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U.S. Stocks Advance on Anniversary of S&P 500 Index’s 2009 Bear-Market Low

by on March 9, 2010

By Rita Nazareth and Elizabeth Stanton March 9 (Bloomberg) — U.S. stocks rose on the anniversary of the 2009 bear-market low for the Standard & Poor’s 500 Index amid speculation the economy will continue to recover from the worst contraction since the Great Depression. American International Group Inc. surged 13 percent on speculation the insurer will sell more assets. United Technologies Corp., General Electric Co. and AT&T Inc. led gains in the Dow Jones Industrial Average . Boeing Co. advanced after Northrop Grumman Co. withdrew as a bidder for a U.S. Air Force contract. Benchmark indexes briefly erased gains in the final hour as the S&P 500 climbed within 0.5 percent of its 2010 high. The S&P 500 rose 0.2 percent to 1,140.45 at 4:10 p.m. in New York. The Dow Jones Industrial Average advanced 11.86 points, or 0.1 percent, to 10,564.38. Six stocks advanced for every five that fell on the New York Stock Exchange and Nasdaq Stock Market. “It’s happy anniversary day,” said Philip Orlando , New York-based chief equity market strategist at Federated Investors Inc., which oversees $400 billion. “The economy is out of recession, the improvement is sustainable and stocks will continue grinding higher. Investors are waiting for the next catalyst.” The S&P 500 is up 69 percent since hitting a 12-year low of 676.53 one year ago today, the biggest rally for the index since the 1930s. The main benchmark for U.S. stocks has recovered losses after sliding as much as 8.1 percent from this year’s high amid concern that some European countries’ will fail to pay back debt and speculation the Federal Reserve will need to rein in emergency stimulus measures as the economy improves. ‘Still Cheap’ Improving profits have reduced the S&P 500’s valuation to 18.3 times its companies reported operating earnings, compared with a multiple of 22.9 in December. “Stocks are still cheap,” said billionaire Kenneth Fisher , who oversees $37 billion as chairman of Fisher Investments Inc. in Woodside, California. “The nature of the beginning of the second year of a bull market is one where people are still climbing the wall of worry and they have ‘acrophobia,’” he said, referring to the fear of heights. The S&P 500 climbed as high as 1,145.37 today, near the 15- month closing high of 1,150.23 reached on Jan. 19. The rally that day extended the index’s advance from March 9, 2009, to 70 percent. “I believe we’ll play around that 1,150 level until we decide to go one way or the other,” said James Paulsen , who helps oversee about $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “We might break through this, but we need catalysts.” AIG Rallies AIG led gains by financial companies bailed out by the U.S. government on speculation the insurer will sell more assets after raising $51 billion through deals. “We’re hearing some rumors AIG might sell more assets,” said Michael Nasto , the senior trader at U.S. Global Investors Inc., which manages about $2.5 billion in San Antonio. “Their ability to raise capital is a positive thing. Back on the days when they were having all those problems, there was talk of whether or not the company could even be salvaged. Not only they are still around, the companies under their umbrella have value.” AIG jumped 13 percent to $32.77 for the biggest gain in the S&P 500. Citigroup Inc. advanced 7.3 percent to $3.82 for the second-biggest gain in the index as Fox Business Network said the U.S. may sell its stake in the bank within three months, without saying where it got the information. Fannie Mae climbed 5.9 percent to $1.07, and Freddie Mac increased 7.6 percent to $1.28. Risk Assets “We’re poised for risk assets to do well for a few quarters,” said David Darst , the New-York based chief investment strategist at Morgan Stanley Smith Barney, which has $1.6 trillion in client assets. “The interest rate is low, inflation is low and liquidity is enormous. The final positive is global growth.” United Technologies had the biggest gain in the Dow average, rising 1.4 percent to $71.78. The maker of Pratt & Whitney jet engines and Otis elevators was raised to “outperform” from “neutral” at Cowen & Co. UAL Corp. rose 3.7 percent to $18.16. The parent of United Airlines said February revenue for each passenger flown a mile increased by between 17 percent and 19 percent. Boeing, Sprint Boeing gained 0.8 percent to $67.79. The world’s second- largest commercial-plane maker is the only bidder for the U.S. Air Force’s $35 billion tanker program after Northrop Grumman withdrew because the government refused to alter some of its requirements. Sprint Nextel Corp. had the third-biggest gain in the S&P 500, jumping 6.5 percent to $3.62. The third-largest U.S. wireless company advanced for a second day after saying it expects revenue growth in the next several quarters and saying it will pay down debt and control expenses. Sprint, the third-largest U.S. wireless carriers, led a 1.2 percent rally in telephone companies, the biggest advance among 10 groups. Industrial shares climbed 0.8 percent as a group, the second biggest gain of the 10. Yum! Brands Inc. climbed 3.4 percent to $36.60. UBS AG upgraded the shares to “buy” from “neutral” and raised its price estimate on the shares by 16 percent to $44, saying the stock has underperformed its global consumer peers. Comerica Inc. retreated 1.6 percent to $35.70. The bank, with a market value of about $5.5 billion, is raising about $800 million by selling shares. BMO Capital Markets cut its rating on the shares to “market perform” from “outperform.” First Solar Inc. fell 2.2 percent to $106.22. The world’s largest maker of thin-film solar modules was downgraded to “underweight” from “neutral” at JPMorgan. Energy Conversion Devices Inc. , also lowered to “underweight” from “neutral” at JPMorgan, fell 8.1 percent to $7.87. To contact the reporters on this story: Elizabeth Stanton in New York at estanton@bloomberg.net ; Rita Nazareth in New York at rnazareth@bloomberg.net .

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U.S. Stocks Advance on Anniversary of S&P 500 Index’s 2009 Bear-Market Low

U.S. Economy Expanded at 5.9% Pace in Fourth Quarter on Business Spending

by on February 26, 2010

By Timothy R. Homan Feb. 26 (Bloomberg) — The U.S. economy expanded at a 5.9 percent annual rate in the fourth quarter, more than the government reported last month, reflecting stronger business investment and a greater contribution from inventories. The rise in gross domestic product, which exceeded the median forecast of economists surveyed by Bloomberg News, marked the best performance in more than six years, the Commerce Department said today in Washington. Inventories added 3.88 percentage points to GDP, more than previously reported, and investment in software and equipment grew at the fastest pace in almost a decade. Manufacturers such as Deere & Co. may continue to lead the recovery as increasing sales prompt companies to boost purchases and add to stockpiles. At the same time, consumer spending, which accounts for 70 percent of the economy, is likely to be restrained by an unemployment rate that’s forecast to average 9.8 percent this year. “There’s still room for inventories to add to growth,” said James O’Sullivan , global chief economist at MF Global Ltd. in New York, who accurately forecast the rise in GDP. “Going forward, the question comes back to sustainability, and the key to that is a clear pickup in the labor market, which I think is coming.” Stock-index futures swung between gains and declines after American International Group Inc.’s bigger-than-forecast quarterly loss overshadowed the GDP report. Standard & Poor’s 500 Index futures expiring in March rose less than 0.1 percent to 1,103.30 at 9:14 a.m. in New York after rising as much as 0.4 percent. Economists’ Estimates The economy was forecast to grow at a 5.7 percent annual pace, the same rate the government initially reported in January, according to the median estimate of 76 economists in a Bloomberg News survey. Estimates ranged from gains of 4.2 percent to 6.3 percent. For all of 2009, the economy shrank 2.4 percent, the worst single-year performance since 1946. The GDP report is the second for the fourth quarter and will be revised in March as more information, such as corporate profits, becomes available to the government. Consumer spending rose at a 1.7 percent pace, compared with the 2 percent rate forecast by economists and a 2.8 percent gain in the prior quarter. Spending added 1.23 percentage points to GDP. Third-quarter purchases received a boost from the government’s auto-incentive program that offered buyers discounts to trade in older cars and trucks for new, more fuel- efficient vehicles. The plan expired in August. Household Purchases Household purchases dropped 0.6 percent last year, the biggest decrease since 1974. Increases in production last quarter stemmed the slide in inventories from earlier in the year. Stockpiles dropped at a $16.9 billion annual pace following a $139.2 billion decline the previous three months. Inventories declined at a record $160.2 billion pace in the second quarter. Today’s report showed purchases of equipment and software increased at an 18.2 percent pace in the fourth quarter, the most since 2000. The gain helped offset a 13.9 percent drop in commercial construction, leaving total business investment up 6.2 percent during the final three months of 2009. A report yesterday showed companies ordered more capital goods in January, driven primarily by bookings for commercial aircraft. Declines in other, less volatile industries indicate business investment may be slowing, according to yesterday’s Commerce Department figures. Job Market The job market is one part of the economy where a recovery is slow to take hold. Payrolls fell by 20,000 last month after a 150,000 drop in December. The U.S. has lost 8.4 million since the start of the recession in December 2007, the most of any slowdown in the post-World War II era. The jobless rate fell to 9.7 percent in January, the Labor Department said on Feb. 5. Unemployment is projected to end the year at 9.5 percent, according to a Bloomberg survey. In other areas of the economy, today’s report showed a smaller trade deficit, which contributed 0.3 percentage point to fourth-quarter growth. Government spending fell at a 1.2 percent pace after a 2.6 percent increase the previous quarter. Residential construction climbed at a 5 percent rate last quarter after expanding at a 18.9 percent pace in the previous three months. Deere, the world’s largest maker of farm machinery, posted first-quarter profit this month that topped analysts’ estimates and raised its 2010 forecast. Chief Executive Officer Samuel Allen said Feb. 17 that full-year equipment revenue will increase as much as 8 percent. ‘Great Potential’ “Positive developments based on the world’s prospects for population and economic growth hold great potential and should help our company,” he said in a statement. Inflation stayed within the Fed’s long-term forecast range, today’s report showed. The central bank’s preferred price gauge, which is tied to consumer spending and strips out food and energy costs, rose at a 1.6 percent annual pace following a 1.2 percent increase in the prior quarter. The GDP price gauge climbed at a 0.4 percent pace, less than the 0.6 percent median forecast of economists surveyed. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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U.S. Economy Expanded at 5.9% Pace in Fourth Quarter on Business Spending

U.S. Economy Grew at 5.9% Pace in Fourth Quarter, More Than First Reported

February 26, 2010

By Timothy R. Homan Feb. 26 (Bloomberg) — The U.S. economy expanded at a 5.9 percent annual rate in the fourth quarter, more than the government reported last month, reflecting stronger business investment and a greater contribution from inventories. The rise in gross domestic product, which exceeded the median forecast of economists surveyed by Bloomberg News, marked the best performance in more than six years, the Commerce Department said today in Washington. Inventories added 3.88 percentage points to GDP, more than previously reported, and investment in software and equipment grew at the fastest pace in almost a decade. Manufacturers such as Deere & Co. may continue to lead the recovery as increasing sales prompt companies to boost purchases and add to stockpiles. At the same time, consumer spending, which accounts for 70 percent of the economy, is likely to be restrained by an unemployment rate that’s forecast to average 9.8 percent this year. “There’s still room for inventories to add to growth,” said James O’Sullivan , global chief economist at MF Global Ltd. in New York, who accurately forecast the rise in GDP. “Going forward, the question comes back to sustainability, and the key to that is a clear pickup in the labor market, which I think is coming.” Stock-index futures swung between gains and declines after American International Group Inc.’s bigger-than-forecast quarterly loss overshadowed the GDP report. Standard & Poor’s 500 Index futures expiring in March rose less than 0.1 percent to 1,103.30 at 9:14 a.m. in New York after rising as much as 0.4 percent. Economists’ Estimates The economy was forecast to grow at a 5.7 percent annual pace, the same rate the government initially reported in January, according to the median estimate of 76 economists in a Bloomberg News survey. Estimates ranged from gains of 4.2 percent to 6.3 percent. For all of 2009, the economy shrank 2.4 percent, the worst single-year performance since 1946. The GDP report is the second for the fourth quarter and will be revised in March as more information, such as corporate profits, becomes available to the government. Consumer spending rose at a 1.7 percent pace, compared with the 2 percent rate forecast by economists and a 2.8 percent gain in the prior quarter. Spending added 1.23 percentage points to GDP. Third-quarter purchases received a boost from the government’s auto-incentive program that offered buyers discounts to trade in older cars and trucks for new, more fuel- efficient vehicles. The plan expired in August. Household Purchases Household purchases dropped 0.6 percent last year, the biggest decrease since 1974. Increases in production last quarter stemmed the slide in inventories from earlier in the year. Stockpiles dropped at a $16.9 billion annual pace following a $139.2 billion decline the previous three months. Inventories declined at a record $160.2 billion pace in the second quarter. Today’s report showed purchases of equipment and software increased at an 18.2 percent pace in the fourth quarter, the most since 2000. The gain helped offset a 13.9 percent drop in commercial construction, leaving total business investment up 6.2 percent during the final three months of 2009. A report yesterday showed companies ordered more capital goods in January, driven primarily by bookings for commercial aircraft. Declines in other, less volatile industries indicate business investment may be slowing, according to yesterday’s Commerce Department figures. Job Market The job market is one part of the economy where a recovery is slow to take hold. Payrolls fell by 20,000 last month after a 150,000 drop in December. The U.S. has lost 8.4 million since the start of the recession in December 2007, the most of any slowdown in the post-World War II era. The jobless rate fell to 9.7 percent in January, the Labor Department said on Feb. 5. Unemployment is projected to end the year at 9.5 percent, according to a Bloomberg survey. In other areas of the economy, today’s report showed a smaller trade deficit, which contributed 0.3 percentage point to fourth-quarter growth. Government spending fell at a 1.2 percent pace after a 2.6 percent increase the previous quarter. Residential construction climbed at a 5 percent rate last quarter after expanding at a 18.9 percent pace in the previous three months. Deere, the world’s largest maker of farm machinery, posted first-quarter profit this month that topped analysts’ estimates and raised its 2010 forecast. Chief Executive Officer Samuel Allen said Feb. 17 that full-year equipment revenue will increase as much as 8 percent. ‘Great Potential’ “Positive developments based on the world’s prospects for population and economic growth hold great potential and should help our company,” he said in a statement. Inflation stayed within the Fed’s long-term forecast range, today’s report showed. The central bank’s preferred price gauge, which is tied to consumer spending and strips out food and energy costs, rose at a 1.6 percent annual pace following a 1.2 percent increase in the prior quarter. The GDP price gauge climbed at a 0.4 percent pace, less than the 0.6 percent median forecast of economists surveyed. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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Video: Harris Sees `Sustained’ Home Price Rebound in 3-5 Years: Video

October 27, 2009

Oct. 27 (Bloomberg) — Ethan Harris, head of North America economics at Bank of America-Merrill Lynch, talks with Bloomberg’s Mark Crumpton and Lori Rothman about the U.S. housing market. Harris also discusses the economy and the outlook for the government’s $8,000 first-time homebuyer tax credit. Home prices in 20 U.S. cities rose in August for a third consecutive month. The S&P/Case-Shiller home-price index climbed 1 percent from the prior month, seasonally adjusted, after a 1.2 percent increase in July, the group said today in New York. (Source: Bloomberg)

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Video: Moody’s Zandi Calls Rise in U.S. Home Prices `Temporary’: Video

October 27, 2009

Oct. 27 (Bloomberg) — Mark Zandi, chief economist at Moody’s Economy.com, talks with Bloomberg’s Francine Lacqua, Michael McKee and Jon Erlichman about the significance of today’s rise in the S&P/Case-Shiller home-price index. Home prices in 20 U.S. cities rose in August for a third consecutive month. The S&P/Case-Shiller home-price index climbed 1 percent from the prior month, seasonally adjusted, after a 1.2 percent increase in July.(Source: Bloomberg)

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Industrial Output Gain in U.S. Beats Estimates; Consumer Confidence Slips

October 16, 2009

By Shobhana Chandra Oct. 16 (Bloomberg) — Industrial production in the U.S. rose more than anticipated in September, putting manufacturing at the forefront of the emerging economic recovery. The 0.7 percent increase in production at factories, mines and utilities exceeded every forecast of economists surveyed by Bloomberg News and followed gains of 1.2 percent in August and 0.9 percent in July, Federal Reserve figures showed today. Another report showed consumer sentiment dropped more than projected this month. The recent burst of activity on factory floors, spurred in part by a rebound at automakers, will likely give way to more moderate and sustainable gains in coming months as companies rebuild inventories and exports grow. The improvement has yet to generate jobs, one reason consumers remain anxious and underscoring why Fed policy makers say they will keep interest rates low for a long time. “Manufacturing is turning around from deep recession to strong growth in a very short time,” said Dean Maki , chief U.S. economist at Barclays Capital Inc. in New York. “It’s going to be one of the important supports to growth.” The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 69.4 from 73.5 in September, which was the highest in more than a year, the group reported today. Measures of expectations for six months ahead and current conditions both fell. Stocks Fall Stocks dropped, depressed by disappointing results at General Electric Co. and Bank of America Corp. The Standard & Poor’s 500 Index fell 1.1 percent to 1,084.50 at 12:51 p.m. in New York. Treasury securities rose. Industrial production was forecast to increase 0.2 percent after a previously reported 0.8 percent gain in August, according to the median estimate of 77 economists surveyed by Bloomberg News. Projections ranged from a gain of 0.5 percent to a drop of 0.5 percent. Manufacturing accounts for about 12 percent of the U.S. economy. The jump in production over the past three months was the biggest since late 2005. Capacity use climbed to 70.5 percent last month from 69.9 in August, the report showed. It was estimated to rise to 69.8 percent, according to the Bloomberg survey median. Economists track plant operating rates to gauge factories’ ability to produce goods with existing resources. Lower rates reduce the risk of bottlenecks that can force prices higher. Factory Production Factory output, which accounts for about four-fifths of industrial production, increased 0.9 percent after a 1.2 percent gain the prior month. Motor vehicle and parts production climbed 8.1 percent following a 6.1 percent increase the prior month. “Cash for clunkers,” which offered incentives of as much as $4,500 for consumers to trade in old cars for more fuel- efficient ones, helped automakers trim stockpiles as sales climbed in July and August. Industry data showed sales plunged in September after the plan expired on Aug. 24. General Motors Co. and Toyota Motor Corp. have predicted sales gains for the fourth quarter. GM on Oct. 7 said it plans to boost output to 655,000 vehicles in North America during this quarter to match increasing demand. The increases in output last month were widespread. Factory production excluding motor vehicles increased 0.5 percent, and the diffusion index gauging the number of categories advancing was 56.9 in September, exceeding the 50 breakeven level for a second month. October Gains Regional reports yesterday showed gains in manufacturing extending into October. The New York Fed’s Empire State index soared to the highest level since mid-2004, while the Philadelphia Fed’s gauge eased off September’s two-year high. Winnebago Industries Inc. , the motor-home maker, yesterday reported a fiscal fourth-quarter loss that was smaller than analysts had estimated. The Forest City, Iowa-based company said it’s seeing a pickup in demand. “Dealer inventory is very close to reaching the bottom, and our dealer partners will need to start to replenish soon to satisfy retail demand going forward,” Chief Executive Officer Bob Olson said in a statement. Inventories at businesses fell 1.5 percent in August, the biggest drop this year, bringing the value of goods on hand down to $1.31 trillion, the least since December 2005, according to Commerce Department data this week. American factories may also get a boost as more than $2 trillion in government stimulus programs worldwide are reviving demand from Asia to Europe. Exports climbed in August for a fourth consecutive month to reach the highest level of the year, according to Commerce Department figures. To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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Recession in U.S. Eased in Second Quarter, Recovery Probably Taking Hold

September 30, 2009

By Shobhana Chandra Sept. 30 (Bloomberg) — The worst U.S. recession since the Great Depression eased in the second quarter and the economy is probably now in the early stages of recovery, economists said before reports today. Gross domestic product contracted at a 1.2 percent annual rate from April to June, the smallest drop in a year, according to the median of 78 forecasts in a Bloomberg News survey. Companies cut fewer workers this month and business activity expanded for the first time in a year, other figures may show. Government stimulus plans such as “cash for clunkers” and first-time homebuyer credits are giving manufacturing and housing, the two areas at the center of the economic slump, a boost this quarter. Federal Reserve policy makers are among those concerned that gains in consumer spending will not be sustained as unemployment climbs and incomes stagnate. “The worst is over and the third quarter will be a strong growth quarter,” said Patrick Newport , an economist at IHS Global Insight in Lexington, Massachusetts. “The stimulus is one reason for the improved economy. The only part still suffering is the job market.” The Commerce Department report on GDP, the sum of all goods and services produced, is due at 8:30 a.m. in Washington. Forecasts in the Bloomberg survey ranged from declines of 1 percent to 1.5 percent. Job Losses At 8:15 a.m., ADP Employer Services may report companies trimmed 200,000 jobs this month after cutting 298,000 in August, according to the Bloomberg survey. ADP includes only private employment and does not take into account hiring by government agencies. The Labor Department’s payrolls report this week may also show job losses are slowing. Figures from Institute for Supply Management-Chicago Inc., due at 9:45 a.m., may show its business barometer rose to 52, the highest level since September 2008, from 50 in August. A reading of 50 is the dividing line between contraction and expansion. Today’s GDP report is the last of three estimates the government issues on quarterly economic growth. The government’s report last month showed a 1 percent pace of contraction at an annual pace last quarter. The world’s largest economy contracted at a 6.4 percent rate from January to March. The Standard & Poor’s 500 Index has jumped 57 percent since reached a 12-year low on March 9 as reports indicated the recession was abating. The gauge closed down 0.2 percent yesterday at 1,060.61 in New York. ‘Guarded Confidence’ The economic recovery is “slow but certain,” FedEx Corp. Chief Executive Officer Fred Smith said this week, adding he has “guarded confidence” about an improving global outlook. “Recovery is not a straight line up, but a zig-zag with a few steps forward and backward,” Smith, the founder of the second-largest U.S. package-shipping company, said at FedEx’s annual meeting in its hometown of Memphis, Tennessee. Consumer spending, which accounts for about 70 percent of the economy, probably fell 1 percent from April to June, economists forecast today’s report will show. Purchases are recovering this quarter. Sales at retailers surged in August by the most in three years, boosted by demand for automobiles as Americans rushed to take advantage of the “cash for clunkers” plan. Declines in stockpiles, which dropped last quarter at the fastest pace on record, have set the stage for a pickup in manufacturing. Automakers General Motors Co. and Ford Motor Co. are among firms boosting production in the second half of 2009. The drag from housing is dissipating. Sales of new homes rose last month to the highest level in almost a year, and a report yesterday on the S&P/Case-Shiller home-price index showed house values in 20 U.S. cities climbed in July from the prior month by the most since 2005. The jobs report in two days may show payrolls declined by 180,000 this month after a 216,000 drop in August, and the unemployment rate climbed to 9.8 percent from 9.7 percent, the survey median shows. Economists surveyed by Bloomberg predict unemployment may reach 10 percent by year-end, the highest level since 1983. To contact the report on this story: Shobhana Chandra in Washington schandra1@bloomberg.net

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Pimco Adviser Clarida Says U.S. Savings Rate May Exceed 8%, Slowing Growth

September 28, 2009

By Thomas Keene and Susanne Walker Sept. 28 (Bloomberg) — Pacific Investment Management Co. strategic adviser Richard Clarida said the U.S. savings rate may exceed 8 percent, hurting consumer spending and weighing on the economic recovery. “I’m in the glass is half empty camp,” Clarida said during an interview in New York on Bloomberg radio. “Traditionally the consumer comes to the rescue of economic recoveries. We’ll see a more subdued consumer.” Americans took on less debt to repair tattered balance sheets, pushing the savings rate up to 6 percent of disposable income in May, the highest level since 1998. It last exceeded 8 percent in December 1992. Consumer spending accounts for more than 70 percent of U.S. economic activity. Only 8 percent of U.S. adults plan to increase household spending, almost one-third will spend less, and 58 percent expect to “stay the course,” a Bloomberg News poll showed Sept. 17. More than three in four adults said they reduced spending in the past year, the poll showed. Officials at Newport Beach, California-based Pimco, the world’s largest bond fund manager, have forecast a “new normal” in the global economy that will include heightened government regulation, lower consumption and slower growth. Slower Growth “Economic growth will be choppy,” Clarida said. “We see the economy recovering. There will be some quarters above two percent, and others below.” The world’s largest economy shrank at a 1.2 percent annual rate from April to June, more than the originally reported 1 percent contraction, according to a Bloomberg News survey before the Commerce Department’s Sept. 30 report. The jobless rate climbed to 9.8 percent this month, from 9.7 percent in August, according to a separate Bloomberg survey before the Labor Department reports figures on Oct. 2. “At some point as unemployment declines, the Fed will need to renormalize rates,” Clarida said. “It’s too soon to tell the pace at which they will renormalize. I don’t think there will be a Fed hike until late 2010 or 2011.” The Fed cut its target for overnight lending between banks to a record-low range of zero to 0.25 percent in December. Traders bet there’s a 72 percent chance the central bank will raise its target rate by April, based on futures data compiled by Bloomberg. To contact the reporter on this story: Susanne Walker in New York at swalker33@bloomberg.net

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Employers in U.S. Probably Eliminated Fewer Jobs, Manufacturing Gauge Rose

September 27, 2009

By Bob Willis Sept. 27 (Bloomberg) — Employers probably cut fewer jobs in September and manufacturing expanded for a second month as the U.S. embarked on a tenuous recovery, economists said before reports this week. Payrolls fell by 180,000 workers, the smallest drop in a year, according to the median of 58 estimates in a Bloomberg News survey ahead of an Oct. 2 Labor Department report. Figures from a private group of purchasing managers may show factories advanced at the fastest pace in more than three years. The mixed figures explain why Federal Reserve policy makers last week said they will keep interest rates low for the foreseeable future. Another report may show household purchases jumped last month by the most in six years as the now-expired government’s “cash-for- clunkers” plan helped prop up consumers shaken by rising joblessness and stagnant wages. “The initial stages of the recovery will be gradual and uneven,” said Ryan Sweet , a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “The labor market holds the key. We need to see further moderation in payroll declines or risk unwinding the improvement in consumer spending.” The jobless rate this month probably climbed to 9.8 percent, the highest level since 1983, from 9.7 percent in August, according to economists surveyed by Bloomberg. Unemployment will reach 10 percent by the last quarter of 2009, a Bloomberg poll this month showed. Job Losses Payroll losses peaked at 741,000 in January, the most for a single month since 1949. The U.S. has lost 6.9 million jobs since the recession began in December 2007. While acknowledging that “economic activity has picked up,” the Fed last week said household spending “remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.” The Standard & Poor’s 500 Index fell 2.2 percent last week, the biggest weekly drop since early July, as figures on home sales and business spending came in weaker than analysts anticipated. Economists surveyed by Bloomberg this month forecast the economy will grow at a 2.5 percent pace in the second half of the year after shrinking 3.9 percent in the 12 months to June, the biggest slump since quarterly records began in 1947. Revised figures from the Commerce Department on Sept. 30 may show the economy contracted at a 1.2 percent annual rate in the second quarter, more than the 1 percent pace previously estimated. Automaker Payrolls Companies such as auto-parts maker Tenneco Inc. continue to eliminate jobs to cut costs and boost profits amid weak sales. Carmakers, which are trying to rebuild depleted dealer inventories, are calling staff back to work. General Motors Co., which came out of bankruptcy in July, will add a third shift at plants in Kansas, Indiana and Michigan after “cash-for-clunkers” boosted sales. The plants are taking on additional production from factories slated to close or be idled. The changes will restore 2,400 jobs, the Detroit-based company said last week. Nonetheless, Tim Lee , the company’s vice president of global manufacturing, said on a conference call Sept. 22, “even with these actions, we will have some employees left on layoff.” The Obama administration’s $3 billion auto incentive to trade in gas-guzzlers for more fuel-efficient vehicles ran out of funds in late August. Auto Incentives Consumer spending probably climbed 1.1 percent in August from the prior month, the most since August 2003, partly reflecting the surge in car sales , economists forecast a Commerce Department report Oct. 1 will show. Incomes, on the other hand, likely grew just 0.1 percent, reflecting the job losses, according to the survey median. The Tempe, Arizona-based Institute for Supply Management may report Oct. 1 that its manufacturing index climbed to 54 in September, the highest level since April 2006, the survey showed. Readings greater than 50 signal expansion. Orders placed at factories likely rose 0.5 percent in August after a 1.3 percent gain the prior month, economists projected an Oct. 2 Commerce Department report will show. The jobs report may also show factory employment dropped by 53,000 workers this month compared with a 63,000 decrease in August. In other reports this week, the number of contracts to buy previously owned homes rose in August for a seventh consecutive time, according to the survey median. The National Association of Realtors’ report on pending home sales is due Oct. 1. The S&P/Case-Shiller index of home prices, due Sept. 29, may show declines in property values slowed in July. Consumer confidence probably rose in September to the highest level in a year, figures from the Conference Board may show the same day, according to economists surveyed. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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U.S. Stocks Decline, Led by Energy Producers; Toll Brothers Falls on Loss

August 27, 2009

By Adam Haigh and Elizabeth Stanton Aug. 27 (Bloomberg) — U.S. stocks dropped, led by energy producers , as crude oil fell for a third day and higher-than- forecast jobless claims spurred speculation that the Standard & Poor’s 500 Index ’s 52 percent rally since March isn’t justified. Exxon Mobil Corp. and Chevron Corp., the biggest U.S. fuel suppliers, declined more than 1 percent. Toll Brothers Inc. slid after the largest U.S. builder of luxury homes posted a wider quarterly loss. Boeing Co. , the second-biggest maker of commercial aircraft, gained 8.2 percent after predicting its 787 Dreamliner will make its first flight this year. The Standard & Poor’s 500 Index slipped 7.14 points, or 0.7 percent, to 1,020.98 as of 9:58 a.m. in New York. The Dow Jones Industrial Average lost 42.47, or 0.5 percent, to 9,501.05. The Nasdaq Composite Index decreased 20.52, or 1 percent, to 2,003.91. The S&P 500’s 52 percent rally since March 9 has pushed gauge’s price to about 19 times annual earnings of its companies, the most expensive level since 2004. About 76 percent of companies in the index that have reported results since June 17 beat the average analyst estimate for second-quarter profits, according to Bloomberg data. Jobless claims totaled 570,000, more than forecast, in the week ended Aug. 22, compared with a revised 580,000 the week before, according to the Labor Department. The data offset a Commerce Department report showing the U.S. economy contracted less than anticipated in the second quarter as a jump in government spending and smaller cutbacks by consumers helped mitigate a record plunge in inventories. 200 Days A decline in the S&P 500 below its 200-month average would probably signal an additional slump of as much as 6.5 percent, according to Chicago-based Technical Analytics Inc. The index, which closed at 1,028.12 yesterday, has traded higher than its 200-day moving average since July 13 and rose 17 percent above it yesterday, the most since April 1999. All 10 industries in the S&P 500 fell today, led by a 1.2 percent decline in energy shares. Crude oil slid after a report showed that inventories unexpectedly rose last week in the U.S., the world’s largest energy user. Exxon dropped 97 cents to $70.40 and Chevron lost $1.02 to $70.07. Crude for October delivery retreated 86 cents, or 1.2 percent, to $70.57 a barrel on the New York Mercantile Exchange. Toll Brothers dropped 44 cents, or 1.9 percent, to $22.70. The net loss for the three months ended July 31 swelled to $472.3 million, more than analysts projected. Boeing added $3.81 to $51.63. The first 787 will now fly for the first time by the end of this year and be delivered to customers in the fourth quarter of 2010, the Chicago-based company said in a statement today. The delivery target is about 2 1/2 years behind the original goal of May 2008. Citigroup increased 11 cents to $4.74. Hedge fund manager John Paulson has acquired about a 2 percent stake in the New- York based bank, the New York Post reported today, citing unidentified people. Financial stocks in the S&P 500 have climbed 134 percent since the benchmark for U.S. equity began rallying from a 12-year low on March 9. To contact the reporters on this story: Adam Haigh in London at ahaigh1@bloomberg.net . Elizabeth Stanton in New York at estanton@bloomberg.net

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Container Lines `Tough’ Talks May Fail to Lift Asia-U.S. Rates, End Losses

August 13, 2009

By Wendy Leung and Seonjin Cha Aug. 14 (Bloomberg) — Shipping lines operating half the world’s container vessels plan to raise Asia-U.S. rates, ending a price war that contributed to industrywide losses. Falling demand and a flood of new vessels may stop them. A group of 14 lines, including CMA CMG SA, Evergreen Marine Corp. and Neptune Orient Lines Ltd. ’s APL Ltd., agreed to raise rates by $500 per 40-foot container starting this week. The figure was a “voluntary guideline,” the Transpacific Stabilization Agreement, or TSA, said last month. The lines, now in the busiest period of the year, may have to settle for less as slumping traffic and empty ships let customers seek discounts. “Cargo volumes aren’t big enough” to support the $500 rise , said Bruce Tseng, a spokesman for Taiwan-based Yang Ming Marine Transport , a TSA member. The group wants to renegotiate contracts signed in the past few months to raise rates after the 10 largest listed container-shipping companies all posted losses. A similar attempt in April failed as lines competed for volumes to avoid costly ship lay-ups amid a roughly 20 percent drop in Asia-U.S. volumes. Even a $500 increase would leave rates at unprofitable levels and 30 percent lower than a year earlier, according to CMA CGM. “A rise in transpacific rates is very difficult,” said Johnson Leung , a Hong Kong-based analyst at Tufton Oceanic Ltd., the world’s largest shipping hedge-fund group. There should be some increase in the peak season, “the question is how long it will last,” he said. Container lines traditionally raise rates around the third quarter as shops stock up for the “back to school” and holiday shopping seasons. This year, cargo-box trade is tumbling as retailers pare orders amid weak demand. U.S. consumer spending fell at a 1.2 percent pace in the second quarter. Inbound container volumes at the Port of Los Angeles , the busiest in the U.S., fell 17 percent from a year earlier in June. Very Low Demand “Demand is very low,” said Ken Cambie , chief financial officer of Orient Overseas (International) Ltd., Hong Kong’s biggest container line. “We haven’t seen any restocking from the retailers in the U.S. and Europe.” The company reported its first loss in a decade last week. Its transpacific rates averaged 14 percent lower in the first half than a year earlier. “Discussions to move rates back up again are pretty tough,” said Ron Widdows , chief executive officer of Neptune Orient, the owner of Southeast Asia’s biggest container line. Nippon Yusen K.K., Japan’s largest shipping line by sales, isn’t sure how many customers will accept the higher rates, said Suguru Uchida , a spokesman. Mediterranean Shipping, the world’s second-largest container line, Evergreen Marine Corp., Asia’s biggest, and Hapag Lloyd AG, Germany’s biggest, declined to comment. Expanding Fleet Shipping lines also face more competition as shipbuilders work through container-vessel orders with a combined capacity equal to 38 percent of the existing global fleet, according to data compiled by Bloomberg. The ships were ordered during a trade boom that ended last year. The World Bank has forecast a 6.1 percent decline in global trade this year. New vessels are entering service even as lines mothball existing ships because of a shortage of cargo. The capacity of the laid-up fleet will likely expand 66 percent by around year’s end to 2 million 20-foot containers, according to AXS Alphaliner , an industry data company. “The container-shipping industry will only see a recovery in profits after the overcapacity issue is resolved,” said Jee Heon Seok , a Seoul-based NH Investment & Securities Co. analyst. “Without drastic measures such as scrapping, it’s hard to see rates showing a meaningful rebound until the first half of next year.” Capacity Cuts Shipping lines are trying to drive up rates by withdrawing capacity. A.P. Moeller Maersk A/S , CMA CGM and Mediterranean Shipping last week agreed to combine two Asia-U.S. services into one. A $500 increase would leave rates “below minimum profitability” because of the need to haul empty containers back to Asia from the U.S., said Jean-Philippe Thenoz, head of North American lines at CMA CGM, the world’s third-biggest container carrier. He added that the increase will stick as customers understand that it’s an “necessity” and because a U.S. economic rebound will trigger an increase in demand. “There are already signs of a recovery in U.S. consumption,” he said. “We’re very optimistic for the end of 2009 and for 2010.” Jo Jo Hsu, manager at the Hong Kong office of Yiu Fung Forwarder, which arranges cargo shipments, also said that shipping lines have raised rates and that the increases may hold until the end of September. Peak-season surcharges and fuel levies, lower than last year, also are being added, she said. Higher rates likely will only remain in place if the U.S. economy recovers and companies in the world’s largest economy become confident enough to rebuild inventories. Big customers at present “don’t have any idea what the demands for their products are,” said Neptune Orient’s Widdows. Restocking “may happen, but that’s not happened yet.” To contact the reporters on this story: Wendy Leung in Hong Kong at wleung12@bloomberg.net ; Seonjin Cha in Seoul at scha2@bloomberg.net

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Personal Incomes in U.S. Declined 1.3% in June, Biggest Drop in Four Years

August 4, 2009

By Shobhana Chandra Aug. 4 (Bloomberg) — U.S. personal incomes tumbled 1.3 percent in June, more than forecast and the biggest drop in four years, signaling that consumer spending will take time to recover. The decline partly reflected the unwinding of one-time transfer payments from the Obama administration’s stimulus plan, which boosted incomes 1.3 percent in May, figures from the Commerce Department showed today in Washington.

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Personal Incomes in U.S. Declined 1.3% in June, Biggest Drop in Four Years

August 4, 2009

By Shobhana Chandra Aug. 4 (Bloomberg) — U.S.

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