• TSX +21.18 to 11,888 ending on a 15-month high
• DOW -11.94 the number of buyers who agreed to purchase previously occupied homes fell sharply in Nov. The National Association of Realtors says its seasonally adjusted index of sales agreements fell 16%. The drop was far larger than the 2% decline that economists expected. It was also the first decline following 9 straight months of gains
• Dollar +.23c to 96.25cUS touching another 2 ½ month high as the U.S. currency weakened for a second day
• Oil +$.26 to $81.77US per barrel.
• Gold +$.40 to $1,118.10USD per ounce
U.S. economy could create up to two million jobs in 2010
Paul Vieira, Financial Post
OTTAWA -- Markets might be "dramatically underestimating" how many jobs the U.S. economy will produce this year, economists at Scotia Capital said Tuesday, indicating the pace of job creation could reach levels not seen in over a quarter century.
In a note to clients, Derek Holt and Karen Cordes suggested the U.S. economy, mostly through help from the federal government, could create up to two million jobs in 2010. The bulk of this job creation, especially for the first half of this year, will be driven by U.S. government hiring to complete the once-in-a-decade census.
"The consensus is dramatically underestimating potential upsides to nonfarm employment in 2010," say the Scotia Capital analysts. "We readily admit we'll be wrong on the final tally, but if we're even anywhere close to the mark, then the main point will be that current consensus is caught flat-footed on such expectations and is off by orders of magnitude on potential job growth."
However, the analysts add the census-related jobs will disappear as quickly as they are created – resulting in steep monthly job losses in the latter half of 2010. But on net, they believe up to two millions jobs could be created in the United States in the 12-month period.
This call comes as both Canada and the United States release jobs data for December on Friday. In November, market analysts were caught offguard after data suggested the U.S. economy shed only 11,000 jobs – after 21 consecutive months of six-figure job losses. Action Economics, a U.S.-based forecasting firm, issued its own analysis on Tuesday indicating there's a chance the United States could post job growth in December.
Scotia Capital said the impact of census-related job growth would be greater this year than in the previous censuses of 1990 and 2000, as the White House will be eager to use stimulus cash to create jobs. The economists forecast that about 180,000 census jobs will be created in the first quarter and an additional 971,000 in second quarter. All those jobs will then be lost by the end of the third quarter. Most of the hiring will be concentrated in one or two months, Scotia Capital said, "such that one single month could see up to one million jobs created," likely in May.
The record single-month nonfarm job gain was September 1983 when 1.11 million jobs were created in the United States.
Meanwhile, other factors will spur job creation, most notably the impact of Washington's nearly US$800-billion stimulus package and decisions by private-sector companies to add to their payrolls.
Nevertheless, the Scotia Capital economists warn the "potential is there" for markets and policy makers to overreact to the initial job data. Of concern, they say, is that pressure will mount on the U.S. Federal Reserve to hike interest rates based on the strong data, even though it might be skewed by one-time factors, such as the census.
"[But] markets probably will and therefore heighten the risk of prematurely tightening growth drivers," they said
Wednesday, January 6, 2010
Tuesday, January 5, 2010
Financial Update For Jan. 5, 2010
• TSX +120.79 Canadian stocks surged on their first day of trading of 2010, led by positive economic news that drove commodity stocks higher and supported recovery hopes for 2010.
• DOW +155.91 Figures showing factories around the world cranked up production in December –the 5th month in row, were the main catalyst for the gains. The Institute for Supply Management's factory index rose to 55.9, its highest level since April 2006
• Dollar +.87c to 96.02cUS hitting a 2 month high as the price of crude oil rallied and global equity markets kicked off 2010 on an upbeat note, increasing demand for riskier assets.
• Oil +$2.15 to $81.51US per barrel. breaking the US$80 benchmark for the first time since November
• Gold +$22.50 to $1,117.70USD per ounce
One-hundredth of a percentage point. For example, the difference between 5.25% and 5.50% is 25 basis points.
Bear Market
A market in which stock prices are falling. The rule of thumb seems to be at least 20 percent. However, a lot depends on how long the drop lasts. The quicker the rebound, the less likely that investor psychology will turn from optimism to the pessimism that usually accompanies a bear market.
Bull Market
A market in which stock prices are rising for a length of time. Prices need not rise continuously. There can be days, weeks and even months in which prices fall. What matters is the long-term trend. When it comes to people, bullish describes one who is optimistic.
Dow Jones Industrial Average (DJIA)
There are thousands of investment indexes around the world for stocks, bonds, currencies and commodities however the DJIA is one of the best known and most widely quoted stock market averages in the media. It contains an average made up of 30 actively traded blue chip stocks spanning many different industries that trade on the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest U.S. companies are performing.. The DJIA is calculated by adding the prices of each of the 30 stocks and dividing by a divisor. The average is quoted in points rather than dollars. It is price weighted, meaning that a $2 change in a $100 per share stock will have a greater affect than a $2 change in a $20 per share stock.
Gross Domestic Product
GDP is the value of all goods and services produced in Canada in a calendar year. The gross domestic product includes only final goods and services, not goods and services used to make another product. Changes in the gross domestic product are an indication of economic output.
Income Trust
Trusts structured to own debt and equity of an underlying entity, which carries on an active business, or has royalty revenues generated by the assets of an active business. By owning securities or assets of an underlying business, an income trust is structured to distribute cash flows, typically on a monthly basis, from those businesses to unit holders in a tax-efficient manner. The trust structure is typically utilized by mature, stable, sustainable, cash-generating businesses that require a limited amount of maintenance capital expenditures. An income trust is an exchange-traded equity investment that is similar to a common share
Index or stock price index
A statistical measure of the state of the stock market, based on the performance of stocks. Examples include the S&P/TSX Composite Index
Recession
Two consecutive quarters of contraction in the gross domestic product
TSX Composite Index
Comprises the majority of market capitalization for Canadian-based, Toronto Stock Exchange listed companies. It is the leading benchmark used to measure the price performance of the broad, Canadian, senior equity market. It was formerly known as the TSE 300 Composite Index
• DOW +155.91 Figures showing factories around the world cranked up production in December –the 5th month in row, were the main catalyst for the gains. The Institute for Supply Management's factory index rose to 55.9, its highest level since April 2006
• Dollar +.87c to 96.02cUS hitting a 2 month high as the price of crude oil rallied and global equity markets kicked off 2010 on an upbeat note, increasing demand for riskier assets.
• Oil +$2.15 to $81.51US per barrel. breaking the US$80 benchmark for the first time since November
• Gold +$22.50 to $1,117.70USD per ounce
One-hundredth of a percentage point. For example, the difference between 5.25% and 5.50% is 25 basis points.
Bear Market
A market in which stock prices are falling. The rule of thumb seems to be at least 20 percent. However, a lot depends on how long the drop lasts. The quicker the rebound, the less likely that investor psychology will turn from optimism to the pessimism that usually accompanies a bear market.
Bull Market
A market in which stock prices are rising for a length of time. Prices need not rise continuously. There can be days, weeks and even months in which prices fall. What matters is the long-term trend. When it comes to people, bullish describes one who is optimistic.
Dow Jones Industrial Average (DJIA)
There are thousands of investment indexes around the world for stocks, bonds, currencies and commodities however the DJIA is one of the best known and most widely quoted stock market averages in the media. It contains an average made up of 30 actively traded blue chip stocks spanning many different industries that trade on the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest U.S. companies are performing.. The DJIA is calculated by adding the prices of each of the 30 stocks and dividing by a divisor. The average is quoted in points rather than dollars. It is price weighted, meaning that a $2 change in a $100 per share stock will have a greater affect than a $2 change in a $20 per share stock.
Gross Domestic Product
GDP is the value of all goods and services produced in Canada in a calendar year. The gross domestic product includes only final goods and services, not goods and services used to make another product. Changes in the gross domestic product are an indication of economic output.
Income Trust
Trusts structured to own debt and equity of an underlying entity, which carries on an active business, or has royalty revenues generated by the assets of an active business. By owning securities or assets of an underlying business, an income trust is structured to distribute cash flows, typically on a monthly basis, from those businesses to unit holders in a tax-efficient manner. The trust structure is typically utilized by mature, stable, sustainable, cash-generating businesses that require a limited amount of maintenance capital expenditures. An income trust is an exchange-traded equity investment that is similar to a common share
Index or stock price index
A statistical measure of the state of the stock market, based on the performance of stocks. Examples include the S&P/TSX Composite Index
Recession
Two consecutive quarters of contraction in the gross domestic product
TSX Composite Index
Comprises the majority of market capitalization for Canadian-based, Toronto Stock Exchange listed companies. It is the leading benchmark used to measure the price performance of the broad, Canadian, senior equity market. It was formerly known as the TSE 300 Composite Index
Monday, January 4, 2010
Financial Update For Jan. 4, 2010
Welcome to 2010!
• TSX +28.65 as the TSX wound up 2009 trading with its biggest annual gain in three decades. A rally that has run practically non-stop since March took the TSX up about 31 per cent for 2009, its best one-year gain since growing by more than 38 per cent in 1979. The main index is up a stunning 54 per cent from the lows of early March, when investors feared the global financial system was on the verge of collapse.
• DOW +120.46
• Dollar +.39c to 95.15cUS those who predicted the loonie would reach parity with the U.S. greenback by year’s end are forced to wait a little longer.
• Oil +$.08 to $79.36US per barrel.
• Gold +$3.70 to $1,095.20USD per ounce
Bernanke says regulation is first defence against bubbles BY JEANNINE AVERSA
WASHINGTON — Stronger regulation is the best way to prevent financial speculation from getting out of hand and throwing the U.S. economy into a new crisis, Federal Reserve Chairman Ben Bernanke said Sunday.
But he didn’t rule out higher interest rates to stop new speculative investment bubbles from forming.
The Fed chief’s remarks were his most extensive on the subject since the housing market’s tumble led to the gravest financial crisis since the Second World War — and perhaps the worst in modern history, in his view.
Critics blame the Fed for feeding that speculative boom in housing by holding interest rates too low for too long after the 2001 recession.
But Bernanke, in a speech to the American Economic Association’s annual meeting in Atlanta, defended the central bank’s actions. Extra-low rates were needed to get the economy and job creation back to full throttle after the Sept. 11 attacks and accounting scandals that rocked Wall Street, he said.
He said the direct links were weak between super-low interest rates and the rapid rise in house prices that occurred at roughly the same time. The stance on interest rates during that period “does not appear to have been inappropriate,” he said.
Still, the enormous economic damage from the housing bust — the longest and deepest recession since the 1930s and double-digit unemployment — shows how important it is to guard against a repeat, Bernanke said.
“All efforts should be made to strengthen our regulatory system to prevent a recurrence of the crisis, and to cushion the effects if another crisis occurs,” he said.
“However, if adequate reforms are not made, or if they are made but prove insufficient to prevent dangerous buildups of financial risks, we must remain open to using monetary policy as a supplementary tool,” Bernanke added.
Speculative excesses are not easy to pinpoint in their early stages, he said, and using higher interest rates to combat them can hurt the economy.
For instance, rate increases in 2003 and 2004 to constrain the housing bubble could have “seriously weakened” the economy just when a recovery from the 2001 recession was starting, Bernanke said.
To help the country emerge from that recession, the Fed under then-chair Alan Greenspan cut its key bank lending rate from 6.5 per cent in late 2000 to 1 per cent in June 2003. It held rates at what was then a record low for a year. It’s this action that critics blame for feeding the housing speculation.
Bernanke, however, said the expansion of complex mortgage products and the belief that housing prices would keep rising were the keys to inflating the housing bubble. As a result, lenders made home loans to people that they couldn’t afford.
The Fed in 2005 did crack down on dubious mortgage practices and the type of mortgages blamed for the crisis. He acknowledged that these efforts “came too late or were insufficient to stop the decline in underwriting standards and effectively constrain the housing bubble.”
Still, Bernanke said the lesson learned from the crisis isn’t that regulation is ineffective but that regulation “must be better and smarter.”
However, the Fed’s regulatory lapses and its failure to spot problems leading up to the crisis have spurred efforts in Congress to rein in the Fed’s powers and subject it to more oversight. Bernanke, who has been tapped by President Barack Obama to a second term as Fed chief, faces a contentious confirmation in the Senate.
When the Fed meets later this month, it is expected to keep its key bank lending rate at a record low, near zero. The big question is whether the Fed will provide clues at that time about when it will need to start raising rates to prevent inflation from taking off.
Some analysts worry that the Fed, which has held rates at record lows since December 2008, could be fuelling a new speculative period and potentially a future economic crisis.
Looking back, Bernanke suggested the Fed might have underestimated the full force of the recession, which struck in December 2007. “It turns out the recession was worse than we thought at the time,” he said.
After four straight losing quarters, the economy finally grew from July through September last year. Much of that growth, though, came from government-supported spending on homes and cars. There’s concern about how vigorous the recovery will be once government supports are removed later this year.
• TSX +28.65 as the TSX wound up 2009 trading with its biggest annual gain in three decades. A rally that has run practically non-stop since March took the TSX up about 31 per cent for 2009, its best one-year gain since growing by more than 38 per cent in 1979. The main index is up a stunning 54 per cent from the lows of early March, when investors feared the global financial system was on the verge of collapse.
• DOW +120.46
• Dollar +.39c to 95.15cUS those who predicted the loonie would reach parity with the U.S. greenback by year’s end are forced to wait a little longer.
• Oil +$.08 to $79.36US per barrel.
• Gold +$3.70 to $1,095.20USD per ounce
Bernanke says regulation is first defence against bubbles BY JEANNINE AVERSA
WASHINGTON — Stronger regulation is the best way to prevent financial speculation from getting out of hand and throwing the U.S. economy into a new crisis, Federal Reserve Chairman Ben Bernanke said Sunday.
But he didn’t rule out higher interest rates to stop new speculative investment bubbles from forming.
The Fed chief’s remarks were his most extensive on the subject since the housing market’s tumble led to the gravest financial crisis since the Second World War — and perhaps the worst in modern history, in his view.
Critics blame the Fed for feeding that speculative boom in housing by holding interest rates too low for too long after the 2001 recession.
But Bernanke, in a speech to the American Economic Association’s annual meeting in Atlanta, defended the central bank’s actions. Extra-low rates were needed to get the economy and job creation back to full throttle after the Sept. 11 attacks and accounting scandals that rocked Wall Street, he said.
He said the direct links were weak between super-low interest rates and the rapid rise in house prices that occurred at roughly the same time. The stance on interest rates during that period “does not appear to have been inappropriate,” he said.
Still, the enormous economic damage from the housing bust — the longest and deepest recession since the 1930s and double-digit unemployment — shows how important it is to guard against a repeat, Bernanke said.
“All efforts should be made to strengthen our regulatory system to prevent a recurrence of the crisis, and to cushion the effects if another crisis occurs,” he said.
“However, if adequate reforms are not made, or if they are made but prove insufficient to prevent dangerous buildups of financial risks, we must remain open to using monetary policy as a supplementary tool,” Bernanke added.
Speculative excesses are not easy to pinpoint in their early stages, he said, and using higher interest rates to combat them can hurt the economy.
For instance, rate increases in 2003 and 2004 to constrain the housing bubble could have “seriously weakened” the economy just when a recovery from the 2001 recession was starting, Bernanke said.
To help the country emerge from that recession, the Fed under then-chair Alan Greenspan cut its key bank lending rate from 6.5 per cent in late 2000 to 1 per cent in June 2003. It held rates at what was then a record low for a year. It’s this action that critics blame for feeding the housing speculation.
Bernanke, however, said the expansion of complex mortgage products and the belief that housing prices would keep rising were the keys to inflating the housing bubble. As a result, lenders made home loans to people that they couldn’t afford.
The Fed in 2005 did crack down on dubious mortgage practices and the type of mortgages blamed for the crisis. He acknowledged that these efforts “came too late or were insufficient to stop the decline in underwriting standards and effectively constrain the housing bubble.”
Still, Bernanke said the lesson learned from the crisis isn’t that regulation is ineffective but that regulation “must be better and smarter.”
However, the Fed’s regulatory lapses and its failure to spot problems leading up to the crisis have spurred efforts in Congress to rein in the Fed’s powers and subject it to more oversight. Bernanke, who has been tapped by President Barack Obama to a second term as Fed chief, faces a contentious confirmation in the Senate.
When the Fed meets later this month, it is expected to keep its key bank lending rate at a record low, near zero. The big question is whether the Fed will provide clues at that time about when it will need to start raising rates to prevent inflation from taking off.
Some analysts worry that the Fed, which has held rates at record lows since December 2008, could be fuelling a new speculative period and potentially a future economic crisis.
Looking back, Bernanke suggested the Fed might have underestimated the full force of the recession, which struck in December 2007. “It turns out the recession was worse than we thought at the time,” he said.
After four straight losing quarters, the economy finally grew from July through September last year. Much of that growth, though, came from government-supported spending on homes and cars. There’s concern about how vigorous the recovery will be once government supports are removed later this year.
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