Elastic Tapes: June 2008 Archives

The Dow Jones industrial average (.DJI) fell 43.48 points, or 0.38 percent, to 11,303.03. The Standard & Poor's 500 Index (.SPX) dropped 1.87 points, or 0.15 percent, to 1,276.51. The Nasdaq Composite Index (.IXIC) declined 13.07 points, or 0.56 percent, to 2,302.56.

AFP/Getty Images Photo: A sign advertises easy credit at a used car dealership in May 2008 in Chicago....

Copyright © 2008 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.



Full Story: Financials, record oil send stocks lower (Reuters)

CHICAGO (Reuters) - Business activity in the U.S. Midwest contracted in June for a fifth straight month but at a less severe rate, even as production and new orders both slipped, a report showed on Monday.

The National Association of Purchasing Management-Chicago business barometer rose to 49.6 from 49.1 in May, and was the strongest since January.

"The fact that we are hanging around 50 is consistent with an economy that is hovering right above recession level, but is not in a recession," said Mark Vitner, economist at Wachovia Securities in Charlotte, North Carolina .



Full Story: Midwest business activity less weak in June (Reuters)

may be hesitant to raise interest rates ahead of the U.S. election in November, although there is no hard evidence to support the widely held view that politics influences monetary policy.

The Fed has raised rates in election years, as well as leaving them on hold or cutting. As a result, there is no pattern to confirm the strong sense that the central bank prefers to hold fire as Americans go to the polls.

Nonetheless, economists say the case for rate increases would have to be particularly convincing for the Fed to act.



Full Story: Election could delay Fed rate rise until December (Reuters)

Chicago Cubs play baseball. That is a luxury he is not giving up, despite high gas prices and other strains on his wallet.

But he is cutting back on hot dogs and beer at the relatively expensive concession stands at Wrigley Field. "I try to spend less at the game," said Holzhammer, 55. "I came up with three high-school boys and I had them eat outside the ballpark." Even in an economic downturn, fans still go to sports games, and some leagues are setting attendance records, but such statistics hide a more complicated story on the effect of a weakening U.S. economy on sports.

In a Reuters/Zogby survey on June 12 to 14, almost 15 percent of those polled said they are attending fewer sporting events this year, and most of those people cited the weak economy as the reason. About 28 percent are spending less on food and souvenirs.



Full Story: Sports attendance up, hot dog spending down (Reuters)

and pushed the saving rate to a 13-year high, but another report released on Friday showed confidence took a hit.

Commerce Department data showed U.S. personal spending rose by a greater-than-expected 0.8 percent in May, while a key gauge of inflation remained muted.

Some economists said the stronger spending would double the pace of U.S. growth in the second quarter from what they had been predicting before the data. There is a big question mark, however, over whether this will be sustainable.



Full Story: Consumer spending jumps as stimulus checks land (Reuters)

killed the market for trucks and SUVs and made it impossible for many drivers to swap out for more fuel-efficient, new cars.

Major automakers, including Ford Motor Co (F.N) and General Motors Corp (GM.N), and leading dealerships have warned that June sales plummeted and shoppers grew suddenly scarce.

Now the urgent question for investors has become whether the world's largest car market has hit bottom or whether an even deeper downturn awaits over the remainder of the year due to $4 per gallon gasoline and tighter credit.



Full Story: Auto sales: bleak, but is it the bottom? (Reuters)

33 years ago. All the extra money helped to push consumer spending up by the biggest amount in six months, but economists warned the boost would likely prove short-lived given all the other problems now facing consumers.

The Commerce Department reported Friday that after-tax disposable incomes jumped by 5.7 percent in May, the biggest one-month gain since a 6.3 percent increase in May 1975 when Ford was president. He was fighting a recession that year with a program to mail individual taxpayers $50 checks.

This time around, individual payments range from $300 to $600 with couples getting up to $1,200. In all, $48.1 billion in rebate payments were made in May and through this week, the government announced Friday, payments total $78.3 billion — three-fourths of the $106.7 billion scheduled to be paid to 130 million households. The payments are to be completed by mid-July.



Full Story: After-tax incomes and spending show big gains (AP)

Curiosity about European gas prices inspired one of three questions in this edition of "Ask AP," a weekly Q&A column where AP journalists respond to readers' questions about the news.

If you have your own news-related question that you'd like to see answered by an AP reporter or editor, send it to newsquestions@ap.org, with "Ask AP" in the subject line. And please include your full name and hometown so they can be published with your question.

oil futures to hedge against the rising cost of gasoline, but it would not say how much it spent or its estimates of gasoline prices .



Full Story: Ask AP: Car buying incentives, European gas prices (AP)

scaled back their borrowing from the Federal Reserve's emergency lending program over the past week, while commercial banks stepped it up.

A Fed report released Thursday said the investment firms averaged $6.1 billion in daily borrowing for the week ending June 25. That compared with $8.6 billion the previous week.

The investment houses were given similar loan privileges as commercial banks in March after a run on Bear Stearns pushed the nation's fifth-largest investment bank to the brink of bankruptcy and raised fears that other Wall Street firms might be in jeopardy.



Full Story: Wall Street firms reduce, banks step up Fed loans (AP)

's aggressive period of cutting interest rates to keep the country from falling into a recession is over. That point is in general agreement. The trouble starts when you try to figure out what period the Fed has now entered.

Could the central bank keep rates unchanged for a considerable period? Yes, many analysts say, predicting that the Fed will leave rates alone until next spring.

However, other economists are still worried that the Fed could start ratcheting up rates much sooner than that, especially if this year's surge in oil prices does not soon abate.



Full Story: Fed signals aggressive rate cutting is done (AP)

held interest rates steady Wednesday, ending nearly a year of cuts to bolster the economy, and hinted that the next direction for rates could be up.

Fed Chairman Ben Bernanke and all but one of his central bank colleagues agreed that the best course was to leave a key rate alone at 2 percent, as the country slogs through the crosscurrents of plodding economic growth and zooming energy and food prices that threaten to spread inflation.

That meant the prime lending rate for millions of consumers and businesses stayed at 5 percent. The prime rate applies to certain credit cards, home equity lines of credit and other loans.



Full Story: Fed holds rates steady for now (AP)

1 Prices in 20 big cities fell a record 15.3% vs. a year earlier, says S&P/Case-Shiller. The 10-city index sank 16.4%. Monthly price declines have slowed, but still are sharp. Meantime, the gov't OFHEO home price index fell 4.6% vs. April '07. Both reports track like-to-like home sales, but OFHEO includes only conforming loans , so it shows less of a price boom and bust.

Confidence Falls To 16-Year Low 2 The Consumer Confidence Index fell 7.7 points in June to 50.4, far worse than expected and the lowest since '92. The expectations gauge hit a record low. Americans are facing soaring energy costs, a weak job market and housing woes. Inflation expectations stayed at a record high, with buying plans at long-time lows.

S&P 500 0.3%. Financials rose on apparent bargain-hunting. The 10-year Treasury yield fell 8 basis points to 4.10%.



Full Story: IBD's Top 10 - Tuesday (Investor's Business Daily)

rose Tuesday on a report that consumer confidence fell in June more than economists expected, the latest another indication that higher gas and food prices are taking a toll on consumer spending. The market was also awaiting the results of the Federal Reserve 's two-day meeting on interest rates.

The Conference Board reported that its U.S. consumer confidence index sank to 50.4, far below forecasts of 56.5 and May's reading of 58.1. The research group also said its reading of consumers' expectations hit an all-time low as the economy continues to struggle.

With consumer spending accounting for two-thirds of the economy, the report raised concerns about economic growth in the coming months. Investors reacted by pulling their money out of stocks and into the relative safety of government bonds .



Full Story: Treasury bonds spike after more economic doubt (AP)

on Monday urged oil-producing nations to boost their output and warned that soaring energy costs threatened to prolong a U.S. economic slowdown.

"This is a very, very important issue because the high price of oil is creating economic issues...and is a heavy burden for people around the world," Paulson said at a press conference with Mexican Finance Minister Agustin Carstens ahead of a conference of Latin American finance chiefs.

"In my judgment, it's got a very real risk of prolonging this economic slowdown, but this is not a situation that avails itself to a quick fix," he said, adding that both producers and consumers of oil needed to work together to cope with it.



Full Story: Paulson urges boost in oil output (Reuters)

General Motors Corp initiated a series of steps on Monday from cutting production of trucks to offering aggressive incentives to combat the drop in demand for large vehicles amid record-high gas prices .

The production cuts and increased incentives come as the largest U.S. automaker struggles with a deepening slump in U.S. auto sales amid a consumer exodus from pickup trucks and SUVs.

"We really want to spark the market at the end of the month," GM's U.S. sales chief Mark LaNeve said. "We want to close the quarter strong." GM also said it hired Citigroup to help review its Hummer brand that the automaker is looking to sell or revamp.



Full Story: GM to cut truck output, offer interest-free loans (Reuters)

CHICAGO - Like a lot of people, Nate Towne is cutting back on spending. He's carpooling to work and only shops at grocery stores that take coupons or offer discount "rewards" cards.

He's not the only one who's stuck on candy. Americans buy billions of dollars worth of the stuff each year — with more than $29 billion in retail sales in 2007, according to the National Confectioners Association. That's about a 3 percent increase from the previous year.

That sizable sweet tooth is a big reason many analysts say the candy business is likely to fare better than other nonessentials in these economically trying times, even as prices for commodities such as sugar, milk and cocoa have risen.



Full Story: Candy a sweet spot in sour economy (AP)

NEW YORK (Reuters) - Gasoline is costing U.S. drivers a record $4.10 per gallon on average, but pump prices may be at a peak and could start to come down, an industry analyst said on Sunday.

"I suspect that oil prices have peaked and will flip further because of this news and the physical addition of more oil on the market in July," Lundberg said. "This gives a strong chance that pump prices are peaking now, or may already have done so." A barrel of oil has doubled in price over the past year, stoking inflation, triggering protests from Asia to Europe, and compounding the financial pain of U.S. consumers already grappling with a sagging housing market, job uncertainty and soaring food costs.

Top officials, policy makers and oil company executives met on Sunday in Jeddah, Saudi Arabia , for emergency talks on how to bring prices down.



Full Story: Gas prices climb to record $4.10 (Reuters)

The can-do, bootstrap approach embedded in the American psyche is under assault. Eroding it is a dour powerlessness that is chipping away at the country's sturdy conviction that destiny can be commanded with sheer courage and perseverance.

The sense of helplessness is even reflected in this year's presidential election. Each contender offers a sense of order — and hope.

Republican John McCain promises an experienced hand in a frightening time. Democrat Barack Obama promises bright and shiny change, and his large crowds believe his exhortation, "Yes, we can." Even so, a battered public seems discouraged by the onslaught of dispiriting things. An Associated Press-Ipsos poll says a barrel-scraping 17 percent of people surveyed believe the country is moving in the right direction. That is the lowest reading since the survey began in 2003.



Full Story: Everything seemingly is spinning out of control (AP)

and his colleagues is unlikely to lead to a boost in interest rates -- at least for now, economists say.

Even as central bank officials step up hawkish rhetoric, base rates will likely be held steady at 2.0 percent at a two-day meeting opening Tuesday of the Federal Open Market Committee , most analysts predict.

The Fed appears to be in a box with inflation pressures heating up even as the economy teeters on the brink of recession.



Full Story: Despite tough talk, Bernanke Fed unlikely to boost rates (AFP)

The Int'l Monetary Fund said the U.S. economic slowdown has been less than feared and a slow recovery should begin in '09. The group didn't mention recession in its annual review and urged the Fed to hold interest rates steady. The recommendation assumed inflation will be contained. The IMF sees GDP growth of 1% in '08 and 0.8% in '09 vs. its prior estimates of 0.5% and 0.6%, respectively.

The European Central Bank will have to raise interest rates unless the euro zone's service sector productivity improves to help offset higher commodity prices that are adding inflationary pressures, said policymaker Lorenzo Bini Smaghi. He suggested it was time to resurrect a failed plan to create a single European service market.

German producer prices rose 1% in May -- 6% vs. May '07 -- on a sharp hike in energy costs. It's the latest sign of mounting price pressures in Europe 's top economy. Mexico's central bank raised its key interest rate by 25 basis points to 7.75%. Inflation rose to 4.95% in May, the highest in over 3 year s.



Full Story: Economy - Friday (Investor's Business Daily)