U.S. stocks fell Thursday morning, as disappointing earnings compounded with lingering global concerns as China worked to contain a potentially deadly disease that has so far sickened hundreds.
1:35 p.m. ET: US fines ex-Wells Fargo CEO Stumpf $17.5 million
US regulators announced actions against eight former Wells Fargo executives over a 2016 scandal, Bloomberg reports. The US Office of the Comptroller of the Currency (OCC) fined former CEO John Stumpf $17.5 million and seeks to fine former head of community banking Carrie Tolstedt $25 million. Stumpf is also barred from working in banking.
The 2016 scandal revealed Wells Fargo incentivized its employees to open millions of bank accounts without account holders’ permission.
1:20 p.m. ET: Bernie Sanders ‘is stronger than people think’
A roundtable of prominent Wall Street investors have yielded some interesting thoughts about the economy and the 2020 race. The group, led by billionaire bond investor (and DoubleLine’s founder) Jeffrey Gundlach, seem to agree that people are underestimating Bernie Sanders ‘s chances in 2020:
While investors would be “okay with” former Vice President Joe Biden, they shouldn’t count out a victory by Vermont Senator Bernie Sanders .
“There is a lot of political risk in this market more than people are willing to acknowledge,” Bianco added.
DoubleLine’s founder Jeffrey Gundlach said he thinks there will be “a moment where the market has to try on the idea of Bernie for real,” now that Massachusetts Senator Elizabeth Warren appears to have lost momentum.
Investors “never believed in Elizabeth Warren. We saw that. She was an ascendant for a brief moment, perhaps the frontrunner. Nothing happened,” he said.
“But Bernie, I believe, is stronger than people think, and [the] market is going to have to deal with that,” Gundlach added.
12:36 p.m. ET: What are the chances Trump is removed from office?
Whether the U.S. Senate votes to effectively end President Donald Trump’s presidency early is anyone’s guess, but betting markets see that outcome as nearly infinitesimal. According to political betting site Smarkets:
The chance of Trump being convicted in his impeachment trial seems all but impossible at just 1%, and subsequently he looks dead set to serve a full term in office (93%). The more interesting market regarding the trial is whether any Republican senators will vote to remove the President. Latest prices suggest that there is a 42% chance of at least one doing so.
On the Democratic side, Smarkets sees a horse race developing between former Vice President Joe Biden (34% chance to win the nomination) and Vermont Senator Bernie Sanders not far behind (32%, up from 24% last night)
9:36 a.m. ET: Stocks open lower after batch of weak earnings, coronavirus fears
Stock futures reversed lower in early trading and ultimately opened to the downside after a weak set of earnings results from airlines and consumer companies weighed.
In China, fears over the spread of a potentially deadly coronavirus and ensuing cancelations of Lunar New Year celebrations in Beijing, Wuhan, Zhejiang and Macau led the Shanghai composite index to its worst last day of the Lunar New Year in at least 30 years.
Here’s where U.S. markets opened Thursday morning:
S&P 500 (^GSPC): -0.52% or -17.28 points to 3,304.47
Dow (^DJI): -0.64% or -187.84 points to 28,998.43
Nasdaq (^IXIC): -0.5% or -45.88 points to 9,335.37
Crude oil (CL=F): -2.86% or -$1.62 to $55.12 a barrel
Gold (GC=F): +0.03% or +$0.40 to $1,557.10 per ounce
9:03 a.m. ET: Procter & Gamble shares fall on weak quarterly sales
Consumer giant Procter & Gamble (PG) posted disappointing organic sales results for its fiscal second quarter, overshadowing a more upbeat full-year outlook.
The Dow component said overall organic sales grew 5% over last year in the last three months of 2019, missing expectations for growth of 5.6%. The company’s beauty, grooming, health-care and fabric and home care segments all met or beat organic sales expectations.
The top-line miss was driven by weakness in Procter & Gamble’s company’s baby, feminine and family care products segment, with organic sales rising just 1% during the quarter versus a 1.5% increase expected. Competitor Kimberly-Clark (KMB), which houses brands including Kleenex and Huggies, also pointed to weakness in its baby and child-care segment in results Thursday morning, noting that volumes fell by mid-single digits in the quarter.
Procter & Gamble raised full-year organic revenue guidance to a band of between a 4-5% increase, from the 3-5% rise seen previously. It said it expects core earnings per share will grow between 8-11%, versus the 5-10% seen before.
Shares of Procter & Gamble fell 1.8% in early trading.
8:45 a.m. ET: U.S. airlines hit by extended Boeing 737 Max groundings
Southwest (LUV) and American Airlines (AAL) each cited the extended groundings of Boeing’s 737 Max (BA) as creating increased costs and additional operating disruptions through the end of last year and into the start of this year. Boeing said earlier this week it did not expect the aircraft to get back into the air until at least mid-year.
Southwest, which had been the largest domestic operator of the 737 Max, saw fourth-quarter net income fall 21% to $514 million over last year, with full-year costs up 7.7% due in large part to scheduling disruptions stemming from the absence of the globally grounded aircraft. The company said it expects costs per available seat mile (CASM) To rose by 6-8% in the current quarter.
American Airlines beat consensus expectations on the top and bottom lines and saw net income grow in the fourth quarter over last year, but was also not immune to impacts from the 737 Max groundings. The company said it canceled 10,000 flights in the fourth quarter alone due to the absence of the aircraft.
8:30 a.m. ET: Initial jobless claims rise less than expected
Weekly unemployment claims rose less than expected for the week ended January 18, according to the Labor Department’s weekly update.
New jobless claims rose by 6,000 to 211,000 during the week, short of the increase to 214 expected, according to Bloomberg consensus data. This brought the four-week moving average – a less volatile measure of underlying unemployment trends in the labor market – down by 3,250 to 213,250.
Continuing unemployment claims fell more than expected for the week ended January 11. These decreased from the prior week’s 1.768 million to 1.731 million, versus consensus expectations for a decrease to just 1.756 million.
7:04 a.m. ET: Stock futures mostly flat as China expands travel restrictions to contain coronavirus
U.S. stock futures were little changed Thursday morning after Chinese health officials expanded travel restrictions to try and contain a potentially deadly coronavirus.
Chinese officials on Thursday halted travel to and from the city of Wuhan, the apparent region of origination for the SARs-like virus. The travel restriction comes as hundreds of millions of Chinese citizens gear up to gravel for the Lunar New Year holiday this week.
The equity market reaction to the rapidly shifting coronavirus developments was mostly consolidated among Asian stocks, with mainland China’s Shenzhen composite down 3.5%. Crude oil prices also fell by more than 1% amid fears that the disease could impact global growth.
The death toll from the virus was 17 as of Wednesday, and more than 540 cases had been confirmed.
In the U.S., investors digested the latest batch of corporate earnings results, including those from Southwest Airlines (LUV) and Procter and Gamble (PG). Economic data including weekly initial jobless claims and the Conference Board’s Leading Economic Index are due for release later this morning.
Here were the main moves during the pre-market session, as of 7:14 a.m. ET:
S&P futures (ES=F): 3,319.5, down 0.25 points or 0.01%
Dow futures (YM=F): 29,121, down 19 points or 0.07%
Nasdaq futures (NQ=F): 9,200.5, up 4.75 points or 0.05%
Crude oil (CL=F): $55.79 per barrel, down $0.95 or 1.67%
Gold (GC=F): $1,553.20 per ounce, down $3.50 or 0.22%
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