Dollar's Fed-inspired rally gives way

The euro broke above the $1.55 level for the first time in early North American trading, and peaked at $1.5524 -- its highest level since the European unit began trading in January 1999.
The dollar also sank inversely to crude-oil futures, which hit a record high of $110.20 a barrel Wednesday. See Futures Movers.
Crude oil is traded in dollars. As the dollar declines in value, so does the price of oil in non-dollar terms, making it more appealing to speculators.
The Fed's announcement Tuesday of a coordinated plan with other central banks aimed at keeping prices of illiquid securities from plunging gave the dollar a lift Tuesday, and boosted the stock market as well.

Read more at http://www.marketwatch.com/news/story/dollars-fed-inspired-gains-fade-euro/story.aspx?guid=%7BA107DF34-4456-4713-9D90-45926494B4C6%7D

This article is about how the dollar is dropping against the euro and the actions that the Fed is taking in order to help the problem. They devised a plan along with the central banks to keep illiquid security prices from falling in order to "give a boost" to the dollar and in return, the stock market benefitted as well. The influence on the stock market carried through Wednesday, however the dollar dropped again proving the plan insufficient.

As oil powers upward, stocks end day lower

Market update
Index Dow NASDAQ S+P 500
Last 11740.15 2169.34 1273.37
Change -153.54 -43.15 -20.00
% change -1.29% -1.95% -1.55%

NEW YORK - Wall Street sank Monday as oil’s surge above $108 a barrel and more worrisome signs for the financial sector led investors to extend last week’s losses. The Dow Jones industrial average fell more than 150 points, bringing its three-day loss to nearly 515, while broader indexes showed steeper percentage losses.

Wall Street had no bleak economic data to contend with Monday, but instead faced a steady drumbeat of negative news on companies exposed to mortgages.

Mortgage lenders dropped after Thornburg Mortgage Inc. was downgraded by a Jefferies & Co. analyst and Countrywide Financial Corp. was reported to be under investigation by the government for securities fraud.

Then, Bear Stearns Cos. dropped as Moody’s Investors Service downgraded a batch of Bear securities backed by Alt-A mortgages, which are home loans given to people lacking proof of income or with minor credit problems.

The slew of downbeat financial news overshadowed a strong February sales report from McDonald’s Corp., and led restless investors to proceed cautiously ahead of big economic reports later in the week: Thursday’s report on retail sales and Friday’s report on consumer prices. Those two readings will give Wall Street a better idea of how much the average American is struggling with falling home values and rising costs, and how aggressively the Federal Reserve will need to act when it meets next week.

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Is the rising price of oil truly the common denominator for the lack of success in the stock market? Companies costs of production are jumping as the the prices of oil rises and consumers have less money to spend if a larger portion of it is going to gasoline. The rising prises of oil are hitting both sides of supply and demand - the lessening of a supply of goods as well as a decrease in demand. Lets take a company like McDonalds for example. McDonalds, for say, has to rise the price of everything on the menu $0.05 to accomodate for a rise in oil prices. On the other side, consumers are wondering where there $1.05 (after oil) went for a double cheesebuger. Much, if not all, went to their tanks. Companies, like McDonalds, are taking hits from the rising oil prices and the stocks are showing it.

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Economic woes lead to retail retrenchment

The signs that smaller retailers are struggling are unavoidable at malls across America: “Going out of business” sales at many Wilsons Leather stores. “Up to 70 percent off” at KB Toys.

At the once-sizzling Paradise Valley Mall in Phoenix, the space formerly occupied by Bombay Co., the furniture chain that went bankrupt last year, is empty. Wilsons just finished liquidating its inventory. KB Toys, Ann Taylor and American Eagle feature bold posters advertising steep discounts.

“I don’t think it brings much business when all these stores are closed,” said Michelle Green, a sales clerk at Fred Meyer Jewelers.

Around the country, mall centers are starting to feel the recoil from a rapid expansion in recent years that allowed retailers to aim stores at almost every niche, from shoppers who wanted Talbots clothes for their children to those who craved Bombay’s little wood tables.

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Because of the expansionary period in the last few years, chain stores have become ubiquitous. Now that we are in a contractionary period, the over supply of these chain stores are becoming more and more apparent. Along with the peak in gas prices, aggregate demand has decrease and consumers will only buy the products that they need most right now. One figure in the article noted that we are undergoing "economic Darwinism." Stores can only slash prices so much and some have closed down temporarily because of the lack of business. Currently, the malls and their stores are taking a large hit due to the current lack of demand.

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Fed Loans Not Easing Credit Crunch

Banks could very well trip over themselves Monday as they bid on $50 billion in loans in the latest Federal Reserve auction.

But despite this eagerness to accept the government's "liquidity" injections, banks aren't significantly increasing their lending, experts said. In fact, some banks seem to be pulling back even further - for example, Citigroup Inc.'s (C, Fortune 500) last week said that it will scale back its mortgage business.

"It's still not enough to get the banks to loosen their lending terms," said Walker Todd, a research fellow at the American Institute for Economic Research and former attorney and economist at the New York Fed.

Banks have already borrowed a total of $160 billion since the Fed started holding these auctions in December as a way to ease the credit crunch, which began last year when mortgage defaults and foreclosures began to skyrocket. Since then, the crisis has extended far beyond the residential home loans, roiling the markets for everything from municipal bonds to student loans to auto financing.

Read the full story here.

This article addresses the "liquidity" that the government says it has and the lack of increase in the bank's lending. Many banks even seem to be decreasing their lending. The Federal Reserve has been holding auctions since December in an attempt to ease the "credit crunch" that began as a result of mortgage defaults and foreclosures increasing dramatically. This "crunch" has grown to include municipal bonds, students loans, and auto financing. This "credit crunch" has even called to securities backed by Fannie Mae and Freddie Mac have been called into question. Because of this, the auctions are anticipated to continue for at least six more months. According to Tom Schlesinger, the Fed's actions are showing a "deepening sense of anxiety." The Fed has taken many steps to ease this credit crunch that the United States's economy is experiencing. Some believe that the problem is not with the liquidity; however, it is with the fear of rising defaults which causes them to "shy away" from offering credit. Another issue facing banks is the low capital standing that they have. Banks and the Federal Reserve have partnered and are making attempts to increase bank's capital standing. If the capital standing is raised, then banks may be more likely to lend money which can begin to reverse the credit crunch.

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Gasoline's Price Spike Has Only Just Begun

Gasoline hit record levels Tuesday - and experts say it will likely continue to soar in tandem with the skyrocketing price of crude.

The national average retail price for gas has risen 27 cents in the last month to $3.227 a gallon, matching the all-time high set on May 24, 2007, according to the motorist organization AAA.

And experts say motorists should prepare to pay nearly $4 a gallon - and in some places even more than that - before the price of gas finally comes down in the late spring as high prices crimp demand.

Read the full story here.

This article addresses the continued rise in gas prices, and this rise is expected to continue as the price of crude oil continues to rise. According to the article, gas buyers should expect to pay almost four dollars a gallon before they can see any decline in prices. The price of oil increased dramatically when the economy worsened and the Federal Reserve cut interest rates in an attempt to reverse the worsening state of the economy. This shows that many times we must pick our battles, and because the federal reserve took these steps to reverse the state of the economy to some degree, an aspect of our economy (the price we pay for oil) was raised. According to the article, gas prices must rise so that the producers will make a profit and continue to produce the oil. These prices show the true value of a dollar and the possibility of the severity of inflation.

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Big Pharmacy Opens Wallet to Democrats

Democrats have long served as the traditional enemy of Big Pharma, but in this presidential campaign, the left is taking the lion's share of drugmaker money.

Democratic senators Barack Obama and Hillary Clinton are the top recipients of donations from the pharmaceutical industry, according to The Center for Responsive Politics, a non-profit, non-partisan research group in Washington, D.C. Meanwhile, donations to Sen. John McCain, who was recently endorsed by President Bush as the official Republican candidate, pale in comparison.

Obama maintains a slight edge over his Democratic rival, with $181,000 in Big Pharma donations through Jan. 31, compared with Clinton's $174,000, according to the center. McCain is far behind with $44,000.

This is in spite of the fact that all three candidates have consistently bashed the pharma industry and vowed to lower drug prices, which would take a bite out of corporate profits.

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In this election, donations from large pharmaceutical companies have shifted from the Republican candidates in past elections to the two remaining Democratic candidates remaining in this year's election. One reason for this shift is that although Republicans still control the White House the Democrats have taken over the Senate and the pharmaceutical companies could be trying to secure access to the ruling party by funding their traditional enemies. Secondly, the distinctions have blurred between the two parties' relationship with big business. Democrats have traditionally been seen as enemies to the pharmaceutical industry, while Republicans are supposed to be their allies. With Mccain acting as the conservative candidate the situation is no longer clear cut. The policies of all three remaining candidates uniformly unfriendly to Big Pharma.

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Bush: 'Economy has slowed'

President Bush said Friday that "it's clear our economy has slowed," hours after a government report showed a decline in payrolls for the second straight month.

But he said the long-term outlook is good, with a stimulus package enacted last month by Congress providing support for the economy.

"I know this is a difficult time for our economy," the president said. "But we recognized the problem early and we provided the economy with a booster shot."

Bush said the effects of the stimulus package are "just starting to kick in" and that the plan will "put money into the hands of American workers and businesses."

Earlier in the day, Bush's chief economic adviser Edward Lazear said that the nation's economy could contract in the current quarter. But he added that, "we expect that the economy will get stronger, primarily in the third quarter."

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On Friday, President Bush finally explained a piece of news to America that has been clear for a number of months now, that the economy is performing poorly. However, Bush also said that he believes that the economy is in good shape over the long term due to the stimulus package that was enacted last month. Because we wiill not see the effects of the stimulus package for a couple months the economy will probably contract this quarter, but by the time the third quarter rolls around, the economy is expected to get stronger. The statements come after the Labor Department said employers made their deepest cut in staffing in almost five years during February, showing concerns that a recession is coming. It doesn't help the matter that oil prices are at record highs and that stocks have fallen to their lowest value in 18 months.

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Forbes says Gates is no longer the world's richest man

Microsoft Corp. co-founder Bill Gates is no longer the richest man in the world, according to Forbes magazine's rankings.
In fact, he's not even in the top two anymore.
Warren Buffet, helped by a rising price of his Berkshire Hathaway shares, is atop the list at $62 billion. It's the first time in 13 years that Gates didn't top the magazine's list.
At No. 2 is Mexican telecom tycoon Carlos Slim Helú, with an estimated net worth of $60 billion.

Gates isn't struggling at No. 3 with $58 billion, according to the magazine's list, and is worth $2 billion more than last year. Paul Allen, who co-founded the Redmond computer giant (NASDAQ: MSFT) with Gates, is No. 41 on the list at $16 billion. And Microsoft's current CEO, Steve Ballmer, is No. 43 on the list at $15 billion.

Read more at http://www.bizjournals.com/seattle/stories/2008/03/03/daily29.html

This article explains that Forbes magazine rankings claims that Bill Gates is not the richest man in the world anymore. Warren Buffet is number one followed by Carlos Slim Helu- both worth around $60 billion each. Gates sits at number three, worth around $58 billion and the article ranks the other men closely affiliated with Gates.

New Recession Worry: Bank Failures

As if the economy wasn't already fighting enough strong headwinds, the risk of capital shortfalls and outright failure of the nation's banks is rising.

The Federal Deposit Insurance Corp., the federal agency that backs bank deposits, last week reported the biggest jump in "problem institutions" it has seen since the savings and loan crisis of the late 1980s. While the extent of the problem is still low by historic standards, it identified 76 banks as in trouble - a 52% increase from a year ago.

Read the full story here.

According to the article, there is an increased risk for bank failures in the United States due to the current state of the economy. The Federal Deposit Insurance Corporation (FDIC) cited that largest increase in "problem institutions" since the crisis of the 1980s; there has been a 52% increase in "problem institutions" from last year. Many people believe that these seventy-six are just a slight representation of the large number of bank that are on the verge of failing. Many regulators are expecting around two hundred banks to fail within the next few years. The FDIC reassured people that despite the large number of "problem institutions," not that many banks will actually fail if the same thing happens that did last year (fifty "problem institutions," only three failed). Despite this hope that not many banks will fail, the FDIC plans to hire twenty-five staffers so that they will be prepared if and when the bank failures occur. This article shows the current state of the economy in that many banks are on the verge of failure because they do not have adequate resources in order to survive; however, the leaders of organizations that influence the banks are remaining optimistic while still preparing for the worst.

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Productivity Slows, Labor Costs Rise

Readings on worker productivity and labor costs in the final three months of 2007 were both revised higher, according to a government report Wednesday.

The Labor Department said productivity rose at a rate of 1.9% in the fourth quarter, up from an initial reading of 1.8%

Economists surveyed by Briefing.com had expected the reading to remain unchanged.

The revised growth rate is still sharply lower than the 6.3% productivity growth rate posted in the third quarter of last year.

Read the full story here.

This article addresses the recent observations of the rising productivity and labor cost rates; these numbers were increased from the initial projection. Despite the rise of the observation for the fourth quarter, the productivity rate remains much lower than that of the third quarter. According to Sam Bullard, an economist with Wachovia, believes that this decrease in productivity is representative of the current state of the United States's economy. The Labor Department believes that the great increase in labor costs (2.1% to 2.6%) counteracts the slight rise in productivity rates (1.8% to 1.9%). According to the article, inflation will not rise to an outrageous amount if the labor costs remain steady. These percentages show the current state of the US economy, and it is now the government's job to be sure that these rates remain steady.

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Bush Refuses to Promise More Troop Returns From Iraq Before He Leaves Office

Decisions about troop cuts beyond those planned through July would be based on generals' recommendations for what levels are necessary to ensure success in Iraq, the president said.
"There is going to be enormous speculation," he said in a joint appearance at his ranch with Denmark's prime minister, Anders Fogh Rasmussen.
Bush strongly suggested Iraq's provincial elections in October may mean that bringing more troops home would have to wait until after the voting.
"I think our generals ought to be concerned about making sure there's enough of a presence so that the provincial elections can be carried out in such a way that democracy advances," he said. "I'll wait and hear what they have to say. But yes, that ought to be a factor in their recommendation to me."
On Friday, a senior administration official told reporters during a briefing at the White House, "I fully expect there to be more reductions this year — and so does the president."

Read more at http://www.foxnews.com/story/0,2933,334333,00.html

Bush implied that Iraq's provincial election would cause a postponement of troops returning to their homes. He explained that there should be enough troops there to secure that the process is carried out in the correct manner however, by July, there will be about 15 brigades in Iraq for a total of 140,000 men. A senior administration official reports that both he and the President plan to see a considerable reduction in the numer of troops in Iraq in 2008.

Pizza and beer now cost an arm and a leg

If you’re looking for a sure sign the U.S. economy is headed in the wrong direction, all you need to do is look at the skyrocketing price of “recession-proof” foods: pizza, hot dogs, bagels and beer.

For many Americans, the credit crunch and the mortgage mess have left their pocketbooks – and their cupboards – bare. These same consumers, many living paycheck to paycheck, have relied on these cheaper foods to keep their expenditures down. Not anymore.

In the past few months, the news has gone from bad to worse:

Pizza makers have seen their cheese costs soar this year from $1.30 a pound to $1.76 a pound. Even worse, the flour used to make the dough has gone from $3-$7 dollars a bushel to $25 a bushel in less than a year.

Beer makers have been forced to raise their prices because of the skyrocketing price of hops – one of the principle ingredients. The price of hops has gone from about $4 a pound in September to $40 a pound. The price of barley, beer’s other main ingredient, has nearly doubled.

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This article is especially true anywhere you go you can hardly find a good meal that won't empty your wallet. This inflation is largely due to rising oil prices since the trucks deliver the cheese, flour, sauce, and beer not to mention the custom napkins. The increased prices will cause a decrease in demand which will cause owners to stopping buying as much cheese and such, then causing truckers to deliver less and finally have cheese makers to make less. All owners, truckers, and cheese makers will then need to cut their costs of production. The situation is an example of wage price spiral largely due to oil as an increasing factor in costs of production.

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Independent truckers may be run off the road

Trucker Robert Griffith is on the road three weeks out of four, pulling oversize loads like crane booms, railroad ties and air conditioning ducts. One of his biggest worries: How he'll find the money to buy his daughter a prom dress.

As the cost of diesel doubled over the last four years, his take-home pay has plummeted, from $50,000 to $11,000 last year. He's literally burning money; he spent $64,000 on diesel in the last eight months. Since he canceled his satellite radio, he's on citizens band radio constantly (handle: Instigator) talking about what needs to change so truckers like him can survive.

"I had to learn to live totally different," said Griffith, 41, of Lebanon, Tenn. No more $150 family outings to Shogun sushi. No more weekly washes for his Western Star 4900 EX truck. No more health insurance for him and his family.

"It hurts," he said. "I'm a man who's trying to make a living for my family and I'm not succeeding."

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Due to many outside influences, such as rising diesel prises and decreasing aggregate demand, the truckers are taking a huge hit. They're like dentists trying to make a living in an area where everyone has perfect teeth. Thousands of products are transported via who? truckers. Since there is less of a need for products to be transported, a surplus of truckers exists. Along with rising diesel prices, the lessening need for truckers has created a population that are part of structural unemployment and they will now have the chance to go and become more educated: hopefully researching methods to reduce our dependence on oil.

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How Low will Interest Rates Go?

The leading Fed watchers say that the lowest interest rates will go is 2%. This will most likely happen by the summer. "For the rates to move lower, economic weakness would have to be much more intractable than now envisioned" they said. The Fed forecast is said to be for sluggish growth with downside risks. Everyone who is not in the Fed will experience a recession if this happens. There are not worries of inflation but worries of falling prices, especially in home values for example, which is a bigger worry. The forecast of a 2% Fed funds rate by the summer fits with the current expectation of financial markets, as measured by the Fed funds futures contract. Money market futures contracts expect a half-point reduction to 2.5% on March 18. 

A lot of chief economists seem upset with the actions taken by the feds. They see the fed to continue cutting the interest rates in the future. All of these cuts taking place will lower the values of homes and other things of that such. This can put a lot of people who are trying to move to another home in a bit of financial trouble when they go to sell their house. 

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Stocks sink on recession fears

Stocks slumped Thursday after comments from Fed chair Ben Bernanke on the banking sector and weak reports on economic growth and the jobs market revived worries about a recession.

The Dow Jones industrial average (INDU) lost 0.9%, while the broader Standard & Poor's 500 (SPX) index fell 0.9%. The Nasdaq composite (COMP) declined 0.9%.

GDP. A revised reading of gross domestic product, the broadest measure of the nation's economic activity, showed fourth-quarter growth remained at the same tepid 0.6% rate initially reported. Economists surveyed by Briefing.com thought growth would be revised up to 0.8% in the quarter.

Jobless claims. Separately, the number of Americans filing new claims for unemployment rose unexpectedly to 373,000 last week from a revised 354,000 in the previous week. Economists expected 350,000 new claims.

Financials fall. The financial sector led the stock downturn after weak earnings from mortgage lender Freddie Mac and comments from Bernanke that while large U.S. banks will likely recover from the recent credit crisis, smaller, regional ones could fail.

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Chairman of the Fed, Ben Bernanke made comments on the banking sector, and these comments alon with bad GDP, the decreasing value of the dollar, and the increasing of oil and gold prices, have caused stocks to slump and the fear of an oncoming recession to increase. The Dow Jones, S&P 500, and NASDAQ all declined .9% and according to Bernanke, these problems are not going to go away any time soon.

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Oil hits new record

Crude prices rebounded Thursday, shooting up nearly $3 a barrel to another new record as a falling dollar and the prospect of lower interest rates attracted fresh money to the oil market. Retail gas prices, meanwhile, rose closer to records above $3 a gallon.

A pair of dismal economic reports Thursday drew more money into the oil market, as did Federal Reserve Chairman Ben Bernanke's comments that the economy is not immediately threatened with stagflation, a combination of economic weakness and rising inflation. The Commerce Department said gross domestic product grew at only a 0.6% rate in the fourth quarter, below estimates and at only a fraction of the previous quarter's growth rate, while the Labor Department said applications for unemployment benefits rose by 19,000 last week, more than expected.

Rather than viewing such news as bad for oil demand, investors chose to see it as confirmation of their beliefs that the Fed will continue cutting interest rates to try to shore up the economy. Interest rate cuts tend to weaken the dollar, and crude futures offer a hedge against a falling dollar. Also, oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.

Light, sweet crude for April delivery rose $2.95 to settle at a record $102.59 a barrel on the New York Mercantile Exchange. Prices continued rising after the Nymex closed, setting a new trading record of $102.97.

Crude prices are within the range of inflation-adjusted highs set in early 1980. A $38 barrel of oil then would be worth $97 to $104 or more today, depending on the how the adjustment is calculated. A direct comparison with daily Nymex prices is difficult because historical data, gathered before the crude futures contract was created in 1983, are based on average monthly prices posted by oil producers.

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On Thursday, the price of crude oil rose to an all new record high of almost $3 a barrel, and gas prices rose to around $3 a gallon. Crude oil prices are reaching all-time highs because the worth of the dollar is continuing to drop and because of the possibility of decreased interest rates. It is expected that the Fed will continue to cut interst rates in hopes of helping the economy as a whole. Lower interest rates tend to lower the value of the dollar, and crude futures help prevent the dollar from falling too much.

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Wholesale Prices Surge in January

Inflation at the wholesale level soared in January by the fastest pace in 16 years, pushed higher by costs for food, energy and medicine.

The Labor Department said Tuesday that wholesale prices rose 1% last month, more than double the 0.4% increase that economists had been expecting.

The worse-than-expected performance was certain to capture attention at the Federal Reserve, which has chosen to combat a threatened recession by aggressively
cutting interest rates in the belief that weaker economic growth will keep a lid on prices.

But the combination of rising inflation and weaker growth raises the threat of "stagflation," the economic malady that plagued the country through the 1970s, when a series of oil shocks left households battered by the twin problems of stagnant growth and rising prices.

Read the full story here.

This article concerns the rising inflation rates that the United States's economy has been experiencing. This increase is attributed to rising costs for food, energy, and medicine. This article also addresses the Federal Reserve's attempt to avoid a recession by drastically cutting interest rates hoping that the "weaker economic growth will keep a lid on prices." Because of these two decisions, there are concerns that the United States's economy will become stagnant, a fear they called "stagflation." There has also been an increase in wholesale prices which the government is going to attempt to fight with one of the previous mentioned methods. The Federal Reserve's role in fighting the stagnation, inflation, and interest rates shall be evident in the next few months to see the measures they take to change these three problems the United States's economy is experiencing.

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Dollar Hits Record Low Versus Euro

The dollar sank to a new low against the euro after the release of three disheartening economic reports Tuesday.

The dollar also hit floating-era lows against the Brazilian real and New Zealand dollar, or "kiwi."

The 15-nation euro leaped to $1.4982 before settling at $1.4967, its previous record, in late New York trading. On Monday, the euro was worth $1.4825. The euro's previous high of $1.4967 was set on Nov. 23.

The New York-based Conference Board said its Consumer Confidence Index fell to 75 in February from 87.3 in January, the index's lowest level since February 2003. The reading was below analysts' expectations.

Read the full story here.

This article addresses the recent economic report that was released regarding the value of the American dollar and the euro. According to the article, the dollar hit an all-time low compared to the euro, the Brazilian real, and the New Zealand dollar ("kiwi"). Also the Consumer Confidence Index has fallen to seventy-five which is an all-time low since February 2003, dropping from 87.3 in January. Also the inflation rate has increased by one percent which is more than anticipated; this rise is contributed to the rising oil and food costs. This article shows the fluctuation of the United States's economy. It is the government's "job" to make the economy achieve more stable levels, so the government should attempt to implement policy to allow this to occur.

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