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Pence Wealth Management Financial Markets Report

US FINANCIAL MARKET

  • Wall Street edged lower at the open on Tuesday as investors hesitated to push the market higher, with major indexes near record levels.\

o    The dollar fell to a 6 1/2-month low on Tuesday as investors looked past signs the U.S. economy is emerging from a winter-induced slowdown and focused on the improving picture in Europe.

  • BOEING HAS REACHED AGREEMENT WITH THE U.S. NAVY ON A MULTIBILLION-DOLLAR CONTRACT for 47 more F/A-18 fighter jets and EA-18G electronic attack planes funded in fiscal years 2013 and 2014, and is “very close” to signing a contract.
  • BAYER WINS MERCK’S $14 BILLION CONSUMER UNIT AUCTION. The transaction will make Bayer the second biggest over-the-counter drugs maker after Johnson & Johnson.

o    J&J commands about 4% of the consumer health market – worth nearly $200 billion at the retail level.

o    Merck has around 1% with brands including Dr Scholl foot care, Coppertone sunscreen and Claritin allergy medicine.

o    OTC drugs units carry far lower margins than prescription drugs businesses but many drug majors regard them as attractive complements due to the stable stream of cash they can generate.

  • FRANCE’S HOLLANDE SAYS GE MUST IMPROVE ALSTOM BID. Alstom said last week it was reviewing a binding $16.9 billion bid from GE for its energy arm, although it has not turned down a rival offer from Germany’s Siemens.
  • OFFICE DEPOT TO CLOSE 400 U.S. STORES over two years. The company said it would shut 150 stores this year. The store closures are a part of the company’s plan to consolidate operations after the acquisition of OfficeMax in November. Office Depot had 1,900 U.S. stores as of March 29.
  • AIG’S FIRST-QUARTER PROFIT FELL 27% as claims costs climbed at the property-casualty business. Net income declined to $1.61 billion.
  • TWITTER FELL TO ITS LOWEST SINCE DEBUTING IN NOVEMBER as more shares became available from insiders who got their first chance to sell since the company’s initial public offering. 480 million shares from insiders became eligible for sale today.
  • COCA-COLA AND PEPSI TO REMOVE CONTROVERSIAL DRINK INGREDIENT. Coca-Cola plans to remove brominated vegetable oil from all its U.S. drinks by the end of this year, abandoning an ingredient that has been targeted by food activists.
  • PREMATURE WITHDRAWALS FROM RETIREMENT ACCOUNTS SUCH AS 401(K) HAVE BECOME AMERICA’S NEW PIGGY BANK. The IRS collected $5.7 billion in 2011 from penalties, meaning that about 4% of Americans took out about $57 billion from retirement funds before they were supposed to.

o    The median size of a 401(k) is $24,400 as of March 31, with people older than 55 having $65,300, according to Fidelity Investments.

o    Adjusted for inflation, the government collects 37% more money from early-withdrawal penalties than it did in 2003.

US ECONOMY & POLITICS

  • U.S. TRADE DEFICIT NARROWS IN MARCH AS EXPORTS REBOUND. The trade gap fell 3.6% to $40.4 billion. February’s deficit was revised to $41.9 billion from a previously reported $42.3 billion.

o    Economists had forecast the trade deficit falling to $40.3 billion in March.

o    EXPORTS increased 2.1% to $193.9 billion in March.

o    IMPORTS rose 1.1% to $234.3 billion in March, the highest level in two years, in part reflecting a rise in the price of petroleum.

o    Goods and services sold to CHINA increased 9.6%, while imports from that country advanced 1.6%.

o    Trade subtracted 0.83 percentage point from GDP growth in the first quarter, helping to hold down the economy to a 0.1% annual growth rate.

  • U.S. ECONOMY TO SEE FASTER GROWTH AFTER WINTER FREEZE, the OECD said. The OECD forecast U.S. GDP expanding at a 3.9% annual pace this quarter.

o    Growth is expected to average 2.6% this year and quicken to 3.5% in 2015, the OECD also said,as gains in asset prices boost household wealth and the drag from fiscal policy continues to lighten.

o    In November, it forecast growth of 2.9% and 3.4%.

EUROPE & WORLD

  • THE WORLD ECONOMY WILL EXPAND 3.4% THIS YEAR INSTEAD OF THE 3.6%predicted in November, the OECD said.

o    China will grow 7.4%, down from a previous projection of 8.2%.

  • UK SERVICES HIT 2014 HIGH, HOUSE PRICES IN FOCUS. The pound jumped to its highest level against the dollar in nearly five years after the Markit/CIPS survey came.

o    The Markit/CIPS services purchasing managers’ index (PMI) rose to 58.7 in April from 57.6 in March, far above the 50 threshold for growth.

  • Euro zone Markit Composite Purchasing Managers’ Index (PMI) pointed to second-quarter growth of 0.5%, which would be the strongest in three years.

TODAY in HISTORY

  • The Universal Exposition opened in Paris, marking the completion and dedication of the Eiffel Tower (1889)
  • The German airship Hindenburg blew up and burst into flames at Lakehurst, N.J. (1937)
  • Dictator Joseph Stalin became the premier of Russia (1941)
  • The Chunnel between England and France officially opened (1994)
  • Scotland elected its first separate parliament in three centuries (1999)

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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