April 15, 2021

Fight Over U.S. Budget Weighs on Shares

Concerns about the strength of the economy and the potential for a budget fight in Washington pushed the stock market down on Monday.

The Dow Jones industrial average fell 49.71 points, or 0.32 percent, to 15,401.38, while the Standard Poor’s 500-stock index dropped 8.07 points, or 0.47 percent, to 1,701.84. The Nasdaq composite index declined 9.44 points, or 0.25 percent, to 3,765.29.

The Dow jumped 147 points on Wednesday to close at a record after the Federal Reserve decided to keep its huge economic stimulus program intact. But that rally has been wiped out by anxiety over a budget and debt fight in Washington.

Investors initially cheered the Fed’s surprise decision to keep its stimulus in place because the program has helped sustain a bull run in stocks dating to March 2009.

Doubts have crept into investors’ minds, however, because the central bank thinks the economy is not strong enough for it to pull back the stimulus.

William C. Dudley, the president of the Federal Reserve Bank of New York, said on Monday that while the economy was improving, “the headwinds” created by the financial crisis were only easing slowly.

Kate Warne, an investment strategist at Edward Jones, said that while the stimulus looked positive at first blush, “at second blush, it says conditions weren’t as strong as we were previously thinking.” She added: “Markets are now responding to that.”

The Fed is buying $85 billion in bonds each month to hold down long-term interest rates and encourage borrowing and spending.

Financial stocks fell the most among the 10 industrial groups in the S. P. 500 index. Investors sold on concerns that earnings would be hurt by lower trading volumes of bonds and foreign currencies at investment banks.

Utilities were the best performing industry group in the S. P. 500 as investors sought less risky places to put their money.

Nike and Visa, along with Goldman Sachs, also began trading on the 30-member Dow Jones industrial average on Monday, replacing Alcoa, Bank of America and Hewlett-Packard.

The threat of a looming political showdown over the budget also weighed on investors.

The House of Representatives voted to defund President Obama’s health care law on Friday, a gesture that reminded Wall Street that the Republican-led House and the Democratic-controlled Senate are poised for a showdown over spending.

The debt ceiling must be raised by Oct. 1 to avoid a government shutdown, and a potential default on payments, including debt, later in the month.

“There seems to be a higher probability there will be more of a battle over that,” said Scott Wren, a senior equity strategist at Wells Fargo Advisors. “That could inject some volatility into the market.”

Also on Monday, the financial data firm Markit said its so-called flash, or preliminary, manufacturing purchasing managers index for the United States retreated to 52.8 this month from 53.1 in August, confounding analysts’ forecasts for an improvement. A reading above 50 indicates expansion.

Output growth accelerated but new orders slowed, suggesting “production growth is likely to weaken in the fourth quarter unless demand picks up again in October,” said Chris Williamson, Markit’s chief economist.

In government bond trading, the price of the benchmark 10-year Treasury note rose 10/32, to 98 9/32, and its yield fell to 2.70 percent, from 2.74 percent late Friday.

Article source: http://www.nytimes.com/2013/09/24/business/daily-stock-market-activity.html?partner=rss&emc=rss

Stocks Up as Traders Expect a Small Cut in Fed Stimulus

Wall Street indexes rose on Tuesday on expectations the Federal Reserve will make only modest changes to a monetary policy that has been highly supportive of stocks and other assets.

In afternoon trading the Standard Poor’s 500-share index gained 0.4 percent, the Dow Jones industrial average was 0.3 percent higher and the Nasdaq composite 0.7 percent.

The policy-setting Federal Open Market Committee was to begin its two-day meeting on Tuesday to discuss whether to scale back its monthly bond purchases, or quantitative easing. Many investors expect Fed chairman, Ben S. Bernanke, will announce a scale-back of purchases by $10 billion a month to $75 billion, while keeping rates close to zero.

“It seems like now the market is believing that tapering will be very well managed by Bernanke, that he knows exactly what the market is expecting and that he’s not going to disappoint,” said Jack De Gan, principal and senior adviser at Harbor Advisory in Portsmouth, N.H. “We know that the tapering will be subjective based on the economic information that is coming in, and that the interest rate policy will remains as it is for a very long time.”

Market sentiment was also pressured by President Obama who warned Republicans in Congress he will not negotiate over an extension of the federal debt ceiling as part of a budget fight.

The government’s economic data released on Tuesday showed United States consumer prices barely rose in August compared with July as the cost of energy fell, but an increase in rents and medical care costs pointed to a stabilization in underlying inflation that could allow the Federal Reserve to start trimming its bond purchases.

A separate report showed United States homebuilder sentiment was unchanged in September after four straight months of gains.

In Europe, markets ended the trading session generally lower, with the FTSEurofirst 300 index of blue chips off 0.5 percent. German Bunds edged lower after a survey from ZEW economic research organization showed German analyst and investor sentiment rose more than expected in September, prompting a search for higher yielding assets.

Asian markets also closed lower. Japan’s Nikkei stock average ended the session 0.7 percent lower, Hong Kong’s Hang Seng was 0.3 percent lower, and the Shanghai composite was 2.1 percent down.

In company news, Microsoft shares rose 0.4 percent to $33 after the company said it would buy back up to $40 billion of its shares and raise its quarterly dividend by 22 percent.

Apple shares, which closed below their 200-day moving average for the first time since August 2012, rose 1.7 percent.

Pandora Media shares were up 4.1 percent a day after the company warned that its business is slowing and proposed a follow-on offering of 10 million shares for capital expenditures, according to a regulatory filing.

Shares of Aéropostale jumped 20 percent after Sycamore Partners reported a 7.96 percent stake in the teen apparel retailer as of Sept. 9.

United States benchmark crude fell $1.45 a barrel, to $105.14, as easing worries over a potential military action on Syria calmed concerns of a disruption to Middle East oil supplies and after output resumed at a western Libyan oil field.

Gold fell 0.4 percent, to $1313.10 an ounce.

Article source: http://www.nytimes.com/2013/09/18/business/daily-stock-market-activity.html?partner=rss&emc=rss

Obama Warns Congress Not to Imperil Recovery

“Budget battles and debates, those are as old as the Republic,” Mr. Obama said before a friendly audience assembled in a White House annex. But, he added, “I cannot remember a time when one faction of one party promises economic chaos if it can’t get 100 percent of what it wants.”

A bloc of conservative House Republicans have said that unless Mr. Obama’s signature health insurance law is delayed or repealed, they will not support financing for government operations in the new fiscal year starting Oct. 1 or an essential increase in the nation’s borrowing limit in mid-October. Failure to act on federal funding would provoke a government shutdown; even worse, failing to increase the debt limit would leave the government unable to pay bills and creditors and ultimately threaten the nation’s default.

“The last time the same crew threatened this course of action back in 2011, even the mere suggestion of default slowed our economic growth,” Mr. Obama said, recalling that summer’s market-rattling showdown.

Mr. Obama’s remarks followed his administration’s release of a report chronicling the actions taken since 2008 to encourage job creation, save the auto industry, revive and regulate banking, and expand education opportunities.

But he spoke at a time when the economy, as he acknowledged, is still struggling to create enough jobs and his agenda faces opposition mostly from Republicans but also from some Democrats increasingly emboldened against a second-term lame-duck president.

Still, on the budget fight, most Democrats in Congress support the president, and with his comments he sought to rally them and to set up Republicans for blame should the fiscal fights end badly. He noted that in the past Republicans fought for more spending cuts to reduce deficits but that now, with annual deficits declining, they are making their fight over the health care law.

“The Affordable Care Act has been the law for three and a half years now,” Mr. Obama said. “It passed both houses of Congress. The Supreme Court ruled it constitutional. It was an issue in last year’s election, and the candidate who called for repeal lost. The Republicans in the House have tried to repeal or sabotage it about 40 times. They failed every time. Meanwhile the law has already helped millions of Americans.”

The president repeated his warning against “self-inflicted wounds” at the event, which was moved from the Rose Garden to the Eisenhower Executive Office Building because of rain. He proceeded with the event even as a shooting unfolded at a naval office building in Southeast Washington.

Mr. Obama was joined onstage by a group of people that White House officials said included “small-business owners, construction workers, homeowners, consumers and tax cut recipients.”

The president has struggled for years to balance the desire to claim credit for a slowly improving economy against the need to make sure he acknowledges the pain that many people still feel.

At the event on Monday, Mr. Obama recalled how close the country, and the world, came to another depression after the collapse of the investment bank Lehman Brothers in September 2008. The Lehman bankruptcy caused the credit markets to seize up, the unemployment rate to sour and economic activity to plummet.

Mr. Obama and his allies have for a long time said that the administration’s actions in early 2009, while extremely unpopular, were critical to holding off a worse collapse. Those include the decision to support President George W. Bush’s bailout of Wall Street, Mr. Obama’s own bailout for the auto industry and the passage of the economic stimulus program.

But while the unemployment rate has fallen to 7.3 percent — down from a high of 10.1 percent in late 2009 —millions of Americans are still struggling to find a job, and millions more are working at low-wage or part-time jobs and having trouble making ends meet.

That has been Mr. Obama’s message in the last several months as he has delivered speeches arguing for what he calls a “better bargain for the middle class.” In those speeches, he argues for investments in infrastructure, education, college aid and housing as a way to help middle-class Americans and those trying to get into the middle class.

The president is scheduled to deliver another one of his “better bargain” speeches in Kansas City, Mo., on Friday when he visits a Ford Motor Company assembly plant.

Article source: http://www.nytimes.com/2013/09/17/us/politics/obama-to-release-report-on-response-to-financial-crisis.html?partner=rss&emc=rss