November 14, 2018

For Shares, a Flat End to a Rocky November

Stocks were flat on Friday as politicians remained at odds about how to settle the looming federal requirements for tax increases and spending cuts.

Trading has been choppy in the last two weeks as investors react to statements from policy makers on the state of discussions on how to avert a fiscal stalemate, which many economists say could pull the economy back into recession.

The Standard Poor’s 500-stock index was up 0.29 percent in November even as it suffered a slide of more than 6 percent from the month’s high to its low.

“Given the on-again-off-again ‘fiscal cliff,’ it’s rather surprising how resilient this market has been,” said David Rolfe, chief investment officer at Wedgewood Partners in St. Louis.

“Between now and the end of the year, there’s going to be an information vacuum outside the fiscal cliff, and I believe that resiliency will be tested.”

In contrast to the apparent calm in equities, the CBOE Volatility Index, a gauge of market anxiety, jumped 5.4 percent, its largest daily gain in two weeks.

The VIX also rose for the week, but posted a 14.7 percent decline for November.

On Friday, President Obama said a “handful of Republicans” in the House of Representatives were holding up legislation to extend tax cuts for middle-class Americans to try to preserve them for the wealthy.

Speaking shortly after the president, the House speaker, John Boehner, Republican of Ohio, said: “There is a stalemate; let’s not kid ourselves.”

Despite the divisive language, many market participants are betting that a deal will be struck — if only at the 11th hour.

Corporations continue to react to what is expected to be a higher tax burden next year. Whole Foods Market was the latest to announce a special cash dividend, of $2 a share, ahead of expected higher tax rates in 2013.

On Friday, the Dow Jones industrial average rose 3.76 points, or 0.03 percent, to 13,025.58. The S. P. 500 rose 0.23, or 0.02 percent, to 1,416.18. But the Nasdaq composite index dipped 1.79 points, or 0.06 percent, to 3,010.24.

For November, the S. P. 500 rose 0.29 percent, its smallest monthly change since March 2011. The Dow fell 0.5 percent and the Nasdaq gained 1.1 percent.

For the week, though, all three major stock indexes advanced, with the Dow up 0.1 percent, the S. P. 500 up 0.5 percent and the Nasdaq up 1.5 percent.

VeriSign shares dropped 13.2 percent to $34.15 after the company said the Commerce Department approved its agreement with ICANN to run the dot-com Internet registry, but VeriSign won’t be able to raise prices as it did before.

Stock in Yum Brands, the parent of the KFC, Taco Bell and Pizza Hut chains, slid 9.9 percent to $67.08 a day after the company forecast a decline in fourth-quarter sales at established restaurants in China.

After maintaining a close relationship for several years, Facebook and Zynga revised terms of a partnership agreement, according to regulatory filings. Now, Zynga, creator of the FarmVille online game, will have limited ability to promote its site on Facebook. Zynga’s stock fell 6.1 percent to $2.46. Facebook’s stock gained 2.5 percent to $28.

Apple’s latest iPhone received final clearance from Chinese regulators, paving the way for a December introduction in a highly competitive market. Its stock fell 0.7 percent to $585.28.

Interest rates were steady. The Treasury’s benchmark 10-year note rose 2/32, to 100 4/32, and its yield was unchanged at 1.61 percent.

Article source: http://www.nytimes.com/2012/12/01/business/daily-stock-market-activity.html?partner=rss&emc=rss

Wall Street Edges Back

The Dow Jones industrial average finished down 0.31 points at 12,815.08, as of 6 p.m. Monday. The closing level of the Dow was revised several times after trading closed. The New York Stock Exchange experienced a trading glitch during the day, forcing it to alter its normal procedure for determining the closing prices of some stocks.

The Dow spent the day alternating from small gains to losses, never rising more than 46 points or falling more than 32.

The Standard Poor’s 500-stock index edged up 0.18 points to 1,380.03. The Nasdaq composite fell 0.61, to 2,904.26.

Trading was light. The federal government and the American bond market were closed for Veterans Day, and no economic reports were released.

Federal spending cuts and tax increases are scheduled to begin with the new year, unless a divided Congress and the White House can find a compromise.

Some traders thought the tentative trading action was inevitable, because there has been no positive or negative news about the economy or the possibility of a deal to avoid the spending cuts and tax increases.

“Nothing good is going on,” said Scott Freeze, president of Street One Financial in Huntingdon Valley, Pa. “Everything forward-looking remains dreary.”

Last week, after voters returned a long-deadlocked and divided government to Washington, the Dow dropped 434 points in two days and had one of its worst weeks of the year.

Even if lawmakers work out a compromise, as they usually do, the political fight until then is sure keep investors on edge, pitching the stock market back and forth until the matter is resolved. Economists say the so-called fiscal cliff could cost the economy $800 billion and three million jobs and would steer the United States back into recession.

President Obama, a Democrat, and Speaker John Boehner, a Republican, have spoken of compromise but appeared to take firm stances on some issues. Mr. Obama will meet with labor representatives as well as other liberal groups on Tuesday. He will hold separate meetings with the business community on Wednesday.

The effect on the markets has been widespread. Fears about the American economy were blamed for keeping a lid on European markets and Asian markets, which closed mostly lower.

In Greece, lawmakers passed a new austerity budget, and the country’s international lenders drafted a report saying it had made progress in righting its finances. Greece is hoping the other euro countries will give it an additional $40 billion in bailout loans. The budget and the report are crucial steps toward that goal.

Still, the new bailout is no sure thing: some of the potential lenders must seek approval from their parliaments. Greece’s main stock market index closed down 3.6 percent.

Mr. Freeze of Street One Financial was among the underwhelmed. “At this point, all the Greek news is just noise,” he said. “None of these bailouts really solve the underlying problem. Now, if all of a sudden Spain became incredibly solvent and its unemployment rate went to 5 percent, then you’d see” a reason to buy.

Leucadia National announced it would buy the investment banking firm Jefferies Group. Jefferies’s chief will run the combined company. Stock in Leucadia, a holding company with investments in eclectic industries including beef processing and medical products, dropped 66 cents, or 3 percent, to $21.14. Jefferies shares soared $2, or 14 percent, to $16.27.

Article source: http://www.nytimes.com/2012/11/13/business/daily-stock-market-activity.html?partner=rss&emc=rss

Shares Edge Up as Budget Concern Clashes With Strong Economic Data

Stocks advanced slightly on Friday but failed to avert the worst week for markets since June, as investors turned their attention from the presidential election to the coming negotiations over impending tax increases and spending cuts.

The market gave up some early gains after President Obama and House Speaker John Boehner, in separate public remarks, made it clear that partisan sparring over taxes and budget cuts to address the deficit would probably dominate the next several weeks.

The Standard Poor’s 500-stock index finished Friday’s session up 0.17 percent, but it fell 2.4 percent for the week, its worst performance since early June.

“At this point, there’s no election, and there’s nothing else that can distract. The junk has filtered out and the politicians will be forced to make a decision on the fiscal cliff,” said Chris Hobart, chief executive and founder of the Hobart Financial Group, an investment management and financial planning company in Charlotte, N.C.

Early in the day, new economic data showed that consumer sentiment was at its highest level in more than five years, according to the Thomson Reuters/University of Michigan surveys, and that wholesale inventories jumped in September, according to a Commerce Department report.

Shares of Walt Disney fell 6 percent to $47.06, dragging on the Dow industrials, after the company reported results late Thursday. The company said future results would be under pressure because of declining home video sales and rising costs.

Groupon’s shares sank 29.6 percent, to $2.76, a day after the daily deal company’s results fell short of Wall Street’s expectations.

The Dow Jones industrial average edged up 4.07 points, or 0.03 percent, to 12,815.39 at the close. The Standard Poor’s 500-stock index rose 2.34 points, or 0.17 percent, to 1,379.85. The Nasdaq composite index advanced 9.29 points, or 0.32 percent, to close at 2,904.87.

For the week, the Dow fell 2.1 percent and the Nasdaq lost 2.2 percent.

Tech stocks managed solid gains in Friday’s session. An S. P. information technology sector index rose 0.6 percent.

Shares of Apple rebounded from their slide into bear market territory this week with a 1.7 percent gain on Friday to close at $547.06.

But the stock of the retailer J. C. Penney slid 4.8 percent to $20.64 and was the S. P. 500’s biggest decliner after the company reported a sharper-than-expected decline in quarterly sales at stores open at least a year.

Investors may be reacting to the prospect of higher tax rates next year by selling both losing and winning stocks for the year to reduce the tax impact from their positions.

International Game Technology, a maker of slot machines, gained 5.2 percent to $13.50 after reporting better-than-expected fourth-quarter earnings.

Lions Gate Entertainment jumped 14.3 percent to $16.68 after reporting better-than-expected earnings of $75.5 million, helped by the studio’s blockbuster movie “The Hunger Games.”

Interest rates were steady. The Treasury’s benchmark 10-year note rose 2/32, to 100 4/32, from 100 2/32 late Thursday, and the yield slipped to 1.61 percent from 1.62 percent.

Article source: http://www.nytimes.com/2012/11/10/business/daily-stock-market-activity.html?partner=rss&emc=rss

Loan Request by Uranium-Enrichment Concern Shakes Up Political Sides

That leaves Congress with a stark choice. It can either risk millions or billions of dollars to keep the company viable, or it will have to rely on domestic inventories and foreign-owned suppliers for a service that is crucial both to maintaining the country’s nuclear arsenal and for running its 104 nuclear power reactors.

The company, USEC, which formerly stood for United States Enrichment Corporation and was spun off by the government as a private company in 1998, runs a plant in Paducah, Ky., that uses 1940s technology to sort the two dominant types of uranium so the enriched product can be used as reactor fuel.

On the site of an old, shuttered factory in Piketon, Ohio, the company is trying to build a new one that would use giant centrifuges. Modern nuclear programs, from France to Russia to Iran, now use centrifuges because they consume about 95 percent less electricity per unit of sorting work.

For years, USEC has been seeking a $2 billion loan guarantee, but the Energy Department was reluctant to back it. And that was before the Solyndra bankruptcy cast a harsh light on the risks the government was taking to support private energy projects.

The Piketon project, though, has scrambled the usual balance of partisan politics. Even harsh critics of the Solyndra loan, including John Boehner, the Ohio Republican and speaker of the House, are demanding that the government come through with the loan. Piketon is about 100 miles from Mr. Boehner’s district.

The Obama administration is now asking Congress for a compromise that would give USEC $300 million for further development of its centrifuges, and allow the company to demonstrate that they are durable enough to warrant a full-scale plant.

Those opposed to the loan guarantee say there is not enough of a market for the product to justify another enrichment technology at such a heavy cost.

Henry D. Sokolski, the executive director of the Nonproliferation Policy Education Center, said Piketon was not a good bargain for taxpayers. “This thing has got more than nine lives, and none of them are worth living,” he said. “It will not do to whine about Solyndra and wink at this.”

But the company, based in Bethesda, Md., points out that it provides nuclear fuel to one reactor for which foreign fuel or fuel from a foreign-owned company cannot substitute, because of rules against nuclear weapons proliferation.

That reactor, a civilian one owned by the Tennessee Valley Authority, is used by the Energy Department to make tritium, a perishable material for nuclear bombs. (Submarine and aircraft carrier reactors can use highly enriched uranium from old inventories, some of it left over from decommissioned weapons.)

There is also the anxiety over the United States not being self-reliant. “How much more technology are we going to lose?” said Andrew C. Kadak, a senior nuclear expert who was formerly the head of a nuclear power company and later a professor at M.I.T. “There’s a policy question that needs to be answered: do we as a nation want to be independent of foreign sources of energy?”

Others are pushing support for USEC as a measure that will support American jobs and competitiveness. “I don’t understand why the government hasn’t provided a loan guarantee to USEC,” said Jim H. Key, the vice president of the United Steelworkers chapter that represents the workers at Paducah. The plant employs about 1,200 people. “I can’t see us as a country ever putting ourselves in a situation where we have to rely on a foreign country for another source for our energy needs,” he said.

USEC’s long-term future is in doubt for several reasons.

The company has kept itself afloat for 20 years in part by acting as the agent for the United States government in a deal with the Russians, to take uranium from former Soviet nuclear weapons and blend it down to a level useful in power reactors. But that deal comes to an end in 2013, and the American utilities have been discussing signing supply contracts directly with Russia, which would reduce their reliance on USEC.

Article source: http://feeds.nytimes.com/click.phdo?i=a6ed03b8f28e0b55980c2d2bc3adb88e

Economix: Debt Fixes’ Drag on the Economy

CATHERINE RAMPELL

CATHERINE RAMPELL

Dollars to doughnuts.

As we explained earlier this week, almost every possible outcome of the current debt talks debacle will most likely be bad for the fragile recovery. Macroeconomic Advisers, an economic forecasting firm, has now estimated how the leading proposals for fiscal consolidation — from the House speaker, John Boehner, a Republican, and the Senate majority leader, Harry Reid, a Democrat — would affect the economy over the next decade.

As you can see in the chart below, both legislators’ packages are expected to drag on economic growth, since cutting government spending has ripple effects throughout the economy.

Decline in economic growth, relative to March adjusted baseline from Congressional Budget Office.Sources: Macroeconomic Advisers LLC; Congressional Budget OfficeDecline in economic growth, relative to March estimates from Congressional Budget Office.

The economic forecasts are based on the Congressional Budget Office’s scoring of the two legislators’ proposals, including two different versions of Mr. Boehner’s plan. He recently amended his original proposal to front-load more of the spending cuts in order to appease some of his more conservative colleagues.

Even so, Mr. Boehner’s proposal still has smaller spending cuts than Mr. Reid’s, and as a result, it hurts economic growth less.

The new Boehner plan would slow gross domestic product growth by an average of 0.1 percentage point per year for the fiscal years 2012 through 2015. By contrast, the Reid plan would slow growth by about 0.25 percentage point on average during the same period, with the biggest annual drag at nearly 0.5 percentage point in the 2013 fiscal year.

Those drags may sound minuscule, but given the depths of the recession and how far the American economy already is from its full potential, their effects will be painful. And should these austerity measures wreak so much havoc that they actually throw the economy back into recession, the country’s debt problems would actually get much worse, since downturns mean smaller tax revenues.

One important caveat, however: A significant portion of the deficit savings in Mr. Reid’s plan comes from scaling back war spending. It’s not clear how easy this would be to execute, as such military spending cuts would very likely be fiercely opposed by Republicans.

Article source: http://feeds.nytimes.com/click.phdo?i=3a33d3a7137a2cf1f98661cc41ca3aab

Shares Decline as Wall Street Waits on Washington

Wall Street stocks fell Tuesday as Washington lawmakers remained in a bitter stalemate over how to resolve the nation’s debt problems.

Republican and Democratic leaders have offered competing proposals to avoid a catastrophic default on the government’s debt. But a resolution still appeared a long way off. President Barack Obama called for a compromise in a televised address late Monday, but House Speaker John Boehner said efforts to negotiate with the White House had been futile.

By mid-morning, Dow Jones industrial average was down 89.04 points, or 0.71 percent, to 12,503.76.

The Standard Poor’s 500-stock index 6.70 points, or 0.50 percent, to 1,339.73, and the Nasdaq composite index lost 8.62 points, or 0.30 percent, to 2,834.18.

“Right now, everybody’s just on pause, waiting to see what happens with the debt ceiling,” said Dan Neuger, head of American and European active equities at PineBridge Investments.

Worries about debt problems in the United States and Europe have caused the VIX, a measure of the stock market’s volatility, to rise 17 percent in July. But stocks are still up for the month. Through Monday, the Dow was up 1.4 percent, while the S.P. 500 was up 1.3 percent. The Nasdaq composite was up 2.5 percent.

One reason for the gains: stronger earnings. Companies in the S.P. 500 are on track to report record profits in the second quarter. Earnings are expected to rise 12.5 percent compared to the same period a year ago, according to FactSet. Revenue is expected to jump 8.3 percent.

Ford rose about 2 percent after the company’s sales rose more than analysts expected. Its profit fell 8 percent, though, as it spent more on raw materials like steel and copper.

Lockheed Martin rose nearly 3 percent ahead of the opening. The military contractor raised its 2011 earnings forecast after reporting that its profit dipped, in part, because of charges tied to job cuts.

United Parcel Service said its earnings rose 26 percent, helped by continued strength in Asian and European exports. But its stock slipped about 1 percent after its revenue came in lower than analysts had anticipated.

JetBlue also fell about 1 percent after its earnings dropped 19 percent because of higher costs for fuel and maintenance.

Bond yields fell slightly, pushing prices higher. The yield on the 10-year Treasury note fell to 2.99 percent from 3.00 percent late Monday.

Article source: http://feeds.nytimes.com/click.phdo?i=2d9986c11795281ef826f7b94465fbe2

Economix: Fear the Bond Market

James Carville famously said that if reincarnated, he’d like to come back as the bond market, since “you can intimidate everybody.”

“Everybody” includes politicians, with good cause.

A showdown over the debt limit is coming down the pike, and despite warnings from Timothy F. Geithner, Ben S. Bernanke and many  economists about the potential catastrophe that could result, the game of chicken has continued. But it appears that bond traders are now weighing in.

Politico reports:

Republicans are growing increasingly concerned about the impact a bruising fight over raising the nation’s $14.29 trillion debt ceiling could have on financial markets in the United States.

House Speaker John Boehner (R-Ohio) has had conversations with top Wall Street executives, asking how close Congress could push to the debt limit deadline without sending interests rates soaring and causing stock prices to go lower, people familiar with the matter said.

Ezra Klein notes that Republicans may back down because they do not want to upset Wall Streeters, who have donated large sums to the G.O.P. (and Democrats too, really).

But there’s a more fundamental cost at stake: If there is fear that the government will default on its debt, the costs for the government to borrow will go way up, as would be the case with any borrower. The Politico article cites this potential consequence:

“They don’t seem to understand that you can’t put everything back in the box. Once that fear of default is in the markets, it doesn’t just go away. We’ll be paying the price for years in higher rates,” said one executive.

What do higher government borrowing costs mean?

For one,  the federal debt will become even harder to pay off, which is obviously not the desired effect.

And two,  a rise in long-term interest rates could derail the recovery. Treasury yields are used as a benchmark for all borrowing, and so higher interest rates for the government could make it more expensive for other parties (including consumers and small businesses) to borrow, too. A botched economic recovery affects not just Wall Streeters and the size of their donations, but voters everywhere across the country.

Article source: http://feeds.nytimes.com/click.phdo?i=1ad337aa74921d3417e4519e62c3e593