Financial Headline News for Wednesday 8/31

Stocks climbed today on surge in factory orders to finish one of the most turbulent months on record on an up note. There were 16 days of over 100 point moves on the Dow in August. However major indexes still had the worst August since 2001.

Unemployment rates fell in 193 large metro areas in July, rose in 118, and were flat in 61 as the rate came in at 9.1% nationally. The August figure will be released on Friday and it is projected to stay the same.

Home prices were up slightly for the 2nd Quarter in most cities but not as much as compared to last year.

Here are the top financial stories of the day:

1) Dow up for a fourth day, turns positive for 2011-From the AP

It was a quiet end to a wild month for financial markets.

Stocks edged higher for a fourth straight day Wednesday on a report that factory orders surged in July.

The Dow Jones industrial average turned higher for the year. The Dow's winning streak ended a tumultuous August that included four consecutive days of swings of 400 points or more, a first in the history of the index.

A surge in factory orders indicated to investors that the manufacturing industry is still healthy. Orders rose 2.4 percent in July, the largest increase since March, after falling 0.4 percent in June. That decline caused worries that manufacturing, one of the best-performing areas of the U.S. economy since the recession ended two years ago, might be starting to sputter.

The Dow rose 53.58 points, or 0.5 percent, to end at 11,613.53. It fell 4.4 percent for the month, although it is now up 0.3 percent for the year. Aluminum maker Alcoa Inc. rose 3.6 percent, the most of the 30 companies that make up the Dow average.

Joy Global rose 1.3 percent after the mining equipment maker said its earnings rose 46 percent because of strong global demand for commodities like copper and coal.

That helped to push up other stocks in the mining and commodities industry. Equipment giant Caterpillar Inc. rose 1.3 percent.

The Standard & Poor's 500 index rose 5.97, or 0.5 percent, to 1,218.89. It fell 5.7 percent for the month. Financial stocks were the worst performers in August as many worked to raise capital to comply with new regulations.

On Wednesday, nine of the 10 company groups that make up the index rose. The telecommunications industry was the only one to fall.

AT&T Inc. plunged 3.9 percent after the Justice Department filed a lawsuit to stop the company's $39 billion merger with rival T-Mobile USA. Sprint Nextel Corp., which opposed the deal, rose 5.9 percent.

The Nasdaq composite index rose 3.35, or 0.1 percent, to 2,579.46. It fell 6.4 percent for the month.

The Dow, S&P and Nasdaq each had their worst August since 2001.

The market is closing out an extraordinarily volatile month. The Dow was as high of 12,132 this month and as low of 10,719 in the span of 23 trading days.

The volatility that began in late July seeped into August amid the debate in Washington over extending the country's borrowing limit to avoid a debt default. The declines gained speed the week ended Aug. 5, when all three major indexes entered a correction, or a decline of 10 percent or more from a recent peak.

Investors feared that Italy or Spain, Europe's third and fourth largest economies,would be unable to repay their debts. Some economists began to worry that the U.S. would slip into another recession.

Then came even worse news. Standard & Poor's lowered the nation's credit rating, and stocks plunged. The S&P 500 hit a low for 2011 on Aug. 8 and the Dow had four consecutive days of 400-point swings, the first time that's happened in its 115-year history.

Stocks had their first positive week in a month the week ended Aug. 26 after Federal Reserve Chairman Ben Bernanke said the U.S. remains on pace for long-term economic growth. The Dow has risen for seven of the last eight days.

Bond prices have also been volatile. The yield on the 10-year Treasury note briefly fell to 1.98 percent on Aug. 18, a record low, on weak manufacturing data from the Philadelphia Federal Reserve. On Wednesday, the yield rose to 2.21 percent from 2.18 percent late Tuesday.

Some investors chose to avoid the swings in stocks and bonds by parking their money in gold, but even that wasn't entirely a safe bet. Gold hit a record high of $1,891.90 an ounce Aug. 22. Two days later, it fell $104 to $1,757.30 an ounce. It rose $1.90 to $1,831.70 an ounce Wednesday.

Rex Macey, chief investment officer of Wilmington Trust, said he expected more sudden turns in the stock market until investors can determine if the U.S. economy is headed for another recession or a recovery.

"When you're on the edge of growth versus recession, that's a big difference," he said. "Being near the precipice means that markets are going to be more volatile."

2) Unemployment rates fell in most US cities in July-From the AP

Unemployment rates fell in a majority of U.S. cities in July, despite a weak economy that is producing few jobs.

The Labor Department said Wednesday that unemployment rates dropped in 193 large metro areas, increased in 118 and were flat in 61. That's a sharp change from June, when unemployment rates rose in more than 90 percent of metro areas.

The biggest monthly decrease was in Morgantown, W.Va. The unemployment rate there fell from 6.6 percent in June to 5 percent in July, mostly because people stopped looking for work. The government only counts people as unemployed if they are actively seeking work.

Yuma, Ariz., a farming hub that depends heavily on migrant farm work, experienced the largest increase, from 27 percent in June to 30 percent in July.

Unlike the national data, metro unemployment rates are not adjusted for seasonal changes, such as the start of the school year.

In July, the U.S. economy added 117,000 net jobs and the national unemployment rate fell to 9.1 percent.

Still, the economy needs roughly twice that number of jobs to significantly lower the unemployment rate.

Many businesses pulled back on hiring this spring, after high gas prices, scant wage gains and supply disruptions caused by the Japan crisis contributed to a slowdown in growth.

The economy expanded at an annual pace of just 0.7 percent in the first half of the year. That's the weakest six months of growth since the recession officially ended two years ago.

The July-September quarter is off to a better start. Consumer spending rose 0.8 percent last month, the largest gain in five months. Americans bought more cars and spent more to cool their homes during a heat wave.

Twelve cities reported unemployment rates greater than 15 percent. Eleven of those cities were in California. El Centro, Calif., had the nation's highest rate at 30.8 percent. It was followed by Yuma, Az. Both cities are big agricultural producers.

Bismarck, N.D., had the nation's lowest rate, at 3 percent. It was followed by Fargo, N.D., at 3.7 percent, and Lincoln, Neb., at 3.8 percent. Eight of the 10 metro areas with unemployment rates less than 5 percent were in the upper Midwest. North Dakota, in particular, has been helped by a boom in its oil drilling industry.

3) Gloom Clouds Slight Rise in Home Prices-From The Wall Street Journal

U.S. home prices increased in the second quarter but fell compared with the same period last year, painting a mixed picture of the real-estate market amid plummeting consumer confidence.

The S&P/Case-Shiller Home Price Index, released Tuesday, rose 3.6% for the quarter ended in June, but fell 5.9% annually, sending prices back to pre-boom 2003 levels. Consumer confidence, meanwhile, sank to its lowest level in two years, according to the Conference Board, a private research group.

Confidence fell to a reading of 44.5 in August from 59.2 in July. That is its lowest level since April 2009 and much worse than most economists had expected.

"Coming in the wake of a rancorous debate over the debt ceiling and the downgrade of U.S. debt, such a drop in confidence could hardly be much of a surprise," Nomura's chief U.S. economist David Resler wrote in a note to clients. "Nonetheless, declines in confidence run the risk of becoming self-fulfilling if they affect buying intentions."

The latest indicators also don't account for Hurricane Irene, which caused flooding and other damage in the East over the weekend. Total Mortgage, a lender in Milford, Conn., has begun asking borrowers in affected areas for an affidavit pledging that their home values and conditions remain the same as the initial appraisal.

Homes in areas seeking funds from the Federal Emergency Management Agency likely will have to undergo an additional inspection before closing, said Total Mortgage President John Walsh. While the numbers of affected buyers and sellers might be small, he says an already-shaky housing market can't handle much more.

"Any impact is a large impact," Mr. Walsh said. "We have a situation where people are going to be focusing on repairing their homes, and that might make people nervous about buying a home along the coast."

The housing gauge showed prices generally rose in its 20-city index. Minneapolis and Chicago led gains, both at 3.2%, while prices in Portland, Ore., remained flat. But across the board, prices were down from a year ago. Minneapolis posted the steepest annual decline, at 10.9%.

Still, the price increases remain good news in an industry that has had little to cheer. "The pace of sales is better than a year ago," said Vance Shutes, an associate broker for Real Estate One's Ann Arbor, Mich., office. "In our northern suburbs, where the automotive companies were just decimated, those markets are now rebounding strongly as the auto companies have started bringing people back after five years of shedding them."

Indeed, one bright spot of the consumer-confidence report was that the percentage of people who intend to buy a car or a major appliance edged higher. Yet far fewer respondents said they plan to buy a house in the next six months.

One economist, citing uncertainty in the labor and stock markets, called Tuesday's housing data, which reflect prices only until June, the "last hurrah" before prices begin to slide. The National Association of

Realtors reported this week that pending home sales—which measure the number of contracts to buy previously owned homes—fell 1.3% after two months of gains.

"The real concern is what's going to happen in July and August," said Stan Humphries, chief economist at real-estate firm Zillow Inc. "Consumers have been getting a lot of bad data points about the economy and that is going to get translated into the housing market."

Quote of the Day from Dave Ramsey.com:

All growth depends upon activity. There is no development physically or intellectually without effort, and effort means work. — Calvin Coolidge

Financial Headline News for Tuesday 8/30

Stocks were up today after Fed minutes show some officials pushed for more stimulus on August 9th.

Bank of America continues to restructure as the bank will make $3.3 Billion as it cuts its holding in Chinese lender to 5% from 10%.

From consumer spending to business investments, it seems nothing is the same this time around in the economic recovery or lack thereof.

Here are the top financial stories of the day:

1) Stocks rise on hopes for more economic stimulus-From the AP

The mere discussion of more economic stimulus from the Federal Reserve was enough to send stocks higher Tuesday. The Dow Jones industrial average rose 33 points.

Minutes from the Fed's latest policy meeting on Aug. 9 showed that central bank officials discussed a variety of options to bolster the economy, including buying more Treasury bonds. In the end, they decided to keep interest rates low until at least mid-2013.

The news that more aggressive action was being considered gave investors a reason to buy stocks.

"They want to see stimulus and they hope stocks will go higher," said Joseph Saluzzi, co-head of stock trading at Themis Trading.

The Federal Reserve has purchased Treasury bonds twice in the past as a way to keep long-term interest rates low. The government's second round of purchases, announced last August, helped to push the Dow up 28 percent through April 29.

Stocks were mixed for much of the day Tuesday after consumer confidence fell to the lowest level since April 2009. Trading volume was also much lighter than usual because many investors are on vacation.

The Dow Jones industrial average rose 33 points, or 0.3 percent, to 11,572 at 3:15 p.m. It had been down as many as 109 points earlier in the day.

Boeing Co. rose 2.3 percent after the aircraft maker said it received approval from its board to build a version of its workhorse 737 jet with a redesigned engine. That should help it compete better with rival Airbus. Caterpillar Inc. rose 2.2 percent, the most of any company in the Dow.

The Standard & Poor's 500 rose 3.7 points, or 0.3 percent, to 1,214. The Nasdaq composite index rose 16, or 0.6 percent, to 2,578.

Trading volume, or the number of shares bought and sold, was shaping up to be the lowest this year. About 2.1 billion shares exchanged hands on the New York Stock Exchange, the lowest since Dec. 31, 2010.

Low volume is worrisome because it suggests that few investors are driving the stock market's gains or losses. That creates the risk for bigger price swings, said Stephen Carl, principal and head of equity trading at The Williams Capital Group. A lack of volume also indicates that some investors don't believe that stocks are worth buying right now.

Stocks have swung widely in August. The Dow was down as much as 7.4 percent for the year on Aug. 10, but it is now up 0.1 percent. On Monday, the Dow soared 254 points, its fourth-largest gain this year. Insurers rose the most after it became clear the damage from Tropical Storm Irene wasn't nearly as bad as analysts had feared.

The Standard & Poor's 500 index hit a 2011 low Aug. 8 after the U.S. government's credit rating was downgraded for the first time. Since then, it has risen 7.7 percent.

Bond prices have been just as volatile. The yield on the 10-year Treasury note briefly fell to a record low below 2 percent on Aug. 18 on weak manufacturing data from the Philadelphia Federal Reserve. On Tuesday, the yield fell to 2.18 percent, down from 2.27 percent late Monday.

2) BofA Cashes Its China Chips- From The Wall Journal 

Chief Executive Brian Moynihan bought himself some breathing room as the bank agreed to sell more than $8 billion of China Construction Bank Corp. stock, its second multibillion-dollar deal in a week.

Shares rose 8% Monday, adding to a rally following a deal Thursday for Warren Buffett's Berkshire Hathaway Inc. to buy $5 billion worth of Bank of America stock. Since the Buffett deal, the Charlotte, N.C., lender has regained $14 billion of market value.

It's a dramatic turn for a bank whose shares lost $16 billion in a single day earlier in August amid mounting questions about the bank's legal costs and its capacity to withstand another economic downturn.

The rally gives Mr. Moynihan more time to deliver on a strategy he has been pursuing since he took over as CEO on Jan. 1, 2010: to narrow the focus of the nation's largest lender and wring efficiencies out of a far-flung empire that was built up over the reign of his predecessor, Kenneth Lewis.

Still, it remains unclear whether raising new capital will set the bank on a path to success. Even with the recent gains, Bank of America stock is down 37% this year.

Every asset they sell might firm up their capital, but it will cost them earnings," said Paul Miller, bank analyst at FBR Capital Markets. "What does the earnings model look like when all these asset sales are done?"

Neither the Buffett deal nor the China stock sale look like bargains. Mr. Buffett will get a large stream of cash dividends and the right to buy more stock near its two-year low, which could turn him into the bank's largest shareholder.

And while Bank of America will recognize a $3.3 billion gain on its sale of China Construction Bank shares, those shares are down 30% from their high earlier this year.

On Tuesday, CCB confirmed that Bank of America agreed to sell about 13.1 billion of its Hong Kong-listed H shares to institutional investors. The Beijing-based lender didn't give any details about the deal but said it expects the share sale to be completed in third quarter.

The buyers of the stake include Singapore state investment company Temasek Holdings Pte. Ltd. and its wholly owned hedge fund, Seatown, according to people familiar with matter. The two funds were part of a group of buyers that included a Chinese investment fund, the people said. It was unclear how the stake was divided up.

Monday's sale represents about half of the company's stake in the Chinese lender. Under the deal, which was long anticipated by analysts and investors, Bank of America will continue to hold a 5% stake in China Construction Bank.

Bank of America has been trying to shore up its position by selling off noncore assets, inching the bank closer to meeting global regulatory standards due to take effect in coming years.

Doubts about the bank's ability to meet those rules without issuing new shares sent the price of its stock tumbling earlier in the month.

Mr. Moynihan spent the early part of August on a campaign to calm investors, board members and employees about the bank's ability to weather the turmoil.

The bank has now made several moves in the past few weeks to assuage those concerns, including selling its consumer credit-card unit in Canada and putting other non-U.S. card units up for sale.

Executives are scrubbing the company for other noncore pieces to unload, such as mortgage-servicing rights or private-equity assets, said a person familiar with the situation. It also is finishing work on a dramatic restructuring of its consumer units that may eliminate at least 10,000 jobs, that person said. That is on top of 6,000 jobs already cut across the company this year.

A key meeting that will determine the extent of the additional job cuts is expected to happen shortly after Labor Day, the person said.

Like its competitors, Bank of America has struggled to make up revenue lost to a stagnant economy and tighter rules on fees.

But Bank of America faces additional worries because of its 2008 acquisition of Countrywide Financial Corp., the troubled California lender that is the source of many bad mortgages now plaguing the bank.

"No one really knows the capital hole that sits there," said Mr. Miller, the bank analyst for FBR Capital Markets.

Shareholders, he said, could get more comfortable about that exposure if a judge rules that an $8.5 billion settlement the Bank of America reached with a group of mortgage-bond investors is fair and can move forward. The Federal Deposit Insurance Corp. on Monday joined the parties objecting to that proposed agreement.

3) Four ways this economic recovery is different-From Fortune

It's hard to pinpoint exactly what has continued to hamper the U.S. economy. Economists and the media have popularly adopted the term "The Great Recession" to describe all that's gone wrong since the housing market collapsed several years ago, implying that Americans have just come out of a typical recession that, if anything, was only more severe.

Needless to say, the near implosion of the U.S. financial system was severe. But as Harvard University economist Kenneth Rogoff has pointed out, the recovery today is something that can only be called "The Great Contraction," suggesting that the aftermath of a financial crisis does not look anything close to that of a typical recession.

"In a conventional recession, the resumption of growth implies a reasonably brisk return to normalcy," Rogoff wrote earlier this month in Project Syndicate. "The economy not only regains its lost ground, but, within a year, it typically catches up to its rising long-run trend."

The recession officially ended more than two years ago. And yet, during the first half of this year, the economy barely grew. With Federal Reserve Chairman Ben Bernanke acknowledging in his speech in Jackson Hole, Wyo., last week that the problems plaguing the marketplace are beyond the powers of the central bank, it becomes all the more important for Washington lawmakers to help reboot the economy.

Members of Congress might be scratching their heads over what to do next, but perhaps as a starting point, members should look at how this recovery is different from previous ones.

Long-term business investment: Since 1949, construction has been a major component driving economic recoveries. Not only does construction of new buildings and factories help make companies become more productive, but it also creates jobs for the overall economy as each order of concrete, for instance, demands workers to do everything from taking the order to delivering it from the warehouse to the building site.

But unlike the end of other recessions when business investment surged, companies today aren't building many new factories or buying up much commercial real estate. Business investment has continued at a slow place, averaging 10.3% of GDP since the start of the latest recession – the lowest average for any business cycle since the 1970s, according to the Center for American Progress.

Given that S&P 500's non-financial companies altogether hold more than $1.1 trillion in cash and short-term investments, it's not as if America's biggest companies don't have the money to invest. So what's to blame for the pullback in spending?

"It's a question of why is it that we no longer in a recovery can fund long-term assets –basically 20 years or more – and the answer essentially is that there's a huge element of uncertainty in this economy," former

Federal Reserve Chairman Alan Greenspan said in a recent interview with The Financial Times.

Greenspan has urged Washington lawmakers and policymakers to stand aside and let the economy heal on its own. However, the pains of slow growth and high unemployment might be too much for many to endure.

What's more, doing nothing would certainly be politically unpopular especially given the 2012 presidential election.

Government job loss: The private sector may have shed millions of jobs during the depths of the latest recession, but part of what has added to the persistent gloom of the economic recovery is the slash in government jobs.

For instance in July, the private sector added 154,000 jobs but the bump was counteracted by the fact that the economy shed 37,000 public-sector jobs.

Government employment today is about 1.9% lower than it was at the start of the recovery, a fall of 430,000 jobs, according to a recent report by the Economic Policy Institute. By contrast, government employment rose by 1.1% or 232,000 jobs during the same stage of the recovery following the 2000 recession.

The stubborn woes of today's government job market have been largely due to falling tax revenues while spending on unemployment and Medicaid has surged. State and local governments, unable to legally run deficits (unlike the federal government), have been dealing with glaring budget holes by slashing headcount at an unprecedented rate. And that likely will continue – not only at the state and local level, but also the federal level depending how a special congressional committee assigned to reduce America's debt decides to find $1.5 trillion in savings.

Consumer spending: In the years leading up to the latest recession, households clearly overspent. They've since been working to improve their finances but we're still a long way from the point where household debt levels fall where consumers feel comfortable spending more and saving less.

Consumption, which makes up roughly 70% of the U.S. economy, dropped off significantly during the depths of the recession and has continued to be slow through the economic recovery. But as the Federal Reserve Bank of New York recently noted, what has been unusual is the decline in spending on discretionary services like education, entertainment and meals at restaurants.

Spending on such luxuries partly drove the decline of real GDP during the latest recession. It is down nearly 7% -- more than double the percentage decline seen in the early 1980s recession.

Housing: During most economic recoveries, the housing industry typically rebounded in a big way and helped drive overall growth.

Needless to say, this hasn't played out this time. And it become less likely that it will, given expectations that home prices could fall further as an onslaught of foreclosures could eventually seep into the housing market already in excess.

This not only impacts home sales, but it also means consumers will spend less on furniture and appliances and other housing-related goods and services.

Bernanke, acknowledging that economic policies supporting strong economic growth in the long run are beyond powers of the central bank, has urged Washington lawmakers to adopt "good, proactive housing policies" to undo the depressed real estate market.

Quote of the Day from Dave Ramsey.com:

People are changed, not by coercion or intimidation, but by example. — John Maxwell

Financial Headline News for Friday 8/26

Stocks were up significantly after being down big in the morning.

Ben Bernanke is becoming the modern day EF Hutton-when he speaks everyone listens as the stock market did a complete reverse and rallied after his speech today. Bernanke proposed no new steps to boost the economy but hints Congress should help.

The economy seems to have slowed to a crawl as the GDP increased by a meager 1% in July.

Here are the top financial stories of the day:

1) Stocks Turn Positive After Bernanke-From The Wall Street Journal

U.S. stocks surged in whipsawed trading Friday as investors applauded Federal Reserve Chairman Ben Bernanke's stern remarks urging fiscal policymakers to take appropriate measures to jumpstart the struggling economy.

The Dow Jones Industrial Average recently rose 157 points, or 1.4%, to 11307. The blue-chip index staged a big reversal after opening lower and dropping as much as 221 points right after Mr. Bernanke's comments were released.

Stocks pared losses throughout the morning and turned higher after market participants had time to digest the Fed chief's latest remarks about the weak economic landscape.

Investors said much of Friday's bullish tone was related to the comments Mr. Bernanke made at the end of his speech. He criticized the debt-ceiling negotiations this summer, saying they disrupted financial markets as well as the economy. Mr. Bernanke also noted "the country would be well served by a better process for making fiscal decisions."

"I think we got exactly what we needed to get from Bernanke," said Phil Orlando, equity strategist at Federated Investors. "I thought he took the Congress and the Administration to the woodshed. The Fed's done all it can from a monetary standpoint. Now it's time for appropriate fiscal policies to get the economy going again."

The Standard & Poor's 500-stock index gained 21 points, or 1.8%, to 1180, led higher by consumer discretionary and technology stocks. All 10 of the S&P 500's sectors rose. The technology-heavy Nasdaq Composite surged 64 points, or 2.6%, to 2483.

Mr. Bernanke said the Fed is ready to provide further support to a persistently weak economy, but didn't indicate any move was imminent despite fresh signs of anemic growth. He didn't elaborate on the central bank's remaining tools to boost the economy. Instead, Mr. Bernanke said the Fed would extend its mid-September meeting to two days to discuss options the central bank could pursue.

"The Fed made the right move," said Douglas Cote, chief market strategist at ING Investment Management.

"It is prudently stepping aside to keep the pressure on the U.S. administration to institute both long-term fiscal restraint and pro-growth economic policies."

Mr. Cote said he is not in favor of a full-fledged third bond-buying program, commonly known as quantitative easing, or QE3. "These short-term fixes are the wrong answer," he added. "All monetary authorities can do is buy time. I want some long-term structural reform."

Before Mr. Bernanke's comments, the Commerce Department said gross domestic product rose 1% during the April-to-June period—revised down from 1.3%—which matched Wall Street expectations. Additionally, U.S. consumer confidence barely inched up at the end of August after plunging earlier in month, according to data released Friday.

Investors were also keeping an eye on Hurricane Irene, which headed toward landfall on the East Coast. Seth Setrakian, co-head of trading at First New York Securities, said he wouldn't be surprised if this rally faded by end of the day, especially as concerns ramp up about what sort of impact the hurricane may have.

"You could see a fear selloff into the end of the day," he said. "People are starting to freak out. A lot of risk reduction could happen because no one knows what's going to happen."

Gold futures climbed to about $1,795 an ounce as investor anxiety prompted some moves back into the haven asset after a sharp selloff this week. Crude-oil futures pared earlier losses and traded around $85 a barrel. The U.S. dollar lost ground against both the euro and the yen.

In corporate news, shares of Tiffany climbed 9.3% after the high-end jewelry retailer reported better-than-expected fiscal second-quarter results and raised its full-year earnings estimate.

OmniVision Technologies slumped 31% after the imaging-technology company issued a disappointing earnings and revenue outlook for the current quarter.

Pandora Media climbed 7.5% after the company reported fiscal second-quarter revenue that was more than double year-earlier levels.

Shoe Carnival's fiscal second-quarter profit fell 34% as the retailer blamed inclement weather for softer-than-expected sales, though it issued an optimistic outlook for the current period. Shares fell 3.1%.

Krispy Kreme Doughnuts' fiscal second-quarter profit soared as the doughnut chain posted higher same-store sales and a sharp increase in franchise revenue abroad. The stock rose 13%

2) Bernanke proposes no new steps to boost economy-From the AP

Federal Reserve Chairman Ben Bernanke leaned on Congress on Friday to do more to promote hiring and growth, or risk delaying the economy's return to full health.

Bernanke proposed no new steps by the Fed to boost the economy. But at a time when Congress has been focused on shrinking long-run budget deficits, he warned lawmakers not to "disregard the fragility of the current economic recovery."

Bernanke, who spoke at an annual economic conference in Jackson Hole, left open the possibility that the Fed will take further steps to strengthen the economy. He said its September policy meeting will be held over two days, instead of just one, to allow for a "fuller discussion."

But analysts said the speech provided no assurances of any new help from the Fed.

"He appears to be saying that the Fed has largely played its part and that the politicians need to step up their game," said Paul Dales, senior U.S. economist at Capital Economics.

Stocks fell after the speech was released but then recovered. The Dow Jones industrial average rose about 150 points in early-afternoon trading as traders responded to Bernanke's judgment that the job market and the economy would return to full health in the long run.

Bernanke's speech followed news that the economy grew more slowly in the April-June quarter than previously estimated -- a meager 1 percent annual rate.

Some economists worry that Europe's financial crisis, along with persistently weak U.S. job growth and falling home prices, could tip the economy into another recession. Those fears have pulled down stock prices in the past month. The Dow has lost 12 percent of its value since late July.

The sell-off on Wall Street was triggered Congress's battle over raising the debt ceiling. In his speech, Bernanke criticized lawmakers for their handling of the issue and warned that further standoffs could hurt the economy in the long run.

A plan Congress passed this month means annual deficits are expected to be reduced by $3.3 trillion over the next decade through spending cuts.

The Fed chairman said long-term deficit reduction is necessary. But he said that future economic health could be jeopardized if hiring and growth are not strengthened now.

Analysts noted the lack of new proposals in Bernanke's speech.

But Aneta Markowska, senior U.S. economist at Societe Generale, said the extension of the Fed's September meeting to two days might suggest something new could be unveiled.

Many have looked with anticipation to the Fed to do more. It has already kept short-term interest rates near zero for 2 1/2 years. And earlier this month, it said it would keep them there through mid-2013.

"I'm a little fearful that there are a lot of expectations built in that I don't think Bernanke can deliver on," said Jack Ablin, chief investment officer at Harris Private Bank.

To promote growth, Bernanke said the government must pursue tax, trade, and regulatory policies that encourage economic health.

The approach of this year's Jackson Hole conference raised expectations. In last year's speech, Bernanke signaled that the Fed might unveil a Treasury-buying plan to help lower long-term rates. In November, the Fed announced a $600 billion such program. The bond purchases were intended to lower long-term rates, lift stock prices and spur more spending.

Immediately afterward, stock prices started rising and continued up until May, when they leveled out.

Still, critics, from congressional Republicans to some Fed officials, have raised concerns that the Fed's Treasury purchases could ignite inflation and speculative buying on Wall Street, while doing little to aid the economy.

Others have wondered whether any further lowering of long-term rates is needed. Investors seeking the safety of U.S. debt have forced down the yield on the 10-year Treasury note to 2.19 percent -- a full point lower than it was when the Fed completed its Treasury purchases about two months ago. Yet the economy is still sputtering.

The Congressional Budget Office this week estimated that the unemployment rate will hover around 8.5 percent when President Barack Obama seeks re-election next year. And it predicts that unemployment will stay above 8 percent through 2013.

That continued weakness is why many speculated that the Fed would still embark on some new plan to help the economy. They note that while inflation has risen, it's still within the Fed's target range.

At their meeting earlier this month, Bernanke said policymakers discussed the "relative merits and costs" of further steps to spur growth. Clues to where the Fed is leaning might be found in those meeting's minutes, which will be released Tuesday.

"There could be more action, but we're in treacherous waters right now," said John Silvia, Wells Fargo's chief economist. "What he's doing is making small moves."

Many economists note, however, that the economy's main problem is not that interest rates are too high.

They say the main problem is that consumer spending remains too weak. So businesses feel little incentive to hire, expand and invest.

Until demand for goods and services steps up, the Fed may have limited ability to strengthen the economy.

Joshua Shapiro, an economist at MFR Inc., said that by dwelling on budget and tax issues facing Congress, Bernanke was conceding that the Fed has "basically exhausted its tools."

3) Economic Growth Slows to Crawl, GDP Increase at 1%-From CNBC

The U.S. economy grew much slower than previously thought in the second quarter as business inventories and exports were less robust, a government report showed on Friday, although consumer spending was revised up.

Gross domestic product growth rose at annual rate of 1.0 percent the Commerce Department said, a downward revision of its prior estimate of 1.3 percent. It also said after-tax corporate profits rose at the fastest pace in a year.

Economists had expected output growth to be revised down to 1.1 percent. In the first quarter, the economy advanced just 0.4 percent. The government's second GDP estimate for the quarter confirmed growth almost stalled in the first six months of this year.

The United States is on a recession watch after a massive sell-off in the stock market knocked down consumer and business sentiment. The plunge in share prices followed Standard & Poor's decision to strip the nation of its top notch AAA credit rating and a spreading sovereign debt crisis in Europe.

While sentiment has deteriorated, data such as industrial production, retail sales and employment suggest the economy could avoid an outright contraction.

The GDP report comes as central bankers from around the globe gathered for a conference in Jackson Hole, Wyoming.

Federal Reserve Chairman Ben Bernanke will deliver the keynote address on Friday, which will be watched for any sign a further easing of U.S. monetary policy is on the way to support the ailing economy.

The downward revisions to second-quarter growth came as businesses accumulated less stock than previously estimated. Business inventories increased $40.6 billion instead of $49.6 billion, cutting 0.23 percentage point from GDP growth during the quarter.

However, the slow build-up of inventories means goods are not piling up on shelves, which should support growth in the third quarter. Excluding inventories, the economy grew at a 1.2 percent rate.

Output was also curbed by exports, which grew at a 3.1 percent pace instead of 6.0 percent. Imports increased at a 1.9 percent rate rather than 1.3 percent. That left a slightly wider trade deficit and trade barely contributed to GDP growth. Trade had previously been estimated to have added 0.58 percentage point to overall output.

The drag from business inventories was offset by consumer spending, which was revised up to a 0.4 percent rate from 0.1 percent. The increase in spending, which accounts for more than two-thirds of U.S. economic activity, was still the smallest since the fourth quarter of 2009.

Business spending was revised to a 9.9 percent rate of increase from 6.3 percent as investment in nonresidential structures and equipment and software was stronger than previously estimated. But there are fears that the recent stock market rout could make businesses a bit hesitant to spend on capital and hiring.

The report also showed that after-tax corporate profits increased 4.1 percent in the second quarter after edging up 0.1 percent in the first three months of the year. It also showed inflation pressures abating, with the personal consumption expenditures price index rising at a 3.2 percent rate. That compared to 3.9 percent in the first quarter.

The core PCE index closely watched by the Fed advanced at a 2.2 percent rate, the largest increase since the fourth quarter of 2009. It was revised up from 2.1 percent.

Quote of the Day from Dave Ramsey.com:

Proverbs 10:4 — Lazy hands make for poverty, but diligent hands bring wealth.

Financial Headline News for Thursday 8/25

Stock were down big today due to the disappointing first time job claims and in anticipation of this weekend's potentially devastating northeastern hurricane.

Another bad week of first time unemployment claims as today's figure came in 12,000 more than was projected.

Warren Buffett invested $5 billion on Bank of America and made a $280m profit stake in just 24 hours.

Here are the top financial stories of the day:

1) Stocks sink, ending a three-day rally; Dow off 170-From the AP

Stock indexes fell sharply soon after trading began Thursday and then bounced around near their bottoms the rest of the day, ending a three-day rally.

Indexes in both the U.S. and Europe sank after Germany's main stock index, the DAX, suddenly dipped 4 percent. Traders struggled to explain the dive. The Dow Jones industrial average closed down 170.89 points, or 1.5 percent, to close at 11,149.82. It had been up 85 points the first few minutes of trading.

Bank of America Corp. jumped 9 percent on news that Warren Buffett will invest $5 billion in the troubled bank. BofA had lost half its value this year as investors worried about its need to raise capital and its growing liabilities related to subprime mortgages. BofA stock was up 26 percent early, to $8.80, and closed at $7.65, up 66 cents.

Other banks also rose after the billionaire investor gave his backing to Bank of America. Morgan Stanley gained 2.7 percent and Citigroup Inc. 4.8 percent. BofA and American Express Co. were the only two of the 30 companies in the Dow to rise.

This week's trading has been marked by a series of sudden reversals. Robert Stein, a money manager responsible for $1.2 billion at Astor Asset Management, said questions about the economy have made investors uncertain and the stock market more volatile. Gains made one day have disappeared the next, or even in the same day.

"We're not seeing anything that's convincingly bearish enough to call another recession, but nothing optimistic enough to suggest that a recovery is going to regenerate," Stein said.

Friday could be another day of big swings as Federal Reserve Chairman Ben Bernanke gives a highly anticipated speech at a conference in Jackson Hole, Wyo. Bernanke speaks at 10 a.m. EDT.

Earlier Thursday, the government reported an increase in the number of people applying for unemployment benefits last week. The Labor Department said applications rose to 417,000, the highest in five weeks, but the figure was inflated by a strike at Verizon that earlier this week.

The S&P 500 index fell 18.33 points, or 1.6 percent, to 1,159.27. The Nasdaq fell 48.06 points, or 1.9 percent, to 2,419.63.

The S&P, the benchmark for most money managers, has gained 3 percent this week but is still down 10 percent for the month. Thursday's drop broke a three-day rally in which the Dow gained 503 points.

Paul Zemsky, chief investment officer of ING Investment Management in New York, said this week's gains were a result of investors bargain-hunting after stocks fell too far over the past month. He also said some of the gains were caused by technical trading as investors bought shares to exit short positions, or bets that the market would continue to fall.

Zemsky expects to see more big swings as long as the fear of recession hangs over the market. "People are trying to adjust their positions to news," he said. "Once it's clear where the economy is headed, I think things will calm down."

There's plenty of speculation about whether Bernanke will offer more support for the economy. It was at the same conference last year that he laid out an argument for what became a $600 billion bond-buying program by the central bank.

Zemsky thinks there's little chance Bernanke will announce any action Friday. "There's nothing more than hope that Bernanke will drop a gift from the sky."

More than three stocks fell for every one that rose on the New York Stock Exchange. Trading volume was above average at 5 billion shares, thanks to BofA, which accounted for nearly 900 million shares.

2) Job Market Still Looks Weak-From The Wall Street Journal 

A 15-day strike at Verizon Communications Inc. fueled a surge in new jobless benefit claims last week, but the job market still looks weak after stripping out those effects.

Initial jobless claims rose by 5,000 to a seasonally adjusted 417,000 in the week ended Aug. 20, the Labor Department said Thursday. Claims filed in the previous week were revised up to 412,000 from 408,000.

Separately, an index of regional manufacturing activity by the Federal Reserve Bank of Kansas City remained flat in August despite signs of a downturn elsewhere in the U.S. The index remained at three for the month, unchanged from July, as the relatively healthy farm and energy sectors helped the region. Figures above zero indicate expansion.

Other regional manufacturing surveys suggest a slowdown in the overall economy, though jobless claims and other key indicators aren't showing substantial deterioration yet.

The Labor Department said the Verizon strike added at least 8,500 new jobless claims last week and another 12,500 claims in the week ending Aug. 13. "Those claims have inflated the national total," a Labor economist said.

Workers at Verizon, who weren't paid by the company during the walkout, began returning to work Monday evening. Verizon's unions had called the strike, involving 45,000 workers, to protest concessions the company is seeking on pensions, health care and job security. After the strike figures are stripped out, Thursday's report paints a mixed picture of the overall market.

"The labor market may be improving but the rate of improvement is very sluggish with layoffs remaining fairly elevated," said Steven Wood, chief economist at Insight Economics LLC.

The four-week moving average of new claims, which smooths out often-volatile weekly data, increased 4,000 to 407,500, the Labor Department said. Economists generally say the labor market is improving significantly when claims drop below 400,000, a level breached only once since April.

"We are concerned about the potential for weakening in job growth in coming months in response to recent plunging sentiment in response to market and political turmoil, but we aren't seeing it yet in the latest claims results," said Morgan Stanley economist Ted Wieseman.

Thursday's report showed the number of continuing unemployment benefit claims—those drawn by workers for more than a week—fell by 80,000 to 3,641,000 in the week ended Aug. 13. Continuing claims are reported with a one-week lag.

3) Berkshire Hathaway Invests $5 Billion in Bank of America-From CNBC

Warren Buffett's Berkshire Hathaway will invest $5 billion in Bank of America, stepping in to shore up the company in the same way he helped prop up Goldman Sachs during the financial crisis

Bank of America [BAC  7.65    0.66  (+9.44%)   ] shares jumped as high as $8.80 in Thursday trading before dropping later in the day. Shares rose 9.44 percent to close at $7.65 on Thursday.

"This helps with the credibility gap that I think has existed in the minds of some shareholders. It reiterates the point that the balance sheet is healthy. They needed an endorsement in the market and they got it," said Jon Finger, managing partner of Finger Interests in Houston.

Bank of America will sell Berkshire [BRK.A  103491.00    -2859.00  (-2.69%)   ] 50,000 shares of cumulative perpetual preferred stock with a 6 percent annual dividend, it said in a statement Thursday. Bank of America can buy back the investment at any time by paying Buffett a 5 percent premium.

Berkshire also will get warrants to buy 700 million Bank of America shares at an exercise price of just over $7.14 a share, with the ability to exercise any time in the next 10 years.

It is virtually a mirror of the deal Berkshire did with Goldman Sachs [GS  109.84    -0.47  (-0.43%)   ] in the depths of the crisis in fall 2008, except in this case the dividend is less. The Goldman deal paid Berkshire $15 a second in dividends until Goldman bought Buffett out earlier this year.

In an interview with CNBC on Thursday, Buffett said the loan was his idea and that "this isn't 2008," and that is why Bank of America is getting better terms for its loan from Berkshire than what GE and Goldman paid for similar loans during the financial crisis.

Market watchers said the deal proved again that Buffett had become something of a lender of last resort to the financial system, as he did with Goldman and also GE [GE  15.45    -0.27  (-1.72%)   ] .

(GE is a minority owner of NBC Universal, the parent of CNBC and CNBC.com.)

"This proves to the market that if the bank needs additional capital, which we don't believe they do, but if they needed to calm the market by raising capital, they could do it within 30 minutes with a quick call to Uncle Warren," said Sean Egan, managing principal of Egan-Jones Ratings.

Buffett called Bank of America Chief Executive Brian Moynihan this week and offered to make the investment, a Bank of America spokesman said, adding that the deal was negotiated and consummated in a couple of days.

Investors have battered Bank of America's stock on fears that the largest U.S. bank by assets has yet to overcome billions of dollars in problem mortgage loans.

In recent weeks, investors have sold shares, worrying that the bank might need to raise outside capital—as much as $50 billion by some estimates—to cope with losses and meet new industry capital rules.

Bank of America shares lost roughly a third of their value in August before this deal, and half their value since the beginning of the year.

Quote of the Day from Dave Ramsey.com:
In the absence of clearly-defined goals, we become strangely loyal to performing daily trivia until ultimately we become enslaved by it. — Robert Heinlein

Financial Headline News for Wednesday 8/24

Stocks rallied for the third consecutive day on anticipation of QE3.

Did the gold bubble burst today as it fell an astonishing $104!

Steve Jobs stepped down today from his post at Apple. He was the consummate example of the American Dream by starting this company in his garage. Hopefully his health will allow him to see Apple continue to grow like it did under his ingenuity and leadership.

Here are the top financial stories of the day:

1) U.S. Stocks Post Strong Gains-From The Wall Street Journal

U.S. stocks notched a third straight day of gains as an upbeat durable goods report set a positive tone while investors await Federal Reserve Chairman Ben Bernanke's highly anticipated speech later this week.
The Dow Jones Industrial Average gained 143.95 points, or 1.29%, to 11320.71. All but one of the Dow's 30 components closed higher.

Bank of Amerca led blue-chip gains, surging 69 cents, or 11%, to $6.99. The stock had been battered in recent weeks amid worries over mortgage litigation woes and the possibility of more capital raises. But analysts say the bank is much sounder now than it was before the financial crisis.

The Standard & Poor's 500-stock index gained 15.25 points, or 1.31%, to 1177.60. Financial and utility stocks registered the biggest gains in a broad rally. All 10 of the S&P 500's sectors rose. The technology-heavy Nasdaq Composite rose 21.63 points, or 0.88%, to 2467.69.

The recent gains comes as investors hope Mr. Bernanke's much-awaited speech on Friday will offer clues on how the central bank prepares to combat the slowing economy. That optimism may be fleeting, however, as the Fed hasn't given signs that it's ready to enact additional stimulative measures.

Stocks got a jolt early Wednesday as demand for long-lasting manufactured goods bounced back in July, giving the fragile economy a much-needed boost.

Orders for factory goods rose by 4.0% from the prior month to $201.45 billion, according to the Commerce Department. However, orders for nondefense capital goods excluding aircraft, which economists use to gauge business spending on new equipment, dropped by 1.5%.

2) Gold's Price Tumbles 5.6% in Abrupt Halt to Its Rise-From The Wall Street Journal

Gold's glittering rise came to an abrupt halt on Wednesday as investors piled out of the metal, driving prices down 5.6%.

The decline lopped $104.20 off the price of a troy ounce, pushing it down to $1,754.10. It marked a dramatic reversal after weeks of gains.

The slump began in early trading, and selling accelerated quickly as volume spiked. Ominously, in some people's opinions, the move came amid very little obviously negative news. That underscored for many analysts and investors how quickly sentiment can turn and how rapidly money can be siphoned out of the market.

Gold's decade-long rally picked up steam in recent months, driving the metal from record to record, in nominal terms. In less than two months, it rose 27%, and it appeared to be headed to $2,000 an ounce. Just one year ago, gold was at $1,200.

"An exponential move like that is unsustainable," said Pratik Sharma, managing director of Atyant Capital, a firm in Boca Raton, Fla., that has a gold fund. "Exuberance has to be washed out."

In dollar terms, the decline on Wednesday was topped only by a $143.50 plunge in January 1980, which came the day after the market peaked at close to $825.50, equal to an inflation-adjusted record of $2,397.15. That marked the end of the last great bull market in bullion.

Responding to the big swing, CME Group, which operates the main exchange where gold futures are traded, late Wednesday raised margins on gold for the second time this month, upping the amount of money it requires investors to put up to trade futures. CME said gold margins will be raised 27% as of the close of trading Thursday.

While gold is typically used as a hedge against inflation—it is considered a fixed asset that tends to retain value as other assets fall—its recent appeal has been as a protection against much worse scenarios, such as the debt problems in Europe, fears of a double-dip recession in the U.S. and possible widespread financial crisis.

3) Top 10 Reasons Steve Jobs Will Be Missed By Apple Employees-From Glassdoor.com Blog

The world is buzzing about Steve Jobs’ resignation as CEO of Apple and likely will be for weeks. After all, Jobs founded the company decades ago in his garage and has led the tech giant with groundbreaking innovations from the Apple II in the 1980’s to the iPad 2 earlier this year.

But Jobs wasn’t just a tech genius, he was a highly rated CEO (97% approval rating) with thousands of employees who will sincerely miss his outstanding leadership. But what is it that made Jobs a well-liked boss?

Glassdoor turns to those who know best – the employees who work at Apple.

Top 10 Reasons Steve Jobs Will Be Missed By Apple Employees

1. “Steve Jobs is the Thomas Edison of this century…the Steve Jobs keynote presentations are as close to ‘rock star’ as an engineer is ever going to get.” – Apple Middle Manager (Cupertino, CA)

2. “You will have lots of opportunity to practice working in a somewhat chaotic, but often creative workplace, and to benefit from the genius of Steve Jobs.” – Apple Employee (Cupertino, CA)

3. “Steve Jobs is on top of things; if he see’s bureaucracy he will cut it out, and even if he doesn’t there is a fear that if he does see you as a bureaucrat he will cut you out.” – Apple Software Engineer IV (Cupertino, CA)

4. “Absolutely loved working for Uncle Steve. The corporation, even as a corporation, was a great thing to be a part of.” – Apple Genius (Mission Viejo, CA)

5. “Great senior level management, I can see how Steve Jobs gets voted the Best CEO.” – Apple Engineer (Cupertino, CA)

6. “Steve Jobs is revered at the company. He seems to be a great leader and everyone is excited about the products.” – Apple Employee (Cupertino, CA)

7. “It’s one of the most exciting places to work for! Watching Apple grow in the Steve 2.0 era has been nothing short of astonishing.” – Apple Network Engineer (Cupertino, CA)

8. “Apple takes care of its employees. Full time workers receive health benefits, all employees are offered stock options and very good prices on previous generation apple products.” – Apple Mac Specialist (location n/a)

9. “I am proud to say that I work for Apple. The products speak for themselves and it is great to be able to use them.”  - Apple Project Manager (Austin, TX)

10. “Management is transparent and very friend, great colleagues, pleasant work environment in which you encouraged to be who you are.” – Apple Employee (location n/a)

Quote of the Day from Dave Ramsey.com:
If a leader demonstrates competency, genuine concern for others and admirable character, people will follow. — Richard Chase

Financial Headline News for Tuesday 8/23

Lost in the Great Eastern Earthquake today was that stocks rallied big time with the Dow advancing 3%.

More predictions sense there will be no economic impact from the impeding QE3.

What are going to be the effects of low interest until at least 2013? Borrowers will benefit, savers will suffer as interest rates fall which will cause a mixed blessing for firms. Good article below from The Wall Street Journal detailing this.

Here are the top financial stories of the day:

1) Stocks jump; Dow notches best gain in 2 weeks-From the AP

The Dow Jones industrial average is closing with its biggest gain in nearly two weeks.

Investors were picking up beaten-down stocks Tuesday after fears that the U.S. would slip into a recession pounded the market over the last month.

The Dow rose 322 points, or 3 percent, to close at 11,177. That's its best day since it jumped 423 points Aug. 11. It dipped about 60 points shortly after the quake hit the East Coast in the early afternoon, but recovered within minutes.

The S&P 500 index rose 39 points, or 3.4 percent, to 1,162. The Nasdaq rose 101 points, or 4.3 percent, to 2,446.

Five stocks rose for every one that fell on the New York Stock Exchange. Trading volume was higher than average at 5.2 billion shares.

2) Bernanke's 'Playbook' Can't Work Magic-From The Street

While it's possible Federal Reserve Chairman Ben Bernanke may use his speech in Jackson Hole, Wyo., to lay the groundwork for further quantitative easing as he did at the same speech last year, the market's reaction is likely to be much different.

The Dow sold off almost 150 points in reaction to Bernanke's speech on Aug. 27, 2010. A few days later, the rally began and the blue-chip index was able to add roughly 1200 points in the two months prior to the Federal Reserve actually pulling the trigger on QE2.

When the good news arrived on Nov. 3, 2010, the Dow jumped another 200 points then climbed steadily for the next six months or so, reaching near-term highs above 12,800 in late April of this year.
In the current economic environment, a similar rally after Bernanke's words would seem a miracle.

With interest rates already targeted near zero until mid-2013, the few tools the Fed has left include re-entering the mortgage market, changing the duration of its holdings, lowering the interest rate banks pay to hold reserves at the central bank, and potential purchases of large-scale bond assets.

In the very 'best' scenario, Bernanke would say that the Fed is ready to act on some combination of the above action. But economists are saying that the threat of core inflation is too high and won't ease until at least next year. If Bernanke plays ball and the markets assume QE3 won't be announced for another four months down the road, then an imminent rally on the chairman's words seems unlikely.

Furthermore, even if investors do expect further quantitative easing from the Fed, whether that alone would send investors back into stocks is also uncertain. The idea that fiscal stimulus is the answer has taken a hit given how QE2 played out. Stocks have essentially tanked since the $600 billion bond-buying binge concluded at the end of June, and neither the housing market nor the employment picture saw any meaningful benefit beyond stabilization.

"You can't necessarily say that further quantitative easing will put the economy in a better place," says Paul Nolte, strategist at Dearborn Partners.

He expects Friday will be nothing more than the "proverbial pushing on a string," adding later that: "Bernanke is working with one lever that doesn't necessarily reach into the economy as much anymore."

"While I don't think we're setting ourselves up for disappointment, there won't necessarily be a catalyst for upside either," says David Lefkowitz, strategist at UBS. "No one speech is going to change anything in a big way." Like many economists, Lefkowitz is largely expecting Bernanke to "clarify" the Fed's options and "reassure" investors, not announce QE3 definitively.

So what can we expect Friday's market reaction to be?

Given the violent swings after the Federal Reserve's latest FOMC statement Aug. 9, Bernanke's words will likely trigger a lot of volatility. The Dow plunged almost 300 points immediately after the Fed changed its "extended period" language in regards to low interest rates, but rebounded to finish that same session ahead by 430 points. That didn't mean much though as sellers gouged the Dow more than 500 points the next day.

For this Friday, Nolte of Dearborn Partners says he expects a swing in the Dow, either up or down, of 75 to 150 points. However, "whether anybody is willing to hold that position over the weekend is another question," he added.

The longer term effect of Bernanke's speech is much harder to predict.

Bernanke's language could be interpreted two ways as the FOMC announcement was. On the one hand, keeping interest rates near zero until at least 2013 made investors feel like the Fed was doing something. On the other hand, the announcement suggested that the Fed was worried about a double-dip recession but remained reluctant to say the "R" word.

Similarly, investors might cheer if Bernanke shows that the Fed stands ready to act.

But "the fear is that an aggressive move would be seen as an admission by the Fed that the economy is slipping into a recession," writes Marc Pado of Cantor Fiztgerald. "In an environment where the one thing that is lacking is 'confidence,' we don't want to see the Fed Chairman panicking. On the flip side, to do nothing might be seen as complacent, and hurt the market."

Jim Cramer weighs in with his prediction for Friday in a recent blog post : "I think that the post-Jackson Hole move will be just like the post-Merkel-Sarkozy period."

The disappointing results of the meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel sent the Dow tumbling 160 points at the day's lows on Aug 16, but the index did pare losses before the close.

Lefkowitz of UBS notes that Merkel and Sarkozy didn't give a 'playbook' for solving the Eurozone crisis. "I think they missed expectations in that regard whereas I think the Fed will give you a playbook so expectations will be met."

Another factor to consider is that the timing of Bernanke's speech, which coming just before the weekend might allow investors extra time to digest his words. By the following Monday, investors could be trading on more fundamental news than speculation.

3) Living in a Low-Rate World-From The Wall Street Journal 

Federal Reserve Chairman Ben Bernanke has put the financial world on notice: Brace for two more years of rock-bottom interest rates.

That is great news for borrowers, but it promises rough going for anyone seeking returns from fixed-income investments—from retirees to giant pension funds to companies sitting on record amounts of cash.

It has been almost three years since the Fed cut its key rate to almost zero, and on Aug. 9, the central bank said rates are likely to remain there until at least mid-2013. Rates for everything from Treasury bills to money-market funds are near zero. The yield on the 10-year note briefly slid below 2% last week, a level last seen in April 1950.

Central banks traditionally use low rates to prompt more borrowing and nudge investors to seek higher returns in riskier assets like stocks, thereby boosting the broader economy.

But the benefits may not flow so easily. Consumers are showing few signs of wanting to borrow, bank and insurer profits are likely to suffer, and, with the stock market sliding, pension and other investment funds face years of low returns.

Some analysts worry the U.S. may be in for a Japan-like scenario of years of low rates, sluggish growth, and poor returns.

If you do Depression-type studies, then you've seen this pattern before—or Japan," says Priya Misra, head of U.S. rates strategy at Bank of America Merrill Lynch. "Both comparisons are not great."

Consumers

For consumers, low rates mean cheap loans for everything from a new home to a new car. But with millions of people nearing the end of their working lives, low rates also portend meager returns on fixed-income investments. With the stock market well below its 2007 highs, that could be particularly painful.

"The retiree who doesn't have any debt, but relies on interest income to supplement their Social Security check, they're really feeling the squeeze from lower interest rates," says Greg McBride, senior financial analyst at personal finance website Bankrate.com.

Yields on savings vehicles such as certificates of deposit, or CDs, have fallen sharply. In 2006, the average one-year CD yielded roughly 3.78%, according to Bankrate.com. As of last week, that was down to 0.42%. Average seven-day yields on the more than $2.5 trillion in assets in money-market mutual funds are near zero, at 0.01%, according to data provider iMoneyNet. In 2007 they hovered above 4.5%.

On the flipside, mortgage rates have tumbled sharply. On Friday, Freddie Mac reported mortgage rates hit their lowest level in more than 50 years, with the average 30-year fixed-rate mortgage at 4.15%.

Banks

One of the most basic ways banks make money is by borrowing at low short-term interest rates and lending at higher long-term rates.

While short-term rates have little room to fall, longer-term rates have been in decline.

Banks try to cope by cutting what they pay depositors, but that often isn't enough. One measure showing the pressure is banks' yield on assets, which fell to 4.41% for banks with assets of more than $1 billion in the first quarter, the lowest in at least six years, according to the Federal Deposit Insurance Corp. Exacerbating the problem, demand for loans is low, and customers are still pouring in savings.

Zions Bancorporation of Salt Lake City is cutting rates by as much as two-thirds on certificates of deposit as they mature, in an effort to keep costs down while loan demand is weak.

In Ann Arbor, Mich., small mortgage lender University Bank has few takers for loans. "My customers aren't borrowing, because they are worried about the future," says Stephen Lange Ranzini, the bank's chief.

On the upside: Banks are sitting on $19 billion of unrealized gains, mainly on Treasurys and other bonds that rallied amid the economic uncertainty, according to Nomura Equity Research. But generally, the negatives outweigh the positives.

"The risk is that low interest rates will eat into profits for years," says Craig Siegenthaler, an analyst at Credit Suisse.

Companies

Low rates are a mixed blessing for corporations, which have been raising billions in the bond market at sometimes record-low rates. But companies including Apple Inc. and Google Inc. are also sitting on record amounts of cash. According to Standard & Poor's, the top 500 U.S. companies by market capitalization had almost $1 trillion in cash and cash equivalents at the end of the first quarter. Low rates mean they are earning remarkably little on that hoard.

Data-storage company Equinix Inc. keeps the majority of its $1.2 billion in cash in Treasurys, but the Redwood, Calif.-based company is getting a tiny return of 0.10%, says Chief Financial Officer Keith Taylor. In some cases, it is a negative rate after fees, he says.

In late July, Mr. Taylor began moving cash to higher-yielding assets such as commercial paper, where the company receives about 2%, he says. He is also looking at moving funds into the debt of countries like Canada.

Others are moving to take advantage of low borrowing costs. At Utah-based self-storage company Extra Space Storage, finance chief Kent Christensen's team is working to lock in the lowest interest rates he has seen in years.

Mr. Christensen says the sudden drop in interest rates has emboldened the company to quickly refinance the debt on some of its 820 storage facilities, which could save $2 million to $4 million this year.

"We have more interest and debt than we did three years ago, but we're actually paying a lower amount of interest costs than we were," he says.

Institutional Investors

Pension funds and insurance companies are among the biggest owners of bonds in the U.S., and they face serious headaches as they cut checks to retirees or pay claims to policyholders.

For many pension funds, low yields are one half of what Goldman Sachs analysts call a "double whammy" with lower stock prices. Goldman estimates that the aggregate funded status—a measure of plan assets as a share of estimated obligations—of U.S. corporate-pension plans in the Standard & Poor's 500-stock index was down to about 75% as of mid-August, from 85% at the beginning of 2011.

State pensions face a similar squeeze. The plans are shooting for a return of 8%, the median assumption of 126 plans, the National Association of State Retirement Administrators says on its website. That would be a challenge at the best of times.

Insurers are sensitive to interest rates because premiums that pour in from policyholders are mostly invested in bonds. Some insurers, like MetLife Inc., have hedging programs to help manage the situation, according to Barclays Capital. Still, "low interest rates are pressure points" across the industry, says UBS Securities insurance analyst Andrew Kligerman.

Insurers are likely to raise prices to make up for some of the lost income, though those in highly competitive parts of the property-casualty industry will find it tough to do so, analysts say. As rates have fallen over the past couple of years, some life insurers already have redesigned and repriced products, offering less-generous benefits, and some have exited product lines entirely.

The problem is worrisome enough for Moody's Investors Service to release a report Friday warning that ultralow rates for five or more years would subject some life insurers "to substantial losses that could result in downgrades, some multi-notch."

Quote of the Day from Dave Ramsey.com:

Many of life's failures are people who did not realize how close they were to success when they gave up. — Thomas Edison

Financial Headline News for Monday 8/22

Stocks were relatively tame today after the wild frenzy of past weeks.

Ben Bernanke is still trying to concoct a way to throw QE3 upon us. I guess failure twice in QE1 and QE2 wasn't enough for him.

Are you wondering as the price per barrel of oil is going down, why we are not seeing more of a drop in the actual price per gallon at the pump? There is a good article from the Wall Street Journal below explaining why which includes the devaluation of the dollar thanks to the aforementioned QE1 and QE2.

Here are the top financial stories of the day:

1) Bargain hunters tiptoe back but remain cautious-From Reuters

U.S. stocks ended slightly higher on Monday after four weeks of losses as investors hesitated to take big risks without a catalyst for buying.

The market was led by large-cap techs and industrials until late in the session when a rally faded.

Banks struggled. Bank of America (NYSE:BAC - News), the largest U.S. bank, fell 7.9 percent to $6.42, the biggest drop among the Dow's components. Chief Executive Brian Moynihan sent a memo to senior executives last week outlining plans to cut another 3,500 jobs. JPMorgan Chase (NYSE:JPM - News) lost 2.7 percent to $33.41.

"The ground zero of all worries is financials," said Charlie Smith, chief investment officer of Pittsburgh-based Fort Pitt Capital Group.

Google (NasdaqGS:GOOG - News), Hewlett-Packard (NYSE:HPQ - News) and IBM (NYSE:IBM - News), were among the top gainers. Hewlett-Packard shares came back from a 20 percent decline on Friday in its worst day since 1987.

The S&P 500 has dropped 12.7 percent so far in August on fears of another recession and the intractable European debt crisis. The rebound came on lower volume than in recent days of selling.

"I don't see any major appetite for buying stocks. We are driven higher (today) because of selling exhaustion," said James Dailey, portfolio manager of TEAM Asset Strategy Fund in Harrisburg, Pennsylvania.

One possible spark for the market could be Federal Reserve Chairman Ben Bernanke's Friday speech in Jackson Hole, Wyoming. Some in the market hope Bernanke will hint at additional stimulus measures that could buoy stocks.

"Until we get some kind of a catalyst from Europe regarding the sovereign debt crisis or from the Fed later this week, I expect range-bound trading with high intraday volatility," said Dailey.

The Dow Jones industrial average (DJI:^DJI - News) was up 36.85 points, or 0.34 percent, at 10,854.50.

The Standard & Poor's 500 Index (^SPX - News) was up 0.29 point, or 0.03 percent, at 1,123.82. The Nasdaq Composite Index (Nasdaq:^IXIC - News) was up 3.54 points, or 0.15 percent, at 2,345.38.

IBM shares gained 0.9 percent at $158.98 and Hewlett-Packard rose 3.6 percent to $24.45.

On Monday, Credit Suisse cut its year-end target for the S&P 500 to 1,100 from its previous level of 1,275. U.S. equity strategist Doug Cliggott cited expectations for lower earnings in coming quarters and little hope for price-to-earnings multiples to expand.

Some investors hope the Fed will announce a new stimulus after the central bank promised earlier this month to keep interest rates near zero for at least two more years and said it would consider further steps to help growth.

Shares of Lowe's Companies Inc (NYSE:LOW - News) rose 1.1 percent to $19.53 after the company said it has put aside $5 billion to buy back its shares over the next two to three years, joining a string of companies using their cash reserves to shore up their stocks in a weak economy.

2) How to Tell If QE3 Is Coming-From CNBC

Reading Fedspeak has never been easy, but these tips will help you weigh the odds of another round of pain for the dollar - er, quantitative easing.

Want to figure out if QE3 is in the works? You could wait to hear what Fed Chairman Ben Bernanke has to say at Jackson Hole - or you could consider these clues.

Marc Chandler, global head of currency strategy at Brown Brothers Harriman, looks for a convergence of indicators to figure out the odds of QE3. Right now, he told me, surveys of things like sentiment and consumer confidence are quite negative, but "real data like retail sales - those data are holding up better."

For Chandler to view QE3 as likely, he says, "I would want to see that survey data as lead indicators for the real sector data. I would want to see the real sector data break down. We're not seeing that yet."

Aroop Chatterjee, foreign exchange strategist at Barclays Capital, looks at long-term inflation expectations.

He has compared five-year over five-year inflation expectations now and right before the beginning of QE2, and he says investors are now expecting about 2.5% inflation, compared to less than 2% before the last round of easing. Chatterjee argues that the dollar (New York Board of Trade (Futures): .DXY) has remained weak against the euro (Exchange: EUR=X)because investors are anticipating QE3, but he says, "I think the Fed would want to see more evidence of a real slowdown in the economy" before committing to another round.

Others think QE3 could be with us already. "Holding the fed funds rate low to the middle of 2013 will require the Fed to buy quite a lot of bonds, and that is actually a de factor QE3," Diane Swonk, chief economist at Mesirow Financial, told me.

Swonk says that as recently as a few weeks ago, she would have put the odds of QE3 quite low. But the downward revision of GDP "lowered that threshold quite dramatically," she says, as did the wrangling over the debt ceiling and the euro zone's failure to resolve its issues.

You have to decide for yourself whether QE3 is in the works. But at least now you can understand the Fedspeak.

3) Oil's Slide Stalls at Pump-From The Wall Street Journal

U.S. benchmark oil prices have tumbled since early May, but drivers—and the economy—have yet to feel the full benefit.

While crude-oil futures on the New York Mercantile Exchange are down 38%, ending last week at $82.26 a barrel, the average price of gas at the pump is down just 9% in that time.

That suggests that some forecasts for an easing of pressure on the U.S. economy may be optimistic, for now.

Economists estimate that a $10 drop in oil prices translates to an increase of a few tenths of a percent in gross-domestic product growth. But that is largely dependent on the decline in prices flowing through to consumers. With financial markets tumbling due to fears of a second recession in the U.S. and debt contagion in Europe, dropping fuel costs would be a welcome relief for household budgets and business balance sheets.

The disparity comes in part because of a quirk in the oil market—U.S. gasoline prices are affected far more by international crude prices, which haven't come down as much as U.S. crude prices. In fact, the gap between international prices and U.S. Nymex oil is at a record high. That all could change—even if temporarily—should the success of rebel forces in Libya fuel investors' hopes for the reopening of the oil fields in the nation.

Even then, gas prices are still lagging behind. Much of the fuel sold in the U.S., especially on the East Coast, follows the price of Brent crude, which is down 14% since the beginning of May. The Nymex price is primarily a benchmark for some oil in the middle of the U.S.

Brent is being held relatively high by strong demand from emerging markets such as China, and lingering worries about turmoil in the Middle East, which could curtail supplies. Refiners have been reluctant to ratchet down prices, hoping to capture as much profit as possible lest prices shoot higher again, said Sander Cohan, principal at energy consultancy ESAI Inc.

"Typically, the retailer will raise prices in front of rising crude and be more reluctant to lower prices" when it drops, he said.

Some consumers have noticed.

"I don't understand how the oil price can fluctuate so much, and yet the price of gas has just not changed," says Ritch Blasi, a 57-year-old telecom marketer from Middlesex, N.J. "If a barrel of crude drives the price, there's a lot of different things that happened between that crude and when it goes into my car. And something in there is messed up."

lag may be expected, but this time around it is far more pronounced. In the second half of 2008, for example, when oil slumped 68%, gasoline prices fell 61%. Regular-grade retail gasoline was at $3.58 a gallon last week, according to the Energy Information Administration. Prices remain 33% higher than this time last year, while crude is just 11% higher.

Many suggest that crude prices may be unlikely to fall much further, removing hopes for further relief for the economy.

In a shift from recent years, when investment flows and prices of other assets were guiding oil-price projections, analysis of supply and demand is regaining its importance. The continued thirst for oil in China and other countries has become a crucial part of that.

Nymex prices have hewed close to $80 in recent trading. Tim Evans, an oil analyst with Citi Futures

Perspective, said prices near current levels are reasonably balanced given the current outlook for oil supply and demand, a view shared by several market watchers.

J.P. Morgan Chase & Co. expects oil demand to grow by as much as 1.2 million barrels a day this year, despite worries that the U.S. is downshifting to another recession, with turmoil in the U.S. and Europe cutting just 250,000 barrels a day from its earlier forecast.

The International Energy Agency, an agency looking out for the interests of oil-consuming nations, expects a more conservative increase of 600,000 barrels a day, based on a forecast that the global economy will grow by 3% in 2011.

"Demand growth continues to be driven almost exclusively by emerging markets," wrote Lawrence Eagles, J.P. Morgan global head of oil research, in a report.

China's fuel consumption is expected to grow by 6.1% this year despite efforts by the government to slow growth, and will reach more than 10.1 million barrels a day in 2012, according to the IEA. Demand is expected to grow by 3.6% this year in India.

On the supply side, the civil war in Libya has meant exports from that country have essentially halted. Before the outbreak of fighting, it was producing 1.7 million barrels of oil a day.

Overall, though, the expected growth in global demand for oil has outweighed the decline in gasoline use seen in the U.S. The Department of Energy expects U.S. demand to fall to 10-year lows during what's usually the peak summer driving season.

Only a major cratering in the global economy is likely to bring either Brent or Nymex oil prices back down to the lows seen in 2008, says Adam Sieminski, chief energy economist at Deutsche Bank.

"Could you go to $40? Sure, but only if we're going to have the Great Depression all over again. Oil will be $30 and a cup of coffee will be 25 cents," Mr. Sieminski says.

Quote of the Day from Dave Ramsey.com:
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