Wachovia Stocks Drop By $3.01
April 14, 2008
With the rockiness of the stock market and the economy, Wachovia shares dropped during premarket.
This was in response to the bank stating that they would like to put at least seven billion of its stock up for sale. This is a consequence of reduced revenue after its first quarter, and having a lower dividend than the original.
By reducing stock amount, Wachovia will keep at least two billion dollars in savings. Wachovia is now trading at $24.80 after a drop of at ten point eight percent.
EU Jobless Rate Remains Stable
April 1, 2008
According to the European Union’s agency for statistics Eurostat, the countries that used the Euro had a stable unemployment rate. Eurostat stated that for the fifteen EU countries, the unemployment rate held itself steadily at approximately seven percent. This rate was calculated from January until now, with no change.
Of all the European Union countries, the Netherlands had the lowest rate of unemployment at around two percent, with France having a rate of over seven percent. This is in comparison to Japan where unemployment is close to four percent, and in the USA where it is a little less than five percent.
MetLife Exercise Shares
March 26, 2008
It has recently been announced that the company MetLife has excised its options for approximately three thousand common stock shares. This trade was arranged beforehand, as noted in information files with the Securities and Exchange Commission.
The Chairman of MetLife, C. R. Henrikson was instrumental in exercising these options at a price tag of $29.95 each. The shares were resold later in the day for $60.84 each. This trading plan has been in place to allow people within the company to carry out such transactions.
Wall Street Hoping For Better Returns This Week
March 6, 2008
As the fears of recession are at there highest, investors are looking to economic data scheduled to be released on the Monday for a brighter outlook. At this stage, investors seem to be quite used to the declining employment market service sector. Some analysts have stated that investors are, however, willing to turn a blind eye to these factors and start investing once again. Wall Street is clinging to the hope that economic reports due this week will indicate some upward momentum, as fears are that reports of another downward moving quarter will once again turn investors away.
The week is scheduled to start off with the Institute for Supply Management’s report on the nation’s manufacturing in the month of February. Forecasts are, however, that these reports will show a decrease in production, especially after the slight increase the industry saw in January. Another report due this week is the ISM’s calculation of the Service Sector activity for February. Economists are again predicting another decline , unfortunately right on the back of the dramatic plunge that was witnessed in the previous month.
The turmoil in the market is only reinforced by the reductions that occurred in the manufacturing industry in December; which was the first time such a decrease had been seen since January 2007. The service sector also showed large-scale reductions in the past few months which is the first time it has done so for the last five years.
However, the most important report to be released this week for Wall Street is employment figures for February. This data is scheduled to be released on the last day of the week. Friday’s report is, irrespective of the data in it, going to pull the investors in one way or the other. Though when one group of economists in the country are predicting a small rise in payrolls, another group are saying that payrolls are likely to dip and make it two months in a row of reductions. Speculations of this nature are fueled by the Labor Department of USA announcing that net jobs for the nation saw a loss for January. This was the first time this had happened in the last four years.
However, the former group of the economists are of the view that the Labor Department might actually revise the January report if they later find out later that jobs had actually risen during the month. This has occurred previously, in August of 2007, and the labor market had then revised figures one month later. According to analysts, Wall Street has its fingers crossed for good figures in the coming economic data, either way.
Value Of Dollar To Decline Further
March 6, 2008
According to many currency experts, the US dollar is predicted to weaken further in the near future. The dollar has been enduring severe losses in the past few weeks, and according to analysts, it is only going to get worse.
Many analysts are of the view that the greenback is going to be in a bad state until the middle of the year. It is believed that it will receive some sort of relief after this point.
The main reason for the massive decline in value of the dollar this week, is due largely to statements made by the Federal Reserve chairman last week. Ben Bernanke, Federal Reserve chief, had mentioned during his testimony at Capitol Hill last week, that the Federal Reserve might implement another rate slash during the Federal Reserve’s meeting in March, which resulted in the dollar losing a lot of ground.
Bernanke’s words, along with the other issues already facing the dollar, where enough to send the value of the dollar down the drains. This drop saw the Dollar touching decade lows against many currencies; the Japanese yen, Swiss Franc and the Malaysian ringgit are some of the currencies against which the dollar took an especially large fall. Last week the dollar hit its all time low against the Euro.
Most currency strategists are saying that the weak value of the currency is indicating the economy of the nation is going to go from bad to worse. The dollar last week was very consistent in recording all time lows against the Euro.
Currency analysts are very sure that the dollar is going to stay in its current state for the next month at least, if not longer. The dollar is going to go even further down if the employment report that is scheduled to come out later this week also turns out to be as bad as economists are forecasting. If it indeed turns out to be a depressing report the result might be that the dollar hits rock bottom.
As per the forecasts that have been made recently the dollar is going to hit a top of $1.55 to the fifteen nation currency very soon and this it will drop further in front of the Japanese Yen. The fall might be as low as ¥101 or ¥102.
Although currency experts are united in saying that the dollar will recover towards the middle of the year, as the economy of the nation starts to get back on its legs. The dollar again would reach a more stable position as soon as the Federal Reserve puts a stop to the rate slashes it has been employing so frequently nowadays.
Fed Head calls on the lenders for leniency
March 5, 2008
On the fourth of March the Federal Reserve chairman Ben Bernanke called on the mortgage lenders to show more leniencies towards the homeowners who are facing foreclosures and to help them by decreasing the loan amounts. He made this statement on Tuesday as a result of the large amount of home foreclosures that were happening recently. He urged the lenders across the country to provide extra relief to the suffering homeowners.
On Tuesday, when he was addressing a meeting of a banking group in Orlando, he said that the current situation calls for a spirited response. He warned that although many relief attempts were on their way from both the government as well as the industry the number of foreclosures and delayed repayments of home mortgages are going to be very high for some more time at least.
The very high numbers of foreclosures that are happening in the country are now contributing to worsening the various problems that exist in the country’s housing market. Bernanke also said that this was again making the economy of the nation look more fragile. It also strengthens the beliefs that the economy is in a recession or is on the verge of one.
The chairman of the Fed said that if the rates of stoppable foreclosures were to be reduced it would help in providing economic steadiness to the households, neighborhoods as well as to the nation. Acknowledging the efforts many service’s and lenders have already undertaken an action, Bernanke said that more needs to be done to get the housing market out of the mess it is already in. He especially appreciated the efforts the lenders have taken in widening the various loss-mitigating methods.
Talking to the meeting of the banking group he suggested that the numerous mortgage companies must decrease the amount of their loans and offer more support to the struggling home owners. He also said that reductions in the principal would help in refurbishing some amount of equity for the owners. This would, according to him, be a better way to avoid delinquencies and foreclosures. Bernanke admitted that this was going to be a very difficult idea to sell to the lenders. This is because the lenders are very unenthusiastic about writing down principals. This is because the lenders feel that if they wrote down the principals and if the house prices were to take another fall, they might yet again be pressurized to write down the principals.
An official from the banking association responded to this suggestion of the Fed head and said that they will discuss the issue amongst the bankers. He also said that the decision was going to a very difficult one. Another official was of the view that if every one was going to be given reliefs it would anger many people who had taken mortgages they could handle. If such a move was to be made it would create a lot of animosity amongst many people. Bernanke however countered these arguments saying that such long terms will have to be taken if some improvements were to be made in the nations housing sector.
The Democratic fundraising makes the GOP edgy
March 3, 2008
As the Grand Old Party watches the amount of cash the two Democratic Party nominees are sweeping in as campaign funds the Republicans are starting to feel a bit edgy. Many people in the country believe that what is happening is a look into the future. The Republican Party members, when they see Hilary Clinton and Barack Obama raking in tons of cash suddenly get the feeling that they may be outrun in the race just because of lack of funds.
The fact that the amount of money the Republican is certain for the presidential elections have been able to get is only one by seventh of what the 2 democratic nominees put together was able to get. This itself reflects the amount of cash the Democrats are receiving in the form of donations. Out of the two Democrat nominations, Barack Obama especially has been able to develop a very broad base of enthusiastic donors. The good thing for him about this is that the help that these people are willing to give is far more than just money. This is what is ringing the alarm bells in the Republican camp.
The gap that had been existing between the 2 parties since the mid term election in 2006, has been maintained by the Democrats with fervent vigor. Even the republicans have started to feel that the Democrats raise more money, have better crowd support and a lot of excitement during their campaign trail. If all these put together with the fact that the Democrats have more turnout during their campaigns, the Grand Old Party is going find it very tough during the fall when the elections will be held.
In the month of January Barack Obama raised close to $36 million and in the month of February Hilary Clinton was able to raise $35 million according to her campaign aides. It is estimated that Obama would have received at least $50 million as funds in the month of February. But the amount of money McCain was able to raise in the month of January was only $12 million. It is said and believed that he is going to get only the same kind of money in the month of February as well.
The amount of money that is flowing into the Democratic camp hints strongly towards the possibilities of a presidential candidate for the first time since the Watergate scandal forgoing public finance for the purpose of General Elections. This would result in the setting aside of almost $85 million for the months of September and October if he or she is able to raise more money.
As if the Republican Party is sensing this, McCain had been asking Obama to agree on holding the general elections using public funds. But it is learnt that the Democrats are advising Obama not to give ears to the Republican request. This is because they fear that the republicans would then use outside parties to raise any amount of cash to flatten any advantage the Democrats may have in terms of cash.
Consumer spending almost at a standstill
March 3, 2008
On the 29th of February the consumer spending in the country came to an almost standstill. The consumer spending throughout the country has been threatening to freeze up for a long time. The reason behind the declining consumer spending is said to be the completely battered consumer sentiment prevailing in the US. The consumer sentiment has been reducing frequently as a result of the sky high energy prices and the fallout in the housing sector.
The economists in the nation said that the reports about the consumer spending that came in on the 29th were clear indications that the county’s economy was moving from bad to worse. They are of the opinion that the fallout in the consumer spending is because of the looming prospects of an economic recession.
The Commerce Department of the nation however, on the 29th, announced that the spending had actually gone up by 0.4 percent in the month of January. This according to them was much better than what the analysts had been predicting. However the fact is that the gain in consumer spending that the Commerce Department announced was as a result of the gush in inflation that had happened during the course of the month. If the impact of the rising prices were neglected the consumer spending for the month of January did not really show any gain. This was the second month in a row when the amount of money spent by the consumers did not increase.
Ever since the last two months of the year 2001, when the country was down with the previous recession, this is the first time that the consumer spending has touched this low barring the 2 months in the year 2005 when the disruptions due to the Hurricane Katrina had weakened the consumer spending by a considerable amount. This is rather an alarming fact because the last time the consumer sentiment was in a negative state the country was in a recession.
A survey to measure the consumer sentiment that was conducted recently found out that consumer confidence has dived to an even lower limit in the month of February. The reading about the consumer sentiment in the nation which is displayed at Reuters/University of Michigan showed that the consumer sentiment has taken a fall to reach 70.8 in the month of February. In the last 16 years the consumer sentiment has never taken this big a fall. A survey which was conducted by the Conference Board suggested that the consumer sentiment reading that was recorded for the month of February was even lower than what it was during the war of Iraq in 2003. The consumer sentiment that was recorded for the month of January was 78.4 and the amount by which it fell in just one month is quite disturbing.
The common opinion of the analysts around the nation is that the slowing down of the spending and decline in consumer confidence is reflecting the bad time through which the economy had gone through in the last few months.
Economic growth still the same as predicted
February 29, 2008
On the 28th of February when a revised evaluation on the GDP came out, it showed that the growth rate of the US economy which was predicted in the last quarter is going to remain the same. The growth rate which was announced earlier was of almost 0.6 percent.
Gross Domestic Product is the widest measure of a country’s economic activity. The Commerce Department on Thursday said that the Gross Domestic Product after getting adjusted for inflation is going to be at an annual rate of 0.6 percent in the last quarter. The results of the announcement that came out on the 28th were in line with the estimates that were released late in the month of January. Even though the rate has managed to stay at the same position without slipping further below, this rate is still way below the finishing reading in the third quarter. The final reading in the third quarter was 4.9 percent annual rate.
The various economists of the nation who were surveyed said that they had expected the revised reading to show that the economy had grown at an annual rate of 0.8 percent in the final quarter. However there are quite a lot of positive things that can be inferred from the revised report.
Some of the positive signs are that the alterations in the non-farm catalog sheared off almost 1.4 percentage points of the total predicted growth. This was more than the prediction in the previous report where it had said that the percentage point was going to be 1.2 percent.
Many of the surveyed economists were of the opinion that the economy was stronger than what most people were thinking. True that the numbers in the various economic reports that are coming out are not all that great, but the economy is managing to stay in a fixed position without slipping further. The economist say that the numbers in the revised inventory hints that the real Gross Domestic Product growth rate was up from the previously forecasted 1.8 percent to 2 percent.
Other economists said that the boost in the inventory insolvency indicates that the business sector will pick up on its production during the first quarter to refill those inventories. This would then provide for the first quarter to show some signs of positive growth. But most of the economists who were surveyed said that the country’s economy is going to grow at a very slow pace indeed. Although most of them were of the view that USA would be able to stay clear of any recession.
Another interesting thing that was there in the report was that it showed a mixed view for inflation in the previous quarter. The Federal Reserve has cut the interest rates several times after September. While many economists are of the view that the Fed must slash the rates further to improve the current economic condition, many others are of the view that further key interest rate cuts would result in the nation going into an inflation.
Google shares recuperates slightly
February 28, 2008
On the 27th of February the Google shares were able to recover a bit after almost three days of massive selling. The company was able to do so as a result of the support of some analysts in the internet field. Some days back a report had come out saying that the ‘Pay-per-click’ advertising sector of the company is slowing down a bit. However the analysts of the field came to the rescue of the company to suggest that nothing of that sort is happening.
Throughout the year the Google shares has been on quite a slide. After starting the current year at a stock value near the $700 mark it has been falling steadily. By now it has lost almost one by third of that value. The slide was a bit too much in the last few days as it came down by almost 8 percent in the last couple of days. The main reason for this sudden drop was the report that comScore let out, which said that the growth of paid clicks that was happening in the Google supported site was declining. The growth rate is calculated by the number of times a Web user will click on an advertisement supported link.
Since most of the websites make a heavy chunk of revenue in this fashion, the news came out as a blow to the company. Just like any other Google also got a large amount of its revenue from these ‘paid clicks’. As the report came out saying that these clicks were reducing it led to worries amongst the investors that the company would be a victim of the economic slowdown if the consumers decided to put a check on their spending.
Many analysts came in defense of the internet giant as the report came out. Many of them admitted that the escalation of the company’s paid search had to slow down over a period of time. But they made it very clear that the company will not be affected by the present macroeconomic conditions that exist in the society now. Many believe that such things will in the least way affect the paid clicks of the company.
As an explanation to the report the company executives said that this was only a short term phenomenon that was happening and as a result of improved technology Google has implemented to make sure that accidental clicks by the users were kept to a minimum. This they believe would result in reduced revenues for a short period of time. This was the explanation the company used to justify the drop in the number of paid clicks as it came out with its fourth quarter earning report.
The shares of the Google based in Mountain View, California rose by $8.67 which is almost 1.9 percent to finish on the 27th at $472.86. This was the first time in three days that the shares increased. The stocks however are still at a very low level as compared to where it was one year back.
Bernanke to focus on the monetary policies
February 27, 2008
When the Federal Reserve chairman Ben Bernanke faces the House Financial Services and Senate Banking committees it is believed that he is going to focus remarking about the monetary policies. Only last week had Bernanke along with Treasury Secretary Henry Paulson testified before the lawmakers about the various actions of the Fed. Now he returns to the Capitol Hill on the 27th to appear before the committees.
It is believed that his remarks are going to revolve around the current state of the central bank’s economic policy. Ben Bernanke, it is believed, will have to face a lot of questions about the wobbly state of the U.S. economy. The position of the credit markets and the possibilities of the inflation are the other areas on which he will have to give answers. It has only been two weeks since Bernanke had to face questions from the Senate Banking committee.
In the meanwhile however the 2 policy makers said that the economic growth in the year is going to be rather slow. But they expressed their belief that the economy would stay well clear of the recession. This they believe so because of the $168 billion economic plan President Bush had signed on the 13th of February. The recent interest rate cuts that Fed brought about in the last week is another factor which strengthens this belief.
Bernanke is expected to elaborate on these believes but he is not expected to steer away from his current script of thoughts. This is because it would not be good for the image of Fed if its chairman was found to be deviating from his ideas.
Lately Fed has taken a sterner stand on issues regarding the economy of the country. Only last week did they announce that the forecasted growth rate for the current year was going to be lesser than what they had predicted earlier. They also said that the unemployment rate was going to climb more than 5 percent in the current year. The various economic data that has come out in the recent past are also suggesting that this is true.
A survey about the residential real estate on Thursday revealed that the turn-down in the home prices gather pace as the previous year came to an end. The New York based Conference Board reported that the consumer confidence fell to the lowest level in the last five years. The main reason for this fall in confidence is because of the fears that exist about the job market and the slowing business activity.
Another item that will remain as a main concern for the Federal Reserve and Bernanke will focus a lot on is the fragility of the credit markets. This is because the credit markets continue to face major liquidity issues. The commercial paper market is another area which continues to remain under a whole lot of pressure. This market is one of the important sources of short term funding.
White house to go against the foreclose bill
February 27, 2008
The White House on the 26th of February said that it is going to veto a foreclosure bill that will reach there. The bill seeks to follow the recent economic stimulus package with many other proposals to get the struggling housing market to stand up on its own. The bill also seeks to reduce the number of foreclosures that are happening in the country.
The democrats in the senate had wanted to begin the debate on the issue as soon as possible but all action on the topic has been postponed to a later date in the week as the republicans are keen on keeping the subject of Iraq in the prime position.
The housing bill with which the Democrats came up with would change the bankruptcy laws that are there in the land and would provide the judges to decrease the interest rates and cut down on the money the borrowers owe the mortgage providers. It would also provide $4 billion to communities to buy and recuperate the already foreclosed houses. It also tries to make the sub prime mortgage loans more transparent to make sure that the borrowers would not be surprised by some big payment increases.
The White House however said that the amount of $4 billion is too high for the purpose of buying foreclosed homes. It also said that if the bill was passed it would serve as a bailout for the loan providers and the lenders were doing nothing to help the homeowners who are struggling to cling on to their homes. The White House also said that both the provisions that are mentioned in the bill would actually result in delaying of the recovery of the housing market.
Some of the other features that are there in the democratic bill are the provisions taken from the Senate’s version of the stimulus bill to encourage the mortgage revenue bonds. It will also add a decent amount of flexibility to help the homeowners get a refinance done on their sub prime loans. The measures would also allow the homebuilders as well as many other money losing businesses to reclaim those taxes which were paid previously.
This bankruptcy measure which the Democrats are trying to get approved is being vociferously opposed by many lenders and mortgage providers not to mention the long list of Republicans. They say that if such a bill got approved it would hurt the borrowers as it would then mean higher interest rates and increased down payments to reduce the risk of the homeowners trying to file for bankruptcy and get a court intervention.
The Democrats as a response to this claim of the Republicans and the money lenders said that they would tighten the bankruptcy provision that is mentioned in the bill so that only those borrowers of a sub prime loan would be able to get the benefits of the provisions. They also said that in order get the benefits the borrowers of the sub prime loans they will have to prove that they are not in a position to afford their current mortgage.
Chairman of American Express gets huge pay increase
February 26, 2008
The chief executive and chairman of the American Express Co. received a very huge boost in pay for the year 2007. On the 25th of February it was announced that Kenneth l. Chenault is getting a compensation which is approximated at a value of $53.2 million in the year 2007. This amount is almost twice the amount he got in the previous year. The news was let out in a regulatory filing on the 25th of February.
The main reason for him getting this big increase is because of a very high rise in the stock and options grant the American Express gave him. Chenault who is only 56 got an enormous amount of $42.8 million as stock awards for his performance in the year 2007. Apart from this he also got a special incentive stock option grant. This is way more than what he had got in the previous year in the form of stock awards. He had got only $16.9 million in 2006 as stock awards.
American Express also increased the base salary of Chenault in the year 2007 by an incredible figure of 13 percent to bring it to $1.24 million. Last year his base salary was only $1.10 million. Apart from the huge increase in base salary the company also gave him $6.5 million as bonus. He had received the same amount in the previous year as well.
He also got compensation in the range of $1.04 million for the year 2007. This amount however covers perquisites like a home security system worth $126,992, $323,884 for the personal use of the company plane as well as $102,601 for the personal use of company owned cars. For the time being the chairman was able to pull in $1.55 million above-market returns in the form of deferred compensation in 2007.
The total amount Chenault had received in the year 2006 was almost $27.3 million as per the statistics that was let out by the Associated Press. According to the calculations Associated Press has made the total pay which includes salary, incentives, bonuses, perquisites, and the approximate value of stock options and awards granted in a year. The calculations which are made do not include the changes in current value of pension benefits.
Chenault however might not be able to realize the 2007 grant–date value of his stock award unless American Express is successful in bouncing back from the tough consumer credit surrounding. In the year 2007 the American Express shares had fallen by more than 14 percent. The fall in 2008 till date has been 13 percent. The company however was able to gain 15 percent on the 25th of February to close at a price of $45.21.
The company however is doing rather well. They announced that the net income in the year 2007 rose from $3.71 billion to $4.01 billion. The revenue in the year 2007 also went up to $24.14 billion from $22.16 billion in the previous year.
The write downs continue
February 26, 2008
On the 25th of February the Wall Street took another hit of write downs. After the analysts predicted that the struggling financial firms are going to go through another round of multi billion dollar losses the shares of Fannie Mae, Citi, and Freddie Mac went down heavily.
These write downs are coming at a time when the falling economy and crashing house prices are weighing heavily on the shoulders of the Americans. The write downs are actually reflecting the increasing loan defaults as well as the steep declines in the indexes which track the safety related to the securities.
Shares of Citi went down by 2 percent on the 25th of February after an Oppenheimer analyst cut the full year earning prediction from the previous prediction of $2.70 to almost 75 cents per share. The person also went on to say that the bank’s profits are going to be thrashed by the group’s need to decrease the values of bonds and loans in its balance-sheet. Citi however is not the only group that is facing trouble at the moment. There are many other companies as well that are taking major hits to their earnings. It is expected that Fannie is going to announce a $4.2 billion and Freddie a write-down worth $2.6 billion later this week when the organizations which are sponsored by the government report their earnings in the fourth quarter. The experts are saying that it would be better for people to get rid of Freddie Mac shares before Thursday’s expected earnings report.
The experts are also reducing the predicted earnings for quite a lot of Wall Street companies as well. These giants include Bear Stearns, Morgan Stanley, Merrill Lynch and Lehman Brothers. But the fact is that most of the investors who have been there long enough are finding the huge write downs as a part of the game. The best example for that is that in the last 2 months Citi took a write down worth $8.1 billion of its securities holdings on mortgage. UBS is another group which took write-downs of almost $13.7 billion. These write-downs are mostly mortgage related. The massive list in red ink is now no big surprise for the people as the banks and other brokerage firms now realize that they are hauling loans and securities related to mortgages which are worth billions. These loans are actually those whose worth has declined sharply along with the sudden slow down in the arrears markets.
Some people, however, are of the opinion that these write downs in most cases exaggerate the degree of troubles in financial firms. Most of the write downs that happen are as a result of need to ‘mark-to-market’. Because most of the securities never trade the managers start looking at the various market indexes to get help on the enormity of the writes down which would be appropriate.
Since most of the brokers and banks need to make use of such indexes as well as other such market information to ‘mark-to-market’ their existing loan commitments, the banks have no other option but to replicate these market turn downs.
Oil price goes up again
February 26, 2008
The oil prices on the 25th of February went up higher to reach almost $100 for a barrel. The increase in oil price led to a hike in the gas price as well. The gas price went up by almost 2 cents in the last 2 weeks. The gas price on Friday went up to such an extent to become the highest in the last seven months.
The ongoing increase in oil price has already resulted in the gasoline price going up by 2.2 cents for a gallon. The analysts of the economy are expecting gas prices to be somewhere around $3.75 and $4 by the time spring arrives. The current national average of $3.137 is the highest since the month of June 2007. The rise in gas price that is going to happen in spring is going to be a record growth. The Energy Department is predicting the gas prices to reach its highest level of $3.40 per gallon in the coming spring.
However some other experts in the field are of the view that this steep hike in price of gas is solely because of record growth of oil price which even touched $101 a barrel in the previous week. They also feel that the inventory levels at a decade high will not be able to sustain this kind of a price. They say that even though the prices are at a record high at the moment the inventories are not tight enough. They believe that the gasoline market in the country is right now facing bear market conditions.
They say that the gas inventories have been accumulating on a continual basis throughout the last 15 weeks. This is mainly because the demand is usually weak in the winter season. But the fact is that the demand this year has been weaker than the previous year which contributed to the speed at which these inventories are getting accumulated.
The price of crude oil for the month of April went up by 24 cents to $99.05 a barrel in the New York Mercantile Exchange. Earlier the price had gone as high as $99.70 per barrel as a result of supply concerns. These supply concerns were heightened by the rumors of a Turkish incursion into the northern parts of Iraq and warnings by Iran against more international sanctions.
Another factor which creates volatility in the market is that many investors have invested in crude oil. These heavy investments have been made in the belief that the price of crude oil will continue to rise. The price of crude oil went up in Europe as well. The price was up by 52 cents to become $97.53 per barrel.
In other areas of trade, the price of heating oil went up by 1.8 cents to become $2.7810 for a gallon. Natural gas on the other hand lost 3.1 cents to become $9.115 per 1,000 cubic feet. It is believed that this was just a temporary drop and that it will be up in the next 2 days.
Oil prices keep soaring
February 21, 2008
The oil price kept on increasing on the 20th of February as well to reach record high price by the end of the day. There was a time when the oil price increase was strongly influenced by the US economy and required the strong backing of the US economy. The oil price on Wednesday was again at a record high, and the prospect of a looming recession makes the scenario all the more worse for US.
Keeping in mind that the oil prices increasing to such high levels require the backing of a strong economy, and the present-day bad shape of the US economy, the easy inference is that some other economy is driving the oil prices for now and it is not the economy of USA. Some private economists are of the opinion that this economy, which is on the driving seat at present, is on the other side of the world.
The closing rate of oil on the previous day was $100 per barrel and steep climb that happened in the space of just one day has created turmoil in the stock exchange. The ongoing fight between the Venezuelan government and Exxon Mobil, tensions of the Fed cutting down on the interest rates yet again, and some talks of the OPEC cutting down on production, have all contributed to the dollar going down by the day against most currencies in the world. This ultimately leads to the United States losing control over the price of crude oil. This, however, was not a satisfying explanation for many experts in the field. They believe that the reason why the US economy is doing bad at the moment is because the Fed is trying too hard to keep the inflation under control. This ultimately leads to instability in the stock market and hence creates turbulences in the economy.
The growth rate that has been predicted for the USA in the year 2008 is only around 1.5 percent. The case in Europe is also not all that good. On the other hand, the developing economies like India and China are predicting a growth rate of almost 8 percent in the year. These developing nations are consuming more fuel by the day in their quest to attain excellence. The statistics show that the world is going to use at least 1.4 million barrels a day, more than it did in the year 2007. Out of this, almost 1 million barrels of oil are used by the developing countries. The reason why the demand for oil is so high is because of the subsidies that are there present in most of these countries.
The fact is that these economies around the world, with the exception of USA, and Europe to some extent, are doing very well at the moment. This, along with the fore mentioned subsidies are the main cause for the steep rise in oil price. If this situation is going to continue, the oil price is going to break all records as per the statistical data that is available.
Stock on a rally
February 21, 2008
On Wednesday, the 20th of February, the stocks went on a rally, as the investors welcomed the Fed’s forecast report of the nation’s economy, which said that the country can avoid the recession. In the report, it is mentioned that the country’s economy will be able to keep the recession at bay. It also says that this is despite the ever rising unemployment, continuous slowing down of the economy, and many more other pricing pressures. The investors also seemed to be least worried about the price of oil, which created records yesterday. The oil price was at $110 a barrel.
As a result of the rally, Dow Jones industrial average gained 0.7 percent and the Broad and the wider Standard & Poor’ 500 index was able to gain 0.8 percent. The tech heavy NASDAQ was also able to go up by 0.9 percent. The gains helped the investors heave a sigh of relief after long days of losses.
The stocks had initially lost in the morning sessions. This was as a result of increasing consumer prices heavily indicating an inflation. Another reason for the early losses were the worries and speculations that were existing about the Federal Reserve’s ability to go on slashing the interest rates, and that too in the midst of increasing oil prices. But, just as soon as the report came out in the afternoon, it seemed as if all worries had been set aside by the investors. The investors were willing to rake up certain stocks which were the worst affected in the recent sell offs. These shares include both retail as well as financial shares. The tech shares also went up as Hewlett Packard, the computer giant, reported their earnings for the first fiscal quarter, which was far more exceeding than all expectations.
The report that was let out by the central bank showed that the economy of the country had weakened considerably over the recent past. It also said that the pricing pressures and conditions in the labor market were worsening by the day. Along with the forecast report, the Fed’s latest economic outlook for the period of 2008 to 2010 was also published on Wednesday. In this forecast, the central bank believes that the slowdown was going to be worse than what they had predicted in the earlier report that was published in last October. However, the Fed expects the Gross Domestic Product and economic growth to attain more pace, as the present year comes to an end and the next year starts. This, they say, would happen as a result of all the interest rate cut plans and the stimulus plan that have been approved lately.
Thursday, however, is going to bring out more economic data on the jobless claims, weekly oil inventories and other leading economic indicators. The effect of this data is also going to create some amount of impact on the stocks tomorrow. The investors’ response and reaction to this new collection of data has to be awaited and seen.
HP announces robust profits
February 20, 2008
On February nineteenth, the world’s largest personal computer maker Hewlett-Packard announced robust profits in its first fiscal quarter. This latest report from the company led to the stock prices soaring sky high in the after-hours after trading. The profit they which they announced in the sales and earnings were much higher than the estimates and all the predicted gains. This again proves that the company is gaining a lot of market share when compared to many of its credible rivals and that its move to cut cost is paying off.
Hewlett-Packard also published its expected revenue and gain guidance for the second quarter as well as the complete fiscal year. After the announcement was made the shares of the company (HPQ, Fortune 500) went as high as 6 percent in the after hours trading session.
When the first quarter of the company came to an end in the month of January, the net returns leaped 13 percent to reach $28.5 billlion which was more than what the forecast had been. The expected revenue in the first quarter according to the valuation of Thomson One Analytics was only $27.6 billion. The PC giant was able to earn $2.1billion more, which is 80 cents per share, than the previous year. The growth that happened in this period was of the magnitude of 38 percent. HP also reported profits of 86 cents per share if various one-time items were excluded. This was also well ahead of the expected 81 cents per share.
On nineteenth HP also issued the expected sales for the second quarter. They said that it was going to be in the range of $27.7 billion to $27.9 billion. This again was higher than the predicted estimate of $27.4 billion. And as for the full year also HP said that company’s expected revenue is going to be more than the predicted returns of $111.7 billion. Company officials said that they are expecting a full year return of $113.5 billion to $114 billion.
According to the company almost 70 percent of its first quarter revenue came from places outside the United States of America. They said that revenue that came from newly emerged markets like Russia, India, China and Brazil had grown by 35 percent from last year. The large amount of international exposure the company got was a huge bonus for the company considering the present economic scenario in USA now. The company believes that being able to reach the global position it is in now was a huge advantage.
The branch in the company which saw maximum gains was the Personal Systems Group. This branch which deals with notebooks and desktops for both commercial as well personal uses saw an increase in sales of 24 percent. The HP’s service division also saw in increase in sales of 11 percent from last year. The latest report will help the company in getting a lead in the PC market. The profits the company made will be more than enough to make sure that the company remains immune to any troubles that might happen as a result of the economic turbulences.
Crude prices at record $100.01
February 20, 2008
On the nineteenth of February the crude oil prices reached a record $100.01 barrel and the price of gold and other commodities as well went higher. This resulted in the stocks sliding down which erased the small gains it had achieved in the session. The increase in oil and gold prices is raising many worries about what the impact of inflation would be on the already troubled US economy.
Another factor which prompted the stocks to slide towards the end of the day was the weakness of the telecom stocks and the problems the banking sector is going through currently.
INDU (the Dow Jones industrial average) and the SPX (Standard & Poor’s 500) index finished the session with small declines while COMP (the NSADAQ composite) lost 0.7 percent in the end of the day. As the trading came to an end the computer maker HP announced its fiscal first quarter sales which was higher than the forecasts.
The day’s trading had started well and was doing well till mid day when the prices of crude oil went up. The 3 main indexes in the country had posted significant gains but this got erased by afternoon as the increase in crude price gained momentum. The fact that the increase in prices happened during a period when there are widespread worries of OPEC cutting down on its oil production made the situation even worse.
Even while the increase in oil prices will help in boosting the value of energy stocks the very high price is definitely going to weigh deep down in the minds of investors. The fact that the price of gold also increased on the 19th also will make the investors hesitant in making their moves. The gold prices increased by almost $24 per ounce on the nineteenth. The increase in gold and other commodities is considered as a clear cut indication of inflation starting off.
As a result of the slide of stocks the treasury prices took a dip. The slump in treasury prices led to raising the yield on the benchmark ten year note to 3.89 percent from 3.78 percent on Friday. The US dollar dropped against the other currencies of the world.
The banking sector in the country continues to be trouble. The Lehman Brothers dropped by 2.5 percent on 19th after it was reported that they could face a write-off because of its contact to various bad mortgage bets. The Credit Suisse Group (CS) also went down by 5.2 percent after they said that they would have to slice its profit by $1 billion in the first quarter after the traders priced the value of its holdings in asset backed securities at a very high level of almost $3 billion. The European bank later reported that these traders have been suspended.
20th is going to be very important for the investors as many reports regarding the consumer prices, housing starts and building permits will be coming out on the day. The Minutes from the Federal Policy meeting will also be published by the evening of 20th.
Lukewarm growth predicted for US economy
February 20, 2008
On 20th February, the US Federal Reserve is predicted to release its latest economic forecast for the year 2008. It is expected that the report will predict a lukewarm growth of the US economy throughout the year. However the chances of finding a recession mentioned it is going to be very remote. The FED believe that the economy will stay out of a recession courtesy the huge rate cuts the Fed have implemented and the stimulus plan that has been approved by the President.
The fore cast that is being released is along with the minutes of the Fed’s policy meeting held in January. The new measure has been taken by the chairman of the Federal Reserve to make sure that economic updates are available in a more frequent basis. He also said that the forecast that is going to be released will be lower than the forecast that released late last year.
Bernanke, the chairman of the Federal Reserve, said that the $168 billion economic stimulus plan which has been passed recently would help in improving the growth of the economy towards the later half of the year. He said that currently the future lying near ahead looked sluggish. However he believes that the period after that is going to showcase a swifter growth rate when the monitory and other fiscal plans that have been passed come into effect. He also said that the forecast the Fed is going to come out with this week is definitely going to be somewhat consistent with what the private forecasters are predicting.
The opinion of many, however, is not the same as that of Bernanke. They feel that the forecast which comes out will not be accurate. They are of this view because even though many private analysts are predicting the recession the chances of the Fed forecasting a recession are very remote. They will also be hesitant in forecasting a negative gross domestic product even if they were willing to make downward revisions. Another thing they are concerned about is that the Fed forecast they had made in the previous year had failed to take into account the impacts of the stimulus plan. They therefore believe that this time also the Fed might overlook certain facts.
However the Fed officials are confident that the forecast with which they come will be almost accurate and without any major hitches. They believe that the stimulus plan which has been approved by the President last week would be enough to bring the US economy out of serious trouble. Once the plan starts talking effect the turbulences that exists in many sectors of the economy could be brought under control. They also say that the expected shape of the GDP in the next two years will be in the shape of a ‘W’. Both years would start off with fears of a recession, but later it is expected to get better.