Stocks wavered throughout the week as investors watched for news that European leaders were producing a viable plan to stabilize European economies and banks. Better-than-expected corporate earnings reports from many companies buoyed markets.
U.S. and global economic news
European leaders struggle to seal debt deal
Throughout the week European policymakers captured the attention of investors as they worked to come up with a deal to contain the European debt and banking crisis. Finance ministers met in Brussels on Friday to lay the groundwork for an October 23 gathering of government leaders that was to have been the deadline for a solution to the debt crisis. However, another summit was scheduled for October 26 after Germany and France, on Thursday, said that the European Union needed more time to seal a "global and ambitious" accord.
Moody's cuts Spain's debt rating, warns France
Moody's Investors Service downgraded Spain's government bond rating two notches in response to the country's fading growth prospects. The credit rating agency also warned France about its credit rating, noting that France in the months ahead will face challenges such as the possible need to support other European sovereigns or its own. Those challenges are exerting pressure on the stable outlook of France's AAA-debt rating.
China's economic growth slows
China's economy in the third quarter grew 9.1% from a year earlier, the slowest pace since 2009. The news drove global stocks lower amid investor fear that Europe's debt crisis would hinder the global recovery. The economy grew 9.5% in the second quarter of this year.
U.S. existing home sales fall 3%
The National Association of Realtors reported that existing home sales fell 3% in September to a 4.91 million annual rate. The median home price dropped 3.5% from a year ago and about one in five real estate agents polled said contracts had been cancelled. U.S. home construction rose in September, with work beginning on 658,000 homes.
U.S. and global corporate news
Big U.S. banks report mixed results as earnings season heats up
Morgan Stanley saw a $2.15 billion profit for the third quarter. Goldman Sachs reported a rare quarterly loss, and Bank of America lost its title as the biggest U.S. bank by assets to JPMorgan Chase. Microsoft saw 6.1% gains in its net income helped by sales of its Office product. Intel's profit rose 17%, and the company reported its sixth straight quarter of record sales. General Electric's earnings climbed 11% in the third quarter as the finance unit's gains were able to override tighter profit margins in the energy business. Schlumberger, the world's largest oil field services provider, reported third-quarter profits that missed expectation as income from Asia and the Middle East declined. Philip Morris International, the largest publicly traded tobacco company, reported a 30% increase in profit. Higher shipment levels and increased cigarette prices in Asia helped the company beat profit estimates.
iPhone helps Verizon double profits; AT&T suffers as it loses sole carrier status
Verizon's profit doubled in the third quarter as consumers bought its iPhone and Android devices. AT&T’s profit fell 70.6% in the third quarter from a year ago as net income dropped to $3.62 billion from $12.3 billion in the same quarter last year. Last year’s income was boosted by the sale of a subsidiary and a tax settlement. The company, which this year lost the exclusive contract with Apple to carry the iPhone, said it added less than one-half the number of contract customers than it did a year earlier. Also hurting it bottom line, iPhone activations slowed to 2.7 million, nearly one million fewer than in the second quarter. Meanwhile, Apple's profit climbed 54% but missed expectations because it sold fewer-than-expected iPhones.
Groupon tempers IPO
Groupon, the largest online coupon site, is seeking an $11.4 billion valuation from its initial public offering. That is less than one-half the amount discussed with banks earlier this year. The company will offer 30 million shares of Class A common stock at $16 to $18 each.
Tuesday, October 25, 2011
Tuesday, October 18, 2011
U.S Economic News for week ending October 14, 2011
Stocks rose for the third week despite a rash of downgrades that put financial shares under pressure. Investor sentiment got a boost as Group of 20 policymakers began talks on ways to tame the European debt crisis and amid optimism about plans to recapitalize eurozone banks. Solid earnings from Google also gave markets a lift late in the week.
U.S. and global economic news
G 20 starts talks on eurozone rescue plan
The Group of 20 nations began talks to contain Europe's debt woes. Policymakers are discussing an expansion of the International Monetary Fund's role as they seek to come up with rescue measures for the region. Some officials are considering boosting the IMF's lending capacity. On Wednesday the European Commission set out its plan to shore up European banks.
S&P downgrades Spain to AA-
Standard & Poor's Ratings Services downgraded Spain for the third time in three years as slowing growth and rising defaults threaten banks and undermine efforts to contain Europe's sovereign debt crisis. Its rating was lowered one level to AA-.
Harrisburg, Pennsylvania files for bankruptcy
Pennsylvania's capital city, Harrisburg, filed for bankruptcy protection from creditors after a faction of the city council repeatedly rejected a state-backed plan that called for selling or leasing assets to pay down debt. The case is being closely watched by other cities and towns looking for ways out of financial troubles. Harrisburg is the second city to file for such Chapter 9 protection this year. In August, Central Falls, Rhode Island filed for bankruptcy protection after retired city workers refused to accept an offer to cut their pensions.
U.S. retail sales rise more than expected
U.S. retail sales rose a more-than-expected 1.1% in September as consumers spent more on cars, clothing, and fuel. The gains were broad based and also seen in restaurants, furniture, and department stores. The increase eased some concern that slumping consumer confidence will hurt spending.
U.S. trade gap with China hits record
The U.S. trade gap with China, the fastest growing major market, widened 7.4% to a new record in August — $28.96 billion. Globally, the U.S. trade deficit narrowed to $45.61 billion.
European inflation accelerates
European inflation accelerated to 3% in September, the fastest pace in almost three years, amid rising energy costs. The inflation complicates the job of the European Central Bank as it seeks to keep interest rates low to combat the region's debt woes.
U.S. and global corporate news
Fitch downgrades UBS, RBS, and Lloyds
Fitch Ratings downgraded Swiss banking giant UBS and foreshadowed possible ratings cuts for other European banks as the lenders continued to grapple with the debt problems. UBS' long-term issuer default rating was cut to A from A+ as the bank struggles to recover from a multi-billion-dollar trading scandal that has already triggered a slew of management changes. Fitch said it was concerned about waning government support for the bank. This week, Fitch also cut ratings on Royal Bank of Scotland and Lloyds Banking Group after determining they are also less likely to receive government support in the future. RBS and Lloyds are 83% and 41% state-held, respectively. Both were downgraded two notches to A from
AA-. Barclays, which has never taken direct state support and is rated
AA-, was put on Ratings Watch Negative.
Apple's iPhone 4S hits stores
Apple's iPhone 4S hit stores on Friday and sold out for preorder at AT&T, Verizon Wireless, and Sprint Nextel on Thursday. Apple said that it had received more than 1 million iPhone pre-orders — a record for the company — on October 7, the first day of preorders.
Google's profits jump 26%
Google's profits rose a better-than-expected 26% in the third quarter, and revenue jumped 33% amid record spending on online advertising.
JPMorgan's profits fall 33%
JPMorgan Chase reported its profits fell 33% because of weak results in its investment-banking operations, which were not offset by strong lending and revenue gains. JPMorgan Chase is the first of the big banks to report results and is watched as a barometer.
BofA to cut 324 New York jobs
Bank of America plans to cut 324 jobs in New York beginning next month. The reduction will include investment bankers and equity traders and comes as the lender seeks to reduce expenses after losing half its market value. The cuts are part of plans to eliminate 3,500 jobs that were announced in August.
U.S. and global economic news
G 20 starts talks on eurozone rescue plan
The Group of 20 nations began talks to contain Europe's debt woes. Policymakers are discussing an expansion of the International Monetary Fund's role as they seek to come up with rescue measures for the region. Some officials are considering boosting the IMF's lending capacity. On Wednesday the European Commission set out its plan to shore up European banks.
S&P downgrades Spain to AA-
Standard & Poor's Ratings Services downgraded Spain for the third time in three years as slowing growth and rising defaults threaten banks and undermine efforts to contain Europe's sovereign debt crisis. Its rating was lowered one level to AA-.
Harrisburg, Pennsylvania files for bankruptcy
Pennsylvania's capital city, Harrisburg, filed for bankruptcy protection from creditors after a faction of the city council repeatedly rejected a state-backed plan that called for selling or leasing assets to pay down debt. The case is being closely watched by other cities and towns looking for ways out of financial troubles. Harrisburg is the second city to file for such Chapter 9 protection this year. In August, Central Falls, Rhode Island filed for bankruptcy protection after retired city workers refused to accept an offer to cut their pensions.
U.S. retail sales rise more than expected
U.S. retail sales rose a more-than-expected 1.1% in September as consumers spent more on cars, clothing, and fuel. The gains were broad based and also seen in restaurants, furniture, and department stores. The increase eased some concern that slumping consumer confidence will hurt spending.
U.S. trade gap with China hits record
The U.S. trade gap with China, the fastest growing major market, widened 7.4% to a new record in August — $28.96 billion. Globally, the U.S. trade deficit narrowed to $45.61 billion.
European inflation accelerates
European inflation accelerated to 3% in September, the fastest pace in almost three years, amid rising energy costs. The inflation complicates the job of the European Central Bank as it seeks to keep interest rates low to combat the region's debt woes.
U.S. and global corporate news
Fitch downgrades UBS, RBS, and Lloyds
Fitch Ratings downgraded Swiss banking giant UBS and foreshadowed possible ratings cuts for other European banks as the lenders continued to grapple with the debt problems. UBS' long-term issuer default rating was cut to A from A+ as the bank struggles to recover from a multi-billion-dollar trading scandal that has already triggered a slew of management changes. Fitch said it was concerned about waning government support for the bank. This week, Fitch also cut ratings on Royal Bank of Scotland and Lloyds Banking Group after determining they are also less likely to receive government support in the future. RBS and Lloyds are 83% and 41% state-held, respectively. Both were downgraded two notches to A from
AA-. Barclays, which has never taken direct state support and is rated
AA-, was put on Ratings Watch Negative.
Apple's iPhone 4S hits stores
Apple's iPhone 4S hit stores on Friday and sold out for preorder at AT&T, Verizon Wireless, and Sprint Nextel on Thursday. Apple said that it had received more than 1 million iPhone pre-orders — a record for the company — on October 7, the first day of preorders.
Google's profits jump 26%
Google's profits rose a better-than-expected 26% in the third quarter, and revenue jumped 33% amid record spending on online advertising.
JPMorgan's profits fall 33%
JPMorgan Chase reported its profits fell 33% because of weak results in its investment-banking operations, which were not offset by strong lending and revenue gains. JPMorgan Chase is the first of the big banks to report results and is watched as a barometer.
BofA to cut 324 New York jobs
Bank of America plans to cut 324 jobs in New York beginning next month. The reduction will include investment bankers and equity traders and comes as the lender seeks to reduce expenses after losing half its market value. The cuts are part of plans to eliminate 3,500 jobs that were announced in August.
Friday, October 7, 2011
U.S. economic news for the week ended October 7, 2011
Stocks clawed their way back this week from near bear-market territory amid optimism that European leaders are making progress in containing the region's sovereign debt crisis and as better-than-expected U.S. economic data added to evidence that the United States is maintaining its expansion.
U.S. and global economic news
ECB resumes bond purchases
The European Central Bank resumed covered bond purchases and reintroduced year-long loans for banks. The central bank, however, did not cut interest rates, keeping its benchmark at 1.5% at its meeting this week. The ECB did acknowledge that the downside risks to the economy have intensified. Meanwhile the European Commission has been pushing for a coordinated capital injection for banks to shield them from the fallout of a potential Greek debt default.
BOE expands bond-buying program
The Bank of England this week expanded its bond-buying program for the first time in two years. The bank raised the ceiling for so-called quantitative easing to £275 billion from £200 billion in an effort to stop the euro region debt crisis from pushing the U.K. economy back into recession.
U.S. employers add more jobs than expected
The U.S. Department of Labor reported that employers added more jobs that expected in September and that job gains were revised up for the prior two months. The news eased some concern over the possibility of renewed recession, although the pace of job growth is still too slow to push down the unemployment rate, which held at 9.1%. Payrolls rose by 103,000.
Other U.S. data also positive
Other encouraging U.S. economic news helped bolster investor sentiment this week. U.S. manufacturing unexpectedly accelerated in September, and service sector activity and same-store sales results from retailers topped expectations.
Japan's Tankan shows manufacturers' sentiment still weak
The Bank of Japan's quarterly Tankan index of sentiment at large manufacturers rose to 2 in September from - 9 in June. The reading shows that sentiment is worse than it was before the March earthquake, a signal that concern over a weakening global demand will restrain the nation's recovery.
U.S. and global corporate news
Moody's downgrades U.K. and Portuguese banks
Moody's Investors Service cut the senior debt and deposit ratings of 12 British lenders, noting that the government would be less likely to provide support for the banks in the event of failure. The Bank of England, the Financial Services Authority, and the Treasury have said that in the future banks that fail should not expect a taxpayer-funded bailout. Lloyds TSB Bank, Santander UK, and Co-operative Bank had their ratings lowered one step while Royal Bank of Scotland and Nationwide Building Society were cut two levels. Moody's also lowered its standalone ratings for six Portuguese banks, citing lower asset quality, increased risk from Portuguese sovereign debt holdings, and funding strains.
Apple's shares hold steady after Jobs' death; iPhone 4S debut.
Apple's shares held steady following the death of Steve Jobs, Apple's chairman and cofounder. Jobs had battled pancreatic cancer and stepped down as chief executive in August. His death came two days after Apple debuted its iPhone 4S. The long awaited device will use two antennas to improve call quality and a processor that is seven times faster than the chip in the previous iPhone.
Sprint to offer iPhone
Sprint Nextel struck a deal to offer Apple's iPhone, joining rivals AT&T and Verizon. Sprint had been struggling to compete with those rivals, who were able to lure potential customers with the offer of the iPhone.
Dexia to split up
Franco-Belgian bank Dexia announced a planned breakup to protect its Belgian depositors and its municipal-lending business in France. France and Belgium are trying to split up, bank's assets in a manner designed to avoid injecting more capital. Trading in Dexia's shares was suspended on Thursday as governments and the bank's management scrambled to figure out what to do with the lender. The bank is said to have heavy exposure to Greek and Italian debt, a factor that has made other financial institution wary of lending to it.
Friendly's files for Chapter 11
Hurt by a weak economy and rising commodity costs, the Friendly's restaurant chain filed for Chapter 11 bankruptcy protection.
U.S. and global economic news
ECB resumes bond purchases
The European Central Bank resumed covered bond purchases and reintroduced year-long loans for banks. The central bank, however, did not cut interest rates, keeping its benchmark at 1.5% at its meeting this week. The ECB did acknowledge that the downside risks to the economy have intensified. Meanwhile the European Commission has been pushing for a coordinated capital injection for banks to shield them from the fallout of a potential Greek debt default.
BOE expands bond-buying program
The Bank of England this week expanded its bond-buying program for the first time in two years. The bank raised the ceiling for so-called quantitative easing to £275 billion from £200 billion in an effort to stop the euro region debt crisis from pushing the U.K. economy back into recession.
U.S. employers add more jobs than expected
The U.S. Department of Labor reported that employers added more jobs that expected in September and that job gains were revised up for the prior two months. The news eased some concern over the possibility of renewed recession, although the pace of job growth is still too slow to push down the unemployment rate, which held at 9.1%. Payrolls rose by 103,000.
Other U.S. data also positive
Other encouraging U.S. economic news helped bolster investor sentiment this week. U.S. manufacturing unexpectedly accelerated in September, and service sector activity and same-store sales results from retailers topped expectations.
Japan's Tankan shows manufacturers' sentiment still weak
The Bank of Japan's quarterly Tankan index of sentiment at large manufacturers rose to 2 in September from - 9 in June. The reading shows that sentiment is worse than it was before the March earthquake, a signal that concern over a weakening global demand will restrain the nation's recovery.
U.S. and global corporate news
Moody's downgrades U.K. and Portuguese banks
Moody's Investors Service cut the senior debt and deposit ratings of 12 British lenders, noting that the government would be less likely to provide support for the banks in the event of failure. The Bank of England, the Financial Services Authority, and the Treasury have said that in the future banks that fail should not expect a taxpayer-funded bailout. Lloyds TSB Bank, Santander UK, and Co-operative Bank had their ratings lowered one step while Royal Bank of Scotland and Nationwide Building Society were cut two levels. Moody's also lowered its standalone ratings for six Portuguese banks, citing lower asset quality, increased risk from Portuguese sovereign debt holdings, and funding strains.
Apple's shares hold steady after Jobs' death; iPhone 4S debut.
Apple's shares held steady following the death of Steve Jobs, Apple's chairman and cofounder. Jobs had battled pancreatic cancer and stepped down as chief executive in August. His death came two days after Apple debuted its iPhone 4S. The long awaited device will use two antennas to improve call quality and a processor that is seven times faster than the chip in the previous iPhone.
Sprint to offer iPhone
Sprint Nextel struck a deal to offer Apple's iPhone, joining rivals AT&T and Verizon. Sprint had been struggling to compete with those rivals, who were able to lure potential customers with the offer of the iPhone.
Dexia to split up
Franco-Belgian bank Dexia announced a planned breakup to protect its Belgian depositors and its municipal-lending business in France. France and Belgium are trying to split up, bank's assets in a manner designed to avoid injecting more capital. Trading in Dexia's shares was suspended on Thursday as governments and the bank's management scrambled to figure out what to do with the lender. The bank is said to have heavy exposure to Greek and Italian debt, a factor that has made other financial institution wary of lending to it.
Friendly's files for Chapter 11
Hurt by a weak economy and rising commodity costs, the Friendly's restaurant chain filed for Chapter 11 bankruptcy protection.
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