Download Report

Market Snapshot*
DJIA
Nasdaq
Tuesday, April 28, 2015
Most U.S. stocks rose despite weakness
in the biotechnology sector. "In a market
that's been up huge, it's taking a
breather," said Ian Winer, head of equities trading at Wedbush Securities. Last
week, the Nasdaq Composite advanced
to a record close for the first time in 15
years, and on Friday, strong corporate
results in the technology sector catapulted both the Nasdaq and the S&P 500
into record territory.
Treasurys
U.S. government bonds sold off on
Tuesday, sending the yield on the benchmark 10-year note to a one-month high,
as the market was hurt by a flurry of new
bond sales from the public and private
sectors. In late-afternoon trading, the
yield on the benchmark 10-year Treasury
note was 1.975%, the highest closing
level since March 26, compared with
1.923% on Monday.
Forex
Wednesday's Federal Reserve statement
kept dollar bulls at bay as the central
bank was thought likely to acknowledge
disappointing first-quarter growth and
heightened uncertainty about the state of
the economy. The euro touched a 3week high against the dollar.
-4.81
2114.76
+5.84
10-Year
1.9745%
-16/32
30-Year
2.6707%
-1 7/32
Euro
$1.09735
+0.0086
$57.06
+0.07
Nymex Crude
*preliminary values subject to adjustments
Tomorrow’s Headlines
SEC Investigates If BofA Broke
Customer-Protection Rules
The Securities and Exchange Commission is investigating whether Bank of
America Corp. broke rules designed to safeguard client accounts, potentially
putting retail-brokerage funds at risk in order to generate more profits, according to people familiar with the inquiry.
For at least three years, the bank used large, complex trades and loans to
save tens of millions of dollars a year in funding costs and to free up billions
of dollars in cash and securities for trading that Bank of America otherwise
would have needed to keep off-limits, these people said.
Now, the SEC is investigating whether the bank’s unusual strategy violated
customer-protection rules and whether the bank misled regulators about what
it was doing, these people said.
Bank of America, the second-largest U.S. lender by assets, stopped the strategy in mid-2012, amid internal debate about its potential regulatory and other
risks, they said. The trades took place in Bank of America’s Merrill Lynch unit,
which it bought in 2009.
continued on page 2
Tomorrow’s Calendar
7:00 a.m.
8:30 a.m.
Commodities
U.S. oil prices ended Tuesday with a
modest gain, after a brief spike following
the news that Iran seized a Western
cargo ship in the Strait of Hormuz. Light,
sweet crude for June delivery rose 7
cents, or 0.1%, to $57.06 a barrel on the
New York Mercantile Exchange. Brent
crude, the global benchmark, fell 19
cents, or 0.3%, to $64.64 a barrel on the
ICE Futures Europe exchange.
+72.17
5055.42
S&P 500
Source: SIX Telekurs, ICAP plc
Stocks
18110.14
10:00 a.m.
10:00 a.m.
10:30 a.m.
2:00 p.m.
04/24 MBA Weekly Mortgage Applications Survey Market
Composite Index (previous 458.4) Market Composite Index Cur
Chg (previous +2.3%) Purchase Index (S.A.) (previous 205.4)
Purchase Index (S.A.) Cur Chg (previous +5%) Refinance Index
(previous 1920.1) Refinance Index Cur Chg (previous +0.6%)
Q1 Advance estimate GDP GDP (expected +1%) Chain-Weighted
Price Index (expected +0.4%) PCE Price index (previous -0.4%)
Purchase Price Index (previous -0.1%) Real Final Sales
(previous +2.3%) Core PCE Price index (Ex Food/Energy)
(previous +1.1%) Personal Consumption (previous +4.4%)
Mar Pending Home Sales Index Current (previous 106.9) MoM Pct
Change (Current Period) (expected +1%) YoY Pct Change
(Current Period) (previous +12%)
Mar Metropolitan Area Employment & Unemployment
04/24 EIA Weekly Petroleum Status Report Crude Oil Stocks
(previous 489.M) Crude Oil Stocks (Net Change) (previous +5.32M)
Gasoline Stocks (previous 225.74M) Gasoline Stocks (Net Change)
(previous -2.14M) Distillate Stocks (previous 129.34M) Distillate
Stocks (Net Change) (previous +0.4M) Refinery Usage
(previous 91.2%) Total Products Supplied (previous 19.14M) Total
Products Supplied (Net Change) (previous +0.14M)
U.S. interest rate decision Federal Funds Rate Federal Funds
Rate Change (Pts) Discount Rate Discount Rate Change
FOMC Vote For Action (previous 10) FOMC Vote Against Action
(previous 0) High Range Value (Current Period) Low Range Value
Federal Funds Rate Change High Range (previous 0.25) Federal
Funds Rate Change Low Range (previous 0)
Copyright © Dow Jones & Company, Inc. All Rights Reserved.
www.dowjones.com
page 1
Tuesday, April 28, 2015 4 p.m. ET
Tomorrow’s Headlines
Earnings beat expectations, though revenue fell short
because of the stronger dollar and lower fuel surcharges.
continued
“These transactions, which began at Merrill Lynch before
the acquisition by Bank of America, received extensive
review and approval,” a spokeswoman for the Charlotte,
N.C.-based bank said. “The firm fully complied with the
rules designed to safeguard client funds.”
US Sends Ship, Planes as Iranians
Seize Commercial Ship
A U.S. Navy destroyer was rushed to the area of a confrontation Tuesday between Iranian warships and a
Marshall Islands-flagged cargo ship in the Strait of Hormuz
amid increased tensions in the region over the simmering
conflict in Yemen, the Pentagon said.
The USS Farragut sped to the scene after Iranian sailors
fired warning shots across the bow of the M/V Maersk
Tigris that was in Iranian waters, said Col. Steve Warren, a
Pentagon spokesman. The warning shots were fired after
the cargo ship refused Iranian orders to head further into
Iranian waters, Col. Warren said.
After the Iranian ship fired the warning shots, the cargo ship
changed course and complied with the order, Col. Warren
said. The ship was directed to proceed to Larak Island by
Iranian vessels, he said. Iranian sailors from the Iranian
vessel then boarded the ship. The ship is currently under
the control of Iranian forces, officials said.
In response to the confrontation, the U.S. Navy sent the
Farragut and U.S. planes to keep watch on the confrontation.
The U.S. is observing the Maersk Tigris with a Navy maritime patrol and reconnaissance plane, Col. Warren said.
Consumer Confidence Falls in April
Chief Executive David Abney said the company is now “on
track” to achieve its long-term financial targets. For the full
year, UPS reaffirmed its guidance for per-share earnings
between $5.05 and $5.30.
Separately, the company said today that Chief Financial
Officer Kurt Kuehn, 60, will be retiring on July 1. He will be
succeeded by Richard Peretz, 53, who is currently the corporate controller and treasurer.
Last quarter, the shipping giant surprised Wall Street by
announcing that preparations to handle the holiday rush
cost it $200 million more than expected. On UPS’s last
quarterly earnings call, executives said they would increase
holiday rates by tacking on peak surcharges for customers
shipping to residential addresses.
Ukraine Leaders Fear Russian Attack,
Says EU’s Juncker
Ukraine’s leaders believe Russia is preparing a broad
attack on their country, European Commission President
Jean-Claude Juncker said on Tuesday, as he returned from
a summit in Kiev that coincided with fresh violence in
Ukraine’s east.
In an interview with a small group of reporters in his flight
back from Kiev, Mr. Juncker said he had advised Ukrainian
President Petro Poroshenko to ease tensions by avoiding
comments on Ukraine’s possible bid to join the North
Atlantic Treaty Organization. His advice, he acknowledged,
received short shrift.
In the last couple of days, the Organization for Security and
Cooperation in Europe has warned of an uptick in violence
in eastern Ukraine where a Feb. 12 cease-fire, signed in
the Belarus city of Minsk, was supposed to bring fighting
between Kiev and pro-Russian separatists to an end.
Consumers are feeling less upbeat about the economy this
month amid a slowdown in job creation and worries about
the near-term outlook.
Cablevision to Offer Hulu
to Its Customers
The Conference Board, a private research group, said
Tuesday its index of consumer confidence decreased to
95.2 in April from a revised 101.4 in March, which had been
first reported as 101.3. Economists surveyed by The Wall
Street Journal had forecast a level of 102.5 for this month.
Cablevision Systems Corp. reached a deal with streaming
video service Hulu to offer the service’s catalog of ondemand shows and movies to its customers, becoming the
first cable or satellite TV provider to strike such a partnership.
The present situation index, a gauge of consumers’ assessment of current economic conditions, fell to 106.8 from a
revised 109.5, first set at 109.1. And consumer expectations for economic activity over the next six months
dropped to 87.5 from an unrevised 96.0.
UPS Posts Higher Earnings;
CFO To Retire
United Parcel Service Inc. said Tuesday that first-quarter
earnings rose 14%, boosted by new pricing initiatives and
strong growth in its domestic segment.
“There is a new generation of consumers who access video
through the Internet, and whatever their preference,
Cablevision will facilitate a great content experience,” said
Kristin Dolan, chief operating officer of Cablevision, in a
statement.
Hulu’s $7.99-a-month Plus subscription service, which is
battling streaming giant Netflix and Amazon.com Inc.’s
Prime Instant Video for customers, could benefit from the
marketing boost by Cablevision. “Even with the rapid
growth in streaming, there is a huge audience that consumes television through their cable provider, and we want
to be there for them too,” said Tim Connolly, senior vice
president of distribution at Hulu.
Copyright © Dow Jones & Company, Inc. All Rights Reserved.
www.dowjones.com
continued on page 3
page 2
Tuesday, April 28, 2015 4 p.m. ET
Tomorrow’s Headlines
observers, the results indicate that oil companies may be able
to cope with low prices better than many investors expected.
continued
The companies didn’t say whether Hulu would be made available as an app on Cablevision set-top boxes. Cablevision
said it will provide pricing and other details in the “near future.”
Hulu has been seeking such tie-ups with pay TV providers
since the latter half of 2013, after its media company owners decided not to sell the company. Hulu is owned by Walt
Disney Co., 21st Century Fox and Comcast Corp. (Fox and
The Wall Street Journal were part of the same company
until mid-2013.)
Ford Profit Down on
International Markets
Ford Motor Co. reported net income down 7% in the first
quarter as better-than-expected North American profits
were dented by losses in Europe and South America, which
continue to be a drag on the bottom line.
The Dearborn, Mich. auto maker earned $924 million, or 23
cents a share, in net profit for the first quarter, down from
the $989 million, or 24 cents a share, booked in the same
year-ago period. The company’s pretax operating profit of
$1.4 billion, or 23 cents a share, missed Wall Street expectations by 3 cents.
The performance represents a muted start for new Chief
Executive Mark Fields in 2015. The company said the timing of important vehicle launches and capacity additions
should generate more earnings momentum over the second half of the year, allowing the auto maker to meet its targeted operating-profit range of $8.5 billion to $9.5 billion.
Sales totaled $33.9 billion for the quarter, down 6% from a
year earlier. Revenue fell in each of the company’s five
regions as the strong dollar, product changeovers and dismal conditions in South America hit the top line.
BP, Total Report Sharply Lower Profits
BP PLC of the U.K. and Total SA of France each reported
sharply lower quarterly profits on Tuesday while providing
glimpses into how the world’s largest oil companies are
weathering the depths of an oil-price crash.
BP’s version of net income plunged by 40% from a year earlier and its cash flow nose-dived more than 75%, while Total’s
net profit fell by 20%. Both companies saw their revenues
from oil sales plummet as crude traded for about $54 a barrel in the first quarter of 2015, half its price a year earlier.
“The dire earnings collapse is not going to be as bad as
generally anticipated,” said Brian Youngberg, an analyst at
Edward Jones.
Citi Holders OK Pay Packages,
Proxy-Access Proposal
Citigroup Inc. shareholders on Tuesday approved the pay
packages of the bank’s top executives, a vote of confidence
for a bank that is trying to move forward after a tough 2014.
However, the approval rating slipped slightly from a year
ago. About 84% of investors voted in favor of CEO Michael
Corbat’s $13 million pay package at the annual shareholder
meeting, according to preliminary calculations from the
bank. About 85% voted in favor last year.
Pfizer Trims Outlook on Stronger Dollar
Pfizer Inc. trimmed its full-year outlook on Tuesday amid a
stronger U.S. dollar and weaker euro, though the pharmaceutical giant posted better-than-expected results in the first
quarter on the strength of its new products.
For the year, the company now expects per-share earnings
between $1.95 and $2.05, down from its previous guidance
of $2 to $2.10. It lowered its revenue forecast to $44 billion
to $46 billion from its previous forecast of $44.5 billion to
$46.5 billion.
Pfizer has had to combat a wave of patent expirations
weighing on sales, while a stronger dollar also has hurt
results. The company has forged development partnerships
and sought to make deals in a busy time for pharmaceutical mergers and acquisitions.
In February, Pfizer agreed to buy Hospira Inc., a maker of
injectable drugs and infusion technologies, for about $16
billion. Hospira Inc. on Tuesday reported sharply betterthan-expected profit in its first quarter as its injectable drugs
continued to drive growth.
MasterCard CEO’s 2014 Pay Increases
MasterCard Inc. Chief Executive Ajay Banga received
$13.4 million in compensation in 2014, an increase of 8.4%
from a year earlier.
Mr. Banga’s base salary inched up to $1.06 million from $1
million in 2013. The biggest increase came in his non-equity incentive plan compensation, which grew to $3.58 million
from $2.54 million in 2013.
In a sign of how bad things have been for big oil companies, those numbers were seen as being better than
expected. Three months ago, Total reported a $5.7 billion
loss for the fourth quarter of 2014, while BP’s losses totaled
almost $1 billion.
Mr. Banga, a former Citigroup Inc. executive, has led the
Purchase, N.Y.-based payments network since 2010.
This time around, BP and Total—the world’s fourth- and fifthlargest independent oil companies by market value—were
helped by increased production, deep cost cuts and healthy
profits from their refining businesses. To some industry
Although consumers are saving money at the gasoline
pump due to lower oil prices, Mr. Banga has said that so far
there is no indication that they are funneling those savings
into other discretionary spending.
Mr. Banga said earlier this year that MasterCard is seeing
good credit trends in the U.S. as banks and consumers
move with caution during the recovery.
Copyright © Dow Jones & Company, Inc. All Rights Reserved.
www.dowjones.com
page 3
Tuesday, April 28, 2015 4 p.m. ET
Copyright Dow Jones & Co., Inc.
Talking Points
Tomorrow's News Today is made
available as a complimentary service
to Dow Jones News Service paying
subscribers. No further redistribution is
permitted without written permission
from Dow Jones. Tomorrow’s News
Today is intended to provide factual
information, but its accuracy cannot
be guaranteed. Dow Jones is not a
registered investment adviser, and
under no circumstances shall any of
the information provided be construed
as a buy or sell recommendation or
investment advice of any kind.
Auto Giants Get Savvy In China
Want to send a co-branded daily
version to your valued clients?
Dow Jones offers subscribing firms the
opportunity to co-brand Tomorrow's
News Today for redistribution to their
clients. If your firm is interested in
co-branding, please contact us at
[email protected] or
1.800.223.2274.
As the demand boom for cars in China cools, global auto makers are looking to
impart to their dealers skills common in more mature markets: salesmanship and
after-sales service.
Nissan Motor Co., whose passenger car sales rose a disappointing 2.7% in
2014, late last year parachuted in a U.S.-based expert to conduct a detailed survey of its Chinese dealer network. The Japanese auto maker also introduced a
dealership advisory system, common in the U.S. and some European countries,
to increase communication.
Foreign auto makers are grappling with erosion in China’s car-buying binge:
Chinese passenger-car sales growth is expected to slow to 8% this year to 21.3
million vehicles, compared with a 9.9% gain last year, according to an official estimate. Consultancy IHS Automotive forecast growth for this year and next at 8%.
When China’s market was growing rapidly, selling cars was easy, auto executives and dealers say. Global auto makers tended to have the upper hand over
dealers, who needed more cars to sell. But dealers now complain their profits
are being hit by excess inventory, and some say the car makers’ sales targets
are unrealistic. According to the China Automobile Dealers Association, dealers
across China had inventories of 53 days of sales on average in March, exceeding what it calls the healthy level of no more than 45 days.
The most glaring case of dealer malaise recently was for luxury-car maker BMW
AG. Some of its dealers aired their grievances in the media, saying the German
company’s sales targets were too aggressive. BMW has said it is in regular dialogue with its dealers and regularly readjusts its targets to reflect such discussions.
Luxury-car brand Jaguar Land Rover, whose China sales growth of 28% for 2014
was down from 30% the prior year, brought a group of Chinese dealers to the U.K.
last year to show them how dealerships operate there. General Motors Co. said it is
also working with its dealers to help develop business beyond new car sales. GM’s
first-quarter passenger car sales rose 2.2%, down from 13% growth a year earlier.
Honda Motor Co.’s car sales in China rose 4.1% in 2014, exceeding 2.6%
growth a year earlier, but its first-quarter sales this year were up only 0.6%. The
company is considering introducing a dealer advisory in China system similar to
Nissan’s, said Seiji Kuraishi, head of Honda’s Chinese operations.
“It has to be a win-win relationship for both sides,” said Yasuhide Mizuno, an
operating officer for Honda and president of Guangqi Honda, one of the
Japanese auto maker’s joint ventures with a Chinese partner.
Dealers also need more of a marketing and after-sales service strategy than
they had before, normal practice in markets such as Japan and the U.S. but not
necessarily the case in China until recently, Mr. Mizuno said last week at the
Shanghai auto show.
Jaguar Land Rover’s sales took a beating during the first quarter following criticism on China’s government-controlled television broadcaster over faulty gearboxes. The unit of Tata Motors Ltd. didn’t disclose its sales for the period, but
U.S.-based researcher JL Warren Capital said in the first three months of this
year retail sales for the brand fell 20% to 20,526 vehicles.
Bob Grace, China head of Jaguar Land Rover, said some Chinese dealers have
seen the writing on the wall and are seeking profit sources beyond new-car
sales, such as after-sales services. “At the moment they have got most of their
eggs in one basket, which is new-car profitability.”
Nissan was a latecomer to China, but its vehicle sales there grew more than sixfold over the decade ended 2014, making it the best-selling Japanese car maker
in the country. In 2011 the company, which manufactures cars with joint-venture
partner Dongfeng Motor Group Co., had planned to raise its China market share
to 10% from 6% over six years. But Nissan later suffered from a Sino-Japanese
political feud in 2012 that led to vandalism of Japanese cars in China.
continued on page 5
Copyright © Dow Jones & Company, Inc. All Rights Reserved.
www.dowjones.com
page 4
Tuesday, April 28, 2015 4 p.m. ET
Talking Points
doors are open to any candidate who is serious about
transforming our economy with high and rising wages,” Mr.
Trumka said.
continued
Its 2014 market share fell to 5.2%, based on company sales
figures provided by Nissan and overall market sales from
the Chinese auto lobby. Its performance deterioration in
China prompted Chief Executive Carlos Ghosn in December
to declare the company was in “crisis mode” there.
One of Nissan’s main ways of tackling the problem is the
adoption in China last year of the dealership advisory body,
which exists in the U.S. and some European countries.
AFL CIO Blasts Trade Deal
The country’s most powerful labor leader warned
Democratic candidates Tuesday that they can’t take unions’
support for granted and must push to raise wages while
opposing a contentious trade pact backed by President
Barack Obama.
AFL-CIO President Richard Trumka, in remarks at the
union federation’s Washington headquarters, voiced skepticism about Democrats’ commitment to working-class
Americans, took aim at President Obama and made veiled
threats at Hillary Clinton, without naming her.
“It’s early, and although many candidates are already in the
race, the field remains open. And the labor movement’s
“We’re tired of scared politicians who won’t stand up for
what’s right,” he said, noting a union poll after the 2014 election that found about a third of working-class voters “couldn’t
see any significant difference between the two parties.”
Eight in 10 Democrats and Republicans surveyed in the
same poll, he said, saw both parties as doing “far too much
for Wall Street and not nearly enough to help average folks.”
He credited President Obama with spending “much of his
presidency” digging the U.S. out of a deep crisis, but said
persistently flat wages would be worsened by the TransPacific Partnership trade deal Mr. Obama is pushing in
Congress.
Mr. Trumka said that over nearly two generations, national
leaders of both political parties have “either taken steps that
worsened inequality or fiddled around the edges’ trying to
raise wages in an economy built to lower them.
Dozens of major labor unions earlier this year agreed to
freeze campaign contributions to Democratic and
Republican members of Congress to pressure them to
oppose the fast-track trade legislation sought by Mr.
Obama. The move was part of the unions’ campaign
against the Pacific trade deal, which the Obama administration is negotiating with Japan, Australia, Vietnam and eight
other countries.
Copyright © Dow Jones & Company, Inc. All Rights Reserved.
www.dowjones.com
page 5