The U.S. economy grew at the fastest pace in more than six years during the fourth quarter of 2009, according to a government report Friday.
The nation’s gross domestic product, the broadest measure of economic activity, rose at a 5.7% annual rate in the fourth quarter. That was much stronger than expected and provides another sign that a recovery in the economy is taking hold.
Economists surveyed by Briefing.com had forecast growth of 4.7%.
Good end to a terrible year. The growth in the fourth quarter was the highest since the third quarter of 2003. The economy rose at a 2.2% annual pace in the third quarter of last year.
But even with the strong growth in the second half of 2009, the economy shrunk by 2.4% last year. That was the biggest drop in 63 years and first annual decline for the economy since 1991.
The GDP report does not mark an official end of the recession. That determination will be made by the National Bureau of Economic Research, and that group typically waits months — if not more than a year — to declare when recessions ended and began.
But two straight quarters of economic growth is typically a sign of a recovery, and most economists agree that the recession ended at some point in the middle of 2009. The Federal Reserve even used the word "recovery" in the statement following its latest meeting earlier this week.
Inventories lead the way. Much of the improvement was driven by a turnaround in inventories, the supply of goods that businesses produce in anticipation of sales. Businesses slashed inventories in late 2008 and early 2009 due to concerns about worsening economic conditions.
According to Friday’s report, 3.4 percentage points of growth in the fourth quarter came from the change in inventories. A pickup in auto production was a significant part of the inventory turnaround, even though auto sales themselves only rose modestly.
But the U.S. consumer was somewhat of a bystander in the fourth quarter, as personal consumption grew at only a 2% annual rate in the period. Spending by consumers accounts for more than two-thirds of economic activity.
Lakshman Achuthan, managing director of Economic Cycle Research Institute, said that growth from inventories shouldn’t be dismissed since they are typically a driving force of strong recoveries.
"In late 2008 into 2009 everyone freaked out to prepare for Armageddon," he said. "They fired everybody and stopped buying inventories. That overreaction is what’s being undone. Yes, you have to have jobs growth, but we’ll get that next, probably in January or February."
Other economists say the turnaround in inventories isn’t enough to lead to strong growth over a sustainable period. A better labor market that would give consumers the confidence and money they need to spend is also necessary.
"I’m not dismissing the inventory gain, but now that inventories are getting more into line with final sales, then the thrust of economic growth depends on final demand picking up," said John Silvia, chief economist with Wells Fargo Securities.
Stimulus, exports, also feed growth. Economic growth in the third quarter was greatly attributed to the federal stimulus bill passed at the beginning of 2009. But stimulus doesn’t appear to have had as big of an impact in the fourth quarter.
Federal spending on stimulus does not show up on any one line of the GDP report. In fact, government spending contributed little to growth by itself, even as non-defense spending by the federal government rose at an annual 8% rate in the quarter.
But money pumped into the economy by tax cuts, such as the first-time home buyer tax credit, coupled with spending by businesses that received stimulus dollars, did have an impact in the quarter, even if it was harder to quantify.
An 18% jump in the value of exports also played a major role in the economy’s rebound, contributing nearly 2 percentage points of growth. Silvia said exports have a chance to be a significant source of growth in the coming year, helped by the weaker dollar and stronger growth in developing economies, particularly in Asia.
Investment in business equipment and software jumped at a 13% annual rate, the biggest increase in nearly four years. That spending added almost a full point to GDP, and is often a precursor to employers starting to hire once again.
Slower growth ahead? Sung Won Sohn, economics professor at Cal State University Channel Islands, said there was good news in the report, but cautioned that the economy is unlikely to keep growing at such a strong pace.
"The not-so-good news is that most of the growth came from temporary factors such as inventories and government stimulus which can’t be sustained," he said.
Sohn’s forecast is for GDP growth of 2.6% in the first quarter, and only a bit higher than that for the full year. Silvia expects GDP growth of 2.3% in the first quarter of 2010, and 2.7% for the full year.
But Achuthan said growth doesn’t have to stay above 4% or 5% for the economy to start making significant gains.
"It is normal to have a burst of acceleration coming out of a recession, particularly a sharp recession, and then have growth ease back," he said.
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The St. Louis area, which has a soft spot for mostaccioli and ravioli, has been one of the top-performing markets for Fazoli’s, the Italian quick-service restaurant chain based in Lexington, Ky.
That’s why Carl Howard, Fazoli’s chief executive, picked this region for the chain’s first new store in more than 3 years.
The new outlet, which opened this week in Edwardsville, is also the first to debut the chain’s new prototype. The new design is smaller than the old model, located in strip centers instead of a stand-alone building, and has a brighter, more modern decor.
"This is a fresh look for us," Howard said in an interview during a visit to the new store. "Our old facility is a little bit stale. We wanted to juice it up and have some fun."
Fazoli’s has undergone more than just a face-lift. In the last year, it has also overhauled about 80 percent of its menu, adding new items such as baked pasta dishes. It has also started using fresher ingredients and revamped everything, from the submarino sandwiches to the marinara sauce.
Fazoli’s had become quiet over the years, Howard acknowledged. Its menu hadn’t kept up with the growing sophistication of the public’s palate. And the previous leaders of the chain let the brand grow stagnant as they sought a buyer for the company, he said.
In 2006, Fazoli’s was finally sold to Sun Capital Partners. Howard came in as CEO two years later. When he took over, the chain had been grappling with declining customer counts for several years at its 280-plus locations. One of his first major decisions was to shut down dozens of underperforming stores. Fazoli’s now has closer to 240 outlets and does $239 million in sales.
"You get rid of your dogs and stick with your stars and all of a sudden your numbers and performance begins to improve," said Darren Tristano, executive vice president of Technomic, a Chicago-based food consultant group.
Now customer visits have been consistently rising since January 2009, Howard said, though he declined to say by how much.
The new Edwardsville site will be followed by six to eight other new Fazoli’s in the next year or so in other strong markets for the company such as Kansas City, and Dayton and
Columbus, Ohio, Howard said.
"We have a Midwest appeal." Howard said. "We have real comfort food."
St. Louis, which now has nine Fazoli’s locations, is the chain’s third-largest market in terms of number of stores, behind only Indianapolis and Lexington.
Kim Tucci, president of St. Louis-based The Pasta House Co., isn’t sweating it as Fazoli’s angles for a larger local presence.
The Pasta House has a very similar logo to Fazoli’s — a fat, red tomato — and has about 20 locations in the metro area and another dozen outside the region. Tucci said his competitors are more along the lines of Macaroni Grill — and not Fazoli’s, which he equated to a fast-food chain like McDonald’s.
"This is like apples and watermelons," he said. "You can’t compare it to what we have — nothing against them."
Tucci added that it makes sense for Fazoli’s to be aggressive in this economy because of their lower price points. The average bill per person at Fazoli’s is just under $6.
Like most other restaurants, Pasta House has been feeling the pinch of the recession as people eat out less. Tucci has responded by lowering his prices. In late December, Pasta House started a promotion offering six pastas for under $6.
"We’re hanging in there," Tucci said. "We’re hustling everyday, 24-7."
As a whole, fast food and fast-casual outlets have done well during the recession — better than the traditional, sit-down restaurants, Tristano said.
The prototype for the new Fazoli’s is about 2,100 square feet — roughly a quarter smaller than their older locations of between 2,700 and 3,100 square feet, Howard said.
"It’s a lot more efficient," Howard said.
By having these smaller stores in strip malls, Howard hopes this will be more attractive to franchises. The start-up costs associated with a new location will be closer to $500,000 compared with as much as $1.7 million for land and the building of the older standalone stores.
"It’s going to be easier to replicate," he said. "There’re a lot of shopping strips for us to go rather than fighting for the last great piece of real estate in a market."
Fazoli’s is also testing out some other innovations at the Edwardsville store — slightly lower prices on some items, a new line of pizzas and bringing back the "breadstick person" who goes table to table.
When it opens its new stores in Dayton in the next several weeks, Fazoli’s will try out other new ideas, such as having real tableware and silverware.
If the innovations do well in these new stores, Fazoli’s hopes to roll out the changes to its other company-owned stores. As for the franchises, Howard hopes that the new elements will be such a hit that they will be motivated to follow suit.
French business confidence rose more than economists forecast in January on signs that the recovery is gaining pace after the worst recession in six decades.
The index of sentiment among factory executives jumped to 92 from a revised 88 in December, Paris-based statistics office Insee said today. Economists expected a reading of 90, according to the median of 18 forecasts gathered by Bloomberg News.
France’s economy emerged from the slump last year, growing 0.3 percent in the second and third quarters. The Finance Ministry said this week that growth accelerated in the three months through December and raised its 2010 forecast, predicting that Europe’s second-largest economy will expand 1.4 percent.
“French industry is benefiting from the pickup in world trade,” said Joost Beaumont, an economist at Fortis Bank Nederland in Amsterdam. “Growth should mainly come from foreign demand.”
French bonds gained after the report, pushing the yield on the benchmark 10-year bond due in 2019 down 2 basis points to 3.43 percent. A basis point is 0.01 percentage point.
French 10-year debt yielded an average 37 fast cash online.18 basis points more than 10-year German securities in 2009, according to data compiled by Bloomberg. The spread today was 23.5 basis points.
“Manufacturers see business significantly improving,” Insee said. “Inventories of finished products are judged to be small and order books, overall and from abroad, are filling up, even if they are still considered much less than full.”
The level of orders from foreign clients now shows a reading of minus 48, up from minus 58 in December, Insee said.
Domestic demand may be restrained by rising unemployment. The Finance Ministry expects France to lose 71,000 jobs this year, mostly in the first half, after shedding 373,000 in 2009.
“We have a recovery and the only question is how strong it will be,” said Pierre-Olivier Beffy, chief economist at Exane BNP Paribas in Paris. “In the U.S. inventories are being re- built and in Europe we are positive on the prospects for France and Germany.”
Fewer Americans than anticipated filed claims for unemployment benefits last week, pointing to an improvement in the labor market that will help sustain economic growth next year.
Initial jobless claims fell by 22,000 to 432,000 in the week ended Dec. 26, the lowest level since July 2008, Labor Department figures showed today in Washington. The number of people collecting unemployment insurance fell in the prior week to 4.98 million, and those receiving extended benefits jumped.
Companies are retaining staff as sales improve and production picks up. Gains in consumer spending, which accounts for 70 percent of the economy, may encourage more hiring in coming months, helping to bolster the rebound from the worst recession since the 1930s.
“It’s boding well for outright job growth,” said Stephen Gallagher, chief U.S. economist at Societe Generale in New York, who forecast claims would drop to 430,000. “It seems that some of the layoffs that took place in the early part of the year were excessive.”
Treasury securities fell after the report, pushing the yield on the benchmark 10-year note up to 3.84 percent, from 3.79 percent late yesterday. The Standard & Poor’s 500 Index dropped 1 percent to 1,115.1 at 4:09 p.m. in New York. The S&P 500 gained 23.5 percent this year, the biggest annual advance since 2003.
Unexpected Drop
Economists forecast claims would rise to 460,000 from a previously reported 452,000, according to the median of 29 projections in a Bloomberg News survey. Estimates ranged from 430,000 to 490,000.
“What we’ve seen is definite stability and just a hint toward things trying to get better,” Jeffrey Joerres, chief executive officer of Manpower Inc., said in a Bloomberg Television interview today. The world’s second-largest provider of temporary workers, is experiencing “slow but steady increases in people who are out on assignment,” he said. “It’s a little in every office, which is a good sign because it’s broad-based.”
A Labor Department spokesman said last week’s figures were “consistent” with recent trends and were not influenced by any unusual factors. Even so, the week of the Christmas holiday is difficult to adjust for seasonal variations, he said.
The four-week moving average of initial claims, a less volatile measure, dropped to 460,250 last week from 465,750 the prior one. Claims are down from a 26-year high of 674,000 in the week ended March 27.
Continuing claims decreased by 57,000 in the week ended Dec. 19, reaching the lowest level since February. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.
Extended Benefits
Today’s report showed the number of people who’ve use up their traditional benefits and are now collecting extended payments climbed by about 199,000 to 4.82 million in the week ended Dec. 12. Twenty-nine of the states and territories where workers are eligible to receive government extension have begun to report that data, a Labor Department spokesman said. Two states have started reporting data on the latest emergency extension, he said.
President Barack Obama this month signed into law legislation that included a stopgap provision to ensure that unemployment benefits weren’t cut off over the holidays.
The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.8 percent in the week ended Dec. 19, today’s report showed.
State Breakdown
Twenty-seven states and territories reported a decrease in claims, while 26 reported an increase. These data are reported with a one-week lag.
The government is scheduled to release its December payrolls report on Jan. 8. In November, the economy lost the fewest jobs since the recession began two years ago and the unemployment rate receded to 10 percent from a 26-year high of 10.2 percent the prior month.
Even so, Americans are concerned about their financial future. Fewer consumers in December believed their incomes will increase over the next three to six months, the Conference Board’s confidence report this week showed.
Warren Buffett’sBerkshire Hathaway Inc. is among companies that slashed employment in 2009. The Omaha, Nebraska-based company last week said it cut 21,000 workers from its payroll amid a slump at the firm’s manufacturing and retail units. The company and its subsidiaries now have about 225,000 workers, it said in regulatory filings.
Greece sold 2 billion euros ($2.9 billion) of floating-rate notes privately to banks, eight days after Fitch Ratings downgraded the nation’s debt as the government struggles to cut the European Union’s largest budget deficit, two bankers familiar with the transaction said.
The securities, which mature in February 2015, will yield 250 basis points, or 2.5 percentage points, more than the six- month euro interbank offered rate, or Euribor, they said. That’s 30 basis points higher than a similar-maturity Greek fixed-rate bond when converted into a floating rate of interest, according to data compiled by Bloomberg.
Greek bonds have fallen in the past week, with two-year note yields rising by the most in more than a decade on Dec. 8, when Fitch cut the nation’s credit rating to BBB+, the lowest in the euro region, citing the “vulnerability” of the nation’s finances. Prime Minister George Papandreou has been unable to convince investors he can reduce a deficit the government says will rise to 12.7 percent of gross domestic product this year, after the economy shrank 1.7 percent in the third quarter.
“Selling bonds via a private placement can be a double- edged sword at this point,” said Luca Cazzulani, a fixed-income strategist in Milan at UniCredit Markets & Investment Banking. “On the one hand, it shows that Greece can always find buyers for their bonds. But the market might take it as a sign that they only have this channel left.”
Widening Spread
Greek bonds rose snapped two days of declines today, with the yield on the 10-year note dropping 11 basis points to 5.62 percent as of 10:26 a.m. in London. It rose as much as 29 basis points yesterday to 5.76 percent, the highest since April 3.
Concern some countries may struggle to pay their debt was reignited after Dubai’s state-owned Dubai World said on Dec. 1 it wanted to restructure $26 billion of debt. The premium, or spread, investors demand to hold Greek 10-year bonds instead of German bunds, Europe’s benchmark government securities, rose as high as 250 basis points yesterday, the highest closing level since April 2. It narrowed to 239 basis points today guaranteed payday loans.
The participating banks in yesterday’s private placement were National Bank of Greece SA, Alpha Bank AE, EFG Eurobank Ergasias SA, Piraeus Bank SA and Banca IMI SpA, the bankers familiar with the transaction said. Italy’s Banca IMI was the only foreign-based in the group.
Worst Performers
The government paid “generous” terms, said Wilson Chin, a fixed-income strategist in Amsterdam at ING Groep NV.
“I guess you have to pay some liquidity premium, given the sale was done at the end of the year,” he said. “I would be very surprised if they continue to use this method into the first quarter of next year. That would probably be taken as a sign the market isn’t working for them.”
Greek bonds are the worst performers after Ireland among the debt of so-called peripheral euro-region countries this year, handing investors a 3.5 percent return, according to Bloomberg/EFFAS indexes.
In a private placement, issuers offer securities directly to chosen private investors as opposed to selling them through an auction or via a group of banks.
Papandreou pledged in a speech two days ago to begin reducing the nation’s debt, set to exceed 100 percent of GDP this year, from 2012. The European Commission estimates the ratio at 112.6 percent of GDP this year, second only to Italy.
‘Painful Decisions’
“In the next three months we will take those decisions which weren’t taken for decades,” Papandreou said in Athens. He said many choices will be “painful,” though he promised to protect poorer and middle-income Greeks.
Credit-default swaps on Greece rose 1 basis point to 238.5, according to CMA DataVision, after surging 25.5 basis points yesterday. Such swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should an issuer fail to adhere to its debt agreements. A basis point on a contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.
Canadian Tire Corp., one of the nation’s most iconic retailers, introduced a dollar coin on Wednesday to complement its multi-hued, low-denomination stable of widely hoarded bills.
The move, first reported in the Star on Wednesday, puts an end to speculation that Canadian Tire was ready to eliminate its popular paper money loyalty program.
"Over the years the high-valued program has evolved to include electronic "Money" on Canadian Tire branded credit cards, as well as the addition of special promotions which now includes this limited edition $1 Canadian Tire coin," Canadian Tire Retail president Mike Arnett said in a release this morning.
The coin was created by the Royal Canadian Mint and will be given to customers who spend $25 or more at a Canadian Tire store on Dec. 5th or 6th.
The company held a press conference this morning to make the announcement, where Arnett also announced the company would develop and test a new rewards program throughout 2010.
However, a copy of a flyer destined for Canadian Tire stores in Quebec, obtained by the Star on Tuesday, shows an ad for a limited edition one-dollar coin. Images of the coin had also been posted on collectors’ websites, revealing it to look a bit like a quarter, with the Canadian Tire logo on one side and the beaming fictional Scotsman Sandy McTire on the other.
In a digital economy, Canadian Tire money is quite literally throwback to an era of physical cash and human interaction that scarcely exists in this online age of speedy and efficient consumption.
But a decision to cancel the paper money program would surely shock the nation - not least, the money’s ardent collectors - even if the retailer has already moved to a parallel electronic rewards program using a credit card and electronic Canadian Tire money.
"Whenever my dad went and got stuff for the house, he’d give me the money," said Roger Fox, 64, who has been collecting Canadian Tire bills since 1963, is a past-president of the Canadian Tire Coupon Collectors Club and wrote a chapter on the subject for a book published by the Royal Canadian Numismatic Association. The coin is a dramatic introduction for collectors such as Fox: Is it a heartbreakingly thrifty move away from paper money or a reassertion of the importance of the rewards program?
"They may be cutting back their printing costs while at the same time not eliminating Canadian Tire money altogether, but replacing say, the 50 cent, dollar, and two dollar (bills) with a coin," Fox said, adding, "I’m just thinking out loud, that’s all. I have no proof."
Canadian Tire has been making a gradual shift away from emphasizing its paper money.
The company’s exclusive credit card, Options Mastercard, introduced in 2000, lets shoppers accumulate Canadian Tire money wherever they shop, at a better rate than using cash.
In its promotions, the company refers to it as "Canadian Tire money rewards" - with quotation marks around money.
Customers now receive paper money only if they use cash or debit.
Jerome Fourre, a collector since 1985 from the Montreal area, said that after a golden age of 5 per cent Canadian Tire money returns - $5 for every $100 spent - the current return is more like 0.4 per cent, or 40 cents for every $100 spent.
The company does not release such details on the loyalty program and refused, not for the first time, to comment on Fourre’s calculations.
"Canadian Tire money was originally to get people to pay cash," said Fourre.
"In 2009, cash is not what they want."
For its part, the company said it has no immediate plans to cancel the beloved bills, though it is obviously trying to yank its rewards program into the modern era.
Collectors such as Fourre and Fox - part of a national subculture of clubs, meetings and exhibits devoted to Canadian Tire money - want to see the paper bills survive, though eliminating them would probably up the value of their stashes.
"When it’s on plastic it’s not something you have tangible in your hand," Fox said.
"It’s as if you’re getting something for free.
"Who doesn’t want something for nothing?"
Wells Fargo Financial will close three stores on the Big Island and Kauai next week as part of a plan to consolidate its Hawaii operations.
The plan to close the Hilo, Kailua-Kona and Lihue stores is in response to the slow economy, a company spokesman said.
Customers on the Big Island and Kauai will be served by one of the company’s three remaining stores in Wailuku on Maui and in Aiea and Waipahu on Oahu.
The company, which offers home equity and auto loans and credit cards, has 40 employees in Hawaii low fee cash advance.
All of the employees on the Big Island and Kauai were offered the opportunity to transfer to one of the other Hawaii stores or the Mainland, the company said. Most chose to take the transfer offer, but seven employees turned it down and elected to receive a severance package, the company said.
Stocks rallied Thursday in a broad-based advance as a strong report on economic growth in the third quarter reassured investors that the recovery is on track.
The Dow Jones industrial average (INDU) gained just shy of 200 points, or 2%, closing at 9962.58. It was the Dow’s biggest one-day percentage gain since July 15, and came exactly 80 years after Wall Street’s darkest day, the Crash of 1929.
The S&P 500 (SPX) index added 23 points, or 2.3%, managing its biggest one-day percentage gain since July 23.
The Nasdaq composite (COMP) climbed 38 points, or 1.8%, its biggest one-day percentage gain in about a month.
"The market sold off Wednesday in expectation of a lower number and today it got a positive surprise," said Karl Mills, president and chief investment officer at Jurika Mills & Keifer.
"This shows the economy is continuing to recover and heal," he said. "It’s just not clear what that recovery is going to look like."
Gains were broad based, with 29 of 30 Dow issues rising, led by Boeing (BA, Fortune 500), Chevron (CVX, Fortune 500), Caterpillar (CAT, Fortune 500), Hewlett-Packard (HPQ, Fortune 500), IBM (IBM, Fortune 500) JPMorgan Chase (JPM, Fortune 500), 3M (MMM, Fortune 500), Travelers (TRV, Fortune 500), Wal-Mart Stores (WMT, Fortune 500) and Procter & Gamble (PG, Fortune 500), which reported a better-than-expected profit.
The rally in the financial sector boosted the KBW Bank (BKX) index by 4%. Commodity shares spiked, with the Morgan Stanley Commodity (CSX, Fortune 500) index up 5%.
The Dow and S&P ended three of the last four sessions lower, and the Nasdaq declined in all four, as investors turned cautious after a seven-month stock rally. Early enthusiasm about better-than-expected third-quarter profit gave way to questions about the strength of the economy, causing investors to pull back.
The S&P 500 lost 5% between the rally peak on Oct. 19 and Wednesday’s close. Both the better-than-expected GDP report and the preceding sharp, short selloff gave stocks a boost Thursday. Since bottoming at a 12-year low on March 9, the S&P 500 has gained 57.6% as of Thursday’s close.
Reports on personal income and spending, consumer sentiment and manufacturing are all due Friday morning.
Dow component Chevron (CVX, Fortune 500), Duke Energy (DUK, Fortune 500), Alcatel-Lucent (ALA) and Sony (SNE) are among the corporations reporting quarterly results in the morning.
Economy: GDP grew at a 3.5% annualized rate in the third quarter, the government reported Thursday. That was better than the 3.2% rate economists surveyed by Briefing.com had predicted and also marked the first quarter of growth in a year. GDP fell at a 0.7% rate in the second quarter.
Some organic factors fueled the advance, including a slowdown in the pace of businesses reducing inventories. But other short-term factors played a role too, including the impact of government stimulus programs such as Cash for Clunkers default payday loan. Yet some economists are concerned that when those short-term factors are removed, any recovery could be pretty flimsy.
"It was a little better than expected, but you have to wonder how much of the growth was pulled from another quarter, with the stimulus driving so much of it," said Drew Kanaly, chairman and CEO at Kanaly Trust.
"As you look to quarters down the road, you have to wonder how sustainable this level of GDP is," he said. "Can the government take away all the stimulus and make that handoff to the private sector?"
A separate government report showed that the number of Americans filing new claims for unemployment fell to 530,000 last week from 531,000 the previous week. Economists thought it would drop to 525,000.
Continuing claims, a measure of Americans receiving benefits for a week or more, fell to 5,797,000 from 5,945,000 the week before. Economists thought claims would fall to 5,905,000.
Results: Exxon Mobil (XOM, Fortune 500) said quarterly earnings plunged 68% in the quarter due to lower oil and natural gas prices. The No. 1 U.S. oil company reported weaker quarterly revenue as well. Both earnings and revenue missed estimates. Shares of the Dow component ended little changed.
Dow component Procter & Gamble (PG, Fortune 500) reported weaker quarterly earnings and revenue that topped estimates. The consumer products maker also boosted the low end of its fiscal 2010 earnings forecast. Shares gained 4%.
With 302 companies, or 60% of the S&P 500 having already reported results, profits are on track to have fallen 17.9% from a year ago, according to the latest results from Thomson Reuters.
Currency and commodities: The dollar fell versus the euro, resuming its slide after a few up days and moving closer to a 14-month low hit last week. The greenback gained versus the yen.
U.S. light crude oil for December delivery rallied $2.44 to settle at $79.87 a barrel on the New York Mercantile Exchange, a gain of 3%.
COMEX gold for December delivery rallied $16.60 to settle at $1,047.10 an ounce. Gold has surpassed records repeatedly this month due to the weak dollar and longer-term worries about inflation.
World markets: Global markets were mixed. In Europe, London’s FTSE 100, France’s CAC 40 and Germany’s DAX all gained over 1%. Asian markets ended lower, with Japan’s Nikkei losing 1.8%.
Bonds: Treasury prices tumbled, raising the yield on the 10-year note to 3.49% from 3.41% Wednesday. Treasury prices and yields move in opposite directions.
Market breadth was positive. On the New York Stock Exchange, winners beat losers four to one on volume of 1.45 billion shares. On the Nasdaq, advancers topped decliners nine to four on 2.33 billion shares.
Tough talk from the Bank of Canada briefly pulled the rug from under Canada’s rebounding currency this week, but strong commodity prices and a weak U.S. dollar mean the rant likely won’t have a lasting impact.
Last week, the Canadian dollar nearly climbed above the U.S. dollar for the first time since July 2008, something the central bank fears would endanger the economic recovery, given Canada’s reliance on exports to the United States.
Clearly anxious to contain the currency’s surge off a four-year low hit in March, the Bank of Canada on Tuesday renewed its commitment to keeping interest rates low and forecast delays in the economic turnaround.
The statement extinguished any talk that the Bank of Canada would follow Australia’s central bank in hiking interest rates quickly, and Canada’s currency fell 3.6 percent from the 14-month high it hit last week.
But the currency nudged its way higher on Wednesday, and seems set to resume its march toward parity with the greenback once the sting of the central bank statement wears off.
“This is a short-term trend reversal but it’s really not a game changer,” said Jack Spitz, managing director of foreign exchange at National Bank Financial in Toronto.
“The reaction to the statement, not surprisingly, was to bid dollar/Canada higher, but the sustainability is going to be based on ongoing fundamentals which continue to advocate for a stronger Canadian dollar over time.”
Spitz said this week’s pullback in the Canadian dollar was driven mainly by speculative accounts, which he described as sensitive to short-term volatility driven by news like the Bank of Canada statement payday loans with low fees.
The Canadian dollar has risen 17.5 percent this year, helped by lofty prices for oil and gold, economic data that hinted at a rebound, and surging equity markets.
When those factors reclaim the spotlight, many experts say the currency could climb again as investors sell the greenback and buy assets that are more closely correlated with economic recovery.
“Can we trade down to parity? Yes, we absolutely can. Are we going to stay there? I don’t think so,” said Steve Butler, director of foreign exchange trading at Scotia Capital.
“We had an upside day last Thursday which technically says we are overdue for a correction, but I just don’t think (the C$ upside) is over yet because I don’t think the pressure is off the U.S. dollar right now.”
Some experts even suggest the Canadian dollar could keep rallying until the U.S. Federal Reserve starts raising interest rates again, which it is not expected to do until the second half of 2010.
C$ NEAR UPSIDE LIMITS
But foreign investors may also opt to sell Canadian dollars and buy higher yielding growth sensitive currencies, a move that could boost to the Australian dollar and Norwegian crown and limit the upside for the Canadian currency.
Microblogging service Twitter is in advanced talks with Google Inc and Microsoft Corp about licensing its data feed to the companies’ search engines, a Web blog associated with the Wall Street Journal reported on Thursday.
Twitter’s discussions with Microsoft and Google are being conducted separately and would allow each company to incorporate the 140-character messages, or “tweets,” that Twitter is known for into their Internet search results.
The ability to cull through the flood of tweets as they are posted, known as real time search, is gaining popularity as an important new way to search the Internet for up-to-the-minute information on the latest news events and happenings.
The AllThingsDigital blog quoted unidentified sources as saying the companies are discussing several types of deals. Details could include Twitter receiving a payment of several million dollars and various types of revenue-sharing agreements to allow Twitter to benefit from the ad revenue that Microsoft and Google generate from search results cash advances pay day loan.
Twitter has emerged as one of the fastest-growing Internet social media services. But the company has yet to generate any significant revenue from its free service. Twitter has cited advertising and premium features as two potential money-making plans.
Last month, Twitter received $100 million in new funding from investors including T.Rowe Price and Insight Venture Partners, based on a $1 billion valuation for Twitter, according to a person familiar with the matter.
Representatives from Twitter were not immediately available for comment. Google and Microsoft declined to comment.
(Reporting by Alexei Oreskovic; Editing by Tim Dobbyn)
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