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Vanguard withheld support for key Wells Fargo directors: filings

BOSTON (Reuters) – Vanguard Group, one of the world’s biggest fund managers, voted against three directors at Wells Fargo Co this year, including Chairman Stephen Sanger, according to U.S. filings, a rare rebuke from the bank’s second-largest shareholder.

The lack of support from Vanguard was disclosed on Wednesday and Thursday, just as Wells Fargo announced it had uncovered more than a million additional accounts potentially opened without customers’ knowledge in a drawn-out scandal that has already resulted in a $190 million settlement with regulators and the ouster of its chief executive officer.

Investors are concerned that as the sales scandal deepens it will make it more difficult to restore the San Francisco bank’s once-pristine brand. Shares in Wells Fargo fell 0.6 percent on Thursday to close at $51.07. They are down 7.3 percent so far this year.

Vanguard said it voted against certain directors at “a U.S. financial company that was fined for fraud” in an annual voting report on Thursday. (

Vanguard executives, including Investment Stewardship Officer Glenn Booraem, declined to confirm the language referred to Wells Fargo. According to filings with the Securities and Exchange Commission, Vanguard funds supported 12 of 15 Wells Fargo directors on the ballot, and backed the company’s management on all nine shareholder proposals up for a vote at the April meeting.

Wells Fargo declined to comment on the investor votes.

Mutual funds, often the largest owners of U.S. corporations, wield decisive clout through their proxy voting over governance questions like the election of directors or the setting of executive pay.

But while the majority of the votes take place during the springtime annual meeting season, the funds rarely detail any of their votes until securities filings appear in late August. The fund firms also generally support corporate boards — Vanguard said it backed director put up for election by management 96 percent of the time at U.S. companies in the most recent proxy season.

In the case of Wells Fargo, it was clear that many shareholders were displeased, with only three of 15 directors receiving more than 90 percent support from voting shareholders at the bank’s annual meeting on April 25. Sanger received just 56 percent.

Vanguard’s regulatory filings showed funds like Vanguard Total Stock Market Index Fund voted against Wells Fargo directors including Federico Pena, chair of its Corporate Responsibility Committee; Enrique Hernandez, who had chaired its risk committee, and Sanger.

Other funds that voted critically at Wells Fargo included American Funds like Income Fund of America, which did not support nine of 15 directors, filings show.

American Funds representatives did not respond to a request for comment.

Wells Fargo said this month that former Federal Reserve governor Elizabeth Duke will replace Sanger on Jan. 1, and two other directors will also retire.

Hernandez and Pena remain on the board but Hernandez will no longer chair its risk committee and Pena and Sanger are leaving the committee.

In its annual voting report, Vanguard wrote of its votes at the financial company: “…we concluded that certain directors had fallen short of their responsibility to understand the risks and culture of the company and to challenge management when necessary.”

Vanguard’s report stated that while it supported the changes made by the company’s board since the vote, “we will continue to engage to ensure ongoing progress.”

According to Thomson Reuters data, Vanguard holds a 6 percent stake in Wells Fargo second only to the 9 percent stake held by Warren Buffett’s Berkshire Hathaway Inc which has supported the bank.

Reporting by Ross Kerber; Editing by Lisa Shumaker

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Tenet to replace CEO, ‘refresh’ board

NEW YORK (Reuters) – Hospital operator Tenet Healthcare Corp (THC.N) said on Thursday it is replacing Chief Executive Trevor Fetter and would “refresh the composition of its board.”

The move comes two weeks after the company’s largest shareholder, Glenview Capital Management, pulled two of its executives from Tenet’s board, citing irreconcilable differences over strategy.

Fetter, who has led the company since 2003, will step down as CEO and as a director by March 15, 2018 or when a successor is appointed, whichever comes earlier, the company said. The company has already launched the search for a new CEO.

Independent lead director Ronald Rittenmeyer will become Tenet’s executive chairman effective immediately.

Reporting by Michael Erman; Editing by Chris Reese

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Wall Street gains on data and Mnuchin tax reform remarks

NEW YORK (Reuters) – U.S. stocks closed higher on Thursday as investors reacted to economic data and took cautious hope from Washington’s latest promises for long-awaited details of a tax reform plan.

The SP 500 has been building momentum this week, notching five days of gains for the first time in three months as investors showed confidence a day after the benchmark closed above its 50-day moving average. This was a technical level that acted as resistance in the past week.

“People are coming back from vacation and noticing the market is near its all-time highs still, that a hurricane and all the North Korea bluster didn’t impact it,” said Michael Antonelli, managing director, institutional sales trading at Robert W. Baird in Milwaukee.

“There’s no doubt that the market is still in an uptrend. We’ve been throwing all sorts of bricks into the wall of worry and it’s still reaching for the sky.”

The Dow Jones Industrial Average .DJI rose 55.67 points, or 0.25 percent, to end at 21,948.1, the SP 500 .SPX gained 14.06 points, or 0.57 percent, to 2,471.65 and the Nasdaq Composite .IXIC added 60.35 points, or 0.95 percent, to 6,428.66.

For the month, the SP edged up 0.05 percent while the Dow gained 0.28 percent and Nasdaq rose 1.27 percent.

U.S. Treasury Secretary Steven Mnuchin said on Thursday that President Donald Trump’s administration has a detailed plan on tax reform and is on track to implement it by year-end. On Wednesday Trump reiterated his call for a U.S. corporate tax rate cut to 15 percent from 35 percent.

“Even if investors aren’t taking him at his word they expect him to do all he can. This is a market that has heard tax reform so often. It wants to see if they can deliver,” Quincy Krosby, chief market strategist at Prudential Financial in Newark, NJ.

Investors were also focused on economic indicators such as Wednesday’s gross domestic product data.

Data released Thursday showed annual inflation advanced at its slowest pace in more than 1-1/2 years, diminishing expectations of an interest rate increase in December. And U.S. consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.3 percent last month compared with forecasts of 0.4 percent.

The data “reinforced the belief that the bull market is still intact,” according to Robert W. Baird’s Antonelli.

Also investors awaited the monthly jobs report on Friday to gauge the strength of the labor market and look for clues on the Federal Reserve’s next move on interest rates.

Ten of the 11 major SP sectors were higher, with the health index’s .SPXHC 1.5 percent rise leading the advancers.

UnitedHealth’s (UNH.N) 1.5 percent gain provided the biggest boost to the Dow. The Nasdaq biotech index .NBI rose 2.8 percent, with the biggest boosts coming from Gilead (GILD.O), Celgene (CELG.O) and Biogen (BIIB.O), all of which rose more than 3 percent.

Dollar General (DG.N) fell 5.4 percent after reporting a slide in second-quarter margins.

Campbell Soup (CPB.N) slid 8.1 percent, the biggest percentage loser on the SP, after the company warned that sales for fiscal 2018 could fall.

The SP 500 posted 49 new 52-week highs and 10 new lows; the Nasdaq Composite recorded 117 new highs and 21 new lows.

About 6.2 billion shares changed hands on U.S. exchanges on Thursday compared with the 5.8 billion average for the last 20 sessions.

Additional reporting by Sruthi Shankar and Tanya Agrawal in Bengaluru and Chuck Mikolajczak in New York; Editing by Saumyadeb Chakrabarty and James Dalgleish

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Cash flowing again from Fed’s flood-threatened Houston branch

(Reuters) – Cash has begun flowing again from the Federal Reserve’s steel and cement vault in Houston, heading for banks in the hurricane-ravaged region after several days of flooding halted armored-truck deliveries and stranded employees overnight.

In the wake of Hurricane Harvey this week, water rose to the property of the U.S. central bank’s office in downtown Houston but did not reach the building or its above-ground vault, senior Fed officials said in an interview on Thursday.

The floods, which drenched the Gulf of Mexico coast and killed at least 35 people, marooned the Fed branch for a few days and stopped its cash shipments just as demand surged from nearby lenders. The first truck re-started deliveries on Wednesday, joining a fleet of others making emergency trips from the Fed’s San Antonio and Dallas offices to local banks that, in many cases, were not able to open on Monday.

“If in a certain location the logistics around a vault are imperiled, like in Houston, it puts much more burden on Dallas and San Antonio for re-routing … so that we can serve outlying areas of Houston,” Robert Kaplan, president of the Dallas Fed region that oversees Houston, told Reuters.

Those branches are delivering “a very high” amount of cash now, he added from the regional Fed headquarters in Dallas, without giving specifics.

Meanwhile, in the Fed’s 400-seat call center in Dallas, the first of about 100 agents from the Federal Emergency Management Agency have begun to set up shop. FEMA was concerned it would not have the physical capacity to handle calls from its existing center in nearby Denton, so the Dallas Fed offered its space, said its chief operating officer Meredith Black.

The facilities normally field calls for the U.S. Treasury to help people set up direct deposit of their federal benefit checks.

Dallas is one of the U.S. central bank’s 12 regional branches, supervising private lenders throughout Texas as well as parts of Louisiana and Oklahoma.

(For a map of Hurricane Harvey flooding in Houston and region, click

Reporting by Jonathan Spicer and Ann Saphir; Editing by Chizu Nomiyama

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Oil rises, gasoline jumps 10 percent as U.S. refineries reel

NEW YORK (Reuters) – Gasoline futures surged 10 percent on Thursday as almost a quarter of U.S. refining capacity remained offline and traders scrambled to reroute millions of barrels of fuel, while oil prices rose nearly 3 percent.

U.S. gasoline futures RBc1 have rallied roughly 26 percent from the previous week to a two-year high above $2 a gallon, buoyed by fears of a fuel shortage days ahead of the Labor Day weekend that typically brings a surge in driving. Gasoline was up 21.03 cents, or 11.2 percent, at $2.0950 at 1:53 p.m. (1753 GMT).

Hurricane Harvey, which brought record flooding to the U.S. oil heartland of Texas and killed at least 35 people, has paralysed at least 4.4 million barrels per day (bpd) of refining capacity, according to company reports and Reuters estimates.

The shutdowns led the U.S. government to tap its strategic oil reserves for the first time in five years on Thursday, releasing 500,000 barrels of crude to a working refinery in Louisiana. Traders were also scrambling to redirect fuel to the United States.

U.S. West Texas Intermediate (WTI) crude futures CLc1 recovered some early-week losses, trading $1.24 per barrel higher at $47.20 per barrel at 1309 EDT (1709 GMT). It was still on track to close the month down just under 6 percent, the steepest monthly loss since March.

  • Energy Secretary: U.S. gas prices will rise in Storm Harvey’s wake
  • U.S. releases 1 million barrels of oil from strategic reserve

International benchmark Brent crude LCOc1 was up $1.47 per barrel, or 2.89 percent, at $52.33 a barrel. It had fallen by just over 2 percent in the previous session.

“The market has turned in reverse pretty sharply,” said Gene McGillian, manager of market research at Tradition Energy. “You do have some signs of rebalancing, regardless of Harvey.”

Prices fell on Wednesday despite a drop in U.S. crude stocks, which are typically watched closely by oil investors as a sign of balance. The data showed a 5.39 million barrel drop in commercial crude stocks last week. They are now 14.5 percent below the record levels hit in March. C-STK-T-EIA [S/EIA]

OPEC output also fell this month by 170,000 bpd from a 2017 high, a Reuters survey found, as renewed unrest cut supplies in Libya and other members stepped up compliance with a production-cutting deal

Analysts said the status of U.S. refineries could be a key to oil prices going forward.

“We could see rising U.S. crude inventories in the next couple of weeks until demand from refineries recovers. But by the end of September I expect the situation to be almost back to normal,” said Frank Schallenberger, head of commodity research at LBBW.

Analysts at Goldman Sachs and Stifel said they expected U.S. infrastructure outages to last several months but said it was difficult to estimate the exact damage.

Others saw potential for operational refineries to delay typical September seasonal maintenance to benefit from high prices.

“Refineries outside the affected area may delay maintenance to benefit from high processing margins,” said Commerzbank oil analyst Carsten Fritsch.

“Hence, the negative impact on crude oil demand and oil product supply might be less severe than feared.”

The trend for shrinking oil stocks and expectations for a rise in global oil demand growth meant analysts polled on a monthly basis by Reuters raised their oil price forecasts for the first time in six months. OILPOLL

Additional reporting by Karolin Schaps in Amsterdam and Henning Gloystein in Singapore; Editing by David Goodman and David Gregorio

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NAFTA nations plan talks progress under barrage of Trump threats

MEXICO CITY (Reuters) – Trade negotiators plan to take small steps forward in a second round of talks to rework the North American Free Trade Agreement (NAFTA) this weekend, trying to ignore daily threats from U.S. President Donald Trump to tear it up if he does not get his way.

Trump has used Twitter, press conferences and speeches to attack NAFTA in recent days, a ploy Mexican and Canadian officials regard as a negotiating strategy to wring concessions, but which has heightened uncertainty over the accord.

“Hopefully we can renegotiate it, but if we can’t, we’ll terminate it and we’ll start all over again with a real deal,” Trump told cheering workers at a factory in Missouri on Wednesday, as Mexico’s foreign and trade ministers met their U.S. counterparts in Washington to keep relations on track.

Away from the diplomatic noise, trade experts from the three NAFTA nations hope to advance the revamp during the five days of talks in Mexico that start on Friday by working through areas of greater consensus before turning to trickier issues.

“We want to see positive signs of progress at the negotiating tables,” said Moises Kalach, head of the international negotiating arm of Mexico’s CCE business lobby, which is leading the private sector in the talks. “Hopefully we’ll get it, even if it doesn’t have to be stated publicly. Hopefully we’ll start getting closure on some issues.”

Overall, the Mexican round, which follows talks two weeks ago in Washington, is expected to define more clearly the priorities of each nation rather than yield major breakthroughs.

The emergence of detailed positions on the tougher points looks less likely in this round, officials said.

Kalach and one Mexican negotiator, who spoke on condition of anonymity, saw broad agreement between the NAFTA members on how to improve conditions for small businesses, as well as in salvaging elements of the Trans-Pacific Partnership (TPP) trade accord that Trump ditched after taking office.

Some consensus was forged between the three countries when the TPP was finalized in 2015 on issues including the environment, anti-corruption, labor rules and digital trade.

More divisive issues that could enter the talks range from exploring the scope to raise NAFTA content requirements for autos to the contested U.S. demand to scrap the so-called Chapter 19 dispute settlement mechanism for resolving complaints about illegal subsidies and dumping, officials say.

A key plank of the U.S. strategy is how to reduce its trade deficit with Mexico, which has sent negotiators scrambling for creative ways to rebalance trade, Kalach said.

One hope is that Mexico’s incipient oil and gas sector opening will result in more imports and infrastructure investment from U.S. companies, some of which have already entered the market, such as Exxon Mobil Corp and Chevron Corp.

Folding that reform into NAFTA in a way that would make any attempt to unwind it politically costly for a future Mexican government would give U.S. and Canadian investors more security, Kalach and the Mexican negotiator said.

The risk the reform will stall has preoccupied officials in the region because the current front-runner for Mexico’s July 2018 presidential election, Andres Manuel Lopez Obrador, opposed the opening of the energy industry.

“The best thing (the United States and Canada) can do is protect NAFTA because this essentially protects their investments,” said Kalach.


Trump has accused Mexico and Canada of being “very difficult”, and officials from both countries say his words come as little surprise given his confrontational negotiating style.

Still, Mexico’s government has touted a back-up plan, seeing a “high risk” that NAFTA could unravel.

Canada’s Prime Minister Justin Trudeau on Tuesday shrugged off the threats and Canadian officials close to the process said they remained fully focused on the talks.

“There are always going to be words thrown about here and there but … we will continue to work seriously and respectfully to improve NAFTA to benefit not just Canadians but our American and Mexican friends as well,” Trudeau said.

A spokeswoman for U.S. Trade Representative (USTR) Robert Lighthizer declined to comment directly on how Trump’s comments would affect the talks. However, trade experts say they are unlikely to foster a spirit of cooperation.

“I think his tweets and statements are just complicating what’s already a difficult negotiation,” said Wendy Cutler, a former deputy USTR and lead U.S. negotiator for the TPP.

“I think it will embolden the naysayers in Canada and Mexico who don’t want to move in certain areas by telling the negotiators, ‘don’t move on these issues because the president has already said he probably won’t sign off on this deal'”.

Additional reporting by David Lawder in Washington, David Ljunngren in Ottawa and Anthony Esposito in Mexico City; Editing by Frank Jack Daniel and Andrew Hay

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GE’s new CEO preparing job cuts in bid to reduce costs: source

NEW YORK (Reuters) – General Electric Co is making plans to significantly reduce corporate staff in an effort to cut spending and boost profits under its new chief executive, and the company already has halted hiring in certain technology positions, a person familiar with the situation told Reuters.

New Chief Executive Officer John Flannery has told senior-level executives to prepare for cuts at headquarters and other areas of the company that do not produce revenue or profit.

“The cutting is going to start and it’s going to be aggressive,” said the source, who had direct knowledge of the discussions.

It was not known how many jobs would be eliminated.

GE declined to discuss details but noted that in March it announced plans to reduce overhead.

“We have a plan to take out $2 billion in cost by the end of 2018,” GE spokeswoman Jennifer Erickson said. “We’ve said John is reviewing all aspects of the company. He will present to investors in November.”

Flannery is not waiting until November to begin making reductions, the source said.

Analysts have said GE would need to cut spending by more than $2 billion because it is increasing spending in other areas, such as its digital business. GE also is changing financial targets and strategy for GE Digital and its Predix industrial internet system to boost sales.

GE’s profit and cash flow under former CEO Jeff Immelt disappointed investors, and GE stock has fallen 23 percent this year.

GE’s $2 billion cost-reduction target was set in March after the company’s leaders talked with activist investor Nelson Peltz, whose Trian Fund Management owns about $2 billion in GE stock.

In cutting corporate overhead Flannery would limit the size of its new Boston headquarters, according to the source.

GE said earlier this month that it would delay construction of part of its headquarters to save money.

Staff reductions would affect people working in such areas as human resources, recruiting, corporate security, helicopter and jet operations, procurement, auditing and possibly finance, the source said.

Reductions also are expected in information technology, where a hiring freeze is in place, though they would not include people working on Predix and its applications or digital sales, the source said.

Reporting by Alwyn Scott; Editing by Toni Reinhold

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Car makers, retailers rush to open, restock Houston after Harvey

DETROIT (Reuters) – Houston area car retailers and automakers are rushing to reopen dealerships and beef up inventory to replace many thousands of vehicles damaged in flooding from Hurricane Harvey.

Pete DeLongchamps, vice president for manufacturer relations at Group 1 Automotive Inc, the third-largest U.S. auto dealer group, said the company prepared for the storm with a plan designed after Hurricane Katrina in 2005. This included moving moved inventory to higher ground and cleaning roof drains to avoid cave-ins.

Group 1 thus lost a “relatively small percentage” of inventory and reopened its roughly 25 dealerships in the Houston and Beaumont area by Thursday.

“Things have been moving fast and furious with a large number of tow-ins already,” DeLongchamps said. “Our customers have lost a lot of vehicles we need to help them replace.”

Harvey brought record flooding to Houston and killed at least 35 people. The storm is expected to briefly depress already slowing U.S. auto sales but could eventually help boost demand as damaged cars are replaced. Automakers report U.S. August sales on Friday.

Estimates for the number of Harvey-damaged vehicles needing replacement range up to 500,000.

By Thursday AutoNation Inc, the largest U.S. auto retail chain, had reopened its 17 Houston stores and is moving cars and trucks from other regions, company spokesman Marc Cannon said.

The company plans to move 500 to 1,000 used cars to an AutoNation USA used car store and stage a sale Sept 21-23, when many would-be buyers should have insurance checks to replace destroyed vehicles, Cannon said.

AutoNation is still assessing how many vehicles it lost, but it too moved vehicles to higher ground ahead of the storm.

General Motors Co spokesman Jim Cain said the number of damaged vehicles at dealerships “is relatively modest.”

“But there are still several dealerships that are inaccessible, so the number will increase,” he said. GM will move new and used vehicles to Houston, “but it won’t be done until the infrastructure and our dealers are ready.”

Ford Motor Co is still assessing damage and inventory needs, a spokeswoman said.

CarMax Inc, the biggest U.S. used car dealer, will reopen its six Houston area stores on Labor Day, spokeswoman Claire Hunter said. “We are mobilizing additional inventory to the region as we speak,” Hunter said.

Paul Lips, chief operating officer at ADESA, a unit of KAR Auction Services Inc which with Manheim dominates the U.S. car auction industry, said Houston inventory is “dry and ready for sale.”

“Once roads are clear and employees can return safely to work, we will reopen business as usual,” he said. 

Group 1’s DeLongchamps said the high inventory levels that have been a concern for the U.S. auto industry this year amid slackening sales are now a positive.

As vehicles sell, the retailer plans to replenish inventory by drawing from surpluses at other dealers.

“We have one guy in our office here whose sole job is to match inventory to sales,” in the Houston area, DeLongchamps said. “We call him the ‘inventory czar.'”

In afternoon trading, AutoNation shares were up 4.5 percent, Group 1 was up 3.4 percent, while CarMax had risen 2 percent and KAR was up nearly 1 percent. GM shares were up 2 percent and Ford was up 1.2 percent.

Additional reporting by Joseph White; Editing by Cynthia Osterman

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Truck maker Volvo targets operating margin above 10 percent

STOCKHOLM (Reuters) – Sweden’s Volvo (VOLVb.ST), one of the world’s biggest truck makers, on Thursday set new financial targets, and said it aimed for an operating margin above 10 percent over a business cycle.

Years of heavy cost cuts and efficiency gains have led to marked improvements in Gothenburg-based Volvo’s profitability. It reported an adjusted operating margin of 9.7 percent in the second quarter of this year, up from 7.8 percent a year ago.

Volvo said in a statement it was now “in a phase where focus is on organic growth and improved profitability through continuous improvement and innovation.”

The company, which competes with Daimler (DAIGn.DE) and Volkswagen (VOWG_p.DE), previously had a profitability target where its different businesses, which include construction equipment and buses, were benchmarked annually against competitors.

“A clear and straightforward operating margin target supports the efforts to drive performance across the group,” Volvo said.

The company said the target for its financial services business remained unchanged with a return on equity of12-15 percent at an equity ratio above 8 percent.

(This version of the articke corrects Thursday from Wednesday in first paragraph)

Reporting by Johannes Hellstrom. Editing by Jane Merriman

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