Economic reports show improvement, but not enough to suggest lower unemployment ahead. However the unemployment number for first time filers came in at 391,000 this morning, 37,000 less than last week, which was the lowest figure since April.
Hopefully this is not a sign of things to come but I doubt it-Bank of America is going to charge $5 a month fee for debit cards. I can't wait to hear what Dave Ramsey will say about this.
Here are the top financial stories of the day:
1) Dow ends up 1.3%: Stocks come off lows, finish mixed-From USA Today
An early rally on the stock market faded Thursday afternoon, but indexes then moved up from the day's lows to finish mixed.
The Dow Jones industrial average closed up 1.3%, gaining 143.08 points to finish at 11,153.98. The Standard & Poor's 500 index gained rose 9.34, or 0.8%, to 1,160.40, while the Nasdaq composite index fell 10.82, or 0.4%, to 2,480.76.
Technology stocks fell more than the rest of the market, pulling down the Nasdaq.
Analysts said stock trading was likely to remain volatile until investors got more certainty about Europe's debt crisis and the U.S. economy. "Until we start to see more clarity on policy intervention, we'll continue to see this intraday, manic market reaction," said James Dailey, chief investment officer of TEAM Financial Managers.
Stocks rose sharply in early trading after the government reported that first-time applications for unemployment benefits fell to a five-month low. The government also raised its estimate of economic growth in the April-June period. The Commerce Department said the economy grew at a 1.3% annual rate in the second quarter, up from its previous estimate of 1%.
Other economic reports came in relatively weak. A trade group survey showed that chief executives of the nation's largest companies are more pessimistic than they were just three months ago. Also, fewer Americans signed contracts to buy homes in August, the second straight month of declines.
In Europe, German lawmakers voted to expand the powers of the region's bailout fund. The measure must be approved by all 17 countries that use the euro. The plan will allow the bailout fund to buy government debt and lend money to troubled European countries. Finland approved the measure Wednesday.
Banks, which would have the most to lose if Europe's debt crisis gets worse, rose more than the rest of the market. Analysts cautioned that bank stocks remain vulnerable if Europe stumbles in its efforts to contain its debt crisis. "Investors need to be very careful, because there is still a vast labyrinth of potential challenges that remain to be cleared with regard to Europe," said Frank Barbera, a portfolio co-manager of the Sierra Core Retirement Fund.
2) Economy gaining but not enough to cut unemployment-From the AP
The economy is showing signs of modest improvement -- not enough to reduce high unemployment but enough to ease fears that another recession might be near.
Fewer people applied for unemployment benefits last week, though some of that was due to technical factors. And the economy grew slightly more in the April-June quarter than previously estimated.
Growth is also expected to tick up in coming months.
Investors initially drew some hope from the latest data, as well as from news that Germany's government approved a plan to bolster Europe's response to its debt crisis. The Dow Jones industrial average surged more than 200 points in morning trading before erasing all its gains by mid-afternoon.
Some of the news Thursday wasn't encouraging. Chief executives of the nation's largest companies are more pessimistic than they were just three months ago, according to a survey by a trade group, the Business Roundtable.
Only about one-third of the CEOs said they plan to hire or boost spending in the next six months. That's down from about half who said so in June.
And fewer Americans signed contracts to buy homes in August, the second straight month of declines.
The economy expanded at an annual rate of 1.3 percent in the April-June quarter, up from an estimate of 1 percent a month ago, the Commerce Department said. The improvement reflected modestly higher consumer spending and a bigger boost from trade.
Even so, the economy grew at an annual rate of just 0.9 percent in the first six months of the year. That's the weakest six-month performance since the recession ended more than two years ago.
Many Americans are spending less because they're paying off debt. That trend is likely to hold back the economy in the months ahead.
Michelle Fregoso, 32, and her husband recently put off buying a new car, and they canceled a gym membership. They're focused on paying off their credit cards.
All the talk of slow growth and a possible recession has made Fregoso, who lives and works outside Chicago, more cautious.
"Obviously the economy stinks," she said. "We just want to be careful about how we're spending our money."
Weak consumer spending, high unemployment and financial market turmoil could slow growth for the rest of this year.
Most economists don't expect another recession. But they also don't see growth accelerating much.
Many foresee a rebound to between 2 percent and 2.5 percent growth in the current quarter.
A forecasting panel for the National Association for Business Economics predicts that growth for all of 2011 will be just 1.7 percent.
Many economists expect similarly tepid growth in 2012 and 2013. The economy would need to grow consistently at 4 percent to 5 percent to generate enough hiring to lower unemployment significantly.
"Growth remains sluggish and insufficient to reduce the unemployment rate," Ryan Sweet, an economist at Moody's Analytics, said in a note to clients.
The unemployment rate was stuck at 9.1 percent in August for the second straight month. Employers didn't add any jobs in August -- the weakest showing in nearly a year.
Economists expect little if any improvement in hiring for September. Sweet thinks employers will have added 50,000 jobs this month. More than twice as many jobs would be needed just to keep up with population growth.
Others are gloomier. Capital Economics predicts that the economy in September will have failed for a second straight month to create any jobs. The main problem, the firm says, is that businesses don't think their customer demand justifies additional workers.
Though growth has probably strengthened a bit in the July-September quarter, the economy suffered shocks that will restrain growth in the final quarter of this year, economists say.
In early August, for example, Congress fought to the final hours before raising the nation's borrowing limit.
That delay, in part, led to a downgrade of long-term U.S. debt by Standard & Poor's. Stocks tumbled in response.
In addition, consumer confidence plunged last month to its lowest level since April 2009, when the economy was officially in recession.
And retail sales were flat in August, a sign that the turmoil caused consumers to pull back.
Businesses and investors are also worried that Europe won't be able to prevent Greece from defaulting and worsening the region's debt crisis. If Greece defaults, it could destabilize other indebted countries, such as Portugal, Ireland and Italy. It could also harm many of Europe's banks, which own Greek debt.
And if European banks hoard cash to make up for their losses and stop lending to their U.S. counterparts, that could restrict credit in the United States and slow the economy. A financial crisis in Europe would also reduce U.S. companies' exports and sales to the region.
Last week, applications for unemployment benefits dropped 37,000 to a seasonally adjusted 391,000. That was the fewest since April 2.
Some of the improvement was due to technical factors related to the seasonal adjustment of the data, a
Labor Department spokesman said. The spokesman also said some states had reported higher applications in previous weeks due to Hurricane Irene.
As a result, the drop in applications for benefits "may not be as encouraging as it looks," said Paul Dales of Capital Economics. "Further falls will be needed before we can conclude a downward trend is underway."
3) Bank of America to charge $5 debit card fee-From the AP
Bank of America plans to start charging customers a $5 monthly fee for using their debit card to make purchases. The fee will be rolled out starting early next year.
A number of banks have already either rolled out or are testing such fees. But Bank of America's announcement carries added weight because it is the largest U.S. bank by deposits.
Anne Pace, a Bank of America Corp. spokeswoman, said Thursday that customers will only be charged the fee if they use their debit cards for purchases in any given month. Customers won't be charged if they only use their cards at an ATM.
The fee will apply to basic accounts and will be in addition to any existing monthly service fees. For example, one of the bank's basic accounts charges a $12 monthly fee unless customers meet certain conditions, such as maintaining a minimum average balance of $1,500.
A fee for using debit cards is still a novel concept for many consumers and was unheard of before this year. But there are signs it may soon become an industry norm.
SunTrust, a regional bank based in Atlanta, began charging a $5 debit card fee on its basic checking accounts this summer. Regions Financial, which is based in Birmingham, Ala., plans to start charging a $4 fee next month.
Chase and Wells Fargo are also testing $3 monthly debit card fees in select markets. Neither bank has said when it will make a final decision on whether to roll out the fee more broadly.
The growing prevalence of the debit card fee is alarming for Josh Wood, a 32-year-old financial adviser in Amarillo, Texas.
Wood relies entirely on debit cards to avoid interest charges on a credit card. If his bank, Wells Fargo, began charging a debit card fee, he said he would take his business to a credit union.
If a debit fee became so prevalent that it was unavoidable, Wood said he's not sure how he'd react.
"I might use all cash. Or go back to writing checks," he said.
The debit card fee isn't the only unwelcome change for checking account customers are seeing either.
The banking industry has been raising fees and scaling back on rewards programs as they adjust to new regulations that will limit traditional revenue sources.
Starting Oct. 1, a regulation will cap the fees that banks can collect from merchants whenever customers swipe their debit cards. Those fees generated $19 billion in revenue for banks in 2009, according to the Nilson Report, which tracks the payments industry.
There is no similar cap on the fees that banks can collect from merchants when customers use their credit cards, however. That means banks may increasingly encourage customers to reach for their credit cards, reversing a trend toward debit card usage in the past several years.
An increasing reliance on credit cards would be particularly beneficial for Bank of America, which is a major credit card issuer, notes Bart Narter, a banking analyst with Celent, a consulting firm.
"It's become a more profitable business, at least in relation to debit cards," Narter said.
This summer, an Associated Press-GfK poll found that two-thirds of consumers use debit cards more frequently than credit cards. But when asked how they would react if they were charged a $3 monthly debit card fee, 61 percent said they'd find another way to pay.
If the fee were $5, 66 percent said they would also change their payment method.
Bank of America's debit card fee will be rolled out in stages starting with select states in early 2012. The company would not say which states would be affected first.
Bank of America shares rose 9 cents, or 1.5 percent, to $6.25 in afternoon trading.
Quote of the Day from Dave Ramsey.com:
Deuteronomy 30:19 — Choose life that both you and your descendants may live.
No comments:
Post a Comment