U.S. Stocks Retreat as Fed Minutes Disappoint - Businessweek U.S. Stocks Retreat as Fed Minutes Disappoint - Businessweek

Wednesday, July 11, 2012

U.S. Stocks Retreat as Fed Minutes Disappoint - Businessweek

U.S. Stocks Retreat as Fed Minutes Disappoint - Businessweek

The Standard & Poor’s 500 Index erased losses in the final hour of trading as investors weighed the Federal Reserve’s latest policy minutes for evidence that the central bank may be closer to additional stimulus actions.

Bank of America Corp. (BAC) (BAC) and JPMorgan Chase & Co. (JPM) (JPM) added more than 1 percent as financial companies rallied. Exxon Mobil Corp. rose 1.5 percent as oil rebounded from the lowest close in more than a week. DuPont Co. and Google Inc. (GOOG) (GOOG) fell at least 1.1 percent after analysts said the companies may miss estimates. Best Buy Co. sank 8.4 percent after electronics retailer Hhgregg (HGG) (HGG) Inc. cut its forecasts.

The S&P 500 fell less than 0.1 percent to 1,341.45 at 4 p.m. New York time, after sinking as much as 0.6 percent earlier. The benchmark gauge has retreated 2.4 percent over five days amid concern about corporate profits. The Dow Jones Industrial Average lost 48.59 points, or 0.4 percent, to 12,604.53. Volume for exchange-listed stocks in the U.S. was 6 billion shares, 9.5 percent below the three-month average.

“You didn’t see any kind of commitment one way or another from the Fed in the minutes from last time,” Robert Pavlik, who helps manage $1.4 billion as chief market strategist at Banyan Partners LLC in New York, said in a phone interview. “You have to be taking a cautious approach to this market here, especially heading into the earnings season. I’m optimistic, but I’m not fully committed to the possibility of a terrific earnings season.”

Fed Minutes

Stocks initially turned lower as minutes from the Fed’s June meeting showed two participants believed more bond purchases are appropriate, while two others said they would be warranted in the absence of “satisfactory progress” in cutting unemployment or if downside risks increase. Equities recovered as the S&P 500 briefly dipped below its average price over the past 50 days and analysts dissected the minutes, with Jefferies & Co. economist Ward McCarthy saying there’s a “reasonable probability” a third round of quantitative easing is announced in coming months.

“Between the Fed’s outlook and the technical support we should find at the moving average, there is generally going to be a lift and that’s exactly what you saw materializing,” said Peter Kenny, managing director in institutional sales at Knight Capital Group Inc. in Jersey City, New Jersey.

The Fed minutes come amid growing concern that the U.S. economy is faltering and corporate profits are shrinking. Goldman Sachs Group Inc. cut its estimate for second-quarter gross-domestic product growth twice today, lowering it to 1.3 percent after data on wholesale inventories and the trade deficit dimmed prospects for the economy. The S&P 500 slumped yesterday amid lower sales estimates at Applied Materials Inc. and Cummins Inc.

Earnings Estimates

Profits for S&P 500 companies fell 1.8 percent in the second quarter, according to analyst estimates compiled by Bloomberg. That would be the first decline since 2009, even as revenue is forecast to rise 2.5 percent. Analysts project profit growth of 3.9 percent and 15 percent, respectively, in the third and fourth quarters of 2012

“You’re seeing a weakening demand picture, at least in the near term, starting to take root,” Matthew Kaufler, a portfolio manager at Federated Investors Inc. in Rochester, New York, said in a phone interview. His firm oversees $363.6 billion. “The key calibration is whether the market reaches the conclusion that weakness is broad-based, but it’s shallow and short in duration, or it’s going to be deeper and longer in duration. It’s too soon to make that call. I think that’s the question upon us over the next two weeks.”

Energy Shares

Energy companies climbed the most among 10 S&P 500 industry groups today, rallying 1.4 percent, as oil rebounded from the lowest close in more than a week. Exxon rose 1.5 percent to $84.38, while Chevron Corp. gained 0.9 percent to $104.85.

Financial companies advanced. Bank of America rallied 2 percent to $7.63. JPMorgan climbed 1 percent to $34.59. JPMorgan, the biggest U.S. bank by assets, kicks off the industry’s second-quarter earnings season on July 13 and may report a profit of 76 cents a share, excluding accounting adjustments, according to the average estimate of analysts in a Bloomberg survey.

Abercrombie & Fitch Co. (ANF) (ANF) had the biggest jump in the S&P 500, climbing 4.1 percent to $34.12. The teen-clothing retailer may substantially increase its buyback authorization from the current 12.9 million shares, the New York Post reported, citing a person it didn’t identify.

Wendy’s Co. (WEN) (WEN) added 2.4 percent to $4.69. The hamburger chain was raised to outperform from neutral at Nick Setyan, an analyst with Wedbush Securities Inc. The 12-month price target is $5.50.

‘Erroneous’ Reports

Mead Johnson Nutrition Co. (MJN) (MJN) gained 4 percent to $78.28. The maker of the world’s best-selling Enfamil baby formula said China’s Hunan province apologized for “erroneous” reports claiming formula sold by the company contained a banned flavor additive.

DuPont dropped 1.1 percent to $47.14. Cooley May, an analyst with Macquarie Group Ltd., cut the stock’s rating to neutral from outperform, citing concern over profit growth in the company’s chemical and industrial businesses.

Google slid 1.8 percent to $571.19. The owner of the world’s most popular search engine may miss analysts’ second- quarter sales estimates because of a fluctuation in foreign exchange rates, according to Carlos Kirjner, an analyst with Sanford C. Bernstein & Co.

Best Buy, the largest U.S. consumer-electronics retailer, declined 8.4 percent to $19.37. Hhgregg plunged 36 percent, the most since its initial public offering in 2007, to $7.34. The Indianapolis-based appliance and electronics retailer cut its full-year forecast amid sinking television sales.

Goldcorp Tumbles

Goldcorp Inc. (G) tumbled 9.7 percent to $33.17. The second- largest producer of the precious metal by market value cut its full-year 2012 gold production forecast by as much as 9.6 percent after delays at a Canadian mine and a water shortage at a Mexican project.

Waste Management Inc. (WM) (WM) fell 4.5 percent to $31.59. The trash hauler was cut to underweight, the equivalent of sell, from equalweight at Morgan Stanley.

Blackstone Group LP’s Byron Wien said the S&P 500 may climb past 1,400 this year. Wien, vice chairman of the advisory services unit of the world’s biggest private-equity firm, recommended buying Apple Inc. (AAPL) (AAPL) shares and said the iPad maker is the “most innovative” U.S. company. He said he’s also bullish on gold because the metal will retain its value should global growth slow.

“When everybody is so negative it’s usually a good time to take the other side,” he said today in a television interview on “Bloomberg Surveillance” with Tom Keene. “I think we can do better than 1,400.”

An advance to 1,400 would require a 4.4 percent increase in the U.S. equity benchmark from yesterday’s close. The S&P 500 has gained 6.7 percent this year. Apple shares have surged almost 50 percent this year.

To contact the reporters on this story: Lu Wang in New York at lwang8@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

TV review: Show Me Your Money; The Town That Never Retired - The Guardian

There are some programmes that make you bless the internet – sometimes because you are viewing online at a time of your choosing, sometimes because of the oceans of information available to you at the click of a mouse to further and deepen an interest suddenly stimulated. But last night I exalted it for its simple gift to the world of the abbreviation "WTF?": I estimate that this saved me at least 17 minutes of note-taking time during Show Me Your Money (Channel 4).

This was the tale of Pimlico Plumbers, founded, owned and run by Charlie Mullins, a man with a sparrow strut and disturbing hair atop an even more fearsome head for business. His company has no formal pay structure ("It's always been – 'You look like you're working hard, have a few more quid. You look like a lazy bastard … '") so Charlie invites his employees to disclose their salaries to each other so that he can even out discrepancies by asking those who earn more to take a pay cut to finance raises for their colleagues.

WTF? say my notes. WTF?

The newest recruit (the only man on the switchboard, it seems, though this isn't mentioned on screen) to the plumbers' call centreis found to be on £21,000, £3,000 more than the five female employees who were there before him. They must therefore ask/beg the plumbers – who earn up to £150,000 a year each – to make up the £15,000 shortfall. Mechanic Mark discovers he earns £31,000 to his friend John's £40,000, despite doing virtually the same job. And then there's canteen worker Tina, whose salary leaves her a disposable income of around £5 a week. It is deemed – possibly by Charlie, more likely by the programme makers who can sense a telegenic conflict a mile off – that Karl (a manager on £56,000 who has applied for a £19,000 rise) should give up £1,000 a year to help her.

WTF? WTF'ingF?

It raises and ignores so many questions about the value of skilled and unskilled labour and of transparency, the necessity of minimum wage and other equality legislation, the invulnerability of bosses (and their sons – Scott Mullins, heir apparent, is on £120,000 for his management job. "Dad's company – get off my case" is his only comment) compared to those low down the totem pole, and the failures and successes of free market capitalism, – here writ small in a single company but none the less potent for that – that all you could do in the end was throw your hands up in the air and cry: "WTF?" to the heedless skies. And that's before you delved into the ethics of setting colleague against colleague and creating the kind of poisonous atmosphere it was hard to imagine would ever fully disperse, even after the redistribution of everyone's – except Charlie's – wealth. The boss did in the end agree to match whatever the employees gave (though he didn't seem to count the £31,000 of business savings the mechanics came up with as an alternative to sacrificing their salaries). But nobody pointed out that in percentage terms this would be a nugatory amount of his £1m annual income, if indeed it came from his income at all.

The thinking – if there was any – behind the experiment was never properly explained. Did somebody, somewhere, have a theory about humanity's instinct for cooperation, and towards egalitarianism giving rise to the best of all possible pay grades? Was it a look at how money or financial inequality affects human relations? Was it a new twist on the reality show bearbaiting formula, or just a brilliant opportunity for some free publicity for Pimlico Plumbers? Answers on a postcard of Karl Marx to the usual address, please.

The Town That Never Retired (BBC1), the latest programme in the BBC's season of programmes examining old age, was almost as woolly in its thinking and execution as Show Me Your Money, but less profoundly annoying. Presented by The Apprentice's Nick Hewer (68) and his former sidekick Margaret Mountford (60), it aimed to investigate the potential problems involved in asking people to work into their late 60s and beyond by sending 15 people back to work after 10 or more years of retirement.

This, of course, is very different from continuing to work into your old age, but nobody mentioned that. Sheila, a nurse, naturally struggled – with the computers, and with the 10 years of updated medical guidelines she was missing; others didn't like being busted down to new boy (which, again, presumably wouldn't happen if they had been in continuous employ) and for every non-blinding insight (grandparents often provide care for children without which working-age parents couldn't enter the marketplace, for example) there were a thousand unanswered questions and unacknowledged holes beneath the waterline. If this had been submitted as one of an Apprentice team's tasks, Margaret would have given it one of her Looks and rightly so.

Stocks Drop For Fifth Straight Day On Fed Meeting Minutes - Huffington Post

-- Stocks fell for the fifth straight day Wednesday after minutes from a Federal Reserve meeting highlighted concerns about the U.S. economy.

In a summary of their June meeting, Fed officials said the economy could struggle if Congress fails to avert tax hikes and spending cuts scheduled for the end of the year. Europe's debt crisis and China also posed risks.

The Dow Jones industrial average fell 48.59 points, or 0.4 percent, to 12,604.53.

The Standard & Poor's 500 dropped 0.02 of a point, less than 0.01 percent, to 1,341.45.

The Nasdaq composite index fell 14.35 points, or 0.5 percent, to 2,887.98.

For the week:

The Dow is down 167.94, or 1.3 percent.

The S&P 500 is down 13.23, or 1 percent.

The Nasdaq is down 49.35, or 1.7 percent.

For the year:

The Dow is up 386.97, or 3.2 percent.

The S&P 500 is up 83.85, or 6.7 percent.

The Nasdaq is up 282.83, or 10.9 percent.

Earlier on HuffPost:

Stocks down as US Fed disappoints - Sydney Morning Herald

US stocks fell for a fifth day and the Dollar Index rose to a two-year high as Federal Reserve meeting minutes disappointed investors looking for a definitive signal that the central bank plans more stimulus. Commodities gained while Treasuries were little changed.

The Standard & Poor's 500 Index lost 0.3 per cent to 1,337.84 at 3:14 p.m. in New York after drifting between gains and losses before the Fed minutes. The Dollar Index, a gauge of the currency against six major peers, rose as much as 0.3 per cent to 83.61, the highest level since July 2010. The S&P GSCI Index of commodities increased 1.2 per cent as oil rallied following a drop in US supplies. Gold lost 0.4 per cent.

Stocks turned lower and the dollar rallied as minutes from the Fed's June meeting showed two participants believed more bond purchases are appropriate, while two others said they would be warranted in the absence of "satisfactory progress" in cutting unemployment or if downside risks increase. Some investors had anticipated a stronger signal of a third round of so-called quantitative easing, nicknamed QE3 by investors.

"The equity market was definitely hoping for additional quantitative easing," Tim Hoyle, director of research at Radnor, Pennsylvania-based Haverford Trust Co., which manages $US6 billion, said in a telephone interview. "There doesn't look to be any incremental news on any QE3."

The minutes also show policy makers considered the risk that further easing might pose. Some members of the committee noted that excessive purchase of Treasuries could lead to deterioration in the functioning of the Treasury market.


"There is not much cheerleading in these minutes," Mike Shea, a managing partner at New York-based brokerage firm Direct Access Partners LLC, said in an interview. "We see a lot of discussion on what the real benefits of more stimulus would be, and it appears there is a conclusion that benefits would be modest."

The Fed minutes come amid growing concern that the US economic recovery is faltering and corporate profits are shrinking. Goldman Sachs Group Inc. cut its estimate for second- quarter US gross-domestic product growth twice today, lowering it to 1.3 per cent after data on wholesale inventories and the trade deficit dimmed prospects for the economy.

Earnings Season

Earnings at S&P 500 companies decreased 1.8 per cent in the second quarter, according to analyst estimates compiled by Bloomberg. That would mark the first year-over-year decline since 2009.

Technology shares in the S&P 500 fell 1.2 per cent as a group and were the biggest drag on the index for a second day. The group lost 1.2 per cent yesterday as reduced sales projections at Advanced Micro Devices Inc. and Applied Materials Inc. spurred concern about profits at technology companies, the group forecast to have the strongest second-quarter earnings growth among 10 industries.

The five-day drop in the S&P 500 before is the longest slump in almost two months. United Technologies Corp., Boeing Co. and Microsoft Corp. lost at least 1.9 per cent to lead declines in 24 of 30 stocks in the Dow Jones Industrial Average.

Last's month Fed meeting came before a report July 6 that showed US employers added fewer workers than forecast in June and growth in private payrolls was the slowest in 10 months.

The Dollar Index reversed a decline of as much as 0.4 per cent. The US currency strengthened at least 0.2 per cent against eight of its 16 major peers, rising the most against the South African rand, Swedish krona and Japanese yen.

European Shares

Almost two shares fell for each that gained in the Stoxx Europe 600. Burberry Group Plc tumbled 7.4 per cent after the U.K.'s largest luxury-goods company reported sales that missed estimates. Britvic Plc plunged 13 per cent after the maker of Robinsons fruit drinks said full-year results will be at the bottom end of analysts' estimates. Bankia SA, the nationalized Spanish lender, tumbled 7.8 per cent.

Spain's IBEX 35 Index of stocks rallied 1.2 per cent and its bonds surged for a second day after Prime Minister Mariano Rajoy said the government will take more measures amounting to 65 billion euros ($US79.9 billion) to shore up the budget.

The prime minister announced cuts in jobless benefits and public wages, signaled reductions in pensions and raised sales taxes as part of a 65 billion-euro ($US80 billion) package of deficit cuts, risking a deeper recession. As striking miners clamored for aid to keep their industry alive in a march along Madrid's main boulevard, Rajoy trimmed union funding by 20 per cent.

Spain's Yield

The yield on Spain's 10-year bond fell 23 basis points to 6.58 per cent, while the rate on similar-maturity Italian securities slipped 14 basis points to 5.81 per cent.

The yield on 10-year German bunds decreased five basis points to 1.27 per cent as the government sold 4.15 billion euros of the securities at a record-low yield of 1.31 per cent. Two-year German yields were minus 0.016 per cent.

Corn fell 2.2 per cent to $US7.015 a bushel, retreating from a 10-month high on speculation that a drought-fueled rally in prices will curb demand. Earlier, the grain reached $US7.48, the highest for the most-active contract since Sept. 13. Today, the USDA cut its domestic production estimate by 12 per cent a month after predicting a record harvest. The US is the world's largest grower and exporter.

Corn prices through yesterday surged 42 per cent since mid- June as areas of moderate to extreme drought expanded to 53 per cent of the Midwest. Crop conditions as of July 8 were the worst for that date since the drought of 1988, government data show.

Oil in New York rose 2.3 per cent to $US85.81 a barrel today after the US Energy Department reported supplies dropped and refineries operated at the highest rate in almost five years.

The MSCI Emerging Markets Index fell 0.4 per cent, retreating for a sixth day in the longest run of declines since May. Russia's Micex Index lost 1.3 per cent and India's Sensex slipped 0.7 per cent. The Shanghai Composite Index rose 0.5 per cent. The Turkish lira strengthened against 13 of 16 major peers after the current-account deficit narrowed.


Financial Services Ethics Survey Produces Shocking (but not Surprising) Results - hereisthecity.com

Conducted by Populus in June, Wall Street, Fleet Street and Main Street: Corporate Integrity at a Crossroads reveals startling data on corporate ethics, the regulatory landscape, and individuals' willingness to blow the whistle on wrongdoing.

The survey is being released in conjunction with the launch of the firm's SEC Whistleblower Eligibility Calculator, an innovative web-based tool to enable users to assess their eligibility for the SEC Whistleblower Program.

According to the survey, 24% of respondents reported a belief that financial services professionals may need to engage in unethical or illegal conduct in order to be successful, while 26% of respondents indicated that they had observed or had firsthand knowledge of wrongdoing in the workplace. Particularly troubling, 16% of respondents reported that they would commit a crime - insider trading - if they could get away with it.

'When misconduct is common and accepted by financial services professionals, the integrity of our entire financial system is at risk', said Jordan Thomas, partner and chair of the Whistleblower Representation Practice at Labaton Sucharow. 'In this era of corporate scandals, we must refocus our energies on corporate ethics and encourage individuals to report wrongdoing - internally or externally'.

Labaton Sucharow's survey also revealed the following:

39% of respondents reported that their competitors are likely to have engaged in illegal or unethical activity in order to be successful;

30% of respondents reported their compensation or bonus plan created pressure to compromise ethical standards or violate the law, while 23 percent of respondents reported other pressures that may lead to unethical or illegal conduct; and

30% of respondents feel that the SEC/SFO effectively deters, investigates and prosecutes misconduct - despite the new leadership, record enforcement actions and new reforms; 29 percent of respondents feel the same way about FINRA/FSA.

Chris Keller, partner and head of case development at Labaton Sucharow commented: 'It is shocking that four years after the global economic crisis began there continues to be a fundamental lack of integrity in the financial services industry. For more than 50 years, Labaton Sucharow has been on the forefront of corporate governance reform. Given the results of this survey, our work is more important than ever'.

Are Whistleblowers the Answer ?

As a former assistant director and assistant chief litigation counsel in the Enforcement Division, Jordan Thomas played a leadership role in the development of the SEC Whistleblower Program. The program has broad extraterritorial reach and offers eligible whistleblowers, regardless of nationality, significant employment protections, monetary awards and the ability to report anonymously. Other jurisdictions around the world are considering initiatives that encourage individuals to break their silence and report possible violations of the law.

While Labaton Sucharow's survey found that 94% of respondents would report wrongdoing given the protections and incentives such as those offered by the SEC Whistleblower Program, only 44% of respondents were aware of this important investor protection program.

Scepticism and uncertainty about employers' handling of claims of misconduct persist. One in five of the professionals surveyed weren't sure of, or had serious doubts about, how their employers would handle a report of wrongdoing. In addition, in the U.S., gender was a factor in attitudes toward retaliation; 22% of female respondents believe that they would be retaliated against if they reported wrongdoing in the workplace, compared with 12% of male respondents.

Responding both to the lack of awareness of avenues to report wrongdoing and the personal challenges inherent in blowing the whistle, Labaton Sucharow has launched a first-of-its-kind SEC Whistleblower Eligibility Calculator, which may be found at http://www.secwhistlebloweradvocate.com/eligibility/.

This confidential web-based tool provides potential whistleblowers with a detailed eligibility report—empowering them to make an informed reporting decision. This is the latest addition to secwhistlebloweradvocate.com, an innovative website that uses videos, comprehensive legal primers and timely blog entries to help responsible organizations establish a culture of integrity and courageous whistleblowers to report possible securities violations.

Between June 19-25, 2012, Populus conducted 250 online interviews in the U.K. and 250 in the U.S. with senior individuals within the financial services industry. The full methodology is provided in the survey's executive summary at www.labaton.com/en/about/press/upload/ US-UK-Financial-Services-Industry-Survey.pdf.

image: © Steven Depolo

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