Stocks tumble as investors worry about consumers
NEW YORK (AP) -- Investors
are finding out what everybody else already knew: The consumer isn't going to
spend the economy into recovery.
Major U.S. stocks indexes
tumbled by the biggest amount in six weeks Monday as investors grew worried
that they have been too quick to bet on an economic rebound during the market's
five-month rally. Overseas markets plunged and investors' demand for safe-haven
investments sent the dollar and Treasury prices shooting higher.
The Dow Jones industrial
average skidded 186 points to 9,135.34, while the major indexes fell at least 2
percent. The Nasdaq composite index was hardest hit, falling 2.8 percent, but
it also had the biggest advance as Wall Street rallied this year.
Fed survey: bank lending
tight through mid-2010
WASHINGTON (AP) -- The
Federal Reserve said Monday most banks expect their lending to remain tight
through the second half of next year, with the exception of mortgage standards,
which already are loosening a bit.
The Fed's latest survey of
loan officers found that about 20 percent of U.S. banks tightened their lending
standards on prime home mortgages in the April-June quarter, down from around
50 percent in the previous quarter and a peak of about 75 percent a year ago.
Meanwhile, 45 percent of
banks say they tightened standards on nontraditional mortgages, such as
adjustable-rate loans with multiple payment options, down from 65 percent in
the April survey and around 85 percent a year ago.
Fed extends consumer lending
program through March
WASHINGTON (AP) -- The
Federal Reserve has extended the length of a program intended to spur lending
to consumers and small businesses at lower rates, but the central bank said it
had no plans to expand the types of loans being made.
The Fed said Monday it was
extending its Term Asset-Backed Securities Loan Facility through March 31 for
most of the types of loans it makes. The program was scheduled to end on Dec.
31.
The TALF started in March
and figures prominently in efforts by the Fed and the Obama administration to
ease credit, stabilize the financial system and help end the recession. Under
the program, investors use the funds to buy securities backed by auto and
student loans, credit cards, business equipment and loans guaranteed by the
Small Business Administration.
Lowe's 2Q profit falls 19
pct; shares fall
NEW YORK (AP) -- No. 2
home-improvement retailer Lowe's Cos. on Monday said second-quarter earnings
fell 19 percent on weaker-than-expected sales, adding fresh fuel to doubts
about the ability and willingness of consumers to lead the U.S. economy out of
recession.
Lowe's shares and the
broader market fell sharply as investors worried that consumers remain
tight-fisted in their spending habits. A recovery in consumer spending is
crucial for an economic recovery because it accounts for two-thirds of all U.S.
economic activity.
NY AG sues Charles Schwab
over securities sales
NEW YORK (AP) -- New York
Attorney General Andrew Cuomo filed a lawsuit Monday against the brokerage unit
of Charles Schwab Corp., claiming the firm misled customers about the safety of
auction-rate securities.
Cuomo's office has been at
the forefront of pushing brokers and underwriters of auction-rate securities to
repurchase them from investors who were left with steep losses after the market
for the investments collapsed in early 2008.
The suit against Schwab is
aimed at forcing the retail brokerage firm to repurchase the securities at face
value from investors.
The auction-rate securities
market involved investors buying and selling instruments that resembled
corporate debt whose interest rates were reset at regular auctions, some as
frequently as once a week.
CIT Group wraps debt
purchase, dodges bankruptcy
NEW YORK (AP) -- Commercial
lender CIT Group Inc. said Monday its offer to repurchase outstanding debt at a
discount -- a crucial step to help stave off bankruptcy -- was successful.
The embattled New York-based
lender offered to buy $1 billion in debt that was set to mature Monday. CIT
warned that if not enough bondholders were willing to sell the debt back to the
company, it would likely have to file for bankruptcy protection.
The company said nearly 60
percent of the debt was tendered for purchase, barely topping the 58 percent
minimum needed to complete the offer. CIT is paying $875 for every $1,000
tendered as part of the offer.
CIT will pay off the
remaining notes that matured Monday but were not tendered for purchase as part
of the offer.
Japan's economy rebounds in
2Q on export growth
TOKYO (AP) -- Japan's
economy climbed out of yearlong recession in the second quarter, the government
said Monday, expanding 3.7 percent at an annual pace and joining Germany,
France and other regions that appear to be emerging from the global financial
crisis.
But economists and
politicians sounded cautious, noting that the main driver of growth was exports
and that domestic consumer spending remained fragile amid plunging incomes and
rising unemployment.
The recovery in the
April-June quarter was driven by robust demand for cars, video recorders and
other electronics goods, according to government data. Shipments to China and
other emerging markets were particularly strong, although exports to the U.S.
and Europe also showed modest recoveries.
Homebuilder sentiment index
rises in August
NEW YORK (AP) -- The
National Association of Home Builders said Monday its housing market index rose
in August to the highest point in more than a year, as homebuyers hurried to
take advantage of a federal tax credit before it expires.
The Washington-based trade
association said Monday the index rose one point to 18, a level not seen since
June 2008.
The federal tax credit that
covers 10 percent of a home price up to $8,000 for first-time buyers is set to
expire at the end of November. To qualify, single buyers must earn less than
$75,000, for couples the cap is $150,000. The trade group is lobbying Congress
to extend the tax credit for another year and to offer it to all buyers,
regardless of income.
Chapter 11 plan cedes
Reader's Digest to lenders
NEW YORK (AP) -- The
publisher of Reader's Digest, the country's most popular general interest
magazine, said Monday it will file for Chapter 11 protection with a plan to
swap a portion of its debt for ownership of the company.
Reader's Digest Association
Inc., which also markets books and publishes dozens of other magazines and Web
sites, said it has reached an agreement in principle with a majority of lenders
to erase a portion of $1.6 billion in senior secured notes. The lenders will
get ownership in return.
Already, this year's
advertising declines have prompted the shuttering of several high-profile
magazines, including Conde Nast's Portfolio, Domino and Blender.
UBS clients used foreign
shells to hide income
MIAMI (AP) -- Wealthy
American clients of Swiss bank UBS AG used sham corporations set up in havens
from Hong Kong to the British Virgin Islands as part of their efforts to evade
U.S. taxes, according to documents filed in Florida and California court cases.
The shell corporations, or
"pass-through entities," were key elements of the tax-evasion
schemes, but they also helped federal investigators snare the UBS clients
It's cheap to set up the
shell corporations in countries with little or no income tax and a lenient
regulatory system, said Martin Press, a tax attorney with the Gunster law firm
in Fort Lauderdale, Fla.
By The Associated Press
The Dow fell 186.06, or 2
percent, to 9,135.34.
The broader S&P 500
index fell 24.36, or 2.4 percent, to 979.73, while the Nasdaq fell 54.68, or
2.8 percent, to 1,930.84.
Benchmark crude for
September delivery fell 76 cents to settle at $66.75 a barrel on the New York
Mercantile Exchange.
In other Nymex trading,
gasoline for September delivery rose 1.35 cents to settle at $1.9515 a gallon
and heating oil dropped 1.45 cents to settle at $1.8265. Natural gas for
September delivery fell 7.5 cents to settle at $3.163 per 1,000 cubic feet.
Brent prices tumbled $1.77
to settle at $70.54 a barrel on the ICE Futures exchange.