Durable goods orders drop 2.4%

New orders for long-lasting U.S. manufactured goods fell unexpectedly in August, dropping by their biggest margin in seven months, following a plunge in commercial aircraft orders, the government reported Friday.

The Commerce Department said durable goods orders tumbled 2.4%, the largest decline since January, after rising by a revised 4.8% in July. New orders for July were previously reported to have increased 5.1%.

Analysts polled by Reuters forecast orders rising 0.5% in August. Compared with the same period last year, new orders were down 24.9%.

Durable goods orders are a leading indicator of manufacturing activity, which in turn provides a good measure for overall business health.

U.S. stock index futures fell on the report, while government bond prices rose.

"This is a bit of a reality check for people. It means there is more to be done and we are not out of the woods yet," said Doug Roberts, chief investment strategist at Channel Capital Research.com in Shrewsbury, N.J.

The data coming on the heels of areport on Thursday that showed a surprise drop in existing home sales in August was a reminder that recovery from the worst recession since the 1930s would be uneven. Doubts linger over its sustainability as consumer spending remains constrained by a weak labor market.
0:00 /0:56Chinese manufacturing on the rise

Non-defense aircraft and new parts orders plunged 42.2% in August, likely reflecting a drop in civilian aircraft orders received by Boeing (BA, Fortune 500). New orders for transportation equipment dropped 9.3%.

New durable goods orders excluding transportation were flat in August, after rising for three straight months, the department said. Analysts polled by Reuters had expected new orders, excluding transportation to rise 1%, after a 1.1% increase in July.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, unexpectedly fell 0.4% in August. Analysts polled by Reuters had expected core capital goods to increase 1.3%.

The prior month was revised to show a 1.3% drop, previously reported as a 0.3% fall.

Durable goods inventories fell 1.3% in August after dropping 1.1% the prior month and declining for eight consecutive months. Shipments fell 1.4% after two months of straight gains. Shipments rose 2.2% in July.

Fortune 500's top stock: Freddie Mac

With apologies to the Beatles, the list of the best-performing Fortune 500 stocks in the year after the collapse of Lehman Brothers reads like a stroll down Penny Lane.

Penny stocks -- those that trade for less than $5 apiece -- are here, there and everywhere.

The top returning Fortune 500 stock over the past year is, ironically enough, Freddie Mac (FRE, Fortune 500). The irony lies in the fact that the government's seizure last September of the mortgage purchaser and its big sister Fannie Mae (FNM, Fortune 500) kicked off the most turbulent month in the financial markets since the Great Depression.

Taking over the companies didn't just tip Fannie and Freddie shares into free fall. It also sent shock waves through the financial system, as dozens of banks and insurance companies were left with big losses on preferred shares of Fannie and Freddie they had viewed as safe.

When Lehman failed a week later, Fannie and Freddie shares had a head start in the race to the bottom that many other giant financial firms, from AIG (AIG, Fortune 500) to Wachovia and Washington Mutual, would soon join.

Since then, shares of Freddie are up 367%. Fannie Mae was No. 3, returning 167% over the year ended Sept. 15, 2009.

Yet even after those gains -- much of the increase coming during the manic cheap-stock rallies this summer -- shares of Freddie were trading recently for only $1.87 each and those of Fannie were fetching just $1.60. Given the tens of billions of dollars of federal aid the companies have received, many analysts doubt the shares will hold even that value for long.

Though Fannie and Freddie are the most prominent penny stocks on the list, they aren't the only ones. Shares in the eighth-best performer, drug store chain Rite Aid (RAD, Fortune 500), surged 82% over the past year -- to $1.82 each. The debt-laden Camp Hill, Pa., company posted a $2.9 billion loss for the fiscal year ended in April and is struggling to reduce a massive debt load.

The top stocks on the Fortune 500 list aren't all lottery tickets, as some refer to the low-priced shares of companies with poor prospects. But, owing to the depth of the economic meltdown last fall, almost all the top performers have spent some time trading in the single digits.

Take Oshkosh (OSK, Fortune 500), the military truck maker that was the No. 2 Fortune 500 performer over the past year with a 171% gain. It traded recently at $31.47 and fetched as much as $60 a share in 2007, following a big Army order.

But shares dropped as low as $3.85 last fall, as the economy went into free fall.

The only stock among the top 10 performers in the Fortune 500 to have spent the entire year above $10 a share was World Fuel Services (INT, Fortune 500). The Doral, Fla.-based provider of nautical and aviation fuel was the No. 6 gainer last year, rising 101% to a recent $50.

Obviously, though, it wasn't all fun and games in low-price stock land last year. Three of the worst-performing Fortune 500 stocks -- not counting those that were delisted or filed for Chapter 11 bankruptcy protection, such as General Motors, cable company Charter Communications and numerous auto parts suppliers -- were AIG, Citigroup (C, Fortune 500) and CIT (CIT, Fortune 500).

AIG, the insurer that was taken over by the government as it teetered on the brink of insolvency the day after Lehman's failure, dropped 59% over the past year, adjusted for a 1-for-20 reverse stock split the company did in June to retain its New York Stock Exchange listing. It was the sixth-worst performer in the Fortune 500 among companies still listed on a major exchange.

Citi, the big bank that is the biggest recipient of federal aid via capital infusions and loan guarantees, was the fourth-worst performer with a 73% decline. This despite the fact that the stock has more than quadrupled since March, when it hit a multidecade low below a dollar amid fears a government takeover was on the way.

And CIT, the troubled small business lender that this summer pledged all its assets to get its hands on a $3 billion emergency loan, was down 81%. That made it the second-worst performer on the Fortune 500, after Crosstex Energy (XTXI, Fortune 500), the Dallas-based pipeline company that posted an 84% decline.

Stocks slip on global rout

Stocks stumbled Monday, taking a cue from overseas markets, as a growing trade rift between the U.S. and China raised worries about the strength of the recovery.

Investors were also looking to President Obama, who was due to speak a day ahead of the one-year anniversary of the collapse of Lehman Bros.

The Dow Jones industrial average (INDU) lost 44 points, or 0.5%. The S&P 500 (SPX) index lost 4 points, or 0.4%. The Nasdaq composite (COMP) fell 9 points, or 0.4%.

President Obama comes to Wall Street to talk about financial services reform as the first anniversary of the collapse of Lehman Brothers approaches. In his address, Obama will urge the financial services industry to support his reform efforts and call for quick action, an administration official told CNN.

The anniversary of the Lehman Brothers collapse and other "horror stories of the past" are likely to weigh on Wall Street Monday, said Peter Cardillo, chief market strategist for Avalon Partners.

"All of these things are giving investors an excuse to take some money off the table," he said.

The president's decision last week to impose a tariff on Chinese-made tires may also resonate with investors. China's commerce industry responded Sunday by saying it will investigate the dumping of U.S. chicken and autos into its markets.

Stocks snapped a 5-day advance Friday as falling oil prices gave investors reason to pull back after pushing the major indexes to 11-month highs in the previous session. Despite Friday's retreat, all three indexes posted gains for the week.

The market has been supported recently by a weak dollar, higher commodity prices and investor fears of missing out on a rally that has been going strong since March. But trading volume thinned out near the end of last week, suggesting investors were becoming reluctant to commit.

Readings on retail sales, consumer prices and new home construction are on tap for later in the week.

Major corporations reporting quarterly financial results this week include BestBuy (BBY, Fortune 500), Oracle (ORCL, Fortune 500), FedEx (FDX, Fortune 500) and Palm (PALM).

Trading is expected to be volatile this week as investors adjust portfolios ahead of a slew of options expirations on Friday. The quarterly event, known as "quadruple witching," is when stock index futures and options and individual stock futures and options all expire at the same time.

In corporate news, Eli Lilly (LLY, Fortune 500) announced a number of job cuts and also said that over the next few years it would not be replacing certain employees who leave, resulting in a smaller workforce.

World markets: Asian markets closed lower, with Tokyo's Nikkei index down 2.3%. Major indexes in Europe retreated in midday trading.

Currency: The dollar gained against the euro, the yen and the pound. The dollar index (DXY), which measures the greenback against a basket of currencies, fell to a one-year low last week.

Oil and gold: The price of oil rose 13 cents to $69.42 a barrel after falling nearly 4% on Friday and slipping in the morning Monday.

Gold prices eased, but remained above $1,000 an ounce.

U.S. calls for global bank capital requirements

The U.S. Treasury Department Thursday proposed tough international standards on capital and liquidity at banks, saying new rules are needed to reduce the risk of another global financial crisis.

The standards call for higher capital levels at all banks and even more stringent requirements for banks that could pose a threat to overall financial stability. They also call for a simple constraint on leverage for all banks, as well as strict but flexible liquidity regulations.

The proposal will be a key topic of discussion at the meeting of the Group of 20 rich and developing economies in London, which begins on Friday, starting a process eventually to supplant the Basel II standards with a broader-based effort.

The U.S. Treasury said a comprehensive new international agreement should be reached by the end of 2010 and that countries should implement the standards by the end of 2012.

"Capital requirements have long been and will remain a principal regulatory tool used by supervisors to promote the safety and stability of the banking system," the proposal says.

U.S. Treasury Secretary Timothy Geithner said Wednesday that a stronger capital accord was a critical part of making the world financial system more stable by limiting the risk of large institutions failing.

"We're going to be outlining a framework of principles to begin a discussion -- not to reach agreement on -- but to discuss a framework of principles on a new international capital accord that will put in place, once the crisis is behind us, a more conservative framework of constraints on leverage in the financial sector across the major globally active financial institutions," he told a news conference.
0:00 /1:40Bank CEOs still rake it in

Geithner said the accord would be developed under the auspices of the Financial Stability Board, an international body that was recently expanded to include major emerging economies such as China, India and Brazil.

The Treasury said in its 14-page proposal that capital and liquidity rules need to be as uniform as possible across countries, and that they should be structured so as not to allow the re-emergence of an under-regulated financial sector outside of the banking system.

But it did not prescribe specific capital or leverage ratios.

The proposal highlighted the gaps in existing regulations that let major financial firms around the world do business with low capital buffers, excessive amounts of leverage and unstable, short-term funding sources.

The framework comes almost a year after U.S. investment bank Lehman Brothers filed for bankruptcy, sending shockwaves through the global financial system and freezing credit markets.

Many of the institutions that have failed or have been subjected to government bailouts over the past year have met regulatory standards for being well-capitalized, but have suffered severe liquidity problems.

The Treasury's framework said new global rules should put greater emphasis on higher quality forms of capital, not just on levels of capital.

It also said the rules used to measure risks embedded in banks' books must be improved so that risk-based capital requirements are more accurate.

In the United States, officials are already working to rejig capital requirements. The Treasury has set a deadline of Dec. 31, 2009 for a working group to produce a report that reassesses existing regulatory capital rules for banks.

The Treasury said it was aware of the balance global regulators need to strike with the new rules.

"Stricter capital requirements generally will reduce the amount of financial intermediation and may limit credit availability," the proposal said.