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Pence Wealth Management Financial Markets Report

US FINANCIAL MARKET

  • U.S. stocks fluctuate at the open on Wednesday as data on economic report and before ECB meeting.
    • Investors are watching data from Europe before a meeting of central bank policy makers. 
    • Fed’s Fisher said that he would favor ending the U.S. central bank’s massive bond-buying program in October, but said he sees no 2014 rate hike.
    • The S&P 500 has rebounded 5.9 percent since a selloff in small-cap and Internet shares spread to the broader market in April.
    • The Index is up 184 percent from its bear-market low in March 2009.
    • The U.S. Justice Department said it will review decades-old agreements that govern songwriter royalties, following court battles between rights holders and the Internet radio company. Pandora shares fell 3.2 percent at the open.
  • Walmart’s ‘Made in USA’ push exposes strains of manufacturing rebirth.
    • When Walmart pledged last year to buy an extra $250 billion in U.S.-made goods over the next decade, it appeared to be just what was needed to help move America’s putative manufacturing renaissance from rhetoric to reality.
    • But suppliers trying to reshore production as part of the initiative by the world’s largest retailer are running into practical problems as they try to restart long-idled corners of U.S. manufacturing.
    • A lot of the tribal knowledge and skill sets are gone because the humans who used to do that work have either retired or died. Trying to rebuild that manufacturing capability, while making products that meet Walmart’s standards, can require companies to “start from scratch”.
    • Walmart’s critics say the company bears some responsibility for the diminished capability of U.S. manufacturers. For years, its relentless insistence that suppliers cut costs prompted companies to shut domestic plants and shift production to low-wage countries.
  • U.S. May car sales jump to 1.6 million, beating expectations.
    • Automakers yesterday reported that industry sales rose 11.3 percent to 1,606,264 vehicles.
    • The top seven automakers beat analysts’ expectations, some by a wide margin. 
    • The annual sales rate in May hit 16.77 million vehicles, the strongest pace since it reached the same level in February 2007.
    • Economists had expected a rate of 16.1 million.
  • Cars that drive themselves could be on the roads four years from now in 2018.
    • Renault-Nissan CEO said the first cars could hit the roads in 2018 in the “pioneer countries” of France, Japan and the US, with commercialization starting across Europe in 2020.
    • Google tested one in Nevada in 2012.
    • Mercedes-Benz developed an S-class limousine that drove in August without any driver input.

US ECONOMY & POLITICS

  • U.S. private hiring slows, trade deficit widens.
    • Private employers added 179,000 jobs to their payrolls in May, the ADP National Employment Report showed.
      • That compared to 215,000 jobs in April and was below economists’ expectations for a gain of 210,000 jobs in May.
      • It was released ahead of the government’s comprehensive employment report on Friday. 
    • The trade gap increased 6.9 percent to $47.2 billion as imports hit a record high.
      • It was the largest deficit since April 2012 and followed a $44.2 billion shortfall in March.
      • When adjusted for inflation, the deficit increased to $53.8 billion from $50.9 billion in March.
      • Trade subtracted almost a percentage point from first-quarter GDP.
      • Imports increased 1.2 percent to an all-time high of $240.6 billion in April. Imports of automobiles, capital goods, food and consumer goods all hit record highs in April.
        • The trade deficit with the European Union was the largest on record, as was the gap with Germany.
        • Imports from South Korea also touched a record high, while Chinese imports rose 16.3 percent.
      • Exports slipped 0.2 percent to $193.3 billion.
  • Nonfarm productivity fell at its sharpest pace in six years in the first quarter as harsh winter weather depressed output, leading to a jump in labor-related production costs.
    • It tumbled at a 3.2 percent annual rate
    • That was the biggest drop since the first quarter of 2008. It had initially been reported falling at a 1.7 percent rate.
    • Workers put in more hours in the first quarter but with output falling, that raised labor costs.
  • Unit labor costs surged at a revised 5.7 percent rate. It was the biggest rise in unit labor costs since the fourth quarter of 2012.
    • Despite the jump last quarter, there was little sign that wage inflation was igniting.
    • Unit labor, the price of labor per single unit of output, costs rose by a revised 1.2 percent compared to the first quarter of 2013.
  • U.S. services sector grows at fastest rate in more than two years.
    • The third straight gain in the services measure shows demand is strengthening as companies add workers and rising stock and home prices give consumers the wherewithal to keep spending.
      • Markit’s final services Purchasing Managers Index (PMI) was 58.1 in May, up from the April read of 55 but below the preliminary reading of 58.4.
        • The employment subindex rose to 52.8 from 51.2, below the initial reading of 53.1.
        • New business growth for the services sector was at its fastest since February 2011.
        • Markit’s composite PMI, a weighted average of its manufacturing and services indexes, hit 58.4 in May, up solidly from April’s read of 55.6. 
      • The Institute for Supply Management’s (ISM) non-manufacturing index increased to 56.3 in May from 55.2 a month earlier.
        • The median forecast of economists called for 55.5.
        • The ISM services survey covers an array of industries including utilities, retailing, health care and finance that make up almost 90 percent of the economy.
  • U.S. mortgage applications fall in latest week.
    • The MBA’s mortgage application activity index, which includes both refinancing and home purchase demand, fell 3.1 percent in the week ended May 30.
    • Fixed 30-year mortgage ratesaveraged 4.26 percent in the week, down 5 basis points from 4.31 percent the week before.
    • The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.

EUROPE & WORLD

  • Euro zone business growth eases in May despite firms cutting prices.
    • Firms cut prices for the 26th straight month.
    • Markit’s Composite PMI, widely seen as a good gauge of growth, dipped to 53.5 in May, shy of a flash reading of 53.9 and below April’s final 54.0.
    • But it held above the 50 mark dividing growth from contraction for the 11th month running.
      • German private sector grows for 13th straight month in May.
      • Markit’s Germany final composite PMI stood at 55.6 in May. It was, however, below April’s reading of 56.1.
  • Japan’s Dai-ichi Life agrees to buy Protective Life for $5.7 billion.
    • Faced with weak growth prospects at home amid Japan’s ageing population, Dai-ichi Life and other Japanese insurers have been buying assets in more dynamic markets from the United States to Southeast Asia.
    • Protective Life, based at the Birmingham, Alabama, ranked 36th among U.S. insurers by premium income.
  • China preparing to cancel tariffs on rare earth exports after a WTO panel branded them discriminatory earlier this year.
    • China is responsible for more than 90 percent of global rare earth production.
    • That gives China a chokehold over the supply of 17 elements with a wide range of uses in high-tech sectors such as defense and renewable energy.
  • U.S. sets new import duties on Chinese solar products.
    • The U.S. arm of German solar manufacturer SolarWorld filed a petition complaining that Chinese manufacturers are sidestepping duties imposed in 2012.

TODAY in HISTORY

  • The Sierra Club, led by John Muir, was incorporated in San Francisco (1892)
  • Henry Ford took his first car out for a test drive (1896)
  • Martha Stewart was indicted on charges of insider trading (2003)

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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