U.S. Economic News Week Ending April 1, 2011

Stocks closed out the first quarter of 2011 with the Dow Jones Industrial Average gaining 742 points, its biggest first-quarter point gain in more than a decade. The Standard & Poors 500 Stock Index ended the quarter up 4.8%, its best first-quarter performance since 1998. A surge in merger and acquisition activity renewed optimism among investors that the global recovery remained on track despite spreading political turmoil in the Middle East, sustained higher oil prices, lingering economic and environmental concerns following the Japan earthquake, and sovereign debt downgrades for Greece and Portugal.
Global economic news

U.S. economy creates 216,000 jobs; unemployment rate dips to 8.8%
In a sign that the U.S. labor market may be strengthening, the nations companies added 216,000 jobs in March, more than the 190,000 gain projected by a number of leading economists. The U.S. Department of Labor reported that the jobless rate fell again in March to a two-year low of 8.8%. The governments jobs creation figure is even higher than the 201,000 jobs ADP Employer Services estimated were added to U.S. payrolls last month.

Home prices in U.S. drop again in January
The average price of single-family homes in 20 major U.S. metropolitan areas fell 3.1% from a year ago, according to the Standard & Poors/Case-Shiller Home Price Index. January is the sixth month in a row that U.S. home prices have fallen. Eighteen of the twenty markets covered by the survey recorded year-over-year price declines.

Consumer spending in U.S. rises in February
U.S. consumer spending jumped 0.7% in February, the eighth-straight month of increases. In addition, the U.S. Department of Commerce said that personal incomes rose 0.3% for the month. Still, higher consumer prices absorbed a significant portion of the spending increase. After inflation, the increase was a more modest 0.3%.

U.S. Treasury recoups TARP funds
The U.S. Department of the Treasury reported that money it loaned to banks during the financial crisis has been paid back. The federal bailout and its Troubled Asset Relief Program (TARP) is currently $6 billion in the black. Still, according to published reports, Treasury Secretary Timothy Geithner admitted that the federal government has more work to do repairing the damage caused by the crisis and strengthening the recovery, but today is an important milestone in our efforts to recover taxpayer dollars as we continue winding down TARP.

Confidence of U.S. consumers falls from three-year high
The Conference Boards Consumer Confidence Index fell more than anticipated to 63.4 in March from a revised 72.0 in February. The sharp decline in confidence was driven by a number of global and economic factors, including rising gas and oil prices, the Japan crisis, and ongoing unrest in the Middle East.

Americas CEOs report encouraging outlook for sales, jobs
The Business Roundtable, an association of CEOs at the largest U.S. companies, reported in its first-quarter survey that nearly all its members expect sales to increase over the next six months. More than 60% expect additional investment in their businesses, and over half plan to hire more workers in the next two quarters.

U.S. businesses expand at a faster-than-expected pace
The Institute for Supply Management said its business barometer slipped to 70.6 in March from a reading of 71.2 in February. The index surpassed the 69.6 median projected by economists surveyed by Bloomberg News. An index reading greater than 50 indicates business expansion.

S&P downgrades Greece, Portugal
Ratings agency Standard & Poors lowered its rating of Greek sovereign debt two notches to BB- from BB+, dropping the countrys debt further into junk territory. S&P also cut Portugals senior debt rating by one notch to BBB- from BBB. The most recent cut follows last weeks two-notch downgrade of Portugal, which is now close to losing its investment-grade status for the first time. The outlook for both countries ratings remains negative, according to S&P. Greece has already accepted a three-year plan of emergency help from the European Union and International Monetary Fund. Standard & Poors expects Portugal to ask the IMF and the European Financial Stability Facility for a similar bailout package.

Irish banks need additional 24 billion
A plan to nationalize Irelands banking sector may be imminent after a third round of stress tests revealed that the countrys banks will need an additional capital influx of 24 billion. The stress tests are a condition of the bailout the Irish government agreed to with the European Union and International Monetary Fund in November. With the latest bailout, the total cost of the bank rescue is approximately 70 billion. Irelands government also announced plans for an overhaul of the countrys banking system aimed at restoring investor confidence.

Eurozone confidence slips in March
An index of executive and consumer sentiment in the 17-nation euro region fell slightly to 107.3 in March from a revised 107.9 in February, the European Commission said. The drop in the confidence measure was larger than economists had forecast, as rising oil prices, Middle East unrest, and Japans earthquake resulted in rising pessimism for global growth prospects. Februarys reading was the highest for the index since August 2007.

German unemployment falls to lowest level since 1992
The number of Germans who were out of work dropped a seasonally adjusted 55,000 to 3.01 million, according to the Nuremberg-based Federal Labor Agency. That is the lowest level since June 1992. Germanys unemployment rate fell to 7.1% in March from 7.3% the month before.
Global corporate news

Fujitsu says impact of Japans earthquake to be in billions of yen
Following the countrys March 11 earthquake and tsunami, Japanese electronics conglomerate Fujitsu will have to revise its earnings forecasts for the fiscal year ending this month. Fujitsus president said the quakes impact on earnings will likely exceed several billions of yen. Fujitsu, which has resumed most of its operations in the quake-hit region, is among several major Japanese companies affected by one of the largest natural disasters in the countrys history.

Harry & David to file for bankruptcy protection
Harry & David announced it is preparing to file for Chapter 11 bankruptcy protection. In a prearranged deal with creditors, the specialty gourmet fruit retailer will convert its bond debt to equity and seek to raise additional capital through a new stock sale. The company has been struggling as consumers cut back in the weak economy. In January, the 75-year-old retailer reported that revenue during the critical holiday quarter fell nearly 2%, and last month the company cut approximately 100 jobs.

EBay to buy GSI Commerce for $2.4 billion
EBay agreed to purchase e-commerce company GSI Commerce for $2.4 billion, extending eBays reach into Internet retailing and intensifying the companys rivalry with Amazon. GSIs core business is providing e-commerce infrastructure e-store technology, payment processing, fulfillment, marketing, and customer service for more than 180 top brands and retailers.

GE to purchase stake in Converteam
General Electric agreed to pay $3.2 billion in cash for a controlling stake in Converteam, the power conversion company. The acquisition of the French company, which serves a variety of industries including oil and gas companies, is the latest in a string of deals totaling $11 billion over the past six months aimed at expanding GEs energy business. They have also acquired Dresser Inc., Wellstream Holdings, Lineage Power Holdings, and John Wood Groups well support division.

Qihoo goes public
Chinese Internet company Qihoo 360 went public this week on the New York Stock Exchange, and the companys shares immediately doubled at the start of trading. The Internet software company, which sells antivirus software and security services, raised more than $175 million in its IPO. Qihoo also makes the second-most-used Internet browser in China, behind Microsofts Internet Explorer.

Galaxy reports profit drop
Galaxy Entertainment Group said its net profit fell 22% last year in part because of one-time accounting and valuation adjustments. The casino operator, controlled by the family of tycoon Lui Che Woo, reported that net profit totaled HK$898.46 million last year, down from HK$1.15 billion in 2009. Galaxy is moving ahead with plans to open a HK$14.9 billion casino-resort in Macaus lucrative Cotai area.