a-one-year-high

Cheyne Capital Bets on U.K. Property Rally With Lower-Rated Mortgage Debt

by on March 12, 2010

By Esteban Duarte March 12 (Bloomberg) — Cheyne Capital Management (U.K.) LLP, a hedge fund firm which oversees $5.5 billion, is betting on an improvement in Britain’s real estate market. Cheyne is boosting the allocation of lower-rated mortgage debt in its Queen’s Walk Investment Ltd. fund in expectation home-loan defaults will continue to decline, partner Shamez Alibhai said in an interview. Queen’s Walk invests most of its 120 million euros in mortgage-backed securities. “After strong profits from investments on triple-A residential MBS we are moving down the structures of the transactions,” Alibhai said. Queen’s Walk sold 3.4 million euros of AAA rated notes with an equivalent annual profit of 28 percent, the fund said yesterday in its fourth-quarter results. The U.K. property market is rebounding after its worst slump since the early 1990s, with Bank of England data showing mortgage approvals close to a one-year high in December. Delinquencies of more than 90 days on higher-risk, non- conforming mortgages declined to 18.6 percent in the last three months of 2009 compared with 19 percent at the end of September, according to Fitch Ratings. Cheyne is focusing its purchases on debt backed by non- conforming and buy-to-let mortgages, loans which the mortgage holder repays using rental income, Alibhai said. Queen’s Walk is also buying the mezzanine portions of bonds backed by mortgages on commercial property, he said. “Now we are buying double-A and single-A notes, usually located at the mezzanine portions of the deals, at an average price of 44 cents,” Alibhai said. The rankings are the third and sixth highest investment grades. So-called mezzanine pieces of issues sold by Northern Rock Plc, among the most liquid of mortgage-collateralized debt, rose 10 cents so far this year, compared with 1 cent for the top- rated portions, according to JPMorgan Chase & Co. Northern Rock was nationalized in 2008 after depositors withdrew funds on concern the Newcastle, England-based bank had borrowed too much using mortgages as collateral. Banks create mortgage-backed securities by pooling home loans and selling them to investors as notes with varying risk and returns. To contact the reporter on this story: Esteban Duarte in Madrid at eduarterubia@bloomberg.net

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Philippines May Keep Benchmark Rate at 4%, Unwind More Stimulus Measures

by on March 9, 2010

By Karl Lester M. Yap and Michael Munoz March 10 (Bloomberg) — The Philippine central bank will probably keep borrowing costs at a record low to support the country’s recovery even as it prepares to drain excess cash from the economy. Bangko Sentral ng Pilipinas will keep its benchmark interest rate at 4 percent for a sixth straight meeting tomorrow, according to all 15 economists surveyed by Bloomberg News. Policy makers will consider measures including reducing the budget for the so-called rediscounting window, a facility that allows lenders to borrow from the central bank, Deputy Governor Diwa Guinigundo said this week. “The central bank cannot raise interest rates because recovery is still nascent and needs to be nurtured,” said Marcelo Ayes , a senior vice president at Rizal Commercial Banking Corp. in Manila. “But they have to show they are on top of inflation and may decide to cut the rediscounting budget.” Asian nations from China to Malaysia have started pulling back monetary stimulus as growth accelerates and inflation returns. Bangko Sentral raised the interest rate for the rediscounting facility earlier this year, and Guinigundo said March 8 there are reasons to review “crisis intervention measures” put in place during the global financial turmoil. Benchmark four-year bond yields dropped to a three-month low yesterday on optimism borrowing costs will remain low. The Philippine peso rose to its strongest level in more than a month as Asia’s rebound attracts funds to the region’s assets. Growth Recovers Philippine economic growth accelerated to a one-year high of 1.8 percent last quarter from a decade-low 0.4 percent in the previous three months, lifting prospects for the country’s property and food companies. Jollibee Foods Corp ., the fast-food chain that outsells McDonald’s Corp. in the Philippines, is looking forward “to a more robust growth in 2010,” the company said last month. The government forecasts the economy will expand 2.6 percent to 3.6 percent in 2010, as President Gloria Arroyo , whose term ends this June, increases outlays on airports, bridges and state programs to a record 1.54 trillion pesos ($34 billion) this year to bolster growth. Policy makers will review all measures put in place to counter the global crisis now that financial markets have improved, Guinigundo said this week. The rediscounting window allows lenders to borrow from the central bank using loans as collateral. Cheap Money “The rediscounting facility is unnecessary cheap money especially since financial markets have stabilized,” Ayes said. Low interest rates in the U.S. and Europe and faster growth in Asia are spurring capital flows into the region, prompting China to start draining excess cash from the economy to prevent asset bubbles. Australia and Vietnam have raised borrowing costs as inflation accelerates, and Malaysia last week increased its overnight policy rate, saying it wants to avoid “financial imbalances”. Bangko Sentral forecasts inflation may slow to a range of 3.4 percent to 3.5 percent in 2011 from an estimated 4 percent this year, Guinigundo said. Consumer-price gains in the Philippines eased for a second month in February to 4.2 percent. The Philippines’ benchmark interest rate is at the lowest level since central bank data started in 1990. Easing inflation last year allowed Bangko Sentral to slash the overnight borrowing rate by 2 percentage points from December 2008 to July 2009 to support economic growth as exports collapsed. Policy makers also reduced the proportion of cash banks need to set aside as reserves and raised the amount of money available for loans to local lenders in late 2008. To contact the reporter on this story: Karl Lester M. Yap in Manila at kyap5@bloomberg.net

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Yen Declines Versus Dollar, Euro Amid Speculation Importers Sold Currency

February 25, 2010

By Yoshiaki Nohara and Ben Levisohn Feb. 26 (Bloomberg) — The yen traded near a one-year high against the euro as Greece’s deficit concerns and signs of a slow economic recovery in the U.S. boosted demand for Japan’s currency as a refuge. The dollar was close to a three-week low against the yen after the number of Americans filing first-time jobless claims unexpectedly rose and before a report that economists said will show U.S. companies grew at a slower pace this month. The yen rose against higher-yielding currencies yesterday as stocks fell and Standard & Poor’s and Moody’s Investors Service said Greece faces further downgrades. “Risk aversion is going to continue to rise in global markets surrounding the Greece situation and you’ve also had a pretty poor round of U.S. data over this week,” said Jonathan Cavenagh , a currency strategist at Westpac Banking Corp. in Sydney. “Yen crosses will continue to weaken.” The yen traded at 120.76 per euro as of 8:07 a.m. in Tokyo from 120.69 in New York yesterday, when it climbed to 119.66, the strongest since Feb. 24, 2009. Japan’s currency was at 89.16 per dollar from 89.07 yesterday when it reached 88.80, the highest since Feb. 4. The euro was at $1.3545 from $1.3548. It fell to $1.3444 on Feb. 19, the lowest since May 18. Europe’s currency has fallen 2.3 percent versus the dollar this month heading for a third monthly loss, its longest stretch since November 2008. Jobless Claims The dollar fell yesterday after the Labor Dapartment said initial jobless claims rose by 22,000 to 496,000 in the week ended Feb. 20. The Institute for Supply Management-Chicago Inc. is forecast to report today that its business barometer fell to 59.7 this month from 61.5 in January, according to a Bloomberg survey. Readings greater than 50 signal expansion. The euro has dropped 3.5 percent against the yen this month on concern sovereign debt problems in countries such as Greece would hamper the region’s recovery. The MSCI World Index fell 0.8 percent yesterday. A further downgrade of Greece of one to two levels is possible within a month, S&P analysts led by Marko Mrsnik in London said in a statement on Feb. 24. Pierre Cailleteau, managing director of sovereign risk at Moody’s, said in Tokyo yesterday Greece faces a downgrade of “a couple of notches” within a few months. S&P, Moody’s and Fitch downgraded Greece’s credit rating in December as its deficit approached 13 percent of gross domestic product. Germany has denied there are concrete plans to aid Greece, and former European Central Bank Chief Economist Otmar Issing said Feb. 24 that granting assistance would “open the flood gates” for other euro-area nations with soaring deficits. — Editors: Nicholas Reynolds , Ron Harui To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net ; Ben Levisohn in New York at blevisohn@bloomberg.net .

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Yen Declines Versus Dollar, Euro Amid Speculation Importers Sold Currency

February 25, 2010

By Yoshiaki Nohara and Ben Levisohn Feb. 26 (Bloomberg) — The yen traded near a one-year high against the euro as Greece’s deficit concerns and signs of a slow economic recovery in the U.S. boosted demand for Japan’s currency as a refuge. The dollar was close to a three-week low against the yen after the number of Americans filing first-time jobless claims unexpectedly rose and before a report that economists said will show U.S. companies grew at a slower pace this month. The yen rose against higher-yielding currencies yesterday as stocks fell and Standard & Poor’s and Moody’s Investors Service said Greece faces further downgrades. “Risk aversion is going to continue to rise in global markets surrounding the Greece situation and you’ve also had a pretty poor round of U.S. data over this week,” said Jonathan Cavenagh , a currency strategist at Westpac Banking Corp. in Sydney. “Yen crosses will continue to weaken.” The yen traded at 120.76 per euro as of 8:07 a.m. in Tokyo from 120.69 in New York yesterday, when it climbed to 119.66, the strongest since Feb. 24, 2009. Japan’s currency was at 89.16 per dollar from 89.07 yesterday when it reached 88.80, the highest since Feb. 4. The euro was at $1.3545 from $1.3548. It fell to $1.3444 on Feb. 19, the lowest since May 18. Europe’s currency has fallen 2.3 percent versus the dollar this month heading for a third monthly loss, its longest stretch since November 2008. Jobless Claims The dollar fell yesterday after the Labor Dapartment said initial jobless claims rose by 22,000 to 496,000 in the week ended Feb. 20. The Institute for Supply Management-Chicago Inc. is forecast to report today that its business barometer fell to 59.7 this month from 61.5 in January, according to a Bloomberg survey. Readings greater than 50 signal expansion. The euro has dropped 3.5 percent against the yen this month on concern sovereign debt problems in countries such as Greece would hamper the region’s recovery. The MSCI World Index fell 0.8 percent yesterday. A further downgrade of Greece of one to two levels is possible within a month, S&P analysts led by Marko Mrsnik in London said in a statement on Feb. 24. Pierre Cailleteau, managing director of sovereign risk at Moody’s, said in Tokyo yesterday Greece faces a downgrade of “a couple of notches” within a few months. S&P, Moody’s and Fitch downgraded Greece’s credit rating in December as its deficit approached 13 percent of gross domestic product. Germany has denied there are concrete plans to aid Greece, and former European Central Bank Chief Economist Otmar Issing said Feb. 24 that granting assistance would “open the flood gates” for other euro-area nations with soaring deficits. — Editors: Nicholas Reynolds , Ron Harui To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net ; Ben Levisohn in New York at blevisohn@bloomberg.net .

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Stocks Fall Worldwide, Led by Commodity Companies; Canadian Dollar Weakens

December 30, 2009

By Stuart Wallace Dec. 30 (Bloomberg) — The MSCI World Index of stocks fell for the first time in three days, led by commodity companies, the best-performing industry this year. Currencies of raw- material producers weakened. The World Index of 23 developed nations dropped 0.5 percent at 11:40 a.m. in London, with the commodities group retreating 0.9 percent. The MSCI Asia Pacific Index slipped 0.5 percent, as did Standard & Poor’s 500 Index futures. The Canadian dollar, known as the loonie, declined against 16 of its most-traded counterparts and the Australian dollar fell against 11. China led world economies out of recession this year, and the nation’s demand for raw materials spurred a 50 percent gain in the S&P GSCI index of 24 commodities, the best performance in almost four decades. Valuations on commodity stocks rose to a record, with the World Index’s materials group trading at 81 times earnings , according to data compiled by Bloomberg. “After strong gains over the past year, there’s a propensity to lock in profits and reposition for 2010,” said Mark Pervan , a senior commodity strategist at ANZ Banking Group Ltd. in Melbourne. Europe’s Dow Jones Stoxx 600 Index declined 0.7 percent. Basilea Pharmaceutica Ltd. slumped as much as 28 percent, the most in 10 months, after the U.S. Food and Drug Administration rejected the Swiss biotechnology company’s experimental antibiotic for skin infections. The index, which will be calculated for the last time this year today, is heading for a 27 percent annual gain, the biggest in 10 years. Japan, Russia The MSCI Asia Pacific Index dropped as Japan Airlines Corp. tumbled to a record low in Tokyo on speculation the carrier will file for bankruptcy. Asia’s biggest airline by sales fell 24 percent as Japan’s Cabinet met to discuss the airline’s future. Equity indexes of commodity-producing nations fell, with South Africa’s FTSE/JSE Africa All Share Index sliding 1.1 percent, Kazakhstan’s KASE Index down by the same amount and Russia’s Micex Index losing 0.8 percent. Futures trading indicated the Standard & Poor’s 500 Index will decline for a second day. The Institute for Supply Management-Chicago Inc. business barometer, due at 9:45 a.m. in New York, may have eased to 55.1 from a one-year high of 56.1 in November, according to the median estimate of 53 economists surveyed by Bloomberg News. Readings above 50 signal expansion. Dollar Rises The dollar rose 0.3 percent to 92.26 yen, after climbing to a two-month high of 92.28 yen. The U.S. currency advanced 0.2 percent to $1.4327 per euro, on course for its first monthly gain since June. The Canadian dollar fell 0.6 percent to C$1.0495 per U.S. dollar and the Australian dollar declined 0.3 percent to 89.25 U.S. cents. Copper for delivery in three months rose 0.6 percent to $7,319 a metric ton on the London Metal Exchange, advancing for a fourth session and extending this year’s advance to 138 percent. Palladium for immediate delivery rose 2.2 percent to $395.45 an ounce, the most since July 2008, and crude oil for February fell 0.2 percent to $78.75 a barrel. Treasuries were little changed, with the yield on the 10- year note at 3.80 percent. The U.S. is scheduled to sell $32 billion of seven-year debt today, the last of three auctions this week totaling $118 billion. The government sold a record- tying $42 billion of five-year securities yesterday and $44 billion in two-year notes on Dec. 28. U.S. government securities have fallen 3.6 percent this year, according to Bank of America Merrill Lynch indexes, the worst annual performance since at least 1978, when Merrill began collecting the data. To contact the reporter on this story: Stuart Wallace in London at swallace6@bloomberg.net

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U.S. Businesses Probably Expanded for Third Month, Chicago Index May Show

December 30, 2009

By Bob Willis Dec. 30 (Bloomberg) — Companies in the U.S. probably expanded in December for a third consecutive month as they strove to maintain inventories in the face of improving sales , economists said before a report today. The Institute for Supply Management-Chicago Inc. business barometer may have eased to 55.1 from a one-year high of 56.1 in November, according to the median estimate of 53 economists surveyed by Bloomberg News. Readings above 50 signal expansion. Fueled by government incentives and discount pricing, rising demand has led to reduced stockpiles that will prompt manufacturers to boost production into early 2010. The accompanying increases in the workweek and employment may boost incomes enough to support additional gains in consumer spending, which accounts for 70 percent of the economy. Manufacturing “will remain strong enough to entice businesses to increase hours and add payrolls,” said Ryan Sweet , a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “Manufacturing helped lead the economy out of recession, and conditions will remain favorable.” The ISM-Chicago report is due at 9:45 a.m. New York time. Survey estimates ranged from 52 to 58.5. The measure averaged 56.8 during the six-year expansion that ended in December 2007. Economists watch the Chicago index for an early reading on the outlook for overall U.S. manufacturing, which makes up about 12 percent of the economy. Components of the Chicago index include measures of production, orders, shipments and employment. The group had said their membership includes both manufacturers and service providers, making the gauge a measure of overall growth. Survey Results The Tempe, Arizona-based Institute for Supply Management’s factory index probably rose this month to 54 from 53.6 in November, according to a survey median. That report is due Jan. 4. The world’s largest economy expanded at a 2.2 percent pace from July through September after a yearlong contraction that was the worst since the 1930s, figures from the Commerce Department showed last week. Economists surveyed by Bloomberg forecast growth to pick up to a 3 percent pace in the fourth quarter and average 2.6 percent for all of 2010. Exports rose for the six month in October as economies worldwide rebounded from the global economic slump. A 13 percent drop in the dollar since March 5 against a basket of 6 major currencies also made American goods more competitive to overseas buyers. Inventories at U.S. companies rose in October for the first time in more than a year, the government said Dec. 11, a sign firms are boosting production in line with rising sales. Industrial Shares The Standard & Poor’s Supercomposite for industrial machinery is up 89 percent since reaching a six-year low on March 9, exceeding the 66 percent of the broader S&P 500 index. United Parcel Service Inc. Chief Executive Officer Scott Davis said Dec. 2 demand for shipments was starting to improve as companies rebuild inventory and consumers began holiday shopping. UPS, the world’s largest package-delivery company, is considered a bellwether for the economy because it handles goods ranging from auto parts to electronics to clothing. “Inventory has gotten real low,” Davis said in a Bloomberg Television interview. “We think there will be some replenishment of inventories going forward, so the outlook is much better.” The labor market is showing signs of improvement. Caterpillar Inc., the world’s largest maker of bulldozers and excavators, will bring back some laid-off workers next year as sales improve, said Chief Executive Officer Jim Owens . “We’ll gradually begin to call people back and to rebuild our overall sales and ability to ship product,” Owens said in an interview Dec. 11 with Bloomberg Television. “I think it will gradually begin to pick up as 2010 unfolds.” Caterpillar cut about 18,700 full-time jobs and about the same number of temporary workers since December 2008 as the global recession reduced demand. The Peoria, Illinois-based company predicts 2010 sales will increase as much as 25 percent from the midpoint of the 2009 forecast range. To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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U.S. Business Activity Grows a Second Month in Sign Recovery Strengthening

November 30, 2009

By Bob Willis Nov. 30 (Bloomberg) — Business activity in the U.S. unexpectedly accelerated in November as orders climbed, signaling the economic recovery will carry through into 2010. The Institute for Supply Management-Chicago Inc. said today its barometer rose to 56.1, the highest level since August 2008, from 54.2 the prior month. Readings above 50 signal expansion. Milwaukee and Texas also showed gains in manufacturing, other reports showed. Rising sales, spurred in part by government incentives, and growing demand from abroad have led to a drawdown in inventories that will boost production and sustain the recovery. Mounting job losses raise the risk spending will retrench, one reason why Federal Reserve policy makers have pledged to keep borrowing costs low “for an extended period.” “There is definitely room for production to be coming back,” said David Semmens , an economist at Standard Chartered Bank in New York, who forecast the index would rise. “There will be some export-led growth.” Stocks trimmed earlier losses after the stronger-than- expected report. The Standard & Poor’s 500 Index rose 0.1 percent to 1,093.07 at 11:00 a.m. in New York. Economists projected the Chicago index would drop to 53, based on the median estimate of 53 projections in a Bloomberg News survey. Forecasts ranged from 50 to 57. More Orders The Chicago purchasers’ new orders gauge climbed to 62.8, the highest level since May 2007, from 61.4 the previous month. “The ongoing strength in that measure, a leading indicator of activity, bodes well for production gains going forward,” Michelle Girard , a senior economist at RBS Securities Inc. in Stamford, Connecticut, said in a note to clients. An increase in bookings also propelled other regional measures this month. The National Association of Purchasing Management- Milwaukee said its factory gauge climbed to 57 from 50 in October. Manufacturing activity in Texas expanded in November for the first time in two years, according to a report from the Fed Bank of Dallas. The figures underscore gains in earlier reports. The Fed Bank of New York’s Empire State Index showed manufacturing in its district expanded in November for a fourth month, while the Philadelphia Fed’s gauge climbed to the highest level in more than two years. Production, Employment Today’s report showed the Chicago group’s production index fell to 57.6 from a one-year high of 63.9 in October. The employment index improved to 41.9 from 38.3, the report showed. A measure of prices paid for raw materials increased to 52.6 from the prior month’s 48.6, while a gauge of inventories rose to 34.9 from 32.2. Economists watch the Chicago index for an early reading on the outlook for overall U.S. manufacturing, which makes up about 12 percent of the economy. The Tempe, Arizona-based Institute for Supply Management group’s nationwide manufacturing index probably fell this month to 54.8 from a three-year high of 55.7 in October, according to the Bloomberg survey median. Those figures are due tomorrow. The world’s largest economy expanded at a 2.8 percent pace from July through September after a yearlong contraction that was the worst since the 1930s, figures from the Commerce Department showed last week. Auto Production Automotive companies have been at the forefront of increases in manufacturing. General Motors Co. and Ford Motor Co. had their first combined sales gain in three years in October, helping the industry rebound from a drop in demand after the “cash for clunkers” program expired. Sales climbed 4.1 percent from a year earlier at GM, its first monthly gain since January 2008, and 3.1 percent at Ford, the companies said Nov. 3. “Clearly, we’re seeing improvement in the economy and in the industry,” Michael DiGiovanni , GM’s sales analyst, said on a conference call. Many companies are counting on government stimulus to help boost profits. Eaton Corp . may win $1 billion in orders in 2010 and 2011 from stimulus spending to spur construction of schools and renovation of military bases, said the top executive of the Cleveland-based maker of circuit breakers and fuel pumps. “We will benefit from a lot of these building projects,” Chief Executive Officer Sandy Cutler said last month in an interview. “These infrastructure-related programs always take longer to get out and get going. The time the economy is going to be recovering in 2010 is when a lot of these opportunities will actually be adding up.” — With assistance from Jeff Green in Southfield, Michigan, and Shruti Date Singh in Chicago. Editors: Carlos Torres , Vince Golle To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

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U.S. Stocks Post Biggest Weekly Drop Since May on Concern Recovery Falters

October 31, 2009

By Sapna Maheshwari and Mary Childs Oct. 31 (Bloomberg) — U.S. stocks fell the most since May this week as new home sales that missed forecasts and a drop in consumer spending added to speculation that the seven-month rally outpaced prospects for an economic recovery. Home Depot Inc. and Alcoa Inc. declined at least 4.4 percent following the housing report. Bank of America Corp. lost 10 percent, leading financial companies lower, on concern that the largest U.S. lender will have to sell shares to pay back its government bailout. Exxon Mobil Corp. and Freeport-McMoRan Copper & Gold Inc . retreated as a dollar rally dragged down oil and metals prices. “The financial crisis had its roots in the property boom and bust, so any data that flies in the face of improvement is going to raise suspicion,” said Kevin Caron , a market strategist at Stifel Nicolaus & Co. in Florham Park, New Jersey, which oversees about $90 billion. “The burden of proof now falls on the economy itself to deliver.” The Standard & Poor’s 500 Index dropped for a second week, falling 4 percent to 1,036.19. The Dow Jones Industrial Average slid 259.45 points, or 2.6 percent, to 9,712.73. The Russell 2000 Index dropped 6.3 percent to 526.77. The S&P 500’s rebound of as much as 62 percent since March 9 propelled the index to a one-year high on Oct. 19 and pushed its valuation to more than 20 times the reported operating income of its companies, the most expensive level since 2004. All 10 industries in the S&P 500 declined this week, led by raw- materials producers, financial and industrial companies. Home Sales, Spending Home Depot , the world’s largest home-improvement chain, fell 4.5 percent to $25.09 and Alcoa , the largest U.S. aluminum producer, slid 9.5 to $12.42 after sales of new U.S. homes unexpectedly dropped in September. Purchases declined 3.6 percent to a 402,000 annual pace, lower than the most pessimistic economist’s forecast , according to Commerce Department figures. D.R. Horton Inc., the largest U.S. homebuilder by revenue, lost 12 percent to $10.96. Walt Disney Co., the world’s biggest media company, and Wal-Mart Stores Inc., the largest retailer, fell after Americans cut spending for the first time in five months and a gauge of confidence weakened. Consumer spending dropped 0.5 percent in September after a 1.4 percent jump in August, Commerce Department figures showed. The Reuters/University of Michigan final index of consumer sentiment slid to 70.6 in October from 73.5 the month before. Economic Rebound The threat of a CIT Group Inc. bankruptcy raised concern about the sustainability of the economic rebound, pushing financial stocks to their steepest weekly drop since May. CIT, the commercial lender, plunged 37 percent to 72 cents as investor Carl Icahn agreed to support its prepackaged bankruptcy plan. JPMorgan Chase & Co. declined 7.7 percent to $41.77, and Morgan Stanley fell 8.2 percent to $32.12. Bank of America Corp . lost 10 percent to $14.58, the steepest decline in the Dow average. Dick Bove , an analyst at Rochdale Securities LLC in Lutz, Florida, said the lender will have to sell shares to pay back its government bailout. The Reuters/Jefferies CRB Index of 19 raw materials dropped 3.6 percent as the Dollar Index , a six-currency gauge of the greenback’s strength, added 1.1 percent, its first increase in four weeks. Gold and crude oil fell, their first weekly declines in a month. Exxon lost 2.6 percent to $71.67 and Freeport lost 9.8 percent to $73.36. U.S. Steel Corp. and AK Steel Holding Corp. fell at least 15 percent after reporting lower third-quarter results and offering fourth-quarter outlooks that disappointed investors. ‘Strong Path Up’ Goodyear Tire & Rubber Co. lost 27 percent this week, the steepest drop since at least 1980, falling to $12.88. The largest U.S. tiremaker forecast an operating loss in North America this quarter. Stocks fell even after a Commerce Department report showed the U.S. economy returned to growth in the third quarter after a yearlong contraction. The world’s largest economy expanded at a 3.5 percent pace from July through September as government incentives spurred consumers to spend more on homes and cars. “People are trying to evaluate how strong the economy really is and whether we’re on a strong path up,” said Giri Cherukuri , who helps manage $1.5 billion at Oakbrook Investments in Lisle, Illinois. “We had some mixed signals. We may be in for a period of volatility for the near term as people try to digest all the news and evaluate where we stand.” Earnings Reports Kraft Foods Co. , Cisco Systems Inc., and Mastercard Inc. are among 96 companies in the S&P 500 scheduled to report quarterly earnings next week. Since the start of the third-quarter reporting period, 81 percent of the companies in the S&P 500 have released better- than-expected results, according to Bloomberg data. That’s the highest proportion in data going back to 1993. Verizon Communications Inc. climbed 2.6 percent, the steepest advance in the Dow average, to $29.59. The second- largest U.S. phone company reported third-quarter profit that topped analysts’ estimates after cutting workers and adding mobile-phone customers. Gannett Co ., the owner of USA Today, dropped 26 percent to $9.82 and the New York Times Co. lost 26 percent to $7.97. U.S. newspaper circulation declines steepened in the six months through September on increased subscription and newsstand prices, according to data from the Audit Bureau of Circulations. Reports next week will probably show that payrolls fell by 175,000 workers last month, deepening the worst employment slump since the 1930s, and factories expanded at the fastest pace since 2006, according to the median forecast of economists surveyed by Bloomberg. The benchmark index for U.S. stock options had its biggest weekly gain in a year. The VIX, as the Chicago Board Options Exchange Volatility Index is known, surged 38 percent to 30.69. The index, which measures the cost of using options as insurance against declines in the S&P 500 , is down from a record 80.86 in November, yet above its 20 average over its 19-year history. To contact the reporters on this story: Sapna Maheshwari in New York at smaheshwar11@bloomberg.net ; Mary Childs in New York at mchilds4@bloomberg.net .

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U.S. Economy Grows at 3.5% Rate as Stimulus Spending Helps End Recession

October 29, 2009

By Timothy R. Homan Oct. 29 (Bloomberg) — The U.S. economy grew in the third quarter for the first time in more than a year, propelled by stimulus-driven gains in consumer spending and home building. The world’s largest economy expanded at a 3.5 percent pace from July through September, exceeding the median estimate of economists surveyed by Bloomberg News, after shrinking the previous four quarters, figures from the Commerce Department showed today in Washington. Household purchases climbed 3.4 percent, the most in more than two years. Policy makers will now focus on whether the recovery, supported by federal assistance to the housing and auto industries, can be sustained into 2010 and generate jobs. The record $1.4 trillion budget deficit limits President Barack Obama’s options for more aid, while Federal Reserve officials try to convince investors that the central bank will exit emergency programs in time to prevent a pickup in inflation. “People will, regardless of the number, call into question the durability of the recovery,” Michael Feroli, an economist at JPMorgan Chase & Co. in New York, said before the report. “It’s going to be a little bit challenging for the consumer this quarter.” The economy was forecast to grow at a 3.2 percent annual pace, according to the median estimate of 79 economists surveyed by Bloomberg News. Estimates ranged from gains of 2 percent to 4.8 percent. Depth of Recession The economy shrank 3.8 percent in the 12 months to June, the worst performance in seven decades. The four consecutive decreases through the second quarter marks the longest stretch of declines since quarterly records began in 1947. The gain in consumer spending, which accounts for about 70 percent of the economy, “largely reflected” an increase in purchases of automobiles attributable to the administration’s “cash-for-clunkers” plan, the report said. The 22 percent jump in purchases of durable goods, which includes autos, was the biggest since 2001. Total purchases were forecast to climb 3.1 percent, according to the survey median. Excluding the influence of auto sales, production and inventories, the economy grew 1.9 percent last quarter. While most economists estimate the recession has ended, an official pronouncement will take many months to materialize. The National Bureau of Economic Research, based in Cambridge, Massachusetts, is responsible for determining when contractions begin and end. Robert Hall, head of the committee charged with making the call, said in August it may take more than a year for the group to reach a conclusion. Homebuilding Rebound Residential construction jumped at a 23 percent annual rate last quarter, the first gain in almost four years and the biggest since 1986. The rebound added 0.5 percentage point to growth. Homebuilding rebounded as sales climbed, propelled in part by an $8,000 tax credit for first-time buyers and Fed purchases of mortgage-backed securities that helped lower borrowing costs. Total inventories last quarter continued to drop, boosting expectations that factory production will keep growing. The drop in stockpiles was smaller than the record decrease in the second quarter, contributing to growth, today’s report showed. Trade subtracted from GDP as imports grew faster than exports, while government spending expanded at a 2.3 percent pace after jumping 6.7 percent in the prior quarter. A decline in state and local government outlays limited the overall increase. Growing Profits The improving global economy helped companies from Amazon.com Inc. to Whirlpool Corp. exceed analysts’ sales estimates last quarter. Profits at about 85 percent of the companies in the Standard & Poor’s 500 Index that have released results beat expectations, according to Bloomberg data. That marks the highest proportion in records going back to 1993. The S&P 500 closed at a one-year high on Oct. 19 and has dropped over the past four days on growing concern that the rebounds in housing and consumer spending will not be sustained. “You should see more expansion in the categories we’re in, as well as more geographical expansion over time,” Chief Financial Officer Thomas Szkutak of Amazon.com, the world’s largest Internet retailer, said on an Oct. 22 conference call. In September, the unemployment rate reached a 26-year high of 9.8 percent, up from 7.6 percent from when Obama took office in January, figures from the Labor Department show. Economists project the jobless rate will exceed 10 percent by early 2010. Since the recession began in December 2007, the U.S. has lost 7.2 million jobs. Payroll cuts peaked at 741,000 in January before falling to 263,000 job losses in September. The economy will likely grow at a 2.4 percent annual rate from October through December, the median forecast in a survey earlier this month showed. GDP will also grow 2.4 percent next year and 2.8 percent in 2011, the survey showed, compared with an average of 3.4 percent growth over the past six decades. To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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U.S. Stocks Retreat for First Week in Three; Boeing, Boston Scientic Drop

October 24, 2009

By Lynn Thomasson and Mary Childs Oct. 24 (Bloomberg) — U.S. stocks fell for the first time in three weeks as companies from Burlington Northern Santa Fe Corp. to Boston Scientific Corp. forecast earnings that are below analysts’ estimates. Boeing Co. plunged 6.2 percent, the steepest drop in the Dow Jones Industrial Average, after posting a loss that was bigger than analysts estimated and reducing its full-year profit projection. Boston Scientific fell the most since February on signs heart-device sales are slowing. Burlington Northern slumped 8.4 percent, the most since March, on concern shipments of consumer products will remain weak. “Given that the market has moved up so far, investors are looking for more demand,” said Richard Sichel , chief investment officer at Philadelphia Trust Co. in Philadelphia, which manages $1.3 billion. “The earnings get more difficult to beat when it needs to come from sales, rather than just cost cutting.” The S&P 500 fell 0.7 percent to 1,079.60. The Dow Jones Industrial Average lost 23.73 points, or 0.2 percent, to 9,972.18. The Russell 2000 Index dropped 2.5 percent to 600.86. The S&P 500’s 60 percent rally since March 9 propelled the index to a one-year high on Oct. 19 and pushed the valuation of its companies to more than 20 times their reported operating income, the most expensive level since 2004. Nine of 10 industries in the S&P 500 retreated this week, led by raw- materials producers, health-care companies and industrial shares. Housing Starts Stocks also dropped following government reports that showed housing starts rose less than forecast in September and initial applications for jobless benefits were higher than estimated. Profits at companies that reported third-quarter results have dropped 14 percent, adding to a record eight straight quarters of earnings declines. Boeing fell 6.2 percent this week, the most since June, to $49.89 after posting a loss that was the biggest in Bloomberg records dating to mid-1983. The world’s second-largest airplane maker was hurt by $3.5 billion in charges for the delayed 787 Dreamliner and 747-8 jumbo jet programs. Since the start of the third-quarter reporting period, 80 percent of the companies in the S&P 500, including Apple Inc. , Caterpillar Inc. and Morgan Stanley this week, have released better-than-expected results, according to Bloomberg data . That’s the highest proportion in data going back to 1993. Loan Losses Marshall & Ilsley Corp., BB&T Corp. and Zions Bancorporation dropped at least 7.4 percent as more borrowers fell behind on payments and losses from construction loans increased. Housing starts increased 0.5 percent to an annual rate of 590,000 from a 587,000 pace in August that was lower than previously estimated, figures from the Commerce Department showed. Permits, a sign of future construction, fell for the second time in the past three months. Initial applications for jobless benefits rose to 531,000 in the week ended Oct. 17, topping the average analyst estimate by 16,000 and up from a revised 520,000 the prior week that were the fewest in nine months, the Labor Department said. “The stock market is up so high right now,” said Robert Calabretta , managing director for Huntington, New York-based Waypoint Capital, which oversees $60 million. “I agree with a lot of skeptics that say the economy hasn’t come along with that.” Health-Care Shares Boston Scientific plunged 13 percent to $8.75. Full-year earnings, adjusted for some items, will be 75 cents to 79 cents a share, lower than the 82 cents to 86 cents, the medical-device maker said. The drop in Boston Scientific pushed a measure of health- care shares in the S&P 500 to a 1.7 percent loss. Burlington Northern fell 8.4 percent to $79.12. The largest U.S. railroad forecast fourth-quarter profit of $1.10 to $1.20 a share, trailing the average analyst estimate of $1.31 a share in a Bloomberg survey. State Street Corp. slumped 14 percent to $45.70. The world’s largest money manager for institutions cut its earnings projection and California sued the company for overcharging two state pensions. Earnings Beat Estimates Amazon.com Inc. soared 24 percent to a record $118.49. The world’s largest online retailer reported third-quarter earnings after discounts and the Kindle electronic book reader fueled sales. Apple jumped 8.5 percent, the most in three months, to $203.94. Soaring iPhone and Macintosh computer sales and speculation that Chief Executive Officer Steve Jobs will unveil new gadgets next year pushed the company to close at $205.20 on Oct. 22, an all-time high. New York Times Co., PNC Financial Services Group Inc. and Capital One Financial Corp. rallied more than 12 percent after their quarterly results exceeded estimates. More than 150 S&P 500 companies will report earnings next week, including Exxon Mobil Corp., Procter & Gamble Co. and Verizon Communications Inc. The world’s largest economy probably expanded in the third quarter at the fastest pace in two years as government stimulus programs helped bring an end to the worst recession since the 1930s, economists said before reports next week. To contact the reporters on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net ; Mary Childs in New York at mchilds4@bloomberg.net .

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Pound, New Zealand Dollar Rise on Rate-Increase Speculation; Stocks Fall

October 21, 2009

By Justin Carrigan Oct. 21 (Bloomberg) — The pound and the New Zealand dollar rose after central bankers signaled interest rates may increase as economies emerge from the recession. Oil and emerging-market stocks declined for a second day. The U.K. currency climbed 0.9 percent against the dollar as of 9:34 a.m. in London and the New Zealand dollar strengthened 0.9 percent. Crude oil dropped 0.9 percent in New York. The MSCI Emerging Markets Index slid 0.7 percent. Bank of England Governor Mervyn King started preparing Britons for higher interest rates, writing in the Herald newspaper of Scotland that “it would be wise to take account” of the prospect of rising borrowing costs. Reserve Bank of New Zealand Governor Alan Bollard said a strengthening currency isn’t an obstacle to raising rates. Australia last week became the first Group of 20 nation to lift its benchmark rate since the start of the global financial crisis. “This is the sort of stage where the market gets excited about currencies, when central banks start priming the market to expect higher rates,” Steven Barrow , head of Group of 10 research at Standard Bank Plc, said in a Bloomberg Television interview in London. The pound advanced against all but one of the 16 most- traded currencies tracked by Bloomberg, rising 0.9 percent compared with the euro. The New Zealand dollar climbed versus all 16, adding 1 percent against the dollar and 0.9 percent compared with the euro. ‘Seismic Shift’ “King is turning and so is the pound,” Neil Jones , head of European hedge-fund sales in London at Mizuho Corporate Bank Ltd., wrote in an e-mailed note. This is a “seismic shift in thinking at the Bank of England,” he said. U.K. gilts led declines in government bonds, with the yield on the 10-year note rising 9 basis points to 3.63 percent after King’s remarks. Minutes of the Bank of England’s Oct. 8 meeting published today showed policy makers voted 9-0 to hold the benchmark rate at a record low 0.5 percent and keep its asset- purchase program unchanged at 175 billion pounds ($289 billion). More than $2 trillion in stimulus packages and rising demand in Asia are helping to haul the world economy out of its first recession since World War II. This month, the International Monetary Fund raised its forecast for global growth next year, predicting 3.1 percent expansion, compared with a July forecast of 2.5 percent. The U.K. economy will increase 0.9 percent, up from an earlier forecast of 0.2 percent, the IMF said. Emerging Markets The MSCI Emerging Markets Index posted its first back-to- back declines in almost three weeks after China Mobile Ltd. earnings missed analysts’ estimates and the retreat in oil dragged down energy producers. China Mobile, the world’s first phone company with more than half a billion subscribers, declined 1.9 percent in Hong Kong. Europe’s Dow Jones Stoxx 600 Index slipped for a second day, losing 0.3 percent. Deutsche Bank AG retreated 3.7 percent in Frankfurt after saying it depended on a tax gain for a threefold increase in third-quarter profit. Automakers posted the steepest drop among 19 industry groups in the Stoxx 600, falling 1.8 percent. PSA Peugeot Citroen, Europe’s second-biggest carmaker, slid 6.2 percent in Paris after reporting a 7.7 percent drop in third-quarter sales. Futures on the Standard & Poor’s 500 Index decreased 0.2 percent, indicating the benchmark gauge for U.S. equities may drop for a second straight day. The measure retreated yesterday as a disappointing report on housing starts overshadowed better- than-estimated profits at Apple Inc. and Caterpillar Inc. Improving Earnings Earnings have surpassed analysts’ projections for 79 percent of the S&P 500 companies that have released results third-quarter results so far, according to Bloomberg data. About 72 percent beat the average estimate in the second quarter, matching the highest proportion in data going back to 1993. More than 130 S&P 500 companies are reporting results this week, with Morgan Stanley, Boeing Co., Wells Fargo & Co. and Freeport-McMoran Copper & Gold Inc. scheduled to announce today. Base metals prices were mostly higher on the London Metal Exchange, with copper for three-month delivery rising 0.3 percent to $6,435.75 a ton. Crude oil for December delivery fell 71 cents to $78.41 a barrel in electronic trading on the New York Mercantile Exchange, after reaching a one-year high this week. To contact the reporter on this story: Justin Carrigan in London at jcarrigan@bloomberg.net

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U.S. Stocks Retreat as Housing Starts Report Overshadows Company Earnings

October 20, 2009

By Elizabeth Stanton Oct. 20 (Bloomberg) — U.S. stock futures rose as earnings at companies from Apple Inc. and Texas Instruments Inc. to Caterpillar Inc. beat analysts’ estimates, offsetting declines in consumer shares after housing starts trailed projections. Apple, Texas Instruments and Caterpillar climbed at least 2.6 percent in pre-market New York trading. DuPont Co. , the third-biggest chemical maker, advanced 1.8 percent and Pfizer Inc. , the world’s largest drugmaker, gained 2.9 percent after third-quarter profit topped analysts’ projections. Home Depot Inc. and Walt Disney Co. fell on the housing starts report. Futures on the Standard & Poor’s 500 Index expiring in December added 0.3 percent to 1,094.1 at 8:59 a.m. in New York. Earlier the contract rose as much as 0.7 percent. Dow Jones Industrial Average futures increased 0.2 percent to 10,035. Nasdaq-100 Index futures climbed 0.8 percent to 1,765. Asian shares also advanced, while European benchmarks erased gains. “We’re beginning to see a trend where profits are actually improving, and this is just the beginning of a recovery, so from the standpoint of the market this is good news,” William Dwyer , chief investment officer at MTB Investment Advisors Inc. in Baltimore, said on Bloomberg Radio. MTB manages $13 billion. “Technology is probably going to be the leader.” Earnings surpassed analysts’ projections at fifty-nine of the 71 companies in the S&P 500 that reported results since Oct. 7, including JPMorgan Chase & Co. and Google Inc. , according to Bloomberg data . Profit topped estimates at all but one of the 12 technology companies that released results. Earnings Watch More than 130 S&P 500 companies are scheduled to report this week, Bloomberg data show. The S&P 500 has rallied 62 percent from a 12-year low in March, closing at a one-year high yesterday, on signs the economy is emerging from the worst slump in seven decades. Crude oil fell from a one-year high above $80 a barrel after OPEC said it wouldn’t be comfortable with oil at $100. Apple advanced 6.3 percent to $201.82 in New York as back- to-school orders for iPhones, iPods and Macintosh computers fueled a 47 percent increase in fourth-quarter net income. Texas Instruments rose 2.6 percent $24.13. The second- largest U.S. chipmaker said earnings will be 42 cents to 50 cents a share this quarter on sales of $2.78 billion to $3.02 billion. Analysts predicted profit of 40 cents a share on revenue of $2.79 billion, according to the median estimate in a Bloomberg survey. Caterpillar, Pfizer Caterpillar climbed 6 percent to $61.30 after reporting a per-share profit of 64 cents. Analysts had estimated 5 cents, according to a Bloomberg survey. Pfizer gained 2.9 percent to $18.50 after posting adjusted third-quarter profit of 51 cents a share, beating the 48-cent average of analysts’ estimates compiled by Bloomberg. DuPont reported a third-quarter profit of 45 cents a share, beating analysts’ estimates of 33 cents, as job cuts and lower raw-material costs more than offset lower sales. The shares climbed 1.8 percent to $35.25. Companies in the S&P 500 will report a ninth straight quarter of declining profits, the longest streak since the Great Depression, before returning to growth in the final three months of the year, analysts’ estimates compiled by Bloomberg show. Disney and Home Depot retreated after the Commerce Department said housing starts rose 0.5 percent to an annual rate of 590,000 from a 587,000 pace in August that was lower than previously estimated. Permits, a sign of future construction, fell for the second time in the past three months. Barclays lost 5 percent in London. Qatar will first exercise warrants at 197.775 pence, the firm said today, after shares of Barclays almost quadrupled in the past eight months. The Doha-based arm of the Qatar Investment Authority would make more than 630 million pounds ($1 billion) on the transaction at today’s market price. To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

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Video: Energy Stocks: Biggest Gainers This Week

October 16, 2009

Energy stocks are the biggest gainers this week after crude oil climbs to a one-year high. (Taking Stocks)

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U.S. Stock Futures Decline After GE, Bank of America Results; Dollar Gains

October 16, 2009

By Daniel Hauck Oct. 16 (Bloomberg) — European stocks rose to a one-year high as Google Inc. ’s earnings buoyed speculation that the global economic rebound is accelerating. The dollar snapped a four-day decline. The Dow Jones Stoxx 600 Index of European shares added 0.3 percent at 11:45 a.m. in London. Futures on the Standard & Poor’s 500 Index pared earlier gains and were little changed after General Electric Co. posted sales that trailed analysts’ estimates. The dollar strengthened 0.2 percent against the euro, while corn and soybeans climbed in Chicago. Google, the world’s most popular Internet search engine, reported a 27 percent increase in third-quarter net income yesterday as the economic recovery boosted demand for online ads and e-commerce. Companies from Royal Philips Electronics NV to JPMorgan Chase & Co. already reported earnings that exceeded projections this week. Industrial production in the U.S. probably rose in September for a third consecutive month, data from the Federal Reserve may show today. “The reporting season has so far delivered some major stimuli with some positive surprises,” Viola Stork , an economist at German state-owned bank Helaba Landesbank Hessen- Thueringen in Frankfurt, wrote in a note today. There has been “upbeat sentiment in the equity markets during the past few days,” she said. GE, Google U.S. futures pared their advance as GE slid 1.4 percent in pre-market New York trading. The world’s biggest maker of jet engines and medical-imaging machines announced third-quarter revenue of $37.8 billion, trailing the $39.7-billion estimate of analysts surveyed by Bloomberg. Bank of America Corp. will also announce results today. Analysts surveyed by Bloomberg estimate that profits for S&P 500 companies will rebound 62 percent in the last three months of the year after falling for nine straight quarters, the longest streak since the Great Depression. Google gained 3.6 percent in pre-market New York trading. Chief Executive Officer Eric Schmidt said yesterday that the worst of the recession has passed and the company has “the confidence to be optimistic.” Energy companies led the advance in Europe’s Stoxx 600 , climbing 2.2 percent as a group. A seven-month, 57 percent rally has pushed the regional index’s valuation to 49.5 times earnings, near the most expensive level since 2003, weekly data compiled by Bloomberg show. Repsol YPF SA added 1.4 percent in Madrid as Spain’s biggest oil company discovered crude oil in a natural-gas well offshore Venezuela. Lloyds Banking Group Plc rose 2.8 percent after Deutsche Bank AG recommended the U.K.’s largest mortgage lender. Thailand, Corn Thailand’s SET Index rallied 3.5 percent after Finance Minister Korn Chatikavanij said shares may rebound from their biggest two-day loss in a year on reduced foreign selling and an economic recovery. Corn for delivery in December rose 1.1 percent to $3.7725 a bushel and soybeans for November added 1.3 percent to $9.955 a bushel after freezing temperatures in the U.S. Midwest. The Dollar Index , which IntercontinentalExchange Inc. uses to track the currency against six major U.S. trading partners, rose from a 14-month low. The gauge added 0.2 percent to 75.601 as some investors bet that its declines were exaggerated given the signs of an economic recovery. U.K. gilts led declines in government bonds as the gains in stocks sapped demand for the relative safety of fixed income. The yield on the 10-year note increased 7 basis points to 3.63 percent. Industrial Production The yield on the 10-year Treasury was little changed at 3.47 percent. The Fed may say today at 9:15 a.m. in Washington that output at U.S. factories, mines and utilities climbed 0.2 percent in September, following increases of 0.8 percent and 1 percent in August and July, according to the median forecast of 77 economists surveyed by Bloomberg News. The Reuters/University of Michigan preliminary index of consumer confidence at 10 a.m. may show that sentiment this month slipped from the highest level in more than a year, economists said. To contact the reporters on this story: Daniel Hauck in London at dhauck1@bloomberg.net .

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Stock Rally of 503 Percent Puts OPEC to Shame: William Pesek

October 16, 2009

Commentary by William Pesek Oct. 16 (Bloomberg) — There’s only one thing to say about OPEC’s goal to be compensated for falling oil prices: Ha ha ha! Folks, you must be kidding me. The stuff has made you rich. Government coffers are flush with the spoils of pumping “black gold” out of the ground and hastening global warming. Now you want us to cushion the blow as we combat the phenomenon? It would be laughable if it weren’t an indicator of the difficulty of working together to make sure future generations can breathe. Anyone expecting big, history-making news at the United Nations Climate Change Conference in Copenhagen this December should think again. Saudi Arabia, the biggest supplier in the Organization of Petroleum Exporting Countries , is seeking to enlist other members to request compensation if environmental policies reduce demand for oil, the New York Times reports. It’s hardly the first time Saudi Arabia has pushed the idea, yet it plans to take a harder line on an issue that has moved to the forefront. Even if meetings in Copenhagen result in ambitious plans to limit greenhouse gases and keep temperatures from rising, oil production won’t take a big hit anytime soon. Nobuo Tanaka , head of the International Energy Agency, spoke for many of us this week when he asked: “Do they really need to be compensated?” No, and they shouldn’t be. It’s one thing for a government like the U.S. to use taxpayers’ money to save General Motors Corp. It’s quite another to ask the citizens of one nation to pay for the greed and complacency of producers that had decades to diversify their economies away from oil — and didn’t. Commodity Gods OPEC should be thanking the commodity gods that crude oil prices reached a one-year high yesterday. Not long ago, the talk was of another Great Depression. Now the focus is on whether oil will rise toward $100 per barrel from $75. Like any self- respecting cartel, OPEC should revel in the difficulties that families are having filling gas tanks from New York to Seoul. Governments around the world weren’t demanding compensation from OPEC in July 2008 when oil was approaching $150. Oil producers should look inward, own their plights and act accordingly. OPEC overplays its hand by supporting inflated energy prices, and everyone knows it except for its members. Sure, the cartel helped out a little in the past year by boosting production here and there. Pipeline flows slowed pretty quickly, though, once markets stabilized and OPEC may be sowing the seeds of its own demise. 82 Years On It’s disheartening to think that 82 years later, Upton Sinclair’s book “ Oil! ” still helps explain where we are. The last 12 months have been all about the excesses of capitalism, corruption, income inequality and obsession with fossil fuels that Sinclair explored in his 1927 novel. The question is whether consumers are so fed up with oil producers’ greed that they will now make more effort to find alternative-energy sources. While hard to imagine two years ago, China is working to leapfrog the Japanese and the U.S. economies by using green technologies. BYD Co. tells the story, and not just because its share price has gained 503 percent this year. The Chinese maker of the world’s first mass-produced plug-in hybrid car got the attention of Warren Buffett . Last year, BYD sold 225 million new shares to Berkshire Hathaway Inc.’s MidAmerican Energy Holdings Co. Buffett is profiting from something that isn’t obvious to everyone: There is money to be made as China, India and other key developing nations work to slow environmental degradation. Deadly storms in the Philippines and Vietnam leave little doubt that rising world temperatures can no longer be ignored. Climate Change The same goes for residents of Sydney. Recent dust storms that reddened the skies and triggered health warnings are a signal that the fallout from climate change will increasingly affect one of the Asia-Pacific region’s financial centers. We can debate the magnitude of BYD’s stock rally, which enabled founder Wang Chuanfu to jump 102 places to top the annual Hurun Rich List of China’s wealthiest people. What isn’t in dispute is the intensifying hunger to replace oil. Look no further than Detroit, where even GM is producing an electric car to compete with Toyota Motor Corp.’s Prius hybrid. Japan emerged from the 1970s oil shocks way ahead of the pack in the area of energy efficiency. It would be OPEC’s worst nightmare if this dynamic were afoot on a much larger scale at this very moment. All over the globe, scientists are working on the next generation of fuel alternatives. By engineering high prices, OPEC is merely accelerating the process. Oil at $100 a barrel will fuel the very innovation the cartel would sooner avoid. If you think oil producers should be compensated for this, that’s fine. Just keep my tax dollars out of it. ( William Pesek is a Bloomberg News columnist. The opinions expressed are his own.) Click on “Send Comment” in the sidebar display to send a letter to the editor. To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net

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Crude Oil Surges to One-Year High After U.S. Gasoline Inventories Tumble

October 15, 2009

By Mark Shenk Oct. 15 (Bloomberg) — Crude oil rose above $77 a barrel to a one-year high in New York and gasoline surged after an Energy Department report showed an unexpected decline in stockpiles of the fuel as refineries idled units. Inventories of the motor fuel tumbled 5.23 million barrels last week, the biggest drop since September 2008, the department said. A 1.13 million-barrel increase was forecast by analysts surveyed by Bloomberg News. Gasoline output declined 10 percent, the most in 13 months. Refineries operated at 80.9 percent of capacity, the lowest level since April. “Utilization fell a great deal and the gasoline production number really grabs you by the neck,” said Peter Beutel , president of trading adviser Cameron Hanover Inc. in New Canaan, Connecticut. “This will obviously eat into stocks. If refinery utilization stays at this level and demand doesn’t drop, we will see 4- and 5-million-barrel draws for weeks to come.” Crude oil for November delivery climbed $2.40, or 3.2 percent, to $77.58 a barrel at 2:44 p.m. on the New York Mercantile Exchange, the highest settlement since Oct. 14, 2008. Prices have climbed 12 percent in six days, the longest stretch of gains since July. Gasoline for November delivery rose 8.74 cents, or 4.7 percent, to $1.9449 a gallon in New York, the highest settlement since Aug. 31. Gasoline supplies fell to 209.2 million barrels, 4.3 percent higher than the five-year average for the period, the department said. Refineries reduced output by 964,000 barrels a day to 8.45 million, the lowest since September 2008. Refinery Operations Last week’s 4.1 percentage-point decline in refinery utilization rates was the biggest since September 2008 when units were shut because of hurricanes Gustav and Ike. Refiners often idle units for repairs and upgrades in October as gasoline demand drops and before heating-oil use increases. ‘We are in the shoulder period,” Jan Stuart , global oil analyst at Macquarie Group Ltd. in New York, said on Bloomberg Television. “We should be building crude stocks and we should be drawing products as refiners prepare for the winter.” Fuel imports plunged 13 percent to 2.53 million barrels a day, the report showed. Crude oil imports fell 4 percent to 8.73 million barrels a day, the lowest since Aug. 14. “The report was definitely bullish for products,” said Antoine Halff , head of energy research at Newedge USA LLC in New York. “From the supply side you have this massive drop in every aspect of production: runs, yields and imports. At the same time the very high delivery numbers continued this week from last.” Distillate Fuel Supplies of distillate fuel , a category that includes heating oil and diesel, fell 1.08 million barrels to 170.7 million last week, according to the report. Stockpiles in the week ended Oct. 2 were at the highest level since January 1983. Heating oil for November delivery increased 7.54 cents, or 3.9 percent, to $2.0181 a gallon, the highest settlement since Nov. 5, 2008. The decline in fuel supplies sent the hypothetical profit margin, or crack spread , for refining crude higher. The crack for processing three barrels of oil for November delivery into two of gasoline and one of heating oil surged 25 percent to $5.0476 a barrel, based on futures prices. It was the biggest one-day gain since February. The crack spread slipped to $3.419 on Sept. 29, the lowest since Dec. 11. Inventories of crude oil rose 334,000 barrels to 337.8 million, the department said. Supplies were forecast to increase by 1 million barrels, according to the median of 14 analyst responses in the Bloomberg News survey. Positive Signals Prices also rose after government reports showed that the number of Americans filing first-time claims for unemployment benefits dropped last week and that the cost of living in the U.S. rose at a slower pace in September. The releases add to evidence that the country’s economy is recovering. Brent crude oil for November settlement rose $1.35, or 1.9 percent, to close at $74.45 a barrel on the London-based ICE Futures Europe exchange. The November contract expired today. December Brent increased $2.36, or 3.2 percent, to end the session at $76.23. The Organization of Petroleum Exporting Countries will decrease shipments 0.4 percent in the four weeks ending Oct. 31, according to consultant Oil Movements. OPEC will cut exports by sea in the period to 22.58 million barrels a day, from 22.68 million in the month ended Oct. 3, the Halifax, England-based tanker-tracker said in a report today. OPEC Output The 12-member group agreed at its Sept. 9 meeting in Vienna to maintain production quotas at 24.845 million barrels a day. The 11 members governed by quotas, all except Iraq, produced 1.58 million barrels a day over the target in September, according to the International Energy Agency. Oil volume in electronic trading on the Nymex was 664,847 contracts as of 3:01 p.m. in New York. Volume totaled 621,794 contracts yesterday, 9.9 percent higher than the average over the past three months. Open interest was 1.28 million contracts, the most since February. To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net .

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Stocks in U.S. Gain as Energy Companies Offset Decline in Financial Shares

October 15, 2009

By Sapna Maheshwari Oct. 15 (Bloomberg) — U.S. stocks rose as energy shares gained after oil climbed to a one-year high, helping the market reverse an early drop triggered by earnings at Citigroup Inc. and Goldman Sachs Group Inc. that disappointed some investors. Benchmark indexes climbed to one-year highs for a second day and the Dow Jones Industrial Average extended its advance past 10,000. Exxon Mobil Corp. and Chevron Corp. gained at least 1.5 percent as crude jumped above $77 a barrel, while Sunoco Inc. gained the most in 10 months as Morgan Stanley recommend shares of the largest refiner in the northeast U.S. Citigroup tumbled 5 percent and Goldman Sachs fell 1.9 percent. The Standard & Poor’s 500 Index gained 0.4 percent to 1,096.55 at 4:06 p.m. in New York after earlier losing as much as 0.5 percent. The Dow Jones Industrial Average added 47.08 points, or 0.5 percent, to 10,062.94 after climbing above 10,000 for the first time in a year yesterday. “As the economy improves, the demand for oil improves, so oil prices have been coming up and the oil companies themselves have been doing really well,” said Larry Seibert , who helps manage $550 million at Avatar Associates in New York. “We would expect the price of oil to fluctuate around this level and trend up over the next few years.” Earlier declines in stocks also came as a gauge of manufacturing expanded at a slower pace this month. The Federal Reserve Bank of Philadelphia’s general economic index dropped to 11.5, lower than the reading of 12 forecast by economists in a Bloomberg survey. The cost of living in the U.S. rose at a slower pace in September, showing inflation will not be a threat as the economy emerges from the worst recession since the Great Depression, and jobless claims decreased more than forecast, according to Labor Department reports. Valuation Watch The S&P 500, which rebounded 62 percent from a 12-year low in March, is trading at more than 20 times the reported operating earnings of its companies, the highest valuation since 2004. Companies in the index will report a ninth straight quarter of declining profits, the longest streak since the Great Depression, before returning to growth in the final three months of the year, analysts’ estimates compiled by Bloomberg show. The S&P 500 Energy Index added 2 percent as crude oil rose after an Energy Department report showed an unexpected decline in U.S. gasoline stockpiles as refineries idled units for maintenance. The energy index rose for a ninth straight day and reached its highest level in more than a year. Goldman Slips Goldman Sachs dropped 1.9 percent to $188.63. The bank reported third-quarter profit that more than tripled to $3.19 billion, or $5.25 a share, driven by trading and investments with the firm’s own money. The shares declined as earnings fell short of Goldman Sachs’s record of $3.44 billion. “There were some people looking for even $6, which was really unrealistic,” said William Dwyer , chief investment officer at Baltimore-based MTB Investment Advisors, which oversees $13 billion. “A lot of momentum had already been built into the stock.” Citigroup fell 5 percent to $4.75. The lender that’s 34 percent owned by the U.S. government posted a $101 million profit, defying expectations for a loss as the company added the smallest amount to loan-loss reserves in two years. “They are being overly optimistic on the outlook for loan losses,” Jon Fisher , a fund manager at Fifth Third Asset Management in Minneapolis, which oversees more than $19 billion, said in a Bloomberg Television interview. “We are going to find out in a couple of quarters that they are way under-reserved.” Financial shares in the S&P 500 fell the most of 10 industries, losing 0.7 percent as a group. The industry had the biggest advance yesterday, rising 3.4 percent to the highest level since November. “If stocks ramp up surprisingly nicely on a given day, there’s a tendency for people to want to reduce their positions to take advantage of that strength,” said Robert Schaeffer , who helps oversee $2 billion at Becker Capital Management Inc. in Portland, Oregon. To contact the reporter on this story: Sapna Maheshwari in New York at smaheshwar11@bloomberg.net .

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Most Stocks in U.S. Fall on Whitney’s Goldman Downgrade; J&J Shares Slide

October 13, 2009

By Sapna Maheshwari Oct. 13 (Bloomberg) — Most U.S. stocks fell, pulling the Standard & Poor’s 500 Index down from a one-year high, as analyst Meredith Whitney downgraded Goldman Sachs Group Inc. and said she was “far less bullish” on banking shares. Goldman Sachs slipped 2.1 percent as Whitney cut the bank to “ neutral ” and said investors should take profits after the stock more than doubled since. Johnson & Johnson tumbled 2.6 percent on lower-than-estimated revenue. The market’s losses were limited as technology shares gained after Cisco Systems Inc. agreed to buy Starent Networks Corp. for $2.9 billion. Almost two stocks retreated for each that rose on the New York Stock Exchange. The S&P 500 lost 0.3 percent to 1,073.03 at 1:06 p.m. in New York after rising for the previous six days, its longest streak of gains since June 2007. The Dow Jones Industrial Average fell 10.51 points, or 0.1 percent, to 9,875.29. The Nasdaq Composite added 0.1 percent to 2,141.6. “We’ve had an awfully nice run in the market here, and I think we’re just at a process of digesting some of those gains,” said Joseph Keating , chief investment officer of Raleigh, North Carolina-based RBC Bank, which oversees $3 billion. “There’s some nervousness ahead of the big earnings week we’re having here.” The S&P 500 climbed to a one-year high yesterday amid speculation improving corporate results will extend a seven- month advance in equities. Alcoa Inc. last week began the third- quarter earnings season with an unexpected profit. Earnings Slump Companies in the S&P 500, which has rebounded 59 percent from a 12-year low in March, will report a ninth straight quarter of declining profits, the longest streak since the Great Depression, analysts’ estimates compiled by Bloomberg show. Earnings growth is projected to resume in the final three months of the year. Goldman Sachs, which is scheduled to announce earnings Oct. 15, slid 2.1 percent to $186.07 after Whitney downgraded the bank to “neutral” from “buy.” Goldman Sachs has surged more than 30 percent since Whitney, who correctly predicted Citigroup Inc.’s dividend cut in 2007, raised her rating on the New York-based bank to “buy” on July 13. She said in a note to clients today that while she remains “fundamentally constructive on Goldman Sachs over the long term, we prefer to invoke a ‘why be greedy’ rationale and lock in profits at these levels.” JPMorgan Chase & Co. slid 1.6 percent and Wells Fargo lost 1.4 percent, helping lead financial shares to the steepest decline among 10 industries in the S&P 500. Whitney said she has become less bullish on banks since they are now “at least fairly valued.” The S&P 500 Financials Index has rallied about 150 percent from a 17-year on March 6. Bank of America Bank of America Corp. lost 1.5 percent to $17.76. The largest U.S. lender by assets failed to persuade a Delaware judge to dismiss a shareholder suit challenging the fairness of its $33 billion stock-swap buyout in January of Merrill Lynch & Co. Johnson & Johnson, the world’s largest health-products company, lost 2.6 percent to $60.92 even after earnings topped analysts’ estimates. Revenue fell 5.3 percent to $15.1 billion, below the $15.2 billion anticipated by 14 analysts surveyed by Bloomberg. Sales of medical devices didn’t rise enough to counter slowing sales of drugs and consumer items. “The cost-cutting that some of the larger international companies have done will be what preserves and produces the surprises,” said Eric Teal , who helps oversee $5 billion at First Citizens BancShares Inc. in Raleigh, North Carolina. “Long-term organic growth seems to be out a few quarters.” Gold Rallies Newmont Mining Co., the largest U.S. gold producer, gained 2.7 percent to $47.71 as gold rose to a record of $1,069.70 an ounce in New York. Barrick Gold Corp. climbed 1 percent to $39.76. Starent jumped 17 percent to $33.92. The company Cisco agreed to acquire makes equipment to help wireless carriers understand the kind of traffic that’s crossing their networks, enabling speedy routing of that information to mobile devices. Cisco added 0.7 percent to $23.94. Mergers and acquisitions among U.S. companies are poised to rise, according to Goldman Sachs, which said shares are cheap and executives have cash. While the steepest rally in the S&P 500 in seven decades pushed the average price-earnings ratio for companies in the gauge to 20.3, the highest level since 2004, Goldman Sachs says most stocks remain cheap relative to their valuations in the last 10 years. Allianz SE, Europe’s biggest insurer, expects stocks to fall because the economic recovery is lagging behind the market’s rally over the past seven months. “The market rally right now is — my personal view is — way ahead of real-life developments,” Paul Achleitner , head of finance at Munich-based Allianz, said yesterday in an interview at Bloomberg headquarters in New York. “The expectation level is so high, you’re going to have the risk that there’s going to be a discrepancy in expectation” and economic data, Achleitner said. To contact the reporter on this story: Sapna Maheshwari in New York at smaheshwar11@bloomberg.net .

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Stocks in U.S., Europe Advance on Earnings Outlook; Oil, Metal Prices Gain

October 12, 2009

By Sapna Maheshwari and Lynn Thomasson Oct. 12 (Bloomberg) — U.S. and European stocks rose, sending the MSCI World Index to near a one-year high, on speculation improving corporate earnings will extend a seven- month rally in equities. Oil advanced to a six-week high and metal prices gained as the dollar retreated. Black & Decker Corp. advanced the most since July after the maker of power tools raised its third-quarter earnings forecast. Freeport-McMoRan Copper & Gold Inc. added 1.9 percent as copper increased. Advanced Micro Devices Inc. rallied 6 percent as UBS AG recommended the shares. The Standard & Poor’s 500 Index rose for a sixth straight day, its longest streak since June 2007. “The market will continue with a positive bias,” said Stanley Nabi , New York-based vice chairman of Silvercrest Asset Management Group, which oversees $8 billion. “The profit reports that will begin to come out this week should be very solid and the economic data that’s coming out is quite encouraging.” The S&P 500 advanced 0.6 percent to 1,077.88 at 11:46 a.m. in New York, above its highest close since Oct. 3, 2008. The Dow Jones Industrial Average rose 43.23 points, or 0.4 percent, to 9,908.17. The MSCI World Index of 23 developed nations climbed 0.6 percent to above its highest close since Oct. 1, 2008. The S&P 500 last week jumped 4.5 percent, its best advance since July, as Alcoa Inc. started the third-quarter earnings season with an unexpected profit and economic data signaled the U.S. recession is ending. ‘Recovery Is Under Way’ “Last week’s earnings showed that analyst expectations can be surpassed and that not everything is priced in yet,” said Gregor Mast , an equity strategist at Clariden Leu AG in Zurich, which oversees about $88 billion. “We believe that the recession is over and the recovery is under way.” Companies from Intel Corp. to Goldman Sachs Group Inc. are scheduled to report earnings this week. S&P 500 companies will report a ninth straight quarter of declining profits, the longest streak since the Great Depression, before returning to growth in the final three months of the year, analysts’ estimates compiled by Bloomberg show. Royal Philips Electronics NV helped lead Europe’s Stoxx 600 to a 0.9 percent gain after Europe’s biggest consumer- electronics maker said operating earnings at its consumer unit more than doubled. Black & Decker surged 6.6 percent to $50.36. The manufacturer of the Dewalt brand said net earnings will be about 91 cents a share in the third quarter because sales were higher than estimated. In July, it forecast earnings of 35 cents to 45 cents. Analysts projected 43 cents, the average of 10 estimates. Commodity Producers Freeport rose 1.9 percent to $75.78. Copper climbed on speculation demand for raw materials is increasing as the global economy recovers from its worst recession since World War II. Alcoa , the largest U.S. aluminum company, gained 1.2 percent to $14.41. Oil and gas producers rallied the most among the 10 main industries in the S&P 500, adding 1.8 percent as a group. Exxon Mobil Corp. , the largest U.S. energy company, climbed 1.5 percent to $70.30 for a sixth straight day of gains. Crude rose on the New York Mercantile Exchange for a third day, climbing 2.4 percent to $73.51 a barrel. The Dollar Index , which tracks the currency’s performance against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, dropped 0.5 percent to 76.06. The S&P 500 and the dollar are moving in opposite directions by the most in at least four decades. The stock index has surged 59 percent since March 9. The Dollar Index fell 15 percent during the same period, including the steepest two-quarter drop since 1991. Dollar, Stocks Correlation Their so-called correlation coefficient using 120 days of data is minus 0.43. When it sank to minus 0.45 in July, it was the lowest in the history of the 42-year-old Dollar Index. Investors outside the U.S. are purchasing companies in the S&P 500 at the cheapest valuations on record, their buying power boosted by a seven-month decline in the dollar. The index is valued at the biggest discount to the MSCI World Index of 23 developed countries since May 2003, according to monthly data compiled by Bloomberg. AMD added 6 percent to $6.23. The second-largest maker of personal-computer processors was raised to “buy” from “neutral” at UBS, which said near-term growth will improve on increased computer sales. Visa Inc. and MasterCard Inc. advanced at least 1.3 percent. The world’s biggest card-payment networks were upgraded to “outperform” from “neutral” by Credit Suisse Group AG. The analysts said revenue will increase as the “shift from cash to plastic continues.” Google, Ford Rally Google Inc. climbed 1.6 percent to $524.65. Analysts at Goldman Sachs Group Inc. raised earnings estimates for the Internet search engine operator on speculation companies will spend more on advertising. Ford Motor Co. jumped 6.7 percent to $7.59. The only major U.S. carmaker not to seek bankruptcy protection said sales in Europe rose 12 percent in September as new versions of the Fiesta and Ka subcompacts attracted buyers. The S&P 500 didn’t update for almost an hour in early trading today after a computer malfunction at the Chicago Board Options Exchange prevented the dissemination of updates. To contact the reporters on this story: Sapna Maheshwari in New York at smaheshwar11@bloomberg.net ; Lynn Thomasson in New York at lthomasson@bloomberg.net .

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Stocks in U.S., Europe Gain on Philips Profit; Yen Drops, Crude Oil Rises

October 12, 2009

By Sapna Maheshwari Oct. 12 (Bloomberg) — U.S. and European stocks rose, sending the MSCI World Index to near a one-year high, on speculation improving corporate earnings will extend a seven- month rally in equities. Oil and metal prices advanced. General Electric Co., which will report third-quarter results on Oct. 16, climbed 1.5 percent after Royal Philips Electronics NV unexpectedly posted a profit. Freeport-McMoRan Copper & Gold Inc. added 1.5 percent as copper increased. Advanced Micro Devices Inc. rallied 4.1 percent after UBS AG recommended the shares. The Standard & Poor’s 500 Index rose for a sixth straight day, its longest streak since June 2007. “The market will continue with a positive bias,” said Stanley Nabi , New York-based vice chairman of Silvercrest Asset Management Group, which oversees $8 billion. “The profit reports that will begin to come out this week should be very solid and the economic data that’s coming out is quite encouraging.” The S&P 500 advanced 0.3 percent to 1,075.06 at 9:34 a.m. in New York, above its highest close since Oct. 3, 2008. The Dow Jones Industrial Average rose 32.72 points, or 0.3 percent, to 9,897.66. The MSCI World Index of 23 developed nations climbed 0.6 percent to above its highest close since Oct. 1, 2008. The S&P 500 last week jumped 4.5 percent, its best advance since July, as Alcoa Inc. started the third-quarter earnings season with an unexpected profit and economic data signaled the U.S. recession is ending. ‘Recovery Is Under Way’ “Last week’s earnings showed that analyst expectations can be surpassed and that not everything is priced in yet,” said Gregor Mast , an equity strategist at Clariden Leu AG in Zurich, which oversees about $88 billion. “We believe that the recession is over and the recovery is under way. Equities are fairly valued but require that we see the profit side move up.” Companies from Intel Corp. to Goldman Sachs Group Inc. are scheduled to report earnings this week. Companies on the S&P 500, which has rebounded 59 percent from a 12-year low in March, will report a ninth straight quarter of declining profits, the longest streak since the Great Depression, before returning to growth in the final three months of the year, analysts’ estimates compiled by Bloomberg show. GE gained 1.5 percent to $16.42. Philips, Europe’s biggest consumer-electronics maker, said operating earnings at its consumer unit more than doubled as it reported third-quarter net income of 174 million euros ($256 million). Analysts had predicted a loss of 44.7 million euros, the average of 13 estimates compiled by Bloomberg. Philips helped lead the gains in Europe’s Stoxx 600 , adding 6.4 percent in Amsterdam, while energy companies rose with oil. Total SA , Europe’s biggest refiner, rose 1.6 percent in Paris. Commodity Producers Freeport rose 1.5 percent to $75.46. Copper climbed on speculation demand for raw materials is increasing as the global economy recovers from its worst recession since World War II. Alcoa , the largest U.S. aluminum company, gained 0.8 percent to $14.35. Chevron Corp., the second-largest U.S. oil company, increased 0.7 percent to $73.23 as crude rose above $73 a barrel for the first time in three weeks. Advanced Micro Devices added 4.1 percent to $6.12. The second-largest maker of personal-computer processors was raised to “buy” from “neutral” at UBS. Plum Creek Timber Co. climbed 1.9 percent to $32.45. The forest-products company was raised to “neutral” from “underweight” at JPMorgan Chase & Co. U.S. Discount The S&P 500 is valued at the biggest discount to the MSCI World Index of 23 developed countries since May 2003, according to monthly data compiled by Bloomberg. There is still room for stocks to rise, according to Barclays Capital Inc.’s Larry Kantor , while David Rosenberg says investors should buy bonds or seek dividends because this isn’t a normal recovery. Kantor, head of research at Barclays Capital in New York, was one of the first economists to call the end of the recession, in March. Barclays sees GDP expanding at a 4 percent rate now, 5 percent in the first quarter and 3.6 percent for 2010. Rosenberg, the chief economist and strategist for Toronto- based Gluskin Sheff + Associates Inc., was among the first to warn of impending recession in 2006. Federal Reserve Bank of St. Louis President James Bullard said in a speech yesterday that U.S. jobs growth will return this year or next. To contact the reporter on this story: Sapna Maheshwari in New York at smaheshwar11@bloomberg.net

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U.S. Consumer Spending Jumps by the Most in Almost Eight Years

October 1, 2009

By Shobhana Chandra Oct. 1 (Bloomberg) — Spending by U.S. consumers climbed in August by the most in almost eight years, indicating the biggest part of the economy is starting to rebound from the worst slump in almost three decades. The 1.3 percent increase in purchases was larger than forecast and followed a 0.3 percent gain in the prior month that was bigger than previously estimated, Commerce Department figures showed today in Washington. Incomes climbed 0.2 percent for a second month and inflation decelerated. Automakers including General Motors Co. benefited from the Obama administration’s $3 billion “cash-for-clunkers” incentives. A projected drop in auto purchases last month is a reminder that such gains will be hard to sustain as the stimulus programs expire and households grapple with rising joblessness and stagnant incomes. “We’re seeing sparks of life in the consumer, which is very important at this stage of the economic recovery,” Lindsey Piegza, an economist at FTN Financial in New York, said before the report. Even so, “spending is not going to be as robust as we’d like. Income growth will remain constrained for some time, and consumers’ burden of debt is not something that can be fixed quickly.” Economists forecast spending would rise 1.1 percent, after an originally reported increase of 0.2 percent the prior month, according to the median of 80 estimates in a Bloomberg News survey. Projections ranged from gains of 0.1 percent to 1.6 percent. Most Since 2001 The August increase in spending was the biggest since October 2001 and reflected broad-based increases in goods and services. “Economic activity has picked up,” the Federal Reserve said last week. At the same time, household spending “remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.” Fed policy makers, who also said they’d keep the benchmark lending rate near zero “for an extended period,” are trying to secure an economic recovery while withdrawing fiscal and monetary stimulus in time to avoid driving inflation and borrowing costs higher. The tame inflation readings in today’s report indicate policy makers need not rush to remove the trillions of dollars they’ve pumped into financial markets. The price gauge tied to spending patterns was down 0.5 percent from August 2008. Less Inflation The Fed’s preferred price measure, which excludes food and fuel, climbed 0.1 percent from the previous month and was up 1.3 percent from a year earlier, the smallest year-over-year gain since September 2001. A report yesterday showed the worst U.S. recession since the Great Depression eased more than anticipated in the second quarter. Consumer spending, which accounts for about 70 percent of the economy, fell at a 0.9 percent pace, less than the government previously estimated. Adjusted for inflation, spending increased 0.9 percent, following a 0.2 percent gain the prior month. Because the increase in spending was bigger than the gain in incomes, the savings rate fell to 3 percent from 4 percent the prior month. Inflation-adjusted spending on durable goods, such as autos, furniture, and other long-lasting items, jumped 5.8 percent in August after rising 1.8 percent in the prior month. Cash for ‘Clunkers’ Buyers responded to the government offer of as much as $4,500 to trade in older, less fuel-efficient cars and trucks in August. Industry figures showed auto sales climbed to a one-year high in August. Auto sales last month, due later today, probably fell to the second-lowest pace this year, according to the median estimate of analysts surveyed by Bloomberg News. Consumer purchases of non-durable goods increased 1 percent, today’s report showed, and spending on services, which account for almost 60 percent of all outlays, rose 0.2 percent. Best Buy Co., the world’s largest electronics retailer, yesterday said it plans to hire more seasonal holiday workers this year to help meet demand for flat-panel televisions and mobile phones. The Richfield, Minnesota-based company expects to sell more merchandise this holiday season than last, Chief Executive Officer Brian Dunn said at a briefing. A report from the Labor Department tomorrow may show payrolls fell by 175,000 workers in September after a 216,000 drop the prior month, according to the survey median. The jobless rate will probably climb to 10 percent by year-end, the highest level since 1983. It reached 9.7 percent in August. To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

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Leveraged-Loan Sales Pick Up as Prices Rise to One-Year Record (Bloomberg)

September 25, 2009

Sept. 25 (Bloomberg) — High-yield, high-risk loan sales picked up as bank debt rallied to a one-year high in the secondary market after dropping to record lows.

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Goods Orders, Home Sales Probably Increased as U.S. Emerged From Recession

September 25, 2009

By Timothy R. Homan Sept. 25 (Bloomberg) — Orders for durable goods probably rose in August for the fourth time in the last five months, a sign companies are gaining confidence the U.S. is emerging from the worst recession since the 1930s, economists said before reports today. Bookings for long-lasting goods likely rose 0.4 percent, according to the median forecast of 75 economists surveyed by Bloomberg News. Another report may show purchases of new homes climbed last month to a one-year high, the survey showed. Government stimulus measures such as “cash for clunkers” and credits to first-time homebuyers have revived manufacturing and housing, two areas that deepened the slump. Federal Reserve policy makers this week acknowledged the economy had picked up and pledged to keep interest rates low for the foreseeable future to ensure the rebound is sustained. “The recovery is here, and it’s starting to look like it will be more robust than we previously thought” said Christopher Low , chief economist at FTN Financial in New York. “There’s no question it would not be happening at all without stimulus. But the stimulus is there and will continue to be there next year.” The Commerce Department’s durable goods report is due at 8:30 a.m. in Washington. Survey estimates ranged from a decline of 2 percent to a 4 percent increase. The projected gain would follow a 5.1 percent surge in July that was the biggest jump in two years. Broad Gains Excluding transportation equipment, such as cars and aircraft, orders climbed 1 percent, according to the survey median. That would be the fourth monthly gain and the longest streak since November 2005. Carmakers including General Motors Co. and Ford Motor Co. plan to boost output through the second half of the year to rebuild depleted inventories. The government’s $3 billion cash- for-clunkers incentive to trade in gas-guzzlers for more fuel- efficient vehicles lifted auto sales and production last month. GM will add a third shift at three U.S. plants that are taking on additional production from factories slated to close or be idled. The facilities getting the new shifts are in Fairfax, Kansas; Fort Wayne, Indiana; and Delta Township, Michigan, GM said this week. The changes will restore 2,400 jobs , the Detroit-based company said. “This is a really good day for GM employees,” Tim Lee , the company’s vice president of global manufacturing, said during a Sept. 22 conference call. An additional 600 jobs will be restored at stamping and powertrain facilities, he said. New-Home Sales Data on new-home sales , due from the Commerce Department at 10 a.m., will probably show sales rose 1.6 percent to a 440,000 rate, according to the survey median. They reached a record-low rate of 329,000 in January. The Obama administration’s $8,000 tax credit for first- time buyers has helped boost new-home sales this year. Sales of existing homes , meanwhile, unexpectedly fell last month for the first time since March. Purchases dropped 2.7 percent in August to a 5.1 million annual rate, the second- highest level in the last 23 months, the National Association of Realtors said yesterday. The median price dropped 12.5 percent from August 2008. Housing starts rose to a nine-month high in August, the Commerce Department reported last week, signaling residential construction may soon add to growth after subtracting from gross domestic product since 2006. The Standard & Poor’s Homebuilder Supercomposite is up 29 percent so far this year, compared with a 16 percent gain for the broader S&P 500. Consumers are becoming less pessimistic as the recession eases. The Reuters/University of Michigan index of consumer sentiment probably rose to 70.5 this month from 65.7 in August, according to economists’ forecasts before today’s report, due at 10 a.m. To contact the reporter on this story: Timothy Homan in Washington at thoman1@bloomberg.net

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Single-Family U.S. Housing Starts Rise for a Fifth Month in Stability Sign

August 18, 2009

By Shobhana Chandra and Bob Willis Aug. 18 (Bloomberg) — Housing starts in the U.S. unexpectedly fell in July, pulled down by multifamily dwellings, while single-family starts which make up most of the industry rose to the highest level since October. The 1 percent decline in starts to an annual rate of 581,000 was the first drop in three months and followed a 587,000 rate in June, the Commerce Department said today in Washington. Construction of single-family houses, which account for 75 percent of the industry, rose 1.7 percent to a 490,000 rate, today’s report showed. Single-family home construction has been rising since March, a sign that falling home values and stimulus efforts such as a tax credit for first-time buyers are starting to reverse the housing meltdown that triggered the financial crisis. While the economy is forecast to grow this quarter, foreclosures, tight credit and job losses will temper the recovery. “We’ve formed a bottom but probably only have limited upside, with unemployment too high to boost demand” much higher than current levels, said Mark Vitner , a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “Single-family construction is probably getting some help from the $8,000 tax credits. We expect construction to make a positive contribution to GDP growth in the second half.” Stocks rose after the report and Treasuries were little changed. The yield on the benchmark 10-year note was 3.48 percent at 9:33 a.m. in New York. The Standard & Poor’s 500 Index was up 0.4 percent at 984.04. Economists’ Forecasts Total starts were projected to rise to a 599,000 annual pace, after an initially reported 582,000 the prior month, according to the median forecast of 70 economists surveyed by Bloomberg News. Estimates ranged from 542,000 to 646,000. Building permits, a sign of future construction, fell 1.8 percent in July to a 560,000 annual pace from 570,000. Separately, a Labor Department report today showed wholesale prices in the U.S. fell more than forecast in July as energy costs receded. The 0.9 percent decrease in prices paid to factories, farmers and other producers followed a 1.8 percent gain in June, the Labor Department said. Excluding food and fuel, so-called core prices unexpectedly fell 0.1 percent. Confidence among builders rose to a one-year high this month, a National Association of Home Builders/Wells Fargo index showed yesterday. The gauge climbed to 18, matching forecasts, from 17 the prior month. At the same time, a reading below 50 means most respondents view conditions as poor. Multifamily Work on multifamily homes, such as townhouses and apartment buildings, dropped 13 percent to an annual rate of 91,000. Multifamily projects are more vulnerable to credit constraints facing some builders. The decrease in starts was led by a 16 percent drop in the Northeast, followed by a 1.6 percent decline in the West and 1.4 percent in the South. They rose 13 percent in the Midwest. Toll Brothers Inc. , the largest U.S. luxury homebuilder, reported third-quarter revenue that exceeded analysts’ estimates. New-home contracts rose over the year-earlier quarter for the first time since 2005, Horsham, Pennsylvania-based Toll said on Aug. 12. “Although some of our markets are still stuck in the mud, many are improving,” Chairman and Chief Executive Officer Robert Toll said on a conference call. “It does feel as if the fence sitters are looking for reasons to jump in.” Government Help Government efforts to stoke the housing market have included offering lenders incentives to modify the terms of delinquent mortgages; Federal Reserve purchases of mortgage- backed securities to free up funding for home loans; and an $8,000 tax credit for first-time home buyers for transactions completed before Dec. 1. Foreclosures remain a threat to builders. About $3.4 trillion worth of houses are at risk of default because the owners owe more than the property is worth, Santa Ana, California-based First American CoreLogic said last week. Meanwhile, foreclosure-driven declines in prices are lifting sales. Homeowners cut asking prices by $27.8 billion in the year through Aug. 1, according to Trulia Inc., a San Francisco-based real estate data provider. To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net ; Bob Willis in Washington bwillis@bloomberg.net

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