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Pence Wealth Management Financial Markets Report

US FINANCIAL MARKET

  • Stocks advanced at the open on Friday, putting the S&P on track for its third straight weekly gain, buoyed by some strong results from technology companies.
    • Investors have dismissed worse-than-forecast U.S. economic data over the past two weeks, speculating that harsh winter weather explains the weakness in reports such as housing and hiring. 
    • The coldest winter in two decades boosted heating demand to all-time highs. U.S. natural gas futures prices gained as much as 50% this year, breaking the $6 mark for the first time since 2010, a far cry from the $2 seen in 2012.
  • Dish Network reported a 38% rise in fourth-quarter profit as it generated more revenue per user.
    • Dish, the second largest U.S. satellite TV company after DirectTV, said its stable of U.S. customers reached about 14.1 million as it added 8,000 pay-TV subscribers on a net basis in the fourth quarter. The average revenue generated per subscriber rose 5% to $81.24.
    • Dish’s net income was $288 million compared with $209 million a year earlier. Revenue rose about 7% to $3.54 billion.
    • DirecTV’s results that topped Wall Street estimates with better-than-expected U.S. growth and announced a $3.5 billion share buyback.
  • Comcast plans to submit documents on its proposed $45 billion takeover of Time Warner Cable to U.S. regulators by the end of March, when antitrust and public interest reviews will be launched.
  • DirecTV CEO Mike White called for U.S. regulatory scrutiny of Comcast’s proposed purchase of Time Warner Cable and the “effective broadband monopoly” he said it might create in as much as two-thirds of the United States.
  • Hewlett Packard’s revenue fell less than Wall Street expected in the first quarter and it raised its outlook for fiscal 2014 earnings. On Thursday, the company broke its losing streak in its PC-focused personal system group with a 4% gain in revenue.
    • For the first quarter, HP posted revenue of $28.2 billion, down slightly from $28.4 billion a year earlier and beating expectations for about $27.2 billion.
    • The company posted a 16% rise net earnings of $1.4 billion in the first quarter, compared to $1.2 billion a year ago. 
  • Priceline, the largest U.S. online travel agent, reported profit for the fourth quarter that topped analysts’ estimates as Europe’s economic recovery lifts hotel bookings.
  • Groupon tumbled 15% at the open to $8.76 after saying higher expenses for acquisitions and marketing will hurt profit. 
  • Coca-Cola announced deals to sell bottling operations in Greater Chicago and Central Florida, as it slowly undoes its 2010 purchase of its North American bottler. Several years ago, Coke and arch rival PepsiCo bought their North American bottlers to streamline decision-making and cut costs.
  • Amazon.com has discussed adding listings for 10 brands including J. Crew, Ralph Lauren and Lord & Taylor, people familiar with the matter told the Wall Street Journal.
  • Verizon now has full ownership of the U.S. Verizon Wireless. After pulling off the $130 billion sale, Vodafone will drop from the world’s second-biggest phone company to the fourth, measured by market value, behind China Mobile, AT&T. and Verizon Communications.
  • Facebook’s $19 billion purchase of mobile-messaging startup WhatsApp is a stark reminder of how much money phone carriers are losing out on as competitors let users text and chat at no charge.
    • Free social-messaging applications like WhatsApp cost phone providers around the world $32.5 billion in texting fees in 2013, according to research from Ovum. That figure is projected to reach $54 billion by 2016.
    • As free services continue to gain in popularity, U.S. text-messaging revenue will decline 3% to 4% this year from $21 billion in 2013.
    • In Mexico, for instance, almost 90% of all instant messaging goes through WhatsApp.
  • Google sold bonds for the first time in three years, borrowing funds to refinance $1 billion of maturing debt even after its cash hoard swelled to a record of more than $60 billion. The owner of the world’s largest search engine issued 3.375%, 10-year notes that yield 62.5 basis points more than similar-maturity Treasuries. Google is rated Aa2 by Moody’s Investors Service and an equivalent AA at Standard & Poor’s. 
  • The Pentagon’s No. 1 arms supplier Lockheed Martin sees significant growth potential for its range of unmanned aircraft.
    • Lockheed, known for its F-16 and F-35 fighter jets and Aegis missile defense system, lacks a drone with a widely recognizable name – like General Atomics’s Predator – but its portfolio includes a number of planes designed for everything from reconnaissance to bringing supplies to troops in combat.
    • The company is still tight-lipped about the RQ-170 intelligence drone, developed by the company’s Skunkworks research division, that grabbed the limelight when one went down in Iran in 2011.
    • Lockheed’s unmanned aircraft range from a 5-pound Indago surveillance bird to the 12,000-pound K-MAX cargo helicopter built with Kaman Aerospace, that can carry 6,000 pounds in a sling.
    • The company is particularly upbeat about the prospect of U.S. and foreign orders for Fury, a 400-pound rail-launched drone that has a range of 1,500 miles and can stay aloft for 15 hours.
    • On a separate report, on-the-ground stress testing for the U.S. Marine Corps version of Lockheed Martin’s F-35 jet may be halted for as long as a year after cracks were found in the aircraft’s bulkheads, Pentagon officials said.

US ECONOMY & POLITICS

  • The biggest U.S. companies are poised to surprise investors this year with how much they are planning to dig into their massive cash stock piles and invest in big projects.
    • Corporate America has been reluctant to spend aggressively since the recession, choosing instead to amass cash reserves or reward shareholders by raising dividends and buying back shares. Cash still represents close to 10% of the market value of members of the Standard & Poor’s 500 index. Some investors have become increasingly unhappy with companies that hoard their dollars rather than invest in the business or give a good chunk back to shareholders.
    • Combining dividend payments with buy backs, S&P 500 companies spent an estimated $214.4 billion returning cash to shareholders last year, around 31% more than their capex outlay.
    • According to a Thomson Reuters analysis, 70% of the 227 S&P companies that have so far announced 2014 spending plans have exceeded Wall Street’s expectations. 
    • The average capital expenditure for the year is about $1.71 billion.
  • U.S. companies are currently using roughly 78.5% of their production capacity, Federal Reserve data showed. That’s near the highest levels since the recession and up substantially from June 2009′s record low of under 70%.
  • Home resales (existing home sales) fell more than expected in January and hit an 18 month-low as the combination of cold weather and a lack of housing stock sidelined potential buyers. The NAR said home sales dropped 5.1% to an annual rate of 4.62 million units, the lowest level since July 2012. December’s sales pace was unrevised at 4.87 million.
  • Fannie Mae will soon send the U.S. Treasury $7.2 billion, a profit-related dividend that makes taxpayers whole for the 2008 bailout of the mortgage-financing giant and its sibling company Freddie Mac.
    • Fannie Mae posted net income of $6.5 billion for the quarter. For 2013 as a whole, its net income was a record $84.0 billion, helped by a recovery in the housing market and some tax-related windfalls.
    • Before returning to the black last year, Fannie Mae had suffered five years of losses totaling $164 billion, and it had drawn $116.1 billion in taxpayer aid. Freddie Mac, which lost $94 billion between 2007 and 2011 before it turned things around, was supported by $71.3 billion in bailout funds. 
    • The dividend payment to Treasury by Fannie Mae means that combined with Freddie Mac, they will have more than repaid the government, paying dividends of about $192.5 billion compared to the $187.5 billion they have drawn for their 2008 bailouts.

 EUROPE & WORLD

  • Group of 20 finance ministers and central bankers meeting in Sydney this weekend will seek to minimize volatility as the Fed slows its bond-buying program. The group also aims to find new ways to support global growth in the next five years while maintaining fiscal sustainability.
  • As Europe takes the lead in trying to end the bloodshed in the Ukrainian capital, Vladimir Putin is running out of options to shape events in a country that he sees as firmly within Russia’s sphere of influence.
  • Canada’s inflation rate accelerated the most in 20 months on a surge in home heating costs amid one of the most severe winters in decades. The consumer price index (CPI) rose 1.5% in January from a year earlier, the most since June 2012.
  • Growth in Japan’s factory output likely accelerated in January and core inflation hovered near five-year highs, a Reuters poll showed, underscoring the ongoing economic recovery despite fears that momentum may soon start to fade.
  • The Bank of Japan is expected to ease policy further by this summer to help boost the economy and pull it out of a 15-year deflation, as the effects from Prime Minister Shinzo Abe’s stimulus strategy loses momentum, a Reuters poll showed.
  • Greece’s four big banks are expected to need a total of about 5 billion euros ($6.9 billion) in extra capital, based on a second stress test by the central bank, two senior banking sources told Reuters on Friday.
  • Kering’s Gucci luxury-goods brand posted the weakest quarterly sales growth in four years amid softening demand in Europe and China, increasing concern over a slowdown at the company’s biggest unit. Gucci’s fourth-quarter comparable sales gained 0.2%, Paris-based Kering said today in a statement.

TODAY in HISTORY

  • Michael Romanov was elected czar of Russia, beginning the Romanov imperial line (1613)
  • The first telephone book was issued (New Haven, Conn.) (1878)
  • Battle of Verdun, the longest and one of the bloodiest engagements of World War I, began (1916)
  • Black nationalist leader Malcolm X was assassinated (1965)
  • President Nixon became the first U.S. president to visit China (1972)
  • Steve Fossett became the first person to cross the Pacific Ocean solo in a balloon (1995)
  • Eurozone finance ministers reached an agreement on a second, 130-billion bailout for Greece to help with the country’s debt crisis (2012)

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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