As Wall Street traders cheered positive jobs data on Thursday, they seemed to ignore layoffs and bonus cuts on their own trading floors that will hurt growth in the broader U.S. jobs market in the coming months, TrimTabs Chief Executive Charles Biderman said.
U.S. jobless claims dropped to a 3 1/2-year low last week, the Labor Department said on Thursday morning, sending major stock indexes higher. But more current indicators for jobs and wages show opposite trends, said Biderman, a Wall Street veteran who founded the investment research firm in 1990.
“The conventional wisdom on Wall Street is that the U.S. economy is picking up steam despite the turmoil in the rest of the world,” Biderman Said. “The key real-time indicators we track - wage and salary growth and online job demand - suggest Wall Street is wrong.”
In contrast to the positive jobless claims figure, a TrimTabs index showed that a rise in online job postings has slowed over the past month . The firm’s pay analysis showed that wages have fallen 1.2 percent over the past month, adjusting for taxes and inflation, a bigger drop than the 0.2 percent decline over the past three months.
Job cuts at big Wall Street banks including Goldman Sachs Group Inc (GS.N: Quote, Profile, Research, Stock Buzz), Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz), JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) and Bank of America-Merrill Lynch (BAC make quick cash.N: Quote, Profile, Research, Stock Buzz) will only hurt job growth further , Biderman said, while dwindling bonus pools will add pressure to wage growth.
Large U.S. banks have outlined plans to lay off nearly 40,000 employees so far this year as a result of the European sovereign debt crisis and weak economic growth, according to a Reuters tally.
Reports from compensation consultants such as Johnson Associates and Options Group suggest that Wall Street bonuses may decline as much as 30 percent to 40 percent this year. That will only hurt U.S. wage growth more in the weeks ahead, Biderman said, since bonuses are typically paid from late December through early February.
The earnings report from Jefferies Group Inc (JEF.N: Quote, Profile, Research, Stock Buzz) on Tuesday may offer clues to broader Wall Street trends. Jefferies’ fiscal year ends November 30, a month earlier than those of bigger rivals like Goldman and Morgan Stanley.
The investment bank laid off roughly 70 people in equities trading and cut overall compensation and benefits 24 percent during its fourth quarter. Chief Executive Rich Handler and a number of other senior executives also agreed to forgo bonuses for 2011.
“We recognize our shareholders had a tough year,” Handler said. “We’re shareholders and we’re getting zero bonus.”
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Doubts about China’s breakneck plans to expand high-speed rail across the country have been underscored by a bullet train wreck that killed at least 36 people.
Railways Minister Sheng Guangzu has already apologized to the victims of Saturday’s crash, and their families. A train rammed into the back of another one that stalled after being hit by lightning in China’s deadliest rail accident since 2008. Six carriages derailed and four fell about 65 to 100 feet (20 to 30 meters) from a viaduct.
The Railway Ministry and government officials haven’t explained why the second train was not warned there was a stalled train in its path.
The accident is the latest blow to China’s bullet train ambitions. Designed to show off the country’s rising wealth and technological prowess, the national prestige attached to the high-speed rail project is on a par with China’s space program.
Beijing plans to expand the high-speed rail network _ already the world’s biggest _ to link far-flung regions and is also trying to sell its trains to Latin America and the Middle East.
Last month, it launched to great fanfare the Beijing to Shanghai high-speed line, whose trains can travel at a top speed of 186 miles (300 kilometers) per hour. The speed was cut from the originally planned 217 mph (350 kph) after questions were raised about safety.
In less than four weeks of operation, power outages and other malfunctions have plagued the showcase 820-mile (1,318-kilometer) line. The Railways Ministry previously apologized for the problems and said that summer thunderstorms and winds were the cause in some cases.
Official plans call for China’s bullet train network to expand to 8,000 miles (13,000 kilometers) of track this year and 10,000 miles (16,000 kilometers) by 2020.
China’s trains are based on Japanese, French and German technology, but the manufacturers are trying to sell to Latin America and the Middle East. That has prompted complaints that Beijing is violating the spirit of licenses with foreign providers by reselling technology that was meant to be used only in China.
Saturday’s accident involved the first-generation bullet trains, which were launched in 2007 and have a top speed of 155 miles (250 kilometers) per hour _ slower than the new Beijing to Shanghai trains.
The Ministry of Railways said in a statement on its website Monday that the accident had killed 36 people and injured 192 direct payday lenders.
The crash happened when a bullet train traveling south from the Zhejiang provincial capital of Hangzhou lost power in a lightning strike, stalled and was hit from behind by a second train in Wenzhou city.
Three top officials at the Shanghai Railway Bureau were sacked after the accident, and state-controlled media have raised questions, especially as rail travel moves hundreds of millions of people a year.
In an editorial entitled ‘Train crash lesson for railway progress,’ the Global Times said the accident should be “a bloody lesson for the entire railway industry in China.”
The newspaper said the collision casts doubt on China’s high-speed railway expansion plans because the country “lacks experience” as it seeks to join the top ranks of railway engineering.
It said China’s high-speed railway has become “the newest target of public criticism,” adding the accident should lead to “safer, not slower, railway transportation.”
China’s transportation authority ordered local departments at an emergency meeting Sunday to launch thorough safety overhauls to “resolutely curb” severe traffic accidents, the official Xinhua News Agency reported. The order follows a number of recent accidents, including a fire on a long-distance bus on Friday that killed 41 people.
The China Daily said in an editorial that the rapid development of China’s high-speed network has eased travel for passengers, but safety worries could keep them off high-speed trains.
This is because “the higher the speed of the trains, the more sophisticated the technology will be and the greater the risk if there is a failure of any link in the safety chain,” it said.
The paper called for better training of railway employees and efforts to make sure the railways are not vulnerable to extreme weather conditions.
State broadcaster CCTV reported Monday that a 2-year-old girl pulled from one of the derailed carriages 21 hours after the crash had undergone a three-hour operation. It said she had suffered lung, kidney and leg injuries and is now in intensive care. Her parents died in the crash.
In April 2008,a regular-speed train traveling from Beijing to the eastern coastal city of Qingdao derailed and crashed into another train, killing 72 people and injuring 416.
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An unexpected drop in hiring put an end to the excitement that had been bubbling up on Wall Street over the past two weeks.
Stock indexes fell sharply Friday, erasing most of the week’s gains, after the government reported that U.S. employers created the fewest number of jobs in nine months. The 18,000 net jobs in created in June were a fraction of what many economists expected and dampened hopes that the economy was improving. Private companies added jobs at the slowest pace in more than a year. The unemployment rate edged up to 9.2 percent, its highest level this year.
A broader measure of weakness in the labor market was even worse. Among Americans who want to work, 16.2 percent are either unemployed or unable to find full-time jobs. That was up from 15.8 percent in May.
“There’s just a lot more evidence than before that we’re in an extended weak patch,” said Brian Gendreau, market strategist for Cetera Financial Group. He said private economists will likely reduce their projections for overall economic growth this year.
The Standard and Poor’s 500 index fell 9.42 points, or 0.7 percent, to 1,343.80. That eliminated the index’s gains from Thursday and left it with a 0.3 percent gain for the week.
The Dow Jones industrial average lost 62.29, or 0.5 percent, to 12,657.20. The Dow, which had been down by as much as 150 points Friday, had only its second down day over the past nine. The Nasdaq composite dropped 12.85, or 0.4 percent, to 2,859.81. It was its first loss in two weeks.
Companies whose business would be most affected by a weakening economy were hit hardest. Bank of America Corp., General Electric Co. and Boeing Co. were among the biggest decliners in the Dow average.
“The chance of a July bounce back in the economy looks pretty slim now,” said Jay Tyner, president of Semmax Financial Group in Greensboro, North Carolina.
Expectations for Friday’s jobs report were raised Thursday after payroll processor ADP said that private companies added more than 150,000 jobs in June. While the ADP report does not always accurately predict the broader Labor Department report, some investors said that the apparent clashing pictures of the job market were due to a jobs pickup in the last weeks of June.
Phil Orlando, chief market strategist at Federated Investors, said he believes manufacturers began rehiring workers in late June following signs that Japan’s economy was improving. Hiring slumped in May due partly to high fuel prices and disruptions of industrial supplies because of the earthquake and tsunami disasters in Japan guaranteed online payday loans.
Traders rushed to the relative safety of government bonds. The yield on the 10-year Treasury note fell to 3.01 percent from 3.19 percent just before the jobs report came out. Bond yields fall when demand for them increases.
Oil prices fell 2.5 percent. The slowdown in hiring suggested that demand for fuel will increase less than traders had expected. Lower fuel prices could eventually help the economy by leaving consumers with more money to spend on things other than gas.
Weak economic data this spring pushed stocks near their lowest levels of the year two weeks ago. Markets recovered last week, giving the Dow its best week in two years, on signals that the economy was rebounding. Stock indexes closed near their 2011 highs on Thursday.
Despite the weak job market, analysts still expect earnings at big U.S. companies to be strong. Companies are benefiting from export growth as the weak dollar makes American goods cheaper, and therefore more competitive, in overseas markets. Aluminum maker Alcoa Inc., one of the 30 companies in the Dow average, will be the first major corporation to report second-quarter financial results on Monday.
Orlando, the market strategist, said investors will be looking to see how companies have responded to higher commodity costs and a shortage of parts from Japan. “It’s not going to be an earnings season where you can have a blanket proclamation regarding how companies are doing this time around,” he said.
In other company news, Rupert Murdoch’s media conglomerate News Corp. fell nearly 4 percent as a phone-hacking scandal at its News of the World tabloid deepened. A former editor of the paper who later served as spokesman for British Prime Minister David Cameron was arrested Friday. News Corp. shuttered the 168-year old paper on Thursday in hopes of saving its deal to take over the lucrative British satellite TV company British Sky Broadcasting. Government approval of that deal will now be delayed because of the crisis, which has shocked Britain.
The Dow rose 0.6 for the week, the Nasdaq 1.6 percent.
Two stocks fell for every one that rose on the New York Stock Exchange. Volume was lighter than average at 3.1 billion shares.
President Barack Obama prodded Congress Tuesday to make a deal within the next two weeks on raising the nation’s borrowing limit, and he said he was summoning leaders of both parties to the White House this week to try to get it done.
Obama said he opposed any effort to “kick the can down the road” with a short-term increase, as suggested by some lawmakers _ though he stopped short of ruling that out. He reiterated his position that any deal must include not only spending cuts but also new revenue _ tax increases already ruled out by Republicans.
“We need to come together over the next two weeks to reach a deal that reduces the deficit and upholds the full faith and credit of the United States government and the credit of the American people,” Obama said at the White House.
“We’ve made progress, and I believe that greater progress is within sight, but I don’t what to fool anybody _ we still have to work through real differences,” the president said.
He said congressional leaders were being invited to meet Thursday at the White House need a personal loan with bad credit.
Obama spoke as the Aug. 2 deadline for raising the nation’s borrowing limit came closer. Experts say lawmakers must waste no time in making a deal if they are to have any chance of getting it finalized and passed through both chambers of Congress in time.
Despite the president’s optimism, it remained unclear where compromise could be found. Republicans are insisting they will note vote to raise the debt limit without major spending cuts; Democrats are refusing to sign off on cuts of such magnitude without at least some tax increases as well. Republicans say they won’t sign off on any tax hikes at all, including those Obama wants targeting the wealthiest Americans or closing loopholes to corporations.
The administration says that if the government’s borrowing limit is not increased by Aug. 2, the U.S. will face its first default ever, potentially throwing financial markets into turmoil.
OTTAWA—The Harper government will bring in back-to-work legislation Monday to end the postal strike and get mail moving again.
Declaring that the two sides have had “ample amount of time” to reach a settlement, Labour Minister Lisa Raitt said she would force an end to the Canada Post labour dispute if necessary.
The government was preparing to introduce the legislation Monday afternoon though it could take several days to become law.
The move sparked an angry reaction from New Democrats who accused the Conservatives of meddling in collective bargaining loan for people with bad credit.
It’s possible NDP MPs could delay a legislated end to the dispute.
Interim Liberal Leader Bob Rae accused the Conservatives of doing little to safeguard defined benefit pensions, one of the issues at the heart of the Canada Post dispute.
Even cities that weathered the housing market crash with relatively little damage are suffering now.
Severe price declines have spread to Dallas, Denver, Minneapolis and Cleveland, which had mostly withstood the bust in housing since 2006. The damage has now gone well beyond cities hit hardest by unemployment and foreclosures, such as Phoenix and Las Vegas.
“We didn’t enjoy the highs and the lows like other cities,” said Kay Weeks, a Realtor with Ebby Halliday in Dallas, where prices fell nearly 1 percent in March and are expected to keep falling. “But when we get bad news nationally, people take notice and cut back on spending and buying homes.”
Home prices in big metro areas have sunk to their lowest since 2002, the Standard & Poor’s/Case-Shiller 20-city monthly index showed Tuesday. Since the bubble burst in 2006, prices have fallen more than they did during the Great Depression.
The index, which covers metro areas that include about 70 percent of U.S. households, is updated every quarter and provides a three-month average. The March data is the latest available.
Foreclosures have forced prices down so much that some middle-class neighborhoods have turned into lower-income areas within months.
Prices are expected to keep falling until the glut of foreclosures for sale is reduced, companies start hiring in greater force, banks ease lending rules and more people think it makes sense again to buy a house. In some markets, that could take years.
The latest report points to a “double dip in home prices across much of the nation,” said David Blitzer, chairman of the Index Committee at Standard & Poor’s.
Prices fell from February to March in 18 of the metro areas tracked by the Standard & Poor’s/Case-Shiller index. And prices in a dozen markets have reached their lowest points since the housing bubble burst in late 2006.
The overall index fell for the eighth straight month and has dropped 3.6 percent in the past year. Prices had risen last summer, fueled by a temporary federal homebuying tax credit. But they’ve tumbled 7 percent since then. After adjusting for inflation, the home-price index has sunk to the level of 1999.
Cities with high foreclosures such as Phoenix, Las Vegas and Tampa, Fla., are flooded with homes sitting vacant, awaiting buyers. Many banks have agreed to allow homes at risk of foreclosure to be sold for less than what is owed on their mortgages. That has pulled down prices.
In Phoenix, for example, home prices rose about 5 to 6 percent annually in the pre-boom years before exploding nearly 23 percent in 2004. The next year, in 2005, they skyrocketed nearly 43 percent. Prices there soon leveled off before plunging in 2007 and 2008. They’re now back to 2000 levels.
Coastal areas, such as San Francisco, San Diego, Los Angeles, Washington and Boston, have fared comparatively better in the past two years. They have been helped by healthy local economies, desirable city centers and limited space for new housing. In New York, homes are still 63 percent more expensive than in 2000.
In the middle are cities like Dallas, Denver, Minneapolis and Cleveland, which are seen as bellwethers for the national housing market.
Before the housing boom, prices in Minneapolis rose 7 percent or more a year. Then they stalled in 2006, fell in 2007 and 2008, and rose modestly in 2009. Last year, prices started falling again and haven’t stopped.
Over the past decade, Dallas has grown faster than any other metro area. Among companies that have moved their headquarters there are Comerica Inc. and AT&T. Construction surged to meet the demand.
But since the housing bubble burst, foreclosures have risen. Many homes have been sold at steep discounts. Dallas-area foreclosures bought at auction in March sold for just 57 percent of their appraised value, according to Foreclosure Listing Service.
Denver had also avoided the peaks and valleys of the bubble and bust pay day loans. It enjoys a diversified local economy that has expanded to include the telecommunications, wind-energy and space-technology industries.
Foreclosures haven’t flooded the Denver market. But many of Denver’s potential buyers, most of whom would otherwise be first-timers, are opting to rent instead.
“When they’re doing the calculations to rent versus buy, they’re choosing to rent,” said Gary Bauer, a broker in Littleton, Colo., outside Denver. “It’s simple math, and for many people, it’s too expensive to own.”
As a result, falling prices have turned once-costly, newer subdivisions, including those in Aurora and Commerce City, into largely vacant neighborhoods.
“The closer to the mountains you are here, the pricier it is, so people built a lot of new, big homes during the housing boom,” said Yve Roberts, a Denver real estate agent. “They thought that’s where the next wave of houses would be. But many of the young people that bought there can’t afford it anymore.”
In the next two months, prices in Dallas and Denver are expected to reach their lowest since the housing downturn began.
In 12 other cities, prices are already at the lowest point since the end of the boom: Atlanta, Charlotte, Chicago, Cleveland, Detroit, Las Vegas, Miami, Minneapolis, New York, Phoenix, Portland, Ore., and Tampa, Fla.
Minneapolis fared the worst in March, with prices down 3.7 percent. They dropped 2.4 percent in Charlotte and Chicago and 2 percent in Detroit. Prices rose 0.1 percent in Seattle and 1.1 percent in Washington. The nation’s capital is the only metro area in the index where prices have risen in the past year.
One obstacle to a rebound in prices: A delay in processing foreclosures. Homes in foreclosure sell at a 20 percent discount on average, which can hurt prices in the neighborhood. But many foreclosure sales have been delayed while federal regulators, state attorneys general and banks review how those foreclosures were carried out over the past two years.
Once those homes are eventually foreclosed upon, they will cause prices to fall even further. Those declines are “etched in stone,” said Patrick Newport, U.S. economist at IHS Global Insight.
Falling home prices led Neil Isakson of Amery, Wis., about an hour and a half from Minneapolis, to pull his four-bedroom lakefront house off the market this spring after it went unsold for nearly two years.
Isakson chose to rent out the home rather than reduce the price further. He had listed it in June 2009 for $359,000. Last summer, he cut it to $339,000. Yet fewer than a dozen people showed up to look at the house. He’s holding out for the market to recover.
“I’m willing to wait two to three years,” Isakson said.
Home equity accounts for most of the wealth of typical households. So when prices fall, they have “important spillover effects on other sectors of the economy,” said Yelena Shulyatyeva, an analyst at BNP Paribas. Those sectors include consumer spending and state and local property tax collections. Consumer spending fuels about 70 percent of the overall economy.
“Folks are having so much difficulty in getting financing for a home,” said Mark Vitner, senior economist at Wells Fargo. “And foreclosures will likely bring about a third dip. It may be early next year before prices hit bottom.”
That won’t change soon. Roughly 92 percent of homeowners say it’s a bad time to sell their home, according to the latest Thomson Reuters/University of Michigan index of consumer sentiment.
In the seven years before its peak in July 2006, the home-price index surged 155 percent. Since then, it’s fallen 33 percent.
During the Great Depression, prices fell 31 percent. It took 19 years for the housing market to regain its losses after the Depression ended.
Japan’s consumer prices in April rose for the first time in more than two years on a temporary spike in energy and tobacco prices, the government said Friday.
Japan’s core consumer price index, which excludes fresh food, climbed 0.6 percent last month from a year earlier, marking the first year-on-year increase since December 2008, the Ministry of Internal Affairs and Communications said.
The rise in Japanese consumer prices was due to a jump in gasoline and tobacco prices. The ministry said education costs were also higher in April. On a month-on-month basis, Japan’s core consumer price index was up 0.4 percent last month.
But economist Hiroshi Watanabe at the Daiwa Institute of Research said the April increase in consumer prices does not mean Japan’s economy has emerged from deflation.
“The April results were mainly lifted by temporary factors, such as a surge in tobacco prices. Overall, Japan’s economy still remains under deflationary pressure as the economy has yet to post a steady recovery,” he said.
The world’s No. 3 economy has been battling periods of deflation _ or a steady decline in prices _ since the 1990s. Deflation is a burden as it can hamper economic growth by depressing company profits, sparking wage cuts and causing consumers to postpone purchases. It also can increase debt burdens.
Faced with tumbling output and exports following the March 11 earthquake and tsunami, Japan’s economy recently slipped into a recession after contracting at an annualized rate of 3.7 percent in the January-March quarter.
DETROIT
Stock futures are down sharply as new warnings about European finances stoke fears about that region’s debt crisis. The euro dipped to its lowest level in two months.
Ahead of the opening bell, Dow Jones industrial average futures are down 97, or 0.8 percent, at 12,369. S&P 500 index futures are down 10, or 0.8 percent, at 1,317. Nasdaq 100 futures are down 20, or 0.8 percent, at 2,324.
Ratings agency Standard & Poor’s cut its outlook Saturday on Italy’s debt to negative from stable.
Financial markets in Spain are down sharply after a defeat for its ruling Socialist party caused investors to fear that the government cannot solve its public finance issues.
On Friday, the Fitch ratings agency downgraded Greece’s debt rating further into junk status.
LinkedIn priced its IPO at $45 per share to set up the first stock market debut among a fraternity of Internet networking services that’s captivating investors.
The pricing completed late Wednesday marks the final step before LinkedIn Corp.’s shares are available in the public market for the first time in the company’s eight-year history. Shares are expected to begin trading Thursday morning.
Most analysts believe the shares are likely to rise Thursday, even though LinkedIn raised the IPO price by 30 percent from its initial target of $32 to $35 per share paydayloan.
The IPO puts a $4.3 billion market value on LinkedIn, the highest for a U.S. Internet company taking its first bow on Wall Street since Google Inc. went public nearly seven years ago.
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