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G-Fin™: Another Choppy Day for Stocks as Durable Goods Decline

The Gilmer Free Press

Glenville, WV—Markets lost their bottom shortly after midday Wednesday, March 25, 2015 in volatile trading amid uncertainty over the Federal Reserve‘s rate plans. The Nasdaq was particularly hard hit with biotech companies and chipmakers sinking the tech-heavy index.

The S&P 500 dropped 0.7%, the Dow Jones Industrial Average fell 0.9%, and the Nasdaq slid 1.4%.

“It’s jitters as to the Fed rate hikes and kind of the divergence in central bank policy ... This year we’re going to see more volatility than we’ve seen in the last three or four years,“ said Luis Gonzalez, managing director of Snowden Lane Partners, in a call.

Benchmark indexes have whipsawed from near-record highs and back into the red over the past week since the Fed removed its “patient” language from its policy statement and reiterated data dependence.  

“If you were to shut your eyes on Jan. 1 and open your eyes and look at your statement on Dec. 31, I think you’ll see that the markets were positive but you’re going to see some big swings through the course of the year,“ Gonzalez added.

Among the worst-performing semiconductor stocks, Advanced Micro Devices (AMD) plummeted 6.8%, Nvidia (NVDA) sank 5.1% and Micron Technology (MU) fell 4.1, while the iShares PHLX Semiconductor ETF (SOXX) tanked 3.4%.

In biotech, Alexion (ALXN) declined 2.3%, Ariad (ARIA) fell 2.1% and NewLink Genetics (NLNK) tumbled 6.2%, while the iShares NASDAQ Biotechnology Index ETF (IBB) slid 2.6%. 

Durable goods orders in the U.S. unexpectedly slipped 1.4% to $231.3 billion in February, an unexpected drop compared to estimates of a 0.4% increase. In January, durable goods increased 2%.

“The tone of this report was weak, and it adds to a wide array of economic indicators have been pointing to a softening in domestic growth momentum,“ said TD Securities’ Millan Mulraine. “We continue to highlight the downside risks to our Q1 GDP growth forecast of 1.5% q/q, with the risks that growth could slow to a crawl as the recovery appears to have gotten stuck in another weather-induced soft patch.“

Oil prices were holding onto slight gains despite weekly crude oil inventories coming in higher than expected. West Texas Intermediate crude was up 1.4% to $48.15 a share. U.S. crude inventories added 8.2 million barrels over the week ended March 20, higher than an estimated 5.1-million-barrel increase. 

Kraft (KRFT) shares were keeping markets active on Wednesday after the company announced plans to merge with privately held Heinz to create Kraft Heinz Co. Kraft shares surged more than 39%.

Heinz, owned by private-equity firm 3G Capital and Warren Buffett’s Berkshire Hathaway (BRK.A), will hold a 51% stake in the new company. The combined companies will form the third-largest food and beverage company in North America.

In more deals news, computer imaging company Lexmark (LXK) agreed to buy software developer Kofax (KFX) for about $1 billion, or $11 a share. Lexmark shares popped 7.8% and Kofax rocketed 45.8% higher.

There is more uncertainty for Europe on reports Greece will run out of money by April 20, according to Reuters. The unofficial deadline puts even more pressure on Greek Prime Minister Alexis Tsipras to resolve discussions with European Union creditors sooner rather than later. This week Tsipras met with German Chancellor Angela Merkel and agreed to present a comprehensive list of reforms by Monday.

Separately, German business confidence hit its highest level since July 2014, according to the Ifo Institute’s indicator of business climate. The measure rose to 107.9 in March, its fifth straight increase and above economists’ estimates of 107.3.

Pharmaceuticals company Merck (MRK) added nearly 1% after boosting its buyback authorization to $11.7 billion from $10 billion. Last year, the company returned $13 billion to its shareholders.

G-Fin™ Jobless Rates Up in West Virginia

The Gilmer Free Press

Unemployment rates increased in all of West Virginia’s 55 counties in February.

The West Virginia’s seasonally adjusted unemployment increased two-tenths of a point to 7.6%.

The U.S. unemployment rate was down to 5.5% in February from 5.7% in January.

The February 2014 unemployment rate for West Virginia was 8.1%.

Calhoun County had the highest non-seasonally-adjusted unemployment rate at 14.8%, followed by McDowell County at 14.4%.

Jefferson County, in the state’s Eastern Panhandle, had the lowest unemployment rate at 5%, followed by Monongalia at 5.1%.

Employment in goods-producing industries was down from 105,200 workers in January to 103,600 workers.

GOVERNOR TOMBLIN SIGNS FY 2016 BUDGET BILL WITH TARGETED REDUCTIONS

The Gilmer Free Press


CHARLESTON, WV - Governor Earl Ray Tomblin has signed House Bill 2016, the budget bill for Fiscal Year 2016, with targeted cuts.

In January, Governor Tomblin presented the Legislature with a responsible, balanced budget that took into account the tough budget year.

“As a longtime legislator and former Finance Committee chairman, I respect the hard work legislators put into the budget and the difficult choices they face when choosing how to allocate state dollars to best serve all West Virginians,“ Governor Tomblin said. “West Virginia has a reputation of being one of the most fiscally responsible states in the country. We’ve worked hard to earn that distinction, and I remain committed to finding ways to reduce government expenditures and minimize use of the Rainy Day Fund.“

Governor Tomblin adjusted 46 line items representing a total of nearly $11 million from the FY 2016 budget, which includes a $14.8 million withdrawal from the Rainy Day Fund.

“Our six-year projections show we will again have surpluses in the coming years,“ Governor Tomblin said. “That additional revenue, which will become available as we pay off long-term liabilities such as the old workers’ compensation fund debt, can be used to provide extra funding in several critical areas. But those funding increases cannot occur if we increase the baseline budget in 2016. I am committed to maintaining fiscally responsible policies now and into the future.“

The total general revenue budget for FY 2016 is $4.296 billion.

To read the budget letter in its entirety, Click H E R E.

U.S. Home Sales Rebound Slightly in February

The Gilmer Free Press

WASHINGTON — Slightly more Americans bought homes in February, but tight inventories, affordability problems and nasty winter weather point to sluggish sales in the coming few months.

Sales of existing homes rose 1.2 percent last month to a seasonally adjusted annual rate of 4.88 million, a slight rebound after plunging in January yet still underperforming by historical standards, the National Association of Realtors said Monday.

The real estate market has hibernated through the first two months of 2015, creating the potential for a second straight year of weak buying activity.

Strong job growth and relatively low mortgage rates have failed to awaken buyers. Meanwhile, relatively few homes are being listed for sale and builders are mostly catering to the wealthiest slivers of the market. Sales are running below last year’s pace of 4.93 million, which represented a 3.1% drop from 2013.

Despite February’s uptick, buying activity appears to have been slow coming into March because of a series of harsh winter storms.

The weather last month shut down construction and hurt open houses, likely causing fewer signed contracts and put additional downward pressure on completed sales in March.

Housing starts plunged 17% in February, the Commerce Department reported last week. Buyer traffic also slipped last month, according to the National Association of Home Builders/Wells Fargo index. Mortgage applications slipped in March, according to the Mortgage Bankers Association.

Sales tumbled 6.5% last month in the Northeast, which was hammered hard by snow, the Realtors said. Home-buying was unchanged in the Midwest and increased in the South and West.

The recent storms have led several economists to expect a strong recovery in the coming spring months, when more buyers usually step up their search and sellers decide to list their properties.

Still, some homeowners are trapped by mortgage debt, making it unprofitable for them to sell. Their negative equity is a lingering aftershock from the recession and housing bust, limiting the supply of available homes on the market.

The real estate data firm Zillow reported last week that 16.9% of homeowners owe more on their mortgage than their homes are worth. In several metro areas including Philadelphia, Houston and Boston, that rate actually increased from the levels in the third quarter of 2014.

The Realtors reported Monday that just 4.6 months of supply was listed for sale, compared to a full five months a year ago.

That meager inventory has helped push up sales prices, creating additional affordability pressures despite strong monthly job gains averaging more than 200,000 for the past year.

Median home prices increased 7.5% over the past 12 months to $202,600, almost quadruple the pace of average hourly wage gains.

Sales to investors and for all-cash have also declined over the past year, while first-time buyers have yet to return. First-timers accounted for only 29% of home sales, compared to a historical average of 40%.

Nor have buyers responded much to the comparatively low mortgage rates.

Average 30-year fixed rates were 3.78% last week, according to the mortgage giant Freddie Mac. That average has plunged from a 52-week high of 4.41%, which should help to make housing more affordable.

Because of tight credit, few potential buyers have been able to take advantage of the low rates.

An Urban Institute index measuring credit availability found that lenders are taking fewer risks with mortgages, choosing buyers with high credit scores and providing them routine mortgages, rather than the exotic and opaque loans that inflated the housing bubble and led to the financial crisis.

The restricted credit “has been, and threatens to continue to be, a headwind for the housing recovery,” said Michelle Meyer, a senior economist at Bank of America Merrill Lynch, in a client note.

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