Global Market and Economic Updates
The Dow and S&P 500 hit new records yesterday, closing at 18,209 and 2,115, respectively, as investors attempted to infer a subtle change in emphasis from Fed Chair Janet Yellen’s testimony. Taking the word “patient” out of the FOMC’s policy statement, Yellen announced that the policymaking body would now decide on rates “on a meeting-by-meeting basis.” However, U.S. futures are inching lower prior to Yellen’s second day of semi-annual congressional testimony, where she will appear in front of the House Financial Services Committee.
China’s factory sector edged up to a four-month high in February but export orders shrank at their fastest rate in 20 months, painting a gloomy outlook that argues for more policy support. The flash HSBC/Markit PMI crept up to 50.1 (just above contraction) in February, while the new export orders sub-index dropped three points to 47.1, the sharpest rate of contraction since June 2013. Meanwhile, Hong Kong’s GDP was reported to have slowed to 2.3% in 2014 and weakened to 0.4% in the fourth quarter as pro-democracy protests froze parts of the city.
Greek stocks and bonds surged yesterday, with Athens’ main stock exchange closing almost 10% higher on the day after eurozone financial ministers approved a four-month extension to the country’s bailout program. Although the list of proposals were accepted, the ministers warned that the reforms must be expanded in detail before new bailout funding would be released. Athens’ ATG stock index +0.1%.
Southwest Airlines took 128 of its jets out of service late Tuesday, or roughly one-fifth of its fleet, after informing federal regulators that it “inadvertently omitted” required maintenance checks on the planes’ backup hydraulic systems. Dozens of flights were immediately canceled as a result, while officials from Southwest (NYSE:LUV) and the FAA discussed plans to complete the maintenance checks and return the planes to service.
The Irish government rebuffed an attempt by IAG (OTCPK:ICAGY), the owner of British Airways and Iberia, to buy Aer Lingus (OTC:AIRXY) yesterday, saying it needed more assurances on jobs and growth prospects before it would consider selling its 25% stake in the carrier. The rejection came despite support for a sale from Aer Lingus’ board and industry lobby groups, and is a blow to Dublin-born IAG chief Willie Walsh, who previously served as CEO of the Irish airline.
In yet another foreign currency scandal, Reuters reports that BNY Mellon (NYSE:BK) is in settlement talks with the DOJ and New York AG over claims that it defrauded clients in foreign exchange transactions. The bank faces several lawsuits, including class actions, stemming from allegations that it misled clients about how it determined currency exchange rates for certain transactions.
HSBC chairman Douglas Flint and chief executive Stuart Gulliver will face a grilling by MPs on the U.K.’s Treasury Select Committee of lawmakers today over tax evasion at its Swiss subsidiary, the bank’s underlying performance and whether HSBC (NYSE:HSBC) should be broken up. Adding to the pressure before the hearing are the newly released tax arrangement details of Gulliver, who uses a Swiss bank account to hold his bonus payments.
Announcing its fourth downgrade to the state-run oil company in five months, Moody’s has cut Petrobras’ (NYSE:PBR) ratings two steps into junk, and placed the new Ba2 ratings on review for downgrade. The ratings agency said the downgrade reflects increasing concern about the corruption investigations and liquidity pressures that might result from the delay of its audited financial statements. PBR -1.5% premarket.
In a new S-1, GoDaddy declared plans to list on the NYSE under the symbol “GDDY” and announced IPO underwriters including Morgan Stanley, JPMorgan, Citi and others. In November, the NY Post reported GoDaddy was seeking a $4.5B IPO valuation. Revenue for 2014 at the Web hosting/domain name services provider came in at $1.39B (+23% Y/Y), while net loss was $143.3M. Bookings (+20% to $1.68B) were well above revenue.
Hewlett-Packard reported flat or lower quarterly revenue at all its operating units yesterday, and forecast earnings below analysts’ expectations due to the strong U.S. dollar. Revenue as a whole dropped 4.7% to $26.83B in the first quarter ended Jan. 31, with revenue from the company’s enterprise services unit falling 11%. HP (NYSE:HPQ) expects FQ2 EPS of $0.84-$0.88 vs. a $0.92 consensus and FY15 EPS of $3.53-$3.73 vs. a $3.95 consensus. HPQ -7%premarket.
DreamWorks Animation swung to a loss in the fourth quarter even with advance writedowns on films The Penguins of Madagascar and Mr. Peabody and Sherman. Net loss came in at $263.2M, or $3.08 per share, compared with a profit of $17.2M, or $0.20 per share, a year earlier. The results also featured the impact of its plans for heavy layoffs; DreamWorks Animation took a $210.1M pre-tax charge associated with restructuring. DWA -8.7%premarket.
Apple has been ordered to pay $532.9M after a federal jury found its iTunes software infringed three of Smartflash’s patents that relate to accessing and storing downloaded songs, videos and games. Apple (NASDAQ:AAPL) tried to avoid a trial, which was filed last May, by having the lawsuit thrown out, but this month U.S. District Judge Rodney Gilstrap ruled that Smartflash’s technology was not too basic to deserve the patents.
Rio Tinto will not be taken over by rival Glencore (OTCPK:GLNCY) because there is no value in it for shareholders and regulators will never let it happen, announced Rio Tinto chief executive Sam Walsh. Rio (NYSE:RIO) snubbed a takeover approach from Glencore last August to create a $160B mining and trading giant, but Glencore never ruled out making a fresh attempt. Under U.K. rules, it could return with an offer from April onward.
Anthem, which earlier this month reported that it was hit by a massive cyberbreach, has concluded that the personal information of 78.8M customers was exposed in the attack, including 8.8M-18.8M people who were members of independently run Blue Cross Blue Shield plans. Anthem (NYSE:ANTM) still believes the hacked data was restricted to birthdays and Social Security numbers, among other data, but doesn’t appear to have involved medical information or financial details.
As expected, President Obama swiftly vetoed a bill approving TransCanada’s (NYSE:TRP) Keystone XL oil pipeline, leaving the long-debated project in limbo for another indefinite period. Immediately after receiving the veto message, Senate Majority Leader Mitch McConnell, countered by announcing the Republican-led chamber would attempt to override it by March 3. Obama offered no indication of whether he’ll eventually issue a permit for the pipeline, but a White House spokesman said it’s “certainly possible” after the State Department review.