What is going on with the economy?

[2Real4me!]

Gas guzzlers a hit in China, where car sales are booming
Monday April 21, 2:19 pm ET
By Joe Mcdonald, AP Business Writer



Bigger is better in China, where SUV and luxury car sales soar despite high oil prices

BEIJING (AP) -- High, wide and fuel-hungry, the gleaming black Cadillac Escalade on display at the Beijing auto show is an unlikely car for an era of record oil prices.
But while sport utility vehicle sales in the U.S. are tumbling, automakers are finding that for China's newly prosperous car buyers, bigger is still better.
So General Motors Corp. has made the Escalade a star of its auto-show display and is eager to get it on the market here.
"If you look at the fastest-growing market segments in China, there are two -- SUVs and luxury cars," said Joseph Y.H. Liu, GM China's vice president for sales and marketing.
Auto sales in China are booming, with analysts and automakers forecasting growth at 15-20 percent this year. But demand for the biggest vehicles is even stronger, with sales of luxury cars and SUVs expected to surge by 40-45 percent.
The phenomenon is welcome news for automakers seeing little or no growth in the United States, Europe and Japan. They also make fatter profits from sales of high-end vehicles than from economy models.
Sales have been boosted by economic growth that has topped 10 percent for five straight years and a surge in real estate and stock prices that created a new crop of Chinese billionaires.
Buyers of land yachts have also been unintended beneficiaries of a government policy meant to help the poor. Beijing has tried to shield farmers and the urban poor from high oil prices by freezing pump prices for gasoline and diesel, keeping them among the world's lowest. That takes the sting out of filling up a gas guzzler.
Gas costs 5.34 yuan (76 cents) a liter or 20.5 yuan ($2.90) a gallon. State oil companies are barred from passing on rising crude costs to consumers, instead covering their losses out of profits from their drilling units.
Both foreign and Chinese automakers are using the Beijing show to highlight luxury sedans, muscle cars and SUVs. It opens to the public Thursday after a weekend press preview.
On Sunday, Daimler AG CEO Dieter Zetsche was joined onstage by film star Zhang Ziyi to unveil a top-of-the-line Mercedes-Benz SUV, the GLK, which goes on sale in China next year.
Daimler says Mercedes sales in China surged 42 percent in the first quarter. Sales of R-class minivans jumped 110 percent while those of M-, G- and GL-class SUVs doubled. The company says China is the second-biggest market for its S-class sedans, behind only the United States, and accounts for one-third of global Mercedes sales.
GM showed off its new Cadillac CTS sedan, which it said was designed with China in mind. It added a bigger back seat to the basic CTS model sold worldwide, since many Chinese owners sit in back while a chauffeur drives.
Cadillac's entry in the SUV competition, the Escalade, can seat up to eight people and gets an estimated 12 miles per gallon. It goes on sale in China next year.
For SUV sales, "the volume is low but the growth rate is high, and we're all trying to get into this segment," said Robert Socia, executive vice president of Shanghai General Motors, a GM joint venture with a Chinese partner.
By contrast, GM's SUV sales in the United States fell 22 percent in March from the same month last year.
China's auto market is still dominated by smaller, low-cost models such as the popular QQ made by Chery Automobile Co., the country's biggest domestic producer.
But even at prices below luxury levels, drivers are willing to pay for bigger wheels. Toyota Motor Corp. sold 170,000 Camry sedans in China last year, despite a price of more than 210,000 yuan ($30,000), according to J.D. Power & Associates. That is ten times the average Chinese worker's annual income.
"Chinese buyers typically like bigger cars and they have the resources to go for them," said Tim Dunne, J.D. Power's director of Asia-Pacific market intelligence.
Chrysler LLC, looking to China to help drive its resurgence as an independent company following its split with Daimler, unveiled two SUVs to be sold in China and said Sunday its new Jeep Wrangler goes on sale this month. The company says sales in China doubled in the first quarter over the same period of 2007.
Also Sunday, Volkswagen AG unveiled two sedans designed with a local partner for the China market.
Infiniti, Nissan Motor Co.'s luxury brand, announced it will launch its EX35 SUV in China this year, adding to a range of three sedans already on sale. Carlos Tavares, a Nissan executive vice president, said that portfolio should grow to 10 models in coming years.
Chery's lineup included an SUV, while Chinese maker Huanghai Motors Corp. was showing an SUV and an American-size pickup truck.
Beijing is trying to encourage the growth of China's auto industry and domestic sales -- but communist leaders are alarmed at pollution and rising dependence on imported oil, which they see as a strategic weakness. China is the world's No. 2 oil consumer after the United States, and imports rose 12.3 percent last year.
Beijing and other major Chinese cities are among the world's smoggiest, and the rise of big engines and more horsepower is adding to the haze.
Authorities are expected to try to clear the air for August's Beijing Olympics by getting half the capital's 3.3 million cars off the streets during the games. No final plan has been issued, but during a four-day test last summer drivers were ordered off the road on alternate days, based on license plate numbers.
Regulators are phasing in tougher emissions standards and higher sales taxes for bigger engines. They are pushing Chinese automakers to develop fuel cells and other clean propulsion.
But bigger models reign even among customers willing to pay more for hybrids and other cleaner technology.
General Motors says it will start selling a gas-electric hybrid in China in July. It will be the first manufactured in China and the second in the market following Toyota's Prius.
GM's hybrid will be a Buick LaCrosse, a full-size sedan, after research found likely buyers wanted a car that size, said Liu, the China GM vice president. He said sales are expected to be modest.
"The Chinese consumer is still back on the curve of satisfying their basic need for transportation," said John Parker, Ford Motor Co.'s executive vice president for Asia, "rather than looking at being green."

[2Real4me!]

Wal-Mart-owned Sam's Club limits rice purchases
Wednesday April 23, 4:01 pm ET
By Marcus Kabel, AP Business Writer



Wal-Mart's warehouse chain Sam's Club limits rice purchases

Sam's Club, the membership warehouse division of Wal-Mart Stores Inc., is limiting how much rice customers can buy because of what it calls "recent supply and demand trends," the company said Wednesday
The broader chain of Wal-Mart stores has no plans to limit food purchases, however.
Sam's Club said it will limit customers to four bags at a time of Jasmine, Basmati and long grain white rice. Rice prices have been hitting record highs recently on worries about tight supplies as part of broader global inflation in food costs.
The warehouse chain caters heavily to small businesses, including restaurants. Spokeswoman Kristy Reed said she could not comment on whether the problem was caused by short supplies or by customers stocking up in anticipation of higher prices.
Sam's Club's restriction is effective immediately at all locations where quantity restrictions are allowed by law. It does not apply to other staples such as flour or oil.
"We are working with our suppliers to address this matter to ensure we are in stock, and we are asking for our Members' cooperation and patience," Reed said in an statement.
Sam's Club has 593 stores compared to 2,523 Wal-Mart Supercenters that combine a full grocery section with general merchandise.
Wal-Mart spokeswoman Deisha Galberth said Wal-Mart stores have no plans for restrictions similar to those at Sam's Club.
"We are not seeing any signs of concern in the supply chain that would cause us to limit the sales of any items," Galberth said.
U.S. rice futures soared to an all-time high Wednesday as investors bet that surging world demand will continue to pressure already dwindling stockpiles. Rice for the most actively traded July contracted jumped 62 cents to $24.820 per 100 pounds on the Chicago Board of Trade, after earlier rising to a record $24.85.
Relentless demand from developing countries and poor crop yields have pushed rice prices up 70 percent so far this year, raising concerns of severe shortages of the staple food consumed by almost half the world's population.
The steep increases have followed similar jumps in the price of wheat, corn and soybeans that have added to Americans' growing grocery bill and led to violent food riots in poor countries including Haiti, Senegal and Pakistan.
Most of the rice eaten in the world is consumed within 60 miles of where it was grown, said Nathan Childs, an economist and rice expert with the U.S. Department of Agriculture. Traditionally very little of it was traded in the world market.
But as populations crossed borders, the taste for specialty rices such as the Indian basmati, or Thai jasmine rice, which grow only in their areas of origin, spread.
U.S. production of long grain and medium grain rice is strong, and the global crop is larger than ever, Childs said. But with some of the principal exporters of the higher-priced rices, such as India and Vietnam, shunning foreign sales to control prices at home and the cost of food generally going up, the price of rice has been climbing to new heights.
What adds to the price spike -- and the run on specialty products like basmati -- is that rice consumers tend to be very loyal. The market is highly segmented by type of rice and quality, and buyers will generally not take a substitute, Childs said.
"California's had a pretty good crop, but basmati and jasmine consumers have a history of not switching," he said. "They could always have bought cheaper Calrose. But they don't."
AP Business Writers Stevenson Jacobs in New York and Juliana Barbassa in San Francisco contributed to this report

[IV]

Rice turns into pure glucose in our bodies once digested. That means it's no good for usbecause unless you have a crazy metabolism, it all gets stored, and in all the wrong places.Hence, rice isn't good for us.

I predict a new generation of skinnier and as a result...healthier people. See, you can find good in everything.

[2Real4me!]

Wall Street rises after drop in jobless claims, Ford results
Thursday April 24, 4:26 pm ET
By Tim Paradis, AP Business Writer



Wall Street advances on jobless claims drop, Ford's 1Q; dollar gains as commodity prices slide

NEW YORK (AP) -- Wall Street rallied Thursday after the government's jobless claims data and Ford Motor Co.'s first-quarter results helped reinject some optimism about the economy into the market.
The Dow Jones industrial rose more than 80 points as investors focused on the Labor Department data showing weekly unemployment claims dropped and on Ford's stronger-than-expected earnings. The news allowed investors to look past the Commerce Department's report that new home sales fell in March to the lowest level in more than 16 years, a sign that the housing slump isn't close to an end.
Investors were also able to set aside any concerns about another drop in factory orders for big-ticket manufactured goods and weak forecasts from Amazon.com Inc. and Starbucks Corp. And oil and other commodities prices fell as the dollar rose, also helping to boost stocks.
Sellers held sway early in the session, sending the Dow down nearly 57 points, after the home sales report. The data appeared to stir concerns that the hangover from the housing bubble would remain an intractable obstacle for the economy.
But as the session wore on, the market righted itself, perhaps because there were no real surprises in the day's negative news.
John Merrill, chief investment officer at Tanglewood Capital Management in Houston, said investors are seeing confirmation of many of the economic themes that have played out in recent months, with weakness in the financial, homebuilding and automotive sectors and relative strength elsewhere.
"The earnings picture is not so bleak as people though it was going to be," he said. "There's been so much talk of the spillover from the credit crunch and homebuilding into the real economy and that just doesn't seem to have happened."
According to preliminary results, the Dow rose 85.73, or 0.67 percent, to 12,848.95.
Broader stock indicators also gained. The Standard & Poor's 500 index rose 8.89, or 0.64 percent, to 1,388.82, and the Nasdaq composite index advanced 23.71, or 0.99 percent, to 2,428.92.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 1.45 billion shares.

[2Real4me!]

Economy grows by only 0.6 percent in 1st quarter of 2008
Wednesday April 30, 1:28 pm ET
By Jeannine Aversa, AP Economics Writer



Economy limps ahead at a 0.6 percent pace in first quarter, better pace than expected

WASHINGTON (AP) -- The bruised economy limped through the first quarter, growing at just a 0.6 percent pace as housing and credit problems forced people and businesses alike to hunker down.
The country's economic growth during January through March was the same as in the final three months of last year, the Commerce Department reported Wednesday. The statistic did not meet what economists consider the classic definition of a recession, which is a retraction of the economy. This means that although the economy is stuck in a rut, it is still managing to grow, even if modestly.
Many analysts were predicting that the gross domestic product (GDP) would weaken a bit more -- to a pace of just 0.5 percent -- in the first quarter. Earlier this year, some economists thought the economy would actually lurch into reverse during the opening quarter. Now, they say they believe that will likely happen during the current April-to-June period.
"The economy is weak but not collapsing," said Lynn Reaser, chief economist at Bank of America's Investment Strategies Group. "A recession can't be ruled out, although the stars are not lined up at this point to definitively say one way or the other."
Gross domestic product measures the value of all goods and services produced within the United States and is the best measure of the country's economic health. Voters are keenly worried about the country's economic problems and so are politicians -- in Congress, in the White House and on the campaign trail.
The housing situation turned more bleak in the first quarter, as record-high foreclosures dumped more unsold homes on the market, adding to builders' headaches. Builders slashed spending on housing projects by a whopping 26.7 percent, on an annualized basis, the most in 27 years. That was the big drag on the economy.
Consumers -- whose spending is vital to the country's economic health -- turned much more cautious, also restraining overall economic growth in the first quarter. Their spending rose at just a 1 percent pace. That was down from a 2.3 percent growth rate and was the slowest since the second quarter of 2001, when the United States was suffering through its last recession.
Soaring energy and food prices are walloping people's pocketbooks, leaving them with less to spend on other things. The credit crunch also has made it harder for people to finance big ticket items, such as cars and homes. And, many homeowners -- watching their homes -- often their single-biggest asset -- slump in value, also are feeling less wealthy and less inclined to spend.
Another report from the Labor Department Wednesday showed that workers' compensation -- including wages and benefits -- grew 0.7 percent in the first quarter, the slowest pace in two years. Many economists were expecting a 0.8 percent rise. The report suggests that the weak labor market is making employers a bit less generous with their compensation.
Businesses, meanwhile, cut back spending on equipment and software at a 0.7 percent pace, the most since the final quarter of 2006. And, they trimmed spending on commercial construction at a 6.2 percent pace, the most since the third quarter of 2005.
However, businesses boosted their investment in building up stocks of supplies in the first quarter, a big force adding to GDP. Exports of U.S. goods and services also helped first-quarter growth. U.S. exports are being helped by the falling value of the U.S. dollar, which makes U.S. made goods and services less expensive to foreign buyers.
Spending by the government was another factor helping out GDP in the first quarter. That spending rose at a 2 percent pace for the second quarter in a row.
To bolster the economy, the Federal Reserve is expected to lower a key interest rate by one-quarter percentage point to 2 percent later Wednesday. That would mark a more moderate-sized rate reduction after a recent string of hefty cuts. Many economists believe the Fed, which started dropping rates last September, may be nearing the end of its rate-cutting campaign because policymakers don't want to aggravate inflation. Those rate reductions, which take months to affect economic activity, can sow the seeds of inflation down the road.
An inflation measure linked to the GDP report showed that prices grew at a rate of 3.5 percent in the first quarter, down from a 3.9 percent pace in the prior quarter.
Another gauge showed that the core prices excluding food and energy rose at a rate of 2.2 percent in the first quarter. That was a lower than the 2.5 percent pace registered in the fourth quarter but still outside the Fed's comfort zone. The upper level of the Fed's inflation tolerance is 2 percent.
Gas and food prices, however, have moved higher since the start of the year, adding to inflation pressures. Gasoline prices, which have recently set new record highs, have climbed to $4 a gallon in some parts of the country.
A growing number of economists believe the economy is in a recession and is indeed contracting now.
Under one rough rule, if the economy contracts for six straight months it is considered to be in a recession. That didn't happen in the last recession -- in 2001-- though. A panel of experts at the National Bureau of Economic Research that determines when U.S. recessions begin and end uses a broader definition, taking into account income, employment and other barometers. That finding is usually made well after the fact.
During the first three months of this year, job losses neared the staggering quarter-million mark. The unemployment rate has climbed to 5.1 percent and is expected to move higher in the coming months.
Fed Chairman Ben Bernanke, earlier this month, acknowledged for the first time that a recession this year was possible.
President Bush on Tuesday said the country was dealing with "difficult times." Bush said he understood Americans' anxiety over soaring gas prices, record-high home foreclosures and other economic woes.
The government's $168 billion economic-stimulus package -- including tax rebates that started flowing to bank accounts on Monday -- should help energize the economy in the second half of this year, the Bush administration and Federal Reserve officials say. Democrats in Congress insist more relief needs to be provided, including additional unemployment benefits to cushion the pain of joblessness. The administration has resisted, saying the rebates and other stimulative efforts should be sufficient once they fully kick in.

[IV]

What Recession? First Quarter GDP Shows Modest But Better-Than-Expected Growth...



This was a headline on most of the news sites today...but I beg to differ. Is it me or Kosher was right when he posted his opinion some time back about the media and what they do. Upbeat and positive on minute, and an hour later negative and heavy recession in progress, and then by the end of the day it's all good again.

Smells like a lot of you know what if you ask me. There is a recession and if anything, it may even be a depression. You have everybody owing but not paying. You have gas prices way out of control and ....no it is not because of supply and demand when Exxon made 17 billion in 3 months.

Also, people are walking away from their homes because they are mad that they bought at the height of the real estate cycle. Oops. That's just called plain irresponsibility.

.6 percent is not upbeat, especially when you take into consideration all of these other economic factors.

Recent issues have been about corn and wheat shortages and now...of all things, abull havno shortage. (worldwide no less)I'm not kidding. I was gonna post a whole article on just that, but I quickly realized that nobody is in the mood for yet more BS in light of everything else that's happening. *blwup*Oyyyyyy.

[2Real4me!]

Consumer spending up mainly because of sharp price increases
Thursday May 1, 5:32 pm ET
By Martin Crutsinger, AP Economics Writer



Consumer spending up in March mainly because of sharp price gains for range of products

WASHINGTON (AP) -- Don't be fooled by a larger-than-expected increase in consumer spending. People aren't buying more -- they're just paying more for their purchases, raising doubts about whether the 130 million stimulus payments the government began sending out this week will be enough to lift consumers' sagging spirits.
The Commerce Department reported Thursday that consumer spending was up 0.4 percent, double the increase that economists had forecast. However, once inflation was removed, spending edged up a much slower 0.1 percent.
The March reading was the fourth straight lackluster performance and did nothing to alleviate worries that consumer spending, which accounts for two-thirds of total economic activity, remains under severe strains, reflecting an economy beset by multiple problems.
Rising food costs, soaring energy prices and rising unemployment have pushed consumer confidence to the lowest levels in five years. Incomes in March rose a weak 0.3 but after removing inflation, after-tax incomes were flat.
The Bush administration is counting on its $168 billion stimulus program to give the economy enough of a lift to keep the country from slipping into a full-blown recession, but private economists are worried that the boost could well be fleeting.
"Consumers are facing bad news on all fronts," said Nigel Gault, chief U.S. economist at Global Insight. "Any burst of spending based on the stimulus payments is likely to prove short-lived."
Sal Guatieri, senior economist at BMO Capital Markets, said economic growth could still turn negative this quarter even with the rebates. He cited a recent Associated Press-Ipsos poll that found only 19 percent of people plan to spend their rebates, with others surveyed preferring instead to use the $600 to $1,200 checks for the typical family to pay off bills or boost savings.
Guatieri said he expected the rebate checks to be a "moderate tonic," but he cautioned that once the rebates are spent, growth could turn negative later this year.
On Wall Street, investors brushed aside weak economic reports to focus instead on a rebound in the dollar's value against other currencies and falling oil prices. The Dow Jones industrial average surged 189.87 points to close at 13,010.00, the first close above 13,000 since Jan. 3.
The government reported Wednesday that the overall economy, as measured by the gross domestic product, eked 0.6 percent growth in the first three months of this year, weak but still in positive territory. Much of the drag in the first quarter came from a tiny 1 percent growth in consumer spending, the weakest increase since the economy was last in recession in 2001.
Some analysts are worried that the GDP could turn negative this quarter if there is a significant cutback on production by businesses trying to work off excess inventories and if consumers grow more glum in the face of continued increases in unemployment.
The Labor Department reported Thursday that jobless claims jumped by a bigger-than-expected 35,000 last week to total 380,000 with the number of people receiving benefit checks rising to 3.02 million, the first time that figure has surpassed 3 million in four years.
The department will release the unemployment figure for April on Friday. Economists expect it will show the jobless rate rising to 5.2 percent, up from 5.1 percent in March, with the economy shedding jobs for a fourth straight month.
In other signs of economic stress, the Commerce Department said Thursday that construction spending fell 1.1 percent in March with housing activity plunging by a record 4.6 percent, indicating that builders are still cutting back sharply in the face of the worst slump in housing in more than two decades.
A closely watched gauge of manufacturing activity from the Institute of Supply Management activity posted a reading of 48.6 for April, indicating that manufacturing remained in recession territory. Analysts said without strength in export sales coming from the weaker dollar, the decline in manufacturing would be much worse.
The Federal Reserve on Wednesday cut a key interest rate for the seventh time in the past eight months, although the quarter-point move may prove to be the last rate cut because of Fed worries about rising inflation pressures.
On the inflation front, a price gauge tied to consumer spending rose by 0.3 percent in March, triple the 0.1 percent rise in February. Much of that jump reflected higher food and energy costs. Core inflation, which excludes those categories, rose by 0.2 percent in March and is up 2.1 percent over the past 12 months, higher than the Fed's 1 percent to 2 percent comfort zone.

[2Real4me!]

Oil prices slide as the dollar extends its gains
Thursday May 1, 4:22 pm ET
By John Wilen, AP Business Writer



Oil prices fall as the dollar extends its gains; down trend could be temporary, analysts say

NEW YORK (AP) -- Another jump in the dollar and the end of an oil workers' strike in Nigeria sent crude prices falling Thursday as speculators who drove crude futures to nearly $120 pulled out of the market. Retail gas prices, meanwhile, rose to a new record above $3.62 a gallon.
The dollar's rise against the euro and other currencies stripped away some of oil's appeal to investors who have been betting for months that the greenback would continue to falter. When the greenback gains ground, commodities such as oil lose their value as a hedge against inflation, prompting selling. Also, a stronger dollar makes oil more expensive to investors overseas.
As the dollar has strengthened this week, oil futures have dropped more than $7 from their highs to their lowest levels since April 14. On Thursday, light, sweet crude for June delivery fell 94 cents to settle at $112.52 a barrel on the New York Mercantile Exchange, after trading as low as $110.30. Meanwhile, the euro bought $1.5457 in afternoon trading, down from $1.5642 late Wednesday.
Meanwhile, a strike that cut production at an Exxon Mobil Corp. facility in Nigeria ended Thursday, giving investors another reason to sell. Oil prices jumped last week on word of the strike and a separate labor action in Scotland, which ended Tuesday. Nigeria is a major U.S. oil supplier.
Analysts caution that oil's swoon could be temporary. The dollar's protracted decline has been a major factor behind oil's rise from about $64 a year ago, and future dollar weakness could easily push crude futures above $120.
"It's all about the dollar," said James Cordier, president of Tampa, Fla., trading firms Liberty Trading Group and OptionSellers.com. "I don't think the dollar is going to stay strong."
Indeed, oil prices rebounded more than $2 from their lows late in Thursday's trading session after the dollar stopped gaining ground against the euro.
The dollar's recent gains have come on a view that the Federal Reserve's interest rate cutting campaign is nearing its end; lower interest rates tend to weaken the dollar. The Fed cut rates a quarter percentage point on Wednesday, and did not give a clear indication of its future plans. But with the benchmark federal funds rate at 2 percent, investors sense that the Fed can't cut rates much further.
"It's not going to be zero (percent), it's not going to be a half (percent)," Cordier said.
However, other nations' central banks are considering raising interest rates, actions that could further weaken the dollar, Cordier said. If that happens, or if there is a major supply disruption, crude prices could easily rise to $130 in June, he said, and that could push gas prices to $4 a gallon.
At the pump, the average national price of a gallon of regular gas rose 0.6 cent to a record $3.623 Thursday, according to a survey of stations by AAA and the Oil Price Information Service. Diesel prices inched 0.1 cent higher to a record $4.251 a gallon. Gas prices are already higher than $4 in many parts of the country, including in California and Hawaii.
Despite crude's recent declines, gas prices are likely to keep rising for a while. Crude's rapid rise over the past year has squeezed refinery profit margins; refiners must pay for the oil they refine into fuel, but have been unable to raise gas prices fast enough to keep up with crude. While oil prices are up about 73 percent in the last year, gas prices are only up 22 percent.
On Thursday, Exxon Mobil Corp. reported a first quarter profit of $10.9 billion, but missed analyst expectations. The company said significantly lower worldwide refining margins reduced earnings by about $1 billion in the quarter.
Analysts expect gas prices to peak within the next two months.
In other Nymex trading Thursday, June heating gasoline futures fell 2.81 cents to settle at $2.8782 a gallon, and June heating oil futures fell 4.03 cents to settle at $3.1177 a gallon. June natural gas futures fell 28.2 cents to settle at $10.561 per 1,000 cubic feet. The Energy Department said natural gas inventories rose by 86 billion cubic feet last week, more than many analysts had expected.
In London, June Brent crude futures fell 86 cents to settle at $110.50 a barrel on the ICE Futures exchange.
AP Business Writer John Porretto in Houston contributed to this report.

[2Real4me!]

Stocks rise and Dow crosses 13,000 as dollar advances
Thursday May 1, 5:38 pm ET
By Madlen Read, AP Business Writer



The Dow Jones industrials cross 13,000 as dollar soars and optimism rises about economy

NEW YORK (AP) -- Wall Street shot higher Thursday as investors, while anticipating another dismal jobs report Friday, viewed the rising dollar and falling oil prices as promising signs for the economy. The Dow Jones industrial average soared nearly 190 points to close above 13,000 for the first time since Jan. 3.
The dollar jumped on better-than-expected economic data and the Federal Reserve's apparent resolve to monitor inflation. The Commerce Department said consumer spending rose 0.4 percent in March, more than predicted, and the Institute for Supply Management said U.S. manufacturing contracted in April by a bit less than anticipated.
The readings were not all positive -- consumer spending ticked higher mainly due to rising energy and food prices. The ISM's report also indicated that companies are hurting from climbing costs.
But the dollar, which has recently strengthened after a protracted decline, rallied anyway, pushing the euro down more than 1 percent to $1.5461 in late trading. Trading was thin, with major currency markets in London and elsewhere closed for the May Day holiday, but the dollar's advance helped crude oil fall briefly near $110 a barrel and then settle at $112.52. That alleviated some of the inflation-related anxieties in the market, given that crude recently traded at a record near $120 a barrel.
"I don't know if it's all turned around, but I think oil got out of control," said Todd Leone, managing director of equity trading at Cowen & Co.
The Dow rose 189.87, or 1.48 percent, to 13,010.00, after briefly rising more than 200 points. It hadn't closed above 13,000 since Jan. 3, when it ended at 13,056.72; the Dow is still down 8.15 percent from its record close of 14,164.53, reached Oct. 9, 2007, before the brunt of the credit crisis hit Wall Street.
Broader stock indicators also enjoyed a significant advance Thursday. The Standard & Poor's 500 index rose 23.75, or 1.71 percent, to 1,409.34 -- its first settlement above 1,400 since Jan. 14. The Nasdaq composite index climbed 67.91, or 2.81 percent, to 2,480.71, its highest close since Jan. 10.
The dollar's rise came a day after the Fed lowered key interest rates by a quarter-point, but indicated the economy should keep growing moderately, while inflation is the growing concern.
"What we're seeing is that maybe the economy is not falling off a cliff, but perhaps leveling off," said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners Inc. "I think the Fed (rate-cutting campaign) is over with, even though the Fed's statement didn't say that."
The economic assessment statement accompanying the Fed's rate decision was unclear about its policy going forward, but it has been widely believed that the central bank will pause following a string of cuts that lowered rates by 3 percentage points since last summer.
On Thursday, banks, homebuilders, chip makers and retailers surged, after getting battered earlier this year due to worries about the mortgage crisis and its effect on the global economy.
Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.77 percent by late trading from 3.73 percent late Wednesday.
As the dollar moved higher against other currencies, gold prices dropped.
Investors are predicting another gloomy reading on U.S. employment on Friday. The Labor Department's report is expected to show a 75,000 net loss in jobs for April -- which would be the fourth straight month of losses -- and a rise in unemployment to 5.2 percent from 5.1 percent in March. In a negative sign ahead of that data, the government said Thursday the number of newly laid off workers filing claims for unemployment benefits increased by a greater-than-expected 35,000 last week.
However, with the government sending stimulus checks to taxpayers and Fed rate cuts still working their way through the financial system, many investors are focused on the second half of the year, when they are betting the economy will rebound.
Shares of Exxon Mobil Corp., one of the 30 Dow components, declined $3.37, or 3.6 percent, to $89.70, after it said its first-quarter profit rose 17 percent to $11 billion -- not as high as analysts expected, despite record-high oil prices. Lower production volumes caused the company's profit margins to shrink.
But on the whole, corporate profits have been coming in a bit stronger over the past few weeks than the market had expected. Meanwhile, spreads between rates on riskier securities and rates on safer issues have been narrowing, indicating that the credit markets are getting back to normal.
After the Fed's rate cut Wednesday, that pattern continued Thursday. Bank stocks benefited -- Citigroup Inc. rose $1.04, or 4.2 percent, to $25.99; Bank of America Corp. rose $1.85, or 4.9 percent, to $39.39; and JPMorgan Chase & Co. rose $1.60, or 3.4 percent, to $49.25.
In another sign that the financial sector is on the mend, the Fed said late Thursday that investment firms averaged a relatively low $18.6 billion in daily borrowing over the past week from the Fed's emergency lending program. Earlier Thursday, the Fed auctioned off $24.12 billion in super-safe Treasury securities to big investment firms.
The Russell 2000 index of smaller companies rose 13.57, or 1.89 percent, to 729.75.
Advancing issues more than doubled decliners on the New York Stock Exchange. Consolidated volume amounted to 4.32 billion, up from 3.66 billion shares traded Wednesday.
Overseas, Japan's Nikkei stock average fell 0.60 percent. Markets in much of the world, including Europe and Hong Kong, were closed for May Day.

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Gas prices slip for first time in weeks, may be near top
Friday May 2, 3:03 pm ET
By John Wilen, AP Business Writer



Gas prices slide for the first time in 18 days, and analysts say a peak is near; oil surges

NEW YORK (AP) -- Retail gas prices fell slightly Friday -- the first time in 18 days they haven't risen to a new record -- and analysts say pump prices may be peaking for the year. Oil futures, meanwhile, soared after Turkish airstrikes on Kurdish rebel bases in Iraq injected some supply concerns into the market and the Labor Department's employment report gave investors reason to be optimistic about the economy.
The national average price of a gallon of regular gas fell 0.1 cent overnight to $3.622, according to a survey of gas stations by AAA and the Oil Price Information Service. That's the first time since April 14 that retail prices have fallen. Diesel prices fell 0.2 cent to a national average of $4.249 a gallon.
"It could go up just a little bit more," said Fred Rozell, retail pricing director at the Oil Price Information Service, in Wall, N.J., but, "I think it's running out of steam."
Prices could reach $3.70 a gallon, "at the most," Rozell said, but are highly unlikely to rise to $4 on a national basis. Still, motorists in parts of states such as California and Hawaii are paying $4 right now.
Soaring gas prices are cutting demand for gasoline, and analysts have long theorized that falling demand will eventually force prices lower. However, gas prices bucked those forecasts for most of the spring and followed oil's sharp gains.
On Friday, light, sweet crude for June delivery rose $3.80 to $116.32 a barrel on the New York Mercantile Exchange. Turkish warplanes bombed Kurdish rebel bases inside Iraq for three hours overnight, a rebel spokesman said Friday. When conflict breaks out in the Middle East, investors often buy on concerns that supplies will be disrupted.
Some investors were also buying crude on a view that the economy is improving, analysts said. The Labor Department said employers cut far fewer jobs in April than expected.
"If the jobs (situation) isn't as bad, maybe we'd see a snap back in demand," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
For a change, investors shrugged off the dollar, which rose on a theory that the employment data means the Federal Reserve is less likely to cut interest rates further this year; falling rates tend to weaken the dollar.
A rising dollar undercuts the appeal of commodities such as oil as a hedge against inflation, and makes oil more expensive to investors overseas. The rising greenback helped pull oil prices back to nearly $110 a barrel on Thursday. Oil's climb to almost $120 on Monday from about $64 a year ago was largely due to a protracted decline by the dollar, analysts say.
However, oil's connection to the dollar can be broken when other factors predominate, as they did Friday.
"It's not a perfect relationship, and on any given day, oil will choose to go its own way," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.
Still, analysts think the market's decision to shrug off Friday's stronger dollar will be short lived, particularly if the Fed holds interest rates steady and the dollar continues to gain.
"It will be difficult to sustain (oil price) rallies in the face of any further strength in the dollar," Ritterbusch said.
And that means retail gas prices will likely rise no higher than $3.65 to $3.70 a gallon, before falling back toward $3 a gallon over the summer, he said.
In other Nymex trading Friday, June gasoline futures rose 7.65 cents to $2.9547 a gallon, and June heating oil futures rose 9.61 cents to $3.2138 a gallon. June natural gas futures rose 21.8 cents to $10.779 per 1,000 cubic feet.
In London, June Brent crude futures gained $3.65 to $114.15 a barrel on the ICE Futures exchange.
Associated Press writer C. Onur Ant in Istanbul, Turkey, contributed to this report.