Actual finance blog

Strong corporate earnings reports and the lowest unemployment claims in almost four years gave investors more reasons Thursday to take risks on stocks, and the market continued its quiet but solid January climb.

The Dow Jones industrial average gained 45.03 points to close at 12,623.98. The Standard & Poor’s 500 index added 6.46 points to close at 1,314.50. Both averages are at their highest since July.

Volume was slightly above average. The market has been subdued this year: The S&P has moved up or down 1 percent or more only twice, and the Dow has moved 100 points only once, a 179-point gain on opening day, Jan. 3.

But the gains have been steady. The S&P has closed higher 12 of 14 days, and all three major averages have recorded healthy advances for the young year _ 3.3 percent for the Dow, 4.4 percent for the S&P and 7 percent for the Nasdaq composite index.

Investors appear ready to believe that the economic recovery is for real and getting stronger.

“The market is screaming loud and clear,” said Doug Cote, chief market strategist with ING Investment Management. “Prices have lagged fundamentals, and now they’re catching up.”

After the market closed, Google stock plunged more than 10 percent after its earnings per share badly missed Wall Street expectations. Intel and Microsoft rose slightly in after-hours trading after more encouraging reports.

In a sign of a bigger appetite for risk, investors moved money out of U.S. debt, a haven during the stock market’s volatile second half of 2011. The yield on the 10-year U.S. Treasury note increased to 1.98 percent from 1.90 percent Wednesday.

The market was led by industries that tend to perform best when the economy is getting stronger _ consumer discretionary stocks, financials and industrial companies.

Of the 10 categories of stocks in the S&P 500, the only one that lost considerable ground was utilities _ a safe play for investors during turbulent times and the best-performing category last year.

Cote said the market’s gains could accelerate as investors begin to focus more on economic fundamentals in the United States instead of worries about their exposure to risk.

And the economic news Thursday was good: The number of people seeking unemployment benefits plummeted last week to 352,000, the fewest since April 2008 payday loans guaranteed no fax. The decline added to evidence that the job market is strengthening.

U.S. consumer prices were unchanged last month, a signal inflation is under control. In the housing market, a third straight increase in single-family home building in December was offset by a drop in apartment construction.

France and Spain also held successful bond auctions, easing concerns about the debt crisis in Europe. As global risk factors subside, Cote predicts that markets will see “a strong snap-back rally.”

Bank of America rose 2 percent and Morgan Stanley rose 5 percent after reporting encouraging financial results. Bank of America returned to a profit in the last three months of 2011, while Morgan Stanley’s loss was much less than forecast.

Renewable Energy Group Inc., the nation’s largest producer of biodiesel, edged up 10 cents to $10.10 on its first day of trading. It was the first initial public offering of stock this year.

Trading was halted in shares of Eastman Kodak, the iconic photography company, after it filed for Chapter 11 bankruptcy protection. Kodak could not find a buyer for its trove of 1,100 digital imaging patents.

The Dow’s gain for the day amounted to 0.4 percent. The S&P’s came to 0.5 percent. The Nasdaq added 18.62 points, or 18.62 points, to close at 2,788.33.

Among other stocks in the news:

_ eBay Inc., the online auction company, rose 3.9 percent after it beat Wall Street earnings forecasts and gave a healthy outlook for the year.

_ Southwest Airlines Co. rose 3.1 percent after it said its fourth-quarter net income and revenue jumped. Southwest said it expects strong revenue in the first quarter too, based on passenger-booking trends.

_ Johnson Controls Inc., an auto parts and building equipment maker based in Milwaukee, fell 8.8 percent. Its profit and revenue fell short of Wall Street forecasts. It also cut its forecasts, blaming weaker auto production in Europe, a lower euro and poor demand for batteries.

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Asian stock markets rose Wednesday as expectations that China will loosen its monetary policy to boost growth overcame nervousness sparked by mixed earnings reports from big U.S. banks.

Benchmark oil rose above $101 per barrel while the dollar fell against the euro and the yen.

Japan’s Nikkei 225 index rose 1.4 percent to 8,579.80. Hong Kong’s Hang Seng added 0.3 percent to 19,685.87. South Korea’s Kospi was down 0.2 percent at 1,888.88 while Australia’s S&P/ASX 200 was up 0.2 percent at 4,223.60.

Benchmarks in Singapore, Indonesia and Malaysia rose while mainland China and Taiwan fell.

Investors cheered news out of China on Tuesday when the government said its economy slowed less dramatically in the fourth quarter than feared _ but still enough of a slowdown to persuade investors that Beijing will pursue a pro-growth monetary policy, analysts said.

“People have been buying stocks in anticipation of a relaxation in monetary policy by the Chinese government,” said Derek Cheung, chief investment officer at Neutron INV Partners Ltd. in Hong Kong. “The market expects this around Chinese New Year. If China doesn’t loosen around the new year, the market may come under pressure.” The holiday begins Jan. 23.

China is one of the biggest importers and slower growth could have global repercussions if it cuts demand for iron ore, industrial components and other goods from Australia, Brazil, Southeast Asia and elsewhere.

It would also mean less demand for U.S. and European capital goods for Chinese factories and construction sites, and smaller profits for U.S. and European companies that do business here. The luxury goods industry would also feel a significant pinch, since China is just about the only growth market for those.

Commodities shares jumped on the growth data out of China. Australian miners Fortescue Metals Group jumped 5 percent and Rio Tinto Ltd Low fee payday loans. added 1.5 percent after both companies reported target-beating production figures Tuesday.

But some financial shares came under pressure on weak quarterly earnings from some U.S. banks, including Citigroup Inc., which said its fourth-quarter income fell 11 percent due in part to lower investment banking income and an accounting charge.

Australia & New Zealand Banking Group fell 1.1 percent and Hong Kong-listed Agricultural Bank of China also lost 1.1 percent.

South Korean high-tech shares also slumped. Samsung Electronics Co., the top global manufacturer of flat screen televisions, memory chips and liquid crystal displays, fell 0.9 percent. LG Electronics shed 1.8 percent, and Hynix Semiconductor was 1.2 percent lower.

European shares ended mostly higher Tuesday on the heels of short-term debt auctions by Spain, Greece and Europe’s bailout fund that drew strong investor demand, despite recent credit rating downgrades by Standard & Poor’s.

Many had feared the downgrades would prevent them from obtaining funds and worsen a sovereign debt crisis in Europe.

On Tuesday, the Dow Jones industrial average rose 0.5 percent to close at 12,482.07. The Standard & Poor’s 500 index gained 0.4 percent to 1,293.67. The Nasdaq composite index added 0.6 percent to 2,728.08.

Benchmark crude for February delivery was up 66 cents to $101.37 per barrel in electronic trading on the New York Mercantile Exchange. The contract finished at $100.71 per barrel in New York on Tuesday.

In currency trading, the euro rose to $1.2779 from $1.2722 late Tuesday in New York. The dollar fell to 76.65 yen from 76.82 yen.

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French President Nicolas Sarkozy on Monday shrugged off his country’s loss of its prized AAA debt rating, saying the downgrade by rating agency Standard & Poor’s would change nothing.

The comments, his first since S&P lowered its score on France and eight European other countries on Friday, followed a successful auction by France of euro8.6 billion ($10.9 billion) in short-term debt Monday. The yields, the interest rates charged by investors on the debt, fell _ a sign investors still see the country as a good bet.

France won a further small reprieve Monday, when the Moody’s agency confirmed that it would keep its top rating. However, the S&P decision could seriously impair Sarkozy’s bid for re-election this spring.

Sarkozy told reporters he was unconcerned with the opinions of ratings agencies.

“We have to react to this (the downgrade) with calm, by taking a step back,” he said at a news conference with the new Spanish Prime Minister Mariano Rajoy. “At the core, my conviction is that it changes nothing.”

Sarkozy won support from Rajoy for a new European tax on financial transactions being pushed by France and Germany. Rajoy’s center-right government took power last month, and had not previously stated its position on the tax.

The French president said the ratings agencies’ decisions would not affect his policies, though he did acknowledge that France has work to do, saying that its deficits and spending were too high and that its growth was too slow.

He also noted that two of the three major agencies still rate France at triple-A, the highest rating. Fitch confirmed the rating last week. The S&P move was especially brutal for France, one of the world’s biggest economies and a financier of bailouts for smaller, poorer eurozone countries.

There are more government auctions in Europe this week, including longer-term offerings from France on Thursday, so the European debt crisis will never be too far from investors’ minds.

The news conference began combatively when Sarkozy refused to answer a question about whether France’s downgrade would affect its ability to lead Europe out of the crisis and if it had any connection with the meeting between the French, Italian and German leaders scheduled for next week being postponed.

Sarkozy and German Chancellor Angela Merkel have taken the lead in proposing solutions to the crisis and major decisions are often hashed out at their meetings ahead of European summits.

“You don’t have the latest information,” Sarkozy blithely told the reporter, apparently referring to Moody’s decision on Monday. The reporter rephrased the question two more times, but Sarkozy again refused to answer totally free credit score.

Later on, in response to other questions, he confirmed that the three-way summit would take place in February and spoke about the S&P downgrade.

Earlier, Sarkozy met with Spanish King Juan Carlos, who said he’s confident France and Spain would help Europe find a way out of the crisis.

The king said the two nations were “struggling together for the advance of a unified and prosperous Europe in solidarity that confronts the crisis with strength.”

Rajoy’s Socialist predecessor also supported the financial tax championed by Sarkozy, but was ousted from office by Spaniards angry about the country’s hurting economy and high unemployment.

The European Commission has estimated that the tax could raise as much as euro57 billion ($72.2 billion) a year, funds that could be used to help reduce the substantial budget deficits crippling European economies.

For the tax to be successful, however, it needs to be adopted by as many countries as possible. Sarkozy has said it might be enough to enact it among the 17-nation euro countries. Italian Prime Minister Mario Monti prefers applying it across the full 27-nation European Union, but that would be more difficult because of U.K. opposition.

Part of the reason for the tax would be to raise funds at a time when governments are struggling with high debts.

Moody’s cited France’s economic strength as a reason for affirming its top rating but said bleak growth prospects in France and the region present “risks to the French government’s fiscal consolidation plans.”

“France, like other eurozone sovereigns, may face a number of challenges in the coming months. The need to provide additional support to other European sovereigns or to its own banking system cannot be excluded,” Moody’s warned.

Moody’s said Monday it “will update the market during the first quarter of 2012 as part of the initiative to revisit the overall architecture of our sovereign ratings in the EU.”

Sarkozy’s challengers for the presidency have seized on the S&P downgrade as evidence that his policies are wrong-headed and ineffective.

It will be a bruising election battle for Sarkozy, a dynamic leader who has a strong international profile but is widely disliked at home. Leftists say he has coddled the rich, while many of those who supported him in his 2007 campaign say he hasn’t fulfilled his promises.

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President Barack Obama

PARIS

Consumers are demanding better service in unprecedented ways.

In the past several months, public outrage has helped beat back efforts by Bank of America, Netflix and Verizon to raise fees or significantly alter services. The victories come at a time when money is tight all around and consumers are tapping into social media to air their frustrations with like-minded individuals.

“In the past people would be angry, but they’d be all over the country talking to their neighbors,” said Kit Yarrow a professor of consumer psychology at Golden Gate University. “Now they can connect online and they have power.”

For example, petitions on Change.org were instrumental in convincing Bank of America and Verizon to drop plans for new fees. “Bank Transfer Day,” which sprang to life after Bank of America’s announcement, called on Facebook supporters to move their money to a credit union or community bank.

Not every issue demands a mass call to action. But consumers basking in their newfound sense of empowerment should keep their expectations high going into 2012. Here are some strategies for making sure you get the service you deserve.

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Work the chain of command

Before you switch into outrage mode, give a company a fair chance to right any wrongs. It may be that the issue can be easily resolved with a simple email or phone call to customer service.

But if the customary means aren’t helpful, one strategy is to reach out to the company CEO or another high-ranking officer. Most major companies have “executive resolution teams” that field correspondence from customers who take their complaints to the top, says Edgar Dworsky, founder of ConsumerWorld.org, which features news and tips on deals. And these teams generally have a lot more leeway to appease customers.

To get your message in the right hands, start by searching under the “About” section on the company’s website. Even if executive contact information isn’t listed, you can usually figure out their email addresses based on the contact information listed for other employees. Otherwise, try mailing a letter to the corporate headquarters.

“Really boil it down,” Dworsky said. “If it goes on and on, they’re not going to have the time or patience to read it. Put yourself in the shoes of the recipient of the letter.”

Make it easy for the company by quickly spelling out the resolution that you’re seeking. And don’t forget to include any relevant information, such as order numbers or purchase dates.

Reach out and tweet

You don’t have to be Alec Baldwin to have your complaints heard on Twitter.

Most major companies have a social media presence by now. And since they don’t want negative mentions turning up in search results, any reasonable question or complaint is likely to get a response.

Even if you don’t hear back from anyone, it’s likely that companies are taking note of any comments about them.

At JetBlue, for example, a few customers recently tweeted about a crowded gate that only had one agent. That triggered the airline’s social media team to contact staff at the airport to find out if any additional agents were available to help out, said Morgan Johnston, JetBlue’s social media strategist.

But he noted that Twitter is more commonly used to request time-sensitive information that can be conveyed in 140 characters _ such as connecting flight or gate numbers. The company monitors its Twitter account around the clock and tries to respond within a few minutes.

“It’s more of an information booth than a traditional customer service channel,” Johnston said.

Twitter isn’t only for basic information requests, however. Citibank also monitors the site and tries to respond to any questions within an hour, said Frank Eliason, who heads the bank’s social media strategy. If customers need to share personal account information, they’re sent a link to a private page on the bank’s website where they can continue the exchange in the same Twitter-like format.

Call for backup

If you’re not getting anywhere and feel your complaints are being brushed off, it can help to get a third-party involved.

If you paid with your credit card, you can always file a claim to have a charge removed from your account. Keep in mind that you need a concrete reason _ such as a product defect or missed delivery _ to make such claims. Your card issuer isn’t going to investigate a dispute just because you were unhappy with a rude waiter.

Another option is to file a complaint with the Better Business Bureau at www.bbb.org/complaint. The local BBB office will contact the company within two days and ask for a response to the complaint on your behalf. The vast majority of complaints are resolved this way, said spokeswoman Katherine Hutt. That’s because businesses know their ratings are affected by whether they respond to complaints.

For more serious situations where you suspect fraud or feel your rights were violated, consider filing a complaint with the Federal Trade Commission or your state attorney general’s office. You likely won’t get a speedy resolution but at least those agencies will be on notice in case other customers are reporting similar abuses.

Stay connected online

In rare situations, you may feel a company policy calls for a broader action. In the case of Bank of America and Verizon, online petitions were key in quantifying the public’s widespread distaste for new fees.

“It’s an incredibly efficient means of customer feedback that’s not controlled by the company,” said Ben Rattray, founder of the Change.org, which hosted the petitions against both companies. “It’s customer feedback that’s controlled by customers.”

Your issues don’t necessarily have to be with a big national company either. Change.org plans to roll out localized versions so users can voice concerns about businesses in their communities.

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Dropped calls and spotty service, particularly for iPhone owners, made AT&T the most hated wireless carrier in America. Here’s the surprise twist: widespread, under-the-radar improvements to the company’s network have quietly helped AT&T move past its infamous struggles.

The nation’s second-largest wireless carrier says it spent roughly $20 billion last year making 48,000 network enhancements across the country. That spending spree bought a 25% improvement in dropped-call performance on AT&T’s 3G network, plus added capacity and faster speeds.

In the process, the company turned on two new networks. Though both were confusingly labeled "4G," they each offer significant improvements over AT&T’s (, Fortune 500) existing 3G network: one new network has speeds of up to four times faster than 3G, and the other brings a ten-fold improvement in speed.

Yet consumers have been slow to change their opinion of AT&T.

"Satisfaction with our network performance has gone into a neutral state," said John Stankey, CEO of AT&T Wireless, at a telecommunications conference held in San Francisco by Citigroup (, Fortune 500) last week. "Our goal is to go from neutral to positive. We’ve made a lot of progress, but I don’t want to suggest we’re done."

A recent survey conducted by Consumer Reports ranked AT&T the worst carrier in America in terms of customer satisfaction. AT&T received the lowest possible rating on value and voice quality, and the second-lowest possible rating on data service.

That’s not particularly surprising. AT&T’s network woes have been very high-profile thanks to its four-year iPhone exclusivity deal with Apple (, Fortune 500). The wireless giant’s struggles were blasted and mocked everywhere from the mainstream news media to late-night comedy shows.

AT&T’s reputation wasn’t helped by dismal satisfaction with the company’s customer service, according to the Consumer Reports survey. AT&T also took a PR hit during its wildly unpopular T-Mobile takeover attempt.

Still, the mediocre perception of AT&T’s network quality lags behind the much-improved reality, according to wireless industry experts.

Frost & Sullivan, an influential telecommunications industry analysis firm, awarded AT&T its 2011 strategy award for the North American mobile network market, praising the company for its dual-network improvement strategy.

AT&T is gradually rolling out its ultra-fast 4G Long Term Evolution (LTE) network, which will be the mobile network standard of the future guaranteed fast personal loans. AT&T’s LTE network now covers 74 million Americans, which is about a quarter of the company’s 3G network coverage.

At the same time, AT&T is upgrading its 3G network — which operates on the older High Speed Packet Access (HSPA) standard — to what it calls "4G" HSPA+. The upgraded network is now available to more than 285 million Americans, AT&T Wireless CEO Stankey said last week.

Archrival Verizon (, Fortune 500), by contrast, quickly rolled out its LTE network to cover 200 million Americans by the end of last year. But Verizon’s 3G network is based on the Code Division Multiple Access (CDMA) standard, which is essentially maxed out in terms of speed. Sprint’s (, Fortune 500) 3G CDMA network also can’t be upgraded significantly.

That’s potentially a huge advantage for AT&T, since it will take several years for LTE networks to reach the vast majority of Americans the way that 3G networks do today.

"As 4G LTE networks are rolled out nationwide, AT&T’s wireless network strategy will undoubtedly benefit its customers, who will have access to faster speeds, even when outside an LTE coverage area," said Peter Finalle, analyst at Frost & Sullivan.

What’s more, Verizon’s recent 4G struggles give AT&T an opportunity to flaunt its own rival strategy.

Though Verizon has been praised for rolling out its LTE network before any other wireless company even got started, its deployment speed was more out of necessity. It lacked the 3G upgrade option that AT&T has. Verizon is paying for that strategy now, suffering outage after outage: Verizon’s 4G network totaled five nationwide outages in 2011 and four in December alone.

Will customers notice? They haven’t yet. The alphabet soup — 4G, LTE, HSPA and so on — is confusing to most.

"AT&T advertises HSPA+ as ‘4G,’ so the average consumer will likely not think of the carrier as not being current with latest technology," said Ari Zoldan, CEO of Quantum Networks, a next-generation network supplier. "Having HSPA+ in areas outside of LTE markets is very smart and serves a niche for the carrier, and it’s still to be determined whether customers will put enough value on ‘true’ 4G."

AT&T’s network is getting better, and it’s better positioned for the long haul than any of its rivals. Now it just has to wait for perception to catch up to that reality. 

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Stock prices are being increasingly influenced by the trading of exchange-traded funds, with real estate investment trusts as well as energy and consumer companies most affected, according to a Goldman Sachs Group Inc. study.

REITs and energy companies accounted for eight of the top 10 firms in the Standard & Poor’s 500 Index whose trading volume was most driven by trading in ETFs, Robert Boroujerdi, a Goldman Sachs analyst, and three colleagues wrote in a paper released Friday.

Consumer retailers accounted for the five most affected companies in the Russell 2000 Index, which tracks small-capitalization stocks.

ETFs bundle together investments in a particular market index, such as the S&P 500. Unlike mutual funds, they can be traded during daily sessions just like stocks.

They have come under increased scrutiny over whether their trading has increased market volatility and correlation between individual stocks business card. The growing impact of ETF trading on the price movements of individual stocks has discouraged some companies from publicly listing ETFs.

Correlation between the share prices of companies within the same industry groups has increased as ETF assets and trading volume have soared, the study said. Higher correlations indicate that stock prices are rising or falling in tandem.

The Goldman Sachs analysts also estimated the impact of ETFs on the trading volume of individual stocks. Smaller companies were more affected. Among companies belonging to the Russell 2000 small cap index, three had more than 60 percent of their volume driven by ETF trading., led by Houston-based retailer Stage Stores Inc. at 66 percent.

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If Republican primary voters are inclined to reward candidates who have big, bold, game-changing plans for the tax code, Mitt Romney might be in trouble.

Compared to the ideas pushed by other White House hopefuls this cycle — particularly Newt Gingrich — Romney’s plan is just not that aggressive.

Of course, Romney’s plan is still firmly rooted in mainstream Republican thought, and that means big tax cuts and a corresponding reduction in federal revenue.

If the Bush tax cuts remain in place — something Romney favors — the federal government would bring in $180 billion less in 2015 under Romney’s plan, according to an analysis conducted by the Tax Policy Center, a group of tax experts who have already examined the plans of Gingrich and Rick Perry.

The rich would see the most benefit, with individuals in the top 1% receiving a tax cut of more than $80,000, while the average person would get a little more than $1,000 break.

"In many ways, Romney’s tax plank is a fairly mainstream Republican offering," Howard Gleckman of TPC said in a blog post. The plan, he said, contains "no major tax reform."

Romney would leave marginal tax rates on income at their current levels, while eliminating taxes on interest, dividends and capital gains for taxpayers who make less than $200,000.

The Romney plan also calls for the elimination of the estate tax, and a reduction in the tax rate paid by corporations from 35% to 25%.

Other candidates have gone further.

"It’s timid, at least by standards of Republican primary plans," said Daniel Mitchell, a senior fellow at the Cato Institute. "From the perspective of the average primary voter, he is probably just trimming around the edges."

Romney has not proposed a flat tax like Gingrich or Perry, and the front-runner has also shied away from the retail sales tax that was the centerpiece of Herman Cain’s now famous 9-9-9 plan personal loan for poor credit.

The Tax Foundation, a think tank that generally advocates for lower tax rates, has said that Romney’s plan for the individual code "really takes no step toward fundamental reform."

In fact, Romney is the lone Republican candidate who has not proposed modifying current tax brackets or substantially reducing income tax rates. Instead, he has articulated only a vague promise to pursue a future plan with "lower, flatter rates on a broader base."

Even President Obama’s fiscal commission, which won plaudits from both sides of the aisle, planned to lower individual rates across the board while eliminating special deductions and loopholes. Under that plan, the top rate paid by individuals would have dropped from 35% to 23%.

On corporate taxes, Romney favors higher rates than his competitors. Romney’s 25% proposed rate carries a less aggressive reduction than that of Gingrich (12.5%), Perry (20%), Rick Santorum (17.5%) or Ron Paul (15%).

America’s Choice 2012

Andrea Saul, a spokeswoman for the campaign, said Romney’s economic policies are a "blueprint for governing that includes dramatic spending cuts to reduce the deficit and pro-growth tax policies."

Grover Norquist, head of the anti-tax advocacy group Americans for Tax Reform, said late last year that Romney’s plan was "fine" but noted that he was falling behind his rivals.

"I think Romney put his plan in very early, Norquist said on Meet the Press, and he "needs to update it to catch up with where the debate’s going,"

But after capturing the Iowa caucuses, Romney might not need to change or explain his tax policies in more detail.

"If you’re the front-runner, then there are a lot of incentives to just run out the clock," Mitchell said. 

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The job market is looking a little brighter at the start of the new year.

Weekly unemployment benefit applications have fallen to levels last seen more than three years ago. Holiday sales were solid. Service companies grew a little faster in December. And many small businesses say they plan to add jobs over the next three months.

The mix of private and government data released Thursday sketched a picture of an economy that is slowly strengthening, stoking optimism one day ahead of the government’s important read on December job growth.

“Businesses have increased hiring to meet the underlying pick-up in (consumer) demand,” said Neil Dutta, an economist at Bank of America Merrill Lynch.

The mostly positive reports had little impact on financial markets. Traders seemed more focused on the debt crisis in Europe, which could slow U.S. growth later this year. The Dow Jones industrial average dropped 37 points in midday trading. Broader indexes were mixed.

Weekly applications for unemployment benefits dropped to a seasonally adjusted 372,000 last week, the Labor Department said Thursday. That’s 11 percent lower than the same time last year.

The four-week average, which smooths fluctuations, fell to 373,250 _ the lowest level since June 2008.

When applications drop below 375,000 _ consistently _ they generally signal that hiring is strong enough to reduce the unemployment rate.

Steven Wood, an economist at Insight Economics, said applications last year averaged 411,000 per week, down from 459,000 per week in 2010.

That’s “a clear indication that the pace of layoffs has slowed,” Wood said.

U.S. service firms, which employ roughly 90 percent of the work force, grew a little faster in December, according to the Institute for Supply Management.

The trade group of purchasing managers said its index of non-manufacturing activity rose to 52.6. That’s slightly above November’s reading of 52 _ the lowest in nearly two years _ but well below last year’s high of 59.7 recorded in February.

Any reading above 50 indicates expansion.

An increase in new orders and stronger imports drove last month’s modest expansion. But a gauge of hiring showed many service firms were hesitant to add workers no fax payday advance.

Retailers, meanwhile, reported solid but not spectacular sales gains last month. And much of the increase stemmed from heavy discounting that will likely cut into profits.

Sales rose 3.5 percent in December for a group of 25 retail chains tracked by the International Council of Shopping Centers. Holiday sales, which cover the last two months of the year, rose 3.3 percent, a decent rise but less than last year’s gain.

Small businesses remain encouraged about their plans to hire over the next three months. The National Federation of Independent Business says the proportion of those firms that expect to add workers is slightly off from the three-year high hit last month.

Economists are predicting that overall hiring increased in December and will strengthen this year.

John Ryding, an economist at RDQ Economics, forecasts that employers added 180,000 jobs last month, a big jump from November’s 120,000 net jobs.

Economists surveyed by the Associated Press project that the economy will generate an average of 175,000 jobs per month this year. That would be a step up from average monthly gains of 130,000 last year and 78,000 in 2010.

In November, the unemployment rate fell to 8.6 percent from 9 percent. Still, about half that decline occurred because many of the unemployed gave up looking for work. When people stop looking for a job, they’re no longer counted as unemployed.

The pickup in hiring reflects some modest improvement in the economy. Growth will likely top 3 percent at an annual rate in the final three months of this year, economists expect. That would be a sharp improvement over the 1.8 percent growth in the July-September quarter.

Even so, many economists forecast that growth could slow to roughly 2 percent this year. Europe is almost certain to fall into recession because of its financial troubles. And without more jobs and higher incomes, consumers may have to cut back on spending. That could drag on growth in 2012.

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AP Economics Writer Martin Crutsinger contributed to this report.

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