October 20, 2017

For the Dow, the Week Goes From Bad to Worst

Stocks fell Friday, closing out what was the worst week of the year for the Dow Jones industrial average.

The market was dragged lower by a weak performance from retailers and companies sensitive to higher interest rates. Home builders and banking stocks were among the best performers.

Stocks had a decent start to the week, but were hit hard the last three days. The Dow retreated 2.2 percent in its worst week in 2013. The broader Standard Poor’s 500-stock index lost 2.1 percent for the week, its second-worst performance of the year.

The possibility of a cutback in the Federal Reserve’s huge bond-buying program in September has roiled the bond market, which has spilled over into stocks. The yield on the benchmark 10-year Treasury note rose to 2.83 percent, its highest level since July 2011, from 2.77 percent late Thursday. Its price, which moves in the opposite direction of the yield, fell 16/32 to 97 6/32.

“When yields are going up like this, that’s scary for most equity investors,” said Brian Reynolds, chief market strategist at Rosenblatt Securities.

Rising bond yields have a direct impact on the cost of borrowing for everyone — from homeowners trying to refinance their mortgages to companies trying to sell debt — making them a potential long-term drag on the economy. The Federal Reserve’s bond-buying programs were intended to keep the cost of borrowing as low as possible.

On Friday, the S. P. 500 lost 5.49 points, or 0.33 percent, to 1,655.83. The Dow fell 30.72 points, or 0.2 percent, to 15,081.47, and the Nasdaq composite lost 3.34 points, or 0.1 percent, to 3,602.78.

Shares of utilities and telecommunications companies, which typically perform poorly in a higher interest-rate environment, closed broadly lower. Consolidated Edison fell 75 cents, or 1.3 percent, to $56.64, and PGE of California was down 71 cents, or 1.6 percent, to $42.64. Verizon Communications fell 1.7 percent, and ATT, 0.5 percent.

Stocks in companies like utilities, pharmaceuticals and telecommunications are often purchased because they provide a higher-than-normal dividend. As Treasury yields rise, it makes all dividend-paying stocks less attractive to investors because Treasuries can provide a similar return with significantly less risk.

“You try to focus on stocks that usually benefit from higher interest rates — banks are a good example,” said John Fox, who oversees $873 million as co-manager of the FAM Value Fund.

The Dow has fallen 3.7 percent from its high of 15,658.36, which it hit two weeks ago. Even so, it is up 15 percent this year, and the S. P. 500 has climbed 16 percent.

“Keep it in perspective — we’re down modestly from what was an all-time high,” Mr. Fox said.

A multiday sell-off continued for retailers. Nordstrom gave a bleak sales outlook late Thursday that echoed forecasts this week from Walmart and Macy’s. The outlooks have raised worries that American shoppers might be curtailing spending.

Nordstrom’s stock fell $2.90, or 4.9 percent, to $56.43, making it the biggest decliner in the S. P. 500.

The retail industry is a closely watched part of the American economy because consumer spending makes up roughly 70 percent of economic activity. The disappointing outlooks are worrisome because they take into account the lucrative back-to-school shopping season.

“It’s left us scratching our heads,” Mr. Fox said. “It really forces you to ask the question: ‘Is the consumer slowing down?’ ”

Investors have also been concerned about what will happen to the stock market — and the economy — if the Fed begins winding down its bond-buying program in September. Some investors think that the Fed’s program has been a large contributor to the stock market’s record run.

“The big question is, will the Fed eliminate the bond-buying program in September, and, if so, how they will they remove the bond buying,” said Frank Davis, director of sales and trading for LEK Securities.

With the markets declining, investors shifted into a safer asset — gold. Its price rose $10.10, or 0.7 percent, to $1,371.70. Gold had its third-best week this year, rising 3.7 percent.

Also in focus were home builders. The government reported that new home construction was up 6 percent in July to a seasonally adjusted rate of 896,000.

Shares of the home builder PulteGroup closed up 2.3 percent, and Lennar was up 1.8 percent.

Article source: http://www.nytimes.com/2013/08/17/business/daily-stock-market-activity.html?partner=rss&emc=rss

Markets Start the Week Lower

Stocks fell sharply on Monday, following the worst weekly decline for the Standard Poor’s 500-stock index in two months, on concerns that the Federal Reserve’s stimulus may be drawing to a close and a cash squeeze in China could further slow growth.

In morning trading, the S.P. was 1.6 percent lower, the Dow Jones industrial average fell 1.4 percent — about 220 points — and the Nasdaq composite lost 1.5 percent. European and Asian shares also slumped.

Banking shares in China tumbled to their biggest daily loss in almost four years after the People’s Bank of China, the country’s central bank, said lenders needed to do a better job of managing their cash and loans. The central bank is attempting to move China, the world’s second largest economy, away from credit-driven investment.

The S.P. 500 has fallen 2.3 percent in June, and is on track for its worst monthly performance since May 2012. The index is down 4.6 percent from its closing high on May 21.

“We are starting to see that follow-through in Asia, which is all part of the broader narrative — the focus on a lack of stimulus, a creeping higher in rates and the potential impact for less liquidity globally,” said Peter Kenny, chief market strategist at Knight Capital in Jersey City. “This underscores the power and the importance of Fed policy to global central banking.”

The shift out of assets which have benefited most from cheap money has been sharpest in the United States debt market, where yields on 10-year Treasury notes hit 2.6 percent on Monday, its highest level since August 2011.

This rise in rates and the brighter outlook for the American economy, which was behind the Fed’s decision, has favored the dollar against most major currencies. The dollar index was up 0.4 percent at 82.66 points on Monday, building on last week’s 2.2 percent rally, its biggest weekly gain in 19 months.

Against the yen, the dollar was down 0.2 percent to 97.71 yen, while euro fell 0.3 percent to $1.3078, a level not seen since June 6.

Tenet Healthcare, a hospital operator, said it would buy smaller rival Vanguard Health Systems for $4.3 billion, or $21 per share including debt, to expand into new geographies. In early trading Vanguard shares jumped 67.1 percent and Tenet gained 7.1 percent.

Rising interest rates served to dent gold prices, weighing on mining stocks, while other commodities were also pressured by strength in the dollar.

Barrick Gold Corp will lay off up to a third of its corporate staff at its Toronto headquarters and other offices, sources said, as the world’s top bullion producer intensifies downsizing amid a slump in the price of gold. United States-listed shares dipped 3.6 percent.

Freeport McMoRan Copper and Gold has restarted some operations at the world’s second-biggest copper mine after receiving approval from the Indonesian government. Freeport shares shed 3 percent.

European equity markets remained weak despite data showing German business morale picking up for a second straight month in June, pointing to a slow recovery for Europe’s largest economy. The Euro Stoxx 50 of euro zone blue chips was down 1.8 percent, and the FTSE 100 in London lost 1.5 percent.

Article source: http://www.nytimes.com/2013/06/25/business/daily-stock-market-activity.html?partner=rss&emc=rss

Markets Jump on Hopes for European Action

Stock and bond markets rallied on hopes that the E.C.B. would cut the benchmark interest rate for euro countries as early as next week. On Wall Street, the Standard Poor’s 500-stock index, the Dow Jones industrial average and the Nasdaq composite index all closed with gains of more than 1 percent, while the 10-year Treasury bond yield touched 1.645 percent, the lowest intraday level since Dec. 12.

Separately, the Dow Jones industrial average skidded more than 150 points briefly in mid-afternoon before recovering after the Twitter account of The Associated Press was hacked and a fake tweet about an attack on the White House was posted.

But outside of trading rooms, the European data were not likely to inspire any joy.

Besides pointing to continued decline in the euro zone economy, the survey of purchasing managers by Markit, a research firm, showed that Germany could be slipping into recession.

Germany has served as the main counterweight to economic malaise elsewhere in the euro zone, and a prolonged slowdown could delay a recovery on the whole Continent.

The Flash Germany Composite Output index issued by Markit fell to 48.8 in April from 50.6 in March, a six-month low. A reading below 50 is considered a sign that the economy is likely to contract. For the euro zone as a whole, the corresponding index was unchanged at 46.5, confirming that the region remains in a rut.

The German economy shrank 0.6 percent in the last three months of 2012. Another negative quarter would push the country into recession and present a problem for Chancellor Angela Merkel as her party campaigns to remain in power in elections this autumn. Meanwhile, the stubborn slowdown in the euro zone is likely to further inflame the debate about how much more austerity troubled countries in Europe can take.

Many political leaders are arguing for a greater emphasis on growth. José Manuel Barroso, president of the European Commission, said in Brussels on Monday that while countries need to continue cutting government debt and budget deficits, ‘’we need to complement this with proper measures for growth.’’

In Europe’s most troubled countries, there was little sign of a turnaround in growth. Economic activity in Spain declined 0.5 percent in the first three months of this year, the Bank of Spain said in a preliminary estimate Tuesday.

Still, markets cheered the pessimistic survey results because of expectations that they would prompt the E.C.B. to cut interest rates or take other action when its policy-making board meets May 2.

On Tuesday, the central bank of Hungary, which is not a member of the euro zone, cut its main interest rate to 4.75 percent from 5 percent. It was the bank’s ninth rate cut in as many months.

The benchmark French stock market index, the CAC 40, finished the day 3.6 percent higher, while the interest rate on France’s 10-year sovereign bond hit a record low of 1.706 percent. Other major European stock indexes posted gains of more than 2 percent while bond yields fell.

For France, the Markit output index rose to 44.2 in April from 41.9 in March, indicating that the pace of decline was slowing in the euro zone’s largest economy after Germany’s. But that tidbit of good news was clouded by a drop in the separate Insee indicator of the French business climate.

The decline in optimism among German purchasing managers might be the result of a deceleration in the pace of growth in China, which in recent years has become one of the most important markets for German products like automobiles and machinery. China has helped to compensate for weak demand in the rest of Europe.

‘’The last nine months have been very slow in our business,’’ said Joachim Schönbeck, a member of the management board of SMS Group, a German company that builds and equips factories to produce steel and other metals.

Article source: http://www.nytimes.com/2013/04/24/business/global/data-points-to-slowdown-in-germany.html?partner=rss&emc=rss

Global Markets Fail to Post Gains in 2011

On Friday, the Standard Poor’s 500-stock index traded off less than a point in early trading, while the Dow Jones industrial average was down 0.2 percent.

The S.P. 500, a benchmark for the broad market, had a razor-thin 0.2 percent gain for the year so far by mid-morning, while the Dow was up 6 percent for the year.

Major European and Asian indexes, however, descended by double-digit percentages in 2011.

Trading volumes thinned out during the holiday season, capping off with a whisper what was a year of political turmoil and financial upheaval that saw governments overturned and prospects for sovereign defaults sharpen.

The euro zone debt crisis set off volatile swings in equity markets that had investors turning to safer assets, while one of the safest assets historically — United States debt — suffered its first ever downgrade to its AAA credit rating.

On Friday, crude oil futures traded in New York were slightly lower at $99.23 a barrel, after rising to $101.34 this week, their highest level since June. In recent days, tensions have bubbled to the surface after Iran threatened to close the Strait of Hormuz if sanctions were imposed on its oil shipments.

Materials and energy shares rose the most on Friday, although their gains were less than 0.5 percent in early trading. Financial stocks were down, following their 2011 trend.

The yield of the benchmark 10-year Treasury, which moves in the opposite direction of its price, was down 2 basis points Friday to 1.876 percent, on track to finish the year well below its 3.75 percent yield in the beginning of 2011.

“The great Treasury rally of 2011 was attributable in large part to events that many of us would have considered unlikely at that time,” said Kevin H. Giddis, the executive managing director and president for fixed-income capital markets at Morgan Keegan Company, “namely, the Arab spring, the loss of the United States’ AAA rating, the devastating earthquake in Japan, and the European monetary pact becoming dangerously close to breaking apart.

As 2011 ends, “the investing landscape doesn’t look all that different,” he wrote in a year-end market commentary. “To put it charitably, economic conditions in Europe remain tenuous, with no clear end in sight.”

Some analysts expect the focus in 2012 to swing back to fundamentals in the United States as investors try to gauge how successfully the country can “de-couple” from Europe’s woes.

The FTSE 100 index of leading British shares closed up 0.1 percent for the day but down 5.6 percent for the year, while Germany’s DAX ended 0.9 percent higher for the day and 14.7 percent lower for the year.

The CAC 40 in France was 0.4 percent higher in late trading, about 18 percent down for the year. The Nikkei 225 closed down more than 17 percent for the year, while the Hang Seng Index was down nearly 20 percent.

Article source: http://feeds.nytimes.com/click.phdo?i=789d633eb685c1d515b5b4fbb619d585

Stocks End Mixed as Europe Haggles Over Debt Fix

Stock indexes rose, fell, rose back again and then ended the day more or less where they started. As they have been doing for weeks now, traders remain focused on the latest hope for a resolution to Europe’s debt crisis: this time, a weekend summit of European leaders.

The Dow Jones industrial average moved between gains and losses all day before ending up 37.16 points, or 0.3 percent, to close at 11,541.78. The Dow had been down as many as 113 points shortly after noon. The Dow is 0.3 percent below where it started the year, and is headed for its first down week after three weeks of gains.

Trading was choppy as talks across the Atlantic appeared to falter because of differences between Germany and France over how to protect European banks from the consequences of a default by the Greek government. Later in the day stocks rose slightly on news that a second summit meeting would take place next week after it became clear that France and Germany would not be able to bridge their difference in time for the meeting Sunday.

A messy default by Greece could lead to deep losses for European banks that hold Greek debt. If that leads them to pull back on lending to each other, it could cause another freeze in global credit markets like the one in late 2008 after Lehman Brothers collapsed.

The Standard Poor’s 500 index rose 5.51 points, or 0.5 percent, to 1,215.39.

The Nasdaq composite lost 5.42 points, or 0.2 percent, to 2,598.62.

U.S. Treasury prices also fluctuated sharply as the latest news from Europe crossed, before ending about where they were a day earlier. The yield on the 10-year Treasury note was 2.18 percent late Thursday compared with 2.16 percent late Wednesday.

Stock indexes had edged higher in early trading after the Federal Reserve Bank of Philadelphia said regional manufacturing was “showing signs of recovery.” Its index of manufacturing, shipments and new orders was far better than economists had forecast. An unexpected drop in the index spurred a stock market sell-off in August.

Other economic reports were mixed. The Labor Department said new applications for unemployment benefits dropped to 403,000 last week, a sign that layoffs are easing. On the down side, sales of previously-occupied homes dipped 3 percent last month.

Among stocks making big moves, Newfield Exploration plunged 14.8 percent, the largest decline in the SP 500 index. The oil and gas producer reported disappointing third-quarter results and cut its production forecast for the year.

Union Pacific Corp., the country’s largest railroad, surged after its earnings came in well ahead of analysts’ estimates. The company gained 4 percent after reporting that its income trumped forecasts. It also said it expects the growth to continue.

Southwest Airlines rose 4.5 percent after reporting income that was a penny per share higher than analysts predicted. ATT Inc. lost 0.3 percent after reporting that the number of new iPhones activated last quarter was the lowest in a year and a half.

The New York Times jumped 9.2 percent after the company reported higher profits than expected.

Casino operator Wynn Resorts Ltd. said that it turned a profit in the third quarter after posting a loss a year ago, but the results still fell short of Wall Street’s estimates. Its stock lost 5.3 percent.

Article source: http://feeds.nytimes.com/click.phdo?i=c4172ede2faa21417a9fe54eeba316c3

Looking for Signals, Wall Street Trading Is Choppy

Stocks were lower in afternoon trading on Wall Street Thursday as investors awaited President Obama’s evening speech on jobs.

The Dow Jones industrial average was down 74 points, or 0.7 percent, at 11,340. The Standard Poor’s 500-stock index was down 9 points, or 0.8 percent, to 1,190, and the Nasdaq composite fell 15 points, or 0.6 percent, at 2,534.

The price of the 10-year Treasury note rose, with its yield falling to 1.993 percent.

In Europe, the FTSE 100 index of leading British shares was up 0.4 percent at 5,340, while Germany’s DAX was steady at 5,408. The CAC-40 in France was 0.4 percent higher at 3,085.

“Global equity markets are attempting to rebound on building hopes for fresh stimulus from the global authorities to support growth,” said Lee Hardman, an analyst at the Bank of Tokyo-Mitsubishi UFJ.

Investors were looking for other signals throughout the day. While both the Bank of England and the European Central Bank kept their interest rates unchanged, President Barack Obama was expected to announce measures to lift job creation in the United States.

Already negative, stocks slid a bit further after Federal Reserve Chairman Ben S. Bernanke offered no hints that the central bank may take steps to help the ailing economy. He spoke Thursday afternoon to the Economic Club of Minnesota.

Some investors have anticipated that the Fed would take additional steps to stimulate the economy at its two-day meeting that begins Sept. 21.

The hopes that policymakers will do more to shore up growth, including at a weekend meeting of finance ministers of the Group of Seven industrialized countries, has helped stocks recover over the last couple of days. A German court decision backing the government’s involvement in Europe’s bailouts has also helped calm concerns over the debt crisis ahead of a meeting of euro zone finance ministers next week.

Earlier in the day, Asian shares posted modest gains. Japan’s Nikkei 225 index rose 0.3 percent to close at 8,793.12 as a softening yen helped Japan’s exporters.

Article source: http://feeds.nytimes.com/click.phdo?i=33955a94fbf1a8090a6f53282e701539

Wealth Matters: The Hidden Dangers In Safe Havens

“They fled the perceived risk of falling stock prices right into the assured risk of overvalued assets,” said G. Scott Clemons, chief investment strategist for the wealth management division at Brown Brothers Harriman.

What drove those decisions was not logic but fear — fear of a repeat of September 2008. And that fear may only have intensified when markets dropped again late this week, sending yields on 10-year Treasury notes to record lows and the price of gold above $1,800 an ounce.

Even if the fear is understandable, however, acting on it may not be the best long-term strategy.

“If you were right about the timing decision to get out, you’re going to have to be right again about when to get back in,” said Joseph W. Spada, managing director at Summit Financial Resources in Parsippany, N.J. “Even professionals have trouble doing it. If that’s not going to be your strategy, then don’t do it once.”

But now that people have done it once, what are the risks of holding on to large positions in gold and Treasuries?

TREASURIES While the economy may seem bad to many people, it would not take much improvement for investors to lose money quickly on their investment in Treasury bonds.

A week and a half ago, the 10-year Treasury note was yielding only 2.10 percent, after Standard Poor’s downgraded the United States’ credit rating. Since the yield of a bond moves in the opposite direction of its price, this meant demand for 10-year Treasuries was high.

If over the next six months, the yield were to move up another half of a percentage point to 2.60 percent, however, investors owning those bonds would have a negative 6.25 percent return, said Barbara Reinhard, chief investment strategist at Credit Suisse Private Banking in New York. If the yield curve were to move up a full percentage point during that time, the loss would be 14 percent.

She said such a quick increase could easily happen, as it did from October 2010 to January 2011 when the Federal Reserve began its second round of large-scale purchases of government debt, the program known as quantitative easing.

Now, plenty of people buy bonds with the intention of holding them until maturity. In doing that, it would seem that they would earn a return of 2.10 percent. But they would actually lose 1.5 percent, when the most recent inflation rate of 3.6 percent is factored in.

“That’s assuming inflation doesn’t rise,” Ms. Reinhard said. “Right now, you’re betting inflation will fall below 2.10 percent. You’re betting against history because inflation has been around 3 to 4 percent historically.”

This is not the brightest picture for people who added to their allocation of Treasury bonds. But many felt it was the only safe place.

J. D. Montgomery, a managing director at Canterbury Consulting, an investment consulting firm in Newport Beach, Calif., said he had a client who wrestled with where to put $5 million that he needed to keep safe. The client chose a three-month Treasury note, even though the interest was only $1,000.

There was at least some logic behind this. Most people who bought Treasuries were abandoning their investment strategy, and wealth advisers say that is more troubling than paltry returns.

“The risk of changing your strategy when it’s being tested as opposed to changing it when it’s not being tested is you risk derailing your long-term investment plan,” said Gregg Fisher, president and chief investment officer of Gerstein Fisher, a wealth management firm in New York.

So what should nervous investors have done? Selling Treasury bonds when everyone else was buying them would have been a start. But that might have taken too much discipline. Moving to cash was the top option because at least investors would have money ready when they felt comfortable returning to the markets.

GOLD Investors in gold are a different breed. They often have a passion for the metal that goes beyond returns. And they are not going to be swayed by arguments that gold, hovering around $1,800 an ounce, is overvalued.

“When you buy gold you’re saying nothing is going to work and everything is going to stay ridiculous,” said Mackin Pulsifer, vice chairman and chief investment officer of Fiduciary Trust International in New York. “There is a fair cohort who believes this in a theological sense, but I believe it’s unreasonable given the history of the United States.”

Article source: http://feeds.nytimes.com/click.phdo?i=aae92cb932f8390d4ee26965fec549ac

Economix: Debt Crises, Real and Fake

There are real debt crises — Greece is going through one — and there are fake ones, created by politicians playing chicken with the nation’s credit.

I expressed that sentiment in a column last week that ran in the Asian editions of The International Herald Tribune on Friday. The new Greek rescue caused me to write a different column for The Times, and the I.H.T. column never made it onto the Web. It follows.

FLOYD NORRIS

FLOYD NORRIS

Notions on high and low finance.

In the world of government bond markets, never have the haves been treated so much better than the have-nots. The haves can borrow for virtually nothing. The have-nots, if they can borrow at all, must pay exorbitant rates.

Yet politicians, even in the countries that investors seem to trust completely, talk of impending budget disaster if spending is not cut immediately.

This summer, as the markets offered a ‘‘no confidence’’ vote on Europe’s effort to rescue Greece — and grew notably more worried about Italy and Spain — they appeared to be highly confident about the debt of the United States government.

The yield on benchmark 10-year Treasury securities fell back below 3 percent this month, even as the Washington rhetoric about the debt ceiling heated up.

That was a sign that investors were not alarmed about a potential United States default, whether in the next few weeks or the next 10 years. If they were, rates would be soaring.

For much of the spring and summer, the proportion of people who believed that Congress would raise the debt ceiling seemed to vary based on the distance from Washington. The closer to Capitol Hill, the more doubt there was that rationality would prevail.

In politics, it appears, familiarity breeds contempt.

If rationality does prevail, the debt ceiling will be raised. For that matter, there is no good reason to have a debt ceiling other than to give politicians a chance to grandstand. The important decisions for Congress and the White House concern spending and taxing. Borrowing, or paying back debt as happened for a couple of years before the Bush tax cuts, is a result of the interplay of those decisions and the state of the economy.

Trying to control the result by putting limits on borrowing is a bit like trying to balance a household budget by waiting until the money has been spent and then deciding not to pay the bills.

To analyze the fiscal problems confronting the United States now, it is necessary not to confuse short-term and long-term problems. And it is crucial to pay attention to the state of the economy.

A weak economy will inevitably worsen the fiscal balance. Tax receipts fall because profits and incomes decline. Government spending increases on automatic stabilizers, like unemployment insurance payments.

To the extent high deficits are a result of a weak economy, a decision to react by cutting spending or raising taxes can lead to a vicious cycle. The solution, if possible, is to revive the economy even if that makes deficits temporarily worse.

One of the most important failures to analyze what was happening in the economy came in the late 1990s, when the United States government, to the surprise of almost everyone, began to run budget surpluses. Some of that was a result of tax increases and spending restraint, but a lot of it was caused by a completely unexpected and misunderstood surge in tax receipts.

That surge was the result of the bull market in stocks, and of the peculiar nature of it. Individual income tax payments soared both because of high capital gains and because profits from stock options are taxed at ordinary income rates, not the reduced rate charged on capital gains.

Most analyses ignored that. The conventional assumption was that the taxes on option profits were balanced by reduced taxes paid by companies. That would have been accurate if the companies were paying taxes and could use the additional deductions. But many of those companies — the heroes of the dot-com bubble — paid no taxes because they had no profits. So the extra deductions did them no good.

A proper analysis would have seen that the inevitable end of the bull market would reduce tax receipts, and a slowdown would increase government spending. In that sense, it is wrong to blame the Bush tax cuts for ending the surpluses of the Clinton years. They would have ended anyway. The deep tax cuts and the wars in Afghanistan and Iraq made the deficits that much larger.

There is a risk that many analysts now are making the opposite mistake. Deficits have skyrocketed in recent years for reasons that are clearly temporary, or that will be temporary if the economy recovers.
In some of the debate, the short-term problems are mixed up with longer-term demographic concerns caused by the aging and retirement of the baby boomers and the rising costs of Medicare, the health insurance program for Americans over the age of 65.

It is worth looking at what has happened to financial markets around the world since the financial crisis exploded. A mild slowdown turned into something much worse after the collapse of Bear Stearns in March 2008 showed the vulnerability of the financial system. Stock markets plunged around the world, credit dried up for many borrowers and there was a flight to safety. Central banks intervened with unprecedented measures and banks were bailed out. Deficits soared.

Now, more than two years later, the American stock market is about where it was in February 2008, just before the crisis hit. That may not sound impressive, but markets in nearly every other country are down sharply. The dollar has lost ground against the Swiss franc and the yen, but is up versus the euro and the pound.

The yields on government bonds — the price investors demand to lend money to the government — are down in countries with solid foundations, including the United States. They have soared in markets where default seems a real possibility, and are up in some European countries where investors are getting more nervous, including Italy and Spain.

That is a vote of confidence in Uncle Sam, at least relative to the alternatives.

Markets can be wrong, of course. But Europe is in far worse shape. Greece is insolvent. It must have its debt reduced, but a default could cause bank failures and substantial losses for the European Central Bank. Europe’s battles reflect the fact that there are no good alternatives. There is a crisis in Europe, where lenders now fear to tread. Would there be one in the United States if the politicians produced an unnecessary default? Let’s hope we will not find out.

Article source: http://feeds.nytimes.com/click.phdo?i=3c2d03e44c894fdd0b088fea8ed232e1

Stocks Are Down on Weak Monthly Jobs Report

The report from the Labor Department showed the economy added just 54,000 jobs in May, compared with the rise in nonfarm payrolls by 232,000 jobs in April. The report also showed that the unemployment rate rose to 9.1 percent in May from 9 percent in April. May’s payrolls number was well below the 165,000 forecast by analysts in a Bloomberg survey.

Investors had been digesting weak signals about the economy in the days leading up to the monthly report, with gloomy reports on jobs, manufacturing and auto sales that helped to send stocks down by more than 2 percent this week to their biggest declines in percentage terms since last August. Also this week, yields on 10-year Treasury notes fell below 3 percent for the first time in 2011 as investors prepared for the economy to slow.

Just after the market opened on Friday, the three main indexes fell more than 1 percent, but over time they started to retrace some ground.

At noon, the Dow Jones industrial average was down 61.72 points, or 0.50percent. The Standard Poor’s 500-stock index was down 6.54 points, or 0.5 percent. The Nasdaq composite index fell 18.16 points, or 0.65 percent.

The benchmark 10-year Treasury yield was down to 2.96 percent from 3.03 percent.

“The body of evidence suggested we were going to get a very weak number this morning, and that’s what we got,” said David Kelly, the chief market strategist for J.P. Morgan Funds.

“It would not be surprising if they reacted badly today,” Mr. Kelly said, referring to the financial markets. “For the last few weeks we have had this drip, drip, drip of bad economic numbers.”

“A lot of individual investors are skittish and they will sell first and ask questions later,” Mr. Kelly added. “But for the long-term investors it is better to ask the questions first.”

Lawrence Creatura, Portfolio Manager at Federated Investors, said investors were more risk averse than they were about a month a go.

“We are in an environment where the volatility of the underlying data is increasing,” Mr. Creatura said. “Today being a Friday, and being confronted with some pretty dark employment data, investors should be ready for anything.”

“Generally people are not going to want to carry too much risk over the weekend, and that may have an impact on pricing as we move through the day,” he added.

Gloomy reports on jobs, manufacturing and auto sales sent stocks down by more than 2 percent on Wednesday in their biggest declines since last August. Yields on 10-year Treasury notes fell below 3 percent for the first time this year as investors looked for the economy to slow.

After closing down 41.59 points, or 0.34 percent, on Thursday, the Dow was on track for its fifth consecutive weekly loss. The last time the index had closed lower for five consecutive weeks was the five-week period ending on July 23, 2004.

“We are entering a time of year where investors often get skittish, and it makes sense for everyone involved in the markets to buckle their seatbelts because the data indicates we may be in for a bumpy ride,” Mr. Creatura said.

But some economists expect the economy to pick up in the latter part of the year.

Mr. Kelly said he estimated economic growth to pick up, averaging above 3 percent in quarterly growth rates in the second half of the year compared with the 2 percent he forecast for the second quarter. He said a situation for a pick-up in growth was more likely than the country sinking into another recession because of factors including a weak dollar, easy monetary conditions and pent-up demand. Corporate profits are also poised to grow.

“For long-term investors that is still the way I would play this,” he added. “But in the short run this is going to raise a lot of fears about something worse.”

“Because of that, stocks are better value than bonds,” Mr. Kelly said.

Steven Ricchiuto, the chief economist for Mizuho Securities USA, said in a research note that the jobs report was weak enough to mean that the 10-year note would trade down toward 2.75 percent.

West Texas Intermediate crude prices for July fell below $100 before the market opened, to $98.60, down by $1.80.  An hour into the trading day, the price reflected a 42-cent decline to $99.98.

Article source: http://www.nytimes.com/2011/06/04/business/04markets.html?partner=rss&emc=rss

Stocks Slightly Higher Despite Weak Economic News

The Labor Department said more people applied for unemployment benefits last week, the first increase in three weeks. The number of people seeking benefits rose by 10,000 to 424,000, more than analysts were expecting.

Applications are above the 375,000 level that is consistent with sustainable job growth. Applications peaked at 659,000 during the recession. Employers stepped up hiring this spring, but some economists worry that rising applications for unemployment benefits indicate hiring is slowing.

The Commerce Department said the economy grew at a sluggish 1.8 percent annual rate in the January-to-March quarter as surging gasoline prices and sharp cuts in government spending overshadowed strong corporate earnings. Consumer spending grew at just half the rate of the previous quarter, less than previously estimated. A surge in imports widened the United States trade deficit.

Economists believe the economy is doing only slightly better in the current April-to-June quarter. Consumers remain squeezed by gas prices near $4 a gallon and renewed threats from Europe’s debt crisis.

At the close of trading, the Dow Jones industrial average was up 8.10 points, or 0.07 percent. The Standard Poor 500-stock index was up 5.22 points, or 0.40 percent. The Nasdaq composite index was up 21.54 points, or 0.78 percent.

The weak economic news drew investors toward safer assets. The yield on the 10-year Treasury note fell to 3.11 percent, near its lowest level of the year. It was trading at 3.15 percent shortly before the economic reports came out. Bond yields fall when their prices rise.

Microsoft rose 2 percent after a hedge-fund manager called for the company’s board to replace its chief executive officer, Steven Ballmer. Tiffany jumped 8 percent after reporting that higher sales lifted earnings. Concerns about the European debt crisis continue to weigh on markets. Stocks fell for three days before Wednesday’s gains, which came as higher oil prices lifted energy stocks.

Greece’s government and opposition party failed late Tuesday to reach agreement on how to pare the country’s debts, adding to the uncertainty surrounding Greece’s financial future. Many analysts believe Greece will eventually have to restructure its debt, possibly by extending interest payments or lowering interest rates.

Analysts are also concerned about how much of an impact the supply disruptions stemming from the March earthquake and tsunami in Japan will have on manufacturing in the United States, especially on factories making cars and electronic products that depend on component parts from Japan.

Some analysts think Japan’s supply chain problems could shave as much as one-half a percentage point from growth in the April-to -June period.

Article source: http://feeds.nytimes.com/click.phdo?i=6a7f970be2a5c3122e686176f6f14d4f