Pence Wealth Management’s Financial Market Report

US FINANCIAL MARKET

• The United States averted “fiscal cliff“. Income tax rates will now rise on families earning more than $450,000 per year. However, workers will see up to $2,000 more taken out of their paychecks annually with the expiration of a temporary payroll tax cut. (see the details below)
• Apple has started testing a new iPhone and the next version of its iOS software, The Next Web reported.
• Abbott spins off AbbVie Tuesday. The new company, AbbVie (ABBV), will hold the big-name drugs developed by the company, including its biggest seller, Humira. Abbott will retain the rest of the business, including medical products like cardiac stents, diagnostics, generic drugs and nutritional products like baby formula.
• Boeing said on Wednesday that it has finalized an order for 60 of its planned 737 Max planes, pushing its total for the Max to more than 1,000.
• New-vehicle sales are expected to top 15 million this year, up 6.6%.
• Car rental company Avis Budget will buy Zipcar for about $500 million in cash.
• South Korea’s biggest automakers Hyundai and affiliate Kia Motors are targeting a 4% increase in global sales this year to a combined 7.41 million vehicles, their slowest growth since 2003.
• Struggling Japanese TV maker Sharp is considering raising more than 100 billion yen ($1.2 billion) this spring.
• Jefferies cut Target to “Hold” from “Buy” and reduced the price target to $59 from $74. The analyst said that the chain had weak December sales at stores open at least a year.

US ECONOMY & POLITICS

• Obama urged “a little less drama” when the Congress and White House next address thorny fiscal issues like the government’s rapidly mounting $16 trillion debt load.
• The U.S. Treasury said it would hit a legal limit on borrowing on Monday but was launching new measures to keep the nation from defaulting on its debt. A Treasury official said the federal government was hitting its $16.4 trillion ceiling on borrowing.
• December factory activity is at seven-month high. Financial data firm Markit said on Wednesday its U.S. Manufacturing Purchasing Managers Index (PMI) rose to 54.0 from 52.8 in November.
• Construction spending fell 0.3% in November, below expectations of a 0.6% gain. The negative surprise was accounted for by weakness in nonresidential construction, which fell by 0.6%. Residential construction grew by 0.4% and is now up 18% year-on-year.

EUROPE & WORLD

• Purchasing managers’ surveys in the 17-nation euro zone showed economic decline spread further into the core members. Markit’s Euro zone Manufacturing Purchasing Managers’ Index (PMI) edged down to 46.1 in December from November’s 46.2.
• China’s official manufacturing purchasing managers’ index held steady in December at 50.6. With the main index above 50 for three straight months, the survey indicates that China’s vast factory sector is expanding.

Details of Senate bill averting ‘fiscal cliff’

• Income tax rates: Extends decade-old tax cuts on incomes up to $400,000 for individuals, $450,000 for couples. Earnings above those amounts would be taxed at a rate of 39.6%, up from the current 35%. Extends Clinton-era caps on itemized deductions and the phase-out of the personal exemption for individuals making more than $250,000 and couples earning more than $300,000.
• Estate tax: Estates would be taxed at a top rate of 40%, with the first $5 million in value exempted for individual estates and $10 million for family estates. In 2012, such estates were subject to a top rate of 35%.
• Capital gains, dividends: Taxes on capital gains and dividend income exceeding $400,000 for individuals and $450,000 for families would increase from 15% to 20%.
• Alternative minimum tax: Permanently addresses the alternative minimum tax and indexes it for inflation to prevent nearly 30 million middle- and upper-middle income taxpayers from being hit with higher tax bills averaging almost $3,000. The tax was originally designed to ensure that the wealthy did not avoid owing taxes by using loopholes.
• Other tax changes: Extends for five years Obama-sought expansions of the child tax credit, the earned income tax credit, and an up-to-$2,500 tax credit for college tuition. Also extends for one year accelerated “bonus” depreciation of business investments in new property and equipment, a tax credit for research and development costs and a tax credit for renewable energy such as wind-generated electricity.
• Unemployment benefits: Extends jobless benefits for the long-term unemployed for one year.
• Cuts in Medicare reimbursements to doctors: Blocks a 27% cut in Medicare payments to doctors for one year. The cut is the product of an obsolete 1997 budget formula.
• Social Security payroll tax cut: Allows a 2-percentage-point cut in the payroll tax first enacted two years ago to lapse, which restores the payroll tax to 6.2%.
• Across-the-board cuts: Delays for two months $109 billion worth of across-the-board spending cuts set to start striking the Pentagon and domestic agencies this week. Cost of $24 billion is divided between spending cuts and new revenues from rule changes on converting traditional individual retirement accounts into Roth IRAs.

TODAY in HISTORY

• Georgia was admitted to the Union as the 4th state (1788)
• Louis Jacques Mandé Daguerre took the first photograph of the Moon (1839)
• The first wire suspension bridge was opened to traffic — in Fairmount, PA (1842)
• Brigham Young, the 71-year-old leader of the Mormon Church, was arrested on a charge of bigamy. He had 25 wives (1872)
• The first spacecraft to fly by the Moon and also to orbit the Sun, Mechta (Luna 1) was launched by the USSR (1959).

Sources: Reuters, Yahoo Finance, Google Finance, Bloomberg, CNN Money.

This information has been prepared from sources believed to be reliable, but no representation is being made as to its accuracy or completeness. The information provided should be used only as general information and is not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in the material may not develop as predicted. All indices, such as the S & P 500, are unmanaged and may not be invested into directly.