Finance & Business World

QUOTE OF THE WEEK

“I wish we had treated jobs the way we treated this debt ceiling, which was a bit of a manufactured crisis, which jobs isn’t. So what if we got everyone together and said let’s set a deadline to figure out how you actually create jobs in this country. Can you imagine if the passion and energy that went into this ridiculous debt ceiling had gone into how do we actually get jobs created?”

U.S. stocks fluctuated Wednesday after companies reported strong earnings but gave mixed forecasts for the future.

Target Corp., Staples Inc. and Dell Inc. all reported earnings for last quarter that were above analysts’ forecasts. Companies in the Standard & Poor’s 500 are on track to report higher profits for a ninth straight quarter. But economic growth is weak around the world, and some economists worry that a second recession may be coming. That could pull down future results.

Target and Staples both gave profit forecasts that were above Wall Street’s expectations, but Dell cut its prediction for revenue growth this year.

The Dow Jones industrial average fell 49 points, or 0.4 percent, to 11,357 at 1:30 p.m. in New York. It had been up as many as 120 around 10:30 a.m. The S&P 500 fell 4, or 0.4 percent, to 1,188. The Nasdaq composite fell 26, or 1.1 percent, to 2,497.

Six of the 10 sectors that make up the S&P 500 rose. Four fell, led by a 1.4 percent drop for technology stocks after Dell’s forecast cut.

“There are a whole bunch of contradictory signals in the system now, and it’s hard to tell which way to go,” said Charlie Smith, chief investment officer of Fort Pitt Capital Group, which has just over $1 billion in assets under management.

The increased role of automated trading by computers has increased volatility, making investing more difficult. “When you get a piece of news, it’s almost like the machines are trying to out-quick each other,” and they are sending stocks in straight lines up or down, Smith said. “That’s what really scares retail investors. We try to sit and wait in the weeds for good businesses at good prices.”

He has focused on telecom stocks and cable companies. Their relatively big dividend yields look more attractive given low yields on bonds. The yield on the 10-year Treasury note is at 2.17 percent, down from 3.34 percent at the start of the year.

Telecom stocks in the S&P 500 rose 1.1 percent Wednesday, the most among the 10 sectors that make up the index. Utility stocks also tend to pay dividends, and they rose 0.8 percent.

Energy stocks rose 0.4 percent after crude oil gained 95 cents per barrel to $87.60.

Dell said late Tuesday its profit rose 63 percent last quarter on strong demand from businesses and government agencies. But it also cited “a more uncertain demand environment” when it cut its forecast for annual revenue growth to a range of 1 percent to 5 percent paperless payday loans. That’s down from an earlier growth forecast for 5 percent to 9 percent. Dell stock fell 10.5 percent Wednesday.

Other companies are more optimistic. Retailer Target said it expects to earn between $4.15 per share and $4.30 per share this year. Analysts had expected $4.14 per share. Target also said its earnings last quarter rose 3.7 percent on sales of grocery, beauty products and other items. Target shares rose 1.5 percent.

Office products retailer Staples raised its profit forecast for the year after saying strong international sales pushed earnings up 36 percent last quarter.

Deere also raised its forecast for full-year earnings. It now expects to earn $2.7 billion this fiscal year, up from a May forecast of $2.65 billion. The maker of tractors and other heavy equipment said its profit rose 15 percent last quarter on strong demand for farm equipment.

Companies are making more money, but many have done so by raising prices to offset higher costs. Higher food prices helped push inflation at the wholesale level to 0.2 percent in July, according to a government report Wednesday. But that is still well below inflation levels earlier this year when oil prices were spiking because of violence in the Middle East. In February, wholesale inflation was 1.5 percent.

Stocks have been particularly volatile in August. Worries rose as the U.S. government said it may default on its debt unless it was allowed to borrow more. The government just beat the deadline to avoid a default, but the partisanship in the debate came at a cost _ Standard & Poor’s downgraded the U.S. credit rating on Aug. 5 by one notch to AA+ from the top AAA rating. That triggered one of Wall Street’s wildest weeks: The Dow rose or fell by at least 400 points in each of the first four days of last week, the first time that has happened.

Markets appear to have calmed somewhat since then. Tuesday marked the first time since the Aug. 5 downgrade that the Dow rose or fell by less than 100 points. It fell 76 points on worries about Europe’s ability to contain its debt problems. Some European countries have borrowed so much that investors fear they won’t be able to repay their debts. The Dow had been down as many as 190 points earlier Tuesday.

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Jamestown Mall’s New York-based owner has filed for bankruptcy and is seeking a new owner for the shopping center.

Jamestown Mall Realty Management LLC, based in Little Neck, N.Y., filed for Chapter 11 bankruptcy in federal court in St. Louis on Monday, listing its assets and liabilities as ranging between $1 million and $10 million. Its unsecured creditors include $127,000 owed to Ameren, $121,000 owed to the Internal Revenue Service, and $29,000 owed to the Missouri Department of Revenue.

Mehran Kohansieh, the managing member of Jamestown Mall Realty Management, declined to comment.

“The owner’s intention is to look for a suitable purchaser,” said his attorney, Scott Greenberg. A hearing on the bankruptcy is set for Monday.

Jamestown Mall Realty Management LLC bought the mall for $3.3 million in 2009. Some other entities, such as Macy’s, own the anchor tenant spaces at the 1.25 million square foot shopping center.

One of Jamestown Mall Realty Management’s lenders, MSC Real Estate, alleged the mall owner defaulted on a more than $2 million loan in mid-June, and the mall was placed in receivership.

MSC was pursuing foreclosure proceedings before the bankruptcy filing, according to St. Louis County Circuit Court documents.

As part of MSC’s legal action, Town and Country-based Priority Properties was appointed the new manager of the shopping center in June. Mike Margiotta, property manager with Priority, said the mall will continue to remain open during the legal proceedings.

“We’re going to operate the mall in a safe and clean manner, no changes at all,” Margiotta said.

Jamestown Mall, which opened in 1973, saw its occupancy drop sharply in recent years, dipping below 44 percent in 2008.

The mall, located at 175 Jamestown Mall in unincorporated north St. Louis County, has struggled with declining store vacancies and foot traffic, but a makeover for the mall

Robin Steinmann remembers a time when nurses were pretty much one-size-fits-all.

“It used to be that if you worked in one area of the hospital, you could float around and work anywhere,” said Steinmann, who handles human resources at Anderson Hospital in Maryville.

Those days are long gone.

“Now areas are becoming more specialized, more complicated,” Steinmann said, “and that can’t happen anymore.”

The emphasis on specific medicine is a small factor in a national health care trend that’s being felt in the Metro East more and more: an acute deficit of trained, professional nurses. While the issue has been simmering for years, it’s become more prominent recently, intensified by changes in the health care industry, an aging baby boomer population just starting to tax the system and a recession that’s altered how people take care of themselves.

Metro East health care administrators and educators know all about the concerns. They’re crafting plans to make sure the shortage won’t catch them off guard. But there are real challenges, including the harsh reality that there won’t be enough new nurses entering the workforce for years, maybe decades.

“We only have the capacity to admit so many students based on our resources and classrooms,” said Virginia Cruz, an associate professor in the Southern Illinois University Edwardsville School of Nursing, the only of its kind in this part of the state. “The sky is not the limit for us.”

The perfect storm

In the most basic sense, the dearth of caregivers is simple supply and demand. The number of new nurses graduating from various programs doesn’t meet growing patient needs, both in terms of sheer numbers and severity of treatment. One study estimates the state will have a nursing deficiency of 21,000

LG Electronics, a top global manufacturer of mobile phones and flat-screen TVs, said second-quarter net profit plunged as sales declined and its mobile phone business remained in the red.

LG earned 108.4 billion won ($103.3 million) in the three months ended June 30, the company said Wednesday. That was down 87.3 percent from net profit of 856.4 billion won a year earlier.

The result snapped two straight quarters of net losses for the Seoul, South Korea-based company, which has been making a push into 3D TVs and smartphones. LG has been trying to turn around its mobile phone business amid tough competition in the fast growing global smartphone market.

LG Electronics Inc. ranks No. 2 globally in flat screen televisions behind South Korean rival Samsung Electronics Co. LG trails global leader Nokia Corp. of Finland and Samsung to rank No. 3 in mobile phones.

Sales in the second quarter fell 0.2 percent to 14.4 trillion won.

LG’s mobile communications business, which includes phones, suffered its fifth straight quarterly operating loss in the second quarter. But in a sign of improvement the scale of red ink declined sharply on higher smartphone sales and cost-cutting.

The mobile business racked up an operating loss of 54 billion won, sharply lower than 101 billion won in the first quarter and 119 billion won in the second quarter last year. Sales fell 4.6 percent from last year to 3.25 trillion won.

LG said it sold 24.8 million mobile phones during the quarter, up slightly from 24.5 million in the previous three-month period. The company sold over 10 million Optimus smartphones in the first half of this year, according to company spokesman Ken Hong.

LG’s results were also hurt by a loss of 56 billion won from investments in affiliates including flat panel maker LG Display Co. and LG Innotek, which manufactures electronic components.

Results were brighter in TVs. LG’s home entertainment business saw sales decline 5.4 percent from the year before, but the unit recorded a profit of 90 billion won compared with a loss of 26 billion won the same quarter last year. Sales increased at the company’s home appliance and air conditioning businesses, though profitability weakened from the year before.

“We expect profitability of our television business to improve next quarter but overall sales and profits will likely decrease as we reduce shipments of lower-end phones to focus more on the high-end,” said LG’s chief financial officer David Jung, according to Hong, the spokesman.

Shares in LG Electronics gained 2.6 percent to close at 83,800 won.

Separately, rival Samsung Electronics said Wednesday that it has sold more than 5 million units globally of the Galaxy S II, the latest version of its flagship smartphone, since it went on sale in late April.

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Unusual stock funds come and go.

In the “gone” category is the Golf Associated Fund, which invested in golf-related items ranging from tour sponsors to magazines and course fertilizers.

Also history is the StockCar Stocks Mutual Fund that invested in companies related to what was then the NASCAR Winston Cup Series through its racing teams or sponsors.

Gabelli Global Interactive Couch Potato Fund did not last long either. It was destined for changes in name and portfolio.

Some unusual funds are whacky, and some adhere to overly focused strategies. However, others work fine for investors seeking to add spice to predictable portfolios that had been formulated by the book.

And ideas for funds keep coming, even if they don’t all get off the ground.

“I once talked with a woman who was researching chocolate companies and how they had performed historically, since they tend to outperform the Standard & Poor’s 500 over a long time period,” recalls Jack Bowers, editor of the independent Fidelity Monitor newsletter (www.fidelitymonitor.com) in Rocklin, Calif. “She was thinking that maybe there would be interest in launching a fund on that theme and doing all sorts of fun stuff with it.”

That sweet fund didn’t become a reality, but other unique concepts have come and are still around. For example, investors distrustful of the shenanigans of our elected officials in Washington have a fund that invests in stocks only when Congress isn’t meeting no fax cash advances.

“The Congressional Effect Investor Fund (CEFFX) invests in the U.S. stock market on days when Congress is out of session and is out of the U.S. stock market on days when Congress is in session,” Tom Roseen, head of research services for Lipper Inc. in Denver, said of that fund, which is up 9 percent over the past 12 months.

One unique fund that’s gotten a lot of publicity, the Vice Fund (VICEX), seeks long-term growth of capital by looking for firms that derive most of their revenues from products considered ’socially irresponsible,” such as tobacco, gambling and alcohol. It then selects stocks from that group based on their financial soundness and growth potential. It is up 30 percent over the past 12 months.

“There have been all kinds of strange industry-specific funds over the years, such as the legendary Steadman Oceanographic Fund that was built around the idea that there were companies building communities under the sea,” said Russel Kinnel, director of fund research for Morningstar Inc. in Chicago. “None of these are around anymore.”

Some quirky funds seem to speak to people who basically want to have something different in their portfolios, Kinnel expects. It is possible to run a mutual fund out of your basement these days, he noted. If it happens to have awesome returns, you will attract a lot of money in the beginning

German authorities have reported another death in the European E. coli outbreak _ bringing the total to 50.

The national disease control center said Friday 48 deaths have been reported in Germany, up from 47 a day earlier. One death in Sweden and another in the United States are linked to the outbreak, according to the World Health Organization.

A total of 3,999 people have now been reported ill in Germany, including 845 suffering from a complication that can lead to kidney failure business cards. Another 122 cases have been reported in 16 other countries.

New infections have been declining for weeks but the total tally is still rising due largely to delays in notification.

European health experts warned Thursday that contaminated Egyptian fenugreek seeds are likely the source of the deadly outbreak.

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The White House says a meeting between President Barack Obama and House Republicans was worthwhile even if it didn’t bridge the partisan divide that exists over how to reduce the deficit.

Press Secretary Jay Carney said it’s useful for Republicans and Democrats to sit down and talk in a non-confrontational environment. But also he said that a large meeting like the one between Obama and dozens of House Republicans Wednesday isn’t the right forum for specific advances in negotiations.

House Republicans pressed Obama at the session for more specifics, and more leadership. One leading Republican also asked Obama to stop “mischaracterizing” a GOP Medicare proposal that’s at the center of the spending debate. But Carney made clear that Obama will continue to criticize the Medicare plan.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

Top House Republicans said they pressed President Barack Obama Wednesday for more leadership and a detailed plan on budget cuts, with one leading lawmaker accusing him of mischaracterizing a GOP Medicare proposal at the center of a partisan divide over spending.

The meeting at the White House came as the GOP sought to build pressure on Obama for trillions in spending cuts in exchange for any increase in the government’s ability to borrow. The White House had no immediate comment.

After the meeting, dozens of rank-and-file GOP lawmakers streamed out of the front door of the White House and into a caravan of blue buses waiting for them on Pennsylvania Avenue, while members of the GOP leadership stopped on the driveway to speak to reporters and camera crews awaiting them in under a steaming sun.

“Any day Republicans and Democrats are actually having a dialogue, this is a good thing, said Republican Rep. Jeb Hensarling of Texas.

Yet it was hard to see any concrete progress from a meeting that, based a description by Republican lawmakers, amounted to a face-to-face accounting of each side’s positions, but no breakthrough on how to reach a debt-reduction deal. The talks came as Aug. 2 deadline approaches for the federal government to raise the debt limit or go into unprecedented default.

“Unfortunately what we did not hear from the president is a specific plan of his to deal with the debt crisis,” Hensarling said. Instead, according to a GOP official briefed on the meeting, Obama noted that he’s deputized Vice President Joe Biden to lead talks on deficit reduction.

House Speaker John Boehner, R-Ohio, said, “I told the president, one more time, this is the moment. This is the window of opportunity where we can deal with this on our terms. We can work together and solve this problem. We know what the problems are. Let’s not kick the can down the road one more time.”

According to the GOP official briefed on the meeting, Boehner and other leaders told Obama that he hadn’t put a specific plan for spending cuts on the table. They brought up a speech he gave at George Washington University in April in which he called for deficit reduction totaling $4 trillion through spending cuts, tax increases and other measures. The Republicans said a speech isn’t a plan.

House Budget Committee Chairman Paul Ryan, R-Wis., had attended the speech only to hear Obama excoriate Ryan’s proposal to have future Medicare beneficiaries shop for insurance in the private market. On Wednesday Ryan told the president he’d viewed that as a sign that Obama was thinking about the 2012 elections and wanted fellow Democrats to turn up the political heat, according to the GOP official.

The official, who spoke on condition of anonymity to discuss the private meeting, said Ryan told the president that leaders have to lead and Obama hadn’t shown leadership.

Pressed on that after the meeting Ryan said: “I just said we got to take on this debt and if we demagogue each other at the leadership level then we’re never gonna take on our debt.”

Ryan said he explained his Medicare plan to the president to get him to stop mischaracterizing it. Obama and Democrats routinely label Ryan’s proposal a “voucher” plan that would undo Medicare as it is now known.

“It’s been mis-described by the president and many others and so we simply described to him precisely what it is we’ve been proposing so that he hears from us how our proposal works so that in the future he won’t mischaracterize it,” Ryan said.

Ahead of Wednesday’s meeting, Boehner released a statement signed by more than 150 economists backing his position on coupling spending cuts with any debt limit increase.

“Increasing the debt ceiling without significant spending cuts and budget reforms will send a message to American job creators that we still are not serious about ending Washington’s spending addiction,” the Ohio Republican said in the statement.

The session between Obama and House Republicans came on the heels of a symbolic and lopsided vote the day before against a GOP proposal to raise the cap on the debt limit by $2.4 trillion. The proposal, intended to prove that a bill to increase the borrowing cap with no spending cuts is dead on arrival, failed badly Tuesday on a 318-97 vote.

Democrats said the vote was aimed more at giving tea party-backed Republicans an opportunity to broadcast a “nay” vote against the administration’s position that any increase in U.S. borrowing authority should be done as a stand-alone measure uncomplicated by difficult spending cuts to programs like Medicare. A more painful vote to raise the debt ceiling looms for Republicans this summer.

In fact, Biden is leading talks on attaching spending cuts to the debt measure in advance of the Aug. 2 deadline set by the Treasury Department.

In Tuesday’s vote, House Democrats accused the GOP of political demagoguery, while the Obama administration maneuvered to avoid taking sides _ or giving offense to majority Republicans.

The House floor debate was brief, occasionally impassioned and set a standard of sorts for public theater, particularly at a time when private negotiations continue among the administration and key lawmakers on the deficit cuts Republicans have demanded.

Roughly two months remain before the date Treasury Secretary Tim Geithner has said the debt limit must be raised. If no action is taken by Aug. 2, he has warned, the government could default on its obligations and risk turmoil that might plunge the nation into another recession or even an economic depression.

The government already has reached the limit of its borrowing authority, $14.3 trillion, and the Treasury is using a series of extraordinary maneuvers to meet financial obligations.

By no longer making investments in two big pension funds for federal workers and beginning to withdraw current investments, for example, the Treasury created $214 billion in additional borrowing headroom.

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Associated Press writers Ben Feller and Erica Werner contributed to this report.

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More people sought unemployment benefits last week, the second rise in three weeks, a sign the job market’s recovery is slow and uneven.

The Labor Department says applications for unemployment benefits jumped 25,000 to a seasonally adjusted 429,000 for the week ending April 23. That’s the highest total since late January.

The four-week average of applications, a less volatile measure, rose to 408,500, its third straight rise and the first time it has topped 400,000 in two months.

Applications near 375,000 are consistent with sustained job creation. Applications peaked during the recession at 659,000.

Some economists predicted that auto factory shutdowns, stemming from supply disruptions in Japan, would cause applications to rise. But a Labor Department analyst said only one state reported auto-related layoffs and the increase was modest.

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China will continue tightening monetary policy for “some time,” central bank Governor Zhou Xiaochuan said a day after the world’s second-biggest economy reported inflation accelerated to the fastest pace since 2008.

“We will remove the monetary factors that are related to inflation,” Zhou said at a briefing today in the southern Chinese province of Hainan, where he’s attending the Boao Forum for Asia. “Our monetary policy will continue to move from moderately loose to prudent. This means properly tightening. The trend will continue for some time.”

China may increase the reserve requirement ratio for the nation’s banks this month in an effort to curb inflation, which the government said yesterday accelerated to 5.4 percent in March, according to Barclays Capital and Citic Securities Co. The People’s Bank of China has raised interest rates four times and increased reserve requirements six times since the third quarter of last year in a bid to rein in consumer prices.

“Policy tightening should remain firm,” Chang Jian, a Hong Kong-based economist with Barclays Capital, said by phone today. “Inflation risk remains significant. If they maintain the tightening stance and continue to withdraw liquidity and continue to control credit as well as the pace of lending, that at least gives you a higher chance of success.”

Economic Growth

China’s economy grew 9.7 percent in the first quarter, faster than the 9.4 percent median estimate in a Bloomberg survey, according to figures released by the National Bureau of Statistics yesterday.

The central bank reported a day earlier that M2 money supply grew a faster-than-expected 16.6 percent in March, and that new yuan loans for the month also exceeded economists’ estimates at 679.4 billion yuan.

China last increased the reserve requirement effective from March 25 and raised benchmark lending and deposit rates from April 6. The central bank has also imposed differentiated reserve requirements on the nation’s lenders. The reserve ratio is 20 percent for China’s biggest banks and the one-year benchmark for borrowing costs is 6.31 percent.

Zhou said today China would continue to use differentiated regulations for financial institutions based on their systemic importance. He also said there isn’t an absolute ceiling for the level of banks’ reserve requirements.

“I agree with the general view that there is no absolute line or limit for where to set the reserve requirement ratio,” Zhou said. “It depends on many conditions. When those conditions change, the force and room for reserve requirement ratio adjustments will also change.”

Inflation in March was largely driven by food costs, which rose 12 percent last month from a year earlier. Non-food inflation accelerated to 2.7 percent.

–Eva Woo, Henry Sanderson. With assistance from Huang Zhe in Beijing. Editors: Bloomberg News, Reinie Booysen

To contact Bloomberg News staff on this story: Eva Woo in Beijing at +86-10-6649-7537 or ewoo9@bloomberg.net

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