South Africa
The bulls weren’t bullish enough.
The stock market just had its best first quarter in 14 years. The surge has sent Wall Street analysts, some of whose forecasts seemed too sunny three months ago, scrambling to raise their estimates for the year.
“That it’s up isn’t surprising. It’s the magnitude,” says Robert Doll, the chief equity investment manager at BlackRock, the world’s biggest money manager.
Doll says stocks could rise 10 percent more before the end of the year. That would be enough to push the Dow Jones industrial average to an all-time high and the Standard & Poor’s 500 close to a record.
For the first three months of the year, the Dow was up 8 percent and the S&P 12 percent, in each case the best start since the great bull market of the 1990s. The Nasdaq composite index, made up of technology stocks, has had an even more remarkable run _ up 19 percent for the year, its best start since 1991.
“I don’t think anyone could have predicted this,” says Chip Cobb, a senior vice president at Bryn Mawr Trust Asset Management. For these gains, he says, “I thought it would take all year.”
The jump gives money managers like Cobb hope that ordinary folks burned by two deep bear markets in a decade will start buying again, propelling the indexes even higher.
In a remarkable act of self-restraint _ or foolishness, depending on your view _ they have mostly stayed out of the market. One reason they may jump in now is that fear of looming disasters, like a full-blown debt crisis in Europe or a second recession in the United States, has faded.
Bulls say investors will turn their attention to the only thing that really matters for stock prices in the long run _ corporate profits.
Another hopeful sign for gains is that those who have been buying stocks appear to be taking bigger risks than before, suggesting growing confidence.
Last year, investors put much of their money into so-called defensive stocks, such as utilities and health care companies, which make money in bad times as well as good. This year, it’s the risky fare that’s being scooped up.
Financial stocks are up 22 percent, the best among the 10 industry groups within the S&P. Technology companies are up 21 percent. Consumer discretionary stocks, like hotels and cable companies, are up 16 percent.
Utilities are down 3 percent for the quarter, the only group in the red.
Standard & Poor’s Capital IQ, a research firm, predicted at the beginning of the year that the S&P would hit 1,400 by the end of the year. By March 15, it had hit 1,403, and on Friday it was at 1,408.
“We were originally accused of being too optimistic,” says Sam Stovall, chief equity strategist at S&P Capital IQ. “It doesn’t mean we can’t have a 10 percent correction, but it’s unlikely we will.”
The Dow is less than 1,000 points away blow its all-time high of 14,164.53, set Oct. 9, 2007. The S&P is about 150 points from its record close of 1,565.15, set the same day.
The first day of the year set the tone. On Jan. 3, the Dow rose 180 points. Later that month, the Federal Reserve said it would probably keep benchmark interest rates near zero for almost three more years. That sent stocks to their highest levels since May 2011.
It was the best January for stocks since 1997. Skeptics pointed out that profits at U.S. companies, after jumping by double-digit percentages for eight quarters in a row, seemed to be growing much more slowly. They also worried that the number of shares of stock traded each day was low, which suggested a lack of conviction by buyers.
Stocks kept climbing anyway, passing two milestones in quick succession.
On Feb. 28, the Dow rose above 13,000 for the first time since May 2008, four months before the financial crisis hit that September payday loan lenders. Two weeks later, it was the Nasdaq’s turn. It crossed 3,000 for the first time since the dot-com frenzy a dozen years earlier.
Even a few duds got caught in the upswing. The stocks of Microsoft and Cisco have barely budged this century. This year, they have have risen 24 percent and 17 percent, respectively. Dell, which has languished for years, is up 13 percent.
Some of the big winners of 2012 are perhaps less surprising: Apple has risen 48 percent. Lions Gate Entertainment, the company behind the hit movies “The Hunger Games” and “Twilight,” is up 67 percent.
As if the surge weren’t enough, the markets impressed long-time stock investors with the way it climbed _ slowly and steadily, without the wild swings of bravado and panic that characterized the market much of last year.
The gap between the daily high and low for the S&P has averaged about 0.9 percentage points. It was three times that early last fall, when the market was obsessed with debt problems in Europe and at home, among other fears.
Investor attention turns next to corporate earnings announcements, which begin when aluminum maker Alcoa, one of the 30 stocks that make up the Dow, reports April 10.
Companies in the S&P 500 are making more money than ever, an impressive feat in a tepid economic recovery.
Those who are bullish on stocks note that the S&P 500 trades at 12.9 times expected earnings this year, somewhat cheap compared with its 10-year average of 14.6.
The so-called forward earnings multiple is generally higher than the long-term average during bull markets. If it rose to 16 or 18 this year, stocks would be significantly higher than they are now, even if corporate earnings failed to grow at all.
Some investors say the bulls are fooling themselves if they think big profits this year are assured. Indeed, first-quarter profits for the S&P 500 are expected to fall 0.1 percent from a year earlier, according to a survey of analysts by FactSet, a provider of financial data.
That would be the first time in more than two years that earnings will not have grown. For the full year, analysts are expecting profits will rise a healthy 9 percent, but those predictions depend on a surge of 16 percent in the last three months.
“The idea that we’re going to have a huge rebound at the end of the year is unrealistic,” says Barry Knapp, head U.S. equity strategist at Barclays Capital.
Knapp says he’s bullish on technology stocks but the rest of the market has “overshot the fundamentals.” He says he’s sticking with his target for the S&P this year: 1,330, which would be a drop of about 6 percent from Friday’s close.
Other skeptics of the surge point to the role of central banks around the world in lifting markets by printing money, lending at near-zero rates and buying bonds and other securities.
The fear is that once that support is removed, stock prices could fall, and all the talk about profits could prove beside the point.
The same day the Nasdaq broke through 3,000 earlier this month, Michael Hartnett, chief global equity strategist at Bank of America, published a report with a curious chart showing how stocks reacted to programs by the Federal Reserve to buy bonds, or big announcements about lending rates.
In every case since the market hit a 12-year low in March 2009, prices jumped on the Fed moves, then fell when the programs ended. A question above the chart asked whether it was time to move more money into stocks.
Hartnett’s answer was no. The bank expects the S&P to end the year at 1,400, almost exactly where it is now.
Stock futures headed lower Monday as last week’s rally, bolstered by healthy job data, appeared to lose some steam.
Even the Nasdaq futures, which had been trading higher Monday, dipped after Apple Inc. announced a dividend and $10 billion share buyback program.
In premarket trading Dow Jones industrial average futures fell 21 points to 13,142 and the broader Standard & Poor’s 500 futures fell 2.50 points to 1,396. Nasdaq 100 futures fell 2.75 points to 2,706.25.
European markets were lower in midday trading there after Asian markets finished narrowly mixed.
Apple said Monday it would pay a quarterly dividend of $2.65 per share and that its board had authorized a three-year share buyback program that will begin later this year.
Apple is sitting on $97.6 billion in cash and securities. For years, it has resisted calls to reward shareholders with some of that money. Since the death of CEO Steve Jobs, management had signaled that it’s been considering options for the money.
Shares broke $600 in early premarket trading, but gave up some ground after the announcement. Shares rose $3.94 to $589.51 30 minutes ahead of the opening guaranteed cash advance.
There is also some macroeconomic data that investors will be watching Monday. The National Association of Home Builders is scheduled to release its March housing market index, which measures homebuilder confidence.
In February, the index rose to 29, the highest level since May 2007. The index has been rising since September as builders are more hopeful about the potential for sales this year. Still, readings below 50 indicate negative sentiment about the new-home market. The index hasn’t hit that level since 2006, during the housing boom.
In Europe, the CAC-40 in France fell 0.7 percent to 3,568, while Germany’s DAX was down the same rate to 7,109. The FTSE index of leading British shares pulled back 0.4 percent to 5,940.
Hong Kong’s Hang Seng Index fell 1 percent to 21,115.29. Benchmarks in Singapore, Taiwan and Indonesia fell.
Other Asian indexes finished slightly up. Japan’s benchmark Nikkei 225 closed 0.1 percent higher at 10,141.99.
British police say a 51-year-old man has been arrested on suspicion of intimidating a witness and encouraging or assisting an offense in relation to the phone-hacking scandal.
Scotland Yard says the man was arrested at a central London police station Wednesday afternoon by officers investigating voicemail hacking by tabloid reporters.
The force says the man was previously arrested in April on suspicion of conspiring to intercept communications and unlawful interception of voicemails. The police did not name the suspect.
The new arrest follows the arrests Tuesday of six other suspects, including former News International executive Rebekah Brooks.
Indonesia
A senior British lawmaker says police mishandled their first investigation of phone hacking at Rupert Murdoch’s News of the World tabloid.
Simon Hughes told the country’s government-commissioned media ethics inquiry Tuesday that if police had taken “robust action” in 2006 when they knew the scale of phone hacking, several victims “might not have suffered as much.”
Hughes, deputy leader of the Liberal Democrat party _ the junior member of Britain’s coalition government, received a 45,000 pound ($71,300) settlement from News of the World’s owner News International earlier this month.
He is among dozens of victims who have received damages over allegations the now defunct tabloid routinely intercepted voice mails of those in the public eye.
It should be a no-brainer: a popular bill with bipartisan support that bans insider trading by members of Congress.
The legislation is known as the Stop Trading on Congressional Knowledge Act, or the Stock Act. It gained momentum last year after an explosive 60 Minutes report that accused several prominent representatives of insider trading using government information. President Obama urged the bill’s passage in his State of the Union address last month.
Now, however, the bill is stuck in part due to a disagreement over a provision that requires so-called "political intelligence" professionals to register with the government and disclose their activities in the same way that lobbyists do.
The disagreement puts the spotlight on an industry that has previously escaped the notice of most Americans. But despite its relatively low profile, political intelligence is big business.
Political intelligence professionals get paid big bucks to gather information about government policy and pending legislation, often through lawmakers or other public officials. Their clients include hedge funds, mutual funds, pension funds and wealthy individuals who use the information to guide investment decisions.
Under one version of the Stock Act, political intelligence practitioners would have to reveal who their clients are, how much they get paid for their research, and what issues they’re hired to gather intelligence on.
"If you seek information from Congress in order to make money, the American people have a right to know your name and who you’re selling that information to," Senator Chuck Grassley of Iowa said in congressional debate earlier this month.
The idea is that shining a light on the industry will help ensure that such firms are confined to objective research and analysis and are not simply providing insider trading tips based on government knowledge.
Amazingly, there are no clear prohibitions on these kinds of insider tips at the moment.
The Senate passed a version of the Stock Act by a margin of 96-3 that included the registration requirement. The House version sailed through last week with similar support — a 417-2 vote — though it scrapped the registration requirement and called only for a government study of the political intelligence industry.
Even without the political intelligence provision, the Stock Act would prohibit Congressmen and other federal employees from exploiting non-public government information or using it to tip off others, and would require them to report investment transactions within 30 days.
Rep. Louise Slaughter told a congressional committee in December that the political intelligence industry brings in $100 million a year in the U.S., and Mayhew estimated that there are roughly 300 firms worldwide providing political intelligence and policy research.
"Political intelligence firms have increasingly become an issue — they have proliferated — and I think part of the issue here is that until the Stock Act, most Americans didn’t even know about the political intelligence industry," said Melanie Sloan, executive director of the progressive watchdog group Citizens for Responsibility and Ethics in Washington.
The political intelligence field bears some similarities to so-called "expert networking" firms in the corporate world, which connect hedge funds and mutual funds with consultants who provide insight about particular companies.
While such firms offer legitimate market research, some have also been accused of passing non-public, inside information to clients as part of the government’s ongoing crackdown on insider trading at hedge funds.
"There is an increasing problem with Wall Street recognizing that they can get inside information not just from corporate insiders, but from the government," Sloan said.
Some in Congress worried that the political intelligence registration requirement was drafted too broadly and required further study. Laena Fallon, a spokeswoman for House Majority Leader Eric Cantor, said in an email that it could affect a range of people from "local rotaries to national media conglomerates."
But Grassley, who added the registration requirement to the Senate bill, called it "astonishing and extremely disappointing that the House would fulfill Wall Street’s wishes by killing this provision." Grassley’s amendment passed the Senate by a vote of 60-39, and included an exception for journalists "disseminating news and information to the public."
"If Congress delays action, the political intelligence industry will stay in the shadows, just the way Wall Street likes it," the senator said in a statement.
Why three senators said no to an insider trading ban in Congress
Looking ahead: A spokeswoman for the Senate’s Governmental Affairs Committee said staffers were unsure of when the two congressional chambers would resolve their disagreement and when the Stock Act might be finalized.
Should the registration requirement go into force, hedge funds and other political intelligence customers who don’t want their identities disclosed may pull back from such services, Mayhew said.
Yet even if it passes without the registration requirement, the Stock Act will still likely have an impact on political intelligence firms, as it will become illegal for them to pass on non-public information gleaned from government officials.
Just as they did during the expert networking crackdown, Wall Street firms will have to beef up their internal regulations to make sure they don’t receive non-public information in the guise of legitimate research, Mayhew said.
"The information will continue to be extremely important, but ultimately, they’re going to be a lot more careful about how they use it," he said.
Wells Fargo Advisors is moving jobs from Minneapolis to St. Louis, though the brokerage arm of Wells Fargo won’t say how many positions would shift to the region.
Wells Fargo Advisors announced to employees in Minneapolis this week that it is closing an office within its Business Services Group there and transitioning those jobs to St. Louis. Employees in Minneapolis can apply for the St. Louis positions.
Raschelle Burton, a Wells Fargo Advisors spokeswoman, confirmed the jobs are moving from Minneapolis but declined to specify how many.
“This is part of a broad and ongoing effort to maximize efficiency,” Burton said.
Wells Fargo Advisors, a subsidiary of San Francisco-based Wells Fargo & Co., is based in downtown St. Louis. The company employs more than 5,000 locally and provides financial services including brokerage, estate planning, and asset management.
In August, Wells Fargo Advisors CEO Danny Ludeman said 200 jobs would be added to the St. Louis headquarters campus within 18 months to improve efficiency following a series of acquisitions. Wachovia acquired St. Louis-based A.G. Edwards in 2007, followed by Wells Fargo’s acquisition of Wachovia in 2008.
Ludeman identified Minneapolis in August as a possible site for jobs that could move to St. Louis, in addition to trader jobs and IT and technical jobs from San Francisco, Seattle and New York.
Japan
Fireballs lit up the night sky in Greece’s capital as buildings were set ablaze late Sunday amid widespread rioting and looting before a historic parliamentary vote expected to approve harsh austerity measures demanded to keep the country from going bankrupt and within the eurozone.
At least 10 buildings, including a closed cinema, a bank, a mobile phone dealership, a glassware store and a cafeteria, were on fire. There were no immediate reports of people trapped inside. Dozens of shops were also looted in the worst riot damage the country has seen since unrest in December 2008 following the fatal police shooting of a teenager.
Dozens of police officers and at least 37 protesters were injured in Sunday’s violence, and more than 20 suspected rioters were detained. Clashes erupted after more than 100,000 protesters marched to parliament to rally against drastic austerity cuts that will ax one in five civil service jobs and slash the minimum wage by more than a fifth.
“I’ve had it! I can’t take it any more. There’s no point in living in this country any more,” said a man walking through his smashed and looted optician store.
A protester who declined to give his name said: “I don’t care if an ornament shop is burning, but it’s a shame the building is old. We will win.”
Since May 2010, Greece has survived on a euro110 billion ($145 billion) bailout from its European partners and the International Monetary Fund. When that proved insufficient, a new rescue loan package worth a further euro130 billion ($171 billion) was decided _ combined with a massive bond swap deal that will write off half the country’s privately held debt.
But for both deals to materialize, Greece has to persuade its deeply skeptical creditors that it has the will and ability to implement spending cuts and public sector reforms that will end years of fiscal profligacy and tame gaping budget deficits.
A three-story corner building was completely consumed by flames with riot officers looking on from the street, and firefighters trying to douse the blaze. Protesters set bonfires in front of parliament and dozens of riot police formed lines to try to deter them from trying to make a run on parliament. Clouds of tear gas drifted across the square in front of parliament. Many in the crowd wore gas masks and had their faces covered, while others carried Greek flags and carried banners.
Riot police fired dozens of tear gas volleys at rioting youths, who attacked them with firebombs, fireworks and chunks of marble smashed off the fronts of luxury hotels, banks and department stores.
Streets were strewn with stones, smashed glass and burnt wreckage, while terrified passers-by sought refuge in hotel lounges and cafeterias.
Athens Mayor Giorgos Kaminis said rioters tried to storm the city hall building, but were repelled.
“Once again, the city is being used as a lever to try to destabilize the country,” he said.
Conservative New Democracy leader Antonis Samaras said the rioting “hurts the entire country.”
“We are seeing scenes from a future that we must do our utmost to avert,” he said.
Prime Minister Lucas Papademos’ government _ an unlikely coalition of the majority Socialists and their main foes, New Democracy _ was expected to carry the austerity vote, even by a narrow margin.
Combined, they control 236 of Parliament’s 300 seats, although at least 20 lawmakers from both main parties said they would not back the new private sector wage cuts, pension reductions and civil service layoffs dictated by the draft austerity program.
“There are very few such moments in the history of a nation,” Finance Minister Evangelos Venizelos said. “Our country has an acute issue of survival.”
“The question is not whether some salaries and pensions will be curtailed, but whether we will be able to pay even these reduced wages and pensions,” he added credit score. “When you have to choose between bad and worse, you will pick what is bad to avoid what is worse.”
The new cutbacks, which follow two years of harsh income losses and tax hikes _ amid a deep recession and record high unemployment _ have been demanded by Greece’s bailout creditors in return for a new batch of vital rescue loans.
“By Wednesday, finance ministers from eurozone countries must finally approve the financing and support program for Greece,” Venizelos said. “If that does not happen, and it is not at all certain that it will happen unless we raise to the occasion, then we will not be able by Friday, Feb. 17, to officially start the bond exchange process.”
“We won’t be in time to carry out the bond swap by March 5, and we won’t be in time to address the problem of major bond issues that must be paid from March 14-20,” he said. “If that doesn’t happen, the country will go bankrupt.”
The parliamentary debate started shortly after 3:30 p.m. (1330 GMT; 8:30 a.m. EST), and will take about 10 hours, finishing around midnight.
“By midnight today, before markets open, parliament must send the message that our nation is both willing and able,” Venizelos aid. “Unfortunately, the markets have subjugated states.”
German Finance Minister Wolfgang Schaeuble was quoted as telling the Welt am Sonntag newspaper Sunday that Greece “cannot be a bottomless pit.”
“That’s why the Greeks must finally put a bottom in,” he added. “Then we can put something in too.”
Highlighting previous promises he said weren’t kept, Schaeuble said “that is why Greece’s promises aren’t enough for us any more,” according to the report.
Asked whether Greece has a long-term future in the eurozone, Germany’s vice chancellor told ARD television “that is now in the hands of the Greeks alone.”
Philipp Roesler said in the interview broadcast that what matters is not just Greece making pledges.
“We want … the Greek parliament also to approve laws and, as far as possible, take the first steps to implement what has been agreed,” he said.
“Only when that happens, only then can there be new aid _ and Greece urgently needs that,” said Roesler, who is also Germany’s economy minister.
Roesler acknowledged that Greece faces “difficult decisions” but stressed that Germany wants it to be able to get out of trouble.
“It is not enough just to give financial aid _ they must tackle the second cause of the crisis, the lack of economic competitiveness,” he said. “For that, they need … massive structural reforms. Otherwise Greece will not get out of the crisis.”
Introducing the legislation Sunday, Socialist lawmaker Sofia Yiannaka said the intense pressure from Greece’s EU partners to pass the measures was the result of delays in implementing already agreed reforms.
“The delays have our imprint. We should not blame foreigners for them,” she said.
“We have finally found out that you have to pay back what you have borrowed … We used to say ‘poor state, but rich citizens’ because we tolerated tax evasion for populist reasons. Is this the country we want?” Yiannaka added.
Leftist parties and the small rightist LAOS _ a former junior coalition partner _ have vowed to vote against the new austerity.
“You are not trying to save Greece, but a handful of industrialists,” Communist Party spokesman Thanassis Pafilis said. “And you disgracefully blame the struggling people who created the wealth we have. You are trying to send them back to the Middle Ages. We will not allow it.”
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