Bank of America Merrill Lynch lowered its oil price forecast on Wednesday, but also said that the selloff in oil stocks has opened up some attractive opportunities.
BofA cited weakening European demand and tepid economic growth in the United States and emerging markets as the catalyst for lower oil prices. It now forecasts Brent crude prices to end 2012 at $106, while WTI prices should hover at $97 per barrel — a cut of $10 for each variant compared with its previous forecast.
But BofA analysts said in a research note on Wednesday that the current reduction in oil prices is overly steep. WTI prices are currently trading in the US$85 a barrel range. That discount has hit oil stocks as well, presenting investors with attractive valuations in the energy sector.
“In some respects this resembles the fall of 2011 but this time underperformance has tracked the stronger dollar and a coincident collapse in oil prices. Now as then sector valuations have fallen to levels we view as unsustainable,” said BofA analysts in a note.
BofA has a handful of stocks it prefers in the energy sector. They include its current top pick, Hess Corp. Other favourites include Marathon Oil Corp., Chesapeake Energy Corp., Anadarko Petroleum Corp. and Occidental Petroleum Corp.
BofA views these stocks as offering the best upside potential when stocks recover from the current risk off environment. As another plus, the analysts said that many of the downside risks facing each of the above companies are already priced into the stocks, helping to minimize risk.
US STOCKS-Wall St climbs on China move; Bernanke limits rise - Reuters
* China rate cut buoys market
* Gains limited by Bernanke's comments
* Spanish auction successful, Fitch cuts rating
* Dow up 0.6 pct, S&P up 0.3 pct, Nasdaq down 0.1 pct
NEW YORK, June 7 (Reuters) - U.S. stocks gained on Thursday after China's central bank cut lending and deposit rates, but the advance was capped as comments from Federal Reserve Chairman Ben Bernanke dimmed hopes for further stimulus measures.
Speculation had been increasing in markets that more monetary stimulus could be coming from policymakers here and abroad.
In his testimony to a congressional committee Thursday, Bernanke said the central bank was ready to take action if financial troubles increase, citing difficulties in Europe, but gave no hint of an imminent stimulus plan.
Stocks lost ground following the comments but were mostly higher in late afternoon. The surprising move by China's central bank to lower benchmark interest rates by 25 basis points eased worries about faltering global demand.
"China is again showing they are flexible in monetary policy and I think we'll continue to see that. China has proven they know when to get aggressive and they are doing it again, you are seeing the positive reaction to that," said Art Hogan, managing director of Lazard Capital Markets in New York.
Industrials, up 1.4 percent, and other growth-senstive sectors led gains on the S&P 500.
The rate cut in China, the world's No. 2 economy, also helped lift the stocks of U.S. companies linked to China's commodity-hungry industrial complex. U.S. Steel Corp climbed 1.9 percent to $20.42, and miner Freeport-McMoRan Copper & Gold Inc advanced 1 percent to $33.98.
The Dow Jones industrial average was up 79.24 points, or 0.64 percent, at 12,494.03. The Standard & Poor's 500 Index was up 3.94 points, or 0.30 percent, at 1,319.07. The Nasdaq Composite Index was down 3.09 points, or 0.11 percent, at 2,841.63.
U.S. stocks jumped more than 2 percent on Wednesday, a third day of gains for the S&P 500. The index has rebounded since hitting its 200-day moving average, a key technical support level, on Friday and is now on track for its biggest weekly percentage gain of the year.
The S&P 500 is still well off its highs for the year.
Comments on Wednesday from Atlanta Fed President Dennis Lockhart and Federal Reserve Vice Chair Janet Yellen led investors to become more optimistic about the possibility of more stimulus from the Fed.
While Europe was still very much in the spotlight, stocks showed little reaction to a downgrade by Fitch in Spain's credit rating to 'BBB' with a negative outlook, just two notches away from junk status.
Germany's government and main opposition agreed on the outlines of a proposal for a European financial transaction tax, which could pave the way for parliament to approve a fiscal pact and permanent rescue plan for the euro zone.
Spain managed to raise more than 2 billion euros at a bond auction, tempering fears it is being cut off from financial markets, although it had to pay a heavy price to borrow the funds.
Money looming even larger over Nov. election - CBS News
(CBS News) WASHINGTON -- President Obama is halfway through a two-day fundraising swing through California.
His trip underlines the importance of money in the 2012 campaign.
It's also being criticized by Republicans who say the president is spending too much time with celebrity Democrats.
The money-raising trip took him to San Francisco and Los Angeles, two towns where he hasn't been a stranger in recent weeks and months, spending plenty of time with the wealthy and famous in the entertainment and tech communities.
But his campaign tweeted Thursday that 98 percent of its donations in May were less than $250.
Either way, it's all about the money.
Mr. Obama got a warm welcome from campaign donors in the Los Angeles gay community Wednesday night, a group he considers crucial to his re-election prospects.
"I could not be prouder of the work we've done on behalf of the LGBT community," Mr. Obama said.
During his speech, he ticked off accomplishments under his watch, such as ending the war in Iraq.
But he also warned the audience about what's ahead during the campaign, and why their donations matter, saying, "You're going to see hundreds of millions of dollars in negative ads, because the other side's not offering anything new."
To build a war chest that would enable him to counter those ads and run his campaign, Mr. Obama is spending two days on the West Coast to raise an expected $5 million.
He will have done 153 fundraisers since formally declaring his candidacy for re-election a little over a year ago - nearly double the number President Bush had done at the same point in 2004.
With the majority of outside super PAC dollars going to Republicans, raising money will be crucially important for Democrats in this election cycle.
In the Wisconsin recall election, unions spearheaded the effort to unseat Gov. Scott Walker after he successfully limited their power. But the union effort to get out the vote was overcome by the GOP advantage in money and TV advertising. Walker raised $30 million. His challenger, Milwaukee Mayor Tom Barrett, raised only $4 million.
Rep. Steve Israel, D-N.Y., chair of the Democrats' campaign committee, warned that the Wisconsin results should be "a wake-up call" that the party needs money for TV ads to compete with the super PACs.
A California political power broker once put it this way: "Money is the mothers' milk of politics."
Four years ago, candidate Obama outspent his Republican opponent, Sen. John McCain by more than two-to-one - $730 million to $333 million.
To see Bill Plante's report, click on the video in the player above.
Stocks rise on Wall Street after China cuts rate - AP - msnbc.com
NEW YORK — Stocks rose on Wall Street Thursday after China cut its benchmark lending rate in another bid to boost its slowing economy, but an early rally faded after Federal Reserve Chairman Ben Bernanke gave no signal of immediate action to prop up the U.S. economy.
The Dow Jones industrial average was up 80 points at 12,494 shortly after noon. It had been up as much as 140 points earlier. On Wednesday the stock market had its biggest gain of the year on hopes that more economic stimulus might be on the way in the U.S. and Europe.
China cut its benchmark lending rate for the first time in nearly four years, adding to efforts to reverse a sharp economic downturn. It was the first rate cut since November 2008.
"Markets received a near-term shot of adrenalin from China," said Matthew Kaufler, portfolio manager at mutual fund group Federated Investors. "China is the world's economic locomotive at the moment and it can't afford to slow down at a time when other major economies are in precarious positions."
Beijing has rolled out a series of measures to stimulate its economy after growth fell to a nearly three-year low of 8.1 percent in the first quarter and April factory output grew at its slowest rate since the 2008 crisis. Private sector analysts expect this quarter's growth to fall further.
The rate cut is a huge boost for global investors. China has been a major engine of global economic growth over the past few years as the U.S. sputtered and debt crises spread through several countries in Europe.
Industrial stocks that rely heavily on the Chinese market for sales were among the biggest gainers on the New York Stock Exchange. Heavy equipment maker Caterpillar rose $1.17 to $87.83, one of the biggest gains among the 30 stocks that make up the Dow Jones industrial average.
The stock market pulled back a little from earlier gains after Bernanke said that the Fed remains ready to act if the economy needs it, but he didn't say any new steps were on the way.
"As always, the Federal Reserve remains prepared to take action as needed to protect the U.S. financial system and economy in the event that financial stresses escalate," Bernanke told the congressional Joint Economic Committee Thursday.
Investors have been worried because a bleaker view of the economy has taken hold in recent weeks, especially as hiring has weakened. U.S. employers added just 69,000 jobs in May, the fewest in a year. Since averaging a robust 252,000 a month from December through February, job growth has slowed to a lackluster 96,000 a month. The U.S. economy grew at a tepid annual rate of 1.9 percent in the first three months of 2012.
Some traders had hoped that Bernanke would signal more action from the U.S. central bank after Atlanta Federal Reserve President Dennis Lockhart said that sustained weakness in job creation could justify more action to support the economic recovery. The Fed's latest bond-buying program is scheduled to wind down at the end of this month.
Investors' fears had also been growing that a collapse of Europe's euro currency union could trigger a panic and cause a global recession.
Some of those fears were allayed Thursday on hopes that Europe is preparing to give Spain financial aid to help the country rescue its banks. Spain is reluctant to accept a full-fledged bailout from its partners in the euro because that would mean giving up control over some of its domestic policies.
Spain successfully raised $2.62 billion Thursday from the bond markets. The interest rate on its benchmark 10-year note fell to 6.02 percent from 6.26 percent late Wednesday, a big drop. Those are positive signs that bond investors are more willing to lend the country money.
In other trading, the Standard & Poor's 500 index rose five points to 1,320 and the Nasdaq composite index rose four points to 2,848.
Among other stocks making big moves:
— Molina Healthcare plunged $7.62, or 30 percent, to $18.14, after the health insurer withdrew its 2012 profit forecast, citing a possible revenue shortfall in Texas. Molina said member claims in Hidalgo and El Paso have far exceeded its estimates and as a result, the premium revenue it is collecting there will not likely be enough to cover its medical costs.
— Men's Wearhouse dropped $5.66, 16 percent, to $29.91 after the clothing chain reported lower-than-expected results and issued a weak forecast for its second quarter.
Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
GLOBAL MARKETS-Stocks rise after China cuts rates; gold tumbles - Reuters UK
(Updates prices, adds details, comments)
* China cuts rates 25 basis points in surprise move
* Fed offers few hints of stimulus, supporting dollar
* Spanish bond yields fall after strong debt sale
By Wanfeng Zhou
NEW YORK, June 7 (Reuters) - Global stocks and the euro rose o n T hursday after China unexpectedly cut interest rates to shore up growth, but optimism was tempered by Federal Reserve Chairman Ben Bernanke, who disappointed investors looking for further stimulus for the U.S. economy.
Gold tumbled 2 percent as investors unwound bullish bets built on expectations of Fed easing. Bullion was hit particularly hard compared with equities and other commodities, as it has been heavily used by institutional investors to hedge against economic uncertainties.
Bernanke, in testimony to Congress, said the Fed was ready to shield the U.S. economy if financial troubles mount, but his tone was far from crisis mode.
He said the central bank was closely monitoring "significant risks" to the U.S. recovery from Europe's debt and banking crisis. But he noted: "Despite economic difficulties in Europe, the demand for U.S. exports has held up well."
"People had built up this hope that something significant was going to happen, and perhaps that was disappointing," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.
The MSCI world equity index rose 1.0 percent to 302.24 points, after hitting its highest level in more than a week.
Hopes that central banks in the United States and Europe would act to bolster the global economy had driven world shares up more than 3 percent this week after steep losses in May.
U.S. stock indexes also gained, but were well off early highs. The Dow Jones industrial average was up 112.09 points, or 0.90 percent, at 12,526.88. The Standard & Poor's 500 Index was up 8.14 points, or 0.62 percent, at 1,323.27. The Nasdaq Composite Index was up 5.56 points, or 0.20 percent, at 2,850.28.
China's interest rate cut helped boost U.S. companies linked to its commodity-hungry industrial complex. U.S. Steel Corp climbed 1.7 percent to $20.38, and miner Freeport-McMoRan Copper & Gold Inc edged up 1 percent to $33.98. The S&P Materials index gained 1 percent.
European shares closed higher, but well off an earlier peak. The FTSEurofirst 300 provisionally closed up 1 percent at 983.81, its highest close since May 29.
The euro rose 0.2 percent to $1.2596, recovering from early losses. It briefly fell after Fitch slashed Spain's credit rating by three notches and signaled it could make further cuts as the cost of restructuring the country's troubled banking system spiraled and Greece's crisis deepened.
Against the yen, the dollar rose 0.5 percent to 79.61 .
CHINA'S SURPRISE CUT
China delivered twin surprises on interest rates on T hursday, cutting borrowing costs to combat faltering growth while giving banks additional flexibility to set competitive lending and deposit rates in a step along the path of liberalization.
China's first rate cut since the global financial crisis underlined heightened concern among policymakers worldwide that the euro area's deepening debt problems are threatening economic growth.
The news had earlier boosted oil prices on expectations that faster growth in the world's largest energy consumer could boost demand. But gains faded after Bernanke's comments.
Brent crude slipped 75 cents to $99.91 a barrel, after rising as high as $102.45 a barrel. U.S. crude was down 23 cents at $83.79, after reaching $87.03.
Spot gold was down 1.8 percent at $1,587.89 an ounce, off a high of $1,628.80 an ounce.
U.S. Treasuries prices erased losses after Bernanke's comments. The benchmark 10-year U.S. Treasury note was up 2/32, the yield at 1.6524 percent.
The better tone in the markets allowed Spain to sell 2.1 billion euros of fresh debt o n T hursday, just days after the country's treasury minister warned that access to the credit markets was under threat.
Yields initially fell 10 basis points on Spain's existing 10-year bonds after the auction, to 6.2 percent. (Additional reporting by Chuck Mikolajczak and Gertrude Chavez-Dreyfuss; Editing by Dan Grebler)
NASDAQ to set aside $40million in 'mea culpa money' to compensate brokers in botched Facebook IPO - Daily Mail
- Nasdaq to offer $40m to brokers and investors after technical glitch marred trading during Facebook's IPO
- $14million given in cash and the remainder in credit
- Company usually caps reimbursement due to technical glitches at $3m
By Reuters Reporter and Associated Press
|
Nasdaq said Wednesday afternoon that it would hand out $40million in cash and credit to reimburse investment firms that lost money on Facebook's opening day because of computer glitches at the exchange.
Nasdaq's chief rival, the New York Stock Exchange, fired off a statement condemning the move, saying Nasdaq was giving itself an unfair advantage and rewarding itself for its own mistakes.
One broker, Knight Capital, said the planned reimbursements weren't nearly enough, encapsulating the complaints that other brokers and investment firms were making privately.
Compensation: Nasdaq said Wednesday afternoon that it would hand out $40million in cash and credit to reimburse investment firms that lost money on Facebook's opening day because of computer glitches at the exchange
Nasdaq OMX's compensation for mishandling Facebook Inc's public offering is 'too limited', though the exchange deserves praise for tackling the issue, former Securities and Exchange Commission chief Harvey Pitt said.
The harm caused by Nasdaq's failures easily exceed the $40 million the exchange has set aside, Mr Pitt said on Wednesday, responding to a query by e-mail.
Not enough: Harvey Pitt, the former Securities and Exchange Commission chief, said the compensation wasn't enough
He also said there does not seem to be any rationale for how the number was arrived at or why it is fair.
Nasdaq 'deserves kudos for taking the bull by the horns, and not waiting for the SEC to finish its review,' Mr Pitt said. 'But I think the steps it has taken — while positive — are too limited. The dollar estimates for harm caused by Nasdaq's failures easily exceed — several times over — the $40 million it has set aside.'
Mr Pitt said Nasdaq would be better served by an independent internal review of all that occurred on May 18, when traders were left in the dark for hours as to whether their orders for Facebook shares had been executed.
Facebook went public May 18 amid great fanfare, but computer glitches at the Nasdaq threw the day into chaos.
The opening was delayed by half an hour. Technical problems kept many investors from buying shares in the morning, selling them later in the day, or even from knowing whether their orders went through. Some investors complained that they were left holding shares they didn't want.
Nasdaq will pay about $14 million in cash to investment companies that bought or sold shares, or tried to, at certain levels. The rest will be given as credit, meaning the firms won't have to pay as much in the usual fees required for trading on the Nasdaq.
Nasdaq predicted that those benefits could last as long as six months.
The credit for trading fees riled the NYSE. It said the move gave investors a strong incentive to move more of their trading to the Nasdaq, allowing Nasdaq 'to reap a benefit from market share gains they would not have otherwise received.'
'This is tantamount to forcing the industry to subsidize Nasdaq's missteps and would establish a harmful precedent that could have far reaching implications for the markets, investors and the public interest,' the NYSE said in a statement.
Dislike: Facebook went public May 18 amid great fanfare, but computer glitches at the Nasdaq threw the day into chaos
The war of words underscores the constant battle that Nasdaq and the NYSE are locked in.
The NYSE, with roots dating to the 18th century and its familiar neoclassic headquarters on Wall Street, bills itself as reliable and well-known. Nasdaq, which started in 1971, promotes itself as a high-tech exchange favored by high-tech companies including Apple and Google.
The $40 million amount is far more than usual: Nasdaq has traditionally imposed a $3million cap for reimbursing customers who lost money because of technical problems.
It's hard to imagine that the amount could cover all the claims. Knight Capital alone has estimated that it lost as much as $35 million because of Nasdaq's glitches.
Knight Capital said it was disappointed that the reimbursement pool 'does not come close to covering reported losses' connected to the technical glitches.
'Their proposed solution to this problem is simply unacceptable,' the company said in a statement.
Large amount: The $40 million amount is far more than usual: Nasdaq has traditionally imposed a $3 million cap for reimbursing customers who lost money because of technical problems
It isn't clear what will happen next. Nasdaq still has to get approval from the Securities and Exchange Commission for its plan. The NYSE said it would 'strongly press our views' but didn't give details. Knight Capital said it is 'evaluating all remedies available under law,' which could mean it plans to sue.
Facebook's stock originally priced at $38 and closed that first day at $38.23, a disappointment to speculators who had hoped for a first-day pop. Nasdaq has said it was embarrassed by the glitches, but that they didn't contribute to the underwhelming returns.
Nasdaq says it will reimburse investment firms that tried to sell shares at $42 or less but either couldn't sell or sold at a lower price than they intended.
It will also reimburse investment firms that bought at $42 but in trades that weren't immediately confirmed. FINRA, the financial industry's self-regulatory group, will review the claims for compensation. Facebook's shares went as high as $45 on the first day.
The shares rose after the Nasdaq announcement and closed up 94 cents, nearly 4 per cent, at $26.81. That's still down nearly 30 per cent from the initial pricing.
The Facebook offering has left a bad taste for many investors, though they don't blame Nasdaq alone.
Many also think that Facebook as well as Morgan Stanley, the main bank that underwrote the deal, overestimated demand, pricing the shares too high and issuing too many.
Nasdaq says the problems have been fixed and that it has hired IBM to review its operating systems.
Stocks rise sharply after China cuts key lending rate - The Boston Globe
NEW YORK (AP) — Stocks rose on Wall Street Thursday after China cut its benchmark lending rate in another bid to boost its slowing economy, but an early rally faded after Federal Reserve Chairman Ben Bernanke gave no signal of immediate action to prop up the US economy.
The Dow Jones industrial average was up 80 points at 12,494 shortly after noon. It had been up as much as 140 points earlier. On Wednesday the stock market had its biggest gain of the year on hopes that more economic stimulus might be on the way in the US and Europe.
China cut its benchmark lending rate for the first time in nearly four years, adding to efforts to reverse a sharp economic downturn. It was the first rate cut since November 2008.
‘‘Markets received a near-term shot of adrenalin from China,’’ said Matthew Kaufler, portfolio manager at mutual fund group Federated Investors. ‘‘China is the world’s economic locomotive at the moment and it can’t afford to slow down at a time when other major economies are in precarious positions.’’
Beijing has rolled out a series of measures to stimulate its economy after growth fell to a nearly three-year low of 8.1 percent in the first quarter and April factory output grew at its slowest rate since the 2008 crisis. Private sector analysts expect this quarter’s growth to fall further.
The rate cut is a huge boost for global investors. China has been a major engine of global economic growth over the past few years as the US sputtered and debt crises spread through several countries in Europe.
Industrial stocks that rely heavily on the Chinese market for sales were among the biggest gainers on the New York Stock Exchange. Heavy equipment maker Caterpillar rose $1.17 to $87.83, one of the biggest gains among the 30 stocks that make up the Dow Jones industrial average.
The stock market pulled back a little from earlier gains after Bernanke said that the Fed remains ready to act if the economy needs it, but he didn’t say any new steps were on the way.
‘‘As always, the Federal Reserve remains prepared to take action as needed to protect the US financial system and economy in the event that financial stresses escalate,’’ Bernanke told the congressional Joint Economic Committee Thursday.
Investors have been worried because a bleaker view of the economy has taken hold in recent weeks, especially as hiring has weakened. US employers added just 69,000 jobs in May, the fewest in a year. Since averaging a robust 252,000 a month from December through February, job growth has slowed to a lackluster 96,000 a month. The US economy grew at a tepid annual rate of 1.9 percent in the first three months of 2012.
Some traders had hoped that Bernanke would signal more action from the US central bank after Atlanta Federal Reserve President Dennis Lockhart said that sustained weakness in job creation could justify more action to support the economic recovery. The Fed’s latest bond-buying program is scheduled to wind down at the end of this month.
Investors’ fears had also been growing that a collapse of Europe’s euro currency union could trigger a panic and cause a global recession.
Some of those fears were allayed Thursday on hopes that Europe is preparing to give Spain financial aid to help the country rescue its banks. Spain is reluctant to accept a full-fledged bailout from its partners in the euro because that would mean giving up control over some of its domestic policies.
Spain successfully raised $2.62 billion Thursday from the bond markets. The interest rate on its benchmark 10-year note fell to 6.02 percent from 6.26 percent late Wednesday, a big drop. Those are positive signs that bond investors are more willing to lend the country money.
In other trading, the Standard & Poor’s 500 index rose five points to 1,320 and the Nasdaq composite index rose four points to 2,848.
Among other stocks making big moves:
— Molina Healthcare plunged $7.62, or 30 percent, to $18.14, after the health insurer withdrew its 2012 profit forecast, citing a possible revenue shortfall in Texas. Molina said member claims in Hidalgo and El Paso have far exceeded its estimates and as a result, the premium revenue it is collecting there will not likely be enough to cover its medical costs.
— Men’s Wearhouse dropped $5.66, 16 percent, to $29.91 after the clothing chain reported lower-than-expected results and issued a weak forecast for its second quarter.
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