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Pence Wealth Management Financial Markets Report

US FINANCIAL MARKET

  • U.S. stocks rose at the open, with the Standard & Poor’s 500 Index trading near its closing record, as purchases of new homes unexpectedly climbed to the highest level in more than five years and retailers rallied.
    • Lowe’s and Abercrombie & Fitch jumped more than 5.5 % after announcing buyback plans. Target gained 4.3 % as profit topped analysts’ estimates. LinkedIn added 2.5 % after RBC Capital Markets recommended buying the shares. First Solar tumbled 12 % after posting a 58 % decline in quarterly profit.
    • The S&P 500 has rallied 6 % since a low on Feb. 3 as investors speculated that severe winter weather explains the weakness in reports such as housing and hiring.
    • Earnings beat analysts’ estimates at about 70 % of the 471 companies in the S&P 500 that have posted results so far this season.
    • Analysts estimate earnings for S&P 500 companies grew by 8.6 % in the fourth quarter of 2013, according to a survey of analysts.
  • Tesla Tops $30 Billion as Morgan Stanley Boosts Outlook. The shares advanced 14 % to $248 at the close in New York, following the analyst note that projected a 12-month price target of $320 and after Tesla’s Model S sedan became the first U.S. car to receive Consumer Reports’ “best overall pick” in the magazine’s annual ranking.
    • Tesla is worth more than half of the biggest U.S. automakers. GM’s market valuation is $57.4 billion, and Ford’s is $59.8 billion. Fiat is valued at $13 billion, and Toyota, a Tesla shareholder, is more than $200 billion.
  • Lowe’s announced a plan to buy back $5 billion in shares. The company also said fourth-quarter profit rose 6.3 % as the housing rebound spurred renovation spending.
    • Sales increased 5.6 % to $11.66 billion. Net income rose 6.3 % to $306 million from $288 million a year earlier.
    • Lowe’s gross margin expanded to 34.67 % in the quarter from 34.27 a year earlier.
  • Abercrombie & Fitch posted fourth-quarter profit that topped analysts’ estimates and saying it would buy back $150 million in shares in the current quarter.
  • Target posted fourth-quarter profit that topped analysts’ estimates, signaling that it’s regaining customer loyalty after a data breach affected tens of millions of shoppers at the peak of the holiday season.
    • Target incurred $61 million in expenses related to the breach during the quarter, but those costs were offset by a $44 million insurance payment.
    • Net earnings fell to $520 million from $961 million a year earlier. Sales fell 3.8 % to $21.52 billion, missing the already lowered estimate of $22.37 billion.
  • TJX Companies plans to repurchase $1.6B-$1.7B in stock during its fiscal year. The company has $970M left on an existing stock repurchase program and authorized a new $2B allowance with no time limit. The new program would rep 5% of all outstanding TJX shares if the company bought to the maximum.
  • DreamWorks Animation plunged as much as 13 % at the open. The independent animation studio reported that fourth-quarter revenue slumped 23 % after home-video sales of “Turbo” missed estimates.
  • GE will pay $1.7 billion to Japan’s Shinsei Bank to end exposure to interest repayment claims related to the sale of its Japanese consumer loan business to the bank in 2008. The deal would reduce fourth-quarter and 2013 earnings by $1 billion and earnings per share by 9 cents. GE reported a fourth-quarter net profit of $4.2 billion, or 41 cents per share. Adjusted profit was 53 cents per share.
  • Rolls-Royce unveiled plans for a new aircraft engine which it said would be up to 6 % more efficient than its latest model and could be ready by the end of the decade. Rolls is the world’s second-largest maker of aircraft engines behind U.S. group GE. Rolls said it was confident about appetite from Airbus and Boeing for its new products.
    • In September Airbus said that airlines, lessors, and cargo operators would need a total of 29,226 new passenger and freighter jets worth $4.4 trillion over the next 20 years.
  • Sony’s electronic unit is closing 20 retail stores in the United States and cutting 1,000 jobs, as the TV and game console maker tries to stem losses and regain market share. Sony has a total of 31 retail stores in the U.S.
  • JPMorgan, Goldman, 16 Other Firms will End Analyst Previews. Firms agreed to stop participating in some surveys of analyst sentiment while New York investigates early access to the information.
  • Morgan Stanley has reached a $275 million proposed settlement with the SEC that would allow the Wall Street bank to move past a substantial legal overhang from the financial crisis. Morgan Stanley’s settlement would follow similar deals reached between the agency and rivals including Goldman Sachs, Citigroup, and JPMorgan Chase.
  • For J.C. Penney, e-commerce is no easy fix.
    • First the good news for J.C. Penney: online sales rose 26.3 % during the holiday quarter.
    • Now the bad: the surge mostly reflects how far the one-time e-commerce pioneer has fallen.
    • The U.S. department store chain started offering e-commerce in 1995, long before most large retailers. Penney now gets some 8 % of sales online, compared with 15 %, including catalog sales, a decade ago.
    • The National Retail Federation estimates that overall U.S. e-commerce sales will grow by as much as 12 % in 2014, three times faster than in-store sales.
  • Investors should treat their equity holdings like real estate purchases, focusing on the potential for profits over time rather than short-term price fluctuations, Buffett, 83, wrote in an excerpt from his annual letter published on the website of Fortune magazine.

US ECONOMY & POLITICS

  • Sales of new U.S. homes increased 9.6 % to a 468,000 annualized pace in January, exceeding the highest estimate of economists surveyed by Bloomberg and the most since July 2008. New home sales rose 2.2 % compared with January 2013.
    • December’s sales were revised up to a 427,000-unit pace from the previously reported 414,000-unit rate.
    • Sales in the Northeast soared 73.7 % to a seven-month high, while the South recorded a 10.4 % rise in transactions to a more than five-year high. Sales, however, tumbled 17.2 % in the Midwest last month, while rising 11 % in the West.
    • The median sales price rose 3.4 % last month from January 2013 to $260,100, today’s report showed.
    • At January’s sales pace it would take 4.7 months to clear the supply of houses on the market. That was down from 5.2 months in December. There were 184,000 new houses on the market at the end of January, the same as in December.
  • Applications for U.S. home mortgages fell. MBA’s mortgage application activity index, which includes both refinancing and home purchase demand, fell 8.5 % to 348.5 in the week ended February 21. The MBA index hit its lowest level since December 2000 at the end of last year. The interest rate on fixed 30-year mortgages averaged 4.53 % last week, up 3 basis points from the previous week and up from 3.35 % in early May 2013.

EUROPE & WORLD

  • Italian Prime Minister Matteo Renzi won his first confidence vote in the Chamber of Deputies.
  • Chancellor Angela Merkel will call for a stronger European Union in a speech in London that may disappoint Prime Minister David Cameron. Cameron let it be known that he wanted Merkel to help him counter euro-skeptics in his own party by supporting his drive for an overhaul of the EU.
  • Egypt’s 77% Stock Rally Tips Generals Winning Investors.
  • Pollution in Beijing was stuck at unhealthy levels for the seventh straight day.

TODAY in HISTORY

  • Napoleon Bonaparte escaped from exile on the island of Elba (1815)
  • A 312-ft long pneumatic subway was opened in New York City; funding for a larger version never materialized (1870)
  • Grand Canyon National Park was established (1919)
  • RADAR (Radio Detection and Ranging) was first demonstrated by Robert Watson-Watt (1935)
  • A bomb exploded at the World Trade Center in New York. The blast killed six people and injured more than 1,000 (1993)

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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