Alibaba shares soared after the company reported market-beating earnings in the three months ended December, with investors content with a record amount of spending by the company in the 2018 calendar year, hoping that it will spur future growth.

The Chinese e-commerce giant posted its slowest revenue growth since 2016 in its fiscal third quarter, but net income beat estimates. The stock closed more than 6 percent higher in New York on Wednesday and edged up further in after-hours trading.

It has had to contend with a slowing Chinese economy and the ongoing U.S.-China trade war. One area the market was focused on is spending by the company, with some analysts thinking that Alibaba could reign in expenditures because of the tougher operating environment.

But the company ended up spending a record amount in 2018 — something that the market was happy with. Over 278.8 billion yuan, or $41.6 billion, was spent on product development, sales and marketing, general administration and cost of revenue last year, a 86.2 percent increase in renminbi terms from 2017, when the company splashed out 149.7 billion yuan.

“Ali appears more disciplined in its spending on operating-related expenses, though top management suggested they are not withdrawing from investing in those strategic businesses,” Nomura said in a research note released Thursday.

Those “strategic businesses” include what Alibaba calls “new retail” — a term it uses to describe the way it can integrate all its services from payments to logistics to bricks and mortar stores in order to create a shopping “ecosystem.”

“It’s all about how to integrate online and offline to transform to a whole digitalized commercial world,” Alibaba CEO Daniel Zhang told CNBC in an interview last year.

It is also investing in food delivery platform and local services guide Koubei. And Alibaba said it spent cash on original content and licensing for its online video service Youku.

Alibaba finance chief Maggie Wu said the profitability from the company’s core commerce business allowed it to generate the money to continue to invest.

“This profitability and $7.5 billion in free cash flow generated this quarter enable us to continue to invest in other important strategic businesses and technology to support the growth of our ecosystem,” Wu said in the earnings release on Wednesday.

While its core e-commerce business is currently the biggest source of revenue and profits, the company sees a more diversified business being stronger in the future. Other businesses such as cloud computing, which is growing rapidly, and digital entertainment have seen their share of revenue increase.

Zhang told CNBC last year that cloud computing could be its “main business” in the future.

Analysts are bullish on Alibaba’s stock, which is down more than 16 percent in the last 12 months.

However, the New York-traded shares are 21.7 percent higher year-to-date and closed at $166.82 on Wednesday. The earnings prompted a number of analysts to increase their price target on the stock. John Choi of Daiwa Capital Markets raised his outlook on the stock price from $190 to $200, while Scott Kessler of CFRA Research upped his price target by $20 to $198.

Alibaba “has demonstrated it can achieve healthy growth even with country-specific challenges. We see the company as a leader in China’s digital economy across many areas, and note opportunities in Southeast Asia as well,” Kessler said in a note on Wednesday.

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Oil giant Royal Dutch Shell reported better-than-expected full-year earnings on Thursday, as deep cost cuts introduced after the 2014 energy market downturn filtered through.

Full-year profits jumped 36 percent to $21.4 billion in 2018 — with cost savings helping the Anglo-Dutch company record its highest annual profits since 2014.

Net income attributable to shareholders on a current cost of supplies (CCS) basis, used as a proxy for net profit, and excluding identified items, came in at $5.7 billion. This compared to a company-provided analyst consensus of $5.28 billion for the final three months of 2018, according to Reuters.

“Shell delivered a very strong financial performance in 2018, with cash flow from operations of $49.6 billion, excluding working capital movements,” Royal Dutch Shell CEO Ben van Beurden, said in a statement published Thursday.

“We will continue with a strong delivery focus in 2019, with a disciplined approach to capital investment and growing both our cash flow and returns. Our strategy to deliver a world-class investment case is working,” he added.

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Bloomberg News/Landov

Fed Chairman Jerome Powell says the case for higher U.S. interest rates “has weakened.”

Federal Reserve Chairman Jerome Powell on Wednesday said the case for higher interest rates “has weakened” because of muted inflation and somewhat slower U.S. growth, stressing the central bank will be “patient” before determining its next move.

The Fed also indicated it’s willing to adjust the size of its balance-sheet runoff, and perhaps end it altogether, amid Wall Street worries that it contributed to the huge stock-market selloff in December.

In a 10-0 vote, senior Fed officials left a key U.S. interest rate unchanged after a two-day meeting in Washington.

The current level of interest rates is “appropriate for the state of the economy,” Powell said in a press conference afterward.

Follow: Live blog of Fed decision and Powell press conference

The central bank also backed away from a pledge for “further gradual increases” in interest rates — the first time since 2015 the Fed’s statement has not included such language.

In other words, the Fed left open the possibility that the next move could be to lower interest rates. As recently as last month, the Fed said it still expected the next policy move would be to raise them.

U.S. stocks extended large gains after the Fed meeting. The Dow Jones Industrial Average

DJIA, +1.66%

 surged more than 400 points and topped 25,000 for the first time since mid-December.

The Fed has done a quick about-face after raising interest rates in December, when the U.S. stock market tanked and worries about a U.S. or even global recession intensified. Since then more evidence of a weaker global economy has emerged, especially in China and Europe, Powell noted.

Yet the sudden shift in the Fed’s new outlook, Powell insisted, doesn’t mean the central bank expects the economy to stumble.

Although growth appears to have slowed, he said the economy is still stable and expanding. The Fed characterized the economy as expanding at a “solid rate” in January, compared a “strong” rate in December.

Powell noted the partial government shutdown has made it harder to assess the economy. A slew of critical reports on the economy were delayed by the 35-day partial shutdown.

Recapping Fed actions

As expected, the Fed kept interest rates unchanged in a range of 2.25% to 2.5%.

The Fed said it continues to think “the most likely outcome” for the U.S. economy is sustained growth with strong labor market conditions and inflation near 2%. But it left open what policy might do to support the economy going forward.

“In light of global economic and financial developments and muted inflation pressures, the FOMC will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes,” the Fed said.

The central bankers omitted any reference to the balance of risks facing the economy. In December, the Fed said those risks were “roughly balanced.”

The Fed’s comments about the balance sheet came in a separate special statement that was unexpected. The central bank has refrained from talking about the balance sheet, hoping to keep it on “auto pilot,” as Fed Chairman Jerome Powell once stated.

The Fed has been letting $50 billion per month of securities run off its balance sheet. Some market participants think this is tightening financial conditions excessively.

In light of this debate, the Fed said “it was appropriate at this time to provide additional information regarding its plans” for the balance sheet.

All Fed members agreed “the FOMC is prepared to adjust any of the details for completing balance sheet normalization in light of economic and financial developments,” the statement said, even though the Fed wanted interest rates to be the primary way monetary policy is implemented.

Before this statement, the Fed had said that runoff would continue unless there was a substantial risk of a recession.

Prior to the meeting, financial markets didn’t think the Fed would raise or lower interest rates all year.

In December, the Fed had penciled in two rate increases in 2019.

Yields on the 10-year Treasury note

TMUBMUSD10Y, -1.00%

  have stayed below 3% since late November.

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A financial tool that homeowners love — and love to hate — just got better.

On Wednesday, Zillow

ZG, +2.18%

announced the winners of a contest launched to improve the accuracy of the Zestimate, the algorithm that helps approximate the value of houses.

The winning team was made up of data scientists and engineers from three countries. Chahhou Mohamed of Morocco, Jordan Meyer of the United States and Nima Shahbazi of Canada will be awarded $1 million for their work, which Zillow estimates beat the existing tool by 13%.

On average, Zillow said, the Zestimate is $10,000 off the actual sale price for a median-priced home of about $223,900, and the information gleaned from the Zillow prize winnings could shave $1,300 off that discrepancy. It also moves the Zestimate’s national median error rate below 4%.

The winning team, which called itself Team ChNJestimate, used machine learning techniques including what Zillow called “deep neural networks,” as well as miscellaneous data like commute times and road noise, to come up with their algorithm.


Stan Humphries, Zillow’s chief analytics officer, visits Jordan Meyer in his hometown of Raleigh, North Carolina to surprise him with a $1 million grand prize

The Zestimate has always been intended as exactly that — an estimate. That hasn’t stopped some disgruntled homeowners from filing suit over what they viewed as deceptive practices. Still, Zillow acknowledged that there was room for improvement and launched the Zillow Prize contest in mid-2017 to crowdsource a better alternative.

Read: Zillow advertising under CFPB fire sets real-estate industry on edge

Housing industry experts applaud both the innovation that brought about the original Zestimate and the company’s willingness to go back to the drawing board and ask for help.

“I think one of the reasons the Zestimate has been so wildly successful for Zillow is that it did tap into a curiosity that homeowners have always had about what their house is really worth,” said Rick Sharga, a longtime industry veteran now at Carrington Mortgage Holdings. “Since for most people a home is the biggest financial investment they’re ever going to make, it doesn’t hurt to have tools that can give you at least an approximation of what that asset is worth in today’s market.”

Using the Zestimate alone for making a financial decision wouldn’t be appropriate, Sharga said. “Don’t bet the farm on it. But for just checking the financial pulse of a neighborhood, it’s a fine tool.”

Also see: Zillow reports a bruising quarter, but housing-watchers think the company rules the roost

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The U.S. dollar turned lower on Wednesday after the Federal Reserve took a decidedly dovish turn, pledging it would be patient with further interest-rates increases, while eliminating language calling for ‘further gradual’ rate increases.

While market expectations for 2019 interest-rate policy deteriorated over the past few months, the dollar was hit by this first policy update of the year. Powell said the case for raising rates had diminished somewhat. In 2018, four Fed hikes had provided a consistent tailwind to the dollar.

The ICE U.S. Dollar Index

DXY, -0.43%

which measures the monetary unit against a basket of a half-dozen currencies, dropped into negative territory in response and was last down 0.4% at 95.408, having bounced back slightly from its session low.

Fed Chairman Powell said inflation, expectations about the global economy and external risks like Brexit contributed to the shift in the central bank’s stance.

Recap: The Fed’s first interest-rate decision of 2019

Earlier in the day, private payrolls for January showed companies added more jobs than expected, while pending home sales for December dropped to their lowest level in nearly five years. Late Wednesday in New York, China’s official purchasing managers’ indexes are due, which will be closely watched as an indicator for global economic health.

The euro

EURUSD, +0.4373%

the greenback’s main rival, was, meanwhile, stronger at $1.1485 versus $1.1434 late Tuesday. In eurozone data, business climate, as well as economic, industrial and services confidence indicators all slightly eased in January.

Don’t miss: Just weeks to make a deal — what’s next for Brexit

In the U.K., the Brexit-battered British pound

GBPUSD, +0.3444%

 was stronger, coming back from Tuesday’s selloff that ensued as the U.K. Parliament debated proposed amendments to the country’s withdrawal agreement from the European Union. Parliament voted to rule out a no-deal Brexit and to replace the proposed Irish backstop with an alternative. Though the EU has said it wouldn’t renegotiate and the deal agreed late last year was the only one on the table, U.K. Prime Minister Theresa May will return to Brussels this week to try to reopen talks.

Sterling, also helped by the lower dollar, bounced up to $1.3113 on Wednesday, up from $1.3067. The currency was slightly weaker against the euro

EURGBP, +0.1029%

with the shared eurozone unit buying £0.8758, up 0.1%.

“Markets seems to be counting on a delay to article 50 but we think the odds of a no-deal Brexit have risen,” wrote Win Thin, global head of currency strategy at Brown Brothers Harriman. “Indeed, the two amendments are at odds with each other. If the EU stands firm on the Irish backstop, the U.K. parliament is unlikely to pass the deal and we would most likely get a no-deal Brexit come March 29. We see no reason to be bullish sterling now.”

The Australian dollar

AUDUSD, +1.2717%

 was the best performer among major currency pairs, climbing 1.4% to $0.7255 after fourth-quarter headline inflation came in higher than expected at 1.8% year-over-year. That is still below the Reserve Bank of Australia’s target range, but it’s getting closer.

Don’t miss: Why the Australian dollar is the world’s riskiest currency

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Tesla is expected to report earnings for the fourth quarter of 2018 after the bell on Wednesday.

Here is what analysts expect:

  • Adjusted EPS: $2.20, according to average estimates compiled by Refinitiv
  • Revenue: $7.08 billion, according to average estimates compiled by Refinitiv

Investors have been paying close attention to any indication of how profitable Tesla’s cars are, particularly the Model 3 sedan. The $7,500 federal tax credit on every Tesla vehicle sold was cut to $3,750 at the beginning of the year, after Tesla sold its allotted 200,000 units that qualified for the full credit.

As that credit winds down, investors are keenly interested in whether demand for the Model 3 can stand on its own, particularly since the company has yet to release a version of the sedan at the $35,000 sticker price Tesla originally promised.

Eyes are also on whether Tesla needs to raise any more capital in the short term, especially given the fact that it needs to pay off $920 million in debt due on March 1. Bondholders can convert the debt into equity if the shares trade at or above the strike price of $359.87. But below that price, Tesla would likely have to pay off the notes with cash.

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Microsoft will announce earnings results for its fiscal second quarter after markets close on Wednesday. Executives will discuss the results with analysts on a conference call at 5:30 p.m. Eastern time.

Here are the numbers to watch:

  • Earnings: $1.09 per share as expected by analysts, excluding certain items, according to Refinitiv.
  • Revenue: $32.51 billion as expected by analysts, according to Refinitiv.

Microsoft is expected to report sales growth of more than 12 percent in the quarter, which ended on Dec. 31.

While the company doesn’t report revenue for Azure, the cloud business has been a big driver of Microsoft’s recent success. Given comments from Intel, Juniper and other companies related to spending on infrastructure, Microsoft investors have reason to be concerned about what that means for Azure, said Brent Bracelin, an analyst at KeyBanc Capital Markets who has a “buy” rating on the stock.

Bracelin estimated that Microsoft’s Commercial Cloud category, which includes the Azure public cloud, commercial subscriptions to the Office 365 productivity software bundle, the Enterprise Mobility and Security products and commercial LinkedIn revenue, would reach $8.83 billion in revenue.

Azure is second to Amazon Web Services in the market for cloud infrastructure, which lets companies offload their computing and data storage. Bracelin predicted Azure would contribute $2.85 billion in the quarter, implying around 74 percent growth, down sequentially from the prior quarter. Amazon, which publishes results tomorrow, is expected to report AWS revenue of $7.3 billion, according to analysts surveyed by FactSet.

“Within the next five years I don’t envision Azure catching up,” Bracelin said in an interview this week. He said that within 10 years, Azure could be bigger if AWS is still part of Amazon.

“The debate becomes at some point, do’s ambitions limit the opportunities for AWS because of the competitive aspirations they have, that just limits the ability for AWS to grow,” Bracelin said.

Microsoft announced some notable cloud deals in the quarter including Gap and Walgreens. The company also acquired Glint and disclosed a change to its Edge browser strategy, a market where it competes with Google Chrome.

In terms of guidance, analysts expect Microsoft to forecast $1.02 in earnings per share, excluding certain items, on $29.87 billion in revenue, according to Refinitiv.

Microsoft has been going back and forth with Amazon in recent weeks for the title of world’s most valuable company by stock market value. The shares are up about 4 percent so far this year.

This is breaking news. Please check back for updates.

WATCH: Satya Nadella has been tactically more impressive than Apple CEO Tim Cook, says portfolio manager

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Facebook is reporting fourth quarter earnings after the bell Wednesday.

Here’s what Wall Street expects:

  • Earnings: $2.19 per share, forecast by Refinitiv consensus estimates
  • Revenue: $16.39 billion, forecast by Refinitiv consensus estimates
  • Daily active users: 1.52 billion, forecast by FactSet estimates
  • Monthly active users: 2.31 billion, forecast by FactSet estimates
  • Average revenue per user: $7.11, forecast by FactSet estimates

All signs point to a strong financial quarter for Facebook, despite growing public outrage over the company’s privacy practices.

Daily active users and monthly active users are each expected to jump 1.8 percent quarter over quarter, and 8.6 percent year over year. Estimated average revenue per user, or ARPU, of $7.11 represents a 17 percent increase from last quarter, and a 15 percent increase from last year.

Facebook and CEO Mark Zuckerberg have been drilling down on the company’s Stories feature, a Snapchat-like sharing option for temporary photos and videos. Last quarter, Zuckerberg said Stories would become “a bigger medium than Feed has been,” and said users across the Facebook family of apps — including WhatsApp and Instagram — post more than 1 billion Stories per day.

Investors will be looking for an update on that number, and on the monetization of ads within Stories, when Facebook reports.

The company previously warned its investment in Stories could contribute to slowing revenue growth during the second half of the year. Third quarter revenue grew by 32.9 percent year over year, breaking a 12-quarter streak of growth rates above 40 percent.

Projected revenue for the December quarter of $16.39 billion marks a year-over-year growth rate of 26.3 percent.

Facebook has also been dumping cash into its dedicated video tab called Facebook Watch, its long-form Instagram product called IGTV and its Craigslist competitor, Facebook Marketplace. The company is also upping investment in cybersecurity — in the wake of data scandals and content moderation flubs — adding to a projected spike in expenses.

This story is developing. Please check back for updates.

WATCH: What Facebook’s workplace culture is really like

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Asian markets mostly rose Wednesday as traders awaited a Federal Reserve policy meeting and U.S.-China talks, though Japan’s benchmark declined.

Japan’s Nikkei 225 index

NIK, -0.52%

  retreated 0.3% while South Korea’s Kospi

SEU, +1.05%

  climbed 0.5%. Hong Kong’s Hang Seng index

HSI, +0.08%

  gained 0.2%. while the Shanghai Composite index

SHCOMP, -0.72%

  edged up 0.1%. Australia’s S&P ASX 200

XJO, +0.21%

  was about flat. Stocks rose in Southeast Asia and Taiwan

Y9999, +0.01%


Among individual stocks, Sony

6758, -1.27%

 , Toyota

7267, -0.12%

  and SoftBank

9984, -0.76%

  all slipped in Tokyo trading. In Seoul, SK Hynix

000660, +3.41%

  and Posco

005490, +6.15%

  jumped. Real estate companies led gains in Hong Kong, with Country Garden

2007, +4.68%

 , China Resources Land

1109, +3.05%

  and China Overseas Land & Investment

0688, +2.66%

  rising. Mining stocks surged in Australia, with Rio Tinto

RIO, +4.51%

 , Fortescue Mining

FMG, +7.75%

  and BHP

BHP, +2.55%

  posting big gains.

U.S. indexes reflected a mixed draw of corporate earnings on Tuesday. 3M

MMM, +1.94%

 , the maker of Post-it notes, industrial coatings and ceramics, posted upbeat fourth quarter results. Harley-Davidson

HOG, -5.05%

  reported a drop in sales. Apple

AAPL, -1.04%

  announced better-than-expected earnings, and its shares surged 5.7% to $163.50 in after-hours trading. The S&P 500 index

SPX, -0.15%

  retreated 0.1% to 2,640.00 while the Dow Jones Industrial Average

DJIA, +0.21%

  was up 0.2% at 24,579.96. The Nasdaq composite

COMP, -0.81%

 shed 0.8% to 7,028.29.

All eyes are on a Federal Open Market Committee meeting ending Wednesday. Although the Fed is expected to leave its short-term interest rate unchanged, the nuances of a press conference by Chairman Jerome Powell will be closely watched.

American and Chinese officials will begin two days of trade talks in Washington. President Donald Trump will reportedly meet Chinese Vice Premier Liu He in an attempt to move negotiations forward. But the Justice Department’s charges against Chinese tech giant Huawei, its subsidiaries and a top company executive may be a hurdle. China has urged U.S. authorities to end what it called an “unreasonable crackdown” against Huawei, which has been accused of stealing technology and violating sanctions on Iran.

“Asia’s markets are trading quietly sideways this morning, and we would expect that to be the theme of the day as the event-risk needle swings much higher from tonight in North America,” Jeffrey Halley of Oanda said in a market commentary.

Benchmark U.S. crude

CLH9, -0.06%

  rose 15 cents to $53.46 per barrel in electronic trading on the New York Mercantile Exchange. It gained $1.32 to settle at $53.31 per barrel on Tuesday. Brent crude

LCOH9, -0.02%

 , used to price international oils, picked up 21 cents to $61.41 per barrel. The contract added $1.39 to $61.20 per barrel in London.

The dollar

USDJPY, -0.11%

  eased to 109.34 yen from 109.35 yen late Tuesday.

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WASHINGTON — As the U.S. and China resume high-level trade talks Wednesday, President Donald Trump sees himself with the upper hand given China’s lagging economic growth, but there is pressure for Trump and his administration to cut a deal too.

Chinese tariffs imposed to counter U.S. levies are unpopular with leading business groups and have hit regions and constituencies that Trump counts among his staunchest supporters, including soybean farmers in the Great Plains, auto workers in the Midwest and oil-industry workers in the Dakotas and Texas.

In a measure of the issue’s significance,Trump mentioned China 18 times in a speech to the American Farm Bureau Federation’s annual conference two weeks ago, offering assurances that a deal was within reach. “Wait until you see what happens” with China, he told the crowd in New Orleans. “They’re already back-ordering, right?…They’re going to order, and they’ve already started.”

Trump won the White House partly on a pledge to renegotiate trade deals with the aim of protecting American workers, a promise that had bipartisan appeal. If Trump’s optimistic projection proves correct, he stands to secure a big victory — one that his predecessors, despite criticizing China’s trade practices, were unable to achieve.

An expanded version of this report appears on

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