March 23, 2023

Stocks & Bonds: Market Closes Tightly Mixed After Day of Wary Trading

Wall Street lacked direction on Tuesday as it awaited the week’s main economic news, and the stock market wandered between slight gains and losses before closing barely higher.

Traders were especially disinclined to make big bets before the Federal Reserve issues its policy statement on Wednesday, which may offer hints about the future of its economic stimulus program. They were also standing pat in anticipation of the government’s initial report on second-quarter economic growth on Wednesday and the July employment report on Friday.

“This week it’s all about Bernanke and the Fed statement,” said Bill Strazzullo, chief strategist of Bell Curve Trading, referring to Ben S. Bernanke, chairman of the central bank. “Stocks need a supportive statement to go higher. That is the key driver.”

To some, the market’s inertia resembled the inactivity typical of mid- to late August, when trading usually dwindles. “It seems like the doldrums of summer have set in,” said Dave Abate, senior wealth adviser at Strategic Wealth Partners.

The Dow Jones industrial average rose as much as 72 points in early trading on Tuesday — less than 0.5 percent — before flickering lower, closing down 1.38 points, or 0.01 percent, at 15,520.59.

The Nasdaq composite index rose 17.33 points, or 0.5 percent, to 3,616.47. But the Nasdaq gained largely because Apple, its largest component, jumped more than 1 percent, rising $5.53, to $453.32.

The Standard Poor’s 500-stock index ended slightly higher, up 0.63 point, or 0.04 percent, to 1,685.96. Its worst performer was Mosaic, a maker of potash, a major ingredient of crop fertilizers, which plunged $9.15, or 17.3 percent, to $43.81 after a Russian fertilizer company said it would drop out of a cartel that keeps potash prices high.

Company earnings provided little guidance. Coach, the maker of luxury handbags, slumped $4.55, or 8 percent, to $53. 30 after reporting a lower quarterly profit. But Goodyear Tire and Rubber jumped $1.52, or 9 percent, to $18.56 after announcing that its quarterly earnings had doubled.

This earnings season has been encouraging on some fronts and troubling on others. Many companies, including big names like Apple and Visa, have posted better-than-expected results, and analysts predicted that second-quarter earnings would be up 4.7 percent for companies in the S. P. 500, according to SP Capital IQ. But many of the gains were based on cost-cutting, not on business growth.

Traders continue to look for clues from the Fed, which began a two-day meeting on Tuesday, about when it might pull back on its bond-buying stimulus program.

The Fed has said it might act this year if the economy continues to improve, but the timing remains uncertain. The central bank has also said it will not raise its benchmark short-term interest rate until the unemployment rate, which was 7.6 percent in June, dips below 6.5 percent.

In the bond market, interest rates were little changed on Tuesday. The price of the benchmark 10-year Treasury note fell 2/32, to 92 21/32. Its yield edged up to 2.61 percent, from 2.60 percent late Monday.

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Media Decoder Blog: Disney Delays Release of Video Game and Toy Initiative

LOS ANGELES — The introduction of Disney Infinity, an ambitious video game and toy initiative, has been pushed from June to late August, a retail window that Disney said on Wednesday was more favorable.

But the delay also shifts Infinity from Disney’s fiscal third quarter to its fourth, meaning that any chance of a turnaround at the company’s video game unit will occur later than some investors expected.

Infinity will now reach stores on Aug. 18 in North America and on Aug. 20 overseas, said John Pleasants, co-president of Disney Interactive, in a telephone interview. A June rollout had been planned, pegged to the release of Pixar’s “Monsters University.”

Mr. Pleasants said retailers, impressed with the public reaction to Disney’s demonstration of Infinity in January, pushed for an introduction closer to the all-important holiday season, which starts in October. “The date became an issue in terms of them asking, ‘Is there a better opportunity here?’ ” Mr. Pleasants said.

There may also be competitive reasons for the August date. Disney hopes that Infinity will be its version of Skylanders, a popular product from Activision Blizzard in which players collect action figures and then transfer them into the game’s action by plugging them into a sensor base. Skylanders has generated more than $1 billion in sales since its 2011 arrival; about 100 million of its toys have been sold.

The next edition of Skylanders is scheduled to arrive in stores this fall. Mr. Pleasants downplayed comparisons, but said, “We think it’s good to be first and really lean into the most important selling season of the year.”

August is traditionally a quiet time for video games as families spend money on vacations and back-to-school clothes. But Mr. Pleasants said retailers were willing to devote significant shelf space to the Infinity product line. Disney also hopes that children will return to school with the Infinity action figures in their backpacks, leading to trading.

It is not unusual for video game studios to push back release dates, but the reason usually involves glitches and missed deadlines. Mr. Pleasants insisted that was not the case here.

“We could deliver in June if we wanted to,” he said, adding: “Will a two-month timing change help us? Sure, of course. It gives us a little more time to add bells and whistles and make sure it really sings and pops.”

Robert A. Iger, Disney’s chief executive and chairman, told Wall Street analysts and investors in May that “we’re targeting 2013 as a year of profitability” for Disney Interactive. He technically fulfilled that pledge in the last quarter; Disney’s video game and Web business turned an operating profit of $9 million after 16 consecutive quarters of losses.

But most people interpreted Mr. Iger’s remark to mean that the unit, Disney’s smallest by far, would make money for the fiscal year, which ends in mid-September. There is now little chance of that, as revenue from Infinity will be mostly pushed into 2014. “This will definitely impact our goal of achieving profitability for the year,” Mr. Pleasants said.

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Influx of Cash in Asia Raises Familiar Worries

Asia’s fast-growing economies have weathered a tough 2012 relatively well, and economists say that unless the U.S. and euro zone economies take a sharp hit in 2013, the region could pick up steam again next year.

But that good news comes with a price tag. Analysts have begun to warn recently that Asia’s relative economic buoyancy could once again attract large amounts of cash, possibly leading to a repeat of what happened two years ago.

Back then, big inflows, mostly from the West, caused many emerging-market currencies to surge and prompted talk of “currency wars” as central bankers scrambled to keep their currencies from rising too fast.

Now, with growth in Asia picking up, and central banks in developed nations stepping up their efforts to oil the wheels of their beleaguered economies, the influx of cash is again starting to have worrying side effects.

Property prices, for example, have risen across much of the region. The South Korean won has climbed more than 5 percent against the U.S. dollar since late August. The Philippine peso has risen about 4 percent, to its highest level since early 2008. The Taiwan dollar, the Thai baht and the Malaysian ringgit also have strengthened.

“We could be heading back towards where we were in 2010,” said Frederic Neumann, regional economist at HSBC in Hong Kong. “Capital is pouring back into emerging Asia.”

Next year, said Rob Subbaraman, chief economist for Asia ex-Japan at Nomura in Hong Kong, “could be a bumper year” for net capital inflows. “The stars are aligned.”

For many parts of the world, a tide of capital would be a blessing. The United States, Europe and Japan have spent much of the last four years trying to reinvigorate their economies by lowering rates and injecting cash into strained financial systems through purchases of financial assets.

More is in store.

Last Wednesday, the U.S. Federal Reserve announced that it would continue to buy large amounts of Treasury securities and mortgage-backed securities until the job market improved.

Likewise, the Japanese central bank may step up its existing asset-buying and lending program at a policy meeting this week, analysts believe.

Over the years, some of that liquidity has seeped into parts of the world where growth is faster and returns are higher. The amounts of money flowing into developing Asia have, at times, been vast. During the rush in late 2009 and 2010, David Carbon, an economist at DBS in Singapore, estimated, the region saw inflows to the tune of $2 billion a day, for example.

Economists at the Japanese bank Nomura estimate that between early 2009 and mid-2011, net capital inflows to Asia, excluding Japan, totaled $783 billion — far more than the $573 billion that came in during the preceding five years.

The renewed inflows in recent months have not been so large. Moreover, not all countries have attracted cash in equal measure. Investors have been wary this year of India’s seeming inability to push through important economic overhauls, for example. That has caused the rupee to sag more than 11 percent since February. China, meanwhile, restricts incoming foreign investments to relatively small amounts.

Elsewhere in the region, however, there are signs of renewed pressure.

An index compiled by Nomura that gauges capital inflow pressures has risen in recent months, said Mr. Subbaraman, the Nomura economist. Although it remains below where it was during the spike in 2010, it is now at its highest since May 2011.

Said Mr. Neumann of HSBC, “currencies have strengthened despite resistant central banks, real estate markets are frothing away, and lending to consumers and companies has accelerated.”

All of that has reignited the concerns that traditionally accompany major — and potentially fickle — capital inflows.

For exporters, stronger currencies are a headache, as they make the exporters’ goods more expensive for consumers elsewhere.

For ordinary citizens, rising property prices make homes increasingly unaffordable. Soaring property prices are also vulnerable to painful reversals if conditions change.

Underscoring that point, the International Monetary Fund warned on Wednesday that a sharp rise in house prices in Hong Kong raised “the risk of an abrupt correction.”

Likewise, a big increase this year in corporate bond issuance — while a positive in that it supports growth and diversifies corporate funding — bears risks.

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Green Blog: Climate Change and the Food Supply

A farmer sampled some sunflower crops lost to the heat in  Ergelija, an Albanian village. Hundreds of wildfires have raged in the western Balkans recently.ReutersA farmer sampled some sunflower crops lost to the heat in  Ergelija, an Albanian village, in late August. Hundreds of wildfires have raged in the western Balkans recently.Green: Living

1:30 p.m. | Updated
A small bit of good news about food prices from the Food and Agriculture Organization, a United Nations agency in Rome: The price spiral seen earlier this summer as markets reacted to droughts and other bad news has leveled off, with the agency’s closely watched index of global food prices essentially unchanged in August compared with July.

Prices are still up sharply from earlier in the year and remain high by historical standards, the F.A.O. said Thursday, but they have not reached the peaks seen in 2008 and 2011. The agency held out hope that a third global food crisis in five years might yet be averted.

Perhaps the biggest single question about climate change is whether people will have enough to eat in coming decades.

We have had two huge spikes in global food prices in five years that were driven largely by chaotic weather. And this year we may be in the early stages of a third big jump. Droughts and heat waves have damaged crops in many producing countries this year, including the United States and India.

As my colleague Annie Lowrey reported this week, United Nations agencies are hitting the alarm button.

Now come two reports that help to frame the problem of the future food supply — one of them offering a stark warning about what could be in store, the other offering a possible way out.

As readers of an article I wrote last year may recall, growing scientific evidence suggests that climate change is already functioning as a drag on global food production.

Rising temperatures during the growing season in many large producing countries are cutting yields below their potential, the research suggests. On top of that background factor, extreme events like droughts or torrential rains can destroy crops altogether. Extremes have always been part of the agricultural picture, of course, but they are expected to increase on a warming planet.

One of the new reports comes from Oxfam, the global antipoverty charity. It commissioned researchers at the Institute of Development Studies, at the University of Sussex in Britain, to use computer modeling to study the possible impacts of climate change on global food prices by 2030, compared with prices in 2010. (The Oxfam report is summarized here and can be downloaded here, and detailed methods and results can be found here.)

The researchers recognized that global food demand is rising as many millions of people in developing countries acquire the means to eat richer diets. That alone would be expected to drive food prices higher, but their calculations suggest that climate change will greatly compound the problem.

For instance, the report said that corn prices could jump by 177 percent, adjusted for inflation, by 2030, with stress from climate change accounting for something like half the increase. The price increases could be 120 percent for wheat and 107 percent for rice, with climate change accounting for perhaps a third of the increases for those crops.

And those are just the baseline price increases. Severe weather shocks could cause further spikes, induce panic buying, prompt countries to close their borders to food exports and even lead to riots and revolutions.

If any of that sounds alarmist, recall that every bit of it has already happened because of the price spikes of recent years. In 2008, food riots broke out in more than 20 countries, and the government of Haiti fell as a result of the unrest. The second price spike, in 2011, apparently played a role in the social discontent that led to the revolutions in the Arab world.

In the West, raw ingredients make up only a small fraction of the cost of the food most people eat, and price spikes tend to be felt only moderately for that reason. But in parts of the world where people subsist on staple grains, Oxfam warns, a doubling or more of grain prices from 2010’s already high levels would probably be devastating. The price spikes occurring over the last decade have already led to some of the biggest increases in global hunger in generations.

“Food price spikes are a matter of life and death to many people in developing countries, who spend as much as 75 percent of their income on food,” Oxfam said in its report. “Increased hunger is likely to be one of climate change’s most savage impacts on humanity.”

As many Green readers know, agriculture is not just a potential victim of climate change — it is also a major cause. It helps to drive extensive deforestation in the tropics, consumes fossil fuels and puts a powerful greenhouse gas, nitrous oxide, into the air.

So another new report, from researchers at the University of Minnesota, may prove especially interesting to anyone worried simultaneously about food security and the environment. It offers hope that both problems can be tackled at once.

This report, a scientific study published last week in the journal Nature, is also the result of computer modeling. The researchers asked whether it would be possible to increase global yields while reducing the use of agricultural inputs like water and fertilizers.

The basic finding is that overall output of 17 of the world’s most important crops could be increased by 45 to 70 percent by closing the “yield gap,” or the tendency of farmers in many regions to produce less than they could. And this could be done, the researchers found, while reducing the overall environmental harm from agriculture.

“We have often seen these two goals as a trade-off: We could either have more food, or a cleaner environment, not both,” the study’s lead author, Nathaniel D. Mueller, a doctoral student at the University of Minnesota, said in a statement. “This study shows that doesn’t have to be the case.”

The trick, the researchers found, would be to reduce inputs in some places where, for instance, nitrogen fertilizer is being applied too heavily (government subsidies often play a role) or water is being wasted. Conversely, more inputs and better farming methods are needed in regions where yields are far below potential.

The report found that the use of nitrogen fertilizer, the source of the nitrous oxide that is helping to warm the planet, could be cut by 28 percent without affecting yields for corn, wheat and rice, the world’s three most important grains. Use of phosphate fertilizer, the focus of fears about a long-term shortage, could be reduced by 38 percent, the researchers found.

In the study, China stood out as a hot spot of excessive fertilizer use, while Eastern Europe and parts of Africa and India stood out as yield laggards where greater effort was needed. The map below shows regions of the world where farmers are meeting their potential, in green, and where they are falling short, in red.

Many organizations are working to change the situation, of course – the Rockefeller Foundation in New York has long been a stalwart of these efforts, joined in recent years by the Bill and Melinda Gates Foundation, the world’s largest charity.

Yet it remains to be seen whether world food production can be adapted quickly enough to head off a global supply squeeze that is even more severe than the one we have already experienced in recent years.

Regions of the world where food production approaches the highest practicable yields, shaded in green, and regions where output lags, in red.  Nathaniel Mueller/.University of MinnesotaRegions of the world where food production approaches the highest practicable yields, shaded in green, and regions where output lags, in red.  

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Bits Blog: Apple Doles Out Stock to Keep Top Executives

One of the biggest questions about Apple’s future has been whether its top executives would head for the exits after the death of the company’s chief executive and cofounder Steve Jobs. Apple just gave them a big incentive to stay put.

In a series of filings with the Securities and Exchange Commission on Friday evening, Apple disclosed a series of huge stock grants to nearly all of the company’s senior executives. Peter Oppenheimer, Bruce Sewell, Philip Schiller, Jeffrey Williams, Scott Forstall and Robert Mansfield all received 150,000 restricted stock units from Apple — worth approximately $60 million each at Apple’s current stock price.

Each of those executive need to stay at Apple for nearly five years to collect the full amount of the grants. Half of the shares in their stock grants vest on June 21, 2013, while the second half vest on March 21, 2016.

Eddy Cue, Apple’s senior vice president for Internet software and services, received 100,000 restricted stock units, worth about $40 million at Apple’s current share price and subject to a slightly different vesting schedule. Mr. Cue, though, received an earlier 100,000 share grant in early September when Apple promoted him.

“Our executive team is incredibly talented and they’re all dedicated to Apple’s continued success,” Apple said. “These stock grants are meant to reward them down the road for their hard work in helping to keep Apple the most innovative company in the world.”

There were only two people from Apple’s senior leadership team for whom Apple did not disclose stock grants on Friday. One is Jonathan Ive, the company’s senior vice president for industrial design, whose position at the company does not trigger S.E.C. rules requiring public disclosure of stock awards.

The other person is chief executive Timothy D. Cook, who received an even bigger stock award in late August after agreeing to take over the top job at Apple from Mr. Jobs. That one million share grant to Mr. Cook is currently worth about $400 million. To collect half of that grant, Mr. Cook needs to stay at Apple until August 24, 2016, and, to get the full amount, he must stay until the same date in 2021.

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Meg Whitman Is Named Hewlett-Packard Chief

The upheaval at H.P. came after several weeks of mounting concerns among board members, senior executives and investors about how the former chief, Léo Apotheker, had handled a major strategy shift at the company announced last month, according to interviews with several people briefed on the board’s discussions.

While the board still endorses the strategy change — which includes a possible spinoff of its personal computer business, the closing of a line of mobile devices and the $11.7 billion acquisition of the software maker Autonomy — its members felt that Mr. Apotheker had bungled communicating the plans to H.P. employees and outsiders.

“It’s not about the strategy, it’s about the guy,” said one of the people with knowledge of the board’s discussions, who was not authorized to speak publicly.

In an interview, Ms. Whitman, who became a member of the board this year, said the process that had led to Mr. Apotheker’s ouster took place over about three months, and came to a head in late August. Once she was aware that she would be a candidate to succeed him, she said, she recused herself from the selection of a successor.

Talking about why she chose to accept the role, she said, “This is a chance to help turn around an American icon,” adding that “we’ve got our hands full.”

In an earlier conference call with Wall Street analysts, Ray Lane, the company’s executive chairman, was asked whether hiring Ms. Whitman had been “hasty and premature.” He replied that the board had revisited the results of the search done before hiring Mr. Apotheker, but wanted “to reach inside” H.P. Despite her brief tenure solely as a board member, he said Ms. Whitman was viewed as an insider.

In one change from Mr. Apotheker’s plans, Ms. Whitman told investors in the conference call that H.P. would reach a decision about the fate of its PC business by the end of the year, rather than next year.

She said in the interview that H.P. would remain committed to the sale of computer hardware, drawing a distinction between herself and Mr. Apotheker. “He was a software executive who thought there was a faster-growing, higher-margin business in software,” she said, but “it will not transform the company.”

H.P. did not reveal any details about Mr. Apotheker’s exit package, though it is expected to in the coming days. After analyzing Mr. Apotheker’s contract, James F. Reda Associates, a compensation consulting firm, estimated he could get as much as $38 million in total compensation, including severance, salary and other items, from his 11 months working at H.P.

A hint of trouble for Mr. Apotheker surfaced two weeks ago, when Dominique Senequier, an H.P. director and chief executive of a private equity firm, notified the company that she planned to leave the board early next year, a fact disclosed in a company filing with securities regulators.

The decision by Ms. Senequier, who was known to be close to Mr. Apotheker, was prompted by a concern about Mr. Apotheker’s fate at the company, according to the person familiar with the board’s discussions.

Dissatisfaction with Mr. Apotheker had been building since he was named to lead the company less than a year ago, but the concerns boiled over beginning on Aug. 18, said Mr. Lane.

That was when H.P. hastily announced that it was exploring a sale or spinoff of its PC business into a separate company, after portions of the news became public earlier in the day, and disappointing quarterly earnings.

The changes caught many H.P. executives off-guard; Todd Bradley, the executive in charge of its PC business, received less than 24 hours’ notice, according to a person close to Mr. Bradley.

The uncertainty about the future of the PC business also created uneasiness among the company’s big corporate customers, causing concern among H.P.’s board that it could contribute to weakness in its PC sales.

Quentin Hardy and Eric Dash contributed reporting.

This article has been revised to reflect the following correction:

Correction: September 22, 2011

An earlier version of the capsule summary for this article misstated Ms. Whitman’s given name as Angela. As the article and picture caption correctly note, it is Meg.

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