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Higher fuel prices to hurt Royal Caribbean earnings
Higher fuel prices and the H1N1 flu virus will hurt Royal Caribbean Cruises Ltd's (RCL.N) (RCL.OL) full-year earnings, the world's second largest cruise operator said on Monday.
Royal Caribbean said its full-year fuel expenses could be 12 cents per share higher at today's oil prices, which have leaped 45 percent since the company provided its outlook in late April. The impact of surging oil was partly blunted by hedging strategies.
Miami-based Royal Caribbean previously had said it expected full-year earnings of $1.35 per share and a 10 percent change in fuel prices would result in a 10 cent per share change in 2009 earnings.
Analysts expect the company to earn $1.09 per share, according to Reuters estimates.
Earlier this month, the company said the flu virus, formerly known as swine flu, would hurt 2009 earnings by about 22 cents per share.
Additionally the world's second-largest cruise operator said its second-quarter other income will be 10 cents per share lower than expected owing to foreign currency adjustments and ineffective hedging.
Shares fell 8 cents to $13.20 in premarket trading.
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Enterprise to buy Teppco in $3.3B all-stock deal
Enterprise Products will acquire Teppco Partners in an all-stock deal worth about $3.3 billion, forming a new energy company that will run nearly 48,000 miles of crude and natural gas pipelines and control one of the largest liquid natural gas terminals in the nation, the companies announced Monday.
Teppco, which had seen its stock value tumble along with the price of oil and natural gas, rejected an earlier bid for $2.8 billion earlier this year.
Enterprise will bring together the oil and gas operations of Texas billionaire Dan Duncan.
For Enterprise, the deal brings an enormous transportation and storage network and will lead to $20 million in savings, the company said.
The acquisition "will establish Enterprise as the largest pipeline partnership as measured by miles of pipe, enterprise value and equity market capitalization," said Michael A. Creel, President and CEO of Enterprise.
The company will control more than 20,000 miles of natural gas pipelines and 20,000 miles of 22,000 miles of pipelines for refined and petrochemical products. It will also have 5,000 miles of crude oil pipelines. The combined company will also control 27 billion cubic feet of natural gas storage capacity.
It will also make up one of the largest inland tank barge companies in the country.
Teppco shareholders will receive 1.24 Enterprise common shares for each Teppco share, a 14.5 percent premium to the initial offer made by Enterprise March 9.
Teppco Partners LP and its general partner Texas Eastern Products Pipeline Co. LLC, will become wholly owned subsidiaries of Enterprise. The new partnership will take the Enterprise name.
Teppco shares rose 2.5 percent, or 71 cents, to $29.40 in premarket trading. Enterprise shares fell 2 percent, or 54 cents, to $24.75.
The deal is expected to close by the end of the year.
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Stocks mixed ahead of week's key data
Investors are beginning a holiday-shortened week on a cautious note.
Stocks seesawed in light trading early Monday, following mixed moves in overseas markets. Stocks in Asia were lower, while European markets advanced.
As the second quarter comes to a close, investors are at a crossroads. After running up the market more than 30 percent in three months on a litany of "less bad" economic data, investors have become skeptical of the economy's recovery in recent weeks, desiring more concrete signs of growth.
Reflecting the market's wary outlook, investors bought up Treasurys, sending yields lower.
There is little by way of economic or corporate news scheduled for Monday. However, this week, which is abbreviated by the Independence Day holiday on Friday, brings key data that will give investors a better sense of where the economy is headed.
Of particular importance is the government's monthly employment report, due Thursday. Though considered a lagging indicator of the country's economic health, the unemployment rate is still one of the most closely watched gauges of the economy. The labor market is intricately tied to many facets of the economy, including consumer spending.
Investors will also get readings on consumer confidence and manufacturing this week.
In early morning trading, the Dow Jones industrial average rose 20.55, or 0.2 percent, to 8,458.94. The Standard & Poor's 500 index rose 0.32, or 0.03 percent, to 919.22, while the Nasdaq composite index fell 6.92, or 0.4 percent, to 1,831.30.
Declining stocks were roughly even with advancing ones on the New York Stock Exchange where volume came to a light 150.6 million shares.
Though the Dow Jones industrial average is still up 28.9 percent from a 12-year low on March 9, it has fallen 4.1 percent from a five-month high on June 12.
Last week, the major indexes finished mixed. The Dow Jones industrial average fell 1.2 percent; the Standard & Poor's 500 index slipped 0.3 percent; and the Nasdaq composite index rose 0.6 percent.
Analysts say the market will likely be rocky again this week, as investment managers try to square their portfolios ahead of the end of the April-June period on Tuesday.
One point of interest Monday will be the sentencing of Bernard Madoff, the mastermind behind a multibillion dollar Ponzi scheme.
Madoff pleaded guilty in March to securities fraud and other charges. Prosecutors are seeking a 150-year jail sentence, while his lawyers are insisting that 12 years in prison is sufficient punishment.
Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, dropped to 3.46 percent from 3.53 percent late Friday.
The dollar was mixed against other major currencies. Gold prices fell.
Light, sweet crude for August delivery rose $1.54 to $70.70 a barrel on the New York Mercantile Exchange.
In other trading, the Russell 2000 index of smaller companies fell 7.53, or 1.5 percent, to 505.69.
Overseas, Japan's Nikkei stock average fell 1.0 percent. In afternoon trading, Britain's FTSE 100 rose 0.5 percent, Germany's DAX index rose 0.8 percent, and France's CAC-40 was up 1.2 percent.
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AIG to repay $25 billion U.S. debt with unit stakes
The federal government has agreed to accept $25 billion of preferred stock in two American International Group Inc (AIG.N) businesses as partial repayment of debt, the company said on Thursday.
The agreement will reduce AIG's debt of about $40 billion under a Federal Reserve Bank of New York credit facility, but it will still be a while before taxpayers get any cash back for their bailout of the insurer.
Since its near-collapse last September, U.S. taxpayers have committed up to about $180 billion to rescue AIG, including the loan under the credit facility and a $40 billion equity injection.
AIG also said the agreement positions the two businesses, American International Assurance Co Ltd (AIA) and American Life Insurance Co (Alico), for initial public offerings, depending on market conditions.
AIG has already begun the process for an IPO of AIA early next year, selecting Morgan Stanley (MS.N) and Deutsche Bank AG (DBKGn.DE) as global coordinators for the offering.
The pact on AIA and Alico follows an agreement AIG reached with the government in March. At that time, the company said the preferred stock in the two units would reduce its balance under the credit facility by up to $26 billion.
The embattled insurer said on Thursday it will put the equity of the units into special purpose vehicles, and the New York Fed will receive preferred stakes of $16 billion in AIA and $9 billion in Alico.
Edward Liddy, AIG's chief executive, said the agreement "represents a major step toward repaying taxpayers and preserving the value of AIA and Alico."
The New York Fed, in a separate statement, said the agreement will help AIG repay taxpayers and restructure. The AIA and Alico transactions are expected to close in the second half of 2009, pending regulatory approvals.
Alico operates in more than 50 countries but generates more than half its revenue in Japan.
Once the world's largest insurer by market value, AIG nearly collapsed last year because of soaring losses from credit default swaps, as customers who bought debt protection from the company's financial products unit boosted their demands for collateral.
AIG lost more than $99 billion in 2008 and has received a series of government bailouts.
The company has found it more difficult to sell assets for good prices because prospective buyers know it needs to dismantle itself to help repay taxpayers.
Last year AIG tried to sell AIA privately for as much to $20 billion but failed to find a buyer.
Liddy, a former chief executive at Allstate Corp (ALL.N), last month announced plans to step down as AIG CEO, saying he had planned for his stay to be temporary. He said at the time it might take several years for AIG to repay taxpayers.
AIG shares were unchanged at $1.42 in morning trading on the New York Stock Exchange.
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Bernanke says he didn't bully BofA to buy Merrill
Federal Reserve Chairman Ben Bernanke told Congress Thursday he didn't pressure Bank of America into acquiring Merrill Lynch in a deal that ultimately cost taxpayers $20 billion.
Bernanke told a House committee investigating the matter that he did not threaten action against Bank of America's CEO Kenneth Lewis or the bank's board members if they decided to abandon the takeover.
"I did not tell Bank of America's management that the Federal Reserve would take action against the board or management" if they decided to invoke a clause in the acquisition contract in an attempt to stop the deal, Bernanke told the House Oversight and Government Reform Committee. "Moreover, I did not instruct anyone to indicate to Bank of America that the Federal Reserve would take any particular action under those circumstances."
Earlier this month, Lewis testified that his job was threatened after he expressed second thoughts about the deal. Lewis said then-Treasury Secretary Henry Paulson and federal regulators made clear that if Charlotte-N.C.-based Bank of America Corp. reneged on its promise, that he and the bank's board members would be ousted.
Bernanke said no member of the Fed ever urged Bank of America to keep quiet about Merrill Lynch's financial problems. Not divulging that information would have violated Lewis' fiduciary duty to the bank's shareholders.
"Neither I nor any member of the Federal Reserve ever directed, instructed or advised Bank of America to withhold from public disclosure any information relating to Merrill Lynch, including its losses, compensation packages or bonuses or any other related matter," the Fed chief said.
It marked Bernanke's first public comments since the House committee launched an investigation earlier this year into whether he or other government officials bullied Bank of America to stick with its plan to combine the two financial powers after Lewis found out about Merrill's financial woes.
The committee's ranking member Darrell Issa, R-Calif., accused the Fed of having "deliberately kept other regulators in the dark regarding the negotiations with Bank of America. The Federal Reserve's cover-up of important information and willingness to exclude key regulatory partners" such as the Securities and Exchange Commission and the Office of the Comptroller of the Currency "raises troubling questions," he said.
Rep. Jason Chaffetz, R-Utah, said of Bernanke's denial that he threatened Lewis' job: "With all due respect, I'm just not buying that."
In turning aggressive toward Bernanke, Republicans are adopting the role of outsider and trying to link the Fed chairman to the Obama administration as advocates of government meddling in private industry. Many Republicans are suspicious of the administration's plan to expand the Fed's regulatory powers.
It's an odd shift, because Bernanke is a Republican appointee and many of his key advocates are Democrats. His term expires early next year, giving President Barack Obama an opportunity to pick his own Fed chief or reappoint Bernanke.
Rep. Dennis Kucinich, D-Ohio, said he thought Lewis was the one pressuring the government. He said that the investigation revealed that Fed officials thought Bank of America failed to do proper due diligence when it came to Merrill Lynch.
When asked about Bank of America's management, Bernanke said: "I did have concerns, yes."
Bank of America received $45 billion from the government's financial bailout program, $20 billion of which was linked to its acquisition of New York-based Merrill Lynch.
"Much of what the Fed, the Treasury and other agencies did in these transactions remains shrouded in secrecy," complained the committee's chairman Rep. Edolphus Towns, D-N.Y. "It's time to yank the shroud off the Fed and shine some light on these events."
Bernanke defended the deal and government bailout, saying the action was needed to avoid another blow to the financial system, which at the time was in distress.
If Bank of America had decided to abandon the deal, it "might have triggered a broader systemic crisis that could well have destabilized Bank of America as well as Merrill Lynch," Bernanke said.
Invoking the clause to rescind the deal also would have "cast doubt in the minds of financial market participants — including the investors, creditors and customers of Bank of America — about the due diligence and analysis done by the company" and the judgment of its management, Bernanke added.
Bernanke also said the Fed's lawyers believed it was "highly unlikely" that Bank of America would be successful in terminating the deal through the special clause.
The "best option," therefore, for the companies and the broader financial system was to work with the Fed and the Treasury Department to develop a contingency plan to ensure that Bank of America would remain stable should the completion of the acquisition and the announcement of losses lead to financial stress, he said.
The government helped orchestrate the deal at a time when the country's economic and financial landscape was especially fragile. Lending, the lifeblood of the economy, had come to a near halt and the financial system was on the brink of a meltdown.
The transaction was hammered out over the same weekend in September that another investment bank, Lehman Brothers, went under, leading to the biggest corporate bankruptcy in U.S. history and plunging financial markets worldwide into crisis. One day later, the government was forced to bail out teetering insurance giant American International Group Inc. The week before the government seized control of mortgage finance companies Fannie Mae and Freddie Mac. Bank of America completed its purchase of Merrill Lynch on Jan. 1.
In January, Bank of America reported a $2.39 billion fourth-quarter loss, and Merrill Lynch disclosed a loss of more than $15 billion.
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What the Fed's Decision Means for Mortgage Rates
The Federal Reserve today left its benchmark interest rate unchanged at virtually zero as it indicated that the economy--while still fragile--appears less imperiled than it did several months back. "Information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing," the central bank said in its statement. "Conditions in financial markets have generally improved in recent months." The announcement comes amid growing concern over mortgage rates, which have surged in recent weeks. Elevated mortgage rates threaten to upend President Barack Obama's plans to revive the housing market--and the economy as a whole--by limiting home loan refinancings and putting additional downward pressure on residential real estate prices. To that end, here is a step-by-step way to evaluate what today's announcement from the Fed could mean for mortgage rates:
1. Mortgage rate trends: Thirty-year fixed mortgage rates plunged to new lows after the Fed announced a series of initiatives beginning last fall, such as purchasing Fannie Mae and Freddie Mac mortgage-backed securities and long-term treasury bonds. But late last month, rates began to spike, surging from 5.03 percent on May 26 to 5.81 percent on June 11, according to HSH.com. The run-up was sparked by mounting concerns over government spending and potential inflation, which pushed yields on 10-year treasury notes--which fixed mortgage rates typically track--sharply higher. More recently, rates have retreated modestly, hitting 5.59 percent yesterday. Still, they remain significantly higher than the all-time lows of less than 4 percent reached during the winter.
2. Treasury yields up slightly: Ten-year Treasury yields stood at 3.69 percent late this afternoon. That's up about 0.12 percentage points from before the Fed's announcement, according to Mike Larson of Weiss Research, who called the move "a fairly large intraday reversal." Larson said the increase in yields was linked to disappointed bond traders, who had hoped that the Fed would explain how it planned to one day exit its lending and liquidity programs. The statement, however, made no mention of unwinding such initiatives.
3. Fed intervention: Back when rates were approaching the 6 percent range, some observers believed the Fed might decide to jump in and unveil plans to buy up additional treasury debt or mortgage backed securities in an attempt to drive long-term rates lower. But expanding the asset purchase program is risky, as the additional government debt needed to finance such purchases could stoke fears of future inflation and actually prod mortgage rates higher. But the Fed made no mention of expanding these programs in today's statement. "This indicates that the committee will now wait and see how the implemented monetary (and fiscal) policies will work out and that it will likely refrain from expanding the existing monetary policy programs designed to bring down long-term interest rates, unless the economic conditions take a turn for the worse," Katrin O'Connor, a staff economist at the National Association of Federal Credit Unions, said in a report.
4. Rate hike: Although there had been some speculation that the Fed might begin increasing its benchmark interest rate--the federal funds rate--before the end of the year, the central bank's statement appears to indicate otherwise. The Fed "continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period," the central bank said in its statement. Keith Gumbinger of HSH.com says the Fed's statement signals to the market: "Forget about rate hikes; they are not coming [anytime soon]." Although mortgage rates don't move in lock step with the federal funds rate, increases can push rates higher. The American Bankers Association's Economic Advisory Committee--which is made up of top economists from big banks across the country--predicted in mid-June that the central bank will hold the federal funds rate in its current range until the third quarter of 2010.
5. Inflation in check: Although the possibility of a future surge in inflation has worked to push 10-year treasury yields--and therefore fixed mortgage rates--higher, the Fed signaled it doesn't consider inflation a pressing concern. "The prices of energy and other commodities have risen of late," the Fed said in its statement. "However, substantial resource slack is likely to dampen cost pressures, and the committee expects that inflation will remain subdued for some time." The Fed's inflation outlook gives credibility to its stated intent to leave the federal funds rate "exceptionally low" for a long time and could help to assuage concerns about future inflation in the bond market.
6. Fed flexibility: While it didn't announce plans to expand its asset purchase or lending programs, the Fed did signal flexibility in operating them. "The committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets," the statement read. "The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted." Gumbinger says this wording suggests that the Fed might not end up buying up all the treasury bonds and mortgage-backed securities it previously indicated it would. "It leaves open the possibility that they might not even spend all of the money they have committed to [the asset purchase programs] if the economy doesn't warrant it," Gumbinger said. "That eases up the concerns about the monetization of debt and the potential for inflationary pressures being stoked by that."
7. Mortgage rate outlook: Larson says that although 10-year treasury yields moved higher following the Fed's announcement, it's still too early to tell what impact today's developments will have on mortgage-rate trends. "A lot of times it kind of takes 24 to 48 hours to sort out what the trend is going to be--the first 15 minutes after the Fed's announcement is typically pretty crazy," he said. "[However,] by the end of the week, if we are still selling off in the bond market, then you are going to see more upward pressure on mortgage rates."
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Energy prices drop with gasoline supplies surging
Energy prices fell Wednesday after the government reported that unused gasoline in storage grew for the third-straight week, another signal that consumer demand for energy is waning.
Benchmark crude for August delivery lost 57 cents to settle at $68.67 a barrel on the New York Mercantile Exchange. In London, Brent prices fell 47 cents to settle at $68.33 a barrel on the ICE Futures exchange.
At the pump, retail gas prices continued to decline this week after peaking Sunday at $2.693 a gallon. The national average for a gallon of gas shed another 0.7 cents overnight to $2.676 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service.
Even though pump prices have risen more than a quarter over the past month, prices at this time last year were above $4 per gallon.
That still hasn't brought more people out for road trips this year. AAA said Wednesday that fewer people will be traveling during the Fourth of July weekend, which is typically the busiest time of the year on America's highways.
A study by the auto club estimated that the number of people traveling during that weekend will fall 1.9 percent from last year, with about 37.1 million people traveling at least 50 miles from home.
Layoffs and fears about the economy as a whole have trumped cheap gas, and refiners have been cutting back on production this year to match weak demand.
Supply and demand numbers this year have taken a back seat to the dollar, however.
Fed, which said in March it would spend $1.2 trillion to revive lending, has sent investors flocking to oil and other commodities in search of a hedge against inflation. But on Wednesday, the Fed said that inflation will remain "subdued for some time."
After the announcement, the euro moved slightly lower at $1.3919 from $1.4083.
The Energy Department's Energy Information Administration reported Wednesday that U.S. oil supplies dropped more than expected last week, falling 1.1 percent. Still, gasoline in storage swelled more than expected to 208.9 million barrels.
The government also reported that orders for big-ticket manufactured goods rose sharply in May, and orders for non-defense capital goods posted the biggest increase since September 2004.
In other Nymex trading, gasoline for July delivery fell 5.07 cents to settle at $1.8425 a gallon and heating oil dropped 3.09 cents to settle at $1.7381. Natural gas for July delivery lost 11.8 cents to settle at $3.761 per 1,000 cubic feet.
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U.S. mortgage applications climb from 7-month low
U.S. mortgage applications climbed last week from a seven-month low, the Mortgage Bankers Association said on Wednesday, adding to emerging signs that the three-year housing market collapse may be abating.
Demand for home loans rose after four straight weekly declines, as U.S. mortgage rates dipped and more borrowers applied to buy houses as well as refinance.
The trade group's seasonally adjusted mortgage applications index, which includes both purchase and refinance loans, rose 6.6 percent to 548.2 in the week ended June 19. This modest rise is from the lowest level since late November.
"In terms of home sales and building activity, we've probably reached a bottom," Keith Hembre, chief economist at First American Funds in Minneapolis, Minnesota said on Tuesday. "But it's highly unlikely there will be a sharp recovery from here."
Existing home sales rose in May for the first back-to-back gain since September 2005, the National Association of Realtors said on Tuesday.
The average 30-year loan rate dipped 0.06 point to 5.44 percent last week, nearly a full percentage point less than a year earlier.
A rate spike from a record low 4.61 percent in March to 5.57 percent in early June, however, has crushed a burgeoning refinance boom.
With rates starting to ease again, some borrowers may be rushing to lock in now rather than chance a renewed surge in borrowing costs.
The Mortgage Bankers Association said its refinancing index rose 5.9 percent from a seven-month low to 2,116.3 last week. Demand for refinancing was at least triple this level in March when mortgage rates hit their record lows, the group said.
On Monday, the MBA slashed its forecast by more than 25 percent for total mortgage loan origination in 2009, mostly due to fewer refinancings and a slow start to the federal Home Affordable Refinance Program.
A plodding upturn in home purchases has been dominated by first-time buyers taking advantage of a federal tax credit and distressed prices on foreclosures.
The mortgage purchase index increased 7.3 percent to 280.3, the highest since early April, the MBA said.
"I've seen for the last several months a flattening of the market, which candidly is close to euphoria if you're a new home builder given how bad it has been," Richard Dugas, chief executive of No. 2 U.S. home builder Pulte Homes (PHM.N), said this week at the Reuters Global Real Estate Summit in New York.
Mortgage rates are still "incredibly good" despite rising from historic lows, he noted.
The greater deterrents are the longest recession since the Great Depression and the highest unemployment rate in more than 26 years, most economists agree.
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Citi boosting salaries to offset lower bonuses
Citigroup Inc. is increasing base salaries for many of its employees — reportedly by as much as 50 percent for some workers — as it restructures its compensation program amid new restrictions on bonus payments.
The increased salaries will offset lower bonuses, according to a person familiar with the matter who requested anonymity because the plans have not been made public. The higher salaries are not the equivalent of annual raises, the person added.
Citi faces restrictions on bonuses as part of a new government compensation oversight plan because the bank received bailout funds from the Treasury Department.
By shifting the mix in compensation packages, it will allow Citi to pay most employees as much as they received in 2008 while adhering to bonus caps.
"Citi continues to examine ways to ensure its employee compensation practices are competitive in this very challenging market environment," Citi said in a statement Wednesday. "Any salary adjustments are not intended to increase total annual compensation, rather to adjust the balance between fixed and variable compensation."
A New York Times report published Wednesday said some employees salaries will rise by as much as 50 percent because of the change in compensation structure.
The New York-based bank has been among the hardest hit by the credit crisis and ongoing recession. Citi has reported six straight quarterly losses totaling nearly $30 billion. But, it would have posted a profit in the first quarter had it not been for dividend payments on preferred stock. In recent months, the bank has been reducing staff and selling assets in an attempt to streamline operations and return to profitability.
The bank has received $45 billion in loans from the government. A portion of those funds will soon be converted to common stock, giving the government a 34 percent stake in the bank.
Bonuses awarded to employees at financial firms that received government bailouts have come under heavy scrutiny in recent months. Earlier this year, American International Group Inc. came under fire for bonuses it paid to employees at one of its most troubled divisions. AIG was rescued from the brink of collapse by the government last fall.
The Obama administration has blamed compensation plans for encouraging excessive risk-taking that pushed the financial services sector into chaos last year.
The administration recently named Kenneth Feinberg a "special master" to oversee compensation packages awarded to the seven companies that have received the most government support, including Citigroup. Feinberg can reject pay plans he deems excessive and review compensation for the top 100 salaried employees at those companies.
Charlotte, N.C.-based Bank of America Corp., which received $45 billion in government support, is among those facing additional scrutiny about bonuses and executive compensation.
Bank of America was not immediately available to comment on whether it also is planning to alter its compensation program.
Ensuring compensation for employees by increasing salaries could be a move banks facing government restrictions take to avoid losing workers to competitors. Some banks that received government loans during the mushrooming credit crisis last fall have already paid back their debt, and are no longer subject to compensation oversight. That could allow them to offer lucrative deals to entice employees away from banks where restrictions are still in place.
Aside from the boost in salary to offset the lost bonuses, Citi is also planning to award new stock options to employees to help ensure they remain at the bank, according to the Times report.
Shares of Citigroup rose 3 cents to $3.04 in morning trading. Bank of America shares rose 12 cents to $12.35.
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So you're out of work -- or worried you may be soon. Your impulse is to batten down the hatches and hunker down rather than hobnob, right? It's natural, but as any sportsman will tell you, the most successful hunts are done in a group and infused with equal amounts of purpose and camaraderie. That's why it's best, if only out of pragmatism, to approach your job pursuit more like a party. You should be inviting people in, instead of thinking about it like a painful ordeal to endure in secret.
Inviting others in is the approach taken by Abhijit Shanker, a guy I recently met on my book tour stop in New York. Two years ago, Shanker had all but dumped his dream of a career in the nonprofit development sector, even though he had worked hard earning a PhD in public policy. His booby prize was a position at a boutique consulting firm in Peoria, Ill., that was making him miserable and depressed. As he tells it, a friend finally recommended that he crawl out of the isolated hole he had dug -- and yes, he dug it himself, as we all do -- and start building the network that would get him what he wanted. The friend gave him a copy of my first book, Never Eat Alone: And Other Secrets to Success, One Relationship at a Time.
There's a lot of tactical advice in Never Eat Alone, but the major message -- as in my new book, Who's Got Your Back -- is that success, and above and beyond that, joy in life only comes by and through other people. And "other people" is the one resource that a recession actually expands your access to, as volunteerism and community values surge and you've got time on your hands to connect.
Found Dream Job Online
Painfully shy but desperate enough to give NEA's approach a try, Shanker jumped on the Internet, opened up about his predicament, and started connecting. "I began to network aggressively with people in the development sector," he told me in an e-mail after we met, explaining how he sought to identify a way he could help every person he reached out to. "Before long, help, advice, and suggestions were pouring at my door from all quarters. Over time I developed mentors who have since been a part of my life."
Shanker's new circle didn't just share resources and contacts. They walked him through mock interviews, prepping him in a way that only people steeped in the field could. They invested their time in him, rebuilding his belief that he had a place in a field that had so far shut him out. (He had been turned down several times for a position at the UN.) And finally, they served as references for a dream job he found online -- a job he now occupies as the chief of the internal communication section at UNICEF.
With his vulnerability, generosity, and courage to reach out, Shanker had created what I call "lifeline relationships" in Who's Got Your Back -- the deep, trusting relationships that have a disproportionately positive effect on your success. "Without a doubt, it was the support system I had created that enabled me to get my dream job," he told me.
Here are some guidelines to help you get that job party started:
Get a Lifeline Group. The research is clear that peer-to-peer mutual support groups are by far the most powerful tool for behavioral change and professional development. Entrepreneurs and executives turn to their exclusive peer organizations, Presidents have their "kitchen" cabinets, and athletes have their cadre of coaches. Weight Watchers is the most successful program for long-term weight loss because peer groups are its bedrock. Alcoholics Anonymous, the first peer group created to contend with a problem, is the most successful model for helping people stay sober.
Likewise, you'll improve your job-hunting process dramatically by creating what I call a "lifeline group:" a circle of three or four people who schedule a regular weekly time to set and refine goals, check progress, and hold each other accountable so progress is made.
"Eat like a bird and poop like an elephant." That's the advice whip-smart author Guy Kawasaki gives to entrepreneurs, and it applies to job-hunters, too. Birds eat 50% of their body weight per day -- which is exactly what job-hunters should do with information. Become an absolute expert in, say, everything related to your industry-specific job hunt. Don't rely on others or be passive about it; rather read everything, talk to everyone, be everywhere. Once you've become a hub of this information, don't hoard it. Spread it around -- like the elephant. Share what you know. Exude dynamism and utility. Remember, all those jobless people in your field won't be jobless forever -- and when they show up at their new jobs, it'll be with your poop on their shoes.
Use your unique currency: Time. That's one thing you've got more of now than you did when you were employed. So use it wisely, obviously, concentrating on your job-specific outreach, but also building relationships more broadly. Constantly seek out opportunities to help others, people you know and people you don't know, with your free time and talents. And don't ruin your efforts by keeping score; it's deeply inauthentic.
Become a social butterfly. You already know you need to network -- what I'm emphasizing is the social. Never again will you have more time to build deep friendships, personal and professional. Don't turn down invitations or be passive in planning your week. Catalog all the relationships that you let slip while in the throes of your last job. Then line up a series of dinners -- what I call "long, slow dinners," the kind that create space for a connection to flourish, whether old or new. You can be social while still being purposeful, too -- i.e., don't feel obligated to reunite with your sixth-generation, twice-removed cousins in Kazakhstan right now, unless maybe you're in oil and gas.
Above all, remember: Your life is happening right now, not the day you're assigned a company computer. So please live it -- with others!
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Global recession nearing bottom, OECD says
The deepest global recession in over 60 years is close to bottoming out, but recovery will be weak unless governments do more to remove uncertainty over banks' balance sheets, the Organization for Economic Cooperation and Development (OECD) said Wednesday.
In its half-yearly economic outlook, the Paris-based organization said it expects its member countries' economies to shrink by 4.1 percent this year, with only government rescue measures heading off an even worse decline.
That is a slight improvement from the OECD's last forecast in March of a 4.3 percent decline this year and is the group's first upward revision to its forecasts in two years, Secretary General Angel Gurria said at a news conference in Paris.
"A really disastrous outcome has become more of a remote risk," said OECD acting economics department head Jorgen Elmeskov.
But the recovery "is likely to be both weak and fragile for some time," Gurria said.
The OECD's slightly less pessimistic outlook contrasted with the World Bank's decision Monday to slash its own economic forecast. The Washington-based multilateral lender said global output will contract 2.9 percent this year, worse than its view in March of only a 1.7 percent drop. The bank cited much deeper and broader economic damage in developing countries.
The OECD forecast applies only to developed countries, where key growth areas like manufacturing and household spending have been hit particularly hard by the economic crisis.
Both organizations agree, however, that the recovery "will be weak, and that's the main story," said Julian Jessop, chief international economist at Capital Economics in London.
The OECD now expects the US economy to shrink by 2.8 percent this year after 1.1 percent growth in 2008. Japanese output is likely to contract by 6.8 percent this year and the 16 nation euro-zone will likely shrink by 4.8 percent.
The OECD forecast a return to growth in all three regions next year, with overall growth across its membership expected to average 0.7 percent in 2010, according to the report.
That also represents an improvement from the OECD's last forecast of a 0.1 percent contraction next year.
World economic growth, which the OECD defines as its members plus Brazil, Russia, India and China, will rebound to 2.3 percent next year from a decline of 2.2 percent in 2009, according to the latest OECD forecast.
The speed of an economic rebound will vary across the globe. China already seems to be recovering, but in the U.S. the end of fiscal stimulus measures and the continued need to repair banks' balance sheets means recovery there "could be uncharacteristically weak and insufficient" to offset unemployment of around 10 percent, the OECD said.
Recovery may also be slow in the euro-zone, the OECD said, as rising unemployment weighs on consumer spending.
The OECD urged countries to both start devising their "post-crisis policy strategies" to roll back their stimulus measures, while also continuing with measures "to ensure a faster and more robust recovery."
Countries that have not already acted to remove uncertainty over their banks' balance sheets need to do so, while stress testing of banks should be employed to restore confidence, the OECD said.
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May existing home sales rise less than expected
Sales of previously occupied homes rose modestly from April to May, the third monthly increase this year, but signs of a housing recovery are fragile at best.
The National Association of Realtors said Tuesday that home sales rose 2.4 percent to a seasonally adjusted annual pace of 4.77 million, up from a downwardly revised rate of 4.66 million in April. The results, however, missed analysts' expectations and stock markets edged lower on the news.
"While activity has stabilized, a meaningful recovery has yet to begin," wrote Paul Dales, U.S. economist with Capital Economics.
The bursting of the housing bubble helped push the U.S. economy into the worst financial crisis in seven decades. Now the economy is hindering the recovery of the real estate market. As companies continue to shed jobs, more cash-strapped homeowners are predicted to go into foreclosure.
About one in three homes sold last month was a foreclosure or distressed sale, dragging down the median price to $173,000 — 16.8 percent below a year ago. Falling prices coupled with new rules for property appraisers have caused many transactions to fall apart or be delayed.
"We have just been flooded with e-mails, telephone calls on the appraisal problems," said Lawrence Yun, the Realtors' chief economist.
One bright spot, however, was that the number of unsold homes on the market at the end of May fell 3.5 percent to nearly 3.8 million. That's a 9.6 month supply at the current sales pace, compared with about 6 months in a normal market.
That drop was "the best news in the report," said Joseph LaVorgna, Deutsche Bank's chief economist.
Still, the inventory figures don't reflect the large number of houses being held off the market by owners reluctant to sell while prices are so weak, noted Richard Moody, chief economist with Forward Capital.
Mortgage rates are another problem. Interest rates for 30-year home loans, which fell to all-time lows this spring, have been edging back up. The average rate was 5.38 percent last week, according to Freddie Mac.
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European stocks claw back ground after big losses
European stocks clawed back some ground Tuesday, with Wall Street also expected higher, after a heavy sell-off on Monday, when the World Bank warned that the global economic downturn would be deeper than previously predicted.
In Europe, the FTSE 100 index of leading British shares was up 17.41 points, or 0.4 percent, at 4,251.46 while Germany's DAX rose 35.19 points, or 0.8 percent, to 4,728.49. The CAC-40 in France was 6.87 points, or 0.2 percent, higher at 3,130.12.
On Monday, Europe's main markets slumped by more than 2 percent after the World Bank said it expected the global economy to shrink by 2.9 percent this year, far more than its previous forecast for a 1.7 percent contraction.
A notable gainer in Europe was news and information company Thomson Reuters PLC, which saw its share price rally more than 5 percent after it announced plans to cancel its listing on the London Stock Exchange but remain in Toronto and New York.
U.S. markets were also expected to stabilize, after the Dow Jones industrial average and the broader Standard & Poor's slumped 2.4 percent and 3.1 percent respectively on Monday. Dow futures were up 35 points, or 0.4 percent, at 8,318 while S&P 500 futures rose 4.8 points, or 0.5 percent, to 893.40.
David Buik, markets analyst at BGC Partners, said the early week selling was perfectly "sensible." The stock rally since March was clearly "overcooked" and came too soon after a 40 percent slide in prices during the peak of the financial crisis, he said.
Equities and oil prices rallied hard since March on hopes that the U.S. economy will recover from recession sooner than anticipated. That optimism has largely dissipated and analysts say investors need clearer evidence that the world economy and company earnings are improving to make sense of stock valuations. In March, many investors saw valuations around the world as particularly cheap and started buying into the market.
In light of the current unease, investors will be closely looking at Wednesday's statement from the U.S. Federal Reserve. Though the Fed is widely expected to keep its benchmark interest rate in the range of zero to 0.25 percent, investors will be focusing on what it says about current economic prospects and how long it expects to keep monetary policy as accommodating as it is.
Most analysts think the Fed has a difficult balancing act — expressing the view that the worst of the recession is over at the same time as not spooking investors into thinking that interest rates will rise any time soon.
"The market will be looking for reassurance," said Buik.
Earlier, Asian stock markets fell in the wake of the big U.S. and European losses on Monday.
Japan's Nikkei 225 stock average lost 276.66, or 2.8 percent, to 9,549.61 while Hong Kong's Hang Seng shed 521.19, or 2.9 percent, to 17,538.36.
South Korea's Kospi lost 2.8 percent, Australia's index was off 3.1 percent and Taiwan's benchmark dropped 2.3 percent. Shanghai's main stock measure traded lower by 0.1 percent.
As expectations of higher economic growth wilted, so did shares of resource companies, which have bloomed in recent weeks. BHP Billiton Ltd., the world's largest mining company, slid 4.1 percent in Australia, and heavyweight oil company PetroChina shed 4.5 percent in Hong Kong.
Oil prices fell on expectations demand will remain weak. Benchmark crude for August delivery was down 52 cents at $66.98 a barrel on electronic trading on the New York Mercantile Exchange.
In currencies, the dollar weakened 0.2 percent 95.29 while the euro was 0.6 percent higher at $1.3923.
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Asian markets rise on China hopes, Europe slides
Asian stock markets rose for a second session Monday amid optimism about China after the Chinese premier said the economy was improving. But European markets opened lower.
Investors remained uneasy about the U.S. economic outlook, which depressed oil prices, after last week's declines on Wall Street. Traders have grown worried that an economic recovery may be more subdued than originally hoped — and that the huge run-up in global stock markets the last three months may be unjustified.
Still, some investors appeared heartened by Premier Wen Jiabao, who was quoted by state media over the weekend as saying China's economy was beginning to recovery steadily amid government stimulus spending. He said Beijing will maintain an easy credit policy to support growth.
Hong Kong's benchmark Hang Seng index surged more than 2 percent before erasing some gains to close up 138.62 points, or 0.8 percent, at 18,059.55.
China's Shanghai Composite index rose 15.81 points, or 0.6 percent, to 2,896.30, while Japan's Nikkei 225 stock average edged up 40.01 points, or 0.4 percent, to 9,826.27, lifted by electronics companies like NEC Corp. and Nikon Corp.
"Hong Kong is up because the Chinese markets are up. Markets are up in Shanghai because investors are optimistic about the future," said Francis Lun, general manager of Fulbright Securities in Hong Kong.
Sentiment in China was helped by the World Bank's decision last week to raise its forecast of the country's 2009 economic growth from 6.5 percent to 7.2 percent. Chinese stocks have been lifted by recent data showing investment, retail sales and other indicators improving despite a plunge in exports.
But European markets opened lower, with Britain's FTSE 100 down 38.95 points, or 0.9 percent, at 4,306.98 and Germany's DAX down 53.94, or 1.1 percent, at 4,785.74. France's CAC 40 slid 1 percent to 3,189.11.
Elsewhere in Asia, South Korea's Kospi climbed 1.2 percent to 1,399.71 and Australia's benchmark added 0.5 percent to 3,918.2.
India's Sensex was down 0.3 percent at 14,471.26 in afternoon trading.
Wall Street finished mixed Friday, leaving the three major indexes with their first weekly loss since early May. The Dow Jones industrial average fell 15.87, or 0.2 percent, to 8,539.73, while the broader Standard & Poor's 500 index rose 0.3 percent to 921.23. The tech-heavy Nasdaq gained 1.1 percent to 1,827.47.
For the week, the Dow lost 3 percent, while the S&P 500 sank 2.6 percent.
Analysts are divided over whether the U.S. market's pullback has more to go, or if it can now move higher. Many predict choppy trading well through the summer, when there is typically less volume, and as the market heads into earnings season in July.
U.S. stock index futures fell, suggesting Wall Street would open lower. Dow futures were down 35 points, or 0.4 percent, to 8,441. S&P 500 futures were down 4.4 points, or 0.5 percent, at 911.30.
Oil slipped in Asia, with benchmark crude for July delivery dropping 40 cents to $69.15 a barrel. On Friday, it fell $1.82 to $69.55.
In currencies, the dollar fell to 96.03 yen from 96.26 yen late Friday in New York. The euro declined to $1.3870 from $1.3936.
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Oil falls towards $69 as bearish U.S. gasoline market weighs
Oil fell toward $69 a barrel on Monday, extending the previous session's drop of more than 2 percent, as bearish sentiment over gasoline markets in the United States continued to dominate investors' concerns.
Oil fell 2.5 percent on Friday, dragged lower by a sell-off in the gasoline market as dealers bet there would ample fuel supply in the United States to meet demand from summer vacationers.
U.S. crude for July delivery fell 40 cents to $69.15 by 0741 GMT (3:41 a.m. EDT). The contract fell $1.82 to settle at $69.55 a barrel on Friday, registering a weekly loss of more than 3 percent.
London Brent crude fell 13 cents to $69.06.
"In May, the market was pricing in that there would be a gasoline shortage but the latest data is obviously showing that it is not happening," said Ben Westmore, a commodities analyst at the National Australia Bank.
"There are also high stockpiles of crude oil, so the general market sentiment is that the balance of demand and supply in the market hasn't improved too much."
U.S. gasoline supplies rose unexpectedly last week as refiners boosted output to prepare for an expected seasonal uptick in demand, according to government data issued Wednesday.
Still, analysts said ongoing attacks of oil facilities in Nigeria by militant groups may help lift prices in the short term.
Nigeria's main militant group said on Sunday it had attacked three oil installations belonging to Royal Dutch Shell in the Niger Delta, widening a month-old offensive against Africa's biggest energy industry.
Rebels in Nigeria, the world's seventh-largest oil exporter, have been carrying out attacks on the oil industry for years in what they claim is a struggle aimed at spreading the region's energy wealth to the poor local communities.
Another bright spark in the demand picture came from China, where data showed the country's implied oil demand rose 6 percent in May over a year ago, its fastest growth since August 2008, as oil firms produced at record rates on a recovering economy and buyers stocked up ahead of an official fuel price hike.
In the Middle East, Iranian opposition leader Mirhossein Mousavi urged supporters to continue protests over the re-election of hardline President Mahmoud Ahmadinejad, in a direct challenge to the Islamic Republic's leadership.
But some analysts say the political turmoil in Iran so far is a non-event for the oil markets, due to high levels of crude spare capacity and inventories.
"In a hypothetical worst-case scenario, even if there is violent regime change in Iran, we would not at all jump to the conclusion that crude production and exports would be shut down," Michael Wittner, global head of oil research of Societe Generale, said in a research note.
"Any new government would know that the Iranian economy is highly dependent on revenues from crude exports. In our view, they would almost certainly aim to keep those revenues coming in."
Crude oil speculators on the New York Mercantile Exchange slashed their net long positions nearly in half in the week to June 16, data from the Commodity Futures Trading Commission showed on Friday.
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Consumers could get up to $4,500 toward new car
Car shoppers could take advantage of government incentives worth up to $4,500 this summer to send their old gas guzzler to the scrap heap in favor of a more fuel-efficient new vehicle.
President Barack Obama is expected to sign into law the "cash for clunkers" program, which was approved by the Senate on Thursday. For owners of low-mileage models such as the 1994 Ford Bronco, 1998 Nissan Pathfinder or the 1995 Chevrolet Blazer, the plan could give them a reason to visit their local car dealer during an economic downturn.
"I've been sitting on the fence for about a year," said Jim Seegraves, 44, of East Lansing, Mich., who has been looking to replace his 2000 GMC Sierra pickup truck. "This legislation will help me get over the hump and get the car that I want."
The bill provides $1 billion for the auto sales program from July through November and the Congressional Budget Office expects that with a total of $4 billion, about 1 million new vehicles could be purchased. The government is expected to implement the program by early August.
Automakers and their unions have lobbied heavily for the incentives to help the auto industry boost sales and stabilize General Motors Corp. and Chrysler Group LLC, which have received billions of dollars for government-led bankruptcies. In May, U.S. auto sales were 34 percent lower than a year ago and the industry expects to sell less than 10 million vehicles in the U.S. in 2009, compared to more than 16 million in 2007.
Here's how the plan works: Car owners could get a voucher worth $3,500 if they traded in a vehicle getting 18 miles per gallon or less for one getting at least 22 mpg. The voucher would grow to $4,500 if the new car's mileage was 10 mpg higher than the old vehicle. The mpg figures are listed on the car's window sticker.
Owners of sport utility vehicles, pickup trucks or minivans getting 18 mpg or less could receive a voucher for $3,500 if their new truck or SUV got at least 2 mpg higher than their old vehicle. The voucher would increase to $4,500 if the mileage of the new truck or SUV was at least 5 mpg higher than the older vehicle.
The program was aimed at replacing older vehicles — built in model year 1984 or later — and would not make financial sense for someone owning a vehicle with a trade-in value greater than $3,500 or $4,500.
A 1998 Jeep Cherokee 4-wheel-drive with about 150,000 miles, for example, might only get $1,000 to $1,500 as a trade-in vehicle, according to estimates by Kelley Blue Book. Since the 1998 Cherokee gets about 17 mpg, an owner could parlay it into a new Ford Escape Hybrid — 2009 versions get 28-to-32 mpg — and maximize their trade-in to $4,500.
Dealers would apply the vouchers to the purchase or lease of a qualifying vehicle and ensure that the older vehicles are crushed or shredded. The new vehicle must have a manufacturer's suggested retail price of less than $45,000.
The program is not without critics.
Jeremy Anwyl, chief executive of Edmunds.com, a Web site for car shoppers, said it would struggle to provide 250,000 new vehicle sales. Most of the qualifying vehicles would be at least 10 years old and many owners would be less inclined to take on a new car payment or unable to afford a new vehicle.
"You've got to consider the profile of consumers who drive these vehicles," Anwyl said.
Budget-conscious Republicans in the Senate opposed it, along with environmental-leaning lawmakers who said it failed to encourage the purchase of high-mileage cars and didn't apply to used vehicles. Someone could receive a voucher for buying a new Hummer, they noted, pointing to analysts who said it would primarily benefit owners of older-model pickup trucks, SUVs and minivans.
Dealers say it will be a valuable tool to lure more shoppers to their showrooms. Many intend to advertise heavily and combine the government plan with other incentives, providing some help at a time when the industry is struggling to sell cars.
"Anything to jump-start the economy," said Jason Robinson, a car salesman with AutoServ of Tilton, N.H. "There's not much sense of urgency out in the market right now."
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Oil prices jump on Iran unrest
Oil prices rose back above 71 dollars on Tuesday owing to a weaker dollar and political unrest in key crude producers Iran and Nigeria, analysts said.
New York's main futures contract, light sweet crude for delivery in July, gained 1.20 dollars to 71.82 dollars a barrel.
Brent North Sea crude for August climbed 1.32 dollars to 71.56 dollars. The July contract expired on Monday.
Prices advanced as the European single currency jumped against the dollar on news that investor confidence in the German economy rose for an eighth month running.
A struggling dollar tends to boost demand for dollar-priced crude as the commodity becomes cheaper for buyers holding stronger currencies.
"It is still important to keep watching out for the dollar," said analyst Andrey Kryuchenkov at VTB Capital in London.
"For now ... (the oil market) could remain quiet until Wednesday afternoon when US energy data is released," he added.
The weekly report on US energy reserves is a key factor because the United States is the biggest oil consuming nation, followed by China.
Meanwhile unrest in Iran and Nigeria remained key focus points for traders, according to Commerzbank commodities analyst Eugen Weinberg.
"In addition to China's oil appetite, coupled with ... a weaker US dollar, the geopolitical risks are the underlying drivers," Weinberg said.
"Political unrest following the presidential elections in Iran and bombing attacks on oil plants in Nigeria represent an explosive mix for the oil market."
Iran's election watchdog said on Tuesday it was ready for a recount in the hotly disputed presidential vote as the nation braced for further protests after seven people were killed in street battles.
The Islamic republic is the second biggest crude oil producer in the Organization of Petroleum Exporting Countries (OPEC) after kingpin Saudi Arabia.
The stage was set for possible further confrontations as President Mahmoud Ahmadinejad's camp and supporters of defeated rival Mir Hossein Mousavi both called for rallies in the biggest outpouring of public anger since the 1979 Islamic revolution.
Meanwhile, tensions remained high in Nigeria after militants in the Niger Delta had on Monday claimed attacks against facilities run by US oil giant Chevron.
The Movement for the Emancipation of the Niger Delta (MEND) also threatened to extend its operations beyond Delta State to others in the oil-rich but volatile southern region.
Oil prices had fallen sharply on Monday as the dollar strengthened and traders took profits from recent gains.
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U.S. housing starts jump in May, inflation muted
New U.S. housing starts and permits surged in May from record lows, while wholesale prices were muted despite higher gasoline prices, indicating the economy was moving closer to the end of a deep recession.
The Commerce Department said on Tuesday housing starts jumped 17.2 percent, the biggest rise in three months, to an annual rate of 532,000 units. This was as ground-breaking activity for multifamily homes surged 61.7 percent after diving 49.4 percent in April.
Even more encouraging for the housing sector, which is at the center of the longest U.S. output decline since the Great Depression, new single family starts rose 7.5 percent, the largest gain since January 2006.
Ground breaking activity for single family homes has now risen for three straight months, an indication that housing investment will be less of a drag on the economy in the quarters ahead, if the trend continues.
A separate report from the Labor Department showed prices paid at the farm and factory gate increased by 0.2 percent versus a 0.3 percent April rise.
Prices compared with a year ago notched their steepest falls since 1949, which should help to ease market fears that inflation could soon be stalking the economy after the recent spike in longer-dated government bond yields.
"There is hope that we are moving toward the end of the recession, but we will caution that once we get to that point any recovery is going to be very muted. It (economy) will not come from the recession with all guns blazing," said Paul Dales, an economist at Capital Economics in Toronto.
U.S. stocks rose on the housing and inflation data, but gains were capped as weekly retail sales data showed consumers were still reluctant to spend on non-essential items, despite an improvement in their overall outlook for the economy.
This was evident as Best Buy Co Inc, the largest U.S. consumer electronics retailer, posted lower first-quarter earnings and below forecast sales on Tuesday.
HOUSING BOTTOMING
Housing market data, including new and existing home sales have shown signs of bottoming in the slide, but the surge in mortgages rates following a spike in Treasury debt yields could hamper the sector's recovery.
Benchmark government bond yields jumped to an eight-month high last week on concerns the government's effort to pull the economy out of a 18-month old recession would push the country budget deficit to unsustainable levels and undermine the value of its assets and ignite inflation.
A survey on Monday showed U.S. home builder sentiment ebbed in June as builders and buyers fretted over rising mortgage costs. While new housing starts rose on a monthly basis in May, they dived 45.2 percent compared to the same period a year ago, the Commerce Department said.
"If we see growth next month (in new housing starts), we might actually have a positive contribution from housing starts coming up in 2009. That would be very beneficial to (overall economic) growth," said Rebecca Braeu, economist at John Hancock Financial, in Boston.
New building permits, which give a sense of future home construction, rose 4.0 percent, the biggest advance since June last year, to 518,000 units in May.
The slower pace of increase in May producer prices was a relief for investors who of late have been preoccupied with inflation in the wake of the surge in government bond yields.
Compared with the same period last year, producer prices fell 5.0 percent for the largest decline since August 1949, the Labor Department said.
"Our take is that once you add in the fall in labor costs as companies cut their head count and also wages, there probably won't be an inflation threat from the rebound in oil prices," said Capital Economics' Dales.
Core producer prices, which exclude food and energy costs, dropped 0.1 percent in May compared with a forecast for a 0.1 percent rise, and after a 0.1 percent increase in April.
This was the largest decline in monthly core producer prices since October 2006, when they fell 0.5 percent. In contrast with May 2008, core producer prices rose 3.0 percent. Gasoline prices rose 13.9 percent.
Another report from the Federal Reserve also suggested any worries about inflation as a result of aggressive programs by the U.S. central bank to boost the economy may be overblown.
Industrial production fell 1.1 percent in May, dragged down by declining vehicle output following plant shutdowns by mostly Chrysler, currently in bankruptcy to help it reorganize. Production fell 0.7 percent in April.
Capacity utilization, a measure of slack in the economy dipped to a record low 68.3 percent.
"The excess slack evident in the economy is a key reason why we expect deflation pressures to continue to build," said Steven Ricchiuto, chief economist at Mizuho Securities in New York.
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Housing starts rebound; inflation stays in check
Fresh signs that the economy is stabilizing — though at very low levels — emerged Tuesday in reports that home construction rose more than expected last month and wholesale prices remain in check.
The building of new homes and apartments jumped 17.2 percent to a seasonally adjusted annual rate of 532,000 units from April's record low of 454,000 units, the Commerce Department said. Building permits, an indicator of future activity, rose 4 percent to an annual rate of 518,000 units, also better than expected.
But the gains in construction were driven by a surge in the highly volatile category of multifamily buildings, which soared 61.7 percent in May after plunging 49.4 percent in April. Single-family home construction rose at a much lower rate, 7.5 percent.
Meanwhile, the Producer Price Index, which measures wholesale prices, rose by a seasonally adjusted 0.2 percent from April, the Labor Department said. That was below analysts' expectations of a 0.6 percent rise.
Despite the increase, wholesale prices fell 5 percent over the past 12 months. That was the largest annual drop in nearly 60 years. Excluding volatile food and energy prices, the core PPI dropped 0.1 percent in May, also below analysts' forecasts of a 0.1 percent rise.
Falling prices can raise fears about deflation, a destabilizing period of extended declines. But most analysts say efforts by the Federal Reserve to stimulate the economy will prevent deflation.
The latest governments reports, including a seventh straight drop in industrial production, follow a dip in homebuilder confidence reported Monday. Taken together, along with a recent rise in mortgage rates, they depict an economy recovering very slowly from the depths of the longest recession since the Great Depression.
"The bottom line is that housing activity appears to have found a floor, albeit at a low level," Paul Dales, U.S. economist at Capital Economics in Toronto, wrote in a research note.
Joshua Shapiro, chief U.S. Economist at MFR Inc., said overall median home prices will keep falling, but the bottom end of the housing market "will probably continue to show signs of life as long as first-time buyers can get the financing they need."
Still, any sustained rebound in home construction isn't expected until next spring. That's partly due to the glut of unsold homes and a record wave of mortgage foreclosures dumping more properties on the market.
For April, the number of unsold existing homes on the market rose almost 9 percent to nearly 4 million. And the supply of unsold new homes dipped to 297,000. That amounts to a 10-month supply of new and existing unsold homes at the April sales pace, according to data from the government and the National Association of Realtors.
President Barack Obama on Wednesday is scheduled to unveil the administration's plan to overhaul financial regulation, in part to prevent the lending abuses that triggered the financial crisis.
A 2.9 percent rise in energy prices, including a 13.9 percent jump in the cost of gas, drove the May increase in wholesale prices. Food prices, meanwhile, fell 1.6 percent, reversing a similar rise in April.
Still, labor is producers' largest expense, and "wage costs will soon start falling sharply," Dales wrote. "Accordingly, the surge in the oil price in unlikely to unleash inflation."
The Federal Reserve on Tuesday said production at the nation's factories, mines and utilities fell 1.1 percent in May, the deepest cut since March. The recession has crimped demand for manufactured goods and helped keep inflation in check. Plant shutdowns at Chrysler LLC and General Motors Corp. also weighed on industrial production last month and probably will into the summer, economists say.
The Fed has cut a key interest rate to a record low near zero and taken other extraordinary steps to flood the banking system with cash. Many economists don't expect the Fed to raise interest rates until the unemployment rate stops rising. It hit a 25-year high of 9.4 percent in May, and many think the jobless rate will top 10 percent by year's end.
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Mixed data on production, housing weighs on stocks
Lackluster data on the economy is keeping the market's spring rally on hold.
Stocks turned lower at midday Tuesday after rising slightly in the early going on better-than-expected data on home construction, building permits and inflation. A later report showed the seventh straight drop in industrial production, sapping the market's effort to move higher.
The decline follows a much larger drop in stocks on Monday, indicating that investors are still nervous that a three-month surge in the market may have been overdone. The Standard & Poor's 500 index is still up 35 percent from the 12-year lows it hit in March.
Analysts say investors need more clear evidence of growth to restart the market's rally, which has stalled in recent days as investors grow worried that a weaker dollar, higher commodity prices and climbing interest rates will hamper the economy's recovery.
"You've got to continue to have a constant flow of good news to push things higher," said Randy Frederick, director of trading at Charles Schwab. "And we just don't have that."
Analysts say a pause in the rally is necessary for stocks to move higher. Market watchers tend to be alarmed when the market moves up in an unbroken line, saying it suggests indiscriminate buying that could easily dissipate once the market's mood changes.
"The market is very overbought right now and what it needs to do is consolidate and it needs to have a series of days like this," said Jon Merriman, chief executive of Merriman Curhan Ford.
In early afternoon trading, the Dow Jones industrial average fell 79.50, or 0.9 percent, to 8,532.63, after earlier rising as much as 31 points. The Standard & Poor's 500 index slipped 9.55, or 1.0 percent, to 914.17, while the Nasdaq composite index fell 13.22, or 0.7 percent, to 1,803.16.
On Monday, the Dow tumbled 187 points, or 2.1 percent, putting it back into the red for the year. Last week, the blue chips were up on the year for the first time since January. Monday's decline was touched off by a stronger dollar, which sent commodity prices tumbling and put pressure on energy and material stocks.
But the dollar resumed its three-month decline against other major currencies Tuesday, pushing prices for commodities higher.
The dollar's slide came after the Kremlin's top economic adviser said Russia may put part of its currency reserves in bonds issued by Brazil, China and India. Arkady Dvorkovich said Russia could make the move if the other three nations reciprocate. Brazil, Russia, India and China are the members of the BRIC group of leading emerging economies.
A weaker dollar, and its subsequent impact on commodity prices and Treasury yields, has become one of investors' chief concerns in recent weeks.
While higher commodity prices can indicate improving demand for industrial goods, analysts warn that a jump in prices combined with a weaker dollar could make it more difficult for the economy to emerge from recession.
"People are getting nervous about how they might be a drag on the consumer," said Blaze Tankersley, chief market strategist at Bay Crest Partners.
The dollar lost ground against the British pound and the euro Tuesday, while the price of light, sweet crude pared early gains and rose 5 cents to $70.67 a barrel on the New York Mercantile Exchange.
Stocks rose in the early going after the Commerce Department said home construction jumped in May by the largest amount in three months, after having fallen in April to a record low. And applications for building permits, which are seen as a good indicator of future activity, rose by 4 percent in May.
Meanwhile, the Labor Department said wholesale prices rose less than expected in May as a large jump in the price of gasoline offset a drop in food costs. And the Federal Reserve said industrial production fell a larger-than-expected 1.1 percent in May as the recession hurt demand for manufactured goods including cars, machinery and household appliances.
"All in all I'm encouraged," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "But this is not a market that should be off to the races."
Treasury yields retreated further Tuesday — a positive sign for homeowners. Yields on long-term Treasurys have been climbing as demand for bonds weakens amid a huge surplus of government debt. This is especially worrisome to investors because Treasury yields are linked to mortgages and other consumer loans. The fear is that higher borrowing costs could seriously undermine a recovery in the housing market and further strap the American consumer.
On Tuesday, the yield on the benchmark 10-year Treasury note slipped to 3.68 percent from 3.72 percent late Monday.
In corporate news, Best Buy Co.'s first-quarter earnings fell 15 percent as consumers cut back on items like appliances and digital cameras. The earnings topped Wall Street expectations, but sales at stores open at least a year fell 6 percent. The stock tumbled $2.67, or 6.9 percent, to $35.99.
About two stocks fell for every one that rose on the New York Stock Exchange, where volume came to 558.3 million shares, down from 547.9 million shares the same time a day earlier.
The Russell 2000 index of smaller companies fell 6.97, or 1.4 percent, to 504.86.
Overseas, Japan's Nikkei stock average slid 2.9 percent. Britain's FTSE 100 rose 0.1 percent, Germany's DAX index rose 0.02 percent, and France's CAC-40 slipped 0.2 percent.
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Foreign demand for US financial assets falls
Foreign demand for long-term U.S. financial assets fell in April as both China and Japan trimmed their holdings of Treasury securities.
The Treasury Department said Monday that net purchases of stocks, notes and bonds obtained by foreigners fell to $11.2 billion in April, from $55.4 billion in March.
China, the largest holder of U.S. Treasury securities, trimmed their holdings to $763.5 billion in April, from $767.9 billion in March. Japan, the second largest holder of Treasury securities, reduced their holdings to $685.9 billion, from $686.7 billion a month earlier.
Treasury Secretary Timothy Geithner traveled to Beijing earlier this month to assure the Chinese government that the Obama administration is determined to get control of an exploding U.S. budget deficit, which is projected to hit a record $1.84 trillion this year.
China's holdings of Treasury securities represent about 10 percent of America's publicly held debt.
The administration has said while its aggressive moves to fight the recession and a severe financial crisis will push up the budget deficit temporarily, it intends to reduce the deficit as soon as the economic situation permits.
With the government's borrowing needs soaring, there have been some concerns that foreign interest in holding U.S. debt might falter, causing interest rates to rise.
The administration contends that recent increases in the interest rates for U.S. Treasury securities were not a sign of investor unease but a reflection of improving economic conditions.
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Stocks fall as dollar pushes oil, commodities down
Investors are worrying that a three-month surge in stocks might be overdone.
Wall Street slid Monday following drops in Europe and Asia as a stronger dollar pushed commodities and materials prices lower. An index of manufacturing in New York indicated that demand weakened in June from May.
Major stock market indexes fell more than 1 percent, including the Dow Jones industrial average, which lost about 140 points.
The market's drop comes as the Standard & Poor's index sits with a gain of 39.9 percent since skidding to a 12-year low on March 9. That type of advance might ordinarily take years to assemble. The market's rise slowed last week as traders looked without much success for fresh signs the economy was strengthening.
The dollar rose against other most other major currencies following comments from Russia's finance minister. The stronger dollar drove oil prices down. A run-up in oil has helped lift energy and materials stocks in recent weeks.
In midmorning trading, the Dow fell 139.74, or 1.6 percent, to 8,659.52. The broader Standard & Poor's 500 index fell 15.54, or 1.6 percent, to 930.67, and the Nasdaq composite index fell 33.89, or 1.8 percent, to 1,824.91.
The Russell 2000 index of smaller companies fell 13.69, or 2.6 percent, to 513.14.
Overseas, Japan's Nikkei stock average fell 1 percent. In afternoon trading, Britain's FTSE 100 fell 1.8 percent, Germany's DAX index fell 2.1 percent, and France's CAC-40 lost 1.9 percent.
The main index from New York Federal Reserve's Empire State Manufacturing Survey fell 5 points in June to a negative 9.4. New orders remained negative and near May's level. But indexes looking further ahead continued to rise, which indicates conditions should improve during the next six months. Capital spending and technology spending measures turned positive for the first time since October.
Jeff Layman, chief investment officer at BKD Wealth Advisors, said investors are asking where is the market going after seeing its advance stall.
"What we've had in the last week and a half or so is really just sort of a consolidation. Things have stabilized a bit," he said. Layman said the gain in the dollar makes it unsurprising that stocks would fall.
The dollar rose after Russia's finance minister, Alexei Kudrin, said during a weekend meeting of G-8 finance ministers in Italy that the greenback's status as the world's main reserve currency wasn't likely to change soon. He has been one of those in the Russian administration raising concern about the dollar in recent months.
The dollar was higher against most other major currencies, while gold prices fell.
Light, sweet crude fell $1.33 to $70.71 per barrel on the New York Mercantile Exchange.
Bond prices mostly rose, driving yields lower. The yield on the benchmark 10-year Treasury note fell to 3.72 percent from 3.80 percent late Friday.
Investors are also getting more specifics on Washington's plans for the biggest overhaul of the financial system since the Great Depression. Among the proposals, the Federal Reserve would have authority over the largest financial institutions whose failure could jeopardize the entire financial system.
Treasury Secretary Timothy Geithner and President Barack Obama's chief economic adviser, Lawrence Summers, outlined the White House proposal in an article Monday in The Washington Post.
The proposed changes in oversight come as investors are still trying to determine when and how the economy will emerge from the recession that began in December 2007. The G-8 meeting offered investors little to go on. Finance ministers said they saw signs economies were stabilizing but said it was too soon to remove the supports of fiscal and monetary stimulus.
Commodities stocks fell as the dollar rebounded. Aluminum maker Alcoa Inc. and Freeport-McMoRan Copper & Gold Inc. slid. Alcoa fell 59 cents, or 4.9 percent, to $10.77, while Freeport-McMoRan fell $1.89, or 3.2 percent, to $56.62.
In corporate news, Rochdale Securities analyst Richard Bove raised his price target on Bank of America Corp., citing growing investor confidence in the bank and a change in how they view bank stocks. He raised his target to $19 from $14.
Bove wrote in a weekend research note, however, that the bank is experiencing "horrific" loan losses because of the recession. Bank of America fell 30 cents, or 2.2 percent, to $13.42.
Diversified manufacturer United Technologies Corp. affirmed its forecast for 2009 revenue and earnings. The parent of Otis elevators and Sikorsky Aircraft fell $1.13, or 2 percent, to $54.71.
Investors are looking for any signs about the direction of the economy. Stocks have been rising in recent weeks, though not as quickly as in March. The Dow and the S&P 500 index are up 12 of the past 14 weeks, and the last four straight weeks. But traders are having a harder time wringing advances from the stock market as questions remain about the timing of recoveries in employment and the housing market.
The gains in oil and other commodities are raising hopes for those industries but also fanning concerns that inflation will choke off the economy's rebound.
At the same time, trading volume has been light, which indicates fewer traders are standing behind the market's gains. Volume does tend to slow in the summer as traders take vacations but thin volume could indicate there is less conviction behind the market's gains.
About eight stocks fell for every one that rose on the New York Stock Exchange, where volume came to 160.7 million shares.
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European stocks fall after grim industrial data
European stock markets fell modestly Friday ahead of an expected retreat on Wall Street and after further dismal industrial production data fueled renewed concerns about the length and depth of the recession.
Germany's DAX fell 23.89 points, or 0.5 percent, to 5,083.37 and the CAC-40 in France was 2.65 points, or 0.1 percent, lower at 3,332.29.
The European Union's statistics office Eurostat revealed that industrial production in the 16 countries that use the euro slumped by 1.9 percent in April from the previous month. That was way more than the 1 percent decline expected in the markets and stoked worries that the recession in the euro zone may not yet have bottomed out, as some had hoped.
"April's euro-zone industrial production figures provide few signs that the negative effects from destocking and the collapse in global trade are waning," said Ben May, European economist at Capital Economics.
Industrial production plays a particularly important role in the European economy and its recovery, whenever it comes, will provide a clear indication that the worst of the recession is over.
Sharply lower industrial output was blamed for the massive 2.5 percent quarterly fall in the euro zone's first quarter gross domestic product. The recession in Germany, the euro zone's biggest economy, was even greater as demand for its high-value exports, such as cars and heavy machinery, slumped amid the collapse in global trade.
Meanwhile, the FTSE 100 index of leading British shares was down 12.57 points, or 0.3 percent, at 4,449.30 with Barclays PLC down around 3 percent after it confirmed the sale of its global investment unit to U.S. fund manager BlackRock Inc. for $13.5 billion.
"This news comes as no surprise to the markets and the weakness today for the Barclays share price seems a case of 'buy the rumour, sell the news' — the shares had rallied by almost 20 pence over the past week or so," said David Jones, chief market strategist at IG Index.
The relatively subdued end to the week echoes developments in the markets over the last fortnight. Following three months of gains, the markets have recently traded in narrow ranges.
Stock markets have rallied since mid-March as investors priced in the possibility of a swifter than anticipated global economic rebound. As equities usually start rising 6 to 9 months before actual recovery emerges in the official economic data, this suggests investors believe the massive sell-off in markets during the most acute phase of the financial crisis was overdone. Some of the world's major equity indexes are now in positive territory for 2009.
Nevertheless, many investors are beginning to worry that higher oil prices and bond yields could limit the extent of an economic recovery, especially if they hit U.S. consumption. Without the support of the U.S. consumer, which accounts for around 70 percent of the U.S. economy and 20 percent of the global economy, any recovery will soon fizzle out.
Wall Street was expected to open little changed after modest gains Thursday amid a dearth of economic news. Dow futures were down 8 points, or 0.1 percent, at 8,691 while the broader Standard & Poor's 500 futures fell 1.2 point, or 0.1 percent, to 937.
Earlier, Asian markets rose after some more encouraging Chinese economic data.
The government said retail sales and industrial output grew strongly in May amid heavy stimulus spending. That followed figures showing domestic investment in factories, real estate and other fixed assets soared 32.9 percent in the first five months of the year, even as exports and imports tumbled in May.
Beijing is trying to shield the Chinese economy from the plunge in demand from Western consumers by injecting money into the economy through heavy spending on construction projects — and so far that seems to be working.
Japan's Nikkei average closed up 154.49 points, or 1.6 percent, to 10,135.82, the highest since Oct. 7. For the week, it climbed 3.8 percent. Hong Kong's Hang Seng index added 98.65 points, or 0.5 percent, to 18,889.68. Australia's key index gained 0.4 percent to 4,062.2, while South Korea's Kospi climbed 0.7 percent to 1,428.59.
Mainland China's Shanghai's Composite index — which has surged more than 40 percent this year — fell 1.9 percent to 2,743.76.
Oil prices fell back after hitting an eight-month high Thursday. Benchmark crude for July delivery slipped $1.22 to $71.46 a barrel in electronic trading on the New York Mercantile Exchange. A day earlier, it climbed to $72.68.
In currencies, the dollar rose to 98.07 yen from 97.51 yen late Thursday, while the euro fell to $1.4057 from $1.4125.
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Oil holds above $72 as economic recovery eyed
Oil prices held above $72 a barrel Friday in Asia, just below an 8-month high, as investors eyed signs a global recession may be easing.
Benchmark crude for July delivery fell 62 cents to $72.06 a barrel by late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. On Thursday, it rose $1.35 to settle at $72.68, the highest since October.
An improving crude demand outlook helped bolster prices. On Thursday, the International Energy Agency in Paris said in its monthly survey that global oil demand would fall by 2.9 percent this year, better than its May forecast of a 3 percent annual fall.
It was the organization's first upward estimate of demand in 10 months.
"Oil prices are discounting positive economic growth by around the end of the third quarter," said Christoffer Molke-Leth, head of sales trading for Saxo Capital Markets in Singapore. "If that doesn't happen, prices at this level are overbought."
Prices have more than doubled since March as investor optimism grew that the worst of a severe U.S. recession was over.
The Labor Department on Thursday reported that the number of newly laid-off Americans filing for jobless benefits fell last week by 24,000 to 601,000 — better than economists had forecast.
Meanwhile, the Commerce Department said retail sales rose 0.5 percent in May, interrupting two months of decreases and marking the largest gain since January.
"I think we're going for a test of $75," Molke-Leth said. "Every time you see a little pull back you have funds ready to step in."
Investors have also bought crude as a hedge against a weakening U.S. dollar and the possibility of inflation down the road. The euro weakened to $1.4054 on Friday from $1.4125 a day earlier.
"Fear of inflation is supporting the whole commodity complex, particularly oil," Molke-Leth said. "The record fiscal and monetary stimulus will have inflationary implications."
In other Nymex trading, gasoline for July delivery fell 1.64 cents to $2.05 a gallon and heating oil dropped 1.05 cents to $1.84. Natural gas for July delivery slid 3.0 cents to $3.90 per 1,000 cubic feet.
In London, Brent prices fell 46 cents to $71.33 a barrel on the ICE Futures exchange.
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Confusion expected as analog TV broadcasts end
TV stations across the U.S. started cutting their analog signals Friday morning, ending a six-decade era for the technology and likely stranding more than 1 million unprepared homes without TV service.
The Federal Communications Commission put 4,000 operators on standby for calls from confused viewers, and set up demonstration centers in several cities. Volunteer groups and local government agencies were helping elderly viewers set up digital converter boxes that keep older TVs functioning.
"When you're alone like me, that's my partner," Patricia Bruchalski, 82, said about her TV.
Bruchalski, a pianist and former opera singer who lives in Brooklyn Park, Md., got assistance Thursday from Anne Arundel County's Department of Aging and Disabilities and a community organization called Partners in Care. After her converter box was installed, Bruchalski marveled that digital broadcasts seemed clearer and gave her more channels — about 15 instead of the three she was used to.
"You're going to be up all night watching TV now," volunteer installer Rick Ebling told her.
A survey sponsored by broadcasters showed that Americans are well aware of the analog shutdown, thanks to a yearlong barrage of TV ads. But not everyone was sure exactly what it means, or what needs to be done to tune in to digital TV.
Any sets hooked up to cable or satellite feeds are unaffected. Newer, digital TVs that get broadcasts through antennas — and older sets hooked up to converter boxes — should be fine, but they will need to be set to "re-scan" the airwaves, to find stations that move to new frequencies Friday.
Some people might also need new antennas, because digital signals travel differently than analog ones. While an analog station that came in imperfectly might have had static but remained viewable, digital generally comes in all or nothing. Indeed, one of Bruchalski's newly available stations looked pixelated, and Ebling said she might have to get a different antenna.
The shutdown of analog channels opens part of the airwaves for modern applications like wireless broadband and TV services for cell phones. It was originally scheduled for Feb. 17, but the government's fund for $40 converter box coupons ran out of money in early January, prompting the incoming Obama administration to push for a delay. The converter box program got additional funding in the national stimulus package.
Research firm SmithGeiger LLC said Thursday that about 2.2 million households were still unprepared as of last week. Sponsored by the National Association of Broadcasters, it surveyed 948 households that relied on antennas and found that 1 in 8 had not connected a digital TV or digital converter box.
Nielsen Co., which measures TV ratings with the help of a wide panel of households, put the number of unready homes at 2.8 million, or 2.5 percent of the total television market, as of Sunday. In February, the number was 5.8 million.
Nearly half of the nation's 1,760 full-power TV stations have already cut their analog signals, though they are mostly in less populated areas. Those ending the signals Friday will do so throughout the day, with many waiting until the evening.
Even after Friday, low-power analog stations and rural relay stations known as "translators" will still be available in some areas. And about 100 full-power stations will keep an analog "night light" on for a few weeks, informing viewers of the need to switch to digital reception.
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European stocks up ahead of key US data
European markets rose cautiously Thursday as investors awaited U.S. economic data due later in the day for further signs that the recession plaguing the world's largest economy is stabilizing.
In European morning trading, Britain's FTSE 100 was up 0.3 percent at 4,450.37, Germany's DAX rose 0.5 percent to 5,077.67, and France's CAC 40 added 0.3 percent at 3,324.72.
Wall Street was set to open moderately higher. Dow Jones industrial average futures rose 0.3 percent to 8,779 and Standard & Poor's 500 futures climbed 0.3 percent to 943.60.
Asian stock markets were mixed, with Japan's benchmark Nikkei index pulling back from its first move above 10,000 in eight months amid conflicting signs about the strength of an economic recovery.
In Europe, volumes were low ahead of the publication of U.S. weekly jobless claims and retail sales, both due at 1230 GMT.
"It's going to be a matter of hanging on till later in the afternoon," said James Hughes, market analyst at CMC Markets. "There's a real lack of corporate data which leaves the market pretty directionless and open to big swings."
Oil and gas stocks were buoyed by crude prices rising to $72 a barrel amid investor optimism about a global economic recovery. Benchmark crude for July delivery was up 77 cents at $72.10 in European trading on the New York Mercantile Exchange.
In Asia, Tokyo's Nikkei 225 index lost 0.1 percent to 9,981.33. It wavered in a narrow range after a surge early in the day took it above the psychologically important 10,000 mark for the first time since Oct. 8.
But signs of upward pressure on U.S. interest rates, which could quash a nascent economic recovery, and some weak economic data from the region offset gains in Tokyo-listed steel shares.
The Dow Jones industrial average fell more than 24 points to 8,739.02 Wednesday after the government sold $19 billion in 10-year Treasury notes in a relatively weak auction. The S&P 500 index slipped 3.28 points, or 0.4 percent, to 939.15.
Strong investment data from China initially overcame investors' qualms over an imminent resumption of initial public offerings on the mainland that some fear will flood the market with new shares.
But dismal export numbers from China, and the IPO news tempted investors to cash in on recent gains after the benchmark Shanghai Composite Index hit a 10-month high on Wednesday.
The Shanghai index slipped 0.7 percent, or 18.93 points, to 2,797.32 while the Shenzhen Composite Index fell 1 percent to 922.62.
Hong Kong's benchmark bounced in volatile trading, ending nearly flat at 18,791.03, up 5.37 points.
"The IPO news is an excuse for a retreat, but it's not reason for a real correction," said Castor Pang, an analyst at Sun Hung Kai Financial in Hong Kong.
Overall, investors remained confident in the economy and trust the regulators to keep a tight rein on IPOs, which in the past have threatened to glut the market with new shares, he said.
"Investor sentiment is strong. Liquidity is still very, very large. It cannot be measured," he said.
In other markets, rising resource prices pushed Australia's key index up 0.6 percent, while Singapore's benchmark fell 0.2 percent.
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