Everybody's aware of the pain caused by a recession: Companies lay off workers, jobs become hard to find, and those who remain employed often have their wages and benefits frozen, or even cut. General anxiety leads millions of consumers to hunker down and stop spending, which slows the economy even more.
But recessions always end, and in most downturns, the majority of consumers actually fare OK. For people with secure jobs, ample savings, or a strong financial safety net, lean economic times can even represent an opportunity to snap up bargains and exploit newfound leverage in a buyer's market.
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As with all financial decisions, trying to time the market and guess where the bottom is can be risky. But with a bit of luck, smart consumers, abiding by the usual prudent caveats, can turn a downturn to their advantage, whether seeking fire sales on electronics, negotiating more responsibility at work, or buying a home. Here's how:
Call the shots when buying a house. Prices in many markets are falling, of course, and while buyers need to be as careful as ever about speculating, those in for the long haul can find some great buys. It's critical to research sales of comparable homes, remodeling records, and other data available at sites like zillow.com and trulia.com. In addition to falling prices, buyers may be surprised to find that with activity drying up, they suddenly have the power to dictate the terms of a deal: Agents may be willing to cut commissions, sellers may agree to cover repairs or other costs they would have dismissed just a year ago, and contractors eager for work might lower their fees for additions or other home improvements.
Buy a distressed property. As an unfortunate outcome of the housing bust, more than a million foreclosed and distressed homes are likely to hit the market this year. It's obviously unpleasant when families lose their homes—but somebody needs to buy them, sometimes at deeply discounted prices. Buyers of distressed homes usually end up dealing with the bank that has repossessed the home, not with the original owners. If you wait for such properties to show up in traditional listing services, you'll probably miss out. Better places to look: the websites for banks and county offices that would know about foreclosures. Real-estate agents plugged into local happenings should also know.
Foreclosure deals are riskier than other real-estate transactions. Properties offered at public auctions often sell for more than they're worth, so buyers can't just assume that if it's up for auction, it's a steal. Buyers may not have time to conduct a thorough inspection or do other due diligence. Insiders may grab the best deals before they ever become public. But for careful buyers who do their homework, there may be plenty of opportunities.
Borrow cheap. True, banks have reined in loans to riskier borrowers, but rates are still historically low, and they might go lower still this year if the Fed continues its rate-cutting ways. So for people with good credit, it's a great time to borrow. That goes for mortgages, obviously, but also for loans people can use to buy a car, ramp up a small business, or remodel their current home.
Refresh your wheels. Automakers are going to need your business in 2008 and will increasingly offer deals to lure buyers into showrooms. Default rates on auto loans have been rising just as they have for mortgages, which means lenders are shunning risky borrowers but wooing those with good credit. And with overall sales slipping, automakers have already started upping rebates and other deals, even on popular models like the Toyota Sienna minivan, the Lexus RX350 SUV, and most pickup trucks. Incentives should continue to improve, predicts Jesse Toprak of Edmunds.com. And cleverly designed vehicles like the Kia Rio5, Nissan Altima, and Hyundai Santa Fe offer a mix of quality, thriftiness, and fun that make them great cars for lean times.
Boost your value to your employer. There's probably little you can do to prevent layoffs at your company. But if they happen, and you're one of the survivors, there are several steps you can take to enhance your standing with the boss. Many times, after layoffs, there's a kind of ghoulish scavenging for the spoils: newly vacant offices, stylish furniture, even phones and staplers. Don't be so crass—or narrow-minded. Instead, figure out what your company may have lost in the ax-wielding, and step in to provide it.
If the sales force has been reduced, for example, there might be key accounts that need to be salvaged. Ask if you can take them over. Many times, during layoffs, companies get rid of specialists who were nice to have during flush times but too costly when it comes to pinching pennies. Can you replace part of the skill set that just went out the door? If so, it might not bring rewards right away. But if you enhance your value to the company, you'll be at the head of the line for a raise or promotion when things improve.
If you do end up out of work, there are more opportunities than ever to start a business as a consultant, find flexible part-time work, or set up a Web operation. Yes, it's easy to talk about "rebranding" yourself and starting a second or third career. But the fact is, trends like telecommuting and flextime have made companies—and customers—more open than ever to creative work arrangements. Take advantage of it.
Pick up some cheap electronics. Fire sales by bankrupt retailers are the obvious place to look, but with rising home foreclosures, expect a flood of used appliances and electronics on craigslist and other secondary marketplaces. Buying somebody else's TV or iPod can be tricky, needless to say, since there's often no way to measure mileage or tell if there's damage to internal components. Here are some rules of thumb:
A used plasma or LCD television ought to be a pretty safe buy; if there's a problem, most likely you'll know just from the picture quality. Desktop PCs and Blu-ray DVD players might be worth buying if they're substantially discounted, less than a year old, and bear a decent brand name. For laptops, don't buy anything more than three months old. Flash-based iPods and MP3 players are pretty durable; just check that the LCD screen is intact, the USB port is clear—and the device works.
Avoid projection TVs, most computers, digital cameras and camcorders, standard DVD players, and MP3 players that rely on a hard drive for storage. In general, these types of devices have lots of moving parts that can easily wear out, or they rely on machinery that's costly to repair if it breaks, and not worth it. Also, skip newer DVD players in the HD DVD format, which Toshiba has just announced it plans to stop developing. Times are tough enough. Don't make it worse by investing in obsolescence.
Copyrighted, U.S.News & World Report, L.P. All rights reserved.
Saturday, March 1, 2008
Friday, February 29, 2008
Stocks Fall Sharply on Economic Worries
AP
Friday February 29, 4:50 pm ET
By Tim Paradis, AP Business Writer
Stocks Fall As Economic Reports, Disappointing Quarterly Reports Stir Concerns About Economy
NEW YORK (AP) -- Stocks fell sharply Friday after a series of depressing economic and corporate reports and high oil prices stoked concerns about the health of the economy. The major stock indexes fell more than 2.5 percent and the Dow Jones industrials lost 315 points.
Investors were unnerved by disappointing quarterly results from American International Group Inc. and Dell Inc. And an index of regional business activity that Wall Street regards as a good indicator of a broader report set to arrive next week had its weakest showing in more than six years.
Oil prices continued to stir concern about inflation after pushing past $103 per barrel for the first time.
While stocks made sharp gains in the first three days this week even amid somewhat lackluster economic readings, the litany of concerns investors succumbed to Friday reflected the undercurrent of uncertainty that has kept Wall Street on edge for months.
"We really had to face a plethora of negative news," said Art Hogan, chief market strategist at Jefferies & Co. in Boston. "We just ran out of gas this week."
Hogan said while stocks held up admirably early in the week amid an uneven flow of economic news, they couldn't hold their gains after the latest round of weak economic signals.
The Dow fell 315.79, or 2.51 percent, to 12,266.39. The decline more than erased the week's 200 point gain and sent stocks lower for February, the fourth straight month of declines.
Broader stock indicators also tumbled. The Standard & Poor's 500 index lost 37.05, or 2.71 percent, to 1,330.63, and the Nasdaq composite index declined 60.09, or 2.58 percent, to 2,271.48.
Bond prices rose sharply as stocks lost ground. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.52 percent from 3.67 percent late Thursday.
The Chicago Board Options Exchange's volatility index, known as the VIX, and often referred to as the "fear index," jumped 12.5 percent.
The dollar showed a slight rebound Friday after hitting a record low against the euro Thursday. The slide in the dollar has sent prices of commodities such as oil and gold soaring.
Light, sweet crude jumped to a record of $103.05 overnight before settling down 75 cents at $101.84 a barrel on New York Mercantile Exchange.
Insurer AIG announced a $5.29 billion quarterly loss largely because of steep declines in the value of a portfolio of contracts known as credit default swaps. Such contracts pledge to cover missed payments on debt. The company's losses caught analysts off guard, as many had expected the company to turn a profit.
While each of the 30 stocks that comprise the Dow industrials showed declines, those of AIG were the steepest. The stock fell $3.29, or 6.6 percent, to $46.86.
Computer maker Dell posted a 6 percent decline in its quarterly profit, falling below analysts' expectations, and warned that its business could suffer from reduced customer spending. Dell slid 97 cents, or 4.7 percent, to $19.90.
Bill Shultz, chief investment officer at McQueen, Ball & Associates, said AIG's report left investors uneasy about the prospect of further sizable write-downs of bad debt.
"Every time we get to a point where we think we've finished, another report comes out and says we're not done yet," he said.
He expects Wall Street will continue to proceed with "fits and starts" until investors sense that the bad debt from faltering mortgages has been accounted for and that balance sheets are on the mend.
Some relief for the ailing bond insurance industry is on the way, though the news did little to dislodge Wall Street's glum mood Friday. Billionaire investor Wilbur Ross agreed to invest up to $1 billion in Bermuda-based reinsurer Assured Guaranty Ltd. Assured Guaranty rose $2.87, or 12.6 percent, to $25.65.
In economic news, the Chicago purchasing managers index for February came in at 44.5, a weaker reading than the 48.5 that had been expected, according to Dow Jones Newswires. The report painted a dreary picture of the manufacturing sector and is seen as a precursor to the national Institute for Supply Management report expected Monday.
A government report showed that personal spending, when stripping out the effects of inflation, stood unchanged in January. The findings arose further concern that consumers are more hesitant to reach into their wallets amid the uncertainties facing the economy.
A parade of economic worries has weighed on consumer as well. The Reuters-University of Michigan final consumer sentiment reading for February came in at 70.8, better than the figure of 69 that had been expected. Still, the index was well off the level of 78.4 seen in January.
Declining issues outnumbered advancers by about 8 to 1 on the New York Stock Exchange, where volume came to 1.76 billion shares compared with 1.46 billion shares traded Thursday.
The Russell 2000 index of smaller companies fell 19.54, or 2.8 percent, to 686.18.
Overseas, Japan's Nikkei stock average closed down 2.32 percent. Britain's FTSE 100 closed down 1.36 percent, Germany's DAX index fell 1.67 percent, and France's CAC-40 fell 1.67 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Friday February 29, 4:50 pm ET
By Tim Paradis, AP Business Writer
Stocks Fall As Economic Reports, Disappointing Quarterly Reports Stir Concerns About Economy
NEW YORK (AP) -- Stocks fell sharply Friday after a series of depressing economic and corporate reports and high oil prices stoked concerns about the health of the economy. The major stock indexes fell more than 2.5 percent and the Dow Jones industrials lost 315 points.
Investors were unnerved by disappointing quarterly results from American International Group Inc. and Dell Inc. And an index of regional business activity that Wall Street regards as a good indicator of a broader report set to arrive next week had its weakest showing in more than six years.
Oil prices continued to stir concern about inflation after pushing past $103 per barrel for the first time.
While stocks made sharp gains in the first three days this week even amid somewhat lackluster economic readings, the litany of concerns investors succumbed to Friday reflected the undercurrent of uncertainty that has kept Wall Street on edge for months.
"We really had to face a plethora of negative news," said Art Hogan, chief market strategist at Jefferies & Co. in Boston. "We just ran out of gas this week."
Hogan said while stocks held up admirably early in the week amid an uneven flow of economic news, they couldn't hold their gains after the latest round of weak economic signals.
The Dow fell 315.79, or 2.51 percent, to 12,266.39. The decline more than erased the week's 200 point gain and sent stocks lower for February, the fourth straight month of declines.
Broader stock indicators also tumbled. The Standard & Poor's 500 index lost 37.05, or 2.71 percent, to 1,330.63, and the Nasdaq composite index declined 60.09, or 2.58 percent, to 2,271.48.
Bond prices rose sharply as stocks lost ground. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.52 percent from 3.67 percent late Thursday.
The Chicago Board Options Exchange's volatility index, known as the VIX, and often referred to as the "fear index," jumped 12.5 percent.
The dollar showed a slight rebound Friday after hitting a record low against the euro Thursday. The slide in the dollar has sent prices of commodities such as oil and gold soaring.
Light, sweet crude jumped to a record of $103.05 overnight before settling down 75 cents at $101.84 a barrel on New York Mercantile Exchange.
Insurer AIG announced a $5.29 billion quarterly loss largely because of steep declines in the value of a portfolio of contracts known as credit default swaps. Such contracts pledge to cover missed payments on debt. The company's losses caught analysts off guard, as many had expected the company to turn a profit.
While each of the 30 stocks that comprise the Dow industrials showed declines, those of AIG were the steepest. The stock fell $3.29, or 6.6 percent, to $46.86.
Computer maker Dell posted a 6 percent decline in its quarterly profit, falling below analysts' expectations, and warned that its business could suffer from reduced customer spending. Dell slid 97 cents, or 4.7 percent, to $19.90.
Bill Shultz, chief investment officer at McQueen, Ball & Associates, said AIG's report left investors uneasy about the prospect of further sizable write-downs of bad debt.
"Every time we get to a point where we think we've finished, another report comes out and says we're not done yet," he said.
He expects Wall Street will continue to proceed with "fits and starts" until investors sense that the bad debt from faltering mortgages has been accounted for and that balance sheets are on the mend.
Some relief for the ailing bond insurance industry is on the way, though the news did little to dislodge Wall Street's glum mood Friday. Billionaire investor Wilbur Ross agreed to invest up to $1 billion in Bermuda-based reinsurer Assured Guaranty Ltd. Assured Guaranty rose $2.87, or 12.6 percent, to $25.65.
In economic news, the Chicago purchasing managers index for February came in at 44.5, a weaker reading than the 48.5 that had been expected, according to Dow Jones Newswires. The report painted a dreary picture of the manufacturing sector and is seen as a precursor to the national Institute for Supply Management report expected Monday.
A government report showed that personal spending, when stripping out the effects of inflation, stood unchanged in January. The findings arose further concern that consumers are more hesitant to reach into their wallets amid the uncertainties facing the economy.
A parade of economic worries has weighed on consumer as well. The Reuters-University of Michigan final consumer sentiment reading for February came in at 70.8, better than the figure of 69 that had been expected. Still, the index was well off the level of 78.4 seen in January.
Declining issues outnumbered advancers by about 8 to 1 on the New York Stock Exchange, where volume came to 1.76 billion shares compared with 1.46 billion shares traded Thursday.
The Russell 2000 index of smaller companies fell 19.54, or 2.8 percent, to 686.18.
Overseas, Japan's Nikkei stock average closed down 2.32 percent. Britain's FTSE 100 closed down 1.36 percent, Germany's DAX index fell 1.67 percent, and France's CAC-40 fell 1.67 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Oil Surpasses $103 for First Time
AP
Friday February 29, 12:58 am ET
By Gillian Wong, Associated Press Writer
Oil Briefly Tops $103 a Barrel for First Time As US Dollar Weakness Draws Investors
SINGAPORE (AP) -- Oil prices surpassed $103 a barrel for the first time Friday as persistent weakness in the U.S. dollar and the prospect of lower interest rates attracted fresh money to the oil market.
Prices were supported by comments Thursday from Federal Reserve Chairman Ben Bernanke, who said the American economy is not immediately threatened with stagflation, a combination of economic weakness and rising inflation.
Investors chose to see the comments as confirmation of their beliefs that the Fed will continue cutting interest rates to try to shore up the economy.
Lower U.S. interest rates tend to weaken the dollar, and crude futures offer a hedge against a falling dollar.
"Due to the weakening dollar and the rising fear of inflation, investors have put money into commodities, oil included," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
"Commodities, as tangible assets, do not face as much inflationary threat as opposed to holding a currency," Shum said. "Even though the value of money is changing, the asset continues to have an intrinsic value."
Light, sweet crude for April delivery jumped to a new trading record of $103.05 a barrel in Asian electronic trading on the New York Mercantile Exchange before slipping back to $102.92 a barrel, up 33 cents.
On Thursday, the contract jumped $2.95 to settle at a record $102.59 a barrel.
Shum warned that a price bubble was emerging in the crude futures market as investors ignored market fundamentals that have shown continuous increases in U.S. crude supply while several recent forecasters have lowered oil demand growth predictions for this year due to the slowing economy.
"We've seen seven straight weeks of builds in crude oil inventories. The oil market fundamentals are softening and yet we see record highs being set, day in and day out," Shum said.
Shum warned of the possibility of a sharp correction at some point, though unlikely in the near term.
"Right now, there's a lot of trading based on emotion -- emotions are high and that could keep crude oil at elevated levels, but the market faces the risk of a price collapse."
Crude prices are within the range of inflation-adjusted highs set in early 1980. A $38 barrel of oil then would be worth $97 to more than $104 today, depending on the how the adjustment is calculated. A direct comparison with daily Nymex prices is difficult because historical data, gathered before the crude futures contract was created in 1983, are based on average monthly prices posted by oil producers.
In other Nymex trading, heating oil dropped 0.82 cent to $2.8538 a gallon while natural gas futures added 0.2 cent to $9.445 per 1,000 cubic feet.
In London, Brent crude futures rose 1 cent to $100.91 a barrel on the ICE Futures exchange.
Friday February 29, 12:58 am ET
By Gillian Wong, Associated Press Writer
Oil Briefly Tops $103 a Barrel for First Time As US Dollar Weakness Draws Investors
SINGAPORE (AP) -- Oil prices surpassed $103 a barrel for the first time Friday as persistent weakness in the U.S. dollar and the prospect of lower interest rates attracted fresh money to the oil market.
Prices were supported by comments Thursday from Federal Reserve Chairman Ben Bernanke, who said the American economy is not immediately threatened with stagflation, a combination of economic weakness and rising inflation.
Investors chose to see the comments as confirmation of their beliefs that the Fed will continue cutting interest rates to try to shore up the economy.
Lower U.S. interest rates tend to weaken the dollar, and crude futures offer a hedge against a falling dollar.
"Due to the weakening dollar and the rising fear of inflation, investors have put money into commodities, oil included," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
"Commodities, as tangible assets, do not face as much inflationary threat as opposed to holding a currency," Shum said. "Even though the value of money is changing, the asset continues to have an intrinsic value."
Light, sweet crude for April delivery jumped to a new trading record of $103.05 a barrel in Asian electronic trading on the New York Mercantile Exchange before slipping back to $102.92 a barrel, up 33 cents.
On Thursday, the contract jumped $2.95 to settle at a record $102.59 a barrel.
Shum warned that a price bubble was emerging in the crude futures market as investors ignored market fundamentals that have shown continuous increases in U.S. crude supply while several recent forecasters have lowered oil demand growth predictions for this year due to the slowing economy.
"We've seen seven straight weeks of builds in crude oil inventories. The oil market fundamentals are softening and yet we see record highs being set, day in and day out," Shum said.
Shum warned of the possibility of a sharp correction at some point, though unlikely in the near term.
"Right now, there's a lot of trading based on emotion -- emotions are high and that could keep crude oil at elevated levels, but the market faces the risk of a price collapse."
Crude prices are within the range of inflation-adjusted highs set in early 1980. A $38 barrel of oil then would be worth $97 to more than $104 today, depending on the how the adjustment is calculated. A direct comparison with daily Nymex prices is difficult because historical data, gathered before the crude futures contract was created in 1983, are based on average monthly prices posted by oil producers.
In other Nymex trading, heating oil dropped 0.82 cent to $2.8538 a gallon while natural gas futures added 0.2 cent to $9.445 per 1,000 cubic feet.
In London, Brent crude futures rose 1 cent to $100.91 a barrel on the ICE Futures exchange.
Thursday, February 28, 2008
Google Gets Into Web Sites Building Biz
AP
Thursday February 28, 12:21 am ET
By Michael Liedtke, AP Business Writer
Google Branching Out With New Tools for Setting Up Web Sites
SAN FRANCISCO (AP) -- Google, already the world's most popular spot for finding Web sites, is aiming to become the go-to place for creating Web sites too.
The Mountain View-based company is taking its first step toward that goal Thursday with the debut of a free service designed for high-tech neophytes looking for a simple way to share information with other people working in the same company or attending the same class in school.
With only a few clicks, just about anyone will be able to quickly set up and update a Web site featuring a wide array of material, including pictures, calendars and video from Google Inc.'s YouTube subsidiary, said Dave Girouard, general manager of the division overseeing the new application.
"We are literally adding an edit button to the Web," Girouard said.
All sites created on the service will run on one of Google's computers.
Google acquired many of the Web-site tools when it bought a Silicon Valley startup, JotSpot, last year.
The tools are the latest addition to a bundle of applications that Google offers to consumers and businesses as alternatives to similar products sold by Microsoft Corp., one of Google's fiercest rivals.
Google's latest service represents a challenge to Microsoft's SharePoint, which charges licensing fees. Google is unveiling its alternative just a few days before Redmond, Wash.-based Microsoft hosts a SharePoint conference in Seattle.
While Microsoft's programs typically are installed on individual computers, Google keeps its application on its own machines so users can access them from anywhere with an Internet connection.
By gradually introducing free versions of word processing, spreadsheet, and calendaring programs over the past two years, Google has been threatening to siphon revenue away from Microsoft, which makes most of its money from software sales.
Microsoft, in turn, hopes to take a bite of out Google's bread-and-butter in online search and advertising by buying Yahoo Inc. for more than $40 billion.
Google says more than 500,000 companies, government agencies and schools use at least some of its applications. The company won't say how many of those organizations subscribe to a premium version of its software suite, but the fees haven't made much of a dent at Google so far.
Last year, Google's software licensing and other products generated $181 million in revenue while $16.4 billion poured in from advertising.
On The Web:
http://sites.google.com
Thursday February 28, 12:21 am ET
By Michael Liedtke, AP Business Writer
Google Branching Out With New Tools for Setting Up Web Sites
SAN FRANCISCO (AP) -- Google, already the world's most popular spot for finding Web sites, is aiming to become the go-to place for creating Web sites too.
The Mountain View-based company is taking its first step toward that goal Thursday with the debut of a free service designed for high-tech neophytes looking for a simple way to share information with other people working in the same company or attending the same class in school.
With only a few clicks, just about anyone will be able to quickly set up and update a Web site featuring a wide array of material, including pictures, calendars and video from Google Inc.'s YouTube subsidiary, said Dave Girouard, general manager of the division overseeing the new application.
"We are literally adding an edit button to the Web," Girouard said.
All sites created on the service will run on one of Google's computers.
Google acquired many of the Web-site tools when it bought a Silicon Valley startup, JotSpot, last year.
The tools are the latest addition to a bundle of applications that Google offers to consumers and businesses as alternatives to similar products sold by Microsoft Corp., one of Google's fiercest rivals.
Google's latest service represents a challenge to Microsoft's SharePoint, which charges licensing fees. Google is unveiling its alternative just a few days before Redmond, Wash.-based Microsoft hosts a SharePoint conference in Seattle.
While Microsoft's programs typically are installed on individual computers, Google keeps its application on its own machines so users can access them from anywhere with an Internet connection.
By gradually introducing free versions of word processing, spreadsheet, and calendaring programs over the past two years, Google has been threatening to siphon revenue away from Microsoft, which makes most of its money from software sales.
Microsoft, in turn, hopes to take a bite of out Google's bread-and-butter in online search and advertising by buying Yahoo Inc. for more than $40 billion.
Google says more than 500,000 companies, government agencies and schools use at least some of its applications. The company won't say how many of those organizations subscribe to a premium version of its software suite, but the fees haven't made much of a dent at Google so far.
Last year, Google's software licensing and other products generated $181 million in revenue while $16.4 billion poured in from advertising.
On The Web:
http://sites.google.com
Wednesday, February 27, 2008
Stocks Finish Mixed in Choppy Session
AP
Wednesday February 27, 5:55 pm ET
By Joe Bel Bruno, AP Business Writer
Investors Pare Gains After Regulator Lifts Caps on Fannie, Freddie, Bernanke Comments Please
NEW YORK (AP) -- Wall Street finished mixed in another seesaw session Wednesday after regulators allowed Fannie Mae and Freddie Mac to buy more mortgages and Federal Reserve Chairman Ben Bernanke said the central bank will remain vigilant about the weakened economy.
Investors pared the market's gains after both developments had initially boosted confidence amid increasing signs of a slowing economy. Wall Street has in recent months grappled with concerns about rising prices, a weaker dollar and continued turmoil in the credit markets.
Bernanke indicated the Fed is more concerned about the sagging economy then the immediate risks of inflation. In testimony on Capitol Hill, he told lawmakers the Fed will "act in a timely manner as needed to support growth and to provide adequate insurance against downside risks."
The remarks came as the dollar plunged to a record low against the 15-nation euro. That sent already inflated oil and gold prices further into record high territory, and raised the prospect of accelerating inflation.
Meanwhile, Fannie Mae and Freddie Mac -- the biggest sources of financing for U.S. home loans -- helped give the market some ballast after the government removed restrictions on the size of their portfolios. That offered a chance for an easing of the extremely tight mortgage market that has been battered by the subprime loan crisis.
"The government is trying to do their part," said Todd Leone, managing director of equity trading at Cowen & Co. "Together, this helps put a little more faith in the economy."
Major indexes initially moved higher before investors cashed in profits, following a pattern set in recent weeks. The Dow Jones industrial average -- now up four straight sessions -- rose 9.36, or 0.07 percent, to 12,694.28.
Broader indexes were narrowly mixed. The Standard & Poor's 500 index fell 1.27, or 0.09 percent, to 1,380.02, and the Nasdaq composite index rose 8.79, or 0.37 percent, to 2,353.78.
Stocks were somewhat under pressure after the euro climbed to a record high of $1.5057 as sentiment increased that the Fed would continue its rate cut campaign. The U.S. currency was mixed against other major currencies.
The dollar's continued slide drove more money into commodities -- especially into oil and gold.
Oil prices broke through a new intraday high of $102 a barrel in overnight trading, then fell $1.24 to settle at $99.64 a barrel on the New York Mercantile Exchange. Meanwhile, gold futures set a new high of $961.30 an ounce.
Bond prices rose slightly. The yield on the benchmark 10-year note, which moves opposite its price, fell to 3.85 percent from 3.86 percent late Tuesday. It then rose back up to 3.86 percent in after-hours trading.
The moves followed a government report showing business investment in durable goods weakened more than forecast at the start of the year, playing into the nervousness about economic slowing. The Commerce Department reported durable goods orders dropped 5.3 percent in January, exceeding forecasts.
There was more bad news about the housing slump. The Commerce Department reported new home sales fell in January for a third straight month, pushing activity down to the slowest pace in nearly 13 years.
Investors have been monitoring economic data to get a better idea about inflation, which could cause the Fed to stop lowering rates. The Fed, widely expected to make a half-point cut in interest rates, will meet again March 18.
Harry Clark, president of Clark Capital Management in Philadelphia, said a slowdown in the economy that avoids recession could create a moderate drop in demand and help ease pressure from rising prices.
"If the economy goes down the drain with rising prices, that's stagflation," he said. "Rising prices aren't a big deal if everyone is employed and the economy is growing."
The notion of some easing in the weakened mortgage sector pleased investors. Fannie Mae shares rose 30 cents to $27.27, while Freddie Mac shares fell 12 cents to $25.09.
The Russell 2000 index of smaller companies fell 0.88, or 0.12 percent, to 716.44.
Declining issues outpaced advancers by a 5 to 4 margin on the New York Stock Exchange, where consolidated volume fell to 3.81 billion shares from 3.95 million shares on Tuesday.
Overseas, Japan's Nikkei stock average closed 1.49 percent higher. Britain's FTSE 100 fell 0.18 percent, Germany's DAX index rose 0.17 percent, and France's CAC-40 fell 0.09 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Wednesday February 27, 5:55 pm ET
By Joe Bel Bruno, AP Business Writer
Investors Pare Gains After Regulator Lifts Caps on Fannie, Freddie, Bernanke Comments Please
NEW YORK (AP) -- Wall Street finished mixed in another seesaw session Wednesday after regulators allowed Fannie Mae and Freddie Mac to buy more mortgages and Federal Reserve Chairman Ben Bernanke said the central bank will remain vigilant about the weakened economy.
Investors pared the market's gains after both developments had initially boosted confidence amid increasing signs of a slowing economy. Wall Street has in recent months grappled with concerns about rising prices, a weaker dollar and continued turmoil in the credit markets.
Bernanke indicated the Fed is more concerned about the sagging economy then the immediate risks of inflation. In testimony on Capitol Hill, he told lawmakers the Fed will "act in a timely manner as needed to support growth and to provide adequate insurance against downside risks."
The remarks came as the dollar plunged to a record low against the 15-nation euro. That sent already inflated oil and gold prices further into record high territory, and raised the prospect of accelerating inflation.
Meanwhile, Fannie Mae and Freddie Mac -- the biggest sources of financing for U.S. home loans -- helped give the market some ballast after the government removed restrictions on the size of their portfolios. That offered a chance for an easing of the extremely tight mortgage market that has been battered by the subprime loan crisis.
"The government is trying to do their part," said Todd Leone, managing director of equity trading at Cowen & Co. "Together, this helps put a little more faith in the economy."
Major indexes initially moved higher before investors cashed in profits, following a pattern set in recent weeks. The Dow Jones industrial average -- now up four straight sessions -- rose 9.36, or 0.07 percent, to 12,694.28.
Broader indexes were narrowly mixed. The Standard & Poor's 500 index fell 1.27, or 0.09 percent, to 1,380.02, and the Nasdaq composite index rose 8.79, or 0.37 percent, to 2,353.78.
Stocks were somewhat under pressure after the euro climbed to a record high of $1.5057 as sentiment increased that the Fed would continue its rate cut campaign. The U.S. currency was mixed against other major currencies.
The dollar's continued slide drove more money into commodities -- especially into oil and gold.
Oil prices broke through a new intraday high of $102 a barrel in overnight trading, then fell $1.24 to settle at $99.64 a barrel on the New York Mercantile Exchange. Meanwhile, gold futures set a new high of $961.30 an ounce.
Bond prices rose slightly. The yield on the benchmark 10-year note, which moves opposite its price, fell to 3.85 percent from 3.86 percent late Tuesday. It then rose back up to 3.86 percent in after-hours trading.
The moves followed a government report showing business investment in durable goods weakened more than forecast at the start of the year, playing into the nervousness about economic slowing. The Commerce Department reported durable goods orders dropped 5.3 percent in January, exceeding forecasts.
There was more bad news about the housing slump. The Commerce Department reported new home sales fell in January for a third straight month, pushing activity down to the slowest pace in nearly 13 years.
Investors have been monitoring economic data to get a better idea about inflation, which could cause the Fed to stop lowering rates. The Fed, widely expected to make a half-point cut in interest rates, will meet again March 18.
Harry Clark, president of Clark Capital Management in Philadelphia, said a slowdown in the economy that avoids recession could create a moderate drop in demand and help ease pressure from rising prices.
"If the economy goes down the drain with rising prices, that's stagflation," he said. "Rising prices aren't a big deal if everyone is employed and the economy is growing."
The notion of some easing in the weakened mortgage sector pleased investors. Fannie Mae shares rose 30 cents to $27.27, while Freddie Mac shares fell 12 cents to $25.09.
The Russell 2000 index of smaller companies fell 0.88, or 0.12 percent, to 716.44.
Declining issues outpaced advancers by a 5 to 4 margin on the New York Stock Exchange, where consolidated volume fell to 3.81 billion shares from 3.95 million shares on Tuesday.
Overseas, Japan's Nikkei stock average closed 1.49 percent higher. Britain's FTSE 100 fell 0.18 percent, Germany's DAX index rose 0.17 percent, and France's CAC-40 fell 0.09 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Tuesday, February 26, 2008
Wall Street Lifts on IBM Stock Buyback
AP
Tuesday February 26, 4:18 pm ET
By Madlen Read, AP Business Writer
Stocks Lift After IBM OKs Buyback, Offsetting Disappointment Over Economic Data
NEW YORK (AP) -- Wall Street reversed earlier losses and rallied Tuesday after IBM approved a $15 billion stock buyback, suggesting to investors that there are still some companies out there with financial muscle. The Dow Jones industrial average rose more than 110 points.
IBM Corp., one of the 30 companies that make up the Dow, said the buyback will boost its earnings for 2008 past Wall Street's prior forecasts. Shares of Big Blue vaulted $4.30, or 3.9 percent, to $114.38.
The buyback news followed two dismal economic reports showing core wholesale prices shot up more than expected last month and that consumer confidence is waning. The data reinforced worries that the United States is suffering from stagflation, a state when the economy weakens amid rising costs.
"The market is kind of overcoming negative news, which is potentially a next step toward higher prices," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "At least in the short-term, it's a nice change here."
Tuesday's advance extended a rally that began Monday when Standard & Poor's affirmed the AAA ratings for troubled bond insurers Ambac Financial Group Inc. and MBIA Inc. MBIA, which on Tuesday said it would eliminate its quarterly dividend, was also affirmed by Moody's Investors Service.
According to preliminary calculations, the Dow rose 114.70, or 0.91 percent, to 12,684.92, after declining in earlier trading.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 9.49, or 0.69 percent, to 1,381.29, and the Nasdaq composite index rose 17.51, or 0.75 percent, to 2,344.99.
Government bonds rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, slipped to 3.86 percent from 3.91 percent late Monday. The dollar was mixed against most other major currencies, while gold prices edged higher.
Tuesday's pair of economic reports was decidedly downbeat.
The Conference Board's index of consumer confidence plunged in February to 75.0 from a revised 87.3 in January. The reading was the lowest since the index registered 64.8 in February 2003, and came in far below analysts' average estimate. Though the report is not a perfect predictor of consumer spending, it suggests Americans are watching their budgets.
Meanwhile, the latest wholesale inflation report showed the headline producer price index rising by a full 1 percent in January, driven up by higher energy prices and soaring food costs.
The result was a bit below the 1.1 percent advance projected by Thomson/IFR, but core PPI -- which excludes food and energy prices -- rose 0.4 percent, steeper than the predicted 0.3 percent gain. The data was disconcerting because the Federal Reserve is known to closely monitor core-level inflation in setting monetary policy.
"The market is holding up extraordinarily well given all this negative stuff," said Scott Fullman, director of investment strategy for I. A. Englander & Co. He said the prospect of more corporate buybacks was a "positive for the market," but also, "the market is tired of going down."
Cementing the belief that costs won't be easing anytime soon was oil's surge back above $100 a barrel. Light, sweet crude rose $1.65 to $100.88 a barrel on the New York Mercantile Exchange.
Positive news from some retailers helped keep stocks afloat.
Target Corp., the discount store chain, said fourth-quarter profits fell due to poor holiday sales and a quirk in the earnings calendar, but results came in above the average forecast. Target rose $1.64, or 3.1 percent, to $54.89.
Rite Aid Corp. also jumped, after an analyst upgraded the pharmacy chain and said a recent stock drop makes its risk and reward profile more favorable. Rite Aid rose 17 cents, or 6.5 percent, to $2.78.
RadioShack Corp. rose after the electronics retailer posted a rise in fourth-quarter profit and higher sales than analysts predicted. RadioShack rose $3.30, or 21.5 percent, to $19.13.
In other corporate news, Tenet Healthcare Corp., the hospital operator, said its fourth-quarter losses narrowed sharply thanks to new contracts, higher admissions and cost-cutting. Tenet rose 62 cents, or 14.4 percent, to $4.90.
The Russell 2000 index of smaller companies rose 6.86, or 0.97 percent, to 717.32.
Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where volume came to 1.53 billion shares.
Overseas, Japan's Nikkei stock average fell 0.65 percent. Britain's FTSE 100 rose 1.47 percent, Germany's DAX index rose 1.50 percent, and France's CAC-40 rose 1.09 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Tuesday February 26, 4:18 pm ET
By Madlen Read, AP Business Writer
Stocks Lift After IBM OKs Buyback, Offsetting Disappointment Over Economic Data
NEW YORK (AP) -- Wall Street reversed earlier losses and rallied Tuesday after IBM approved a $15 billion stock buyback, suggesting to investors that there are still some companies out there with financial muscle. The Dow Jones industrial average rose more than 110 points.
IBM Corp., one of the 30 companies that make up the Dow, said the buyback will boost its earnings for 2008 past Wall Street's prior forecasts. Shares of Big Blue vaulted $4.30, or 3.9 percent, to $114.38.
The buyback news followed two dismal economic reports showing core wholesale prices shot up more than expected last month and that consumer confidence is waning. The data reinforced worries that the United States is suffering from stagflation, a state when the economy weakens amid rising costs.
"The market is kind of overcoming negative news, which is potentially a next step toward higher prices," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "At least in the short-term, it's a nice change here."
Tuesday's advance extended a rally that began Monday when Standard & Poor's affirmed the AAA ratings for troubled bond insurers Ambac Financial Group Inc. and MBIA Inc. MBIA, which on Tuesday said it would eliminate its quarterly dividend, was also affirmed by Moody's Investors Service.
According to preliminary calculations, the Dow rose 114.70, or 0.91 percent, to 12,684.92, after declining in earlier trading.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 9.49, or 0.69 percent, to 1,381.29, and the Nasdaq composite index rose 17.51, or 0.75 percent, to 2,344.99.
Government bonds rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, slipped to 3.86 percent from 3.91 percent late Monday. The dollar was mixed against most other major currencies, while gold prices edged higher.
Tuesday's pair of economic reports was decidedly downbeat.
The Conference Board's index of consumer confidence plunged in February to 75.0 from a revised 87.3 in January. The reading was the lowest since the index registered 64.8 in February 2003, and came in far below analysts' average estimate. Though the report is not a perfect predictor of consumer spending, it suggests Americans are watching their budgets.
Meanwhile, the latest wholesale inflation report showed the headline producer price index rising by a full 1 percent in January, driven up by higher energy prices and soaring food costs.
The result was a bit below the 1.1 percent advance projected by Thomson/IFR, but core PPI -- which excludes food and energy prices -- rose 0.4 percent, steeper than the predicted 0.3 percent gain. The data was disconcerting because the Federal Reserve is known to closely monitor core-level inflation in setting monetary policy.
"The market is holding up extraordinarily well given all this negative stuff," said Scott Fullman, director of investment strategy for I. A. Englander & Co. He said the prospect of more corporate buybacks was a "positive for the market," but also, "the market is tired of going down."
Cementing the belief that costs won't be easing anytime soon was oil's surge back above $100 a barrel. Light, sweet crude rose $1.65 to $100.88 a barrel on the New York Mercantile Exchange.
Positive news from some retailers helped keep stocks afloat.
Target Corp., the discount store chain, said fourth-quarter profits fell due to poor holiday sales and a quirk in the earnings calendar, but results came in above the average forecast. Target rose $1.64, or 3.1 percent, to $54.89.
Rite Aid Corp. also jumped, after an analyst upgraded the pharmacy chain and said a recent stock drop makes its risk and reward profile more favorable. Rite Aid rose 17 cents, or 6.5 percent, to $2.78.
RadioShack Corp. rose after the electronics retailer posted a rise in fourth-quarter profit and higher sales than analysts predicted. RadioShack rose $3.30, or 21.5 percent, to $19.13.
In other corporate news, Tenet Healthcare Corp., the hospital operator, said its fourth-quarter losses narrowed sharply thanks to new contracts, higher admissions and cost-cutting. Tenet rose 62 cents, or 14.4 percent, to $4.90.
The Russell 2000 index of smaller companies rose 6.86, or 0.97 percent, to 717.32.
Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where volume came to 1.53 billion shares.
Overseas, Japan's Nikkei stock average fell 0.65 percent. Britain's FTSE 100 rose 1.47 percent, Germany's DAX index rose 1.50 percent, and France's CAC-40 rose 1.09 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Monday, February 25, 2008
Stocks Higher on Hope for Housing Bottom
AP
Monday February 25, 11:16 am ET
By Joe Bel Bruno, AP Business Writer
Wall Street Moves Higher As Investors Hope Housing Slump Might Be Nearing Bottom
NEW YORK (AP) -- Wall Street turned higher Monday on hopes that the worst housing slump in a quarter century might be nearing a bottom, a trend that could be the catalyst needed to revive the badly beaten financial sector.
Investors, while still wary of recession, grew hopeful after the National Association of Realtors reported existing homes fell less than forecast. Some experts interpreted this as a housing market on the verge of bottoming out with a rebound expected to start toward the end of this year.
Wall Street also found encouragement after Visa said it still planned to go ahead with a $19 billion initial public offering this year that could go down as the biggest in U.S. history. Further, investors were still hoping that troubled bond insurer Ambac Financial Group Inc. would receive a capital injection to help preserve its coveted "AAA" rating.
"The home sales, even though they were weak, showed some signs of stabilization -- and even the smallest bit of positive news and the market takes off," said Chris Johnson, president of Johnson Research Group. "People will get very excited if they sense a bottom in the financials because they've been the Achilles' heel of this market."
However, he warned that the rise in major indexes could "turn on its nose" as investors remain skittish. The market this year has been prone to quick swings as investors buy on dips and then quickly cash out.
The Dow rose 104.37, or 0.84 percent, to 12,485.39.
Broader stock indexes were also higher. The Standard & Poor's 500 index added 8.86, or 0.65 percent, to 1,361.97; and the Nasdaq composite index rose 15.74, or 0.68 percent, to 2,319.09.
Despite continuing volatility, the stock market has traded in a range this month as investors hedge their bets as to whether troubled credit markets and the overall economy have stabilized.
Last week, the Dow inched up 0.27 percent, the S&P 500 index rose a modest 0.23 percent and the Nasdaq composite index dipped 0.79 percent. But the three indexes are all down sharply since the start of 2008.
Bond prices fell. The yield on the 10-year Treasury note, which moves opposite its price, rose to 3.88 percent from 3.80 percent late Friday. The dollar was higher against most major currencies, while gold prices fell.
Oil prices hovered near $100 a barrel with supply concerns heightened by a Turkish military incursion into northern Iraq and warnings by Iran against further international sanctions. A barrel of light, sweet crude rose 19 cents to $99 on the New York Mercantile Exchange.
In corporate news, Ambac rose 26 cents, or 2.4 percent, to $10.97 on optimism about a possible rescue plan. Dresdner Bank said Monday it intends to support such a package that would shore up the bond insurer's balance sheet.
"Everyone is waiting to see how the Ambac matter comes out," said Peter Cardillo, chief market economist at Avalon Partners. "The fact that this is not a done deal is keeping the market a little on the defensive side."
The credit industry, already slammed by the summer's mortgage crisis, could face further erosion if bond insurers were to falter. Municipalities and companies used these insurers to back bonds, allowing them to get higher rating and cheaper financing.
Visa said in a Securities and Exchange Commission filing it will offer 406 million shares at $37 to $42 per share. The IPO was seen as a positive sign that a major financial company feels confident to go public despite the ongoing market turbulence.
TakeTwo Interactive Software Inc. surged $8.49, or 48.9 percent, to $25.85 after rival Electronic Arts Inc. renewed its bid to buy the company.
There was good news for cancer drug manufacturer Genentech Inc. The Food and Drug Administration granted an accelerated approval for its Avastin treatment, which is administered with a chemotherapy treatment to breast cancer patients. Shares rose $6.70, or 9.4 percent, to $78.30.
Lowe's Cos. reported a drop in fourth quarter earnings and cited the weak housing market. However, shares of the home improvement retailer rose 92 cents to $24.51 amid hopes that the housing slump might soon hit a bottom.
The Russell 2000 index of smaller companies rose 7.57, or 1.09 percent, to 703.00.
Advancing issues outpaced decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 368.1 million shares exchanging hands.
Overseas, the Tokyo closed 3.07 percent higher. In London, the FTSE 100 rose 1.31 percent, Paris' CAC 40 advanced 0.73 percent, and Frankfurt's DAX gained 1.45 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Monday February 25, 11:16 am ET
By Joe Bel Bruno, AP Business Writer
Wall Street Moves Higher As Investors Hope Housing Slump Might Be Nearing Bottom
NEW YORK (AP) -- Wall Street turned higher Monday on hopes that the worst housing slump in a quarter century might be nearing a bottom, a trend that could be the catalyst needed to revive the badly beaten financial sector.
Investors, while still wary of recession, grew hopeful after the National Association of Realtors reported existing homes fell less than forecast. Some experts interpreted this as a housing market on the verge of bottoming out with a rebound expected to start toward the end of this year.
Wall Street also found encouragement after Visa said it still planned to go ahead with a $19 billion initial public offering this year that could go down as the biggest in U.S. history. Further, investors were still hoping that troubled bond insurer Ambac Financial Group Inc. would receive a capital injection to help preserve its coveted "AAA" rating.
"The home sales, even though they were weak, showed some signs of stabilization -- and even the smallest bit of positive news and the market takes off," said Chris Johnson, president of Johnson Research Group. "People will get very excited if they sense a bottom in the financials because they've been the Achilles' heel of this market."
However, he warned that the rise in major indexes could "turn on its nose" as investors remain skittish. The market this year has been prone to quick swings as investors buy on dips and then quickly cash out.
The Dow rose 104.37, or 0.84 percent, to 12,485.39.
Broader stock indexes were also higher. The Standard & Poor's 500 index added 8.86, or 0.65 percent, to 1,361.97; and the Nasdaq composite index rose 15.74, or 0.68 percent, to 2,319.09.
Despite continuing volatility, the stock market has traded in a range this month as investors hedge their bets as to whether troubled credit markets and the overall economy have stabilized.
Last week, the Dow inched up 0.27 percent, the S&P 500 index rose a modest 0.23 percent and the Nasdaq composite index dipped 0.79 percent. But the three indexes are all down sharply since the start of 2008.
Bond prices fell. The yield on the 10-year Treasury note, which moves opposite its price, rose to 3.88 percent from 3.80 percent late Friday. The dollar was higher against most major currencies, while gold prices fell.
Oil prices hovered near $100 a barrel with supply concerns heightened by a Turkish military incursion into northern Iraq and warnings by Iran against further international sanctions. A barrel of light, sweet crude rose 19 cents to $99 on the New York Mercantile Exchange.
In corporate news, Ambac rose 26 cents, or 2.4 percent, to $10.97 on optimism about a possible rescue plan. Dresdner Bank said Monday it intends to support such a package that would shore up the bond insurer's balance sheet.
"Everyone is waiting to see how the Ambac matter comes out," said Peter Cardillo, chief market economist at Avalon Partners. "The fact that this is not a done deal is keeping the market a little on the defensive side."
The credit industry, already slammed by the summer's mortgage crisis, could face further erosion if bond insurers were to falter. Municipalities and companies used these insurers to back bonds, allowing them to get higher rating and cheaper financing.
Visa said in a Securities and Exchange Commission filing it will offer 406 million shares at $37 to $42 per share. The IPO was seen as a positive sign that a major financial company feels confident to go public despite the ongoing market turbulence.
TakeTwo Interactive Software Inc. surged $8.49, or 48.9 percent, to $25.85 after rival Electronic Arts Inc. renewed its bid to buy the company.
There was good news for cancer drug manufacturer Genentech Inc. The Food and Drug Administration granted an accelerated approval for its Avastin treatment, which is administered with a chemotherapy treatment to breast cancer patients. Shares rose $6.70, or 9.4 percent, to $78.30.
Lowe's Cos. reported a drop in fourth quarter earnings and cited the weak housing market. However, shares of the home improvement retailer rose 92 cents to $24.51 amid hopes that the housing slump might soon hit a bottom.
The Russell 2000 index of smaller companies rose 7.57, or 1.09 percent, to 703.00.
Advancing issues outpaced decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 368.1 million shares exchanging hands.
Overseas, the Tokyo closed 3.07 percent higher. In London, the FTSE 100 rose 1.31 percent, Paris' CAC 40 advanced 0.73 percent, and Frankfurt's DAX gained 1.45 percent.
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
Sunday, February 24, 2008
Congress to Examine Housing Proposals
AP
Sunday February 24, 1:56 pm ET
By Marcy Gordon, AP Business Writer
Congress to Consider Bankruptcy Relief, Foreclosure Assistance Proposals to Help Homeowners
WASHINGTON (AP) -- Congress is set to examine another round of possible repairs for consumers and investors threatened by widening cracks in the housing market.
Proposals include easing bankruptcy rules, shielding banks from lawsuits and providing government assistance to homeowners facing foreclosure.
Lawmakers also plan this week to question several high-profile mortgage and banking executives about industrywide losses and lavish executive-compensation packages.
The housing proposals percolating on Capitol Hill, many of them designed by Democrats, are expected to face much tougher resistance than the recently approved economic stimulus package, which touched on the mortgage crisis in a limited way.
Some of these proposals have been kicked around in one form or another for months. Others are considered attempts to address perceived shortcomings in the Bush administration plan to freeze interest rates on a small percentage of loans made to high-risk borrowers.
A bill likely to be debated on the Senate floor Tuesday includes a proposed revision to the U.S. bankruptcy code that would allow judges to cut interest rates and reduce what's owed on troubled borrowers' mortgages. Currently, mortgage lenders can foreclose against a homeowner in default on a primary residence 90 days after a bankruptcy filing, and judges have no authority to order changes in mortgage terms.
"This week we have an opportunity to pass a housing bill that will help the economy recover, help American families stay in their homes and change the law so this never happens again," said Sen. Richard Durbin of Illinois, the Senate's second-ranking Democrat and author of the proposal to ease bankruptcy rules.
The bankruptcy measure, a similar version of which has cleared a House committee, is fiercely opposed by lenders and many Republicans.
The Mortgage Bankers Association, which is lobbying against the measure, said it would end up hurting many more borrowers in the long run by requiring "higher interest rates and larger down payments to offset the risk" of bankruptcy court intervention on behalf of some homeowners.
Consumer advocates, meanwhile, are pushing senators to approve the change.
Also included in the Senate legislation is a measure mandating $200 million for foreclosure-prevention counseling services -- a near doubling of funds already committed by Congress -- and an allowance for states to issue more tax-exempt bonds so that housing agencies could help homeowners refinance high-cost mortgages.
In the House, lawmakers are considering whether the federal government should shield banks from lawsuits brought by investors whose holdings of mortgage securities are negatively affected by changes in loan terms or other measures intended to help at-risk borrowers. The plan was first put forward by Rep. Mike Castle, R-Del., but appears to have attracted support from key House Democrats.
Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee, has proposed the creation of a federal corporation, funded with as much as $20 billion, to buy distressed mortgages and help struggling homeowners refinance into affordable loans.
The focus on new housing proposals isn't limited to the legislative branch.
The federal Office of Thrift Supervision, a division of the Treasury Department, is drafting a plan to help borrowers who owe more on their mortgages than their homes are worth.
The plan would allow an estimated 8 million homeowners with "upside-down" mortgages to refinance into government-backed loans covering the home's current value. To make up the difference, lenders would receive a special certificate equivalent to the remainder of the balance owed that they could redeem if the home were eventually sold at a higher price.
On Thursday, the House Committee on Oversight and Government Reform will scrutinize the compensation and retirement packages of one chief executive and two recently deposed CEOs of companies ensnared in the mortgage crisis. The witness list includes: Angelo Mozilo of Countrywide Financial Corp., the nation's largest mortgage lender; Stanley O'Neal, formerly of Merrill Lynch & Co.; and Charles Prince, formerly of Citigroup Inc.
Sunday February 24, 1:56 pm ET
By Marcy Gordon, AP Business Writer
Congress to Consider Bankruptcy Relief, Foreclosure Assistance Proposals to Help Homeowners
WASHINGTON (AP) -- Congress is set to examine another round of possible repairs for consumers and investors threatened by widening cracks in the housing market.
Proposals include easing bankruptcy rules, shielding banks from lawsuits and providing government assistance to homeowners facing foreclosure.
Lawmakers also plan this week to question several high-profile mortgage and banking executives about industrywide losses and lavish executive-compensation packages.
The housing proposals percolating on Capitol Hill, many of them designed by Democrats, are expected to face much tougher resistance than the recently approved economic stimulus package, which touched on the mortgage crisis in a limited way.
Some of these proposals have been kicked around in one form or another for months. Others are considered attempts to address perceived shortcomings in the Bush administration plan to freeze interest rates on a small percentage of loans made to high-risk borrowers.
A bill likely to be debated on the Senate floor Tuesday includes a proposed revision to the U.S. bankruptcy code that would allow judges to cut interest rates and reduce what's owed on troubled borrowers' mortgages. Currently, mortgage lenders can foreclose against a homeowner in default on a primary residence 90 days after a bankruptcy filing, and judges have no authority to order changes in mortgage terms.
"This week we have an opportunity to pass a housing bill that will help the economy recover, help American families stay in their homes and change the law so this never happens again," said Sen. Richard Durbin of Illinois, the Senate's second-ranking Democrat and author of the proposal to ease bankruptcy rules.
The bankruptcy measure, a similar version of which has cleared a House committee, is fiercely opposed by lenders and many Republicans.
The Mortgage Bankers Association, which is lobbying against the measure, said it would end up hurting many more borrowers in the long run by requiring "higher interest rates and larger down payments to offset the risk" of bankruptcy court intervention on behalf of some homeowners.
Consumer advocates, meanwhile, are pushing senators to approve the change.
Also included in the Senate legislation is a measure mandating $200 million for foreclosure-prevention counseling services -- a near doubling of funds already committed by Congress -- and an allowance for states to issue more tax-exempt bonds so that housing agencies could help homeowners refinance high-cost mortgages.
In the House, lawmakers are considering whether the federal government should shield banks from lawsuits brought by investors whose holdings of mortgage securities are negatively affected by changes in loan terms or other measures intended to help at-risk borrowers. The plan was first put forward by Rep. Mike Castle, R-Del., but appears to have attracted support from key House Democrats.
Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee, has proposed the creation of a federal corporation, funded with as much as $20 billion, to buy distressed mortgages and help struggling homeowners refinance into affordable loans.
The focus on new housing proposals isn't limited to the legislative branch.
The federal Office of Thrift Supervision, a division of the Treasury Department, is drafting a plan to help borrowers who owe more on their mortgages than their homes are worth.
The plan would allow an estimated 8 million homeowners with "upside-down" mortgages to refinance into government-backed loans covering the home's current value. To make up the difference, lenders would receive a special certificate equivalent to the remainder of the balance owed that they could redeem if the home were eventually sold at a higher price.
On Thursday, the House Committee on Oversight and Government Reform will scrutinize the compensation and retirement packages of one chief executive and two recently deposed CEOs of companies ensnared in the mortgage crisis. The witness list includes: Angelo Mozilo of Countrywide Financial Corp., the nation's largest mortgage lender; Stanley O'Neal, formerly of Merrill Lynch & Co.; and Charles Prince, formerly of Citigroup Inc.
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