Actual finance blog

Orders for manufactured goods posted a surprisingly strong increase in April as demand rose across a number of industries.

The Commerce Department reported that orders were up 1.1% in April following a 1.5% increase in March. Orders had fallen in January and March as a spreading slowdown in the overall economy depressed activity in manufacturing.

The April increase came as a surprise. Analysts had been forecasting a small decline faxless cash advance. Orders in the battered auto industry and in the volatile commercial aircraft sector did fall sharply but other areas showed strength, from rising demand for iron and steel to appliances and heavy machinery. Demand for petroleum was also up sharply, reflecting sharply higher prices. 

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Oil prices will likely take on more importance for the stock market next week as the summer driving season officially kicks off and as more companies are seen feeling the pinch of higher energy prices on their profit margins.

For the week, the Dow fell 3.9 percent, the S&P 500 shed 3.5 percent and the Nasdaq dropped 3.3 percent. For all three indexes, it was their worst weekly percentage drop in three months.

Pressure from higher energy costs is already being felt, with Kimberly-Clark (KMB.N: Quote, Profile, Research) announcing it intends to hike prices on its consumer goods products by 6 to 8 percent in the third quarter. The maker of Kleenex tissues and Huggies diapers said higher energy and raw materials costs were to blame for the price hikes.

Earlier in the week, Ford Motor Co (F.N: Quote, Profile, Research) said it no longer expected to return to profitability in 2009, with analysts saying the automaker’s recent gains have been overrun by a weak U.S. economy and spiraling oil prices.

With the earnings agenda nearly empty, investors will pay close attention for any other intermittent announcements about energy prices and their impact on profitability.

The industries most likely to downgrade their earnings outlooks are those “which have less elasticity of demand, such as the consumer discretionary sector, restaurants in particular,” said Bucky Hellwig, senior vice president at Morgan Asset Management, in Birmingham, Alabama payday loan. “All they can do it make portions smaller or raise their prices, neither which are popular.”

The Dow Jones U.S. Restaurants & Bars index .DJUSRU fell 4.5 percent this week, its worst five-day percentage decline since the first trading week of the year.

More price hikes are likely to come from staples producers, which could help the individual shares, but may stoke overall inflation fears, said Brandon Thomas, chief investment officer with Portfolio Management Consultants in Chicago, a unit of Envestnet Asset Management. 

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Apparel retailer Gap Inc. said Thursday its same-store sales fell 6% in April, widely missing analyst expectations, hurt by weak results at Old Navy and international stores.

Analysts surveyed by Thomson Financial expected combined same-store sales to fall just 1.9%.

Same-store sales, or sales at stores open at least a year, is a key measure of retailer performance, because it measures growth at existing stores rather than from newly opened ones.

For the four-week period ended May 3, same-store sales were flat at namesake Gap (GPS, Fortune 500) stores and Banana Republic, down 12% at Old Navy and down 7% at international stores.

Analysts had predicted declines of just 4.5% and 2.7% at Old Navy and overseas, respectively, while expecting Banana Republic stores to post a 2.8% increase. Gap’s North America same-store sales were slightly better than Wall Street’s projection for a 1% decline.

Total sales rose 1% to $1.1 billion from $1.09 billion last year.

For the fiscal first quarter ended May 3, same-store sales fell 11%, while total sales fell 5% to $3.38 billion credit report. Analysts expected higher sales of $3.45 billion.

Gap said though traffic patterns and sales continue to be challenging, it reaffirmed its earnings outlook for the year.

The company continues to expect earnings between $1.20 and $1.27 per share, while analysts polled by Thomson Financial, on average, expect a profit of $1.23 per share.

The San Francisco-based company said it expects first quarter net of 30 cents to 32 cents per share, including a $15 million tax benefit.

Analysts expect earnings of 27 cents per share. Analyst estimates usually exclude one-time items. 

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Citigroup Inc will present plans to sell as much as $400 billion of extraneous assets when it meets with investors and analysts on Friday, a person familiar with the situation said.

Newly-installed Chief Executive Vikram Pandit, scrambling to slash Citi’s costs and assets that have been hard hit by the global credit crunch, also intends to reaffirm his promise to cut annual expenses at the largest U.S. bank by roughly 20 percent, the source told Reuters on Thursday.

Citigroup declined to comment.

The sales could amount to nearly 20 percent of Citi’s current assets, and according to the Financial Times, which first reported the story on Thursday, would take place over several years.

Although Citi has said previously that it plans to shed assets to improve its capital position, the magnitude of the potential sales struck some analysts as worrisome free credit report online.

“The only reason you’d sell off that many assets is you have a lot more losses coming than you originally thought,” said Jim Huguet, co-chief executive at fund manager Great Companies LLC, which does not own Citi shares.

Since late last year, Citi has recorded more than $45 billion of writedowns and credit losses, raised more than $40 billion of new capital including $2 billion of preferred shares this week, and slashed its dividend 41 percent.

Precisely which non-core assets are for sale is unclear, but analysts speculated that consumer finance businesses in the United States, Japan, Mexico, and Germany are possible. 

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Members of a United Auto Workers union local went on strike Monday at General Motors’ Fairfax facility — hitting the plant that makes GM’s popular Malibu sedan.

During talks over the weekend, UAW Local 31 set a Monday morning strike deadline because union negotiators believed the two sides remained far from an agreement. The Fairfax plant employs more than 2,500 UAW members.

The plant makes the Chevrolet Malibu, a medium-sized sedan that was named "Car of the Year" at this year’s North American International Auto Show in Detroit.

The strike hits a key GM (GM, Fortune 500) product at a time when the company can ill afford it cash til payday loan.

Last week GM announced that it lost $3.3 billion in the first quarter, due largely to one-time charges and North American losses that offset gains in the rest of the world. 

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A top aide to billionaire investor Kirk Kerkorian says Ford Motor Co. should sell its Volvo and Mercury brands.

Jerry York tells Automotive News for a story Thursday he sees no reason for keeping them. York says he’s confident in Ford’s turnaround plan and thinks the automaker will put Volvo on the market within 1 1/2 years.

Kerkorian disclosed Monday that he acquired a 4.7% stake in Ford and hoped to boost his holdings. His investment company plans to make an offer for up to 20 million additional shares at $8.50 a share.

Ford (F, Fortune 500) spokesman Mark Truby told The Associated Press on Friday that Volvo isn’t for sale and that the company is investing in Mercury savings account payday advance. But he said the automaker continues to evaluate its portfolio. 

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The Federal Reserve’s Board of Governors will hold a closed meeting on Wednesday to discuss paying interest on bank reserves, one of a number of options officials have been mulling to address liquidity problems in financial markets in case measures taken to date fail to gain traction.

The Fed announced meeting on its website on Monday.

The meeting does not necessarily mean the U.S. central bank is poised to take that step, which would require congressional action. But Fed officials have identified that measure as among a menu of options the central bank is considering as it copes with persistent problems in credit markets that are weighing on U.S. economic growth.

Congress in 2006 granted the Fed authority beginning in 2011 to pay interest on bank reserves. At the time, the central bank assigned staff to study the implications such a move could have on its operations.

The staff report is now ready and will be presented to the Fed during the regularly scheduled meeting of its interest-rate setting panel, a Fed official added, declining to comment further on whether the presentation is pegged to any imminent steps to boost liquidity.

The information is timely because it comes as Fed officials seek to thaw frozen credit markets with a series of liquidity offerings to banks and financial institutions cash advance flexible payments. Despite offering more than $400 billion in funding through cash and Treasury securities, banks and financial institutions continue to be wary about lending to one another.

Fed officials have been concerned recently that credit markets remain clogged in spite of extensive liquidity measures.

Paying interest on reserves would allow the Fed to separate interest rate policy from liquidity and financial stability policy, JPMorgan economist Michael Feroli said. 

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Passengers can expect to pay higher ticket fares this summer because of soaring fuel prices. But even that may not be able to save many small airlines from going under.

"Consumers need to realize that fares need to go up," said Jim Corridore, airline equity analyst for Standard & Poor’s. "We’re headed towards a year of marginal profitability for the industry at best and large losses at worst."

In fact, fares have already gone up this year, but the relatively modest increase in ticket prices pales in comparison to the fuel price spike.

Domestic fares edged up 6% in January and February, according to the Air Transport Association.

But the price of jet fuel rocketed up 55% during those two months, according to the Energy Information Administration.

"If fares were keeping pace with fuel, then airlines wouldn’t be going out of business," said John Heimlich, chief economist for the Air Transport Association, an industry trade group. He said that 34% of a ticket’s price goes towards covering the fuel cost, compared to 15% in 2000.

Continental (CAL, Fortune 500), Delta (DAL, Fortune 500) and United (UAUA, Fortune 500) recently raised ticket prices. US Airways (LCC, Fortune 500) said it has considered increases as well.

Northwest (NWA, Fortune 500) and Continental have also boosted fees for services such as extra baggage, phone reservations and food.

But these increases may not stick. And they certainly won’t eclipse rising costs, says Philip Baggaley, the senior airlines credit analyst for S&P.

"We think the airlines will raise fares, but it’s not going to be enough to offset the fuel costs in this soft economy," he said. "Jet fuel last year was a third of airline costs and will clearly be more this year. Therefore, revenues will have to rise by a third just to make up the expense."

But a fare increase of that magnitude is unlikely, analysts say, because passengers won’t support it, especially in the face of a recession - even though the slowdown hasn’t taken a bite out of ticket sales yet.

"We’re in a consumer-led recession," said Heimlich fast cash. "That’s the most difficult time to raise fares."

The airlines will have to take other measures, such as purging super-cheap fares, analysts say. Also, experts said they expect airlines to offer fewer flights and charge higher prices for them.

"Reducing capacity is the single most important thing they can do," said James Higgins, analyst for Soleil-Solebury Research. "That means less flights and fewer seats."

Some larger airlines may find some relief in consolidation. Northwest and Delta on Monday announced a plan to merge, which might help them reduce costs if the deal goes through. A Delta-Northwest deal could pave the way for other mergers, such as a rumored United-Continental combination.

But any deal is unlikely to get approved until late this year, if not next year. Plus, it will take some time after completion of a merger for an airline to start realizing savings from a combination.

And several smaller carriers, like ATA, Aloha Airlines and Skybus, have recently filed for bankruptcy as a result of rising fuel prices and said they will cease flying as a result. Frontier Airlines also just filed for bankruptcy but has received approval to continue operations while it reorganizes.

Experts had mixed opinions as to whether more airline bankruptcies and shutdowns will follow suit.

"The weak ones have already fallen," said Bob McAdoo, analyst for Avondale Partners, who is not predicting any more bankruptcies.

But Ray Neidl of Calyon Securities said some smaller airlines were still vulnerable to going under.

And given the rising fuel costs, Heimlich said there will "probably" be more bankruptcies, though he declined to point fingers at specific companies.

"There’s only so much you can do," said Heimlich. "It’s survival of the fittest." 

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A U.S. judge sentenced the “mastermind” behind the collapsed hedge fund Bayou Group to 20 years in prison on Monday, a sentence that reflects the big losses suffered by investors in the $400 million fund.

Samuel Israel III, 48, is the last of three officials at the defunct fund to be sentenced for their role in bilking investors in Connecticut-based Bayou out of millions. The fund’s demise rocked the $1.8 trillion hedge fund industry and led to calls for more oversight.

U.S. District Judge Colleen McMahon rejected requests for leniency by Israel’s lawyer — who cited the Bayou founder’s lengthy list of medical problems, including a bad back, heart problems, and gout. She said he was the “mastermind of this scheme.”

“You were, in every meaning of the sense, a career criminal,” McMahon told Israel, who leaned on the defense table for support and repeatedly wiped sweat from his bald head and neck.

“You ruined lives,” she said, saying investors had lost their retirement funds and money for their children’s and grandchildren’s education $500 payday loan. “They want justice,” she said.

“Financial fraud, white-collar crimes are every bit as heinous as every other type of crime and they will be punished severely,” McMahon said.

Israel was also ordered to make $300 million in restitution. In addition, the judge ordered him to forfeit his interests in a Bank of America Corp (BAC.N: Quote, Profile, Research) account that held a little more than $100 million. She ordered Israel to surrender no later than June 9 to begin serving his sentence.

Israel pleaded guilty in September 2005 to charges of conspiracy and fraud in connection with stealing from Bayou investors over an eight-year period. 

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I recently had a disturbing experience when applying for a job. After three phone interviews, I was asked to interview in person. That meeting went well, and I was told that I would be invited back to meet the rest of the team.

On my way out, I was handed two release forms and told to return them within two days. These forms authorized the company to check my credit report, criminal background and driving record, even though driving isn’t part of the job. Although I have nothing to hide, this request seemed inappropriate.

I responded by both phone and e-mail, saying that I would return the forms after receiving a formal offer of employment, contingent upon a satisfactory background check. I also pointed out that unnecessary credit checks could lower my excellent rating.

Within a day, I was informed that my application was no longer active. Can the company do this?
Although regulated by state and federal laws, the general practice of conducting applicant background checks is both acceptable and common. Employers must have your permission, but if you don’t give permission, they don’t have to hire you.

Used appropriately, these investigations help to identify embezzlers, violent offenders and other undesirable hires. But more upstanding candidates may feel their privacy is being invaded. Smart interviewers explain the purpose of the process instead of robotically dispensing release forms.

The real lesson from your story, however, is that job applicants have virtually no leverage before an offer is made paydayloans.com. Because this company requires background checks, your refusal to return the forms killed your application.

My boss, who is in charge of payroll records, appears to be making some serious errors. Three of us have access to this data, and we all have noticed major mistakes.

Our company is not doing well, and these inaccuracies are costing thousands of dollars. Fixing this problem would help financially.

When we have pointed out past mistakes, however, our manager has gotten really mad. Also, we don’t want her to think we’re spying. What should we do?

Your first loyalty should be to the business. Your boss may be careless, or she may be dishonest. Either way, management needs to investigate.

Document the errors carefully, then meet with a receptive executive or human resources manager. To increase credibility and minimize risk, all three of you should attend this meeting.

But be sure to choose your audience wisely. Select someone who will share your concerns and look into the problem, not simply alert your boss.

Marie G. McIntyre is a workplace coach. Send questions and get tips at www.yourofficecoach.com.

2008, McClatchy-Tribune Information Services

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