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Wall Street Falls on Weak Morgan Stanley Results, Trade Concerns

Wall Street fell Thursday as weak numbers from Morgan Stanley and worry over trade relations between the U.S. and China weighed on investors. The S&P 500 fell 8 points, or 0.33%, as of 9:30 AM ET (14:30 GMT), while the Dow decreased 113 points, or 0.47%, and the tech-heavy Nasdaq Composite lost 22 points, or 0.32%. U.S. lawmakers introduced bills on Wednesday that would ban the sale of U.S. chips to Huawei and other Chinese companies that violate U.S. sanctions or export control laws. Investors are worried the news could put trade talks between the two largest economies in the world in jeopardy. Meanwhile, Morgan Stanley tumbled 4% after it posted a steep decline in its fourth quarter profit, citing volatility in the markets. Chipmakers were also down, as Taiwan Semiconductor Manufacturing Co (TSMC) forecast its sharpest quarterly revenue fall in a decade. Its customer Apple declined 0.6% over worries of declining demand for smartphones. Advanced Micro Devices slumped 3.3% and Micron fell 2.5%. Netflix fell 0.5% ahead of its quarterly results after the closing bell. The streaming site raised subscription rates in U.S. earlier this week and is expected to report an increase in subscribers. Elsewhere Pacific Gas & Electric continued to be volatile, jumping 16.5%, while Boeing inched up 0.3%. In commodities, gold futures fell 0.2% to $1,290.95 a troy ounce and crude oil decreased 1.3% to $51.62 a barrel. The U.S. dollar index, which measures the greenback against a basket of six major currencies, rose 0.09% to 95.76.

Hedge fund pushes for share buyback at Gulfport to boost stock price

Firefly Value Partners said on Thursday that it wants Gulfport Energy Corp. to buy back $500 million worth of shares, an action the hedge fund argues could help double the stock price of the natural gas and oil company. The New York-based hedge fund, in a public letter, criticized how Oklahoma City-based Gulfport, which has a market capitalization of $1.5 billion, has allocated capital and complained that current board members may not be committed to pushing for improvements. "The current board does not seem up to the task of fixing the company's capital allocation strategy and regaining investors' trust," wrote Firefly, which owns 8.1 percent of the company. Its prescription for change begins with a call for share repurchases and a moratorium on issuing more shares, a practice that it says has diluted the company's value over the last years. The hedge fund also wrote that it may be time to add a shareholder to the board who could energize the group to push for these changes. "We propose an action plan that we believe allows Gulfport to create at least $9 per share of value for stockholders (over 100 percent of the current market capitalization) over the next 12 months," the letter said. Rising commodity prices would make the impact of the share buybacks even bigger. The company's shares, which traded at $8.70 on Thursday morning, have tumbled 32 percent in the last year. A Gulfport spokesman did not have an immediate comment. This is the time of year investors who are pushing for change traditionally write public letters to companies that detail their complaints. Later they may run a proxy contest to seat newcomers on the board. Firefly has been invested in Gulfport since 2013 and there have been private discussions, the hedge fund acknowledged. A year ago the company authorized share repurchases of $200 million but stopped after having bought back $110 million worth of stock. Even if the program were revived, the buying would not "be nearly enough," the hedge fund said. There was turmoil at the company late last year. In December it appointed David Wood as chief executive to replace Michael Moore, who resigned after having misused the company's chartered aircraft and a company credit card.

Goldman Sachs CEO apologizes for ex-banker's role in 1MDB scandal

Goldman Sachs Chief Executive Officer David Solomon on Wednesday apologized to the Malaysian people for former banker Tim Leissner's role in the sovereign wealth fund 1MDB scandal, but said the bank had conducted due diligence before every transaction. U.S prosecutors last year charged two former Goldman bankers for the theft of billions of dollars from 1MDB. Leissner, a former partner for Goldman Sachs in Asia, pleaded guilty to conspiracy to launder money and violate the Foreign Corrupt Practices Act. "When control functions in the firm asked if each transaction whether intermediaries were involved, they were told no. Leissner himself said no intermediaries were involved in the transaction," Solomon said on a post-earnings conference call with analysts. Goldman is being investigated by Malaysian authorities and the U.S. Department of Justice for its role as underwriter and arranger of three bond sales that raised $6.5 billion for 1MDB. The DOJ has said that $4.5 billion was misappropriated by high-level officials of the fund and their associates between 2009 and 2014.

Where will the UK end up: fudge, no-deal exit or halting Brexit?

With just 10 weeks until the United Kingdom is due to leave the European Union, it is unclear how or even whether the divorce will take place. The crushing defeat of Prime Minister Theresa May's deal means she must now work with other parties in parliament on a new variant if she is to avoid a no-deal Brexit or the other option, a referendum on membership. As the clock ticks down to 2300 GMT on March 29, the time and date set in law for Brexit, May has three main options: a compromise deal, a no-deal Brexit or halting Brexit altogether. FUDGED DEAL After her defeat, May pledged to speak to senior to parliamentarians to find a compromise, and financial markets are betting that lawmakers will cobble together a last-minute deal. The opposition Labour Party's finance policy spokesman, John McDonnell, said Labour would support May if she agreed to stay in a permanent customs union with the EU, a close relationship with its single market and greater protections for workers and consumers. With May's Conservatives deeply split, the opposition party holds great influence over the eventual outcome of Brexit. It is difficult to see how any Brexit plan can pass the House of Commons without the support of some of Labour's 256 lawmakers. But if May moves closer to Labour's position, she risks losing the support of dozens of pro-Brexit Conservative lawmakers as well as the small Northern Irish party which props up her minority government. If May is unable to forge a compromise deal, she will have to chose between calling a national election, delaying Brexit or going for a no-deal exit. Many Conservative lawmakers would oppose fighting a national election at such a crucial juncture, especially after she lost the party its majority in a snap poll in 2017. May herself said on Wednesday an election would be "the worst thing we could do". EU chief negotiator Michel Barnier indicated that one way forward would be for Britain to accept closer alignment with EU regulations. EU officials say London could, for example, abandon its plan to leave the EU customs union and single market, but that is unlikely to win backing among many Conservatives. NO-DEAL BREXIT Despite strong opposition among a majority of British lawmakers and many businesses to leaving the EU without a deal, this remains the default option unless parliament can agree on a Brexit plan. "It is not enough to just not like May's deal - to not have a no-deal there has to be something to replace it with, otherwise we leave without a deal," said one senior British lawmaker. No-deal means there would be no transition so the exit would be abrupt, the nightmare scenario for international businesses and the dream of hard Brexiteers who want a decisive split. Britain is a member of the World Trade Organization so tariffs and other terms governing its trade with the EU would be set under WTO rules. Business leaders are triggering contingency plans to cope with additional checks on the post-Brexit UK-EU border they fear will clog ports, silt up the arteries of trade and dislocate supply chains in Europe and beyond. Brexit supporters say there would be short-term disruption but in the long-term the UK would thrive if cut free from what they cast as a doomed experiment in German-dominated unity that is falling behind China and the United States. NO BREXIT Since the 2016 referendum, opponents of Brexit have sought another vote they hope would overturn the result, but May has repeatedly ruled this out, saying it would undermine faith in democracy among the 17.4 million who voted in 2016 to leave. A new referendum can only be called if it is approved by parliament and there is currently no majority in favor of one. The opposition Labour Party wants to push for an election and only if that is rejected will it consider another referendum. Labour leader Jeremy Corbyn is a veteran euroskeptic who has also spoken out in the past against a second referendum. However, a prominent pro-EU Conservative lawmaker, Dominic Grieve, on Wednesday submitted legislation making provisions for a second Brexit referendum. If parliament agreed to a second referendum, Britain would have to ask for an extension to its timetable for leaving the EU to allow enough time for a campaign, probably by withdrawing its Article 50 formal departure notification. The Electoral Commission would have to agree what question, or questions, would be asked of the public. At the highest levels of government, there are worries that a second referendum would exacerbate the deep divisions exposed by the 2016 referendum, alienate millions of pro-Brexit voters and stoke support for the far-right. If Britons voted to remain, Brexit supporters might then demand a third and decisive vote. "I became prime minister immediately after that (2016) referendum," May said minutes after her Brexit deal was rejected on Tuesday. "I believe it is my duty to deliver on their instruction and I intend to do so."

Britain's May faces defeat in parliament over Brexit plan

Prime Minister Theresa May faced the prospect of defeat in a historic vote on her Brexit deal in parliament on Tuesday, potentially leaving Britain in limbo about the biggest political and economic change for the country in decades. A day after May urged lawmakers to take a second look at her plan, parliament looked set to reject it in a voting session due to start at 1900 GMT. Two-and-a-half months before Britain is due to leave the EU, May's hopes of keeping her plan alive will hinge on the scale of her expected loss. Avoiding a heavy defeat could give her the chance to ask Brussels for more concessions before attempting to get the plan through parliament in another vote. But a humiliating outcome could pressure her to delay Britain's scheduled March 29 departure from the EU and potentially open up other options, ranging from a second referendum to leaving the EU with no deal. One of May's senior ministers, Environment Secretary Michael Gove, called on lawmakers to respect the outcome of the 2016 Brexit referendum decision, or risk undermining democracy. "The British people have placed a responsibility on us," Gove told BBC radio. "Are we going to live up to that responsibility and vote to leave the European Union or are we going to disappoint them and damage our democracy by not voting to leave the EU?" But many Brexit-supporting lawmakers from May's Conservative Party reject the deal's "backstop" requirement that Northern Ireland stay closely aligned to EU rules to avoid the return of a hard border with EU member Ireland if a broader trade deal cannot be struck. Dominic Raab, who resigned as May's Brexit minister in November in protest at her plans, said the government should not lose its nerve over the possibility of a no-deal Brexit, something many employers fear would mean chaos for business. "It's time for us, through this vote, to make clear not just that the current terms are unacceptable, but that we are not just throwing our hands up in the air," he said. "We are going to leave on March 29." But investors sense the possibility of a no-deal Brexit is receding, given the concerns of many lawmakers about the upheaval it could bring. Sterling hit a two-month high against the U.S. dollar on Monday and held near that level on Tuesday. CRISIS In Britain's deepest political crisis for at least half a century, May and EU leaders swapped assurances on the withdrawal deal on Monday, but there was little sign of a change of heart among rebel lawmakers. The EU told May that it stood by commitments to find ways to avoid triggering the Irish "backstop". That failed to reassure the Northern Irish Democratic Unionist Party, which props up May's minority government and said it will still not back the deal. May has warned lawmakers that if her plan is rejected, no Brexit at all would be more likely than Britain leaving the EU without a deal, a result she called "catastrophic" for democracy after parliament promised to honor the 2016 vote to leave. She has also said that a break-up of the United Kingdom could be the result of parliament voting against the agreement and warned her Conservative Party against allowing the left-wing opposition Labour Party to seize the initiative. Labour is formally committed to Brexit but opposes May's deal. Polls of party activists show that most of them want the party to back a new referendum, although it has not done so. Labour leader Jeremy Corbyn, hoping to force a national election, is expected to call for a parliamentary vote of no confidence in May if she loses Tuesday's vote. May has refused to budge over her deal despite criticism from all quarters. The agreement, which envisages close economic ties with the EU, has united the opposing sides of the debate -- pro-EU lawmakers who see it as the worst of all worlds and Brexit supporters who say it will make Britain a vassal state. With a 'no deal' Brexit the default option if May's deal is defeated, some lawmakers are planning to try to pull control of Brexit from the government. But though May is weakened, the executive has significant powers, especially during times of crisis, so it has not been clear how parliament would be able to take control of Brexit.

Apple loses bid to undo $440 million verdict in VirnetX patent case

A U.S. appeals court on Tuesday upheld a judgment worth $440 million the intellectual property licensing firm VirnetX Inc won against Apple Inc (NASDAQ:AAPL) in a patent infringement case. The U.S. Court of Appeals for the Federal Circuit denied Apple's appeal of a 2016 jury verdict originally valued at $302 million that grew to $440 million with interest, enhanced damages, and other costs. The same patent claims have been ruled invalid by an administrative court, but VirnetX is in the process of appealing those determinations.

Volkswagen to build new electric vehicle in U.S.: Tennessee governor

Volkswagen AG is announcing on Monday it will build a new electric vehicle at its plant in Chattanooga, Tennessee as it shifts toward zero emission vehicles, the state’s governor told Reuters. The German automaker is making the announcement at the Detroit auto show and will make an unspecified additional investment and add jobs, Tennessee Governor Bill Haslam said, declining to disclose details ahead of the formal announcement. "We obviously think electric vehicles are going to play a more and more prominent role,” Haslam said who is taking part in the announcement. Volkswagen said in November it planned to assemble EVs at a plant in North America, but had not decided which one.

American Airlines says government shutdown holds up FAA approval of aircraft

American Airlines Group Inc on Monday said the Federal Aviation Administration's (FAA) approval of two Boeing (N:BA) MAX 8 aircraft is on hold due to the U.S. government shutdown. The airline has already taken delivery of the two aircraft, but both planes are in Tulsa awaiting FAA approvals required for commercial operation. American said it did not see any impact from the delay on its flight schedule or customers. A partial U.S. government shutdown over President Donald Trump's demand for $5.7 billion to build a wall along the U.S.-Mexico border entered its 24th day on Monday. Talks between Trump and congressional Democrats remained stalled even as some of his fellow Republicans called on the president to cut a deal, as tension mounted nationwide. Shares of the planemaker were down nearly 1 percent at $349.65, while American Airlines fell 2.4 percent to $31.05 in morning trading.

U.S. House passes bill to reopen some agencies shut down in wall fight

The Democratic-controlled U.S. House of Representatives voted on Friday to restore funding for federal agencies that have been shut down by a fight with President Trump over border wall funding, as some 800,000 government workers, from tax collectors to FBI agents, missed their first paycheck. But a full resumption of government operations did not appear in sight because Senate Republican Leader Mitch McConnell has said he will not bring the House bill up for a vote. Republicans who control the Senate have so far stood with Trump and insisted that any spending bills include money for his wall. The House bill, which passed 240-179 with only a handful of Republicans supporting it, would restore funding for the Interior Department and the Environmental Protection Agency, two of the agencies that have been without funding since Dec. 22 amid the standoff over the proposed wall along the U.S.-Mexico border. The bill provides $35.9 billion in discretionary funding, $6 billion above Trump's budget request and $601 million above the fiscal year 2018 enacted level. Facing the prospect of the longest U.S. government shutdown in history, Trump has said he might declare a national emergency to bypass Congress to get funding for his wall, which was a central promise of his 2016 presidential campaign. "Humanitarian Crisis at our Southern (NYSE:SO) Border," Trump said on Twitter on Friday, a day after he visited the Texas-Mexico border. "I just got back and it is a far worse situation than almost anyone would understand, an invasion!" Entering its 21st day, the partial shutdown on Friday tied the record for the longest in U.S. history. Some 800,000 federal workers did not receive paychecks that would have gone out on Friday. Some have resorted to selling their possessions or posting appeals on online fundraising outlets to help pay their bills. "Most of them are living from paycheck to paycheck and now they approach this day on Friday having moved from paycheck to no check," Democratic Representative Elijah Cummings said in debate on the House floor. The head of the U.S. Secret Service, which is responsible for protecting Trump, warned employees that financial stress can lead to depression and anxiety. "Keep an eye out for warning signs of trouble," Director R.D. "Tex" Alles wrote in a memo seen by Reuters. During his presidential campaign, Trump repeatedly pledged that Mexico would pay for the wall, which he says is needed to stem the flow of illegal immigrants and drugs. But the Mexican government has refused and Trump is now demanding that Congress provide $5.7 billion in U.S. taxpayer funding for the wall. Democrats in Congress call the wall an ineffective, outdated answer to a complex problem. LEGAL BATTLE COULD LOOM With no Capitol Hill compromise in sight, Trump publicly ruminated on Thursday during the Texas trip about declaring an emergency. A close Trump confidant judged the time for such a step had come. Republican Senator Lindsey Graham said in a statement: "It is time for President Trump to use emergency powers to fund the construction of a border wall/barrier. I hope it works." Critics of the national emergency strategy have said it may be illegal. In any case, it was almost certain to trigger an immediate court challenge from Democrats, including an accusation of trying to circumvent Congress' power over the national purse strings. An emergency declaration would come with risks. Even some of Trump's fellow Republicans in Congress have signaled worries about such an action. Given that the Constitution gives Congress the power to set spending priorities and appropriate money, they worry about a tough legal fight and an unwise precedent. "I don't think he should do that. It's a bad precedent," Republican Senator Chuck Grassley said on CNBC. "It seems to me that An emergency declaration, however, would allow the government to be fully reopened while the judges weigh the case, which could take months. "After the emergency announcement, the path toward construction via executive order may be as unclear as a storm at midnight. But it will at least allow the president to move out of the corner he's boxed himself into," said Charles Gabriel, analyst at strategy firm Capital Alpha Partners. Partial government funding expired on Dec. 22, leaving departments ranging from Justice, Agriculture and Treasury to Commerce and Homeland Security without money to operate programs and pay their workers. Before the shutdown began, Trump said he would be "proud" to close the government over the issue of border security and would not blame Democrats, although he later did.

GM bucks gloomy earnings forecast trend, shares jump

General Motors Co (N:GM) executives on Friday bucked gloomy forecasts for growth and sent the automaker's shares soaring, promising investors stronger 2019 earnings and outlining ambitious plans for its Cadillac brand to challenge Tesla Inc (O:TSLA) in the growing electric vehicle market. GM said that despite forecasts of decline in U.S. and China passenger car sales, the company expects 2018 profit to exceed Wall Street expectations, and promised higher earnings per share in 2019. Chief Executive Mary Barra, in her presentation to investors on Friday, stood her ground on cost-cutting actions that have provoked threats of retribution from U.S. President Donald Trump and outrage from unions and elected officials in the affected states. "Because of the actions we have been taking for several years, General Motors enters 2019 leaner, more agile and positioned to win," Barra told investors at the New York presentation. The market cheered GM's forecast, sending the company's stock up nearly 9 percent even as Tesla shares slipped. "We're very much looking forward to the execution of what they've announced," Tim Piechowski, portfolio manager with ACR Alpine Capital Research, which owns GM shares. Piechowski said GM's core business, its stake in ride services company Lyft and its Cruise self-driving car unit are together worth more than the company's recent share price indicates. Barra also said proposals from Ohio officials that GM sell its Lordstown, Ohio, small car factory to Tesla are "moot" because Tesla is "not interested in our GM workforce represented by the UAW," the United Auto Workers union. GM's bullish outlook coincided with new cost-slashing actions by rival Ford Motor Co (N:F), which on Thursday outlined plans to cut thousands of jobs in its European operations and kill an experiment in providing van rides. Ford executives are scheduled to meet with investors next at a conference on the sidelines of the Detroit auto show. Barra and her lieutenants have spent the last two years pushing a strategy to exit unprofitable markets in Europe and developing markets, restructuring money-losing operations in South Korea, and killing unprofitable car lines in North America. In November it put five North American factories, including four in the United States, on notice for closure, and cut almost 15,000 jobs. "We are no longer investing in things that don’t make money," GM President Mark Reuss told investors on Friday. "The future is coming fast. We are doing everything we need to do as fast as we can." ELECTRIFYING CADILLACS That includes making the Cadillac brand "the tip of the corporate spear" on electrification, Reuss said. He outlined plans to launch a new generation of electric vehicles that would be "profitable ... and attainable." The automaker said Cadillac will become GM's lead electric vehicle brand as the largest U.S. automaker gears up to introduce a new model under that luxury brand to challenge Tesla, a development first reported by Reuters on Thursday. Tesla's market capitalization is higher than GM's, even though the electric carmaker has never posted a full-year profit. GM is relying on profits from sales of large pickup trucks and sport utility vehicles in North America to fund its electrification push. The battle for sales in that lucrative market is intensifying among the Detroit Three automakers as sales of small cars in the United States shrivel. Both GM and Fiat Chrysler Automobiles NV (MI:FCHA) (N:FCAU) have launched revamped pickup trucks in a bid to take more share in the U.S. auto industry's most profitable segment. Still, GM Chief Financial Officer Dhivya Suryadevara emphasized to investors on Friday that the large pickup market is a three-company oligopoly protected by "competitive moats." Those include a 25 percent U.S. tariff on imported trucks that predates the Trump administration's trade actions. GM's biggest market by vehicle sales volume is China, and the slowdown in the economy of the world's largest auto market has rattled investors across industries. Apple Inc (O:AAPL), for instance, last week took the rare step of cutting its quarterly sales forecast, blaming slowing iPhone sales in China. GM's China president, Matt Tsien, told investors on Friday that industry-wide auto sales in that country should stay roughly flat in 2019 after the 2018 decline. GM is taking actions to cut costs, including increasing automation in its Chinese plants and pushing down purchasing costs, he said. Cost-cutting coupled with 20 new or redesigned vehicles that will launch in China this year will sustain the company's profit, he said. "Overall, GM is in a good position to mitigate the headwinds" in China, Tsien said. GM, with its Chinese partners, sells more vehicles in China than in the United States. The automaker builds locally most of the vehicles it sells in China. BULLISH EARNINGS OUTLOOK GM said it expects 2019 adjusted earnings per share in the range of $6.50 to $7.00, above the $5.86 expected by analysts according to IBES data from Refinitiv. "Bottom line, we believe management just reset the bar higher for earnings and cash flow despite increased macro concerns among investors," Buckingham Research Group analyst Joseph Amaturo wrote in a client note. The company said it expects adjusted automotive free cash flow in 2019 to come in between $4.5 billion and $6 billion. "We are focused on strengthening our cash generation and creating efficiencies that will position us to take advantage of opportunities through the cycle," GM's CFO, Suryadevara, said in a statement. GM said it also expects 2018 earnings per share to come in above its previous forecast. The carmaker said in October it expected adjusted 2018 earnings of $5.80-$6.20 per share. The company also expects adjusted free cash flow for 2018 to be above its previous guidance of $4 billion. The automaker lowered that 2018 cash flow figure, which excludes the impact of $600 million in pension contributions, last year due to the impact of tariffs imposed by Trump. Still, CEO Barra faces pressure to lift GM's share price, which has lagged broader market performance. The company has confronted challenges from activist shareholders twice during the past four years. GM shares were up 8.5 percent at $37.69 at midday on Friday. Ford Motor Co (N:F) shares were up 1.7 percent at $8.82 and Fiat Chrysler shares were up 1.9 percent at $16.32 on the New York Stock Exchange. Tesla shares were down 0.6 percent at $342.85 on the Nasdaq.