The Dow Jones Industrial Average was up 26.2 points, or 0.32% as of 11:00 a.m. today (Thursday), while the Standard & Poor’s 500 Index was up 4.58 points, or 0.52%.

The surge was prompted by an increase in U.S. wholesale prices, which allayed concern over deflation. Producer prices rose 0.3% in April after falling 1.2% in March. Food prices posted the biggest gain, soaring 1.5% – enough to offset a 0.1% fall in energy prices. Excluding food and fuel prices, so-called core-prices climbed 0.1%.

The rise in producer prices accompanied an increase in import prices, which climbed 1.6% in April, the government said yesterday. Producer prices and the cost of imports comprise two of the three major gauges of inflation. The third measure of inflation, consumer prices, is scheduled for release tomorrow.

The rise in U.S. equities was further supported by a solid earnings report from Wal-Mart Stores Inc., the world’s largest retailer. Wal-Mart posted a profit of $3 billion, or 77 cents a share, in the quarter ended April 30, up from 76 cents a year earlier, matching analysts’ forecasts, according to Thomson Reuters.

Net sales for the quarter fell 0.6% to $93.4 billion, but the company blamed that decline on the negative impact of a stronger dollar, which dented international sales. Wal-Mart’s international operating income fell 16.2% to $880 million on an 11.1% drop in sales to $21.3 billion.

However, international operating income at constant exchange rates was $1.13 billion in the three months ended April 30 on sales of $26.1 billion.

“In almost every country we grew the top line faster than the market despite the strong dollar and a recession that is even deeper in some countries than it is in the United States,” said chief executive Mike Duke.

Wal-Mart’s resilience offered a modicum of comfort to the retail sector after a report yesterday showed retail sales fell 0.4% in April, the eighth monthly decline in the last 10 months. Retail sales tumbled 1.3% in March.

Retail sales have been badly battered by a sharp rise in unemployment. And data from the Labor Department today furthered illustrated the frailty of the current labor market.

Initial claims for unemployment rose by 32,000 to 637,000 in the week ended May 9, from a revised 605,000 the week prior, the Labor Department said.

The economy has shed about 5.7 million jobs since the recession began in December 2007. Payrolls fell by 539,000 in April, as the jobless rate climbed to 8.9% – its highest level since 1983.

Source: Producer Prices and Wal-Mart Results Give the Market Edge Over Weak Jobs Data

The U.S. trade deficit grew to $57.2 billion in October, a 1.1% increase from $56.5 billion in September. Imports fell 1.3% to $208.9 billion, but exports fell even further, dropping 2.2% to $151.7 billion – the lowest level since January.

On reason for the reason for the larger deficit was more lopsided trade with China. The trade gap with China increased to a record $28 billion, up from $27.8 billion in September. China last year supplanted Canada as the largest source U.S. imports. Since joining the World Trade Organization in 2001, China has also emerged as the fastest growing major export market for U.S. products.

A record amount of oil imports also sent the deficit soaring, offsetting a significant decline in crude prices. Petroleum import prices fell 25.8%, with the average price for a barrel of crude tumbling by $15.56 a barrel to $92.02. However, that decline was negated by a record-high 70.9 million-barrel increase in oil imports. The sheer increase in the volume of imports drove the U.S. oil bill up by 3% to $37.7 billion.

Trade was also dampened by a resurgent dollar, which made U.S. products more expensive to foreign markets. The dollar surged 17% from mid-July to the end of November, reaching its highest level in three years on Nov. 21, Bloomberg reported.

“Trade is going to be a significant drag on fourth-quarter growth,” Dean Maki, co-head of U.S. economic research at Barclays Capital Inc., told Bloomberg. “The slowdown in foreign demand is hitting manufacturing.”

Trade added 1.1 percentage points to U.S. economic growth in the third quarter, when gross domestic product (GDP) actually shrank by 0.5%.

Source: Trade Deficit Grows, Despite Record Decline in Oil Prices

• October sales dropped for big-name retailers Macy’s Inc. (M), Target Corp. (TGT) and Gap Inc. (GPS) a result of continuing job losses and widespread credit drought that took the spirit out of consumer spending. Same-store sales climbed 2.4% at Wal-Mart Stores Inc. (WMT), as tight-budget shoppers searched for cheaper prices, Bloomberg reported.

• A day after forecasting a 5% to 10% annual revenue drop, Cisco Systems Inc. (CSCO) said it will invest $100 million sales to small businesses, Reuters reported. Despite a weaker global economy, Cisco said it sees a window to expand sales of routers, switches and other equipment.

• Blackstone Group LP (BX) posted its biggest quarterly loss, shedding $502.5 million in the third quarter, or 44 cents a share, Bloomberg reported. Blackstone is the world’s largest private-equity firm who went public 18 months ago, right before the credit crisis depleted the value of its holdings and made acquiring financing more difficult.

• The International Energy Agency said that import prices for crude oil will “likely” average $100 a barrel from 2008 to 2015, MarketWatch reported. The opposite happened Thursday, as December crude futures fell $3.51 to $61.77 a barrel. The official IEA 2008 Energy Outlook will be released on Nov. 12.

• Mattel Inc. (MAT) said yesterday (Thursday) it is cutting about 1,000 jobs worldwide. The maker of Barbie and Fisher Price products said the positions equate to 3% of its global work force and will reduce its professional and management staff by 8%. Mattel last month reported fiscal third-quarter profit rose less than 1% to $238.1 million.

• DirecTV Group Inc. (DTV), the nation’s largest satellite TV operator, yesterday (Thursday) announced third-quarter earnings rose 14%. The company reported net income of $363 million, or 33 cents per share, up from $319 million, or 27 cents per share, a year ago. Revenue rose 15% to $4.98 billion. Revenue in Latin America jumped 49% to $658 million.

• Fidelity Investments said yesterday (Thursday) it is cutting nearly 1,300 jobs this month, with more layoffs coming early next year. The layoff notices, set to go out later this month, amount to about 2.9% of Fidelity’s total work force of 44,400. A second round of cuts is planned for the first three months of 2009.

• The number of U.S. workers filing new claims for jobless benefits fell by 4,000 last week to 481,000, the Labor Department reported yesterday (Thursday). The department revised up its estimate for jobless claims the week prior to 485,000. The four-week moving average of claims, a less volatile measure, was unchanged at 477,000 last week.

Source: Global Investing Roundups Friday, November 7th, 2008

Courtomer, France Friday, June 13, 2008

First, a quick look at what happened in the markets yesterday.

The Dow rose 57 points. Oil held steady – but at a near record price of $136 a barrel. The dollar rose…and gold dropped $10.

The big news this morning is that retail sales actually went up last month – at 1%, twice what economists expected.

What? How can consumers continue to spend? They’re supposed to be cutting back. Maybe they’re spending those rebate checks.

Meanwhile, we find import prices up 2.3% in May, mostly because of higher oil prices. And the NY Times tells us that commodity price increases show “no let up.” Floods in the Midwest are aggravating the situation – driving up corn prices to new record highs.

“Inflation expectations rise sharply,” says the Financial Times.

The Fed’s ‘Beige Book’ tells us that the economy is “generally weak.”

We spent the week with a group of Internet marketers. The financial publishing business has gone electronic in a big way. In this business, you either learn how to publish on the Internet…or you fail.

Your editor, who grew up without air-conditioning, let alone without the Internet, finds it hard to keep up.

“You’ve got to understand the semantic dynamic of the bot-driven crawlers,” said one of the speakers. We had no idea of what he was talking about, but the others present nodded their heads in approval.

That is just one of the problems with growing older; you grow wiser…but wiser about things that no longer exist. When the car is slow to start, for example, we naturally think we need to clean the carburetor or check the points. Then we realize that there isn’t a carburetor and there aren’t any points. The cars have gone electronic too.

The other thing that has gone electronic is money.

In our decaying wisdom, we’re suspicious of the new electronic money. The old paper money was bad enough. Given the opportunity, central banks would print it up…far more of it than they should. Soon, there would be a lot more pieces of paper than there were things that it would buy. Now, the authorities who control money don’t even have to get ink on their hands. They can create money electronically. In fact, there is no limit on how much they can create – theoretically. Just add zeros. Add them electronically. The sky’s the limit.

But real wealth is not created so easily…

Real wealth is not electronic. It’s not just 1s and 0s – not just digital…not just phantoms that disappear when the power goes out. Real wealth is physical…things you can touch, eat, drive around in, and live in.

Real wealth and “money” are connected. But this new electronic money has plenty of stretch in it. Houses, for example, are real wealth. But in money terms, their value varies. In the ten years – 1996-2006 – for example, the price of America’s houses almost doubled. Of course, they were essentially the same houses…a little bigger perhaps…with a few more marble countertops, but otherwise not much different. What had happened that made them more valuable? Well, they weren’t really more valuable…just more expensive. America’s elastic money had stretched out to make them more expensive.

But now the elastic is snapping back. Houses are down 13% – according to Case/Shiller – from a year ago. And now an analyst at JP Morgan says they’ll probably go down about 30% before the snapback is finished in 2010.

This, he says, will cost Wall Street about $1 trillion in losses on mortgage-backed securities. It will cost the nation $4 trillion in “lost access to capital.”

Whoa! That’s the trouble with stretchable money – when the elastic snaps, it can hurt.

*** The other trouble with these new electronic systems is that they are hard to fix. When your car wouldn’t start in the ’60s, you lifted the hood…took off the distributor cap and checked for sparks. Or, you removed the carburetor and made sure it was working properly. Even when you didn’t know what you were doing, skinning your knuckles once or twice seemed to cure most minor mechanical problems.

But when an electronic system breaks down, it’s hard to figure out what is wrong…and almost impossible to fix. When money is in paper form, it is pretty easy to understand how it works. Simply count up the bills in circulation. If the supply is going up…prices are likely to follow. But this new electronic money has most people stumped. The Fed sends an electronic credit to the Bank of America, which in turn gives an electronic credit to its credit card holders. Now, they can go out and buy things. Do they have “money?” How much “money” is in circulation?

Then, the American shopper buys something made in China – where else? – so that the Chinese producer ends up with a credit in his account in dollars…which he trades with the Bank of China for yuan. The BoC doesn’t want the yuan to go up…so it creates more yuan, electronically, to trade for the electronic dollars it has received.

This was the ‘great money machine’ – an electronic machine – that was responsible for creating so much of the world’s liquidity…and the world’s bubbles.

But as we said yesterday, this machine seems to be slowing down…maybe even breaking down. America’s trade deficit is shrinking. In fact, it seems to us that the elastic currency is snapping back in America’s face. Its import prices go up…while its major asset – housing – goes down.

The import that people care most about is oil. It’s causing the highest gasoline prices Americans have ever had to pay. And it’s calling into question the whole ‘car culture’ society. In America, much more than in Europe, people live in individual, standalone houses – which are much more expensive to heat and maintain than row houses or apartments. They also live far from their work…their schools…their restaurants…and their shops.

Here in Europe, big shopping malls have become common. The small shops couldn’t compete with them on price or choice. Still, now that the price of oil has gone up so dramatically, the latest reports tell us that shoppers are turning their backs on the big malls; they prefer to walk out to neighborhood stores.

But in the United States, there are few neighborhood stores left…in fact, there are few neighborhoods. Instead, in many areas, houses were flung out like confetti from a parade float. They may have fallen a mile from a major shopping mall…or the wind might have carried them 50 miles away.

“Oklahoma’s painful car culture,” is changing the way people live, says an article on CNN Money. Out on panhandle, it is not unusual to drive 70 miles to get to work. In their big SUV and pickups, commuters might have to spend $50 a day – just to get to work. It’s not surprising that they are looking for alternatives – bikes, carpools, and buses.

As noted, Bernanke’s words gave a big boost to the buck. The weak U.S. currency has “contributed to the unwelcome rise in import prices and consumer-price inflation,” Bernanke told an international bankers forum.

The Fed is “attentive to the implications of changes in the value of the dollar for inflation and inflation expectations, and will continue to formulate policy to guard against risks” to price stability and sustainable growth, Bernanke said.

“Bernanke’s defense was about as strong as he could make it, given the U.S. policy of letting only the U.S. Treasury Secretary speak about matters concerning the dollar,” said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co.

However, as Peter Schiff, president of Euro Pacific Capital, points out, only imposing sharp interest-rate hikes and curbing the rate of growth in the money supply will strengthen the dollar and cut inflation. And those could kill off any economic recovery.

That leaves the Fed to walk the tightrope between the rock and the hard place. Some observers were speculating that the tough talk could be followed with Washington intervening in currency markets by buying dollars and selling other currency, a prospect one analyst believes could happen as early as today.

Source: Bernanke Talk of Inflation Vigilance Supports Dollar – Fed Teetering on the Tightrope

The Federal Reserve said that headline inflation, as measured by the personal consumption index, will likely spike to a range of 3.1% to 3.4% this year, up sharply from a previous forecast for 2.1% to 2.4%, made in January.

The release of the Fed’s summary notes from its last meeting revealed that there were two dissenters to the rate cut that was implemented. Dallas Fed President Richard Fisher argued that the rate cuts were pushing down the dollar’s exchange rate, thereby contributing to higher commodity and import prices, cutting consumer spending and hurting the economy.

The dissenters “believed that another reduction in the funds rate at this meeting could prove costly over the longer run,” the summary said.

Since then, various policymakers have indicated that the reductions are at an end. Fed Vice Chairman Donald Kohn says that policy is “appropriately calibrated,” San Francisco Fed President Janet Yellen calls current policy appropriate, Governor Kevin Warsh says that the Fed will resist bringing out “the hammer” again.

Most observers are expecting the Fed to begin raising rates by year’s end, but the damage has already been done, as inflation that is raging far beyond official numbers demonstrates.

Source: Dollar In Tailspin

It’s becoming very plain that they were wrong. The most obvious credit crunch casualty so far has been the housing market – more on which below. But now the British Retail Consortium has revealed that like-for-like high street sales fell 1.6% year-on-year in March. And The Telegraph reports that accountant BDO Stoy Hayward reckons the figure was more like 2.9%.

And yet, prices are rising…

No more easy credit to accommodate the rising prices

Consumers are caught between a rock and a hard place. The price of everything they need is rising. The Office for National Statistics reported that wholesale food prices rose 8.5% in the past year. Data from MySupermarket.co.uk suggests that rising food prices have added nearly £600 to the average family’s food bill in the past year.

Fuel costs aren’t helping either. The days of £1 a litre petrol seem far behind us – it’s more like £1.10 now.

But what’s new? Prices have been rising for a long time – maybe not at current rates, but certainly, the experience of living in Britain for several years now has been one of rising domestic costs, ‘offset’ by falling import prices. So what’s changed? You guessed it, the credit crunch.

Rising prices didn’t matter while there was plenty of easy credit to pay for them. But the credit lines have been shut down, and there’s no more money left in the pot.

Hence the fall in high street sales. We’ve already seen DSGi (formerly known as Dixons) issue its second profit warning of the year as consumers pull back on buying unnecessary electronic gadgets. Philips yesterday warned that falling sales of flatscreen TVs had hammered its profits for the first quarter, while the end of the construction boom meant lighting sales had taken a dive, particularly in Spain.

Surveyors: this is worse than the 90s crash

And – as mentioned above – there’s been yet more bad news for the housing market. The Royal Institution of Chartered Surveyors has just reported that almost 80% of surveyors saw house prices fall in March. That’s the worst reading since such records began, 30 years ago. Surveyors are also more pessimistic than ever before, with 73% expecting prices to fall over the next three months.

Yes, you read that right – surveyors now believe that the state of the housing market is worse than at any time throughout the 90s crash. Yet most commentators are still claiming that it won’t be as bad this time around. The professionals clearly disagree with them.

Things look grim. And the credit crunch will only get worse – we look at the various other nasties piled up on banks’ balance sheets waiting to wreak havoc, in the latest issue of MoneyWeek, out on Friday (if you’re not already a subscriber, you can get your first three issues free by clicking here (http://www.moneyweek.com/file/194/subscribe-from-not-logged-in.html).

But what does this misery mean for investors? You might be tempted to stick all your money under the mattress, but the truth is there are still plenty of interesting investment opportunities out there. Sure, you should be avoiding any consumer-facing stocks – and by that I mean banks, airlines, travel companies, leisure companies, retailers – anyone whose business relies on selling discretionary items to consumers. The UK recession will be much worse than most people yet expect (it’s still somewhat controversial to even say that there will be a recession), which means that stocks aren’t yet pricing it in sufficiently.

Source: http://www.moneyweek.com/file/45379/the-outlook-for-house-prices-is-the-worst-in-30-years.html