“Personally I don’t see how you can justify it given the state of the current economy,” Dallas Federal Reserve President Richard Fisher said in remarks that underscored the sharp divide within the U.S. central bank over what to do in the face of an uneasy economic recovery.

Earlier Thursday, the head of the Chicago Fed, Charles Evans, advocated a much more forceful approach in tackling unemployment, even if it means jumping into a potentially controversial new round of so-called quantitative easing, or QE3.

“I would be very aggressive,” Evans told a small group of reporters.

Fisher and Evans stand on opposite ends of a wide philosophical spectrum of the 17 Fed policymakers, a divide that was clear last week when the central bank anonymously published their individual forecasts: some expect rates to rise this year while others don’t see that until 2016.

Chairman Ben Bernanke and others have suggested that more asset purchases may be necessary if unemployment, now at 8.5 percent, remains high and if inflation is subdued, and if the U.S. economic recovery fails to gain traction.

Inflation has slowed over the last couple of months and the Fed expects it to ease this year. Core inflation is now running at about 1.7 percent.

Fisher, an outspoken policy hawk, acknowledged that the Fed may have more latitude to pursue easy-money policies if inflation runs below its newly set 2 percent target - though he added that such a move does not guarantee more jobs, and that he personally would not advocate it.

“Again it’s a question of efficacy,” he told reporters after a speech to the Headliners Club of Austin. “Is it needed? I don’t think so. And secondly it compounds the difficulty of an exit when the right time comes.”

UNPRECEDENTED POLICY STEPS

In a big step toward transparency, the central bank last week adopted the explicit inflation target. But it declined to likewise set a target for its other main concern, unemployment, arguing that monetary policy has little direct influence on jobs.

Already the Fed has bought some $2.3 trillion in long-term securities and has kept interest rates near zero for more than three years in an unprecedented attempt to revive the economy after a harsh recession that doubled the jobless rate.

Bernanke, testifying before Congress Thursday, found himself on the defensive against charges from Republican lawmakers that the Fed’s easy-money policies and focus on employment risked sparking inflation. The chairman argued the economy still needs plenty of support, aligning himself more with the doves like Evans than with the hawks.

On Friday, U.S. data on new January jobs are released, which could show how sustainable were the labor market improvements at the end of 2011.

EYES ON THE CALENDAR

In what was interpreted as more easy policy, the Fed’s policy-setting committee last week also said it expected to keep interest rates “exceptionally low” at least through late 2014, more than a year later than its previous target date.

Fisher - echoing comments by Charles Plosser of the Philadelphia Fed on Wednesday - criticized the move on grounds that monetary policy should not be tied to a specific date.

“Instead, I feel that the key should be to calibrate monetary policy according to the state or condition of the economy,” Fisher said.

The Fed should use monetary policy to sustain the signs of improvement, “and not to crimp what are emerging buds,” he said of the recent signs of economic improvement.

Fisher dissented in decisions of the Fed’s policy-setting committee last year because he saw the actions as over-accommodative and risking inflation in the future.

Both he and Evans do not have votes this year but they regain them in 2014, when most policymakers expect the first rate rise, according to the forecasts by individual Fed officials.

The Fed’s new inflation target and the acknowledgement on unemployment effectively puts the ball into Congress’ court to take steps to lower unemployment and help the economy, Fisher added.

“The Fed, the nation’s monetary authority, has clearly articulated its longer-run goal and policy strategy and has conducted itself with integrity by responding to the needs of the economy,” he said.

“In contrast, the fiscal authorities have conducted themselves with impunity: Their only long-term strategy is to pass the bill to our children and grandchildren.”

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The number of people signing on for jobless benefits increased by 177,470 to 4.6 million, the Labor Ministry in Madrid said in an e-mailed statement today. That was the biggest increase since January 2009 and the total is the most since records began 16 years ago. Data last week showed overall unemployment in the fourth quarter reached a 15-year high.

Spanish Prime Minister Mariano Rajoy is battling to trim the budget deficit while nurturing growth and creating jobs in an economy home to a third of the euro region

In what was mostly a slow and steady climb, the Dow Jones industrial average rose 3.4 percent in January and the Standard & Poor’s 500 gained 4.4 percent, the best performances for both indexes to open a year since 1997.

Investors were encouraged by modest but welcome improvement in the U.S. economy, including an 8.5 percent unemployment rate, the lowest in almost three years. Corporate profits didn’t wow anyone _ except Apple’s _ but they were good enough.

“I don’t see anything really glamorous or tremendous about the economy or earnings,” said Jerry Harris, chief investment strategist at the brokerage Sterne Agee. “But I think they’re very acceptable, and things are grinding along.”

An unexpected drop in consumer confidence dragged stocks down on the final day of the month. The Dow Jones industrial average finished down 20.81 points, or 0.2 percent, at 12,632.91.

The broader market fared better. The S&P barely finished in the red, declining 0.60 point to 1,312.41. The Nasdaq composite index rose 1.90 points to close at 2,813.84. The Nasdaq gained 8 percent for the month, its best January since 2001.

In January 1997, the last time stocks had such a fast start, the S&P gained 6.1 percent. Bill Clinton was inaugurated for his second term. An Asian financial crisis and “Titanic” lay ahead. Later that year, the Dow crossed 7,000 and 8,000 for the first time.

This January, analysts said, investors had such low expectations for the economy that it was easy for things to turn out better than expected.

“There are no big surprises,” said Kim Caughey Forrest, a senior equity analyst at money manager Fort Capital Group. “That’s the kind of ho-hum economy that we are in right now.”

The Dow closed at 12,217.56 at the end of last year, then started this year with a pop _ a gain of 179.82 points on opening day. It was the kind of big swing investors became accustomed to in 2011.

Since then, it’s been a quiet ascent: 19 days in a row of moves of less than 100 points. The last time the Dow had such a placid stretch was a 34-day run that started Dec. 3, 2010.

Scottrade, the online brokerage, said stock buyers outpaced sellers among its clients for the first 14 trading days of the year, Jan. 3 to Jan. 23. It also said volume was 16 percent higher than December’s average.

On Tuesday, the Dow started up 66 points after encouraging signs from Europe that Greece might finally complete a deal to cut its crushing debt, a step toward securing a critical euro130 billion bailout payment.

Greece is negotiating with investors who bought its government bonds. They are expected to swap their bonds for new ones with half the face value, plus a lower interest rate and longer term of maturity.

Investors are increasingly worried that Portugal may need a similar deal with its private creditors. European leaders insist the Greek reduction is a one-time event. Portugal’s borrowing costs have risen to record highs.

The Dow lost its gains after consumer confidence fell to 61.1 in January, down from 64.8 in December. Economists had expected 68. The Conference Board said Americans are more worried about their incomes, gas prices and business conditions.

There were also signs that the housing market continues to struggle business cards. Home prices fell in November for a third straight month in in 19 of the 20 cities tracked by the S&P/Case-Shiller index. The biggest declines were in Atlanta, Chicago and Detroit.

In the commodities market, investors worried that the confidence figure was a sign of weaker demand to come, and they sold industrial metals that have prices closely tied to the economy.

Copper for March delivery dropped 3.65 cents to $3.79 per pound, and March palladium ended down $2.15 at $686.35 per ounce. April platinum fell $28.20 to $1,588.10 an ounce.

The metals ended the day down after wild swings. Traders bid up prices in morning trading, encouraged by news that European officials were making progress to contain the financial crisis there, then sold hard on the confidence number.

“This is a day that every trader takes Tums,” said George Gero, vice president at RBC Global Futures.

Precious metal prices ended the day mixed. The price of gold rose, as it often does when it looks like the economy might shrink or the dollar might lose its value. Gold for April delivery gained $6 to finish at $1,740.40 an ounce.

In the bond market, the weak U.S. economic data and uncertainty about Greece lit up demand for safe investments. The benchmark 10-year Treasury yield dipped below its lowest closing level in nearly four months.

The yield on the five-year Treasury note hit a record low for the second straight day, falling to 0.71 percent.

Treasury yields have been falling since last week, when the Federal Reserve said it expected to hold interest rates near zero into late 2014, more than a year longer than its last estimate, because the economic recovery will need help.

In corporate news:

_ RadioShack Corp. stock plummeted 30 percent after the company said its profit fell sharply _ 11 cents to 13 cents per share for the quarter that ended in December, down from 51 cents a year earlier and less than half what Wall Street was expecting.

_ Best Buy Co. Inc., one of RadioShack’s competitors, responded by falling 5.6 percent, worst in the S&P. Both companies sell and service cellphones, but demand has softened at their stores.

_ Avery Dennison Corp., which makes labels and packaging materials, fell 5.6 percent after it said earnings plunged 81 percent on nearly flat sales. Its 2012 outlook was well below Wall Street expectations.

_ Mattel Inc. soared 5 percent because of strong demand for Barbie and Monster High dolls during the holidays. That boosted Mattel’s fourth-quarter profit by a better-than-expected 14 percent. The company also raised its dividend.

_ U.S. Steel Corp. gained 5 percent after it reported strong demand for pipes from the oil industry from October through December. The company was also optimistic about this quarter.

_ Agriculture conglomerate Archer Daniels Midland declined 4.6 percent after it reported an 89 percent drop in quarterly net income. The company said its results were weighed down by weakness in oilseeds, corn processing and agricultural services.

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A statement from creditor representatives Charles Dallara and Jean Lemierre says the two sides are “close to the finalization of a voluntary (private sector involvement) … We expect to conclude next week as discussions on other issues move forward.”

The statement Saturday also refers to “the framework expressed publicly earlier this week by Luxembourg Prime Minister Jean-Claude Juncker in his capacity as Chairman of the Eurogroup.”

This means that the creditors have accepted an interest rate below 4 percent for the new bonds that will be issued by Greece in place of the old ones.

Prime Minister Lucas Papademos and Finance Minister Evangelos Venizelos represented the Greek government throughout the talks.

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Buffett revealed the donations Wednesday in a year-end update on his Berkshire Hathaway Inc. stock holdings.

Buffett gave away 521,292 Class B shares of Berkshire stock between July and the end of December. These gifts are in addition to Buffett’s annual gifts to the Bill & Melinda Gates Foundation and the four Buffett family foundations that are slated to eventually receive most of Buffett’s fortune need a personal loan with bad credit.

The new stock donations included one sizeable gift of 394,737 shares worth roughly $31.5 million.

Buffett has said he plans to eventually donate all of his 350,000 Class A and 26.2 million Class B shares of Berkshire stock worth about $44 billion to charities.

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]]> http://economicsurveys.com/rim-wont-be-busted-up-new-ceo-thorsten-heins/feed/ http://economicsurveys.com/microsoft-and-ibm-push-dow-up-google-falls/ http://economicsurveys.com/microsoft-and-ibm-push-dow-up-google-falls/#comments Sun, 22 Jan 2012 05:12:04 +0000 Town http://economicsurveys.com/microsoft-and-ibm-push-dow-up-google-falls/ Microsoft and IBM drove the Dow Jones industrial average up after the tech giants reported stronger earnings than analysts had expected.

The Dow rose 97 points Friday to close at 12,720. That’s a gain of 0.8 percent.

The S&P 500 index inched up 1 point to 1,315.

An earnings miss by Google caused its stock to plunge 8 percent, pulling down the Nasdaq. The Nasdaq fell 2 to 2,786.

All three major indexes still ended the week with gains of 2 percent or more. The S&P 500 has closed higher on 11 of the past 13 days and is now up 4.6 percent for the year.

Roughly four stocks rose for every three that fell on the New York Stock Exchange. Trading volume was below average at 3.9 billion shares.

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