Stocks are plunging at the opening of trading on news that the U.S. economy added no new jobs last month. Treasury yields fell and gold rose.
The jobs report was the weakest in almost a year. It renewed fears that the U.S. might slip back into recession.
A strike by 45,000 Verizon workers lowered the job totals. Those workers are back on the job. Private employers added 17,000 jobs. Without the Verizon strike the total would have been 62,000.
Ten minutes after the opening bell, the Dow Jones industrial average is down 245 points, or 2.1 percent, at 11,248. The Standard & Poor’s 500 index is down 27, or 2.3 percent, at 1,176. The Nasdaq composite index is down 56, or 2.2 percent, at 2,490.
Torstar Corp., publisher of the Toronto Star, reported higher revenues in the second quarter of 2011, the company said Thursday.
Ontario
Boaters were warned to stay off an oil-fouled stretch of Montana’s popular Yellowstone River Friday, as lawmakers on Capitol Hill pressed regulators to bolster the country’s pipeline safety rules following a string of high-profile spills and explosions.
The warning from state officials to stay off a 22-mile stretch of the river between Laurel and Lockwood comes after an Exxon Mobil pipeline failure spewed an estimated 1,000 barrels of crude into the flooding river July 1.
More than 50 boats and hundreds of workers are involved in the cleanup. Officials say people recreating on the river could pose a safety risk.
The cause of the spill remains under investigation. Richard Opper with the Montana Department of Environmental Quality said Friday that an initial investigation shows the pipeline was completely severed in the accident.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.
Legislators questioned federal officials Friday about their plans to tighten the country’s pipeline safety rules following numerous high-profile spills and explosions during the past year, asking whether the lead agency overseeing energy pipelines had been overly cozy with the industry.
The agency’s highest concern is public safety, and reform proposals pending before Congress will give the government the authority it needs to prevent accidents, Cynthia Quarterman, administrator of the Pipeline and Hazardous Materials Safety Administration, told a congressional committee.
“Having spent time with the employees within the agency, I know they may have concerns about upper-level leadership but in terms of their commitment to the mission, it is the highest thing on their mind,” Quarterman testified at the hearing. “To a person, their concern is the safety of the public.”
It will likely be months before investigators determine what caused an oil pipeline to rupture near Billings, Mont., on July 1, spilling about 1,000 barrels of crude into the scenic Yellowstone River. The spill fouled dozens of miles of shoreline and backwaters.
Committee members also quizzed Quarterman and other panelists about a Pacific Gas & Electric Co. natural gas pipeline explosion last year in San Bruno, Calif., that killed eight people, injured many more and left 38 homes in smoking ruins.
Also mentioned was the rupture of an Enbridge Inc. pipeline in July of last year in southwest Michigan, which spilled more than 800,000 gallons of oil into the Kalamazoo River.
“The industry has been driving policy,” said U.S. Rep. Jackie Speier, a California Democrat whose district includes San Bruno. “We’ve got to make it safe for the consumers, for the ratepayers.”
Michigan Republican Rep. Fred Upton, who chairs the Committee on Energy and Commerce, compiled a large list of witnesses including several members of the oil and gas industry, but testimony from ExxonMobil Pipeline Co. was postponed for a second hearing next Thursday.
Quarterman said the Montana accident has focused her agency’s attention on preventing pipeline failures.
She previously said it will likely be August or September before water levels in the river are low enough to exhume the section of damaged pipe responsible for the spill.
It could take two months after that before investigators identify a cause, and her agency won’t know for certain how large the leak was until it examines records at the company’s control room in Houston, she said at another congressional hearing Thursday.
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Burke reported from San Francisco.
Ontario teachers will take home less pay and earn smaller pensions under a deal aimed at erasing a projected $17.2 billion shortfall in their pension plan.
Details of a negotiated deal approved by union representatives and the Ontario cabinet began reaching teachers by mail during this final week of the school year, or earlier by email.
A three-part plan calls for:
Traders are eagerly awaiting indications from Federal Reserve chairman Ben Bernanke that interest rate hikes aren’t likely anytime soon.
The hope that Bernanke will make that clear in remarks scheduled for Tuesday afternoon is keeping stocks afloat. Stocks recovered some of their losses Tuesday after sliding for four straight days.
The Dow Jones industrial average rose 53 points, or 0.4 percent, to 12,142 in midday trading. The Standard & Poor’s 500 index rose 5, or 0.4 percent, to 1,291. The Nasdaq composite rose 6, or 0.2 percent, to 2,708.
The Fed has said it will wind down its $600 billion bond-buying program later this month. But a string of disappointing economic reports in recent weeks has renewed speculation that the Fed might extend the program or delay any increase in interest rates well into next year. Before the latest indications that the economy was losing momentum, economists widely expected the Fed to begin raising rates as soon as the end of this year to head off inflation. Bernanke is scheduled to speak at the International Monetary Conference at 3:45 p.m.
“The markets are now thinking there’s going to be a little bit of a positive jolt from Bernanke,” said Rob Lutts, president of Cabot Money Management. “He is the key market participant that has the impact to make people excited and give the market a little more medicine.”
Stocks were also boosted by traders reacting to a technical milestone. The S&P 500 fell 14 points Monday. That brought the index down to 5 percent below its April 29 peak. A five percent drop from the peak is a key signal to buy for many traders, said Lutts.
“A lot of people look at a 5 percent correction as a time to make some kind of change,” said Lutts. “Some say it’s a time of weakness and they should get out, but some say it’s the time to get in.” He added that Hedge Funds like it when markets are volatile because they can exploit short-term stock dips for gains.
Banks recovered some of their recent losses. JPMorgan Chase & Co. rose 1.6 percent to $41 quick guaranteed personal loans.19 and Bank of America Corp. rose 0.5 percent to $10.88. Bank stocks took a hit Monday after a Federal Reserve board member indicated in a speech that banks might have to increase the amount of money they keep on hand to cover potential losses.
A contentious acquisition proposal ratcheted up the stock price of all companies involved.
International Paper Co. rose 1.2 percent after smaller rival Temple-Inland fought back against International Paper’s hostile takeover bid for $3.3 billion in cash. Temple-Inland also soared 40 percent on the news. Weyerhouser co. rose 6 percent, the most of any company in the S&P 500, possibly on suspicion it was another takeover candidate for International Paper.
Cablevision Systems Corp. rose 5.7 percent after the New York-area cable company set a date when it would spin off its cable networks. The company plans to divest popular television networks including AMC, which broadcasts the popular “Mad Men” show on June 16. Investors prefer the sleeker broadcast networks like WE TV, IFC and the Sundance Channel operating on their own to the current unwieldy corporate structure.
Traders had some economic news to consider, too. The Labor Department reported that businesses had fewer job openings in April. The government said that employers posted 3 million ads for jobs in April, down from 3.1 million in March. The figure added to the stack of other signs that the U.S. is having an employment crisis. However, the report did little to change the direction of stocks.
Oil prices fell toward $98 a barrel ahead of an OPEC meeting that could result in higher oil production. Rising oil prices have contributed to the recent stock sell-off. Oil has hovered around $100 a barrel since March. On Wednesday ministers from the 12 countries that make up the oil cartel OPEC will consider raising output levels. Producing more oil could ease the pressure on prices.
TOKYO
Sears Holding Corp. may need to go back to the drawing board. The company’s dependence on appliances and what seemed to be growing strength at its Kmart stores failed it in the first quarter, as the retailer reported a bigger-than-expected loss in contrast to a profit a year ago.
The company led by billionaire Edward Lampert has long seen customers drawn to the value of its appliances, under brands such as Kenmore. But the absence of a government appliance rebate program took a bite out of its performance.
On Thursday, Sears reported a net loss of $170 million, or $1.58 per share, in the quarter ended April 30 compared with net income of $16 million, or 14 cents per share, a year earlier. The adjusted loss was $1.39 per share.
Analysts surveyed by FactSet predicted a smaller loss of 99 cents per share.
Sears had cautioned earlier this month that it would post a bigger-than-expected first-quarter loss due mainly to a drop in appliance, clothing and consumer electronic sales.
But the results are still a disappointment, particularly at Kmart, which had recently been the bright spot within the company’s struggling business.
Revenue at Kmart stores open at least a year fell 1.6 percent in the quarter mostly because of fewer sales in the food and consumables and pharmacy categories. At Sears’ domestic stores, the figure dropped 5.2 percent on declining sales of appliances, clothing and consumer electronics.
Total revenue from domestic stores open at least a year slipped 3.6 percent.
This metric is a key gauge of a retailer’s health because it excludes results from stores opened or closed during the year.
Sears, which is based in Hoffman Estates, Ill., said its overall revenue fell 3 percent to $9.71 billion in part because of the weak results from its domestic stores, as well as having fewer Kmart and Sears stores open. The company also reported a 9.2 percent drop in revenue from Sears stores in Canada open at least a year.
The results also fell shy of the $9.73 billion that analysts expected.
President and CEO Lou D’Ambrosio, who was named to the company’s top spot in February, said in a statement that bad weather, economic pressures and the absence of the appliance rebate program hurt Sears’ performance.
But D’Ambrosio admitted that the company could have done a better job internally.
“We cannot control the weather or economy or government spending. But we can control how we execute and leverage the potent set of assets we have,” he said.
Sears, whose other brands include DieHard and Craftsman, also announced 10 days ago that it is considering a possible move of its headquarters. State and local incentives it receives expire next year.
The company has more than 4,000 stores in the U.S. and Canada.
The Reserve Bank of Australia left its benchmark interest rate unchanged today for a fifth straight meeting, signaling a record local dollar will help contain consumer prices until late this year.
“The rising exchange rate will be helping to hold down prices for some consumer products over the coming few quarters,” RBA Governor Glenn Stevens said in a statement today after holding the overnight cash rate target at 4.75 percent, as forecast by 21 of 22 economists surveyed by Bloomberg News. “Over the longer term, inflation can be expected to increase somewhat if economic conditions evolve broadly as expected.”
Australia’s currency surpassed $1.10 this week as surging mining investment cuts the economy’s spare capacity, and Federal Reserve policy makers said April 27 U.S. borrowing costs are likely to stay low for “an extended period.” Reports last month showed lending to Australian business surged and inflation accelerated to the fastest pace since 2006.
“The currency is clearly doing some of the RBA’s work for it,” said Su-Lin Ong, senior economist at RBC Capital Markets in Sydney who predicts the central bank’s next rate increase will be in October. “The currency is probably the most significant development since they last met and they are aware that it’s in unchartered territory.”
Currency’s Reaction
The Australian dollar maintained earlier declines after the decision, trading at $1.0909 as of 3:26 p.m. in Sydney, from $1.0921 before the statement and $1.0944 yesterday in New York.
Stevens, the only developed-nation central banker whose economy avoided recession as credit markets froze in 2008, has refrained from raising borrowing costs since November after flooding damaged crops and disrupted coal mines in Queensland state, which supplies more than 30 percent of the nation’s fruit and vegetables.
Today in his statement, Stevens said the resulting loss of coal production likely “caused a decline in real gross domestic product in the March quarter.” The first-quarter GDP report from the Bureau of Statistics is scheduled to be released June 1.
Traders see a 34 percent chance Stevens will boost borrowing costs by a quarter percentage point in August, bank bill futures showed, down from 44 percent before today’s announcement.
In the statement, Stevens said “in future meetings, the board will continue to assess carefully the evolving outlook for growth and inflation.”
Rate Differences
Australia’s benchmark rate contrasts with near-zero levels in Japan and the U.S., helping drive the currency to the strongest level since it was freely floated in 1983.
The Australian dollar touched $1.1012 yesterday and an April 27 inflation report showed prices rose 1.6 percent in the first quarter from the previous three months and were 3.3 percent higher than a year earlier, prompting speculation the RBA will raise rates sooner than the Fed.
The RBA aims to keep annual inflation in a range of 2 percent to 3 percent on average.
While the currency’s rise has eased the RBA’s task of controlling inflation by reducing import costs, it has hurt some manufacturers that sell goods abroad.
In parts of the nation’s economy, particularly urban areas not linked to the mining boom, “people are not doing it easy,” Australia & New Zealand Banking Group Ltd. Chief Executive Officer Mike Smith said in a briefing with reporters today no faxing 1 hour payday loans. The recent acceleration in inflation is a “blip” triggered by natural disasters and the nation’s rising currency is “doing the work of the central bank,” he said.
Mining Boom
Australia’s terms of trade, a ratio of export prices to import prices, are at their highest level since the early 1950s. “Australia’s terms of trade are reaching higher levels than assumed a few months ago, and national income is growing strongly,” Stevens said today.
Wage pressure from the mining industry is intensifying inflation concerns.
Two coal-seam gas projects, expected to cost more than A$30 billion ($32.7 billion), are proceeding near the Queensland port of Gladstone. Santos Ltd. (STO), Australia’s third-largest oil producer, and BG Group Plc, the U.K.’s third-biggest gas producer, will start hiring the first of more than 10,000 construction workers needed for the two projects this year.
‘Strongest Signal’
“It is significant that the terms of trade are running above what they were forecasting,” said RBC’s Ong. “At the end of the day, that’s what’s going to drive stronger business investment and income and employment. So I think that is your strongest signal of a tightening bias and why you would need to hike.”
A central bank report last week showed loans provided by Australian banks and finance companies increased 0.6 percent in March from the previous month, matching the biggest monthly advance since January 2009.
Lending to companies gained 1 percent in March, the biggest rise since October 2008 and the third straight monthly gain, it showed. Business lending had declined for six consecutive months through December, falls noted by the RBA in its statements.
Australia had its biggest annual increase in jobs on record last year and employers added more workers in March than economists forecast, lowering the jobless rate to 4.9 percent.
“Most leading indicators suggest further growth in employment, though most likely at a slower pace than in 2010,” Stevens said today. “Reports of skills shortages remain confined, at this point, to the resources and related sectors.”
Wage Growth
Growth in wages has returned to levels seen prior to the global recession, he said.
The Reserve Bank in February raised its forecast for 2011 growth to 4.25 percent, from a November prediction of 3.75 percent, saying flood rebuilding will accelerate in the second half. It will update those estimates in its quarterly monetary policy statement to be released on May 6.
Stevens boosted the benchmark lending rate by 175 basis points from early October 2009 to November last year from a half-century low of 3 percent during the global financial crisis.
Treasurer Wayne Swan welcomed today’s decision, saying it is “good news for the many Australian households and businesses doing it tough in our patchwork economy, with the higher dollar making things even tougher in some sectors.”
Swan will release the nation’s budget on May 10.
OTTAWA
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