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National

After meeting with President Trump at the White House on Wednesday, congressional leaders said they failed to find a solution that would end the government shutdown and plan to meet again on Friday.

The state of play: House Democrats plan to pass a short-term spending bill Thursday that does not include funding for Trump's border wall. Senate Majority Leader Mitch McConnell said the Senate won’t take up the House bill if President Trump won’t sign it, and suggested that it could take "weeks" to reach an agreement.

No solution on government shutdown emerges from White House meeting

Mitch McConnell suggested it could take "weeks" to come to an agreement.

Chuck Schumer and Nancy Pelosi look flabbergasted.

Politics

Government shutdown

Politics & Policy

Axios AI+

Apple warned Wednesday that revenue from its holiday quarter will fall short of prior estimates, a rare occurrence for the iPhone maker.

Why it matters: Apple is one of the world's biggest companies and a significant driver of the tech economy. The company said it now expects revenue of around $84 billion, down from a prior estimate of between $89 billion and $93 billion.

Shares fall: Apple's stock tumbled once after-hours trading resumed after a brief halt. Shares changed hands recently at $146.10, down $11.82 or nearly 7.5%.

In a letter to investors, CEO Tim Cook blamed slow iPhone sales in China for the shortfall.

"While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China," Cook said. "In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline, occurred in Greater China across iPhone, Mac and iPad."

Cook added that the trade war between the U.S. and China exacerbated the weakening economy there, and that he hasn't seen any signs Apple has been targeted by the Chinese government.

The context: There had been hints of weak iPhone demand for weeks, with a number of reports of suppliers and contract manufacturers cutting production plans. Yet similar reports have also appeared after strong launch quarters, too.

Outside of the iPhone and China, Apple said its business was strong. Cook said Apple's non-iPhone businesses (aka services, Mac, iPad, wearables and accessories) up 19% year-over-year. However, the iPhone is the biggest driver of Apple's sales and profits.

Thought bubble, via tech editor Scott Rosenberg: Apple's warning, while rare and a temporary shock to its shares, is probably more alarming for the wider world, since Apple's visibility into what is actually happening in China is likely to be more reliable than more official info on the state of Chinese economy. In other words, this could be worse news for China — and the world economy — than for Apple specifically.

Apple issues rare earnings warning, citing China woes

The tech giant says its revenue will fall short of estimates.

Apple CEO Tim Cook. Photo: Stephanie Keith/Getty Images

Technology

Apple

Business

Big Tech

From the Valley to D.C., Big Tech players like Facebook, Google and Amazon are under more scrutiny than ever as new technology develops and privacy and antitrust concerns grow in lockstep with companies’ ambitions.

Top Democrats unveiled a series of proposed changes to House rules Tuesday night, including the creation of a select committee on climate change and an exemption to a ban on hats that would allow members to wear religious headwear on the floor of the House.

The big picture: The rules overhaul is already being opposed by progressive Democrats Ro Khanna and Alexandria Ocasio-Cortez, who have said they will vote against the package because of the "pay as you go" (PAYGO) rule — which requires any increase in entitlement spending be offset by paring back other entitlement programs. If more than 16 Democrats defect and no Republicans vote for the package, the Democratic majority won’t be able to pass the package as is.

Khanna: "[PAYGO] is terrible economics. The austerians were wrong about the Great Recession and Great Depression. At some point, politicians need to learn from mistakes and read economic history."

Ocasio-Cortez: "PAYGO isn’t only bad economics, as Ro Khanna explains; it’s also a dark political maneuver designed to hamstring progress on healthcare and other legislation. We shouldn’t hinder ourselves from the start."

Other details of the package, via the Atlanta Journal-Constitution

Requires annual ethics training for all members.

Prohibits members from serving on corporate boards.

Permits members to wear religious headscarves on the floor.

Creates two new select committees on the modernization of Congress and the climate crisis.

Requires members to pay for discrimination settlements.

Prohibits members and committee staffers from having sexual relationships with one another.

Requires indicted members to step back from committee and leadership positions.

Requires a majority of either party to start the process to oust the speaker, rather than just one member.

Limits power of the majority to block action on measures relating to the War Powers Act. House Republicans blocked action on plans that would end U.S. military support for Saudi Arabia’s role in the civil war in Yemen late last year.

Renews the "Gephardt Rule," which raises the debt ceiling automatically when the House passes a budget.

Eliminates dynamic scoring as a technique for predicting the effects of fiscal policy.

Requires pieces of legislation with the backing of at least 290 members to be debated and brought to the floor.

What's next: Voting on the rules package will be one of the first items on the agenda when Congress convenes on Thursday.

Progressives announce opposition to Pelosi-backed rule changes

The PAYGO rule could derail a package of changes intended to modernize Congress.

Rep-elect Alexandria Ocasio-Cortez. Photo: Rick Loomis via Getty Images

House Democrats

Policymaking

The early data from the historic New Year's flyby of a space object nicknamed "Ultima Thule," located about 4 billion miles from Earth, reveals that it's comprised of two joined spheres that are reddish in color. 

Why it matters: This is the first so-called "contact binary" ever studied closely by a spacecraft, according to Alan Stern, principal investigator of the New Horizons mission. Ultima Thule used to be two separate, icy objects that are now fused together, according to NASA. It is located in a region of our solar system known as the Kuiper Belt and thought to be a time capsule dating back to the formation of the solar system itself about 4.6 billion years ago. 

The big picture: Ultima Thule, formally known as 2014 MU69, is the most primitive object ever studied closely by a spacecraft, mission scientists said. It's thought to be comprised of the building blocks of early planets, measuring about 19 miles from end-to-end. Researchers hope Ultima Thule will provide new data about how planets — perhaps including Earth — might form.

The flyby, which occurred at 12:33 a.m. ET on Tuesday, required scientists to stretch the capabilities of the New Horizons spacecraft to their limit. 

As New Horizons, which also visited Pluto in 2015, sped past Ultima Thule, the spacecraft traveled at about 32,000 mph, gathering data from the seven instruments on board.

What's next: Researchers say they still only know a limited amount about Ultima Thule, whose nickname means "beyond the known world." 

Less than 1% of the data gathered during the flyby has been received and processed back on Earth, largely due to the lag time involved with broadcasting signals across such a long distance. Researchers will continue to release new imagery and data over the coming months.

NASA's New Horizons phones home after flyby of Ultima Thule

NASA is about to make space exploration history

The most distant space object ever visited looks like a red "snowman"

Ultima Thule is located about 4 billion miles from Earth.

The first color image of Ultima Thule, taken at a distance of 85,000 miles on Jan. 1, 2019. 

The first color image of Ultima Thule, taken at a distance of 85,000 miles on Jan. 1, 2019. Left and right-most images use near infrared, red and blue channels. Credit: NASA/Johns Hopkins University Applied Physics Laboratory/Southwest Research Institute.

Science

Space

News and analysis of the scientific advances fueling AI and quantum computing, revolutionizing biology and medicine, and tackling climate change. Science is changing the world and colliding with the global politics that shape it.

Macro

Axios Macro

The issues that whipsawed stocks in 2018 — namely trade and the Fed — aren't going anywhere this year, leaving few catalysts to push stocks to new highs.

The big picture: Analysts overwhelmingly predict the historic bull run has at least one more year to go. The analysts who cut their expectations say they did so because of recent market volatility. "The world’s largest banks and money managers are gearing up for the last hurrah of one of the longest bull markets in history," Bloomberg writes.

Source: Yahoo Finance and analysis of Wall Street outlooks; Chart: Andrew Witherspoon/Axios

Wall Street outlooks reviewed by Axios say that although the U.S.-China trade war is the crucial factor for stocks, almost all feel good about the likelihood of a deal, despite the unpredictable nature of the trade conflict.

A continuing trade war would hit CEO confidence and create more uncertainty for capital expenditure plans.

And thanks to dwindling impact from the corporate tax cut, earnings growth is expected to fall to 8% from 20% this year. Add an escalation of the trade war and there will be no earnings growth next year, UBS strategist Keith Parker predicts.

The Fed may back off on hiking interest rates as quickly as previously planned, but the central bank will continue on the tightening path and won't revert to easing — despite what traders are betting.

As Axios' Dion Rabouin notes, Fed chair Jerome Powell's thinking may have shifted after the bleak performance of equity markets in December. But if the economic data remains solid, it's unclear how much further equities will have to fall in order to see the Fed really dial back its hawkish stance.

An added Fed wild card: This year brings more press conferences, and thus more chances for Powell to spook the markets. Or, if we're being optimistic, give the market more opportunity to adapt to Powell's communication style.

What to watch: We'll get some clue about how the biggest issues for the market may play out early in the year: Trade talks kick off within the next few days, and the Fed holds a two-day meeting and faces reporters in late January.

Wall Street analysts won't kill the bull market

Analysts overwhelmingly predict the historic bull run has at least one more year to go.

Stock market

Federal Reserve

Top stories & latest news on the Federal Reserve, real-time data, plus the biggest shifts happening in the U.S. and global economy.

Economy

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

Pro Rata

Axios Pro Rata

Dan and Axios media reporter Sara Fischer discuss how Netflix is taking on the movie industry.

Go deeper: Netflix takes on the movie industry

Podcast: Netflix vs. Hollywood

Pro Rata Podcast

Axios Re:Cap

Podcasts

A handful of pharmaceutical companies raised the prices of their drugs, effective Jan. 1, according to the Wall Street Journal and reports from pharmaceutical industry analysts.

The bottom line: This was expected, and the drug price increases will continue. Drug companies are following through on decisions that prioritize earnings over politics.

Details: New Year's Day traditionally has been a popular time for drugmakers to hike prices. This story from last January is almost identical to what is playing out again this year. Here are some of the increases in list prices, which do not include rebates:

AbbVie: Humira, a blockbuster drug with $15 billion in sales in the first 9 months of 2018 — ⬆️ 6.2%

Allergan: Many of its brand-name drugs, including dry-eye medication Restasis — ⬆️ 9.5%

Biogen: Multiple sclerosis drug Tecfidera — ⬆️ 6%

Bristol-Myers Squibb: Eliquis, a drug that prevents blood clots and is on pace for $6 billion in sales in 2018 — ⬆️ 6%

Eli Lilly: Type 2 diabetes medication Jardiance — ⬆️ 6%

Hikma Pharmaceuticals: Injectable pain reliever morphine — ⬆️ 10%

Teva: Similar to Allergan, many of its products — ⬆️ 9%

Looking ahead: "Some companies chose to go forward early, but by the end of January, we expect the majority to raise," said Ronny Gal, a pharmaceutical industry analyst at Bernstein.

2019's drug price hikes are here

Drug companies are following through on decisions that prioritize earnings over politics.

Drug price increases are here again. Photo: Gerard Julien/AFP/Getty Images

Axios

Wednesday's top stories

No solution on government shutdown emerges from White House meeting

Apple issues rare earnings warning, citing China woes

Progressives announce opposition to Pelosi-backed rule changes

The most distant space object ever visited looks like a red "snowman"

Wall Street analysts won't kill the bull market

Podcast: Netflix vs. Hollywood

2019's drug price hikes are here

A look inside the trouble at Silicon Valley's August Capital

Netanyahu helps Honduras warm ties with Trump

Scoop: Trump's plan for today's shutdown meeting

Democrats' 2020 race is about to speed up

House Democrats are set to go for the jugular on health care

What Facebook knows about you

Mitt Romney: Trump failing the U.S. as a world leader