October 25, 2021

Stocks Jump on Greek Debt Deal

But some analysts said that while the deal helped to give the financial markets confidence, there remained questions about its implementation, and that fully fixing the problems of excessive debt and weak growth could take years.

Still, after days of anticipation, the markets put whatever uncertainties remained behind them, at least for the short term. Stocks were up as much as 6 percent in Europe, and Wall Street’s three main indexes jumped more than 2 percent at the opening, putting the broader market higher for the year to date. Asia also closed higher.

It was a marked turn-around from just a few weeks ago, when anxiety over the European debt crisis helped push the broader market in the United States to the brink of a bear market. On Oct. 3, the Standard Poor’s 500 index was down 19.4 percent from its high on April 29.

The latest news from Europe came early Thursday, when officials from the European Union and the International Monetary Fund reached a deal with bankers to write down the face value of their Greek debt by 50 percent, hoping to reduce the ratio of the country’s debt to gross domestic product to 120 percent by 2020. Economists believe that is essential if Greece is not to default on its loans.

Officials also agreed that European banks would need to raise more capital and said they would increase the euro zone bailout fund to $1.4 trillion, a move that they hope will provide the capacity necessary to keep Italy and Spain from following Greece’s painful path.

The measures are not complete, but after anxiety had run high before the meeting, investors greeted the signs of apparent success by bidding stocks higher.

“I think it is a very good step but I don’t think it is the complete package,” said Russell Price, the senior economist with Ameriprise Financial. “That is going to take years to make sure some of these heavily indebted countries are going to be able to bring down their debt.”

Mr. Price noted that the agreement sent a message to the financial markets that the European leaders were “willing to do whatever it takes” to solve the problem.

“I think that has given the markets confidence in the system and that is really what is propelling” trading, he added.

In late trading in Europe, the Euro Stoxx 50 index, a barometer of euro zone blue chips, rose 5.7 percent, while the FTSE 100 index in London gained 2.6 percent.

Financial shares led European indexes. BNP Paribas rose 15 percent, Société Générale rose 13 percent, Deutsche Bank rose 15 percent and H.S.B.C. Holdings rose 4.3 percent.

On Wall Street, the Standard Poor’s 500-stock index rose 2.4 percent, turning positive for the year to date. The Dow Jones industrial average and the Nasdaq composite index were both up about 2.1 percent.

The United States 10-year Treasury bond yield rose to 2.27 percent, from 2.21 percent on Wednesday.

Anthony Valeri, a fixed income investment strategist for LPL Financial, said that the European deal, to an extent, removed one of the lingering risks to the market and more specifically, to the banking system.

“But the devil is in the details,” he added. “There are some implementation risks going forward.”

He said there were questions about participation in increasing the bailout fund.

“We don’t know the participation from private investors or the emerging market countries, as the case may be,” he said.

Another negative was that banks must meet a new core capital ratio of 9 percent by the middle of 2012, he added. That could mean they could either raise capital or shed assets, which would be a negative for the market because of the pressure on prices.

In Asia, shares were stronger almost across the board. The Tokyo benchmark Nikkei 225 stock average rose 2 percent, the Sydney market index S.P./ASX 200 rose 2.5 percent, and Hong Kong’s Hang Seng index rose 3.3 percent.

“Bank recapitalization, haircuts and more firepower for the rescue funds are supposed to form a euro-style bazooka,” Carsten Brzeski, an economist with ING in Brussels, said in a research note. “Even if there are still loose ends and unsolved questions, yesterday’s summit was an important step in the right direction.”

Shortly after the deal was announced, United States crude oil futures for December delivery rose 2.8 percent to $92.71 a barrel. Comex gold futures slipped were mostly unchanged, at $1,723.40 an ounce.

The dollar was mixed against most other major currencies. The euro rose to $1.4140 from $1.3906 late Wednesday in New York, while the British pound rose to $1.6059 from $1.5975. But the dollar fell to 75.83 yen from 76.17 yen, and to 0.8640 Swiss franc from 0.8810 franc.

Bond market movements showed investors moving out of the securities considered the most secure and into riskier assets.

The Federal Reserve on Thursday is starting a bond buy-back measure that will bump up prices on long-term notes, Mr. Valeri said.

Bond prices for embattled euro zone governments rose sharply, while the yields fell. The yield on Greek 10-year bonds was 22.16 percent, down 1.17 percentage points. Spanish and Italian bond yields also fell.

David Jolly reported from Paris.

Article source: http://www.nytimes.com/2011/10/28/business/daily-stock-market-activity.html?partner=rss&emc=rss

Consumer Inflation Shows Small Rise for May

Taken together, the reports reflect the impact of some of the global events that took place in recent months.

“Both of them are reflective of the slowdown in the economy that we have experienced over the last few months,” said Russell Price, a senior economist with Ameriprise Financial.

The Labor Department said in its monthly report that the Consumer Price Index, the most widely used measure of inflation, was up 0.2 percent in May, compared with 0.4 percent in April, and up 3.6 percent from a year earlier before seasonal adjustment.

The monthly rise in the C.P.I. was the lowest since November, when the index was up 0.1 percent, the department’s Bureau of Labor Statistics said.

Analysts had forecast smaller increases, expecting a monthly rise of 0.1 percent in May and a 3.4 percent rise for the 12-month period.

The overall C.P.I. index reflected rising food prices, with the food index up 0.4 percent, the same as the previous month. The energy index fell by 1.0 percent in May, including a 2.0 percent decrease in the gasoline component in May, making it the first time gasoline has declined since June 2010.

When the traditionally volatile prices for energy and food are stripped out, the core C.P.I. index in May recorded its largest increase since July 2008. It edged up 0.3 percent in May, compared with 0.2 percent in April, and reached 1.5 percent in the 12-month period, the department said. The monthly indexes for May were above analysts’ forecasts of 0.2 percent and 1.4 percent for the year.

Prices for clothes, shelter, new vehicles and recreation contributed to the price acceleration last month, the department said, while there were declines in airline fares, tobacco, and personal care.

In another report released on Wednesday, manufacturers in the New York region reflected less optimism about business conditions. The Empire State Manufacturing Survey, released by the Federal Reserve Bank of New York, indicated that conditions for New York manufacturers deteriorated in June, as measured by the survey’s general business conditions index, which fell 20 points to -7.8, dipping below zero for the first time since November of 2010.

Analysts had forecast a decline in the index but that it would remain above zero, at 14.

In addition, the future general business index fell compared with its level in May, suggesting that optimism about the next six months has deteriorated. It was down 30 points to 22.5, its lowest level since early 2009, the survey said.

The new-orders and shipments indexes posted steep declines and fell below zero, the report said. The indexes for number of employees, prices paid and prices received were also lower.

Mr. Price noted that automobile production in the United States declined in April after the March earthquake and tsunami in Japan, contributing to a moderation in business activity. Demand has softened because of the recent spike in gasoline prices.

“It affects just about every region,” Mr. Price said. “In the manufacturing report, the component shortages were the No. 1 factor, and then the broader softening that went along with the higher gasoline prices.”

A third report from the Federal Reserve showed that industrial production rose 0.1 percent in May, after no growth in April because of the Mississippi river flooding and the effects on business related to Japan, analysts said. The report showed a 0.4 percent increase in manufacturing production in May that was mostly offset by a 3.3 percent decline in electric utility production. 

“It is clear that supply chain problems emanating from Japan are still an issue — motor vehicle production fell again in May, but overall manufacturing is robust,” Daniel J. Meckstroth, the chief economist for the Manufacturers Alliance/MAPI, said in a statement. 

Article source: http://feeds.nytimes.com/click.phdo?i=4bb96604d7a2e5c21bcd4c2d3efe63ec

Wall Street Indexes End the Week on the Upside

The market’s three main indexes have been climbing steadily in recent weeks as quarterly results trickled out and proved better than expected in many cases.

While the one-day gains on Friday were minimal, they were enough to build on past advances and to push the broader market and the Dow to their best monthly performances this year.

The dollar, on the other hand, declined against its index of six currencies to a three-year low, said Brian Dolan, the chief currency strategist at Forex.com.

The euro was at $1.4839 on Friday, up from  $1.4821 on Thursday.

“It is weak across the board,” said Mr. Dolan of the dollar. “U.S. interest rates are low and going to stay low, and other central banks are tightening. There is very little on the fundamental horizon to alter that downtrend.”

But corporate results have surpassed many forecasts.

About 300 of the companies in the Standard Poor’s 500-stock index have reported quarterly results so far, and nearly 80 percent have said sales and operating earnings were higher in the first quarter than they were in the quarter a year ago, according to a survey compiled by Howard Silverblatt, the senior index analyst at Standard Poor’s.

Russell T. Price, the senior economist for Ameriprise Financial, said the first quarter had suffered some economic and financial shocks from the disaster in Japan and the higher oil prices fueled by turmoil in the Middle East and North Africa.

But he said quarterly results were “coming out so much better than expected.” He added, “It is a pretty good indication that corporate America is able to deal with the headwinds.”

Some companies benefited from the higher oil prices. Energy shares in S. P. were up more than 1 percent on Friday.

Exxon Mobil released results on Thursday that reflected an increase in higher oil prices in the first quarter, reporting a 69 percent rise in net income to $10.7 billion, or $2.14 a share. Its shares rose less than 1 percent to $87.98.

Occidental Petroleum rose 8.71 percent to $114.29 after it reported on Thursday that profit rose to $1.55 billion, beating forecasts.

Industrial shares were also up.

Caterpillar, the heavy equipment maker, climbed more than 2.4 percent to $115.41 after its first-quarter income of $1.23 billion a share topped Wall Street’s expectations.

The Goodyear Tire and Rubber Company was 12.04 percent higher at $18.15 after reporting a profit that was four times greater than forecast.

The markets were also partly lifted this week by the Federal Reserve statement on Wednesday that it would continue to stimulate growth with low interest rates.

The Dow Jones industrial average closed up 47.23 points, or 0.37 percent, at 12,810.54, a nearly 4 percent rise in the month and its best close since May 2008. Eighteen of the 30 components rose.

The S. P. was 0.23 percent, or 3.13 points higher, at 1,363.61, in its highest close since June 5, 2008. It rose 2.85 percent in April, its best monthly advance this year.

The Nasdaq was 1.01 points higher at 2,873.54, weighed down by Microsoft, which reported that its third-quarter profit was up 31 percent, but that revenue from the division that includes the Windows operating system fell 4 percent.

Microsoft was down by 2.96 percent at $25.92. Research in Motion, the maker of the BlackBerry, was down by about 14 percent at $48.65 after it lowered its forecast for the current quarter.

The market has also been assessing the latest indicators of growth and spending this week. The government reported on Thursday that the economy grew at a rate of 1.8 percent in the first quarter. Consumer spending increased 0.6 percent in March.

Interest rates were lower. The Treasury’s benchmark 10-year note rose 7/32, to 102 26/32, and the yield fell to 3.29 percent from 3.31 percent late Thursday.

Article source: http://www.nytimes.com/2011/04/30/business/30markets.html?partner=rss&emc=rss