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Markets Extends Its Rally

May 7, 2013 by Leave a Comment

Stocks rose on Tuesday, with the Standard Poor’s 500-share index extending its three-day rally to an intraday high, although profit-taking in technology shares capped gains.

In afternoon trading the S.P. was up 8.18 points, or 0.5 percent, to 1,625.68. The Dow Jones industrial average was up 76.91 points, or 0.5 percent, to 15,045.80. The Nasdaq composite Index rose 6.08 points, or 0.2 percent, to 3,398.96.

The tech sector, which had been among the gainers for the past couple of days, turned negative as a decline in Apple weighed heavily on the Nasdaq composite index.

Shares of First Solar and video subscription company Netflix were also down, pressuring the index.

Equities this year have gone without a sustained pullback as investors use any market decline to add to positions. Many analysts expect markets to trend higher, but some see a near-term pullback, citing a lack of positive catalysts and mixed economic data.

“The payroll report indicated that things are better than we were thinking in terms of growth, so until the market finds proof otherwise against the recovery, stocks will continue to move generally higher,” said Andres Garcia-Amaya, global market strategist with J.P. Morgan Funds in New York.

“There are still things to be concerned about, but stocks remain cheap and the biggest risk is to try and time a correction rather than follow the trend.”

Apple shares fell 0.7 percent in volatile trading after rising for the past three sessions. First Solar shares were off 9.2 percent after reporting earnings below Wall Street expectations late Monday. Netflix shares were off 1.9 percent.

Both Fossil and DirecTV reported earnings that surged past expectations. Fossil jumped 9.4 percent as one of the S.P.’s top percentage gainers, followed by DirecTV, up 6.8 percent.

Overseas, European shares rose about 0.3 percent on positive earnings, and the DAX in Frankfurt reached an all-time high after the release of data showing German industrial orders rose in March, confounding expectations of a drop.

Japan’s Nikkei stock market, which had been closed on Monday, jumped in a delayed reaction to Friday’s jobs data in the United States. The Nikkei ended the day up 3.6 percent. In Hong Kong the Hang Seng rose 0.6 percent and the Shanghai composite closed up 0.2 percent.

Article source: http://www.nytimes.com/2013/05/08/business/daily-stock-market-activity.html?partner=rss&emc=rss

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S.&P. 500 Reaches Another Record

May 6, 2013 by Leave a Comment

The Standard Poor’s 500-stock index closed at another record high Monday, pushing further above 1,600 as financial shares led the way after Bank of America’s settlement with MBIA.

Apple’s advance helped lift both the S.P. and the Nasdaq.

Bank of America said it would settle claims with MBIA for $1.6 billion, lifting shares of both companies as well as the S.P. financial sector index, which gained 1 percent. MBIA shares jumped 45.4 percent to $14.29 and Bank of America shares rose 5.2 percent to $12.88.

Apple shares were also among the top gainers after Barclays raised its price target on the stock. Apple shares shot up 2.4 percent to $460.71, leading both the Nasdaq composite index and the benchmark S.P. 500 higher.

The day’s gains followed a strong run in stocks since the start of the year. Supportive monetary policies that have kept interest rates low as well as solid earnings have helped to keep the market up. The S.P. 500 has gained 13.4 percent since Dec. 31.

“As long as you continue to have decent earnings reports and the support from central banks around the world providing liquidity, it’s going to be hard to derail this market, at least in the short term,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

The Dow Jones industrial average dipped 5.07 points, or 0.03 percent, to 14,968.89 at the close. But the Standard Poor’s 500 inched up 3.08 points, or 0.19 percent, to finish at a record 1,617.50. The Nasdaq composite index gained 14.34 points, or 0.42 percent, to close at 3,392.97.

During the session, the S.P. 500 also reached an all-time intraday high of 1,619.77.

Although weak economic data from the euro zone and China has caused concerns over the global growth outlook, Friday’s stronger-than-expected United States employment report fueled the gains that drove both the Dow and the S.P. 500 to record levels.

Warren Buffett, the chief of Berkshire Hathaway, said on Monday that low interest rates have made bonds “terrible” investments, but stocks are “reasonably priced,” and he continues to shy away from sectors such as media, where he cannot predict which will thrive in the long run.

But some analysts suspect the rally has little strength to keep going on.

The market “is discounting a tremendous amount of good news now, which I don’t think is going to be substantiated, and I don’t think it’s allowing for any possibility of bad news,” said Uri Landesman, president of Platinum Partners in New York.

Earnings have been mostly higher than expected, with 68.5 percent of companies surpassing estimates so far. At the same time, second-quarter estimates have fallen as outlooks remain more negative than positive.

Among Monday’s reports, Tyson Foods posted a weaker-than-expected quarterly profit and cut its full-year sales forecast. Its shares declined 3.3 percent to $24.10.

In contrast, Humana jumped 2.1 percent to $75.49 as one of the S.P. 500’s biggest percentage gainers. JPMorgan upgraded the stock to “overweight.”

But Johnson Johnson shares slid 1.3 percent to $84.68, weighing on the blue-chip Dow average.

General Motors stock also declined. The Treasury said it would begin another round of sales of G.M. stock acquired during the government’s bailout of the auto sector, and shares slipped 0.9 percent to $31.82.

Article source: http://www.nytimes.com/2013/05/07/business/daily-stock-market-activity.html?partner=rss&emc=rss

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Strategies: Dow Touches 15,000 but the Economy Lags

May 4, 2013 by Leave a Comment

Yet in the financial markets, it’s a much happier world. An epic rally in stocks has been roaring ahead, with the Dow Jones industrial average on Friday briefly surpassing 15,000 for the first time.

Thanks to the intervention of the Federal Reserve, the bond market remains improbably strong, too. The benchmark 10-year Treasury rate fell as low as 1.612 percent last week, driving prices, which move in the opposite direction, to stratospheric levels. That helped Apple sell $17 billion of bonds at yields once reserved for the sovereign debt of only the safest governments.

In short, it’s been a giddy time to be an investor. But while the financial markets are soaring, the real economy appears to be mired in an endless slog. That discrepancy raises a troubling question: How long can financial portfolios continue to swell if wages, employment and corporate revenue remain constrained?

Unfortunately, there is no clear answer.

“The beauty of economics is that we are still arguing about the causes of the start and the end of the Great Depression,” said James W. Paulsen, the chief investment strategist at Wells Capital Management in Minneapolis. “We’ll be debating these questions for the rest of our lives.”

Economists and market strategists have plenty of opinions, however, and Mr. Paulsen, who takes a glass-half-full perspective on the current situation, is no exception.

He says the stock market rally can continue so long as the economy keeps growing at what he prefers to call a “modest” pace, rather than a disappointing one. Despite evidence to the contrary — most crucially, stubbornly high unemployment — he maintains that the recovery is actually quite good under the circumstances. And, he said, it’s robust enough for American corporations to churn out solid profits that will bolster stock returns.

That provides no comfort for people who are out of work or earning inadequate wages, he said, but it may reassure investors and be useful for public policy.

Why? Mr. Paulsen has been arguing for years that the annual rate of economic growth is likely to remain in the low single digits because of a long-term demographic shift: the aging of the American population. The working-age population has been expanding less rapidly, at an annualized rate of 1.1 percent from 1986 to 2012, down from 1.7 percent from 1960 to 1985.

Mr. Paulsen favors liberalizing immigration rules, which would reverse this trend and spur more robust growth, he said. Until that happens, he said, “it’s possible that 4 percent annual growth is all we are going to get, and we should be happy with it.”

In the first quarter of this year, the annualized G.D.P. growth rate was only 2.5 percent, he points out, but it would have been 4 percent if the effects of government budget cuts had been excluded. Government austerity is a drag on the economy now, he said, but is likely to become less severe at some point, when a longer-term solution replaces the draconian budget sequestration.

Whatever the reason for less-than-stellar economic growth, American companies have been reaping handsome profits. And corporate America’s ability to preserve its profit margins has been a linchpin of the market rally, said David J. Kostin, the chief United States equity strategist at Goldman Sachs.

An important metric, recurring profit margin, has plateaued near 9 percent, according to his calculations, and as long as it continues at that level, it should be enough to propel the market upward. Last week was the heart of earnings season for American companies. More than 80 percent of the companies in the S. P. 500 have reported results for the first quarter and, by and large, they fared well, he said.

“The stock market is trading at fair value today, and I think it can continue to climb higher in line with earnings growth,” he said.

Goldman projects that the American economy will grow at a rate of 2 percent this year, he said. In the quarter, sales reported so far at S. P. 500 companies — which include revenue from faster-growing markets like China’s — were virtually flat, according to Thomson Reuters I/B/E/S. But profits grew 5.7 percent. “We aren’t seeing an extraordinary level of economic growth,” he said, “so companies need to take other measures to enhance profits.”

ONE thing that companies are doing is “being very careful about costs and about hiring,” he said, which helps explain the anemic labor market. And by borrowing at low rates, businesses can use the money for productive purposes or to engage in financial engineering.

They can buy back shares — thus increasing earnings per share — or increase dividends or both, which is what Apple plans to do with its borrowed billions. (Apple is keeping a cash hoard of more than $100 billion overseas, at least partly to avoid incurring a tax liability in the United States.)

Low interest rates will be with us a good while longer, Fed policy makers reiterated last week. They said they’d keep rates low as long as inflation was subdued and unemployment stayed high. In fact, they suggested that they might even add stimulus — increasing their $85 billion a month in bond purchases — if economic conditions worsen.

“For the stock market the Federal Reserve is the big wild card,” said Ed Clissold, United States market strategist at Ned Davis Research in Venice, Fla. “As long as the Fed and the other central banks keep pumping liquidity into the economy, our base case is that the cyclical bull market in stocks can continue.”

But Mr. Clissold said the lack of meaningful sales growth for S. P. 500 companies concerned him. Weak sales could presage a drop in profit margins, he said. And if profit margins decline sharply — by about 10 percent or so — history suggests that it’s time to say goodbye to the bull market. And that’s the least of it.

A sharp drop in sales and profit margins might also be an early indicator of an outright recession. That would bring untold pain to many people, not just stock investors.

For now, though, while he is scrutinizing the numbers closely, they appear to be benign.

It may not be a great economy, but the financial markets are partying on.

Article source: http://www.nytimes.com/2013/05/05/your-money/dow-touches-15000-but-the-economy-lags.html?partner=rss&emc=rss

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Jobless Data and Rate Cut Propel Wall Street

May 2, 2013 by Leave a Comment

Stocks rose on Thursday on strong job market data and hopes the first rate cut by the European Central Bank in 10 months would help shore up the euro zone economy.

By the end of trading the Standard Poor’s 500-stock index gained 0.9 percent, the Dow Jones industrial average was 0.9 percent higher, and the Nasdaq composite rose about 1.3 percent.

Data showed the number of Americans filing new claims for jobless benefits fell sharply last week to a five-year low. That followed a recent string of underwhelming data, including a slow rate of growth in factory activity in the United States and China.

In an effort to bolster the recession-hit euro zone economy, the European Central Bank cut interest rates for the first time in 10 months and held out the possibility of further policy action.

The central bank’s move followed Wednesday’s Federal Reserve statement that it would continue its bond buying scheme to keep interest rates low and spur growth, and added it would step up purchases if needed.

Earnings reports helped marginally, with Visa, up nearly 5.7 percent, as one of the highlights.

Market participants shifted focus this week to macroeconomic news as some of the biggest American companies have already reported earnings, according to Art Hogan, managing director at Lazard Capital Markets in New York.

“Three-fourths of the macro concerns this week have been positive. Factory activity was not anything to write home about, but the Fed, the E.C.B. and now jobless claims were good,” he said. “With a macro focus, the market seems to not be finding any resistance.”

General Motors rose 3.3 percent after reporting a stronger-than-expected quarterly profit as its North American business improved and its loss in Europe was smaller than Wall Street estimated.

Shares of Facebook Inc rose 5.6 percent after the social network said late Wednesday its mobile advertising revenue growth gained momentum in the first three months.

Other data showed the United States trade deficit fell more than expected in March as imports recorded their biggest drop since 2009, the latest sign of slowing domestic demand.

Article source: http://www.nytimes.com/2013/05/03/business/daily-stock-market-activity.html?partner=rss&emc=rss

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Wall St. Declines on a Day Of Disappointing Signs

May 1, 2013 by Leave a Comment

Signs of a slowing economy dragged down the stock market on Wednesday. Even the prospect of continued stimulus from the Federal Reserve did not help.

The three major market indexes fell by 0.9 percent. Small-company stocks fell even more as investors shunned risk. The yield on the Treasury’s 10-year note fell to its lowest point this year as investors moved their money into government securities.

Stocks sagged throughout the day, hurt by reports of a slowdown in hiring and manufacturing last month. Discouraging earnings announcements from major companies also did not help.

“Investors are going to be rattled by these numbers,” said Colleen Supran, a principal at Bingham, Osborn Scarborough. She expects stock market swings to increase after the early gains of the year.

The Dow Jones industrial average closed down 138.85 points, at 14,700.95 points. Merck, the giant drug company, had one of the biggest falls in the Dow after reporting earnings that disappointed investors.

The Standard Poor’s 500-stock index lost 14.87 points to 1,582.70. The Nasdaq composite index declined 29.66 points, to 3,299.13.

The stock market declined even though the Federal Reserve stood by its economic stimulus campaign after a two-day policy meeting. The Fed is maintaining its program to buy $85 billion in Treasury and mortgage-backed securities a month in an effort to keep interest rates low to encourage borrowing, spending and investing.

The Fed also raised concerns about the economy, noting that tax increases and spending cuts that kicked in this year were slowing growth.

“If you get a market that is purely built on free money, as opposed to solid fundamentals, investors should take pause,” said John Lynch, chief regional investment officer at Wells Fargo.

The Fed’s program has been one of the factors behind the stock market’s rally this year. But the market has stumbled in recent weeks after several reports suggested the economy might be weakening.

On Wednesday, a report showed that factory activity in April dropped to its slowest pace this year as manufacturers pulled back on hiring and cut stockpiles. Companies added just 119,000 jobs in April, the fewest in seven months, according to the ADP National Employment Report. The government will report on April employment on Friday, and the economy is expected to have added 145,000 jobs.

Company earnings drew investors’ attention.

Merck fell $1.31, or 2.8 percent, to $45.69 after cutting its 2013 profit forecast. The company said competition from generic versions of its drugs and unfavorable exchange rates hurt profit.

MasterCard eased $13.11, or 2.4 percent, to $539.80 after the payments processing company reported that revenue missed the expectations of financial analysts who cover the company.

About 70 percent of the companies that have reported earnings have topped the forecasts of Wall Street analysts, according to SP Capital IQ. Revenue has disappointed, though, with about 60 percent of companies falling short. That suggests companies are raising profits through cutting costs rather than increasing revenue.

In government bond trading, the 10-year Treasury note rose 12/32, to 103 10/32, pushing its yield down to 1.63 percent from 1.67 percent.

Article source: http://www.nytimes.com/2013/05/02/business/daily-stock-market-activity.html?partner=rss&emc=rss

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DealBook: Market Delay in Chicago Points Again to Technology

April 26, 2013 by Leave a Comment

A trader at the Chicago Board Options Exchange in March. Traders said Thursday's delay made the exchange unusually quiet.Scott Olson/Getty ImagesA trader at the Chicago Board Options Exchange in March. Traders said Thursday’s delay made the exchange unusually quiet.

9:24 p.m. | Updated

Trading on the nation’s largest options exchange was delayed for several hours on Thursday because of computer problems, the latest incident to highlight the vulnerability of markets to technological shocks.

The Chicago Board Options Exchange, which normally begins trading for most of its products at 9:30 a.m. Eastern time, returned to normal operations by early afternoon. But brokers who typically trade tens of thousands of options each day through the exchange sat on the sidelines for much of the morning.

The exchange trades options based on the Standard Poor’s 500-stock index and the VIX index, a popular barometer of investor sentiment about volatility in United States stock markets. The contracts are important tools among investors seeking ways to hedge their stock holdings.

The system failure was the second instance this week of technology intruding into the markets. Earlier this week, a message from The Associated Press’s Twitter account falsely reported explosions at the White House, causing the Dow Jones industrial average to plunge nearly 150 points in two minutes. The markets rebounded quickly after The A.P. said its account had been hacked.

Also, the market debut of Facebook was botched last May, and a blowup at Knight Capital rattled the markets and nearly toppled the firm.

In today’s rapid-speed electronic trading world, where high-frequency traders zip in and out of stocks and futures at speeds that are faster than the blink of an eye, the nation’s exchanges have sometimes struggled to keep up. Probably most famous is the “flash crash” of May 2010 that sent the Dow into a tailspin. It took regulators months to figure out how what caused the index, already down more than 300 points, to suddenly drop like a stone to a 1,000-point loss before recovering much of that within 20 minutes.

The malfunction in Chicago stoked fear again among regulators and reignited concerns about the market’s vulnerability to broader shocks.

“The recurrence of technology glitches in markets means we need not blindly accept that the whiz-bang machinery will always work as well as it should have,” said Bart Chilton, a regulator at the Commodity Futures Trading Commission. “On the contrary, we need to open our eyes to that fact.”

A news release from the exchange said the cause of delay was “an internal systems issue and not the result of any outside influence.” The exchange has told authorities that the problem stemmed from a “bug” in its computer software, said a person briefed on the matter who was not authorized to speak publicly. Although the exchange is still searching for the source of the problem, the person said, it assured authorities that it did not expect a repeat of the problem on Friday.

Analysts said while investors could find alternatives to S. P. 500 options, few good alternatives were available for the VIX index.

The first notice that something was awry at the exchange came soon after 8 a.m. Eastern time, when the exchange’s system said that some users were experiencing “issues” downloading certain products. The exchange delayed its opening, expecting to start trading about 10:15 a.m., according to notices sent to traders.

That opening never happened. For several hours the exchange could not provide an expected opening time. Finally, more than three and a half hours past its usual opening, the exchange said all trading would begin at 1 p.m. About a half-hour later, the exchange reported all systems were operating normally.

Justin Kaechele, a trader for BFL Trading, said he received news that the system was down minutes before trading was supposed to begin.

“A lot of companies had some trades planned at that time,” he said. “I don’t know what happened with those, but we had some unhappy customers.”

With nothing to do, traders said they made small talk about various things: sports, the headaches of buying a home, the rising cost of sending their children to private school.

Brian Gilbart, a trader for Belvedere Trading, said the absence of continuous action that normally filled the room could be strongly felt.

“It was eerily quiet,” he said. “The most quiet I’ve ever heard it.”

In an industry where every minute is an opportunity to make more money, the lost time was frustrating. “I think everybody’s mad,” Mr. Gilbart said when asked to describe the mood inside. “Brokers probably lost business.”

Observers said although the failure most likely idled investors trading the volatility index in the morning, it was fortunate that the equity markets were relatively quiet and stable.

“We would be having a very different conversation if the S. P. 500 was down 50 points or more,” said Mark Sebastian, the chief operating officer of Option Pit, an educational and consulting firm. “It is kind of a slow day, so this wasn’t a big deal.”

As the problems in Chicago emerged on Thursday, the Securities and Exchange Commission mobilized its “market event response team” in Washington, a collection of experts at the agency who monitor trading mishaps in real time, according to officials briefed on the matter. Concerns grew at the agency as the exchange failed to get back online.

“The S.E.C. staff became aware of the situation just before the opening this morning and has monitored developments throughout the day, as is our practice,” John Nester, an agency spokesman, said Thursday. “The commission staff will continue to consult closely with the C.B.O.E. to understand the precise reason for the trading interruption and remediation measures.”

The commodities agency also spoke to exchange employees, the officials said. But the agency stepped aside upon learning that the problems did not affect the futures side of the business.

The incident comes at a difficult time for the Chicago platform, as the S.E.C. increases its scrutiny of the nation’s largest exchanges. The S.E.C. is already investigating the exchange for not properly policing the markets. By Thursday afternoon, the officials said, the agency’s enforcement unit had not opened an investigation into the system problems.

Steven Yaccino contributed reporting from Chicago.

This post has been revised to reflect the following correction:

Correction: April 26, 2013

An earlier version of this post misspelled the name of a trader at Belvedere Trading. He is Brian Gilbart, not Brian Gilbert.

Article source: http://dealbook.nytimes.com/2013/04/25/system-failure-delays-options-exchange/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

DealBook: System Failure Delays Options Exchange

April 25, 2013 by Leave a Comment

The Chicago Board Options Exchange building.Scott Olson/Getty ImagesThe Chicago Board of Options Exchange building.

The Chicago Board Options Exchange opened after a delay of several hours on Thursday because of a system failure.

By early afternoon, the options exchange, the nation’s largest, said all of its systems were operating normally. But brokers who normally trade tens of thousands of options each day through the exchange sat on the sidelines for much of the morning, waiting for updates.

The exchange trades option based on the Standard Poor’s 500-stock index and the VIX index, a popular barometer of investor sentiment about volatility in United States equities markets. The contracts are important tools among investors seeking ways to hedge their stock holdings.

The system failure was the second example this week of technology intruding into trading in the United States. Earlier this week, a false tweet from The Associated Press that reported explosions at the White House caused the Dow Jones industrial average to plunge nearly 150 points in two minutes. The markets rebounded quickly after the A.P. said its Twitter account had been hacked.

It also comes on the heels of the botched stock market debut of Facebook last May, as well as a blowup at Knight Capital that rattled the markets and nearly toppled the firm.

In today’s rapid-speed electronic trading world, where high-frequency traders zip in and out of stocks and futures at speeds that are faster than the blink of an eye, the nation’s exchanges have sometimes struggled to keep up. Most famous is the “flash crash” of May of 2010 that sent the markets into a 1,000-point tailspin. It took regulators months to unravel what had transpired.

Now, the latest mishap in Chicago stoked fear among regulators and reignited concerns about the market’s vulnerability to broader shocks.

“The recurrence of technology glitches in markets means we need not blindly accept that the whiz-bang machinery will always work as well as it should have,” said Bart Chilton, a regulator at the Commodity Futures Trading Commission. “On the contrary, we need to open our eyes to that fact.”

A press release from the exchange said the delay was not the result of hacking but did not provide any more information about the system problem. Gail Osten, a spokeswoman for the exchange, declined to provide further information in an e-mail.

Edward Provost, the chief business development officer for the exchange, later said that a “software glitch” caused the failure, according to Bloomberg News. Mr. Provost made his remarks from an industry conference that he and other exchange executives were attending in Las Vegas.

Analysts said while investors could find alternatives to S.P. 500 options, few good alternatives were available for the VIX index.

The first notice that something was awry at the exchange came soon after 8 a.m. Eastern time, when the exchange’s system said that some users were experiencing “issues” downloading certain products. The exchange delayed its opening, expecting to start trading about 10:15 a.m. Eastern time, according to notices sent to traders.

That opening never happened. And for several hours the exchange could not provide an expected opening time. Finally, more than three-and-a-half hours past its usual opening, the exchange said all trading would begin at 1 p.m. Eastern time. About a half-hour later, the exchange reported all systems were operating normally.

Justin Kaechele, a trader for BFL Trading, said he got news that the system was down minutes before trading was supposed to begin.

“A lot of companies had some trades planned at that time,” he said. “I don’t know what happened with those, but we had some unhappy customers.”

With nothing to do, traders said they just waited, making small talk about things people typically make small talk about – sports, the headaches of buying a home, the rising cost of sending their kids to private school.

“We just sat in our booth and talked about personal stuff,” Mr. Kaechele said.

While waiting, said Brian Gilbert, a trader for Belvedere Trading, an absence of the continuous action that normally filled the room could be strongly felt.

“It was eerily quiet,” he said. “The most quiet I’ve ever heard it.”

In an industry where every minute is an opportunity to make more money, the lost time was frustrating. “I think everybody’s mad,” Mr. Gilbert said when asked to describe the mood inside. “Brokers probably lost business.”

Observers said while the failure most likely idled investors trading the volatility index this morning, they said it was fortunate that the equity markets were relatively quiet and stable.

“We would be having a very different conversation if the S..P 500 was down 50 points or more,” said Mark Sebastian, the chief operating officer of Option Pit, an educational and consulting firm. “It is kind of a slow day, so this wasn’t a big deal.”

Equity markets climbed higher during the morning, buoyed by robust corporate earnings. The S..P. 500 was up 13.09 points, at 1,591.94, in early afternoon trading.

As the problems in Chicago emerged on Thursday, the Securities and Exchange Commission mobilized its “market event response team” in Washington, a collection of experts at the agency that monitor trading mishaps in real-time, according to officials briefed on the matter. Concerns grew at the agency as the exchange failed to get back online.

“We have been monitoring developments, as is our practice,” said John Nester, an agency spokesman.

The commodities agency also consulted with the exchange, the officials said. But officials there stepped aside upon learning that the problems were contained to the equities side of the business.

The incident comes at a difficult time for the Chicago platform, as the S.E.C. ramps up its scrutiny of the nation’s largest exchanges. The S.E.C. is already investigating the Chicago exchange for not properly policing the markets. By Thursday afternoon, the officials said, the agency’s enforcement unit had not opened an investigation into the system problems.

The S.E.C. is also pursuing an investigation of how Nasdaq bungled Facebook’s public debut. The exchange said this week that it put aside $10 million to cover a potential fine from the agency.

Steven Yaccino contributed reporting from Chicago.

Article source: http://dealbook.nytimes.com/2013/04/25/system-failure-delays-options-exchange/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Wall Street Moves Higher

April 24, 2013 by Leave a Comment

United States stocks climbed on Tuesday in a broad rally, recovering from sharp declines set off by a bogus Associated Press Twitter post about explosions at the White House.

A false post by hackers about two explosions at the White House that supposedly injured President Obama provoked a steep drop in stocks, before they quickly recovered minutes later.

Thomson Reuters data showed the benchmark Standard Poor’s 500-stock index fell 14.6 points, or 0.93 percent, in the space of three minutes when the post hit the market. With the S.P. 500 valued at about $14.6 trillion at the time of the false Twitter post, the plunge briefly wiped out $136.5 billion of the index’s value.

“If that was true that had happened, that’s a justified sell-off, but because people suffer from information overload, people tend to overreact and don’t wait to substantiate things — that is the downside to a 24-7 news cycle,” said Jason Weisberg, managing director of Seaport Securities Corporation in New York.

“You want instantaneous pricing; you want all the advantages of the technology. Well then, you have to live by the negatives that the speed and expediency provide.”

The move was a reminder of the May 6, 2010, tumble in markets now known as the flash crash, when the Dow industrials dropped more than 600 points, eventually piling up a loss of about 1,000 points, in a few minutes before largely recovering.

Stocks had seen a solid advance before the tweet, lifted by a host of strong corporate earnings, including Travelers Companies, Netflix and Coach.

After the closing bell, Apple, maker of iPads and iPhones, climbed 4.9 percent to $425.95 after reporting second-quarter earnings and announcing plans to double the amount of capital it returns to shareholders.

The Dow Jones industrial average rose 152.29 points, or 1.05 percent, to close at 14,719.46. The Standard Poor’s 500-stock index gained 16.28 points, or 1.04 percent, to finish at 1,578.78. The Nasdaq composite index advanced 35.78 points, or 1.11 percent, to end at 3,269.33.

Netflix shares jumped 24.4 percent to $216.99 while Coach shot up 9.8 percent to $55.55. They were the S.P. 500’s two biggest percentage gainers.

Shares of the movie streaming service Netflix shot higher after it reported strong subscriber growth and earnings that beat expectations. Coach stock leapt after the company, which makes and sells upscale leather goods, reported higher-than-expected quarterly sales.

Travelers helped lift the Dow, up 2.1 percent at $86.35 after the insurer posted earnings that topped expectations and increased its dividend.

Earnings season has been largely positive, with more than 68.9 percent of S.P. 500 companies that have reported results so far beating expectations, according to Thomson Reuters data. Since 1994, 63 percent have surpassed estimates on average, while the beat rate is 67 percent for the last four quarters.

“We are encouraged to see the market focusing on fundamentals, because we had been in a period where the macro trade was pretty much driving things — whatever the global macro event was or political event was seemed to be affecting the movement of the markets for a period of time,” said Paul Mangus, head of equity research and strategy at Wells Fargo Private Bank in Charlotte, N.C.

The benchmark S.P. 500 index has risen 2.4 percent over the last three sessions.

Analysts see earnings growth of 2.3 percent this quarter, up from expectations of 1.5 percent at the start of the month.

Housing stocks ranked among the best performers, after Barclays raised its rating on the homebuilding sector to positive from neutral. The sector also got a lift from encouraging housing data, with new-home sales in the United States up 1.5 percent in March.

The PHLX housing sector index rose 3.8 percent, led by a 9.3 percent gain in Toll Brothers to $34.13.

Article source: http://www.nytimes.com/2013/04/24/business/daily-stock-market-activity.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

The Caucus: Hacked A.P. Twitter Feed Jars Markets

April 24, 2013 by Leave a Comment

Hackers hijacked the Twitter account for The Associated Press on Tuesday and sent out an erroneous message reporting explosions at the White House that injured President Obama.

Within minutes, Jay Carney, Mr. Obama’s press secretary, confirmed that the president was unharmed, and Julie Pace, the chief White House correspondent for The A.P., announced at a White House briefing that the account had been hacked.

Twitter suspended the account but by then the post had already moved markets. The Dow Jones industrial average abruptly plummeted more than 150 points, then surged back after it became clear there had been no incident.

A group calling itself the Syrian Electronic Army claimed responsibility for the attack. The group’s Twitter account is linked to the Web site Syrianelectronicarmy.com, an Arabic language Web site that broadcasts what the group says are its latest computer attacks. Even as the Twitter accounts for @AP and @AP_Mobile were suspended Tuesday afternoon, the Syrian Electronic Army was posting.

The A.P.’s account was the sixth prominent Twitter account to be hacked in recent months. On Saturday, three CBS-affiliated Twitter accounts were hacked and used to post suspicious links.

Hackers, saying they were part of the Syrian Electronic Army, claimed responsibility for hacking several NPR Twitter accounts last week as well as BBC Twitter accounts last month.

The episodes raise questions about the security of social media passwords and the ease of access to brand-name accounts. Logging on to Twitter requires the same process for a company as for a consumer — just a user name and one password.

Security experts say Twitter could do more. The company has yet to offer its users two-factor authentication, a service that texts a second login PIN to users’ mobile phones, to keep attackers from hijacking their accounts with a single, stolen password.

Microsoft rolled out two-factor authentication last week. Apple added it in March. Both Google and Facebook have offered the service for years.

“It’s a very established baseline,” said Mark Risher, co-founder of Imperium, a Silicon Valley start-up that aims to help social networks. “But there are costs, and user friction is introduced. You could put four deadbolts on your front door, but it’s going to be a pain every time you go to the drugstore. That said, why not offer it? I don’t have a good answer for that.”

Officials at Twitter did not return requests for comment. In the past, the company has said that security is something it does not take lightly. Twitter has automatic and manual controls to help identify malicious content on the site, and last year Twitter sued those responsible for five of the most-used spamming tools on the site.

But preventing hacking and identifying fake accounts continues to be more art than science. Security researchers estimate that as many as 20 million Twitter accounts on the platform are fakes, and real accounts continue to be catnip for hackers.

Security experts also say it is not clear whether two-factor authentication would have prevented the attack on The A.P.’s account. Paul Colford, a spokesman for The A.P., said the hacking incident was preceded by a “phishing” attempt on The A.P.’s corporate e-mail network. Employees had been sent e-mails with malicious links or attachments that, once clicked, would give an attacker a foothold.

“In the case of a phishing message, two-factor authentication would not eliminate the problem,” Mr. Risher said. “There are ways to circumvent this. I could create a fake Web page for Twitter and ask you to enter your user credentials.”

Mr. Colford said the phishing attempt had been blocked, raising the question of how hackers had grabbed credentials for the account.

This post has been revised to reflect the following correction:

Correction: April 23, 2013

An earlier version of this story incorrectly attributed a statement about a phishing attempt on The A.P.’s corporate e-mail system to a spokeswoman for the news organization. That person, an employee of The A.P., was not authorized to speak for the organization.

Article source: http://thecaucus.blogs.nytimes.com/2013/04/23/hacked-a-p-twitter-feed-sends-erroneous-message-about-explosions-at-white-house/?partner=rss&emc=rss

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Markets Jump on Hopes for European Action

April 23, 2013 by Leave a Comment

Stock and bond markets rallied on hopes that the E.C.B. would cut the benchmark interest rate for euro countries as early as next week. On Wall Street, the Standard Poor’s 500-stock index, the Dow Jones industrial average and the Nasdaq composite index all closed with gains of more than 1 percent, while the 10-year Treasury bond yield touched 1.645 percent, the lowest intraday level since Dec. 12.

Separately, the Dow Jones industrial average skidded more than 150 points briefly in mid-afternoon before recovering after the Twitter account of The Associated Press was hacked and a fake tweet about an attack on the White House was posted.

But outside of trading rooms, the European data were not likely to inspire any joy.

Besides pointing to continued decline in the euro zone economy, the survey of purchasing managers by Markit, a research firm, showed that Germany could be slipping into recession.

Germany has served as the main counterweight to economic malaise elsewhere in the euro zone, and a prolonged slowdown could delay a recovery on the whole Continent.

The Flash Germany Composite Output index issued by Markit fell to 48.8 in April from 50.6 in March, a six-month low. A reading below 50 is considered a sign that the economy is likely to contract. For the euro zone as a whole, the corresponding index was unchanged at 46.5, confirming that the region remains in a rut.

The German economy shrank 0.6 percent in the last three months of 2012. Another negative quarter would push the country into recession and present a problem for Chancellor Angela Merkel as her party campaigns to remain in power in elections this autumn. Meanwhile, the stubborn slowdown in the euro zone is likely to further inflame the debate about how much more austerity troubled countries in Europe can take.

Many political leaders are arguing for a greater emphasis on growth. José Manuel Barroso, president of the European Commission, said in Brussels on Monday that while countries need to continue cutting government debt and budget deficits, ‘’we need to complement this with proper measures for growth.’’

In Europe’s most troubled countries, there was little sign of a turnaround in growth. Economic activity in Spain declined 0.5 percent in the first three months of this year, the Bank of Spain said in a preliminary estimate Tuesday.

Still, markets cheered the pessimistic survey results because of expectations that they would prompt the E.C.B. to cut interest rates or take other action when its policy-making board meets May 2.

On Tuesday, the central bank of Hungary, which is not a member of the euro zone, cut its main interest rate to 4.75 percent from 5 percent. It was the bank’s ninth rate cut in as many months.

The benchmark French stock market index, the CAC 40, finished the day 3.6 percent higher, while the interest rate on France’s 10-year sovereign bond hit a record low of 1.706 percent. Other major European stock indexes posted gains of more than 2 percent while bond yields fell.

For France, the Markit output index rose to 44.2 in April from 41.9 in March, indicating that the pace of decline was slowing in the euro zone’s largest economy after Germany’s. But that tidbit of good news was clouded by a drop in the separate Insee indicator of the French business climate.

The decline in optimism among German purchasing managers might be the result of a deceleration in the pace of growth in China, which in recent years has become one of the most important markets for German products like automobiles and machinery. China has helped to compensate for weak demand in the rest of Europe.

‘’The last nine months have been very slow in our business,’’ said Joachim Schönbeck, a member of the management board of SMS Group, a German company that builds and equips factories to produce steel and other metals.

Article source: http://www.nytimes.com/2013/04/24/business/global/data-points-to-slowdown-in-germany.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,
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