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Pence Wealth Management Financial Markets Reports

US FINANCIAL MARKET

  • Stocks were mostly lower at the open on Friday, as declines in Intel and General Electric outweighed the advance in American Express in the wake of their quarterly earnings.
  • Apple is finally launching its iPhone on China Mobile’s vast network on Friday, opening the door to the world’s largest carrier’s 763 million subscribers. Samsung had a 21 % share of China’s smartphone market in the third quarter of 2013, with Apple trailing in fifth place with just 6 %.
    • China Mobile’s iPhone sales are expected to reach 12 million in its 2014 fiscal year. For the basic 16GB iPhone 5S, with no subscriber contract, China Mobile is charging 5,288 yuan ($870). The carrier is charging 4,488 yuan ($740) for a basic iPhone 5C.
  • GE posted a slightly better-than-expected rise in revenue on Friday propelled by its businesses selling oil pumps and jet engines, and said its order backlog again swelled to a record.
    • Net earnings rose to $4.2 billion from $4.01 billion a year earlier. Revenue rose 3.1 % to $40.38 billion, about $160 million ahead of analysts’ targets.
    • GE’s backlog of orders for everything from locomotives to jet engines and turbines rose 16 % to $244 billion.
    • GE expanded its operating margin for its industrials businesses by 0.66 of a percentage point, below its full-year target of a 0.7 percentage point improvement.
  • Intel’s earnings missed expectations by a penny in the fourth quarter due to weak spending on servers, and the chipmaker gave a lukewarm forecast for first-quarter revenue that did little to dispel concerns about a slowing PC industry.
    • Intel posted fourth-quarter net earnings of $2.6 billion from $2.5 billion a year earlier. Revenue was $13.8 billion, compared with $12.5 billion in the year-ago quarter.
    • Intel forecast revenue of $12.8 billion, plus or minus $500 million, for the first quarter, which ends in March. Analysts had expected $12.79 billion on average.
  • American Express reported a two-fold jump in fourth-quarter profit as its affluent customers spent more in the U.S. holiday season and fewer users defaulted on payments. U.S. retail sales increased 3.8 % in the 2013 holiday season.
    • Net profit rose to $1.31 billion in the quarter from $637 million a year earlier. Total revenue increased 5 % to $8.55 billion.
    • American Express said it had seen ‘minimal exposure’ to the data breach at Target.
    • Cards on American Express’s platform are seen as safer than those on Visa and MasterCard platforms due to the ‘closed loop’ system.
  • Morgan Stanley reported a sharp fall in quarterly profit on Friday due to large legal bills. Net income fell to $192 million from $661 million a year earlier. Revenue rose 12.5 % to $7.83 billion.
  • BNY Mellon’s profit rose slightly and met Wall Street expectations. Excluding a one-time item, the world’s largest custody bank earned $628 million compared with $622 million a year earlier.
  • UPS said its 2013 profit would miss forecasts as a flurry of orders towards the end of a shorter U.S. holiday shopping season and cold weather took a toll on service. UPS said it delivered more than 31 million packages on December 23 — its highest ever and 13 % more than the prior-year peak day. However, the “highest delivery day” occurred six days later than expected and was 7.5 % greater than planned. The company said it was confident of its 2014 outlook. UPS expects full-year diluted earnings to rise by 10-15 %, implying a profit of $5.02-$5.26 per share. Analysts were expecting $5.48.
  • Royal Dutch Shell issued a “significant” profit warning on Friday. The western world’s No. 3 oil company revealed the so-called reserves accounting scandal. It also follows a similar warning from Chevron, the second-largest U.S. oil company, last week and reflects how the industry is having to grapple with replacing reserves, lower oil prices and the need to control costs.
    • The group’s weak performance was also due in part to outages in its liquefied natural gas (LNG) sector. Shell is the world’s largest LNG shipping operator, managing and operating 50 carriers, and owning production and import assets or projects in Australia, Brunei, Malaysia, Nigeria, Oman, Qatar, Russia, and Mexico.
  • Schlumberger, the largest oilfield-services provider, said fourth-quarter profit rose 22 % as customers spent more in the search for harder-to-reach deposits around the globe. Net income climbed to $1.66 billion from $1.36 billion a year earlier. Sales climbed 7.4 % to $11.9 billion.
  • Nintendo said on Friday that sales of its Wii U consoles had flopped, pushing it to a third consecutive annual loss and raising a question mark over its future in a home console market increasingly dominated by Sony and Microsoft.
  • IBM said it will invest more than $1.2 billion to build up to 15 new data centers across five continents to expand its cloud services and reach new clients and markets. The new cloud centers will be in Washington D.C., Mexico City, Dallas, China, Hong Kong, London, Japan, India and Canada, with plans to expand in the Middle East and Africa in 2015. IBM said the investment will bring up its data center count to 40 this year and double cloud capacity for SoftLayer, which leases online storage space to companies and was acquired by IBM last year for $2 billion. IBM said the global cloud market is estimated to grow to $200 billion by 2020.
  • Mining companies are extending massive cuts in exploration budgets for a second year, setting up the next price boom as China continues its relentless pursuit of metals and energy. Exploration spending plunged by 30 % or $10 billion last year. Payments may drop another 10 % this year for geologists, drilling exploratory holes and analyzing mineral specks to unearth the next copper, iron ore or gold El Dorado. Platinum, aluminum, silver, nickel, zinc, lead and uranium all are forecast to rise by 2017. The losers will be buyers of cans, cars and all the goods made from metals.
  • Volatile weather around the world is taking farmers on a wild ride. Too much rain in northern China damaged crops in May, three years after too little rain turned the world’s second-biggest corn producer into a net importer of the grain. Dry weather in the U.S. will cut beef output from the world’s biggest producer to the lowest level since 1994. U.K. farmers couldn’t plant in muddy fields after the second-wettest year on record in 2012 dented the nation’s wheat production. Fast-changing weather patterns, such as the invasion of Arctic air that pushed the mercury in New York from an unseasonably warm 55 degrees Fahrenheit (13 Celsius) on Jan. 6 to a record low of 4 (minus 16) the next day, will only become more commonplace.

US ECONOMY & POLITICS

  • U.S. industrial output rose at its fastest clip in 3-1/2 years in the fourth quarter as factory activity closed out the year on a strong note, a sign of the economy’s brightening prospects. Manufacturing production rose a stronger-than-expected 0.4 % in December. That helped push overall output at the nation’s factories, mines and utilities up 0.3 %. For the fourth quarter as a whole, industrial production advanced at a 6.8 % pace, the largest quarterly increase since the second quarter of 2010.
    • The report on industrial output showed that industry employed 79.2 % of its capacity in December – the most since June 2008. Still, capacity use remained 1 percentage point below its long-run average.
  • Housing starts fell less than expected in December. Groundbreaking for new homes (Housing Starts) dropped 9.8 % to a seasonally adjusted annual rate of 999,000-unit pace. It was the largest percentage decline since April, but housing starts were coming off a multi-year high reached in November and the decline was smaller than economists had expected. For all of 2013, starts increased 18.3 % to an average of 923,400-units.
    • Groundbreaking for single-family homes, the largest segment of the market, fell 7.0 % to a 667,000-unit pace in December.
    • Starts for the volatile multi-family homes segment declined 14.9 % to a 332,000-unit rate.
    • Increasing household formation and a tight supply of houses has been boosting home building, which in turn is supporting the labor market.
  • Permits to build homes fell 3.0 % in December to a 986,000-unit pace. It was the second straight month of declines. For all of 2013, permits increased 17.5 % to an average of 974,700-units.
  • The Thomson Reuters/University of Michigan’s U.S. consumer sentiment index came in at 80.4, down from 82.5 in December. It was below the median forecast of 83.5 among economists polled by Reuters.
    • The survey’s barometer of current economic conditions fell to 95.2 from 98.6 and below a forecast of 98.5.
    • The survey’s gauge of consumer expectations slipped to 70.9 from 72.1 and below a forecast of 74.2.
    • The survey’s one-year inflation expectation was unchanged from last month at 3.0 %, while the survey’s five-to-10-year inflation outlook rose to 2.9 % from 2.7 %.
  • Washington’s battles over government funding ended with a whimper on Thursday as the U.S. Senate approved a $1.1 trillion spending bill that quells for nearly nine months the threat of another federal agency shutdown. President Barack Obama is expected to sign it into law by Saturday. The fiscal focus in Congress now turns to debate over another boost in the $17 trillion federal debt limit. An increase could be needed in as little as six weeks.

EUROPE & WORLD

  • Canada loses patience on Keystone XL, tells U.S. to decide. Canada bluntly told the United States on Thursday to settle the fate of TransCanada Corp’s proposed Keystone XL pipeline, saying the drawn-out process on whether to approve the northern leg of the project was taking too long.
  • Bill Gross is souring on Brazil. After the country’s real-denominated debt plunged 13.6 % last year, more than the 9 % average decline for developing nations, PIMCO’s Gross said Jan. 15 that Brazil was no longer a preferred market.  His $237 billion Total Return Fund cut Brazilian assets to 3.27 % in December from 4.18 % three months earlier.

TODAY in HISTORY

  • Benjamin Franklin was born in Boston (1706)
  • James Madison Randolph, the grandson of Thomas Jefferson, became the first child born in the White House (1806)
  • President Clinton became the first sitting U.S. president to testify as a defendant in a criminal or civil suit (1998)
  • Gov. Gray Davis declared a state of emergency concerning California’s electricity crisis (2001)

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. 

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