Market Snapshot* DJIA

16516.22

+117.65

4685.92

+47.93

S&P 500

1938.68

+15.01

10-Year

2.1015%

17/32

Nasdaq

Tuesday, January 12, 2016

30-Year

2.8804%

1 17/32

Euro

$1.08555

+0.0002

$30.44

-0.96

Nymex Crude Source: SIX Telekurs, ICAP plc

Stocks

Tomorrow’s Headlines

U.S. stocks rose Tuesday as investors bought shares of consumer, technology and health-care companies. The Dow Jones Industrial Average added 118 points, or 0.7%, at 16516. The S&P 500 gained 0.8%, while the Nasdaq Composite rose 1%. Major indexes swung between gains and losses several times during the session.

BP to Lay Off About 4,000 Workers BP PLC said Tuesday it would slash about 4,000 jobs from its explorationand-production unit—about one-sixth of the staff in that business—over the next year or so, the latest in a wave of cuts across an industry beset by plummeting oil prices.

Treasurys A new bout of selling in the oil market sent investors piling into haven assets, pushing the yield on the benchmark 10year U.S. government debt to the lowest level in more than two months. In lateafternoon trading, the yield on the benchmark 10-year Treasury note was 2.100%, compared with 2.160% on Monday.

Forex The British pound sank to a fresh 5 1/2year low against the dollar Tuesday, as weak economic data raised concerns that the Bank of England may hold off from increasing interest rates this year. Sterling was recently down 1.1% at $1.4389, its lowest level since June 2010.

*preliminary values subject to adjustments

BP’s cuts will affect workers in places including Angola, Azerbaijan and the U.S., a spokesman said, where BP has big oil-and-gas production operations. Some 600 of the cuts will come from BP’s operations in the North Sea. The company currently has about 3,000 employees in the North Sea, and 24,000 exploration-and-production employees world-wide, the spokesman said. BP’s announcement comes after many of its rivals announced similar levels of job cuts in response to oil prices that have fallen by more than two-thirds since mid 2014. U.S. oil was trading just above $31 on Tuesday, brought lower by a Chinese slump in energy demand, a continued world-wide crude glut and a strengthening American dollar. In the U.S., Chevron said last year it could cut between 6,000 and 7,000 jobs. France’s Total SA last year said it would cut 2,000 jobs by 2017. Norway’s Statoil ASA said it would get rid of up to 1,500 permanent jobs and 525 consultants this year in a $1.7 billion cost-cutting program. The company had previously cut 1,340 permanent jobs and 995 external consultants since the end of 2013. Royal Dutch Shell PLC said in July it would slash 6,500 jobs, and could make further cuts in continued on page 2

Commodities U.S. oil prices briefly tumbled below $30 a barrel on Tuesday, underscoring the global economy's difficulty with absorbing a relentless flood of crude supplies. The magnitude of the oil rout, now in its 19th month, has defied the forecasts of industry experts and Wall Street prognosticators who underestimated the ability of both big state-controlled producers and smaller private-sector energy firms to weather the historic slide in prices.

Tomorrow’s Calendar 7:00 a.m.

01/08 MBA Weekly Mortgage Applications Survey Composite Idx (previous 328.6), W/W% (previous -11.6%), Purchase Idx-SA (previous 196.2), W/W% (previous -11.1%), Refinance Idx (previous 1114.8), W/W% (previous -12.4%)

10:00 a.m.

World Development Report launch media briefing

10:30 a.m.

01/08 EIA Weekly Petroleum Status Report Crude Oil Stocks (Bbl) (previous 482.324M), Net Chg (Bbl) (previous -5.085M), Gasoline Stocks (Bbl) (previous 231.996M), Net Chg (Bbl) (previous +10.576M), Distillate Stocks (Bbl) (previous 159.418M), Net Chg (Bbl) (previous +6.308M), Refinery Usage (previous 92.5%), Total Prod Supplied (Bbl/day) (previous 18.296M), Net Chg (Bbl/day) (previous 2.182M)

1:00 p.m.

FRB Chicago President Charles Evans speech at Corridor Economic Forecast Luncheon

2:00 p.m.

U.S. Federal Reserve Beige Book

2:00 p.m.

Dec Monthly Treasury Statement of Receipts & Outlays of the U.S. Govt

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Tuesday, January 12, 2016 4 p.m. ET

Tomorrow’s Headlines continued

“The continued growth in online purchases means that retailers need fewer bodies on the sales floor, while more workers are needed by warehouses, fulfillment centers and shipping companies,” he said.

EU Launches Antitrust Review of Halliburton Merger

Challenger Gray & Christmas also said retailers are moving up hiring timetables, putting October job gains on the rise to a record for the month.

Halliburton Co. faces a fresh hurdle toward its $35 billion acquisition of rival Baker Hughes Inc. after European Union regulators opened a full-blown antitrust investigation into the deal, warning it raised “serious potential competition concerns.”

BTG Pactual Aims to Sell Stakes in Firms

The merger, which would unite the second and third largest oil-field services suppliers, already faces a growing list of antitrust concerns in the U.S., even as the slump in oil prices complicates the firms’ efforts to find buyers for any assets that might need to be sold to assuage regulators. The European Commission, the EU’s top antitrust authority, said Tuesday it would open an in-depth probe into the merger after its initial inquiry revealed that the firms “seem to be close competitors, both in terms of tenders and in innovation.”

Nasdaq to Suspend KaloBios Shares The Nasdaq Stock Market said it plans to officially suspend KaloBios Pharmaceuticals Inc. on Wednesday, as the biotech firm remains under scrutiny since the arrest of former Chief Executive Martin Shkreli. The move is not an official delisting of KaloBios. But it ends the trading halt that has been in place on the stock since Dec. 17 and allows shares to trade in over-the-counter markets under the symbol “KBIOQ.” Trading in KaloBios has been halted at $23.59 following the arrest of Mr. Shkreli for allegedly misleading investors in his hedge funds and raiding a public company to cover the losses. Mr. Shkreli pleaded not guilty and has denied all charges. Soon after the arrest, the Nasdaq sent a delisting letter to KaloBios, which fired Mr. Shkreli as chief executive after he was charged.

Retailers Hired Fewer Holiday Workers For 2nd Straight Year Retailers hired fewer workers during the holidays for the second straight year, as technology is helping retailers meet higher demand with fewer workers, Challenger Gray & Christmas said Tuesday. Retailers added 745,800 workers in the final three months of 2015, according to an analysis of government employment data by the outplacement consultancy, down 1.2% from the 755,000 workers added in 2014, which was 4% lower than the year before. Chief Executive John Challenger pointed to “the shift in Christmas shopping from brick-and-mortar to click-andorder.”

Brazilian investment bank BTG Pactual SA confirmed it is in talks to sell its ownership stakes in two financial-services companies as it attempts to raise cash and restore investor confidence following the November arrest of its former chief executive. In a regulatory filing, BTG said it is holding discussions to sell its holdings in insurance company Pan Seguros SA and brokerage firm Pan Corretora SA. Combined, BTG’s stakes in the two Brazilian companies represent about 0.1% of BTG’s assets. BTG took control of both businesses in 2014. BTG on Tuesday didn’t provide information on possible buyers or a time frame for the deal. BTG, which up until last year had global ambitions, has been selling assets after the arrest of former Chief Executive Andre Esteves as part of an investigation into corruption at Petroleo Brasileiro SA.

Asian Brewers Mull $3B Bids for Peroni, Grolsch Brands Asian brewers from Japan to Thailand are considering bids of over $3 billion to buy well-known beer brands Peroni and Grolsch, which are being sold to win clearance for the megamerger of Anheuser-Busch InBev NV and SABMiller PLC, according to people familiar with the situation. Asahi Group Holdings Ltd. of Japan has lined up financing for a bid of more than $3 billion to buy the two European brands, according to these people. Asian brewers including San Miguel Corp. of the Philippines and Thai Beverage PCL of Thailand are among the other bidders that have expressed interest in buying the brands, they said. Bids for the two brands are due later this week, and other potential buyers—including private-equity firms—are expected to show interest, according to the people.

California Regulators Reject Volkswagen Recall Plan California environmental regulators on Tuesday rejected Volkswagen AG’s proposals for recalling nearly 500,000 two-liter diesel-powered cars, raising the tension ahead of a crucial meeting this week between the company and government regulators. The California Air Resources Board, known as CARB, said Volkswagen violated 13 specific state environmental regula-

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continued on page 3

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Tuesday, January 12, 2016 4 p.m. ET

Tomorrow’s Headlines

chisees rents that exceed market rates by up to 10 times, and by limiting their ability to switch to other brands.

continued tions. Explaining its decision in a letter to the company, CARB said Volkswagen’s planned technical fix for its twoliter engines was too vague to allow a technical evaluation. The proposals also failed to address how the fix would affect the engine’s performance, emissions and vehicle safety. California regulators said they would continue their investigation. “Today’s actions do not preclude a recall, but allow for a broader array of potential remedies,” CARB said in its statement. The rejection of Volkswagen’s recall plan comes a day before the company’s chief executive, Matthias Muller, is scheduled to meet Gina McCarthy, head of the Environmental Protection Agency, for talks in Washington.

Melrose Weighs Offer For Philips Lighting Arm U.K. industrial firm Melrose Industries PLC is considering a bid for the lighting business of Dutch electronics group Koninklijke Philips NV, according to people familiar with the matter. Philips has said that it plans to separate its lighting business in the first half of 2016 and is exploring either a sale or an IPO of the bulk of the unit, which could be valued as high as 6 billion euro ($6.5 billion) according to one of the sources. The plan comes after the sale of Philips’s lighting components and automotive-lighting operation to a fund led by Chinese venture-capital firm GSR Ventures for $3.3 billion. But that deal has run into some trouble, as a U.S. body that reviews foreign investments has raised concerns over Chinese investors gaining control of the U.S. portion of the Philips operation. The acquisition of the Philips lighting unit would be a major investment by Melrose, which focuses on turning around manufacturing businesses for a profit. On Tuesday its market capitalization stood at 2.8 billion pounds. In addition to Melrose, a number of private-equity firms are considering bidding for the unit, say people familiar with the matter.

McDonald’s Faces EU Antitrust Complaint McDonald’s Corp. could face fresh regulatory headwinds in Europe after three Italian consumer groups filed an antitrust complaint with the European Union alleging that the fastfood chain imposes illegal terms on its franchisees. The complaint, which is supported by U.S. and European trade unions, alleges that McDonald’s abuses its dominant market position and harms consumers by charging its fran-

It comes a month after EU regulators opened a full-blown investigation into McDonald’s tax affairs in Luxembourg, as part of a widening inquiry into unfair tax sweeteners for multinationals. The unions claimed that the company had avoided about 1 billion euro ($1.09 billion) in taxes by funneling royalties to Luxembourg.

GameStop’s Holiday Sales Fuel Concerns About Downloads GameStop Inc. on Tuesday said that sales of new software fell 9.7% during the holiday period, further fueling concerns that the increase in digital downloads is hurting the videogame retailer. Overall, the Grapevine, Texas, company said its total sales for the nine weeks ended Jan. 2 rose 1.8% to $2.99 billion, helped by sales of new game consoles and collectibles. Changes in foreign-exchange rates hurt sales by $119.5 million, GameStop said, and sales increased 5.9% on a constant-currency basis. Shares of GameStop, which had fallen 13% over the past 12 months before Tuesday, fell another 6% to $27.61 in midday trading in New York. GameStop blamed the decline in new software sales on fewer Nintendo titles being available, compared with a year ago, and on declines in prior-generation software sales.

Kindred to Pay $125M To Settle U.S. Suit Kindred Healthcare Inc. agreed to pay $125 million to settle federal allegations it provided unnecessary therapy services to nursing-home patients as part of a scheme to overbill the federal Medicare program, according to the agreement finalized on Tuesday. Several nursing homes that hired Kindred’s therapy unit, RehabCare, to provide services to their residents separately agreed to pay the federal government about $8 million for their role in the alleged scheme.

Captive Insurance Cos To Lose Federal Home Loan Bank Membership A top federal housing regulator on Tuesday shut the door on mortgage investors who had been using a loophole to access low-cost, government-backed financing. The Federal Housing Finance Agency said so-called captive insurance companies, which insure the risks of the companies that own them, no longer will be eligible for membership in government-backed federal home loan banks. The 11 regional federal home loan banks advance loans to commercial banks, savings banks, insurers and credit unions to help fund mortgages and community investments.

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Tuesday, January 12, 2016 4 p.m. ET Copyright Dow Jones & Co., Inc.

Talking Points

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Delta Poised To Surpass United As No. 2 Carrier By Traffic

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Delta Air Lines Inc. nosed ahead of United Continental Holdings Inc. in 2015 to become the nation’s No. 2 airline based on newly released traffic figures for the year, adding a flourish to the Atlanta-based carrier’s strong performance in recent years. Delta said it ended the year with 209.6 billion miles flown by paying passengers, up 3.3% from the prior year. That put it behind American Airlines Group Inc., which on Tuesday reported its traffic rose 2.4% to 223 billion revenue-passenger miles in 2015. United came in at 208.6 billion revenue-passenger miles, up 1.5% from 2014. The figures include regional-carrier partners flying under the airlines’ brands. United has been one of the most cautious carriers about boosting its capacity in recent years, and has been consumed with trying to finish integrating its operations and workforce after its 2010 merger. United said it is “continuing to focus on running a reliable operation and investing in the tools and services that allow us to deliver the flier-friendly experience our customers deserve and expect.” Delta declined to comment on its higher ranking. Traffic — the number of passengers multiplied by the miles they flew — is widely used to compare airlines. Rankings differ slightly by other measures, such as the number of passengers carried: American hauled 201.2 million fliers last year, Delta 179.4 million, Southwest 144.6 million and United 140.4 million. Based on annual revenue, Delta had already been second after American before last year, and by market capitalization, Delta ranks first, with a value of about $37 billion, followed by Southwest Airlines Co. at $27 billion. Traffic volume doesn’t necessarily translate into profit, although all the U.S. carriers for now are posting record results on sharply lower fuel expenses, conservative capacity additions and a gush of revenue from charging for things such as checked luggage, priority boarding, Wi-Fi service and food. Delta had become first by traffic among U.S. airlines after its 2008 merger with Northwest Airlines. But it lost that crown in 2010 when United bolstered its size by merging with Continental Airlines. American, after its combination with US Airways in late 2013, retook the top honors in 2014. Southwest, the nation’s largest discounter, has long cruised in fourth place, despite its 2011 acquisition of AirTran Airways. It has no regional partners. Last year, Southwest racked up 117.5 billion revenue-passenger miles, up 8.8%.

EIA: Oil To Recover To Near $50 In 2017 U.S. oil prices will hold below $50 a barrel on average this year and next, government forecasters said Tuesday. Oil prices have tumbled from more than $100 a barrel in mid-2014 to just above $30 a barrel Monday, as a global glut of crude and concerns about demand weighed on the market. Analysts widely expect prices to stay subdued this year as supply continues to exceed demand, but some are calling for prices to rise in the second half of the year as companies cut spending and production falls in the U.S. and elsewhere. The Energy Information Administration, in its monthly short-term energy outlook, cut its 2016 forecast for U.S. oil prices to $38.54 a barrel, down from its prior forecast of $50.89 a barrel. For Brent, the global benchmark, the EIA expects prices to average $40.15 a barrel this year, down from its prior forecast of $55.78 a barrel. Next year, the EIA expects U.S. prices to average $47 and Brent to average $50. The EIA hadn’t previously released forecasts for 2017. continued on page 5 Copyright © Dow Jones & Company, Inc. All Rights Reserved. www.dowjones.com

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Tuesday, January 12, 2016 4 p.m. ET

Talking Points

from 9.4 million barrels a day in 2015 to 8.7 million barrels a day in 2016 and 8.5 million barrels a day in 2017.

continued The agency expects the global market to remain oversupplied this year and next. The EIA raised its global supply forecast for this year and cut its demand outlook. The EIA said international petroleum supplies would average 95.93 million barrels a day in 2016 and 96.69 million barrels a day in 2016, up from 95.71 million barrels a day last year. Consumption is projected to average 95.19 million barrels a day this year and 96.61 million barrels a day next year. Last year, global consumption averaged 93.77 million barrels a day. Oil traders have been closely focused on U.S. production in recent months, after a global glut of crude oil sent prices plunging in 2014. With the Organization of the Petroleum Exporting Countries producing above its target of 30 million barrels a day, investors say U.S. production needs to fall to make the market less oversupplied. After booming to multidecade highs in spring 2015 because of new technologies in shale-oil drilling, U.S. oil production has started to fall as companies cut back on projects in response to low crude prices. However, the pace of decline has been slower than many investors initially expected, keeping oil prices low. The EIA said that production fell by 80,000 barrels a day in December from the prior month to 9.2 million barrels a day. The EIA expects production to fall

Dow, DuPont Struggle On Chemistry A feat of corporate and fiscal engineering, Dow Chemical Co. and DuPont Co.’s planned megamerger hinges on finding the right chemistry with about 100,000 employees. Senior leaders who have spent decades at the two giants poised to be dismantled are coping with upended career prospects and attempting to keep their staff? focused amid the merger of two companies with a combined value of $103 billion. At the same time, they could find themselves in line for plum positions when the new company — DowDuPont — eventually separates the combined businesses into three units focused on agriculture, industrial materials and specialty expected within three years. Recruiters, coaches and executives who have weathered deals and integrations say it is a tough process. “On one side of your mind you’re saying, ‘Tomorrow will be like today.’ You go about and do your job,” says Robert Lynn Oakes, who worked for Rohm & Haas Co. when Dow acquired the chemical maker in 2009. He stayed for three years afterward before leaving in 2012 because he was told he would have to relocate. “In the back of your mind, you’re looking for opportunities,” he said.

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