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Jan 3, 2019

The 10-Point, Today's Gude to the WSJ.

The 
Wall Street Journal.
The 
10-Point.

Today's guide to the WSJ
Good Morning. In today’s edition, Apple lowers its sales forecast, a new Congress convenes, fracking’s secret problem, and more.
 
1.
Apple cut its quarterly revenue forecast for the first time in more than 15 years, prompted by a downturn in sales of iPhones in China.
  • The surprise cut renewed concerns about waning demand for the iPhone, which generates the vast share of its revenue—and about Apple’s prospects in China. The world’s top smartphone market represents nearly 20% of company sales.
     
  • The sales slowdown is the latest sign of broader economic malaise in China, set off by trade tensions with the U.S.
 
From reporter Tripp Mickle:
This is a first in the Tim Cook era and it speaks to two issues. For Apple, it underscores the huge challenge shadowing the company for years: How do you sustain revenue growth when sales of a once-in-a-lifetime product like the iPhone stumble? And beyond Apple, this raises the stakes of the U.S.-China trade battle, which has harmed China’s economy and is now spilling over to hit a U.S. tech giant.
tripp.mickle@wsj.com
 
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2.
U.S. stocks edged higher Wednesday in a bumpy first session of the year. But stocks exposed to Apple shook markets in Asia and Europe Thursday, and futures pointed to sharply lower openings for the Dow industrials, S&P 500 and Nasdaq Composite.
  • Wednesday’s volatility reflected investor anxiety about global growth and interest rates.The Dow finished up 19 points—less than 0.1%—after sliding nearly 400 points to start the day. The S&P and Nasdaq followed similar paths to small gains.
     
  • Oil prices likewise recovered from an early decline, after new supply data suggested OPEC cuts are taking hold.
In a sign of diminishing confidence in the economy, federal-funds futures—which investors use to bet on the direction of Fed policy— on Wednesday suggested a 91% probability that interest rates will end the year at or below their current level. In November, they pointed to a 90% probability that rates would end 2019 higher.
From reporter Daniel Kruger:
The turnaround in market sentiment has surprised with its rapidity—and because the economy is expected to continue to grow, albeit slower. Fundamental economic and geopolitical factors have changed little, according to investors. The big difference is in the perception of Fed rate increases—once seen as necessary, now viewed by many as a threat to the expansion. “The pessimism doesn’t really reflect what’s going on” in the economy, said Jack Ablin, chief investment officer at Cresset Wealth Advisors. “I don’t mind being worried, but panic seems extreme.”
daniel.kruger@wsj.com
3.
President Trump and congressional leaders showed no sign of progress toward ending the partial government shutdown.
For Wednesday’s cabinet meeting, President Trump sat in front of a ‘Game of Thrones’-style campaign poster promoting new economic penalties against Iran. ‘Sanctions are coming,’ it read. PHOTO: MICHAEL REYNOLDS, EPA/SHUTTERSTOCK
Republicans at a White House meeting accused Democrats of not negotiating. Democrats, in turn, focused on asking Mr. Trump to support legislation previously backed by the GOP to open agencies that have been shut for 12 days in a dispute over funding for a border wall demanded by the president.
  • Democrats take control of the House today. California Rep. Nancy Pelosi is expected to be elected speaker with two immediate priorities: ending the shutdown and passing a package of bills changing campaign-finance rules and government-ethics law while expanding voting.
     
  • House Democrats plan to put forward bills to fund most of the shut-down part of the government through September, and separately a proposal to continue current funding through Feb. 8 for the Department of Homeland Security—which oversees the border—allowing more time to discuss the wall.
  • Senate Majority Leader Mitch McConnell (R., Ky.) said the Senate wouldn’t take up the House Democrats’ spending package, because Mr. Trump opposes it.
Mr. Trump also held a 95-minute cabinet meeting Wednesday, during which he expounded on a wide range of issues, aired grievances—including against former Defense Secretary Jim Mattis—and waved a letter from North Korean leader Kim Jong Un.
4.
Fracking has a secret problem: Thousands of shale wells drilled in the past five years are less productive than their owners forecast, raising questions about the strength and profitability of the fracking boom that turned the U.S. into an oil superpower. 
  • A Journal analysis compared estimates that top shale-oil companies gave investors with third-party projections about how much oil and gas the wells are now on track to pump over their lives.
     
  • Two-thirds of companies’ projections between 2014 and 2017 in the four hottest drilling regions appear overly optimistic, according to the analysis of some 16,000 wells operated by 29 of the biggest producers in Texas and North Dakota oil basins.
5.
Tesla said it cut prices for its entire vehicle lineup, raising concerns that demand is slowing for the Model 3, the new compact sedan that drove the electric-car maker’s record deliveries last quarter.
  • Tesla struggled last year to make enough Model 3s to meet demand. It had a record fourth quarter, but deliveries just missed expectations.
  • Tesla said the $2,000 cut—lowering the starting price for the Model 3 to $44,000—was to help make up for the phasing out of federal tax incentives starting this year. The company has been working toward offering the car at $35,000.
6.
Some colleges and universities are asking students who applied through the regular admissions process to try a binding option that would boost their chances—and help the schools lock in acceptances.
  • The schools say they are just reminding students of their choices, but some guidance counselors, students and parents say the emails are often read as pressuring students into committing to a college before they are ready.
     
  • Students who switch from regular to early decision aren’t guaranteed admission, but agree to withdraw all other applications if they do get in. That means they can’t compare different financial-aid packages.
7.
What We’re Following
An artist’s impression of the rover for China’s Chang’e-4 lunar probe, which successfully landed on the far side of the moon. CHINA NATIONAL SPACE ADMINISTRATION/EPA-EFE/REX/SHUTTERSTOCK
Lunar New Year: China successfully landed a probe on the far side of the moon, in the latest milestone for the country’s ambitious space program.
Property Play: Sears Chairman Eddie Lampert’s hedge fund is interested in bidding for the retailer’s real estate if its offer to buy the company out of bankruptcy fails.
Help Wanted: The U.S. Labor Department’s online submissions portal for temporary worker visa requests crashed after unprecedented demand in the first five minutes of New Year’s Day.
Flagrant Foul: A former assistant basketball coach at the University of Southern California pleaded guilty to conspiring to take bribes in exchange for steering top players to financial advisers and sports business managers.
8.
Trending Stories at WSJ.com
A prolonged government shutdown would likely delay billions of dollars in income-tax refunds. (Read)
The world is getting quietly, relentlessly better, writes the Journal’s Greg Ip. (Read)
A North Korean diplomat in Rome has gone into hiding along with his wife, South Korean lawmakers said, citing Seoul’s intelligence agency. (Read)
A popular weather app built by a Chinese tech conglomerate has been collecting too much user data, security experts say. (Read)
Meet the trendiest social media stars of the Big Apple: the bathrooms at a new concourse at LaGuardia Airport. (Read)
9.
What Else Were Reading
U.S.-based Roman Catholic bishops gathered yesterday for a weeklong retreat on the church sexual-abuse scandal. (Associated Press)
Thousands of low-wage workers in Chinese “censorship factories” trawl the online world for forbidden content, where even a photo of an empty chair could cause big trouble. (New York Times)
China is back in the market for U.S. soybeans after taking a holiday break as Washington and Beijing plan more trade discussions. (Bloomberg)
China’s top prosecutor said two Canadians detained after Canada arrested a Chinese technology company executive had “without a doubt” violated the law. (Reuters)
10.
Today’s Question and Answer
In response to our question about some pharmaceuticals companies raising the prices of drugs:
Bridget Barry in Kansas wrote: “The market for life-saving, life-extending and life-improving drugs feels different to me than the market for handbags, plastic cutlery or soccer balls. More morally laden. Empirically, maybe it’s not. But I have a gut feeling it’s different. On an emotional level these hikes are sad and exploitative. Some (few) folks will make more money that they’ll invest and spend on second homes while others will struggle even more to afford maintenance meds.”
Peter Hoagland from Virginia said: “Bringing down drug prices was one of President Trump’s campaign promises. Turns out to be more fake news from the White House.”
Dave Hickie of Arizona shared: “Over the years the pharmaceutical industry has merged, swapped drugs, rationalized production to where we now have a pharmamonopoly raising drug prices at will! Both political parties won’t touch them, as the lobbying and campaign money is so effective. Did anything substantial happen with the EpiPen hearings? No. Will we see the same headline next year? 
 
The 10-Point was the name given to the news column that runs on the front page of The Wall Street Journal.