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Holiday shopping off to mildly encouraging start
After shoppers gave retailers a somewhat encouraging start to the holiday shopping season, stores now turn their attention to the online promotions known as Cyber Monday and bringing back customers the rest of the season.
The good news is that holiday shopping held steady through the Thanksgiving weekend after retailers saw a huge crowd of bargain shoppers for early morning deals Friday.
But economic worries about jobs were still apparent as shoppers mostly stuck to their lists and focused on practical items for themselves and for their loved ones. The big worry is that consumers may not return until the final hours before Dec. 25.
According to preliminary figures released Saturday by ShopperTrak, a research firm that tracks more than 50,000 outlets, sales rose 0.5 percent to $10.66 billion Friday, compared with a year ago. That was on top of a 3 percent increase last year.
Online sales Thursday and Friday, however, rose 11 percent to $913 million, according to data released Sunday by comScore, an Internet research firm. Online business got a big boost as stores pushed online promotions the week leading into the Thanksgiving weekend.
The National Retail Federation trade group said Sunday it's sticking to its forecast for holiday sales to decline 1 percent from last year.
A year after suffering the biggest sales decline in four decades, the nation's merchants pulled out all the stops in stores and online to keep the momentum going for the holiday weekend, further blurring the lines between their Web-based and land-based businesses.
Major merchants including J.C. Penney Co. and Sears Holdings Corp. broke new ground by making many of their Black Friday specials available on their Web sites at the same time.
The heavy online push could steal some thunder from sales on Cyber Monday, the day when sellers unveil another raft of discounts online to lure shoppers looking in after returning to work.
Marketing gurus have started calling the season a "Twitter Christmas" as merchants have been tweeting deals and previewing discounts on Facebook pages.
Sears tweeted its bargains through the weekend, spokesman Tom Aiello noted Sunday.
"Forget Black Friday for bricks and Cyber Monday for clicks — this year it's all about making it easy for customers to satisfy their shopping fix ... wherever and whenever," said John Long, a retail strategist at Kurt Salmon Associates.
Long, however, noted that "we're still seeing cautious spending. The pie isn't increasing whether you decide to buy in the stores or online."
Laura Gurski, a partner in the retail practice at A.T. Kearney, a global management consultant, believes the weekend's results offered signals that consumers, many of whom had cut spending all year to bare-bones necessities, had saved up for the holidays and were opening their wallets — even if just a little.
Shoppers' cautious mood was evident.
Allentown, Pa. resident Jamie Sandrock, 27, who was visiting New York City on Saturday and was outside toy store FAO Schwarz, said she got up at 7 a.m. Friday and took advantage of online deals on Amazon.com, American Eagle Outfitters and Sephora.
That's a big change from the Black Fridays of years past, when Sandrock would get up at 3:30 a.m. to head to Target or Best Buy.
"Last year, I was part of the stampede," she said. "This year, I didn't have to shower. I didn't have to get dressed. All I had to do was click."
But Sandrock, who has been trying to find a job in nursing since she graduated from college in May, said she's slashing her holiday spending to $350 from last year's $500.
Michelle Nuanez of Rio Rancho, N.M., who was checking out toys at Target in Albuquerque on Saturday, said she thought about waking up before dawn and heading to Walmart Friday. Then she thought better of it.
"You might save a couple of dollars here or there, but so far I haven't seen anything that's a really good deal as far as toys go," she said.
Nevertheless, reports Sunday from malls and stores were comforting and different from last year when stores had a decent Black Friday before sales tanked the rest of the season.
The Mall of America in Minneapolis, saw 325,000 visitors Friday and Saturday, the most in 17 years. Spokeswoman Bridget Jewell said traffic remained steady through the weekend and said she's fairly confident that weekend sales will rise from last year.
Taubman Centers, which operates 24 malls, said sales Friday were up anywhere from mid-single digits to double digits compared with a year ago, according to spokeswoman Karen MacDonald. On Saturday, sales were anywhere from unchanged to up slightly.
Shoppers bought about half the items sold for themselves, she said, but the buying was focused on basics like denim, fleece jackets and boots, as well as electronics.
A more complete sales picture won't be known until Thursday, when the nation's retailers report November sales.
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US retailing fears weigh on world markets
European and U.S. stock markets fell Monday amid concerns about the start of the Christmas shopping season in the U.S. and despite relief over the pledge from the United Arab Emirates' central bank to back lenders exposed to Dubai's debt problems.
In Europe, the FTSE 100 index of leading British shares closed down 55.05 points, or 1.1 percent, at 5,190.68 while Germany's DAX ended 59.66 points, or 1.1 percent, lower at 5,625.95. The CAC-40 in France was 41.30 points, or 1.1 percent, lower at 3,680.15.
Earlier, European stocks had steadied as concerns about the fallout from Dubai's debt woes were soothed by the UAE central bank pledge to stand behind local and foreign banks.
However, a renewed bout of selling on Wall Street prompted a late reverse — the Dow Jones industrial average was down 33.63 points, or 0.3 percent, at 10,276.29 around midday New York time while the broader Standard & Poor's 500 index fell 3.71 points, or 0.3 percent, to 1,087.78.
Analysts said the soft start to the week was due to some disappointment at the start of holiday shopping season in the U.S. after preliminary figures by ShopperTrak, a research firm that tracks more than 50,000 outlets, showed sales rose 0.5 percent on Friday.
"Admittedly last year, it was minus 10 percent but I was expecting a bit better than the figure posted," said David Buik, markets analyst at BGC Partners.
Retail sales are particularly important when assessing the outlook for the global economy — without the help of U.S. consumer spending, which accounts for around 70 percent of the U.S. economy, any global economic recovery will be modest.
Economic news will increasingly take center stage over the rest of the week, culminating in Friday's U.S. nonfarm payrolls report for November — the jobs data often sets the tone in markets for a week or two.
However, there are other important U.S. releases due, including the Institute for Supply Management's surveys into the services and manufacturing sectors.
If investors conclude that the U.S. economy is losing some steam, then that could well pave the way for an end of year bout of profit-taking following an eight-month bull run.
Last week's announcement from Dubai World, a government investment company with some $60 billion worth of debts, that it wanted to postpone forthcoming debt payments until May sent shockwaves around financial markets and a big retreat in stocks, particularly in Europe and Asia. The U.S. avoided much of the immediate fallout as traders were on holiday for Thanksgiving.
Those shockwaves were still evident in the emirates' stock markets Monday, where traders returned from the Eid holiday, but the central bank's reassurances steadied market confidence elsewhere.
"The statement by the UAE central bank over the weekend, where it committed itself to providing liquidity to banks, appears to have calmed any remaining nerves," said David Jones, chief market strategist at IG Index.
"Traders, for now at least, seem happy to take the view that this is a localized problem and not the start of Credit Crunch Part 2," he added.
Though the markets have managed to steady Monday, there are still concerns that Dubai's problems may be a harbinger of things to come, even though the announcement from the UAE central bank may minimize the risk of contagion.
"It is a warning sign that sovereign credit risks are likely to remain a problem — Ireland, Greece and Britain, for example — and the deterioration in budget deficits and debt/GDP ratios will remain a key feature for some time," said Neil Mackinnon, global strategist at VTB Capital.
If, and when, the Dubai concerns diminish, investors have a raft of economic news this week to digest, which could well be crucial in how markets end the year.
Earlier in Asia, nearly every market traded higher, with Japan's Nikkei 225 stock average climbing 264.03 points, or 2.9 percent, to 9,345.55. Hong Kong's Hang Seng added 687.00 points, or 3.3 percent, to 21,821.50 and South Korea's Kospi added 2 percent to 1,555.60. Both those markets tumbled nearly 5 percent on Friday.
Elsewhere, Shanghai's market climbed 3.2 percent, Australia's index was 2.8 percent higher and Taiwan's benchmark rose 1.2 percent.
Stocks in the UAE ended sharply lower though, with Abu Dhabi's main index down 8 percent and Dubai's closing more than 7 percent lower.
Elsewhere, oil prices steadied, with benchmark crude up 47 cents at $76.52 a barrel, while gold was steady at $1,174.30 an ounce.
The dollar fell 0.6 percent to 86.10 yen, while the euro was down 0.2 percent at $1.4982.
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Dubai debt `standstill' raises alarms about image
Just a year after the global downturn derailed Dubai's explosive growth, the city is now so swamped in debt that it's asking for a six-month reprieve on paying its bills — causing a drop on world markets Thursday and raising questions about Dubai's reputation as a magnet for international investment.
The fallout came swiftly after Wednesday statement that Dubai's main development engine, Dubai World, would ask creditors for a "standstill" on paying back its $60 billion debt until at least May. The company's real estate arm, Nakheel — whose projects include the palm-shaped island in the Gulf — shoulders the bulk of money due to banks, investment houses and outside development contractors.
In total, the state-backed networks nicknamed Dubai Inc. are $80 billion in the red and the emirate needed a bailout earlier this year from its oil-rich neighbor Abu Dhabi, the capital of the United Arab Emirates.
Markets took the news badly — with the Dubai woes and the continued fall of the U.S. dollar giving investors twin worries.
In Europe, the FTSE 100, Germany's DAX and the CAC-40 in France opened sharply lower. Earlier in Asia, the Shanghai index sank 119.19 points, or 3.6 percent, in the biggest one-day fall since Aug. 31. Hong Kong's Hang Seng shed 1.8 percent to 22,210.41.
Wall Street was closed for the Thanksgiving holiday and most markets in the Middle East were silent because of a major Islamic feast.
"Dubai's standstill announcement ... was vague and it remains difficult to discern whether the call for a standstill will be voluntary," said a statement from the Eurasia Group, a Washington-based research group that assesses political and financial risk for foreign investors interested in Dubai.
"If it is not, Dubai World will be going into default and that will have more serious negative repercussions for Dubai's sovereign debt, Dubai World and market confidence in the UAE in general," the statement added.
Dubai became the Gulf's biggest credit crunch victim a year ago. But its ruler, Sheik Mohammed bin Rashid Al-Maktoum, had continually dismissed concerns over the city-state's liquidity and claims it overreached during the good times.
When asked about the debt, he confidently assured reporters in a rare meeting two months ago that "we are all right" and "we are not worried," leaving details of a recovery plan — if such a plan exists — to everyone's guess.
Then, earlier this month, he told Dubai's critics to "shut up."
"He needs to produce a recovery plan that will be respected by those who want to do business with Dubai," said Simon Henderson, a Gulf and energy specialist at the Washington Institute for Near East Policy. "If he does not do it right, Dubai will be a sad place."
After months of denial that the economic downturn even touched the glitzy city-state, the Dubai government earlier this year showed signs of trying to deal with the financial fallout that has halted dozens of projects and touched off an exodus of expatriate workers.
In February, it raised $10 billion in a hastily arranged bond sale to the United Arab Emirates central bank, which is based in Abu Dhabi.
The deal — seen by many as Abu Dhabi's bailout of Dubai — was part of a $20 billion bond program to help Dubai meet its debt obligations.
On Wednesday, the Dubai Finance Department announced the emirate raised another $5 billion by selling bonds — all taken by two banks controlled by Abu Dhabi.
Abu Dhabi's ruling Al Nahyan family has been more conservative with its spending, investing oil profits into infrastructure, culture and state institutions. During Dubai's real estate bonanza, the Nahyans saw their flashy neighbor race ahead with development plans and tourism plans that had plenty of hype but few details on how they would be pulled off.
Some did materialize. The more than 2,600-foot (800-meter) Burj Dubai is scheduled to open in January as the world's tallest building. But many other projects, including a tower even taller than the Burj Dubai and satellite cities in the desert, are still just blueprints.
Last week, Sheik Mohammed demoted several prominent members of Dubai's corporate elite and replaced them with members of the ruling family, including his two sons, one of whom is Mohammed's designated heir.
Businessmen who fell out of favor were closely associated with Dubai's phenomenal success. They include the head of Dubai World, Sultan Ahmed bin Sulayem, and Mohammed Alabbar, the chief of Emaar Properties, developer of the Burj Dubai and hundreds of other projects.
"He is trying to shake things up," said Christopher Davidson, a lecturer on the Gulf at Britain's Durham University and an author of two books on the UAE.
However, Davidson added, Mohammed's decision to replace those who helped put Dubai on the world map with his relatives might be "read as an increase in autocracy which does not look good internationally."
Not everyone is upset at Dubai Inc.'s transformation into a family business, analysts say.
Mohammed's latest moves may have pleased Abu Dhabi more than the foreign investors, but it is Abu Dhabi that still has the strongest incentives to save Dubai from its financial misery.
"By shifting the power base back to the family things are as they should be as far as Abu Dhabi is concerned," said Mohammed Shakeel, a Dubai-based analyst for the Economist Intelligence Unit.
After an expensive adventure in doing things the Western way, it's "going back to basics" for Dubai, Shakeel added.
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"Black Friday" deals may not signal retail comeback
When the U.S. holiday shopping season kicks off on the day after Thanksgiving, retailers can expect to see millions of less frightened, but even more bargain-hungry customers cross their thresholds.
Industry experts expect a strong turnout on Black Friday, which falls on November 27 this year, as deep discounts lure shoppers after more than a year of subdued spending. But they caution it will not mean a bumper holiday season in the weeks leading up to Christmas since consumers still remain cautious.
"Given what we know about consumer shopping patterns, even this month, I would suspect it will turn out to be a very strong performance," said Michael Niemira, chief economist of the International Council of Shopping Centers.
Special promotion days have been big drivers of sales, he said, pointing to the lift retailers saw on the November 11 Veteran's Day holiday.
Retailers and websites dedicated to Black Friday deals have leaked sales plans earlier than usual, in the hopes of sparking demand for flat-panel televisions, toys and other goods after 2008's worst holiday season in decades.
While the economy remains weak and unemployment has risen, U.S. shoppers have had more than a year to adjust their spending and digest the bad news. In 2008, holiday shopping started just weeks after the global financial crisis erupted.
"Certainly last year was a year of tremendous uncertainty going into Black Friday because we were right in the middle of the storm," said Chris Donnelly, a partner in Accenture's retail practice. "There is much less panic, I would say, or much less uncertainty, as we go into the season."
Even so, more than 172 million shoppers visited stores and websites from Thanksgiving Day through Sunday last year, up from 147 million in 2007, according to the National Retail Federation. The average amount of money spent by shoppers over that weekend rose 7.2 percent to $372.57 per person.
Those numbers, however, did not prevent a sales slide of 3.4 percent for the entire shopping season last year, marking the first decline since the NRF began tracking such data.
While the NRF has not issued a Black Friday forecast, it expects 2009 holiday season sales to decline 1 percent. The ICSC forecast a 1 percent to 2 percent rise.
"Retail sales have been, while not stellar, somewhat stabilizing over the past few months and there is every reason to believe that as we go into the holiday season that we are going to see some stability as well," Donnelly said.
BARGAIN FRIDAY
The term "Black Friday" is said to have originated in Philadelphia during the 1960s to describe the difficulty of police and drivers to deal with exceptionally heavy traffic on that day as shoppers flooded the city's commercial center.
The phrase was later co-opted by retailers to refer to the holiday shopping period as a time of year when their business moves into the black, or turns a profit.
Niemira, for one, refers to Black Friday as "Bargain Friday" since it is known for deals.
"If Black Friday is flattish to slightly positive, that would be encouraging, but I don't think we'd be ready to kind of write the story of the season yet," Donnelly said.
Sixty-one percent of chief marketing officers at leading U.S. retailers surveyed by BDO Seidman expect Black Friday sales to be flat, while 33 percent predicted an increase.
One factor that could help spur consumer appetite is a prediction for good weather, with mild temperatures and slim chance of precipitation, though the Pacific Northwest could see strong storms, according to tracking firm Planalytics.
Market research firm IBISWorld expects total retail sales over Black Friday weekend to rise 2.8 percent to $42.9 billion. It expects 76.9 million people to swarm into retail stores on Black Friday alone.
ShopperTrak, which measures customer traffic, expects Black Friday to again be the busiest day in stores after accounting for 6 percent of traffic in the 2008 holiday season.
Target Corp (TGT.N), Best Buy (BBY.N) and others are opening at 5 a.m. on November 27, while Chelsea Premium Outlets locations are opening as early as 9 p.m. on Thanksgiving Day.
Wal-Mart Stores Inc (WMT.N) is keeping most of its discount stores open for 24 hours a day to help control crowds after a worker was trampled to death at one of its stores during last year's Black Friday rush.
SEARCHING FOR DISCOUNTS
After last winter's bevy of deep discounts, many consumers will only open their wallets if they spot a bargain. Almost 70 percent of consumers surveyed by America's Research Group said they wanted to see discounts of at least 50 percent before they would buy something for the holidays.
"The range of the promotions will be different from what we've seen in recent years, because it has to be," said NRF spokeswoman Kathy Grannis. "Retailers know that consumers are so bargain focused and bargain conscious."
BDO Seidman's poll found that 96 percent of retailers planned to increase promotions and discounts this year.
"They are going to have to be creative," said Ted Vaughan, a partner in BDO Seidman's retail and consumer product practice.
Of course, fewer retailers are vying for that business. According to Bain & Co, 27 retailers went bankrupt in 2008 and 18 more have done so to date in 2009. Together, those chains used to account for about $25 billion to $30 billion in sales.
Earlier holiday-themed sales expanded the season this year and may make it easier for consumers who have less credit available, Vaughan said. Sears, Kmart and Toys R Us have also been touting layaway plans to help shoppers spread out spending.
Consumers flocking to stores may not be buying gifts. A Consumer Reports survey found that 66 percent of shoppers heading out over the weekend will be shopping for themselves.
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Gas prices fall to begin busy travel week
Retail gasoline prices headed downward to begin one of the country's busiest travel weeks, with more than 33 million people expected to hit the road for the Thanksgiving holiday.
Americans are still remaining closer to home because of anxiety about the economy and demand for gasoline is weaker now than it was last year at this time.
That is telling because a gallon of gasoline then cost only $1.93 as the economic crisis unfolded in 2008.
Unlike last year, however, gas is not falling sharply and though prices fell overnight, it still cost $2.64 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service.
Crude prices have remained relatively strong, which has helped keep prices gas prices well above $2.50 this year.
A survey by the AAA this weekend found that the number of Americans traveling away from home for Thanksgiving will be up just 2.1 percent this year from 2008.
Oil prices jumped to begin the week and higher crude prices are one of the reasons why gasoline prices are at current levels.
Benchmark crude for December delivery gained $2.05 to $79.52 a barrel on the New York Mercantile Exchange on a weakening dollar and surprising housing data.
The National Association of Realtors said home sales rose 10.1 percent in October. That is the highest level in more than two years and helped push crude prices higher on expectations of increased demand.
Still, crude in storage is above normal levels for this time of year and it is the dollar that been the biggest driver behind rising oil prices.
Investors holding stronger currencies can buy more dollar-based crude when the U.S. currency falls. But the refiners that turn crude into gasoline, jet fuel and diesel are cutting back because demand is so weak.
Valero Energy became the latest to shut down a refinery Friday, the largest U.S. facility shut down so far this year.
That follows other refiners like Sunoco and Western Refining, who have shut down plants in recent months and off almost 1,000 workers.
Refiners say they can't raise the price of gasoline and jet fuel because people aren't traveling as much, but they must pay higher prices for crude because of the weak dollar.
Air travel is projected to decline 6.7 percent, or 2.3 million travelers this year compared to 2.5 million in 2008.
In other Nymex trading, heating oil rose 5.5 cents to $2.03 a gallon. Gasoline for December delivery gained 5 cents to $2.03 a gallon. Natural gas for December delivery rose 9 cents to $4.515 per 1,000 cubic feet.
In London, Brent crude for January delivery rose $1.96 to $79.16 on the ICE Futures exchange.
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U.S. home sales surge to highest level in 2 1/2 years
Home sales far exceeded expectations last month, surging to the highest level in 2 1/2 years as first-time buyers rushed to take advantage of an expiring tax credit.
The National Association of Realtors said Monday that home resales rose 10.1 percent to a seasonally adjusted annual rate of 6.1 million in October, from a downwardly revised pace of 5.54 million in September.
The tax credit of up to $8,000 for first-time owners was originally set to run out on Nov. 30, but Congress renewed it earlier this month and broadened its reach. People who have owned their current homes for at least five years can now claim a tax credit of up to $6,500 for a home purchase. To qualify, buyers must sign a purchase agreement by April 30.
The Realtors report on October home sales reflect offers made before buyers knew the tax credit would be extended. "There was a lot of rush and hurry to complete sales" before the deadline, said Lawrence Yun, the trade group's chief economist.
But sales are likely to drop over the winter as buyers hibernate for a few months without the looming tax credit deadline.
The new deadline means that "we're going to see some good activity coming out of the spring," said Pat Lashinsky, chief executive of online real estate brokerage ZipRealty Inc.
Sales, which were nearly 24 percent above last year's level, had been expected to rise to an annual pace of 5.65 million, according to economists surveyed by Thomson Reuters.
The median sales price was $173,100, down 7.1 percent from a year earlier and off 1.6 percent from September.
In addition to lower prices, mortgage rates have been hovering around 5 percent since the spring, largely because of government intervention. That has helped restore housing affordability in large swaths of the country.
The inventory of unsold homes on the market fell about 4 percent to 3.6 million. That's a 7 month supply at the current sales pace, and close to a healthy stock of about six months.
Nationwide sales are up nearly 37 percent from their bottom in January, but are still off about 16 percent from the peak in autumn 2005.
Over the summer, the housing market started to rebound from the worst downturn in decades, aided by aggressive federal intervention to lower mortgage rates and bring more buyers into the market.
But experts forecast that prices will fall again. Most say they will hit a new low next spring, perhaps falling another 5 to 10 percent, as more foreclosures get pushed onto the market.
A record-high 14 percent of homeowners with a mortgage were either behind on payments or in foreclosure at the end of September, the Mortgage Bankers Association said last week. The worst damage is still concentrated in the states hardest hit from the start: Florida, Nevada, California and Arizona. Together, they accounted for 43 percent of new foreclosures.
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U.S. labor group unveils plan to tackle joblessness
The head of the largest U.S. labor federation urged President Barack Obama on Tuesday to use the $700 billion Wall Street bailout fund to help cash-starved small businesses as a way to stem rising joblessness.
In a preview of labor's contribution to Obama's December jobs summit, AFL-CIO President Richard Trumka said money from the Troubled Asset Relief Program could be lent directly to small- and medium-sized businesses at commercial rates.
He said TARP money could also help small community banks that were ignored during the financial rescue effort by having them manage the loans.
The proposal, unusual for a labor organization, is part of a five-point AFL-CIO plan to address rising unemployment that hit 10.2 percent in October, its highest rate in 26-1/2 years.
The AFL-CIO jobs plan also calls for extended unemployment benefits, food assistance and healthcare for the unemployed, more money for infrastructure projects and state and local governments, and job creation aimed at distressed communities.
Trumka will take the plan to the White House next month, when he joins business leaders, economists and others for a December 3 brainstorming session on how to tackle joblessness in the weakest economy since the Great Depression.
Rising unemployment poses a political danger to Obama as his fellow Democrats in Congress approach the 2010 election with voters increasingly dissatisfied with incumbents.
The AFL-CIO and other union groups need to retain the Democratic majority to win reforms that could reverse decades of labor decline. Trumka is also trying to sweeten labor's appeal to businesses, young workers and college students as part of an effort to reverse decades of declining union membership.
"If small businesses can get credit, they will create jobs. And we need jobs now," Trumka said in a speech to the Economic Policy Institute, a left-leaning Washington think tank.
"This is something they can do right now and it would make a critical difference."
The TARP fund was created in the depths of the 2008 financial crisis to shore up banks after investment bank Lehman Brothers failed.
The AFL-CIO's proposal comes as the White House considers whether some of the TARP fund's remaining $210 billion should be used to help debt-burdened families and small businesses.
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IRS settles with 14,700 over foreign accounts
More than 14,700 U.S. taxpayers came forward to disclose billions in offshore bank accounts in 70 countries under a voluntary Internal Revenue Service program allowing most to avoid criminal prosecution as long as they pay what they owe, IRS officials said Tuesday.
A flood of people came forward in the last days before the amnesty program expired Oct. 15, IRS Commissioner Doug Shulman said. The final total far surpasses the number who disclose offshore accounts in a typical year — about 100 — and comes amid a broad U.S. crackdown on international tax evasion at Swiss bank UBS AG and other institutions.
"To put it simply, this is a historic milestone for the nation's hardworking taxpayers," Shulman said in a conference call from Washington.
The total in taxes, interest and penalties collected from those in the voluntary disclosure program will be in the "billions of dollars," Shulman said. The disclosures involved accounts on every continent but Antarctica.
Taxpayers flocked to the amnesty program after the U.S. reached an agreement in August with the Swiss government and UBS to obtain names of 4,450 U.S. taxpayers believed to be hiding assets in secret bank accounts. Earlier this year, UBS paid a $780 million penalty under a deferred prosecution agreement filed in a Florida federal court that included disclosure of an additional 150 names.
Seven of those people have been charged criminally, with at least two getting sentenced to prison time.
Shulman said the combination of the UBS disclosures and the amnesty program have fundamentally changed the offshore tax landscape, particularly in Switzerland where bank secrecy was the tradition for centuries.
"It shows we are serious about piercing the veil of bank secrecy," he said. "The whole game has changed."
Also Tuesday, the IRS and Swiss unveiled the criteria being used to determine which American UBS accounts will be disclosed under the August agreement.
Accounts being targeted include those that contained 1 million or more Swiss francs at any time between 2001 and 2008; instances in which there was clear fraudulent actions, such as false documents; and accounts that earned an average of 100,000 francs a year for at least three years.
The Swiss have until the end of August to hand over the names. Swiss officials said the first 400 names will be chosen by the end of this week, with another 100 expected to be ready by the end of the month. Those taxpayers who are picked for disclosure can appeal to Switzerland's top administrative court.
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Stocks jump as retail sales rebound in October
Investors grew more upbeat about the economy Monday after retail sales rebounded more than expected in October on higher auto sales.
The stock market's gains followed advances overseas propelled by a weakening dollar and stronger gold prices, which boosted commodities and shares of companies that produce raw materials.
Major stock indexes rose more than 1 percent, including the Dow Jones industrial average, which advanced 125 points.
The Commerce Department said retail sales rose 1.4 percent in October, easily surpassing the 0.8 percent increase forecast by economists polled by Thomson Reuters. It was a sharp rebound following the 2.3 percent drop in September. Excluding the gain from autos, however, sales rose just 0.2 percent, half of what economists predicted.
Jamie Cox, a managing partner at Harris Financial Group, said the sales growth was a good sign heading into the holiday shopping season, especially because the data were not affected by factors such as sales tax holidays and government stimulus programs that had been present in the preceding months.
In midmorning trading, the Dow rose 126.29, or 1.2 percent, to 10,396.76. The Standard & Poor's 500 index rose 16.53, or 1.5 percent, to 1,110.01, while the Nasdaq composite index rose to 28.76, or 1.3 percent, to 2,196.64.
General Motors Co. said it lost $1.2 billion in the period since emerging from bankruptcy and the end of the third quarter on Sept. 30. Despite the loss, GM said it will begin to repay $6.7 billion in government loans and was seeing a stabilization in its business.
Home improvement retailer Lowe's Cos. reported lower profits that matched analysts' expectations and said it was seeing stabilization in some of the hardest hit housing markets. The company's shares rose 24 cents, or 1.1 percent, to $22.09.
Investors will get more insight into consumer spending as other retailers including Home Depot Inc., Target Corp. and TJX Cos. report earnings Tuesday.
Cox said the wide range of retailers reporting earnings during the week will provide insight into whether shoppers are willing to step up their spending and move back toward more expensive goods. Investors will be carefully parsing any updated outlooks from the companies ahead of the holiday shopping season.
The stock market is coming off a strong week, which added more than 2 percent to major indexes. On Friday the market was buoyed by encouraging earnings reports and outlooks from major retailers Abercrombie & Fitch Co. and J.C. Penney Co. as well as The Walt Disney Co.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite to its price, fell to 3.40 percent from 3.42 percent late Friday.
The dollar mostly fell against other major currencies, while gold prices rose to another record. Gold rose $11.50 to $1,129.20 an ounce after reaching a record of $1,133.50.
Crude oil rose $1.63 to $77.98 per barrel on the New York Mercantile Exchange.
The Russell 2000 index of smaller companies rose 11.70, or 2 percent, to 597.98.
Overseas, Japan's Nikkei stock average rose 0.2 percent. In afternoon trading, Britain's FTSE 100 rose 1.4 percent, Germany's DAX index gained 1.3 percent, and France's CAC-40 rose 1.2 percent.
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GM posts loss, vows to repay U.S. debt early
General Motors Co (GM.UL) posted a quarterly loss on Monday but said stabilizing sales since its bankruptcy would allow it to begin paying down $8.1 billion in debt to the United States and Canada next month.
GM said it expected to repay its government debt by the end of 2011 and could opt to move faster by refunding money left over in an account created by the Obama administration to finance GM's fast-track sale out of bankruptcy in July.
Analysts said GM's third-quarter results underscored the pressure facing the largest U.S. automaker despite sharply lower debt and operating costs and a $50 billion financing package that has made the U.S. government a 61-percent owner.
"They are still on life support as a business and they are going to continue to be," said Mirko Mikelic, a portfolio manager at Fifth Third Bank in Grand Rapids, Michigan.
GM's third-quarter sales dropped 26 percent to $28 billion. It posted a net loss of $1.2 billion for the period from its July 10 bankruptcy emergence to the end of September.
"There are some signs of stability," Chief Executive Fritz Henderson said. "But when you come away from it, we lost money. It's certainly not satisfactory."
But Henderson also said the financial damage to GM's business from a volatile quarter that saw it transferred to U.S. government ownership had been less damaging than feared.
Henderson's predecessor, Rick Wagoner, was asked to step down by the White House after resisting plans for a bankruptcy that GM had long argued would hurt consumer confidence.
"The underlying business, relative to the projections that we had going into bankruptcy, has actually performed better," Henderson said.
'SURPRISING' AND 'DISAPPOINTING'
Bolstered by its bailout, GM ended September with almost $43 billion in cash compared with $14 billion a year earlier.
That included $17.4 billion in a special account created with bankruptcy financing provided by the U.S. government. GM said it had allocated $8.1 billion from that taxpayer-funded account to pay down its government debt.
GM's results were not prepared according to generally accepted accounting principles and were not comparable to past results. GM has lost $88 billion since 2005.
The company's global share of auto sales slipped to 11.9 percent in the third quarter compared with 13 percent a year earlier. In the United States, where the "cash for clunkers" sales incentives helped lift a sagging market, GM's U.S. share slipped to 19.5 percent from 24.3 percent a year earlier.
Aaron Bragman, an analyst with IHS Global Insight, called the GM results "surprising and a little disappointing."
"The bankruptcy was effective in some ways, the debt is a lot less, the structural costs are dramatically less, but why are they still turning in a loss?" Bragman said. "We expected better."
GM said its international operations including its European Opel unit had earnings before interest and taxes of $238 million for the shortened third-quarter period. By contrast, GM's North American operations posted a loss of $651 million.
In a move that has strained relations with its German union and Germany's government, GM's board reversed course earlier this month and decided to keep Opel.
The German government had pledged to contribute 4.5 billion euros ($6.7 billion) to finance a deal that would have sold Opel to a Russian-backed group led by Canadian auto parts supplier Magna International (MGa.TO).
GM is readying a new restructuring plan for Opel that will rely less on help from Germany's government.
GM said it would repay Berlin the remaining $600 million in bridge loans for Opel by the end of November. It said its European operations were carrying $2.9 billion in cash as of the end of September.
Separately, GM plans to begin paying back $6.7 billion of loans from the U.S. Treasury and $1.4 billion from the governments of Canada and Ontario through quarterly payments totaling $1.2 billion.
A congressional oversight panel has said the U.S. government is unlikely to recover all of the $50 billion financing it provided GM.
Henderson said it was an "open question" as to whether U.S. government-imposed restrictions on executive compensation would lift with the repaying of the government loans.
GM is in the process of revaluing its balance sheet after bankruptcy. That process of readying "fresh start accounting," which is expected to take until the first quarter of next year, is a step toward an eventual IPO.
In a move that would represent its first return to the capital markets, GM also plans to get a revolving line of credit in preparation for the IPO, Henderson said.
"All of our shareholders want to sell shares," Henderson said. "Creating a market for an orderly trading of the stock is important."
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Ahead of the Bell: Rise in gas reserves expected
The Energy Department on Friday is expected to report a build of 14 billion to 18 billion cubic feet of natural gas storage inventories for the week ended Nov. 6, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
The Energy Information Administration — the statistical agency of the Department of Energy — releases its weekly report at 10:30 a.m. EST.
A reading above or below estimates can influence market trading.
Last Thursday, the EIA said for the week ended Oct. 30 natural gas inventories held in underground storage in the lower 48 states grew by 29 billion cubic feet to a new record high of about 3.79 trillion cubic feet. Analysts had expected a boost of between 29 billion and 33 billion cubic feet.
After that report, natural gas for December delivery plunged 18.7 cents to settle at $4.595 per 1,000 cubic feet on the New York Mercantile Exchange.
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Germany economy recovers, but advisors slam debt
Germany is well into recovery, official data showed Friday shortly before the government's own advisers slammed "deceptive" plans to reduce ballooning debt in Europe's biggest economy.
Data from the national statistics office "indicate that the German economy managed a remarkable comeback" in the second and third quarters of 2009 from its worst post-war recession, UniCredit economist Andreas Rees said.
But a coalition government agreement to cut the public deficit and pay down debt "is vague and deceptive in every way," a panel of top economists dubbed the "Five Wise Ones" added in an attack on Chancellor Angela Merkel's cabinet.
"The massive new public deficits must be rolled back from 2011 ... Without significant spending cuts tax hikes will be unavoidable," they said.
Germany is emerging from its historic recession in large part owing to huge injections of cash -- some 80 billion euros (119 billion dollars) -- from the state.
The Destatis statistics office said activity expanded by a provisional 0.7 percent in the third quarter from the previous three-month period, more than twice the figure achieved in neighbouring France which showed growth of 0.3 percent. Italy posted growth of 0.6 percent.
Across the 16-nation eurozone, economic activity increased by 0.4 percent according to the European Union's data agency Eurostat, ending a recession that began in the second quarter of 2008.
In Germany, Desatis revised its initial estimate for second-quarter growth slightly higher as well, to 0.4 percent from 0.3 percent previously.
That followed four quarters of contraction, including a plunge of 3.5 percent in the first three months of this year.
"The German economy has emerged from the deep recession earlier and faster than many had thought," ING senior economist Carsten Brzeski said.
Destatis is to release detailed results on November 24.
Fears of rising unemployment and an end to Germany's car scrapping premium have weighed on consumer spending however, while imports jumped, "probably the main reason why third quarter GDP (gross domestic product) came in a nudge weaker than we had expected," said UBS economist Martin Lueck.
On a 12-month basis, German activity contracted by 4.8 percent, in line with forecasts and better than a decrease of 5.8 percent in the second quarter, Destatis said.
Germany's export-dependent economy was slammed by the global downturn, but is now meeting fresh demand for machine tools, automobiles and chemical products.
Economy Minister Karl-Theodore zu Guttenberg has forecast the economy would grow by 1.2 percent in 2010, while the "Five Wise Ones" were more optimistic, issuing an outlook for growth of 1.6 percent.
Although Germany has recovered quickly from recession, the country faces the prospect of rising unemployment, despite subsidised shorter working hours that have limited the damage.
"Today's figures exaggerate the underlying pace of growth," Commerzbank's chief economist Joerg Kraemer warned.
He said that a large part of the gain came from the fact "that companies around the globe are now catching up on some of the spending shelved when the shock news of Lehman Brothers? collapse was announced" in September 2008.
But Kraemer and other analysts also noted that some government stimulus measures had still not kicked in.
"Ongoing monetary and fiscal stimulus also in 2010 - notably government investment in infrastructure and higher child support payments for the consumer - will remain supportive for German economic growth in the quarters ahead," Global Insight senior economist Timo Klein concluded.
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Fed: banks need customer consent on overdraft fees
Banks will have to secure their customers' consent before charging large overdraft fees on ATM and debit card transactions, according to a new rule announced Thursday by the Federal Reserve.
The rule responds to complaints from consumer groups, members of Congress and other regulators that the overdraft fees are unfair because many people assume they can't spend more on a debit card than is available in their account. Instead, many banks allow the transactions to go through, then charge fees of up to $25 to $35.
For small purchases, such as a cup of coffee, the penalty can far exceed the actual cost of the transaction.
Under the Fed's new rule, which will take effect July 1, banks will be required to notify new and existing customers of their overdraft services and give customers the option of being covered. If customers don't "opt in," any debit or ATM transactions that overdraw their accounts will be denied, Fed officials said.
Many consumers do want checks and regular electronic bill payments to be covered in the event of an overdraft, Fed officials said. As a result, those transactions aren't covered by the rule.
Banks earn as much as $25 billion to $38 billion annually from overdraft fees, Fed officials said, but that total includes check overdrafts.
Many larger banks, including Bank of America Corp., JPMorgan Chase & Co., U.S. Bank and Wells Fargo & Co. began instituting similar "opt-in" plans in late September after coming under fire for the fees.
But consumer groups and other regulators, including Federal Deposit Insurance Corp. Chairman Sheila Bair, said new rules were still necessary to ensure smaller banks followed suit.
Many lawmakers have criticized the Fed for failing to provide sufficient consumer protection in the past, a defect they say contributed to last year's financial crisis. Sen. Christopher J. Dodd, D-Conn., on Tuesday introduced a bill that would strip the Fed of its consumer oversight.
Dodd also proposed legislation last month that would have imposed limits similar to the Fed's on the banks' ability to charge overdraft fees.
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Jobless claims fall more than expected to 502K
New claims for unemployment insurance fell more than expected last week, evidence the job market is slowly healing as the economy recovers.
Still, many private economists and Federal Reserve officials worry the nation could be in for a "jobless recovery" as the unemployment rate rises despite some overall economic growth.
The Labor Department said Thursday that first-time claims for jobless benefits dropped to a seasonally adjusted 502,000 from an upwardly revised 514,000 the previous week. That's the fewest claims since the week ending Jan. 3, and below economists' estimates.
The four-week average, which smooths fluctuations, dropped to 519,750, also the lowest in almost a year. It has fallen by more than 20 percent since its peak in the spring.
"The weekly claims figures are showing steady progress," said Zach Pandl, an economist at Nomura Securities. "Firing activity is starting to taper off. It's not clear whether hiring has picked up."
Economists closely watch initial claims as a gauge of the pace of layoffs. But claims also can provide a signal about the willingness of companies to hire, because laid-off workers able to find jobs are less likely to request benefits.
Abiel Reinhart, an economist at JPMorgan Chase, estimates that claims in the high 400s would be a signal the economy is starting to add jobs. That level could be reached by January, he said, and the economy should start gaining jobs in the first quarter of 2010.
Still, he doesn't expect the gains to be strong enough to push down the unemployment rate — now at a 26-year high of 10.2 percent — until the second quarter.
Pandl, meanwhile, said that claims will need to drop to about 425,000 before jobs are added. Still, he also expects the economy to see net gains in payrolls by January.
The last time the economy saw job gains was in December 2007, when employers added 120,000 jobs. Claims that month averaged about 340,000, though Reinhart said claims don't have to fall that far at the end of the recession to signal gains.
Many analysts estimate that job gains need to top 125,000 to account for population growth and lower the unemployment rate.
President Barack Obama called the better-than-expected jobless claims report "a hopeful sign," but said he'll host a White House summit next month on combating the joblessness that continues to drag on a struggling economy.
"We are open to any demonstrably good idea to supplement the steps we've already taken to put America back to work," Obama said before taking off for a trip to Asia. With millions of unemployed Americans, Obama said the government has "an obligation to consider every additional responsible step we can" to get people back to work.
The December jobs "forum" will bring in public and private sector experts to talk about how to get the job-creation engine running again, Obama said.
The stock market dipped in midday trading. The Dow Jones industrial average fell about 50 points, while broader indexes also edged down.
Employers cut a net total of 190,000 jobs in October, the government said last month, bringing total losses in the recession to 7.3 million.
Several regional Fed bank presidents warned in speeches Tuesday that the unemployment rate is likely to remain high for several years.
The economy grew at a 3.5 percent annual rate in the July-September quarter after a record four straight quarterly drops. The disparity between the unemployment rate and economic growth figure has raised fears among many economists that the nation's economy could be in for a "jobless recovery."
The government also said Thursday that the number of people continuing to claim benefits dropped by 139,000 to 5.6 million, below analysts' estimates. The figures on continuing claims lag initial claims by a week.
But millions of unemployed Americans have used up the regular 26 weeks of benefits typically provided by states and are receiving extended benefits for up to 73 additional weeks, paid for by the federal government. Congress added 14 to 20 weeks to the extended program last week, the fourth extension since the recession began and the longest total extension on record.
About 4.1 million people were receiving extended benefits in the week ended Oct. 24, little changed from the previous week.
More job cuts were announced this week by Adobe Systems Inc., the maker of Photoshop, Flash and Acrobat software products, and internet company AOL LLC, which will soon be spun off from parent Time Warner Inc.
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Stocks mostly fall as the dollar's slide eases
Investors cooled their buying of stocks and commodities, pausing from a surge that's carried major stock indexes to their highest levels in more than a year.
Stocks mostly fell Tuesday, a day after the Dow Jones industrials shot up 200 points for the second time in three days. Following a recent pattern, the stock market on Monday took its cue from the dollar, driving higher as the dollar weakened.
A modest rebound in the dollar Tuesday weighed on stocks.
On Tuesday, investors increased their buying of safe-haven assets like the dollar and Treasurys. The ICE Futures US dollar index, which measures the dollar against other currencies, crept up less than 0.1 percent.
"People are reaching for a little less risk today after we've had such a run," said Bill Stone, chief investment strategist at PNC Wealth Management.
Record-low interest rates in the U.S. and the resulting slide in the dollar have been major forces behind the surge in stocks over the past several months. A weaker dollar allows investors to borrow money cheaply, while the low interest rates also encourage them to hold any assets other than low-yielding cash, such as stocks, commodities and bonds.
The falling dollar has enabled many investors to look past some of the economy's persistent trouble spots, including unemployment. The jobless rate rose to 10.2 percent in October, the highest level in 26 years.
A number of market watchers still believe that the recent upsurge in stocks has been overdone given the weaknesses that remain in the economy, such as the large amounts of souring loans on banks' balance sheets.
In midday trading, the Dow slipped 9.37, or 0.1 percent, to 10,217.57. On Monday the Dow closed at its highest level since October 2008.
The broader Standard & Poor's 500 index fell 3.19, or 0.3 percent, to 1,089.89, while the Nasdaq composite index fell 9.18, or 0.4 percent, to 2,144.88.
About two stocks fell for every one that rose on the New York Stock Exchange, where volume came to 434.2 million shares, compared with 443.3 million at the same time on Monday.
Beazer Homes USA rose after the homebuilder turned a fiscal fourth-quarter profit despite a plunge in revenue and said it saw "some moderation" in weak market trends. The stock rose 40 cents, or 8.5 percent, to $5.09.
Bond prices rose, sending yields down, ahead of an auction of 10-year notes. The 10-year yield fell to 3.47 percent from 3.49 percent late Monday.
Light, sweet crude fell 11 cents to $79.32 a barrel on the New York Mercantile Exchange. Gold rose.
In other trading, the Russell 2000 index of smaller companies fell 6.99, or 1.2 percent, to 585.32.
Markets overseas were mixed. Japan's Nikkei stock average rose 0.6 percent. Britain's FTSE, Germany's DAX index and France's CAC-40 each slipped less than 0.1 percent.
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Home prices fall in 8 out of 10 U.S. cities
A real estate group says home prices fell in eight out of every 10 U.S. cities in the third quarter of this year as heavily discounted distressed sales made up 30 percent of all deals.
But home sales continued their climb, with quarterly sales outpacing the second quarter and the previous year's figures, the National Association of Realtors said Tuesday.
The median sales prices of existing homes declined in 123 out of 153 metropolitan areas compared with the same period a year ago. Prices rose in the other 30 cities.
The national median price clocked in at $177,900, or 11 percent below the third quarter last year.
"The decline in the national median price has moderated recently, and a shrinking supply of unsold inventory suggests we are getting closer to price stabilization in many areas, " said Lawrence Yun, the group's chief economist, in a statement. "But we need a steady stream of financially qualified buyers to further reduce inventory and get us to a self-sustaining market."
Prices in Fort Myers, Fla., plunging 40 percent to $98,000 from a year ago, the worst in the nation. Las Vegas saw its median price tumble almost 35 percent to $138,500 year-over-year.
The largest price gain, by contrast, was in Cumberland, Md., where prices jumped 19 percent to $122,100. Davenport, Iowa, followed with an increase of 14 percent to $115,600.
The federal tax credit of up to $8,000 for first-time homebuyers helped boost sales in the third quarter. U.S. home sales grew in 45 states from the second quarter, with 28 states posting double-digit gains.
Total quarterly sales hit a seasonally adjusted annual rate of 5.3 million, up more than 11 percent from 4.76 million in the second quarter.
President Barack Obama signed a bill last week extending and expanding the federal tax credit. Now, buyers who have owned in their current homes for at least five years are eligible for tax credits of up to $6,500. First-time homebuyers — or anyone who hasn't owned a home in the last three years — would still get up to $8,000. To qualify, buyers have to sign a purchase agreement by April 30, 2010, and close by June 30.
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Housing plan reaches 1 in 5 borrowers
After a slow start, the Obama administration's mortgage relief program has reached one in five eligible homeowners, a government report says.
As of the end of October, more than 650,000 borrowers, or 20 percent of those eligible, have signed up for trials lasting up to five months, the Treasury Department said Tuesday. The modifications reduce monthly payments to more affordable levels.
Launched with great fanfare in March, the plan got off to a weak start, but now nearly 920,000 loan modification offers have been sent to more than 3.2 million eligible homeowners. That works out to 29 percent, up from 15 percent at the end of July.
In California, about 130,000 homeowners have been enrolled in the "Making Home Affordable" loan modification plan, which President Barack Obama unveiled in February. That works out to about 19 percent of the state's homeowners who were either two payments behind or in foreclosure at the end of last month, according to Treasury Department data.
"We are reaching all the places that really got decimated," said Michael Barr, an assistant Treasury secretary. "The other basic story is we're reaching borrowers at a scale that has not been done by any other modification program."
Two other hard-hit states, Arizona and Nevada had similar rates of assistance as California, at 22 percent and 18 percent respectively. Florida, however, was much lower, at 12 percent, possibly because of high numbers of investor-owned properties that don't qualify for the program.
Government officials say they are pressing mortgage companies hard to improve their performance. Still, many housing advocates have been disappointed with the $50 billion plan's progress and say that getting a loan modification remains a battle.
And economists doubt the Obama administration will reach its broad goal of helping 3 million to 4 million borrowers within three years.
Most of the borrowers enrolled so far have been signed up for preliminary trial modifications for up to five months. To make the change permanent, though, they must complete a big stack of paperwork and show they can make their payments on time. The government expects to release details in the coming weeks on permanent modifications.
"We're seeing some early indications that the servicers haven't done enough to get all the documents in," Barr said.
Traditionally mortgage servicers were low-cost operations, with workers in collections departments trying to wring payments from tardy borrowers. Those workers, and thousands of new ones, are now engaged in a far different job — figuring out whether thousands of borrowers qualify for help.
Banks, for their part, have been slow to adapt to an unfamiliar climate of sinking home prices and rising unemployment.
"Even as foreclosures and delinquencies were soaring, everybody underestimated how ugly the housing picture was," said Thomas Lawler, an independent housing economist in Virginia.
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Can't find the hot new toy? Blame the economy
Robotic toy hamsters, the latest Barbie dolls and stylish boots are disappearing from store shelves as holiday shoppers start to get serious. But don't confuse this with the days of Tickle Me Elmo.
Instead of a throwback to great buying binges of the past, the empty shelves are just another sign of bad times.
The shortages come from stores that are terrified of ordering too much and are keeping their inventories thin.
"I guess if you see it, you should get it," said Martha Frey, who was surprised when she couldn't find a specific style of boots in a popular size for her 17-year-old daughter recently at a Top Shop in Manhattan's SoHo district.
Shoppers are spending a little more these days, but they aren't going on buying sprees. Stores, remembering how Americans snapped their wallets shut last holiday season, didn't order big piles of merchandise in the first place.
The result, with seven weeks to go before Christmas, is that popular toys are already hard to find.
In fact, the holiday season's early hit — the Zhu Zhu Pets hamster, an interactive mechanical rodent by Cepia Inc. that sells for $9.99 and is being compared to Furby a decade ago — is almost impossible to nab.
Other toys that are already becoming hard to find include Mattel's Mindflex, which measures brain activity through a helmet, a Nerf dart thrower called Nerf N Strike from Hasbro Inc. and Barbie Fashionista, who can twist her hips and strike other poses.
"Stores just underordered across the board," said Jim Silver, an analyst at Timetoplaymag.com, who predicted shortages of the top 100 toys by early December. In a typical year, only the top 15 are in short supply that early.
In recent weeks toy makers have dispatched executives to China to make sure they get enough products to keep shelves full, Silver said. But production times can be long, and chances look slim that people who put off buying a coveted toy until Thanksgiving will be able to get one by Christmas.
Shoppers are starting to notice.
Tami Megal, a 36-year-old mother of girls ages 5 and 9 from Melville, N.Y., had to go to Toys R Us five times before she got her hands on Zhu Zhu Pets a month ago. But she's having a hard time finding the accessories, like the car, pet carrier and bed.
"It's no use to just get the hamsters. You need the habitat," she said. Megal noted that overall worry about shortages has made her start her holiday shopping early. She's almost finished.
The barren shelves are in stark contrast to last year, when stores ordered too much and had to slap big discounts on merchandise as soon as it hit the floor. Holiday sales posted their biggest decline in at least three decades, and the results cascaded into poor profits and even the closings of prominent stores like Circuit City.
This year, inventory is 8 to 13 percent smaller for mid-price clothing, and 10 to 15 percent smaller for home furnishings, said Antony Karabus, CEO of Karabus Management, a retail advisory firm.
Stores would rather be out of stock than stuck with lots of leftovers. But they also know that merchants who carry goods shoppers want will have an edge.
"No one wants to leave money on the table," said John Long, a retail strategist at Kurt Salmon Associates. "No one wants to disappoint customers."
October sales results showed that lean inventories have helped raise profits for stores, but they're also limiting sales. And many reported slower sales toward month's end as they ran out of clearance merchandise.
Inventory is one of the biggest challenges stores face this holiday season, said Carl Steidtmann, an economist at Deloitte Research. Nevertheless, they're reordering only the best-selling items.
Even then, they may be out of luck. Manufacturers, particularly small ones, matched production to orders and don't have extras ready to ship.
BaseCamp Adventure Outfitters in Basking Ridge, N.J., which sells outdoor clothing and gear, has sold out of a few styles of fleece jackets from brands like Horny Toad and Prana. The store can't get more until April.
"Folks are coming in, and we are trying to reorder," said Nick Marotta, a sales associate. "But there is nothing to get."
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Stocks open sharply higher on Wall Street
Stocks are rising on Wall Street Monday after a weekend meeting of world financial leaders raised hopes for the economy.
U.S. stocks are following overseas markets, which are rising after officials from the Group of 20 countries agreed to keep economic stimulus measures in place.
Investors are awaiting retailers' earnings reports to see how much consumers are spending as the holidays approach. The market is concerned that rising unemployment, which now sits at 10.2 percent, will further discourage already hesitant consumers from spending.
Still, the Labor Department's jobless report Friday hasn't deterred investors, who were buying stocks on the theory that the weak labor market will prompt the Federal Reserve to keep interest rates low for some time.
In the opening moments of trading, the Dow Jones industrial average rose 81.70, or 0.8 percent, at 10,105.12. The broader Standard & Poor's 500 index rose 9.69, or 0.9 percent, at 1,078.99, and the Nasdaq composite index is up 23.61, or 1.12 percent, at 2,136.05.
In corporate news, Britain's Cadbury Plc rejected a $16.4 billion hostile takeover bid from Kraft Foods Inc.
McDonald's, the world's largest fast-food chain, said monthly sales growth was relatively flat in the U.S. but offset by stronger growth globally.
Stock futures also got a lift as the House approved the health care reform bill.
Meanwhile, oil prices hovered around $79 a barrel as Hurricane Ida threatened the Gulf of Mexico. A barrel of crude traded at $79.06, up $1.63 cents.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was unchanged from 3.50 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.06 percent from 0.04 percent late Friday.
The dollar fell against other major currencies, while gold prices rose.
Overseas, Japan's Nikkei stock average rose 0.2 percent. In afternoon trading, Britain's FTSE 100 was up 1.7 percent, Germany's DAX index was up 1.6 percent, and France's CAC-40 was up 1.4 percent.
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Ten percent jobless rate adds to pressure on Barack Obama
For months he had warned it was coming but that didn't ease the political shockwaves for President Barack Obama when unemployment topped 10 percent.
A year after his election Obama finds it increasingly difficult to blame the sour economy on George W. Bush or offer reassurances that jobless Americans will soon find work.
Never mind that the economy itself grew in the last quarter, that the recession, as measured by the precise formulas used by economists, is over and that the number of jobs lost in October was less than one-third the number of job losses at the start of his presidency.
Those claims about the recession's end do not convince people who remain painfully aware of the unemployment rate.
At 10.2 percent, October unemployment climbed to chart-topping heights unseen in more than a quarter century. The bottom line is that more than 15 million Americans are out of work and 3.5 million lost their jobs while Obama was president. Expected or not, this is Obama's new reality.
"I won't let up until the Americans who want to find work can find work, and until all Americans can earn enough to raise their families and keep their businesses open," the president declared Friday.
That's a hopeful promise but not very realistic.
And it shows that, for the time being, action to tackle record budget deficits will simply have to wait.
Obama, appearing at the White House Rose Garden on Friday three hours after the jobless numbers were made public, said his administration was looking at additional spending for roads and bridges and energy efficient buildings. Additional tax cuts for businesses and steps to increase credit for small businesses were also on the bill.
The new unemployment rate also came on the same day Obama signed a $24 billion bill to extend jobless benefits and spur homebuying
In a sign of Democratic thinking, Rep. Carolyn Maloney, who heads Congress's Joint Economic committee, said Democrats would consider new aid to states, an "infrastructure bank" to increase construction jobs and small business tax credits.
"I think we're witnessing a political renaissance about concerns about jobs," Lawrence Mishel, president of the labor-leaning Economic Policy Institute, said approvingly. "It will put the deficit concerns into their appropriate context."
What all this amounts to is another stimulus for the economy. Though don't look for Democrats to call it that; Democrats have a tough enough time debating the merits of the $787 billion stimulus Congress passed earlier this year.
Republicans were quick to pounce on the proposals. Internal polling by the Republican National Committee after Republican gubernatorial victories in New Jersey and Virginia showed that Republican candidates could do well by arguing against additional spending while promoting job growth through tax cutting alone.
But in rhetoric and in deed, Obama is being forced to address an unemployment picture his economic team had long ago expected to avoid.
Many economists predict the jobless rate will rise again, peaking at 10.5 percent sometime next year before employment makes a turnaround in the spring. That still means unemployment will remain high for some time. The administration's own projections still see unemployment at 8 percent by the end of 2011.
Such lingering discomfort can have economic and political consequences.
Consumer spending likely won't increase rapidly. Foreclosures will continue to rise, hitting not just subprime borrowers, but prime mortgage holders as well. Commercial real estate lending, already teetering, could plunge in the face of rising vacancy and loan delinquency rates.
Politically, Democrats are staring at some damage — and the fear of unemployment — themselves. Exit polls Tuesday in the New Jersey and Virginia GOP victories showed that the economy was the top issue in the minds of voters. And national public opinion surveys show that a majority of the public doesn't believe Obama's economic policies are working.
Couple that with traditional losses by the president's party during midterm elections and Democrats have cause to worry about their own fate.
The unemployment number masks the fact that job losses slowed compared to past months — the work force went down by 190,000 in October compared to 219,000 in September. What's more, the Bureau of Labor Statistics said job losses in August and September had been overstated by 91,000.
In addition, the economy grew by 3.5 percent in the third quarter. And Christina Romer, a top Obama economic adviser, noted an increase in temporary service jobs. "That's often the first sign of firms kind of dipping their toe back into hiring people," she said in an interview with The Associated Press.
But since the start of the recession in December 2007, 7.3 million Americans have lost their jobs and key sectors — construction, manufacturing and retail trade — are still seeing significant declines.
The president has not been helped by reports of flaws in the administration's count of jobs created by the $787 billion stimulus.
Ten months into the job, Obama did not even try to lay the blame for the economy at Bush's feet, as he has in the past. His only criticism was implied.
"When we first came into office, our immediate goal was to stop the free fall that caused our economy to shrink at an alarming rate," he said. "We've succeeded in achieving that goal, as our economy grew last quarter for the first time in a year."
But Obama has already taken ownership of the economy.
Republicans, he noted wryly during a July speech in Michigan, were eager to blame him for the economy.
"That's fine," he added, "Give it to me!"
Four months later, it would be hard to give it back.
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Stocks rise as traders shrug off unemployment
Stocks rose early Friday as investors shrugged off news that more jobs were lost in October than expected, pushing the unemployment rate above 10 percent for the first time since 1983.
The rise in joblessness reassured some investors that the Federal Reserve will have to hold interest rates lower for some time. That weakened demand for the dollar, which gave a boost to stocks.
Safe-haven assets like Treasurys were mixed. Oil prices plunged and gold topped $1,100 an ounce for the first time.
The jobs report bodes poorly for consumer spending, a major component of economic activity. Consumers will cut back on their spending if they are worried about losing their jobs. And robust consumer spending is necessary to sustain the economic recovery.
The Labor Department said employers cut 190,000 jobs last month, less than the 219,000 jobs lost in September, but more than the 175,000 job losses economists had forecast. The unemployment rate jumped to 10.2 percent from 9.8 percent in September.
The government also revised lower the number of jobs lost in August and September.
The market has been expecting unemployment to top 10 percent before peaking. But the pace of job losses has accelerated and the rate is likely to go higher.
In midmorning trading, the Dow Jones industrial average rose 27.89, or 0.3 percent, to 10,033.85. The Standard & Poor's 500 index rose 3.64, or 0.3 percent, to 1,070.27, while the Nasdaq composite index rose 10.24, or 0.5 percent, to 2,115.56.
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Jobless rate tops 10 percent for first time since 1983
The unemployment rate has surpassed 10 percent for the first time since 1983 — and is likely to go higher.
Nearly 16 million people can't find jobs even though the worst recession since the Great Depression has apparently ended. Many economists worry that persistently high unemployment could undermine the recovery by restraining consumer spending, which accounts for 70 percent of the economy.
The Labor Department said Friday that jobless rate rose to 10.2 percent, the highest since April 1983, from 9.8 percent in September. The economy shed a net total of 190,000 jobs in October, less than the downwardly revised 219,000 lost in September, but more than economists expected.
The jump in the jobless rate reflects a sharp increase in the tally of unemployed Americans, which rose to 15.7 million from 15.1 million. The net loss of jobs occurred across most industries, from manufacturing and construction to retail and financial. That tally is based on a separate survey of businesses.
Economists say the unemployment rate could climb as high as 10.5 percent next year because employers remain reluctant to hire.
Christina Romer, who heads President Barack Obama's Council of Economic Advisers, said the rate was not unexpected but was still a disappointment.
"It's a stark reminder of how much work remains to be done to get people back to work," she said in an interview.
There were some positive signs hidden in the numbers, Romer said, specifically pointing to a 34,000 increase in temporary service jobs.
"That's often the first sign of firms kind of dipping their toe back into hiring people," she said.
Still, counting those who have settled for part-time jobs or stopped looking for work, the unemployment rate would be 17.5 percent, the highest on records dating from 1994.
"It's not a good report," said Dan Greenhaus, chief economic strategist for New York-based investment firm Miller Tabak & Co. "What we're seeing is a validation of the idea that a jobless recovery is perfectly on track."
Friday's report is the first since the government said last week that the economy grew at a 3.5 percent annual rate in the July-September quarter, the strongest signal yet that the economy is rebounding. But that isn't fast enough to spur rapid hiring.
"You need explosive growth to take the unemployment rate down," Greenhaus said in an interview Thursday.
The economy soared by nearly 8 percent in 1983 after a steep recession, Greenhaus said, lowering the jobless rate by 2.5 percentage points that year. But the economy is unlikely to improve that fast this time, as consumers remain cautious and tight credit hinders businesses. In fact, many analysts expect economic growth to moderate early next year, as the impact of various government stimulus programs aimed at home and car buying fade.
The stock market seesawed in early trading. The Dow Jones industrial average dipped about 13 points, while broader indexes also edged down.
Persistently high unemployment is likely to become a political liability for Obama and Democrats in Congress. Most economists expect the jobless rate will remain above 9 percent through next November, when congressional elections are held.
When unemployment topped 10 percent in the fall of 1982, President Ronald Reagan's Republican Party lost 26 seats in the House.
One sign of how hard it still is to find a job: the number of Americans who have been out of work for six months or longer rose to 5.6 million, a record. They comprise 35.6 percent of the unemployed population, matching a record set last month.
Congress sought to address the impact of long-term unemployment this week by approving legislation extending jobless benefits for the fourth time since the recession began. The bill would add 14 to 20 extra weeks of aid and is intended to prevent almost 2 million recipients from running out of unemployment insurance during the upcoming holiday season. Obama is expected to quickly sign the legislation.
October was the 22nd straight month the U.S. economy has shed jobs, the longest on records dating back 70 years. The report showed job losses remain widespread across many industries. Manufacturers eliminated a net total of 61,000 jobs, the most in four months. Construction shed 62,000 jobs, down slightly from the previous month.
Retailers, the financial sector and leisure and hospitality companies all continued to reduce payrolls. The economy has lost a net total of 7.3 million jobs since the recession began in December 2007.
The average work week was unchanged at 33 hours, a disappointment because employers are expected to add more hours for current workers before they begin hiring new ones.
There were some bright spots in the report. Professional and business services companies added 18,000 jobs. And temporary employment grew by 33,700 jobs, after losing positions for months. That's a positive sign because employers are likely to add temporary workers before hiring permanent ones.
Still, economists expect jobs likely will remain scarce even as the economy improves. Diane Swonk, chief economist at Mesirow Financial, said that small businesses, a primary engine of job creation, still face tight credit and don't have the cash reserves to support extra workers.
And many companies are squeezing more production from their existing work forces. Productivity, the amount of output per hour worked, jumped 9.5 percent in the third quarter, the Labor Department said Thursday.
That's the sharpest increase in six years and followed a 6.9 percent rise in the second quarter. The increases enable companies to produce more without hiring extra people.
The Federal Reserve said earlier this week that it will keep a key interest rate at a record low level of nearly zero for an "extended period" to support the economy.
The central bank said economic activity has "continued to pick up," but Fed Chairman Ben Bernanke and his colleagues warned that rising joblessness and tight credit could restrain the rebound in the months ahead.
While the unemployment rate hasn't yet topped the post-World War II high of 10.8 percent set in December 1982, many experts say this recession is worse.
The unemployment rate was much lower when the recession began — 4.9 percent in December 2007, compared with 7.2 percent in July 1981, when a brutal downturn started. That means the current job cuts have been much steeper to get to the 10 percent mark.
And the work force, on average, is older now as the baby boomers have aged and fewer teenagers are out looking for work. Gary Burtless, an economist at the Brookings Institution, notes that older workers are more likely to be employed than younger ones. As a result, it takes a tougher job market to push the rate to 10 percent.
"This may be the toughest employment situation we've seen in the postwar era," Mark Gertler, an economics professor at New York University, said in an interview earlier this week.
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Banks borrow more from emergency Fed program
Banks borrowed slightly more from the Federal Reserve's emergency lending program over the past week, while reducing their use of other credit programs designed to ease the financial crisis.
The Fed said commercial banks averaged $22.6 billion in daily borrowing over the week that ended Wednesday. That's up $32 million from the week ended Oct. 28, but is far less than the $110 billion they borrowed a year ago at the height of the financial crisis.
The increase, while slight, was the first since the week of Sept. 2.
The identities of the financial institutions are not released. They pay just 0.50 percent in interest for the emergency, overnight loans.
The banks sharply cut their use of a separate program intended to boost the availability of short-term financing crucial for paying salaries and supplies.
Under that program, the Fed's net holdings of "commercial paper" averaged $15.6 billion, a drop of $16.6 billion from the previous week. At its peak in late January, the Fed held almost $350 billion of commercial paper.
Meanwhile, banks' use of short-term loans drawn from the Fed's "term auction credit" facility averaged $139.2 billion, unchanged from the previous week.
The limited borrowing shows banks are having a slightly easier time getting short-term loans in private markets.
But the improvement hasn't necessarily translated into easier terms for businesses and individuals. For them, the flow of credit is not back to normal. That's one reason Fed Chairman Ben Bernanke and other economists believe the nascent economic recovery will be weak.
The report Thursday also showed that the central bank is slowing its purchases of mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac. Its holdings were valued at $774.5 billion over the past week, a drop of $1.6 billion from the previous week.
The Fed said in September that it would wrap up its effort to buy $1.25 trillion of the securities 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 said Wednesday, after a meeting of its governing board, that it will also reduce its buying of Fannie Mae and Freddie Mac securities to $175 billion from $200 billion. The central bank's weekly balance sheet said it now holds $146.9 billion of those securities, $5.4 billion higher than the previous week.
The Fed's purchasing programs have been credited with helping to force down mortgage rates.
Rates on 30-year home loans averaged 4.98 percent this week, down from 6.2 percent last year, according to mortgage company Freddie Mac. The rate was 5.03 percent last week.
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Sweden, Finland okay Russia's Nord Stream pipeline
After years of procrastination, Sweden and Finland agreed on Thursday to allow the Russian-led Nord Stream pipeline to pass through their waters in the Baltic Sea, a crucial step for the project destined to supply Europe with Russian gas.
The breakthrough approvals come as new tensions have been playing out between Moscow and Ukraine, raising fears for a new row between the countries that could jeopardise Russian gas supplies to Europe.
By going under the Baltic Sea, Nord Stream's pipeline could free the European Union of the risks posed by disputes between Moscow and the Ukraine, through which 80 percent of Russian gas currently transits on its way to Europe.
One quarter of all gas consumed in Europe comes from Russia.
"The government authorises Nord Stream to build a pipeline in international waters inside the Swedish economic zone," Swedish environment minister Andreas Carlgren told reporters in Stockholm.
A few hours later, the Finnish government issued a statement saying it "granted consent for Nord Stream AG's plan to construct an offshore natural gas pipeline system that would traverse the Baltic Sea."
Denmark agreed to Nord Stream on October 20, leaving Russia and Germany the only countries that still need to officially approve the project.
"This is an important day for the Nord Stream project," Nord Stream managing director Matthias Warnig said in a statement.
"These two permits are further significant milestones for our project and Europe's security of supply," he added.
The Swedish minister said that after 23 months of environmental impact studies requested by his government, it could be proved that "the environmental requirement" of the project had been met.
He added that the basis for Sweden's decision was "that all states are entitled to lay pipelines in international waters and on the continental shelf of a costal state."
Finland also underlined the environmental aspect of its decision and said Nord Stream was required to "take all possible measures to prevent and minimise any damage" to sealife, maritime safety and Finland's border security.
The 7.4 billion dollar (5.0-billion-euro) Nord Stream project is led by Russian state-run energy giant Gazprom in partnership with Germany's E.On Ruhrgas and BASF-Wintershall.
It will link the Russian city of Vyborg and Greifswald in Germany over a distance of 1,220 kilometres (758 miles), going under the Baltic Sea and passing through Russian, Finnish, Swedish, Danish and German waters.
Sweden's approval resolves what had become a dispute between Stockholm and Moscow two weeks before a EU-Russia summit to be held in Stockholm, as Sweden currently holds the rotating EU presidency.
In June, Russia's ambassador to the EU, Vladimir Chijov, asked the Swedish prime minister if Nord Stream was going to be one of his presidency's priorities.
Fredrik Reinfeldt bluntly replied that Sweden "was evaluating the project according to Swedish law."
"We believe in the rule of law," he said.
Russian Prime Minister Vladimir Putin on Thursday thanked Finland and Sweden for approving the project.
"In the name of the Russian leadership, I want to thank our Swedish colleagues and the Swedish government for this decision," he said.
Nord Stream AG wants to start installing the pipeline, formed of two parallel gas tubes, in 2010. Gas delivery to Europe will start in the autumn of 2011, after the first tube is installed, and the entire project should be completed by 2012.
The pipeline has the capacity to bring 55 billion cubic meters of Russian natural gas to Europe per year, which represents 11 percent of expected gas consumption in Europe for 2011.
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Stocks surge on jobs data, Cisco forecast
A drop in unemployment claims and an upbeat forecast from Cisco Systems Inc. gave investors a jolt of confidence a day before a key government report on jobs.
The Dow Jones industrial average jumped 200 points Thursday to its first close above 10,000 in two weeks, while the Nasdaq composite index led major indexes with a gain of 2.4 percent after Cisco, the maker of computer-networking gear, predicted its revenue would grow.
The Labor Department said the number of newly laid-off workers seeking unemployment benefits fell to 512,000 last week, the lowest level since January and fewer than economists had forecast. Initial claims are considered a gauge of the pace of layoffs.
The report unleashed a wave of optimism about the government's monthly report on employment Friday, which will shape trading because of the ties between joblessness and consumer spending. Economists say spending must increase for the economy to mount a sustained recovery. Analysts project that the unemployment rate rose to 9.9 percent in October.
The biggest jump in productivity in six years drove hopes that lower costs will boost corporate profits. The report also illustrated, though, that many employers remain reluctant to hire.
The government said the amount of output per hour worked rose 9.5 percent in the July-September quarter.
Meanwhile, retailers posted sales gains for the second straight month in October after watching business slide for more than a year. The retail industry posted a 2.1 percent sales gain for October, according to an International Council of Shopping Centers-Goldman Sachs tally. Investors are looking for any sign that consumers are willing to spend more as the holiday shopping season approaches.
"The news coming in has been for the most part better than expected," said Mike Boyle, senior vice president and portfolio manager at Advisors Asset Management.
According to preliminary calculations, the Dow rose 203.82, or 2.1 percent, to 10,005.96, its first close above 10,000 since Oct. 22. It was the Dow's biggest advance since a gain of 257 points on July 15, when computer chip maker Intel Corp. said business was improving.
The broader Standard & Poor's 500 index rose 20.13, or 1.9 percent, to 1,066.63, while the Nasdaq rose 49.80, or 2.4 percent, to 2,105.32.
The Russell 2000 index of smaller companies rose 18.03, or 3.2 percent, to 581.15.
Five stocks rose for every one that fell on the New York Stock Exchange, where volume came to 1.3 billion shares compared with 1.4 billion Wednesday.
Bond prices were mixed. The benchmark 10-year Treasury note slipped but its yield remained flat at 3.53 percent from late Wednesday.
Mixed economic data in recent weeks have made it difficult for investors to get a sense of where the economy is headed, leading to choppy trading. The Federal Reserve pointed to hopeful signs about the economy Wednesday but also said it would keep interest rates low for "an extended period" to help stimulate growth.
While the market often jumps at good news, investors can't shake fears that the economy won't be able to maintain the 3.5 percent pace of growth seen in the third quarter as government stimulus programs wind down.
Jeff Mortimer, chief investment officer at Charles Schwab Investment Management, predicts the choppiness will last at least through the end of the year.
"This is a transition period in a bull phase," he said. "Bull markets are front-end loaded and they give almost 50 percent of their return in their first one year of life."
Cisco pulled tech stocks higher after it said late Wednesday that it expects revenue to grow for the first time in a year for the quarter ending in January. The stock rose 64 cents, or 2.8 percent, to $23.93.
The Labor Department's monthly employment report is considered by many economists the most important economic reading because a sustained recovery depends on consumer spending.
Quincy Krosby, market strategist for Prudential Financial, said investors will be looking inside the report for the average number of weekly hours worked and demand for temporary workers. That's because as the economy improves businesses will first ask employees to stay at work longer and bring in more temps before managers gain enough confidence to hire.
In September, the number of weekly hours worked stood at a record low of 33, while the number of temporary workers fell by a modest 2,000 people.
Krosby said improvements in hours worked and the number of temp workers would bolster the idea the job market is healing.
"It will give legitimacy to the notion that the economy is picking up," she said.
The dollar fell against other major currencies. Gold prices rose.
Light, sweet crude fell 78 cents to settle at $79.62 per barrel on the New York Mercantile Exchange.
Overseas, European shares recovered from early losses to end higher after central banks left interest rates unchanged. The Bank of England said it would pump more money into the economy after news last week that the country remains in recession.
Britain's FTSE 100 rose 0.4 percent, Germany's DAX index added 0.7 percent, and France's CAC-40 gained 1.1 percent. Earlier Thursday, Japan's Nikkei stock average fell 1.3 percent.
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