February 23, 2024

Economic Reports Overshadow Earnings on Wall Street

The Federal Reserve said Friday that factories increased production for the ninth consecutive month. Separately, the Labor Department said inflation rose just 0.1 percent last month excluding food and gas prices. That was far better than the 0.2 percent increase economists were expecting.

Bond prices rose as inflation concerns eased. The yield on the 10-year Treasury note fell to 3.43 percent from 3.51 percent late Thursday. Bond yields fall when their prices rise.

At noon, the Dow Jones industrial average was 72.50 points, or 0.6 percent higher, while the Standard Poor’s 500-stock index gained 6.84 points, or 0.52 percent. The technology heavy Nasdaq was up 1.37 points.

Google dragged down the Nasdaq index after the company that missed analysts’ estimates, in part because it is in the midst of a hiring spree. Its shares fell nearly 7 percent.

And the Bank of America Corporation announced Friday that its earnings and revenue fell in the first quarter compared with a year ago. The bank also announced a settlement that could reduce its liability for its part in issuing shoddy mortgages. Its shares were down 1.1 percent.

In Europe, the FTSE 100 in London was 0.54 percent higher, while the DAX in Germany rose 0.44 percent. The CAC-40 in Paris added 0.1 percent. Earlier in Asia, Hong Kong’s Hang Seng Index fell less than 0.1 percent to close at 24,008.07.

Despite the inflation figures, China’s Shanghai Composite Index staged a late rally to finish 0.3 percent higher at 3,050.53.

Japan’s Nikkei 225 stock average fell 0.7 percent to end at 9,591.52.

Benchmark oil for May delivery rose $1.83, to $109.94 a barrel in New York trading.

While inflation was relatively mild in the United States in March, other figures released Friday reinforced expectations that the European Central Bank and the People’s Bank of China will soon be raising interest rates to counter rising inflation.

In China, figures showed consumer prices rose 5.4 percent in the year to March, up from February’s 4.9 percent. The increase was largely driven by surging food costs and represents a setback for the government, which has lifted interest rates four times since October to cool prices.

Analysts expect the People’s Bank to enact further measures in the days to come in response to those figures.

They also think that the European bank will raise rates again in June after figures showed inflation in the 17-country euro zone revised up to 2.7 percent in the year to March from the preliminary estimate of 2.6 percent, largely because of rising fuel costs.

Investors also kept a watched on the sovereign debt situation in Europe.

Portugal avoided default on Friday as it scraped together 4.2 billion euros ($6.1 billion) for a bond redemption, but further depleted its meager cash reserves as it desperately awaits a bailout.

Lisbon is eight weeks away from possible bankruptcy. Officials admit they will not have enough money to settle a 7 billion euro debt falling due in mid-June and have asked for financial help amid a cash crunch that is threatening the provision of basic services.

The ailing country is weathering unsustainable costs on loans to finance its economy, with its 10-year bond yield reaching 8.9 percent Friday as markets shied away from investing their money in a country viewed as a risky bet.

Portugal’s European partners and the International Monetary Fund last week agreed to provide aid which could amount to 80 billion euros ($115 billion).

But negotiations on the terms of the loan, especially what interest rates Portugal will be obliged to pay on it, will probably take weeks.

There are also mounting concerns that Greece will be forced to restructure, though the prime minister, George Papandreou, insisted that Athens did not intend to do so. The country’s woes, he said, “will be addressed in depth. Not by restructuring the debt but when we restructure the country.”

Another credit rating downgrade of Ireland by Moody’s also stoked concerns that Europe’s debt crisis still has a way to play out.

Article source: http://www.nytimes.com/2011/04/16/business/16markets.html?partner=rss&emc=rss

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