U.S. producer prices fall; jobless claims up for fourth straight week

FILE PHOTO: A woman shops for produce inside a Whole Foods Market in the Manhattan borough of New York City, New York, U.S. June 16, 2017. REUTERS/Carlo Allegri/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. producer prices fell for the first time in nearly 1-1/2 years in December amid declining costs for services, which could temper expectations that inflation will accelerate in 2018.

Other data on Thursday showed the number of Americans filing for unemployment increasing for the fourth straight week to more than a three-month high. That probably does not signal weakness in the labor market as bitter cold and snow in parts of the country likely kept some workers at home.

Still, weak inflation at the producer level could add to concerns that the factors restraining inflation could become more persistent and result in the Federal Reserve being more cautious about raising interest rates this year.

The Labor Department said on Thursday its producer price index for final demand slipped 0.1 percent last month. That was the first drop in the PPI since August 2016 and followed two straight monthly increases of 0.4 percent.

In the 12 months through December, the PPI rose 2.6 percent after accelerating 3.1 percent in November. Economists polled by Reuters had forecast the PPI rising 0.2 percent last month and increasing 3.0 percent from a year ago.

A key gauge of underlying producer price pressures that excludes food, energy and trade services edged up 0.1 percent last month. The so-called core PPI increased 0.4 percent in November. It rose 2.3 percent in the 12 months through December. The core PPI was up 2.4 percent in the 12 months through November.

The PPI data came on the heels of a report on Wednesday showing a sharp moderation in import prices in December. Economists are hoping that a tightening labor market and recent weakness in the dollar will lift inflation toward the Fed’s 2 percent target this year.

The U.S. central bank’s preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, has undershot its target since May 2012. The greenback lost 7 percent of its value against the currencies of the United States’ main trading partners last year.

The Fed raised interest rates three times in 2017. Its forecast of three rate hikes for this year will depend on the inflation outlook.

The dollar <.DXY> fell to a session low against a basket of currencies after the data. Prices of U.S. Treasuries were trading lower while U.S. stock index futures were marginally higher.

STRONG LABOR MARKET

Last month, the price of services fell 0.2 percent after rising for nine straight months. That reflected a 10.7 percent drop in margins for automotive fuels and lubricants retailing.

Wholesale food prices recorded their biggest drop since May, while energy prices were unchanged. The cost of healthcare services increased 0.2 percent last month after being unchanged in November. Those costs feed into the core PCE price index.

In a second report on Thursday, the Labor Department said initial claims for state unemployment benefits increased 11,000 to a seasonally adjusted 261,000 for the week ended Jan. 6, the highest level since late September. Economists had forecast claims falling to 245,000 in the latest week.

A large part of the country faced frigid temperatures and snow during the first week of 2018, likely making it hard for some people to report for work. Unadjusted claims for New York rose by 27,170 last week, more than half of the national total.

Claims have risen since mid-December, though the data tend to be volatile during year-end holidays.

Last week marked the 149th straight week that claims remained below the 300,000 threshold, which is associated with a strong labor market. That is the longest such stretch since 1970, when the labor market was much smaller.

The labor market is near full employment, with the jobless rate at a 17-year low of 4.1 percent. Last week, the four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 9,000 to 250,750.

The continuing low level of claims suggests a strong labor market. The pace of job growth is, however, expected to slow this year as the labor market hits full employment. Nonfarm payrolls increased by 148,000 jobs in December after surging by 252,000 jobs in November.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Chances of U.S. leaving NAFTA must be taken seriously: Canada

FILE PHOTO: Flags are pictured during the fifth round of NAFTA talks involving the United States, Mexico and Canada, in Mexico City, Mexico, November 19, 2017. REUTERS/Edgard Garrido/File Photo

LONDON, Ontario (Reuters) – The United States must be taken seriously when it says it might walk away from NAFTA, Canada’s foreign minister said on Thursday, a day after government sources said Ottawa was increasingly convinced U.S. President Donald Trump would pull the plug.

Chrystia Freeland also told reporters that Canada had come up with some creative ideas in a bid to solve the toughest challenges facing negotiators when they meet for the sixth and penultimate round of talks to modernize the North American Free Trade Agreement later this month.

Trump has repeatedly threatened to walk away from the 1994 pact between the United States, Canada and Mexico unless major changes are made.

“The United States has been very clear since before the talks started that … (this) was a possibility and I think we need to take our neighbors at their word, take them seriously, and so Canada is prepared for every eventuality,” Freeland told reporters on her way to a two-day cabinet meeting.

Freeland also said it was “absolutely possible to have a positive outcome” at the Jan. 23-28 talks in Montreal if all three sides showed good will.

The Canadian and Mexican currencies, as well as stocks of firms that rely heavily on North America’s integrated economy, fell on Wednesday after government sources told Reuters they saw an increased likelihood of a U.S. withdrawal.

(Reporting by David Ljunggren; Editing by Chizu Nomiyama and Andrea Ricci)

Lagging industry, Ford puts auto emergency brakes on two 2019 models

FILE PHOTO: The Ford Motor Company logo is pictured at the Los Angeles Auto Show in Los Angeles, California, U.S., November 30, 2017. REUTERS/Mike Blake/File Photo

(Reuters) – Ford Motor Co <F.N> said on Thursday it will make automatic emergency brakes standard on two key 2019 models, an effort by the No. 2 U.S. automaker to catch up with rivals in offering the new technology designed to help vehicles avoid collisions.

Ford will fit the brakes on its redesigned 2019 Edge midsize crossover vehicle and its new 2019 Ranger midsize pickup, that will compete later this year with the Chevrolet Colorado and Toyota Tacoma.

The brakes are part of a suite of standard safety features on the new Edge, Ford said, including technology that detects objects and pedestrians and can prevent collisions by automatically braking and steering for the driver.

The 2019 Edge, which goes on sale this summer, will also offer new optional safety features, including a more sophisticated cruise control system as well as automatic steering assist to help avoid potential crashes.

In an update last month, the U.S. National Highway Traffic Safety Administration said four of 20 automakers in 2017 equipped at least half of their U.S. models with standard automatic emergency brakes, with the highest installation rates for luxury brands such as Tesla Inc <TSLA.O> and Daimler AG’s <DAIGn.DE> Mercedes-Benz.

Among mass-market companies, Toyota Motor Corp <7203.T> fitted the devices to 56 percent of its 2017 fleet, compared with 30 percent for Honda Motor Co <7267.T>, 20 percent for General Motors Co <GM.N> and less than 10 percent for Ford.

Overall, 20 carmakers have agreed to equip virtually all of their new passenger vehicles with automatic emergency brakes by September 2022, NHTSA said.

In an interview, Raj Nair, president of Ford’s North American operations, said the company plans to be “more aggressive” in standardizing features that assist drivers. He declined to say when Ford planned to make automatic emergency brakes standard on all its U.S. models.

(Reporting by Paul Lienert in Detroit; Editing by Bill Rigby)

Wall Street lower after report China may slow U.S. bond purchases

FILE PHOTO: The trading floor is seen on the final day of trading for the year at the New York Stock Exchange (NYSE) in Manhattan, New York, U.S., December 29, 2017. REUTERS/Andrew Kelly

By Sruthi Shankar

(Reuters) – Wall Street’s major indexes fell on Wednesday, stalling the rally that marked the start of 2018, after a report that China is considering slowing its purchases of U.S. government debt.

Bank stocks were largely favored as U.S. Treasury yields jumped to 10-month highs after Bloomberg reported the U.S. bond market was becoming less attractive for Beijing, one of the largest foreign holders of U.S. government debt.

The report weakened the dollar, which slipped 0.4 percent, while gold jumped to its highest in four months.

At 11:03 a.m. ET, the Dow Jones Industrial Average <.DJI> was down 39.3 points, or 0.15 percent, at 25,346.5 and the S&P 500 <.SPX> was down 5.27 points, or 0.19 percent, at 2,746.02.

The Nasdaq Composite <.IXIC> was down 29.08 points, or 0.41 percent, at 7,134.49.

The CBOE Volatility index <.VIX>, a widely followed measure of market anxiety, rose to its highest level in more than a week at 10.41.

“We’ve had a tremendous run, mostly unabated since Trump’s election in 2016 and with no volatility. If we do see a pullback, that’s going to be a buying opportunity,” said Michael Scanlon, managing director of Manulife Asset Management.

The S&P and the Nasdaq have closed at record highs on all days in 2018, on optimism over global growth and expectations of a strong quarterly earnings.

Wells Fargo <WFC.N> and JPMorgan <JPM.N> rose about 0.8 percent each. The two largest U.S. lenders will kick off the fourth-quarter earnings season on Friday.

Earnings for S&P 500 companies are expected to increase by 11.8 percent, with biggest contribution from the energy sector, according to Thomson Reuters I/B/E/S.

“It will be the first time that Corporate America has the ability to talk about guidance that incorporates lower tax rates. It’s going to be confusing and noisy but will be fascinating,” said Art Hogan, chief market strategist at B. Riley FBR in Boston.

Berkshire Hathaway <BRKb.N> rose 0.7 percent after the conglomerate promoted two of its top executives, cementing their status as the most likely successors to Warren Buffett.

Nine of the 11 major S&P sectors were lower, led by a 1.6 percent fall in interest-rate sensitive real estate and 0.8 percent drop in utilities <.SPLRCU>.

However, the Dow Jones Transport index <.DJT>, an indicator of economic activity, rose 0.6 percent, boosted by airline stocks.

No.2 U.S. homebuilder Lennar Corp <LEN.N> fell 0.12 percent after its profit missed estimates due to a delay in the booking of a single large transaction.

Nordstrom <JWN.N> was down about 7 percent after the retailer reported holiday period same-store sales.

Nvidia <NVDA.O> slipped 0.5 percent after the chipmaker said some of its chipsets have been affected by a memory corruption flaw.

Declining issues outnumbered advancers on the NYSE by 1,901 to 914. On the Nasdaq, 1,751 issues fell and 1,060 advanced.

(Reporting by Sruthi Shankar in Bengaluru; editing by Patrick Graham and Arun Koyyur)

Microsoft says security patches slowing down PCs, servers

FILE PHOTO: The Microsoft logo is shown on an electric car at the Auto Show in Los Angeles, California, U.S., November 28, 2017. REUTERS/Mike Blake

By Eric Auchard and Supantha Mukherjee

(Reuters) – Microsoft Corp <MSFT.O> said on Tuesday that software patches released to guard against microchip security threats slowed down some personal computers and servers, with systems running on older Intel Corp <INTC.O> processors seeing a noticeable decrease in performance.

The comments in a blog post were the clearest signal from Microsoft that fixes for flaws in microchips from Intel and rivals described last week could meaningfully degrade performance. The topic is of keen interest to large data center operators, which could incur significant cost increases if computers slow down.

Microsoft also said that security updates froze some computers using chipsets from Intel rival AMD <AMD.O>, dragging AMD’s shares down nearly 4 percent.

Shares in Intel, which reiterated on Tuesday that it saw no sign of significant slowdown in computers, fell 2.5 percent taking the loss since the issue surfaced last week to about 7 percent or around $15 billion in market value.

AMD shares have gained nearly 20 percent in the last week as investors speculated that the chipmaker could wrest market share from Intel, whose chips were most exposed to the security flaws.

Security researchers disclosed the flaws on Jan. 3 that affected nearly every modern computing device containing chips from Intel, AMD and ARM Holdings, owned by Japan’s SoftBank Group Corp <9984.T>.

“We (and others in the industry) had learned of this vulnerability under nondisclosure agreement several months ago and immediately began developing engineering mitigations and updating our cloud infrastructure,” Microsoft executive Terry Myerson wrote in a blog post on Tuesday. (http://bit.ly/2mj6f3Q)

Internet and networking equipment maker Cisco Systems Inc <CSCO.O> said in a security advisory updated on Tuesday that it has identified 18 vulnerable products, including some of its blade servers, rack servers and routers, and expects to have patches for servers in about five weeks, on February 18.

Cisco said it is also looking for problems in nearly 30 other products, including switches and routers. The majority of Cisco’s products were not vulnerable because they are “closed systems that do not allow customers to run custom code on the device,” it said. The memory corruption flaws, named Meltdown and Spectre, could allow hackers to bypass operating systems and other security software to steal passwords or encryption keys on most types of computers, phones and cloud-based servers.

ARM Holdings estimated that around 5 percent of more than 120 billion chips its partners have shipped since 1991 was impacted by Spectre. It said the number of chips affected by Meltdown was significantly less.

“ARM will address Spectre in future processors but there will need to be an ongoing discipline in the design of secure systems which needs to be addressed through both software and hardware,” a company spokesman said in an emailed statement.

Intel and AMD have not disclosed the number of chips affected by the security flaws.

Intel said a typical home and business PC user should not see significant slowdowns in common tasks such as reading email, writing a document or accessing digital photos. (http://intel.ly/2FiL0Hk)

The chipmaker said last week that fixes for security issues in its microchips would not slow down computers, rebuffing concerns that the flaws would significantly reduce performance.

Rival AMD had also played down the threat, saying its products were at “zero risk” from the Meltdown flaw, but that one variant of the Spectre bug could be resolved by software updates from vendors such as Microsoft.

But on Tuesday AMD said it was aware of an issue with some older-generation processors following the installation of a Microsoft security update that was published over the weekend.

Microsoft said it was working with AMD to resolve the issues.

Apple Inc <AAPL.O> also released an updated version of its operating system software on Monday to fix the security flaw.

(Reporting by Eric Auchard in Frankfurt, Jim Finkle in Toronto and Supantha Mukherjee and Sonam Rai in Bengaluru; Editing by Shounak Dasgupta and Lisa Shumaker)

U.S. wholesale inventories rebound strongly in November

FILE PHOTO: A shopper walks down an aisle in a newly opened Walmart Neighborhood Market in Chicago in this September 21, 2011 file photo. REUTERS/Jim Young/Files

WASHINGTON (Reuters) – U.S. wholesale inventories rose slightly more than initially estimated in November, suggesting that inventory investment will probably contribute to economic growth in the fourth quarter.

The Commerce Department said on Wednesday that wholesale inventories rebounded 0.8 percent after dropping 0.4 percent in October. The department reported last month that wholesale inventories jumped 0.7 percent in November.

The component of wholesale inventories that goes into the calculation of gross domestic product – wholesale stocks excluding autos – also increased 0.8 percent in November.

Inventory investment contributed almost eight-tenths of a percentage point to the economy’s 3.2 percent annualized growth pace in the third quarter. Inventory investment accelerated in the third quarter after slowing sharply at the start of 2017.

Auto inventories increased 0.7 percent in November, reversing October’s 0.7 percent drop. There were also increases in inventories of petroleum, machinery and electrical goods.

Sales at wholesalers shot up 1.5 percent in November after increasing 0.8 percent in October. Sales of motor vehicles rose 1.2 percent in November after jumping 3.4 percent the prior month.

At November’s sales pace it would take wholesalers 1.24 months to clear shelves, the fewest since November 2014, down from 1.25 months in October.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Tax cuts mean Fed must be vigilant on ‘overheating’: Kaplan

FILE PHOTO: Dallas Federal Reserve Bank President Robert Kaplan gestures during a news conference after of the True Economic Talks event in Mexico City, Mexico, July 14, 2017. REUTERS/Edgard Garrido/File Photo

By Lisa Maria Garza

DALLAS (Reuters) – The Federal Reserve must be wary of the “risk of overheating” the economy in the wake of sweeping tax cuts that could raise already unsustainable debt levels even while they boost business investment, Dallas Fed President Robert Kaplan said on Wednesday.

“We want to avoid a situation where we have such an overheating that we’re playing catch up,” Kaplan said at a business event. The cuts are in part a concern, he said, “because I think debt levels of the country are unsustainable.”

Kaplan, who does not vote on policy this year as the central bank undergoes an unprecedented leadership overhaul, did not comment specifically on interest rates aside from saying the Fed has “got some operating room for a while.” He added that cyclical inflation pressures are building with unemployment low.

The Fed raised rates three times last year and aims to do the same in 2018, even while tax legislation signed into law by U.S. President Donald Trump last month is expected to boost short-term activity.

The bill slashes the corporate tax rate and offers cuts for individuals, stimulus that Republicans argue will boost both business and consumer spending. But the individual cuts are skewed toward higher-income households, which economists say have a low propensity to consume, and the overall bill is expected to balloon the federal deficit by $1.5 trillion over 10 years. The national debt is roughly $20 trillion.

The Fed expects a modest economic boost from the bill that does not, for now, require tighter-than-expected monetary policy, according to a handful of interviews with policymakers in recent days.

“We have to be vigilant at the Fed” because there are concerns, Kaplan told the event called the Weitzman Group Annual Retail Forecast. Still, he added, the bill reforms the tax structure in positive ways that should attract investments to the United States and create incentives.

Kaplan said he was “pretty confident that business investments will be better this year” thanks to the tax cuts.

(Reporting by Lisa Maria Garza; Writing by Jonathan Spicer; Editing by Chizu Nomiyama and Susan Thomas)

IPhone addiction may be a virtue, not a vice for investors

FILE PHOTO: The new iPhone X is pictured at the Apple Store Marche Saint-Germain in Paris, France, November 3, 2017. REUTERS/Benoit Tessier/File Photo – RC16586E26B0

By Trevor Hunnicutt

NEW YORK (Reuters) – Apple Inc <AAPL.O> investors are shrugging off concerns raised by two shareholders about kids getting hooked on iPhones, saying that for now a little addiction might not be a bad thing for profits.

Hedge fund JANA Partners LLC and the California State Teachers’ Retirement System (CalSTRS) pension fund said on Saturday that iPhone overuse could be hurting children’s developing brains, an issue that may harm the company’s long-term market value.

But some investors said the habit-forming nature of gadgets and social media are one reason why companies like Apple, Google parent Alphabet Inc <GOOGL.O> and Facebook Inc <FB.O> added $630 billion to their market value in 2017.

“We invest in things that are addictive,” said Apple shareholder Ross Gerber, chief executive of Gerber Kawasaki Wealth and Investment Management.

He also owns stock in coffee retailer Starbucks Corp <SBUX.O>, casino operator MGM Resorts International <MGM.N> and alcohol maker Constellation Brands Inc <STZ.N>.

“Addictive things are very profitable,” Gerber said.

Still, the investment community is increasingly holding companies to higher social standards, and there is some concern that market-leading tech companies could draw attention from regulators much like alcohol, tobacco and gambling companies have in the past.

Alphabet and Facebook could not immediately be reached for comment on Monday. Facebook has said social media can be beneficial if used appropriately.

In a statement to Reuters, Apple said it has offered a range of controls on iPhones since 2008 that allow parents to restrict content, including apps, movies, websites, songs and books, as well as cellular data, password settings and other features.

“Effectively anything a child could download or access online can be easily blocked or restricted by a parent,” Apple said in the statement.

Apple shares fell marginally on Monday. CalSTRS holds $1.9 billion in Apple stock, a sliver of the company’s nearly $900 billion market value, while JANA declined to disclose the size of its smaller stake.

“Before Apple speaks, I think it’s too early to change the narrative” for investors, said Peter Jones, vice president of research for Ferguson Wellman Capital Management, which has about 350,000 Apple shares.

Social media companies, not hardware makers, are more deserving of any addiction-related scrutiny, some said.

Jordan Waldrep, who invests in alcohol, tobacco and gambling stocks as manager of the USA Mutuals Vice Fund <VICEX.O>, said blaming Apple for its customers’ addiction was analogous to blaming makers of cigarette packs instead of tobacco companies.

“The social media, the cigarettes, are the addictive product,” he said. Waldrep’s Vice fund does not own Apple, but Waldrep said he would consider including social media companies.

Kim Forrest, senior portfolio manager and vice president at Fort Pitt Capital Group, agreed that companies like Facebook, Twitter Inc <TWTR.N> and Snap Inc <SNAP.N> might be more at risk than Apple if investors and regulators push back on how much time people spend on mobile devices.

“Apple is just the delivery device,” said Forrest, who said Fort Pitt has limited Apple holdings. “It’s only compelling with software. Software is the dopamine releaser that keeps you coming back.”

Twitter declined to comment and Snap could not immediately be reached.

The letter from JANA and CalSTRS recommends Apple set up a committee of child-development experts and make more new tools available to parents.

In its statement, Apple did not directly respond to the investors’ demands but said changes are in store for its parental controls. It did not provide details.

“We are constantly looking for ways to make our experiences better,” Apple said. “We have new features and enhancements planned for the future, to add functionality and make these tools even more robust.”

The addiction issue gained notoriety when former Disney child star Selena Gomez said she canceled a 2016 world tour to go to therapy for depression and low self-esteem, feelings she linked to a social media addiction.

Fears about smartphone addiction have already kicked off regulatory backlash. In December, the French education minister said mobile phones would be banned in schools, and draft legislation in France would require children under 16 to seek parental approval to open a Facebook account.

Even tech insiders are among the vocal critics of social media and its addictive potential.

“Apple Watches, Google Phones, Facebook, Twitter – they’ve gotten so good at getting us to go for another click, another dopamine hit,” said Tony Fadell, a former Apple executive, on Twitter.

John Streur, chief executive of Calvert Research and Management, an Apple shareholder that focuses on social responsibility, said it is plausible that tech devices may some day be understood to hold risks we do not currently understand well.

That would hurt investors if evidence later emerged that companies intentionally built features that create dependency and had evidence that doing so was unsafe.

For the time being, John Carey, a portfolio manager at Amundi Pioneer Asset Management in Boston, said concerns over the human impacts from being glued to screens are not likely to cut into profits. The company holds Apple stock, but the funds Carey manages do not.

“I doubt there will be any impact on the use of smartphones,” he said. “We’re already addicted to them.”

(Adds statement from Apple)

(Reporting by Trevor Hunnicutt; Additional reporting by Ross Kerber, April Joyner, Sinead Carew, David Ingram, Elizabeth Dilts and Stephen Nellis; Editing by Megan Davies, Meredith Mazzilli and Leslie Adler)

Intel says Mobileye’s autonomous driving tech to be used in two million vehicles

Brian Krzanich, Intel CEO, speaks at the Intel Keynote address at CES in Las Vegas, Nevada, U.S. January 8, 2018. REUTERS/Rick Wilking

(Reuters) – Intel Corp <INTC.O> Chief Executive Brian Krzanich said on Monday 2 million vehicles from BMW <BMWG.DE>, Nissan Motor Co Ltd <7201.T> and Volkswagen AG <VOWG_p.DE> would use its unit Mobileye’s autonomous vehicle technology to crowdsource data for building maps that enable autonomous driving.

The world’s largest chipmaker bought Israeli firm Mobileye last year to compete with peers such as Qualcomm Inc <QCOM.O> and Nvidia Corp <NVDA.O> and tap the fast-growing market of driverless cars.

Intel will also tie up with SAIC Motor Corp Ltd <600104.SS>, which will use Mobileye technology to develop cars in China, the chipmaker said.

Krzanich also said Intel had not received any information of customer data being compromised so far after the company confirmed last week that the security issues reported by researchers in its widely used microprocessors could allow hackers to steal sensitive information from computers, phones and other devices.

Security researchers had disclosed two security flaws exposing vulnerability of nearly every modern computing device containing chips from Intel, Advanced Micro Devices Inc <AMD.O> and ARM Holdings.

(Reporting by Philip George in Bengaluru; Editing by Amrutha Gayathri)

Target lifts profit forecast after holiday sales jump

FILE PHOTO: A newly constructed Target store is shown in San Diego, California May 17, 2016. REUTERS/Mike Blake/File Photo

By Siddharth Cavale

(Reuters) – Target Corp <TGT.N> reported strong same-store sales for November and December on Tuesday, more customer visits and higher online sales putting the United States’ second largest mass retailer on track for the best quarter in five years.

Shares of the Minneapolis-based chain rose as much as 4 percent to hit a near one-year high of close to $70 after the company raised its profit forecast to $1.30-$1.40 a share from an earlier range of $1.05-$1.25.

That was well above analysts average forecast of $1.22 per share, according to Thomson Reuters I/B/E/S.

Target is slated to have poured $1 billion of last year’s profits into an effort to boost sales, mainly by investing in online business and delivery options to take on Amazon.com <AMZN.O>.

It has hired more staff, remodeled existing stores and focused on building small-format stores to reach more customers in suburbs.

On Tuesday, the company said same-store sales rose 3.4 percent in November and December.

“Target invested heavily in holiday 2017, ramping up its hiring to 100,000 – well above year ago levels – as well as (investing) in new brands,” Retail Metrics President Ken Perkins said. “It was a strong holiday (for them).”

The retailer raised its same-store sales growth forecast for the quarter ending in January to 3.4 percent from a prediction of up to 2 percent growth earlier.

Perkins said that, if met, that would be Target’s strongest quarterly gain since the first quarter of 2012.

“Our holiday season performance reflects meaningful investments in our team, increasing wages, staffing and training to deliver elevated service and expertise,” Target Chief Executive Brian Cornell said in a statement.

Target is the latest in a run of relatively upbeat holiday sales numbers from brick-and-mortar retailers who have suffered most from the huge gains made by Amazon.com <AMZN.O> and other online retailers over the past decade.

Shares of department store chain Kohl’s on Monday surged after it reported a 6.9 percent rise in same-store sales for the same months.

Target said same-store sales in November and December saw strong gains in all five of its core merchandise categories: home, apparel, food & beverage, hardlines and essentials.

Kitchen items from brands like Threshold, KitchenAid and Keurig, and cordless vacuums from Roomba and Dyson were popular gifting items. An exclusive furniture and household goods brand co-designed by TV personalities Chip and Joanna Gaines was a hit after launching in November, the company said.

The company’s profit forecast includes a 6 to 8 cent benefit from the newly-approved reduction in Federal corporate tax rates.

(Reporting by Siddharth Cavale and Vibhuti Sharma in Bengaluru; Editing by Bernard Orr)

Infosys signs agreement with U.S. IRS; sees lower tax rate

FILE PHOTO: The logo of Infosys is pictured inside the company’s headquarters in Bengaluru, India, April 13, 2017. REUTERS/Abhishek N. Chinnappa/File Photo

(Reuters) – Indian software services company Infosys Ltd <INFY.NS> on Tuesday said it has signed an agreement with the U.S. Internal Revenue Service (IRS), resulting in an effective tax rate of about 100 basis points lower going forward.

The Advanced Pricing Agreement (APA), now concluded following discussions initiated in 2015, is expected to result in reversal of tax provisions of about $225 million made in the previous periods and boost the company’s consolidated basic earnings per share by about $0.10 for quarter ended December 31, the Bengaluru-based company said in a statement. http://bit.ly/2mbawWj

APA is an agreement between a taxpayer and the tax authority defining an appropriate methodology for computing taxable income.

The agreement covers financial years from 2011 to 2021 and the company expects to payout about $233 million over the next few quarters due to difference between taxes payable as per APA and the actual amount paid in the prior periods.

The APA will enhance predictability of company’s tax obligations in respect to U.S. operations, Infosys added.

(Reporting by Vishal Sridhar in Bengaluru; Editing by Vyas Mohan)

U.S. bank gains from tax law start with red ink

Lower Manhattan including the financial district is pictured from the Manhattan borough of New York, U.S. June 1, 2016. REUTERS/Carlo Allegri/File Photo

By David Henry and Catherine Ngai

NEW YORK (Reuters) – U.S. bank executives and investors expect a long-term boost from the new federal tax code, but the biggest lenders will first need to book multi-billion-dollar charges that will muddle fourth-quarter results.

Banks will adjust deferred tax assets and liabilities to account for a lower corporate rate, and also take charges related to other tax changes. But analysts said the overall benefit from lower taxes will make up for any short-term hit.

Citigroup Inc <C.N> could report a quarterly loss of more than $15 billion and Goldman Sachs Group Inc <GS.N> will likely have lost about $3 billion, based on analyst estimates and recent profit warnings.

JPMorgan Chase & Co, <JPM.N> which reports first on Friday morning, could show a 35 percent plunge in net income from a year earlier. Bank of America Corp <BAC.N>, which reports the following Wednesday, could show a 50 percent drop.

“It is no doubt going to be a messy quarter,” said Jason Goldberg, bank stock analyst at Barclays.

Citigroup is expected to take a $20 billion charge, largely because its losses during the 2007-2009 financial crisis will offset future taxes less now that the corporate tax rate has been cut to 21 percent from 35 percent.

Goldman is expected to take a $5 billion charge, mostly due to a new repatriation tax on income kept outside of the United States.

Meanwhile, banks with deferred tax liabilities will be able to write those down thanks to the lower tax rates.

In an extreme case, Wells Fargo & Co <WFC.N> is expected to report a $2.5 billion boost to its bottom line largely because it will owe less tax in the future on income from a set of businesses including mortgage servicing.

But most analysts and institutional investors brush aside big one-time items, viewing them as accounting charges that reveal little about underlying financial performance or future profits.

Instead, they are confident that big banks will be largely better off from paying a lower tax rate. Still, just how much each bank will benefit will vary based on where they earn their income.

Bank of America could earn $4.5 billion, or 19 percent, more in 2019 than it would have without the lower rates, said Keefe, Bruyette & Woods analyst Brian Kleinhanzl. That would more than cover an expected $3 billion fourth-quarter charge.

But Citigroup might get a profit pickup in 2019 of only $1.7 billion, or 11 percent, Kleinhanzl said. That would be far less than the $19.7 billion he expects in total fourth-quarter charges.

Bank of America earns about 90 percent of its income in the United States, according to estimates by analyst Richard Ramsden of Goldman Sachs. Citigroup, meanwhile, has been getting only about 50 percent of its earnings at home, so will not benefit as much from lower U.S. tax rates.

Analysts plan to push executives in conference calls for clues about whether investors will benefit as much as they hope.

Banks could provide a boon by putting more money toward stock buybacks and dividends. But there is worry they will be too quick to shift those dollars towards trying to beat competitors with lower prices on loans and better services for customers.

“Banks benefit from a lower corporate tax rate,” said Barclays’ Goldberg, “but what will they do (with the extra money)?”

(Reporting by David Henry and Catherine Ngai in New York; Editing by Lauren Tara LaCapra and Meredith Mazzilli)

Oil little changed as rising U.S. output offset OPEC worries

FILE PHOTO: A pump jack operates at a well site leased by Devon Energy Production Company near Guthrie, Oklahoma, U.S., September 15, 2015. REUTERS/Nick Oxford/File Photo

By Scott DiSavino

NEW YORK (Reuters) – Oil prices were little changed on Monday, trading near their highest since May 2015, as political concerns in some OPEC nations offset projections for higher U.S. oil production.

“Oil prices are finely balanced in today’s trading session. Ongoing protests in Iran, together with recent detention of several princes in Saudi Arabia, have reinvigorated geopolitical concerns,” Abhishek Kumar, Senior Energy Analyst at Interfax Energy’s Global Gas Analytics in London.

“However, prospects for further increases in U.S. oil production amid recent improvements seen in oil prices continue to promote bearish sentiment,” Kumar said.

Brent futures <LCOc1> were up 2 cents at $67.64 a barrel by 11:58 a.m. EST, while U.S. West Texas Intermediate (WTI) crude <CLc1> rose 6 cents, or 0.1 percent, to $61.50.

Last week, both contracts rose to their highest since May 2015 with Brent at $68.27 and WTI at $62.21.

U.S. production <C-OUT-T-EIA> is expected soon to rise above 10 million barrels per day, largely thanks to soaring output from shale drillers, according to federal energy data. [EIA/M]

Only Russia and Saudi Arabia produce more.

“The U.S. oil price is now into a range that is anticipated to attract increased shale oil production,” said Ric Spooner, chief market analyst at CMC Markets in Sydney.

“Traders may decide that discretion is the better part of valor while markets wait on evidence of what happens to the rig count and production levels over the next couple of months,” Spooner said.

U.S. drillers reduced the number of oil rigs operating by five in the week to Jan. 5, the first decline in three weeks, according to a report by energy services firm Baker Hughes on Friday. [RIG/U]

Rising U.S. production is the main factor countering output cuts led by the Middle East-dominated Organization of the Petroleum Exporting Countries and by Russia, which began in January 2017 and are set to last through 2018.

A senior OPEC source from a major Middle Eastern oil producer said OPEC was monitoring unrest in Iran, as well as Venezuela’s economic crisis, but will boost output only if there are significant and sustained production disruptions from those countries.[nL8N1P33B6]

Stephen Innes, head of trading for Asia/Pacific at futures brokerage Oanda in Singapore, said “the OPEC versus shale debate will rage” this year, being a key price-driving factor.

However, Innes added that Middle East turmoil would remain a key focus for oil markets and had the potential to “send oil prices rocketing higher.”

(Additional reporting by Dmitry Zhdannikov in London, Henning Gloystein and Florence Tan in Singapore; editing by Dale Hudson and Marguerita Choy)

Kohl’s outstrips peers in best holiday season in years

FILE PHOTO: A sign marks a Kohl’s store in Medford, Massachusetts, U.S., February 21, 2017. REUTERS/Brian Snyder/File Photo/File Photo

By Vibhuti Sharma and Siddharth Cavale

(Reuters) – Kohl’s Corp posted far stronger same-store sales for the holidays than its bigger peers, as a revamp of its business model and a strategy to have more stand-alone department stores rather than at struggling shopping malls paid off.

Kohl’s shares jumped nearly 9 percent to $59.07 on Monday, their highest since December 2016, after the retailer reported a 6.9 percent rise in same-store sales for November and December, putting it on track for its best holiday quarter in three years.

Analysts said that came courtesy of a revamp of Kohl’s beauty departments and an increase in space for Under Armour Inc’s sportswear, as well as a direct partnership with Amazon.com to sell its smart-home products.

Store checks by industry research firm Retail Metrics also showed Kohl’s was one of the busiest department chains during the holiday season due to its mix of low price private-label apparel offerings and desirable national brands.

“Even if Kohl’s has a very weak January, (it) is poised to turn in its strongest quarterly same store sales gain in at least 3 years,” said Retail Metrics President Ken Perkins.

Kohl’s same-store sales growth topped the 1-4 percent increase posted by J.C. Penney Co Inc and Macy’s Inc. Shares of Macy’s, among the biggest victims of the shift to online shopping, fell 2.4 percent. Those of JC Penney were up 1.2 percent, reversing from a drop of nearly 1 percent.

“Unlike peers JCP and Macy’s, Kohl’s enjoyed consistent results in both November and December, with traffic in store positive while digital sales came in well ahead of the year-to-date trend,” Gordon Haskett analyst Chuck Grom said.

The figures follow a MasterCard Advisors report in late December that showed shoppers spent more than $800 billion in stores and online between Nov. 1 and Dec. 24, a new record.

Separately, Canadian sportswear chain Lululemon Athletica Inc said the holiday season was better than it had expected and raised its profit and revenue forecasts for the fourth quarter.

Kohl’s said it now expects fiscal 2017 earnings per share to come in between $4.10 and $4.20, versus its previous forecast of $3.72 to $3.92.

Analysts on average were expecting a profit of $3.64, according to Thomson Reuters I/B/E/S.

The company also said its guidance did not include the impact of recent changes in U.S. corporate taxes, which are expected to benefit its effective tax rate and generate a favorable non-cash tax benefit.

(Reporting by Vibhuti Sharma in Bengaluru; Editing by Saumyadeb Chakrabarty and Savio D’Souza)

Williams paints benign picture of Fed rate hikes, strong U.S. economy

FILE PHOTO – San Francisco Federal Reserve President John Williams speaks to Reuters in San Francisco, California, U.S. on September 27, 2016. REUTERS/Stephen Lam/File Photo

By Jonathan Spicer and Howard Schneider

PHILADELPHIA (Reuters) – The Federal Reserve should raise interest rates three times this year given the already strong economy will get a boost from tax cuts, and can tighten more or less aggressively if needed, a key U.S. rate-setter said on Saturday.

In an interview, San Francisco Fed President John Williams painted a benign picture of the world’s largest economy operating at or near its full capacity over the next few years.

While his colleagues at the U.S. central bank see unemployment dipping only slightly from 4.1 percent currently, Williams predicted it would fall to 3.7 percent this year without any risk of a worrisome jump in inflation.

The comments from Williams, a veteran policymaker at a time of an unprecedented leadership overhaul at the Fed, suggest the central bank remains confident in its approach after a year of gradual tightening even in the face of the $1.5-trillion tax-cut bill passed last month.

“We’re in a pretty good situation: the economy is doing great, everyone expects us to raise rates gradually … and if the data change we can respond to that,” said Williams, who has a vote on policy this year under a rotation.

“I’m not worried about inflation suddenly taking off,” he told Reuters over lunch during an American Economic Association conference in Philadelphia. “Something like three rate hikes makes sense to me” this year, he added.

The U.S. central bank hiked rates three times in 2017 in response to robust growth and falling unemployment, despite sagging inflation which has fallen short of a 2 percent goal for more than five years.

Median forecasts from Fed officials see three more hikes in 2018 as the tax stimulus, including cuts for corporations and individuals, seeps into the economy.

The Trump administration argues the tax cuts will boost both business and consumer spending. But the individual income tax cuts are skewed toward higher-income households, which economists say have a low propensity to consume more as taxes fall.

Many economists also believe companies will use much of the windfall on stock buybacks and debt reduction rather than capital expenditure.

Williams said the cuts should have a “modest, positive effect” on economic growth over the next three years due to consumer spending and business investment. He expects gross domestic product growth of 2.5 percent in 2018, in line with overall Fed estimates, as well as a modest boost to the labor force and productivity, which has been surprisingly weak through the recovery from recession.

The U.S. economy will be “in a very positive place two years from now: I think we’ll be at 2 percent inflation and around 4 percent unemployment,” Williams said.

(Reporting by Jonathan Spicer and Howard Schneider; Editing by Meredith Mazzilli)

SEC probing Kushner Cos use of wealthy investor visas: WSJ

FILE PHOTO: U.S. President Donald Trump passes his adviser and son-in-law Jared Kushner during a Hanukkah Reception at the White House in Washington, U.S., December 7, 2017. REUTERS/Kevin Lamarque

(Reuters) – The real estate company of Jared Kushner, President Donald Trump’s senior adviser and son-in-law, is being investigated by the U.S. Securities and Exchange Commission for its use of a federal program that grants visas to wealthy foreigners investing in the United States, the Wall Street Journal reported on Saturday.

Kushner Cos was asked by the SEC for information on its use of the visa program, known as EB-5, in May 2017, according to a person the Journal said was familiar with the matter.

The EB-5 visa is a method for eligible immigrants to become lawful permanent residents, or “green card” holders, by investing at least $500,000 into a business in the United States that will employ 10 or more American workers. Most holders are wealthy Chinese individuals.

The Journal said the company also received a separate request from New York federal prosecutors in the same month for information on development projects financed in part by the EB-5 program.

Kushner, the White House and New York prosecutors did not reply to requests for comment from Reuters. The SEC could not be reached for comment.

“As we said months ago, we are cooperating with all government requests for information about our past legal use of the EB-5 program,” a Kushner Cos representative said in a statement to Reuters.

The exact subject of the SEC’s inquiry, or whether it identified particular projects, is not clear, the Journal reported.

The Kushners’ use of EB-5 visas to raise cash to finance developments came to broad attention in May last year, when Kushner’s sister, Nicole Kushner, spoke at a publicly advertised event in Shanghai to attract Chinese investment into a two-tower luxury apartment complex in New Jersey, called One Journal Square, being developed jointly by Kushner Cos and KABR Group. The company later apologized for mentioning Jared Kushner’s name while wooing investors.

The developers were seeking to raise $150 million, or 15.4 percent of funding for the project, from investors through the EB-5 visa program, according to marketing materials posted by the event’s organizer, immigration agency Qiaowai, Reuters reported at the time.

Kushner Cos is not a publicly traded company but the EB-5 is considered a securities offering, the Journal said, hence the SEC’s interest.

Kushner resigned from his role leading Kushner Cos when he was appointed Trump’s senior White House adviser early last year but still owns a stake in parts of the business, according to his most recent personal financial disclosure form, the Journal said

VW U.S. sales chief quits amid falling deliveries

FILE PHOTO: A Volkswagen logo is pictured at Volkswagen’s headquarters in Wolfsburg, Germany, April 22, 2016. REUTERS/Hannibal Hanschke/File Photo

BERLIN (Reuters) – A senior U.S. sales manager has quit Volkswagen’s <VOWG_p.DE> North America operations just as the carmaker’s deliveries in the world’s second-largest auto market fall steeply.

Ron Stach, senior vice president of sales at Volkswagen of America, has left the automaker, a spokesman for VW in the United States said on Saturday, confirming a report by Automotive News.

He declined comment on the reason for Stach’s departure. A spokesman at VW’s global headquarters in Wolfsburg didn’t return calls seeking comment.

Stach, who joined VW’s North America operations in 2006 and previously worked at Mazda Motor Corp’s <7261.T> division in the region, couldn’t be reached for comment.

VW said last Wednesday that its U.S. sales rose 5.2 percent to 339,676 brand models last year but plunged 19 percent in December after posting their first monthly drop in 2017 in November.

The world’s largest automaker by sales is keen to end losses in the United States by the end of the decade, counting on a series of higher-margin new models and structural changes as it struggles to draw a line under its diesel emissions test cheating scandal which broke in the United States in 2015.

Stach became vice president of sales in March 2016, the same month that Michael Horn, the carmaker’s then-CEO of North American operations, resigned.

During VW’s initial response to the emissions scandal, Horn was the carmaker’s public face in the United States, apologizing days after the scandal became public on Sept. 18, 2015 and testifying before Congress.

Stach will be replaced temporarily by Derrick Hatami who joined VW of America last June as executive vice president for sales and marketing, VW said.

(Reporting by Andreas Cremer; Editing by Stephen Powell and Adrian Croft)

CES kicks off with no lead women speakers or code of conduct

Workers walk through Las Vegas Convention Center lobby as they prepare for the 2018 CES in Las Vegas, Nevada, U.S. January 5, 2018. REUTERS/Steve Marcus

By Salvador Rodriguez and Paresh Dave

SAN FRANCISCO (Reuters) – The technology industry’s premier annual gathering kicks off next week with no women leading the keynote sessions and no code of conduct that might prevent incidents of sexual harassment, despite efforts by organizers to cast the show as a more inclusive event.

CES, the showcase for the latest consumer electronics from televisions to self-driving cars, is known for mostly male attendees and female models known as ‘booth babes’ showing off the new technology.

It has attracted criticism for not making itself more welcoming for women or toning down its sexualized atmosphere even as the issue of harassment and assault has grabbed headlines in the last six months and propelled the #MeToo movement into life.

“The fact that this large global gathering of tech leaders is totally ignoring this issue makes them completely tone deaf and irresponsible,” said Liliana Aide Monge, chief executive of California coding school Sabio, who is skipping CES for the second year in a row because of the lack of women and minority speakers.

The organizers of CES, which opens its doors to nearly 200,000 attendees in Las Vegas on Tuesday, drew criticism last month from executives at Twitter Inc <TWTR.N> and other tech companies for a keynote list dominated by white men. CES made a concerted push to diversify its entire speaker lineup, but ultimately failed to find a high-ranking female executive for an individual keynote address.

“To keynote at CES, the speaker must head (president/CEO level) a large entity who has name recognition in the industry,” said Karen Chupka, who oversees the event as senior vice president at the Consumer Technology Association (CTA), in a blog post a month ago. “As upsetting as it is, there is a limited pool when it comes to women in these positions. We feel your pain. It bothers us, too. The tech industry and every industry must do better.”

On top of that, CES also will go forward without creating a code of conduct, a mechanism several conferences in technology and other industries have adopted in recent years to set rules for behavior for attendees, from guidelines on using inclusive language in presentations to requirements that attendees wear name tags at all events, even after hours, to deter misconduct.

“It’s sad that CES doesn’t have a code of conduct,” said Y-Vonne Hutchinson, founder of ReadySet, a diversity-focused consulting firm. “They have a lot of influence. If they’re choosing not to leverage that to promote diversity and inclusion at large, that communicates to the rest of the industry that maybe it isn’t as necessary as we keep saying that it is.”

HIGH STAKES

Evidence of the effect on shows’ safety and tone is mostly anecdotal, but several conferences with these codes, including hacker convention DEF CON, CoreOS Fest and Cloud Foundry Summit, say they have removed attendees after reports of harassment.

The stakes are high for the technology industry, rocked in the past year by a sexual harassment scandal at Uber Technologies Inc [UBER.UL] and misconduct by some prominent Silicon Valley investors.

The organizers of CES say they expect attendees to heed their own companies’ standards of business conduct and will kick out anyone who behaves poorly, but will not introduce a set of guidelines.

“We don’t necessarily have specific rules because we assume everyone will be held accountable to the standards of being in an office,” said Chupka.

“Unacceptable” behavior would be addressed by the executive team and legal counsel as necessary, the CTA said. “We have the right at any time to revoke a show badge and/or trespass an individual.” CES notes that it has received no reports of sexual harassment at the event in recent years.

Women subjected to uncomfortable situations at or near past CES gatherings told Reuters that they did not report incidents because they were too used to it or did not recognize there was a way to do so.

To change that thinking, the show is debuting a security app that lets attendees report issues from crimes to broken elevators. While there will be no effort to promote the app specifically as a way to report sexual harassment, attendees may do so, and CES said its lawyers will be ready to act.

SLUSH CODE

The need for a code of conduct became apparent at Finland’s Slush tech startup event in 2016 when multiple women spoke up about being inappropriately touched and receiving unwanted propositions for sex by male attendees as well as being ignored by investors who were only interested in working with male entrepreneurs.

The following year, it doubled security, trained staff on how to handle reports of harassment and instituted a code of conduct, including a requirement to wear name badges at all times as a way to make it easier for attendees to identify a harasser.

A similar approach has been adopted by some in the U.S. tech industry. Salesforce.com Inc’s <CRM.N> Dreamforce event, second only to CES in attendee numbers, added a code of conduct in 2014, while film, tech and music conference South by Southwest added one in 2016. Meanwhile, large conferences run by Oracle Corp <ORCL.N> and RSA Security have not adopted such a code.

It remains to be seen if CES’s lack of a code of conduct will prove costly.

Las Vegas’ reputation for excess is part of the problem, said Liz Lopez, a tech marketing professional who has attended several industry conferences in the city.

“People are over the edge in their behavior when they’re in Vegas,” she said.

(Editing By Peter Henderson and Bill Rigby)

Morgan Stanley to take $1.25 billion hit in the fourth quarter from the tax bill

FILE PHOTO: The Morgan Stanley logo is displayed at the post where it is traded on the floor of the New York Stock Exchange (NYSE) in New York, U.S., April 19, 2017. REUTERS/Brendan McDermid

(Reuters) – Morgan Stanley <MS.N> said on Friday it would take a $1.25 billion hit in its fourth-quarter earnings due to a cut in corporate tax rate as part of the U.S. tax code overhaul.

The net blow of the bill to the bank will include about a $1.4 billion net discrete tax provision, mainly due to the remeasurement of certain net deferred tax assets using the lowered corporate tax rate, the company said in a filing.

It would be offset by $160 million in other positive effects, Morgan Stanley added.

The sweeping tax code changes enacted in late December cuts the corporate tax rate to 21 percent from 35 percent and were expected to mean short-term pain, but long-term gain for U.S.-based corporations.

Scores of large companies, including big banks such as Citigroup <C.N> and JPMorgan Chase & Co <JPM.N>, have socked away an estimated $2.8 trillion overseas in recent years.

The one-time tax on those earnings is expected to raise $339 billion in federal revenues over the coming decade, according to the Joint Committee on Taxation (JCT), a nonpartisan research arm of the U.S. Congress.

Morgan Stanley’s arch rival Goldman Sachs Group Inc <GS.N> had said on Dec. 29 it expects its fourth-quarter earnings to decrease by about $5 billion due to repatriation tax, the cost of moving money from foreign countries to the U.S., Goldman said in a filing.

(Reporting by Diptendu Lahiri in Bengaluru; Editing by Arun Koyyur)

Uber ex-CEO Kalanick selling nearly a third of stake for $1.4 billion: source

FILE PHOTO: Uber CEO Travis Kalanick speaks to students during an interaction at the Indian Institute of Technology (IIT) campus in Mumbai, India, January 19, 2016. REUTERS/Danish Siddiqui/File Photo

By Liana B. Baker and Heather Somerville

(Reuters) – Uber Technologies Inc co-founder Travis Kalanick, who was ousted as chief executive in June, is selling nearly a third of his 10 percent stake in the ride-services company for about $1.4 billion, a person familiar with the matter said on Thursday.

Kalanick’s sale is part of a deal struck by a consortium led by SoftBank Group Corp which is taking a 17.5 percent stake in Uber, mostly by buying shares from early investors and employees. SoftBank last week secured agreements from shareholders who were willing to sell, and the deal will close early this year, Uber said.

The SoftBank deal values Uber at $48 billion, about a 30 percent discount from its most recent valuation of $68 billion. However, the investor consortium is also making a $1.25 billion investment of fresh funding at the older, higher valuation.

Kalanick had offered to sell half of his total shares, but because there was a limit on how much SoftBank will buy, he will sell just 29 percent, according to the source. Other investors also did not get to unload as many shares as they had hoped because of such widespread interest to sell.

The former CEO owns 10 percent of the company, which means his sale will unload 2.9 percent of Uber shares and earn him about $1.4 billion, the source added.

A spokesman for Kalanick declined to comment. SoftBank and Uber could not be reached immediately for comment.

The sale would make the Uber co-founder a billionaire for the first time, not just on paper. Kalanick has never before sold shares of the company he ran for almost a decade, the source said.

The SoftBank deal offers investors and employees what could be their last chance to sell shares in a company-approved transaction before Uber’s long awaited initial public offering, planned for 2019.

The transaction marks a victory for new CEO Dara Khosrowshahi, who helped broker the deal and who will benefit from a deep-pocketed investor like SoftBank.

Bloomberg first reported Kalanick’s plans to sell part of his stake.

(Reporting by Liana B. Baker and Heather Somerville in San Francisco; Additional reporting by Philip George in Bengaluru; Editing by Lisa Shumaker and Muralikumar Anantharaman)

Dow breaks above 25,000 for first time

A board shows the Dow Jones Industrial Average as it rises above 25,000 on the floor of the New York Stock Exchange shortly after the opening bell in New York, U.S., January 4, 2018. REUTERS/Lucas Jackson

By Sruthi Shankar

(Reuters) – The Dow Jones Industrial Average sailed past the 25,000-mark for the first time on Thursday, while other major indexes rose to new highs after a strong private jobs report added to a bullish sentiment from indications of robust growth in major economies.

The ADP National Employment Report showed that U.S. private employers added 250,000 jobs in December, marking the biggest monthly increase since March, and much above the 190,000 job additions forecast by economists polled by Reuters.

A more comprehensive non-farm payrolls report on Friday is expected to show the economy added 190,000 jobs in December, down from the 228,000 additions in November.

“Economic data tomorrow is not going to be tremendously spectacular, but what we’re seeing is very positive growth, a good economic backdrop that gives people more confidence in corporate earnings,” said Aaron Anderson, senior vice president of research at Fisher Investments.

The Federal Reserve affirming its view of gradual interest rate hikes this year in minutes released on Wednesday also supported the sentiment.

At 9:37 a.m. ET (1437 GMT), the Dow Jones Industrial Average <.DJI> was up 93.26 points, or 0.37 percent, at 25,015.94 and the S&P 500 <.SPX> was up 9.54 points, or 0.35 percent, at 2,722.6. The Nasdaq Composite <.IXIC> was up 31.71 points, or 0.45 percent, at 7,097.24.

World stocks also hit records, driven by strong manufacturing and services sector data in major economies.

Seven of the 11 major S&P sectors were higher, led by gains in the financial index <.SPSY>.

Wells Fargo <WFC.N> rose about 2 percent, JPMorgan <JPM.N> 1.3 percent and Goldman Sachs <GS.N> 1 percent, as the strong data raised the odds of further rate hikes.

Shares of department store operators J.C. Penney <JCP.N> and Macy’s <M.N> were down more than 5 percent after the companies reported same-store sales during the key selling months of November and December.

Tesla’s shares <TSLA.O> slipped 2.7 percent after the electric car maker delayed a production target for its new Model 3 sedan for the second time.

Sprint <S.N> shares fell about 5 percent after the wireless carrier appointed former Altice NV Chief Executive Michel Combes as chief financial officer.

Victoria’s Secret-owner L Brands <LB.N> slid 13 percent on disappointing quarterly earnings forecast.

Advancing issues outnumbered decliners on the NYSE by 1,820 to 736. On the Nasdaq, 1,787 issues rose and 638 fell.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Sriraj Kalluvila)

U.S. private payrolls growth accelerates; jobless claims up

FILE PHOTO: Recruiters and job seekers are seen at a job fair in Golden, Colorado, June 7, 2017. REUTERS/Rick Wilking

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. private employers stepped up hiring in December and planned layoffs by American-based companies fell sharply, pointing to sustained labor market strength that likely keeps the Federal Reserve on course to increase interest rates in March.

Other data on Thursday showed a third straight weekly rise in first-time applications for unemployment benefits, though that probably reflected volatility around the end-of-year holidays.

The Labor Department said claims data for some states, including California, Massachusetts, North Carolina and Virginia, had been estimated. The labor market is near full employment, with the jobless rate at a 17-year low of 4.1 percent.

“Higher jobless claims are not signaling a slowdown in the economy, that’s for sure,” said Chris Rupkey, chief economist at MUFG in New York. “The labor market looks strong and the outlook for 2018 is even better.”

The ADP Research Institute said private payrolls increased by 250,000 jobs in December, the biggest gain since March, and well above economists’ expectations for a rise of 190,000.

The ADP National Employment Report is jointly developed with Moody’s Analytics.

The gains in employment were broad-based last month. Manufacturing payrolls rose by 9,000 and employment in the construction sector increased by 16,000. The service-providing industries added another 222,000 jobs last month.The ADP report was released ahead of the Labor Department’s more comprehensive employment report on Friday. According to a Reuters survey of economists, nonfarm payrolls probably rose by 190,000 jobs in December after a gain of 228,000 in November.

The tightening labor market encouraged the Fed to raise interest rates three times last year despite inflation persistently undershooting the U.S. central bank’s 2 percent target.

Minutes of the Fed’s Dec. 12-13 policy meeting published on Wednesday showed officials upbeat about the economy and labor market prospects. They viewed economic activity as “rising at a solid rate,” and the labor market as continuing to strengthen.[nW1N1LO001]

The Fed has forecast three rate hikes for 2018. Some economists, however, expect the central bank to lift borrowing costs four times this year, citing the impact of the $1.5 trillion in tax cuts passed by the Republican-led Congress and signed into law by President Donald Trump last month.

LAYOFFS DECLINE

In a separate report on Thursday, global outplacement consultancy Challenger, Gray & Christmas said U.S.-based employers announced 32,423 job cuts in December, a 7.4 percent decrease from November. That brought the total number of layoffs in 2017 to 418,770, the fewest since 1990. Employers announced 526,915 job cuts in 2016.

The dollar rose against the yen and trimmed losses versus the euro after the ADP report. Major stock indexes on Wall Street hit fresh record highs in early morning trading, while prices for U.S. Treasuries fell.

In a third report, the Labor Department said initial claims for state unemployment benefits increased 3,000 to a seasonally adjusted 250,000 for the week ended Dec. 30.

Last week marked the 148th straight week that claims remained below the 300,000 threshold, which is associated with a strong labor market. That is the longest such stretch since 1970, when the labor market was much smaller.

The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, increased by 3,500 to 241,750 last week.

“Seasonal adjustment is especially challenging around year-end,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, New York. “Through the volatility, the data continue to signal strength in employment growth.”

Thursday’s claims report also showed the number of people receiving benefits after an initial week of aid dropped by 37,000 to 1.91 million in the week ended Dec. 23. The four-week moving average of the so-called continuing claims rose by 750 to 1.92 million.

(Reporting by Lucia Mutikani; Additional reporting by Richard Leong in New York; Editing by Paul Simao)

Oil hits highest since 2015 as Iran unrest spooks market

FILE PHOTO: A pumpjack brings oil to the surface in the Monterey Shale, California, April 29, 2013. REUTERS/Lucy Nicholson/File Photo

By Alex Lawler

LONDON (Reuters) – Oil rose above $68 a barrel to its highest since May 2015 on Thursday after unrest in Iran raised concerns about supply risks, with support also coming from OPEC-led output cuts and demand-boosting cold weather in the United States.

Six days of anti-government protests in OPEC’s third-largest producer have added a geopolitical risk premium to oil prices, though Iran’s production and exports have not been affected.

Brent crude <LCOc1>, the international benchmark, was down 11 cents at $67.73 a barrel by 1455 GMT but traded as high as $68.27 earlier in the session. U.S. crude <CLc1> rose 4 cents to $61.67 and also touched its highest since May 2015.

“There is enough support for prices with the cold in the U.S. and the geopolitical factor,” said Petromatrix oil analyst Olivier Jakob.

Freezing weather in the United States has spurred short-term demand, especially for heating oil.

Apart from the spike in May 2015, oil is trading at its highest since December 2014 – the month after a decision by the Organization of the Petroleum Exporting Countries to stop cutting output to support prices.

Analysts at JBC Energy said the price reaction to the Iranian unrest was overdone, while Swiss bank Julius Baer said prices projected “an overly rosy picture” that left the market at risk of profit-taking.

OPEC, supported by Russia and other non-members, began to reduce output a year ago to remove a glut built up in the previous two years. Compliance has been high, aided by involuntary declines in Venezuela, where the economy is collapsing, plus unrest in Nigeria and Libya.

Producers have decided to extend the supply pact until the end of 2018.

OPEC’s cuts are helping reduce global inventories. In the United States crude stocks fell by 5 million barrels in the latest week, the American Petroleum Institute said on Wednesday before the government’s supply report later on Thursday. [EIA/S]

Byron Wien of Blackstone listed the prospect of U.S. crude topping $80 as one of 10 potential shockers for investors in 2018 in his annual list of surprises.

Balancing the trend towards a tighter market is higher production in the United States, where the OPEC-led effort to push prices up is spurring more shale oil output.

(Addtional reporting by Henning Gloystein; Editing by Mark Potter and David Goodman)

Tesla Model 3 delay raises cashflow risks, but analysts upbeat

The Tesla logo is seen at the entrance to Tesla Motors’ new showroom in Manhattan’s Meatpacking District in New York City, U.S., December 14, 2017. REUTERS/Brendan McDermid

By Munsif Vengattil and Laharee Chatterjee

(Reuters) – Tesla Inc <TSLA.O> shares fell as much as 3.6 percent on Thursday, setting the company up to lose nearly $1.9 billion in market value after it pushed back a production target for its much-anticipated Model 3 sedan yet again.

Analysts stayed upbeat, saying the electric car maker had finally set an achievable target for their mass-market sedan that is priced at $35,000. Investors, however, are likely to focus on how the delay will impact Tesla’s cashflow, a big challenge for many quarters now.

Tesla said on Wednesday it would likely build about 2,500 Model 3s per week by the end of the first quarter, half the number it had earlier promised. The company now expects to reach its goal of 5,000 vehicles per week by the end of the second quarter.

“With absolute Model 3 sales tracking behind expectations and Model 3 gross margin improvement likely to be pushed out until production reaches greater scale, the expected cash tailwind from Model 3 will take longer to manifest itself than was anticipated,” Evercore ISI analyst George Galliers said in a note.

Tesla, headed by Elon Musk, has been struggling to overcome production bottlenecks and reported its biggest-ever quarterly loss in the July-September quarter.

The company burned through $1.1 billion in cash in that quarter and said in November it would spend roughly the same amount in the fourth quarter. It had about $3.5 billion in cash and cash equivalents as of Sept. 30.

Chief Financial Officer Deepak Ahuja had reassured investors that cash flow would “improve significantly” over the next few quarters as Tesla continued to ramp up Model 3 production.

Tesla shares fell to $305.68 in morning trading on Thursday. The median price target on the stock is $310 and eight of 25 brokerages covering the stock rate it “buy” or higher. Eight have a “hold” rating and the rest a “sell” or lower.

“We believe that Tesla may have finally set a beatable production target,” Nomura Instinet analyst Romit Shah said in a note.

“Importantly, we believe that Tesla is prioritizing quality control. While Tesla’s repeated guidance revisions could begin to risk damaging its elite brand, a mass-recall would probably be far more damaging,” he said.

Tesla’s luxury Model S sedans and Model X SUVs regularly require fixes before they can leave the factory and quality checks have routinely revealed defects in nearly all of these models inspected after assembly, Reuters reported in November, citing sources.

Tesla has maintained that its quality control process is unusually rigorous.

Analysts said on Thursday they continue to believe that sales of the Model 3 sedan could transform the niche automaker into a mass producer, giving it an edge over a host of rivals such as General Motors Co <GM.N> and BMW <BMWG.DE> who are entering the nascent electric car market.

“Given that TSLA received over 400k Model 3 reservations with essentially no marketing, we believe potential demand for the vehicle is likely underestimated, and think TSLA could significantly increase demand through its own advertising in the future,” Baird Equity Research analyst Ben Kallo said.

(Reporting by Munsif Vengattil and Laharee Chatterjee in Bengaluru; Editing by Sayantani Ghosh)

Intel extends losses as worries over chip security linger

FILE PHOTO: Intel’s logo is pictured during preparations at the CeBit computer fair, which will open its doors to the public on March 20, at the fairground in Hanover, Germany, March 19, 2017. REUTERS/Fabian Bimmer/File Photo

(Reuters) – Intel Corp <INTC.O> shares fell as much as 5 percent on Thursday, marking their biggest one-day drop in more than a year, a day after a report said mobiles and computers using its chips were vulnerable to being hacked.

Intel’s shares were trading at $43.16 in heavy early morning trading. They closed down 3.4 percent on Wednesday.

Security researchers on Wednesday disclosed a set of flaws that they said could let hackers steal sensitive information from nearly every modern computing device that uses chips from Intel, Advanced Micro Devices Inc <AMD.O> and ARM Holdings.

Intel said it has started providing software and firmware updates to mitigate the security issues, which it claimed would not have any financial or market-share impact.

The chipmaker said the issue was not a design flaw, but it would require users to download a patch and update their operating system.

“We believe the impact to Intel’s financials and long-term market share is minimal,” Instinet analyst Romit Shah wrote in a note.

Evercore analysts agreed with Shah and said they do not expect a material impact as Intel has previously has provided patches for several bugs without causing financial repercussions.

Morgan Stanley analysts said the concerns over the decline in performance of its chips due to the flaws were overblown.

“We see this as primarily a public relations issue, rather than a business issue,” the analysts wrote in a note.

(Reporting by Siddharth Cavale in Bengaluru; Editing by Sayantani Ghosh and Arun Koyyur)

U.S. factory activity accelerates; construction spending at record high

FILE PHOTO: Construction is seen in downtown Los Angeles, California U.S. November 28, 2017. REUTERS/Lucy Nicholson

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. factory activity increased more than expected in December, boosted by a surge in new orders growth, in a further sign of strong economic momentum at the end of 2017.

The economy’s robust fundamentals were also underscored by other data on Wednesday showing construction spending rising to a record high in November amid broad gains in both private and public outlays.

The Institute for Supply Management (ISM) said its index of national factory activity jumped to a reading of 59.7 last month from 58.2 in November. A reading above 50 indicates growth in manufacturing, which accounts for about 12 percent of the U.S. economy.

The survey’s production sub-index rose 1.9 points to a reading of 65.8 and a gauge of new orders shot up 5.4 points to 69.4. Manufacturers also reported an increase in export orders. A measure of factory employment, however, fell to 57.0 last month from 59.7 in November.

Manufacturing is likely to get a boost this year from a $1.5 trillion tax cut approved by the Republican-controlled U.S. Congress last month. The overhaul of the tax code, the most sweeping in 30 years, slashed the corporate income tax rate to 21 percent from 35 percent.

Business spending surged in anticipation of the corporate tax cuts. Recent weakness in the dollar and a strengthening global economy are expected to buoy exports of U.S.-made goods, which would underpin manufacturing.

The dollar rose against the euro and yen after Wednesday’s data. U.S. stock indexes hit new record highs, while prices of U.S. Treasuries were mixed.

SOLID ECONOMIC OUTLOOK

In a separate report on Wednesday, the Commerce Department said construction spending rose 0.8 percent to an all-time high of $1.257 trillion in November. Construction spending advanced 2.4 percent on a year-on-year basis.

The manufacturing and construction reports added to data ranging from the labor market to housing and consumer spending in sketching a robust picture of the U.S. economy.

Gross domestic product estimates for the fourth quarter are converging around a 2.8 percent annualized rate. The economy grew at a 3.2 percent pace in the third quarter.

In November, spending on private residential projects soared 1.0 percent to the highest level since February 2007 after rising 0.3 percent in October. The increase was in line with a recent jump in homebuilding and supports the view that housing would boost economic growth in the fourth quarter after acting as a drag on gross domestic product since the April-June period.

Spending on nonresidential structures rebounded 0.9 percent in November after falling 0.2 percent in the prior month. Overall, spending on private construction projects climbed 1.0 percent in November to a record high. That followed a 0.3 percent increase in October.

Outlays on public construction projects rose 0.2 percent in November after jumping 3.5 percent in October. Spending on state and local government construction projects rose 0.7 percent. Federal government construction spending tumbled 4.8 percent.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Design flaw found in Intel chips; fix causes them to slow: report

FILE PHOTO – The Intel logo is shown at the E3 2017 Electronic Entertainment Expo in Los Angeles, California, U.S. June 13, 2017. REUTERS/ Mike Blake

By Douglas Busvine

FRANKFURT (Reuters) – A design flaw has been found in microprocessors made by Intel Corp <INTC.O> that requires updates to computer operating systems, a tech publication reported, adding that the fix causes the chips to operate more slowly.

The defect affects the so-called kernel memory on Intel x86 processor chips manufactured over the past decade, The Register reported citing unnamed programmers, allowing users of normal applications to discern the layout or content of protected areas on the chips.

That could make it possible for hackers to exploit other security bugs or, worse, expose secure information such as passwords, thus compromising individual computers or even entire server networks.

Intel did not immediately respond to an emailed request for comment. Microsoft declined to comment.

Shares in Intel were down by 3.4 percent in early U.S. trading following the report.

The Register said programmers working on the Linux open-source operating system were overhauling the affected memory areas, while Microsoft Corp <MSFT.O> was expected to issue a Windows patch next Tuesday.

“Crucially, these updates to both Linux and Windows will incur a performance hit on Intel products,” The Register wrote (http://bit.ly/2CsRxkj).

“The effects are being benchmarked, however we are looking at a ballpark figure of a five to 30 percent slowdown, depending on the task and the processor model.”

It was not immediately clear whether Intel would face any significant financial liability arising from the reported flaw.

“The current Intel problem, if true, would likely not require CPU replacement in our opinion. However the situation is fluid,” Hans Mosesmann of Rosenblatt Securities in New York said in a note.

Intel may end up having to indemnify harm or costs incurred by customers, and could also lose customers and faces a hit to its reputation, he added.

AMD NOT AFFECTED

Competing chip maker AMD <AMD.O> has told Linux developers by email that its chips are not vulnerable to the types of attacks that the fix for the Intel chip is intended to address by isolating the kernel memory, The Register said.

Shares in AMD jumped by 7.2 percent in early trade on Wednesday.

The bug is likely to affect major cloud computing platforms such as Amazon <AMZN.O> EC2, Microsoft Azure and Google <GOOGL.O> Compute Engine, according to one software blogger cited by The Register.

Microsoft Azure is due to undergo a maintenance reboot on Jan. 10 while Amazon Web Services has also advised customers via email to expect a major security update this Friday.

The Register also said that similar operating systems, such as Apple’s <AAPL.O> 64-bit macOS operating system, would need to be updated.

The Linux patches are based on work by researchers from the Graz University of Technology in Austria who came up with a way to split kernel and user memory spaces to eliminate the security vulnerability.

(Reporting by Douglas Busvine and Jim Finkle; Additional reporting by Laharee Chatterjee in Bengaluru; Editing by Susan Fenton)

Spotify makes confidential filing for U.S. IPO: source

Earphones are seen on a tablet screen with a Spotify logo on it, in Zenica, Bosnia and Herzegovina, February 20, 2014. REUTERS/Dado Ruvic/File Photo

By Greg Roumeliotis and Liana B. Baker

NEW YORK/SAN FRANCISCO (Reuters) – Music streaming service Spotify has filed confidentially for an initial public offering with the U.S. Securities and Exchange Commission (SEC) and is moving ahead with a direct listing in the first half of the year, a source familiar with the matter said on Wednesday.

If Spotify, with was valued at as much as $19 billion last year, goes ahead with its plans, it would make it the first major company to carry out a direct listing, an unconventional way to pursue an IPO without raising new capital.

It also mainly eliminates the need for a Wall Street bank or broker to underwrite an IPO along with many associated fees and could change the way companies approach selling shares to the public.

The confidential filing was initially reported by news outlet Axios.

Spotify is the biggest global music streaming company and counts Apple Inc <AAPL.O> and Amazon.com Inc <AMZN.O> as its main rivals. Reuters has previously reported Spotify was aiming to file for an IPO in late 2017 and list with the New York Stock Exchange early this year.

Spotify could not be reached for comment.

Spotify was sued by Wixen Music Publishing Inc last week for allegedly using thousands of songs, including those of Tom Petty, Neil Young and The Doors, without a license and compensation to the music publisher. It was unclear what the lawsuit’s effect would be on its IPO plans.

Wixen, an exclusive licensee of songs such as “Free Fallin'” by Tom Petty, “Light My Fire” by the Doors, “(Girl We Got a) Good Thing” by Weezer and works of singers such as Stevie Nicks, is seeking damages worth at least $1.6 billion along with injunctive relief.

Spotify still intends to proceed with a U.S. direct listing in the first half of 2018, despite the lawsuit, according to a source familiar with the matter. It has filed for the listing confidentially with the SEC, with Goldman Sachs, Morgan Stanley and Allen & Co helping arrange it, the source added.

(Reporting by Greg Roumeliotis in New York and Liana B. Baker in San Francisco; Editing by Meredith Mazzilli)

Automakers post lower December U.S. sales; eye taxes, rate hikes

FILE PHOTO: New cars are displayed for sale at a Chevrolet dealership in National City, California, U.S., June 30, 2017. REUTERS/Mike Blake/File Photo

By Nick Carey

DETROIT (Reuters) – Most major automakers on Wednesday reported lower December U.S. sales despite hefty consumer discounts, as higher interest rates and a new tax code cast uncertainty over their prospects in 2018.

Automakers had benefited in 2017 from the continued shift in consumer tastes away from passenger cars to far more profitable pickup trucks and SUVs, with final U.S. new vehicle sales set to come in just under the record 17.55 million in 2016.

But industry observers expect sales to edge lower again in 2018 after a long bull run, thanks to a saturated market and rising interest rates that will boost consumers’ monthly payments and reduce their purchasing power.

Last month, the Federal Reserve raised rates a quarter of a percentage point to a range of 1.25 percent to 1.50 percent and maintained its forecast of three more increases in 2018 and 2019.

It is unknown if sales will see any benefit from the sweeping tax overhaul passed by the Republican-controlled U.S. Congress. In a conference call with analysts, Ford Motor Co <F.N> said the new tax code should be a “net positive” for the industry.

Consumer discounts aimed at moving vehicles off dealer lots will likely remain a concern for the industry. Discounts of more than 10 percent of a vehicle’s sticker price can hurt resale values, in turn weighing on new vehicle sales. In December, auto consultancies J.D. Power and LMC estimated discounts had topped 10 percent for the 17th time in the last 18 months.

General Motors Co <GM.N> reported a 3.3 percent drop in sales in December, driven by a decline in lower-margin fleet sales to government agencies and rental car companies. The company’s retail sales were up 1.8 percent in December.

For the full year, GM’s sales fell 1.3 percent. The automaker said its average transaction price hit $35,400, above the industry average of $31,600.

The No. 1 U.S. automaker said it expects industry-wide U.S. new vehicle sales in 2018 “in the high 16 million-unit range.”

“This year, many consumers will see their take-home pay rise because of tax reform,” GM chief economist Mustafa Mohatarem said in a statement. “That will keep the broad economy growing, and help keep sales at very healthy levels even as the Fed increases interest rates.”

GM’s high inventory of unsold vehicles had been a concern for observers earlier in the year. The automaker said at the end of December it had 63 days supply unsold vehicles, beating its target of around 70 days supply.

Ford reported a 0.9 percent increase in sales for December, fueled by a 17 percent increase in fleet sales.

The No. 2 U.S. automaker said retail sales were down 4 percent and that lucrative pickup truck sales were 1 percent lower than in December 2016.

In late morning trading, GM shares were up 2.2 percent, Ford shares were up 0.6 percent and Fiat Chrysler was up 1.2 percent.

Fiat Chrysler Automobiles NV (FCA) <FCHA.MI> posted an 11 percent sales decrease, with retail sales dropping 3 percent. Fleet sales slumped 42 percent, in line with a company strategy over the last year to cut back on this low-margin way to offload product.

Toyota Motor Corp <7203.T> said its sales fell 8.3 percent in December, with decreases across all segments. Sales of the Japanese automaker’s passenger cars were off 12.2 percent and its luxury Lexus brand was down 13.9 percent versus December 2016.

Honda Motor Co Ltd <7267.T> posted a 7 percent drop in sales in December, driven mostly by declining passenger car sales.

(Reporting by Nick Carey; Editing by Bernadette Baum and Meredith Mazzilli)

Amazon says over 5 billion items shipped in 2017 via Prime

FILE PHOTO: Amazon boxes are seen stacked for delivery in Manhattan, New York, U.S., January 29, 2016. REUTERS/Mike Segar/File Photo

(Reuters) – Online retailer Amazon.com Inc <AMZN.O> said on Tuesday it shipped over 5 billion items worldwide via its subscription based Prime service in 2017 while adding more new members than ever before.

The e-commerce giant, which revealed its Prime shipment numbers for the first time, did not give comparable full-year shipment number for 2016.

Amazon claimed that its Fire TV Stick and voice controlled smart device Echo Dot were the best-selling products among U.S. Prime members from any manufacturer in any category across all of its product offerings.

Amazon Prime, which offers its users services like free two-day shipping for certain purchases, unlimited streaming of movies and TV shows with Prime Video, has been attracting more subscribers every year.

The company said it shipped over 1 billion items worldwide via Prime during holiday season in 2016.

Amazon Prime, which entered countries including Mexico, Netherlands, Luxembourg and Singapore last year, now is present in 16 countries around the world.

Shares of the Seattle, Washington based company were up 1.5 percent at $1,187 in afternoon trading.

(Reporting by Vibhuti Sharma in Bengaluru; Editing by Arun Koyyur)

BP takes $1.5 billion hit over U.S tax changes, joining Shell

The logo of BP is seen at a petrol station in Kloten, Switzerland October 3, 2017. REUTERS/Arnd Wiegmann

By Ron Bousso

LONDON (Reuters) – Oil giant BP <BP.L> will take a one-off $1.5 billion charge to adjust to new U.S. tax rules, joining rival Royal Dutch Shell and other companies, but expects a long-term boost from the corporate-friendly tax rates, it said on Tuesday.

The massive $1.5 trillion tax overhaul that U.S. President Donald Trump signed into law last month cuts the corporate rate from 35 percent to 21 percent and temporarily reduces the tax burden for most individuals as well.

BP, like many other international companies, said it expected a positive impact to its U.S. earnings in the long run.

But in the short term, lower tax rates will affect its deferred tax assets and liabilities, resulting in a one-off, non-cash charge of $1.5 billion to its 2017 fourth quarter results which are due to be announced on Feb. 8, it said.

“The ultimate impact of the change in the U.S. corporate income tax rate is subject to a number of complex provisions in the legislation which BP is reviewing,” BP said in a statement.

The British company’s shares were down 1.15 percent by 1534 GMT.

The adjustment will not impact BP’s cash flow in the fourth quarter.

Deferred tax assets refer in some cases to a company overpaying taxes in advance and then getting them back in the form of tax relief.

BP has large operations in oil and gas production in the Gulf of Mexico and onshore shale operations as well as refineries that can process up to 746,000 barrels per day of crude oil, according to its website.

Shell <RDSa.L> said last week it would incur a one-off charge of $2-$2.5 billion, although the new legislation would have a “favorable” impact on earnings.

On Dec. 22, Trump signed the tax overhaul into law, cutting tax rates for businesses and offering some temporary cuts for some individuals and families.

(Additional reporting by Arathy S Nair in Bengaluru; Editing by David Goodman and Mark Potter)

Hyundai Motor, Kia Motors flag slow sales recovery in 2018

Hyundai Motor Group Vice Chairman Yoon Yeo-chul speaks during the company’s New Year ceremony in Seoul, South Korea, January 2, 2018. REUTERS/Kim Hong-Ji

By Hyunjoo Jin and Joyce Lee

SEOUL (Reuters) – South Korea’s Hyundai Motor and Kia Motors on Tuesday flagged 4 percent sales growth in 2018, suggesting a slow recovery from a slump linked to their lack of SUVs in the United States and diplomatic tensions with China.

Hyundai and smaller affiliate Kia said demand was expected to soften in the U.S. and Chinese markets as they unveiled a combined sales target of 7.55 million vehicles this year, from 7.25 million vehicles last year.

“The market environment is expected to be difficult due to a slowdown in major markets like the U.S. and China, prolonged low growth in the global economy and trade protectionism in major countries,” Hyundai Motor said in a statement.

Sales slumped 7 percent last year from 2016, falling well short of the firms’ target of 8.25 million vehicles and marking their third consecutive annual miss, as buyers in China and the United States increasingly shunned sedans for SUVs.

A diplomatic row between China and South Korea over Seoul’s deployment of a U.S. missile defense system also hit the carmakers’ sales in the world’s biggest auto market, although two countries recently agreed to normalize ties.

“This year’s target for Hyundai and Kia is lower than expected. It seems to be a conservative target, reflecting a slow recovery in China and ongoing U.S difficulties,” Kim Jin-woo, an analyst at Korea Investment & Securities said.

Hyundai Motor shares ended down 4.2 percent on Tuesday, and Kia Motors stocks finished 2.1 percent lower. The broader market rose 0.5 percent.

The grim outlook came as the Korean won strengthened to a more than three-year high against the dollar on Tuesday, threatening the competitiveness of South Korean exporters as their Japanese rivals benefit from the weakening yen.

The expiration of a tax cut on small-engine cars in China also would be a negative for Hyundai’s sedan-heavy line-up, they said.

While Hyundai Motor has plans to offer more SUVs in the United States and China this year, analysts said new models such as the redesigned Santa Fe SUV may come too late in the year to significantly impact sales.

Hyundai Motor Group chairman Chung Mong-koo said in a statement it would “actively venture into” new markets like Southeast Asia, as protectionism was expected to grow elsewhere.

South Korea and the United States will hold talks on a trade deal on Jan. 5 although U.S. President Donald Trump has threatened to withdraw from the pact.

Chung, 79, skipped his annual New Year speech to employees for a second year in a row. He has not made any public appearances since December, 2016.

(Reporting Hyunjoo Jin and Joyce Lee; Editing by Stephen Coates)

Airbus delivered over 700 jets in 2017, met target: sources

FILE PHOTO: An Airbus logo is pictured during the delivery of the new Airbus A380 aircraft to Singapore Airlines at the French headquarters of aircraft company Airbus in Colomiers near Toulouse, France, December 13, 2017. REUTERS/Regis Duvignau

By Tim Hepher

LONDON (Reuters) – European planemaker Airbus <AIR.PA> delivered over 700 aircraft in 2017, breaking company records and meeting its core industrial target for the year, industry sources said.

Exact figures have been kept under wraps ahead of an announcement on January 15, but the sources said Airbus handed over a record monthly total of jets in December, surpassing the previous monthly peak of 111 seen in the closing weeks of 2016.

Coming on top of 591 deliveries posted between January and November last year, that implies deliveries of at least 703 aircraft in 2017 as a whole, up at least 2 percent from 2016.

A spokesman for Airbus declined comment.

Airbus stuck throughout 2017 to an official target of more than 700 deliveries for the year, but abandoned a more ambitious informal goal of more than 720 deliveries in October due to continued delays in engine deliveries for the A320neo family.

Airbus officials have said the delays have now eased, following a two-year wrangle with supplier Pratt & Whitney <UTX.N> over late engines for the company’s fastest-selling jet.

It is the second year in a row that Airbus has been forced to accelerate sharply in December, with that month’s deliveries accounting for at least 16 percent of the annual total.

Without disclosing numbers, Chief Operating Officer Fabrice Bregier thanked staff in a memo for “huge collective efforts” that had seen the company break records for deliveries logged both in one month and in one year, industry sources said.

Still, insiders said the strong industrial performance would be seen by many as a personal coup for Bregier, weeks before he is due to leave the company after losing a bid to succeed Chief Executive Tom Enders, who is himself leaving in 2019.

Airbus is bracing for more internal changes this year as it emerges from a top-level power struggle and rows over the handling of corruption investigations, but ended 2017 with what appears to be a grand slam performance from its current regime.

Besides ending the year on record output, Airbus is also heading for a record December in new business after soon-to-retire sales chief John Leahy announced the firming up of more than 700 orders, equivalent to a year’s production.

Both Leahy and Bregier are leaving Airbus in coming weeks, handing their responsibilities to executives from outside the planemaking inner circle: Airbus Helicopters CEO Guillaume Faury, who will replace Bregier as head of the planemaking division, and Rolls-Royce <RR.L> civil engines head Eric Schulz, who will replace Leahy after he retires later this month.

Airbus will remain in second place on deliveries in 2017 behind the world’s largest planemaker, Boeing <BA.N>, but analysts say the outcome of the order race depends on how many of the new sales make it into the end-year tally of net orders.

(Reporting by Tim Hepher; Editing by Ingrid Melander and Geert De Clercq)

Dollar starts new year in doldrums, Asia stocks in good cheer

FILE PHOTO: A man walks past an electronic stock quotation board outside a brokerage in Tokyo, Japan, September 22, 2017. REUTERS/Toru Hanai

By Wayne Cole

SYDNEY (Reuters) – The euro stood within striking distance of its 2017 peak on an ailing U.S. dollar on Tuesday, while Asian stocks began the new year close to their highest in a decade.

Sentiment was helped by news that North Korea had offered an olive branch to South Korea, with Kim Jong Un saying he was “open to dialogue” with Seoul.

Yet activity was sparse, with Japan on holiday and many investors on an extended break. MSCI’s broadest index of Asia-Pacific shares outside Japan was a fraction firmer after rising by one-third in value last year to heights last visited in 2007.

Japan’s Nikkei also had a bright 2017 with gains of 19 percent.

While Wall Street had ended Friday with modest losses, it was still a bumper year for U.S. stocks.

The benchmark S&P 500 climbed 19.5 percent during 2017, while the Dow added 25.2 percent and the Nasdaq 28.2 percent, all the best yearly performances since 2013.

Still to come on Tuesday was the Caixin survey of Chinese manufacturing which is expected to show a slight slowdown as a punishing crackdown on air pollution and a cooling property market weigh on the world’s second-largest economy.

The official Purchasing Managers’ Index (PMI) released on Sunday dipped to 51.6 in December, from 51.8 in November, though the index of non-manufacturing rose to a three-month high of 55 from 54.8 in November.

In currency markets, the dollar remained out of favor having hit a three-month low against a basket of its peers on Friday. That brought its losses for 2017 to 9.8 percent, its worse performance since 2003.

Its pain was the euro’s gain, with the single currency enjoying its strongest year against the dollar in 14 years. Early Tuesday, the euro was firm at $1.2013 and just off a three-month top of $1.2028.

Bulls were now eyeing the September peak of $1.2092, a break of which would take the euro to ground last trod in late 2014.

The euro had already broken major resistance on the yen to reach highs not seen since late 2015 at 135.51, leaving the dollar struggling at 112.74 yen.

A major hurdle for the dollar will be Wednesday’s release of minutes from the Federal Reserve’s December meeting when it raised interest rates. Two policymakers voted against the move amid doubts inflation would accelerate as hoped.

“With the market pricing in a 68 percent chance of a March hike and two hikes for 2018, there will close inspection to assess just how shaky their confidence is for any pick-up in inflationary trends,” said Chris Weston, chief markets strategist at broker IG in Sydney.

“That said, the U.S. dollar is underloved and oversold and it won’t take much to promote a bout of profit-taking from the shorts.”

The skid in the dollar, combined with strength in Chinese demand, has benefited commodities priced in the currency.

Copper stood tall at $7,251.50 a ton, having risen 31 percent in 2017 to a four-year top, while aluminum amassed gains of 34 percent.

Gold was 0.2 percent firmer at $1,305.62 an ounce, after advancing by 13 percent in 2017 for its best performance in seven years.

Brent crude oil futures ended the year with a 17 percent rise, while U.S. crude rose 12 percent on strong demand and declining global inventories. [O/R]

Early Tuesday, Brent was steady at $66.62 a barrel while U.S. crude eased 17 cents to $60.25.

(Editing by Richard Borsuk)

Siemens to gauge interest of state funds in Healthineers IPO: CEO

Siemens CEO Joe Kaeser attends the company’s annual news conference in Munich, Germany, November 9, 2017. REUTERS/Michael Dalder – RC12652D94E0

FRANKFURT (Reuters) – Siemens will test the appetite of sovereign wealth funds ahead of the planned listing of its healthcare unit Healthineers next year, its chief executive told a German weekly, possibly to secure anchor investors for the flotation.

The listing of a minority of the unit, which makes X-ray and MRI machines, is set to take place in the first half of 2018 and is expected to value Healthineers as a whole at around 40 billion euros ($48 billion).

Siemens is expected to sell 15-25 percent of Healthineers, sources have said, implying stock worth 6-10 billion euros could be sold – Germany’s biggest share offering since Deutsche Telekom in 1996.

“Internal preparations are going well and we are still planning the listing in the first half of 2018, if markets play along,” Joe Kaeser told Frankfurt Allgemeine Sonntagszeitung in an interview published on Sunday.

“In any case, we are planning to test the interest of relevant anchor shareholders, including sovereign wealth funds.”

Asked whether this included Norway and China, home to the world’s largest and third-largest state funds, respectively, Kaeser said: “We will probably cover the range of the most important state funds, yes. The advantage would be that we would gain anchor investors. The disadvantage: the free float of shares is not as high.”

The move is designed to enable the unit to raise its own funds for takeovers and investments in the healthcare sector as well as crystallizing its standalone value, removing some of the “conglomerate discount” that weighs on Siemens’ valuation.

In 2016, utility RWE won BlackRock as an anchor investor in the initial public offering of its Innogy unit. RWE ended up selling a 23.2 percent stake in the networks, renewables and retail unit.

(Reporting by Christoph Steitz; Editing by Alison Williams)

Wall Street eyes 2018 gains with a side of caution

FILE PHOTO: Traders react at the closing bell on the floor of the New York Stock Exchange, (NYSE) in New York, U.S., November 30, 2017. REUTERS/Brendan McDermid/File Photo

By Sinead Carew

(Reuters) – U.S. stocks are expected to keep rising in 2018 because a massive drop in the corporate tax rate is seen boosting the economy and corporate profits, but strategists say sizable gains could either be short-lived or elusive.

The bull market is on track to mark its ninth birthday in March, with the S&P 500 climbing 20 percent for 2017 – its biggest increase since 2013. The drop in the corporate tax rate in 2018, to 21 percent from 35 percent, is seen by many as the biggest factor for the stock market next year.

Yet 2018 share gains are expected to be smaller than 2017 with the S&P 500’s price/earnings ratio – a measure of stock prices against expected profits – is around its highest level since June 2002. Many on Wall Street cite potential pitfalls even though they see no signs of a recession.

“We’ve had six years in a row where stocks have (outperformed) earnings, and I think we break that streak with stocks going up but not as much as earnings,” said Robert Doll, chief equity strategist at Nuveen Asset Management in Princeton, New Jersey.

Some say the tax bill’s benefit will be short lived. David Kelly, chief global strategist at J.P. Morgan Asset Management described the bill as “more carbs and less protein,” because the tax overhaul will improve spending but does nothing to boost productivity.

“It’ll be a one-year wonder,” said Kelly. “People should enjoy the party while it lasts but just make sure you know where your coat is.”

Several strategists cite the risk that faster economic growth could cause inflation to increase at a pace that would lead the U.S. Federal Reserve to raise interest rates faster than expected.

Wall Street’s rosy forecasts seem “well supported by the tremendous string of good news which the economy has delivered,” according to Jim Paulsen, chief investment strategist with Leuthold Group in Minneapolis.

But he said, the news is too good: “The problem with getting good news is that at some point you can’t be positively surprised any more.”

Paulsen does not expect a recession. But when the economic surprise index – which compares economic data to consensus expectations – is at high levels, equity performance tends to be weaker, according to Paulsen.

The Citi Economic Surprise index <.CESIUSD> was at 77 on Thursday, not far from its almost six-year high of 84.5 reached on Dec. 22.

“We’re going to have a 10-15 percent correction at some time in 2018. I wouldn’t be surprised if we’re down for the year,” Paulsen said. “If we get a correction and people get scared I’ll probably be buying again.”

Investors will keep a close watch on the on U.S. mid-term elections in 2018 because a Republican loss of control of the Senate or the House of Representatives could stall the party’s agenda. In 10 of the last 17 U.S. mid-term election years, equity price moves for the full year followed January’s direction, according to Jeff Hirsch, editor of the Stock Trader’s Almanac.

Investor moods in January may depend on whether the U.S. Congress reaches an agreement to raise the country’s debt ceiling. Investors will also be hoping Congress can reach a 2018 budget pact by Jan. 19. These are just some of the worries traders are contending with.

But the market has history against it. The S&P 500 rises on average 1.3 percent in the so-called Santa Clause rally – the period between Dec. 22 and Jan. 3 – according to Hirsch. This year, five days in, the S&P has risen just 0.1 percent.

“The failure of stocks to rally during this time tends to precede bear markets or times when stocks could be purchased at lower prices later in the year,” Hirsch wrote in a blog post.

(Reporting by Sinead Carew; Additional reporting by Caroline Valetkevitch and Rodrigo Campos; Editing by Leslie Adler)

As U.S. budget fight looms, Republicans flip their fiscal script

FILE PHOTO: The U.S. Capitol Dome (L) building is pictured in Washington, DC, U.S. on October 4, 2013. REUTERS/Jonathan Ernst/File Photo

WASHINGTON (Reuters) – The head of a conservative Republican faction in the U.S. Congress, who voted this month for a huge expansion of the national debt to pay for tax cuts, called himself a “fiscal conservative” on Sunday and urged budget restraint in 2018.

In keeping with a sharp pivot under way among Republicans, U.S. Representative Mark Meadows, speaking on CBS’ “Face the Nation,” drew a hard line on federal spending, which lawmakers are bracing to do battle over in January.

When they return from the holidays on Wednesday, lawmakers will begin trying to pass a federal budget in a fight likely to be linked to other issues, such as immigration policy, even as the November congressional election campaigns approach in which Republicans will seek to keep control of Congress.

President Donald Trump and his Republicans want a big budget increase in military spending, while Democrats also want proportional increases for non-defense “discretionary” spending on programs that support education, scientific research, infrastructure, public health and environmental protection.

“The (Trump) administration has already been willing to say: ‘We’re going to increase non-defense discretionary spending … by about 7 percent,'” Meadows, chairman of the small but influential House Freedom Caucus, said on the program.

“Now, Democrats are saying that’s not enough, we need to give the government a pay raise of 10 to 11 percent. For a fiscal conservative, I don’t see where the rationale is. … Eventually you run out of other people’s money,” he said.

Meadows was among Republicans who voted in late December for their party’s debt-financed tax overhaul, which is expected to balloon the federal budget deficit and add about $1.5 trillion over 10 years to the $20 trillion national debt.

“It’s interesting to hear Mark talk about fiscal responsibility,” Democratic U.S. Representative Joseph Crowley said on CBS.

Crowley said the Republican tax bill would require the United States to borrow $1.5 trillion, to be paid off by future generations, to finance tax cuts for corporations and the rich.

“This is one of the least … fiscally responsible bills we’ve ever seen passed in the history of the House of Representatives. I think we’re going to be paying for this for many, many years to come,” Crowley said.

Republicans insist the tax package, the biggest U.S. tax overhaul in more than 30 years, will boost the economy and job growth.

‘ENTITLEMENT REFORM’

House Speaker Paul Ryan, who also supported the tax bill, recently went further than Meadows, making clear in a radio interview that welfare or “entitlement reform,” as the party often calls it, would be a top Republican priority in 2018.

In Republican parlance, “entitlement” programs mean food stamps, housing assistance, Medicare and Medicaid health insurance for the elderly, poor and disabled, as well as other programs created by Washington to assist the needy.

Democrats seized on Ryan’s early December remarks, saying they showed Republicans would try to pay for their tax overhaul by seeking spending cuts for social programs.

But the goals of House Republicans may have to take a back seat to the Senate, where the votes of some Democrats will be needed to approve a budget and prevent a government shutdown.

Democrats will use their leverage in the Senate, which Republicans narrowly control, to defend both discretionary non-defense programs and social spending, while tackling the issue of the “Dreamers,” people brought illegally to the country as children.

Trump in September put a March 2018 expiration date on the Deferred Action for Childhood Arrivals, or DACA, program, which protects the young immigrants from deportation and provides them with work permits.

The president has said in recent Twitter messages he wants funding for his proposed Mexican border wall and other immigration law changes in exchange for agreeing to help the Dreamers.

Representative Debbie Dingell told CBS she did not favor linking that issue to other policy objectives, such as wall funding. “We need to do DACA clean,” she said.

On Wednesday, Trump aides will meet with congressional leaders to discuss those issues. That will be followed by a weekend of strategy sessions for Trump and Republican leaders on Jan. 6 and 7, the White House said.

Trump was also scheduled to meet on Sunday with Florida Republican Governor Rick Scott, who wants more emergency aid. The House has passed an $81 billion aid package after hurricanes in Florida, Texas and Puerto Rico, and wildfires in California. The package far exceeded the $44 billion requested by the Trump administration. The Senate has not yet voted on the aid.

(Reporting by Kevin Drawbaugh; Additional reporting by Roberta Rampton in Florida; Editing by Peter Cooney)

Gold breaks above $1,300/oz on way to best year since 2010

FILE PHOTO: An employee sorts gold bars in the Austrian Gold and Silver Separating Plant ‘Oegussa’ in Vienna, Austria, December 15, 2017. REUTERS/Leonhard Foeger

By Jan Harvey

LONDON (Reuters) – Gold hit its highest in 2-1/2 months on Friday and remained on track for its biggest annual rise since 2010 as a wilting dollar, political tensions and receding concerns over the impact of U.S. interest rate hikes fed into its rally.

The dollar, in which gold is priced, is sliding towards its worst year since 2003, damaged by tensions over North Korea, the Russian scandal surrounding U.S. President Donald Trump’s election campaign, and persistently low U.S. inflation. [FRX/]

The dollar’s drop to three-month lows versus a basket of currencies on Friday lifted gold to its highest since mid October at $1,303.90 an ounce.

At 1430 GMT spot gold <XAU=> was at $1,302.72 an ounce, up 0.2 percent, while U.S. gold futures <GCv1> for February delivery were up $7.80 an ounce at $1,305.00.

“In the last couple of weeks, trade has been relatively thin, yields have been under pressure and the dollar as well, so gold has profited from that,” ABN Amro analyst Georgette Boele said. “If you look over the year, dollar weakness has been the main theme.”

Gold will be vulnerable next year to a rebound in the currency, as well as any gains in yields, she said. The opportunity cost of holding non-interest bearing bullion increases when yields rise elsewhere.

The impact of three U.S. interest rate hikes this year was offset by the dollar’s weakness, Boele said. “The dollar is the most important driver, and then real yields. The Fed is increasing rates, but the dollar’s not profiting.”

Gold, which is also on course for its best month since August, has also benefited of late from technically driven momentum, analysts said.

ScotiaMocatta’s technical team said in a note that chart signals for the metal look positive after it broke above its 100-day moving average this week at $1,295 an ounce. “Momentum indicators are bullish as gold appears poised to target the October high (of) $1,306,” it said.

Among precious metals, palladium has seen the strongest rise this year, climbing 56 percent as concerns grew over availability after years of market deficit.

Spot palladium <XPD=> was down 0.5 percent at $1,059.65 an ounce, having hit its highest since February 2001 at $1,072 in the previous session. It has held in a historically unusual premium to platinum through the fourth quarter.

Spot silver <XAG=> was up 0.7 percent at $16.97, while platinum <XPT=> was 1.2 percent higher at $933.90. This year the two metals have risen by 6.5 percent and 3.8 percent respectively.

(Additional reporting by Nallur Sethuraman in Bengaluru; editing by Mark Heinrich and Jason Neely)

Goldman to take one-time $5 billion hit to profit from new tax law

FILE PHOTO: A view of the Goldman Sachs stall on the floor of the New York Stock Exchange July 16, 2013. REUTERS/Brendan McDermid

(Reuters) – Goldman Sachs Group Inc <GS.N> said on Friday it expects fourth-quarter earnings to decrease by about $5 billion, as the bank looks to take advantage of a new tax law that makes it cheaper for U.S. companies to repatriate profits.

Around two-thirds of the $5 billion decrease is due to repatriation tax, the cost of moving money from foreign countries to the U.S., Goldman said in a statement with the Securities and Exchange Commission.

However, the impact of the tax legislation may differ from the estimate, according to the bank.

Congress’ U.S. tax overhaul bill, which President Donald Trump signed into law last week, significantly cuts the corporate tax rate to 21 percent from 35 percent.

According to the new law, profits brought back to the United States would not be taxed at the full 35-percent corporate tax rate that would normally be due. Instead, those profits would be taxed at only 15.5 percent for cash assets and 8 percent for illiquid assets.

Apple Inc <AAPL.O> is likely to be a big beneficiary of the overhaul since it allows the company bring back its $252.3 billion foreign cash pile without a major tax hit.

Drugmaker Amgen Inc <AMGN.O> last week said it expects to incur tax expenses of $6 billion to $6.5 billion over time as it repatriates cash.

Several other companies have also warned of a one-time loss due to the tax overhaul, Delta Airlines <DAL.N> said it may take a hit of around $200 million to tax expense.

Big European banks such as Barclays <BARC.L>, UBS Group <UBSG.S> and Credit Suisse Group <CSGN.S> said the new tax rules will cost each between $1.3 billion to $3 billion.

JPMorgan Chase & Co <JPM.N>, Wells Fargo <WFC.N> and Morgan Stanley <MS.N> did not immediately respond to requests for comments.

Bank of America <BAC.N> said in a public filing last week it expects net income for the quarter ended Dec. 31, 2017 to reduce by about $3 billion, mainly due to lower valuation of some deferred tax assets.

Goldman Sachs shares were down marginally down in early trading.

(Reporting By Aparajita Saxena in Bengaluru; Editing by Shounak Dasgupta)

Citigroup to pay $11.5 million fines, compensation over errant stock ratings

File Photo: The Citigroup Inc (Citi) logo is seen at the SIBOS banking and financial conference in Toronto, Ontario, Canada October 19, 2017. Picture taken October 19, 2017. REUTERS/Chris Helgren

By Jonathan Stempel

NEW YORK (Reuters) – Citigroup Inc <C.N> will pay at least $11.5 million in fines and restitution to settle charges it displayed the wrong research ratings on more than 1,800 stocks, causing many customers to own shares they never would have bought, a U.S. regulator said on Thursday.

The Financial Industry Regulatory Authority fined Citigroup $5.5 million and ordered it to pay at least $6 million to retail customers over errors that occurred between February 2011 and December 2015, and involved more than 38 percent of the equity securities that the New York-based bank covered.

Citigroup did not admit or deny wrongdoing, but the sanctions reflected its cooperation, including its decisions to report the rating issues and compensate customers, FINRA said.

The regulator said Citigroup would sometimes display to customers, brokers and supervisors the wrong ratings, such as “buy” instead of “sell,” while in other cases it would display ratings for companies it did not cover, or no ratings at all.

As a result, brokers solicited thousands of transactions and negligently made inaccurate statements premised on wrong ratings, and many customers ended up owning stocks with “sell” ratings despite a prohibition on such ownership, FINRA said.

FINRA said the errors stemmed from problems with an electronic data feed, and Citigroup failed to timely fix the wrongly displayed ratings despite “numerous” red flags. The bank’s actual research reports and ratings were not affected.

“The display and use of incomplete and inaccurate research ratings can have widespread, adverse consequences to customers,” FINRA enforcement chief Susan Schroeder said in a statement. “Firms should react quickly to address those errors.”

Citigroup spokeswoman Danielle Romero-Apsilos said the bank was pleased to resolve the matter.

(Reporting by Jonathan Stempel in New York; Editing by Andrew Hay)

U.S. jobless claims steady in latest week

FILE PHOTO: A sign advertises open jobs at an Embassy Suites hotel in Waltham, Massachusetts, U.S., December 13, 2017. REUTERS/Brian Snyder

WASHINGTON (Reuters) – The number of Americans filing for unemployment benefits was unchanged last week and the underlying trend remained consistent with a tightening labor market.

U.S. workers filed 245,000 initial claims for state unemployment benefits during the week that ended Dec. 23, according to seasonally adjusted figures published by the Labor Department on Thursday. Data for the prior week was unrevized.

Since mid-October, claims have been confined to a range of 223,000 to 252,000.

Economists polled by Reuters had forecast claims edging down to 240,000 in the latest week. Last week marked the 147th straight week that claims remained below the 300,000 threshold, which is associated with a strong labor market. That is the longest such stretch since 1970, when the labor market was smaller.

The labor market is widely seen as near full employment, with the jobless rate at a 17-year low of 4.1 percent. Labor market tightness and a strengthening economy encouraged the Federal Reserve to increase interest rates earlier this month for a third time this year. The U.S. central bank has forecast three rate hikes for 2018.

The economy added 228,000 jobs in November, well above the roughly 100,000 jobs per month needed to keep up with growth in the working-age population.

The Labor Department said claims-taking procedures continued to be disrupted in the Virgin Islands months after Hurricanes Irma and Maria battered the islands. The processing of claims in Puerto Rico was still not back to normal.

Last week, the four-week moving average of initial claims, which is seen as a measure of labor market trends because it irons out week-to-week volatility, rose 1,750 to 237,750.

The claims report also showed the number of people receiving benefits after an initial week of aid increased 7,000 to 1.94 million in the week ended Dec. 16. The four-week moving average of the so-called continuing claims fell 4,250 to 1.92 million.

(Reporting by Jason LangeEditing by Chizu Nomiyama)

Apple, Epson face French legal complaints over allegedly shortening life of products

An Apple logo is seen in a store in Los Angeles, California, U.S., March 24, 2017. REUTERS/Lucy Nicholson

PARIS (Reuters) – Smartphone maker Apple <AAPL.O> and Japanese printer company Epson <6724.T> are facing legal complaints in France over allegedly speeding up the ageing process of their products to stimulate demand.

A French consumer association called “HOP” — standing for “Stop Planned Obsolescence” — filed preliminary, legal complaints in court against the two groups over the charges.

HOP said it filed its complaint against Apple in Paris on Wednesday. A prosecutor opened an investigation into Epson last month, a judicial source said on Thursday, following a complaint filed in September by HOP in a court in the Paris suburb of Nanterre.

Laetitia Vasseur, co-founder of HOP, told Reuters the aim of both complaints was to apply the French consumer law, which was modified in 2015 to include the notion of planned obsolescence.

Apple is already facing lawsuits in the United States over accusations of having defrauded iPhone users by slowing down devices without warning to compensate for poor battery performance.

These lawsuits came after Apple said last week that operating system updates released since “last year” for the iPhone 6, iPhone 6s, iPhone SE and iPhone 7 included a feature “to smooth out” power supply from batteries that are cold, old or low on charge.

Phones without the adjustment would shut down abruptly because of a precaution designed to prevent components from getting fried, Apple said.

Under French law, companies risk fines of up to 5 percent of their annual sales for deliberately shortening the life of their products to spur demand to replace them.

A spokeswoman for Epson France said Epson denied the charges made against it by the HOP association. She added that Epson was working with authorities on the matter and that the quality of its products was of the utmost importance for the company.

Officials for Apple France could not be immediately reached for comment.

(Reporting by Sudip Kar-Gupta, Emmanuel Jarry and Gwenaelle Barzic; Editing by Mathieu Rosemain and David Evans)

 

Apple faces lawsuits after saying it slows down aging iPhones

FILE PHOTO – A salesman checks a customer’s iPhone at a mobile phone store in New Delhi, India, July 27, 2016. REUTERS/Adnan Abidi/File photo

By Paresh Dave

SAN FRANCISCO (Reuters) – Apple Inc <AAPL.O> defrauded iPhone users by slowing devices without warning to compensate for poor battery performance, according to eight lawsuits filed in various federal courts in the week since the company opened up about the year-old software change.

The tweak may have led iPhone owners to misguided attempts to resolve issues over the last year, the lawsuits contend.

All the lawsuits – filed in U.S. District Courts in California, New York and Illinois – seek class-action to represent potentially millions of iPhone owners nationwide.

A similar case was lodged in an Israeli court on Monday, the newspaper Haaretz reported.

Apple did not respond to an email seeking comment on the filings.

The company acknowledged last week for the first time in detail that operating system updates released since “last year” for the iPhone 6, iPhone 6s, iPhone SE and iPhone 7 included a feature “to smooth out” power supply from batteries that are cold, old or low on charge.

Phones without the adjustment would shut down abruptly because of a precaution designed to prevent components from getting fried, Apple said.

The disclosure followed a Dec. 18 analysis by Primate Labs, which develops an iPhone performance measuring app, that identified blips in processing speed and concluded that a software change had to be behind them.

One of the lawsuits, filed Thursday in San Francisco, said that “the batteries’ inability to handle the demand created by processor speeds” without the software patch was a defect.

“Rather than curing the battery defect by providing a free battery replacement for all affected iPhones, Apple sought to mask the battery defect,” according to the complaint.

The plaintiff in that case is represented by attorney Jeffrey Fazio, who represented plaintiffs in a $53-million settlement with Apple in 2013 over its handling of iPhone warranty claims.

The problem now seen is that users over the last year could have blamed an aging computer processor for app crashes and sluggish performance – and chose to buy a new phone – when the true cause may have been a weak battery that could have been replaced for a fraction of the cost, some of the lawsuits state.

“If it turns out that consumers would have replaced their battery instead of buying new iPhones had they known the true nature of Apple’s upgrades, you might start to have a better case for some sort of misrepresentation or fraud,” said Rory Van Loo, a Boston University professor specializing in consumer technology law.

But Chris Hoofnagle, faculty director for the Berkeley Center for Law & Technology, said in an email that Apple may not have done wrong.

“We still haven’t come to consumer protection norms” around aging products, Hoofnagle said. Pointing to a device with a security flaw as an example, he said, “the ethical approach could include degrading or even disabling functionality.”

The lawsuits seek unspecified damages in addition to, in some cases, reimbursement. A couple of the complaints seek court orders barring Apple from throttling iPhone computer speeds or requiring notification in future instances.

(Reporting by Paresh Dave; Editing by Leslie Adler)

No Trump windfall for private prisons yet, but some bet on gains

FILE PHOTO: Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 13, 2017. REUTERS/Brendan McDermid/File Photo

By Sinead Carew

(Reuters) – Investors who bet on private prison operators as big winners from Donald Trump’s tough line on crime and illegal immigration are looking back at a bruising year of high hopes and disappointment. Some, however, say the stocks still offer good value even though an anticipated windfall under the Trump administration so far has failed to materialize.

They say the two listed operators – Geo Group Inc <GEO.N> and CoreCivic Inc <CXW.N> – stand to win contracts from states struggling with prison overcrowding, such as Kansas and Oklahoma, and have plenty of room to accommodate new demand.

Valuable properties owned by the two companies, which operate as prison real estate investment trusts (REITs), and long-term federal contracts with minimum revenue guarantees also make them attractive, they say.

The administration’s proposals to bolster the U.S. Immigration and Customs Enforcement (ICE) agency could help in the future though it is still unclear how much new money it will bring.

“People are focusing on ICE and ignoring the state level opportunities,” said Jordan Hymowitz managing partner Philadelphia Financial Management in San Francisco.

Geo and CoreCivic shares soared after Trump won the White House, partly on expectations that detention centers they run for ICE would fill up thanks to an anticipated surge in arrests along the Mexican border.

Yet the opposite happened – arrests declined for months after Trump’s inauguration because fewer people attempted to cross the border and shares in CoreCivic and Geo reversed course after peaking in February and April respectively. (Graphic: http://tmsnrt.rs/2BUZlfe)

While detentions have been rising from month to month since hitting a year-low in May, the stocks have not yet recovered. CoreCivic now trades 37 percent below its post election high, while Geo is about 32 percent below its 2017 peak.

Investors say lack of clarity on how much business they will get from ICE, the companies’ biggest client, is holding the shares back.

“People can’t figure out if immigration reform is good or bad for private contractors,” said Eric Marshall, portfolio manager and head of research at Hodges Capital Management in Dallas, Texas. Hodges sold its CoreCivic shares after the post-election rally but still owns Geo.

CoreCivic and Geo declined comment on their performance and outlook beyond their comments in earnings calls and statements.

MAIN CUSTOMER

The immigration enforcement agency, which cites its average cost per bed at $129 per day, accounted for about a quarter of CoreCivic’s and Geo’s revenue in the first nine months of 2017.

Federal, state and local prisons make up most of the remaining revenue.

ICE asked Congress for a $1.2 billion funding increase, but the latest budget proposal offered $700 million, according to Geo, and its 2018 funding remains unclear.

GEO and CoreCivic make up two-thirds of the roughly $5.3 billion per year U.S. private prison business, according to market research firm IBISWorld.

However, potential state contracts promise to boost prison companies’ earnings and make them less controversial.

Both the sheer size of the U.S. prison population, by far the world’s largest, and the use of privately-run prisons have been a subject of political debate. (Graphic: http://tmsnrt.rs/2BFI8Sz)

As a result, Barack Obama’s administration laid out plans, abandoned under Trump, to phase out outsourcing, citing, among others, safety concerns.

Investors said a pending Kansas Department of Corrections proposal for CoreCivic to build a new prison which the state would manage, would address some investor concerns by making the company a landlord rather than a prison operator. If copied by other states, such approach would open new opportunities for the companies, which mostly derive revenue from running their own prisons or government facilities.

“There’s a lot of noise around being a private prison operator” said Jamie Cuellar, co-portfolio manager of the Buffalo Small Cap Fund based in Mission, Kansas.

“If people start thinking of them more like a government agency REIT than a prison operator it could be helpful to the valuation,” he said.

Cuellar noted that Easterly Government Properties <DEA.N>, a REIT which leases office buildings to government agencies, trades at a multiple of 15.8 times earnings estimates. In comparison, CoreCivic’s forward multiple is 10.0 and Geo’s is 11.8, according to the latest data.

Thousands of vacancies at CoreCivic and Geo facilities should also be viewed as a positive, because they could lift earnings with little extra investment, investors say.

Hymowitz estimated that CoreCivic, which has around 15,000 empty beds, could boost by a fifth its funds from operations (FFO) per share if it could fill just a quarter of them. CoreCivic said in November it could add $1 to annual earnings per share (FFO) if it can open its eight idle prisons and boost inmate numbers in partially vacant facilities.

Geo said in October that filling 7,000 empty beds could add $50-$60 million to its annual earnings before interest, tax, depreciation and amortization (EBITDA), a roughly 11-13 percent increase to 2018 analyst estimates.

Buffalo Funds’ Cuellar has a $45 long term price target for CoreCivic, which last traded around $22. While it would take new business to get there, Cuellar says he can afford to be patient given its steady dividend payouts.

“I don’t believe there is a lot of downside from here. Meanwhile, I get paid a 7.6 percent dividend to wait.”

(GRAPHIC: http://reut.rs/2BzSzex)

(GRAPHIC: http://tmsnrt.rs/2y7wgeh)

(Additional reporting by Noel Randewich and Megan Davies; Editing by Tomasz Janowski)

JPMorgan pays $2.8 million fine over improper safeguards for customers

FILE PHOTO: People pass the JP Morgan Chase & Co. Corporate headquarters in the Manhattan borough of New York City, May 20, 2015. REUTERS/Mike Segar/File Photo

By Jonathan Stempel

NEW YORK (Reuters) – JPMorgan Chase & Co <JPM.N> will pay $2.8 million to settle charges that a broker-dealer unit lacked sufficient controls to safeguard customer securities from several countries over more than eight years, a U.S. regulator said on Wednesday.

The Financial Industry Regulatory Authority said JPMorgan Clearing Corp created hundreds of millions of dollars of deficits by violating U.S. rules designed to thwart the improper commingling of assets.

Such rules are intended to avoid delays in returning customer securities, or the inability to make customers whole, when broker-dealers fail.

FINRA said the violations occurred from March 2008 to June 2016, and stemmed in part from defective electronic systems that JPMorgan inherited from Bear Stearns Cos, the investment bank it bought in May 2008 in a government-arranged fire sale.

JPMorgan did not admit or deny wrongdoing in agreeing to settle. Brian Marchiony, a spokesman for the New York-based bank, in an email said there were no findings that any client accounts were harmed.

According to settlement papers, JPMorgan failed to properly segregate customer securities from its own assets because of systematic coding and design flaws and a lack of supervision.

FINRA cited as examples how the improper safeguarding of Italian securities for nearly two years and Nigerian securities for four years created respective deficits of $146 million and $120 million.

The fine reflected JPMorgan’s “extraordinary” cooperation in addressing the violations, and its practice of setting aside excess deposits to protect customers from losses, FINRA said.

(Reporting by Jonathan Stempel in New York; Editing by Bill Rigby)

Top small-cap funds of 2017 focus on healthcare, tech in year ahead

By David Randall

NEW YORK (Reuters) – Healthcare, technology and Japanese small-cap stocks look poised to outperform the broader market in the year ahead, according to some of the best performing U.S.-based stock fund managers of 2017.

Small-cap stocks should be among the largest winners of the newly-signed Republican-led tax law, which slashed corporate taxes at home and made it cheaper for companies to bring back their profits from overseas. Yet small-cap fund managers from Loomis Sayles, Federated Investors and Wasatch Advisors whose funds are up 30 percent or more for the year say that a bigger factor in the year ahead will be continued global growth.

“The tax bill is going to make some balance sheets look better on the margin, but we think the larger factor is that the recovery is still going on internationally,” said Kenneth Korngiebel, a co-portfolio manager of the $335-million Wasatch Micro Cap fund, which is up 36.1 percent year-to-date. That performance makes it the 13th best small-cap fund of the year, according to Lipper data, which tracks about 1,800 small-cap funds.

As a result, Korngiebel is shifting more of his portfolio into international stocks, which often trade at lower valuations than their U.S. counterparts and have better growth characteristics, he said.

Korngiebel is adding to stocks like Japanese outsourcing company UT Group Co Ltd, whose shares are up 243 percent for the year to date, and which he expects to grow its revenue by more than 30 percent in the year ahead. He is also adding to his position in U.S.-based Tabula Rasa Healthcare Inc, which helps doctors screen for potential drug interactions. Shares of the company are up 97 percent in 2017.

“The percentage of the population who take five or more medication is going up and adverse drug events are expensive and can lead to loss of life. What we see here is opportunity to take advantage of an under-covered company that is unique and meets a large need,” he said.

Overall, companies in the small-cap benchmark Russell 2000 index pay a median effective tax rate of 31.9 percent, while the larger, multinational companies in the S&P 500 pay a median effective tax rate of 28 percent, according to Thomson Reuters data. The median for the 30 mega-cap stocks in the Dow Jones Industrial Average is 23.8 percent.

Some of the benefits of the tax cut are already reflected in stock prices. The iShares Russell 2000 ETF, which tracks the benchmark Russell 2000 index of small-cap shares, is up 14 percent for the year to date, with about half of that gain coming over the last three months as Republicans rolled out their tax plan.

John Slavik, a co-portfolio manager of the $18-million Loomis Sayles Small/Mid Cap Growth fund, the 16th best performing small-cap fund this year, said that industrial machinery companies such as Gardner Denver Holdings Inc should benefit if corporations reinvest part of their tax windfalls into improving their factories.

The fund’s largest position is in supply chain company XPO Logistics Inc, which Slavik expects to gain from both corporate capital reinvestment and global economic growth. Shares of the company are up 78 percent for the year, and now trade at a trailing price to earnings ratio of 65.9, but Slavik said that he expects its revenues and cash flow to accelerate as the global manufacturing sector continues to expand.

“The valuation of the stock has been more challenging but we still thinks it works into the future,” he said.

He has also been selling his position in clear-braces maker Align Technology Inc, whose shares are up 135 percent this year and now trade at a market value of more than $18 billion, making it too large for his fund.

“This is a company that has done very well for us but we are looking to start to redeploy that cash elsewhere,” he said.

Stephen DeNichilo, a portfolio manager of the $872 million Federated Kaufmann Small Cap fund, the 9th best small-cap fund this year, said that fund holdings such as plastics molding manufacturer Milacron Holdings Corp will benefit from a pickup in capital spending because its products help improve a factory’s efficiency. “This kind of investment pays for itself very quickly,” he said.

Yet he has a larger position overall in biotech companies, which have greater growth potential, he said. He has been adding to his position in Nektar Therapeutics, which is developing in abuse-proof opioid medication, and gene-therapy drug maker Spark Therapeutics Inc.

He also added a position in retailer Floor & Decor Holdings Inc shortly after its initial public offering in April as a play on consumer spending on home renovation. Shares of the company, which makes high-end floor tiles, are up 37.8 percent for the year.

“This a traditional brick and mortar retailer that has built a better mouse trap,” he said.

(Reporting by David Randall; Editing by Nick Zieminski)

Wall St. lower as iPhone X concerns hit Apple shares

FILE PHOTO: Traders work on the floor of the New York Stock Exchange, (NYSE) in New York, U.S., December 1, 2017. REUTERS/Brendan McDermid

By Sruthi Shankar

(Reuters) – Wall Street’s main indexes came under pressure on Tuesday following a 2.5 percent drop in Apple’s shares on a report of weak iPhone X demand.

Apple <AAPL.O> will slash its sales forecast for its flagship phone in the current quarter to 30 million units, down from what it said was an initial plan of 50 million units, Taiwan’s Economic Daily reported, citing unidentified sources.

That, along with a few bearish brokerage calls on iPhone X demand, put its shares on track for their worst single-day percentage fall since Aug. 10.

Shares of companies that supply parts to Apple, including Broadcom <AVGO.O>, Skyworks Solutions <SWKS.O>, Finisar <FNSR.O> and Lumentum Holdings <LITE.O>, fell between 2 percent and 5.5 percent.

The S&P technology index <.SPLRCT> fell 0.7 percent, the biggest loser among the 11 major S&P 500 sectors. The tech-heavy Nasdaq <.IXIC> fell 0.37 percent to 6,934.14 as high-flying names such as Facebook, Amazon, Alphabet and Netflix declined.

“It looks to me that technology sector, already paying the lowest in taxes of around 24 percent, will not get as much of an impact as the financial sector, which pays the highest,” said Sandy Villere, portfolio manager of the Villere Balanced Fund

“Maybe that rotation has begun and the FANGS may see some profit-taking into next year.”

A long-promised Republican bill to cut corporate tax rates to 21 percent from 35 percent was ratified last week.

At 12:26 p.m. ET (1726 GMT), the Dow Jones Industrial Average <.DJI> fell 0.08 percent to 24,734.98 and the S&P 500 <.SPX> slipped 0.09 percent to 2,680.88.

Most markets around the world, including parts of Europe and Asia, were shut on Tuesday. Trading volumes are also expected to be light in the holiday week.

Oil prices jumped more than 2 percent, helped by an explosion on a crude pipeline in Libya and voluntary OPEC-led supply cuts. [O/R]

Chevron <CVX.N>, EOG Resources <EOG.N>, Exxon <XOM.N> and ConocoPhillips <COP.N> rose between 0.8 percent and 2.5 percent.

Shares of department store operators Kohl’s <KSS.N>, JC Penney <JCP.N> and Macy’s <M.N> got a boost after a report that retail sales in the holiday period rose at their best pace since 2011.

Sucampo Pharma <SCMP.O> surged 6 percent after Mallinckrodt <MNK.N> said it would acquire the drugmaker for $1.2 billion. Mallinckrodt shares rose 2 percent.

Bitcoin <BTC=BTSP> traded up more than 14 percent at $15,865, recovering from last week’s selloff that saw the cryptocurrency plunge about 30 percent.

Related stocks such as Riot Blockchain <RIOT.O>, Overstock.com <OSTK.N> and Longfin Corp <LFIN.O> rose between 3 percent and 37 percent.

Advancing issues outnumbered decliners on the NYSE by 1,702 to 1,117. On the Nasdaq, 1,463 issues fell and 1,386 advanced.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Anil D’Silva)

Robot growing pains: Two U.S. factories show tensions of going digital

FILE PHOTO: A job seeker departs the Dr. Martin Luther King Jr. career fair held by the New York State department of Labor in New York, April 12, 2012. REUTERS/Lucas Jackson

By Timothy Aeppel

COLUMBUS, Ind. (Reuters) – When Sandy Vierling took a job at a new robot-packed factory her company built just a few miles from an older plant where she made automotive exhaust systems, she crossed into the future of manufacturing in the United States.

She didn’t like it at all.

Auto supplier Faurecia SA’s <EPED.PA> new plant – dubbed Columbus South to distinguish it from the older operation known as Gladstone – is glistening clean and the physical work is lighter. But the 57-year-old found her new job had long hours and was monotonous – loading parts onto conveyors that fed robots all day. She also missed the interaction with coworkers she had at Gladstone.

Other workers at the new plant complain that they do not get to fix machines when they jam. Technicians swoop in to do that.

“I was stressed all the time,” she said.

President Donald Trump has put bringing manufacturing jobs back to the United States at the center of his economic and trade agenda. But when jobs actually come – as they have here in southern Indiana – many factory workers are not prepared for them, and employers are having trouble hiring people with the needed skills.

U.S. manufacturing job openings stand near a 15 year high and factories are hiring workers at the fastest clip since 2014, with many employers saying the hardest-to-fill jobs are those that involve technical skills that command top pay.

In 2000, over half of U.S. manufacturing workers had only high school degrees or less, according to the Bureau of Labor Statistics. Today, 57 percent of manufacturing workers have technical school training, some college or full college degrees, and nearly a third of workers have bachelors or advanced degrees, up from 22 percent in 2000.

(For a graphic, click http://tmsnrt.rs/2z5f84w)

Mark Muro, a senior fellow at the Brookings Institution, said the digitalization sweeping the economy is forcing employers to hunt for a different mix of workers – and pay more in some cases for workers with technical skills.

A new study by Muro found those with the highest digital skills saw average wage growth of 2 percent a year since 2010, while wages for those with medium skills grew by 1.4 percent and those at the bottom by 1.6 percent.

SKILLS MISMATCH

The skills mismatch is playing out at Faurecia’s factories in Columbus.

The company’s older Gladstone plant has 500 production workers and only a handful of robots. The new plant, Columbus South, has about 400 workers and about 100 robots, including 30 automated guided vehicles that move materials instead of human-driven tugs. Both plants make exhaust systems.

Faurecia invested $64 million in its new plant, and invited trained workers from the old plant to apply for jobs in the new one. Many workers, including Vierling, were lured by higher wages. She saw her pay jump from $16.65 an hour to $18.80 at Columbus South. About 150 made the move, according to the union that represents workers in both facilities, the International Brotherhood of Electrical Workers.

There’s no plan to shutter the older plant, but rather to introduce automation there in phases as well.

But some said no to the opportunity.

Christina Teltow says she never even considered it. She is 42 years-old, and has spent 22 years at Gladstone. She was recently promoted, but previously worked as “gap leader,” one of the better jobs someone with a high school education can attain at the plant. That job includes overseeing the schedules of workers and monitoring the quality of parts.

The same job at Columbus South requires 16 credit hours from the local technical college in business administration as well as learning to use computers to track production and schedules.

“Here, I get in and work on machinery,” she said. “In South, it’s totally different — it’s all robots.”

The company says one reason the new plant needs a lot of robots is because it produces a different kind of product. Gladstone mostly makes exhaust systems for light vehicles, while Columbus South is dedicated to much beefier commercial exhaust systems used mainly on large trucks. One worker can easily lift most of the parts at Gladstone, while some parts at Columbus South weigh up to 260 pounds.

Without robots, the new plant would need many more workers just to move things around, said managers.

Of course, robots have been in factories for decades. The difference now is that the machines are being linked together in networks that allow more oversight and control. At Columbus South, managers and engineers walk around with iPads that allow them to watch production levels in real time and even less-skilled workers have to know the basics of how to use computer drop down screens and entering data.

Leading the way onto the factory floor, manager Mike Galarno points to the front of one of the long production lines dotted with robots to a large video screen that tracks production in real time.

At the old plant, each part of the operation was like an island. If a problem arose, the people working there could sort it out without ever coming to the attention of managers, he said.

“Here, it’s all data – and everyone is looking and reacting to it,” he said.

This type of work requires some workers with skills normally found in high-tech, not in auto parts factories. Drawing those workers to Columbus – and keeping them – has posed another challenge.

One of the first employees hired for Columbus South last year was Chase Chapman, a mathematician and data-management specialist who was finishing a five-year stint in the Navy. The company moved Chapman and his young family from Florida, so he could become the plant’s head of data analytics – a position that doesn’t exist at Gladstone or at any other Faurecia exhaust system factory.

He left in April after only eight months, citing the desire to be closer to his extended family.

The position has now been empty for months as the company tries to recruit someone new.

Another problem became clear after the new plant was up and running. As a start-up operation—with lots of potential for technical glitches in its highly automated systems—many workers at the new plant work 12 hour shifts, often more than five days a week.

Those long hours have worn on workers like Vierling. “I was making all that money, but I had no time to spend it,” she said.

Workers from Gladstone were required to stay at the new plant a year before seeking a transfer back. Last month, Vierling returned to her old workplace. She gave up most of the $2 an hour raise she got for moving, but does not regret it.

“I feel like I’ve gone back home,” she said.

(Editing by Joe White and Edward Tobin)

Chicago police say Facebook ‘secret groups’ traffic in guns and drugs

FILE PHOTO: Chicago Police Superintendent Eddie Johnson speaks about the latest police districts to start wearing body cameras, during a news conference at the 20th District Chicago Police Department in Chicago, Illinois, U.S. October 30, 2017. REUTERS/Joshua Lott/File Photo

By Bernie Woodall

(Reuters) – Police in Chicago said on Thursday they have arrested 50 people suspected of using “secret groups” on Facebook to deal in guns and drugs, and have teamed up with the world’s largest social media network to crack down on criminal trafficking online.

Announcing the arrests at a news conference, Police Superintendent Eddie Johnson initially criticized Facebook as being unhelpful during a 10-month investigation by his department.

“Quite frankly, they haven’t been very friendly to law enforcement to prevent these things,” he told reporters.

However, police later said the department and the California-based company agreed to work collaboratively “to target any illegal activity on the platform.”

Police did not detail charges facing the 50 men and women arrested through Thursday, but said there were “dozens and dozens” of private Facebook groups being used for illegal drug and weapons transactions. Arrest warrants for 18 more suspects have been signed, and most have prior criminal histories, police said.

Among the illicit sites monitored by police was one offering a “Thanksgiving special” on cocaine baggies discounted to $40 from a normal street price of $60.

In an emailed statement on Thursday, Facebook Inc, which boasts 2 billion users worldwide, said it had only just been alerted to the arrests in Chicago.

“We do not allow the sale of guns or drugs on our platform. We routinely work with law enforcement and outline how officials may submit a request on our site,” Facebook added.

Among those arrested was an elementary school teacher taken into custody at his Chicago school in possession of scales often used for weighing drugs, according to Anthony Riccio, chief of the police department’s organized crime unit.

Since a confidential informant alerted investigators about alleged criminal trade on Facebook in February, police detectives working undercover arranged for the purchase of 17 different types of drugs and 18 different illegal firearms, Riccio said.

Riccio said investigators created covert identities on Facebook and were invited into private groups, which are closed unless the user-administrator allows someone to join. Police then monitored messages and contacted those in the group via Facebook to make buys.

Chicago has been singled out by President Donald Trump as one of the most violent U.S. cities. In 2016, the number of murders there exceeded 760.

(Reporting by Bernie Woodall in Fort Lauderdale, Florida; Editing by Leslie Adler and David Gregorio)

Alphabet’s Eric Schmidt to step down as executive chairman

FILE PHOTO: Alphabet’s Executive Chairman Eric Schmidt looks on during the Milken Institute Global Conference in Beverly Hills, California, U.S., May 1, 2017. REUTERS/Mike Blake/File Photo

By Salvador Rodriguez and Sonam Rai

SAN FRANCISCO (Reuters) – Alphabet Inc <GOOGL.O> said on Thursday its Executive Chairman Eric Schmidt will step down in January, ending a 17-year-run in which he played a central role in building a promising startup called Google into a global technology powerhouse.

He will continue to serve on the Alphabet’s board of directors and act as an adviser on focused on technical and science issues, the company said. (http://bit.ly/2BXJzz6)

“The time is right in Alphabet’s evolution for this transition,” Schmidt said in a statement.

“I’m incredibly excited about the progress our companies are making and about the strong leaders who are driving that innovation,” said Chief Executive Larry Page in a statement.

Schmidt, who was recruited to the company by Google co-founders Page and Sergey Brin, served as chief executive from 2001 through 2011, acting as what the three jokingly referred to as the “adult supervision.”

Schmidt then became executive chairman, often traveling the world touting the company’s accomplishments, negotiating with governments on regulatory matters and speaking about the state of the tech industry.

“He helped them mature into the powerhouse business it is today without throwing away the uniqueness that was Google during those early days,” said Joe Beda, chief technology officer of Seattle startup Heptio and a Google employee from 2004 through 2014.

Among Schmidt’s accomplishments were taking the company public in 2004, shepherding critical product initiatives like the Android mobile operating system, and overseeing a massive 2015 corporate restructuring in which Google became a business unit of the holding company Alphabet.

Bismarck Lepe, CEO of San Francisco startup Wizeline and a Google employee from 2003 until 2007, said Page and Brin focused on the company’s technology and the product strategies, while Schmidt focused on how to scale every product to a global level.

Schmidt “was incredibly smart and incredibly technical, which made him a perfect fit,” Lepe added.

Schmidt’s tenure was not without its problems. Google, Apple and several other tech companies were hit with a class action lawsuit in 2011 alleging that executives including Schmidt and the late Apple CEO Steve Jobs conspired to keep wages down by not hiring one anothers’ employees. The suit was settled for $415 million in 2015.

The company has also been hit with lawsuits alleging that it pays women less than men. It also faces a series of antitrust actions in Europe, though Schmidt was instrumental in convincing the U.S. Federal Trade Commission not to pursue antitrust actions in the United States.

Schmidt spent more than a decade at Sun Microsystems and ran the now-defunct networking company Novell before joining Google in 2001. The 2004 initial public offering came at time when the industry was still reeling from the dot-com bust, but it helped lay the groundwork for the current boom.

Shuman Ghosemajumder, chief technology officer of Mountain View, California, startup Shape Security and a Google employee from 2003 until 2010, recalled that shortly after the IPO, Schmidt spoke at an all-hands meetings and said that he, Page and Brin had the ambition of making Google a $100 billion company.

“Did you mean a $100 billion market cap or $100 billion in revenue?” one employee asked.

“And Eric said ‘You pick,'” recalled Ghosemajumder. “That was definitely inspiring to me.”

Alphabet now carries a market cap of $741 billion, and this year, it is projected to surpass $100 billion in annual revenue, according to analyst estimates.

(Reporting by Sonam Rai in Bengaluru; editing by Jonathan Weber and Tom Brown)