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Pence Wealth Management Financial Markets Report

US FINANCIAL MARKET

  • U.S. stocks rose at the open, with the S&P 500 Index poised for a record close before the holiday weekend, as HP rallied and data showed purchases of new U.S. homes climbed in April for the first time in three months.
    • The S&P 500 is trading at 17.4 times reported earnings, near the highest level since 2010. Of the 489 S&P 500-listed companies that have released results this season, 75 percent have beaten estimates for profit, while 53 percent have exceeded projections for revenue.
    • U.S. companies see smaller lift from stock buybacks.
    • Corporate buybacks have been strong in recent years, but higher stock valuations reduce the lift companies get from their repurchases.
    • As economic growth improves, companies are more likely to invest in longer-term projects, such as capital expenditures.
  • Visa and MasterCard to stay in Russia, help create payment system.
    • Visa and MasterCard stopped serving several Russian banks after the United States imposed sanctions over the annexation of Crimea in March.
  • Coca-Cola to launch ‘glacéau smartwater’ in Britain.
    • Coca Cola aimed at the country’s 1.4 billion pound ($2.4 billion) bottled water market, a decade after its Dasani brand failed in the region.
    • Coca-Cola GB, which also owns Fanta, Sprite and Dr Pepper, will spend 3 billion pounds to promote the launch in August.
    • Coca-Cola, which has 106 water brands, already sells glacéau vitaminwater, a range of fruit-flavored drinks, in Britain.
  • After reporting an 11th straight quarter of declining sales, HP’s CEO Meg Whitman is propping up profit by paring as many as 16,000 more employees, on top of 34,000 already announced.
    • Consumers are buying fewer personal computers and printers as they embrace smartphones and tablets, and companies are opting to use more software via the Internet or building their own machines.
    • Sales fell 1 percent to $27.3 billion in its fiscal second quarter, just shy of the $27.41 billion Wall Street had expected.
    • Net income rose 18 percent to $1.27 billion from $1.08 billion a year earlier.
    • Whitman said China remained a challenging region, though revenue from that country rose in the quarter.
    • Quarterly global PC shipments fell 4.4 percent to 73.4 million units. Hewlett-Packard’s market share rose to 16 percent, making it the No. 2 vendor after Lenovo.
  • U.S. air safety board urges more battery tests for Boeing 787.
    • The NTSB said it sought “to urge the FAA to take action” on its five recommendations, which include seeking advice from independent experts on new technologies well before they’re authorized for use on aircraft.
  • GE agrees to extend its $16.9 billion bid deadline on Alstom to June 23.
    • GE has encountered resistance from the French government, which has sought to encourage Germany’s Siemens as a potential rival bidder.
  • U.S. states probe eBay cyber-attack as customers complain. Connecticut, Florida and Illinois said they are jointly investigating the matter. 
    • Details about what happened are still unclear because eBay has provided few details about the attack. It is also unclear what legal authority states have over eBay’s handling of the matter.
  • T-Mobile overtakes Sprint as No. 3 smartphone buyer in U.S.
    • T-Mobile bought 6 million smartphones in the first quarter, compared with Sprint’s 5 million.
    • While T-Mobile still trails Sprint in total subscribers, the numbers show that T-Mobile’s price cuts and promotions are working.
    • Smartphones account for 87 percent of total handsets in the U.S. but their numbers are growing at a crawling pace. 
    • Apple and Samsung captured more than two-thirds of the smartphone purchases in the quarter, with Android making up 59 percent of shipments.
    • Apple phones were more popular with the two largest carriers, AT&T and Verizon, while Samsung was the best performing brand at T-Mobile.
  • Comcast ‘Goliath’ seen buoyed by AT&T-DirecTV in review.
    • Comcast’s $45 billion takeover of Time Warner Cable, announced in February, and AT&T’s May 18 deal to buy DirecTV for $48.5 billion are part of a wave of merger activity in the telecommunications industry.
    • Companies are looking to get bigger to keep pace with surging broadband growth that requires faster Internet speeds and new methods of transmitting video on all devices.

US ECONOMY & POLITICS

  • Housing sector turning the corner.
    • New home sales rebound, inventories at 3-1/2 year high.
    • Sales increased 6.4 percent to a seasonally adjusted annual rate of 433,000 units, ending two straight months of declines.
  • Economists had forecast new home sales at a 425,000-unit pace last month.
    • According to Freddie Mac, the fixed 30-year mortgage rate fell to an average of 4.14 percent this week, a near seven-month low.
    • The inventory of new houses on the market increased 0.5 percent to 192,000 units, the highest level since November 2010. 
  • At April’s sales pace it would take 5.3 months to clear the supply of houses on the market, down from 5.6 months in March. 
    • With inventories improving, the median price of a new home last month fell 1.3 percent to $275,800 from April last year.
    • Declining borrowing costs and greater employment opportunities raise the prospects for an industry that has struggled to build on gains made earlier last year.
    • A pickup in construction that puts more properties on the market and slows price gains would help improve affordability and attract buyers.
  • California’s $68 billion train seeks bond sale approval.
    • The California High-Speed Rail Authority will seek to get its plans for the first U.S. bullet-train back on track today when it asks an appeals court for approval to issue $8 billion in bonds to finance the project.
    • The agency suffered a setback in November when a state judge blocked it from issuing bonds because a committee didn’t adequately disclose the reasons for the financing. 

EUROPE & WORLD

  • German domestic demand reliance shows uneven EU recovery.
    • Economic growth in the first quarter was driven exclusively by internal demand. Domestic consumption climbed 1.9 percent from the fourth quarter and construction surged 3.6 percent.
  • Putin says Russia will work with new Ukrainian president.
    • Russia and China have agreed on a $25 billion prepayment under a supply deal signed earlier this week.
    • Russia and China signed a 30-year gas supply contract, worth a total of more than $400 billion, earlier this week.
    • Putin says Russia may become swing gas producer for Europe and Asia.
  • China’s economy entered ‘manageable slowdown’ – central bank chief.
    • China’s economy has lost steam this year with growth falling to an 18-month low of 7.4 percent in the first quarter.
    • Analysts expect the economy to grow 7.3 percent this year, a level unseen in 24 years.

TODAY in HISTORY

  • Joan of Arc was captured by the Burgundians and subsequently sold to the English (1430)
  • South Carolina became the 8th state in United States (1788)
  • The Baltimore and Ohio Railroad began the first passenger service in the United States (1830)
  • The New York Public Library, at the time the largest marble structure ever built in the United States, was dedicated by President Taft in New York City after 16 years of construction (1911)
  • The German Federal Republic came into existence (1949)

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. Sources: Reuters, Bloomberg.

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