After Hours Summary: FLEX +14%, FB +12%, DLB +9%, NOW +8%, MLNX +6% are higher, while X -6%, PYPL -3.5%, MSFT -2.7%, V -2%, TSLA -1.5% are lower following earnings/guidanceAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: FLEX +13.8%, FB +11.8%, DLB +8.8%, NOW +7.9%, MLNX +5.7%, WYNN +3.8%, LLNW +3.3%, QCOM +2.3%, CACC +1.4%
Companies trading higher in after hours in reaction to news: TWTR +3.1% / SNAP +1.5% (higher with FB), PXLW +1.8% (announces partnership with HMD Global for delivery of advanced visual processing solutions on Nokia smartphones), SCHW +0.4% (authorizes $4 bln stock repurchase, declares 31% increase in quarterly common stock dividend to $0.17/share)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: X -6.3%, MEOH -5.8% (light volume), EFII -5.7%, GHL -3.7%, PYPL -3.5%, MSFT -2.7%, V -2.1%, TSLA -1.5%, AGNC -1.3%, CRUS -1.1%
Companies trading lower in after hours in reaction to news: TVPT -2.3% (Travelport Worldwide confirms expiration of 45-day "go-shop" period pursuant to the terms of the Merger Agreement and establishes meeting date of March 15, 2019), MA -0.7% (lower with V and ahead of its own earnings release tomorrow)
Closing Stock Market SummaryThe S&P 500 began the day comfortably higher as Apple's (AAPL 165.25, +10.57, +6.8%) better-than-feared earnings and Boeing's (BA 387.72, +22.81, +6.3%) impressive report fueled broad-based buying interest. The benchmark index then added as much as 1.9% after the Federal Reserve provided some market-friendly commentary before finishing up 1.6%.
The Dow Jones Industrial Average gained 1.8%, the Nasdaq Composite gained 2.2%, and the Russell 2000 gained 1.1%.
All 11 S&P 500 sectors finished higher with information technology (+3.0%) and consumer discretionary (+2.2%) leading the advance.
Specifically, Apple reported in-line Q1 results and guided Q2 revenue that was towards the low end of expectations, yet that was apparently enough to placate investors who found some comfort in the solid growth reported for the company's services business. Boeing for its part exceeded Q4 revenue and earnings estimates by a wide margin and issued upbeat FY19 guidance.
Advanced Micro Devices (AMD 23.09, +3.84) joined Apple with a better-than-feared report, which catapulted the stock 20.0%, and provided strong support for the Philadelphia Semiconductor Index (+2.9%) and the heavily-weighted information technology sector.
Not all stocks, however, were able to brush past underwhelming results.
Asset management stocks T. Rowe Price (TROW 89.24, -3.51, -3.8%), Franklin Resources (BEN 29.09, -2.10, -6.7%), and Invesco (IVZ 18.59, -0.47, -2.5%) weighed on the underperforming financial sector (+0.4%). In addition, McDonald's (MCD 181.77, -0.40, -0.2%), AT&T (T 29.37, -1.33, -4.3%), and Amgen (AMGN 184.86, -7.25, -3.8%) slumped following their reports.
Still, it was a relatively strong morning with the market rallying around a host of earnings reports that were generally not as bad as anticipated.
At the same time, investors were hopeful that U.S.-China trade talks, which began in Washington on Wednesday, and that the FOMC decision, and a follow-up press conference from Fed Chair Powell, would bode well for the market.
True to the bullish narrative, the S&P 500 more than doubled its gains from 0.8% to 1.7% in the time between the FOMC releasing its policy directive at 2:00 p.m. ET and Fed Chair Powell's follow-up press conference at 2:30 p.m. ET to explain the FOMC's thinking.
The FOMC voted unanimously to keep the fed funds rate unchanged at a target range of 2.25% to 2.50%, as expected.
The underlying message from that decision, and Mr. Powell's press conference, is that the market need not fear the Fed (for the time being anyway), as the Fed is content to be patient with its policy approach and is open to curtailing its balance sheet normalization effort if necessary.
The Fed's dovish-minded perspective sent U.S. Treasuries in the belly of the curve to session highs. Longer-dated Treasuries were less affected.
The 2-yr yield, which was up as much as two basis points, decreased four basis points to 2.53%. The 10-yr yield, which was up as much as two basis points, decreased two basis points to 2.70%. The U.S. Dollar Index also fell on the news, losing 0.4% to 95.43.
Reviewing Wednesday's economic data, which included the ADP National Employment Report for January, Pending Home Sales for December, and the weekly MBA Mortgage Applications Index:
- The ADP National Employment Report showed an increase of 213,000 in January (consensus 170,000), and the December reading was revised to 263,000 (from 271,000).
- Pending Home Sales decreased 2.2% in December (Briefing.com consensus +0.7%). Today's reading follows a revised decrease of 0.9% in November (from -0.7%).
- The weekly MBA Mortgage Applications Index decreased 3.0% following a 2.7% decline in the prior week.
Looking ahead, investors will receive the fourth quarter Employment Cost Index, the weekly Initial and Continuing Claims report, and the Chicago PMI for January on Thursday.
- Russell 2000 +10.3% YTD
- Nasdaq Composite +8.3% YTD
- Dow Jones Industrial Average +7.2% YTD
- S&P 500 +7.0% YTD
Foxconn may scale back manufacturing plans for $10B Wisconsin campus
Foxconn Technology Group is reconsidering plans to make advanced liquid crystal display panels at a $10 billion Wisconsin campus, and said it intends to hire mostly engineers and researchers rather than the manufacturing workforce the project originally promised.
Announced at a White House ceremony in 2017, the 20 million-square-foot campus marked the largest greenfield investment by a foreign-based company in US history and was praised by President Trump as proof of his ability to revive American manufacturing.
Foxconn, which received controversial state and local incentives for the project, initially planned to manufacture advanced large-screen displays for TVs and other consumer and professional products at the facility, which is under construction. It later said it would build smaller LCD screens instead.
Now, those plans may be scaled back or even shelved, Louis Woo, special assistant to Foxconn chief executive Terry Gou, told Reuters. He said the company was still evaluating options for Wisconsin, but cited the steep cost of making advanced TV screens in the United States, where labor expenses are comparatively high.
“In terms of TV, we have no place in the US,” he said in an interview. “We can’t compete.”
When it comes to manufacturing advanced screens for TVs, he added: “If a certain size of display has more supply, whether from China or Japan or Taiwan, we have to change, too.”
Rather than a focus on LCD manufacturing, Foxconn wants to create a “technology hub” in Wisconsin that would largely consist of research facilities along with packaging and assembly operations, Woo said. It would also produce specialized tech products for industrial, health care, and professional applications, he added.
“In Wisconsin we’re not building a factory. You can’t use a factory to view our Wisconsin investment,” Woo said.
SEE ALSO
Apple manufacturer to create 3K US jobs with new $10B factory
Apple manufacturer to create 3K US jobs with new $10B factory
Earlier this month, Foxconn, a major supplier to Apple Inc., reiterated its intention to create 13,000 jobs in Wisconsin, but said it had slowed its pace of hiring. The company initially said it expected to employ about 5,200 people by the end of 2020; a company source said that figure now looks likely to be closer to 1,000 workers.
It is unclear when the full 13,000 workers will be hired.
But Woo, in the interview, said about three-quarters of Foxconn’s eventual jobs will be in R&D and design — what he described as “knowledge” positions — rather than blue-collar manufacturing jobs. Foxconn is formally known as Hon Hai Precision Industry Co.
Rather than manufacturing LCD panels in the United States, Woo said it would be more profitable to make them in greater China and Japan, ship them to Mexico for final assembly, and import the finished product to the United States.
He said that would represent a supply chain that fits with Foxconn’s current “fluid, good business model.”
Heavily criticized in some quarters, the Foxconn project was championed by former Wisconsin Gov. Scott Walker, a Republican who helped secure around $4 billion in tax breaks and other incentives before leaving office. Critics of the deal, including a number of Democrats, called it a corporate giveaway that would never result in the promised manufacturing jobs and posed serious environmental risks.
Modal TriggerPresident Donald Trump takes a tour of Foxconn with Foxconn chairman Terry Gou, right, and CEO of SoftBank Masayoshi Son.
President Donald Trump takes a tour of Foxconn with Foxconn chairman Terry Gou (right) and CEO of SoftBank Masayoshi Son.AP
The company’s own growth projections and employment goals suggest the taxpayer investment would take at least 25 years to recoup, according to budget think tank the Wisconsin Budget Project.
Foxconn CEO Gou plans to meet with Wisconsin’s new Democratic governor, Tony Evers, a past critic of the deal, later this year to discuss modifications of the agreement, according to the source familiar with the company’s thinking.
Evers could not be reached for comment.
Currently, to qualify for the tax credits, Foxconn must meet certain hiring and capital investment goals. It fell short of the employment goal in 2018 — hiring 178 full-time jobs rather than the 260 targeted — failing to earn a tax credit of up to $9.5 million.
The company may be prepared to walk away from future incentives if it is unable to meet Wisconsin’s job creation and capital investment requirements, according to the source familiar with the matter.
LSE/Brexit: clear and present danger
Purchase of Euroclear stake raises suspicion that it is insurance in case of catastrophe
Brexiters put the UK on a collision course with Brussels. Hours later, the London Stock Exchange buys a stake and a board seat at a big Belgian rival in financial infrastructure. It is maybe not such a coincidence.
Two years ago, the LSE’s hopes of combining forces with Deutsche Börse were blown apart by the Brexit vote. So the suspicion is that its €278.5m purchase of a near-5 per cent stake in Euroclear is insurance in case quitting the EU ends in catastrophe.
LSE denied such a motive. Euroclear is an important provider of trade settlement and custody services, Brexit or no Brexit. Managing collateral used in financial trades is a business growth opportunity when central bank bond purchases and tougher regulations are squeezing the supply of safe assets.
LSE also secured the stake at a reasonable price. Euroclear’s shareholders are mainly financial institutions — with an incentive to sell if that strengthens capital ratios watched by regulators. Euroclear is worth about €6bn, reckons UBS, based on comparisons with US peers. LSE’s deal valued it at €5.7bn.
The timing probably had much to do with internal LSE politics. US rival Intercontinental Exchange increased its Euroclear stake to 10 per cent almost a year ago. Back then, LSE was preoccupied by its search for a chief executive to replace Xavier Rolet, who quit in November 2017 amid a power struggle. But the deal at least looks defensive at a time when Brexit is straining Europe’s financial unity.
Tighter ties with a large eurozone partner can only help the LSE. It faces continental demands for euro-denominated instruments to be settled post-Brexit within the eurozone.
LSE bought Borsa Italiana in 2007. LCH, its clearing arm, has a Paris operation. Business could be diverted there. But much of the collateral held by LCH — €160bn in 2017 — is managed by Euroclear. Brexit is a leap into the great unknown. A seat on the Belgian company’s board will only help smooth the bumps.
Executive at payments giant suspected of using forged contracts
Wirecard’s internal presentation pointed to possible ‘falsification of accounts’
A senior Wirecard executive was last year suspected of using forged and backdated contracts in a string of suspicious transactions that raise questions about the integrity of the accounting at one of Europe’s rare technology success stories.
An internal presentation described potentially fraudulent money flows at Wirecard, a fintech group valued at €20bn, which last year surpassed Deutsche Bank in market capitalisation and supplanted Commerzbank in Germany’s prestigious Dax 30 index.
According to the presentation and other documents seen as part of a Financial Times investigation, the transactions were ordered by Edo Kurniawan, who is responsible for the payments group’s accounting in the Asia-Pacific region.
Titled “Project Tiger Summary” and dated May 7 2018, the presentation outlined potential violations of Singapore law, including “falsification of accounts” and “money laundering”. Mr Kurniawan remains employed in the same position of responsibility at the group’s regional head office in Singapore.
The whistleblower who briefed the FT on the document was motivated to do so, the person said, out of a concern that no action appeared to have been taken over potentially criminal acts inside a company presenting itself as a blue-chip financial institution.
Reached at his desk in Singapore on Wednesday, Mr Kurniawan said he was in a meeting. “I’m closing off the group audit at this moment,” he said, and asked for questions to be sent by email. He did not respond to emailed questions.
The news of suspect transactions rekindles questions about Wirecard’s accounting and internal controls which have dogged the company for more than a decade. Critical investors and analysts raised concerns about the group’s financial statements in 2008, 2015, and 2016, citing apparent inconsistencies. On each occasion Wirecard claimed it was subject to stock market manipulation and insisted the published figures were sound.
Markus Braun, chief executive since he helped recapitalise the company in 2002, has become a billionaire selling his vision of a cashless society. The company owns a bank and is a member of the Visa and Mastercard payment networks, distributing hundreds of millions of euros in credit and debit card transactions every day. It is a gatekeeper with responsibilities to help police flows of cash as governments try to restrict the ability of criminals and terrorists to move their money around.
Wirecard has denied any wrongdoing. It said it took all compliance and regulatory obligations extremely seriously, it had “stringent internal and external audits” and any concerns “are always thoroughly and appropriately investigated”. It also said that no material compliance findings as to the governance and accounting practices of any Wirecard subsidiary nor the personal conduct of Mr Kurniawan had resulted from its continuous internal and external audit activities.
The Project Tiger document was prepared by a Wirecard compliance officer for a presentation to the company’s four most senior executives, led by Mr Braun, on May 8. It sets out, in graphic form, how about €37m appeared to have been moved in and out of Wirecard subsidiaries and external businesses, across seven sets of complex transactions, flagged as suspicious.
Strong demand for business jets and IT services helped General Dynamics notch another forecast-beating quarter of sales and earnings growth.
The aerospace and defence company — best known for its Gulfstream planes — saw its shares jump 3 per cent in pre-market trading as it became the latest to be lifted by the bounceback in the corporate-jet maket.
After a tough couple of years for the industry, demand has taken off again thanks to provisions in President Donald Trump’s 2017 tax reform that allow buyers to deduct 100 per cent of a new or used plane’s cost on their returns.
“Our Aerospace segment successfully managed through a new model transition while achieving good order intake,” said Phebe N. Novakovic, chairman and chief executive.
Revenue in the aerospace division, which makes the business jets, jumped by more than 36 per cent during the fourth quarter to $2.7bn. For the year, sales were up 4 per cent at $8.45bn, making the unit once again the company’s biggest, accounting for over 23 per cent of total group sales.
While General Dynamics is best known as the maker of Gulfstream jets, tanks and Navy ships, it has also in recent years greatly expanded its information systems and technology business, which provides the US government with cyber security systems.
It snapped up IT and cyber security group CSRA for $9.6bn, including debt, last February. Gains from the acquisition helped the division nearly double its sales during the quarter to $2.38bn.
Elsewhere, the marine systems division — which does work for the Navy — reported an 11.5 per cent rise in revenues to $2.29bn. The combat systems unit, which builds armoured vehicles and ammunitions for the Army, and the mission systems unit, which makes secure communications networks for the military, were the main outliers, with sales dipping 0.2 per cent and 0.3 per cent, respectively, during the period.
Overall, General Dynamics took in $10.37bn in sales for the fourth quarter, a 25.4 per cent jump from the prior-year period and ahead of the $10.35bn analysts had expected.
Net income, at $909m, or $3.07 per diluted share, also topped expectations for $888m, or $2.99 a share.
Last week, Textron, the company behind Cessna jets and Bell helicopters, cited strengthening demand for business jets for a better than expected quarterly profit.