First time unemployment claims this week of 428,000 came in way over the 410,000 that were expected.
It looks like more and more people are following Dave Ramsey's advice as most major credit card issuers report further declines in defaults and late payments for August.
Here are the top financial stories of the day:
1) Dow Win Streak at 4, With 186-Point Gain-From the Wall Street Journal
Stocks notched a fourth consecutive day of gains after a pledge by central banks to pump dollars into the European banking system.
Bank stocks led the way higher as the Dow Jones Industrial Average rose 186.45 points, or 1.7%, to 11433.18, closing a hair's width from session highs.
Bank of America was the strongest blue chip, rising 4%, followed by J.P. Morgan Chase, which gained 3.1%. The Standard & Poor's 500-stock index gained 20.43 points, or 1.7%, to 1209.11, with all sectors rising. The measure's financial components jumped 2.6%. The technology-oriented Nasdaq Composite added 34.52 points, or 1.3%, to 2607.07.
The Russell 2000 index of small-capitalization stocks posted its first four-day winning streak since July, rising 9.39 points, or 1.3%, to 713.51. Smaller stocks are generally viewed as a riskier segment of the market.
Investors were encouraged by five major central banks' decision to arrange three new funding operations aimed at stemming a liquidity crisis. The move took some pressure off European lenders that have faced trouble borrowing the U.S. currency. It also underscored the funding predicament those lenders face.
"It's a newer, bigger, slightly better Band-Aid," John Brady, vice president at MF Global, said. "There's nothing to address the value of the sovereign bonds on European banks' balance sheets."
In corporate news, Morgan Stanley was one of the S&P 500's strongest performers, rising 7.2% after disclosing that Chairman and former Chief Executive John Mack will step down from its board at the end of the year.
Stocks' gains came despite discouraging U.S. economic news. Initial claims for unemployment benefits in the latest week were worse than economists had anticipated, underscoring the weakness in the job market. A survey of New York-area manufacturing activity worsened. Also, the consumer-price index for August showed an inflation rate of 0.4%, and 0.2% when adjusted to strip out prices of food and energy.
A fourth batch of data showed that an index on manufacturing activity in the Philadelphia area remained in negative territory, but improved from a contraction in August.
2) Jobless Claims, Inflation Rise, Manufacturing Gets Weaker-From CNBC
Applications for unemployment benefits continued to rise in the past week, while inflation pushed higher and a key manufacturing index weakened.
The weekly jobless claims number, which is closely watched as an indicator for employment trends, unexpectedly rose 11,000 to 428,000, well ahead of estimates of 411,000.
The consumer price index, meanwhile, gained 0.4 percent when including volatile food and energy prices, after an increase of 0.5 percent in July. The so-called core CPI, though, gained 0.2 percent, which was in line with expectations.
Consumers paid more for a range of goods and services last month, pushing up inflation and squeezing Americans' purchasing power.
For the 12 months ending in August, the core index surged 2 percent, the biggest year-over-year increase in nearly three years. That's at the top end of the Federal Reserve's informal inflation target.
It could limit the central bank's ability to take further steps to try to revive the economy.
Food prices rose 0.5 percent, the biggest increase since March. That was due to higher prices for cereals and dairy products. Energy costs increased 1.2 percent.
"The large CPI gain in the face of weakening confidence, slowing consumer spending and softening production provides a poor backdrop for expansion," said Citigroup economist Steven C. Wieting in a note to clients.
Also, the US current account deficit narrowed unexpectedly to $118 billion in the second quarter from a revised $119.6 billion in the first quarter as exports hit a record high.
Jobs Market Languishing
The number of people applying for unemployment benefits jumped last week to the highest level in three months.
Applications have been rising over the past month, a signal that the job market remains depressed.
Applications typically drop during short work weeks, as was the case with the Labor Day observation. In this case, applications didn't drop as much as the department expected, so the seasonally adjusted value rose. A Labor spokesman said the total wasn't affected by Hurricane Irene.
Still, applications appear to be trending up. The four-week average, a less volatile measure, rose for the fourth straight week to 419,500.
It was a bumpy summer for credit card issuers, but most of the top banks reported that their customers continued to make their payments on time.
Default rates were down at four of the five companies that reported their August results by midday Thursday.
Only Capital One Financial Corp. had an uptick in the rate of its write-offs of uncollectible balances.
Capital One also posted a slight increase in its rate of payments late by 30 days or more, which is considered an indicator of future default.
Discover Financial Services, American Express, Chase and Bank of America reported continued declines in both rates.
Citibank is expected to report August results to the Securities and Exchange Commission later Thursday.
The results were similar in July, with a few banks reporting slight increases but most reporting improvements in defaults, or charge-offs, and delinquencies.
Overall, both defaults and delinquencies have dropped sharply since hitting their peaks. Late payments, in particularly, are now at historically low points.
Charge-off rates for cards peaked in the second quarter of 2010 at 10.96 percent, according to Fed data, and were down to 5.6 percent in the latest second quarter. Monthly data from most card issuers has shown continued declines, which will be reflected in third-quarter figures. Industrywide delinquency rates were down to 3.62 percent in the second quarter, after peaking in the second quarter of 2009 at 6.76 percent.
One reason consumers are able to keep up with their payments is that balances have dropped sharply since the height of the recession. Lower balances translates to lower minimum payments.
The Federal Reserve said total revolving credit balances, which are mostly credit cards, dropped at an annual rate of 5.25 percent in July, to $792.5 billion. That's down 21 percent since the peak in 2008 of $957.5 billion. The drop reflects both an effort on the part of card users to pay down debt and the amount that banks have written off as uncollectible, which Moody's Investor Services estimates at more than $75 billion since 2009.
Reforms passed in 2009 are also helping consumers, industry watchers have said. Limiting the fees that banks can tack on and the speed at which they can raise interest rates has helped consumers reduce their balances.
Analysts expect rates to remain low, even while individual banks might see blips along the way.
"It's tough to say there's going to be further improvement, just because there's been so much improvement up to this point," said Cynthia Ullrich, an analyst with Fitch Ratings.
Quote of the Day from Dave Ramsey.com:
When you have vision it affects your attitude. Your attitude is optimistic rather than pessimistic. — Charles R. Swindoll
No comments:
Post a Comment