There was finally some good news on the hiring front today.The ADP National Employment Report showed on Wednesday the economy's private sector added 110,000 jobs last month, topping economists' expectations for a gain of 101,000 jobs.
Luckily the Fed decided today to take a wait and see approach. It is putting off any new actions so it can gauge the impact of steps it's already taken.
Here are the top financial stories of the day:
1) Dow Bounces Back, Gains 178- From The Wall Street Journal
Stocks bounced back after a two-day selloff, as the Federal Reserve pledged to support the economy.
The Dow Jones Industrial Average gained 178.08 points, or 1.5%, to 11836.04, snapping a two-day losing streak. The Standard & Poor's 500-stock index added 19.62 points, or 1.6%, to 1237.90, while the Nasdaq Composite rose 33.02 points, or 1.3%, to 2639.98.
The Dow gained 219 points in morning trading before paring gains in half by the afternoon. Stocks pushed higher after Fed Chairman Ben Bernanke reiterated at a news conference that the Fed stood ready to ease monetary policy further if growth stalled, saying the central bank was "prepared to take action as appropriate."
In its policy-setting meeting, the central bank kept interest rates unchanged and appeared to show little movement toward further monetary easing, which some in the markets had expected. Separately, the Fed lowered its gross-domestic-product forecast for 2012 to 2.5%, from 2.9%. It now also expects the unemployment rate to be between 8.5% and 8.7% in 2012, higher than its previous forecast of between 7.8% and 8.2%.
All 10 S&P 500 sectors and all but one of the 30 Dow components finished in positive territory. The financial sector was among the day's leaders. Bank of America rose 5%, while American Express advanced 2.7% and J.P. Morgan Chase gained 2.8%.
The gains were helped by U.S. private-sector hiring, which came in slightly stronger than expected. Encouraging earnings reports boosted energy and materials stocks after positive signals from EOG Resources and Pioneer Natural Resources. Alcoa gained 3.2%, Chevron rose 2.4% and Exxon Mobil climbed 1.9%.
Some of the afternoon selloff was triggered by reports that suggested the European Union and International Monetary Fund could withhold further bailout money to Greece until a referendum is held. On Monday and Tuesday, the Dow tumbled a combined 573 points after Greek Prime Minister George Papandreou called for a referendum on the terms over a debt bailout for the nation.
In overseas markets, European stocks pushed higher, with the Stoxx Europe 600 rising 0.9%. Germany's DAX index gained 2.3% and France's CAC-40 index advanced 1.4%. Asian bourses erased early losses to trade mostly higher. China's Shanghai Composite closed up 1.4%, while Hong Kong's Hang Seng Index gained 1.9%. But Japan's Nikkei Stock Average fell 2.2%.
On Thursday, investors will hear from the European Central Bank's new president, Mario Draghi, and will keep an eye on a meeting of the Group of 20 industrial and developing nations in Cannes, France.
Gold futures rose 1%, to settle at $1,728.70 a troy ounce, and crude-oil prices gained 0.4%, to $92.51 a barrel. The dollar lost ground against the euro and the yen.
In corporate news, MasterCard surged 7% after the card company reported a 38% jump in third-quarter profit as spending and transactions made with its credit and debit cards increased.
EOG Resources jumped 12% after its production of more-lucrative liquid fuels continued to surge. Pioneer Natural Resources gained 13% after third-quarter earnings more than tripled amid a bigger-than-expected revenue gain.
JDS Uniphase climbed 8.5% after reporting better-than-expected fiscal first-quarter earnings and revenue, offsetting a lowered current-quarter revenue outlook because of the flooding in Thailand.
Garmin rallied 4.5% after the satellite-navigation company reported better-than-expected third-quarter results and provided an upbeat outlook for the full year.
Diamond Foods slumped 18% after the company said the closing of its $1.5 billion purchase of
Procter & Gamble's Pringles business will be delayed until the first half of 2012.
MF Global Holdings, which filed for bankruptcy protection on Monday, dropped 79% in heavy trading after its trading suspension was lifted.
2) Private sector adds 110,000 jobs in October-From Reuters
U.S. private employers added more jobs than expected in October, and more were added in September than originally reported, while a separate report showed planned layoffs dropped sharply last month.
The ADP National Employment Report showed on Wednesday the economy's private sector added 110,000 jobs last month, topping economists' expectations for a gain of 101,000 jobs. ADP also increased September's job additions, to a gain of 116,000 from the previously reported 91,000.
The report is jointly developed with Macroeconomic Advisers LLC.
"It is not a huge amount better, but the fact that it was better than expected and there was a revision in the last month's number is a pretty encouraging sign," said Peter Jankovskis, co-chief investment officer at Oakbrook Investments LLC in Lisle, Illinois.
U.S. stock index futures added to gains immediately after the report, while Treasuries widened losses and the dollar slightly extended losses against the euro.
That report is expected to show a rise in overall nonfarm payrolls of 95,000 last month, based on a Reuters poll of analysts, and a rise in private payrolls of 120,000.
Economists often refer to the ADP report to fine-tune their expectations for the payrolls numbers, though it is not always accurate in predicting the outcome.
Fears the U.S. economy could be heading for another recession have ebbed in recent months as growth accelerated in the third quarter after a weak first-half performance.
The data came as the Federal Reserve was convening for the second day of its policy-setting meeting with a statement due later in the day. The central bank is expected to take a breather from monetary stimulus measures, and will give an update on its economic forecast.
Earlier on Wednesday a separate report showed the number of planned layoffs at U.S. firms dropped in October after hitting a more than 2-year high the month before, while seasonal positions pushed hiring plans sharply higher.
Employers announced 42,759 planned job cuts last month, tumbling 63.1 percent from 115,730 the month before, according to the report from consultants Challenger, Gray & Christmas, Inc. It was the lowest level in four months.
Hiring plans surged to 159,177 jobs last month from 76,551 in September as companies announced seasonal positions. Retail jobs led the way with 133,940 openings.
In housing data, applications for U.S. home mortgages were little changed last week as purchase demand improved but refinancing activity stagnated, an industry group said.
The Mortgage Bankers Association's seasonally adjusted gauge of loan requests for home purchases rose 1.8 percent, while the index of refinancing applications was off 0.2 percent. The overall index of mortgage application activity edged up 0.2 percent.
3) Fed's outlook for the economy is revised lower-USA Today
The Federal Reserve delivered a bleaker outlook Wednesday for the economy, which it thinks will grow much more slowly and face higher unemployment than it had estimated in June.
The Fed now predicts the economy will grow a scant 1.6% to 1.7% for 2011. For 2012, it estimates growth will range between 2.5% and 2.9%. Both forecasts are roughly a full percentage point lower than its June forecast.
The Fed sees unemployment of between 8.5% and 8.7% next year. In June, the Fed had predicted unemployment would drop next year to as low as 7.8% from 9.1% now.
Even so, the Fed said earlier, after its policy meeting, that the economy had improved since nearly stalling in the spring. As a result, it is putting off any new actions so it can gauge the impact of steps it's already taken.
Fed policymakers made that announcement, after a two-day meeting.
In their statement immediately after the meeting, before delivering their revised outlook, members of the Federal Open Market Committee said the economy has strengthened and consumers have stepped up spending. Still, they said the economy continues to face significant risks, including the debt crisis and risk of recession in Europe.
The Fed left open the possibility of taking steps later to try to boost the sluggish economy. But it gave no hint as to what those moves might be.
"They're noting the better growth numbers but remain pretty cautious," said Michael Feroli, a former Fed economist now with JPMorgan Chase. "They're not celebrating by any means, which probably is appropriate."
The vote on the policy stance was 9-1. Charles Evans, president of the Chicago Federal Reserve Bank, dissented. The statement said Evans wanted to take stronger action to try to boost the economy.
The vote was a shift from the previous two Fed meetings, when three members dissented for the opposite reason: They opposed the Fed's continued efforts to keep interest rates super-low, for fear it could ignite inflation. Those three members, known as inflation "hawks," dropped their opposition this time.
Some analysts say the shift doesn't necessarily mean the Fed is more likely to take additional action soon to try to boost the economy.
"The view of the hawks is that once the decision has been made by the majority, it just causes confusion if they continue to vote to roll back action that has already been taken," said Paul Ashworth, chief U.S. economist at Capital Economics.
Stocks had little initial reaction to the announcement. Prices remained sharply higher, as they had been all morning.
Some analysts say they expect the Fed to take further action to support the economy at coming meetings, given the expectation that growth will remain sub-par.
"Policymakers are keeping the door open because the unemployment rate remains high, and there are clear downside risks from the economic situation in Europe," said Sal Guatieri, senior economist at BMO Capital Markets.
After their September meeting, policymakers said they would shuffle the Fed's investment portfolio to try to further reduce long-term interest rates. And in their previous meeting in August, they said they expected to keep short-term rates near zero until at least mid-2013, unless the economy improved.
The Fed repeated the mid-2013 timeframe in its statement Wednesday. It also said it is continuing its program to rebalance its portfolio to try to lower long-term rates.
The Fed has kept the federal funds rate, a key short-term interest rate, at a record low since December 2008. This is the rate banks charge each other for overnight loans. It serves as a benchmark for millions of business and consumer loans.
At 2: 15 p.m. ET Wednesday, the Fed will release its economic forecasts, and Chairman Ben Bernanke will hold a press conference.
The Fed noted that growth strengthened over the summer, in part because temporary factors that had weighed on the economy in the spring had eased. Consumers are able to spend a little more because gasoline prices have declined from their May peak of roughly $4 a gallon. And auto sales and production have picked up now that supply chains disrupted by the March earthquake in Japan are flowing more freely.
But the Fed said the job market remains weak. And it suggested the troubles in Europe could hurt U.S. growth.
The debt crisis in Europe could force the Fed to lower its economic projections. The Greek prime minister's surprise move to call a referendum on the country's latest rescue plan sparked fears that the debt deal could unravel, that Greece could default on its debt and that the crisis could infect the global financial system.
Even if Europe dodges a financial catastrophe, many economists believe it's headed for a recession that would affect the U.S. and global economies. The Fed expressed such concerns after its August meeting.
Still, the Fed remains deeply divided over what, if any, action to take next.
The actions taken in August and September were adopted on 7-3 votes, the most dissents in nearly 20 years.
Three regional bank presidents — Richard Fisher of Dallas, Charles Plosser of Philadelphia and Narayana Kocherlakota of Minneapolis — all voted no. They have expressed concern that the Fed's policies could lead to high inflation later.
On the other hand, Vice Chair Janet Yellen, Governor Daniel Tarullo, Evans and New York Fed President William Dudley have said the economy is at risk and might need more support.
Two officials pushed for bolder action at the September meeting, according to minutes. The members discussed more bond-buying. Some said it should remain an option.
A brighter outlook for the economy has given the Fed more room to wait. The economy grew at an annual rate of 2.5% in the July-September quarter — best quarterly performance in a year. That was largely because consumers increased their spending at triple the rate from the previous quarter.
The growth is strong enough to show that the economy isn't about to slide into recession. Still, growth would have to be nearly twice as high — consistently — to make a major dent in the unemployment rate, which has been stuck at 9.1% for three straight months.
Evans has proposed that the Fed set benchmarks for raising rates. For example, it could agree not to raise short-term rates until unemployment fell below 7% or the outlook for inflation exceeded 3%. The unemployment rate has hovered around 9% for more than two years, and the Fed's inflation outlook is under 2%.
Quote of the Day from Dave Ramsey.com:
Most people have no idea of the giant capacity we can immediately command when we focus all of our resources on mastering a single area of our lives. — Tony Robbins
No comments:
Post a Comment