Sunday, March 31, 2013

Wall Street Week Ahead: Pullback possible after S&P's milestone!!!

  • Traders work on the floor at the New York Stock Exchange, March 28, 2013. REUTERS/Brendan McDermidView PhotoTraders work on the floor at the New York Stock Exchange, March 28, 2013. REUTERS/Brendan McDermid

RELATED QUOTES

SymbolPriceChange
^GSPC1,569.19+6.34
^INX
0.00
^DJI14,578.54+52.38
^IXIC3,267.520.00
By Ryan Vlastelica
NEW YORK (Reuters) - After flirting with an all-time high for three weeks, the S&P 500 (.SPX) posted its best closing level in history. But some strategists say Thursday's record could be a harbinger that the stock market rally is running out of steam.
The S&P traded within 10 points of the all-time closing high for 13 sessions before breaking through, showing that investors need new catalysts to push firmly above resistance levels.
"As the market has gone higher ... upward moves have generally gotten smaller, which suggests that the move is getting old and that we need a pullback," said Mark Arbeter, chief technical strategist for Standard & Poor's in New York.
Stocks could fall about 3 percent to 4 percent, he said.
The benchmark index has risen almost 10 percent so far this year, fueled by strong profit growth and accommodative monetary policy from the Federal Reserve. But those gains have slowed as investors fret over Cyprus's bailout and mixed signs about the economy.
Still, stocks have been resilient, lifting the S&P to its record close of 1,569.19 on Thursday. Investors stepped in on declines to buy and finally pushed the S&P above the previous record set on October 9, 2007.
The broad index is also within a stone's throw of its intraday record of 1,576.09. The Dow surpassed its record close on March 5 and set a series of records, ending Thursday at 14,578.54.
The S&P has risen for 11 of the past 13 weeks, up 0.4 percent over the past two weeks. In contrast, the CBOE Volatility index (.VIX), a measure of investor anxiety, is up about 14.5 percent over the same period.
"The increase in volatility we've seen is far more likely to be the sign of a short-term top" than the trend of investors buying on dips, Arbeter said. "If that volatility persists, then you would need to worry about an intermediate top."
In addition, speculator positions show a preference for holding long positions. Mike O'Rourke, chief market strategist at Jones Trading, noted that long positions account for more than 65 percent of speculative positions in futures contracts, a point at which rallies can be overextended.
U.S. markets will be closed for the Good Friday holiday and reopen on Monday.
The stock market next week will face tests of the milestone it reached, with the situation of Cyprus's banks and a round of U.S. data, including the March jobs report on Friday, facing investors.
GOLDILOCKS REPORT
About 197,000 jobs were added in March, according to a Reuters poll of economists. That would be down from the 236,000 jobs created in the previous month but still suggest improvement in the labor market. The unemployment rate is seen holding steady at 7.7 percent.
A strong payroll report could spark caution if it raises questions about whether the Federal Reserve would be more inclined to reduce monetary stimulus more quickly.
"There will be those who fear that if things improve too dramatically, too quickly, the Fed will take its foot off the pedal of quantitative easing," said Kristina Hooper, head of portfolio strategies at Allianz Global Investors in New York.
So far, however, the Fed has not suggested a change in its stimulus measure is likely. If the central bank slows the rate of its monthly bond purchases, a program that has been credited with boosting equity prices, "that could cause some weakness," Hooper said.
Rex Macey, chief investment officer at Wilmington Trust in Atlanta Georgia, said a "Goldilocks report" was needed for markets to rally.
In the first quarter the S&P rose 10 percent. It gained 3.4 percent in March, the index's fifth straight monthly rise. The Dow was up 3.7 percent in March and more than 11 percent in the first quarter, while the Nasdaq composite index was up 3.2 percent in March and 8 percent in the quarter.
Cyprus will remain in focus after the government was forced to accept a stringent European Union rescue package to avert default. In a positive sign, there were no runs by depositors on banks after they reopened under tight controls on Thursday.
Macey, who helps manage about $20 billion in assets, compared the market's situation to the card game "Texas Hold 'Em" poker where players start out with cards they can see and don't see additional cards until after rounds of betting.
"Based on the cards we can see now, which are things like economic fundamentals, I think stocks are a fine place to be in the longer term," he said. "However, there are still cards we can't see, like what the resolution will be in Cyprus, that could cause trouble."
(Editing by Kenneth Barry)

Friday, March 29, 2013

Can Cyprus like crisis happen in US?

With all of this economic doom and gloom that is going around these days it is a legitimate question. Can what happened in Cyprus happen here? I think that it is not outside the realm of possibility. I don't think it is because we are economically as weak as the EU. I think it is because of the political situation in the US. It seems to be that every time there is some sort of crisis the government decides to "step" in and rescue the poor dumb people. When they are "stepping" in they also exert their control over the system that they "help". So every time they see a crisis they never let it go to waste. I just hope the the people in our country will wake up and smell the coffee at some point. The United States is involved in so much globally that we are the economic super power of the world. If you disagree with me than why do so many other countries want to buy our debt? The answer is so that they can be involved with us economically. Think about it larger credit card companies sell their debt to smaller companies right? So what is the difference here? The problem will occur only if the entire globe goes into a severe depression. If this occurs then the us will face a "Cyprus" type situation. Most economists think the chances are remote but they still are remote which means it is possible. " If you fail to plan you plan to fail"

Thursday, March 28, 2013

Advertisement Advertisement S&P 500 ends at record closing high!!!

By Rodrigo Campos
NEW YORK (Reuters) - The S&P 500 set a record closing high on Thursday, finishing a fifth consecutive month of gains to extend a four-year rally.
The S&P had hovered near its record for more than two weeks, and market action next week will help determine if this is just another stepping stone for the rally, or if a long-expected pullback is in the offing.
The benchmark S&P 500 closed its strongest quarter in a year - up 10 percent. The Dow climbed 11.3 percent and the Nasdaq gained 8.2 percent for the first three months of the year.
The new closing high "is a very appropriate punctuation for a great quarter that saw a lot of last year's anxieties recede," said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland.
"However, this could be the start to a more realistic look at the problems that still haven't gone away. Some degree of caution is probably still merited, with the problems in Cyprus probably only the beginning to what we could see in coming months."
The rally hit a wall in the last two weeks as the latest chapter in the euro-zone crisis developed, with Cyprus nearing a default and a possible exit from the euro bloc.
The S&P 500 had been in a fairly tight range, having traded within 10 points of the October 9, 2007, record closing high of 1,565.15 over the previous 13 sessions.
On Thursday, the S&P 500 (.SPX) gained 6.34 points, or 0.41 percent, to end at a new record of 1,569.19.
The Dow industrials, which surpassed its 2007 record on March 5 and has set a series of record highs since then, ended Thursday's session at yet another nominal closing high - at 14,578.54. For the day, the Dow rose 52.38 points, or 0.36 percent.
The Nasdaq Composite (.IXIC) added 11 points, or 0.34 percent, to close at 3,267.52.
The gains in the three first months of the year have a very bullish history. An analysis by Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati, showed the S&P 500 has risen in the three first months of the year nine times in the past 30 years, and in each case, it has posted gains for the year.
The average yearly gain after such a start, the data showed, was 17.56 percent. An advance like that would leave the S&P 500 at about 1,676 at the end of this year.
"The key is the follow-through," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.
"It will be very important how the market handles next week's data."
Key manufacturing numbers are expected on Monday and factory orders Tuesday, building up to Friday's widely followed payrolls report.
During March, the Dow gained 3.7 percent, the S&P 500 rose 3.6 percent and the Nasdaq added 3.4 percent.
Thursday marked the end of the trading week. U.S. stock markets will be closed on Friday because of the Good Friday holiday.
Netflix (NFLX.O) was the S&P 500's best-performing stock during the first quarter, up 104.4 percent at $189.28, followed by Best Buy (BBY.N), up 86.9 percent at $22.15.
On the downside, Cliffs Natural Resources (CLF.N) tumbled 50.7 percent in the first quarter to $19.01 and J.C. Penney (JCP.N) lost 23.3 percent to $15.11.
Data showed the number of Americans filing new claims for unemployment benefits rose more than expected last week, but probably not enough to suggest a faltering in the labor market's recovery. Other data showed the economy expanded more in the fourth quarter than was previously estimated by the government.
Volume was lighter than average with some market participants absent for the observance of Passover or to get an early start on the long Easter weekend.
About 5.8 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, below the daily average so far this year of about 6.4 billion shares.
On the NYSE, advancers outnumbered decliners by a ratio of roughly 8 to 5. On the Nasdaq, 14 stocks rose for every 11 that fell.
(Reporting by Rodrigo Campos, Chuck Mikolajczak and Ryan Vlastelica; Editing by Jan Paschal)


Tuesday, March 26, 2013

Data lifts Dow to a record, S&P near record close!!

By Angela Moon
NEW YORK (Reuters) - Stocks rallied on Tuesday, with the Dow climbing more than 100 points to another record close and the S&P 500 coming within striking distance of its all-time closing high, as strong data on home prices and manufacturing fed optimism about the economy.
The Dow Jones industrial average initially surpassed its 2007 record closing high on March 5. Since then, the Dow has reached a series of subsequent nominal record highs.
In Tuesday's session, the S&P 500 made yet another attempt at a record, but failed to break above the all-time closing high for the second day this week.
At Tuesday's close, the S&P 500 was only 1.38 points below its lifetime closing high. On Monday, the benchmark index traded just a quarter point below its record closing high, which stands at 1,565.15 set on October 9, 2007, and then retreated as investors sold some equities to cash in on gains in the wake of the news out of Europe.
Data showed U.S. single-family home prices rose in January at the fastest pace in more than six years, while long-lasting U.S. manufactured goods, also known as durable goods orders, shot up in February.
"I think the batch of data was enough to convince investors that the U.S. economy is on the right track," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co, in New York.
"At this point, it's hard to argue that anything will derail the U.S. economy, and that is boosting investors' confidence as they continue to load up on equities."
Still, investors may look for reasons to take profits, with the S&P 500 up nearly 10 percent so far this year. The rally has lifted the benchmark index near its all-time closing high, which it nearly reached on Monday.
The Dow Jones industrial average (.DJI) rose 111.90 points, or 0.77 percent, to end at 14,559.65, a record closing high. The Standard & Poor's 500 Index (.SPX) gained 12.08 points, or 0.78 percent, to finish at 1,563.77. The Nasdaq Composite Index (.IXIC) advanced 17.18 points, or 0.53 percent, to close at 3,252.48.
The semiconductor index (.SOX) climbed 0.9 percent, buoyed by Intel Corp (INTC.O) shares, up 2.9 percent at $21.77.
The CBOE Volatility Index (.VIX) or VIX, Wall Street's favorite barometer of investor anxiety, fell 7.1 percent to close at 12.77.
In a sign that growth continues to be slow, sales of new U.S. single-family homes fell more than expected in February, and the latest reading on consumer confidence was weaker than expected.
Shares of homebuilding stocks were mixed. Lennar Corp (LEN.N) stock rose 0.4 percent to $41.72, but Hovnanian Enterprises (HOV.N) shares slid 3.1 percent to $5.87.
But investors remained concerned about the negative implications of a financial rescue plan for Cyprus. They worried that it would serve as a template for other euro-zone economies requiring bailouts.
Banks in Cyprus will remain closed until Thursday and will then be subject to capital controls to prevent a run on deposits. President Nicos Anastasiades said late on Monday that a 10-billion-euro ($13 billion) rescue plan approved over the weekend was "painful" but essential to avoid economic meltdown.
"If there's a run on deposits, there may be a selloff (in U.S. stocks), but that could pose an excellent entry point to get into the market and take advantage of this rally," said Todd Schoenberger, managing partner at LandColt Capital, in New York.
In U.S. corporate news, Monsanto Co (MON.N) and DuPont Co (DD.N) settled a legal battle over rights to technology for genetically modified seeds. The companies agreed to drop antitrust and patent lawsuits against each other in U.S. federal court. Monsanto shares rose 4.4 percent to $103.79. DuPont, a Dow component, shed 0.3 percent to $48.97.
Netflix Inc (NFLX.O) was the S&P 500's top percentage gainer, jumping 5.4 percent to $190.61 after Pacific Crest raised its price target on the stock to $225 from $160, citing prospects for international subscriber growth.
Michael Dell's $24.4 billion buyout bid for Dell Inc (DELL.O) could be derailed after billionaire Carl Icahn opened the door to an alliance with Blackstone Group LP (BX.N) to take control of the computer maker from its founder. Dell dipped 0.1 percent to $14.50.
In Tuesday's session, volume was lighter than usual with some market participants absent for the observance of the Jewish holiday of Passover.
Volume was roughly 5.2 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, compared with the 2012 average daily closing volume of about 6.45 billion.
Advancers outnumbered decliners on the New York Stock Exchange by a ratio of about 7 to 3. On the Nasdaq, seven stocks rose for every five that fell.
(Editing by Jan Paschal)


Monday, March 25, 2013

Cyprus banks remain closed to avert run on deposits!!!

By Michele Kambas and Karolina Tagaris
NICOSIA (Reuters) - The president of Cyprus assured his people a bailout deal he struck with the European Union was in their best interests, but banks will remain closed until Thursday - and even then subject to capital controls to prevent a run on deposits.
Returned from fraught negotiations in Brussels, President Nicos Anastasiades said late on Monday the 10-billion euro ($13 billion) rescue plan agreed there in the early hours of the morning was "painful" but essential to avoid economic meltdown.
He agreed to close down the second-largest bank, Cyprus Popular, and inflict heavy losses on big depositors, many of them Russian, after Cyprus's outsize financial sector ran into trouble when its investments in neighboring Greece went sour.
European leaders said a chaotic national bankruptcy that might have forced Cyprus from the euro and upset Europe's economy was averted - though investors in other European banks are alarmed by the precedent of losses for depositors in Cyprus.
"The agreement we reached is difficult but, under the circumstances, the best that we could achieve," Anastasiades said in a televised address to the nation on Monday evening.
"We leave behind the uncertainty and anxiety that we all lived through over the last few months and we look forward now to the future with optimism," he told compatriots who face an immediate, deep recession and years of hardship unlikely to be milder than those experienced by Irish, Greeks and Portuguese.
Many Cypriots say they felt anything but reassured by the bailout deal, however, and are expected to besiege banks as soon as they reopen after a shutdown that began over a week ago.
Reversing a previous decision to start reopening at least some banks on Tuesday, the central bank said late on Monday that they would all now stay shut until Thursday to ensure the "smooth functioning of the whole banking system".
Little is known about the restrictions on transactions that Anastasiades said the central bank would impose, but he told Cypriots: "I want to assure you that this will be a very temporary measure that will gradually be relaxed."
Capital controls, preventing people moving funds out of the country, are at odds with the European Union's ideals of a common market but the government may fear an ebb tide of panic that would cause even more disruption to the local economy.
Without an agreement by the end of Monday, Cyprus had faced certain banking collapse and risked becoming the first country to be pushed out of the European single currency - a fate that Germany and other northern creditors seemed willing to inflict on a nation that accounts for just a tiny fraction of the euro economy and whose banks they felt had overreached themselves.
Backed by euro zone finance ministers, the plan will wind down the largely state-owned Cyprus Popular Bank, known as Laiki, and shift deposits under 100,000 euros to the Bank of Cyprus to create a "good bank", leaving problems behind in, effectively, a "bad bank".
Deposits above 100,000 euros in both banks, which are not guaranteed by the state under EU law, will be frozen and used to resolve Laiki's debts and recapitalize the Bank of Cyprus, the island's biggest, through a deposit/equity conversion.
PRECEDENT SET
The raid on uninsured Laiki depositors is expected to raise 4.2 billion euros of the 5.8 billion euros the EU and IMF had told Cyprus to raise as a contribution to the bailout, Dutch Finance Minister Jeroen Dijsselbloem said.
Cyprus government spokesman Christos Stylianides said losses for uninsured depositors would be "under or around 30 percent".
Laiki will effectively be shuttered, with thousands of job losses. Officials said senior bondholders in Laiki would be wiped out and those in Bank of Cyprus would have to make a contribution - setting a precedent for the euro zone.
Comments by Dijsselbloem on the need for lenders to banks to accept the potential risks of their failure had a knock-on effect in the euro zone, raising the cost of insuring holdings of bonds issued by other banks, notably in Italy and Spain.
Global equity markets and the euro retreated on his comment that the Cyprus bailout could be a template for solving other problems, by shifting more risk to depositors and stakeholders:
"What we've done last night is what I call pushing back the risks," Dijsselbloem, who heads the Eurogroup of euro zone finance ministers, told Reuters and the Financial Times.
A first attempt at a deal 10 days ago had collapsed when the Cypriot parliament rejected a proposed levy on all deposits, large and small. That proposal outraged ordinary Cypriots, leading to queues at bank cash machines.
The central bank has imposed a 100-euro daily limit on withdrawals from ATMs at the two biggest banks to avert a run.
PUBLIC SCEPTICAL
Russia signaled it would back the bailout even though it would impose big losses on Russian depositors, who by some estimates may hold a third of all deposits in Cypriot banks.
President Vladimir Putin ordered officials to restructure a loan Moscow granted to Cyprus in 2011 - having rejected Nicosia's request for easier terms in crisis talks last week.
Among Cypriots sipping coffee in warm sunshine, there was a mood of wariness about the deal: "How long will it last?" asked Georgia Xenophontos, 23, a hotel receptionist in Nicosia.
"Why should anyone believe anything this government says?"
In the morning, a public holiday, residents of the capital lined the streets to watch a parade by soldiers and students to mark Greek Independence Day, waving the Greek and Cypriot flags.
"On this day I'm proud to be Greek, but at the same time I feel humiliated," said Marios Charalambous, 56, a print-shop owner. "I'm worried what will happen when the banks reopen."
Cyprus' tottering banks held 68 billion euros in deposits, including 38 billion in accounts of more than 100,000 euros - enormous sums for an nation of 860,000 people that could never sustain such a big financial system on its own.
The U.S. Treasury, noting the importance to the United States of financial stability in Europe, its largest trading partner, said it was now up to Cypriots to rebuild their economy: "It is critical to lay the foundation for a return to financial stability and growth in Cyprus," the Treasury said.
(Additional reporting by Luke Baker, John O'Donnell, Robin Emmott, Philip Blenkinsop and Rex Merrifield in Brussels, Costas Pitas in Nicosia and Lionel Laurent in Paris; Writing by Giles Elgood and Matt Robinson; Editing by Alastair Macdonald)


Saturday, March 23, 2013

Wall Street Week Ahead: Cyprus deal could spur S&P 500 to new peak!!!

By Chuck Mikolajczak
NEW YORK (Reuters) - Stocks could break through to all-time closing highs next week - provided a resolution to the fiscal woes of Cyprus satisfies investors.
The island nation accounts for a fraction of euro zone economic output, and yet the wrangling over a 10 billion euro($13 billion) bailout package kept markets on edge throughout this past week. The S&P 500 fell for the first time in four weeks, with weakness linked to uncertainty overseas.
The Cypriot ruling party said Friday that it was close to a deal to raise billions of euros in order to secure a bailout from the European Union to avoid a financial meltdown and a potential exit from the euro.
Euro zone leaders have offered the country 10 billion euros on the condition it raises 5.8 billion euros on its own. The rescue plan is smaller in scope than previous bailouts to euro zone members, making investors worry less about a banking collapse and more about the possibility Cyprus would exit the bloc and drop the euro currency.
The worry "is the psychological knock-on effect of the credible possibility of some (country) saying ‘Cyprus got out, now they are on their own, they devalued their currency, they don't have to go through austerity'," said Art Hogan, managing director at Lazard Capital Markets in New York.
"What is going to stop Greece from doing the same thing? And you start a daisy chain."
Similarly, investors had reacted harshly to proposals by European officials to tax depositors - including those protected by depositor insurance - to fund the bailout. That sparked some selling on the idea that such a plan could set a precedent for dealing with other troubled euro zone economies, and set off bank runs across the continent.
Assuming Cyprus's troubles are solved, investors will turn their attention to economic data due during the holiday-shortened week, with equity markets closed on Friday for the Good Friday holiday.
The data will include orders for durable goods orders and pending home sales for February as well as the final reading of fourth-quarter gross domestic product.
But with the trend of economic data showing a slow improvement in the U.S. economy, few negative surprises are expected next week. That could enable the S&P 500 (.SPX)(.INX) to once again make a run at its all-time closing high of 1,565.15. After all, for all of the worry about Cyprus, the S&P only dipped 0.3 percent this week and the benchmark index remains up more than 9 percent for the year.
"The story doesn't seem to be weakening and domestically it seems to be growing in terms of strength," said Sandy Lincoln, chief market strategist at BMO Asset Management U.S. in Chicago.
"People are looking at a better backdrop, whether it is the jobs data, the GDP data or the consumer stepping up on the retail sales side in spite of fiscal drag."
Stocks could see another boost in the form of quarter-end "window dressing" in which money managers add outperforming stocks to their portfolios.
"You are coming into the end of the quarter, everybody has some great results. You are going to get some window dressing on some of the stocks that are doing well," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.
With earnings season several weeks away, only nine S&P 500 companies are expected to report quarterly results next week, including discount retailer Dollar General Corp (DG.N) and video game retailer Gamestop Corp (GME.N).
Only a few companies released results this week, but they were disconcerting. Oracle Corp (ORCL.O), the world's No. 3 software maker, fell well short of revenue expectations. FedEx Corp (FDX.N), the second-largest U.S. package delivery company, cut its forecast for the year.
According to Thomson Reuters data, of the 491 companies in the S&P 500 that have reported quarterly earnings, 69 percent have topped analysts' expectations, compared with 62 percent since 1994 and 65 percent over the past four quarters.
A strong showing next week could push the index past both its record closing high as well as its record intraday high of 1576.09.
But the index has faced stiff resistance in prior attempts to break the mark, climbing as high as 1,563.62 before losing steam. As more attempts to break the mark fall short, the likelihood of a bigger dip that many analysts have been expecting increases.
"Every time it gets up there, it seems to sell off, so you have to get through that resistance point," Mendelsohn said.
"Once we get through that resistance point that will probably bring more buyers in. If you can't get through it, that will probably encourage some of the sellers a little bit."
(Reporting by Chuck Mikolajczak; Editing by Kenneth Barry)

Friday, March 22, 2013

Stocks rise on Wall Street aided by earnings!!!


Stocks opened higher on Wall Street, bolstered by strong earnings from some major U.S. corporations.
The Dow Jones industrial average rose 47 points, or 0.3 percent, to 14,469 as of 9:44 a.m. EDT. The Standard & Poor's 500 index advanced five points, or 0.3 percent, to 1,551. The Nasdaq composite gained 11 points, or 0.4 percent, to 3,224.
Nike shares hit an all-time high, rising more than 10 percent in early trading, after it surprised Wall Street late Thursday with a 55 percent spike in net income for the quarter. Tiffany rose $2.57 to $70.46 after its fourth-quarter earnings beat predictions thanks to strong customer demand in Asia for its pricey baubles.
Yet the S&P 500 appears to be headed for its second weekly decline of the year as a deadline looms for the Mediterranean nation of Cyprus to avoid an economic disaster.
Cypriot lawmakers are expected to vote Friday on a raft of new measures they hope will qualify the country for a 10-billion euro lifeline from the European Union and the International Monetary Fund. Without a bailout, Cyprus could be forced out of the EU monetary block.
The S&P 500 is down 0.7 percent for the week, paring its gain for the year to 8.7 percent. The Dow is down 0.3 percent on the week, trimming its advance for the year to 10.4 percent.
Stocks have had a strong start to the year with the housing sector in recovery mode and with companies bringing more workers on board. Healthy profits for companies and continuing stimulus from the Federal Reserve have also boosted stock prices.
The yield on the 10-year Treasury note rose from 1.91 percent to 1.93 percent.
Among other stocks making big moves Friday;
— Micron Technology rose 93 cents to $10.01 despite reporting a loss in its fiscal second-quarter later Thursday. The chipmaker said that revenue grew 3 percent, to $2.08 billion, better than analysts had expected.
— Anacor Pharmaceuticals Inc. climbed $1.97 to $6.83 Friday, after the drug developer reported strong data from a mid-stage study of a potential chronic rash treatment.




Russia rebuffs Cyprus, EU awaits bailout "Plan B"!!?

By Michele Kambas and Lidia Kelly
NICOSIA/MOSCOW (Reuters) - Cyprus's finance minister left Moscow empty-handed on Friday after Russia turned down appeals for aid, leaving the island to strike a bailout deal with the European Union before Tuesday or face the collapse of its financial system.
The rebuff left Cyprus looking increasingly isolated, with the deadline looming to find billions of euros demanded by the EU in return for a 10 billion euro ($12.93 billion) bailout.
Without it, the European Central Bank said on Wednesday it would cut off emergency funds to the country's teetering banks, potentially pushing Cyprus out of Europe's single currency.
"The talks have ended as far as the Russian side is concerned," Russian Finance Minister Anton Siluanov told reporters after two days of crisis talks with his Cypriot counterpart, Michael Sarris.
Having angrily rejected a proposed levy on tax deposits in exchange for the EU bailout, Nicosia had turned to the Kremlin to renegotiate a loan deal, win more financing and lure Russian investors to cut-price Cypriot banks and gas reserves.
Wealthy Russians have billions of euros at stake in Cyprus's outsized and now crippled banking sector.
But Siluanov said Russian investors were not interested in Cypriot gas and that the talks had ended without result.
Sarris was due to fly home, where lawmakers were preparing to debate measures proposed by the government to raise at least some of the 5.8 billion euros required to clinch the EU bailout.
They included a "solidarity fund" bundling state assets, including future gas revenues and nationalized pension funds, as the basis for an emergency bond issue and likened by JP Morgan to "a national fire sale".
They were also considering a bank restructuring bill that officials said would see the country's second largest lender, Cyprus Popular Bank, split into good and bad assets, and a government call for the power to impose capital controls to stem a flood of funds leaving the island when banks reopen on Tuesday after a week-long shutdown.
There was no silver bullet, however, and Cyprus's partners in the 17-nation currency bloc were growing increasingly unimpressed.
"I still believe we will get a settlement, but Cyprus is playing with fire," Volker Kauder, a leading conservative ally of German Chancellor Angela Merkel, told public television ARD.
Merkel told lawmakers that nationalization of pension funds was unacceptable as a way to plug a hole in finances and clinch the bailout, parliamentary sources said. They quoted the chancellor as saying debt sustainability and bank restructuring would have to be the core of any deal, which she called a matter of "credibility".
"IN A MESS"
Senior euro zone officials acknowledged in a confidential conference call on Wednesday that they were "in a mess" and discussed imposing capital controls to insulate the currency area from a possible collapse of the small Cypriot economy.
Cyprus itself refused to take part in the call, minutes of which were seen by Reuters. Several participants described its absence as troubling and reflecting the wider confusion surrounding the island's predicament.
In Brussels, a senior European Union official told Reuters that an ECB withdrawal would mean Cyprus's biggest banks being wound up, wiping out the large deposits it has sought to protect, and probably forcing the country to abandon the euro.
"If the financial sector collapses, then they simply have to face a very significant devaluation, and faced with that situation, they would have no other way but to start having their own currency," the EU official said.
Cypriot banks have been crippled by their exposure to Greece, the centre of the euro zone debt crisis.
There were long queues at ATMs on Thursday and angry scenes outside parliament, where hundreds of demonstrators gathered after rumors spread that Popular Bank would be closed down and its staff laid off.
"We have children studying abroad, and next month we need to send them money," protester Stalou Christodoulido said through tears. "We'll lose what money we had and saved for so many years if the bank goes down."
Cypriots have been stunned by the pace of the unfolding drama, having elected conservative President Nicos Anastasiades barely a month ago on a mandate to secure a bailout. News that the deal would involve a levy on bank deposits, even for smaller savers, outraged Cypriots, who raided cash machines last weekend.
While EU lenders, notably Germany, had wanted uninsured bank depositors to bear some of the cost of recapitalizing the banks, Cyprus feared for its future reputation as an offshore banking haven and planned to spread the burden also to small savers whose deposits under 100,000 were covered by state insurance.
($1 = 0.7737 euros)
(Additional reporting by Jan Strupczewski and Luke Baker in Brussels, Karolina Tagaris and Costas Pitas in Nicosia, Georgina Prodhan in Vienna, Lidia Kelly and Darya Korsunskaya in Moscow, Paul Carrel in Frankfurt and Gernot Heller in Berlin; Writing by Matt Robinson)

Thursday, March 21, 2013

Data points to growing economic momentum!!!

By Jason Lange
WASHINGTON (Reuters) - A clutch of data pointed to growing momentum in the economy during the first quarter, with jobless claims trending lower and factory activity and homes sales both on the rise.
The reports on Thursday built on recent upbeat data on hiring and consumer spending that have led many economists to see a sharp rebound in economic growth despite the onset of increased fiscal austerity. In particular, the claims data suggested March could be another month of solid job gains.
"There is enough strength in the economy to generate jobs on a sustained basis," said Sam Bullard, an economist at Wells Fargo in Charlotte, North Carolina.
Forecasting firm Macroeconomic Advisers said the data backed its view that gross domestic product would expand at close to a 3 percent annual rate in the first three months of the year. The economy eked out a growth rate of just 0.1 percent in the fourth quarter.
However, Bullard and others noted that government belt tightening and the growing risk of a flare-up in Europe's debt crisis are creating headwinds for the economy that could still cause trouble ahead. On Wednesday, the Federal Reserve also indicated it was concerned about these issues when it pressed forward with its aggressive policy stimulus.
The federal government raised taxes on most Americans in January and a gaggle of budget cuts began this month, with the economic bite from reduced government spending expected to be concentrated in the next few months.
"The first quarter of 2013 is shaping up to be pretty good," said Joshua Dennerlein, an economist at Bank of America Merrill Lynch in New York. "(But) as the Fed noted yesterday, we are worried about the second and third quarter with the fiscal tightening."
While the number of Americans filing new claims for jobless benefits edged higher last week to 336,000, a trend reading dropped to its lowest level in five years.
That bodes well for job creation in March because the data covered the survey period for the government's monthly tally of nonfarm jobs. The four-week average of new claims fell last week to 339,750, down 6 percent relative to the survey week in February, when nonfarm payrolls increased by 236,000.
Gennadiy Goldberg, a strategist at TD Securities in New York, said the four-week average, which is seen as a measure of labor market trends, was consistent with a March payroll reading above 200,000.
BUILDING STEAM
Separately, two surveys of industry showed an increase in activity at American factories despite weakness in overseas markets like Europe.
The Philadelphia Federal Reserve Bank said manufacturing activity in the mid-Atlantic region grew in March after contracting for two months in a row.
Also, financial data firm Markit said its preliminary Manufacturing Purchasing Managers Index, which gauges activity nationwide, increased to 54.9 this month from 54.3 in February.
Data on the housing sector, which was blighted by the 2007-09 recession, was also upbeat.
Home resales hit a three-year high in February and prices jumped, adding to signs of an acceleration in the housing market recovery.
The National Association of Realtors said existing home sales increased 0.8 percent to an annual rate of 4.98 million units last month, the highest level since November 2009. The January sales pace was revised up a 4.94 million units from the previously reported 4.92 million units.
Another measure of home prices by the Federal Housing Finance Agency showed a 0.6 percent gain in January.
Also pointing to momentum in the economy, a gauge of future economic activity rose for a third straight month in February.
The positive signs on the economy were overshadowed in financial markets by a decline in tech sector shares and by worries that a banking crisis in Cyprus could enflame the European crisis. Stocks fell, as did yields on government debt.
(Additional reporting by Lucia Mutikani in Washington, Steven C. Johnson, Leah Schnurr and Richard Leong in New York; Editing by Neil Stempleman)


Tuesday, March 19, 2013

Wall Street holds its own after Cyprus 'no' vote!!!

NEW YORK (AP) — The latest twists in Europe's debt drama weighed down the stock market Tuesday, offsetting more good news on the U.S. housing market.
The Dow Jones industrial average managed a gain of just four points, while other indexes closed slightly lower. Investors were focused on Cyprus, where the Mediterranean country's lawmakers vote against a proposed bailout plan for banks that would have called for raiding the savings accounts of ordinary citizens, setting a precedent in Europe's ongoing debt crisis. The vote happened 90 minutes before U.S. markets closed, at 2:30 p.m. Eastern time.
The plan was rejected — with zero votes in favor — even after being changed to lessen the burden on savers with lower balances. The vote leaves Cyprus's bailout from international lenders in question. Cyprus is seeking $15.8 billion to fund its government and its banks. Without the money, both could collapse, and the country could wind up leaving the union of 17 countries that use the euro.
"The concern in the market is that they could default or they could be forced out of the euro zone and that would create a precedent," said Alec Young, a global equity strategist with S&P Capital IQ. "The selling, though, is fairly contained, and that tells you most people think there will be some kind of compromise reached."
The Dow and other U.S. indexes started higher following a report of a surprisingly large increase in home construction in February. The index gained as much as 62 points in morning trading.
It turned lower at midday as Cyprus' parliament began debating the contentious plan demanded by the country's lenders to seize as much as 10 percent of the funds in savings accounts. The market steadied in the afternoon after the vote occurred.
The eurozone's debt crisis still has the power to captivate stock global markets, but investors worry about it less these days after European Central Bank President Mario Draghi pledged last year to do "whatever it takes" to preserve the euro.
The Dow's biggest fall this year came Feb. 25, when it lost 1.6 percent after the results of Italian elections left the country in political turmoil, endangering crucial economic reforms. Even that was less than sell-offs a year ago when borrowing rates spiked for Spain and Italy as investors lost confidence in the ability of those countries to service their debt.
On Tuesday, the Dow rose 3.76 points, or 0.03 percent, to close at 14,455.82.
Other major market indexes fell. The Standard & Poor's 500 fell 3.76 points, or 0.2 percent, to 1,548.34. The Nasdaq composite fell 8.50 points, or 0.3 percent, to 3,229.10.
On Monday, the Dow fell 62 points after a weekend of drama as Cyprus' leaders acceded to the demands from European lenders to seize depositors' funds, which were met with outrage. While the reaction Tuesday was more muted, investors were still watching closely to see if the situation worsens.
"The situation in Cyprus is keeping everyone glued to their TVs," Joseph Tanious, global market strategist at J.P. Morgan Funds, said before the vote.
Tanious says investors shouldn't overreact to the news coming out of Europe, but instead take a step back and remember Draghi's pledge. "Do not underestimate the power of the ECB," said Tanious.
U.S. markets have been on a roll this year. The Dow is up 10.3 percent and broke through its previous all-time high on March 5, driven by strength in housing and a pickup in hiring. Strong company earnings and continuing stimulus from the Federal Reserve are also helping boost demand for stocks.
The S&P 500 is up 8.6 percent in 2013 and is 1.1 percent from its record close of 1,565.15, which was reached in October 2007.
The Federal Reserve opened its second policy meeting of the year Tuesday. On Wednesday, it will issue a policy statement and update its economic forecasts. Fed Chairman Ben Bernanke will give a press conference at 2:30 p.m. EDT. Economists and investors don't expect the Fed to let up in its drive to keep stimulating the economy by keeping interest rates at historic lows.
"The Fed has clearly been a big push in this market, no question," said Maury Fertig, chief investment officer at Relative Value Partners. "What the Fed has done has really helped the market recover....they're not going to pull away prematurely."
Investors are increasingly putting more money in stocks, according to a Bank of America Merrill Lynch survey, published Tuesday. The survey of fund managers showed that 57 percent of investors favored allocating money to stocks, the highest percentage in more than two years.
The yield on the 10-year Treasury note fell to 1.91 percent from 1.96 percent Monday. That shows investors continued to move money into low-risk assets. Two weeks ago the yield was 2.05 percent.
Among stocks making big moves:
— Lululemon fell $1.82, or 2.8 percent, to $64.08 after the company yanked its popular black yoga pants from store shelves after it found that the sheer material used was too revealing.
— Electronic Arts fell $1.56, or 8.3 percent, to $17.15 after the video game maker said its adjusted revenue fell 28 percent to $1.18 billion for the last three months of 2012. The figure was below Wall Street's expectations. The company also said its CEO, John Riccitiello, will step down on March 30.



Monday, March 18, 2013

Cyprus bailout plan keeps wall street down 500 points off high!!!

By Caroline Valetkevitch
NEW YORK (Reuters) - Stocks fell on Monday after a plan to tax bank accounts in Cyprus to help pay for the country's bailout stoked worries that it could threaten the stability of financial institutions in the euro zone.
The move pushed the S&P 500 farther from its 2007 record closing high of 1,565.15 after the index came within striking distance of the level last week.
Financial stocks led the day's decline, with the S&P 500 financial index (.SPSY) down 1 percent, following a steep slide in European bank shares. JPMorgan Chase (JPM.N) fell 1 percent to $49.51.
Cypriot ministers were trying to revise a plan to seize money from bank deposits before a parliamentary vote on Tuesday that will secure the island's financial rescue or could lead to its default.
European officials have said the measure is a one-off for a country that accounts for just 0.2 percent of European output. The fear is that savers in larger European countries will become nervous and start withdrawing funds, although there was no immediate sign of that on Monday.
"There are worries about whether there will be any spillover from the Cyprus situation," said Nick Sargen, chief investment officer at Fort Washington Investment Advisors in Cincinnati, which oversees more than $45 billion.
"Will authorities be able to convince markets that this proposal is only for this unique situation, for such a small country where the banking system is more of a tax shelter? If they can't, that might cause new concerns about Europe's banking system."
The Dow Jones industrial average (.DJI) slipped 62.05 points, or 0.43 percent, to 14,452.06 at the close. The Standard & Poor's 500 Index (.SPX) shed 8.60 points, or 0.55 percent, to 1,552.10. The Nasdaq Composite Index (.IXIC) dropped 11.48 points, or 0.35 percent, to close at 3,237.59.
Earlier in the day, the Dow had lost more than 100 points to tumble to an intraday low of 14,404.21. The Dow, which broke through its 2007 record highs on March 5, is still up about 10.3 percent for the year.
The S&P 500 is up 8.8 percent for the year. The benchmark index is on track to post its best quarter in a year.
"Given what went on in the rest of the globe, it's hung in there," said Uri Landesman, president of Platinum Partners, an alternative investment fund in New York, in reference to the S&P 500's performance.
"The bulls are definitely still in control of this market, and because of that, it's possible by the end of the month, we set an all-time high on the S&P," Landesman said.
The CBOE Volatility Index (.VIX), or VIX, Wall Street's favorite barometer of fear, shot up 18.2 percent to 13.36. Last week, the VIX hit a six-year low.
Among decliners, Schlumberger shares (SLB.N) fell 3.9 percent to $76.34 after the world's largest oilfield services company said fewer rigs than predicted were going back to work in its North American operations.
Shares of Dow component Boeing Co (BA.N) fell 1.4 percent to $85.18. Boeing is putting the 787 Dreamliner through tough tests that it had helped develop, but never used on the jet.
Shares of Charter Communications Inc (CHTR.O) surged 8.8 percent to $98.04 after the Wall Street Journal said Liberty Media Corp (LMCA.O) is close to buying a 25 percent stake in the cable operator for about $2.5 billion.
Liberty shares rose 0.3 percent to $110.66.
After the bell, shares of Electronic Arts (EA.O) climbed 2.6 percent to $19.20 after the video game company said its chief executive has resigned. [ID:nL1N0CABFW] The shares closed at $18.71.
Volume was roughly 5.8 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, compared with the 2012 average daily closing volume of about 6.45 billion.
Decliners outpaced advancers on the NYSE by a ratio of slightly more than 3 to 2, and on the Nasdaq, by about 2 to 1.
(Additional reporting by Ryan Vlastelica and Rodrigo Campos; Editing by Kenneth Barry and Jan Paschal)

Sunday, March 17, 2013

Just Explain It Just Explain It: Retiring With $1.5 Million Saved!!

 

Many Americans fail to plan properly for their retirements. In some cases, they put paying monthly bills, home renovations and even planning a vacation ahead of saving for retirement.
Data from a 2010 Employee Benefit Research Institute study found that retirement finances for early baby boomers were at risk. Almost half of them didn’t have resources to pay for “basic retirement expenditures and uninsured health care costs.”
In a separate report, the institute found that estimating the amount of retirement savings you’ll need makes a difference. Workers who did so, calculated their nest egg should be at least one $1 million.

Which brings us to today’s Just Explain It.
What’s the best way to retire with $1.5 million in savings?
We asked Doug Wheat, a Certified Financial Planner at Family Wealth Management, to help us figure it all out.
Saving $1.5 million will provide a very comfortable nest egg for most professional couples in retirement, and here’s why.
Wheat says a safe initial withdrawal rate from an investment portfolio is 4% if you want to avoid running out of money during a 30-year retirement. Taking 4% of $1.5 million will give you $60,000 to add to your annual budget…and that’s not including your Social Security benefits.
But there are steps you need to take to reach your goal.
Number 1 – Start saving early and put away as much as you can. A worker in his 20s who takes advantage of compounding rates of growth has a good chance of reaching the $1.5 million mark.

Wheat says if you can afford it, contributing a $1,000 or more per month to your retirement plan will help you reach your goal. If not, saving 10% of your income a month is reasonable…assuming the growth rate is about 6%.
Number 2 – Have contributions to your retirement plan withdrawn directly from your paycheck. The funds can be deposited into your 401(K) or 403(B) plan…and some employers even match your contributions.
Wheat suggests donating to an Individual Retirement Account, or IRA, if you don’t have access to a retirement plan at work. The drawback is that individuals under 50 can only contribute $5,500 a year to the account.
Number 3 – Stay focused on saving for your retirement. Buying a home, a car or paying for your kid’s college education will compete with saving for retirement. Wheat says, “steadily setting aside money in retirement accounts, in good times and bad, is the best way to ensure you don’t have regrets when you want to retire.”
The bottom line is your golden years should be important to you. How well you plan can be the difference between living comfortably or running out of money.
Did you learn something? Do you have a topic you’d like explained? Give us your feedback in the comments below or on Twitter using #justexplainit.

EU wants to include financial services in U.S. trade talks!!

BRUSSELS (Reuters) - The European Union's top trade official said on Saturday he wants financial services to be included in negotiations on an ambitious EU-U.S. free trade pact.
The United States and the 27-nation EU agreed last month to launch negotiations on a wide-ranging Transatlantic free trade agreement, but details of what the talks will cover have been limited.
The EU's executive Commission approved a proposed European negotiating mandate last Tuesday but kept its contents secret.
The negotiating mandate must be approved by EU governments before the launch of negotiations, which the EU and the United States hope to start by June.
EU Trade Commissioner Karel De Gucht said on Saturday that financial services are among the sectors that he proposes to include in the negotiations.
"On financial services, you have two aspects - you have on the one hand the regulatory (aspect) and then you have the market access," he told a conference organized by the German Marshall Fund of the United States, a group which aims to strengthen transatlantic cooperation.
He said the question of regulating financial services should not be part of the trade negotiation, although he said it was obvious that transatlantic discussions on this matter would continue independently.
"But, as far as we are concerned, market access in financial services should be on the agenda and that is also part of the mandate that we are asking (for) from ... ministers," he said in response to a question, without giving details.
The United States and the EU hope for a deal by the end of 2014 - a tight deadline in international trade talks.
The two sides believe a deal would add 0.5 percent to the EU economy and 0.4 percent to the U.S. economy by 2027, or 86 billion euros ($113 billion) a year for the Europeans and 65 billion euros for the Americans.
De Gucht has warned previously that the talks will be tough, with no "low hanging fruit". Import tariffs between the two are already not high - an average of 4 percent.
Negotiations will focus on harmonizing standards, from car seat belts to household cleaning products, and regulations governing services. These help ensure exporters can compete.
Fleshing out the negotiating plans can cause friction. Last year it took EU trade ministers four months to persuade the European car industry to let Brussels officials talk to Japan about creating a similar free-trade pact.
(Reporting by Adrian Croft, Philip Blenkinsop; Editing by Jason Webb)


Saturday, March 16, 2013

Fed's Fisher: Too-big-to-fail banks are "crony" capitalists!!

By Pedro Nicolaci da Costa
NATIONAL HARBOR, Maryland (Reuters) - The largest U.S. banks are "practitioners of crony capitalism," need to be broken up to ensure they are no longer considered too big to fail, and continue to threaten financial stability, a top Federal Reserve official said on Saturday.
Richard Fisher, president of the Dallas Fed, has been a critic of Wall Street's disproportionate influence since the financial crisis. But he was now taking his message to an unusual audience for a central banker: a high-profile Republican political action committee.
Fisher said the existence of banks that are seen as likely to receive government bailouts if they fail gives them an unfair advantage, hurting economic competitiveness.
"These institutions operate under a privileged status that exacts an unfair tax upon the American people," he said on the last day of the annual Conservative Political Action Conference (CPAC).
"They represent not only a threat to financial stability but to fair and open competition … (and) are the practitioners of crony capitalism and not the agents of democratic capitalism that makes our country great," said Fisher, who has also been a vocal opponent of the Fed's unconventional monetary stimulus policies.
Fisher's vision pits him directly against Fed Chairman Ben Bernanke, who recently argued during congressional testimony that regulators had made significant progress in addressing the problem of too big to fail. Bernanke asserted that market expectations that large financial institutions would be rescued is wrong.
But Fisher said mega banks still have a significant funding advantage over its competitors, as well as other advantages. To address this problem, he called for a rolling back of deposit insurance so that it would extend only to deposits of commercial banks, not the investment arms of bank holding companies.
"At the Dallas Fed, we believe that whatever the precise subsidy number is, it exists, it is significant, and it allows the biggest banking organizations, along with their many nonbank subsidiaries - investment firms, securities lenders, finance companies - to grow larger and riskier," he said.
Fisher argued Dodd-Frank financial reforms were overly complex and therefore counterproductive.
"Regulators cannot enforce rules that are not easily understood," he said.
(Reporting by Pedro Nicolaci da Costa; editing by Gunna Dickson)


Friday, March 15, 2013

Details emerge from MF Global bankruptcy plans!!

By Bernard Vaughan
NEW YORK (Reuters) - MF Global Holdings revealed new details about its proposed bankruptcy plan in court papers filed on Friday.
Initial members of a director selection committee led by representatives of its hedge fund creditors have been selected. They will select board members for the company as it liquidates.
The initial members are Andrew Shannahan, of Knighthead Capital LLC; Joe Kronsberg, of Cyrus Capital Partners; and Austin Saypool, of Silver Point Capital, according to one of the filings on Friday.
A trust agreement, called the "MF Global Plan Trust," will aid and implement the firm's liquidation plan, according to the filing.
MF Global, run by former New Jersey Governor Jon Corzine, is liquidating after filing for bankruptcy in 2011. Regulators determined that the firm misappropriated money in customer trading accounts to cover liquidity gaps as it teetered on the brink. Corzine has denied any wrongdoing.
The filings also reveal terms of a $70 million senior secured credit facility to finance the liquidation.
The company's creditor payout plan was proposed earlier this year by a group of its hedge fund creditors, led by Silver Point, Knighthead and Cyrus.
Louis Freeh, the trustee liquidating MF Global's estate, cooperated with the hedge funds on later drafts of the plan.
(Reporting by Bernard Vaughan and Nick Brown; Editing by Mohammad Zargham)


Ex-JPMorgan exec Drew denies blame for "Whale" losses

By Emily Flitter and Aruna Viswanatha
WASHINGTON (Reuters) - Ina Drew, the former JPMorgan Chase & Co (JPM.N) executive in charge of the unit that made the disastrous "London Whale" trades that became public last year, told lawmakers on Friday that she does not bear personal responsibility for the $6 billion in losses.
Instead, she blamed others for deceiving her, including her direct reports - Achilles Macris, who supervised the trading book at issue, and Javier Martin-Artajo, who managed it on a day-to-day basis.
Those employees did not appear at the hearing before the Senate Permanent Subcommittee on Investigations, and did not participate in the panel's probe. They are based in London and are not subject to the U.S. Senate's subpoena power.
"Some members of the London team failed to value positions properly and in good faith, minimized reported and projected losses, and hid from me important information regarding the true risks of the book," said Drew, the bank's former chief investment officer, in her first public comments on the matter.
She defended her oversight as "reasonable and diligent" and said she believed she didn't hold personal responsibility for the losses. "Clearly mistakes were made," she said.
The comments from Drew, who spoke softly but firmly about her role in the debacle, came early in Friday's hearing into the losing derivatives bets that came to be known as the "London Whale" trades.
The Senate panel released on Thursday a report that alleged the bank ignored risks, misled investors, fought with regulators and tried to work around rules as it dealt with mushrooming losses in that portfolio.
The report blamed Drew and other senior managers for doing little to rein in the risky trading as danger signs emerged in early 2012.
On Friday, Senator John McCain from Arizona, the top Republican on the panel, questioned why Drew and others were transferring blame. "It seemed that the traders seemed to have more responsibility and authority than the higher-up executives," McCain said.
LINGERING TEMPEST
JPMorgan Chief Executive Jamie Dimon initially dismissed rumors of a troubled trading position as a "tempest in a teapot" during an April 2012 conference call.
Less than a month later, the bank disclosed serious problems with the trading strategy, and later said it lost $6.2 billion from the trades.
Dimon, who has testified publicly twice before about the Whale trades, was not invited to appear on Friday. Instead, the panel pressed Drew and other former managers.
Senator Carl Levin, the Democrat from Michigan who heads the subcommittee, asked Peter Weiland, the former head of market risk in Drew's office, about why he dismissed a key risk measure that warned of potentially blooming losses in the synthetic credit portfolio.
The metric predicted that the portfolio could produce a yearly loss of $6.3 billion, which Weiland rejected as "garbage" in February 2012. He said on Friday that, in hindsight, the measure did not appear so far off.
"The whale trades demonstrate how credit derivatives, when purchased in massive quantities with complex components, can become a runaway train barreling through every risk limit," Levin said.
SHIFTING BLAME
Other JPMorgan executives described the losses as a terrible mistake, and said the bank had largely fixed the problems that led to them.
Levin asked a series of questions about misstatements by JPMorgan that he had identified in the report, but the executives provided little in the way of new admissions.
The bank's current vice chairman, Douglas Braunstein, blamed outside counsel and auditors at PricewaterhouseCoopers for signing off on the shift from valuing the positions at the middle of the range to an extreme that made the positions look better. But he said the bank felt it could justify the inflated marks based on the volatility of the market.
A representative from PwC did not immediately respond to a request for comment.
The largest U.S. bank has long been seen as the safest and best-managed in the country, but the subcommittee's report could taint its reputation as well as that of CEO Dimon.
The report also gives ammunition to advocates calling for stricter financial reforms, including to regulators crafting the Volcker rule, which proposes to put limits on banks betting with their own funds.
"If derivatives books can be cooked as blatantly as they are in this case without breaking the rules, then the rules need to be revamped," Levin said.
(Reporting by Aruna Viswanatha, Emily Flitter and Sarah N. Lynch; Editing by Karey Van Hall, Phil Berlowitz and Tim Dobbyn)

Stock market gains smile on US dollar!!!


By Wanfeng Zhou NEW YORK (Reuters) - The stars are aligning for U.S. dollar bulls. For more than a decade, good times in such markets as stocks and real estate were bad news for the greenback. Investors tended to use the U.S. dollar only as a life jacket when storms raged in risky markets. Now, though, rather than serving as a hiding place, the dollar is benefiting from the stock market's surge to new highs and the improvement in U.S. economic data. The dollar nudged down a tad from a seven-month high against a basket of currencies (.DXY) on Thursday even as the Dow Jones industrial average (.DJI) surged to another record high despite interest rates remaining at record lows. For instance, the dollar has gained fairly steadily against the yen. In January, it was trading at 86.67 yen to the dollar; on Thursday it was trading at 96.06 to the dollar. Likewise, the British pound has fallen from 1.62 to 1.51 to the dollar so far this year. The moves suggests the dollar has entered a multi-year bull cycle, and marks a major shift in its behavior against other asset classes. "Certainly, all the pieces are slowly coming into place for a bull market for the dollar," said Paresh Upadhyaya, director of currency at Pioneer Investments in Boston, which had assets under management of $204 billion as of the end of last year. The dollar has outperformed eight out of nine major G-10 currencies so far this year. Political uncertainty in Italy has re-ignited fear about the euro zone's ongoing debt crisis. Weak economic growth and the prospects of aggressive monetary easing in Japan and Britain have driven the yen and sterling to multi-year lows. To be sure, there are those who caution that spending cuts from Washington could put a damper on economic growth and the Federal Reserve has pledged to keep interest rates low for the foreseeable future. Still, capital flows and futures positioning bears out the attitude to U.S. assets. Cross-border inflows into U.S. stocks are tracking at about $100 billion to $150 billion for 2013, compared with a net neutral level in recent years, according to Nomura Securities. Futures activity shows increased bets on the dollar from speculators. And stocks are not the only U.S. asset drawing in overseas capital. A recovering commercial property market, where transactions have rebounded by more than four-fold from their post crisis-low in 2009, is also enticing foreign investment. Purchases of commercial real estate by foreign buyers totaled $24.18 billion in 2012, according to Real Capital Analytics, which tracks the commercial real estate market. That's up 1.6 percent from the year before and the highest annual total since 2007, a year when the dollar index fell 8.4 percent. Another undercurrent is the shrinking U.S. current account deficit, the difference between what the U.S. imports and what it exports in goods and services and money transfers, and a measure of how much the United States relies on foreign lenders to fund its economic growth. The gap, a major headwind for the dollar, narrowed to $110.4 billion in the fourth quarter, or 2.8 percent of gross domestic product, down from a peak of 6.5 percent of GDP in 2005. Analysts expect the shortfall to hit around 2.5 percent this year and next. For Stephen Jen, a managing partner at London-based hedge fund SLJ Macro Partners, the move confirms a long-held theory that the dollar outperforms when the United States either leads the world into a deep recession or a sustained recovery. The theory, which Jen developed with economist Fatih Yilmaz when both were at Morgan Stanley, is called "the dollar smile," because it creates a U-shaped line on a graph when charted against the relative U.S. growth rate. The dollar would hit the trough of the smile when the global economy is highly coupled and there's little difference in growth between economies. "The dollar seems to have started to smile again, after being debased by the Fed in the past years," said Jen, who believes the currency is undervalued and "has the potential to stage a broad-based rally against a wide range of currencies." LIABILITY NO MORE Strong appetite for U.S. assets from overseas investors has driven the rally in the dollar and stocks in 2013. Foreigners have poured money into U.S. equities in recent months while U.S. demand for foreign assets has waned, in part due to the improved outlook for the U.S. economy. The 25-day correlation between the U.S. dollar index and the S&P 500 stood at 0.53 on Thursday, so the two indicators are moving in tandem more frequently. In late 2012, the correlation was -0.9, almost a perfect inverse relationship. Net inflows into U.S. equities surged in the second half of 2013. The four-month moving average of net equity inflows rose to $17 billion at the end of 2012, highest since January 2008, according to Nomura Securities. Jens Nordvig, global head of currency strategy at Nomura Securities in New York, said the shift in cross-border flows in favor of U.S. equities is notable because it is not a response to risk aversion. "The underlying trend is starting to be U.S. dollar bullish on the private flow side," he said. "In the past, this has been important for dollar direction. Hence, one should take note." Investors had become accustomed to the dollar as a hiding place, as its last major rally came when the financial crisis raged in 2008 and 2009. But the last two major bull markets for the U.S. dollar - 1995-2000 and 1980-1985 - came at a good time for stocks, said Greg Anderson, North America head of FX strategy at Citigroup in New York. BETTING ON THE DOLLAR Speculators boosted bets in favor of the dollar for a third straight week to $23.57 billion in the week ending March 5, data from the Commodity Futures Trading Commission showed. That's still below a high of nearly $40 billion in June, suggesting positioning is far from extreme levels. Of course, that's not to say the dollar won't wobble a bit in the short-term. Hefty government spending cuts tied to the sequester could dampen economic activity later this year. For all of the fanfare behind recent moves, the dollar index has still not surpassed levels seen in the summer of 2012, and previous rallies were short-lived. In addition, a major move in the dollar may still be months away until the Federal Reserve sends a clear hint that it intends to taper its bond purchases. Bilal Hafeez, global head of FX strategy at Deutsche Bank, said the dollar's surge against the yen makes him think the U.S. currency may be starting a "multi-year uptrend." Since 1995, the yen has always been the last currency to peak or trough against the dollar, he said. With Japan ramping up monetary easing, investors may revive the yen "carry trade," borrowing with Japanese assets to finance purchases of higher-yielding stocks or commodities. The dollar is up 11 percent against the yen this year and has gained nearly 30 percent from a record low of 75.35 yen set in October 2011. Ken Dickson, investment director of currencies at Standard Life Investments in Edinburgh, with assets under management of $263.9 billion, said his firm is "very heavily overweight" the dollar, especially against the yen. "Our positive stance has been maintained for a number of quarters but became more significant in the second half of last year," he said. (Additional reporting by Gertrude Chavez-Dreyfuss, Ilaina Jonas and Daniel Bases; Editing by David Gaffen, Dan Burns and Leslie Gevirtz)