundamentally having an advantage in that regard,” Boeing CEO Dennis Muilenburg said.

The American International Automobile Dealers Association (AIADA), however, called the proposal “heart stopping,” in a letter last week to 9,500 dealers selling vehicles like Toyota, Volkswagen (VOWG_p.DE), and BMW.

Opponents of the border tax may have already found some allies.

Republican Representative Trey Gowdy of South Carolina, where BMW has a large plant, said the importance of foreign automakers such as BMW and Toyota to the economy needs to be considered when making laws.

“I cannot overstate how significant that industry is to my state,” Gowdy said in an interview, adding that he and his wife both drive Toyotas.

(Reporting by Ginger Gibson and David Shepardson in Washington, Additional reporting by Mike Stone and Joel Schectman in Washington, Joe White in Detroit, Alwyn Scott in New York, Hyunjoo Jin in Seoul, Stephen Nellis and Jeffrey Dastin in San Francisco. Editing by Soyoung Kim and Ross Colvin)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/u8Zml5EdJJo/us-usa-trump-companies-tax-insight-idUSKBN15F0FK

FCA hands Deutsche Bank record 163 million pound fine for Russia trades


LONDON Britain’s financial regulator fined Deutsche Bank (DBKGn.DE) 163 million pounds ($203.70 million) for serious failings in relation to anti-money laundering controls, it said on Tuesday.

The fine was the biggest ever imposed by the Financial Conduct Authority or its predecessor, the Financial Services Authority.

The regulator said that inadequate controls by Deutsche Bank meant that its Russian subsidiary was able to execute more than $6 billion of so-called “mirror trades”, where stocks were bought in roubles and sold at the same time in U.S. dollars, in a manner “highly suggestive of financial crime”.

It added that a further $3.8 billion in suspicious “one-sided” trades also occurred.

On Monday, New York’s banking regulator said Deutsche Bank had agreed to pay it $425 million for the “mirror trading” scheme, saying the lender had conducted its business in an unsafe and unsound manner.

(Reporting by Simon Jessop; Editing by Rachel Armstrong)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/p2B7Eu5EOdE/us-deutsche-mirrortrade-probe-fca-idUSKBN15F0K3

Halliburton asks workers from banned countries not to travel to U.S.


Halliburton Co has advised workers from the countries named in President Trump’s immigration ban not to travel to the U.S., according to an email from a spokeswoman.

The U.S. President on Friday announced a four-month hold on allowing refugees into the United States and a temporary ban on travelers from seven Muslim-majority countries.

The Halliburton employees from the banned countries are being notified that travel to the U.S. is not advisable during the travel restriction period, the spokeswoman said.

Bloomberg on Monday reported about Halliburton’s advice to workers from restricted countries against traveling to the U.S.

The ban affects travelers with passports from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen and extends to green card holders who are legal permanent residents of the United States.

(Reporting by Vishal Sridhar in Bengaluru; Editing by Sunil Nair)

Article source: http://feeds.reuters.com/~r/reuters/businessNews/~3/qx65WBUa4lw/us-halliburton-immigration-workers-idUSKBN15F09B

Wal-Mart offers free two-day shipping in latest attempt to compete with Amazon


CHICAGO Wal-Mart Stores Inc (WMT.N) will offer U.S. shoppers free two-day shipping on a minimum order of $35 starting Tuesday, its latest attempt to compete with rival Amazon.com Inc’s (AMZN.O) popular Prime shipping program.

Free shipping will replace ‘Shipping Pass’, Wal-Mart’s existing two-day shipping program that charges shoppers an annual membership fee of $49. Amazon Prime charges customers $99 a year for two-day shipping that comes with additional features like a streaming video service.

Marc Lore, head of Wal-Mart’s e-commerce operations, said the company’s offer will be “most compelling” for shoppers looking for low prices, a wide assortment and fast shipping.

“In today’s world of e-commerce, two-day free shipping is table stakes. It no longer makes sense to charge for it,” Lore said on a conference call. He is the former head of online retailer Jet.com, which Wal-Mart bought for $3.3 billion last year.

The decision to scrap the membership fee is Lore’s boldest move yet to challenge Amazon since he took charge of Wal-Mart’s struggling online business. Earlier this month, Lore shuffled Wal-Mart’s e-commerce decks.

The move is in line with the broader push by Wal-Mart Chief Executive Doug McMillon to narrow the gap with Amazon and give it an even more dominant position in U.S. e-commerce. The retailer has been investing in e-commerce for the past 15 years, but it still lags far behind its Seattle-based rival.

Wal-Mart’s free shipping offer will be available on over 2 million items. It will include frequently ordered items such as household essentials, baby products, cleaning supplies and food items like cereal and peanut butter.

Wal-Mart said it will use its new online warehouses around the country to fulfill such orders and expects to ship many such items in just one day. In October, the retailer said it is on track to double the number of giant warehouses dedicated to online sales to 10 by the end of 2016.

Wal-Mart will also fully refund the membership fee for existing Shipping Pass members. The company started experimenting with Shipping Pass in 2015 and was trying to boost demand for the program by offering a free 30-day trial in 2016.

In a separate blog post, Lore said the retailer remains committed to saving consumers money. “I’ve been here for four months and I couldn’t be more excited about how fast we are moving. It feels like a startup.”

He indicated there will be more changes at the world’s largest retailer.

(Reporting by Nandita Bose; Editing by Christopher Cushing)

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Trump order targeting business rules leaves key regulations untouched


WASHINGTON President Donald Trump signed an order on Monday that will seek to dramatically reduce federal regulations, but the policy will not apply to most of the financial reform rules introduced by the Obama administration.

Trump’s latest executive action will require that agencies cut two existing regulations for every new rule introduced and it will set an annual cap on the cost of new regulations.

For the rest of fiscal 2017, the cap will require that the cost of any additional regulations be completely offset by undoing existing rules.

But, the move does not cover independent agencies that crafted many of the rules required by the 2010 Dodd-Frank Wall Street reform law, including the Securities and Exchange Commission and the Commodity Futures Trading Commission, the White House said.

It also would not apply to rules mandated by statutes.

“There will be regulation, there will be control, but it will be normalized control,” Trump said as he signed the order in the Oval Office, surrounded by a group of small business owners.

During a meeting with the business owners, Trump described the Dodd-Frank law as “a disaster.” He asserted that it was “almost impossible now to start a small business and it’s virtually impossible to expand your existing business because of regulations.”

The creation of new U.S. businesses has actually climbed steadily since 2010, according to the U.S. Bureau of Labor Statistics. (bit.ly/2jnU32o)

White House spokesman Sean Spicer on Monday called the executive order a “first step” and said the administration would work with Congress to begin making changes to Dodd-Frank.

Implementing the new regulatory order may be difficult alongside the Trump administration’s push to repeal and replace the Affordable Care Act, said Tom Bulleit, head of the healthcare practice in the Washington D.C. office of law firm Ropes Gray.

As the Congress passes new legislation on healthcare, there will need to be new rules, Bulleit said.

“There’s a great deal of regulation that is either expressly required by legislation or is necessary to make the legislation work,” he said.

Consumer groups and environmentalists criticized the push to peel back regulations, arguing that it would remove important protections for the public.

Major regulations are typically reviewed by the White House’s Office of Management and Budget (OMB) before they are issued. That review will continue under this new measure, but agencies will also have to identify what two regulations will be repealed to offset the costs of any new rule.

Harvard Law School Professor Jody Freeman said the new order was “entirely unnecessary,” given similar cost-benefit regulatory directives made by past presidents and existing agency processes for reviewing older rules.

“Even it is fairly toothless in the end, it will be a weapon that OMB can use to harass agencies and slow regulation,” Freeman said.

The new order does not require that the repeal of the two regulations be done simultaneously with the release of additional rules.

“This vests tremendous power and responsibility in the OMB director to ensure the president’s direction in how we manage this across the government,” a White House official told reporters before the signing.

Certain categories of regulations will be exempt from this new policy, including those dealing with the military and national security. The OMB director will also have the ability to waive this policy in certain instances.

Trump has tapped U.S. Representative Mick Mulvaney of South Carolina to lead the OMB.

(Reporting by Ayesha Rascoe; Additional reporting by Amanda Becker, Caroline Humer, Doina Chiacu, Sarah Lynch; Editing by Chizu Nomiyama and Grant McCool)

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Wall Street falls the most since Oct as Trump honeymoon sours


NEW YORK The SP 500 and the Dow were set to post their largest drop in more than three months on Monday as investors worried that a curb on immigration ordered by Donald Trump was a reminder that some of the U.S. president’s policies are not market-friendly.

An executive order issued by Trump on Friday banned immigration from seven Muslim-majority countries, including legal residents and visa holders, and temporarily halted the entry of refugees. Over the weekend, thousands of people rallied in major U.S. cities and at airports in protest.

U.S. equities had hit a series of record highs following Trump’s election in November, encouraged by his promise of tax cuts and simpler regulations. However, the potential risk from some of Trump’s policies have dampened enthusiasm.

“Investors focused on the pro-growth of (Trump’s) proposals and not those detrimental to economic activity, like protectionism,” said Peter Cardillo, chief market economist at First Standard Financial in New York.

He said investors wore blinders to only see the market-friendly policies Trump spoke about during the campaign and the immigration ban was a reminder of actions he could take that could undermine the economy.

Technology, a sector which has openly opposed bans on immigration and hurdles to hiring foreign talent, weighed the most on the SP 500.

The Dow Jones Industrial Average .DJI fell 176.47 points, or 0.88 percent, to 19,917.31, the SP 500 .SPX lost 20.22 points, or 0.88 percent, to 2,274.47 and the Nasdaq Composite .IXIC dropped 57.99 points, or 1.02 percent, to 5,602.79.

The Dow, which rose nearly 10 percent in the month after Trump’s election, has gained 1 percent after his Jan. 20 inauguration.

Trump also signed an executive order that would seek to pare back federal regulations by requiring agencies to cut two existing regulations for every new rule introduced.

However, the Russel 2000 index of small and mid-cap companies fell 1.3 percent, giving back all the month’s gains.

The CBOE Volatility index .VIX or Wall Street’s “fear gauge” rose 1.55 points, the most for any day since early November.

Airline stocks fell, with American Airlines (AAL.O) down 4.9 percent and United Continental (UAL.N) down 3.8 percent. At least one analyst cited worries over the travel ban to the United States.

“The concern is that (Trump’s) travel ban starts to encompass more countries or that there are more stringent restrictions on travel to the U.S.,” or other countries retaliate, said Stifel analyst Joseph DeNardi.

Delta (DAL.N), which suffered a systems outage that grounded almost 300 flights between Sunday and Monday, fell 4.1 percent.

Also on investor’s crosshairs: a Federal Reserve’s policy meeting that begins Tuesday, corporate earnings from key companies such as Apple (AAPL.O) and Facebook (FB.O) and a raft of economic data including Friday’s crucial jobs report.

The SP 500 posted 4 new 52-week highs and 5 new lows; the Nasdaq Composite recorded 46 new highs and 38 new lows.

(Reporting by Rodrigo Campos, aditional reporting by Lewis Krauskopf; Editing by Nick Zieminski)

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