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Pence Wealth Management Financial Markets Report

US FINANCIAL MARKET

  • Stocks were little changed at the open on Friday ahead of the release of consumer sentiment data, with the S&P 500 set for its first two-week winning streak of the year.
  • Campbell Soup, the world’s largest soup maker, reported a higher-than-expected quarterly profit, helped by an increase in soup sales during the holiday quarter, sending shares up as much as 7%.
    • Sales in the U.S. simple meals business, which includes soups and sauces such as Prego pasta sauce, rose 7%. Soup sales alone rose 5%. Campbell’s total sales rose 5.5% to $2.28 billion in the quarter. Net income rose to $325 million from $190 million a year earlier.
  • Kraft Foods reported a higher quarterly profit on lower costs and a large accounting gain related to retiree benefits.
    • Kraft, whose stable of famous food brands includes Velveeta cheese, Jell-O desserts and Maxwell House coffee, said net earnings rose to $931 million up from $90 million a year ago. Net revenue grew 2.3% to $4.6 billion with the company selling more goods and a greater proportion of higher-priced products.
  • PepsiCo is rejecting a proposal by activist investor Nelson Peltz, said it had decided not to spin off its North-American beverage business.
    • Soda sales have been declining in North America as health-conscious consumers reach for non-carbonated beverages such as juices and health drinks. Peltz had also urged PepsiCo to create a snack food giant by acquiring Oreo cookie maker Mondelez International, but dropped that push after winning a seat on the Mondelez board last month.
  • Boeing is mounting a last-ditch campaign to convince U.S. lawmakers to buy more fighter jets and stave off a shutdown of a St. Louis production line after the U.S. Navy failed to fund the jets.
    • The Navy’s fiscal 2015 budget plan omits funding for any extra F/A-18E/F Super Hornets or EA-18G Growlers. The White House is due to submit its 2015 budget request to Congress on March 4.
    • Boeing remains in competition for orders from Canada and Denmark, and sees other prospects in the Middle East. But none of those foreign orders are likely to materialize in time to maintain the St. Louis F/A-18 line past the end of 2016.
  • Twitter will give insiders the first chance to sell their stock today. As many as 9.87 million of non-executive employees’ shares will become eligible for sale as agreements that locked them up after the IPO expire. That would boost the number of shares available for trading by 12% to about 90 million.
  • Ford increased European car sales by 9.2% in January, the eighth straight monthly gain, benefiting from strong demand in the region’s top markets Germany and the UK.
  • Toyota Motor is recalling 261,114 Lexus and Toyota brand vehicles in the United States because various safety systems, including stability control and anti-lock brakes, could become inoperative.
  • Wells Fargo, the largest U.S. mortgage lender, is tiptoeing back into subprime home loans again. The bank is looking for opportunities to stem its revenue decline as overall mortgage lending volume plunges. 
    • It is looking at customers with credit scores as low as 600. Its prior limit was 640, which is often seen as the cutoff point between prime and subprime borrowers. The small steps from Wells Fargo could amount to a big change for the mortgage market. 
    • Lenders remain cautious in part because of financial reform rules. Under the 2010 Dodd-Frank law, mortgage borrowers must meet eight strict criteria including earning enough income and having relatively low debt.
    • If the borrower does not meet those hurdles and later defaults on a mortgage, he or she can sue the lender and argue the loan should never have been made in the first place.

US ECONOMY & POLITICS

  • University of Michigan consumer sentiment remained unchanged at 81.2 in the February preliminary estimate, slightly exceeding expectations.
  • U.S. manufacturing output slightly weaker than expected in January as cold weather disrupted production in the latest indication the economy got off to a weak start this year.
    • Factory production fell 0.8% last month, the Federal Reserve said. The Fed attributed the first decline in factory output since July to “severe weather that curtailed production in some parts of the country.”
    • The weakness in factory output last month was broad-based, with the production of motor vehicles and parts tumbling 5.0%.
    • Mining output was also hampered by cold weather, which caused slowdowns at some oil and gas extraction facilities.
  • In January, the amount of industrial capacity in use fell to 78.5% from 78.9% in the prior month.
    • Industrial capacity utilization, a measure of how fully firms are using their resources, was 1.6 percentage points below its long-run average.
  • U.S. export prices rose in January for the third straight month, potentially positive signs for global economic demand and the outlook for American manufacturers. Prices for U.S. goods and services sold abroad climbed 0.2%. Import prices also rose last month, increasing 0.1% and confounding analysts’ expectations for a slight decline.

 EUROPE & WORLD

  • The euro zone economy grew 0.3%, more than expected, in the last quarter of 2013 thanks to stronger expansion in its biggest countries France and Germany. This slightly exceeded market expectations for a 0.2% expansion.
    • Germany saw its growth accelerating to 0.4% on the quarter.
    • The French economy expanded by 0.3%.
    • Italy expanded marginally by 0.1%, marking the first quarterly gain in more than two years.
    • Spain has already reported fourth quarter growth of 0.3%.
    • The Dutch economy grew by a solid 0.7% on the quarter.
    • The 9.5 trillion euro economy contracted 0.4% overall in 2013.
  • Separately, Eurostat data showed the bloc’s December foreign trade surplus grew to 13.9 billion euros from 9.8 billion euros in the same period last year, driven by a 4% year-on-year rise in exports, as imports rose only 1%.
    • The euro zone’s full year external trade surplus more than doubled to 153.8 billion euros last year, from 79.7 billion euros in 2012, with exports rising 1% and imports falling 3%.
  • China’s consumer inflation hugged a seven-month low in January and showed no signs of accelerating anytime soon. Producer prices slid for the 23rd consecutive.
  • Smartphone shipments in China fell for the first quarter in more than two years. There were 90.8 million smartphones shipped in China, down 4.3% from 94.8 million in the September quarter, IDC said.

TODAY in HISTORY

  • Oregon became the 33rd state in the United States (1859)
  • Arizona became the 48th state in the United States (1912)
  • Iran’s Ayatollah Khomeini issued a fatwa, calling for the death of Salman Rushdie, author of The Satanic Verses (1989)
  • Dolly the sheep, the first cloned mammal, was euthanized because of incurable lung cancer (2003)

Sources: Reuters,  Bloomberg.

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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