The Wall Street Journal - 11.09.2019

© 2019 Dow Jones & Company. All Rights Reserved. *** THE WALL STREET JOURNAL.** Wednesday, September 11, 2019 |B1

TECHNOLOGY: GOOGLE, AMAZON AND MICROSOFT AIM TO PUT HEALTH DATA IN CLOUD B4

BUSINESS&FINANCE

Saudi Arabia is planning a

two-part listing of Saudi Ara-

bian Oil Co. on its domestic

stock market to ensure that

the exchange can easily absorb

what would be the kingdom’s

largest initial public offering,

according to advisers familiar

with the process.

Aramco, as the national oil

giant is usually known, is con-

sidering a 1% offering of the

company this year and an-

other 1% next year on the local

market, the advisers said, as

the government seeks to accel-

erate a centerpiece of Crown

Prince Mohammed bin Sal-

man’s economic reform pro-

gram.

The crown prince aims to

list 5% of Aramco in an effort

to raise billions of dollars to

diversify his oil-dependent

economy. He has indicated he

wants a $2 trillion valuation

for the world’s most profitable

oil company—though analysts

put the company’s value at

closer to $1.5 trillion.

Even at the lower estimate,

a 1% sale is likely to raise $15

billion from Saudi and interna-

tional investors and would be

the largest initial public offer-

ing on the $500 billion domes-

tic market, known as the

Tadawul. Saudi Arabia opened

its domestic market in 2015 to

institutional foreign investors,

who can participate in IPOs.

The offering will commence

“very soon,” Aramco President

and Chief Executive Amin Nas-

ser told reporters at the World

Energy Congress in Abu Dhabi

on Tuesday. He said the com-

pany was prepared to list in

multiple markets: “The pri-

mary listing is to list locally,

Please turn to page B2

By Summer Said and

David Hodari

in Abu Dhabi and Rory

Jones in Dubai

Aramco

Prepares

Two-Part

Saudi

Listing

Amazon.com Inc. agreed to

take space in a first-of-its-kind

three-story warehouse, a new

type of distribution center

that could reduce delivery

times in congested cities to

hours rather than days.

While common in densely

populated Asian and European

cities, modern warehouses

with multiple floors have been

absent until recently in the

U.S., where higher land and

construction costs deterred

developers.

But now that more retailers

are racing to deliver more

same-day packages, develop-

ers are starting to build the

multistory fulfillment centers

needed to speed delivery in

congested cities.

Amazon recently signed a

lease for a three-story ware-

house in Seattle. The ware-

house is the first of its kind to

open in the U.S. with multiple

floors that large delivery

trucks can access by ramps,

property analysts say.

Amazon is taking about

500,000 square feet, and

Home Depot Inc. has plans to

take almost 100,000 square

feet, according to a person fa-

miliar with the project.

Home Depot’s lease at the

Seattle warehouse is part of

its investment strategy to

speed up delivery to custom-

ers and stores and reach 90%

of its shoppers with same-day

and next-day delivery, a com-

pany spokeswoman said.

Amazon, Target Corp.,

Please turn to page B7

BYKEIKOMORRIS

ANDJENNIFERSMITH

Amazon

Thinks Tall

With Urban

Warehouse

MARKETS

A bet that

natural-gas prices

would fall blows up for

hedge funds, others B13

larger 6.5-inch option, which

first appeared last year. As

usual, it has the newest pro-

cessor—Apple is now up to

the A13.

What else? Most obvi-

ously, there are now three

cameras on the back, instead

of two. In addition to a tele-

photo and standard wide-an-

gle lens, both iPhone 11 Pro

models have an ultrawide-

angle lens.

This means three different

options for framing camera

shots—even 4K videos. You

can also take those blurry-

background portrait shots

with the wide or telephoto

lenses. Apple said all of the

cameras will be better at

lowlight shooting (a long

overdue improvement), and

Please turn to page B5

S&P 2979.39À0.03% S&P FIN À0.40% S&P IT g0.49% DJ TRANS À1.54% WSJ $ IDX À0.04% LIBOR 3M 2.132 NIKKEI (Midday) 21514.14À0.57% See more at WSJ.com/Markets

economy surprise analysts and

accelerate.

Moving from stocks to

bonds also consolidates gains

made during the recent climb

by major indexes. At the same

ancing the risks of different as-

sets. Corporate bonds produce

more income than the sub-2%

yields available from most

Treasurys, while offering great

potential gains should the

sector picked up. And the num-

ber of jobs created by the econ-

omy has declined for two con-

secutive months.

Investors moving into corpo-

rate bonds said they are bal-

time, the stability of bonds

could help cushion against

blows from a slowing economy

or the trade fight with China.

While companies can slash

dividends, they can’t simply opt

to reduce their interest pay-

ments, absent a default or other

extreme situation. Company de-

fault rates have remained lower

than their long-term average,

and analysts and investors said

there appears to be little risk of

a large increase should the

economy enter a recession.

Wells Fargo Asset Manage-

ment is recommending that cli-

ents increase allocations to

BBB-rated and BB corporate

bonds while reducing holdings

in the stock market. Those rat-

ings represent the lowest-rated

part of the investment-grade

credit spectrum and the high-

est part of the speculative-

grade market, respectively.

Bonds sold by companies with

those ratings have the potential

to post gains and are unlikely

to face the kinds of risks that

could lead to default, Mr. Ja-

cobsen said.

Northern Trust Wealth Man-

agement is advising clients

with allocations focusing on

maximizing gains over a one-

year period to hold larger

amounts of higher-quality junk

bonds, said Katie Nixon, chief

investment officer.

The firm is recommending

the BB part of the speculative-

grade market rather than lower

tiers of debt, which are more

susceptible to default. That ap-

proach would keep investors

out of the retail and energy

sectors, which could become in-

creasingly troublesome should

the economy weaken further,

Ms. Nixon said.

That doesn’t mean investors

should add a lot of risk in their

bond portfolios, said Mark Lus-

chini, chief investment strate-

gist at Janney Montgomery

Scott. As long as the economy

is growing, investors should

stick with stocks and boost

their safer assets by buying

higher-quality corporate bonds

or Treasurys rather than junk

debt.

Some investors are shifting
money from stocks into corpo-
rate bonds, a sign that concern
about slower earnings growth
isn’t leading to worries about
the ability of companies to pay
back their debts.
In August, investors pulled a
net $46.2 billion from stock
funds, the biggest monthly out-
flow this year, and added $13.5
billion to taxable bond portfo-
lios, according to data provider
Lipper.
The move highlights ten-
sions between stocks’ near-re-
cord highs and the economic
worries behind a recent rally in
bonds that has sent yields to-
ward record lows.
Investors tend to seek the
stability of bonds when they
are nervous about growth. But
the additional yield, or spread,
investors demand to hold junk-
rated company debt instead of
safer U.S. government bonds
was recently 3.72 percentage
points, its lowest level since
July and below the average for
this year, according to
Bloomberg Barclays data. That
is a sign investors don’t expect
a slowdown tipping companies
into default.
The spreads on bonds of
companies that investors tend
to view as more resilient in a
slowdown, such as makers of
consumer goods, are the nar-
rowest among high-yield sec-
tors. Those for energy and re-
tail companies, among the most
vulnerable to a downturn, are
the widest.
“It really is the world view
of growth being sluggish but
not necessarily negative,” said
Brian Jacobsen, a senior invest-
ment strategist at Wells Fargo
Asset Management.
For investors, last month in-
cluded numerous conflicting
signals. Markets were jolted
when President Trump unex-
pectedly announced additional
tariffs on Chinese imports. Data
on the manufacturing sector
showed it contracted in August
for the first time in years,
though output in the service

BYDANIELKRUGER

Corporate Bonds Draw Funds Exiting Stocks

service to compete with Net-

flix and other rivals. The com-

pany initially laid out plans to

offer a three-tiered platform,

with an entry-level option fo-

cused on movies and addi-

tional tiers with the premium

HBO Now and Warner Bros.

programming. AT&T initially

said the service would launch

in late 2019.

By this summer, the com-

pany had shifted to focus on a

single offering, HBO Max.

“This quick reversal has inten-

sified the skepticism around

WarnerMedia, its OTT [direct-

Please turn to page B2

combination,” Elliott said. The

investment firm called for

AT&T to focus more on execu-

tion, rather than acquisitions,

and divest itself of any non-

core assets across its business.

A lengthy antitrust battle

with the Justice Department,

which only came to a close in

February, significantly slowed

AT&T’s ability to integrate

Time Warner. In a statement,

AT&T said Monday that it is

already executing many of the

actions outlined by Elliott.

One of the biggest priorities

for AT&T is launching a new

direct-to-consumer streaming

vertising-analytics business

that could benefit the TV in-

dustry broadly.

But Elliott said that when it

comes to direct-to-consumer

streaming, there is a “growing

sense that AT&T doesn’t have

a plan,” given recent shifts in

strategy. And it said the de-

parture of top Time Warner

executives leaves the company

without necessary media ex-

pertise at a critical moment in

the industry.

“While it is too soon to tell

whether AT&T can create value

with Time Warner, we remain

cautious on the benefits of this

Now, the telecom giant is

under pressure to deliver.

Elliott Management Corp.,

the activist investor that dis-

closed a stake in AT&T on

Monday, said in a letter to the

company that it has “failed to

articulate a clear strategic ra-

tionale” for the $80 billion-

plus Time Warner acquisition.

AT&T had told Wall Street

and regulators that Time War-

ner—which was re-christened

WarnerMedia —would help it

launch into the streaming-

video wars, boost its tradi-

tional wireless and pay-TV

services and build up an ad-

When AT&T Inc. agreed to
buy Time Warner nearly three
years ago, it promised to cre-
ate an entertainment and ad-
vertising behemoth that could
take on Silicon Valley giants
like Alphabet Inc.’s Google and
Netflix Inc.

BYJOEFLINT
ANDPATIENCEHAGGIN

AT&T Pressed on Growth Plans

Investor says company

hasn’t articulated

strategic rationale for

Time Warner deal

INSIDE

PERSONAL TECHNOLOGY|By Wilson Rothman

Making Sense of iPhone 11, Other Choices

Not much

was expected

of Apple Inc.,

hardware-

wise, on Tues-

day and, in

that respect, it didn’t disap-

point. The company deliv-

ered upgrades to last year’s

three iPhone models, plus

some minor tweaks to the

Apple Watch and iPad lines

and an update on its coming

subscription services.

The biggest news was that

the company reduced the

cost barrier for some of its

devices, by bringing the

iPhone 8 (with wireless

charging) and the iPhone XR

(with Face ID) down $150.

Still, there are some new

features. Here’s a look at

how the different phones

compare:

iPhone 11 Pro and Pro Max

At the top of the line,

these models will have the

high-resolution OLED

screens, wireless charging

and Face ID we have seen

since the iPhone X, and a

The new iPhone 11 Pro has three cameras on the back, instead of two, and an ultrawide-angle lens.

STEPHEN LAM/REUTERS

Net fund flows, weekly

July 31

RATE CUT

Yield premium demanded by investors

to buy high-yield corporate bonds

over Treasurys, selected sectors

Jan. 1

7.12

7.10

6.09

5.59

5.26

4.40

3.93

Pct. pts.

6.86

5.31

4.22

3.98

3.72

3.33

2.84

Pct. pts.

Aug. 15

Sept. 10

Sources: Bloomberg Barclays (spreads); Lipper (flows)

Taxable bonds

Stocks

Junk spreads widened after the Federal Reserve’s July 31

rate-cut announcement, but high-risk corporate debt has

become more popular in recent weeks.

Jan. Sept.

$10

–20

–10

0

billion

All high yield

Energy

Telecom

Retail

Consumer

products

Autos

REITs

BROKERAGE

Schwab is cutting 600

jobs, about 3% of its

workforce, as it deals

with low rates B12

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