September 22, 2023

Profit Falls 13% at Target, and It Lowers Expectations

The retailer on Wednesday lowered its annual profit forecast after reporting a 13 percent drop in second-quarter profit, as its expansion into Canada — its first foray outside the United States — has proved more challenging than it previously thought.

But the company is also contending with mixed economic signals that have caused it and its rivals, like Walmart and Macy’s, to temper their forecasts for the remainder of the year. While jobs are easier to obtain and the housing market is gaining momentum, these improvements have not been enough to persuade most Americans, who are facing stagnant wage growth, to spend more freely.

“As we monitor the economy and consumer sentiment, we continue to see a mix of signals in which emerging optimism is balanced with continuing challenges,” Gregg W. Steinhafel, Target’s chairman, president and chief executive, said on an earnings call with investors.

Target earned $611 million, or 95 cents a share, in the quarter ending Aug. 3, compared with $704 million, or $1.06 a share, in the period a year earlier.

Excluding certain items related to its expansion into Canada, the retailer earned $1.19 a share.

Total revenue reached $17.12 billion, up 2 percent from $16.78 billion a year ago. Analysts had expected earnings of 96 cents a share on revenue of $17.28 billion, according to FactSet.

Revenue at stores open at least a year — a gauge of a retailer’s health — rose 1.2 percent. That was below the 1.9 percent analysts had expected. Its shares fell 3.6 percent on Wednesday, or $2.45, to $65.50.

Like Walmart, Target said that its customers continued to struggle with a 2 percentage-point increase in the Social Security payroll tax since Jan. 1. That means take-home pay for a household earning $50,000 a year has been cut by $1,000.

For the full year, Target now expects earnings per share to be at the low end of its previous guidance of $4.70 to $4.90. Target said that it expected its costs related to its Canadian expansion will depress earnings by 82 cents, up from its projected 45 cents a share. In May, the company trimmed its projections from the original outlook of $4.85 a share to $5.05, citing cautious shoppers. Analysts expect $4.29 a share for the full year.

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Economix Blog: The Incredible Shrinking Budget Deficit

For four years, during and in the wake of the recession, the federal budget deficit ballooned to more than $1 trillion. But because of belt-tightening in Washington and a strengthening economy, it has started shrinking — and fast.

The number crunchers at Goldman Sachs have lowered their estimates of the deficit both this year and next, on the back of higher-than-expected revenues and lower-than-projected spending. Analysts started the year projecting that the deficit in the current fiscal year would be about $900 billion. Earlier this year, they lowered the estimate to $850 billion. Now they have lowered it again, to $775 billion, or about 4.8 percent of economic output.

“Spending in the fiscal year to date is lower than a year ago and the nominal growth rate is lower than it has been in decades,” the Goldman economists wrote in a note to clients. “Revenues have also exceeded expectations, with a 12 percent gain fiscal year to date. What is more notable is that the strength in revenues preceded the payroll tax hike at the start of the year, and the spending decline does not seem to reflect sequestration, which has just started to take effect.” To translate: the deficit could come in even smaller than currently anticipated because of spending cuts and higher tax rates.

On the face of it, this sounds like something to applaud: The growing economy is bolstering tax revenue and reducing the need for spending on programs like unemployment insurance. Washington has gotten its act together. The budget is finally coming back into balance. Indeed, Goldman now expects the budget deficit to fall to just 2.7 percent of economic output by the 2015 fiscal year. Many economists consider budget deficits that small to be sustainable — particularly if the federal government is investing in public goods like schools and roads — with the accrued debt paid off by later years’ economic growth.

But a number of budget experts are booing rather than applauding, including the fiscal hawks at the International Monetary Fund. Last week, the fund nudged down its estimates for United States growth in 2013 and 2014. It said it saw many bright spots in the American economy, including the strength of the private sector, but it criticized Washington for imposing too much austerity, too soon, and thus sapping strength from the recovery and preventing the unemployment rate from coming down faster.

“The growth figure for the United States for 2013 may not seem very high, and indeed it is insufficient to make a large dent in the still-high unemployment rate,” the fund said. “But it will be achieved in the face of a very strong, indeed overly strong, fiscal consolidation of about 1.8 percent of G.D.P. Underlying private demand is actually strong, spurred in part by the anticipation of low policy rates under the Federal Reserve’s ‘forward guidance’ and by pent-up demand for housing and durables.”

The fund’s economists specifically dinged “sequestration,” the $85 billion in mandatory budget cuts that Congress promised to undo, but failed to undo, earlier this year. “While the sequester has decreased worries about debt sustainability, it is the wrong way to proceed,” the fund said. “There should be both less and better fiscal consolidation now and a commitment to more fiscal consolidation in the future.”

In its note, Goldman Sachs did specify a few trends that could widen the deficit this year, like a “negative economic surprise.” The investment bank did not elaborate much on what that economic surprise could be, but troubles in the emerging economies that are driving global growth, higher gas prices and an intensification of the financial troubles in Europe seem like plausible candidates, as do natural disasters like hurricanes and droughts.

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Unemployment Data Lifts Stocks

Wall Street was higher on Thursday as investors attempted to push the rally further after the latest economic data suggested a pickup in the labor market.

In afternoon trading the Standard Poor’s 500-stock index added 0.2 percent, the Dow Jones industrial average rose 0.3 percent, and the Nasdaq composite index was up 0.2 percent.

On Wednesday, the Dow surged to record levels for a second day, while the S.P. 500 closed 1.5 percent below its own record close.

A strengthening economy and loose monetary policy by central banks around the world have pushed Wall Street equity markets higher this year. While some expect the market will ease off its current lofty levels, so far dips have been short-lived as investors look for an opportunity to buy.

“It appears the positive feeling in this market has shifted a bit from waiting for a pullback to put money to work, to not missing a train that’s leaving the station,” said Art Hogan, managing director of Lazard Capital Markets in New York.

Data from the government on Thursday showed the number of Americans filing claims for unemployment benefits unexpectedly fell last week to a seasonally adjusted 340,000. It was the second straight week of declines.

“It’s certainly welcoming to the market and it’s once again supporting the thought that the economic recovery is strengthening,” said Andrew

Also on Thursday, several retailers, including Costco Wholesale and Limited Brands, announced better-than-expected sales for February. The data was a rebound from the previous month, when shoppers first felt the effect of a payroll tax increase.

Investor attention will remain on the labor market ahead of Friday’s nonfarm payroll report, which is expected to show that the economy added 160,000 jobs in February. While it has been a soft spot in the economic recovery, the labor market is seen as healing slowly.

Economists say job gains of at least 250,000 a month over a sustained period are needed to have a significant impact on the unemployment rate.

Among individual stocks, the network equipment maker Ciena jumped 15.5 percent after it reported a smaller quarterly loss.

Colgate-Palmolive rose 0.3 percent after it said it was planning a two-for-one stock split and would increase its dividend.

Dell said Carl C. Icahn has urged the company to pursue a leveraged recapitalization and pay a $9 per share dividend instead of going private. The Dell chief executive, Michael S. Dell, has already struck a $24.4 billion deal to take the company, the No. 3 maker of personal computers, private. Its shares were 0.6 percent lower.

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You’re the Boss Blog: Business Owners Confront the Budget Impasse

She Owns It

Portraits of women entrepreneurs.

At the most recent meeting of the She Owns It business group, the conversation focused on the end of the payroll tax holiday, the impact of the federal budget impasse, and the challenges of implementing new technology.

Jessica Johnson, who owns Johnson Security Bureau, said many of her employees didn’t realize their paychecks would be 2 percent smaller when the payroll tax holiday ended in January 2013. As soon as they got their first checks of the year, the complaints began, she said.

“You’re taking my money!” they told her.

“No, we’re not taking your money, we’re withholding the proper payroll taxes according to the federal government,” she responded. “I would love to have a check for all that two percent that I’m withholding.”

“That’s funny, I haven’t had anyone say anything, and I know it affects people,” said Susan Parker, who owns Bari Jay.

Ms. Johnson is also thinking about the March 1 deadline for the federal government to agree on a budget, and how any decisions — or lack thereof — will affect her business. Cuts in government spending are a likely part of any plan, she said. “If the federal government doesn’t have the money,” she said, “then money won’t trickle down to the state level, which will mean that state and other municipal contracts that I have might be impacted.”

Beth Shaw, who owns YogaFit, asked what percentage of Ms. Johnson’s business these contracts represent.

“Less than 50 percent,” Ms. Johnson said.

“So, still significant,” Ms. Shaw said.

“Still significant,” Ms. Johnson agreed. But she added that her greater concern is the way in which cuts to various government programs, such as Section 8, the federally funded housing subsidy program, may affect her employees. “If somebody doesn’t get their Section 8 voucher, then will that mean I have homeless employees? And if you’re homeless, how can I expect you to go to work?” she asked.

“But there’s nothing you can really do about it,” Ms. Parker said. “First of all, you’re speculating as to what’s going to happen.”

“That’s true,” Ms. Johnson said.

“And second of all, even if that is ultimately what happens, what can you do to change it?” Ms. Parker asked.

“That’s a very valid point,” Ms. Johnson said.

“I feel like I’m throwing the towel in, but I don’t know what proactively you could do,” Ms. Parker said.

In the meantime, Ms. Parker is preoccupied with the new software her company has been trying to implement for more than a year. The customized Web-based software will run all of Bari Jay’s operations, including invoicing and order entry. Ms. Parker said she paid the software design firm $36,000 during the early stages of the project, and “tens of thousands on top of that for data conversion.” Additionally, beginning in November, when the software design firm began testing the system with Bari Jay’s live data — like the actual number of dresses it will produce — Ms. Parker has been paying a monthly fee of $2,000.

“It’s so frustrating I don’t even know where to begin,” she said. “I was supposed to be on this software a year and change ago.” The software design firm initially thought the job would take three months. Finally, they are close to “going live,” Ms. Parker said. She thinks that should happen within a month. But, she said, “I know once we’re live, a whole new slew of problems are going to come about.”

Deirdre Lord, who owns the Megawatt Hour, agreed there will be challenges.

“How do you implement something new or make a major change and have the course of business continue?” Ms. Parker asked. “It doesn’t have to be a new software system, it could be any major change.” Further complicating matters, the changeover will now have to take place during her busiest time of year.

“Can you run the two systems in parallel for a period of time?” Ms. Lord asked.

Ms. Parker said the systems were running in parallel now as the new one is tested , but once the new one goes live, the old one will shut down. The group also wondered what, exactly, has caused the delays.

Ms. Parker explained that when she began the process she spoke with multiple software companies — all of which assured her they handled work for garment companies. “But the bridesmaid business is so different from almost any other garment company out there,” she said. For example, her dresses are made to order — a dress may come in three different colors and the customer can choose whichever she wants.

“How many S.K.U.‘s” — or products for sale — “do you have?” asked Ms. Shaw.

“I couldn’t even tell you,” Ms. Parker said. A dress may have three different colors, and a customer might have 30 colors from which to choose, she said. “I mean what’s 30 times 30 times 30?” she asked. And that’s just one style out of hundreds.

Most garment industry software systems run on S.K.U. numbers, Ms. Parker explained. Because Bari Jay has so many, the programs tend to crash. The good news is that her new system hasn’t been crashing while on trial.

But that was just one challenge. Other issues arose from the high level of customization her business required. With the exception of bookkeeping, everything had to be tailored, including accounts payable and accounts receivable.

Ms. Lord said Ms. Parker should prioritize the issues her software company must address, and give it a time frame for each.

Ms. Parker said invoicing, production, and order entry were the most critical functions. If those work, Bari Jay can deal with other issues. At the moment, she said, order entry works, production works, and invoicing “mostly works.”

Again, Ms. Lord said, “You need to create some way of prioritizing problems around the business issues so they can be responsive.”

“I understand what you’re saying,” Ms. Parker said.

“You need almost a service-level agreement that commits them contractually to solving certain problems in a certain priority order,” Ms. Lord said.

“So, if it’s a production or an invoice thing, they have to do it immediately, whereas if it’s something else they can get to it whenever,” Ms. Parker said.

“And then there’s a penalty associated with missing those goals,” Ms. Lord said.

“I actually really like that idea,” Ms. Parker said.

While Ms. Parker can’t rewrite the agreement at this stage, she knows the software company is eager to get her new system up and running. Doing so will enable it to pursue other clients in the bridal industry. “I could say, ‘You want to go live? Well this is what I need from you,’ and I think I might get them to agree to it,” she said.

You can follow Adriana Gardella on Twitter.

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Markets, Uneasy Over Economic Data, Continue to Fall

Wall Street lost ground for a second day on Thursday after weak economic reports, reflecting continued investor concern about the Federal Reserve’s resolve to keep bolstering the economy.

Signaling that the labor market remains in a slow recovery, the government said more people applied for unemployment benefits last week. The four-week average, a less volatile measure, rose to the highest in six weeks.

The Dow Jones industrial average fell 46.92 points, or 0.3 percent, to close at 13,880.62.

The Standard Poor’s 500-stock index dropped 9.53 points, or 0.6 percent, to 1,502.42, setting it on a path for its first weekly loss of the year. The Nasdaq composite index lost 32.92 points, or 1 percent, to 3,131.49.

The stock market indexes have climbed this year to the highest levels since the financial crisis, but Wall Street may be ready to retreat, said Kim Caughey Forrest, senior analyst with Fort Pitt Capital Group, a portfolio management firm.

”I think the market has gotten ahead of itself,” she said. She said fourth-quarter earnings had generally met expectations, but only after those expectations were reduced because of dire projections companies made in November and December.

Wal-Mart Stores rose $1.05, or 1.5 percent, to $70.26 after beating analysts’ profit forecasts in the fourth quarter. However, the company, the nation’s largest retailer, warned of a slow start to the year.

After a strong start to the holiday season, Wal-Mart Stores said, the first three weeks of December were weak, and business has been volatile since then. The company attributed some of the weakness to a delay in tax refund checks that have left people short of cash. Walmart customers also have less money to spend because a temporary payroll tax cut expired in December.

“Everybody’s gotten a 2 percent pay cut, and people who file their taxes early are not getting a refund back in a timely manner,” Ms. Forrest said.

The Safeway supermarket chain was the biggest gainer in the S. P. 500, rising $2.84, or 14.1 percent, to $22.97, after it said its net income jumped 13 percent in the fourth quarter, helped by higher gift and prepaid card revenue.

Tesla Motors plunged a day after reporting that its fourth-quarter net loss grew 10 percent on costs related to production of its new Model S electric car. The stock fell $3.38, or 8.8 percent, to $35.16.

Earlier, Asian and European stocks had closed sharply lower. The sell-off began Wednesday afternoon in New York after minutes from the Fed’s latest meeting were released. The account showed that some policy makers want to wind down bond purchases and other measures aimed at bolstering the economy.

The account also revealed new divisions over the Fed’s low-interest rate policies. There is no sign of inflation, yet there was more evidence that some Fed officials are ready to ease off the stimulus programs before the economy has fully recovered.

“Thinking maybe interest rates will creep higher, this is a very chilling scenario” for the market, Ms. Forrest said.

Interest rates, however, slipped on Thursday as demand increased for safer assets than stocks. The price of the Treasury’s 10-year note rose 11/32, to 100 88/32, while its yield fell to 1.97 percent from 2.01 percent late Wednesday.

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U.S. Retail Sales Show Slight Rise in January

The Commerce Department said on Wednesday that retail sales edged up 0.1 percent after a 0.5 percent rise in December.

The small increase suggested that the expiration of a 2 percentage point payroll tax cut on Jan. 1 and higher tax rates for wealthier Americans were weighing on the economy.

Still, economists said consumer spending was unlikely to buckle given rising home values, moderate job growth and rallying stock market prices.

“We are starting to see the impact of higher taxes, but we have a positive wealth effect from increasing house prices and a boost from equities,” said Robert Dye, chief economist at Comerica Bank. “My expectation is that consumers are able to continue to increase spending but only moderately.”

Core sales, which strip out automobiles, gasoline and building materials and correspond most closely with the consumer spending component of gross domestic product, ticked up 0.1 percent.

Consumer spending, which accounts for about 70 percent of the American economy, grew at a 2.2 percent annual rate in the fourth quarter. That helped to soften the blow to the economy from slower inventory accumulation and sharp cuts in military spending.

The government said last month that economic output slipped at a 0.1 percent rate in the final three months of 2012.

However, the retail sales report showed core sales were a bit stronger in November and December than previously reported. In addition, businesses — excluding auto dealerships — accumulated slightly more inventory in December than earlier thought.

Taken together with a smaller trade deficit in December, the data suggested the government would raise its estimate for fourth-quarter gross domestic product when it publishes a revision later this month. Even so, the economy most likely grew at under a 1 percent rate in the fourth quarter, economists said.

Growth in consumer spending is expected to retreat from the pace of the fourth quarter as households adjust to smaller paychecks and higher gasoline prices. Prices at the pump have increased 30 cents so far this year.

Estimates for consumer spending growth in the first quarter currently range from 0.7 percent to 1.8 percent.

Some economists were encouraged that consumers had maintained purchases, though at a slow pace, despite a reduction in their disposable incomes.

“By no means are we completely out of the woods when it comes to the impact of higher taxes,” said Michael Feroli, an economist at JPMorgan Chase. “Evidence from past episodes suggests it could take up to two quarters for spending to fully adjust to new tax realities.”

A softer pace of consumer spending is expected to limit G.D.P. growth to a 1.8 percent rate this quarter, according to a Reuters poll of economists. For the year as a whole, economists expect growth of just 2.3 percent.

A separate report from the Labor Department showed that higher oil prices helped push up the cost of imported goods by 0.6 percent last month. Import prices had fallen by 0.5 percent in December.

Still, nonpetroleum import prices edged up just 0.1 percent in January and have risen just 0.2 percent over the last year, showing a lack of broad inflation pressure.

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Economix Blog: The Growing Burden of Payroll Taxes

Owen Zidar, a doctoral student in economics at the University of California, Berkeley, was previously a staff economist at the Council of Economic Advisers and an analyst at Bain Capital Ventures.

Owen Zidar, a doctoral student in economics at the University of California, Berkeley, was previously a staff economist at the Council of Economic Advisers and, in 2008-9, an analyst at Bain Capital Ventures.

Payroll taxes and corporate income taxes accounted for an equal share of federal tax revenue in 1969. By 2009, payroll taxes generated more than six times as much revenue. We’ve become reliant on payroll taxes, and a goal of a tax overhaul should be to reform and reduce them, permanently.

First, some background. The share of federal tax revenues coming from payroll taxes has doubled since the 1970s, to about two-fifths of revenue. The payroll tax, underwriting social insurance programs, nearly surpassed the individual income tax as the single largest source of federal tax revenue in 2009.

Source: Office of Management and Budget Historical Table 2.2

Since payroll taxes finance Social Security and part of Medicare, cost growth in these programs pressures policy makers to raise those taxes. In particular, pressure from the Social Security disability insurance program and Medicare Part A has been intensifying.

The number of disability recipients has increased nearly sixfold since 1970. Disability outlays exceeded revenues by roughly $34 billion in 2011. And costs are likely to continue growing because shrinking labor market opportunities for noncollege-educated workers are likely to continue well past this recession. The Congressional Budget Office’s long-run projections for the program support this conclusion.

Pressure on the payroll tax from Medicare Part A is even worse. Health cost growth has steadily outpaced inflation, and the pattern shows no sign of abating. Fundamental economic forces – such as Baumol’s cost disease, which describes the phenomenon of rising costs in industries less conducive to automation – will most likely continue to increase health care costs steadily.

The primary argument for severing the link between these growing programs and the payroll taxes is that the tax is regressive: It uses a flat rate on income up to $110,100, does not apply to most income above that threshold and does not apply to nonlabor income, like capital gains. Because of this relatively regressive nature, payroll tax cuts tend to be a more effective stimulus than typical income tax cuts – and thus are a more effective way for Washington to respond to recessions.

Despite these features, AARP and other groups often resist payroll tax cuts out of a fear that the cuts will undermine the future of the safety net (even though the cuts are fully paid for out of general revenue). Permanently breaking the link between payroll taxes and both disability and Medicare would allow the tax code to become more progressive – and do more to offset inequality – without creating political problems when the business cycle calls for fiscal stimulus.

Obviously, the government would need other revenue if it severed the link between payroll taxes and the safety-net programs. One option would be to limit tax breaks, as Congress and the Obama administration have recently discussed. Others include phasing in a carbon tax, raising top marginal rates slightly or overhauling the tax code to use a progressive consumption tax that encourages saving.

The country is almost certain to face higher costs for health care and for an aging work force whose skills are being outpaced by technology. But there is no reason those costs must be borne by a regressive tax vulnerable to recurring struggles over economic policy.

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In Europe, Arguing to Apply Some Stimulus Along With the Austerity

On a concrete wall in Oporto, Portugal, where a tough austerity effort has hit hard, a somber graffiti mural depicts a submarine in a nose dive.

“Austerity doesn’t save,” the caption warns. “It sinks.”

As Western countries grapple with lingering economic malaise, even some traditionalists within the policy-making fraternity are starting to worry that such slogans might be right. But as a phalanx of politicians, academics and other experts gathers this week at the World Economic Forum
in Davos, Switzerland, perhaps the biggest question they will face is whether it is possible to develop policies to revive growth even as Western countries seek to reduce debt.

Europe and the United States are both locked into fiscal strategies based on curbing government debt and paring borrowing. Europe has been following a German prescription intended to save the euro zone. Meanwhile, Washington, which is in the throes of a heated presidential campaign, is divided over whether to extenda payroll tax cut
for the rest of the year and has committed, at least on paper, to cutting spending by $1.2 trillion starting this year.

Whether austerity will help revive economies over the long term is the subject of an intensifying debate, especially as much of Europe heads into what looks like its second recession in three years. The United States — where belt-tightening, though painful, has not been nearly so severe — shows glimmers of a recovery.

“It is clear that austerity alone is a recipe for stagnation and decline,” said Joseph E. Stiglitz, a Nobel laureate and professor at Columbia University in New York. “The likelihood that things would work out well is extraordinarily small.”

Recently, there have been signs the tide is shifting. In the past several weeks, European politicians have begun to insist quite publicly that austerity can no longer be the sole answer to putting even the most heavily indebted economies on the path to a brighter future.

After months of talk of almost nothing but cuts, Prime Minister Mario Monti of Italy and President Nicolas Sarkozy of France delivered such a message to the German chancellor, Angela Merkel, during recent visits to Berlin, with a surprising result: “Growth” has become the new watchword on everybody’s lips — even Mrs. Merkel’s.

“Budget consolidation is one of the legs Europe’s future must be built on,” Mrs. Merkel said this month after meeting with the Italian and French leaders. “But of course we need a second leg,” she added, which is “economic growth, jobs and employment.”

Germany is still insistent that the most foolproof path to sustainable recovery is through structural change, including the overhaul of rigid labor markets and changes to pension laws, much like those Germany painfully pushed through in the 1990s.

But the fruits of such labors often take years to emerge. In the meantime, the concern is that economies that are already in a slowdown will be weakened further by large cuts in national spending and by tax increases that governments are embracing to satisfy lenders and to placate the financial markets.

“You could say that if there’s no austerity, growth might be higher,” said Stefan Schneider, the chief international economist at Deutsche Bank in Frankfurt. “But then again, no austerity would probably escalate the bond crisis in Europe, and then you would wind up with total chaos.”

In the United States, where the budget deficit remains high and President Barack Obama has pressed for more stimulus, there are tentative signs of an economic comeback. The unemployment rate fell to 8.5 percent in December, its lowest level in nearly three years, after about 200,000 jobs were added.

The outlook remains fragile. The phaseout of an earlier stimulus program cost the United States an estimated half a percentage point in growth last year, and could further reduce potential gains in 2012. Washington is also likely to provide less government support this year amid continued wrangling between Republicans and Democrats over economic policy.

But the U.S. Federal Reserve has been more accepting than the European Central Bank of keeping interest rates low and of pumping extra money into the banking system in a bid to restart the engines of the economy.

“The U.S. government has been willing to provide more stimulus than the Europeans, and the Federal Reserve has been more accommodative on monetary policy,” said Paul De Grawe, a professor of economics at the Catholic University of Leuven in Belgium. “So America’s environment is easier right now because its macroeconomic policies are less contractionary than in Europe.”

In Europe, Mr. De Grawe added, “excessive austerity, no fiscal stimulus and a European Central Bank not willing to do the same as the Fed is the wrong policy mix.”

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Stocks & Bonds: Markets Close for Holidays in Slow but Hopeful Climb

Stocks closed higher Friday after a quiet, preholiday session that turned the Standard Poor’s 500-stock index positive for the year.

Traders were relieved by news that Congress extended emergency unemployment benefits and a payroll tax holiday for workers. Both programs were set to expire at the end of the year. Letting that happen would have reduced economic growth by about 1 percent, analysts said.

The final business day before Christmas also was the slowest full day of trading so far this year. Traders exchanged just 2.22 billion shares, about half of the recent average. The market will be closed on Monday because Christmas falls on Sunday.

Stocks have risen since Tuesday on hopeful signs about the pace of economic growth in the fourth quarter, which ends next week. New claims for unemployment benefits fell last week to the lowest level since April 2008.

A series of mixed economic reports Friday did little to derail that optimism. The S. P. added 11.33 points, or 0.9 percent, to 1,265.33. It started the year at 1,257.64.

The Dow Jones industrial average rose 124.35 points, or 1.02 percent, to 12,294.

The Nasdaq composite index gained 19.19 points, or 0.74 percent, to 2,618.64.

The Dow has risen 527.74 points, or 4.5 percent in the last four days. It was the first four-day winning streak for the Dow since mid-September.

The Treasury’s 10-year note fell 20/32, to 99 26/32. The yield rose to 2.02 percent, from 1.95 percent late Thursday.

Stocks could surge into the new year if the S. P. 500 passes a couple of crucial technical thresholds, said Todd Salamone, research director at Schaeffer’s Investment Research.

Fund managers currently hold relatively few stocks, Mr. Salamone said, and many of their funds have underperformed the market and are negative for the year. If the index rises farther above its break-even point for the year or its average over the last several months, fund managers might flood into the market in a last-ditch attempt to improve their annual returns, he said.

“The worst thing that can happen for a fund manager is to underperform and be in the red when your benchmark, the S. P. index, is in the green” for the year, Mr. Salamone said.

Bank of America was the Dow’s biggest gainer, adding 2.4 percent. All but two of the 30 Dow stocks rose, Alcoa and Boeing.

Earlier Friday, the government said that consumer spending and incomes barely grew in November. The weak gains suggest that consumers may have trouble sustaining their spending into 2012.

In another worrying sign, a measure of business investment decreased for the second straight month. Business investment has been a pocket of strong demand and spending amid a sluggish recovery. A tax break that encouraged companies to invest in new equipment and facilities expires at the end of the year.

Hopes for the economy remained high after this week’s encouraging news about the job market and strong holiday sales for retailers.

Rambus, the technology licensing company, jumped 12.2 percent after it said it reached a patent license deal and settled a lawsuit with Broadcom, the chip maker.

TripAdvisor rose 6.1 percent, the most in the S. P. 500, as traders reassessed the value of the newly spun off travel review Web site. The stock had fallen since it started trading on Wednesday. It recovered some losses on Friday as analysts weighed its growing revenue.

Eastman Kodak rose 9.5 percent after it said its general counsel, Laura Quatela, would become co-president on Jan. 1.

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Bucks Blog: Friday Reading: Students Say No to Healthier School Fare

December 23

Friday Reading: Students Say No to Healthier School Fare

Students say no to healthier school fare, House Republicans back temporary payroll tax extension, retailers slash prices ahead of the holiday and other consumer-focused news from The New York Times.

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