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Stimulus saved or created 650,000 jobs: White House
The Obama White House on Friday said it believed the $787 billion economic stimulus plan approved early this year had saved or created about 650,000 jobs so far.
The stimulus, pushed through the U.S. Congress in February by President Barack Obama's Democrats, has been heavily criticized by Republicans because it has done little to stop U.S. unemployment from rising to 9.8 percent.
The Obama administration has been eager to counter the argument that the stimulus has been ineffective amid a Washington debate over whether a second stimulus might be in order.
Administration officials said they looked at $150 billion of the stimulus spending and determined it had created or saved about 650,000 jobs through September 30.
Vice President Joe Biden, who has taken a lead role in promoting the stimulus, was to talk about the report at a midday event.
The 650,000 figure was based on a look at state and local projects and activities paid for by the stimulus such as education funding, highway repairs and construction projects.
The reports did not capture the complete job impact of the tax cuts, direct payments to individuals through such programs as Pell Grants for college education and unemployment compensation.
"The majority of the funds were reported on by state governments, with both Republican and Democratic governors participating in the process," an official said.
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Consumer spending falls in September, incomes flat
Consumer spending plunged in September by the largest amount in nine months, reflecting the end of the government's Cash for Clunkers auto sales program. Incomes, the fuel for future spending, were flat.
While the government reported that the overall economy grew in the July-September period, signaling the end of the worst recession in seven decades, the weakness in spending and incomes as the quarter ended underscores the fragility of the recovery.
Economists worry that the recovery could falter in coming months if households cut back on spending to cope with rising unemployment, heavy debt loads and tight credit conditions.
"With incomes so soft, increased spending will be a struggle," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a note to clients.
The Commerce Department said Friday that spending dropped 0.5 percent in September, the first decline in five months. Personal incomes were unchanged as workers contend with rising unemployment. Wages and salaries fell 0.2 percent, erasing a 0.2 percent gain in August.
A second report showed that wages and benefits including health care rose just 1.5 percent for the 12 months ending in September. That's the smallest increase for the Labor Department's Employment Cost Index on records that date to 1982.
The concern is that much of third-quarter growth stemmed from temporary government programs such as the clunkers sales incentives that ended in August.
The government said Thursday the gross domestic product, the broadest measure of economic health, expanded at an annual rate of 3.5 percent in the third quarter, the first increase after a record four straight declines. A 3.4 percent rise in consumer spending, which accounts for 70 percent of total economic activity, powered the gain.
And consumers appear willing to pay a little more for Colgate toothpaste, Kellogg's Frosted Flakes and Gillette Fusion shavers, according to earnings released Thursday. Procter & Gamble Co., Colgate-Palmolive Co. and Kellogg Co. all gave upbeat reports and even stronger outlooks for next year.
However, some economists believe that consumer spending will slow sharply in the current quarter, lowering GDP growth to perhaps 1.5 percent. Analysts said the risk of a double-dip recession cannot be ruled out over the next year.
The 0.5 percent drop in consumer spending in September followed a 1.4 percent surge in August which was propelled by the big jump in car sales that month as consumers rushed to take advantage of the clunkers' incentives.
Last month's drop in spending resulted in a boost in the savings rate to 3.3 percent of after-tax incomes, up from 2.8 percent in August. Many analysts believe households will keep striving to increase savings in the months ahead to replenish nest eggs that were crushed by last year's stock market crash. That also would hold back spending in the months ahead, weakening the recovery.
The Obama administration is being encouraged to extend some of the elements of the $787 billion economic stimulus package that Congress passed in February to jump-start the economy, but the White House has been cautious in endorsing various proposals being advanced by Democratic lawmakers for fear of pushing the federal budget deficit even higher. The deficit hit an all-time high of $1.42 trillion for the budget year ending Sept. 30.
But inflation remains in check. An inflation gauge tied to consumer spending edged up just 0.1 percent in September, after a 0.3 percent August rise. Excluding food and energy, the gauge rose 1.3 percent over the past year, well within the Federal Reserve's comfort zone.
Fed officials meet next week and economists believe they will again keep a key interest rate at a record low in an effort to support the economy given that inflation is not a threat.
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Oil rises to near $79 on strong US growth data
Oil prices rose to near $79 a barrel Thursday after fresh data showed that the U.S. economy grew faster than expected in the third quarter, raising hopes of a sustained recovery in demand.
By mid-afternoon in Europe, benchmark crude for December delivery had jumped $1.51 to $78.97 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.09 to settle at $77.46 on Wednesday.
The U.S. Commerce Department said the world's largest economy expanded by 3.5 percent in the third quarter of the year, more than analysts were forecasting, and confirming the U.S. is out of recession.
The news boosted equity and commodity markets on hopes that crude demand would recover more quickly than previously anticipated.
Still, separate data was less encouraging and reminded investors that a rebound in growth would be fragile: the Labor Department reported that the number of people claiming jobless benefits for the first time dropped less than expected last week.
On Wednesday, the Energy Information Administration said Wednesday that gasoline stocks rose 1.7 million barrels last week while analysts had expected a fall of 1 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. Crude supplies rose 900,000 barrels last week, the EIA said.
"The bearish EIA report featured some unusually negative gasoline figures," Galena, Ill.-based consultancy Ritterbusch and Associates said in a report. "We feel that further price declines will be forthcoming."
Since last week, crude has retreated from $82 a barrel, the high for 2009, as the U.S. dollar gained back some of its losses from recent months. Because commodities are priced in dollars, they become more expensive — and less attractive — to international investors when the U.S. currency rises.
The euro rose to $1.4799 on Thursday from $1.4714 while the dollar gained to 91.24 yen from 90.64.
"It appears that market participants have come out of self-denial and realized that the build in crude prices is not founded on solid fundamentals," said JBC Energy in Vienna, forecasting that the market was in a "downward correction phase and should continue moving toward the $70 per barrel mark."
In other Nymex trading, heating oil rose 4.45 cents to $2.0414 a gallon. Gasoline for November delivery added 1.90 cents to $2.0054 a gallon, while natural gas for December delivery fell 1.5 cents to settle at $5.051 per 1,000 cubic feet.
In London, Brent crude for December delivery rose 1.44 cents to $77.30 on the ICE Futures exchange.
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Economy grows in 3Q, signals end of recession
The economy grew at a 3.5 percent pace in the third quarter, the best showing in two years, fueled by government-supported spending on cars and homes.
The Commerce Department's report Thursday delivered the strongest signal yet that the economy entered a new, though fragile, phase of recovery and that the worst recession since the 1930s has ended.
The much-awaited turnaround ended the streak of four straight quarters of contracting economic activity, the first time that's happened on records dating to 1947.
It also marked the first increase since the spring of 2008, when the economy experienced a short-lived uptick in growth.
The third-quarter's performance — the strongest since right before the country fell into recession in December 2007 — was slightly better than the 3.3 percent growth rate economists expected.
Armed with cash from government support programs, consumers led the rebound in the third quarter, snapping up cars and homes.
Consumer spending on big-ticket manufactured goods soared at an annualized rate of 22.3 percent in the third quarter, the most since the end of 2001. The jump largely reflected car purchases spurred by the government's Cash for Clunkers program that offered a rebate of up to $4,500 to buy new cars and trade in old gas guzzlers.
The housing market also turned a corner in the summer. Spending on housing projects jumped at an annualized pace of 23.4 percent, the largest jump since 1986. It was the first time since the end of 2005 that spending on housing was positive.
The government's $8,000 tax credit for first-time home buyers supported the housing rebound. Congress is considering extending the credit, which expires on Nov. 30.
The collapse of the housing market led the country into the recession. Rotten mortgage securities spiraled into a banking crisis. Home foreclosures surged. The sector's return to good health is a crucial ingredient to a sustained economic recovery.
Brisk spending by the federal government, led by efforts to stimulate the economy and on defense, also played into the third-quarter turnaround. Federal government spending rose at a rate of 7.9 percent in the third quarter, on top of a 11.4 percent growth rate in the second quarter.
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A New Executive-Search Business Model
Most in business would agree that one key to success lies in valuing the differences and experiences that each individual on your team represents. That's what good team building and performance is all about. Few think of this as diversity, but at its core, diversity is about valuing the difference that each person brings to the organization.
Brian Duperreault, CEO of management and insurance consultancy Marsh & McLennan (NYSE:MMC - News), understands this. Earlier this year, I and several of my colleagues at executive search firm Heidrick & Struggles (NasdaqGS:HSII - News) met with Brian and his global human resources chief, Orlando Ashford. During the meeting in Brian's New York office, he talked about his commitment to further diversify the MMC workforce.
What excited my colleagues was that they saw what I already knew: Diversity solutions could lead to more business opportunities. If we could present a compelling plan to bring Brian a diverse slate of executive talent, it would mean that MMC would potentially commit more business to us.
In a brainstorming session with Orlando, we proposed that Heidrick could help MMC increase minority representation at the company. Orlando wanted to do more business with minority- and women-owned executive search firms, who he felt had greater access to diverse talent than most mainstream search firms. We proposed to go a step further: MMC could hire Heidrick, and we would team up with minority- and women-owned search boutiques, called our Inclusion Network, and manage their efforts to help us recruit diverse talent across MMC's five operating companies.
Global Reach as Well as Specialization
This plan resonated with Orlando because it allowed MMC to benefit from both the global reach and deep industry knowledge of a major firm like Heidrick, as well as from the diverse networks and industry specialization that a search boutique can bring to the table -- and MMC wouldn't have to manage multiple firms. Heidrick would shoulder the risk and work involved in such management.
There are advantages for everyone in this model. By partnering with a large search firm like Heidrick, which has far more leverage with global corporations, the boutique firms gain exposure to large clients such as MMC -- exposure they have historically had difficulty securing. And MMC, in turn, gets a slate full of quality diverse candidates without having to worry about the challenge of managing multiple vendors. The arrangement also positions Heidrick to become a preferred diversity solutions provider -- the one that not only delivers exceptional executives but also fulfills our client's pressing need to satisfy diversity goals and secure their bottom line.
With such approaches, Heidrick & Struggles is changing the traditional model of executive search. The new model will require strategic alliances, partnerships, and unique solutions to complex challenges in talent acquisition. Our clients are looking for us to add value as business consultants in the full range of leadership advisory services, including succession planning, team effectiveness, organizational performance, and diversity to name a few. Our Inclusion Network puts Heidrick at the forefront of this emerging model in the executive search industry.
We will roll out the initiative this fall. Our goal is to take our Inclusion Network beyond MMC to multiple clients and various industries -- and put to work a concept we believe is just the beginning of a new business model in executive search that will soon revolutionize our industry.
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Shell cuts 5,000 jobs as profits tumble
Oil majors Royal Dutch Shell Plc (RDSa.L)and Eni (ENI.MI) dashed hopes of an imminent turnaround for the industry, as sluggish economic recovery weighs on energy demand and prices, contributing to a big drop in profits.
Shell, Europe's largest oil company by market value, said on Thursday it was cutting 5,000 jobs, after net profit dropped 73 percent in the third quarter to $2.99 billion.
Italy's Eni said it was cutting its production forecast for the year due to lower gas demand, and project deferrals aimed at saving cash, as it unveiled a 58 percent drop in net profit.
The results and pessimistic outlook contrast with London-based BP Plc's (BP.L) third-quarter earnings which smashed forecasts by 50 percent, lifting sector shares on Tuesday on hopes the industry would weather the economic slump better than expected.
Shell and Eni's cautious comments echo worries in recent days about the fragility of the recovery, after weak U.S. new homes sales data, which also weighed on crude markets.
"We see some indications that energy demand and pricing are improving, but the outlook remains very uncertain, and we are not expecting a quick recovery," Shell Chief Executive Peter Voser said in a statement.
Analysts at Citigroup said Shell's results painted a "disappointing picture" and added Eni's comments would boost worries about its ability to grow production.
Shell's London-listed A shares traded down 4.5 percent at 1,825.5 pence at 1109 GMT on Thursday, while Eni's shares dropped 2.6 percent to 17.1 euros against a 1.0 percent drop in the DJ Stoxx European oil and gas sector index (.SXEP)
REMEDIAL MEASURES
Oil companies are tackling the downturn by slashing costs, which doubled as oil prices soared between 2004 and 2008.
Voser said the restructuring program he launched just before taking the helm in July had lowered costs by $1 billion, excluding $2.5 billion in savings related to foreign exchange moves, in the first nine months of 2009.
BP said earlier this week it had achieved savings of $3 billion, including currency benefits, and is now targeting another $1 billion by year-end.
Operationally, the companies failed to shine, with Shell's oil and gas production in the quarter flat compared with the same period in 2008, at 2.93 million barrels of oil equivalent per day (boepd), while Eni's output dropped 5 percent.
Shell's Chief Financial Officer Simon Henry refused to promise a return to output growth in 2010, despite a downward trajectory for this year and a target of 2-3 percent average annual growth between 2009 and 2012.
In addition to a 40 percent drop in Brent crude prices and a 65 percent drop in UK and U.S. gas prices, the companies' earnings were hit by a collapse in refining margins.
Henry warned that the refining environment was unlikely to improve in the short or medium term, echoing comments from the CEO of Finnish refiner Neste Oil (NES1V.HE), which also unveiled a big drop in profits on Thursday.
Analysts expect oil companies to remain focused on paring overheads.
"We believe we will see further cost reduction over the next 12-18 months well in excess of what we have seen," said Gordon Gray, oil analyst at Collins Stewart.
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First-time jobless claims drop less than expected
The government says the number of people claiming jobless benefits for the first time droppped slightly last week, evidence that the labor market remains weak even as the economy is recovering.
The Labor Department said Thursday its tally of newly laid-off workers seeking unemployment insurance fell by 1,000 to a seasonally-adjusted 530,000 last week. Analysts expected a steeper drop to 521,000.
Still, the four-week average, which smooths out volatility, fell for the eighth straight week to 526,250, its lowest level since early January. Claims are slowly declining as companies lay off fewer workers.
The number of people continuing to claim benefits, meanwhile, has dropped sharply by 148,000 to 5.8 million, below analysts' expectations.
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Stocks rise as hopes for earnings grow
Stocks rose Monday as investors grew more hopeful that corporate earnings would continue to improve and as a weak dollar drove oil higher.
Traders looked to another busy week of earnings reports. Investors will look for clues about a possible pickup in consumer spending when companies including Kellogg Co., Procter & Gamble Co. and Visa Inc. report earnings.
The energy and insurance industries also will be in focus throughout the week with ConocoPhillips and Exxon Mobil Corp. as well as Aetna Inc. and MetLife Inc. scheduled to release quarterly results.
In early trading, the Dow Jones industrial average rose 91.97, or 0.9 percent, to 10,064.15. The Standard & Poor's 500 index rose 11.37, or 1.1 percent, to 1,090.97, while the Nasdaq composite index rose 26.37, or 1.2 percent, to 2,180.84.
Four stocks rose for every one that fell on the New York Stock Exchange, where volume came to 209.6 million shares compared with 265.4 million shares traded at the same point Friday.
The Dow fell 0.2 percent last week, while the S&P 500 index fell 0.7 percent.
Bond prices fell as stocks rose and as the government prepared to auction more than $120 billion in debt this week. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.55 percent from 3.49 percent late Friday.
The dollar fell against most other major currencies, while gold rose.
Crude oil rose 82 cents to $81.32 per barrel on the New York Mercantile Exchange.
The Russell 2000 index of smaller companies rose 8.65, or 1.4 percent, to 609.51.
Overseas, Japan's Nikkei stock average rose 0.8 percent. In afternoon trading, Britain's FTSE 100 gained 0.6 percent, Germany's DAX index rose 0.9 percent, and France's CAC-40 rose 0.8 percent.
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Home sales rise 9.4 pct in September, beats forecast
Home resales in September clocked the largest monthly increase in 26 years as buyers scrambled to complete their purchases before a tax credit for first-time owners expires.
Sales jumped 9.4 percent to a seasonally adjusted annual rate of 5.57 million last month, from a downwardly revised pace of 5.1 million in August, the National Association of Realtors said Friday.
That pace was the strongest in two years and beat Wall Street forecasts. Sales had been expected to rise to an annual rate of 5.35 million, according to economists surveyed by Thomson Reuters.
"There's a mini-boom going on in the housing market," said Thomas Popik, who conducts a monthly survey of real estate agents for Campbell Communications, a research firm.
Nationwide sales are up nearly 24 percent from their bottom in January, but are still down 23 percent from four years ago.
Prices, however, continued to be dragged down by foreclosures and short sales, where the mortgage exceeds the sales price. The median price last month was $174,900, down almost 9 percent from $191,200 a year earlier, and slightly lower than August's median of $177,300.
The inventory of unsold homes on the market fell about 7 percent to 3.63 million. That's less than an eight-month supply at the current sales pace, and the lowest level since March 2007.
Sales rose around the country, especially in the West, where they grew 13 percent from a month earlier. Foreclosure sales are booming in cities like Los Angeles, San Diego and Las Vegas.
First-time homebuyers and investors are snapping up those homes and taking advantage of low mortgage rates. These buyers can also take advantage of a tax credit of 10 percent of the sales price, up to $8,000, if the sale is completed by the end of November.
The tax credit is so important to some buyers that they are adding a clause to their contracts, allowing them to back out if the sale doesn't close by Nov. 30. However, economists note that bargain-priced foreclosures and low mortgage rates are making a big contribution to the sales boom.
"We think the housing market has touched bottom and it is now only a matter of time until home prices stabilize — something that we anticipate to occur in late 2010," wrote Joseph LaVorgna, chief U.S. economist at Deutsche Bank.
Prices could fall further because rising unemployment leads to more foreclosures. The jobless rate, currently at 9.8 percent is expected to rise as high as 10.5 percent next year, causing more people to fall behind on their mortgages.
"There's more supply that's going to come into the marketplace," said Stan Humphries, chief economist at real estate Web site Zillow.com. "That additional supply will outpace demand."
With concerns about the housing market still prominent, Congress is considering several proposals to extend the tax credit for first-time buyers. Senators Johnny Isakson, R-Ga., and Christopher Dodd, D-Conn., want to extend it through June 30, and expand it to include all home buyers, at an estimated cost of $16.7 billion.
Realtors and homebuilders are loudly in favor, arguing that the tax credit is crucial to get the housing market back on its feet.
"We are not there in terms of removing the consumer fear factor," said Lawrence Yun, the Realtors' chief economist.
However, some analysts say the tax credit may not be as critical to the housing market as real estate agents suggest. "The group has an incentive to talk up the effects of the credit as it is urging Congress to extend it, and it therefore may be exaggerating the credit's effects," wrote Zach Pandl, an economist with Nomura Securities.
One potential roadblock to an extension also emerged this week. There are concerns that some of the 1.5 million applications for the tax credit are fraudulent.
At a hearing on Thursday the Treasury Department's inspector general for taxes questioned the legitimacy of some 100,000 claims for the credit, potentially including some illegal immigrants and 580 people under 18. The youngest taxpayers to apply for the credit were 4 years old.
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Banks cut back on emergency loans from Fed
Banks cut back on loans from the Federal Reserve's emergency lending program over the past week, a sign some credit problems are easing as the economy recovers.
The Fed on Thursday said commercial banks averaged $23.8 billion in daily borrowing over the week that ended Wednesday. That was down from $27.4 billion in the week ended Oct. 14.
The identities of the financial institutions are not released. They pay just 0.50 percent in interest for the emergency, overnight loans.
Banks also trimmed their use of other credit programs set up to ease the financial crisis, including one aimed at boosting the availability of short-term financing crucial for paying salaries and supplies.
The Fed's net holdings of "commercial paper" averaged $39.8 billion, a drop of $979 million from the previous week. At its peak in late January, the Fed held almost $350 billion of commercial paper.
Elsewhere, banks' use of short-term loans drawn from the Fed's "term auction credit" facility averaged $155.4 billion, nearly the same as the previous week.
The reduced borrowing in the past week shows banks are having a slightly easier time getting short-term loans in private markets, an encouraging sign.
But bank customers — both businesses and individuals — are still having trouble securing loans. There's been improvements since the financial crisis struck last fall, but the flow of credit is not back to normal. That's one reason Fed Chairman Ben Bernanke and other economists believe the budding economy recovery will be lethargic.
The report Thursday also showed that the central bank boosted its purchases of mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac. Those purchases averaged $766.5 billion over the past week, an increase of nearly $64 billion from the previous week.
The Fed at its meeting last month decided to slow down its purchases of these securities. The central bank will wrap up its $1.25 trillion program by the end of March, rather than by the end of this year. The goal of the program is to drive down mortgage rates and prop up the housing market.
The Fed's program has been credited with helping to force down mortgage rates.
Rates on 30-year home loans averaged 5 percent this week, down from 6.04 percent a year ago, Freddie Mac, the mortgage company reported. The rate was 4.92 percent last week.
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Boeing posts $1.6B loss in 3Q on plane charges
Boeing Co. lost $1.6 billion in the third quarter as hefty charges from its delayed 787 and revamped 747 dragged down results. Those charges also forced the airplane maker to slash this year's profit forecast.
Shares of the Chicago-based company fell 59 cents, or 1 percent, to $51.30 in pre-market trade after results were announced Wednesday.
Boeing, the world's second-largest commercial plane maker after Europe's Airbus, has struggled with a series of setbacks: production problems have delayed its eagerly awaited 787 passenger aircraft and a bigger version of its 747 jumbo jet, resulting in write-downs and additional design and manufacturing costs.
The expected charges, totaling $3.62 billion, led the company to cut its 2009 profit forecast to $1.35 to $1.55 per share, down from $4.70 to $5 per share. Analysts had predicted $1.53.
Earlier this month, Boeing said it planned to record a $1 billion charge because of delays of its 747-8 jet.
That was the second time in four months the company had postponed a new aircraft model.
In June, it announced the latest of several delays of its 787, a highly anticipated passenger jet designed for fuel efficiency with carbon composite parts. That plane, Boeing's best-selling new plane, is more than two years behind schedule.
Boeing said it would book a $2.5 billion charge in the third quarter for the first three 787 test planes, which lack commercial value. On Wednesday, Boeing disclosed an additional charge of 14 cents per share for spending on those planes in August and September. The company plans to fly the 787 for the first time by the end of the year.
The 747 has been flying for four decades and is one of the world's best-known airplanes. The 747-8 version was unveiled in 2005 and is designed to be larger and more fuel-efficient. The passenger version of the 250-foot plane, called the Intercontinental, seats 467 passengers.
The plane setbacks have damaged Boeing's credibility among analysts and investors.
Meanwhile, weak demand for air travel and cargo services has undermined demand for Boeing's jetliners since the global economy deteriorated late last year. Some customers have been forced to cancel or delay plans to buy new aircraft.
Boeing's quarterly loss amounted to $2.23 per share. That compared with earnings of $695 million, or 96 cents per share, a year earlier.
Sales from the company's defense business, which makes fighter jets, satellites and security systems and accounts for about half the company's overall revenue, lifted revenue 9 percent to $16.69 billion in the latest quarter. However, revenue a year earlier was reduced by $2.1 billion by a labor strike and problems with suppliers.
Analysts expected a loss of $2.12 per share on revenue of $17.16 billion. Wall Street estimates typically exclude one-time charges.
Boeing said its order book shrank 2 percent during the quarter, to $320 billion, due to dwindling demand across its commercial airplane and defense businesses.
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Wells Fargo 3Q profit rises, but so do loan losses
Wells Fargo & Co. on Wednesday reported a $2.6 billion third-quarter profit as the company's retail banking operations, including the loan business it acquired with the purchase of Wachovia Corp., offset its rising loan losses.
Shares added 11 cents to $30.57 in early trading.
San Francisco-based Wells Fargo joined other big banks in reporting continuing heavy losses from failed loans. Well Fargo said credit losses climbed to $5.1 billion, or 2.5 percent of its loan portfolio. That is up from $2 billion a year ago and $4.4 billion in the second quarter.
Unlike its retail banking peers, however, Wells Fargo was profiting from it traditional banking operations, which includes the big mortgage business it took on when it bought Wachovia at the height of the credit crisis a year ago. Wells Fargo reported interest income of $5.57 billion after accounting for $6.1 billion in credit losses, which includes the loan losses and adding more money to its loan loss reserves.
The increase in loan losses follows the pattern at other top U.S. banks, including Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. Those banks' results, however, were supported by their robust trading businesses. Wells Fargo has a relatively small trading operation.
Wells Fargo also offered a more upbeat outlook than some of the other banks, saying it expects credit losses to peak in 2010, with consumer losses possibly even peaking by the first half of the year.
The nation's fourth-largest bank reported a third-quarter profit of $2.64 billion, or 56 cents per share, after paying preferred dividends, up from $1.64 billion, or 49 cents per share, a year ago. Analysts, on average, were expecting earnings of 37 cents per share.
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Stocks open higher; profits at banks provide boost
Stocks edged higher early Wednesday as investors found some encouragement from the latest batch of earnings reports.
A handful of banks, including Wells Fargo and Morgan Stanley, reported better results for the July-September period Wednesday. However both those banks also reported high loan losses, bringing fresh reminders that the broader economy is struggling even as the financial industry recovers.
Last week, Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. all reported higher credit losses as consumers and businesses struggle to pay off their bills.
Many other companies were also reporting third-quarter results, not all of them positive. Continental Airlines Inc. cited lower revenue from business travelers as it reported a loss for the third quarter. Competitor AirTran Airways posted a profit, benefiting from the discount carrier's low costs and focus on domestic routes where it believes it can make money.
On Tuesday, United Airlines said it is seeing early signs of a recovery in business travel as it reported a smaller-than-expected quarterly loss.
Investors are eager to see whether companies from a range of industries on continue to post better-than-expected earnings. Soft U.S. housing data on Tuesday squelched some of the market's optimism, sending major indexes down about half a percent.
In the first hour of trading, the Dow Jones industrial average rose 40.81, or 0.4 percent, to 10,082.29.
The broader Standard & Poor's 500 index rose 5.87, or 0.5 percent, to 1,096.93, and the Nasdaq composite index rose 16.82, or 0.8 percent, to 2,180.29.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.40 percent from 3.34 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, was unchanged from 0.08 percent late Tuesday.
The dollar mostly fell against other major currencies. Gold prices also fell.
Crude oil fell 30 cents to $78.82 per barrel on the New York Mercantile Exchange.
The Russell 2000 index of smaller companies fell 6.13, or 1 percent, to 619.54.
Overseas, Japan's Nikkei stock average fell 0.03 percent. In afternoon trading, Britain's FTSE 100 fell 0.6 percent, Germany's DAX index fell 0.4 percent, and France's CAC-40 slid 0.7 percent.
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Stock futures point to higher Wall Street open
The stock market pointed to a higher open Monday as investors awaited companies' earnings reports for clues about consumers' mood and the economy's health.
The toy maker Hasbro Inc. reported higher third-quarter profits, citing cost-cutting, but also reported that its revenue fell. Gannett Co. also cited cost-cutting for a profitable third quarter. But the latest financial results for the country's largest newspaper publisher show another big decline in ad revenue.
Later in the day, Apple Inc. and Texas Instruments Inc. are scheduled to release earnings.
Investors are anxious to see if companies from a broad range of industries fared better in the quarter than banks did.
Dow Jones industrial average futures rose 51, or 0.5 percent, to 9,975. Standard & Poor's 500 index futures rose 5.70, or 0.5 percent, to 1,087.70, while Nasdaq 100 index futures rose 8.50, or 0.5 percent, at 1,740.00.
Disappointing earnings from Citigroup Inc. and Bank of America Inc. chilled some of investors' optimism last week. Their results showed that loan losses remain high meaning consumers and businesses are having trouble paying their bills.
Traders who had sent Dow over 10,000 for the first time in a year, questioned if reports still to be released by hundreds of companies would also point to a lackluster recovering economy. But some of that concern seemed to have faded by Monday.
Global markets were also focused on U.S. earnings reports, hoping for signs of economic strength.
Japan's Nikkei stock average fell 0.2 percent. In afternoon trading, Britain's FTSE 100 was up 0.6 percent, Germany's DAX index was up 1.3 percent, and France's CAC-40 was up 1.2 percent.
Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.43 percent from 3.42 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.08 percent from 0.05 percent late Friday.
The dollar fell against other major currencies, while gold prices rose.
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Gannett ad sales still dropping despite 3Q profit
Profits at Gannett Co. fell 53 percent in the third quarter as the nation's largest newspaper publisher endured another big decline in ad revenue.
Cost cutting helped keep Gannett company profitable, following a pattern it and other newspaper publishers have shown.
Advertising sales in the publishing division of Gannett, which includes USA Today and more than 80 other newspapers, dropped 28 percent from a year ago. That follows a 32 percent decline in the second quarter and a 34 percent decline in the first.
Overall revenue fell 18 percent to $1.34 billion.
Layoffs, other belt-tightening moves and falling newsprint costs helped the company earn $73.8 million, or 31 cents per share. That was down from $158.1 million, or 69 cents per share, a year earlier.
Excluding unusual items, Gannett said it would have earned 44 cents per share. On that basis, analysts expected 41 cents, according to Thomson Reuters. On Sept. 29, Gannett guided analysts to expect 39 cents to 42 cents per share.
Gannett shares rose 33 cents, or 2.5 percent, to $13.33 in premarket trading.
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CIT still might face bankruptcy after debt swap
Struggling lender CIT Group is warning that it might still file for bankruptcy even if it completes a revised debt restructuring plan, according to a regulatory filing Monday.
The New York-based lender to small and midsize businesses is trying to slash its near-term debt burden.
On Friday, it sweetened the restructured exchange offer to current bondholders as it tries to ensure the offer's success. The revised offer gives bondholders a better interest rate and shorter maturities on new debt.
The revised offer would also give the government a 5.4 percent stake in the lender, up from a proposed 2.4 percent under the original plan. The government provided CIT Group $2.3 billion in loans last fall amid the peak of the credit crisis.
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Dollar gains as US earnings temper recovery hopes
Dollar momentum continued Friday as more disappointing earnings signaled to investors that the economic recovery will likely be muted.
The 16-nation euro dropped to $1.4880 from $1.4931 late Thursday, while the dollar rose to 91.03 Japanese yen from 90.65 yen. The British pound, meanwhile, gained to $1.6360 from $1.6268.
Also on Friday, the government said that foreigners continued to buy long-term U.S. financial assets in August, although China, the No. 1 holder of U.S. Treasurys, cut its holdings of government debt.
Demand for U.S. assets is important for dollar demand, because foreigners must buy greenbacks in order to purchase American assets. Another concern is that some economists worry that if foreign institutions don't keep buying U.S. debt, funding our budget deficits, interest rates could rise amid inflation. Inflation eats away at the purchasing power of a currency.
China, meanwhile, alongside several other emerging countries, has been pushing for an alternative to the dollar as a reserve asset as it diversifies its holdings. A falling dollar means its reserves are not worth as much.
Recent figures from the International Monetary Fund showed that the dollar's share of total reserves has fallen to its lowest level since 1995.
On Friday, both General Electric Co. and Bank of America Corp. showed credit weakness as businesses and consumers struggle with debt. BofA said loan losses were nearly $10 billion.
That's a bad sign for the economy, weighing on stocks. The Dow Jones industrial average dropped 1.1 percent in morning trading. But it's good for the dollar, which continues to trade inversely to equities as investors seek out "safe" investments.
In other morning trading, the dollar rose to 1.0395 Canadian dollars from 1.0331 late Thursday, and gained to 1.0201 Swiss francs from 1.0155 francs.
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Foreign demand rises for long-term US assets
Foreign demand for long-term U.S. financial assets rose in August even though China trimmed its holdings of Treasury securities.
Foreigners purchased $28.6 billion more in assets than they sold in August, according to Treasury data released Friday. That followed a net increase of $15.3 billion in July, and $90.2 billion in June.
The Treasury Department is auctioning record amounts of debt to cover a deficit estimated to have hit $1.41 trillion for the budget year that ended in September. Some economists worry that if overseas buyers don't keep buying U.S. debt, interest rates could rise. Inflation eats away at the purchasing power of a currency.
China trimmed its holdings by $3.4 billion to $797.1 billion in August, but still remained the largest foreign holder of Treasury securities.
Japan, the second largest foreign holder, boosted its Treasury securities to $731 billion, from $724.5 billion in July.
The federal budget deficit for 2009, which will be officially released later Friday, is expected to more than triple last year's record imbalance. The Congressional Budget Office projects that under President Barack Obama's spending plans, the red ink will total $9.1 trillion over the next decade.
The 2009 deficit ballooned as the government spent massive amounts to stabilize the financial system and jump-start the economy. In addition, revenues plunged as millions of Americans lost their jobs and recession-battered companies paid less in corporate income taxes.
China's foreign holdings of Treasury securities are a direct result of the huge trade deficits the U.S. runs with China. The Chinese take the dollars Americans pay for Chinese products and invest them in Treasury securities and other dollar-denominated assets.
American manufacturers argue that the huge dollar reserves China is building up reflect a strategy by the Chinese government to keep its currency artificially low against the dollar to gain trade advantages. A weak Chinese currency makes Chinese goods cheaper to American consumers and U.S. products more expensive in China.
However, the administration on Thursday declined to cite China as a currency manipulator in its latest currency report to Congress.
China, alongside several other emerging countries, has been pushing for an alternative to the U.S. dollar as a reserve asset as the emerging Asian power diversifies its holdings. A falling dollar means its reserves are worth less.
Recent figures from the International Monetary Fund showed that the dollar's share of total reserves has fallen to its lowest level since 1995.
The dollar's reaction was muted Friday. The 16-nation euro dropped to $1.4880 from $1.4931 late Thursday, while the dollar rose to 91.03 Japanese yen from 90.65 yen. The British pound, meanwhile, gained to $1.6360 from $1.6268.
The Chinese currency is not freely traded. The dollar edged up to 6.8266 yuan from 6.8259 late Thursday, according to Thomson Reuters data.
Treasury also said Friday that Russia boosted its holdings of Treasury securities in August by 3.1 percent to $121.6 billion. The holdings of oil exporting nations were unchanged at $189.2 billion.
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Finance arm pushes down General Electric 3Q profit
General Electric's third-quarter results showed just how fragile the U.S. economy remains, as its troubled financial unit dragged down earnings 44 percent, despite gains in divisions that make wind turbines, household appliances and broadcast television shows.
The report from one of the nation's largest companies illustrates the damage from a severe recession that has only recently begun to lift, leaving consumers and businesses devastated by high rates of defaults in everything from credit cards to mortgages.
CEO Jeffrey Immelt described the current environment as "tough" but said the global economy is slowly recovering.
General Electric Co.'s total quarterly profit fell to $2.4 billion, or 23 cents per share, hurt sharply lower earnings at its GE Capital arm, which loans money for businesses ranging from credit cards to shopping centers. A year earlier, the Fairfield, Conn.-based company earned $4.3 billion, or 43 cents a share.
GE's overall revenue fell 20 percent to $37.8 billion, coming up short of what Wall Street was looking for. It's a sign that the conglomerate still faces a long road to recovery.
Shares of the company fell 52 cents, or 3.1 percent, to $16.27 in pre-market trading.
GE has struggled to overcome GE Capital's troubles, which include big losses from real estate. The financial unit'sprofit dropped 87 percent during the quarter.
GE is relying on its industrial side — whose divisions build dishwashers, sonogram machines, locomotives and wind turbines — to help it rebuild profits following the recession, which began in late 2007 and has burdened the U.S. economy with huge job losses, a tight credit market and sharply lower home values across much of the nation.
GE's industrial businesses, however, are showing signs of revival. Profits edged up 4 percent, helped by gains in divisions that make power plant turbines and refrigerators. Still, sales declined 13 percent, an indication that demand remains lackluster.
Meanwhile, GE is trying to shrink the size of GE Capital, which once made up nearly half its profits. It also wants to reduce the financial unit's reliance on risky forms of funding and has propped up GE Capital with infusions of cash.
But investors are still nervous about looming problems at some of GE Capital's larger businesses, like its big holdings and loans in office buildings, shopping centers and other commercial properties.
Many analysts believe that market is heading for a major crisis. The commercial real estate unit lost $538 million during the third quarter, the only GE Capital division that failed to post a profit.
GE is also reportedly trying to shed NBC Universal through a deal to sell the entertainment division to cable company Comcast Corp. NBC has suffered from a decline in advertising, but the unit posted a bigger profit last quarter.
The past year has been a painful one for GE, as it slashed its dividend for the first time since the Great Depression to save cash and lost its coveted top credit rating.
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At foreclosure auctions, broken dreams on sale
The seven-bedroom, three-bath house in this city's West Garfield Park neighborhood had once been someone's American Dream.
But at a recent auction of about 100 foreclosed houses and condos, it was just Property No. 20 -- and drawing no bids from a roomful of buyers despite its bargain-basement price.
"Any interest in this home at $7,000?" fast-talking auctioneer Renee Jones asked the crowd. "If not, we'll move on."
Saddled with swollen portfolios of foreclosed and unsold properties in the housing crisis, U.S. lenders and builders are turning to professional auctioneers to help them unload the unwanted real estate in a hurry.
It is an open question whether the auctions indicate that the U.S. real-estate market is recuperating or is still in intensive care.
But the rapid-fire, under-the-hammer sales -- usually resorted to only after every other effort to market a property has failed -- are on the rise across the United States, providing a colorful burst of activity in a corner of the weak economy that needs all the life it can get.
"Over the last two years, we've progressively seen more and more of these," said Chris Longly, the deputy executive director of the National Auctioneers Association trade group. "It's a sign of the times."
Hard data on the number of foreclosed properties being sold at auction are hard to come by. "The foreclosure market is a moving target right now," said Dave Webb of Hudson & Marshall, one of the biggest auctioneers in the market.
But Hudson & Marshall and its rivals say they are gearing up for more in the coming months, convinced that a moratorium on foreclosures earlier this year only postponed what they believe is an inevitable avalanche of new repossessions.
"The foreclosures are going to explode again," said Webb.
DREAMS ON THE CHOPPING BLOCK
The cadence and rhythm of the auctions, and the great deals that many buyers walk away with, make the events exciting to watch -- and make it easy to forget the heartache that lies behind almost every forced property sale in a country where home ownership is often equated with "The American Dream."
At the weekend Chicago event, Jones managed to race through the 100 properties up for bid in less than two hours.
When a home did not immediately attract interest or the minimum price, Jones, wielding her gavel in front of a giant tote board, wasted no time moving on.
Kendi Kiogora, a 28-year-old first-time home buyer, said she felt like she "won the lottery" when she bought a one-bedroom, one-bath apartment in Chicago's trendy South Loop neighborhood, with skyline views and heated parking, for just $105,000 -- $62,000 less than its last listed price.
Real-estate professionals in attendance were less euphoric.
Antonette Taylor, an agent at a brokerage that plans to start holding auctions this fall, said the low prices -- most sold for 30 to 50 percent below their last deeply-discounted list price -- made her "a little nervous for my sellers."
Other troubling signs: buyers passed on almost half the properties offered in Chicago and fewer than 100 bidders showed up for the event, which also attracted some online buyers.
"We're having a difficult day," said Tom Atkins of Zetabid, the company holding the auction. "There was a $1,000 property that no one bid on. You'd think a slum lord at the very least would buy it and put a (federal housing assistance voucher) renter in there for $600 a month."
Atkins said bidders at auctions are generally evenly split between first-time homebuyers and veteran investors. Zetabid has a special VIP area near the auctioneer's dais so bidders can raise their paddles with one hand even as they sign contracts with the other.
Among the investors was Thomas Smith, 48, who paid $16,000 for a five-bedroom, three-bath home in Englewood, a notoriously violent neighborhood on Chicago's South Side he called "the murder capital of the world."
Smith figured another $15,000 in repairs would render the place rentable and said his ideal tenants would be "people...who fell off the ladder a little bit. I'm not trying to make a million dollars or anything."
BETTER THAN NOTHING
Later, when the nine-bedroom, four-bath property that David Kosak's boss had been trying to sell for a year went under the hammer, it fetched just $15,000 -- less than one-third its last list price but a figure the 23-year-old broker's assistant called "better than anything we've gotten."
Asked if he thought the auction activity might be a sign the property market was improving, Kosak was less upbeat.
"If it's getting better, we're not seeing it," he said. "We only do foreclosures, and we're only getting busier."
Whitney Tilson, a managing partner of T2 Partners and Tilson Mutual Funds and the author of "More Mortgage Meltdown: 6 Ways to Profit in These Bad Times," said there is a reason Kosak's office is getting busier.
After Barack Obama's election as U.S. president last year, Fannie Mae and Freddie Mac, the two government-sponsored mortgage giants, imposed a foreclosure moratorium that lasted about four months. Many private banks followed suit.
As a result, there was a gap in the pipeline of foreclosed homes that pushed into late spring. That helped auction prices stabilize for a few months and permitted some analysts to claim the market had found its bottom.
But the moratoriums have now expired. With the mortgage modification and foreclosure prevention efforts championed by the Obama administration unable to keep pace with defaults, as many as 7 million homes and condos may eventually enter foreclosure before the dust finally settles, according to a report by Amherst Securities Group issued in September.
"There are a lot of things that have temporarily stabilized the market," Tilson said. "But those things are going away ... Delinquencies are spiking. This is going to be a mess."
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Citi results weighed down by failed loans
Citigroup provided a sobering reminder Thursday that the economy is still struggling, reporting that its third-quarter results were weighed down by billions of dollars in failed loans.
The bank reported a $101 million profit before accounting for $288 million in preferred stock dividends and the debt exchange offer that gave the government a 34 percent stake in the bank. Including those items, the New York-based bank reported a $3.24 billion loss.
Investors reacted negatively to the bank's report of continuing heavy loan losses, and sent Citigroup shares down 24 cents, or 4.8 percent, to $4.76 in morning trading.
The bank, one of the hardest hit during the credit crisis and recession, said loan losses during the quarter came to $8 billion, down $386 million from nearly $8.4 billion in the second quarter, but a sign that many consumers continue to be overwhelmed. Banks including Citigroup had warned when second-quarter earnings were released that loan losses would continue into next year.
John Gerspach, Citigroup's chief financial officer, said during a call with media that the view of credit in North America is "somewhat mixed."
Citigroup said it added $800 million to its loan loss reserves during the third quarter, down $3.1 billion from the addition it made during the second quarter.
Citigroup, like other national banks, has seen more customers stop repaying loans as the economy falters and unemployment rises. Credit card defaults and mortgage losses are likely to continue to climb. Losses on credit cards typically mirror unemployment, which rose to 9.8 percent in September.
Economists predict the jobless rate will pass 10 percent in the coming months.
The debt exchange offer completed during the quarter gave Citigroup a better mix of capital to withstand additional loan losses and further weakening in the economy. It resulted in the government owning a 34 percent stake in Citigroup. The company took an accounting charge of $3.06 billion as a result of the exchange, contributing to the majority of its third-quarter loss.
Citigroup has received $45 billion in loans from the U.S. government, part of which was converted to that ownership stake. It has also received guarantees to protect against losses on more than $300 billion in risky assets.
As part of its efforts to rebuild, Citigroup in January split its operations into two entities: Citicorp and Citi Holdings.
Citicorp, its core consumer and corporate banking operation, had $2.3 billion profit in the third quarter.
Citi Holdings, which contains the money-losing businesses and toxic assets the bank plans to sell, showed a $1.9 billion quarterly loss. It was weighed down by the heavy losses tied to private-label credit cards, mortgages, and consumer loans.
JPMorgan Chase & Co., which reported quarterly results Wednesday, also struggled with rising loan losses, particularly in its home and credit card loan portfolios. However, its strong investment banking division more than offset the troublesome loans, helping JPMorgan earn $3.59 billion during the quarter.
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514K new jobless claims; inflation remains muted
The number of newly laid-off workers filing claims for unemployment insurance has fallen to the lowest level since early January, a sign the labor market is slowly improving.
And consumer price pressures remained mild in September as Americans slowly regain their appetite to shop amid a fledgling economic recovery.
The Labor Department said Thursday that first-time claims for jobless benefits dropped to a seasonally-adjusted 514,000 from an upwardly revised 524,000 the previous week. The fifth decline in six weeks was below Wall Street economists' forecasts of 525,000, according to Thomson Reuters.
The four-week average, which smooths fluctuations, fell for the sixth straight time to 531,500. That's the lowest since January and about 105,000 below the peak reached in early April.
Economists closely watch initial claims, which are considered a measure of layoffs and the willingness of companies to add jobs.
The steady decline in claims indicates that companies are shedding fewer workers. Many economists expect that job losses will fall below 200,000 in October from 263,000 in September. That's still a large amount, but would be the fewest in a year.
In a separate report, the Labor Department said consumer prices rose 0.2 percent last month, matching analysts' expectations. Prices excluding the volatile energy and food categories also rose 0.2 percent, slightly higher than the 0.1 percent increase analysts had forecast.
Over the past 12 months, consumer prices fell 1.3 percent, reflecting a severe recession that has kept a lid on inflation across a wide range of products and services. Excluding food and energy, prices rose 1.5 percent.
The absence of price pressures has been good news for cash-strapped households, but it means no cost-of-living increase next year for the more than 57 million Americans receiving Social Security and other government benefits, the first time that's happened in over 30 years.
However, President Barack Obama on Wednesday urged Congress to provide a one-time payment of $250 to help senior citizens cope with the absence of higher benefit checks next year. Such a payment would cost the government about $13 billion.
Employers have eliminated a net total of 7.2 million jobs since the recession began in December 2007, sending the unemployment rate to a 26-year high of 9.8 percent.
Despite the improvement, the weekly tally of jobless claims remains above the 325,000 associated with a healthy economy.
The tally of people continuing to claim benefits dropped by 75,000 to 5.99 million, its first time below 6 million since the week of March 28. Continuing claims data lags initial claims by a week.
Many of those recipients have moved onto extended benefit programs. Congress has added about 53 weeks of emergency benefits on top of the 26 weeks typically provided by states. When extended programs are included, a total of 8.87 million people received benefits in the week ending Sept. 26, the latest week data is available. That's down about 40,000 from the previous week.
The Labor Department reports come as consumers are showing some signs of life. Retail sales fell in September due to a sharp drop in auto sales, according to a government report Wednesday. But excluding autos, sales rose 0.5 percent in September. That was better than analysts expected and followed a 1 percent gain in August.
Auto sales had been inflated in August by the government's Cash for Clunkers program, which provided $4,500 rebates to consumers who traded in older vehicles for newer, more fuel-efficient models.
Consumer demand, which accounts for 70 percent of total economic activity, is being watched closely by economists who worry that any recovery from the recession could stall due to rising unemployment, tight credit and other headwinds that households still face.
But the two months of gains in retail sales, excluding autos, "are an encouraging sign that consumers' bunker mentality is gradually giving way to more familiar spending patterns," Michael Feroli, U.S. economist at JPMorgan Chase, wrote in a note to clients.
On Wall Street, the better-than-expected retail sales figures and surprisingly strong earnings reports from Intel Corp. and JPMorgan Chase & Co. pushed the Dow Jones industrials above the 10,000 mark for the first time in a year on Wednesday.
Most economists forecast the economy will grow at about a 3 percent pace in the second half of 2009. But they warn that won't be fast enough to bring down the unemployment rate. Federal Reserve Chairman Ben Bernanke has said that even with 3 percent growth, the jobless rate will remain above 9 percent through next year.
Some companies are still shedding workers. Ebay Inc. said Wednesday that it would lay off several dozen employees as part of an internal restructuring.
Among the states, Pennsylvania had the largest increase in claims, with 3,618, which it attributed to layoffs in the construction, primary metals, furniture and food industries. The next largest increases were in Washington, Wisconsin, Missouri and Texas. The state data lag initial claims by one week.
Florida reported the largest drop in claims, with 5,178, which it attributed to fewer layoffs in the construction, service and manufacturing industries. California, Tennessee, Illinois and Arkansas had the next largest drops.
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Stocks open lower after Goldman, Citi earnings
Investors turned cautious Thursday after earnings reports from Goldman Sachs Group Inc. and Citigroup Inc. stirred worries about the troubles banks still face.
Stocks fell moderately in early trading after rallying Wednesday. Investors drew some comfort from a government report that the number of newly laid-off workers filing claims for unemployment insurance fell last week. A report on manufacturing in the New York region also topped expectations.
The economic readings couldn't make up for disappointing profit reports, however. Optimism had grown about bank earnings after JPMorgan Morgan Chase & Co. set a high bar Wednesday with a strong profit that helped propel the Dow Jones industrials past the 10,000 mark for the first time in a year.
Goldman Sachs said it earned $3.19 billion, or $5.25 per share, in the third quarter, easily beating expectations on a sharp rise in trading profits. Revenue from Goldman's core investment banking operations fell sharply from the previous quarter, however reflecting slow activity in dealmaking. Goldman also said it set aside about $5.35 billion for compensation and bonuses, more than a year ago.
Citigroup reported a slightly smaller loss per share than expected but said its credit losses remain high.
Tech firms Google Inc., IBM Corp. and Advanced Micro Devices are scheduled to report earnings after the market closes.
The reports Thursday brought reminders that the recovery will take time.
"Things are going in the right direction but the fundamental economic improvement is slow," said Robert Dye, senior economist at PNC Financial Services Group. "The tendency is for the markets to get ahead of themselves and have to be rebalanced periodically."
In early trading, the Dow fell 19.35, or 0.2 percent, to 9,996.51. The Standard & Poor's 500 index fell 3.02, or 0.3 percent, to 1,089.00. The Nasdaq composite index fell 7.69, or 0.4 percent, to 2,164.64.
On Wednesday, the Dow jumped 144 points to close at 10,015 — its biggest gain since Aug. 21 and highest close since Oct. 3 last year. Broader stock indexes also rallied to 2009 highs.
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US retail sales dragged down by auto sales
US retail sales saw their biggest decline of the year in September as auto sales were dented by the end of government trade-in incentives, official data showed Wednesday.
Sales fell 1.5 percent following a revised 2.2 percent jump in August. The figure was not as weak as a 2.1 percent drop expected by most analysts.
The September contraction, the biggest since December 2008, was attributed to tumbling auto sales after the government ended a rebate program in which car owners swapped old vehicles for new, more fuel-efficient models.
Auto sales fell dramatically by 10.4 percent, reflecting the end in August of the "cash-for-clunkers" program.
But retail sales excluding autos were surprisingly strong, however, up 0.5 percent in September and comfortably higher than expectations of a 0.2 percent rise in core sales, the Commerce Department said.
Analysts said the report was mostly optimistic but wondered whether sales growth -- a key to recovery from recession -- can be sustained.
"Despite the large top-line sales decline, this was a strong retail sales report," said Scott Hoyt, senior director of consumer economics for Moody's Economy.com, pointing out that "very few" segments reported sales declines.
"This suggests that consumers are becoming more optimistic about economic conditions," he said, hastening to add however that the positive numbers may be difficult to sustain.
Hoyt said consumers remained financially constrained and lack the cash to spend aggressively, citing general wage incomes, which were not growing appreciably although declines have ended, and wealth levels that were substantially below previous levels even as equity and house prices rose.
"While sales are up, there is limited confidence that consumers can sustain this pace without jobs," said Stephen Gallagher of Societe Generale.
The US unemployment rate is approaching 10 percent even though data indicated the economy was poised for growth in the third quarter after nearly two years of recession.
"We view the retail sales and consumer data as encouraging and believe that faced with this private demand, order and production increases require employment increases," Gallagher said.
Employment gains are not expected until early 2010.
Some analysts believe the largely positive retail picture can help in US recovery from recession.
Patrick O'Hare of Briefing.com pointed to core retail sales, which excludes autos, gasoline sales, and building materials, which were up 0.5 percent, based on the governmment data.
"That marked the second straight increase for this series, which is noteworthy given that it factors into economists' GDP (gross domestic product) assumptions," he said.
Then US economy is expected by many analysts to chalk up its first growth rate -- of about three percent -- in the third quarter after a year of contractions.
But with credit still tight and consumer caution lingering, US retailers are bracing for a difficult period as the year end holiday shopping season approaches.
Many early projections suggests retail spending in the final two months of 2009 -- a season that accounts for a large proportion of sales and profits -- will be flat or lower.
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Business inventories decline 1.5 percent in August
Businesses slashed inventories for a 13th consecutive month in August although sales posted a third straight increase.
The Commerce Department said Wednesday that inventories fell 1.5 percent in August, more than the 0.9 percent fall that analysts had expected. Inventories also dropped 1.1 percent in July, slightly larger than the 1 percent initially estimated.
But sales by manufacturers, wholesalers and retailers rose 1 percent, reflecting a big boost from the government's Cash for Clunkers program in August.
While retail sales dropped in September, dragged down by the end of the clunkers program, businesses may begin rebuilding depleted store shelves after more than a year of inventory cuts. If that occurs, factory production will begin to rise and help bolster a broad recovery from the worst recession since the 1930s.
The ratio of sales to inventories declined to 1.33 in August, from 1.36 in July. That means it would take 1.33 months to exhaust inventories at the August sales pace, only slightly higher than August 2008 inventory to sales ratio of 1.30.
Forecasters for the National Association for Business Economics said this week they expected inventories would be trimmed by $97.3 billion this year in inflation-adjusted terms after a reduction of $25.9 billion in 2008. But for 2010, they expect stockpiles to increase by $10.5 billion.
A swing to inventory rebuilding should bolster growth in the nation's gross domestic product starting with the July-September quarter. Auto companies got a jolt from the clunkers' sales incentives which boosted sales in August.
Ford Motor Co. on Tuesday reached a deal to alter its contract with the United Auto Workers union that will help Ford keep its costs in line with rivals General Motors Co. and Chrysler LLC. GM and Chrysler already received union concessions as those two companies dealt with severe financial troubles that forced them to go into bankruptcy protection for a brief period.
Factories hold about one-third of all inventories, wholesalers hold about 25 percent and retailers hold the rest.
In August, manufacturers cut inventories 0.8 percent, retailers reduced them 2.3 percent and wholesalers by 1.3 percent. Sales in August rose for both retailers and wholesalers, but dipped 0.3 percent for manufacturers.
Inventories have fallen for 13 straight months, the longest stretch since they dropped for 15 consecutive months in 2001 to 2002, a period that covered the last recession.
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Dollar loses punch and crude finds momentum
Oil prices on Wednesday soared to new highs for the year because of a weak dollar and the upcoming holiday shopping season that could bring more traffic to the roads.
Benchmark crude for November delivery added 78 cents to $74.93 on the New York Mercantile Exchange. Prices jumped as high as $75.40 a barrel earlier in the day.
Oil prices have wavered mostly between $50 and $70 a barrel since May with signs of an economic recovery emerging slowly. But a plunge in the dollar convinced many investors to pump money into crude and other commodities as a hedge against inflation.
There are scant signs of definitive uptick in demand for fuel and refiners have been shutting down facilities for that reason.
"The refiners aren't the guys buying the oil, but someone else might to protect themselves from the dollar," analyst Stephen Schork said.
The dollar slumped to a 14-month low against the euro Wednesday after a top Federal Reserve official indicated that the U.S. would keep its interest rates low for some time.
Some analysts also expect an diesel fuel demand to rise soon as U.S. truckers get in gear for the year-end holiday shopping season.
But burgeoning oil supplies this year have weighed on oil prices. Investors will be looking to the latest U.S. supply data this week from the American Petroleum Institute and the Energy Information Administration. Oil supplies are expected to grow by another 2.2 million barrels, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
At the pump, retail gas prices rose slightly overnight to a new national average of $2.481 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of regular gas is 9.1 cents cheaper than last month and 68.2 cents cheaper than the same time last year.
In other Nymex trading, gasoline for November delivery climbed 2.24 cents to $1.8542 a gallon, and heating oil for November delivery added 1.48 cents to $1.9382 a gallon. Natural gas for November delivery gave up 10 cents to $4.488 per 1,000 cubic feet.
In London, Brent crude rose 65 cents to $73.05 on the ICE Futures exchange.
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JPMorgan earns $3.6B, but loan losses remain high
JPMorgan Chase & Co. reported strong third-quarter earnings Wednesday as its thriving investment banking business more than offset rising loan losses that the bank warned would continue for the foreseeable future.
JPMorgan, the first of the big banks to report earnings for the July-September period, reported a $3.59 billion profit but also said it roughly doubled the amount of money it set aside for failed home and credit card loans in the quarter.
The bank's earnings cheered investors, who sent JPMorgan stock and the overall market higher. Still, the bank's performance shouldn't be taken as a forecast for how well other banks did during the quarter. Many financial companies don't have such big investment banking operations, which includes trading of stocks and bonds and allowed JPMorgan to overcome its loan losses.
Banks including JPMorgan have predicted for some time that their loan losses would keep rising. And in JPMorgan's earnings statement, CEO Jamie Dimon confirmed that this trend continues.
"Credit costs remain high and are expected to stay elevated for the foreseeable future in the consumer lending and card services loan portfolios," Dimon said.
In its earnings statement, the bank also described the near-term path of the economy as uncertain.
The company said for the second straight quarter that there are some signs of stabilization in delinquencies among consumer loans that are only recently past due. But Chief Financial Officer Mike Cavanagh said during a conference call with reporters that the bank "can't at the moment be certain" that the trend will continue.
JPMorgan may be able to raise its 5 cent per share quarterly dividend to as much as 25 cents if loan losses stabilize and the company's credit costs fall, Cavanagh said. The CFO said that an increase could come early next year, but he again cautioned that's it too soon to know if the economy will recover enough to make a higher dividend possible.
Investors didn't seem troubled by the bank's dim credit outlook, and likely were more focused on the fact that big profits in divisions such as investment banking helped the New York-based bank earn 82 cents per share during the third quarter. Analysts forecast a profit of 52 cents per share.
JPMorgan said its investment bank net income came to $1.92 billion, up $1 billion from a year earlier as fixed income trading thrived.
The company's stock jumped $1.69, or 3.7 percent, to $47.35 in midday trading.
JPMorgan, the nation's largest bank by assets, has been considered one of the strongest financial companies during the past year's turmoil. It has performed better than other large competitors in part because of its relatively light exposure to troubled subprime mortgages and commercial real estate. It was also among the first banks to repay government bailout money. On June 17, JPMorgan gave back all of the $25 billion it had received at the height of the credit crisis in 2008.
Its relatively stronger foundation than its competitors, which report results in the coming days, helped set JPMorgan up for a quarter that is likely to be among the best in the industry, analysts said. Citigroup Inc. and Bank of America Corp. are also scheduled to report earnings this week, followed by many other banks over the next two weeks.
"It's harder to come out when you're eight feet deep than when you're two," said Denise Valentine, a senior analyst at financial consulting firm Aite Group.
Still, the company is far from immune to the industry's problems. Traditional residential mortgages and home equity loans as well as credit cards continue to default at a rapid pace and that has eaten into JPMorgan's profits.
JPMorgan's loss provision to cover current and future home loan defaults jumped to $3.99 billion, while its provision for credit card losses surged to $4.97 billion.
Eric Schopf, a vice president at Hardesty Capital Management, said JPMorgan's aggressive additions to loan loss reserves throughout the downturn have also given it a leg up on the competition, which has lagged in adding to reserves.
Indeed, Cavanagh said that if the economy continues on a recovery path and doesn't falter again, JPMorgan is probably close to reaching its peak loan-loss reserve levels.
Credit card defaults and mortgage losses are likely to continue rising and lag an overall economic recovery. Losses on credit cards typically mirror unemployment, which rose to 9.8 percent in September and which is expected to pass 10 percent in the coming months.
JPMorgan said the percentage of credit card loans it wrote off as not being repayable in the third quarter reached 10.3 percent of its total portfolio. Cavanagh said during a separate call with analysts that the card loss rate is expected to reach 10.5 percent in the first half of 2010 and could go higher depending on the unemployment rate.
Loan losses were also pushed higher by weakness in the portfolios JPMorgan acquired when it purchased the failed bank Washington Mutual a year ago.
Fixed income markets accounted for two-thirds of the investment bank's $7.51 billion in revenue. While the company's trading operations were strong, JPMorgan was also able to write up the value of some investments that have started to recover after souring during the peak of the credit crisis.
JPMorgan's fixed-income trading got a boost from investors still uneasiness about their own financial situations. Investors continue to flock to the relative safety of bonds, strengthening that market.
"The good thing at JPMorgan is you have a lot of different profit levers," Schopf said. "The diversity works to their advantage."
Overall, JPMorgan generated $28.78 billion in revenue during the quarter, better than the $24.96 billion predicted by analysts.
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Home rescue plan delaying, not solving crisis
Within weeks of taking office, U.S. President Barack Obama rode to the rescue of homeowners resigned to financial ruin.
Obama, grappling with the worst U.S. housing crisis since the Great Depression, pledged to help as many as 9 million families keep their homes by reworking their mortgages.
Eight months later, the plan is plagued by delays, red tape and, some critics say, a reluctance by banks to do their part. Just 17 percent of eligible borrowers have had their loans modified and monthly payments cut. Hardly any have been given a cut in the amount they owe on homes which are now worth less.
That means many successful applicants are left with loans that they still will not be able to afford in the long run. So instead of resolving the housing crisis that pushed the U.S. economy into recession, America may be prolonging it and, in the process, stunting the global recovery.
"Every single policy we've seen has merely kicked the problem down the road," said Laurie Goodman, a veteran analyst at broker-dealer Amherst Securities Group LP, which specializes in residential mortgage-backed securities.
"But there is no easy solution to the underlying problems."
For homeowners like Jeff Latta, there was no help at all.
Latta, a 53 year-old retiree, pays $1,600 in monthly home payments that eat up 93 percent of his pension and he struggles to make child support payments.
To help pay his mortgage, Latta has slashed his bills by hunting for food in the wooded hills around his town of Albany in southern Ohio, and growing his own vegetables. He has resorted to selling pumpkins and firewood to make cash.
In March, Latta heard about Obama's Home Affordable Modification Program, or HAMP, that allows mortgage payments to be reduced to 31 percent of a homeowner's income.
The plan was launched as a central plank of Washington's efforts to stem foreclosures.
Latta applied for a loan modification but was rejected. His bank said his income from selling pumpkins and firewood -- a net of $906 in 2008 -- was too high.
"Frankly, I'm disappointed," Latta said. "I thought I would qualify as I am at high risk of default."
Foreclosure prevention advocate Bryce Burton at Ohio Housing Finance Agency said Latta's bank miscalculated his income. "Jeff is a shining example of someone doing everything they should be to keep their house," Burton said.
Nonprofit agencies say HAMP helps combat foreclosure but success varies from lender to lender.
Mortgage servicing companies, which service but do not own loans, complain that excessive bureaucracy slows the process.
HOME VALUES DROP $4.7 TRILLION
That banks lent irresponsibly in the U.S. property boom is irrefutable. As San Diego-based realtor Steve Rodgers says: "If you could fog a mirror, they'd give you a mortgage."
But borrowers are facing blame too for using their homes as machines to raise cash and consume on credit. The bubble burst in early 2007 and America went into recession later that year.
From the market's peak in 2005 to the second quarter of 2009, U.S. home equity fell 37 percent, or by $4.7 trillion, according to the Federal Reserve. To put that into context, China's economic output totaled about $4.3 trillion in 2008.
There have been recent signs the housing market may be bottoming. But rising unemployment and "shadow inventory" -- homes that banks have yet to foreclose on -- raise the prospect of further price declines.
Between July 2007 and August 2009 there were more than 7 million foreclosure filings, according to RealtyTrac, out of a total of 111 million households in the United States.
To stem the tide Obama launched HAMP, a $75 billion plan offering cash incentives to servicers to cut payments for distressed borrowers with most of the money coming from the $700 billion bank rescue program Congress approved last year.
But companies like subprime mortgage servicer Ocwen Financial Corp complain they have been inundated with borrowers who simply have no chance of qualifying for HAMP.
"I think there is a sense publicly... (that) everybody will be eligible for this program," said president Ron Faris at Ocwen headquarters in West Palm Beach, Florida.
"What we are finding is probably at this point, unfortunately, less than one in three borrowers that has applied is actually eligible under the government guidelines."
Margery Rotundo, a senior vice president at Ocwen, worried about the consequences of most HAMP applicants being rejected by servicing companies, saying it might produce "a tidal wave of foreclosures."
The U.S. Treasury Department said on October 8 that under HAMP more than 500,000 people so far had their payments cut, slightly under 17 percent of those deemed eligible, ahead of the department's November 1 deadline for reaching that number.
But Treasury officials concede that even if HAMP is a success, millions more foreclosures remain likely.
LAWSUITS PENDING
One of the big obstacles in the government's modification program has been the sheer workload.
"No one, including Treasury, had any concept of how much work this was going to be in getting these documents from borrowers," said Gregory Hebner, head of Irvine, California-based MOS Group Inc which handles loss mitigation for some servicers.
Nonprofit groups also have complaints about the government's program, and others independent of it. Counselors recount tales of lenders losing documents or of difficulty reaching bank staff.
"A client of mine was kept on hold for an hour and a half and transferred 17 times," said Michelle Watts, an OHFA foreclosure prevention advocate. "Some people just give up."
Ohio Attorney General Richard Cordray filed a lawsuit in July against a large mortgage servicing firm, Carrington Mortgage Services, alleging it had failed to make good faith efforts to stem foreclosures, and he warned more could follow.
"We'd rather not sue everyone, but we will if we have to," Cordray said.
Another problem is the number of borrowers who re-default on their modified loans. The U.S. Office of the Comptroller of the Currency says 56.2 percent of loans modified in the second quarter of 2008 re-defaulted after 12 months.
According to Amherst Securities, an even higher 70 percent of homeowners re-default within 12 months of a modification -- but it stresses its data does not include HAMP modifications.
On October 9, a day after the Treasury announced HAMP was ahead of target, the Congressional Oversight Panel issued a scathing report on the program. It found fewer than half of the predicted foreclosures would be avoided under HAMP.
Furthermore, many modifications added to the principle owed by homeowners at the end of their mortgages even as the market value of their homes fell, "a factor that appears to be associated" with higher re-default rates, the report said.
Some nonprofit groups say the high re-default rate is because many homeowners lack counseling on budgeting.
Mark Seifert, head of nonprofit agency Empowering and Strengthening Ohio's People said his group's re-default rate is around 30 percent because counselors help homeowners cut their budgets to keep their homes. This may involve not eating out and cutting all non-essential items.
For all the problems, many nonprofit groups say HAMP has led to more successful loan modification applications.
"HAMP has given us another tool in our toolbox," said Melinda Opperman, vice president of counseling group Springboard in Riverside, California. "Before we could help three to four people out of 10. Now it's five to seven."
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CIT Group says CEO Peek plans to resign
CIT Group Inc., a major business lender that's been devastated by the downturn in the credit markets, said Tuesday its chairman and CEO will resign at the end of the year.
CEO Jeffrey M. Peek is stepping down as the company continues ongoing restructuring efforts to try and avoid bankruptcy.
CIT has posted billions in losses as borrowing costs have outpaced the money it generates from lending to customers. As CIT's customers have struggled amid the recession, they have fallen behind on repaying loans. That has forced CIT to set aside more cash to cover those losses, a problem nearly all lenders have had during the recession.
Some experts have warned that a total collapse of CIT would deal a crippling blow to an economy still bleeding well over 100,000 jobs a month.
Its shares fell 17 cents, or 16.1 percent, to 87 cents in morning trading.
Peek, who has been with CIT Group since 2003, said in a statement that CIT's recently launched restructuring plan makes it "the appropriate time to focus on a transition of leadership."
New York-based CIT is in the middle of its second debt restructuring in recent months as it looks to reduce costs to remain in business.
The current debt exchange could reduce the financial firm's near-term debt burden by $5.7 billion. CIT is trying to swap debt set to mature in the near future for bonds or preferred shares.
At the same time, CIT has asked its biggest debt holders to approve a prepackaged reorganization plan in case it is forced to file for Chapter 11 bankruptcy protection.
CIT has already received $2.3 billion in federal bailout money, a $3 billion emergency loan from some of its largest bondholders, and bought back $1 billion in debt as it tries to reorganize and avoid collapse. The government bailout money was given to the firm last fall amid the peak of the credit crisis. The emergency loan and initial debt deal were completed over the summer.
The retail sector would be hit especially hard by a CIT collapse, since it serves as short-term financier to about 2,000 vendors that supply merchandise to 300,000 stores, according to the National Retail Federation. Analysts have said 60 percent of the apparel industry depends on CIT for financing.
Peek, 62, first served as CIT Group's president and chief operating officer, before being named CEO in 2004 and chairman in 2005.
Before joining CIT, Peek served as a vice chairman at Credit Suisse First Boston LLC, overseeing the firm's financial services division. He also spent 20 years working at Merrill Lynch & Co.
The board of directors is creating a search committee to find a new CEO.
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Home-Foreclosure Rescue Is Falling Short, Critics Say
The Treasury Dept. is basking in the latest tally of homeowners getting a break through its core foreclosure-prevention program. But its data show the number of new mortgage modifications actually fell in September, and government watchdogs are raising concerns that the program is ill-suited to the problems of the housing market.
The Treasury's report on the program released Oct. 8 shows a steady upward march in the number of loan modifications, growing to 487,081 by the end of September -- and, the agency said Thursday, surpassing 500,000 by Oct. 6. That is three weeks ahead of the timetable set by the Administration.
But those are cumulative figures. Mortgage servicers actually signed up fewer homeowners in September than they did in August -- 100,216 last month, down from 133,192 the month before. That was even below the 110,397 signed up in July.
Warning from Oversight Panel
Deceleration doesn't bode well for a program that hasn't yet hit its halfway point. Treasury Secretary Tim Geithner estimates that 40% of 1.2 million people currently eligible for the program are now taking part, and Treasury officials see the drop in new sign-ups as a moderation brought about after servicers worked through a backlog of pent-up demand.
But with the housing crisis worsening, many worry the government's current efforts won't be enough. That's also the warning from the Congressional Oversight Panel, established to keep an eye on the federal response to the financial crisis, including the Administration's Making Home Affordable program.
While recognizing the program's progress, the COP report -- drafted before the Treasury's latest data release -- warns that even if it prevents 2 million to 2.6 million foreclosures, the program may barely dent the crisis. Indeed, with estimates that the economic crisis will force as many as 12 million homes into foreclosure, it may not prove enough even if the program leads to the 3 million to 4 million modifications that the Treasury maintains will ultimately be achieved over time -- a figure the Government Accountability Office has since called unrealistic.
"It's not that we think this program needs to be put on steroids," said Elizabeth Warren, the Harvard law professor heading the oversight panel, in a Thursday evening briefing. "The question we asked is whether this is the optimally designed program to have the optimal effect."
Foreclosures Only Delayed?
Specifically, the panel -- with disagreement from its two Republican members -- argues that the program is too tightly tailored around the problems of subprime mortgages. By lowering monthly payments to 31% of income, the program does little for the increasing numbers of homeowners who lose their jobs and can no longer make mortgage payments at all. "It increasingly appears that (Treasury's Home Affordable Modification Program) is targeted at the housing crisis as it existed six months ago, rather than as it exists right now," the report says.
In addition, the group warned that even "permanent" loan adjustments under the Administration's program aren't permanent -- they last five years, and could leave homeowners in the lurch after that. "We've raised the question about how many foreclosures it will prevent and how many it will simply delay," Warren said.
She also questioned how many of those who qualify for the program -- which includes a 90-day trial period to ensure that government subsidies don't go toward homeowners destined to default even with assistance -- will ultimately get even five years of benefit. (Treasury officials said more than 90% of the loans under its program are still in the trial period.) "Right now, we simply don't have enough data," Warren said.
One bright note in the panel's report is a cost-benefit analysis from Alan White, a Valparaiso University law professor. He estimated that the $50 billion program would spend $16,000 to $21,000 per borrower -- counting both first and second liens -- but that it was likely to be more than offset by savings to investors, taxpayers, and others. About a third of the savings would go to the investors holding the mortgages, White estimated; the rest would accrue to municipalities, neighbors of the borrowers helped by the program, and the assisted families themselves.
In a statement released Thursday night, Treasury spokeswoman Meg Reilly noted that the loan-modification program is "only one piece of the Administration's multifaceted effort" to stem the financial crisis. Citing a health-care subsidy for the unemployed and extended unemployment benefits, she said officials "continue to study further ways to help unemployed homeowners."
GAO Reports Other Shortfalls
A new GAO report points to other hitches in the Administration's housing effort. It notes that, as of late September, not a single mortgage servicer had signed on to the Treasury's program for modifying second liens -- loans that are widely seen as a serious obstacle to assisting many homeowners. The GAO also found that internal controls and compliance oversight was only partly in place for the housing program. It also noted the agency had yet to name a Homeownership Preservation Officer, though it had made strides in filling other positions devoted to housing issues.
In releasing the latest figures, Treasury officials stressed that the federal government has pushed interest rates down, allowing some 3 million homeowners to refinance.
"We're very pleased to have reached this goal," Housing & Urban Development Secretary Shaun Donovan told reporters Thursday. "But we obviously still have a lot more to do in terms of helping American families keep their homes."
One Treasury official told reporters the Administration's loan-modification program was "reaching borrowers who have lost their jobs" or seen their work hours cut. That's because unemployment benefits are counted as income when calculating reductions in a borrower's monthly payment.
Representative Barney Frank (D-Mass.) and some Democratic senators are examining ways to offer direct assistance to unemployed homeowners, perhaps by postponing mortgage payments temporarily or with direct financial assistance. A bill introduced on Sept. 30 by Senator Jack Reed (D-R.I.) would provide funds to states to assist unemployed homeowners at risk of foreclosure.
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