Financial Headline News for Friday 1/20

1) Phil's Financial Tip of the Day:
Now is the time to either buy a home or refinance if your personal situation allows.

7 smart ways to pounce on low interest rates-From BankRate

While go-go lending was partly to blame for the economy's current financial troubles, ironically, borrowing money may help ease the country out of the downturn. At least that's the thinking behind the Federal Reserve's recent pledge to keep low interest rates into 2013.

While this move has not triggered an uptick in consumer confidence, experts agree money probably won't get any cheaper to borrow than right now. At press time, average rates for 30-year fixed-rate mortgages, home equity loans and even 60-month new-car loans are hovering around 4.3 percent, 6.8 percent and 5.3 percent, respectively, according to Bankrate's weekly survey of interest rates.

If you have a good-to-excellent credit score and not a lot of debt, you may want to consider ways to take advantage of these historically low interest rates, says Jessica Cecere, regional president for CredAbility, a nonprofit credit counseling and education agency in West Palm Beach, Fla.

"Interest rates are so low that consumers should take advantage of these rates, if they can afford to, to help them save money on planned purchases," Cecere says.

So what are some smart borrowing decisions to make while interest rates are low? Here are a few.

1. Buy a Home or Rental Property

Rates on long-term fixed-rate mortgages are at their lowest in decades. If you have been putting off your decision to buy a house, now may be the "perfect storm" of low interest rates and low home prices.

Since rates are so low, consider getting a 15-year instead of the traditional 30-year mortgage. "The amount you will save in interest payments over the life of the loan is enormous," says Scott Stratton, author of "Your Last Five Years: Making the Transition from Work to Retirement."

If you already own a home and have some money stashed away for a down payment, now may be a good time to think about buying real estate for passive income, says Greg McFarlane, author of "Control Your Cash: Making Money Make Sense."

Not only are mortgage rates and property values low, but the rash in foreclosures mean more people are in need of shelter."They're called renters, and they're your cash cows," says McFarlane. Not only will you get regular income from renting property, but as a landlord you can take tax breaks in the form of mortgage interest deductions.

2. Refinance Your Home

If you want to get out from under an adjustable-rate mortgage -- and you aren't upside-down on the loan -- now is a good time to switch to a fixed-rate mortgage. Use an online mortgage calculator to figure how much you'll save with the new rate.

While you're at it, look into refinancing your 30-year mortgage into a 15-year loan so you don't inadvertently add many years of interest payments to your mortgage.

For example, a $225,000 house purchased five years ago with a 30-year loan or mortgage rate of 7 percent has a monthly payment of around $1,500 a month with about $76,000 worth of interest paid in those five years. If you refinance the balance of that loan now at the current 3.5 percent interest for 15 years, you'll save almost $175,000 over the life of the loan, plus you'll pay off the home almost 10 years sooner. And your payments will go up only about $25 per month.

"Focusing only on monthly payments is penny-wise and pound-foolish in the long run," says Stratton.

"Owning a home outright and having no monthly mortgage payment goes a long way. ... In 15 years, when the house is paid off, it can literally make the difference between being able to retire or not."

3. Buy a Car

If you're in the market for a new car, now may be the time to trade in your clunker. Car loans aren't as rock-bottom as mortgage loans, but manufacturers are offering plenty of incentives, such as special financing options. Still, at press time the average 60-month new-car loan was around 5.3 percent, according to Bankrate's weekly survey, and some car loans are even cheaper.

"This is where a person with good credit can use that credit as a force multiplier," McFarlane says.

"Stretch out your financing dollar for as long a term as possible, especially since inflation can't be postponed forever."

If you are still paying off your current car, you may want to consider refinancing the remaining car loan at lower and more favorable interest rates.

4. Give Money Away

If you are fortunate enough to have extra money to give away, low interest rates make it easier to be generous and charitable, says Alexey Bulankov, a financial adviser and CFP with McCarthy Asset Management Inc. of Redwood Shores, Calif.

"This environment of low rates and poor economic conditions, combined with a massive intergenerational wealth transfer and looming estate, gift and income tax hikes create a once-in-a-lifetime opportunity to give, borrow, move money, be charitable and create a legacy," Bulankov says.

Look into strategies such as a charitable lead annuity trust, or CLAT, which combines philanthropic with wealth-shifting goals by allowing the grantor to put money into a trust that pays out to a charity during the life of the grantor. At the end of the grantor's life, the remainder is passed to beneficiaries. CLATs work well in a low interest rate environment. If the performance of the investments exceeds the "Section 7520" interest rates -- used to value certain charitable interests in trusts and published monthly by the IRS -- then the excess earnings at the end of the term pass to the beneficiaries tax-free, Bulankov says.

"The lower the 7520 rate, the larger the potential gift to the family or heirs," he says.

5. Review Investments

While you don't want to spend money in a down economy on investments that are not giving you much in return, you may want to look into ways you can diversify your portfolio and spread the risk, Cecere says.

Talk to your financial adviser about alternatives to savings accounts and money market funds, asking for options that earn better returns on your savings. Also, be wary of buying investment vehicles such as bonds when interest rates are low.

6. Lock in Student Loan Rates

Federal student loan rates are usually low, but even they have taken a slight dip in this low-interest environment. If you have more than one student loan outstanding, check with your federal student loan provider on how to consolidate and lock in at a lower interest rate, Cecere says.

7. Pay Off Credit Card Debt

While mortgage and car loans have favorable interest rates, the same is not true for borrowing money on your credit card. Work on reducing or eliminating this debt. If you have a choice of putting money into a savings account or paying off debt, pay off the high-interest credit card debt first because financial institutions are paying very little interest in savings accounts.

You also may want to negotiate lower interest rates with credit card companies, particularly if you have a good track record with paying on time, Cecere says.

2) In the Markets today:
Strong earnings from IBM powered blue-chip stocks even as discouraging quarterly reports from other bellwethers kept a lid on broader market gains.

Stocks close mixed on tech giants' earnings-From USA Today

Microsoft and IBM drove the Dow Jones industrial average higher, ending Friday's trading session up 96.50 points to 12,720.48, after the tech giants reported stronger earnings than analysts had expected.

But an earnings miss by Google caused its stock to plunge, and the Nasdaq composite index ended the day down 1.63 points to 2,786.70. The broader Standard & Poor's 500 index closed up less than a point to 1,315.38.

Microsoft (MSFT) said sales of Xbox games and Office software helped push revenue up in the last quarter of 2011. IBM (IBM) credited better sales of software and services and raised its earnings outlook for the year. Microsoft ended the day up 5.7%. IBM ended the day up 4.4%.

Plenty of things are going right, said Frank Fantozzi, CEO of Planned Financial Services, an independent wealth manager in Cleveland. Applications for unemployment benefits dropped last week to the lowest level in nearly four years. Housing sales are steadily rising. And even though high-profile companies such as web giant Google (GOOG) and investment banking firm JPMorgan Chase (JPM) have posted disappointing earnings results in the past week, the bulk of companies are beating estimates, he said.

"Overall, we're moving in the right direction and it's bolstered the market," Fantozzi said. "The S&P getting over 1,300 this week is a nice sign.

Google lost 8.4% Friday after its earnings per share fell a dollar short of analysts' estimates. The misfire stemmed from an 8% drop in prices that the Internet search giant charges advertisers per click.

In a sign that investors are becoming more willing to take on risk, the yield on the 10-year Treasury note rose to 2.03%, the first time it's been above 2% in two weeks. The yield, a widely used benchmark for corporate and consumer borrowing, has been mostly trading below 2% since early December because investors mostly wanted to park their money in relatively low-risk assets.

Adding to upbeat investor sentiment was a report from The National Association of Realtors, which said home sales rose 5% in December, the third straight monthly increase.

Of course, concerns about debt talks in Greece still hang over the market. Greece is in the middle of talks with creditors to reduce its debts, get the next round of bailout funds, and avoid default when the nation's €14.5 billion bond repayment comes due in March.

Among other companies in the news:

— Capital One Financial (COF) lost 5.6%. The bank and credit-card company's earnings sank 41% as expenses for marketing, salaries and legal fees jumped compared with the year before.

— Schlumberger (SLE) rose less than 1% even though the oil-field services company's quarterly profit surged 36%, helped by exploration work in the Middle East and Africa. The company also raised its quarterly dividend to 27.5 cents.

Stocks have been on a slow and steady climb to start 2012. The S&P 500 has closed higher on 10 of 12 days and is up 4.2% for the year. Nearly all recent economic reports have reflected an improving U.S. economy. However, the euro debt crisis is a dark cloud that will continue to hang over the markets for months to come.

On Friday, the Greek government met with debt inspectors from the European Union, the European Central Bank and the International Monetary Fund. It's also held a third day of talks with creditors to negotiate reduce the value of the creditors' Greek bond holdings. Greece wants creditors to agree a €100 billion ($129 billion) writedown although details of a deal have not yet been announced.

Last October, Greece's eurozone partners sanctioned a deal in which private creditors would take a cut in the value of their bond holdings to help lighten the country's debt burden.

Hopes for such a deal as well as a run of successful European bond auctions and solid economic news out of China, are helping to bolster market sentiment. Many stock indexes have risen to five-month highs, while the euro has clambered off 17-month dollar lows.

In Europe, the FTSE 100 index of leading British shares was flat at 5,741 on Friday, while Germany's DAX fell 0.5% to 6,385. The CAC-40 in France was down 0.5%, too at 3,312.

The euro gave up some recent gains, and was trading 0.5% lower at $1.29 to end the week.

Analysts warned that investor optimism could evaporate if no Greek deal is struck with the Institute of International Finance, which represents private-sector bondholders. Even if a deal is struck, it won't end all of Greece's debt problems, which are at the heart of Europe's debt crisis.

Investors may conclude that a Greek debt restructuring is not a one-off, but must be repeated in other debt-hobbled countries across the troubled 17-nation eurozone.

Earlier, Ireland and Portugal were both bailed out, and Portugal is widely considered to be more at risk of needing further help than Ireland due to the dearth of economic growth.

"There remains the danger for bondholders that at some stage Portuguese politicians decide to follow the Greek example," said Gary Jenkins, director of Swordfish Research.

Earlier in Asia in the last trading day before Chinese New Year holidays begin Monday, the Shanghai Composite Index climbed 1% to 2,319.12. Japan's Nikkei 225 index rose 1.5% to close at 8,766.36. Hong Kong's Hang Seng added 0.8% to 20,110.37 and South Korea's Kospi jumped 1.8% to 1,949.89.

Oil prices tracked equities lower — benchmark oil for February delivery was up 84 cents to $99.55 per barrel in electronic trading on the New York Mercantile Exchange.

3) Top financial story of the day:
GE 4th-quarter profit falls, sales decline and miss Wall Street estimates

GE 4Q profit falls, sales miss estimates-From AP

General Electric Co. said Friday that its fourth-quarter earnings fell 18 percent as revenue declined after it sold its stake in the NBC network.

Revenue of nearly $38 billion was lower than what Wall Street expected.

Shares fell 44 cents, or 2.3 percent, to $18.71 in morning trading.

The Fairfield, Conn., industrial conglomerate, which makes everything from jet engines to light bulbs, earned $3.73 billion, or 35 cents per share, compared with $4.54 billion, or 42 cents per share a year earlier.

Revenue fell 8 percent to $37.97 billion. The decline was largely due to the company's sale of its majority stake in NBC Universal to Comcast last year. But GE also said it also saw slower growth in Europe, and its ongoing effort to make its GE Capital financing arm more efficient reduced revenue at the unit by 9 percent. GE Capital is the company's second-largest segment.

Excluding discontinued businesses and certain pension costs, earnings were 39 cents a share. That topped analysts' forecast of 38 cents, based on a FactSet survey. But revenue fell below Wall Street's $40.05 billion estimate.

GE said infrastructure orders rose 15 percent in the quarter, leaving it with its biggest-ever order backlog of $200 billion.

For all of 2011, the company earned $14.15 billion, or $1.23 per share, up 22 percent compared with $11.64 billion, or $1.06 per share, in 2010.

It expects to post double-digit earnings growth this year over last in its industrial and capital segments, but it still expects to see continued economic volatility.

4) Inspirational Quotes@Inspire_Us from Twitter:
When you follow the dream in your heart, you're energised, inspired, & motivated. -Dr. John F. Demartini

Financial Headline News for Thursday 1/19

1) Phil's Financial Tip of the Day:
Mackay's Moral: Wasting your time is wasting your opportunities.

Time management tips from a pro -From Harvey Mackay

Did you resolve to get more organized in 2012? How is that working out for you so far?

Managing your time is perhaps the most difficult organizational challenge you face. You can always declutter your desk, rearrange your workspace, or get your files in order. But getting control of your schedule is one of those grand intentions that suffer because it involves setting rules for others who interfere with your productivity.

A terrific resource for those of us who struggle with never having enough time is Laura Stack, president of The Productivity Pro (www.TheProductivityPro.com), a time-management training firm that specializes in productivity improvement in high-stress organizations. (Is there any other kind?) Her fifth productivity book, What to Do When There's Too Much to Do, comes out in July.

Laura is also president of the National Speakers Association, an organization to which I also belong. She is the personification of the old adage, "If you need something done, ask a busy person." Why is that true? Because they have probably figured out how to best use their time.

And if you haven't attended one of her seminars, Laura has possibly been helping you already. She is the designer of The Productivity Pro planner by Day-Timer.

You don't have to wait until July to start reorganizing your schedule. Laura shared some thoughts with me about the biggest problems people face when the clock is the enemy.

The #1 time-management challenge that people face is not taking time to think, she says. They are busy putting out fires, directing day-to-day operations, and dealing with distractions, but they should be spending time concentrating on strategy. They should incorporate "thinking time" on their calendars, which allows them to prepare for impending crises and deal with them proactively, rather than reactively.

Laura recommends "strategy retreats" for leaders every few months, a weekend all alone, without email, to write, think, dream, and plan. Assess mission statements and progress toward meeting goals. She acknowledges that setting aside this time is a tremendous challenge but emphasizes the importance of intense focus.

We discussed the role of technology in managing our time. I don't go anywhere without my iPhone and iPad -- I'm afraid I might miss something important. Laura admits that while most people think technology should enhance time management, she cautions that at the same time, it blurs the boundaries between our work and personal lives.

Technology can become addictive, as most of us would agree. We are slaves to our smartphones. Laura says we are conditioned to interrupt what we are doing: "I observe employees doing this. You're at your desk. You're working on something critical. You need to be head down, prepping for a meeting, doing a proposal, preparing a presentation . . . All of a sudden you get this email alert or a ding or your cursor changes or you get some other alert, and you just can't help it. You have to check it.

"A majority of incoming technology alerts are not important, but we stop the critical task to go focus on that. This 'always on' mentality is really keeping us from having a life," she says. "You have to use technology strategically. When you're using it to improve productivity for down time, do so on purpose."

My final question for Laura focused on the biggest waste of time. What should we not be doing?

Her answer was not what I expected: "I think the biggest waste of time is always doing what we've always done." She gave an example of a human resources vice president who generated monthly reports indicating how much time each employee spent in training courses. When she asked the VP what the recipients did with the reports, the VP didn't know even though she had been sending reports for two years.

Laura advised her to survey the recipients as to their usefulness. The result? They perused only the executive summary, so they decided brief quarterly reports would suffice. Time savings: nearly two full work days each quarter.

Ask if what you are doing still makes sense, she says. "Why do we do it this way? If I didn't do this at all, would anybody notice?"

Time is a gift. If you feel like you're wasting it, invite a pro to help you assess your strategy. It will be time well spent.

2) In the Markets today:
The Dow industrials gained 45 points, as jobs data and bank earnings kept the rally moving.

Financials lift Wall Street after bank earnings-From Reuters

Stocks rose for the third straight day on Thursday, sparked by results from Bank of America and Morgan Stanley and as the latest jobless claims dropped to a near four-year low.

The S&P 500 hit a fresh five-month high, with the industrials, consumer discretionary stocks and financials leading gains.

Tech shares advanced ahead of earnings from a number of bellwethers. But after the bell, shares of Google (NasdaqGS:GOOG - News) fell 10 percent to $575.50 following its results.

In the regular session, Bank of America Corp (NYSE:BAC - News) climbed 2.4 percent to $6.96 after it reported it swung to a fourth-quarter profit from a year-ago loss. Morgan Stanley (NYSE:MS - News) reported a loss that was narrower than expected, sparking a 5.4 percent jump in its stock to $18.28.

"We think (financials) have pretty much bottomed here in the U.S.," said Paul Simon, chief investment officer at Tactical Allocation Group in Birmingham, Michigan.

"They represent some compelling value. We think a lot of the bad news has been discounted, and you've seen stock prices rallying in the beginning of the year," said Simon, whose firm has been buying financials.

Financial shares have rallied since the start of the year. The S&P financial index (:.GSPF) is up 8.1 percent so far for 2012, helping to push the S&P 500 up 4.5 percent for the year.

In U.S. economic data, data showed the number of Americans filing for new jobless benefits dropped to a near four-year low last week. It added to views that the economy is slowly moving forward.

Semiconductor stocks also advanced, with the PHLX Sox Index (Nasdaq:^SOX - News) rising 1.9 percent. Xilinx Inc (NasdaqGS:XLNX - News) shot up 1 percent to $35.64 a day after issuing an upbeat forecast.

The Dow Jones industrial average (DJI:^DJI - News) rose 45.03 points, or 0.36 percent, to 12,623.98 at the close. The Standard & Poor's 500 Index (SNP:^GSPC - News) gained 6.46 points, or 0.49 percent, to 1,314.50. The Nasdaq Composite Index (Nasdaq:^IXIC - News) climbed 18.62 points, or 0.67 percent, to close at 2,788.33.

In a sign of optimism about Europe, both Spain and France drew strong demand at government debt auctions.

With the S&P 500 having broken above the 1,300 level, it looks set to hit the 1,360-1,370 area, said Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston.

"That (area) represents the May 2011 high ... and I believe we will see that during this earnings season," Zaro said.

The Dow Jones Transportation Average (DJI:^DJT - News) gained 1.6 percent, with shares of Union Pacific Corp (NYSE:UNP - News) rising 2.2 percent to $112.18 after reporting quarterly profit and revenue that beat estimates.

Volume totaled about 7.6 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, above the daily average of 6.68 billion, and the highest since December 16.

Advancing stocks outnumbered declining ones by a ratio of about 2 to 1 on the New York Stock Exchange and on the Nasdaq, by about 7 to 5.

3) Top financial story of the day:
Weekly applications for unemployment benefits plunge to lowest point in nearly 4 years.

Unemployment claims at 352,000, fewest since 2008-From AP

The number of people seeking unemployment benefits plummeted last week to 352,000, the fewest since April 2008. The decline added to evidence that the job market is strengthening.

Applications fell 50,000, the biggest drop in the seasonally adjusted figure in more than six years, the Labor Department said Thursday. The four-week average, which smooths out fluctuations, dropped to 379,000. That's the second-lowest such figure in more than three years.

A department spokesman cautioned that volatility at this time of year is common. Applications had jumped two weeks ago, largely because companies laid off thousands of temporary workers hired for the holidays.

Still, when weekly applications fall consistently below 375,000, it usually signals that hiring is strong enough to push down the unemployment rate.

"This continues a clear downshift in claims," said Ian Shepherdson, an economist at High Frequency Economics.

Shepherdson suggested that stronger hiring should follow.

Hiring improved in the second half of 2011. In December, employers added 200,000 jobs. That marked the sixth straight month in which the economy added at least 100,000 jobs. And the unemployment rate fell to 8.5 percent, a three-year low.

For all of 2011, the economy added 1.6 million jobs. That was up sharply from 940,000 in 2010. Economists say they expect roughly 1.9 million more jobs to be added this year, according to a survey by The Associated Press.

Still, the job market has a long way to go before it fully recovers from the damage of the Great Recession, which wiped out 8.7 million jobs. More than 13 million people remain unemployed.

Millions more have given up looking for work and so are no longer counted as unemployed.

The overall number of people receiving benefits, which isn't seasonally adjusted, rose. More than 7.8 million people received benefits in the final week of last year. They include about 3.6 million people covered by extended-benefit programs begun during the recession.

The manufacturing sector remains a bright spot. Factory output jumped 0.9 percent in December, the Federal Reserve said this week. That was the sharpest monthly gain in a year. Manufacturing gained 225,000 jobs last year, the most since 1997.

The pickup in hiring reflects stronger economic growth. The economy likely grew at an annual rate of about 3 percent in the final three months of last year, economists estimate.

That would be a sharp improvement over the 1.8 percent annual growth rate in the July-September quarter. Rising consumer spending is thought to be fueling much of the gain in the current quarter.

Even so, economists worry that growth could slow in the first half of 2012. Europe is almost certain to fall into recession because of its financial troubles.

And wages aren't keeping up with inflation. The department said in a separate report that average inflation-adjusted hourly earnings dropped 0.9 percent last year.

Without more jobs and higher pay, consumers might have to cut back on spending. That would weigh down growth next year. Consumer spending accounts for about 70 percent of the economy.

4) Quote of the Day from Dave Ramsey.com:
People become really quite remarkable when they start thinking that they can do things. When they believe in themselves they have the first secret of success. — Norman Vincent Peale

Financial Headline News for Wednesday 1/18

1) Phil's Financial Tip of the Day:
Here is a couple who are a living example of the economic times we are in.

The power of having limited or no debt at all:

'From a $100K-Plus Income to Less Than $35K and Happier Than Ever'-From Financially Fit

Before I was let go two years ago, my husband and I enjoyed a combined income of over $100,000 plus very good benefits. We lived well then and surprisingly, are still managing fairly well. Today, both of us are self-employed with an income of less than $35K. Two years ago, we recognized that my job was not secure and made plans to shore ourselves economically. Fortunately, we had no mortgage or car loans. Before my layoff, we consolidated our credit card debt and opted for a small home equity loan.

Self-Employment and Debt

Because we own several businesses, we like to each have a vehicle, plus a back-up so we don't get stuck and miss opportunities to make money. A few weeks ago, our second work van died and all we had left was a truck. With our consolidated debt, we had a $300 mortgage per month. We had been postponing buying new vehicles for as long as possible to keep our debt minimized.

Emergency Fund and Leveraging Cash in Negotiations

Fortunately, we had saved for a rainy day and tapped into our emergency fund. My husband called me around 3:00 p.m., and asked me what I thought about him buying two vehicles for the price of one.

Our budget was $10,000, and he had found both a mini-van and a pick-up truck that we could negotiate to our budget.

Minimize Costs
An hour later, we chose to finance one of the vehicles to keep some cash for a future rainy day. After giving him my credit information, the sales representative ran us through a credit reporting agency.

Upon seeing the results, he jumped up and slapped my husband a high-five. Our credit was stellar.

Fortunately, bill-paying diligence gave us a lower interest rate. We spent five thousand in cash, reserved five and obtained two new cars for a $100.00 a month payment. Our insurance company modified our auto plan to remove the old vehicles and add the new.

There was no financial adjustment; our rate did not change.

Financially, it would be cheaper to pay cash for both vehicles; however, we would have lost our cash-flow advantage in case of another emergency. There is no prepayment penalty, and we plan to pay the loan off early, but even if we cannot, our long-term debt expenses are still under $500 a month or $6,000 a year. Our super saver mentality includes managing for risks, leveraging cash flow and negotiating better prices with bundling.

Always Ask

If we had accepted the original prices, there's no doubt we'd only have one car now. By simply asking for a better rate, we got it. Many people in our community are small business owners, and we have found that not only does it never hurt to ask, it nearly always yields a positive result.

Trade-Offs

We're big fans of the barter system. Living in a small community, many of our neighbors are in situations similar to ours. We help each other out by trading—when we needed wood for the winter, my husband painted a room for a neighbor who had some.

Buy in Bulk

Especially with non-perishable items, we save a lot of money by buying in bulk. From painting supplies to household items, it means additional organization in the garage, but it's worth it!

Re-Frame Your View

Losing my job was not the heartbreak I thought it would be. Not working in an office environment has lowered my income but also lowered my outlay. I no longer have enormous bills from dry cleaning. I no longer go out to eat because I don't have time to cook. I now employ not one, but two crockpots and have cut our grocery spending by cooking that way.

Being a freelance writer and speaker now, I spend more time at home with my family. We may have lost a lot of income, but we have gained a lot of family togetherness. And that, to us, is priceless.

2) In the Markets today:
The S&P 500 rose more than 1 percent in late trading on Wednesday.

Wall Street gains 1 percent as IMF gives Europe hope-From Reuters

Stocks jumped to their highest since July on Wednesday as the International Monetary Fund sought to help countries hit by the European debt crisis, while forecast-beating earnings from Goldman Sachs dispelled some worries over bank profits.

The stronger-than-expected earnings from Goldman Sachs Group Inc (NYSE:GS - News) followed disappointing results from Citigroup (NYSE:C - News) on Tuesday and JPMorgan Chase & Co (NYSE:JPM - News) last week.

Goldman shares shot up 6.8 percent to $104.31, while the S&P financial sector (:.GSPF) rose 1.7 percent, leading the S&P 500 higher.

The banking sector has outperformed the broader market so far this year, but the financials sector was the S&P 500's weakest-performing one last year.

While the Goldman results supported financial shares, the IMF's willingness to bolster its crisis-fighting resources gave the sector a big push. Financials had suffered throughout 2011 on worries that Europe's debt crisis would hit banks globally.

"Any time liquidity is added to the financial system, it gives financials a little bit of breathing room, and it will result in higher prices for the banks," said Kevin Caron, market strategist at Stifel, Nicolaus & Co, in Florham Park, New Jersey.

Home builders' shares surged after data showed U.S. homebuilder sentiment unexpectedly jumped in January to its highest level in 4-1/2 years. The PHLX housing index (Nasdaq:^HGX - News) climbed 3.1 percent, while the Dow Jones home construction index (DJI:^DJUSHB - News) rose 4.4 percent.

The Dow Jones industrial average (DJI:^DJI - News) rose 96.88 points, or 0.78 percent, to close at 12,578.95. The Standard & Poor's 500 Index (SNP:^GSPC - News) added 14.37 points, or 1.11 percent, to 1,308.04. The Nasdaq Composite Index (Nasdaq:^IXIC - News) climbed 41.63 points, or 1.53 percent, to close at 2,769.71.

XILINX AND ALTERA UP LATE

After the bell, shares of chipmakers Xilinx (NasdaqGS:XLNX - News) and Altera (NasdaqGS:ALTR - News) rose following their earnings reports. Xilinx was up 7 percent from its close of $35.30 and Altera was up 5.1 percent from its close of $40.72.

An index of semiconductor shares (Nasdaq:^SOX - News) climbed 5 percent during the regular session. Intel (NasdaqGS:INTC - News) is expected to report results on Thursday.

Despite the optimism over the IMF, investors watched cautiously as Greece and its creditors resumed negotiations on terms of a planned debt swap, hoping to overcome an impasse in talks and stave off a painful default.

The benchmark S&P 500 closed above 1,300, a key resistance point that analysts said signal more room to rally if the index stays there.

Within the tech sector, Yahoo Inc (NasdaqGS:YHOO - News) jumped 3.2 percent to $15.92 a day after co-founder Jerry Yang said he was severing all formal ties with the company he started in 1995.

Shareholders had blasted Yang for impeding investment deals that could have transformed the Internet media group.

In other bank results, Bank of New York Mellon Corp (NYSE:BK - News) slid 4.6 percent to $20.30 after the world's No. 1 custody bank said fourth-quarter earnings fell.

Another big custody bank, State Street Corp (NYSE:STT - News) slid 6.6 percent to $39.95 after saying it accelerated an expense- control program, a sign it still sees continued weakness in global capital markets.

Financial results will remain in the spotlight, with reports from Bank of America Corp (NYSE:BAC - News) and Morgan Stanley (NYSE:MS - News) later this week. Bank of America's stock gained 4.9 percent to $6.80 and Morgan Stanley's shares were up 6.8 percent at $17.35.

"As we've seen, investment banking revenues have been very weak, and we think that's going to be a trend that continues and (there's) also a lot more exposure to Europe in those banks," said Dan Neuger, portfolio manager, head of U.S. and Europe active equities for PineBridge Investments in New York, which has about $70 billion in assets.

In terms of investing, "we don't like the large money-center banks. That's one area we've been away from," he said. "Where we think there is more value is in the regional, more domestically focused smaller banks."

Volume totaled about 7.3 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, above the daily average of 6.68 billion.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of 4 to 1 while on the Nasdaq, More than three stocks rose for every one that fell.

3) Top financial story of the day:
U.S. factory output surges in December.

Wholesale Prices Decline-From The Wall Street Journal

U.S. wholesale prices fell in December, as food and energy costs declined significantly, but the underlying rate was up as light truck prices rose.

Separately, U.S. industrial production rebounded in December as manufacturing output climbed, an indication that a key sector of the economy regained some momentum at the end of the year.

The producer price index, which measures how much manufacturers and wholesalers pay for goods and materials, fell a seasonally adjusted 0.1% for finished goods in December from November, the
Labor Department said Wednesday.

The slowdown in overall costs may give the Federal Reserve more flexibility to deploy a new round of economic stimulus measures. However, the rise in so-called core wholesale prices will raise some eyebrows at the central bank. Removing volatile energy and food prices, producer prices increased by 0.3%, the largest rise since July 2011. Besides trucks, the cost of drugs, tires and cars also rose.

Economists surveyed by Dow Jones Newswires had forecast overall wholesale prices would be unchanged on a month-to-month basis, while core producer prices were expected to rise by 0.1%.

Wholesale prices were up 0.3% in November from the prior month, after falling by that same amount in October.

Most Fed officials expect that energy and commodity prices will continue to dissipate as the global economy grows slowly in 2012, leading annual inflation to remain at or below 2.0% in 2012 through 2014, within the central bank's comfort zone.

Compared to a year ago, wholesale prices were 4.8% higher in December, Wednesday's report showed. While still high, that's down from the 7.1% annual increase recorded in July. Year-over-year, prices were up 3.0% when removing energy and food costs.

Food prices decreased by 0.8% in December from November, the first decline since May 2011. The drop was due to falling vegetable prices, down 11.1% on a month-to-month basis.

Energy prices also moved down 0.8%, led by declining gasoline prices. Energy prices edged up 0.1% in November.

Prices for intermediate goods--which are semifinished goods like lumber or flour that require further processing--fell by 0.5% last month, after edging up by 0.2% in November. Meanwhile, prices of raw materials, known as crude goods, fell by 1.1% in December.

Richmond Fed President Jeffrey Lacker, who normally worries about inflation, last week said recent trends point to inflation moderating. He's forecasting inflation to remain near 2% on an annual basis in 2012.

"A rate noticeably below 2% is possible, particularly if global growth should soften enough to further ease pressures on commodity prices," he said. This year, Mr. Lacker becomes a voting member on the Federal Open Market Committee, the central bank's body that sets interest rates.

Moderate inflation means the Fed will be under little pressure to raise rates anytime soon. The central bank has said rates will remain near zero at least until the middle of 2013. After its meeting later this month, Fed officials will release their forecast for future interest rates for the first time.

Industrial Output Increases

Overall production increased by 0.4%, the Federal Reserve said Wednesday in its monthly report. The rise followed a 0.3% dip in November--the first fall in seven months.

The Fed data said industries used 78.1% of their capacity last month, compared with 77.8% in November.

Economists surveyed by Dow Jones Newswires had forecast a 0.5% increase in output during December and a capacity utilization rate of 78.1%.

Manufacturing production surged by 0.9% on strong gains for wood products, primary metals and machinery.

Mining production rose 0.3%, while utilities output dropped 2.7% as unseasonably warm weather reduced the demand for heating.

Other recent industrial data has also been broadly positive.

The Institute for Supply Management's manufacturing purchasing managers' index rose to 53.9 last month from 52.7 in November. A reading above 50 indicates expanding activity.

The Labor Department earlier this month reported that manufacturing payrolls rose by 23,000 in December.

And New York manufacturing activity accelerated in January, according to the New York Fed's Empire State Manufacturing Survey released Tuesday. The Empire State's business conditions index rose to 13.48 this month from a revised 8.19 in December.

Still, other indicators have pointed to potential stumbling blocks for the recovery. Commerce Department figures released last week showed that U.S. retail sales almost stalled in December as Americans appeared to tighten their budgets. And the U.S. trade deficit widened in November on slumping exports to the euro area and rising oil prices.

Economists are looking to end-of-year data to help determine the pace of the recovery heading into the new year.

The Fed report Wednesday showed that year over year, industrial production increased by 2.9% from December 2010. For the fourth quarter, industrial production rose at an annual rate of 3.1%, its 10th consecutive quarterly gain, the Fed said.

Output by the service sector, which makes up most of the U.S. economy, isn't reflected in the industrial production data.

4) Quote of the Day from Dave Ramsey.com:
Make every decision as if you owned the whole company. — Charles C. Noble

Financial Headline News for Tuesday 1/17

1) Phil's Financial Tip of the Day:
Organizing your important papers and personal information is a smart move and a great gift to your loved ones.

Great advice for Seniors and all those who want to get organized. Here are some tips to help you get started:

Savvy Senior: Organize your personal, financial information-From The Daily Record of NJ
http://www.dailyrecord.com/apps/pbcs.dll/article?AID=/201201170827/NJLIFE09/301170004

2) In the Markets today:
U.S. stocks advanced after better-than-expected economic data, set for highest close since late July. Financials fell.

Stocks Post Broad Gains; Financials Fall-From The Wall Street Journal

U.S. stocks were ahead but well off session highs late Tuesday as an early rally ran up against technical resistance and weakness in bank stocks after a handful of key earnings reports.

The Dow Jones Industrial Average climbed 46 points, or 0.4%, to 12465 in afternoon trade, though the measure was up by as much as 151 points early in the session. The gains were still enough to push the blue-chip index to what would be a fresh closing high since late July. The Dow already breached five-month highs earlier this month.

The Standard & Poor's 500-stock index was ahead by 2 points, or 0.2%, to 1291 recently and the Nasdaq Composite rose 12 points, or 0.4%, to 2722.

Stocks' early rally on stronger-than-expected economic data in the U.S., China and Germany started to hit headwinds midsession in what traders ascribed to a mix of factors, the most important of them technical in nature.

"We keep bumping up higher, which is good, [but] it gets to this level and peters out," said Alan Valdes, director of floor trading at DME Securities. "There's no volume [and] a lot of guys are just day trading this thing," he added.

Bank stocks, which were weak all session, moved deeper into negative territory. Citigroup set a negative tone in financial stocks early in the session when it posted an 11% drop in fourth-quarter profit and its results fell well short of analysts' expectations. J.P. Morgan Chase was the weakest stock in the Dow, falling 2.7%.

"J.P. Morgan's earnings were mediocre on Friday and Citi was poor today. The banks are dragging the overall market down," said Tom Donino, co-head of trading at First New York Securities.

The earlier gains followed a jump in a gauge of New York manufacturing activity, strength in German economic sentiment and better-than-expected Chinese economic growth figures. European markets gained and the 4.2% rise in the Shanghai Composite was the biggest since October 2009.

In corporate news, cruise-line operator Carnival's stock was one of the worst performers in the S&P 500, slumping 14% after one of the company's cruise ships capsized off the coast of Italy over the weekend. Fellow cruise ship operator Royal Caribbean dropped 5.3%.

3) Top financial story of the day:
Citi's fourth-quarter profit fell from a year earlier as choppy capital markets overshadowed the bank's loan growth globally.

Citigroup profit falls 11 percent, misses Street view-From Reuters

Citigroup Inc's fourth-quarter profit fell 11 percent and missed Wall Street estimates as the European debt crisis battered capital markets, hurting trading revenue and discouraging clients from doing deals.

Citi on Tuesday said the crisis and fears about its impact on other markets and the global economy led to a broad move by clients away from risk and a decline in market volumes around the world. Fixed income, equity markets and investment banking revenues all declined in the quarter.

"The operating environment continues to be extraordinarily challenging in a number of businesses, none more so than securities and banking," Chief Financial Officer John Gerspach said on a conference call with analysts.

Citi's results show how investment banking units are dragging down profits for large Wall Street firms, and portend a tough fourth quarter for others such as Goldman Sachs Group Inc and Morgan Stanley, which report their results later this week.

In contrast, banks that focus more on business and consumer lending are doing better as the U.S. economy shows signs of recovery. Wells Fargo & Co beat analysts' earnings estimates on Tuesday, helped by improving credit quality and loan growth.

This trend was also reflected last week in the results of JPMorgan Chase & Co.

Money manager Jeffrey Sica, president of SICA Wealth Management, an independent wealth manager based in Morristown, New Jersey, which has bet against a basket of bank stocks, said Citi's earnings miss was "horrendous" in light of how much estimates had come down.

"It's a very negative sign for banks in general," said Sica.

Citigroup shares fell 6 percent in midday trading on the New York Stock Exchange, lagging the KBW banks index, which was down 0.2 percent.

"Clearly, the macro environment has impacted the capital markets and we will continue to right-size our businesses to match the environment," Citigroup Chief Executive Vikram Pandit said in a statement.

Pandit said the bank was cutting about 5,000 jobs and had taken a $400 million charge in the fourth quarter for severance payments. The bank, which has about 266,000 employees, said in December that it would cut 4,500 jobs and take that charge.

The world's major banks have announced more than 133,000 layoffs since mid-2011 as euro zone woes take their toll on trading income and investment banking.

Citi, the third-largest U.S. bank by assets, reported net income of $1.16 billion, or 38 cents per share, down from $1.31 billion, or 43 cents per share, a year earlier.

"Citi's number to come in like this, still missing even though estimates were already cut, that's a cause of great concern," said Todd Schoenberger, managing director at LandColt Trading in Wilmington, Delaware.

Citi said securities and banking revenue fell 29 percent from a year earlier, excluding the accounting impact of changes in the value of the bank's debt.

The profit drop came despite a lower provision for bad loans: down 41 percent to $2.9 billion.
Citi Holdings, which holds assets the bank plans to sell, posted a 30 percent decline in revenue to $2.8 billion as it continued to shed assets.

Citi Holdings had $269 billion in assets at the end of the fourth quarter, down about $90 billion from a year earlier.

Citigroup's operating expenses increased 4 percent to $12.9 billion in the fourth quarter. Pandit said the bank expects to reduce expenses by between $2.5 billion and $3 billion in 2012 from the $50.7 billion it posted for all of 2011.

4) Quote of the Day from Dave Ramsey.com:
Whoever wants to reach a distant goal must take small steps. — Helmut Schmidt

Financial Headline News for Friday 1/13

1) Phil's Financial Tip of the Day:
Financial advisers are seeing a trend in older baby boomer parents supporting their adult children, even when it means they are taking away from their own financial security.

Don't Let Your Grown Kids Ruin Your Future-The Wall Street Journal

It's the Boomer Boomerang.

Baby boomers, who were notorious for prolonging their own adolescences well into their 20s and beyond ("Seinfeld," anyone?), are feeling the financial sting now that their own offspring have their hands out.

The problem has only grown since the financial crisis, the official recession and the economic doldrums that have swamped the country.

The crux of the matter: The kids are out of work, out of money and maxed out.

But so are Mom and Dad, who have seen their own retirement nest eggs cracked, their retirement incomes shrunk and even the value of their nests—the family home—fall.

And despite those woes, financial advisers are seeing a trend in boomer parents supporting their children, even when it means they are taking away from their own retirement security.

Will Ellis, a financial adviser in La Grange, Ga., tells the story of a 60-something couple driven to the brink of insolvency by their 30-year-old daughter's profligacy.

A real-estate agent during the housing boom, she racked up $850,000 in debt (including on her house, her car and her second home) before the recession hit and her income was slashed by over 80%.

Lucky for her, Mom and Dad were willing to help out—so much that Mr. Ellis figured they would themselves have gone broke in little more than a decade.

"How much are you willing to sacrifice?" Mr. Ellis recalls asking the retired couple. "Are you willing to give up your own needs?"

Mr. Ellis's clients made the tough, and right, call. They cut off their daughter.

But it's not at all certain that most parents would make similar decisions. A survey released last year by TD Ameritrade found that 57% of boomers said they would be willing to support their adult children even if that means it would take away from their own retirement.

Yet even boomers who aren't financially coddling their children are having a hard time making ends meet in retirement. Fifty-five percent of boomers now plan to retire later than they originally expected, according to the survey. And retirees say their biggest regret is not having saved more money for their golden years, according to a study by Hartford Financial Services, a provider of insurance and wealth-management services.

Financial advisers insist that parents shouldn't jeopardize their own futures for the benefit of their grown children.

Here are some steps to take to avoid facing that problem:

• Don't write a blank check. Even if you are willing to help your children out financially, don't make it a free-for-all. Make sure you can pay your bills before promising to cover your kids' expenses.
• Set limits. Tell children what you feel comfortable providing for them and when you will no longer be able to do it. Be clear about what choices you are willing to make down the road in retirement to be able to give to them. Are you willing to work longer? Take fewer vacations?
• Be the grown-up. Too often parents feel guilty saying no to their child—no matter how old they are. You can be honest with them and explain that you're putting your own retirement savings at risk.
• Reassess your goals.If you have been financially supporting your adult children, develop a new plan to get back on track. Figure out what you will need to live on in retirement and stick to it.
• Insist they grow up. It's OK to make children accountable for themselves. If they aren't held accountable they will repeat the same mistakes over again.

And if your kids aren't grown yet, here are a couple of things you can try to avoid problems later:

• Start young. Educate children about money early, instilling the values of saving and budgeting. The earlier children are involved in making decisions about money the better.
• Don't bankroll everything. The key is to not pick up every tab in their lives or pay every bill. See that they get part-time jobs. It will leave them better suited to go into the work force when they finally do get out on their own.

See that they get part-time jobs. It will leave them better suited to go into the work force when they finally do get out on their own.               

2) In the Markets today:
Stocks tumbled on Friday after news reports that Standard & Poor's would downgrade credit ratings on several euro-zone countries.

Stocks close lower on euro worries, Chase earns-From USA Today

Stocks ended lower Friday after earnings fell at JPMorgan Chase (JPM), the largest U.S bank, and the Standard & Poor's rating agency downgraded France's top-tier AAA credit rating one .

The Dow Jones industrial average lost 49 points to end the day at 12, 422.28, a decline of 0.4%. The broader Standard & Poor's 500 index fell 6 points, or 0.5%, to close 1,289.12. And the Nasdaq composite declined 14 points, or 0.5%, to end the day at 2,710.67.

It was the first earnings miss for JPMorgan since the final quarter of 2007, a period in which a credit crunch began taking a toll on financial markets. The thinking is that if JPMorgan, widely considered one of the best managed big banks, had trouble in the fourth quarter of 2011, the rest of the industry likely had trouble, too.

It's called the "cockroach theory" on trading desks, says Phil Orlando, chief equity strategist at Federated Investors. "You never see just one cockroach. If you see one, you know there's bound to be a lot more."

Surprisingly strong bond auctions in Spain and Italy on Thursday reinforced hopes that policymakers may be getting a grip on Europe's debt crisis after months of indecision. European and Asian markets mostly rose.

However, the euro slipped to its lowest level in 17 months after reports came out that S&P would follow through on its Dec. 5 warning to cut credit ratings for 15 of 17 European governments that use the euro. It cited higher borrowing costs, even for top-rated nations, and ongoing disagreements among European leaders about how to contain the crisis.

By mid-afternoon in New York, S&P announced it was downgrading France's top-tier AAA credit crating a notch to AA. More downgrades were expected after the markets in New York closed for the week.

The euro dropped 1.3% against the dollar to $1.26. Borrowing costs for Italy and Spain, two countries at the center of the region's debt crisis, increased.

The dollar and U.S. Treasury prices rose as investors moved money into lower-risk assets. The yield on the 10-year U.S. Treasury note fell to 1.84% from 1.93% late Thursday.

The weakness at JPMorgan opened the season for bank earnings on a sour note. Though a pickup in the stream of U.S. earnings may help steer markets over the coming days, Europe's debt crisis is likely to remain the focus.

One bright spot in an otherwise down day on Wall Street: The Thomson-Reuters/University of Michigan preliminary index of consumer sentiment for January rose a stronger-than-expected four points to 74.0 from 69.9 at the end of December.

But investors ignored the signal that consumers are feeling pretty good about the economy after the holiday shopping season. The big focus on Wall Street remained Europe.

3) Top financial story of the day:
Talks between Greece and its creditor banks to slash the country's towering debt pile broke down on Friday, with the Greeks warning of "catastrophic" results if a deal to swap bonds is not reached soon.

Debt talks falter, Greeks warn of disaster-From Reuters

Talks between Greece and its creditor banks to slash the country's towering debt pile broke down on Friday, with the Greeks warning of "catastrophic" results if a deal to swap bonds is not reached soon.

The two sides are divided over the interest rate Greece will end up paying, which determines how much of a hit banks take.

Athens needs an agreement, seeing creditors voluntarily giving up a lot of their promised returns, to reduce its debt to more sustainable levels and convince the European Union and International Monetary Fund to keep lending it cash.

Both sides appeared to be digging in their heels in what analysts said looked like a high stakes poker game in a final attempt to convince private bond holders to take some losses to avoid a disorderly default that could threaten the entire euro zone.

It would come via a swap between old bonds teetering on the brink of default and new ones for which banks would take a big write-down. Without a deal, banks could lose even more and Greece would be threatened with default and possibly euro zone ejection.

"Discussions with Greece and the official sector are paused for reflection," said the Institute of International Finance (IIF), which leads talks for private bond holders.

"Unfortunately, despite the efforts of Greece's leadership, the proposal put forward ... has not produced a constructive consolidated response by all parties."

Greek negotiators earlier warned that failure to reach a deal would be disastrous for Europe.

"Yesterday we were cautious and confident. Today we are less optimistic," said a source close to the Greek task force team in charge of negotiations.

"It is important to remind all parties that the consequences of failure would be catastrophic for Greece and the Greek people, Europe and Europeans," the source said.

SEND MORE MONEY

The stumbling block in the negotiations was the low coupon, or interest payment, offered on the new bonds, one source familiar with the matter and one banking source said.

"The main problem was the (European Union and International Monetary Fund's) insistence on a coupon lower than 4 percent on the new bonds," the banking source said.

That could mean an accounting loss of more than 70 percent for banks on their books, far more than the actual 50 percent cut in the original value of the old bonds laid down in the original deal.

Under the terms of the October plan, bondholders would take a 50 percent hit on the notional value of the old bonds. But the actual losses on their books depend on coupon and maturity of the new bonds, and could be far higher.

"When you're dealing with a sovereign, you don't have a huge amount of tricks up your sleeve, because if they choose not to pay you there's not an awful lot you can do," said Gary Jenkins, director of Swordfish Research.

The IIF's Charles Dallara held meetings in Athens on Thursday and Friday and Finance Minister Evangelos Venizelos said talks would most likely resume next Wednesday.

"There is a meeting next week and we'll make every effort to succeed," the source close to the Greek side said.

The IIF said there was a "tentative" plan to meet on Wednesday, but that it depended on events in the next few days.

Time is pressing, as Greece needs a deal to stay afloat when a 14.5 billion euro major bond comes due March 20, and the bond swap paperwork alone will take at least six weeks.

Greek Prime Minister Lucas Papademos said the new aid package and PSI negotiations were interlinked and both needed to succeed for Greece to survive.

"Neither deal can stand on its own. One is a condition for the other," he said in a speech late on Friday. "We are fully aware of how critical the situation is. Until these negotiations are completed, we face dire economic dangers."

EU, IMF and ECB inspectors, who arrive in Athens on Tuesday for talks on a new, 130-billion-euro rescue plan, also want to see a deal on the debt swap before they agree on the bailout.

"We look forward to the resumption of talks between Greece and its creditors. It is important that this lead to a PSI agreement that, together with the efforts of the official sector, ensures debt sustainability," the IMF said in a statement.

Any agreement with private bondholders on debt reduction should be in line with the terms decided by euro zone leaders on October 26, the EU Commission said on Friday.

Under the terms agreed in October, Greek privately held debt would be reduced by half, so that, together with structural reforms, the overall debt to GDP ratio of Greece would fall to a sustainable 120 pct in 2020 from 160 percent now.

A government spokesman said earlier that Greece had not decided yet whether it will submit a law to force creditors into the bond swap, denying a Greek media report that it would do so by Monday.

Three senior euro zone sources told Reuters on Thursday that Athens was mulling such a bill, which would make a debt restructuring binding for all investors once a certain percentage agreed.

Without using so called collective action clauses, the participation rate in any debt swap deal could be smaller than needed because many hedge funds would profit more if Greece defaulted because they would get paid in full from insurance.

"A lot of the (old) bonds have traded and are in the hands of the hedge funds. Do you think the governments are going to (pay out) to hedge funds? No way. So people like us, unless we are forced, we don't have an incentive to accept," said a source at a hedge fund, which owns Greek bonds.

4) Quote of the Day from Dave Ramsey.com:
Most of the important things in the world have been accomplished by people who have kept on trying when there seemed to be no help at all. — Dale Carnegie

Financial Headline News for Thursday 1/12

1) Phil's Financial Tip of the Day:
With W-2's, 1099's and other tax forms about to be mailed out for tax purposes, it is that time to start thinking about your 2011 year tax preparation.

Tips for Choosing the Right Tax Preparer-From Fox Business

With this year’s tax deadline fast approaching, taxpayers’ mailboxes are getting flooded with tax forms. Thanks to a complicated tax code and tedious forms, the task of calculating and filing taxes is less than appealing for most us and we opt to hire a professional to hit this year’s April 17 deadline.

“For a large majority of people, TurboTax or the Internal Revenue Service’s Free File is more than sufficient,” says Certified Public Accountant Jonathan Horn. “However, the tax code is so complex that you may not properly analyze all the deductions and credits available to you.”

Returns become difficult to complete when a filer has more than a W-2 and deductions for mortgage interest and children, says Larry Campagna, an attorney at firm Chamberlain, Hrdlicka, White, Williams & Aughtry. For those with deductions like extensive stock trades or real estate transactions, he says tax software may not be the best choice. “A lot of issues are subject to interpretation, and TurboTax may not prompt you with the right questions.”

To find a reputable tax preparer, experts recommend asking friends, family or a professional association for referrals.

Everyone’s tax situation is different. “You need to match the level of complexity of your return with the qualifications of the preparer,” says Sherrill Trovato, president of the National Association of Enrolled Agents. When evaluating potential candidates, know what special circumstances (ie: small business owner, trust fund…) you have on your return and make sure they have expertise with these issues.

Before hiring a tax preparer, conduct an interview to see if it’s a good fit, recommends Cindy Hockenberry, Tax Knowledge Center supervisor at the National Association of Tax Professionals.

Consider your comfort level for divulging your finances, says Trovato. If you’re looking to establish a longstanding relationship with a preparer, she advises working with a sole practitioner over a national firm like H&R Block and Jackson Hewitt Tax Service.

The IRS has guidelines in place to help protect consumers from fraudulent preparers. “All paid tax preparers are required to be registered with the IRS,” says Hockenberry. “Ask whether they have a Preparer Tax Identification Number (PTIN).”

The IRS issues PTINs to qualified tax preparers, and only preparers with PTINs can sign a return, according to IRS regulations. If a preparer receives any compensation to complete a return, they must also sign the return. PTINs are issued to enrolled agents (EAs), registered tax return preparers (RTRP), certified public accountants (CPA), and attorneys. “If your preparer doesn’t have a PTIN, walk away,” advises Hockenberry.

Registered tax return preparers (RTRP)

Each type of preparer has a different level of expertise. RTRPs are required to pass an IRS exam and attend 15 hours of continuing education every year, according to newly-established IRS guidelines. They are able to sign and prepare tax returns and represent clients to the IRS in limited circumstances, such as for an audit but not for an appeal. At the moment, there are no RTRPs on the market because the IRS recently created the exam and is in the process of determining a passing score.

Enrolled Agents (EA)

EAs can either sit for an IRS exam or have five years work experience for the IRS, according to IRS guidelines. They are also able to represent an individual to the IRS for any tax matter. EAs must complete 72 hours of continuing education every three years.

Certified Public Accountants (CPA)

CPAs have met state guidelines that include having bachelor’s degree with a designated amount of business and accounting courses, passing the state’s CPA exam, and working for an accounting firm for a certain period of time. Each state sets continuing education requirements for CPAs.

“An accountant has a broader picture of financial matters in that an EA is focused solely on the tax code,” says Horn. CPAs can also advise on retirement planning, estate and gift tax planning, and education expense planning.

Attorneys

“Attorneys can also help prepare taxes when there are more complicated and sensitive issues with a return,” says Campagna. Issues like distributions from foreign trusts or bank accounts, unreported income or overstated deductions in a current or prior years return, or legal fees, could make hiring a lawyer to file your return a good idea.

Because lawyers tend to have high fees, experts advise hiring one only when there are significant tax liabilities or refunds. “The average consumer doesn’t need a lawyer to do tax returns,” says Campagna.

What to Ask

Find out if the preparer is a member of a professional organization. An organization may require their members to adhere to a code of ethics or have more stringent continuing education requirements than what’s required by the IRS, says Trovato. Being a member of a professional organization also shows a level of commitment, adds Hockenberry.

Ask about a tax preparer’s fees. Fees for a national firm may not be cheaper than what a sole practitioner may charge, and sole practitioners generally have lower fees than accounting firms, says Horn.

According to the National Society of Accountants, fees per form can range between $233 for an itemized Form 1040 and Schedule A that’s filed by an individual to $695 for a Form 1120 that’s filed by a corporation.

Ask whether a tax preparer charges by the hour. “If the preparer is not familiar with your tax situation, you don’t want to pay to get them up to speed,” says John Ams

In any case, it’s illegal for a tax preparer to charge a fee equal to a percentage of your refund.

Ask how long the tax preparer has been in business. “Experience equals knowledge because the laws keep changing,” says Hockenberry. Contact your state’s Better Business Bureau or licensing board or the IRS to check for complaints or disciplinary actions against the tax preparer.

Ask whether the preparer works year round. “Since questions arise all the time that affect your return, such as marriage, divorce, death, starting or closing a business, or buying or selling properties, I would rather get a call before someone does something instead of in March, during tax season,” says Trovato. A tax preparer can help prevent unexpected tax liabilities if you seek their advice before making major financial decisions.

Ask whether a preparer has professional liability insurance. If there is an issue with the return, the taxpayer is responsible for any amounts due, but a preparer’s insurance policy may cover any penalties and interest owed because the preparer made a mistake on the return, according to Hockenberry. If the preparer does not have a policy and you owe penalties and interest because of a mistake in your return, you may have to take them to court.

Once you choose your tax preparer, there are a few tips to follow. While the return is being completed, your tax preparer should ask for documentation and receipts, says Hockenberry. Once the return is complete, make sure your tax preparer signs the return and writes their PTIN.

“Never sign a blank return,” says Horn. “You’re responsible for what’s on the return.” Once tax forms are completed, everyone advises that taxpayers spend time reviewing their returns to see that the numbers make sense based on their income and expenses.

2) In the Markets today:
Stocks finished slightly higher as investors shrugged off three tepid readings on the state of the U.S. economy and focused on the coming rush of corporate earnings headlines.

Stocks finish higher after late-day recovery-From USA Today

Stocks rose in trading Thursday as investors balanced news of a spike in jobless claims and tepid retail sales against optimism about strong bond auctions in Italy and Spain.

The Dow Jones industrial average rose 21 points to 12,471. The Dow started the day lower, falling as many as 64 points in the first hour of trading. It recouped those losses shortly after noon and broke through into positive territory late in the session.

Stocks got an added boost from falling oil prices. Oil prices dropped below $100 per barrel for the first time this year on rumors that Europe will delay an embargo of Iranian oil.

Materials and industrial companies led the afternoon recovery. Caterpillar and Alcoa rose the most in the Dow.

Rising stocks outnumbered falling ones 3-to-2 on the New York Stock Exchange. Volume was lighter than average at 3.5 billion shares.

Chevron (CVX) fell 2.6%, the most in the Dow, after the world's second-largest publicly traded oil company said its income will be "significantly" below its fourth-quarter results in the prior quarter because of narrower margins on refining and selling fuels.

The S&P 500 was up 3.5 points to 1,296. The Nasdaq rose 14 points to 2,724.

It was the latest day of quiet trading in the stock market. There have been six consecutive days with moves of less than 1 percent in the S&P 500, the quietest stretch since May.

Ralph Fogel, investment strategist and partner at Fogel Neale Partners in New York, said the moderate moves in the market were a healthy sign following the steep rises and sudden declines that were typical of last summer. "This is a much healthier market than we've seen."

Unemployment benefits spiked last week to the highest level in six weeks, mostly because companies let go of thousands of holiday hires, the government reported. Retail sales barely rose in December and were lower than analysts were expecting.

Despite the mixed news on the economy, investors are starting to focus on the U.S. corporate earnings season, which got under way this week with Alcoa Inc. The aluminum maker predicted stronger demand for its products this year and surprised the market with revenue that was higher than analysts were expecting.

"There's a fair amount of pessimism out there but I also think that investors are slowly becoming immune to the bad news," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

"As long as the stuff you can sink your teeth into, like corporate profit, is improving, I think it bodes well for the markets this year."

European markets mostly rose after Italy and Spain held highly successful bond auctions, easing worries about Europe's debt crisis. Italy's benchmark stock index rose 2%.

In Italy's first bond auction of the new year, the country was able to sell one-year bonds at a rate of just 2.735%, less than half the 5.95% rate it had to pay last month. That's a signal that investors are becoming more confident in Italy's ability to pay its debts.

Spain was able to raise double the amount of money it had sought to raise in its own bond sale as demand for its debt was strong. Both auctions were seen as important tests of investor sentiment.

Investors have been worried that Italy and Spain, the third- and fourth-largest countries in the euro area, might get dragged into the region's debt crisis. Greece, Ireland and Portugal have been forced to get relief from their lenders after their borrowing costs spiked to levels the countries could no longer afford.

The euro rose nearly a penny against the dollar, to $1.28, as worries eased about Europe's financial woes. The currency, which is shared by 17 European countries, fell to a 16-month low against the dollar the day before.

Meanwhile, the two leading European central banks held their interest rates Thursday, with the European Central Bank keeping its rate at 1% and the Bank of England maintaining its lending rate at a record low of 0.5%.

Among stocks making big moves:

— Casino operator Wynn Resorts (WYNN) fell after the company disclosed in a regulatory filing that its vice chairman has filed a lawsuit against the company. Kazuo Okada claims that Wynn has refused to give him access to records relating to a $135 million donation the company made to the University of Macau and other matters.

— CA Inc. (CA) jumped after hedge fund Taconic Capital disclosed in a regulatory filing that it has taken a 5.1% stake in the business software and technology company and is pressing CA to return more cash to shareholders and increase its profit margins.

3) Top financial story of the day:
The number of Americans applying for first-time jobless benefits rose on Thursday, reversing a recent decline and suggesting the labor market remains brittle.

Jobless claims rise sharply to 6-week high-From Reuters

Retail sales rose at the weakest pace in seven months in December and first-time claims for jobless benefits moved higher last week, signs the economic recovery remains shaky despite a pick-up in growth.

Total retail sales increased 0.1 percent after rising by an upwardly revised 0.4 percent in November, the Commerce Department said on Thursday.

"The retail sales (data) suggests that spending isn't really picking up any momentum," said Sean Incremona, economist at 4Cast Ltd in New York.

Economists polled by Reuters had forecast retail sales climbing 0.3 percent last month.

The upward revision for November sales suggests consumers likely frontloaded their holiday shopping before cutting spending at the end of the year at department stores and on electronic gadgets. The government had initially estimated retail sales gained 0.2 percent in November.

In a separate report, the Labor Department said initial unemployment claims jumped to 399,000 in the first week of 2012, the highest in six weeks, from an upwardly revised 375,000 in the prior week.

The four-week average of claims also marched higher to 381,750 from 374,000.

The U.S. unemployment rate has fallen sharply in recent months and was 8.5 percent December, but some economists worry the drop has been due in part to discouraged workers dropping out of the labor force.

U.S. stock index futures pared gains after the data, while U.S. Treasury prices turned positive.

Some Federal Reserve officials earlier this week signaled more help for the U.S. economy may be necessary despite recent data that suggested the recovery was picking up steam going into 2012.

Still, the U.S. central bank is not expected to take any action on its next meeting on January 24-25.

Within the retail report, spending at electronics and appliance stores fell 3.9 percent in December, while shopping at department stores slipped 0.2 percent.

Fueling the overall increase in retail sales during December, receipts for motor vehicles and parts increased 1.5 percent, adding to the prior month's 0.9 percent gain.

Excluding autos, retail sales fell 0.2 percent, the first decline since May 2010.

Sales at food and beverage stores fell 0.2 percent in December. Also holding back the overall gain in sales, receipts at gasoline stations dropped 1.6 percent last month after rising 0.9 percent in November.

Core retail sales, which exclude autos, gasoline and building materials, dropped 0.1 percent in
December after advancing 0.3 percent the prior month.

Core sales correspond most closely with the consumer spending component of the government's gross domestic product report.

4) Quote of the Day from Dave Ramsey.com:
It is hard to fail, but it is worse never to have tried to succeed. — Theodore Roosevelt