U.S. Economy
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No Changes to Fed Policy
The U.S. Federal Reserve today (Tuesday) kept its benchmark interest rate at a record low level Tuesday and made no changes to the key "extended period" policy pledge.
In its description of the economy, the Fed noted that "household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit." Also, the housing market has yet to turn a significant corner and the commercial real estate market remains in dire straits.
"Investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls," the Fed statement said.
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Bulls Overcome Market Tug of War to Send Stocks off to Strong March Start
Stocks rose briskly last week, resulting in a big week for the major market indexes. Weekly and monthly index charts improved, and such major U.S. stocks asThe Boeing Co.(NYSE: BA),Hewlett PackardCo. (NYSE: HPQ),American ExpressCo. (NYSE: AXP),Google Inc.(NASDAQ: GOOG),AppleInc. (AAPL), Goldman SachsGroup Inc. (NYSE: GS) and General Electric Co. (NYSE: GE) emerged from flat-lining or faltering price patterns on decent, if not outstanding, volume.
Just two weeks ago, every one of the afore-mentioned stocks looked terrible, exhibiting intense apathy amid slow, grinding declines. Then the skies parted, and suddenly the sun is shining on these shares once again.
That's why U.S. stocks are off to a strong March start - already up 4.1% from the end of February. And don't forget, a year ago at about this time (March 9, 2009), the market reached its nadir: The Standard & Poor's 500 Indexis up 69.98% since that time.
Here's why the shift seems so abrupt. The markets are now in a tug of war between two forces:
- On the plus side are good fourth-quarter earnings reports related to an improving economy.
- On the negative side - as a friend at a major macro hedge fund described it last week - are "frigid winds blowing across the credit icebergs."
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What's In Store for U.S. Stocks in Light of Greece's Tragedy?
The recent month of February was quite interesting for U.S. stocks, because while the Dow Jones Industrial Average rose 2.6%, it didn't exactly take a direct route to those gains: There were eight separate triple-digit moves in the Dow, both up and down.
At the root of that volatility were political and economic developments that challenged the rationale for the huge rally out of the March 2009 low. Bulls were basically rethinking their beliefs that the home-price plunge had abated, employment was on the verge of a big turnaround, governments could cut taxes and boost spending without end, and that interest rates would remain at zero for years.
I had prepared subscribers for much of this turmoil. Back in early November, I highlighted signs of trouble in the market for government debt well before the troubles in Dubai and Greece came to a head. In December, we started a dialogue on what to expect as the U.S. Federal Reserve withdrew liquidity from the economy and lifted interest rates. The upshot was a series of letters detailing why you should expect the first nine months of the year to trade flattish with a lot of volatility.
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A Year After the Bear-Market Bottom, Investors Must Still Pursue Profits – Without Ignoring Risk
With the Standard & Poor's 500 Index up nearly 70% from the post-financial-crash low it set on March 9, 2009, U.S. stocks on Tuesday recorded their second-strongest showing ever for the first 12 months of a bull market.
But that near-record-setting performance brings to light two key issues.
- First, despite the numbers that stand as evidence of the market's stunning surge, many still-shell-shocked investors refuse to label this as a true "bull market."
- And second, no matter how great a market's performance has been, the real question to answer is "where do we go from here ... and how do I position myself to maximize possible returns while mitigating risk as much as possible?"
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The Dividend Stock Recovery: Get Ready for a High-Yield Bonanza
It's been a tough time for income investors lately.
Ten-year Treasuries pay less than 4%. The Standard & Poor's 500 Index yields just over 2%. Money market fund returns are microscopic, paying an average of just 0.05%. (At that rate, it will take your money one thousand years to double.)
What should you do?
Take a look not at the stock market, but inside it. The S&P 500 may yield 2.1%, but many individual stocks are yielding far more. In addition, yields are about to arch higher.
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Which Stocks and Sectors Will Shine as Market Fear Subsides?
A lot of my commentary lately on the markets has been relatively short-term oriented. Today let's take a moment to pan back and consider the weekly perspective, which is rather benign, even positive.
From this point of view, stocks are broadly recovering from their most oversold condition since March of last year -- and the release of the energy stored up then persisted at near-full strength for three months.
To find out which stocks are positioned for profit, click here.
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AIG Could Seek Another Bailout as it Struggles to Return to Profitability
American International Group Inc. (NYSE: AIG), the insurance giant that received billions in federal bailout money, on Friday reported an $8.9 billion fourth-quarter loss. AIG dismissed the loss as part of its rebuilding process, but it also acknowledged that it may require even more government financing.
The loss is not nearly as bad as the previous year's $61.7 billion fourth-quarter stumble - the biggest quarterly loss in corporate history - but at $65.51 a share, it's still much higher than analysts predicted.
Amid scrutiny, AIG in September 2008 received a $182.3 billion bailout, which gave the government an 80% stake in its business. Since then, AIG's debt pay-off funds have generally come from the sale of its non-core assets. AIG recognizes these "fire-sales" as the best way to pay back its debts while also streamlining its business.
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Weak Job Market and Low Inflation Stall Fed's "Exit Strategy"
Any speculation that U.S. Federal Reserve Chairman Ben Bernanke had his finger on the "exit strategy" trigger has been silenced.
Bernanke yesterday (Wednesday) faced the House Financial Services Committee to instill public confidence in the Fed's ability to exercise a smooth exit strategy and quell continued fears of a tightening monetary policy.
The Federal Open Market Committee (FOMC) "continues to anticipate that economic conditions -- including low rates of resource utilization, subdued inflation trends, and stable inflation expectations -- are likely to warrant exceptionally low levels of the Federal Funds rate for an extended period," he said.
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It's Time to Tackle Government Pay
It's fairly well known that the U.S. public sector is paid more than the private sector. What's less well known is that the gap between federal-employee pay and benefits and private-sector pay and benefits is increasing - by about 18% over the last decade.
Given the current level of U.S. unemployment and the size of the budget deficit, it would appear that some economies could be made. In short, it's time to tackle government pay.
After all, if Greece can economize, so can the United States...
To see why government pay cuts are justified, read on...
