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U.S. Housing Recovery Seems Still on Track

September 24, 2013 by

For now, though, builders are building, sellers are selling and mortgage lenders are less nervous about extending credit to buyers.

The heady price increases in the first half of the year slowed a bit in July, according to data released on Tuesday.

But in the face of pent-up demand and emboldened consumers, home values were still heading upward at a healthy pace, rising 12.4 percent from July 2012 to July 2013, according to the Standard Poor’s Case/Shiller home price index, which tracks sales in 20 cities.

A separate index of mortgages backed by Fannie Mae and Freddie Mac showed an 8.8 percent gain in prices over the same time period.

Two national homebuilders, Lennar and KB Home, reported significant revenue growth and profits in the third quarter. Lennar said its third-quarter earnings rose 39 percent over the third quarter of last year, and KB said its profit had increased sevenfold.

“We still have a lot of young people that are going to start moving out and forming households and we’re going to have to find housing for them,” said Patrick Newport, the chief United States economist for IHS Global Insight. “There are shortages of homes just about everywhere.”

Higher home prices help the economy not just by strengthening the construction and real estate industries, but by making homeowners feel wealthier and more likely to spend.

While the number of Americans who lost the equity in their homes in the housing crash set records, rebounding prices have helped nudge more and more households back above water. According to CoreLogic, 2.5 million households regained equity in their homes in the second quarter.

Mr. Newport said the full effects of higher mortgage rates had probably not shown up in the numbers yet.

Rates increased from about 3.4 percent on 30-year fixed-rate loans in January to about 4.4 percent in July, according to a survey by Freddie Mac, and many loans were written at even higher rates this summer. But they remain well below typical rates in recent decades, and mortgage borrowing costs have already eased a bit from their recent peak now that the Federal Reserve opted last week not to begin a wind-down of stimulus measures.

Rising rates may not torpedo the housing market recovery, but they have made refinancing much less appealing.

The number of mortgage applications for purchases has climbed by 7 percent over the last year, according to the Mortgage Bankers Association, but refinance requests have fallen by 70 percent since early May.

As a result, banks have laid off thousands of workers in their mortgage units. Citigroup laid off 1,000 workers from its mortgage business, it said on Monday, following Wells Fargo and Bank of America, which have both done layoffs in recent months.

Refinancing also gave households more spending power as it lowered monthly payments.

Analysts offered a cornucopia of reasons for the continuing strength of the housing market: people rushing to buy before prices and interest rates increased further, a gradual relaxation of lending standards, an uptick in inventory, a smaller share of foreclosures in the sales stream and large-scale buying by investors looking to put houses on the rental market.

Still, some analysts questioned whether fundamental factors like job and wage growth would sustain the market and restore first-time buyers to the market. Others warned of a lurking shadow inventory.

“While recent results have been considerably better than those seen earlier in the cycle, and also better than we had anticipated, we have not given up on the argument that a large supply overhang of existing homes (factoring in all those in foreclosure or soon to be) promises to keep pressure on prices for some time,” Joshua Shapiro, the chief United States economist for MFR, wrote in a note to investors.

Once the backlog of demand is absorbed, continued strength will depend heavily on consumer confidence. That’s where politics, including a looming battle over federal spending and the debt ceiling, could stall improvement.

“The real test will come over the next few months, given the sharp drop in mortgage demand and the potential for a rollover in consumers’ confidence as Congress does its worst,” wrote Ian Shepherdson, an economist with Pantheon Macroeconomics.

On Tuesday, the Conference Board, a New York-based private research group, reported that Americans’ confidence in the economy fell slightly in September from August, as many became less optimistic about hiring and pay increases over the next six months. The September reading dropped to 79.7, down from 81.8 the previous month, but remained only slightly below June’s reading of 82.1, the highest in five and a half years.

Year-over-year prices were up in all 20 cities tracked by Case/Shiller, but the gains varied widely, from 3.5 percent in New York and 3.9 percent in Cleveland on the low end to a frothy 24.8 percent in San Francisco and 27.5 percent in Las Vegas.

The month-to-month increase in the Case/Shiller index slowed to 0.6 percent, after gains of 1.7 percent in April, 0.9 percent in May and 0.9 percent in June.

Asked if the slowdown in growth was alarming, Robert Shiller, the Yale economist who helped develop the home price index, said no. “I’m not worried. I think that would be a good thing,” he said.

“I’m worrying more about a bubble — in some cities, it’s looking bubbly now.”

Still, Mr. Shiller said, even the bubbliest markets were still well below their peak.

Other analysts raised the same point. Prices in San Francisco are still only at 2004 levels, cautioned Steve Blitz, chief economist for ITG Investment Research. “For those who bought and still hold homes in 2005, ’06 and ’07, they may still be in a negative equity position, depending on the terms of their mortgage,” Mr. Blitz wrote. “Don’t let those double-digit year-over-year percentage gains bias opinion to believe all is all right.”

Article source: http://www.nytimes.com/2013/09/25/business/economy/home-prices-still-rising-but-at-slower-pace.html?partner=rss&emc=rss

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DealBook: HSBC Profit Surges as Restructuring Plan Gains Traction

May 7, 2013 by Leave a Comment

A branch of HSBC in London.Andy Rain/European Pressphoto AgencyA branch of HSBC in London.

8:42 a.m. | Updated

LONDON – Job cuts, asset sales and other cost reductions paid off for the British bank HSBC as it posted first-quarter earnings on Tuesday that beat analysts’ expectations.

Earnings at the bank rose almost 50 percent, to $8.43 billion, compared with the $4.32 billion the bank reported in the period a year earlier. Analysts polled by Thomson Reuters had expected a pretax profit of $8.1 billion.

“We’re moving into calmer waters but there are still challenges ahead,” HSBC’s chief executive, Stuart T. Gulliver, said during a conference call with reporters.

Like other banks, HSBC has embarked on a far-reaching cost-reduction program. Mr. Gulliver said that cost-cutting would remain on the top of the agenda this year, as the bank aimed to find an additional $1 billion in annual savings.

Operating expenses fell 11 percent, to $9.3 billion, from $10.4 billion in the first quarter of 2012, HSBC said in a statement. HSBC plans to update investors next week about its strategy and the progress it has made with its cost-reduction program.

Mike Jennings, chief investment officer of Premier, an investment firm in Britain, described the earnings as “good,” adding that the bank’s efforts to reduce costs had been better than expected. “They should be able to maintain a good rate of growth compared to competitors,” said Mr. Jennings, who holds HSBC stock as part of his portfolio.

Since it began a revamp in 2011, the bank has reduced costs by $4 billion, sold its unit in Panama to Bancolombia for $2.1 billion and its stake in the Chinese insurer Ping An for $9.4 billion. Last month, HSBC said it would eliminate about 1,150 jobs at branches in Britain, adding to the reduction of 30,000 positions two years ago.

A decline in bad debts also helped results. The bank had to set aside $1.2 billion for bad loans and other credit risks in the first quarter, half the $2.4 billion it did in the period a year earlier. The overall quality of the loans improved, especially in the United States and Europe, HSBC said.

Mr. Gulliver said on Tuesday that he could not rule out additional job cuts, as the economies in Britain and the rest of Europe continued to struggle. After a slower-than-anticipated start to the year, Mr. Gulliver said he expected economic growth in mainland China to gather speed in 2013.

HSBC’s first-quarter earnings were helped by its business in Asia, where it generates more than half of its profit. It also recorded better performance in Europe, swinging to a profit after posting a loss in the first quarter of last year. Going forward, however, Mr. Gulliver said he expected the euro zone would contract but that the United States economy would “continue to outperform its peers.”

Shares of HSBC rose 2.9 percent in London on Tuesday. The shares have gained 13 percent this year, less than shares in Barclays but more than those of Standard Chartered, which also generates most of its profit outside of Europe.

HSBC is recovering from a set of blunders that have weighed on its earnings and reputation. Last year, it agreed to pay a $1.92 billion fine to settle charges by American authorities that the bank broke money laundering rules. The case included charges that HSBC handled money transfers worth billions of dollars for countries under United States sanctions.

The bank has also set aside more than $2 billion to compensate customers who were improperly sold some financial products.

Article source: http://dealbook.nytimes.com/2013/05/07/hsbc-profit-surges-on-restructuring-plan/?partner=rss&emc=rss

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DealBook: UBS Posts $1 Billion First-Quarter Profit

April 30, 2013 by Leave a Comment

The Swiss bank UBS in Zurich.Michael Buholzer/ReutersUBS is based in Zurich.

LONDON – The Swiss bank UBS, buoyed by strong performances in its wealth management and investment banking operations, reported first-quarter earnings on Tuesday that sharply exceeded analysts’ expectations.

Although the bank said profit fell to 988 million Swiss francs ($1 billion) from 1 billion francs in the period a year earlier, the results were much better than the 412 million francs predicted by a group of analysts surveyed by Bloomberg News.

Sergio P. Ermotti, the chief executive, said in a statement that he was very pleased with the performance. He cautioned that it was “too early to declare victory,” but said the earnings showed the company’s “business model works in practice.”

UBS announced a far-reaching overhaul of its business in October to adjust to tighter regulations and the effect of a sluggish European economy. The bank started to eliminate 10,000 jobs, reduce bonus payments, scale back its investment banking trading business and focus more on its successful wealth management operation.

It also sought to rebuild trust among clients and investors after its involvement in some recent scandals. The bank uncovered a $2.3 billion trading loss in 2011 connected with the activities of a former trader, Kweku M. Adoboli, who has since been sentenced to seven years in jail. In December, UBS said it would pay $1.5 billion in fines to settle a case related to the manipulation of the London interbank offered rate, or Libor.

UBS said pretax profit at the investment banking operation rose 92 percent, to 977 million francs. Stronger demand for its equity capital markets services offset a drop in its advisory and debt capital markets business, it said.

Net new money at its global wealth management business was 23.6 billion francs in the first quarter, compared with 10.9 billion francs in the period a year earlier. Pretax profit at wealth management outside the Americas fell 28 percent, to 664 million francs, while earnings at wealth management in the Americas rose 19 percent, to 251 million francs.

UBS has been cutting back more at its investment banking operation than Credit Suisse, its main rival in Switzerland. Mr. Ermotti, who took over UBS at the end of 2011, hired Andrea Orcel from Bank of America Merrill Lynch last year to help overhaul the unit.

Last week, Credit Suisse posted a profit of 1.3 billion francs in the first quarter, up from 44 million francs in the first quarter of 2012, when it booked a loss of 1.6 billion francs on the value of its own debt. The results were helped by a better performance of its investment banking operation.

Article source: http://dealbook.nytimes.com/2013/04/30/ubs-records-1-billion-first-quarter-profit/?partner=rss&emc=rss

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Yahoo Profit Rises 36%, Exceeding Expectations

April 16, 2013 by Leave a Comment

Since Marissa Mayer left Google to lead Yahoo nine months ago, the company’s stock is up more than 50 percent, buoyed less by optimism in Yahoo than Wall Street’s giddiness over Alibaba, the Chinese Internet company in which Yahoo retains a 20 percent stake.

Alibaba has signaled that it is preparing for an initial public offering that analysts predict could value it at $55 billion to more than $120 billion, double to five times more than Yahoo’s $26.2 billion market capitalization.

“If you own Yahoo for Alibaba, you’re doing just great,” said Colin Gillis, an Internet analyst at BGC Partners. “But if you own it for the core business, you’ve got some speed bumps.”

On Tuesday the company reported that net income in the first quarter rose 36 percent to $390 million, or 35 cents a share, from the year-ago quarter. Wall Street analysts had expected net income of 24 cents a share.

But much of that was because of Alibaba. The income contribution from Yahoo’s equity interests in Alibaba and Yahoo Japan was $217.6 million, well above its own first quarter operating income of $186 million.

Meanwhile, Yahoo’s revenue was down. The company said revenue was $1.14 billion, down 7 percent from the year-ago quarter. Excluding traffic acquisition costs, revenue was flat at $1.07 billion. That news sent Yahoo’s stock down about 4 percent in after-hours trading, after closing at $23.79 on Tuesday.

Yahoo reported first-quarter earnings at a critical juncture for Ms. Mayer. Investors are eager to see whether she can increase revenues, which have languished in an increasingly competitive landscape.

Once the biggest seller of display ads, Yahoo lost that position to Facebook and Google in 2011. In the first quarter, Yahoo’s display ad business fell 11 percent, to $455 million, compared with a year ago, even as total display advertising increased 18.1 percent to $17.7 billion in the United States, according to eMarketer.

Ms. Mayer told analysts Tuesday that she planned to lure back advertisers by starting a “chain reaction” that begins with hiring engineers to improve Yahoo’s core products, which include e-mail, sports and finance offerings, and optimizing them for Yahoo’s mobile and tablet users.

Without its own mobile hardware, browser or social platform, Yahoo, which is based in Sunnyvale, Calif., has a long way to go in mobile. Ms. Mayer has said she plans to quickly develop a mobile presence through “smaller-scale acquisitions” of mobile app companies. She has acquired six start-ups since joining Yahoo, as much for their engineering talent as for their products.

Ms. Mayer has put those engineers to work making Yahoo’s Web products more applicable to mobile users. Those efforts seem to have paid off. Yahoo now has more than 300 million monthly mobile users, up from 200 million three months ago.

Article source: http://www.nytimes.com/2013/04/17/technology/yahoo-reports-quarterly-earnings.html?partner=rss&emc=rss

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Santander to Take Full Control of Banesto in Bid to Cut Costs

December 18, 2012 by Leave a Comment

MADRID — Banco Santander said Monday that it would absorb Banesto, its main domestic subsidiary and once one of the largest Spanish banks, as part of a plan to cut 700 branches, or about 15 percent of its retail network.

Santander, the biggest bank in Spain by assets at the end of September, said it would buy out minority investors in Banesto, in which it already owns 90 percent of the equity, by offering them Santander shares in a deal that values Banesto at about €2.6 billion, or $3.4 billion.

The offer values the Banesto shares at €3.73 each, a premium of 25 percent over the closing price Friday. The shares closed Monday at €3.54.

Santander predicted that its absorption of Banesto would yield €520 million in savings within three years through the branch cuts and economies of scale gained by centralizing back-office operations and management. Santander did not quantify how many layoffs the transaction would entail, but said that any job cuts would be implemented “gradually.”

The bank said it would also absorb Banif, a private banking subsidiary that has been operating under its own brand name.

The decision to unify Santander’s main brands and reduce its network to about 4,000 branches in Spain comes amid a banking crisis that has led banks in the country to curtail their bloated branch networks to offset tumbling domestic earnings.

In October, Banesto reported an 83 percent decline in third-quarter earnings as it raised its provisioning against bad loans.

Over all, Santander forecast that banking consolidation in Spain would shrink the domestic network to 30,000 branches by the end of 2015, a decline of about 16,000 branches, or 35 percent, in the eight years since the financial crisis started.

“This transaction is part of the restructuring of the Spanish financial system, which involves a significant reduction in the number of competitors and the creation of larger financial institutions,” Santander said.

Several other Spanish banks have recently announced branch closures, led by Bankia, a giant lender whose near-collapse required the government to negotiate a European banking bailout worth €100 billion in June.

Santander took over Banesto in 1994, after Banesto got entangled in a fraud scandal that resulted in its seizure by the Bank of Spain and eventually led to a jail sentence for its flamboyant chairman, Mario Conde.

After the takeover, however, Banesto continued to operate under its own management. In fact, some of Santander’s leading executives had stints running Banesto, including Ana Patricia Botín, the daughter of Santander’s chairman, Emilio Botín. Ms. Botín was in charge of Banesto until 2010, when she took the helm of Santander’s British subsidiary.

Daragh Quinn, a banking analyst in London for Nomura, wrote in a note to investors that Santander was making “a strategically good move,” particularly given the challenge facing Banesto of setting aside enough funds for problem loans.

“Although Banesto has been able to avoid raising any capital so far during the crisis, the current provisioning needs were maybe a little too much to absorb with ongoing profits,” Mr. Quinn said.

Article source: http://www.nytimes.com/2012/12/18/business/global/santander-to-absorb-banesto-in-bid-to-cut-costs.html?partner=rss&emc=rss

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Wal-Mart Reports a Sales Increase in U.S. Stores

October 13, 2011 by Leave a Comment

Sales at American stores open at least a year increased during the last three months, reversing a negative trend that began in 2009, the company announced on Wednesday. The uptick in same-store sales was a positive sign ahead of third-quarter earnings, which will be announced on Nov. 15.

“Three consecutive months of positive U.S. comps is a good way to be heading into the holiday season,” William S. Simon, president and chief executive for Wal-Mart’s United States division, said at the company’s annual meeting for investors at its headquarters in Arkansas.

Mr. Simon said one reason for the turnaround was the company’s decision to restock more than 10,000 items that had been removed as part of an effort to clean up the stores and make them less cluttered. He said customers were shopping less because they didn’t see the items they wanted.

“We never lost customers,” he said. “What we lost was trips of current customers.”

In addition, Mr. Simon said lower gas prices probably helped bring customers to the stores more often.

The resilience of Wal-Mart’s turnaround will be put to the test during the holiday season, which tends to account for a fifth of retailers’ sales for the year. Wal-Mart officials said they would double the amount they were spending on television advertising during the holiday season, compared to last year.

The first holiday ads should appear in the next few weeks. They will promote Wal-Mart’s layaway program, which it scrapped in 2006 but decided to start again because of demand from consumers.

Shares of Wal-Mart, the nation’s largest discount retailer, increased 48 cents and closed at $55.20 on Wednesday.

While sluggish sales in the United States have partly been offset by more robust results at the company’s Sam’s Club stores, and its Wal-Mart stores overseas, several analysts said the positive turn in the company’s United States business was significant given how long the business had struggled — nine straight quarters of negative same-store sales.

“Heading into today’s event, that is one of the big hurdles people want to hear,” said Joseph Feldman, of Telsey Advisory Group. “The good news is they sounded positive, just in general.”

David A. Schick, of Stifel Nicolaus, said Wal-Mart finally seemed to be recovering from an abrupt change in its strategy of offering fewer products and more upscale items. When the company decided to drop that strategy last summer amid lackluster results, he said it was like “turning the battleship.”

“This is a company that reversed course and felt that friction and pain throughout the model,” he said. “There’s been enough time where that friction is lessening.”

Besides adding items back to its stores, Wal-Mart also decided to focus on more basic apparel, Mr. Schick said. “A return to basics is the primary focus,” he said.

Wal-Mart officials said Wednesday that they planned to decrease capital expenditures in the 2013 fiscal year by 7 percent from the 2012 fiscal year. Even so, because of reductions in remodeling and construction costs, the retail chain plans to build as many as 250 stores in the United States in 2013, compared to 160 in 2012.

Among the new stores planned for 2013, roughly 100 will be smaller-format neighborhood markets and express stores.

Article source: http://feeds.nytimes.com/click.phdo?i=47cdfc3b206b3d4e15ab35b918dbb3f7

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DealBook: K.K.R. 2nd-Quarter Earnings Fall 25%

August 3, 2011 by Leave a Comment

George Roberts, left, and Henry Kravis, co-founders of Kohlberg Kravis Roberts.Gary SpectorGeorge Roberts, left, and Henry Kravis, co-founders of Kohlberg Kravis Roberts.

Kohlberg Kravis Roberts said on Wednesday that its second-quarter profit fell 25 percent as growth slowed in its main investment businesses.

The private equity giant reported $245.3 million in economic net income after taxes atop $117.6 million in fees. That amounts to an after-tax profit of 36 cents a stock unit; analysts had, on average, expected a profit of 41 cents, according to the market researcher Capital IQ.

Economic net income is a nonstandard profit measure used by publicly traded private equity firms that excludes some stock-based compensation costs. On a generally accepted accounting principles basis, K.K.R. earned $39.6 million for the quarter.

The firm said assets under management grew to $61.9 billion. Much of that growth resulted from an increase in the value of K.K.R.’s investments, as well as from newly raised capital.

“In an increasingly challenged global economic environment, our business continued its growth trajectory across all segments,” Henry R. Kravis and George R. Roberts, the firm’s co-founders and co-chairmen, said in a statement.

K.K.R.’s second-quarter performance trailed that of its main rival, the Blackstone Group, which more than tripled its profit for the period, thanks to its huge real estate arm.

Since becoming a public company, K.K.R. has focused on building up its operations outside of its core leveraged buyout business. The firm has raised billions of dollars for energy and infrastructure investments, and it has bolstered its nascent credit trading division.

Still, K.K.R. pointed to successes in its traditional private equity business. The unit increased assets under management to $47.1 billion, offset by payments made to its investors through the sales of portfolio companies and assets.

Article source: http://feeds.nytimes.com/click.phdo?i=3f62cdb0cc5036e4e76f518b55176adb

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Profit Jumps at Exxon and Shell

April 28, 2011 by Leave a Comment

LONDON — Exxon Mobil and Royal Dutch Shell reported hefty increases in their first-quarter profit on Thursday, helped by higher oil prices and earnings from refining.

Exxon Mobil, the largest American oil company, said net income rose 69 percent to $10.7 billion, or $2.14 a share, in the first three months of this year, from $6.3 billion, or $1.33 a share, in the same period last year.

The earnings beat some analysts’ expectations, and marked the fifth quarter in a row that Exxon reported an earnings increase.

Shell reported earlier on Thursday that its profit for the period rose 30 percent.

Oil companies are benefiting from a rise of more than 30 percent of the price of oil over the last twelve months. Concerns about political unrest in North Africa and the Middle East had pushed up prices to heights some analysts said were not justified by the level of demand. Continued growth in economic demand is expected to support a relatively high price of oil but there are signs that rising gasoline prices are keeping some consumers in the United States from filling up their tanks.

Exxon’s earnings “reflect continued leadership in operational performance during a period of strong commodity prices,” said Exxon’s chairman Rex W. Tillerson in a statement.

Exxon’s and Shell’s earnings outshone those of rivals BP and ConocoPhillips, which reported figures Wednesday. BP reported a drop in first-quarter earnings because of costs linked to the Gulf of Mexico oil spill and ConocoPhillips missed some analysts’ expectations because of a decline in production. Chevron, the No. 2 American oil company, is set to report earnings on Friday.

Revenue at Exxon increased 26 percent to $114 billion from $90.3 billion and oil-equivalent production increased more than 10 percent from the first quarter of last year. A group of analysts surveyed by Thomson Reuters on average expected Exxon to report a first-quarter profit of $2.07 per share.

Royal Dutch Shell, Europe’s biggest oil company by market value, said profit excluding one-time items rose to $6.3 billion from $4.8 billion after refining profit more than doubled to $1.65 billion. The shares gained 1 percent in early trading in London, but were flat by mid-afternoon.

Shell’s chief executive Peter Voser has been cutting costs and selling assets to make the company more profitable. Earlier this year, he said he would continue to reduce costs by another $1 billion and at the same time increase output by investing in new projects, including in Qatar.

“We are making good progress against our targets, to deliver a more competitive performance,” Mr. Voser said in a statement Thursday.

Article source: http://feeds.nytimes.com/click.phdo?i=e7b89fa5444a5fae81dd23337b039edd

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BP Profit Falls as Costs of Gulf of Mexico Spill Outweigh Higher Oil Prices

April 28, 2011 by Leave a Comment

But there are signs that the high prices have started to hurt demand in the United States and other developed countries, which could start pushing prices down again. Lower prices could make the rest of 2011 more difficult for BP and other big oil companies.

BP’s rivals, including Royal Dutch Shell and Exxon Mobil, are still expected to report strong results when they release their first-quarter performances on Thursday.

But some analysts said oil prices could drop about $20 a barrel in the near term, raising questions about whether such companies could keep up the stellar profit growth of last year.

“Concern about supply might fade, and there is a possibility that the world economy will slow,” said Julian Jessop, chief international economist at Capital Economics in London.

But “the future is still bright for oil companies,” he added. “Oil prices will fall back but remain historically high.”

An improving world economy returned oil prices to higher levels in 2010 after a sharp drop in 2009. Exxon Mobil, the largest American oil company, reported a 53 percent increase in profit for the fourth quarter of last year. Chevron earnings in that period rose 72 percent, and ConocoPhillips reported a 46 percent rise.

On Wednesday, BP was the first of the largest publicly traded oil companies to report first-quarter earnings.

For BP, a higher oil price was offset by asset sales to pay for the repercussions from the Gulf of Mexico oil spill. Earnings were $5.48 billion in the first three months of this year, down from $5.6 billion in the period a year earlier.

The company has sold more than $24 billion of assets to raise money to cover the oil spill costs. Production fell as a result. Including lost production from the Gulf accident, production fell 11 percent in the first quarter from a year earlier.

BP set aside an additional $384 million for the oil spill in the first quarter, bringing the total to $41 billion.

BP’s shares have fallen 23 percent in the last 12 months, while those of its largest competitors have risen at least 18 percent.

To win back investors, the company focused on exploration and signed cooperation agreements in India and Russia. But its Russian deal with the government-owned Rosneft was held up this year because of a legal challenge from its Russian shareholders. Russia has surpassed Saudi Arabia as the biggest oil producer in the world. New oil from the region could play an important part in ensuring sufficient supplies and the future level of oil prices.

Those analysts who predicted a decline in the price of oil said concerns about political tensions in North Africa and the Middle East had increased prices but were likely to fade. At the same time, there are signs that high oil prices discourage consumers from filling their tanks just as the summer vacation season starts in the northern hemisphere.

“The oil price is, to an extent, too high at the moment,” said Christopher Wheaton, a director at the asset management firm RCM in London. “We are at the point at which we get demand destruction.”

Still, oil prices are expected to remain high enough for companies to increase investments in drilling aimed at raising production in the longer term. Exxon Mobil said last month that it planned to spend about $100 million a day for the next six years on new oil and gas projects.

The drilling for reserves in more remote and harder-to-reach areas has increased costs for oil companies as they compete for talent and technology. The Gulf of Mexico oil spill also led regulators to tighten safety rules and delay decisions on exploration permits, often further increasing costs for oil companies.

One year after the rig explosion that led to the spill in the Gulf of Mexico, BP is still seeking to resume drilling in the region’s waters, and investors continue to wait for BP to give a total figure for the costs of the spill.

Article source: http://feeds.nytimes.com/click.phdo?i=f485bfb51b24d420c4353342ae63a3d9

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Stocks and Bonds: Broad Rally Lifts Shares to a Nearly 3-Year High

April 28, 2011 by Leave a Comment

Stock indexes have more than doubled since hitting a 12-year low in March 2009. The fastest bull market since the 1950s has now erased most of the losses stemming from the financial crisis.

The Standard Poor’s 500-stock index reached its highest level since June 2008. It gained 11.99 points, or 0.90 percent, to 1,347.24. It remains 16 percent below the record high of 1,565 it reached in October 2007.

The Dow Jones industrial average also reached a high for the year, rising 115.49 points, or 0.93 percent, to 12,595.37. The Nasdaq composite index rose 21.66 points, or 0.77 percent, to 2,847.54.

Better-than-expected earnings reports from a variety of companies, including airlines and office products manufacturers, helped drive a broad rally that included all 10 company groups that make up the S. P. index. Industrial companies gained nearly 2 percent, the most of any group.

Shares of Delta Air Lines rose 11 percent after it reported a loss that was smaller than investors had expected.

Cummins, the engine maker, gained 8 percent after raising its earnings forecast for the year because of strong demand. United Parcel Service rose 1 percent after raising its own earnings estimate for the year.

“What we’re seeing now is a positive reinforcement of the fact that demand is rising around the world,” said Quincy Krosby, chief market strategist at Prudential Financial. That is occurring although some companies say rising costs are hurting their profits, Mr. Krosby said.

Ford shares rose 0.7 percent after the automaker reported its best first-quarter earnings since 1998. Ford beat Wall Street’s earnings estimates with stronger sales of new vehicles.

3M, which makes Post-it notes and Scotch tape, rose 1.9 percent after it raised its full-year earnings expectations. The company said quarterly profit rose 16 percent compared with a year ago, beating analysts’ estimates.

Interest rates were lower. The Treasury’s benchmark 10-year note rose 16/32, to 102 21/32, and the yield fell to 3.31 percent from 3.36 percent late Monday.

Article source: http://feeds.nytimes.com/click.phdo?i=086fdeadd4d5d1df2bdf8b464b2eebb1

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