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Pence Wealth Management Financial Markets Report

US FINANCIAL MARKET

  • U.S. stocks opened lower on Friday as a number of bellwether names, including Amazon and Ford, fell following their quarterly results, overshadowing positive numbers from Microsoft.
    • Of the 239 companies that have released results this season, 75 percent have exceeded analysts’ profit estimates, while 53 percent have beaten sales projections, data compiled by Bloomberg show.
    • Investors turned attention to geopolitical developments today after U.S. Secretary of State John Kerry late last night warned Russia President Vladimir Putin he’s running out of time to ease tension in Ukraine. 
  • Amazon’s revenue increases even as spending rises. Global unit sales rose 23 percent to $19.74 billion, boosted by North American sales. This beat the average Wall Street estimate of $19.4 billion. Amazon’s international unit, which accounts for 40 percent of sales, continued to be a drag as sales growth slowed to 18 percent during the quarter.
    • Net income was $108 million, up from $82 million a year ago.
    • Amazon spending hailed by investors as Bezos touts growth. Amazon is pouring cash into expanding Amazon’s business at the expense of profits. Amazon indicated spending wouldn’t decelerate anytime soon, with a forecast for an operating loss of $55 million to $455 million for the current quarter.
    • Total operating expenses were $19.6 billion, rising from $15.9 billion a year ago. In particular, fulfillment expenses climbed 29 percent to $2.3 billion while technology and content costs jumped 44 percent to $2 billion.  
    • The company is building more warehouses to speed shipments, while adding new services like a grocery-delivery program and a TV set-top box for streaming movies and TV shows to compete with Apple and Netflix.
    • Amazon has 244 million active customer accounts.
  • Microsoft beats Wall Street on new CEO debut. Microsoft reported lower quarterly profit of $5.66 billion compared with $6.05 billion in the year-ago quarter due to falling computer sales.
    • Sales fell 0.4 percent to $20.4 billion, meeting analysts’ average estimate. Personal computer sales fell by as much as 4.4 percent in the quarter.
    • CEO’s emphasis on cloud computing helped its server software business, while a softer-than-expected decline in PC sales limited damage to the bottom line.
  • Starbucks raises profit forecast as new foods help sales. Net income in the second quarter climbed 9.4 percent to $427 million from $390.4 million a year earlier. Revenue rose 9.1 percent to $3.87 billion, while analysts estimated $3.95 billion, on average.
    • The company has about 20,100 stores globally.
  • Visa says revenue growth to slow and Russia sanctions hurting volumes. Visa’s quarterly revenue growth slid to a single digit in percentage terms for the first time in more than four years, due to a strong U.S. dollar. Visa has 100 million cards in Russia. The company’s revenue growth slowed to 7 percent in the second quarter from 11 percent in the first quarter. 
    • Total operating revenue increased to $3.16 billion from $2.96 billion. Analysts on average had expected a revenue of $3.19 billion. 
    • Net income rose 26 percent from a year earlier to $1.60 billion in the second quarter.
    • Visa said it expected full-year revenue to grow 10-11 percent.  A strengthening U.S. dollar will continue to weigh on earnings growth in the next quarter.
  • Ford profits driven down by North America and warranty costs. Net income fell 39 percent to $989 million from $1.61 billion in the year-earlier period.
    •  The quarter included the $400 million in additional costs for warranty reserves in North America for vehicles from as early as the 2001 model year, and $100 million in costs related to higher freight and other items due to the quarter’s harsh winter in North America.
    • First-quarter automotive sales were little changed at $33.9 billion as Ford cut North American production by 1.8 percent during the period to 770,000 cars and trucks. The average estimate for total first-quarter automotive revenue was $34.2 billion.
  • Colgate-Palmolive profit drops 16 percent as Venezuelan bolivar pinches. Colgate, which controls nearly 45 percent of the global toothpaste market, said net profit fell to $388 million in the quarter from $460 million a year earlier, hurt by a one-time charge related to the fall in value of the Venezuelan bolivar. Sales rose marginally to $4.33 billion, slightly above the average analyst estimate of $4.32 billion.
  • Cable companies are matching competitors’ pricing and unveiling new technology, like Comcast’s X1 set-top box, to keep customers in the fold. The battle among cable, phone and satellite providers is growing more intense as the pool of potential customers shrinks.
    • About 97 percent of U.S. households already subscribe to pay-TV, and younger viewers are increasingly shunning those bills and instead watching video online.
    • Last year, the number of Americans paying for television fell for the first time. The industry lost 251,000 customers to about 100 million, according to research firm SNL Kagan.
  • U.S. prosecutors are seeking more than $13 billion from Bank of America to resolve federal and state investigations of the lender’s sale of bonds backed by home loans in the run-up to the 2008 financial crisis, according to people familiar with the matter. The settlement would come on top of the $9.5 billion the bank agreed last month.
  • The cash pile reached $2.02 trillion in the latest quarterly filings of 2,300 non-financial companies in the Russell 3000 Index, according to the data compiled by Bloomberg as of April 21.

US ECONOMY & POLITICS

  • U.S. consumer sentiment up more than expected in April. The Thomson Reuters/University of Michigan’s U.S. consumer sentiment rose to 84.1, beating an expectation of 83.0 and up from 80.0 the month before.
    •  The survey’s barometer of current economic conditions rose to 98.7, its highest reading since July 2007, from 95.7 in March and above a forecast of 97.2.
    • The survey’s gauge of consumer expectations rose to 74.7 in April from 70.0 in March and above an expected 73.7.
  • U.S. services sector expands at slower pace in April. Markit’sservices Purchasing Managers Index (PMI) hit 54.2 in April compared with March’s final reading of 55.3.
    • The services sector added employees at the slowest rate in almost two years, with the employment subindex at 51.0, its lowest since June 2012, down from 51.8 last month.
  • Markit’s “flash” composite PMI, a weighted average of its manufacturing and services indexes, hit 54.9 in April versus 55.7 in March. It was below the average for the first quarter of this year, which was 55.3.
  • New report calls U.S. a ‘rising star’ of global manufacturing. A new ranking of the competitiveness of the world’s top 25 exporting countries says the United States is once again a “rising star” of global manufacturing thanks to falling domestic natural gas prices, rising worker productivity and a lack of upward wage pressure.
    • The report, released on Friday by the Boston Consulting Group (BCG,) found that while China remains the world’s No. 1 country in terms of manufacturing competitiveness, its position is “under pressure” as a result of rising labor and transportation costs and lagging productivity growth.
    • The United States, meanwhile, which has lost nearly 7.5 million industrial jobs since employment in the sector peaked in 1979 as manufacturers shipped production to low-cost countries, is now No. 2 in terms of overall competitiveness, BCG said.
    • The biggest factor driving the U.S. rebound, according to BCG: cheap natural gas prices, which have tumbled 50 percent over the last decade as a result of the shale gas revolution.
    •  “Overall costs in the U.S.,” the report’s authors write, “are 10 to 25 percent lower than those of the world’s ten leading goods-exporting nations other than China” and on par with Eastern Europe.
    • Another standout in the rankings is Mexico, which BCG categorizes as a “rising star” with lower average manufacturing costs than China. But the country failed to make BCG’s list of Top 10 manufacturers because of other factors, including rampant crime and corruption.
  • Here is BCG’s ranking of the world’s Top 10 countries in terms of manufacturing competitiveness:
1 China
2 United States
3 South Korea
4 United Kingdom
5 Japan
6 Netherlands
7 Germany
8 Italy
9 Belgium
10 France

EUROPE & WORLD

  • Airbus eyes regional plane with hybrid engines in 15-20 years. The development of a regional plane, seating between 70 and 90 people, that can take off and land using electric power could take between 15 and 20 years, Airbus Group Chief Technology Officer Jean Botti told reporters in Munich.
  • Russia debt rating cut to step above junk at S&P. S&P cut Russia’s rating one step to BBB-, it said in a statement today.

TODAY in HISTORY

  • New York became the first state to require license plates on cars (1901)
  • British, Australian, and New Zealand forces landed at Gallipoli (1915)
  • Delegates met in San Francisco to organize the United Nations (1945)
  • The Francis Crick and James Watson article describing the double helix of DNA is published in the magazine Nature (1953)

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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