Market Commentary | Paint the Town Red

Monday’s stock rally in the US was but a blip in what was otherwise a down week for most global markets. Asian stocks extended losses after US bourses reversed yesterday’s gains and European stocks kept floundering. Most bond yields kept rising as the prospect of more global monetary stimulus receded further, and oil prices remained close to recent lows.

Apple stood out with gains in excess of 2% yesterday, as carrier data from T-Mobile seemed to indicate strong demand for its latest iPhone. The stock was the only gainer on the Dow Jones. Things are looking slightly better this morning, as European stocks are tentatively attempting a rebound, and US futures are in slight positive territory.

US Incomes Hit Post-Recession Highs

US household incomes rose by a significant 5.2% in 2015, taking the median inflation-adjusted income to levels just below those in 2007, before the financial crisis and the – prolonged – recession hit home. Gains were broad based and spread across different age groups and genders.

The data suggests that steady job gains, which have become somewhat of a staple in the US data calendar, have helped incomes and wages break out of an apparent stagnation. Improvements were also registered in the poverty rate, which dropped 1.2% to 13.5% (that’s more than 43 million people…). People without health insurance, a cornerstone of Obama’s Affordable Care Act, fell to an all-time low.

Pandora to Launch Premium Service

Ad-free internet radio platform Pandora is ‘finally’ closing in on a licensing deal with major record labels, which will enable it to offer an on-demand subscription-based service. CEO Tim Westergren said on Tuesday that licensing agreements had been signed with Sony Music, Universal Music Group, the Merlin Network and more than 40 independent distributors.

Noticeably absent from the list is Warner Music Group, an absence which could hinder Pandora’s efforts to rival Spotify and Apple in a growingly competitive field. Pandora have said however that negotiations with Warner Music are on-going and it hopes to sign on the label by the end of the year. More than half of the top 15 best-selling albums in US history are by artists signed to the Warner label.

Pandora currently boasts a user-base of around 78 million which currently use the service for free. Converting around 10% of those users to the premium subscription-based service would generate approximately $1.3 billion in revenue by the end of 2020, according to estimates by Pandora. Up to 70% of that subscription service revenue would cover royalty costs. Pandora also intends to generate revenue from concert ticket sales. It expects to generate revenue in excess of $300 billion by the end of 2020 from Ticketfly, a concert ticket service it purchased just under a year ago.

Reactions to the announcement were lukewarm. Many analysts welcomed the move by Pandora albeit, being somewhat late to the fore. Plans to undercut Spotify and Apple by charging just $9.99 a month for its subscription service were welcomed, but raised doubts about how such a low fee can help sustain costs in the long-term, and whether current users would even be swayed to go for a paid service after being accustomed to free listening. The stock closed at $14.10 on Tuesday, around 1.3% lower.

Disclaimer:
This article was issued by Andrew Martinelli, Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt . The information, views and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.