News Archive


Financial, tech stocks drive Wall Street higher

(Reuters) – Wall Street was higher on Thursday, driven by gains in financial and technology stocks and ahead of earnings from marquee companies, including Google-parent Alphabet and Amazon.

The earnings season has been largely positive, with 75 percent of the SP 500 companies that have reported so far topping expectations.

However, with U.S. indexes at record levels, investors are taking a closer look at earnings to see if they justify stretched valuations.

Celgene’s (CELG.O) 20 percent fall was the biggest drag on the SP 500 and the Nasdaq, after the company reported lower-than-expected sales for its flagship multiple myeloma drug Revlimid and its psoriasis drug Otezla.

“You’re always going to see reactions to the misses, and that’s going to make the headlines. But stock prices tend to follow the bigger picture,” said Brad McMillan, chief investment officer for Commonwealth Financial Network in Waltham, Massachusetts.

“Perhaps companies have done a little bit more in guiding expectations than usual.”

Market is also closely watching on any news around President Donald Trump’s nomination of the next Federal Reserve chair.

Trump’s search has come down to Fed Governor Jerome Powell and Stanford University economist John Taylor, according to a Politico report. A White House official told Reuters that no final decision had been made.

In a step closer towards enacting Trump’s tax cut plan, the U.S. House of Representatives voted to clear a procedural path forward for the tax bill, which is expected to be unveiled next week.

At 10:57 a.m. ET, the Dow Jones Industrial Average .DJI was up 117.86 points, or 0.51 percent, at 23,447.32, the SP 500 .SPX was up 8.32 points, or 0.33 percent, at 2,565.47 and the Nasdaq Composite .IXIC was up 14.17 points, or 0.22 percent, at 6,578.06.

Healthcare .SPXHC was the only laggard among the 11 major SP sectors.

Bristol-Myers Squibb (BMY.N) fell 3.6 percent after the company said its gross margin, as a percentage of revenue, fell.

AbbVie (ABBV.N) dropped 1.8 percent after reporting deaths in psoriasis studies.

Tech sector’s 0.65 percent rise .SPLRCT led the gainers. Microsoft (MSFT.O) and Intel (INTC.O) are the other big companies set to report after the bell.

A more than 1 percent rise in JPMorgan (JPM.N) and Bank of America (BAC.N) led gains in the financial index .SPSY.

Twitter (TWTR.N) jumped 15 percent after the company said it could turn its first ever profit in the fourth quarter, helped by cost cuts and new sources of revenue.

Advancing issues outnumbered decliners on the NYSE by 1,592 to 1,139. On the Nasdaq, 1,578 issues rose and 1,107 fell.

Reporting by Sruthi Shankar in Bengaluru; Editing by Anil D’Silva

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Twitter says it could turn first-ever profit, shares surge

(Reuters) – Twitter Inc (TWTR.N) said on Thursday it may become profitable for the first time next quarter after slashing expenses over the past year and ramping up deals to sell its data to other companies, which could help to break its reliance on advertising for revenue.

Shares of Twitter soared more than 16 percent to $20.04 in afternoon trading. The company also said user growth resumed in the third quarter after stalling in the prior three months.

Twitter has never had a profitable quarter based on generally accepted accounting principles (GAAP), but said it “will likely be GAAP profitable” in the fourth quarter if it hits the high end of its estimates.

The social media company has struggled to convert its appeal among celebrities and public figures such as U.S. President Donald Trump to attract users and advertisers amid fierce competition from Facebook Inc (FB.O) and Snap Inc’s (SNAP.N) Snapchat. It has worked in recent months to sign live-streaming deals and make other changes to improve user experience.

Revenue from data licensing and other sources in the third quarter was $87 million, Twitter said, up 22 percent from a year earlier. That helped cushion an 8 percent decrease in advertising revenue.

Twitter said it signed a “significant number” of enterprise deals in the third quarter, which would help stabilize its revenue flow. The company did not name the companies it had inked deals with.

Twitter reported quarterly revenue of $590 million, down 4 percent from a year earlier, attributing much of the decrease to a previously announced decision to wind down its TellApart advertising product.

Analysts on average had expected revenue of $587 million, according to Thomson Reuters I/B/E/S.

San Francisco-based Twitter also disclosed that it had discovered an error in how it had measured its user base since 2014 and revised its estimates downward, but said the difference amounted to less than 1 percent.

The company reported 330 million monthly active users in the quarter ended on Sept. 30, up 4 million from a quarter earlier, helped by email and push notifications.

In the United States, where growth had stalled earlier this year, the number of users rose to 69 million from 68 million.

Analysts on average expected 330.4 million monthly active users worldwide and 69 million in the United States, according to financial data and analytics firm FactSet.

Twitter said that in past estimates it had wrongly counted people who logged into applications associated with the company’s Fabric software platform, which Twitter sold this year to Alphabet Inc’s (GOOGL.O) Google.

Unlike Facebook, Twitter does not disclose daily active users, but says that number is less than half the monthly figure.

The decline in quarterly revenue was the third since Twitter’s debut as a public company in 2013 and raised concerns about growth among some analysts.

“Yes, they grew 4 million MAU sequentially, which is good enough for the stock to stay at current levels, but revenue growth remains a problem,” said Michael Pachter, managing director, equity research at Wedbush Securities.

“It’s great that they are controlling expenses and generating EBITDA growth, but investors want to see faster MAU growth and some revenue growth,” Pachter said.

Twitter Chief Executive Jack Dorsey said on a conference call that the company was trying out ways to attract and engage more users.

“We’re playing a lot with better matching people with their interests and with topics they care about. This is an area of experimentation,” he said.

Also on Thursday, Twitter said it banned advertisements from accounts owned by Russian media outlets Russia Today and Sputnik, citing allegations by U.S. intelligence agencies that the outlets tried to interfere with the 2016 U.S. election.

The company has been under scrutiny from U.S. lawmakers as part of a broad investigation into Russian influence in the 2016 election.

COST CUTS, SMALLER LOSS

Twitter’s net loss narrowed to $21 million, or 3 cents per share, from $103 million, or 15 cents per share, a year earlier. Excluding items, the company earned 10 cents per share.

Analysts expected a profit of 6 cents per share, according to Thomson Reuters I/B/E/S.

Twitter cut expenses by 16 percent from a year earlier. Stock-based compensation declined 36 percent, but Twitter said the cuts were broad-based, covering sales and marketing and research and development.

Expenses would selectively increase moving forward, the company said.

Chief Operating Officer Anthony Noto told analysts that Twitter was still in the early stages of exploring a product around its TweetDeck interface.

“We’ve only done concept tests,” he said.

The company has stepped up efforts to keep people hooked through live-streaming deals, including for concerts, professional golf and news programs.

Twitter last month began testing tweets as long as 280 characters, double the existing cap, and has announced plans to toughen its rules on online sexual harassment.

Up to Wednesday’s close, Twitter’s stock had risen 5.2 percent this year, compared with a 30.4 percent gain in the SP 500 information technology index .SPLRCT.

Reporting by David Ingram in San Francisco and Pushkala A in Bengaluru; Editing by Bernard Orr and Meredith Mazzilli

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UAW files complaint against Tesla for terminated workers

(Reuters) – The United Auto Workers (UAW) International Union said on Thursday it filed a complaint against electric carmaker Tesla Inc (TSLA.O) on behalf of the company’s terminated workers.

The unfair labor practice (ULP) charges were filed at the National Labor Relations Board’s (NLRB) Oakland office, the union said.

Tesla in October fired about 400 employees including associates, team leaders and supervisors, Reuters reported, citing a former employee.

Performance reviews can result in promotions and occasionally in employee departures and no action was taken based on their feelings on unionization, Tesla said in an email to Reuters on Thursday.

Roughly 20,000 ULPs are filed with the NLRB by unions like the UAW as an organizing tactic, the company said.

UAW said in February it will greet Tesla’s Fremont, California, assembly plant workers with ‘open arms’ in a bid to unionize the factory.

NLRB, the U.S. agency in charge of enforcing labor law, in late August filed a complaint against Tesla, saying it found merit to workers’ complaints about unfair labor practices.

Reporting by Munsif Vengattil and Laharee Chatterjee in Bengaluru; Editing by Sriraj Kalluvila

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RBS to pay $44 million to settle U.S. claims it defrauded customers

(Reuters) – Royal Bank of Scotland Group Plc (RBS.L) agreed to pay more than $44 million and enter a non-prosecution agreement to settle a U.S. Department of Justice criminal probe of traders accused of defrauding customers on bond prices.

The settlement with RBS Securities Inc was announced on Thursday by U.S. Attorney Deirdre Daly in Connecticut.

RBS will pay a $35 million fine, plus at least $9.09 million to more than 30 customers, including Pacific Investment Management Co, Soros Fund Management and affiliates of Bank of America, Barclays, Citigroup, Goldman Sachs and Morgan Stanley.

Prosecutors said that from 2008 to 2013, RBS cheated customers by lying about bond prices, charging commissions it did not earn and concealing the fraud in an effort to boost profit at the customers’ expense. Some victims had received federal bailout money through the Troubled Relief Asset Program.

“For years, RBS fostered a culture of securities fraud,” Daly said in a statement. “By entering into this agreement, RBS has admitted the seriousness of its past criminal conduct and made a clean break.”

The settlement arose from a five-year federal crackdown on deceptive bond trading in which eight traders, including two from RBS, have been criminally charged.

According to settlement papers, RBS admitted and accepted responsibility for its misconduct. Daly said RBS’ “voluntary self-reporting and extraordinary cooperative efforts” were the reason it avoided criminal charges.

U.S. authorities sometimes use non-prosecution agreements to encourage cooperation. The criminal probe of individuals associated with RBS’ trading will continue.

“RBS has zero tolerance for market misconduct,” the bank said in a statement. “We are pleased to be able to resolve this issue as we continue to build a simpler, stronger bank that is fully focused on serving our customers well.”

RBS’ improper activity was conducted mainly in Stamford, Connecticut, through the bank’s U.S. asset-backed securities, mortgage-backed securities and commercial mortgage-backed securities trading group, which was shut down in 2015.

Adam Siegel, RBS’ former co-head of U.S. ABS, MBS and CMBS trading, and Matthew Katke, a former RBS trader, both pleaded guilty in 2015 to conspiracy to commit securities fraud and have been cooperating with the government.

Of the eight traders who were criminally charged, two were convicted, two were acquitted of various charges, three pleaded guilty and one pleaded not guilty. Two other traders were also hit with civil charges.

Reporting by Jonathan Stempel in New York; Editing by Steve Orlofsky and Dan Grebler

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U.S. jobless claims rise modestly as labor market tightens

WASHINGTON (Reuters) – The number of Americans filing for unemployment benefits increased less than expected last week, suggesting the labor market continued to tighten after recent hurricane-related disruptions.

Other reports on Thursday, however, offered a less favorable look at the economy. The goods trade deficit widened in September and retail inventories fell, prompting the Atlanta Federal Reserve to trim its third-quarter GDP growth estimate. In addition, signed contracts to buy previously-owned homes were unchanged last month.

“Firms remain unwilling to release labor. The labor market is very tight,” said John Ryding, chief economist at RDQ Economics in New York.

Initial claims for state unemployment benefits increased 10,000 to a seasonally adjusted 233,000 for the week ended Oct. 21, the Labor Department said. Claims fell to 223,000 in the prior week, which was the lowest level since March 1973.

Economists had forecast claims rising to 235,000 in the latest week. They have declined from the almost three-year high of 298,000 hit at the start of September in the aftermath of Hurricanes Harvey and Irma, which ravaged parts of Texas and Florida.

The impact of Harvey and Irma has largely dropped out of the claims data for the mainland United States. But Irma and Hurricane Maria continue to impact claims for the Virgin Islands and Puerto Rico, now virtually isolated because of the destruction of infrastructure due to the storms.

A Labor Department official said claims data for the islands had continued to be estimated.

Last week marked the 138th straight week that claims remained below the 300,000 threshold, which is associated with a strong labor market. That is the longest such stretch since 1970, when the labor market was smaller.

The labor market is near full employment, with the jobless rate at more than a 16-1/2-year low of 4.2 percent. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 9,000 to 239,500 last week.

That suggests a sharp rebound in job growth in October after nonfarm payrolls dropped by 33,000 jobs in September.

LABOR MARKET SLACK DIMINISHING

The claims report also showed the number of people still receiving benefits after an initial week of aid declined 3,000 to 1.90 million in the week ended Oct. 14, the lowest level since December 1973.

The four-week moving average of the so-called continuing claims fell 4,500 to 1.90 million, the lowest reading since January 1974. The continuing claims data covered the week of the household survey from which October’s unemployment rate will be derived.

The four-week average of continuing claims fell 40,500 between the September and October survey weeks, suggesting a further improvement in the unemployment rate as labor market slack continues to diminish. The job market strength supports the view that the Federal Reserve will raise interest rates in December.

U.S. financial markets were little moved by the data as investors digested the European Central Bank’s announcement that it would extend its bond purchases at a reduced rate. The dollar .DXY rose against a basket of currencies, while prices for U.S. Treasuries were largely unchanged. Stocks on Wall Street rose.

In a separate report on Thursday, the Commerce Department said the goods trade deficit rose 1.3 percent to $64.1 billion in September. Exports of goods increased $0.9 billion to $129.6 billion. Goods imports gained $1.7 billion to $193.7 billion amid a surge in capital and consumer goods imports, which likely reflects the economy’s underlying strength.

The Commerce Department also said wholesale inventories increased 0.3 percent last month. But stocks of goods at retailers tumbled 1.0 percent, weighed down by a 2.6 percent dive in motor vehicle inventories. As a result, the Atlanta Fed lowered its third-quarter gross domestic product estimate two-tenths of a percentage point to a 2.5 percent annualized rate.

“The higher-than-expected trade deficit implies a lower contribution from the net exports,” said Michael Gapen, chief economist at Barclays in New York. “In addition, today’s weak inventories data also imply a lower contribution from this subcomponent.”

The government will publish it’s advance estimate of third-quarter GDP on Friday. The economy grew at a 3.1 percent pace in the April-June quarter.

A fourth report from the National Association of Realtors showed its pending home sale index was unchanged at more than a 2-1/2-year low in September. The index, which is based on signed home purchase contracts, fell 3.5 percent on an annual basis.

Reporting by Lucia Mutikani; Editing by Paul Simao

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Sales of U.S. pickups lift Ford profit; self-driving test set for ’18

DETROIT (Reuters) – Ford Motor Co (F.N) reported a better-than-expected quarterly net profit on Thursday, driven largely by U.S. sales of its high-margin pickup trucks, and said it would begin to test self-driving cars in some cities next year.

A large part of the company’s profits came from its F-Series pickup trucks, which have been the best-selling vehicle in North America for decades. Ford said the average transaction price for its trucks rose $2,800 to $45,400.

The company redesigned its larger F-series Super Duty pickups a year ago, and recently updated its standard F-150 trucks for model year 2018.

Ford said its North American margin rose to 8.1 percent from 5.8 percent a year earlier. Earlier this week, GM reported a third-quarter margin for North America of 8.3 percent.

Ford plans to begin testing self-driving vehicles in some cities in 2018, Chief Executive Officer Jim Hackett disclosed on an earnings call with analysts on Thursday, but gave no details.

Ford also is developing new business partnerships with unnamed companies to use its self-driving vehicles in commercial applications other than ride hailing, Hackett said. He declined to confirm whether Ford still planned to put those vehicles into service by 2021, executives have said.

Rival General Motors Co (GM.N) said in recent weeks it plans to accelerate the commercial application of its self-driving Chevrolet Bolts, some of which could be in operation before 2020. GM also plans to introduce 20 electric vehicles by 2023.

Year to date, GM’s stock is up nearly 30 percent, while Ford is down almost 1 percent. In mid-morning trade, Ford was up 0.3 percent to $12.08.

Wall Street has been underwhelmed by Ford, particularly by Hackett’s caveat that most of the company’s $14 billion in planned cost savings will not show up on Ford‘s bottom line until 2019 and 2020.

When asked by reporters about the flagging stock, Chief Financial Officer Bob Shanks said Ford has a “really good plan” for electric vehicles and self-driving car technology.

“I think the market will reward us,” he said.

On the earnings call on Thursday, Shanks said Ford will “aggressively restructure the business as required to achieve our objectives … We are prepared to do what we have to do.”

He did not provide details.

Apart from North America, the only other region that was profitable for Ford was Asia Pacific, where a record profit was driven by sales increases outside China. CFO Shanks said sales volumes, market share and margins were all down in China.

He said Ford’s European operations would return to profitability in the fourth quarter and for the full year.

Ford said it had lower engineering, advertising and promotion expenses than in the third quarter.

The second largest U.S. automaker posted a quarterly net profit of $1.56 billion, or 39 cents per share, up more than 60 percent from $960 million, or 24 cents, a year earlier.

Excluding one-time items, Ford reported earnings per share of 43 cents, above Wall Street expectations of 32 cents.

Revenue rose to $36.45 billion from $35.94 billion a year earlier.

Ford said it now expects full-year earnings in a range of $1.75 to $1.85 per share. Previously it had looked for $1.65 to $1.85.

Editing by Jeffrey Benkoe

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Amazon’s bold spending to be closely watched in latest results

(Reuters) – Amazon.com Inc’s (AMZN.O) audacious spending on original TV shows and movies, its cloud business and an ever-expanding core retail operations, will be closely watched by investors when the retail giant reports results on Thursday.

Wall Street has often overlooked the company’s relatively small profits as Chief Executive Jeff Bezos chases growth.

Bezos has looked to cement the company’s position as a leader in cloud services, become a formidable foe of Netflix Inc (NFLX.O), and disrupt the retail industry with its recent purchase of premium grocer Whole Foods.

This quarter, however, investors will want to see if Amazon’s operating income is being pressured as it cuts prices to fight competition from Wal-Mart Stores Inc (WMT.N), which is investing heavily in its own online business.

“The open question for the fourth quarter is whether they will have to compete on price because Wal-Mart is making such a push into online,” Wedbush Securities analyst Michael Pachter said in a preview note.

“If their guidance for operating profit is substantially below a year ago, then that’s a signal that they intend to compete on price.”

Amazon closed its $13.7 billion Whole Foods buy on Aug. 28 and immediately slashed prices of some products at the grocer.

Analysts say the price cuts and investments in other sectors, from cloud computing to video, are likely to raise the company’s costs and reduce third-quarter operating income.

Amazon has given a wide forecast range – between operating income of $300 million and an operating loss of $400 million.

Analysts on average are expecting $144.6 million, according to data and analytics firm FactSet.

The company said in July it expected third-quarter revenue of $39.25 billion to $41.75 billion. Analysts expect revenue to rise 29 percent $42.14 billion, according to Thomson Reuters I/B/E/S.

Amazon’s shares were up 0.6 percent in early trading on Thursday. They have dropped 7 percent since the company reported second-quarter results on July 27.

Investors acknowledge that Amazon’s ambitions to disrupt multiple industries requires constant spending, and lower margins may not be a big concern, Barclays analysts said in their preview note.

The company’s operating costs jumped 29 percent to $32.14 billion in the third quarter of 2016.

Shareholders will also be closely watching Amazon’s holiday-quarter forecast, he said, adding that the company might forecast disappointing fourth-quarter operating income.

Amazon reported operating income of $1.11 billion in the fourth quarter of 2016.

The high level of spending is not going to slow this year either, analysts said.

Video will remain an area where Amazon spends heavily as original shows help it gain and retain subscribers. Rival Netflix Inc (NFLX.O) commands the online-streaming market by spending billions on original shows.

“The beauty of Amazon versus Netflix is that Amazon can monetize its video content through retail, Netflix unfortunately doesn’t have that luxury,” said Benchmark Co analyst Daniel Kurnos.

Reporting by Aishwarya Venugopal; Additional reporting by Munsif Vengattil and Supantha Mukherjee; Editing by Sayantani Ghosh

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U.S. October new vehicle sales seen down 4 pct on year: J.D. Power and LMC

DETROIT (Reuters) – U.S. auto sales in October likely fell close to 4 percent from the same month in 2016, though automakers’ sales were buoyed by replacement of storm-damaged vehicles and record-high consumer discounts, industry consultants J.D. Power and LMC Automotive said on Thursday.

LMC maintained its full-year forecast for new vehicle sales in 2017 of 17.1 million units.

October U.S. new vehicle sales will be about 1.32 million units, a drop of almost 3.7 percent from 1.37 million units a year earlier, the consultancies said.

The forecast was based on the first 17 selling days of October. Automakers will release U.S. sales results for the month on Nov. 1.

Major automakers’ U.S. new vehicle sales climbed to a monthly high for the year in September as consumers replaced flood-damaged cars after Hurricane Harvey hit southeast Texas in late August.[nL2N1ME0SD]

The seasonally adjusted annualized rate for October will be 17.6 million vehicles, down more than 1 percent from 17.8 million units in the same month in 2016, the consultancies said.

Retail sales to consumers, which do not include multiple fleet sales to rental agencies, businesses and government, were also set to decline more than 4 percent in October.

U.S. sales of new cars and trucks hit a record high of 17.55 million units in 2016. But a saturated market, thanks partly to a glut of nearly new used vehicles, has forced automakers to hike discounts to entice consumers to buy.

Consumer discounts hit a monthly record of $3,901, above the previous record of $3,835 set in October 2016.

“While incentives have declined from the record high set last month, the need to reduce inventory could push spending to a new all-time high level in the final months of the year,” said Thomas King, J.D. Power’s senior vice president for data and analytics.

Discounts as a percentage of the manufacturer’s recommended sale price hit 10.5 percent in October, as they have for 15 of the last 16 months. Consumer discounts of more than 10 percent are considered unhealthy for automakers in the long term as they undermine resale values.

Despite the lofty consumer discounts, the average new vehicle sold in October spent 75 days in inventory. This was the longest since July 2009, during the height of the Great Recession.

Editing by Bernadette Baum

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Consumer groups join conservatives against AT&T deal for Time Warner

WASHINGTON (Reuters) – Seven groups ranging from the Tea Party Patriots to liberal consumer groups warned against ATT’s (T.N) plan to buy Time Warner (TWX.N) in a letter to Attorney General Jeff Sessions, saying the deal could give one company too much power over what Americans see on television.

The letter is signed by officials from the more liberal Public Knowledge and Consumer Federation of America as well as Tea Party Patriots and American Family Association, which opposes homosexuality.

“While the undersigned groups’ opinions diverge significantly on many policy issues, we are united in our desire to ensure that free expression is not threatened by an increasingly limited number of companies that dominate U.S. media,” the groups said in the letter.

ATT, the No. 2 wireless carrier which already owns satellite television service DirecTV, is in the process of buying Time Warner Inc for $85.4 billion in an effort to turn itself into a media powerhouse that can bundle mobile service with video. It has said it expects the deal to close by the end of the year.

Owning DirecTV makes ATT the top pay-TV firm. Combining that clout with Time Warner, which owns HBO, CNN and the movie studio Warner Brothers, would make ATT even more powerful, the seven groups warned.

The groups expressed concern in particular that ATT could create incentives for its customers to only watch its shows by not counting ATT content against data caps. Or, the groups said, ATT could relegate channels it does not own to undesirable channel locations.

Signatories also include officials from Americans for Limited Government, Frontiers of Freedom and Writers Guild of America West.

Reporting by Diane Bartz; Editing by Andrea Ricci

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