Financial Headline News for Friday 7/29

Stocks were all over the place today but in the last hour they tanked to finish the week down 3.9% as the debt ceiling uncertainty continues.

The GDP grew at an anemic 1.3% in the 2nd Quarter from April-June.

Interesting article below about corporate insiders who are selling their companies' shares at an abnormally fast pace.

Here are the top financial stories of the day:

1) Wall Street ends worst week in year on debt stalemate-From Reuters

Stocks ended the worst week in a year as time runs out on Washington to reach agreement before the government loses its ability to borrow money.

The S&P 500 fell every day this week and was down 3.9 percent for the week as legislators failed to work out an agreement to raise the federal borrowing limit, which expires on Tuesday. Investors also worry about the likelihood of a U.S. credit downgrade.

The CBOE Market Volatility Index (Chicago Options:^VIX - News), a gauge of investor fear, jumped as much as 9 percent to its highest level since mid-March before paring its rise.

Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda,

Maryland, said investors are taking a more defensive stance, possibly moving more into cash.

"It's frustrating for investors and for U.S. citizens to see this unfold in the way it has been," she said.

"From an overall asset allocation standpoint, in an environment like this, you get bigger moves into cash and safe havens."

The Dow Jones industrial average (DJI:^DJI - News) was down 96.87 points, or 0.79 percent, at 12,143.24. The Standard & Poor's 500 Index (^SPX - News) was down 8.39 points, or 0.65 percent, at 1,292.28. The Nasdaq Composite Index (Nasdaq:^IXIC - News) was down 9.87 points, or 0.36 percent, at 2,756.38.

U.S. President Barack Obama told Republicans and Democrats to find a way "out of this mess." The United States will be unable to borrow money to pay its bills if Congress does not raise the debt limit by August 2.

A second attempt for a vote in the House of Representatives is expected after the close of trading on Friday after a bill was modified to try to win over more conservative lawmakers. The measure has little chance of passing in the Senate, however.

At least one credit rating agency has said it is likely to lower the United States' prized tripe-A rating if the cuts in Washington don't go far enough.

"Will the deal be enough to satisfy the credit rating agencies is really what's at stake here," Trunow said, whose firm manages about $14.8 billion.

The S&P utility index (^GSPU - News) is down 2.1 percent for the week, while the Dow is down 4.2 percent and the Nasdaq is down 3.6 percent for the week.

Major indexes also posted losses for the month: the Dow and S&P 500 each lost 2.2 percent while the Nasdaq fell 0.6 percent.

The S&P 500 briefly fell below its 200-day moving average, seen as key support, and bounced back from its worst levels of the day.

Weak economic data also weighed on equities. The U.S. economy stumbled badly in the first half of this year and came dangerously close to contracting in the January-March period.

Among declining stocks, Chevron Corp (NYSE:CVX - News), the second-largest U.S. oil company, fell 1 percent to $104.02 despite reporting a 43 percent jump in quarterly profit that beat estimates.

Energy led declines on the Dow on Friday, but the industrial sector was among the hardest hit for the week.

The S&P industrial sector (^GSPI - News) lost 6.1 percent this week, following disappointing results from companies including Illinois Tool Works (NYSE:ITW - News).

2) Weak growth raises concerns on economy-From Reuters

The U.S. economy came perilously close to flat-lining in the first quarter and grew at a meager 1.3 percent annual rate in the April-June period as consumer spending barely rose.

The Commerce Department data on Friday also showed the current lull in the economy began earlier than had been thought, with the growth losing steam late last year.

That could raise questions on the long held view by both Federal Reserve officials and independent economists that the slowdown in growth as the year started was largely the result of transitory factors.

Growth in gross domestic product -- a measure of all goods and services produced within U.S. borders - rose at a 1.3 percent annual rate. First-quarter output was sharply revised down to a 0.4 percent pace from a 1.9 percent increase.

Economists had expected the economy to expand at a 1.8 percent rate in the second quarter. Fourth-quarter growth was revised to a 2.3 percent rate from 3.1 percent.

"The second quarter disappointed, but the first-quarter downward revision is more disturbing. It advances the pangs of concern. The debt ceiling nonsense is not going to help us. We're already in an economy that is subpar," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

"Gasoline price increasing from $3 to $4, that really slapped the consumer back considerably."U.S. stock index futures added to losses and government debt prices extended gains after the weak GDP data. The dollar fell to a four-month low against the yen, while the Swiss franc hit a record high against the greenback.

3) Insiders Selling at Unusually Fast Pace-From MarketWatch
Bad news, stock-market bulls: Corporate insiders are selling their companies' shares at an abnormally fast pace.

In fact, one measure of that selling activity shows insiders of NYSE- and AMEX-listed companies recently were selling at the fastest rate since data began being collected in the early 1970s, four decades ago.
On the theory that insiders know more about their companies' prospects than do the rest of us, this is an ominous sign.

Corporate insiders, of course, are a company's officers, directors and largest shareholders. They are required to file a report with the Securities and Exchange Commission more or less immediately upon buying or selling shares of their companies, and the SEC makes those reports public.

One firm that gathers and analyzes the data is Argus Research, which publishes its findings in the Vickers Weekly Insider Report. One indicator that the firm calculates is a ratio of the number of shares that insiders have sold in the open market to the number that they have purchased.

In the week ending last Friday, according to the latest issue of the Vickers report, this sell-to-buy ratio stood at 6.43 to 1. This is higher than 95% of other weeks' readings over the last decade.

That's ominous enough, but consider last week's sell-to-buy ratio for just those issues listed on the NYSE or AMEX. That came in at 13.10 to 1, which is the highest reading for this ratio since when Vickers began collecting the data, which was October 1974.

Is there any way for a bull to wriggle out from underneath the weight of these high readings? Perhaps, though it's not easy.

One counterargument bulls can make is that it's entirely normal for insiders to sell when the market rallies, and therefore such selling does not carry particularly bearish significance.

But the stock market hasn't exactly been rallying all that strongly. To be sure, the latest sell-to-buy ratio reflects last week, not the current one, and that week did have a better tone than the current one — but not all that great a tone.

In any case, the other occasions in recent years in which the sell-to-buy ratio rose to close to the same level it is today were on the heels of more or less uninterrupted rallies over the previous two or three months. That's not the case now, of course, suggesting that insider selling this time around may not be so benign.

Another bullish counterargument is that the volume of insider transactions last week was light, as it usually is during earnings season. That's because insiders are either reticent to buy or sell their companies' shares in the days and weeks before their companies report earnings, for fear of being charged with acting improperly.

But I'm not sure how much weight to put on this argument. There still were several hundred firms with insider activity last week, and it's unclear why earnings season would have discouraged just those insiders who otherwise were interested in buying.

Furthermore, it's worth remembering that the extensive Vickers database encompasses many other earnings seasons besides the current one. Also, the latest insider sell-to-buy ratio is higher than almost all comparable readings from those prior seasons.

Perhaps the strongest counterargument the bulls can muster at this point is that the insiders are not infallible.

That indeed is true. Still, researchers report that they have been more right than wrong.

At a minimum, I think we can all agree it can't be good news that insiders recently have been selling at such a fast pace.


Quote of the Day from Dave Ramsey.com:

The quality of a leader is reflected in the standards they set for themselves. — Ray Kroc

Financial Headline News for Thursday 7/28

After holding steady most of the day, stocks stumbled late and never recovered for another day of losses.However Nasdaq was up slightly.

There was finally some good economic news as first time unemployment claims came in under 400,000 for the first time in 15 weeks.

Some horrifying predictions on the economy if the debt ceiling doesn't get raised in the article below.

Here are the top financial stories of the day:

1) Stock rally fades ahead of House vote on debt deal-From the AP

A late sell-off wiped out the stock market's gains Thursday as investors worried that a bill headed for a vote in the House of Representatives would fail to break a stalemate over raising the country's debt limit.
The market was up for much of the day but started to sink in the last half-hour of trading. Senate Majority Leader Harry Reid said in the afternoon that the House bill wouldn't get a single Democratic vote in the Senate, meaning it would fail.

"That gave a catalyst for selling," said Quincy Krosby, market strategist at Prudential Financial.

The Dow Jones industrial average fell 62.44 points, or 0.5 percent, to close at 12,240.11. The index had been up as many 82 points earlier in the day following an unexpected decrease in new claims for unemployment benefits.

Just five days remain until the Treasury Department says the government won't have enough money to cover all its bills. The Dow has fallen every day since Friday because of worries that the U.S. might default on its debt if Congress doesn't raise the country's borrowing limit. The Dow is headed for its worst week in just over a year.

The Standard & Poor's 500 fell 4.22, or 0.3 percent, to close at 1,300.67. The S&P 500 has fallen for the past four days. The Nasdaq composite index edged up 1.46, or 0.1 percent, to 2,766.25.
Even if the U.S. doesn't default, investors worry that the country might lose its triple-A credit rating. That could raise interest rates and possibly slow down the U.S. economy, which is still recovering from the worst recession in decades.

"We're running out of time," said Phil Dow, director of equity strategy at RBC Wealth Management in Minneapolis. "It's getting scary."

The Dow is now down 3.5 percent for the week and is headed for its worst week since early July 2010. The S&P 500 is down 3.3 percent for the week, while the Nasdaq is down 3.2 percent.

Markets were still less volatile than Wednesday, when the Dow had its biggest one-day drop since early June. One reason for optimism: The government said first-time applications for unemployment benefits fell to 398,000 last week, the lowest level in four months. That's a sign that employers are laying off fewer workers.

The price of gold, which tends to rise when investors are fearful of economic disruptions, fell $1.70 to $1,613.40 an ounce. It's still up 13.4 percent this year. The dollar rose against other currencies, as did Treasury prices. The dollar and Treasurys would likely fall if investors were worries that a default was imminent.

Technology stocks rose after LSI Corp., which makes storage and networking chips, forecast revenues that were higher than investors were expecting. Its stock gained 14.1 percent, the most in the S&P 500.
Bristol-Myers Squibb Co. rose 1.5 percent after the drugmaker reported earnings that were better than analysts anticipated. The company also raised its earnings forecast for 2011.

Exxon Mobil Corp. fell 2.2 percent after its earnings came in below analysts' estimates.

Akamai Technologies Inc. fell 19.1 percent, the most in the S&P 500 index, after the online streaming company's earnings were lower than analysts had expected. Sprint Nextel Corp. fell 15.9 percent. The nation's No. 3 wireless carrier said its loss widened in the second quarter, partly because of a tax expense and investment losses.

Nearly two stocks fell for every one that rose on the New York Stock Exchange. Volume was relatively heavy at 4.4 billion shares.

2) Jobless claims fall below 400,000-From Reuters

New claims for unemployment benefits fell more than expected last week, dropping below the key 400,000 level for the first time since early April, according to a government report on Thursday that pointed to some labor market improvement.

Initial claims for state unemployment benefits dropped 24,000 to a seasonally adjusted 398,000, the Labor Department said.

Economists polled by Reuters had forecast claims falling to 415,000. The prior week's figure was revised up to 422,000 from the previously reported 418,000.

Employment growth stumbled badly in May and June, with the increase in nonfarm payrolls totaling only 43,000.

The drop in jobless claims last week below the 400,000 mark that is normally associated with stable jobs growth will be welcome news for the economy after a recent string of weak data.

It is also a hopeful sign for the economy which has struggled to regain momentum after growth faltered in the first half of 2011.

The government is expected to report on Friday that the economy grew at a 1.8 percent annual rate, according to a Reuters survey, after a tepid 1.9 percent pace in the first three months of the year.

On Wednesday, the Federal Reserve said growth slowed in much of the country in June and early July.

A Labor Department official said there were no special factors in last week's jobless claims data.

The four-week moving average of claims, considered a better measure of labor market trends, fell 8,500 to 413,750.

The number of people still receiving benefits under regular state programs after an initial week of aid declined 17,000 to 3.70 million in the week ended July 16.

Data for the so-called continuing claims covered the survey week for the household survey from which the unemployment rate is derived. The jobless rate rose to 9.2 percent in June from 9.1 percent in May.

The number of Americans on emergency unemployment benefits rose 18,427 to 3.17 million in the week ended July 9, the latest week for which data is available.

A total of 7.65 million people were claiming unemployment benefits during that period under all programs, up 320,152 from the prior week.

3) If US Defaults, Stocks Fall 30%, GDP 5%: Credit Suisse-From CNBC

In the very unlikely event that the United States defaults on its debt obligations, the country's economy would contract by 5 percent and stocks would fall by nearly a third, according to Credit Suisse.

While Andrew Garthwaite and the global strategy team at the Swiss bank see a 50-50 chance of a ratings downgrade of U.S. debt by the major ratings agencies, they remain confident such an outcome would not lead to disaster.

"We think there is a 50 percent chance of a ratings downgrade on U.S. sovereign debt.

This could happen even if the debt ceiling is raised," Garthwaite, the head of global strategy at Credit Suisse, said in research note.

"We doubt it will have much effect," he continued. "Japan has a 1.1 percent yield and an AA- rating, many U.S. Treasury funds do not have credit-rating limitations and national bank regulators would probably keep risk weightings for U.S. sovereign debt at zero."

If no budget deal is struck, but the U.S. does not default, Garthwaite predicts a bad time for stocks and the economy.

"As our economists point out, each month of no rise in the ceiling could easily take 0.5-1 percent off GDP.
In this case, equity markets would drop by 10-15 percent, prompting Congress to find a solution, and bond yields would fall to 2.75 percent." If that proved to be the case, investors would in Garthwaite's opinion need to get into defensive stocks and out of the dollar.

However, the worst case scenario is clearly an outright U.S. default. That is where things could get nasty, according to the Credit Suisse team.

"This is very unlikely, but if it occurs, GDP could fall 5 percent plus, and equities by 30 percent," Garthwaite said.

In the event of such a disastrous outcome, Garthwaite predicts the only place to hide would be in cash-rich stocks.

Quote of the Day from Dave Ramsey.com:

Leaders get out in front and stay there by raising the standards by which they judge themselves—and by which they are willing to be judged.-Unknown

Financial Headline News for Wednesday 7/27

As the August 2nd debt ceiling deadline gets another day closer, stocks tanked today. It will be interesting tomorrow to see the first time unemployment claims release in the middle of all of this uncertainty and political chaos.

The economy remains stagnant at best as durable goods fell in June.

A good piece on job creation analysis from the Wall Street Journal below.

Here are the top financial stories of the day:

1) Fear over debt fight hits Wall St.; Dow loses 198-From the AP

Anxiety about a deadline to raise the nation's debt ceiling swept across Wall Street on Wednesday and drove the Dow Jones industrial average down almost 200 points. With Washington showing no sign it will find a solution, financial planners around the country said their clients were increasingly worried.

The Dow took a sharp drop during the last two hours of trading and closed down for the fourth session in a row. The declines have grown each day. The market turmoil was a sign that consequences of the debt fight were beginning to materialize in earnest.

With six days to go until the Treasury Department's Tuesday deadline -- raise the national borrowing limit or face an unprecedented federal default and unpredictable fallout in the economy -- analysts suggested the market would only grow more volatile.

"The longer we go without any type of hope or concrete plans for resolution, the more concerned investors are going to become," said Channing Smith, a managing director at the financial firm Capital Advisors Inc.
While no one was panicking, financial professionals who handle the investment accounts of everyday Americans -- college funds, retirement accounts and other nest-eggs -- said their customers were growing more worried by the day. One said he had not seen this level of anxiety since the 2008 financial crisis.
"We're getting a ton of calls," said Bob Glovsky, president of Mintz Levin Financial Advisors in Boston. "It's all `What happens if the U.S. defaults? What's going to happen to me?'"

The Dow finished the day down 198.75 points, at 12,302.55. About half of the decline came between 2 and 4 p.m., when the market closes for the day. It was the worst fall for the Dow since June 1, with 28 of the 30 component stocks losing value.

While the decline was not close to the stomach-churning days of the fall of 2008, when the Dow lurched lower and higher by 700 points some days, there were signs that fear on Wall Street was growing. The Dow fell 43 points Friday, 88 points Monday and 91 points Tuesday, then more than twice that on Wednesday.
"Right now the clouds are gathering," said Chris Long, a financial planner in Chicago.

Without a deal by Tuesday, the Obama administration has said the government will be unable to pay all its bills, and could miss checks to Social Security recipients, veterans and others who depend on public help. In addition, credit rating agencies could downgrade their assessment of the government's finances, further unnerving financial markets and perhaps causing interest rates to rise for everyone.

Already, some investors are taking precautions. Richard Shortt, 66, of Somerville, Mass., worries that a default, or even just a downgrade of U.S. debt, could cause bond and stock markets to tumble. Last week he sold about 10 percent of his stock holdings and put the proceeds into a money-market mutual fund.
"It might just be a short-term decline in the markets, but it could last a week or two while this gets resolved," said Shortt, a semi-retired small business consultant. "If we do get any sort of debt downgrade, even if we avoid a default, that will change the game a bit."

Financial advisers typically tell their clients not to tinker with their portfolios or try to play a short-term move in the market to their advantage. Of course, leaving investments alone could be a test of patience for the rest of this week.

On Friday afternoon, for example, it's plausible that Congress could reach a deal in mid-afternoon and send the Dow soaring 300 points in the final hour of trading. It's also plausible that there's still no deal and traders decide staying in the market over the weekend is too risky, and send the Dow plunging.

Investors who rode out the financial turbulence in 2008 without rejiggering their portfolios have made up most of their losses. The stock market has almost doubled since its post-meltdown low in March 2009. Many people who withdrew their money from the stock market during the worst haven't come close to breaking even.

"Trying to adjust to something on a day-to-day basis is how you get hurt," Glovsky said. "You've got to take a long-term approach."

The memory of October 2008 remains vivid. The Dow plunged 777 points in a single day when Congress surprised investors by rejecting an early version of $700 billion legislation to bail out the nation's biggest banks.

"We've been through this, or something like it," said Leisa Aiken, a financial planner in Chicago. "I think what we went through in 2008 has toughened clients up a little. They realize that they will get through it if they don't give in to a knee-jerk reaction."

This time around, analysts say, the chances of similar turmoil are small but growing. Standard & Poor's, one of the rating services, has said that "the reverberations of the showdown may be deep and wide -- particularly if Washington does not come to a timely agreement on the debt ceiling."

Bond traders were still betting on a last-minute deal on the debt. The yield on the 10-year Treasury note, which should rise when investors believe there is a greater risk they won't get their money back, has stayed near 3 percent all month.

Even if Washington sails past the deadline without raising the debt limit, bond traders believe the Obama administration will keep up its interest payments and cut spending on everything else. The resulting shock to the economy and other financial markets would make Treasury bonds a safe place for investors to hide, which could result in lower yields.

For individual investors, experts are cautioning against overreaction.

Financial planner Jim Pearman, a principal in Partners in Financial Planning in Roanoke, Va., said he was telling clients his firm isn't changing its investments based on a "game of chicken" in Congress.

"You have to make two decisions right when you try to time this thing. One is when you get out, and the other is when you get back in," he said. "It's hard to make that. We don't try."

One measure of investor concern, the Vix, or volatility index, shot up 14 percent on Wednesday. The tone of the market changed this week, as nervous investors began moving money out of stocks, said Howard Ward, a chief investment officer at asset manager GAMCO.

He said the stock market will likely become more volatile as the weekend nears, and while he said he was not repositioning his portfolio, he admitted: "Right now I'm pretty worried."

2) Durable goods orders fall 2.1 percent in June-From the AP

Businesses cut back on orders for aircraft, autos, heavy machinery and computers in June, sending demand for long-lasting manufactured goods lower for the second month in the past three.

Orders for durable goods fell 2.1 percent last month, with the weakness led by a big drop in orders for commercial aircraft, the Commerce Department reported Wednesday. A number of other categories also showed weakness including autos and auto parts. A key category that tracks business investment plans fell 0.4 percent in June.

Manufacturing has been the stellar performer in the two-year-old recovery. But activity slowed in the spring, reflecting in part supply disruptions following the March earthquake and tsunami in Japan. Manufacturing was also hurt by the hit the overall economy took from higher energy prices which dampened consumer demand.

The 2.1 percent decline in June orders came after an even bigger 2.5 percent drop in April. Orders had risen 1.9 percent in May. The latest drop was a disappointment to economists who had forecast a slight rise, believing that the disruptions caused by the Japanese natural disasters and the surge in energy prices earlier this year were beginning to wane.

The June decline pushed durable goods orders down to $191.98 billion on a seasonally adjusted basis. That is still 29.1 percent higher than the recession low hit in April 2009, but it is 21.6 percent below the high set in December 2007 as the recession was beginning.

Demand for commercial aircraft plunged 28.9 percent while orders for new cars and auto parts fell 1.4 percent. Total demand for transportation products fell 8.5 percent as orders for military aircraft were also done. Outside of transportation, orders would have shown a small 0.1 percent increase.

Demand for primary metals such as steel rose 1 percent but orders for heavy machinery fell 2.3 percent and demand for computers and related products dropped 0.8 percent.

The category of capital goods excluding aircraft, considered a good proxy for business investment plans, fell for the second time in three months, dropping 0.4 percent in both June and April.

The Federal Reserve reported recently that auto production fell 2 percent in June, the third straight month of declines for autos. U.S. automakers have had trouble getting component parts out of Japan. Overall industrial production showed a slight 0.2 percent rise in June. Gains in mining and utilities offset a flat reading for factory output.

A closely watched gauge of manufacturing activity grew more strongly in June after a sluggish May. The Institute for Supply Management's manufacturing index rose to 55.3 last month after a May reading that was the weakest in 20 months. A reading above 50 indicates manufacturing is continuing to expand.

Caterpillar Inc. reported last week that robust demand for its heavy equipment boosted the company's second quarter profits by 44 percent. But even with the gain, the company's quarterly profits fell short of Wall Street estimates for the first time since the recession ended

3)What's Wrong With America's Job Engine? From the Wall Street Journal

Over the past 10 years:
• The U.S. economy's output of goods and services has expanded 19%.
• Nonfinancial corporate profits have risen 85%.
• The labor force has grown by 10.1 million.
• But the number of private-sector jobs has fallen by nearly two million.
• And the percentage of American adults at work has dropped to 58.2%, a low not seen since 1983.
What's wrong with the American job engine? As United Technologies Corp. Chief Financial Officer Greg Hayes put it recently: "Sales have come back, but people have not.''
That's largely because the economy is growing much too slowly to absorb the available work force, and industries that usually hire early in a recovery—construction and small businesses—were crippled by the credit bust.

Then there's the confidence factor. If employers were sure they could sell more, they would hire more. If they were less uncertain about everything from the durability of the recovery to the details of regulation, they would be more inclined to step up their hiring.

Something else is going on, too, a phenomenon that predates the recession and has persisted through it: Changes in the way the job market works and how employers view labor.

Executives call it "structural cost reduction" or "flexibility." Northwestern University economist Robert Gordon calls it the rise of "the disposable worker," shorthand for a push by businesses to cut labor costs wherever they can, to an almost unprecedented degree.

Looking back at the percentage of Americans with jobs in the 1990s (rising) and the 2000s (falling), Princeton University economist Alan Krueger estimates that 70% of today's job shortage is simply cyclical, the result of a disappointing recovery from a deep recession. But he attributes 30% to changes in the job market that began a decade or more ago.

Consider these clues:
In the most recent recession and the previous two—in 1990-91 and 2001—employers were quicker to lay off workers and cut their hours than in previous downturns. Many also were slower to rehire. As a result, the "jobless recovery" has become the norm.

In the past, when business slumped, employers cut work forces and accepted less work per employee. During the deep recession of the early 1970s, the output of goods and services in the U.S. fell by 5% and employment by 2.5%. Economists puzzled over "labor hoarding," or the tendency of companies to hold on to unneeded workers.

No one talks about that any longer. Between the end of 2007 (when American employment peaked) and the end of 2009 (when it touched bottom), the U.S. economy's output of goods and services fell by 4.5%, but the number of workers fell by a much sharper 8.3%. Today's puzzle: How and why employers managed to boost productivity, or output per hour of work, like never before during the worst recession in decades?

In an earlier era, when more Americans worked on assembly lines, many layoffs were temporary. When business bounced back, workers were recalled, often because of union-contract guarantees.

At the worst of the 1980-82 recession, 1 in 5 of the unemployed were "temporary layoffs." In the recent recession, the proportion of temporary layoffs never exceeded 1 in 10. In part that's because fewer Americans work in factories, where production can be stopped and restarted; if a restaurant doesn't have enough customers, it goes out of business.

"When layoffs are temporary, subsequent recalls can take place quickly," say economists Erica Groshen and Simon Potter of the Federal Reserve Bank of New York. When layoffs are permanent, job recovery is slower, they say. If the employer wants to hire, there's the time-consuming chore of sifting through applications.

Corporate employers, their eyes firmly fixed on stock prices and the bottom line, prize flexibility over stability more than ever. The recession showed them they could do more with fewer workers than many of them previously realized.

In a survey of 2,000 companies earlier this year, McKinsey Global Institute, the think tank arm of the big consulting firm, found 58% of employers expect to have more part-time, temporary or contract workers over the next five years and 21.5% more "outsourced or offshored" workers.

"Technology," McKinsey says, "makes it possible for companies to manage labor as a variable input. Using new resource-scheduling systems, they can staff workers only when needed—for a full day or a few hours."
Temporary-help agencies are playing an ever-larger role—from providing clerical and factory workers to nurses and engineers.

Black & Veatch, a Kansas City, Mo., engineering firm, which shrank from 9,600 employees before the recession to about 8,700 today, is hiring about 100 workers a month. About 10% of its workers are temps, says Jim Lewis, the firm's human-resources chief. "That's a quick way to bring people in, and gives you a little time to see if growth is going to hold or not," he says.

It also makes it easier to cut back in tough times. Workers, in short, now can be hired "just in time." And many employers apparently don't think it's time yet. Because they can hire temps almost instantly, there's little need to hire in anticipation of a pickup in business.

When they do hire, big U.S.-based multinational companies are more able and more willing to hire overseas, both because wages are often cheaper there and because that's where the customers are.

In the 1990s, those multinationals added nearly two jobs in the U.S. for every new job overseas; in the 2000s, they cut their U.S. work forces by 2.9 million and increased them abroad by 2.4 million, according to the Commerce Department

Quote of the Day from Dave Ramsey.com:

Success is not final, failure is not fatal: it is the courage to continue that counts. — Winston Churchill

Financial Headline News for Tuesday 7/26

All three sectors were down today as the debt ceiling talks and bickering continue to weigh on the markets.

Sale of housing data was released today with mixed results.

Discrimination of the long term unemployed continues with some companies. Luckily New Jersey made legislation making this sickening practice illegal. Lets hope other states pick up this cause.

Here are the top financial stories of the day:

1) Earnings, Debt Fight Weigh on Stocks-From The Wall Street

U.S. stocks finished lower Tuesday as a mixed batch of earnings reports failed to stem investor caution over the deadlock in Washington's debt negotiations.

The Dow Jones Industrial Average closed down 91.50 points, or 0.73%, at 12501.30, its third straight decline and fourth loss in five sessions. 3M led the blue-chip index lower, sinking $5.41, or 5.4%, to 89.93.

The conglomerate expects one of its biggest businesses, providing films used in flat-screen television sets, to remain weak in the second half of the year. 3M accounted for more than a third of the Dow's declines.
The Dow's fall accelerated in the final half hour of trading, with the index down as much as 104 points late in the day.

"Short-term traders are taking bets one way or another ahead of a debt-ceiling announcement," said Ryan Larson, head of U.S. equity trading at RBC Global Asset Management. "When a deal isn't announced, people are taking positions off the table at the end of the day. This light-volume, choppy environment will continue until we get some kind of announcement."

The Standard & Poor's 500-stock index fell 5.49 points, or 0.41%, to 1331.94, as industrial and material stocks declined. The technology-oriented Nasdaq Composite fell 2.84 points, or 0.10%, to 2839.96.

The Dow has dropped 223 points, or 1.75%, over the last three sessions as the deadlock in Washington's debt negotiations has curbed investor enthusiasm. Financial markets this week have begun seriously assessing the prospect of a downgrade of the U.S.'s triple-A credit rating. Republicans and Democrats appear far apart on reaching a deal to reduce the nation's fiscal deficit and increase the limit on federal borrowing.

"As the clock ticks away, the probability of a downgrade becomes larger," said Natalie Trunow, chief investment officer of equities at Calvert Investment Management. "We're playing with fire."

Late Monday, in prime-time national addresses, President Barack Obama and House Speaker John Boehner pitched their divergent plans for solving the nation's fiscal problems. Mr. Obama warned that the U.S. is on the brink of a default that could spark a "deep economic crisis—one caused almost entirely by Washington."

Despite the recent weakness, stocks remain within striking distance of multiyear highs. Many investors still believe the political posturing will eventually give way to some type of resolution.

The Dow is up 8% year-to-date and is only 2.4% below the three-year closing high it hit in late April, indicating Wall Street doesn't appear much perturbed by the debt debate.

2) Spring buying boosted home prices for 2nd month-From the AP

Home prices in major U.S. cities rose for the second straight month in May, propped up by an annual flurry of spring buyers. But after adjusting for such seasonal factors, prices fell in a majority of markets.

The Standard & Poor's/Case-Shiller home-price index released Tuesday showed that prices rose in 16 of the 20 cities tracked.

Boston posted the biggest monthly increase, followed closely by Minneapolis and Washington. Three metro areas hit the hardest by the housing crisis -- Detroit, Las Vegas and Tampa, Fla. -- hit their lowest points since the recession began. Prices in Phoenix were unchanged.

Still, 19 of the 20 cities have seen year-over-year price declines.

The 20-city index rose 1 percent in May from April. The index measures prices compared with those in January 2000. It then provides a three-month average. The May data is the latest available.

Last year, a tax credit for first-time buyers helped boost prices. They rose nearly 4 percent from April through July before falling more than 7 percent this winter to record lows. Prices in big metro areas sank in March to their lowest levels since 2002.

Housing remains the weakest part of the economy. Sales of previously owned homes fell in June for a third straight month to a seasonally adjusted annual rate of 4.77 million homes. This year's pace is lagging behind the 4.91 million homes sold last year -- the fewest since 1997. In a healthy economy, people buy roughly 6 million homes per year.

Home sales have fallen in four of the past five years, forcing prices down in most areas. Declining home values have made people feel less wealthy, and they are spending less as a result. That affects consumer spending, which accounts for 70 percent of economic activity.

Fewer first-time homebuyers are able to qualify for a loan or have the money required for a down payment.

A growing number of contracts are being canceled before sales are final, because unexpectedly low home appraisals are scuttling loans. Few people want to take on the extra debt associated with a home purchase.

High unemployment, millions of foreclosures and tighter credit are likely to keep people from buying homes in the second half of the year, economists say. Even historically low home prices and cheap mortgage rates haven't brought people back to the market.

Foreclosures and short sales -- when a lender agrees to sell for less than what is owed on a mortgage -- made up about 30 percent of all home sales last month, up from about 10 percent in past years. And a wave of foreclosures are being held up, either by backlogged courts or lenders awaiting state and federal probes into troubled foreclosure practices.

3) The Help-Wanted Sign Comes With a Frustrating Asterisk- From The New York Times

The unemployed need not apply.

That is the message being broadcast by many of the nation’s employers, making it even more difficult for 14 million jobless Americans to get back to work.

A recent review of job vacancy postings on popular sites like Monster.com, CareerBuilder and Craigslist revealed hundreds that said employers would consider (or at least “strongly prefer”) only people currently employed or just recently laid off.

Unemployed workers have long suspected that the gaping holes on their résumés left them less attractive to employers. But with the country in the worst jobs crisis since the Great Depression, many had hoped employers would be more forgiving.

“I feel like I am being shunned by our entire society,” said Kelly Wiedemer, 45, an information technology operations analyst who said a recruiter had told her that despite her skill set she would be a “hard sell” because she had been out of work for more than six months.

Legal experts say that the practice probably does not violate discrimination laws because unemployment is not a protected status, like age or race. The Equal Employment Opportunity Commission recently held a hearing, though, on whether discriminating against the jobless might be illegal because it disproportionately hurts older people and blacks.

The practice is common enough that New Jersey recently passed a law outlawing job ads that bar unemployed workers from applying. New York and Michigan are considering the idea, and similar legislation has been introduced in Congress. The National Employment Law Project, a nonprofit organization that studies the labor market and helps the unemployed apply for benefits, has been reviewing the issue, and last week issued a report that has nudged more politicians to condemn these ads.

Given that the average duration of unemployment today is nine months — a record high — limiting a search to the “recently employed,” much less the currently employed, disqualifies millions.

The positions advertised with preferences for the already-employed run the gamut. Some are for small businesses, and others for giants, including the commercial University of Phoenix (which, like some other companies, removed the ads after an inquiry by The New York Times) or the fast-food chain Pollo Tropical.

They cover jobs at all skill levels, including hotel concierges, restaurant managers, teachers, I.T. specialists, business analysts, sales directors, account executives, orthopedics device salesmen, auditors and air-conditioning technicians.

“It is really a buyer’s market for employers right now,” said Harry J. Holzer, an economist at Georgetown University and the Urban Institute. One consequence is that the long-term unemployed will rack up even more weeks of unemployment, Mr. Holzer said, and will find it harder to make the transition back to work.

Even if Congress passed a measure forbidding companies from making current employment a requirement for job applicants, companies could still simply decide not to hire people who are out of work. Discrimination
would be difficult to prove.

After all, there are legitimate reasons that many long-term unemployed workers may not be desirable job candidates. In some cases they may have been let go early in the recession, not just because business had slowed, but because they were incompetent.

Idle workers’ skills may atrophy, particularly in dynamic industries like technology. They may lose touch with their network of contacts, which is important for people in sales. Beaten down by months of rejection and idleness, they may not interview well or easily return to a 9-to-5 schedule.

“We may be seeing what’s called statistical discrimination,” said Robert Shimer, a labor economist at the University of Chicago. “On average, these workers might be less attractive, and employers don’t bother to look more closely to pick out the good ones.”

Employers receive so many applications for each opening that some may use current employment status as an easy filter. In some cases — as with Ms. Wiedemer, of Westminster, Colo. — recruiters merely assume employers do not want jobless workers.

“Clients don’t always tell us ‘we don’t want to see résumés from unemployed workers,’ but we can sense from what people have interested them in the past that they’re probably looking for somebody who’s gainfully employed, who’s closer to the action,” said Dennis Pradarelli, a talent acquisition manager for Marbl, a recruiting firm in Brookfield, Wis. Many of the job ads posted by his firm seek workers who are “currently employed or only recently unemployed.”

Many firms that are not intentionally screening out the unemployed may still disqualify such applicants for having bad credit histories after having fallen behind on the bills — which they of course need a job to pay.
It’s not clear what can be done to pull workers out of this unemployment trap.

Government incentives for companies to hire unemployed workers have met with limited success. One such tax incentive from last year was poorly publicized, so most employers did not know about it. Better publicity may not suffice, either. An experiment from the 1980s found that telling companies that the unemployed were eligible for generous wage subsidies actually made employers less likely to hire such workers.

Job counselors often encourage the long-term unemployed to go back to school or volunteer to demonstrate that they are still productive, engaged members of society. But absent the actual acquisition of marketable skills — which many retraining programs do not provide — it’s not clear such efforts improve the chances of being hired.

“Mentally, it may be good for the candidate, but I think companies are still in a position to say ‘O.K., we’re looking for a candidate with the most up-to-date skills,’ ” Mr. Pradarelli said. “If you’ve been out of pocket for two years, going back to school sounds nice, but it doesn’t make or break the situation.”

The best solution, economists say, would be to encourage job growth more broadly, which may initially involve poaching people from other companies but could eventually draw even the least desirable workers back into jobs. During the boom years of the late ’90s, the labor market was so tight that ex-convicts had relatively little trouble finding work.

In the meantime, people like Ms. Wiedemer — who has been out of work for three years — are exhausting their benefits and piecing together what support they can from food stamps and family members. And they are stuck hoping that economic growth manages to outpace their own descent into permanent economic exile.

“I worry that unemployment may eventually come down, not because older workers who have been unemployed for a year or two find jobs,” Professor Shimer said, “but because older workers finally give up and drop out of the labor force.”

Quote of the Day from Dave Ramsey.com:

Fate knows where you are going, but it is up to you to drive there. — Michelle Keesling

Financial Headline News for Monday 7/25

The debt crisis deadline of August 2nd without an agreement weighed down stocks today but commodities gold and silver surged on the uncertainty.

The Greek economic crisis goes on and on and on.

IPO's are back at their highest level since before the economic collapse of 2008.

Here are the top financial stories of the day:

1) Debt standoff pressures stocks, drives wary mood-from Reuters

Stocks dipped on Monday as lawmakers remained in a standoff over raising the debt ceiling to avoid default, but investors were convinced a compromise will be reached before next week's critical deadline.

Trading volume, however, was light even for a seasonally quiet period, suggesting investors were holding to the sidelines. In another sign of negative sentiment, declining stocks far outpaced advancers despite the day's moderate declines.

Lawmakers are facing an August 2 deadline to raise the $14.3 trillion debt ceiling to avert a U.S. default.

"If you listen to all of the rhetoric and read all of the print, August 2 has the potential of being one of the worst days ever, if the debt ceiling isn't raised," said Hank Smith, chief investment officer at Haverford Trust Co. in Philadelphia.

But the market is not reacting as if that's going to happen, he said. "Politicians are being politicians...but when they get to the end of the cliff, they're not going to jump. They will raise the debt ceiling."

A deal remained elusive in Washington as President Barack Obama's Democrats and their Republican rivals pushed for separate budget proposals in Congress, increasing the threat of a ratings downgrade and default that could sow chaos in global markets. For details, see (ID:nN1E76N0CA) A two-stage Republican plan would call for $1.2 trillion in cuts.

Investor anxiety remained high, reflected in the CBOE Volatility Index (Chicago Options:^VIX - News), which jumped 10.5 percent, its biggest percentage increase in two weeks.

The Dow Jones industrial average (DJI:^DJI - News) was down 88.36 points, or 0.70 percent, at 12,592.80. The Standard & Poor's 500 Index (^SPX - News) was down 7.59 points, or 0.56 percent, at 1,337.43. The Nasdaq Composite Index (Nasdaq:^IXIC - News) was down 16.03 points, or 0.56 percent, at 2,842.80.

Among the weakest sectors were health care (^GSPA - News), telecommunications (^GSPL - News) and consumer staples (^GSPS - News), erasing some of last week's market gains notched on second-quarter earnings that were mostly stronger than expected. The S&P index of each sector was down at least 1 percent.

On the New York Stock Exchange, decliners outweighed advancers by about 4-to-1, while Nasdaq losers
beat winners by about 10-to-3.

The political jousting in Washington pushed gold prices to record highs as the fear of a default raised the appeal of bullion versus the greenback. The dollar fell to a record low against the Swiss franc, a safe-haven currency.

"There is concern about the implication about what our own debt rating will be as we air out this dirty laundry to try to come to a resolution," said Kevin Caron, market strategist at Stifel, Nicolaus & Co in Florham Park, New Jersey.

Strong earnings reports have offset worries about the debt debate, helping stock indexes post gains last week. Of the 154 S&P 500 companies that have reported earnings so far, 75 percent have beaten analyst expectations, according to Thomson Reuters data.

2) Moody's warns Greek default virtually 100 percent-From the AP

Moody's downgraded Greece's bond ratings by a further three notches Monday and warned that it is almost inevitable the country will be considered to be in default following last week's new bailout package.

The agency said the new EU package of measures implies "substantial" losses for private creditors. As a result, it cut its rating on Greece by three notches to Ca -- one above what it considers a default rating.

Though Moody's said a Greek debt default is "virtually certain," it noted that the new measures will increase the likelihood that Greece will be able to stabilize and eventually reduce its overall debt burden.

It also said the package also benefits other eurozone countries by "containing the near-term contagion risk that would likely have followed a disorderly payment default or large haircut on existing Greek debt."

In recent weeks, financial markets have been rocked by fears that much bigger economies like Spain and Italy may get dragged into Europe's debt crisis mire, which has also seen Ireland and Portugal bailed out alongside Greece.

Eurozone countries and the International Monetary Fund last week agreed to give Greece a second bailout worth euro109 billion ($155 billion), on top of the euro110 billion granted in rescue loans a year ago.

If all goes to plan, banks and other private investors will contribute some euro50 billion ($71 billion) to the rescue package until 2014 by swapping Greek bonds that they hold for new ones with lower interest rates or slightly lower face value, or selling the bonds back to Greece at a low price

"The support package incorporates the participation of private sector holders of Greek debt, who are now virtually certain to incur credit losses," Moody's said in a statement. "If and when the debt exchanges occur,
Moody's would define this as a default by the Greek government on its public debt."

Despite Greece's new package, which was more comprehensive than many in the markets had predicted, Moody's said it's going to take many years of hard graft for Greece to get complete control of its debts.

"Greece will still face medium-term solvency challenges -- its stock of debt will still be well in excess of 100 percent of GDP for many years and it will still face very significant implementation risks to fiscal and economic reform," Moody's said.

3) Dunkin' Leads IPO List-From The Wall Street Journal

The U.S. IPO market is revving up this week for the biggest flurry of deals in nearly four years, as the summer hiatus looms.

Eleven initial public offerings are firmly on the calendar. If all manage to price, it will be the busiest week since 13 deals went public in November 2007.

The offerings include a familiar consumer name, Dunkin' Brands Group Inc., which is also the largest offering. It is seeking as much as $400 million through a listing on the Nasdaq under the symbol DNKN. The coffee-and-doughnut chain franchises all of its locations, keeping capital expenses low and operating margins around 34%. But its mature food service business doesn't provide the kind of double-digit growth that investors have been lining up for in Internet IPOs. In the first quarter, revenue rose 9%, same-store sales growth remained less than 3%, and the company booked a net loss due to a debt repricing transaction, and higher interest expense

The other deals range in size from $30 million to $370 million and span a variety of industries and there are some that could match or outshine Dunkin' on the first day of trading. C&J Energy Services Inc. and ADS Tactical Inc. are considered two deals to watch.

C&J, which plans to list on the New York Stock Exchange under the symbol CJES, specializes in hydraulic-fracturing services to extract oil and gas from unconventional deposits. Revenue nearly quadrupled in the first quarter to $127.2 million. For 2010, revenue more than tripled to $244.2 million. Its bottom line looks good, too. The company reported first- quarter net income of $29.1 million, compared with $2.2 million a year earlier. Net income for 2010 was $32.3 million, from a net loss of $2.4 million.

ADS Tactical, which wants to list on the NYSE under the symbol ADSI, enters into procurement contracts with the U.S. military that allows it to coordinate a network of vendors for things such as communications equipment and eyewear to the Department of Defense and Homeland Security. ADS Tactical says it is able to maintain an asset-light, low-inventory business, and expects the military to continue increasing the average amount its spends per soldier. Net sales in the first quarter rose 18% to $344 million, but net income declined 46% on refinancing expenses.

Tea boutique chain Teavana Holdings Inc. is also on the radar. The 180-store chain, headed for the NYSE under the symbol TEA, sells premium loose teas that can cost $25 for about 25 teaspoons. Though the U.S. isn't a big tea-drinking nation, the company has carved out a niche as a premium retailer. In the 13 weeks that ended May 2, net sales rose 36% to $35 million and net income increased 72% to $3.3 million; same store sales rose 6%.

Falling somewhere in the middle of the pack are deals from American Midstream Partners L.P., a natural-gas pipeline and processing partnership that is listing on the NYSE under the symbol AMID; Tangoe Inc., a software company that helps companies manage their communications equipment and services, headed to the Nasdaq as TNGO; and Wesco Aircraft Holdings Inc., a supplier and logistics manager for aerospace companies that is aiming to trade on the NYSE under WAIR.

A straggler may be specialty food distributor Chefs' Warehouse Holdings LLC, which wants to list on the Nasdaq as CHEF. Its net sales and profit margins rose over the past year, but food distributors generate lower profit margins than most other industries and have a customer base that is sensitive to economic downturns.

Three that are likely to struggle are the Uruguay farming operation Union Agriculture Group Corp., which wants to list on the NYSE as UAGR; Horizon Pharma Inc., which wants to list as HZNP on the Nasdaq; and WhiteGlove Health Inc., which is headed to the NYSE Amex under the symbol WGH. None are profitable on an annual basis. Neither agricultural companies nor early-stage biopharmaceutical firms have been a hit with IPO investors. WhiteGlove, which contracts with insurers and self-insured employers to provide medical care in homes and offices, has a relatively unproven business model.

Quote of the Day from Dave Ramsey.com:

Ideas without action are worthless. — Harvey Mackay

Financial Headline News for Friday 7/22

It was a rare mixed day on Wall Street today with the Dow down and the Nasdaq and S&P up. Their movement have been in sync recently but not today.

All of those kids Happy Meals pushed McDonald's to an all time high stock price today.

Unemployment rates were released today by the State Department for state by state comparisons to last months figures.

Here are the top financial stories of the day:

1) Earnings, hope for debt deal brighten Wall Street-From Reuters

Investors poured into tech shares on Friday as promising chipmaker earnings and optimism that a solution was on the horizon for the U.S. debt stalemate triggered a move into growth-oriented shares.

The Dow was held back by Caterpillar Inc (NYSE:CAT - News), with shares of the heavy equipment maker falling 5.8 percent on disappointing results. The stock exerted a 48.6-point drag on the Dow, which ended off 43 points.

The benchmark S&P 500 index rose 2.2 percent for the week, lifted by strong earnings and a new bailout plan for Greece to contain Europe's debt crisis. Stocks have been restrained, however, by the long slog of negotiations to resolve the U.S. debt crisis.

"It's likely an agreement in any form will cause a relief rally for equities," said Andrew Slimmon, managing director, global investment solutions at Morgan Stanley Smith Barney in Chicago.

"Coming on the heels of overall pretty good earnings numbers and some sort of resolution in Greece and that could make for a rally in the market," he said.

President Barack Obama insisted on Friday he was prepared to make "tough choices" for a sweeping deficit-reduction deal to avert a U.S. default, despite Democrats warning him not to make too many concessions.

Semiconductor shares led the market on Friday after Sandisk (NasdaqGS:SNDK - News), a maker of flash memory chips used in smartphones and tablets like the iPad, and Advanced Micro Devices (NYSE:AMD - News) reported strong results late Thursday. The PHLX Semiconductor index (Nasdaq:^SOX - News) rose 2.4 percent, led by AMD, which jumped 19.2 percent to $7.75.

"Nasdaq has more things out on the risk curve, and one of the things our folks have been saying is that the risk-on button should be pushed here," said Glenn Starkman, global head of sales trading at Dahlman Rose in New York.

"You might see some rotation into things like energy, into materials and industrials as well as technology and money might rotate out of things like defensives."

The Dow Jones industrial average (DJI:^DJI - News) dropped 43.25 points, or 0.34 percent, to 12,681.16.

The Standard & Poor's 500 Index (^SPX - News) added 1.22 points, or 0.09 percent, to 1,345.02. The

Nasdaq Composite Index (Nasdaq:^IXIC - News) gained 24.40 points, or 0.86 percent, to 2,858.83.
For the week, along with the S&P's 2.2 percent, the Dow rose 1.6 percent and the Nasdaq advanced 2.5 percent.

The second bailout for Greece supported sentiment, even as Fitch ratings agency on Friday said Greece would be in temporary default as the result of the new rescue plan. Fitch pledged to give Greece a higher, "low speculative grade" rating after its bonds had been exchanged and said Athens now had some hope of tackling its debt mountain.

Caterpillar, a maker of equipment used in mining and construction, has been a stalwart performer in recent years and was the top Dow performer for 2010, but rising labor and materials costs hit earnings.
Fellow Dow component McDonald's Corp's (NYSE:MCD - News) income topped estimates, sending the stock up 2.3 percent to $88.56.

Microsoft Corp (NasdaqGS:MSFT - News) posted a greater-than-expected jump in its fiscal fourth-quarter profit but sales of its flagship Windows software disappointed for a third straight quarter. The Dow component rose 1.6 percent to $27.53.

But General Electric Co (NYSE:GE - News) dipped 0.6 percent to $19.04, even as it reported a 21.6 percent jump in quarterly profit.

Verizon Communications Inc (NYSE:VZ - News) lost 2.2 percent to $36.74 after the telecom giant posted second-quarter results and named a new chief executive officer.

Volume was light with about 5.81 billion shares traded on the New York Stock Exchange, NYSE Amex and

Nasdaq, well below the daily average of 7.48 billion.

Declining stocks outnumbered advancing ones on the NYSE by 1,530 to 1,400, while on the Nasdaq, decliners beat advancers 1,294 to 1,256.

2) McDonald's Shares Hit High After Profit Beats Estimates-From CNBC

McDonald's shares hit an all-time high Friday, after the company reported a higher-than-expected quarterly profit on strength in Europe and the U.S.


June sales at restaurants open at least 13 months were stronger than analysts expected in each of the world's biggest hamburger chain's operating units.

During the month, closely watched same-restaurant sales were up 6.9 percent in the U.S., 9.1 percent in
Europe, and 4.8 percent in McDonald's Asia/Pacific, Middle East and Africa unit.

Analysts were expecting June same-restaurant sales to rise 2 percent in the U.S., 3 percent in Europe, and 2 percent in the Asia/Pacific, Middle East and Africa unit. Europe is McDonald's largest market for sales, contributing about 40 percent of revenue, and the U.S. is a close second.

For the second quarter, sales at established restaurants were up 4.5 percent in the U.S., up 5.9 percent in Europe and up 5.2 percent in the Asia/Pacific, Middle East and Africa unit.


The company said net income rose to $1.41 billion, or $1.35 per share, from $1.23 billion, or $1.13 a share, a year earlier.

The results exceeded the analysts' average forecast of $1.28 per share, according to Thomson Reuters I/B/E/S.

Revenue rose to $6.91 billion from $5.95 billion.

McDonald's has been taking market share from its fast-food peers. It has added more value-priced Dollar Menu items, as well as high-margin beverages such as coffee to broaden its appeal beyond the young males that account for the biggest share of sales at most other fast-food chains.

David Palmer, senior restaurant and packaged food analyst at UBS, told CNBC that McDonald's benefited in the quarter from strong sales of its McCafe beverage line, including the new Frozen Strawberry Lemonade, which the company introduced in May 2009.

"Their cold beverage initiative is obviously helping during this hot month," he said. "It's also helping their margins as well, you're seeing the food inflation and those are high-margin products that are helping to bolster the margin for them and for franchisees just at a time when inflation is peaking."

3) Unemployment rates rose in majority of US states-From the AP

Unemployment rates rose in more than half of U.S. states in June, evidence that slower hiring is affecting many parts of the country.

The Labor Department said Friday that unemployment rates in 28 states and Washington, D.C., increased last month. Rates declined in eight states and were flat in 14. That's a change from May, when 24 states reported falling unemployment rates.

Twenty-six states reported a net gain in jobs in June, while 24 states lost jobs.

The changing trend in state unemployment rates reflects a weaker economy hampered by high gas prices and lower factory output. Nationally, employers added only 18,000 net jobs in June, the second straight month of feeble hiring.

The U.S. unemployment rate ticked up to 9.2 percent.

The economy expanded only 1.9 percent in the January-March period, and most economists expect similar growth in the April-June quarter. The government releases its first estimate for second-quarter growth on July 29.

Nevada had the highest unemployment rate among the states for the 13th straight month. It rose in June to 12.4 percent, up from 12.1 percent in May. The state has been hampered by foreclosures, depressed home sales and a decline in tourism.

It was followed by California (11.8 percent) and Rhode Island (10.8 percent).

Some companies are cutting their work forces. Layoffs rose to their highest level in nine months in May, according to a separate Labor Department report last week.

The impasse in Washington over raising the federal government's borrowing limit could affect several states, including Tennessee and Virginia. Those states could see a downgrade to their credit rating if the U.S. defaults on its debt, according to Moody's Investors Services.

The government reached its $14.3 trillion borrowing limit in May. The Treasury Department has said it will default on its debt if the limit is not raised by Aug. 2.

Virginia is closely tied to the federal government because of its large number of military bases, defense contractors and government employees. A downgrade to a state's rating would mean it would pay higher interest rates to borrow money.

Analysts are expecting another weak month of hiring in July, based on recent data.
The economy needs to generate about 125,000 jobs per month to keep up with population growth and prevent the unemployment rate from rising. It needs at least twice that many to rapidly reduce unemployment.

Quote of the Day from Dave Ramsey.com:

A duty dodged is like a debt unpaid; it is only deferred, and we must come back and settle the account at last. — Joseph Newton

Financial Headline News for Thursday 7/21

Stocks soared today thanks to renewed hope in the US and European debt talks.

First time unemployment filers remained above 400,000 for the 15th consecutive week as they exceeded the projected rate of 406,000 coming in at 418,000.

A colossal merger between two of the nation's three largest pharmacy-benefit managers happened today when St.Louis based Express Scripts agreed to buy Medco of Franklin Lakes, NJ.

Here are the top financial stories of the day:

1) Progress On Debt Rubs Off On Stocks-From The Wall Street Journal

Signs of progress in dealing with debt woes on both sides of the Atlantic Thursday propelled U.S. stocks, European bonds and the euro sharply higher in volatile trading.

In the U.S., the good news came in the form of hints that talks between the White House and congressional Republicans are moving closer to a deal that would raise the federal debt ceiling and slice the U.S. government's deficit.

In Europe, officials agreed to a plan designed to reduce Greece's debt burden and, more important for most investors, limit the potential for contagion that could send Italy and Spain into crisis.

The Dow Jones Industrial Average posted its second straight day of triple-digit gains, rising 152.50 points, or 1.2%, to 12724.41. The blue-chip index is now less than 100 points shy of its 2011 high of 12810.54 reached in late April. In Europe, Spanish and Italian stock markets were the big winners, gaining 2.9% and 3.8%, respectively, recovering ground lost in recent weeks.

The euro went for a roller-coaster ride on its way higher, as traders were once again whipsawed by comments from European officials. During European trading hours, it fell to around $1.4150 from more than $1.42 on news suggesting a meeting of European leaders wouldn't result in a comprehensive plan aimed at thwarting contagion. But then traders were spun around as news of a deal trickled out. The euro was up 1.5% against the U.S. dollar at $1.4424 in late New York trade.

The hope among investors is that the day's events bring the financial markets another step closer to resolving the major risks that have been bedeviling investors. In recent weeks, fears have been growing that the political bickering over the U.S. debt ceiling could lead ratings firms to take away the U.S. government's AAA rating. At the same time, Italy and Spain were once again being dragged down by worries that a default by Greece would ricochet through financial markets.

2) Jobless claims rise above expectations-From Reuters

The number of Americans filing new claims for unemployment benefits rose more than expected last week, pointing to a labor market that is struggling to regain momentum.

Initial claims for state unemployment benefits increased 10,000 to a seasonally adjusted 418,000, the Labor Department said on Thursday.

Economists polled by Reuters had forecast claims rising to 410,000 from a previously reported 405,000.

"We're just stuck in this trend between 410,000 and 430,000. Generally we're just really not seeing any improvement but also not much worsening," said Jeffrey Greenberg, an economist with Nomura Securities in New York.

Stock index futures held earlier gains after the data, while the dollar extended losses against the euro.
The claims data covered the survey period for the closely watched nonfarm payrolls count for July, which will be released on August 5.

Initial claims fell 11,000 between the June and July survey periods, suggesting a modest improvement in payrolls after June's paltry 18,000 gain.

Job growth has faltered in the last two months, in line with the generally weak tone in the economy.

A rise in layoffs held back payroll growth in May, according to the department's latest Job Openings and Labor Turnover Survey, which was released last week.

Layoffs were probably behind the downshift in employment growth in June as well.

A major consumer food producer, PepsiCo Inc, tempered its full-year outlook on Thursday due to economic uncertainty, sending its shares down slightly in premarket trading.

The maker of Pepsi-Cola, Frito-Lay snacks and Quaker oatmeal said it now expects 2011 earnings to grow at a high single-digit rate.

The company said the new goal reflects greater uncertainty regarding macroeconomic and consumer trends for 2011, high global commodity cost inflation and ongoing investments in emerging markets and brand building.

A government shutdown in Minnesota following a budget impasse resulted in an additional 1,750 state employees filing claims for jobless benefits last week, the Labor Department said. The shutdown ended this week.

Initial claims have now been above the 400,000 mark for 15 straight weeks. That level is usually associated with a stable labor market.

The four-week moving average of claims, considered a better measure of labor market trends, slipped 2,750 to 421,250.

The number of people still receiving benefits under regular state programs after an initial week of aid dropped 50,000 to 3.70 million in the week ended July 9.

The number of Americans on emergency unemployment benefits declined 80,133 to 3.15 million in the week ended July 2, the latest week for which data is available.

A total of 7.33 million people were claiming unemployment benefits during that period under all programs, down 159,000 from the prior week.

3) Express Scripts-Medco Deal Unites Two Giants-From the Wall Street Journal 

Express Scripts agreed to buy Medco Health Solutions Inc. for $29.1 billion in cash and stock, merging two of the nation's three largest pharmacy-benefit managers as the industry faces a new rival from managed-care giant UnitedHealth Group Inc.

By joining forces, Express Scripts and Medco will become the largest manager of drug prescription services, with nearly a third of the market. They aim to leverage their newfound heft to lower the cost of prescription drugs—indicating more pressure on pharmaceutical companies at a time they're already facing the loss of patent protection for top products.

"The cost and quality of health care is a great concern to all Americans; this is the right deal at the right time for the right reasons," said Express Scripts Chief Executive George Paz, 55 years old, who will lead the combined company.

PBMs help employers and health-insurance companies administer prescription-drug benefits, process claims and control drug costs by securing discounts from drug makers.

Medco—larger than Express Scripts by revenue but smaller by market capitalization—also confirmed its contract with UnitedHealth won't be renewed when the current one expires after next year. UnitedHealth, which represents 17% of Medco's sales, said it will run that business itself.

UnitedHealth's OptumRx pharmacy-benefit manager is "fully capable of delivering outstanding service," company spokesman Don Nathan said.

As a result, the news Thursday changes the dynamics of the PBM industry, long dominated by the threesome of Medco, Express Scripts and CVS Caremark Corp., a hybrid PBM and drugstore. After the deals, according to Bernstein Research, the merged company will control nearly a third of the market, followed by CVS at 21% and UnitedHealth at 12%.

The emergence of UnitedHealth, ironically, could ease regulatory approval, said Bernstein analyst Helene Wolk, who also cited the industry's "competitive intensity." Nonetheless, she predicted that the review process would be "challenging."

The companies, meanwhile, emphasized that the deal would help lower drug costs and create a more efficient health-care system. "We wouldn't be doing this if we didn't think we didn't have a very good chance of getting this through," Mr. Paz said.

He also disagreed with the suggestion this is "a borderline case," and said "I believe it's what America needs." The companies expect the deal to close by first half of 2012.

Under the deal, Medco holders will receive $28.80 in cash and 0.81 Express Scripts shares for each share, valuing Medco at $71.36, a 28% premium to Wednesday's close.

Thursday morning, Medco was trading at a more than 10% discount to the deal, suggesting that Wall Street has doubts about the deal's regulatory chances. The deal—based on Express Scripts trading at $54.77, up 4.2%—was valuing Medco at $73.16 a share. Medco shares were trading at $62.85, up 12.7%.

Should the deal close, Express Scripts shareholders are expected to own about 59% of the combined company, and Medco shareholders will have the remainder. The combined company will be headquartered in St. Louis, where Express Scripts is now, and could have $1 billion less in costs. Mr. Paz noted that the companies spend more than $100 billion combined.

"I feel very comfortable there's a lot of opportunities to take costs out of the equation," he said.
While the catalyst for the Express Scripts-Medco deal is "ultimately offensive," it's "initially defensive," Barclays analyst Larry Marsh said. He noted Medco's UnitedHealth loss plus Express Scripts "weaker-than-expected scripts" for the second quarter.

Express Scripts on Thursday reported its second-quarter earnings climbed 15% to $334.2 million, or 66 cents a share. Excluding items, per-share earnings were 71 cents. Revenue edged up 0.6% to $11.36 billion.

Meanwhile, Medco reported its earnings fell 4% to $342.8 million, or 85 cents a share. Excluding write-downs, per-share earnings rose to 96 cents from 87 cents. Revenue rose 4.1% to $17.07 billion.

There has been consolidation in the pharmacy-benefit-management industry. Express Scripts officials have said the company was on the hunt for acquisitions. In 2009, it acquired the prescription unit of WellPoint Inc., a health insurer, in a $4.7 billion deal.

In 2007, Express Scripts lost out on acquiring rival Caremark Rx to CVS, which acquired Caremark for about $26 billion. At that time, Medco was seen as a possible next target for Express Scripts. Express Scripts, which employs about 13,000 people, also distributes injectible biopharmaceutical products to patients or doctors, and provides cost-management and patient-care services.

Medco, spun out of drug giant Merck & Co. in 2003, provides clinical research and pharmacy services aimed at improving care while reducing health-care costs for private and public employers, union and government agencies. The company took in $66 billion in 2010 net revenue.

The advisers for Express Scripts are Credit Suisse Group AG, Citigroup Inc. and law firm Skadden, Arps, Slate, Meagher & Flom LLP. Medco is advised by J.P. Morgan Chase & Co., Lazard Ltd., and law firms Sullivan & Cromwell LLP and Dechert LLP.

This deal is the second-largest announced this year, after AT&T Inc.'s planned purchase of T-Mobile USA from Deutsche Telekom AG.

Quote of the Day from Dave Ramsey.com:

Be careful the environment you choose for it will shape you; be careful the friends you choose for you will become like them. — W. Clement Stone

 

Financial Headline News for Wednesday 7/20

Stocks, oil and gold all fell today. However Zillow, the real estate website founded in 2004, exceeded expectations in its initial offering today.

The bad news on the housing front continues with another negative report issued today of previously occupied home sales declining in June.

Food inflation will continue as Coke will raise their products by 3%-4% during the second half of 2011.

The financial headlines for today are:

1) Stocks dip after biggest day in a year-From the AP

A rally over hopes for a debt-limit deal turned into a waiting game for investors.

One day after the Dow Jones industrial average had its best day this year, the stock market edged lower on Wednesday. Analysts say concerns about lifting the U.S. debt limit outweighed strong earnings from Apple and a slew of new corporate deals.

"In this environment, stringing together a few days like yesterday is going to be tough," said Brad Sorensen, director of market analysis at Charles Schwab.

Apparent progress on raising the U.S. debt limit launched a stock market rally Tuesday. The Dow jumped 202 points, its best day this year. But investors woke up Wednesday to find Washington still at a stalemate. And with less than two weeks before the government risks defaulting on its debt, they are finding it hard to continue the celebration.

The Dow Jones industrial average fell 15.51 points, or 0.1 percent, to close at 12,571.91.
The S&P 500 index dropped 0.89 point to 1,325.84. The Nasdaq fell 12.29 points, or 0.4 percent, to 2,814.23.

Apple Inc. rose 2.7 percent after the company's income doubled last quarter. Sales of Apple's iPhones quadrupled in Asia.

The stock of Zillow, a real estate website, jumped 79 percent in its first day of trading to $35.77. Zillow's initial public offering of stock priced at $20 late Tuesday.

2) Home Resales Dip Again-From The Wall Street Journal

Sales of previously occupied homes in the U.S. dipped in June to the lowest level in seven months amid weakness in the job market and overall economy.

Existing-home sales decreased 0.8% from a month earlier to a seasonally adjusted annual rate of 4.77 million, the National Association of Realtors said Wednesday. It was the third-straight monthly drop. May's sales pace was unrevised at 4.81 million per year.

The results were worse than forecast. Economists surveyed by Dow Jones Newswires had expected home sales to rise by 1.9% to an annual rate of 4.90 million.

Lawrence Yun, NAR's chief economist, attributed the poor results to "a very weak economy leading to weak sales." He also said 16% of buyers who signed contracts for properties wound up canceling them in June -- up from a typical level of 10%. The reason for the high level of cancellations remains a mystery, he said.

The median sales price was $184,300, up 0.8% from $182,900 a year earlier.

The inventory of previously owned homes listed for sale, meanwhile, grew at the end of June to 3.8 million.

That represented a 9.5-month supply at the current sales pace, compared a healthy level of about six months.

The struggling housing market is one of several key burdens on the slowing economy.

Though construction of single-family homes and overall home construction were up from a month earlier last month, it was still the second-worst June for single-family construction on records dating back to 1959, the Commerce Department said Tuesday.

Demand for apartments has been strong of late as more families opt to rent rather than buy. But the market for previously occupied homes has been far softer amid an oversupply of foreclosed properties. About 2.2 million properties have been foreclosed but have yet to go up for sale, according to Lender Processing Services Inc.

Government incentives, such as a tax credit that mainly benefited first-time home buyers helped home sales last year. But the housing market has faltered since it expired.

The housing sector faces even more trouble this fall when the maximum size of loans that can be backed by government controlled mortgage companies Fannie Mae, Freddie Mac and the Federal Housing Administration goes down.

Economists say stronger income and job growth are needed to spur more families to buy homes and work through the massive inventory of foreclosures.

The Realtors' report said home sales fell last month compared with a month earlier in two out of four regions. Sales were down 5.2% in the Northeast and 1.7% in the West. They were up 0.5% in the South and 1.0% in the Midwest.

3) Coca-Cola Is Looking Like a Cereal Killer-From The Wall Street Journal

When it comes to pricing power in the grocery aisle, Coke is it.

Even with consumers looking weak, Coca-Cola said Tuesday it plans to raise prices by 3% to 4% in its North America division during the second half. It has already negotiated many of the price increases with retailers.

Other food manufacturers are unlikely to have the same clout. After all, Coca-Cola and rival PepsiCo are among the strongest brands in the world, with very little private-label competition. So if PepsiCo also raises prices, consumers might simply allocate more of their budgets to soft drinks.

With little growth in disposable income likely, consumers would be hungry for deals elsewhere. Take cereals, where the likes of Kellogg, General Mills, and Post face higher costs for wheat and corn. At the start of the year, Kellogg, maker of Frosted Flakes and Cocoa Krispies, said it expected companywide pricing and product mix to increase revenue by 3% to 4% in 2011.

Unfortunately, the cereal business looks especially competitive. Post, a unit of Ralcorp Holdings, has gradually been losing market share for the past few years. In turn, it has spent heavily on promotions to stem the bleeding. Kellogg could also feel compelled to sacrifice margins to keep share. Thilo Wrede, of Jefferies & Co., says Kellogg's cereal promotions in the past few months have resulted in market-share gains. Kellogg usually reduces such offers around the end of the first half but could be tempted to extend them.

Of course, the cereal market has less private-label competition than other categories, such as milk. But with consumers squeezed and already growing accustomed to promotions, cereal companies should prepare for a crunch.

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Financial Headline News for Tuesday 7/19

Thanks to incredible IBM earnings news and a positive housing starts report, stocks were up big from the getgo and throughout the day.

A great article on the failure of Keynesian Economic Theory which never has and never will succeed!

On a personal story, it was sad to hear yesterday that Borders will be going out of business. With all the hours spent there, including the one in the World Trade Center before it was destroyed on 9/11, I will always cherish the memories. I made a point to go with my wife to the one near us this past Sunday for one last time of reminiscing. My thoughts go out to the 10,700 Borders employees who will be affected by this.

The financial headlines for today are:

1) Stocks rebound on earnings, debt-limit proposal-From the AP

Strong profits and a bipartisan plan to lift the U.S. debt limit drove a stock market rebound Tuesday.

Stock indexes rose after Coca-Cola, IBM and other companies reported better second-quarter earnings.

The indexes added to their gains in the afternoon after President Barack Obama backed a proposal by six senators that would cut debt by $3.7 trillion over the next decade and raise the country's $14.3 trillion debt ceiling.

The Dow Jones industrial average gained 202.26 points, or 1.6 percent, to close at 12,587.42. That's the Dow's largest one-day jump this year.

"It looks like there's bipartisan support for a robust plan," said Burt White, chief investment officer at LPL Financial in Boston. "The stock market had been looking for a reason to have a relief rally. And it looks like they got the start of one today. "

The ongoing deadlock in Washington over raising the country's borrowing limit and Europe's debt crisis have been weighing on markets this month. The Dow slid five of the previous seven days.

The S&P 500 index rose 21.29 points, or 1.6 percent, to 1,326.73. That's the broader index's best day since March 3. The Nasdaq gained 61.41 points, or 2.2 percent, to 2,826.52.

Tuesday's gains turned the three major indexes positive for the month. The Dow and Nasdaq are now up more than 1 percent in July. The S&P 500 is up 0.5 percent.

Information technology stocks led industry groups higher after IBM Corp.'s results beat analysts' estimates. Corporate software spending held steady during the quarter. IBM's stock rose 5.7 percent.

The tech gains could continue Wednesday. Apple Inc. reported another surge in earnings after the stock market closed as sales of iPhones and iPads again set records. The stock rose 6 percent to $399.53 in after-hours trading.

Coca-Cola Co.'s income increased 18 percent in the second quarter on stronger sales overseas. The world's largest beverage maker raised some prices to offset higher ingredient costs. Coca-Cola's stock was up 3.3 percent.

KeyCorp rose 4.3 percent after the Cleveland-based banking company reported a jump in earnings thanks to a drop in loan losses. The bank reported income of 25 cents a share, up from 3 cents a share a year ago.
Harley-Davidson Inc. rose 8.9 percent, making it the top performing stock in the S&P 500 index. The motorcycle maker reported its first increase in U.S. sales since the final quarter of 2006. Sales of its motorcycles, some of which sell for more than $30,000, had languished throughout the economic slump.

A jump in housing construction lifted the stocks of Lennar Corp. and D.R. Horton Inc. The Commerce Department said building of new houses and apartments increased 14.6 percent in June from the previous month. Single-family house construction rose 9.4 percent, the largest increase since June 2009, the month that marked the end of the recession. Much of the monthly increase, however, came from new apartment buildings.

2) The dangers of being wrong on Keynes- The Washington Post

If you ask economists what went wrong during the Great Depression, you’ll often hear: “We hadn’t read Keynes yet.” That’s John Maynard Keynes, author of the “The General Theory of Employment, Interest and Money.” After the crash, his description of economic crises — and how to get out of them — became so widely accepted that, in the 1960s, President Richard Nixon said, “We’re all Keynesians now.”

Well, we’re not all Keynesians now. When you hear “Keynesian” today, it’s usually with “Obamacare” and “socialists.” It’s Republican shorthand not only for the economic theory that governed the Obama administration’s response to the crisis, but also for the general Democratic outlook. And it’s not a compliment.

The president’s team were fervent believers in the theories of a British economist called John Maynard Keynes,” wrote Majority Leader Eric Cantor (R-Va.) in his election-year manifesto, “Young Guns.” He’s right about that. Lawrence Summers, the former director of the National Economic Council, and Christina Romer, the former head of the Council of Economic Advisers, were two of the most influential Keynesian economists in the country. Obama didn’t just have a team of Keynesians. He had the Keynesian all-star team.

Perhaps the president’s team should have better explained their theories to Cantor. In his book, Cantor goes on to describe Keynesianism as the theory “that government can be counted on to spend more wisely than the people.” He’s wrong — and wrong in a way that’s making it harder to recover from this crisis, and could make it harder to respond to the next one.

“I think Keynes mistitled his book,” Summers says. “The correct title would have been ‘A Specific Theory of Collapsing Employment, Interest and Money’. What his book really was about was the proper understanding of the convulsive downturns to which a free-market economy is intermittently prone.”

The idea, in other words, is not about whether the government spends money better than individuals. After all, a lot of the policies advocated by the Keynesians, like the Making Work Pay tax cut, put money into the hands of individuals so that they can spend it. The idea is that the government has a role to play when, because of a “convulsive downturn,” a crisis begins feeding on itself.

Keynes — and others who later elaborated on his work, like Hyman Minsky — taught us that although markets are usually self-correcting, they occasionally enter destructive feedback loops in which a shock to, say, the financial system scares business and consumers so badly that they hoard money, which worsens the damage to the system, which further persuades other economic players to hoard, and so on and so forth.
In that situation, the role of the government is to break the cycle. Because businesses and consumers have stopped spending, the government breaks the cycle by spending. As clean as that theory is, it turned out to be a hard sell.

The first problem was conceptual. What Keynes told us to do simply feels wrong to people. “The central irony of financial crises is that they’re caused by too much borrowing, too much confidence and too much spending, and they’re solved by more confidence, more borrowing and more spending,” Summers says.

3) Borders Forced to Liquidate, Close All Stores-From The Wall Street Journal 

Borders Group Inc. said it would liquidate after the second-largest U.S. bookstore chain failed to receive any offers to save it.

Borders, which employs about 10,700 people, scrapped a bankruptcy-court auction scheduled for Tuesday amid the dearth of bids. It said it would ask a judge Thursday to approve a sale to liquidators led by Hilco Merchant Resources and Gordon Brothers Group.

The company said liquidation of its remaining 399 stores could start as soon as Friday, and it is expected to go out of business for good by the end of September.

Borders filed for bankruptcy-court protection in February. It has since continued to bleed cash and has had trouble persuading publishers to ship merchandise to it on normal terms that allowed the chain to pay bills later, instead of right away.

"Following the best efforts of all parties, we are saddened by this development," said Borders President Mike Edwards. "We were all working hard toward a different outcome, but the head winds we have been facing for quite some time, including the rapidly changing book industry, [electronic reader] revolution and turbulent economy, have brought us to where we are now."

Borders's best chance for survival fell apart last week when talks with private-equity investor Jahm Najafi to buy the company collapsed. Borders scrambled unsuccessfully over the weekend to find other potential buyers who would keep the chain alive.

The chain's demise could speed the decline in sales of hardcover and paperback books as consumers increasingly turn to downloading electronic books or having physical books mailed to their doorsteps.


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