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Pence Wealth Management Financial Markets Report

US FINANCIAL MARKET

  • Stocks edges lower at the open on Thursday, weighed by a disappointing outlook from Cisco Systems and weaker-than-expected data on consumer spending and the labor market. The dollar slipped and the yield on the benchmark 10-year Treasury note fell to session lows of 2.74 %.
  • Comcast agreed to acquire Time Warner Cable for $45.2 billion in stock, a surprise deal that combines the two largest U.S. cable companies and creates a bulwark against competition from phone and satellite providers.
    • Comcast will pay $158.82 per share (or 17 % more than its closing price yesterday), which is roughly what Time Warner Cable demanded from Charter. Time Warner Cable investors will receive 2.875 Comcast stock for each of their shares. Time Warner Cable shareholders will own about 23 % of Comcast’s common stock after the transaction is completed.
    • The proposed deal will be accretive to Comcast, which plans to expand its stock buyback program to $10 billion at the close of the transaction.
    • The deal, which would put Comcast in 19 of the nation’s 20 largest TV markets, could give it unprecedented leverage in talks with content providers and advertisers.
    • If successful, the deal will be the second time in little more than a year that Comcast has helped reshape the U.S. media landscape after its $17 billion acquisition of NBC Universal was completed in 2013.
  • Apple is planning to introduce a new Apple TV set-top box and is negotiating with Time Warner Cable and other potential partners to add video content, according to people with knowledge of the matter.
    • Apple is aiming to unveil the device by April and have it available for sale by the Christmas holidays.
    • The new device, which plugs into a television set, will have a faster processor than the previous version and an upgraded interface to make it easier for customers to navigate between TV shows, movies and other online content such as including Disney, ABC, ESPN, HBO, PBS and Bloomberg TV.
    • An agreement with Time Warner Cable would mark the first such deal with a cable or satellite company. For Time Warner Cable, the deal would advance its “TV Everywhere” strategy, giving customers the ability to watch content on different devices. Its viewing app is already available on Apple’s iPad and tablets running Google Inc.’s Android software, as well as Roku and Amazon’s Kindle Fire.
    • Media companies that own TV shows and movies have been reluctant to sell content directly to online services such as Apple because it could harm the business of cable and satellite providers, whose licensing fees make up a substantial part of their revenue. Apple is attempting to address those concerns by partnering with cable companies.
  • Cisco lost 4.6 % at the open after saying revenue will decline 6 % to 8 % in the current period ending in April, faster than average of analysts’ forecasts.
  • Whole Foods Market slumped 8 % at the open after posting profit that trailed projections and lowering its full-year forecast.
  • GM is recalling 778,562 older-model Chevrolet Cobalt and Pontiac G5 compact cars in North America to correct a condition that may allow the engine and other components, including airbags, to be unintentionally turned off.
  • Ford Motor will build its redesigned Edge midsize crossover at its Oakville Assembly plant near Toronto. The Edge will be exported to more than 60 countries from Oakville. In September, Ford said it would invest C$700 million to expand the Oakville factory and preserve more than 2,800 jobs. The Edge was introduced in 2006 and remodeled four years later. Analysts expect the next version to debut in early 2015.
  • PepsiCo reported a better-than-expected 5 % rise in quarterly profit and said it would return about $2.3 billion more to shareholders in 2014 in the form of share buybacks and dividend.
    • The maker of Pepsi-Cola, Cheetos, Quaker Oats and Tropicana juice said net income attributable to PepsiCo rose to $1.74 billion in the fourth quarter from $1.66 billion a year earlier. Revenue rose marginally to $20.11 billion. Organic revenue increased 4.1 %, helped by higher prices. Snacks volumes rose 3 % in the Americas, but beverage volumes slid 2 %. PepsiCo maintained its forecast of 7 % growth in full-year adjusted earnings.
  • Avon Products said that it may cost as much as $132 million to settle a U.S. bribery investigation into the beauty products company’s efforts to develop new markets overseas. Revenue dropped 10 % to $2.67 billion, while analysts expected $2.75 billion.

US ECONOMY & POLITICS

  • Economists are yet to quantify the effect of the relentlessly freezing temperatures, which have left large parts of the country shivering since December. Retail sales fell unexpectedly in January and the number of Americans filing new claims for unemployment benefits rose last week. January was the coldest in three years.
  • Retail sales in the U.S. declined in January by the most in 10 months as inclement weather kept consumers away from auto showrooms and stores.
    • Retail sales fell 0.4 % last month, led by a drop in automobile sales. Sales excluding automobiles were unchanged.
    • Sales in December were revised to show a 0.1 % fall instead of the previously reported 0.2 % rise.
    • Purchases excluding merchants such as food services, car dealers, hardware stores and service stations — which are the figures used to calculate gross domestic product – fell 0.3 % after a revised 0.3 % increase in the previous month that was smaller than initially reported.
    • Spending decreased 0.9 % at clothing chains and 1.5 % at department stores, today’s report showed.
  • The decrease in January sales is among reasons why economists at Credit Suisse today reduced their first-quarter growth forecast to 1.6 % from 2.6 %.
  • Another report showed that initial claims for state unemployment benefits rose 8,000 to a seasonally adjusted 339,000 in the week ended February 8. Economists had forecast applications for jobless benefits slipping to 330,000.

EUROPE & WORLD

  • The record cost of President Vladimir Putin’s Winter Olympics will keep climbing long after the athletes have gone home and the flame goes out in Sochi. Russia, which is already spending 1.53 trillion rubles ($44 billion) to host its first Winter Games, may have to spend as much as $7 billion more in the next three years just to maintain the venues and other new infrastructure around Sochi.
  • Growth in China’s auto market slowed to 6 % in January, a third of the rate seen in December, partly weighed down by sluggish sales of commercial vehicles likes trucks and buses. The overall market grew 17.9 % in December last year and ended the 2013 year with a growth rate of 13.9 %.
    • Foreign carmakers like General Motors, Ford Motor and Toyota Motor reported double-digit growth in January, but some local players like Geely Automobile, posted sharp declines.
  • Japan’s economic growth is expected to have quickened at the end of last year as consumers ramped up spending ahead of a planned sales tax hike, but analysts say that Tokyo may have to inject fresh stimulus to brighten the outlook. The median from a Reuters poll of 26 economists forecast Japan’s economy to have grown 0.7 % in the October-December quarter from the previous three months.
  • Britain will warn Scotland on Thursday it can’t keep the pound if it votes for independence, its boldest attempt yet to scuttle a nationalist bid to break the 307-year-old union with England.
    • Scotland will vote for independence in the September 18 referendum which will be open to about 4 million residents of Scotland over the age of 16.
  • Nestle dropped 1.6 % at the open after the world’s largest food company predicted growth near the low end of its target.
  • Rolls-Royce sank 15 % at the open after the maker of commercial-jet engines said sales won’t grow this year for the first time in a decade.
  • Renault rallied 5.1 % after Europe’s third-largest carmaker said full-year operating profit jumped 59 % as low-cost models from the Dacia brand pushed delivery growth and the company lowered costs.
  • In the first official trip by a French president to California in 30 years, Francois Hollande sought to convince San Francisco-area companies that he’s making France a better country to invest and pay taxes in.

TODAY in HISTORY

  • The gang that included Jesse James and Cole Younger committed their first bank robbery in Liberty, Mo (1866)
  • France exploded its first atomic bomb (1960)

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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