TOP NEWS: Economy: July 18, 2012
- Task Force: Even if Economy Rebounds, State Forecast Dire
- Fed Dims View, Weighs Its Options
- Some Firms Opt to Bring Manufacturing Back to U.S.
- Libor ‘structurally flawed’, says Fed
- Democrats Propose Plan to Sidestep Anti-Tax Pledge
Excerpts and more top stories
Mary Williams Walsh and Michael Cooper, NY Times – The fiscal crisis for states will persist long after the economy rebounds as they confront rising health care costs, underfunded pensions, ignored infrastructure needs, eroding revenues and expected federal budget cuts, according to a report issued here Tuesday by a task force of respected budget experts.
Jon Hilsenrath and Kristina Peterson, WSJ – Federal Reserve Chairman Ben Bernanke delivered a bleak new assessment of the U.S. economy to lawmakers on Tuesday but remained guarded about what, if anything, the Fed would do about it.
MANUFACTURING: Some Firms Opt to Bring Manufacturing Back to U.S.
James R. Hagerty, WSJ – About 14% of U.S. companies surveyed by a Massachusetts Institute of Technology professor definitely plan to move some of their manufacturing back home—the latest sign of growing interest among executives in a strategy known as “reshoring.”
Brooke Masters and Chris Giles, FT – Libor is “structurally flawed” and an international effort would be needed to restore the rate’s credibility as the leading benchmark for mortgages, derivatives and corporate lending around the world, Ben Bernanke, US Federal Reserve chairman, told Congress on Tuesday.
Jonathan Weisman, NY Times – Senate Democrats — holding firm against extending tax cuts for the rich — are proposing a novel way to circumvent the Republican pledge not to vote for any tax increase: Allow all the tax cuts to expire Jan. 1, then vote on a tax cut for the middle class shortly thereafter.
REAL ESTATE: Housing Starts Jump
Sarah Portlock and Alan Zibel, WSJ – U.S. home building rose in June to the highest level in nearly four years, confirming that the housing market has finally started to boost the struggling economy after a prolonged bust. Home construction increased 6.9% last month from May to a seasonally adjusted annual rate of 760,000, the Commerce Department said Wednesday. Compared with a year ago, starts were up 23.6%.
Michael A. Fletcher and Zachary A. Goldfarb – For much of the year, economists worried about the impact of the slowdown in Europe on the U.S. economy. Now, analysts say anxiety about the impact of the fast-approaching fiscal cliff — the series of federal spending cuts and tax hikes set to take effect at the beginning of 2013 if Congress and the Obama administration do not act — is displacing Europe as the primary threat to the nation’s sputtering economy.
FISCAL CLIFF: Fund managers alarmed by US ‘fiscal cliff’
Alexandra Stevenson, FT – Nearly one in five fund managers view the US “fiscal cliff” as a greater cause for alarm than the eurozone crisis, underpinning fears that debt gridlock could slow the world’s biggest economy.
TECHNOLOGY SECTOR: Intel’s Earnings Warning is an Ominous Sign for the Tech Sector
Sam Gustin, TIME – Citing the weak global economy, Intel, the world’s largest microchip-maker, lowered its financial forecast for the rest of 2012. It’s an ominous sign for the technology sector, which is entering the heart of earnings season. Reporting second-quarter financial results, the closely-watched tech bellwether (INTC) revised its revenue growth projection downward to between 3% and 5% — below the previous forecast of “high single-digit growth.”
BANKING/COMPLIANCE: HSBC compliance boss quits in hearing
Shahien Nasiripour, FT – HSBC’s chief compliance officer resigned from his post during a US Senate hearing following publication of a damning report alleging that Britain’s biggest bank may have inadvertently allowed the laundering of Mexican drug money. David Bagley will, however, remain with the bank.
BANKING/LIABILITY: HSBC Report Should Result in Prosecutions, Not Just Fines, Say Critics
Jesse Singal, DailyBeast – When a bank is found to be shockingly noncompliant in preventing money laundering, are monetary fines enough? Or should high-level employees be criminally liable?
More on the Fed
FED/MORTAGES: The Feds’ New Mortgage Disclosures Are a Bust
Jonathan Macey, WSJ Opinion – Incredibly, the annual percentage rate is hidden under new rules from the Consumer Financial Protection Bureau.
ECONOMIC FORECAST: Bernanke gloomy on economic outlook
Robin Harding, FT – Ben Bernanke offered a gloomy outlook for the US economy but offered no hint of further monetary easing in testimony to Congress. He also warned that progress in reducing a 8.2 per cent unemployment rate “seems likely to be frustratingly slow”. The testimony initially disappointed markets – with stocks falling and the dollar rising before turning around later in the day.
ECONOMIC GROWTH: A conservative growth agenda for the US economy
Glenn Hubbard, FT, Opinion – The most recent grim US jobs report brought forth calls for more Federal Reserve action on fiscal stimulus. Meanwhile, business leaders call for clarity about long-term policy and the need to return to growth. While a growth-focused agenda would have many parts, two fiscal policy issues stand out – getting our fiscal house in order and reforming the tax code.
MARKETS: Wall Street Mixed in Early Trading
Staff, NY Times – Dow Jones industrial average fell 0.2 percent, and the Standard & Poor’s 500-stock index was 0.1 percent lower. Nasdaq futures gained 0.2 percent. Bank of America’s earnings topped most Wall Street expectations for the second quarter although revenue fell short. Profits declined for both PNC Financial Services Group and investment manager BlackRock. Except for Bank of America, financial stocks mostly fell in premarket trading.
Inyoung Hwang, Bloomberg – U.S. stocks fell, paring yesterday’s gain, as earnings reports disappointed investors before the release of the Federal Reserve’s Beige Book survey of business conditions. The Standard & Poor’s 500 Index lost 0.2 percent to 1,360.37 at 9:31 a.m. in New York. The Dow Jones Industrial Average dropped 47.75 points, or 0.4 percent, to 12,757.79 today. The S&P 500 rose 0.7 percent yesterday as Fed Chairman Ben S. Bernanke told senators the central bank is prepared to act to boost the economy if the labor market doesn’t improve.
Josh Mitchell, WSJ – Student debt is rising sharply among all age groups, but middle-aged Americans appear to be struggling the most with payments, according to new data released Tuesday by the Federal Reserve Bank of New York.