More concern on customer spending make recession fear
Global Market
Spending by US consumers rose in February at the slowest pace in more than a year. The 0.1 percent increase followed a 0.4 percent gain in January. The report also showed the Federal Reserve's most closely watched measure of inflation cooled.
Falling home prices, job losses and higher gasoline prices are driving down consumer spending. As the figures released, J.C. Penney Co. cut its sales and earnings forecasts.
The consumer sentiment index decreased to 69.5 from 70.8 and down from a preliminary reading of 70.5. The figure was less than analysts anticipated. Treasury notes strengthened, with the benchmark 10-year note yielding 3.44 percent down from 3.53 percent late yesterday. The Standard & Poor's 500 Retailing Index closed 2.7 percent lower. The core price measure rose 0.1 percent last month and up 2 percent from February 2007. The year-over-year increase matched the downwardly revised gain in January. The savings rate improved to 0.3 percent from a minus a 0.1 percent last month. A negative rate indicates consumers drew down savings to maintain spending. Adjusted for the increase in prices, spending was unchanged in February after increasing 0.1 percent. Inflation-adjusted spending on durable goods increased 0.2 percent. Purchases of non-durable goods decreased 0.1 percent and spending on services was unchanged. The biggest job losses and record fuel costs are eroding confidence and spending. The economy lost 85,000 jobs in early of the year. Consumer spending will grow at a 0.5 percent pace in the first quarter. More economists are forecasting a recession as job, retail sales and manufacturing data have deteriorated.
General Motors Corp. and Ford Motor Co. are among companies experiencing the slump in consumer demand.
Stock Market
U.S. stocks fell as J.C. Penney Co. forecast weaker sales and concern grew that further writedowns may jeopardize banks' access to capital.
J.C. Penney slipped after saying slower consumer spending will hurt first-quarter earnings. Citigroup Inc. tumbled on a prediction that they lacked sufficient cash to maintain its $1.28 annual dividend. The market erased earlier gains sparked by speculation new phones will boost results at Apple Inc.
The Standard & Poor's 500 Index ended down 10.54 points at 1,315.22. The Dow Jones Industrial Average declined 86.06 to 12,216.4. The Nasdaq Composite Index decreased 19.65 to 2,261.18.
European shares dropped on concern an economic slowdown will erode earnings, while Asian stocks completed their biggest weekly gain of the year.
J.C. Penney tumbled $3.04 to $37.48. Store sales will decline in the quarter. Profit will be about 50 cents a share, less than the previously predicted. Target Corp. lost $1.29 to $49.69. Kohl's Corp. dropped $2.19 to $42.33. Macy's Inc. decreased $1.39 to $21.97.
Citigroup slumped 96 cents to $20.83. Analyst said earnings headwinds may force a reduction in the stock's payout. Analyst correctly predicted Citigroup would reduce its dividend two months before they announced its first-ever dividend cut in January.
Bank of America Corp. and Wachovia Corp. also may cut their dividends. Bank of America slipped 57 cents to $38.07. Wachovia declined $1.08 to $25.99.
Morgan Stanley fell 95 cents to $44.74. They talk with lenders to obtain a reduced credit backstop for its commercial paper after cutting the outstanding short-term debt to $16 billion from an average of $25.3 billion last year. Morgan Stanley is seeking $7.5 billion to replace $11 billion of credit that expires on April. Lenders are only willing to extend about $4.9 billion.
Fannie Mae and Freddie Mac fell after regulator said the government-chartered mortgage companies may raise as much as $20 billion in capital as part of an agreement that allows them to buy more debt securities. Fannie Mae lost $1.95 to $26.02. Freddie Mac dropped $1.63 to $25.45.
Shares also slumped as spending by U.S. consumers rose at the slowest pace in a year, a sign the economy may be in recession. The 0.1 percent advance in spending followed a 0.4 percent gain in January. The index of consumer sentiment decreased to 69.5 from 70.8. The measure is the lowest reading 1992.
Apple added $2.76 to $143.01. They may start selling iPhones with faster Internet connections to increasing earnings.
Bear Stearns Cos. fell 45 cents to $10.78. Bear chairman sold his entire stake in the Bear for $10.84. The move signaled a higher bid from JPMorgan Chase & Co. is unlikely.
Apollo Group Inc. tumbled $15.13 to $41.21. They said that it earned 41 cents a share less than the 52-cent average estimate of analysts.
Red Hat Inc. rose 96 cents to $18.49. They said fourth-quarter profit rose 7.4 percent, more than analysts estimated, after customers renewed subscription contracts.
Tenet Healthcare Corp. climbed 21 cents to $5.51. They will probably beat some analysts' forecasts for first-quarter results because of solid pricing, seasonably strong volume growth and good cost control.
Alcoa Inc. added 73 cents to $36.11. Analyst raised its recommendation to overweight. The downside risk to aluminum prices is less than for other commodities.
H.J. Heinz Co. added 79 cents to $46.89. Their rate was upgraded to outperform. Stock price predict to up by 6 percent to $56.
U.S. regulators are investigating whether traders spread false rumors about Lehman Brothers Holdings Inc.'s financial soundness to profit from a drop in the company's share price. The SEC has expanded an inquiry into whether investors including hedge funds tried to manipulate Bear Stearns Cos. stock to also review a decline in Lehman's shares. The Lehman probe examines short sales of the company's stock.
Lehman has tumbled 26 percent this month amid speculation that Wall Street firms can't fund their operations. A run on Bear Stearns two weeks ago forced they to sell itself to JPMorgan Chase & Co. at a fraction of its market value.
The SEC said it may look for signs of market manipulation or insider trading when examining incidents such as the near collapse of Bear Stearns. Such inquiries may focus on the dissemination of false or misleading information to investors by companies or other market participants.
Lehman stock plunged, falling 48 percent on speculation it would face a cash shortage similar to Bear Stearns. The shares recouped all their loss and then some by the next day's close of trading, after the firm announced first-quarter earnings and its cash position.
Currencies
The dollar posted drop against the euro as traders increased bets the Federal Reserve will cut borrowing costs further while the European Central Bank holds rates steady.
The currency fell against most currencies as reports showed U.S. manufacturing and housing weakened while German and French business confidence rose. The pound declined versus the euro as March consumer confidence slumped to a 15-year low.
The dollar traded at $1.5798 per euro. It traded at 99.25 yen. Yen traded at 156.80 per euro. The U.S. currency dropped 2.4 percent against the euro.
The Icelandic krona was the biggest loser against the dollar on concern financial firms will suffer from the global credit freeze. The risk of Iceland's banks defaulting rose above 49 percent, credit-default swaps show.
The Turkish lira dropped against the dollar and it remain week until a March 31 hearing on a suit brought by the chief prosecutor to shut down the ruling party for undermining secularism. The lira fell 2.4 percent to 1.3059 per dollar.
The pound dropped against most of the major currencies on the decline in consumer confidence and a separate report showing U.K. housing prices advanced at the slowest pace in a decade. Sterling fell 0.8 percent to a record of 79.29 pence against the euro.
ECB indicated they would raise borrowing costs if inflation accelerated. While the current benchmark rate of 4 percent is helping to contain inflation, the bank will act if its price-stability goal is threatened.
German business confidence rose as companies increased efficiency and reduced labor costs, helping them remain competitive. French business confidence got a boost from consumer spending and export orders.
Orders for U.S. durable goods unexpectedly fell, led by a slump in demand for machinery. Sales of new homes dropped last month to a 13-year low.
Europe's currency has gained 8.4 percent versus the dollar as traders reduced bets the ECB will lower rates this year. The Euribor interest-rate futures contract expiring in December increased to 4.04 percent, compared with 3.91 percent a week earlier.
Futures on the Chicago Board of Trade show traders increased bets the Fed will lower its 2.25 percent target lending rate by a half-percentage point on April 30.
The Dollar Index traded on ICE Futures was at 71.77, down from 72.71 a week ago.
Commodities
Oil
Crude oil fell more than $1 a barrel as the flow of oil to Iraq's Basra export terminal resumed after an explosion. Shipments through Iraq's southern pipeline system returned to normal yesterday. Iraqi pledged to maintain a crackdown on Shiite militias in Basra that has sparked violence across the country. The two main pipelines in the network were unaffected by the explosion and fire. A third pipeline was damaged by the fire, started by an explosive device. The system typically carries about 1.5 million barrels a day of Iraqi crude to the shipping terminal on the Persian Gulf.
Crude oil for May delivery fell $1.96 to settle at $105.62 a barrel. Brent crude for May settlement declined $1.23 to close at $103.77 a barrel.
The Organization of Petroleum Exporting Countries has no plans to increase output even with crude prices near a record. Oil demand is expected to decline in the second quarter by 1.2 million barrels a day, as winter end and the U.S. economic slowdown reduces consumption. OPEC's supply probably increased by 100,000 barrels a day in March,. The group's 13 members have supplied 32.9 million barrels a day, up from 32.8 million a day in February.
Gold
Gold fell after crude oil declined, reducing the appeal of the precious metal as an inflation hedge. Silver also slid. The UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials retreated on concern that a slowing U.S. economy may reduce demand.
Gold futures for June delivery fell $17.20 to $936.80 an ounce. Silver futures for May delivery fell 59.5 cents to $17.955 an ounce.
Reports showed U.S. consumer spending rose at the slowest pace. Consumer prices increased at a 2 percent annual rate, the Fed's forecast of 2 percent to 2.2 percent.
Oil fell touching $105.22 a barrel. Copper dropped 1.8 percent and soybeans fell 5.2 percent..
Wide price fluctuations in gold also may cause investors to pause. The historical volatility of gold futures, or the rate at which a price moves up and down, was 40 percent for the past 10 days before today. A month earlier, the 10-day rate was 17 percent. Gold has traded as low as $906.20 and as high as $960.30 this week. Still, a price decline is an opportunity for investors seeking a hedge against inflation and a falling dollar. The precious metal may rise to $1,100 in three months as oil climbs to $120 a barrel. A majority of traders, investors and analysts expect gold to climb next week.
Spending by US consumers rose in February at the slowest pace in more than a year. The 0.1 percent increase followed a 0.4 percent gain in January. The report also showed the Federal Reserve's most closely watched measure of inflation cooled.
Falling home prices, job losses and higher gasoline prices are driving down consumer spending. As the figures released, J.C. Penney Co. cut its sales and earnings forecasts.
The consumer sentiment index decreased to 69.5 from 70.8 and down from a preliminary reading of 70.5. The figure was less than analysts anticipated. Treasury notes strengthened, with the benchmark 10-year note yielding 3.44 percent down from 3.53 percent late yesterday. The Standard & Poor's 500 Retailing Index closed 2.7 percent lower. The core price measure rose 0.1 percent last month and up 2 percent from February 2007. The year-over-year increase matched the downwardly revised gain in January. The savings rate improved to 0.3 percent from a minus a 0.1 percent last month. A negative rate indicates consumers drew down savings to maintain spending. Adjusted for the increase in prices, spending was unchanged in February after increasing 0.1 percent. Inflation-adjusted spending on durable goods increased 0.2 percent. Purchases of non-durable goods decreased 0.1 percent and spending on services was unchanged. The biggest job losses and record fuel costs are eroding confidence and spending. The economy lost 85,000 jobs in early of the year. Consumer spending will grow at a 0.5 percent pace in the first quarter. More economists are forecasting a recession as job, retail sales and manufacturing data have deteriorated.
General Motors Corp. and Ford Motor Co. are among companies experiencing the slump in consumer demand.
Stock Market
U.S. stocks fell as J.C. Penney Co. forecast weaker sales and concern grew that further writedowns may jeopardize banks' access to capital.
J.C. Penney slipped after saying slower consumer spending will hurt first-quarter earnings. Citigroup Inc. tumbled on a prediction that they lacked sufficient cash to maintain its $1.28 annual dividend. The market erased earlier gains sparked by speculation new phones will boost results at Apple Inc.
The Standard & Poor's 500 Index ended down 10.54 points at 1,315.22. The Dow Jones Industrial Average declined 86.06 to 12,216.4. The Nasdaq Composite Index decreased 19.65 to 2,261.18.
European shares dropped on concern an economic slowdown will erode earnings, while Asian stocks completed their biggest weekly gain of the year.
J.C. Penney tumbled $3.04 to $37.48. Store sales will decline in the quarter. Profit will be about 50 cents a share, less than the previously predicted. Target Corp. lost $1.29 to $49.69. Kohl's Corp. dropped $2.19 to $42.33. Macy's Inc. decreased $1.39 to $21.97.
Citigroup slumped 96 cents to $20.83. Analyst said earnings headwinds may force a reduction in the stock's payout. Analyst correctly predicted Citigroup would reduce its dividend two months before they announced its first-ever dividend cut in January.
Bank of America Corp. and Wachovia Corp. also may cut their dividends. Bank of America slipped 57 cents to $38.07. Wachovia declined $1.08 to $25.99.
Morgan Stanley fell 95 cents to $44.74. They talk with lenders to obtain a reduced credit backstop for its commercial paper after cutting the outstanding short-term debt to $16 billion from an average of $25.3 billion last year. Morgan Stanley is seeking $7.5 billion to replace $11 billion of credit that expires on April. Lenders are only willing to extend about $4.9 billion.
Fannie Mae and Freddie Mac fell after regulator said the government-chartered mortgage companies may raise as much as $20 billion in capital as part of an agreement that allows them to buy more debt securities. Fannie Mae lost $1.95 to $26.02. Freddie Mac dropped $1.63 to $25.45.
Shares also slumped as spending by U.S. consumers rose at the slowest pace in a year, a sign the economy may be in recession. The 0.1 percent advance in spending followed a 0.4 percent gain in January. The index of consumer sentiment decreased to 69.5 from 70.8. The measure is the lowest reading 1992.
Apple added $2.76 to $143.01. They may start selling iPhones with faster Internet connections to increasing earnings.
Bear Stearns Cos. fell 45 cents to $10.78. Bear chairman sold his entire stake in the Bear for $10.84. The move signaled a higher bid from JPMorgan Chase & Co. is unlikely.
Apollo Group Inc. tumbled $15.13 to $41.21. They said that it earned 41 cents a share less than the 52-cent average estimate of analysts.
Red Hat Inc. rose 96 cents to $18.49. They said fourth-quarter profit rose 7.4 percent, more than analysts estimated, after customers renewed subscription contracts.
Tenet Healthcare Corp. climbed 21 cents to $5.51. They will probably beat some analysts' forecasts for first-quarter results because of solid pricing, seasonably strong volume growth and good cost control.
Alcoa Inc. added 73 cents to $36.11. Analyst raised its recommendation to overweight. The downside risk to aluminum prices is less than for other commodities.
H.J. Heinz Co. added 79 cents to $46.89. Their rate was upgraded to outperform. Stock price predict to up by 6 percent to $56.
U.S. regulators are investigating whether traders spread false rumors about Lehman Brothers Holdings Inc.'s financial soundness to profit from a drop in the company's share price. The SEC has expanded an inquiry into whether investors including hedge funds tried to manipulate Bear Stearns Cos. stock to also review a decline in Lehman's shares. The Lehman probe examines short sales of the company's stock.
Lehman has tumbled 26 percent this month amid speculation that Wall Street firms can't fund their operations. A run on Bear Stearns two weeks ago forced they to sell itself to JPMorgan Chase & Co. at a fraction of its market value.
The SEC said it may look for signs of market manipulation or insider trading when examining incidents such as the near collapse of Bear Stearns. Such inquiries may focus on the dissemination of false or misleading information to investors by companies or other market participants.
Lehman stock plunged, falling 48 percent on speculation it would face a cash shortage similar to Bear Stearns. The shares recouped all their loss and then some by the next day's close of trading, after the firm announced first-quarter earnings and its cash position.
Currencies
The dollar posted drop against the euro as traders increased bets the Federal Reserve will cut borrowing costs further while the European Central Bank holds rates steady.
The currency fell against most currencies as reports showed U.S. manufacturing and housing weakened while German and French business confidence rose. The pound declined versus the euro as March consumer confidence slumped to a 15-year low.
The dollar traded at $1.5798 per euro. It traded at 99.25 yen. Yen traded at 156.80 per euro. The U.S. currency dropped 2.4 percent against the euro.
The Icelandic krona was the biggest loser against the dollar on concern financial firms will suffer from the global credit freeze. The risk of Iceland's banks defaulting rose above 49 percent, credit-default swaps show.
The Turkish lira dropped against the dollar and it remain week until a March 31 hearing on a suit brought by the chief prosecutor to shut down the ruling party for undermining secularism. The lira fell 2.4 percent to 1.3059 per dollar.
The pound dropped against most of the major currencies on the decline in consumer confidence and a separate report showing U.K. housing prices advanced at the slowest pace in a decade. Sterling fell 0.8 percent to a record of 79.29 pence against the euro.
ECB indicated they would raise borrowing costs if inflation accelerated. While the current benchmark rate of 4 percent is helping to contain inflation, the bank will act if its price-stability goal is threatened.
German business confidence rose as companies increased efficiency and reduced labor costs, helping them remain competitive. French business confidence got a boost from consumer spending and export orders.
Orders for U.S. durable goods unexpectedly fell, led by a slump in demand for machinery. Sales of new homes dropped last month to a 13-year low.
Europe's currency has gained 8.4 percent versus the dollar as traders reduced bets the ECB will lower rates this year. The Euribor interest-rate futures contract expiring in December increased to 4.04 percent, compared with 3.91 percent a week earlier.
Futures on the Chicago Board of Trade show traders increased bets the Fed will lower its 2.25 percent target lending rate by a half-percentage point on April 30.
The Dollar Index traded on ICE Futures was at 71.77, down from 72.71 a week ago.
Commodities
Oil
Crude oil fell more than $1 a barrel as the flow of oil to Iraq's Basra export terminal resumed after an explosion. Shipments through Iraq's southern pipeline system returned to normal yesterday. Iraqi pledged to maintain a crackdown on Shiite militias in Basra that has sparked violence across the country. The two main pipelines in the network were unaffected by the explosion and fire. A third pipeline was damaged by the fire, started by an explosive device. The system typically carries about 1.5 million barrels a day of Iraqi crude to the shipping terminal on the Persian Gulf.
Crude oil for May delivery fell $1.96 to settle at $105.62 a barrel. Brent crude for May settlement declined $1.23 to close at $103.77 a barrel.
The Organization of Petroleum Exporting Countries has no plans to increase output even with crude prices near a record. Oil demand is expected to decline in the second quarter by 1.2 million barrels a day, as winter end and the U.S. economic slowdown reduces consumption. OPEC's supply probably increased by 100,000 barrels a day in March,. The group's 13 members have supplied 32.9 million barrels a day, up from 32.8 million a day in February.
Gold
Gold fell after crude oil declined, reducing the appeal of the precious metal as an inflation hedge. Silver also slid. The UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials retreated on concern that a slowing U.S. economy may reduce demand.
Gold futures for June delivery fell $17.20 to $936.80 an ounce. Silver futures for May delivery fell 59.5 cents to $17.955 an ounce.
Reports showed U.S. consumer spending rose at the slowest pace. Consumer prices increased at a 2 percent annual rate, the Fed's forecast of 2 percent to 2.2 percent.
Oil fell touching $105.22 a barrel. Copper dropped 1.8 percent and soybeans fell 5.2 percent..
Wide price fluctuations in gold also may cause investors to pause. The historical volatility of gold futures, or the rate at which a price moves up and down, was 40 percent for the past 10 days before today. A month earlier, the 10-day rate was 17 percent. Gold has traded as low as $906.20 and as high as $960.30 this week. Still, a price decline is an opportunity for investors seeking a hedge against inflation and a falling dollar. The precious metal may rise to $1,100 in three months as oil climbs to $120 a barrel. A majority of traders, investors and analysts expect gold to climb next week.
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