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Thread: U.S. Economy

  1. #1

    Default U.S. Economy

    Stocks End Higher on GDP Data
    Thursday, July 31, 2003

    NEW YORK * Wall Street closed higher Thursday after investor confidence in the economy was boosted by a strong government report showing gross domestic product advanced much faster than expected in the second quarter.

    The Dow Jones industrial average ended higher 33.75, or 0.37 percent, to close at 9,233.80. The Nasdaq Composite closed up 14.11, or 0.81 percent, at 1,735.02, while the Standard & Poor's 500 index was up 2.82, or 0.28 percent, to close at 990.31.

    The Dow had earlier gained as much as 160 points, but stocks pulled back from sharper gains in the last two hours of trading, a phenomenon that often happens on the last trading day of the month, when portfolio managers make last-minute adjustments to maximize returns and look good to shareholders.

    For July, the Dow climbed 2.8 percent, the S&P 500 rose 1.6 percent, and the Nasdaq Composite jumped 6.9 percent.

    Volume was heavy with 1.6 billion shares changing hands on the New York Stock Exchange and 1.8 billion traded on Nasdaq.

    The main force driving stocks higher on Thursday was new data released by the Commerce Department showing the U.S. economy grew at a brisk 2.4 percent annual clip in the second quarter, driven by a surge in defense spending.

    The pickup in gross domestic product, or GDP, from an annual rate of 1.4 percent in each of the two prior quarters, easily beat Wall Street economists' forecasts for a 1.5 percent pace of second-quarter growth.

    Also on Thursday, the government said the weekly number of Americans lodging new jobless claims drifted down unexpectedly to the lowest level since February.

    The level of new claims, which gives an early reading on the resilience of the job market, edged down by 3,000 in the July 26 week to 388,000 from a revised 391,000 in the prior week, the Labor Department said.

    The Purchasing Management Associated of Chicago (search) also reported encouraging economic data. The group's index of area business activity rose to 55.9 in June on a seasonally adjusted basis from 52.5 in May, according to Dow Jones Newswires.

    A reading above 50 signals that the manufacturing sector is expanding, while a reading below 50 indicates it is contracting. The July reading exceeded analysts' forecast calling for 53.8.

    "The fact that these numbers came in so good, you can only expect there's going to be even better numbers tomorrow," said Jack Francis, co-head of equity trading at UBS.

    Friday brings another big batch of economic numbers, including closely watched reports on both the labor market and the manufacturing sector.

    Adding to the optimism on Wall Street, several corporate giants reported strong earnings in the second quarter.

    Click for List of Earnings

    Procter & Gamble Co. (PG), the maker of Tide laundry detergent, Pringles potato chips and about 300 other consumer products, said profit rose as newer products and the weak dollar helped boost sales. Shares rose 12 cents to $87.87 on the New York Stock Exchange.

    Exxon Mobil Corp. (XOM), the world's biggest publicly traded oil company, said its second-quarter profit rose on higher oil and gas prices and improved refining margins. Exxon gained 26 cents to $35.58.

    Insurer Chubb Corp. (CB) said after the close of trading on Wednesday that its quarterly profit rose 20 percent. Its shares were up 4.6 percent, or $2.90, to $64.80.

    CVS Corp. (CVS) climbed $1.04 to $29.99, adding to the $1.20 it gained Wednesday when the drug store company reported second-quarter profits that beat analysts' expectations by a penny a share. On Thursday, Morgan Stanley upgraded CVS to "overweight" from "equal-weight."

    Merrill Lynch helped bolster the semiconductor sector after it raised its ratings on a number of companies in the sector, including National Semiconductor Corp. (NSM), which rose $1.59, or 8 percent, to $22.35. The Philadelphia Stock Exchange semiconductor index rose 2.22 percent.

    Weighing on the market was Cardinal Health Inc. (CAH), which tumbled after the drug wholesaler's fiscal 2004 earnings forecast disappointed Wall Street. Its shares fell $9.71, or 15 percent, to $54.75.

    Consumer products maker Newell Rubbermaid Inc. (NWL) also took a hit after it said its profit fell 17 percent amid weaker retail orders and it cut its earnings forecast for the year. Its shares dropped $4.79, or 17 percent, to $23.63.

    The bond market had stock investors on edge again. U.S. Treasury prices crumbled and yields surged to one-year highs. The move fanned fears higher borrowing costs could deflate the housing market an area of strength in an otherwise soggy economy.

    Despite having the lead for most of the session, advancing issues ended up matching decliners on the New York Stock Exchange. Trading volume was moderate.

    The Russell 2000 index, which tracks smaller company stocks, rose 3.22, or 0.68 percent, to 4768.02.

    Overseas, Japan's Nikkei stock average finished Thursday down 0.7 percent. In Europe, Britain's FTSE 100 gained 0.4 percent, France's CAC-40 rose 1.2 percent and Germany's DAX index advanced 1.3 percent.

    Reuters and The Associated Press contributed to this report.

    So do you all think the economy is going to start shaping up or this is just hype over nothing?

  2. #2

    Default Economy

    GDP Surges on Defense Spending
    Thursday, July 31, 2003

    WASHINGTON The biggest surge in defense spending since the Korean War era helped drive U.S. economic growth ahead at a surprisingly brisk 2.4 percent annual clip in the second quarter, the Commerce Department (search) said on Thursday.

    The pickup in gross domestic product, or GDP (search), from an anemic annual rate of 1.4 percent in each of the two prior quarters, easily beat Wall Street economists' forecasts for a 1.5 percent pace of second-quarter growth and showed relatively broad-based gains.

    It was the most robust expansion in GDP since a 4 percent annual rate of increase in the third quarter of last year and is certain to buttress forecasts from Bush administration officials and private analysts for an economic acceleration in the second half of 2003.

    "Growth in the second quarter was boosted by federal defense spending, by business investment in plant and equipment, and by consumer spending," Commerce noted. Spending on defense, much of it to support the war in Iraq, shot up at a 44.1 percent rate the strongest since a jump of 110 percent in the third quarter of 1951 after falling 3.3 percent in the first three months of the year.

    The dollar's value climbed against other major currencies immediately after the GDP data was issued, in the apparent belief a U.S. economic rebound will outstrip those in other major regions and make U.S. investments relatively more attractive.

    Business Spending Revives

    Business investment, which has lagged during the slow expansion from the 2001 recession, showed definite signs of revival in the spring quarter.

    Nonresidential spending the broadest category of investment climbed at a 6.9 percent annual rate in the second quarter after decreasing 4.4 percent in the first three months. It was the strongest advance in investment spending in three years, since a 10.2 percent jump in the second quarter of 2002.

    Consumer spending, which fuels two-thirds of national economic activity, added to the second-quarter pace of expansion. Spending, especially on new cars and other costly durable goods, climbed to a 3.3 percent rate from 2 percent in the first three months of the year, and was the strongest since a 4.2 percent increase in the third quarter of last year.

    The Federal Reserve, which has cut U.S. short-term interest rates to 45-year lows in a bid to spark a stronger recovery, said on Wednesday it saw signs in June and early July that a more vigorous pace of growth was budding as manufacturing activity grew.

    "Several districts noted increased optimism about economic prospects in coming months," the U.S. central bank said in its periodic beige book summary of national economic conditions in the 12 Fed districts, adding it saw "nascent signs of a recovery" in a down-trodden manufacturing sector that has shed an estimated 2.6 million jobs since mid-2000.

    Spreading the Word

    Treasury Secretary John Snow (search), touring two states in the Midwest in company with Commerce Secretary Don Evans and Labor Secretary Elaine Chao on Tuesday and Wednesday, similarly maintained the economy was "spring loaded" for a more powerful second-half performance with growth rising to around a three percent rate in the third quarter and 3.5 percent by the final quarter this year.

    The GDP report showed businesses reduced their inventories of unsold goods at a $17.9 billion annual rate in the second quarter after building them up at rates of $4.8 billion in the first quarter and $25.8 billion in the final three months last year.

    Slimmed-down inventories generally are considered promising for the future, since it means companies must quickly ramp up production and potentially hire more employees once stronger demand is firmly established.

  3. #3

    Default Economy

    All I can say is its still quite bad here on Long Island. Roosevelt Field mall lost over 10 stores since the beginning of the year, it just lost 2 more last week.
    Dont see the city doing that well either. Hopefully though things have turned the corner, but the effects always lag in New York and Long Island.

  4. #4

    Default Economy

    StocksView: Confidence Lags on Wall St.

    Sat Aug 2, 8:48 AM ET

    By Dick Satran

    NEW YORK (Reuters) - Like voters in the nation's most populous state, stock market investors are trying hard to erase the grim memories of the past three years and move forward.

    But the reality is that California, and the stock market, might have some hard slogging to go through before things get a lot better. In both cases, a sluggish economy and a crisis of confidence are sapping prospects for a strong rebound.

    "Confidence is vulnerable right now," said Robert Shiller, a professor of behavioral economics at Yale University's International Center of Finance. "There's distrust and dissatisfaction with the people on Wall Street -- the talking heads and analysts who kept telling them the market would keep going up when it didn't."

    Californians know all about distrust. Facing ballooning budget deficits and economic malaise, they've backed a historic recall election of Gov. Gray Davis (news - web sites).

    Wall Street's lack of confidence shows up when investors sit on their wallets -- but the signs are mixed about what hey'll do next. The major averages have climbed now for five straight months, but are still far below their all-time highs.

    Few analysts expect stocks to continue the first-half boom, especially after the latest round of corporate earnings appeared suspect, pumped up by one-time gains and cost cuts, and unemployment still near nine-year highs.

    Thursday's surprisingly strong 2.4 percent growth in gross domestic product bolstered optimists. John *Bitner, chief economist for Eastern Investment Advisors, said the figures show "we're on the cusp of a stronger recovery." He sees growth rising to 3.5 percent a year -- still moderate but good for stocks, as it doesn't trigger steep gains in interest rates or inflation.

    So far, though, the economy hasn't shown the ability to create new jobs, and that's been a source of major concern for investors. Friday's employment data showed overall unemployment falling to 6.2 percent but jobs still disappearing.

    The jobs picture is one of the big factors sapping investor confidence, said Shiller. In surveys of investor confidence, he finds investors are increasingly willing to put money into stocks, but not for the long term. Most people still don't trust the market as a long-term investment, he said.

    Back in 2000, when stocks were near their all-time peaks, the vast majority of people were true believers, with 76 percent "strongly agreeing" with the statement: "The stock market is the best investment for long-term holders." But that figure declined precipitously since then to just 39 percent this year.


    The economy has undermined investor confidence and California politics. California is ground zero of a malaise" that's infected almost every state trying to cope with a cutback in federal funding. The state's whopping budget deficit of almost $40 billion sparked the recall election of Davis.

    But there are plenty of economists who see the embattled governor as more scapegoat than perpetrator in the budget crisis. About half of the state's $20 billion deficit can be blamed on lost tax revenues caused by the tech bubble's collapse, says Stephen Levy, senior economist at the Palo Alto, California-based Center for Continuing Study of the California Economy.

    The economic downturn has been dramatic in the tech industry. The San Francisco Bay Area lost more than 275,000 jobs in the past three years, or 10 percent of all jobs lost in the recession. In this week's Federal Reserve (news - web sites) "Beige Book" Report on regional economies in the United States, the Bay area was cited as one of three remaining trouble spots nationally.

    To be sure, job losses all around the country have battered consumer and investor confidence alike. That helped knock the Conference Board (news - web sites)'s consumer confidence indicator down 10 percentage points on Thursday, pushing stocks downward.

    "The fact that the economy has lost 2.5 million jobs is an enormous negative," said Shiller. "It's a confidence destroyer."

    Still, Bitner sees the economic recovery finally reaching the level where new job creation will take place and moderate growth will allow stocks to gain 8 percent to 10 percent a year.

    "A lot of people have been talking as if the economy will jump up like a coiled spring -- but what I see is something moderate," said Bitner.

    California's troubles, he said, are not likely to spill over into the national economy. Still, he sees the legacy of stock market scandals and stock bubbles sparking a different kind of malaise for investors all over America.

    "People have to overcome their fear, and they have to see that the government really has clamped down on the stock market excesses. They have to realize that it's safe to go back in the water," Bitner said. The legacy of terror attacks, the sluggish economy and the Iraq (news - web sites) war also continue to shred confidence. "It will take a while to wipe that away."

    Copyright Reuters

    In the long term, the balooning budget deficit is worrisome.

  5. #5


    October 14, 2003

    Don't Look Down


    During the 1990's I spent much of my time focusing on economic crises around the world in particular, on currency crises like those that struck Southeast Asia in 1997 and Argentina in 2001. The timing of such crises is hard to predict. But there are warning signs, like big trade and budget deficits and rising debt burdens.

    And there's one thing I can't help noticing: a third world country with America's recent numbers its huge budget and trade deficits, its growing reliance on short-term borrowing from the rest of the world would definitely be on the watch list.

    I'm not the only one thinking that. Lehman Brothers has a mathematical model known as Damocles that it calls "an early warning system to identify the likelihood of countries entering into financial crises." Developing nations are looking pretty safe these days. But applying the same model to some advanced countries "would set Damocles' alarm bells ringing." Lehman's press release adds, "Most conspicuous of these threats is the United States."

    O.K., let's run through some reassuring counterarguments.

    First, economists are very good at devising models that would have predicted past crises, but each new crisis tends to happen where and when they didn't expect it. So even though our budget deficit is bigger relative to the economy than Argentina's in 2000, and our trade deficit is bigger relative to the economy than Indonesia's in 1996, our experience needn't be the same.

    Second, nasty crises in third world countries have a lot to do with the fact that their debt is in foreign currency, usually dollars. As a result, when the peso or the rupiah plunges, debts explode while assets don't, and balance sheets collapse. By contrast, thanks to the special international role of the dollar, America's burgeoning foreign debt is in our own currency.

    Finally, financial markets are generally willing to give advanced countries the benefit of the doubt. Even when an advanced country seems to be deep in a financial hole, lenders usually assume that it will somehow find the resources and political will to climb back out.

    So is America safe, despite its scary numbers?

    Third world countries typically suffer from institutional weaknesses. They have poor corporate governance: you can't trust business accounting, and insiders often enrich themselves at stockholders' expense. Meanwhile, cronyism is rampant, with close personal and financial links between powerful politicians and the very companies that benefit from public largesse. Luckily, in America we don't have any of these weaknesses. Oh, wait. . . . (Isn't that all history? No. According to The Wall Street Journal, we are again hearing warnings that "optimism is based on massaged earnings.")

    Still, there's no question that the U.S. has the resources to climb out of its financial hole. The question is whether it has the political will.

    There is now a huge structural gap that is, a gap that won't go away even if the economy recovers between U.S. spending and revenue. For the time being, borrowing can fill that gap. But eventually there must be either a large tax increase or major cuts in popular programs. If our political system can't bring itself to choose one alternative or the other and so far the commander in chief refuses even to admit that we have a problem we will eventually face a nasty financial crisis.

    The crisis won't come immediately. For a few years, America will still be able to borrow freely, simply because lenders assume that things will somehow work out.

    But at a certain point we'll have a Wile E. Coyote moment. For those not familiar with the Road Runner cartoons, Mr. Coyote had a habit of running off cliffs and taking several steps on thin air before noticing that there was nothing underneath his feet. Only then would he plunge.

    What will that plunge look like? It will certainly involve a sharp fall in the dollar and a sharp rise in interest rates. In the worst-case scenario, the government's access to borrowing will be cut off, creating a cash crisis that throws the nation into chaos.

    I know: it all sounds unbelievable. But would you have believed, three years ago, that the U.S. budget would plunge so quickly from a record surplus to a record deficit? And would you have believed that, confronted with that plunge, our leaders would offer excuses rather than solutions?

    Copyright 2003 The New York Times Company

  6. #6

  7. #7


    Actually if anyone's been paying attention the economy has recently started to get back on its feet. Stocks are going up. The unemployment rate hasn't gone up in a while. And President Bush does care about the economy, that's why he issued tax cuts. And they are starting to work. However, maybe he is slow to make new changes to help the economy because anything he does gets criticized from the left.

  8. #8


    He's afraid to do anything out of fear of criticism?
    Even I give him more credit than that.

  9. #9


    Well he has good reason to be afraid of criticism Zippy. Originally he didn't worry about criticism if he knew the cause was just. He went through with the tax cuts, and the war in iraq. He knew that those two things were neceassary and he did them, despite criticism. But criticism of him is getting way out of hand. He is probably realizing that even though things he does may be right, like trying to get rid of affirmative action, he will be criticized severly for doing them. I didn't say he wouldn't do more for the economy, just that it is possible that he will take longer to do things because of fear from criticism. But that is a guess, not a fact. I'm just guessing that he will be slower in making ANY decision because he wants to think about what will be criticized about it first. When Clinton was in office he was hardly ever criticized, despite Waco, Monica, lying to the entire country, and not going after terrorists in 1993. Why is that? I don't know. Clinton should have been criticized much more than he was. President Bush should be criticized a lot less than he is being criticized. IMO liberals are just more dirty in politics. They will attack President Bush on nearly anything, which will most likely slow down any decisions he makes. But that is just my guess for why he hasn't done more than tax cuts, and lower interest rates for the economy. Although those two things are definately improving the economy and preventing it from getting worse.

  10. #10


    The last time I checked, Clinton was not the president. When things start to go bad, the argument becomes, "Well, he's not as bad as so-and-so."

    When Clinton was in office he was hardly ever criticized,

    A president who is afraid of criticism is not presidential. Bush did not fear criticism two years ago because he wasn't getting any. He was riding his huge bump in popularity because of the terror attacks. Democrats were politically afraid to voice opposition (to their discredit). Now that his popularity is back down to reasonable levels, his administration is politically vulnerable.

    I have said before that the war in Iraq would become a political and economic issue. Now we are stuck for the long haul. Iraq has replaced Afghanistan as the base for terrorism. A cleric set up his own Islamic government in the south. The death toll since Bush declared hostilities over is 100. Bush blames the press for the negativity. It appears that we are finally getting the idiot we elected.

  11. #11


    And the clinton thing was a point. It doesn't matter whether or not he is in office now. I'm comparing the two parties. Because the TV news has a liberal slant when clinton was making bad choices they didn't criticize him. When President Bush makes a GOOD choice, they find something bad about it. It's a double standard I'm talking about. You or another liberal has probably criticized a past Republican President at one time or another, and I bet you no one said "Well he isn't the presidnet anymore so it doesn't count." That is another double standard because when I criticize a past democratic president, which is my right, I am told not to.

  12. #12


    That is another double standard because when I criticize a past democratic president, which is my right, I am told not to.
    I am sorry that you have problems with reading comprehension. I was expressing my opinion that it's not relevant to this discussion. No one told you not to do it.

    When President Bush makes a GOOD choice, they find something bad about it.
    You're just going to have to accept the fact that some people think they are BAD choices.

    You or another liberal has probably criticized a past Republican President at one time or another, and I bet you no one said "Well he isn't the presidnet anymore so it doesn't count."
    I would appreciate it if you would limit your criticisms to statements I have actually made in this forum (you seem to be having enough trouble with that), and not guess at statements you think I may have made in the past.

    Bush still has Fox News and that rag the NY Post - who seemed to have problems figuring out who won the Yankee-Red sox game.

  13. #13


    As long as Zippy brought up Iraq, I think we may need to readdress the issue of "why did we ever get involved."

    The original choice on Iraq was to either A) Leave sanctions in place, continue to pressure Saddam Hussein; B) Lift sanctions, and let Saddam rejoin the world community on his own terms, or C) Go in guns blazing, and get our hands dirty, remove Saddam, and face the consequences.

    Choice A was rapidly becoming politically unacceptable. Europe and Russia were clamoring to lift sanctions, so that they could recover billions in loans to Saddam and dormant oil investments. Saddam was lobbying hard to have sanctions lifted, claiming he didn't have weapons of mass destruction.

    Choice B was virtually unthinkable. Given an enormous resource base that is Iraq's oil reserves, Saddam with his hands untied could recreate his WMD program from scratch in 3-4 years, tops. Then we would REALLY have some fun.

    It is obvious that choice C was the only plausible solution. The fact that Saddam didn't actually possess WMD is moot. In fact, it is precisely because he did not yet have those weapons that we were able to attack him with impunity in the first place. Given more time and and a lax enforcement policy, Iraq would not take long to turn into a North-Korea-like mess.

    I will not deny that the Bush administration bungled the diplomatic effort that accompanied the war with Iraq. They should have told it like it was, and not relied on bogus terrorism and WMD claims. However, that does not negate the fact that the war was necessary.

    It is, of course, unfortunate that over 100 american soldiers have died since the official end of the war, as announced by Bush. However, we should also keep in mind that 100 is a very low casualty rate for an occupation of this size (140,000 troops), and is probably right up there with the rate at which those soldiers would die in traffic accidents at home.

    To all those, who would call for an early return of American troops, remember the lessons learned from Somalia. Because Americans turned tail and ran at the first whiff of casualties, the emboldened terrorists decided that they can strike us with no fear of retribution.

  14. #14


    Choice C is the obvious choice among the three, but there was a fourth:

    D. Gradual escalation. There was no immediacy as the public was led to believe. As a result of the rush for a spectacular military victory, no real planning was made for the aftermath.

    The war, coupled with the tax cuts, has become a huge political and economic issue.

    and is probably right up there with the rate at which those soldiers would die in traffic accidents at home.

  15. #15


    "To all those, who would call for an early return of American troops, remember the lessons learned from Somalia. Because Americans turned tail and ran at the first whiff of casualties, the emboldened terrorists decided that they can strike us with no fear of retribution."

    Even though I said I wouldn't bother posting, I couldn't help but agree with that statement made by euGENIUS. Not to mention how the anti-war protesters only bolstered the morale for Saddam and his goons. The anti-war and "pull-back the troops" movements also screwed up Vietnam. We, believe it or not, had killed a lot more North Vietnamese then we lost in Americans but then on days people protested bombing raids would stop. The war wasn't fought with full effort becuase there was so much criticism of it. The more the war is criticized the worse it is going to turn out.

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