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- Jobs Report Shows Weakening Economy
Yesterday's jobs report told a tale of weakness. The U.S. economy lost over 60,000 jobs in the short month of February and over 20,000 jobs in January. An AP article says the pink slips have increased and some economists hear the recession bell ringing.The grim snapshot of the country's employment climate underscored the heavy toll the housing and credit debacles are taking on companies, jobseekers and the economy as a whole.
President Bush was quick to reassure everyone that the economy is not in a recession. Bush said, "I know this is a difficult time for our economy, but we recognized the problem early and provided the economy with a booster shot. We will begin to see the impact over the coming months."
"It sounds like the recession bell is ringing for the U.S. economy, although it is still faint," said Stuart Hoffman, chief economist at PNC Financial Services Group.
On Wall Street, stocks tumbled. The Dow Jones lost 146.70 points, a little more than 1 percent to close at 11,893.69. The Dow was down 370 for the last two days of the week.
The worsening situation will prompt the Federal Reserve to cut a key interest rate deeply -- perhaps by as much as three-quarters of a percentage point -- at its next meeting March 18, or possibly sooner, to help brace the teetering economy, analysts predicted.
The shower of pink slips was widespread. Factories, construction companies, mortgage brokers, real-estate firms, retailers, temporary-help firms, child day-care providers, hotels, educational services, accounting firms and computer designers were among those shedding jobs. All those cuts swamped job gains at hospitals and other health care sites, bars and restaurants, legal services and the government.
Less and less people are expecting the quick recovery that President Bush is. With the DOW falling under the 12,000 mark Friday next week could be a difficult one.
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Sat, 8 Mar 2008 20:00:00 EST - Dow Falls For Fourth Straight Day
The DOW fell for the fourth straight day. It was down over 40 points. However, the NASDAQ managed to eek out a gain thanks to comments made by Cisco CEO John Chambers. With articles like this one mentioning the threat of stagflation it isn't surprising to see stocks falling.
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Tue, 4 Mar 2008 18:00:00 EST - Bernanke Says Some Small Banks May Fail
Federal Reserve Chairman Ben Bernanke said in testimony in front of U.S. Congress today that there could be some bank failures because of the ongoing credit crisis. The AP reports that Bernanke did says that the "large U.S. banks will likely recover" but it is disturbing to hear he expects some small bank failures.Bernanke, testifying before Congress, said that while the large U.S. banks will likely recover from the recent credit crisis, others could fail.
On the positive side Bernanke doesn't anticipate a return to the stagflation periods of the 1970s - although with gas forecast to exceed $4 a gallon not everyone is convinced. Marketwatch reports that stocks are lower today following Bernanke's words and news that last year's GDP growth was just 0.6%
"Implying that some banks may fail stirs concerns for any investor who's familiar with financial and economic history," said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors. "Investors have been very edgy about credit market conditions and banks' financial conditions. Very edgy. And this doesn't remove that edginess."
Earlier, stocks had fallen in response to a Labor Department report that first-time unemployment claims rose last week by 19,000 to 373,000, the highest level since late January.
Scott Wren, equity strategist for A.G. Edwards & Sons, said he still believes there's less than a 50 percent chance of a recession, but that it's clear employers are cautious about hiring.
"To consistently see claims up near 400,000, that's pretty telling often-times of a recession," he said.
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Thu, 28 Feb 2008 14:25:00 EST - Greenspan Sees Recession Risk
The BBC reports that former Fed chairman Alan Greenspan - who blasted Bush in his book - has warned "that US economic growth has stalled and a quick recovery is not likely."
"As of right now US economic growth is at zero," he said, adding the longer it stayed this way the greater the risk of a deep recession.
If the gloomy outlook isn't enough Greenspan also thinks oil will keep rising and that the housing mark will provide more concern before it gets better.
Wall Street giants Goldman Sachs and Merrill Lynch have both forecast that the US economy will contract in 2008.
The US Federal Reserve has said 2008 growth will be between 1.3% and 2%.
The forecast, made last week, was half a percent lower than the Fed's previous estimation.
The gloomy outlook was blamed on falling house prices, reduced bank lending, turmoil in the financial markets and higher oil prices.Mr Greenspan also predicted that booming oil prices, which reached a record of more than $101 last week would keep rising and that the US housing market would see more misery before the tide turned.
Greenspan isn't alone. Just yesterday there were reports that more analysts have jumped on the recession is likely bandwagon. If we do dip into an actual recession how long will we stay there? That's the next question that needs answering.
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Mon, 25 Feb 2008 21:00:00 EST - High Gold Prices Make Oscar Statues More Expensive
The price of gold has been rising over the past several years. Bloomberg reports that the price of gold is also making those Oscar statues more expensive. They cost $500 this year compared to $400 last year according to Blooomberg.
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Sun, 24 Feb 2008 14:00:00 EST - Oil Closes at $100+ and Stock Rally Fizzles
Just as stocks seemed to be gaining some momentum oil closes at above $100 a barrel for the first time and the rally fizzles. The Dow ended up down over 10 points and the Nasdaq fell by over 15 points. There is concern that the high oil prices will translate into high gas prices during the summer driving months that will reduce consumer spending even more than the weak economy already has. In the video Reuters says OPEC mentioned a supply cut which helped to drive up oil prices.
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Tue, 19 Feb 2008 18:00:00 EST - Many U.S. Citizens Think Recession is Already Here
The dreaded R word is now being used commonly in news stories and polls. A new AP-Ipsos poll has found that 61% of U.S. citizens believe the country is already in a recession. 59% are worried about their stocks and retirement investments. Technically the economy needs to shrink for two consecutive quarters or six straight months (see recession definition) for it to count as a recession but for the people suffering in a struggling economy the technical definition doesn't really matter. Another poll found that most people think a Democrat and not a Republican would best be able to get the nation out of a recession - that might be a sign of the way the election is going to go in November. Even author Stephen King is weighing in. He's slamming the economic pundits who think a recession would help "purge the system."
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Mon, 11 Feb 2008 18:20:00 EST - Super Tuesday is Terrible Tuesday for Stock Market
The American public is busy trying to figure out what all these polls mean about who is going to be their party's candidate. Meanwhile, Super Tuesday has turned out to be Terrible Tuesday for the stock market. Today's news that service sector shrank sent stocks in the wrong direction.
The volatility that pummeled stocks in January returned with the news that the service sector shrank last month for the first time since March 2003. The report from the Institute for Supply Management wiped out the nascent optimism about the economy that had sent stocks surging higher last week.
Marketwatch's entry says the data today is pointing toward a recession.
"The report drives a nail into the coffin from investors' minds that we're in a recession," said Todd Salamone, director of trading at Schaeffer's Investment Research. "That doesn't mean stock prices in the months ahead will be lower. But when you see headline numbers like this, there tends to be a reactionary sell."
The ISM said its index of service sector activity, which accounts for about two-thirds of the economy, dropped below 50, a level that indicates contraction. Economists had expected another month of growth.
It's possible the service sector, which includes businesses ranging from restaurants to retailers to banks, could bounce back in February as the manufacturing sector did in January after its December contraction. The benefit of the Federal Reserve's two big interest rate cuts in the latter part of January could also help spur the service sector back into growth mode later this year.
Today's awful numbers: - Dow down 370.03 (2.93%) - biggest one-day point drop for Dow since it dropped 387 points on Aug. 9, 2007.
- Nasdaq lost 73.28 (3.08%)
- Standard and Poor's 500 lost 44.18 (3.20%)
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Tue, 5 Feb 2008 16:43:00 EST - Microsoft Makes $44.6 Billion Offer to Buy Yahoo
Microsoft has made a surprise $44.6 billion offer to buy Yahoo at $31 per share share.
Yahoo issued a statement saying they would consider the offer. Yahoo said that its board "will evaluate this proposal carefully and promptly, in the context of Yahoo's strategic plans, and pursue the best course of action to maximize long-term value for shareholders."
Microsoft CEO Steve Ballmer said they could help Yahoo compete: "We have great respect for Yahoo, and together, we can offer an increasingly exciting set of solutions for consumers, publishers, and advertisers while becoming better positioned to compete in the online-services market,"
Yahoo recently laid off over 1,000 employees. They are a great company with numerous online products including several recently purchased social media sites like Blo.gs and del.icio.us. They also have a significant media side with original content and acquisitions like Rivals.com. It will be interesting to see whether Microsoft can convince Yahoo shareolders that this is the best option for them or whether Yahoo shareholders believe the company can do better by staying independent.
Yahoo's shares (YHOO) are up over 44% on news of the deal reports Marketwatch.
Google shares are down significantly on the news because of concerns that a Microsoft-Yahoo merger could threaten Google's search and online advertising dominance.Microsoft views Yahoo as its best chance to thwart Google, which has leveraged its leadership in Internet search and advertising to emerge as an increasingly serious threat to the world's largest software maker's persuasive influence on how people interact with computers.
Google shares (GOOG) are down 9% on the news in early trading today.
Google already controls nearly 60 percent of the U.S. search market, and has been widening its lead, despite concerted efforts by both second-place Yahoo and third-place Microsoft. By combining, Microsoft and Yahoo would have a 33 percent share of the U.S. search market, according to the latest data from comScore Media Metrix.
By joining forces, Microsoft and Yahoo also would widen their narrowing advantage over Google in providing free e-mail accounts -- a service that helps foster more loyalty with users and create more advertising opportunities.
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Fri, 1 Feb 2008 21:00:00 EST - Economy Growing Very Slowly
The GDP grew 2.2% in 2007 and slow 0.6% in the fourth quarter of 2007. Raw Story says economists were expecting 1.2% growth in Q4.For all of 2007, the economy grew by just 2.2 percent, the weakest performance in five years, when the country was struggling to recover from the 2001 recession. The housing collapse dealt the economy its biggest blow last year. Builders slashed spending on housing projects by 16.9 percent on an annualized basis, the most in 25 years.
IDEAglobal's chief U.S. economist calls it "stall speed" according to MarketWatch.com.
"The economy has been subject to something of the perfect storm here. It has been hit by the housing slump the credit squeeze, the subprime slime and stock price declines on Wall Street," said economist Ken Mayland, president of ClearView Economics. "The economy is weathering some pretty stormy seas but it is weak."
The fourth-quarter's performance was much weaker -- half the pace -- than economists were expecting. They were forecasting growth to clock in a 1.2 percent pace.
The 0.6 percent annualized increase in gross domestic product (GDP) marked a big loss of momentum from the third quarter's brisk, 4.9 percent showing. The fourth-quarter pace was the slowest since the first quarter of last year."The GDP hit stall speed," wrote Joseph Brusuelas, chief U.S. economist at IDEAglobal.
The 1st quarter 2008 GDP is going to be interested. Will the economy tread along, pick up speed or start to step into a recession?
GDP hadn't been any slower since the end of 2002, when the economy was struggling to recover from the recession a year earlier.
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Wed, 30 Jan 2008 20:15:00 EST - The Credit Crisis: How We Got Here
Sometimes it is worth tacking a look at how we got into this mess in the first place. Reuters has a great recap in the video below. It began with a US housing problem that has quickly mushroomed into a crisis. In this video, Reuters explains how banks begin to tighten credit when a high percentage of subprime mortgages started to become overdue. The loan problem escalated and subprime lender New Century filed bankruptcy. These losses spread to larger banks that have had to write off billions of dollars of debt. Today, the credit problems have not gone away. Home prices are still dropping and inflation is a serious problem. The weakening economy is starting to impact growth and job creation. There are worldwide concerns that the U.S. will fall into a recession and this recessio nwill drag the global economy down with it.
Direct video link
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Mon, 28 Jan 2008 21:15:00 EST - Apple Takes a Drubbing
Apple (AAPL) has been taking a beating on Wall Street today. The stock is down over 10%. The reason isn't the company's holiday performance but the possibility of a weaker future. Forbes is asking if one bad Apple could spoil the bunch - meaning could Apple weakness spill over into other tech stocks. It's hard to see gadgets having as good a year this year as they did last year if we are heading into a recession.
To some extent, it's a case of one bad Apple (AAPL) spoiling the bunch. Steve Jobs & Co. is seen as the most innovative, growth-producing group in tech. And if the U.S. consumer's economic troubles are starting to rattle mighty Apple, high fliers like Research In Motion (RIMM) and Google (GOOG) might not be immune, either.
Apple did have a great holiday quarter but what will happen to Apple in the first three quarters of this year with consumers fighting off a recession and rising prices? That's the question investors are asking about Apple and many other gadget manufacturers. There are also concerns that if people already have any iPod will they might not be as excited about owning the latest and greatest iPod - especially if things get tight.
Indeed, Apple's holiday performance showed signs that the company's not unstoppable in 2008. In particular, Apple's cautious outlook, weakness in U.S. iPod growth and the unpredictability of iPhone sales left Wall Street's pessimists plenty of reason to doubt. And in this jittery market, those pessimists have a lot of power.
First, a recap of Apple's good news - and there was plenty of it. Apple turned in revenue of $9.6 billion and profit of $1.6 billion for the holiday quarter, blowing past the average analyst estimate. The company shipped a record 2.3 million Intel (INTC)-based Macs during the period, and actually sold as many iPhones as computers. In the process Apple generated $2.7 billion in cash, bringing its war chest to $18.4 billion.
But there was troubling news, too. On the conference call with analysts, Chief Financial Officer Peter Oppenheimer admitted that iPod sales merely met the company's expectations, rather than exceeding them. Part of the reason, he said, was that U.S. iPod sales weakened in December - it took overseas sales to make up the difference. "In the U.S., in the gift-buying season, we saw a slightly different curve," he said. "That was made up for in our very, very good growth internationally."
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Wed, 23 Jan 2008 15:43:00 EST - Miserable Opening Bell?
The New York Times reports that the stock market plunge in Asia and Europe continued into Tuesday. Stocks are falling due to concerns that the U.S. economy is headed for a recession. MarketWatch has a roundup of the two day losses.
- Shanghai (two days): -12%
- Japan's Nikkei 225 (two days): - 10.2%
- Hang Seng (two days): -13.7%
- U.K. FTSE 100 (two days): -8.6%
- German DAX 30 (two days): -12.4%
This sell off could extend to U.S. stocks today.Amid fears that the United States may be in a recession, the decline in stock markets accelerated this morning as exchanges opened across Asia.
Marketwatch also says that the DJIA futures are currently down 650 points which could result in a miserable and nervous day of stock trading today.
Markets in Tokyo, Hong Kong, Sydney all fell farther in the opening hours of trading today than they had all day Monday. Until now, overseas markets had largely avoided the sell-off that has caused steep declines recently in the United States, whose markets were closed Monday in observance of Martin Luther King's Birthday. But investors reacted with what many analysts described as panic to the multiplying signs of weakness in the U.S. economy.
And in a sign that the United States could join the sell-off today, trading in U.S. stock futures Monday suggested that the Dow Jones industrial average would fall more than 500 points at the opening bell.
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Tue, 22 Jan 2008 04:55:00 EST - Global Markets FallThe BBC is reporting some serious drops in foreign markets -- the biggest drops since stock markets plummeted after 9/11. The FTSE 100 was off 5.5%. Paris and Frankfurt are down 7%.
Global stock indexes, including the UK FTSE 100, have fallen their most since the terrorist attacks of September 11 2001 amid fears of a recession.
The U.S. markets are closed today to celebrate Martin Luther King Jr.'s birthday. Marketwatch reports that stock future indicate the DOW will open 500 points down on Tuesday morning.
The FTSE 100 index tumbled 5.5% to 5,578.2, wiping ?84bn ($163bn) off the value of its listed shares.
Indexes in Paris and Frankfurt slumped by about 7%, while markets in Asia, India and South America also dropped.
Investors questioned whether a recent plan to boost the US economy would be enough to avert a full-blown recession.
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Mon, 21 Jan 2008 17:01:00 EST - Worst Day of 2008 For StocksStocks plunge again as concerns about the economy continue. Marketwatch reports that the DOW is now at a 10-month low. Today was also the worst day of the year for the stock market. It has been a short year and it hasn't been a good year at all so far.
When reminded about how bad things are, the market remembers it should go down," said Art Hogan, chief market strategist at Jefferies & Co.
Here's a look at the numbers.
"And, it is going to take more than just monetary policy to clean up the mess we've made with this economy," Hogan said.
"The Philadelphia Fed Survey was a disaster, defying even the most pessimistic projections," said Frederic Ruffy, an analyst at Optionetics.
- DOW - lost 300 points - 2.5%. Hits 10-month low.
- NASDAQ - lost 47.69 points - 2%
- S&P 500 - lost 39.94 points - 2.9%.
The tumble began when the Philadelphia Fed reported dismal figures.Shortly before the Fed chairman spoke, the Philadelphia Fed said its measure of manufacturing activity feel sharply to a negative 20.9 from a revised reading of negative 1.6 in December. The report underscored the seriousness of the economic concerns that have in recent weeks drawn the focus of both Wall Street and Washington.
Bloomberg says Merrill Lynch's huge 4th quarter loss also played a role in the bad day on Wall Street.
"The Philadelphia Fed just announced dreadful numbers," said John O'Donoghue, co-head of equities at Cowen & Co. He said if you look back at Philadelphia Fed data for similar numbers, it takes you back to the 2001 to 2002 recession.
"It's not rocket science - the economy is slowing dramatically, and it's being reflected in economic reports."
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Thu, 17 Jan 2008 15:00:00 EST
