Actual finance blog

The owner of Quality Candy Shoppes and Buddy Squirrel has filed for Chapter 11 bankruptcy, but the future of the 13-store St. Francis-based chain could not immediately be determined.

Quality Candy Shoppes/Buddy Squirrel of Wisconsin Inc. filed for bankruptcy Jan. 15 in U.S. Bankruptcy Court in Milwaukee. The company listed assets of between $1 million and $10 million and liabilities in the same range.

Two of the company’s largest unsecured creditors are suppliers: Cargill Inc., for $89,938, and Wright Brothers Paper Box at $10,959. The other top unsecured creditors include radio station owner Lakefront Communications, $10,332; George Pinter, accounting services, $8,910, and J.M. Swank Co., $8,032.

Harris Bank is the company’s secured lender and is owed an unspecified amount.

In a Jan. 19 hearing, Quality Candy/Buddy Squirrel sought emergency funding to make its payroll. Bankruptcy Judge Margaret McGarity approved the motion and required the company to provide an accounting of its cash use by this Wednesday and make interest-only payments to the bank until then payday loans guaranteed no fax.

Another hearing is scheduled for Feb. 8.

Jonathan Goodman, an attorney for the company, declined to comment Monday. The president, CEO and sole shareholder is Margaret Gile, who represents the third generation of family ownership.

Quality Candy was founded in Milwaukee in 1916, according to the firm’s Web site. In the 1960s, Quality Candy bought Buddy Squirrel of Wisconsin, and in 1999, the two businesses were merged and the company was renamed Quality Candy Shoppes/Buddy Squirrel of Wisconsin Inc. The company built a 15,000-square-foot distribution center in 2001.

Margaret Gile, represents the 3rd generation as owner and president.

Quality Candy/Buddy Squirrel owns and operates stores in the Milwaukee area, Racine and Madison.

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Glen W. Bell Jr., founder of the Taco Bell restaurant chain, died Saturday at his home in Rancho Santa Fe, Calif. He was 86.

Bell was born Sept. 3, 1923 in Lynwood, Calif.

He founded the Taco Bell chain in 1962 in Downey, Calif., and sold the first franchise in 1964. He sold his entire 868-franchise company in 1978 to PepsiCo., which spun the company off in 1997 as a part of Louisville-based Tricon Global Restaurants Inc. Tricon became Yum Brands Inc. (NYSE: YUM) in 2002.

Yum Brands also owns Pizza Hut, Long John Silver’s A&W Restaurants, and KFC.

Today, Irvine, Calif.-based Taco Bell has more than 5,600 U.S. restaurants that serve about 36.8 million customers each week.

"The entire Taco Bell family of franchisees and employees are deeply saddened by the loss of the founder of Taco Bell. Glen Bell was a visionary and innovator in the restaurant industry, as well as a dedicated family man," Greg Creed, president and chief concept officer of Taco Bell, said in a news release. "His innovative business acumen started out of humble beginnings and created one of the nation's largest restaurant chains in Taco Bell. Mr. Bell introduced an entire nation to the taco and Mexican cuisine."

Click here to read the full release.

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MONTREAL–Bombardier Inc. has received an order from Spain's national rail operator to maintain a fleet of high-speed trains for 14 years, the transportation equipment maker announced Thursday.

RENFE will pay US$917 million to Bombardier and Spanish railway vehicle maker Talgo to maintain the new trains. Bombardier's share of the contract comes to US$405 million.

The maintenance activities will take place at RENFE's depots in Spain with work expected to begin in 2010.

Bombardier will be responsible for the preventive and corrective maintenance of the train power-heads, power supply, signalling and propulsion system and auxiliaries.

The trains that will be maintained are currently being manufactured by Bombardier in association with Talgo.

Bombardier is no stranger to Spain's railway industry, and employs more than 600 people at various sites in the country. The AVE 102 and AVE 103 high speed trains and the Madrid Barajas airport people mover are among its key projects in the region.

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Greek Prime Minister George Papandreou pledged “radical” action to bring the country’s budget deficit within European Union limits by 2013 as the two- month old government struggles to convince investors it can get to grips with public finances.

“In the next three months we will take those decisions which weren’t taken for decades,” he said in a speech in Athens today, attended by union and employer-group representatives, and politicians. Papandreou, who came to power in October, said many choices will be “painful,” though he pledged to protect poorer and middle-income Greeks.

Papandreou is trying to shore up confidence in Greece after its bonds tumbled last week amid concern about its commitment to cutting the European Union’s largest budget deficit, set to reach almost 13 percent of economic output this year. Fitch Rating cut Greece one step to BBB+ and the yield on the Greek 10-year government bond has risen more than a percentage point to 5.465 percent since Oct. 8.

“It does not appear that he has provided much insight into how he will reduce Greece’s heavy debt burden,” Brown Brothers analysts led by New York-based Marc Chandler wrote in a research note. “The most important take-away point is that key decisions will be made over the next three months and the pain will be distributed.”

European Central Bank Vice President Lucas Papademos on Dec. 12 said Greece’s fiscal situation is “extremely serious.”

Papandreou, who said he will forge a “new national” agreement, today pledged to cut the deficit, to under 7 percent from 2011 and begin reducing the debt, set to exceed 100 percent of gross domestic product this year, from 2012 Payday advance. That will be achieved through taming the deficit and selling more state asset beginning next year.

The premier said revenue to reduce debt would come from exploiting the state’s real estate holdings, a real estate investment fund, as well as securitization of income from the state’s tax on major property holdings.

Under pressure from the EU to move quickly, Papandreou said he would step up talks on an overhaul of the tax system, one of his election pledges. The new system will be in place in the first quarter of 2010, he said.

The audience applauded when Papandreou announced executives of banks under state control wouldn’t get any bonuses and those paid at private banks would carry a 90 percent tax rate.

The government will set up a new economic police department to stamp out contraband, tax evasion and corruption, a key plank in the Socialists’s agenda to boost revenue.

“Today our biggest deficit is that of credibility,” Papandreou said. “In the last years Greece lost all traces of credibility, which is why international institutions, partners want to see actions.”

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Options traders are growing less bullish on the yen after efforts by Japanese officials to boost the world’s second-biggest economy and a U.S. jobs report led to the currency’s biggest weekly decline in a decade.

Japan’s currency plunged 2.5 percent against the dollar and 1.3 percent versus the euro on Dec. 4 after America’s Labor Department said employers cut the fewest jobs since the recession began. The yen sank 4.5 percent versus the greenback for the week, the most since February 1999 and retreating from a 14-year high. Traders sold yen and bought dollars on speculation interest rates in the U.S. will increase before June.

“The improving U.S. jobs market suggests the Federal Reserve won’t stand pat on interest rates longer than the Bank of Japan,” said Kazutoshi Yasuda, general manager of the markets department in Tokyo at FX Prime Corp., a unit of Itochu Corp. Increased U.S. borrowing costs would lead traders to favor using yen to finance higher-yielding investments, leading to more losses for the Japanese currency, he said.

Options showed declining bets that the yen will rise. The odds for a gain to 84.5 yen per dollar by the end of March from 90.56 last week fell to 38 percent from 80 percent on Nov. 30, data compiled by Bloomberg show. Chances of a decline to 92 versus the dollar by Dec. 31 reached 63 percent. Options grant buyers the right to purchase or sell an asset at a predetermined price.

Weekly Tumble

The yen tumbled 3.6 percent versus the euro to 134.54 last week, the sharpest slide since the week ended April 3. The yen’s biggest drop during the week came after the U.S. Labor Department said payrolls dropped by 11,000 last month, the smallest decrease since the recession began in December 2007.

“What the job numbers do is firm up expectations that the Fed interest-rate hike is coming,” said Camilla Sutton, a strategist in Toronto at Bank of Nova Scotia, the nation’s third-largest lender. “That should be a strong-dollar story.”

Federal-funds futures contracts on the Chicago Board of Trade show a 43.3 percent probability that the U.S. central bank will lift its target rate for overnight bank borrowing to 0.5 percent by June from a range of zero to 0.25 percent now, up from 12.6 percent a month ago.

UBS AG expects the Fed to set its key rate at the top end of its 0.25 percent range in April and follow with a quarter- point increase in June. The jobs report and last week’s gains “suggest the greenback is finally turning,” Mansoor Mohi-uddin, the Zurich-based bank’s global head of currency strategy, wrote in a note to clients.

Best Performer

The yen was the best performer against the dollar among the 16 most-traded currencies the past four years, Bloomberg data show. It surged to 84.83 on Nov. 27, the strongest since July 1995, from 124.13 in June 2007. The yen tends to advance amid financial turmoil because Japan’s trade surplus reduces reliance on foreign capital.

Record low U.S. interest rates have kept the dollar under pressure at the expense of the yen, making the greenback the favorite for so-called carry trades, where investors raise funds in countries with low borrowing costs and use the proceeds to invest in countries with higher returns.

Benchmark rates of as low as zero in the U.S. and 0.1 percent in Japan compare with 3.75 in Australia and 2.5 percent in New Zealand.

The London interbank offered rate, or Libor, for three- month loans in the U.S. currency has been below the equivalent yen rate since Aug. 24. In the decade before then, the dollar rate averaged 2.94 percentage points more than the yen rate.

‘Extreme’ Positioning

Contracts betting the yen would climb against the dollar rose to 51,710 on Nov. 27, the most since May 2008, according to data from the Commodities Futures Trading Commission in Washington based on contracts at the Chicago Mercantile Exchange. As recently as June, there more contracts betting on a decline in the yen than a gain.

Such “extreme” positioning may suggest that the decline in the yen represents traders unwinding “long” positions rather than an outright bet on the currency’s depreciation, Marc Chandler, the global head of currency strategy at Brown Brothers Harriman & Co. in New York, said in a note to clients on Dec. 4.

The median estimate of more than 30 strategists surveyed by Bloomberg is for the yen to end March at 92 to the dollar and 136 to the euro.

‘Urgent Steps’

Fujio Mitarai, head of Japan’s largest business lobby, called on the government to take “urgent steps” on Nov. 27 to curb gains in the yen, which make Japanese exports less competitive and threaten corporate profits. The same day, Finance Minister Hirohisa Fujii said in Tokyo the nation will “do what is necessary” and he may contact U.S. and European officials to act.

Exports make up about 12 percent of Japan’s economy, compared with 6 percent in the U.S. The nation’s gross domestic product is forecast to shrink 5.7 percent this year, according to the median estimate of 14 economists surveyed by Bloomberg. That compares with a contraction of 2.4 percent in the U.S.

The Bank of Japan announced an emergency 10 trillion yen ($113 billion) credit program on Dec. 1 to combat falling prices and the stronger yen. The spread between dollar- and yen-based Libor narrowed to 2.72 basis points on Dec. 4 from as much as 7.25 basis points on Sept. 8.

Stimulus Plan

“The BOJ’s action worked,” said Masato Mori, senior manager of the business and marketing department at NTT SmartTrade Inc. a unit of Nippon Telegraph & Telephone Corp. “Stopping the yen’s advance will require additional spending from the government.”

A stimulus plan worth as much as 4 trillion yen ($45.4 billion) may be agreed upon today, Chief Cabinet Secretary Hirofumi Hirano said last week. The government planned to announce the measures on Dec. 4 before disagreements between Prime Minister Yukio Hatoyama’s ruling Democratic Party of Japan and coalition partners, who want a larger package, caused a delay.

Bonds to be issued in the fiscal year starting April 1 may reach 146.2 trillion yen compared with a revised 132.3 trillion yen this year, according to Citigroup Global Markets Japan Inc.

“There is probably enough in the policy action in Japan by the government and the BOJ to argue for further upside on cross- yen currencies near term,” said Greg Gibbs, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney.

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Indonesia can’t replicate the “high single digit” economic growth of China and India because of impediments to investment and high credit costs, according to Credit Suisse Group AG.

“We don’t expect investment to take off,” Cem Karacadag, an economist at Credit Suisse in Singapore, said in a report received yesterday. “It will take the government many years to fix the structural obstacles to investment, including corruption, regulatory risks, and a weak legal framework.”

President Susilo Bambang Yudhoyono’s re-elected government has “neither the mandate nor the capacity” to implement quickly the reforms needed to overcome these obstacles to investment, according to Credit Suisse. Borrowing costs are also too high as the central bank isn’t committed to keeping monetary policy “stable and tight,” Karacadag said in the report.

Indonesia wants to be included among the so-called BRIC nations of Brazil, Russia, India and China, according to Emil Salim, an adviser to President Yudhoyono and a former Cabinet member. The nation’s accelerating growth provides a case for its inclusion among BRIC economies, Morgan Stanley said in June.

Credit Suisse said it was likely that gross domestic product growth in Southeast Asia’s largest economy would remain below that of China and India.

“The key question for Indonesia is will investment accelerate quickly and be efficient enough to lift GDP growth to high single digits?” Karacadag said. “Our answer is no.”

‘Bright’ Outlook

Still, Indonesia’s long-term economic outlook is “bright” and annual GDP growth may average 5.6 percent from 2010 to 2014 and 6.5 percent from 2015 to 2019, according to Credit Suisse. That will see per capita income almost triple to $6,800 by 2019 from $2,300 in 2009, it said.

Indonesia’s economic growth accelerated in the three months to Sept. 30 for the first time in five quarters, with GDP expanding 4.2 percent from a year earlier. The $514 billion economy may expand 4.3 percent this year and between 5 percent and 5.5 percent in 2010, the central bank said yesterday.

“The country has a sound fiscal policy, good balance of payments, declining government and external debt ratios, and an improving political situation,” Karacadag said. “However, we don’t expect investment and real GDP growth in Indonesia to take off in a hurry.”

China and India will continue to achieve faster rates of GDP growth until Indonesia fixes structural impediments to investment and shows a “credible commitment to low inflation,” according to Credit Suisse.

Inflation Target

Bank Indonesia kept its benchmark interest rate unchanged at 6 payday loan.5 percent for a fourth straight month yesterday, after nine consecutive cuts that ended in August.

The central bank said monetary policy would be directed toward “keeping inflation low while taking into account the recovery of the economy.” Inflation this year may be “lower than” the target of 3.5 percent to 5.5 percent, the bank said.

“Unfortunately, we don’t perceive the government and Bank Indonesia to be committed to keep monetary policy stable and tight enough to rein in inflation and persistently high inflation expectations,” Karacadag said. “Even if the central bank was committed to bringing inflation under control once and for all, it first would probably have to keep real interest rates high for many years.”

Indonesia’s inflation rate has hovered around 4 percent to 17 percent over the past decade, according to Credit Suisse.

Weak Credibility

“Being able to deliver on their inflation targets in the coming two years would be a significant breakthrough for Indonesia,” said Enoch Fung, an economist at Goldman Sachs Group Inc. in Hong Kong. “Weak inflation credibility is the biggest issue overhanging the Indonesian risk premium.”

Indonesia’s inflation unexpectedly slowed in November, suggesting that the central bank may take more time before it follows other Asia Pacific nations including Australia, India and Vietnam in withdrawing monetary stimulus.

Consumer prices rose 2.41 percent last month from a year earlier after gaining 2.57 percent in October.

“There is less pressure for Bank Indonesia to increase rates earlier in 2010 following Vietnam and Australia,” said Destry Damayanti, chief economist at PT Mandiri Sekuritas in Jakarta. “The central bank may maintain the benchmark rate at the current rate of 6.5 percent at least until the second quarter of 2010 before gradually increasing it to 7.25 percent.”

Bank Indonesia needs to show a stronger commitment in its fight against inflation in order to bring down borrowing costs to companies and consumers, according to Credit Suisse.

“The higher the rate of inflation, the higher are real lending rates because of the inflation risk premium that is built into nominal interest rates,” Karacadag said. “It would only be much later, once tight and consistent policy has raised the credibility of the central bank, that the payoff would come in the form of lower real interest rates.”

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Stocks fell Friday, capping a mostly down week, as investors remained jittery about the economy and the outlook for the technology sector.

The Dow Jones industrial average (INDU) fell 14 points, or 0.1%, to close at 10,318.16. The S&P 500 (SPX) slipped 0.3% to end at 1091.38. The tech-heavy Nasdaq composite (COMP) dropped 0.5% to 2146.04.

Despite Friday’s decline, the Dow ended the week with a 0.5% gain. The S&P 500 fell 0.2% and the Nasdaq slid 1% over the last five days. The mixed performance came after all three major gauges posted two consecutive weekly gains.

The dollar rose against rival currencies for the second day in a row, helped by increased demand for safe-haven assets and supportive comments from Federal Reserve officials.

The stronger greenback weighed on the oil market, with crude prices closing below $77 a barrel. Gold prices recovered from early losses to close at another record high.

Wall Street started the week on a high note, closing at 13-month highs on Monday and Tuesday. A softer dollar and bets that U.S. interest rates will remain low for a prolonged period helped boost the S&P 500 above the key 1,100 level early in the week.

But the tone turned more cautious Wednesday after government data showed a surprise drop in new home construction and a pair of software makers issued bearish profit forecasts.

Housing and tech woes continued to plague the market Thursday after a report showed that nearly 10% of all mortgage loans were delinquent in the third quarter and analysts at Bank of America Merrill Lynch downgraded the semiconductor industry.

On Friday, tech shares remained under pressure after PC giant Dell reported weak third-quarter results late Thursday. Homebuilder stocks fell after D.R. Horton posted a larger-than-expected quarterly loss and said conditions in the industry remain challenging.

"The market is suffering from mixed economic news this week," said John Wilson, chief technical strategist at Morgan Keegan. However, the declines were surprisingly small considering the market’s recent strength, he added.

"I think the market has to work-off a fairly overbought position," he said.

Analysts said the market was ripe for a move lower given growing concerns that stocks have come too far, too fast. After bottoming at 12-year lows in March, stocks have been on a near-continuous rally fueled by signs of economic stabilization.

"There’s a lot of concern that the stock market has gotten ahead of expectations," said Jack Ablin, chief investment officer at Harris Private Bank. "There’s not much room to advance without a concurrent improvement in economic news."

Looking ahead, trading is expected to be volatile next week with a busy economic calendar, quarterly results from Hewlett Packard (HPQ, Fortune 500) and thin trading volume.

Economic reports due next week include data on home sales and prices, a revised reading on gross domestic product and a monthly read on consumer confidence.

Dow component H-P reports quarterly financial results after the closing bell Monday.

U.S. markets will be closed on Thursday for the Thanksgiving holiday, and trading will end early on Friday. With many traders taking next week off, analyst said the number of shares trading hands will be small, which could exaggerate swings in the market.

Companies: D.R. Horton (DHI, Fortune 500), the nation’s second-largest homebuilder, said its quarterly loss narrowed to $231.9 million, or 73 cents a share, in the fourth quarter ended Sept. 30. Shares fell 15%.

Analysts surveyed by Thomson Reuters were expecting a loss of 30 cents per share.

After the closing bell Thursday,Dell (DELL, Fortune 500) reported a sharp drop in quarterly profit that fell short of Wall Street’s estimates. The stock tumbled 10%.

Also on Thursday, analysts at Bank of America Merrill Lynch downgraded the semiconductor industry. That came one day after two key software companies issued cautious profit outlooks.

But in other earnings news, retailer Gap (GPS, Fortune 500) said its quarterly profit surged 25%.

Economy: A government report showed more U.S. states suffered rising unemployment rates, though fewer reported joblessness above the national average in October.

World markets: Asian shares retreated. The Nikkei in Japan lost 0.5% while the Hang Seng fell 0.8%. Major European indexes also closed lower, with the CAC-40 in Paris falling 0.8%.

Money, gold and oil: The dollar rose versus major international currencies, including the euro, the yen and the pound.

Gold rose $4.90 to settle at a record $1,146.80 an ounce.

The price of oil fell 74 cents to close at $76.72 a barrel.

Bonds: Prices for U.S. Treasurys were mixed. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell to 3.36% from 3.50% late Thursday. The yield on the 3-month Treasury bill, which is seen as a temporary shelter from market volatility, stood at 0.015%.  

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Major League Baseball still faces an uncertain U.S. economy that led to lower attendance and financial losses at some clubs this year, the commissioner of the U.S. sports league said on Thursday.

“I’ve said this all year and I’ll say it again, we’re living in the most difficult economic environment since the Great Depression,” Bud Selig said to reporters at a meeting of owners in a hotel here.

“We don’t live in a bubble,” he said, acknowledging that some clubs he would not identify lost money this season.

The league’s regular-season attendance fell 6.6 percent to 73.4 million in its recently completed season as consumers dialed back spending in the weak economy. The teams with the biggest declines were in markets that suffered from high unemployment, including Detroit, Cincinnati, San Diego, Oakland and the Florida Marlins in Miami.

Over the past year, most sports have been hurt as corporate backers also cut spending on tickets and sponsorships.

Selig did not say where league revenue would finish compared with last year’s $6.5 billion, saying some areas of the business were down and others were flat. Helping baseball was the January launch of its TV channel, MLB Network.

However, a source familiar with league finances, who asked not to be identified, said revenue would likely finish about flat cash advance flexible payments.

Selig said it was too early to say what demand was like for next year’s tickets, but said his concerns about the economy have not eased.

“I haven’t talked to an economist yet … who would tell me why I shouldn’t be as concerned,” he said when asked to compare his feelings with last year at this time.

When asked about the sales process of the Texas Rangers, Selig said he is awaiting bids, which are due on Friday. He declined to discuss whether baseball would support owner Tom Hicks reconstituting his ownership group to maintain control of the team.

Three groups are interested in buying the team and analysts expect bids in the range of $500 million to $550 million.

Billionaire sports tycoon Hicks is working to satisfy creditors who in April declared his sports group, which also owns the Dallas Stars National Hockey League team, in default on $525 million in loans. Hicks separately owns half of the English Premier League’s Liverpool soccer club.

(Reporting by Ben Klayman, editing by Matthew Lewis)

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Baidu’s hasty move to a new Internet ad system marks a rare stumble for China’s dominant search engine, opening a window of opportunity for others salivating for a piece of the country’s fast-growing online market.

Baidu, whose name is practically synonymous with Internet search in China, surprised investors when it revealed transition to its new Phoenix Nest system will lead to softer revenues into next year as customers adjust, sending its stock down sharply.

The news was music to others, such as Sina Corp and global search leader Google, looking for a bigger piece of the pie in the world’s biggest Internet market with 235 million search users in June, up about a third from a year ago.

“In the short term Baidu could possibly lose market share to Google,” said JP Morgan analyst Dick Wei.

“From the end user perspective, they aren’t going to see much of a difference, but from the advertisers perspective, if you look at monetization market share, it (Baidu’s market share) could be a bit lower in the next few months,” he said.

Baidu expects to lose some customers and have lower revenue in the near term after the system is fully rolled out.

Baidu shares, which shed 0.5 percent to close at $432.97 during regular trading hours in New York, fell more than 13 percent in after-hours trade to $375.99 after the company gave its revenue forecast that was well below Wall Street estimates.

The glitch isn’t the first for Baidu, which was previously accused by some of the world’s biggest music companies of allowing illegal trading of copyrighted songs over its system.

But the stumble could have more serious implications as it relates directly to the company’s revenue generation model.

ONLINE PLAYERS

Baidu, whose name comes from an ancient Chinese poem, is just one of a growing field of upstart firms seeking to cash in on China’s rapidly growing Internet, home to a search market valued at 1.8 billion yuan ($264 million) in the second quarter.

Online game companies such as Shanda Games and NetEase vie for dominance in the country’s Internet gaming market worth nearly $1 billion in the second quarter, while portal operators such as Sina and Sohu.com also spar for dominance in the portal space.

In an Internet market where two or three names usually control each space, Baidu stands out because of its single-handed dominance of China Internet search.

Several Chinese Internet firms such as NetEase, Perfect World and Baidu, have seen their share prices skyrocket this year. However, softer-than-expected fourth quarter guidance from two other companies may further dampen investor sentiment.

Sohu and its recently listed gaming unit Changyou.com warned on Monday that current-quarter revenue would come in below Wall Street estimates, sending their shares down. 

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The economy in the U.S. probably grew in the third quarter at the fastest pace in two years as government stimulus helped bring an end to the worst recession since the 1930s, economists said before reports this week.

The world’s largest economy grew at a 3.2 percent pace from July through September after shrinking the previous four quarters, according to the median estimate of 65 economists surveyed by Bloomberg News. Other reports may show sales of new homes and orders for long-lasting goods increased.

Americans flocked to auto showrooms and real-estate offices last quarter to take advantage of government programs such as “cash-for-clunkers” and tax credits for first-time homebuyers. Growing demand caused stockpiles to keep falling, which will prompt companies to rev up assembly lines and help sustain the recovery into 2010 even as unemployment climbs.

“The recovery is off to a decent but unspectacular start,” said Joe Brusuelas, a director at Moody’s Economy.com in West Chester, Pennsylvania. “While another large drawdown in inventories will be a drag on third-quarter growth, it sets the stage for a longer and stronger upturn in manufacturing.”

The Commerce Department’s report on gross domestic product is due Oct. 29. The four consecutive decreases through the second quarter marks the longest stretch of declines since quarterly records began in 1947. The economy shrank 3.8 percent in the 12 months to June, the worst performance in seven decades.

Stocks Climb

Stocks have rallied as earnings at companies from Caterpillar Inc. to Morgan Stanley topped estimates. Profits exceeded expectations at about 80 percent of the companies in the Standard & Poor’s 500 Index that have released results, according to Bloomberg data. That marks the highest proportion in data going back to 1993. The S&P 500 closed at a one-year high on Oct. 19.

Consumer spending last quarter probably jumped at a 3.1 percent annual rate from the previous three months, the biggest gain since the first quarter of 2007, the GDP report is also projected to show.

September readings on household purchases, due from the Commerce Department on Oct. 30, may show the quarter ended on a soft note after the Obama administration’s car incentive expired the month before. Spending probably fell 0.5 percent last month as car sales slowed after jumping 1.3 percent in August, the biggest gain since 2001.

The so-called cash-for-clunkers program offered buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles. The plan boosted sales by about 700,000 vehicles, according to a Transportation Department estimate.

Homebuyer Credit

The administration’s $787 billion stimulus package, signed into law in February, included an $8,000 tax credit for first- time homebuyers that expires at the end of November.

New-home sales last month increased 2.6 percent to an annual pace of 440,000, the highest level since August 2008 and reflecting the boost from the credit, according to economists surveyed. The Commerce Department’s report is due Oct. 28.

Lawmakers in Washington are debating an extension of the credit through June, and are discussing expanding it to all buyers under an income cap.

A report from S&P/Case-Shiller home-price index due Oct. 27 may show home values in 20 U.S. metropolitan areas declined in the year ended August at the slowest pace since January 2008, according to the survey median.

More Orders

Orders for durable goods rose 1 percent in September, economists project the Commerce Department will report Oct. 28. A gain would be the fourth in the last six months and indicates companies are starting to invest in new equipment.

Business spending and housing “stand ready to provide the oomph necessary to generate continued optimism until consumer activity stabilizes,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia.

Optimism among U.S. consumers in October is forecast to rise even as unemployment probably also increased, economists said. The Conference Board’s confidence index, due Oct. 27, climbed to 53.5 from 53.1, according to the survey median.

The economy will likely grow at a 2.4 percent annual rate from October through December, according to a Bloomberg survey earlier this month. GDP will also expand 2.4 percent next year and 2.8 percent in 2011, the survey showed, compared with an average of 3.4 percent growth over the past six decades.

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