44.63 -0.05 (-0.11%)
After hours: 7:29PM EDT
|Bid||44.55 x 900|
|Ask||44.75 x 3200|
|Day's range||44.62 - 45.04|
|52-week range||43.02 - 59.53|
|Beta (3Y monthly)||1.19|
|PE ratio (TTM)||9.23|
|Earnings date||15 Oct. 2019|
|Forward dividend & yield||2.04 (4.51%)|
|1y target est||48.54|
(Bloomberg) -- At Wells Fargo & Co.’s town hall meetings, executives have fielded countless questions from employees about efforts to resolve scandals that erupted almost three years ago.One looming topic hasn’t come up recently: Who will run the bank?While the abrupt exit of Chief Executive Officer Tim Sloan in March kicked off a succession hunt that’s captivated the industry, an unexpected calm has taken hold inside Wells Fargo, according to people close to the firm. The rumor mill -- once abuzz with talk of potential candidates -- has quieted. Privately, some executives say the continuing search is giving them room to focus on their businesses and work through regulators’ remaining concerns.Yet on Wall Street, the scene is the other kind of sanguine: The stock has slipped into the red for the year. Since its hunt for a leader began, the company has lost almost $24 billion in market value.That performance puts Wells Fargo behind its largest U.S. competitors this year, signaling frustration in the market over the board’s quiet search. The stock has lost 8% since Sloan stepped down in late March, while top rivals have broken even or posted gains. JPMorgan Chase & Co. is up 8% and Citigroup Inc. 4%. Bank of America Corp. is little changed. The broader KBW Bank Index has slipped almost 1%.Much of Wells Fargo’s divergence occurred just after Sloan stepped down. The gap later widened, at least briefly, after the lender forecast a bigger drop in interest income than some major rivals as declining interest rates drag on the industry. The firm also faces a regulatory cap on assets imposed last year. Still, those challenges bring some analysts and big investors back to the CEO search: They say they can’t advocate buying more shares until the bank installs a leader with the authority to lay out a plan for the future.“It’s really hard to own the stock if there’s no long-term strategy being articulated,” said Brian Kleinhanzl at KBW. He downgraded the shares to “market perform” when Sloan announced his retirement.A company spokeswoman declined to comment. Wells Fargo shares fell 1.2% to $44.73 at 10:31 a.m. in New York, in line with the drop in the 24-company KBW Bank Index.In March, Chair Betsy Duke said the board would act with urgency to recruit an outsider. Still, “we want to be thorough in our search and find the candidate that we think will best fit the objectives for Wells Fargo,” she said at the time.‘Opaque Process’Since then, the board hasn’t provided updates. In the meantime, a number of potential candidates turned down overtures from recruiters. On a conference call with analysts last month, interim CEO Allen Parker said he isn’t directly involved in the search and doesn’t know when it will end.The CEO hunt “has been made worse by having it be an opaque process being driven by the board with management unable to communicate to investors,” said Kleinhanzl, the KBW analyst. “The fact that people don’t want this job hurts the reputation of the bank.”Altogether, only 31% of analysts covering the company recommend buying its stock, according to ratings tracked by Bloomberg. For JPMorgan, Bank of America and Citigroup, the percentage ranges from 49% to 90%.Outside, a constellation of political issues is threatening to complicate the search. Senator Elizabeth Warren, one of Wells Fargo’s most vocal critics, is climbing in polls as she pursues the Democratic nomination for next year’s U.S. presidential race. Last week, House Financial Services Committee Chairwoman Maxine Waters, a Democrat from Wells Fargo’s home state of California, issued a report slamming the lack of diversity atop the financial industry. She and others on the committee are turning up pressure on the nation’s largest banks to elevate a woman or member of a minority group to CEO.Predicting CutsOne thing that does weigh on Wells Fargo employees is the uncertainty around what a new CEO might do next. An outside hire is widely expected to review the bank’s strategy, which long focused on selling as many products as possible through a network of branches. That’s left Wells Fargo with the largest workforce among U.S. banks, with almost 263,000 people at the end of June. Yet their productivity has suffered since the scandals came to light.“There’s a tremendous opportunity to streamline,” said Kyle Sanders, an analyst at Edward Jones. “I expect a new leader to come in and likely say, ‘We’re going to let a lot of people go and cut costs to support profitability.’”Expenses were front of mind for investors when Wells Fargo posted quarterly results last month. On a conference call, executives predicted costs would be “relatively flat” in 2020 compared with this year. Under Sloan, the bank had said next year’s expenses would be lower.Parker, formerly the bank’s general counsel, has publicly vowed not to “tread water” while in charge. His priorities include improving operations and customer service, while tackling issues raised by regulators. Indeed, senior executives credit his knowledge of those woes with hastening reforms. Progress there may even give the board more time to find a longer-term replacement.People familiar with the thinking at the bank say the last thing the board wants to do is make a quick decision it later regrets. Wells Fargo faces significant challenges -- both in its business and in relationship with regulators -- and the wrong pick could damage the company and erode returns for years.Those people predict the panel will take the time it needs to find the right person, however long that is.“The board of directors wants the best of the best to clean up all the problems,” said Jeanne Branthover, a managing partner at executive-search firm DHR International who isn’t involved in Wells Fargo’s CEO search. “The best of the best most likely felt that this is too risky for their career and their reputation to take it. So then the question is going to be, who do you go to?”(Updates with shares in eighth paragraph.)To contact the reporter on this story: Hannah Levitt in New York at email@example.comTo contact the editors responsible for this story: Michael J. Moore at firstname.lastname@example.org, David Scheer, Dan ReichlFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Today, it’s not just humans competing for work in banking. Machines are becoming a threat to warm-blooded number crunchers worldwide. Indeed, almost one-third of financial-services jobs could be displaced by automation by the mid-2030s, according to a report by PricewaterhouseCoopers LLP last year.Despite those stark forecasts, some optimists argue that the rise of machines at banks isn’t simply taking away jobs, but rather changing their definition and adding some roles.Job seekers with expertise in artificial intelligence, machine learning, and data science are among the most in-demand candidates in finance, according to hiring sites Glassdoor, LinkedIn, Hired, and ZipRecruiter. It’s not only disrupters such as Square Inc. or Stripe Inc. hiring this talent; legacy financial companies such as JPMorgan Chase, Capital One, and Morgan Stanley are scooping these people up as well. In the U.S. financial sector alone, job postings that list these big data skills as requirements increased almost 60% in the 12-month period ending in July, according to LinkedIn.Business and finance professors who are preparing students for future banking careers are also seeing the trend. Data scientist is the “hottest job function” now for employers, says Andrew Lo, director of the MIT Laboratory for Financial Engineering in Cambridge, Mass.Lo says data portfolio managers, who are charged with maintaining and maximizing the value of a company’s data assets, also are gaining importance. “We already have that happening informally because chief technology officers are playing that role,” he says. “But this has become a much more business-oriented set of challenges that the typical CTO might not be equipped for, so I think that’s going to evolve over time.”While machine learning has the ability to “augment” jobs and enhance the performance of organizations, it will also present risks and the need for “AI auditors” at banks, says Theodoros Evgeniou, a professor of decision sciences and technology management at Insead in Fontainebleau, France. As machines make more decisions in banking, he says, ethical and legal concerns will be raised that need to be addressed at the board level.“Let’s say you’re a bank and you’re giving credit based on credit scoring and machine learning, and your models are discriminating certain populations of people,” Evgeniou says. “If you’re then sued for being discriminatory, who is liable for this? If [the models] discriminate, you are liable.”There are also ways machine learning may indirectly create jobs. For instance, automating tasks previously done by humans in the asset management industry should theoretically reduce costs. Lower fees will likely increase demand for financial services and, subsequently, the need for more staff to service new customers, according to Guo Bai, a lecturer of strategy at China Europe International Business School in Shanghai. “It will probably be easier to serve clients that were previously excluded from financial services,” she says. These new clients may require a more human touch, Bai says, meaning more client relationship managers will be needed. Machine learning may also provide an opportunity to reinvent a career. While it’s not easy or affordable in all cases to go back to school, some financial sector employees who find themselves displaced by technology could be in a position to reskill. “Certainly in the financial sector people are already pretty highly trained, so I do believe they can be retrained to focus on data science and all of the job functions that are required to support data science analytics,” says MIT’s Lo. “That’s not true in all industries.” Help WantedAI expertise is becoming one of the most desired skills in finance. Think you have what it takes to automate the banking industry? Here’s a glance at some of the jobs requiring experience with AI, machine learning, or deep learning. Descriptions are based on ads on company sites and online job boards as of Aug. 5. Median base salaries for the roles are estimates from Glassdoor, as pay information wasn’t provided by the companies.Artificial Intelligence Platform Support EngineerEstimated median base pay: $116,760Main duties: One of the world’s largest banks is seeking an engineer capable of managing the massive server farms that are essential for its AI platform. The work can be fast-paced and high-demand. Expect to be on call.Must-have: Several years’ experience with middleware products and open-source operating systems, as well as a history of application development and implementation. Based on a job advertisement on Wells Fargo & Co.’s website.Artificial Intelligence Manager/ArchitectEstimated median base pay: $96,898Main duties: One of the “Big Four” accounting organizations needs “architects” with creative ideas for developing and deploying AI components at large companies. The job could involve working on anything from chatbots and virtual assistants to vision and language processing.Must-have: Among other things, the company is looking for at least a couple of years’ experience working with cognitive computing technology, IBM Watson, neural networks, augmented intelligence software for financial services, and cloud platforms.Based on a Deloitte job advertisement posted on LinkedIn.Senior Python Engineer—Machine Learning PlatformEstimated median base pay: $113,827Main duties: This bulge-bracket bank seeks an engineer fluent in high-level programming languages. The role comes with many responsibilities, but you’ll be on a team in charge of building pipelines that feed massive data into machine learning models for real-time predictions.Must-have: The bank cites lots of required technical experience, including a track record of developing distributed systems using Python.Based on a job advertisement on JPMorgan Chase & Co.’s website.Conversational AI Content StrategistEstimated median base pay: $59,306Main duties: If anyone has ever said you’re a great conversationalist, this job might be your next career move. You’ll be working on an AI-powered, voice/text digital assistant and “the hub” of the bank’s conversational commerce strategy. The strategist will drive the assistant’s “conversation design with brand flair.” Must-have: A background in writing and editing with some work in conversational user interfaces, AI, and chat or interactive voice responses.Based on a job advertisement on Bank of America Corp.’s website.Artificial Intelligence—Senior Digital Product ConsultantEstimated median base pay: $75,265Main duties: This role is part of this bank’s expansion plans for its virtual-assistant technology. It’s seeking someone to work on “future state” integration of its AI agent. The product consultant will lead its development during all stages, which include building, testing and acceptance, quality assurance, and reporting. Must-have: An interest in emerging technology trends and several years in a management role in a financial-services organization.Based on a job advertisement on Bank of America’s website.Machine Learning Platform Web SpecialistEstimated median base pay: $57,054Main duties: A love for data visualization might help in this role. The specialist will be tasked with creating web-based user interfaces for the bank and have a multitude of responsibilities, including constructing “visualizations that are able to depict vast amounts of data.”Must-have: A bachelor’s degree in computer science or a similar field and a strong understanding of machine learning algorithms, high-level programming languages, and neural networks. Experience with HTML, cascading style sheets, and web standards is required.Based on a job advertisement on JPMorgan’s website.Quantitative Analytics Consultant—Decision Science and Artificial Intelligence Financial Crimes Model ValidatorEstimated median base pay: $105,804Main duties: This bank is advertising a heavy-duty-sounding role with responsibilities to match. The hired candidate will work on a team responsible for validating and approving the machine learning and AI models behind marketing, credit scoring, financial-crimes detection, and fair-lending practices.Must-have: Several years’ experience in an advanced scientific or mathematical field. A background in sanctions screening and anti-money-laundering analysis will also help.Based on a job advertisement on Wells Fargo’s website. Note: Glassdoor uses a proprietary machine learning algorithm to approximate median base pay by job title, industry, and employer size. To contact the authors of this story: Siobhan Wagner in London at email@example.comShelly Hagan in New York at firstname.lastname@example.orgTo contact the editor responsible for this story: Stryker McGuire at email@example.comFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Nvidia Corp.’s second-quarter sales and profit topped analysts’ estimates, suggesting that a slump in orders may be easing amid a revival in demand for graphics chips and parts used in data centers. The stock rallied in late trading.Revenue in the quarter that ended July 28 was $2.58 billion and profit excluding certain costs was $1.24 a share, the Santa Clara, California-based company said in a statement on Thursday. Analysts, on average, had estimated adjusted earnings of $1.14 a share on sales of $2.54 billion.Sales in all business lines rose from the previous quarter, Nvidia said, a sign the company is addressing challenges that had stalled growth. Chief Executive Officer Jensen Huang has argued that a slowdown in orders for computer-gaming chips and processors for artificial intelligence tasks was temporary as customers worked through stockpiles of unused parts.Revenue has now shrunk from a year earlier for three straight quarters, and Nvidia forecast another decline of about 9% for the current period. Still, the 17% contraction in the second quarter was narrower than some analysts had projected, and the rate of decline is slowing. That may indicate customers are beginning to place new orders again.Gaming-chip sales came in at $1.3 billion, up 24% sequentially. Revenue from Nvidia’s second-biggest business, data center, climbed 3.3% from the prior period to $655 million.According to some estimates, that rebound in data-center revenue fell short. Wells Fargo analyst Aaron Rakers had predicted unit sales of $685 million, and he wrote in a note that the consensus estimate was about $669 million. On a conference call to discuss results, Nvidia executives faced multiple questions on the prospects for the business.On the call, Huang said demand for graphics chips used in servers was improving across the board, excluding a couple of so-called hyperscale data-center operators who don’t give Nvidia much insight into their plans. He declined to say when the business will return to annual growth, but maintained his optimism that artificial intelligence computing is the biggest-ever opportunity for his company.Nvidia’s detractors say that stiffer competition is the cause of the company’s struggles, but Huang said rivals aren’t eroding growth. Nvidia pioneered the use of graphics chips to run AI software in data centers, while Nvidia GeForce processors have been the main choice for PC gamers wanting the highest resolution action. Now, Intel Corp. and Advanced Micro Devices Inc. are offering rival products in these markets.“The competition should show up with something,” he said in an interview. “AI is going to be a large market for everybody and the growth is ahead of us. The bottom is behind us.”Nvidia shares rose more than 6% in extended trading following the report. Earlier, they slipped about 1% to close at $148.77 in New York.Net income in the second quarter was $552 million, or 90 cents a share, down from $1.1 billion, or $1.76, in the same period a year earlier.The company said sales in the current period will be about $2.9 billion, plus or minus 2%. That compares with an average analyst estimate for revenue of $2.98 billion, according to a Bloomberg survey. Adjusted gross margin will be 62.5%, Nvidia said.(Updates with CEO comments in eighth paragraph)To contact the reporter on this story: Ian King in San Francisco at firstname.lastname@example.orgTo contact the editors responsible for this story: Jillian Ward at email@example.com, Alistair BarrFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- The growing odds of a recession before the 2020 election threaten to crush President Donald Trump’s hopes of a second term.Though still uncertain, such a scenario would be a political gift to Democrats, who have avoided talking about the nearly full employment, record stocks and low inflation so far in the Trump presidency.Instead, the candidates have highlighted rising income inequality and untenable costs of health care and college to argue that the working class isn’t feeling the boom.But this week, fears of a broader downturn arose. The S&P 500 sank almost 3% on Wednesday and the Dow Jones Industrial Average plunged 800 points in its worst rout of the year, sparked when the 10-year Treasury rate slid below the two-year for the first time since 2007, a harbinger of a possible downturn.With a global factory slowdown and Trump’s trade war already weighing on growth, the chances that the U.S. will tip into a recession within the next year have risen to 35%, according to an August survey of economists by Bloomberg News.“Short of Justices Gorsuch and Kavanaugh disclosing membership in the Communist Party, it is hard to think of any development that could undercut Trump more than a recession,” said Jack Pitney, a professor of government at Claremont McKenna College.“He promised the religious right that he would give them judges and he promised the rest of his base that he would give them prosperity. Take away prosperity, and he won’t have a prayer,” he said.At least one Democrat took notice of the signs.Senator Elizabeth Warren, who posted a Medium blog in July about the economic slowdown, tweeted Wednesday that “the warning signs for another recession are flashing. We need to pay attention and act now, while we still have time to avert a downturn.”Government data on jobless claims out Thursday showed the labor market remained healthy last week, though it may be cooling slightly. At the same time, retail sales rose in July by the most in four months, suggesting consumers will help support the economy. But data on manufacturing were mixed.Economic trends tend to predict election outcomes, and recessions can be kryptonite for the party in power. In the last century, the only elected presidents who lost re-election did so after overseeing a recession — George H.W. Bush in 1992, Jimmy Carter in 1980 and Herbert Hoover in 1932.Approval RatingsFor Trump, the economy may be even more important than for his predecessors. His low-40s approval rating is already perilous for an incumbent, and the economy is the main factor keeping him afloat. He scores poorly on most other policy issues and on questions of leadership and character.“If the economy is what’s holding him at a 43% approval rating, what happens if there is a recession or a stock market retrench going into 2020 or in 2020? If that were to occur, at that point what’s holding him up?” said Joe Trippi, a Democratic strategist and presidential campaign veteran. “There is a danger that the one thing that’s holding him up starts to dissipate. And then he’s in deep trouble.”In February 1991, Bush’s approval rating in the Gallup poll reached an astounding 89% after the Gulf War. By June 1992, as unemployment was peaking, his approval rating plunged to 38%. Shortly before Election Day, in mid-October 1992, it was 34%. Then he was swept out of power by Democrat Bill Clinton.Slowdown SignsThe yield on the 10-year Treasury note fell below the 2-year note on Wednesday after the gap gradually shrank over the past two years. An inversion — in which short-term interest rates are higher than long-term rates — is a sign that economic growth is expected to slow.Before the markets closed, Trump tried to deflect any blame for the economic news by turning it on the Federal Reserve’s interest-rate increases, venting about the “CRAZY INVERTED YIELD CURVE!” in a tweet Wednesday, blaming it on the central bank’s interest rate increases.On Thursday, Trump told radio station WGIR in New Hampshire that “the economy is phenomenal right now,” but added: “We had a couple of bad days but we’re going to have some very good days.”A Federal Reserve Bank of New York index based on the yield curve shows the probability of an American recession over the next 12 months is close to its highest level since the financial crisis more than a decade ago.Still, economists caution that the warning signs don’t mean that a crash is about to hit.“There’s not a ton of flashing warning signals from a pure economic sense that would suggest a recession is imminent, yet we have all of these other signals -- some coming from the markets obviously -- that suggest that caution is certainly warranted right now,” said Sam Bullard, senior economist at Wells Fargo & Co.Trade-policy uncertainty, economic weakness spanning from China to Europe and the tightening of financial conditions could lead to trouble on the horizon, he said.Weakness Spreading?U.S. factory activity deteriorated in July to an almost three-year low, according to the latest figures from the Institute for Supply Management. In a sign that manufacturing weakness is threatening to spread, the purchasing managers group said its gauge of service providers also dropped to the lowest level since 2016.Economists worry this weakness will take a toll on what’s been the American economy’s bright spot -- the job market.“The labor market is what hits home the most” for everyday Americans, said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC. “As long as you have a job and you’re confident in your job, you’re probably feeling reasonably good about things.”Despite the uptick in recession odds, economists still see fairly healthy growth as the U.S. is buoyed by a strong labor market. Weekly jobless claims are arguably a more timely gauge of any change in the state of the job market, and it shows little sign of deterioration. Even with the latest increase, applications continue to hover just above a 49-year low.Republican strategist Brad Todd signaled that if the economy worsens, Trump allies will highlight what they call a Democratic drift toward “socialism.”“Swing voters believe lower taxes are better for them and higher taxes are worse for them,” he said. “As Democrats move further toward socialism, that will not help them take advantage of any deterioration in the economy, because anybody in America who’s not a raging liberal believes socialism makes the economy worse.”(Updates with new economic data in 10th paragraph, Trump comment in 17th paragraph.)\--With assistance from Vince Golle and Catarina Saraiva.To contact the reporters on this story: Sahil Kapur in Washington at firstname.lastname@example.org;Reade Pickert in Washington at email@example.comTo contact the editors responsible for this story: Wendy Benjaminson at firstname.lastname@example.org, John HarneyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here. A key measure of U.S. consumer prices unexpectedly accelerated in July in a broad-based advance, signaling inflation may be firming as the Federal Reserve debates whether to lower interest rates further.The core consumer price index, which excludes food and energy, rose 0.3% from the prior month, and 2.2% from a year earlier, according to a Labor Department report Tuesday. Both gains exceeded the median estimate of economists, while the broader CPI advanced 0.3% on the month and 1.8% annually.Faster inflation may strengthen the hand of those policy makers who are reluctant to keep lowering borrowing costs following last month’s quarter-point reduction, as employment and consumer spending remain solid. At the same time, the latest ratcheting-up of U.S.-China trade tensions and a deepening global economic slowdown are weighing on the outlook, with investors pricing in two to three more moves this year.Following the report, traders trimmed slightly the amount of Fed easing they have priced in for this year while the 10-year Treasury yield climbed to its high for the day. Those moves were amplified later in the morning, and stocks surged, after the U.S. delayed tariffs on a range of consumer goods from China by more than three months, to Dec. 15.Policy makers have struggled to lift inflation toward their 2% target, which is based on a separate Commerce Department index that tends to run slightly below the Labor Department’s CPI. President Donald Trump has repeatedly cited low inflation in his attacks on the Fed and calls for deeper interest-rate cuts, and he tweeted after the CPI data that the tariffs aren’t actually boosting prices.“While a few details suggest that the pace overstates the trend, it is clear tariffs are beginning to drive goods prices higher,” Sarah House, a senior economist at Wells Fargo & Co., said in a note Tuesday.The 2.2% annual gain in the core CPI followed 2.1% in June and marked the fastest increase since January. The index rose an annualized 2.8% over the past three months, the most since early 2018. The two-month gain of 0.6% was the most in more than a decade.What Bloomberg’s Economists Say“Firming core CPI in July is challenging the Fed’s view that a return to its 2% inflation target would take longer than previously projected.”-- Yelena Shulyatyeva and Eliza Winger Click here for the full note.While the Fed officially targets inflation including all items, policy makers look to the core measures for a better sense of the underlying trend because food and energy prices tend to be volatile.Many key measures within the Labor Department’s gauge advanced in July. Shelter costs, which make up about a third of total CPI, rose 0.3% for a second month, while medical care was up 0.5%, apparel advanced 0.4% and used cars and trucks rose 0.9%.Prices for new vehicles fell 0.2%, the first decline since February.Energy prices rose 1.3% from the prior month as gasoline prices increased 2.5%. A national gauge of retail gasoline prices was up on average during the month though it has declined since mid-July. Food costs were unchanged for a second month.Get MoreA separate Labor Department report Tuesday showed average hourly earnings, adjusted for price changes, rose 1.3% in July from a year earlier, following 1.5% in June, indicating higher inflation took a bigger bite out of wage gains. Economists surveyed by Bloomberg had forecast the core gauge would rise 0.2% from the prior month and 2.1% from a year earlier, with the broader index rising 0.3% on the month and accelerating to 1.7% on a yearly basis. (Updates with markets and latest tariff developments in fourth paragraph, adds economist comment in fifth paragraph, adds Bloomberg Economics comment.)\--With assistance from Kristy Scheuble, Benjamin Purvis and Vince Golle.To contact the reporter on this story: Katia Dmitrieva in Washington at email@example.comTo contact the editors responsible for this story: Scott Lanman at firstname.lastname@example.org, Vince GolleFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Argentine assets extended an unprecedented slump as traders reassessed the new political outlook for the troubled South American nation after Sunday’s primary election upset.The peso fell another 6% after losing 15% on Monday. Century notes fell to a record 49.85 cents on the dollar in New York, while yields on bonds due in 2021 surged to 46%. Argentina’s spreads over U.S. Treasuries have now surpassed Zambia, according to JPMorgan indexes, and trail only Venezuela. The selloff has pushed the upfront cost to protect Argentine debt for five years with credit-default swaps to 45.8%, making it the most costly to insure against non-payment in the world, according to CMA data. That would imply a probability of default of about 80%.Investors are concerned Argentina will return to populist policies that included currency controls after President Mauricio Macri’s stunning loss in primary elections over the weekend, seriously hindering his re-election chances in the Oct. 27 vote. While the opposition’s Alberto Fernandez said Monday that he doesn’t want a default, neither candidate has been able to assuage market concerns. “So much of the path for peso is going to be determined by commentary now and I didn’t think Fernandez’s comments helped too much,” said Brendan McKenna, a currency strategist at Wells Fargo in New York. “It would have been more comforting to hear something along the lines of ‘we’ll find a way to not default’ or something to calm markets."While some investors like Jefferies have held firm through the turmoil, most have run for the exit -- and recommended clients do the same. Citigroup closed its recommendation to go long on 2020 Lecaps as Argentine assets, saying the country’s assets will likely to remain under pressure, while BTG Pactual said investors should reduce positions in the nation’s bonds trading above the mid-60 cents level on the dollar to underweight.It’s the same for the currency: Morgan Stanley said the peso may still drop another 20% from Monday’s close in nominal terms in the months to come as traders clean out positioning and inflation expectations deteriorate. Analysts at Bank of America Merrill Lynch revised its forecasts to 70.5 per dollar by year-end, from 51.4 before, and 106.6 by 2020, saying the market collapse will have strong effects on the economy going forward.Stocks have been the sole bright spot on Tuesday, with the Merval benchmark gauge rebounding 8.5% in dollar terms after falling a record 48% the previous day. \--With assistance from Katia Porzecanski.To contact the reporters on this story: Julia Leite in Sao Paulo at email@example.com;Aline Oyamada in Sao Paulo at firstname.lastname@example.orgTo contact the editor responsible for this story: Daniel Cancel at email@example.comFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Following two deadly mass shootings last weekend, Democratic presidential candidates promised to take on the National Rifle Association and address gun safety through legislation and executive actions.The Democrats were called to answer how they would prioritize gun safety if elected during the Everytown For Gun Safety Presidential Gun Sense Forum in Des Moines, Iowa, on Saturday.Joe Biden, Kamala Harris, Elizabeth Warren and Bernie Sanders and other Democrats appeared at the event, which was quickly convened after attacks in El Paso, Texas, and Dayton, Ohio, that left over 30 dead and dozens more injured.Also on hand was Michael Bloomberg, owner of Bloomberg LP, the parent company of Bloomberg News, who founded and helps fund Everytown for Gun Safety, a nonprofit that advocates for universal background checks and other gun violence prevention measures.The candidates said that as the chief executive, they would act with or without the help of Congress, where new measures on guns have stalled year after year.A majority of Americans support increasing limits on guns, and the Democratic candidates are making it a key part of their campaigns -- even more so since last weekend’s events.Stricter LawsThe latest Economist/YouGov poll found 56% of Americans overall support stricter gun laws. The Democrat largely agree on their approach to gun policies, offering plans that would ban assault riffles, mandate background checks, and improve mental health resources.Biden on Saturday emphasized his experience addressing gun reform. He highlighted his work on the Brady Bill, writing the Violence Against Women Act, crafting the 1994 assault weapons ban, and drafting executive orders after the Sandy Hook Elementary School shooting in 2012 as former President Barack Obama’s vice president.“If you know anything about my background, this has been the fight of my life,” Biden said. He added that if elected president, in addition to what others have called for, he would work for a transition to biometric locks on guns based on fingerprints. Doing so would raise the security needed to pull the trigger on an automatic weapon to a level similar to that needed to operate an iPhone.Warren ProposalAhead of the event, Massachusetts Senator Warren rolled out a new gun control plan that aims to reduce gun-related deaths in America by 80% by enacting tougher laws including tighter firearms regulation and reinstating a federal assault weapons ban.Warren said that retailer Walmart Inc.’s decision to remove photographs of guns and other violent imagery from its stores isn’t enough. Senators Sanders of Vermont and Harris of California this week also called for Walmart to stop selling guns.“Walmart says it’s going to take down pictures of guns on video games. I tell you what, I think it’d be a lot more effective if you just stopped selling guns,” Warren said. She also took on Wells Fargo & Co., which she suggested helped to fund the NRA, and urged voters to put the “power of their purse” to work.“It’s up to every Walmart customer....to say I’ve got choices on where I spend my money,” Warren said. “I’ve got choices on where I do my banking.”100 DaysWarren’s made a crusade of taking on Wells Fargo’s banking practices during her time as a senator, and the NRA angle is a new twist. Before she took the stage on Saturday, Moms Demand Action Founder Shannon Watts said Warren has “has been the worst nightmare of the NRA’s bank of choice Wells Fargo.”Harris said that as president, she’d give Congress 100 days to pass gun safety legislation before she signed an executive order expanding background checks. She also took on President Donald Trump, saying he “didn’t pull the trigger” in the El Paso shooting, but has been “tweeting out the ammunition.” Former San Antonio Mayor Julian Castro said he’d use executive authority to lengthen waiting periods for gun sales, tighten background checks for licensees, and redefine anyone who sells more than five guns a year as a gun dealer.“I haven’t heard an issue that 94% of Americans agree about,” Mayor Pete Buttigieg of South Bend, Indiana, said Saturday. “Politically our party needs to get out of the defensive crouch that’s got us thinking that we’re in the minority on these issues.”In the first half of 2019 alone, there were 254 mass shootings in the U.S., an average of well over one per day, and 9,012 people have been killed as a result of gun violence, according to the Gun Violence Archive.To contact the reporters on this story: Emma Kinery in Washington at firstname.lastname@example.org;Misyrlena Egkolfopoulou in Des Moines at email@example.comTo contact the editors responsible for this story: Wendy Benjaminson at firstname.lastname@example.org, Ros Krasny, Steve GeimannFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Broadcom Inc. said it agreed to buy Symantec Corp.’s division that serves business customers for $10.7 billion in cash, adding software designed to keep hackers out of corporate systems.The deal, which is expected to close in Broadcom’s fiscal first quarter ending in January, comes less than a month after the two companies’ discussions for a full merger fell apart over disagreements about the price. The transaction announced Thursday will refocus Symantec on its consumer-facing products, such as the LifeLock identity-protection brand and Norton antivirus software.The acquisition marks Broadcom’s second big bet in software, following its $19 billion takeover of CA Technologies last year. Chief Executive Officer Hock Tan is spreading the reach of the company he built through acquisitions in the chip industry, and is now using a similar playbook to extract value from software assets that are struggling to grow.Symantec has been grappling with major challenges in the past year, facing job cuts, an internal investigation that led to restated earnings and the sudden departure of its CEO in May. The 37-year-old company provides products and services to more than 300,000 businesses and 50 million consumers, according to its website.“This transaction represents the next logical step in our strategy following our acquisitions of Brocade and CA Technologies,” Tan said in a statement. Broadcom will use its sales channels to pitch Symantec products to its corporate customers.Broadcom said it expects $2 billion in sustainable revenue from the acquisition, which will deliver earnings before interest, tax, depreciation and amortization of $1.3 billion. The company will carve out “more than $1 billion of run-rate cost synergies within 12 months following close,” it said in the statement. The transaction doesn’t need approval in China, Chief Financial Officer Tom Krause said on a conference call.Broadcom is maintaining its fiscal year 2019 sales forecast of $22.5 billion. About $17.5 billion of that revenue will come from chips and $5 billion from infrastructure software, the company said in the statement.The chip market is still suffering from the impact of the trade dispute between China and the U.S., but business conditions haven’t worsened since the company gave its forecast in June.Broadcom is going to concentrate the use of its cash flow on paying down debt to make sure it retains its investment rating, Krause said.Symantec had been projected to report overall sales growth of just 1% in its current fiscal year, according to analysts’ estimates. That would follow a 2% decline in the previous 12 months. Symantec’s lackluster outlook mirrors the performance of previous targets for Tan and his team. So far he’s been successful in turning them around.The enterprise business generated about $2.3 billion in sales in the last fiscal year for the Mountain View, California-based company. While Symantec’s revenue may not be growing, the purchase of a piece of the company will bring with it wider profit margins -- higher than those typically achieved in the chip industry, which historically requires greater levels of investment and higher costs to build products. Symantec’s gross margin, the percentage of sales remaining after deducting costs of production, will reach 83% this year, according to estimates. Broadcom’s margin is predicted to be a full 10 percentage points lower than that.Symantec said the sale is expected to generate $8.2 billion after taxes, which it will provide to shareholders after the completion of the deal in the form of a special dividend of $12 a share. It plans to cut jobs, reducing its headcount by about 7%. It’ll also close some facilities incurring charges of about $100 million.Tan’s strategy has been to acquire “franchises,” groups or businesses within companies that have sustainable market positions through technology leadership. He then invests in them to maintain that leadership, running the purchased units as distinct parts of Broadcom, rather than integrating them.The discipline he’s brought to his acquisitions and the spinoff or sale of other assets has created a more profitable company. Broadcom’s estimated gross margin for fiscal 2019 is more than 10 points wider than what the company reported in 2016.Symantec was advised by Goldman Sachs Group Inc. and its legal adviser was Fenwick & West LLP. Broadcom was working with banks including JPMorgan Chase & Co., Bank of America Corp, Barclays Plc, Bank of Montreal, Wells Fargo & Co., Citigroup Inc., HSBC Holdings Plc, Royal Bank of Canada and Morgan Stanley, while Wachtell, Lipton, Rosen & Katz was its legal adviser.(Updates advisers in the final paragraph.)\--With assistance from Nabila Ahmed.To contact the reporter on this story: Ian King in San Francisco at email@example.comTo contact the editors responsible for this story: Jillian Ward at firstname.lastname@example.org, Andrew Pollack, Molly SchuetzFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Amidst growing concerns over skyrocketing gun violence in America, big banks maintain their financial relationships with gun manufacturers and the NRA.
(Bloomberg) -- Barneys New York Inc. is in talks with potential buyers of the rights to its name and trademarks as its advisers search for ways to salvage the luxury retailer, according to people with knowledge of the matter.Potential buyers include Authentic Brands Group LLC, a brand management firm that has snapped up intellectual property from several retailers in recent years, said the people, who asked not to be named discussing private negotiations. Bankruptcy is a likely option for Barneys, and a filing could come as soon as Monday evening, they said.As cash has dwindled and bills go unpaid, advisers are looking to generate some cash for Barneys from its famous name. A deal could involve selling the intellectual property to Authentic, and then leasing it back for as long as the business remains in operation, the people said.“The Barneys New York Board and management continue to work constructively and collaboratively with a number of parties and are committed to reaching a mutually agreeable resolution to strengthen our business,” the company said in a statement. Authentic didn’t respond to a message after regular business hours.Bankruptcy LoanThe retailer has been talking to third-party lenders as well as its existing bankers at Wells Fargo & Co. to secure a bankruptcy loan, which would keep Barneys running until a reorganization plan is worked out.While the negotiations are not final, potential lenders include Great American Capital Partners, Gordon Brothers Group and Hilco Global, the people said. Representatives for those firms didn’t immediately respond to requests for comment. The involvement of Hilco and Gordon Brothers was reported earlier by the Wall Street Journal. Without such a deal, as well as significant support and relief from its landlords, Barneys is at risk of running out of time to enact a turnaround and proceeding straight to liquidation, the people said.Online retailer Farfetch also held discussions about buying Barneys, but no deal was reached, the people said. Officials at London-based Farfetch weren’t immediately available after regular business hours.Barneys operates flagship stores in New York on Madison Avenue and in Chelsea, as well as Beverly Hills, Chicago, Seattle, Boston, San Francisco and Las Vegas. The chain has been hobbled by steeply rising rents and shoppers defecting to other outlets.(Updates with potential lenders and buyer, starting in the sixth paragraph)\--With assistance from Katherine Doherty.To contact the reporters on this story: Eliza Ronalds-Hannon in New York at email@example.com;Lauren Coleman-Lochner in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Rick Green at email@example.com, Boris KorbyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- The Federal Reserve, rebuffing an intensive Wall Street lobbying campaign, plans to create a real-time payment system that will compete with a venture formed by big banks.The FedNow Service, set to begin operating by 2023 or 2024, will modernize the payments infrastructure by allowing money to be moved almost instantly at every hour of every day, the regulator said in a statement Monday. The system could give consumers and businesses more flexibility in managing money and making time-sensitive payments, the Fed says.“Immediate access to funds could be especially important for households on fixed incomes or living paycheck to paycheck, when waiting days for the funds to be available to pay a bill can mean overdraft fees or late fees,” Fed Governor Lael Brainard said in a speech at the Federal Reserve Bank of Kansas City, where she announced the plan.The Fed voted 4-1 to seek comment on its proposal, with the lone dissenting vote coming from Randal Quarles, who as vice chairman for supervision is the agency’s top official overseeing Wall Street.“We see important benefits from the resilient and competitive market that would result from the FedNow Service providing an alternative.”-- Fed Governor Lael BrainardThe Clearing House, a group of financial giants including Citigroup Inc. and Wells Fargo & Co., introduced its Real-Time Payments service in 2017, aiming to improve the antiquated U.S. processing system. The companies pitched their idea as a kind of utility and have been lobbying lawmakers and the Fed to abandon consideration of a government-run system.“We see important benefits from the resilient and competitive market that would result from the FedNow Service providing an alternative,” Brainard said. “We have provided vital support to the sole private-sector provider of real-time settlement for faster payments, and we will continue to do so.”But Quarles argued the government “should provide its own capacity only when the evidence of market failure is clear and alternative means to achieve public goals are not feasible,” he said in a statement after the vote. “In this case, I do not see a strong justification for the Federal Reserve to move into this area and crowd out innovation when viable private-sector alternatives are available.”‘Innovative Capabilities’Bank Policy Institute President Greg Baer, whose Washington-based group lobbies on behalf of Wall Street lenders, said last week that the 24 firms involved in Real-Time Payments “have individually or collectively paid hundreds of millions of dollars to build that system.” The Clearing House’s service has been widely available in big-bank accounts but has been slower to reach the customers of community lenders.While the Fed works for years on this, “our focus will remain on ensuring that the RTP network has reach to all depository institutions,” the Clearing House said in a statement on Monday. “Consumers and commercial customers are demanding real-time payment capabilities now, and depository institutions on the RTP network are already offering these innovative capabilities.”Brainard noted the Fed’s history of “healthy competition with private-sector providers” and said the central bank is uniquely placed to provide this service -- especially in guaranteeing access for thousands of small banks. In addition to improving the financial plumbing for consumers, Brainard said, it will help small businesses turn sales proceeds into payments to suppliers quickly, reducing or eliminating the need for expensive short-term financing.She also suggested Facebook Inc.’s recent announcement of plans to create a digital currency -- Libra -- may have been a factor in the Fed moving forward, noting that private companies are looking to establish payment systems that bypass banks and fiat currencies. The Fed is on the record being wary of Libra and its potential for privacy and money-laundering abuses.‘Overwhelmingly Favorable’Recent remarks from Fed Chairman Jerome Powell had been taken as a signal the central bank was leaning toward doing its own system. He said last week that support for his agency getting involved had been “overwhelmingly favorable,” and he underlined the fact that the Fed had long been in the payments business.When the agency asked for input last year on whether it should move forward, community banks generally supported the government alternative so they wouldn’t have to rely on Wall Street. The Fed had also been encouraged by lawmakers including Senator Elizabeth Warren, who joined other Democrats last month to introduce a bill that would have required the central bank to take the step.“I’m glad the Fed has finally taken action to ensure that people living paycheck-to-paycheck don’t have to wait up to five days for a check to clear,” Warren said in a statement, praising the agency announcement alongside Senator Chris Van Hollen and House Democrats.Republican OppositionIn recent encounters with Fed officials on Capitol Hill, Republican lawmakers had frequently argued against letting the government go head-to-head with the private sector.On Monday, however, groups representing small lenders and retailers were happy with the central bank’s decision. Faster, easier payments would be a boon for retailers, including Amazon.com Inc., which has said that a real-time system could be an alternative to “high-cost” credit-card networks.The Fed will gather public comments for 90 days on how it should build FedNow.(Updates with Quarles statement in seventh paragraph.)\--With assistance from Jenny Surane.To contact the reporter on this story: Jesse Hamilton in Washington at firstname.lastname@example.orgTo contact the editors responsible for this story: Jesse Westbrook at email@example.com, Gregory MottFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Q2 has so far been good for Big Wall Street Banks, though the outlook seems blurred from Fed's 25-points rate cut and downfall in investment banking.
Joe Brusuelas, chief economist at RSM, tells Yahoo Finance’s On the Move, that the Fed's action will force banks "to pump money into the real economy."
(Bloomberg) -- Brazil’s central bank on Wednesday delivered its strongest message yet that it’s poised to pump more stimulus into an ailing economy after lowering its key rate by a half percentage point.The bank’s board, led by its President Roberto Campos Neto, cut the benchmark Selic to a record low of 6%, as forecast by 18 of 45 economists surveyed by Bloomberg. The others expected a smaller reduction or even no cut at all. While stating that their next move will depend on activity and inflation data, policy makers signaled that forecasts for below-target consumer prices in 2020 leave the door open to more easing.“The Committee deems that the consolidation of the benign scenario for prospective inflation should permit additional adjustment of the degree of stimulus," the bank board wrote in a statement accompanying the decision.Brazil now joins central banks from the U.S. to South Africa to Indonesia that are lowering borrowing costs as global activity slows. Local policy makers are rushing to the aid of an economy that’s expected to grow less than 1% this year amid headwinds including high unemployment, low confidence and weak investments. The central bank’s actions also come after the lower house of Congress backed a pension reform, thus mitigating the primary threat to inflation going forward.President Jair Bolsonaro has been saying for some time that lower interest rates would be positive for the economy and is pleased with the central bank’s decision, his spokesperson Otavio Rego Barros told reporters after the new rate was announced.What Our Economist Says"We believe the decision and the statement are consistent with at least another 50bps cut in the next meeting, which would bring the Selic to 5.5%. For now, we maintain our forecast for the policy rate to close this year at 5.5% -- but we do see risks tilted to the downside. Absent negative surprises on either the external, local or political fronts, the total easing may reach 125bps or 150bps, bringing the Selic to or close to 5% by end-2019."\--Adriana Dupita, Latin America economist at Bloomberg EconomicsIn the last major consumer price reading before Wednesday’s decision, annual inflation in mid-July came in almost a full percentage point below this year’s target of 4.25%. The central bank’s own estimates published with the rate decision show inflation continuing below target next year even after additional borrowing cost reductions.The dovish message should put pressure on the Brazilian real, as further rate cuts reduce the currency’s attractiveness for carry trade. Local rates should also see a downward adjustment to price in a more aggressive easing cycle, according to Brendan McKenna, a currency strategist at Wells Fargo in New York.“Markets were really only prepared for a 25-bps cut and then a more patient BCB," McKenna said. "A 50-bps cut with intention for easing more is probably going to put pressure on BRL and push yields lower.”Caution NoteStill, policy makers maintained a degree of caution in their comments. Aside from not explicitly committing themselves to more rate cuts, they warned that frustration of expectations over Brazil’s economic reforms could drive inflation higher.A crucial pension overhaul that seeks to save government coffers some 900 billion reais ($236 billion) in a decade will be put to a second floor vote in the lower house in August before moving to the Senate. Lower house Speaker Rodrigo Maia said on Twitter that the central bank’s rate cut was facilitated by the bill’s advance through Congress.Read more: Why the Future of Brazil’s Economy Rides on Pensions: QuickTake"If everything stays the same, then there will be room for another half-point cut in September," said Thais Zara, chief economist at Rosenberg Consultores Associados. "But, the central bank leaves a little wiggle room."\--With assistance from Aline Oyamada and Igor Sodre.To contact the reporter on this story: Mario Sergio Lima in Brasilia Newsroom at firstname.lastname@example.orgTo contact the editors responsible for this story: Juan Pablo Spinetto at email@example.com, ;Walter Brandimarte at firstname.lastname@example.org, Matthew Malinowski, Robert JamesonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.