Federal Reserve Chairman Ben Bernanke told Congress Tuesday that a prolonged rise in oil prices would pose a danger to the economy. But he said a more likely outcome is a temporary and modest increase in consumer prices _ not runaway inflation.
Bernanke, in prepared testimony to the Senate Banking Committee, expressed confidence that economic growth would increase this year. But he warned it won’t be strong enough to quickly lower unemployment, now at 9 percent.
He also cited other risks to the economy, including rising prices for oil, gasoline, food and other commodities, and further weakness in home prices. All could prompt Americans to spend less.
The Fed chief said the economy still needs the support of its $600 billion bond-purchase program, downplaying runaway inflation risks that others have raised.
“The most likely outcome is that the recent rise in commodity prices will lead to, at most, a temporary and relatively modest increase in U.S. consumer price inflation,” Bernanke said in the first of two appearances this week to deliver the Fed’s twice-a-year economic report to Congress.
The bond-purchase program is scheduled to end in June. It is intended to spur more spending and invigorate the economy by lowering rates on loans and boosting prices on stocks.
Republicans in Congress and some Fed officials worry that the program could trigger high inflation and a wave of speculative buying on Wall Street that could lead to new bubbles in the prices of assets like stocks and bonds.
Bernanke once again defended the program. He said it is needed to energize growth and reduce unemployment. He blamed the rise in oil and global commodities prices on strong demand from fast-growing countries such as China, not the Fed’s stimulus policy.
Gas prices jumped over the weekend to a new nationwide average of $3.37 a gallon _ 26.7 cents a gallon more than a month ago. Food prices in January rose at the fastest since the fall of 2008.
Political upheaval in the Middle East, Bernanke said, has caused oil and gasoline prices to march higher. However, Bernanke said he and a majority of his Fed colleagues continue to believe that the situation won’t lead to out of control inflation.
Workers have little power to demand big pay increases because the jobs market is still weak. Many factories and other companies are operating well below full capacity because customer demand is far from booming. Those forces will prevent inflation from taking off, Bernanke said.
However, a prolonged rise in the price of oil or other commodities would represent a “threat” to economic growth and to inflation, Bernanke acknowledged. The Fed is closely monitoring the situation.
The Fed regularly reviews its bond-purchase program. It could buy fewer securities if the economy were to grow more strongly than anticipated or if inflation showed signs of breaking out. Or it could buy more if the economy was in danger of weakening. Most economists believe the Fed will spend the full $600 billion on schedule.
Bernanke says the sharp drops in the nation’s unemployment rates over the last two months were encouraging. But he said it will still take “several years” for unemployment to drop back to normal - around 6 percent.
“Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established,” he said.
If gas prices rise to $3.75 a gallon and stay there for a year, it could mitigate the benefit of the Social Security tax cut, economists said. The economy would still grow, but it wouldn’t get a boost from people spending more on goods and services.
If gasoline prices went as high as $5 a gallon, spending cuts by consumers and businesses could push the economy into a recession, analysts say.
President Barack Obama wants to cast some light on economic success stories in the shadows of a slow recovery. And he is looking to find some more.
On Friday, the president travels to Schenectady, N.Y., birthplace of the General Electric Co., to showcase a new GE deal with India and announce a restructured presidential advisory board to focus on increasing employment and competitiveness.
Obama is naming GE CEO Jeffrey Immelt as the head of a Council on Jobs and Competitiveness. The panel replaces Obama’s Economic Recovery Advisory Board, which had been chaired by former Federal Reserve Chairman Paul Volcker. Obama announced late Thursday that Volcker, as expected, was ending his tenure on the panel.
Obama, in a statement after midnight, said the council’s mission will be to help generate ideas from the private sector to speed up economic growth and promote American competitiveness.
“We still have a long way to go, and my number one priority is to ensure we are doing everything we can to get the American people back to work,” the president said.
For Obama, the visit to upstate New York is also an opportunity to claim credit for tax, trade and energy policies pursued by his administration as the nation attempts to recover from the worst recession since the 1930s. It’s the first of many treks during the second half of his term that the president is expected to take to put a more hopeful countenance on the economy amid stubbornly high unemployment.
The GE plant is benefitting from a power turbine contract with India announced during Obama’s Southeast Asia trip in November. Immelt also has been an advocate of alternative forms of energy, and the GE facility, the company’s largest energy plant, is the future site of GE’s advanced battery manufacturing program. New battery technology has become something of an Obama pet project as a symbol of innovation, clean energy and job creation.
“This is a company that has brought jobs from overseas back into the United States,” Obama spokesman Robert Gibbs said.
Obama also plans to take note of GE employees as examples of middle class Americans who are benefiting from the payroll tax cut he negotiated with Republicans in a December economics package that retained Bush-era tax rates for all taxpayers.
In Immelt, Obama has a useful corporate ally. As chief executive of a multinational company, Immelt was one of 20 CEOs who met with the president during a daylong summit at Blair House last month. He was one of 14 U.S. business leaders invited to meet with Chinese President Hu Jintao this week at the White House and was among the guests for the lavish state dinner that followed.
In an opinion piece Friday in the Washington Post, Immelt said the restructured council under his leadership would focus on manufacturing and exports, trade and innovation.
“The president and I are committed to a candid and full dialogue among business, labor and government to help ensure that the United States has the most competitive and innovative economy in the world,” he wrote.
His appointment adds another corporate insider to the White House orbit, underscoring the administration’s efforts to build stronger ties to the business community. Earlier this month, Obama named former Commerce secretary and JPMorgan Chase executive William Daley as chief of staff.
The change also signals Obama’s intention to shift from policies that were designed to stabilize the economy after the 2008 financial meltdown to a renewed focus on increasing employment, a vexing task that could affect his re-election efforts. The White House says the board’s mission will be to help generate ideas from the private sector to speed up economic growth and promote American competitiveness.
The advisory board has included past government officials and representatives from labor and the corporate community. Volcker has been a regular White House adviser, though the board itself has met infrequently with the president.
Immelt has been supportive of Obama since the start of his presidency, though his political contributions tend to be bipartisan and he financially supported Hillary Rodham Clinton and Republicans John McCain, Rudy Giuliani and Mitt Romney during the 2008 presidential campaign.
General Electric employees and their spouses, however, supported Obama over any other presidential candidate.
GE is a conglomerate with interests in diversified technology, media and financial services.
At a time when money managers’ concerns have swung between record government stimulus and the potential for a new recession, investors remain bullish on commodities that beat stocks and bonds for a second year.
The benchmark Standard & Poor’s GSCI gauge advanced 20 percent, more than the 9.1 percent gain in the MSCI World Index of stocks and 5.3 percent return on a Bank of America Merrill Lynch index of Treasuries. Currency traders are betting on a stronger dollar, sending a contrarian signal because commodities moved in an opposite direction to the currency in 16 of the past 20 quarters, data compiled by Bloomberg show.
Silver, an investment and an industrial material, will jump as much as 37 percent next year, leading gains in the 15 commodities covered in a Bloomberg survey of more than 100 analysts, traders and investors. Zinc, this year’s worst- performing metal, will appreciate 21 percent. Arabica coffee, which reached a 13-year high last week, will be the weakest performer, adding no more than about 7 percent.
The strength in demand “has been a surprise considering that we’ve just come out of the worst recession since the 1930s and carnage in most asset classes,” London-based Roxana Mohammadian-Molina, one of a team of 18 analysts at Barclays Capital who correctly called the bottom in oil and copper last year, said by phone Dec. 22. The bank says U.S. natural gas, will be the only one of the 25 commodity prices it follows that will average less next year.
Stocks Short
Global stocks are still about $11 trillion short of the record $62.6 trillion of market capitalization reached in October 2007, data compiled by Bloomberg show. Over the same period, commodity assets under management rose about 80 percent to $354 billion, and will attract a total of $60 billion in new money this year, the second most after 2009, Barclays estimates.
The S&P GSCI Index is extending last year’s 50 percent advance, which also beat the 27 percent jump in the MSCI World Index and the 3.7 percent loss on Treasuries.
Investors favored raw materials this year as China, the biggest user of everything from coal to iron ore to zinc, led the recovery from the first global recession since World War II. With economies now expanding, competition for raw materials is intensifying.
U.S. growth will rise to 3.25 percent in the fourth quarter of 2011, from 2.5 percent in the first, according to the median estimates of as many as 66 economists surveyed by Bloomberg. China’s will slow to 9 percent next year from 10 percent in 2010, still three times the rate of the U.S. and six times the speed of the euro zone, the surveys show. China on Dec. 26 raised interest rates to counter inflation.
Goldman’s Picks
Commodities gaining the most will be those in which China is least self-sufficient and with the smallest spare production capacity, according to Goldman Sachs Group Inc. analysts led by London-based Jeffrey Currie. Oil, copper, cotton, soybeans and platinum are the bank’s top picks.
Goldman on Dec. 13 forecast an 18 percent advance in raw materials in 12 months, led by a 28 percent gain in precious metals. That tallies with the results of the Bloomberg survey.
Silver, the precious metal most used in industry, will rise 37 percent to as high as $40 an ounce next year from $29.1238 an ounce Dec. 24 in trading in London, the survey shows. Palladium, used in catalytic converters for cars, will jump as much as 18 percent to $900 an ounce from $764 in trading in London Dec. 24.
Silver futures for March delivery rose 53 cents, or 1.8 percent, to $29.785 an ounce at 10:14 a.m. on the Comex in New York. Palladium futures for March delivery gained $11.90, or 1.6 percent, to $779 an ounce on the New York Mercantile Exchange.
Markets in London are closed for a second day today for public holidays.
Gold Outlook
“Investors will be cycling out of gold and into silver, platinum and palladium if financial and economic conditions improve,” said Jeffrey Christian, managing director of CPM Group, a research company in New York.
Christian correctly predicted in January that gold would reach $1,400 an ounce this year and is now forecasting prices to peak at $1,550 in the first quarter before declining as low as $1,200. The median forecast in the Bloomberg survey is for a 23 percent gain to as high as $1,700. Gold reached a record $1,431.25 Dec. 7 in London and closed at $1,381.47 Dec. 24.
Gold futures for February delivery rose $18.70 or 1.4 percent, to $1,401.60 on the Comex.
The popularity of precious metals suggests investors are seeking safety as governments and central banks pump money into economies to shore up recovery.
The Federal Reserve has kept its benchmark interest rate near zero since December 2008 and plans to inject $600 billion into the economy through June by purchasing government bonds through so-called quantitative easing. It already bought $1.7 trillion of securities in a first phase that ended in March.
Fiscal ‘Concern’
“I like gold because I’m concerned that our fiscal and monetary policies don’t make any sense,” David Einhorn, the president of Greenlight Capital Inc., which manages about $6.8 billion of assets, said in an interview in New York. “It leads potentially to a risk of greater instability later.”
Investors increased precious-metals holdings by 22 percent to a record 17,390 metric tons in the 10 months to Dec. 17, data compiled by Bloomberg show. That’s worth about $111 billion, of which 84 percent is in gold and 13 percent in silver, with the remainder in platinum and palladium.
GSCI Returns
Returns for commodity investors may be lower than the spot index suggests. The S&P GSCI Total Return Index, tracking the net amount received, rose 8.4 percent this year, reflecting the cost of maintaining positions in futures markets. When longer- dated contracts cost more than those for immediate delivery, a market structure known as contango, investors pay a premium to maintain their holdings as positions expire.
Gains in commodities may evaporate if currency traders’ bets that the dollar will strengthen are right.
Contracts on the dollar appreciating against the euro are at a three-month high and the U.S. Dollar Index gauge against six counterparts rose 6 percent since Nov. 4. The inverse relationship between the currency market and commodities last month reached the highest level in more than a year, data compiled by Bloomberg show.
Commodity experts in the Bloomberg survey are betting this time will be different amid surging demand and dwindling stockpiles.
Copper Deficit
Copper use will outpace supply by 825,000 tons next year, more than twice the inventory in LME-monitored warehouses, according to Barclays Capital. Prices which reached a record $9,392 a ton on Dec. 21 in London will rise to $10,475 next year, the Bloomberg survey shows. Zinc will be the best- performing industrial metal, advancing as much as 21 percent to $2,800 a ton from $2,308 in London on Dec. 24.
Copper futures for delivery in March rose 2.25 cents, or 0.5 percent, to $4.3025 a pound on the Comex. Earlier, the metal climbed to an all-time high of $4.3195.
Demand may also come from new exchange-traded products. ETF Securities Ltd. started offering investors ETPs backed by copper, tin and nickel this month, attracting about $25 million so far. JPMorgan Chase & Co., BlackRock Inc. and Credit Suisse Group AG also plan similar products.
Weather Markets
A stronger dollar may also be trumped by weather in agricultural markets. Wheat as much as doubled since June and corn jumped 83 percent as Russia’s worst drought in at least a half century, flooding in Canada and parched fields in Kazakhstan and Europe ruined crops.
While wheat should rise as much as 17 percent to $9.13 a bushel next year from $7.83 in Chicago on Dec. 23 and corn 14 percent to $7 a bushel from $6.14, coffee was picked as likely to be the worst performer in the Bloomberg survey. Analysts see a gain of no more than 7 percent to $2.53 a pound from $2.359 a pound in New York on Dec. 23.
Wheat futures for March delivery climbed 8.5 cents, or 1.1 percent, to $7.8875 a bushel today on the Chicago Board of Trade. Corn futures for March delivery rose 3.5 cents, or 0.6 percent, to $6.1875 a bushel, the eighth straight gain. Arabica- coffee futures for March delivery rose 1.05 cent, or 0.4 percent, to $2.385 a pound on ICE Futures U.S. in New York.
“We don’t see an imminent threat to commodity prices in 2011,” said Evan Smith, who helps manage $900 million at U.S. Global Investors Inc. in San Antonio. “You will still have concern over currency stability and in emerging economies there’s the wealth effect that’s driving demand.”
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.
Germany’s finance minister is quoted as insisting that Europe’s common currency will not fail, warning that those who bet against the euro “will not succeed.”
Wolfgang Schaeuble’s comments published Sunday in the Bild am Sonntag weekly come ahead of a European Union summit this week that is to focus on establishing a permanent crisis mechanism for nations using the euro starting in 2013.
Schaeuble underlined that all 16 members of the eurozone agreed the common currency is beneficial to their finances and “for that reason we will successfully defend it.”
The euro has come under pressure since Ireland tapped into a euro750 billion rescue fund, following Greece.
The number of workers filing first- time claims for unemployment insurance payments fell last week in the U.S., showing the labor market continues to improve.
Applications for jobless benefits decreased to 421,000, less than the median forecast of economists surveyed by Bloomberg News, from a revised 438,000 the prior week, Labor Department figures showed today. The four-week moving average, a less-volatile measure, dropped to the lowest level in more than two years.
Companies are holding on to more workers as sales improve and expectations for growth brighten. A faster pace of growth is needed for firms to add enough jobs to bring down the November unemployment rate of 9.8 percent, the highest since April, and alleviate concerns of policy makers including Federal Reserve Chairman Ben S. Bernanke.
“The labor market is moving in the right direction, slowly but surely,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “Things look a little better than they first appeared, but we’re still not creating enough jobs to lower the unemployment rate.”
Futures on the Standard & Poor’s 500 Index expiring this month rose 0.5 percent to 1,234.30 at 8:32 a.m. in New York. The yield on the 10-year Treasury note, which moves inversely to price, fell to 3.22 percent from 3.27 percent late yesterday.
Economists forecast claims would fall to 425,000, according to the median of 50 projections in a Bloomberg News survey. Estimates ranged from 394,000 to 445,000.
No Special Factors
A Labor Department official said there were no special factors that had an impact on the figures released today. The four-week moving average fell to 427,500, the lowest since August 2008, from 431,500.
The number of people continuing to collect jobless benefits fell by 191,000 in the week ended Nov. 27 to 4.09 million. They were forecast to fall to 4.24 million.
The continuing claims figure does not include the number of workers receiving extended benefits under federal programs.
Those who’ve used up their traditional benefits and are now collecting emergency and extended payments decreased by about 393,200 to 4.51 million in the week ended Nov. 20.
The Obama administration on Dec. 6 announced an agreement with congressional Republicans to extend Bush-era tax cuts, reduce the payroll tax and fund unemployment insurance for the long-term jobless for 13 months credit report. Under current legislation, the extension in emergency benefits expired Nov. 30, which the Labor Department has estimated would interrupt aid to 1.36 million before the last week of 2010.
Unemployment Rate
The unemployment rate among people eligible for benefits, which tends to track the jobless rate, dropped to 3.2 percent in the week ended Nov. 27, the lowest in two years, today’s report showed. Sixteen states and territories reported an increase in claims, while 37 had a decrease.
Initial jobless claims reflect weekly firings and tend to fall as job growth — measured by the monthly non-farm payrolls report — accelerates. That relationship has broken down in recent months as some companies cut staff and others expand — pointing to an uneven recovery.
The U.S. added 39,000 jobs in November, fewer than forecast, the Labor Department reported Dec. 3.
Federal Reserve Chairman Ben S. Bernanke has been among those saying the recovery has been too slow, keeping unemployment too high.
“At the rate we’re going, it could be four, five years before we are back to a more normal unemployment rate” of about 5 percent to 6 percent, Bernanke said in an interview broadcast Dec. 5 by CBS Corp.’s “60 Minutes” program.
The economy hasn’t grown to the point where demand can’t be met with current staff at Illinois Tool Works Inc., chief executive officer David Speer said in an interview on Dec. 3.
Next year “there will be some modest level of improvement in employment in industrial manufacturing in the U.S.,” Speer said. “I don’t think anything significant for us, because I still see us with enough capacity in terms of labor right now to not have to make any significant additions.”
ITW, the maker of Hobart food mixers and Duo-Fast nail guns, may do more hiring in 2012 if “we progress as I suspect we will,” Speer said. The company last week forecast business revenue, which doesn’t include sales from acquired companies, will increase 5 percent to 7 percent in 2011 over this year.
The high-flying commodities markets hit a patch of rough air this week, but analysts expect strong demand from developing countries will continue to support prices into next year.
Investors have been plowing money into gold, oil and other commodities since September on speculation that the Federal Reserve would pump more money into the economy. The Fed officially announced its $600 billion bond-buying program earlier this month.
But the months-long rally came into question earlier this week amid renewed concerns that Ireland’s long-term debt problems could undermine the fragile European economy. Those fears eased Thursday after officials in Dublin signaled that the country is willing to accept aid from the European Union and International Monetary Fund.
Commodities were also pressured this week by signs that China will act to cool its red-hot economy, raising concerns about demand from one of the world’s biggest consumers of raw materials. Oil prices plunged 2% on Tuesday after Chinese Premier Wen Jiabao said that the government is preparing steps to tame inflation.
James Cordier, president of brokerage firm Optionsellers.com, said short-term market drivers such as Fed policy and sovereign debt worries are "just noise," adding that an improved economic outlook is the main reason to be bullish on commodities.
"The global economy is doing extremely well right now," said Cordier. "In China, India and parts of Brazil, there are hundreds of millions of people who are looking forward to driving and consuming. That’s going to continue to put upward pressure on commodity prices."
Prices for industrial metals were higher on Thursday, with copper gaining nearly 3%. Among agricultural commodities, corn and soy beans gained 3%, while wheat prices rose 2%.
Cotton prices, which have benefited from weather-related supply disruptions, rose about 3%. Cocoa and sugar also rose, while coffee prices declined.
After falling sharply Wednesday, oil prices rallied 1.7% to close Thursday at $81.85 a barrel. Gold prices also moved higher, rising $16.10 to end at $1,353 an ounce, as the U.S. dollar weakened against the euro and other more risky currencies.
The weak dollar tends to support prices for commodities that are priced in the U.S. currency. Many analysts expect the dollar to remain soft into next year as the Fed pumps money into the economy.
But Cordier said demand from developing nations will continue to boost commodity prices even if the dollar turns around. He said a strong dollar would also reflect improved economic conditions in the United States, which could signal stronger domestic demand.
"Even if the dollar is on firmer footing, I don’t think that spells the end of a bull market in commodities," he said.
Asian stocks dropped Tuesday as markets pulled back from a rally that has driven some of the region’s benchmarks to record highs.
Oil prices also fell following a string of gains but gold reached a new high above $1,400 an ounce as some investors sought a safe haven.
Japan’s Nikkei 225 stock average fell 40.33 points, or 0.4 percent, to 9,692.59 with exporters pressured by the dollar resuming its fall against the yen.
Hong Kong’s Hang Seng lost 0.8 percent to 24,774.05 and South Korea’s Kospi slipped 0.1 percent to 1,940.49. Australia’s S&P/ASX 200 shed 0.5 percent to 4,755.00.
China’s Shanghai Composite Index declined 0.4 percent to 3,146.91. Markets in Singapore and Taiwan were also lower.
Gains in global stocks and commodities were extended last week after the U.S. Federal Reserve on Wednesday announced it would sink $600 billion into buying Treasurys over the next eight months to stimulate the sluggish economy by lowering long-term interest rates.
Indexes in India, Indonesia, the Philippines and Malaysia have recently hit new highs while others have touched multiyear peaks.
But the rally began to run out of steam by Friday in the U.S despite the Labor Department reported a better-than-expected increase in the number of new jobs.
The Dow Jones industrial average fell 37.24, or 0.3 percent, to close at 11,406.84 on Monday. It surged 2.9 percent last week after the Fed announced its stimulus plan.
The Standard and Poor’s 500 index fell 2.60, or 0.2 percent, to 1,223.25. The Nasdaq composite index continued to outperform other market measures, as it has done all year, edging up 1.07, or 0.04 percent, to 2,580.05.
In currencies, the dollar fell to 81.03 yen, from 81.20 yen in New York late Monday. The euro rose to $1.3876 from $1.3849.
Benchmark crude for December delivery was down 37 cents at $86.69 a barrel in electronic trading on the New York Mercantile Exchange. The contract settled up 21 cents at $87.06 on Monday.
Daugherty Chevrolet on Fulton Avenue in Sacramento is closing its doors today and is expected to open next week as Kuni Chevrolet.
Kuni is the longtime owner of Hubacher Cadillac and Roseville Volkswagen.
Check this site later for more information.
Fitch Ratings agency said it will have to downgrade Blockbuster’s ratings to “restricted default” or “default” if the company fails to make a $42.4 million payment to creditors next month.
The payment was originally due July 1, but Blockbuster received an extension from bondholders who hold 70 percent of the outstanding principal on the senior secured notes, which are due in 2014. Blockbuster now has until Aug. 13 to make a payment.
Fitch said Blockbuster’s ratings are okay for now, but will become a problem if they miss another payment when the extended deadline hits.
Fitch said it will downgrade Blockbuster’s issuer default rating to ‘RD’ from ‘C’ if the company ends up defaulting again or receiving another extension on Aug cash advance in one hour. 13. In the alternative, the ratings giant said it will downgrade the company’s issuer default rating from ‘C’ to ‘D’ if the company ends up filing for bankruptcy or entering into a similar procedure on or before Aug. 13.
New York-based ratings agency Standard & Poor’s also reacted to Blockbuster’s rough Thursday. The company lowered its corporate credit rating on Blockbuster to ‘SD’ from ‘CC’, and the company’s ratings on Blockbuster’s $675 million senior secured notes were downgraded to ‘D’ from ‘CC.’
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