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Pence Wealth Management Financial Markets Report

US FINANCIAL MARKET

  • Stocks opened little changed on Wednesday, with the S&P 500 near its record high reached in the prior session, after data on the labor market was slightly below expectations.
    • The equities benchmark trades at 17.4 times reported earnings, the highest level since 2010 and 11 % above its five-year average, according to data compiled by Bloomberg.
    • Investors have removed $3.7 billion from U.S. equity ETFs in the past five days and added $1.3 billion to bond ETFs.
  • Apple is in talks to buy Japan chip venture, seeks to secure iPhone supply chain.
  • Amazon is set to unveil a television-viewing device for streaming movies, television shows and other video from the Web at an event today in New York.
    • The device will put Amazon in closer competition with Apple and Google. The move will also escalate the company’s rivalry with Netflix. With its own box, Amazon can feature its library of video instead of depending on other TV manufacturers.
    • All of the companies are striving to reach into consumers’ living rooms and to tie customers to a particular ecosystem of services.
  • Monsanto reported higher-than-expected quarterly earnings as its corn and soybean businesses expanded globally.  Monsanto earned $1.67 billion in the second quarter, up 13 % from $1.48 billion a year earlier. Net sales rose to $5.8 billion from $5.5 billion, in line with analysts’ expectations.
    • Corn remains king in terms of growth.
    • Sales of soybean seeds and traits rose 21 %.
    • Sales of vegetable seeds rose 10 %.
  • Chrysler is recalling nearly 870,000 vehicles to fix a defect in the brake systems following complaints about excessive brake-pedal firmness. Jeep Grand Cherokee and Dodge Durango SUVs, model years 2011-2014, are under inspection.
  • CEO Barra calls GM’s actions on deadly defect ‘unacceptable’. General Motors CEO Mary Barra on Tuesday called her company’s slow response to faulty ignition switches linked to at least 13 deaths “unacceptable,” but could not give U.S. lawmakers many answers as to what went wrong.
  • Pressure rises on Gross as investors pull $3.1 billion from Pimco’s flagship fund. Gross, co-founder of Newport Beach, California-based Pimco and dubbed as the market’s “Bond King,” has been dealing with a public falling-out with former heir-apparent Mohamed El-Erian, who shared the co-chief investment officer title.
  • Five years after Lehman Brothers’ seismic bust and just two years after euro member Greece defaulted, the concept of being too big or too strategic to fail is alive and well. The IMF study detailed this week, there’s still a running assumption that governments would again rescue the biggest banks in the event of another panic.
  • Cash in the S&P 500 (ex-Financials) boosted by strong cash flows, stagnant CapEx.

SP500_CashInv_ExFinancials -Mar 26 14

US ECONOMY & POLITICS

  • U.S. private job growth accelerates in March. Domestic private employers added 191,000 workers in March, the ADP National Employment Report showed. Economists had forecast the ADP jobs report likely showed a gain of 195,000 jobs. Private payrolls for February were adjusted higher to a gain of 178,000 from the previously reported 139,000.
  • U.S. factory orders surge in February. New orders for manufactured goods jumped 1.6 %, the biggest rise since last September. Economists had forecast new orders received by factories rebounding 1.2 % in February.
    • Shipments of new orders increased 0.9 % in February, the largest rise since last July.
    • Orders excluding the volatile transportation category advanced 0.7 % in February, also the biggest gain since last July.
  • U.S. mortgage applications fell last week. The MBA’s mortgage application activity index declined 1.2 % in the week ended March 28. The MBA’s seasonally adjusted index of refinancing applications fell 2.9 %. Fixed 30-year mortgage rates averaged 4.56 % in the week, unchanged from the week before.

EUROPE & WORLD

  • China takes first step to steady economic growth. The Chinese cabinet will accelerate the construction of rail projects that have been approved, and increase the total length of lines being laid this year by 18 % compared to 2013. The government also said it would lower tax rates for smaller companies.
  • German cabinet signs off on minimum wage from 2015. Germany’s cabinet gave the green light on Wednesday to a national minimum wage of 8.50 euros ($11.72) per hour starting next year. The minimum wage is due to apply from 2015 but will not cover minors, trainees and some interns. The ministry expects that 3.7 million employees will get higher wages on Jan. 1, 2015.
  • Lufthansa grounded by three-day pilot strike. A three-day strike by pilots at Lufthansa over early retirement shows no sign of ending. Lufthansa has cancelled 3,800 flights during the strike. Pilots at the airline used to be forced to retire at 60, leaving them with a five-year gap before legal retirement provisions kicked in at 65.
  • Nearly 70 % of Japan households to cut spending post-tax hike. Many policymakers already expect household spending to cool following the tax hike, but how soon it rebounds will be key to whether the economy can make a sustained exit from years of deflation.
  • Philip Morris plans to stop manufacturing cigarettes in Australia by the end of the year, citing government production regulations that restrict its export opportunities. Philip Morris’ sales and production volumes were stable in 2013, despite the introduction of Australia’s plain packaging laws in December 2012.

TODAY in HISTORY

  • Spanish explorer Juan Ponce de Leon landed in Florida (1513)
  • Congress authorized the first U.S. mint, in Philadelphia (1792)
  • President Woodrow Wilson asked Congress to declare war against Germany (1917)
  • Pope John Paul II died (2005)

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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