General Motors says it will reconfigure the factory that makes the Chevrolet Volt so it can produce up to 60,000 electric cars per year.
Currently the plant in Detroit can make about 16,000 of the cars annually.
The company will shut down the plant for four weeks in June for the upgrades.
The Volt can run on battery power for about 35 miles before a gas-powered motor kicks in to generate electricity to run the car guaranteed approval cash loans. It can be recharged through a home electrical outlet.
GM says the Volt will be in short supply over the next three months. The company says the upgraded plant will be able to meet global demand for the Volt and its European counterpart, the Opel Ampera.
Conference call, anyone?
Several times a year, the lords of the global economy descend on the city of the moment. Their massive entourages fly business class, zoom around in motorcades and sleep at 5-star hotels. What do taxpayers funding all this summitry get in return? Ambiguous communiqués, hollow pledges and a nagging sense that world leaders should discover videoconferencing.
The latest summit of emerging-market stars is a case in point. As if the alphabet soup of G-7, G-8, G-20, APEC and OPEC weren’t enough, we now must follow BRICS events. In 2009 and 2010, they were just BRIC affairs: Brazil, Russia, India and China. This year, an “S” was awkwardly added for South Africa. Even Jim O’Neill, the Goldman Sachs economist who 10 years ago coined the acronym BRIC, doesn’t get why it’s there.
Far more deserving additions exist in Asia — South Korea and Indonesia. Yet the more I see what the BRICS are becoming, the more I think Seoul and Jakarta should decline any invite. BRICS confabs reinforce how artificial the whole enterprise is.
Take the bluster about a new world order. No one in their right mind would argue we don’t need one, yet the Group of 20 nations is a far more productive framework for any redesign of global markets and institutions. And each of the BRICS has a seat at the G-20 table.
Staging Sideshows
The trick is for emerging economies to demand a bigger voice there — not stage sideshows. That’s not to say economic groupings are pointless. In Asia, for example, the 10-member Association of Southeast Asian Nations is the only forum where the world can engage Myanmar’s repressive regime. Still, Asean is more about photo opportunities than substance.
The Asia-Pacific Economic Cooperation group is a circus. The only real thing its 21 members have in common is beachfront property. An APEC-wide free-trade zone would be a wonderful thing. On its watch, bilateral agreements, not sweeping international ones, became the norm. APEC gatherings are now Davos-like affairs. Like the World Economic Forum, they’re an excuse for corporate bigwigs to jet in and do deals. Rather than meeting in Hawaii in November, APEC leaders should call it in and reduce their carbon footprint.
Important topics were broached at the April 14 BRICS summit at the Chinese city of Sanya, including regulating derivatives and volatility in commodity prices. What it really highlighted is what really matters: the “C” in BRICS.
The group hasn’t moved beyond being about China’s voracious appetite for the commodities of the other four members, with a bit of America-bashing tossed in.
China’s Money
Brazil, Russia, India and South Africa are key economies in their own right, yet BRICS gatherings have evolved into the geopolitical equivalent of investment roadshows. China has piles of money, and the real action is on the sidelines of formal discussions. There, officials angle for more Chinese investment and access to the nation’s 1.3 billion consumers.
This dynamic offers some useful reality checks. For India, it’s realizing a trade deficit with China exceeding $20 billion annually will grow no matter how close Prime Minister Manmohan Singh sits to Chinese President Hu Jintao at the BRICS table. For Russia, it’s a one-time superpower being part of an emerging-nation group it doesn’t even lead. For Brazil, it’s how Latin America’s biggest economy weakened its trade defenses for a Chinese government unwilling to do the same. For South Africa, it’s that more will be expected of it on the progress front.
BRICS Brotherhood
As much as these economies must harness China’s 9.7 percent growth, they also need to protect domestic economies. Their currencies are rising while China works 24/7 to maintain an undervalued yuan. The trouble is, membership in the BRICS brotherhood makes it hard politically for officials in Brasilia, Moscow, New Delhi or Pretoria to criticize Beijing.
That’s why anger is being projected elsewhere. The U.S. deserves some for its hypocritical policies since the 2008 crisis. Back in 1997, when Asia blew up, America told the region to raise interest rates to support currencies, reduce debt, avoid blaming speculators for market swings and follow free- market policies. Today, the U.S. is doing exactly the opposite.
Yet big changes like replacing the dollar are better handled by the broader G-20. With over $4 trillion of combined currency reserves, any BRICS move to dump the dollar will shake markets. If you think the real, ruble, rupee, yuan or rand will replace the dollar anytime soon you’re dreaming. Even if the yuan emerged as a viable reserve currency, it first must be fully convertible. That’s a ways off.
Eclipsing U.S.
BRICS don’t want to live in a world run by Washington –not when their combined gross domestic product could eclipse the U.S. by the end of 2014. And it’s ridiculous that the governance of the International Monetary Fund and World Bank still rotates between the U.S. and Europe to the exclusion of the rest of the world.
The future clearly belongs to emerging nations. It’s just not clear that the BRICS as a political entity is evolving into something that can play a credible role in creating it.
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
China’s foreign-exchange reserves exceeded $3 trillion for the first time, highlighting global imbalances that Group of 20 finance chiefs aim to tackle at meetings in Washington.
China’s currency holdings, the world’s biggest, swelled by $197 billion in the first quarter, the nation’s central bank said yesterday. New loans were a more-than-estimated 679.4 billion yuan ($104 billion) in March, it said.
Premier Wen Jiabao’s policy of controlling the currency, along with trade surpluses and flows of capital into the fastest-growing major economy, have boosted the reserves by $1 trillion in two years. G-20 finance chiefs are seeking to agree on an early-warning system that can prevent the type of imbalances in trade and financial patterns that contributed to the 2007-09 crisis and recession.
“The continued substantial foreign-exchange reserve accumulation by China is a reflection of global imbalances,” said David Cohen, a Singapore-based economist at Action Economics who formerly worked for the U.S. Federal Reserve. China continues to “resist the pressure for faster appreciation of the yuan,” he said.
China will report first-quarter economic growth of 9.7 percent and March inflation of 5.4 percent, Jiang Guangce, a partner and fund manager at Congrong Investment Management Co., said yesterday, citing market speculation. Consumer prices rose 5.3 percent or 5.4 percent last month, according to a Phoenix Television report yesterday.
Those numbers, to be released today, would exceed economists’ median forecasts for 9.4 percent growth and 5.2 percent inflation.
‘Striking’ Increase
The currency holdings at the end of March compared with the $2.98 trillion estimate in a Bloomberg News survey of five economists and $2.85 trillion at the end of last year. M2 money supply rose 16.6 percent in March from a year earlier, exceeding analysts’ median estimate.
“Most striking at first sight is how fast the foreign- exchange reserves are rising,” said Mark Williams, a London- based economist for Capital Economics Ltd. “Chinese officials point to the first quarter’s trade deficit as evidence that there is less need for the renminbi rise, but the scale of reserve growth shows that the People’s Bank is still intervening very actively to keep the renminbi down.”
Yesterday’s reports underscore the challenges for China’s policy makers as they seek to stem inflation while at the same time preventing the yuan from soaring.
Stronger Yuan
The yuan closed at 6.5315 per dollar in Shanghai yesterday, about 4.5 percent higher than a year ago. By contrast, Singapore’s currency has climbed 10 percent in that time, according to Bloomberg data. That nation, which uses its exchange rate as the main monetary policy tool, yesterday said it will allow further appreciation after a greater-than-forecast acceleration in growth last quarter.
Any slowing in the pace of gross domestic product growth may help defuse risks of overheating and aid Wen’s campaign to contain consumer prices. The peak year-on-year gain in GDP growth during 2010 was 11.9 percent.
U.S. Federal Reserve Chairman Ben S. Bernanke is among those who have said that excess savings in Asia contributed to inflows of capital into the U.S. The investments helped hold down American borrowing costs, fueling a record mortgage boom that ended with a bust that sparked the global credit crisis.
Global Imbalances
At a February meeting in Paris, G-20 policy makers produced a list of criteria to use as yardsticks for when dangerous global imbalances are developing. The list included public debt and fiscal deficits, private debt and savings rates, trade balances and net investment-income flows and transfers.
Omitted at China’s behest were foreign-exchange reserves, a sign of the international disparities in spending and saving. In a signal that China may continue to resist the initiative, Li Yong, a vice finance minister, said guidelines could be used as a “political tool” against his nation by the G-20.
Reserves are also affected by exchange-rate swings. Strength in the euro against the dollar may have bolstered China’s holdings in the first quarter, by boosting the dollar- denominated value of assets held in the European currency.
Chinese officials are reining in lending to counter inflation after a record expansion of credit in 2009 and 2010, with the central bank boosting interest rates four times since mid-October and raising banks’ reserve requirements.
“We will further improve the yuan formation mechanism and increase yuan exchange-rate flexibility to eliminate monetary conditions that fuel inflation,” Wen told China’s cabinet this week.
–Zheng Lifei. Editors: Paul Panckhurst, Chris Anstey
To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at +86-10-6649-7560 or lzheng32@bloomberg.net
Technology stocks rose Wednesday after the CEO of Cisco Systems Inc. promised to take “bold steps” to narrow the company’s focus.
Cisco rose 4 percent, the most of any stock in the Standard & Poor’s 500 index, after CEO John Chambers said in a memo to employees that recent missteps were “unacceptable.” Cisco has had three quarters of poor earnings. Analysts say the company is overly reliant on revenues from state and local governments. Chambers promised that major changes were coming, although he offered few specifics.
Other technology companies also rose. Hewlett-Packard Co. rose 2.3 percent, while Microsoft Corp. and chipmaker Qualcomm Inc. each rose about 1 percent. Broadcom Corp. jumped 3.4 percent after an Oppenheimer analyst said the semiconductor company would benefit from higher sales of mobile phones.
Chip stocks were still a big focus for investors after Texas Instruments Inc. said Monday it would pay $6.5 billion in cash for National Semiconductor Corp.
Materials and energy companies fell, leaving broad market indicators narrowly mixed. Monsanto Co. fell 4.4 percent after the world’s biggest seed company issued an earnings forecast for the year that fell below analysts’ expectations payday loans no faxing.
The Dow Jones industrial average rose 12, or 0.1 percent, to 12,406.
The Standard & Poor’s 500 index edge up less than a point to 1,332. The Nasdaq composite index was also up less than a point to 2,791.
Bond prices fell, pushing their yields higher. The yield on the 10-year Treasury note rose to 3.51 percent from 3.49 percent late Tuesday.
Abercrombie & Fitch Co. rose 1.5 percent after several analysts raised their price targets on the company, citing the retailer’s strong 2012 earnings outlook and international prospects.
Traders want to see how higher prices for oil, gas and other raw materials are affecting corporate profits. They’ll get their first glimpse next Monday, when Alcoa Inc. reports its first-quarter earnings, providing the unofficial start of earnings season.
Robert Russell, president of Russell & Co., a wealth advisory firm, said he expects higher commodity prices to hurt profits.
“The U.S. markets are running on fumes at this point,” he said. “There’s going to be more of a strain on corporate earnings.”
Portuguese Prime Minister Jose Socrates said he presented his resignation to President Anibal Cavaco Silva after parliament rejected the government’s deficit- cutting plan, raising the chance of an international bailout.
Socrates made the announcement tonight in an address to the nation after meeting with Cavaco Silva at the president’s residence in Lisbon. “This crisis occurs in the worst possible moment for Portugal,” Socrates said.
Cavaco Silva will meet political parties represented in parliament on March 25 and the government will retain its full powers until the president accepts Socrates’s resignation, according to a statement on the president’s website.
The euro weakened to $1.4083 following the announcement. It came after lawmakers backed resolutions against the government’s stability and growth program, and before European Union leaders meet tomorrow in Brussels to sign off on measures aimed at stopping the contagion that led Greece and Ireland to accept EU- led rescues. The meeting begins as the cost of insuring Portuguese debt against default hovers near a record high.
Socrates had said last week that his minority government was available to discuss deficit-cutting measures with opposition parties to avert a “political crisis.” Portugal is raising taxes and implementing the deepest spending cuts in more than three decades to convince investors it can narrow its budget gap, curb debt and avoid seeking a rescue from the EU.
The spread between Portuguese and German 10-year bond yields widened 16 basis points to 439 basis points today after reaching a euro-era record of 484 on Nov. 11. Ireland in November became the second euro country after Greece to seek a bailout and the first to request aid from the European Financial Stability Facility. Portugal’s 5-year bond yield climbed to a euro-era record of 8.202 percent today, according to data compiled by Bloomberg.
Commitments
“If parliament decides on a motion against the stability and growth program, that means the government is not in a condition to make commitments internationally,” Socrates said on March 15. “That would mean a political crisis. In my understanding, the consequence of a political crisis is the worsening of the financing risks of our economy and would lead Portugal to request external intervention guaranteed online payday loans.”
Finance Minister Fernando Teixeira dos Santos on March 11 presented additional deficit-cutting measures equal to 4.5 percent of gross domestic product over three years, including a reduction in pensions of more than 1,500 euros ($2,132) a month and further cuts in tax benefits.
The Social Democrats, the biggest opposition group in parliament, contested the new austerity measures. The party has still said it supports Portugal’s plan to reduce its budget gap and meet deficit targets.
Minority Government
Socrates became prime minister in 2005 and his Socialist Party won re-election in 2009 without a majority in parliament. The Social Democrats agreed in October to let the government’s 2011 budget proposal pass in parliament by abstaining.
Between 1995 and 1999, Antonio Guterres led the only minority government in Portugal to survive a full term since the end of a four-decade dictatorship in 1974. Portugal has been trying to avoid requesting aid for the first time since 1983, when it received external help from the Washington-based International Monetary Fund.
Polls
The Social Democrats led the ruling Socialists in a survey of voters’ intentions for parliamentary elections published by Diario Economico on Feb. 25. The survey indicated 48 percent backing for the Social Democrats, led by Pedro Passos Coelho, and 29 percent support for the Socialists, the newspaper said.
Portugal intends to sell as much as 20 billion euros of bonds this year to finance its budget and cover the cost of maturing debt. Portugal faces bond redemptions in April and June worth about 9 billion euros in total. It also faces bill maturities in July, August, September, October and November.
“With bond yields stubbornly high and heavy debt redemptions due over the next few months, it appears all but inevitable that Portugal will be forced to follow Greece and Ireland in accepting financial support,” economists Emilie Gay, Roger Bootle and Jonathan Loynes of Capital Economics Ltd. wrote in a note yesterday.
Japan’s risk of becoming the first Group of Seven member to return to a recession after the global financial crisis eased as the G-7 intervened to halt the yen’s appreciation.
The G-7’s yen sales sent the currency down the most since September, to 80.58 per dollar at the close yesterday in New York, compared with the postwar high of 76.25 reached March 17. Japan’s Vice Finance Minister Fumihiko Igarashi said in an interview “we confirmed” further intervention could be done.
“The risks to the downside for Japan’s economy were reduced significantly by the G-7 intervention,” said Takuji Aida, a senior economist at UBS AG in Tokyo. “This coordinated action may help corporate sentiment to recover, a key factor in reviving growth, along with public spending.”
Reduced scope for yen gains would limit damage to exporters’ earnings once companies from Toyota Motor Corp. to Sony Corp. restart factories. Focus now turns to the duration of electricity cuts in the aftermath of the nation’s record earthquake. At the crippled Fukushima Dai-Ichi nuclear power plant, engineers worked to restore power used for pumps needed to protect fuel rods from overheating and releasing radiation.
Paring Loss
The Nikkei 225 Stock Average closed 2.7 percent higher yesterday, paring its slide since the disaster to 12 percent. The tumble in equities in the aftermath of the quake, in conjunction with the rising yen, threatened to impair companies’ balance sheets ahead of the March 31 close to the fiscal year.
To aid companies with fund-raising concerns, Prime Minister Naoto Kan’s government may provide more than 10 trillion yen ($124 billion) of loans, the Nikkei newspaper reported without saying where it obtained the information.
Japan’s economy, the world’s third biggest, may skirt a contraction and grow about 1 percent this year as the nation rebuilds after the March 11 temblor and tsunami, according to UBS and Nomura Holdings Inc.
The Federal Reserve, European Central Bank, Bank of England, Germany’s Bundesbank, the Bank of France, the Bank of Canada and the Italian central bank said they joined the yen sales. A Japanese government official said on condition of anonymity that his country probably sold less than 2 trillion yen, the amount it used in its last intervention. Yesterday’s drop in the yen was the biggest since Japan’s unilateral sales on Sept. 15.
‘Very Problematic’
“The risk of the yen rising unchallenged to uncompetitive levels would have been very problematic in an economy where, outside of export dynamism, there’s really been very little dynamic for growth,” said Richard Jerram, head of Asian economics at Macquarie Securities Ltd. in Singapore. The intervention is “a significant help” to the economy, he said.
Japan’s economy had already shrunk in the fourth quarter of 2010 as government stimulus measures adopted during the global financial crisis were phased out. The nation has suffered limited growth and sustained declines in consumer prices as an aging and shrinking population undercut domestic demand.
Every one yen that the currency appreciates against the dollar erodes about 30 billion yen from Toyota’s earnings, according to the company. Honda Motor Co., which produces more than 70 percent of its vehicles outside Japan, loses 17 billion yen for each yen the currency strengthens.
“We won’t manipulate it, but I hope that the yen goes back to where it was before the earthquake,” Igarashi said in the interview in Tokyo March 18. He added that he hoped the G-7 action would put a floor under the currency.
Yen’s Climb
The yen has appreciated 3 percent against the dollar since the close the day before the magnitude-9 quake. The currency, which has now strengthened 19 percent in the past two years, rose in recent days on speculation Japan’s insurers would repatriate overseas assets. Economic and Fiscal Policy Minister Kaoru Yosano has said there was no basis for such speculation.
Nomura analysts see the economy expanding 1.1 percent this year, 0.4 percentage point less than their estimate before the disaster struck. The earthquake and tsunami ripped apart northeastern towns, killing thousands and damaging nuclear reactors at Tokyo Electric Power Co.’s Fukushima Dai-Ichi plant. Almost 400,000 people remained in evacuation shelters yesterday.
Soldiers and firefighters from Tokyo, using dozens of fire engines, doused sea water on reactor No. 3 yesterday, after an explosion this week. TEPCO also said it may finish reconnecting a power line to the No. 2 reactor.
U.S. Optimistic
Admiral Robert Willard, head of the U.S. Pacific Command, said he was cautiously optimistic that the damage can be contained and a “worst-case scenario will never be encountered.”
The risks to an economic recovery include an uncertain power supply, with the nation facing rolling blackouts and Citigroup Inc. warning this week that the nation may face an “irreversible” blow to capacity. Household sentiment has also suffered.
“Japan has little choice but to rely on exports as consumer spending will likely stay weak,” said Junko Nishioka, chief economist at RBS Securities. “Service consumption will likely slump even in the Tokyo area as consumers may be discouraged from going out because of the confusion resulting from the earthquake, such as the power shortage,” she said.
Before the quake, Japan’s economy was showing signs of a revival, after shrinking an annualized 1.3 percent in the fourth quarter of last year.
The central bank yesterday repeated its pledge to pursue “powerful monetary easing” and added 3 trillion yen to the financial system, bringing its total emergency fund injections this week to 37 trillion yen. On March 14, it doubled an asset- purchase fund to 10 trillion yen, pledging to step up purchases of securities including government debt, exchange-traded funds and real-estate investment trusts.
The Republican-controlled U.S. House voted to cut at least $61 billion in federal spending this year, setting up a battle with Democrats over the budget that threatens a government shutdown.
After more than 90 hours of debate, the House decided 235-189 early today to send the measure to the Senate.
Members adopted a number of changes that will make it harder to reach agreement with the Senate, including a ban on funds for President Barack Obama’s health-care overhaul or for Planned Parenthood, which provides abortions. The measure would block regulations on greenhouse-gas emissions, for-profit colleges and the Federal Communications Commission’s “net neutrality” Internet rules.
Senate Democrats already said they won’t accept the steep cuts in the $1.2 trillion spending bill, and Obama’s budget office has threatened a veto. With Congress out of session next week lawmakers have little time to work out their differences. Current spending authority ends March 4, and without a new plan the government will shut down.
House Speaker John Boehner, an Ohio Republican, said this week he won’t accept a short-term extension without some spending reductions. “Read my lips: We’re going to cut spending,” he told reporters.
Military Pay
Minority Leader Nancy Pelosi said a shutdown would halt military pay, veterans’ benefits, Social Security checks and government functions such as food-safety inspections, she said.
“The last thing the American people need is for congressional Republicans or Democrats to draw a line in the sand that hinders keeping the government open,” said Pelosi, a California Democrat.
The plan, designed to fulfill Republican campaign promises to slash federal spending, would kill more than 100 programs and cut funding for hundreds more.
It would make big reductions in programs affecting education, the environment, health care, energy, science and the arts. The Peace Corps budget would be cut by 20 percent and the maximum Pell college tuition grant would be slashed by 15 percent. The Social Security Administration said it would have to furlough employees.
500 Amendments
The House voted on more than 80 amendments among at least 500 offered under Boehner’s promise of an open debate.
An effort by a group of fiscally conservatives to force an additional $22 billion in cuts was defeated, 281- 147, amid warnings from Republicans and Democrats alike that it would force the Federal Bureau of Investigation and other agencies to furlough employees.
“It’s not pleasant to reduce spending — I get that,” said Ohio Republican Jim Jordan, who sponsored the amendment. “This is what the American people elected 87 freshman Republicans to do.” Ninety-two Republicans and 189 Democrats voted against the proposal.
A number of other Republican amendments were adopted, including one accepted 239-187 barring the administration from paying any employees to implement its health-care overhaul.
“Our efforts — and my amendment — will save billions of wasted funding while opening the door for true health-care reform,” said Representative Denny Rehberg, a Montana Republican.
Pre-Existing Conditions
The health-care law aims to expand health-insurance coverage to another 32 million Americans and bars insurers from refusing to cover pre-existing conditions. The law, which cleared Congress last year with no Republican support, also allows young adults to stay on their parents’ insurance plans up to age 26.
“Are you the ones who are going to go tell the American people that insurance companies can drop you when you get sick?” said Democrat Jan Schakowsky of Illinois.
The Education Department amendment, approved 289-136, would block the agency’s “gainful employment” rule that would tie for-profit colleges’ eligibility for federal student aid to their graduates’ income and loan-repayment rates. The administration contends for-profit schools often saddle students with big tuition debts they can’t pay back.
‘Job-Destroying Regulation’
Education and Labor Committee Chairman John Kline, a Minnesota Republican, said Education Secretary Arne Duncan should “put an end to this job-destroying regulation once and for all.”
“Students should be empowered to make an informed decision about their education, and we must ensure they have the information they need without targeting an entire sector of colleges and harming our economy,” Kline said.
The chamber voted 240-185 for Indiana Republican Mike Pence’s amendment to cut off federal funding to Planned Parenthood, which provides a variety of reproductive-health services.
“Congress has taken a stand for millions of Americans who believe their tax dollars should not be used to subsidize the largest abortion provider in America,” he said.
Senator Barbara Boxer, a California Democrat, called it an “extreme attack on women’s health that threatens the health and lives of millions of women.” She said, “We will continue to fight in the Senate against any effort to deprive women of access to lifesaving health care.”
Planned Parenthood receives $363 million in local, state and federal government funding, about 90 percent of it from the federal government or Medicaid, a joint federal-state program, according to spokesman Tait Sye.
Nokia Oyj, the world
Stocks closed barely changed Tuesday amid light trading ahead of the New Year’s holiday.
The blue-chip Dow Jones industrial average finished slightly higher, though stocks had dipped earlier on disappointing consumer confidence and home prices reports.
The Dow edged up after Treasury prices fell in the wake of a weak bond auction in the afternoon. Fewer than expected buyers emerged for the government’s auction of $35 billion five-year bonds. The yield on the 10-year Treasury note rose to 3.49 percent from 3.34 percent late Monday.
The Dow closed the day higher by 20.51 points, or 0.2 percent, to 11,575.54. The Standard and Poor’s 500 index was up 0.97, or less than 0.1 percent, to 1,258.51. The technology-focused Nasdaq composite index lost 4.39, or 0.2 percent, to 2,662.88.
Earlier in the day, the Conference Board announced that consumer confidence in the economy slid to a level of 52.5 in December, down from 54.3 in November, as Americans continued to fret about the high rate of unemployment. The market was expecting a slightly higher reading because of signs of improved consumer spending in the Christmas holiday season this year.
“The spending patterns this Christmas looks better, but unemployment continues to be a big question,” said Kim Caughey Forrest, senior equity research analyst at Fort Pitt Capital Group.
Another factor weighing on the minds of traders is fear that the housing market will continue to fall. Standard & Poor’s/Case-Shiller said Tuesday that home prices fell 1.3 percent in October from a month earlier.
Home prices slid across the country, including the biggest cities. Prices were down 2.9 percent in Atlanta, 2 percent in Chicago, and 1.9 percent in San Francisco.
Energy and materials companies were posting gains as the price of crude oil gained. Chevron Corp. led Dow gainers, rising 1.2 percent to finish at $91.19.
American Express Co. had the largest fall, losing 0.6 percent to $42.79.
In corporate news, General Motors Co. gained 2.1 percent to close at $35.32 after a handful of analysts from investment banks that underwrote the automaker’s IPO initiated coverage with favorable ratings.
Home builder Beazer Homes USA Inc. fell 4.5 percent to $5.37 on the disappointing home prices report.
The dollar slid to a 7-week low versus the Japanese yen Tuesday in thin post-Christmas trading, but rose against the euro and pound.
About 559 million shares changed hands, about half the usual volume on Wall Street. Trading is expected to be light for most of the week as many investors have already closed their books for the year.
Falling shares narrowly outpaced rising ones on the New York Stock Exchange.
Regulators on Friday shut down three banks in Florida, Pennsylvania and Wisconsin, lifting the number of U.S. banks that have failed this year to 149 as soured loans pile up and the economy limps forward.
The Federal Deposit Insurance Corp. took over the banks, the largest by far being First Banking Center, based in Burlington, Wis., with $750.7 million in assets.
First Michigan Bank, based in Troy, Mich., agreed to assume the assets and deposits of First Banking Center. In addition, the FDIC and First Michigan Bank agreed to share losses on $515.6 million of First Banking Center’s loans and other assets.
The failure of First Banking Center is expected to cost the deposit insurance fund $142.6 million.
Also seized were Gulf State Community Bank in Carrabelle, Fla., with $112.1 million in assets, and Allegiance Bank of North America in Bala Cynwyd, Pa., with $106.6 million in assets.
Centennial Bank, based in Conway, Ark., agreed to assume the assets and deposits of Gulf State Community Bank. Vist Bank, based in Wyomissing, Pa., is acquiring the assets and deposits of Allegiance Bank.
In addition, the FDIC and Centennial Bank agreed to share losses on $84.4 million of Gulf State Community Bank’s loans and other assets. Centennial said the acquisition was the latest in a series in Florida under its strategy.
Centennial and the failed bank have competed directly in the Tallahassee and Franklin County markets in Florida, according to regulators. Separately Friday, the Federal Reserve Board approved the transaction, finding that the harmful effects of Centennial’s takeover on competition in the two markets are outweighed “in the public interest” by its benefit to the communities in those areas.
The failure of Gulf State Community Bank is expected to cost the deposit insurance fund $42.7 million.
Florida has been the hardest hit state for bank failures. Gulf State Community Bank was the 28th bank to fail in the state this year guaranteed approval cash advance loans. Other states that have seen large numbers of bank failures are California, Georgia and Illinois, amid an avalanche of bad loans, especially for commercial real estate.
The FDIC and Vist Bank agreed to share losses on $86.2 million of Allegiance Bank’s assets. The failure of Allegiance Bank is expected to cost the deposit insurance fund $14.2 million.
The 149 closures nationwide so far this year tops the 140 shuttered in all of 2009 and is the most in a year since the savings-and-loan crisis two decades ago. By this time last year, regulators had closed 123 banks.
The 2009 failures cost the insurance fund about $36 billion; the failures so far this year have cost around $21 billion, less because the banks failing in 2010 have on average been smaller. Twenty-five banks failed in 2008, the year the financial crisis struck with force; only three succumbed in 2007.
The growing bank failures have sapped billions of dollars out of the deposit insurance fund. It fell into the red last year, and its deficit stood at $15.2 billion as of June 30.
The number of banks on the FDIC’s confidential “problem” list jumped to 829 in the second quarter from 775 three months earlier, even as the industry as a whole had its best quarter since 2007, making $21.6 billion in net income. Banks with more than $10 billion in assets _ only 1.3 percent of the industry _ accounted for $19.9 billion of the total earnings.
The FDIC expects the cost of resolving failed banks to total around $52 billion from 2010 through 2014.
Depositors’ money _ insured up to $250,000 per account _ is not at risk, with the FDIC backed by the government. That insurance cap was made permanent in the financial overhaul law enacted in July.
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