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Oil prices fell below $67 a barrel Friday and headed for its first monthly decline since January as traders focused on a huge surplus of crude and natural gas in the United States.
Benchmark crude for September delivery was dropped $1.03 to $65.91 a barrel on the New York Mercantile Exchange. In London, Brent prices fell $1.77 to $68.34 a barrel on the ICE Futures exchange.
Traders have gotten whiplash this week as prices jerked up and down on investor uncertainty about a global economic recovery in the near term.
The Commerce Department added some clarity Friday, reporting that the economy sank at a pace of 1 percent in the second-quarter. Many economists were predicting a bigger slump and took the report as another sign that the country was pulling itself out of the longest recession since World War II.
However, signs of weak energy consumption have dampened enthusiasm in a prolonged rally in oil prices. The government reported this week that crude and natural gas stockpiles continue to expand.
At the pump, retail gas prices ticked higher for the 10th day in a row. The national average for a regular unleaded added less than a penny overnight to $2.517 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Gas is 11.3 cents a gallon cheaper than last month, and it's $1.392 a gallon cheaper than last year.
In other Nymex trading, gasoline for August delivery fell 2.92 cents to $1.9619 a gallon and heating oil lost 3.1 cents to $1.7377. Natural gas for August delivery gave up 11.7 cents to $3.626 per 1,000 cubic feet.
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Russia starts building major Asian gas pipeline
Russia on Friday started construction of a major gas pipeline supplying its Pacific Ocean port city of Vladivostok, which could eventually be used to feed exports of gas to Japan.
The pipeline is due to be completed before Vladivostok hosts the summit of the Asia-Pacific Economic Cooperation (APEC) group in 2012, Gazprom said in a statement announcing the start of construction.
Prime Minister Vladimir Putin attended the inauguration ceremony in Russia's far eastern Khabarovsk region and pushed a button to start welding of a section of pipe, television pictures showed.
"The priority for gas in East Siberia and the Far East is above all to serve the domestic market," Putin said.
However, Russia's state-controlled gas giant Gazprom has said the pipeline could eventually be used to feed exports of gas to East Asian countries, including energy-hungry Japan.
Earlier this year, Gazprom head Alexei Miller said during a visit to Tokyo that gas exports to Japan through Vladivostok would be possible once Russia's own needs were met.
When completed, the Sakhalin-Khabarovsk-Vladivostok pipeline will be 1,800 kilometres (1,100 miles) long and will be able to transport 30 billion cubic metres of gas per year, Gazprom said.
The pipeline will be ready for use in the third quarter of 2011, ahead of the APEC gathering, Gazprom said. Russia is pursuing a number of infrastructure projects in Vladivostok aimed at improving the city in time for the summit.
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Congress wants say on Wall Street pay
Congress wants to give the government a direct role in deciding how much executives on Wall Street are paid, after the nation's biggest banks accepted billions in taxpayer money and still managed to distribute $1 million bonuses to thousands of employees.
The House was expected to pass legislation Friday by Rep. Barney Frank, chairman of the House Financial Services Committee, that would ban "incentive-based" pay that could threaten the economy or viability of the institution.
The bill, which would give regulators nine months to hash out the details, would give the government unprecedented say in how private corporations reward brokers and traders.
Democrats said excessive salaries and bonuses risk harming the broader economy.
"The problem with executive compensation is essentially, from the systemic standpoint, that it gives perverse incentives," said Frank, D-Mass.
Without penalties for bad bets, the system means "heads you win, tails you break even," he said.
Aware of the bill's populist appeal, Democratic leaders left the vote as one of their final acts before adjourning for their monthlong summer recess.
Republicans opposed the bill in committee because they said it would give the government too much control over executive pay. But the top Republican on the Financial Services Committee, Rep. Spencer Bachus of Alabama, said he understands its attractiveness.
"Politically, it was very difficult for my members to stand up and fight this legislation," Bachus said after the committee endorsed the bill in a 40-28 vote along party lines.
The House turns to the legislation one day after New York Attorney General Andrew Cuomo concluded in a report that the nation's biggest banks, including Bank of America Corp., Merrill Lynch & Co., JPMorgan Chase & Co. and Goldman Sachs Group Inc., awarded nearly 4,800 million-dollar-plus bonuses in 2008.
Citigroup, which is now one-third owned by the government as a result of the bailout, gave 738 of its employees bonuses of at least $1 million, even after it lost $18.7 billion during the year, Cuomo's office said.
The New York-based bank received $45 billion in government money and guarantees to protect it against hundreds of billions of dollars in potential losses from risky investments.
Bank of America, which also received $45 billion in government money, paid $3.3 billion in bonuses, with 172 employees receiving at least $1 million and the top four recipients receiving a combined $64 million. Merrill Lynch, which Charlotte, N.C.-based Bank of America acquired during the credit crisis, paid out $3.6 billion, including a combined $121 million to four top employees.
"This egregious behavior proves that Wall Street still doesn't get that times have changed and the old way of paying executives is long gone," said Rep. Edolphus Towns, D-N.Y., chairman of the House Oversight and Government Reform Committee.
President Barack Obama has proposed trying to discourage excessive corporate pay by giving shareholders a nonbinding vote on compensation packages and requiring that compensation committees not have financial relationships with the company and its executives.
Frank embraced the proposal in his legislation, but added the provision banning risky incentives. Firms with less than $1 billion in assets would be exempt.
While the legislation would apply to the broader financial community, firms that have accepted hefty federal bailouts already are under tougher restrictions. Obama has appointed Kenneth Feinberg, a lawyer who oversaw payments to families of victims of the Sept. 11, 2001, terrorist attacks, to monitor compensation at those companies and reject pay plans he deems excessive. Feinberg's authority does not cover compensation before this year.
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GDP report is likely to show recession eased in 2Q
The recession likely eased in the spring, with the U.S. economy no longer in free-fall.
Many analysts predict that when the Commerce Department releases its first estimate of second-quarter activity Friday, it will say the economy shrank at a 1.5 percent pace from April though June. If they are correct, it would mark a vast improvement from the 5.9 percent annualized drop recorded over the prior six months — the weakest showing in 50 years.
"The recession kind of came in like a lion and is going out like a lamb," said economist Ken Mayland of ClearView Economics.
Less drastic spending cuts by businesses, a resumption of spending by the federal government and an improved trade picture factor into expectations for a better performance. Consumers, though, probably pulled back a bit. Rising unemployment, shrunken nest eggs and lower home values have weighed down their spending.
President Barack Obama said Thursday that while he thinks economic activity contracted in the spring, Friday's report also should show that the United States has "stepped away from the precipice."
Business inventories could be the key swing number in Friday's report. If companies slash the stockpiles on their shelves more deeply than expected, the report could show the economy suffering from an unexpectedly big contraction.
There's a silver lining to the scenario of rock-bottom inventories, though: It likely would mean that the economy would fare better in the third quarter because businesses would have to ramp up production to satisfy customer demand.
"There will probably be another huge decline in inventories, but it will be setting up the economy for some growth in the second half of this year," said Stuart Hoffman, chief economist at PNC Financial Services Group.
Federal Reserve Chairman Ben Bernanke has said he thinks the recession will end later this year. And many analysts think the economy will start to grow again — perhaps at around a 1.5 percent pace — in the July-to-September quarter. That would be anemic growth by historical measures, but it would signal that the downturn has ended.
Obama's stimulus package of tax cuts and increased government spending provided some support to second-quarter economic activity. But it will have more impact through the second half of this year and will carry a bigger punch in 2010, economists said.
Even if the recession ends later this year, the job market will remain weak. Companies are expected to keep cutting payroll through the rest of this year, but analysts say monthly job losses likely will continue to narrow.
Still, unemployment — now at a 26-year high of 9.5 percent — will keep rising. The Fed says it will top 10 percent at the end of this year. Businesses will be unlikely to boost hiring until they're certain the recovery has staying power.
Friday's report on gross domestic product provides a tally of all the goods and services produced within the United States. It is considered the best barometer of the economy's health.
The convergence of a collapse in the housing market, a near shutdown of credit and a financial crisis created what Bernanke and others have called a perfect storm for the economy. Those negative forces — the scale of which hasn't been seen since the 1930s — plunged the country into a recession in December 2007. It is the longest since World War II.
Bernanke and his Fed colleagues warned earlier this month that it could take five or six years for the economy and the labor market to return to long-term health. Recoveries after financial crises tend to be especially slow.
The economy's still-fragile state makes it vulnerable to any further shocks, Fed officials say. Given that, Fed policymakers are expected to keep a key bank lending rate — which influences rates on many consumer loans — at a record low near zero at its meeting in August and probably through the rest of this year, analysts say.
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June new home sales rise 11 percent
New U.S. home sales rose by the largest amount in more than eight years last month, in another sign the housing market is finally bouncing back from the worst downturn in decades.
The Commerce Department said Monday that sales rose 11 percent in June to a seasonally adjusted annual rate of 384,000, from an upwardly revised May rate of 346,000.
It was the strongest sales pace since November 2008 and exceeded the forecasts of economists surveyed by Thomson Reuters, who expected a pace of 360,000 units. The last time sales rose so dramatically was in December 2000.
Sales have risen for three straight months. The median sales price of $206,200, however, was down 12 percent from $234,300 a year earlier and down nearly 6 percent from $219,000 in May.
The report is another encouraging sign that the beleaguered housing sector is finally coming back to life. Last Thursday, the National Association of Realtors reported that home resales posted a monthly increase of 3.6 percent in June.
There were 281,000 new homes for sale at the end of June, down more than 4 percent from May. At the current sales pace, that represents 8.8 months of supply — the lowest level since October 2007.
Fallout from the housing crisis has played a central role in the U.S. recession, now the longest since World War II. Foreclosures have spiked, homebuilders have slashed construction, and financial companies have lost billions.
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Main Street's soaring sour loans
As the effects of the economic collapse began pouring down Main Street, the government last year was left holding a record $2.1 billion in write-offs of small business loans it had guaranteed. Officials expect the number of defaults to rise as the nation continues to climb out of the recession.
Records obtained under the federal Freedom of Information Act show the public is paying to offset bank losses on small business loans across the country, from a convenience story in the tiny Canadian border town of Houlton, Maine, to a graphic arts design company on the island of Hawaii, more than 5,000 miles away.
Despite having loans written off, little companies such as Caffe Sportivo, an espresso shop and small gym in Redwood City, Calif., are barely scraping by.
"I just couldn't make any payments. I was barely making rent or payroll," owner Chris Sakelarios said on a recent afternoon when her cafe stood empty except for two patrons who read as they sipped coffee. "The same as everyone else. We're in a hovering pattern."
It's a sign that even as record profits re-emerge on Wall Street, thanks to massive government loans and guarantees for banks deemed too big to fail, the pain on Main Street is as profound as it's been in half a century. The companies that were not too big to fail are failing.
Their plight is a shift from previous recessions when small business bounced back ahead of big employers, said Todd McCracken, president of the lobby group National Small Business Association.
"This could be the first economic recovery we've seen in a long time that hits small business the hardest the longest," he said.
The Small Business Administration purchased $2.1 billion in bad loans from lenders last year. Agency officials say it's likely that this year will see another high as the recession nears the two-year mark.
"It's frustrating when (banks) are getting bailed out for bad decisions they made, that there isn't more assistance for the small business," said Eric Geedey, who manages Caffe Sportivo for Sakelarios.
Sakelarios obtained a $20,000 SBA loan from Union Bank in late 2007 to start her business when the economic outlook was brighter on the affluent San Franciso Peninsula. Within a year, however, she was scraping by with the help of a landlord and vendors who let her adjust payments. She has reduced the hours of her seven employees and relies on her brother and a friend to help keep the doors open on weekends. The balance of the loan was written off in early January.
In addition to being dogged by bad credit, the cafe will have to report the loan charge-off as taxable income, Geedey said.
Sakelarios isn't the only recession victim and she won't be the last.
SBA loan defaults generally occur in two stages. The first is when the bank decides it won't get its money back and asks the government for the guaranteed portion of the loan. In the second, the government decides it won't get any more collateral or money from the borrower.
Years can elapse between the time that the borrower stops paying and the government writes off the loan.
In 2008, for example, the government concluded it wouldn't be able to recover $1.3 billion in defaulted bank loans it had guaranteed. Many loans were part of a backlog, according to SBA officials.
But an AP analysis found that the time between loan approvals and loan defaults is narrowing. According to the analysis:
_More than $235 million in restaurant loans have been charged off since 2007. The 2,586 restaurant charge-offs make up the largest number of defaulted loans, according to the SBA. More than 150 loans made to Quizno's franchises — worth nearly $15.5 million — have been written off since 2007.
_The Gulf Coast fishing industry, battered by two major hurricanes in 2005, has been hit especially hard. Half of the 10 cities with the highest industry-specific write-offs are in Biloxi, Miss.; New Orleans; Ocean Springs, Miss.; Lafayette, La.; and Abbeville, La. All told, the shellfish fishing industry had 45 loans charged off, at a total cost of $19.5 million.
_The banks making the loans have also been hit hard by the recession. Bank of America Corp., which has received $52.5 billion in government aid, has had nearly 7,000 loans worth $238 million charged off since 2007. More than 660 loans worth $174 million have been charged off by CIT Group Inc., a major commercial lender forced to turn to bondholders in an effort to try to avoid bankruptcy protection after the government refused to save the company.
JPMorgan Chase & Co., which repaid $25 billion in taxpayer loans last month, has written off nearly 2,300 loans worth $117 million.
"I have never seen it as rough as it is right now," said Scott Hauge, president of Small Business California, a business advocacy group.
Small businesses account for half of all private-sector workers and have created roughly half of the nation's jobs over the past decade. They received some help from the $787 billion federal stimulus package in February, including higher microlending amounts and federal loan guarantees. Congress also authorized the U.S. Treasury to purchase $15 billion in pooled loans to encourage lenders to provide money to small companies. The SBA recently announced it will guarantee short-term bank loans to help small businesses pay off existing bills.
The White House has floated a proposal to take money from a $700 billion bailout of the financial system and provide small companies with working capital, allowing them to add inventory and employees. If it happens, the White House said, help might arrive by fall.
That's too late for thousands of defunct companies with shuttered windows, disconnected phones and broken dreams.
Diego Garcia's soccer supply store in the modest Northern California city of Richmond has shrunk to one small location after Garcia was forced to close his two larger stores last year. Garcia started the business after launching a youth program and soccer league in gang-ridden Richmond. He had turned away from his own gang lifestyle after being shot in the chest at age 18.
Garcia expanded fast, never imagining how quickly his booming business would decline. When he couldn't pay up, his bank wrote off nearly all of his $45,000 loan. He lost rental property to foreclosure at the same time.
"It's too much of a loss," he said. "We had to get loans to get bigger. Then everything went the opposite way."
Eric Zarnikow, SBA's associate administrator for capital access, said the bad numbers probably will continue to rise as the agency receives charged-off loans in the future from defaults occurring now.
Sakelarios, a breast cancer survivor without health insurance, tries to stay optimistic.
"Anytime anyone asks me how it's going, I say the same thing. It's going really good."
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World stocks extend rally amid earnings optimism
Asian markets extended their winning streak Monday as hopes company earnings will rebound along with global growth continue to drive investors into stocks. European shares followed Asia higher.
Major benchmarks across Asia posted gains of 1 percent or more, while oil rose above $68 a barrel and the dollar strengthened against the yen. The first Chinese IPO on the country's main exchange in almost a year surged over 300 percent in its debut.
Improving company outlooks and economic data coupled with still-large amounts of uninvested cash have helped jump-start a rally in world equities that started in March but began to fade in June.
Whether the markets continue their run higher could hinge on another round of second-quarter results this week from major companies in the U.S. Visa Inc., Colgate-Palmolive Co. and ExxonMobil Corp. Big Japanese corporations, including Nissan Motor Co. and Sony Corp., also start reporting in the coming days.
Lucinda Chan, a director at Macquarie Private Wealth in Sydney, said investors are adding to their positions in stocks because they expect companies to make more optimistic forecasts, which would in turn reinforce faith in a global economic recovery.
"No one is running away. I think the fear of missing out is still strong, and there is this extreme appetite for risk right now," Chan said.
As trading got under way in Europe, Britain's FTSE 100 was up 0.1 percent, while benchmarks in Germany and France rose 0.6 percent each.
Earlier in Asia, Tokyo's Nikkei 225 stock average added 144.11 points, or 1.5 percent, to 10,088.66, and Hong Kong's Hang Seng rose 268.83, or 1.4 percent, to 20,251.62.
South Korea's Kosi gained 1.4 percent and Australia's stock measure was up by 1.2 percent.
In Shanghai, the main index climbed 1.9 percent, buoyed by the strong performance of the first company to list on China's main stock exchange in 11 months.
Sichuan Expressway Co. surged 324 percent to 15.25 yuan ($2.22) per share before falling back to end the day at 10.90 yuan ($1.59) — still a 203 percent gain over the price that shares were sold for in its initial public offering. The company was the first to start trading in Shanghai since regulators ended a ban on IPOs in June.
"I'm speechless. Even the most optimistic investors wouldn't have expected such a high price," said Cao Xuefeng, an analyst for Huaxi Securities in the western city of Chengdu.
Friday in New York, Wall Street added to its recent gains. The Dow rose 23.95, or 0.3 percent, to 9,093.24, its highest finish since Nov. 5. The S&P 500 index rose 2.97, or 0.3 percent, to 979.26.
Wall Street futures augured a mixed opening Monday. Dow futures gained 12, or 0.1 percent, to 9,070 while S&P futures fell 0.5, or 0.1 percent, to 977.30.
Investor hunger for riskier assets extended to commodities, with benchmark crude for September delivery gaining 67 cents to $68.72 barrel in Asian trade. On Friday, the contract rose 89 cents.
The dollar rose to 95.17 yen from 94.74 yen. The euro was higher at $1.4241 compared to $1.4224.
Associated Press researcher Bonnie Cao in Beijing contributed to this report.
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Hyundai Motor 2Q net profit rises 48 percent
Hyundai Motor Co. said second-quarter net profit rose 48 percent to a record high as robust sales in China and India helped it ride out the global auto slump.
Hyundai Motor, which along with affiliate Kia Motors Corp. forms the world's fifth-biggest automotive group, said in a regulatory filing Thursday it earned 811.85 billion won ($650 million) in the three months ended June 30. It posted net profit of 546.9 billion won a year earlier.
Company spokesman Ki Jin-ho said the profit was the biggest ever for a single quarter.
Total sales revenue during the three-month period, however, fell 11 percent to 8.08 trillion won from 9.11 trillion won.
Still, the result snapped four straight quarters of decline in net profit at Hyundai, which has been expanding aggressively overseas while gaining a global reputation for quality. Earlier this month, the company introduced its first hybrid electric vehicle, the Elantra LPI Hybrid.
Hyundai, like other automakers, has been hit by falling demand amid the global economic downturn. The Ulsan, South Korea-based company, however, has used the opportunity to introduce new models and gain market share.
Hyundai said it grabbed 5 percent global market share for the first time despite what it said was a 15 percent decline in demand for autos worldwide during the first half of 2009.
The company's performance was strong in China and India, where Hyundai has built factories to meet increasing vehicle demand in the two fast growing economies.
Hyundai did not provide a breakdown for the second quarter alone in those markets, but in separate presentation materials for investors it said its Chinese and Indian units helped boost earnings in the first half of this year.
Ki, the company spokesman, said their performance was the main factor contributing to the gain in second-quarter net profit.
Sales revenue in China rose 96 percent in the first half from a year earlier, while vehicle sales gained 56 percent. In India, sales revenue rose 36 percent and vehicle sales gained 9.7 percent.
Hyundai said that global second-quarter vehicle sales eked out a 1.2 percent gain from the same period last year, though slipped 5.8 percent for the first six months of this year.
Hyundai, South Korea's largest automaker, said earlier this month that its global auto sales jumped 9.6 percent in June from the same month last year to a record high 278,485 vehicles.
Hyundai attributed the gain to rising demand for new vehicles in South Korea spurred by a government incentive program to trade in older models.
Shares in Hyundai Motor, which released earnings results about one hour before the stock market closed, fell 3 percent to finish at 81,700 won.
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Porsche CEO steps down, making way for VW merger
Porsche chief executive Wendelin Wiedeking is leaving the luxury sports car maker after 16 years at the helm, a move widely expected to clear the way for a merger with Volkswagen AG.
The board for Porsche Automobil Holding SE said Thursday that Wiedeking, 56, and chief financial officer Holger Haerter, 53, were leaving with immediate effect from the heavily indebted company that makes the 911, among other models.
The move — along with the announcement that Porsche will seek to raise funds, possibly from a Qatar investor — is expected to make it easier for Volkswagen and Porsche to merge given that Wiedeking, who had been CEO since 1993, opposed such a move.
"The measure shall create the foundation of building an integrated car manufacturing group with Porsche SE and Volkswagen AG," a company statement said.
Ferdinand Dudenhoeffer, an expert on the automotive industry at the University of Duisberg-Essen, called any merger "a done deal" and said that "Qatar will now get on board in order to master the financial burden."
Porsche is grappling with some euro9 billion in debt it accumulated while building up a stake in Volkswagen in an unsuccessful takeover attempt.
Reaction to the announcement was met with skepticism by investors, who pushed Volkswagen shares down 4 percent to euro241.70 and Porsche shares down 3.6 percent to euro49.75.
VW and its chairman Ferdinand Piech have been pushing for a deal that would see it take 49 percent of Porsche and fold the lucrative luxury-car business into its portfolio, widening its range in anticipation of a recovery in the luxury market.
Piech also is part of the family that controls Porsche.
Wolfsburg-based VW, Europe's biggest carmaker by sales, said its board was meeting Thursday, but did not immediately comment about the moves at Porsche or what the topics of the meeting were.
At stake is who will control what would be Germany's most powerful automaker — Volkswagen or Porsche.
The head of Porsche SE's supervisory board, Wolfgang Porsche, who also sits on VW's board, told reporters in Stuttgart that "everything is wonderful" as he arrived for the meeting.
Christian Wulff, the governor of the German state of Lower Saxony, which holds approximately 21 percent of VW, called on both companies to work together.
"We'll set off together to become the number one in the world," he said.
Bernd Osterloh, the head of the Volkswagen worker's council, said any tie-up would have to benefit the "well-being" of workers at both companies.
"Only if we can fulfill this condition, a common and integrated automobile group will we have the opportunity to become a successful project," he said. Porsche employs some 10,000 people while Volkswagen, whose brands include VW, Audi, Seat, Skoda, Bentley, Bugatti and Lamborghini, employs some 370,000 workers worldwide.
In announcing the resignation, Porsche said Wiedeking would receive euro50 million (nearly $71 million), far below the reports of euro140 million or even euro250 million that German media had speculated. Wiedeking's contract was set to expire in 2012.
Porsche said Haerter would receive euro12.5 million, though both executives might see more compensation through other agreements or bonuses.
"Wiedeking and Haerter came to the conclusion in the last week that the further strategic development of Porsche SE and Porsche AG would be better when they were no longer the responsible people on the board," the company said.
Porsche announced the moves after an all-night meeting on its future that saw the board agree to seek a capital increase of at least euro5 billion and throw its weight behind talks with a Qatar investment fund.
Wiedeking will be replaced by Michael Macht, 48, who currently oversees production, while personnel chief Thomas Edig will serve as his deputy, the board said.
Wiedeking and Haerter have agreed to remain available for consultation, the board said.
About the talks with Qatar, Porsche spokesman Albrecht Bamler said the supervisory board agreed to sign a deal with a Qatar investment fund, with which negotiations have been ongoing, Bamler said.
He did not provide any more detail and would not say whether the euro5 billion capital increase would come from Qatar, or if it was in addition to what was being sought from the fund.
Wiedeking joined Porsche in 1983, working in the car maker's production and materials management unit and left the company in 1988 for supplier Glyco Metall-Werke KG where he rose to chief executive in 1990. The next year, he returned to Porsche as production director and became CEO in 1993.
He was hailed for streamlining Porsche's operation and production but his David-and-Goliath effort, beginning in 2005, to take over the much larger Volkswagen ultimately felled him. Porsche eventually acquired 51 percent and — until the end of last year — was hailed for the move.
However, the global economic crisis put the brakes on luxury car sales — hampering Porsche's push to increase its VW stake to 75 percent and take full control. It had also counted on the European Union to strike down a German law that gives the state of Lower Saxony, which holds just around 20 percent, unparalleled power to veto any changes or decisions.
Porsche tied up so many VW shares that, when traders needed shares in October to cover bets they had made against the stock, a so-called short-squeeze briefly pushed VW shares so high that it was, for a few days, the world's most valuable company.
Porsche slammed on the brakes earlier this year, announcing its intention to create an "integrated company" with VW but leaving unclear how that might happen. Volkswagen balked and talks soon screeched to a halt.
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Asia stocks up after US earnings, Bernanke comment
Asian stocks rose modestly Wednesday after more U.S. companies posted stronger earnings and the Federal Reserve's chairman said the world's largest economy was on pace to recover this year. European markets were weaker.
Most markets in Asia posted gains of less than 1 percent after a mixed performance the day before. Wall Street futures fell along with crude oil prices.
Another round of better-than-expected earnings and improved forecasts in the U.S., this time from Caterpillar Inc. and Apple Inc., gave investors more reason to believe the worst of the global downturn was over.
That view was reinforced by Federal Chairman Ben Bernanke, who said the U.S. was set to turn around this year, albeit at a slow rate as rising unemployment continues to strain the economy. Investors also welcomed Bernanke's assurances the Fed would keep interest rates low for the time being.
Investors have rushed headlong into global equities over the last week or so as earnings lent more support to the case for a revival in economic growth.
Now, more and more investors are tip toeing as they try to determine the actual shape of the rebound, said Thomas Lam, senior treasury economist at the United Overseas Bank in Singapore.
"The U.S. economy either has stabilized or is stabilizing, there's no doubt about that," Lam said. "We have transitioned from thinking it's the end of the world to trying to see what the new world will look like."
In Japan, the Nikkei 225 stock average rose 71.14, or 0.7 percent, to 9,723.16.
South Korea's Kospi was up 0.3 percent. Shanghai's index gained 1.9 percent, Australia's benchmark advanced 0.4 percent and Taiwan's market edged up 0.5 percent.
Elsewhere, Hong Kong's Hang Seng added 253.26, or 1.3 percent, to 19,248.47. India's Sensex shed 1.3 percent.
During early trade in Europe, Britain's FTSE-100 lost 0.3 percent, Germany's DAX fell 0.3 percent and France's CAC-40 dropped 0.3 percent.
Wall Street added to its gains overnight.
The Dow rose 67.79, or 0.8 percent, to 8,915.94, its highest level since January.
The S&P 500 index rose 3.45, or 0.4 percent, to 954.58, its highest close since November. And the Nasdaq rose 6.91, or 0.4 percent, to 1,916.20, its 10th straight gain. The last time the index rose 10 straight days was in July 1997.
U.S. futures pointed to a weaker open Wednesday. Dow futures were off 66, or 0.7 percent, at 8,820 and S&P futures declined 5.9, or 0.6 percent, at 947.50.
Oil prices fell in Asia, with the September contract down 81 cents to $64.80 a barrel. On Tuesday, the August contract expired, rising 74 cents to settle at $64.72.
The dollar fell to 93.22 yen from 93.64 yen. The euro fell to $1.4188 from $1.4217.
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U.S. back-to-school spending seen dropping
U.S. consumers will spend 8.5 percent to 12 percent less this year on back-to-school items than they did last year, as cash-strapped parents try to get children to wear last year's fashions, a retail industry monitor said on Tuesday.
A total of 34.4 percent of parents surveyed earlier this month said they planned to spend less this year compared to last year, according to a survey by America's Research Group and financial firm UBS. Parents continue to be concerned about job security, higher debt and dwindling income.
The survey led America's Research Group founder and CEO Britt Beemer to forecast the decline in back-to-school sales, which follows a 5 percent decline in 2008.
"Back-to-school spending will be a minor blip on the radar screen for retailers this year," Beemer said in a news release.
The back-to-school season is typically one of the busiest shopping seasons of the year and is seen as a precursor for spending during the key Christmas holiday season.
In a survey done for Reuters by America's Research, and released last week, almost two-thirds of consumers said they were not willing to spend more now than they were three months ago.
In the results released Tuesday, 41.8 percent of consumers cited having less money as a reason for cutting back, while 40.5 percent cited higher debt and 8.2 percent cited fear of losing their jobs.
This year 33.4 percent of parents expect to spend over $400. Last year the figure was 47.0 percent.
Almost nobody - 1.8 percent of those surveyed - was willing to pay full price this season.
Not surprisingly, more people said they will shop this year at Wal-Mart Stores Inc (WMT.N), which has been winning new customers in the recession. Of the 1,000 consumers surveyed, 22.3 percent said they would shop at the discount chain, up from 15.4 percent last year.
As for other retailers, 10.5 percent said they would shop at Target Corp (TGT.N), up from 7.6 percent in 2008; 9.6 percent said they would shop at Sears (SHLD.O), up from 6.4 percent last year, and 7.9 percent said they would shop at American Eagle Outfitters Inc (AEO.N), up from 6.4 percent in 2008.
How many pants, sweaters, dresses and such will consumers be buying? If parents have their way, not many.
Just over half of parents are trying to get their children to wear what they wore last year.
The survey was conducted July 6-10 and has an error factor of plus or minus 3.8 percent.
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Coca-Cola 2nd-quarter profit rises 43 percent
Coca-Cola, the world's largest beverage maker, on Tuesday posted a 43 percent increase in second-quarter profit, beating expectations as rapid overseas growth helped offset a sales decline caused by the stronger dollar.
Profit rose mostly because last year's quarter was dragged down by big restructuring charges and asset write-downs.
The Atlanta-based seller of Coke, Sprite and VitaminWater on Tuesday said it earned $2.04 billion, or 88 cents per share, in the three months ending July 3. That's up from $1.42 billion, or 61 cents per share, a year earlier.
The company recorded significant one-time charges a year earlier that dragged down comparable profit by 40 cents per share, compared with 4 cents per share in charges in the most recent quarter.
Excluding restructuring charges, write-downs and other items, Coca-Cola earned 92 cents per share in the most recent quarter. Analysts expected 89 cents per share.
Sales fell 9 percent to $8.27 billion, mostly hurt by the strong dollar. Wall Street's revenue estimate was $8.66 billion. Companies that do significant business overseas are hurt by a stronger dollar as sales revenue is translated from local currencies into fewer dollars.
Overseas, case volume grew 5 percent, including 33 percent growth in India and 14 percent in China. In North America, case volume fell 1 percent but Coca-Cola gained slightly in its share of sales volume. Sales volume of Coke Zero grew 24 percent.
The company is on track to save $500 million a year by 2011 through restructuring, CEO Muhtar Kent said in a statement. More than half of the savings would be achieved by the end of the year, Kent said.
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Drugmaker Merck posts 12 percent drop in 2Q profit
Drugmaker Merck & Co. on Tuesday posted a 12 percent drop in second-quarter profit, due to lower sales of its cholesterol drugs and several vaccines, but still beat Wall Street's conservative expectations.
The maker of asthma and allergy treatment Singulair and cervical cancer vaccine Gardasil said its net income was $1.56 billion, or 74 cents per share. A year earlier, net income was $1.77 billion, or 82 cents per share.
The company said it had restructuring charges and expenses related to its acquisition of Schering-Plough Corp. that totaled 9 cents per share. Excluding those one-time charges, earnings per share would have been 83 cents.
Merck said the strong dollar also was a factor, lowering revenue abound 6 percentage points to $5.9 billion. That was down from $6.05 billion in the second quarter of 2008.
Analysts polled by Thomson Reuters were expecting earnings per share of 77 cents and revenue of $5.84 billion.
The company said it still expects earnings per share this year of $2.84 to $3.09, or $3.15 to $3.30 excluding one-time items. That forecast includes pretax charges of roughly $500 million for restructuring and $300 million of costs related to the Schering-Plough deal.
Merck said its plan to acquire Schering-Plough, for $41.1 billion, is progressing as planned and on track to close in the fourth quarter.
The two companies already jointly sell the cholesterol drugs Vytorin and Zetia, both of which have seen sales steadily decline since January 2008, when concerns about their effectiveness and safety first surfaced. The drugs' combined sales dropped 10 percent in the quarter, to $1 billion.
Merck's top seller, Singulair, saw sales jump 16 percent to $1.3 billion. Two newer products, Januvia for type 2 diabetes and HIV drug Isentress, saw sales rise as well, to $462 million and $172 million, respectively.
Most other products, though, posted sales declines, including Gardasil, which has seen sales slide now that many adolescent girls have been inoculated, and two other vaccines, Rotateq for rotavirus and Zostavax for shingles.
For the first six months, net income was down 41 percent at $2.98 billion, or $1.41 per share. In the first half of 2008, net income totaled $5.07 billion, or $2.34 per share.
The first half of this year included a total of 16 cents worth of charges for restructuring and merger expenses.
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Stocks extend rally as worries over CIT ease
The stock market is extending a big rally from last week on more upbeat earnings and word that troubled lender CIT will avoid bankruptcy.
Both the Dow Jones industrials and the Standard & Poor's 500 index edged above their recent highs from mid-June on Monday.
News that CIT Group Inc. struck a deal with its bondholders helped stoke the market's optimism, which got a big boost last week from a string of good earnings news. The Dow and the S&P 500 are coming off their best weekly performance since a spring rally began in March.
CIT's future was cast in doubt after negotiations with federal regulators for bailout funds fell through. Its failure would have been a blow to investor confidence and would have hurt industries like retailing, which has suppliers who rely on CIT for financing.
A bigger-than-expected rise in a predictor of future economic activity also supported stocks. The Conference Board's index of leading economic indicators rose 0.7 percent in June, more than the 0.4 percent forecast. It was the third straight month of increases.
Market indicators jumped about 7 percent last week. The huge advance came after a monthlong slide in stocks driven by reports showing the economy was not healing as quickly as hoped. Solid earnings and outlooks from companies like Goldman Sachs Group Inc., Intel Corp. and International Business Machines Corp. gave investors hope that the worst of the recession could be past.
"The main reason the market has been fairly strong is we haven't had any major disappointments in earnings," said Joe Keetle, senior wealth manager at Dawson Wealth Management.
In midafternoon trading, the Dow rose 63.40, or 0.7 percent, to 8,807.34, surpassing a high of 8,799 hit in June. The S&P 500 index rose 6.45, or 0.7 percent, to 946.83, edging out its high in June of 946.21. The Nasdaq composite index rose 15.66, or 0.8 percent, to 1,902.27.
Among the earnings news, toy maker Hasbro Inc.'s profit rose 5 percent, beating expectations, as strong U.S. revenue offset international sales hurt by the stronger dollar. The stock gained 4 percent, rising $1.01 to $26.39.
Oilfield services company Halliburton Co. said its profit tumbled 48 percent amid sluggish exploration and production activity, but the results were better than analyst forecasts and its shares rose 61 cents, or 2.9 percent, to $21.99.
Auto parts and building products maker Johnson Controls Inc.'s fiscal third-quarter earnings dropped 63 percent but also exceeded expectations. Shares rose 6.5 percent, advancing $1.22 to $22.74.
With the bulk of earnings reports still to come, the market has yet to hear from some key industries including retailing. If those results are disappointing, it could force investors to rethink their most recent rally. Several factors are still hanging over the market including record-high unemployment and a damaged housing market.
On Monday, though, the CIT news and optimism over better earnings reports stoked investors' appetite for risk. Investors moved out of safe-haven assets like U.S. Treasurys and the dollar, and into riskier bets like commodities. CIT shares surged 81 percent, adding 57 cents to $1.27.
But some analysts said the market could have a hard time advancing, even with more welcome news.
"The market itself has hit kind of a top here temporarily. People are already getting used to the earnings," said Matt Lloyd, chief investment strategist at Advisors Asset Management.
Oil prices rose 23 cents to $63.80 a barrel. Gold rose, while the dollar was mixed.
Bond prices rose, pushing yields lower. The yield on the benchmark 10-year Treasury note fell to 3.64 percent from 3.66 percent late Friday.
Advancing stocks outnumbered decliners by about 3-to-1 on the New York Stock Exchange, where volume came to 614.7 million shares compared with 798.8 million traded at the same point Friday.
The Russell 2000 index of smaller companies rose 3.62, or 0.7 percent, to 522.84.
Overseas, Britain's FTSE 100 rose 1.3 percent, Germany's DAX index rose 1 percent, and France's CAC-40 gained 1.6 percent. Japanese financial markets were closed for a holiday.
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CIT Group board OKs $3 billion rescue loan
CIT Group Inc.'s board approved a deal late Sunday with major bondholders to keep the company out of bankruptcy with a $3 billion rescue loan, the New York Times reported.
The emergency financing is intended to give the ailing company time to restructure some of the billions of dollars in debt payments coming due this year, the Times reported, citing anonymous sources.
CIT representatives could not immediately be reached for comment.
New York-based CIT had been negotiating with key bondholders — including bond manager Pimco — in an attempt to avoid a bankruptcy filing. Jeffrey Peek, the company's chairman and chief executive, was actively involved in the talks, according to a person briefed on the matter. The person spoke on condition of anonymity because the talks are confidential.
CIT has been scrambling to raise $2 billion to $4 billion after the federal government refused to bail out the company. Rescue talks with government regulators broke off late Wednesday after days of round-the-clock negotiations.
Under the deal, CIT's main bondholders would give the company $3 billion at an initial rate of 10.5 percent, the Times reported.
A bankruptcy filing would have threatened funding for scores of small businesses across the country. It also would have wiped out $2.3 billion in federal bailout money injected into the company in December.
The lender faces $7.4 billion in debt due in the first quarter of next year. Highlighting its woes, CIT will be removed from the Standard & Poor's 500 index next Friday and replaced with software distributor Red Hat Inc.
CIT had warned that depriving it of more federal aid could imperil about a million corporate borrowers — from Dunkin' Donuts franchisees to retailer Dillards Inc. But the Obama administration turned down the company's request, showing it's drawing a line on federal rescues for troubled financial firms.
In recent weeks, as the prospect of a CIT bankruptcy filing loomed, industry trade groups increased their pitch to lawmakers to prevent the collapse of CIT, which they say would imperil their small-business members and derail the already fragile economy.
CIT serves as short-term financier to about 2,000 vendors that supply merchandise to 300,000 stores, according to the National Retail Federation. Analysts say 60 percent of the apparel industry depends on CIT for financing, so other lenders taking up all the slack would pose a big financial strain.
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Oil rises above $64 on strong Q2 corporate results
Oil prices broke above $64 a barrel Monday in Asia as strong second quarter company results helped boost investor optimism.
Benchmark crude for August delivery was up 83 cents to $64.39 a barrel by late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. On Friday, the contract jumped $1.54 to settle at $63.56.
Better than expected earnings last week from Goldman Sachs Group Inc., Intel Corp. and JPMorgan Chase & Co. eased some investor doubts about the chances of a U.S. economic recovery this year. Traders will be watching results this week from Apple Inc, Amazon.com Inc. and Microsoft Corp. for further clues about economic growth.
"Sentiment has been helped a great deal by the earnings reports so far," said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore. "If the remaining reports paint an upbeat picture, that could sustain oil."
Oil has bounced from $58.78 a barrel last week after falling from an eight-month high of $73.23 on June 30.
Investors remain concerned about weak crude demand. Rising inventories of oil products, such as gasoline, suggest the recession has kept some U.S. drivers from hitting the road this summer.
"Weak fundamentals should keep a lid on prices," Shum said. "We have a glut of oil products."
In other Nymex trading, gasoline for August delivery rose 1.31 cents to $1.78 a gallon and heating oil gained 1.34 cents to $1.65. Natural gas for August delivery jumped 2.3 cents to $3.69 per 1,000 cubic feet.
In London, Brent prices rose 84 cents to $66.20 a barrel on the ICE Futures exchange.
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Oil bounces above $62 after U.S. housing data
Oil bounced above $62 a barrel on Friday, buoyed by U.S. data suggesting the battered housing sector was beginning to stabilize and pointing to a gradual recovery from recession.
Oil was on track for a gain of more than 4 percent on the week, snapping four straight weeks of declines thanks to stronger equities markets, better corporate results and positive economic data, particularly from Asia.
U.S. crude oil for September delivery was up 60 cents at $62.62 a barrel by 1339 GMT (9:39 a.m. EDT). London Brent crude rose 60 cents to $64.35.
Oil prices slipped in early trade as the market consolidated after four days of gains and was undermined by a jump in the value of the dollar. Oil often moves inversely to the dollar as a rise in the U.S. currency makes oil more expensive to many consumers.
But the market then recovered on data showing new U.S. housing starts and permits jumped in June, propelled by a rise in ground-breaking for single-family homes and suggesting the battered housing sector was beginning to stabilize.
BOUNCE OFF LOWS
"Looks like some initial profit taking after (a) good rally on the week. Certainly dollar strength was part of the early decline," said Tom Bentz, analyst at BNP Paribas Commodities Futures Inc.
"Then June housing starts came in (at) 3.6 percent, better than expected, providing a bounce off lows," he said.
Bank of America (BAC.N) posted lower earnings on Friday and Citibank (C.N) relied on a one-off gain to turn a profit, following strong showings from their peers which have driven stocks higher.
Some analysts had suggested Friday's corporate results might provide some upside surprises after strong figures earlier this week from Goldman Sachs (GS.N).
Economic data are sending mixed messages about the pace of recovery from recession.
Nouriel Roubini, one of the few economists who accurately predicted the magnitude of the financial crisis, said on Thursday the worst of the turmoil had passed, but said the United States would need a second fiscal stimulus, possibly by the end of this year, as the unemployment rate approaches 10 percent.
In China, refiners in the world's No.2 energy consumer boosted production by 6 percent in June to a record high after a rise in domestic motor fuel prices aided margins, although higher inventories and rising exports suggested domestic demand was lagging.
Oil prices are down nearly $10 since early July, partly reversing last quarter's 40 percent surge on concerns over energy demand, which has contracted for the first time in a quarter century under the weight of the recession.
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Why Do Home Foreclosures Keep Rising? 6 Things You Need to Know
Five months after the Obama administration unveiled a sweeping initiative designed to reach 9 million struggling homeowners, home foreclosures continue to rise at an alarming rate. Foreclosure filings were reported on more than 1.5 million properties in the first six months of the year, a 15 percent increase over the same period of last year, according to RealtyTrac. All told, 1 in 84 American homes--or 1.19 percent--received a foreclosure filing during the period. "We talk about green shoots or about things getting worse at a slower rate, but this is one thing that is getting worse month by month," says Patrick Newport, an economist for IHS Global Insight.
Here are six things you need to know about the rise in home foreclosures:
1. Unemployment: The erosion of the labor market--the unemployment rate recently hit 9.5 percent--is the key factor in the rise of home foreclosures, says Celia Chen, an economist at Moody's Economy.com. "Employers continue to shed jobs, and that makes it difficult for even people with good credit who were doing fine to keep up with their mortgage payment," Chen says. For example, a recent report issued by federal bank regulators found that home loans to borrowers with solid credit histories were going bad at a rapid clip. "Prime loans, which represented two thirds of all mortgages in the portfolio, experienced the highest percentage increase in serious delinquencies, climbing by more than 20 percent from the prior quarter to 2.9 percent of prime mortgages," the report stated.
2. Plunging home values: Nearly three years after its peak, the painful decline in home prices continues. Although the pace of decline moderated slightly from the previous month, home prices in 20 major metro areas dropped 18.1 percent in April from a year earlier. Falling home values have dragged more than 20 percent of American homeowners "underwater"--meaning they owe more on their mortgages than the property is worth--as of the first quarter. By sucking equity out of homes, the price declines have also evaporated much of a homeowner's financial incentive for paying their mortgage bill, Chen says. "When somebody doesn't have equity in their house and they are struggling to pay their mortgage, the likelihood of a foreclosure is much higher," she says. In addition, home owners with less equity in their homes will have a more difficult time refinancing their mortgage.
3. End of foreclosure moratoriums: The end of certain foreclosure moratoriums--including those of Fannie Mae and Freddie Mac, which were lifted in late March--also contributed to the rise in foreclosures during the period, Chen says. As these efforts unwound, lenders and servicers put additional properties into their foreclosure pipelines, she says.
4. Is Obama's plan working?: A key component of Obama's housing rescue plan is an effort to restructure--or modify--as many as 4 million troubled loans. So far, about 325,000 modification offers have been made through the program, according to Bloomberg news. Chen says the program is having an impact for certain individual borrowers, but the efforts--at least so far--have not put much of a dent into the national foreclosure epidemic. "The program is making progress. It's just that there are a large number of distressed borrowers out there," she says. "It's so hard to process all of those loans, and then second of all, not all of those borrowers will qualify for the program." Borrowers have complained of long delays and bureaucratic hurdles in their efforts to modify their mortgages.
Though the administration's effort includes incentive payments to convince servicers to modify the loans, Newport says some may find it less costly to foreclose on the property. "My understanding is that there is going to be some pressure from the administration to get banks to start renegotiating more loans," he says. "But if [modification is] not in [the servicer's] self-interest, I don't think that they are going to do much."
5. Mounting political pressure: Mortgage services appear to be facing mounting pressure from Washington to redouble their efforts. "We believe there is a general need for servicers to devote substantially more resources to this program for it to fully succeed and achieve the objectives we all share," Treasury Secretary Tim Geithner and HUD chief Shaun Donovan said in a recent letter to 25 mortgage servicing firms. In a hearing today, Senate Banking Committee Chairman Christopher Dodd, a Democrat from Connecticut, expressed his frustration more directly. "Why am I still reading about lost files, understaffed and undertrained servicers, and hours spent on hold on the phone?" Dodd said in a prepared opening statement. "Why are servicers and lenders refusing to accept principal reduction so that homeowners can start building equity and get the housing market moving again?"
6. Foreclosure outlook: Despite this pressure, Newport expects foreclosure rates to creep higher for the next year or so. "It's going to keep on getting worse until the unemployment rate peaks, which we think will happen in about the middle of next year," he says. For her part, Chen argues that a successful mortgage rescue program could expedite a housing recovery. "The hope is that we will be able to push through enough mortgage modifications to prevent home prices from falling too much more," she said.
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Citigroup profit soars on Smith Barney sale
Citigroup Inc. surprised Wall Street Friday, reporting a $3 billion second-quarter profit instead of the big loss analysts expected.
Citigroup became the fourth big bank to report strong results for the quarter. Citi announced its results shortly after Bank of America Corp. also beat expectations with earnings of $2.42 billion. The pair of profit reports follows strong earnings from Goldman Sachs Group Inc. and JPMorgan Chase & Co. earlier in the week.
However, Citi's profit was not driven by improved trading like other banks, and instead came from the gain on the sale of its Smith Barney unit and the increasing values of some of its riskier assets that had plunged during the credit crisis. Citi recorded an after-tax gain of $6.7 billion on the sale of a majority stake in its Smith Barney brokerage unit to Morgan Stanley.
After paying preferred dividends, the New York-based Citigroup earned 49 cents per share versus a loss of $2.59 billion, or 55 cents per share, during the same quarter last year. Analysts forecast a loss of 37 cents per share for the quarter, according to Thomson Reuters.
Citigroup's shares rose 5 cents or 1.7 percent to $3.08 in early trading Friday. The stock is down 54 percent in the year to date.
Citi has been among the hardest hit by the credit crisis and ongoing recession. It has received $45 billion in funds from the government and guarantees to protect against losses on more than $300 billion in risky assets. The government is in the process of acquiring a 34 percent stake in the bank as part of a broader debt exchange program.
The exchange program will provide Citi a better mix of capital to withstand additional loan losses and further weakening in the economy. By turning preferred shares into common stock, Citi also no longer has to pay out dividends on the preferred shares, thus helping improve its cash flow.
Like other large retail banks, such as Bank of America, Citi is still facing mounting loan losses as the recession continues. Citi set aside $12.68 billion to cover loan losses during the second quarter, compared with $7.1 billion during the year-ago period.
Christine Barry, a research director at Aite Group, said credit losses are "still a big concern" at Citigroup. "As long as unemployment continues to rise, any consumer credit is still at risk."
Big banks have faced mounting losses across a wide range of credit, from mortgages to home equity loans to credit cards, as more customers struggle to repay loans during the recession.
Trying to better manage the mounting losses and return to profitability, Citi took a radical step to realign its operations in January, splitting its operations into two entities. After suffering a fifth-straight quarterly loss during the last three months of 2008, Citi split its operations into Citicorp and Citi Holdings. The first is focused on traditional banking around the world, while the second will hold the company's riskier assets and tougher-to-manage ventures.
The move allows it to more easily sell off those riskier assets and keep their losses separate from the traditional businesses — the operations where Citi is now squarely focused.
Citi Holdings generated an operating profit of $1.36 billion during the second quarter, compared with a loss of $5.23 billion thanks to the gain on the Smith Barney sale. Citi Holdings also recorded an increase of $1 billion in the value of some of its risky assets, primarily related to subprime mortgages. The value of those same investments was cut by $6.6 billion during the same quarter last year.
A collapse of the housing market in 2007, primarily due to rising defaults among subprime mortgages, was one of the primary causes of the credit crisis and recession.
At Citicorp, operating profit fell 11 percent to $3.06 billion during the second quarter. The decline was primarily the result of foreign currency exchange and rising credit losses.
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JPMorgan 2Q profit jumps 36 pct, topping forecasts
JPMorgan Chase & Co. posted a second quarter profit of $2.72 billion, a 36 percent jump that easily surpassed expectations as strength in its core consumer and investment banking businesses offset a jump in credit losses.
Shares of the New York-based banking giant fell 1 percent in premarket trading to $35.90.
JPMorgan, the second big financial institution in a week to release upbeat earnings news, reported net income of $2.72 billion, or 28 cents per share, up 36 percent from $2 billion, or 53 cents per share, a year earlier. Revenue rose 39 percent to $25.62 billion from $18.4 billion.
Earnings per share fell despite an increase in profit because the company had more stock outstanding in the most recent quarter ending June 30.
Analysts forecast earnings of 4 cents per share on revenue of $25.89 billion for the quarter.
The profit came despite a $1.1 billion charge, or 27 cents a share, as JPMorgan repaid in full $25 billion in loans it received from the government as part of the Troubled Asset Relief Program, or TARP. The bank was also hit by a 10-cents-a-share FDIC special assessment penalty.
CEO Jamie Dimon said he was "pleased" by the results, even as the company's latest numbers were weighed down by higher credit costs, particularly in the company's consumer lending and credit card businesses.
Results were driven by record investment banking fees and revenue in fixed income markets, much like rival Goldman Sachs Group Inc., which reported strong earnings on Tuesday. At JPMorgan's investment bank, revenue jumped 33 percent to $7.3 billion. The segment's profit more than tripled to $1.5 billion.
But that was offset by credit costs that remain high in consumer lending and card services. The bank said it set aside $9.7 billion for credit losses, up from $4.29 billion a year earlier but down from the first quarter's $10 billion.
Dimon said the company expects credit costs to "remain elevated for the foreseeable future."
Still, the company has continued to lend, Dimon said.
JPMorgan said it extended $150 billion in new credit to consumers, corporations, small businesses, municipalities and non-profits and has approved 138,000 trial mortgage modifications in the quarter, bringing total foreclosures prevented since 2007 to 565,000.
"Throughout this crisis, we have remained committed to doing our part to help bring stability to the communities in which we operate and to the financial system overall," Dimon said.
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Jobless claims drop, but clouded by auto shutdowns
The number of newly laid-off Americans signing up for unemployment benefits last week, and those using this safety net over a longer period, both plunged. But the government figures released Thursday were clouded by difficulties adjusting for temporary shutdowns at auto plants.
Even if the recession ends this year as the Federal Reserve and many private economists expect, companies are expected to keep trimming payrolls. The unemployment rate will climb because companies won't be in any mood to hire until they feel certain a recovery is firmly rooted.
The Labor Department said new applications for unemployment insurance dropped by a seasonally adjusted 47,000 to 522,000, the lowest level since early January. Economists polled by Thomson Reuters expected claims to rise to around 575,000.
A department analyst said the drop in new claims didn't point to improvements in economic conditions. The second straight weekly decline reflected problems adjusting layoffs for temporary shutdowns at General Motors and Chrysler plants to retool for new models.
Weekly claims remain far above the roughly 325,000 that analysts say is consistent with a healthy economy. New claims last fell below 300,000 in early 2007. The lowest level this year was 488,000 for the week ended Jan. 3.
The unadjusted figures for last week actually showed that new claims rose by 86,389 last week, which would push the total to 667,534.
The department's seasonal adjustment process expected a large increase in claims from auto workers and some other manufacturers, the analyst said. Since that didn't happen, seasonally-adjusted claims fell.
Those adjustment difficulties also were behind a big drop reported for people continuing to draw unemployment benefits, the analyst said.
The number of people still collecting benefits fell by a seasonally adjusted 642,000 to 6.27 million, the lowest level since mid-April.
The unadjusted figures for continued claims showed an increase of 63,714. That data lags initial claims by a week.
"Seasonal adjustment problems are wreaking havoc with the layoffs data" and will continue to for another few weeks, said Richard Yamarone, economist at Argus Research Corp.
When federal and state emergency programs are included, the total benefit rolls are higher. More than 2.8 million are receiving unemployment insurance under the programs, which add up to 53 weeks of benefits on top of the typical 26 weeks. The data for the emergency programs lags the initial claims by two weeks. About 9.1 million people received jobless benefits the week ending June 27.
The layoffs picture is expected to be muddied by the auto shutdowns in the weeks ahead, the department analyst and private economists said.
The shutdowns typically occur in the summer, but took place over the last two months as GM and Chrysler LLC sought bankruptcy protection and implemented sweeping restructuring plans. That means the government data is more volatile than usual, making it harder to draw firm conclusions from the report about the direction of the economy and the pace of future layoffs.
The Fed, in a new forecast issued Wednesday, predicted the jobless rate would top 10 percent this year. It rose to 9.5 percent, a 26-year high, in June.
The recession, which started in December 2007 and is the longest since World War II, has snatched a net total of 6.5 million jobs.
Earlier this week, US Airways announced that it will cut 600 jobs this fall as it continues to struggle with the slow economy. Gannett Co. recently said it planned to eliminate 1,400 positions and credit card issuer Advanta Corp. says it's laying off half its work force.
Among the states, Michigan reported the largest increase in initial claims, with 12,144, which it attributed to higher layoffs in most industries. The next largest increases were reported by New York, Wisconsin, Indiana and Ohio. The state data lags initial claims by one week.
New Jersey reported the largest decrease, with 5,030, which it attributed to a shorter work week and fewer layoffs in the transportation, trade, service and warehousing industries. California, North Carolina, Kansas and Oregon reported the next largest drops.
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Stocks rise on upbeat earnings reports
Better-than-expected earnings at Intel sent investors pouring back into the market Wednesday, sending stocks higher in morning trading.
Chipmaker Intel Corp.'s report after the market closed Tuesday lifted investor confidence because its sales figures suggest consumers are purchasing computers at a faster rate than anticipated, a potential sign the economy is recovering.
Consumer spending accounts for more than two-thirds of economic activity. Increased spending by consumers is widely seen as a key to an economic recovery.
Just as important as quarterly results, Intel's third-quarter sales prediction was bigger than analysts' forecast, a further indication that the chipmaker believes the personal computer market has bottomed and a recovery is under way.
In another sign the recession is easing, a new report showed industrial companies cut back production again in June, but not nearly as much as they have been in previous months.
The Federal Reserve said production at the nation's factories, mines and utilities fell 0.4 percent last month, after declining 1.2 percent in May.
Investors "want to see consumer demand coming back and inventories being reloaded," John Lekas, senior portfolio manager at Leader Capital in Portland, Ore. Intel's second-quarter sales results and third-quarter forecast provide evidence of that demand, he added.
"This is the first step toward recovery," Lekas said. However, Lekas cautioned that a recovery is likely to be slow as earnings reports overall are likely to be mixed, and companies still have to work on restructuring balance sheets and reducing costs.
The Dow Jones industrial average rose 124.39, or 1.5 percent, to 8,483.88. The Standard & Poor's 500 index rose 13.07, or 1.4 percent, to 918.91, while the tech-heavy Nasdaq composite index gained 35.39, or 2 percent, to 1,835.12.
Advancing issues outnumbered decliners by about 7 to 1 on the New York Stock Exchange, where volume came to 108.8 million shares, compared to 109.2 million traded at the same point Tuesday.
Investors were little swayed by a Labor Department report Wednesday that showed consumer prices rose 0.7 percent in June, its fastest pace in 11 months as gasoline costs surged. Economists were predicting a rise of 0.6 percent after a 0.1 percent gain in May.
The Consumer Price Index, which measures the cost to consumers of buying goods, is a key measure of inflation.
The report helped push Treasury bond prices slightly lower and yields up. The bond market is sensitive to signs of inflation, which can depress the value of outstanding bonds.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.55 percent, from 3.47 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.19 percent from 0.17 percent late Tuesday.
Intel's upbeat report followed strong earnings earlier Tuesday from Goldman Sachs Group Inc. Goldman kicked off earnings in the banking sector by easily topping analysts' earnings predictions. The Wall Street banking giant said it earned $2.72 billion, after paying preferred dividends, only two quarters after posting a steep loss during the peak of the credit crisis.
Investors will now set their sights on three other major banks — JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. — reporting second-quarter results later in the week to see if the broader sector is actually recovering from the malaise that beset the sector late last year.
JPMorgan Chase, Bank of America and Citigroup all have strong retail banking operations, unlike Goldman, that could pose problems as loan defaults continue to rise. Moderation in loan defaults could be a sign the economy is strengthening as customers are better able to repay loans.
Investors are getting a fresh round of earnings reports Wednesday.
Abbott Laboratories, a drug and medical-device company Abbott Laboratories said its profit fell 3 percent, but earnings met expectations. Its third-quarter forecast was mostly in line with analysts' predictions.
American Airlines parent AMR Corp. reported a quarterly loss amid a drop in air travel. But, the loss was smaller than analysts expected.
Meanwhile, the dollar fell against other major currencies Wednesday, while gold prices rose.
Oil prices rose $1.19 to $60.71 per barrel on the New York Mercantile Exchange.
Commodities stocks gained as the dollar weakened and commodity prices rose.
The Russell 2000 index of smaller companies was 9.92, or 2 percent, to 506.44.
Overseas, Japan's Nikkei stock average rose 0.1 percent. In afternoon trading, Britain's FTSE 100 gained 1.7 percent, Germany's DAX index rose 1.9 percent, and France's CAC-40 gained 2 percent.
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Consumer prices jump, industrial production falls
Consumer prices shot up in June by the largest amount in 11 months, reflecting the biggest jump in gasoline prices in nearly five years.
The Labor Department said Wednesday that inflation at the consumer level rose by 0.7 percent last month, slightly higher than the 0.6 percent increase that economists were expecting. It was the biggest one-month gain since a 0.7 percent increase last July.
The big jump was seen as a temporary blip, however. Inflation is not expected to be a problem any time soon given a severe recession which is keeping a lid on wage pressures.
The Federal Reserve reported Wednesday that industrial production fell 0.4 percent in June as the recession crimped output for a wide range of manufactured goods including cars, machinery and household appliances. However, the decline was not as severe as the 1.4 percent plunge in May, a possible sign that the recession is easing its grip.
Underscoring the low threat of accelerating inflation, prices in June compared to a year ago were actually down by 1.4 percent, the biggest year-over-year decline in nearly six decades.
Core inflation, which excludes food and energy, posted a moderate 0.2 percent rise in June, slightly higher than the 0.1 percent rise that economists had expected.
The absence of an inflation threat has allowed the Federal Reserve to drive a key interest rate to a record low in an effort to fight a severe recession which is already the longest since World War II. The central bank pushed its target for the federal funds rate to near zero in December and it is expected to remain there until the nation's unemployment rate, currently at a 26-year high of 9.5 percent, stops rising.
The 0.7 percent jump in the Consumer Price Index in June followed three months of moderation including a small 0.1 percent rise in May.
The upward surge was driven by a 7.4 percent rise in energy prices, reflecting a 17.3 percent increase in gasoline prices, the biggest one-month jump in gas prices since a 20.9 percent spurt in September 2005 after Hurricane Katrina had shut Gulf Coast refineries.
Analysts are looking for gasoline and other energy costs to retreat in coming months. Already, gasoline pump prices are down by about a dime since the start of July.
Food costs edged up a small 0.1 percent in June, held back by a big drop in the cost of dairy products.
The 0.2 percent rise in core inflation left the core inflation rate rising by a moderate 1.7 percent over the past 12 months, reflecting the downward pressure on costs coming from the prolonged recession.
For June, new car prices jumped by 0.7 percent and clothing costs were also up 0.7 percent. However, those gains ere offset by a 0.6 percent drop in airline fares. Price increases were also moderate in the health area with medical care edging up by 0.2 percent, the smallest gain in three months.
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Goldman Sachs earnings easily surpass expectations
Goldman Sachs Group Inc. said Tuesday its second-quarter profit easily surpassed expectations as profit was buoyed by strength in its trading and underwriting businesses.
Long considered one of the strongest banks in the financial sector, analysts widely expected Goldman's profit to continue its rebound. Goldman posted a quarterly loss during the final quarter of 2008 amid the mushrooming credit crisis before returning to profitability in the first three months of 2009.
During the quarter ended June 26, the New York-based banking giant earned $2.72 billion, or $4.93 per share, after preferred stock dividends.
Goldman recorded a charge of 78 cents per share as it repaid the government's $10 billion investment in the bank as part of the Troubled Asset Relief Program. The bank had previously announced it would be taking the charge during the second quarter.
Goldman is the first bank to report second-quarter earnings, and analysts predict other banks' results may not be as strong. Others face greater loan losses because of their focus in retail banking, and their more conservative approach to business after the credit crisis could hinder a return to strong profits.
Bank of America Corp. and Citigroup Inc. have been among the hardest hit by loan losses and have yet to repay government bailout funds. JPMorgan Chase & Co. has repaid the government, but still remains saddled with rising consumer loan losses. All three banks report results later this week.
Goldman's results were even better than its fiscal second quarter last year. For that period, which ended May 30, Goldman reported a profit of $2.05 billion, or $4.58 per share. Goldman shifted its quarterly reporting periods after changing its regulatory structure to become a bank holding company last fall amid the deepening credit crunch.
Analysts polled by Thomson Reuters, on average, forecast earnings of $3.54 per share for the quarter on revenue of $10.66 billion.
Goldman's second-quarter net revenue totaled $13.76 billion. It generated $9.42 billion in revenue during its fiscal second quarter last year.
The bank reported a record $6.8 billion in revenue from fixed income, currency and commodities trading during the quarter. Particularly strong trading in credit and interest rate products and currencies help boost Goldman's fixed income, currency and commodities trading. Equities trading revenue totaled $3.18 billion during the quarter due in part to stronger trading in derivatives. It generated $811 million in revenue from principal investments.
After credit markets nearly shut down last fall, equity and debt markets began to recover during the spring as investors optimism for an economic recovery began to grow. During that recovery, companies that had been stretched for capital flooded equity and debt markets with new offerings to raise sorely needed cash.
Goldman was able to take advantage of that crush of offerings, generating record net revenue of $736 million from underwriting equity offerings during the quarter. Total underwriting revenue, which also includes underwriting debt offerings, totaled $1.07 billion during the quarter.
Goldman's profit would have been better had it not been for a charge taken to repay the government investment.
In early June, Goldman became one of the first banks to repay the government TARP funds it received. The government provided banks with capital in exchange for preferred stock and warrants to purchase common shares. The program was launched last fall after Lehman Brothers collapsed and insurer American International Group Inc. needed a government bailout to remain in business.
The government investment also included certain restrictions, such as caps on executive compensation.
Chafing at the restrictions, and with the cash available to repay the debt, Goldman paid the government the $10 billion to cover the loan. The warrants to purchase common shares, however, remain outstanding.
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Wholesale prices, retail sales rise in June
Higher energy prices rippled through the economy in June, helping to drive a bigger-than-expected gain in retail sales.
The sharp rise in wholesale prices — as well as "core" prices that exclude food and energy — could fan investors' fears about inflation. Economists viewed the energy cost hikes as temporary and not the beginning of a dangerous bout of spiraling prices, but said consumers likely will remain cautious as the unemployment rates ticks up.
The 1.8 percent jump in the Producer Price Index, which tracks the costs of goods before they reach store shelves, came after wholesale prices rose 0.2 percent in May, the Labor Department reported Tuesday. Last month's increase was double what economists expected.
"We don't expect to see these trends stick, especially with crude oil prices coming down," said Anika Khan, economist at Wells Fargo. "We don't see any inflation or deflation at this point."
Many analysts expect the increase in energy prices will be short-lived and that the weak economy will restrain companies from ratcheting up prices they charge consumers.
Retail sales rose 0.6 percent last month, due mainly to higher gas prices and auto sales, the Commerce Department said Tuesday.
Still, the second straight increase in retail sales may be a sign that the economy is on the verge of a rebound. Americans spending more for the rest of this year should help end the longest recession since World War II, but economists maintain that any recovery will be slow.
Over the past 12 months, wholesale prices have actually fallen 4.6 percent.
Stripping out volatile food and energy prices, all other prices rose a bigger-than-expected 0.5 percent in June, the most since October. In May, the core prices dipped 0.1 percent. Economists expect a bump-up in core prices of just 0.1 percent last month.
For the 12 months ending in June, core prices rose 3.3 percent.
In June, energy prices jumped 6.6 percent. Gasoline prices increased 18.5 percent, home-heating oil 15.4 percent and liquefied petroleum gas, such as propane, went up 14.6 percent. All were the biggest increases since November 2007.
Crude oil prices topped $72 a barrel in June but have eased since then. Oil prices hit a record-high of $147 a barrel last July.
Food prices also rose sharply in June. They posted a 1.1 percent gain, after falling 1.6 percent in May.
A 21.8 percent jump in the price of vegetables led the way. Prices for eggs and young chickens also fed the increase in overall food prices as did a record 3.6 percent increase in the price of bottled carbonated soft drinks. The prior record price increase of 2.7 percent in that category came in January 1998.
Higher prices for cars, trucks, furniture and pharmaceutical preparations factored into the pickup in "core prices" in June. Economists blamed higher energy costs for spilling over and helping to push up the prices of other goods. They believe this will reverse as energy prices moderate.
To battle the recession, the Federal Reserve has slashed a key banking lending rate to a record low near zero. It is expected to hold the rate there through the rest of this year to help support the economy and because the central bank doesn't foresee inflation getting out of hand.
Fed Chairman Ben Bernanke and many private economists predict the recession will end later this year. However, they warn that the recovery will be slow. That means the unemployment rate, now at a 26-year high of 9.5 percent, will keep rising, probably hitting double-digits in the months ahead.
At the Fed's last meeting in late June, policymakers dropped concerns that the recession could trigger deflation — a destabilizing and prolonged bout of falling prices and wages.
Fed policymakers did acknowledge that energy and other commodity prices had risen. But they predicted that idle factories and the weak employment market would make it hard for companies to raise prices. The Fed said it expects inflation will "remain subdued for some time."
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Identity thieves target job seekers
Never mind landing the job. Now people on the lookout for employment have another cause for worry: identity theft. As the joblessness rate soars, scammers are ginning up fake Web sites or posing as recruiters to trick job seekers into giving up sensitive personal information.
Corneilus Allison became a potential target after he applied for a position at Aetna (aet.) in January, court documents show. In hopes of securing a position at the insurer, he entered required personal information into Aetna's job Web site. In May he received a response -- but it wasn't an offer of employment. Aetna instead told him that his personal information, including his Social Security number, might have been compromised. Hackers had found their way into Aetna's job application site, managed by an outside vendor, nabbed e-mail addresses of job seekers, and sent correspondence as if from Aetna asking for additional personal information.
A lot of people, many of them unemployed and eager to divulge information they believe will land them a job, are the target of similar scams. "The job-seeker market has slowly but surely been invaded by scammers," says Jay Foley, executive director of the Identity Theft Resource Center.
Cybercriminals have for years built fake sites purporting to be PayPal (NasdaqGS:EBAY - News) or other financial-services firms to dupe Web surfers into giving up data that can in turn be used to defraud. Scammers now appear to be using false job-listing sites more frequently, security experts say. In the U.K., the number of fake job ads rose more than fourfold over the last three years, according to a report released in September by APACS, a U.K. trade association for payments.
Aetna's Breach Sparks a Class Action
In some cases, scam artists sell data on legitimate job seekers to people who lack credentials -- say, illegal residents -- who need the data to land jobs. Of the roughly 313,000 cases of consumers registering complaints of identity theft to the U.S. Federal Trade Commission in 2008, about 15% said thieves had perpetrated employment-related fraud with their stolen identities, according to a February 2009 report by the commission. That's up from 14% of 259,266 identity-theft complaints in 2007.
After Aetna discovered the breach in early May, the company contacted 65,000 job applicants whose e-mails were swiped and offered free credit counseling. About a month later, Allison sued in a class action, accusing Aetna of negligence, breach of implied contract, and invasion of privacy. "Aetna did the right thing by proactively notifying people about this incident and offering free credit monitoring," Aetna spokeswoman Cynthia Michener writes in an e-mailed statement. "It's unfortunate that we're being sued for acting with integrity and honesty." Aetna asked the court to dismiss the lawsuit, calling it meritless. Allison's legal counsel didn't respond to a request for comment. Contact information for Allison couldn't immediately be obtained.
In another popular scam, perpetrators pose as recruiters ready to extend an offer who request Social Security numbers or other personal information to do background checks. "We've even heard cases of fraudsters posing as potential employers, asking for bank account numbers," says Jeremy Miller, director of operations at Kroll's Fraud Solutions Practice. "They're using the fact that a person is looking for a job and has that need, and counting on the fact that they'll do anything to get that job."
A Spike in Craigslist Fraud
It's unclear how many identities are stolen through the job-application process, but ID theft in general is growing. The number of identity-fraud victims reached 9.9 million in 2008, a jump of 22% over 2007, according to the 2009 Identity Fraud Survey Report released in February by consulting firm Javelin Strategy & Research. Economic misfortune may be a contributor to the increase, since higher rates of fraud have historically occurred when the economy worsens, the report says.
On June 11, Colorado Attorney General John Suthers warned consumers of a spike in reported cases of fraudulent job listings on Craigslist and other popular job-search Web sites. In one posting, a foreign company seeks a U.S. resident to handle transactions. The employee would process payments through a U.S. bank and then wire money to his or her new employer. The payment checks are fake, but the victim wouldn't discover that until after wiring money abroad -- and being left holding the bag.
Experts recommend that job seekers take care with personal information, particularly Social Security numbers, and not put it on resumes. Foley recommends using particular caution if a recruiter contacts a job seeker out of the blue, when they didn't apply for a position, and asks for sensitive information. It's a good idea to ask to call the recruiter back and then verify independently that he or she is indeed a representative of that company. Foley also says criminals have tried to harvest personal information from resumes on career sites. Some experts say it's best to send resumes directly to corporate sites.
"Job seekers are faxing and e-mailing and posting on sites where criminals are trying to attack," says William Morrow, chairman and CEO of CSIdentity, a company that offers identity-protection services. "Once you get a few pieces of someone's identity, it's helpful in getting the rest."
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Stocks futures move up ahead of busy earnings week
Stock futures traded higher Monday morning as investors brace for a crush of earnings reports, including key readings from the banking sector, this week.
Futures have moved higher throughout the morning as European markets also gained strength after Asian markets tumbled overnight.
Investors have been cautious as they prepare for earnings reports this week, including from some of the nation's largest financial firms. Banks have been among the hardest hit companies since the recession began in late 2007 as investment and loan losses piled up.
"People are focused on sectors battered the most to see if there is any bounceback," said Dan Deighan, founder of Deighan Financial Advisors in Melbourne, Fla. Financial firms and retail companies will probably be the most closely watched sectors as earnings reports are released, Deighan said.
The nation's largest banks — Goldman Sachs Group Inc., JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. — are all scheduled to report second-quarter results this week.
Commercial finance lender CIT Group Inc., meanwhile, said late Sunday it is talking with regulators about ways to improve its short-term liquidity as recent losses may jeopardize its compliance with capital requirements.
Earnings reports are also expected from major companies in non-financial industries as well this week, including Dow Jones industrial average components Johnson & Johnson, International Business Machines Corp. and General Electric Co. and technology bellwethers Intel Corp. and Google Inc.
The earnings results will give investors a chance to see if there was any meaningful economic improvement during the second quarter. But second-quarter results aren't expected to be stellar, so investors will instead focus on executives' "optimism or pessimism moving forward," Deighan said. Stocks rallied in the spring amid hope of an eventual recovery in late 2009. Investors want evidence that timetable will be met and corporate outlooks could provide it.
Ahead of the opening bell, Dow futures rose 53, or 0.7 percent, at 8,138. Standard & Poor's 500 index futures rose 7.20, or 0.8 percent, at 881.50, while Nasdaq 100 index futures rose 9.25, or 0.7 percent, at 1,425.25.
A host of economic data during the week will also provide some insight into the economy. Investors will get readings on inflation, retail sales, industrial production and housing starts throughout the week.
Last week, stocks continued a four-week slide as the Dow dropped to 8,147, its lowest level since April 28. Investors have been giving back some of the 40-percent gains picked up during a vigorous rally during the spring. Concerns have been mounting that the rally was overdone and investors are now waiting for fresh signs the economy is actually on the mend instead of just weakening at a slower pace.
Bond prices were mixed Monday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.28 percent from 3.30 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.18 percent from 0.16 percent late Friday.
The dollar was mostly lower against other major currencies, while gold prices fell.
Overseas, Japan's Nikkei stock average fell 2.6 percent. In afternoon trading, Britain's FTSE 100 rose 1.2 percent, Germany's DAX index gained 1.7 percent, and France's CAC-40 rose 1.5 percent.
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