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
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