Wall Street rallies on profits

NEW YORK (Reuters) – Stocks rallied for a sixth straight day on Tuesday after Alcoa’s quarterly results heartened investors that had fled to the sidelines on jitters about the sustainability of the economic recovery.

Ezra Klein: 6 Ways Congress Could Improve The Economy By November

If elections are dependent on the economy, then the obvious question is what, if anything, can Democrats in Congress actually do to improve the economy between here and November? The answer, even if they had the votes, is probably not that much. But that’s not to say nothing.

Read more: US Economy, Census Jobs, White House, Economic Stimulus Package, Mid-Term Elections, Congress, Obama, Recovery Act, Republicans, Democrats, Obama Mid-Term Elections, Economy, Business News

Dan Dorfman: Day of the Lion or the Lamb?

Will the lion — the suddenly resurging stock market — continue to roar or revert back to a lamb?

That was the question of the hour among Wall Street pros over the weekend, following a great week for investors. After a bruising six-week loss of 16% between early March and late April, the slumping, schizophrenic stock market suddenly looked like a lion again last week by awakening from its Rip Van Winkle slumber and transforming itself into Superman, LeBron James and Samson all wrapped into one.

As a result, the Dow zoomed 5.3% or 511.55 points in four consecutive winning sessions, in the process racking up its best week of the year.

That surge raises a perplexing question: Was the giant gain a fluke or the start of something big?

Judging from what I hear from Sam Stovall, the chief investment strategist of Standard & Poor’s, don’t bet the farm on further near term gains. He opts for the meekness of the lamb, telling me “I’m getting concerned.”

In effect, Stovall challenges those rosy market forecasts based on the expected emergence of a decidedly peppier economy, a logical extension of President Obama’s repeated promises of an economic scenario characterized by much better times ahead.

Stovall is not alone in his skepticism. If indeed a zippier economy is factored into forecasts of a sunnier market, it would surely be viewed as pure hokum by the employees of Wells Fargo, which just announced plans to lay off 3,800 workers, as well as the folks at Merck, which followed with the news that it will ditch 15% of its workforce. You can also toss in a dubious note from the 15 million unemployed Americans who can’t find jobs.

To give any credibility to expectations of a more vibrant economy means you must ignore or minimize the effects of a number of economic storm warnings that makes any exuberance highly suspect.

Here are some of these warnings. The housing market is starting to crack. A jobless rate of 9% to 10% (now 9.5%) is expected by numerous economists to last for another couple of years, with some saying a workforce close to pre-recession levels is unlikely before 2013 or 2014 at the earliest. Consumer confidence is plummeting. Chinese economic growth is slowing. And the International Monetary Fund has just warned that Europe’s debt crises are threatening to spill over to other regions.

Stovall, who leaned to the optimistic side in earlier interviews I did with him this year and has now shifted gears, voices some clear economic concern, given his belief the recovery will be half-speed at best, meaning, he says, GDP will likely grow 3% to 3.5% this year, versus a more normal 7% in the early stages of an economic recovery.

Why a slower rate of economic growth? Stovall sees three main drags — continuing high unemployment (which he pegs at 9.7% this year and 9.2% next year), high consumer and government debt levels, which should pressure growth, and a further reduction in non-residential construction.

Interestingly, a concerned Standard & Poor’s recently downgraded its expectations this year for the S&P 500 from 1270 to 1190 (now 2,196), and is recommending an underweighting in equities and an overweighting in cash.

On a more bearish note, Stovall says several of the firm’s technical indicators suggest a 50% retracement of the bull market advance from March 9, 2009, through April 23, 2010. If that were to happen, he says, we would see the S&P 500 tumble to 950 and the resumption of a bear market, since the S&P 500 would have fallen 22% from its recovery high.

Stovall blames the 16% market decline in the latter part of the second quarter on a four-letter word: fear. Defining these letters, he points to F — financial reform legislation; E — environmental impact of the Gulf Coast oil spill; A — Asian tensions, particularly as it relates to Chinese growth; and R — recession or the world slipping into a double-dip as a result of sovereign debt worries and a slowdown in U.S. consumer spending.

Stovall, who has examined the patterns of 17 bear market declines (10% to 20%) since World War II, says history would suggest we now have a greater chance of morphing into a new bear market than we do of emerging from a correction.

Stovall, who characterizes himself as a near-term bear and a long-term bull, notes that his cautious posture for now could be open to question based on the vigor, or lack of it, of second quarter earnings reports and company earnings guidance for the rest of 2010, both of which we’ll begin to see this week..

Stovall expects S&P 500 earnings to rise 42% in the second quarter, followed by decelerating growth of 31% and 28%, respectively, in the third and fourth quarters. He notes these are fairly optimistic predictions, but points out the comparisons are easy because we’re coming off a low base.

For those investors who disagree with Stovall’s near-term worries and believe the giant four-day rally represents a positive market turn, he gave me his five favorite stocks for the long term, all sporting S&P’s highest five-star rankings. They are Chevron, CVS Caremark, IBM, Medtronic and Oracle, all rated market outperformers over the next 12 months.

While they may seem appealing, keep in mind the jury is still out whether this will be the year of the lion or the lamb. With all the land mines out there, common sense, judging from Stovall’s thoughts, suggests that as far as putting new money to work in the market is concerned, be a lamb.

What do you think? E-mail me at Dandordan@aol.com.

Read more: Bull Market, Dow-Up, Bear Market, Stock Market Surge, Stock Market, Wall Street, Dow Jones, Business News

Kristie Arslan: Senate Wakes Up and Pays Attention to Small Business [Commentary]

On the eve of expiration for a number of key small business tax deductions and with the Small Business Administration running out of funding for small business loans, the U.S. Senate finally wakes up and begins to pay attention to small business. The same sector of the business community they have been touting will pull us out of this economic downturn.

With the guidance and leadership of Senator Mary Landrieu, the current chair of the Senate Committee on Small Business and Entrepreneurship, Senate leadership has finally introduced legislation that includes help for our nation’s smallest businesses. The Small Business Jobs Act of 2010 (H.R. 5297) includes a one-year business tax deduction for health insurance costs for the self-employed, an increase in the start-up business expense deduction, expansion of Section 179 expensing limits, increases in SBA loan limits, and a new Small Business Lending Fund to help increase access to capital.

To make things even better, Senator Barbara Boxer, has introduced an amendment to the Small Business Jobs Act to create a standard home office deduction option. This would allow millions of qualifying home-based business owners to forgo complicated paperwork and calculations to take a simple, standard deduction which will save them both time and money.

Can it be that policymakers are realizing that the self-employed — which number 23 million, represent 78 percent of all small businesses, and contribute close to $1 trillion to the U.S. economy — are the economic backbone of our country?!

Whatever the impetus behind the Small Business Jobs Act, we’re happy lawmakers are starting to pay attention to the self-employed.

For more information, please visit:

Senate Committee on Finance newsroom
NASE in Action

Read more: Senate, Small Business, Economy, Health Care Reform, Sba, Home Office Tax Deduction, Health Insurance, Mary Landrieu, Politics News

Janet Murguía: What’s the Holdup? Strategies to Jump-Start a Stalled Economy

More than 15 million Latinos are unemployed. If 400,000 jobs were created each month, it would take three years to get back to a national unemployment rate of 5%. Worse, more than 4.5 million families are at risk of losing their homes to foreclosure. It’s easy to get lost in these grim statistics, but for the millions of Latinos and Blacks bearing the brunt of the financial crisis, it’s much more personal than numbers. The National Council of La Raza (NCLR), through the work of its Affiliates and the NCLR Homeownership Network, sees the recession from the eyes of families facing the prospect of losing their jobs and homes.

Although financial experts say that the national economy has turned a corner, minority communities have remained stagnant. At Monday’s Economy town hall at the 2010 NCLR Annual Conference, major national figures convened to report on the status of economic recovery in Latino communities and discuss local and national approaches to restoring the nation’s financial well-being. Shaun Donovan, Secretary of the U.S. Department of Housing and Urban Development (HUD), acknowledged that communities of color have been hit hardest by the recession. He announced First Look, a new HUD initiative that gives state and local governments, and nonprofits involved in the HUD Neighborhood Stabilization Program, the first opportunity to acquire HUD properties. He also announced that there would be increased rental assistance to ensure that public housing is available to everyone who needs it. Citing Brown v. Board of Education, which ended segregation in public schools more than 50 years ago, as evidence that segregation in public housing must end, Secretary Donovan declared that it was time to put an end to a “separate but equal housing” policy.

Lack of access to opportunity prohibits communities that need support the most from getting it. Angela Glover Blackwell, Founder and CEO of PolicyLink, said that the location of where someone lives has become a determinant of opportunity. She felt that all aspects of a region–from public transportation and affordable housing to job training and employment opportunity–should be a coordinated effort to enable every community to have a chance at succeeding. Mayor Julián Castro of San Antonio underscored this point in his comments about his city, noting the Trinity Project, a holistic effort to improve neighborhoods by bringing public education, public transportation, and utilities closer together.

With record-high foreclosure and unemployment rates, addressing the needs of communities of color is not only essential to restoring financial stability to Blacks and Latinos but also vital to the health of our national economy. While these initiatives are steps in the right direction, Americans need to call their senators and let them know that despite the positive headlines and bright forecasts, our communities continue to shoulder the burden of a stalled economy. Let them know the importance of implementing and enforcing local hiring to boost employment in communities that are desperate for jobs. Remind them of their responsibility to all communities by marching on Washington as part of the One Nation rally this October to call for an increased national focus on jobs.

It’s true that the deck is stacked against us. It’s true that there is a long road ahead to real recovery for communities of color. But it is also true that the nation’s economic recovery–the very future of this country–depends on financially stable communities of color. Our needs cannot and will not be ignored.

Read more: Politics, Education, Poverty, Unemployment, Latino Voters, Financial Reform, Financial Crisis, Foreclosure, Hispanics, Housing Crisis, African Americans, Transportation, Minorities, Politics News

Small Business Confidence Deteriorates; Economy ‘Mediocre At Best’

Small business confidence plummeted last month by the largest amount since the height of the financial crisis as lackluster economic growth and anemic job creation begins to take its toll on America’s small businesses.

The National Federation of Independent Businesses said its Small Business Optimism Index dropped 3.2 points to 89.0, its steepest decline since October 2008. The index reversed two months of gains.

The NFIB said the consistent readings below 90 — 19 of the last 21 months have registered a sub-90 score — was “unprecedented in survey history.”

“The performance of the economy is mediocre at best,” the small business advocacy group said in their report. “The small business sector is not on a positive trajectory and with this half of the private sector ‘missing in action’, the poor growth performance is no surprise.”

From plans to create new jobs to expected sales to capital spending, the report shows that small business owners continue to retrench, potentially prolonging economic pain. Nearly 15 million American workers remain unemployed. Nearly half have been out of work for at least six months.

“Owners do not trust the economic policies in place or proposed and are distressed by global and
national developments that make the future more uncertain,” the NFIB said.

  • Just one percent more of owners plan to create new jobs, only the second positive reading in 20 months. The NFIB noted that “since the third quarter of 2009, job creation plans have underperformed the recoveries from the other two deep recessions covered by the NFIB survey”;
  • Six percent more owners expect business conditions to deteriorate further over the next six months. Last month, eight percent more owners expected conditions to improve. This metric had been on a positive trend for three months;
  • Five percent more small businesses expect lower sales over the next few months, as opposed to last month’s report which showed that five percent more owners expected higher sales. “Far more firms [are] reporting negative sales trends quarter to quarter than positive,” the NFIB reported;
  • “Small business owners continued to liquidate inventories and weak sales trends gave little reason to order new stock”;
  • Thirteen percent more owners cut prices or held them constant versus raising them, dampening inflation expectations. Last month was the 19th consecutive month in which more owners reported “cutting average selling prices that raising them,” the report said, adding that “widespread price cutting contributes to the high percentage reporting declining sales revenues”;
  • And just four percent more small businesses raised worker compensation. The report noted that “in past recovery periods, compensation improved at a much faster pace than we have experienced in this recovery period.”

“While political leaders trumpet their ideological attempts to remake the economy and save ‘small business’, more and more ordinary folks are wondering what in the world are they are thinking,” the NFIB report stated. “Either policymakers have no idea how to help the economy or they are intentionally committing it to unsustainable expenditure growth and deficits so large that there will be no alternative but to raise taxes, a slow suicide for a dynamic economy.”

While President Barack Obama and Federal Reserve Chairman Ben Bernanke continue to implore banks to lend more to stimulate the economy and boost job creation — with Obama pressing Congress to authorize additional taxpayer money to support private business lending — the NFIB reports that small businesses maintain their position that sales and a poor economy are the biggest hurdles.

About half the firms participating in the NFIB survey had less than five employees.

Nine out of ten small businesses reported that all of their credit needs were met last month, according to the NFIB report. Just six percent of owners said “finance” was their single most important problem. Rather, poor sales, taxes and government red tape took the top three spots.

“What businesses need are customers, giving them a reason to hire and make capital expenditures and borrow to support those activities,” the NFIB said.

And financing has rarely been cheaper: borrowers paid an average of 6.0 percent interest on short-term loans, a drop of 50 basis points from May, the report shows. The lowest interest rate the NFIB has found in its survey was 5.9 percent, which was achieved last November. A basis point is equal to 0.01 percentage point.

READ the full report:



Shahien Nasiripour is the business reporter for the Huffington Post. You can send him an e-mail; bookmark his page; subscribe to his RSS feed; follow him on Twitter; friend him on Facebook; become a fan; and/or get e-mail alerts when he reports the latest news.

Read more: Small Business, Nfib, Economy, Optimism, Great Recession, Financial Crisis, National-Federation-of-Independent-Businesses, Obama Small Business, Small Business Lending, Business News