Tag Archives: Washington

U.S. Stocks Rise as Investors Weigh Timing of Fed Cuts

According to Bloomberg,

U.S. stocks rose, sending the Standard & Poor’s 500 Index above its record close, as investors weighed the timing of any cuts to Federal Reserve monetary support amid budget negotiations in Washington.

Sysco Corp. jumped 12 percent after the food distributor agreed to buy closely held US Foods in a deal valued at about $3.5 billion. Gilead Sciences Inc. advanced 1.4 percent after getting approval for a hepatitis C pill that may generate more than $6 billion in annual sales. McDonald’s Corp. (MCD) dropped 0.9 percent after November sales missed analysts’ estimates.

The S&P 500 rose 0.3 percent to 1,810.76 at 1:30 p.m. in New York. The Dow Jones Industrial Average added 30.89 points, or 0.2 percent, to 16,051.09. Trading in S&P 500 stocks was 6 percent below the 30-day average at this time of day.

Slideshow: The Best and Worst Investments of 2013

“People are getting more comfortable with the idea of tapering and the concept that the reason for the taper is that the economy is getting stronger,” Walter Todd, who oversees about $950 million as chief investment officer of Greenwood Capital Associates LLC in Greenwood, South Carolina, said by phone. “At the end of the day that’s a good thing not a bad thing. For the next week it’s just going to be speculation around the timing.”

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U.S. Stocks Fall as Best Buy Drops Before Bernanke Speech

According to Bloomberg,

U.S. stocks fell after disappointing forecasts from Best Buy (BBY) Co. and Campbell Soup Co. while investors awaited a speech from Federal Reserve Chairman Ben S. Bernanke to gauge the prospect of continued stimulus.

Best Buy slid 11 percent, the most in almost a year, after saying it will work to keep pace with competitors’ discounts in the holiday season, hurting fourth-quarter profitability. Campbell Soup fell 6.2 percent after cutting its profit forecast. Home Depot Inc. (HD) gained 0.9 percent after boosting its earnings forecast as rising home prices spurred homeowners to splurge on renovations. Tyson Foods Inc. climbed 4.6 percent for a sixth day of gains as sales beat analysts’ expectations.

The Standard & Poor’s 500 Index fell 0.2 percent to 1,787.87 at 4 p.m. in New York. Yesterday, the gauge briefly surpassed 1,800 (SPX) for the first time. The Dow Jones Industrial Average lost 8.99 points, or less than 0.1 percent, to 15,967.03. About 5.8 billion shares changed hands on U.S. exchanges, about 3 percent below the three-month average.

“The economy is not doing badly, and the Fed is remaining very aggressive and very friendly toward the market,” Bruce Bittles, chief investment strategist at RW Baird & Co., said by phone from Sarasota, Florida. His firm oversees $100 billion. “We’ve had a big run. My suspicion is that the market might go sideways now for a little while before we encounter a year-end rally in December.”

The S&P 500 is up 25 percent this year, putting it on track for the biggest annual gain since 2003, as the Fed kept its monetary stimulus to spur economic growth and corporate earnings topped analysts’ estimates.

‘More Hopeful’

BlackRock's Fink on Equities, Regulatory Oversight

BlackRock’s Fink on Equities, Regulatory Oversight

Bernanke is scheduled to speak in Washington today after Fed Bank of New York President William Dudley said yesterday that while he’s “more hopeful” the U.S. economy is strengthening, it’s not enough to warrant stimulus cuts yet.

Chicago Fed President Charles Evans, among the most vocal advocates for additional easing from the Fed, said today that while the central bank is going to deliver highly accommodative policy until it can get the economy where it wants, the biggest challenge is credibility.

The Organization for Economic Cooperation and Development cut global growth forecasts for this year and next as emerging-market economies including India and Brazil cool. The world economy may expand 2.7 percent this year and 3.6 percent next year, instead of the 3.1 percent and 4 percent predicted in May, the Paris-based OECD said in a report today. Growth in the U.S. will be 1.7 percent and 2.9 percent this year and next, broadly similar to the outlook in May.

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Bernanke Sees Low Interest Rates Long After Bond Buying Ends

According to Bloomberg,

Fed Chairman Ben S. Bernanke

Fed Chairman Ben S. Bernanke

Federal Reserve Chairman Ben S. Bernanke said the labor market has shown “meaningful improvement” since the start of the central bank’s bond-buying program and that the benchmark interest rate will probably stay low long after the purchases end.

“The target for the federal funds rate is likely to remain near zero for a considerable time after the asset purchases end, perhaps well after” the jobless rate falls below the Fed’s 6.5 percent threshold, Bernanke said today in a speech to economists in Washington. He said a “preponderance of data” would be needed to begin removing accommodation.

Fed officials will weigh both the “cumulative progress” since they began the third round of bond buying in September 2012 as well as “the prospect for continued gains” as they evaluate the outlook for the labor market, Bernanke said. While recent job reports have been “somewhat disappointing,” the unemployment rate has fallen 0.8 percentage point during the program and about 2.6 million payroll jobs have been added, he said.

Policy makers are debating how to slow the pace of asset purchases without causing a surge in interest rates that could jeopardize the more than four-year economic expansion. Central bankers have sought to convince investors that tapering the $85 billion monthly pace of bond purchases wouldn’t signal that an increase in the benchmark interest rate is any closer.

‘Progressed Sufficiently’

When the Fed does slow asset purchases, “it will likely be because the economy has progressed sufficiently” for central bankers to rely more on guidance about the outlook for the main interest rate, Bernanke said.

“He’s saying that they achieved improvement in labor market conditions, but they’re still uncertain whether that progress will be sustained without all their support,” said Laura Rosner, a U.S. economist at BNP Paribas SA in New York and a former researcher at the Federal Reserve Bank of New York.

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State-Run Obamacare Exchanges Report 49,100 Enrollees

According to Bloomberg,

Affordable Care Act (Bloomberg)

Affordable Care Act (Bloomberg)

Enrollment through Nov. 10 represents 3 percent of the 1.4 million people projected to sign up in those states by the end of 2014, Washington-based Avalere Health said in a statement today. The data don’t include California, the most populous U.S. state, Massachusetts or Oregon. It also doesn’t account for those enrolled through the federal website serving 36 states.

Insurance companies have received enrollment data for 40,000 to 50,000 people through the U.S. website, the Wall Street Journal reported today, citing two sources it didn’t identify. A nationwide tally of those who used the federal website to enroll in health plans in October is scheduled to be released this week, Obama administration officials said last week, adding they expect enrollment to be low initially. Republican lawmakers have been pressuring the government to reveal just how many sign-ups have been affected by website outages and other flaws plaguing the federal website.

 

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Bernanke: Failing Bank Process Needed to Reduce Crises

Fed Chairman Ben S. Bernanke (Bloomberg)

Fed Chairman Ben S. Bernanke (Bloomberg)

According to Bloomberg,

Federal Reserve Chairman Ben S. Bernanke said a process under development that would allow regulators to take down a failing bank will help ensure investors discipline weak firms and prevent them from taking risks without consequence.

“As we try to make the financial system safer, we must inevitably confront the problem of moral hazard,” Bernanke said today in remarks at an International Monetary Fund conference in Washington. “Market discipline can only limit moral hazard to the extent that debt and equity holders believe that, in the event of distress, they will bear costs.”

He addressed the economy only briefly during the panel discussion, saying that there was still “an awful lot of slack in the labor market” and said that was justification for the Fed taking “strong actions to try to support job creation.”

In response to audience questions, Bernanke said that the high level of student debt is “another drag on the recovery” although it is not likely to cause a financial crisis because most such loans are owned by the government, not financial institutions.

Financial Crises

Bernanke spoke as part of a panel discussion that included Harvard University’s Kenneth Rogoff, the co-author of the history of financial crises titled “This Time Is Different: Eight Centuries of Financial Folly”; former Bank of Israel governor Stanley Fischer; and former U.S. Treasury Secretary Larry Summers.

 

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U.S. Economy Expands at a 2.8% Rate on Inventories

Economy in U.S. Expands at a 2.8% Rate as Inventories Climb (Bloomberg)

Economy in U.S. Expands at a 2.8% Rate as Inventories Climb (Bloomberg)

According to Bloomberg, Household purchases and business spending on equipment slowed in the third quarter, even as a buildup in inventories unexpectedly boosted the pace of economic growth in the U.S.

The 2.8 percent annualized gain in gross domestic product followed a 2.5 percent increase in the prior three months, Commerce Department figures showed today in Washington. Final sales, which exclude unsold goods, rose 2 percent in the third quarter as consumer spending climbed at the slowest pace since 2011 and corporate investment fell.

The biggest gain in inventories since the beginning of 2012 risks holding back the economy this quarter as companies limit production. A 16-day partial shutdown of the federal government added to the headwinds that the Federal Reserve is trying to offset by maintaining $85 billion in monthly bond purchases intended to keep borrowing costs low.

“You’ve got this big jump in inventories, and that’s clearly in excess of what the flow of spending is,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who projected a 1.9 percent gain in final sales. “If you stockpile all this inventory but your sales don’t really change all that much, then what you’re going to do in the next quarter is cut back.”

Economists at Morgan Stanley, Credit Suisse, TD Securities USA LLC and HSBC Securities America were among those who said they might reduce their forecasts for GDP.

“Fourth-quarter growth appears to be on a trajectory for growth a bit below 1.5 percent at this point,” Morgan Stanley economists said in an e-mail to clients.

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Recent Political and Market Events will likely Drive Wall Street Profitability and Compensation Lower

Source: The Wall Street Journal

Source: The Wall Street Journal

According to The Wall Street Journal, a strong first half had initially signaled a good year for Wall Street, but recent political and market events will likely drive profitability and compensation lower, according to a report released by New York state Comptroller Thomas DiNapoli.

Profits could total about $5 billion in the second half after generating an estimated $10 billion in the first half, the report said.

Mr. DiNapoli said profits could wane due to rising interest rates, litigation costs associated with settlements with the federal government and the recent political turmoil in Washington over the budget and debt ceiling, according to the report.

“Washington’s inability to resolve budget and fiscal issues is bad for business,” Mr. DiNapoli said in a statement. “Failure to resolve the federal budget and debt ceiling impasse could disrupt the economy and hurt New York City and New York state.”

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