By Michael Patterson
Dec. 3 (Bloomberg) -- U.S. stocks dropped for the first time in five days, led by financial companies, after Deutsche Bank AG analyst Mike Mayo said bond losses will hurt profits at brokerages and concern increased that economic growth will slow.
Morgan Stanley and Merrill Lynch & Co., the second- and third-biggest U.S. securities firms, slumped after Deutsche Bank said declining fixed-income markets will reduce fourth-quarter earnings. MetLife Inc. spurred declines in insurers after forecasting 2008 profit below analysts' projections. General Electric Co. fell after Citigroup Inc. analysts cut their profit estimate for the second-biggest U.S. company by market value.
The Standard & Poor's 500 Index lost 8.72, or 0.6 percent, to 1,472.42. The Dow Jones Industrial Average decreased 57.15, or 0.4 percent, to 13,314.57. The Nasdaq Composite Index decreased 23.83, or 0.9 percent, to 2,637.13. About two stocks fell for every one that rose on the New York Stock Exchange.
``People are contending with several different issues right now, and trying to get your arms around all of it is very difficult,'' said Jason Cooper, who helps manage $2.5 billion at 1st Source Investment Advisors in South Bend, Indiana. ``I'm more cautious than bullish.''
Financial shares lost 1.2 percent, halting their steepest weekly advance in five years. The market pared its losses after U.S. Treasury Secretary Henry Paulson set a timeline for a plan to minimize home foreclosures, then fell to fresh lows after analysts at Barclays Plc and UBS AG said the program may do little to boost mortgage bonds.
Brokerage Stocks
Morgan Stanley slipped 44 cents to $52.28. Merrill declined 88 cents to $59.06. Lehman Brothers Holdings Inc., the fourth- biggest U.S. securities firm, dropped $1.25 to $61.38. Lower revenue from fixed-income markets and possible losses from bond holdings reduced fourth-quarter profit at securities firms and may crimp next year's revenue as well, Deutsche Bank's Mayo wrote.
The 93-member S&P 500 Financials Index has tumbled 17 percent this year as securities firms and banks announced more than $50 billion of writedowns for their subprime assets.
MetLife, the biggest U.S. life insurer, slipped 81 cents to $64.78. Operating profit next year will be between $5.90 and $6.20 a share, the company said. That's less than the $6.31 average estimate of 16 analysts surveyed by Bloomberg.
Other insurers declined after MetLife's forecast. American International Group Inc., the world's largest insurer, fell $1.23 to $56.90. Prudential Financial Inc., the second-largest U.S. life insurer, slipped 87 cents to $93.27.
Fed Watch
Traders increased wagers that the Federal Reserve will reduce interest rates to revive the U.S. economy after San Francisco Fed President Janet Yellen said financial conditions and consumer spending deteriorated more than she expected, and Boston Fed President Eric Rosengren said growth will slow ``well below'' its long-term pace for two quarters.
A report today showing manufacturing expanded in November at the slowest pace in 10 months also added to evidence that the central bank may need to reduce borrowing costs to keep the world's largest economy from falling into a recession.
The odds of a quarter-percentage point rate cut to 4.25 percent at the central bank's Dec. 11 policy meeting are 60 percent, Fed funds futures contracts show. Futures are also pricing in a 40 percent chance of a 0.5 percentage point cut.
The Institute for Supply Management's manufacturing index dropped to 50.8, matching economists' forecasts, from 50.9 the prior month, the Tempe, Arizona-based group said today. Fifty is the dividing line between contraction and expansion.
`Mixed News'
``The market's grappling with whether or not we're in a recession,'' said Keith Wirtz, who helps oversee $23 billion as chief investment officer at Fifth Third Asset Management in Cincinnati. ``We're getting mixed news and the market is reacting by moving south.''
The Chicago Board Options Exchange Volatility Index, known as the market's ``fear gauge'' because it tends to rise as stocks fall, increased 3.5 percent to 23.66. Higher readings in the so- called VIX, derived from prices paid for S&P 500 options, indicate traders expect bigger share-price swings in the next 30 days.
Treasuries rose, pushing two-year note yields to within 3 basis points of the lowest level since 2004.
General Motors Corp. led declines in auto-related companies, falling $1.22 to $28.61. The largest U.S. automaker trimmed its first-quarter North American production plan 11 percent after November U.S. sales fell the same amount.
Ford, E*Trade
Ford Motor Co., the second-biggest U.S. automaker, declined 26 cents to $7.25. U.S. sales rose 0.4 percent last month, ending 12 straight months of declines, Ford said. The automaker plans to cut first-quarter North American production 7.4 percent from year-earlier levels. Johnson Controls Inc., the largest maker of automotive batteries, lost 69 cents to $37.93.
E*Trade Financial Corp. posted the biggest decline in the S&P 500, dropping 49 cents, or 11 percent, to $4.11. The online bank and brokerage was downgraded to ``sell'' from ``neutral'' at Banc of America Securities, which cited the ``dwindling'' value of its retail brokerage business and mortgage-related losses at its bank.
D.R. Horton Inc. and Lennar Corp. led homebuilders to their biggest two-day advance since August after Paulson said a deal to fix some subprime mortgage rates before they reset higher may be reached this week. The Treasury chief today proposed letting state and local governments ``temporarily'' exempt taxes on bonds issued to help refinance subprime borrowers.
A gauge of homebuilders in S&P indexes gained 1.5 percent, bringing its two-day advance to 10 percent. D.R. Horton, the second-biggest U.S. homebuilder by sales, climbed 37 cents to $12.34.
Lennar
Lennar increased 90 cents to $16.74. The largest U.S. builder and Morgan Stanley formed a land investment venture that purchased 11,000 properties from Lennar for $525 million. The properties had a net book value of about $1.3 billion on Sept. 30, Lennar said. Merrill Lynch & Co. analysts reiterated their ``buy'' rating on Lennar, saying the land sales will boost the company's liquidity.
Some analysts said Paulson's plan may do little to ease mortgage-related losses. Barclays said few homeowners may qualify for the proposed aid and many are likely to default even before rates reset higher. UBS said most borrowers who would be helped by the plan would have their loans reworked without a coordinated effort.
Subprime loans, given to people with poor or limited credit histories or high debt, typically offer a low introductory rate for the first two or three years. The rate then resets for the duration of the mortgage, usually 30 years.
The S&P 500 last week posted its biggest weekly gain since March, rebounding from its first so-called correction in four years, after Fed officials signaled more interest rate cuts may be on the way. The S&P 500 still needs to rise 6.3 percent to reach its all-time closing high of 1565.15 on Oct. 9.
The Russell 2000 Index, a benchmark for companies with a median market value of $593.8 million, today dropped 1 percent to 759.97. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, slipped 0.6 percent to 14,848.71. Based on its decline, the value of stocks decreased by $105 billion.
American International Group Inc. (AIG US)
D.R. Horton Inc. (DHI US)
E*Trade Financial Corp. (ETFC US)
Ford Motor Co. (F US)
General Electric Co. (GE US)
General Motors Corp. (GM US)
Lehman Brothers Holdings Inc. (LEH US)
Lennar Corp. (LEN US)
Merrill Lynch & Co. (MER US)
MetLife Inc. (MET US)
Morgan Stanley (MS US)
Prudential Financial Inc. (PRU US)
Monday, December 3, 2007
Yellen Sees Risks to Spending From Market `Turmoil' (Update1)
By Vivien Lou Chen and Craig Torres
Dec. 3 (Bloomberg) -- Federal Reserve Bank of San Francisco President Janet Yellen said financial conditions and consumer spending have deteriorated more than she expected in the past month, signaling she supports cutting interest rates next week.
``The turmoil in financial markets has not subsided as much as I had hoped and some data on personal consumption have come in weaker than expected,'' Yellen said in a speech in Seattle. ``These developments necessitate some rethinking of my growth forecast, and have highlighted the downside skew in the risks to that forecast.''
Yellen's remarks buttress those made by Fed Chairman Ben S. Bernanke and Vice Chairman Donald Kohn last week, which stoked investors' expectations for lower rates. Bernanke and Kohn said reduced access to credit may threaten spending, and policy makers must be ``flexible'' given greater-than-usual ``uncertainty'' about the economic outlook.
``Recent data on personal consumption expenditures and retail sales are not that encouraging,'' Yellen said to a luncheon sponsored by the Seattle Chamber of Commerce Board of Trustees and Community Development Roundtable. ``They have begun to show significant deceleration -- more than was expected -- and consumer confidence has plummeted.''
Yellen, 61, previously served as a Fed governor in Washington. She doesn't vote on rates again on the Federal Open Market Committee until 2009. She also headed former President Bill Clinton's Council of Economic Advisers.
`Consensus Builder'
``Yellen is one of the consensus builders on the Federal Open Market Committee,'' said Christopher Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York. ``Her comments suggest that the balance of views will shift the outlook in favor of downside economy risks at the Dec. 11 meeting.''
As of Oct. 31, the Fed in its last statement said that risks between inflation and growth were ``roughly'' balanced. Now, federal funds futures prices indicate a 38 percent probability policy makers will cut the benchmark by half a point next week, to 4 percent. Yellen is the last Fed official scheduled to speak before the Dec. 11 meeting.
The San Francisco Fed president said she has begun to hear ``a pattern of negative comments and stories'' from business contacts in her district, which accounts for about one-fifth of the U.S. economy. She added that she saw signs of ``improvement in underlying inflationary pressures'' in recent reports.
Rate Cuts
Since Sept. 18, the Fed has cut its main rate 75 basis points. Officials also lowered the cost of direct loans to banks by 50 basis points in an unscheduled meeting Aug. 16 to help offer a liquidity backstop for banks. A basis point is 0.01 percentage point.
Yellen said the drop in the dollar against major currencies since 2002 ``will help to improve our gaping trade deficit and thereby offset some of the otherwise contractionary effects of the tighter credit conditions.''
In describing her forecast, she said the economy faces a risk ``that the problems in the housing market could spill over to personal consumption expenditures in a bigger way than has thus far been evident.''
Bernanke said in a Nov. 29 speech in Charlotte, North Carolina that officials must ``judge whether the outlook for the economy or the balance of risks has shifted materially'' due to financial turbulence.
Funding Costs
Borrowing costs on loans between banks have climbed this month as mounting losses on assets linked to subprime mortgages spurred lenders to conserve cash. The three-month dollar London Interbank Offered Rate is 5.14 percent, or about 64 basis points over the Fed's target for the federal funds rate. The typical spread has been 21 basis points over the past five years.
``Indications of heightened risk-aversion continue to abound both here and abroad,'' Yellen said. Still, ``we do not appear to be at the point of an all-out credit crunch as we were in the early 1990s,'' she said.
Economic growth has slowed in seven of 12 U.S. regions from October through mid-November, with retailers ``slightly pessimistic'' about year-end holiday sales, the Fed's regional business survey showed Nov. 28. The U.S. grew at a revised annual rate of 4.9 percent in the third quarter, before the full impact of the housing recession and credit-market turmoil took hold.
``The data for the beginning of the fourth quarter in October have shown even more of a slowdown,'' Yellen said. ``The bottom line is that housing construction will likely be quite weak well into next year before beginning to turn around.''
Manufacturing in the U.S. grew in November at the slowest pace in 10 months, an industry survey showed today. The Institute for Supply Management's factory index fell to 50.8 from 50.9 the previous month.
Yellen hasn't dissented from an FOMC rate decision since becoming San Francisco Fed president in 2004 or during her tenure as a Fed governor in Washington from 1994 to 1997. She was previously an economics professor at the University of California at Berkeley.
Dec. 3 (Bloomberg) -- Federal Reserve Bank of San Francisco President Janet Yellen said financial conditions and consumer spending have deteriorated more than she expected in the past month, signaling she supports cutting interest rates next week.
``The turmoil in financial markets has not subsided as much as I had hoped and some data on personal consumption have come in weaker than expected,'' Yellen said in a speech in Seattle. ``These developments necessitate some rethinking of my growth forecast, and have highlighted the downside skew in the risks to that forecast.''
Yellen's remarks buttress those made by Fed Chairman Ben S. Bernanke and Vice Chairman Donald Kohn last week, which stoked investors' expectations for lower rates. Bernanke and Kohn said reduced access to credit may threaten spending, and policy makers must be ``flexible'' given greater-than-usual ``uncertainty'' about the economic outlook.
``Recent data on personal consumption expenditures and retail sales are not that encouraging,'' Yellen said to a luncheon sponsored by the Seattle Chamber of Commerce Board of Trustees and Community Development Roundtable. ``They have begun to show significant deceleration -- more than was expected -- and consumer confidence has plummeted.''
Yellen, 61, previously served as a Fed governor in Washington. She doesn't vote on rates again on the Federal Open Market Committee until 2009. She also headed former President Bill Clinton's Council of Economic Advisers.
`Consensus Builder'
``Yellen is one of the consensus builders on the Federal Open Market Committee,'' said Christopher Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York. ``Her comments suggest that the balance of views will shift the outlook in favor of downside economy risks at the Dec. 11 meeting.''
As of Oct. 31, the Fed in its last statement said that risks between inflation and growth were ``roughly'' balanced. Now, federal funds futures prices indicate a 38 percent probability policy makers will cut the benchmark by half a point next week, to 4 percent. Yellen is the last Fed official scheduled to speak before the Dec. 11 meeting.
The San Francisco Fed president said she has begun to hear ``a pattern of negative comments and stories'' from business contacts in her district, which accounts for about one-fifth of the U.S. economy. She added that she saw signs of ``improvement in underlying inflationary pressures'' in recent reports.
Rate Cuts
Since Sept. 18, the Fed has cut its main rate 75 basis points. Officials also lowered the cost of direct loans to banks by 50 basis points in an unscheduled meeting Aug. 16 to help offer a liquidity backstop for banks. A basis point is 0.01 percentage point.
Yellen said the drop in the dollar against major currencies since 2002 ``will help to improve our gaping trade deficit and thereby offset some of the otherwise contractionary effects of the tighter credit conditions.''
In describing her forecast, she said the economy faces a risk ``that the problems in the housing market could spill over to personal consumption expenditures in a bigger way than has thus far been evident.''
Bernanke said in a Nov. 29 speech in Charlotte, North Carolina that officials must ``judge whether the outlook for the economy or the balance of risks has shifted materially'' due to financial turbulence.
Funding Costs
Borrowing costs on loans between banks have climbed this month as mounting losses on assets linked to subprime mortgages spurred lenders to conserve cash. The three-month dollar London Interbank Offered Rate is 5.14 percent, or about 64 basis points over the Fed's target for the federal funds rate. The typical spread has been 21 basis points over the past five years.
``Indications of heightened risk-aversion continue to abound both here and abroad,'' Yellen said. Still, ``we do not appear to be at the point of an all-out credit crunch as we were in the early 1990s,'' she said.
Economic growth has slowed in seven of 12 U.S. regions from October through mid-November, with retailers ``slightly pessimistic'' about year-end holiday sales, the Fed's regional business survey showed Nov. 28. The U.S. grew at a revised annual rate of 4.9 percent in the third quarter, before the full impact of the housing recession and credit-market turmoil took hold.
``The data for the beginning of the fourth quarter in October have shown even more of a slowdown,'' Yellen said. ``The bottom line is that housing construction will likely be quite weak well into next year before beginning to turn around.''
Manufacturing in the U.S. grew in November at the slowest pace in 10 months, an industry survey showed today. The Institute for Supply Management's factory index fell to 50.8 from 50.9 the previous month.
Yellen hasn't dissented from an FOMC rate decision since becoming San Francisco Fed president in 2004 or during her tenure as a Fed governor in Washington from 1994 to 1997. She was previously an economics professor at the University of California at Berkeley.
Sunday, December 2, 2007
Japan's Exporter Stocks May Rise on Weaker Yen, Led by Honda
By Pavel Alpeyev
Dec. 3 (Bloomberg) -- Japanese stocks may rise after the yen weakened against the dollar, boosting the value of companies' overseas sales. Honda Motor Co. and Matsushita Electric Industrial Co. may climb.
Gains may be bolstered by speculation U.S. Treasury Secretary Henry Paulson's negotiations for an agreement with banks to fix interest rates on loans to subprime borrowers will help slow credit losses. Paulson will address a housing conference in the U.S. today.
``The worst of subprime-related trouble is mostly behind us, thanks to various efforts by U.S. officials,'' said Ryoji Musha, chief investment officer at Deutsche Securities Inc. in Tokyo. `
Nikkei 225 Stock Average futures expiring in December closed in Chicago at 15,790 on Nov. 30, up from the close of 15,730 in Osaka and 15,710 in Singapore last week. The Bank of New York Japan ADR Index, which tracks the nation's American depositary receipts, was little changed.
Last week, the Nikkei rose 5.3 percent to 15,680.67 and the Topix index gained 6.6 percent to 1,531.88.
Dec. 3 (Bloomberg) -- Japanese stocks may rise after the yen weakened against the dollar, boosting the value of companies' overseas sales. Honda Motor Co. and Matsushita Electric Industrial Co. may climb.
Gains may be bolstered by speculation U.S. Treasury Secretary Henry Paulson's negotiations for an agreement with banks to fix interest rates on loans to subprime borrowers will help slow credit losses. Paulson will address a housing conference in the U.S. today.
``The worst of subprime-related trouble is mostly behind us, thanks to various efforts by U.S. officials,'' said Ryoji Musha, chief investment officer at Deutsche Securities Inc. in Tokyo. `
Nikkei 225 Stock Average futures expiring in December closed in Chicago at 15,790 on Nov. 30, up from the close of 15,730 in Osaka and 15,710 in Singapore last week. The Bank of New York Japan ADR Index, which tracks the nation's American depositary receipts, was little changed.
Last week, the Nikkei rose 5.3 percent to 15,680.67 and the Topix index gained 6.6 percent to 1,531.88.
Unemployment May Rise, Manufacturing Slow: U.S. Economy Preview
By Joe Richter
Dec. 2 (Bloomberg) -- Employers in the U.S. hired fewer workers in November and the unemployment rate rose to a 16-month high, reflecting a loss of confidence in the economic expansion, economists said before a report this week.
The economy created 75,000 jobs, less than half October's 166,000 gain, according to the median forecast in a Bloomberg News survey of economists before the Labor Department's Dec. 7 report. The jobless rate rose to 4.8 percent from 4.7 percent, based on the survey.
Companies are curbing expenses as the economy is forecast to nearly stall this quarter under the weight of the worsening housing slump. Federal Reserve Chairman Ben S. Bernanke last week said consumers face ``headwinds,'' and the labor market was ``important'' for sustaining growth.
``The labor market is adding to the list of reasons the consumer is in trouble,'' said Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Massachusetts. ``If employment growth is weakening, then so will spending.''
There is already evidence Americans are scaling back.
Consumer spending rose less than forecast in October and incomes increased at the slowest pace in six months, figures last week from the Commerce Department showed. Spending stalled when adjusted for inflation, the figure used in calculating economic growth.
Auto sales in November were probably the third weakest of the year, according to analysts surveyed by Bloomberg News. General Motors Corp., Ford Motor Co. and Chrysler LLC probably all posted declines compared with November 2006. Automakers will release November results tomorrow.
Manufacturing Slows
Also tomorrow, the Institute for Supply Management may report manufacturing expanded in November at the slowest pace in 10 months, adding to evidence the housing slump and rising energy costs are reverberating though the economy.
The Tempe, Arizona-based group's factory index probably fell to 50.7 from 50.9 in October, according to the survey median. A reading of 50 is the dividing line between expansion and contraction.
A report on Dec. 5 from the Commerce Department may show factory orders were unchanged in October after a 0.2 percent gain in September, the Bloomberg survey showed.
Service industries have so far fared better than manufacturers this quarter, economists said.
Services Little Changed
A separate report from the Institute for Supply Management due Dec. 5 may show banks, builders, retailers and other non- manufacturers expanded last month at about the same pace as in October. The gauge fell to 55 from 55.8, based on the median of economists' forecasts.
Energy prices, the weakening labor market and the persistent housing slump raise the odds that retailers and other service providers will soon feel the brunt of the economic slowdown, economists said.
Bear Stearns Cos., the biggest underwriter of U.S. mortgage bonds, said last week it will eliminate 650 jobs in the firm's fourth round of cuts this year.
Citigroup Inc., the largest U.S. bank, said it is reviewing ways to cut expenses as it seeks a new chief executive officer and grapples with mortgage writedowns. Former CEO Charles O. ``Chuck'' Prince III, who was forced to resign last month, had pledged to eliminate 17,000 jobs and trim costs by $4.6 billion.
Fed policy makers have signaled mounting concern over the outlook.
Consumer `Headwinds'
``The combination of higher gas prices, the weak housing market, tighter credit conditions, and declines in stock prices seem likely to create some headwinds for the consumer in the months ahead,'' Bernanke said in a Nov. 29 speech.
Federal funds futures show traders see a 100 percent chance of a reduction in the benchmark rate this month, with a 40 percent probability of a half-point move. The Fed has cut rates by 0.75 percentage point over the past two meetings.
Policy makers said Nov. 20 that they expect U.S. gross domestic product to increase between 1.8 percent and 2.5 percent in 2008, ``notably below'' the 2.5 percent to 2.75 percent they predicted in July.
In other reports this week, a Labor Department report on Dec. 5 may show worker productivity in the third quarter rose, while labor costs fell. Two days later, a preliminary estimate from the University of Michigan may show consumer sentiment fell to a two-year low in December.
Bloomberg Survey
Date Time Period Indicator BN Survey Prior
12/03 10:00 Nov. ISM Manufacturing 50.7 50.9
12/03 10:00 Nov. ISM Prices 65.5 63.0
12/05 8:30 3Q F Productivity 5.7% 4.9%
12/05 8:30 3Q F Unit Labor Costs -1.0% -0.2%
12/05 10:00 Oct. Factory Orders 0.0% 0.2%
12/05 10:00 Nov. ISM Non-Manufacturing 55.0 55.8
12/06 8:30 11/17 Continuing Claims 2603K 2553K
12/06 8:30 11/24 Initial Jobless Claims 335K 329K
12/07 8:30 Nov. Avg. Hourly Earnings 0.3% 0.2%
12/07 8:30 Nov. Change Nonfarm Jobs 75K 166K
12/07 8:30 Nov. Unemployment Rate 4.8% 4.7%
12/07 10:00 Dec. P Confidence- U. of MI 75.0 76.1
12/07 15:00 Oct. Consumer Credit $5.5B $3.7B
Dec. 2 (Bloomberg) -- Employers in the U.S. hired fewer workers in November and the unemployment rate rose to a 16-month high, reflecting a loss of confidence in the economic expansion, economists said before a report this week.
The economy created 75,000 jobs, less than half October's 166,000 gain, according to the median forecast in a Bloomberg News survey of economists before the Labor Department's Dec. 7 report. The jobless rate rose to 4.8 percent from 4.7 percent, based on the survey.
Companies are curbing expenses as the economy is forecast to nearly stall this quarter under the weight of the worsening housing slump. Federal Reserve Chairman Ben S. Bernanke last week said consumers face ``headwinds,'' and the labor market was ``important'' for sustaining growth.
``The labor market is adding to the list of reasons the consumer is in trouble,'' said Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Massachusetts. ``If employment growth is weakening, then so will spending.''
There is already evidence Americans are scaling back.
Consumer spending rose less than forecast in October and incomes increased at the slowest pace in six months, figures last week from the Commerce Department showed. Spending stalled when adjusted for inflation, the figure used in calculating economic growth.
Auto sales in November were probably the third weakest of the year, according to analysts surveyed by Bloomberg News. General Motors Corp., Ford Motor Co. and Chrysler LLC probably all posted declines compared with November 2006. Automakers will release November results tomorrow.
Manufacturing Slows
Also tomorrow, the Institute for Supply Management may report manufacturing expanded in November at the slowest pace in 10 months, adding to evidence the housing slump and rising energy costs are reverberating though the economy.
The Tempe, Arizona-based group's factory index probably fell to 50.7 from 50.9 in October, according to the survey median. A reading of 50 is the dividing line between expansion and contraction.
A report on Dec. 5 from the Commerce Department may show factory orders were unchanged in October after a 0.2 percent gain in September, the Bloomberg survey showed.
Service industries have so far fared better than manufacturers this quarter, economists said.
Services Little Changed
A separate report from the Institute for Supply Management due Dec. 5 may show banks, builders, retailers and other non- manufacturers expanded last month at about the same pace as in October. The gauge fell to 55 from 55.8, based on the median of economists' forecasts.
Energy prices, the weakening labor market and the persistent housing slump raise the odds that retailers and other service providers will soon feel the brunt of the economic slowdown, economists said.
Bear Stearns Cos., the biggest underwriter of U.S. mortgage bonds, said last week it will eliminate 650 jobs in the firm's fourth round of cuts this year.
Citigroup Inc., the largest U.S. bank, said it is reviewing ways to cut expenses as it seeks a new chief executive officer and grapples with mortgage writedowns. Former CEO Charles O. ``Chuck'' Prince III, who was forced to resign last month, had pledged to eliminate 17,000 jobs and trim costs by $4.6 billion.
Fed policy makers have signaled mounting concern over the outlook.
Consumer `Headwinds'
``The combination of higher gas prices, the weak housing market, tighter credit conditions, and declines in stock prices seem likely to create some headwinds for the consumer in the months ahead,'' Bernanke said in a Nov. 29 speech.
Federal funds futures show traders see a 100 percent chance of a reduction in the benchmark rate this month, with a 40 percent probability of a half-point move. The Fed has cut rates by 0.75 percentage point over the past two meetings.
Policy makers said Nov. 20 that they expect U.S. gross domestic product to increase between 1.8 percent and 2.5 percent in 2008, ``notably below'' the 2.5 percent to 2.75 percent they predicted in July.
In other reports this week, a Labor Department report on Dec. 5 may show worker productivity in the third quarter rose, while labor costs fell. Two days later, a preliminary estimate from the University of Michigan may show consumer sentiment fell to a two-year low in December.
Bloomberg Survey
Date Time Period Indicator BN Survey Prior
12/03 10:00 Nov. ISM Manufacturing 50.7 50.9
12/03 10:00 Nov. ISM Prices 65.5 63.0
12/05 8:30 3Q F Productivity 5.7% 4.9%
12/05 8:30 3Q F Unit Labor Costs -1.0% -0.2%
12/05 10:00 Oct. Factory Orders 0.0% 0.2%
12/05 10:00 Nov. ISM Non-Manufacturing 55.0 55.8
12/06 8:30 11/17 Continuing Claims 2603K 2553K
12/06 8:30 11/24 Initial Jobless Claims 335K 329K
12/07 8:30 Nov. Avg. Hourly Earnings 0.3% 0.2%
12/07 8:30 Nov. Change Nonfarm Jobs 75K 166K
12/07 8:30 Nov. Unemployment Rate 4.8% 4.7%
12/07 10:00 Dec. P Confidence- U. of MI 75.0 76.1
12/07 15:00 Oct. Consumer Credit $5.5B $3.7B
OPEC Won't Boost Crude Output, Algeria's Khelil Says (Update1)
By Ahmed Rouaba and Abeer Allam
Dec. 2 (Bloomberg) -- OPEC won't increase crude-oil supply to world markets to meet rising demand for energy during the winter because stocks of fuel are already ``high,'' Algerian Oil Minister Chakib Khelil said.
``We will not increase output unless there is a need in the market,'' Khelil told reporters during a mining conference in Algiers today. ``For the moment there is no need. Stocks are high.''
The U.S. and other oil consuming nations are pressing OPEC, which produces more than 40 percent of the world's oil, to increase output again to ease crude oil prices that tripled in four years to a record $99.29 on Nov. 21 in New York.
Saudi Arabia's Oil Minister Ali al-Naimi said yesterday that inventory levels were ``very comfortable,'' and the 12- member Organization of Petroleum Exporting Countries may not need to increase oil supply when it meets Dec. 5 in Abu Dhabi.
Inventory ``levels are still in the five-year range,'' said al-Naimi, speaking to reporters in Doha, Qatar, before an Arab oil ministers' meeting. ``It's important to look at the information first, jointly, so we can come to a consensus.''
The U.S., the world's largest oil consumer, may go into recession next year and trigger an economic slowdown across the world, Qatar's Oil Minister Abdullah al-Attiyah told reporters yesterday in Doha.
No `Shortage'
Crude prices shouldn't be blamed for causing a recession, and there is no ``shortage'' of oil in the market, al-Attiyah said.
Venezuela's Minister of Energy and Oil Rafael Ramirez said speculation was responsible for the current price of oil and that OPEC doesn't need to increase supply. The decline of the price in the past week shows that there is enough oil in the market, he said in remarks broadcast on state television.
Oil dropped 9.7 percent last week, the biggest weekly loss since April 2005, on concern slowing economic growth will cut energy demand. Crude oil for January delivery declined $9.47 to $88.71 a barrel last week on the New York Mercantile Exchange.
Saudi Arabia, OPEC's biggest producer, is adding 500,000 barrels of spare capacity in December to ensure that consumers are adequately supplied. The country is producing 9 million barrels a day, al-Naimi has said.
-- With reporting by Ayesha Daya and Glen Carey in Doha and Steven Bodzin in Caracas. Editors: Guy Collins, Tony Barrett
Dec. 2 (Bloomberg) -- OPEC won't increase crude-oil supply to world markets to meet rising demand for energy during the winter because stocks of fuel are already ``high,'' Algerian Oil Minister Chakib Khelil said.
``We will not increase output unless there is a need in the market,'' Khelil told reporters during a mining conference in Algiers today. ``For the moment there is no need. Stocks are high.''
The U.S. and other oil consuming nations are pressing OPEC, which produces more than 40 percent of the world's oil, to increase output again to ease crude oil prices that tripled in four years to a record $99.29 on Nov. 21 in New York.
Saudi Arabia's Oil Minister Ali al-Naimi said yesterday that inventory levels were ``very comfortable,'' and the 12- member Organization of Petroleum Exporting Countries may not need to increase oil supply when it meets Dec. 5 in Abu Dhabi.
Inventory ``levels are still in the five-year range,'' said al-Naimi, speaking to reporters in Doha, Qatar, before an Arab oil ministers' meeting. ``It's important to look at the information first, jointly, so we can come to a consensus.''
The U.S., the world's largest oil consumer, may go into recession next year and trigger an economic slowdown across the world, Qatar's Oil Minister Abdullah al-Attiyah told reporters yesterday in Doha.
No `Shortage'
Crude prices shouldn't be blamed for causing a recession, and there is no ``shortage'' of oil in the market, al-Attiyah said.
Venezuela's Minister of Energy and Oil Rafael Ramirez said speculation was responsible for the current price of oil and that OPEC doesn't need to increase supply. The decline of the price in the past week shows that there is enough oil in the market, he said in remarks broadcast on state television.
Oil dropped 9.7 percent last week, the biggest weekly loss since April 2005, on concern slowing economic growth will cut energy demand. Crude oil for January delivery declined $9.47 to $88.71 a barrel last week on the New York Mercantile Exchange.
Saudi Arabia, OPEC's biggest producer, is adding 500,000 barrels of spare capacity in December to ensure that consumers are adequately supplied. The country is producing 9 million barrels a day, al-Naimi has said.
-- With reporting by Ayesha Daya and Glen Carey in Doha and Steven Bodzin in Caracas. Editors: Guy Collins, Tony Barrett
ComScore Says Online Sales Rose 18% Last Week on Electronics
By Mary Jane Credeur
Dec. 2 (Bloomberg) -- Online sales last week rose 18 percent as consumers hunted for bargains on electronics, toys and computers.
Internet retail purchases jumped to $4.06 billion in the week ended Nov. 30, led by Yahoo! Inc. and Web sites for Target Corp., Apple Inc., Circuit City Stores Inc. and Toy ``R'' Us Inc., Reston, Virginia-based ComScore Inc. said today in a statement. Online sales of video games and consoles jumped 170 percent, toy sales gained 36 percent and computer hardware rose 21 percent, ComScore said.
Online spending, which makes up more than 3 percent of all retail sales, may climb 20 percent to $29.5 billion in November and December, ComScore has estimated. That trails the 26 percent growth in online sales during the holidays in 2006 as consumers seek less-expensive items this year. Online spending rose 18 percent in November to $13.4 billion, ComScore said.
``It shows that online sales growth continues to be very strong,'' Jay McIntosh, the Chicago-based director of Ernst & Young LLP's retail and consumer products practice, said in a phone interview. ``The difference between 18 percent and 20 percent is not significant.''
Comparison Shopping
Shoppers spent a record $733 million online on the Monday after Thanksgiving, a 21 percent increase from a year earlier, according to ComScore. The National Retail Federation dubbed that day ``Cyber Monday'' because of a pattern of increased Web purchases after the U.S. holiday weekend.
Consumers are purchasing on the Web to reduce spending on high-priced gasoline and because sites have become easier to navigate and allow simpler comparison shopping, McInctosh said. The traditional brick-and-mortar retailers, which all have their own Web sites, are going to be the primary beneficiaries of this sales growth, he said.
Wal-Mart Stores Inc., the world's biggest retailer, reported online sales jumped more than 60 percent on the day after Thanksgiving compared with a year earlier after it tripled the number of discounted items to 150. Shoppers snapped up items including a microsuede reclining massage chair for under $100 and Canon digital cameras for $200.
The Bentonville, Arkansas-based discounter's strategy this holiday season is to lower prices on more items earlier in the shopping cycle to woo consumers coping with higher mortgage, energy and food costs.
``We go to market every day looking at the lowest possible price that we can offer,'' Raul Vazquez, head of Walmart.com, said in a Nov. 26 interview.
Dec. 2 (Bloomberg) -- Online sales last week rose 18 percent as consumers hunted for bargains on electronics, toys and computers.
Internet retail purchases jumped to $4.06 billion in the week ended Nov. 30, led by Yahoo! Inc. and Web sites for Target Corp., Apple Inc., Circuit City Stores Inc. and Toy ``R'' Us Inc., Reston, Virginia-based ComScore Inc. said today in a statement. Online sales of video games and consoles jumped 170 percent, toy sales gained 36 percent and computer hardware rose 21 percent, ComScore said.
Online spending, which makes up more than 3 percent of all retail sales, may climb 20 percent to $29.5 billion in November and December, ComScore has estimated. That trails the 26 percent growth in online sales during the holidays in 2006 as consumers seek less-expensive items this year. Online spending rose 18 percent in November to $13.4 billion, ComScore said.
``It shows that online sales growth continues to be very strong,'' Jay McIntosh, the Chicago-based director of Ernst & Young LLP's retail and consumer products practice, said in a phone interview. ``The difference between 18 percent and 20 percent is not significant.''
Comparison Shopping
Shoppers spent a record $733 million online on the Monday after Thanksgiving, a 21 percent increase from a year earlier, according to ComScore. The National Retail Federation dubbed that day ``Cyber Monday'' because of a pattern of increased Web purchases after the U.S. holiday weekend.
Consumers are purchasing on the Web to reduce spending on high-priced gasoline and because sites have become easier to navigate and allow simpler comparison shopping, McInctosh said. The traditional brick-and-mortar retailers, which all have their own Web sites, are going to be the primary beneficiaries of this sales growth, he said.
Wal-Mart Stores Inc., the world's biggest retailer, reported online sales jumped more than 60 percent on the day after Thanksgiving compared with a year earlier after it tripled the number of discounted items to 150. Shoppers snapped up items including a microsuede reclining massage chair for under $100 and Canon digital cameras for $200.
The Bentonville, Arkansas-based discounter's strategy this holiday season is to lower prices on more items earlier in the shopping cycle to woo consumers coping with higher mortgage, energy and food costs.
``We go to market every day looking at the lowest possible price that we can offer,'' Raul Vazquez, head of Walmart.com, said in a Nov. 26 interview.
Australia's October Retail Sales Probably Rose on Hiring Boom
By Jacob Greber
Dec. 3 (Bloomberg) -- Australia's retail sales probably rose for a fifth month as the lowest unemployment rate in three decades spurred spending, adding to inflation pressures that have already prompted the central bank to raise interest rates twice this year.
Sales advanced 0.6 percent in October from September, when they climbed 0.8 percent, according to the median estimate of 24 economists surveyed by Bloomberg News. The Bureau of Statistics releases the report at 11:30 a.m. in Sydney tomorrow.
Income tax cuts and rising wages, driven by a shortage of skilled labor as miners such as Rio Tinto Group expand to meet demand, have boosted household spending on cars, food and electronics. Higher consumption may prompt the central bank to raise interest rates again early next year to cap price gains.
``Spending will continue to be well supported by robust jobs growth, rising wealth and tax cuts,'' Westpac Banking Corp. economist Bill Evans said in Sydney.
Reserve Bank of Australia policy makers led by Governor Glenn Stevens hold their final meeting for 2007 in Sydney tomorrow and will keep the benchmark rate at 6.75 percent, according to all 27 economists surveyed by Bloomberg News. The bank will announce its decision a day later at 9:30 a.m.
Nineteen economists say the bank will raise the rate by a quarter point to 7 percent in the first three months of 2008 to curb inflation.
Australia marked its longest run of jobs growth in more than 12 years in October, worsening a labor shortage that prompted the central bank to raise borrowing costs in November and August. The unemployment rate is 4.3 percent.
Inflation Forecast
The Reserve Bank raised its inflation forecast last month and said the economy's expansion shows ``considerable momentum,'' reinforcing speculation Stevens will increase interest rates by March.
Core inflation will accelerate to 3.25 percent by December and remain there until June, more than a previous estimate of 3 percent and exceeding its target, the central bank said in a quarterly statement in Sydney on Nov. 12.
The bank's August rate increase probably triggered a fall in home-building approvals in October, according to a separate survey of economists by Bloomberg News. The government will publish the report at 11:30 a.m. tomorrow in Sydney.
The nation's economic growth probably accelerated to 1 percent in the third quarter from the previous three months, when it expanded 0.9 percent, another Bloomberg News survey of economists shows. The government will publish the gross domestic product report at 11:30 a.m. on Dec. 5.
Still, rising oil and fuel prices may prompt households to reduce spending on other goods in coming months, economists say. The price of crude oil has surged 49 percent this year.
Bloomberg Survey
The following table shows economists' estimates of the monthly change in retail sales in October from the previous month:
----------------------------------
Median 0.6%
Average 0.6%
High Forecast 0.9%
Low Forecast 0.3%
No. of forecasts 24
----------------------------------
4Cast 0.6%
ABN Amro 0.7%
AMP Capital 0.3%
Ausbil Dexia 0.9%
BT Financial 0.4%
ANZ Bank 0.6%
Bank of America 0.5%
Citigroup 0.5%
Commonwealth Bank 0.8%
Deutsche Bank 0.6%
Goldman Sachs JBWere 0.4%
Grange Securities 0.6%
HSBC 0.7%
JPMorgan Chase 0.3%
Macquarie Bank 0.6%
Merrill Lynch 0.6%
National Australia Bank 0.5%
RBC Capital Markets 0.4%
St. George Bank 0.4%
Suncorp 0.6%
TD Securities 0.4%
Thomson IFR 0.7%
UBS Australia 0.6%
Westpac Bank 0.5%
==================================
Dec. 3 (Bloomberg) -- Australia's retail sales probably rose for a fifth month as the lowest unemployment rate in three decades spurred spending, adding to inflation pressures that have already prompted the central bank to raise interest rates twice this year.
Sales advanced 0.6 percent in October from September, when they climbed 0.8 percent, according to the median estimate of 24 economists surveyed by Bloomberg News. The Bureau of Statistics releases the report at 11:30 a.m. in Sydney tomorrow.
Income tax cuts and rising wages, driven by a shortage of skilled labor as miners such as Rio Tinto Group expand to meet demand, have boosted household spending on cars, food and electronics. Higher consumption may prompt the central bank to raise interest rates again early next year to cap price gains.
``Spending will continue to be well supported by robust jobs growth, rising wealth and tax cuts,'' Westpac Banking Corp. economist Bill Evans said in Sydney.
Reserve Bank of Australia policy makers led by Governor Glenn Stevens hold their final meeting for 2007 in Sydney tomorrow and will keep the benchmark rate at 6.75 percent, according to all 27 economists surveyed by Bloomberg News. The bank will announce its decision a day later at 9:30 a.m.
Nineteen economists say the bank will raise the rate by a quarter point to 7 percent in the first three months of 2008 to curb inflation.
Australia marked its longest run of jobs growth in more than 12 years in October, worsening a labor shortage that prompted the central bank to raise borrowing costs in November and August. The unemployment rate is 4.3 percent.
Inflation Forecast
The Reserve Bank raised its inflation forecast last month and said the economy's expansion shows ``considerable momentum,'' reinforcing speculation Stevens will increase interest rates by March.
Core inflation will accelerate to 3.25 percent by December and remain there until June, more than a previous estimate of 3 percent and exceeding its target, the central bank said in a quarterly statement in Sydney on Nov. 12.
The bank's August rate increase probably triggered a fall in home-building approvals in October, according to a separate survey of economists by Bloomberg News. The government will publish the report at 11:30 a.m. tomorrow in Sydney.
The nation's economic growth probably accelerated to 1 percent in the third quarter from the previous three months, when it expanded 0.9 percent, another Bloomberg News survey of economists shows. The government will publish the gross domestic product report at 11:30 a.m. on Dec. 5.
Still, rising oil and fuel prices may prompt households to reduce spending on other goods in coming months, economists say. The price of crude oil has surged 49 percent this year.
Bloomberg Survey
The following table shows economists' estimates of the monthly change in retail sales in October from the previous month:
----------------------------------
Median 0.6%
Average 0.6%
High Forecast 0.9%
Low Forecast 0.3%
No. of forecasts 24
----------------------------------
4Cast 0.6%
ABN Amro 0.7%
AMP Capital 0.3%
Ausbil Dexia 0.9%
BT Financial 0.4%
ANZ Bank 0.6%
Bank of America 0.5%
Citigroup 0.5%
Commonwealth Bank 0.8%
Deutsche Bank 0.6%
Goldman Sachs JBWere 0.4%
Grange Securities 0.6%
HSBC 0.7%
JPMorgan Chase 0.3%
Macquarie Bank 0.6%
Merrill Lynch 0.6%
National Australia Bank 0.5%
RBC Capital Markets 0.4%
St. George Bank 0.4%
Suncorp 0.6%
TD Securities 0.4%
Thomson IFR 0.7%
UBS Australia 0.6%
Westpac Bank 0.5%
==================================
Subscribe to:
Posts (Atom)