US stocks gain on unemployment report - Yahoo Finance US stocks gain on unemployment report - Yahoo Finance

Friday, May 25, 2012

US stocks gain on unemployment report - Yahoo Finance

US stocks gain on unemployment report - Yahoo Finance

Stocks rose modestly on Wall Street Thursday, breaking a six-day losing streak for the Dow Jones industrial average, after the government said weekly jobless claims edged down.

The lower jobless number suggests that employers may accelerate hiring this month.

In late morning trading, the Dow rose 27 points to 12,862. The Standard & Poor's 500 index gained four points to 1,358. The Dow had been up 96 points earlier.

The tech-heavy Nasdaq composite index fell six points to 2,928. Cisco Systems, one of the 30 stocks in the Dow average, plunged 9 percent after the networking giant warned investors that technology spending appeared to be slowing down and that its revenue would rise much less than analysts had been expecting this quarter. Hardware maker Oracle fell 2 percent.

Before Thursday, the Dow had fallen for six days in a row, its longest losing streak since August. Investors were encouraged by the Labor Department's report that applications for unemployment benefits dropped 1,000 to 367,000 in the week ending May 5. The four-week average, which economists watch more closely, fell 5,250 to 379,000. When that figure remains consistently below 375,000, it suggests that job growth is strong enough to lower the unemployment rate.

The numbers could dispel nascent fears that that strongest yearly start for hiring since the recession ended 2009 was sputtering.

Stocks also benefited from news that Spain would take over Bankia SA, the country's fourth-largest bank, which has high exposure to bad property loans. The government is hoping to convince investors that Spain won't need a bailout.

"Europe's problems are by no means being solved. But the feeling that there is some support there probably helps sentiment a little bit," said Ed Hyland, a global investment specialist with J.P. Morgan Private Bank.

The news helped U.S. financial stocks, which would be vulnerable to an increase in financial stress in Europe. Citigroup rose 1.6 percent and JPMorgan Chase rose 1 percent.

European stocks rose. Spain's IBEXC 35 index jumped 3.1 percent on the Bankia news and a drop in Spain's borrowing costs. Britain's FTSE 100 rose 0.2 percent, Germany's DAX rose 0.6 percent.

Other U.S. stocks on the move included:

— Pfizer rose 1.6 percent after the drugmaker got preliminary approval for an arthritis drug.

— Avon fell 2.1 percent after beauty products maker Coty Inc. raised its offer to buy Avon but also said it will withdraw the latest bid if it doesn't get a response by the close of business Monday.

— Kohl's fell 3 percent after price-cutting led to a 23 percent drop in its first-quarter profit.

Oil prices rose 21 cents to $97.45 per barrel.

Financial Companies Need A New Model - Yahoo Finance

While the dust is still settling from the bursting of the housing bubble and the resulting credit crunch, it's not hard to make a few general statements about the circumstances that fueled much of the excess. Though the U.S. government has chosen to do little to change how financial companies are structured and managed, this seems like one of the core contributing features of the most recent crisis. It may be time, then, to consider whether the U.S. financial system would benefit from a new model for its financial companies.

SEE: Getting To Know Business Models

Underlying Premises
There were many contributing circumstances to the emergence, growth and collapse of the housing bubble. Like most disasters, the problem wasn't so much a single factor as a combination of multiple reinforcing factors that ultimately led to trouble. That said, the structure of many financial companies appeared to have played a major role.

A large percentage of the major players in the credit system - banks, investment banks and insurance companies - were all structured as public corporations. While this structure theoretically gives every shareholder a voice in how the company is run, in practice it almost never worked that way. Instead, boards of directors and senior managers acted as they saw fit, particularly when it came to the compensation and risk management philosophies of the company.

Across the spectrum of companies, there was widespread excessive risk-taking, with virtually no accountability or personal risk involved. While an individual trader, banker or portfolio manager could be fired for a series of bad trades, and executives could be fired for hiring too many ineffective employees, the shared risk stretched no further than that job. At the same time, managers were rewarding successful employees with huge cash payouts and little apparent concern for the risk they took to produce the results.

When it all fell apart, numerous financial corporations received millions of dollars from the government to stay afloat, but bonuses already paid out were left untouched. Consequently, the system essentially evolved into a "heads, I win; tails, you lose" scenario, where executives had everything to gain by taking on outsized risks (large salaries and cash bonuses) and very little to lose if it all went wrong.

Are There Alternatives?
Financial companies weren't always structured this way. For much of the business history of the U.S., banks were privately owned, investment banks (and merchant banks before them) were structured as partnerships, and many insurance companies were mutual organizations.

While these are all different structures, they share a few common features as they pertain to financial companies. For starters, they tend to attract and retain less capital, so managers tended to focus on a relatively smaller number of businesses where they had real expertise and understanding. Likewise, with capital in short supply (and expensive), managers were much more conservative about how that capital was allocated.

These structures all often gave senior executives huge personal financial stakes in the fate of the enterprise they managed. While not all partnerships were structured in a way that made partners individually financially liable for the company, many were. All in all, then, these structures often meant that managers had a deep personal connection to their businesses; failure of the business was often tantamount to personal financial bankruptcy or at least significant loss of wealth.

SEE: Identifying And Managing Business Risks

Definite Downsides
These are not perfect organizational structures, and certainly do feel out of place in a financial sector that is far larger, more dynamic and more global than ever before.

For starters, a higher cost of capital means that fewer worthwhile projects will be funded or pursued, and this is less efficient for the economy as a whole. After all, there has to be a happy medium somewhere between enterprising businesspersons or young couples being unable to get loans on any reasonable terms and widespread NINJA loans (no income, no job/assets).

These structures are also inherently exclusionary and inefficient. Banks, investment banks and insurance companies are legitimate enterprises that many people want to invest in, and avoiding public shareholding altogether again removes options from the market and reduces investment and capital efficiency. What's more, small, siloed businesses are less efficient and that inefficiency filters through to the economy as more expensive capital and slower-than-necessary growth.

Time for a Hybrid?
Hybrids are still all the rage today in cars, and maybe governments need to consider hybrid models for financial companies. Perhaps it would be possible to structure them as modified limited partnerships where regular investors can participate as shareholders, but managers hold a different sort of stake that entitles them to a different share of profits at the cost of more responsibility and personal liability.

In such a model, then, senior managers would essentially be forced to own this different class of shares as a prerequisite of the position. With more of their own assets on the line, perhaps they would be less eager to pursue risk blindly.

Then again, it may be that such advanced measures are excessive. Perhaps there's a simpler way that fits within the existing structures. What if senior executives were required to hold a certain percentage of their personal financial assets in company shares and could only receive a limited amount of cash compensation in a given year (with the rest in the form of restricted or preferred shares). Such a model would, at a minimum, delay some of the gratification of excessive risk-taking and would enable boards of directors to claw back compensation or otherwise punish those whose decisions ultimately did serious harm to the corporation and its shareholders.

SEE: $1 CEOs And What They Make Now

The Bottom Line
There is no perfect corporate structure, and probably no failsafe method of restraining greed or self-interest. That said, reducing the short-term cash benefits of risky behavior and putting more of a decision-maker's net worth on the line, might serve as a reasonable brake on destructive impulses.

More From Investopedia

World stocks mixed amid bargain-hunting vs caution - Yahoo Finance

BANGKOK (AP) -- Asian stocks eked out gains Thursday as traders hunted for bargains after sharp selling in recent days, but markets in Europe fell amid intensifying fears of a messy exit by Greece from the euro common currency.

Greece called a new round of elections for June 17 after coalition talks to form a government fell apart. The president said depositors were pulling hundreds of millions of euros out of banks, weakening the country's strained financial system.

The developments fueled fears that Greece would exit the euro currency and shake global markets. In elections earlier this month, Greek voters punished parties that supported tough austerity measures needed to secure international bailout money.

But analysts at Credit Agricole CIB in Hong Kong said the scheduling of new Greek elections suggested "a reduction in near-term uncertainties" that could lead to some relief for volatile markets.

Britain's FTSE 100 fell 0.4 percent to 5,380.72 in early trading. Germany's DAX fell 0.2 percent to 6,373.01 and France's CAC-40 lost 0.2 percent to 3,042.45.

U.S. stocks were set for a moderately higher opening, with Dow Jones industrial futures up 0.3 percent at 12,610. S&P 500 futures rose 0.4 percent to 1,327.

In Asia, stock markets enjoyed a slight rebound as investors went bargain-hunting, analysts said.

Japan's Nikkei 225 climbed 0.9 percent to close at 8,876.59 after the country posted better-than-expected growth figures for the first quarter. South Korea's Kospi added 0.3 percent to 1,845.24. Benchmarks in Taiwan, New Zealand and the Philippines also rose.

Australia's S&P/ASX 200 slipped 0.2 percent to 4,157.40, dragged down by financial stocks. Hong Kong's Hang Seng closed 0.3 percent down at 19,200.93.

Mainland Chinese shares bounced back from early losses, buoyed by calls from the country's central bank governor, Zhou Xiaochuan, for market reforms.

The benchmark Shanghai Composite Index rose 1.4 percent to 2,378.89. The Shenzhen Composite Index also gained 1.4 percent to 954.95. Shares in brokerages, financial and trading-related companies led the gains.

Positive news on the U.S. economy on Wednesday underpinned sentiment in Asia. Construction of homes in April rose 2.6 percent from March, and U.S. factory production increased 0.6 percent in April, helped by a gain in auto production.

Some Japanese stocks saw big gains amid news that the country's economy grew at an annualized 4.1 percent for the January-March quarter thanks to a rebound in consumer spending.

Sharp Corp. jumped 5.7 percent and Mazda Motor Corp. added 3.8 percent. Steel company JFE Holdings shot up 5.5 percent.

Benchmark oil for June delivery was up 52 cents to $93.33 per barrel in electronic trading on the New York Mercantile Exchange. On Wednesday, the contract fell by $1.17 to finish at a seven-month low of $92.81 per barrel in New York.

In currencies, the euro fell to $1.2715 from $1.2725 late Wednesday in New York. The dollar rose to 80.35 yen from 80.29 yen.


AP researcher Fu Ting contributed from Shanghai.

Accusations that climate science is controlled by money are mistaken -

Ars Technica

One of the unfortunate memes that has made repeated appearances in the climate debate is that money isn't just influencing the public debate about science, but it's also influencing the science itself. The government, the argument goes, is paying scientists specifically to demonstrate that carbon dioxide is the major culprit in recent climate change, and the money available to do so is exploding.

Although the argument displays a profound misunderstanding of how science and science funding work, it's just not going away. Just this week, one of the sites where people congregate to criticise mainstream climate science once again repeated it, with the graph accompanying this story. That graph originated in a 2009 report from a think tank called the Science & Public Policy Institute (notable for using the serially confused Christopher Monckton as a policy advisor).

The report, called " Climate Money: The climate industry: $79 billion (£50.4 billion) so far -- trillions to come" (PDF) and prepared by Australian journalist Joanne Nova for the Science & Public Policy Institute, claims to show how money has distorted climate science. There are several aspects to this argument, but we'll start with the money itself.

Who's got the money?
Many discussions have focused on the fact that businesses with a large carbon output (like fossil fuels extractors) have funded PR and lobbying efforts that, in part, have attempted to undercut the scientific case for human-driven climate change. It notes that there is now significant money being made by companies that build carbon-neutral energy sources and energy efficient technology, some coming from tax incentives and subsidies. In addition, carbon-trading markets are predicted to grow rapidly over the coming decades. Combined, the report asserts, this money provides an incentive to keep the spotlight focused on carbon.

In short, some of the green industries are now in the same position as their fossil fuel counterparts, in that they have an incentive to shape policy and the public support for it. There's a definite element of truth to this, although there are clearly reasons other than climate change -- ocean acidification, energy security, extending the lifetime of finite resources -- for promoting efficiency and green energy.

But the key thing here is that, at best, these companies can influence things like public perception and policy responses. They don't influence the underlying science because almost none of them are paying any scientists to gather data. So, although a focus on the income of various companies might tell us something about public opinion, it doesn't really say much about the science.

The false assertion that money is distorting the science comes, in part, from a spectacular misreading of the graph that accompanies this article.

The graph ostensibly shows how the US has gone from essentially funding nothing in the way of climate research to spending over $7 billion (£4.47 billion) a year. But the vast majority of that money is in the form of "Climate Technology," and a careful reading of the report indicates that this goes to things like wind and solar power, biofuel production, and things of that nature. None of that money goes to the researchers who are actually generating the results that point to anthropogenic warming, so it can't possibly provide an incentive to them.

The money that is actually going to climate science is on the bottom of the graph, in purple. And, as that shows, funding has been essentially flat since the early 1990s. (Funding has gone up slightly in recent years, but is still in the neighbourhood of $2 billion (£1.2billion) annually.) A lot of that money doesn't actually go to scientists, either, as it pays to support everything from some of NASA's Earth-monitoring satellites to land and ocean temperature monitoring.

The other issue with this graph is that it gives the false impression that funding shot up from nowhere around 1990. The truth of the matter is that the US has been funding climate science for decades. It's why we have things like a record of CO2 levels that goes back to the 1950s, temperature records that span over a century, and a detailed history of periods like the ice ages. People didn't just suddenly start studying this stuff in 1990 -- and much of the work from before that date was funded by the government. What changed was the accounting. There are over a dozen different branches of the government that fund some sort of science, but it wasn't until 1990 that the government formed the Climate Change Science Program, which started aggregating the expenditures across agencies.

There has never been any sudden boom in government funding for climate research that is luring people onto the research track, much less inducing them to support the consensus view. If anything, many years of flat funding would provide an incentive for people to look to getting out of the field. The graph, held up as evidence that climate scientists are being led around by money, actually shows the exact opposite.

Where's that money going?
But maybe that money is somehow being directed in a biased manner, distributed in a way that ensures the current consensus is supported. "Where is the Department of Solar Influence or the Institute of Natural Climate Change?" Nova asks, elsewhere claiming, "Thousands of scientists have been funded to find a connection between human carbon emissions and the climate. Hardly any have been funded to find the opposite."

This displays an almost incomprehensible misunderstanding of how science research works. Thereare institutes that are dedicated to studying the Sun -- the Naval Research Laboratory has one, as does NASA. But those institutes are focused on learning about what the Sun actually does, not squeezing what we learn into some preconceived agenda. For decades, solar activity has been trending downwards, even as temperatures have continued to rise. It's not that the researchers are being induced or compelled to some sort of biased interpretation of the data. Reality just happens to have a bias.

The same thing works in other areas as well. A number of countries have spent large sums of research dollars to put Earth-monitoring satellites in orbit, not with the intent of finding anything in particular, but because monitoring the Earth can tell us important things. This hardware has imaged the Greenland ice sheet -- again, not because of some sort of bias, but because the sheet is very big and very significant. Most of these studies have suggested that ice loss is accelerating, but a recent one concluded, "sea level rise from Greenland may fall well below proposed upper bounds."

The researchers weren't from some sort of "Institute to discover a stable sea level." They were from departments focused on polar research and Earth sciences. What Nova doesn't seem to get is that the people who study the planet actually pay attention to what the planet tells them, not to what their institute may be titled.

(Incidentally, this paper is also a clear indication that research that indicates things aren't as bad as they could be not only gets published, but makes it into very prestigious journals.)

Like many other self-proclaimed skeptics, Nova also has the bizarre idea that research normally proceeds by "auditing" existing studies. "Auditing AGW research," she writes "is so underfunded that for the most part it is left to unpaid bloggers who collect donations from concerned citizens online." But nobody audits the JPL to see if it's handling the Cassini probe properly; geneticists aren't being asked to open their books so that other scientists can see if they're fudging the numbers.

Science simply doesn't proceed through audits. The Greenland paper linked above provides a much more typical picture of how things work. The researchers behind it didn't simply reanalyse what others had done; they got new (and, in many ways, better) data that addressed the same issue and provided a more comprehensive picture of what was going on at the ice sheet's glaciers.

In short, you generally don't make an impression on science by auditing past data; you do it by coming up with better data.

It's pretty strange that people find in the graph (which shows research stuck in neutral for decades) evidence of a flood of money into climate science that distorts its conclusions. But it's unfortunately typical that an argument focused on climate science leaves the facts behind from the start.

Source: Ars Technica

Emerging Stocks Post Longest Weekly Losing Streak Since 1994 - Bloomberg

Most emerging stocks fell, posting their longest weekly losing streak since 1994, as utilities and telephone companies slid and concern China’s biggest banks may miss lending plans offset gains for commodity producers.

The MSCI Emerging Markets Index (MXEF) declined 0.5 percent to 902.13 this week, extending the rout to the longest in 18 years. Utility companies tumbled for an eighth week as Federal Grid Co. fell for a 12th week. Telephone companies retreated to the lowest level in 2012, led by declines in Indonesian communication providers. Russia’s Micex Index added 0.8 percent in five days while Brazil’s Bovespa slipped 0.1 percent.

China’s biggest banks may fall short of loan targets for the first time in at least seven years as an economic slowdown crimps demand for credit, three bank officials with knowledge of the matter said today. Copper and crude oil gained today after Prime Minister Mario Monti told Italian television station La7 yesterday the majority of European Union leaders at a Brussels meeting this week backed joint euro-area bonds.

“European leaders are trying to instill order into chaos, they’re doing everything to prevent another crisis from happening,” said Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc. “There has to be a clearer picture on China’s slowdown and some resolution must be reached in Europe to reverse this sentiment.”

Outflows Slowing

Emerging-market equity fund outflows slowed this week, Citigroup Inc. said. Developing nations had $1.5 billion of outflows in the week ended May 23, according to Citigroup and Morgan Stanley reports today, citing data from fund researcher EPFR Global.

There were net sales of $2.3 billion the previous week, Citigroup reported on May 18. Funds in Asia excluding Japan had the biggest redemptions of the year with outflows of $768 million in the most recent week, Citigroup said today.

The MSCI gauge of 21 developing nations, down 1.6 percent this year, trades at 9.7 times estimated earnings, compared with 11.7 for the MSCI World Index (MXWO) of advanced nations, which has added 0.5 percent in 2012.

Brazil’s Bovespa retreated 0.1 percent this week as Centrais Electricas Brasileiras SA plunged 17 percent. Clothing retailer B2W Cia Global do Varejo declined 13 percent in Sao Paulo.

Russia’s Micex index added 0.8 percent, snapping a four- week decline. OAO Tatneft, an oil producer, led advances for the index after it rose 8.3 percent, the biggest weekly gain in 2012.

Utility, Phone

Federal Grid, Russia’s monopoly for high-voltage power transmission lines, slipped 16 percent in Moscow to fall for a 12th week, the longest losing streak since 2008.

Federal Grid was among leading decliners for utility companies this week, which have retreated 2.1 percent.

Telephone companies had a weekly slide of 1.6 percent after PT Telekomunikasi Indonesia (TLKM), the nation’s biggest telephone company, plunged 8.2 percent. Indonesia’s Jakarta Composite Index (JCI) sank 2 percent as a weakening rupiah raised concerns investors are reducing holdings of the nation’s assets amid Europe’s debt crisis.

The rupiah fell 1.1 percent against the dollar to the weakest level since December 2009.

PT Bank Danamon Indonesia (BDMN) slumped 8.8 percent amid concern Bank Indonesia’s plan to tighten a bank-ownership regulation will prevent DBS Group Holdings Ltd. from buying Danamon shares through a tender offer, according to Arief Fahruri, an analyst at PT Mega Capital Indonesia in Jakarta.

Commodity Producers

The FTSE/JSE Africa All Shares Index (JALSH) sank 0.5 percent in Johannesburg, while the BUX Index (BUX) declined 0.4 percent in Budapest. The WIG20 Index (WIG20) fell 1.2 percent in Warsaw. The Shanghai Composite Index fell 0.5 percent.

Cnooc Ltd. (883), China’s largest offshore crude producer, rose 0.7 percent in Hong Kong. KGHM Polska Miedz (KGH), the copper miner with the biggest European mine output, fell 1 percent this week.

Crude for July delivery rose 20 cents to settle at $90.86 a barrel in electronic trading on the New York Mercantile Exchange today.

The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose one basis point, or 0.01 percentage point, to 407 today, according to JPMorgan Chase & Co.’s EMBI Global Index.

To contact the reporters on this story: Christine Harvey in New York at; Ian Sayson in Manila at

To contact the editors responsible for this story: Darren Boey at; Tal Barak Harif at

US STOCKS-Wall St little changed, investors focus on Greece - Reuters UK

Fri May 25, 2012 4:03pm BST

(Fixes day to Friday in lead)

* French banks drawing up Greek euro zone exit contingency plans- sources

* U.S. consumer sentiment climbs in May, highest since Oct 2007

* Stocks off: Dow 0.4 pct, S&P 0.1 pct, Nasdaq 0.2 pct

By Angela Moon

NEW YORK, May 25 (Reuters) - U.S. stocks were little changed in volatile trading on Friday as fresh warnings about Greece kept investors away from risky assets.

Despite the weak start, the S&P 500 was on track to post its best weekly gain in over two months. Trading has been choppy all week, with stocks usually opening lower or little changed but adding gains heading into the close.

Volume was also expected to be light as traders stay away from making new bets or positions heading into the Memorial Day holiday weekend. U.S. markets will be closed on Monday.

French banks, which are among the lenders most exposed to Greece, have stepped up their efforts on contingency plans for the debt-laden country leaving the euro zone, sources familiar with the situation said.

The heightened preparations by banks, including Credit Agricole, BNP Paribas and Societe Generale , come after euro zone sources told Reuters earlier this week that each member of the common currency would have to prepare a plan for a possible Greek exit.

Belgian deputy Prime Minister Didier Reynders issued a new warning over Greece, saying it would be a "grave professional error" if central banks and companies were not preparing for a Greek exit from the euro zone.

Energy stocks were among the day's top gainers. Chesapeake Energy Corp rose 2.4 percent to $15.95, up for the second day after the company announced it has put a half-million acres in Wyoming and Colorado up for sale.

Data showed Thomson Reuters/University of Michigan Surveys of Consumers' final May consumer sentiment index rose to 79.3 from 77.8 in the preliminary May report. It was the highest level since October 2007. Market reaction was muted.

Morgan Stanley will adjust thousands of trades to ensure outstanding limit orders to sell will be filled at no more than $42.99 a share for Facebook stock from last Friday's botched initial public offering, the firm told its brokers on Thursday, according to several who listened to the call. Facebook shares were down 2.9 percent at $32.07.

The Dow Jones industrial average was down 44.95 points, or 0.36 percent, at 12,484.80. The Standard & Poor's 500 Index was down 1.69 points, or 0.13 percent, at 1,318.99. The Nasdaq Composite Index was down 6.40 points, or 0.23 percent, at 2,832.98.

(Editing by Dave Zimmerman)

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