September 23, 2017

Eyes on Fed, Wall Street Ends Higher on Job Data

Yet many of them are spending a lot of energy trying to get inside the head of Ben S. Bernanke, the Federal Reserve chairman, and making bets on what they think he sees.

Stocks, bonds and currencies around the globe had a chaotic week as traders and strategists reassessed how Mr. Bernanke viewed the economy and whether those views would prompt the central bank to pull back on the bond buying that has supported markets in recent years.

“The market is looking at every piece of incoming data through Fed sunglasses,” said Rebecca Patterson, the chief investment officer at Bessemer Trust. “It’s not what does this data mean, it’s what you think the Fed thinks about this data.”

The middling jobs report on Friday appeared to soothe the nerves of investors for the moment.

Many on Wall Street agreed that the 175,000 jobs created in May was strong enough to keep the economy on a steady path but not so strong as to encourage the Fed to let up on its stimulus sooner than expected. The Fed can afford to be patient.

With this interpretation prevailing, stocks rose in trading on Friday. The benchmark Standard Poor’s 500-stock index ended up 1.28 percent to close out a week that also experienced one of the worst days of the year.

The sharp movements in stocks, bonds and currencies this week reflect the peculiar anxiety felt by investors. There is confusion over when and by how much the central bank may withdraw its support. But even if there were clear signals about a pullback, there is little precedent for what kind of effect those policies will have on the markets. A decision to pare back the stimulus could be a good thing if the economy is growing fast. But it could also throw markets into disarray given the degree to which investors have come to rely on the Fed’s bond-buying programs over the last five years.

All of which suggests that the markets could be in for a bumpy summer.

“This hasn’t really been seen at this scale ever,” said James Swanson, the chief investment strategist at MFS Investment Management in Boston. “We don’t know how they will get out of it,” he added, referring to Fed officials.

Central-bank watching is not a new sport on Wall Street. But for most of the last few years, many other events, including the European debt crisis and the prospect of a double-dip recession in the United States, have been at least as important as the Fed in driving markets. What’s more, the Fed had been steadily ramping up its bond-buying programs, not looking at cutting back.

The prospect of a reversal came to the fore on May 22, when Mr. Bernanke said in Congressional testimony that he and his colleagues might consider paring back their bond-buying programs “in the next few meetings” if the economy is showing signs of improvement.

As investors have speculated on what exactly Mr. Bernanke meant, and what might prompt him to act, the markets have been on a wild ride. The S. P. 500 experienced two consecutive weeks in the red for the first time this year as investors prepared for a future without support from Mr. Bernanke.

The bond market has experienced more violent swings because the Fed has supported the economy by buying government and mortgage bonds. In anticipation of the Fed buying fewer bonds, investors sold off all kinds of bonds, pushing up interest rates to their highest level in over a year.

Concerns over a Fed pullback persisted on Friday. Bond prices slumped, pushing the yield, which moves in the opposite direction, on the benchmark 10-year Treasury to 2.18 percent from 2.08 percent on Thursday.

Mr. Bernanke and his colleagues have made it clear that they are not planning to suddenly stop the bond-buying programs that have been so important to investors. Instead, they are likely to “taper” back the $85 billion in bond purchases they are making each month, and could step back up if the economy shows signs of flagging.

There is still significant disagreement on Wall Street about whether the economy will improve enough for Mr. Bernanke to begin this process.

Article source: http://www.nytimes.com/2013/06/08/business/daily-stock-market-activity.html?partner=rss&emc=rss

Depressed High-Dividend Shares Leads Market Loss

Wall Street’s recent passion for high-dividend stocks seems to be fading.

The stock market closed lower on Wednesday, led by the same industry groups that had the biggest gains early in the year: rich dividend payers like power utilities and makers of consumer staples.

Rising bond yields have been an important factor behind that shift.

The yield on the 10-year Treasury note is near the highest it has been in 13 months after a sharp increase on Tuesday. That is giving investors who want steady income an alternative to dividend-rich stocks. Investors piled into those stocks at the beginning of the year, when bond yields were close to historic lows.

More broadly, after this year’s powerful bull run — the Dow Jones industrial average is up 16.8 percent, the Standard Poor’s 500-stock index rose 15.6 percent — investors may be running out of reasons to keep plowing money into the stock market.

“There’s a vacuum of catalysts to continue to push,” said Sam Stovall, chief United States equity strategist for SP Capital IQ. Now, Mr. Stovall said, investors are wondering: “Well, should I take some profits and sit on the sidelines and then get back in?”

Mr. Stovall noted that S. P. 500 has had a temporary pullback of at least 5 percent every year since the end of the World War II, which has not happened yet in 2013.

The Dow closed down 106.59 points at 15,302.80, a loss of 0.7 percent. That decline matched its advance the day before, when it closed at a high, the ninth time it has done so this month. The Dow was down as much as 179 points in late morning trading, then rose moderately in the afternoon.

The S. P. 500 index was down 11.70 points to 1,648.36, also 0.7 percent. The Nasdaq composite lost 21.37 points to 3,467.52, or 0.6 percent.

“At some point, interest rates will go up, and that’s obviously having some impact on stocks,” said Erik Davidson, deputy chief investment officer for Wells Fargo Private Bank. “And you’re seeing it in the sectors that you would expect. The hardest sectors hit recently have been the more dividend-driven stock sectors.”

In commodities trading, the price of crude oil fell $1.88, or 2 percent, to $93.13. Gold rose $12.20, or 0.9 percent, to $1,391.30 an ounce. The dollar fell against the euro and the Japanese yen.

The price of the benchmark 10-year Treasury rose 14/32, to 96 23/32, and the yield fell to 2.12 percent from 2.17 on Tuesday.

Article source: http://www.nytimes.com/2013/05/30/business/daily-stock-market-activity.html?partner=rss&emc=rss

Rate Increase for Private Medicare Buoys an Uncertain Market

Stocks rose on Tuesday, led by the health care sector after the government said it would alter payment rates for private Medicare insurers, and helped by data on factory orders that indicated the economy was steadily improving.

The Standard Poor’s 500-stock index and the Dow Jones industrial average closed at nominal highs, though the S. P. fell short of breaking above its milestone intraday high of 1,576.09.

The federal government dropped plans to cut payments for private Medicare Advantage insurers, and instead said it would allow a 3.3 percent raise.

The news improved shares of some health insurers, including Humana, which derives about two-thirds of its revenue from the Medicare Advantage business. The stock jumped 5.5 percent to $79.11 and was among the biggest percentage gainers on the S. P. 500. UnitedHealth Group gained 4.7 percent to $61.74.

“They didn’t expect the result that they got. That will help with their bottom line,” said Quincy Krosby, market strategist at Prudential Financial in Newark, N.J.

Strengthening economic data has helped stocks rally since the start of the year. On Tuesday, data showed February factory orders rose 3 percent, slightly above expectations. That follows a weak reading on manufacturing on Monday that sparked a pullback in stocks.

The S. P. 500-stock index is now up 10.1 percent since the start of the year.

For the day, the Dow Jones industrial average was up 89.16 points, or 0.61 percent, at 14,662.01. The S. P. 500 was up 8.08 points, or 0.52 percent, at 1,570.25. The Nasdaq composite index was up 15.69 points, or 0.48 percent, at 3,254.86.

The S. P. 500 surpassed its 2007 closing high last Thursday, while the Dow first broke above its 2007 record on March 5.

Stocks pared gains late in the session, giving investors another reason to question the strength of the recent rally.

“The recent legs of this rally have lacked a bit of conviction,” said Mark D. Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. “What’s been leading equity markets has been more defensive sectors.”

Health care sector stocks are still seen as cheap relative to the overall market. Humana, which has a market cap of about $11.9 billion, has a forward price-to-earnings ratio of 9.4, below the S. P. 500 P/E average ratio of about 16.5. UnitedHealth has a P/E ratio of 10.6 and Cigna, 9.7 ratio.

“We do think that health care stocks are a nice combination of dividend yields, growth and low valuations, and we are very constructive on the sector,” said Jim Russell, senior equity strategist for U.S. Bank Wealth Management in Cincinnati.

Other big gainers in the health care sector included Cigna, up 2.9 percent at $64.75.

Moves are expected to be limited this week before Friday’s employment report.

The March jobs report could give clues on how successful the Federal Reserve has been in lowering unemployment, one of the primary headwinds for the economy.

About 200,000 jobs were created last month, according to a Reuters poll, down from 236,000 in February. The unemployment rate is expected to come in at 7.7 percent, unchanged from the previous month, the poll showed.

In an effort to bring down the unemployment rate, the Fed has maintained an accommodative monetary policy, which has also benefited stocks.

Other gainers included Hertz Global Holdings shares, up 6.8 percent to $23.41, after the company forecast strong earnings and revenue through 2015 as a result of increasing global demand for car rentals and benefits from its recently completed acquisition of Dollar Thrifty.

Among decliners, Delta Air Lines was off 8.1 percent at $14.94. Delta’s unit revenue for March rose at a slower rate than in the prior two months.

Shares of the Nasdaq OMX Group fell 12.8 percent to $27.91 after agreeing to buy a BGC Partners trading platform. BGC shares were up 48.6 percent at $5.72.

Shares of Hewlett-Packard fell 5.2 percent to $22.10 after Goldman Sachs downgraded them to sell.

Interest rates were steady. The Treasury’s benchmark 10-year note fell 8/32, to 101 8/32 and the yield rose to 1.86 percent from 1.84 percent late Monday.

Article source: http://www.nytimes.com/2013/04/03/business/daily-stock-market-activity.html?partner=rss&emc=rss

Wall Street Rally Takes a Break

Stocks on Wall Street opened lower on Tuesday as investors paused after a seven-session string of gains and after a warning from the Bundesbank’s chief that the euro zone crisis has not ended.

The Standard Poor’s 500-stock index fell 0.1 percent in morning trading, the Dow Jones industrial average was flat and the Nasdaq composite index fell 0.1 percent. European markets were generally higher.

Both the Dow and benchmark S.P. 500 index have rallied, with the Dow closing at another record high on Monday and the S.P. within 10 points of its closing high of 1,565.15 points, set on Oct. 9, 2007.

Any pullback may be short-lived, however, as investors have been using recent dips as a buying opportunity.

Sounding a note of caution in Europe, Jens Weidmann, the head of the Bundesbank, Germany’s central bank, said the euro zone’s “crisis is not over despite the recent calm on financial markets.” Mr. Weidmann, who is also a member of the European Central Bank’s governing council, said that the region’s economic stability remains on shaky ground.

Still, investors’ confidence has grown on Wall Street, leading to a gain of more than 9 percent by the S.P. Signs of improvement in the economy and the Federal Reserve’s quantitative easing have helped to drive the gains.

“The data has been improving. No horror stories out of Europe at the moment, and China is on the mend,” said Frank Lesh, a futures analyst and broker at FuturePath Trading L.L.C. in Chicago.

Yum Brands, the parent company of the KFC restaurant chain, advanced 3.4 percent in early trading after reporting an unexpected rise in February sales in China.

Article source: http://www.nytimes.com/2013/03/13/business/daily-stock-market-activity.html?partner=rss&emc=rss

Unemployment at 4-Year Low as U.S. Hiring Gains Steam

Even as analysts hailed a better-than-expected jobs report on Friday that pointed to an acceleration in growth, they warned that stronger employment gains are being put at risk by sequestration, the automatic spending cuts being imposed by the federal government.

“They’re doing their best to get in the way,” Nigel Gault, chief United States economist at IHS Global Insight, said of lawmakers and other officials. “But the good news is that the economy is carrying plenty of momentum going into sequestration.”

The Labor Department reported that the economy added 236,000 jobs in February as the unemployment rate sank to 7.7 percent, down from 7.9 percent in January and the lowest level since December 2008.

Wall Street expected no more than 165,000 additional jobs in February, and the surprise helped lift the Dow Jones industrial average to another new nominal record, its fourth for the week. It closed at 14,397.07.

But many experts said if it weren’t for political gridlock in Washington, which led to the automatic spending reductions on March 1, the performance of the job market and the broader economy would be even more robust in the months ahead.

“It does suggest a bit more cushion heading into the spring, when we will see the bulk of the impact from the sequester and fiscal pullback,” said Michelle Meyer, senior United States economist at Bank of America Merrill Lynch. “This was a good report. It’s hard to poke holes in it. But we think we’ll see some slowdown in April and May because of the sequester.”

Mr. Gault estimated that the economy would achieve a 1.5 percent growth rate in the first half of 2013. Without the spending cuts and a rise in Social Security taxes that went into effect in January, he said, the economy would probably advance at double that pace.

As a result, he and other economists expected that the pace of job creation would slow, leaving the unemployment rate not much lower than where it is now. If jobs were added at February’s pace for the rest of 2013, the unemployment rate would crack the closely watched 7 percent level by the end of the year. Instead, Ms. Meyer predicted that unemployment would remain near 7.5 percent.

Macroeconomic Advisers, an independent forecasting firm, predicted that the federal spending cuts would cost about 700,000 jobs this year, with most of the damage occurring in the second and third quarters.

While the economy is expected to continue to add enough jobs to keep the jobless rate from rising significantly, estimates like these suggest that without the drag from Washington the labor market might have added, on average, a robust 300,000 jobs a month or so.

The data for February, adjusted for normal seasonal variations, don’t reflect the federal cuts, which are expected to affect not just government jobs but also industries that rely on public spending.

Public sector employment continued a long decline, with the number of state and local government workers falling by 10,000 in February. Over all, there are now 366,000 fewer government workers in the United States than there were two years ago.

On Friday, the White House was quick to point to the new data as a sign that the economy is strengthening even as it warned of the impact from the squeeze on spending.

“The recovery is gaining traction,” said Alan Krueger, chairman of the White House Council of Economic Advisers. But the sequestration, he said, “is an unnecessary headwind. It’s something that will slow the expansion. We’re poised for stronger growth if we don’t get in the way with misguided fiscal policy.”

In some respects, the rest of the year is shaping up as a tug of war between a strengthening private sector and federal austerity.

Private hiring last month was broad-based, with healthy job gains in several areas, including business services and manufacturing.

Article source: http://www.nytimes.com/2013/03/09/business/economy/us-added-236000-jobs-in-february.html?partner=rss&emc=rss

Jobless Rate Down, Stocks Up, Washington Is Unmoved

Even as analysts hailed a better-than-expected jobs report on Friday that pointed to an acceleration in growth, they warned that stronger employment gains are being put at risk by sequestration, the automatic spending cuts being imposed by the federal government.

“They’re doing their best to get in the way,” Nigel Gault, chief United States economist at IHS Global Insight, said of lawmakers and other officials. “But the good news is that the economy is carrying plenty of momentum going into sequestration.”

The Labor Department reported that the economy added 236,000 jobs in February as the unemployment rate sank to 7.7 percent, down from 7.9 percent in January and the lowest level since December 2008.

Wall Street expected no more than 165,000 additional jobs in February, and the surprise helped lift the Dow Jones industrial average to another new nominal record, its fourth for the week. It closed at 14,397.07.

But many experts said if it weren’t for political gridlock in Washington, which led to the automatic spending reductions on March 1, the performance of the job market and the broader economy would be even more robust in the months ahead.

“It does suggest a bit more cushion heading into the spring, when we will see the bulk of the impact from the sequester and fiscal pullback,” said Michelle Meyer, senior United States economist at Bank of America Merrill Lynch. “This was a good report. It’s hard to poke holes in it. But we think we’ll see some slowdown in April and May because of the sequester.”

Mr. Gault estimated that the economy would achieve a 1.5 percent growth rate in the first half of 2013. Without the spending cuts and a rise in Social Security taxes that went into effect in January, he said, the economy would probably advance at double that pace.

As a result, he and other economists expected that the pace of job creation would slow, leaving the unemployment rate not much lower than where it is now. If jobs were added at February’s pace for the rest of 2013, the unemployment rate would crack the closely watched 7 percent level by the end of the year. Instead, Ms. Meyer predicted that unemployment would remain near 7.5 percent.

Macroeconomic Advisers, an independent forecasting firm, predicted that the federal spending cuts would cost about 700,000 jobs this year, with most of the damage occurring in the second and third quarters.

While the economy is expected to continue to add enough jobs to keep the jobless rate from rising significantly, estimates like these suggest that without the drag from Washington the labor market might have added, on average, a robust 300,000 jobs a month or so.

The data for February, adjusted for normal seasonal variations, don’t reflect the federal cuts, which are expected to affect not just government jobs but also industries that rely on public spending.

Public sector employment continued a long decline, with the number of state and local government workers falling by 10,000 in February. Over all, there are now 366,000 fewer government workers in the United States than there were two years ago.

On Friday, the White House was quick to point to the new data as a sign that the economy is strengthening even as it warned of the impact from the squeeze on spending.

“The recovery is gaining traction,” said Alan Krueger, chairman of the White House Council of Economic Advisers. But the sequestration, he said, “is an unnecessary headwind. It’s something that will slow the expansion. We’re poised for stronger growth if we don’t get in the way with misguided fiscal policy.”

In some respects, the rest of the year is shaping up as a tug of war between a strengthening private sector and federal austerity.

Private hiring last month was broad-based, with healthy job gains in several areas, including business services and manufacturing.

Article source: http://www.nytimes.com/2013/03/09/business/economy/us-added-236000-jobs-in-february.html?partner=rss&emc=rss

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.

Article source: http://www.nytimes.com/2013/03/08/business/economy/daily-stock-market-activity.html?partner=rss&emc=rss

News Analysis: Market Highs of January Fade as Sequester Looms

The investor euphoria that began the year is beginning to seem like a hazy dream.

After looking to be ready to rocket past milestone levels just a few weeks ago, the benchmark Standard Poor’s 500-stock index has been stalled, and is now coming out of its first negative week of the year.

The index could just as easily have ended last week in the black — it was down only 0.3 percent — and it is still just a few good days away from the nominal high set in 2007. But there has been a distinct shift in the sentiment on trading desks, as investors have returned their focus to the risks of the automatic federal budget cuts set to begin on March 1, and to the possibility that the Italian elections will produce an ineffective government.

Beyond these risks, though, economists say that investors entered the year with too much enthusiasm and ignored signs that the United States was still in a period of slow economic growth.

“The optimism that got built into the market assumed that things were going to get a lot better,” said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland. “Truly, things are not getting really good. They are just so-so, as they have been.”

The S. P. 500 index is now almost exactly where it was at the beginning of February, but there is lots of speculation that the market is due for a downturn after rising nearly 6 percent in January.

“Everybody is looking for some type of pullback,” said Timothy M. Ghriskey, chief investment officer at the Solaris Group. “It’s what the chatter is out there from traders.”

The shift in opinion has extended to smaller investors. A poll of individual investors found last week that bearish sentiment had risen above the historical average for the first time this year. Those saving for retirement who were pouring money into stock mutual funds through January have dialed it back to a trickle.

The political agreement early in the year to avoid the so-called fiscal cliff seemed to remove one of the last major weights that had been dragging down the economy, opening up the possibility of faster growth. But that compromise did not avert a two percentage point increase in the payroll tax, which is already being blamed for the slowdown in consumer spending that Wal-Mart Stores reported last week.

At the same time, Congress decided at the beginning of the year to delay the automatic budget cuts, known as sequestration, until March 1 rather than cancel them altogether. The spirit of political compromise seemed to be in the air, but Democrats and Republicans are showing no signs now of coming together to avert a $44 billion reduction in federal spending in 2013. Economists have said the cuts could hold back economic growth by half a percentage point this year.

In presenting their financial results for the last three months of 2012, American companies have also been reining in expectations that profits will remain at the elevated levels of last few years.

Seventy-nine companies in the S. P. 500 index have warned in their quarterly earnings presentations that their future profits will be lower than analysts expect, while only 19 have said profits will be better than expected, according to Thomson Reuters. This has led analysts to lower their expectations for profits in the current quarter.

Many strategists say these hurdles for the economy are likely to be temporary, while the type of existential crises that weighed on stock prices for the last few years have largely dissipated.

James O’Sullivan, chief United States economist at High Frequency Economics, said that he was prepared for economic data to show signs of a slight slowdown over the next few months. But he said that the recovery in housing prices looked set to continue at the same time that companies are putting more money into hiring new employees.

“The recovery still looks pretty secure,” Mr. O’Sullivan said.

Even if the markets do begin to take off again, the Federal Reserve is likely to serve as an impediment to any big upward moves. The central bank has said that when the economy assumes a steadier footing, it will stop the bond buying programs that have pushed markets up since the financial crisis.

One hint of what could happen came last week, when the Fed released minutes from its January meeting, indicating that its members were growing more divided on how long the stimulus program should continue. That news led to the biggest one-day market decline of the year. By the end of the week, though, Fed officials were emphasizing that the bond buying was not likely to stop anytime soon.

There is an outspoken contingent in the investing community that believes the Fed’s actions will bring their own problems, encouraging a bubble in riskier assets that will end in another financial crisis. The Fed has discounted those worries, and the consensus among strategists is that a slow but steady recovery is under way.

“There are things to be worried about out there,” Mr. Ghriskey said, “but to us, the outlook for the U.S. is favorable with short-term blips.”

Article source: http://www.nytimes.com/2013/02/25/business/market-highs-of-january-fade-as-sequester-looms-news-analysis.html?partner=rss&emc=rss

Wall Street Shares Slide

Stocks slid on Wall Street on Thursday, as data continued to show a slowly improving economy.

The Standard Poor’s 500-stock index declined 0.8 percent, the Dow Jones industrial average lost 0.5 percent and the Nasdaq composite index fell 1.3 percent in afternoon trading. European markets ended down about 2 percent.

In one economic report released Thursday, the Labor Department said the number of Americans filing new claims for unemployment benefits rose 20,000 to a seasonally adjusted 362,000, above expectations for 355,000.

In another report, the government said consumer prices were flat for a second straight month in January, providing scope for the Federal Reserve to maintain its very accommodative monetary policy stance as it tries to stimulate the sluggish economy. Excluding food and energy, consumer prices rose 0.3 percent, the largest gain since May 2011.

The S.P. 500 index dropped 1.2 percent on Wednesday, its biggest decline since Nov. 14, after minutes from the Federal Reserve’s most recent meeting suggested the central bank may slow or stop buying bonds sooner than expected.

With the benchmark S.P. index still up 6 percent for the year, many analysts considered the Fed minutes as a trigger for an overdue pullback in equities, as would be the upcoming sequestration in Washington. The sequestration — automatic across-the-board spending cuts put in place as part of a larger congressional budget fight — is due to begin March 1 unless lawmakers agree on an alternative.

“It’s the sequester, it’s the knee-jerk reaction to yesterday’s Fed minutes and it’s the realization the consumer is slowing,” said Phil Orlando, chief equity market strategist at Federated Investors in New York. “I’d love to see a healthy 5 percent correction. Let’s wash out some of the weak hands and set up for a better move during the year.”

Wal-Mart rose 2.2 percent after the world’s largest retailer reported a larger-than-expected rise in quarterly profit and raised its dividend. Investors weighed the news of better profit against persisting weakness in sales in the United States.

VeriFone Systems tumbled 41 percent after the credit card swipe-machine maker forecast first- and second-quarter profit that were well below analysts’ expectations.

Berry Petroleum jumped 17 percent after the oil and gas producer Linn Energy said it would buy the company in an all-stock deal valued at $4.3 billion including debt.

Article source: http://www.nytimes.com/2013/02/22/business/daily-stock-market-activity.html?partner=rss&emc=rss

Economic Costs of Budget Impasse Inevitable, Experts Say

While negotiators in the capital focus on keeping Bush-era tax rates in place for all but the wealthiest Americans, other tax increases are expected to go into effect regardless of what happens in the coming days. For example, a two percentage point jump in payroll taxes for Social Security is all but certain after Jan. 1, a change that will equal an additional $2,000 from the paycheck of a worker earning $100,000 a year.

Many observers initially expected the lower payroll-tax deduction rate of 4.2 percent to be preserved. But in recent weeks, as it became clear that political leaders were prepared to let that rate rise to 6.2 percent, economists reduced their predictions for growth in the first quarter accordingly.

Largely because of this jump in payroll taxes, Nigel Gault, chief United States economist at IHS Global Insight, is halving his prediction for economic growth in the first quarter to 1 percent from an earlier estimate of just over 2 percent. That represents a significant slowdown in economic growth from the third quarter of 2012, when the economy expanded at an annual rate of 3.1 percent.

Mr. Obama has pushed to preserve Bush-era tax rates on income below $250,000 a year but Republicans have held out for a higher threshold, perhaps in the neighborhood of $400,000 a year. Republicans also favor deeper spending cuts to curb long-term budget deficits — a move many Democrats oppose.

While hopes dimmed Sunday afternoon that a deal could be reached before Jan. 1, most observers said they did not expect the full impact from more than $600 billion in potential tax increases and spending cuts to swamp the economy right away. Indeed, a compromise could be struck in the coming weeks that heads off the worst of the fallout.

In the event no compromise is found, however, the Congressional Budget Office and many private economists warn that the sudden pullback in spending and the rise in taxes would push the economy into recession in the first half of the year. Under this outcome, Mr. Gault said, the economy could shrink by 0.5 percent over all of 2013.

With the clock ticking, some observers bolstered their criticism of Washington. “If we have a recession, it’s unforgivable,” said Bernard Baumohl, chief global economist at the Economic Outlook Group. “For the first time in modern history, we will have a self-inflicted recession in the U.S.”

Despite Washington’s history of delaying fiscal compromises to the last possible minute — as in the fight over raising the debt ceiling in the summer of 2011 — investors had assumed until very recently that a deal would be completed before year-end.

But last week, stocks sold off as hopes for a quick compromise faded. More pressure on shares is expected beginning on Monday, especially if the fight does indeed slip into 2013. If anything forces politicians to act, Mr. Baumohl said, it could be a sell-off on Wall Street. “The politicians need to be pressed by markets to be forced to the table,” he said.

Payroll managers at many companies are also watching the negotiations closely but have already prepared systems for the two percentage point change in payroll taxes, said Scott A. Schapiro, a principal at KPMG.

“We’re primarily closed down from Christmas to New Year’s,” he said, “but our payroll folks are working. Payroll has to be around.”

“This is one of the most obvious effects of the fiscal cliff,” Mr. Schapiro added, “because it will affect all taxpayers.” The Social Security payroll tax applies to the first $113,700 of annual income, he said. It was first cut by Congress in late 2010 to help give the economy a jolt, and was extended again last year to cover 2012.

Another big question mark is whether unemployment benefits for more than two million jobless Americans will be extended beyond Jan. 1. While there is still the possibility these payouts for the long-term unemployed will be preserved as the negotiations go down to the wire, failure to extend them would deliver another sizable blow to a still-fragile economy, experts said.

“This is not just an inside-the-Beltway-game,” said Vincent Reinhart, chief United States economist at Morgan Stanley. “Both the payroll tax increase and the change in unemployment benefits would hit hand-to-mouth consumers hard. This has consequences for the whole economy.”

Consumer spending is especially critical right now, because many businesses have pulled back already, citing the fiscal impasse in Washington as a prime concern. Until recently, consumers have been more optimistic about the economy, although sentiment has eroded in recent weeks as anxiety increased about just what policy makers would do in terms of taxes and spending.

If it were not for the uncertainty in Washington and the fallout from the fiscal impasse, Mr. Reinhart said, the economy would be growing at an annual rate of 2 percent to 2.5 percent. Instead, he estimated growth in the fourth quarter of 2012 at just under 1 percent, and said he expected it to edge up only slightly to around 1 percent in the first half of 2013. Unemployment, now at 7.7 percent, is about 0.3 percentage point higher than it otherwise would be, he added.

To be sure, the impact from some other scheduled changes will not be felt right away — and could still be reversed if a deal is completed in the coming weeks. For example, automatic spending cuts set to hit the Pentagon budget as well as nonmilitary programs are spread out between now and the end of the 2013 fiscal year in September, giving legislators time to change course and head off any major impact.

But the longer the standoff continues, the deeper the economic damage, experts said. “Because the politicians couldn’t get out of the way,” Mr. Reinhart said, “growth in the last quarter of 2012 and the first two quarters of 2013 will be below trend. There is a real cost of not coming to the table.”

Article source: http://www.nytimes.com/2012/12/31/business/economy/economic-costs-of-budget-impasse-are-inevitable-experts-say.html?partner=rss&emc=rss