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U.S. STOCKS SLIDE AMID MIXED ECONOMIC DATA

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US FINANCIAL MARKET | US ECONOMY & POLITICS
 EUROPE & WORLD | TODAY IN HISTORY

DAILY MARKET REPORTS

  • Wall Street indexes fell on Tuesday as investors worried about a lack of progress in U.S.-China trade talks and Treasury yields rose after U.S. retail sales data indicated rising inflation.
  • The United States and China are still “very far apart” on resolving trade frictions, U.S. Ambassador to China Terry Branstad said, as a second round of high-level talks were set to begin in Washington.
  • U.S. retail sales increased a moderate 0.3% in April, as rising gasoline prices weighed on discretionary spending.
  • China, meanwhile, reported mixed results for business activity, adding to signs of cooling in the world’s second biggest economy. Industrial output quickened last month from a year earlier, but investment and retail sales slowed.

US FINANCIAL MARKET

Home Depot misses comparable-sales forecasts as spring selling dips

  • Home Depot missed Wall Street forecasts for sales at established stores, as an unusually long winter hit sales of typical spring products like lawn-mowers and patio furniture.
  • Sales at Home Depot stores open for more than a year rose 4.2% in the quarter, missing expectations for the first time in seven quarters. Analysts on average had expected a 5.4% rise.
  • U.S. comparable-store sales also fell short of expectations, and customer traffic dipped 1.3%, which the retailer attributed to cooler than usual weather in February, March and April in some parts of the United States.
  • Home Depot’s total net sales rose 4.4% to $24.95 billion, but fell short of expectations of $25.16 billion.
  • Net earnings rose 19.4% to $2.40 billion in the first quarter, edging past expectations.
  • Still, the company maintained its forecast for 2018 sales and earnings.

CBS Ups Stakes in Feud with Redstones

  • CBS moved to break free from the Redstone family’s grip and thwart what it fears would be a forced merger with Viacom, escalating a years-long power struggle over the fate of the two media giants.
  • CBS filed a lawsuit Monday against the family holding company and invoked a little-known provision in the CBS corporate charter that it claims would allow it to issue voting shares to all stockholders, significantly diluting the voting power that the Redstones have held over CBS for nearly two decades.
  • CBS and the committee say they are seeking to prevent the Redstones and their company from breaching their fiduciary duties and causing irreparable harm by forcing a merger of CBS and Viacom, among other issues.
  • CBS said it is seeking a temporary restraining order to prevent Ms. Redstone, president of National Amusements and vice chairman of both CBS and Viacom, from replacing CBS board members and forcing through a merger.

Comcast’s all-cash bid could pit Murdoch against Fox shareholders

  • Twenty-First Century Fox Executive Chairman Rupert Murdoch is used to getting his way at the company he built into a media empire. But a challenge to a $52 billion deal he put together six months ago could test his sway with shareholders.
  • Several Fox investors told Reuters they would be open to terminating the company’s agreement, inked in December, to sell most of its media assets to Walt Disney if Comcast follows through on its plan to launch a rival all-cash bid for as much as $60 billion.
  • Murdoch, Fox’s largest shareholder, will be tough to win over, however.
  • His family trust holds a 17% stake in the U.S. TV and movie giant and would face a multi-billion dollar capital gains tax bill if he accepted an all-cash offer from Comcast, tax experts told Reuters.
  • Sources close to the deal between Disney and Fox said the financial impact on Murdoch would be big enough for him to prefer an all-stock transaction, which would be non-taxable for all Fox shareholders.

Microchip gets China antitrust approval to buy Microsemi

  • Microchip Technology said it has received antitrust approval from China to buy rival Microsemi, clearing a major hurdle to the $8.35 billion deal.
  • The clearance for the deal from China’s Ministry of Commerce comes days after U.S. President Donald Trump decided to revisit penalties for Chinese company ZTE for flouting U.S. sanctions on trade with Iran.
  • Microchip makes analog chips for carmakers and industrials, expects the merger to be completed in late May or early June.

Qualcomm-NXP deal still on hold in China, trade talks with U.S. eyed: sources

  • Qualcomm’s proposed $44 billion takeover of rival NXP Semiconductors is yet to see a concrete breakthrough in China, sources said, tempering hopes a lull in trade tensions with the United States had prompted Beijing to speed up its ruling on the deal.
  • China’s approval would likely depend on the progress of broader trade discussions, three people with knowledge of the deal said, as senior Chinese and U.S. officials meet this week in Washington for their second round of high-stake talks.

U.S. chipmaker Intel submits plans for $5 billion Israel expansion

  • Intel said it had submitted plans to expand its production operations in Israel, with the government saying the U.S. chipmaker would invest about $5 billion.
  • Intel is one of the biggest employers and exporters in Israel, where many of its new technologies are developed. The new investment will upgrade its Kiryat Gat manufacturing plant in southern Israel, the company said in a statement.
  • Israel’s Finance Ministry said the company would invest about 18 billion shekels ($5 billion) in the factory between 2018-2020 and had agreed to spend 3 billion shekels on local suppliers.
  • In return, Intel will be granted an extension of its reduced tax rate of 5% until 2027. The Finance Ministry said it was also considering giving Intel a 700 million shekel grant, with a second grant of the same size to come with future investments.

Tyson Foods to buy poultry blending assets of American Proteins

  • Tyson Foods said it would buy the poultry rendering and blending assets of American Proteins and AMPRO Products for about $850 million, as the company looks to recycle more animal products to use in feed and pet food.
  • Tyson, the No. 1 U.S. meat processor, said it expects its new business to generate adjusted net sales of more than $550 million over the next year.

Uber Ends Mandatory Arbitration Clauses for Sexual-Harassment Claims

  • Uber is taking a step toward moving past its scandal-ridden history by ending the company’s use of the widespread but controversial practice of mandatory arbitration for claims of sexual harassment and assault.
  • The move, coming after pressure from both former employees and customers, will immediately free U.S.-based litigants to sue Uber in open court, rather than in private with an impartial arbitrator.
  • The ride-hailing company has been trying to overcome last year’s allegations from former employees that management disregarded repeated claims of sexism and sexual harassment.
  • Uber also said it would no longer require employees, riders or drivers who allege sexual assault or harassment to agree to confidentiality about the specifics of their claims as a condition of a future settlement.

Capital Spending Boom Is No Great Boost to Capital Markets

  • Spending on factories, equipment and other capital expenditures by companies in the S&P 500 is expected to have risen 24% in the first quarter to $166 billion, on track for the most ever spent in the first quarter of a year, according to Credit Suisse data going back to 1995.
  • As a share of gross domestic product, a measure of capital spending has been rising for more than a year, although it remains below levels hit in 2014, when soaring crude-oil prices pushed energy companies to spend heavily.
  • The biggest spenders run the gamut, from technology behemoths such as Google parent Alphabet to auto maker General Motors and oil firm Exxon Mobil.
  • Investments in data centers, undersea cables and New York City real estate pushed Alphabet’s capex tab in the first quarter to $7.3 billion—the most of any S&P 500 firm, and nearly triple what it spent a year earlier.

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US ECONOMY & POLITIC

U.S. Retail Sales Rose Broadly in April

  • Retail sales—a measure of spending at stores, online-shopping websites and restaurants—rose a seasonally adjusted 0.3% in April from the prior month. Economists expected a 0.3% increase in April.
  • Compared with a year earlier, retail sales were up 4.7% in April. Spending continued to outpace inflation, with the Labor Department’s consumer-price index rising 2.5% in April from a year earlier.
  • Gasoline-station sales rose 0.8% in April from the prior month, potentially driven by the recent pickup in gasoline prices.
  • The national average price for a gallon of regular gasoline in April was $2.76, up nearly 17 cents from the prior month and the highest since mid-2015.

New Fed Reports Show Rising Inflation Expectations

  • On Monday, the Federal Reserve Bank of New York reported in its monthly Survey of Consumer Expectations that the public sees price pressures accelerating in the next year and over the next three years.
  • For both time horizons, the bank found expectations of a 3% inflation rate in April. That compares with expected 2.8% year-ahead inflation and 2.9% for three years ahead in the March survey.

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EUROPE & WORLD

China’s Industrial Output Revs Up

  • Value-added industrial production in China rose 7.0% in April from a year earlier, accelerating from a 6.0% year-over-year increase in March. Economists were expecting industrial output to grow 6.4% in April.
  • Retail sales in China climbed 9.4% in April from a year earlier, slowing from a 10.1% year-over-year increase in March, official data showed.
  • Fixed-asset investment outside rural households, a gauge of construction activity, rose 7.0% in the January-April period from a year earlier, slower than economists’ median estimate for a 7.4% gain and below the 7.5% increase recorded in the January-March period.

Samsung in talks with ZTE, others to supply mobile processor chips

  • Samsung Electronics is in talks with several smartphone makers including China’s ZTE to supply mobile processor chips, a senior executive said, a move that will bring it in more direct competition with larger rival Qualcomm.
  • The South Korean tech giant generates the bulk of its profit from its basic memory chips and has been beefing up development of logic chips such as mobile processors, image sensors and automotive chips to diversify.

North Korea Starts to Dismantle Nuclear-Test Site

  • North Korea has begun to remove buildings from around its nuclear-test site in a step toward dismantling the facility, new satellite imagery shows, as the regime seeks to build trust with the U.S. after declaring its nuclear arsenal complete.
  • Pyongyang appears to be “sanitizing” the site, at the foot of Mount Mantap in the country’s northeast, to protect secrets before journalists arrive.
  • Destroying the site could serve as a visible sign of North Korean leader Kim Jong Un’s denuclearization pledge—and help maintain a detente on the peninsula ahead of talks with President Donald Trump in Singapore on June 12.

One $100 Billion Tech Fund Isn’t Enough for SoftBank CEO

  • SoftBank Group’s near-$100 billion Vision Fund has yet to close, but its acquisitive founder is already gauging interest for a second fund.
  • In just under a year since the fund’s launch, SoftBank CEO Masayoshi Son has identified target investments for more than half of the existing Vision Fund’s promised capital, deploying billions of dollars at a pace that is transforming tech investment.
  • The fund’s portfolio includes stakes in semiconductor firms such as ARM Holdings, Nvidia and office-share company WeWork.

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TODAY in HISTORY

  • The Standard Oil Company, headed by John D. Rockefeller, was ordered dissolved by the Supreme Court, under the Sherman Antitrust Act. (1911)
  • The Soviet Union began to withdraw its estimated 115,000 troops from Afghanistan. (1988)

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, Wall Street Journal.

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