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US stocks drop from latest records on soft car sales, Iran nuke comment

A day after Dow and S&P hit record high levels, the stocks at the Wall Street dropped on Tuesday, as Nasdaq retreated after hitting a 15-year milestone after cold car sales data and commentary by Iran raised high concerns among some investors.

The decrease in US stocks followed a strong run-up for key indexes in the month of February and ahead of a series of economic data to be released later this week, concluding with the monthly payrolls report.

The American vehicle sales slowed down for the second year in a row in February, thanks to the tough winter weather conditions. Several automakers missed the projections made by the market analysts. The shares of US-listed Fiat Chrysler dropped three percent to USD 15.32, while Ford Motor fell 2.5 percent to USD 16.16.

On Wednesday morning, Israeli Prime Minister Benjamin Netanyahu cautioned US President Barack Obama against approving a nuclear agreement with Iran. According to him, the deal would be a “countdown to a potential nuclear nightmare by a country that will always be an enemy of America.”

The S&P 500 fell 0.48 percent, or 10.14 points, to 2,107.25, while the Dow Jones industrial average dropped 0.45 percent, or 82.17 points, to 18,206.46. On the other hand, the Nasdaq Composite declined 0.64 percent, or 32.01 points, to 4,976.08.

Decliners outnumbered advancers 1,818 to 1,193, for a 1.52-to-1 ratio on the NYSE, 1,744 issues dropped and 954 advanced, for a 1.83-to-1 ratio on the Nasdaq.

The S&P 500 was recording nine new 52-week highs and no new lows, while the Nasdaq Composite was posting 27 new lows and 63 new highs.

House likely to vote on DHS funding bill without immigration provisions

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US House of Representatives Speaker John Boehner on Tuesday reportedly told his fellow Republicans that the House will be voting later in the day on a crucial Senate bill intended to provide funding to the Department of Homeland Security (DHS) for the complete fiscal year without lodging any restriction on President Barack Obama’s executive actions on immigration.

According to the members present at the meeting, the vote is expected to end the ongoing legislative conflict between Republicans and Democrats over the DHS funding.

The security department, which spearheads domestic counterterrorism operations, will run out of funds at midnight on Friday.

Conservative Republicans in House have demanded for the inclusion of language in the spending legislation that would block Obama’s executive actions that would lift the deportation threat for millions of undocumented people in the country. But President Obama and his Democratic leaders have supported the so-called ‘clean’ DHS funding bill which has been already passed by the Senate.

Last Friday, the House resorted to a temporary solution and passed the bill for one-week spending fix when just few hours were left for funding lapse. The House voted 357-60 for the bill and temporarily averted the shutdown.

The Senate-passed bill, which includes the immigration provisions, has been repeatedly blocked by Republican Democrats.

The bill will provide approximately USD 40 billion in funding for the security agency that secures American borders, coastal waters and airports. In the dearth of enough funds, the security agency would be forced to send its nearly 30,000 employees, or around 15 percent of its total workforce, on furlough.

Bill Gates retains top spot as world’s richest person in 2015 Forbes list

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Renowned Forbes magazine has again come up with its annual ranking of global billionaires for 2015 and this time again Bill Gates has been declared as the world’s richest man.

The Microsoft founder has been named the richest person of the world for the 16^th time in the last 21 years.

Gates managed to grab the top spot in the Forbes report after beating Mexican businessman Carlos Slim.

His net worth surged by just more than USD 3 billion to USD 79 billion in the year to February 13.

According to Forbes, there are a record 1,826 people who are billionaires worldwide. It’s a surge of 181 billionaires in the past one year.

With a net worth of USD 72.7 billion, prominent American investor Warren Buffett has reclaimed third place in the list

Forbes said that the funds needed to make it into the top 20 in its richest people list have dropped by USD 2 billion to USD 29 billion in 2015.

The founders and chief executives of the US technology companies dominated the Forbes list again. Six of the top 20 richest men in the world belonged to technology world.

Top 10 richest people in 2015 Forbes list

Bill Gates USD 79.2bn (Microsoft)
Carlos Slim Helu USD 77.1bn (Phones and construction in Mexico)
Warren Buffett USD 72.7bn (Global investor)
Amancio Ortega USD 64.5bn (Zara and other fashion chains)
Larry Ellison USD 54.3bn (Oracle data storage technology)
Charles Koch USD 42.9bn (Industrialist)
David Koch USD 42.9bn (Industrialist)
Christy Walton USD 41.7bn (Walmart retail giant)
Jim Walton USD 40.6bn (Walmart retail giant)
Liliane Bettencourt USD 40.1bn (L’Oreal cosmetics firm)

US economy grew slowly in fourth quarter

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The US economy witnessed a sluggish expansion in the fourth quarter of 2014 than previously thought after it was restrained by a widening trade gap and minimal gain in stockpiles.

According to the US Commerce Department report, the country’s economy expanded at 2.2 percent annual rate during the fourth quarter.

The economic growth, which is measured by the gross domestic product (GDP), was weaker than the initial estimations of 2.6 percent in January.

The lower rate of economic growth has marked a significant slowdown from the third quarter, when the strongest growth was witnessed in 11 years.

The median forecast of 83 economists showed a two percent annual growth pace of the American economy.

The consumer spending surged by the most in four years during last quarter as it underlined the underlying strength of the expanding economy of the country.

An improving labor market of the country as well as cheaper fuel costs is believed to be helping in underpinning the households this year. This is expected to assist the country in overcoming a slowdown witnessed in its exports sector.

“The economy is still chugging along pretty nicely. We’re seeing better job growth, the decline in gas prices is really going to be beneficial for consumers and small businesses, and that should help the pace of growth to pick up,” said chief economist Scott Brown, from Raymond James & Associates in Florida.

The market analysts also hold trade responsible for weighing more heavily on growth compared to initial estimates. They said trade contributed to the subtraction of 1.2 percentage points amid stronger growth in imports.

Wall Street stocks tumble after weaker growth in Q4

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The month of February turned to be stronger month for the US stocks, but it ended in modest fashion.

The US economy grew at the annual pace of 2.2 percent in the fourth quarter, according to the US Commerce Department. The expansion of economic activity was sluggish in the fourth quarter of 2014 as it was restrained by a widening trade gap and smaller gain in stockpiles.

Major stock indexes were lower on Friday at the closing trade as they capped a week of subdued trading that continued delivering a couple of new highs for both Standard & Poor’s 500 index and Dow Jones industrial average. The Nasdaq composite was also brought within outstanding distance of its 2000 high in March.

The Nasdaq witnessed the largest monthly gain at 7.1 percent, while the S&P 500 saw 5.5 percent gain that marked its best monthly hike since October 2011, and a turnaround from its drop of 3.1 percent recorded in January. The Dow Jones industrial average increased 5.6 percent for the month.

TD Ameritrade’s chief strategist JJ Kinahan, said, “It’s a wait-and-see attitude. Many people are trying to figure out what to do, taking some profits when they can. We saw that over the past couple of days with tech stocks.”

The S&P 500 slipped 6.24 points, or 0.3 percent, to 2,104.50, while the Dow ended down 81.72 points, or 0.5 percent, to 18,132.70. The S&P 500 index slipped 0.5 from a high of 2,115.48 on Tuesday and Dow was 0.5 percent below its latest high of 18,224.57 on Wednesday.

The Nasdaq, on the other hand, dropped 24.36 points, or 0.5 percent, to 4,963.53. The index has inched closer to crossing the 5,000-point mark.

The three main stock indexes of the United States are all up for the current year.

The current bull market, which is now in its sixth year, turned stronger after being boosted by healthy growth in corporate earnings and low rates of interest, which make stocks more attractive relative to bonds.

The improving consumer confidence and strong growth in the jobs front also encouraged traders, despite indications of sluggishness in Europe and elsewhere.

US Jobless Claims Went Up to 313,000 This Week

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Recent reports show that more Americans have sought unemployment aid last week, even though the number of job applications was still consisted and companies were steady hiring.

According to a statement released by the Labor Department on Thursday, weekly jobs applications have gone up by 31,000 which led to a total of 313,000. The applications claims have not been this high in more than six weeks, according to the analysts.

Also, the four-week average increased by 11,500, reaching approximately 294,000.
The analysts say that job applications are a proxy for layoffs. Reports show that the average has been close or below 300,000 since last September. This was a new record number which suggests that companies are hanging on to their employees and are even considering increasing the number of hiring.

Derek Lindsey, economist for BNP Paribas, explained that the fact that there was an unexpected increase of jobless claims, the trend is still a consistent one, suggesting that the US labor market is still improving.
Jim O’Sullivan, an economy analyst for High Frequency Economics, said the state of the current four-week average is very similar to the one that occurred in the last three months of 2014.
O’Sullivan noted that employers added approximately 324,000 jobs on a monthly average in the fourth quarter of last year.
National statistics have shown that US employers have added more than 1 million jobs in a very short three-month timeline, from November to January 2014, which has not happened since 1997.

Also, in the past year, more than 3.3 million jobs have been added, which helped lower the unemployment rate to 5.7% in January. It was an improvement from the 6.6% that was in January 2014.

The recent strong jobs gains have started to show signs of lifting paychecks for more employees.
The average hourly pay increased by 0.5% in January, which is the most in approximately 6 years, according to the Labor Department.

This means that employers are finally starting to feel the need to increase the wages so that they can attract new employees and keep the ones who are already working for them.
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Morgan Stanley to pay USD 2.6 bn to US government under settlement deal

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Investment bank Morgan Stanley on Wednesday announced its USD 2.6 billion settlement deal with the US government for resolving the potential claims cropping from the sale of residential mortgage-backed securities or bonds before the financial crisis, which lowered its profit by more than half in the year 2014.

Under the settlement agreement, the bank has agreed to pay the whopping amount to the US Department of Justice and the Attorney’s Office for the Northern District of California.

Morgan Stanley surged its legal reserves by nearly USD 2.8 billion, which affected its income coming from continuing operations in 2014 by USD 2.7 billion, or USD 1.35 per share, according to a regulatory US Securities and Exchange filing by the bank.

In 2014, the earnings of USD 5.83 billion, or USD 2.96 per share, had been reported by the bank from its continuing operations.

The shares of Morgan Stanley closed at USD 36.59 on the New York Stock Exchange (NYSE) on Wednesday.

In another development, Goldman Sachs Group Inc on Monday stated that possibility of a federal civil lawsuit against it is looming larger as a government investigation has held the bank accused of violating laws associate with the residential mortgage-backed securities sale ahead of the financial crisis.

Goldman had also underlined the top end of its “reasonably possible” estimate of legal losses to nearly USD 3 billion from USD 2.5 billion.

New York proposes new measures for bank system to combat money laundering

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In order to combat the menace of money laundering, New York is expected to conduct random audits of banking systems that would be primarily designed to check such illegal activities.

New York’s chief financial services regulator on Wednesday said that the state will bring significant changes in the design of bank systems so that the loopholes can be dealt and the cases of money laundering can be checked.

Benjamin Lawsky, superintendent of the New York’s Department of Financial Services, said that senior bank executives are expected to be needed to personally confirm that the banking systems are adequate for the detection of possible money laundering cases.

But the proposed measures could also bring more headaches for the financial institutions and their executives following payments of hundreds of millions and even billions of dollars by the world’s largest banks for settling the lapses in policing transactions from entities under the US sanctions.

“We believe there may be widespread problems with transaction monitoring and filtering systems in the banking industry. Improving those systems is critical to stopping criminal activity, including terrorism,” Lawsky said.

According to Lawsky, the agency is expecting to move instantly on the random audits and new requirements by the executives. He also hopes other regulators to follow similar initiatives.

US consumer confidence plunges to 96.4 in February

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The consumer confidence in the United States tumbled beyond expectations in the month of February as the initial elation over a decline in the prices of fuel faded and the Americans became less positive about the prospects for income and jobs.

According to the Conference Board report, its sentiment index dropped to 96.4 from a revised reading of 103.8 in January, the highest level since August 2007.

The median forecast of 80 economists in news agency survey called for a drop in consumer confidence to 99.5.

A latest price rise in gasoline from a six-year low is likely checking the enthusiasm of several households after a fall in prices in 2014 and a pickup in job hiring also contributed in building the consumer confidence.

The consumer expectations index for the coming six months dropped to 87.2 from January’s 97 reading. The 9.8-point decline was the biggest since the US government shutdown in October 2013.

Lynn Franco, Conference Board director of economic indicators, in a statement said, “Despite this month’s decrease, consumers remain confident that the economy will continue to expand at the current pace in the months ahead.”

The economists and the Federal Reserve Bank have noted that the faster growth in wage has remained a missing piece of the current expansion program. According to the board, the income expectations dropped back in the month of February after increasing in January.

The survey showed 15.1 percent of households in February expected the surge in their incomes in the coming six months, against 19.5 percent saying that last month. Another 12.0 percent of the participating households believe their incomes will decrease in the next six months as compared to January’s response rate of 10.8 percent.

US existing home sales drop 4.9 percent to hit nine-month low in January

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The sales of existing homes in the United States dropped sharply in January to the lowest level in nine months after getting hit by the shortage of properties on the market.

The poor existing home sales report could devastate the expectations for an accelerated growth in the housing activity in the country this year.

The report of National Association of Realtors, which was released on Monday, showed the existing home sales tumbled 4.9 percent to an annual rate of 4.82 million units. The figure recorded for January is the lowest level since April 2014.

The sales pace of December was revised up to 5.07 million units from the earlier reported 5.04 million units. However, the revisions to sales data moving back to 2012 were minimal. Last month, the sales dropped despite a slump in mortgage rates that witnessed the 30-year rate hitting a low of 20 months.

The tighter inventories are severely affecting the sales by restricting the selection of houses that are available in the market for the potential buyers. Moreover, the dearth of supply has also kept the house prices elevated, extending a helping hand to sideline the first-time buyers from the housing market.

Several economists had made forecast that the existing home sales in the United States would drop only to a 4.97-million unit pace in January. The sales gained 3.2 percent from a year ago.

In January, the inventory of homes on the market that were not sold dropped 0.5 percent to 1.87 million from last year.

According to the economists, the inadequate equity and the uncertainty about the strengths of the American economy were the major drivers that have forced the potential sellers to stay in their homes.

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