The U.S. economy continues to muddle along, failing to gain momentum in the face of fiscal drag caused by Washington’s sequester. The Bureau of Economic Analysis released its first second quarter GDP estimate on Wednesday, showing real output expanded 1.7%, substantially above estimates. Yet downward revisions to the past four quarters suggest underlying trend growth hasn’t picked up at all. The silver lining: demand, which pushed up imports and supported consumption spending. In terms of what this means to Fed Chairman Ben Bernanke, it suggests he will move forward with plans to taper quantitative easing (QE) before the end of the year. …read more
GDP data Wednesday is expected to show a slow-moving, zombie-like economy, as the Fed meets for a second day.
Many economists expect second quarter growth to be paltry, less than one percent, and some think that data could help shape the Fed’s thinking if it’s even weaker than expected. The first quarter grew at a 1.8 percent rate.
The Fed meanwhile, isn’t expected to say much new when its meeting ends. The 2 p.m. Eastern time statement isn’t seen altering what Fed Chairman Ben Bernanke has already said about the Fed’s plans to taper bond purchases before the end of the year. But it may adjust its comments to reflect a temporary slowing of the economy. The Fed, and many economists, expect a stronger growth rate in the second half of the year.
“[Wednesday] is an action-packed today. It’s one of those weird ones where it’s so action-packed, what if it is a dud?” said George Goncalves, Treasury strategist at Nomura Americas. “We have all these high expectations — GDP, revisions to GDP, ADP, the Treasury going to announce at 8:30 their intentions for borrowing. We have the Fed later on.”
It is also the end of the month, and that could make markets more volatile as traders square positions. For July, the S&P 500 is up five percent, bringing its year to date gain to 18.2 percent, The Dow was up four percent in July so far. Markets Tuesday were in a wait-and-see mode ahead of the Fed’s announcement Wednesday. The Dow Jones industrial average (^DJI) edged 1 point lower to 15,520 and the S&P 500 (^GSPC) rose less than a point to 1,685.
The 10-year Treasury note was at 2.61 percent Wednesday. Traders are watching that yield level, as a move higher could take the market to a potential nervous zone for stocks.
“We’ve had a little bit of a backup in yields. [Month end] could amplify whatever’s happening toward the end of the day,” Goncalves said.
“I think GDP will be constructive. I think it’s still coming in on the weak side. The Fed will react to it by not being too hawkish. Then we’re going to quickly turn our attention to [nonfarm payrolls] on Friday,” he said. The Fed has said it would base its tapering decisions on economic data , and it is particularly focused on employment so some traders expect to get more new information from the jobs data than the Fed statement.
The 8:30 a.m. Eastern time GDP release is also be important because the government will release revisions in the data going back to 1929. It last issued massive revisions in 2009. “It’s clear the level of GDP is going to be higher by …read more
Economists polled by Reuters had expected new home sales to rise to a 482,000-unit rate last month.
Compared with June last year, sales were up 38.1 percent, the largest increase since January 1992.
The third straight month of gains in new home sales, which are measured when contracts are signed, suggested the housing market was gaining more muscle and should allay concerns that higher mortgage rates could slow down momentum.
Mortgage rates have spiked in anticipation of the U.S. Federal Reserve starting to taper its generous monetary stimulus later this year. Rates still remain low and Fed Chairman Ben Bernanke last week expressed optimism the housing market recovery would continue.
Last month, the inventory of new homes on the market increased 1.3 percent to 161,000, the highest since August 2011, as builders continue to ramp up production to meet the growing demand.
Still, supply remains tight, putting upward pressure on prices. The median new home price increased 7.4 percent from a year ago.
At June’s sales pace it would take 3.9 months to clear the houses on the market, down from 4.2 months in May. A supply of 6.0 months is normally considered as a healthy balance between supply and demand.
Sales last month rose in three regions, but fell in the Midwest.
Stocks managed solid gains again on Wednesday as the much better than expected earnings from Bank of America (BAC) increased the enthusiasm for stocks. Testimony by Fed Chairman Ben Bernanke was also reassuring as he repeated that there was no firm timeline for stopping the stimulus. Yields declined further in reaction to his comments which was inline with the technical outlook. …read more
In his semi-annual testimony before the House Committee on Financial Services, Fed Chairman Ben Bernanke was very clear about how the central bank engages in quantitative easing. We are printing money, just not literally, the Chairman told policymakers, while contradicting himself regarding recent record highs in stock markets, first attributing them both to the strength of the economy and the impacts of monetary policy. The market didn’t seem to care, rallying tepidly upon the release of the prepared remarks and remaining range-bound through most of the session. …read more
With the market’s attention focused on Fed Chairman Ben Bernanke and the possible tapering of quantitative easing this year, Tuesday’s inflation numbers must have been slightly disconcerting for investors. The Bureau of Labor Statistics announced the consumer price index (CPI) jumped 0.5% in June, accelerating since May and breaking a dangerous deflationary trend that had been building up. Most of the increase, though, came from a surge in gasoline prices, which directly affects consumers across the nation. The more closely watched core CPI reading, which excludes food and energy, gained a more tepid 0.2%. …read more
Economists polled by Reuters had expected consumer inflation to increase 0.3 percent last month.
In the 12-months through June, consumer prices advanced 1.8 percent after rising 1.4 percent in May. It was also the largest increase since February.
Stripping out volatile energy and food, consumer prices increased 0.2 percent for a second straight month. That took the increase over the 12 months to June to 1.6 percent, the smallest increase since June 2011. The so-called core CPI had increased 1.7 percent in May.
While both inflation measures remain below the Federal Reserve’s 2 percent target, details of the report suggested the recent disinflation trend had probably run its course, with medical care costs rising.
There were also increases in the prices for new motor vehicles, apparel and household furnishings. That could keep on track expectations the U.S. central bank will start scaling back its massive monetary stimulus in September.
Fed Chairman Ben Bernanke, who last month said the central bank would start cutting back the $85 billion in bonds it is purchasing each month to keep borrowing costs low, has viewed the low inflation as temporary and expects prices to push higher.
NEW YORK — This week marks the first big week of second-quarter earnings, and it is sure to bring both joy and misery to Wall Street.
Investors will concentrate on market fundamentals after weeks when Federal Reserve policies have dominated the market. If they see companies are still struggling, stocks could take a fall.
Even after Fed Chairman Ben Bernanke scared markets in June by telling investors the Fed is likely to reduce monetary stimulus in the coming months, stocks have recovered, with both the Dow Jones industrial average and S&P 500 climbing to all-time highs. In an appearance earlier this week, the Fed chairman said monetary policy was likely to be accommodative for some time.
“We’re in the terminal stages of a Bernanke-driven bubble,” said Walter Zimmerman, a technical analyst at United-ICAP in Jersey City, N.J. “While a lot of damage has been done to the bear case, eventually bad news like weak earnings growth will start to bear fruit.”
To be sure, the Fed, which has shown a much friendlier face to investors lately, will not be out of the picture. Bernanke will appear before congressional committees Wednesday and Thursday to deliver the semiannual testimony about monetary policy. However, few surprises are expected.
The S&P’s 17.8 percent advance in 2013 is largely attributable to the central bank’s accommodative policies. The major indexes made impressive gains in the week: the Dow (^DJI) up 2.1 percent, the S&P 500 (^GSPC) 3 percent higher and the Nasdaq (^IXIC) up 3.5 percent. It was the third straight week of gains for all three, and the best week for the S&P and Nasdaq since early January.
“The Fed has been able to prevent a big sell-off so far, but eventually the economy will have to catch up to the market or the market will fall back to match the economy,” said Scott Armiger, who helps oversee $5.6 billion as portfolio manager at Christiana Trust in Greenville, Del.
More Focus on Earnings
That analysts are now turning their focus to earnings, believing the Fed’s power to buoy stocks is waning, may not be a positive if the rally is going to continue.
Earnings are seen growing 2.8 percent in the second quarter, according to Thomson Reuters data, a far cry from the 8.4 percent growth forecast by analysts Jan. 1. Revenue is now seen increasing 1.5 percent.
For every company that has said it expects positive earnings, 6.5 have lowered their forecasts, the worst positive-to-negative ratio since the first quarter of 2001.
The so-called “Gang of Eight” yesterday announced they were very close to coming up with an immigration reform bill.
Leading conservative Republicans, however—not the gaggle of RINOS that make up half of the Gang of Eight—point out that the immigration “reform” bill has a flaw: it will provide a back door for millions of illegal aliens to collect welfare.
The cost? Several trillion dollars.
That’s trillion with a “t.”
That would put our national debt above the “magic number” of twenty trillion, the point that many economists state is the tipping point of our economy. Tipping point meaning the U.S. economy would implode.
Add to this the fact that Obama is actually calling for a second Stimulus—as if a trillion dollars flushed down the toilet wasn’t enough.
If one were a conspiracy theorist, it would seem like Barack Obama was actually trying to collapse the economy, putting us in a place like Cyprus where the EU is “taxing”—that is, confiscating—privately held bank accounts to the tune of 40% of their value.
On April 2, Ben Bernanke was asked if the U.S. would do the same thing in a dire economic crisis.
Bernanke hemmed and hawed for several minutes and finally gave up this answer: “It’s unlikely.”
Gee, that sure instills confidence in our banking system.
I guess we’re just a bunch of knuckle-dragging conspiracy theorists who think Obama is actually trying to collapse the economy—by devaluing (killing) the U.S. dollar.
But that is just the beginning. According to the source, after the collapse of the economy, after the collapse of the dollar—after the U.S. dollar is properly devalued and buried long after the collapse of the euro—there will be a banshee cry by the globalists and banksters for an international currency with global government in order to prevent another world-wide economic crisis.
All it took was some reassuring comments from Fed Chairman Ben Bernanke to calm the markets and take the focus off Cyprus. The majority of technical studies, like the Advance/Decline lines have turned higher again having maintained their up trends. Only the NYSE New Highs have not yet confirmed the new market highs but they have not given a sell signal yet. …read more Source: FULL ARTICLE at Forbes Latest
After three straight days of down markets, the Dow Jones Industrial Average scored a solid victory today, gaining 56 points, or 0.4%, as anticipation, and later the delivery, of the Fed’s Open Market Committee report seemed to push stocks higher. The Dow opened strong, but then faded slightly during the day before getting a jolt when Fed Chairman Ben Bernanke spoke at 2 p.m.
Bernanke essentially repeated his remarks from past presentations, saying the Fed would continue its $85 billion a month bond-buying program until the unemployment pictures significantly improves. He did allow that economic growth has rebounded to a moderate pace and said that the central bank may take steps to reduce the quantitative easing as the labor market gets better. Investors tend to favor the Fed’s stimulus and sent stocks up as Bernanke conveyed its continued need.
Caterpillar was the Dow’s poorest performer for the second day in a row, falling 1.5% after reporting a 13% drop in sales of its power equipment for the three-month period ending in February. The Asia-Pacific region was particularly poor, declining 26%, and even North American sales fell 12% despite the domestic economic recovery. Caterpillar had previously warned that profits could decline this year as miners and builders have been hesitant to begin new projects.
Two stocks making noise after reporting earnings today were FedEx and Oracle .
Often seen as a bellwether for the global economy, FedEx finished down 6.9% after its earnings per share of $1.23 missed estimates of $1.38. CEO Fred Smith blamed the miss on “weakness in international air freight markets.” The shipping company is planning to reduce capacity in Asia in response to lower demand. It also lowered its EPS guidance for the year to $6.00-$6.20, below estimates of $6.35.
Oracle shares were also down sharply after hours, falling 7.2% after the software giant said revenue slid 1% to $9 billion, below expectations of $9.38 billion, while adjusted earnings per share of $0.65 missed estimates by a penny. The tech titan blamed the sales drop on a young sales force, as it has quickly expanded its global sales team in recent months. Revenue in both hardware and software declined as Oracle faces increased competition in cloud computing from companies such as IBM.
Caterpillar is the market share leader in an industry in which size matters, and its quality products, extensive service network, and unparalleled brand strength combine to give it solid competitive advantages. Read all about Caterpillar’s strengths and weaknesses in The Motley Fool’s brand-new report. Just click here to access it now.
Late this afternoon, Fed Chairman Ben Bernanke held a press conference that acted as a catalyst for the markets to push higher. The members of the central bank remain optimistic about the U.S. economy. They believe unemployment will drop to a range of 7.3% to 7.5% by the end of 2013, while projecting economic growth to fall somewhere in the range of 1.3% to 1.7%.
With that said, the Fed will keep buying bonds and will not raise interest rates until unemployment hits 6.5% or inflation rates climb to 2.5%. Thus, the cheap money train continues and investors jumped aboard. The broad S&P 500 index tacked on 0.67%, while the tech-heavy Nasdaq became the winning index of the day, after it closed higher by 0.78%. The Dow Jones Industrial Average gained 55 points, or 0.39%, and only six of the 30 blue-chip stocks ended the trading session lower.
This morning, I discussed the reasons why Caterpillar, JPMorgan Chase, and Verizon were in the red. Below, I talk about why the other three Dow losers were falling today.
Top Dow losers Shares of Hewlett-Packard closed the day down 0.82% after trading in positive territory nearly the whole day. The late-day drop was likely related to the news that all of the company’s board members had been re-elected. A number of activist investors and shareholders had called for them to be voted off because they sat on the board when Autonomy was purchased. HP recently wrote off more than $8 billion of the $10 billion that it had paid for the software company.
Shares of Boeing ended the day down 0.16%. The drop may be coming from shortsighted investors who are reading into comments FedEx made this morning. The package delivery company will trim its flight capacity to Asia as customers use cheaper shipping options and not FedEx’s lucrative air freight delivery service. Additionally, FedEx will retire some of its older, less-efficient planes as a way to cut cost.
The news would indicate that Boeing will likely not be receiving any new orders from FedEx in the near future, which would affect Boeing’s short-term sales prospects. But the fact that FedEx will be retiring its older planes means Boeing will have the opportunity down the road to sell it the more fuel-efficient Dreamliner, if they ever get it working.
And the last of the Dow’s losers today is UnitedHealth , who saw shares fall by 0.29%. As new Medicare payouts and Obamacare are set to take effect in the coming year, the stock has not performed very well in 2013. Year to date, shares are only up 1.18%, making it the third worst-performing Dow component this year, and that comes at a time when the index itself is up 10.74% in 2013. But my Fool colleague Brenton Flynn believes this is one Dow stock with a solid dividend, which will likely continue to grow in the …read more Source: FULL ARTICLE at DailyFinance
Thank you Ben and Brian After not doing much at all last Thursday, B of A began its climb up, up, and away last Friday. Why the lag and leap? If you’ve been following B of A, the banking sector, or just the general news at all over the last week, you already know the answer: the Federal Reserve‘s stress tests.
The 2013 Comprehensive Capital Analysis and Review, known informally as stress tests, put 18 of the country’s largest financial institutions through a simulated, severe economic downturn to see how they would perform from a capital-reserves perspective, and B of A did well — well enough for the Fed to approve a $5 billion share-buyback program. And investors always love share buybacks.
So we have Fed Chairman Ben Bernanke to thank for approving B of A’s capital-return plan, but we also have B of A management to thank.
B of A came out of the financial crisis hurting badly, and Brian Moynihan and his team deserve credit for beginning to fill in the massive hole their predecessors dug the bank into. Basically, if B of A wasn’t in better capital health, it certainly wouldn’t have performed as well as it did on the CCAR. So thank you both, Ben and Brian.
But always remember, Foolish investors, that you’re in this for the long term. Your favorite stocks, in the short term, will always rise and fall — sometimes precipitously. But so long as the companies behind them have sound fundamentals, don’t worry: Your money is in the right place.
The Dow added three points yesterday, but the S&P 500 lost three and the Nasdaq fell eight.
Amazon (AMZN) has reportedly won a $600 million dollar, 10-year contract to supply cloud computing services to the CIA. The technology news site FCW says Amazon will help the agency build a private cloud infrastructure to keep up with emerging technologies.
Another sign that the national housing recovery is going strong: Homebuilder Lennar (LEN) reports quarterly earnings nearly quadrupled, blowing past expectations.
But FedEx (FDX) failed to deliver on its earnings promise. Its net missed Street expectations because of sluggish international deliveries.
Yahoo (YHOO) is reportedly in talks to buy a controlling interest in DailyMotion – a European-based online video site similar to YouTube. It’s owned by France Telecom. The Wall Street Journal reports it would be the first major acquisition by Yahoo chief Marissa Mayer since taking over last year.
General Electric’s (GE) chairman says the company is not looking to spin off or sell its huge financial unit, GE Capital. But he indicated that GE could consider such a move at a later time, as the company continues to re-focus its effort on industrial operations.
Shares of Photoshop maker Adobe Systems (ADBE) are set to pop, even though quarterly earnings fell 65 percent from a year ago, but that was still better than the company had forecast. Adobe also said its technology chief is leaving for a position at Apple (AAPL).
Retailer Williams-Sonoma (WSM) posted a better-than-expected 9 percent earnings increase. It also boosted its dividend and announced a stock buyback.
The price of oil was stable Tuesday as traders set aside jitters about Cyprus and turned their attention to a U.S. Federal Reserve meeting and soon-to-be released housing data.
Benchmark oil for April delivery was unchanged at $93.74 per barrel at midday Bangkok time in electronic trading on the New York Mercantile Exchange. The contract rose 29 cents to end at $93.74 a barrel in New York on Monday.
The U.S. Commerce Department will release housing starts for February later Tuesday. Data on sales of existing homes for the month will be released Thursday.
Also Tuesday, Federal Reserve policymakers start a two-day meeting that is expected to end without any change to its economic stimulus policies. Fed Chairman Ben Bernanke is expected to reiterate his past evaluation of the economy and particularly the job market.
Traders had been worried about a plan to pay for a bailout for cash-strapped Cyprus by imposing a tax on deposits in the country’s banks. Some bank customers withdrew as much of their cash as they could and the fear was the panic could spread to other countries and prompt capital flight from weaker EU economies.
Global stock markets fell Monday, but Asian markets staged a recovery on Tuesday.
Brent crude, used to price many kinds of oil imported by U.S. refineries, fell 10 cents to $109.41 per barrel on the ICE Futures exchange in London.
In other energy futures trading on the Nymex:
— Wholesale gasoline lost 1.5 cents to $3.102 a gallon.
— Heating oil fell 0.8 cent to $3.024 a gallon.
— Natural gas rose 0.5 cent to $3.887 per 1,000 cubic feet.
The economy’s giving the Dow Jones Industrial Average a boost into new record-setting territory. The Dow has risen 47 points, or 0.32%, as of 2:25 p.m. EST, riding on the back of strong employment data. Most stocks on the blue-chip index are in the green, and all signs point to a happy ending to this investor-friendly week. Let’s check out the biggest stories on the Dow today.
Jobs rise as financials fall Optimism over the employment picture fueled the Dow’s early gains and has kept the index in the green ever since. The unemployment rate fell from 7.9% to 7.7% in February, and some analysts see hope that the figure could fall to an even 7% by the end of the year. That’s good news for an economy still emerging from the recession despite stocks’ record gains. Some on Wall Street even expressed fear that the falling unemployment figure could impact the Federal Reserve‘s ongoing stimulus efforts, but that’s unlikely: Fed Chairman Ben Bernanke is sticking to his goal of 6.5% unemployment with the current “QE Infinity,” and America’s still a long way from reaching that lofty mark.
McDonald’s is gaining today, with shares of the fast-food giant up 1.6% to lead the Dow higher. Stronger employment — and thus more money for low- and middle-income consumers — will help boost McDonalds’ lagging revenue. Company sales in February fell less than expected: According to data released today, global sales for restaurants open 13 months or more fell 1.5%, besting analyst expectations of a 1.63% decline. It’s a modest gain for McDonalds, but it’s a sign the company’s plight may be improving — and investors have bought into the optimism today.
Shares of Disney are also on the upswing today, although the 1.6% gain has nothing to do with unemployment. Sales projections have risen for the company’s new box-office release, Oz: The Great and Powerful, the new take on the classic “Wizard of Oz” story. Boxoffice.com raised its expectations for domestic sales by 17% to $75 million for the movie’s opening weekend. Disney needs the movie to do well: Oz cost around $225 million — no chump change, even for a company as large as Disney.
On the other side of the Dow, however, financial stocks are sinking. Bank of America , which always seems to rank among the biggest movers on the blue-chip index, leads all Dow laggards lower, down 1.5%. Rival JPMorgan ranks close behind with losses of 0.9%. The losses come after the Federal Reserve determined that 18 of the 19 financial institutions it put through a stress test are capable of weathering a severe economic downturn; only Ally Financial failed to make the cut. Bank of America came out strong from the test, with its results pushing Edward Jones to upgrade the stock from a “hold” to a “buy” yesterday. Still, investors haven’t bought in yet as the sector as a whole falls.
A week after Fed Chairman Ben Bernanke faced off with Washington lawmakers in Congress, the Federal Reserve released its latest assessment of economic conditions, or Beige Book. With data spanning to February 22, the Fed’s economists saw activity continued to expand at a moderate pace, as consumer spending and manufacturing strengthened. Interestingly, the Beige Book also revealed loan demand remained flat as bankers faced “stiff competition among lenders to provide credit to well-qualified” borrowers. This could be one indication of why quantitative easing and ultra-loose monetary policy haven’t provided such a boost to the economy, as policies aren’t fully trickling down. …read more Source: FULL ARTICLE at Forbes Latest
By Robert Lenzner, Forbes Staff The most illuminating moment in Fed Chairman Ben Bernanke‘s testimony today was his very precise blunt warning that the costs of Obama‘s fiscal policy– the coming $85 billion sequester and the already installed 2% tax on wages for those earning less than $114,000– would just about wipe out the gains in economic growth perpetrated by the Fed’s mighty easy monetary policy. There lies the rub for 2013 and going forward. The cost of reviving the 2% tax on wages for the middle class is expected to reduce economic activity by at least 0.5%. Add to that the coming reduction in spending of $85 billion, and you can reduce economic growth by another 0.6%. That’s a reduction in GDP of at least 1.1% during 2013. A serious matter for sure since the economy was flat- zero growth– like the cost of Fed funds– during the 4th quarter. Bernanke pointedly explained that growth rose to 3% in the third quarter of the year– only to go flat over the last 3 months. Means we had average growth of 1.5% during the last 6 months of 2012. Not enough to drive unemployment down from its perch at 7.9%. For Bernanke, it was a serious enough drag to strongly suggest that the $85 billion sequester be culled way back to a much lesser amount in the first instance so as not to dampen down economic activity. A very wise position to be taking if you value emulating the 3% growth of 2012’s 3rd quarter. A great deal depends on the political parties adopting a less punitive prescription. Only the continued run-up in stock prices and activity in residential housing. Maybe Bernanke better call in the Republican leadership and warn them about repercussions in the 2014 elections unless they go easy on cuts. And to all the Cassandras warning of inflation and higher interest rates, Bernanke made clear an educated optimism inflation was under control and is expected to remain under control. The overall message; don’t cut spending too severely or his monetary policy of QE— increasing the money supply by buying Treasuries and mortgage bonds– will not be as effective as it has been in driving asset prices higher to increase household wealth and economic recovery. …read more Source: FULL ARTICLE at Forbes Latest
By Scott Redler, Contributor S&P futures are down 4-6 handles this morning as earnings season gets set to start in earnest. Fed Chairman Ben Bernanke didn’t really say anything unexpected yesterday after the close except that he thinks the Debt Ceiling should be raised with no strings attached. While he may be right–the failure to raise the debt ceiling would be a catastrophe–we need to stop kicking the can down the road with no conditions or plan to rein in our spending. The action has been slow and digestive since the fast start to 2013, but earnings could be the catalyst to stoke some volatility. Source: FULL ARTICLE at Forbes Latest