Actual finance blog

U.S. stocks fell sharply in afternoon trading after seesawing through most of the morning. The Dow Jones industrial average dropped nearly 190 points and the S&P 500 hit a new low for the year.

European markets slumped, dragging U.S. stocks down along with them, after Greece said it will miss deficit reduction targets it agreed to as part of its bailout deal. Benchmark indexes in Germany, France and Spain all fell 2 percent.

The Dow briefly turned higher after 10 a.m., when the Institute of Supply Management said its gauge of U.S. manufacturing did better than Wall Street had predicted in September. The Dow and S&P turned mixed within 20 minutes, then took a sharp slide shortly after noon.

The Dow Jones industrial average was down 186 points, or 1.7 percent, to 10,729 at 1:15 p.m. Eastern.

The S&P 500 lost 22, or 2 percent, to 1,109. That’s below its closing low of 1,119 for the year, reached on Aug. 8.

The Nasdaq composite fell 52, or 2.2 percent, to 2,362.

All 10 company groups in the S&P index fell. Banks, energy, and consumer discretionary stocks had the steepest declines. The yield on the 10-year Treasury note fell to 1.79 percent from 1.91 percent late Friday as investors piled into lower-risk investments.

“The market is continuing to trade based on what is happening in Europe, and that is going to overshadow everything else,” said Quincy Krosby, market strategist at Prudential Financial. “The math (for the Greek bailout) didn’t add up a year ago, and the math doesn’t add up today. The market knows that and is waiting for the Europeans to acknowledge it.”

The renewed concerns about Europe’s debt problems pushed the U.S. dollar up 0.8 percent against the euro. That could hurt large U.S. companies that rely on exports by making their products more expensive overseas. Coca-Cola Co. fell 3 percent. Caterpillar Inc., which sells construction equipment globally, lost 3.8 percent.

Concerns that the U.S. economy is headed for another recession helped send the S&P 500 index, the basis for most mutual funds that invest in U.S. stocks, down 14 percent over the three months that ended in September. It was the worst quarter for the stock market since the financial crisis of 2008.

In corporate news, Yahoo gained 2.3 percent to $13.45, after the head of Chinese Internet company Alibaba Group Holdings said he would be interested in buying the company. Yahoo, which recently ousted Carol Bartz as its CEO, has been trying to decide whether to sell parts of the company.

Bank of America fell to its lowest price since the financial crisis in 2008. The bank lost 4.8 percent to $5.83. The company has fallen 56 percent since January.

Netflix rose 0.2 percent after an analyst from Morgan Stanley upgraded the company following a sharp drop in its stock price. Netflix has plummeted 60 percent from its recent high of $304 because of a drop in subscribers and a plan to split its streaming service from its DVD-by-mail business.

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The European banking system is teetering. Congress lurches from one government shutdown crisis to another. Unemployment in the U.S. is stuck at 9 percent with no improvement in sight.

Amid it all, the stock market has gone manic-depressive, jumping one day and tanking the next business card. The Dow Jones industrial average is off 5.7 percent for the year.

That leaves the risk-shy investor yearning for shelter

Stock futures are rising, signaling another day of gains on Wall Street. Investors will assess fresh U.S. economic data and closely watch developments in Europe.

The government is expected to report Wednesday that factory orders for long-lasting manufactured goods fell in August after rising in July. Manufacturing has been one of the strongest parts of the economy since the recession ended.

Investors also remain focused on Europe. Stocks have soared this week on hopes that the region is moving closer to resolving its debt crisis.

About 90 minutes before the opening, Dow Jones industrial average futures are up 64 points, or 0.6 percent, at 11,184. Standard & Poor’s 500 futures are up 7, or 0.6 percent, at 1,176. Nasdaq 100 futures are up 11, or 0.5 percent, at 2,265.

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China’s Ministry of Land and Resources has ordered a further tightening of controls on strategically vital rare earths used in advanced manufacturing, for the sake of what it says is “sustainable and healthy development.”

The order seen Tuesday on the ministry’s website calls for tighter controls over unauthorized exploration, mining, processing and sales of such minerals, which are used in mobile phones and other high-tech products.

It cites vice minister Wang Min as calling the materials _ which are not rare but have unique qualities that make them useful for high-tech applications _ the “vitamins” of modern industry.

China accounts for 97 percent of world production of rare earth metals. It has alarmed global manufacturers by reducing exports while it tries to build up its own industry, prompting pressure from Europe and the United States to treat foreign and domestic buyers equally.

Wang emphasized the need for vigilance over use of China’s “21st century treasure trove of new materials.”

The crackdown is focused on three regions with abundant rare earth reserves _ Inner Mongolia, Shandong and Sichuan. Officials from those areas agreed to cooperate in controlling rare earths reserves, production and trading.

Generally, repeated crackdowns suggest earlier restrictions may not have been fully enforced.

The latest move followed an industry gathering in Baotou, a major center for rare earths and other raw materials such as coal.

Rare earths are a group of 17 minerals used in manufacturing flat-screen TVs, mobile phones, batteries for electric cars, wind turbines and weaponry.

China has about 30 percent of the world’s rare earths. The United States, Canada and Australia also have deposits but stopped mining them in the 1990s as lower-cost Chinese ores flooded the market. Companies are restarting production in North America and elsewhere but the Chinese restrictions have pushed up global prices.

China has said it is restricting exports of rare earths to conserve scarce supplies and curb environmental damage caused by mining. But foreign governments complain similar limits were not applied to domestic manufacturers that use rare earths.

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Debra Fox lost her management job at a St. Louis technology company in February, more than a year after the recession officially ended. As far as she’s concerned, it’s still going on.

Fox is among 6 million Americans who have been out of work for six months or more, a group that seems in jeopardy of becoming a permanent underclass if the job market doesn’t turn around soon.

It’s not the first time she’s been unemployed, but Fox, 55, of Creve Coeur, says this is by far the most difficult job search she’s undertaken. She believes employers are pickier simply because they can be.

“If there are 10 attributes they are looking for and you have eight of the 10, you won’t make the cut,” she says. “It’s the whole cyclical thing. It’s something that needs to get kick-started somehow.”

But how? That’s the question being asked as Congress considers President Barack Obama’s proposal for an $447 billion jobs program. Some Democrats say it should be bigger, while Republican leaders say it will just inflate the budget deficit without creating many jobs.

Much of the debate is partisan posturing, but it also involves a difficult economic question. Does today’s 9.1 percent unemployment reflect long-lasting structural changes, like the housing downturn that has cost legions of construction workers their jobs, or is it just a cyclical problem that can be cured by faster economic growth?

David Andolfatto, a vice president and economist at the St. Louis Federal Reserve Bank, believes it’s probably a bit of both. The debate, he says, is between Humpty Dumpty and a deflated balloon.

Deflated-balloon thinkers attribute the economy’s ills to a severe lack of demand. If the government could just stimulate more spending, the balloon would reinflate.

The Humpty Dumpty hypothesis holds that the economy is badly broken, and stimulus won’t work until we’ve repaired the structural issues.

The severe financial crisis that accompanied the recession certainly did leave parts of the economy looking shattered. General Motors and Chrysler laid off thousands of people as they went through bankruptcy. When the housing bubble collapsed, so did the job market for construction workers.

Growing industries, like health care, don’t have much use for the specialized skills of an auto worker or a carpenter. A worker displaced by structural change may need to retrain, accept a much lower wage or wait out a long stretch of unemployment - or all three.

The story also has a geographic element. Normally, we’d expect workers to move from areas where jobs are scarce, like Michigan, to states where unemployment is low, like North Dakota. Moving becomes difficult, though, when a lot of people are locked into mortgages that exceed their houses’ worth.

Conventional policy measures, like stimulus spending by the government or monetary easing by the Federal Reserve, may not help workers much in such an environment. “The Fed can’t train a construction worker to become a nurse,” Andolfatto says.

The best evidence for the Humpty Dumpty hypothesis may be a couple of numbers from the Bureau of Labor Statistics: Between July 2009 and July 2011, employers reported 52 high risk personal loans.8 percent more job openings, but they increased hiring by just 8.7 percent. In other words, companies are having a hard time matching the skills they need with the workers who are available.

“It’s not a slam dunk, but it certainly does suggest that perhaps structural factors are playing some role,” Andolfatto says.

Data on business confidence, however, support the deflated-balloon story. A survey by the National Federation of Independent Business says that more companies expect their sales to fall than to rise in the months ahead.

When you’re pessimistic about future orders, you’re likely to put any hiring plans on hold. That may be why employers, as Fox says, are being picky.

Are they being rational, though? That’s a key question, Andolfatto says: If they are, and they’re reacting to deep-seated problems like the federal budget deficit, then a government spending spree won’t help.

If, on the other hand, employers are succumbing to emotion and panic, the government should make investments that will help break the cycle of fear.

Ken Matheny, an economist at Macroeconomic Advisers in Clayton, acknowledges that some structural factors are at work, but he thinks unemployment is mostly stuck in “a long and severe cycle that takes a long time to overcome.”

Obama’s proposed American Jobs Act would have some benefits, but they’d be temporary, Matheny says. His firm’s base forecast is for unemployment to fall slowly, to 8.9 percent next year and 8.4 percent in 2013. If all of the president’s stimulus measures are enacted, Matheny says, the jobless rate would drop faster, to 8.6 percent in 2012 and 8 percent in 2013.

For the long-term unemployed, such slow improvement is cold comfort. Ruth Ann Edwards, 58, was laid off from a health care call center last October, and she doesn’t think her job skills are out of date. She enrolled in a community college program to earn a certificate as a health-information professional, but she’s landed only three job interviews in 11 months.

“I don’t think there are very many opportunities out there,” she says.

D.C. Cooper, 50, has been out of work even longer: He was part of an AT&T downsizing in December 2008. Cooper’s résumé features a four-year-old master’s degree and a recently earned certificate in Lean Six Sigma, a quality-improvement discipline, but he says his long spell of unemployment seems to count against him.

“If you’ve been out for over six months, companies won’t interview you,” he says. They feel as though you’ve been out that long, so there must be something wrong with you.”

In reality, the flaw is with the economy itself. Whether it’s a deflated balloon or a shattered egg is open to debate, but either way, the repairs are going to take a very long time.

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The St. Louis region is not only getting its second Nordstrom department store this week — it will also soon have a second Nordstrom Rack.

A 35,000 square foot Nordstrom Rack, the retailer’s smaller off-price store, is scheduled to open in fall 2012 in Manchester. The store will be located on Manchester Road next to a Weekends Only Furniture Outlet. It is just east of the Manchester Highlands where there is a Costco, Walmart, Best Buy and more.

It will be about three miles from West County Center, where Nordstrom opened its first full-line department store in the region back in 2002.

On Friday, Nordstrom will open its second full-line department store at the St. Louis Galleria, just down the street from the Nordstrom Rack it opened last year.

“We find that our Racks do well when they’re located near full-line department stores,” said Brooke White, a Nordstrom spokeswoman. “That’s something that’s worked well for us.”

So I guess this must mean that the first Rack here has done well?

“Yes, we’re happy with our business at our store in Brentwood,” White said. “That’s really what helps us decide that we should move ahead.”

Nordstrom announced the new location in St. Louis today after the Post-Dispatch inquired about it on Monday.

Construction of the store is to begin immediately, according to Pace Properties, which will develop and own the building.

Nordstrom has been on a expansion boom with its Rack stores in recent years, especially as customers have gravitated toward more discount offerings in this economy. It opened about 17 Rack stores last year and plans to open 18 this year. The Manchester store is one of six stores planned for next year, White said.

Nordstrom Rack carries merchandise that is 50 to 60 percent off Nordstrom department store prices. About 20 percent of it comes from full-line Nordstrom stores. The rest is specially-purchased from the same brands, but will often be the previous year’s designs and will often have fewer bells and whistles.

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LONDON — World stocks and the euro fell sharply on Monday as investors feared a messy Greek default within weeks unless Athens implements the austerity measures demanded by its international lenders.

International lenders told Greece on Monday that it must shrink its public sector and improve tax collection to secure a vital 8 billion euro rescue payment next month.

After a rare four-day rally in world stocks last week, markets fear the crisis is worsening again after Greece’s prime minister cancelled a U.S. trip to chair an emergency cabinet meeting at home and German Chancellor Angela Merkel suffered a regional election loss.

EU finance ministers also failed to make progress on the debt crisis at the weekend, and the focus is now shifting to a conference call between Greece and its international lenders at 1600 GMT to see how Greece plans to make up its budget shortfall and avoid a disorderly default.

With the gloom so widespread, investors took little comfort from expectations that the Federal Reserve would introduce new measures to stimulate the U.S. economy later this week.

“It’s no more a link between markets and economics, but a link between markets and politics. The politicians should have seen the crisis coming and done more, but the problem is they are not proactive,” said Koen De Leus, strategist at KBC Securities, in Brussels.

“We are just going from one crisis to another. It’s a nightmare for the markets.”

The MSCI world equity index fell 1.1 per cent on the day, after posting its biggest weekly gain since early July last week in buying largely driven by short-term players.

Long-term asset managers have been either staying on the sidelines, or steadily cutting back on exposure to risky assets. The MSCI index is around 5 per cent above its one-year low hit earlier in September.

European stocks lost nearly 2 per cent, led by sharp losses on the banking sector, while emerging stocks dropped nearly 2.2 per cent. U.S. stock futures pointed to a weaker open on Wall Street later.

The euro fell more than 1 per cent to $1.3632.

POLICY RISKS

Events this week promise a heavy dose of policy action.

Finance ministers of the BRIC emerging economies — Brazil, Russia, India and China — meet later this week to discuss steps to offer support to the euro zone.

Market sentiment may change if they buy euro-denominated bonds, as suggested in preliminary talks, after the European Central Bank’s 70 billion euro bond-buying spree over the last five weeks or so failed to stop the crisis from spreading to Spain and Italy.

Investors will also be watching U.S. President Barack Obama’s deficit-reduction plan on Monday aimed at covering the cost of his recent jobs bill.

U.S. crude oil was down 1.4 per cent to $86.76 a barrel.

Bund futures rose 78 ticks.

The dollar gained 0.7 per cent against a basket of major currencies, supported by expectations that new Fed measures would be focused on the maturities of the debt it buys rather than on expanding its already swollen balance sheet.

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Ameren Missouri Vice President Mark C. Birk went to considerable lengths in a Post-Dispatch guest column last week to explain why the utility’s leaking coal ash pond at the Labadie power plant doesn’t pose a risk to groundwater — an argument that members of the Labadie Environmental Organization still don’t accept.

So it was surprising to see on Ameren’s website Wednesday afternoon a statement that the utility planned to place monitoring wells around all of its Missouri coal ash ponds.

Specifically, Ameren’s website said:

We have also volunteered to implement the Utility Solid Waste Activities Group’s (USWAG) Action Plan. USWAG is a consortium of more than 80 utility operating companies that generate more than 70% of the electricity used in the United States. Compliance with the USWAG Action Plan will result in the placement of monitoring wells around our Missouri ash ponds and other surface impoundments.

The mention of a groundwater monitoring plan (you can see a cached version of the web page on the left) prompted several questions, such as: When would monitoring wells be installed? When did Ameren commit to the USWAG plan? How often would sampling be done? What pollutants would be tested for?

On Thursday, after a Post-Dispatch inquiry, the company deleted the paragraph. Utility spokeswoman Rita Holmes-Bobo explained that the web page was out of date payday loan companies. Ameren has no plans to monitor groundwater at existing Labadie ash ponds.

Holmes-Bobo said that Ameren put the monitoring plan on hold when the Environmental Protection Agency began developing rules for coal ash disposal.

Mike Menne, an Ameren vice president, told the Post-Dispatch last month that the utility was part of an industry group, presumably USWAG, that was working with the EPA to voluntarily implement groundwater monitoring before the 2008 Kingston, Tenn., ash spill.

It was that disaster that renewed the debate over coal waste and prompted the EPA to propose the first national rules for coal ash disposal. Two coal ash disposal rules were issued in May 2010, but implementation of a final rule has been delayed.

Meanwhile, the utility does plan to fix the leaks, or “seeps,” as it calls them.

And discussion over a proposed coal waste landfill at Labadie continues. A draft of proposed land use regulations to accommodate utility waste landfills was supposed to be complete by July 19. But the Franklin County counselor went on medical leave for a month before the draft was complete. There’s no word yet on when the draft will be complete.

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Stock futures are falling, a day after major indexes notched only their second day of gains this month.

Major European markets are trading mixed Tuesday after Italy’s finance minister confirmed that officials had met with China’s sovereign wealth fund about buying Italian bonds. Worries that Italy or Spain would have trouble paying down debts have been hanging over markets worldwide.

Traders said a report that China may buy Italian government bonds played a role in a Monday afternoon rally that pushed stocks higher for the second day this month.

Ninety minutes ahead of the opening bell, Dow Jones industrial average futures are down 51 points, or 0.5 percent, to 10,938. S&P 500 index futures are down 6 to 1,150. Nasdaq 100 futures are down 7, or 0.4 percent, to 2,182.

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Egypt’s benchmark stock index fell slightly on Sunday, weighed down by investor unease after the storming of Israel’s embassy and protests in Cairo over the weekend. Inflation, meanwhile, eased in August to 8.5 percent on a slower increase in food prices.

The Egyptian Exchange’s EGX30 index closed almost 1.2 weaker, at 4,698 points the first day of the trading week. The index’s year-to-date losses are at about 34 percent.

“To be honest, we were expecting a lot worse than this _ maybe a fall of 3 to 4 percent,” said Khaled Naga, a senior broker with Mega Investments. “Even so, I’m not recommending anyone buy at this time. … There could still be a lot of problems cropping up this week.”

But in a measure of good news, the government’s statistical arm announced Saturday that annual urban inflation had dropped to 8.5 percent in August, from 10.4 percent in July. The decline came as food inflation, which accounts for over 40 percent of the consumer price index, increased at a slower pace in the month _ 12.2 percent compared with 16.7 percent the prior month.

Food inflation, in particular, was seen as one of the factors that fueled Egyptians’ frustrations ahead of the Jan. 25 revolution, and a decline in that key figure could help ease some of the economic pressure the country’s more than 80 million citizens feel daily.

In addition, Suez Canal revenues, a key source of foreign income for the government, climbed to $472.9 million in August, gaining 7.9 percent on the same month in 2010 and hitting a roughly three-year high, government figures showed.

Analysts warned that Egypt still faced major pressures in trying to retrench and rebuild its economy, which recorded GDP growth of 1.8 percent in the 2010-2011 fiscal year. Before the Jan. 25 uprising, economic growth had been projected at nearly 6 percent.

London-based Capital Economics, which is forecasting that GDP will contract by 1 percent in the current fiscal year, said in a recent research note that given the current global economic climate, “it is too early to expect a rapid recovery.”

In a reflection of the difficulty Egyptian officials have faced, the country’s net international reserves have slipped to slightly more than $25 billion, roughly $11 billion below their December 2010 levels. The slide, in part, is linked to efforts to support the Egyptian currency.

The storming of the Israeli Embassy over the weekend was the most serious challenge to relations between the two countries since the signing of their peace treaty in 1979. An angry mob, for hours, laid siege to the embassy, trapping six Israeli guards in a safe room before they were rescued by Egyptian commandoes.

The incident at the Israeli Embassy spoke not only to the anger over the shooting death of six Egyptian soldiers along the country’s border with Israel last month, but also the hostility toward the Jewish state many feel in the country despite the peace agreement. The soldiers were killed as Israeli troops pursued militants who had launched an attack inside Israel that killed eight Israelis.

It also reflected the pressures and challenges confronting Egypt’s military rulers, who are balancing often opposing ends of placating an irate Egyptian populace after Mubarak’s ouster and pushing the country toward an elected civilian leadership.

The 18-day uprising that began in late January opened the floodgates to decades of pent up resentment over a widening income disparity, shoddy salaries, poor social and educational systems and the general sense in the Arab world’s most populous country that opportunities were something that came through nepotism and cronyism versus skills and perseverance.

The continuing mass protests have battered Egypt’s economy, undercutting vital tourism revenue and crimping foreign direct investment.

In a reversal of an earlier decision that would likely have done little to spur tourism, the government froze a ruling requiring tourists and other visitors to apply for visas before arrival in the country, the official MENA news agency reported, citing the deputy tourism minister.

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