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Pence Wealth Management Financial Markets Report

US FINANCIAL MARKET

  • Stocks rose at the open on Monday, following a sharp selloff last session, with earnings results from Citigroup and strong retail sales data lifting sentiment while traders kept tabs on the possible escalation of hostilities in Ukraine.
    • Edwards Lifesciences gained 15% at the open after a court ruled to limit U.S. sales of peer Medtronic’s CoreValve system.
    • Coca-Cola, Goldman Sachs, Yahoo!, Google and GE are among companies scheduled to report later this week. 
    • The S&P 500 is down 3.4% from a record on April 2 amid concern valuations may be too high as earnings season begins. The Nasdaq Composite trades at 35 times reported earnings of the companies in the index. That’s double the ratio for the S&P 500, which trades at about 17 times earnings.
  • Citigroup profit rises on smaller loss from troubled assets. First-quarter net income climbed 3.5% to $3.94 billion from $3.81 billion a year earlier. Revenue dropped 1% to $20.12 billion, but this beat the average estimate of $19.37 billion.
  • Twitter says co-founders, CEO have no plans to sell stock. Jack Dorsey and Evan Williams are hanging onto their stakes through the company’s May 5 expiration of its share lockup.
  • TIAA-CREF agreed to buy Nuveen Investments from Madison Dearborn Partners for $6.25 billion, propelling the manager of teachers’ retirement savings into the top 20 of U.S. mutual-fund firms.
    • Madison Dearborn purchased Nuveen almost seven years ago for $5.75 billion, in what was then the largest buyout of a U.S. asset manager. TIAA-CREF will add $221 billion in assets, bringing its funds under management to about $800 billion. 
  • Price of new hepatitis C drugs not so daunting after all. While the $84,000 price of Gilead Sciences’ Sovaldi has riled lawmakers and public health advocates, doctors say this new generation of hepatitis C drugs may actually help cut costs.
    • In studies presented at the International Liver Congress in London this weekend, drugmakers including GileadAbbVieMerck and Bristol-Myers showed that their latest medicines can achieve sustained cure rates approaching 100%, rendering obsolete an older generation of products with daunting side effects. That will mean shorter treatment, and fewer follow-up medicines and hospital visits, doctors said.

US ECONOMY & POLITICS

  • Bullish U.S. March retail sales brighten growth outlook. Retail sales increased in March as Americans bought more cars, clothing and garden supplies, helping the economy recover from a weather-depressed start to the year. 
    • Retail sales increased 1.1% last month, the biggest rise since September 2012, as receipts rose in nearly all categories. Economists had forecast retail sales advancing 0.8% last month. 
    • Retail sales, which account for a third of consumer spending, had risen by a revised 0.7% in February.
    • So-called core retail sales, which strip out automobiles, gasoline, building materials and food services, and correspond most closely with the consumer spending component of GDP, increased 0.8% in March. That followed a revised 0.4% rise in February. 
  • Obama’s shrinking budget deficits silence foreign fiscal critics. The Congressional Budget Office is projecting the 2014 deficit will be the lowest in six years and down more than 60% from the record $1.4 trillion in 2009. 
    • The deficit will shrink to $514 billion this year from $680 billion in 2013, according to the CBO, which is projecting a gap of $478 billion in 2015. After that, the deficit will start rising every year, reaching $1 trillion by 2022. The increase will be driven by “dramatically” rising Medicare and Social Security payments needed to care for an aging society.
    • The U.S. has received about $80 billion more in income taxes this fiscal year than it had 12 months earlier. Revenue increased 16% to $215.8 billion from $186 billion in March 2013. Spending totaled $252.7 billion, down 13.6%.
    • Corporate tax revenue may climb further as accelerating growth and declining unemployment boost sales and earnings. 
  • U.S. mortgage lending is contracting to levels not seen since 1997. Wells Fargo and JPMorgan, the two largest U.S. mortgage lenders, reported a first-quarter plunge in loan volumes that’s part of an industry-wide drop off.
    • Lenders made $226 billion of mortgages in the period, the smallest quarterly amount since 1997 and less than one-third of the 2006 average.
    • Lenders also are tightening credit standards, requiring higher FICO scores. More than 40% of borrowers in 2013 had scores above 760, compared with about 25% in 2001.
    • Private-equity firms, hedge funds, real estate investment trusts and other institutional landlords have spent more than $20 billion to buy as many as 200,000 rental homes in the last two years. They snapped up properties after prices fell as much as 35% from the 2006 peak and rental demand rose from the almost 5 million owners who went through foreclosure since 2008.

 EUROPE & WORLD

  • World’s highest minimum wage on ballot in Switzerland. The Swiss will vote in a national referendum May 18 on whether to create a minimum wage of 22 francs ($25) per hour, or 4,000 francs a month. While about 90% of workers in Switzerland already earn more than that. About 10% of Switzerland’s full-time workforce receive a pretax wage of less than 4,000 francs. When adjusted for purchasing power, the Swiss proposed wage would amount to $14.01 an hour
  • World trade picture improves but 2014 still below trend. The World Trade Organization (WTO) slightly raised its 2014 forecast for growth in global goods trade to 4.7%, saying it did not expect a return to the historical trend level of 5.3% until 2015. The dollar value of global services exports grew 6% to $4.6 trillion in 2013, against two% growth in 2012.
  • German finance minister sees no sign of deflation spiral in Europe.
  • Draghi says a stronger euro would trigger looser ECB policy. The issue of weak euro zone inflation took center stage at meetings of top finance ministers and central bankers on Saturday. “The IMF is recommending more monetary easing to the ECB, and rightly so,” said Brazil’s finance minister. Over the past 12 months, the euro has strengthened by nearly 5.5% against the dollar and by nearly 10% against the yen.
  • EU weighs tougher Russian sanctions amid Ukraine unrest. EU foreign ministers, meeting today in Luxembourg, said the bloc should be prepared to impose a third round of sanctions, including economic measures.
  • Ukraine suspends gas payments to Russia until talks conclude. Russian gas giant Gazprom earlier this month increased gas price for Ukrainian consumers to $485 per 1,000 cubic meters from $268 for the first quarter, saying Kiev was no longer eligible for previous discounts. Kiev gets about half of its gas from Moscow and a large proportion of Europe’s gas is pumped from Russia via Ukraine.
  • Australian pensions with a $1.8 trillion assets seek Google and Disney. The pension either bought or increased its stakes in Google, Walt Disney, Visa, UPS and Honeywell International in the 12 months to June.

TODAY in HISTORY

  • Noah Webster copyrighted the first edition of his dictionary (1828)
  • The first pony express rider reached his destination of San Francisco. He left St. Joseph, Mo., on April 3 (1860)
  • Abraham Lincoln was assassinated by John Wilkes Booth (1865)
  • Titanic hit the iceberg that would sink her the next morning (1912)

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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