The Dow Jones industrial average () fell 11 points, or 0.1%, to end at 12,705. The S&P 500 () rose 1 points, or 0.1%, to 1,324. The Nasdaq () rose 11 points, or 0.4%, to 2,860.

"It’s a quiet day," said Paul Zemsky, head of multi-asset strategies at ING Investment Management. "The market is taking a pause before payrolls."

On Friday, the government is expected to report the U.S. economy added 130,000 jobs in January, according to economists surveyed by CNNMoney.

That would mark a sharp slowdown in hiring versus December, when 200,000 jobs were created. The unemployment rate is expected to rise to 8.6%.

Speaking before Congress Thursday, Fed chairman Ben Bernanke said the economy has shown some signs of improvement recently, but described the pace of the recovery as "frustratingly slow."

The sluggish recovery leaves the economy "vulnerable to shocks," including the debt crisis in Europe, the central bank chief added.

The comments raised speculation that the Fed is willing to take additional steps to support the economy if conditions deteriorate, said Doug Roberts, chief market strategist for Channel Capital Research.

"He’s saying that if things get worse, I’m available and we’re going to ease," said Roberts. "Clearly, he’s telling the market that if you decide to bet against me you’re going to get killed."

The Fed has purchased billions of dollars worth of Treasury bonds and other assets under its quantitative easing program. Some analysts say the Fed could hold a third round of asset purchases this year, depending on how the recovery progresses.

Europe: Where things stand

Meanwhile, investors remain on the lookout for an official agreement on a debt-reduction plan and second bailout for Greece. The deal is expected to come by the end of the week, though deadlines have been missed in the past.

U.S. stocks rose Wednesday, but closed off the highs of the day, on a combination of improved economic data and easing concerns about Europe’s debt crisis.

Economy: Initial jobless claims for the week ended Jan. 28 totaled 367,000, according to the government. They were expected to total 375,000, according to a survey of analysts by Briefing.com.

Data released Thursday morning from outplacement consulting firm Challenger, Gray & Christmas shows planned job cuts surged 28% in January to 53,486 — marking the highest total since 116,000 job cuts were announced in September.

The Challenger report follows data Wednesday from payroll processor ADP saying that the private sector added 170,000 jobs in January, down sharply from 292,000 in December.

Companies: Retailers reported better-than-expected same-store sales in January, according to data from sales-tracker Thomson Reuters.

Abercrombie & Fitch’s () stock fell 13% after the clothing retailer reported weak same-store sales for the latest quarter and lowered its earnings guidance.

Zynga () shares rallied 17% following Facebook’s IPO filing. Zynga’s gaming apps and advertising contributed about 12% of Facebook revenue last year.

Facebook IPO: Morgan Stanley is big winner

Sony () shares fell 6% after the company reported disappointing earnings and revenue.

Unilever () shares slumped 3.5% after the maker of Lipton teas, Dove soaps and other consumer products said it had difficulty passing higher raw material costs on to consumers last year, and announced a gloomy outlook for 2012.

Qualcomm (, Fortune 500), a company that sells chips used in cell phones, boosted its forecast for its 2012 performance. Shares rose 2%.

Viacom (, Fortune 500) shares fell after the media giant reported better-than-expected earnings in its fiscal first quarter, but cited ratings weakness and softness in the U.S. television advertising market. Its film division swung to an operating loss in the quarter.

Green Mountain Coffee Roasters () shares jumped 24% after the company reported its first-quarter revenue soared 102% compared to a year earlier, boosted by K-Cup sales.

World markets: European stocks closed modestly higher. Britain’s The DAX () in Germany added 0.6% and France’s CAC 40 () gained 0.3%. The FTSE 100 () in London ended little changed.

Asian markets ended higher. The Shanghai Composite () climbed 2%, the Hang Seng () in Hong Kong added 2% and Japan’s Nikkei () rose 0.8%.

Currencies and commodities: The dollar rose against the euro and the British pound, but fell versus the Japanese yen.

Oil for March delivery slipped $1.25 cents to end at $96.36 a barrel.

Gold futures for April delivery added $9.80 to $1,759.30 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 1.85%.  

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The increase was less than forecast and followed a revised 292,000 rise the prior month that was smaller than previously reported, the report from the Roseland, New Jersey-based ADP Employer Services showed today. The median estimate in a Bloomberg News survey of economists called for an advance of 182,000.

]]> http://latestfinnews.com/us-companies-add-170000-workers-in-january-bloomberg/feed/ http://latestfinnews.com/euro-area-economic-confidence-rises-less-than-forecast-bloomberg/ http://latestfinnews.com/euro-area-economic-confidence-rises-less-than-forecast-bloomberg/#comments Tue, 31 Jan 2012 07:04:15 +0000 Piter http://latestfinnews.com/euro-area-economic-confidence-rises-less-than-forecast-bloomberg/ Euro-area confidence in the economic outlook improved less than forecast in January as the region

But workers for some of the biggest names in the business claim their phones fell silent because of a conspiracy among their employers. And they claim the world’s biggest tech icon was at the center.

A lawsuit filed in federal court in San Jose claims senior executives at Google Inc., Intel Corp., Adobe Systems Inc., Intuit Inc., Lucasfilm Ltd., Pixar and Apple Inc. violated antitrust laws by entering into secret anti-poaching agreements not to hire each other’s best workers. In doing so, the suit contends the companies were able to keep wages artificially low by preventing bidding wars for the best employees.

The plaintiffs also claim that company e-mails show Steve Jobs himself sought and orchestrated at least some of the so-called “gentlemen’s agreements” while Apple’s CEO.

“I believe we have a policy of no recruiting from Apple,” then-Google chief executive Eric Schmidt wrote in a 2007 email cited by the plaintiffs. The email was originally furnished to the U.S. Justice Department, which investigated similar allegations in 2010. The same email included a forwarded message from Jobs complaining that Google’s recruiting department was trying to lure away an Apple engineer.

“Can you get this stopped and let me know why this is happening?” Schmidt wrote. Google’s director of staffing replied that the recruiter “will be terminated within the hour.”

The companies’ attorneys said the facts even as presented by the plaintiffs show no evidence of a conspiracy.

Rather, they said in court filings that some companies had separate one-to-one pacts among themselves as they worked together on various business ventures.

“The obvious explanation for the existence of these agreements were the collaborations,” said Apple defense attorney George Riley, as the two sides squared off Thursday in U.S. District Court in San Jose. Riley told Judge Lucy Koh that such arrangements were common.

The case hinges on a practice described in court documents as “cold-calling.” Under the practice, recruiters from one company will call an employee at another company who has the skills the company needs. The practice can lead to bidding wars as workers play the companies off one another to get the highest pay.

Cold-calling, the suit contends, helps workers get a sense of what they’re worth in a free market for employment in which all the companies are competing against one another for top employees. When the cold-calling stops, workers lose the knowledge and the leverage they could otherwise use to demand higher pay.

The Justice Department’s 2010 investigation included all the same companies except Lucasfilm, and the plaintiffs in some ways mimic the language from the department’s original case. The companies settled without admitting any wrongdoing but agreed not to enter into future agreements preventing them from cold-calling each other’s employees to recruit them.

Because the Justice Department’s case was settled quietly without any public dispute, court records contain little detail about any specific alleged agreements among companies.

Some of those details did come to light, however, in a recent filing by the plaintiffs, which quotes emails they obtained from the companies that had previously been given to the Justice Department business cards.

In a 2005 email describing a purported agreement between former Adobe CEO Bruce Chizen and his then-counterpart at Apple, an Adobe human resources executive wrote: “Bruce and Steve Jobs have an agreement that we are not to solicit ANY Apple employees, and vice versa,” according to court documents.

Ex-Palm Inc. CEO Ed Colligan wrote to Jobs in 2007: “Your proposal that we agree that neither company will hire the other’s employees, regardless of the individual’s desires, is not only wrong, it is likely illegal,” the plaintiffs’ filing said.

In internal company communications, Intel CEO and Google board member Paul Otellini described a gentleman’s agreement between the two companies: “Let me clarify. We have nothing signed. We have a handshake `no recruit’” between himself and then-Google CEO Schmidt. “I would not like this broadly known.”

Defense attorneys contend the emails are being distorted by the plaintiffs and show nothing beyond legitimate one-to-one agreements. Apple declined to comment.

“Intel disagrees with the allegations contained in the private litigation related to recruiting practices and plans to conduct a vigorous defense,” said Sumner Lemon, an Intel spokesman.

Adobe said the company does not comment on pending litigation.

The other companies named in the suit did not immediately respond to requests seeking comment.

Whichever side prevails, the case underscores the high wages talented tech workers can command in Silicon Valley, where the tech industry added thousands of jobs last year. According to federal labor statistics, mid-level tech workers in the region such as computer security specialists, web developers and network architects earn more money than anywhere else in the country, with average annual salaries topping $110,000.

Many of those workers could get thousands more if the case goes their way, lead plaintiff’s attorney Joseph Saveri said. Given the potentially tens of thousands of workers affected if the plaintiffs succeed in turning the suit into a class-action case, Saveri said the combined damages for the companies could reach into the hundreds of millions of dollars if decided at trial.

Such penalties would sink many companies. But Apple recently reported cash reserves of more than $97 billion. Google also has billions in cash on hand.

One anti-trust attorney not involved in the case doubts the companies have much to worry about anyway.

Antitrust cases that revolve around hiring practices are difficult to win, said David Balto, a Washington, D.C.-based antitrust lawyer who investigated Microsoft as a staff attorney for the Federal Trade Commission in the 1990s. Among the legal challenges they face is defining who exactly makes up the class of workers harmed by the alleged violations, since people with different jobs have different employment options, he said.

“I don’t think anybody at these companies is losing a nanosecond of sleep because of this lawsuit,” Balto said.

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On Thursday, the yield on 10-year government bonds spiked above 15%, the highest level since the euro currency was launched in 1999, while yields on 3-year notes surged to nearly 21%.

Investors have been rattled by the increasingly coercive debt negotiations in Greece, where private sector bondholders are facing losses of up to 70% of their Greek debt holdings. The fear is that Portugal may eventually seek a similar deal to write down some of its €162 billion debt load.

Portugal’s borrowing costs shot up after Standard & Poor’s downgraded the government’s credit rating to speculative grade, or junk, on Jan 13. The ratings agency said investors could lose up to 50% of their holdings if Portugal were to default on its debts.

But investors are also worried about Portugal’s bleak economic prospects and the uncertain outlook for the eurozone in general. The Portuguese economy is expected to shrink 3% this year as austerity measures take their toll and the broader eurozone economy contracts.

"Obviously it is not just the downgrade but the starting debt position, the economic outlook and the possibility that Greece is setting a template for the future that is concerning investors," said Gary Jenkins, a fixed-income analyst at Swordfish Research.

Roubini: Europe needs a ‘bazooka’

While the bond market has turned against Portugal, investors have been primarily worried about larger eurozone economies such as Italy and Spain, which are seen as vulnerable to a full-blown debt contagion.

Borrowing costs for Italy and Spain have backed off recent highs amid a flood of liquidity from the European Central Bank, which pumped nearly €500 billion of long-term loans into the banking system and relaxed its collateral requirements.

Meanwhile, Portugal succumbed to the debt crisis long ago. The nation first tapped a €78 billion bailout from the European Union and International Monetary Fund in Apirl 2011.

In December, the IMF released €2.3 billion from Portugal’s bailout and praised the government for the progress it has made on fiscal reforms, saying the program was "broadly on track."

The IMF expects Portugal to return to the public markets in 2013. But fund officials cautioned that the government needs to do a better job at controlling public spending, especially at the local level and in state-owned enterprises.

IMF cuts growth forecast for all but U.S.

Despite the market pressure and economic challenges, analysts say Portugal is not in immediate danger of default.

"Regardless of the future complications, it is unlikely that the government will opt to default in the next few months," said Antonio Barroso, an analyst at Eurasia Group, a political risk research firm.

However, the government may need to seek additional bailout money in the second half of the year, depending on its progress on fiscal reforms and the outcome of the eurozone crisis, Barroso wrote in a note to clients.

Greece, by contrast, has struggled to implement budget cuts and structural reforms that are a condition of its bailout loans.

The nation has yet to seal a deal with private investors over a proposed 50% reduction in the value of Greek government bonds. The agreement is a key condition of a second €130 billion bailout, the terms of which are now being negotiated.

Athens is facing a €14.5 bond redemption in March that it may not be able to pay without additional bailout funds.

Ireland, which passed its latest bailout review with flying colors last week, has been the most successful bailout recipient. The nation’s borrowing costs have eased this year and Dublin announced a debt swap with private investors on Wednesday.  

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But what the firm did, and the role it and larger rival Fannie Mae played in the housing crisis of the last decade, remain a source of confusion for many Americans.

What do Freddie Mac and Fannie Mae do? The two of them support the housing industry by providing billions in financing to the mortgage market.

They buy mortgage loans from lenders that conformed to their guidelines, typically safer loans with a large down payment, good credit scores for the borrowers and verification of their income.

Because there is an implicit guarantee that the federal government stands behind both firms, which were set up by Congress, they borrow money at the lowest possible rates and get a good return on their investment.

Did the two firms create the housing bubble that caused the financial meltdown? Not really.

The two firms were major players in the mortgage market, and so the rising home values were at least partly funded by their flow of money.

But the bubble really inflated when Wall Street started buying riskier loans made to borrowers who didn’t qualify for a Fannie or Freddie conforming loan. Those loans carried higher interest rates, with relatively little risk for investors while home prices were going up.

Experts say it was the growth of those riskier loans that caused home prices to rise and the bubble to inflate.

"When you bring in 5 million marginal buyers who under normal circumstances would not qualify for a mortgage, that’s what ends up driving home prices," said Barry Ritholtz, CEO of Fusion IQ.

He said the big Wall Street firms that became major players in the mortgage market, such as Citibank (, Fortune 500), Bank of America (, Fortune 500), Goldman Sachs (, Fortune 500), Morgan Stanley (, Fortune 500) and AIG (, Fortune 500), are as or more guilty than Freddie and Fannie.

"If Freddie and Fannie never existed, we would have had the same problem," he said.

What caused problems for Fannie and Freddie? By the middle of the last decade, Freddie and Fannie had lost their dominant position in the home loan market, as the riskier loans became a larger share of the mortgage market.

So they adjusted their underwriting standards in order to participate in the riskier lending as well.

Obama’s housing track record

Even though the riskier loans were a minority of the loans each purchased, because each was so huge, they ended up with a large volume of those loans.

They also were relatively late to the game. That meant they got into riskier loans right before the decline in home prices — which began in 2006 — led to a spike in foreclosures. After that, home buyers started to default on loans that were safer, adding to Freddie and Fannie’s losses.

"What killed Fannie and Freddie is the housing market went to hell and they were 100% exposed to housing," said Jaret Seiberg, analyst with Guggenheim Washington Research Group.

How much money did the collapse cost taxpayers? So far Freddie has received $72.2 billion from Treasury, while Fannie, which is larger, received $111.6 billion. The combined $183.8 billion makes it the most expensive bailout by taxpayers of the financial crisis. But part of that bailout has been repaid to taxpayers in the form of dividends. Freddie has repaid $14.9 billion, while Fannie paid $17.2 billion.

Seiberg said that the bailout might have been avoided, or been relatively minor, if Fannie and Freddie had stayed away from the riskier loans.

"Best-case scenario would have been they were knocked down, but not knocked out," he said.

Why did Freddie and Fannie hire Washington insiders such as Newt Gingrich?Gingrich’s contract with Freddie is short on specifics of the work he performed for $25,000 a month. But even if he did no lobbying, as he says, the contract came at a time when Freddie and Fannie were eager to buy as much Washington influence as possible.

For years, the two firms were among the most powerful companies in terms of Washington muscle, getting free reign from both Congress and their regulator, then known as the Office of Federal Housing Enterprise Oversight (OFHEO).

"Fannie and Freddie had Congress wrapped around their fingers," said Guy Cecala, CEO of Inside Mortgage Finance, which publishes trade publications following the mortgage market. "They were untouchable."

Because of the public-private nature of their charters, the firms wanted to make sure Congress and OFHEO allowed them to operate with few restrictions. But they also wanted to keep government’s implicit backing in place so they could borrow money cheaply.

"They were very aggressive lobbying Congress and OFHEO to stay out of their way," said Ritholtz. 

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Vancouver

A pipeline executive said Thursday that the company was weighing whether to build a segment of the line _ from Oklahoma to Texas _ that wouldn’t require U.S. State Department approval. And government officials said Canada would push harder for a pipeline to the Pacific Coast, where oil could be shipped to China.

At the same time, Canadian officials said, they are hopeful the 1,700-mile (2,740-kilometer) Keystone XL pipeline will be built.

Alberta Premier Alison Redford, the leader of the Canadian province that has the world’s third-largest reserves of oil, said that while Canada is disappointed at Obama’s decision, the government believes Obama has made it clear the U.S. would consider a new Keystone XL pipeline application with a new routing.

Obama called Prime Minister Stephen Harper to explain that the decision on Wednesday was not on the merits of the pipeline but rather on the “arbitrary nature” of a Feb. 21 deadline set by Republican legislators as part of a tax measure he signed, Harper’s office said.

“The fact that the president has said that the decision was not based on the merits we take as a signal that there is an opportunity to make a decision that is in the national interest that allows the project to go ahead,” Redford told The Associated Press in a telephone interview.

Calgary-based TransCanada Corp., which proposed the pipeline, said Thursday it was considering building the pipeline in segments, with the first connecting an existing pipeline in Oklahoma to refineries in Texas.

The Obama administration had suggested development of an Oklahoma-to-Texas line to alleviate an oil glut at a Cushing, Oklahoma, storage hub.

“If our shippers are interested in building that portion of the pipeline (first), we would look at that,” TransCanada President and CEO Russ Girling told The Associated Press in an interview.

Obama’s rejection of Keystone XL “clearly gives flexibility to do that,” Girling said. He emphasized that the company had made no decisions.

U.S. officials have said that building the pipeline in sections could speed up the process since the U.S. State Department would not be involved if the pipeline does not cross the U.S.-Canada border.

Girling’s remarks were in contrast to a statement TransCanada issued on Wednesday declaring it would reapply for a presidential permit to build the full pipeline. Girling said the company still expects to reapply, but “will take our time for how to refile it.”

He said a new route that avoids environmentally sensitive areas of Nebraska should be made public in a matter of weeks

In Washington, the proposed $7 billion pipeline has become a political hot potato.

Republicans _ who earlier put the president in the awkward position of having to make a decision on it before Feb. 21 _ now hope to force Obama to deal with it yet again before next November’s presidential election. He wants to put it off beyond that.

Republicans are looking to drive a wedge between Obama and two key Democratic constituencies. Some labor unions support the pipeline as a job creator, while environmentalists fear it could lead to an oil spill disaster.

The Alberta-to-Texas pipeline proposed by TransCanada would carry 800,000 barrels of oil a day from Alberta across six U.S. states to the Texas Gulf Coast, which has numerous refineries.

Natural Resource Minister Joe Oliver said it’s clear the process is not yet over and said Canada is hopeful the pipeline will be accepted on its merits.

Redford said Obama’s decision adds urgency to Enbridge’s proposed pipeline to the Pacific Coast of British Columbia that would allow Canadian oil to be shipped to Asia for the first time.

The project is undergoing a regulatory review in Canada.

“Asian markets are a very viable alternative. I say alternative, I probably shouldn’t. It’s not an either or situation. There’s an opportunity here for us to grow our markets in both directions and we’d like to be able to do that,” Redford said.

Canadian officials see the pipeline to the Pacific coast as critical as Canada seeks to diversify its energy customer base beyond the United States, which Canada relies on for 97 percent of its energy exports.

Alberta has more than 170 billion barrels of oil reserves. Daily production of 1.5 million barrels from the oil sands is expected to increase to 3.7 million in 2025. Only Saudi Arabia and Venezuela have more reserves.

Sinopec, a Chinese state-controlled oil company, has a stake in Enbridge’s proposed $5.5 billion Northern Gateway Pipeline. Chinese state-owned companies also have invested more than $16 billion in the oil sands in the last two years.

Tens of billions more are expected to be invested in Canada’s oil sands if the Pacific pipeline is built.

There is fierce environmental and aboriginal opposition to the Pacific pipeline, but Harper’s government has called it a nation-building project that is crucial to the country’s goal of becoming an energy super power.

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