Stocks closed modestly higher Monday after a reported threat to Germany’s credit rating deflated a morning market rally. The Dow Jones industrial average closed up 78 points, giving back much of a 167-point gain from earlier.
News reports Monday afternoon said Standard & Poor’s will put all nations that use the euro on “creditwatch negative,” meaning there is a 50-50 chance of a downgrade in the coming months. S&P had warned of possible rating demotions for many of the countries. But the inclusion on the list of Germany, Europe’s strongest economy, came as a surprise.
Stocks had risen strongly in the morning after the leaders of France and Germany called for a new treaty to impose greater fiscal discipline on European countries. Yields on Italian government bonds receded sharply after the new government of Mario Monti introduced sweeping austerity measures over the weekend. That suggests that traders believe Italy is less likely to default.
“There’s pent-up demand, and people will use any excuse to get back in, thinking there’s been too much pessimism,” said Brian Gendreau investment strategist with Cetera Financial Group. Despite strong signals about the U.S. economy, the market has been weighed down by negative headlines about the U.S. budget impasse, credit-rating downgrades of the U.S. and other nations, and Europe’s spreading crisis, Gendreau said.
The Dow Jones industrial average rose 78.41 points, or 0.7 percent, to 12,097.83.
The gains were broad. All 10 industry groups in the S&P 500 rose. Financials stocks were among the biggest winners. Investors have feared that U.S. banks might be dragged down by their close connections to the unstable European financial system.
JPMorgan Chase & Co. jumped 3.7 percent, the most in the Dow. Bank of America was the second-biggest gainer, rising 2.7 percent. Citigroup Inc. rose 5.9 percent, Morgan Stanley 6.8 percent.
The S&P 500 rose 13, or 1 percent, to 1,257. The Nasdaq rose 29, or 1.1 percent, to 2,656.
Investors are hoping that a summit of European leaders on Thursday and Friday will produce concrete measures to prevent a messy breakup of the euro currency, which is shared by 17 nations. Markets have been jittery because of fears that the euro might disintegrate, causing a sharp recession in Europe that would spread through the world economy.
While the statements from French President Nicolas Sarkozy and German Chancellor Angela Merkel were far from a long-term solution, investors are eager to buy on any hint of good news because they have been earning meager returns from relatively low-risk investments such as Treasurys and CDs, Gendreau said no faxing payday loans.
Italian bond yields dropped to their lowest level in a month, a day after the nation’s new government introduced austerity measures. That suggests traders believe that Italy is far less likely to default. The main Italian stock index jumped 2.9 percent.
Italy’s borrowing costs pulled back from a level that might have forced the nation to default. Analysts say bailing out Italy would be too costly and would hurt the credit standing of German and France, which have the strongest economies in the euro group.
The yield on the 10-year Italian bond plunged half a percentage point to 5.93 percent. It rose above 7 percent last month, a level at which other nations were forced to take bailouts. By comparison, bond yields in Germany, Europe’s largest and most stable economy, are roughly 2 percent.
Monday’s strong gains follow the best week in more than two years for U.S. stock indexes. The S&P 500 rose 7.4 percent last week, the most since March 2009. The Dow jumped 7 percent, the most since July 2009.
Markets are hopeful that, given the gravity of the situation afflicting the euro zone, the German and French leaders will come up with a common proposal for tighter integration on budget matters. Analysts say that such a plan could lead to further emergency aid from the European Central Bank, possibly through the International Monetary Fund.
In corporate news:
_ Gannett Co. leapt 10.2 percent after the media company was upgraded to “buy” from “neutral” by analysts at Lazard Capital Markets.
_ Incyte Corp. fell 2 percent after a Citigroup analyst downgraded the drug maker to “neutral” from “buy,” saying its new blood-disease drug Jakafi might not work as a long-term treatment.
_ SuccessFactors Inc. soared more than 50 percent after the company agreed to be sold to German software company SAP for $3.4 billion. SuccessFactors makes software specializing in human resources tasks. The deal is part of SAP’s plan to compete with software rival Oracle Corp.
Workers continued to stash more money in their 401(k) plans in the third quarter, but the stock market’s sharp decline only left them further behind in reaching their savings goals.
The average balance in Fidelity Investments’ plans dropped nearly 12 percent, falling to $64,300 by the end of September from $72,700 three months earlier, the company said Wednesday.
That setback snapped four consecutive quarters of increases, and even put investors behind where they stood a year ago. Their balances were down 2 percent compared with September of last year, according to Fidelity, the largest workplace savings plan provider, with 11.7 million participants.
Blame the 14 percent decline in the Standard & Poor’s 500 index in the third quarter. Investors worried about the European debt crisis and slow economic growth at home, leading to the stock market’s worst quarterly loss since the financial crisis in late 2008.
Workers’ 401(k)s are typically invested in bonds along with stocks to help reduce volatility. Third-quarter investment gains for bonds helped offset some of the stock market’s decline, preventing deeper damage to account balances.
The damage also was eased because workers set aside more from their paychecks to stash in 401(k)s, while employers increased matching contributions.
Fidelity said 84 percent of plan participants contributed over the past 12 months, the highest level in more than two years. Their average contribution was $5,890, setting a record, and up $200 from the same period a year earlier. Employers contributed an average $3,320, an increase of $220.
Over the past 10 years, about two-thirds of annual increases in account balances have been due to workers’ added contributions and company matches, with one-third the result of investment returns, said Beth McHugh, Fidelity’s vice president of market insights.
There are several reasons why changes in account balances don’t match the performance of market indexes. Results depend on the performance of the specific funds an investor holds. Plus, participants in 401(k)s also pay investment fees, which chip away at returns. Investment earnings and contributions can grow tax-free in employer-sponsored 401(k)s, which the government established to encourage saving for retirement.
Balances have risen eight of the 10 quarters since early 2009, when the stock market meltdown reduced the average to $46,200.
Workers who have stayed in the market haven’t been able to rely on investment gains to build up 401(k) savings, because stocks remain about 23 percent below their historic peak in October 2007. Instead, they’ve had to rely on contributions from themselves, and their employers.
Fidelity’s 401(k) participants appear to recognize that, McHugh said. Each quarter for the past two and half years, more workers have increased their contributions than cut them.
However, Fidelity reported a recent slight increase in hardship withdrawals from 401(k)s, reflecting the financial stress many workers face as the economic recovery struggles to find momentum. About 2.3 percent took hardship withdrawals over the 12 months ended Sept. 30. In the latest 12-month period, workers making hardship withdrawals removed an average $5,800.
“People are still looking at their retirement accounts as a source of funds,” McHugh said. “We recommend people look at it as a last resort.”
The major reason? Hardship withdrawals can subject the participants to taxes and possible early withdrawal penalties, if they occur before age 59 1/2. Withdrawals also leave less money in an account to grow as a result of potential market gains and compounding, setting an investor back further in reaching their goals.
EMI Group Ltd., the iconic British music company that is home to The Beatles, Coldplay and Katy Perry, is being split and sold for $4.1 billion.
The deals will open EMI’s buyers, Universal Music and Sony/ATV, to regulatory scrutiny as they increase their dominance of the music industry.
Universal Music Group said Friday that it will pay 1.2 billion pounds ($1.9 billion) for the recording division, joining Universal artists including Lady Gaga and Eminem with EMI superstars such as David Guetta and Lady Antebellum.
A consortium led by Sony/ATV announced a separate deal Friday to pay $2.2 billion for EMI’s publishing division. That business is in charge of songwriting copyrights for such artists as Rihanna and Norah Jones.
Sony/ATV, a joint venture between Sony Corp. and the Michael Jackson estate, said it is a 38 percent partner in the consortium. Other parties include Mubadala Development Co., Jynwel Capital Ltd., the Blackstone Group and David Geffen.
The two-part sale, if approved by regulators, would further increase Universal Music’s dominance in recorded music and springboard Sony/ATV into the top spot as a music publisher, according to Impala, an association of European independent music companies that is against the deal.
The purchases would give Universal Music and Sony/ATV undue negotiating power over artists and distributors of music, even over the world’s biggest music store, Apple Inc.’s iTunes, Impala said.
Both deals are expected to be carefully reviewed in Europe, the U.S., Japan and Australia. Even if regulators approve, they could force the sale of key assets or attach other terms.
Helen Smith, Impala’s executive chairwoman, noted that when Universal Music bought music publisher BMG in 2007, it had to sell some assets to get smaller.
“When you have players which are dominant, even if they take over small players in market share, that can have a serious impact on competition,” she said.
Jean-Bernard Levy, CEO of Universal Music parent company Vivendi SA, told analysts on a conference call that he was “very confident” the deal would be approved in as little as 10 months.
In the United States, Universal is the top music producer with a 30 percent market share compared with EMI’s 9 percent, according to Nielsen SoundScan. With a combined share of 39 percent, they would tower over Sony at 29 percent and Warner Music at 19 percent.
On the publishing side, Sony/ATV will add EMI’s 1.3 million song copyrights to its roster of 750,000 songs that include hits from The Beatles, Bob Dylan and Taylor Swift.
The deal leaves Citigroup, EMI’s current owner, with liability for its underfunded pension plan, according to two other people familiar with the talks. One put the liability at $600 million, the other said it was about $260 million.
Neither person was authorized to speak publicly and spoke on condition of anonymity.
Citigroup had put EMI up for sale in June, four months after it foreclosed on private equity firm Terra Firma. Terra Firma bought EMI in 2007 in a $6.8 billion acquisition financed with debt from Citigroup, but it couldn’t make enough money to keep up with the terms.
Vivendi believes it is swooping in to buy a troubled asset at an “inflection point” in the music industry, Levy said. Thanks to gains in digital track and album sales, overall U.S. album sales are up 5.2 percent at 360 million units so far this year, according to SoundScan. At this point last year, overall album sales had plunged 10 percent.
Vivendi expects to cut costs and save more than $150 million a year _ making the deal profitable even if the music industry doesn’t grow in the future. Vivendi expects the deal to boost its profits in the first year after regulatory approval.
Morningstar analyst Allan Nichols, who covers Vivendi, viewed the deal with trepidation on fears that the music industry could resume its decline and that regulators could reject it.
But antitrust regulators could be more lenient of big tie-ups when the music industry is struggling to recover from more than a decade of online piracy, he said.
Also, Vivendi is paying less per dollar of earnings than Access Industries’ Len Blavatnik did when he took Warner Music Group Corp. private for $1.24 billion in July.
“The catalog is very impressive, and they didn’t pay a whole lot,” Nichols said.
Sony/ATV’s interest in expanding its library is due to the stability of licensing music copyrights, a business that has been profitable over the years because it relies on business customers like filmmakers instead of individual consumers.
Sony/ATV plans to reap new revenues from the EMI catalog, which includes around 100 No. 1 hits from Motown artists Smokey Robinson, Marvin Gaye, Stevie Wonder and The Supremes.
“We think there are biopics and life stories yet to be told about them,” said Sony/ATV Chief Executive Marty Bandier in an interview. “There’s a depth and quality to this asset that can’t be compared to anything.”
In a move that may appease regulators in Europe and the U.S., Vivendi said it would sell 500 million euros ($680 million) worth of non-core assets, mostly minority stakes in companies that it did not disclose. Strategic bidders that lost out on the auction, such as Warner Music, are expected to vie for those assets.
Vivendi said that London-based EMI would find a safe home at a company headquartered not far away in Paris.
“For me, as an Englishman, EMI was the pre-eminent music company that I grew up with,” Universal CEO Lucian Grainge said in a statement. “UMG is committed to both preserving EMI’s cultural heritage and artistic diversity and also investing in its artists and people to grow the company’s assets for the future.”
Grainge said on the conference call that he would ensure the famous Beatles’ recording studio, Abbey Road Studios, would remain open as a “symbol of British culture.”
Universal released statements from bands in support, including from Coldplay manager Dave Holmes, who said “this can only be a positive for the artists and executives at EMI.”
Greece’s embattled prime minister asked the country’s president on Sunday to host a meeting between him and the head of the opposition in an attempt to find a way out of a political crisis, as pressure mounts to ensure Greece avoids bankruptcy and remains in the eurozone.
Prime Minister George Papandreou told ministers in an emergency Cabinet meeting that he asked President Karolos Papoulias to convene the meeting Sunday night, his ministers said.
Political leaders are struggling to agree on creating an interim government. Papandreou has said he will resign once power-sharing talks conclude on a replacement.
Conservative opposition leader Antonis Samaras has insisted the resignation come first.
Samaras’ party spokesman, Yiannis Michelakis, said that while they were aware of Papandreou’s comments, there had been no invitation from the president for talks. If such an invitation were extended to Samaras, he would attend, Michelakis said in a statement cash advance no faxing.
Papandreou narrowly survived a confidence vote in his government Saturday night, mid-way through his four-year term, amid increasing calls from both the opposition and many of his own lawmakers that he resign.
The crisis was sparked after Papandreou’s shock announcement Monday night that he wanted to put a new European debt deal aimed at rescuing his country’s economy to a referendum. The plan for such a vote caused an uproar in Europe, roiled international markets and led to calls in Greece for Papandreou’s resignation, with lawmakers saying he had endangered Greece’s bailout.
The prime minister withdrew the plan on Thursday, after Samaras indicated his party would back the new debt deal, agreed on after marathon negotiations in Europe on Oct. 27.
With financial help from St. Clair County, a Michigan company will build a perishable-goods warehouse at MidAmerica St. Louis Airport in Mascoutah. The facility will handle fresh fruit and vegetables bound for international markets.
The deal announced Thursday includes $2.15 million from the county in upfront money and for refrigeration equipment for the warehouse, which will cost up to $5.7 million.
North Bay Produce Inc. of Traverse City, Mich., will build the 36,448-square-foot warehouse, which will be completed by the middle of next year, officials said.
In exchange for the county’s help, the airport will own the warehouse after 15 years, officials said.
North Bay specializes in year-round production and marketing of fresh fruit and vegetables for customers in North America, Latin America and Europe Business Card Holders. County officials said the warehouse will help North Bay open a shipping route to Asia.
“A large portion of the product they will handle at Mid-America flies, and we look forward to hosting their worldwide air activity,” said County Board Chairman Mark Kern. “This is the anchor tenant for our international trade route linking Latin America with Asia.”
North Bay’s president, Mark Girardin, said the company searched for three years to find a distribution center in the Midwest.
The refrigeration equipment the county is contributing to the project came from a MidAmerica warehouse the Boeing Co. began using last year for assembly operations.
DETROIT
The Toronto Historical Board plaque is the first hint to would-be buyers that 7 Wellesley Ave. is every bit as special as its $775,000 price tag.
And it is.
This classic Cabbagetown Victorian is a historic home without a history.
It
The maker of BlackBerry smartphones says the problems that have plagued users worldwide were caused by a core switch failure within the company’s infrastructure.
Research in Motion Ltd. says that a transition to a back-up switch did not function as tested, causing a large backlog of data.
In an update Tuesday, it said it is now working to clear the backlog and restore normal service as soon as possible.
Large numbers of BlackBerry users in Europe, the Middle East, Africa, India, Brazil, Chile and Argentina are experiencing problems for a second day, with many unable to access email and messaging services.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.
LONDON (AP) _ BlackBerry’s woes spread on Tuesday as the smartphone’s maker reported service disruptions for a second straight day in Europe, the Middle East and Africa and fresh problems in Latin America and India.
Research in Motion Ltd., which makes BlackBerry devices, acknowledged there were ongoing problems Tuesday, hours after it said services were operating normally and the cause of delays in subscriber services a day earlier had been resolved.
“Some users in Europe, the Middle East and Africa, India, Brazil, Chile, and Argentina are experiencing messaging and browsing delays,” the company said in a statement, adding that it is “working to restore normal service as quickly as possible payday loans.”
Research in Motion Ltd. also apologized for “any inconvenience,” as Twitter and the Internet lit up with condemnation over a delayed response to problems some users had reported for hours.
In Britain, Vodafone UK told customers via Twitter that service was not fully restored. Rival T-Mobile UK blamed “a European-wide outage on the BlackBerry network” which it said was affecting all mobile operators. There were also reports of problems elsewhere in Europe, such as Spain.
In addition, the disruptions were experienced in the Middle East and Africa.
Etisalat, which operates in the United Arab Emirates, apologized for “the further interruption” to Blackberry services, “once again due to RIM problems.”
And Kenya’s Safaricom Ltd. said on Twitter that its Blackberry customers were experiencing a “technical fault,” while South Africa’s Vodacom told subscribers the issues were affecting multiple networks and countries.
There were no reports of any problems in the U.S.
Angry smartphone users took to Twitter to vent frustration with the company and bemoaned the loss of their messaging capabilities, questioning why the company took so long to restore services.
The Federal Deposit Insurance Corp. seized Sun Security Bank in Ellington, Mo., after the troubled bank was shut down by Missouri bank regulators.
Sun Security has 27 branches, including two in St. Charles County. The bank held $355.9 million in assets and $290.4 million in deposits.
In a deal with the FDIC, Great Southern Bank of Springfield, Mo., has agreed to assume all the deposits of Sun Security.
The federal regulator said all Sun Security branches will open on Saturday, and after Columbus Day, the offices will become Great Southern branches. Columbus Day is a bank holiday.
Customers with questions about the seizure can call the FDIC at 1-866-806-6128 Payday Loan for Bad Credit.
The failure of Sun Security Bank is expected to cost the FDIC $118.3 million.
Sun Security, which has two branches in St. Charles County, was formerly led by Shaun Hayes as chief executive.
The FDIC’s seizure Friday of Sun Security and Wyoming, Minn.-based Riverbank increases to 76 the number of U.S. bank failures this year.
The Standard & Poor’s 500 index fell 1.6 percent early Tuesday, bringing it into what many consider to be a bear market. The yield on the 10-year Treasury note fell near a record low as investors piled into lower-risk assets.
Stocks fell broadly as investors worried that Greece might be edging closer to default, which would cause heavy losses for banks that hold Greek debt and rattle global financial markets. Greece has said it wouldn’t be able to make budget cuts it had agreed to as part of a deal to receive emergency loans.
The S&P 500 fell 20 points, or 1.8 percent, to 1,079 as of 10:15 a.m. That brought the widely used index 21 percent below its April 29 high of 1,363, meeting the criteria of a bear market.
The Dow Jones industrial average lost 207, or 1.9 percent, to 10,448.The Dow is 18 percent below its recent peak, just shy of the 20 percent decline market watchers consider to be a bear market.
The Nasdaq composite dropped 28, or 1.2 percent, to 2,307.
Bank of America fell 3.9 percent, the most of the 30 stocks that make up the Dow average. American Express Co. and General Electric Co. each lost 3 percent.
The yield on the 10-year Treasury fell to 1.72 percent, just above its record low of 1.71 percent reached on Sept. 22. Bond yields fall as prices rise.
In testimony before Congress, Federal Reserve Chairman Ben Bernanke said the economy is weaker than the central bank expected and that poor job growth continues to undercut consumer confidence. He warned Congress that deep spending cuts may impede a recovery.
In corporate news, Apple Inc. is widely expected to announce the newest version of its iPhone Tuesday. Tim Cook, who took over the company’s CEO role from co-founder Steve Jobs in August, is expected to unveil the new smartphone at Apple’s Cupertino headquarters. The company lost 0.6 percent in early trading.
Bank of America Corp. lost 7 percent to $5.15 as investors continued to be troubled by its exposure to soured mortgages securities and a several-day outage of its website. The company’s stock lost 9 percent Monday to $5.53, a level not seen since 2009.
European indexes also declined sharply. Benchmark indexes in Germany, France, and Spain each lost more than 3 percent.
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