Consumer spending rose in February, rebounding for the second month in row after falling for six straight months, according to government figures released Friday.
The Commerce Department said spending by individuals rose 0.2%, after increasing a revised 1.0% in January. February's results were in line with a forecast from Economists surveyed by Briefing.com.
After adjusting for inflation, however, real personal spending declined 0.2%. In January, it rose 0.7%.
"It appears the majority of the declines in consumption for this cycle are behind us," Adam York, an economist at Wachovia Economics Group, wrote in a client note.
February's spending uptick came as the Commerce Department reported personal income fell 0.2%. Income rose 0.4% in January, but last month's decline marks a return to the recent downward trend as unemployment has risen.
The report also showed that personal savings declined $27.4 billion in February to $450.7 billion. The personal savings rate, expressed as a percentage of disposable personal income, fell to 4.2% from 4.4% in January.
"The personal saving rate remains near recent highs, as consumers attempt to rebuild their damaged balance sheets," said York. "However, weaker income growth is offsetting slower spending."
Consumer spending makes up nearly two thirds of the nation's gross domestic product, which is the broadest measure of economic activity.
The government said Thursday that GDP fell at an annual rate of 6.3% during the final three months of 2008, with spending by consumers falling at an annual rate of 4.3%.
If the consumer spending figures reported Friday carry over into March's report, GDP could see a 1.2% annualized gain during the first three months of 2009, according to Ian Shepherdson, chief U.S. economist at High Frequency Economics.
However, the outlook for consumer spending and second quarter GDP is less optimistic.
"We look for a renewed decline in the second quarter on the back of falling incomes and the lagged effect of the massive destruction of housing and other wealth," Shepherdson wrote in a research note. "The first quarter is a correction, not a recovery."
Friday, March 27, 2009
Thursday, March 26, 2009
GM: 7,500 workers to take buyouts
General Motors announced that 7,500 factory workers had taken its latest buyout offer as the embattled automaker continues its efforts to cut costs as part of its request for additional federal help.
The workers leaving the company represent about 12% of the GM's remaining U.S. hourly work force, leaving it with just under 55,000 factory workers in the United States.
With this latest program, GM (GM, Fortune 500) has shed about 60,000 hourly U.S. jobs since 2006.
Most of the workers who took the buyouts will leave the company no later than Wednesday, the start of the second quarter.
The company did not give any update about its plans to cut 10,000 salaried workers worldwide, or 14% of that staff. Those cuts, which include just over 3,000 U.S. salaried jobs, are to be completed by May 1.
GM has offered buyout packages to all of its remaining hourly workers. It said to the extent that the hourly workers need to be replaced, the company will try to use laid-off GM staff, who are generally still receiving money from GM to supplement their unemployment compensation.
Even if the company needs to hire someone new to replace a departed worker, the company will save money under terms of the 2007 labor contract that pays new hires at a lower wage scale and with a far less lucrative benefit package.
But GM spokesman Tony Sapienza said given the current weak market for auto sales, the company does not expect to have to hire any workers in the near term.
GM did not set any target for the size of the staff reduction it was seeking with this buyout offer.
0:00 /1:14Will automakers deliver?
"We're pleased," said Sapienza when asked if this met the company's cost-cutting goal. "We feel this is a significant milestone of progress towards our restructuring plan and ultimately it will lead to a leaner and stronger company."
More than 90% of those taking the package are eligible for retirement and will receive full pension and health care coverage, in addition to the buyout package, which includes $20,000 in cash and a $25,000 voucher towards the purchase of a GM car in most cases.
The company did not say how much it expected to save as a result of these buyouts. But investors seemed to like the news. Shares of GM rose more than 13% in midday trading.
GM received $13.4 billion in federal funds to stave off filing for bankruptcy at the end of last year. It has asked for up to $16.6 billion in additional government loans. The Treasury Department has until Tuesday to consider the request, although GM announced earlier this month that it would not need that money this month due to the success of other cost-cutting efforts.
Rival Chrysler LLC, which received $4 billion in federal loans and is seeking an additional $5 billion in help, has also offered buyouts to its hourly workers. The company said its buyout offer is still ongoing.
The workers leaving the company represent about 12% of the GM's remaining U.S. hourly work force, leaving it with just under 55,000 factory workers in the United States.
With this latest program, GM (GM, Fortune 500) has shed about 60,000 hourly U.S. jobs since 2006.
Most of the workers who took the buyouts will leave the company no later than Wednesday, the start of the second quarter.
The company did not give any update about its plans to cut 10,000 salaried workers worldwide, or 14% of that staff. Those cuts, which include just over 3,000 U.S. salaried jobs, are to be completed by May 1.
GM has offered buyout packages to all of its remaining hourly workers. It said to the extent that the hourly workers need to be replaced, the company will try to use laid-off GM staff, who are generally still receiving money from GM to supplement their unemployment compensation.
Even if the company needs to hire someone new to replace a departed worker, the company will save money under terms of the 2007 labor contract that pays new hires at a lower wage scale and with a far less lucrative benefit package.
But GM spokesman Tony Sapienza said given the current weak market for auto sales, the company does not expect to have to hire any workers in the near term.
GM did not set any target for the size of the staff reduction it was seeking with this buyout offer.
0:00 /1:14Will automakers deliver?
"We're pleased," said Sapienza when asked if this met the company's cost-cutting goal. "We feel this is a significant milestone of progress towards our restructuring plan and ultimately it will lead to a leaner and stronger company."
More than 90% of those taking the package are eligible for retirement and will receive full pension and health care coverage, in addition to the buyout package, which includes $20,000 in cash and a $25,000 voucher towards the purchase of a GM car in most cases.
The company did not say how much it expected to save as a result of these buyouts. But investors seemed to like the news. Shares of GM rose more than 13% in midday trading.
GM received $13.4 billion in federal funds to stave off filing for bankruptcy at the end of last year. It has asked for up to $16.6 billion in additional government loans. The Treasury Department has until Tuesday to consider the request, although GM announced earlier this month that it would not need that money this month due to the success of other cost-cutting efforts.
Rival Chrysler LLC, which received $4 billion in federal loans and is seeking an additional $5 billion in help, has also offered buyouts to its hourly workers. The company said its buyout offer is still ongoing.
Tuesday, March 24, 2009
Washington's reluctant auto bailout
General Motors and Chrysler LLC have about a week or less before they find out if they'll get the additional help they need from taxpayers, creditors and unions to avoid bankruptcy.
What they already know is that any assistance they receive won't be given happily.
The two companies face a March 31 deadline to win concessions from bondholders and unions in order to prove to the Treasury Department that they can be viable in the long term. Without such a finding, the government can recall the $13.4 billion it has already lent to GM (GM, Fortune 500) and the $4 billion it loaned to Chrysler.
Few expect Treasury to take such a drastic step. Still, it's clear that the automakers need more than the loans they already have received. Chrysler is on record as saying it needs as much as $5 billion in additional funds by March 31 to avoid being forced into bankruptcy.
0:00 /1:14Will automakers deliver?
And while GM now says it doesn't face an immediate cash crunch, it has asked for up to $16.6 billion more in federal assistance, with most of that needed later this year. Its auditors have even said there is significant doubt about GM's ability to stay in business without more loans.
But it's growing less certain that GM will be able to get enough concessions from its creditors to satisfy the government. On Sunday, an ad hoc committee of leading GM bondholders issued a statement saying they were not ready to agree to swap their current notes for a combination of new debt and stock.
According to the letter released by the bondholders' financial advisors, the creditors are concerned GM may be headed for bankruptcy since the rebound in auto sales that the company is calling for in the turnaround plan it submitted to the government last month may not occur.
Without the government agreeing to give the bondholders some protections or more cash upfront, GM and Chrysler might not be able to restructure their debt in the manner called for in their turnaround plans. And without shedding debt, it will be difficult to win the necessary additional cost savings from the United Auto Workers that the union has already granted Ford Motor (F, Fortune 500).
Shelly Lombard, lead auto analyst for debt research firm Gimme Credit, said it will be tough for GM and Chrysler to get approved for additional loans if they are unable to get more concessions from the creditors and the union. And she said a deal with creditors is looking more and more unlikely.
Obama's tough talk
Perhaps most troubling for GM and Chrysler though is the fact that President Obama said in an interview on "60 Minutes" Sunday that while he wants to help the companies stay out of bankruptcy, they have yet to prove that they can remain viable.
He acknowledged that, given the political uproar over bailouts in general, it may be difficult for his administration to agree to further help for the automakers while it is also fighting for a controversial bank rescue package that Obama said is his top economic priority.
"I just want to say the only thing less popular than putting money into banks is putting money into the auto industry," Obama said during the interview.
Still, the automakers remain hopeful, at least on the record, that the federal help they are seeking will be approved in time to avoid bankruptcy.
They point to the $5 billion bailout of the auto parts sector announced by the Treasury Department last week as a sign that the Obama administration is committed to saving the automakers -- even though a member of the government's auto industry task force cautioned reporters that help for GM and Chrysler was a separate issue from loans for the parts makers.
"I think you have to take it as a positive sign, as a commitment to help the industry like other countries are doing, and certainly a recognition of what the industry means for the country's economy and manufacturing sector," said GM spokesman Greg Martin.
GM and bondholders both said in their statements Sunday that they were open to additional talks. Other industry experts say the reluctance of bondholders to accept the demand to swap debt for stock is likely more of a negotiating stance than a final position.
"If it's something or nothing, they're going to take something," said Bob Schnorbus, chief economist for J.D. Power & Associates.
The member of Obama's auto industry task force, who spoke to reporters last week on the ground that his name not be used, said to expect some kind of announcement from Treasury about what's next for GM and Chrysler ahead of the March 31 deadline. But he cautioned that won't settle the issue.
"I don't expect what we say before March 31 will be the final word on this situation," he said. "It's very big, very complicated."
And that's why Schnorbus and others say they expect negotiations between the automakers, government, creditors and the UAW will well go beyond next Tuesday's deadline.
"I'm inclined to think they'll get just enough federal help to keep the lights on," Schnorbus said. "Treasury will give them a lifeline. But even with that, they'll still be a long way from safely being out of harm's way."
What they already know is that any assistance they receive won't be given happily.
The two companies face a March 31 deadline to win concessions from bondholders and unions in order to prove to the Treasury Department that they can be viable in the long term. Without such a finding, the government can recall the $13.4 billion it has already lent to GM (GM, Fortune 500) and the $4 billion it loaned to Chrysler.
Few expect Treasury to take such a drastic step. Still, it's clear that the automakers need more than the loans they already have received. Chrysler is on record as saying it needs as much as $5 billion in additional funds by March 31 to avoid being forced into bankruptcy.
0:00 /1:14Will automakers deliver?
And while GM now says it doesn't face an immediate cash crunch, it has asked for up to $16.6 billion more in federal assistance, with most of that needed later this year. Its auditors have even said there is significant doubt about GM's ability to stay in business without more loans.
But it's growing less certain that GM will be able to get enough concessions from its creditors to satisfy the government. On Sunday, an ad hoc committee of leading GM bondholders issued a statement saying they were not ready to agree to swap their current notes for a combination of new debt and stock.
According to the letter released by the bondholders' financial advisors, the creditors are concerned GM may be headed for bankruptcy since the rebound in auto sales that the company is calling for in the turnaround plan it submitted to the government last month may not occur.
Without the government agreeing to give the bondholders some protections or more cash upfront, GM and Chrysler might not be able to restructure their debt in the manner called for in their turnaround plans. And without shedding debt, it will be difficult to win the necessary additional cost savings from the United Auto Workers that the union has already granted Ford Motor (F, Fortune 500).
Shelly Lombard, lead auto analyst for debt research firm Gimme Credit, said it will be tough for GM and Chrysler to get approved for additional loans if they are unable to get more concessions from the creditors and the union. And she said a deal with creditors is looking more and more unlikely.
Obama's tough talk
Perhaps most troubling for GM and Chrysler though is the fact that President Obama said in an interview on "60 Minutes" Sunday that while he wants to help the companies stay out of bankruptcy, they have yet to prove that they can remain viable.
He acknowledged that, given the political uproar over bailouts in general, it may be difficult for his administration to agree to further help for the automakers while it is also fighting for a controversial bank rescue package that Obama said is his top economic priority.
"I just want to say the only thing less popular than putting money into banks is putting money into the auto industry," Obama said during the interview.
Still, the automakers remain hopeful, at least on the record, that the federal help they are seeking will be approved in time to avoid bankruptcy.
They point to the $5 billion bailout of the auto parts sector announced by the Treasury Department last week as a sign that the Obama administration is committed to saving the automakers -- even though a member of the government's auto industry task force cautioned reporters that help for GM and Chrysler was a separate issue from loans for the parts makers.
"I think you have to take it as a positive sign, as a commitment to help the industry like other countries are doing, and certainly a recognition of what the industry means for the country's economy and manufacturing sector," said GM spokesman Greg Martin.
GM and bondholders both said in their statements Sunday that they were open to additional talks. Other industry experts say the reluctance of bondholders to accept the demand to swap debt for stock is likely more of a negotiating stance than a final position.
"If it's something or nothing, they're going to take something," said Bob Schnorbus, chief economist for J.D. Power & Associates.
The member of Obama's auto industry task force, who spoke to reporters last week on the ground that his name not be used, said to expect some kind of announcement from Treasury about what's next for GM and Chrysler ahead of the March 31 deadline. But he cautioned that won't settle the issue.
"I don't expect what we say before March 31 will be the final word on this situation," he said. "It's very big, very complicated."
And that's why Schnorbus and others say they expect negotiations between the automakers, government, creditors and the UAW will well go beyond next Tuesday's deadline.
"I'm inclined to think they'll get just enough federal help to keep the lights on," Schnorbus said. "Treasury will give them a lifeline. But even with that, they'll still be a long way from safely being out of harm's way."
Friday, March 20, 2009
Stocks: Second straight week of gains
Stocks managed gains for the second week in a row despite tumbling Friday, as investors pulled back after the recent run.
The Dow Jones industrial average (INDU) lost 122 points or 1.7%. However, it also managed slim gains for the week, rising for the second week in a row for the first time since last May.
The S&P 500 (SPX) index fell 15 points, or 2%. The Nasdaq composite (COMP) fell 26 points or 1.8%.
Stocks fell Friday in a quiet session, with banks and tech leading the retreat.
"We were up sharply in just over a week, so giving something back is to be expected," said Richard Campagna, chief investment officer at brokerage 300 North Capital.
Stocks fell Thursday too after gaining for six of the prior seven sessions. During that run, the S&P 500 rose 17%, as investors keyed off better-than-expected reports on housing and retail sales and some signs of stabilization in the bank sector. Investors also welcomed news Wednesday that the Federal Reserve is pumping another trillion into the economy to try to get credit flowing.
Campagna said that although some of the recent news has been "less bad," it still hasn't been good. "It's not like the world has suddenly changed."
He said that the rally was as much a function of an oversold market as anything else. The gains followed a 28% decline for the S&P 500 that left the benchmark index at a 12-1/2 year low.
The S&P 500 topped 800 both Wednesday and Thursday and that will likely prove to be a key technical level to watch in the weeks ahead, said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.
"The Fed did what the market wanted on Wednesday, but now we need more leadership coming from Washington," Detrick said. "We need to know more about Geithner's plan for stabilizing the bank sector."
Friday was also the quarterly options exchange, when stock index futures and options and individual stock futures and options all expire at the same time. The process can lead to gyrations in the prices of the underlying stocks.
Detrick said that stocks might see a retreat next week in that the week after a quadruple options exchange has proven to be bearish for the market in recent years.
Economy: Federal Reserve Chairman Ben Bernanke, speaking before a group of community bankers in Phoenix, defended the need to bail out banks seen as "too big to fail," such as AIG. However, he noted that it is an enormous problem that must be addressed.
Sheila Bair, chairman of the Federal Deposit Insurance Corp, also spoke before the same industry group. She said that more regulation is needed to solve the banking crisis. (Full story)
Separately, the government reported that there were 2,769 mass layoffs in February, resulting in 295,477 job cuts. A mass layoff involve 50 or more job cuts at the same time. In January, there were 2,227 mass layoffs.
AIG: The troubled insurer remained in focus after the House of Representatives on Thursday voted to impose a steep tax on large employee bonuses at firms that accepted government bailout money.
The legislation was created in response to the public outcry after AIG (AIG, Fortune 500) handed out over $165 million in bonuses to executives after it accepted more than $170 billion in federal bailout money.
In an interview with CNN Thursday, Treasury Secretary Timothy Geithner said his department was responsible for a provision in the $787 billion stimulus package that allowed AIG and other companies to award bonuses.
AIG shares fell 22% Friday. Other financial stocks falling included Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500), Wells Fargo (WFC, Fortune 500), Morgan Stanley (MS, Fortune 500) and JPMorgan Chase (JPM, Fortune 500). The KBW Bank (BKX) index fell 5%.
Company news: LM Ericsson (ERIC) warned that it will post a loss in the first quarter due to weaker consumer demand for its phones amid the global financial crisis. Shares fell 10.6%.
Also in the telecom space, Palm (PALM) reported a wider quarterly loss and weaker sales late Thursday that missed analysts' estimates.Despite the loss, shares gained 2%.
Market breadth was negative. On the New York Stock Exchange, losers beat winners by nearly three to one on volume of 2.47 billion shares. On the Nasdaq, decliners beat advancers two to one on volume of 2.52 billion shares.
Bonds: Treasury prices slipped, raising the yield on the benchmark 10-year note to 2.63% from 2.60% Thursday. Treasury prices and yields move in opposite directions.
Lending rates improved. The 3-month Libor rate fell to 1.22% from 1.23% Thursday, while the overnight Libor rate dipped to 0.28% from 0.3% Thursday, according to Bloomberg.com. Libor is a bank-to-bank lending rate.
0:00 /02:39Life in the pits
Other markets: In global trading, Asian markets tumbled and European markets ended higher.
In currency trading, the dollar gained versus the euro and the yen.
U.S. light crude oil for April delivery, which expires on Friday, settled down 55 cents to $51.06 a barrel on the New York Mercantile.
COMEX gold for April delivery fell $2.60 to settle at $956.20 an ounce.
The Dow Jones industrial average (INDU) lost 122 points or 1.7%. However, it also managed slim gains for the week, rising for the second week in a row for the first time since last May.
The S&P 500 (SPX) index fell 15 points, or 2%. The Nasdaq composite (COMP) fell 26 points or 1.8%.
Stocks fell Friday in a quiet session, with banks and tech leading the retreat.
"We were up sharply in just over a week, so giving something back is to be expected," said Richard Campagna, chief investment officer at brokerage 300 North Capital.
Stocks fell Thursday too after gaining for six of the prior seven sessions. During that run, the S&P 500 rose 17%, as investors keyed off better-than-expected reports on housing and retail sales and some signs of stabilization in the bank sector. Investors also welcomed news Wednesday that the Federal Reserve is pumping another trillion into the economy to try to get credit flowing.
Campagna said that although some of the recent news has been "less bad," it still hasn't been good. "It's not like the world has suddenly changed."
He said that the rally was as much a function of an oversold market as anything else. The gains followed a 28% decline for the S&P 500 that left the benchmark index at a 12-1/2 year low.
The S&P 500 topped 800 both Wednesday and Thursday and that will likely prove to be a key technical level to watch in the weeks ahead, said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.
"The Fed did what the market wanted on Wednesday, but now we need more leadership coming from Washington," Detrick said. "We need to know more about Geithner's plan for stabilizing the bank sector."
Friday was also the quarterly options exchange, when stock index futures and options and individual stock futures and options all expire at the same time. The process can lead to gyrations in the prices of the underlying stocks.
Detrick said that stocks might see a retreat next week in that the week after a quadruple options exchange has proven to be bearish for the market in recent years.
Economy: Federal Reserve Chairman Ben Bernanke, speaking before a group of community bankers in Phoenix, defended the need to bail out banks seen as "too big to fail," such as AIG. However, he noted that it is an enormous problem that must be addressed.
Sheila Bair, chairman of the Federal Deposit Insurance Corp, also spoke before the same industry group. She said that more regulation is needed to solve the banking crisis. (Full story)
Separately, the government reported that there were 2,769 mass layoffs in February, resulting in 295,477 job cuts. A mass layoff involve 50 or more job cuts at the same time. In January, there were 2,227 mass layoffs.
AIG: The troubled insurer remained in focus after the House of Representatives on Thursday voted to impose a steep tax on large employee bonuses at firms that accepted government bailout money.
The legislation was created in response to the public outcry after AIG (AIG, Fortune 500) handed out over $165 million in bonuses to executives after it accepted more than $170 billion in federal bailout money.
In an interview with CNN Thursday, Treasury Secretary Timothy Geithner said his department was responsible for a provision in the $787 billion stimulus package that allowed AIG and other companies to award bonuses.
AIG shares fell 22% Friday. Other financial stocks falling included Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500), Wells Fargo (WFC, Fortune 500), Morgan Stanley (MS, Fortune 500) and JPMorgan Chase (JPM, Fortune 500). The KBW Bank (BKX) index fell 5%.
Company news: LM Ericsson (ERIC) warned that it will post a loss in the first quarter due to weaker consumer demand for its phones amid the global financial crisis. Shares fell 10.6%.
Also in the telecom space, Palm (PALM) reported a wider quarterly loss and weaker sales late Thursday that missed analysts' estimates.Despite the loss, shares gained 2%.
Market breadth was negative. On the New York Stock Exchange, losers beat winners by nearly three to one on volume of 2.47 billion shares. On the Nasdaq, decliners beat advancers two to one on volume of 2.52 billion shares.
Bonds: Treasury prices slipped, raising the yield on the benchmark 10-year note to 2.63% from 2.60% Thursday. Treasury prices and yields move in opposite directions.
Lending rates improved. The 3-month Libor rate fell to 1.22% from 1.23% Thursday, while the overnight Libor rate dipped to 0.28% from 0.3% Thursday, according to Bloomberg.com. Libor is a bank-to-bank lending rate.
0:00 /02:39Life in the pits
Other markets: In global trading, Asian markets tumbled and European markets ended higher.
In currency trading, the dollar gained versus the euro and the yen.
U.S. light crude oil for April delivery, which expires on Friday, settled down 55 cents to $51.06 a barrel on the New York Mercantile.
COMEX gold for April delivery fell $2.60 to settle at $956.20 an ounce.
Thursday, March 19, 2009
Stocks struggle after advance
Stocks turned mixed Thursday morning, giving up early gains, as investors showed some caution after pushing markets higher for six of the last seven sessions.
The Dow Jones industrial average (INDU) lost 27 points, or 0.4% in the early going. The S&P 500 (SPX) index fell 3 points, or 0.4%. The Nasdaq composite (COMP) was barely lower.
On Wednesday, stocks rallied after the Federal Reserve said it was pumping more than $1 trillion into the economy.
But after an early move upward Thursday, stocks turned lower, as investors sorted through the morning economic news.
The Philadelphia Fed index, a regional reading on manufacturing, fell to negative 35.0 in March from negative 41.3 in February, indicating the economy remains deep in recession. Economists surveyed by Briefing.com though it would fall to negative 39.0.
The index of leading economic indicators fell 0.4% in February, short of expectations for a drop of 0.6%. LEI rose a revised 0.1% in the previous month.
Stocks have gained in 6 of the last 7 sessions, but market pros caution that it's a bear-market rally and not something more substantial.
"I think it's a short-term bump," said David Jones, chief market strategist at IG Markets in London.
0:00 /2:27Hoping jobless claims level off
Economy: The government released its weekly report on initial jobless claims for the week ended March 14, showing a decline in claims to 646,000.
That was better than the forecast for 655,000 claims from a consensus of economists surveyed by Briefing.com. Jobless claims totaled 658,000 the prior week, according to the government's revised figure. However, continuing claims hit another record high above 5 million.
Companies: Oracle (ORCL, Fortune 500) managed to beat estimates for quarterly sales and profit, and declared its first dividend since going public in 1986, despite overall weakness in the software sector.
The maker of business software announced a 2% increase in total revenue to $5.4 billion in the third quarter, compared to the year-earlier quarter, and a 25% gain in net profit to $1.3 billion, or 26 cents per share, excluding certain items. The company's stock jumped 11% in morning trading.
Citigroup (C, Fortune 500) announced plans to do a reverse stock split. The value of the company's stock has plunged more than 80% over the past year, despite a rally over the past few days. The split has to be approved by shareholders. Shares gained 23% in the morning.
Global markets: Asian stocks ended lower, with Tokyo's Nikkei index down 0.3%. European stocks were higher in midday trading.
Oil: Prices surged $2.83 to $50.97 a barrel, recapturing its higher price from earlier in the week. A day after its biggest one-day drop in more than two decades, the dollar fell further against the euro, the yen and the British pound.
The Dow Jones industrial average (INDU) lost 27 points, or 0.4% in the early going. The S&P 500 (SPX) index fell 3 points, or 0.4%. The Nasdaq composite (COMP) was barely lower.
On Wednesday, stocks rallied after the Federal Reserve said it was pumping more than $1 trillion into the economy.
But after an early move upward Thursday, stocks turned lower, as investors sorted through the morning economic news.
The Philadelphia Fed index, a regional reading on manufacturing, fell to negative 35.0 in March from negative 41.3 in February, indicating the economy remains deep in recession. Economists surveyed by Briefing.com though it would fall to negative 39.0.
The index of leading economic indicators fell 0.4% in February, short of expectations for a drop of 0.6%. LEI rose a revised 0.1% in the previous month.
Stocks have gained in 6 of the last 7 sessions, but market pros caution that it's a bear-market rally and not something more substantial.
"I think it's a short-term bump," said David Jones, chief market strategist at IG Markets in London.
0:00 /2:27Hoping jobless claims level off
Economy: The government released its weekly report on initial jobless claims for the week ended March 14, showing a decline in claims to 646,000.
That was better than the forecast for 655,000 claims from a consensus of economists surveyed by Briefing.com. Jobless claims totaled 658,000 the prior week, according to the government's revised figure. However, continuing claims hit another record high above 5 million.
Companies: Oracle (ORCL, Fortune 500) managed to beat estimates for quarterly sales and profit, and declared its first dividend since going public in 1986, despite overall weakness in the software sector.
The maker of business software announced a 2% increase in total revenue to $5.4 billion in the third quarter, compared to the year-earlier quarter, and a 25% gain in net profit to $1.3 billion, or 26 cents per share, excluding certain items. The company's stock jumped 11% in morning trading.
Citigroup (C, Fortune 500) announced plans to do a reverse stock split. The value of the company's stock has plunged more than 80% over the past year, despite a rally over the past few days. The split has to be approved by shareholders. Shares gained 23% in the morning.
Global markets: Asian stocks ended lower, with Tokyo's Nikkei index down 0.3%. European stocks were higher in midday trading.
Oil: Prices surged $2.83 to $50.97 a barrel, recapturing its higher price from earlier in the week. A day after its biggest one-day drop in more than two decades, the dollar fell further against the euro, the yen and the British pound.
Wednesday, March 18, 2009
Stocks tumble ahead of Fed announcement
Stocks fell Wednesday morning as the Federal Reserve resumed its policy meeting and investors responded to outrage on Capitol Hill regarding bonus payments at bailed out insurer AIG.
The Dow Jones industrial average (INDU) was down about 100 points, or 1.3%, after 1-1/2 hours of trading. The S&P 500 (SPX) index was off 0.9% while the Nasdaq composite (COMP) retreated 0.3%.
"I think the biggest catalyst is the fact that we've been uni-directly up over the last few trading days, and now we're taking a bit of a pause," said Art Hogan, chief market analyst at Jefferies & Co. "It's natural to have a bit of a give back at some point."
Stocks rallied Tuesday after the government issued a much stronger-than-expected report on housing starts and building permits in February. It was the fifth gain in six sessions for the major indexes.
Fed: The Federal Reserve wraps up a two-day meeting Wednesday and will release a policy statement around 2:15 p.m. ET.
"We are waiting to see what the Fed's going to say," Hogan said. "We hope to get some sort of reading about how they think the economy is doing."
The central bank is expected to hold the fed funds rate, its key short-term interest rate, at zero percent. Analysts say the Fed may turn to more unconventional methods to jolt the economy since cutting interest rates is no longer an option.
Some investors think the Fed will start buying long-term U.S. Treasurys, having said at its last few meetings that it was prepared to do so. The aim is to drive down rates on other types of debt, such as some corporate debt an mortgages, that are tied to the bond market.
AIG: A House Financial Services subcommittee was meeting Wednesday to discuss the $170 billion government bailout of insurance giant American International Group (AIG, Fortune 500).
Among the witnesses slated to testify will be CEO Edward Liddy, who will face scrutiny on the controversial $165 million paid in bonuses to some of the employees whose actions led to the bailout. (full story)
In written testimony, Liddy said he found the company's controversial bonuses "distasteful," but necessary because of legal obligations and competition.
"We are meeting today at a high point of public anger," Liddy is prepared to say. "I share that anger."
IBM: Dow component International Business Machines (IBM, Fortune 500) is in talks to buy Sun Microsystems Inc. (JAVA, Fortune 500) for at least $6.5 billion, according to The Wall Street Journal. The deal could create a new powerhouse in the computer server business to challenge the dominant player Hewlett-Packard.
Sun, which makes the technology platform Java, surged 65% to $8.26 a share. Shares of IBM where down 2.5%.
Economy: Before the market opened, the government announced an increase in consumer prices for February that was slightly higher than expected.
The Bureau of Labor Statistics said the Consumer Price Index rose a seasonally adjusted 0.4% in February. The core CPI, excluding volatile food and energy prices, rose 0.2%.
A consensus of economists surveyed by Briefing.com had forecast an overall increase of 0.3%, with core CPI up 0.1%. In January, CPI was up 0.3% and the core prices were 0.1% higher.
Separately, the Mortgage Bankers Association said mortgage applications surged last week, led by a 30% increase in refinancing activity. The spike comes as rates on home loans fall near historic lows, the MBA said.
Bonds: Treasurys rose, lowering the yield on the benchmark 10-year note to 2.95% from 3.01% Monday. Treasury prices and yields move in opposite directions.
Lending rates were improved. The 3-month Libor rate fell to 1.29% from 1.3% Monday, while the overnight Libor rate was unchanged at 0.31%, according to Bloomberg.com. Libor is a bank-to-bank lending rate.
Other markets: In global trading, Asian markets advanced and European markets fell in afternoon trade.
In currency trading, the dollar fell versus the euro and the yen, but gained against the pound.
U.S. light crude oil for April delivery was down $1.36 to $47.79 a barrel after the government reported that the nation's supplies of gasoline soared last week.
COMEX gold for April delivery fell $12.20 to $904.60 an ounce.
The Dow Jones industrial average (INDU) was down about 100 points, or 1.3%, after 1-1/2 hours of trading. The S&P 500 (SPX) index was off 0.9% while the Nasdaq composite (COMP) retreated 0.3%.
"I think the biggest catalyst is the fact that we've been uni-directly up over the last few trading days, and now we're taking a bit of a pause," said Art Hogan, chief market analyst at Jefferies & Co. "It's natural to have a bit of a give back at some point."
Stocks rallied Tuesday after the government issued a much stronger-than-expected report on housing starts and building permits in February. It was the fifth gain in six sessions for the major indexes.
Fed: The Federal Reserve wraps up a two-day meeting Wednesday and will release a policy statement around 2:15 p.m. ET.
"We are waiting to see what the Fed's going to say," Hogan said. "We hope to get some sort of reading about how they think the economy is doing."
The central bank is expected to hold the fed funds rate, its key short-term interest rate, at zero percent. Analysts say the Fed may turn to more unconventional methods to jolt the economy since cutting interest rates is no longer an option.
Some investors think the Fed will start buying long-term U.S. Treasurys, having said at its last few meetings that it was prepared to do so. The aim is to drive down rates on other types of debt, such as some corporate debt an mortgages, that are tied to the bond market.
AIG: A House Financial Services subcommittee was meeting Wednesday to discuss the $170 billion government bailout of insurance giant American International Group (AIG, Fortune 500).
Among the witnesses slated to testify will be CEO Edward Liddy, who will face scrutiny on the controversial $165 million paid in bonuses to some of the employees whose actions led to the bailout. (full story)
In written testimony, Liddy said he found the company's controversial bonuses "distasteful," but necessary because of legal obligations and competition.
"We are meeting today at a high point of public anger," Liddy is prepared to say. "I share that anger."
IBM: Dow component International Business Machines (IBM, Fortune 500) is in talks to buy Sun Microsystems Inc. (JAVA, Fortune 500) for at least $6.5 billion, according to The Wall Street Journal. The deal could create a new powerhouse in the computer server business to challenge the dominant player Hewlett-Packard.
Sun, which makes the technology platform Java, surged 65% to $8.26 a share. Shares of IBM where down 2.5%.
Economy: Before the market opened, the government announced an increase in consumer prices for February that was slightly higher than expected.
The Bureau of Labor Statistics said the Consumer Price Index rose a seasonally adjusted 0.4% in February. The core CPI, excluding volatile food and energy prices, rose 0.2%.
A consensus of economists surveyed by Briefing.com had forecast an overall increase of 0.3%, with core CPI up 0.1%. In January, CPI was up 0.3% and the core prices were 0.1% higher.
Separately, the Mortgage Bankers Association said mortgage applications surged last week, led by a 30% increase in refinancing activity. The spike comes as rates on home loans fall near historic lows, the MBA said.
Bonds: Treasurys rose, lowering the yield on the benchmark 10-year note to 2.95% from 3.01% Monday. Treasury prices and yields move in opposite directions.
Lending rates were improved. The 3-month Libor rate fell to 1.29% from 1.3% Monday, while the overnight Libor rate was unchanged at 0.31%, according to Bloomberg.com. Libor is a bank-to-bank lending rate.
Other markets: In global trading, Asian markets advanced and European markets fell in afternoon trade.
In currency trading, the dollar fell versus the euro and the yen, but gained against the pound.
U.S. light crude oil for April delivery was down $1.36 to $47.79 a barrel after the government reported that the nation's supplies of gasoline soared last week.
COMEX gold for April delivery fell $12.20 to $904.60 an ounce.
Sunday, March 15, 2009
Wall Street: The rally test
Investors return to work on the back of Wall Street's best week in months - and that's both a good and bad thing.
"I think it's going to take a lot more time for the economy to work through all the issues, but the valuations on certain companies are appealing," said Gary Flam, portfolio manager at Bel Air Investment Advisors.
He said that the current cycle could follow the path of the economic era it is most often compared to: the 1930s. He said that during that period, the stock market bottomed in 1932, but the Great Depression stretched on for several more years.
The week ahead brings reports on manufacturing, housing, consumer and wholesale prices and the next Federal Reserve policy meeting. The economic news is set to show what investors already know - that the economy remains in recession. But what's more important is how investors react to the news.
The Dow and S&P 500 ricocheted off 12-year lows to spike more than 10% in just four sessions, while the Nasdaq bounced off six-year lows to jump almost 13%. That short sharp advance has left investors both hopeful that the market could be closer to stabilizing - and wary that the gains were just an illusion.
0:00 /02:39Life in the pits
Eye on banks: In the short run, the financial sector and the U.S. government remain the drivers of the market.
Last week, Citigroup (C, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500) all said that they were profitable in the first two months of the year. But the quarter isn't over and investors will be looking to see that the earnings actually reported next month back up those claims.
Ahead of that, investors will continue to look to the government for guidance. Talk about reinstating the "uptick rule" that limits short selling and changing mark-to-market accounting fed the advance last week and anything related could help stocks sustain the advance this week.
"The investor class is looking at the Congress, the president and the regulatory system to show them they can have confidence," said Mike Stanfield, CEO of VSR Financial Services.
"People understand that being in the market means taking a risk, but they don't want to be part of a system that they think is rigged," he said. "They want to know that someone is looking out for them."
On the docket
Monday: February industrial production and factory output are on track to continue to decline as the recession wears on.
Production is expected to have fallen by a seasonally adjusted 1.2% in February after falling by 1.8% in January, according to a consensus of economists surveyed by Briefing.com. Capacity utilization, a measure of factory output, is expected to drop to a seasonally adjusted 71.1% from 72% in January.
The NY Empire State index, a key regional manufacturing report, is expected to have improved marginally after hitting a record low last month. The index is expected to have improved to a reading of negative 32 in March from negative 34.7 in February.
Also due: The National Association of Home Builders report on homebuilders' confidence in the current market and the outlook six months from now.
Tuesday: Reports on housing and wholesale inflation are due in the morning.
Housing starts are expected to have fallen to a 453,000 annual unit rate in February from a 466,000 unit annual rate in January. Building permits are expected to have fallen to a 510,000 annual rate from a 531,000 annual unit rate in January.
The Producer Price Index (PPI), a measure of wholesale inflation, likely rose 0.4% in February after rising 0.8% in the previous month. The so-called Core PPI, which strips out volatile food and energy prices, rose 0.1% after rising 0.4% in the previous month.
Wednesday: The Consumer Price index (CPI), a read on consumer inflation, is due in the morning. CPI is expected to have risen 0.3% in February after rising 0.3% in January. The Core CPI is expected to have risen 0.1% after rising 0.2% in January.
The latest interest-rate decision from the Federal Reserve is due Wednesday afternoon at the conclusion of the two-day policy meeting. The Fed is expected to hold rates steady near zero and to say that it is ready to take additional steps to help mend the U.S. economy and credit markets.
Thursday: The Philadelphia Fed index, another regional reading on manufacturing, is expected to have improved modestly to 40.0 in March from 41.3 in February.
The index of leading economic indicators is expected to have fallen 0.6% in February after falling 0.4% in January.
The weekly jobless claims report is also on tap.
Friday: Fed Chairman Ben Bernanke speaks in Phoenix on the financial crisis and community banking.
"I think it's going to take a lot more time for the economy to work through all the issues, but the valuations on certain companies are appealing," said Gary Flam, portfolio manager at Bel Air Investment Advisors.
He said that the current cycle could follow the path of the economic era it is most often compared to: the 1930s. He said that during that period, the stock market bottomed in 1932, but the Great Depression stretched on for several more years.
The week ahead brings reports on manufacturing, housing, consumer and wholesale prices and the next Federal Reserve policy meeting. The economic news is set to show what investors already know - that the economy remains in recession. But what's more important is how investors react to the news.
The Dow and S&P 500 ricocheted off 12-year lows to spike more than 10% in just four sessions, while the Nasdaq bounced off six-year lows to jump almost 13%. That short sharp advance has left investors both hopeful that the market could be closer to stabilizing - and wary that the gains were just an illusion.
0:00 /02:39Life in the pits
Eye on banks: In the short run, the financial sector and the U.S. government remain the drivers of the market.
Last week, Citigroup (C, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500) all said that they were profitable in the first two months of the year. But the quarter isn't over and investors will be looking to see that the earnings actually reported next month back up those claims.
Ahead of that, investors will continue to look to the government for guidance. Talk about reinstating the "uptick rule" that limits short selling and changing mark-to-market accounting fed the advance last week and anything related could help stocks sustain the advance this week.
"The investor class is looking at the Congress, the president and the regulatory system to show them they can have confidence," said Mike Stanfield, CEO of VSR Financial Services.
"People understand that being in the market means taking a risk, but they don't want to be part of a system that they think is rigged," he said. "They want to know that someone is looking out for them."
On the docket
Monday: February industrial production and factory output are on track to continue to decline as the recession wears on.
Production is expected to have fallen by a seasonally adjusted 1.2% in February after falling by 1.8% in January, according to a consensus of economists surveyed by Briefing.com. Capacity utilization, a measure of factory output, is expected to drop to a seasonally adjusted 71.1% from 72% in January.
The NY Empire State index, a key regional manufacturing report, is expected to have improved marginally after hitting a record low last month. The index is expected to have improved to a reading of negative 32 in March from negative 34.7 in February.
Also due: The National Association of Home Builders report on homebuilders' confidence in the current market and the outlook six months from now.
Tuesday: Reports on housing and wholesale inflation are due in the morning.
Housing starts are expected to have fallen to a 453,000 annual unit rate in February from a 466,000 unit annual rate in January. Building permits are expected to have fallen to a 510,000 annual rate from a 531,000 annual unit rate in January.
The Producer Price Index (PPI), a measure of wholesale inflation, likely rose 0.4% in February after rising 0.8% in the previous month. The so-called Core PPI, which strips out volatile food and energy prices, rose 0.1% after rising 0.4% in the previous month.
Wednesday: The Consumer Price index (CPI), a read on consumer inflation, is due in the morning. CPI is expected to have risen 0.3% in February after rising 0.3% in January. The Core CPI is expected to have risen 0.1% after rising 0.2% in January.
The latest interest-rate decision from the Federal Reserve is due Wednesday afternoon at the conclusion of the two-day policy meeting. The Fed is expected to hold rates steady near zero and to say that it is ready to take additional steps to help mend the U.S. economy and credit markets.
Thursday: The Philadelphia Fed index, another regional reading on manufacturing, is expected to have improved modestly to 40.0 in March from 41.3 in February.
The index of leading economic indicators is expected to have fallen 0.6% in February after falling 0.4% in January.
The weekly jobless claims report is also on tap.
Friday: Fed Chairman Ben Bernanke speaks in Phoenix on the financial crisis and community banking.
Friday, March 13, 2009
Bonds fret over stock market, China
Treasurys ended a volatile trading day mixed Friday as stocks managed to pull out gains for a fourth day in a row.
But bond investors also reacted to a speech by Chinese Premier Wen Jiabao in which he expressed concern that the mammoth amounts of Treasury debt his country holds will deteriorate in value.
"We have lent a massive amount of capital to the United States, and of course we are concerned about the security of our assets," said Wen at his annual news conference on Friday. "To speak truthfully, I do indeed have some worries."
China owns more than $727 billion of U.S. debt, more than 6% of the $10.9 trillion of U.S. debt outstanding, according to the Treasury Department.
Wen said he was concerned that America's record deficit spending would cause an inflationary spike that would diminish the value of China's assets. The premier called on the U.S. government to help guarantee the safety of China's assets by "maintaining creditworthiness" and engaging in responsible economic policies.
Yet, while bonds were down, they were relatively calm compared to some of the much larger drops the market has seen in the past weeks - and there was at least some discounting of the China issue.
"China, as well as everybody else, is worried about the impact of the massive amounts of stimulus and the subsequent runup in the deficit," said Kim Rupert, fixed income analyst at Action Economics.
With $787 billion it will owe for stimulus, $700 billion for the bank bailout and trillions more in liquidity programs, the Treasury expects to issue between $2.7 trillion - $4.2 trillion of debt over the next two years.
Treasurys fell sharply earlier in the week when investors had expressed concern that this week's auctions would not be met with adequate demand.
But Treasury successfully completed a $63 billion sale this week, attracting more than enough investors to fund the debt offerings. Bonds rose in the past two days on the renewed confidence.
Some analysts said they believe that the United States will continue to attract foreign investors, especially from Asia, as droves of weak economic data from around the globe continue to suggest a drawn-out recovery. With stocks still unable to prove they can maintain a long rally and commodity prices in flux, U.S. government debt has remained relatively attractive.
"Eventually, we know the dollar is going to get trashed, but for now, we're in the middle of a crisis," said Peter Cardillo, chief market economist at Avalon Partners. "I think this is all just rhetoric."
Still, not all are convinced that investors will continue to demand Treasurys when interest rates are again falling close to uncharted territory.
"The U.S. is faced with massive borrowing requirements that necessitate demand from everyone we can find," said Rupert. "I think that everyone is pretty worried about the future of U.S. debt."
Bond prices: Bond prices were lower in morning trade when stocks were higher, rallied as Wall Street lost its traction in midday trade, but then fell again as Wall Street ended the day higher.
The benchmark 10-year note edged down 9/32 to 98 25/32 and its yield rose to 2.90% from 2.86% Thursday. Bond prices and yields move in opposite directions.
The 30-year bond fell 1 3/32 to 96 27/32 with a yield of 3.68%, up from 3.62%.
The 2-year note edged up 3/32 to 99 27/32 and yielded 0.97%, down from 1.02%.
The 3 month bill yielded 0.21%, up from 0.20%.
Lending rates: The 3-month Libor rate held at 1.32%, according to data on Bloomberg.com. The overnight Libor rate held steady at 0.33%.
Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money in London.
Two credit market gauges were mixed. The "TED" spread narrowed to 1.11 percentage point from 1.12 percentage points. The less wide the TED spread, the more willing investors are to take risks.
The Libor-OIS spread widened to 1.08 percentage point from 1.07 percentage points the prior day. A wider spread indicates that less cash is available for lending.
But bond investors also reacted to a speech by Chinese Premier Wen Jiabao in which he expressed concern that the mammoth amounts of Treasury debt his country holds will deteriorate in value.
"We have lent a massive amount of capital to the United States, and of course we are concerned about the security of our assets," said Wen at his annual news conference on Friday. "To speak truthfully, I do indeed have some worries."
China owns more than $727 billion of U.S. debt, more than 6% of the $10.9 trillion of U.S. debt outstanding, according to the Treasury Department.
Wen said he was concerned that America's record deficit spending would cause an inflationary spike that would diminish the value of China's assets. The premier called on the U.S. government to help guarantee the safety of China's assets by "maintaining creditworthiness" and engaging in responsible economic policies.
Yet, while bonds were down, they were relatively calm compared to some of the much larger drops the market has seen in the past weeks - and there was at least some discounting of the China issue.
"China, as well as everybody else, is worried about the impact of the massive amounts of stimulus and the subsequent runup in the deficit," said Kim Rupert, fixed income analyst at Action Economics.
With $787 billion it will owe for stimulus, $700 billion for the bank bailout and trillions more in liquidity programs, the Treasury expects to issue between $2.7 trillion - $4.2 trillion of debt over the next two years.
Treasurys fell sharply earlier in the week when investors had expressed concern that this week's auctions would not be met with adequate demand.
But Treasury successfully completed a $63 billion sale this week, attracting more than enough investors to fund the debt offerings. Bonds rose in the past two days on the renewed confidence.
Some analysts said they believe that the United States will continue to attract foreign investors, especially from Asia, as droves of weak economic data from around the globe continue to suggest a drawn-out recovery. With stocks still unable to prove they can maintain a long rally and commodity prices in flux, U.S. government debt has remained relatively attractive.
"Eventually, we know the dollar is going to get trashed, but for now, we're in the middle of a crisis," said Peter Cardillo, chief market economist at Avalon Partners. "I think this is all just rhetoric."
Still, not all are convinced that investors will continue to demand Treasurys when interest rates are again falling close to uncharted territory.
"The U.S. is faced with massive borrowing requirements that necessitate demand from everyone we can find," said Rupert. "I think that everyone is pretty worried about the future of U.S. debt."
Bond prices: Bond prices were lower in morning trade when stocks were higher, rallied as Wall Street lost its traction in midday trade, but then fell again as Wall Street ended the day higher.
The benchmark 10-year note edged down 9/32 to 98 25/32 and its yield rose to 2.90% from 2.86% Thursday. Bond prices and yields move in opposite directions.
The 30-year bond fell 1 3/32 to 96 27/32 with a yield of 3.68%, up from 3.62%.
The 2-year note edged up 3/32 to 99 27/32 and yielded 0.97%, down from 1.02%.
The 3 month bill yielded 0.21%, up from 0.20%.
Lending rates: The 3-month Libor rate held at 1.32%, according to data on Bloomberg.com. The overnight Libor rate held steady at 0.33%.
Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money in London.
Two credit market gauges were mixed. The "TED" spread narrowed to 1.11 percentage point from 1.12 percentage points. The less wide the TED spread, the more willing investors are to take risks.
The Libor-OIS spread widened to 1.08 percentage point from 1.07 percentage points the prior day. A wider spread indicates that less cash is available for lending.
Thursday, March 12, 2009
Record number of Americans on unemployment
The number of Americans filing initial claims for unemployment insurance rose last week, with the number of people collecting benefits overall rising to a record 5.3 million, according to a government report released Thursday.
In the week ended March 7, 654,000 Americans filed initial jobless claims, up from a revised 645,000 the previous week.
Economists expected 644,000 new claims, according to a consensus survey by Briefing.com. The 4-week moving average for weekly filings was 650,000, up 6,750 from the previous week's revised average.
"We think claims are still nowhere near their peak, which could well be close to a million," said Ian Shepherdson, chief U.S. economist with High Frequency Economics, in a research note.
The steady increase suggests that the rate of decline is likely to accelerate, Shepherdson said.
Continuing claims: In a sign that more jobless Americans are having trouble finding work, 5,317,000 continued filing for unemployment insurance in the week ended Feb. 28. That's an increase of 193,000 from the revised number from the previous week.
It was the highest level since record-keeping began in 1967. Continuing claims have set a new record for six out of the last seven weeks. The 4-week moving average was 5,139,750, an increase of 124,250.
Initial claims spiked to a 26-year high two weeks ago, reaching 670,000 for the week ended Feb. 21.
The insured unemployment rate is 4%, up 0.2 percentage point from the previous week's unrevised rate.
Highs and lows: Initial claims rose by more than 1,000 in 12 states in the week ended Feb. 28, the most recent state-by-state data available.
The largest increases were in New York, with 16,481; California, at 7,765; Oregon, at 4,001; Georgia, with 3,313; and Wisconsin, 3,006. Those spikes were likely due to layoffs in the construction, trade and manufacturing industries, among others, the report said.
By contrast, five states - Missouri, Massachusetts, New Jersey, Florida, and New Mexico - saw claims decrease by more than 1,000.
Stimulus: The stimulus bill that President Obama signed into law has several provisions that help those living on unemployment benefits.
The weekly unemployment benefit has temporarily increased by $25 on top in addition to the about $300 jobless workers currently receive now. Also, the first $2,400 of benefits in 2009 will be exempt from federal income taxes.
In the week ended March 7, 654,000 Americans filed initial jobless claims, up from a revised 645,000 the previous week.
Economists expected 644,000 new claims, according to a consensus survey by Briefing.com. The 4-week moving average for weekly filings was 650,000, up 6,750 from the previous week's revised average.
"We think claims are still nowhere near their peak, which could well be close to a million," said Ian Shepherdson, chief U.S. economist with High Frequency Economics, in a research note.
The steady increase suggests that the rate of decline is likely to accelerate, Shepherdson said.
Continuing claims: In a sign that more jobless Americans are having trouble finding work, 5,317,000 continued filing for unemployment insurance in the week ended Feb. 28. That's an increase of 193,000 from the revised number from the previous week.
It was the highest level since record-keeping began in 1967. Continuing claims have set a new record for six out of the last seven weeks. The 4-week moving average was 5,139,750, an increase of 124,250.
Initial claims spiked to a 26-year high two weeks ago, reaching 670,000 for the week ended Feb. 21.
The insured unemployment rate is 4%, up 0.2 percentage point from the previous week's unrevised rate.
Highs and lows: Initial claims rose by more than 1,000 in 12 states in the week ended Feb. 28, the most recent state-by-state data available.
The largest increases were in New York, with 16,481; California, at 7,765; Oregon, at 4,001; Georgia, with 3,313; and Wisconsin, 3,006. Those spikes were likely due to layoffs in the construction, trade and manufacturing industries, among others, the report said.
By contrast, five states - Missouri, Massachusetts, New Jersey, Florida, and New Mexico - saw claims decrease by more than 1,000.
Stimulus: The stimulus bill that President Obama signed into law has several provisions that help those living on unemployment benefits.
The weekly unemployment benefit has temporarily increased by $25 on top in addition to the about $300 jobless workers currently receive now. Also, the first $2,400 of benefits in 2009 will be exempt from federal income taxes.
Sunday, March 8, 2009
Cutting your own salary before cutting staff
Think being your own CEO means you can't be laid off or have your paycheck pared back? Not quite. Half of the small business owners polled in a recent survey said they've cut their own compensation in response to the economic downturn.
The survey, conducted in December by office supplies retailer Staples (SPLS, Fortune 500), surveyed owners and senior executives at companies with 20 or fewer employees. Half said their clients are taking longer to pay bills than they did in the past, and 44% of the respondents said they're "seeking distractions from business issues that are upsetting."
Paul Gemellaro, CEO of Accutech Photo Machining (APM) in San Fernando, Calif., says that cutting his own salary is the best way to keep his company healthy. APM, founded in 1989, manufactures metal parts and prototypes. Three years ago, after rising inspection fees eroded the company's margins, Gemellaro decided to trim expenses by reducing his paycheck.
The latest recession has been taking its toll. "Our roughest time was last summer. May through June was terrible for APM," Gemellaro says. "It was almost like the phone was shut off."
Things haven't improved: January was APM's worst month in 10 years. Gemellaro, who once had a staff of 20, starting laying off employees - but he also knew he would need to deepen his own pay cut to stay afloat. Today, he's left with 7 employees and a salary that has dropped from $75,000 to less than $40,000.
Talk back: How is your biz handling pay raises and cuts?
Companies of all sizes are ruthlessly cutting costs, but small business owners are particularly prone to taking the hit themselves when times are tough. It's an instinctive move, says John Challenger, CEO of outplacement firm Challenger, Gray and Christmas.
"Owners take care of employees - their biggest asset," says John Challenger, CEO of outplacement firm Challenger, Gray and Christmas. "They just know they've got to make the business survive, which may mean making personal sacrifices. It's their creation and they are responsible for it, so to keep it going and growing and healthy is paramount."
Business owners new to entrepreneurship can still feel that sense of deep obligation to their company. Richard Ray and his wife, Laura Lee Ray, opened their mobile pet spa business, Zoom Groom, last May in Crestview, Fla. They have yet to cut themselves a check.
Richard, an Air Force vet, committed to helping his wife pursue her dream of owning a mobile dog grooming business. Banks wouldn't loan them any startup capital, so the pair collected all the extra cash they could find, including tax refunds and last year's stimulus checks, to buy a secondhand van with 100,000 miles on it and used engine parts to keep it running.
Then Richard, 51, had a heart attack. With medical bills piling up, he defaulted on his mortgage. The Rays had to make the decision between keeping the business or the house Richard's family had lived in for 15 years.
"We saw that the house was depreciating and that the business had potential, so we took a gamble," he says.
The house went into foreclosure. The Rays moved in to a rented house, and the couple put all their money and energy into the business. Richard took on the accounting and marketing responsibilities while Laura Lee honed her grooming skills.
The couple's persistence is just beginning to pay off. After months of slow sales, business started picking up in the past few weeks. Last month's bills, for the first time in a year, were paid entirely with business profits.
"Since I didn't have to raid personal funds to keep things moving, I admit I've slept better," Richard says with a laugh.
Bartering and scrimping
Still, it will still be a while before the couple is able to take a salary from the business. Richard's Air Force retirement pay is covering the rent, but without a business income, the Rays are strapped when it comes to paying for necessities. They've omitted all luxuries like movies and restaurants from their lives, and they barter with other area business owners for services. The Rays' youngest daughter, a high school senior and part-time worker at Taco Bell, takes care of buying groceries.
"That's a lot to ask of a 17-year-old, but she's good about chipping in for the survival of the business," says Richard, who intends these measures to be temporary. "This area is recession resistant, because we have so many military people and defense contractors. And a slew of military programs are scheduled to move here, with thousands of military personnel. We're waiting for the cavalry to arrive."
In the meantime, the Rays are keeping their fingers crossed that the van, cobbled together from spare parts, doesn't give out.
APM's Gemellaro is also doing whatever he can to keep his business running until conditions improve. He's frozen all capital purchases until the economy stabilizes.
"My employees are now on a four-day work week," he says. "Of course, I'm still on a six-day work week."
If Gemellaro has to reach deeper into his own pockets to keep his employees, he says he will. Part of that decision is pragmatic: When APM lands a prototype project, it has to turn around results in as little as 60 days. That can't happen without trained employees ready to dive right in.
But emotions also play a part in Gemellaro's choice to cut his own pay before cutting staff.
"Most of my people have worked here a long time. They're my friends - my best friend Mike is the president of the company," he says. "Maybe I'm just old fashioned, but they've always been there for me, so I'm going to be there for them."
The survey, conducted in December by office supplies retailer Staples (SPLS, Fortune 500), surveyed owners and senior executives at companies with 20 or fewer employees. Half said their clients are taking longer to pay bills than they did in the past, and 44% of the respondents said they're "seeking distractions from business issues that are upsetting."
Paul Gemellaro, CEO of Accutech Photo Machining (APM) in San Fernando, Calif., says that cutting his own salary is the best way to keep his company healthy. APM, founded in 1989, manufactures metal parts and prototypes. Three years ago, after rising inspection fees eroded the company's margins, Gemellaro decided to trim expenses by reducing his paycheck.
The latest recession has been taking its toll. "Our roughest time was last summer. May through June was terrible for APM," Gemellaro says. "It was almost like the phone was shut off."
Things haven't improved: January was APM's worst month in 10 years. Gemellaro, who once had a staff of 20, starting laying off employees - but he also knew he would need to deepen his own pay cut to stay afloat. Today, he's left with 7 employees and a salary that has dropped from $75,000 to less than $40,000.
Talk back: How is your biz handling pay raises and cuts?
Companies of all sizes are ruthlessly cutting costs, but small business owners are particularly prone to taking the hit themselves when times are tough. It's an instinctive move, says John Challenger, CEO of outplacement firm Challenger, Gray and Christmas.
"Owners take care of employees - their biggest asset," says John Challenger, CEO of outplacement firm Challenger, Gray and Christmas. "They just know they've got to make the business survive, which may mean making personal sacrifices. It's their creation and they are responsible for it, so to keep it going and growing and healthy is paramount."
Business owners new to entrepreneurship can still feel that sense of deep obligation to their company. Richard Ray and his wife, Laura Lee Ray, opened their mobile pet spa business, Zoom Groom, last May in Crestview, Fla. They have yet to cut themselves a check.
Richard, an Air Force vet, committed to helping his wife pursue her dream of owning a mobile dog grooming business. Banks wouldn't loan them any startup capital, so the pair collected all the extra cash they could find, including tax refunds and last year's stimulus checks, to buy a secondhand van with 100,000 miles on it and used engine parts to keep it running.
Then Richard, 51, had a heart attack. With medical bills piling up, he defaulted on his mortgage. The Rays had to make the decision between keeping the business or the house Richard's family had lived in for 15 years.
"We saw that the house was depreciating and that the business had potential, so we took a gamble," he says.
The house went into foreclosure. The Rays moved in to a rented house, and the couple put all their money and energy into the business. Richard took on the accounting and marketing responsibilities while Laura Lee honed her grooming skills.
The couple's persistence is just beginning to pay off. After months of slow sales, business started picking up in the past few weeks. Last month's bills, for the first time in a year, were paid entirely with business profits.
"Since I didn't have to raid personal funds to keep things moving, I admit I've slept better," Richard says with a laugh.
Bartering and scrimping
Still, it will still be a while before the couple is able to take a salary from the business. Richard's Air Force retirement pay is covering the rent, but without a business income, the Rays are strapped when it comes to paying for necessities. They've omitted all luxuries like movies and restaurants from their lives, and they barter with other area business owners for services. The Rays' youngest daughter, a high school senior and part-time worker at Taco Bell, takes care of buying groceries.
"That's a lot to ask of a 17-year-old, but she's good about chipping in for the survival of the business," says Richard, who intends these measures to be temporary. "This area is recession resistant, because we have so many military people and defense contractors. And a slew of military programs are scheduled to move here, with thousands of military personnel. We're waiting for the cavalry to arrive."
In the meantime, the Rays are keeping their fingers crossed that the van, cobbled together from spare parts, doesn't give out.
APM's Gemellaro is also doing whatever he can to keep his business running until conditions improve. He's frozen all capital purchases until the economy stabilizes.
"My employees are now on a four-day work week," he says. "Of course, I'm still on a six-day work week."
If Gemellaro has to reach deeper into his own pockets to keep his employees, he says he will. Part of that decision is pragmatic: When APM lands a prototype project, it has to turn around results in as little as 60 days. That can't happen without trained employees ready to dive right in.
But emotions also play a part in Gemellaro's choice to cut his own pay before cutting staff.
"Most of my people have worked here a long time. They're my friends - my best friend Mike is the president of the company," he says. "Maybe I'm just old fashioned, but they've always been there for me, so I'm going to be there for them."
Wednesday, March 4, 2009
Oil remains higher on China and supply
Oil prices remained higher Wednesday as a government report that supplies of crude oil fell unexpectedly last week added to indications of improvement in China's economy.
Light sweet crude prices for April delivery rose $3.18 to $44.83 a barrel. Oil had traded up $3 just prior to the report's release, supported by better economic news from China.
The main indicator of China's manufacturing sector, its purchasing managers' index, rose in February for the third month in a row.
The gauge climbed as factories restocked, suggesting China could see an earlier economic recovery despite the bleak global environment.
China's announcement "was the shot in the arm that the global economy needed," said James Cordier, president of Liberty Trading Group. "We haven't seen any bullish news in a while, so people put their arms around it."
Crude supply: In its weekly inventory report, the Energy Information Administration said crude stocks decreased by 700,000 barrels in the week ended Feb. 27. Despite the decrease, oil supply is still above the upper limit of the average range for this time of year.
Analysts expected an increase of 2.2 million barrels of crude oil, according to a consensus estimate of industry analysts surveyed by Platts, a global energy information provider.
The troubled global economy has crippled consumer demand for oil, which in turn has caused a glut of crude. Oil prices have plummeted from a record high of $147.27 a barrel last summer.
OPEC: In response to the growing crude stockpiles, the Organization of Petroleum Exporting Countries - whose members produce about 40% of the world's crude - has been pressured to put a floor under prices.
OPEC has already promised to reduce oil output by 4.2 million barrels per day from September production levels. The group will meet March 15 to decide if it will further cut production or wait to see the outcome of the already existing cuts.
Crude prices have held gains and even rallied recently, so further cuts may not be a good course of action in this fragile economy, Cordier said.
"Everyone is trying to turn the global economy around," he said. "Cutting supplies so prices shoot up $10 could be an anchor on that optimism."
Gasoline: Stockpiles of gasoline rose by 200,000 barrels, while analysts predicted a decrease of 600,000 barrels. Gas supply is in the lower half of the average range.
The national average price for a gallon of regular unleaded gasoline was $1.933, unchanged from the previous day, according to motorist group AAA. That ended five consecutive days of increases.
The EIA report also said distillates, used to make heating oil and diesel fuel, were up by 1.7 million barrels. Analysts were looking for a decrease of 1.5 million barrels.
Outlook: Energy prices have hit their lows and are pushing through a resistance level at $45, Cordier said. He expected crude prices "could be pushing $50 a barrel before too long."
Gasoline sees a seasonal increase in March and April, and prices at the pump could jump 20 to 30 cents in just a few weeks, Cordier said.
"The springtime rally will take place over the next eight weeks no matter what," he said. "After that, any possible further gains are based purely on the stock market and overall economy."
Light sweet crude prices for April delivery rose $3.18 to $44.83 a barrel. Oil had traded up $3 just prior to the report's release, supported by better economic news from China.
The main indicator of China's manufacturing sector, its purchasing managers' index, rose in February for the third month in a row.
The gauge climbed as factories restocked, suggesting China could see an earlier economic recovery despite the bleak global environment.
China's announcement "was the shot in the arm that the global economy needed," said James Cordier, president of Liberty Trading Group. "We haven't seen any bullish news in a while, so people put their arms around it."
Crude supply: In its weekly inventory report, the Energy Information Administration said crude stocks decreased by 700,000 barrels in the week ended Feb. 27. Despite the decrease, oil supply is still above the upper limit of the average range for this time of year.
Analysts expected an increase of 2.2 million barrels of crude oil, according to a consensus estimate of industry analysts surveyed by Platts, a global energy information provider.
The troubled global economy has crippled consumer demand for oil, which in turn has caused a glut of crude. Oil prices have plummeted from a record high of $147.27 a barrel last summer.
OPEC: In response to the growing crude stockpiles, the Organization of Petroleum Exporting Countries - whose members produce about 40% of the world's crude - has been pressured to put a floor under prices.
OPEC has already promised to reduce oil output by 4.2 million barrels per day from September production levels. The group will meet March 15 to decide if it will further cut production or wait to see the outcome of the already existing cuts.
Crude prices have held gains and even rallied recently, so further cuts may not be a good course of action in this fragile economy, Cordier said.
"Everyone is trying to turn the global economy around," he said. "Cutting supplies so prices shoot up $10 could be an anchor on that optimism."
Gasoline: Stockpiles of gasoline rose by 200,000 barrels, while analysts predicted a decrease of 600,000 barrels. Gas supply is in the lower half of the average range.
The national average price for a gallon of regular unleaded gasoline was $1.933, unchanged from the previous day, according to motorist group AAA. That ended five consecutive days of increases.
The EIA report also said distillates, used to make heating oil and diesel fuel, were up by 1.7 million barrels. Analysts were looking for a decrease of 1.5 million barrels.
Outlook: Energy prices have hit their lows and are pushing through a resistance level at $45, Cordier said. He expected crude prices "could be pushing $50 a barrel before too long."
Gasoline sees a seasonal increase in March and April, and prices at the pump could jump 20 to 30 cents in just a few weeks, Cordier said.
"The springtime rally will take place over the next eight weeks no matter what," he said. "After that, any possible further gains are based purely on the stock market and overall economy."
Tuesday, March 3, 2009
Stimulus money hits the street
The White House released its promised cash infusion on Tuesday to strengthen the transportation infrastructure across America, and began to announce the first recipients of the funds.
The U.S. government released $26.6 billion from the American Recovery and Reinvestment Act to state and local transportation authorities, for the building and rebuilding of roads, highways and bridges.
"President Obama is keeping his promise to the American people and he is doing it ahead of schedule," said Department of Transportation Secretary Ray LaHood in a statement, noting that the funds were released eight days sooner than required.
The money was already being put to work on Tuesday. American Infrastructure, a Worcester, Penn.-based recipient of ARRA funds, began a repaving project on Rt. 650 in Maryland, according to the company and the government. The project is in Montgomery County, near Baltimore and Washington, D.C.
Mark Compton, director of government affairs for American Infrastructure, said his company received $2.1 million in federal funds, by way of the Maryland State Highway Administration. The money will be used to repave and add safety features to a stretch of the highway.
Compton said the cash infusion is the "catalyst" to create 60 jobs, including bringing back some employees who had been laid off. He hopes that the workers can be retained beyond this six-month project.
"We'll continue to bid, so the goal is to get more projects to keep those guys working, so they can roll off that project onto another," said Compton.
The DOT said more than 100 transportation projects, receiving some $750 million in ARRA funds, have been identified and can begin work within one month.
The $26.6 billion in highway funds is aimed to generate 150,000 jobs through the end of 2010. The median pay for these jobs is $18.31 an hour, according to the White House.
This is part of President Obama's $787 billion economic stimulus plan, intended to "save or create" at least 3.5 million jobs through 2010.
The U.S. government released $26.6 billion from the American Recovery and Reinvestment Act to state and local transportation authorities, for the building and rebuilding of roads, highways and bridges.
"President Obama is keeping his promise to the American people and he is doing it ahead of schedule," said Department of Transportation Secretary Ray LaHood in a statement, noting that the funds were released eight days sooner than required.
The money was already being put to work on Tuesday. American Infrastructure, a Worcester, Penn.-based recipient of ARRA funds, began a repaving project on Rt. 650 in Maryland, according to the company and the government. The project is in Montgomery County, near Baltimore and Washington, D.C.
Mark Compton, director of government affairs for American Infrastructure, said his company received $2.1 million in federal funds, by way of the Maryland State Highway Administration. The money will be used to repave and add safety features to a stretch of the highway.
Compton said the cash infusion is the "catalyst" to create 60 jobs, including bringing back some employees who had been laid off. He hopes that the workers can be retained beyond this six-month project.
"We'll continue to bid, so the goal is to get more projects to keep those guys working, so they can roll off that project onto another," said Compton.
The DOT said more than 100 transportation projects, receiving some $750 million in ARRA funds, have been identified and can begin work within one month.
The $26.6 billion in highway funds is aimed to generate 150,000 jobs through the end of 2010. The median pay for these jobs is $18.31 an hour, according to the White House.
This is part of President Obama's $787 billion economic stimulus plan, intended to "save or create" at least 3.5 million jobs through 2010.
Monday, March 2, 2009
Dow falls below 7,000
Stocks opened lower Monday morning, with the Dow falling below 7,000 for the first time since October 1997, after American International Group reported a massive quarterly loss and a restructuring of its bailout by the government.
The Dow Jones industrial average (INDU) was down 96 points, or 1.4%, to 6,966 points, 20 minutes after the opening bell. The S&P 500 (SPX) index slid 11 points, or 1.5% to 724 points. The Nasdaq composite (COMP) was down 0.7%.
Both the Dow and S&P are hovering at their lowest levels in about 12 years, as the market remains anxious about the state of the global economy and the world financial system.
"There's a buyer's strike right now in the stock market," said Art Hogan, chief market strategist at Jefferies & Co.
He blamed the decline in futures on "ongoing concerns about the global recession," noting that the European indexes were down 3% to 4%.
Asian markets closed lower, with Tokyo's Nikkei down 3.8%.
AIG: AIG (AIG, Fortune 500), whose status as a Dow component may be in jeopardy, reported a worse-than-expected $61.7 billion loss for the fourth quarter of 2008.
The company blamed "severe credit market deterioration," particularly in mortgaged-back securities, as well as charges from ongoing restructuring activities.
In addition, the insurer and the government announced a restructuring of the $150 billion bailout agreement. Key components included the government's decision to commit another $30 billion to the firm in exchange for cumulative preferred stock, and an exchange of an existing $40 billion preferred shares stake for shares that more closely resembles common stock.
Shares of AIG were indicated to open up 10 cents at 52 cents, bucking the market-wide plunge.
Dave Rovelli, managing director for Canaccord Adams, said investors were unhappy with the government's $30 billion "donation" to AIG, because there are no expectations that the government will ever get its money back.
"How is [AIG] going to pay it back?" said Rovelli. "With what? There's no way in God's name that [the government] is going to recoup the money they've lent them."
Economy: Before the opening bell, the government released the personal income and spending data for January. Personal income rose 0.4%, beating expectations of a 0.2% decline, according to a consensus of economic opinion from Briefing.com.
Personal spending rose for the first time in seven months, up 0.6%, which was higher than the 0.4% increase expected by Briefing.com consensus.
After the open, the Institute for Supply Management issues in February report on manufacturing. The purchasing managers' index is expected to have declined to 34 from 35.6 in January, remaining deep in recessionary territory.
Also after the open, a government report on construction spending is expected to show a 1.5% drop in January after a 1.4% swoon in the previous month.
Job cuts: Europe's leading bank, HSBC (HBC), said Monday that it would cut 6,100 jobs, all of them in the United States. The bank also said it would close most of the branches of its U.S.-based consumer lending businesses, HFC and Beneficial.
In addition, the bank announced a full-year profit of $5.7 billion, down 70% from $19.1 billion in 2007. HSBC stock fell more than 20% in pre-market trading.
Buffett: Investor Warren Buffett's Berkshire Hathaway (BRK.A) reported the worst results in the 44 years he has run the company, and only the second decline in net worth in that time. In his report to shareholders Saturday, Buffett said Berkshire's net worth fell in 2008 by $11.5 billion.
Oil and money: Oil fell $2.15 to $42.61 in electronic trading. The dollar was lower against the euro and pound, but higher versus the yen.
The Dow Jones industrial average (INDU) was down 96 points, or 1.4%, to 6,966 points, 20 minutes after the opening bell. The S&P 500 (SPX) index slid 11 points, or 1.5% to 724 points. The Nasdaq composite (COMP) was down 0.7%.
Both the Dow and S&P are hovering at their lowest levels in about 12 years, as the market remains anxious about the state of the global economy and the world financial system.
"There's a buyer's strike right now in the stock market," said Art Hogan, chief market strategist at Jefferies & Co.
He blamed the decline in futures on "ongoing concerns about the global recession," noting that the European indexes were down 3% to 4%.
Asian markets closed lower, with Tokyo's Nikkei down 3.8%.
AIG: AIG (AIG, Fortune 500), whose status as a Dow component may be in jeopardy, reported a worse-than-expected $61.7 billion loss for the fourth quarter of 2008.
The company blamed "severe credit market deterioration," particularly in mortgaged-back securities, as well as charges from ongoing restructuring activities.
In addition, the insurer and the government announced a restructuring of the $150 billion bailout agreement. Key components included the government's decision to commit another $30 billion to the firm in exchange for cumulative preferred stock, and an exchange of an existing $40 billion preferred shares stake for shares that more closely resembles common stock.
Shares of AIG were indicated to open up 10 cents at 52 cents, bucking the market-wide plunge.
Dave Rovelli, managing director for Canaccord Adams, said investors were unhappy with the government's $30 billion "donation" to AIG, because there are no expectations that the government will ever get its money back.
"How is [AIG] going to pay it back?" said Rovelli. "With what? There's no way in God's name that [the government] is going to recoup the money they've lent them."
Economy: Before the opening bell, the government released the personal income and spending data for January. Personal income rose 0.4%, beating expectations of a 0.2% decline, according to a consensus of economic opinion from Briefing.com.
Personal spending rose for the first time in seven months, up 0.6%, which was higher than the 0.4% increase expected by Briefing.com consensus.
After the open, the Institute for Supply Management issues in February report on manufacturing. The purchasing managers' index is expected to have declined to 34 from 35.6 in January, remaining deep in recessionary territory.
Also after the open, a government report on construction spending is expected to show a 1.5% drop in January after a 1.4% swoon in the previous month.
Job cuts: Europe's leading bank, HSBC (HBC), said Monday that it would cut 6,100 jobs, all of them in the United States. The bank also said it would close most of the branches of its U.S.-based consumer lending businesses, HFC and Beneficial.
In addition, the bank announced a full-year profit of $5.7 billion, down 70% from $19.1 billion in 2007. HSBC stock fell more than 20% in pre-market trading.
Buffett: Investor Warren Buffett's Berkshire Hathaway (BRK.A) reported the worst results in the 44 years he has run the company, and only the second decline in net worth in that time. In his report to shareholders Saturday, Buffett said Berkshire's net worth fell in 2008 by $11.5 billion.
Oil and money: Oil fell $2.15 to $42.61 in electronic trading. The dollar was lower against the euro and pound, but higher versus the yen.
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