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Pence Wealth Management Financial Markets Report

US FINANCIAL MARKET

  • U.S. stocks were little changed as a gauge of American manufacturing increased more than forecast, tempering concern about the economy after data showed Chinese and European factory output weakened.
  • Facebook will buy fast-growing mobile-messaging startup WhatsApp for $19 billion. The accord includes $12 billion in stock, $4 billion in cash and $3 billion in restricted shares.
    • With 450 million users, WhatsApp has a particularly strong following in Europe and India and is less known in the U.S., Zuckerberg told investors yesterday. WhatsApp lets users send messages through its service on mobile devices based on different operating systems.
    • Unlike traditional text messages, which consumers pay for through their mobile-phone plans, WhatsApp is free for the first year, and then costs 99 cents a year after that.
    • WhatsApp is almost always cheaper than texting, particularly across national borders. For sending photos and videos, WhatsApp is typically far less expensive than multimedia messaging services from carriers.
    • And unlike Apple’s iMessage and BlackBerry’s BlackBerry Messenger, it has always been available across multiple operating systems,
    • One day last June, WhatsApp carried 27 billion messages, it said on its official Twitter feed — 42 percent more than all the SMS texts sent worldwide on a typical day last year, according to researcher Informa.
    • WhatsApp currently carries no advertising, and messages can only be seen by a pre-selected group. Those conversations can contain huge amounts of detail; it’s not uncommon for users to leave two-person or group chats on WhatsApp open for weeks or months,
  • Tesla Motors posted better-than-expected fourth-quarter results on Wednesday and said deliveries of its Model S electric sedan would surge more than 55 percent this year.
    • Quarterly revenue jumped to $761.3 million from $306.3 million a year earlier. That beat a consensus estimate of sales of $712.7 million. Tesla’s annual net loss narrowed to $74 million from $396.2 million in 2012.
    • Tesla expects to deliver more than 35,000 Model S vehicles in 2014, an increase of more than 55 percent from the 22,477 it delivered last year.
    • The company has a market capitalization of nearly $25 billion, slightly less than half of GM’s $57.7 billion market cap. The company expects its automotive gross margin to rise to about 28 percent in the fourth quarter of this year. In the fourth quarter of last year, adjusted automotive gross margin was 25.2 percent. GM had an operating margin of 3.65% last year.
    • Musk has said his focus is further accelerating Model S production at Tesla’s Fremont, California, plant as sales of the car are set to begin next month in China.
    • The new production goal is 1,000 cars a week by the end of the year, up from about 600 per week now, Musk said in the letter to shareholders.
  • Wal-Mart forecast a lower full-year profit than analysts expect. It expects net sales growth this year to be at the lower end of its forecast range of 3 to 5 percent. Revenue increased 1.5 percent to $129.7 billion in the quarter ended Jan. 31. Analysts projected $130.2 billion.
    • The giant retailer is trying to open small format stores that will expand its reach into urban areas. It expects to open between 270 and 300 of those stores this fiscal year, up from an earlier plan of 120 to 150.
  • DirecTV, the largest U.S. satellite-TV provider, said it will buy back $3.5 billion of stock after fourth-quarter sales exceeded analysts’ estimates on stronger than expected U.S. subscriber growth.
    • Sales rose 6.7 percent to $8.59 billion. Analysts were expecting $8.48 billion on average.
    • DirecTV reported fourth-quarter net income of $810 million down from $942 million a year a year earlier.
    • In the U.S., DirecTV added 93,000 pay-TV subscribers, better than the 21,000 new customers that 11 analysts had estimated on average. The satellite-TV provider uses exclusive programming such as National Football League games to lure customers.
    • DirecTV signed up 231,000 new customers in Latin America, less than the 332,000 average estimate.
  • Gap said it would raise the hourly pay for its U.S. employees to $9 in June 2014 and $10 in June 2015, after the White House said the minimum wage for federal contract workers would be raised to $10.10 an hour in 2015. Gap, owner of Old Navy, Banana Republic and Gap apparel chains, said the increased pay will benefit about 65,000 store employees.
  • Separately, Wal-Mart Stores (with 2.2 million employees), the largest private employer in the United States, said it remains “neutral” on the issue of the federal minimum wage order of at least $10.10 per hour as it already pays most full-time employees above that level.
  • Burlington Northern Santa Fe (BNSF) Railway plans to buy its own fleet of up to 5,000 new crude oil tank cars with safety features that exceed the latest standards adopted by the industry more than two years ago.
    • Last week, Canadian National Railway and Canadian Pacific Railway said they would charge higher rates for customers that move crude in railcars built before October 2011, which the National Transportation Safety Board said in 2009 were unsafe.
  • Mexican billionaire Carlos Slim plans to increase his stake in The New York Times by exercising at the end of this year warrants he received when he made a major loan to the newspaper company.
  • Google is exploring a major expansion of its super-fast “Fiber” TV and Internet service (up to 100 times faster than average networks) which could extend the nascent network to 34 more U.S. cities and pose a competitive threat to home broadband providers.
    • Fiber may not prove feasible for every one of the 34 cities under consideration. The company will make a final decision on which of those get Fiber by the end of the year. Google now provides Fiber service, at up to $120 a month, in the Kansas City metropolitan area. Last year, it announced plans to expand in Provo, Utah and Austin, Texas in 2014.
  • Safeway, the second-largest U.S. grocery-store chain, said it is in discussions about a potential sale of the company as it divests some assets and struggles to increase revenue.

US ECONOMY & POLITICS

  • U.S. leading indicators index climbed in January, an indication the economy will bounce back after winter storms damped economic growth at the beginning of 2014.
    • The Conference Board’s gauge of the outlook for the next three to six months rose 0.3 percent after no change in the prior month.
    • Five of the 10 indicators in the leading index contributed to the increase, today’s report showed. They included a drop in jobless claims and a pickup in factory orders. Declines in building permits and hours worked weighed on the measure.
    • Higher equity prices and home values last year have helped bolster household wealth, giving Americans the means to sustain spending after a winter-related slowdown.
  • The share of consumers expecting the economy to worsen fell in February to an almost two-year low as Americans looked beyond harsh winter weather.
    • Thirty percent, the fewest since May 2012, said the economy was headed in the wrong direction, data from the Bloomberg Consumer Comfort Index showed today.
  • Initial claims for state unemployment benefits declined 3,000 to a seasonally adjusted 336,000, the Labor Department said.
  • Consumer prices rose in January as unseasonably cold weather boosted demand for electricity and heating fuel, but inflation pressures remained muted.
    • The CPI had risen 0.2 percent in December.
    • In the 12 months to January, consumer prices advanced 1.6 percent after increasing 1.5 percent in December.
    • Last month, electricity prices rose 1.8 percent, the largest gain since March 2010. Natural gas prices surged 3.6 percent, while heating fuel jumped 3.7 percent. Those increases offset a 1.0 percent fall in the price of gasoline.
  • U.S. manufacturing activity accelerated in February at its fastest pace in nearly four years due in part to growth in new orders. Markit’s U.S. Manufacturing Purchasing Managers Index (PMI) rose to 56.7 in February, its highest since May 2010, compared to 53.7 in the final reading for January.
    • The new orders component jumped to 58.8, the highest since May 2010, while output rose to 57.2 from 53.5 in January.
  • The Fed decided at its January meeting to press on with a second cut of $10 billion to its bond buying. Three rounds of stimulus have helped push the S&P 500 as much as 173 percent higher from a 12-year low in 2009.
    • Federal Reserve policy makers backed away from their year-old commitment to consider raising interest rates when unemployment falls below 6.5 percent.
    • With the joblessness falling faster than expected even as other labor-market indicators show weakness, policy makers agreed it would “soon be appropriate” to revise their guidance about how long the era of record-low interest rates will remain, minutes of their January meeting showed.
  • TransCanada’s Keystone XL pipeline route through Nebraska was ruled illegal by a state court judge in a decision seen as setting back the project by as long as a year as U.S. officials consider needed approval. The ruling prolongs the approval process in Nebraska as the Obama administration reviews whether to approve the multi-state extension of the international project.
    • TransCanada, based in Calgary, is seeking to build the pipeline through the U.S. heartland, connecting oil sands in Alberta with refineries along the Gulf Coast of Texas and Louisiana. The 1,179-mile (1,897-kilometer) pipeline would run from Hardisty, Alberta, to Steele City, Nebraska. From there it would connect to an existing network.

 EUROPE & WORLD

  • The IMF said the global recovery is still weak and “significant downside risks remain,” citing increasing political tensions from Ukraine to Thailand, China’s slowdown and the Fed’s tapering of its stimulus as reasons for falling stocks and currencies in emerging markets.
  • Chinese Markit/HSBC PMI fell to a seven-month low of 48.3 in February from January’s 49.5.
  • Markit’s Eurozone Composite PMI dipped to 52.7, just below January’s 31-month high of 52.9.
    • Markit said the latest data point to 0.5 percent economic growth in the bloc this quarter, stronger than the 0.3 percent predicted in a Reuters poll published last week.
  • Germany will not take delivery of the final shipment of 37 Eurofighter jets. Originally, the German military wanted 180 Eurofighters but there has never been a decision or a contract for the final tranche.
  • Porsche said it will recall all 785 models of its 911 GT3 sports-car that have been delivered worldwide this year after two of them caught fire.
  • Japan suffered a record trade deficit in January as growth in exports spurred by a weak yen was far outstripped by a surge in import costs. The trade balance came to a deficit of 2.79 trillion yen ($27.30 billion) in January.
    • Exports rose 9.5 percent in January.
    • Imports rose 25 percent to a record amount.
  • Singapore’s GDP rose an annualized 6.1 percent in the three months through December from the previous quarter.
  • Coffee shipments from Indonesia may drop 17 percent this year to the lowest since 2011 as elections and the soccer World Cup raise local consumption to a record and rain cuts output in the third-biggest grower of robusta. Declining supplies of robusta beans, used by Nestle in instant drinks, may extend a bull market in futures.
  • The death toll grew in Ukraine as a new wave of deadly clashes in Kiev destroyed a truce declared last night by President Viktor Yanukovych and the opposition. While the Health Ministry reported seven killed, including two policemen, the opposition Svoboda party said more than 60 were dead.

TODAY in HISTORY

  • President George Washington signed the Post Office Act, establishing a permanent Post Office Department (1792)
  • The Supreme Court ruled the power of the federal government is greater than that of any individual state (1809)
  • John Glenn became the first American to orbit Earth (1962)

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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