Stocks fell throughout the week amid further evidence that the U.S. economic recovery is losing steam. On Thursday, the Dow Jones Industrial Average closed below the psychologically important 10,000 level. Friday's pledge by U.S. Federal Reserve Board Chairman Ben Bernanke to safeguard the U.S. economic recovery sparked a rally early Friday but did not seem to provide investors enough encouragement to erase earlier losses.
U.S. economic news
Bernanke pledges Fed to do all it can to ensure recovery
U.S. Federal Reserve Board Chairman Ben Bernanke said Friday that the U.S. central bank "will do all that it can" to ensure economic recovery continues. He outlined steps the Fed might take if the economy slows. In his opening remarks to the world's central bankers in Jackson Hole, Wyoming, Bernanke said the Fed is prepared to provide additional monetary accommodation through unconventional measures if necessary.
GDP grows more slowly than thought
The U.S. economy grew more slowly that initially estimated in the second quarter and corporate profits nearly dried up. Gross Domestic Product rose from April through June at an annualized seasonally adjusted rate of 1.6%. A month ago, the government estimated the rate at 2.4% after a 3.7% expansion in the first quarter. After-tax earnings rose 0.1%, off the previous quarter's 11.4% gain.
Weak durable goods orders, drop in home sales show recovery losing pace
Weakness in durable goods orders and a drop to historic lows in new-home sales offered more signs that the economy is losing momentum. Durable goods orders rose 0.3% in July from June, mostly on the back of an increase in aircraft orders. Excluding the volatile transportation sector, orders tumbled 3.8%.
Also this week, reports showed that sales of new single-family homes fell 12.4% in July from June to a seasonally adjusted rate of 276,000, the lowest level since the data series began in 1963. Many purchasers seem to have left the markets since the expiration on April 30 of a federal tax credit for homebuyers. Existing home sales suffered a similar decline, dropping a record 27.2% to their lowest level in 15 years, as inventories soared to their highest level in more than a decade. Adding to the discouraging news were reports by the Federal Reserve Bank of Kansas City that manufacturing activity in the district stalled.
Initial jobless claims decline more than expected
More encouragingly, initial jobless claims declined by 31,000 to 473,000, more than the 10,000 drop predicted by economists. However, new claims for the previous week were revised upward, and the four-week moving average rose to the highest level since November 2009.
U.S. and global corporate news
Toyota Motor announced it will recall about 1.13 million Corolla and Matrix cars for an engine defect that U.S. regulators said could cause stalling. The recall will affect model years 2005 to 2008 in the United States and Canada and comes after three reported accidents linked to the defect. GM will recall approximately 200,000 of the Pontiac Vibe, which was designed and engineered by Toyota and built alongside the Matrix at a joint manufacturing plant in California.
Johnson & Johnson pulled two hip-repair implants off the market because of quality problems. That recall, administered through J&J's DePuy Orthopaedics unit, came the same week that J&J's Vision Care unit withdrew about 100,000 boxes of contact lenses sold in Asia and Europe because of a manufacturing problem.
Spirits giant Diageo reported its net profit rose 1.5% for the year ended June 30. Sales increased 5% but were up only 2% when stripping out the effects of currency fluctuations, acquisitions, and disposals. During the fiscal year, Diageo benefited from an 11% jump in organic net sales in emerging markets, including China and India, but suffered a 2% sales decline in the developed world.
Global economic news
U.K. economy expands 1.2%
The U.K. economy expanded 1.2% in the second quarter, marking its biggest growth spurt since 2001, as companies rebuilt inventories and construction work surged.
Standard & Poor's downgrades Ireland; Fitch upgrades Rwanda
Standard & Poor's Ratings Services cut its long-term sovereign credit rating on Ireland one notch to AA-. The company said the projected fiscal cost to the Irish government of supporting the financial sector has increased significantly above prior estimates. Ireland's banks were hit by the property market crash; as a result, the Irish government was forced to pump billions of euros into the banks.
Meanwhile, Fitch Ratings upgraded Rwanda, citing the African nation's "strong growth" and an improvement in its business environment. It noted that the country has posted an "uninterrupted" period of strong economic growth that has more than doubled its per capita income since 1994, when genocide killed some 800,000 people. The rating was upgraded to B, five steps below investment grade.
Japan's exports rise, albeit at a slower rate
Japan's exports rose in July for the eighth month in a row as sales of products, such as cars and electronic components, in emerging markets were still solid. However, the rate of growth slowed for the fifth month in a row. That pace is expected to slow even more if the yen, which this week surged to a 15-year high against the dollar, continues to appreciate.
Friday, August 27, 2010
Friday, August 20, 2010
U.S. Economic News Week Ending August 20, 2010
Despite signs that the U.S. economy is recovering, initial unemployment claims and the four-week moving average both rose to their highest levels since late 2009. Meanwhile, producer prices and industrial production showed modest improvement.
Globally, economic signals also were mixed, with inflation rising in the eurozone while tapering in India. Japanese economic growth slowed to a crawl, while Germany’s central bank raised its economic forecast for 2010.
Stock markets reflected this ambivalence with a lackluster weekly performance. As of Friday morning, major U.S. stock indices had lost less than 1%, while major European indices were off about 2% and the largest Asian markets were down slightly for the week. Yields fell to 0.47% on two-year U.S. Treasury notes and 2.55% on 10-year Treasury notes as investors were drawn to safe havens in response to fears of ongoing economic weakness. Along a similar safety theme, gold futures rose for seven straight daily sessions through Thursday, hitting a seven-week peak of $1,235 an ounce for gold contracts for December delivery.
U.S. economic news
U.S. weekly jobless claims reach 500,000
Initial unemployment claims rose unexpectedly again, hitting 500,000 for the week ended August 14. Claims increased by 12,000, though economists surveyed by Dow Jones Newswires had predicted a decline of 4,000. The four-week moving average rose by 8,000 to 482,500. The weekly jobless claims number and the four-week average reached their highest levels since late in 2009. As previously reported, the economy lost 131,000 jobs in July. Together, these reports signal a struggling economic recovery.
Philadelphia-area manufacturing index weakens
The Federal Reserve Bank of Philadelphia’s general economic index turned negative in August, signaling an economic contraction for the first time since July 2009. The widely watched survey fell to minus 7.7 from plus 5.1 in early July. Economists surveyed by Bloomberg News had forecast a rise to plus 7.
Industrial production up slightly
U.S. industrial production rose 1% from June to July, the U.S. Federal Reserve Board reported. This was slightly better than expected.
Producer prices perk up, deflation fears ease
The U.S. Department of Labor’s Producer Price Index increased 0.2% in July after a drop of 0.5% in June. It was the index’s first rise in three months and helped ease growing concerns about deflation.
U.S. and global corporate news
BHP Billiton aims to take over Potash Corp.
Australian mining powerhouse BHP Billiton said it would ask Saskatchewan-based Potash Corp.’s shareholders directly to approve its $38.6 billion all-cash takeover bid after the fertilizer company’s board rejected the offer. The proposed acquisition needs approval from at least 50% of Potash shareholders.
Intel to acquire McAfee
Computer maker Intel agreed to pay $7.7 billion to buy computer-security software maker McAfee in the latest in a series of technology company acquisitions as profitable companies take advantage of low valuations to make bargain purchases.
GM files for an IPO
General Motors filed for a public stock offering that would allow the federal government to begin selling its 61% stake in the automaker and help GM raise money for its turnaround. GM’s interim CEO, Edward E. Whitacre, Jr., who oversaw the automaker’s dramatic return to profitability this year, will step down as chief executive September 1 and as chairman at year end. Last week, GM announced a second-quarter profit of $1.3 billion, its strongest quarter in six years.
Tech bellwethers post profits
Hewlett-Packard and Dell both reported improved profits for the quarter just ended, signaling strength in the technology sector. HP posted a 6% increase in profits on an 11% rise in revenue. Rival computer maker Dell’s profit rose 15% and its revenues were 22% higher than a year earlier.
Deere’s profit leaps
Deere & Company, the world’s largest manufacturer of farm machinery, announced a 47% jump in quarterly earnings as sales of large farm machinery and construction equipment rebounded. U.S. sales rose because of robust commodity prices, strong cash receipts from farming, and low interest rates. However, European demand continued to be weak.
Wal-Mart earnings up on non-U.S. results
Wal-Mart Stores posted a 3.6% increase in second-quarter earnings, with strong international results leading the way. The discount retail chain’s international sales and operating income had double-digit growth. However, its U.S. same-store sales fell for the fifth straight quarter.
Williams-Sonoma earnings soar
Williams-Sonoma, a retailer of housewares and home decor, posted a $30.8 billion profit for its quarter ended July 31, compared with just $399,000 during the same period a year ago. Excluding restructuring and other charges, the company grew its earnings six-fold. Revenue rose 15% and same-store sales grew 14%
U.S. and global corporate news
BHP Billiton aims to take over Potash Corp.
Australian mining powerhouse BHP Billiton said it would ask Saskatchewan-based Potash Corp.’s shareholders directly to approve its $38.6 billion all-cash takeover bid after the fertilizer company’s board rejected the offer. The proposed acquisition needs approval from at least 50% of Potash shareholders.
Intel to acquire McAfee
Computer maker Intel agreed to pay $7.7 billion to buy computer-security software maker McAfee in the latest in a series of technology company acquisitions as profitable companies take advantage of low valuations to make bargain purchases.
GM files for an IPO
General Motors filed for a public stock offering that would allow the federal government to begin selling its 61% stake in the automaker and help GM raise money for its turnaround. GM’s interim CEO, Edward E. Whitacre, Jr., who oversaw the automaker’s dramatic return to profitability this year, will step down as chief executive September 1 and as chairman at year end. Last week, GM announced a second-quarter profit of $1.3 billion, its strongest quarter in six years.
Tech bellwethers post profits
Hewlett-Packard and Dell both reported improved profits for the quarter just ended, signaling strength in the technology sector. HP posted a 6% increase in profits on an 11% rise in revenue. Rival computer maker Dell’s profit rose 15% and its revenues were 22% higher than a year earlier.
Deere’s profit leaps
Deere & Company, the world’s largest manufacturer of farm machinery, announced a 47% jump in quarterly earnings as sales of large farm machinery and construction equipment rebounded. U.S. sales rose because of robust commodity prices, strong cash receipts from farming, and low interest rates. However, European demand continued to be weak.
Wal-Mart earnings up on non-U.S. results
Wal-Mart Stores posted a 3.6% increase in second-quarter earnings, with strong international results leading the way. The discount retail chain’s international sales and operating income had double-digit growth. However, its U.S. same-store sales fell for the fifth straight quarter.
Williams-Sonoma earnings soar
Williams-Sonoma, a retailer of housewares and home decor, posted a $30.8 billion profit for its quarter ended July 31, compared with just $399,000 during the same period a year ago. Excluding restructuring and other charges, the company grew its earnings six-fold. Revenue rose 15% and same-store sales grew 14%.
Global economic news
China passes Japan as world’s second-largest economy
In the latest reminder of China’s growing clout and Japan’s decline as an economic giant, China replaced Japan as the world’s second-largest economy in the second quarter. China’s economic output was valued at $1.33 trillion in the second quarter while Japan’s economy stood at $1.28 trillion. Japan has had the world’s second-largest economy for most of the last four decades. In comparison, U.S. second-quarter gross domestic product was $14.6 trillion, according to the U.S. Department of Commerce.
German central bank raises economic forecast
The Deutsche Bundesbank raised its 2010 forecast for German economic growth to 3% from 1.9% after second-quarter figures released last week showed surprising strength. The country's economy grew at its fastest pace in 20 years, fueled by robust growth in exports.
Japan’s GDP slows to a crawl
Japan’s economy grew at an anemic 0.4% in the second quarter, falling far below expectations because of stagnant consumption and weak exports. Strength in the yen is weighing down demand for Japanese exports.
Taiwan economy grows
Taiwan’s economy grew at a robust 12.53% in the second quarter, much faster than the median forecast of 10.5% in a Dow Jones Newswires poll, prompting the Taiwanese government to raise its full-year GDP growth forecast to 8.24% for 2010, from 6.14%.
Inflation climbs in eurozone, eases in India
An increase in eurozone inflation and a decrease in the rate of rising prices in India could both be considered good news. Higher energy prices in Europe caused the eurozone annual inflation rate to rise to 1.7%, its highest annual rate since November 2008, but still below the European Central Bank’s target of 2.0%. In India, wholesale inflation tapered to 9.97% in July from 10.55% in June.
Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.
The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, or as an indication of trading intent on behalf of any MFS product.
Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual, or quarterly report. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section on mfs.com.
Past performance is no guarantee of future results.
Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times
Globally, economic signals also were mixed, with inflation rising in the eurozone while tapering in India. Japanese economic growth slowed to a crawl, while Germany’s central bank raised its economic forecast for 2010.
Stock markets reflected this ambivalence with a lackluster weekly performance. As of Friday morning, major U.S. stock indices had lost less than 1%, while major European indices were off about 2% and the largest Asian markets were down slightly for the week. Yields fell to 0.47% on two-year U.S. Treasury notes and 2.55% on 10-year Treasury notes as investors were drawn to safe havens in response to fears of ongoing economic weakness. Along a similar safety theme, gold futures rose for seven straight daily sessions through Thursday, hitting a seven-week peak of $1,235 an ounce for gold contracts for December delivery.
U.S. economic news
U.S. weekly jobless claims reach 500,000
Initial unemployment claims rose unexpectedly again, hitting 500,000 for the week ended August 14. Claims increased by 12,000, though economists surveyed by Dow Jones Newswires had predicted a decline of 4,000. The four-week moving average rose by 8,000 to 482,500. The weekly jobless claims number and the four-week average reached their highest levels since late in 2009. As previously reported, the economy lost 131,000 jobs in July. Together, these reports signal a struggling economic recovery.
Philadelphia-area manufacturing index weakens
The Federal Reserve Bank of Philadelphia’s general economic index turned negative in August, signaling an economic contraction for the first time since July 2009. The widely watched survey fell to minus 7.7 from plus 5.1 in early July. Economists surveyed by Bloomberg News had forecast a rise to plus 7.
Industrial production up slightly
U.S. industrial production rose 1% from June to July, the U.S. Federal Reserve Board reported. This was slightly better than expected.
Producer prices perk up, deflation fears ease
The U.S. Department of Labor’s Producer Price Index increased 0.2% in July after a drop of 0.5% in June. It was the index’s first rise in three months and helped ease growing concerns about deflation.
U.S. and global corporate news
BHP Billiton aims to take over Potash Corp.
Australian mining powerhouse BHP Billiton said it would ask Saskatchewan-based Potash Corp.’s shareholders directly to approve its $38.6 billion all-cash takeover bid after the fertilizer company’s board rejected the offer. The proposed acquisition needs approval from at least 50% of Potash shareholders.
Intel to acquire McAfee
Computer maker Intel agreed to pay $7.7 billion to buy computer-security software maker McAfee in the latest in a series of technology company acquisitions as profitable companies take advantage of low valuations to make bargain purchases.
GM files for an IPO
General Motors filed for a public stock offering that would allow the federal government to begin selling its 61% stake in the automaker and help GM raise money for its turnaround. GM’s interim CEO, Edward E. Whitacre, Jr., who oversaw the automaker’s dramatic return to profitability this year, will step down as chief executive September 1 and as chairman at year end. Last week, GM announced a second-quarter profit of $1.3 billion, its strongest quarter in six years.
Tech bellwethers post profits
Hewlett-Packard and Dell both reported improved profits for the quarter just ended, signaling strength in the technology sector. HP posted a 6% increase in profits on an 11% rise in revenue. Rival computer maker Dell’s profit rose 15% and its revenues were 22% higher than a year earlier.
Deere’s profit leaps
Deere & Company, the world’s largest manufacturer of farm machinery, announced a 47% jump in quarterly earnings as sales of large farm machinery and construction equipment rebounded. U.S. sales rose because of robust commodity prices, strong cash receipts from farming, and low interest rates. However, European demand continued to be weak.
Wal-Mart earnings up on non-U.S. results
Wal-Mart Stores posted a 3.6% increase in second-quarter earnings, with strong international results leading the way. The discount retail chain’s international sales and operating income had double-digit growth. However, its U.S. same-store sales fell for the fifth straight quarter.
Williams-Sonoma earnings soar
Williams-Sonoma, a retailer of housewares and home decor, posted a $30.8 billion profit for its quarter ended July 31, compared with just $399,000 during the same period a year ago. Excluding restructuring and other charges, the company grew its earnings six-fold. Revenue rose 15% and same-store sales grew 14%
U.S. and global corporate news
BHP Billiton aims to take over Potash Corp.
Australian mining powerhouse BHP Billiton said it would ask Saskatchewan-based Potash Corp.’s shareholders directly to approve its $38.6 billion all-cash takeover bid after the fertilizer company’s board rejected the offer. The proposed acquisition needs approval from at least 50% of Potash shareholders.
Intel to acquire McAfee
Computer maker Intel agreed to pay $7.7 billion to buy computer-security software maker McAfee in the latest in a series of technology company acquisitions as profitable companies take advantage of low valuations to make bargain purchases.
GM files for an IPO
General Motors filed for a public stock offering that would allow the federal government to begin selling its 61% stake in the automaker and help GM raise money for its turnaround. GM’s interim CEO, Edward E. Whitacre, Jr., who oversaw the automaker’s dramatic return to profitability this year, will step down as chief executive September 1 and as chairman at year end. Last week, GM announced a second-quarter profit of $1.3 billion, its strongest quarter in six years.
Tech bellwethers post profits
Hewlett-Packard and Dell both reported improved profits for the quarter just ended, signaling strength in the technology sector. HP posted a 6% increase in profits on an 11% rise in revenue. Rival computer maker Dell’s profit rose 15% and its revenues were 22% higher than a year earlier.
Deere’s profit leaps
Deere & Company, the world’s largest manufacturer of farm machinery, announced a 47% jump in quarterly earnings as sales of large farm machinery and construction equipment rebounded. U.S. sales rose because of robust commodity prices, strong cash receipts from farming, and low interest rates. However, European demand continued to be weak.
Wal-Mart earnings up on non-U.S. results
Wal-Mart Stores posted a 3.6% increase in second-quarter earnings, with strong international results leading the way. The discount retail chain’s international sales and operating income had double-digit growth. However, its U.S. same-store sales fell for the fifth straight quarter.
Williams-Sonoma earnings soar
Williams-Sonoma, a retailer of housewares and home decor, posted a $30.8 billion profit for its quarter ended July 31, compared with just $399,000 during the same period a year ago. Excluding restructuring and other charges, the company grew its earnings six-fold. Revenue rose 15% and same-store sales grew 14%.
Global economic news
China passes Japan as world’s second-largest economy
In the latest reminder of China’s growing clout and Japan’s decline as an economic giant, China replaced Japan as the world’s second-largest economy in the second quarter. China’s economic output was valued at $1.33 trillion in the second quarter while Japan’s economy stood at $1.28 trillion. Japan has had the world’s second-largest economy for most of the last four decades. In comparison, U.S. second-quarter gross domestic product was $14.6 trillion, according to the U.S. Department of Commerce.
German central bank raises economic forecast
The Deutsche Bundesbank raised its 2010 forecast for German economic growth to 3% from 1.9% after second-quarter figures released last week showed surprising strength. The country's economy grew at its fastest pace in 20 years, fueled by robust growth in exports.
Japan’s GDP slows to a crawl
Japan’s economy grew at an anemic 0.4% in the second quarter, falling far below expectations because of stagnant consumption and weak exports. Strength in the yen is weighing down demand for Japanese exports.
Taiwan economy grows
Taiwan’s economy grew at a robust 12.53% in the second quarter, much faster than the median forecast of 10.5% in a Dow Jones Newswires poll, prompting the Taiwanese government to raise its full-year GDP growth forecast to 8.24% for 2010, from 6.14%.
Inflation climbs in eurozone, eases in India
An increase in eurozone inflation and a decrease in the rate of rising prices in India could both be considered good news. Higher energy prices in Europe caused the eurozone annual inflation rate to rise to 1.7%, its highest annual rate since November 2008, but still below the European Central Bank’s target of 2.0%. In India, wholesale inflation tapered to 9.97% in July from 10.55% in June.
Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.
The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell, or as an indication of trading intent on behalf of any MFS product.
Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual, or quarterly report. Full holdings are also available on the individual Fund Profile tab in the Products and Performance section on mfs.com.
Past performance is no guarantee of future results.
Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times
Saturday, August 14, 2010
U.S. Economic News Week Ending August 13, 2010
Stocks fell throughout the week as worries intensified that global growth is slowing. Investors dumped commodities and riskier currencies amid a flight to safety that sent the U.S. dollar, U.S. Treasuries, the Japanese yen, and gold higher. The U.S. Federal Reserve Board's (Fed) downgrade of its assessment of the U.S. economy and its vow to stop shrinking its securities portfolio intensified concerns about a fading recovery. Another poor jobs report and a profit warning from technology giant Cisco Systems on Thursday accelerated the equity decline.
U.S. economic news
Fed downgrades assessment of U.S. economic recovery
The Fed said this week that "the pace of economic recovery is likely to be more modest in the near term than had been anticipated." The central bank said it will buy U.S. Treasuries with proceeds from mortgage holdings. It set a $2.05 trillion floor on its holdings of government bonds and housing debt to buoy an economic recovery. The Fed's statement followed a government report last month that showed the recession that started in December 2007 was worse than estimated.
Increase in jobless claims adds to evidence of weakening economy
An unexpected increase in jobless claims this week added to evidence that the economy is weakening. The number of U.S. workers making new claims for jobless benefits climbed last week to the highest level in six months. Initial unemployment claims rose by 2,000 to 484,000 in the week ended August 7, according to the U.S. Department of Labor. Also this week, reports showed personal incomes fell in the United States last year, except in areas with a high concentration of federal government and military jobs.
Retail sales rise less than forecast
Retail sales rose less than forecast in July as a lack of jobs caused consumers to hold back on spending. Sales rose 0.4%, led by autos and gasoline. Economists predicted a 0.5% gain.
Cost of living rises
The cost of living in the United States rose for the first time in four months as the Consumer Price Index increased 0.3%, the most in a year. The gauge, excluding volatile food and energy costs, rose 0.1%.
U.S. and global corporate news
Cisco Systems results fall short of expectations
Cisco Systems' revenue from its latest quarter and its forecast for future revenue fell short of analysts' expectations. Cisco is seen as a bellwether for the technology sector and the drop in the profits of the company was viewed as a sign that consumers' reluctance to spend is starting to affect corporate sales and profits.
Freddie loses; Disney gains
Freddie Mac reported a second-quarter loss of $4.7 billion and asked the United States for $1.8 billion more in aid. Disney posted strong earnings and revenue growth aided by hit movies and an improving economic climate.
Merger and acquisition activity rises
Deal activity rose this week, boosting hopes that U.S companies are ready to put their $1.8 trillion of stockpiled cash to work. The Blackstone Group agreed to buy Dynegy for $4.7 billion, and International Business Machines said it would acquire Unica for about $480 million.
Global economic news
European economy expands more than expected
Europe’s economy expanded more than economists forecast in the second quarter as the fastest growth in Germany in two decades powered the region’s recovery. The eurozone's gross domestic product increased 1% from the first quarter when it rose 0.2%. This is the fastest growth rate that the 16-country region has experienced in four years, and it is the first time eurozone growth has outpaced that of the United States since the second quarter of 2009. Germany's exports surged in June to near prerecession levels.
China pushes currency lower
China pushed its currency sharply lower on Thursday; the move essentially wiped out gains the yuan had made since the Chinese government loosened its peg against the dollar in June. The country's trade surplus rose in July to its highest level in a year and a half.
U.S. economic news
Fed downgrades assessment of U.S. economic recovery
The Fed said this week that "the pace of economic recovery is likely to be more modest in the near term than had been anticipated." The central bank said it will buy U.S. Treasuries with proceeds from mortgage holdings. It set a $2.05 trillion floor on its holdings of government bonds and housing debt to buoy an economic recovery. The Fed's statement followed a government report last month that showed the recession that started in December 2007 was worse than estimated.
Increase in jobless claims adds to evidence of weakening economy
An unexpected increase in jobless claims this week added to evidence that the economy is weakening. The number of U.S. workers making new claims for jobless benefits climbed last week to the highest level in six months. Initial unemployment claims rose by 2,000 to 484,000 in the week ended August 7, according to the U.S. Department of Labor. Also this week, reports showed personal incomes fell in the United States last year, except in areas with a high concentration of federal government and military jobs.
Retail sales rise less than forecast
Retail sales rose less than forecast in July as a lack of jobs caused consumers to hold back on spending. Sales rose 0.4%, led by autos and gasoline. Economists predicted a 0.5% gain.
Cost of living rises
The cost of living in the United States rose for the first time in four months as the Consumer Price Index increased 0.3%, the most in a year. The gauge, excluding volatile food and energy costs, rose 0.1%.
U.S. and global corporate news
Cisco Systems results fall short of expectations
Cisco Systems' revenue from its latest quarter and its forecast for future revenue fell short of analysts' expectations. Cisco is seen as a bellwether for the technology sector and the drop in the profits of the company was viewed as a sign that consumers' reluctance to spend is starting to affect corporate sales and profits.
Freddie loses; Disney gains
Freddie Mac reported a second-quarter loss of $4.7 billion and asked the United States for $1.8 billion more in aid. Disney posted strong earnings and revenue growth aided by hit movies and an improving economic climate.
Merger and acquisition activity rises
Deal activity rose this week, boosting hopes that U.S companies are ready to put their $1.8 trillion of stockpiled cash to work. The Blackstone Group agreed to buy Dynegy for $4.7 billion, and International Business Machines said it would acquire Unica for about $480 million.
Global economic news
European economy expands more than expected
Europe’s economy expanded more than economists forecast in the second quarter as the fastest growth in Germany in two decades powered the region’s recovery. The eurozone's gross domestic product increased 1% from the first quarter when it rose 0.2%. This is the fastest growth rate that the 16-country region has experienced in four years, and it is the first time eurozone growth has outpaced that of the United States since the second quarter of 2009. Germany's exports surged in June to near prerecession levels.
China pushes currency lower
China pushed its currency sharply lower on Thursday; the move essentially wiped out gains the yuan had made since the Chinese government loosened its peg against the dollar in June. The country's trade surplus rose in July to its highest level in a year and a half.
Monday, August 9, 2010
U.S. Economic News Week Ending August 6, 2010
U.S. stocks were volatile this week as investors struggled with conflicting corporate and economic data. The yield on the two-year U.S. Treasury note fell below 0.5% for the first time after a weaker- than-expected U.S. employment report added to evidence that the economy may be slowing. That news trimmed gains that stocks made earlier in the week on news of strong earnings reports. As of Friday, 72% of companies in the Standard & Poor's 500 Stock Index had reported better-than-expected results.
U.S. economic news
Employment falls more than expected; unemployment rate steady at 9.5%
Employment fell more than expected in July as the economy shed 131,000 jobs; the unemployment rate held steady at 9.5%. The numbers are another sign that the economic recovery may be losing momentum. Nonfarm payrolls fell last month because the rise in private-sector employment was not enough to make up for the government jobs lost.
U.S. service sector growth picks up; manufacturing growth slows
The Institute for Supply Management reported that U.S. service sector growth picked up in July. Service companies have expanded every month this year, but the sector continues to grow at a less robust pace than in the manufacturing sector. Its slow recovery has put a damper on overall hiring because it accounts for 80% of U.S. employment. Despite its strong recovery to date, growth in manufacturing slowed in July.
Retail sales rise but fall short of expectations
Retail sales at U.S. chain stores rose 2.9% in July, falling short of forecasts, as markdowns failed to inspire consumers.
U.S. and global corporate news
European banks post solid profits
HSBC's reported pretax profit more than doubled to $11.1 billion in the first half, while BNP Paribas posted a 31% increase in net income as provisions for bad loans dropped. Barclay's posted a 29% increase in net profit, but costs soared and revenue fell at Barclay Capital's investment banking unit. Société Générale's earnings more than tripled as strong retail operations and lower provisions helped offset a weaker investment banking business. American International Group swung to a $2.7 billion net loss for the second quarter because of charges associated with a unit that is being sold. That loss compares with a $1.8 billion net profit a year ago. Still, the company's insurance business generated an operating profit.
Toyota raises forecast; Rio Tinto profits more than triple
Toyota Motor raised its profit forecast for its fiscal year and posted its highest quarterly net profit in two years after it was able to improve its U.S. finance division and reduce costs. Rio Tinto's profits more than tripled in the first half, and the company made plans to increase output in Australia and Africa.
Newsweek sold; Barnes and Noble on block
The Washington Post Company agreed to sell the 77-year-old Newsweek magazine to stereo tycoon Sidney Harman. Barnes and Noble put itself up for sale as digital books eroded its traditional business.
Global economic news
Global manufacturing activity slows
Growth in manufacturing activity slowed in many of the world's major economies in July; the weaker pace indicates that factories will not be the strong driver of growth that they were earlier in the year. Growth slowed in a large portion of Asia, with China's manufacturing activity expanding at the slowest pace in 17 months amid tightening measures and uncertain global demand. In Europe, however, activity strengthened.
ECB and BOE keep rates steady
The European Central Bank and Bank of England kept their main interest rates unchanged this week. ECB President Jean-Claude Trichet said Europe is recovering faster than forecast and money markets are improving. Markets saw these remarks as an indication that the ECB is looking for ways to phase out liquidity tools put in place to fight the financial crisis.
Wheat prices rise after Russia bans exports
Wheat futures prices in Europe and the United States soared to their highest levels in 23 months after Russia said it would ban grain exports because of a severe drought. That move has heightened concerns about global supplies of grain and the possible impact on food prices. Russia's troubles are all the more problematic because many of the world's wheat exporters have also experienced crop problems. Canada has been hit with heavy rains, Australia has battled locusts, and part of the wheat-growing region in the European Union has, like Russia, been hit by drought.
Greece hits austerity targets
Greece met European Union and International Monetary Fund austerity targets, but monitors warned of overspending at local levels.
U.S. economic news
Employment falls more than expected; unemployment rate steady at 9.5%
Employment fell more than expected in July as the economy shed 131,000 jobs; the unemployment rate held steady at 9.5%. The numbers are another sign that the economic recovery may be losing momentum. Nonfarm payrolls fell last month because the rise in private-sector employment was not enough to make up for the government jobs lost.
U.S. service sector growth picks up; manufacturing growth slows
The Institute for Supply Management reported that U.S. service sector growth picked up in July. Service companies have expanded every month this year, but the sector continues to grow at a less robust pace than in the manufacturing sector. Its slow recovery has put a damper on overall hiring because it accounts for 80% of U.S. employment. Despite its strong recovery to date, growth in manufacturing slowed in July.
Retail sales rise but fall short of expectations
Retail sales at U.S. chain stores rose 2.9% in July, falling short of forecasts, as markdowns failed to inspire consumers.
U.S. and global corporate news
European banks post solid profits
HSBC's reported pretax profit more than doubled to $11.1 billion in the first half, while BNP Paribas posted a 31% increase in net income as provisions for bad loans dropped. Barclay's posted a 29% increase in net profit, but costs soared and revenue fell at Barclay Capital's investment banking unit. Société Générale's earnings more than tripled as strong retail operations and lower provisions helped offset a weaker investment banking business. American International Group swung to a $2.7 billion net loss for the second quarter because of charges associated with a unit that is being sold. That loss compares with a $1.8 billion net profit a year ago. Still, the company's insurance business generated an operating profit.
Toyota raises forecast; Rio Tinto profits more than triple
Toyota Motor raised its profit forecast for its fiscal year and posted its highest quarterly net profit in two years after it was able to improve its U.S. finance division and reduce costs. Rio Tinto's profits more than tripled in the first half, and the company made plans to increase output in Australia and Africa.
Newsweek sold; Barnes and Noble on block
The Washington Post Company agreed to sell the 77-year-old Newsweek magazine to stereo tycoon Sidney Harman. Barnes and Noble put itself up for sale as digital books eroded its traditional business.
Global economic news
Global manufacturing activity slows
Growth in manufacturing activity slowed in many of the world's major economies in July; the weaker pace indicates that factories will not be the strong driver of growth that they were earlier in the year. Growth slowed in a large portion of Asia, with China's manufacturing activity expanding at the slowest pace in 17 months amid tightening measures and uncertain global demand. In Europe, however, activity strengthened.
ECB and BOE keep rates steady
The European Central Bank and Bank of England kept their main interest rates unchanged this week. ECB President Jean-Claude Trichet said Europe is recovering faster than forecast and money markets are improving. Markets saw these remarks as an indication that the ECB is looking for ways to phase out liquidity tools put in place to fight the financial crisis.
Wheat prices rise after Russia bans exports
Wheat futures prices in Europe and the United States soared to their highest levels in 23 months after Russia said it would ban grain exports because of a severe drought. That move has heightened concerns about global supplies of grain and the possible impact on food prices. Russia's troubles are all the more problematic because many of the world's wheat exporters have also experienced crop problems. Canada has been hit with heavy rains, Australia has battled locusts, and part of the wheat-growing region in the European Union has, like Russia, been hit by drought.
Greece hits austerity targets
Greece met European Union and International Monetary Fund austerity targets, but monitors warned of overspending at local levels.
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