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Pence Wealth Management Financial Markets Report

US FINANCIAL MARKET

  • S&P 500 climbs to record at the open as employment data tops forecast. Dollar also gains most in 6 weeks after the job report.
  • Chevron’s profit drops on lower production and crude prices. The company posted net income of $4.51 billion compared with $6.18 billion in the year-ago quarter.
    • Chevron’s production fell 2% to 2.59 million barrels of oil equivalent per day (boed).
  • AstraZeneca rejects Pfizer’s raised bid of $106 billion. AstraZeneca’s board said the offer undervalued the company “substantially” and was not an adequate basis on which to engage with its suitor.
  • CVS posted first-quarter profit that missed analyst estimates as cold weather and a mild flu season hurt sales. The company reaffirmed its 2014 forecast.
    • Net income rose to $1.13 billion from $954 million a year earlier. Revenue increased 6.3% to $32.7 billion from $30.8 billion a year earlier, beating the $32.3 billion average of analysts’ estimates
    • CVS previously announced plans to stop selling tobacco products at its more than 7,600 pharmacy stores in the U.S. by October, a potential $2 billion a year sales hit. 
  • LinkedIn’s sales outlook again falls short. LinkedIn forecast 2014 revenue below Wall Street’s expectations, underscoring concerns about its ability to sustain its rapid growth.
    •  The social networking company, which is geared toward connecting professionals with prospective employers expects sales of $2.06 billion to $2.08 billion – up from a previous forecast, but still lagging analysts’ $2.11 billion target.
    •  LinkedIn’s tepid outlook overshadowed a higher-than-expected 46% increase in first-quarter revenue to $473.2 million
    • LinkedIn’s membership rose 8.3% to 300 million worldwide from 277 million.
  • Google faces antitrust lawsuit on U.S. mobile internet search. The lawsuit alleges that Google has expanded its monopoly of the internet search market by pre-loading its applications onto Android mobile devices through its Mobile Application Distribution Agreements. Google said Android and Google can be used independent of each other.
  • EBay settles with U.S. over pact to not poach employees. EBay has agreed to refrain from making deals with other technology companies to not poach each others’ employees and by doing so limit workers’ access to better jobs.
  • ‘Bond King’ Gross suffers twelfth month of Pimco fund outflows. Investors withdrew another $3.1 billion from the world’s largest bond fund in April. The fund has now seen a total of $55.26 billion in net outflows since last May. The Pimco Total Return Fund had $230 billion in assets under management (AUM) at end of April, down from a peak of $292.9 billion in April 2013.

US ECONOMY & POLITICS

  • U.S. payrolls surge, jobless rate hits 5-1/2 year low. Nonfarm payrolls surged 288,000 last month. That was the largest gain since January 2012 and beat Wall Street’s expectations for an increase of 210,000.
    • March and February data were revised to show 36,000 more jobs than previously reported.
    • While the unemployment rate dived 0.4 percentage point to a 5-1/2 year low of 6.3%, part of the decline was because hundreds of thousands of people left the labor force. 
    • The labor force declined by 806,000 people to 62.8%. That was the lowest level since last December.
    • Employment gains in April were broad-based, with the private sector adding 273,000 jobs and government payrolls rising 15,000.
    • Manufacturing employment increased 12,000 after rising by 7,000 in March.
    • Construction payrolls gained 32,000. That followed an increase of 17,000 jobs in March. 
    • One cloud in today’s employment report is worker pay is stagnating. Average hourly earnings held at $24.31 in April, and were up 1.9% over the past 12 months, the smallest gain this year.
  • U.S. factory orders up and durable goods revised higher. New orders for manufactured goods increased 1.1%. Economists had forecast new orders received by factories advancing 1.4% in March.
    • February’s orders were revised to show a 1.5% rise instead of the previously reported 1.6% gain.
    • Orders excluding the volatile transportation category rose 0.6%.
  • Fed seen hiking rates in June 2015 as U.S. job creation surges. Traders bet that the rosier jobs picture could prompt the Fed, which has kept rates near zero for more than five years. The contracts show markets are assigning a roughly 50 chance of a first Fed rate hike in June 2015. Before the report, they showed traders gave a first rate hike in June 2015 only about a 47% chance.
  • Seattle’s Mayor proposed a $15-an-hour minimum wage that would be the highest of any big U.S. city. The wage would be phased in over three to seven years. Murray’s proposal is 61% more than the present $9.32 hourly minimum wage in Washington state. 
  • Million-dollar homes in the U.S. are selling at double their historical average while middle-class property demand stumbles, showing that the housing recovery is mirroring America’s wealth divide. Purchases costing $1 million or more rose 7.8% in March from a year earlier. Million-dollar-plus homes made up 2% of deals in February, about the same proportion as in 2008. While demand from the super-rich began to rebound in 2012, with investors from countries such as China and Russia scooping up the most expensive U.S. homes, the lower end of the luxury market has surged in the past year.

 EUROPE & WORLD

  • RBS first-quarter profit trebles. Royal Bank of Scotland reported a net profit of 1.2 billion pounds ($2 billion), up from 400 million the year before, benefiting from improved cost controls and a reduction in losses from bad loans.
  • Japan’s consumption hangover begins as car sales decline. Vehicle deliveries last month in Asia’s second-largest auto market fell to the lowest since December 2012 after Japan raised its consumption tax for the first time 17 years. Total sales fell 5.5% to 345,226.
  • Canada: energy superpower in waiting. Canada lessens its reliance on the US for oil exports. Today, Canada has the world’s third largest crude oil reserves.

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TODAY in HISTORY

  • The Soviet Union announced the fall of Berlin (1945)
  • Nelson Mandela was victorious in South Africa’s first multiracial election (1994)
  • U.S. troops and CIA operatives shot and killed Osama bin Laden in Abbottabad, Pakistan (2011)
  • A pastel version of The Scream, by painter Edvard Munch, sold for $120 million in a New York City auction. The transaction set a new world record for an auctioned piece of art (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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