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Stocks Fall as Traders Prepare for Fed Moves

August 19, 2013 by

Stocks lost ground on Monday, with each of the major indexes falling for a fourth straight session, as investors were hesitant to make new bets ahead of an expected shift in Federal Reserve policy that could lead to higher interest rates.

The Nasdaq was positive for most of the session, spurred by gains in technology shares, such as Apple and Google, before selling pressure in the last hour of trading turned the index negative. At the close of trading, Apple shares had gained 1.1 percent to $507.74 while Google advanced 1 percent to $865.65.

The Nasdaq composite ended the day down 0.4 percent. The Standard Poor’s 500-stock index closed down 0.6 percent and the Dow was down 0.5 percent.

The Fed’s policy of buying large amounts of bonds in an attempt to keep interest rates low has been credited with fueling the stock market’s solid gains in 2013. But many analysts expect that to change at the Fed’s September policy meeting.

With little expected this week in the way of economic indicators, market participants are focused on the minutes from the July Fed meeting, due to be released on Wednesday, for possible insights into policy makers’ thinking.

“The market is just sitting on its hands right now until Wednesday with the Fed,” said Terry Morris, senior equity manager for National Penn Investors Trust Company in Reading, Pennsylvania. “The market has made a big run year-to-date and now investors have to consider the possibility of rising interest rates that could be for real, because the economy is growing for real, as opposed to all the stimulus and there is the possibility of the stimulus tapering.”

Growing concerns about a pullback in the program contributed to the Dow’s largest weekly drop in more than a year last week. In the bond market, the United States benchmark 10-year note yield rose to a two-year high.

Trading volume has been light in recent sessions because of uncertainty over the Fed and few catalysts for investors, who have kept to the sidelines in most sessions.

European shares have outperformed over the last two months as the euro zone has pulled out of a recession, but on Monday indexes struggled. London’s FTSE ended the day down 0.5 percent, the DAX in Frankfurt fell 0.3 percent and CAC 40 in Paris closed 1 percent lower.

Rising debt yields in major economies make it harder for developing nations to finance growing current account deficits, and so emerging markets have taken a spill.

The Indian rupee slid as far as 62.73 to the dollar on Monday, emphatically breaching the previous low of 62.03. India’s central bank has tried to restrict how much Indian residents and companies can send offshore, but that only raised fears of outright capital controls that would further undermine the confidence of foreign investors.

Other Asian markets were mixed. The Nikkei in Japan ended the day up 0.8 percent, while Hong Kong’s Hang Seng was 0.24 percent lower.

With little expected this week in the way of economic indicators, market participants are focused on the minutes of the latest Fed meeting, expected on Wednesday.

A federal bribery investigation into whether JPMorgan Chase hired the children of prominent Chinese officials to help it win business is the latest in a series of legal and regulatory headaches for Jamie Dimon, the bank’s chief executive. JPMorgan shares closed down 2.7 percent.

Article source: http://www.nytimes.com/2013/08/20/business/daily-stock-market-activity.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Central Banks of Europe and England Pledge to Keep Rates Low for a While

July 4, 2013 by Leave a Comment

The bid to reassure investors brought the two central banks into closer alignment with the Federal Reserve, which, under Chairman Ben S. Bernanke, has adopted a policy of becoming more open about its intentions.

At the same time, they appeared eager to signal that they would not follow the Fed in preparing for a gradual withdrawal of economic stimulus.

Mario Draghi, the president of the European Central Bank, said at a news conference that crucial interest rates would “remain at present or lower levels for an extended period of time.” Until Thursday, the central bank had steadfastly refused to pin itself down on future policy.

“It’s not six months,” Mr. Draghi said. “It’s not 12 months. It’s an extended period of time.”

Mr. Draghi also said that the central bank was signaling a “downward bias” in interest rate policy, meaning further cuts were possible or even likely.

Only hours earlier, Mark J. Carney, who became governor of the Bank of England on Monday, made a similar break with tradition. The British central bank said in a statement that any expectations that interest rates would rise soon from their current record low level were misguided.

With their promises of easy money stretching toward the horizon, the central bankers offered more certainty to investors at a time when tensions in Europe are rising again. So-called forward guidance is considered one of the tools available to central banks, but it was one the European Central Bank and the Bank of England had not used before.

European markets reacted positively to the announcements, with the FTSE 100 in London closing 3.1 percent higher and the Euro Stoxx 50, a benchmark of euro zone blue chips, climbing 3 percent. (Markets in the United States were closed for the Fourth of July holiday.) The euro fell sharply, a development that was probably not unwelcome at the European Central Bank, since a cheaper euro makes European products less expensive in foreign markets, feeding exports. The British pound also fell.

Mr. Draghi said it was a coincidence that his central bank and Bank of England introduced forward guidance on the same day. Both left their main interest rates at 0.5 percent and did not announce any other policy moves. It was a day for talk rather than action.

“Mr. Draghi did what he does best today: intervene verbally to great effect,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, said in a note.

Mr. Draghi’s statement on Thursday came almost a year after he defused the euro zone debt crisis with a promise to do “whatever it takes” to preserve the currency union.

But after months of relative calm, Europe has been rattled in recent days by a political crisis in Portugal, which has raised questions about whether the region’s governments will be able to withstand popular discontent with their policies of cutting budgets to bring public debt under control. Investors have responded by pushing up the risk premium they demand on bonds issued by Italy, Spain and other troubled euro zone countries. Market rates on Italian and Spanish bonds retreated on Thursday after Mr. Draghi’s comments.

The commitment to keep rates low helps amplify the effect of rates that are already nearly rock bottom, by reassuring investors that they can count on easy money for the foreseeable future.

But some analysts saw Mr. Draghi’s statement as a bluff — a tacit admission that the central bank has run out of other ways to stimulate the euro zone economy.

“A change of a few words in the way he phrases the E.C.B.’s policy stance is an insufficient policy response to alter the — very troubled — course of the euroland economy,” Carl B. Weinberg, chief economist at High Frequency Economics in Valhalla, N.Y., said in an e-mail.

Jack Ewing reported from Frankfurt, and Julia Werdigier from London.

Article source: http://www.nytimes.com/2013/07/05/business/global/central-banks-of-europe-and-england-pledge-to-keep-rates-low-for-a-while.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Shares Push Higher as Fed Maintains Stimulus Program

March 20, 2013 by Leave a Comment

Fear of a revived debt crisis in Europe faded from the stock market on Wednesday, freeing the Dow Jones industrial average to touch another milestone.

After falling Monday on concerns that Cyprus would become the latest European nation to stir fiscal chaos, the Dow posted its second consecutive day of gains.

Stocks traded steadily higher for most of the day and spiked after the Federal Reserve said it would continue with aggressive measures to support the economy. The Federal Reserve chairman, Ben S. Bernanke, said the crisis in Cyprus posed no major risk to the United States economy.

The Dow was up 44 points shortly before the Fed announcement. It rose as much as 91 points shortly after the Fed released its policy statement at 2 p.m., reaching a milestone of 14,546 at 2:25 p.m.

The Fed said the nation’s economy had strengthened after pausing late last year, but still needed support from the central bank. The Fed plans to continue buying $85 billion in bonds a month indefinitely to keep long-term borrowing costs down and encourage investment. It also said it would keep short-term interest rates at record lows, at least until unemployment falls to 6.5 percent.

Interest rates were higher. The Treasury’s benchmark 10-year note fell 16/32, to 100 12/32, and the yield rose to 1.96 percent from 1.90 percent late Tuesday.

Unemployment fell last month to 7.7 percent, the lowest level in four years. The Fed does not expect the rate to reach its target until 2015.

The Dow closed up 55.91 points Wednesday, or 0.4 percent, at 14,511.73.

Stock markets were little changed on Tuesday despite rising uncertainty in Cyprus. Anyone watching “would conclude that the market decided Cyprus is overblown as an issue,” said Brian Gendreau, a strategist at the Cetera Financial Group.

Mr. Gendreau said traders had been concerned about what precedent might be set by Cyprus’s efforts to avoid a crisis. A plan to seize money from bank savings accounts was met with outrage, and the nation’s Parliament rejected the proposal on Tuesday.

The nation’s unusual status as an international financial haven makes it an unlikely road map for future rescue efforts.

“I think the market’s going to start looking at other things,” he said.

Cyprus was negotiating with international lenders, seeking support for its ailing financial system. Without a bailout deal, Cyprus’s banks could collapse, devastating the country’s economy and potentially forcing it to exit the euro currency group. That could roil global financial markets.

Attention returned to Europe this week after several months’ respite, during which traders focused on the strengthening economy in the United States and drove stocks to multiyear highs.

Over the previous two years, concerns about a breakup of the euro currency often dominated trading of United States stocks. The jitters receded after central banks provided enough extra cash to help prop up Europe’s commercial banks.

Among stocks making big news was FedEx. The company reported sharply lower quarterly earnings and said it would cut capacity to Asia. FedEx sank $7.33, or 6.9 percent, to $99.13.

Adobe soared after reporting strong first-quarter earnings. The company, which makes Adobe Reader and Photoshop, said it had picked up more subscriptions to online versions of its software products. The stock rose $1.71, or 4.2 percent, to $42.46.

In other trading, the Standard Poor’s 500-stock index rose 10.37 points, or 0.7 percent, to 1,558.71. The Nasdaq composite index rose 25.09, or 0.8 percent, to 3,254.19.

The S. P. 500 is just six points below its milestone of 1,565, reached in October 2007. It is up 9.3 percent so far this year.

The Dow is up 10.7 percent for the year. From March 1 through March 14, the index had a 10-day winning streak — its longest since 1996. The Dow rose 484 points, to 14,539, during that period. After a two-day dip on Friday and Monday, the Dow has added 60 points to 14,511.

Article source: http://www.nytimes.com/2013/03/21/business/daily-stock-market-activity.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Economix Blog: A Look at Taxing Marijuana

December 9, 2012 by Leave a Comment

Anthony Bolante/Reuters

Here’s a thought for a tax increase that might at least break some of the tension in the room between President Obama and John Boehner: a marijuana tax.

It’s not as ludicrous an idea as it might seem. This week, Washington became the first state in the nation where marijuana is legal for recreational use. Colorado is set to follow its lead soon.

The fact that some states are starting to relax their marijuana laws got analysts at the Tax Policy Center thinking. What if the drug were legalized nationwide and taxed?

The center looked at two studies, one of which estimated that a marijuana tax could bring in $9 billion a year in state and federal tax revenues and save roughly the same amount on law enforcement. (The study made certain assumptions about price and demand, and applied taxes comparable to those on alcohol and tobacco, as well as income taxes on those making money in the legalized trade.) Another study, which used the approximate tax on cigarettes as a benchmark, estimated that a marijuana tax could bring in $1.4 billion to California alone.

Now, of course, $9 billion isn’t much. One percent of the country’s gross domestic product is about $150 billion. And this year’s deficit is about $1 trillion. The tax increases and spending cuts set to begin taking effect on Jan. 1 if Mr. Obama and Mr. Boehner aren’t able to agree on a plan to head them off add up to about $600 billion.

Is a marijuana tax a bit fanciful in the near-term? Probably. Federal prosecutors aren’t planning on making it any easier for these states to tax marijuana. In fact, the White House and the Justice Department have been considering whether to pursue legal action against Colorado and Washington to block their new marijuana laws.

Article source: http://economix.blogs.nytimes.com/2012/12/07/taxing-marijuana/?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

World Stocks Waver on Last Trading Day of 2011

December 30, 2011 by Leave a Comment

BANGKOK (AP) — Global stock markets were mixed Friday on 2011’s last trading day and turned in heavy losses for the year after Europe’s debt crisis and natural disasters battered a struggling global economy. Japan’s benchmark hit its lowest close in 29 years.

Benchmark oil hovered below $100 per barrel and the dollar weakened against the yen but rose against the euro.

Asian traders recorded gains for the day Friday but markets in Tokyo, Shanghai and Hong Kong ended the year with double-digit losses.

Japan’s Nikkei 225 index, after three straight days of losses, rose 0.4 percent to 8,429.45, but it was the lowest closing since 1982. China’s benchmark gained 1.2 percent to close at 2,199.42 — still, a 20 percent loss for the year.

European shares were steady or slightly down in early trading. Britain’s FTSE 100 lost 0.2 percent at 5,555.92. Germany’s DAX was marginally down at 5,846.35 and France’s CAC-40 was nearly unchanged at 3,127.34.

Wall Street appeared headed for a lower closing, with Dow Jones industrial futures down 0.2 percent at 12,194 and SP 500 futures slipping 0.2 percent to 1,255.40.

Hong Kong’s Hang Seng Index gained 0.2 percent to close at 18,434.39 — a precipitous slide of 19.7 percent from a year ago. Singapore’s Straits Times Index closed down 1 percent at 2,646.35 — a 17.5 percent dive.

Australia’s benchmark SP ASX 200 ended the year at 4,140.4 — down 0.4 percent on the day and 14.5 percent lower for 2011. A day earlier, South Korea’s benchmark Kospi closed at 1,825.74 on Thursday — 11 percent down on its last trading session of the year Thursday.

Analysts said global stocks tumbled in lockstep, suffering from the effects of natural disasters, a wobbly recovery in the U.S. — and an escalating European debt crisis that has resisted repeated measures taken by the region’s governments and financial institutions.

“The big reason is Europe. Europe tried to muddle through without a real solution. They can save a small country like Greece, but they cannot save a big country like Italy. Two trillion euros in foreign debt — nobody in the world has that kind of money,” said Francis Lun, managing director of Lyncean Holdings in Hong Kong.

“Europe will enter a lost decade, a decade of no solutions and no growth,” he said. “Maybe except in Germany, their machinery is still selling.”

Japan’s benchmark plunged after the March 11 tsunami and earthquake disaster that destroyed huge chunks of the island nation’s northeastern region, left 20,000 people dead or missing and set off the world’s worst nuclear crisis since Chernobyl.

Disaster damage extended to key suppliers for major companies like Toyota Motor Corp. and Sony Corp., which suffered production disruptions. The Thai flooding that followed caused similar problems for automakers, including Honda Motor Co., but on a smaller scale.

The Tokyo market also saw two big-name brands lose much of their value.

One was Tokyo Electric Power Co., the utility that runs Fukushima Dai-ichi nuclear power plant, where at least three reactors went into meltdown after tsunami destroyed backup generators to keep power going at the plant.

Some officials say TEPCO may have to be nationalized because of ballooning losses and the costs to bring the reactors under control and compensate victims.

Another was camera and medical equipment maker Olympus Corp., whose offices have been raided by criminal investigators after fabricated accounting to cover up massive investment losses came to light.

A British executive, who has since resigned from the board, was first to draw attention to the dubious investments, and has become a celebrity figure raising questions about old-style Japanese management.

Across the board, Japanese companies have been slammed by the rising value of the yen, which erodes the value of revenue from exports.

The Nikkei lost nearly a fifth of its value over the past year. It nose-dived right after the disaster, recouped some of those losses in July, but then started a decline that has the benchmark hovering at below the March value.

Article source: http://www.nytimes.com/aponline/2011/12/29/business/AP-World-Markets.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Wealth Matters: The Best Investing Advice? Maybe Not the Conventional Method

October 28, 2011 by Leave a Comment

The best-performing funds over time were not necessarily the ones with the lowest fees, run by the best-known managers or focused on any particular strategy, according to more than 20 years of data examined by DAL Investments, an investment adviser and publisher of the NoLoad FundX newsletter in San Francisco. DAL analyzed the returns on 306 mutual funds for The New York Times.

Janet M. Brown, president of DAL Investments, said the deep dive was motivated as much by trying to figure out what worked as by testing the effectiveness of the firm’s own unconventional strategy. (More about that later.)

“The overall challenge of mutual fund investing is selecting funds in advance that people think will do well in the future,” Ms. Brown said. “The easiest thing would be to buy and hold or to select a manager with a good long-term track record and buy it and forget it. That was not an effective way of selecting funds.”

The 306 funds in the study were founded before 1989 and still exist. They all invest broadly with various styles and none concentrated on one sector. The data spans 21.75 years, from Dec. 31, 1989, to Sept. 30, 2011. The performance of the funds was measured against the Vanguard S. P. 500 Index Fund, which had annual returns of 7.65 percent during that time.

As much as people in the fund industry may want to measure their performance against a narrowly defined index, the reality is that most investors judge their returns against the S. P. 500, for better or worse.

So what did the study find?

PERFORMANCE Over the two decades of the data, no one investment strategy dominated, and most were successful for only four to five years, on average. Not one fund beat the benchmark every year.

In fact, most funds underperformed the S. P. 500 about a third of the time.

The top-performing mutual fund in the study was the FPA Capital Fund, which invests in small- and midcapitalization stocks, generally defined as companies with market capitalizations of $300 million to $10 billion. It had an annual return of 14.43 percent, and it beat the index 15 times.

The best manager against the benchmark was Bill Miller, chairman and chief investment officer of Legg Mason Capital Management. His Value Trust fund outperformed the benchmark in 16 of the 22 periods of the survey. Yet it ranked only 187, with an annualized return of 7.37 percent. This was lower than the benchmark.

The eighth-ranked fund in the survey, the Heartland Value, underperformed 10 times and still returned 11.66 percent annually. Its long-term performance demonstrated how stellar years attract the attention, but the bad years, when the fund kept losses in check, were more significant. The RS Investments Small Cap Growth fund, for example, underperformed the S. P. 500 more than it outperformed it, yet still beat it with an annual return of 9.85 percent.

The study also disputed the value of hitching your strategy to star managers. Mr. Miller was one example but so, too, were the various managers of Fidelity’s famous Magellan Fund. It underperformed the benchmark 14 times and ranked 222, with annual returns of 6.74 percent.

One reason star managers fail over the long term is that they become known for a particular style of investing that may go in and out of favor. DAL’s research found that no one style was dominant for the whole period. But funds focused on small- and midcap stocks did perform the best over this period. (Ms. Brown cautioned against reading anything into this for the future.)

“In my view, it has less to do with the brilliance of the portfolio manager as when their styles are in sync with the market,” she said.

EXPENSES One belief that investors take as gospel is that high expenses erode gains. On the one hand, this is obvious — the more that goes to the manager, the less that goes to you. But what the DAL study found was that there was only a slight correlation between lower expenses and higher performance. And the level of fees was not a determining factor in which funds beat the benchmark over the long term.

DAL divided the results into quintiles. Funds in the top performing group had fees that ranged from 0.45 to 2.01 percent. Funds in the middle had fees from 0.10 to 2.0 percent, while those in the worst-performing group had fees from 0.39 to 3.84 percent. (There were only three with fees higher than 2.5 percent.)

The expenses on the top-performing FPA Capital Fund were 0.87 percent. The average expense of the top 20 funds was 1.07 percent. The fund with the lowest expenses, the Fidelity Spartan 500 Index fund, was ranked 161st with an annual return of 7.58 percent.

The two worst-performing funds, the Stonebridge Institutional Small-Cap Growth Fund and Midas Magic, did charge the highest fees in the study at 3.4 and 3.84 percent. Their annual returns were 2.66 percent and 0.58 percent.

If expenses, and not return, were the primary concern, Ms. Brown said an investor should simply invest in an index fund and forget about it.

Article source: http://feeds.nytimes.com/click.phdo?i=8abfb36669fc2f720003a4d094ff3f9f

Filed Under: Your Money Tagged With: , ,