U.S. markets began the week quietly as Monday was the lowest-volume full trading day on the New York Stock Exchange this year with just over two billion shares traded. The sluggish trading was the result of a slow holiday week exacerbated by a massive snowstorm that brought New York City and much of the Northeast to a standstill.
The year ended with ongoing concerns by investors worldwide about the European sovereign debt crisis, a murky outlook on the domestic housing and jobs fronts, and a U.S. municipal bond market that is set to have its worst quarter since 1994. Still, many investors are feeling optimistic that the stock market rally which started at the end of August will continue into 2011. A number of stock indices, particularly those in North American and Europe, are on track to post double-digit percentage gains for 2010.
U.S. financial markets are open today, New Year’s Eve. The bond market closes early at 2 p.m., and many overseas markets will have shortened sessions or will be closed on Friday. Happy New Year to all!
Global economic news
Confidence of American consumers drops slightly in December
The Conference Board’s Consumer Confidence Index unexpectedly fell to 52.5 in December from a revised 54.3 in November. The New York-based research group said lackluster economic growth and a pessimistic jobs outlook are largely to blame for the drop. The median forecast for U.S. consumer confidence, based on a survey of 61 economists, had projected confidence would rise to 56.3.
Italian business confidence hits 34-month high
The Isae institute’s manufacturing-sentiment index, which measures Italian business confidence, climbed to 103 in December, from a revised 101.7 in November. The latest figure, the highest level for the index in almost three years, indicates increasing optimism about economic recovery in the region.
Initial U.S. jobless claims at lowest level since July 2008
The U.S. Department of Labor reported that the number of initial jobless claims filed fell to 388,000 in the week ended December 25, down 34,000 from an upwardly revised 422,000 claims the previous week. It is the first time in over two years that the number of Americans filing new unemployment claims fell below the 400,000 level.
Pace of German inflation accelerates in December
The inflation rate in Germany increased to 1.9% in December from 1.6% in November, according to the Federal Statistics Office in Wiesbaden. That is the highest rate since October 2008 and higher than the rate expected by economists who had projected an unchanged reading. Consumer prices jumped 1.2% from November, the biggest monthly gain since December 2002.
U.S. home prices tumble in October, third straight month-over-month drop
The Standard & Poor’s/Case-Shiller Home Price Indices, a broad gauge of U.S. home prices, fell 1.3% in October from a month earlier. The October drop in prices represents an annualized decline of 15%. Prices in 20 major U.S. metropolitan areas were down 0.8% from October 2009, the biggest year-over-year decline since December 2009. Many economists project that the declines will continue into at least next spring.
French economy expands; pace of growth slows from previous quarter
The Paris-based statistics office Insee reported that France’s gross domestic product rose 0.3% in the third quarter, down from a 0.6% gain in the second quarter.
European retail sales grow at fastest pace since May 2008
A gauge of European retail sales increased to 52.9 in December from 51.3 in November, London-based Markit Economics reported on its Web site. The index, which is at its highest level since May 2008, is based on a survey of more than 1,000 executives. A reading above 50 indicates expansion.
Global corporate news
Cal-Maine Foods reported that its profit for the fiscal second quarter ended November 27 was $15.2 million, down from $16.1 million a year earlier. This represents a 5.6% drop in earnings for the largest U.S. producer and distributor of fresh-shell eggs. The company cited higher feed costs for the earnings decline.
BJ’s Wholesale Club reportedly hired investment bank Morgan Stanley to conduct an auction of the chain after receiving an unsolicited bid from Leonard Green & Partners LP earlier this year. But if the retailer does not move forward with the auction soon, Leonard Green, the Los Angeles private equity firm that bought 9.5% of the chain last summer, could launch a hostile takeover bid. Some analysts have estimated that BJ’s could sell for as much as $3 billion at auction.
Groupon, the Chicago online discount coupon site that earlier this month turned down a $6 billion takeover bid from Google, has filed to raise up to $950 million from the sale of preferred stock. Andrew Mason, Groupon’s chief executive, is raising money as he considers an initial public offering in 2011. This would be the biggest round of equity financing since Pixar sought approximately $500 million in 1995.
Friday, December 31, 2010
Wednesday, December 29, 2010
U.S. Economic News Week Ending December 23, 2010
Despite mostly light trading volume this week, U.S. stocks continued their winning ways of December. On Wednesday, the Dow Jones Industrial Average hit 11559.49, its highest close since August 28, 2008. The Standard & Poor’s 500 Stock Index also reached a two-year high, closing at 1258.84, its highest level since September 8, 2008. The Nasdaq Composite hit 2671.48, a three-year closing high. All three indices are poised for double-digit gains for the year.
Globally, the European sovereign debt crisis was front-page news again as credit downgrades threatened to spread across the region despite attempts by the Organization for Economic Cooperation and Development and the European Central Bank to step in and help struggling eurozone economies.
Many major financial markets around the world are closed Friday in observance of the Christmas holiday. Happy holidays to all!
Global economic news
U.S. economy sees uptick as GDP revised slightly higher
The U.S. gross domestic product (GDP) grew at an annual pace of 2.6% in the third quarter, according to the U.S. Department of Commerce. GDP, the value of all goods and services produced, is the broadest measure of a country’s economic activity. While the revised third-quarter GDP figure is slightly higher than the initial reading of 2.5%, it falls below the 2.7% level projected by many economists. The economy grew at a 1.7% annual rate in the second quarter.
Wave of credit downgrades threaten eurozone
The European sovereign debt crisis was on the minds of investors and market watchers around the world as Moody’s Investors Service warned that it may lower Portugal’s credit rating by as much as two notches. The warning came less than a week after the agency said it may downgrade its rating on Spanish and Greek government debt. On December 17, Moody’s slashed Ireland’s credit rating five levels to “Baa1” from “Aa2,” leaving the country just above speculative grade or junk status. France is also at risk of losing its top “AAA” rating, and Belgium is facing a possible cut. Further credit rating downgrades could make it more costly for eurozone periphery nations to borrow in capital markets.
Existing home sales edge 5.6% higher in November
The National Association of Realtors said that sales of previously occupied homes in the United States increased to a 4.68 million annual rate in November, up 5.6% from October’s 4.43 million. It was the third increase in sales of existing U.S. homes in the past four months.
Gas, oil prices up
Increased demand for petroleum has resulted in a 4% jump in gasoline prices since last month while crude oil prices rose above $90 per barrel for the first time since October 2008.
ECB to lend European banks $197 billion
The European Central Bank agreed to meet the liquidity needs of eurozone banks by lending them 149.5 billion euros ($196.8 billion USD) over a period of three months. While the central bank decided against giving 6- and 12-month loans, President Jean-Claude Trichet said that it will keep offering banks as much cash as needed through the first quarter of 2011 to help restore lending in the region.
U.S. initial jobless claims drop again
The U.S. Department of Labor reported that the number of Americans filing new unemployment claims decreased to 420,000 in the week ended December 18. The latest number of filings represents 3,000 fewer claims than the previous week’s total.
Americans using less of their income to pay down debt
U.S. household financial obligations as a share of after-tax income fell to 16.78% in the third quarter from 16.97% the previous quarter. The drop indicates that Americans are allocating a smaller portion of their paychecks to paying off personal debt.
Airlines set to record biggest profits in over 10 years
The U.S. Department of Transportation reported that operating profits for airlines in the United States surpassed $7.1 billion in the first nine months of 2010. The figure exceeds the industry’s full-year profit figures going back to at least 1999 when airlines reported profits of $6.89 billion for a full 12 months. This year’s strong results are due in part to airfares, which are 13% higher than last year. New fees, including baggage fees, have also led to higher profits for the industry. According to the Bureau of Transportation Statistics, the industry collected $2.1 billion in fees during the third quarter alone. The airline industry lost more than $5.5 billion in 2008 at the height of the global recession.
Global corporate news
Global M&A activity jumps 16% in 2010
Deals in emerging markets helped spur a 16% increase in global mergers and acquisitions activity this year. According to preliminary data from Mergermarket, firms in developing countries closed 2,570 transactions worth a total $502.6 billion in the year to date. This figure represents a 42.9% increase over last year’s $351.8 billion.
The year’s two biggest deals were America Movil’s $28.1 billion takeover of Carso Global Telecom and GDF Suez Energy International’s $27.3 billion union with International Power. As more companies are seeking ways to spend their significant cash piles outside of their home markets, many industry analysts expect to see a continued upswing in M&A activity in emerging markets in 2011.
Other mergers and acquisitions news
Russian potash fertilizer producers OAO Uralkali and OAO Silvinit announced a long-anticipated merger earlier in the week. Uralkali reported that it is buying a 20% stake in Silvinit for $1.4 billion. The union will create a company with a market capitalization of nearly $24 billion.
Canada’s Toronto-Dominion Bank agreed to purchase Chrysler Financial, the auto lender owned by private equity firm Cerberus Capital Management, for $6.3 billion. As part of the deal, Cerberus will retain about $1 billion of non-auto assets. The deal will place TD Bank in the top-five North American auto lenders. Chrysler Financial is no longer affiliated with the automaker whose name it bears.
Earnings update
ConAgra Foods reported a drop in profit for its fiscal second quarter ended November 28. Profit fell 16%, dropping to $200.9 million from $239.7 million a year ago. Net sales increased 2% to $3.16 billion, exceeding analysts’ projections.
Adobe recorded a profit of $268.9 million for its fiscal fourth quarter ended December 3, up from a year-earlier loss of $32 million. The maker of Photoshop and Illustrator design software cited strong product sales and subscription revenue as reasons for its strong performance.
Walgreens said its profit for the quarter ended November 30 was $580 million, up 19% from the $489 million profit the drugstore chain reported a year earlier.
Dillard’s appears to be on the verge of a comeback following a strong third quarter. The department store chain posted net income of $14.4 million, up from $8 million a year ago. Dillard’s, after nearly three years of financial troubles, seems to have turned things around by shuttering stores that did not report strong sales numbers, doing a better job tracking inventory, and buying higher quality products.
Globally, the European sovereign debt crisis was front-page news again as credit downgrades threatened to spread across the region despite attempts by the Organization for Economic Cooperation and Development and the European Central Bank to step in and help struggling eurozone economies.
Many major financial markets around the world are closed Friday in observance of the Christmas holiday. Happy holidays to all!
Global economic news
U.S. economy sees uptick as GDP revised slightly higher
The U.S. gross domestic product (GDP) grew at an annual pace of 2.6% in the third quarter, according to the U.S. Department of Commerce. GDP, the value of all goods and services produced, is the broadest measure of a country’s economic activity. While the revised third-quarter GDP figure is slightly higher than the initial reading of 2.5%, it falls below the 2.7% level projected by many economists. The economy grew at a 1.7% annual rate in the second quarter.
Wave of credit downgrades threaten eurozone
The European sovereign debt crisis was on the minds of investors and market watchers around the world as Moody’s Investors Service warned that it may lower Portugal’s credit rating by as much as two notches. The warning came less than a week after the agency said it may downgrade its rating on Spanish and Greek government debt. On December 17, Moody’s slashed Ireland’s credit rating five levels to “Baa1” from “Aa2,” leaving the country just above speculative grade or junk status. France is also at risk of losing its top “AAA” rating, and Belgium is facing a possible cut. Further credit rating downgrades could make it more costly for eurozone periphery nations to borrow in capital markets.
Existing home sales edge 5.6% higher in November
The National Association of Realtors said that sales of previously occupied homes in the United States increased to a 4.68 million annual rate in November, up 5.6% from October’s 4.43 million. It was the third increase in sales of existing U.S. homes in the past four months.
Gas, oil prices up
Increased demand for petroleum has resulted in a 4% jump in gasoline prices since last month while crude oil prices rose above $90 per barrel for the first time since October 2008.
ECB to lend European banks $197 billion
The European Central Bank agreed to meet the liquidity needs of eurozone banks by lending them 149.5 billion euros ($196.8 billion USD) over a period of three months. While the central bank decided against giving 6- and 12-month loans, President Jean-Claude Trichet said that it will keep offering banks as much cash as needed through the first quarter of 2011 to help restore lending in the region.
U.S. initial jobless claims drop again
The U.S. Department of Labor reported that the number of Americans filing new unemployment claims decreased to 420,000 in the week ended December 18. The latest number of filings represents 3,000 fewer claims than the previous week’s total.
Americans using less of their income to pay down debt
U.S. household financial obligations as a share of after-tax income fell to 16.78% in the third quarter from 16.97% the previous quarter. The drop indicates that Americans are allocating a smaller portion of their paychecks to paying off personal debt.
Airlines set to record biggest profits in over 10 years
The U.S. Department of Transportation reported that operating profits for airlines in the United States surpassed $7.1 billion in the first nine months of 2010. The figure exceeds the industry’s full-year profit figures going back to at least 1999 when airlines reported profits of $6.89 billion for a full 12 months. This year’s strong results are due in part to airfares, which are 13% higher than last year. New fees, including baggage fees, have also led to higher profits for the industry. According to the Bureau of Transportation Statistics, the industry collected $2.1 billion in fees during the third quarter alone. The airline industry lost more than $5.5 billion in 2008 at the height of the global recession.
Global corporate news
Global M&A activity jumps 16% in 2010
Deals in emerging markets helped spur a 16% increase in global mergers and acquisitions activity this year. According to preliminary data from Mergermarket, firms in developing countries closed 2,570 transactions worth a total $502.6 billion in the year to date. This figure represents a 42.9% increase over last year’s $351.8 billion.
The year’s two biggest deals were America Movil’s $28.1 billion takeover of Carso Global Telecom and GDF Suez Energy International’s $27.3 billion union with International Power. As more companies are seeking ways to spend their significant cash piles outside of their home markets, many industry analysts expect to see a continued upswing in M&A activity in emerging markets in 2011.
Other mergers and acquisitions news
Russian potash fertilizer producers OAO Uralkali and OAO Silvinit announced a long-anticipated merger earlier in the week. Uralkali reported that it is buying a 20% stake in Silvinit for $1.4 billion. The union will create a company with a market capitalization of nearly $24 billion.
Canada’s Toronto-Dominion Bank agreed to purchase Chrysler Financial, the auto lender owned by private equity firm Cerberus Capital Management, for $6.3 billion. As part of the deal, Cerberus will retain about $1 billion of non-auto assets. The deal will place TD Bank in the top-five North American auto lenders. Chrysler Financial is no longer affiliated with the automaker whose name it bears.
Earnings update
ConAgra Foods reported a drop in profit for its fiscal second quarter ended November 28. Profit fell 16%, dropping to $200.9 million from $239.7 million a year ago. Net sales increased 2% to $3.16 billion, exceeding analysts’ projections.
Adobe recorded a profit of $268.9 million for its fiscal fourth quarter ended December 3, up from a year-earlier loss of $32 million. The maker of Photoshop and Illustrator design software cited strong product sales and subscription revenue as reasons for its strong performance.
Walgreens said its profit for the quarter ended November 30 was $580 million, up 19% from the $489 million profit the drugstore chain reported a year earlier.
Dillard’s appears to be on the verge of a comeback following a strong third quarter. The department store chain posted net income of $14.4 million, up from $8 million a year ago. Dillard’s, after nearly three years of financial troubles, seems to have turned things around by shuttering stores that did not report strong sales numbers, doing a better job tracking inventory, and buying higher quality products.
Tuesday, December 14, 2010
U.S. Economic News Week Ending December 10, 2010
In the wake of the proposed extension of Bush-era tax breaks and a payroll tax cut, many investors are turning away from U.S. Treasury bonds toward stocks. Prices on U.S. Treasuries and municipal bonds slumped this week as yields on 30-year Treasuries neared a seven-month high and the 10-year Treasury yield reached its highest level since June. The Dow Jones Industrial Average neared and the Standard & Poor’s 500 Stock Index reached a two-year high before faltering during the week amid concerns over the lack of consensus on the domestic tax package and disagreement among the European Union about the extent of bailouts for struggling eurozone countries.
U.S. economic news
Democrats push back against tax compromise plan
Democrats in the U.S. House of Representatives withheld support for President Obama’s tax package on Thursday by agreeing not to vote on the newly negotiated tax package in its current form. A leading Republican said the deal, highlighted by extensions of Bush-era tax cuts for two years and long-term jobless benefits, is flawed because it fails to address fiscal austerity measures that will be needed to help reduce the mounting federal deficit. Despite the House Democrats’ nonbinding resolution, the tax measure moved closer to passage in the Senate.
Consumer credit jumps in October
The U.S. Federal Reserve Board reported that the level of consumer borrowing in the United States rose to $2.4 trillion in October, an increase of $3.4 billion from September. The increase, the most in more than two years, was largely the result of a $9 billion increase in nonrevolving credit, which includes categories such as car loans, to $1.6 trillion. Revolving credit, almost entirely credit card debt, dropped 8.4% for the month, meaning that credit card use has fallen for a record 26th straight month.
Jobless claims drop
The U.S. Department of Labor said that the number of Americans filing initial unemployment claims fell to 421,000 in the week ended December 4. The figure is a decrease of 17,000 from a revised 438,000 claims filed the previous week.
U.S. and global corporate news
Three retailers head into holiday season with strong earnings
Talbots reported that its profit for the fiscal third quarter ended October 30 increased to $17 million from $14.6 million on higher margins. Still, the retailer lowered its earnings forecast for the year, raising concerns about its turnaround plan. Despite cutting debt, buying out its largest shareholder, and revamping its clothing line, the company's revenue in stores open at least one year fell 7.1% for the same period.
Neiman Marcus Group, operator of its namesake store and Bergdorf Goodman, said its profit rose to $25.7 million for the quarter ended October 30. The latest figure, more than triple the $8.5 million profit the company reported a year ago, could be an indication that sales of luxury goods are on the rebound.
Costco posted a profit of $312 million for its first quarter ended November 21, up 18% from $266 million a year earlier. Revenue increased 11% to $19.24 billion, while sales increased 11% to $18.82 billion.
Global economic news
Eurozone officials disagree over size of bailout fund
Eurozone finance ministers met this week to discuss a number of issues, including the rescue package for Ireland, the creation of a temporary bailout fund for other struggling economies, and the possible establishment of a debt agency to issue “e-bonds” in lieu of national debt. Officials are split on the need to increase the size of any bailout fund as German Chancellor Angela Merkel rejected calls from Belgium and central bankers to boost the European Union’s 750 billion euro emergency fund or begin joint bond sales to save countries such as Portugal and Spain.
Ireland’s credit rating cut three levels
Ireland’s credit rating was lowered to “BBB+” from “A+” by Fitch Ratings. It is the second downgrade of the country by Fitch in two months. Ireland agreed to an 85 billion euro bailout from European governments and the International Monetary Fund on November 28.
RBA, BOE hold rates steady
Australia’s central bank voted this week to keep its benchmark interest rate unchanged at 4.75%. The Reserve Bank of Australia (RBA) said it expects inflation to remain contained over the “next few quarters.” The Bank of England’s Monetary Policy Committee also left its key interest rate unchanged at its all-time low rate of 0.5%.
U.S. economic news
Democrats push back against tax compromise plan
Democrats in the U.S. House of Representatives withheld support for President Obama’s tax package on Thursday by agreeing not to vote on the newly negotiated tax package in its current form. A leading Republican said the deal, highlighted by extensions of Bush-era tax cuts for two years and long-term jobless benefits, is flawed because it fails to address fiscal austerity measures that will be needed to help reduce the mounting federal deficit. Despite the House Democrats’ nonbinding resolution, the tax measure moved closer to passage in the Senate.
Consumer credit jumps in October
The U.S. Federal Reserve Board reported that the level of consumer borrowing in the United States rose to $2.4 trillion in October, an increase of $3.4 billion from September. The increase, the most in more than two years, was largely the result of a $9 billion increase in nonrevolving credit, which includes categories such as car loans, to $1.6 trillion. Revolving credit, almost entirely credit card debt, dropped 8.4% for the month, meaning that credit card use has fallen for a record 26th straight month.
Jobless claims drop
The U.S. Department of Labor said that the number of Americans filing initial unemployment claims fell to 421,000 in the week ended December 4. The figure is a decrease of 17,000 from a revised 438,000 claims filed the previous week.
U.S. and global corporate news
Three retailers head into holiday season with strong earnings
Talbots reported that its profit for the fiscal third quarter ended October 30 increased to $17 million from $14.6 million on higher margins. Still, the retailer lowered its earnings forecast for the year, raising concerns about its turnaround plan. Despite cutting debt, buying out its largest shareholder, and revamping its clothing line, the company's revenue in stores open at least one year fell 7.1% for the same period.
Neiman Marcus Group, operator of its namesake store and Bergdorf Goodman, said its profit rose to $25.7 million for the quarter ended October 30. The latest figure, more than triple the $8.5 million profit the company reported a year ago, could be an indication that sales of luxury goods are on the rebound.
Costco posted a profit of $312 million for its first quarter ended November 21, up 18% from $266 million a year earlier. Revenue increased 11% to $19.24 billion, while sales increased 11% to $18.82 billion.
Global economic news
Eurozone officials disagree over size of bailout fund
Eurozone finance ministers met this week to discuss a number of issues, including the rescue package for Ireland, the creation of a temporary bailout fund for other struggling economies, and the possible establishment of a debt agency to issue “e-bonds” in lieu of national debt. Officials are split on the need to increase the size of any bailout fund as German Chancellor Angela Merkel rejected calls from Belgium and central bankers to boost the European Union’s 750 billion euro emergency fund or begin joint bond sales to save countries such as Portugal and Spain.
Ireland’s credit rating cut three levels
Ireland’s credit rating was lowered to “BBB+” from “A+” by Fitch Ratings. It is the second downgrade of the country by Fitch in two months. Ireland agreed to an 85 billion euro bailout from European governments and the International Monetary Fund on November 28.
RBA, BOE hold rates steady
Australia’s central bank voted this week to keep its benchmark interest rate unchanged at 4.75%. The Reserve Bank of Australia (RBA) said it expects inflation to remain contained over the “next few quarters.” The Bank of England’s Monetary Policy Committee also left its key interest rate unchanged at its all-time low rate of 0.5%.
Friday, December 3, 2010
U.S. Economic News Week Ending December 3, 2010
Eurozone debt problems and the still-precarious nature of the U.S. economic recovery dominated the news this week. The euro dropped to a 10-week low, and bond markets across the European periphery sank as investors dismissed European leaders' latest attempt to restore market calm. On Sunday European governments agreed to bail out Ireland and set up a permanent rescue fund in the latest effort to stop the spread of panic that began last year in Greece. But by Tuesday investors were demanding record-high risk premiums for loans to Spain and Italy.
Volatility persisted throughout the week as strong manufacturing reports from China, Germany, and the United Kingdom countered fears about the eurozone. By Friday morning, however, U.S. stocks reversed a two-day rally, and Treasury prices jumped after the November U.S. jobs report dashed widespread hopes that the job market would accelerate last month.
U.S. economic news
Employers add fewer jobs than expected
The U.S. economy added fewer jobs than expected in November, and the unemployment rate unexpectedly increased. Nonfarm payrolls increased 39,000, less than expected, and the jobless rate rose to 9.8%, the highest since April. Hours worked and earnings stagnated. The numbers underline the continued weakness in the labor market, whose turnaround is seen as key to economic recovery. This week the law that extended unemployment benefits to as long as 99 weeks expired after Democratic and Republican senators blocked rival attempts to renew it. That means that extended jobless benefits affecting about two million people are set to expire at the end of the year.
Other data suggest recovery gathering momentum
Despite the discouraging signs from the labor market, other reports showed momentum this week. Retailers have reported robust November sales as consumers kept spending despite high unemployment. U.S. manufacturing expanded for the sixteenth month in a row in November, according to the Institute for Supply Management. Factory output grew as consumers and businesses spent more on autos, computers, and other goods. Also last month, consumer confidence rose, according to the Consumer Confidence Index®. The measure rose to 54.1 in November from 49.9 in October, reaching its highest level in five months
Housing prices still falling
The Standard & Poor's/Case-Shiller index of home values showed that home prices are falling faster in the nation's largest cities than in the rest of the country. The home-price index fell 0.7% in September from August. Eighteen of the 20 cities recorded monthly price declines.
House agrees to extend tax cuts
The U.S. House of Representatives approved legislation this week that would extend the current tax rates on income up to $250,000. They also agreed to allow taxes on higher earnings to increase. However, the legislation is expected to fail in the Senate.
U.S. and global corporate news
S&P puts several Portuguese banks on credit watch
Standard & Poor's said it has put several Portuguese banks on credit watch with negative implications after it did the same with Portugal's long-term rating earlier in the week. The banks put on watch include Banco Santander, Santander Totta, Banco Comercial Portugues, Banco Espirito Santo, Banco BPI and the state-owned Caixa Geral de Depositos. S&P said it believes "that Portugal's macroeconomic challenges and difficult external financing conditions will put pressure on the bank's operating environment, potentially weakening their creditworthiness."
Toll Brothers swings to profit
The luxury home builder Toll Brothers swung to a profit for the second quarter in a row. The builder was helped by a tax benefit and fewer writedowns. At the same time revenues fell less than expected.
Global economic news
ECB extends liquidity measures
As the crisis in Ireland rocked global markets, the European Central Bank opted to extend its special liquidity measures, abandoning plans to wind down emergency support for banks and government debt markets. ECB President Jean-Claude Trichet said the ECB would continue to offer unlimited liquidity to banks for as long as necessary. He added that the bank would continue its special bond purchasing program to support the weakened eurozone debt markets.
Eurozone and U.K. economies show slow recovery
Meanwhile, reports this week showed that the eurozone economy slowed sharply in the third quarter as business investment ground to a halt. The slowing investment suggests companies are still too uncertain about the prospects of recovery to commit more capital. In the United Kingdom, weak confidence and jobs cuts weighed down the dominant services sector, which expanded at a marginally slower pace in November.
India posts 8.9% growth for quarter
India posted an 8.9% year-over-year increase for the quarter ended September 30 as the country's economic expansion continued.
Volatility persisted throughout the week as strong manufacturing reports from China, Germany, and the United Kingdom countered fears about the eurozone. By Friday morning, however, U.S. stocks reversed a two-day rally, and Treasury prices jumped after the November U.S. jobs report dashed widespread hopes that the job market would accelerate last month.
U.S. economic news
Employers add fewer jobs than expected
The U.S. economy added fewer jobs than expected in November, and the unemployment rate unexpectedly increased. Nonfarm payrolls increased 39,000, less than expected, and the jobless rate rose to 9.8%, the highest since April. Hours worked and earnings stagnated. The numbers underline the continued weakness in the labor market, whose turnaround is seen as key to economic recovery. This week the law that extended unemployment benefits to as long as 99 weeks expired after Democratic and Republican senators blocked rival attempts to renew it. That means that extended jobless benefits affecting about two million people are set to expire at the end of the year.
Other data suggest recovery gathering momentum
Despite the discouraging signs from the labor market, other reports showed momentum this week. Retailers have reported robust November sales as consumers kept spending despite high unemployment. U.S. manufacturing expanded for the sixteenth month in a row in November, according to the Institute for Supply Management. Factory output grew as consumers and businesses spent more on autos, computers, and other goods. Also last month, consumer confidence rose, according to the Consumer Confidence Index®. The measure rose to 54.1 in November from 49.9 in October, reaching its highest level in five months
Housing prices still falling
The Standard & Poor's/Case-Shiller index of home values showed that home prices are falling faster in the nation's largest cities than in the rest of the country. The home-price index fell 0.7% in September from August. Eighteen of the 20 cities recorded monthly price declines.
House agrees to extend tax cuts
The U.S. House of Representatives approved legislation this week that would extend the current tax rates on income up to $250,000. They also agreed to allow taxes on higher earnings to increase. However, the legislation is expected to fail in the Senate.
U.S. and global corporate news
S&P puts several Portuguese banks on credit watch
Standard & Poor's said it has put several Portuguese banks on credit watch with negative implications after it did the same with Portugal's long-term rating earlier in the week. The banks put on watch include Banco Santander, Santander Totta, Banco Comercial Portugues, Banco Espirito Santo, Banco BPI and the state-owned Caixa Geral de Depositos. S&P said it believes "that Portugal's macroeconomic challenges and difficult external financing conditions will put pressure on the bank's operating environment, potentially weakening their creditworthiness."
Toll Brothers swings to profit
The luxury home builder Toll Brothers swung to a profit for the second quarter in a row. The builder was helped by a tax benefit and fewer writedowns. At the same time revenues fell less than expected.
Global economic news
ECB extends liquidity measures
As the crisis in Ireland rocked global markets, the European Central Bank opted to extend its special liquidity measures, abandoning plans to wind down emergency support for banks and government debt markets. ECB President Jean-Claude Trichet said the ECB would continue to offer unlimited liquidity to banks for as long as necessary. He added that the bank would continue its special bond purchasing program to support the weakened eurozone debt markets.
Eurozone and U.K. economies show slow recovery
Meanwhile, reports this week showed that the eurozone economy slowed sharply in the third quarter as business investment ground to a halt. The slowing investment suggests companies are still too uncertain about the prospects of recovery to commit more capital. In the United Kingdom, weak confidence and jobs cuts weighed down the dominant services sector, which expanded at a marginally slower pace in November.
India posts 8.9% growth for quarter
India posted an 8.9% year-over-year increase for the quarter ended September 30 as the country's economic expansion continued.
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