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Jobs Data Cements a Bad Week for the S.&P. 500

April 5, 2013 by Leave a Comment

Weak data on jobs tripped up Wall Street on Friday, capping the worst week of the year for the Standard Poor’s 500-stock index and throwing cold water on optimism that the country was finally poised for a sustained recovery.

The employment figures for March showed that employers added the fewest jobs in nine months and that more people gave up looking for work. Employers added just 88,000 jobs, according to the Labor Department’s monthly survey. That is half the pace of the previous six months. The report was far worse than economists had forecast and a disappointment for investors following positive signs on housing and the job market over the winter.

The Dow Jones industrial average fell 40.86 points, to 14,565.25, down 0.3 percent. The index was down as much as 171 points in the early going, but it rose gradually throughout the day. The Standard Poor’s 500 fell 6.70 points, or 0.4 percent, to 1,553.28. The S. P. was down 1 percent for the week. The Nasdaq composite index, which includes many technology companies, fell 21.12 points, or 0.7 percent, to 3,203.86.

The employment survey, one of the most closely watched economic indicators, dented investors’ confidence in the country’s economic rebound. The stock market has surged this year, and the Dow hit another high close on Tuesday. The index is still up 11.2 percent this year.

“Things are still looking decent, but there’s no doubt that this was a bit of a disappointment,” said Brad Sorensen, the director of market and sector research at Charles Schwab. “We’re watching to see: is this the start of another soft patch?”

The Treasury’s benchmark 10-year note rose 15/32, to 102 4/32, and the yield plunged to 1.71 percent, from 1.77 percent late Thursday. The yield declined to 1.69 percent at one point on Friday, the lowest since December. The benchmark rate has declined sharply over the last month, from 2.06 percent on March 11, because demand for low-risk assets increased as evidence mounted that domestic growth was slowing.

Technology stocks fell the most of the 10 industry groups in the S. P. 500, dropping 1 percent. Among big decliners in tech stocks, Cisco Systems shares fell 43 cents, or 2 percent, to $20.61. Oracle stock dropped 34 cents, or 1 percent, to $32.03.

Investors were cutting their exposure to risk, in addition to buying Treasuries, by playing it safe with companies that provide rich dividends and stable earnings. Utilities and telecommunications industries, for example, bucked the downward trend in the market, with both rising 0.4 percent on Friday.

The Dow Jones transportation average, which includes airlines like United and Delta and shipping companies like U.P.S. and FedEx, was down 3.5 percent for the week, its biggest weekly decline since September. The index is thought to be a leading indicator of the broader market.

Investors will shift their focus to earnings reports next week.

Alcoa, the first company in the Dow index to report earnings, will release its first-quarter financial results after the markets close on Monday.

Article source: http://www.nytimes.com/2013/04/06/business/economy/daily-stock-market-activity.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

High & Low Finance: A Central Bank Doing What Central Banks Do

December 22, 2011 by Leave a Comment

That should be the slogan of Mario Draghi, the president of the European Central Bank.

In recent weeks, the new president publicly insisted the central bank would never do any of the things that Germany opposed. The bank would not drastically step up its purchases of Spanish and Italian government bonds. It would not directly finance European governments. It would not backstop European rescue funds or print money that the International Monetary Fund could use to bail out governments.

It would do only what central banks normally do. It would lend to banks.

It turns out that may be enough to stem the European crisis for at least a few years, and go a long way to recapitalizing banks in the process.

That fact only became clear on Wednesday, although Mr. Draghi announced his intentions on Dec. 8, when the central bank said it would offer to lend money to banks for three-year terms, in unlimited amounts, at a very low rate.

In reality, it was an offer banks could not refuse. They will initially pay the central bank’s official rate of 1 percent. But if the bank lowers the rate in coming months — as it is widely expected to do — the rate on these loans will drop as well.

There is no limit on what the banks can do with the money. But there is an obvious, virtually risk-free, option. A bank can buy short-term securities of its own government and pocket the difference — up to four or five percentage points — for the life of the securities.

On the same day the central bank announced its lending offer, Mr. Draghi held a news conference at which he talked very tough. He said he was surprised that a speech he had made a week earlier had been widely interpreted as signaling the bank was ready to make large scale purchases of Spanish and Italian bonds. He threw cold water on the idea of the bank funneling money to countries through the I.M.F.

Many observers — including me — focused on what he told reporters, not on what he announced. Bond yields rose. The yield on three-year Italian bonds leaped to 6.6 percent on Dec. 8 from 5.9 percent. For Spain, the comparable rate rose to 5.1 percent from 4.6 percent. Stock prices plunged, with the main Spanish index down 2 percent and its Italian counterpart off more than 4 percent.

It was more than Mr. Draghi’s rhetoric that had misled the market. In normal times, borrowing from a central bank is seen as a sign of weakness, and banks hate to do it for fear word will leak out that they had to do it. And banks have come under pressure to raise more capital in part because of their exposure to dubious government paper. Would they really line up to buy more, even with favorable financing?

The answer is yes. On Wednesday, the European Central Bank announced that 523 banks would borrow a total of 489.2 billion euros ($640 billion). That was above virtually every forecast.

On Tuesday, the same day the banks were putting in their requests for loans, Spain held an auction of Treasury bills. A month earlier, it had to pay an annual rate of 5.1 percent on three-month bills and 5.2 percent on six-month securities. This time the rates were 1.7 percent and 2.4 percent. Credit that plunge to Mr. Draghi.

Rates have also fallen significantly on government debt out to three years, but the declines in longer term rates have been smaller.

It now seems obvious that this was what Mr. Draghi had in mind. Spain and Italy will be able to borrow money from the market at rates they can live with, but this move is unlikely to have much effect on long-term rates. If those stay high, the pressure for austerity, as Germany demands, will remain.

There is no assurance that the banks will use all, or even most, of the money they borrowed, to buy government securities. It would be nice if some of it were lent to the private sector to spur growth and investment. But the logic of putting it in two- or three-year government notes is obvious.

Spanish two-year securities now yield about 3.6 percent, while Italian ones offer 5.1 percent. A bank that uses central bank money to buy them will clear the difference between those rates and 1 percent. The spread will be a little larger when the central bank lowers rates in a month or two. The securities will mature well before the loans come due.

Floyd Norris comments on finance and the economy at nytimes.com/economix.

Article source: http://feeds.nytimes.com/click.phdo?i=05fe436cdbfbee31b368f84324daf29f

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Cold-Water Detergents Get a Cold Shoulder

September 17, 2011 by Leave a Comment

Even in Germany, where consumers tend to be more environmentally attuned than in the United States, manufacturers have discovered that cold-water washing is such a hard sell that they have relegated claims about it — and the attendant green benefits — to the fine print, choosing to emphasize other attributes.

“For selling, it is much more effective to focus on stain removal and whiteness, performance and price,” said Dr. Thomas Mueller-Kirschbaum, a senior vice president for research and development at Henkel, the German company that markets cold-water formulas under the Persil and Purex brands. “In market research, when you ask consumers, they currently don’t see the immediate benefit of saving energy.”

Of course, some consumers have long preferred to wash their clothes in cold water to prevent them from shrinking or the colors from fading, and many others wash darks or delicate clothes on the cold cycle.

But the idea of reformulating detergent so that all types of clothes can be washed in cold water is relatively new, at least in North America and Europe. (In Japan, consumers routinely do their laundry in cold water.)

About three-quarters of the energy use and greenhouse-gas emissions from washing a load of laundry come from heating the water — a practice that, scientists say, is often wasteful and unnecessary.

Procter Gamble, the consumer products giant that makes brands like Crest and Gillette in addition to Tide, takes credit for the innovation in North America, which emerged from an evaluation of the company’s energy footprint in 2003.

After realizing how much energy was used to heat water for laundry, Procter set a goal to convert 70 percent of all washing-machine loads to cold water by 2020; by Proctor’s estimate currently 38 percent of laundry loads globally were done in cold water.

But in trying to create Tide Coldwater, Procter’s scientists were confronted with a problem: hot water does help get clothes cleaner. In fact, thermal energy is one of three secrets to cleaning clothes, along with mechanical energy and chemicals.

“When you reduce one, you have to do better in the others,” said James Danzinger, a senior scientist who works on detergents for Procter Gamble.

So the company set its scientists loose to find new chemicals to compensate, and what they came up with was a detergent, Tide Coldwater, with different enzymes and surfactants that work better in cold water.

Tide Coldwater was introduced in 2005. Several competitors followed with their own cold-water formulas, including Purex from Henkel, Wisk from Sun Products and Biokleen from a small company by the same name.

Do cold-water detergents work? Consumer Reports ranked Tide Coldwater among its top detergents last year, though some of its competitors did not rate as high.

The chemical composition of the new cold-water detergents, which cost about the same as regular detergents, is “totally different” from what was found in detergents a decade ago, said Dr. Mueller-Kirschbaum of Henkel. Some even contain chemicals that coat fabric fibers so that they are less likely to absorb dirt in the interval before the next washing.

Tide Coldwater, by far the best-selling cold-water detergent, now accounts for $150 million in sales in the United States and $60 million in Canada, the company says. By comparison, regular Tide has well more than $1 billion a year in sales in the United States alone.

Article source: http://feeds.nytimes.com/click.phdo?i=f46ae324003f6d8247180732d918ddbd

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