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.
Monday, August 9, 2010
Friday, July 30, 2010
U.S. Economic News Week Ending July 30, 2010
U.S. stocks, unable to maintain gains made earlier in the week, were flat amid concerns that the U.S. economic recovery is losing momentum. Those worries wiped away the enthusiasm of strong second-quarter earnings reports of companies from Exxon to Sony along with other encouraging economic reports.
On Friday, after a government report showed that U.S. economic growth slowed in the second quarter, the U.S. dollar dropped below 86 yen for the first time this year, and the yield on the two-year U.S. Treasury note fell to an all-time low of 0.5461%.
U.S. economic news
U.S. economy slows; government says recession worse than believed
The U.S. economy slowed in the second quarter as growth rose at an annualized rate of 2.4%. The expansion was supported to a greater degree by business investments and exports than by consumer spending, which continued to play a smaller role in the recovery. For instance, business spending increased 21.9%, while consumer spending rose only 1.6%. In the first quarter, the economy grew by 3.7%.
The U.S. Department of Commerce reported that the recession was deeper, and subsequent recovery slower, than earlier estimated. The government revised downward its earlier estimates of gross domestic product for seven of the 12 quarters of 2007, 2008, and 2009, primarily because consumer spending grew more slowly and homebuilding fell more sharply than previously estimated. The overall depth of the most recent recession surpassed any other since the late 1940s. GDP fell by 4.1% between the fourth quarter of 2007, when the recession officially began, and the second quarter of 2009, when many economists believe it ended. The previous estimate for the overall decline was 3.7%.
Better-than-expected U.S. home prices
Home prices rose in May but were expected to lose momentum with the expiration of federal tax credits.
U.S. labor market slow to improve; consumer confidence falls
The number of Americans filing first-time claims for unemployment insurance fell to 457,000 last week. Claims dropped 11,000, while the number of people receiving unemployment benefits rose. Amid these still-weak job markets and pessimism about business conditions in the coming months, the Conference Board said its Consumer Confidence Index fell to 50.4 in July, the second consecutive monthly decrease.
U.S. global and corporate news
Basel team moves to define capital
International regulators and central bankers participating in the Basel Committee on Banking Supervisions agreed on key aspects of new global standards aimed at constraining risk at the world's largest banks. Details on what counts as capital were ironed out. Limits were placed on the degree to which banks can count assets such as deferred taxes, mortgage serving rights, and minority interest toward minimal capital levels. That limitation will effectively force banks to reinforce their balance sheets with common equity.
Oil producers post impressive results
Higher energy prices and stronger refining markets helped buoy earnings at oil producers in the second quarter. Exxon's earnings jumped 91% as commodity prices rose and refining profits and production surged. Royal Dutch Shell posted a 15% rise as oil and gas production rose 5% and a restructuring aimed at trimming costs was completed early. Chevron's earnings more than tripled as the oil company benefited from increased production and prices as well as a stronger market for refined products. French oil company Total posted a 43% increase in profits on the back of stronger production, higher oil prices, and a stronger dollar.
Sony announced strong quarterly results and a more bullish full-year outlook. The company raised its full-year profit forecast 20%. Meanwhile, Panasonic revised its projection by 70%. Both companies posted first-quarter earnings that exceeded analysts’ estimates.
Merck reported a 50% decline in second-quarter profits as merger-related and restructuring costs offset a near doubling in sales, resulting from its takeover of Schering-Plough. That profit still beat analysts' expectations.
Global economic news
Eurozone's economic prospects improve
European confidence in the economic outlook rose in July to the highest level in more than two years, and German unemployment declined for a thirteenth month as exports sustained a recovery in the region. Growth in Europe's services and manufacturing industries accelerated in July.
U.K. consumer confidence falls
U.K. consumer confidence fell more than forecast in July as the prospect of government spending cuts undermined optimism on economic recovery. An index of sentiment released by the market research firm GfK NOP fell to its lowest level in 11 months.
India's central bank raises rates
India's central bank raised interest rates more than anticipated in a move to quell double-digit inflation.
Japan's recovery still mixed
Japan's factory output slid 1.5% in June from the previous month, and its jobless rate rose to 5.3%, the highest level since November.
On Friday, after a government report showed that U.S. economic growth slowed in the second quarter, the U.S. dollar dropped below 86 yen for the first time this year, and the yield on the two-year U.S. Treasury note fell to an all-time low of 0.5461%.
U.S. economic news
U.S. economy slows; government says recession worse than believed
The U.S. economy slowed in the second quarter as growth rose at an annualized rate of 2.4%. The expansion was supported to a greater degree by business investments and exports than by consumer spending, which continued to play a smaller role in the recovery. For instance, business spending increased 21.9%, while consumer spending rose only 1.6%. In the first quarter, the economy grew by 3.7%.
The U.S. Department of Commerce reported that the recession was deeper, and subsequent recovery slower, than earlier estimated. The government revised downward its earlier estimates of gross domestic product for seven of the 12 quarters of 2007, 2008, and 2009, primarily because consumer spending grew more slowly and homebuilding fell more sharply than previously estimated. The overall depth of the most recent recession surpassed any other since the late 1940s. GDP fell by 4.1% between the fourth quarter of 2007, when the recession officially began, and the second quarter of 2009, when many economists believe it ended. The previous estimate for the overall decline was 3.7%.
Better-than-expected U.S. home prices
Home prices rose in May but were expected to lose momentum with the expiration of federal tax credits.
U.S. labor market slow to improve; consumer confidence falls
The number of Americans filing first-time claims for unemployment insurance fell to 457,000 last week. Claims dropped 11,000, while the number of people receiving unemployment benefits rose. Amid these still-weak job markets and pessimism about business conditions in the coming months, the Conference Board said its Consumer Confidence Index fell to 50.4 in July, the second consecutive monthly decrease.
U.S. global and corporate news
Basel team moves to define capital
International regulators and central bankers participating in the Basel Committee on Banking Supervisions agreed on key aspects of new global standards aimed at constraining risk at the world's largest banks. Details on what counts as capital were ironed out. Limits were placed on the degree to which banks can count assets such as deferred taxes, mortgage serving rights, and minority interest toward minimal capital levels. That limitation will effectively force banks to reinforce their balance sheets with common equity.
Oil producers post impressive results
Higher energy prices and stronger refining markets helped buoy earnings at oil producers in the second quarter. Exxon's earnings jumped 91% as commodity prices rose and refining profits and production surged. Royal Dutch Shell posted a 15% rise as oil and gas production rose 5% and a restructuring aimed at trimming costs was completed early. Chevron's earnings more than tripled as the oil company benefited from increased production and prices as well as a stronger market for refined products. French oil company Total posted a 43% increase in profits on the back of stronger production, higher oil prices, and a stronger dollar.
Sony announced strong quarterly results and a more bullish full-year outlook. The company raised its full-year profit forecast 20%. Meanwhile, Panasonic revised its projection by 70%. Both companies posted first-quarter earnings that exceeded analysts’ estimates.
Merck reported a 50% decline in second-quarter profits as merger-related and restructuring costs offset a near doubling in sales, resulting from its takeover of Schering-Plough. That profit still beat analysts' expectations.
Global economic news
Eurozone's economic prospects improve
European confidence in the economic outlook rose in July to the highest level in more than two years, and German unemployment declined for a thirteenth month as exports sustained a recovery in the region. Growth in Europe's services and manufacturing industries accelerated in July.
U.K. consumer confidence falls
U.K. consumer confidence fell more than forecast in July as the prospect of government spending cuts undermined optimism on economic recovery. An index of sentiment released by the market research firm GfK NOP fell to its lowest level in 11 months.
India's central bank raises rates
India's central bank raised interest rates more than anticipated in a move to quell double-digit inflation.
Japan's recovery still mixed
Japan's factory output slid 1.5% in June from the previous month, and its jobless rate rose to 5.3%, the highest level since November.
Friday, July 23, 2010
U.S. Economic News Week Ending July 23, 2010
Stocks and bonds had a seesaw week in response to conflicting economic and earnings reports. By Wednesday, the market’s mood was dour as U.S. Federal Reserve Board Chairman Ben Bernanke shared a somber economic outlook without announcing any action plan to ease the situation. However, on Thursday and Friday the picture turned brighter, leading stock prices to rebound along with U.S. Treasury yields. At midweek, the yield on the two-year Treasury bill had hit an all-time low, and the yield on the 10-year Treasury note fell to its lowest point in a year. The week ended on an inconclusive note, with a sense of skepticism about the rigor of the much-anticipated European bank stress test.
In a very positive sign, about five in six companies in the Standard &Poor's 500 Stock Index surpassed their earnings expectations. The market’s turning point was prompted by indications of a European economic rebound as eurozone consumer confidence, retail sales, and purchasing activity all rose. By Friday morning, major U.S. stock indices were all at least 2% higher for the week. The Dow Jones Global Index advanced 2.5%.
U.S. home sales decline
Sales of existing homes in the United States slid by 5.1% in June, in the aftermath of a government tax credit program that ended in April. Year over year, existing home sales rose 9.8% in June. Housing starts also dropped 5.0% in June, to a seasonally adjusted 549,000, the U.S. Department of Commerce reported.
Weekly jobless claims rise
Initial claims for unemployment benefits jumped 37,000 to 464,000 in the week ended July 17. The four-week moving average, which smoothes volatility and can give a better view of the overall trend, rose 1,250 to 456,000.
Wages lag inflation for year
Weekly wages for U.S. workers failed to keep up with the pace of inflation over the past year, according to a report issued by the U.S. Department of Labor. Median weekly earnings rose to $740, from $734 a year earlier, an increase of 0.8%, while the Consumer Price Index climbed 1.8%.
U.S. and global corporate news
Caterpillar’s profits, sales pick up
Strong sales by industrial company Caterpillar drove a 91% increase in profits as dealers restocked their inventories of heavy machinery amid a pickup in demand for construction equipment in Asia and North America.
UPS delivers much larger profit
In an indication of a healthy resumption of economic activity, package shipper United Parcel Services reported a 90% rise in earnings and revenue growth of 13%, driven by Asian trade flows and a moderate U.S. economic recovery. UPS and its rival FedEx are seen as key barometers of international trade flows.
Ford’s new focus pays off
Automaker Ford reported a 13% increase in second-quarter earnings as its strategy to trim the number of cars and trucks it makes and to offer more features and charge higher prices paid off. A turnaround in Ford’s North American operations was key, as the group turned in a pretax profit of $1.9 billion, reversing an $899 million loss a year earlier. This was Ford’s fifth consecutive quarterly profit and its best earnings report in six years.
3M earnings rise
Manufacturer 3M posted a 43% rise in earnings as its sales rebounded to prerecession levels, benefiting from new products along with a growth in demand in emerging markets and in its niches in automotive manufacturing and consumer electronics.
Apple profit soars
Computer and consumer electronics firm Apple recorded a 78% surge in profit on very strong sales growth, including early sales of its iPad tablet computer and its latest version of the popular iPhone. Apple’s sales revenue for the quarter rose 61%.
Nokia hurt by smartphone competition
Nokia reported a 40% decline in second-quarter profit. The world’s largest mobile-phone maker had its hands full as rival Apple’s iPhone ate away at its market share in the high-end segment.
Roche profit jumps 58%
Swiss firm Roche Holding, the world’s largest maker of cancer medicines, reported a sharp rise in profits for the first half of its year because of healthy drug sales and robust growth in the sales of the company’s cancer-fighting drugs.
Xerox earnings jump 62%
Printer and copier maker Xerox posted a 62% increase in profits, surpassing expectations on improving demand in developing markets and from small and midsized businesses. The company reported growth in all business segments.
Global economic news
European bank stress test released
All eyes were on Europe this week, as the long-awaited stress tests for 91 European banks were released Friday. The stress test results were met with initial skepticism over whether they were rigorous enough, and the tests themselves may have failed to ease uncertainty about the health of the European banking industry. All but seven of the 91 banks passed the test. The seven included five Spanish banks, one German bank, and one Greek bank. This was better than the market’s expectation that about 90% of banks would pass, as reported in The Wall Street Journal. Banks that fail the test will need to raise money from investors or governments. Most observers believe the amount of capital raised will leave banks adequately funded.
Eurozone economic activity picks up
Activity picked up in both the manufacturing and service sectors in the eurozone, according to a survey by financial information firm Markit. The preliminary composite Purchasing Managers Index (PMI) rose to 56.7 from 56.0 in June. The manufacturing and services PMIs both rose and had been expected to decline. Meanwhile, the euro has risen about 8% against the U.S. dollar in recent weeks, reflecting increased confidence in this regional economy. However, the euro’s rise makes exports from Europe more expensive in global markets.
U.K. economy grows for third straight quarter
The U.K. economy grew 1.1% from the first to the second quarter this year, and it grew 1.6% when compared with the second quarter of 2009. This is the third consecutive quarter of U.K. economic expansion after a deep recession and the fastest pace of growth since the first quarter of 2006.
German business confidence hits three-year high
German business confidence turned strongly higher in July, registering a leap of 4.4 points to 106.2 in the Ifo compound index. Economists polled by Dow Jones Newswires had expected a decline to 101.5. Business confidence in Germany is now at its highest since 2007, and the increase in confidence was the greatest since German reunification in 1990.
In a very positive sign, about five in six companies in the Standard &Poor's 500 Stock Index surpassed their earnings expectations. The market’s turning point was prompted by indications of a European economic rebound as eurozone consumer confidence, retail sales, and purchasing activity all rose. By Friday morning, major U.S. stock indices were all at least 2% higher for the week. The Dow Jones Global Index advanced 2.5%.
U.S. home sales decline
Sales of existing homes in the United States slid by 5.1% in June, in the aftermath of a government tax credit program that ended in April. Year over year, existing home sales rose 9.8% in June. Housing starts also dropped 5.0% in June, to a seasonally adjusted 549,000, the U.S. Department of Commerce reported.
Weekly jobless claims rise
Initial claims for unemployment benefits jumped 37,000 to 464,000 in the week ended July 17. The four-week moving average, which smoothes volatility and can give a better view of the overall trend, rose 1,250 to 456,000.
Wages lag inflation for year
Weekly wages for U.S. workers failed to keep up with the pace of inflation over the past year, according to a report issued by the U.S. Department of Labor. Median weekly earnings rose to $740, from $734 a year earlier, an increase of 0.8%, while the Consumer Price Index climbed 1.8%.
U.S. and global corporate news
Caterpillar’s profits, sales pick up
Strong sales by industrial company Caterpillar drove a 91% increase in profits as dealers restocked their inventories of heavy machinery amid a pickup in demand for construction equipment in Asia and North America.
UPS delivers much larger profit
In an indication of a healthy resumption of economic activity, package shipper United Parcel Services reported a 90% rise in earnings and revenue growth of 13%, driven by Asian trade flows and a moderate U.S. economic recovery. UPS and its rival FedEx are seen as key barometers of international trade flows.
Ford’s new focus pays off
Automaker Ford reported a 13% increase in second-quarter earnings as its strategy to trim the number of cars and trucks it makes and to offer more features and charge higher prices paid off. A turnaround in Ford’s North American operations was key, as the group turned in a pretax profit of $1.9 billion, reversing an $899 million loss a year earlier. This was Ford’s fifth consecutive quarterly profit and its best earnings report in six years.
3M earnings rise
Manufacturer 3M posted a 43% rise in earnings as its sales rebounded to prerecession levels, benefiting from new products along with a growth in demand in emerging markets and in its niches in automotive manufacturing and consumer electronics.
Apple profit soars
Computer and consumer electronics firm Apple recorded a 78% surge in profit on very strong sales growth, including early sales of its iPad tablet computer and its latest version of the popular iPhone. Apple’s sales revenue for the quarter rose 61%.
Nokia hurt by smartphone competition
Nokia reported a 40% decline in second-quarter profit. The world’s largest mobile-phone maker had its hands full as rival Apple’s iPhone ate away at its market share in the high-end segment.
Roche profit jumps 58%
Swiss firm Roche Holding, the world’s largest maker of cancer medicines, reported a sharp rise in profits for the first half of its year because of healthy drug sales and robust growth in the sales of the company’s cancer-fighting drugs.
Xerox earnings jump 62%
Printer and copier maker Xerox posted a 62% increase in profits, surpassing expectations on improving demand in developing markets and from small and midsized businesses. The company reported growth in all business segments.
Global economic news
European bank stress test released
All eyes were on Europe this week, as the long-awaited stress tests for 91 European banks were released Friday. The stress test results were met with initial skepticism over whether they were rigorous enough, and the tests themselves may have failed to ease uncertainty about the health of the European banking industry. All but seven of the 91 banks passed the test. The seven included five Spanish banks, one German bank, and one Greek bank. This was better than the market’s expectation that about 90% of banks would pass, as reported in The Wall Street Journal. Banks that fail the test will need to raise money from investors or governments. Most observers believe the amount of capital raised will leave banks adequately funded.
Eurozone economic activity picks up
Activity picked up in both the manufacturing and service sectors in the eurozone, according to a survey by financial information firm Markit. The preliminary composite Purchasing Managers Index (PMI) rose to 56.7 from 56.0 in June. The manufacturing and services PMIs both rose and had been expected to decline. Meanwhile, the euro has risen about 8% against the U.S. dollar in recent weeks, reflecting increased confidence in this regional economy. However, the euro’s rise makes exports from Europe more expensive in global markets.
U.K. economy grows for third straight quarter
The U.K. economy grew 1.1% from the first to the second quarter this year, and it grew 1.6% when compared with the second quarter of 2009. This is the third consecutive quarter of U.K. economic expansion after a deep recession and the fastest pace of growth since the first quarter of 2006.
German business confidence hits three-year high
German business confidence turned strongly higher in July, registering a leap of 4.4 points to 106.2 in the Ifo compound index. Economists polled by Dow Jones Newswires had expected a decline to 101.5. Business confidence in Germany is now at its highest since 2007, and the increase in confidence was the greatest since German reunification in 1990.
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