U.S. economic news for the week ended August 26, 2011

U.S. and global economic news

Bernanke makes no promises about aid to economy
In a much-anticipated speech, U.S. Federal Reserve Board Chairman Ben Bernanke said the Fed is ready to provide more support to the economy, but he did not indicate that a move was imminent. Throughout the week, investors had pushed stocks higher on the hopes that Bernanke, in remarks delivered Friday to global monetary policymakers in Jackson Hole, Wyoming, would announce a third round of quantitative easing. At the same meeting last year, Bernanke's promise to stimulate the economy through U.S. Treasury purchases sparked an eight-month rally in the equity market.

U.S. economy grows less than expected
U.S. gross domestic product rose at a 1% annual rate in the second quarter. The gain was less than expected, and the report, released by the U.S. Department of Commerce, showed that consumer spending grew at a 0.4% annual rate, the smallest gain in more than a year. On a more positive note, corporate profits grew, and wages and salaries were revised upward at the start of the year to show the biggest gain in more than four years.

Moody's downgrades Japan
Moody's Investors Service downgraded Japan's debt rating by one notch, citing concerns over the government's ability to reduce its debt and implement long-term sustainability measures. The rating now stands at Aa3, three levels below Aaa. Moody's added that the outlook is stable and that there is little chance the country would experience a crisis in its debt market anytime soon. However, the rating agency said the frequent change in political leadership is a key factor impeding the implementation of the fiscal measures necessary to reduce the debt.

New home sales fall more than expected
Sales of new U.S. homes fell more than expected in July, to the lowest level in five months. The medium sales price of a new home increased 4.7% from July 2010, to $222,000. Last week, mortgage applications for purchases fell 2.4%, to a nearly 15-year low, amid increased fears over the economy.

Weekly U.S. jobless claims rise
U.S. jobless claims unexpectedly rose last week, climbing by 5,000 to 417,000. The numbers were pushed higher by the labor dispute at Verizon Communications. At least 8,500 applications were filed by workers at Verizon last week, compared with the 12,500 filed in the previous week, according to the Commerce Department.

U.S. durable goods orders rise more than expected
U.S. durable goods orders rose 4% in July, more than expected and the most in four months. Rising demand for aircraft and autos made up for a decrease in business equipment, whose orders fell 1.3% in June. Orders excluding the volatile transportation category rose 0.7%.

German economy shows more signs of faltering
A sharper-than-expected drop in Germany's Ifo business confidence survey added to evidence that the German economic recovery is faltering. The index fell to 108.7 from 112.9. Investors' confidence also fell more than expected in August, to its lowest level in more than two-and-a-half years, as fears mounted that Europe's debt crisis will curb growth. Likewise, eurozone growth remained at a two-year low in August. On an annualized basis, eurozone gross domestic product rose 0.7% in the second quarter. The ZEW Center for European Economic Research said its index of investor and analyst expectations, which tries to predict developments six months in advance, fell to -37.6 from -15.0 in July. That is the lowest level since December 2008 and the largest drop since July 2006.

Japan announces moves to curb yen's rise
In an effort to help its export-dependent manufacturing base, the Japanese government announced a package of incentives and regulations aimed at curbing the surge of the yen. The announcement had little effect on the Japanese currency, which has been bought by investors as a safe haven amid worries about U.S. and eurozone finances. The package comprises a $100 billion fund to encourage Japanese businesses to increase acquisitions of companies outside Japan and a rule requiring major financial institutions to report currency trading positions twice daily.

China's manufacturing activity declines
HSBC reported that its China Manufacturing Purchasing Managers Index showed a decline in manufacturing activity for the second month in a row.

U.S. and global corporate news

Buffett to invest $5 billion in Bank of America
Warren Buffett will invest $5 billion in Bank of America in an effort to shore up the company. Bank of America's shares rose 15% after the announcement. Buffett's move follows similar efforts to help prop up Goldman Sachs and General Electric during the 2008 financial crisis. Bank of America's stock has suffered as investors, fearing that the bank is still burdened by billions of dollars in problem mortgages, dumped the stock. The cost of insuring BofA's bonds against default surged to a record this week amid investor concern over the bank's creditworthiness.

Jobs announces resignation
Technology stocks fell after Apple's Steve Jobs announced his resignation as chief executive officer. Jobs, who has been on medical leave since January, will remain with the company as chairman. Tim Cook, formerly chief operating officer, was named CEO.

UBS and ABN Amro announce job cuts
UBS announced plans to lay off more than 5% of its work force, mainly in its investment banking division. The move, which will eliminate 3,500 jobs, is part of a plan to save two billion Swiss francs annually and comes as the bank experiences weaker earnings, tighter regulation, and a rise in the Swiss franc. ABN Amro Bank also announced this week that it will cut an additional 2,350 jobs in the coming years in an effort to cuts costs as it prepares for privatization.

BHP posts record profit
BHP Billiton, the world's largest mining company, posted record full-year profits but cautioned about the future amid rising costs. BHP benefited from strong prices for iron ore and other commodities. The company's net profit rose 86%, to $23.65 billion in the year ended June 30, a record for an Australian company.

Toll Brothers profits jump 54%
Luxury homebuilder Toll Brothers reports its fiscal third-quarter earnings jumped 54% after getting a boost from a larger tax benefit. However, the company said it expects revenues to fall by double digits as home deliveries fall.