Financial life in a big town

NEW YORK–Hotels, construction firms and retailers saw business shrink in October as slower spending and declining employment sent the service sector into contraction, another gloomy sign for the economy.

The Institute for Supply Management, a trade group of purchasing executives, said Wednesday its service sector index suffered a sharper-than-expected drop to 44.4 in October from 50.2 in September.

Wall Street economists surveyed by Thomson Reuters expected a reading of 47.5. A reading below 50 signals contraction.

"In short, horrible, but only to be expected in the wake of the equity plunge and the subsequent collapse in confidence," said Ian Shepherdson, chief economist at High Frequency Economics, a private research firm.

Asked in a one-time question whether the financial crisis was affecting business, 82.2 per cent of respondents said they had reduced spending, hiring or both, according to the ISM report.

New orders, deliveries, backlogs and inventories all fell.

The one glimmer of good news could also be further evidence of a recession: After a summer of price hikes, the index of prices paid showed its largest one-month decline since the index was first reported in 1997 bad credit pay day loans.

One of the few industries reporting growth was utilities, but that business is not immune to the downturn. Duke Energy Corp., one of the nation's largest electric power companies, said Wednesday its third-quarter profit fell 65 per cent. It blamed the worsening economy, as well as record Midwest storm outages, for the decline.

On the retail front, intimate apparel maker Maidenform Brands Inc. on Wednesday lowered its 2008 profit and sales outlook to reflect the bankruptcies of department store chains Mervyns LLC and Boscov's Department Store LLC.

A manufacturing report issued Monday by ISM showed the worst reading since September 1982, when the country was near the end of a 16-month recession.

Stocks fell in late-morning trading, with the Dow Jones industrial average down more than 120 points. The broader indexes also fell.

Source

Britain will inject up to 50 billion pounds ($87.2 billion) of government money into the country’s banks as part of a multibillion pound package to shore up the financial system.

After frantic overnight talks that followed dramatic falls in the share prices of some of Britain’s biggest banks, Finance Minister Alistair Darling rushed out measures Wednesday he said would help boost lending and restore confidence.

“This is beginning a process of un-bunging a big problem where banks won’t lend to each other for long periods,” Darling said.

Under the plans, Britain will inject new capital into the banks in the form of preference shares or similar instruments, and make available at least 200 billion pounds of liquidity in a bid to free up lending in the banking system.

The decision follows days of crippling pressure on British banks, some of which have lost nearly half their value on the stock market amid investor fears they could collapse if they are not handed a massive liquidity lifeline (pay day loan).

HBOS, which last month agreed to be taken over by rival Lloyds in a government-brokered deal, welcomed the plan.

“The government’s announcement represents a very real and serious intention on the part of the authorities, following consultation with the banking industry, to bring stability and certainty to the UK banking system.

“HBOS believes that this initiative is very much in the interests of its shareholders and customers.” 

Read more

General Electric Co (GE.N: Quote, Profile, Research, Stock Buzz) shares fell as much as 10 percent on Thursday, touching a new 5-1/2-year low, as its sale of $15 billion in new stock to investors including Warren Buffett failed to soothe Wall Street worries.

GE shares have tumbled about 40 percent this year as the global credit crunch has taken a heavy toll on its hefty finance arm and the company warned that 2008 profit could drop 12 percent.

The U.S. conglomerate sold $3 billion in preferred stock at $22.25 per share to Buffett’s Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research, Stock Buzz)(BRKb.N: Quote, Profile, Research, Stock Buzz) on Wednesday, and another 548 million common shares at the same price to other investors on Thursday.

GE said the new capital will help improve its liquidity and provide the option to make acquisitions at a time of market turmoil.

The U.S. Senate approved a $700 billion financial bailout package on Wednesday, and the U.S no checking account payday advance. House of Representatives is scheduled to vote on the plan on Friday.

The rescue plan is intended to reinvigorate credit markets and frozen interbank lending, stabilize battered risky assets, including stocks, and ease corporate lending.

Because of the breadth and depth of its operations, which stretch around the world and include jet engines to electricity-generating turbines to lending to the NBC television network, GE is regarded as an economic bellwether.

“The fact that GE needs to go out and sell shares at $22.25 is not particularly good news,” said Michael Church, financial analyst and portfolio manager at Church Capital Management, a Pennsylvania-based company that oversees $2 billion in investments and holds GE shares. 

Read more

new york — Stocks surged Friday in the biggest two-day global rally in 38 years as the government announced plans to purge banks of bad assets and crack down on speculators who drove down shares of financial companies.

The Standard & Poor’s 500 index jumped 4 percent, capping its steepest two-day gain since the aftermath of the 1987 crash. The Dow Jones industrial average added 929 points from Thursday’s low, and markets from the U.K. to China advanced the most ever.

U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke ignited the rally by proposing to shore up banks’ balance sheets and guaranteeing money-market mutual funds, while the Securities and Exchange Commission banned short sales of financial firms.

Washington Mutual Inc. rose 42 percent, Wachovia Corp. was up 29 percent and Citigroup Inc. added 24 percent among the 15 companies in the in the S&P 500 Financials index to jump more than 20 percent. General Electric Co. added 7.4 percent.

"What the government and its regulatory agencies have tried to do here is restore some confidence and remove some fear," Robert Doll, chief investment officer of global equities at New York-based BlackRock Inc., which manages $436 billion in stocks, told Bloomberg Television. "That will work in the short run and improve psychology."

The S&P 500 advanced 48.57 points to 1,255.08. The Dow surged 368.75 to 11,388.44, capping its biggest two-day jump in six years. The Nasdaq composite index increased 74.80 to 2,273.90.

The S&P 500 erased its decline for the week, ending 0.3 percent higher. The benchmark index for U.S. equities tumbled 4.7 percent twice in the last five days after Lehman Brothers Holdings Inc. filed for bankruptcy, the U.S. government seized control of American International Group Inc. and Merrill Lynch & Co. was forced to sell itself to Bank of America Corp.

The S&P 500 is still down 15 percent this year, poised for its first annual decline since 2002. Until Friday, financial companies led the retreat as losses stemming from the first nationwide drop in house prices since the 1930s surpassed $500 billion.

A record 3 billion shares changed hands on the NYSE, more than double the three-month daily average. Goldman Sachs Group Inc. and Morgan Stanley, the last remaining major independent investment banks on Wall Street, rose more than 20 percent two days after falling the most ever.

Nine of 10 industry groups in the S&P 500 advanced as a better-than-estimated forecast at Oracle Corp. helped boost tech companies by 2.9 percent and higher oil prices helped Chevron Corp. lead an advance among all 39 energy companies in the S&P 500.

 Radical rescue: Hundreds of billions for bailout

 Local bankers say Paulson had to act on “bad” assets

 NICKLAUS: In the short term, we are all going to be socialists

 NEWSWATCH: How much is TOO MUCH?

 NEWSWATCH: Will bailout help housing market?

 Wall Street ends wild week with biggest two-day rally in 38 years

 Area financial advisers survive storm

 STROUD: Market turbulence can test your level of risk tolerance

 Missouri regulators reassure AIG policyholders

 Credit market remains tight, but avoids collapse

Only consumer staples, the best performing group year-to-date, declined $500 payday loan. Wal-Mart Stores Inc. fell 2.9 percent to $59.70 for the biggest decline in the Dow.

U.S. and European government bonds tumbled, shedding gains that Thursday drove the prices of some Treasury bills higher than their face value. The dollar rose the most since April against the yen, while the cost of default protection on corporate bonds dropped by the most since the bailout of Bear Stearns Cos. in March. Gold fell.

John Bogle, who created the $106 billion Vanguard 500 Index Fund in 1976, said the U.S. government is "punch drunk," given its proposals to rescue the financial system. "We’re playing a game of casino capitalism, interfering with the way the market is working," Bogle, 79, said.

The S&P 500 Financials index climbed 11 percent after a 12 percent gain Thursday, marking the best two-day advance since the gauge was created in 1989.

JPMorgan Chase & Co. rose 17 percent, and Bank of America added 23 percent.

Wells Fargo & Co. and U.S. Bancorp, which avoided making the riskiest types of loans, rose to records. Genworth Financial Inc., the life and mortgage insurer spun off from General Electric Co. in 2004, surged 67 percent to $15.25 after falling 39 percent over the last four days.

Morgan Stanley snapped seven days of losses, advancing $4.66 to $27.21 as the SEC temporarily banned short-selling in shares of 799 financial companies to curtail the market rout. In a short sale, borrowed stock is sold and sellers profit if the shares fall and they can repay the loan with cheaper stock.

Goldman gained $21.80 to $129.80. Goldman, the biggest U.S. securities firm, and Morgan Stanley are seeking to avoid the type of run on their shares that helped trigger emergency sales of Merrill and Bear Stearns and the Sept. 15 bankruptcy by Lehman, once the fourth-biggest.

Bank of New York, the world’s largest custodian of financial assets, rose $4.13 to $35.70, rebounding from its lowest closing price since October 2005.

Oracle advanced $1.32, or 7 percent, to $20.07.

Crude oil for October delivery gained 6.6 percent to $104.33 a barrel on the New York Mercantile Exchange.

Exxon Mobil Corp., the biggest U.S. oil company, added 2.4 percent to $79.61. Chevron Corp., the second-largest, climbed 5.9 percent to $87.80. Halliburton Co., the world’s second-biggest oilfield services provider, increased 8.6 percent to $37.62.

UBS AG, the European bank hit hardest by the subprime market’s collapse, added 32 percent.

Bank of China, the nation’s second-biggest bank, jumped 17 percent to 3.36 yuan. A 24 percent slump in the month through Thursday left it valued at a record low of 10.5 times profit.

Source

MONTREAL–The Ontario Securities Commission moved Friday to restrict the short sale of 13 financial stocks that are also listed in the United States after regulators in that country and the United Kingdom suspended short selling of financial stocks.

"This order is being issued as a precautionary measure to prevent regulatory arbitrage with respect to short selling in Ontario of the securities of the financial sector issues and to promote fair and orderly markets in Ontario," the provincial regulator said.

The restriction, effective immediately, expires Oct. 3.

The stocks affected included the Big 5 Canadian banks (TSX:BMO, TSX:BNS, TSX:CM, TSX:RY, TSX:TD), Manulife Financial Corp. (TSX: MFC) and Sun Life Financial Inc. (TSX: SLF).

Ontario Finance Minister Dwight Duncan said the ban was consistent with recent steps taken in the United States and U.K.

"We are actively monitoring market developments and working with the OSC as it continues to work closely with other securities and financial market regulators in Canada and other countries as we go forward," Duncan said in a statement.

Short-selling is a form of trading that makes money for an investor when a stock's price goes down, rather than up. Market observers say it is not as widespread in Canada as on Wall Street.

The Canadian Securities Administrators said it supported the decision by the Ontario regulator.

"Other jurisdictions in the CSA will be taking similar action today, or in the coming days," Jean St-Gelais, chairman of the CSA and head of Quebec's securities regulator, said late Friday.

Earlier in the day, St-Gelais noted that some of short-selling techniques that have been occurring in the United States are banned in Canada.

"We are following this like everyone around the world. If we can have a united approach, so much the better," St-Gelais told reporters, adding Canadian regulators are "in the loop" of discussion by global regulators.

The U.S. Securities and Exchange Commission took the unusual move to temporarily ban short-selling of 799 financial stocks. The rule took effect immediately and extends through Oct. 2.

Short-selling is a complicated form of trading that sometimes unnerves even seasoned market professionals because of the potential for losses is potentially huge, while other money managers consider it a routine manoeuvre.

In essence, the trader borrows shares and then quickly sells them, knowing that the shares will have to be repurchased and returned to the lender.

The only way short sellers make money is if the stock price falls significantly before the shares must be repurchased and returned 1500 payday loans. The strategy can backfire and create losses for the trader if stock price goes up.

It is a legitimate method of trading, but there have been allegations of abuse, such as spreading false rumours or manipulating debt derivatives to drag down share prices artificially.

Christopher Cox, chairman of the U.S. Securities and Exchange Commission, said Friday that the SEC is "committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets."

"The emergency order temporarily banning short-selling of financial stocks will restore equilibrium to markets," he said.

The move appeared to work, at least in the short term. North American stock markets rebounded strongly Friday, essentially reversing the losses experience throughout the week.

Chyanne Fyckes, chief investment manager at Stone Asset Management, noted, the situation in Canada is complicated by the presence of 13 provincial and territorial securities commissions – not one national regulator like the Securities and Exchange Commission in the United States.

"I think anybody at this point in time would tell you that the fact that we don't have a single securities regulator is a huge impediment," she said.

"It's completely nonsensical and it makes life very difficult."

Tom Caldwell, chairman of Toronto-based money manager Caldwell Securities Ltd., welcomed the SEC ban, but noted that Canadian markets have a so-called uptick rule which helps control short-selling.

The rule, introduced in the U.S. Securities Exchange Act of 1934 after the stock market crash but eliminated last year, aimed to prevent short-sellers from adding to downward price momentum.

The uptick rule prevents short-selling when the last bid is lower than the previous one, but the SEC scrapped it because it can be circumvented by new financial instruments.

-With files from Canadian Press reporter Kristine Owram in Toronto

Source

Partial payments for people claiming that the withdrawn painkiller Vioxx caused heart attacks will go out starting Aug. 28, under the $4.85 billion settlement between drugmaker Merck & Co. and plaintiffs’ lawyers, the claims administrator said Wednesday.

Those payments will amount to about 40% of each plaintiff’s estimated total payout, but it’s unclear how many people will be receiving checks from the first batch going out.

The settlement, meant to end the bulk of personal injury lawsuits against Whitehouse Station, N.J.-based Merck, was reached last November. Merck had pulled Vioxx from the market on Sept. 30, 2004, after its own research showed the once-blockbuster arthritis pill doubled the risk of heart attack and stroke.

During the monthly status conference with the New Orleans federal judge who is coordinating most of the massive Vioxx litigation, Orran Greer of claims administrator BrownGreer PLC said 49,954 eligible claimants have now registered for a settlement. That amounts to more than 97% of claimants eligible for the settlement - well above threshold levels the company required for the deal to proceed - and most of the others cannot be located by their attorneys, Greer told U.S. District Judge Eldon Fallon.

Greer said Merck waived its right to walk away from the settlement on Aug. 4 and, over the next 2 days, deposited $500 million in an escrow account and gave the claims administrators a letter of credit worth up to $4.1 billion to cover payments to claimants.

His firm is now painstakingly reviewing millions of pages of documents submitted by claimants, electronically or on paper, for accuracy and to make sure that no documents - particularly those releasing Merck from any future legal liability - are missing or incomplete.

Lynn Greer, also of BrownGreer, said 44,680 claimants have submitted at least some of the required materials, and those missing items are being notified free credit report .com. She said 3,441 claimants have reached the stage where administrators are determining how many points they get toward a settlement amount - decided by a complicated formula that factors in how serious a claimant’s injury was, how much Vioxx was taken and how many health risk factors the person had.

"Our projected value of each point [is] in excess of $1,900," she said, adding, "it is unprecedented that claims can begin going out in an 8-month period" since the complex settlement process began.

The 4-year legal saga begun when Merck yanked Vioxx off the market, triggering tens of thousands of lawsuits, damaging Merck’s once-spotless reputation and forcing out its then-chief executive.

Settlement amounts can run from the minimum of $5,000 up to a couple of million dollars, but the federal government is arranging to be reimbursed for care provided to Vioxx users under the Medicare and Medicaid programs. Likewise, private insurers are seeking reimbursement, although Fallon has ruled that their claims cannot hold up interim payments to claimants.

Payments to Vioxx users who suffered strokes are set to start in February 2009.

Merck (MRK, Fortune 500) still faces about 260 potential class-action suits, alleging either harm or financial losses related to Vioxx, that still must be resolved, plus 2 cases already certified as class actions in Canada.

The Vioxx case has cost Merck at least $7 billion, including more than $1.74 billion through July 31 on legal costs for defense research and individual trials, most of which it has won.

Vioxx, which was launched in 1999, brought Merck revenue of $2.5 billion at its peak in 2003 and a total of at least $11 billion. 

Source

Personal income rose slightly in June after surging the previous month on the first wave of economic stimulus checks, the government reported Monday.

The Commerce Department said individual income increased by 0.1% in June after a revised 1.8% jump in May. Economists polled by Briefing.com were expecting a 0.1% decrease in June.

Personal spending in June increased by 0.6%, which was more than the 0.5% increase that economists polled expected.

However, the spending jump was driven by inflation. Individual spending, when adjusted for inflation, actually fell by 0.2% following a 0.3% increase in May, according to the report.

"Inflation is taking a pretty big bite out of the actual dollars," said Adam York, economic analyst at Wachovia. "It means that we are spending more dollars on gas, food, and things that are increasing in cost."

Another measure in the report that tracks prices that consumers pay on goods and services, excluding food and energy, rose by 0.3% over the previous month.

In addition, the core personal consumption expenditures index - a year-over-year inflation gauge that excludes food and energy - rose to 2.3% from 2.0% a year earlier. Core PCE was 2.2% in March, April and May. The Federal Reserve is widely believed to prefer that core PCE stay in a range of 1% to 2%.

While personal income rose in June, disposable income fell by 1.9%, after spiking up by 5.7% in May low fee cash advance. And in inflation adjusted dollars disposable income decreased by 2.6% after jumping 5.2% in May.

Disposable income is what consumers have left over after they pay taxes.

The drop-off in disposable income tracks a monthly decline in the amount of economic aid distributed by the federal government.

The Treasury Department sent out $48.1 billion in economic stimulus payments in May and $27.9 billion in June.

"The pattern of changes in income reflect the pattern of payments associated with the Economic Stimulus Act of 2008," according to the report.

Excluding stimulus rebate payments, disposable personal income actually increased by 0.3% in June after increasing by 0.4% in May.

"There is no way that the underlying trend increase could make up for the decline in the tax rebate payments," said York. 

Source

The nation’s employers continue to put jobs on the chopping block at a steep rate as the economy struggles, according to a new report.

Challenger, Gray & Christmas, an outplacement consultancy firm, said Monday that planned job cuts announced by employers in July jumped 26% to 103,312 from 81,755 announced in June. That’s up 141% from a year ago, when employers announced planned job cuts totaling 42,897.

The July figure marks the second-highest number of planned job cuts this year, rivaling the May reading that showed 103,522.

"We have seen job cuts increase in the majority of industries that we track," John Challenger, chief executive of Challenger, Gray & Christmas, said in a statement.

Monday’s report indicates that the downturn in the housing and financial sectors, "has spread throughout much of the economy," Challenger said.

Indeed, the report showed job cuts in the works increasing from a year ago in 17 of the 25 industries tracked by Challenger.

Employers in the transportation industry announced the largest number job cuts on the horizon, at 17,051 for the month pay day advance.

Planned job cuts in the transportation sector were dominated by airlines, which have struggled with soaring fuel costs and declining ticket sales due to softening consumer confidence, according to Challenger.

Transportation was followed by the financial services sector, where employers announced 15,517 job cuts on the block.

Financial firms remained led the year, having already announced 100,775 planned layoffs through July, the report showed.

Employers in the retail and automotive industries also ranked high on the list.

The Challenger report follows a Labor Department report Friday that showed the nation’s unemployment rate climbing to a four-year high of 5.7%. It was the worst reading since March 2004, and slightly worse than economists’ forecast of 5.6%.

But there was a bright spot in the government’s report. The economy lost 51,000 jobs lost in July, which was much lower than the 75,000 loss that economists had expected.  

Source

Deutsche Telekom AG’s major shareholder, the German state, is pressing it to make large acquisitions in the hope of raising its sagging share price, a source familiar with the government’s thinking said.

“Berlin is very clearly on an expansion course and is putting pressure on Deutsche Telekom,” the source told Reuters on Monday, as speculation swirled the German company could bid for U.S. wireless phone company Sprint Nextel (S.N: Quote, Profile, Research).

A source close to the company said Deutsche Telekom (DTEGn.DE: Quote, Profile, Research) had been looking at Sprint Nextel since the U.S. company announced a huge goodwill writeoff in February. The person said no decision had been taken on whether to bid.

The Berlin government still owns around a third of the former state-owned company, has a representative on its supervisory board and has a major say in company decisions.

Asked about Telekom being interested in Sprint Nextel, German Finance Minister Peer Steinbrueck told reporters in Berlin he considered it to be “a rumor, like so much else”.

Deutsche Telekom’s chief executive, Rene Obermann, has said he wants to grow the group’s mobile phone business through acquisitions to compensate for a dwindling fixed-line business and has linked his performance to boosting the share price.

Telekom shares lost 1.5 percent to close at 11.61 euros, the second-biggest decliner among German blue-chips .GDAXI faxless online payday advances. Sprint shares were up 4.3 percent at $8.23 by 1751 GMT.

Such a deal would vault Deutsche Telekom’s T-Mobile USA unit past AT&T (T.N: Quote, Profile, Research) and Verizon Wireless (VZ.N: Quote, Profile, Research) (VOD.L: Quote, Profile, Research) to the number one spot among U.S. mobile phone service providers, but industry experts were skeptical Telekom would pull it off. 

Read more

Monsanto Co., the world’s largest seed producer, said fiscal second-quarter profit more than doubled as U.S. farmers bought more Roundup weed killer and genetically modified corn seed.

The Creve Coeur-based company is taking market share from rivals such as DuPont Co. by spending more to develop new varieties of corn, soybean and cotton seeds. Higher prices will help double gross profit from Roundup this year, Chief Executive Hugh Grant said on a conference call.

Net income in the three months through February rose to $1.13 billion, or $2.02 a share, from $543 million, or 98 cents, a year earlier. That surpassed Thomson Financial’s prediction of $1.72 a share.

The second-quarter earnings include a 23-cent gain from the settlement of Monsanto’s claims related to Solutia Inc.’s emergence from bankruptcy.

Sales were boosted by global demand for Roundup and genetically modified corn seeds in the U.S bad credit payday loan. and Brazil, Monsanto said.

"Between now and 2012, I think we’re the only company in agriculture that can point to consistent growth irrespective of swings in commodity prices, fluctuations in planted acres or the usual ups and downs in the popularity of things like ethanol," Grant said.

Monsanto said it won an additional 3 to 5 percentage points of the U.S. corn-seed market this year, confirming earlier forecasts.

Monsanto last year surpassed DuPont’s Pioneer unit as the largest producer, with 32 percent of U.S. corn-seed sales. DuPont had 30 percent and has pledged to hold its share steady this year. Monsanto said its share this year will be 35 percent to 37 percent.

The Associated Press contributed to this report.

Source