Market Snapshot* DJIA Nasdaq S&P 500 10-Year

Tuesday, October 18, 2016

18161.94

+75.54

5243.84

+44.01

2139.6

+13.1

1.7495%

3/32

30-Year

2.5144%

4/32

Euro

$1.09795

-0.0024

$50.29

+0.35

Nymex Crude

Source: SIX Financial Information, ICAP plc *preliminary values subject to adjustments

Stocks Stocks and commodities rebounded Tuesday following another batch of better-than-expected corporate results. The gains come as U.S. stocks have struggled to maintain a rally in recent trading sessions. The S&P 500 hasn't risen 0.5% or more this month, and it has alternated between gains and losses each trading session for nearly two weeks.

Treasurys Prices of U.S. government bonds strengthened for a second consecutive day, putting the brakes on the market's weekslong selling pressure.

Forex The dollar pared losses Tuesday, as solid consumer price data in the U.S. bolstered the case for the Federal Reserve to raise interest rates in coming months.

Commodities Crude-oil prices flipped from losses to gains Tuesday, pivoting around the $50 mark, as the dollar retreated and market participants continued to evaluate OPEC's proposed production cuts.

Tomorrow’s Headlines

Goldman Sachs Profit Climbs on Trading Revenue Goldman Sachs Group Inc. said its quarterly earnings rose 47% and handily beat expectations as the Wall Street firm’s trading division bounced back from a slow start to 2016. The New York-based firm reported a profit of $2.09 billion, or $4.88 a share. That easily surpassed the $1.43 billion, or $2.90 a share, it reported in the same period last year. Revenue grew 19% to $8.17 billion from $6.86 billion a year earlier, when sluggish trading activity across Wall Street—particularly in fixed-income,— dragged down earnings. Analysts polled by Thomson Reuters had expected Goldman to earn $3.82 a share on revenue of $7.42 billion. Shares climbed 2.4%. The firm’s return on equity, a closely watched measure of profitability, rose to 11.2% in the third quarter. It was 7% a year ago and hadn’t exceeded 10% — its theoretical cost of capital—since early 2015.

Consumer Prices Rose a Steady 0.3% U.S. consumer prices increased steadily in September, a sign of slowly building inflation that could nudge the Federal Reserve closer toward raising interest rates. continued on page 2

Wednesday’s Calendar 7:00 a.m.

10/14 MBA Weekly Mortgage Applications Survey Composite Idx (previous 509.6), W/W% (previous -6.0%), Purchase Idx-SA (previous 216.7), W/W% (previous -2.6%), Refinance Idx (previous 2189.8), W/W% (previous -8.0%)

7:45 a.m.

'Improving Diversity in the Financial Services Industry' event with San Francisco President John Williams

8:30 a.m.

Sep New Residential Construction - Housing Starts and Building Permits Total Starts (expected 1.18M), Housing Starts, M/M% (expected +3.5%), Building Permits (expected 1.17M), M/M% (expected +1.7%)

10:30 a.m.

10/14 EIA Weekly Petroleum Status Report Crude Oil Stocks (Bbl) (previous 474.0M), Net Chg (Bbl) (previous +4.9M), Gasoline Stocks (Bbl) (previous 225.5M), Net Chg (Bbl) (previous -1.9M), Distillate Stocks (Bbl) (previous 157.0M), Net Chg (Bbl) (previous -3.7M), Refinery Usage (previous 85.5%), Total Prod Supplied (Bbl/day) (previous 20.738M), Net Chg (Bbl/day) (previous +0.177M)

1:00 p.m.

Federal Reserve Bank of Dallas President Robert Kaplan speaks in Fort Worth, TX

2:00 p.m.

U.S. Federal Reserve Beige Book

7:45 p.m.

Federal Reserve Bank of New York President William Dudley speaks on New York City's economic history at the Lotos Club

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Tuesday, October 18, 2016 4 p.m. ET

Sprint Continues to Add More Customers

Tomorrow’s Headlines continued The consumer-price index, measuring what Americans pay for everything from dental care to cars, rose 0.3% from a month earlier, the Labor Department said Tuesday. Excluding the volatile costs of food and energy, so-called core prices climbed 0.1%. Overall prices have risen 1.5% over the past year, a sluggish pace historically but still the biggest gain in any 12month period since October 2014, driven largely by rent and health care cost increases. Core prices rose 2.2% over the period. Meanwhile, gasoline costs, which have been depressed for much of the past two years, are starting to rise again as oil markets rebound. As more Americans get jobs and household income rises, businesses are starting to charge more for goods and services.

Tesla Extends Delivery Date of Model 3 for New Reservations The wait for Tesla Motors Inc.’s upcoming Model 3 sedan just got longer for some buyers. New reservations for the vehicle won’t be filled until mid-2018 or later, according to the company’s website. Prospective customers who already had reserved a Model 3 could expect delivery in late 2017, as Tesla previously had promised, a company spokeswoman said Tuesday. Tesla has said that 373,000 Model 3s were reserved. Tesla this week posted the later delivery schedule for new reservations on its website, which suggests continuing strong interest in the Model 3. Last week, the company’s website said that delivery of the $35,000 sedan would begin in late 2017, according to a tesla.com, a nonprofit that archives webpages.

Sprint Corp. reported that its loss narrowed while revenue rose as the wireless carrier detailed its preliminary results for its second fiscal quarter, which ended in September. The company said net postpaid phone subscriber additions more than doubled to 347,000 from the prior quarter, and surged from 62,000 a year earlier. Still, overall postpaid net additions were 344,000, down from 553,000 a year ago. Shares of the Overland Park, Kan., company, up 85% this year, fell 3.1% to $6.71 in late morning trading Tuesday as adjusted earnings before interest, taxes, depreciation and amortization also missed expectations. During July, the four largest U.S. wireless carriers turned in quarterly results that suggested that prices have been stabilizing after years of slashing prices, offering big promotions and undercutting each other to attract new subscribers. In a regulatory filing Tuesday, Sprint said its preliminary net revenue rose 3% to $8.25 billion for the three-month period ended Sept. 30, while wireless net revenue increased nearly 5% to $7.85 billion.

9 Regional Fed Banks Wanted To Raise Discount Rate in September More of the Federal Reserve’s 12 regional reserve banks wanted to raise the interest rate on discount-window loans ahead of the central bank’s Sept. 20-21 policy meeting, according to minutes released Tuesday. Directors of nine regional banks—Boston, Cleveland, Richmond, Dallas, San Francisco, Philadelphia, Atlanta, St. Louis and Kansas City—voted to raise the rate to 1.25% from 1%, citing improving economic conditions. All of those banks except Atlanta voted to raise the discount rate in August as well, the minutes also showed.

J&J Brushes Off Looming Biosimilar Competition

Eight favored raising the rate in July, six wanted to raise it in June and just four wanted to do so in May.

Johnson & Johnson on Tuesday sought to reassure investors and analysts that lower-priced competition for one of its top-selling products won’t slow a company that posted slightly better-than-expected results in the third quarter.

UnitedHealth Tops Views, Boosts Outlook

The health-products company said world-wide sales in the quarter grew by 4.2%, to $17.8 billion. The company reported profit of $4.27 billion, or $1.53 a share, up from $3.36 billion, or $1.20 a share, in the same period a year ago. Looking ahead, J&J lifted the low end of its financial guidance for the year. J&J’s shares have performed strongly, up 15% this year, propelled by a drugs business that has been delivering new big sellers. But shares fell 2% Tuesday morning as investors digested the announcement from rival Pfizer Inc. late Monday that it planned to challenge J&J’s Remicade rheumatoid-arthritis treatment by launching a lower-priced copy, known as a biosimilar, in late November.

UnitedHealth Group Inc. boosted its earnings outlook for the year as it posted strong profit growth in the latest quarter on climbing revenue across its segments. The Minnetonka, Minn., company now expects adjusted earnings for the year of about $8 a share compared with its previous forecast of $7.80 to $7.95 a share. The health-care delivery businesses drove growth at Optum, its health-services unit, where revenue rose 9% to $21.1 billion. Optum is rapidly expanding its business of providing primary care—the company has said it aims to have a “national platform,” with owned or affiliated clinics in more than 75 major markets around the U.S. Optum has

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continued on page 3

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Tuesday, October 18, 2016 4 p.m. ET

Tomorrow’s Headlines

auditing and audit firms, that’s an important focus for us and it will continue to be,” Andrew Ceresney, the SEC’s enforcement director, told reporters on a conference call.

continued also benefited from UnitedHealth’s acquisition of pharmacybenefit manager Catamaran Corp., which was completed in July 2015. Meanwhile, the insurer’s medical-loss ratio—the percentage of premiums paid in claims—decreased 60 basis points year-over-year to 80.3% in the third quarter. UnitedHealth said revenue from its employer-based and individual plans rose 12% to $13.3 billion in the period. It said growth from employer-sponsored groups offset decreases in individual benefit coverage.

Home-Builder Sentiment Edged Lower in October U.S. home builders reported a slight drop in optimism in October but sentiment remained elevated, a sign the market for new single-family homes should continue its slow but steady recovery in coming months. The National Association of Home Builders housing-market index fell two points from the prior month to a seasonally adjusted 63 in October, the trade group said Tuesday. That is the second-highest level of the year, following a September reading of 65. A number over 50 indicates more builders view conditions as good than poor. “The headline index is consistent with higher new home sales over the next couple of months,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. While two components of the index slipped slightly — the present conditions and the buyer traffic indexes — the measure of forward-looking sentiment ticked up one point to its highest level in a year, and has been above 70 for the past two months.

Ernst & Young To Pay $11.8M To Settle SEC Claims Ernst & Young LLP agreed Tuesday to pay $11.8 million to settle Securities and Exchange Commission allegations that it failed to uncover deceptive accounting which inflated earnings at one of its audit clients. The SEC said E&Y disregarded red flags and repeatedly failed to detect moves that oil-services company Weatherford International PLC allegedly made to manipulate its income-tax reporting, which boosted the company’s earnings by hundreds of millions of dollars over a four-year period. Weatherford itself agreed last month to pay $140 million to settle fraud allegations from the SEC. The SEC’s case against E&Y is its first since 2009 alleging botched audits by a Big Four accounting firm, though the commission has brought other cases against Big Four firms over issues like auditor independence. “This is an area,

Qualcomm Promises 5G Modem Chip for 2018 Qualcomm Inc. announced plans to deliver its first chip for the next generation of cellular networks, angling to be ready as some carriers roll out versions of 5G services by 2018. The San Diego-based company said it expects the forthcoming Snapdragon X50 modem chip to be available in sample quantities in the second half of 2017 and to deliver download speeds of up to 5 gigabits per second. That is roughly 100 times faster than peak speeds claimed by most networks that use the fourth-generation technology called LTE, for long-term evolution. Most telecom carriers don’t plan to begin offering such services until 2020, and industry groups have yet to finalize a technical definition for 5G. But Verizon Communications Inc. has discussed launching a service based on the technology to compete with fixed-line internet services by 2017.

Abbott, St. Jude Medical to Sell $1.1B In Assets Abbott Laboratories and St. Jude Medical Inc., in the midst of a merger, said Tuesday they would sell certain businesses to Japanese medical-equipment maker Terumo Corp. for about $1.1 billion as the two American companies march toward completing their tie-up. The companies said they plan to sell a portion of their vascular closure and electrophysiology businesses to Terumo after the St. Jude Medical-Abbott transaction closes. No sale would occur if the planned merger were to fall apart. The divestiture, an all-cash transaction, will include St. Jude Medical’s Angio-Seal and Femoseal vascular-closure products and Abbott’s Vado steerable sheath. Abbott will retain its vascular-closure products.

Domino’s Pizza Profit Boosted by Strong Sales Domino’s Pizza Tuesday reported a 25% jump in profit, powered by strong sales and an expanding number of stores. The chain reported that it had 316 more stores compared with the prior quarter, with domestic same-store sales posting a 13% gain, higher than the 8.9% estimated by analysts surveyed by Thomson Reuters. International stores saw same-store sales expand 6.6% during the September quarter which was better than the 6.2% projected by analysts. Supply chain sales followed overall revenue higher, rising 17%.

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Tuesday, October 18, 2016 4 p.m. ET Copyright Dow Jones & Co., Inc.

Talking Points

Tomorrow's News Today is made available as a complimentary service to Dow Jones News Service paying subscribers. No further redistribution is permitted without written permission from Dow Jones. Tomorrow’s News Today is intended to provide factual information, but its accuracy cannot be guaranteed. Dow Jones is not a registered investment adviser, and under no circumstances shall any of the information provided be construed as a buy or sell recommendation or investment advice of any kind.

Stern: Google Goes Toe-to-Toe With iPhone, And Wins

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Why is Google suddenly making such an aggressive play for iPhones? Ironically, it’s because the smartphone war is over. The big leaps now come in software and services and the ecosystem of devices around them. With an iPhone of its own, Google can appeal to longtime Apple buyers who already tend to live mostly in Google’s world.

Android people, please step forward. Good news! Your next phone-buying decision just got a heck of a lot easier. The Google Pixel is now the best Android smartphone you can buy. The other leading contender was disqualified due to spontaneous combustion. iPhone people, it’s your turn. Ask yourself: Why do I have an iPhone? Is it because of its software, services and privacy policies? Or is it because it’s a very good phone for things like Google Maps, Gmail, Spotify and Facebook Messenger? If you’ve answered yes to the latter, the Pixel may be for you, too. The Pixel looks like an iPhone 7 clone. It comes in two sizes like the iPhone. It’s the same price (starting at $650 for the 5-inch Pixel and $770 for the 5.5-inch Pixel XL). And, for the first time, Google itself controls both the phone hardware and the software. Yep, just like Apple.

While Google still needs to convince me why we should trust it with so much data, the Pixel succeeds in refuting many of the arguments I’ve long made for choosing iPhone over Android. I bought an iPhone for superior design What better way to make iPhone users feel at home than to make an uglier iPhone? On occasion, I’ve reached for the Pixel’s curved edges and aluminum body thinking they belonged to my iPhone —whose design that hasn’t changed in years. (Why no rose gold, Google?) Plus: The Pixel has a headphone jack. Minus: It’s inconveniently placed up top. Like an iPhone, you can’t remove the battery, and have to pay for extra storage. Unlike an iPhone or Galaxy S7, the Pixel probably won’t survive a dunk in the pool. Maybe Apple aesthetic wouldn’t allow the rear placement of the fingerprint sensor — or the glossy plastic it’s surrounded by. I, however, have gotten so used to gently tapping the back of the phone to unlock that I’ve found myself doing it on the iPhone. Google thinks the appeal is so clear, it built a dongle to make switching to the Pixel quick and painless, even from an iPhone. ...for the best camera The best camera is the one you have with you. In most situations, I’d rather have the Pixel camera. One reason is the phone’s superior screen. The AMOLED display makes photos look better; even ones taken on an iPhone. Blacks are deeper, colors are more vibrant and the higher pixel density makes everything sharper. The camera also performs better in low-light situations, compared with the excellent cameras in the Samsung Galaxy S7 and iPhone 7. In testing, its photos had more dynamic range and color saturation. The only noticeable tradeoff is that some Pixel night shots have more noise (digital graininess). Plus, you never have to stop snapping. The Pixel comes with unlimited cloud storage of full-resolution photos and video. You can easily clear photos to make room on your phone, with automatic and manual options. continued on page 5 Copyright © Dow Jones & Company, Inc. All Rights Reserved. www.dowjones.com

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Tuesday, October 18, 2016 4 p.m. ET

Talking Points

Tension Between Allies In Mosul

continued

Tensions emerged Tuesday among allied forces fighting to retake the northern Iraqi city of Mosul from Islamic State, as Kurdish fighters accused Iraqi government forces of inaction on only the operation’s second day.

The iPhone 7 Plus with its second lens does beat the Pixel camera. Not only does the iPhone 7 Plus optically magnify shots 2X, but it uses the dual-lens setup to gauge depth for a lens blur effect. The Pixel has a similar effect, but it looks pretty fake. for better battery life The Pixel XL had no problem making it through my day. The smaller Pixel had a harder time keeping up, hitting 10% most days by 8 p.m. In my punishing lab tests, the iPhone 7 and 7 Plus lasted an hour longer than the similarsize Pixels. The Pixels win on faster charging, though. With the included USB-C wall charger, the smaller Pixel went from zero to 100% in 1.5 hours —nearly an hour faster than the iPhone 7. ...for easy-to-use software Google’s reasoning for making its own phone becomes clear with the software. I’ve never used a faster, more fluid Android device. It’s a Google app user’s dream: Gmail, Google Docs, Maps, Calendar...all work far better than their iOS counterparts.

The long-awaited assault on the extremist group’s last major Iraqi stronghold began Monday with rapid advances by a contingent of Kurdish fighters, who stormed nine nearby villages in the first phase of the effort to retake Iraq’s second-largest city. But the pace slowed Tuesday as the Kurdish fighters, known as Peshmerga, consolidated their gains and prepared for the next push. They also criticized their partners in the Iraqi military. “The Iraqi army hasn’t moved even a bit,” said the Peshmerga’s Gen. Sihad Barzani, brother of Iraqi Kurdistan’s president, Masoud Barzani. “The plan was us taking villages, and then the Iraqi army takes some of them. They didn’t.” As he spoke, Gen. Barzani gestured to a nearby staging area where Iraqi artillery pieces sat hitched to trucks and covered with tarps, waiting to be transported to the front. There was no indication they would be moving soon. “Our front didn’t start yet. We’re waiting for the Peshmerga to finish,” said Iraqi army Gen. Hazaa Korek, who is in charge of those artillery pieces.

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