US FINANCIAL MARKET
U.S. Stocks Advance at the open as Fed Spurs Optimism over Economy
- The S&P 500 gained for a sixth day to a fresh record high at the open and on track for a fourth weekly gain over the past five.
- CarMax jumped 15 percent after quarterly results topped forecasts as increased customer traffic boosted vehicle sales.
- Oracle slid 5 percent after reporting profit and sales that fell short of analysts’ estimates.
- The S&P 500 is trading at 16.6 times the projected earnings, up from 15.5 times at the beginning of the year.
- Valuations in the S&P 500 have expanded to 17.9 times current earnings, the highest level since 2010.
- The best U.S. stocks this month are ones that just a few months ago were the biggest losers.
- Investors have reduced hedges on technology stocks amid a renewed confidence in equities.
- Netflix, Tesla, and TripAdvisor have rallied more than 16 percent in the past four weeks.
- The Nasdaq Composite Index reached a 14-year high this week and the Russell 2000 Index is 2 percent from a record. Both fell at least 8 percent earlier in 2014.
- Reports yesterday showed the Fed Bank of Philadelphia’s factory index unexpectedly climbed in June and a Labor Department release showed claims for unemployment benefits dropped more than expected.
AbbVie Weighs Higher Offer After Shire Rejects $46.5 Billion Bid
- AbbVie is considering raising its takeover offer for drugmaker Shire a fourth time.
- Shire said today that its management team had discussions with AbbVie and rejected three offers to buy the company.
- US companies have been looking to acquire rivals in the U.K. and other European countries with lower tax rates to decrease their tax burden to the federal government.
Siemens-Mitsubishi Boosts Alstom Energy Offer to $19.9 Billion
- Siemens and Mitsubishi Heavy lifted the cash component by 1.2 billion euros to 8.2 billion euros, valuing the French company’s energy assets at 14.6 billion euros ($19.9 billion) and raising the stakes in the takeover battle with General Electric.
- GE yesterday refined its bid for Alstom’s energy assets by adding alliances in nuclear technology and rail.
US ECONOMY & POLITICS
Yellen gives the green light for more stock gains
- Federal Reserve chief Janet Yellen signaled that rational exuberance is just fine.
- That, at least, is how some of America’s largest money managers interpreted her comments on Wednesday suggesting interest rates will remain low through 2016.
Housing Market Falters Amid Rising Prices, Lower-Paying Jobs
- The two-year-old U.S. housing recovery is faltering.
- The MBA yesterday lowered its new and existing home sales forecast for 2014 to 5.28 million — a decrease of 4.1 percent that would be the first annual drop in four years.
- The industry group also cut its prediction on mortgage lending volume for purchases to $751 billion, an 8.7 percent decline and the first retreat in three years.
- The median U.S. household income rose less than 1 percent in 2013.
- In April, the median income was $52,959. When adjusted for inflation, that’s almost 6 percent lower than in June 2009.
- High-wage sectors haven’t rebounded either. Compared with 2008, there were 1.6 million fewer people working in manufacturing in May and 340,000 fewer people working in finance, according to government data.
Relaxing Mortgage Borrowing Standards
- The average credit score for borrowers in May who bought homes was 755 on a scale of 300 to 850.
- That compared with 756 in December, the last time it was higher.
EUROPE & WORLD
Canada Inflation Tops 2% Target for First Time Since 2012
- The consumer price index rose 2.3 percent in May from a year ago following April’s 2 percent pace.
- The core rate, which excludes eight volatile products, increased 1.7 percent after a gain of 1.4 percent the prior month.
- Both increases exceeded all forecasts.
- Energy costs rose 8.4 percent in May from a year ago.
- The pace of food inflation quickened to 2.3 percent in May from April’s 1.9 percent pace, led by an 8.0 percent jump in meat prices.
TODAY in HISTORY
- The Great Seal of the United States was adopted (1782)
- The 320-ton Savannah became the first steamship to cross the Atlantic (1819)
- Queen Victoria ascended the British throne (1837)
- West Virginia became the 35th state in the United States (1863)
- Muhammad Ali was convicted of violating Selective Service laws by refusing to be drafted (1967)
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