Business life: My finance news blog

The Senate on Tuesday voted 90-5 to approve a bill that will make it tougher for credit card issuers to raise fees and interest rates starting early next year.

The bill includes an unrelated measure that would allow people to carry concealed weapons into national parks.

The bill now goes to the House, which is expected to take it up on Wednesday and pass it before the weekend. The bill would get to President Obama’s desk before Memorial Day, as he called for.

"To have the industry reaching and be as abusive to consumers, it needed to stop and it needed to change," said Sen. Chris Dodd, D-Conn., a bill sponsor.

The legislation is moderately tougher on card issuers than are new Federal Reserve rules that take effect in July 2010.

The Senate’s bill would take effect in nine months and make it harder for people under age 21 to get credit cards. It would also ban rate hikes unless a consumer is more than 60 days late - and then restore the previous rate after six months if minimum payments are made.

The banking industry decried the bill, saying it would exacerbate the credit crisis and force banks to drop some risky credit card holders.

"We are concerned that the Senate bill will have a dramatic impact on the ability of consumers, students, and small businesses to obtain and use credit cards," said American Bankers Association president Edward Yingling

The credit card legislation has been a long work in progress. The House passed a bill in 2008 and again earlier this year. The legislation, which stalled in past years, was propelled by public outrage and pressure by President Obama.

"I’m very glad to have these reforms within reach at long last," said the bill’s House sponsor, Rep business cards template. Carolyn Maloney, D-N.Y. "To Sen. Dodd’s credit, he has enhanced my bill in a few areas - especially in extending from 30 to 60 days before penalty rate hikes can kick in on existing balances."

Maloney added she thought it "unfortunate," that the measure to allow concealed weapons in national parks remained on the credit card bill, especially since Memorial Day kicks off the summer season at national parks. She planned to vote against the gun provision but said it shouldn’t block the bill’s final passage.

In recent few months, credit card companies have been raising fees and interest rates. From November 2008 to February 2009, rates increased from an average to 13.08% from 12.02%, according to a Federal Reserve Board report.

At the same time, more people are not able to make their credit cards payments and are walking away from the debt, according to a Federal Reserve report.

However, Treasury Secretary Tim Geithner said Monday he was not concerned about a consumer debt "bubble."

"Americans are going to be reducing how much they borrow, improving their balance sheets, saving more," he said. "Banks are still going to have losses they’re going to have to adjust to. And that’s what’s going to make the process of repair here longer. . .But that’s a necessary, healthy process of adjustment for us to go through." 

Source

Big tech companies are likely targets for the Justice Department’s antitrust crackdown, say experts, which could bode well for some smaller players.

One reason tech firms tend to be on antitrust watch lists is because technology is always evolving with companies looking to enter new consumer markets with new products. It’s that emphasis on "new" that will make it easier for the Justice Department to launch an investigation, say experts.

"Obama’s biggest obstacle to its antitrust policy is that the federal courts have developed a number of defendant-favoring rulings that have made it difficult for the Justice Department to win," said Keith Hylton, antitrust professor at the Boston University School of Law. "That makes tech attractive to the Obama team, because there will be cases that the courts haven’t ruled on before."

President Obama’s top antitrust official, Assistant Attorney General Christine Varney, last week announced the reversal of a Bush-era policy that had weakened the government’s ability to take on monopolies.

Also last week, European regulators levied a record $1.5 billion fine against Intel Corp. for unfairly paying computer makers to delay or even cancel products that contained chips made by rival AMD.

"In the tech sector, it’s possible to get such an advantage with a product, that nothing else is worth buying," said Martin Reynolds, analyst with tech consultancy Gartner. "There becomes an inertia effect, where a product builds a critical mass, and it’s difficult to move away from it."

Among the most common ways for leading tech firms to gain market share is through mergers and acquisitions. But with the Obama administration vowing to be aggressive on the antitrust front, those types of tie-ups may now face much closer inspection in the United States.

Here’s a snapshot of some potential losers and winners in the new antitrust era:

Losers: Experts said companies that dominate their fields are the most likely to draw the attention of antitrust officials.

Google (GOOG, Fortune 500) tops most analysts’ lists of tech companies likely to attract notice. It has already been down the antitrust road. During the Bush era, Google came under close examination when it tried to ink an advertising partnership with rival Yahoo — a move that was subsequently abandoned.

"Google has a durable network effect, becoming far more valuable to consumers than other competitors," said John Harkrider, co-chairman of the antitrust practice at Axinn Veltrop Harkrider LLP. "Creating a competitive product to Google isn’t difficult, but it has so many people using it, that it has become difficult for anyone to break into that market."

Google said it is not an antitrust target.

"We know that competition on the Internet really is just one click away, so we work hard to make sure that we earn our users’ trust and support every day," Google spokesman Adam Kovacevich said. "We make it easy for users to switch to competing services, help other business be more competitive by lowering their IT and advertising costs, and have developed open source browsers that foster competition paydayloans.com."

Meanwhile, Microsoft (MSFT, Fortune 500), which has already found itself on the opposite ends of U.S. and EU court rulings this decade, could again be under scrutiny because of the dominance of its Windows operating system.

Windows is cheap compared with competitors like Red Hat’s Linux and Apple’s Mac OS, and a large percentage of personal computers come with Windows pre-installed — 83%, according to Gartner. Accordingly, a majority of software gets written exclusively for Windows-based computers and ultimately forces consumers to use Windows whether they want to or not, say experts.

Apple (AAPL, Fortune 500) is another possible target. It dominates the MP3 player market with its iPod line with a near-80% market share. Apple has the capital to invest enough in development that it can come out with a new iPod every year. That keeps bringing back consumers who want the newest toy, said Reynolds.

Intel (INTC, Fortune 500) could be the target of more scrutiny, because it churns out new processors almost as quickly as Apple produces new iPods. Analysts say Intel’s new microchips usually double the performance of chips made in the previous year. Intel has no rivals that can compete with that consistency because no other company has the revenue Intel has.

Winners: While smaller competitors of the dominant firms could have much to gain in the new landscape, there are some bigger companies that also stand to win.

Microsoft could find itself on both sides of the coin, as a ruling against Google could help it become a player in the online advertising world. Yahoo (YHOO, Fortune 500) also stands to benefit from any ruling that goes against Google, as the former giant has struggled mightily to match Google’s ad share.

AMD (AMD, Fortune 500), which brought its case against Intel to the European Commission, could make out well if the Intel ruling is upheld after a looming appeal. Analysts say AMD actually took a bite out of Intel’s market share several few years ago when it developed a dual-core processor for desktops, but the company has since struggled to compete with its much bigger rival.

"When [AMD] has a product in the market that is compelling, they do very, very well," said Reynolds. "When they don’t, they do very badly."

And Oracle (ORCL, Fortune 500), which recently announced it will acquire Sun Microsystems (JAVA, Fortune 500), could gain share in the consumer software market if Microsoft is found to be in violation of antitrust laws. Oracle and Sun offer open-source software products for free, but they have still failed to compete with many Microsoft products, which have a strong consumer following.

Analysts say there’s no guarantee that the Obama administration will target tech companies in its anti-monopoly push, but they expect antitrust complaints to rise and big tech companies to be on high alert. 

Source

and some top officials could also be at risk.

EMAIL  |   PRINT  |     |  

• FACEBOOK
• DEL.ICIO.US
• REDDIT
• STUMBLE UPON
• MYSPACE
• MIXX IT

Paste this link into your favorite RSS desktop reader

See all CNNMoney.com RSS FEEDS

By David Ellis, CNNMoney.com staff writer

Last Updated: May 15, 2009: 9:04 AM ET

NEW YORK (CNNMoney.com) — The nation’s leading banks may have been deemed solvent, but it remains to be seen whether top management at those firms will soon go bust.

Among the findings in its two-month long "stress test" program announced May 7, the government not only told 10 institutions to raise a total of $75 billion in additional capital, but also pushed banks to take a hard look at their leadership.

Industry regulators specifically asked banks to review both top executives and board members over the next month "to assure that the leadership of the firm has sufficient expertise and ability to manage the risks presented by the current economic environment."

Some experts suggest those remarks could foreshadow a wave of management changes.

"There is some vulnerability there," said Gary Townsend, former bank analyst and current president of the Chevy Chase, Md.-based investment adviser Hill-Townsend Capital.

Of course, when talk of management surfaces within the financial services industry, it often centers around two of its most troubled firms: Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500).

Both companies have certainly made plenty of concessions to regulators so far this year. But with the government owning sizeable stakes in both institutions, there are expectations that the two financial giants may have to bend even further.

In the weeks leading up to the stress test results, the fate of the two firms’ CEOs — Citi’s Vikram Pandit and BofA’s Ken Lewis — was certainly a subject of much speculation.

Other analysts suspect that there could be some pressure exerted on regional lenders as well, particularly those considered by regulators to be facing a relatively severe capital shortfall. Those banks include Cleveland-based KeyCorp (KEY, Fortune 500), Cincinnati-based FifthThird (FITB, Fortune 500) and Atlanta-based SunTrust (STI, Fortune 500).

Of the 10 banks that need to raise capital after the tests, none would comment on whether any changes to top management or the board were deemed necessary.

Even before the stress tests results were published, however, the White House had already indicated that it may push some lenders to make changes either in the c-suite or the boardroom no fax pay day loan.

Not surprisingly, bank leaders are giving a lot of credibility to those threats. In March, the Obama administration ousted General Motors chief Rick Wagoner because it believed the automaker did not have a suitable long-term viability plan. Chief executives at insurer AIG as well as the twin mortgage buyers Fannie Mae and Freddie Mac were also shown the door last year after the government intervened to rescue the three firms.

More blame for the board: Still, there are those who consider an imminent wave of management shake-ups across the banking sector as remote — at least for now.

Graham Michener, a managing director at the Connecticut-based executive search and corporate governance recruiting firm RSR Partners, notes that it is not for a lack of available talent, but the fact that the government may be unwilling to make a lot of big changes in this important transition time as banks try to nurse themselves back to health.

"For the next three to six months, we will see little to no change in the senior ranks because continuity will be crucial for the success of their plans," said Michener.

Such changes, however, would hardly represent the first time that the nation’s banking industry has undergone a massive management facelift since the crisis first took hold more than a year ago.

Citigroup’s Chuck Prince and Stan O’Neal of Merrill Lynch became the first in a long line of executive casualties in late 2007 when both men were ousted from their respective firms. That was followed just months later with the departure of Wachovia’s Ken Thompson and Washington Mutual’s Kerry Killinger as part of both banks’ last-ditch efforts to turn their companies around.

Many of the recent leadership changes, however, have taken place at the board level. Earlier this year, Citigroup replaced Sir Win Bischoff with former Time Warner chief and long-time board member Richard Parsons. (Time Warner is the parent company of CNNMoney.com).

That’s not to mention last month’s high-profile decision by Bank of America shareholders to strip Ken Lewis of his title as chairman amid outrage over his last-minute purchase of Merrill Lynch.

Many experts contend that any further bank shakeup in the months ahead will happen in the boardroom.

Too cozy?: Bank of America has already indicated that the company was considering changes to its current roster of directors, which would match changes at Citigroup. Shareholders at the New York City-based bank confirmed a handful of new board members last month.

Experts argue that bank boardrooms are ripe for change, having become tainted by cozy relationships and clogged with directors who have little, if any, banking or financial experience.

Many shareholder activists and analysts cite that lack of experience with helping to create the current state of affairs at many troubled institutions.

"Why we have not wiped out the board of directors at a number of banks already is just shocking in my view," said Dick Bove, a bank analyst at Rochdale Securities. "It proves there is no accountability in banking at the board level."

Certainly many controversial directors are secure for now, having thwarted several activist shareholder challenges this proxy season.

But amid pressure from regulators and possibly even the Obama administration, it remains doubtful that the current board makeup of most troubled institutions will remain intact until next year’s annual shareholder meeting, notes Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware.

"The risks of making the changes are frankly minimal compared to the risks of not making the changes," he said. 

Source

Chrysler dealers nationwide were fearing the UPS guy on Thursday.

For 789 dealerships, the man in brown came carrying an overnight letter from Chrysler LLC indicating that they are being closed as part of the automaker’s bankruptcy. Some dealers received additional phone calls from company representatives, while others discovered their fate after being contacted by reporters.

Those calls and letters informed dealers that on Thursday morning Chrysler had filed a plan with the bankruptcy court listing the 789 Chrysler, Jeep and Dodge dealers it selected to discontinue operations. Under the plan - which is still subject to review by the bankruptcy judge - the dealers have until June 9 to close their Chrysler franchises.

Frederick George, who is a partner in the Flint., Mich.-based dealership his grandfather founded in 1928, received his letter on Thursday morning. "The UPS truck came in this morning with a package," he said. "We’re upset, stunned. We were not expecting it. We thought we were pretty safe, even in the area that we’re in."

George Chrysler Jeep has 100 new Chrysler vehicles on the lot, along with 40 used vehicles. "They told us they weren’t going to give us any monetary help, but they would help us get rid of the vehicles and the parts," George recounted.

The dealership has 31 employees, and George said layoffs are imminent; the partners will also be meeting to decide the future of the business.

"We’ve been in the car business since 1928, so it’s devastating to us," he said.

James "Buddy" Jones, owner of Buddy Jones Chrysler, Dodge and Jeep in Greenwood, Miss., said he had no indication his dealership would land on the list cheap payday loans. "We are not the problem," he said. "Their investments are their own. The cars and facilities and investments are strictly our own."

Jones said that after Chrysler declared bankruptcy, he threw caution to the wind and started scaling back on his inventory. Because he had already anticipated transferring some Chrysler staff to his Ford dealership across the street, Jones believes he will land on his feet.

"Scaling back may have played into our being cut, but we made the right decision and we won’t look back," he said.

On a conference call with reporters, Chrysler executives acknowledged that they had sent letters notify the dealerships. But they did not address the lag time between the closures becoming public and the letters arriving.

"It is with a deep sense of sadness that we must take steps to end some of our Sales and Service Dealer Agreements," Steven Landry, Chrysler’s executive vice president for North American sales, said in a prepared statement. "The decision, though difficult, was based on a data-driven matrix that assessed a number of key metrics."

About half the dealerships being closed sell fewer than 100 vehicles per year, Landry said in the conference call. About 44% also sell vehicles other than Chrysler products, he added. As a result, not every business receiving a letter will be completely shuttered.

CNNMoney.com staff writer Aaron Smith contributed to this report. 

Source

Stocks rallied Thursday, bouncing back after several down sessions as investors weighed some weaker-than-expected reports with growing economic optimism.

The Dow Jones industrial average (INDU) gained 46 points, or 0.5%. The S&P 500 (SPX) index rose 9 points, or 1%. The Nasdaq composite (COMP) gained 25 points, or 1.5%.

The S&P and Nasdaq fell for three sessions in a row and the Dow fell for two of the last three sessions as investors stepped back after the earlier spring rally.

But on Thursday, investors used the recent selloff as an opportunity to dip back into stocks, particularly technology, telecom and consumer issues.

Bets that the economy is closer to stabilizing has fueled the recent rally, lifting all three major gauges by more than 30% over 9 weeks. But a few recent reports have raised worries that investors may have gotten ahead of themselves, including Wednesday’s weak retail sales report and Thursday’s surprise rise in jobless claims.

"The thinking today is that we have had a couple of bad numbers, but they are not enough to derail the perspective that conditions are not as bad as they have been and are getting better," said Phil Orlando, chief equity market strategist at Federated Investors.

"The question going forward will be whether these were random reports or an indication of a reversal," he said. "There will be other disappointing reports, but I think the trend is still toward improving data."

Government reports are due in the morning on consumer prices, manufacturing, capacity utilization and industrial production and consumer sentiment.

Company news: Chrysler said it wants to close 789 dealerships, or roughly 25% of those in business, according to a plan filed in bankruptcy court.

General Motors (GM, Fortune 500) is expected to announce Friday that it will close 1,000 to 2,000 of its dealerships, according to reports.

GM said Thursday that it has agreed to accelerate payments to its parts suppliers, as it teeters closer to bankruptcy. The automaker has until the end of the month to gain enough concessions from its creditors and union to remain viable easy to get unsecured personal loans. However, GM is not expected to meet that deadline and the company’s CEO has said that a bankruptcy is "probable."

Wal-Mart Stores (WMT, Fortune 500) reported higher quarterly earnings that met estimates on weaker revenue. The No. 1 retailer also forecast second-quarter earnings in a range that could surpass analysts’ current forecasts. Shares fell 1.9%.

Market breadth was positive. On the New York Stock Exchange, winners topped losers by seven to three on volume of 1.52 billion shares. On the New York Stock Exchange, advancers beat decliners by two to one on volume of 2.23 billion shares.

Economy: The number of Americans filing new claims for unemployment last week surged to 637,000 from 601,000 the previous week, the Labor Department reported. The rise in jobless claims reflects the extensive layoffs in the auto industry after Chrysler filed for bankruptcy.

Economists surveyed by Briefing.com had expected 610,000 new claims.

The Producer Price index (PPI), a measure of wholesale inflation, rose 0.3% in April after falling 1.2% in March, according to a government report released Thursday. PPI was expected to rise 0.2%.

The so-called core PPI, which strips out volatile food and energy prices, rose 0.1% in the month, as expected, after holding steady in the previous month.

Bonds: Treasury prices inched higher, lowering the yield on the benchmark 10-year note to 3.10%, down from 3.11% Wednesday. Treasury prices and yields move in opposite directions.

Other markets: In global trading, Asian and European markets ended lower.

In currency trading, the dollar fell versus the euro and gained against the yen.

U.S. light crude oil for June delivery rose 60 cents to settle at $58.62 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery climbed $2.50 to settle at $928.40 an ounce. 

Source

With the stress tests behind them, banking regulators now face the potentially thornier issue of deciding which banks, if any, should be allowed to repay government funds.

Since regulators unveiled a long-awaited blueprint for returning money from the Treasury Department’s Troubled Asset Relief Program last week, lenders have been scrambling to raise cash so they can pay back TARP funds.

Four companies that were among those included in the stress test — BB&T (BBT, Fortune 500), U.S. Bancorp (USB, Fortune 500), Capital One (COF, Fortune 500) and Bank of New York Mellon (BK, Fortune 500) — all announced plans Monday to raise capital which would go towards buying the preferred stock and warrants associated with the government’s stake.

Before they can return taxpayer funds, banks first have to prove that they can issue debt without having to rely on the Federal Deposit Insurance Corp.’s debt guarantee program.

Even if they are able to do that, many experts contend that regulators may be tempting fate by allowing banks to carry out their TARP repayment plans.

Consider the issue of compensation. As a result of legislation passed earlier this year, banks that participate in TARP are required to rein in outsized bonuses for senior executives and top earners.

Goldman Sachs (GS, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) are two financial firms widely believed to very close to getting out from under the TARP program. Should they get approval to pay back taxpayer funds, they would no longer be subject to those compensation restrictions.

As a result, they may have a huge advantage over rivals given their ability to lure top earners away from banks that still have to place limits on salaries and bonuses. That could make it even tougher for some of the struggling banks to remain competitive.

"If you let a big firm out, they can hire the best 200 people on Wall Street at a discount," said one compensation consultant who could not speak publicly on the subject.

There is also the potential impact on bank stocks. Even though shares of many banks have rallied in the past two months, Jeff Davis, director of research at investment bank Howe Barnes Hoefer & Arnett, said some investors may now steer clear of lenders that are operating under heightened government and taxpayer scrutiny classic car insurance.

"All other things being equal, over time, [banks that have paid back TARP] are going to have substantially better valuations than those that remain semi-wards of the state," he said.

But perhaps the biggest risk in scaling back the program remains the fact that the government could very well sabotage what the TARP program was originally designed for: to keep credit flowing in the nation’s economy.

Until last week, federal officials had offered few indications on how they would respond to the growing chorus of larger banks like JPMorgan Chase and Goldman Sachs that are looking to pay back government funds.

So far, a dozen TARP recipients have managed to repurchase their shares from the Treasury Department, according to agency transactions records.

But many of those firms have been community banks - institutions that provide just a small amount of credit to the overall economy.

Part of the problem is that regulators may be worried about allowing a big bank to repay the money, only to find that the economy takes a severe turn for the worse, notes Kevin Petrasic, a former Office of Thrift Supervision official who is now an attorney in Washington at the law firm Paul Hastings.

"The last thing you want to have is a company pay the money back and find out 3, 6 or 9 months later they really shouldn’t have," Petrasic said.

In theory, the stress tests should solve that problem since most of the big banks eager to pay back TARP were found to not need more capital.

Still, some think regulators may only be willing to allow community banks or other non-traditional banks like asset manager Northern Trust (NTRS, Fortune 500) to be among those institutions that return taxpayer money in the weeks and months ahead.

But for the major financial players like JPMorgan Chase that are responsible for making billions of dollars of loans every quarter across the country? Don’t be surprised if regulators drag their feet a little longer in order to prevent them from quickly returning TARP funds, experts warn. 

Source

President Obama on Monday revealed more details of his myriad tax proposals — and added a few new ones along the way.

In the past few months, the administration has proposed many revenue raisers but left tax experts guessing as to the specifics.

Thanks to the release of the Treasury’s "Green Book," they now have more answers … and more proposals to analyze. From very technical changes on estate and gift taxes to some new ones on international taxes, Obama has added a host of new measures to his tax roster.

"They’re putting in enough provisions to get to the revenue gains they originally estimated," said Roberton Williams, senior fellow at the Tax Policy Center.

Who is high-income? Among the details that tax experts had been looking for was how the administration would determine who qualifies as "high-income." Obama has said he would restore the two top tax rates to 36% and 39.6% for families making more than $250,000 and individuals making more than $200,000.

Until Monday the administration hadn’t specified whether it would use use adjusted gross income or taxable income, which comes after all deductions and credits. The answer is somewhere in between, and as a result a small number of high-income families won’t be hit with higher rates.

Rather than consider AGI, the administration will consider a household to be high income if it meets the income thresholds after taking the standard deduction plus two personal exemptions for couples or one personal exemption for single filers.

How to value a gift? On the gift and estate tax front, a new provision would require the reported value of a gift to be the same as the value declared when the recipient sells the gift and must declare capital gains or losses for income tax purposes.

Say a parent with a $1 million business gives equal shares to each of his three children. For gift and estate tax purposes, the value of the gift isn’t 33% per child, but something less because no one child has control over the company. That reduces the gift tax liability.

But when the children go to sell the company, they may declare that their basis was 33% per person, which would decrease their capital gains tax liability direct faxless payday loans. Under Obama’s proposal they would have to report the same basis in both instances.

On the business front. The biggest guessing game among experts about corporate taxes was how the administration would raise $210 billion over 10 years by closing corporate tax loopholes.

The answer is a number of previously unannounced loophole closers in addition to what the administration revealed last week.

"It seems they’ve rounded up every international tax increase proposal … but they’ve failed to address the [issue of lowering] the corporate tax rate," said Clint Stretch, managing principal for tax policy at Deloitte Tax.

Among the additions is a proposal to place limits on companies’ abilities to shift income through so-called intangible property transfers to other countries.

Others boost reporting requirements, such as one that would make the IRS more aware of when there are discrepancies between what a company reports for tax purposes and what it reports on its books.

Another will hold both a company that leases out employees to a firm and the firm itself liable if the leased workers’ employer taxes aren’t paid. The government essentially would say "we don’t care who pays them but if you don’t we’ll hold you both liable," Stretch said.

There are a number of industry-specific proposals that Obama is making as well, particularly for financial products companies, insurance companies, paper companies and oil and gas producers.

No one expects all of the administration’s tax proposals to go through. Far from it. As it is, lawmakers have already indicated they’re not on board with a number of the revenue raisers that Obama has proposed.

But "this sets a marker," Stretch said. "It makes the A-list of things to talk about and then the conversation becomes ‘What should we do instead?’ " 

Source

China added to the drip-feed of encouraging news on Monday with a top central banker saying the government’s stimulus has worked better than expected and crude imports data showing a spike in demand.

Global stock markets have rallied in recent weeks on hopes the U.S. economy will start growing again later this year and that banks were getting back on their feet after the industry was caught in the worst financial crisis in six decades.

China, for years the world’s factory floor, also plays a big part in the recovery scenario with many economies in Asia relying on Chinese demand and markets scrutinizing Beijing’s data for any signs of global demand bottoming out.

“China’s economy is expected to sustain rapid growth for some period in the future,” Deputy Central Bank Governor Su Ning told a financial conference.

Prime Minister Wen Jiabao pitched in, too, telling state radio that the government’s response to the financial crisis went far beyond its $585 billion stimulus and suggested it would be rolling out new initiatives throughout the year.

RELIEF

There were also more encouraging signs from the United States and Europe on Friday, with the world’s biggest economy shedding fewer jobs than feared and Germany’s exports rising for the first time in six months in March.

Investors around the world also greeted with relief last week’s results of stress tests of 19 biggest U.S. banks, with regulators ordering 10 of them to raise nearly $75 billion of capital — less than some analysts had estimated fast cash advance.

Su’s comments coincided with Beijing’s release of April price data that showed both consumer and producer prices kept falling last month. But markets saw the falls as a natural reaction to last year’s surge in prices rather than a symptom of weakness of demand, with analysts predicting a return to moderate inflation in the second half of the year.

For related graphic, click on: here

In yet another sign that China’s industry was pulling out of a deep slump late in 2008 and early this year, crude oil imports in April jumped 13.6 percent from a year earlier, a source said. That was the first annual gain this year and the second-highest daily rate.

Chinese officials have sounded increasingly confident in the past weeks that the economy can regain traction and meet the government’s 8 percent growth goal this year.

In a sign of growing optimism about the U.S. economy, an influential survey of private forecasters predicted it would resume growth in the third quarter and expand 1.9 percent next year after shrinking 2.8 percent in the whole of 2009.

The forecasts are more optimistic than the International Monetary Fund’s latest outlook, which saw the U.S. economy stagnating next year.

CAUTION 

Read more

Frivolous spending, one of the hallmarks of America’s consumer-driven economy, is on its way out, with budget shopping becoming the mantra for households.

April store sales results Thursday showed clearly how the recession is training consumers to embrace value at all levels - whether it is shopping for food at Wal-Mart (WMT, Fortune 500), or buying clothes for your kids at a discount department store such as Ross Stores (ROST, Fortune 500) instead of at Macy’s (M, Fortune 500).

Consumer psychology expert Paco Underhill believes this change in the "mindset" of the consumer will define the post-recession shopper.

"Our retail culture is in a major transition. Conspicuous consumption is now bad manners," he said. "Too many of us have spread ourselves far beyond our means. We can’t do this anymore."

"Our closets are full, are houses are too big, we have too many cars," he said. "It’s time to make some very wrenching changes."

Post-recession consumers will spend very carefully. Buying previously owned products, for instance, will lose its stigma.

Also, more consumers will feel comfortable buying stores’ "private label" products versus higher-priced branded goods.

Luxury market expert Andrew Sacks, head of advertising firm AgencySacks, said even high-income shoppers will shop a little differently in the months ahead americashadvance.

"Even for those whose jobs haven’t been affected, they will be thinking about putting more money away. Everyone values their dollars more now," he said.

Not all high-income shoppers will trade down in prices, but they will be "more selective" with what they buy, focusing on quality rather than quantity, Sacks said.

Underhill, who’s also CEO of retail-focused consulting firm Envirosell, said the recession — whenever it ends — will dramatically change not only the "shop at any cost" mentality of the American consumer but also retailers’ approach to selling.

Retailers, he said, will have to adapt to a new reality in American consumerism by really selling the concept of "value."

Merchants will also have to focus on how they sell rather than "how much" they sell.

"I am 6′ 4". I can walk into a Gap store and find just two pairs of pants that will fit me," Underhill said. "I don’t think this makes any sense. Retailers have to become more sophisticated sellers."  

Source

Stocks surged Wednesday, with financial issues leading the way, after reports about the government’s "stress tests" suggested that the major banks are better capitalized than some had thought.

Also helping: jobs reports that suggested the pace of the slowdown is easing.

The Dow Jones industrial average (INDU) gained 102 points, or 1.2%. The S&P 500 (SPX) index climbed 16 points, or 1.7%. The Nasdaq composite (COMP) rose 5 points, or 0.3%.

The major stock gauges had seesawed through the early afternoon, but staged a rally through the close after reports about the stress tests surfaced.

Bank shares led the charge even on reports that major companies such as Bank of America and Citigroup will need to raise billions more to meet the requirements of the regulators conducting so-called stress tests.

But investors were perhaps relieved that the companies didn’t need to raise even more, said Tom Hepner, financial adviser at Ruggie Wealth Management.

Stocks drifted lower Tuesday as investors retreated after a roughly 8-week advance that boosted the S&P 500 by 34%. The rally followed a rout that left the index at a more than 12-year low.

Since then, investors have been moving back into the market on indications that the economy is starting to find its footing. Wednesday’s two job market reports continued that trend.

"There are indications that the rate of decline is slowing and that has made investors a bit more optimistic," Hepner said. "They’re taking an almost ho-hum response to bad news."

After the close, Cisco Systems (CSCO, Fortune 500) reported quarterly sales and earnings that fell from a year ago but still topped estimates.

Reports are due before the start of trading Thursday on first-quarter productivity, first quarter unit labor costs and weekly jobless claims. A report on March consumer credit is due in the afternoon.

Stress tests: Investors were sorting through published reports on the health of the nation’s banking system ahead of the government’s official release of the stress test results Thursday.

The government is testing to see that the 19 biggest banks have enough money on hand to withstand a potential bigger downturn in the economy. More than half the banks may have to raise additional capital, according to reports this week.

Bank of America (BAC, Fortune 500) may need to raise an additional $34 billion in order to meet the regulators’ standard. Wells Fargo (WFC, Fortune 500) may need around $15 billion, according to published reports Thursday. Dow component Citigroup (C, Fortune 500) may need at least another $10 billion.

JPMorgan Chase (JPM, Fortune 500), American Express (AXP, Fortune 500) and Bank of New York Mellon (BK, Fortune 500) won’t need any additional capital, according to the reports.

All the bank stocks mentioned rallied, along with regional banks. Fifth Third Bancorp (FITB, Fortune 500) added 15.5% and was one of the Nasdaq’s big gainers.

The KBW Bank (BKX) sector index gained 11.5%.

Employment: A pair of reports released before the open showed that the pace of unemployment is starting to slow.

Employers in the private sector pared 491,000 jobs from their payrolls in April, after cutting 708,000 jobs in March, according to payroll services firm ADP credit scores. Economists surveyed by Briefing.com expected a decline of 645,000.

The number of job cuts announced in April decreased for the third month in a row, according to outplacement firm Challenger, Gray & Christmas Inc. U.S. employers announced 132,590 cuts in April, the lowest number since October, but still 47% more than in the same month a year ago.

The reports raised bets that Friday’s bigger non-farm payrolls report from the government will show a slower pace of job losses too. Employers are expected to have cut 620,000 jobs from their payrolls after cutting 663,000 in March. The unemployment rate, generated by a separate survey, is expected to have risen to 8.9% from 8.5% in March.

Autos: General Motors (GM, Fortune 500) shares slumped ahead of its quarterly report, due out Thursday. The troubled U.S. automaker, facing a potential bankruptcy filing, is expected to post a steep quarterly loss.

Last week rival Chrysler filed for bankruptcy, after failing to win enough concessions from its lenders.

Ford Motor (F, Fortune 500) - the only Detroit automaker that has not taken government loans - said its restructuring is on track and that it has enough money to fund its plan. The company also said it will spend $550 million to convert a plant that produced trucks and SUVs into a complex for making fuel-efficient and battery-powered cars.

Corporate news: Walt Disney (DIS, Fortune 500) issued quarterly results late Tuesday. The Dow component reported weaker earnings that topped estimates on weaker revenue that missed estimates. Shares jumped nearly 12% Wednesday.

A rally in oil prices gave a boost to big oil services stocks Exxon Mobil (XOM, Fortune 500), Chevron (CVX, Fortune 500), ConocoPhilips (COP, Fortune 500) and Schlumberger (SLB).

Among decliners, Wal-Mart Stores (WMT, Fortune 500) and other retailers declined. Thursday brings April sales from the nation’s retailers.

Market breadth was positive. On the New York Stock Exchange, winners topped losers seven to three on volume of 1.88 billion shares. On the Nasdaq, advancers topped decliners five to four on volume of 3.02 billion shares.

Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.13% from 3.15% Tuesday. Treasury prices and yields move in opposite directions.

Borrowing costs continued to improve. The 3-month Libor rate fell to an all-time low of 0.97% from 0.99% Tuesday, according to Bloomberg.com. The overnight Libor held steady at 0.24%. Libor is a bank lending rate.

Other markets: In global trading, most Asian markets ended higher. Japanese markets have been closed all week for a holiday. European markets ended higher.

In currency trading, the dollar gained versus the euro and fell against the yen.

U.S. light crude oil for June delivery rose $2.50 to settle at $56.34 a barrel on the New York Mercantile Exchange.

COMEX gold for June delivery rose $7.20 to settle at $911.50 an ounce. 

Source