The greenback remains under pressure as traders position ahead of this week’s closely anticipated FOMC monetary policy setting meeting. Fed funds futures are fully pricing in a 25-basis point rate cut to 4.50%, thereby dragging the dollar to fresh record lows against the euro at 1.4437 and a new multi-decade lows versus the Loonie at 0.9576 and Aussie at 0.9270.
Although the Fed is largely expected to ease by 25-bp, the dollar’s direction will likely be dictated by the accompanying FOMC policy statement and whether further easing can be anticipated. We look for the Fed to maintain a largely neutral stance in its policy statement, with an emphasis on the preemptive nature of the cut “to forestall some of the adverse effects on the broader economy”, as stated last month.
Several key pieces of US economic data are slated for release this week including Q3 GDP, Chicago PMI, September PCE, October manufacturing ISM, September durable goods orders, factory orders and the October labor report. Economic growth in the third quarter is estimated to slip to 3.0%, down from 3.8% previously. Meanwhile, October non-farm payrolls are expected to slip to 80.0k, versus 110.0k from September. The unemployment rate is seen unchanged at 4.7%. Nevertheless, garnering the lion’s share of market attention will be the Fed’s two-day policy setting meeting and accompanying statement scheduled for Wednesday at 2:15 PM.Euro Climbs to New All-Time High
The single currency rallied to a fresh high against the dollar at 1.4437 and recovered further versus the yen toward 165.47. Economic data released from the Eurozone overnight saw Germany’s preliminary CPI and HICP. The October CPI in the Eurozone’s largest economy edged up 0.2% m/m and 2.4% on an annualized basis, versus expectations for an increase of 0.1% m/m and 2.4% y/y. The October preliminary HICP was in line with forecasts, up 0.2% m/m and 2.7% y/y.
EURUSD continues to hold steady above the 1.44-level, with resistance emerging at 1.4440 and 1.4470. Subsequent ceilings are seen at 1.45 and 1.4550. On the downside, support begins at 1.44, followed by 1.4380 and 1.4350. Additional floors are eyed at 1.43, backed by 1.4250 and 1.4220.
Rabu, 31 Oktober 2007
USD Slumps on Consumer Confidence by Korman Tam
The beleaguered dollar found no reprieve on Tuesday, remaining mired near all-time lows versus the euro at 1.4436, and 26-year lows against the sterling just shy of the 2.07-level. Dragging the greenback lower today was a report from the Conference Board revealing a dip in consumer confidence to a new 2-year low at 95.6 for October, compared with a downwardly revised 99.5 from September. The expectations index for October fell to 80.1, versus a revised 85.0 from a month earlier.
The currency market will likely consolidate in the coming session as traders take to the sidelines ahead of Wednesday’s FOMC monetary policy decision and accompanying statement. Although the Fed funds futures are fully discounting a 25-basis point rate cut to 4.50% tomorrow, the focus will be on the language used in the subsequent policy statement. Further, the dollar may regain its footing against the majors if the Fed instead opts to leave rates unchanged at 4.75% while signaling a cut at its December meeting.
Prior to the Fed announcement, several key pieces of economic data will provide additional gauges on the state of the US economy. Growth in Q3 is estimated to fall to 3.0%, down from 3.8%. The core PCE is seen edging up to 1.5% from 1.4%, while the headline Q3 PCE is forecasted to fall to 1.5% from 4.3%. The October ADP private sector payrolls, often viewed as a proxy to the more important non-farm payrolls, are seen up slightly to 60k versus 58k. Meanwhile, the October Chicago PMI is estimated to slip to 53.0, down from 54.2.GBP Rallies amid Tempered Rate Cut Expectations
The sterling climbed to its highest level in 26-years against the greenback while rallying sharply versus the yen prompted by overnight comments from a Bank of England board member. The BoE’s Barker pondered whether conditions have changed significantly since August that would force the Bank’s hand next week. Given the recent slate of upbeat UK economic reports, we do not expect the BoE to alter its stance when it deliberates monetary policy next week.
Cable remains buoyed near its multi-decade highs, pulling off slightly from beneath the 2.07-level. Resistance is seen at 2.07, followed by 2.0740 and 2.0775. Subsequent ceilings are eyed at 2.08 and 2.0850. Meanwhile, on the downside support begins at 2.0650, followed by 2.06 and 2.0560. Additional floors will emerge at 2.0530 and 2.05.Euro Hovers near All-Time High
The euro remains buoyed near its record high versus the dollar near the 1.4440-level. Germany’s October unemployment rate was unchanged at 8.7%, while the unemployment change was -40k, versus -30k from September. In the Wednesday session, traders will digest Germany September retail sales, Eurozone October business climate, consumer sentiment, industrial sentiment, unemployment rate and flash inflation.
EURUSD continues to hold steady above the 1.44-level, with resistance emerging at 1.4440 and 1.4470. Subsequent ceilings are seen at 1.45 and 1.4550. On the downside, support begins at 1.44, followed by 1.4380 and 1.4350. Additional floors are eyed at 1.43, backed by 1.4250 and 1.4220.
The currency market will likely consolidate in the coming session as traders take to the sidelines ahead of Wednesday’s FOMC monetary policy decision and accompanying statement. Although the Fed funds futures are fully discounting a 25-basis point rate cut to 4.50% tomorrow, the focus will be on the language used in the subsequent policy statement. Further, the dollar may regain its footing against the majors if the Fed instead opts to leave rates unchanged at 4.75% while signaling a cut at its December meeting.
Prior to the Fed announcement, several key pieces of economic data will provide additional gauges on the state of the US economy. Growth in Q3 is estimated to fall to 3.0%, down from 3.8%. The core PCE is seen edging up to 1.5% from 1.4%, while the headline Q3 PCE is forecasted to fall to 1.5% from 4.3%. The October ADP private sector payrolls, often viewed as a proxy to the more important non-farm payrolls, are seen up slightly to 60k versus 58k. Meanwhile, the October Chicago PMI is estimated to slip to 53.0, down from 54.2.GBP Rallies amid Tempered Rate Cut Expectations
The sterling climbed to its highest level in 26-years against the greenback while rallying sharply versus the yen prompted by overnight comments from a Bank of England board member. The BoE’s Barker pondered whether conditions have changed significantly since August that would force the Bank’s hand next week. Given the recent slate of upbeat UK economic reports, we do not expect the BoE to alter its stance when it deliberates monetary policy next week.
Cable remains buoyed near its multi-decade highs, pulling off slightly from beneath the 2.07-level. Resistance is seen at 2.07, followed by 2.0740 and 2.0775. Subsequent ceilings are eyed at 2.08 and 2.0850. Meanwhile, on the downside support begins at 2.0650, followed by 2.06 and 2.0560. Additional floors will emerge at 2.0530 and 2.05.Euro Hovers near All-Time High
The euro remains buoyed near its record high versus the dollar near the 1.4440-level. Germany’s October unemployment rate was unchanged at 8.7%, while the unemployment change was -40k, versus -30k from September. In the Wednesday session, traders will digest Germany September retail sales, Eurozone October business climate, consumer sentiment, industrial sentiment, unemployment rate and flash inflation.
EURUSD continues to hold steady above the 1.44-level, with resistance emerging at 1.4440 and 1.4470. Subsequent ceilings are seen at 1.45 and 1.4550. On the downside, support begins at 1.44, followed by 1.4380 and 1.4350. Additional floors are eyed at 1.43, backed by 1.4250 and 1.4220.
Fed Rate Cut Expected Wednesday By Martin Crutsinger, AP Economics Writer
WASHINGTON (AP) -- With oil prices soaring and the housing market sinking, the Federal Reserve is likely to combat the economic turmoil with more interest rate cuts.
Federal Reserve Chairman Ben Bernanke and his colleagues were wrapping up a two-day meeting Wednesday and many economists believe they will announce that they have decided to follow September's half-point cut in the federal funds rate with a quarter-point cut at this meeting."They are going to cut rates," predicted Mark Zandi, chief economist at Moody's Economy.com. "The economy is weakening and financial markets remain unsettled."
Many analysts said this rate reduction probably will not be the last either, as the central bank keeps reducing rates to help the economy overcome a host of problems.
The Fed cut the federal funds rate, the interest that banks charge each other, for the first time in four years at its September meeting, reducing it to 4.75 percent. Responding to that move, commercial banks cut their prime lending rate, the benchmark for millions of consumer and business loans, by a half-point as well to 7.75 percent.
The economy's troubles include the worst slump in housing in more than two decades and a credit crunch that roiled financial markets this summer when investors suddenly became concerned about mounting losses from defaults on subprime mortgages.
With lenders tightening mortgage standards, marking it harder for prospective buyers to qualify for loans, and defaults continuing to rise, the slump in housing has deepened.
Financial markets also have a new worry in the latest surge in oil prices. Crude oil prices have hit records above $93 per barrel.
The worry is that the combination of the deep slump in housing, a lingering credit-crunch and rising oil prices will severely dampen consumer spending, the economy's main growth engine, in the months ahead.
"The economy is facing a perfect storm right now of a crisis-related tightening of credit, higher oil prices and lower house prices," said David Jones, chief economist at DMJ Advisors, a Denver forecasting firm. "We are going to see a significant slowing in growth."
Jones forecast that the overall economy, as measured by the gross domestic product, will slow to a rate of 1.5 percent for this quarter and will dip even lower to a rate of 1.3 percent in the first three months of next year.
That sluggish pace would make the economy vulnerable to some type of economic shock that could push GDP growth into the negative territory that signals a recession.
"The consumer is getting squeezed right now between falling home prices and rising oil prices," said David Wyss, chief economist at Standard & Poor's in New York. "They have got to slow down. It is just a question of how much and how fast."
In two worrisome developments, the Conference Board's consumer confidence index fell for a third consecutive month in October, dropping to the lowest level in two years, while the S&P/Case-Shiller Index of home prices, based on 20 cities around the country, dropped by a record 5 percent in August.
Still, the economy showed strength in reports released before the Fed meeting Wednesday. In the third quarter, gross domestic product grew at a brisk 3.9 percent pace, faster than economists had expected, the Commerce Department reported Wednesday.
A second report showed construction spending rose 0.3 percent in September, the best showing in four months, with commercial and private building more than offsetting the weak home market.
But the ongoing credit and housing problems and the renewed surge of energy prices are expected to exact a toll in upcoming months with the economy not expected to regain its balance until mid-2008. Many analysts believe that in addition to a rate cut Wednesday, the Fed will cut rates at its final meeting of the year in December and possibly at its January meeting as well.
Lyle Gramley, a former Fed board member and now an economist with Stanford Financial Group, put the chances of a recession at around 40 percent, saying the Fed's primary concern right now is what is happening in housing and how much of a spillover that will have on the overall economy.
"It is possible that the housing industry will take us over the edge into a recession," he said, noting that every housing downturn of the past 60 years with the exception of two have triggered recessions.
Federal Reserve: http://www.federalreserve.gov
Google Stock Barrels Through $700 By Michael Liedtke, AP Business Writer
SAN FRANCISCO (AP) -- Google Inc.'s stock price barreled through $700 for the first time Wednesday, propelled by a belief that the Internet search leader will become even more profitable as it plants its products and services in new markets.The Mountain View-based company's shares traded as high as $704.79 in morning trading before falling back to $703.87, up $9.10 for the session. It took less than a month for the stock to leap from $600 to $700, building upon a fervor that has lifted Google's market value by more than 30 percent since mid-September.
During that 6 1/2-week stretch, Google has created an additional $53 billion in shareholder wealth. That dwarves the total $41 billion market value of another Internet icon, Yahoo Inc., which had a 4-year head start on Google.
The latest surge came after Google confirmed plans to become a bigger force in the Internet's social networking scene and amid reports that the company is about to unveil a long-rumored operating system designed for mobile phones so it can make more money by distributing ads to people on the go.
The recent rally has firmly established Google as Silicon Valley's most valuable publicly held company, supplanting Internet networking supplier Cisco Systems Inc. With a market value of nearly $220 billion, Google also is now worth more than Warren Buffett's holding company, Berkshire Hathaway Inc., whose steadfast refusal to split its stock during the past four decades has left its shares at nearly $130,000.
Google co-founders Larry Page and Sergey Brin, who regard Buffett as an inspiration, so far have resisted requested requests to split their company's stock so more people could afford to buy a few shares. Their theory: a high stock price tends to attract more patient and knowledgeable investors who pay closer attention to a company's long-term strategy than its ability to hit short-term earnings targets.
The philosophy has generated impressive returns so far. A $10,000 investment in Google stock's at its August 2004 initial public offering price of $85 would now be worth about $82,000.
Brin and Page, both 34, have been the biggest winners by far, with estimated fortunes exceeding $20 billion apiece. At least two other Google executives, Chairman Eric Schmidt and sales chief Omid Kordestani, are billionaires while hundreds of other employees have become millionaires because of their stock holdings in the 9-year-old company.
Wall Street is betting Google is still in its financial infancy, even though it's already on track for a profit of about $5 billion this year on more than $15 billion in revenue.
The company has made virtually all of its money so far by displaying text-based advertising links alongside search results and other Web content that includes topics related to the commercial message.
During the past year, Google has introduced new online advertising channels featuring video, graphics and other more compelling features while also extending its marketing machine into television, radio and print.
Now, Google appears intent on shaking up the telecommunications industry by introducing inexpensive cell phones that will make it easier for people on the go to use Google's search engine, maps, e-mail and other applications.
If it pans out, the new Google phone presumably will give the company a chance to sell more mobile advertising and further boost its profits.
Economy Logs Brisk 3.9 Percent Growth By Jeannine Aversa, AP Economics Writer
WASHINGTON (AP) -- The economy picked up speed in the summer, growing at a brisk 3.9 percent pace, the fastest in 1 1/2 years and an impressive performance even as a credit crunch plunged the housing market deeper into turmoil.The latest snapshot of the country's economic health, released by the Commerce Department on Wednesday, suggested that the economy is demonstrating much resilience and thus far holding up well to the strains in the housing and credit markets, which had intensified during the third quarter and rocked Wall Street.
A second report from the department showed construction spending rose 0.3 percent in September, the best showing in four months. All-time high spending in both commercial construction by private builders and government projects more than offset weakness in home building.
For the entire July-to-September quarter, individuals ratcheted up their spending. U.S. businesses sold more goods abroad and boosted some investment at home. Those were main factors helping to push up overall economic activity during that period.
The third quarter's growth rate was up slightly from a 3.8 percent pace logged in the second quarter. It marked the strongest showing since the first quarter of last year.
The increase in gross domestic product exceeded analysts' forecasts for a 3.1 percent growth rate for third quarter. Gross domestic product is the value of all goods and services produced within the United States and is considered the best barometer of the country's economic fitness.
The White House was pleased that problems in housing didn't spread widely through other parts of the economy during the summer as some feared. "This is an extremely resilient economy," said Ed Lazear, chairman of President Bush's Council of Economic Advisers. "It is really quite remarkable."
Builders slashed investment in housing projects by 20.1 percent, on an annualized basis, in the third quarter, the largest drop in a year. That was even deeper than the 11.8 percent annualized cut made in the second quarter and provided stark evidence of the darkening housing picture.
"This may have been the summer of the housing market's discontent but it clearly wasn't for the rest of the economy," said Joel Naroff of Naroff Economic Advisors.
The new figures on the economy come as the Federal Reserve meets for a second day Wednesday to weigh whether it needs to lower a key interest rate to protect the economy down the road from the ill effects of the ailing housing market. Wall Street investors are betting on a smaller, one-quarter percentage point cut. That would follow up on a bolder half-percentage point reduction ordered in September, the first rate cut in more than four years.
Stocks were up in trading before the Fed's decision. The Dow Jones industrials were up 42 points.
The ill effects of the housing slump and credit crunch didn't deter consumers in the summer.
Consumers, whose spending is an important ingredient for the economy's good health, actually rediscovered their appetite to spend in the third quarter. Their spending rose at a 3 percent pace, a considerable improvement from the second quarter's rather weak 1.4 percent growth rate.
One of the reasons why people are continuing to spend is because the nation's employment climate has managed to stay fairly sturdy through all the problems. Wage and job gains have served as shock absorbers for some of the negative forces of the housing slump, weaker home prices and more restrictive credit.
Another report from the Labor Department showed employers' costs to hire and retain workers rose 0.8 percent in the July-to-September quarter. That was down a bit from a 0.9 percent increase posted in the second quarter, but still suggested workers are seeing solid compensation gains.
Businesses, meanwhile, increased their spending on equipment and software at a 5.9 percent pace in the third quarter, up from a 4.7 percent growth rate in the prior period. They also boosted their investment in inventories, another factor that added to GDP.
Strong sales of U.S. exports to foreign buyers was another big factor in the good third-quarter showing. Exports of goods and services grew by 16.2 percent, on an annualized basis, during the quarter. That was the biggest increase since the final quarter of 2003.
Business investment in commercial structures, such as office buildings and factories, grew at a 12.3 percent pace in the third quarter, a good showing but down from a sizzling 26.2 percent growth rate in the second quarter.
Government spending also contributed to third quarter GDP growth. Such spending rose at a rate of 3.7 percent, following a 4.1 percent pace in the second quarter.
As the economy picked up a bit of speed, so did inflation, although the rise wasn't seen as worrisome.
An inflation gauge closely watched by the Federal Reserve showed "core" prices -- excluding food and energy -- rose at a rate of 1.8 percent in the third quarter. That was up from a 1.4 percent pace in the second quarter, but it was within the Fed's "comfort zone."
Still, skyrocketing oil prices, which have reached record highs in recent days, could push up inflation and put a chill on consumer spending.
The meltdown in the mortgage market has made it harder for people to obtain financing to buy homes. That's aggravating problems in the housing market and leading to a mounting pileup of unsold homes. The housing slump is expected to drag on well into next year.
Against that backdrop, the Fed's overriding worry is that problems in housing and harder-to-get credit could seriously crimp spending and investing, dealing a dangerous blow to the national economy. Growth in the current October-to-December quarter is expected to slow to a pace of around 2 percent or less.
Merrill Lynch CEO O'Neal Out By Joe Bel Bruno, AP Business Writer
NEW YORK (AP) -- The unfolding credit crisis has claimed its biggest corporate casualty so far: Merrill Lynch CEO Stan O'Neal.The announcement of his departure Tuesday came after the world's largest brokerage posted a $2.24 billion quarterly loss, its biggest since being founded 93 years ago. Merrill Lynch did not name a replacement for O'Neal, whose ouster had been expected, and who leaves the company with benefits worth $161.5 million.Laurence Fink, the chief executive of investment manager BlackRock Inc., turned down an initial overture from Merrill's board but is in active negotiations, according to a person with direct knowledge of the offer who was not authorized to speak publicly. With the presumed front-runner out of contention, filling the top spot at Merrill Lynch is not expected to be easy given the remaining unknowns from the global credit crisis.
Any replacement will face the daunting task of cleaning up investments in subprime mortgages and other risky types of debt, and rebuilding an investment house badly bruised.
There is speculation by a number of analysts that Merrill Lynch faces a $4 billion writedown during the fourth quarter. This would be on top of a $7.9 billion charge taken last quarter, a stunning amount since Merrill originally said it would write down only $4.5 billion because of credit market turmoil.
O'Neal was also criticized for reportedly approaching Wachovia Corp. about some kind of merger without the approval of his board.
"These losses, coupled with rumors that O'Neal had proposed a merger with Wachovia without the board's approval, essentially dug O'Neal's grave," said Morningstar analyst Ryan Lentell. "The new CEO's first priority must be to ensure proper risk-management procedures are in place to prevent a recurrence of the quarter's loss."
O'Neal, 56, accepted blame for the losses, which immediately led to calls for his ouster. The mistake would prove to be his last, ending a career that spanned more than two decades at Merrill.
He was one of the highest-ranking blacks on Wall Street -- a stunning climb from his impoverished roots in Alabama as the grandson of a former slave.
O'Neal emphasized riskier bets than past Merrill CEOs, rather than the safety of just selling stocks. That strategy -- which handed Merrill Lynch record results during the market's peak -- came with a heavy cost during the tumultuous third quarter.
Merrill Lynch still has sizable portfolio of complex financial instruments called collateralized debt obligations, which combine slices of different kinds of risk. It was Merrill's bet on CDOs, and the subprime mortgages underpinning many of them, that proved to be O'Neal's downfall.
Dealing with that portfolio will be the priority for co-presidents and chief operating officers Ahmass Fakahany and Gregory Fleming. Merrill Lynch said their duties will be split -- with Fleming in charge of Merrill's front-line businesses, such as its brokerage.
Fakahany, a close confidant of O'Neal, will lead back-office functions such as finance and human resources. Robert McCann, the president of the company's wealth management group, was not named in the power-sharing agreement.
Both McCann and Fleming were tipped as potential CEO candidates. Among those who had been said to be considered outside the firm were BlackRock's Fink and NYSE Euronext CEO John Thain. O'Neal resigned his board seat at BlackRock, in which Merrill owns a 49 percent stake.
A spokesman for Thain declined to comment.
Merrill's board is expected to tap someone that can boost morale among its 16,000 brokers. Many of them felt uncomfortable with O'Neal given Merrill's history of having CEOs with trading experience.
Merrill Lynch shares fell $2.42, or 3.6 percent, to $65. The price of buying protection against a default on Merrill Lynch bonds also increased after the news of O'Neal's departure, according to Phoenix Partners Group.
AP Business Writers Ellen Simon, Rachel Beck and Leslie Wines contributed to this report from New York.
Rate Cut Unlikely to Fix Housing Woes By Alan Zibel, AP Business Writer
WASHINGTON (AP) -- The interest rate cut that Wall Street believes will buffer the economy from housing market woes is unlikely to give much of a boost to suffering banks and homebuilders in the near term, analysts say.The Federal Reserve policymaking committee is expected to approve cutting a key short-term rate at least a quarter percentage point Wednesday to help the economy get through a deeper-than-expected housing slump and credit crunch that accelerated in August.
Investors are betting the central bank will reduce the federal funds rate, the rate banks charge each other for overnight loans, to 4.5 percent. Over the next 12 to 18 months, lower short-term rates will aid the overall economy because many equity credit lines and some credit card rates are pegged to short-term market rates.
Yet the Fed's efforts now, on top of a half-percentage-point rate cut in September, won't change the outlook much, if at all, for companies on the front lines of surging mortgage defaults and a dried-up market for complex securities backed by home loans.
"The problems in the housing market, the problems in the credit markets are not easily solved by the Fed cutting rates," said Steve East, chief economist for investment bank Friedman Billings, Ramsey & Co. in Arlington, Va., who sees the Fed making three quarter-point cuts by January and puts the odds of a recession in 2008 at 60 percent.
The thinking is that lenders can improve battered balance sheets if they have to pay less for money they borrow short-term while the rate they charge borrowers for long-term loans holds steady or moves higher. Yet analysts say problems in the credit markets extend beyond the benefits of small rate cuts.
Struggling homebuilders, such as D.R. Horton Inc., Lennar Corp. and Pulte Homes Inc., are faced with tightened lending standards and severely limited demand. Many would-be buyers are unable to qualify for loan approvals, even if rates move lower.
Lower interest rates are "certainly not the panacea" for getting the housing market back on track, said UBS homebuilding analyst David Goldberg.
The median U.S. home price nationwide fell for the eighth consecutive month in August, according to the S&P/Case-Shiller index released Tuesday. Fifteen of 20 metropolitan areas included in the index declined. Many experts predict housing prices will fall further before demand rebounds.
Jefferson Harralson, a banking analyst with Keefe, Bruyette & Woods Inc. who follows banks such as Bank of America Corp. and Wachovia Corp., said an acceleration in losses from defaults "seems to be a given, whether or not a rate cut occurs."
He says home equity lines of credit will be less likely to default if rates are lower. But that's hardly a revenue cure for banks in an environment in which housing prices continue to fall and foreclosures continue to rise.
"The home equity business isn't going to be a growth business," Harralson said.
Stocks Slide Ahead of Fed Rate Decision By Madlen Read, AP Business Writer
EW YORK (AP) -- Wall Street pulled back Tuesday as investors, uneasy about a drop in consumer confidence, traded cautiously ahead of the Federal Reserve's impending decision on interest rates.
After the Fed's half-point reduction in September, most investors expect the central bank to deliver a quarter-point cut at the conclusion of its two-day meeting on Wednesday.But inflation remains a threat. Crude oil prices fell Tuesday, but only after hitting a record a day earlier, and meanwhile, the dollar has been tumbling. So a rate cut -- much less additional decreases in the coming months -- is not a given.
Some on Wall Street fear economic growth could halt if rates aren't lowered, given the troubles in housing and credit. The statement the Fed issues alongside its rate decision will be closely read for clues about future moves.
"We don't think the economy's about to slip into recession. The corporate portion of the economy is still in pretty good shape," said Phil Orlando, chief equity market strategist at Federated Investors. "However, should the Fed choose not to cut anymore, and the economy continue to slip, that potentially could raise some concerns for us."
Most earnings have been coming in better than expected over the past few weeks, particularly in the technology sector. But consumers, the key drivers of the economy, appear to be flagging.
Following last week's news of a significant decline in existing home sales and Standard & Poor's report Tuesday of home prices sinking further, the Conference Board said its index of consumer confidence fell to its lowest level in two years in October. The index came in at 95.6, below the consensus estimate of 99.5 and down from a revised reading of 99.5 in September.
The Dow Jones industrial average fell 77.79, or 0.56 percent, to 13,792.47.
Broader stock indicators were mixed. The S&P 500 index fell 9.96, or 0.65 percent, to 1,531.02, while the Nasdaq composite index fell 0.73, or 0.03 percent, to 2,816.71.
Treasury bond prices were little changed ahead of the Fed decision. The yield on the 10-year Treasury note, which moves inversely to its price, was at 4.38 percent, flat with late Monday.
The market remains nervous that even if the Fed decreases the target fed funds rate by a quarter-point or half-point, the move may not end up helping the credit and housing markets. It's not the price of borrowing that's deterring investors, many say; demand has waned because of worries about the quality of the underlying assets.
Furthermore, the central bank must walk a narrow line between keeping investors calm and acknowledging the problems out there -- particularly for the banks and brokerages that could see more big losses if portions of the credit market, like asset-backed commercial paper, don't improve.
"Providing the superficial image of stability when everybody realizes things aren't normal just doesn't work," said Axel Merk, manager of the Merk Hard Currency Fund.
In addition to this week's Fed decision, Wall Street faces important economic data. On Wednesday, the Commerce Department issues a reading on third-quarter gross domestic product; Thursday, the Labor Department reports on personal spending, income and inflation; and Friday, the Labor Department releases its highly anticipated jobs report.
Some disappointing financial reports from Procter & Gamble Co. and Qwest Communications International Inc., as well as a management shake-up at Merrill Lynch & Co., gave the market little reason to buy ahead of the Fed meeting.
Merrill Lynch's chairman and chief executive, Stan O'Neal, retired Tuesday as expected after the brokerage last week posted the biggest quarterly loss in its 93-year history. But no replacement was named. Alberto Cribiore, a director since 2003, was named interim non-executive chairman. Merrill Lynch fell $1.86, or 2.8 percent, to $65.56.
Procter & Gamble was the biggest loser among the 30 Dow components after warning that higher commodity costs will squeeze margins. P&G fell $2.88, or 4 percent, to $68.95.
Although Qwest reported a third-quarter profit jump, its shares tumbled $1.12, or 13.7 percent, to $7.06, after the telecommunications company declined to give details about its outlook.
The technology-dominated Nasdaq performed better than the other indexes, helped by ongoing strength in such bellwethers as Apple Inc., Microsoft Corp., and Google Inc. Apple rose $1.91 to $187; Microsoft rose $1, or 2.9 percent, to $35.57; and Google rose $15.54, or 2.3 percent, to $694.77.
Crude oil prices retreated $3.15 to settle at $90.38 a barrel, after hitting a record on Monday above $93 a barrel. Gold also fell.
The dollar declined against most other major currencies, except the yen.
Declining issues outnumbered advancers by about 5 to 3 on the New York Stock Exchange. Volume has been fairly light so far this week; consolidated volume came to 3.11 billion shares Tuesday, up from 3.02 billion Monday.
The Russell 2000 index of smaller companies fell 5.57, or 0.68 percent, to 816.15.
Overseas, Britain's FTSE 100 fell 0.70 percent, Germany's DAX index fell 0.40 percent, and France's CAC-40 fell 0.55 percent. Japan's Nikkei stock average fell 0.28 percent, while Hong Kong's Hang Seng index rose 0.16 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Selasa, 30 Oktober 2007
Time to refinance is now LizPulliamWeston
Rates on 2 million mortgages are scheduled to rise by the end of 2008. If yours is one of them, consider refinancing now -- if you can.
Falling home values are eroding people's equity rapidly enough that some who can refinance today might not be able to do so in a year, notes mortgage expert Dick Lepre. Even those who have plenty of equity now may face more limited options and higher costs in a few months.
That's because much of the refinance math lenders do depends on how much equity you have in your home:
- If your mortgage and other home loans equal 80% or less of your home's worth, you'll typically have the most choices and be offered the best rates, contingent on your credit scores.
- As your equity shrinks, though, rates tend to get higher and terms get stricter, said Lepre, a California loan officer who writes a weekly newsletter on the mortgage business. Every time you slip over an equity benchmark -- 85%, 90% and 95% -- rates tick up and your options decrease.
- Once you owe more on your house than it's worth, your alternatives pretty much decline to none, at least in today's mortgage market. Lenders who were once eager to make 100% or more loan-to-value mortgages have either gone out of business or turned away from these high-risk loans.
Risk is in waiting, not acting
What a difference a few months makes. In the recent past, the only folks who had to worry about not having enough equity to refinance were those who had already gobbled it up with home-equity borrowing. Even that was a temporary situation, as ever-rising home values continued to supply more equity.Now that home prices are dropping in many areas, the easy equity gains have turned into equity erosion. Someone with a $200,000 mortgage would have an 80% loan-to-value on a home worth $250,000, but if that home drops 10% in value, to $225,000, the same loan now represents 89% of the home's worth.
7 Trading Ideas for Monday By TradingMarkets Research
Here are 7 trading ideas for today. This list comes directly from the TradingMarkets Stock Indicators page and is based upon our latest quantitative research.
Bullish
5+ Consecutive Down Days: These are stocks that have closed down for five or more consecutive days and are trading above their 200-day moving average. Our research shows that stocks trading above their 200-day moving average that close down for five or more days have shown positive returns, on average, 1-day, 2-days and 1-week later. Historically, these stocks have provided traders with a significant edge.Kendle International (NasdaqGS:KNDL - News). KNDL's PowerRating (for Traders) is 7.
5+ Consecutive Lower Lows: These are stocks that have made a lower low for five or more consecutive days and are trading above their 200-day moving average. Our research shows that stocks trading above their 200-day moving average that make lower lows for five or more days have shown positive returns, on average, 1-day, 2-days and 1-week later. Historically, these stocks have provided traders with a significant edge.
Horizon Lines (NYSE:HRZ - News). HRZ's PowerRating (for Traders) is 6.
2-Period RSI Below 2: These are stocks that have a 2-period RSI reading below 2 and are trading above their 200-day moving average. Our research shows that stocks trading above their 200-day moving with a 2-period RSI reading below 2 have shown positive returns, on average, 1-day, 2-days and 1-week later. Historically, these stocks have provided traders with a significant edge.
National Instruments (NasdaqGS:NATI - News) . NATI's PowerRating (for Traders) is 7.
Stocks Down 10% or More: These are stocks that have lost 10% or more over the past five days and are trading above their 200-day moving average. Our research shows that stocks trading above their 200-day moving average that have lost 10% or more over the past five days have shown positive returns, on average, 1-day, 2-days and 1-week later. Historically, these stocks have provided traders with a significant edge.
Immucor (NasdaqGS:BLUD - News). BLUD's PowerRating (for Traders) is 7.
Bearish
5+ Consecutive Up Days: These are stocks that have closed up for five or more consecutive days and are trading below their 200-day moving average. Our research shows that stocks trading below their 200-day moving average that close up for five or more days have shown negative returns, on average, 1-week later. Historically, these stocks have provided traders with a significant edge.
Countrywide Financial (NYSE:CFC - News) & Lennary (NYSE:LEN - News). CFC's PowerRating (for Traders) is 4, and LEN's PowerRating (for Traders) is 3.
Stocks Up 10% or More: These are stocks that have gained 10% or more over the past five days and are trading below their 200-day moving average. Our research shows that stocks trading below their 200-day moving average that have gained 10% or more over the past five days have shown negative returns, on average, 1-week later. Historically, these stocks have provided traders with a significant edge.
Abbot Laboratories (NYSE:ABT - News). ABT's PowerRating (for Traders) is 4.
Go to TradingMarkets.com for Today's Top 25 Stocks.
Oil Surges to New Record Near $94
By John Wilen, AP Business Writer
Crude Prices Jump Sharply, Nearing $94 As Dollar Weakens and Mexico Suspends Some Production NEW YORK (AP) -- Oil futures surged to a new record near $94 Monday, propelled by the weak dollar and news that Mexico's state oil company had suspended a fifth of its oil production due to stormy weather.Crude futures rallied late in the session as the euro rebounded against the dollar, analysts said. The euro hit a record high against the dollar early Monday morning, then declined only to rally back later in the day.
"The dollar seems to be the force that's driving us now," said Phil Flynn, an analyst at Alaron Trading Corp., in Chicago.
The dollar's descent against other major currencies has drawn investors to crude futures as a hedge against the weakening currency and made dollar-denominated oil futures less expensive to people dealing in other currencies, said David Moore, commodities strategist with the Commonwealth Bank of Australia in Sydney.
Oil prices were also supported by news that Mexico's Petroleos Mexicanos, or Pemex, was to temporarily halt as much as 600,000 barrels of daily crude production.
"Mexico shut in production for a few days," which will likely disrupt imports and cut domestic oil inventories, said Chip Hodge, energy portfolio manager at John Hancock Financial Securities in Boston.
The Mexican oil fields are expected to return to service later this week.
Light, sweet crude for December rose $1.67 to settle at a record $93.53 a barrel on the New York Mercantile Exchange after rising as high as $93.80 earlier, a trading record. Crude prices are closing in on the inflation-adjusted highs hit in early 1980. Depending on the how the adjustment is calculated, $38 a barrel then would be worth $96 to $101 or more today.
Oil prices have jumped 10 percent since the Energy Department on Wednesday reported that oil supplies dropped sharply during the week ended Oct. 19. That news came amid rising political tensions in the Mideast.
Prices on Monday were also supported by fighting in Turkey between armed forces and Kurdish rebels, and the U.S. government's imposition last week of harsh penalties against Iran, the world's fourth largest oil producer.
Other Nymex energy futures were also higher. Gasoline for November delivery rose 5.34 cents to settle at $2.3274 a gallon, while November heating oil rose 3.21 cents to settle at $2.4646 a gallon.
November natural gas futures, which expired at the end of the Nymex session, rose 5.1 cents to settle at $7.269 per 1,000 cubic feet.
In London, December Brent crude rose $1.63 to settle at $90.32 a barrel on the ICE Futures exchange.
At the pump, the national average price of a gallon of gas rose 0.7 cent overnight to $2.856 a gallon, according to AAA and the Oil Price Information Service. Gas prices have risen nearly a dime in two weeks.
Oil prices could get another boost this week if the Federal Reserve cuts interest rates.
"The central bank will in all likelihood cut rates again, thus pressuring the dollar even further and providing underlying support to commodities in general," wrote Edward Meir, an analyst at MF Global UK Ltd., in a research note.
Despite oil's relentless march higher in recent weeks, many analysts argue that the price increases are being driven by speculation, not market fundamentals. Bullish news headlines out of Turkey, Iran and, on Monday, Mexico, contribute to this buying frenzy, these analysts argue.
"There is no shortage of news that speculators can use now to push oil prices higher," said Fadel Gheit, an analyst at Oppenheimer & Co.
Associated Press writers George Jahn in Vienna, Gillian Wong in Singapore and AP Business Writer Thomas Hogue in Bangkok, Thailand, contributed to this report.
Wall Street Rises As Fed Meeting Looms
By Madlen Read, AP Business Writer
Stocks Lift As Wall Street Awaits Fed Meeting; Oil Prices Surge, Passing $93 for First Time
NEW YORK (AP) -- Wall Street advanced Monday as investors undeterred by record oil prices speculated that the Federal Reserve will cut interest rates later this week to boost the slow economy and lure more buyers into the troubled credit markets.The Fed begins its two-day meeting Tuesday, and the market widely expects a rate reduction the following day. Central bankers lowered rates by a half-point in September for the first time in four years after the credit markets seized up and posed the threat of recession. The economy has a hard time growing if companies can't borrow and lend money.
Stocks Lift As Wall Street Awaits Fed Meeting; Oil Prices Surge, Passing $93 for First Time
NEW YORK (AP) -- Wall Street advanced Monday as investors undeterred by record oil prices speculated that the Federal Reserve will cut interest rates later this week to boost the slow economy and lure more buyers into the troubled credit markets.The Fed begins its two-day meeting Tuesday, and the market widely expects a rate reduction the following day. Central bankers lowered rates by a half-point in September for the first time in four years after the credit markets seized up and posed the threat of recession. The economy has a hard time growing if companies can't borrow and lend money.
But with energy prices soaring to new records, the risk of inflation -- which tends to accelerate when rates are low -- may give policy makers some pause. Crude oil futures soared above $93 a barrel for the first time on the New York Mercantile Exchange Monday after a storm led Mexico's state oil company to suspend about a fifth of its oil production.
The Fed remains concerned about inflation but is likely to lower the target federal funds rate by a quarter-point due to overriding credit worries, said Scott Wren, equity strategist for A.G. Edwards & Sons.
"It's kind of a psychological sort of move," Wren said. "A 25 basis-point cut isn't going to ease the credit crunch. But it'll give the Fed a little more time to figure out what's going on with the economy."
The Dow Jones industrial average rose 63.56, or 0.46 percent, to 13,870.26.
Broader stock indicators also gained. The Standard & Poor's 500 index rose 5.70, or 0.37 percent, to 1,540.98, while the Nasdaq composite index rose 13.25, or 0.47 percent, to 2,817.44.
Treasury bond prices rose modestly as bond investors grew more cautious in their rate expectations. The yield on the 10-year Treasury note, which moves inversely to the price, slipped to 4.38 percent, from 4.41 percent late Friday.
The dollar was mixed against rival currencies, while gold prices rose to 27-year highs.
Light, sweet crude for December rose $1.67 to settle at a record $93.53 a barrel on the New York Mercantile Exchange after rising as high as $93.80.
Though record-high crude prices and rising metal prices hurt consumers, they helped boost the stocks of companies who sell commodities. ExxonMobil Corp. and Alcoa Inc. were among the biggest gainers in the Dow.
Alcoa rose $1.08, or 2.7 percent, to $40.43, and ExxonMobil rose $1.40 to $93.61.
In addition to the hope for a rate cut, an earnings report from electronics retailer RadioShack Corp. encouraged Wall Street. RadioShack, after swinging to a third-quarter profit thanks to reduced expenses and improved inventory, rose 80 cents, or 4.1 percent, to $20.42.
Worries about Office Depot Inc.'s results, however, caused the retailer's shares to drop $2.86, or 14.1 percent, to $17.43. Three analysts downgraded the stock after the company said it will postpone its third-quarter earnings report.
Earnings so far have generally shown weakness in the financial and housing sectors but strength in others.
"It's a stock-pickers' kind of market. If you're in the right sectors, you're going to do well, but if you're in the broader market, you've got exposure to those weak sectors," said Rob Lutts, president and chief investment officer of Cabot Money Management.
Nearly 300 companies in the S&P 500 reported third-quarter earnings by last Friday, and on average posted a profit decline of 4.9 percent, said Nick Raich, director of equity research for National City's private client group. The figure was wider than the consensus, but primarily because of the dismal results at companies with exposure to housing and the credit markets. Eight of the S&P 500's 10 sectors reported average earnings gains of 8 percent or more, and five of those sectors posted double-digit gains.
In other corporate news, investors awaited the fate of Merrill Lynch & Co.'s chief executive Stan O'Neal, who was reportedly close to resigning amid broad criticism for leading the company to its biggest quarterly loss in its 93-year history. Merrill shares rose $1.33, or 2 percent, to $67.42.
Trading was relatively light Monday. Consolidated volume came to 3.02 billion shares, down from 3.51 billion Friday. Advancing issues outnumbered decliners by about 4 to 3 on the New York Stock Exchange.
The Russell 2000 index of smaller companies rose 0.33, or 0.04 percent, to 821.72.
In Asian trading, Japan's Nikkei stock average rose 1.17 percent, and Hong Kong's Hang Seng index rose 3.89 percent. In European trading, Britain's FTSE 100 rose 0.67 percent, Germany's DAX index advanced 0.76 percent, and France's CAC-40 added 0.71 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Senin, 29 Oktober 2007
Dollar Hit Record Low by Yan Xu
The dollar extended its loss versus the euro and sterling on expectations that the Fed may cut interest rates again next week. The dollar index slumped to a fresh all-time low at 77.035. The euro approached 1.44 versus the dollar, while the sterling rose to as high as 2.0571.
This week¡¯s economic data, including housing sales, durable goods orders, weekly jobless claims and today¡¯s consumer sentiment index, all showed signs of economic growth slow down. University of Michigan consumer sentiment index fell from 83.4 to 80.9 in October, below the estimate of 82.
It is widely expected that the Fed will lower rates by a quarter-percentage point to 4.00%. Under the pressure of housing slump and rising credit costs, the nation¡¯s economic growth may slow down in the future. The overall sentiment on the dollar is bearish.
Eurogroup Chairman Junker said in a newspaper interview published today that last week¡¯s G7 statement limited to the yuan showed they did not reach agreement on the yen and dollar foreign exchange range. He added that he preferred a stronger euro and the currency¡¯s current trading level was not yet an alarm-causing level. The euro may rise further to reach next target area at 1.4420-50 versus the dollar.
EURUSD will face interim resistance at 1.44, followed by 1.4420 and 1.4450. Additional ceilings will emerge at 1.4480, backed by 1.45. Support starts at 1.4350, backed by 1.4320, 1.43 and 1.4280. Subsequent floors are eyed at 1.4250.
GBPUSD encounters interim resistance at 2.0550, backed by 2.0570 and 2.06. Subsequent ceilings will emerge at 2.0620, followed by 2.0650 and 2.0680. On the downside, support begins at 2.05, followed by 2.0470 and 2.0450. Additional floors are eyed at 2.0430, backed by 2.04 and 2.0350.Rising Oil Boosted CAD & AUD
Rising oil prices boosted the commodity currencies, such as the Canadian dollar and the Australian dollar. Crude Oil hit record high at 92.22 per barrel today. The Canadian dollar strengthened to 0.9592 versus the dollar, while the Australian dollar rallied to 0.9176 against the dollar. With increasing demand of gas in the coming winter, oil prices are likely to surge higher.
Yen Fell on Core CPI Decline
The yen fell against high yielding currencies after a report showed core inflation declined in Japan, indicating the end of deflation fight may delay. Excluding food and energy prices, core CPI dropped 0.1% in September. The euro rose from 163 to round 164.50 versus the dollar, and the dollar remained around 114 against the dollar.
USDJPY encounters interim resistance at 114.30, backed by 114.50 and 114.80. Subsequent ceilings will emerge at 115, followed by 115.20 and 115.50. On the downside, support begins at 114 and 113.80, followed by 113.50. Additional floors are eyed at 113.20, backed by 113 and 112.70.
This week¡¯s economic data, including housing sales, durable goods orders, weekly jobless claims and today¡¯s consumer sentiment index, all showed signs of economic growth slow down. University of Michigan consumer sentiment index fell from 83.4 to 80.9 in October, below the estimate of 82.
It is widely expected that the Fed will lower rates by a quarter-percentage point to 4.00%. Under the pressure of housing slump and rising credit costs, the nation¡¯s economic growth may slow down in the future. The overall sentiment on the dollar is bearish.
Eurogroup Chairman Junker said in a newspaper interview published today that last week¡¯s G7 statement limited to the yuan showed they did not reach agreement on the yen and dollar foreign exchange range. He added that he preferred a stronger euro and the currency¡¯s current trading level was not yet an alarm-causing level. The euro may rise further to reach next target area at 1.4420-50 versus the dollar.
EURUSD will face interim resistance at 1.44, followed by 1.4420 and 1.4450. Additional ceilings will emerge at 1.4480, backed by 1.45. Support starts at 1.4350, backed by 1.4320, 1.43 and 1.4280. Subsequent floors are eyed at 1.4250.
GBPUSD encounters interim resistance at 2.0550, backed by 2.0570 and 2.06. Subsequent ceilings will emerge at 2.0620, followed by 2.0650 and 2.0680. On the downside, support begins at 2.05, followed by 2.0470 and 2.0450. Additional floors are eyed at 2.0430, backed by 2.04 and 2.0350.Rising Oil Boosted CAD & AUD
Rising oil prices boosted the commodity currencies, such as the Canadian dollar and the Australian dollar. Crude Oil hit record high at 92.22 per barrel today. The Canadian dollar strengthened to 0.9592 versus the dollar, while the Australian dollar rallied to 0.9176 against the dollar. With increasing demand of gas in the coming winter, oil prices are likely to surge higher.
Yen Fell on Core CPI Decline
The yen fell against high yielding currencies after a report showed core inflation declined in Japan, indicating the end of deflation fight may delay. Excluding food and energy prices, core CPI dropped 0.1% in September. The euro rose from 163 to round 164.50 versus the dollar, and the dollar remained around 114 against the dollar.
USDJPY encounters interim resistance at 114.30, backed by 114.50 and 114.80. Subsequent ceilings will emerge at 115, followed by 115.20 and 115.50. On the downside, support begins at 114 and 113.80, followed by 113.50. Additional floors are eyed at 113.20, backed by 113 and 112.70.
Oil Rises but Pulls Back From $93 Record By John Wilen, AP Business Writer
NEW YORK (AP) -- Oil futures rose Monday, but pulled back from a new trading record above $93 set after Mexico's state oil company suspended a fifth of its oil production due to stormy weather.
The news that Petroleos Mexicanos, or Pemex, was to temporarily halt as much as 600,000 barrels of daily crude production came amid rising political tensions in the Mideast, a weakening U.S. dollar and a tight supply outlook that had already pushed crude oil to record prices."Mexico shut in production for a few days," which will likely disrupt imports and cut domestic oil inventories further, said Chip Hodge, energy portfolio manager at John Hancock Financial Securities in Boston.
Oil prices have jumped 9 percent since the Energy Department on Wednesday reported that oil supplies dropped sharply during the week ended Oct. 19. The Mexican oil fields are expected to return to service later this week.
Prices were also supported by fighting in Turkey between armed forces and Kurdish rebels, and the U.S. government's imposition last week of harsh penalties against Iran, the world's fourth largest oil producer.
However, many analysts argue that oil prices have risen to levels not supported by crude's underlying demand and supply fundamentals, and are due for a correction.
Light, sweet crude for December rose 33 cents to $92.19 a barrel on the New York Mercantile Exchange after rising as high as $93.20 in overnight trading. Crude prices are closing in on the inflation-adjusted highs hit in early 1980. Depending on the how the adjustment is calculated, $38 a barrel then would be worth $96 to $101 or more today.
Other Nymex energy futures were also higher. Gasoline for November delivery rose 2 cents to $2.294 a gallon, while November heating oil rose 1.09 cent to $2.4434 a gallon.
Natural gas futures rose 11.2 cents to $7.33 per 1,000 cubic feet.
In London, December Brent crude advanced 50 cents to $89.19 a barrel on the ICE Futures exchange.
At the pump, the national average price of a gallon of gas rose 0.7 cent overnight to $2.856 a gallon, according to AAA and the Oil Price Information Service. Gas prices have risen nearly a dime in two weeks.
The weak dollar was also supporting energy futures. The dollar's descent against other major currencies has drawn investors to crude futures as a hedge against the weakening currency and made dollar-denominated oil futures less expensive to people dealing in other currencies, said David Moore, commodities strategist with the Commonwealth Bank of Australia in Sydney.
Oil prices could get another boost this week if the Federal Reserve cuts interest rates.
"The central bank will in all likelihood cut rates again, thus pressuring the dollar even further and providing underlying support to commodities in general," wrote Edward Meir, an analyst at MF Global UK Ltd., in a research note.
Despite oil's relentless march higher in recent weeks, many analysts argue that the price increases are being driven by speculation, not market fundamentals. Bullish news headlines out of Turkey, Iran and, on Monday, Mexico, contribute to this buying frenzy, these analysts argue.
"There is not shortage of news that speculators can use now to push oil prices higher," said Fadel Gheit, an analyst at Oppenheimer & Co.
Associated Press writers George Jahn in Vienna, Gillian Wong in Singapore and AP Business Writer Thomas Hogue in Bangkok, Thailand, contributed to this report.
Midday Action, Oct. 29 By Jody Osborne
Gains continue Monday for stocks on interest rate cut hopes. However, gains have been light so far to start the week. Another record high for oil prices has pushed oil producer stocks higher, but also negatively impacts sentiment. The normal bout of merger news to start a week is missing, although Oracle (ORCL) did withdraw its bid for BEA Systems (BEAS). Overall, with expectations for a Fed rate cut Wednesday, stocks could see gains leading into the announcement.
Oil prices hit a new all-time high Monday with the December contract reaching a price of $93.20 this morning. Currently, crude is up about 50-cents to trade near $92.40 a barrel. News that Pemex, the state-owned Mexican oil producer, halted operations for a few days has pushed prices higher. Pemex averages about 600,000 barrels a day. Of course, the fact that the Fed is expected to cut rates is also pushing prices higher.
BEAS decided that it needs $21 a share, which is much higher than the $17 Oracle was offering. ORCL decided on Sunday withdrew its offer and there are no guarantees the company will even reenter a bid at $17 in the future. Shares of BEAS are trading flat Monday at a price near $16.50. Oracle shares are also flat near a price of $21.40.
Merrill Lynch (MER) is a company in the news Monday. The financial giant is expected to announce the resignation of its CEO Stan O’Neal. After reporting a larger than expected third quarter loss, shareholders are calling for changes and the Wall Street Journal believes that his resignation is very near. MER shares are actually down slightly on the news.
In earnings news, Verizon (VZ) reported a profit of $1.27 billion with earnings per share coming in at 63-cents, a penny ahead of estimates. Revenues also were slightly above expectations at $23.77 billion. VZ also raised its stock buyback plan by $500 million to $2.5 billion. Despite this positive news, VZ shares are higher by just half a percent to $45.85.
The Fed meeting will get underway tomorrow with their decision on interest rates expected Wednesday afternoon. Fed fund futures are pricing in a 90 percent chance of at least a 25 basis point cut. A 25-basis point cut is seeing just about 70 percent chance with 20 percent odds for a 50-basis point cut. Stocks are likely to price in a 25-basis point cut heading into the meeting.
Market moves higher on rate cut hopes By Jennifer Coogan
NEW YORK (Reuters) - Stocks rose on Monday but the gains looked shaky as investors weighed whether equities still have room to move higher if the Federal Reserve cuts interest rates this week.
Shares of Exxon Mobil (NYSE:XOM - News) and other energy companies led gains on the Dow after U.S. crude futures set a record at $93.20 a barrel on Monday.
The S&P has gained about 2 percent over the past week on speculation the Fed will cut its benchmark fed funds rate by 0.25 percentage point to 4.5 percent. The Fed's rate-setting committee will meet on Tuesday and Wednesday, with a decision expected on Wednesday.
"We continue to be propelled by hopes of a rate cut. It seems most likely the Fed is going to do it, but the real question is what happens after," said Jim Awad, chairman of W.P. Stewart Asset Management in New York.
The recent advance by stocks in anticipation of a rate cut may leave no room for further gains once it comes.
"My gut tells me we have discounted an awful lot and we're in for a reality check," Awad said.
The Dow Jones industrial average (DJI:^DJI - News) was up 40.40 points, or 0.29 percent, at 13,847.10. The Standard & Poor's 500 Index (^SPX - News) was up 2.84 points, or 0.18 percent, at 1,538.12. The Nasdaq Composite Index (Nasdaq:^IXIC - News) was up 4.01 points, or 0.14 percent, at 2,808.20.
The S&P financial sector index (^GSPF - News) was down 0.4 percent. Thrifts and mortgage lenders were the worst-performing sub-sector on the S&P. Adding to the gloomy forecast for the sector, Swiss bank UBS AG (VTX:UBSN.VX - News) warned it may face more write-downs on its fixed income portfolio, joining other major banks that have been bruised in the mortgage market crisis.
Exxon shares were up 1.6 percent to $93.70 on the NYSE. Chevron (NYSE:CVX - News) stock gained 1.2 percent to $92.72.
In earnings news, consumer electronics chain RadioShack (NYSE:RSH - News) said it swung to a quarterly profit from a loss a year ago. RadioShack shares jumped 7.4 percent to $21.08 on the NYSE.
Shares of Merrill Lynch & Co Inc (NYSE:MER - News) were down 0.8 percent to $65.55 as investors awaited word on the fate of the investment bank's chairman and chief executive, Stan O'Neal. News reports have said Merrill's board was likely to force O'Neal's departure, possibly as early as Monday. Merrill's stock had surged on Friday on reports hinting at his departure.
10 Financial Steps You Can't Afford to Put Off ByJeffrey Strain
Putting off for tomorrow what you can do today could end up hurting your wallet.
According to University of Calgary professor Piers Steel in a study published earlier this year in Psychological Bulletin, a peer-reviewed journal by the American Psychological Association, more than one in four Americans consider themselves
Are you a financial procrastinator? When it comes to your own finances, have you been avoiding tasks that you know are important and postponing them until a later date?
Here are 10 financial tasks that you know you should do, but may have been putting off. Answer each to see how much of a financial procrastinator you truly are:1. Are you paying off your credit card in full each month? You know that you pay a fortune to borrow money from credit card companies and that you should pay off your credit card in full each month, but are you doing it? If you have too much credit card debt to pay it in full this month, have you at least put into place a
2. Are you contributing to your 401(k) up to the match? You would think that most people would jump at the chance to receive free money. If your company matches a certain percentage of your 401(k) contribution, that is exactly what they are offering you, but studies indicate there is only a
3. Have you written your will? Accidents happen and even those who are young should have a will, but many people make excuses as to why they haven't gotten around to creating this important financial document. It may be that you don't want to think about it or you believe you have plenty of time, but the reality is that you
4. Have you built an
5. Have you created a budget? You know you should have one so you know where your money is going. Many people fail to create a budget, because they fear what they may see. But creating a budget is a cornerstone of getting your finances in order and everyone should at least have a basic plan in place.
6. Have you compared your insurance rates this year? Insurance is a competitive business and prices can change dramatically from year to year. The best way to make sure you are getting the best price on your insurance is to compare the rates once a year. Not doing so can cost you hundreds of dollars. This can also be done with a lot of
7. Have you checked your credit report this year? In the past you could make the excuse that it cost too much to get your credit report, but now that you qualify for a free credit report from each of the three credit rating agencies at
8. Have you opened an online bank account? Online banks tend to pay a lot more interest than traditional banks when it comes to savings accounts. If your money is still sitting in a traditional bank earning a couple of percentage points interest at most, your failure to open one of the many online banking accounts available is costing you money. This is one of many
9. Do you check your tire pressure each month? Making sure that your tire pressure is correct is one way to help save on gas consumption. Yet many people, while aware of this, still don't spend the five minutes it takes to make sure their tire pressure is correct each month -- costing them not only money in wasted gas, but also the cost of additional wear on the tires.
10. Have you had a home energy audit? Energy companies want to help you save money by showing what areas of your house are leaking energy. Many will perform energy audits for free if you simply ask, while many more will do it for a nominal fee. You can even
How did you score? If you are not a financial procrastinator, you should have answered "yes" to all of the questions. If you answered no to any of them, it should give you an idea on how much you procrastinate on your finances and provide a list of things that you know you need to get done.
Take the initiative and break yourself from the financial procrastination habit and vow to complete each step you haven't taken before the end of the month.
Merrill Lynch CEO Close to Exit
NEW YORK (AP) -- Stan O'Neal, the beleaguered chief executive of Merrill Lynch & Co., was reportedly close to resigning Sunday amid broad criticism for leading the world's largest brokerage to its biggest quarterly loss since it was founded 93 years ago.In a week that included an $7.9 billion write-down related to subprime mortgages and O'Neal's unauthorized overture to sell the company to retail bank Wachovia Corp., the board of Merrill Lynch reached a broad consensus Friday for his dismissal, according to several media reports. He would become the highest-ranking casualty of the global credit crisis that swept through Wall Street's biggest investment banks during the third quarter.
An announcement of his departure could come as soon as Sunday evening or Monday morning, according to reports in The Wall Street Journal and The New York Times.
A Merrill Lynch spokesman declined to comment Sunday.
Merrill's 11-member board, which currently includes O'Neal as chairman, was expected to initiate a search to find a replacement that will include both internal and external candidates.
O'Neal, 56, came under fire Wednesday when Merrill Lynch announced a $2.24 billion loss as big bets on mortgage-backed securities were rendered almost worthless because of a global credit squeeze. His fate was also plunged into doubt after he initiated talks about a possible merger with Wachovia, according to the Times. Such a deal could have handed O'Neal a $250 million separation package if he wasn't chosen to lead the new company.
O'Neal, who rose to power five years ago, was known for shaking up top management and putting a greater emphasis on riskier bets rather than the safety of just selling stocks. That strategy -- which handed Merrill Lynch record results during the market's peak -- came with a heavy cost during the tumultuous third quarter. The company said Wednesday it didn't know what impact it would have in the current earnings period.
O'Neal shouldered the blame for the earnings miss.
"I'm not going to talk around the fact that there were some mistakes that were made," he said in a conference call with analysts Wednesday. Merrill Lynch shares plunged for two days, then spiked Friday amid speculation O'Neal might be forced out.
Investors, who have seen Merrill's shares slump by 30 percent this year, will now be keenly interested in who might take control. Widely tipped as a successor is Laurence Fink, currently chairman and CEO of asset manager BlackRock Inc. He's credited with being one of Wall Street's most powerful players in the fixed-income market, which has been slammed by a global aversion to risk as mortgage-backed securities lost significant value during the summer.
Fink had dinner with O'Neal on Thursday but has yet to meet with Merrill's board, according to a person familiar with the matter who was unauthorized to speak on the record. Merrill Lynch owns a 49 percent stake in BlackRock.
Internally, Gregory Fleming, Merrill's co-president, has been named as a possible replacement, as has Bob McCann, who heads Merrill's brokerage division.
There was also speculation that Fink, Fleming and McCann might enter into some power-sharing arrangement until the board can find a permanent replacement.
Kamis, 25 Oktober 2007
Stocks Up After New Home Sales Rise
NEW YORK (AP) -- Stocks turned higher Thursday after a surprise gain in new home sales eased some of Wall Street's concerns about the housing sector.
The Commerce Department said sales of new homes rose 4.8 percent in September from August's levels, a pleaant surprise for a market that had a decline. The data was particularly reassuring after a drop in existing home sales sent stocks tumbling early in the previous session.The department's report earlier in the morning on orders of big-ticket items was less upbeat. Durable goods orders fell 1.7 percent in September, worse than the uptick economists had anticipated after August's significant 5.3 percent drop. Meanwhile, the Labor Department said claims for unemployment dipped last week by a smaller number than economists predicted.
From the market's perspective, the bright side to the weaker reports is that they could compel the Federal Reserve to lower interest rates again to boost spending. The central bank, which reduced rates last month by a half-percentage-point, is scheduled to meet next week to decide on monetary policy.
And meanwhile, most corporate earnings showed respectable growth Thursday. Motorola Inc. managed in the third quarter to post its first quarterly profit this year. The cell phone maker's earnings expectations for the fourth quarter were higher than forecasts, and shares rose 74 cents, or 4 percent, to $19.29.
In mid-morning trading, the Dow Jones industrial average rose 30.81, or 0.23 percent, to 13,706.06, recovering from an earlier loss.
Broader stock indicators also turned higher. The Standard & Poor's 500 index rose 3.77, or 0.25 percent, to 1,519.65, while the Nasdaq composite index rose 4.58, or 0.17 percent, to 2,779.34.
Bonds fell after the positive home sales report. The yield on the benchmark 10-year Treasury note rose to 4.36 percent from 4.35 percent late Wednesday.
In other earnings news, Aetna Inc. on Thursday boosted profit forecasts after posting a 4 percent rise in third-quarter earnings. The health insurer cost cuts and saw medical membership increase. Aetna rose $1.80, or 3.4 percent, to $54.70.
The dollar fell against most other major currencies, except the yen, while gold prices rose.
Crude oil futures for December delivery rose $1.32 to $88.42 a barrel on the New York Mercantile Exchange.
The Russell 2000 index of smaller companies was up 0.30, or 0.04 percent, at 811.15.
Advancing issues outnumbered decliners by about 5 to 4 on the New York Stock Exchange, where volume came to 249.1 million shares.
Stock markets overseas were mostly higher.
In Asian trading, Japan's Nikkei stock average fell 0.45 percent, but Hong Kong's Hang Seng index rose 0.78 percent. In European trading, Britain's FTSE 100 rose 1.33 percent, Germany's DAX index rose 1.00 percent, and France's CAC-40 rose 1.16 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Rabu, 24 Oktober 2007
Stocks Finish Higher on Earnings Reports
By Joe Bel Bruno, AP Business Writer
NEW YORK (AP) -- Wall Street ended an erratic session with a big advance Tuesday as investors uneasy about the economy were reassured by solid earnings from blue chip names including Apple Inc. and American Express Co. The Dow Jones industrial average rose more than 100 points.Technology stocks were among the biggest gainers after Apple surpassed analysts' expectations with a 67 percent jump in fiscal fourth-quarter profit on strong sales of Macintosh computers, iPods and iPhones. Two Dow components -- American Express, one of the largest credit card companies, and chemicals maker DuPont Co. -- posted better-than-expected profit gains as well.
NEW YORK (AP) -- Wall Street ended an erratic session with a big advance Tuesday as investors uneasy about the economy were reassured by solid earnings from blue chip names including Apple Inc. and American Express Co. The Dow Jones industrial average rose more than 100 points.Technology stocks were among the biggest gainers after Apple surpassed analysts' expectations with a 67 percent jump in fiscal fourth-quarter profit on strong sales of Macintosh computers, iPods and iPhones. Two Dow components -- American Express, one of the largest credit card companies, and chemicals maker DuPont Co. -- posted better-than-expected profit gains as well.
"Housing is obviously still a big concern, and the question is how much does it spill over into the rest of the economy," said Alexander Paris, economist and market analyst for Chicago-based Barrington Research. "I think the trend for the market is down unless investors see something positive, and the market drifts back up again."
He said investors were also adjusting their positions ahead of key housing data this week. On Thursday, the National Association of Realtors will release its existing home sales report, while the Commerce Department reports new home sales a day later.
The Dow rose 109.26, or 0.81 percent, to 13,676.23.
Broader stock indicators also had solid gains. The Standard & Poor's 500 index rose 13.26, or 0.88 percent, to 1,519.59; the Nasdaq composite index rose 45.33, or 1.65 percent, to 2,799.26.
The stock market extended its recovery from Monday after plunging Friday. Wall Street had sold off for five straight sessions as worries about the credit market's effect on the economy escalated, when several blue chip companies offered sluggish outlooks and S&P downgraded more mortgage-backed securities.
Higher energy prices and a weakening dollar are also hanging over the market. Treasury Secretary Henry Paulson said in a speech Tuesday China must allow its currency, the yuan, to gain in value more quickly, to counter imbalances in the economy and make monetary policy more effective in responding to inflation.
Analysts believe investors are also looking for the Federal Reserve to throw them a lifeline when it meets next week to decide the future of rates. Wall Street widely expects the central bank will again lower rates after its half-point cut in September.
"I think you're going to see trading will be really choppy between now and next week's Federal Reserve meeting," said Scott Fullman, director of investment strategy for I.A. Englander & Co. "The market is very sensitive right now, and I continue to tell my clients that I don't mind being long so long as you're hedged -- risk levels are still high."
Treasury bonds were little changed amid a disappointing auction of new issues, and as investors moved back into stocks. The yield on the 10-year note closed at 4.40 percent, unchanged from Monday. In late trading, it rose to 4.41 percent.
Oil prices dipped on expectations of rising U.S. crude inventories, and concerns over a continuing buildup of Turkish military forces along the northern Iraqi border. A barrel of light, sweet crude fell 75 cents to $85.27 on the New York Mercantile Exchange.
The dollar fell against most other major currencies, while gold rose.
Earnings commanded most of the attention on Tuesday as investors looked for any indication about how companies fared during the quarter, and what they expect for the balance of the year. Recent results reinvigorated investors after companies posted a string of downbeat results last week, a disappointment that contributed to a 366-point slide in the Dow Friday.
So far, roughly 41 percent of the Standard & Poor's 500 companies have reported results -- with 51 percent beating expectations, according to the rating agency.
Apple rose $11.80, or 6.3 percent, to $186.16 after the company reported it shipped a record 2.16 million Macs in the quarter, an increase of 34 percent from the same period a year ago. That generated $3.1 billion, or about half of the company's revenues for the quarter.
American Express said late Monday higher spending by cardholders pushed third-quarter profit up 10 percent. Shares rose $1.79, or 3.2 percent, to $58.66.
DuPont posted a larger profit for the third quarter on agricultural and nutritional products in Latin America and the company boosted its full-year outlook. The stock rose 24 cents to $46.81.
AT&T Inc., the nation's largest telecommunications company, reported profit rose 42 percent after its acquisition of BellSouth Corp. Shares rose 85 cents, or 2.1 percent, to $42.02.
The Russell 2000 index of smaller companies rose 8.45, or 1.05 percent, to 818.53.
Advancing issues led decliners by a 2 to 1 margin on the New York Stock Exchange, where consolidated volume came to 3.21 billion shares, compared to 3.34 billion on Monday.
In Asian trading, Japan's Nikkei stock average inched up 0.07 percent, while Hong Kong's Hang Seng index soared 3.54 percent. In European trading, Britain's FTSE 100 rose 0.85 percent, Germany's DAX index rose 0.61 percent, and France's CAC-40 rose 0.77 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Selasa, 23 Oktober 2007
Stocks End Volatile Session Higher By Madlen Read, AP Business Writer
NEW YORK (AP) -- Wall Street finished a back-and-forth session higher Monday as investors overcame some of their nervousness about the credit markets and uneven earnings and found solace in the technology sector.Several companies including drug maker Merck & Co. reported decent third-quarter results, but investors were unhappy with rival drug maker Schering Plough Corp.'s results. They were also mindful of the downbeat profit outlooks from several blue chip companies last week.
Still, after an early slide, the market seemed to grow optimistic about Apple Inc.'s earnings, which did top Wall Street's expectations when the company reported after the closing bell. The eager anticipation of the report sent tech stocks higher, and by early afternoon, other stocks were tagging along.
Disappointing earnings and Standard & Poor's downgrade of another series of mortgage-backed securities sent stocks plunging Friday, taking the Dow Jones industrials down 366 points.
"It is not unusual for a big down day to be followed by an up day. I think the bargain hunters are out there," said Brian Gendreau, investment strategist for ING Investment Management. "It seems there's fairly strong demand out there, despite all the bloodletting on Friday."
He noted that while some big-name companies' results have disappointed Wall Street, about two-thirds of earnings so far have beat estimates and outlooks remain upbeat for the technology and health care sectors.
The Dow rose 44.95, or 0.33 percent, to 13,566.97, after falling more than 100 points early in the session.
Broader stock indicators finished higher, with tech stocks leading. The S&P 500 index rose 5.70, or 0.38 percent, to 1,506.33, and the technology-dominated Nasdaq composite index rose 28.77, or 1.06 percent, to 2,753.93.
The Russell 2000 index of smaller companies climbed 11.29, or 1.41 percent, to 810.08.
Advancing issues outnumbered decliners by about 9 to 7 on the New York Stock Exchange, where consolidated volume came to 3.4 billion shares, compared with a heavy 4.05 billion shares traded Friday.
Treasury bonds were little changed after Friday's steep gains. The yield on the 10-year note, which moves inversely to its price, was flat at 4.40 percent.
On Friday -- the 20-year anniversary of the Black Monday crash -- investors sold off stocks and bought up safer assets like U.S. Treasury bonds as the prospect of a thaw in the frozen credit markets grew dimmer.
Though the major U.S. stock indexes showed signs of strength Monday, there are still big worries on Wall Street about how problems in the financial markets might drag on corporate and economic growth -- concerns that make the record highs reached earlier this month by the Dow and the Standard & Poor's 500 index appear unreasonable.
"It may take a little time here, a week or two, of trying to heal," said Steven Goldman, chief market strategist at Weeden & Co.
Overseas markets were unsettled, responding to Friday's drop on Wall Street. In Asian trading, Japan's Nikkei stock average declined 2.24 percent, while Hong Kong's Hang Seng index dropped 3.7 percent. In later European trading, Britain's FTSE 100 fell 1.05 percent, Germany's DAX index fell 1.13 percent, and France's CAC-40 fell 1.38 percent.
Strong tech earnings could give a boost to investor sentiment.
Apple's fiscal fourth-quarter earnings handily topped Wall Street's expectations as the company set a record for quarterly shipments of its Mac computers and sold more than 1 million iPhones. Apple shares, which finished the regular session up $3.94, or 2.3 percent, at $174.36 rose 6 percent in after-hours electronic trading.
Netflix Inc., the online DVD rental service, said its third-quarter earnings rose 23 percent as its subscriber base grew. The company's results topped its expectations. Netflix slipped 23 cents to $23.01 in the regular session but rose 13 percent in after-hours trading.
American Express Co., one of the nation's biggest credit card issuers, said Monday higher spending by cardholders pushed third-quarter profit up 10 percent but that it set aside more money for write-downs. Amex fell 24 cents to $56.87 during the session and rose more than 2 percent in after-hours trading.
Schering-Plough's profit gain, however, fell short of expectations. The drug maker fell $4.37, or 13.4 percent, to $28.34.
Analysts said the upbeat results that arrived Monday won't erase all of investors' concerns.
"People are worried there are more time bombs out there," Gendreau said. He posited that a big reason the market sold off as sharply as it did last week was because fund managers wanted to lock in positive returns for the year before any more bad news hits.
Over the weekend, the world's economic leaders not only said that smoothing the turbulent global financial markets will require vigilance, but they also warned of inflation risks -- which puts central banks like the U.S. Federal Reserve in a tight spot. The Fed lowered interest rates on Sept. 18 to make borrowing cheaper amid a growing credit market crisis, and Wall Street hopes policy makers reduce rates again when they meet next week.
Fed Governor Randall Kroszner at a speech in Washington reaffirmed that the central bank will "act as needed" to calm the financial markets. He also said problems with structured credit products -- which dampened the profits at several banks in the third quarter -- are recovering, but gradually.
Crude oil futures settled down $1.04 to $87.56 a barrel on the New York Mercantile Exchange. Gold also declined, while the dollar rebounded sharply against several major currencies.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Minggu, 21 Oktober 2007
IMF Urges Nations to Focus on Stability By Harry Dunphy, Associated Press Writer
IMF Urges Governments to Try to Ensure Smooth Functioning of Financial Markets WASHINGTON (AP) -- Finance ministers and central bankers should remain vigilant to ensure the smooth functioning of financial markets that have been jarred by a global credit crisis, the International Monetary Fund's policy-making committee said Saturday.
The group also said in a statement that monetary policy of member governments should focus on achieving price stability while keeping a close eye on inflation in the light of rising food and oil prices, among other factors.
The group also said in a statement that monetary policy of member governments should focus on achieving price stability while keeping a close eye on inflation in the light of rising food and oil prices, among other factors.
Problems in the global economy came to a boil when credit markets froze on Aug. 9 as fear overwhelmed many investors. Troubles that began in the market for subprime mortgages in the U.S. spread to many other kinds of debt on international markets.
In an attempt to soothe jittery markets, the IMF statement urged "continued vigilance to maintain well-functioning financial markets."
The ministers said they would continue "to work together to analyze the nature of the disturbances and consider lessons to be learned and actions needed to prevent further crises."
"The turbulence has revealed a number of problems that may be deeper than the specific episode that triggered the tensions," said Italian Economy Minister Tommaso Padoa-Schioppa, the new head of the IMF's policy-making committee.
The head of the IMF, Spain's Rodrigo de Rato, was optimistic despite the recent concerns about the credit market.
"The global economy is expanding from a solid foundation," he said.
The IMF statement said global economic growth was moderating amid disturbances in financial markets, but financial growth in countries with fast-growing economies and "strong fundamentals" continue to support the world economy.
Ministers said the financial innovation that led to the packaging of securities based on subprime mortgages in the U.S., "while having contributed to enhanced risk diversification and improved market efficiency, have also created some new challenges that need to be properly addressed."
Padoa-Schioppa said some of the institutions involved in the packaging needed to be monitored.
"There is a clear need for supervisory audits even for the great financial institutions that create these instruments, to understand better what their creations are doing out on the market. This is clearly a reason for concern," he said.
The IMF statement recognized the growing importance of sovereign wealth funds -- huge pools of money controlled by governments -- in international financial markets.
"While recognizing their positive role in enhancing market liquidity and financial resource allocation," the statement said, "the committee welcomes the work by the IMF to analyze issues for investors and recipients of such flows, including a dialogue on identifying best practices."
The IMF took up the issue because of growing concern that countries with these funds, ranging from China to Kuwait, might buy up companies, banks and real estate in the West.
The ministers paid tribute to de Rato, who is leaving at the end of the month, and said they looked forward to working with his successor, France's Dominique Strauss-Kahn.
"This is a sad day for the IMF but should be a very satisfying day for you," Padoa-Schioppa told de Rato at a news conference.
Based in Washington, the 185-member organization, which helps out countries in financial crisis and makes loans to poor nations, has been criticized for not allowing countries with fast-growing economies more of a say in IMF decisions.
Under an informal practice dating back to the founding of the IMF and its sister institution the World Bank 63 years ago, an American heads the bank and a European leads the fund, a process critics of the two institutions say is outmoded.
De Rato said the institution needed to update its governance. The ministers said they had made some progress working on a formula to increase the representation of fast-growing economies in IMF decision-making, but advocacy groups said the reform program was "going nowhere."
"The Europeans refuse to give up their stronghold on the institution and the United States is not really interested in the poorest countries having a bigger say at the table," said Elizabeth Stuart, senior policy adviser to Oxfam International, an aid group and frequent IMF critic.
Associated Press writer Desmond Butler contributed to this report.
World Bank: http://www.worldbank.org
International Monetary Fund: http://www.imf.org
Jumat, 19 Oktober 2007
Oil rises towards $90 high as dollar sinks
LONDON (Reuters) - Oil climbed back towards its new $90 peak on Friday, supported by tight fuel stocks ahead of winter and a softening dollar.
U.S. crude gained 29 cents to $89.76 a barrel by 6:05 a.m. EDT. It hit an all-time high of $90.02 in early trade on Friday. London Brent crude edged up 12 cents to $84.72.
Oil's rally -- which has seen six straight days of record highs for U.S. crude -- has been fuelled by unprecedented weakness in the dollar, a factor that has supported all dollar-denominated commodities.
The greenback fell to a new record low against the euro on Friday, knocked by sentiment that weak U.S. economic and financial market indicators may force another interest rate cut.
"The dollar weakened further, spurring some investment into oil as a hedge against dollar weakness," said David Moore, commodity strategist from the Commonwealth Bank of Australia.
"And there are still concerns that oil market conditions will remain tight over the northern winter."
Oil has averaged just over $67 a barrel this year, but is climbing towards the inflation-adjusted high of $101.70 hit in April 1980, a year after the Iranian revolution.
The price run-up has concerned OPEC, which may call for an early formal meeting to discuss a further output increase. An OPEC supply rise of 500,000 barrels per day (bpd), agreed last month, will take effect on November 1.
Although stocks of fuel in top consumer the United States rose last week, crude inventories stand about 4 percent below a year ago, while gasoline and distillate stocks are about 7 percent below last year.
Rising political tension between Turkey and Kurdish rebels in northern Iraq has also supported gains, as traders worry about a disruption in flows of Iraq's northern oil exports.
(Additional reporting by Felicia Loo in Singapore)
This Is Your Brain on Money by Laura Rowley
One afternoon on his way to lunch, New Yorker Jason Zweig found a roll of bills on the sidewalk that totaled $300.
He subsequently picked up the restaurant check for his office mates, took his girlfriend out to dinner, and splurged on some books, music, and a few classy ties. When all was said and done, he'd blown $430 -- or $130 more than his lucky strike.
Eager Spenders
Researchers have found that an unexpected windfall makes people more eager to spend than an expected one, as Zweig discovered in writing his new book, "Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich."
In the book, Zweig, a senior writer at Money magazine and editor of the revised edition of Benjamin Graham's classic "The Intelligent Investor," examines the psychological, neurological, and biological phenomena that drive foolish financial behavior.
"It's very important for people to realize that this is not a study by very smart people of how stupid the rest of us are," says Zweig. "If you talk to the researchers, they make the exact same mistakes that they spend their careers documenting."
Here are five ways your brain can trick you into making financial blunders, and how to avoid them:
1. Familiarity breeds admiration, not contempt.
Psychological research shows that we're attracted to the familiar, Zweig says. A simple test proves his point: Take a digital photo of yourself, and using photography-manipulation software, flip it to the reverse image so that if it was shot from the left, it now looks as if it was taken from the right.
"You'll have a strong preference for one of those images and not the other -- because one is your mirror image, the other is the image that people see when they look at you," says Zweig. "Whenever a stock, an industry, a market, a country, or an investing theme is familiar, you'll like it better. But familiarity is very dangerous."
One example: More than 5 million Americans have at least 60 percent of their 401(k) savings in the stock of the company where they work. Investment advisors recommend holding no more than 5 percent.
On the other hand, what about the famous advice of legendary Fidelity fund manager Peter Lynch, to invest in what you know? "That's not what Peter Lynch said," Zweig says. "He did invest in Chrysler after getting a minivan, but he didn't invest only because he liked the minivan -- he researched the stock. If he hadn't liked what he saw when he researched the company, he wouldn't have bought the stock."
Whenever you feel an investment is a no-brainer, stop and write down 8 to 10 different reasons why you must be right, Zweig advises. If you find after three or four that you can't think of any more, think twice before buying.
2. The pattern you swear you see is probably an illusion.
The brain is built to detect patterns, even when confronted with an arbitrary occurrence. "A small streak of random luck looks to us like part of a longer pattern of reliable foresight," Zweig writes.
After someone learns a set of circumstances through which they made money, the brain will fire up with the pleasure chemical dopamine when those conditions occur again. "If you see something once, then twice, you automatically, involuntarily expect it a third time," Zweig says.
"You associate a signal with a result -- 'when I listen to that guy on CNBC and I do what he tells me, I make money.' If that happens to you twice, and if you see him again on TV, dopamine is released, and you'll buy what he recommends because just seeing him will give you a good feeling. The intensity of expectation really gets you into trouble."
Investors relying on technical analysis tend to succumb to this problem. "As soon as a stock seems to conform to a pattern that has made money before, an 'I-got-it' effect kicks in, making investors feel sure they know what's coming next -- regardless of whether there's any objective reason to believe they do," Zweig explains. Even sophisticated investors tend to hire money managers who are on a three-year hot streak.
Zweig says one way to prevent your brain from reacting to these "three-peats" is to use dollar-cost averaging -- investing the same amount every month in a fund or stock that's part of as larger long-term strategy based on your goals.
3. Everything is relative.
The brain will hook onto a number and then compare subsequent figures to the initial one, a phenomenon known as "anchoring and adjustment." It's why real estate agents tend to show a potential buyer the most expensive house first, because subsequent ones will seem inexpensive; and why mutual fund companies nearly always launch new funds at a "cheap" price of $10 a share.
The solution? Avoid the numbers. Zweig quotes Warren Buffett, who says he always likes to look at investments without knowing the price, "because if you see the price, it automatically has some influence on you."
4. Tune out the play-by-play.
If you're someone who obsessively monitors the prices of your holdings, watch out. Several studies by Princeton Nobel laureate Daniel Kahneman and other researchers have found that the more often people watch an investment move up and down, the more likely they are to trade in and out short-term -- and the less likely they are to earn a high return over the long term.
"If owning stocks is a long-term project for you," Kahneman tells Zweig, "following their changes constantly is a very, very bad idea. It's the worst possible thing you can do, because people are so sensitive to short-term losses. If you count your money every day, you'll be miserable."
5. Beware of group-think.
"When the market gets really greedy or really fearful, basically everyone's brain starts to work the same way," says Zweig. "That's why many people buy high and sell low."
A New York University researcher performed MRI scans on subjects as they watched the Clint Eastwood film "The Good, the Bad and the Ugly." "Throughout most of the movie, the brain scans were all over the map," says Zweig. "Then there's a scene in which Clint Eastwood blows the bad guy's head off. Everyone had the same reaction -- fear and alarm. The lesson is that, at emotional turning points, people think alike."
To avoid following the herd, set your own financial policies and rules, and stick by them.
"Try to determine what your long-term goals are, put a really good financial plan in place, and follow it," says Zweig. "The worst imaginable thing you can do is listen to Pied Pipers who tell you 'here are seven tricks to beat the pros at the game.' That game will make you miserable."
Rabu, 17 Oktober 2007
Stocks Rebound on Strong Earnings
By Joe Bel Bruno, AP Business Writer
Stocks Open Higher on Strong Results From JPMorgan Chase, Techs; Tame Inflation Reading NEW YORK (AP) -- Wall Street rebounded Wednesday after key earnings reports from JPMorgan Chase & Co. and Yahoo Inc. and other companies topped Wall Street forecasts.
Better-than-expected earnings reports helped investors shake some of their concerns about the ongoing housing slump and lingering problems in the credit markets. The market largely looked past weak housing data, while the Labor Department's reading on September consumer price inflation came in close to analyst expectations.Strong results from component companies of the Dow Jones industrial average, including JPMorgan Chase, Altria Group Inc. and United Technologies Group Inc., helped encourage investors that third-quarter earnings overall might come in better than expected. And technology shares led the Nasdaq higher after robust earnings from Intel Corp., Yahoo Inc. and International Business Machines Corp. late Tuesday.
In early trading, the Dow rose 53.65, or 0.39 percent, to 13,966.59. The Standard & Poor's 400 index rose 9.35, or 0.61 percent, to 1,547.88, while the Nasdaq composite index rose 30.73, or 1.11 percent, to 2,794.64.
Wall Street's recovery followed two days of declines. Stocks slid Tuesday after banks including Wells Fargo & Co. and KeyCorp reported disappointing quarterly results due to the ongoing credit crisis. Meanwhile, investors were also spooked after Federal Reserve Chairman Ben Bernanke said the housing slump may drag on through next year.
JPMorgan Chase said third-quarter profit rose 2 percent record earnings in asset management helped the country's third-largest bank overcome hefty writedowns on its leveraged loans credit loss provisions resulting from the summer's credit market turmoil. Its shares rose $1.09, or 2.4 percent, to $46.20.
Yahoo said late Tuesday that third-quarter profit fell less than analysts had expected, raising hopes of a turnaround at the Internet search company. Yahoo gained $2.03, or 7.6 percent, to $28.72.
Chipmaker Intel posted a 43 percent increase in third-quarter earnings late Tuesday. The company's shares jumped $1.02, or 4 percent, to $26.50.
Beyond earnings, investors absorbed two economic reports that appeared to give the Fed more wiggle room in cutting rates. Central bankers will next meet Oct. 30-31.
U.S. consumer prices rose modestly last month, suggesting there are still inflation risks, but they likely wouldn't get in the way of an interest rate cut. The consumer price index rose 0.3 percent in September, reversing August's 0.1 percent decline. The core CPI, which excludes volatile food and energy prices, advanced 0.2 percent for a fourth-straight month.
Meanwhile, the Commerce Department said new home construction slowed to the weakest pace in 14 years during September. Housing starts plunged 10.2 percent to a seasonally adjusted 1.191 million annual rate, after falling 3.2 percent in August to 1.327 million.
Investors are still waiting for the Fed to release its Beige Book report at 2 p.m. EDT. The report gauges regional economic conditions based on data gathered by the Fed's 12 regional district banks.
Oil traded higher ahead of the Energy Department's weekly petroleum report, which is forecast to show crude and gasoline inventories rose last week. A barrel of light, sweet crude rose 36 cents to $87.97 on the New York Mercantile Exchange.
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