Weekly Market News Roundup

May 25, 2013
By Vlad Karpel

The Dow Jones Industrial Average ended Friday with an 8.6-point gain, up 0.1% at 15,303.10 after losing 95 points early in the session. It lost 0.3% for the week.

The Standard & Poor’s 500 Index  dipped 0.91 point, or 0.1%, to 1,649.6. Among S&P sectors, utilities, energy and telecommunications were the biggest losers. The index lost 1.1% for the week.

The Nasdaq Composite lost 0.3 point, or 0.01%, to 3,459.14, off 1.1% for the week.

Stocks, bonds, and commodities fell as Bernanke announced a possible pullback in stimulus efforts in the coming months.

IMF calls on UK to get a grip on monetary policy

IMF’s latest report wants stricter monetary policy to turnaround consistent under performance of the UK. IMF noted that while per capita income is trending up, it is still 6 points below the precrisis high. Additionally, capital investment is on all-time low while youth unemployment is still high.

Ford departs from the land down under

Ford announced it will close its plants in Australia in 2016. High labor cost in the Australian manufacturing plant is keeping Ford from competing with cheap imports in the Australian market. Due to this strategy, about 1,200 jobs will be affected by the shutdown.

Hewlett-Packard announced sales boost, thanks to Google

In its earnings call today, Hewlett-Packard CEO Meg Whitman remarked that its position in the PC market has been improved by its tablets sales powered by Google’s Android. “If we have the right product and the right price, the channel still loves HP and they want to sell our products,” Whitman said. “Frankly, having Android products helps a lot.”

China’s factory activity declines

HSBC released a report that China’s purchasing managers’ index (PMI) slips to 49.6 in May compared to 50.4 in April. China slowed down in domestic demand and factory activity has shrunk for the first time in seven months. According to HSBC, “The cooling manufacturing activities in May reflected slower domestic demand and on-going external headwinds. A sequential slowdown is likely in the middle of Q2, casting downside risk to China’s fragile growth recovery. Moreover, the further signs of labour market slackness call for more policy support. Beijing still has fiscal ammunition to do so.”

Senate says Apple used Irish subsidiaries to avoid taxes

The Senate Permanent Subcommittee on Investigations report led by Sen. Carl Levin (D-Mich.) alleged that Apple (AAPL) used its Irish subsidiaries that have no tax residency in either Ireland or the US to avoid paying taxes on some $74 billion in profits from 2009-2012. Apple is also keeping over $100 billion of is cash overseas to avoid paying US taxes. This tax avoidance practice is possible because US taxes according to where the company is incorporated, while Ireland taxes according to the location of the management of the company. The Irish affiliate named Apple Operations International reported profits of $30 billion for over five years but paid no taxes whatsoever. Tim Cook testified before the Congress on May 21 to defend their tax practices.

Inflations hit below forecasts in UK

Inflation in the UK hit 2.4% in April, continuing its seven-month low and even lower than 2.8%. This was lower than analysts’ expectations of at least 2.6%. Economists also predict that consumer price increases may peak at 3% during the summer compared to the 3.5% earlier forecast.

Goldman Sachs upgrades S&P 500

Goldman Sachs upgraded its forecast for S&P 500 (SPY) as David Kostin stated they expect a very bullish view for index to gain 5% to 1,750 before the year ends, 9% to 1,900 in 2014, and 10% to 2,100 in 2015. These expectations are backed by above-trend real GDP growth and P/E increasing to 16 times. Dividends are expected to rise at about 30% over the next two years as Goldman Sachs claim that investors should start buying dividend equities.

Immigration bill approved by US Senate

The US Senate Judiciary committee stamps a seal of approval on immigration reform bill. The final approval comes after almost five days of deliberation. Three Republicans and ten Democrats voted in favor of the bill which will pave the way for citizenship to over 11 million undocumented immigrants. The bill also covers investments in new border security measures and overhauls the legal immigration system.

Bank of Japan is keeping its monetary policy while Nikkei trends up

Bank of Japan announced today that it is keeping things as is on its monetary policy. The Bank of Japan will continue to expand the monetary base by 60 – 70 trillion yen or $585 – $680 billion per year. Meanwhile, Japanese stocks are surging as Nikkei is up by 80% since November last year. Sony greatly contributes to the Nikkei with its recent 8.4% increase to a two-year high as it evaluates Third Point’s proposal to spin-off 15%-20% of Sony Entertainment including Sony Pictures.

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