July 22, 2017

Markets Soar to New Highs on Jobs Data

The indexes’ surge to fresh records was propelled by the announcement that the economy added 168,000 jobs in April and significantly more than had been initially reported in February and March.

The job growth is still barely enough to keep up with the expansion of the population, but just a few weeks ago stock prices were falling on fears that the labor market might be shrinking.

Investors have become accustomed to big slowdowns in late spring; downturns have hit about this time each of the last three years. This time around, though, the economic data is showing signs of improvement and there are few of the looming threats that sent markets into tailspins in previous years.

“We worried about a double dip each of the last few years,” said Michelle Girard, the chief United States economist at RBS Securities. “I don’t think we will get to that point this time.”

“The U.S. is on more solid footing than at any point in the last couple years,” she added.

The blue-chip Dow briefly rose above 15,000 before slipping back later in the day. But it still finished at a record, up 1 percent, or 142.38 points, at 14,973.96.

The S.P. 500 climbed 1 percent, or 16.83 points to 1,614.42. The Nasdaq composite index rose 1.1 percent, or 38.01 points to 3,378.63. The technology-heavy index is still well below the peak it hit during the dot-com boom in 2000.

The gains built on a nearly two-week long rally that has brought the S.P. 500 up 13.2 percent for the year. The dissipating concerns were also evident in the sell-off in Treasury bonds, which investors have flocked to in times of danger. The interest rate on the 10-year government bond rose to 1.741 percent, up 11.5 basis points.

Still, the outlook is not entirely rosy. Chinese growth, one of the few reliable engines of the global economy, has been slowing more than expected. Meanwhile in Europe, most countries have fallen into recession again. The Cypriot banking crisis earlier this year showed how sensitive traders still are to any flare-up of problems in Europe’s financial system. Last summer’s market swoon was set off by fears that Greece would have to leave the European Union.

But investors have been comforted by the European Central Bank’s insistence that it will provide a backstop if there are new problems on the continent. This week, the central bank dropped its benchmark interest rate to the lowest level ever in an effort to encourage economic growth. Stock indexes across Europe are up this year, and rose Friday after the jobs report.

The moves by the E.C.B. provide a reminder of just how important central banks have been in the market’s recovery since the 2008 financial crisis. In the United States, the Federal Reserve gave reassurances this week that it was not planning to taper off its economic stimulus programs any time soon.

While the easy money has been a big help to banks, there are signs that the Fed policy is beginning to provide support for the real economy as well. The employment report on Friday showed that the size of the United States work force grew in March, while the number of long-term unemployed shrunk.

But the new data, like many other recent economic reports, was more indicative of slow expansion than roaring growth. A survey of the American service sector, released Friday, showed the lowest level of growth since last summer.

“These numbers aren’t going to be bringing down the unemployment rate in a serious fashion,” said Jonathan Lewis, the chief investment officer at Samson Capital Advisors. “No one is going to say it is robust, but people were so geared up for a weaker than expected number that these numbers have led to a lot of buoyancy in the market.”

The meager growth has made it hard for companies to expand their revenues. In the first quarter of this year, revenues have been flat among companies in the SP 500, according to Thomson Reuters. But companies have used cost cutting, and the easy availability of credit to continue to rake in record profits, the most important factor in stock prices.

Share prices have risen so quickly this year that there are questions about whether it can continue without economic growth picking up. If it does slowdown, though, strategists are expecting it to be more gradual, unlike the vacation-interrupting crises of recent summers.

“The further we get from the crisis, the more it clear that central bankers have put a floor on the next big event,” Mr. Lewis said. “It seems less likely that you’ll have that sudden severe sell-off.”

Article source: http://www.nytimes.com/2013/05/04/business/daily-stock-market-activity.html?partner=rss&emc=rss

SAP Sees Profitability Rise on New Web Products

SAP, based in Walldorf, southern Germany, is betting on faster growing, web-based software products that are less vulnerable to the economic downturn as there are no upfront costs for program licenses, hardware or installation.

SAP said on Wednesday it expected operating profit this year to be 5.85-5.95 billion euros at constant currencies, up 12-14 percent from 5.21 billion in 2012, and beating an average analyst forecast for a 6 percent rise in a Reuters poll.

However, revenue growth in software and software-related services as a whole would slow to 11-13 percent this year after a 17 percent jump to 13.2 billion euros ($17.5 billion) last year, SAP said.

Software sales generate high-margin, long-term maintenance contracts and are an important gauge of future profit.

Goldman Sachs analyst Mohammed Moawalla said SAP’s outlook implied an improvement of 60-70 basis points in this year’s operating margin to 32.3 percent at constant currencies.

“We believe that 2012-13 are peak years of investments and we expect better operating leverage going forward,” he said in a client note, rating the shares ‘buy’.

SAP shares were up 2.5 percent by 6.00 a.m. ET, partly erasing last week’s drop when it announced worse-than-expected quarterly revenue and operating profit and investors feared it was failing to keep up with arch-rival Oracle.

Traders said SAP shares as well as those of software groups Cap Gemini and Software AG, were also helped by strong IBM results, published late on Tuesday.

Shares in UK peer Sage Group bucked the trend after it said conditions in mainland Europe were still challenging.

SAP last year splashed out $7.7 billion to buy internet-based computing companies Ariba and SuccessFactors. These so-called cloud services, which deliver services via the Internet from remote data centers, will approach revenues of 1 billion euros this year.

Profitability will also be boosted by a new product called Hana, which helps firms analyze large amounts of data quickly.

The product will have revenues of 650-700 million euros this year, up from 392 million euros in 2012, and will steal business away from its main competitor Oracle, the company’s co-chief executive Bill McDermott told reporters.

SAP said it still saw 2015 revenue above 20 billion euros.

($1=0.7526 euro)

(Reporting by Harro ten Wolde; Editing by Dan Lalor and Helen Massy-Beresford)

Article source: http://www.nytimes.com/reuters/2013/01/23/technology/23reuters-sap-results.html?partner=rss&emc=rss

Stocks Seek Direction

Investor sentiment in Europe was hurt by a report from the Z.E.W. economic research institute showing that confidence was declining in Germany. Z.E.W.’s economic sentiment indicator fell in November for a ninth straight month, dropping 6.9 points to minus 55.2 points, well below the historical average of 25.0 points and the lowest since October 2008, in the aftermath of the Lehman Brothers collapse.

The Z.E.W. report overshadowed data from the European Union showing that the bloc’s economy grew 0.2 percent in the third quarter from the second, as Germany and France pulled the laggards with them.

In the latest indicator of bond market stress, the Spanish Treasury auctioned €3.2 billion, or $4.3 billion of short-term debt securities at the highest interest rates it has had to pay since 1997, according to Reuters.

The Treasury sold most of the bills on auction, but paid an average yield of 5.022 percent to move the 12-month securities, compared to 3.61 percent in September, paid an average yield of 5.159 percent to move 18-month securities, up from 3.80 percent last month.

The yield on the Italian 10-year bond rose 33 basis points, or 33 hundredths of a percentage point, to 7.00 percent. Spanish 10-year yields rose 21 basis points to 6.25 percent. French 10-years traded to yield 3.60 percent, 20 basis points higher.

German and United States bonds, meanwhile, which are perceived as offering more security, rose in price, pushing down yields as investors left more risky assets. The German 10-year yielded 1.75 percent, while its United States counterpart was at 1.99 percent.

The spread, or gap, between German bonds, on the one hand, and French and Spanish bonds, on the other, reached the widest since the creation of the euro, according to Bloomberg News.

In early trading, the Dow Jones industrial average and the Standard Poor’s 500 index were both up about 0.1 percent.

The Euro Stoxx 50 index, a barometer of euro zone blue chips, fell 1.2 percent, while the FTSE 100 index in London was flat.

Financial shares were lower in Europe, with the largest British lender, HSBC Holdings, fell 1.0 percent, BNP Paribas, the largest French bank, falling 5.8 percent, and UniCredit, the largest Italian bank, falling 3 percent. Deutsche Bank, the largest German lender, fell 2.1 percent.

Asian shares fell. The Tokyo benchmark Nikkei 225 stock average fell 0.7 percent. The Sydney market index SP/ASX 200 fell 0.4 percent. In Hong Kong, the Hang Seng index fell 0.8 percent, but in Shanghai, the composite index managed to stay in positive territory, rising less than 0.1 percent.

U.S. crude oil futures ticked up 0.1 percent to $98.21 a barrel. Comex gold futures rose 0.1 percent to $1,779.70 an ounce.

The dollar rose against major European currencies. The euro slipped to $1.3562, down 0.5 percent from late Monday in New York, while the British pound slipped 0.3 percent to $1.5856. The dollar rose 0.6 percent against the Swiss currency, to 0.9135 francs. But the dollar fell 0.2 percent against the Japanese currency, to ¥76.96.

Article source: http://www.nytimes.com/2011/11/16/business/global/daily-stock-market-activity.html?partner=rss&emc=rss

Fed Caps Debit Card Fees for Merchants

The cap is a defeat for banks generally, although the news was not as bad as banks expected. The limits are significantly higher than the initially proposed cap of 12 cents a transaction laid out by the Federal Reserve in December. Banks currently charge merchants an average of 44 cents for a debit card transaction.

The rules were approved on a 4-to-1 vote by the Fed’s Board of Governors.

The new limits include a transaction fee of 21 cents plus an assessment of 5 basis points — 0.05 percent of the transaction amount — for fraud reduction costs, an element that could raise the overall fee by a penny or two on average. The rules would go into effect on Oct. 21, and the Fed is asking for public comment on the fraud portion of the fee cap.

The fee cap is a result of the Dodd-Frank financial regulation act, which was signed into law last July. The law required the Federal Reserve to determine whether the fees charged to process debit card transactions were “reasonable and proportional to the cost incurred” by the bank that issued the cards.

The law allowed, but did not require, the Fed to make an allowance in its fee cap for the cost of preventing fraud, which banks say is a substantial expense. Under the new law, the revamped fees are scheduled to take effect on July 21, the first anniversary of the signing of the Dodd-Frank Act into law.

In December, the Fed proposed a rule that that would cut the allowable “swipe” fee to an average of 12 cents a transaction from an average of 44 cents in 2009, when total interchange fees on debit and prepaid cards reached $16.2 billion, according to the Federal Reserve. According to merchant trade groups, retailers paid $20.5 billion in fees last year to accept debit cards, including processing fees.

Those fees rose significantly during the 2000s, the Federal Reserve found. In the early 1990s, when debit cards were first beginning to expand in popularity, card networks and banks often compensated merchants for the cost of installing terminals that allowed them to accept debit cards at the point of sale.

The direction of fees began to reverse in the mid-1990s, however, with merchants who accepted cards paying the card networks for processing.

Merchants asserted that banks and the major credit card networks steadily raised the fees they charged even as improvements in technology and economies of scale meant that the fees should be falling. And they charged that the two major card networks, Visa and MasterCard, unfairly controlled prices and stifled competition.

The card companies, in turn, said that along with greater debit card use came greater fraud, which the banks had to pay to police. In addition, they said, the costs reflected constant investments in technology, which gave faster transaction confirmations to consumers.

Card companies also frequently offered perks or rewards to debit card users, which also affected costs.

Debit cards grew faster than any other form of electronic payment over the last decade, increasing to 37.9 billion transactions, according to Federal Reserve research.

Congress exempted banks, credit unions and other debit card issuers with assets of less than $10 billion from the cap on debit fees. But officials from the Federal Reserve and the Federal Deposit Insurance Corporation raised doubts earlier this year that regulators could effectively require large banks to charge a lower fee and still allow small banks to charge a higher fee.

Ben S. Bernanke, the Fed chairman, told members of Congress that basic economics precluded such an arrangement — that retailers would naturally favor cards that resulted in them paying lower fees, leaving smaller banks to lose business despite the exemption from the fee cap.

Credit unions and community banks argued strongly against the fee caps, saying that a reduction in those fees might cause them to have to eliminate debit cards or to charge customers higher fees for checking accounts and other services. Large banks, too, said consumers would pay for any reduction in their revenue from debit fees, and some institutions said they might set limits on debit card use.

The debit card rules were the subject of a furious lobbying battle on Capitol Hill and at the Federal Reserve. A bill to delay the rules failed in the Senate earlier this month, garnering 54 votes but falling short of the 60-vote majority required for passage.

Article source: http://feeds.nytimes.com/click.phdo?i=59fd9ab940fc6f377bd60d6f8e9a9564