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Pence Wealth Management Financial Markets Report

US FINANCIAL MARKET

  • U.S. stocks rose at the open, sending the Standard & Poor’s 500 Index toward a record, and Treasuries pared an advance as investors awaited minutes of the latest Federal Reserve meeting. Ukraine’s bonds tumbled as anti-government protests escalated while U.S. natural gas jumped to a four-year high.
    • The yield on Ukraine’s June 2014 bond jumped 11 percentage points to 34.27 %, an all-time high.
    • Natural gas climbed 7.9 % and silver ended the longest rally since at least 1968.
    • The Fed releases the minutes of its Jan. 28-29 meeting after European markets close today. At the meeting, the last under former Chairman Ben S. Bernanke, policy makers reduced the bank’s monthly asset purchases by $10 billion to $65 billion, citing improved economic growth.
  • Eli Lilly said Ramucirumab Phase 3 lung cancer trial improved survival in second-line study of patients with non-small cell lung cancer.
  • Apple is looking at cars and medical devices to diversify its sources of revenue as growth from iPhones and iPads slow, according to a San Francisco Chronicle report.
    • Apple’s head of mergers and acquisitions, Adrian Perica, met with Tesla Motors founder Elon Musk at the company’s headquarters last year around the same time analysts suggested that Apple acquire the Model S electric car maker.
    • The company is also exploring medical devices and sensors that can help predict heart attacks by studying sound blood makes at it flows through arteries.
  • Boeing will locate a new factory for building the wings of its forthcoming 777X jet in Everett, Washington, where it currently builds 777 jetliners.
    • Locating the factory in Everett is expected to reduce the risk that delivery of the first 777X jet would be delayed beyond the target date of 2020. The 777X will be the latest version of the company’s best-selling widebody jet, a so-called minijumbo, which carries a list price of up to $320 million.
  • SunExpress, a joint venture between Lufthansa and Turkish Airlines, is placing an order for 50 Boeing jets, worth $4.5 billion at list prices.
    • The order includes 40 firm orders and 10 options, the firm said in a statement on Wednesday, and comprises 25 Next Generation 737-800 and 15 737-8 Max jets. The new planes will be delivered between 2015 and 2021.
  • Chinese low-cost carrier Spring Airlines is set to make an order for up to 30 Airbus A320 aircraft worth $3 billion at list prices.
  • Herbalife, the nutrition products company accused by billionaire investor William Ackman of being a pyramid scheme, raised its forecast for the first quarter of 2014 on strong sales growth in China.
  • Investors are losing patience with hedge-fund managers who rely on computers to follow global market trends after three years of underperformance.
    • Quantitative hedge funds saw investors pull $4.9 billion in the last three months of 2013, the most in five years, according to data provider Hedge Fund Research (HFR).  HFR estimates quant funds now manage about $224 billion worldwide.

US ECONOMY & POLITICS

  • U.S. household debt rose in the latest quarter by the most since before the recession, a sign that Americans may be nearing the end of a multi-year belt-tightening trend.
    • Total consumer debt rose 2.1 % to $11.52 trillion in the fourth quarter of 2013 from $11.28 trillion in the third quarter. The increase, $241 billion, marked the biggest quarterly jump since the third quarter of 2007.
    • Auto loan balances jumped by $18 billion.  Student debt rose again with outstanding balances up $53 billion to $1.08 trillion.
  • U.S. housing starts recorded their biggest drop in almost three years in January, likely weighed down by harsh weather, but the third month of declines in permits pointed to some underlying weakness in the housing market.
    • Groundbreaking tumbled 16.0 % to a seasonally adjusted annual rate of 880,000 units, the lowest level since September. The percentage drop was the largest since February 2011.
    • Economists polled by Reuters had expected starts to fall to a 950,000-unit rate in January.
    • Starts for December were revised up to a 1.05 million-unit pace from the previously reported 999,000-unit rate.
    • Starts in the Midwest tumbled a record 67.7 %, suggesting unseasonably cold weather could have disrupted activity. But at the same time groundbreaking in the Northeast surged to the highest since August 2008.
    • Groundbreaking for single-family homes, the largest segment of the market, fell 15.9 % to a 573,000-unit pace in January.
    • Starts for the volatile multi-family homes segment dropped 16.3 % to a 307,000-unit rate.
  • Permits to build homes fell 5.4 % in January, the largest drop in since June, to a 937,000-unit pace. Permits for single-family homes slipped 1.3 %. Multifamily sector permits declined 12.1 %.
  • Applications for U.S. home mortgages fell in the latest week. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, fell 4.1 % in the week ended February 14. The interest rate on fixed 30-year mortgages averaged 4.50 % last week, up 5 basis points from the previous week.
  • The MBA’s seasonally adjusted index of refinancing applications fell 2.7 %. The gauge of loan requests for home purchases, a leading indicator of home sales, fell 6.3 % to hit its lowest level since September 2011.
  • Producer price index (PPI) for final demand rose 0.2 % last month as the cost of goods increased. It was the largest increase since October.
    • Inflation continues to run very low because of labor market slack, which could see the Federal Reserve keeping its benchmark interest rate near zero for a while even as it dials back its monetary stimulus.
    • Economists expect fourth-quarter gross domestic product will be lowered to an annual pace of about 2.4 % from 3.2 %. The trade deficit in December was much larger than the government had assumed in its first GDP estimate.
  • Raising the U.S. minimum wage would lead to the loss of about half a million jobs by late 2016 but lift almost a million Americans out of poverty, the Congressional Budget Office forecast in a report on Tuesday that reignited debate over one of President Barack Obama’s top priorities this year.
  • The Federal Reserve adopted tight new rules for foreign banks to shield the U.S. taxpayer from costly bailouts. Foreign banks with sizable operations on Wall Street such as Deutsche Bank and Barclays had pushed back hard against the plan because it means they will need to transfer costly capital from Europe. The largest foreign banks, with $50 billion or more in U.S. assets, will need to set up an intermediate holding company subject to the same capital, risk management and liquidity standards as U.S. banks, the Fed said.

EUROPE & WORLD

  • BAE Systems said the U.K. and Saudi Arabia agreed on pricing for Eurofighter Typhoon combat jets, providing Europe’s largest defense company with a boost to last year’s earnings after protracted talks.
    • The accord covers the cost of 72 planes, with a cash payment due early this year for the more than 30 jets already handed over. Saudi Arabia is the largest export customer for the Typhoon combat jet. The contract for the Typhooon aircraft, which costs about $100 million each, was valued at about 4.5 billion pounds at the time of signing.
  • Japan’s government described consumer prices as “rising moderately“, using that wording for the first time since October 2008, a sign that the economy is making steady progress towards exiting 15 years of stubborn deflation.
  • China’s banks will have to increase their liquidity coverage ratio (LCR) to 100 % by 2018 under new rules to take effect from March 1, the banking regulator said on Wednesday.
  • France’s Industry Minister confirmed on Tuesday the French state would inject 800 million euros ($1.10 billion) in Peugeot Citroen leaving it with a 14 % stake in the carmaker as part of a deal with China’s Dongfeng. Peugeot and Dongfeng have agreed a 3 billion euro capital tie-up that buys Peugeot more time to turn its business around.

TODAY in HISTORY

  • The Netherlands and England signed the Peace of Westminster, by which New Amsterdam passed to the English (and was renamed New York) (1674)
  • Thomas Edison patented the gramophone (phonograph) (1878)
  • President Franklin Roosevelt signed an executive order that resulted in the internment of thousands of Japanese-Americans living on the West Coast (1942)
  • Britain, Turkey, and Greece signed the agreement granting Cyprus independence (1959)
  • Fidel Castro resigned as President of Cuba after 49 years in power. Raúl Castro, Fidel’s brother, succeeded him as president (2008)

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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