WASHINGTON
Retail sales and industrial production both rose in December, indicating that the U.S. economic recovery is picking up as the new year begins.
Purchases climbed 0.6 percent, capping the biggest annual increase in more than a decade, Commerce Department figures showed today in Washington. Output at factories, mines and utilities increased 0.8 percent, the most in five months, according to data from the Federal Reserve.
Americans this year are forecast to boost the spending that accounts for 70 percent of the economy as tax cuts put more money in their pockets, increasing demand for Ford Motor Co. cars and Apple Inc. iPads. At the same time, an unexpected drop in consumer confidence indicates that rising gasoline prices and unemployment stuck above 9 percent pose a risk for sales.
“The expansion should no longer be described as fragile,” said Dean Maki, chief U.S. economist at Barclays Capital in New York, who today raised his forecast for fourth-quarter growth to 3.5 percent from 3 percent. The pickup in sales “is an important signal that consumers are more comfortable spending than they have been.”
Stocks rose, sending the Standard & Poor’s 500 Index to its longest weekly rally since 2007 as JPMorgan Chase & Co. reported record profits. The S&P 500 increased 0.7 percent to 1,293.24 at the 4 p.m. close in New York. Treasury securities fell, pushing up the yield on the benchmark 10-year note to 3.34 percent from 3.30 percent late yesterday.
Sentiment Slips
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment for this month dropped to 72.7, the lowest since November, from 74.5 in December. Economists surveyed by Bloomberg News projected a gain to 75.5, according to the median forecast.
Americans anticipated stagnant incomes this year along with rising inflation, a product of the highest gasoline prices at the pump since October 2008.
The cost of living climbed 0.5 percent in December, led by higher fuel and food prices, figures from the Labor Department also showed today. For all of 2010 the consumer-price index rose 1.5 percent compared with a 2.7 percent increase the prior year.
The so-called core rate of inflation, which excludes volatile food and fuel costs, rose 0.1 percent for a second month. That held last year’s increase to 0.8 percent, the smallest annual gain since records began in 1958.
For all of 2010, retail sales increased 6.7 percent, the biggest one-year advance since an 8.2 percent jump in 1999.
Less Than Forecast
Last month’s gain in purchases fell short of the 0.8 percent median forecast of 83 economists surveyed by Bloomberg. Forecasts ranged from a decline of 0.1 percent to a gain of 1.3 percent cash till payday.
Eight of 13 major retail categories showed increases last month, led by a 2.6 percent jump at non-store retailers, which include Internet vendors. The increase was the biggest in more than two years. Demand at auto dealers climbed 1.1 percent.
Apple sold 7.5 million iPads as of the end of September, making it the best-selling tablet, and the device has generated almost $5 billion in revenue. The Cupertino, California-based company will provide an update on sales when it reports fiscal first-quarter earnings next week.
President Barack Obama signed into law an $858 billion bill on Dec. 17 extending Bush-era tax cuts for two years. The measure also renewed emergency jobless benefits for the long- term unemployed and cut 2011 payroll taxes by two percentage points. Economists such as John Herrmann at State Street Global Markets LLC in Boston said the tax package will boost consumer spending in early 2011.
Projected Pickup
Household spending this year will climb 3 percent, the most since 2005, according to the median forecast of economists surveyed this month. That’s up from a 2.6 percent median estimate in the December, before the legislation was signed.
Auto sales in December reached a 12.53 million annual pace, the highest since the government’s so-called cash-for-clunkers incentive program in August 2009, according to industry data.
Ford said Jan. 10 it plans to hire more than 7,000 workers in the next two years, including engineers with expertise in battery-powered cars. The Dearborn, Michigan-based company will hire 4,000 factory workers and 750 engineers this year and add 2,500 hourly workers next year, Mark Truby, a company spokesman, said in an interview in Detroit.
The University of Michigan’s confidence survey’s gauge of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, decreased to a three-month low of 79.8 this month from 85.3 in December.
Rising Expectations
The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, increased to 68.2, the highest since June 2010.
“Rising gasoline prices are definitely hurting people’s wallets,” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto. “The more important thing is to focus on the expectations index, which shows consumers are feeling a little better about their finances in coming months and that will guide spending patterns up.”
Also today, inventories at U.S. companies rose 0.2 percent in November, the smallest gain in six months as companies struggled to keep up with increasing sales, according to another report from the Commerce Department. Companies may need to keep placing orders or pick up production to meet demand and restock shelves in coming months, sustaining the rebound in manufacturing into 2011.
Stocks started 2011 with a lift Monday thanks to better news on the economy.
Manufacturing activity and construction spending both rose more than analysts were predicting. The Institute of Supply Management’s index of manufacturing activity rose in December for the 17th straight month. Separately, the Commerce Department said construction spending rose 0.4 percent in November.
The Dow Jones industrial average jumped 125 points, or 1.1 percent, to 11,703 in afternoon trading.
The Standard and Poor’s 500 index gained 17, or 1.4 percent, to 1,275. The Nasdaq composite rose 48, or 1.8 percent, to 2,701.
The gains were broad. All 10 company groups that make up the S&P index rose. Financial companies led the way with a 2.2 percent jump.
Bank of America Corp. shot up 5.3 percent to $14.05 after the bank settled a dispute with Fannie Mae and Freddie Mac over soured mortgage investments. That was the best performance among the 30 stocks that make up the Dow index. McDonalds Corp. had the largest fall, losing 0.1 percent to $76.70.
The better economic news dimmed the appeal of safer assets. The yield on the 10-year Treasury note, which rises as its price falls, moved up to 3.34 percent from 3.29 percent late Friday.
Small companies, which are considered riskier investments, surged. The Russell 2000, which tracks the performance of smaller stocks, jumped 1.9 percent.
Traders on Wall Street see early gains in January as a sign that that stocks will rise throughout the year. A gain in the S&P index during the first five days of January has preceded annual gains nearly 90 percent of the time, according to the Stock Trader’s Almanac.
At the same time, smaller companies tend to do better early in the year than large ones, a phenomenon known as the January effect. Some of that has to do with traders buying the shares of risker small companies in a new year after selling underperforming shares in December to reap tax benefits, said Jeffrey Hirsch, the editor of the Stock Trader’s Almanac.
In corporate news, Goldman Sachs Group Inc. gained 2.6 percent to $172.58 after the New York Times reported that it bought a stake in Facebook in a deal that valued the company at $50 billion. Facebook remains a private company, though its shares are traded on private stock exchanges.
Shares rose throughout Europe earlier in the day after a report showed that manufacturing in countries that use the euro expanded faster than analysts had forecast. The Euro Stoxx 50 index rose 0.6 percent. Benchmark indexes in France and Belgium each rose more than 2 percent.
The dollar was flat against an index of six heavily traded currencies.
Stocks in the U.S. ended mixed on Friday, which marked the last day of trading in 2010. For many investors, 2010 turned out better than expected. Every major stock market index in the U.S. increased by double digits.
The S&P 500, the market measure used by most professional investors, returned 15.1 percent after dividends. Historically, the index has returned an average of 10.01 percent a year, including dividends.
Stocks ended 2010 especially strong. The S&P gained 20 percent over the last four months of the year, capped by a 7 percent jump in December.
Peabody Energy Corp. said Thursday that severe flooding in Queensland has prompted it to declare force majeure on some Australian coal shipments.
The St. Louis-based coal producer didn’t specify the volume of shipments that have been interrupted or provide additional details.
Force majeure is a contract clause that frees a party from fulfilling obligations because of circumstances outside of its control, such as extreme weather check cash advance.
Peabody sold 20 million tons of coal through the first three quarters of 2010, or just over 10 percent of the company’s total. However, that production represented more than a third of the company’s total revenue and profit.
Japan may extend a capital-gains tax break by a year after the Financial Services Agency opposed ending it in 2011 as scheduled, according to two government officials familiar with the matter.
Vice Finance Minister Fumihiko Igarashi, who moderates the tax panel that will make policy recommendations to Prime Minister Naoto Kan, said last month he wanted to end the 10 percentage point break for levies on dividends and capital gains. Japan’s banking regulator has rejected the proposal, citing the potential effect on stocks, said the officials, who spoke on the condition of anonymity because the talks were private.
The discussions reflect policy makers’ dual objectives of reining in the world’s largest public debt burden while sustaining confidence in a recovery from Japan’s deepest postwar recession. Igarashi has favored bringing the tax back to 20 percent from 10 percent, a step that might make it easier to avoid having to sell more deficit-financing bonds next year.
“This is good news for investors but it’s important to keep in mind is that it’s not clear the tax break has been encouraging people to buy stocks,” said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo. “Japan’s fiscal situation is so severe that they are going to need to end the tax break eventually.”
‘Severe State’
Toshiharu Mashita, an FSA spokesman, confirmed that his agency wants an extension of the reduced tax rate. “We are asking to extend the equities tax break because of concerns with the outlook for economy, which remains in a severe state, as well as finance,” he said.
Igarashi told reporters today that the panel hasn’t made a decision about the tax break, adding that the Finance Ministry has presented alternatives to the FSA, without elaborating.
The benchmark Nikkei 225 Stock Average has advanced 9 percent so far in the fourth quarter, helped by a halt to the yen’s appreciation against the dollar and signs of stabilizing growth in the U.S. and China. The index added gains after the news on the tax-policy discussions, and was up 0.8 percent at 10,293.89 as of 3:28 p.m. in Tokyo.
Japan’s government has previously extended the tax break, in the wake of the global financial crisis, a move that pushed its expiration to 2011 from 2008. Implemented in 2003, the measure was originally scheduled to last five years. The government tax panel plans to compile tax guidelines for the year starting in April 2011 this month.
Small Investors
The Finance Ministry had proposed bolstering tax benefits for small investors to help offset the effect of repealing the tax break.
Kan’s government is struggling to halt growth in a government debt level estimated by the International Monetary Fund at 226 percent of gross domestic product in 2010. His party lost ground in an upper house of parliament election in July after Kan favored discussing an increase in sales taxes.
Japan’s new bond issuance of 44.3 trillion ($527 billion) for the fiscal year through March 2010 is expected by the finance ministry to exceed tax revenue.
The tax panel is also debating a reduction in income-tax deductions and an inheritance tax break, and scaling back the scope of a pledge to increase childcare handouts. A further area for potential changes is corporate taxes, where officials are discussing a reduction to help make Japan more competitive.
Finance Minister Yoshihiko Noda said this month it would be “difficult” to reduce the effective corporate tax rate by 5 percentage points without coming up with revenue sources to compensate for the lower income.
Debt-strapped Greece will likely get more time before it has to repay the bailout loans that saved it from defaulting on its bonds, a top EU official indicated Thursday as the union seeks to keep its government debt crisis from mushrooming.
A decision on delaying Greece’s first repayments will likely be taken next year, EU monetary affairs commissioner Olli Rehn said during a visit to Athens.
Greece has to start repaying bailout loans of up to euro110 billion ($145 billion) from the EU and International Monetary Fund in 2013, when the current rescue package ends. EU governments are considering pushing back that date by 4 1/2 years to put it in line with the deadlines of the bailout given to Ireland.
The move comes as EU officials make efforts to ease the pressure in debt markets that forced Ireland’s rescue last week and threatened to engulf Portugal as well as larger economies like Spain and Italy. While the EU has resisted further big moves, such as boosting its bailout fund or creating European bonds to share the debt burden, it has focused on austerity plans and making bailout repayment terms more flexible.
Fears of default push bond yields for trouble countries so high they face being unable to borrow at affordable rates and roll over expiring debt.
Fitch Ratings on Thursday said that while the eurozone’s credit strength was better than markets were indicating, the “dramatic deterioration” in borrowing conditions may mean leaders will have do more such as increase the size of their current bailout fund from euro750 billion or have the European Central Bank step up its purchases of government bonds.
But Fitch said it doesn’t expect the crisis to lead to the breakup of the euro.
In Greece’s case, the extension addresses fears that its economy will not be growing sufficiently by 2013 to generate enough revenue to pay back its debts if it had to pay back the full IMF/eurozone loan in 2014 and 2015.
Rehn said the European Commission was discussing the repayment extension “following the decision to do so by the EU finance ministers.”
“We stand ready to make the concrete proposal early next year, and I’m certain that it will receive the support of EU finance ministers,” the commissioner told reporters after meeting with Greek Finance Minister George Papaconstantinou payday loans with no fax.
Speaking at a conference outside Athens earlier in the day, Rehn said that the extension “will mean that we will be able to go beyond and stabilize (Greece’s) debt dynamics and overcome the hump in debt repayment, especially in 2014 and 2015.”
Rehn expressed “sincere admiration” at the progress of Greek financial reforms, which have included overhauling the pension system, cutting civil service salaries, trimming pensions and increasing consumer taxes.
Greece must lower its budget deficit from the 15.4 percent of gross domestic product it stood at in 2009, to below the eurozone limit of 3 percent of GDP by 2014. Its finances are under strict supervision by the IMF and EU, and the quarterly disbursement of bailout loans depends on Athens meeting financial targets.
The austerity measures have led to a backlash from labor unions, who say they are causing ever increasing hardship.
The country’s statistics agency said Thursday that unemployment in September rose to 12.6 percent from 12.2 percent the previous month. The figure in Sept. 2009 stood at 9.1 percent.
Unions have staged a series of strikes and demonstrations, with hundreds of uniformed firefighters marching to the Finance Ministry on Thursday. Greece’s seventh nationwide general strike this year has been called for Dec. 15.
On Tuesday, IMF managing director Dominique Strauss-Kahn said on a visit to Athens that he supported the extension without imposing additional demands for economic austerity.
The European Union is seeking to toughen fiscal rules for countries using the euro to prevent a repeat of the crises seen in Greece and Ireland and contain the debt market turmoil which some fear could drag in other countries with shaky finances, such as Spain and Portugal.
Rehn said a comprehensive response was needed by the EU.
“It is increasingly a systemic crisis, and therefore we need a systemic answer,” he said in response to questions by Greek deputies during an appearance in Parliament.
The nation’s top automakers reported disappointing sales Wednesday, resulting in the worst August for industrywide auto sales in 27 years.
According to sales tracker Autodata, U.S. new vehicle sales fell just short of 1 million vehicles, a drop of 21% from a year ago, which included Cash for Clunkers. That federal program created a sugar rush of sales by dangling an incentive of up to $4,500 in cash for buyers who traded in older gas guzzlers for more efficient models.
Industry sales also fell 5% from July levels. August sales typically outpace July, as deals become available on older models ahead of the fall introduction of new model year cars. August sales would equate to an annual sales pace of about 11.5 million vehicles.
"Car buying is far from repaired, and consumers hesitate before they make a big ticket purchase," said Jesse Toprak, an analyst with the auto pricing Web site Truecar.com. "It shows that the recovery is going to be much slower and more painful than expected."
This year was the weakest August sales total since the 993,100 sold in 1983. Analysts had been forecasting a weak month, with expected sales of about 1.03 million. Most of the major automakers fell short of estimates. The soft demand for autos is seen by economists as another sign of growing weakness among nervous consumers.
GM sales toppled 25% from a year ago, partly because of comparisons to the Cash for Clunkers program of last summer. The federal program created a sugar rush of sales by dangling an incentive of up to $4,500 in cash for buyers who traded in older gas guzzlers for more efficient models.
But it wasn’t all Clunkers. August’s sales also dropped 7% from July and fell short of forecasts from sales trackers Edmunds.com and TrueCar.
GM officials echoed that they are seeing a tougher environment for car sales.
"We are realistic. We do think that consumers will continue to be cautious in their spending," said Don Johnson, GM’s vice president of U.S. sales.
GM did not get as much of a lift from Cash for Clunkers as some of its rivals. But its sales comparisons were hurt by the nearly 40,000 vehicles it sold a year ago at four brands it has since discontinued or sold — Pontiac, Saturn, Hummer and Saab. Sales at its four continuing brands — Chevrolet, Buick, GMC and Cadillac — fell only 11% from a year ago.
Ford (F, Fortune 500) reported an 11% drop from year-ago sales levels and a 5% decline from July. It also missed forecasts from Edmunds and TrueCar.
Most of the decline in sales were concentrated in its Focus compact sedan and its Escape small SUV, which were the company’s best two sellers in the Cash for Clunkers program a year ago.
Ford announced that it made a slight trim in its fourth quarter production target, to 570,000 vehicles from 574,000 a year ago — a sign that Ford’s strong sales gains may be starting to level off in the face of softening demand for automobiles.
"Sales were weaker than expected. Right now auto sales seem to be moving horizontally," said Ken Czubay, Ford vice president of U.S. marketing, sales and service.
Japanese automaker Toyota Motor (TM), which had been the biggest winner in Cash for Clunkers sales a year ago, suffered the hardest hit to sales among the largest automakers — sales plunged 34% from a year ago, and 12% from July.
"This month’s [Toyota] results are even worse than expected," said Michelle Krebs, senior analyst with Edmunds. "Toyota still is suffering a hangover from its numerous recalls this year. It is taking a long time for Toyota to get back to ‘business as usual.’"
Sales at Honda Motor (HMC) plunged 33% from a year ago, and 3% from July falling short of forecasts. Nissan sales tumbled 27% from a year ago and 7% from July.
Chrysler Group, which includes the Chrysler, Dodge and Jeep brands, was the only one to report a modest gain in August sales, posting a 7% gain compared to both a year ago and July. But the year-over-year bar wasn’t terribly high, as Chrysler got the smallest sales lift of any major automaker from the Clunkers program.
MidSouth Bank has raised about $5 million in a stock offering begun in March, a level that’s well beneath the $15 million maximum the Murfreesboro lender set, but in line with what its chief executive said his expectations were.
Lee Moss, chairman and CEO, said today is the last day the bank will receive payments for the public offering, which began with current shareholders then opened to the general public. He said the total will likely ring in at slightly more than $5 million, and that the bank had expected to raise between $5 million and $6 million.
“It will keep us well in excess of all the regulatory capital ratios for a well-capitalized bank,” Moss said.
Faisal Shahzad lived on the downslope side of affluence in the small Connecticut hamlet of Shelton. On Monday, while Shahzad sits in a jail cell in downtown New York City, a judge is scheduled to foreclose on his home, clipping Shahzad’s last attachment to the American dream.
Like many other homeowners across the U.S., he used his house as a piggy bank. Shahzad, who is accused of trying to detonate a Nissan Pathfinder in the center of Times Square last week, took out a second mortgage on the home just months before he left the country for what prosecutors say was a stretch of bomb-making training in Waziristan, Pakistan.
That second mortgage gave him access to a $65,000 credit line, secured by the tidy three-bedroom suburban house he bought in July 2004 for $273,000. Though the frothy real estate market was flinging around cheap money, Shahzad put down the traditional 20%, financing a mortgage balance of $218,400 at a 4% interest rate.
The 30-year-old had a steady job as a financial analyst at Affinion in Norwalk, Conn. He was trading up from a condo he had recently sold. He seemed like a good risk.
And for years, he was. Sure, he repeatedly tried to sell the house, listing it for the boom-time price of $399,000 just one year after buying it — but who didn’t try to hit the real-estate jackpot? And while others were draining their homes of equity, Shahzad stayed away from extra mortgages and loans for the first few years he owned the house. He married Huma Mian, added her name to the deed in December 2007, and kept mailing off his mortgage checks each month.
So when he approached Wachovia Bank in January 2009 for a $65,000 loan secured by his home, no red flags were raised. They approved the money, and he suddenly had a line of credit. Wachovia, now Wells Fargo, did not return calls requesting comment.
Three months later, Shahzad would become a U.S. citizen. Four months later he would leave his job. Five months later he would stop paying his mortgage and leave for Dubai and, eventually, Pakistan.
The house sat empty after he left. In September 2009, Chase (JPM, Fortune 500) initiated foreclosure proceedings, saying Shahzad owed them $200,673.49. Chase, and its local attorney, declined to comment on the case instant payday loan no telecheck.
Connecticut state marshal Mark Pesiri served the papers on the abandoned home, in accordance with Connecticut procedures.
"I don’t get too many up there," Pesiri said.
It’s true. There’s hardly a For Sale sign or foreclosure notice to be seen along the three-mile stretch of Long Hill Avenue that Shahzad lived on. His 7-year-old, grey-sided house is the noticeable exception. There’s a lockbox on the front door at #119, where the lawn is erratically mowed and trash has accumulated in front of the garage door.
Two days after the foreclosure papers were delivered, Chase hired appraiser Scott Iadarola to inspect the property. He valued it at $245,000, putting Shahzad $20,673.49 under water — meaning Shahzad owed the banks that much more than his property was worth.
Shahzad — listed as Faisal "Zhahzad" in the legal filings — never responded to any of these notices and or court actions. He was in Pakistan, where he has told investigators he was studying bomb making. When he returned in February 2010, without his wife or children, he didn’t make up his missing mortgage payments, or try to execute a short sale, or even return the keys. Instead, he rented an apartment 13 miles away in Bridgeport, Conn.
Two months later, he would allegedly drive a Nissan Pathfinder loaded down with fertilizer, propane tanks, gas cans, fireworks, clocks and wiring, and leave it smoking on a street in Times Square.
Meanwhile, the interest meter on his Shelton home kept ticking. And, as many American homeowners now understand far too well, home prices kept falling. When Shahzad house was reappraised on March 15, 2010, Iadarola declared the property to be worth just $240,000 — 12% less than Shahzad paid for it six years ago.
And so on Monday, when Shahzad’s case is scheduled to appear before a judge in Connecticut Superior Court, he will be just one more of the millions of American homeowners who hasn’t paid his mortgage in more than a year and is sitting on a debt — in this case, $37,870.38 — that outstrips the value of the home buried beneath it.
The University of Houston and the Dublin Institute of Technology in Ireland have signed a five-year memorandum of understanding to explore new methods of cooperation in research, instruction and academic exchange in a variety of areas with a focus on energy.
The university said it has been in talks with DIT for the past two years.
As part of the MOU, the two schools will examine opportunities for credit transfer, faculty collaboration and joint funding.
DIT has about 20,000 students and provides technology education to the doctoral level.
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