Friday August 29, 7:17 am ET By Tomoko A. Hosaka, Associated Press Writer
Japan unveils economic stimulus package as inflation surges and spending slips
TOKYO (AP) -- Japan unveiled a stimulus package with 2 trillion yen ($18 billion) in fresh spending to shore up its flagging economy on Friday as figures showed that inflation has spiked to its highest in nearly 11 years, denting consumer spending.
Measures in the package span discounts on expressway tolls to assistance to farms and help for part-time workers to find better jobs. Funds are also earmarked for better medical care, ecological technology, housing loans and education, according to the Cabinet Office.
Economists are skeptical that the package will help revive Japan's economy, which shrank 2.4 percent at an annual pace in the second quarter.
And critics call it a publicity stunt to lift Prime Minister Yasuo Fukuda's dismal approval ratings.
"This is just reckless spending," Yukio Hatoyama, leader of the main opposition Democratic Party, said on nationally televised news. "The package is aimed at getting voters' attention in anticipation of the next election."
All told, the value of the programs involved comes to 11.7 trillion yen ($107.5 billion). Aside from the $18 billion cash infusion, most of the package consists of non-spending measures such as lower road tolls and loans to businesses.
Friday's package did not include tax breaks, but cuts will be considered in the future, the government said.
Masamichi Adachi, senior economist for JP Morgan Securities in Tokyo, called the new spending a "drop in the bucket" compared to Japan's total gross domestic product of about 500 trillion yen, or $4.6 trillion.
"It's definitely positive, but to what extent (is the question)," he said.
July economic figures released Friday painted a mixed picture of the Japanese economy. Industrial production rose modestly, but the outlook is choppy. The jobless rate fell and retail sales rose. Household spending declined but not as steeply as expected.
The rapid acceleration in inflation was the most alarming of all the indicators released.
Japan's core consumer price index, which excludes fresh food prices but includes energy, rose 2.4 percent in July, the quickest pace in almost 11 years, the Ministry of Internal Affairs said.
While Japan's economy is indeed slowing, many economists see the downturn as mild, with little risk of the sort of deep recession that crippled the country in the 1990s.
"We've been calling this a 'shallow recession,' and the data today tend to support that view," Adachi said. "But that doesn't mean they point toward a quicker recovery either."
The Bank of Japan, meanwhile, is unlikely to tighten monetary policy in response to inflation, even though July's figure surpasses the central bank's inflation target range of 0-2 percent. Last week, policy board members kept the key interest rate unchanged at 0.5 percent.
So-called core-core inflation excluding food and energy rose a modest 0.2 percent, indicating that huge price gains have yet to permeate all sectors.
Merrill Lynch economists Takuji Okubo and Masayuki Kichikawa said earlier this week that current inflation appears to be a short-term trend.
"Going forward, whether core measures of CPI excluding food and energy would show signs of inflation would be the key factor in determining (the Bank of Japan's) actions," they said.
Overall CPI was up 2.3 percent in July, while core CPI for the Tokyo area rose 1.5 percent in August.
Among other key economic data, Japan's industrial production in July was up 0.9 percent from the previous month on a seasonally adjusted basis, posting the first rise in two months on higher output by makers of cars and electronics.
"Improved external demand for products of those industries in July seemed to be in the background of their industrial production gains," said UBS economist Akira Maekawa in a research memo.
The news cheered investors, who helped push the benchmark Nikkei 225 stock index up 2.9 percent Friday. Stronger-than-expected economic growth figures in the U.S. in the second quarter -- up 3.3 percent at an annual pace -- also lifted sentiment.
The outlook for industrial production looks uneven. The Ministry of Economy, Trade and Industry said it expects production to fall 2.9 percent in August before increasing 3.4 percent in September.
Japan's unemployment rate fell from 4.1 percent to 4 percent in July.
Meanwhile, spending by Japanese households slipped 0.5 percent from a year earlier but was more robust than anticipated. Hotter weather spurred sales in items like air conditioners and certain types of food, Maekawa said.
Retail sales in the country rose 1.9 percent in July from the previous year, the government said.
Friday, August 29, 2008
Stocks fall after personal income data; oil rises
Friday August 29, 10:47 am ET By Tim Paradis, AP Business Writer
Stocks fall as drop in personal incomes stirs concerns about consumers; Dell weighs on techs
NEW YORK (AP) -- Stocks declined unevenly Friday after the government said personal incomes fell last month by the largest amount in nearly three years while consumer spending slowed. A disappointing profit report from computer maker Dell Inc. weighed on technology stocks.
Meanwhile, oil prices rose as investors charted the path of Tropical Storm Gustav as it heads toward the Gulf of Mexico and its oil rigs and refineries.
Wall Street's retreat following the downbeat news about consumers also comes after several days of sizable gains in stocks and on the final session before the long Labor Day weekend. Pre-holiday trading is generally light; therefore, some pullback was to be expected.
Still, investors were uneasy after the Commerce Department reported that personal incomes fell by 0.7 percent in July -- well beyond the drop of 0.1 percent that analysts polled by Thomson IFR had predicted on average. That reflects the waning impact of tax rebate checks that Americans received this spring.
As expected, the government also said consumer spending rose a modest 0.2 percent. That was below the 0.6 percent increase seen in June and, accounting for rising prices, spending actually fell by 0.4 percent in July. Wall Street has been particularly concerned about Americans' ability to help the economy grow, since rising prices for gas and food have strapped many household budgets.
In midmorning trading, the Dow Jones industrial average fell 80.85, or 0.71 percent, to 11,632.44. The blue chips began the session having logged a three-day advance of nearly 330 points.
Broader stock indicators also fell. The Standard & Poor's 500 index fell 9.15, or 0.70 percent, to 1,291.53. The technology-heavy Nasdaq composite index fell 31.69, or 1.31 percent, to 2,379.95.
Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to an anemic 153.9 million shares. Trading has been light all week, prompting some observers to dismiss the market's moves as aberrations that occur when many traders are on vacation.
Bond prices fell Friday. The 10-year note's yield, which moves opposite its price, rose to 3.81 percent from 3.79 percent late Thursday. The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude rose $2.41 to $118 per barrel on the New York Mercantile Exchange. So far, oil trading has been fairly orderly as Gustav progresses, although there is concern about damage from the storm or a disruption in the flow of gasoline and other fuel from Gulf Coast refineries.
With many investors fixated on the thickness of the consumers' wallets, Wall Street showed little reaction to the Reuters/University of Michigan's index on consumer sentiment, which rose to 63 for August from 61.2 in July, its highest level in five months. Still, most economists reason that consumers who are upbeat about their prospects are more likely to spend.
Also, investors shrugged off the Chicago Purchasing Managers' index, which measures business conditions across Illinois, Michigan and Indiana. It jumped to 57.9 from 50.8 in July.
In corporate news, Dell fell $3.05, or 12 percent, to $22.16 after the company's profit margins came in well below what analysts had been expecting.
The Russell 2000 index of smaller companies fell 8.12, or 1.09 percent, to 739.67.
In Tokyo, the Nikkei index rose 2.39 percent. In afternoon trading in Europe, London's FTSE-100 index rose 1.32 percent, Frankfurt's DAX fell 1.57 percent and the CAC-40 index in Paris rose 0.81 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Stocks fall as drop in personal incomes stirs concerns about consumers; Dell weighs on techs
NEW YORK (AP) -- Stocks declined unevenly Friday after the government said personal incomes fell last month by the largest amount in nearly three years while consumer spending slowed. A disappointing profit report from computer maker Dell Inc. weighed on technology stocks.
Meanwhile, oil prices rose as investors charted the path of Tropical Storm Gustav as it heads toward the Gulf of Mexico and its oil rigs and refineries.
Wall Street's retreat following the downbeat news about consumers also comes after several days of sizable gains in stocks and on the final session before the long Labor Day weekend. Pre-holiday trading is generally light; therefore, some pullback was to be expected.
Still, investors were uneasy after the Commerce Department reported that personal incomes fell by 0.7 percent in July -- well beyond the drop of 0.1 percent that analysts polled by Thomson IFR had predicted on average. That reflects the waning impact of tax rebate checks that Americans received this spring.
As expected, the government also said consumer spending rose a modest 0.2 percent. That was below the 0.6 percent increase seen in June and, accounting for rising prices, spending actually fell by 0.4 percent in July. Wall Street has been particularly concerned about Americans' ability to help the economy grow, since rising prices for gas and food have strapped many household budgets.
In midmorning trading, the Dow Jones industrial average fell 80.85, or 0.71 percent, to 11,632.44. The blue chips began the session having logged a three-day advance of nearly 330 points.
Broader stock indicators also fell. The Standard & Poor's 500 index fell 9.15, or 0.70 percent, to 1,291.53. The technology-heavy Nasdaq composite index fell 31.69, or 1.31 percent, to 2,379.95.
Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to an anemic 153.9 million shares. Trading has been light all week, prompting some observers to dismiss the market's moves as aberrations that occur when many traders are on vacation.
Bond prices fell Friday. The 10-year note's yield, which moves opposite its price, rose to 3.81 percent from 3.79 percent late Thursday. The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude rose $2.41 to $118 per barrel on the New York Mercantile Exchange. So far, oil trading has been fairly orderly as Gustav progresses, although there is concern about damage from the storm or a disruption in the flow of gasoline and other fuel from Gulf Coast refineries.
With many investors fixated on the thickness of the consumers' wallets, Wall Street showed little reaction to the Reuters/University of Michigan's index on consumer sentiment, which rose to 63 for August from 61.2 in July, its highest level in five months. Still, most economists reason that consumers who are upbeat about their prospects are more likely to spend.
Also, investors shrugged off the Chicago Purchasing Managers' index, which measures business conditions across Illinois, Michigan and Indiana. It jumped to 57.9 from 50.8 in July.
In corporate news, Dell fell $3.05, or 12 percent, to $22.16 after the company's profit margins came in well below what analysts had been expecting.
The Russell 2000 index of smaller companies fell 8.12, or 1.09 percent, to 739.67.
In Tokyo, the Nikkei index rose 2.39 percent. In afternoon trading in Europe, London's FTSE-100 index rose 1.32 percent, Frankfurt's DAX fell 1.57 percent and the CAC-40 index in Paris rose 0.81 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Thursday, August 28, 2008
Stocks jump on better-than-expected GDP, jobs data
Thursday August 28, 6:03 pm ET By Tim Paradis, AP Business Writer
Stocks jump on better-than-expected gross domestic product reading, decline in jobless claims
NEW YORK (AP) -- Wall Street barreled higher Thursday after a better-than-expected reading on the gross domestic product and a drop in jobless claims gave investors some reassurance that the economy is holding up. The Dow Jones industrial average jumped more than 200 points.
A decline in oil prices also appeared to add force to the rally in stocks. But trading volume was again light heading toward the Labor Day weekend, a condition that can skew price moves.
The Commerce Department's report that gross domestic product rose at an annual rate of 3.3 percent for the April-June period followed several economic readings this week that have left guarded investors somewhat optimistic. The weaker dollar helped boost U.S. exports, which pushed GDP growth beyond the government's initial estimate of 1.9 percent as well as economists' forecast of 2.7 percent.
It marked the economy's best performance since the third quarter of last year, when GDP rose at a 4.8 percent pace.
Investors are watching GDP, considered the best barometer of the economy's well-being, to look for signs that growth is picking up after being pounded by housing woes and a debilitating credit crisis. The economy grew at a weak rate of 0.9 percent in the first quarter after shrinking in the last three months of 2007.
Also Thursday, the Labor Department said the number of newly laid off people seeking jobless benefits fell for the third straight week. Claims dropped to a seasonally adjusted 425,000, down 10,000 from the previous week. That was slightly better than the 427,000 expected by analysts surveyed by Thomson/IFR.
But some economists consider claims above 400,000 an indicator of a slowing economy. Companies have cut jobs every month this year as they grapple with high energy costs and tighter credit.
The Dow rose 212.67, or 1.85 percent, to 11,715.18, bringing its three-day advance to nearly 330 points. Still, for the week, the Dow is up only slightly after a big decline Monday on credit worries.
Broader stock indicators also rose Thursday. The Standard & Poor's 500 index advanced 19.02, or 1.48 percent, to 1,300.68, and the Nasdaq composite index rose 29.18, or 1.22 percent, to 2,411.64.
Bonds fell as investors moved into stocks. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.79 percent from 3.77 percent late Wednesday. The dollar rose against most major currencies. Gold also advanced.
"This is an environment in which we're likely to get a lot of head-fakes both on the upside and the downside," said Bill Urban, principal with San Francisco-based Bingham, Osborn & Scarborough, referring to economic data. He noted that the initial reading on the fourth quarter last year had been positive before revisions revealed the economy contracted.
"This is just sort of data that trickles out that can be very positive one day and negative the next. We don't yet think it signals a trend," he said.
Beyond economic reports, investors are watching oil prices as Tropical Storm Gustav churns toward the Gulf of Mexico on a course that could collide with oil and gas platforms. Oil rose in the early going on concerns about the storm but a strengthening dollar upended oil's climb.
Light, sweet crude fell $2.56 to settle at $115.59 on the New York Mercantile Exchange.
The decline in oil made energy stocks one of the session's few areas of weakness.
Devon Energy Corp. fell $3.62, or 3.4 percent, to $103.16, while Hess Corp. fell $1.61, or 1.5 percent, to $105.53.
Financial shares advanced after MBIA Inc. agreed to reinsure nearly $200 billion of municipal bonds backed by FGIC Corp. The deal between the two bond insurers led to some hopes that the troubled credit market is beginning to right itself. MBIA jumped $4.17, or 35 percent, to $16.15. Other bond insurers also rose, with Ambac Financial Group Inc. climbing $2.18, or 42 percent, to $7.42.
Government-chartered mortgage companies Fannie Mae and Freddie Mac rose for a fourth straight session after Fannie Mae announced a management shake-up and analysts raised further doubts that a government bailout of the companies is in the offing; such a move could wipe out shareholder equity. Fannie Mae rose $1.47, or 23 percent, to $7.95, while Freddie Mac rose 53 cents, or 11 percent, to $5.28.
Among retailers, Tiffany & Co. jumped $4.24, or 11 percent, to $43.85 after reporting that its second-quarter profit doubled as sales jumped in Asia and Europe.
Zale Corp. forecast a fiscal 2009 profit that topped what Wall Street had been expecting. The specialty jeweler rose $4.77, or 21 percent, to $27.92.
Investors have been looking at retailers' results this week for insights into the health of consumers, whose spending accounts for more than two-thirds of U.S. economic activity. Several upbeat retail reports Wednesday helped buoy Wall Street's mood.
Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where volume came to 956.2 million shares compared with 820.6 million shares Wednesday.
The Russell 2000 index of smaller companies rose 14.84, or 2.02 percent, to 747.79.
Overseas, Japan's Nikkei stock average edged up 0.12 percent. Britain's FTSE 100 rose 1.32 percent, Germany's DAX index added 1.57 percent, and France's CAC-40 jumped 2.02 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Stocks jump on better-than-expected gross domestic product reading, decline in jobless claims
NEW YORK (AP) -- Wall Street barreled higher Thursday after a better-than-expected reading on the gross domestic product and a drop in jobless claims gave investors some reassurance that the economy is holding up. The Dow Jones industrial average jumped more than 200 points.
A decline in oil prices also appeared to add force to the rally in stocks. But trading volume was again light heading toward the Labor Day weekend, a condition that can skew price moves.
The Commerce Department's report that gross domestic product rose at an annual rate of 3.3 percent for the April-June period followed several economic readings this week that have left guarded investors somewhat optimistic. The weaker dollar helped boost U.S. exports, which pushed GDP growth beyond the government's initial estimate of 1.9 percent as well as economists' forecast of 2.7 percent.
It marked the economy's best performance since the third quarter of last year, when GDP rose at a 4.8 percent pace.
Investors are watching GDP, considered the best barometer of the economy's well-being, to look for signs that growth is picking up after being pounded by housing woes and a debilitating credit crisis. The economy grew at a weak rate of 0.9 percent in the first quarter after shrinking in the last three months of 2007.
Also Thursday, the Labor Department said the number of newly laid off people seeking jobless benefits fell for the third straight week. Claims dropped to a seasonally adjusted 425,000, down 10,000 from the previous week. That was slightly better than the 427,000 expected by analysts surveyed by Thomson/IFR.
But some economists consider claims above 400,000 an indicator of a slowing economy. Companies have cut jobs every month this year as they grapple with high energy costs and tighter credit.
The Dow rose 212.67, or 1.85 percent, to 11,715.18, bringing its three-day advance to nearly 330 points. Still, for the week, the Dow is up only slightly after a big decline Monday on credit worries.
Broader stock indicators also rose Thursday. The Standard & Poor's 500 index advanced 19.02, or 1.48 percent, to 1,300.68, and the Nasdaq composite index rose 29.18, or 1.22 percent, to 2,411.64.
Bonds fell as investors moved into stocks. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.79 percent from 3.77 percent late Wednesday. The dollar rose against most major currencies. Gold also advanced.
"This is an environment in which we're likely to get a lot of head-fakes both on the upside and the downside," said Bill Urban, principal with San Francisco-based Bingham, Osborn & Scarborough, referring to economic data. He noted that the initial reading on the fourth quarter last year had been positive before revisions revealed the economy contracted.
"This is just sort of data that trickles out that can be very positive one day and negative the next. We don't yet think it signals a trend," he said.
Beyond economic reports, investors are watching oil prices as Tropical Storm Gustav churns toward the Gulf of Mexico on a course that could collide with oil and gas platforms. Oil rose in the early going on concerns about the storm but a strengthening dollar upended oil's climb.
Light, sweet crude fell $2.56 to settle at $115.59 on the New York Mercantile Exchange.
The decline in oil made energy stocks one of the session's few areas of weakness.
Devon Energy Corp. fell $3.62, or 3.4 percent, to $103.16, while Hess Corp. fell $1.61, or 1.5 percent, to $105.53.
Financial shares advanced after MBIA Inc. agreed to reinsure nearly $200 billion of municipal bonds backed by FGIC Corp. The deal between the two bond insurers led to some hopes that the troubled credit market is beginning to right itself. MBIA jumped $4.17, or 35 percent, to $16.15. Other bond insurers also rose, with Ambac Financial Group Inc. climbing $2.18, or 42 percent, to $7.42.
Government-chartered mortgage companies Fannie Mae and Freddie Mac rose for a fourth straight session after Fannie Mae announced a management shake-up and analysts raised further doubts that a government bailout of the companies is in the offing; such a move could wipe out shareholder equity. Fannie Mae rose $1.47, or 23 percent, to $7.95, while Freddie Mac rose 53 cents, or 11 percent, to $5.28.
Among retailers, Tiffany & Co. jumped $4.24, or 11 percent, to $43.85 after reporting that its second-quarter profit doubled as sales jumped in Asia and Europe.
Zale Corp. forecast a fiscal 2009 profit that topped what Wall Street had been expecting. The specialty jeweler rose $4.77, or 21 percent, to $27.92.
Investors have been looking at retailers' results this week for insights into the health of consumers, whose spending accounts for more than two-thirds of U.S. economic activity. Several upbeat retail reports Wednesday helped buoy Wall Street's mood.
Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where volume came to 956.2 million shares compared with 820.6 million shares Wednesday.
The Russell 2000 index of smaller companies rose 14.84, or 2.02 percent, to 747.79.
Overseas, Japan's Nikkei stock average edged up 0.12 percent. Britain's FTSE 100 rose 1.32 percent, Germany's DAX index added 1.57 percent, and France's CAC-40 jumped 2.02 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Wednesday, August 27, 2008
Borders shares gain 25 percent after narrower loss
Wednesday August 27, 10:39 am ET
Borders shares surge 25 percent after bookseller posts narrower 1st-quarter loss
ANN ARBOR, Mich. (AP) -- Shares of Borders Group Inc. soared more than 25 percent in early trading Wednesday following the bookseller's better-than-expected earnings for the second quarter.
Borders said late Tuesday that it narrowed its losses in the second quarter, losing $9.2 million, or 15 cents a share, compared with a loss of $25.1 million, or 43 cents a share for the same quarter of last year.
The company, which has been restructuring and selling some business units, said that it lost $11.3 million, or 19 cents a share, from its continuing operations, compared with a loss of $18.1 million, or 31 cents a share, last year.
Analysts polled by Thomson Reuters had anticipated a second-quarter loss of 29 cents per share, on average.
Total revenue fell to $758.5 million from $812.4 million. Borders said comparable-store sales for the quarter fell 8.9 percent, due in part to the release of a book in the Harry Potter series last year and current declines in music sales.
Borders shares gained $1.39 to $6.75 in morning trading.
Borders shares surge 25 percent after bookseller posts narrower 1st-quarter loss
ANN ARBOR, Mich. (AP) -- Shares of Borders Group Inc. soared more than 25 percent in early trading Wednesday following the bookseller's better-than-expected earnings for the second quarter.
Borders said late Tuesday that it narrowed its losses in the second quarter, losing $9.2 million, or 15 cents a share, compared with a loss of $25.1 million, or 43 cents a share for the same quarter of last year.
The company, which has been restructuring and selling some business units, said that it lost $11.3 million, or 19 cents a share, from its continuing operations, compared with a loss of $18.1 million, or 31 cents a share, last year.
Analysts polled by Thomson Reuters had anticipated a second-quarter loss of 29 cents per share, on average.
Total revenue fell to $758.5 million from $812.4 million. Borders said comparable-store sales for the quarter fell 8.9 percent, due in part to the release of a book in the Harry Potter series last year and current declines in music sales.
Borders shares gained $1.39 to $6.75 in morning trading.
Stocks turn higher following durable goods report
Wednesday August 27, 11:49 am ET By Tim Paradis, AP Business Writer
Stocks turn higher after durable goods orders rise more than expected; retailers advance
NEW YORK (AP) -- Stocks rose moderately Wednesday after the government reported a larger-than-expected increase in orders for big-ticket manufactured goods, offsetting some unease about a rise in oil prices.
The Commerce Department said orders for durable goods jumped 1.3 percent in July compared with the previous month, led by a big gain in demand for commercial aircraft. That was well above the 0.1 increase expected by economists surveyed by Thomson/IFR.
Durable goods, which also include cars, appliances and machinery, are under scrutiny not only because they reflect business spending, but because they are also an indicator of consumer confidence. The July increase equaled a 1.3 percent rise in June; both months produced the strongest gains since a 4.1 percent leap back in December.
Mark Coffelt, portfolio manager at Empiric Funds in Austin, Texas, cautioned against reading too much into the durable goods report and said economic readings will likely continue to come in mixed. He predicts that volatility also will likely continue as investors thumb through a list of concerns ranging from the financial sector, to housing to energy costs.
"I think what we see is a lot of confusion right now. I'm not sure investors really know what to do. You've got oil jumping all over the place," he said.
Light, sweet crude rose $1.53 a barrel to $117.80 on the New York Mercantile Exchange on worries that Tropical Storm Gustav might hit Gulf of Mexico installations
In late morning trading, the Dow Jones industrial average rose 46.57, or 0.41 percent, to 11,459.44.
Broader stock indicators also rose. The Standard & Poor's 500 index advanced 5.16, 0.41 percent, to 8,319.06, and the Nasdaq composite index rose 9.76, or 0.41 percent, to 2,371.73.
Light trading volume ahead of the long Labor Day weekend is also likely to exacerbate the market's moves.
Stocks ended mixed Tuesday as what was then Hurricane Gustav sent oil prices higher and offset a better-than-expected reading on consumer confidence.
Bond prices fell slightly Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.79 percent from 3.78 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.
Rising energy prices initially curtailed the market's overall advance but investors eventually appeared to set aside some of their concerns. But the rise in oil prices still weighed on companies such as airlines, which have been hit hard by rising costs for jet fuel. It also buoyed names in the energy sector.
Northwest Airlines Corp. fell 99 cents, or 10 percent, to $8.56, while U.S. Airways Group fell $1.27, or 11 percent, to $9.88.
Oil refiner Tesoro Corp. rose $1.79, or 11 percent, to $18.36, while Valero Energy Corp. added $1.87, or 5.6 percent, to $35.47.
Several retailers advanced after signaling that business is stronger than some investors might have expected, offering investors some reassurance about consumer spending and in turn, the health of the economy.
Borders Group Inc. jumped $1.10, or 21 percent, to $6.46 after the bookseller reported better-than-expected second-quarter results and slashed debt.
Clothing retailer Talbots Inc. rose $2.90, or 29 percent, to $12.90 after the company raised its forecast for 2008 per-share earnings.
Chico's FAS Inc. rose 48 cents, or 9.4 percent, to $5.56 after the women's apparel retailer's fiscal second-quarter profit fell sharply but beat Wall Street's expectations.
Advancing issues outnumbered decliners by about 5 to 2 on the New York Stock Exchange, where volume came to a light 243.3 million shares.
The Russell 2000 index of smaller companies rose 5.78, or 0.80 percent, to 729.29.
Overseas, Japan's Nikkei stock average fell 0.20 percent. In afternoon trading, Britain's FTSE 100 rose 0.49 percent, Germany's DAX index fell 0.42 percent, and France's CAC-40 slipped 0.08 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Stocks turn higher after durable goods orders rise more than expected; retailers advance
NEW YORK (AP) -- Stocks rose moderately Wednesday after the government reported a larger-than-expected increase in orders for big-ticket manufactured goods, offsetting some unease about a rise in oil prices.
The Commerce Department said orders for durable goods jumped 1.3 percent in July compared with the previous month, led by a big gain in demand for commercial aircraft. That was well above the 0.1 increase expected by economists surveyed by Thomson/IFR.
Durable goods, which also include cars, appliances and machinery, are under scrutiny not only because they reflect business spending, but because they are also an indicator of consumer confidence. The July increase equaled a 1.3 percent rise in June; both months produced the strongest gains since a 4.1 percent leap back in December.
Mark Coffelt, portfolio manager at Empiric Funds in Austin, Texas, cautioned against reading too much into the durable goods report and said economic readings will likely continue to come in mixed. He predicts that volatility also will likely continue as investors thumb through a list of concerns ranging from the financial sector, to housing to energy costs.
"I think what we see is a lot of confusion right now. I'm not sure investors really know what to do. You've got oil jumping all over the place," he said.
Light, sweet crude rose $1.53 a barrel to $117.80 on the New York Mercantile Exchange on worries that Tropical Storm Gustav might hit Gulf of Mexico installations
In late morning trading, the Dow Jones industrial average rose 46.57, or 0.41 percent, to 11,459.44.
Broader stock indicators also rose. The Standard & Poor's 500 index advanced 5.16, 0.41 percent, to 8,319.06, and the Nasdaq composite index rose 9.76, or 0.41 percent, to 2,371.73.
Light trading volume ahead of the long Labor Day weekend is also likely to exacerbate the market's moves.
Stocks ended mixed Tuesday as what was then Hurricane Gustav sent oil prices higher and offset a better-than-expected reading on consumer confidence.
Bond prices fell slightly Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.79 percent from 3.78 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.
Rising energy prices initially curtailed the market's overall advance but investors eventually appeared to set aside some of their concerns. But the rise in oil prices still weighed on companies such as airlines, which have been hit hard by rising costs for jet fuel. It also buoyed names in the energy sector.
Northwest Airlines Corp. fell 99 cents, or 10 percent, to $8.56, while U.S. Airways Group fell $1.27, or 11 percent, to $9.88.
Oil refiner Tesoro Corp. rose $1.79, or 11 percent, to $18.36, while Valero Energy Corp. added $1.87, or 5.6 percent, to $35.47.
Several retailers advanced after signaling that business is stronger than some investors might have expected, offering investors some reassurance about consumer spending and in turn, the health of the economy.
Borders Group Inc. jumped $1.10, or 21 percent, to $6.46 after the bookseller reported better-than-expected second-quarter results and slashed debt.
Clothing retailer Talbots Inc. rose $2.90, or 29 percent, to $12.90 after the company raised its forecast for 2008 per-share earnings.
Chico's FAS Inc. rose 48 cents, or 9.4 percent, to $5.56 after the women's apparel retailer's fiscal second-quarter profit fell sharply but beat Wall Street's expectations.
Advancing issues outnumbered decliners by about 5 to 2 on the New York Stock Exchange, where volume came to a light 243.3 million shares.
The Russell 2000 index of smaller companies rose 5.78, or 0.80 percent, to 729.29.
Overseas, Japan's Nikkei stock average fell 0.20 percent. In afternoon trading, Britain's FTSE 100 rose 0.49 percent, Germany's DAX index fell 0.42 percent, and France's CAC-40 slipped 0.08 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
July durables orders surprisingly strong
Wednesday August 27, 9:07 am ET By Mark Felsenthal
WASHINGTON (Reuters) - New orders for long-lasting U.S. manufactured goods jumped a surprising 1.3 percent in July, while a gauge of business investment also rose unexpectedly, a government report showed on Wednesday.
Orders for durable goods, items meant to last three years or more, were up after an upwardly revised 1.3 percent gain in June, the Commerce Department said. Analysts were expecting durables orders to remain unchanged from the previous month.
Stock futures rose and the dollar strengthened in foreign exchange trading against the euro, while U.S. Treasury debt prices slipped on the report.
"This bodes well for capital spending in the third quarter," said Matthew Moore, economic strategist at Banc of America Securities in New York. "It doesn't seem like the credit crisis is impacting capital spending."
Transportation orders rose 3.1 percent in July, the largest gain since February, on a 28 percent rise in civilian aircraft orders.
Orders for machinery and primary and fabricated metals rose, while demand for computers and appliances waned.
Even when volatile transportation orders were stripped out, demand for durables rose 0.7 percent. Analysts had expected a 0.5 percent drop in durables orders excluding transportation.
Non-defense capital goods orders excluding aircraft, seen as a barometer of business spending, jumped 2.6 percent, the steepest gain since April. Analysts were expecting that category to decline by 0.1 percent.
(Additional reporting by Walden Siew in New York, Editing by Andrea Ricci)
WASHINGTON (Reuters) - New orders for long-lasting U.S. manufactured goods jumped a surprising 1.3 percent in July, while a gauge of business investment also rose unexpectedly, a government report showed on Wednesday.
Orders for durable goods, items meant to last three years or more, were up after an upwardly revised 1.3 percent gain in June, the Commerce Department said. Analysts were expecting durables orders to remain unchanged from the previous month.
Stock futures rose and the dollar strengthened in foreign exchange trading against the euro, while U.S. Treasury debt prices slipped on the report.
"This bodes well for capital spending in the third quarter," said Matthew Moore, economic strategist at Banc of America Securities in New York. "It doesn't seem like the credit crisis is impacting capital spending."
Transportation orders rose 3.1 percent in July, the largest gain since February, on a 28 percent rise in civilian aircraft orders.
Orders for machinery and primary and fabricated metals rose, while demand for computers and appliances waned.
Even when volatile transportation orders were stripped out, demand for durables rose 0.7 percent. Analysts had expected a 0.5 percent drop in durables orders excluding transportation.
Non-defense capital goods orders excluding aircraft, seen as a barometer of business spending, jumped 2.6 percent, the steepest gain since April. Analysts were expecting that category to decline by 0.1 percent.
(Additional reporting by Walden Siew in New York, Editing by Andrea Ricci)
Tuesday, August 26, 2008
Oil falls as dollar strengthens against euro, yen
Tuesday August 26, 6:37 am ET By Pablo Gorondi, Associated Press Writer
Oil prices fall as stronger dollar trumps concerns Hurricane Gustav may disrupt oil output
Oil prices slumped below $113 a barrel Tuesday as gains by the U.S. dollar against other major currencies pulled investors away from commodities and outweighed concerns Hurricane Gustav may disrupt oil operations in the Gulf of Mexico.
By midday in Europe, light, sweet crude for October delivery was down $2.17 to $112.94 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 52 cents overnight to settle at $115.11 a barrel.
In London, October Brent crude retreated $2.68 to $111.82 a barrel on the ICE Futures exchange.
While oil prices initially rose earlier in Tuesday's session due to the fears over Hurricane Gustav, they began falling markedly as the dollar strengthened.
"Lately, there has been a very strong correlation between oil futures and the U.S. dollar," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
Oil prices typically fall when the dollar strengthens as investors buy commodities as a hedge against inflation and weakness in the U.S. currency.
The euro fell below $146 Tuesday, a six-month low. By midday in Europe, the 15-nation currency stood at $1.4594, more than 1.5 cents below the $1.4756 it bought in late trading Monday in New York.
At the same time, the dollar gained to 109.78 Japanese yen compared with 109.35 Monday.
Tropical storm Gustav became a hurricane Tuesday as it approached Haiti's southern coast, and is also on track to hit Cuba.
"It's hard to predict where Gustav will strike," Shum said. "But the market is reacting to it and edging up some."
The National Hurricane Center in Miami said the hurricane's maximum sustained winds were near 80 mph (130 kph).
Haitians were told to prepare for evacuations as the storm formed Monday in the Caribbean. Haiti upgraded storm warnings to hurricane warnings along much of its coast as Gustav closed in from the south.
Forecasters said storm preparations in Haiti should be rushed to completion and that floods and landslides were possible across its southern peninsula. The forecasts suggested Gustav's eye could pass near the capital of Port-au-Prince, home to nearly 3 million people.
Traders worried that the hurricane could head into the Gulf, where there are many oil drilling platforms. The storm was centered about 130 miles (210 kilometers) south-southeast of Port-au-Prince and was moving toward the northwest near 12 mph (19 kph).
In other Nymex trading, heating oil futures fell 2.23 cents to $3.1291 a gallon, while gasoline prices lost 3.24 cents to $2.8499 a gallon. Natural gas futures increased 12 cents to $7.945 per 1,000 cubic feet.
Associated Press writers Alex Kennedy in Singapore and Matt Moore in Frankfurt contributed to this report.
Oil prices fall as stronger dollar trumps concerns Hurricane Gustav may disrupt oil output
Oil prices slumped below $113 a barrel Tuesday as gains by the U.S. dollar against other major currencies pulled investors away from commodities and outweighed concerns Hurricane Gustav may disrupt oil operations in the Gulf of Mexico.
By midday in Europe, light, sweet crude for October delivery was down $2.17 to $112.94 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 52 cents overnight to settle at $115.11 a barrel.
In London, October Brent crude retreated $2.68 to $111.82 a barrel on the ICE Futures exchange.
While oil prices initially rose earlier in Tuesday's session due to the fears over Hurricane Gustav, they began falling markedly as the dollar strengthened.
"Lately, there has been a very strong correlation between oil futures and the U.S. dollar," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
Oil prices typically fall when the dollar strengthens as investors buy commodities as a hedge against inflation and weakness in the U.S. currency.
The euro fell below $146 Tuesday, a six-month low. By midday in Europe, the 15-nation currency stood at $1.4594, more than 1.5 cents below the $1.4756 it bought in late trading Monday in New York.
At the same time, the dollar gained to 109.78 Japanese yen compared with 109.35 Monday.
Tropical storm Gustav became a hurricane Tuesday as it approached Haiti's southern coast, and is also on track to hit Cuba.
"It's hard to predict where Gustav will strike," Shum said. "But the market is reacting to it and edging up some."
The National Hurricane Center in Miami said the hurricane's maximum sustained winds were near 80 mph (130 kph).
Haitians were told to prepare for evacuations as the storm formed Monday in the Caribbean. Haiti upgraded storm warnings to hurricane warnings along much of its coast as Gustav closed in from the south.
Forecasters said storm preparations in Haiti should be rushed to completion and that floods and landslides were possible across its southern peninsula. The forecasts suggested Gustav's eye could pass near the capital of Port-au-Prince, home to nearly 3 million people.
Traders worried that the hurricane could head into the Gulf, where there are many oil drilling platforms. The storm was centered about 130 miles (210 kilometers) south-southeast of Port-au-Prince and was moving toward the northwest near 12 mph (19 kph).
In other Nymex trading, heating oil futures fell 2.23 cents to $3.1291 a gallon, while gasoline prices lost 3.24 cents to $2.8499 a gallon. Natural gas futures increased 12 cents to $7.945 per 1,000 cubic feet.
Associated Press writers Alex Kennedy in Singapore and Matt Moore in Frankfurt contributed to this report.
Stock futures mixed ahead of new home sales data
Tuesday August 26, 9:24 am ET By Stevenson Jacobs, AP Business Writer
Wall Street heads for mixed open ahead of reports on new home sales data, consumer sentiment
NEW YORK (AP) -- Wall Street headed for a narrowly mixed open Tuesday, a day after a big pullback, as investors awaited key readings on new home sales and consumer confidence.
Investors expect the Commerce Department report to show new home sales dropped again in July, falling nearly 1 percent to a seasonally adjusted annual rate of 525,000 from June's 530,000, according to analysts surveyed by Thomson/IFR. That would be the eighth decline in the past nine months. The report is due at 10 a.m. EDT.
Reducing the inventory of new homes has been difficult as mortgage rates have increased and banks have tightened lending standards due to the credit crunch.
Also Tuesday, the widely watched Standard & Poor's/Case-Shiller home price index tumbled the most ever during the second quarter, falling 15.4 percent compared to the same period a year ago.
The market is also awaiting a report on U.S. consumer sentiment. The Conference Board's Consumer Confidence Index is expected to rise slightly for August to 53, just higher than last month's reading of 51.9, according to economists surveyed by Thomson/IFR. That would be the second straight month the index posted a slight gain, but the forecast still remains about half of what it was a year ago.
Investors closely watch for any sign that consumers' moods are lifting as consumer spending accounts for two-thirds of the U.S. economy.
The Dow Jones industrial average futures rose 14, or 0.12 percent, to 11,398. On Monday, the Dow fell almost 250 points as worries about American International Group Inc. fed concerns that the deterioration of the credit markets will bring more big losses for financial companies.
The Standard & Poor's 500 index futures rose 0.10, or 0.01 percent, to 1,266.50, and the Nasdaq 100 index futures fell 2.50, or 0.13 percent, to 1,892.50.
Bonds rose. The yield on the benchmark 10-year Treasury note, which trades opposite its price, fell to 3.78 percent from 3.79 percent late Monday. The dollar was higher against other major currencies, while gold prices fell.
Light, sweet crude rose 67 cents to $115.78 in premarket electronic trading on the New York Mercantile Exchange.
In corporate news, Smithfield Foods Inc., the nation's largest hog producer and pork processor, said Tuesday it swung to a fiscal first-quarter loss due in part to a $20.1 million write-down in the value of commodities contracts. The company said it lost $12.6 million, or 9 cents per share, in the period. Analysts, who typically exclude one-time costs, expected a loss of 4 cents per share on $2.87 billion in sales.
Overseas, Japan's Nikkei stock average fell 0.78 percent. In afternoon trading, Britain's FTSE 100 was down 1.98 percent, Germany's DAX index was down 0.18 percent, and France's CAC-40 was down 0.95 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Wall Street heads for mixed open ahead of reports on new home sales data, consumer sentiment
NEW YORK (AP) -- Wall Street headed for a narrowly mixed open Tuesday, a day after a big pullback, as investors awaited key readings on new home sales and consumer confidence.
Investors expect the Commerce Department report to show new home sales dropped again in July, falling nearly 1 percent to a seasonally adjusted annual rate of 525,000 from June's 530,000, according to analysts surveyed by Thomson/IFR. That would be the eighth decline in the past nine months. The report is due at 10 a.m. EDT.
Reducing the inventory of new homes has been difficult as mortgage rates have increased and banks have tightened lending standards due to the credit crunch.
Also Tuesday, the widely watched Standard & Poor's/Case-Shiller home price index tumbled the most ever during the second quarter, falling 15.4 percent compared to the same period a year ago.
The market is also awaiting a report on U.S. consumer sentiment. The Conference Board's Consumer Confidence Index is expected to rise slightly for August to 53, just higher than last month's reading of 51.9, according to economists surveyed by Thomson/IFR. That would be the second straight month the index posted a slight gain, but the forecast still remains about half of what it was a year ago.
Investors closely watch for any sign that consumers' moods are lifting as consumer spending accounts for two-thirds of the U.S. economy.
The Dow Jones industrial average futures rose 14, or 0.12 percent, to 11,398. On Monday, the Dow fell almost 250 points as worries about American International Group Inc. fed concerns that the deterioration of the credit markets will bring more big losses for financial companies.
The Standard & Poor's 500 index futures rose 0.10, or 0.01 percent, to 1,266.50, and the Nasdaq 100 index futures fell 2.50, or 0.13 percent, to 1,892.50.
Bonds rose. The yield on the benchmark 10-year Treasury note, which trades opposite its price, fell to 3.78 percent from 3.79 percent late Monday. The dollar was higher against other major currencies, while gold prices fell.
Light, sweet crude rose 67 cents to $115.78 in premarket electronic trading on the New York Mercantile Exchange.
In corporate news, Smithfield Foods Inc., the nation's largest hog producer and pork processor, said Tuesday it swung to a fiscal first-quarter loss due in part to a $20.1 million write-down in the value of commodities contracts. The company said it lost $12.6 million, or 9 cents per share, in the period. Analysts, who typically exclude one-time costs, expected a loss of 4 cents per share on $2.87 billion in sales.
Overseas, Japan's Nikkei stock average fell 0.78 percent. In afternoon trading, Britain's FTSE 100 was down 1.98 percent, Germany's DAX index was down 0.18 percent, and France's CAC-40 was down 0.95 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
S&P: Home prices tumble by record amount
Tuesday August 26, 9:26 am ET
Private housing index shows home prices tumbling by record amount nationwide in June
NEW YORK (AP) -- A widely watched housing index released Tuesday showed home prices dropping by the sharpest rate ever in the second quarter.
The Standard & Poor's/Case-Shiller U.S. National Home Price Index tumbled a record 15.4 percent during the quarter from the same period a year ago.
The monthly indices also clocked in record declines. The 20-city index fell by 15.9 percent in June compared with a year ago, the largest drop since its inception in 2000. The 10-city index plunged 17 percent, its biggest decline in its 21-year history.
No city in the Case-Shiller 20-city index saw year-over-year price gains in June, the third straight month that's happened.
However, the rate of single-family home price declines slowed from May to June, a possible silver lining, the index creators said.
"While there is no national turnaround in residential real estate prices, it is possible that we are seeing some regions struggling to come back, which has resulted in some moderation in price declines at the national level" said David M. Blitzer, chairman of the index committee at S&P.
Private housing index shows home prices tumbling by record amount nationwide in June
NEW YORK (AP) -- A widely watched housing index released Tuesday showed home prices dropping by the sharpest rate ever in the second quarter.
The Standard & Poor's/Case-Shiller U.S. National Home Price Index tumbled a record 15.4 percent during the quarter from the same period a year ago.
The monthly indices also clocked in record declines. The 20-city index fell by 15.9 percent in June compared with a year ago, the largest drop since its inception in 2000. The 10-city index plunged 17 percent, its biggest decline in its 21-year history.
No city in the Case-Shiller 20-city index saw year-over-year price gains in June, the third straight month that's happened.
However, the rate of single-family home price declines slowed from May to June, a possible silver lining, the index creators said.
"While there is no national turnaround in residential real estate prices, it is possible that we are seeing some regions struggling to come back, which has resulted in some moderation in price declines at the national level" said David M. Blitzer, chairman of the index committee at S&P.
German consumer, business confidence ebbs
Tuesday August 26, 7:01 am ET By Matt Moore, AP Business Writer
German consumer, business confidence slide to 5- and 3-year lows; gov't confirms GDP pinch
FRANKFURT, Germany (AP) -- Consumer confidence in Europe's biggest economy declined for a fourth month in a row, sliding to another five-year low as lower energy prices failed to bolster Germans' likelihood of buying new goods, a report released Tuesday found.
A separate report, meanwhile, found that business executives' confidence in the German economy had also dropped to a three-year low in August, the third consecutive monthly decline.
The forward-looking GfK consumer climate forecast index dropped to 1.5 points for September from a revised 1.9 points in August. The last time it was that low was five years earlier.
"The consumer climate ... was depressed further by the very subdued economic outlook. Even significantly lower crude oil prices did nothing to brighten the consumer mood," the report said.
"Consumers are not interpreting the marked decrease in crude oil prices as an all-clear signal when it comes to purchasing power," GfK added in the report.
Ifo's Business Climate for Germany report, which surveyed 7,000 business executives across Germany, found that business confidence fell to 94.8 points in August from 97.5 points in July.
The global financial turbulence was still affecting business confidence despite the recent fall in oil prices and the euro's retreat from record highs against the dollar, said Timo Klein, an economist with Global Insight, of the latest report.
Munich-based Ifo said that manufacturing firms had seen a cooling in the business climate, as had construction and retail companies.
"The German economy is encountering an increasingly more difficult situation," Ifo said in the report.
Germany's government also confirmed that the economy shrank for the first time in nearly four years in the second quarter as consumer spending and capital investment declined.
The reports helped push the euro to a six-month low against the dollar. It fell to $1.4595 in late morning trading compared with $1.4756 the night before in New York.
The economy contracted by 0.5 percent in the April-June period compared with the previous quarter, the Federal Statistical Office said. It was the first decline since the third quarter of 2004.
The two reports provided ample proof that Germany, and its consumers, are not immune to the global economic slowdown, said Andreas Rees, an economist at UniCredit in Munich.
"The German consumer is clearly no match for the rapid slowdown of the global economy," he said.
In the report, the Nuremberg-based GfK said that consumers' propensity to buy dropped by 1.7 points to minus 27.9 points, a level last seen in mid-2005.
"High energy prices are reducing the purchasing power of consumers. With manufacturing and wholesale prices rocketing most recently, there is little hope of an easing in the price trend of other fast-moving consumer goods," the report said.
Because of that it is unlikely that Germans, even those who have received bumps in their salaries because of union wage talks, will make major purchases from cars to washing machines.
As such "real disposable income for consumption will therefore hardly see an increase this year," GfK said.
All three of GfK's subindexes, which refer to current conditions, fell in August versus July.
The index that measures economic expectations dropped to minus 21.8 points in August from minus 8 points in July. The index showing income expectations fell to minus 16.8 points in August from minus 20 points in July. The index showing consumers' consumption and propensity to buy fell to minus 27.9 points in August from minus 26.2 points in July.
http://www.gfk.com
German consumer, business confidence slide to 5- and 3-year lows; gov't confirms GDP pinch
FRANKFURT, Germany (AP) -- Consumer confidence in Europe's biggest economy declined for a fourth month in a row, sliding to another five-year low as lower energy prices failed to bolster Germans' likelihood of buying new goods, a report released Tuesday found.
A separate report, meanwhile, found that business executives' confidence in the German economy had also dropped to a three-year low in August, the third consecutive monthly decline.
The forward-looking GfK consumer climate forecast index dropped to 1.5 points for September from a revised 1.9 points in August. The last time it was that low was five years earlier.
"The consumer climate ... was depressed further by the very subdued economic outlook. Even significantly lower crude oil prices did nothing to brighten the consumer mood," the report said.
"Consumers are not interpreting the marked decrease in crude oil prices as an all-clear signal when it comes to purchasing power," GfK added in the report.
Ifo's Business Climate for Germany report, which surveyed 7,000 business executives across Germany, found that business confidence fell to 94.8 points in August from 97.5 points in July.
The global financial turbulence was still affecting business confidence despite the recent fall in oil prices and the euro's retreat from record highs against the dollar, said Timo Klein, an economist with Global Insight, of the latest report.
Munich-based Ifo said that manufacturing firms had seen a cooling in the business climate, as had construction and retail companies.
"The German economy is encountering an increasingly more difficult situation," Ifo said in the report.
Germany's government also confirmed that the economy shrank for the first time in nearly four years in the second quarter as consumer spending and capital investment declined.
The reports helped push the euro to a six-month low against the dollar. It fell to $1.4595 in late morning trading compared with $1.4756 the night before in New York.
The economy contracted by 0.5 percent in the April-June period compared with the previous quarter, the Federal Statistical Office said. It was the first decline since the third quarter of 2004.
The two reports provided ample proof that Germany, and its consumers, are not immune to the global economic slowdown, said Andreas Rees, an economist at UniCredit in Munich.
"The German consumer is clearly no match for the rapid slowdown of the global economy," he said.
In the report, the Nuremberg-based GfK said that consumers' propensity to buy dropped by 1.7 points to minus 27.9 points, a level last seen in mid-2005.
"High energy prices are reducing the purchasing power of consumers. With manufacturing and wholesale prices rocketing most recently, there is little hope of an easing in the price trend of other fast-moving consumer goods," the report said.
Because of that it is unlikely that Germans, even those who have received bumps in their salaries because of union wage talks, will make major purchases from cars to washing machines.
As such "real disposable income for consumption will therefore hardly see an increase this year," GfK said.
All three of GfK's subindexes, which refer to current conditions, fell in August versus July.
The index that measures economic expectations dropped to minus 21.8 points in August from minus 8 points in July. The index showing income expectations fell to minus 16.8 points in August from minus 20 points in July. The index showing consumers' consumption and propensity to buy fell to minus 27.9 points in August from minus 26.2 points in July.
http://www.gfk.com
Stocks poised higher ahead of new home sales data
Tuesday August 26, 7:57 am ET By Stevenson Jacobs, AP Business Writer
Wall Street heads for higher open ahead of reports on new home sales data, consumer sentiment
NEW YORK (AP) -- Wall Street headed for a higher open Tuesday, a day after a big pullback, as investors awaited key readings on new home sales and consumer confidence.
Investors expect the Commerce Department report to show new home sales dropped again in July, falling nearly 1 percent to a seasonally adjusted annual rate of 525,000 from June's 530,000, according to analysts surveyed by Thomson/IFR. That would be the eighth decline in the past nine months. The report is due at 10 a.m. EDT.
Reducing the inventory of new homes has been difficult as mortgage rates have increased and banks have tightened lending standards due to the credit crunch.
Also Tuesday, investors are looking for Standard & Poor's/Case-Shiller's June home price index.
The market is also awaiting a report on U.S. consumer sentiment. The Conference Board's Consumer Confidence Index is expected to rise slightly for August to 52.4, just higher than last month's reading of 51.9, according to economists surveyed by Thomson/IFR. That would be the second straight month the index posted a slight gain, but the forecast still remains about half of what it was a year ago.
Investors closely watch for any sign that consumers' moods are lifting as consumer spending accounts for two-thirds of the U.S. economy.
The Dow Jones industrial average futures rose 36, or 0.31 percent, to 11,420. On Monday, the Dow fell almost 250 points as worries about American International Group Inc. fed concerns that the deterioration of the credit markets will bring more big losses for financial companies.
The Standard & Poor's 500 index futures rose 1.60, or 0.13 percent, to 1,268, and the Nasdaq 100 index futures rose 2.50, or 0.13 percent, to 1,897.50.
Bonds rose. The yield on the benchmark 10-year Treasury note, which trades opposite its price, fell to 3.78 percent from 3.79 percent late Monday. The dollar was higher against other major currencies, while gold prices fell.
Light, sweet crude fell $1.70 to $113.41 in premarket electronic trading on the New York Mercantile Exchange.
In corporate news, Smithfield Foods Inc., the nation's largest hog producer and pork processor, said Tuesday it swung to a fiscal first-quarter loss due in part to a $20.1 million write-down in the value of commodity contracts. The company said it lost $12.6 million, or 9 cents per share, in the period. Analysts, who typically exclude one-time costs, expected a loss of 4 cents per share on $2.87 billion in sales.
Overseas, Japan's Nikkei stock average fell 0.78 percent. In afternoon trading, Britain's FTSE 100 was down 1.98 percent, Germany's DAX index was down 0.18 percent, and France's CAC-40 was down 0.95 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Wall Street heads for higher open ahead of reports on new home sales data, consumer sentiment
NEW YORK (AP) -- Wall Street headed for a higher open Tuesday, a day after a big pullback, as investors awaited key readings on new home sales and consumer confidence.
Investors expect the Commerce Department report to show new home sales dropped again in July, falling nearly 1 percent to a seasonally adjusted annual rate of 525,000 from June's 530,000, according to analysts surveyed by Thomson/IFR. That would be the eighth decline in the past nine months. The report is due at 10 a.m. EDT.
Reducing the inventory of new homes has been difficult as mortgage rates have increased and banks have tightened lending standards due to the credit crunch.
Also Tuesday, investors are looking for Standard & Poor's/Case-Shiller's June home price index.
The market is also awaiting a report on U.S. consumer sentiment. The Conference Board's Consumer Confidence Index is expected to rise slightly for August to 52.4, just higher than last month's reading of 51.9, according to economists surveyed by Thomson/IFR. That would be the second straight month the index posted a slight gain, but the forecast still remains about half of what it was a year ago.
Investors closely watch for any sign that consumers' moods are lifting as consumer spending accounts for two-thirds of the U.S. economy.
The Dow Jones industrial average futures rose 36, or 0.31 percent, to 11,420. On Monday, the Dow fell almost 250 points as worries about American International Group Inc. fed concerns that the deterioration of the credit markets will bring more big losses for financial companies.
The Standard & Poor's 500 index futures rose 1.60, or 0.13 percent, to 1,268, and the Nasdaq 100 index futures rose 2.50, or 0.13 percent, to 1,897.50.
Bonds rose. The yield on the benchmark 10-year Treasury note, which trades opposite its price, fell to 3.78 percent from 3.79 percent late Monday. The dollar was higher against other major currencies, while gold prices fell.
Light, sweet crude fell $1.70 to $113.41 in premarket electronic trading on the New York Mercantile Exchange.
In corporate news, Smithfield Foods Inc., the nation's largest hog producer and pork processor, said Tuesday it swung to a fiscal first-quarter loss due in part to a $20.1 million write-down in the value of commodity contracts. The company said it lost $12.6 million, or 9 cents per share, in the period. Analysts, who typically exclude one-time costs, expected a loss of 4 cents per share on $2.87 billion in sales.
Overseas, Japan's Nikkei stock average fell 0.78 percent. In afternoon trading, Britain's FTSE 100 was down 1.98 percent, Germany's DAX index was down 0.18 percent, and France's CAC-40 was down 0.95 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Thursday, August 21, 2008
Stocks fall on rising oil, unease about financials
Thursday August 21, 12:53 pm ET By Tim Paradis, AP Business Writer
Stocks fall as oil prices rise amid Russia tensions; downgrades weigh on financial sector
NEW YORK (AP) -- Stocks resumed their pullback Thursday as a surge in oil prices fanned inflation concerns and as investors grew more anxious about the financial sector.
Oil jumped as investors questioned whether rising tensions with Russia could disrupt energy shipments from the world's second-largest oil producer. Wall Street is worried that oil's turn higher will hasten increases in inflation and put more pressure on already struggling consumers, whose spending is crucial to the well-being of the economy.
Light, sweet crude oil rose $6.03 to $121.59 a barrel on the New York Mercantile Exchange.
Investors also contended with fresh worries about the financials and the sector's troubles with faltering mortgage debt. A slew of analysts have been downgrading banks and brokerages over the past few weeks, and late Wednesday, Citigroup analyst Prashant Bhatia lowered his third-quarter estimates for the investment banks Lehman Brothers Holdings Inc., Goldman Sachs Group Inc. and Morgan Stanley. He predicted Lehman will write down its assets by $2.9 billion, that Goldman Sachs will write down $1.8 billion, and that Morgan Stanley will write down $1.7 billion.
"Oil is the driver and then it depends on a series of other factors that are kind of like magnifiers," said Doug Roberts, chief investment strategist at Channel Capital Research, pointing to Wall Street's latest worries about the financials.
In midday trading, the Dow Jones industrial average fell 37.78, or 0.33 percent, to 11,379.65. The Dow managed a moderate gain on Wednesday after heavy losses the first two days of the week.
Broader stock indicators also declined Thursday. The Standard & Poor's 500 index fell 2.33, or 0.18 percent, to 1,272.21, and the Nasdaq composite index fell 17.39, or 0.73 percent, to 2,371.69.
Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.83 percent from 3.80 percent late Wednesday.
Gold prices rose and the dollar was lower against other major currencies.
While oil prices remain well off their July 11 high of $147.27, the rebound in recent days is unnerving to investors after inflation readings the past two weeks showed prices were rising for consumers and businesses at a faster pace than expected.
With the focus on oil investors, appeared unimpressed by a better-than-expected snapshot of demand at some factories. The Philadelphia Fed said regional manufacturing activity is increasing in August by more than it did in July. Its index of activity improved to a negative 12.7 from a negative 16.3 in July.
The Conference Board's leading economic indicators report showed a 0.7 percent drop for July compared with a 0.1 percent decline in June. The index is aimed at predicting economic activity in the next three to six months.
A larger-than-expected drop last week in unemployment claims from newly laid-off workers failed to cheer Wall Street -- especially as the four-week moving average for claims hit a nearly seven-year high. The Labor Department said claims fell by 13,000 to 432,000, but that the four-week average rose to 445,750.
A shaky job market has been slamming consumers who also face a tighter credit climate, rising costs and falling home prices. That is troubling to investors as consumer spending accounts for more than two-thirds of U.S. economic activity.
"All three reports tend to indicate that we're bottoming out but that there is no real end in sight and that's what I think the market has to get used to," Channel Capital's Roberts said.
Investors again focused on the financials, which are getting hit as consumers fall behind on payments for mortgages and other debt. Citigroup's downcast note about the sector arrived after a volatile trading session Wednesday that saw worries about the possibility of a government bailout of Fannie Mae and Freddie Mac. Such a move could wipe out shareholder equity.
But Fannie and Freddie shares fluctuated after falling more than 20 percent Wednesday. Fannie rose 29 cents, or 6.6 percent, to $4.68, while Freddie rose 3 cents to $3.28.
Lehman Brothers is under particular scrutiny as well, after the Financial Times reported late Wednesday the investment bank failed to sell up to half of its shares to South Korean or Chinese investors earlier this month. Lehman fell 79 cents, or 5.8 percent, to $12.94.
Goldman Sachs fell $5.04, or 3.2 percent, to $153.21, while Morgan Stanley slipped 87 cents, or 2.3 percent, to $36.53.
The rise in oil weighed on sectors like airlines and lifted energy names. United Airlines parent UAL Corp. fell 78 cents, or 6.3 percent, to $11.62, while Continental Airlines Inc. fell 97 cents, or 6.4 percent, to $14.19.
Exxon Mobil Corp. and Chevron Corp. showed the strongest performance among the 30 stocks that make up the Dow industrials. Exxon rose $1.54, or 2 percent, to $80.35, while Chevron rose $1.84, or 2.1 percent, to $88.30.
Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 423.8 million shares.
The Russell 2000 index of smaller companies fell 7.08, or 0.97 percent, to 724.52.
Overseas, Japan's Nikkei stock average fell 0.77 percent. Britain's FTSE 100 slipped 0.03 percent, Germany's DAX index fell 1.28 percent, and France's CAC-40 declined 1.40 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Stocks fall as oil prices rise amid Russia tensions; downgrades weigh on financial sector
NEW YORK (AP) -- Stocks resumed their pullback Thursday as a surge in oil prices fanned inflation concerns and as investors grew more anxious about the financial sector.
Oil jumped as investors questioned whether rising tensions with Russia could disrupt energy shipments from the world's second-largest oil producer. Wall Street is worried that oil's turn higher will hasten increases in inflation and put more pressure on already struggling consumers, whose spending is crucial to the well-being of the economy.
Light, sweet crude oil rose $6.03 to $121.59 a barrel on the New York Mercantile Exchange.
Investors also contended with fresh worries about the financials and the sector's troubles with faltering mortgage debt. A slew of analysts have been downgrading banks and brokerages over the past few weeks, and late Wednesday, Citigroup analyst Prashant Bhatia lowered his third-quarter estimates for the investment banks Lehman Brothers Holdings Inc., Goldman Sachs Group Inc. and Morgan Stanley. He predicted Lehman will write down its assets by $2.9 billion, that Goldman Sachs will write down $1.8 billion, and that Morgan Stanley will write down $1.7 billion.
"Oil is the driver and then it depends on a series of other factors that are kind of like magnifiers," said Doug Roberts, chief investment strategist at Channel Capital Research, pointing to Wall Street's latest worries about the financials.
In midday trading, the Dow Jones industrial average fell 37.78, or 0.33 percent, to 11,379.65. The Dow managed a moderate gain on Wednesday after heavy losses the first two days of the week.
Broader stock indicators also declined Thursday. The Standard & Poor's 500 index fell 2.33, or 0.18 percent, to 1,272.21, and the Nasdaq composite index fell 17.39, or 0.73 percent, to 2,371.69.
Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.83 percent from 3.80 percent late Wednesday.
Gold prices rose and the dollar was lower against other major currencies.
While oil prices remain well off their July 11 high of $147.27, the rebound in recent days is unnerving to investors after inflation readings the past two weeks showed prices were rising for consumers and businesses at a faster pace than expected.
With the focus on oil investors, appeared unimpressed by a better-than-expected snapshot of demand at some factories. The Philadelphia Fed said regional manufacturing activity is increasing in August by more than it did in July. Its index of activity improved to a negative 12.7 from a negative 16.3 in July.
The Conference Board's leading economic indicators report showed a 0.7 percent drop for July compared with a 0.1 percent decline in June. The index is aimed at predicting economic activity in the next three to six months.
A larger-than-expected drop last week in unemployment claims from newly laid-off workers failed to cheer Wall Street -- especially as the four-week moving average for claims hit a nearly seven-year high. The Labor Department said claims fell by 13,000 to 432,000, but that the four-week average rose to 445,750.
A shaky job market has been slamming consumers who also face a tighter credit climate, rising costs and falling home prices. That is troubling to investors as consumer spending accounts for more than two-thirds of U.S. economic activity.
"All three reports tend to indicate that we're bottoming out but that there is no real end in sight and that's what I think the market has to get used to," Channel Capital's Roberts said.
Investors again focused on the financials, which are getting hit as consumers fall behind on payments for mortgages and other debt. Citigroup's downcast note about the sector arrived after a volatile trading session Wednesday that saw worries about the possibility of a government bailout of Fannie Mae and Freddie Mac. Such a move could wipe out shareholder equity.
But Fannie and Freddie shares fluctuated after falling more than 20 percent Wednesday. Fannie rose 29 cents, or 6.6 percent, to $4.68, while Freddie rose 3 cents to $3.28.
Lehman Brothers is under particular scrutiny as well, after the Financial Times reported late Wednesday the investment bank failed to sell up to half of its shares to South Korean or Chinese investors earlier this month. Lehman fell 79 cents, or 5.8 percent, to $12.94.
Goldman Sachs fell $5.04, or 3.2 percent, to $153.21, while Morgan Stanley slipped 87 cents, or 2.3 percent, to $36.53.
The rise in oil weighed on sectors like airlines and lifted energy names. United Airlines parent UAL Corp. fell 78 cents, or 6.3 percent, to $11.62, while Continental Airlines Inc. fell 97 cents, or 6.4 percent, to $14.19.
Exxon Mobil Corp. and Chevron Corp. showed the strongest performance among the 30 stocks that make up the Dow industrials. Exxon rose $1.54, or 2 percent, to $80.35, while Chevron rose $1.84, or 2.1 percent, to $88.30.
Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 423.8 million shares.
The Russell 2000 index of smaller companies fell 7.08, or 0.97 percent, to 724.52.
Overseas, Japan's Nikkei stock average fell 0.77 percent. Britain's FTSE 100 slipped 0.03 percent, Germany's DAX index fell 1.28 percent, and France's CAC-40 declined 1.40 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Jobless claims fall for second straight week
Thursday August 21, 9:09 am ET By Christopher S. Rugaber, AP Business Writer
Jobless claims fall for second consecutive week, after hitting 6-year high
WASHINGTON (AP) -- The number of newly laid-off workers seeking unemployment benefits fell more than expected last week, the second straight drop from a six-year high, according to government data released Thursday.
The Labor Department reported that applications for jobless benefits dropped to 432,000, down by 13,000 from the previous week. It was a bigger improvement than analysts expected.
But claims remain elevated compared with recent years. The four-week average climbed to 445,750, the highest level in almost seven years.
Unemployment claims have increased in the past several weeks, partly reflecting an outreach effort by the Labor Department to notify people of a 13-week benefit extension approved by Congress in June. The action has turned up some people eligible to file new claims, according to the department.
That effort -- coupled with businesses cutting jobs due to higher energy costs, tighter credit markets and a slowing economy -- caused claims to spike to a six-year high of 457,000 for the week of Aug. 2, the largest total since claims surged to 479,000 in March 2002. The increase more than six years ago occurred the last time Congress extended benefits to deal with the impact of soaring layoffs due to a weak economy.
The number of people continuing to receive benefits last week also dropped slightly to 3.36 million, but the four-week average rose to 3.33 million, its highest level in almost five years.
That number doesn't include the government's extended benefits program. The Labor Department estimated an additional 1.29 million unemployed workers are getting benefits under that program.
Several companies announced job cuts recently, including newspaper publisher Gannett Co. Inc., which said it would lay off 600 workers.
Ford Motor Co. said it would lay off 300 workers at an engine plant, and chip designer Rambus Inc. said it would cut 90 jobs.
Employers cut 51,000 jobs in July, the Labor Department reported earlier this month, pushing the unemployment rate to 5.7 percent.
Jobless claims fall for second consecutive week, after hitting 6-year high
WASHINGTON (AP) -- The number of newly laid-off workers seeking unemployment benefits fell more than expected last week, the second straight drop from a six-year high, according to government data released Thursday.
The Labor Department reported that applications for jobless benefits dropped to 432,000, down by 13,000 from the previous week. It was a bigger improvement than analysts expected.
But claims remain elevated compared with recent years. The four-week average climbed to 445,750, the highest level in almost seven years.
Unemployment claims have increased in the past several weeks, partly reflecting an outreach effort by the Labor Department to notify people of a 13-week benefit extension approved by Congress in June. The action has turned up some people eligible to file new claims, according to the department.
That effort -- coupled with businesses cutting jobs due to higher energy costs, tighter credit markets and a slowing economy -- caused claims to spike to a six-year high of 457,000 for the week of Aug. 2, the largest total since claims surged to 479,000 in March 2002. The increase more than six years ago occurred the last time Congress extended benefits to deal with the impact of soaring layoffs due to a weak economy.
The number of people continuing to receive benefits last week also dropped slightly to 3.36 million, but the four-week average rose to 3.33 million, its highest level in almost five years.
That number doesn't include the government's extended benefits program. The Labor Department estimated an additional 1.29 million unemployed workers are getting benefits under that program.
Several companies announced job cuts recently, including newspaper publisher Gannett Co. Inc., which said it would lay off 600 workers.
Ford Motor Co. said it would lay off 300 workers at an engine plant, and chip designer Rambus Inc. said it would cut 90 jobs.
Employers cut 51,000 jobs in July, the Labor Department reported earlier this month, pushing the unemployment rate to 5.7 percent.
Oil jumps $6 on US-Russia tensions, sliding dollar
Thursday August 21, 11:35 am ET By Stevenson Jacobs, AP Business Writer
Oil jumps $6 on growing US-Russia tensions, sliding dollar, worries of OPEC output cut
NEW YORK (AP) -- Oil prices shot up $6 a barrel Thursday, rising to the highest level in over two weeks as escalating tensions with Russia stoked fears of a disruption of energy shipments to Western countries.
Crude's rally mimicked the wild price swings seen last month and have at least temporarily halted oil's slide back toward $100 a barrel. A weaker U.S. dollar and worries about tightening output from OPEC countries are also supporting prices.
Tensions with Russia about a deal between Washington and Poland to install a missile defense system in Eastern Europe -- seen as a threat by Moscow -- and the continued presence of Russian troops in Georgia contributed greatly to the bullish mood.
Light, sweet crude for October delivery jumped $6.32 to $121.88 a barrel on the New York Mercantile Exchange. It was crude's highest trading level since Aug. 4.
"The sellers are backing away for now," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill. "If military activity heats up again, pipeline flows into Europe could be disrupted and that would affect the United States as well."
The price jump came as retail gas prices continued to fall, shedding more than a penny overnight to a new national average of $3.702, according to auto club AAA, the Oil Price Information Service, and Wright Express. Prices have now fallen 10 percent from record highs above $4 a gallon set July 17, but the pace of the drop off could slow if oil holds onto Thursday's gains.
"This is probably about it in terms of a retail gas drop. We may be a few cents away from the August bottom," said Tom Kloza, publisher and chief analyst at the Oil Price Information Service in Wall, N.J.
Oil's jump came a day after the U.S. government report a huge rise in U.S. crude inventories. But other supplies were less abundant.
Gasoline inventories shrank by a larger-than-expected 6.2 million barrels to below-average levels in the week ended Aug. 15, the U.S. Energy Department's Energy Information Administration said Wednesday. Meanwhile, distillate inventories -- which include heating oil and diesel fuel -- rose by less than expected, the EIA said.
That was enough to offset a hefty 9.4 million barrel rise in U.S. crude stocks last week when the average analyst forecast had been for a 1.7 million barrel increase, according to energy information provider Platts.
"That report had something for everyone," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. "On the one hand, the crude inventory buildup was quite strong, but the gasoline draw was also very prominent."
But growing concerns over Russia's standoff with Georgia and NATO grabbed the attention of most oil traders Thursday.
On Wednesday, Secretary of State Condoleezza Rice and her Polish counterpart signed a deal to build an American missile defense base in Poland. Last week, a top Russian general warned Poland was risking an attack, possibly a nuclear one, by developing the base.
JBC Energy in Vienna said the "political risk premium of oil prices" had widened to more than $10 a barrel, which could be attributed at least in part to the Russian angle.
Investors are also trying to anticipate the outcome of the next Organization of the Petroleum Exporting Countries meeting in early September, as supply concerns could rise further if members of the cartel decide to lower their output in response to slower demand. Venezuelan Oil Minister Rafael Ramirez said he might propose an output cut at the next OPEC meeting.
U.S. energy consultancy Cameron Hanover noted in its daily market report that some members of the oil group were "terrified of allowing Western countries to build any kind of cushion for the unexpected, because it has the potential to return prices to normal or sustainable economic levels" and interfere with OPEC's ability to keep building massive foreign currency reserves.
Oil prices have rebounded after falling about $35, or nearly a quarter, from their all-time trading record $147.27 on July 11. Many investors expect that high gasoline prices and slowing economic growth in the U.S., Europe and Japan will undermine global energy demand.
Prices were supported Thursday by a weaker dollar compared to the euro. A falling greenback encourages investors to seek commodities such as oil as a hedge against inflation and a weaker dollar.
"The slide in the dollar has taken some of the wind out of the bear's sail in the energy complex," said The Schork Report, edited by analyst and trader Stephen Schork.
In other Nymex trading, heating oil futures rose 17.75 cents to $3.3421 a gallon, while gasoline prices gained 15.15 cents to $3.0618 a gallon. Natural gas futures increased 27 cents to $8.355 per 1,000 cubic feet.
In London, October Brent crude rose $5.57 to $119.93 a barrel.
Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.
Oil jumps $6 on growing US-Russia tensions, sliding dollar, worries of OPEC output cut
NEW YORK (AP) -- Oil prices shot up $6 a barrel Thursday, rising to the highest level in over two weeks as escalating tensions with Russia stoked fears of a disruption of energy shipments to Western countries.
Crude's rally mimicked the wild price swings seen last month and have at least temporarily halted oil's slide back toward $100 a barrel. A weaker U.S. dollar and worries about tightening output from OPEC countries are also supporting prices.
Tensions with Russia about a deal between Washington and Poland to install a missile defense system in Eastern Europe -- seen as a threat by Moscow -- and the continued presence of Russian troops in Georgia contributed greatly to the bullish mood.
Light, sweet crude for October delivery jumped $6.32 to $121.88 a barrel on the New York Mercantile Exchange. It was crude's highest trading level since Aug. 4.
"The sellers are backing away for now," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill. "If military activity heats up again, pipeline flows into Europe could be disrupted and that would affect the United States as well."
The price jump came as retail gas prices continued to fall, shedding more than a penny overnight to a new national average of $3.702, according to auto club AAA, the Oil Price Information Service, and Wright Express. Prices have now fallen 10 percent from record highs above $4 a gallon set July 17, but the pace of the drop off could slow if oil holds onto Thursday's gains.
"This is probably about it in terms of a retail gas drop. We may be a few cents away from the August bottom," said Tom Kloza, publisher and chief analyst at the Oil Price Information Service in Wall, N.J.
Oil's jump came a day after the U.S. government report a huge rise in U.S. crude inventories. But other supplies were less abundant.
Gasoline inventories shrank by a larger-than-expected 6.2 million barrels to below-average levels in the week ended Aug. 15, the U.S. Energy Department's Energy Information Administration said Wednesday. Meanwhile, distillate inventories -- which include heating oil and diesel fuel -- rose by less than expected, the EIA said.
That was enough to offset a hefty 9.4 million barrel rise in U.S. crude stocks last week when the average analyst forecast had been for a 1.7 million barrel increase, according to energy information provider Platts.
"That report had something for everyone," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. "On the one hand, the crude inventory buildup was quite strong, but the gasoline draw was also very prominent."
But growing concerns over Russia's standoff with Georgia and NATO grabbed the attention of most oil traders Thursday.
On Wednesday, Secretary of State Condoleezza Rice and her Polish counterpart signed a deal to build an American missile defense base in Poland. Last week, a top Russian general warned Poland was risking an attack, possibly a nuclear one, by developing the base.
JBC Energy in Vienna said the "political risk premium of oil prices" had widened to more than $10 a barrel, which could be attributed at least in part to the Russian angle.
Investors are also trying to anticipate the outcome of the next Organization of the Petroleum Exporting Countries meeting in early September, as supply concerns could rise further if members of the cartel decide to lower their output in response to slower demand. Venezuelan Oil Minister Rafael Ramirez said he might propose an output cut at the next OPEC meeting.
U.S. energy consultancy Cameron Hanover noted in its daily market report that some members of the oil group were "terrified of allowing Western countries to build any kind of cushion for the unexpected, because it has the potential to return prices to normal or sustainable economic levels" and interfere with OPEC's ability to keep building massive foreign currency reserves.
Oil prices have rebounded after falling about $35, or nearly a quarter, from their all-time trading record $147.27 on July 11. Many investors expect that high gasoline prices and slowing economic growth in the U.S., Europe and Japan will undermine global energy demand.
Prices were supported Thursday by a weaker dollar compared to the euro. A falling greenback encourages investors to seek commodities such as oil as a hedge against inflation and a weaker dollar.
"The slide in the dollar has taken some of the wind out of the bear's sail in the energy complex," said The Schork Report, edited by analyst and trader Stephen Schork.
In other Nymex trading, heating oil futures rose 17.75 cents to $3.3421 a gallon, while gasoline prices gained 15.15 cents to $3.0618 a gallon. Natural gas futures increased 27 cents to $8.355 per 1,000 cubic feet.
In London, October Brent crude rose $5.57 to $119.93 a barrel.
Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.
Oil surges on global tensions and soft dollar
Thursday August 21, 11:27 am ET By Richard Valdmanis
NEW YORK (Reuters) - Oil prices rose 5 percent on Thursday, the biggest gain in more than two months, amid rising global tensions and a weak U.S. dollar.
U.S. crude gained $6.00, or 5.19 percent, to $121.56 a barrel by 11 a.m. EDT, the biggest percentage gain since June 6. London Brent crude climbed $6.11 to $120.47.
"There's a myriad of geopolitical factors rumbling in the background -- Russia, Iran," said Tony Machacek, broker at Bache Commodities Ltd. "Also, the dollar is weaker."
The United States and Poland signed a deal on Wednesday to station parts of a U.S. missile defense shield on Polish soil, drawing a sharp response from Russia, the world's second-largest oil exporter.
The pact comes as relations between Russia and the West have been strained by Moscow's military intervention in Georgia. The conflict there has disrupted the transit of Azeri oil through Georgia.
The spat adds to political factors that have supported oil prices in recent months, such as the dispute over Iran's nuclear program and repeated militant attacks on oil facilities in Nigeria.
International tension outweighed a U.S. government report that Wednesday showed crude inventories rose by 9.4 million barrels, the largest weekly increase since March 2001.
Oil has fallen from a record high of $147.27 a barrel reached last month on evidence that demand is slowing, but prices remain up about 20 percent so far this year and have climbed from below $20 in early 2002.
Also supporting the market was concern that Tropical Storm Fay might re-enter the Gulf of Mexico over the weekend, affecting oil refineries and offshore platforms.
Dealers were also concerned that the Organization of the Petroleum Exporting Countries and Saudi Arabia, its top producer, may decide to trim supply in a bid to stem a further price fall.
Saudi Arabia boosted oil output in July to 9.7 million barrels a day from 9.45 million bpd in June, far above the country's informal OPEC target. OPEC meets on September 9 to review output policy.
"As prices drop, Saudi Arabia may cut back on its recent increase in production, which could halt the most recent price decline," the U.S. Energy Information Administration said in its weekly review of the market.
(Additional reporting by Alex Lawler in London, Seng Li Peng in Singapore, editing by Matthew Lewis)
NEW YORK (Reuters) - Oil prices rose 5 percent on Thursday, the biggest gain in more than two months, amid rising global tensions and a weak U.S. dollar.
U.S. crude gained $6.00, or 5.19 percent, to $121.56 a barrel by 11 a.m. EDT, the biggest percentage gain since June 6. London Brent crude climbed $6.11 to $120.47.
"There's a myriad of geopolitical factors rumbling in the background -- Russia, Iran," said Tony Machacek, broker at Bache Commodities Ltd. "Also, the dollar is weaker."
The United States and Poland signed a deal on Wednesday to station parts of a U.S. missile defense shield on Polish soil, drawing a sharp response from Russia, the world's second-largest oil exporter.
The pact comes as relations between Russia and the West have been strained by Moscow's military intervention in Georgia. The conflict there has disrupted the transit of Azeri oil through Georgia.
The spat adds to political factors that have supported oil prices in recent months, such as the dispute over Iran's nuclear program and repeated militant attacks on oil facilities in Nigeria.
International tension outweighed a U.S. government report that Wednesday showed crude inventories rose by 9.4 million barrels, the largest weekly increase since March 2001.
Oil has fallen from a record high of $147.27 a barrel reached last month on evidence that demand is slowing, but prices remain up about 20 percent so far this year and have climbed from below $20 in early 2002.
Also supporting the market was concern that Tropical Storm Fay might re-enter the Gulf of Mexico over the weekend, affecting oil refineries and offshore platforms.
Dealers were also concerned that the Organization of the Petroleum Exporting Countries and Saudi Arabia, its top producer, may decide to trim supply in a bid to stem a further price fall.
Saudi Arabia boosted oil output in July to 9.7 million barrels a day from 9.45 million bpd in June, far above the country's informal OPEC target. OPEC meets on September 9 to review output policy.
"As prices drop, Saudi Arabia may cut back on its recent increase in production, which could halt the most recent price decline," the U.S. Energy Information Administration said in its weekly review of the market.
(Additional reporting by Alex Lawler in London, Seng Li Peng in Singapore, editing by Matthew Lewis)
Leading economic indicators fell sharply in July
Thursday August 21, 10:49 am ET By Ellen Simon, AP Business Writer
July's leading indicators fell sharply as building permits, stocks dropped, unemployment rose
NEW YORK (AP) -- A private business group's measure of the economy's health showed the largest drop in one year as stocks fell, new building permits declined and unemployment rose.
The New York-based Conference Board's said Thursday its monthly forecast of future economic activity fell 0.7 percent in July, far more than the consensus estimate of a 0.2 percent decline by Wall Street economists surveyed by Thomson/IFR.
The last time the index showed a drop this great was last August, when it fell by 1 percent.
Revised June data showed no change to the index, which has slipped 0.9 percent for the six months ending in July.
The decline was the steepest in the index this year. The largest drag on the index was the decline in building permits, followed in order by stock prices, rising unemployment claims, a tightened money supply and falling manufacturers' orders for consumer goods.
Interest rate spreads, consumer expectations and manufacturers' orders for capital goods all contributed to the index.
Stocks, which were down before the index's release, cut some of their losses. The Dow Jones industrial average was down 52.35 at 11,365.08. The Standard & Poor's 500 was down 4.45 at 1,270.09, and the Nasdaq Composite was down 18.64 at 2,370.44.
July's leading indicators fell sharply as building permits, stocks dropped, unemployment rose
NEW YORK (AP) -- A private business group's measure of the economy's health showed the largest drop in one year as stocks fell, new building permits declined and unemployment rose.
The New York-based Conference Board's said Thursday its monthly forecast of future economic activity fell 0.7 percent in July, far more than the consensus estimate of a 0.2 percent decline by Wall Street economists surveyed by Thomson/IFR.
The last time the index showed a drop this great was last August, when it fell by 1 percent.
Revised June data showed no change to the index, which has slipped 0.9 percent for the six months ending in July.
The decline was the steepest in the index this year. The largest drag on the index was the decline in building permits, followed in order by stock prices, rising unemployment claims, a tightened money supply and falling manufacturers' orders for consumer goods.
Interest rate spreads, consumer expectations and manufacturers' orders for capital goods all contributed to the index.
Stocks, which were down before the index's release, cut some of their losses. The Dow Jones industrial average was down 52.35 at 11,365.08. The Standard & Poor's 500 was down 4.45 at 1,270.09, and the Nasdaq Composite was down 18.64 at 2,370.44.
Tuesday, August 19, 2008
Housing starts and permits tumble in July
Tuesday August 19, 9:10 am ET
WASHINGTON (Reuters) - Home building projects started in July fell 11 percent to the lowest annual rate in more than 17 years, while building permits tumbled 17.7 percent, the Commerce Department reported on Tuesday.
The annual pace of housing starts at 965,000 slimly beat Wall Street's expectations of 960,000, but it was the lowest since a 921,000 unit rate in March 1991. In June, housing starts rose 10.4 percent, revised up from the previously reported 9.1 percent.
Building permits, an indicator of future construction, dropped to an annual rate of 937,000, well below the 970,000 analysts polled by Reuters had forecast.
The magnitude of the drop in permits was the biggest since a plunge of almost 24 percent in February 1990, while the number was the lowest since March this year, when they were 932,000.
Single family homes, which constitute the bulk of new housing, were especially weak. The annual unit rate of 641,000 single family homes started in July was the lowest since January 1991, when they were 604,000. Building permits were 584,000, the lowest since 523,000 in August 1982.
U.S. stocks extended their losses and U.S. Treasury bond prices pared their gains after the data were released.
In June, new home construction was boosted by a change in New York City building codes. But July's national numbers hinted that the United States may still be mired in a housing downturn.
"It can be seen as a payback in June from the building code change in New York City. We may see another decline in August," said Dana Saporta, economist at New York's Dresdner Kleinwort Securities LLC.
"The fundamentals in housing are still poor," Saporta added.
(Reporting by Lisa Lambert, Editing by Chizu Nomiyama)
WASHINGTON (Reuters) - Home building projects started in July fell 11 percent to the lowest annual rate in more than 17 years, while building permits tumbled 17.7 percent, the Commerce Department reported on Tuesday.
The annual pace of housing starts at 965,000 slimly beat Wall Street's expectations of 960,000, but it was the lowest since a 921,000 unit rate in March 1991. In June, housing starts rose 10.4 percent, revised up from the previously reported 9.1 percent.
Building permits, an indicator of future construction, dropped to an annual rate of 937,000, well below the 970,000 analysts polled by Reuters had forecast.
The magnitude of the drop in permits was the biggest since a plunge of almost 24 percent in February 1990, while the number was the lowest since March this year, when they were 932,000.
Single family homes, which constitute the bulk of new housing, were especially weak. The annual unit rate of 641,000 single family homes started in July was the lowest since January 1991, when they were 604,000. Building permits were 584,000, the lowest since 523,000 in August 1982.
U.S. stocks extended their losses and U.S. Treasury bond prices pared their gains after the data were released.
In June, new home construction was boosted by a change in New York City building codes. But July's national numbers hinted that the United States may still be mired in a housing downturn.
"It can be seen as a payback in June from the building code change in New York City. We may see another decline in August," said Dana Saporta, economist at New York's Dresdner Kleinwort Securities LLC.
"The fundamentals in housing are still poor," Saporta added.
(Reporting by Lisa Lambert, Editing by Chizu Nomiyama)
Home Depot's 2Q profit drops 24 percent
Tuesday August 19, 11:44 am ET By Ashley M. Heher, AP Business Writer
Home Depot says 2nd-quarter profit falls 24 percent, expects similar full-year drop
CHICAGO (AP) -- The Home Depot Inc. said Tuesday that its second-quarter profit sank 24 percent and reiterated its downbeat outlook for the year amid a weak housing market that shows no signs of recovery.
For the three-months ending Aug. 3, the nation's largest home improvement chain said its net income fell to $1.2 billion, or 71 cents per share. That's down from $1.59 billion, or 81 cents per share, during the same period last year.
Meanwhile, revenue slid 5.4 percent to $21 billion, down from $22.2 billion last year. And same-store sales, an important retail industry metric of sales at stores opened at least a year, fell 7.9 percent.
The results handily beat expectations as do-it-yourselfers began to take their hammers and paint brushes out of retirement. Analysts surveyed by Thomson Reuters had projected earnings of 61 cents per share on revenue of $20.58 billion.
Goldman Sachs analyst Matthew Fassler told investors in a research note that the better-than-expected results indicate a "reprieve" from an earlier slowdown by shoppers who postponed projects as the nation's housing market slows.
"These results confirm that the DIY market received a reprieve from some combination of better weather, fiscal stimulus, and a floor in demand," he wrote.
Still, the results paint a grim picture of the cost-conscious American consumer, and Home Depot shares fell 56 cents, or 2 percent, to $26.40 in midday trading.
The company said comparable sales were negative for each of the company's selling departments and the average spending per customer in a visit fell 1.2 percent to $57.58.
But a bright spot was basic repair jobs that are shoppers are undertaking, even as bigger-ticket purchases continue to fall, executives said.
"Customers are spending to maintain their homes," said Craig Menear, Home Depot's executive vice president of merchandising.
Amid so much economic uncertainty, Home Depot said it expects earnings per share from continuing operations to decline by 24 percent for the year. The company had said in May that it felt "more comfortable" that it would meet the low end of its full-year guidance for a drop of 19 percent to 24 percent in earnings per share, but did not elaborate.
The earnings per-share guidance does not include the company's charge related to the closing of 15 stores and its reduction of 50 stores from its future expansion plan, the company said.
Home Depot also projects that full-year sales should decline by 5 percent.
"As we look forward into the second half of the year, we see continued pressure on our markets," Chief Executive Frank Blake told investors during a conference call.
Home Depot's results come on the heels of better-than-expected second-quarter results from competitor Lowe's Cos. Inc.
The Mooresville, N.C.-based company said second-quarter profit fell nearly 8 percent, but managed to top Wall Street expectations. The company offered a weaker-than-expected outlook for the third quarter, but raised its guidance for the full year.
Home Depot says 2nd-quarter profit falls 24 percent, expects similar full-year drop
CHICAGO (AP) -- The Home Depot Inc. said Tuesday that its second-quarter profit sank 24 percent and reiterated its downbeat outlook for the year amid a weak housing market that shows no signs of recovery.
For the three-months ending Aug. 3, the nation's largest home improvement chain said its net income fell to $1.2 billion, or 71 cents per share. That's down from $1.59 billion, or 81 cents per share, during the same period last year.
Meanwhile, revenue slid 5.4 percent to $21 billion, down from $22.2 billion last year. And same-store sales, an important retail industry metric of sales at stores opened at least a year, fell 7.9 percent.
The results handily beat expectations as do-it-yourselfers began to take their hammers and paint brushes out of retirement. Analysts surveyed by Thomson Reuters had projected earnings of 61 cents per share on revenue of $20.58 billion.
Goldman Sachs analyst Matthew Fassler told investors in a research note that the better-than-expected results indicate a "reprieve" from an earlier slowdown by shoppers who postponed projects as the nation's housing market slows.
"These results confirm that the DIY market received a reprieve from some combination of better weather, fiscal stimulus, and a floor in demand," he wrote.
Still, the results paint a grim picture of the cost-conscious American consumer, and Home Depot shares fell 56 cents, or 2 percent, to $26.40 in midday trading.
The company said comparable sales were negative for each of the company's selling departments and the average spending per customer in a visit fell 1.2 percent to $57.58.
But a bright spot was basic repair jobs that are shoppers are undertaking, even as bigger-ticket purchases continue to fall, executives said.
"Customers are spending to maintain their homes," said Craig Menear, Home Depot's executive vice president of merchandising.
Amid so much economic uncertainty, Home Depot said it expects earnings per share from continuing operations to decline by 24 percent for the year. The company had said in May that it felt "more comfortable" that it would meet the low end of its full-year guidance for a drop of 19 percent to 24 percent in earnings per share, but did not elaborate.
The earnings per-share guidance does not include the company's charge related to the closing of 15 stores and its reduction of 50 stores from its future expansion plan, the company said.
Home Depot also projects that full-year sales should decline by 5 percent.
"As we look forward into the second half of the year, we see continued pressure on our markets," Chief Executive Frank Blake told investors during a conference call.
Home Depot's results come on the heels of better-than-expected second-quarter results from competitor Lowe's Cos. Inc.
The Mooresville, N.C.-based company said second-quarter profit fell nearly 8 percent, but managed to top Wall Street expectations. The company offered a weaker-than-expected outlook for the third quarter, but raised its guidance for the full year.
Oil fluctuates around $113 as storm threat eases
Tuesday August 19, 11:46 am ET By Stevenson Jacobs, AP Business Writer
Oil prices fluctuate around $113 a barrel as supply concerns over Tropical Storm Fay ease
NEW YORK (AP) -- Oil prices fluctuated Tuesday, hovering near $113 a barrel after the dollar weakened and Tropical Storm Fay missed offshore oil and gas installations in the Gulf of Mexico.
At the pump, retail gas prices continued to fall, suggesting that cash-strapped Americans are still cutting back on their driving. A gallon of regular slipped another penny overnight to a new national average of $3.73, almost 10 percent lower than record prices of $4.114 a gallon reached July 17, according to auto club AAA, the Oil Price Information Service and Wright Express.
Fay, the sixth named storm of the 2008 Atlantic hurricane season, swept over southwest Florida early Tuesday, bringing heavy rain and wind but staying well clear of oil and gas platforms scattered across the Gulf. The storm was moving to the north and was expected to gradually weaken during the day. Fay steamed through the Caribbean over the weekend and was blamed for at least 14 deaths in Haiti and the Dominican Republic.
Royal Dutch Shell PLC said the storm no longer threatened its oil facilities in the Gulf and that it had begun redeploying 425 evacuated workers.
Light, sweet crude for September delivery rose 40 cents to $113.27 in morning trading on the New York Mercantile Exchange, after alternating between positive and negative territory earlier in the day. The September contract expires Wednesday, adding to the volatility. On Monday, crude closed below $113 a barrel for the first time since May 1 as traders became assured that Fay wouldn't disrupt offshore oil production.
"We dodged a bullet with the storm so that's leading to some selling," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.
But other traders were buying oil contracts after the dollar weakened slightly against the euro. A falling greenback encourages buying among investors seeking commodities like oil as a hedge against inflation or weakness in the U.S. currency.
Still, analysts said the fact that even slightly bullish news such as the storm or ongoing tensions in Georgia didn't send prices significantly higher shows how much the market sentiment has changed from only a few weeks ago.
Oil prices have shed about $35, or 24 percent, from their all-time trading record $147.27 reached July 11 amid mounting evidence that a cooling global economy and high fuel costs are curtailing demand for energy.
"If this storm had happened a couple of weeks ago, it would have driven prices higher. The momentum of this market is definitely on the downside as people realize that demand is very soft," Flynn said.
Olivier Jakob of Petromatrix in Switzerland, however, said it was too early to assert that oil prices had reached a bottom, "especially since there is a clear lack of buying momentum."
Regarding oil fundamentals, Jakob said it was worth keeping an eye on how China's import of oil products will develop after the buildup of stocks for the Beijing Olympics. Reports of lower demand there could put further downward pressure on prices.
A bearish forecast on Friday from the Organization of the Petroleum Exporting Countries of lower global oil demand growth also helped keep oil prices in check.
In its monthly report, OPEC forecast that the world's daily appetite for oil this year would grow by 1 million barrels, a reduction of 30,000 barrels a day from its previous estimate. It predicted growth for 2009 will be 900,000 barrels a day, the lowest growth in world demand since 2002.
Analysts said uncertainty over the conflict between Russia and Georgia will support oil pricing. Russia has begun withdrawing troops, but U.S. officials said Moscow has positioned missile launchers in the separatist South Ossetia province.
In other Nymex trading, heating oil futures rose 1.91 cents to $3.1039 a gallon, while gasoline prices rose 1.08 cents to $2.826 a gallon. Natural gas futures added 12 cents to $8.008 per 1,000 cubic feet.
In London, October Brent crude rose 13 cents to $112.05 a barrel.
Associated Press writers Pablo Gorondi in Budapest, Hungary and Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.
Oil prices fluctuate around $113 a barrel as supply concerns over Tropical Storm Fay ease
NEW YORK (AP) -- Oil prices fluctuated Tuesday, hovering near $113 a barrel after the dollar weakened and Tropical Storm Fay missed offshore oil and gas installations in the Gulf of Mexico.
At the pump, retail gas prices continued to fall, suggesting that cash-strapped Americans are still cutting back on their driving. A gallon of regular slipped another penny overnight to a new national average of $3.73, almost 10 percent lower than record prices of $4.114 a gallon reached July 17, according to auto club AAA, the Oil Price Information Service and Wright Express.
Fay, the sixth named storm of the 2008 Atlantic hurricane season, swept over southwest Florida early Tuesday, bringing heavy rain and wind but staying well clear of oil and gas platforms scattered across the Gulf. The storm was moving to the north and was expected to gradually weaken during the day. Fay steamed through the Caribbean over the weekend and was blamed for at least 14 deaths in Haiti and the Dominican Republic.
Royal Dutch Shell PLC said the storm no longer threatened its oil facilities in the Gulf and that it had begun redeploying 425 evacuated workers.
Light, sweet crude for September delivery rose 40 cents to $113.27 in morning trading on the New York Mercantile Exchange, after alternating between positive and negative territory earlier in the day. The September contract expires Wednesday, adding to the volatility. On Monday, crude closed below $113 a barrel for the first time since May 1 as traders became assured that Fay wouldn't disrupt offshore oil production.
"We dodged a bullet with the storm so that's leading to some selling," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.
But other traders were buying oil contracts after the dollar weakened slightly against the euro. A falling greenback encourages buying among investors seeking commodities like oil as a hedge against inflation or weakness in the U.S. currency.
Still, analysts said the fact that even slightly bullish news such as the storm or ongoing tensions in Georgia didn't send prices significantly higher shows how much the market sentiment has changed from only a few weeks ago.
Oil prices have shed about $35, or 24 percent, from their all-time trading record $147.27 reached July 11 amid mounting evidence that a cooling global economy and high fuel costs are curtailing demand for energy.
"If this storm had happened a couple of weeks ago, it would have driven prices higher. The momentum of this market is definitely on the downside as people realize that demand is very soft," Flynn said.
Olivier Jakob of Petromatrix in Switzerland, however, said it was too early to assert that oil prices had reached a bottom, "especially since there is a clear lack of buying momentum."
Regarding oil fundamentals, Jakob said it was worth keeping an eye on how China's import of oil products will develop after the buildup of stocks for the Beijing Olympics. Reports of lower demand there could put further downward pressure on prices.
A bearish forecast on Friday from the Organization of the Petroleum Exporting Countries of lower global oil demand growth also helped keep oil prices in check.
In its monthly report, OPEC forecast that the world's daily appetite for oil this year would grow by 1 million barrels, a reduction of 30,000 barrels a day from its previous estimate. It predicted growth for 2009 will be 900,000 barrels a day, the lowest growth in world demand since 2002.
Analysts said uncertainty over the conflict between Russia and Georgia will support oil pricing. Russia has begun withdrawing troops, but U.S. officials said Moscow has positioned missile launchers in the separatist South Ossetia province.
In other Nymex trading, heating oil futures rose 1.91 cents to $3.1039 a gallon, while gasoline prices rose 1.08 cents to $2.826 a gallon. Natural gas futures added 12 cents to $8.008 per 1,000 cubic feet.
In London, October Brent crude rose 13 cents to $112.05 a barrel.
Associated Press writers Pablo Gorondi in Budapest, Hungary and Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.
Wholesale prices rising at fastest pace since 1981
Tuesday August 19, 11:15 am ET By Martin Crutsinger, AP Economics Writer
Wholesale inflation surged by 1.2 percent in July, more than double what had been expected
WASHINGTON (AP) -- Wholesale inflation surged in July, leaving prices for the past year rising at the fastest pace in 27 years, according to government data released Tuesday.
The Labor Department reported that wholesale prices shot up 1.2 percent in July, pushed higher by rising costs for energy, motor vehicles and other products. The increase was more than twice the 0.5 percent gain that economists expected.
Core prices, which exclude food and energy, rose 0.7 percent. That increase was the biggest since November 2006 and more than triple the 0.2 percent rise in core prices that had been expected.
In other economic news, the Commerce Department reported that housing construction fell in July to the lowest pace in more than 17 years. Builders broke ground on 965,000 housing units at a seasonally adjusted annual rate last month -- the weakest showing since March 1991 -- as the housing industry continues to struggle with falling sales and rising mortgage foreclosures.
The bad news on wholesale prices followed a report last week that consumer prices shot up by 0.8 percent in July, leaving consumer inflation rising at the fastest pace since 1981.
The July price pressures reflected in part the big surge in energy costs during the month that pushed crude oil prices to a record of $147.27 per barrel and sent gasoline pump prices to an all-time high of $4.11 per gallon.
Crude oil prices have fallen by more than $30 per barrel since then, raising hopes that the surge in inflation will soon abate.
However, the price spikes in a number of areas seen in July raised concerns that the prolonged surge in energy prices was beginning to show up more broadly throughout the economy.
Sal Guatieri, an economist at BMO Capital Markets, said he believed inflation at both the consumer and wholesale levels will remain high for another month or so but then start to decline, reflecting the large decreases already seen in crude oil and other commodities.
"A firmer dollar, retreating commodity prices and continued economic weakness should damp inflation by the fall," he said.
Such a development would put the Federal Reserve in a severe bind. The central bank would like to keep interest rates low to give a boost to the badly lagging economy, but Fed officials may feel pressured to start raising rates in an effort to make sure inflation does not get out of control.
For July, wholesale energy prices jumped by 3.1 percent following a 6 percent gain in June. That increase reflected big jumps in the price of natural gas, home heating oil and liquefied petroleum gas, which offset a 0.2 percent dip in gasoline costs.
Food prices rose by 0.3 percent in July after a 1.5 percent surge in June. Beef prices jumped by 7.4 percent, the biggest increase in nearly four years. Milk prices shot up by 5 percent, the biggest gain in a year, while soft drink prices rose by 2.4 percent, the largest increase in four years.
Excluding energy and food, the 0.7 percent rise in core inflation reflected big gains in the prices of passenger cars and light trucks, pharmaceutical preparations and plastic products.
Wholesale inflation surged by 1.2 percent in July, more than double what had been expected
WASHINGTON (AP) -- Wholesale inflation surged in July, leaving prices for the past year rising at the fastest pace in 27 years, according to government data released Tuesday.
The Labor Department reported that wholesale prices shot up 1.2 percent in July, pushed higher by rising costs for energy, motor vehicles and other products. The increase was more than twice the 0.5 percent gain that economists expected.
Core prices, which exclude food and energy, rose 0.7 percent. That increase was the biggest since November 2006 and more than triple the 0.2 percent rise in core prices that had been expected.
In other economic news, the Commerce Department reported that housing construction fell in July to the lowest pace in more than 17 years. Builders broke ground on 965,000 housing units at a seasonally adjusted annual rate last month -- the weakest showing since March 1991 -- as the housing industry continues to struggle with falling sales and rising mortgage foreclosures.
The bad news on wholesale prices followed a report last week that consumer prices shot up by 0.8 percent in July, leaving consumer inflation rising at the fastest pace since 1981.
The July price pressures reflected in part the big surge in energy costs during the month that pushed crude oil prices to a record of $147.27 per barrel and sent gasoline pump prices to an all-time high of $4.11 per gallon.
Crude oil prices have fallen by more than $30 per barrel since then, raising hopes that the surge in inflation will soon abate.
However, the price spikes in a number of areas seen in July raised concerns that the prolonged surge in energy prices was beginning to show up more broadly throughout the economy.
Sal Guatieri, an economist at BMO Capital Markets, said he believed inflation at both the consumer and wholesale levels will remain high for another month or so but then start to decline, reflecting the large decreases already seen in crude oil and other commodities.
"A firmer dollar, retreating commodity prices and continued economic weakness should damp inflation by the fall," he said.
Such a development would put the Federal Reserve in a severe bind. The central bank would like to keep interest rates low to give a boost to the badly lagging economy, but Fed officials may feel pressured to start raising rates in an effort to make sure inflation does not get out of control.
For July, wholesale energy prices jumped by 3.1 percent following a 6 percent gain in June. That increase reflected big jumps in the price of natural gas, home heating oil and liquefied petroleum gas, which offset a 0.2 percent dip in gasoline costs.
Food prices rose by 0.3 percent in July after a 1.5 percent surge in June. Beef prices jumped by 7.4 percent, the biggest increase in nearly four years. Milk prices shot up by 5 percent, the biggest gain in a year, while soft drink prices rose by 2.4 percent, the largest increase in four years.
Excluding energy and food, the 0.7 percent rise in core inflation reflected big gains in the prices of passenger cars and light trucks, pharmaceutical preparations and plastic products.
Stocks fall on inflation data, financial worries
Tuesday August 19, 11:25 am ET By Madlen Read, AP Business Writer
Stocks drop following bigger-than-expected jump in wholesale inflation; bank worries remain
NEW YORK (AP) -- Stocks fell sharply Tuesday after a hefty jump in wholesale inflation and a drop in new home construction gave investors more reasons to believe the economy won't rebound anytime soon. The Dow Jones industrial average dropped by more than 100 points.
The Labor Department said its Producer Price Index rose by 1.2 percent in July, more than double the expected rate. The increase means prices have risen in the past 12 months at the fastest pace in 27 years.
The data also showed that core wholesale inflation, which excludes food and energy prices, rose 0.7 percent -- the biggest increase since November 2006 and more than triple the 0.2 percent rise in core prices that had been expected.
"Maybe investors were hoping to shrug off the challenges of high commodity prices and inflation," said Jack A. Ablin, chief investment officer at Harris Private Bank. "But now we find out that perhaps the inflation situation is worse than we thought."
A weak report on new home construction did little to quell investors' worries. The Commerce Department said July housing starts fell to an annual rate of 965,000 units -- higher than analysts predicted, but the lowest level in more than 17 years nonetheless.
Tuesday's pair of economic reports indicated not only that the financial sector is struggling to right itself after billions of dollars in credit losses, but also that the rest of the economy is still showing significant signs of stress.
The weakness in housing has not only imperiled home builders and suppliers, but has left financial companies reeling over how to cope with soured mortgage debt. Lehman Brothers Holdings Inc., for one, came under pressure Tuesday after a JPMorgan Chase & Co. analyst estimated that Lehman will have to write down its investments during the third quarter by $4 billion.
In late morning trading, the Dow Jones industrial average fell 119.69, or 1.04 percent, to 11,359.70.
Broader stock indicators also dropped. The Standard & Poor's 500 index fell 11.56, or 0.90 percent, to 1,267.04, and the Nasdaq composite index fell 22.87, or 0.95 percent, to 2,394.11.
Bond prices slipped. While investors often seek the shelter of government debt when bad news arrives, inflation is unwelcome for bonds because it devalues their fixed returns. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.83 percent from 3.82 percent late Monday.
The dollar was mixed against other major currencies, while gold prices fell.
One of the few bright spots for Wall Street has been the price of oil. Crude has fallen substantially from its July record above $147 a barrel, and fell 32 cents to $112.55 a barrel Tuesday on the New York Mercantile Exchange.
Lehman fell $1.26, or 8.3 percent, to $13.77. There have been reports swirling that the investment bank might have to sell one of its businesses to raise cash.
Retailers reported mixed quarterly results, adding to investors' uncertainty about the economy.
Home Depot Inc. reported a 24 percent decline in its second-quarter earnings but topped Wall Street's expectations. The nation's largest home improvement retailer reiterated its forecast for the year. Shares dipped 50 cents to $26.46.
Target Corp. said its second-quarter earnings fell 7.5 percent but beat forecasts despite anemic sales. Shares fell 22 cents to $49.83.
And Saks Inc. reported a wider-than-expected loss in the second quarter as its affluent shoppers cut back on apparel. The luxury goods retailer also issued a downbeat forecast for the year. Shares dropped $1.42, or 13 percent, to $9.80.
The Russell 2000 index of smaller companies fell 9.45, or 1.27 percent, to 732.52.
Declining issues outnumbered advancers by about 3 to 1 on the New York Stock Exchange, where volume came to 270.8 million shares.
Overseas, Japan's Nikkei stock average fell 2.28 percent. In afternoon trading, Britain's FTSE 100 fell 2.10 percent, Germany's DAX index lost 2.08 percent, and France's CAC-40 fell 2.27 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Stocks drop following bigger-than-expected jump in wholesale inflation; bank worries remain
NEW YORK (AP) -- Stocks fell sharply Tuesday after a hefty jump in wholesale inflation and a drop in new home construction gave investors more reasons to believe the economy won't rebound anytime soon. The Dow Jones industrial average dropped by more than 100 points.
The Labor Department said its Producer Price Index rose by 1.2 percent in July, more than double the expected rate. The increase means prices have risen in the past 12 months at the fastest pace in 27 years.
The data also showed that core wholesale inflation, which excludes food and energy prices, rose 0.7 percent -- the biggest increase since November 2006 and more than triple the 0.2 percent rise in core prices that had been expected.
"Maybe investors were hoping to shrug off the challenges of high commodity prices and inflation," said Jack A. Ablin, chief investment officer at Harris Private Bank. "But now we find out that perhaps the inflation situation is worse than we thought."
A weak report on new home construction did little to quell investors' worries. The Commerce Department said July housing starts fell to an annual rate of 965,000 units -- higher than analysts predicted, but the lowest level in more than 17 years nonetheless.
Tuesday's pair of economic reports indicated not only that the financial sector is struggling to right itself after billions of dollars in credit losses, but also that the rest of the economy is still showing significant signs of stress.
The weakness in housing has not only imperiled home builders and suppliers, but has left financial companies reeling over how to cope with soured mortgage debt. Lehman Brothers Holdings Inc., for one, came under pressure Tuesday after a JPMorgan Chase & Co. analyst estimated that Lehman will have to write down its investments during the third quarter by $4 billion.
In late morning trading, the Dow Jones industrial average fell 119.69, or 1.04 percent, to 11,359.70.
Broader stock indicators also dropped. The Standard & Poor's 500 index fell 11.56, or 0.90 percent, to 1,267.04, and the Nasdaq composite index fell 22.87, or 0.95 percent, to 2,394.11.
Bond prices slipped. While investors often seek the shelter of government debt when bad news arrives, inflation is unwelcome for bonds because it devalues their fixed returns. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.83 percent from 3.82 percent late Monday.
The dollar was mixed against other major currencies, while gold prices fell.
One of the few bright spots for Wall Street has been the price of oil. Crude has fallen substantially from its July record above $147 a barrel, and fell 32 cents to $112.55 a barrel Tuesday on the New York Mercantile Exchange.
Lehman fell $1.26, or 8.3 percent, to $13.77. There have been reports swirling that the investment bank might have to sell one of its businesses to raise cash.
Retailers reported mixed quarterly results, adding to investors' uncertainty about the economy.
Home Depot Inc. reported a 24 percent decline in its second-quarter earnings but topped Wall Street's expectations. The nation's largest home improvement retailer reiterated its forecast for the year. Shares dipped 50 cents to $26.46.
Target Corp. said its second-quarter earnings fell 7.5 percent but beat forecasts despite anemic sales. Shares fell 22 cents to $49.83.
And Saks Inc. reported a wider-than-expected loss in the second quarter as its affluent shoppers cut back on apparel. The luxury goods retailer also issued a downbeat forecast for the year. Shares dropped $1.42, or 13 percent, to $9.80.
The Russell 2000 index of smaller companies fell 9.45, or 1.27 percent, to 732.52.
Declining issues outnumbered advancers by about 3 to 1 on the New York Stock Exchange, where volume came to 270.8 million shares.
Overseas, Japan's Nikkei stock average fell 2.28 percent. In afternoon trading, Britain's FTSE 100 fell 2.10 percent, Germany's DAX index lost 2.08 percent, and France's CAC-40 fell 2.27 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Friday, August 15, 2008
J.C. Penney's 2Q profits fall 36 percent
Friday August 15, 9:21 am ET By Anne D'Innocenzio, AP Business Writer
J.C. Penney's 2Q profits fall 36 percent amid tough economy
NEW YORK (AP) -- J.C. Penney Co. reported a 36 percent drop in second-quarter profits Friday and issued a downbeat outlook for the current quarter as shoppers cut back on clothing spending in a tough economy.
The Plano, Texas-based department store chain said it earned $117 million, or 52 cents per share, in the three-month period ended Aug. 2, compared with $182 million, or 81 cents per share, a year earlier.
Total net sales fell 2.5 percent to $4.28 billion from $4.39 billion. Same-store sales, or sales at stores opened at least a year, fell 4.3 percent. Same-store sales are considered a key indicator of a retailer's health.
Analysts polled by Thomson Reuters expected earnings of 50 cents per share on revenue of $4.28 billion.
Penney said it expects third-quarter earnings to be in the range of 70 cents to 75 cents per share. A poll by Thomson Reuters projects 76 cents per share. The company also predicted that total sales would drop by a low-single digit percentage and that same-store sales would drop in the mid-single digits in the same period.
"In this difficult consumer environment, we have continued to focus on tightly controlling all aspects of our business, and our second-quarter results show the benefits of our approach," said Myron "Mike" Ullman, chairman and chief executive, in a statement.
The company reported that comparable-store inventory levels at the end of the second quarter were below last year, and it remains on track for total inventory to be below 2007 levels by the end of the back-to-school season.
Penney and other apparel chains have been hard hit in a challenging economy as customers, aiming to save money for gas and food, focus their buying on necessities and shop at discounters and warehouse clubs that offer a breadth of merchandise. High-end department store chain Nordstrom Inc. reported a 21 percent drop in second-quarter profit on Thursday and cut its full-year forecast. Meanwhile, Kohl's reported a 12 percent drop in profits but upgraded its full-year outlook to reflect stricter inventory control that boosted profit margins.
In response to the slowing economy, Penney announced in June that it would further slow the pace of new department store openings and cut capital spending next year because of the weak economy. It now plans 20 new or relocated stores next year, down from the 36 it expects to open in 2008. Penney had once planned 50 new stores a year through 2011.
Meanwhile, Penney is expanding its repertoire of exclusive offerings. For the back-to-school season, it introduced six new lines aimed at teens and young adults, compared with only one last year. Earlier this year, Penney unveiled American Living, an exclusive collection that is part of an alliance with Polo Ralph Lauren Corp. The collection is the biggest brand launch in Penney's history. Ullman noted in a statement that the back-to-school launches had "good initial customer response."
J.C. Penney's 2Q profits fall 36 percent amid tough economy
NEW YORK (AP) -- J.C. Penney Co. reported a 36 percent drop in second-quarter profits Friday and issued a downbeat outlook for the current quarter as shoppers cut back on clothing spending in a tough economy.
The Plano, Texas-based department store chain said it earned $117 million, or 52 cents per share, in the three-month period ended Aug. 2, compared with $182 million, or 81 cents per share, a year earlier.
Total net sales fell 2.5 percent to $4.28 billion from $4.39 billion. Same-store sales, or sales at stores opened at least a year, fell 4.3 percent. Same-store sales are considered a key indicator of a retailer's health.
Analysts polled by Thomson Reuters expected earnings of 50 cents per share on revenue of $4.28 billion.
Penney said it expects third-quarter earnings to be in the range of 70 cents to 75 cents per share. A poll by Thomson Reuters projects 76 cents per share. The company also predicted that total sales would drop by a low-single digit percentage and that same-store sales would drop in the mid-single digits in the same period.
"In this difficult consumer environment, we have continued to focus on tightly controlling all aspects of our business, and our second-quarter results show the benefits of our approach," said Myron "Mike" Ullman, chairman and chief executive, in a statement.
The company reported that comparable-store inventory levels at the end of the second quarter were below last year, and it remains on track for total inventory to be below 2007 levels by the end of the back-to-school season.
Penney and other apparel chains have been hard hit in a challenging economy as customers, aiming to save money for gas and food, focus their buying on necessities and shop at discounters and warehouse clubs that offer a breadth of merchandise. High-end department store chain Nordstrom Inc. reported a 21 percent drop in second-quarter profit on Thursday and cut its full-year forecast. Meanwhile, Kohl's reported a 12 percent drop in profits but upgraded its full-year outlook to reflect stricter inventory control that boosted profit margins.
In response to the slowing economy, Penney announced in June that it would further slow the pace of new department store openings and cut capital spending next year because of the weak economy. It now plans 20 new or relocated stores next year, down from the 36 it expects to open in 2008. Penney had once planned 50 new stores a year through 2011.
Meanwhile, Penney is expanding its repertoire of exclusive offerings. For the back-to-school season, it introduced six new lines aimed at teens and young adults, compared with only one last year. Earlier this year, Penney unveiled American Living, an exclusive collection that is part of an alliance with Polo Ralph Lauren Corp. The collection is the biggest brand launch in Penney's history. Ullman noted in a statement that the back-to-school launches had "good initial customer response."
Industrial output up 0.2 percent in July
Friday August 15, 12:28 pm ET By Martin Crutsinger, AP Economics Writer
July industrial output rose by a better-than-expected 0.2 percent despite utility decline
WASHINGTON (AP) -- Industrial output rose in July at a slightly better pace than expected as a further rebound in the auto industry offset a big plunge in output at the nation's utilities.
The Federal Reserve reported Friday that industrial production edged up 0.2 percent last month. That was half the pace of the 0.4 percent gain in June, but it did surpass analysts' expectations for flat production in July.
The increase reflected a 0.4 percent gain in output at manufacturing plants. Motor vehicles and parts showed the biggest increase in manufacturing, advancing for a third straight month.
These gains were not seen as signaling a sustained rebound, however, given the problems facing the auto industry this year. Instead, the rebound in auto activity was viewed as a temporary improvement because a strike ended at parts supplier American Axle.
Even with the recent gains, production at auto plants remained 10.4 percent below where it was a year ago as automakers struggle with slumping demand due to the weak economy and the big spike in gasoline prices, which has hurt sales of their once-popular sport utility vehicles.
The modest increases in June and July production had followed three straight monthly declines. The manufacturing sector has been battered by the prolonged slump in housing and the multiple problems in the auto industry. Many economists viewed the slight strength in the past two months as temporary given what's ailing the broader economy.
"Unfortunately, housing activity continues to worsen, job losses continue, inflation is rampant, credit is more difficult to obtain and firms remain cautious about capital investments," said Daniel Meckstroth, chief economist for the Manufacturers Alliance/MAPI. "We think manufacturing will remain in a slow, shallow, downward trend until early 2009."
Other analysts noted the industries that did well in July were for the most part connected to exports, which have been booming this year as declines in the dollar have boosted the competitiveness of U.S. products in foreign markets.
"Without the lifeline from the rest of the world, the manufacturing picture would be a lot darker," said Nariman Behravesh, chief economist at Global Insight, a Lexington, Mass., forecasting firm.
The 0.4 percent increase in manufacturing helped to offset a big 1.9 percent drop in output at utilities, a decline which followed a 2.3 percent surge the previous month. Both changes were seen as weather-related.
The big June jump came from hotter-than-normal weather requiring increased electricity production. The decline in July reflected a return to more normal weather which meant a drop in utility output compared to the previous month.
Output in the mining sector rose a strong 0.9 percent, matching the increase of the previous month. The gains in this sector have been paced by strong activity in oil and natural gas production.
With all the changes, the nation's factories, mines and utilities operated at 79.9 percent of capacity in July, up slightly from June when the operating rate was 79.8 percent of capacity. That level remained below the average operating rate of 81 percent seen over the last 25 years.
While the surge in U.S. export sales has been a bright spot, there is concern that this boom may not last given spreading weakness in major overseas markets in Europe and Japan.
July industrial output rose by a better-than-expected 0.2 percent despite utility decline
WASHINGTON (AP) -- Industrial output rose in July at a slightly better pace than expected as a further rebound in the auto industry offset a big plunge in output at the nation's utilities.
The Federal Reserve reported Friday that industrial production edged up 0.2 percent last month. That was half the pace of the 0.4 percent gain in June, but it did surpass analysts' expectations for flat production in July.
The increase reflected a 0.4 percent gain in output at manufacturing plants. Motor vehicles and parts showed the biggest increase in manufacturing, advancing for a third straight month.
These gains were not seen as signaling a sustained rebound, however, given the problems facing the auto industry this year. Instead, the rebound in auto activity was viewed as a temporary improvement because a strike ended at parts supplier American Axle.
Even with the recent gains, production at auto plants remained 10.4 percent below where it was a year ago as automakers struggle with slumping demand due to the weak economy and the big spike in gasoline prices, which has hurt sales of their once-popular sport utility vehicles.
The modest increases in June and July production had followed three straight monthly declines. The manufacturing sector has been battered by the prolonged slump in housing and the multiple problems in the auto industry. Many economists viewed the slight strength in the past two months as temporary given what's ailing the broader economy.
"Unfortunately, housing activity continues to worsen, job losses continue, inflation is rampant, credit is more difficult to obtain and firms remain cautious about capital investments," said Daniel Meckstroth, chief economist for the Manufacturers Alliance/MAPI. "We think manufacturing will remain in a slow, shallow, downward trend until early 2009."
Other analysts noted the industries that did well in July were for the most part connected to exports, which have been booming this year as declines in the dollar have boosted the competitiveness of U.S. products in foreign markets.
"Without the lifeline from the rest of the world, the manufacturing picture would be a lot darker," said Nariman Behravesh, chief economist at Global Insight, a Lexington, Mass., forecasting firm.
The 0.4 percent increase in manufacturing helped to offset a big 1.9 percent drop in output at utilities, a decline which followed a 2.3 percent surge the previous month. Both changes were seen as weather-related.
The big June jump came from hotter-than-normal weather requiring increased electricity production. The decline in July reflected a return to more normal weather which meant a drop in utility output compared to the previous month.
Output in the mining sector rose a strong 0.9 percent, matching the increase of the previous month. The gains in this sector have been paced by strong activity in oil and natural gas production.
With all the changes, the nation's factories, mines and utilities operated at 79.9 percent of capacity in July, up slightly from June when the operating rate was 79.8 percent of capacity. That level remained below the average operating rate of 81 percent seen over the last 25 years.
While the surge in U.S. export sales has been a bright spot, there is concern that this boom may not last given spreading weakness in major overseas markets in Europe and Japan.
Merrill facing NY lawsuit over securities sale
Friday August 15, 3:14 pm ET By Stephen Bernard, AP Business Writer
NY AG to file lawsuit against Merrill Lynch for sale of securities; Wachovia settles case
NEW YORK (AP) -- New York Attorney General Andrew Cuomo said Friday he sent a letter to Merrill Lynch & Co. notifying the investment bank that his office will file suit against it imminently as part of an investigation into the collapse of the auction-rate securities market.
"We have been trying to resolve the matter," with Merrill, Cuomo said during a conference call with reporters. Cuomo said he has not been able to reach a satisfactory agreement with the bank.
The letter sent to Merrill, which was given to reporters by Cuomo's office, is similar to one Citigroup Inc. received before settling with the attorney general. Cuomo is one of several regulators investigating whether financial companies misled investors in the auction-rate securities market; officials from several other states and the Securities and Exchange Commission have also been involved in negotiations with the big banks.
Merrill said in a statement it was surprised to receive a letter about potential legal action, noting it has held discussions with regulators since it announced a voluntary repurchase plan.
"We anticipated further talks," Merrill said in the statement.
The expected lawsuit comes a week after Merrill said it would voluntarily repurchase auction-rate securities from customers. Merrill said it would buy back securities between Jan. 15, 2009 and Jan. 15, 2010. The bank said the repurchase plan would likely affect 30,000 clients holdings about $10 billion in the securities.
The attorney general's office called the bank's voluntary buyback plan "woefully inadequate," according to the letter sent to Merrill. The letter said the attorney general is still open to reaching a settlement with Merrill, assuming the bank meets similar provisions agreed upon by other banks reaching settlements.
Cuomo said his office is investigating about 25 financial firms that were involved in selling the securities. The investigation includes Goldman Sachs Group Inc. and other underwriters of the securities as well as retail brokers, Cuomo said.
"We've had discussions with them," Cuomo said of Goldman Sachs. Cuomo's office has targeted the financial firms with the largest portfolios of auction-rate securities because settlements with those companies will affect the most customers.
Earlier Friday, Wachovia Corp. became the fifth bank to settle as part of the investigation; Wachovia agreed to buy back $8.5 billion of the securities at face value from investors. The Charlotte, N.C.-based bank will also pay $50 million in fines to be distributed among states. The fines will be distributed to states based on the amount of securities sold to investors in each state.
Over the past eight days, Citigroup, UBS AG, JPMorgan Chase & Co. and Morgan Stanley agreed to repurchase a combined $32.6 billion in auction-rate securities and will pay fines totaling $310 million.
Nearly 150,000 customers have been affected by the five settlements.
The auction-rate securities market involved investors buying and selling instruments that resembled corporate debt, except the interest rates were reset at regular auctions, some as frequently as once a week. A number of companies and retail clients invested in the securities because they could treat their holdings almost like cash.
The bond-like investments were widely held by many institutional and individual investors and were seen as highly liquid, money market-like investments. However the market for them collapsed in February amid the downturn in the broader credit markets.
Regulators have been investigating the collapse in the market to determine who was responsible for its demise and whether banks knowingly misrepresented the safety of the securities when selling them to investors.
Like the other banks that have reached agreements with regulators, Wachovia will buy back all auction-rate securities from retail customers, charities and small businesses. It will buy back those securities by Nov. 28. Wachovia will also reimburse customers who sold securities at a loss after the market collapsed in February.
Wachovia will also repurchase securities from institutional shareholders by the end of June 2009. Wachovia neither acknowledged or denied any wrongdoing as part of the settlement.
These settlements come amid a time when banks have reported billions of dollars in losses from other investments because of deterioration in credit markets.
Banks have been forced to cut the value of mortgage-backed securities and other investments by more than $300 billion over the past year and added billions of additional dollars to reserves to cover likely loan losses.
Those losses have forced some banks to raise new capital to shore up their balance sheets.
Losses from the auction-rate securities are likely to be smaller than those from mortgage-backed securities.
UBS said it will take a charge of about $900 million on a pretax basis -- including its $150 million fine -- to buy back $18.6 billion in auction-rate securities.
Citigroup said it will take a pretax charge of about $500 million because of its settlement to repurchase $7 billion in the securities.
NY AG to file lawsuit against Merrill Lynch for sale of securities; Wachovia settles case
NEW YORK (AP) -- New York Attorney General Andrew Cuomo said Friday he sent a letter to Merrill Lynch & Co. notifying the investment bank that his office will file suit against it imminently as part of an investigation into the collapse of the auction-rate securities market.
"We have been trying to resolve the matter," with Merrill, Cuomo said during a conference call with reporters. Cuomo said he has not been able to reach a satisfactory agreement with the bank.
The letter sent to Merrill, which was given to reporters by Cuomo's office, is similar to one Citigroup Inc. received before settling with the attorney general. Cuomo is one of several regulators investigating whether financial companies misled investors in the auction-rate securities market; officials from several other states and the Securities and Exchange Commission have also been involved in negotiations with the big banks.
Merrill said in a statement it was surprised to receive a letter about potential legal action, noting it has held discussions with regulators since it announced a voluntary repurchase plan.
"We anticipated further talks," Merrill said in the statement.
The expected lawsuit comes a week after Merrill said it would voluntarily repurchase auction-rate securities from customers. Merrill said it would buy back securities between Jan. 15, 2009 and Jan. 15, 2010. The bank said the repurchase plan would likely affect 30,000 clients holdings about $10 billion in the securities.
The attorney general's office called the bank's voluntary buyback plan "woefully inadequate," according to the letter sent to Merrill. The letter said the attorney general is still open to reaching a settlement with Merrill, assuming the bank meets similar provisions agreed upon by other banks reaching settlements.
Cuomo said his office is investigating about 25 financial firms that were involved in selling the securities. The investigation includes Goldman Sachs Group Inc. and other underwriters of the securities as well as retail brokers, Cuomo said.
"We've had discussions with them," Cuomo said of Goldman Sachs. Cuomo's office has targeted the financial firms with the largest portfolios of auction-rate securities because settlements with those companies will affect the most customers.
Earlier Friday, Wachovia Corp. became the fifth bank to settle as part of the investigation; Wachovia agreed to buy back $8.5 billion of the securities at face value from investors. The Charlotte, N.C.-based bank will also pay $50 million in fines to be distributed among states. The fines will be distributed to states based on the amount of securities sold to investors in each state.
Over the past eight days, Citigroup, UBS AG, JPMorgan Chase & Co. and Morgan Stanley agreed to repurchase a combined $32.6 billion in auction-rate securities and will pay fines totaling $310 million.
Nearly 150,000 customers have been affected by the five settlements.
The auction-rate securities market involved investors buying and selling instruments that resembled corporate debt, except the interest rates were reset at regular auctions, some as frequently as once a week. A number of companies and retail clients invested in the securities because they could treat their holdings almost like cash.
The bond-like investments were widely held by many institutional and individual investors and were seen as highly liquid, money market-like investments. However the market for them collapsed in February amid the downturn in the broader credit markets.
Regulators have been investigating the collapse in the market to determine who was responsible for its demise and whether banks knowingly misrepresented the safety of the securities when selling them to investors.
Like the other banks that have reached agreements with regulators, Wachovia will buy back all auction-rate securities from retail customers, charities and small businesses. It will buy back those securities by Nov. 28. Wachovia will also reimburse customers who sold securities at a loss after the market collapsed in February.
Wachovia will also repurchase securities from institutional shareholders by the end of June 2009. Wachovia neither acknowledged or denied any wrongdoing as part of the settlement.
These settlements come amid a time when banks have reported billions of dollars in losses from other investments because of deterioration in credit markets.
Banks have been forced to cut the value of mortgage-backed securities and other investments by more than $300 billion over the past year and added billions of additional dollars to reserves to cover likely loan losses.
Those losses have forced some banks to raise new capital to shore up their balance sheets.
Losses from the auction-rate securities are likely to be smaller than those from mortgage-backed securities.
UBS said it will take a charge of about $900 million on a pretax basis -- including its $150 million fine -- to buy back $18.6 billion in auction-rate securities.
Citigroup said it will take a pretax charge of about $500 million because of its settlement to repurchase $7 billion in the securities.
Wall Street ends mixed on credit concerns, oil
Friday August 15, 6:01 pm ET By Sara Lepro, AP Business Writer
Wall Street ends mixed as concerns over credit markets offset declining oil prices
NEW YORK (AP) -- Wall Street closed mixed Friday after playing out a now familiar scenario: Upbeat sentiment about falling oil prices flagged amid ongoing concerns about weak credit markets and the economy. The major indexes also turned in a mixed performance after another volatile week.
Investors were encouraged early in the session as oil's pullback lifted the outlook for consumer companies and eased concerns that record-high energy prices would force Americans to curb spending. Light, sweet crude dropped $1.24 to settle at $113.77 a barrel on the New York Mercantile Exchange, and earlier traded as low as $111.34, its lowest level in more than three months.
Oil fell on a growing sense that economies around the world are joining the U.S. in a slowdown. The rising dollar, which is gaining strength on economic concerns, contributed to the sell-off in crude and other commodities. Crude is down more than $35 from its July 11 record of $147.27; meanwhile, gold prices that swept past $1,000 an ounce earlier this year are now below $800.
While the decline in oil was placating investors this week, it still did not offset their ever-present anxiety over the slumping housing and credit markets. Concerns about more write-downs at investment banks continued, causing major market indexes to fluctuate over the course of the week; the Dow Jones industrials continued a volatile streak, dropping more than 100 points two days in a row amid intensifying fears about the health of the financial sector.
"With some of this sharp price collapse in commodities you would think the market would be up a lot more," said Greg Church, chief investment officer of Church Capital Management. "The underlying factor is that credit continues to appear to be very weak."
The Dow rose 43.97, or 0.38 percent, to 11,659.90.
Broader indexes were narrowly mixed. The Standard & Poor's 500 index rose 5.26, or 0.41 percent, to 1,298.20, while the Nasdaq composite index fell 1.15, or 0.05 percent, to 2,452.52.
Volume remained extremely light, exaggerating moves in the major indexes. On the New York Stock Exchange, advancing issues were relatively even with decliners; consolidated volume came to 3.99 billion, about even with Thursday.
For the week, the Dow finished down 0.63 percent and the S&P 500 rose a modest 0.15 percent. The tech-focused Nasdaq, however, logged its fifth-straight weekly gain by finishing up 1.59 percent; it has risen 8.5 percent since mid-July.
The market has been trying to sort through a number of different factors, including the price of oil and other commodities, ongoing concerns about the state of the credit markets and varying economic data. Investors seem to be grabbing on to any piece of news that might signal a turnaround for the economy.
The Nasdaq's performance this week indicates that investors are rotating back into technology stocks. However, the market has had little motivation to move into other sectors -- and analysts said many traders are simply buying into the dips.
The uncertainty in the market has increased demand for the safety of government debt, which rose modestly Friday. In late trading, the yield on the benchmark 10-year Treasury note, which moves opposite its price, slid to 3.84 percent from 3.90 percent late Thursday.
The dollar rose against other major currencies, contributing to Friday's pullback in oil and other commodities.
The day brought somewhat disappointing news about consumers. The University of Michigan reported a slightly smaller-than-expected rise in consumer sentiment in early August compared with July, evidence that the consumer remains under pressure.
Moreover, earnings outlooks from retailers J.C. Penney Co. and Abercrombie & Fitch Co. on Friday came in below forecasts.
"At the beginning of this year, earnings expectations started to drop precipitously, and the stock market dropped with them," said Scott Bleier, founder of market advisory service CreateCapital.com. "Those expectations got built into the stock market and to an excess. A lot of stocks discounted all of the bad news that was out there."
New York Attorney General Andrew Cuomo said Friday he plans to take legal action against Merrill Lynch & Co. as part of an ongoing investigation into the failure of the auction-rate securities market. Wachovia Corp., meanwhile, became the fifth bank in recent weeks to agree to repurchase billions of the investments as part of a settlement with regulators.
Merrill Lynch shares rose 4 cents to $26.33. Wachovia fell 24 cents, or 2.5 percent, to $15.57.
Airline stocks rose on the drop in oil. AMR Corp., the parent company of American Airlines, gained 46 cents, or 4.1 percent, to $11.74. However, shares of major oil companies declined, with ConocoPhillips down $1.71, or 2.1 percent, at $77.66.
The Russell 2000 index, which tracks small-cap stocks, fell 1.01, or 0.13 percent, to 753.37.
Overseas, Japan's Nikkei stock average rose 0.48 percent. Britain's FTSE 100 fell 0.66 percent, Germany's DAX index rose 0.06 percent, and France's CAC-40 rose 0.60 percent.
The Dow Jones industrial average ended the week down 74.42, or 0.63 percent, at 11,659.90. The Standard & Poor's 500 index finished up 1.88, or 0.15 percent, at 1,298.20. The Nasdaq composite index ended the week up 38.42, or 1.59 percent, at 2,452.52.
The Russell 2000 index finished the week up 19.07, or 2.60 percent, at 753.37.
The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index that measures 5,000 U.S. based companies -- ended Friday at 13,271.88, up 74.75 points, or 0.57 percent, for the week. A year ago, the index was at 14,531.52.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Wall Street ends mixed as concerns over credit markets offset declining oil prices
NEW YORK (AP) -- Wall Street closed mixed Friday after playing out a now familiar scenario: Upbeat sentiment about falling oil prices flagged amid ongoing concerns about weak credit markets and the economy. The major indexes also turned in a mixed performance after another volatile week.
Investors were encouraged early in the session as oil's pullback lifted the outlook for consumer companies and eased concerns that record-high energy prices would force Americans to curb spending. Light, sweet crude dropped $1.24 to settle at $113.77 a barrel on the New York Mercantile Exchange, and earlier traded as low as $111.34, its lowest level in more than three months.
Oil fell on a growing sense that economies around the world are joining the U.S. in a slowdown. The rising dollar, which is gaining strength on economic concerns, contributed to the sell-off in crude and other commodities. Crude is down more than $35 from its July 11 record of $147.27; meanwhile, gold prices that swept past $1,000 an ounce earlier this year are now below $800.
While the decline in oil was placating investors this week, it still did not offset their ever-present anxiety over the slumping housing and credit markets. Concerns about more write-downs at investment banks continued, causing major market indexes to fluctuate over the course of the week; the Dow Jones industrials continued a volatile streak, dropping more than 100 points two days in a row amid intensifying fears about the health of the financial sector.
"With some of this sharp price collapse in commodities you would think the market would be up a lot more," said Greg Church, chief investment officer of Church Capital Management. "The underlying factor is that credit continues to appear to be very weak."
The Dow rose 43.97, or 0.38 percent, to 11,659.90.
Broader indexes were narrowly mixed. The Standard & Poor's 500 index rose 5.26, or 0.41 percent, to 1,298.20, while the Nasdaq composite index fell 1.15, or 0.05 percent, to 2,452.52.
Volume remained extremely light, exaggerating moves in the major indexes. On the New York Stock Exchange, advancing issues were relatively even with decliners; consolidated volume came to 3.99 billion, about even with Thursday.
For the week, the Dow finished down 0.63 percent and the S&P 500 rose a modest 0.15 percent. The tech-focused Nasdaq, however, logged its fifth-straight weekly gain by finishing up 1.59 percent; it has risen 8.5 percent since mid-July.
The market has been trying to sort through a number of different factors, including the price of oil and other commodities, ongoing concerns about the state of the credit markets and varying economic data. Investors seem to be grabbing on to any piece of news that might signal a turnaround for the economy.
The Nasdaq's performance this week indicates that investors are rotating back into technology stocks. However, the market has had little motivation to move into other sectors -- and analysts said many traders are simply buying into the dips.
The uncertainty in the market has increased demand for the safety of government debt, which rose modestly Friday. In late trading, the yield on the benchmark 10-year Treasury note, which moves opposite its price, slid to 3.84 percent from 3.90 percent late Thursday.
The dollar rose against other major currencies, contributing to Friday's pullback in oil and other commodities.
The day brought somewhat disappointing news about consumers. The University of Michigan reported a slightly smaller-than-expected rise in consumer sentiment in early August compared with July, evidence that the consumer remains under pressure.
Moreover, earnings outlooks from retailers J.C. Penney Co. and Abercrombie & Fitch Co. on Friday came in below forecasts.
"At the beginning of this year, earnings expectations started to drop precipitously, and the stock market dropped with them," said Scott Bleier, founder of market advisory service CreateCapital.com. "Those expectations got built into the stock market and to an excess. A lot of stocks discounted all of the bad news that was out there."
New York Attorney General Andrew Cuomo said Friday he plans to take legal action against Merrill Lynch & Co. as part of an ongoing investigation into the failure of the auction-rate securities market. Wachovia Corp., meanwhile, became the fifth bank in recent weeks to agree to repurchase billions of the investments as part of a settlement with regulators.
Merrill Lynch shares rose 4 cents to $26.33. Wachovia fell 24 cents, or 2.5 percent, to $15.57.
Airline stocks rose on the drop in oil. AMR Corp., the parent company of American Airlines, gained 46 cents, or 4.1 percent, to $11.74. However, shares of major oil companies declined, with ConocoPhillips down $1.71, or 2.1 percent, at $77.66.
The Russell 2000 index, which tracks small-cap stocks, fell 1.01, or 0.13 percent, to 753.37.
Overseas, Japan's Nikkei stock average rose 0.48 percent. Britain's FTSE 100 fell 0.66 percent, Germany's DAX index rose 0.06 percent, and France's CAC-40 rose 0.60 percent.
The Dow Jones industrial average ended the week down 74.42, or 0.63 percent, at 11,659.90. The Standard & Poor's 500 index finished up 1.88, or 0.15 percent, at 1,298.20. The Nasdaq composite index ended the week up 38.42, or 1.59 percent, at 2,452.52.
The Russell 2000 index finished the week up 19.07, or 2.60 percent, at 753.37.
The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index that measures 5,000 U.S. based companies -- ended Friday at 13,271.88, up 74.75 points, or 0.57 percent, for the week. A year ago, the index was at 14,531.52.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Oil touches 3-month low on stronger US dollar
Friday August 15, 5:10 pm ET By Stevenson Jacobs, AP Business Writer
Oil prices touch 3-month low as US dollar strengthens, demand for energy keeps falling
NEW YORK (AP) -- Oil fell to its lowest price in three months Friday, briefly touching the $111 level after the dollar muscled higher and OPEC predicted the world's thirst for fuel next year will fall to its lowest point since 2002.
Light, sweet crude for September delivery fell $1.24 to settle at $113.77 a barrel on the New York Mercantile Exchange after falling to $111.34, its lowest price since May 2 and more than $35 -- or 24 percent -- below its July 11 trading record above $147.
As high energy costs force countries around the globe to cut back on consumption, crude prices have plummeted and are now within striking distance of $100 a barrel, a level first reached Feb. 19.
At the pump, retail gas prices also continued falling, with a gallon of regular shedding about half a penny overnight to a new national average of $3.771, according to auto club AAA, the Oil Price Information Service and Wright Express. Gas peaked at $4.114 on July 17.
Crude fell after the dollar gained strength against the euro on U.S. data showing that industrial output rose more than expected in July. The 15-nation euro has lost some of its luster compared to its American rival amid growing evidence that European economies are slowing. The euro bought $1.4675 in trading Friday, down from $1.4811 late Thursday.
A rising dollar typically pushes oil prices lower as investors who buy crude and other commodities as hedges against inflation start dumping their positions to cut their losses. A stronger greenback also makes dollar-denominated commodities more expensive to overseas buyers, further eroding demand.
"The dollar is on fire again so that's causing people to re-evaluate everything," said Phil Flynn, oil analyst at Alaron Trading Corp. in Chicago. "It means oil prices could fall dramatically. We could see prices get to double digits if this continues."
An OPEC forecast of lower demand also put downward pressure on prices.
In its monthly oil report, the organization forecast world appetite for oil this year overall will fall by 30,000 barrels a day. While forecasting demand growing by a daily 1 million barrels a day this year, and another 900,000 barrels in 2009, the report noted that world demand growth next year will also be "the lowest since 2002," with demand growth from the major industrialized countries actually declining.
"They're basically saying we could have an oil glut because demand is slowing," Flynn said. "It's obvious that high prices do slow down demand and the market works."
The OPEC report came two days after the U.S. Department of Energy highlighted the ongoing drop in U.S. demand for energy as Americans struggle with high costs for gasoline, food and other goods.
Oil's steady decline has continued despite the simmering weeklong conflict between Russia and Georgia over two breakaway provinces. Western leaders worked Friday to persuade Russia to pull troops out of Georgia, but regional tensions soared after a top Russian general warned that Poland could face attack over its missile defense deal with the United States.
British oil company BP PLC said Thursday it has resumed pumping gas into the Baku-Tbilisi-Erzurum pipeline that runs through Georgia, but two oil pipelines remained closed. BP's Baku-Supsa oil pipeline was shut as a precaution, and the larger Baku-Tbilisi-Ceyhan line, a key supplier to Western countries, remains shut after a fire earlier this month on the Turkish section of the line.
Analysts noted that the conflict in Georgia, while likely not driven primarily by energy concerns, highlights Moscow's influence over oil and natural gas reserves in the region. Russia exports more oil than any country except Saudi Arabia, and is the world's leading producer of natural gas.
Only weeks ago, such a clash would likely have sent oil prices soaring. But the market has largely ignored the fighting in Georgia because traders have already priced in the geopolitical risk, analysts say. Crude's monthlong nosedive has also made it harder for bullish traders to spark a rally, despite a possible threat to oil installations.
Also weighing on prices Friday was the expiration of September oil contract options at the end of the day, a trading cycle that often increases volatility.
In other Nymex trading, heating oil futures rose 2 cents to settle at $3.1191 a gallon, while gasoline prices slipped 5.18 cents to settle at $2.8602 a gallon. Natural gas futures fell 4.4 cents to settle at $8.092 per 1,000 cubic feet.
In London, September Brent crude fell $1.13 to settle at $112.55 a barrel.
Associated Press writers George Jahn in Vienna, Austria, Adam Schreck in Dubai and Alex Kennedy in Singapore contributed to this report.
Oil prices touch 3-month low as US dollar strengthens, demand for energy keeps falling
NEW YORK (AP) -- Oil fell to its lowest price in three months Friday, briefly touching the $111 level after the dollar muscled higher and OPEC predicted the world's thirst for fuel next year will fall to its lowest point since 2002.
Light, sweet crude for September delivery fell $1.24 to settle at $113.77 a barrel on the New York Mercantile Exchange after falling to $111.34, its lowest price since May 2 and more than $35 -- or 24 percent -- below its July 11 trading record above $147.
As high energy costs force countries around the globe to cut back on consumption, crude prices have plummeted and are now within striking distance of $100 a barrel, a level first reached Feb. 19.
At the pump, retail gas prices also continued falling, with a gallon of regular shedding about half a penny overnight to a new national average of $3.771, according to auto club AAA, the Oil Price Information Service and Wright Express. Gas peaked at $4.114 on July 17.
Crude fell after the dollar gained strength against the euro on U.S. data showing that industrial output rose more than expected in July. The 15-nation euro has lost some of its luster compared to its American rival amid growing evidence that European economies are slowing. The euro bought $1.4675 in trading Friday, down from $1.4811 late Thursday.
A rising dollar typically pushes oil prices lower as investors who buy crude and other commodities as hedges against inflation start dumping their positions to cut their losses. A stronger greenback also makes dollar-denominated commodities more expensive to overseas buyers, further eroding demand.
"The dollar is on fire again so that's causing people to re-evaluate everything," said Phil Flynn, oil analyst at Alaron Trading Corp. in Chicago. "It means oil prices could fall dramatically. We could see prices get to double digits if this continues."
An OPEC forecast of lower demand also put downward pressure on prices.
In its monthly oil report, the organization forecast world appetite for oil this year overall will fall by 30,000 barrels a day. While forecasting demand growing by a daily 1 million barrels a day this year, and another 900,000 barrels in 2009, the report noted that world demand growth next year will also be "the lowest since 2002," with demand growth from the major industrialized countries actually declining.
"They're basically saying we could have an oil glut because demand is slowing," Flynn said. "It's obvious that high prices do slow down demand and the market works."
The OPEC report came two days after the U.S. Department of Energy highlighted the ongoing drop in U.S. demand for energy as Americans struggle with high costs for gasoline, food and other goods.
Oil's steady decline has continued despite the simmering weeklong conflict between Russia and Georgia over two breakaway provinces. Western leaders worked Friday to persuade Russia to pull troops out of Georgia, but regional tensions soared after a top Russian general warned that Poland could face attack over its missile defense deal with the United States.
British oil company BP PLC said Thursday it has resumed pumping gas into the Baku-Tbilisi-Erzurum pipeline that runs through Georgia, but two oil pipelines remained closed. BP's Baku-Supsa oil pipeline was shut as a precaution, and the larger Baku-Tbilisi-Ceyhan line, a key supplier to Western countries, remains shut after a fire earlier this month on the Turkish section of the line.
Analysts noted that the conflict in Georgia, while likely not driven primarily by energy concerns, highlights Moscow's influence over oil and natural gas reserves in the region. Russia exports more oil than any country except Saudi Arabia, and is the world's leading producer of natural gas.
Only weeks ago, such a clash would likely have sent oil prices soaring. But the market has largely ignored the fighting in Georgia because traders have already priced in the geopolitical risk, analysts say. Crude's monthlong nosedive has also made it harder for bullish traders to spark a rally, despite a possible threat to oil installations.
Also weighing on prices Friday was the expiration of September oil contract options at the end of the day, a trading cycle that often increases volatility.
In other Nymex trading, heating oil futures rose 2 cents to settle at $3.1191 a gallon, while gasoline prices slipped 5.18 cents to settle at $2.8602 a gallon. Natural gas futures fell 4.4 cents to settle at $8.092 per 1,000 cubic feet.
In London, September Brent crude fell $1.13 to settle at $112.55 a barrel.
Associated Press writers George Jahn in Vienna, Austria, Adam Schreck in Dubai and Alex Kennedy in Singapore contributed to this report.
Tuesday, August 12, 2008
JPMorgan loses $1.5 billion so far in third quarter
Tuesday August 12, 8:50 am ET
(Reuters) - Investment bank JPMorgan Chase & Co has incurred losses of about $1.5 billion since the start of July, hurt by turmoil in the credit and mortgage markets and by wider credit spreads and lower levels of liquidity, the company said in a regulatory filing late Monday.
JPMorgan said trading conditions have "substantially deteriorated" in the third quarter compared with that of the second, and spreads on mortgage-backed securities and loans have "sharply widened." The estimated losses exclude hedging, the firm said.
In addition, if the bank's own credit spreads tighten, the change in the fair value of certain trading liabilities would also hurt trading results, JPMorgan said.
The third-largest U.S. bank was forced to write down the value of its $33 billion in mortgage-backed securities as prices continued to drop in July, the Financial Times said Tuesday, citing people close to the company.
The writedowns were partly driven by Merrill Lynch & Co Inc's recent decision to sell $30.6 billion in risky debt to U.S. private equity firm Lone Star Funds for just $6.7 billion, or about 22 cents on the dollar, the FT said.
Merrill's move ratcheted up pressure on rivals to cut the values of their own subprime assets as they grapple with mounting debts and weakening economies.
As of June 30, JPMorgan held an aggregate $19.5 billion of prime and Alt-A mortgage exposure, $1.9 billion of subprime mortgage exposure, and $11.6 billion of commercial mortgage-backed securities (CMBS) exposure, the filing showed.
"These mortgage exposures could be adversely affected by worsening market conditions, further deterioration in the housing market and market activity reflecting distressed sellers," the company said.
JPMorgan did not immediately return a call seeking comment.
Last month, JPMorgan Chase posted a smaller-than-expected drop in earnings on resilient stock and bond underwriting revenue, but cautioned that the mortgage market and the economy were getting worse.
CAUTIOUS OUTLOOK
In the August 11 filing, JPMorgan said that it expects continued deterioration in credit trends for its consumer portfolios, and that this will likely require additions to the consumer loan loss allowance during the rest of 2008.
Quarterly net charge-offs in the home equity portfolio could continue to increase for the rest of 2008, the company said.
Prime and subprime mortgage net charge-offs were likely to continue to rise "significantly" in the second half of 2008, with deterioration expected to continue into 2009, JPMorgan said.
According to the filing, JPMorgan held $16.3 billion of legacy leveraged loans and unfunded commitments as of June 30.
"Leveraged loans and unfunded commitments are difficult to hedge effectively, and if market conditions further deteriorate, additional markdowns may be necessary on this asset class," the company said.
In a research note to clients on Tuesday, Lehman Brothers cut its 2008 earnings estimates for JPMorgan to $2.30 a share from $2.60, but maintained its "overweight" rating and $50 price target on the stock
Shares of the company were trading at $40.90 in premarket dealings on Tuesday, down from Monday's close at $41.89 on the New York Stock Exchange.
(Reporting by Tenzin Pema in Bangalore; Editing by Elaine Hardcastle and Mike Miller)
(Reuters) - Investment bank JPMorgan Chase & Co has incurred losses of about $1.5 billion since the start of July, hurt by turmoil in the credit and mortgage markets and by wider credit spreads and lower levels of liquidity, the company said in a regulatory filing late Monday.
JPMorgan said trading conditions have "substantially deteriorated" in the third quarter compared with that of the second, and spreads on mortgage-backed securities and loans have "sharply widened." The estimated losses exclude hedging, the firm said.
In addition, if the bank's own credit spreads tighten, the change in the fair value of certain trading liabilities would also hurt trading results, JPMorgan said.
The third-largest U.S. bank was forced to write down the value of its $33 billion in mortgage-backed securities as prices continued to drop in July, the Financial Times said Tuesday, citing people close to the company.
The writedowns were partly driven by Merrill Lynch & Co Inc's recent decision to sell $30.6 billion in risky debt to U.S. private equity firm Lone Star Funds for just $6.7 billion, or about 22 cents on the dollar, the FT said.
Merrill's move ratcheted up pressure on rivals to cut the values of their own subprime assets as they grapple with mounting debts and weakening economies.
As of June 30, JPMorgan held an aggregate $19.5 billion of prime and Alt-A mortgage exposure, $1.9 billion of subprime mortgage exposure, and $11.6 billion of commercial mortgage-backed securities (CMBS) exposure, the filing showed.
"These mortgage exposures could be adversely affected by worsening market conditions, further deterioration in the housing market and market activity reflecting distressed sellers," the company said.
JPMorgan did not immediately return a call seeking comment.
Last month, JPMorgan Chase posted a smaller-than-expected drop in earnings on resilient stock and bond underwriting revenue, but cautioned that the mortgage market and the economy were getting worse.
CAUTIOUS OUTLOOK
In the August 11 filing, JPMorgan said that it expects continued deterioration in credit trends for its consumer portfolios, and that this will likely require additions to the consumer loan loss allowance during the rest of 2008.
Quarterly net charge-offs in the home equity portfolio could continue to increase for the rest of 2008, the company said.
Prime and subprime mortgage net charge-offs were likely to continue to rise "significantly" in the second half of 2008, with deterioration expected to continue into 2009, JPMorgan said.
According to the filing, JPMorgan held $16.3 billion of legacy leveraged loans and unfunded commitments as of June 30.
"Leveraged loans and unfunded commitments are difficult to hedge effectively, and if market conditions further deteriorate, additional markdowns may be necessary on this asset class," the company said.
In a research note to clients on Tuesday, Lehman Brothers cut its 2008 earnings estimates for JPMorgan to $2.30 a share from $2.60, but maintained its "overweight" rating and $50 price target on the stock
Shares of the company were trading at $40.90 in premarket dealings on Tuesday, down from Monday's close at $41.89 on the New York Stock Exchange.
(Reporting by Tenzin Pema in Bangalore; Editing by Elaine Hardcastle and Mike Miller)
June trade deficit shrinks as exports climb
Tuesday August 12, 10:23 am ET By Martin Crutsinger, AP Economics Writer
US trade deficit unexpectedly declines as exports hit all-time high, offsetting rise in oil
WASHINGTON (AP) -- The U.S. trade deficit unexpectedly fell in June as exports advanced to an all-time high, offsetting another big surge in oil imports.
The Commerce Department reported Tuesday the trade imbalance dropped to $56.8 billion in June, down by 4.1 percent from a revised May deficit of $59.2 billion. It was the smallest deficit in three months and much better than the $61.5 billion deficit Wall Street had been expecting.
Exports of goods and services rose to a record of $164.4 billion, helped by the dollar's declines earlier in the year, which have made U.S. goods cheaper on overseas markets.
Imports also rose to a record of $221.2 billion, up 1.8 percent from the May level. But the increase was driven by a 14.6 percent surge in petroleum imports, which hit an all-time high of $44.5 billion as crude oil prices jumped to record levels.
The country's goods trade deficit outside of petroleum shrank to the lowest level since February 2003. Demand for a variety of consumer products from clothing to televisions and furniture has weakened, reflecting the sharp economic slowdown in the United States.
Through the first half of this year, the trade deficit is running at an annual rate of $702.8 billion, up only slightly from last year's deficit of $700.3 billion. The 2007 deficit was down 7 percent from 2006, marking the first annual improvement after five straight years of record deficits.
The Bush administration points to the falling deficits as evidence that the president's trade policies are working to open overseas markets to U.S. products.
But critics say the deficits still remain far above the levels when Bush took office. They also contend that the string of record deficits contributed to the loss of more than 3 million manufacturing jobs since 2001 as many companies moved production to low-wage countries.
The deficit in June, after adjusting for inflation, was the lowest monthly imbalance since December 2001, a month when the country was struggling to emerge from the last recession. Many economists believe the 2008 slowdown will ultimately be ruled a recession too, although the gross domestic product has yet to post back-to-back negative quarters, a traditional definition of a downturn.
The GDP expanded at an annual rate of 1.9 percent in the April-June quarter. It may have been negative during that period, however, had it not been for a sizable improvement in the trade balance, reflecting the drop in demand for imports and surging export sales.
Economists are worried that the big lift from exports could fade in coming months if economic growth in Europe and Japan, two big overseas markets for American goods, falters.
The politically sensitive deficit with China rose to $21.4 billion in June, the largest monthly imbalance since a record $25.9 billion deficit with China last October. The deficit is likely to rise further in coming months.
The Chinese reported Monday that their surplus with the world rose to the highest level in eight months in July. Its surpluses with the United States and the 27-nation European Union expanded.
Critics accuse China of unfair trade practices such as artificially depressing the value of its currency to boost the competitiveness of Chinese products. The Bush administration, led by Treasury Secretary Henry Paulson, has been prodding China to move more quickly to allow its currency to rise against the dollar and head off Democratic moves in Congress to impose penalty tariffs on Chinese goods over the currency issue.
The record level of U.S. exports in June reflected big increases in sales of farm products such as soybeans, corn and wheat and gains in exports of manufactured goods. Sales of aircraft engines, electric generators and computer chips all posted big gains.
U.S. exports to Mexico, the European Union and South and Central America all hit records in June.
But America's deficit with OPEC set a record too in June as the average price of imported crude oil climbed to a record of $117.13 per barrel. Oil prices, which hit a record on the spot market of $147.27 in early July, have fallen by about 20 percent since that time, raising hopes that the oil portion of the trade deficit will start to narrow in coming months.
(This version CORRECTS import figure to $221.2 billion, sted of $164.4 billion.)
US trade deficit unexpectedly declines as exports hit all-time high, offsetting rise in oil
WASHINGTON (AP) -- The U.S. trade deficit unexpectedly fell in June as exports advanced to an all-time high, offsetting another big surge in oil imports.
The Commerce Department reported Tuesday the trade imbalance dropped to $56.8 billion in June, down by 4.1 percent from a revised May deficit of $59.2 billion. It was the smallest deficit in three months and much better than the $61.5 billion deficit Wall Street had been expecting.
Exports of goods and services rose to a record of $164.4 billion, helped by the dollar's declines earlier in the year, which have made U.S. goods cheaper on overseas markets.
Imports also rose to a record of $221.2 billion, up 1.8 percent from the May level. But the increase was driven by a 14.6 percent surge in petroleum imports, which hit an all-time high of $44.5 billion as crude oil prices jumped to record levels.
The country's goods trade deficit outside of petroleum shrank to the lowest level since February 2003. Demand for a variety of consumer products from clothing to televisions and furniture has weakened, reflecting the sharp economic slowdown in the United States.
Through the first half of this year, the trade deficit is running at an annual rate of $702.8 billion, up only slightly from last year's deficit of $700.3 billion. The 2007 deficit was down 7 percent from 2006, marking the first annual improvement after five straight years of record deficits.
The Bush administration points to the falling deficits as evidence that the president's trade policies are working to open overseas markets to U.S. products.
But critics say the deficits still remain far above the levels when Bush took office. They also contend that the string of record deficits contributed to the loss of more than 3 million manufacturing jobs since 2001 as many companies moved production to low-wage countries.
The deficit in June, after adjusting for inflation, was the lowest monthly imbalance since December 2001, a month when the country was struggling to emerge from the last recession. Many economists believe the 2008 slowdown will ultimately be ruled a recession too, although the gross domestic product has yet to post back-to-back negative quarters, a traditional definition of a downturn.
The GDP expanded at an annual rate of 1.9 percent in the April-June quarter. It may have been negative during that period, however, had it not been for a sizable improvement in the trade balance, reflecting the drop in demand for imports and surging export sales.
Economists are worried that the big lift from exports could fade in coming months if economic growth in Europe and Japan, two big overseas markets for American goods, falters.
The politically sensitive deficit with China rose to $21.4 billion in June, the largest monthly imbalance since a record $25.9 billion deficit with China last October. The deficit is likely to rise further in coming months.
The Chinese reported Monday that their surplus with the world rose to the highest level in eight months in July. Its surpluses with the United States and the 27-nation European Union expanded.
Critics accuse China of unfair trade practices such as artificially depressing the value of its currency to boost the competitiveness of Chinese products. The Bush administration, led by Treasury Secretary Henry Paulson, has been prodding China to move more quickly to allow its currency to rise against the dollar and head off Democratic moves in Congress to impose penalty tariffs on Chinese goods over the currency issue.
The record level of U.S. exports in June reflected big increases in sales of farm products such as soybeans, corn and wheat and gains in exports of manufactured goods. Sales of aircraft engines, electric generators and computer chips all posted big gains.
U.S. exports to Mexico, the European Union and South and Central America all hit records in June.
But America's deficit with OPEC set a record too in June as the average price of imported crude oil climbed to a record of $117.13 per barrel. Oil prices, which hit a record on the spot market of $147.27 in early July, have fallen by about 20 percent since that time, raising hopes that the oil portion of the trade deficit will start to narrow in coming months.
(This version CORRECTS import figure to $221.2 billion, sted of $164.4 billion.)
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