Asia markets dive as volatility sweeps globe ahead of Fed meeting

HONG KONG - Asian markets plunged Tuesday following a highly volatile day on Wall Street fuelled by fears about the Federal Reserve's plans to hike interest rates, with attention lasered on its upcoming two-day policy meeting.

A disappointing start to the corporate earnings season, as well as growing concern about Russia's troop build-up on Ukraine's border and warnings of a possible invasion were also dragging on sentiment.

After spending much of last year playing down the spike in prices, the US central bank has in recent months taken a sharp hawkish turn on monetary policy as officials look to bring inflation -- which is at a four-decade high -- under control.

Minutes from the most recent meeting indicate it will begin lifting interest rates from March with three or possibly four more hikes before the end of the year. On top of that, it plans to start offloading its vast bond holdings.

But while the move to battle runaway prices is seen as crucial, the end of the era of ultra-cheap cash for investors has rattled markets after almost two years of uninterrupted gains to record or multi-month highs.

All attention is on the Fed gathering that starts later in the day, with investors poring over every word from the bank's statement and boss Jerome Powell's subsequent news conference.

"The Fed is scrambling to control inflation and markets have gone from expecting a gradual interest rate hiking cycle to an accelerated tightening action until inflation eases," said OANDA's Edward Moya.

"Some economists think the Fed needs a half-point rate increase in March to show they are serious about tackling inflation and signal that more are coming."

He added that officials need to "send a message they are tackling inflation, but they don't need to overcommit themselves. The Fed's best option is to signal they will raise rates by 25 basis points in March and signal another one is coming in May. Inflation may show its peak around then and they may not need to be as aggressive going forward."

Wall Street's three main indexes have had a particularly rough time, with the Nasdaq down more than 10 percent from recent peaks, putting it in correction territory.

And on Monday they saw some wild gyrations, suffering intra-day losses before dip-buying saw them all surge in the last hour to end in positive territory.

London, Paris and Frankfurt tanked Monday, without enjoying any recovery, with eyes on eastern Europe as the United States said 8,500 troops were put on standby for possible deployment to boost NATO as fears grow that Russian President Vladimir Putin is planning to invade Ukraine.

But all three markets rose in opening trade Tuesday.

"Volatility is back," Lori Calvasina, at RBC Capital Markets, told Bloomberg Television. "We're having a sea-change in terms of Fed policy. Equity investors frankly have been behind the curve in anticipating what's coming, so there's a lot of catch-up to do."

Asia spent all Tuesday well in the red with Tokyo down 1.7 percent as Hong Kong shed 1.7 percent, while Singapore, Taipei and Jakarta were also off more than one percent.

Sydney shed 2.5 percent after higher-than-forecast Australian core inflation figures ramped up bets on a rate hike by the country's central bank. 

Shanghai and Seoul fell more than two percent, with Wellington, Mumbai and Bangkok also down.

While there is a general consensus that the long-term outlook for markets remains positive -- thanks to reopenings, vaccination programmes and the less-severe Omicron variant -- many also warn of more near-term upheaval.

Jeremy Siegel, at the Wharton School of the University of Pennsylvania and author of "Stocks for the Long Run", said: "I'm still very positive on long-term equities but I think it's in for a rocky time the next two or three months.

"We have to get used to the fact that the Fed is going to be much more hawkish."

Agence France-Presse

Asian shares rise on dovish Fed chair, oil up as hurricane batters Louisiana

HONG KONG - Asian shares started the week with gains and the dollar was not far off two-week lows after US Federal Reserve Chairman Jerome Powell struck a more dovish tone than some investors expected in long-awaited speech on Friday.

Oil prices rose, meanwhile, after energy firms suspended production as Hurricane Ida slammed into the U.S.' southern coast.

Japan's Nikkei rose 0.9 percent soon after the bell, and MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.32 percent in early trading before Chinese markets had opened.

Australia climbed 0.39 percent and Korea's Kopsi gained 0.54 percent.

U.S. stock futures, the S&P 500 e-minis, were barely moved, up 0.04 percent.

Investors had been waiting to see whether Powell, who was speaking at a symposium in Jackson Hole, Wyoming, would give a clear indication of his views on timing of the central bank's tapering of asset purchases or hiking interest rates to start removing monetary stimulus.

However, in his prepared remarks, he offered no indication on cutting asset purchases beyond saying it could be "this year", causing the S&P 500 and the Nasdaq to close last week at new record highs.

The next big event on traders' calendars is U.S. nonfarm payroll figures for August due to be published Friday, as Powell has suggested an improvement in the labor market is one major remaining prerequisite for action.

"A strong payrolls print could instigate a debate for a September tapering start," Rodrigo Catril, senior FX strategist at NAB, said in a note.

The absence of a timetable for tapering caused U.S. benchmark Treasuries and the dollar to slip, and both trends continued on Monday morning in Asia.

The yield on benchmark 10-year Treasury notes was 1.3054 percent compared with its U.S. close of 1.312 percent, and the dollar index which measures the greenback against a basket of currencies was around a two week low.

Investors in China, in contrast, are watching data this week to see whether they will indicate policymakers are more likely step up easing measures.

Purchasing manager surveys for manufacturing and services are both due this week, with traders waiting to see whether a trend towards slowing growth will continue, a shift that has not been helped by recent localized movement restrictions to cope with an increase in cases of the Delta variant of the new coronavirus.

"We expect both the manufacturing and services PMIs to moderate in August, given the widespread Delta variant and strict lockdown," said Barclays analysts in a note.

"With slowing growth momentum and dovish signals from the (People's Bank of China) meeting this week, we expect more easing, but still at a measured pace"

Oil was also in focus after energy firms suspended 1.74 million barrels per day of oil production in the U.S. Gulf of Mexico as Hurricane Ida slammed into the Louisiana coast as a Category 4 storm.

U.S. crude rose 0.86 percent to $69.34 a barrel. Brent crude rose 1.25 percent to $73.38 per barrel.

Gold was slightly higher, with the spot price gold was traded at $1,817.7863 per ounce, up 0.07 percent.

(Editing by Lincoln Feast.)

-reuters

Asian shares on edge as day of Fed chair speech arrives

HONG KONG - Asian shares were mixed on Friday morning as slight gains in China were balanced by declines elsewhere and investors globally turned cautious ahead of a long-awaited speech by Fed Chair Jerome Powell.

Remarks from the Federal Reserve's more hawkish policy makers and a deadly attack in Afghanistan also subdued sentiment and helped the dollar gain against a basket of its peers.

MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.1% while Japan's Nikkei shed 0.46%.

Australian shares fell 0.18%, and Hong Kong and Korea were flat.

However, in a reversal of recent weeks where Chinese stocks weighed on the region, Chinese blue chips gained 0.57% after China's central bank made its biggest weekly cash injection into the banking system since February.

"There are three things that are conspiring at the moment to sap sentiment," said Kyle Rodda, an analyst at IG markets. 

He was referencing a weak lead from Wall Street after the attack in Afghanistan, the fact Asian markets had been lagging this week because investors were nervous about the potential for future regulatory crackdowns in China, and caution ahead of the upcoming Jackson Hole Symposium.

Powell is set to speak at 1400 GMT in the Kansas City Fed's central banking conference, an event normally held in Jackson Hole, Wyoming, which has been often used by Fed policymakers in the past to provide guidance on their future policy.

Traders will analyze Powell's words for any hints about when the Fed will begin tapering its asset purchasing program.

Analysts at RBC said in a note that while much of the summer had been spent waiting for the event, there was "skepticism that the Fed will provide more specific information around a timetable... amidst a rise in Delta variant COVID cases."

Islamic State struck the crowded gates of Kabul airport in a suicide bomb attack on Thursday, killing scores of civilians and at least 13 U.S. troops.

This, along with public remarks by the U.S. Federal Reserve's hawkish wing urging the central bank to begin paring bond purchases contributed to Wall Street closing slightly lower, ending a streak of all-time closing highs.

The Dow Jones Industrial Average fell 0.54%, the S&P 500 lost 0.58%, and the Nasdaq Composite dropped 0.64%.

Dallas Fed President Robert Kaplan said he believed the progress of economic recovery warrants tapering of the Fed's asset purchases to commence in October or shortly thereafter, following earlier comments from St. Louis Fed President James Bullard, who said the central bank was "coalescing" around a plan to begin tapering.

Early in Asian hours, U.S. stock futures, the S&P 500 e-minis, were flat.

The yield on benchmark 10-year Treasury notes was 1.3441% down from a two-week high of 1.375% set the day before, as traders were cautious ahead of Powell's speech.

The dollar when measured against a basket of currencies has gained a little from Thursday's lows. The euro traded at $1.1747, having eased from the previous day's high of $1.1779 as a survey showed weaker consumer sentiment in Germany.

U.S. crude ticked up 0.34% to $67.65 a barrel. Brent crude rose 0.25% to $71.27 per barrel, resuming this week's rally after taking a rest on Thursday, as energy companies began shutting production in the Gulf of Mexico ahead of a potential hurricane forecast to hit on the weekend

-reuters 

Fed keeps key rate unchanged while signaling future hikes

WASHINGTON — The Federal Reserve on Wednesday (Washington time) left its benchmark interest rate unchanged while signaling further gradual rate hikes in the months ahead as long as the economy stays healthy.

The Fed's widely expected decision kept the central bank's key short-term rate at 1.75 percent to 2 percent — the level hit in June when the Fed boosted the rate for a second time this year.

The Fed projected in June four rate hikes this year, up from three in 2017. Private economists expect the next hike to occur at the September meeting with a fourth rate hike expected in December.

The Fed's statement was upbeat on the economy, pointing to a strengthening labor market, economic activity growing at "a strong rate," and inflation that's reached the central bank's target of 2 percent annual gains.

Analysts saw all the comments about economic strength as a clear signal that the Fed remains on track to raise rates two more times this year.

"All signs still point to a September rate hike," said Greg McBride, chief financial analyst at Bankrate.com. He said consumers should continue to pay down their home equity, credit card and other loans with variable rates that will rise further as the Fed keeps hiking rates.

"Refinance adjustable rate debt into fixed rates to insulate yourself from further rate hikes," McBride recommended.

There was no mention in the statement of what many economists see as one of the biggest risks at the moment: rising tariffs on billions of dollars of U.S. exports and imports that have been imposed as a result of President Donald Trump's new get-tough approach on trade.

The Fed statement also made no reference to criticism Trump has lodged recently against the Fed's continued rate hikes.

The Fed's decision was approved on a unanimous 8-0 vote. The action was not surprising, given that this meeting followed a June session where the Fed took a number of steps including raising rates by another quarter-point and changing its projection for hikes this year from three to four.

The March and June rate hikes followed three hikes in 2017 and one each in 2015 and 2016. The Fed's key policy rate is still at a relatively low level. But it's up from the record low near zero where it remained for seven years as the central bank worked to use ultra-low interest rates to lift the economy out of the Great Recession.

The string of quarter-point rate hikes is intended to prevent the economy from overheating and pushing inflation from climbing too high. But higher rates make borrowing costlier for consumers and businesses and can weigh down stock prices. Trump has made clear he has little patience for the Fed's efforts to restrain the economy to control inflation.

"Tightening now hurts all that we have done," Trump tweeted last month, a day after he said in a television interview that he was "not happy" with the Fed's rate increases.

Over the past quarter-century, presidents have maintained silence in public about Fed actions, believing that lodging complaints would be counter-productive. That's because it could produce even faster rate hikes if the central bank feels the need to convince financial markets that it will not yield to political pressure and allow inflation to rise to worrisome levels.

At the moment, economic growth is strong, rising at an annual rate of 4.1 percent in the April-June quarter, the best showing in nearly four years. Unemployment is at a low 4 percent, and some analysts believe it will fall further when the government releases the July figures on Friday.

But there are worries as well, led by fears of what a Trump-led trade war might do to growth in the United States and around the world.

Many analysts believe that the possible harm from rising tariffs was a key discussion topic this week. While trade was not mentioned in the statement, it likely will show up in the minutes of the Fed's discussion which will be released in three weeks.

Delivering the Fed's semi-annual report to Congress last month, Fed Chairman Jerome Powell refrained from criticizing the Trump administration's effort to use the threat of tariffs to try to lower trade barriers. But Powell noted that the Fed was hearing a "rising chorus of concern" from business contacts about the harm a trade war could cause.

Powell hasn't publicly addressed Trump's criticism of Fed rate hikes. But the chairman had previously said in a radio interview that the central bank has long operated independently in making interest-rate decisions based on what was best for the economy and not in response to political pressure.

source: philstar.com

US payrolls surge, bolster Fed rate hike prospects

WASHINGTON - US employment gains surged in February, the clearest sign yet of labor market strength that could further ease fears the economy was heading into recession and allow the Federal Reserve to gradually raise interest rates this year.

Nonfarm payrolls increased by 242,000 jobs last month, the Labor Department said on Friday. The unemployment rate held at an eight-year low of 4.9 percent even as more people piled into the labor market.

"This is the best news the Fed could have expected going into the meeting. With jobs bouncing back, you can be sure that rate hikes are just around the corner," said Chris Rupkey, chief economist at MUFG Union Bank in New York.

The economy added 30,000 more jobs in December and January than previously reported. The only blemish in the report was a three-cent drop in average hourly earnings, but that was mostly because of a calendar quirk.

The average length of the workweek also fell last month.

Economists had forecast employment increasing by 190,000 last month and the jobless rate holding steady.

The employment report added to data such as consumer and business spending in suggesting the economy had regained momentum after growth slowed to a 1.0 percent annual rate in the fourth quarter. Growth estimates for the first quarter are around a 2.5 percent rate.

Fears of a recession in the wake of poor economic reports in December and slowing growth in China sparked a global stock market rout at the start of the year, causing financial market conditions to tighten.

Financial markets have priced out bets of a rate rise at the Fed's March 15-16 policy meeting and see a roughly 50 percent chance of a hike at the September and November meetings, according to CME FedWatch.

Economists, however, believe the strong jobs market and improved growth outlook, together with signs that inflation is creeping up, could prompt the Fed to lift borrowing costs in June.

The Fed raised its key overnight interest rate in December for the first time in nearly a decade.

Prices of U.S. Treasuries fell after the data, while U.S. stock index futures rose. The U.S. dollar gained against the euro and hit session highs against the yen and Swiss franc.

Slower wage growth
Fed Chair Janet Yellen has said the economy needs to create just under 100,000 jobs a month to keep up with growth in the working-age population.

The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, increased two-tenths of a percentage point to 62.9 percent, the highest level in just over a year.

Adding to the report's strength, a broad measure of joblessness that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment fell two-tenths of a percentage point to 9.7 percent.

The employment-to-population ratio also increased to 59.8 percent last month, the highest since April 2009, from 59.6 percent in January.

While wage growth weakened in February, it was largely payback for January's jump, which was driven by a calendar quirk. Growth in wages is seen accelerating as the labor market settles into full employment.

The drop in average hourly earnings lowered the year-on-year gain in earnings to 2.2 percent from 2.5 percent in January. The average workweek fell to 34.4 hours from 34.6 hours in January.

In February, job gains were almost broad-based, though manufacturing and mining employment fell. The services sector created 245,000 jobs after adding 153,000 jobs in January. Mining lost a further 18,000 jobs after shedding 9,000 positions in January.

Mining payrolls have declined by 171,000 jobs since peaking in September 2014, with three-fourths of the losses in support activities. More losses are likely after oilfield services provider Halliburton Co. said last month it would cut a further 5,000 jobs because of a prolonged slump in oil prices.

Manufacturing employment lost 16,000 jobs, reversing some of January's surprise increase. Private education jobs rebounded after plunging in January. Construction payrolls increased 19,000 and government added 12,000 jobs.

source: interaksyon.com

Asia extends losses as China woes spread, yen shoots up

TOKYO - Asian equities extended losses on Thursday as concerns over China's market turmoil spread, while the safe-haven yen shot to a seven-week high as global risk appetite ebbed.

MSCI's broadest index of Asia-Pacific shares outside Japan shed 0.2 percent, hovering near a 17-month low struck the previous day.

Japan's Nikkei dropped 1.8 percent, Australian shares lost 0.3 percent and South Korea's Kospi fell 0.9 percent.

The focus in Asia again turned towards how Chinese stocks would fare later in the session, with a series of increasingly aggressive attempts by authorities so far having failed to stem the massive exodus from a once booming market.

The country's stock markets have plunged nearly 30 percent over the last three weeks.

"Fundamentally, China is coming back to a point of attraction –the monstrous P/E ratios have come back to more realistic levels. However, the bursting bubble means value is unlikely to factor into thinking in the interim. The repercussions haven't completely played out yet," Evan Lucas, market strategist at IG in Melbourne, wrote.

China's securities regulator took the drastic step late on Wednesday of ordering shareholders with stakes of more than 5 percent from selling shares for the next six months in a bid to halt a plunge in stock prices.

U.S. shares slid sharply overnight on growing fears that nose-diving Chinese shares could destabilize the world's second- largest economy and have global implications.

The doom-and-gloom mood - already heightened earlier in the month by prospects of Greece leaving the euro - benefited the yen, often sought in times of economic uncertainty.

The dollar stood little changed at 120.815 yen, within reach of a seven-week low of 120.41 touched overnight when it suffered a bruising 1.5 percent fall.

The greenback was weighed down further as U.S. Treasury yields continued falling on flight-to-safety bids and new signs that the Federal Reserve may be hesitant about raising interest rates, as shown by their policy meeting minutes.

The dollar's tumble against the yen helped the euro, which climbed to $1.1075, pulling further away from a one-month trough of $1.0916 plumbed on Tuesday.

Commodities, far from immune to the slide in global equities, remained subdued. U.S. crude nudged up 0.4 percent to $51.86 early on Thursday but has shed nearly nine percent so far this week.

Copper received a reprieve overnight thanks to the dollar's plunge, but the metal still remained within reach of a six-year low. Copper on the London Metal Exchange was down 0.4 percent at $5,495 a tonne after hitting the six-year trough of $5,240 a tonne on Wednesday.

source: interaksyon.com

Fed looks past a world in turmoil, confident in U.S. recovery

WASHINGTON - U.S. central bankers have looked beyond a global deflation threat, fear of energy-sector bond defaults, and a surge of oil patch layoffs to reach what appears to be a firm conclusion: the U.S. recovery is here to stay.

New trade data released on Wednesday and signs of ever-stronger consumer spending confirmed the United States remains the bright spot in a global economy plagued by uncertainty.

The trade deficit shrank in November to less than $40 billion, providing a boost to growth as Americans spent less on imported oil.

Meanwhile, the first corporate reports from the Christmas season showed at least some of that money trickling into stores as J.C. Penney Co Inc. said same-store sales rose 3.7 percent in November and December, pushing the company's stock up nearly 20 percent.

At its December policy-setting meeting, according to minutes released on Wednesday, the Federal Reserve took close stock of plunging world oil prices and turmoil in Europe and decided that those negative trends would not undo that underlying strength.

"Several participants ... suggested that the real economy may end up showing more momentum than anticipated, while a few others thought that the boost to domestic spending coming from lower energy prices could turn out to be quite large."

The minutes set the stage for what could be a key economic theme this year: how the global system will react as Fed policy diverges from that of other major central banks.

The European Central Bank and the Bank of Japan are expected to further loosen monetary conditions in coming weeks or months, while the luster has fallen from emerging markets that had been attracting record levels of investment in recent years.

"These minutes defined the environment post-tapering," said Robert Tipp, chief investment strategist at Prudential Fixed Income in New Jersey. "If the Fed moves aggressively it would suck up capital from emerging markets."

Global conditions have arguably weakened since the Fed's Dec. 16-17 meeting, and the minutes note that the United States would not be immune if the world economy turns sharply down.

There is already fallout. Credit analysts have honed in on the debts of companies involved in oil and gas exploration and production, with Standard & Poor's downgrading half a dozen firms at the end of 2014 and concluding the entire sector will be under pressure if prices remain so low.

Workers have taken a hit not just directly among energy firms but in affiliated industries. U.S. Steel announced this week it was laying off 756 workers due to weakening demand for steel pipe and other products used by energy firms.

But the positive impulse from cheap oil is only beginning, according to analysts, and is expected to keep the Fed firmly on track even if it pushes inflation further from the central bank's target in coming months.

The narrowing trade deficit prompted analysts to up their estimates for 2014 economic growth.

The fall in oil prices also was putting hundreds of billions of dollars in the pockets of consumers, a trend that started to show up in earnest in November's retails sales. The December numbers are expected to be strong as well, with the National Retail Federation forecasting 4.1 percent overall growth over the year before.

Falling yields

Even the steady drop in U.S. bond yields says less about expectations for future interest rates than it does about the oil-driven path of inflation and its longer-term impact on the economy, Cornerstone Macro economist Roberto Perli said in a recent analysis.

Bond yields were dropping, he said, in part because the amount investors demanded to offset inflation was falling faster even as expectations for economic growth continued to increase.

"Investors might be tempted to assume that the bond market is sending a very bearish message about the U.S. economy, but in reality the bond market is saying exactly the opposite," Perli wrote.

"Growth expectations embedded in the 10-year yield have actually improved this month, and have been doing so ever since oil prices started to drop in the summer. The bond market shares our view that the drop in oil prices is a good thing for the aggregate U.S. economy."

source: interaksyon.com

Lesson from 6 years of global economic crisis? Keynes was right

Now that the Federal Reserve has brought its program of quantitative easing to a successful conclusion, while the French and German governments have ended their shadow-boxing over European budget “rules,” macroeconomic policy all over the world is entering a period of unusual stability and predictability. Rightly or wrongly, the main advanced economies have reached a settled view on their economic policy choices and are very unlikely to change these in the year or two ahead, whether they succeed or fail. It therefore seems appropriate to consider what we can learn from all the policy experiments conducted around the world since the 2008 crisis.

The main lesson is that government decisions on taxes and public spending have turned out to be more important as drivers of economic activity than the monetary experiments with zero interest rates and quantitative easing that have dominated media and market attention. Fiscal decisions on budget deficits, taxes, and public spending have mostly been debated as if they were largely political choices, with much less influence than monetary policy on macroeconomic outcomes such as inflation, growth, and employment. Yet the reality has turned out to be the opposite. While every major economy in the world has followed essentially the same monetary policy since 2008, their fiscal policies have been very different and the divergence in outcomes, especially when we compare the United States and Europe, has been exactly the opposite to what was implied by the rhetoric of most politicians and central banks.

Countries that took emergency measures to reduce public borrowing have mostly suffered weaker growth, as in the case of Britain from 2010 to 2012, Japan this year, and the United States after the 2013 “sequester” and fiscal cliff deal. In more extreme cases, such as Italy and Spain, fiscal tightening has plunged them back into deep recession and aggravated financial crises. Meanwhile countries that ignored their deficit problems, as in the United States for most of the post-crisis period, or where governments decided to downplay their fiscal tightening plans, as in Britain this year or Japan in 2013, have generally done better, both in terms of economics and finance. The one major exception has been Germany, where budgetary consolidation has managed to coexist with decent growth, largely because of a boom in machinery exports to Russia and China that is now over, pushing Germany back into the recession its stringent fiscal policy suggested all along.

Thus the six years since 2008 have provided strong empirical support for the supposedly outmoded Keynesian view that government borrowing is more powerful than monetary policy in stimulating severely depressed economies and pulling them out of recession. In a sense, it is odd that the power of fiscal policy has come as a surprise – or that it continues to be categorically denied by the German government and the US Tea Party. The underlying reason why fiscal policy is so important in recessions, and has now come to dominate over monetary policy, is a matter of simple arithmetic that should not be open to debate.

Recessions generally occur when private business and households decide to spend less than their incomes in order to reduce their debts or increase their savings. If this process of “deleveraging” is happening in the private sector, which it clearly has been, then simple arithmetic shows that economic balance can only be restored if some other sector of the economy spends more than its income – and such excess spending is only possible if that “other sector” is willing to increase its debts. Disregarding the role of exports and imports, which must sum to zero for the world as a whole, the government is the only possible candidate to play the crucial balancing role as the “other sector.” It is therefore a mathematical certainty that governments must increase their borrowing whenever businesses and households decide to boost their savings by spending less than they earn.

Despite this indisputable arithmetic, there has been surprisingly little interest in the macroeconomic impact of budgetary policies in contrast to the endless debates about every twist and turn of monetary policy. The explanation lies in the monetarist theories that came to dominate standard economic models of the pre-crisis period – and the related institutional changes that elevated central bankers above finance ministers as the supreme arbiters of economic policy.

Monetarism overturned the Keynesian fiscal consensus that prevailed from the 1930s to the 1970s, by introducing one simple assumption into the models that guided governments and central banks. The case for Keynesian fiscal stimulus in deep recessions was simply assumed away by asserting that interest rates could always be reduced sufficiently to stimulate private investment, discourage private savings and so restore growth. As a result, the private sector as a whole would never suffer for long from a shortfall in spending. Therefore government borrowing would never be needed to balance inadequate private demand.

As a result of these assumptions, interest rate decisions by central banks came to be seen as the only effective tool of macroeconomic management, while fiscal policy was relegated to a microeconomic supporting role. Tax structures and public spending levels were seen as supply-side issues influencing incentives and resource allocation, but the demand impact of government borrowing was largely ignored. Whether government borrowing expanded or contracted, interest rates would rise or fall to offset the Keynesian demand effects. Independent central bankers would manage macroeconomic demand with monetary policy, leaving governments to set taxes and spending plans to achieve political or supply-side objectives.

In the era of high inflation when monetarism was introduced, the idea that interest rates could always be cut by enough to revive private economic activity was reasonable enough. After all, when inflation is running at 5 percent, an interest rate of 1 percent is equivalent to minus 4 percent in real terms, imposing a massive tax on savers and offering a big subsidy to private investors. But this argument fails completely when inflation falls to negligible levels or disappears completely, as in the euro-zone and Japan.

Ironically, therefore, the very success of monetarism and central banking in conquering inflation now means that the era of monetary dominance is over. Keynesian fiscal thinking has triumphed and finance ministers are again more important than central bankers, even though most of them have not yet noticed. Once interest rates fell to zero, traditional monetary management lost its ability to provide further stimulus. And now that central banks are providing “forward guidance” which commits them to very low interest rates for years ahead, monetary policy has also lost its ability to offset fiscal easing and restrain demand.

As monetary policy has lost traction, fiscal policy has automatically gained power. With interest rates at or near zero, private demand cannot be simulated with further rate cuts and this means that monetary easing can no longer offset fiscal tightening. As a result, any reduction in budget deficits becomes unambiguously deflationary, which is why the French and Italian governments were right to resist enforcement of the German-inspired fiscal compact in the euro-zone. Conversely, fiscal expansion now provides an unqualified economic stimulus because there is no risk of interest rates rising significantly in the next year or two – and perhaps not until the end of the decade. In short, the world has returned to a period of fiscal dominance, as in the 1950s and 1960s.

source: interaksyon.com

S&P 500 ends at record as jobs report eases Fed worries

NEW YORK - U.S. stocks ended higher on Friday, lifting the S&P 500 to a fresh closing high, after a weaker-than-expected jobs report was taken as a sign that the Federal Reserve will not begin raising interest rates anytime soon.

Stocks had traded lower after the government reported fewer U.S. jobs were created in August than expected.

By early afternoon, however, major indexes turned positive, led by utilities. Fed officials have made it clear that they see the labor market as still struggling, which partially justifies keeping rates at rock-bottom levels.

"The nonfarm payroll numbers fell well short of expectations, but the market reaction suggests a stronger-than-consensus number might have been met with a downward bias in equities," said Jim Russell, senior equity strategist at U.S. Bank Wealth Management in Cincinnati.

"What we saw today called off the dogs to some degree and took the heat down a notch or two from investors' concern about rate hikes."

Utilities gained 1.2 percent as investors turned to the group for their income appeal with bond yields falling in response to the payrolls data. Utility shares often benefit as bond yields fall because the companies pay relatively rich dividends.

Power generator NRG Energy Inc rose 1.9 percent to $30.89, and XCEL Energy Inc advanced 1.9 percent to $32.48.

The Dow Jones industrial average rose 67.78 points, or 0.4 percent, to 17,137.36. The S&P 500 was up 10.06 points, or 0.5 percent, to 2,007.71. The Nasdaq Composite added 20.61 points, or 0.45 percent, to 4,582.90.

For the week, the Dow and the S&P each gained 0.2 percent and the Nasdaq rose 0.06 percent.

Family Dollar Stores Inc shares lost 1.2 percent to $79.11 after the discount retailer rejected Dollar General Corp's sweetened takeover bid. Shares of Dollar General fell 2.3 percent to $63.01.

Apple shares edged up 0.9 percent to $98.97 after the company said it planned to add new security features to its iCloud service.

Retailers lost ground. Michael Kors shares lost 4.5 percent to $76.39 after the company announced a secondary offering of 11.6 million shares.

Gap Inc shares fell 4.2 percent to $44.65 after worse-than-expected same-store-sales in August.

About 5.2 billion shares traded on all U.S. platforms, according to BATS exchange data, compared with the five-day average of 5.1 billion.

source: interaksyon.com

Wall Street Week Ahead: Short week, jobs data may bring back swings

NEW YORK - Wall Street may kick off the second half of the year with an uptick in volatility, thanks to the June jobs report and plenty of other market-moving data in a short trading week.

Financial markets will be closed on Friday for Independence Day. So Thursday will bring a blitz of numbers: the nonfarm payroll figures for June, the May trade deficit and the June index on the services sector from the Institute for Supply Management. On Wednesday, U.S. Federal Reserve Chair Janet Yellen is scheduled to speak on financial stability at an International Monetary Fund conference in Washington.

The elevated volatility would shake some traders out of a stupor. They have been limited in their betting by this market, which has been resilient but boring: The S&P 500 has not had a weekly swing of more than 2 percent since mid-April.

"It has been a very frustrating few months in the market for both long-term and short-term traders. It is very tough to outperform in this environment," said Sam Ginzburg, head of trading at First New York Securities in New York.

The S&P 500 has scored 22 record closing highs for the first half of 2014, feeding concerns about a technical pullback. Yet the CBOE Volatility Index, Wall Street's fear gauge, has hovered near multi-year lows, reflecting a market that seemed to grind higher no matter what was thrown at it.

"Markets will probably trade sideways or lower until the VIX gets to a higher level, where it can support some kind of (a meaningful) advance," said Donald Selkin, chief market strategist at National Securities in New York, which has about $3 billion in assets under management.

The VIX is trading around 11, or about half of its long-term average of about 20. While no one would want to relive the financial crisis when the VIX jumped to 89.53 on Oct. 24, 2008, a modest amount of volatility is welcome on Wall Street.

A higher VIX creates valuation imbalances that drive stock picks and boost trading volume, which has collapsed from more than 8 billion shares a day in 2007 to an average of about 5 billion now.

For long-term investors, though, Wall Street is wrapping up a good first half of the year. The S&P 500 has climbed 6.1 percent this year, following a jump of 30 percent in 2013.

A recent Reuters poll showed market participants expect the benchmark index to hit 2,000 for the first time before the year ends, which is a gain of about 8.2 percent from 2013.

If the market closed the year at current levels, it would mark the best three-year run for U.S. stocks since the 1997-1999 period.

source: interaksyon.com

U.S. recoups jobs lost in recession as economy picks up

WASHINGTON - U.S. employment returned to its pre-recession peak in May with a solid pace of hiring that offered confirmation the economy has snapped back from a winter slump.

Nonfarm payrolls increased 217,000 last month, the Labor Department said on Friday, in line with market expectations. Data for March and April was revised to show 6,000 fewer jobs created than previously reported.

"This was a very solid report with no obvious warts to detract from the underlying message of sustained improvement in economic activity," said Millan Mulraine, deputy chief economist at TD Securities in New York.

May marked a fourth straight month of job gains above 200,000, a stretch last witnessed in January 2000, even though it also was a slowdown from the 282,000 jobs created in April, when hiring was still bouncing back from a winter lull.

The nation finally recouped the 8.7 million jobs lost during the recession, with 8.8 million more people working now than at the trough in February 2010. But the working age population has since increased 10.6 million while 12.8 million Americans have dropped out of the labor force.

The upbeat jobs report hoisted U.S. stocks to record highs. U.S. Treasury debt prices slipped, while the dollar was little changed against a basket of currencies.

Economy gaining traction 

The pace of hiring adds to data from automobile sales to services and factory sector activity that have suggested the economy will grow at a pace of more than 3.0 percent this quarter after shrinking at a 1.0 percent rate in the first three months of the year.

Other data on Friday showed consumer credit in April recorded its largest advance since November 2001, a sign households were feeling more secure in taking on debt.

Last month, the unemployment rate held steady at a 5-1/2 year low of 6.3 percent as some Americans who had given up the search for work resumed the hunt.

A measure of underemployment fell to its lowest level since October 2008. The gauge, which includes people who want a job but have given up searching and those working part-time because they cannot find full-time jobs, fell to 12.2 percent.

Economists expect more previously discouraged workers to re-enter the labor force over the course of the year. While that would be a sign of confidence in the labor market, it could slow the decline in the jobless rate.

The long-term unemployed accounted for 34.6 percent of the 9.8 million jobless Americans, down from 35.3 percent in April. The median duration of unemployment fell to 14.6 weeks, the shortest stretch in five years and a sharp drop from April.

"We are making progress, but we still have a very long way to go," said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.

The return of discouraged job seekers and drop in long-term unemployment will be welcomed by the Federal Reserve, which has cited low labor force participation as one of the reasons for maintaining an extraordinarily easy monetary policy.

The workforce, which had declined sharply in April, increased by 192,000 people last month. That left the labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, at 62.8 percent.

Average hourly earnings, which are being closely watched for signs of wage pressures that could signal dwindling slack in the labor market, rose five cents, or 0.2 percent. On a year-over-year basis, earnings were up a tepid 2.1 percent, suggesting little build-up in wage inflation.

But earnings in some sectors, such as mining and information services, are rising at a much faster clip.

"It's a difficult time for Fed policymakers," said Peter Molloy, president at Edison Investment Research in New York. He said the central bank normally would be raising interest rates by now given the level of the jobless rate but wanted to go slowly because the recovery has been weak by historic norms.

The Fed has kept benchmark overnight rates pegged near zero since late 2008 and is not expected to begin nudging them up until well into next year.

Employment gains in May were broad-based.

Manufacturing payrolls increased by 10,000, expanding for the 10th straight month. Further increases are expected as auto sales outpace inventories.

Construction payrolls rose by 6,000. It was the fifth consecutive month of gains, but the pace is slowing as the housing sector struggles to regain momentum.

There were sturdy job gains in leisure and hospitality, and professional and businesses services. Healthcare added 33,600 workers, likely boosted by the implementation of the Affordable Care Act. Government payrolls increased 1,000, a fourth straight monthly increase. Retail employment also rose.

The length of the workweek held steady at 34.5 hours, with a measure of total work effort rising by 0.2 percent.

source: interaksyon.com

Asian shares on defensive, hoping for China stimulus plan

TOKYO - Asian shares were in a defensive mode on Tuesday after Wall Street fell overnight, though still-vague hopes of a new stimulus plan in China could improve investor sentiment.

U.S. Treasuries prices fell, with the benchmark two-year yield hitting a six-month high as investors grew nervous that the Federal Reserve may raise interest rates sooner than expected. Bond yields rise when prices fall.

MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.1 percent as Australian shares fell 0.5 percent, while Japan's Nikkei dropped 0.5 percent.

On Wall Street, the Nasdaq Composite Index led the losses with a fall of 1.2 percent to five-week low, as investors took some money off recent top performers such as biotech shares. The S&P500 Index fell 0.5 percent to 1,857.44.

Concerns over Ukraine and soft U.S. manufacturing were cited as possible catalyst, though market players noted the selling could also reflect unwinding of positions ahead of the quarter-end.

The survey on U.S. manufacturing by financial data firm Markit also showed U.S. manufacturing activity slowed in March.

U.S. President Barack Obama and major industrialized allies warned Russia on Monday it faces additional economic sanctions if President Vladimir Putin takes further action to destabilize Ukraine following the seizure of Crimea.

"In short, there's nowhere to put money at this point. Investors are generally upbeat on the U.S. but they want to see more evidence that the weakness in some of the recent data is due to a bad weather," said Tohru Yamamoto, chief fixed income strategist at Daiwa Securities.

Yet short-term U.S. bond prices are under pressure after Federal Reserve Chair Janet Yellen said the Fed could raise rates six months after its current bond-buying program ends - potentially as soon as spring 2015.

Even as the U.S. 30-year yield fell to 3.56 percent, near this year's low of 3.525 percent, short-dated debt yields moved in the opposite direction, flattening the yield curve sharply.

The U.S. two-year yield shot to six-month high of 0.4655 percent also due in part to caution over the two-year debt sale on Tuesday, the first leg of U.S. government issuance this week totaling $96 billion.

Rising U.S. short-term rates were undermining the attraction of precious metals, with gold was fetching $1,308.91 per ounce, close to Monday's near one-month low of $1,307.54.

Silver tumbled to a six-week low of $19.84 and last stood at $19.89.

In contrast, emerging markets were generally resilient after weak Chinese manufacturing data on Monday sparked expectations the Chinese government could unveil stimulus measures following Monday's weak survey of manufacturing.

source: interaksyon.com

Wall Street sells off after Fed sticks with stimulus cuts

NEW YORK - U.S. stocks dropped more than 1 percent on Wednesday, hitting session lows after the Federal Reserve stuck with its plan to scale back stimulus even in the midst of emerging market turmoil.

With the day's decline, the S&P 500 is down 4 percent for the month - its worst monthly loss since May 2012. Some investors have been bracing for a correction, given the S&P 500's gain of 30 percent last year.

Trading was volatile after the Fed's move, which further reduces its monthly bond purchases by $10 billion a month. Declines were fairly broad-based, with nine of the 10 S&P 500 sector indexes ending lower. Shares of Boeing Co ranked among the biggest drags on both the Dow and the S&P 500.

Overall improvement in the U.S. economy suggested the central bank would continue to cut the purchases, but some investors had speculated in recent days that the Fed might rethink its plan because of the emerging market problems.

"I think investors had hoped that the Fed would somehow respond to the recent turbulence and show they had their back," said Jack Ablin, chief investment officer of BMO Private Bank in Chicago.

But the Fed really wants "to move to the sidelines here and get out of the QE business."

In its announcement, the Fed said it would buy $65 billion in bonds per month starting in February, down from $75 billion now. In what was Fed Chairman Ben Bernanke's last policy-setting meeting, the central bank also maintained its longer-term plan to keep U.S. interest rates low for some time to come.

The benchmark S&P 500 has lost ground in four of the past five sessions as fears over slowing growth in China and large capital outflows from developing markets prompted investors to seek safe-haven assets.

The Dow Jones industrial average fell 189.77 points or 1.19 percent, to end at 15,738.79. The S&P 500 ost 18.30 points or 1.02 percent, to finish at 1,774.20. The Nasdaq Composite dropped 46.53 points or 1.14 percent, to close at 4,051.43.

The CBOE Volatility Index or VIX, Wall Street's barometer of fear, jumped 9.81 percent to end at 17.35.

The Fed's quantitative easing program has supported not just the U.S. economy but overseas economies as well by increasing liquidity, so cutting the stimulus has been a big factor in the emerging markets' selloff.

Stocks were lower early in the session even after bold efforts by Turkey and South Africa to stabilize their currencies.

South Africa's central bank raised interest rates for the first time in six years. Its move followed a dramatic rate hike by Turkey's central bank late Tuesday, designed to defend its crumbling currency.

Boeing's stock fell 5.3 percent to close at $129.78, after the aerospace and defense company issued conservative forecasts for profit and cash flow. Investors focused on those projections, though the company reported a surge in quarterly profit.

Yahoo shares dropped 8.7 percent to end at $34.89, a day after the Internet company reported a drop in online ad prices that hurt its revenue for a fourth consecutive quarter.

Among other profit reports, Dow Chemical Co posted a quarterly profit that was well ahead of expectations. It also raised its dividend 15 percent and expanded its stock-buyback program. Dow Chemical's stock rose 3.9 percent to end at $44.73.

After the bell, shares of Facebook rose 9.2 percent to $58.45 after the world's largest social networking company reported quarterly revenue increased 63 percent.

Quarterly earnings expectations for the S&P 500 have improved as more companies have reported results. Growth is now estimated at 9 percent, compared with 7.6 percent at the start of the month, Thomson Reuters data showed.

As the stock market rallied last year, valuations rose for S&P 500 companies. The forward price-to-earnings ratio is at 14.9, compared with 13.1 at the start of 2013.

Volume was higher than average for the month. About 7.5 billion shares changed hands on U.S. exchanges, compared with the average of 6.8 billion so far this month, according to data from BATS Global Markets.

Decliners outnumbered advancers on the New York Stock Exchange and the Nasdaq by slightly more than 3 to 1.

source: interaksyon.com

Wall Street retreats from record

NEW YORK - Stocks slipped on Tuesday, a day after a record close on the S&P 500, with traders looking ahead to next week's Federal Reserve meeting in the absence of market-moving economic data.

Healthcare stocks were among the most active after company news while utilities was the worst performer of the 10 industry groups on the S&P 500.

The S&P 500 held above key technical indicators including its 14-day moving average, and volume remained below average even for a thinly-traded month.

"It's a bit of consolidation after a run-up to new highs. There's no reason to think this is anything different than that," said Paul Zemsky, head of asset allocation at ING Investment Management in New York.

A number of Fed policymakers suggested on Monday the U.S. central bank may be closer than previously thought to trimming its $85 billion a month in bond purchases. But stronger economic data of late, including a drop in the unemployment rate to a five-year low, helped ease investors' angst over a pullback in the Fed's stimulus.

"Monetary policy responds to changes in the economy and as long as the economy is better, tapering shouldn't be too difficult to endure," said Kevin Caron, market strategist at Stifel, Nicolaus & Co in Florham Park, New Jersey.

The Fed's policy-setting Federal Open Market Committee meets Tuesday and Wednesday next week.

The Dow Jones industrial average fell 52.4 points or 0.33 percent, to 15,973.13, the S&P 500 lost 5.75 points or 0.32 percent, to 1,802.62 and the Nasdaq Composite dropped 8.261 points or 0.2 percent, to 4,060.49.

Twitter hit an all-time high of $52.58, more than doubling its $26 initial price in early November and extending Monday's gains after a spate of product announcements that could boost its revenues. Shares closed up 5.8 percent at $51.99.

Other Internet stocks also performed well on Tuesday with Facebook up 2.9 percent to $50.25 and Yahoo up 3.5 percent to $40.22.

AbbVie shares hit a record high of $54.11 after its all-oral hepatitis C therapy cured 96 percent of difficult-to-treat patients in a late-stage clinical trial, keeping the company well placed in a highly competitive race to deliver new treatments for the serious liver disease. Shares ended up 1.8 percent at $52.14.

Also in the healthcare orbit, pharmacy chain CVS Caremark and pharmaceutical distributor Cardinal Health announced a 10-year agreement to form the largest generic drug operation in the United States, the world's biggest generic drug market.

Cardinal Health closed up 3 percent at $66.22 and CVS added 1.9 percent to $67.99.

Shares of Rambus Inc jumped 12.3 percent to $9.58 after the company settled a patent dispute with Micron Technology.

General Motors Co stock fell 1.2 percent to $40.40. The automaker said Chief Executive Dan Akerson will step down next month and be replaced by Mary Barra, the company's global product development chief.

About 5.8 billion shares changed hands on U.S. exchanges, below the 6.1 billion average so far this month, according to data from BATS Global Markets.

Advancers trailed decliners on the New York Stock Exchange by about 2 to 3, while on Nasdaq almost two issues fell for every one that rose.

source: interaksyon.com

Dollar, global stocks rise as U.S. jobs data boosts taper talk

NEW YORK - Global equity markets surged and the dollar rose against the yen on Friday after stronger-than-expected U.S. jobs data gave investors confidence the economy is strong enough to withstand an expected reduction in Federal Reserve stimulus.

The Labor Department's monthly report on the main U.S. employment indicator -- nonfarm payrolls -- bolstered the view that the jobs market in the world's biggest economy is on the mend and that the Fed will soon begin reducing its stimulus.

The debate over when the Fed will start to reduce the flow of cheap money has dominated markets worldwide for months.

A total of 203,000 jobs were added in November, beating expectations for 180,000, while the unemployment rate dropped three-tenths of a percentage point to a five-year low of 7 percent.

The dollar jumped to session highs against the yen and stocks on Wall Street surged, with the Nasdaq setting a record intraday high for the year and the Dow and S&P rising more than 1 percent.

"I don't think the Fed is in a big rush to do anything drastic in the absence of inflation. A few strong jobs numbers do not mean we are out of the woods," said Michael Marrale, head of research, sales and trading at ITG in New York.

"That said, we are in a very good spot and we can offset growth with tapering and we come out of this in one piece."

Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York, said that rising incomes stand out as even more important than the job gains.

"Wages are strongly driving consumption in this cycle more than any other time. Overall wage gains were the most compelling news in this data," Porcelli said.

The dollar index, which tracks the greenback versus a basket of six currencies, rose 0.05 percent to 80.277.

Against the yen, the dollar was last up 1.06 percent at 102.86 yen. The dollar's gains versus the euro were short-lived, as the euro zone common currency was boosted by rising short-term interest rates a day after the European Central Bank dampened hopes for an imminent easing move.

The euro was up 0.25 percent against the dollar to $1.3701.

Other data also was bullish for stocks. Consumer spending increased 0.3 percent in October, or one-tenth of a percentage point more than expected, after rising 0.2 percent in September.

The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment jumped to 82.5 for December, up from a final reading of 75.1 in November. This was the highest reading for the index since July and topped analysts' forecasts for a reading of 76.

MSCI's all-country world equity index, which tracks shares in 45 nations, rose 0.81 percent, while the pan-European FTSEurofirst 300 index gained 0.72 percent to close at 1,270.38.

The Dow Jones industrial average rose 198.69 points, or 1.26 percent, to 16,020.2. The S&P 500 gained 20.06 points, or 1.12 percent, to 1,805.09 and the Nasdaq Composite added 29.356 points, or 0.73 percent, to 4,062.521.

U.S. Treasury yields, a benchmark for borrowing costs around the world, briefly climbed above 2.9 percent, and later the 10-year note was up 2/32 in price to yield 2.8553 percent.

Bund futures settled up 22 ticks at 140.11 euros.

U.S. gold futures for February delivery underperformed spot prices, to settle down $2.90 at $1,229.

Brent crude settled up 0.63 percent at $111.61 a barrel. U.S. crude settled up 27 cents at $97.65 a barrel.

source: interaksyon.com

Wall Street edges up in choppy trade

NEW YORK - U.S. stocks ended higher on Monday in light trading volume as investors were reluctant to make big bets with S&P 500 index just below the all-time closing high.

The day's lackluster activity was partly due to the Dow and S&P 500 indexes' four consecutive week of gains. Investors were also awaiting the all-important non-farm payrolls report due Friday for further clues on when the Federal Reserve may begin to start tapering its stimulus.

Among individual stocks, U.S.-listed shares of BlackBerry ended down 16.4 percent to $6.50 after hitting a 52-week low of $6.40. The smartphone maker said it was abandoning a plan to sell itself. With Monday's drop, the stock is at levels unseen since October 2003.

Twitter IPO-TWTR.N, meanwhile, raised the upper end of the projected price range for its initial public offering later in the week, an encouraging sign for the social media company.

The otherwise quiet start to the week follows a week of record highs for U.S. stocks. It remains to be seen whether the market can push higher, with much dependent on the steps the Federal Reserve will take in the months ahead in response to economic data. The Fed's massive bond purchases have helped prop up the economy and the equity market for much of the year.

"The rebound in the U.S. stock market in late October pushed the S&P 500 index up to a 24 percent gain since the start of the year. As a result, we believe this is probably a good time for investors to rebalance their portfolios which may now have equity holdings exceeding their recommended allocations," said Gary Thayer, chief macro strategist at Wells Fargo Advisors in New York.

"We remain longer-term positive on U.S. equities but would recommend taking some profits in stocks at this time."

The benchmark S&P index has risen 4.3 percent over the past four weeks as the partial U.S. government shutdown in October pushed back expectations for the Fed to begin curtailing its stimulus into the first quarter of next year.

The Dow Jones industrial average was up 23.57 points, or 0.15 percent, at 15,639.12. The Standard & Poor's 500 Index was up 6.29 points, or 0.36 percent, at 1,767.93. The Nasdaq Composite Index was up 14.55 points, or 0.37 percent, at 3,936.59.

St. Louis Federal Reserve President James Bullard told CNBC television the Fed should not rush a decision to scale back its asset purchases because of low inflation.

Recent manufacturing data have been stronger than expected, lending weight to the argument that the economy may be sturdy enough to handle an earlier-than-expected reduction in the central bank's bond-buying program.

All key S&P sectors were higher, led by telecoms and energy stocks. The S&P energy index .SPNY rose 1.3 percent and the telecoms sector index .SPLRCL gained 0.8 percent.

In earnings, Kellogg Co advanced 0.7 percent to $62.72 after the cereal maker reported a 3 percent rise in quarterly profit, and said it would slash 7 percent of its workforce by 2017.

With about 75 percent of S&P 500 companies having reported results so far, 69 percent have topped Wall Street's expectations, above the long-term average of 63 percent. Just 53 percent have topped revenue forecasts, below the 61 percent average since 2002, Thomson Reuters data showed.

Volume totaled about 5.1 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, below the average daily closing volume of about 6.2 billion this year.

On the New York Stock Exchange, around two stocks fell for every five that rose, while on the Nasdaq, advancing stocks beat declining ones by a ratio of 3 to 2.

source: interaksyon.com

S&P 500 ends at record high on Fed hopes

NEW YORK - The S&P 500 closed at another record high on Monday as expectations were high that the Federal Reserve will keep its stimulus in place when it meets this week.



But the overall market was little changed, with the Dow and Nasdaq ending down slightly, after the recent sharp run-up in the stock market lost some momentum.



The S&P 500 has risen 6.4 percent since October 8, when it hit its lowest point during the U.S. government's partial shutdown and the debate over raising the debt ceiling. The benchmark index is up 23.6 percent for the year so far.

Relief over the end of the political impasse and investor expectations that the Fed will keep stimulus measures in place for at least several months because of the 16-day shutdown have propped up prices. Fed policymakers will meet on Tuesday and Wednesday.



"I would like to say it's all about people waiting for the Fed, but I don't know what they're waiting for because I don't expect any change in Fed policy this week, given the fact they pointed out repeatedly the fiscal issues they're cognizant of," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.



"My concern with the market at this level is that without signs eliciting some evidence the economy is actually strengthening from the pace we've had, the multiple expansion doesn't seem rational."



Shares of Apple Inc rose 0.7 percent to $529.88 ahead of the release of its earnings, expected after the bell. While Apple's advance helped the S&P 500, the consumer staples sector index .SPLRCS, up 1.2 percent, gave the S&P its biggest boost.



A number of traders appeared to be picking up call options on the Consumer Staples Select Sector SPDR fund, which rose 1.3 percent, on hopes that the sector will continue to perform well through the end of the year.



The Dow Jones industrial average dipped 1.35 points, or 0.01 percent, to end at 15,568.93. The Standard & Poor's 500 Index gained 2.34 points, or 0.13 percent, to finish at a record 1,762.11. The S&P 500 also posted another lifetime intraday high at 1,764.99.


The Nasdaq Composite Index slipped 3.23 points, or 0.08 percent, to close at 3,940.13.

In extended-hours trading, Apple's shares were flat after recovering from a 5 percent drop following the tech bellwether's results. Wall Street had hoped for a stronger beat on quarterly sales after the iPhone maker predicted in September that its revenue and margins would come in at the high end of its own forecasts.

Apple's stock price has climbed 8.8 percent since the end of August.

Among the latest signs that the economy's momentum may be easing, U.S. manufacturing output barely rose in September and contracts to buy previously owned homes recorded their largest drop in nearly 3-1/2 years, according to economic data released on Monday.

On the down side, Dow component Merck & Co fell 2.6 percent to $45.35 and was one of the biggest drags on the Dow after the company reported a decline in sales of its Januvia diabetes treatment, raising concerns about growth prospects for its biggest product.

Biogen Idec posted a rise in its third-quarter profit and boosted its full-year earnings and revenue outlook, sending the U.S. biotech company's stock up 0.9 percent to $254.43.

Based on Thomson Reuters data through Monday morning, S&P 500 earnings are expected to have risen just 3.4 percent in the third quarter over the year-ago period.

Of the 249 companies in the S&P 500 that have reported earnings so far, 69.1 percent beat analysts' expectations, above both the 63 percent beat rate since 1994 and the 66 percent rate for the past four quarters.


Revenue has been lackluster, however, with growth seen at 2.2 percent for the quarter. Just 53.9 percent have beaten sales estimates, below the 61 percent rate since 2002, but above the 49 percent rate for the past four quarters.

On the acquisition front, Mosaic Co agreed to buy CF Industries Holdings Inc's phosphate mining and manufacturing business for $1.2 billion in cash. Shares of CF climbed 4.2 percent to $218.36 while Mosaic gained 1.6 percent to $46.67.

source: interaksyon.com

Wall Street rises as jobs data supports US Fed policy

NEW YORK - U.S. stocks climbed on Tuesday, pushing the S&P 500 to yet another record high, after weaker-than-expected job creation last month reinforced expectations the Federal Reserve will hold the course on its economic stimulus into next year.



U.S. employers added 148,000 workers last month, well below the 180,000 economists had expected. The data was seen as supporting the Fed's decision to maintain its $85 billion in monthly bond purchases, which has been a major factor in the S&P 500's 2013 rally of 23 percent.



Many economists now think the Fed will refrain from scaling back its easy money policy, which has kept borrowing costs low, until next year. The central bank surprised market participants in September when it held off on any plans to trim its stimulus.



"Another soft report on the employment numbers just continues to lead us to believe the Fed will be with us at the holiday table this year with their full $85 billion and ringing in the New Year probably at that rate as well, which the markets like," said Darrell Cronk, regional chief investment officer at Wells Fargo Private Bank in New York.



But gains were limited on the Nasdaq after some of the year's biggest winners, including Netflix Inc, reversed course to move lower.



"This is a horrible one-day reversal, taking out yesterday's action. We saw both higher highs and lower lows today, which is proof the stock is exhausted," said Frank Gretz, market analyst and technician for brokerage Shields & Co in New York.



Netflix shares fell 9 percent to $323.12, giving back gains that followed the release of the company's earnings report on Monday. With more than 17 million shares traded, volume was nearly eight times the average over the last 50 days.



Apple edged down 0.3 percent to $519.87, though losses ebbed after the company unveiled a new line of iPads.



The Dow Jones industrial average rose 75.46 points or 0.49 percent, to 15,467.66, the S&P 500 gained 10.01 points or 0.57 percent, to 1,754.67 and the Nasdaq Composite  added 9.517 points or 0.24 percent, to 3,929.566.



The gains marked the fourth straight record close for the benchmark S&P index.



Consumer staples, up 1.4 percent, was among the best performing S&P sectors, boosted by a 4.2 gain in Kimberly-Clark Corp to $102.97 after the maker of Kleenex tissues posted bigger-than-anticipated quarterly profit.



Transocean shares rose 6 percent to $49.35 after S&P Dow Jones Indices announced the drilling services company will replace Dell on the S&P 500 index after the close of trading next Monday.



Shares of cloud software maker VMware Inc rose 2.8 percent to $85 a day after it reported a higher-than-expected profit.



According to Thomson Reuters data through Tuesday morning, of the 128 companies in the S&P 500 that have reported earnings, 63.3 percent have topped analysts' expectations, roughly in line with the beat rate since 1994 but below the 66 percent rate over the past four quarters.



On a revenue basis, 52.3 percent of companies in the S&P 500 that have reported results have beaten Wall Street expectations, short of the 61 percent beat rate since 2002 but slightly above the 49 percent rate over the past four quarters.



Advancing stocks outnumbered declining ones on the NYSE by 2,210 to 805, while on the Nasdaq, advancers beat decliners 1,397 to 1,148.

source: interaksyon.com

What happens if the US government shuts down?

WASHINGTON -- A US government shutdown is possible on Tuesday, the first day of fiscal 2014, because Congress has so far failed to find a way to pay for it.

A closure would have far-reaching consequences at federal agencies dealing with everything from sending out Social Security checks to collecting admission fees at national parks.








Here is a roundup of how the impact would be felt:  


FEDERAL WORKERS: As many as 1 million US federal employees could face unpaid furloughs or payless paydays, according to the president of the American Federation of Government Employees, which represents 670,000 union members.

NATIONAL PARKS: National parks would close, meaning a loss of 750,000 daily visitors and an economic loss to gateway communities of as much as $30 million for each day parks are shut, according to the non-profit National Parks Conservation Association.

DEFENSE DEPARTMENT: All military personnel would continue on normal duty status, but many civilian employees would be temporarily furloughed, Deputy Defense Secretary Ashton Carter said in a memo. He said furlough notices would be issued on Tuesday, October 1, if no agreement to fund the government is reached.

The ratings agency Standard & Poor's said a shutdown of less than two weeks would not materially affect the credit of big defense contractors, though a longer shutdown could weaken smaller defense contractors. Most defense contractors would not be paid, new contracts would not start and orders would be delayed, with service contracts hardest hit, S&P said.

INTERNAL REVENUE SERVICE: Most of the federal tax agency's 90,000 employees would be furloughed. Taxpayers who requested an extension beyond the April 15 deadline to file their 2012 taxes must do so by October 15, and they will still be able to file these returns even if the IRS is still shut down then.

FEDERAL RESERVE AND OTHER FINANCIAL AGENCIES: The Fed would stay open, since it does not depend on congressional appropriations to operate; so would the Consumer Financial Protection Bureau, which the Fed funds. The Federal Deposit Insurance Corp and the Office of the Comptroller of the Currency pay for themselves and would remain open. The Commodity Futures Trading Commission has been rushing through approvals for a new, untested type of trading platform ahead of a possible shutdown, its top regulator said.

JUSTICE DEPARTMENT: Fewer than 18,000 of the department's 114,486 employees would be furloughed, and if the furlough is prolonged, some of those could be brought back to work. Criminal litigation would continue under a government shutdown, while civil litigation would be curtailed or postponed as much as possible "without compromising to a significant degree the safety of human life or the protection of property," the department said in its contingency plan.

COURTS: The US Supreme Court would probably operate normally, as it has during previous shutdowns, but a spokesman declined to share the high court's plans.

Federal courts would remain open for approximately 10 business days if the government closes on October 1, and would reassess on or about October 15.

NATIONAL INSTITUTES OF HEALTH: The agency's research hospital in Bethesda, Maryland, would take no new patients.

US TRADE REPRESENTATIVE'S OFFICE: Already squeezed by automatic spending cuts imposed by so-called sequester, the USTR office has cut back on travel to the 41 countries where there are concerns about intellectual property, Trade Representative Michael Froman said.

ENVIRONMENTAL PROTECTION AGENCY: EPA Administrator Gina McCarthy said this week that the agency would effectively shut down with only a core group of individuals available in case of a "significant emergency."

AGRICULTURE DEPARTMENT: USDA meat inspectors would stay on the job, industry experts said. Statistical reports would be delayed. An October 1 shutdown would come as the agency is surveying farmers and checking fields for yields and acreage in advance of the October 11 crop report. A government closure of more than a few days could delay the report, relied upon by traders and food manufacturers as the best estimate available of the US food supply.

WASHINGTON DC SIGHTS: Some popular tourist spots in the nation's capital would probably close, including the FDR Memorial, the Kennedy Center for the Performing Arts, the Library of Congress, the Lincoln Memorial, the National Archives, the National Zoo and all Smithsonian Museums.

source: interaksyon.com

PH stock market ekes out modest gain after US fails to break budget impasse

MANILA - Philippine share prices squeezed out marginal gains on Tuesday as the US government partially shut down after Congress failed to reach a deal to fund federal operations. At the Philippine Stock Exchange, the benchmark index inched up 6.04 points, or 0.1 percent, to close at 6,197.84, tracking the modest advance of most Asian markets. Among the sub-indices, only the service and property counters finished in the green with gains of 0.45 percent and 0.35 percent, respectively. Market breadth was negative as decliners beat advancers, 84 to 57, while 41 issues were unchanged. A total of 1.53 billion stocks worth P7.88 billion changed hands. Actively traded stocks were Meralco, Alliance Global, Metrobank, Universal Robina and Ayala Land. Top gainers were Ginebra, Maybank and PAL, while the biggest losers were Keppel Properties, Keppel Holdings and Philex Petroleum. The US government began a partial shutdown for the first time in 17 years after US lawmakers missed the October 1 deadline to agree on the budget for the new fiscal year. The Republican-controlled House of Representatives was pushing for the delay of President Barack Obama's signature healthcare law by a year, while the Senate Democrats refused to do so. "Markets held on to the morning gains for a while, taking time to digest the latest development. Yet as the afternoon session progressed it became evident investors found the sidelines a more enticing place to ride out the uncertainty as to how long the shutdown will last," said Jun Calaycay of Accord Capital Equities Corp. The PSE index fell nearly three percent on Monday as investors braced for a US government shutdown amid a budget impasse. The main gauge jumped to a high of 0.96 percent in early Tuesday trades but succumbed to profit-taking in the afternoon session.

source: interaksyon.com