January 27, 2023

Wall Street Lackluster at the Open

Stocks on Wall Street opened broadly unchanged on Thursday after a seven-day winning streak and a jobless claims report that provided little insight into the Federal Reserve’s decisions about stimulus policy.

In early trading the Standard Poor’s 500-share index was 0.1 percent lower, the Dow Jones industrial average was flat and the Nasdaq composite 0.1 percent.

Initial claims for state unemployment benefits slipped 31,000 to a seasonally adjusted 292,000, the lowest level since 2006 and well below expectations of 330,000 new claims.

But the data was skewed due to technical problems in claims processing because two states were upgrading their computer systems and did not process all the claims they received during the week, muddying the last major reading on the labor market before the Federal Reserve’s next meeting.

The distorted data has made it hard for investors to reach any conclusions about the labor market, said Gordon Charlop, a managing director at Rosenblatt Securities in New York.

“But the fact of the matter remains, the direction is obviously towards tapering, which is really a good thing,” Mr. Charlop said. The question is, how measured the Fed will be in reducing stimulus, he added, “and you have to think they are going to err on the side of caution. They will be very measured in their approach and won’t do anything precipitous.”

The S. P. 500 has risen 3.4 percent over the past seven sessions, its longest winning streak in two months, as concerns about a Western military strike against Syria have faded and stocks have been buoyed by stronger-than-expected economic data from China.

The United States will insist Syria take rapid steps to show it is serious about abandoning its chemical arsenal, senior United States officials said, as Secretary of State John Kerry arrived in Geneva for talks with Foreign Minister Sergei Lavrov of Russia.

United States export prices fell 0.5 percent in August, its sixth straight monthly decline, while import prices remained flat. Expectations were for export prices to rise 0.1 percent and import prices to climb 0.4 percent.

Employment is a key component of the central bank’s planning for economic stimulus, known as quantitative easing.

The Fed will hold a two-day policy meeting ending next Wednesday when a decision is expected about whether to make changes to its current bond purchases of $85 billion a month to boost the economy.

The weakened dollar saw the euro push hold around $1.3309 as it recovers from the selloff seen last week last week following the European Central Bank’s commitment to maintain loose monetary policy despite signs of recovery in the euro area.

While the dollar bought 99.50 yen, down about 0.4 percent. It has moved away from Wednesday’s high of 100.60 yen, which was the highest since July 22, according to Reuters data.

European markets were mixed, with the FTSEurofirst 300 index up 0.1 percent. In Asia, markets were mainly higher, with the Shanghai composite ending the session up 0.6 percent.

Article source: http://www.nytimes.com/2013/09/13/business/daily-stock-market-activity.html?partner=rss&emc=rss

DealBook: With Romney Under Attack, Private Equity Fights Back

Mitt Romney, left, with William W. Bain Jr. in 1990. Mr. Romney began his rise in business working for Mr. Bain, who encouraged him to move into the private equity firm that he ran for 15 years.Justine Schiavo/The Boston GlobeMitt Romney, left, with William W. Bain Jr. in 1990. Mr. Romney began his rise in business working for Mr. Bain, who encouraged him to move into the private equity firm that he ran for 15 years.

It was a long-held fear of Wall Street’s private equity titans. If Mitt Romney won the Republican nomination in 2012, the industry would come under intense scrutiny and withering attacks from his opponents.

As Mr. Romney has established himself as the front-runner in the large Republican field, those fears have come to fruition.

So the private equity titans are fighting back.

The industry’s lobbying group has hatched plans to counter the intensifying criticism of private equity’s business practices. In the coming weeks, the group, the Private Equity Growth Capital Council, will roll out an image campaign, according to two people with direct knowledge of the plans who requested anonymity because they were unauthorized to discuss them publicly.

Initiatives include online advertising that will promote the industry as one that creates jobs and expands companies. The council plans to reach out to political reporters and columnists in an attempt to disabuse them of what it views as gross misconceptions about private equity. It will also hire more people in the coming months, adding to its lean 10-person operation.

“There is a lot of misinformation being spread, purely for political purposes and on both sides of the aisle, as it pertains to private equity,” Steve Judge, the group’s interim president and chief executive officer, said in a statement issued on Monday. “While the business model has evolved over time, the fact of the matter is private equity provides capital and operational expertise to companies that are often underperforming or on the brink of failure.”

Those comments were in direct response to the stepped-up attacks against Mr. Romney’s business record this weekend.

Newt Gingrich said Bain Capital, the firm Mr. Romney ran, looted companies and left people unemployed. “When Mitt Romney Came to Town,” a soon-to-be released film backed by Mr. Gingrich’s political action committee, focuses on four soured Bain deals, including one where it laid off a hundred steel workers in South Carolina. A number of investigative articles in the media have also raised questions about Bain’s investment record while Mr. Romney ran the firm.

This is hardly the first time that the industry has come under assault. In 2007, the world’s largest firms, including Bain Capital, formed the private equity trade group at the peak of the buyout boom. Within months, the industry became a symbol of corporate greed and excess, in part a result of the lucrative initial public offering of the Blackstone Group and a fin de siècle 60th birthday party thrown by its chief executive, Stephen A. Schwarzman.

Stephen A. Schwarzman, the chief executive of the Blackstone Group.Michel Euler/Associated PressStephen A. Schwarzman, chief executive of the Blackstone Group.

Congress, as it began to explore ways to cut the deficit, also homed in on what it saw as tax advantages enjoyed by Mr. Schwarzman and his private equity peers.

The trade group, originally called the Private Equity Council, fought back on tax reform, and has continued to lobby aggressively against it. It has so far succeeded in holding off any tax increase on private equity executives, though Congress is expected to again raise the issue this year.

One of the council’s core aims is to rebut what it views as negative stereotypes about the industry, promoting an image of private equity practitioners as job creators who fix and expand companies. It publishes studies and white papers with titles like “Driving Growth: How Private Equity Investments Strengthen American Companies.”

On its Web site it seeks to disprove various “fictions.” For example: “Fiction: Private equity firms are ‘quick flip’ artists that buy companies and sell them to make a fast buck.” It then tries to debunk the statement: “It takes time to grow and strengthen companies so that they are worth more to future buyers.”

The council has evolved in recent years. Originally a group of the 11 largest buyout shops, like the Carlyle Group and Blackstone, it expanded its membership ranks in 2010 and changed its name to the Private Equity Growth Capital Council.

The council’s rebranding, and its recruitment of smaller firms, was an attempt to promote the industry as doing more than just classic private equity transactions — the risky leveraged buyouts in which large amounts of debt are used to acquire big companies in deals that sometimes end up in bankruptcy.

But the council has had growing pains. Its first chief executive, Douglas Lowenstein, resigned last summer and the group has not yet found a permanent successor.

Last year, Mr. Romney’s former firm, Bain Capital, dropped out of the council. Bain’s partners decided to leave because of dissatisfaction with the group’s direction and the belief that its annual dues of nearly $1 million a year could be better spent elsewhere, according to a person with direct knowledge of the firm’s thinking.

Mr. Romney’s candidacy, combined with Bain’s withdrawal, have complicated the council’s lobbying and advocacy efforts, said two people with direct knowledge of its work. Most of the recent criticism of the industry has been focused on Bain, but the council has resisted directly refuting those attacks. It wants to remain nonpartisan and not appear in any way to be supporting Mr. Romney’s candidacy.

A number of the country’s top private executives — Blackstone’s Hamilton E. James and TPG Capital’s David Bonderman, for example — are big Democratic donors.

The private-equity-is-evil narrative first emerged during the 1980s, when buyout executives began using large amounts of debt to buy companies. They were branded as “barbarians at the gate,” which was the title of a 1990 book about the takeover of RJR Nabisco by Kohlberg Kravis Roberts.

A year before, The Wall Street Journal published a Pulitzer Prize-winning article by Susan Faludi about the human toll of K.K.R.’s leveraged buyout of the grocery chain Safeway. The article opened with a laid-off Safeway truck driver shooting himself in the head.

In 1994, Mr. Romney learned firsthand the power of a negative attack on private equity. That year, he started his political career by running for the Senate and challenging Senator Edward M. Kennedy. He promoted his record of job creation and building businesses at Bain.

Mr. Kennedy turned the tables on Mr. Romney by focusing on American Pad Paper, or Ampad, a company that, under Bain’s ownership, shed factory jobs and cut wages. The Massachusetts senator played television ads featuring laid-off Ampad employees, even though those layoffs occurred after Mr. Romney left Bain.

Mr. Romney later acknowledged that he was unprepared for Mr. Kennedy’s private equity assault.

“He characterized me as a coldhearted, unfeeling robber baron,” Mr. Romney said at the time, in an interview with The Boston Globe.

With Mr. Romney in the spotlight on a national stage and facing a well-funded Obama re-election campaign, the industry’s top officials know that Mr. Romney’s opponents will continue to push the portrayal of Mr. Romney as a fat-cat job-destroying deal maker.

“We were bracing ourselves for this but we’re not even in the general election yet,” said a senior private equity executive who spoke on the condition of anonymity. “Expect more pain.”

This post has been revised to reflect the following correction:

Correction: January 10, 2012

The first name of Hamilton E. James, the Blackstone Group’s top executive, was misspelled in an earlier version of this article.

Article source: http://feeds.nytimes.com/click.phdo?i=5ff1f0629752f9586a579eb9bc750619

Markets Rise on Effort to Help Europe

The European Central Bank, the United States Federal Reserve and three other central banks said Thursday they would provide European banks with unlimited dollar loans. The aim is to fend off worries that the banks could be weakened by their holdings of government bonds from Greece and other struggling European countries.

“It’s a pretty powerful action,” said Brian Gendreau, senior investment strategist at the Cetera Financial Group. “And it’s another piece of news that leads you to think the crisis in Europe could be on the road to resolution.”

The Dow Jones industrial average rose 186.45 points, or 1.7 percent, to close at 11,433.18.

The Standard Poor’s 500-stock index rose 20.43 points, or 1.7 percent, to 1,209.11. The index has jumped 4.8 percent this week but is still 10 points short of where it started the month.

Gold plunged $45, or 2.5 percent, to settle at $1,778 an ounce. Treasury prices fell, pushing their yields up. The Treasury’s benchmark 10-year note fell 26/32, to 100 12/32, and the yield rose to 2.08 percent from 1.99 percent late Wednesday.

The Nasdaq rose 34.52 points, 1.34 percent, to 2,607.07. The index has jumped 5.6 percent so far this week and is up 1.1 percent in September. The Dow is down 1.6 percent this month, the S. P. 0.8 percent.

Daniel Alpert, managing partner at Westwood Capital in New York, said the stock market had been overreacting to Europe’s debt crisis, swinging in response to each new development.

“Every time there’s news out of Europe that’s not bad, the market reacts positively, and that’s occurring on almost a nightly basis,” he said. “You’d think the U.S. economy might be part of what the market trades on, but the fact of the matter is, today and recently, it’s all been about Europe.”

Bank stocks led the market higher. The Goldman Sachs Group rose 3 percent to $107.97. Bank of America rose 4 percent to $7.33. Morgan Stanley jumped 7 percent to $16.59 after reporting that its chairman, John J. Mack, would step down at the end of the year.

The stock market’s gains were tempered by a mixed batch of economic reports. First-time claims for unemployment benefits rose by 11,000 last week, to 428,000. The New York and Philadelphia branches of the Federal Reserve also reported weak manufacturing in their regions.

On the positive side, factory output rose 0.5 percent in August, after increasing 0.6 percent in July. Autos and related products increased 2.6 percent, evidence that supply chain disruptions stemming from the Japan earthquake continued to ease.

Among stocks making big moves, HCA Holdings, a hospital chain, rose 12 percent to $20.84 after it said it would buy back more than $1 billion of its stock from Bank of America.

Research in Motion fell sharply in after-hours trading after falling less than 1 percent and closing at $29.54 in regular trading. The maker of BlackBerry mobile devices reported earnings and sales that came in far below Wall Street’s estimates.

The Swiss bank UBS fell 10 percent to $11.41 on news that a trader could cost the bank as much as $2.2 billion. The bank warned that it could post a loss for the quarter as a result of the unauthorized trade.

Netflix fell almost 19 percent to $169.25, the biggest drop among stocks in the S. P. 500 index, after the company said it expected fewer people to subscribe to its DVD-by-mail service as well as its streaming movie service.

Article source: http://feeds.nytimes.com/click.phdo?i=02812bdbc75367785a554681cdf8bf8f