Market Snapshot* DJIA Nasdaq

Thursday, January 21, 2016

U.S. stocks pushed higher, offering a reprieve from this week's rout, as oil prices climbed and the European Central Bank suggested it was willing to offer more stimulus at its next meeting in March.

Treasurys U.S. government bond prices fell on Thursday as a rally in crude-oil prices lured investors away from low-risk assets. The yield on the benchmark 10year U.S. Treasury note rose to 2.022% in recent trade, up from 1.982% on Wednesday. Bond yields rise as prices fall.

Forex The dollar advanced against the euro on Thursday after European Central Bank President Mario Draghi hinted that more easing could be delivered as early as March. The dollar rose 0.1% versus the common currency as one euro bought $1.0881 in afternoon trading.

Commodities Oil prices surged to their biggest gains in months, briefly peaking over $30 a barrel, after traders learned that oil supplies failed to rise as quickly as the most extreme estimates had suggested. The amount of oil in storage grew by four million barrels last week, according to U.S. government data released Thursday morning.

+115.74

4472.06

+0.37

S&P 500

1868.98

+9.65

10-Year

2.0189%

-12/32

30-Year

2.7973%

-29/32

Euro

$1.08885

-0.0002

$29.53

+2.98

Nymex Crude Source: SIX Telekurs, ICAP plc

Stocks

15882.48

*preliminary values subject to adjustments

Tomorrow’s Headlines

ECB’s Draghi Hints at More Stimulus European Central Bank President Mario Draghi Thursday signaled that the governing council may provide more stimulus at its next meeting in March, noting that the outlook for inflation had weakened “significantly.” Earlier Thursday, the ECB left its key interest rates unchanged, even as low energy prices and concerns about China’s impact on the global economy threaten to derail the central bank’s efforts to bring inflation back to its target. Investors reacted positively to Mr. Draghi’s comments Thursday, with eurozone equity markets moving higher in anticipation of further stimulus from the central bank. The euro fell against the U.S. dollar while government bond prices rose, another sign that investors expected Mr. Draghi to deliver fresh measures in March. Speaking in a news conference, Mr. Draghi said the stimulus measures undertaken by the central bank since June 2014—and topped up most recently in December—had “strengthened the euro area’s resilience to recent, global economic shocks.” But he added that fresh declines in oil prices suggest that the annual rate of inflation in 2016 is likely to be “significantly” below forecasts released last month.

Nigeria Seeks Emergency OPEC Meeting For some of the world’s biggest oil-producing nations, the pain of more than a year and a half of falling prices is forcing increasingly desperate measures. Nigeria’s top oil official used a panel at the World Economic Forum in Davis, Switzerland, to bluntly plead for an emergency meeting of the Organization of the Petroleum Exporting Countries. Other member states of OPEC, a cartel of some of the world’s biggest producers, have quietly lobbied for such a meeting for months. continued on page 2

Tomorrow’s Calendar 8:30 a.m.

Dec Chicago Fed National Activity Index NAI (previous -0.30), NAI, 3-mo Moving Avg (previous -0.20)

8:30 a.m.

U.S. Weekly Export Sales Corn (Metric Tons) (previous 669.2K), Soybeans (Metric Tons) (previous 1127.5K), Wheat (Metric Tons) (previous 290.7K)

9:45 a.m.

Jan US Flash Manufacturing (expected 51.0)

10:00 a.m.

Dec Existing Home Sales Existing Sales (expected 5.3M), Existing Sales, M/M% (expected +11.3%), Unsold Homes Month's Supply (previous 5.1), Median Price (USD) (previous 220300), Median Home Price, Y/Y% (previous +6.3%)

10:00 a.m.

Dec Leading Indicators Leading Index (expected -0.2%), Coincident Index (previous +0.1%), Lagging Index (previous +0.3%)

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Thursday, January 21, 2016 4 p.m. ET

Tomorrow’s Headlines

said he expected to return to work before the end of the first quarter.

continued But on Thursday, Nigerian Oil Minister Emmanuel Ibex Kashiwa made one of the strongest, public calls yet by an OPEC member. He asked the group to convene, in part to help convince other producing countries to join forces and throttle back on production to bolster prices. There is a “lot of energy around trying to meet earlier obviously some of that is a panic reaction,” he told a panel in Davos. “Do we just sit back and watch,” he asked, “or do we put more efforts in talking to countries, like Russia, to try to get some consensus of what we need to be doing?”

Verizon Swings to a Profit Verizon Communications Inc.’s adjusted profit edged in above Wall Street expectations for the fourth quarter, as the company benefited from growth in smartphones and tablets during what is typically a competitive period. Verizon, the first big telecom company to report its earnings for the quarter, has faced tough competition from its rivals. The company on Thursday reaffirmed its warning that earnings may plateau in 2016 as it works through changes it has made to keep its wireless plans in line with competitors. In the latest quarter, Verizon said it added 1.5 million net retail postpaid wireless subscribers, matching forecasts from analysts at Wells Fargo. But the growth represented a 24% decline from the 1.99 million it added in the prior-year period. The fourth quarter is typically tough because many twoyear contracts come to an end and customers are up for grabs. Rival Sprint Corp. had an aggressive half-price offer during the quarter.

Investors have hammered U.S. airline stocks this year, concerned that slowing global economic growth will dent demand and accelerate a yearlong slide in average fares, prompting executives to boost their buybacks. United, the third-largest U.S. airline by traffic, said it plans to repurchase $750 million in shares during the first quarter, having bought back $1.2 billion during 2015. Southwest said it would buy back an additional $500 million starting in the quarter.

Xilinx Soars on Buyout Hopes Xilinx Inc. shares are on the move Thursday—fully erasing January’s 8.2% decline—following the chip maker’s fiscal third-quarter report. But the results, solid as they were, aren’t the reason. Instead, it’s buyout hopes, which have been a major semiconductor catalyst over the past several years. The company disclosed in a regulatory filing made along with the company’s quarterly results that it has entered into change-of-control agreements with five senior executives, including Chief Executive Moshe Gavrielov. They detail what the officials would be in line for in case of a deal. During the company’s quarterly conference call late Wednesday, Mr. Gavrielov noted that “there’s very clearly massive consolidation” in the chip sector “and the general expectation is that that will continue.” He added that the contract moves merely put Xilinx’s pay practices “in line with those...common for public companies”—both in his industry and elsewhere. SunTrust analysts say the development should “drive renewed takeout speculation and a full valuation.” Meanwhile, Pacific Crest says potential buyers include Avago Technologies Ltd. and Qualcomm Inc.

In all, Verizon reported a profit of $5.39 billion, or $1.32 a share, compared with a loss of $2.23 billion, or 54 cents a share, a year earlier.

Jobless Claims Edge Up, But Remain Near Historic Lows

Airlines Boost Buybacks on Confidence in Demand

The number of U.S. workers filing applications for jobless benefits has edged up early this year, suggesting a slightly increased number of layoffs even though the overall level remains consistent with steady job creation.

Two big U.S. airlines on Thursday boosted their share buyback programs and said demand remained solid, though fares continue to fall because of fierce domestic competition and currency headwinds.

Initial jobless claims increased by 10,000 to a seasonally adjusted 293,000 in the week ended Jan. 16, the Labor Department said Thursday. That was the highest level since early July.

United Continental Holdings Inc. and Southwest Airlines Co. both reported record fourth-quarter profits bolstered by falling fuel prices. The carriers also plan to add larger aircraft to lower their costs and tackle the twin challenges of fast-growing discount rivals and pricier new labor deals.

Economists surveyed by The Wall Street Journal had forecast 277,000 new applications for jobless benefits last week.

Oscar Munoz, United’s chief executive, said he was committed to returning more capital to shareholders as he made a surprise appearance on the airline’s quarterly earnings call. Mr. Munoz had a heart transplant on Jan. 6 and

Initial claims increased three of the last four weeks, but that includes the typically volatile holiday period. And even still the level is very low by historical standards. The four-week moving average of claims, which smooths out often volatile weekly data, increased by 6,500 to 285,000. That was the highest reading since last April.

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continued on page 3

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Thursday, January 21, 2016 4 p.m. ET

Tomorrow’s Headlines

Excluding the impact of foreign currency swings, “Avon is growing,” said Steven Mayer, a Cerberus managing director. “If we did not see that this business was growing organically we would not have made the investment,” Mr. Mayer said.

continued

Philly Fed Index Improves, but Still Reflects Contraction Manufacturing activity across the mid-Atlantic continued to contract at the start of the year, as producers remain crimped by adverse exchange rates, slower global growth and reduced capital spending, though conditions improved from the three-year low notched in December. The Federal Reserve Bank of Philadelphia said its index of general business activity covering the regional factory sector rose to -3.5 in January from a downwardly revised -10.2 last month. After revisions, the index has reflected five straight months of contraction and is consistent with a struggling nationwide manufacturing sector. Economists surveyed by The Wall Street Journal expected the index to edge down to -6.0. A rebound in shipments at the start of the year pulled the gauge higher. A subindex measuring shipments jumped 12 points and into positive territory for the first time in four months, though producers signaled the bounce would be short-lived.

Shkreli Seeks to Shield Congressional Testimony Martin Shkreli, the former drug-company executive criticized for dramatically raising a pill’s price, has asked a congressional committee seeking his testimony to guarantee it can’t be used in a federal prosecution, according to materials reviewed by The Wall Street Journal. Mr. Shkreli is seeking immunity similar to that granted Lt. Col. Oliver North when he testified to Congress in 1987 regarding the Iran-Contra scandal. The ex-CEO of Turing Pharmaceuticals AG gained notoriety over the summer after the company bought the U.S. rights to anti-parasite drug Daraprim and raised the price more than 50-fold. Then last month, Mr. Shkreli was indicted on federal fraud charges related to his time as a hedgefund manager. Mr. Shkreli has pleaded not guilty and denied all charges. The House Committee on Oversight and Government Reform, which has been investigating the price increases undertaken by Turing and other drug companies, has subpoenaed Mr. Shkreli and ordered him to testify at a hearing scheduled for Tuesday on drug-price increases.

Cerberus Executive Defends Deal With Avon Cerberus Capital Management decided to make a large investment in struggling beauty company Avon Products Inc. after a six-month review concluded there is potential for the business to grow, a senior executive from the privateequity firm said Thursday.

Sales from Avon’s international operations rose 3% on a constant-currency basis in 2015, according to a company presentation Thursday. Including Avon’s declining North American business, which is being carved out into a separate company controlled by Cerberus, Avon said its global sales were flat last year.

Carlson Exploring Strategic Options Carlson, the owner of Radisson and other hotel brands that are part of Carlson Rezidor Hotel Group, is exploring strategic alternatives for the hotel company that could include a partnership, merger or sale of the company, according to people familiar with the matter. The parent, a privately held hospitality and travel company based in Minnetonka, Minn., has asked its regular banker, Morgan Stanley, to run this process, these people said. Part of the hotel company, known as Rezidor Hotel Group, has shares that trade in Stockholm. That is a reflection of its Swedish roots when it was part of the SAS Group, owner of Scandinavian Airlines. Carlson Rezidor has more than 1,100 hotels and nearly 174,000 rooms world-wide, according to data tracker STR Inc., making it one of the world’s largest hotel companies. Its brands include the flagship Radisson business hotels, and its offshoots, Radisson Blu and Radisson Red, which are more design-oriented hotels. Carlson Rezidor also owns Country Inns and Suites.

GM Sells Record 9.8M Vehicles in 2015 General Motors Co. said Thursday that it sold 9.8 million vehicles in 2015, notching a modest annual increase amid strong conditions in its home market and continued growth in China. The results represent a third consecutive year of record global sales for the Detroit auto maker, with last year’s growth partially attributable to a change in the way it reports China sales. North American deliveries rose 6% to 3.6 million cars, trucks and crossovers, and it also delivered 3.6 million vehicles in China, an increase of 5% from 2014. While GM had reported it sold 9.9 million vehicles in 2014, that number reflected the way it used to account for volume in China. Last year, the auto maker switched from reporting wholesales to reporting retail sales in China, GM’s biggest market — global sales were 0.2% higher in 2015 compared with 2014 on that basis. GM likely remains behind Toyota Motor Corp. and Volkswagen AG in the global sales chase. Toyota has said its 2015 sales likely exceeded 10 million, while Volkswagen reported a rare decline to 9.9 million following the September disclosure of an emissions-testing scheme that damaged its reputation and forced the company to take some vehicles off the market.

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Thursday, January 21, 2016 4 p.m. ET Copyright Dow Jones & Co., Inc.

Talking Points

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Life Without City Water In Flint

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Like most people who enter the Mission of Hope shelter these days, Catherine Brown comes for the water. Ms. Brown, 55 years old, was once an aide to former Mayor Don Williamson but has been unemployed since she was laid off in 2008. Now, she is one of the 100,000 Flint residents whose lives have been upended by lead contamination of the city’s water. She washes herself with bottled water to avoid rashes she got from the water at home last year and drives 20 miles once a week to take a long bath at her sister’s house in Clio, Mich. “We’re nothing but the walking dead in Flint,” said Ms. Brown on Wednesday, bundled in a full-length New York Giants coat and a Detroit Pistons hat. She was making her daily pilgrimage across the city to the daytime shelter for three, onegallon jugs of water. “It’s pitiful,” she said. On a typical day, 300 people come to the small tan-brick building, an oasis in a bleak north side neighborhood where a 235-acre General Motors complex known as Buick City once stood. The shelter—which provides a warming center, meals and other services for the poor, disabled and mentally ill—offers breakfast and prayers, but mostly water. Cluttered rooms are stacked high with the stuff, which is privately donated from individuals and corporations. People warm up for a few minutes in a day room with busted blinds, worn-out sofas and a TV playing in the corner. The water is free but rationed so no one leaves empty-handed. “Poverty brings about a hoarding spirit, sometimes,” said Pastor Bobby Jackson. Flint residents were first told on Oct. 1 by county officials not to drink their water. Gov. Rick Snyder this month declared an emergency and activated the National Guard to help distribute filters and bottled water by the case at sites around the city, where they show their Flint identification to get supplies. Flint’s water system became contaminated with lead after the city, under an emergency manager appointed by the governor, decided to begin using water from the Flint River in April 2014 as part of a cost-saving plan. The corrosive water, however, began eating away at pipes and leaching lead and other contaminants into the water in people’s homes. “The only job that’s more important to me is the job of father,” President Barack Obama, in Detroit Wednesday for the annual auto show, said of Flint. “And I know that if I was a parent up there, I would be beside myself that my kid’s health could be at risk.” Last weekend, he declared a federal emergency, freeing up to $5 million to help pay for water, filters and other equipment. As Michigan officials and multiple federal agencies try to figure out how to restore the city’s entire water infrastructure, thousands of angry and anxious residents are adjusting to a new reality that includes hauling cases of water home each day. For Lashanda Warner, 37, who has eight children, that means driving to four fire stations every day — due to rationing at each point — to get cases of water for cooking and drinking. The trips consume an hour or two of her day and run up the gas bill for her GMC Yukon to $50 a week. Others say water bills remain high even though they hardly turn on their taps. Renee Wilson, 53, said her bill is close to $200 a month. But said she’s even more concerned about a recent diagnosis of high blood pressure that her doctor said could be linked to drinking lead-contaminated water. “I really want to pick up and leave town, but I can’t afford it,” Ms. Wilson said. People are foregoing showers to avoid potential contamination, getting their children’s blood tested for lead and worrying about whether the city will ever return continued on page 5 Copyright © Dow Jones & Company, Inc. All Rights Reserved. www.dowjones.com

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Thursday, January 21, 2016 4 p.m. ET

Talking Points continued

Like others, Claudia Parks said she wanted a test because she worried about her health. “You don’t know what the repercussions are going to be over the long term,” she said.

to normal. Many avoid going out to restaurants because they don’t want to eat food tainted by the city’s water. Properly installed filters are said to remove the contaminants from the water, which now comes again from Detroit, but many people are still wary.

Michael Webber said he believes his high blood pressure and a burst artery in his right eye were caused by lead contamination. He has tested positive for elevated blood lead levels. Water testing by Wayne State University found high lead concentrations in the family’s drinking water.

“It’s a mess,” said Catherine Ainsworth. The 83-year-old widower drove on a recent day to a fire house manned by National Guard members in light green fatigues so she could collect a free filter and a case of water.

New Phenomenon In Investment Banking: The Weekend

Inside, Guardsmen efficiently checked IDs and handed over water at a rate of 170 to 200 cases an hour. “It’s what we all signed up to do,” said Sgt. Daniel Rhodes of Grayling, Mich., who was overseeing the operation. At the Flint Water Treatment Plant, where officials caused the crisis by failing to install corrosion control systems under a plan approved by the Michigan Department of Environmental Quality, residents hustled from their cars through the cold to deliver bottles with water from their homes to be tested by the state for lead. The systems ensure that the water isn’t corrosive, so pipes aren’t damaged, preventing lead and other contaminates from leaking in. The head of the plant and top officials at the state environmental agency have resigned and couldn’t be reached for comment.

J.P. Morgan Chase & Co. is giving its investment bankers an unusual mandate: Relax, take some time off. The firm launched a new effort on Thursday to encourage its investment bankers to take their weekends offóas long as there isn’t a live deal in the works. Carlos Hernandez, J.P. Morgan’s head of global banking, announced the policy Thursday morning on an internal call, saying the rules applied to everyone from analysts to managing directors, the firm said. The initiative, dubbed “Pencils Down,” is unusual in a highpowered corner of Wall Street where 100-hour weeks are worn by some as a badge of honor and dreaded by others as an antiquated aspect of the job that leads to early burnout.

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