AP
Saturday February 23, 5:58 pm ET
By Andrew Welsh-Huggins, Associated Press Writer
Governors: Black Coal Must Be Part of Green Energy Debate
WASHINGTON (AP) -- Governors pushing alternative energy development are not shying from coal, a major culprit in global warming but also a homegrown energy source and an economic lifeline for many states.
Leaders of coal-rich states say clean-coal technology is a must. Governors from states without coal want more evidence the technology works.
"There's no doubt there's a tension and there's no doubt there is very rapidly growing public opposition to coal," said Gov. Jim Doyle, D-Wis. His state relies heavily on coal for power although Wisconsin is not a coal producer.
Energy tops the agenda at the governors' annual winter meeting. The group's new clean energy initiative seeks to promote renewable fuels such as ethanol and biodiesel and reducing greenhouse gas emissions.
"Next-generation coal is going to need to continue to be part of our energy future for this country," said GOP Gov. Tim Pawlenty of Minnesota, chairman of the National Governors Association.
"It is abundant, it is available, it is Americanized in the sense that we control the supply," he said Saturday. "We would be incomplete and doing a disservice to the debate and the ultimate policy direction that we're going to take if we don't envision coal being part of that."
Next-generation coal typically refers to capturing and somehow sequestering or storing the carbon that coal produces. It also envisions reducing or eliminating emissions as coal is burned.
Pawlenty has embraced renewable fuels such as corn-based ethanol and conservation, but he also promotes clean-coal technology.
Such technology is a rallying cry for many coal-producing states. They say it is possible to continue relying on the fossil fuel while minimizing its impact on the environment.
Gov. Ed Rendell, D-Pa., envisions an economic turnaround if clean-coal technology takes off.
"Coal states would be back in business big time and the economies would flourish," said Rendell, the association's vice chairman.
Presidents of two of the country's biggest power companies urged governors not to dismiss coal, calling it the country's most abundant energy resource.
"We cannot ignore coal, we cannot demonize coal," said Thomas Farrell, chairman of Richmond, Va.-based Dominion Resources Inc.
Michael Morris, chairman of Columbus, Ohio-based American Electric Power Co., said "the whole notion of delegitimizing coal is something we should all be frightened of."
Gov. John Baldacci, D-Maine, needs to hear more before he would include clean-coal technology among the promising energy ideas for the country. His state promotes renewable energy produced through wind, solar and even tides.
"You have to deal with the coal states, but I don't think you want them doing more of what they're doing until they change what they're doing and make it truly the next generation," he said in an interview.
"Not just say clean-coal technology, but really do clean-coal technology."
Proponents say all energy sources have their problems. The key, says Gov. Brian Schweitzer, D-Mont., is a national energy policy with many options and sources.
That is important because electricity demand will increase in the future. For instance, Schweitzer predicted that 10 years from now a significant number of cars will be plug-in hybrid vehicles, which will require more power plants, not fewer.
Coal "has a CO2 problem, wind has a reliability problem, solar has a price problem, nukes have a price and radiation problem," Schweitzer said. "So all of those technologies have opportunities. but they all have problems -- coal's no different."
He added, "What I can say about coal, is we have it. We have it in a greater supply than anyplace else on the planet."
Doyle, the Wisconsin governor, said the emerging consensus is a mix of approaches. He said the state's reliance on coal for electricity will decline but definitely not disappear.
National Governors Association: http://www.nga.org
Saturday, February 23, 2008
Boeing Tries to Hold Onto Tanker Deal
AP
Saturday February 23, 6:01 am ET
By Joelle Tessler, AP Business Writer
Boeing Will Try to Hold on to Lucrative Tanker Deal When Air Force Awards $40B in Contracts
WASHINGTON (AP) -- The Air Force is likely days away from handing out one of the biggest Pentagon contracts in years -- a deal valued at up to $40 billion to replace 179 planes in its fleet of aerial refueling tankers.
For the three companies bidding, there is more at stake than just the monetary award: jobs and reputation.
Boeing Co. has supplied the Air Force with refueling tankers for nearly 50 years and doesn't want to let go of that. The incumbent is considered the favorite to win -- an assumption already reflected in its stock price.
But European Aeronautic Defence and Space Co. and its U.S. partner, Northrop Grumman Corp., want to be in on the game. For France-based EADS, the parent of rival Airbus, the contract is an entree into the massive American military market just as overseas spending cools. And for Northrop Grumman, it would tap into a major new military revenue stream at a time when Pentagon spending may be leveling off.
Analysts say the tanker award could be announced any time after Pentagon officials meet Monday to sign off on the Air Force's tanker purchase plan.
The contract -- worth $30 billion to $40 billion over 10 to 15 years -- is the first of three deals to replace the Air Force's entire fleet of nearly 600 tankers, which allow aircraft to refuel without landing.
For Wall Street, the award's potential really takes off with the follow-on contracts likely going to the incumbent. As much as $100 billion over the next 30 years is at stake, says Loren Thompson, a defense industry analyst with Lexington Institute, a policy think tank.
Thompson said the Air Force will eventually buy more than 400 new tankers to modernize its full fleet in "the biggest new aircraft contract anywhere in the world." The Air Force currently flies 531 Eisenhower-era tankers and another 59 tankers built in the 1980s by McDonnell Douglas, now part of Boeing.
"This is one of the biggest defense contracts to come along in decades and will be for future decades," said Scott Hamilton, an aviation industry consultant based outside of Seattle. "You have to take the plums when they come along."
Because Northrop Grumman is considered an underdog, its shares likely will jump if it wins, but may not take a drubbing if the contract goes to Boeing. Yet Boeing's stock would almost certainly take a hit if the company loses, but only rise moderately if the award comes through since a win is already factored into the share price.
On Capitol Hill, members in both parties are lobbying hard for a victor whose spoils include local jobs.
Chicago-based Boeing would perform much of the tanker work in Everett, Wash., and Wichita, Kan., and use Pratt & Whitney engines built in Connecticut. The company says a win would support 44,000 new and existing jobs at Boeing and more than 300 suppliers in more than 40 states.
"The Boeing proposal is far superior," said Rep. Norm Dicks, D-Wash., a senior member of the House Appropriations Subcommittee on Defense who represents a district that is home many Boeing jobs. "I'm very hopeful that on the merits we're going to win."
Other Boeing supporters include Sen. Patty Murray, D-Wash.; Duncan Hunter of California, the top Republican on the House Armed Services Committee and former Speaker of the House Dennis Hastert, an Illinois Republican.
The EADS/Northrop Grumman team would perform its final assembly work in Mobile, Ala., although the underlying plane would mostly be built in Europe. And it would use General Electric engines built in North Carolina and Ohio. Northrop Grumman, which is based in Los Angeles, estimates a Northrop/EADS win would produce 2,000 new jobs in Mobile and support 25,000 jobs at suppliers nationwide.
Alabama Sens. Jeff Sessions and Richard Shelby, both Republicans, are cheering for the French to come to Mobile, as is Rep. Jo Bonner, R-Ala., who represents the district where Northrop has said it would assemble its tanker.
Presidential candidate John McCain, the top Republican on the Senate Armed Services Committee, also has a keen interest in the deal. McCain played a lead role in uncovering a procurement scandal in 2003 that sent a top Air Force acquisition official to prison for conflict of interest and led to the collapse of an earlier tanker contract with Boeing.
Despite that history, Wall Street expects Boeing to win the new award because of its well-established relationship with the Air Force and prior contract wins.
"For Boeing, this is a pride issue," Hamilton said.
It's become an issue of not just corporate, but national pride. Boeing has managed to paint the competition as a fight between an American company and its European rival. Although parts of both tankers would be made overseas, Boeing has raised pointed questions about why the Air Force would award such an important contract to a foreign company.
Analysts say Boeing also has an advantage because its KC-767 tanker is smaller and lighter than the KC-30 being offered by EADS and Northrop Grumman. That means the Boeing tanker would take up less space on the ground and burn less fuel. Still, the KC-30's larger size will enable it to carry more fuel, cargo or personnel on individual flights -- making it a more efficient plane using Air Force criteria, Northrop Grumman stressed.
EADS and Northrop Grumman estimate that compared with the KC-767, the Air Force would need 20 percent fewer KC-30 tankers to meet its refueling needs.
Despite all the drama, at least one analyst stressed that losing the tanker contract would not be a disaster for any of the companies bidding on it.
After all, the contract amounts to just over one tanker a month, noted Richard Aboulafia, an analyst with the aerospace consulting firm Teal Group. And with Boeing and Airbus each booking orders for 500 planes a year, that represents just a "drop in the bucket for the huge commercial jetliner market."
Associated Press Writers Matthew Daly and Ben Evans in Washington contributed to this report.
Saturday February 23, 6:01 am ET
By Joelle Tessler, AP Business Writer
Boeing Will Try to Hold on to Lucrative Tanker Deal When Air Force Awards $40B in Contracts
WASHINGTON (AP) -- The Air Force is likely days away from handing out one of the biggest Pentagon contracts in years -- a deal valued at up to $40 billion to replace 179 planes in its fleet of aerial refueling tankers.
For the three companies bidding, there is more at stake than just the monetary award: jobs and reputation.
Boeing Co. has supplied the Air Force with refueling tankers for nearly 50 years and doesn't want to let go of that. The incumbent is considered the favorite to win -- an assumption already reflected in its stock price.
But European Aeronautic Defence and Space Co. and its U.S. partner, Northrop Grumman Corp., want to be in on the game. For France-based EADS, the parent of rival Airbus, the contract is an entree into the massive American military market just as overseas spending cools. And for Northrop Grumman, it would tap into a major new military revenue stream at a time when Pentagon spending may be leveling off.
Analysts say the tanker award could be announced any time after Pentagon officials meet Monday to sign off on the Air Force's tanker purchase plan.
The contract -- worth $30 billion to $40 billion over 10 to 15 years -- is the first of three deals to replace the Air Force's entire fleet of nearly 600 tankers, which allow aircraft to refuel without landing.
For Wall Street, the award's potential really takes off with the follow-on contracts likely going to the incumbent. As much as $100 billion over the next 30 years is at stake, says Loren Thompson, a defense industry analyst with Lexington Institute, a policy think tank.
Thompson said the Air Force will eventually buy more than 400 new tankers to modernize its full fleet in "the biggest new aircraft contract anywhere in the world." The Air Force currently flies 531 Eisenhower-era tankers and another 59 tankers built in the 1980s by McDonnell Douglas, now part of Boeing.
"This is one of the biggest defense contracts to come along in decades and will be for future decades," said Scott Hamilton, an aviation industry consultant based outside of Seattle. "You have to take the plums when they come along."
Because Northrop Grumman is considered an underdog, its shares likely will jump if it wins, but may not take a drubbing if the contract goes to Boeing. Yet Boeing's stock would almost certainly take a hit if the company loses, but only rise moderately if the award comes through since a win is already factored into the share price.
On Capitol Hill, members in both parties are lobbying hard for a victor whose spoils include local jobs.
Chicago-based Boeing would perform much of the tanker work in Everett, Wash., and Wichita, Kan., and use Pratt & Whitney engines built in Connecticut. The company says a win would support 44,000 new and existing jobs at Boeing and more than 300 suppliers in more than 40 states.
"The Boeing proposal is far superior," said Rep. Norm Dicks, D-Wash., a senior member of the House Appropriations Subcommittee on Defense who represents a district that is home many Boeing jobs. "I'm very hopeful that on the merits we're going to win."
Other Boeing supporters include Sen. Patty Murray, D-Wash.; Duncan Hunter of California, the top Republican on the House Armed Services Committee and former Speaker of the House Dennis Hastert, an Illinois Republican.
The EADS/Northrop Grumman team would perform its final assembly work in Mobile, Ala., although the underlying plane would mostly be built in Europe. And it would use General Electric engines built in North Carolina and Ohio. Northrop Grumman, which is based in Los Angeles, estimates a Northrop/EADS win would produce 2,000 new jobs in Mobile and support 25,000 jobs at suppliers nationwide.
Alabama Sens. Jeff Sessions and Richard Shelby, both Republicans, are cheering for the French to come to Mobile, as is Rep. Jo Bonner, R-Ala., who represents the district where Northrop has said it would assemble its tanker.
Presidential candidate John McCain, the top Republican on the Senate Armed Services Committee, also has a keen interest in the deal. McCain played a lead role in uncovering a procurement scandal in 2003 that sent a top Air Force acquisition official to prison for conflict of interest and led to the collapse of an earlier tanker contract with Boeing.
Despite that history, Wall Street expects Boeing to win the new award because of its well-established relationship with the Air Force and prior contract wins.
"For Boeing, this is a pride issue," Hamilton said.
It's become an issue of not just corporate, but national pride. Boeing has managed to paint the competition as a fight between an American company and its European rival. Although parts of both tankers would be made overseas, Boeing has raised pointed questions about why the Air Force would award such an important contract to a foreign company.
Analysts say Boeing also has an advantage because its KC-767 tanker is smaller and lighter than the KC-30 being offered by EADS and Northrop Grumman. That means the Boeing tanker would take up less space on the ground and burn less fuel. Still, the KC-30's larger size will enable it to carry more fuel, cargo or personnel on individual flights -- making it a more efficient plane using Air Force criteria, Northrop Grumman stressed.
EADS and Northrop Grumman estimate that compared with the KC-767, the Air Force would need 20 percent fewer KC-30 tankers to meet its refueling needs.
Despite all the drama, at least one analyst stressed that losing the tanker contract would not be a disaster for any of the companies bidding on it.
After all, the contract amounts to just over one tanker a month, noted Richard Aboulafia, an analyst with the aerospace consulting firm Teal Group. And with Boeing and Airbus each booking orders for 500 planes a year, that represents just a "drop in the bucket for the huge commercial jetliner market."
Associated Press Writers Matthew Daly and Ben Evans in Washington contributed to this report.
Stocks Turn Positive After Ambac Report
AP
Friday February 22, 6:16 pm ET
By Tim Paradis, AP Business Writer
Stocks Reverse Steep Losses After Report Indicates Deal to Aid Troubled Bond Insurer Is Near
NEW YORK (AP) -- Wall Street staged a dramatic turnaround Friday, shooting higher in the last half-hour of trading after word that a bailout plan for troubled bond insurer Ambac Financial could be announced next week. The major indexes ended a week of choppy trading mixed.
CNBC reported shortly before the closing bell that a plan to help shore up the finances of Ambac Financial Group Inc. could be announced Monday or Tuesday. Ambac shares jumped on the report and finished up $1.48, or 16 percent, at $10.71.
The market's turnaround came after nearly two full days of selling. The Dow Jones industrial average had been down nearly 130 points, but by the close, showed a 225-point reversal from its lows of the session.
"There's probably some validity to the rumors," said Jim Herrick, manager of equity trading at Baird & Co., referring to traders' speculation about Ambac. "With the overall financial crunch we've experienced, this brings new confidence in the sector."
The Dow rose 96.72, or 0.79 percent, to 12,381.02.
Broader stock indicators also moved higher. The Standard & Poor's 500 index rose 10.58, or 0.79 percent, to 1,353.11, and the Nasdaq composite index rose 3.57, or 0.16 percent, to 2,303.35.
For the week, the Dow edged up 0.27 percent, while the S&P 500 rose 0.23 percent and the Nasdaq lost 0.79 percent.
The market's early decline followed a sell-off Thursday that left the Dow down more than 140 points, or 1.15 percent. Investors worried about a weaker-than-expected reading on regional manufacturing from the Federal Reserve Bank of Philadelphia as well as another drop in the Conference Board's monthly index of leading economic indicators.
Bond prices reversed alongside stocks. The yield on the 10-year Treasury note, which moves opposite its price, rose to 3.80 percent in late trading from 3.78 percent late Thursday. The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude for April delivery rose 58 cents to settle at $98.81 a barrel on the New York Mercantile Exchange amid concerns about possible supply disruptions and cold weather.
The day's late reversal appeared to ease some of Wall Street's concerns about the prospects for the financial sector and the overall economy after several weak economic readings. The reports arriving in recent weeks have raised questions about whether the Federal Reserve will be able to fend off a recession. There have also been more urgent fears the U.S. may be entering a period of stagflation -- when stalling growth accompanies rising prices -- for the first time since the 1970s.
As occurred Wednesday and again late Friday, investors at times set aside those concerns and snapped up stocks either to cover bets that stocks would fall or amid genuine, if tentative, optimism that officials from the Fed to other parts of the government could help right the economy. Wednesday's gains followed a quiet start to the week Tuesday -- markets were closed for Presidents Day Monday -- and came after minutes from the Fed's last meeting indicated the central bank plans to lower interest rates as needed and look past some gathering concerns about inflation.
Wall Street's bursts of optimism haven't proven long-lasting. Investors remain concerned that the economy could be so weak that rate cuts, which take months to work their way through the economy, won't stave off a further slowdown. A government-backed plan to aid bond insurers could help boost confidence in the bond market, where a lack of confidence has crimped the flow of money.
The Fed's next rate-setting meeting is scheduled for March 18. Policymakers lowered key interest rates a half-point to 3 percent on Jan. 30, following an emergency three-quarter point cut the previous week.
Ryan Detrick, strategist at Schaeffer's Investment Research in Cincinnati, said that among the reports due next week, investors will be looking to readings on producer prices -- a key measure of inflation -- as well as on consumer sentiment. He noted that recent consumer confidence figures, which have been weak, added to Wall Street's concerns that hesitant consumers could pare their spending.
A pullback among buyers is an unwelcome prospect for investors as consumer spending accounts for more than two-thirds of U.S. economic activity.
Meanwhile, Fed Chairman Ben Bernanke will be testifying about the economy during two appearances on Capitol Hill.
In corporate news, Merrill Lynch lowered its ratings on government-sponsored lenders Freddie Mac and Fannie Mae to "sell," contending the companies face continued headwinds amid the credit crisis. Freddie Mac fell $1.14, or 4.1 percent, to $26.61, while Fannie Mae declined 27 cents to $28.72.
Software maker Intuit Inc. fell $2.74, or 9.2 percent, to $27.05 after posting a 21 percent decline in its second-quarter profit late Thursday.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where consolidated volume came to 3.46 billion shares, compared with 3.55 billion seen Thursday.
The Russell 2000 index of smaller companies slipped 0.85, or 0.12 percent, to 695.43.
Overseas, Japan's Nikkei stock average closed down 1.37 percent. Britain's FTSE 100 fell 0.74 percent, Germany's DAX index closed down 1.43 percent, and France's CAC-40 slid 0.71 percent.
The Dow Jones industrial average ended the week up 32.81, or 0.27 percent, at 12,381.02. The Standard & Poor's 500 index finished up 3.12, or 0.23 percent, at 1,353.11. The Nasdaq composite index ended the week down 18.45, or 0.79 percent, at 2,303.35.
The Russell 2000 index finished the week down 6.09, or 0.87 percent, at 695.43.
The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index that measures 5,000 U.S. based companies -- ended Friday at 13,663.03, up 10.30 points, or 0.08 percent, for the week. A year ago, the index was at 14,778.71.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Friday February 22, 6:16 pm ET
By Tim Paradis, AP Business Writer
Stocks Reverse Steep Losses After Report Indicates Deal to Aid Troubled Bond Insurer Is Near
NEW YORK (AP) -- Wall Street staged a dramatic turnaround Friday, shooting higher in the last half-hour of trading after word that a bailout plan for troubled bond insurer Ambac Financial could be announced next week. The major indexes ended a week of choppy trading mixed.
CNBC reported shortly before the closing bell that a plan to help shore up the finances of Ambac Financial Group Inc. could be announced Monday or Tuesday. Ambac shares jumped on the report and finished up $1.48, or 16 percent, at $10.71.
The market's turnaround came after nearly two full days of selling. The Dow Jones industrial average had been down nearly 130 points, but by the close, showed a 225-point reversal from its lows of the session.
"There's probably some validity to the rumors," said Jim Herrick, manager of equity trading at Baird & Co., referring to traders' speculation about Ambac. "With the overall financial crunch we've experienced, this brings new confidence in the sector."
The Dow rose 96.72, or 0.79 percent, to 12,381.02.
Broader stock indicators also moved higher. The Standard & Poor's 500 index rose 10.58, or 0.79 percent, to 1,353.11, and the Nasdaq composite index rose 3.57, or 0.16 percent, to 2,303.35.
For the week, the Dow edged up 0.27 percent, while the S&P 500 rose 0.23 percent and the Nasdaq lost 0.79 percent.
The market's early decline followed a sell-off Thursday that left the Dow down more than 140 points, or 1.15 percent. Investors worried about a weaker-than-expected reading on regional manufacturing from the Federal Reserve Bank of Philadelphia as well as another drop in the Conference Board's monthly index of leading economic indicators.
Bond prices reversed alongside stocks. The yield on the 10-year Treasury note, which moves opposite its price, rose to 3.80 percent in late trading from 3.78 percent late Thursday. The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude for April delivery rose 58 cents to settle at $98.81 a barrel on the New York Mercantile Exchange amid concerns about possible supply disruptions and cold weather.
The day's late reversal appeared to ease some of Wall Street's concerns about the prospects for the financial sector and the overall economy after several weak economic readings. The reports arriving in recent weeks have raised questions about whether the Federal Reserve will be able to fend off a recession. There have also been more urgent fears the U.S. may be entering a period of stagflation -- when stalling growth accompanies rising prices -- for the first time since the 1970s.
As occurred Wednesday and again late Friday, investors at times set aside those concerns and snapped up stocks either to cover bets that stocks would fall or amid genuine, if tentative, optimism that officials from the Fed to other parts of the government could help right the economy. Wednesday's gains followed a quiet start to the week Tuesday -- markets were closed for Presidents Day Monday -- and came after minutes from the Fed's last meeting indicated the central bank plans to lower interest rates as needed and look past some gathering concerns about inflation.
Wall Street's bursts of optimism haven't proven long-lasting. Investors remain concerned that the economy could be so weak that rate cuts, which take months to work their way through the economy, won't stave off a further slowdown. A government-backed plan to aid bond insurers could help boost confidence in the bond market, where a lack of confidence has crimped the flow of money.
The Fed's next rate-setting meeting is scheduled for March 18. Policymakers lowered key interest rates a half-point to 3 percent on Jan. 30, following an emergency three-quarter point cut the previous week.
Ryan Detrick, strategist at Schaeffer's Investment Research in Cincinnati, said that among the reports due next week, investors will be looking to readings on producer prices -- a key measure of inflation -- as well as on consumer sentiment. He noted that recent consumer confidence figures, which have been weak, added to Wall Street's concerns that hesitant consumers could pare their spending.
A pullback among buyers is an unwelcome prospect for investors as consumer spending accounts for more than two-thirds of U.S. economic activity.
Meanwhile, Fed Chairman Ben Bernanke will be testifying about the economy during two appearances on Capitol Hill.
In corporate news, Merrill Lynch lowered its ratings on government-sponsored lenders Freddie Mac and Fannie Mae to "sell," contending the companies face continued headwinds amid the credit crisis. Freddie Mac fell $1.14, or 4.1 percent, to $26.61, while Fannie Mae declined 27 cents to $28.72.
Software maker Intuit Inc. fell $2.74, or 9.2 percent, to $27.05 after posting a 21 percent decline in its second-quarter profit late Thursday.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where consolidated volume came to 3.46 billion shares, compared with 3.55 billion seen Thursday.
The Russell 2000 index of smaller companies slipped 0.85, or 0.12 percent, to 695.43.
Overseas, Japan's Nikkei stock average closed down 1.37 percent. Britain's FTSE 100 fell 0.74 percent, Germany's DAX index closed down 1.43 percent, and France's CAC-40 slid 0.71 percent.
The Dow Jones industrial average ended the week up 32.81, or 0.27 percent, at 12,381.02. The Standard & Poor's 500 index finished up 3.12, or 0.23 percent, at 1,353.11. The Nasdaq composite index ended the week down 18.45, or 0.79 percent, at 2,303.35.
The Russell 2000 index finished the week down 6.09, or 0.87 percent, at 695.43.
The Dow Jones Wilshire 5000 Composite Index -- a free-float weighted index that measures 5,000 U.S. based companies -- ended Friday at 13,663.03, up 10.30 points, or 0.08 percent, for the week. A year ago, the index was at 14,778.71.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Friday, February 22, 2008
Microsoft to Reveal Software Secrets on Internet
Reversal May Allow
Better Compatibility
With Rival Products
By ROBERT A. GUTH, BEN WORTHEN and CHARLES FORELLE
February 22, 2008; Page A3
Microsoft Corp., aiming to battle Internet rivals, announced a broad set of moves to unlock its tightly protected programs and encourage software makers to build add-on products.
The action reflects the same new dynamics in technology as Microsoft's bid to acquire Yahoo Inc.: Internet companies, in particular Google Inc., are threatening to undermine Microsoft's business of software for personal computers. They are attacking Microsoft with a barrage of smaller online programs that are easy to mix and match. Any programmer can pick up Google's online maps, for instance, and mix in other features such as a calendar of events at various locations.
Microsoft said that for the first time it will allow key details of its software to be freely available over the Internet. That doesn't mean people can download Microsoft Word or Excel without paying for it, but it does mean programmers can more easily build services that work with Microsoft programs without paying licensing or other fees.
MORE ON MICROSOFT
• BizTech: Microsoft Opens Up
• Microsoft's Office Push Scrutinized
2/8/08
• EU Opens New Probes of Microsoft
1/15/08
• Microsoft Drops EU Appeal
10/24/07Yesterday's announcement comes at a generational turning point for Microsoft. Chairman Bill Gates this June plans to retire from full-time work at Microsoft, where he pioneered the personal-computer software business. Chief Executive Steve Ballmer is finding he must rethink some of Mr. Gates's core tenets.
By opening some of its software, Microsoft is also altering business practices that have been the target of European antitrust regulators for years. However, European Union officials greeted the news skeptically, saying the announcement "follows at least four similar statements by Microsoft in the past on the importance of interoperability" between the company's own programs and others' programs.
As part of the changes, Microsoft yesterday published 30,000 pages of technical documents describing how its products work -- documents the company previously only made available for a fee. The programs for which it is providing a peek include Windows Vista, the basic operating software that underlies many PCs, and the Office set of programs for email, spreadsheets and other functions.
The company announced other legal and technical changes to encourage software makers to build products that tie into Vista, Word, Excel and other Microsoft programs.
Powerful Tollgate
For 30 years, Microsoft has built its fortunes on software that runs on PCs. The company has tightly held onto the technical details of how that software works, a policy that enabled it to turn its Windows operating system into a powerful tollgate for other companies that wanted to get into the PC software business. Personified by Mr. Gates, Microsoft's software business became one of the most lucrative franchises in business history.
But Microsoft's traditional products aren't designed to evolve via the add-ons or tweaks of thousands of non-Microsoft programmers. Nor can they be easily mixed and matched with other software and services not controlled by Microsoft or its partners. Now the Internet is making that kind of evolution possible, and transforming the way software is made and distributed.
Many players, from Google to individual programmers, are using a host of free technologies to build new types of applications that work over the Internet. Popular programs such as Google Earth and free email services are the result. Increasingly, companies and individuals are melding existing Web sites and software into new applications.
The more people use these applications, the less need they have for Microsoft's applications, or even for the traditional personal computer that runs Windows. By making its software more accessible, Microsoft is hoping to maintain the PC's relevance.
In interviews, Microsoft executives acknowledged the shift. "The world really has changed as a function of the growth of the Internet...and how developers are choosing to write applications for it," said Ray Ozzie, Microsoft's chief software architect. Microsoft's changes "will have the practical effect of making Microsoft's technologies approachable in a mix-and-match manner," he said.
Mr. Ballmer described as "classic innovation of 20 years ago" the business of making software exclusively designed for PCs and the business that Microsoft so handily controls with its Windows operating system.
Some customers of Microsoft welcomed the changes. Minaz Sarangi, a technology executive at Dutch financial firm ING Groep NV, said integrating Microsoft's technology with technology from other companies, while possible, has traditionally taken a lot of effort. ING runs software from Microsoft and other companies on its servers -- back-office computers that process data -- and is testing customer-management software from Microsoft.
"The less proprietary Microsoft becomes, the better it is for everybody," Mr. Sarangi says.
Microsoft also promised not to sue developers who use its technology for noncommercial purposes. This removes another barrier that may have prevented individual developers and small companies from writing Microsoft-compatible software in the past, said Mike Gilpin, an analyst at Forrester Research. Companies using Microsoft's technology in commercial products will still need to pay royalties to the software giant.
The issue of how much access software developers should have to Microsoft's products has been at the core of the company's battles with European regulators. In a statement, Microsoft said it viewed the new initiative as a key part of its effort to comply with antitrust actions brought by the EU.
Antitrust Ruling
Last September, an appeals court in Luxembourg ruled against Microsoft in a long-running European case. That forced Microsoft to announce a month later that it would drop its appeals and take steps to license information to competitors.
The EU's antitrust watchdog signaled it would keep up its scrutiny. It said it wanted to verify that the principles announced by Microsoft, when put into practice, would end any concerns developers might have over infringement.
A key part of the just-ended case was whether Microsoft had to turn over interoperability information to a rival. Interoperability likewise takes a central role in one of two new antitrust probes announced by the EU just last month.
EU Skepticism
The EU's skepticism over yesterday's announcement in part stems from disappointment over the "Windows Principles," which Microsoft announced in July 2006 with great fanfare. Many of the principles -- such as a commitment to providing rival developers with access to interfaces that let their products talk with Windows -- are echoed in yesterday's announcement. But critics said the Windows Principles fell short.
Maurits Dolmans, a lawyer at Cleary Gottlieb Steen & Hamilton in Brussels who has represented complainants in the Microsoft case, said the new principles are good in theory. "We are not, a priori, negative, but skeptical because of past experience," he added.
Mr. Dolmans noted that Microsoft isn't making any promises about preferred placement of Microsoft services, such as an Internet search engine, within Windows. The EU is examining a complaint by browser maker Opera Software that Microsoft improperly ties its Internet Explorer browser to its dominant Windows software, making it harder for smaller rivals to compete.
One small company that welcomed the announcement is Fog Creek Software Inc. of Manhattan. Company chief Joel Spolsky, who worked at Microsoft in the 1990s, says he has been trying to make a better version of Microsoft's software that lets people access one another's computers over the Internet but didn't have the details he needed.
Yesterday, he located those lines of code tucked inside the 30,000 pages of information Microsoft released, he said. Before the code was available only under trade-secrets licenses.
Better Compatibility
With Rival Products
By ROBERT A. GUTH, BEN WORTHEN and CHARLES FORELLE
February 22, 2008; Page A3
Microsoft Corp., aiming to battle Internet rivals, announced a broad set of moves to unlock its tightly protected programs and encourage software makers to build add-on products.
The action reflects the same new dynamics in technology as Microsoft's bid to acquire Yahoo Inc.: Internet companies, in particular Google Inc., are threatening to undermine Microsoft's business of software for personal computers. They are attacking Microsoft with a barrage of smaller online programs that are easy to mix and match. Any programmer can pick up Google's online maps, for instance, and mix in other features such as a calendar of events at various locations.
Microsoft said that for the first time it will allow key details of its software to be freely available over the Internet. That doesn't mean people can download Microsoft Word or Excel without paying for it, but it does mean programmers can more easily build services that work with Microsoft programs without paying licensing or other fees.
MORE ON MICROSOFT
• BizTech: Microsoft Opens Up
• Microsoft's Office Push Scrutinized
2/8/08
• EU Opens New Probes of Microsoft
1/15/08
• Microsoft Drops EU Appeal
10/24/07Yesterday's announcement comes at a generational turning point for Microsoft. Chairman Bill Gates this June plans to retire from full-time work at Microsoft, where he pioneered the personal-computer software business. Chief Executive Steve Ballmer is finding he must rethink some of Mr. Gates's core tenets.
By opening some of its software, Microsoft is also altering business practices that have been the target of European antitrust regulators for years. However, European Union officials greeted the news skeptically, saying the announcement "follows at least four similar statements by Microsoft in the past on the importance of interoperability" between the company's own programs and others' programs.
As part of the changes, Microsoft yesterday published 30,000 pages of technical documents describing how its products work -- documents the company previously only made available for a fee. The programs for which it is providing a peek include Windows Vista, the basic operating software that underlies many PCs, and the Office set of programs for email, spreadsheets and other functions.
The company announced other legal and technical changes to encourage software makers to build products that tie into Vista, Word, Excel and other Microsoft programs.
Powerful Tollgate
For 30 years, Microsoft has built its fortunes on software that runs on PCs. The company has tightly held onto the technical details of how that software works, a policy that enabled it to turn its Windows operating system into a powerful tollgate for other companies that wanted to get into the PC software business. Personified by Mr. Gates, Microsoft's software business became one of the most lucrative franchises in business history.
But Microsoft's traditional products aren't designed to evolve via the add-ons or tweaks of thousands of non-Microsoft programmers. Nor can they be easily mixed and matched with other software and services not controlled by Microsoft or its partners. Now the Internet is making that kind of evolution possible, and transforming the way software is made and distributed.
Many players, from Google to individual programmers, are using a host of free technologies to build new types of applications that work over the Internet. Popular programs such as Google Earth and free email services are the result. Increasingly, companies and individuals are melding existing Web sites and software into new applications.
The more people use these applications, the less need they have for Microsoft's applications, or even for the traditional personal computer that runs Windows. By making its software more accessible, Microsoft is hoping to maintain the PC's relevance.
In interviews, Microsoft executives acknowledged the shift. "The world really has changed as a function of the growth of the Internet...and how developers are choosing to write applications for it," said Ray Ozzie, Microsoft's chief software architect. Microsoft's changes "will have the practical effect of making Microsoft's technologies approachable in a mix-and-match manner," he said.
Mr. Ballmer described as "classic innovation of 20 years ago" the business of making software exclusively designed for PCs and the business that Microsoft so handily controls with its Windows operating system.
Some customers of Microsoft welcomed the changes. Minaz Sarangi, a technology executive at Dutch financial firm ING Groep NV, said integrating Microsoft's technology with technology from other companies, while possible, has traditionally taken a lot of effort. ING runs software from Microsoft and other companies on its servers -- back-office computers that process data -- and is testing customer-management software from Microsoft.
"The less proprietary Microsoft becomes, the better it is for everybody," Mr. Sarangi says.
Microsoft also promised not to sue developers who use its technology for noncommercial purposes. This removes another barrier that may have prevented individual developers and small companies from writing Microsoft-compatible software in the past, said Mike Gilpin, an analyst at Forrester Research. Companies using Microsoft's technology in commercial products will still need to pay royalties to the software giant.
The issue of how much access software developers should have to Microsoft's products has been at the core of the company's battles with European regulators. In a statement, Microsoft said it viewed the new initiative as a key part of its effort to comply with antitrust actions brought by the EU.
Antitrust Ruling
Last September, an appeals court in Luxembourg ruled against Microsoft in a long-running European case. That forced Microsoft to announce a month later that it would drop its appeals and take steps to license information to competitors.
The EU's antitrust watchdog signaled it would keep up its scrutiny. It said it wanted to verify that the principles announced by Microsoft, when put into practice, would end any concerns developers might have over infringement.
A key part of the just-ended case was whether Microsoft had to turn over interoperability information to a rival. Interoperability likewise takes a central role in one of two new antitrust probes announced by the EU just last month.
EU Skepticism
The EU's skepticism over yesterday's announcement in part stems from disappointment over the "Windows Principles," which Microsoft announced in July 2006 with great fanfare. Many of the principles -- such as a commitment to providing rival developers with access to interfaces that let their products talk with Windows -- are echoed in yesterday's announcement. But critics said the Windows Principles fell short.
Maurits Dolmans, a lawyer at Cleary Gottlieb Steen & Hamilton in Brussels who has represented complainants in the Microsoft case, said the new principles are good in theory. "We are not, a priori, negative, but skeptical because of past experience," he added.
Mr. Dolmans noted that Microsoft isn't making any promises about preferred placement of Microsoft services, such as an Internet search engine, within Windows. The EU is examining a complaint by browser maker Opera Software that Microsoft improperly ties its Internet Explorer browser to its dominant Windows software, making it harder for smaller rivals to compete.
One small company that welcomed the announcement is Fog Creek Software Inc. of Manhattan. Company chief Joel Spolsky, who worked at Microsoft in the 1990s, says he has been trying to make a better version of Microsoft's software that lets people access one another's computers over the Internet but didn't have the details he needed.
Yesterday, he located those lines of code tucked inside the 30,000 pages of information Microsoft released, he said. Before the code was available only under trade-secrets licenses.
Stocks Fall As Market Awaits Data
AP
Friday February 22, 12:28 pm ET
By Tim Paradis, AP Business Writer
Stocks Fall for Second Session As Investors Await Economic Figures for Hints on Economy
NEW YORK (AP) -- Stocks fell Friday as investors with little news to trade on after Thursday's pullback kept selling ahead of economic figures due next week. The Dow Jones industrial average lost more than 100 points.
Investors seemed to be looking at corporate news as they awaited reports on existing home sales and durable goods set to arrive next week, but found few reasons to buy.
The market's decline follows a sell-off Thursday that left the Dow down more than 140 points, or 1.15 percent. Investors worried about a weaker-than-expected reading on regional manufacturing from the Federal Reserve Bank of Philadelphia as well as another drop in the Conference Board's monthly index of leading economic indicators.
"I think what really still seems to be dragging the market down are some of the those manufacturing numbers," said Ryan Detrick, strategist at Schaeffer's Investment Research in Cincinnati, referring to the Philadelphia Fed number as well as another regional manufacturing report from the New York Fed last week. "It just shows that the fears that the U.S. economy is in recession are continuing to dominate."
In midday trading, the Dow fell 109.50, or 0.89 percent, to 12,174.80.
Broader stock indicators also lost ground. The Standard & Poor's 500 index fell 13.55, or 1.01 percent, to 1,328.98, and the Nasdaq composite index slid 31.78, or 1.38 percent, to 2,268.00.
Declining issues outnumbered advancers by more than 2 to 1 on the New York Stock Exchange, where volume came to 534.5 million shares.
Bond prices rose as stocks declined. The yield on the 10-year Treasury note, which moves opposite its price, fell to 3.74 percent from 3.78 percent late Thursday. The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude for April delivery rose 68 cents to $98.91 on the New York Mercantile Exchange.
Wall Street has faced renewed concerns after a stream of mostly weak economic data in recent weeks has raised questions about whether the Federal Reserve will be able to fend off recession. There are also some fears the U.S. may be entering a period of stagflation for the first time since the 1970s. Stagflation brings slowing growth and rising inflation.
Investors have at times found reassurance from the central bank's statements that it will lower rates as needed, but that expectation hasn't been enough to shore up confidence in the stock market for more than brief periods. Wall Street remains concerned that the economy could be so weak that rate cuts, which take months to work their way through the economy, won't stave off a further slowdown.
The Fed's next rate-setting meeting is scheduled for March 18. Policymakers lowered key interest rates a half-point to 3 percent on Jan. 30, following an emergency three-quarter point cut the previous week.
Detrick said that among the reports due next week, investors will be looking to readings on producer prices -- a key measure of inflation -- as well as on consumer sentiment. He noted that recent consumer confidence figures, which have been weak, added to Wall Street's concerns that hesitant consumers could pare their spending.
A pullback among buyers is an unwelcome prospect for investors as about two-thirds of U.S. economic activity is tied to consumer spending.
In corporate news, Merrill Lynch lowered its ratings on government-sponsored lenders Freddie Mac and Fannie Mae to "sell," contending the companies face continued headwinds amid the credit crisis.
Freddie Mac fell $2.33, or 8.4 percent, to $25.42, while Fannie Mae declined $1.55, or 5.4 percent, to $27.44.
Software maker Intuit Inc. fell $3.67, or 12.3 percent, to $26.12 after posting a 21 percent decline in second-quarter profit late Thursday.
The Russell 2000 index of smaller companies fell 11.96, or 1.72 percent, to 684.32.
Overseas, Japan's Nikkei stock average closed down 1.37 percent. Britain's FTSE 100 fell 0.74 percent, Germany's DAX index closed down 1.43 percent, and France's CAC-40 dropped 0.71 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Friday February 22, 12:28 pm ET
By Tim Paradis, AP Business Writer
Stocks Fall for Second Session As Investors Await Economic Figures for Hints on Economy
NEW YORK (AP) -- Stocks fell Friday as investors with little news to trade on after Thursday's pullback kept selling ahead of economic figures due next week. The Dow Jones industrial average lost more than 100 points.
Investors seemed to be looking at corporate news as they awaited reports on existing home sales and durable goods set to arrive next week, but found few reasons to buy.
The market's decline follows a sell-off Thursday that left the Dow down more than 140 points, or 1.15 percent. Investors worried about a weaker-than-expected reading on regional manufacturing from the Federal Reserve Bank of Philadelphia as well as another drop in the Conference Board's monthly index of leading economic indicators.
"I think what really still seems to be dragging the market down are some of the those manufacturing numbers," said Ryan Detrick, strategist at Schaeffer's Investment Research in Cincinnati, referring to the Philadelphia Fed number as well as another regional manufacturing report from the New York Fed last week. "It just shows that the fears that the U.S. economy is in recession are continuing to dominate."
In midday trading, the Dow fell 109.50, or 0.89 percent, to 12,174.80.
Broader stock indicators also lost ground. The Standard & Poor's 500 index fell 13.55, or 1.01 percent, to 1,328.98, and the Nasdaq composite index slid 31.78, or 1.38 percent, to 2,268.00.
Declining issues outnumbered advancers by more than 2 to 1 on the New York Stock Exchange, where volume came to 534.5 million shares.
Bond prices rose as stocks declined. The yield on the 10-year Treasury note, which moves opposite its price, fell to 3.74 percent from 3.78 percent late Thursday. The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude for April delivery rose 68 cents to $98.91 on the New York Mercantile Exchange.
Wall Street has faced renewed concerns after a stream of mostly weak economic data in recent weeks has raised questions about whether the Federal Reserve will be able to fend off recession. There are also some fears the U.S. may be entering a period of stagflation for the first time since the 1970s. Stagflation brings slowing growth and rising inflation.
Investors have at times found reassurance from the central bank's statements that it will lower rates as needed, but that expectation hasn't been enough to shore up confidence in the stock market for more than brief periods. Wall Street remains concerned that the economy could be so weak that rate cuts, which take months to work their way through the economy, won't stave off a further slowdown.
The Fed's next rate-setting meeting is scheduled for March 18. Policymakers lowered key interest rates a half-point to 3 percent on Jan. 30, following an emergency three-quarter point cut the previous week.
Detrick said that among the reports due next week, investors will be looking to readings on producer prices -- a key measure of inflation -- as well as on consumer sentiment. He noted that recent consumer confidence figures, which have been weak, added to Wall Street's concerns that hesitant consumers could pare their spending.
A pullback among buyers is an unwelcome prospect for investors as about two-thirds of U.S. economic activity is tied to consumer spending.
In corporate news, Merrill Lynch lowered its ratings on government-sponsored lenders Freddie Mac and Fannie Mae to "sell," contending the companies face continued headwinds amid the credit crisis.
Freddie Mac fell $2.33, or 8.4 percent, to $25.42, while Fannie Mae declined $1.55, or 5.4 percent, to $27.44.
Software maker Intuit Inc. fell $3.67, or 12.3 percent, to $26.12 after posting a 21 percent decline in second-quarter profit late Thursday.
The Russell 2000 index of smaller companies fell 11.96, or 1.72 percent, to 684.32.
Overseas, Japan's Nikkei stock average closed down 1.37 percent. Britain's FTSE 100 fell 0.74 percent, Germany's DAX index closed down 1.43 percent, and France's CAC-40 dropped 0.71 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Thursday, February 21, 2008
Stocks Fall Amid Weak Economic Data
AP
Thursday February 21, 4:21 pm ET
By Joe Bel Bruno, AP Business Writer
Wall Street Falls After Weak Economic Data Sparks Concern About Recession
NEW YORK (AP) -- The stock market finished with a sharp loss Thursday after bleak readings on the economy heightened investors' fears of a recession. The Dow Jones industrial average fell more than 140 points.
Wall Street was disappointed when the Philadelphia Federal Reserve reported that regional manufacturing fell more than predicted. Another piece of bad news was the Conference Board's January index of leading economic indicators, which posted its fourth straight drop.
Traders have already been pricing in another interest rate cut -- perhaps up to half a percentage point -- after minutes from the Federal Reserve's last policy-setting meeting indicated central bankers will remain vigilant about the economy. The Fed, which meets again March 18, has forecasted slower growth and continued risks to the economy from housing and credit markets.
Though investors been assured by the central bank that it will lower rates again if necessary, that expectation has not been enough to galvanize their confidence in the stock market and the economy. Wall Street remains concerned that the economy could be so weak that rate cuts, which take months to work their way through the economy, won't prevent further deterioration.
"The Fed cutting rates is a little bit like a fire engine pulling up to your house," said Brian Gendreau, investment strategist for ING Investment Management. "You're happy help has arrived, but still, your house is burning down."
According to preliminary calculations, the Dow fell 142.96, or 1.15 percent, to 12,284.30.
The biggest loser among the 30 Dow components was General Motors Corp. after lender GMAC LLC, which is part-owned by GM, said it will slash hundreds of jobs at its auto finance business. GM fell $1.24, or 4.9 percent, to $24.30.
Broader indexes also declined. The Standard & Poor's 500 index shed 17.50, or 1.29 percent, to 1,342.53, while the Nasdaq composite index fell 27.32, or 1.17 percent, to 2,299.78.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Thursday February 21, 4:21 pm ET
By Joe Bel Bruno, AP Business Writer
Wall Street Falls After Weak Economic Data Sparks Concern About Recession
NEW YORK (AP) -- The stock market finished with a sharp loss Thursday after bleak readings on the economy heightened investors' fears of a recession. The Dow Jones industrial average fell more than 140 points.
Wall Street was disappointed when the Philadelphia Federal Reserve reported that regional manufacturing fell more than predicted. Another piece of bad news was the Conference Board's January index of leading economic indicators, which posted its fourth straight drop.
Traders have already been pricing in another interest rate cut -- perhaps up to half a percentage point -- after minutes from the Federal Reserve's last policy-setting meeting indicated central bankers will remain vigilant about the economy. The Fed, which meets again March 18, has forecasted slower growth and continued risks to the economy from housing and credit markets.
Though investors been assured by the central bank that it will lower rates again if necessary, that expectation has not been enough to galvanize their confidence in the stock market and the economy. Wall Street remains concerned that the economy could be so weak that rate cuts, which take months to work their way through the economy, won't prevent further deterioration.
"The Fed cutting rates is a little bit like a fire engine pulling up to your house," said Brian Gendreau, investment strategist for ING Investment Management. "You're happy help has arrived, but still, your house is burning down."
According to preliminary calculations, the Dow fell 142.96, or 1.15 percent, to 12,284.30.
The biggest loser among the 30 Dow components was General Motors Corp. after lender GMAC LLC, which is part-owned by GM, said it will slash hundreds of jobs at its auto finance business. GM fell $1.24, or 4.9 percent, to $24.30.
Broader indexes also declined. The Standard & Poor's 500 index shed 17.50, or 1.29 percent, to 1,342.53, while the Nasdaq composite index fell 27.32, or 1.17 percent, to 2,299.78.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Wednesday, February 20, 2008
Fed Forecasts Inflation, Unemployment
AP
Wednesday February 20, 2:50 pm ET
By Jeannine Aversa, AP Economics Writer
Fed Sees Slower Growth, Higher Unemployment and Higher Inflation This Year
WASHINGTON (AP) -- The Federal Reserve on Wednesday lowered its projection for economic growth this year, citing damage from the double blows of a housing slump and credit crunch. It said it also expects higher unemployment and inflation.
The updated forecasts come amid worry by Federal Reserve Chairman Ben Bernanke and his colleagues that the economy could continue to weaken, even after their aggressive interest rate cuts in January, according to minutes of those private deliberations released Wednesday.
"With no signs of stabilization in the housing sector and with financial conditions not yet stabilized, the committee agreed that downside risks to growth would remain even after this action," minutes of the Fed's Jan. 29-30 closed door meeting showed.
The Fed at that session voted to cut a key interest rate by one-half percentage point to 3 percent at that meeting. Just eight day earlier, the Fed, in an emergency session, slashed its rate by a rare three-quarters percentage point. The two rate cuts together marked the most dramatic rate reductions in a single month by the Fed in a quarter century.
Under its new economic forecast, the Fed said that it now believes the gross domestic product will grow between 1.3 percent and 2 percent this year. That's lower than a previous Fed forecast for growth, which at that time was estimated to be between 1.8 percent and 2.5 percent.
GDP is the value of all goods and services produced within the United States and is the best barometer of the country's economic fitness.
With economic growth slowing, the Fed projected that the national jobless rate will rise to between 5.2 percent to 5.3 percent this year. That is higher than the central bank's old forecast for the rate to climb to as high as 4.9 percent. Last year, the unemployment rate averaged 4.6 percent.
And, with energy prices marching upward, the Fed also raised its projection for inflation. The Fed now expects inflation to be between 2.1 percent and 2.4 percent this year. That's higher than its old forecast for inflation, which was estimated to come in at around 1.8 percent to 2.1 percent.
The Fed said its revised forecasts reflected a number of factors including "a further intensification of the housing market correction, tighter credit conditions .... ongoing turmoil in financial markets and higher oil prices."
The combination of slower economic growth and increasing inflation could complicate the Fed's work. The central bank is trying to keep the economy growing, while ensuring that inflation stays under control. The Fed's remedy for a weakening economy is interest rate cuts. To combat inflation, the Fed usually boosts rates.
Oil prices on Tuesday jumped to a new record -- topping $100 a barrel. Consumer prices, meanwhile, rose by a bigger-than-expected 0.4 percent in January, according to new government figures released Wednesday.
Fed policymakers were mindful that they needed to keep a close eye on inflation, minutes of the Jan. 29-30 meeting said.
And, some policymakers noted that when prospects for economic growth improved, "a reversal of a portion of the recent easing actions, possibly even a rapid reversal, might be appropriate," according to the documents.
Still, all but one of the Fed's members agreed to lower rates by a half-point at that time.
Richard Fisher, president of the Federal Reserve Bank of Dallas was the sole dissenter. He preferred no change. The minutes showed that Fisher felt that the level of interest rates was already "quite stimulative, while headline inflation was too high."
The minutes also revealed that the Fed conducted a conference call on Jan. 9, where policymakers reviewed economic data and financial market developments, which were worsening. It did not lower interest rates at that time, although most policymakers were of the view that "substantial additional policy easing in the near term might well be necessary" to help brace the wobbly economy.
As the financial situation continued to deteriorate, worldwide stocks markets plunged and recession fears intensified, Bernanke convened an emergency conference call on Jan. 21. Fed policymakers believed "the outlook for economic activity was weakening," details of that conference call showed. The Fed decided to slash rates by a dramatic three-quarters of a percentage point and make the announcement on the following morning, Jan. 22.
Demonstrating the Fed's "commitment to act decisively" to support the economy might reduce concerns about the weakening economy that seemed to be contributing to the worsening state of financial markets, according to the minutes. However, there was some concern expressed that such a bold move "could be misinterpreted as directed at recent declines in stock prices, rather than the broader economic outlook," the documents showed.
William Poole, president of the Federal Reserve Bank of St. Louis, was the lone dissenter on the Fed rate cut announced on Jan. 22. He did not believe conditions justified a rate cut before the Fed's regularly scheduled meeting on Jan. 29-30, the minutes said.
Wednesday February 20, 2:50 pm ET
By Jeannine Aversa, AP Economics Writer
Fed Sees Slower Growth, Higher Unemployment and Higher Inflation This Year
WASHINGTON (AP) -- The Federal Reserve on Wednesday lowered its projection for economic growth this year, citing damage from the double blows of a housing slump and credit crunch. It said it also expects higher unemployment and inflation.
The updated forecasts come amid worry by Federal Reserve Chairman Ben Bernanke and his colleagues that the economy could continue to weaken, even after their aggressive interest rate cuts in January, according to minutes of those private deliberations released Wednesday.
"With no signs of stabilization in the housing sector and with financial conditions not yet stabilized, the committee agreed that downside risks to growth would remain even after this action," minutes of the Fed's Jan. 29-30 closed door meeting showed.
The Fed at that session voted to cut a key interest rate by one-half percentage point to 3 percent at that meeting. Just eight day earlier, the Fed, in an emergency session, slashed its rate by a rare three-quarters percentage point. The two rate cuts together marked the most dramatic rate reductions in a single month by the Fed in a quarter century.
Under its new economic forecast, the Fed said that it now believes the gross domestic product will grow between 1.3 percent and 2 percent this year. That's lower than a previous Fed forecast for growth, which at that time was estimated to be between 1.8 percent and 2.5 percent.
GDP is the value of all goods and services produced within the United States and is the best barometer of the country's economic fitness.
With economic growth slowing, the Fed projected that the national jobless rate will rise to between 5.2 percent to 5.3 percent this year. That is higher than the central bank's old forecast for the rate to climb to as high as 4.9 percent. Last year, the unemployment rate averaged 4.6 percent.
And, with energy prices marching upward, the Fed also raised its projection for inflation. The Fed now expects inflation to be between 2.1 percent and 2.4 percent this year. That's higher than its old forecast for inflation, which was estimated to come in at around 1.8 percent to 2.1 percent.
The Fed said its revised forecasts reflected a number of factors including "a further intensification of the housing market correction, tighter credit conditions .... ongoing turmoil in financial markets and higher oil prices."
The combination of slower economic growth and increasing inflation could complicate the Fed's work. The central bank is trying to keep the economy growing, while ensuring that inflation stays under control. The Fed's remedy for a weakening economy is interest rate cuts. To combat inflation, the Fed usually boosts rates.
Oil prices on Tuesday jumped to a new record -- topping $100 a barrel. Consumer prices, meanwhile, rose by a bigger-than-expected 0.4 percent in January, according to new government figures released Wednesday.
Fed policymakers were mindful that they needed to keep a close eye on inflation, minutes of the Jan. 29-30 meeting said.
And, some policymakers noted that when prospects for economic growth improved, "a reversal of a portion of the recent easing actions, possibly even a rapid reversal, might be appropriate," according to the documents.
Still, all but one of the Fed's members agreed to lower rates by a half-point at that time.
Richard Fisher, president of the Federal Reserve Bank of Dallas was the sole dissenter. He preferred no change. The minutes showed that Fisher felt that the level of interest rates was already "quite stimulative, while headline inflation was too high."
The minutes also revealed that the Fed conducted a conference call on Jan. 9, where policymakers reviewed economic data and financial market developments, which were worsening. It did not lower interest rates at that time, although most policymakers were of the view that "substantial additional policy easing in the near term might well be necessary" to help brace the wobbly economy.
As the financial situation continued to deteriorate, worldwide stocks markets plunged and recession fears intensified, Bernanke convened an emergency conference call on Jan. 21. Fed policymakers believed "the outlook for economic activity was weakening," details of that conference call showed. The Fed decided to slash rates by a dramatic three-quarters of a percentage point and make the announcement on the following morning, Jan. 22.
Demonstrating the Fed's "commitment to act decisively" to support the economy might reduce concerns about the weakening economy that seemed to be contributing to the worsening state of financial markets, according to the minutes. However, there was some concern expressed that such a bold move "could be misinterpreted as directed at recent declines in stock prices, rather than the broader economic outlook," the documents showed.
William Poole, president of the Federal Reserve Bank of St. Louis, was the lone dissenter on the Fed rate cut announced on Jan. 22. He did not believe conditions justified a rate cut before the Fed's regularly scheduled meeting on Jan. 29-30, the minutes said.
Stocks Turn Positive After Pullback
AP
Wednesday February 20, 1:29 pm ET
By Tim Paradis, AP Business Writer
Stocks Gain As Investors Set Aside Some Concerns About Rising Consumer Prices; Financials Gain
NEW YORK (AP) -- Wall Street recovered from an early loss and turned positive Wednesday as investors appeared to set aside some concerns about a rise in consumer prices and lackluster readings on home construction.
Stocks initially fell after an uptick in consumer prices and a record finish for oil prices Tuesday raised fresh worries that the Federal Reserve will have less room to lower interest rates in the coming months. Lowering rates can increase inflationary pressures. Investors are hoping for some insights on the Fed's thinking with the expected release Wednesday afternoon of minutes from the last meeting of the central bank's rate-setting committee.
The Fed lowered key interest rates by a half-point to 3 percent on Jan. 30, following an emergency three-quarter point cut the prior week.
While investors appeared to suppress some of their unease they still kept to mostly modest moves. The day's back-and-forth trading was typical of the sessions that Wall Street has endured since the second half of last year.
In early afternoon trading, the Dow Jones industrial average rose 52.83, or 0.43 percent, to 12,390.05.
Broader stock indicators also rose. The Standard & Poor's 500 index advanced 6.98, or 0.52 percent, to 1,355.76, and the Nasdaq composite index rose 13.29, or 0.58 percent, to 2,319.49.
David Kelly, chief market strategist for JPMorgan Funds, the mutual fund arm of JPMorgan Asset Management, said the economic figures released Wednesday weren't that bad but that Wall Street's preoccupation with credit worries have tainted how investors see the economy.
"I think the credit crisis is really generating so much noise that the normal signals from the economy aren't getting through," he said.
He said inflation remains contained because it hasn't shown signs of resulting in higher wages, a crucial factor in holding down some of employers' costs. He added that while the housing market remains distressed, its woes aren't more than expected. The worries about credit have made Wall Street react in unpredictable ways, he said.
"It is very psychological. Hour to hour, the market acts in an irrational fashion but in the long term it's determined by economic fundamentals."
Bond prices fell Wednesday. The yield on the 10-year Treasury note, which moves opposite its price, rose to 3.89 percent from 3.87 percent late Tuesday. The dollar was higher against most major currencies, while gold prices fell.
Light, sweet crude oil on the New York Mercantile Exchange fell 3 cents to $99.98 a barrel. Oil closed above $100 for the first time Tuesday, derailing a stock market rally and renewing Wall Street's inflation concerns.
Investors are concerned that inflation could accelerate at the same time the economy suffers under tough credit conditions. The phenomenon of slowing growth and surging prices is known as stagflation.
The housing data seemed to weigh on investors early in the session. The Commerce Department reported that housing starts rose by 0.8 percent in January, but only after plunging by a downwardly revised 14.8 percent in December. Building permits, a more forward-looking indicator, fell by 3 percent.
By the afternoon stocks turned positive after big names in the financial sector began to rebound and as technology issues like Hewlett-Packard Co. extended their advance.
Lehman Brothers Holdings Inc. rose $2.31, or 4.3 percent, to $55.88, while Morgan Stanley rose $1.99, or 4.8 percent, to $43.48 after hitting a fresh 52-week low earlier in the session.
Hewlett-Packard late Tuesday posted a 38 percent surge in fiscal first-quarter profit following an increase in computer sales. The company, one of the 30 stocks that comprise the Dow Jones industrial average, raised its profit forecast for the year. H-P shares rose $3.60, or 8.2 percent, to $47.55.
In other corporate news, the Financial Times reported that KKR Financial Holdings LLC, a listed affiliate of U.S. private equity group Kohlberg Kravis Roberts & Co., has delayed repayment of billions of dollars of commercial paper for the second time. Commercial paper are short-term bonds companies sell to quickly raise cash; demand for commercial paper began drying up last year, choking the credit markets.
KKR Financial fell 23 cents to $14.30.
Drug maker Pfizer Inc. said it would buy biopharmaceutical company Encysive Pharmaceuticals Inc. for about $195 million to strengthen its portfolio in products treating high blood pressure. Encysive surged $1.20, or 111 percent, to $2.28, while Pfizer slipped 2 cents to $22.35.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 533.8 million shares.
The Russell 2000 index of smaller companies rose 5.43, or 0.77 percent, to 707.77.
Overseas, Japan's Nikkei stock average closed down 3.25 percent. Britain's FTSE 100 closed down 1.23 percent, Germany's DAX index lost 1.47 percent, and France's CAC-40 fell 1.49 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Wednesday February 20, 1:29 pm ET
By Tim Paradis, AP Business Writer
Stocks Gain As Investors Set Aside Some Concerns About Rising Consumer Prices; Financials Gain
NEW YORK (AP) -- Wall Street recovered from an early loss and turned positive Wednesday as investors appeared to set aside some concerns about a rise in consumer prices and lackluster readings on home construction.
Stocks initially fell after an uptick in consumer prices and a record finish for oil prices Tuesday raised fresh worries that the Federal Reserve will have less room to lower interest rates in the coming months. Lowering rates can increase inflationary pressures. Investors are hoping for some insights on the Fed's thinking with the expected release Wednesday afternoon of minutes from the last meeting of the central bank's rate-setting committee.
The Fed lowered key interest rates by a half-point to 3 percent on Jan. 30, following an emergency three-quarter point cut the prior week.
While investors appeared to suppress some of their unease they still kept to mostly modest moves. The day's back-and-forth trading was typical of the sessions that Wall Street has endured since the second half of last year.
In early afternoon trading, the Dow Jones industrial average rose 52.83, or 0.43 percent, to 12,390.05.
Broader stock indicators also rose. The Standard & Poor's 500 index advanced 6.98, or 0.52 percent, to 1,355.76, and the Nasdaq composite index rose 13.29, or 0.58 percent, to 2,319.49.
David Kelly, chief market strategist for JPMorgan Funds, the mutual fund arm of JPMorgan Asset Management, said the economic figures released Wednesday weren't that bad but that Wall Street's preoccupation with credit worries have tainted how investors see the economy.
"I think the credit crisis is really generating so much noise that the normal signals from the economy aren't getting through," he said.
He said inflation remains contained because it hasn't shown signs of resulting in higher wages, a crucial factor in holding down some of employers' costs. He added that while the housing market remains distressed, its woes aren't more than expected. The worries about credit have made Wall Street react in unpredictable ways, he said.
"It is very psychological. Hour to hour, the market acts in an irrational fashion but in the long term it's determined by economic fundamentals."
Bond prices fell Wednesday. The yield on the 10-year Treasury note, which moves opposite its price, rose to 3.89 percent from 3.87 percent late Tuesday. The dollar was higher against most major currencies, while gold prices fell.
Light, sweet crude oil on the New York Mercantile Exchange fell 3 cents to $99.98 a barrel. Oil closed above $100 for the first time Tuesday, derailing a stock market rally and renewing Wall Street's inflation concerns.
Investors are concerned that inflation could accelerate at the same time the economy suffers under tough credit conditions. The phenomenon of slowing growth and surging prices is known as stagflation.
The housing data seemed to weigh on investors early in the session. The Commerce Department reported that housing starts rose by 0.8 percent in January, but only after plunging by a downwardly revised 14.8 percent in December. Building permits, a more forward-looking indicator, fell by 3 percent.
By the afternoon stocks turned positive after big names in the financial sector began to rebound and as technology issues like Hewlett-Packard Co. extended their advance.
Lehman Brothers Holdings Inc. rose $2.31, or 4.3 percent, to $55.88, while Morgan Stanley rose $1.99, or 4.8 percent, to $43.48 after hitting a fresh 52-week low earlier in the session.
Hewlett-Packard late Tuesday posted a 38 percent surge in fiscal first-quarter profit following an increase in computer sales. The company, one of the 30 stocks that comprise the Dow Jones industrial average, raised its profit forecast for the year. H-P shares rose $3.60, or 8.2 percent, to $47.55.
In other corporate news, the Financial Times reported that KKR Financial Holdings LLC, a listed affiliate of U.S. private equity group Kohlberg Kravis Roberts & Co., has delayed repayment of billions of dollars of commercial paper for the second time. Commercial paper are short-term bonds companies sell to quickly raise cash; demand for commercial paper began drying up last year, choking the credit markets.
KKR Financial fell 23 cents to $14.30.
Drug maker Pfizer Inc. said it would buy biopharmaceutical company Encysive Pharmaceuticals Inc. for about $195 million to strengthen its portfolio in products treating high blood pressure. Encysive surged $1.20, or 111 percent, to $2.28, while Pfizer slipped 2 cents to $22.35.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 533.8 million shares.
The Russell 2000 index of smaller companies rose 5.43, or 0.77 percent, to 707.77.
Overseas, Japan's Nikkei stock average closed down 3.25 percent. Britain's FTSE 100 closed down 1.23 percent, Germany's DAX index lost 1.47 percent, and France's CAC-40 fell 1.49 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Stocks Mixed After Weak Economic Reports
AP
Wednesday February 20, 12:22 pm ET
By Tim Paradis, AP Business Writer
Stocks Turn Mixed As Investors Grow Uneasy About Rising Consumer Prices, Weak Housing Figures
NEW YORK (AP) -- Stocks were mixed Wednesday after a rise in consumer prices and lackluster readings on home construction touched off further worries about the health of the economy.
The uptick in consumer prices came a day after a record finish for oil and stirred concerns that the Federal Reserve will have less room to lower interest rates in the coming months. Lowering rates can increase inflationary pressures. Investors are hoping for some insights on the Fed's thinking with the expected release Wednesday afternoon of minutes from the last meeting of the central bank's rate-setting committee.
The Fed lowered key interest rates by a half-point to 3 percent on Jan. 30, following an emergency three-quarter point cut the prior week.
But rate cuts take months to work their way into the economy and the prospect of an economic boost later in the year did little to quiet investors' immediate concerns about the economy. The Labor Department reported a 0.4 percent increase in the consumer price index, and a 0.3 percent increase in the core consumer price index, which strips out often-volatile energy and food prices. The increases came in slightly higher than economists surveyed by Thomson Financial/IFR had anticipated.
"We've got a Fed that's doing almost everything in its tool kit to avoid getting into a recession, if we're not already in one. The elevation of inflation risk really complicates their assignment," said Jefferies & Co. market strategist Craig Peckham.
In midday trading, the Dow Jones industrial average was down 27.93, or 0.23 percent, at 12,309.29.
Broader stock indicators were mixed. The Standard & Poor's 500 index fell 1.63, or 0.12 percent, to 1,347.15, and the Nasdaq composite index rose 1.73, or 0.08 percent, to 2,307.93.
Bond prices slipped. The yield on the 10-year Treasury note, which moves opposite its price, rose to 3.88 percent from 3.87 percent late Tuesday. The dollar was higher against most major currencies, while gold prices fell.
Light, sweet crude oil on the New York Mercantile Exchange fell 41 cents to $99.60 a barrel. Oil closed above $100 for the first time Tuesday, derailing a stock market rally and renewing Wall Street's inflation concerns.
Investors are concerned that inflation could accelerate at the same time the economy suffers under tough credit conditions. The phenomenon of slowing growth and surging prices is known as stagflation.
Housing figures added to Wall Street's list of worries. The Commerce Department said housing starts rose by 0.8 percent in January, but only after plunging by a downwardly revised 14.8 percent in December. Building permits, a more forward-looking indicator, fell by 3 percent.
Peckham said that while the uptick in housing starts could indicate a bottom, investors can't be sure until they get further data, including figures on sales of new and existing homes due next week. He also noted that inventories remain at high levels, which is worrisome.
"Until the inventory issue gets addressed, it's going to be hard for starts to start moving higher," he said.
On Wednesday, the Financial Times reported that KKR Financial Holdings LLC, a listed affiliate of U.S. private equity group Kohlberg Kravis Roberts & Co., has delayed repayment of billions of dollars of commercial paper for the second time. Commercial paper are short-term bonds companies sell to quickly raise cash; demand for commercial paper began drying up last year, choking the credit markets.
KKR Financial fell 25 cents to $14.28.
While some banks have weathered the credit storm relatively unscathed -- Netherlands-based bank ING Groep NV reported an 18 percent gain in fourth-quarter net profit Wednesday -- most have seen significant losses. BNP Paribas SA confirmed that fourth-quarter net profit dropped 42 percent after its credit-related investments shed about 1.2 billion euros, or $1.76 billion, in value.
In other earnings news, Hewlett-Packard Co. late Tuesday posted a 38 percent surge in fiscal first-quarter profit thanks to an increase in computer sales. Hewlett-Packard shares rose $3.31, or 7.5 percent, to $47.26.
Drug maker Pfizer Inc. said it would buy biopharmaceutical company Encysive Pharmaceuticals Inc. for about $195 million to strengthen its portfolio in products treating high blood pressure. Encysive surged $1.20, or 111 percent, to $2.28, while Pfizer slipped 2 cents to $22.35.
Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 533.8 million shares.
The Russell 2000 index of smaller companies rose 0.60, or 0.09 percent, to 702.97.
Overseas, Japan's Nikkei stock average closed down 3.25 percent. In afternoon trading, Britain's FTSE 100 dropped 1.23 percent, Germany's DAX index lost 1.47 percent, and France's CAC-40 fell 1.49 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Wednesday February 20, 12:22 pm ET
By Tim Paradis, AP Business Writer
Stocks Turn Mixed As Investors Grow Uneasy About Rising Consumer Prices, Weak Housing Figures
NEW YORK (AP) -- Stocks were mixed Wednesday after a rise in consumer prices and lackluster readings on home construction touched off further worries about the health of the economy.
The uptick in consumer prices came a day after a record finish for oil and stirred concerns that the Federal Reserve will have less room to lower interest rates in the coming months. Lowering rates can increase inflationary pressures. Investors are hoping for some insights on the Fed's thinking with the expected release Wednesday afternoon of minutes from the last meeting of the central bank's rate-setting committee.
The Fed lowered key interest rates by a half-point to 3 percent on Jan. 30, following an emergency three-quarter point cut the prior week.
But rate cuts take months to work their way into the economy and the prospect of an economic boost later in the year did little to quiet investors' immediate concerns about the economy. The Labor Department reported a 0.4 percent increase in the consumer price index, and a 0.3 percent increase in the core consumer price index, which strips out often-volatile energy and food prices. The increases came in slightly higher than economists surveyed by Thomson Financial/IFR had anticipated.
"We've got a Fed that's doing almost everything in its tool kit to avoid getting into a recession, if we're not already in one. The elevation of inflation risk really complicates their assignment," said Jefferies & Co. market strategist Craig Peckham.
In midday trading, the Dow Jones industrial average was down 27.93, or 0.23 percent, at 12,309.29.
Broader stock indicators were mixed. The Standard & Poor's 500 index fell 1.63, or 0.12 percent, to 1,347.15, and the Nasdaq composite index rose 1.73, or 0.08 percent, to 2,307.93.
Bond prices slipped. The yield on the 10-year Treasury note, which moves opposite its price, rose to 3.88 percent from 3.87 percent late Tuesday. The dollar was higher against most major currencies, while gold prices fell.
Light, sweet crude oil on the New York Mercantile Exchange fell 41 cents to $99.60 a barrel. Oil closed above $100 for the first time Tuesday, derailing a stock market rally and renewing Wall Street's inflation concerns.
Investors are concerned that inflation could accelerate at the same time the economy suffers under tough credit conditions. The phenomenon of slowing growth and surging prices is known as stagflation.
Housing figures added to Wall Street's list of worries. The Commerce Department said housing starts rose by 0.8 percent in January, but only after plunging by a downwardly revised 14.8 percent in December. Building permits, a more forward-looking indicator, fell by 3 percent.
Peckham said that while the uptick in housing starts could indicate a bottom, investors can't be sure until they get further data, including figures on sales of new and existing homes due next week. He also noted that inventories remain at high levels, which is worrisome.
"Until the inventory issue gets addressed, it's going to be hard for starts to start moving higher," he said.
On Wednesday, the Financial Times reported that KKR Financial Holdings LLC, a listed affiliate of U.S. private equity group Kohlberg Kravis Roberts & Co., has delayed repayment of billions of dollars of commercial paper for the second time. Commercial paper are short-term bonds companies sell to quickly raise cash; demand for commercial paper began drying up last year, choking the credit markets.
KKR Financial fell 25 cents to $14.28.
While some banks have weathered the credit storm relatively unscathed -- Netherlands-based bank ING Groep NV reported an 18 percent gain in fourth-quarter net profit Wednesday -- most have seen significant losses. BNP Paribas SA confirmed that fourth-quarter net profit dropped 42 percent after its credit-related investments shed about 1.2 billion euros, or $1.76 billion, in value.
In other earnings news, Hewlett-Packard Co. late Tuesday posted a 38 percent surge in fiscal first-quarter profit thanks to an increase in computer sales. Hewlett-Packard shares rose $3.31, or 7.5 percent, to $47.26.
Drug maker Pfizer Inc. said it would buy biopharmaceutical company Encysive Pharmaceuticals Inc. for about $195 million to strengthen its portfolio in products treating high blood pressure. Encysive surged $1.20, or 111 percent, to $2.28, while Pfizer slipped 2 cents to $22.35.
Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 533.8 million shares.
The Russell 2000 index of smaller companies rose 0.60, or 0.09 percent, to 702.97.
Overseas, Japan's Nikkei stock average closed down 3.25 percent. In afternoon trading, Britain's FTSE 100 dropped 1.23 percent, Germany's DAX index lost 1.47 percent, and France's CAC-40 fell 1.49 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Officials: Delta-Northwest Deal at Risk
AP
Wednesday February 20, 12:43 am ET
By Harry R. Weber, AP Business Writer
Officials: Delta-Northwest Combination Deal in Jeopardy Because of Pilots' Impasse
ATLANTA (AP) -- An impasse among pilot negotiators over blending seniority lists put a $20 billion deal to combine Delta Air Lines Inc. and Northwest Airlines Corp. in "serious jeopardy" as the boards of the two companies prepared to meet Wednesday, two people close to talks told The Associated Press.
The people said the pilots unions have agreed on a comprehensive joint contract, but they are unable to agree to how seniority for the 12,000 pilots would work under a combined carrier. The people asked not to be named because of the sensitive stage of the talks.
They said late Tuesday that the pilot talks were expected to continue Wednesday, but if no agreement is reached, a deal on a combination of the two airlines would be in real trouble.
The boards of both companies were expected to vote on a combination agreement Wednesday if a pilot deal is in place by then. Otherwise, they were expected to just get an update on the merger talks, three people close to the talks said.
One of the officials close to the talks said Northwest's board might only meet by teleconference or, if things fall apart, not meet at all.
A Delta spokeswoman declined to comment on consolidation issues involving Delta. Delta has previously said it was considering a possible consolidation transaction, but it has not commented beyond that.
Talk of airline consolidation has heightened in recent months amid persistently high fuel prices, which are eating away at the industry's bottom line.
A combination of Atlanta-based Delta and Eagan, Minn.-based Northwest would create the world's largest airline in terms of traffic. That's before any divestitures regulators might require them to make if they combine.
There also has been speculation about a possible combination of Chicago-based UAL Corp.'s United Airlines and Houston-based Continental Airlines Inc., which would be a bigger airline than Delta-Northwest in terms of traffic.
The clock is ticking to get any deals accomplished quickly, some observers say. That's because industry observers believe a combination has a better chance of surmounting the considerable political and regulatory hurdles under the current administration than under President Bush's successor.
Delta and Northwest don't need a labor agreement between their pilots unions before announcing a combination, but having one in place now could help them speed up the integration of the two carriers down the line.
One of the people close to the talks said Tuesday night that a small group of Northwest seniority list pilot negotiators want thousands of young Delta pilots to go to the bottom of the combined seniority list as part of agreeing to a deal on seniority. The person said that was a major hang-up.
A spokesman for the Northwest pilots union, Greg Rizzuto, did not immediately return a call and a page to his cell phone seeking comment.
The pilots from both companies have agreed to a significant equity stake for the pilots, including raises for some, one of the people close to the talks said. However, a second person close to the talks said it was not clear that the equity issue had been resolved.
Much of the terms of how the combined carriers would operate had been resolved as of Tuesday, two people close to the talks said. The combined carrier would be based in Atlanta, would be called Delta and Delta's chief executive, Richard Anderson, would be head of the new company, the people said.
It remained unclear what role Northwest's CEO, Doug Steenland, would play in the combined carrier, the people said. A combined Delta-Northwest would maintain a substantial presence in Minneapolis and there would be no furloughs for front-line U.S. employees, the people said. The two airlines have roughly 85,000 total employees.
Associated Press Writer Chris Williams in Minneapolis and AP Business Writer Dave Carpenter in Chicago contributed to this report.
Wednesday February 20, 12:43 am ET
By Harry R. Weber, AP Business Writer
Officials: Delta-Northwest Combination Deal in Jeopardy Because of Pilots' Impasse
ATLANTA (AP) -- An impasse among pilot negotiators over blending seniority lists put a $20 billion deal to combine Delta Air Lines Inc. and Northwest Airlines Corp. in "serious jeopardy" as the boards of the two companies prepared to meet Wednesday, two people close to talks told The Associated Press.
The people said the pilots unions have agreed on a comprehensive joint contract, but they are unable to agree to how seniority for the 12,000 pilots would work under a combined carrier. The people asked not to be named because of the sensitive stage of the talks.
They said late Tuesday that the pilot talks were expected to continue Wednesday, but if no agreement is reached, a deal on a combination of the two airlines would be in real trouble.
The boards of both companies were expected to vote on a combination agreement Wednesday if a pilot deal is in place by then. Otherwise, they were expected to just get an update on the merger talks, three people close to the talks said.
One of the officials close to the talks said Northwest's board might only meet by teleconference or, if things fall apart, not meet at all.
A Delta spokeswoman declined to comment on consolidation issues involving Delta. Delta has previously said it was considering a possible consolidation transaction, but it has not commented beyond that.
Talk of airline consolidation has heightened in recent months amid persistently high fuel prices, which are eating away at the industry's bottom line.
A combination of Atlanta-based Delta and Eagan, Minn.-based Northwest would create the world's largest airline in terms of traffic. That's before any divestitures regulators might require them to make if they combine.
There also has been speculation about a possible combination of Chicago-based UAL Corp.'s United Airlines and Houston-based Continental Airlines Inc., which would be a bigger airline than Delta-Northwest in terms of traffic.
The clock is ticking to get any deals accomplished quickly, some observers say. That's because industry observers believe a combination has a better chance of surmounting the considerable political and regulatory hurdles under the current administration than under President Bush's successor.
Delta and Northwest don't need a labor agreement between their pilots unions before announcing a combination, but having one in place now could help them speed up the integration of the two carriers down the line.
One of the people close to the talks said Tuesday night that a small group of Northwest seniority list pilot negotiators want thousands of young Delta pilots to go to the bottom of the combined seniority list as part of agreeing to a deal on seniority. The person said that was a major hang-up.
A spokesman for the Northwest pilots union, Greg Rizzuto, did not immediately return a call and a page to his cell phone seeking comment.
The pilots from both companies have agreed to a significant equity stake for the pilots, including raises for some, one of the people close to the talks said. However, a second person close to the talks said it was not clear that the equity issue had been resolved.
Much of the terms of how the combined carriers would operate had been resolved as of Tuesday, two people close to the talks said. The combined carrier would be based in Atlanta, would be called Delta and Delta's chief executive, Richard Anderson, would be head of the new company, the people said.
It remained unclear what role Northwest's CEO, Doug Steenland, would play in the combined carrier, the people said. A combined Delta-Northwest would maintain a substantial presence in Minneapolis and there would be no furloughs for front-line U.S. employees, the people said. The two airlines have roughly 85,000 total employees.
Associated Press Writer Chris Williams in Minneapolis and AP Business Writer Dave Carpenter in Chicago contributed to this report.
Tuesday, February 19, 2008
What is Inflation?
Inflation is an increase in the price of a basket of goods and services that is representative of the economy as a whole.
A similar definition of inflation can be found in Economics by Parkin and Bade:
Inflation is an upward movement in the average level of prices. Its opposite is deflation, a downward movement in the average level of prices. The boundary between inflation and deflation is price stability.
Because inflation is a rise in the general level of prices, it is intrinsically linked to money, as captured by the often heard refrain "Inflation is too many dollars chasing too few goods". To understand how this works, imagine a world that only has two commodities: Oranges picked from orange trees, and paper money printed by the government. In a year where there is a drought and oranges are scarce, we'd expect to see the price of oranges rise, as there will be quite a few dollars chasing very few oranges. Conversely, if there's a record crop or oranges, we'd expect to see the price of oranges fall, as orange sellers will need to reduce their prices in order to clear their inventory. These scenarios are inflation and deflation, respectively, though in the real world inflation and deflation are changes in the average price of all goods and services, not just one.
We can also have inflation and deflation by changing the amount of money in the system. If the government decides to print a lot of money, then dollars will become plentiful relative to oranges, just as in our drought situation. Thus inflation is caused by the amount of dollars rising relative to the amount of oranges (goods and services), and deflation is caused by the amount of dollars falling relative to the amount of oranges. Thus, as shown by the article "Why Does Money Have Value?", inflation is caused by a combination of four factors:
The supply of money goes up.
The supply of other goods goes down.
Demand for money goes down.
Demand for other goods goes up.
(courtesy of about.com)
A similar definition of inflation can be found in Economics by Parkin and Bade:
Inflation is an upward movement in the average level of prices. Its opposite is deflation, a downward movement in the average level of prices. The boundary between inflation and deflation is price stability.
Because inflation is a rise in the general level of prices, it is intrinsically linked to money, as captured by the often heard refrain "Inflation is too many dollars chasing too few goods". To understand how this works, imagine a world that only has two commodities: Oranges picked from orange trees, and paper money printed by the government. In a year where there is a drought and oranges are scarce, we'd expect to see the price of oranges rise, as there will be quite a few dollars chasing very few oranges. Conversely, if there's a record crop or oranges, we'd expect to see the price of oranges fall, as orange sellers will need to reduce their prices in order to clear their inventory. These scenarios are inflation and deflation, respectively, though in the real world inflation and deflation are changes in the average price of all goods and services, not just one.
We can also have inflation and deflation by changing the amount of money in the system. If the government decides to print a lot of money, then dollars will become plentiful relative to oranges, just as in our drought situation. Thus inflation is caused by the amount of dollars rising relative to the amount of oranges (goods and services), and deflation is caused by the amount of dollars falling relative to the amount of oranges. Thus, as shown by the article "Why Does Money Have Value?", inflation is caused by a combination of four factors:
The supply of money goes up.
The supply of other goods goes down.
Demand for money goes down.
Demand for other goods goes up.
(courtesy of about.com)
Stocks End Mixed Amid Inflation Fears
AP
Tuesday February 19, 6:00 pm ET
By Madlen Read, AP Business Writer
Wall Street Pares Gains As Oil Surges, Banks See More Credit Problems
NEW YORK (AP) -- Wall Street gave up a big early advance and closed mixed Tuesday after oil prices closed above $100 for the first time and stoked fears that inflation will stymie an already troubled economy.
Soaring oil prices could bring more problems for consumers, having already made many Americans shy about spending in recent months. Consumer spending, a key driver of U.S. economic growth, has also been shaken by falling home prices and the volatile stock market.
The market was also concerned that rising inflation might make the Federal Reserve reconsider its bias toward lowering interest rates to help the economy. The central bank, which next meets March 18, last month slashed rates by 1.25 percent.
"I think there are still a lot of worries in the market that we have this stagnant growth in the economy and higher prices," said Richard Sparks, senior equities analyst at Schaeffer's Investment Research in Cincinnati.
Investors likely were positioning themselves ahead of a half-dozen economic reports that could give the market further direction. Paramount will be Wednesday's Labor Department report on consumer prices for January, which is a closely watched gauge for inflation. The Fed will also release minutes from its last meeting.
Meanwhile, new concerns that banks are facing more financial problems this year dragged the sector sharply lower -- and reminded investors that the credit crisis appears far from a resolution.
The Dow Jones industrial average fell 10.99, or 0.09 percent, to 12,337.22 after being up more than 150 points earlier in the session.
Broader indexes also moved lower. The Standard & Poor's 500 index fell 1.21, or 0.09 percent, to 1,348.78; and the Nasdaq composite fell 15.60, or 0.67, 2,306.20.
But advancing issues were ahead of decliners on the New York Stock Exchange by about 9 to 7, while on the Nasdaq Stock Market, decliners had a modest lead. Consolidated volume on the NYSE came to about 3.50 billion shares, compared to 3.36 billion on Friday.
Government bonds dipped as stocks gained. The yield on the 10-year Treasury note, which moves opposite its price, jumped to 3.87 percent from 3.77 percent late Friday. It rose to 3.90 percent in after-hours trading.
The dollar was mixed against most major currencies.
Light, sweet crude for March delivery rose $4.51 to settle at a record $100.01 a barrel on the New York Mercantile Exchange after earlier rising to $100.10, a new trading record. It was the first time since Jan. 3 that oil had been above $100.
Other commodities, including gold and soybeans, rose as well. At the pump, gas prices rose further above $3 a gallon.
Beyond inflation, investors also continued to worry about the financial sector. So far, global banks have written down more than $150 billion from bad bets on mortgage-backed securities -- and more losses are expected to the first quarter.
British bank Barclays Group PLC revealed credit-related losses totaling $3.13 billion, up from a smaller write-down in November, while Credit Suisse, Switzerland's second-largest bank, said it has suspended "a handful" of traders in connection with the overvaluation of asset-backed securities by $2.85 billion.
Also, The Wall Street Journal reported that Lehman Brothers Holdings Inc. could see big losses due to its significant investments in commercial real estate loans. Lehman fell $1.35, or 1.3 percent, to $53.42.
"Can these financial stocks get to the bottom of their questions of soundness in asset quality? We have to reach a tipping point here," said Richard Cripps, chief market strategist for Stifel Nicolaus. "That's the part that I think has to occur for this market to have a sustained advance."
There have been some signs that troubled financial institutions are finding ways to regain their footing, however.
Bond insurer Ambac Financial Group Inc. is discussing a plan to raise at least $2 billion in capital to maintain its superior credit rating, the Journal reported, citing people familiar with the matter. The move would mirror a $3 billion cash-raising effort by rival bond insurer MBIA Inc., which said Tuesday that its former chairman and chief executive has returned to the lead the company.
Ambac fell 19 cents to $10.03, though, after a Goldman Sachs Group Inc. analyst cut his price target for the insurer to $7 from $10 and said the company will probably to need to raise about $3.5 billion to maintain its "AAA" rating. MBIA slipped 41 cents to $11.83.
In economic news, the National Association of Home Builders said its index measuring homebuilder confidence inched up in February. Wall Street remains wary about the prospects for the housing market, however.
The Russell 2000 index of smaller companies rose 0.82, or 0.12 percent, to 702.34.
Overseas, Japan's Nikkei stock average gained 0.90 percent. Britain's FTSE 100 advanced 0.34 percent, Germany's DAX index added 0.50 percent, and France's CAC-40 increased 0.49 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Tuesday February 19, 6:00 pm ET
By Madlen Read, AP Business Writer
Wall Street Pares Gains As Oil Surges, Banks See More Credit Problems
NEW YORK (AP) -- Wall Street gave up a big early advance and closed mixed Tuesday after oil prices closed above $100 for the first time and stoked fears that inflation will stymie an already troubled economy.
Soaring oil prices could bring more problems for consumers, having already made many Americans shy about spending in recent months. Consumer spending, a key driver of U.S. economic growth, has also been shaken by falling home prices and the volatile stock market.
The market was also concerned that rising inflation might make the Federal Reserve reconsider its bias toward lowering interest rates to help the economy. The central bank, which next meets March 18, last month slashed rates by 1.25 percent.
"I think there are still a lot of worries in the market that we have this stagnant growth in the economy and higher prices," said Richard Sparks, senior equities analyst at Schaeffer's Investment Research in Cincinnati.
Investors likely were positioning themselves ahead of a half-dozen economic reports that could give the market further direction. Paramount will be Wednesday's Labor Department report on consumer prices for January, which is a closely watched gauge for inflation. The Fed will also release minutes from its last meeting.
Meanwhile, new concerns that banks are facing more financial problems this year dragged the sector sharply lower -- and reminded investors that the credit crisis appears far from a resolution.
The Dow Jones industrial average fell 10.99, or 0.09 percent, to 12,337.22 after being up more than 150 points earlier in the session.
Broader indexes also moved lower. The Standard & Poor's 500 index fell 1.21, or 0.09 percent, to 1,348.78; and the Nasdaq composite fell 15.60, or 0.67, 2,306.20.
But advancing issues were ahead of decliners on the New York Stock Exchange by about 9 to 7, while on the Nasdaq Stock Market, decliners had a modest lead. Consolidated volume on the NYSE came to about 3.50 billion shares, compared to 3.36 billion on Friday.
Government bonds dipped as stocks gained. The yield on the 10-year Treasury note, which moves opposite its price, jumped to 3.87 percent from 3.77 percent late Friday. It rose to 3.90 percent in after-hours trading.
The dollar was mixed against most major currencies.
Light, sweet crude for March delivery rose $4.51 to settle at a record $100.01 a barrel on the New York Mercantile Exchange after earlier rising to $100.10, a new trading record. It was the first time since Jan. 3 that oil had been above $100.
Other commodities, including gold and soybeans, rose as well. At the pump, gas prices rose further above $3 a gallon.
Beyond inflation, investors also continued to worry about the financial sector. So far, global banks have written down more than $150 billion from bad bets on mortgage-backed securities -- and more losses are expected to the first quarter.
British bank Barclays Group PLC revealed credit-related losses totaling $3.13 billion, up from a smaller write-down in November, while Credit Suisse, Switzerland's second-largest bank, said it has suspended "a handful" of traders in connection with the overvaluation of asset-backed securities by $2.85 billion.
Also, The Wall Street Journal reported that Lehman Brothers Holdings Inc. could see big losses due to its significant investments in commercial real estate loans. Lehman fell $1.35, or 1.3 percent, to $53.42.
"Can these financial stocks get to the bottom of their questions of soundness in asset quality? We have to reach a tipping point here," said Richard Cripps, chief market strategist for Stifel Nicolaus. "That's the part that I think has to occur for this market to have a sustained advance."
There have been some signs that troubled financial institutions are finding ways to regain their footing, however.
Bond insurer Ambac Financial Group Inc. is discussing a plan to raise at least $2 billion in capital to maintain its superior credit rating, the Journal reported, citing people familiar with the matter. The move would mirror a $3 billion cash-raising effort by rival bond insurer MBIA Inc., which said Tuesday that its former chairman and chief executive has returned to the lead the company.
Ambac fell 19 cents to $10.03, though, after a Goldman Sachs Group Inc. analyst cut his price target for the insurer to $7 from $10 and said the company will probably to need to raise about $3.5 billion to maintain its "AAA" rating. MBIA slipped 41 cents to $11.83.
In economic news, the National Association of Home Builders said its index measuring homebuilder confidence inched up in February. Wall Street remains wary about the prospects for the housing market, however.
The Russell 2000 index of smaller companies rose 0.82, or 0.12 percent, to 702.34.
Overseas, Japan's Nikkei stock average gained 0.90 percent. Britain's FTSE 100 advanced 0.34 percent, Germany's DAX index added 0.50 percent, and France's CAC-40 increased 0.49 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Stocks Up As Wal-Mart Posts Profit Rise
AP
Tuesday February 19, 1:32 pm ET
By Madlen Read, AP Business Writer
Wall Street Gains As Wal-Mart Reports Profit Rise, but Banks See More Credit Problems
NEW YORK (AP) -- Stocks advanced Tuesday as investors found some relief in a quarterly report from Wal-Mart Stores Inc. that showed a rise in sales in the United States and abroad.
Investors were pleased about Wal-Mart's modest profit increase because it was a sign that consumers might not be as hesitant to spend as the market has feared. Still, the world's largest retailer said the uncertain economy will be a critical factor going forward.
Wal-Mart's report "signaled that the consumer is cautious, but that was already priced into the marketplace," said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners Inc. "By the same token, I'm not seeing any indication that we're headed for consumer spending to be in the minus column."
Consumer spending, a key driver of economic growth, has been shaky in recent months as Americans struggle with falling home prices, rising food and energy costs and a volatile stock market.
A spike in oil prices back above $98 a barrel could bring more problems for consumers, but it gave energy stocks a boost. Light, sweet crude oil jumped $2.89 to $98.39 per barrel on the New York Mercantile Exchange due to worries about a possible decline in production; shares of Chevron Corp., ExxonMobil Corp. and ConocoPhillips all rose.
In early afternoon trading, the Dow Jones industrial average rose 88.41, or 0.72 percent, to 12,436.62 following the three-day Presidents Day weekend. On Tuesday, Bank of America Corp. and Chevron Corp. replaced Altria Group Inc. and Honeywell International Inc. among the 30 Dow components.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 9.01, or 0.67 percent, to 1,359.00, while the Nasdaq composite index rose 13.44, or 0.58 percent, to 2,335.24.
Government bonds dipped as stocks gained. The yield on the 10-year Treasury note, which moves opposite its price, jumped to 3.84 percent from 3.77 percent late Friday.
The dollar was mixed against most major currencies, while gold prices rose.
Wal-Mart rose 39 cents to $49.83.
In addition to consumer spending, Wall Street is concerned about credit problems facing financial institutions. British bank Barclays Group PLC revealed credit-related losses totaling $3.13 billion, up from a smaller write-down in November, while Credit Suisse, Switzerland's second-largest bank, said it has suspended "a handful" of traders in connection with the overvaluation of asset-backed securities by $2.85 billion.
Also, The Wall Street Journal reported that Lehman Brothers Holdings Inc. could see big losses due to its significant investments in commercial real estate loans. Lehman fell 80 cents to $53.97.
There have been some signs that troubled financial institutions are finding ways to regain their footing, however.
Bond insurer Ambac Financial Group Inc. is discussing a plan to raise at least $2 billion in capital to maintain its superior credit rating, the Journal reported, citing people familiar with the matter. The move would mirror a $3 billion cash-raising effort by rival bond insurer MBIA Inc., which said Tuesday that its former chairman and chief executive has returned to the lead the company.
Ambac fell 16 cents to $10.06, while MBIA slipped 17 cents to $12.07.
"We're heading to some sort of, perhaps, dare we say, closure on the bond insurance situation," Cardillo said. "If that does occur, the market does start to price in economic recovery."
In other corporate news, Microsoft Corp. chairman Bill Gates said the software company is not privately haggling with Yahoo over its rejected $31-per-share buyout offer. Microsoft Corp. made an unsolicited offer to buy the struggling Internet company just over two weeks ago. Microsoft rose 35 cents to $28.66, and Yahoo fell 39 cents to $29.27.
In economic news, the National Association of Home Builders said its index measuring homebuilder confidence inched up in February. Wall Street remains wary about the prospects for the housing market, however.
The Russell 2000 index of smaller companies rose 6.06, or 0.86 percent, to 707.58.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 708.8 million shares.
Overseas, Japan's Nikkei stock average gained 0.90 percent. Britain's FTSE 100 advanced 0.34 percent, Germany's DAX index added 0.50 percent, and France's CAC-40 increased 0.49 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Tuesday February 19, 1:32 pm ET
By Madlen Read, AP Business Writer
Wall Street Gains As Wal-Mart Reports Profit Rise, but Banks See More Credit Problems
NEW YORK (AP) -- Stocks advanced Tuesday as investors found some relief in a quarterly report from Wal-Mart Stores Inc. that showed a rise in sales in the United States and abroad.
Investors were pleased about Wal-Mart's modest profit increase because it was a sign that consumers might not be as hesitant to spend as the market has feared. Still, the world's largest retailer said the uncertain economy will be a critical factor going forward.
Wal-Mart's report "signaled that the consumer is cautious, but that was already priced into the marketplace," said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners Inc. "By the same token, I'm not seeing any indication that we're headed for consumer spending to be in the minus column."
Consumer spending, a key driver of economic growth, has been shaky in recent months as Americans struggle with falling home prices, rising food and energy costs and a volatile stock market.
A spike in oil prices back above $98 a barrel could bring more problems for consumers, but it gave energy stocks a boost. Light, sweet crude oil jumped $2.89 to $98.39 per barrel on the New York Mercantile Exchange due to worries about a possible decline in production; shares of Chevron Corp., ExxonMobil Corp. and ConocoPhillips all rose.
In early afternoon trading, the Dow Jones industrial average rose 88.41, or 0.72 percent, to 12,436.62 following the three-day Presidents Day weekend. On Tuesday, Bank of America Corp. and Chevron Corp. replaced Altria Group Inc. and Honeywell International Inc. among the 30 Dow components.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 9.01, or 0.67 percent, to 1,359.00, while the Nasdaq composite index rose 13.44, or 0.58 percent, to 2,335.24.
Government bonds dipped as stocks gained. The yield on the 10-year Treasury note, which moves opposite its price, jumped to 3.84 percent from 3.77 percent late Friday.
The dollar was mixed against most major currencies, while gold prices rose.
Wal-Mart rose 39 cents to $49.83.
In addition to consumer spending, Wall Street is concerned about credit problems facing financial institutions. British bank Barclays Group PLC revealed credit-related losses totaling $3.13 billion, up from a smaller write-down in November, while Credit Suisse, Switzerland's second-largest bank, said it has suspended "a handful" of traders in connection with the overvaluation of asset-backed securities by $2.85 billion.
Also, The Wall Street Journal reported that Lehman Brothers Holdings Inc. could see big losses due to its significant investments in commercial real estate loans. Lehman fell 80 cents to $53.97.
There have been some signs that troubled financial institutions are finding ways to regain their footing, however.
Bond insurer Ambac Financial Group Inc. is discussing a plan to raise at least $2 billion in capital to maintain its superior credit rating, the Journal reported, citing people familiar with the matter. The move would mirror a $3 billion cash-raising effort by rival bond insurer MBIA Inc., which said Tuesday that its former chairman and chief executive has returned to the lead the company.
Ambac fell 16 cents to $10.06, while MBIA slipped 17 cents to $12.07.
"We're heading to some sort of, perhaps, dare we say, closure on the bond insurance situation," Cardillo said. "If that does occur, the market does start to price in economic recovery."
In other corporate news, Microsoft Corp. chairman Bill Gates said the software company is not privately haggling with Yahoo over its rejected $31-per-share buyout offer. Microsoft Corp. made an unsolicited offer to buy the struggling Internet company just over two weeks ago. Microsoft rose 35 cents to $28.66, and Yahoo fell 39 cents to $29.27.
In economic news, the National Association of Home Builders said its index measuring homebuilder confidence inched up in February. Wall Street remains wary about the prospects for the housing market, however.
The Russell 2000 index of smaller companies rose 6.06, or 0.86 percent, to 707.58.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 708.8 million shares.
Overseas, Japan's Nikkei stock average gained 0.90 percent. Britain's FTSE 100 advanced 0.34 percent, Germany's DAX index added 0.50 percent, and France's CAC-40 increased 0.49 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Monday, February 18, 2008
UK Govt Outlines Northern Rock Plans
AP
Monday February 18, 2:56 pm ET
By Jane Wardell, AP Business Writer
UK Government Nationalizes Northern Rock Amid Criticism From Lawmakers, Shareholders
LONDON (AP) -- Prime Minister Gordon Brown's government faced accusations of mismanagement Monday as it began nationalizing stricken mortgage lender Northern Rock PLC -- the first time in 20 years that a private company has been taken into public ownership.
The government repeatedly insisted a private sale was its preferred option. But after five months of intense speculation about the future of Britain's most public casualty of the global credit crunch, Brown said that nationalization was the best choice until market conditions improve.
"We will, and always have, put the interests of taxpayers first," he said.
The opposition Conservative Party said Britain's reputation as a major financial services center had been dealt a serious blow.
"The nationalization of Northern Rock is a disaster for the British taxpayer, a disaster for this government and a disaster for our country," said Conservative Party leader David Cameron.
The government's troubles were compounded by the threat of a drawn-out legal battle with unhappy shareholders and the potential of hundreds, or thousands, of workers losing their jobs.
Brown's reputation as a guardian of financial stability in Britain has been dented, eroding some of the plaudits he received for presiding over an unprecedented stretch of economic growth as treasury chief before becoming prime minister.
On the defensive Monday, Brown and his successor in the treasury office, Alistair Darling, disputed that Britain's international reputation has been tarnished.
"What we don't accept is that London or Britain has been uniquely affected by world events," Brown said, referring to the credit troubles that swept global markets in the late summer and led Northern Rock to seek emergency funding from the Bank of England, triggering Britain's first bank run in 150 years.
London would remain the world's "pre-eminent financial center," Darling added.
The government had rejected two private proposals from Richard Branson's Virgin Group and an in-house bid from the bank's management team because they involved too many risks for taxpayers and a very significant government subsidy.
Brown said Northern Rock will be run "at arm's length from the government under professional management until adverse market conditions change and then the bank can be returned to the private sector."
However, critics said that the temporary nationalization proposed by the government could last years as Northern Rock's new management seeks to pay back around 55 billion pounds ($107 billion) via loans from the Bank of England and deposit guarantees.
Ron Sandler, who brought back Lloyd's of London from the edge of bankruptcy in the late 1990s and has been appointed by the government to run Northern Rock, declined to comment on job losses, amid suggestions from analysts that as many as half the company's 6,250 positions could be cut.
"Temporary nationalization is at last a period where the bank can move forward and away from turbulent waters where it's been sailing in recent months," Sandler said.
Darling did not provide details on the restructure of the bank as he announced emergency legislation to allow the nationalization, saying he would provide more information when the bill begins its passage through Parliament on Tuesday.
The new laws would give the government sweeping powers to seize any other bank that runs into trouble, but Darling stressed they have a sunset clause of one year and that the government plans to use them only in relation to Northern Rock.
The Conservative Party said it plans to oppose the legislation, but the government's numbers are expected to push the bill through Parliament.
Meanwhile, trading in the stock was suspended to make way for nationalization, leaving shareholders unable to sell their holdings after the government first announced its plan Sunday.
Under British rules on nationalization, shareholders will be offered compensation for their holdings at a level set by a government-appointed panel.
The panel will calculate a figure based on the bank's value without government guarantees -- a figure most analysts expect to be very little or nothing at all.
The stock closed at 90 pence ($1.75) Friday, valuing the company at 379 million pounds ($738 million). The price has fallen more than 80 percent since Sept. 13, one day before Northern Rock revealed it had sought the emergency funding.
Monday February 18, 2:56 pm ET
By Jane Wardell, AP Business Writer
UK Government Nationalizes Northern Rock Amid Criticism From Lawmakers, Shareholders
LONDON (AP) -- Prime Minister Gordon Brown's government faced accusations of mismanagement Monday as it began nationalizing stricken mortgage lender Northern Rock PLC -- the first time in 20 years that a private company has been taken into public ownership.
The government repeatedly insisted a private sale was its preferred option. But after five months of intense speculation about the future of Britain's most public casualty of the global credit crunch, Brown said that nationalization was the best choice until market conditions improve.
"We will, and always have, put the interests of taxpayers first," he said.
The opposition Conservative Party said Britain's reputation as a major financial services center had been dealt a serious blow.
"The nationalization of Northern Rock is a disaster for the British taxpayer, a disaster for this government and a disaster for our country," said Conservative Party leader David Cameron.
The government's troubles were compounded by the threat of a drawn-out legal battle with unhappy shareholders and the potential of hundreds, or thousands, of workers losing their jobs.
Brown's reputation as a guardian of financial stability in Britain has been dented, eroding some of the plaudits he received for presiding over an unprecedented stretch of economic growth as treasury chief before becoming prime minister.
On the defensive Monday, Brown and his successor in the treasury office, Alistair Darling, disputed that Britain's international reputation has been tarnished.
"What we don't accept is that London or Britain has been uniquely affected by world events," Brown said, referring to the credit troubles that swept global markets in the late summer and led Northern Rock to seek emergency funding from the Bank of England, triggering Britain's first bank run in 150 years.
London would remain the world's "pre-eminent financial center," Darling added.
The government had rejected two private proposals from Richard Branson's Virgin Group and an in-house bid from the bank's management team because they involved too many risks for taxpayers and a very significant government subsidy.
Brown said Northern Rock will be run "at arm's length from the government under professional management until adverse market conditions change and then the bank can be returned to the private sector."
However, critics said that the temporary nationalization proposed by the government could last years as Northern Rock's new management seeks to pay back around 55 billion pounds ($107 billion) via loans from the Bank of England and deposit guarantees.
Ron Sandler, who brought back Lloyd's of London from the edge of bankruptcy in the late 1990s and has been appointed by the government to run Northern Rock, declined to comment on job losses, amid suggestions from analysts that as many as half the company's 6,250 positions could be cut.
"Temporary nationalization is at last a period where the bank can move forward and away from turbulent waters where it's been sailing in recent months," Sandler said.
Darling did not provide details on the restructure of the bank as he announced emergency legislation to allow the nationalization, saying he would provide more information when the bill begins its passage through Parliament on Tuesday.
The new laws would give the government sweeping powers to seize any other bank that runs into trouble, but Darling stressed they have a sunset clause of one year and that the government plans to use them only in relation to Northern Rock.
The Conservative Party said it plans to oppose the legislation, but the government's numbers are expected to push the bill through Parliament.
Meanwhile, trading in the stock was suspended to make way for nationalization, leaving shareholders unable to sell their holdings after the government first announced its plan Sunday.
Under British rules on nationalization, shareholders will be offered compensation for their holdings at a level set by a government-appointed panel.
The panel will calculate a figure based on the bank's value without government guarantees -- a figure most analysts expect to be very little or nothing at all.
The stock closed at 90 pence ($1.75) Friday, valuing the company at 379 million pounds ($738 million). The price has fallen more than 80 percent since Sept. 13, one day before Northern Rock revealed it had sought the emergency funding.
Sunday, February 17, 2008
Hard Times Heighten Long-Felt Unease
AP
Sunday February 17, 3:04 pm ET
By Adam Geller, AP National Writer
As Economic Tide Recedes, an Undertow of Long-Simmering Insecurities Grows Among Americans
Even when experts were declaring the economy healthy, many Americans voiced a vague, but persistent dissatisfaction.
True, jobs were relatively plentiful over the last few years. It was easy to borrow and very cheap. The sharp rise in the value of homes and plentiful credit cards encouraged a nation of consumers to get out and buy. But to many people, something didn't feel right, even if they couldn't quite explain why.
Now the economic tide is receding, and the undertow that was there all along is getting stronger.
Take away the easy credit and consumers are left with paychecks that, for most, haven't nearly kept pace with their need and propensity to spend.
The frustration of $3 gas and $4 milk, the worries about health care costs that have risen four times the rate of pay, become much more real. The retirement security that is only as good as the increasingly volatile stock market seems much less certain.
Americans' declining confidence in their economy is triggered by a storm of very recent pressures, including plunging home prices, tightening credit, and heavy debt. But it is compounded by anxiety that was there all along, the result of a long, slow drip of worries and vulnerabilities.
"The economy is currently in recession or arguably close to recession and that's certainly weighing on the collective psyche," says Mark Zandi, chief economist of forecaster Moody's Economy.com. "But ... I do think there is an increasing level of angst that is more fundamental and is not going to go away even when the economy improves."
Much of that anxiety is the uncomfortable, but expected jolt of the economic roller coaster. During a downturn, people become less confident about keeping their jobs or being able to find new ones, meeting household expenses and about the prospects for the future.
But there may be more to it than just cyclical ups and downs.
What does the economic future hold? Many Americans feel increasingly unable to answer that question with assurance, and they appraise it with a sense that they are less in control of the outcome.
In Westminster, Colo., a Denver suburb, George Apodaca hears that uncertainty from the maintenance workers, drivers and others enrolled in the home budgeting class he teaches. Most have steady jobs, but are just getting by. They talk about challenges like the rising cost of getting to work or medical bills, not as new problems but as a continuing struggle.
"People in my class, they don't know what a recession means or what a boom means," says Apodaca, a counselor for Colorado Housing Enterprises. "They're worried about buying the groceries, buying the gas."
A year ago -- months before economic alarms went off -- nearly two of three Americans polled by The Rockefeller Foundation said that they felt somewhat or a lot less economically secure then they did a decade ago. Half said they expected their children to face an economy even more shaky.
Other polls have registered similar unease in the past few years, showing large numbers of Americans dissatisfied with the economy, and worried about retirement security, health care costs, and a declining standard of living.
The surprising thing about many of these readings isn't that they've recently skyrocketed. It's that in recent years they've registered consistently high levels of worry without ever seeming to ease.
"This has just been a period of great disconnect between what the aggregate economic statistics show and what leading politicians talk about and what ordinary Americans are feeling," said Jacob Hacker, a Yale University professor and author of "The Great Risk Shift," which charts increased economic insecurity. "I think people are saying, where did the gains go? Where did the boom go? And now that it's gone, what are we going to do?"
Those uncertainties have been submerged for the past few years. The war in Iraq and the threat of terrorism dominated, drawing attention away from day-to-day economic concerns. With employers adding workers, people's appraisal of the economy focused less on jobs, the long-standing measure of financial security.
Many people gauged their well-being in wealth -- looking at the stock market, and much more broadly, the rise of real estate prices, said Susan Sterne, president of Economic Analysis Associates.
Americans borrowed freely against the value of their homes. But now there is nothing left to shield them from the insecurities rooted in the old measures of economic prosperity.
Except for the late 1990s, pay has been stagnant for more than a generation, barely keeping pace with inflation. In 1973, the median male worker earned $16.88 an hour, adjusted for inflation. In 2007, he earned $16.85.
For many families, the stagnation has been moderated by the addition of a second paycheck as more women went to work, and their pay rose over the same period.
But the largest gains went to workers at the top of the pay scale. Now, economic worries are rising fastest in households with smaller paychecks, and that chasm is widening.
"Over the past decades, whether inflation was much higher or lower, or incomes grew faster or more slowly, there has never been such a wide divergence in the experiences" separating richer households from poorer ones, Richard Curtin, the director of the University of Michigan's consumer survey said in summing up the most recent figures.
That insecurity shows in small, but telling ways. Shoppers at drug store chain Walgreens Inc. are increasingly bypassing name-brand cough syrups and pain relievers and choosing cheaper store brands. Wal-Mart Stores Inc noticed that many people who received its gift cards for the holidays used them in January to buy food and other necessities instead of extras.
The pullback by consumers contrasts with years of continued spending that long seemed to contradict mounting worries.
Worker optimism, which soared in the late 1990s, never fully rebounded after the last, brief recession. Although jobs again were plentiful, it became clear the new economy's opportunities came with few of the old assurances.
Rennie Sawade, the son of a Michigan auto worker, majored in computer science because he saw no future on the assembly line. He was rewarded with a job at Oracle Corp., but lost it in late 2005 when the company shifted his department's work to India. Sawade, who lives in Woodinville, Wash. near Seattle, has been unable to find a full-time replacement, instead jumping from contract job to contract job.
The contractor offers a 401(k), but contributions are entirely up to workers. When Sawade's wife was diagnosed with thyroid cancer last year he missed the equivalent of two weeks work -- and pay -- to take care of her. The job has health insurance but still left the family with a bill for more than $2,000. Contractors call to offer other jobs, but the pay is frequently disappointing, he says.
"It was pretty well known when I was working on my bachelor's degree that the auto industry was going to move overseas," he says. "Everybody said get into technology because you'll have a career. Now it looks like the same thing is happening to technology."
Cutbacks and changes by employers also have pushed heavy responsibilities on to workers, many who find themselves unprepared.
In the past decade, scores of companies have frozen or eliminated benefit plans providing a guaranteed pension. Many have replaced them with 401(k) plans whose future worth depends on workers' investment skill. Almost half of all households are at risk of coming up short in retirement, according to the Center for Retirement Research at Boston College.
Worry also grew about the cost of health care, with good reason. Since 2001, the cost of health insurance has gone up 78 percent -- about $1,500 more per year for the average family, according to the Kaiser Family Foundation. Over the same period, wages rose about 19 percent, and inflation about 17 percent. About four in 10 people polled by the group say they are worried about paying more for health care or insurance.
Even the consumption made possible by easy credit has helped turn up the financial pressure. The number of products -- from air conditioners to cell phones -- that Americans say they can't live without has grown substantially in recent years, according to the Pew Research Center. About 6 in 10 working Americans polled by the group say they don't earn enough to lead the life they want.
Economic confidence is, largely, a self-fulfilling prophecy. The more consumers believe the economy is heading downhill, the more likely they'll rein in spending that will contribute to a downturn.
"I think if people were generally more satisfied and less anxious perhaps they would be more resistant to thinking things were deteriorating rapidly," says Andrew Kohut, president of the Pew Research Center.
Maybe the downturn in optimism is temporary. Americans are voracious consumers and persistent optimists.
But some believe a fundamental change in behavior and mind-set is taking place. Since the early 1980s, consumers' contribution to the economy has risen from 63 percent, near where it had long hovered, to 70 percent. Baby boomers spent generously on growing families. Interest rates and inflation dropped, making homes and other assets worth more and cutting borrowing costs. The spread of easy credit promoted spending.
Now, those are drying up and the population is aging. Older households don't spend as much, and often assess the economy more conservatively. Over the next generation, that could drive consumers' contribution to the economy back down to the low-60 percent range, Zandi said.
"There were tail winds behind" the growth in consumer spending over the last 25 years, he says. "Now there are headwinds."
Sunday February 17, 3:04 pm ET
By Adam Geller, AP National Writer
As Economic Tide Recedes, an Undertow of Long-Simmering Insecurities Grows Among Americans
Even when experts were declaring the economy healthy, many Americans voiced a vague, but persistent dissatisfaction.
True, jobs were relatively plentiful over the last few years. It was easy to borrow and very cheap. The sharp rise in the value of homes and plentiful credit cards encouraged a nation of consumers to get out and buy. But to many people, something didn't feel right, even if they couldn't quite explain why.
Now the economic tide is receding, and the undertow that was there all along is getting stronger.
Take away the easy credit and consumers are left with paychecks that, for most, haven't nearly kept pace with their need and propensity to spend.
The frustration of $3 gas and $4 milk, the worries about health care costs that have risen four times the rate of pay, become much more real. The retirement security that is only as good as the increasingly volatile stock market seems much less certain.
Americans' declining confidence in their economy is triggered by a storm of very recent pressures, including plunging home prices, tightening credit, and heavy debt. But it is compounded by anxiety that was there all along, the result of a long, slow drip of worries and vulnerabilities.
"The economy is currently in recession or arguably close to recession and that's certainly weighing on the collective psyche," says Mark Zandi, chief economist of forecaster Moody's Economy.com. "But ... I do think there is an increasing level of angst that is more fundamental and is not going to go away even when the economy improves."
Much of that anxiety is the uncomfortable, but expected jolt of the economic roller coaster. During a downturn, people become less confident about keeping their jobs or being able to find new ones, meeting household expenses and about the prospects for the future.
But there may be more to it than just cyclical ups and downs.
What does the economic future hold? Many Americans feel increasingly unable to answer that question with assurance, and they appraise it with a sense that they are less in control of the outcome.
In Westminster, Colo., a Denver suburb, George Apodaca hears that uncertainty from the maintenance workers, drivers and others enrolled in the home budgeting class he teaches. Most have steady jobs, but are just getting by. They talk about challenges like the rising cost of getting to work or medical bills, not as new problems but as a continuing struggle.
"People in my class, they don't know what a recession means or what a boom means," says Apodaca, a counselor for Colorado Housing Enterprises. "They're worried about buying the groceries, buying the gas."
A year ago -- months before economic alarms went off -- nearly two of three Americans polled by The Rockefeller Foundation said that they felt somewhat or a lot less economically secure then they did a decade ago. Half said they expected their children to face an economy even more shaky.
Other polls have registered similar unease in the past few years, showing large numbers of Americans dissatisfied with the economy, and worried about retirement security, health care costs, and a declining standard of living.
The surprising thing about many of these readings isn't that they've recently skyrocketed. It's that in recent years they've registered consistently high levels of worry without ever seeming to ease.
"This has just been a period of great disconnect between what the aggregate economic statistics show and what leading politicians talk about and what ordinary Americans are feeling," said Jacob Hacker, a Yale University professor and author of "The Great Risk Shift," which charts increased economic insecurity. "I think people are saying, where did the gains go? Where did the boom go? And now that it's gone, what are we going to do?"
Those uncertainties have been submerged for the past few years. The war in Iraq and the threat of terrorism dominated, drawing attention away from day-to-day economic concerns. With employers adding workers, people's appraisal of the economy focused less on jobs, the long-standing measure of financial security.
Many people gauged their well-being in wealth -- looking at the stock market, and much more broadly, the rise of real estate prices, said Susan Sterne, president of Economic Analysis Associates.
Americans borrowed freely against the value of their homes. But now there is nothing left to shield them from the insecurities rooted in the old measures of economic prosperity.
Except for the late 1990s, pay has been stagnant for more than a generation, barely keeping pace with inflation. In 1973, the median male worker earned $16.88 an hour, adjusted for inflation. In 2007, he earned $16.85.
For many families, the stagnation has been moderated by the addition of a second paycheck as more women went to work, and their pay rose over the same period.
But the largest gains went to workers at the top of the pay scale. Now, economic worries are rising fastest in households with smaller paychecks, and that chasm is widening.
"Over the past decades, whether inflation was much higher or lower, or incomes grew faster or more slowly, there has never been such a wide divergence in the experiences" separating richer households from poorer ones, Richard Curtin, the director of the University of Michigan's consumer survey said in summing up the most recent figures.
That insecurity shows in small, but telling ways. Shoppers at drug store chain Walgreens Inc. are increasingly bypassing name-brand cough syrups and pain relievers and choosing cheaper store brands. Wal-Mart Stores Inc noticed that many people who received its gift cards for the holidays used them in January to buy food and other necessities instead of extras.
The pullback by consumers contrasts with years of continued spending that long seemed to contradict mounting worries.
Worker optimism, which soared in the late 1990s, never fully rebounded after the last, brief recession. Although jobs again were plentiful, it became clear the new economy's opportunities came with few of the old assurances.
Rennie Sawade, the son of a Michigan auto worker, majored in computer science because he saw no future on the assembly line. He was rewarded with a job at Oracle Corp., but lost it in late 2005 when the company shifted his department's work to India. Sawade, who lives in Woodinville, Wash. near Seattle, has been unable to find a full-time replacement, instead jumping from contract job to contract job.
The contractor offers a 401(k), but contributions are entirely up to workers. When Sawade's wife was diagnosed with thyroid cancer last year he missed the equivalent of two weeks work -- and pay -- to take care of her. The job has health insurance but still left the family with a bill for more than $2,000. Contractors call to offer other jobs, but the pay is frequently disappointing, he says.
"It was pretty well known when I was working on my bachelor's degree that the auto industry was going to move overseas," he says. "Everybody said get into technology because you'll have a career. Now it looks like the same thing is happening to technology."
Cutbacks and changes by employers also have pushed heavy responsibilities on to workers, many who find themselves unprepared.
In the past decade, scores of companies have frozen or eliminated benefit plans providing a guaranteed pension. Many have replaced them with 401(k) plans whose future worth depends on workers' investment skill. Almost half of all households are at risk of coming up short in retirement, according to the Center for Retirement Research at Boston College.
Worry also grew about the cost of health care, with good reason. Since 2001, the cost of health insurance has gone up 78 percent -- about $1,500 more per year for the average family, according to the Kaiser Family Foundation. Over the same period, wages rose about 19 percent, and inflation about 17 percent. About four in 10 people polled by the group say they are worried about paying more for health care or insurance.
Even the consumption made possible by easy credit has helped turn up the financial pressure. The number of products -- from air conditioners to cell phones -- that Americans say they can't live without has grown substantially in recent years, according to the Pew Research Center. About 6 in 10 working Americans polled by the group say they don't earn enough to lead the life they want.
Economic confidence is, largely, a self-fulfilling prophecy. The more consumers believe the economy is heading downhill, the more likely they'll rein in spending that will contribute to a downturn.
"I think if people were generally more satisfied and less anxious perhaps they would be more resistant to thinking things were deteriorating rapidly," says Andrew Kohut, president of the Pew Research Center.
Maybe the downturn in optimism is temporary. Americans are voracious consumers and persistent optimists.
But some believe a fundamental change in behavior and mind-set is taking place. Since the early 1980s, consumers' contribution to the economy has risen from 63 percent, near where it had long hovered, to 70 percent. Baby boomers spent generously on growing families. Interest rates and inflation dropped, making homes and other assets worth more and cutting borrowing costs. The spread of easy credit promoted spending.
Now, those are drying up and the population is aging. Older households don't spend as much, and often assess the economy more conservatively. Over the next generation, that could drive consumers' contribution to the economy back down to the low-60 percent range, Zandi said.
"There were tail winds behind" the growth in consumer spending over the last 25 years, he says. "Now there are headwinds."
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