Phil's Financial Tip of the Day:
I came across Dave Ramsey on Fox and Friends this morning and he gave these valuable tips on avoiding credit card debt while shopping this holiday season:
1) Prioritize who's getting gifts
2) Set a budget for each person
3) Shop around for best deals
4) Go home when your envelope is empty
To hear the complete interview:
http://www.foxnews.com/on-air/fox-friends/index.html#/v/1301971602001/tips-to-avoid-holiday-credit-card-debt/?playlist_id=86912
In the Markets today:
Stocks surged on Wednesday as major central banks around the world acted jointly to add liquidity to the global financial system.
Stock futures soar after central banks act globally-From Reuters
Stocks surged on Wednesday after major central banks agreed to make cheaper dollar loans for struggling European banks to prevent the euro-zone debt woes from turning into a full-blown credit crisis.
The Dow posted its best day since March 2009 after the Federal Reserve, the European Central Bank and other major central banks stepped in to head off escalating funding pressures that threaten the key arteries of the world's financial system.
The S&P 500 scored its best daily percentage gain since August.
The central banks' liquidity move touched off a buying frenzy in financial shares. The S&P financial sector index gained 6.6 percent, with Bank of America the most actively traded stock. The stock jumped 7.3 percent to $5.44 on more than 420 million shares traded.
The drama in Europe kept the U.S. stock market on a roller-coaster ride throughout the month. For November, the S&P ended down just 0.5 percent, but the month was marked by sharp daily swings.
"You don't have to fix everything, you have to be on a path towards fixing things," said Tobias Levkovich, chief U.S. equity strategist at Citigroup in New York.
"Markets will reward you for the efforts you are making as long as you are moving in the right direction. It's the carrot and the stick; you get rewarded when you do the right thing, and you get punished when you do the wrong thing."
The Dow Jones industrial average shot up 490.05 points, or 4.24 percent, to end at 12,045.68. The Standard & Poor's 500 Index jumped 51.77 points, or 4.33 percent, to 1,246.96. The Nasdaq Composite Index soared 104.83 points, or 4.17 percent, to close at 2,620.34.
The Dow scored its largest daily gain -- in terms of points and percentage -- since March 23, 2009.
The S&P 500 posted its best daily percentage advance since August 11.
For the month, the Dow gained 0.8 percent, while the Nasdaq slid 2.4 percent.
Other economically sensitive sectors, including energy, materials and industrials, also were strong performers for the day.
Copper and oil futures rose sharply, while the S&P materials sector index jumped 5.9 percent.
The central banks' actions were intended to ensure that European banks, facing a credit crunch, have enough funding amid the euro zone's worsening sovereign debt crisis.
The moves followed an unexpected cut in bank reserve requirements in China, intended to boost an economy running at its weakest pace since 2009.
Among the banks, shares of JPMorgan Chase & Co gained 8.4 percent to $30.97, its biggest daily percentage gain since May 2009.
The gains in financial shares came despite Standard & Poor's move to cut the credit ratings of 15 big banks, mostly in Europe and the United States, late on Tuesday.
Further encouraging investors, the latest U.S. data suggested the U.S. economy was moving more solidly toward recovery. The U.S. private sector added the most jobs in nearly a year in November, while business activity in the U.S. Midwest grew faster than expected in November.
The day's volume was high, with nearly 10 billion shares changing hands during the day on U.S. exchanges compared with the daily average of 7.96 billion shares.
Advancers beat decliners on the NYSE by nearly 7 to 1 and on the Nasdaq, by about 5 to 1.
Top financial story of the day:
The Fed, ECB and other central banks took coordinated action to support the global financial system as Europe's rolling debt crisis continues to trouble markets.
Central Banks Take Coordinated Action-From The Wall Street Journal
The world's major central banks launched a joint action to provide cheap, emergency U.S. dollar loans to banks in Europe and elsewhere, a sign of growing alarm among policy makers about stresses in Europe and in the global financial system.
The coordinated action doesn't directly address Europe's government-debt and budget woes. Instead, it is aimed at alleviating the impact of those troubles on global markets. Moreover, it raises the prospect of other steps by central bankers to prevent a repeat of the 2008 financial crisis.
"The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity," said a statement issued by the six central banks—the U.S. Federal Reserve, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank.
Global equity markets rose sharply Wednesday in response to the show of action by central banks. The Dow Jones Industrial Average rose 322 points, or 2.8%, to 11877 in morning trading, and the Standard & Poor's 500 jumped 32 points, or 2.7%, to 1227. The Nasdaq Composite gained 69 points, or 2.8%, to 2584. The Stoxx Europe 600 rose 2.9%, while the German DAX surged 4.3% and France's CAC-40 increased 3.6%. Gold and oil prices rose and the dollar weakened.
The promise of cheaper funding from central banks sparked sharp rises in European bank shares and a tightening in credit spreads. Bank shares had been down Wednesday before the announcement, and the cost of insuring European bank bonds against default had soared in recent days. Early in the European afternoon, shares in Barclays PLC, Deutsche Bank AG and Société Générale SA were all up around 6.5%. The Stoxx 600 European banking index was up 4.2%.
U.S. dollar swap lines, as they are known, were launched during the 2008 crisis as the U.S. mortgage crisis spread around the globe. Under the program, the Fed makes dollars available to other central banks, which in turn make the dollars available to banks under their jurisdiction.
The central banks' action on Wednesday effectively made these loans cheaper, lowering their cost by half a percentage point.
Chinese authorities, in a move that appeared to be separate and uncoordinated, also sought to ease lending conditions by reducing the amount of reserves that Chinese banks need to hold with their central bank.
Global investors have become worried about the health of European banks because of their exposure to European government debt. Because of those worries, euro-zone banks are also facing increasingly strained access to dollars. European banks need the U.S. currency to fund loans they have extended to U.S. companies and consumers, to finance U.S. dollar-denominated securities they hold and to pay their own dollar-denominated loans, such as those on money-market funds.
Some central bankers sought to use the move to put additional pressure on Europeans for more aggressive action in their own right.
"The European debt problem can't be solved by liquidity provisions alone," Bank of Japan Gov. Masaaki Shirakawa said at a hastily arranged news conference. "The step is meant to buy time for European countries to proceed with their fiscal and economic reform."
Berenberg economist Christian Schulz said the move was largely a symbolic gesture aimed at restoring calm.
"With today's action, central banks signal that they are aware of the issue and prepared to act. As always in market panics with central bank action, the signal is more important than the actual size of the action," Mr. Schulz said.
Global central banks have taken coordinated action before. In March, they intervened jointly in currency markets to tamp down the rise in the yen following the earthquake and tsunami in Japan. In October 2008, leading central banks cut interest rates simultaneously to alleviate the shock to the financial system after the collapse of Lehman Brothers.
Over three years of crisis fighting, Fed Chairman Ben Bernanke and the world's other leading central bankers have developed much closer ties. In addition to instituting measures to stem the crisis, they have worked closely together in rewriting financial regulatory rules in the wake of the crisis. The new head of the ECB, Mario Draghi, has been part of this inner circle of central bankers for some time as head of the Financial Stability Board.
It is unclear whether the latest steps marked a prelude to bolder joint action by global central banks to ease financial strains and rev up economic growth.
Several Fed officials have made clear they are open to launching a new round of bond buying, known as quantitative easing, to bring down long-term U.S. interest rates. But they have reservations about whether such a program would be effective.
For now, Wednesday's action looks like a limited move to address a discrete problem. Dollar funding costs for European financial firms have shot up in recent weeks, a signal that Europe's woes could be spreading globally. The new program could alleviate those costs.
The rest of the world hasn't been taking the Fed up on its offer of dollar loans recently. As of Nov. 23, non-U.S. central banks had tapped the Fed for $2.4 billion of U.S. dollar loans. During the financial crisis in 2008, they tapped the Fed for $580 billion.
Under the program, the Fed makes dollars available to the ECB, which in turn lends the money to European banks. Still, market observers say foreign banks are often reluctant to use the facility because it can create the impression among their peers that they are financially strained.
"That facility was a pressure release and how far that release was tapped was closely watched to indicate how much pressure there was in the rest of the market," said Chris Clark, strategist at interbank broker ICAP. "Now that valve has been loosened somewhat we're going to see more people turning up, which is not an indication of more pressure but just that actually it makes more sense for more people to go there. We were already expecting see a fairly increased use of the facility and now we can expect even more."
The Fed faces a risk of political blowback at home for the move. Republicans in particular have attacked the Fed for making dollars available to foreign banks. Fed officials say they don't face much risk with this facility because the dollars are going to other central banks, and not directly to European banks.
The Fed sought to stress that U.S. banks aren't facing funding problems. But it also said that it was prepared to provide liquidity if needed "to support financial stability."
During the financial crisis, the Fed designed many short-term programs to support commercial-paper markets, money-market funds, investment banks and other corners of the financial system when panic led to shortages of short-term dollar funding in the U.S.
Some of the Fed's powers were restrained by the Dodd-Frank financial regulatory overhaul. For instance, it can't bail out individual banks. But it still has leeway to provide short-term credit broadly to markets if needed.
"At present, there is no need to offer liquidity in nondomestic currencies other than the U.S. dollar, but the central banks judge it prudent to make the necessary arrangements so that liquidity support operations could be put into place quickly should the need arise," the Fed said.
Quote of the Day from Dave Ramsey.com:
Income seldom exceeds personal development. — Jim Rohn
Wednesday, November 30, 2011
Tuesday, November 29, 2011
Financial Headline News for Tuesday 11/29
Phil's Financial Tip of the Day:
Are you looking for part time work this Holiday season in retail to pay the bills ? I came across this very good article today rating the best retail places to work for ranked by the online career community website Glassdoor:
http://financiallyfit.yahoo.com/finance/article-113784-11644-4-the-best-retailers-to-work-for
Good Luck-I hope it helps!
In the Markets today:
Blue-chip stocks notched a second straight day of gains as a surge in consumer confidence buoyed investor sentiment.
Dow, S&P up for 2nd day but financials a drag-From Reuters
The Dow and S&P 500 advanced for a second day on Tuesday as consumer confidence data was stronger than expected and investors eyed further progress on a solution to Europe's fiscal mess.
But weak financial shares limited the advance, with the S&P financial index (.GSPF) down 0.4 percent. Shares of Bank of America (NYSE:BAC) dropped 2.7 percent to $5.11, on track for their worst close since March 2009. The Nasdaq also was lower.
"There seems to be some movement on the European front, but things certainly haven't been resolved. Financials are taking a step back, and are kind of keeping a cap on the market as a whole," said Thomas Villalta, portfolio manager for Jones Villalta Asset Management in Austin, Texas.
In a positive sign for the euro zone, Italian bond yields fell from session highs, though they were still at record high rates. In the auction, Italy's government sold 7.5 billion euros of three- and 10-year bonds, close to the upper end of its target range.
In addition, investors also eyed a meeting of European officials in hopes they will make a step forward in resolving the region's debt crisis.
In the United States, the Conference Board, an industry group, said its index of consumer confidence jumped to its highest level since July, handily topping economists' forecasts.
The news followed record Black Friday sales, giving investors hope that the holiday shopping season will be a solid one for retailers.
The Dow Jones industrial average (DJI:^DJI) was up 55.29 points, or 0.48 percent, at 11,578.30. The Standard & Poor's 500 Index (SNP:^GSPC) was up 4.14 points, or 0.35 percent, at 1,196.69. The Nasdaq Composite Index (Nasdaq:^IXIC) was down 8.01 points, or 0.32 percent, at 2,519.33.
On Monday, U.S. stocks rebounded sharply from seven days of losses, with the S&P closing up nearly 3 percent.
Weakness in some large-cap Internet stocks weighed on the Nasdaq after strong gains in those stocks on Monday. Amazon.com (NasdaqGS:AMZN) dropped 2.3 percent to $189.62.
AMR Corp (NYSE:AMR) plunged 78.4 percent to about 35 cents a share after the parent of American Airlines filed for bankruptcy protection and named a new chairman and chief executive. The stock was halted more than a dozen times throughout the day.
Top financial story of the day:
U.S. home prices eased, according to S&P Case-Shiller indexes. Separately, consumer confidence hit its highest level since July.
Home prices drop in September, reversing months of gains-From USA Today
Home prices are falling again in most major cities after posting small gains in the summer and spring. The report suggests the troubled housing market remains weak and won't recover any time soon.
The Standard & Poor's/Case-Shiller index released Tuesday showed prices dropped in September from August in 17 of 20 cities tracked. That was the first decline after five straight months where at least half the cities in the survey showed monthly gains.
"Any chance for a sustained recovery will probably need a stronger economy," Blitzer said.
Quote of the Day from Dave Ramsey.com:
If your actions inspire others to dream more, learn more, do more and become more, you are a leader. — John Quincy Adams
Are you looking for part time work this Holiday season in retail to pay the bills ? I came across this very good article today rating the best retail places to work for ranked by the online career community website Glassdoor:
http://financiallyfit.yahoo.com/finance/article-113784-11644-4-the-best-retailers-to-work-for
Good Luck-I hope it helps!
In the Markets today:
Blue-chip stocks notched a second straight day of gains as a surge in consumer confidence buoyed investor sentiment.
Dow, S&P up for 2nd day but financials a drag-From Reuters
The Dow and S&P 500 advanced for a second day on Tuesday as consumer confidence data was stronger than expected and investors eyed further progress on a solution to Europe's fiscal mess.
But weak financial shares limited the advance, with the S&P financial index (.GSPF) down 0.4 percent. Shares of Bank of America (NYSE:BAC) dropped 2.7 percent to $5.11, on track for their worst close since March 2009. The Nasdaq also was lower.
"There seems to be some movement on the European front, but things certainly haven't been resolved. Financials are taking a step back, and are kind of keeping a cap on the market as a whole," said Thomas Villalta, portfolio manager for Jones Villalta Asset Management in Austin, Texas.
In a positive sign for the euro zone, Italian bond yields fell from session highs, though they were still at record high rates. In the auction, Italy's government sold 7.5 billion euros of three- and 10-year bonds, close to the upper end of its target range.
In addition, investors also eyed a meeting of European officials in hopes they will make a step forward in resolving the region's debt crisis.
In the United States, the Conference Board, an industry group, said its index of consumer confidence jumped to its highest level since July, handily topping economists' forecasts.
The news followed record Black Friday sales, giving investors hope that the holiday shopping season will be a solid one for retailers.
The Dow Jones industrial average (DJI:^DJI) was up 55.29 points, or 0.48 percent, at 11,578.30. The Standard & Poor's 500 Index (SNP:^GSPC) was up 4.14 points, or 0.35 percent, at 1,196.69. The Nasdaq Composite Index (Nasdaq:^IXIC) was down 8.01 points, or 0.32 percent, at 2,519.33.
On Monday, U.S. stocks rebounded sharply from seven days of losses, with the S&P closing up nearly 3 percent.
Weakness in some large-cap Internet stocks weighed on the Nasdaq after strong gains in those stocks on Monday. Amazon.com (NasdaqGS:AMZN) dropped 2.3 percent to $189.62.
AMR Corp (NYSE:AMR) plunged 78.4 percent to about 35 cents a share after the parent of American Airlines filed for bankruptcy protection and named a new chairman and chief executive. The stock was halted more than a dozen times throughout the day.
Top financial story of the day:
U.S. home prices eased, according to S&P Case-Shiller indexes. Separately, consumer confidence hit its highest level since July.
Home prices drop in September, reversing months of gains-From USA Today
Home prices are falling again in most major cities after posting small gains in the summer and spring. The report suggests the troubled housing market remains weak and won't recover any time soon.
The Standard & Poor's/Case-Shiller index released Tuesday showed prices dropped in September from August in 17 of 20 cities tracked. That was the first decline after five straight months where at least half the cities in the survey showed monthly gains.
A separate index for the July-September quarter shows prices were mostly unchanged from the previous quarter.
Many Americans are reluctant to buy a home more than two years after the recession officially ended.
High unemployment, weak job growth and falling home prices have deterred many would-be buyers.
Even the lowest mortgage rates in history haven't been enough to lift sales.
David M. Blitzer, chairman of S&P's index committee, said that while the steep price declines seen between 2007 and 2009 appear to be over, home prices are down from the same time last year and do not show signs of easing.
"Any chance for a sustained recovery will probably need a stronger economy," Blitzer said.
The largest monthly price declines were in Atlanta, San Francisco and Tampa. And prices in Atlanta, Las Vegas and Phoenix fell to their lowest points since the housing crisis began four years ago. Blitzer called the new lows reached in those three cities a "bit disturbing."
New York, Portland, Ore., and Washington were the only cities to show monthly price increases in September.
A majority of the cities tracked by the survey posted modest price increases from April through August, the peak buying months. The monthly changes are not adjusted for seasonal factors.
Even with the gains, home prices were down in all but two major cities in September from the same month one year ago.
Sales of previously occupied home sales are on pace to match last year's dismal figures — the worst in 13 years. Sales of new homes are shaping up to be the worst since the government began keeping records a half century ago.
Some people can't qualify for loans or meet higher down payment requirements. Many with good credit and stable jobs are holding off because they fear that home prices will keep falling.
"Despite record high affordability of real estate, the psychology of home buyers is still being weighed down by economic uncertainty, keeping them on the fence when it comes to buying homes," said Stan Humphries, chief economist at Zillow.com, which measures home values.
Atlanta has been especially hard hit in the past year. Prices there dropped nearly 6% in September and have fallen nearly 10% over the past 12 months.
Since the fall of 2008, one out of every four sales in Atlanta has been a foreclosure, an auction or a bank sale.
Many homes there were built during the housing boom. The city has also been confronted by high unemployment. In September, the unemployment rate was 10.3%— more than a point higher than the national average.
The Case Shiller index covers half of all U.S. homes. It measures prices compared with those in January 2000 and creates a three-month moving average. The September data is the latest available.
Prices are certain to fall again once banks resume millions of foreclosures that have been delayed because of a yearlong government investigation into mortgage lending practices.
Home prices had stabilized in coastal cities the past six months, helped by a rush of spring buyers and investors. But this year, home prices in many cities, including Cleveland, Detroit, Las Vegas, Phoenix and Tampa, have reached their lowest points since the housing bust more than four years ago.
Foreclosures and short sales — when a lender accepts less for a home than what is owed on a mortgage — are selling at an average discount of 20%.
Quote of the Day from Dave Ramsey.com:
If your actions inspire others to dream more, learn more, do more and become more, you are a leader. — John Quincy Adams
Monday, November 28, 2011
Financial Headline News for Monday 11/28
Phil's Financial Tip of the Day:
Even though I have never and will never shop on Black Friday, I do shop on Cyber Monday. I was already on Wal-Mart.com this morning taking advantage of the great deals. Here is some more good advice on today's Cyber savings:
The Best Cyber Monday Deals-From Financially Fit
Reports of Black Friday violence and pepper-spraying may have made some holiday shoppers wary of hitting the mall this year. Luckily, there are some great Cyber Monday deals that don't require you to leave the house.
Like many of the brick-and-mortar retailers offering Black Friday sales this year, many Cyber Monday retailers are allowing customers to shop the deals early before the actual online shopping holiday. Others, however, are staying tight-lipped about their deals until the day before, so MainStreet rounded up some of the best Cyber Monday sales that retailers are pushing in 2011.
Wal-Mart
The world's largest retailer tried to lure consumers to its doors first by kicking off Black Friday sales on Thursday. Its Cyber Monday sales are also beginning a day early. Wal-Mart will begin its "Cyber Week" sales with deals on gadgets, toys and home goods. Shoppers will be able to scoop up 32-inch Toshiba LCD HDTVs for $249 and Xbox holiday gamer bundles for $319. Tramontina Dutch ovens will be offered for $35 and Hot Wheels Mega Garage Playsets will be $25. The site will offer free shipping on orders of more than $45, on qualifying products.
Toys "R" Us
The toy superstore plans to roll out discounts on thousands of items on its website, starting at 6 p.m. Sunday. Shoppers will be able to get 60% off the cost of certain video game titles with the purchase of another game. Calico Critters' products will be 50% off, while certain Nerf products will be up to 40%. Perennial favorites such as Little Tikes Bouncers and Razor Scooters will be discounted by 30%. Prices on Easy-Bake Ovens and Power Rangers action figures will be cut by 20%. Barbie dolls will sell for $15 less, while Hot Wheels cars will be offered for $10 off. Consumers will get free shipping on orders of at least $49.
Macy's
The department store plans to offer discounts on hundreds of items on its website. For the home, shoppers will find Dyson DC-17 Total Clean vacuums for $349.99 and 24-piece bedding sets for $99.99. The store will offer buy-one-get-one-free deals on certain women's sweaters and 50% off of select women's coats. In accessories, handbag prices will be cut by 25% to 40%, while Charter Club leather gloves and cashmere scarves will be 50% off. Macy's will also lower its minimum order for free shipping to $75, using the promotional code "CYBER."
Sam's Club
Sam's Club, not to be outdone by sister store Wal-Mart, has some Cyber Monday deals to rival Wal-Mart. The shopping club has an Asus i5 Notebook for $479 with free shipping. The TV deals have been great this year at every retailer, and Sam's Club has a Magnavox 32-inch LCD HDTV for $248.88 with free shipping.
You have to be a member of the shopping club to get the deals, but you can score an annual membership for as little as $40 The deals start at 10 p.m. Sunday and last until Dec. 2.
Costco
Bulk retailer Costco plans to offer deals on everything from jewelry to coffee during its Cyber Monday sale. Shoppers will be able to buy computers for up to $500 off, Brother and Hewlett-Packard printers for up to $120 off and iPad accessories for as much as $30 off. Costco will cut the price of the Dyson DC25 Animal Ball vacuum by $100 and the Maytag washer/dryer set by $500. Certain sheets, robes and gift baskets will be discounted by $10 to $25. Non-members must pay a surcharge to make purchases on the site.
Barnes & Noble
Barnes & Noble is all about the Nook this year and the book seller is giving a $25 Barnes & Noble gift card to shoppers who buy any of the Nook e-readers or the new Nook Tablet with their MasterCard. DVDs and Blu-rays are being offered at up to 70% off and free shipping is available on all orders over $25, which matches the shipping minimum for Amazon.
Microsoft
The software maker is offering discounts on computers, accessories and video games through Monday on its website. The company is offering a Samsung RC512 Core i5 laptop for $499, down from $799. They're cutting the price of their Xbox gaming bundles by $200 and selling their Kinect Sensors for $99.99. Certain Xbox games are on sale for $20 off and prices on many computer accessories have been cut by 25%.
Amazon.com
Starting at midnight on Sunday, the online powerhouse will begin sales on gadgets, toys, home goods and jewelry. Along with its $79 Kindle and $199 Kindle Fire, Amazon is offering a Sony Cybershot 10.2-megapixel camera for $199 (a savings of $150), a Microsoft Xbox 360 holiday bundle that includes Fable III and Halo Reach for $199 ($100 off), and TechnoMarine watches for 40% off. Sweaters and fleece clothing will be discounted by up to 60%. The site is also cutting the price of Hasbro games and VTech electronic toys by 50%. "Twilight" DVDs will be on sale for $6.99.
Target
Wal-Mart's biggest rival will be rolling out its own week of sales during its "Cyberstuffers such as buy-one-get-one-free Pillow Pets and $3.99 DVDs.
In the Markets today:
Stocks sharply higher after strong start to holiday shopping season, signs of Europe progress
Stocks soar after big holiday shopping weekend-From AP
A strong start to the U.S. shopping season and fresh proposals for a far-reaching solution to Europe's debt crisis sent stocks sharply higher Monday. The Dow Jones industrial average soared 260 points in afternoon trading, making up nearly half of the ground it lost last week.
Initial reports show a record number of shoppers hit the mall or bought gifts online during the holiday weekend. Thanksgiving weekend is a make-or-break time for many retailers. For the past six years, Black Friday has been the biggest sales day of the year.
The retail numbers add to a growing set of indicators, including steady drops in the number of applications for unemployment, that suggest the U.S. is far from the second recession economists had begun to fear in August.
"This goes in stark contrast to the gloom and doom that had been over markets," said Rob Lutts, president of Salem, Ma.-based investment firm Cabot Money Management. "A lot of the stocks I follow have been more oversold than any time I can remember in the last few years."
Markets in Europe also rose sharply as leaders there discuss new approaches for containing the region's debt troubles. One plan calls for Europe's most stable economies jointly sell bonds to provide assistance to the region's most indebted members, like Greece and Portugal.
Investors are hoping that the recent signs of deterioration in the debt crisis will finally get Europe's leaders to agree on a package of measures that can ease market concerns over whether the euro currency itself can survive.
Stock indexes in Italy and Germany rose 4.6 percent while France's index rose 5.5 percent. The euro and commodities prices also rose.
The Dow jumped 264 points, or 2.4 percent, to 11,495 as of 3 p.m. Eastern. The index plunged 564 points last week on fear that Europe's debt crisis was spreading to large countries like Spain and even Germany. Alcoa Inc. jumped 5.7 percent, the most of the 30 stocks in the Dow.
The Standard & Poor's 500 rose 30, or 2.6 percent, to 1,189. The rally lifted stocks across the board. Only four stocks in the S&P 500 index fell.
The Nasdaq composite rose 76, or 3.1 percent, to 2,518.
Banks had some of the biggest gains as investors became less fearful of an imminent freeze-up in Europe's financial system. Morgan Stanley jumped 3.9 percent and JPMorgan Chase & Co. rose 2.4 percent. Retailers also rose sharply. Macy's Inc. rose 4.9 percent and Best Buy Co. rose 3.5 percent.
A record 226 million shoppers visited stores and websites during the four-day holiday weekend starting on Thanksgiving Day, up from 212 million last year, according to early estimates by The National Retail Federation released on Sunday. They spent more, too: The average holiday shopper spent $398.62 over the weekend, up from $365.34 a year ago.
It's still unclear whether retailers' will be able to hold shoppers' attention throughout the remainder of the season, which can account for 25 to 40 percent of a merchant's annual revenue.
Questions also remain about the situation in Europe.
Credit rating agency Moody's warned on Monday that the "rapid escalation" of Europe's financial crisis is threatening the creditworthiness of all euro zone governments, even the most highly rated. Only six of the euro zone's 17 countries have the top rating — Germany, France, Austria, the Netherlands, Luxembourg and Finland.
The crisis in Europe will likely be the focus as President Barack Obama hosts European leaders for a summit Monday.
Top financial story of the day:
Fitch Ratings on Monday warned it may cut the United States' AAA rating if policymakers fail to agree in 2013.
Fitch warns of U.S. downgrade if no budget deal in 2013-From Reuters
Fitch Ratings on Monday warned it may cut the United States' AAA rating if policymakers fail to agree in 2013 on a plan to reduce the country's ballooning budget deficits.
The ratings agency revised to negative from stable the outlook on the U.S. credit rating after a special congressional committee failed last week to agree on at least $1.2 trillion in deficit-reduction measures.
"The negative outlook reflects Fitch's declining confidence that timely fiscal measures necessary to place U.S. public finances on a sustainable path and secure the U.S. AAA sovereign rating will be forthcoming," the ratings agency said in a statement.
The so-called "supercommittee" of six Democrats and six Republicans last week said they couldn't agree by their deadline on deficit reduction, setting in motion automatic cuts that should result in lowering the deficit by $1.2 trillion over 10 years. The cuts are designed to be split evenly between domestic and military programs.
Quote of the Day from Dave Ramsey.com:
We are all faced with a series of great opportunities brilliantly disguised as impossible situations. — Charles R. Swindoll
Even though I have never and will never shop on Black Friday, I do shop on Cyber Monday. I was already on Wal-Mart.com this morning taking advantage of the great deals. Here is some more good advice on today's Cyber savings:
The Best Cyber Monday Deals-From Financially Fit
Reports of Black Friday violence and pepper-spraying may have made some holiday shoppers wary of hitting the mall this year. Luckily, there are some great Cyber Monday deals that don't require you to leave the house.
Like many of the brick-and-mortar retailers offering Black Friday sales this year, many Cyber Monday retailers are allowing customers to shop the deals early before the actual online shopping holiday. Others, however, are staying tight-lipped about their deals until the day before, so MainStreet rounded up some of the best Cyber Monday sales that retailers are pushing in 2011.
Wal-Mart
The world's largest retailer tried to lure consumers to its doors first by kicking off Black Friday sales on Thursday. Its Cyber Monday sales are also beginning a day early. Wal-Mart will begin its "Cyber Week" sales with deals on gadgets, toys and home goods. Shoppers will be able to scoop up 32-inch Toshiba LCD HDTVs for $249 and Xbox holiday gamer bundles for $319. Tramontina Dutch ovens will be offered for $35 and Hot Wheels Mega Garage Playsets will be $25. The site will offer free shipping on orders of more than $45, on qualifying products.
Toys "R" Us
The toy superstore plans to roll out discounts on thousands of items on its website, starting at 6 p.m. Sunday. Shoppers will be able to get 60% off the cost of certain video game titles with the purchase of another game. Calico Critters' products will be 50% off, while certain Nerf products will be up to 40%. Perennial favorites such as Little Tikes Bouncers and Razor Scooters will be discounted by 30%. Prices on Easy-Bake Ovens and Power Rangers action figures will be cut by 20%. Barbie dolls will sell for $15 less, while Hot Wheels cars will be offered for $10 off. Consumers will get free shipping on orders of at least $49.
Macy's
The department store plans to offer discounts on hundreds of items on its website. For the home, shoppers will find Dyson DC-17 Total Clean vacuums for $349.99 and 24-piece bedding sets for $99.99. The store will offer buy-one-get-one-free deals on certain women's sweaters and 50% off of select women's coats. In accessories, handbag prices will be cut by 25% to 40%, while Charter Club leather gloves and cashmere scarves will be 50% off. Macy's will also lower its minimum order for free shipping to $75, using the promotional code "CYBER."
Sam's Club
Sam's Club, not to be outdone by sister store Wal-Mart, has some Cyber Monday deals to rival Wal-Mart. The shopping club has an Asus i5 Notebook for $479 with free shipping. The TV deals have been great this year at every retailer, and Sam's Club has a Magnavox 32-inch LCD HDTV for $248.88 with free shipping.
You have to be a member of the shopping club to get the deals, but you can score an annual membership for as little as $40 The deals start at 10 p.m. Sunday and last until Dec. 2.
Costco
Bulk retailer Costco plans to offer deals on everything from jewelry to coffee during its Cyber Monday sale. Shoppers will be able to buy computers for up to $500 off, Brother and Hewlett-Packard printers for up to $120 off and iPad accessories for as much as $30 off. Costco will cut the price of the Dyson DC25 Animal Ball vacuum by $100 and the Maytag washer/dryer set by $500. Certain sheets, robes and gift baskets will be discounted by $10 to $25. Non-members must pay a surcharge to make purchases on the site.
Barnes & Noble
Barnes & Noble is all about the Nook this year and the book seller is giving a $25 Barnes & Noble gift card to shoppers who buy any of the Nook e-readers or the new Nook Tablet with their MasterCard. DVDs and Blu-rays are being offered at up to 70% off and free shipping is available on all orders over $25, which matches the shipping minimum for Amazon.
Microsoft
The software maker is offering discounts on computers, accessories and video games through Monday on its website. The company is offering a Samsung RC512 Core i5 laptop for $499, down from $799. They're cutting the price of their Xbox gaming bundles by $200 and selling their Kinect Sensors for $99.99. Certain Xbox games are on sale for $20 off and prices on many computer accessories have been cut by 25%.
Amazon.com
Starting at midnight on Sunday, the online powerhouse will begin sales on gadgets, toys, home goods and jewelry. Along with its $79 Kindle and $199 Kindle Fire, Amazon is offering a Sony Cybershot 10.2-megapixel camera for $199 (a savings of $150), a Microsoft Xbox 360 holiday bundle that includes Fable III and Halo Reach for $199 ($100 off), and TechnoMarine watches for 40% off. Sweaters and fleece clothing will be discounted by up to 60%. The site is also cutting the price of Hasbro games and VTech electronic toys by 50%. "Twilight" DVDs will be on sale for $6.99.
Target
Wal-Mart's biggest rival will be rolling out its own week of sales during its "Cyberstuffers such as buy-one-get-one-free Pillow Pets and $3.99 DVDs.
In the Markets today:
Stocks sharply higher after strong start to holiday shopping season, signs of Europe progress
Stocks soar after big holiday shopping weekend-From AP
A strong start to the U.S. shopping season and fresh proposals for a far-reaching solution to Europe's debt crisis sent stocks sharply higher Monday. The Dow Jones industrial average soared 260 points in afternoon trading, making up nearly half of the ground it lost last week.
Initial reports show a record number of shoppers hit the mall or bought gifts online during the holiday weekend. Thanksgiving weekend is a make-or-break time for many retailers. For the past six years, Black Friday has been the biggest sales day of the year.
The retail numbers add to a growing set of indicators, including steady drops in the number of applications for unemployment, that suggest the U.S. is far from the second recession economists had begun to fear in August.
"This goes in stark contrast to the gloom and doom that had been over markets," said Rob Lutts, president of Salem, Ma.-based investment firm Cabot Money Management. "A lot of the stocks I follow have been more oversold than any time I can remember in the last few years."
Markets in Europe also rose sharply as leaders there discuss new approaches for containing the region's debt troubles. One plan calls for Europe's most stable economies jointly sell bonds to provide assistance to the region's most indebted members, like Greece and Portugal.
Investors are hoping that the recent signs of deterioration in the debt crisis will finally get Europe's leaders to agree on a package of measures that can ease market concerns over whether the euro currency itself can survive.
Stock indexes in Italy and Germany rose 4.6 percent while France's index rose 5.5 percent. The euro and commodities prices also rose.
The Dow jumped 264 points, or 2.4 percent, to 11,495 as of 3 p.m. Eastern. The index plunged 564 points last week on fear that Europe's debt crisis was spreading to large countries like Spain and even Germany. Alcoa Inc. jumped 5.7 percent, the most of the 30 stocks in the Dow.
The Standard & Poor's 500 rose 30, or 2.6 percent, to 1,189. The rally lifted stocks across the board. Only four stocks in the S&P 500 index fell.
The Nasdaq composite rose 76, or 3.1 percent, to 2,518.
Banks had some of the biggest gains as investors became less fearful of an imminent freeze-up in Europe's financial system. Morgan Stanley jumped 3.9 percent and JPMorgan Chase & Co. rose 2.4 percent. Retailers also rose sharply. Macy's Inc. rose 4.9 percent and Best Buy Co. rose 3.5 percent.
A record 226 million shoppers visited stores and websites during the four-day holiday weekend starting on Thanksgiving Day, up from 212 million last year, according to early estimates by The National Retail Federation released on Sunday. They spent more, too: The average holiday shopper spent $398.62 over the weekend, up from $365.34 a year ago.
It's still unclear whether retailers' will be able to hold shoppers' attention throughout the remainder of the season, which can account for 25 to 40 percent of a merchant's annual revenue.
Questions also remain about the situation in Europe.
Credit rating agency Moody's warned on Monday that the "rapid escalation" of Europe's financial crisis is threatening the creditworthiness of all euro zone governments, even the most highly rated. Only six of the euro zone's 17 countries have the top rating — Germany, France, Austria, the Netherlands, Luxembourg and Finland.
The crisis in Europe will likely be the focus as President Barack Obama hosts European leaders for a summit Monday.
Top financial story of the day:
Fitch Ratings on Monday warned it may cut the United States' AAA rating if policymakers fail to agree in 2013.
Fitch warns of U.S. downgrade if no budget deal in 2013-From Reuters
Fitch Ratings on Monday warned it may cut the United States' AAA rating if policymakers fail to agree in 2013 on a plan to reduce the country's ballooning budget deficits.
The ratings agency revised to negative from stable the outlook on the U.S. credit rating after a special congressional committee failed last week to agree on at least $1.2 trillion in deficit-reduction measures.
"The negative outlook reflects Fitch's declining confidence that timely fiscal measures necessary to place U.S. public finances on a sustainable path and secure the U.S. AAA sovereign rating will be forthcoming," the ratings agency said in a statement.
The so-called "supercommittee" of six Democrats and six Republicans last week said they couldn't agree by their deadline on deficit reduction, setting in motion automatic cuts that should result in lowering the deficit by $1.2 trillion over 10 years. The cuts are designed to be split evenly between domestic and military programs.
Quote of the Day from Dave Ramsey.com:
We are all faced with a series of great opportunities brilliantly disguised as impossible situations. — Charles R. Swindoll
Friday, November 25, 2011
Financial Headline News for Friday 11/25
Phil's Financial Tip of the Day:
Hope you all had a Great Thanksgiving!
There isn't enough money in the world for me to fight the crowds on Black Friday. Since I never have and never will shop on Black Friday, I came across these experts advice on what to and not to shop today to help you out. Good Luck!
http://abclocal.go.com/wabc/story?section=news/7_on_your_side&id=8443622
http://www.foxnews.com/on-air/fox-friends/index.html#/v/1294711966001/best-black-friday-deals/?playlist_id=86912
In the Markets today:
Investors Go Shopping—Just Not for Stocks-From The Wall Street Journal
Thanksgiving week may have left many stock investors reaching for an antacid.
The Dow Jones Industrial Average turned in its worst Thanksgiving week performance since markets began observing the holiday in 1942, falling 564.38 points or 4.8% to 11231.78, capped by a 25.77-point slide on Friday.
The Dow has fallen 7.6% over the last two weeks and is now down 3% for the year amid increasing uneasiness over Europe's sovereign-debt problems and the failure of U.S. lawmakers to reach a deal on reducing the budget deficit.
The Standard & Poor's 500-stock index dropped 3.12 points, or 0.27%, to 1158.67. It has shed 7.9% over the course of a seven-session losing streak. The Nasdaq Composite fell 18.57 points, or 0.75%, to 2441.51. The technology-oriented index notched its fourth straight weekly decline, dropping 11% throughout the skid.
Trading volume was thin Friday; markets closed at 1 p.m. Eastern after being closed Thursday for Thanksgiving.
Italian bond yields climbed following a weak auction of short-term bills. The yield on benchmark 10-year bonds rose to about 7.3%. Yields above 7% have previously prompted other euro-zone countries to seek financial assistance.
Also Friday, Standard & Poor's Ratings Services downgraded Belgium's credit-rating due to renewed funding and market-risk pressures. Additionally, Fitch Ratings on Thursday downgraded Portugal's debt to "junk" and warned that additional downgrades were possible.
"With the weak Italian bond auction, the choppy market and everything else coming out of Europe, it's a sense of 'here we go again,'" said Joe Bell, senior equity analyst at Schaeffer's Investment Research.
"People are getting very concerned that the European politicians aren't going to come up with any solutions anytime soon."
European markets managed to end slightly higher on Friday. The Stoxx Europe 600 gained 0.7%, snapping a six-session losing streak. Volume was light.
Investors found some solace after a meeting of leaders from the euro zone's three largest economies failed to produce any additional negative news.
On Thursday, leaders of Germany, Spain and Italy pledged to propose modifications to European Union treaties that would aim to further integrate economic policy. German Chancellor Angela Merkel said the treaty changes were crucial steps toward building a fiscal union and restoring investor confidence.
"Yesterday's meeting didn't end in tears," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management. "There weren't really any negative headlines. And not having negative news is good news for this market...Potential treaty changes show real substantial and structural change."
The latest European developments overshadowed Black Friday in the U.S. Millions of Americans were expected to hit shopping malls to take advantage of discounts offered by retailers on the traditional opening day of the holiday-shopping season.
Shares of Wal-Mart Stores rose 25 cents, or 0.4%, to 56.89, while Macy's fell 11 cents, or 0.4%, to 29.45. Best Buy declined 8 cents, or 0.3%, to 25.63.
The U.S. economic calendar was bare. The bond market is scheduled to close at 2 p.m. Eastern Time.
AT&T edged down 14 cents, or 0.5%, to 27.41. The blue chip telecommunications company said it would set aside $4 billion in the fourth-quarter to cover potential costs if its planned $39 billion
acquisition of T-Mobile USA were to fall apart.
Amarin said the U.S. Food and Drug Administration accepted for review an application for its lead drug candidate that treats high levels of blood fats lowers "bad cholesterol." Shares rose 43 cents, or 6.5%, to 7.10.
U.S. Steel urged its shareholders to reject an unsolicited offer from TRC Capital to acquire up to three million of the company's shares at $24.50 apiece. Shares fell 14 cents, or 0.6%, to 22.27.
Top financial story of the day:
Season of part-time jobs kicks off with holidays-From USA Today
Lloyd Slocum was unemployed for 18 months, but like hundreds of thousands of Americans, he's working part time this holiday shopping season, unloading trucks and stocking shelves for a Bealls store in Port St. Lucie, Fla.
She takes home $600 a month — enough to pay utility, garbage and water bills — and has no health insurance. Garrett rents out rooms in her three-bedroom house and plans to apply for food stamps and other social services.
He says he uses the deliveries as an opportunity to talk to clients and market the company. "I used to be an introvert. Now I'm a lot more open to going out and meeting people."
Mackay's Moral:
If you want your customers to give thanks for you, make every day Thanksgiving for them
Hope you all had a Great Thanksgiving!
There isn't enough money in the world for me to fight the crowds on Black Friday. Since I never have and never will shop on Black Friday, I came across these experts advice on what to and not to shop today to help you out. Good Luck!
http://abclocal.go.com/wabc/story?section=news/7_on_your_side&id=8443622
http://www.foxnews.com/on-air/fox-friends/index.html#/v/1294711966001/best-black-friday-deals/?playlist_id=86912
In the Markets today:
Investors Go Shopping—Just Not for Stocks-From The Wall Street Journal
Thanksgiving week may have left many stock investors reaching for an antacid.
The Dow Jones Industrial Average turned in its worst Thanksgiving week performance since markets began observing the holiday in 1942, falling 564.38 points or 4.8% to 11231.78, capped by a 25.77-point slide on Friday.
The Dow has fallen 7.6% over the last two weeks and is now down 3% for the year amid increasing uneasiness over Europe's sovereign-debt problems and the failure of U.S. lawmakers to reach a deal on reducing the budget deficit.
The Standard & Poor's 500-stock index dropped 3.12 points, or 0.27%, to 1158.67. It has shed 7.9% over the course of a seven-session losing streak. The Nasdaq Composite fell 18.57 points, or 0.75%, to 2441.51. The technology-oriented index notched its fourth straight weekly decline, dropping 11% throughout the skid.
Trading volume was thin Friday; markets closed at 1 p.m. Eastern after being closed Thursday for Thanksgiving.
Italian bond yields climbed following a weak auction of short-term bills. The yield on benchmark 10-year bonds rose to about 7.3%. Yields above 7% have previously prompted other euro-zone countries to seek financial assistance.
Also Friday, Standard & Poor's Ratings Services downgraded Belgium's credit-rating due to renewed funding and market-risk pressures. Additionally, Fitch Ratings on Thursday downgraded Portugal's debt to "junk" and warned that additional downgrades were possible.
"With the weak Italian bond auction, the choppy market and everything else coming out of Europe, it's a sense of 'here we go again,'" said Joe Bell, senior equity analyst at Schaeffer's Investment Research.
"People are getting very concerned that the European politicians aren't going to come up with any solutions anytime soon."
European markets managed to end slightly higher on Friday. The Stoxx Europe 600 gained 0.7%, snapping a six-session losing streak. Volume was light.
Investors found some solace after a meeting of leaders from the euro zone's three largest economies failed to produce any additional negative news.
On Thursday, leaders of Germany, Spain and Italy pledged to propose modifications to European Union treaties that would aim to further integrate economic policy. German Chancellor Angela Merkel said the treaty changes were crucial steps toward building a fiscal union and restoring investor confidence.
"Yesterday's meeting didn't end in tears," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management. "There weren't really any negative headlines. And not having negative news is good news for this market...Potential treaty changes show real substantial and structural change."
The latest European developments overshadowed Black Friday in the U.S. Millions of Americans were expected to hit shopping malls to take advantage of discounts offered by retailers on the traditional opening day of the holiday-shopping season.
Shares of Wal-Mart Stores rose 25 cents, or 0.4%, to 56.89, while Macy's fell 11 cents, or 0.4%, to 29.45. Best Buy declined 8 cents, or 0.3%, to 25.63.
The U.S. economic calendar was bare. The bond market is scheduled to close at 2 p.m. Eastern Time.
AT&T edged down 14 cents, or 0.5%, to 27.41. The blue chip telecommunications company said it would set aside $4 billion in the fourth-quarter to cover potential costs if its planned $39 billion
acquisition of T-Mobile USA were to fall apart.
Amarin said the U.S. Food and Drug Administration accepted for review an application for its lead drug candidate that treats high levels of blood fats lowers "bad cholesterol." Shares rose 43 cents, or 6.5%, to 7.10.
U.S. Steel urged its shareholders to reject an unsolicited offer from TRC Capital to acquire up to three million of the company's shares at $24.50 apiece. Shares fell 14 cents, or 0.6%, to 22.27.
Top financial story of the day:
Season of part-time jobs kicks off with holidays-From USA Today
Lloyd Slocum was unemployed for 18 months, but like hundreds of thousands of Americans, he's working part time this holiday shopping season, unloading trucks and stocking shelves for a Bealls store in Port St. Lucie, Fla.
"It gives you something to look forward to," says Slocum, 29.
He plans to use the cash to buy his father a Christmas present and hopes to parlay the gig into a full-time position with Bealls/Burke's stores, a Sunbelt chain.
Black Friday, the official start of the holiday shopping frenzy, also kicks off the less-celebrated season of the part-time worker. Retailers alone are hiring about 500,000 seasonal employees this year, most of whom are part time, according to the National Retail Federation. Retailers' recent shift to opening on Thanksgiving or midnight on Black Friday has intensified the need for part-time workers.
Holiday jobs offer financial and emotional lifelines for many of the nation's jobless. They also point up a troubling reality: A near-record number of Americans are working part time throughout the year, even though they would prefer full-time jobs. It's not just because of the sluggish economy.
Economists cite a broader, longer-term shift toward part-time work as employers cut expenses and more precisely match staffing with the ebbs and flows of customer demand.
The number of part-timers who really want full-time positions — so-called involuntary part-time employees — has risen from 8.4 million in January to 8.9 million last month, according to the Bureau of Labor Statistics. The total has hovered at 8.5 million to 9 million since early 2009 — double the pre-recession level.
By contrast, the tally of unemployed Americans has stayed flat at about 13.9 million this year and is down from about 15 million in late 2009 as employers have added a modest 2 million or so jobs. The disparity underscores how the nation's official 9% jobless rate doesn't fully reflect the toll inflicted by a half-speed economic recovery.
"The unemployment rate significantly misses the stress that the job market is under," says Mark Zandi, chief economist for Moody's Analytics.
To be sure, part-time work — defined by the Labor Department as fewer than 35 hours a week — provides sorely needed income and experience that often can be leveraged into full-time jobs. And it's far preferable to unemployment. But it also creates financial uncertainty and instability for workers, economists say, and can keep employees in a cycle that prevents them from advancing to more lucrative positions. Most part-time workers don't get benefits, such as health insurance, sick days or paid vacation.
The number of part-time workers shot up three years ago when businesses cut employees' hours as a precursor to massive layoffs in the recession. Many firms are still trimming their employees' workweeks amid tepid customer demand. Typically, those hours are restored when sales pick up.
Last month, however, 30% of the 8.9 million involuntary part-time workers simply couldn't find full-time work, up from 20% in early 2009. That indicates many employers are hiring new workers as demand rises but are leery of adding full-time staff in a wobbly economy, experts say.
"They don't know what's going to happen next," says Jill Ater, co-founder of 10 til 2, a staffing firm that places part-time workers exclusively. "Rather than bring on a full-time person with benefits, they bring on a 20-hour person for less and get enough done." Some, she says, hire two 20-hour staffers instead of a full-timer to avoid paying benefits.
At Asbestos Abatement in Denver, business "is definitely slower than I'd like to see it," says owner Joel Egelman.
A few weeks ago he hired an office manager who puts in 30 hours a week. "We like the ability to save a little money and see how much we can put on her until we have to move her to full-time status," he says. "We also wanted to test it out to see what that person can handle."
Some cite a deeper structural shift to part-time work. Part-time workers — voluntary and involuntary — represent 19.3% of total employment this year, up from 17.4% in 2008. The increasing use of part-timers lets employers better match staffing with the workload, says Susan Lambert, a labor economist at the University of Chicago.
In department stores and call centers, for example, demand can vary widely by the hour. Sophisticated computer models predict when traffic will surge so managers can slot in workers for just a few hours.
Lambert says other industries — including hospitals, restaurants, hotels and factories — are increasingly using part-time workers to respond to blips in demand even while employing a core full-time staff.
As recently as the 1990s, 60% of retail workers — including seasonal employees — were full time, says Daniel Butler, vice president of operations for the National Retail Federation. Today, 60% are part-timers,. The switch happened after more people began shopping at night and on weekends.
"Retailers through the recession learned that they don't want to be overstaffed," Butler says. "It has a bottom-line effect on the profitability of the company."
Hours are short, applicants plentiful
High unemployment has made it much easier to fill part-time jobs, experts say. At staffing firm Randstad, as many as 10 candidates vie for each position, up from three before the recession, says Senior Vice President Joanie Ruge. "In a good economy, it was much more difficult to find people who wanted to work part time," she says.
There is a downside for firms that employ a large number of workers with no benefits and uncertain hours.
"You get high turnover. You get unreliable workers," Lambert says. "If you have workers committed to your firm, you tend to produce a better product. You provide a better service."
Alpine Access, a call center provider, has about 5,000 representatives who work from home, half of whom are part time and handle spikes in traffic in periods of two or four hours, for example. Such spikes could be prompted by pay-per-view TV specials, cable outages and special credit card offers, among other things, says Chief Operating Officer Rob Duncan.
Duncan says part-time assignments typically fit workers' schedules. But he acknowledges they more readily leave for other jobs than full-timers, and their lower benefit costs are partly offset by other expenses. "To use two people to fill a 40-hour workweek doubles training and recruiting costs," Duncan says.
For workers, part-time gigs can mean relief from unemployment but only a modest easing of financial hardship. Donna Camp, of Schenectady, N.Y., took a job as a part-time grocery cashier in early October after separating from her husband last summer. The former diet technician couldn't find a full-time position in health care or even retailing, in part, because she had been out of the workforce for seven years.
The cashier job pays $8 an hour, and she logs 20 to 30 hours a week. "It's hard to budget when the hours are so variable," says Camp, 50. "It scares me to think how small the check is that I'm going to pick up this week."
The uncertainty has prompted Camp to pay just the minimum balance on her credit cards and to try to avoid using them. She keeps the thermostat in her house at 64 degrees in the daytime, washes clothes in cold water and hangs them to dry to conserve electricity. She gets haircuts once every six weeks instead of monthly.
Camp has thought about getting another part-time job, but her inconsistent hours make that almost impossible. She works afternoons some days but evenings others, and she finds out her weekly schedule the previous Friday. She's also hesitant to limit her availability.
"I want to show them I'll do anything, hoping they'll eventually keep me on," she says. "But I can't pay my bills on the part-time hours, so it's a Catch-22."
When part-time jobs get smaller
Some Americans have had their hours cut.
After losing her job as a horticulturist at a golf course early this year, Vicki Lehr of Branford, Conn., was hired as a salesperson at a garden center in April. But her weekly hours were trimmed to about 30 in July and to 20 a couple of months later, slashing her weekly pay to about $300 from $550.
The reduction was especially trying because her husband, Blake, a food delivery driver, was downgraded from full-time to part-time status two years ago.
The reduction was especially trying because her husband, Blake, a food delivery driver, was downgraded from full-time to part-time status two years ago.
Vicki Lehr, 52, says she grows her own vegetables, postpones doctor visits and shops at Goodwill instead of Marshalls, recently buying a coat for $8. The irregular hours disrupt family life. "On the weekends my husband was off, and I'm working, so we never get the time to spend together."
In the past couple of weeks, both Lehrs were laid off. "I don't know what's going to happen," she says.
Some part-time workers teeter near poverty.
Nancy Garrett, of San Rafael, Calif., lost her $65,000-a-year job providing sales support to a promotions company in March 2009. She exhausted her unemployment benefits early this year and burned through $75,000 in savings before she found a job as the weekend manager of a self-storage facility in early October.
She takes home $600 a month — enough to pay utility, garbage and water bills — and has no health insurance. Garrett rents out rooms in her three-bedroom house and plans to apply for food stamps and other social services.
Still, she says, the job has helped restore her self-confidence. "I have a focus to go someplace and do something, and to have people respond positively to me has really done me a world of good," says Garrett, 56.
While part-time work traditionally has been parceled out to lower-level hourly employees such as cashiers and administrative assistants, Lambert says it has spread to the white-collar world in recent years. Ater of 10 til 2 says she is placing marketing directors, seasonal tax preparers and non-profit directors in part-time roles.
David Bergman, 59, of Elk Grove Village, Ill., earned $350,000 a year as chief financial officer of a firm that administered health benefits before he left several years ago and did some consulting work while he looked for a full-time job.
Last year, he took a part-time position with a small staffing agency. Monday through Wednesday, he serves as comptroller, balancing the books and dispensing advice on how to manage growth and reduce costs. On Thursday and Friday he takes on a less-prestigious role: delivering payroll checks to clients.
He says he uses the deliveries as an opportunity to talk to clients and market the company. "I used to be an introvert. Now I'm a lot more open to going out and meeting people."
Bergman works 28 hours and earns $1,250 each week, a fraction of his former pay. He's not living hand-to-mouth, but he has canceled his lawn service and premium cable TV channels, and treks from store to store to find bargains.
He is among the roughly 20% of part-timers working at least two jobs to get by. He teaches college business courses for several thousand dollars a year.
"You juggle a lot more balls," he says. "This allows me to fill up some of the void."
Mackay's Moral:
If you want your customers to give thanks for you, make every day Thanksgiving for them
Wednesday, November 23, 2011
Financial Headline News for Wednesday 11/23
Phil's Financial Tip of the Day:
Show thanks to your customers this Thanksgiving season.
Happy Thanksgiving to all!
In the spirit of the Thanksgiving holiday-have you thanked your customers lately? Do they know how much they mean to you?
As Harvey Mackay pointed out in his excellent weekly column yesterday, "Customer appreciation is not a wise area in which to economize. Your sales force and customer service staff need support that starts at the top. The boss should set the tone for customer appreciation because without customers, the boss doesn't have any reason to come to work."
As Mr. Mackay also pointed out so astutely about getting thank you cards from customers this time of year: "What I love about this custom is that our greeting never gets lost in the shuffle. We get relatively few cards in November. They are memorable."
So thank your customers this time of year-they will remember it all year!
To read the entire column from Harvey Mackay:
http://harveymackay.com/column/
In the Markets today:
Stocks tumbled as surprisingly poor demand at a German government-bond auction raised concerns about peripheral European issues spreading to the stronger core countries.
Stocks Suffer Third Straight Fall-From The Wall Street Journal
Stocks ended lower again, as surprisingly poor demand at a German government-bond auction raised concerns about peripheral European issues spreading to the stronger core countries.
The Dow Jones Industrial Average fell 236.09 points, or 2.1%, to 11257.63. The Dow saw its third straight decline, following a two-day fall of 2.6% that left the average at a five-week low. With Wednesday's fall, the Dow has given up half its October rally, its biggest month of gains since 2002.
The Standard & Poor's 500-stock index declined 26.24 points, or 2.2%, to 1161.80, in preliminary data, and the Nasdaq Composite shed 61.20 points, or 2.4%, to 2460.08.
Earlier in the afternoon, all but one of the 30 Dow components and all 10 of the S&P 500 sectors were trading in negative territory. Leading the losses were materials, financial and energy stocks. Bank of America, Alcoa and Hewlett-Packard each lost 3.5% or more.
The declines were driven by worrying developments in Europe, where demand at Germany's auction of new 10-year government bonds was surprisingly weak, bringing the euro zone's debt fears closer to the core of the region. The disappointing demand lifted yields on Spanish and French government bonds as well.
The European Central Bank again bought Italian and Spanish bonds as confidence wavered. Also hurting bond-market sentiment were reports Belgium can't pay its agreed share of the planned rescue of the Belgian-French bank Dexia, which is seen as placing more risk at the door of the French treasury and adding another threat to the country's triple-A credit rating. Belgian and French officials denied they are renegotiating the dismantling of Dexia.
"This is a little wakeup call to say no one's immune from this crisis," said Jerry Webman, chief economist at OppenheimerFunds. "That's the issue with contagion—financial system troubles are self-fulfilling prophecies....Troubles in the financial system create further troubles that spread into the economy, so the market is right to be cautious."
At the same time, Mr. Webman said markets may be playing it safe ahead of a quiet four days coming up in the U.S. "A yield of 2.15% on bunds is not exactly Greek territory, so obviously Germany continues to have a lot of financial flexibility," he said.
Those worries sent the euro tumbling against the dollar, falling to $1.3329, near a two-month low, from $1.3505 late Tuesday in New York. The Stoxx Europe 600 finished down 1.3%, with losses limited in part by a better-than-expected reading of the euro-zone composite purchasing-managers index for November.
Asian exchanges were broadly lower, with China's Shanghai Composite erasing early gains to close down 0.7% and Hong Kong's Hang Seng Index dropping 2.8%. The preliminary HSBC China Manufacturing Purchasing Managers Index, a gauge of nationwide manufacturing activity, fell to 48.0 in November, from a final reading of 51.0 in October. Readings below 50 imply contraction.
In U.S. economic news, initial jobless claims ticked slightly higher last week after three consecutive declines, rising slightly to 393,000, in line with expectations. Orders for durable goods decreased 0.7% in October, while the September reading was revised sharply lower to a 1.5% drop, from an earlier estimate of a 0.6% decline.
Consumer spending, meanwhile, slowed in October, growing by just 0.1% after a 0.7% rise the month before, missing expectations. U.S. incomes rose 0.4% in October, following a 0.1% rise in the prior month.
Gold futures slipped 0.4% to settle at $1,695.70 an ounce, while crude-oil futures fell to about $96.25 a barrel. Demand for Treasurys sent the yield on the 10-year note to 1.8881%.
In corporate news, shares of Deere climbed 3.2% after the farm- and construction-equipment maker reported fiscal fourth-quarter earnings and revenue that exceeded expectations.
TiVo slipped into negative territory, shedding 1.2% after reporting fiscal third-quarter losses that were narrower than expected and revenue that exceeded estimates. In addition, the company posted an increase in subscribers to break a four-year streak of decreases.
Pandora Media slumped 7.6% after the online-radio company reported a fiscal third-quarter profit versus expectations of a loss but indicated its current-quarter loss could be wider than anticipated.
Boston Scientific climbed 0.8% after regulators approved its next-generation drug-eluting heart stent
Top financial story of the day:
Slightly more in US sought unemployment benefits last week after 2 months of steady declines
Slightly more in US seek unemployment benefits-From AP
The number of Americans seeking unemployment benefits ticked up slightly last week after two months of steady declines.
But the increase isn't enough to reverse the downward trend. The four-week average of applications, a less volatile measure, fell to its lowest level since April. The decline in the average signals that companies are laying off fewer workers.
Weekly applications for unemployment aid rose 2,000 to a seasonally adjusted 393,000, the Department of Labor said Wednesday.
It's the second increase in six weeks. The four-week average fell to 394,250. That's the eighth drop in the past nine weeks.
Even so, weekly applications would need to stay below 375,000 consistently to push down the unemployment rate significantly. They haven't been at that level since February.
The pace of hiring over the past few months has been mixed. The economy added only 80,000 jobs in October, the fewest in four months. But the government also said this month that employers added more jobs in August and September than it had initially reported. And the unemployment rate dipped to 9 percent.
The economy is growing but not quickly enough to generate many jobs. The economy expanded at a 2 percent annual rate in the July-September quarter, the government said Tuesday. That was down from an earlier estimate of 2.5 percent.
Growth would need to be more than twice that pace to significantly reduce unemployment, economists say.
The lower estimate was mostly because companies sharply reduced their stockpiles of goods. They probably didn't anticipate that consumer and business spending would remain strong through the summer.
A decline in inventories is not always a bad sign. Economists believe this could lead to better growth in the current quarter, if businesses anticipate more demand and restock their shelves.
Economists predict growth will strengthen to around 3 percent in the October-December quarter.
Many raised their estimates after seeing encouraging October reports on retail sales and factory output.
Still, that brighter outlook hinges on whether Europe can prevent its financial crisis from getting worse. If not, Europe could fall into a recession, which could slow U.S. growth next year.
In the first six months of the year, the economy grew at an annual rate of just 0.9 percent. It was the weakest growth since the recession officially ended, which stocked fears over the summer that the economy could be on the verge of another downturn.
The stronger growth in the July-September quarter helped calm those worries. Still, Americans spent more while earning less, and they dipped into their savings to make up the difference. At the same time, businesses invested more in machines and computers, not workers.
Without more jobs and higher pay raises, consumers are unlikely to be able to sustain those gains.
Quote of the Day from Dave Ramsey.com:
A thankful heart is not only the greatest virtue, but the parent of all the other virtues. — Cicero
Show thanks to your customers this Thanksgiving season.
Happy Thanksgiving to all!
In the spirit of the Thanksgiving holiday-have you thanked your customers lately? Do they know how much they mean to you?
As Harvey Mackay pointed out in his excellent weekly column yesterday, "Customer appreciation is not a wise area in which to economize. Your sales force and customer service staff need support that starts at the top. The boss should set the tone for customer appreciation because without customers, the boss doesn't have any reason to come to work."
As Mr. Mackay also pointed out so astutely about getting thank you cards from customers this time of year: "What I love about this custom is that our greeting never gets lost in the shuffle. We get relatively few cards in November. They are memorable."
So thank your customers this time of year-they will remember it all year!
To read the entire column from Harvey Mackay:
http://harveymackay.com/column/
In the Markets today:
Stocks tumbled as surprisingly poor demand at a German government-bond auction raised concerns about peripheral European issues spreading to the stronger core countries.
Stocks Suffer Third Straight Fall-From The Wall Street Journal
Stocks ended lower again, as surprisingly poor demand at a German government-bond auction raised concerns about peripheral European issues spreading to the stronger core countries.
The Dow Jones Industrial Average fell 236.09 points, or 2.1%, to 11257.63. The Dow saw its third straight decline, following a two-day fall of 2.6% that left the average at a five-week low. With Wednesday's fall, the Dow has given up half its October rally, its biggest month of gains since 2002.
The Standard & Poor's 500-stock index declined 26.24 points, or 2.2%, to 1161.80, in preliminary data, and the Nasdaq Composite shed 61.20 points, or 2.4%, to 2460.08.
Earlier in the afternoon, all but one of the 30 Dow components and all 10 of the S&P 500 sectors were trading in negative territory. Leading the losses were materials, financial and energy stocks. Bank of America, Alcoa and Hewlett-Packard each lost 3.5% or more.
The declines were driven by worrying developments in Europe, where demand at Germany's auction of new 10-year government bonds was surprisingly weak, bringing the euro zone's debt fears closer to the core of the region. The disappointing demand lifted yields on Spanish and French government bonds as well.
The European Central Bank again bought Italian and Spanish bonds as confidence wavered. Also hurting bond-market sentiment were reports Belgium can't pay its agreed share of the planned rescue of the Belgian-French bank Dexia, which is seen as placing more risk at the door of the French treasury and adding another threat to the country's triple-A credit rating. Belgian and French officials denied they are renegotiating the dismantling of Dexia.
"This is a little wakeup call to say no one's immune from this crisis," said Jerry Webman, chief economist at OppenheimerFunds. "That's the issue with contagion—financial system troubles are self-fulfilling prophecies....Troubles in the financial system create further troubles that spread into the economy, so the market is right to be cautious."
At the same time, Mr. Webman said markets may be playing it safe ahead of a quiet four days coming up in the U.S. "A yield of 2.15% on bunds is not exactly Greek territory, so obviously Germany continues to have a lot of financial flexibility," he said.
Those worries sent the euro tumbling against the dollar, falling to $1.3329, near a two-month low, from $1.3505 late Tuesday in New York. The Stoxx Europe 600 finished down 1.3%, with losses limited in part by a better-than-expected reading of the euro-zone composite purchasing-managers index for November.
Asian exchanges were broadly lower, with China's Shanghai Composite erasing early gains to close down 0.7% and Hong Kong's Hang Seng Index dropping 2.8%. The preliminary HSBC China Manufacturing Purchasing Managers Index, a gauge of nationwide manufacturing activity, fell to 48.0 in November, from a final reading of 51.0 in October. Readings below 50 imply contraction.
In U.S. economic news, initial jobless claims ticked slightly higher last week after three consecutive declines, rising slightly to 393,000, in line with expectations. Orders for durable goods decreased 0.7% in October, while the September reading was revised sharply lower to a 1.5% drop, from an earlier estimate of a 0.6% decline.
Consumer spending, meanwhile, slowed in October, growing by just 0.1% after a 0.7% rise the month before, missing expectations. U.S. incomes rose 0.4% in October, following a 0.1% rise in the prior month.
Gold futures slipped 0.4% to settle at $1,695.70 an ounce, while crude-oil futures fell to about $96.25 a barrel. Demand for Treasurys sent the yield on the 10-year note to 1.8881%.
In corporate news, shares of Deere climbed 3.2% after the farm- and construction-equipment maker reported fiscal fourth-quarter earnings and revenue that exceeded expectations.
TiVo slipped into negative territory, shedding 1.2% after reporting fiscal third-quarter losses that were narrower than expected and revenue that exceeded estimates. In addition, the company posted an increase in subscribers to break a four-year streak of decreases.
Pandora Media slumped 7.6% after the online-radio company reported a fiscal third-quarter profit versus expectations of a loss but indicated its current-quarter loss could be wider than anticipated.
Boston Scientific climbed 0.8% after regulators approved its next-generation drug-eluting heart stent
Top financial story of the day:
Slightly more in US sought unemployment benefits last week after 2 months of steady declines
Slightly more in US seek unemployment benefits-From AP
The number of Americans seeking unemployment benefits ticked up slightly last week after two months of steady declines.
But the increase isn't enough to reverse the downward trend. The four-week average of applications, a less volatile measure, fell to its lowest level since April. The decline in the average signals that companies are laying off fewer workers.
Weekly applications for unemployment aid rose 2,000 to a seasonally adjusted 393,000, the Department of Labor said Wednesday.
It's the second increase in six weeks. The four-week average fell to 394,250. That's the eighth drop in the past nine weeks.
Even so, weekly applications would need to stay below 375,000 consistently to push down the unemployment rate significantly. They haven't been at that level since February.
The pace of hiring over the past few months has been mixed. The economy added only 80,000 jobs in October, the fewest in four months. But the government also said this month that employers added more jobs in August and September than it had initially reported. And the unemployment rate dipped to 9 percent.
The economy is growing but not quickly enough to generate many jobs. The economy expanded at a 2 percent annual rate in the July-September quarter, the government said Tuesday. That was down from an earlier estimate of 2.5 percent.
Growth would need to be more than twice that pace to significantly reduce unemployment, economists say.
The lower estimate was mostly because companies sharply reduced their stockpiles of goods. They probably didn't anticipate that consumer and business spending would remain strong through the summer.
A decline in inventories is not always a bad sign. Economists believe this could lead to better growth in the current quarter, if businesses anticipate more demand and restock their shelves.
Economists predict growth will strengthen to around 3 percent in the October-December quarter.
Many raised their estimates after seeing encouraging October reports on retail sales and factory output.
Still, that brighter outlook hinges on whether Europe can prevent its financial crisis from getting worse. If not, Europe could fall into a recession, which could slow U.S. growth next year.
In the first six months of the year, the economy grew at an annual rate of just 0.9 percent. It was the weakest growth since the recession officially ended, which stocked fears over the summer that the economy could be on the verge of another downturn.
The stronger growth in the July-September quarter helped calm those worries. Still, Americans spent more while earning less, and they dipped into their savings to make up the difference. At the same time, businesses invested more in machines and computers, not workers.
Without more jobs and higher pay raises, consumers are unlikely to be able to sustain those gains.
Quote of the Day from Dave Ramsey.com:
A thankful heart is not only the greatest virtue, but the parent of all the other virtues. — Cicero
Tuesday, November 22, 2011
Financial Headline News for Tuesday 11/22
Phil's Financial Tip of the Day:
Not sure what to spend on Christmas this year? I just heard on the Dave Ramsey radio show figures you can use as a guide to arrive at a budgeted amount.
The average family household earns $52,000 per year and the average Christmas spending per family is $800. This comes out to a reasonable 1.5% ratio. So if follow this depending on what you earn, you shouldn't overdo your budget. So if you make $100,000 per family, spend about $1,500-$1,600. If you make $25,000, don't spend more than $400.
Hope this simple guide helps you as Christmas shopping is about to begin in earnest this weekend.
In the Markets today:
Stocks fall as US cuts estimate of third quarter growth to 2 percent; Spain's rates rise
Stocks weaken as government lowers growth estimate-From AP
Stock indexes fell Tuesday after the U.S. government lowered its estimate of economic growth in the third quarter. Higher borrowing costs for Spain also renewed worries about Europe's debt crisis.
Hewlett-Packard Co. sank 3.4 percent, dragging down the Dow Jones industrial average. H-P lowered its earnings forecast for the 2012 fiscal year after the market closed Monday. The tech giant said it was being "cautious," citing Europe's debt crisis and weak consumer spending.
The Commerce Department said the U.S. economy grew at a 2 percent annual rate in the July-September period, down from its initial estimate of 2.5 percent. Economists had expected the figure to remain unchanged.
The Dow Jones industrial average was down 59 points, or 0.5 percent, at 11,487 shortly after noon. After H-P, aluminum maker Alcoa Inc. had the biggest fall among the 30 stocks in the index, 2 percent.
The Standard & Poor's 500 index fell 5 points, or 0.5 percent, to 1,188. Energy and technology companies led the index lower.
The S&P is headed for its fifth straight decline, which would be its longest losing streak since August. Stocks have been mostly sliding over the past week on worries that Spain could get dragged into Europe's debt crisis and as Congress neared a deadlock over cutting the U.S. budget deficit.
The Nasdaq composite lost 10, or 0.4 percent, to 2,513.
The Dow plunged 249 points Monday as a congressional committee failed to reach a deal to cut budget deficits. The congressional impasse raised fears that rating agencies might lower the U.S. government's credit rating.
After the market closed Monday, the major agencies said the country's credit rating was unaffected by the news, but Standard & Poor's also said its current rating is based on the expectation that automatic cuts will start in 2013. Some Republicans have said they would block the defense spending cuts.
"Markets are looking for clarity, and you didn't get that from the super-committee," says Steven Ricchiuto, chief economist at Mizuho Securities. "There's no reason to believe the economy is going to get stronger."
Across the Atlantic, there were more signs of trouble in Europe's debt crisis. Spain was forced to pay sharply higher interest rates in an auction of short-term debt. The higher rates suggest that investors are still skeptical that the country will get its budget under control despite a new, center-right government coming to power this week.
Investors have been worried that Spain could become the next country to need financial support from its European neighbors if its borrowing rates climb to unsustainable levels. Greece was forced to seek relief from its lenders after its long-term borrowing rates rose above 7 percent on the bond market.
The rate on Spain's own benchmark 10-year bond is dangerously close to that level, 6.58 percent.
In other trading, Netflix Inc. sank 2.2 percent. The online video rental company said it raised $400 million from selling debt and stock as it tries to recover from a consumer backlash following price hikes.
Campbell Soup Co. sank 5.5 percent after reporting a 5 percent drop in net income. The company said price increases were not enough to offset lower volume in its soup and beverage businesses.
Medtronic Inc. rose 3.5 percent. The world's largest medical device maker reported higher-than-expected earnings and reaffirmed its full-year earnings outlook.
Top financial story of the day:
Economy grew at modest 2 percent rate in July-September quarter, lower than first estimated
Profits Rise as GDP Revised Lower-From The Wall Street Journal
Corporate profits in the U.S. rose even as the economy grew less than initially thought during the third quarter as companies fought through a tepid recovery.
Gross domestic product, the broadest measure of all the goods and services produced in an economy, grew at an inflation-adjusted annual rate of 2.0% in the July to September period. While still the strongest performance of the year, the Commerce Department's second estimate of GDP is lower than the advance estimate of 2.5%.
Economists surveyed by Dow Jones Newswires expected a revised figure of 2.3%.
A big downward revision to inventory investment--and smaller adjustments to business investment and consumer spending--dragged down the GDP number.
Despite a slow recovery, corporate profits--after tax and unadjusted for inventories or capital consumption--rose at a 6.5% seasonally adjusted rate compared with a year earlier, the Commerce Department said in its first estimate for the quarter. Profits were up 2.5% from the prior period, the third consecutive quarterly increase. Even as many corporate balance sheets appear healthy, the economy's slow pace of growth hasn't been enough to bring down unemployment much or boost wages. The unemployment rate was 9.0% in October and has been stuck close to that level all year.
That's frustrated some policy makers.
One possible step: the Fed could buy more mortgage-backed securities to revive the ailing housing market.
Still, some at the central bank are worried that new measures would fuel higher inflation, and it's not clear if the Fed will take additional steps.
The core inflation rate--which excludes volatile moves in food and energy prices and is closely watched by the Fed--increased 2.0% from the previous quarter. That was revised down from an initial estimate of 2.1%.
The overall price index for personal consumption expenditures increased by 2.3% in the second quarter, versus 2.4% as previously thought.
Similarly, the price index for gross domestic purchases, which measures prices paid by U.S. residents, was lowered to 1.9% from 2.0%. The chain-weighted GDP price index was unrevised at a 2.5% gain.
Even though prices charged to consumers are rising, costs for fuel and other commodities are up even more for many companies. That can crimp profits.
H.J. Heinz Co. last week reported a 5.7% drop in fiscal-second-quarter earnings even after price increases--gross margin still fell to 34.3% from 37% amid the higher costs.
But other companies are managing well through the slow recovery.
Women's apparel retailer Ann Inc. Friday posted a 33% jump in fiscal-third-quarter earnings. The operator of Ann Taylor said gross margin grew to 57.5% from 57.2%, an increase that in part reflected improved product offerings and higher full-price selling at its Loft brand.
Clothing retailers generally saw sales hold up in the third quarter as consumers continued spending.
Tuesday's report lowered the third quarter consumer spending increase to 2.3% from an initial estimate of 2.4%.
Quote of the Day from Dave Ramsey.com:
Nothing is more common than unfulfilled potential. — Howard Hendricks
Not sure what to spend on Christmas this year? I just heard on the Dave Ramsey radio show figures you can use as a guide to arrive at a budgeted amount.
The average family household earns $52,000 per year and the average Christmas spending per family is $800. This comes out to a reasonable 1.5% ratio. So if follow this depending on what you earn, you shouldn't overdo your budget. So if you make $100,000 per family, spend about $1,500-$1,600. If you make $25,000, don't spend more than $400.
Hope this simple guide helps you as Christmas shopping is about to begin in earnest this weekend.
In the Markets today:
Stocks fall as US cuts estimate of third quarter growth to 2 percent; Spain's rates rise
Stocks weaken as government lowers growth estimate-From AP
Stock indexes fell Tuesday after the U.S. government lowered its estimate of economic growth in the third quarter. Higher borrowing costs for Spain also renewed worries about Europe's debt crisis.
Hewlett-Packard Co. sank 3.4 percent, dragging down the Dow Jones industrial average. H-P lowered its earnings forecast for the 2012 fiscal year after the market closed Monday. The tech giant said it was being "cautious," citing Europe's debt crisis and weak consumer spending.
The Commerce Department said the U.S. economy grew at a 2 percent annual rate in the July-September period, down from its initial estimate of 2.5 percent. Economists had expected the figure to remain unchanged.
The Dow Jones industrial average was down 59 points, or 0.5 percent, at 11,487 shortly after noon. After H-P, aluminum maker Alcoa Inc. had the biggest fall among the 30 stocks in the index, 2 percent.
The Standard & Poor's 500 index fell 5 points, or 0.5 percent, to 1,188. Energy and technology companies led the index lower.
The S&P is headed for its fifth straight decline, which would be its longest losing streak since August. Stocks have been mostly sliding over the past week on worries that Spain could get dragged into Europe's debt crisis and as Congress neared a deadlock over cutting the U.S. budget deficit.
The Nasdaq composite lost 10, or 0.4 percent, to 2,513.
The Dow plunged 249 points Monday as a congressional committee failed to reach a deal to cut budget deficits. The congressional impasse raised fears that rating agencies might lower the U.S. government's credit rating.
After the market closed Monday, the major agencies said the country's credit rating was unaffected by the news, but Standard & Poor's also said its current rating is based on the expectation that automatic cuts will start in 2013. Some Republicans have said they would block the defense spending cuts.
"Markets are looking for clarity, and you didn't get that from the super-committee," says Steven Ricchiuto, chief economist at Mizuho Securities. "There's no reason to believe the economy is going to get stronger."
Across the Atlantic, there were more signs of trouble in Europe's debt crisis. Spain was forced to pay sharply higher interest rates in an auction of short-term debt. The higher rates suggest that investors are still skeptical that the country will get its budget under control despite a new, center-right government coming to power this week.
Investors have been worried that Spain could become the next country to need financial support from its European neighbors if its borrowing rates climb to unsustainable levels. Greece was forced to seek relief from its lenders after its long-term borrowing rates rose above 7 percent on the bond market.
The rate on Spain's own benchmark 10-year bond is dangerously close to that level, 6.58 percent.
In other trading, Netflix Inc. sank 2.2 percent. The online video rental company said it raised $400 million from selling debt and stock as it tries to recover from a consumer backlash following price hikes.
Campbell Soup Co. sank 5.5 percent after reporting a 5 percent drop in net income. The company said price increases were not enough to offset lower volume in its soup and beverage businesses.
Medtronic Inc. rose 3.5 percent. The world's largest medical device maker reported higher-than-expected earnings and reaffirmed its full-year earnings outlook.
Top financial story of the day:
Economy grew at modest 2 percent rate in July-September quarter, lower than first estimated
Profits Rise as GDP Revised Lower-From The Wall Street Journal
Corporate profits in the U.S. rose even as the economy grew less than initially thought during the third quarter as companies fought through a tepid recovery.
Gross domestic product, the broadest measure of all the goods and services produced in an economy, grew at an inflation-adjusted annual rate of 2.0% in the July to September period. While still the strongest performance of the year, the Commerce Department's second estimate of GDP is lower than the advance estimate of 2.5%.
Economists surveyed by Dow Jones Newswires expected a revised figure of 2.3%.
A big downward revision to inventory investment--and smaller adjustments to business investment and consumer spending--dragged down the GDP number.
Despite a slow recovery, corporate profits--after tax and unadjusted for inventories or capital consumption--rose at a 6.5% seasonally adjusted rate compared with a year earlier, the Commerce Department said in its first estimate for the quarter. Profits were up 2.5% from the prior period, the third consecutive quarterly increase. Even as many corporate balance sheets appear healthy, the economy's slow pace of growth hasn't been enough to bring down unemployment much or boost wages. The unemployment rate was 9.0% in October and has been stuck close to that level all year.
That's frustrated some policy makers.
One possible step: the Fed could buy more mortgage-backed securities to revive the ailing housing market.
Still, some at the central bank are worried that new measures would fuel higher inflation, and it's not clear if the Fed will take additional steps.
The core inflation rate--which excludes volatile moves in food and energy prices and is closely watched by the Fed--increased 2.0% from the previous quarter. That was revised down from an initial estimate of 2.1%.
The overall price index for personal consumption expenditures increased by 2.3% in the second quarter, versus 2.4% as previously thought.
Similarly, the price index for gross domestic purchases, which measures prices paid by U.S. residents, was lowered to 1.9% from 2.0%. The chain-weighted GDP price index was unrevised at a 2.5% gain.
Even though prices charged to consumers are rising, costs for fuel and other commodities are up even more for many companies. That can crimp profits.
H.J. Heinz Co. last week reported a 5.7% drop in fiscal-second-quarter earnings even after price increases--gross margin still fell to 34.3% from 37% amid the higher costs.
But other companies are managing well through the slow recovery.
Women's apparel retailer Ann Inc. Friday posted a 33% jump in fiscal-third-quarter earnings. The operator of Ann Taylor said gross margin grew to 57.5% from 57.2%, an increase that in part reflected improved product offerings and higher full-price selling at its Loft brand.
Clothing retailers generally saw sales hold up in the third quarter as consumers continued spending.
Tuesday's report lowered the third quarter consumer spending increase to 2.3% from an initial estimate of 2.4%.
Quote of the Day from Dave Ramsey.com:
Nothing is more common than unfulfilled potential. — Howard Hendricks
Monday, November 21, 2011
Financial Headline News for Monday 11/21
Phil's Financial Tip of the Day:
Dave Ramsey began his program today by talking of common sense Christmas budgeting that my wife and I happen to use which makes our Christmas season so much less stressful. As Mr. Ramsey said, make a total dollar amount budget of all the people you will be shopping for this season (Ex. $750 for all presents to be bought this Christmas season). Now break that total amount down per person. This is what each individual will be getting in monetary value per present(s) this year. So if you overspend on Aunt Josie by $20, then someone else(could it be Uncle Tom?) will be getting $20 less on their gift.
In the Markets today:
U.S. stocks closed sharply lower Monday, with the Dow ending the session negative for the year, as the failure or the Supercommittee and heavy debt loads both in the United States and Europe heightened fear and volatility.
Selloff in fourth day on Europe, U.S. debt concerns-From Reuters
U.S. stocks fell for a fourth session on Monday, as the lack of progress in dealing with heavy debt both in the United States and Europe further sapped investor confidence in equities.
Risky assets like commodities also fell, sparking a selloff in shares of industrials and energy companies. Volume was lower than average, with investors more inclined to sit on the sidelines amid the uncertainty.
"We're seeing signs of worsening in Europe, worsening in our market here. There is no viable resolution to this," said Stephen Massocca, managing director of Wedbush Morgan in San Francisco.
The Dow Jones industrial average (DJI:^DJI) was down 248.85 points, or 2.11 percent, at 11,547.31. The Standard & Poor's 500 Index (SNP:^GSPC) was down 22.66 points, or 1.86 percent, at 1,192.99. The Nasdaq Composite Index (Nasdaq:^IXIC) was down 49.36 points, or 1.92 percent, at 2,523.14.
A special U.S. congressional committee was expected to concede failure to reach a deal after three months of talks to slash the deficit.
There are concerns the stalemate will make it more difficult to pass extensions of stimulative measures like payroll tax cuts, which could hurt the U.S. economy. In addition, investors are worried that the committee's inability to come to an agreement could result in another downgrade of the U.S. credit rating, though so far the major ratings agencies have not commented.
Moody's Investors Service said a recent rise in interest rates on French government debt and weaker economic growth prospects could be negative for France's credit rating.
Blue chips, which have been outperforming smaller cap stocks, fell the most. The Dow was off 0.3 percent for the year. The S&P and the Nasdaq have fallen about 5 percent.
The S&P quickly fell through the 1,200 level seen as the next level of support. After that support was seen at 1,187, representing the 61.8 percent retracement of the 2011 high to low slide.
Rick Bensignor, chief market strategist at Merlin Securities in New York, said the negative headlines from across the globe made it less likely the market would see a sustained rally despite stocks having what many traders say are attractive valuations.
"Cheap valuations only do so much. They don't make bull markets, they make bidders to curtail down markets but in and of themselves, the fact that stocks are cheap is not a good enough reason to think that they are going to go higher."
Among blue-chip stocks, Bank of America (NYSE:BAC) fell 5 percent to $5.49. On the Nasdaq, Amazon.com Inc (NasdaqGS:AMZN) shares lost 4 percent to $189.25.
After the closing bell, Hewlett-Packard's (NYSE:HPQ) reported quarterly results that beat Wall Street's expectations. The stock rose 2.4 percent to $27.50 in extended trade.
In Europe, the FTSEurofirst 300 (.FTEU3) index fell to its lowest close in nearly seven weeks. Along with the new concerns about France, Spain's bond yields rose despite a clear-cut victory for austerity-committed conservatives in Sunday's election. There were few details on Prime Minister-elect Mariano Rajoy's plans.
About 7.6 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, below the current daily average of 8 billion shares.
On the New York Stock Exchange, about six stocks fell for every one that rose. On the Nasdaq, decliners beat advancers by 5 to 1.
Merger activity provided a bright spot as Pharmasset Inc (NasdaqGS:VRUS) surged 84.6 percent to $134.14 after Gilead Sciences Inc (NasdaqGS:GILD) agreed to buy the company for $11 billion in cash. Gilead slumped 9.1 percent to $36.26.
Economic data showed U.S. existing-home sales unexpectedly rose in October as low interest rates for mortgages and rising rents encouraged more home buyers, a trade group said, but equities were little helped by the data.
Top financial story of the day:
A third of Realtors say they had at least 1 contract for a home fall apart at the last minute as first time buyers continue to decline.
October home sales rose 1.4 percent but still weak-From AP
The number of Americans who bought previously occupied homes rose slightly last month but remained at depressed levels. And more deals are being canceled at the last minute, a sign that even those who are looking to buy are worried about the housing market.
Home sales rose 1.4 percent last month to a seasonally adjusted annual rate of 4.97 million, the
The sales are measured when buyers close on the homes.
Contracts have been cancelled for a number of reasons: Banks have declined mortgage applications; home inspectors have found problems; appraisals showed a home was worth less than the bid; a buyer lost a job before the closing.
Still, the October increase in home sales beat analysts' expectations. Some economists took that as a positive sign for the troubled market.
"We are not looking for a housing renaissance but the straws in the wind suggest that activity in the sector might be improving slightly," said John Ryding, chief economist at RDQ Economics.
More than two years after the recession officially ended, many people can't qualify for loans or meet higher down-payment requirements. Even those with excellent credit and stable jobs are holding off because they fear that home prices will keep falling. Home sales are also being hurt by a steep decline in first-time buyers, who are critical to reviving the housing market.
Activity among first-time buyers rose slightly last month to make up 34 percent of sales. That's up from 32 percent in September.
At the same time, homes at risk of foreclosure made up 28 percent of sales last month. That's down from 30 percent in September. Many of the sales went to investors, who are increasingly buying homes priced under $100,000. Sales in that category have increased more than 24 percent over the past year while sales of more expensive homes have fallen.
Sales have fallen in four of the five years since the housing boom went bust in 2006. Declining prices and record-low mortgage rates haven't been enough to boost sales.
Most economists say home prices will keep falling, by at least 5 percent, through the rest of the year.
Many forecasts don't anticipate a rebound in prices until at least 2013.
The median sales price dropped roughly 2 percent to $162,500 in October.
The high rate of foreclosures has made re-sold homes much cheaper than new homes. The median price of a new home is roughly 30 percent higher than the price of one that's been occupied before — twice the normal markup.
Investors are taking advantage of the discounts. Their purchases made up 19 percent of all sales last month, compared with less than 10 percent in healthier housing markets.
Home sales rose across the most of the country. Sales increased 4.4 percent in the West, 2.8 percent in the Midwest and 2.1 percent in the South. They fell 5.1 percent in the Northeast.
The glut of unsold homes declined slightly in August to 3.33 million homes. At last month's sales pace, it would take 8 months to clear those homes. Analysts say a healthy supply can be cleared in six months.
The housing market continues to struggle even as the broader economy has shown some improvement in recent months.
The economy grew at an annual pace of 2.5 percent in the July-September quarter. Many economists expect slightly better growth in the October-December quarter.
Last week, the government reported further improvement in the number of people seeking unemployment benefits for the first time. The number fell to 388,000, the fewest since April.
In October, the economy added a net total of 80,000 jobs. It was the 13th straight month of gains. Still, the additional jobs were fewer than the roughly 125,000 that are needed each month just to keep up with population growth.
Quote of the Day from Dave Ramsey.com:
If you can't sleep, then get up and do something instead of lying there and worrying. It's the worry that gets you, not the loss of sleep. — Dale Carnegie
Dave Ramsey began his program today by talking of common sense Christmas budgeting that my wife and I happen to use which makes our Christmas season so much less stressful. As Mr. Ramsey said, make a total dollar amount budget of all the people you will be shopping for this season (Ex. $750 for all presents to be bought this Christmas season). Now break that total amount down per person. This is what each individual will be getting in monetary value per present(s) this year. So if you overspend on Aunt Josie by $20, then someone else(could it be Uncle Tom?) will be getting $20 less on their gift.
In the Markets today:
U.S. stocks closed sharply lower Monday, with the Dow ending the session negative for the year, as the failure or the Supercommittee and heavy debt loads both in the United States and Europe heightened fear and volatility.
Selloff in fourth day on Europe, U.S. debt concerns-From Reuters
U.S. stocks fell for a fourth session on Monday, as the lack of progress in dealing with heavy debt both in the United States and Europe further sapped investor confidence in equities.
Risky assets like commodities also fell, sparking a selloff in shares of industrials and energy companies. Volume was lower than average, with investors more inclined to sit on the sidelines amid the uncertainty.
"We're seeing signs of worsening in Europe, worsening in our market here. There is no viable resolution to this," said Stephen Massocca, managing director of Wedbush Morgan in San Francisco.
The Dow Jones industrial average (DJI:^DJI) was down 248.85 points, or 2.11 percent, at 11,547.31. The Standard & Poor's 500 Index (SNP:^GSPC) was down 22.66 points, or 1.86 percent, at 1,192.99. The Nasdaq Composite Index (Nasdaq:^IXIC) was down 49.36 points, or 1.92 percent, at 2,523.14.
A special U.S. congressional committee was expected to concede failure to reach a deal after three months of talks to slash the deficit.
There are concerns the stalemate will make it more difficult to pass extensions of stimulative measures like payroll tax cuts, which could hurt the U.S. economy. In addition, investors are worried that the committee's inability to come to an agreement could result in another downgrade of the U.S. credit rating, though so far the major ratings agencies have not commented.
Moody's Investors Service said a recent rise in interest rates on French government debt and weaker economic growth prospects could be negative for France's credit rating.
Blue chips, which have been outperforming smaller cap stocks, fell the most. The Dow was off 0.3 percent for the year. The S&P and the Nasdaq have fallen about 5 percent.
The S&P quickly fell through the 1,200 level seen as the next level of support. After that support was seen at 1,187, representing the 61.8 percent retracement of the 2011 high to low slide.
Rick Bensignor, chief market strategist at Merlin Securities in New York, said the negative headlines from across the globe made it less likely the market would see a sustained rally despite stocks having what many traders say are attractive valuations.
"Cheap valuations only do so much. They don't make bull markets, they make bidders to curtail down markets but in and of themselves, the fact that stocks are cheap is not a good enough reason to think that they are going to go higher."
Among blue-chip stocks, Bank of America (NYSE:BAC) fell 5 percent to $5.49. On the Nasdaq, Amazon.com Inc (NasdaqGS:AMZN) shares lost 4 percent to $189.25.
After the closing bell, Hewlett-Packard's (NYSE:HPQ) reported quarterly results that beat Wall Street's expectations. The stock rose 2.4 percent to $27.50 in extended trade.
In Europe, the FTSEurofirst 300 (.FTEU3) index fell to its lowest close in nearly seven weeks. Along with the new concerns about France, Spain's bond yields rose despite a clear-cut victory for austerity-committed conservatives in Sunday's election. There were few details on Prime Minister-elect Mariano Rajoy's plans.
About 7.6 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, below the current daily average of 8 billion shares.
On the New York Stock Exchange, about six stocks fell for every one that rose. On the Nasdaq, decliners beat advancers by 5 to 1.
Merger activity provided a bright spot as Pharmasset Inc (NasdaqGS:VRUS) surged 84.6 percent to $134.14 after Gilead Sciences Inc (NasdaqGS:GILD) agreed to buy the company for $11 billion in cash. Gilead slumped 9.1 percent to $36.26.
Economic data showed U.S. existing-home sales unexpectedly rose in October as low interest rates for mortgages and rising rents encouraged more home buyers, a trade group said, but equities were little helped by the data.
Top financial story of the day:
A third of Realtors say they had at least 1 contract for a home fall apart at the last minute as first time buyers continue to decline.
October home sales rose 1.4 percent but still weak-From AP
The number of Americans who bought previously occupied homes rose slightly last month but remained at depressed levels. And more deals are being canceled at the last minute, a sign that even those who are looking to buy are worried about the housing market.
Home sales rose 1.4 percent last month to a seasonally adjusted annual rate of 4.97 million, the
The sales are measured when buyers close on the homes.
Contracts have been cancelled for a number of reasons: Banks have declined mortgage applications; home inspectors have found problems; appraisals showed a home was worth less than the bid; a buyer lost a job before the closing.
Still, the October increase in home sales beat analysts' expectations. Some economists took that as a positive sign for the troubled market.
"We are not looking for a housing renaissance but the straws in the wind suggest that activity in the sector might be improving slightly," said John Ryding, chief economist at RDQ Economics.
More than two years after the recession officially ended, many people can't qualify for loans or meet higher down-payment requirements. Even those with excellent credit and stable jobs are holding off because they fear that home prices will keep falling. Home sales are also being hurt by a steep decline in first-time buyers, who are critical to reviving the housing market.
Activity among first-time buyers rose slightly last month to make up 34 percent of sales. That's up from 32 percent in September.
At the same time, homes at risk of foreclosure made up 28 percent of sales last month. That's down from 30 percent in September. Many of the sales went to investors, who are increasingly buying homes priced under $100,000. Sales in that category have increased more than 24 percent over the past year while sales of more expensive homes have fallen.
Sales have fallen in four of the five years since the housing boom went bust in 2006. Declining prices and record-low mortgage rates haven't been enough to boost sales.
Most economists say home prices will keep falling, by at least 5 percent, through the rest of the year.
Many forecasts don't anticipate a rebound in prices until at least 2013.
The median sales price dropped roughly 2 percent to $162,500 in October.
The high rate of foreclosures has made re-sold homes much cheaper than new homes. The median price of a new home is roughly 30 percent higher than the price of one that's been occupied before — twice the normal markup.
Investors are taking advantage of the discounts. Their purchases made up 19 percent of all sales last month, compared with less than 10 percent in healthier housing markets.
Home sales rose across the most of the country. Sales increased 4.4 percent in the West, 2.8 percent in the Midwest and 2.1 percent in the South. They fell 5.1 percent in the Northeast.
The glut of unsold homes declined slightly in August to 3.33 million homes. At last month's sales pace, it would take 8 months to clear those homes. Analysts say a healthy supply can be cleared in six months.
The housing market continues to struggle even as the broader economy has shown some improvement in recent months.
The economy grew at an annual pace of 2.5 percent in the July-September quarter. Many economists expect slightly better growth in the October-December quarter.
Last week, the government reported further improvement in the number of people seeking unemployment benefits for the first time. The number fell to 388,000, the fewest since April.
In October, the economy added a net total of 80,000 jobs. It was the 13th straight month of gains. Still, the additional jobs were fewer than the roughly 125,000 that are needed each month just to keep up with population growth.
Quote of the Day from Dave Ramsey.com:
If you can't sleep, then get up and do something instead of lying there and worrying. It's the worry that gets you, not the loss of sleep. — Dale Carnegie
Friday, November 18, 2011
Financial Headline News for Friday 11/18
Stocks barely budged today as investors weigh signs of future economic growth with ongoing debt talks deadline looming for a deficit-cutting committee in Congress.
There was a ray of good economic news today as the gauge of future economic activity posted its strongest increase in 8 months.
Economists predict dire consequences if committee fails to reach agreement by midnight on Monday on how to reduce America's massive debt.
Here are the top financial stories of the day:
1) U.S. Stocks Finish Higher-From The Wall Street Journal
U.S. blue-chip stocks closed higher Friday, as investors weighed a potential proposal for future European bailouts with continued worries over Washington's debt talks.
The Dow Jones Industrial Average gained 25.43 points, or 0.22%, to 11796.16, after dropping nearly 400 points over the previous two sessions. The Standard & Poor's 500-stock index dropped 0.48 point, or 0.04%, to 1215.65. Utility and financial stocks rose, while technology and energy fell. The technology-oriented Nasdaq Composite fell 15.49 points, or 0.60%, to 2572.50.
Trading volume was light and stocks moved in a narrow range through much of the session. On the New York Stock Exchange, there were 17 advancing stocks for every 13 decliners. For Nasdaq names, market breadth was nearly split between advancing and declining stocks.
"You have this tug of war taking place in the market between the underlying domestic data and the crisis in Europe," said Mark Luschini, chief investment strategist at Janney Montgomery Scott. "If we had some relief on the European front, that would be the avenue for equities to move decently higher from here."
Traders pointed to potential positive developments over how European bailouts may be funded as a catalyst for Friday's action.
The notion that the International Monetary Fund may call on the European Central Bank to lend it money to finance bailouts is gaining traction, according to Dow Jones Newswires. If all parties agree, a deal could be announced at the Dec. 9 European Union summit.
"IMF firepower coupled with real structural reform in Europe would propel the U.S. stock market skyward in the intermediate term," said Seth Setrakian, co-head of trading at First New York Securities.
Investors also remained on edge regarding a lack of progress over Congress's so-called supercommittee on deficit reduction. Budget cuts are set to be decided by Wednesday.
"My biggest fear is the supercommittee comes out with some plan that has no guts to it whatsoever and people look at it as being totally impotent," said Daniel Genter, chief executive officer at RNC Genter Capital Management.
Hewlett-Packard led the Dow higher, rising 2.6%. The technology company said it will give activist shareholder Ralph Whitworth, co-founder of Relational Investors LLC, a seat on its board. Boeing gained 2.1%, while Walt Disney rose 1.4%. Weighing on the downside were Chevron, which fell 2.2%, and Microsoft, which declined 0.9%.
On the economic front, the Conference Board's index of leading economic indicators jumped last month, suggesting some momentum is building in the U.S. economy. The index rose 0.9%, which was ahead of economists' expectations.
But a slew of better-than-expected domestic economic reports this week have largely been overshadowed by worries in Europe.
European markets were slightly lower even as European Central Bank President Mario Draghi called for swift implementation of measures to combat the currency bloc's debt crisis. The Stoxx Europe 600 lost 0.8%.
Yields on 10-year Italian bonds were below the key 7% mark, and Spanish yields were off earlier highs.
Asian bourses were broadly lower, on the back of U.S. losses on Thursday.
Composite shed 1.9% and Japan's Nikkei Stock Average lost 1.2%.
Gold futures settled up 0.3% at $1725.10 an ounce, while crude oil futures fell 1.4% to $97.41 a barrel. The U.S. dollar fell sharply against the euro and Swiss franc and also declined against the yen.
In corporate news, shares of H.J. Heinz shed 3.3% after the ketchup maker reported fiscal second-quarter earnings that topped estimates but revenue that missed.
Salesforce.com slid 10% after the cloud-computing company reported fiscal third-quarter results that topped estimates, but indicated that current quarter earnings might fall short.
Marvell Technology jumped 6.5% after maker of chips and parts for hard-disk drives reported fiscal third-quarter earnings and revenue that declined from year-earlier levels but still beat expectations.
Nike inched 0.9% higher after the athletic-apparel giant increased its quarterly dividend by 16% to 36 cents a share.
Foot Locker's third-quarter earnings rose 27% as the athletic apparel and footwear chain booked higher sales and improved margins. Shares rose 2.6%.
Gap's fiscal third-quarter earnings fell 36% as the casual-apparel retailer's sales continued to slide and margins declined. The stock dropped 2.6%.
The U.S. economy may end 2011 growing at its fastest clip in 18 months as analysts increase their forecasts for the fourth quarter just a few months after a slowdown raised concern among investors.
Economists at JPMorgan Chase & Co. in New York now see gross domestic product rising 3 percent in the final quarter, up from a previous prediction of 2.5 percent. Macroeconomic Advisers in St. Louis increased its forecast to 3.2 percent from 2.9 percent at the start of November, while New York-based Morgan Stanley & Co. boosted its outlook to 3.5 percent from 3 percent.
Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York, said he wouldn't be surprised to see fourth-quarter growth of 4 percent, though for now he is sticking with his forecast of 3 percent.
Strengthening Economy
The strengthening economy will help lift U.S. stock prices, which have been depressed by the sovereign debt crisis in Europe, LaVorgna said.
Futures on the Standard & Poor's 500 Index expiring in December rose 0.8 percent to 1,225 at 7:54 a.m. in New York. The benchmark Stoxx Europe 600 Index gained 0.1 percent to 234.23 at 12:34 p.m. in London. The yield on the 10-year Treasury note rose to 2 percent from 1.96 percent late yesterday.
There's too much pessimism built into the market, he said, adding that the Standard & Poor's 500 Index could break 1,300 by years end. The stock gauge closed at 1,216.13 yesterday.
The economic pick-up also may push up yields on Treasury securities, Herrmann said. The yield on the 10-year note could rise to 2.25 percent or higher in the first quarter of next year, he said, assuming Europe avoids a financial catastrophe akin to the 2008 bankruptcy of Lehman Brothers Holdings Inc. The 10-year yield stood at 1.96 percent at 5 p.m. New York time yesterday, according to Bloomberg Bond Trader prices.
Consumer Spending
Behind the revised fourth quarter forecasts: Consumers have not cut back on spending even with the turmoil in world financial markets, putting pressure on companies to rebuild inventories they ran down because of concerns about Europe.
Helped by the biggest jump in electronics purchases in two years, retail sales rose 0.5 percent in October, after a 1.1 percent increase the month before, according to the Commerce Department.
We feel confident that the momentum we have heading into the fourth quarter, combined with our holiday strategies, bode well for that quarter,said Karen Hoguet, chief financial officer for Cincinnati-based Macy's Inc., the second-biggest U.S. department-store chain. We'll have a spectacular Christmas,she added on a Nov. 9 conference call with analysts.
Companies, meanwhile, held their inventories little changed in September as sales climbed, the Commerce Department reported on Nov. 15. Businesses had enough goods on hand to last 1.27 months at Septembers sales pace, near the record low of 1.24 months reached earlier this year.
Manage Inventories
Retailers continue to manage their inventories very carefully,Harlan Kent, chief executive officer of Yankee Candle Co. Inc., which sells its products to retailers like Macys and Target Corp., said on a Nov. 10 call with investors. We are in good shape to quickly respond to replenishment orders and capitalize on any uptick in consumer demand.
Restocking will boost growth by 0.8 percentage points in the fourth quarter, according to JPMorgan Chase. In the third quarter, inventory changes reduced GDP by 1.1 percentage points. The economic outlook beyond the fourth quarter rests heavily on what policy makers do, both in Europe and the U.S., said Michael Feroli, JPMorgan Chase's chief U.S. economist.
The U.S. would not be able to escape the consequences of a blowup in Europe,Federal Reserve Chairman Ben S. Bernanke said in El Paso, Texas on Nov. 10. The world's financial markets are highly interconnected.
Fed's Dudley
Federal Reserve Bank of New York President William C. Dudley said in a speech yesterday that while recent economic reports have shown improvement, that shouldn't be a signal for the Fed to relax its efforts to boost the economy. Growth next year may be around 2.75 percent after somewhat more than 2.5 percent in the fourth quarter, he said.
Although the latest news on the U.S. economy is somewhat more encouraging than that from earlier in the year, we should not take much solace from that, he said. The U.S. economy continues to face several obstacles,including consumers cutting debt and caution by businesses.
We also continue to face significant downside risks, mostly related to the stress in the euro zone,Dudley said.
Financial Crisis
Euro-region policy makers are struggling to contain a financial crisis that started two years ago in Greece and which has now spread to Italy, the region's third-biggest economy with a debt of 1.9 trillion euros ($2.6 trillion).
In Washington, the focus has been on the deliberations of the Congressional supercommittee, which faces a Nov. 23 deadline to come up with measures to reduce the budget deficit by $1.2 trillion over 10 years.
What's more important for the economy in 2012 though is the fate of a number of stimulus measures, including a 2 percent cut in employee payroll taxes and extended unemployment benefits, that are due to expire at end year, Feroli said.
If Congress doesn't continue them, the drag from tightening fiscal policy could subtract 1.5 to 2 percentage points from GDP growth next year,the former Fed economist added in Nov. 10 note to clients.
Households would be particularly hit, as the payroll tax cut and extended unemployment benefits boosted their income by about $150 billion this year, according to Feroli.
Holiday Season
For now, consumer spending has been holding up as the crucial end-of-year holiday selling season gets underway.
The rise in retail sales last month prompted economists David Greenlaw and Ted Wieseman at Morgan Stanley to bump up their forecast for growth of household outlays in the fourth quarter to 2.7 percent from 2.2 percent. Personal consumption expenditures rose at an annualized rate of 2.4 percent in the third quarter, the fastest pace so far this year.
Economists are divided over what's behind the buoyancy of spending. David Rosenberg, chief economist at Gluskin Sheff & Associates in Toronto, ties it to a fall in the savings rate that they argue can't last. That rate dropped to 3.6 percent in September, the lowest level since the start of the last recession in December 2007.
Often Revised
Others like LaVorgna play down the significance of the drop in the savings rate, noting that it is a statistic that is frequently revised.
Feroli, too, cautioned against reading too much into the savings numbers and pointed to other reasons for the resilience of consumer expenditures.
Ebbing inflation is giving households more spending power. Consumer prices fell in October for the first time in four months, dropping 0.1 percent after a 0.3 percent rise in September, the Labor Department said on Nov. 16. Contributing to the fall was a 3.1 percent decline in gasoline prices.
Lower borrowing costs, courtesy of a flight into Treasury securities by investors fearful of developments in Europe and the Feds continued easy monetary policy, are also helping households.
The average rate for a 30-year fixed rate mortgage was 4 percent in the week ended Nov. 17, barely above the 3.94 percent record low hit last month, according to Freddie Mac.
Construction Permits
Housing construction permits climbed last month to their highest level since March 2010, according to Commerce Department data, as the near record-low mortgage rates lured some buyers into the market.
The future pace of consumer spending ultimately will be decided by the growth of household income, which in turn is tied to the health of the job market.
And there, Herrmann saw some reason to be optimistic. He forecast that private-sector payrolls would rise an average 160,000 per month for the rest of this year and by 200,000 per month in the first four months of 2012. Private payrolls increased 104,000 in October.
In a sign that the job market may be improving, claims for unemployment benefits dropped to their lowest level in seven months in the week ended Nov. 12, to 388,000, Labor Department figures released yesterday showed.
With Europe an albatross around our necks, the fact that the economy is firming and performing better than expected is really encouraging,said Omair Sharif, an economist at RBS Securities Inc. in Stamford, Connecticut.
3) Supercommittee failure could trigger US credit downgrade, economists warn-The Guardian
Economists are warning of dire consequences if US politicians fail to make progress this weekend in tense talks aimed at reducing America's massive deficit ahead of a Wednesday deadline.
The bi-partisan congressional super-committee is charged with drawing up plans for a $1.2tn reduction in the nation's deficit by the middle of next week. Failure to do so will trigger an automatic "sequester" that will make cuts of that size to defence and social welfare programmes starting in 2013.
But the two sides seem far from finding a solution after clashing over tax revenues.
While Wednesday is the official deadline for the supercommittee to report back, it has until Monday to tell the Congressional Budget Office about the impact any plan they send to Congress will have on the budget.
"Time is running out. What I can say is we are leaving no stone unturned, negotiations continue and we are looking to find a way. We recognise what's at stake and we're hoping to reach an agreement," Democrat committee member Chris Van Hollen told CNN Friday.
Failure to reach an agreement on what is essentially a small reduction on the deficit – just 0.7% of gross domestic product in 2013 – could trigger another rating's agency downgrade, warned economists including Paul Ashworth, chief North American economist at Capital Economics.
"With all this pressure to reach an agreement, it really doesn't look good if they can't find a solution,"said Ashworth.
He said that the US had much more serious problems that would need tackling first.
"The US is already spending 7% of GDP on Medicare and Medicaid [the government-run health schemes] and that will be up to 10-11% in the next two decades. Debt is on an unsustainable path, and if they can't reach an agreement on this, it doesn't look good for the future."
Ratings agency Standard & Poor's cited the "extremely difficult" political conditions in Washington when it made the controversial decision to downgrade its rating on US debt in August. The firm also put the US "on watch' implying further cuts could come.
Morgan Stanley analyst Christine Tan predicted earlier this month that there was now a one-in-three possibility of another downgrade.
"If the supercommittee fails to reach a $1.2tn deficit reduction deal, if such a deal relies more upon accounting changes than real deficit reduction, or if congressional action lessens the impact of the $1.2tn automatic trigger, we believe this could potentially provide S&P with a pretext to downgrade the US further from AA+ to AA," wrote Tan in a note to investors.
HSBC's chief economist, Kevin Logan, said a "procrastination" solution was now the most likely outcome, with an agreement that specifies targets for spending cuts and revenue increases but leaves the details to congressional committees.
Passing the the hard choices back to congressional committees would lead to "lengthy and heated battles over the US deficit throughout 2012, we believe. The rating agencies might be tolerant of this for a while, but failure to make clear progress could lead to downgrades of the US sovereign credit rating at some point next year," Logan said.
David Semmens, US economist at Standard Chartered, said: "I think they will be forced into action. If not the consequences will be long-lasting. Failure will further highlight the political deadlock in Washington. It's very important the the supercommittee sends a strong message to the markets that the US is getting its house in order."
Stock markets are already under pressure form the credit crisis now sweeping Europe and further signals of a lack of leadership in the US could have negative consequences for the markets, said Semmens.
One of the major sticking points facing the supercommittee is what to do with Bush-era tax cuts that are set to expire at the end of 2012. Republicans are against any agreement that does not extend current income-tax rates.
Democrats want them extended only for lower- and middle-income Americans. Extending all the Bush tax cuts would add about $3.7tn to the deficit over the next decade.
Like the automatic deficit cuts, the Bush-era tax cuts too will automatically expire unless an agreement is reached. Gus Faucher, director of macroeconomics at Moody's Analytics, said: "We will see deficit reductions whether the super committee makes an agreement or not."
He said the "level of enmity" between Republicans and Democrats did raise concern, but he expects that some agreement will be reached.
Quote of the Day from Dave Ramsey.com:
Compare yourself to the average and you compete with the average. Compare yourself with the best and you compete with the best. — Simon Sinek
There was a ray of good economic news today as the gauge of future economic activity posted its strongest increase in 8 months.
Economists predict dire consequences if committee fails to reach agreement by midnight on Monday on how to reduce America's massive debt.
Here are the top financial stories of the day:
1) U.S. Stocks Finish Higher-From The Wall Street Journal
U.S. blue-chip stocks closed higher Friday, as investors weighed a potential proposal for future European bailouts with continued worries over Washington's debt talks.
The Dow Jones Industrial Average gained 25.43 points, or 0.22%, to 11796.16, after dropping nearly 400 points over the previous two sessions. The Standard & Poor's 500-stock index dropped 0.48 point, or 0.04%, to 1215.65. Utility and financial stocks rose, while technology and energy fell. The technology-oriented Nasdaq Composite fell 15.49 points, or 0.60%, to 2572.50.
Trading volume was light and stocks moved in a narrow range through much of the session. On the New York Stock Exchange, there were 17 advancing stocks for every 13 decliners. For Nasdaq names, market breadth was nearly split between advancing and declining stocks.
"You have this tug of war taking place in the market between the underlying domestic data and the crisis in Europe," said Mark Luschini, chief investment strategist at Janney Montgomery Scott. "If we had some relief on the European front, that would be the avenue for equities to move decently higher from here."
Traders pointed to potential positive developments over how European bailouts may be funded as a catalyst for Friday's action.
The notion that the International Monetary Fund may call on the European Central Bank to lend it money to finance bailouts is gaining traction, according to Dow Jones Newswires. If all parties agree, a deal could be announced at the Dec. 9 European Union summit.
"IMF firepower coupled with real structural reform in Europe would propel the U.S. stock market skyward in the intermediate term," said Seth Setrakian, co-head of trading at First New York Securities.
Investors also remained on edge regarding a lack of progress over Congress's so-called supercommittee on deficit reduction. Budget cuts are set to be decided by Wednesday.
"My biggest fear is the supercommittee comes out with some plan that has no guts to it whatsoever and people look at it as being totally impotent," said Daniel Genter, chief executive officer at RNC Genter Capital Management.
Hewlett-Packard led the Dow higher, rising 2.6%. The technology company said it will give activist shareholder Ralph Whitworth, co-founder of Relational Investors LLC, a seat on its board. Boeing gained 2.1%, while Walt Disney rose 1.4%. Weighing on the downside were Chevron, which fell 2.2%, and Microsoft, which declined 0.9%.
On the economic front, the Conference Board's index of leading economic indicators jumped last month, suggesting some momentum is building in the U.S. economy. The index rose 0.9%, which was ahead of economists' expectations.
But a slew of better-than-expected domestic economic reports this week have largely been overshadowed by worries in Europe.
European markets were slightly lower even as European Central Bank President Mario Draghi called for swift implementation of measures to combat the currency bloc's debt crisis. The Stoxx Europe 600 lost 0.8%.
Yields on 10-year Italian bonds were below the key 7% mark, and Spanish yields were off earlier highs.
Asian bourses were broadly lower, on the back of U.S. losses on Thursday.
Composite shed 1.9% and Japan's Nikkei Stock Average lost 1.2%.
Gold futures settled up 0.3% at $1725.10 an ounce, while crude oil futures fell 1.4% to $97.41 a barrel. The U.S. dollar fell sharply against the euro and Swiss franc and also declined against the yen.
In corporate news, shares of H.J. Heinz shed 3.3% after the ketchup maker reported fiscal second-quarter earnings that topped estimates but revenue that missed.
Salesforce.com slid 10% after the cloud-computing company reported fiscal third-quarter results that topped estimates, but indicated that current quarter earnings might fall short.
Marvell Technology jumped 6.5% after maker of chips and parts for hard-disk drives reported fiscal third-quarter earnings and revenue that declined from year-earlier levels but still beat expectations.
Nike inched 0.9% higher after the athletic-apparel giant increased its quarterly dividend by 16% to 36 cents a share.
Foot Locker's third-quarter earnings rose 27% as the athletic apparel and footwear chain booked higher sales and improved margins. Shares rose 2.6%.
Gap's fiscal third-quarter earnings fell 36% as the casual-apparel retailer's sales continued to slide and margins declined. The stock dropped 2.6%.
The U.S. economy may end 2011 growing at its fastest clip in 18 months as analysts increase their forecasts for the fourth quarter just a few months after a slowdown raised concern among investors.
Economists at JPMorgan Chase & Co. in New York now see gross domestic product rising 3 percent in the final quarter, up from a previous prediction of 2.5 percent. Macroeconomic Advisers in St. Louis increased its forecast to 3.2 percent from 2.9 percent at the start of November, while New York-based Morgan Stanley & Co. boosted its outlook to 3.5 percent from 3 percent.
Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York, said he wouldn't be surprised to see fourth-quarter growth of 4 percent, though for now he is sticking with his forecast of 3 percent.
Strengthening Economy
The strengthening economy will help lift U.S. stock prices, which have been depressed by the sovereign debt crisis in Europe, LaVorgna said.
Futures on the Standard & Poor's 500 Index expiring in December rose 0.8 percent to 1,225 at 7:54 a.m. in New York. The benchmark Stoxx Europe 600 Index gained 0.1 percent to 234.23 at 12:34 p.m. in London. The yield on the 10-year Treasury note rose to 2 percent from 1.96 percent late yesterday.
There's too much pessimism built into the market, he said, adding that the Standard & Poor's 500 Index could break 1,300 by years end. The stock gauge closed at 1,216.13 yesterday.
The economic pick-up also may push up yields on Treasury securities, Herrmann said. The yield on the 10-year note could rise to 2.25 percent or higher in the first quarter of next year, he said, assuming Europe avoids a financial catastrophe akin to the 2008 bankruptcy of Lehman Brothers Holdings Inc. The 10-year yield stood at 1.96 percent at 5 p.m. New York time yesterday, according to Bloomberg Bond Trader prices.
Consumer Spending
Behind the revised fourth quarter forecasts: Consumers have not cut back on spending even with the turmoil in world financial markets, putting pressure on companies to rebuild inventories they ran down because of concerns about Europe.
Helped by the biggest jump in electronics purchases in two years, retail sales rose 0.5 percent in October, after a 1.1 percent increase the month before, according to the Commerce Department.
We feel confident that the momentum we have heading into the fourth quarter, combined with our holiday strategies, bode well for that quarter,said Karen Hoguet, chief financial officer for Cincinnati-based Macy's Inc., the second-biggest U.S. department-store chain. We'll have a spectacular Christmas,she added on a Nov. 9 conference call with analysts.
Companies, meanwhile, held their inventories little changed in September as sales climbed, the Commerce Department reported on Nov. 15. Businesses had enough goods on hand to last 1.27 months at Septembers sales pace, near the record low of 1.24 months reached earlier this year.
Manage Inventories
Retailers continue to manage their inventories very carefully,Harlan Kent, chief executive officer of Yankee Candle Co. Inc., which sells its products to retailers like Macys and Target Corp., said on a Nov. 10 call with investors. We are in good shape to quickly respond to replenishment orders and capitalize on any uptick in consumer demand.
Restocking will boost growth by 0.8 percentage points in the fourth quarter, according to JPMorgan Chase. In the third quarter, inventory changes reduced GDP by 1.1 percentage points. The economic outlook beyond the fourth quarter rests heavily on what policy makers do, both in Europe and the U.S., said Michael Feroli, JPMorgan Chase's chief U.S. economist.
The U.S. would not be able to escape the consequences of a blowup in Europe,Federal Reserve Chairman Ben S. Bernanke said in El Paso, Texas on Nov. 10. The world's financial markets are highly interconnected.
Fed's Dudley
Federal Reserve Bank of New York President William C. Dudley said in a speech yesterday that while recent economic reports have shown improvement, that shouldn't be a signal for the Fed to relax its efforts to boost the economy. Growth next year may be around 2.75 percent after somewhat more than 2.5 percent in the fourth quarter, he said.
Although the latest news on the U.S. economy is somewhat more encouraging than that from earlier in the year, we should not take much solace from that, he said. The U.S. economy continues to face several obstacles,including consumers cutting debt and caution by businesses.
We also continue to face significant downside risks, mostly related to the stress in the euro zone,Dudley said.
Financial Crisis
Euro-region policy makers are struggling to contain a financial crisis that started two years ago in Greece and which has now spread to Italy, the region's third-biggest economy with a debt of 1.9 trillion euros ($2.6 trillion).
In Washington, the focus has been on the deliberations of the Congressional supercommittee, which faces a Nov. 23 deadline to come up with measures to reduce the budget deficit by $1.2 trillion over 10 years.
What's more important for the economy in 2012 though is the fate of a number of stimulus measures, including a 2 percent cut in employee payroll taxes and extended unemployment benefits, that are due to expire at end year, Feroli said.
If Congress doesn't continue them, the drag from tightening fiscal policy could subtract 1.5 to 2 percentage points from GDP growth next year,the former Fed economist added in Nov. 10 note to clients.
Households would be particularly hit, as the payroll tax cut and extended unemployment benefits boosted their income by about $150 billion this year, according to Feroli.
Holiday Season
For now, consumer spending has been holding up as the crucial end-of-year holiday selling season gets underway.
The rise in retail sales last month prompted economists David Greenlaw and Ted Wieseman at Morgan Stanley to bump up their forecast for growth of household outlays in the fourth quarter to 2.7 percent from 2.2 percent. Personal consumption expenditures rose at an annualized rate of 2.4 percent in the third quarter, the fastest pace so far this year.
Economists are divided over what's behind the buoyancy of spending. David Rosenberg, chief economist at Gluskin Sheff & Associates in Toronto, ties it to a fall in the savings rate that they argue can't last. That rate dropped to 3.6 percent in September, the lowest level since the start of the last recession in December 2007.
Often Revised
Others like LaVorgna play down the significance of the drop in the savings rate, noting that it is a statistic that is frequently revised.
Feroli, too, cautioned against reading too much into the savings numbers and pointed to other reasons for the resilience of consumer expenditures.
Ebbing inflation is giving households more spending power. Consumer prices fell in October for the first time in four months, dropping 0.1 percent after a 0.3 percent rise in September, the Labor Department said on Nov. 16. Contributing to the fall was a 3.1 percent decline in gasoline prices.
Lower borrowing costs, courtesy of a flight into Treasury securities by investors fearful of developments in Europe and the Feds continued easy monetary policy, are also helping households.
The average rate for a 30-year fixed rate mortgage was 4 percent in the week ended Nov. 17, barely above the 3.94 percent record low hit last month, according to Freddie Mac.
Construction Permits
Housing construction permits climbed last month to their highest level since March 2010, according to Commerce Department data, as the near record-low mortgage rates lured some buyers into the market.
The future pace of consumer spending ultimately will be decided by the growth of household income, which in turn is tied to the health of the job market.
And there, Herrmann saw some reason to be optimistic. He forecast that private-sector payrolls would rise an average 160,000 per month for the rest of this year and by 200,000 per month in the first four months of 2012. Private payrolls increased 104,000 in October.
In a sign that the job market may be improving, claims for unemployment benefits dropped to their lowest level in seven months in the week ended Nov. 12, to 388,000, Labor Department figures released yesterday showed.
With Europe an albatross around our necks, the fact that the economy is firming and performing better than expected is really encouraging,said Omair Sharif, an economist at RBS Securities Inc. in Stamford, Connecticut.
3) Supercommittee failure could trigger US credit downgrade, economists warn-The Guardian
Economists are warning of dire consequences if US politicians fail to make progress this weekend in tense talks aimed at reducing America's massive deficit ahead of a Wednesday deadline.
The bi-partisan congressional super-committee is charged with drawing up plans for a $1.2tn reduction in the nation's deficit by the middle of next week. Failure to do so will trigger an automatic "sequester" that will make cuts of that size to defence and social welfare programmes starting in 2013.
But the two sides seem far from finding a solution after clashing over tax revenues.
While Wednesday is the official deadline for the supercommittee to report back, it has until Monday to tell the Congressional Budget Office about the impact any plan they send to Congress will have on the budget.
"Time is running out. What I can say is we are leaving no stone unturned, negotiations continue and we are looking to find a way. We recognise what's at stake and we're hoping to reach an agreement," Democrat committee member Chris Van Hollen told CNN Friday.
Failure to reach an agreement on what is essentially a small reduction on the deficit – just 0.7% of gross domestic product in 2013 – could trigger another rating's agency downgrade, warned economists including Paul Ashworth, chief North American economist at Capital Economics.
"With all this pressure to reach an agreement, it really doesn't look good if they can't find a solution,"said Ashworth.
He said that the US had much more serious problems that would need tackling first.
"The US is already spending 7% of GDP on Medicare and Medicaid [the government-run health schemes] and that will be up to 10-11% in the next two decades. Debt is on an unsustainable path, and if they can't reach an agreement on this, it doesn't look good for the future."
Ratings agency Standard & Poor's cited the "extremely difficult" political conditions in Washington when it made the controversial decision to downgrade its rating on US debt in August. The firm also put the US "on watch' implying further cuts could come.
Morgan Stanley analyst Christine Tan predicted earlier this month that there was now a one-in-three possibility of another downgrade.
"If the supercommittee fails to reach a $1.2tn deficit reduction deal, if such a deal relies more upon accounting changes than real deficit reduction, or if congressional action lessens the impact of the $1.2tn automatic trigger, we believe this could potentially provide S&P with a pretext to downgrade the US further from AA+ to AA," wrote Tan in a note to investors.
HSBC's chief economist, Kevin Logan, said a "procrastination" solution was now the most likely outcome, with an agreement that specifies targets for spending cuts and revenue increases but leaves the details to congressional committees.
Passing the the hard choices back to congressional committees would lead to "lengthy and heated battles over the US deficit throughout 2012, we believe. The rating agencies might be tolerant of this for a while, but failure to make clear progress could lead to downgrades of the US sovereign credit rating at some point next year," Logan said.
David Semmens, US economist at Standard Chartered, said: "I think they will be forced into action. If not the consequences will be long-lasting. Failure will further highlight the political deadlock in Washington. It's very important the the supercommittee sends a strong message to the markets that the US is getting its house in order."
Stock markets are already under pressure form the credit crisis now sweeping Europe and further signals of a lack of leadership in the US could have negative consequences for the markets, said Semmens.
One of the major sticking points facing the supercommittee is what to do with Bush-era tax cuts that are set to expire at the end of 2012. Republicans are against any agreement that does not extend current income-tax rates.
Democrats want them extended only for lower- and middle-income Americans. Extending all the Bush tax cuts would add about $3.7tn to the deficit over the next decade.
Like the automatic deficit cuts, the Bush-era tax cuts too will automatically expire unless an agreement is reached. Gus Faucher, director of macroeconomics at Moody's Analytics, said: "We will see deficit reductions whether the super committee makes an agreement or not."
He said the "level of enmity" between Republicans and Democrats did raise concern, but he expects that some agreement will be reached.
Quote of the Day from Dave Ramsey.com:
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