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Pence Wealth Management Financial Markets Report

US FINANCIAL MARKET

  • U.S. stocks rose at the open on Thursday on expectations of strong growth in the second quarter, even as data showed the world’s largest economy contracted in the first quarter.

o    The U.S. economy contracted for the first time in three years.

o    The U.S. 10-year note yield ticked up after the data but was still near its lowest in 11 months, pressured by expectations of further easing from the ECB next week.

o    Low yields could continue to entice investors into dividend-paying stocks, with the high-yielding utilities sector widely outperforming the S&P 500 benchmark so far this year.

  • Apple will buy Beats for about $3 billion and bring recording mogul Jimmy Iovine into its ranks.

o    As expected, Beats co-founders Iovine and rapper Dr. Dre will join Apple as part of the acquisition.

o    Beats has five month-old music service. Streaming subscriptions jumped 51 % in 2013 to $1.1 billion, out of $15 billion spent on music. Meanwhile, downloads slipped 2.1 %.

  • Boeing 787 receives U.S. approval for expanded flying.

o    The approval, known as ETOPS, will allow airlines to fly routes that are up to 330 minutes, or 5-1/2 hours, away from a landing field, versus the 180-minute, or three-hour, limit in place since the Dreamliner was launched in 2011.

o    The FAA approval formally applies only to U.S. carriers, and within that group only United Airlines now operates the 787.

  • Deutsche Telekom agrees Softbank’s plan to buy T-Mobile.

o    Softbank Chairman Masayoshi Son proposed the buyout in a meeting with top executives of T-Mobile and Deutsche Telekom in mid-May, for an estimated $50 billion price tag.

o    Deutsche Telekom owns a 67-% stake in T-Mobile.

  • Tyson offers to buy Hillshire for $6.13 billion.

o    Tyson said it would offer $50 per share, representing a premium of about 11 % to Hillshire’s closing on Wednesday.

o    The offer comes two days after Pilgrim’s offered to buy Hillshire in an all-cash deal valued at $6.4 billion.

  • Samsung unveils prototype health band with cloud service.

o    The company demonstrated the device called the Simband, which can measure health indicators like heart rate and blood pressure, at an event yesterday in San Francisco.

  • Dish Network said subscribers will soon be able to pay their bills using bitcoin, the online virtual currency that’s drawn scrutiny from regulators.

o    The satellite-TV company, which has more than 14 million customers.

US ECONOMY & POLITICS

  • U.S. economy contracts in first-quarter, but labor market firming.

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  • The Commerce Department revised down its growth estimate to show GDP shrinking at a 1.0 % annual rate. GDP growth was initially estimated to have expanded at a 0.1 % rate.

o    The decline in output was sharper than Wall Street’s expectations for a 0.5 % contraction pace.

o    But the decline in output does not appear to have persisted into the second quarter and the factors that held down the economy are temporary. The government, however, gave no details on the impact of the weather.

o    The worst performance since the first quarter of 2011 reflected a far slower pace of inventory accumulation and a bigger than previously estimated trade deficit.

o    The economy should rebound strongly as they fade. Economists estimate severe weather could have chopped off as much as 1.5 percentage points from GDP growth.

  • Businesses accumulated $49.0 billion worth of inventories in the first three months of the year, far less than the $87.4 billion estimated last month. It was the smallest amount in a year and left inventories subtracting 1.62 percentage points from first-quarter growth.
  • While the decline in exports was not as severe as initially thought, import growth was stronger. That resulted in a trade deficit that sliced off 0.95 percentage point from GDP growth.
  • A measure of domestic demand that strips out exports and inventories expanded at a 1.6 % rate, rather than a 1.5 % rate, indicating underlying strength in the economy.
  • Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 3.1 % rate. It was previously reported to have advanced at a 3.0 % pace.

o    A pickup in receipts at retailers, stronger manufacturing and faster job growth indicate the first-quarter setback will prove temporary as pent-up demand is unleashed.

o    The economy in the second quarter will expand at a 3.5 % rate, according to the median projection of 72 economists surveyed by Bloomberg.

  • The number of Americans filing new claims for unemployment benefits fell more than expected last week.

o    First-time applications for state unemployment benefits declined 27,000 to a seasonally adjusted 300,000 last week.

o    The four-week moving average for new claims hit its lowest level since August 2007. That added to signs of strength in the jobs market.

  • U.S. pending home sales show signs of stabilizing.

o    Pending Home Sales Index, based on contracts signed last month, increased 0.4 % to 97.8. The increase was below economists’ expectations for a 1.0 % advance.

EUROPE & WORLD

  • Asian shares at one-year high, bonds fly high on ECB hopes.

o    Measures being prepared by the ECB are likely to include cutting the deposit rate into negative territory.

  • Japan April retail sales tumble after tax hike, rebound may take time.

o    The 4.4 % annual decrease in retail sales was more than the median estimate for a 3.3 % decline.

o    In one encouraging sign, declines in sales of apparel and toiletries were limited, which suggests consumer spending will pick up in May in line with the Bank of Japan’s scenario, but there are worries that a recovery in durable goods could take more time.

  • China fines Johnson & Johnson and others for price fixing.

o    Johnson & Johnson, Bausch & Lomb and other major producers have been fined more than 19 million yuan ($3.04 million) for fixing prices in China’s eye glass and contact lens market.

  • Malaysia Muslim groups call for boycott of Cadbury, Mondelez foods after pork traces.

o    Cadbury Malaysia said the authorities were running more tests and would announce the results within a week.

TODAY in HISTORY

  • Patrick Henry bitterly denounced the Stamp Act in the Virginia House of Burgesses (1765)
  • Rhode Island became the 13th state in the United States, the last of the original colonies to ratify the Constitution (1790)
  • Wisconsin became the 30th state in the United States (1848)
  • John F. Kennedy was born in Brookline, Mass (1917)
  • Edmund Hillary and Tenzing Norgay became the first to reach the summit of Mount Everest (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. Sources: Reuters, Bloomberg.

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