Economic Calendar

Friday, April 20, 2012

U.S. Stocks Decline as Economic Reports Offset Earnings

By Nikolaj Gammeltoft and Inyoung Hwang - Apr 20, 2012 3:49 AM GMT+0700

U.S. stocks retreated for a second day as disappointing economic data and concern over Europe’s debt crisis overshadowed better-than-forecast earnings from companies including EBay Inc. (EBAY) and Morgan Stanley.

Alcoa Inc. (AA) and DuPont Co. slid at least 1.2 percent, as investors sold shares of companies most tied to economic growth. Qualcomm Inc. (QCOM) declined 6.6 percent after projecting sales and profit that fell short of estimates. EBay Inc. rallied 13 percent, the most since 2005, as earnings were helped by growth in its PayPal payments business. Microsoft Corp. (MSFT) rose 2.9 percent after regular trading as it reported third-quarter profit that topped analysts’ estimates.

Traders work at the New York Stock Exchange. Photographer: Scott Eells/Bloomberg

April 19 (Bloomberg) -- Paul Miller, an analyst at FBR Capital Markets, talks about Bank of America Corp. first-quarter profit released today. The second-largest U.S. lender said profit excluding certain one-time items rose about 40 percent to $3.7 billion, or 31 cents a diluted share. Miller speaks with Erik Schatzker and Stephanie Ruhle on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

Audio Download: Cohen Says U.S. Profit Margins Under Pressure

The Standard & Poor’s 500 Index lost 0.6 percent to 1,376.92 at 4 p.m. New York time, after yesterday’s 0.4 percent decline. The Dow Jones Industrial Average slipped 68.65 points, or 0.5 percent, to 12,964.10. About 7.4 billion shares changed hands on U.S. exchanges, 9.7 percent above the 30-day average.

“The market is in a data-driven holding pattern,” Philip Orlando, the New York-based chief equity strategist at Federated Investors Inc., which oversees about $370 billion, said in a phone interview. “You’ve got a lot of counter-balancing points. We got some soft economic data, while earnings are beating expectations. Investors are looking at each incremental data point trying to draw conclusions.”

The S&P 500 fell after reports showed sales of previously owned U.S. homes in March unexpectedly fell, while more Americans than forecast filed applications for unemployment benefits last week. Another report showed manufacturing in the Philadelphia region expanded at a slower pace in April as orders and sales cooled.

European Bonds

Global equities also declined as yields on French and Spanish 10-year bonds climbed at least six basis points, reviving concern about the sovereign debt crisis. Spain sold 2.54 billion euros ($3.3 billion) of two-year and 10-year debt today, compared with a maximum target of 2.5 billion euros. France auctioned 8 billion euros. Citigroup Inc. economist Michael Saunders said in a note that Moody’s Investors Service is likely to place France’s Aaa rating on review for possible downgrade by the fall.

Investors sold shares of companies most tied to economic growth, sending the Morgan Stanley (MS) Cyclical Index down 0.6 percent.

Alcoa, the largest U.S. aluminum producer, erased 1.9 percent to $9.76. DuPont, the most valuable U.S. chemicals producer, slid 1.2 percent to $52.61 after reporting sales volume fell 2 percent in the first quarter, led by declines in the electronics unit and in the Asia Pacific region.

Technology Shares

Technology stocks had the biggest drop among 10 groups in the S&P 500, as Qualcomm led losses, declining 6.6 percent to $62.57. The largest maker of mobile-phone chips projected third- quarter sales and profit that fell short of analysts’ estimates as it increases spending to improve the output of chips.

EMC Corp. (EMC) fell 3.6 percent to $28.10. The world’s biggest maker of storage computers said it will “meet or potentially exceed” its prior full-year 2012 of profit excluding some items of $1.70 a share. Analysts, on average, estimated $1.75.

Apple Inc. (AAPL), the world’s largest company by market value, lost 3.4 percent to $587.44. The Cupertino, California-based company has erased 7.7 percent since April 9, when it reached an all-time high of $636.23.

The chief financial officer of Verizon Communications Inc. said today that the second-largest U.S. phone company activated 3.2 million of Apple’s iPhones in the first-quarter. That’s down 25 percent from the prior quarter, reducing investor expectations for sales in the full year, according to Gene Munster, an analyst at Piper Jaffray Cos.

Stanley Falls

Industrial stocks had the second-biggest drop in the S&P 500. Stanley Black & Decker (SWK) Inc. fell 7.1 percent to $72.91. The producer of power tools reported first-quarter earnings that trailed analysts’ estimates for the first time since 2008, according to data compiled by Bloomberg.

Rockwell Collins Inc. (COL) declined 4.8 percent to $55.85 after cutting its revenue projection for 2012. Danaher Corp. (DHR) retreated 3.1 percent to $53 after forecasting second-quarter earnings that fell short of analysts’ projections.

Bank of America Corp. (BAC) slid 1.7 percent to $8.77 after earlier rising as much as 2.8 percent. The second-largest U.S. lender said first-quarter profit rose amid a rebound in trading and better credit quality.

Morgan Stanley climbed 2.3 percent to $18.07. Stock- and bond-trading revenue rose more than at any other major U.S. bank. Profit was 71 cents a share excluding accounting charges, topping the 44-cent average estimate of 17 analysts surveyed by Bloomberg.

Volcker Rule

Financial stocks extended declines, falling as much as 1.1 percent, after U.S. regulators said Wall Street banks will have two years to implement the so-called Volcker rule so long as they make a “good faith” effort to comply with the ban on proprietary trading. The rule, named for its original champion, former Fed Chairman Paul Volcker, attempts to reduce the chances that banks will make risky investments with their own capital and put depositors’ money at risk.

Travelers Cos. advanced 3.8 percent, the most in the Dow, to $61.70 as earnings beat analysts’ estimates and the company boosted its dividend 12 percent.

EBay rose 13 percent to $40.62, the highest level since February 2006. The world’s largest Internet marketplace reported sales and profit that topped analysts’ estimates, led by growth in its PayPal online-payments business.

Microsoft, the world’s largest software maker, reported after the market close that fiscal third-quarter profit topped estimates on better-than-expected corporate software sales. The shares rose 2.9 percent to $31.90 at 4:48 p.m. New York time.

Earnings Season

Profits of the companies listed on the S&P 500 are forecast to rise 1.7 percent in the first quarter and 2 percent in the next, according to analysts’ estimates compiled by Bloomberg. About 84 percent of the 83 companies that have reported earnings since April 10 have exceeded analysts’ projections. The S&P 500 has gained 9.5 percent in 2012, boosted by better-than-estimated economic and corporate data.

Abby Joseph Cohen, senior U.S. investment strategist at Goldman Sachs Group Inc., said equities will give better returns than bonds in the mid-to-long term as companies look to emerging markets for growth.

“You need to go back to the late 1950s to see a situation which equities were priced as attractively as they are now relative to bonds,” she said in a Bloomberg Radio interview today with Tom Keene. “1958-1959 was a period in which investors were very concerned about the economy and the yields on many equities exceeded the yields on fixed income at that point and -- as you know -- we moved into a multidecade bull market in equities.”

President Barack Obama’s re-election probably would push the S&P 500 lower this November because investors see his policies as “anti-business,” according to Steven Leuthold, chief executive officer and founder of the Leuthold Global Fund.

“Obama is leading to some degree, and I think if Obama is re-elected it would be somewhat of a negative for the market,” Leuthold said in an interview today on Bloomberg Television’s “In the Loop” with Betty Liu. “He’s kind of viewed still as anti-business. He has a lot of support from Wall Street in terms of money. I’m a social liberal but I’m a fiscal conservative.”

To contact the reporters on this story: Nikolaj Gammeltoft in New York at; Inyoung Hwang in New York at

To contact the editor responsible for this story: Nick Baker at


World’s Richest Worth $1 Trillion on Billionaire List

By Alexander Cuadros and Devon Pendleton - Apr 20, 2012 12:03 AM GMT+0700

The 40 richest individuals on Earth lost a combined $6.2 billion yesterday as stocks dropped amid disappointing U.S. earnings, according to the Bloomberg Billionaires Index, a daily ranking of the wealthiest people.

Saudi Prince Alwaleed bin Talal joined the index, which doubled the number of billionaires it tracks yesterday. Alwaleed’s fortune has increased 18.2 percent, or $3.2 billion, this year, as shares of his Kingdom Holding Co. (KINGDOM), a diversified investment group that is planning to build the world’s tallest tower, rose 36 percent. The 57-year-old ranks 24th on the index with a net worth of $20.5 billion.

Saudi Prince Alwaleed bin Talal ranks 24th on the index with a net worth of $20.5 billion. Photographer: Fayez Nureldine/AFP/Getty Images

Prince Alwaleed

Saudi Prince Alwaleed bin Talal smiles in front of the George V hotel in Paris, France, in this undated photo, provided to the media on Tuesday, April 2, 2012. Source: HRH Prince Alwaleed Bin Talal Private Office via Bloomberg

Mexican Billionaire Carlos Slim

Mexican billionaire Carlos Slim remains the richest person in the world, with a fortune of $68.8 billion. Photographer: Chris Goodney/Bloomberg

“There is no secret to success,” Alwaleed said in an e- mail sent from Saudi Arabia. “It is based on a sound investment strategy, commitment and long-term vision.”

The Bloomberg Billionaires Index takes measure of the world’s wealthiest people based on market and economic changes and Bloomberg News reporting. Each net worth figure is updated every business day at 5:30 p.m. in New York. The valuations are listed in U.S. dollars.

The expanded list was published with the release of new billionaires profile pages in the Bloomberg Professional service. The profiles feature a transparent analysis of how each billionaire’s fortune was calculated.

Alwaleed’s fortune makes him richer than Google Inc. co- founders Larry Page and Sergey Brin. Page ranks in 29th place with $18.9 billion, while Brin ranks 32nd on the list compiled by Bloomberg News. He is worth $18.7 billion.

Buffett, Zuckerberg

The combined wealth of the index is $1.1 trillion. The 40 billionaires have gained a combined $88.2 billion since the beginning of the year.

Mexican telecommunications magnate Carlos Slim, 72, remains the richest person in the world, with a fortune of $68.8 billion, down $572.3 million for the day. Second is Microsoft Corp. (MSFT) co-founder Bill Gates, 56, with $62.7 billion, followed by Warren Buffett, who’s worth $44.6 billion.

Buffett, 81, the chairman of Berkshire Hathaway Inc. (BRK/A), said in an April 17 letter to investors that he has been diagnosed with stage 1 prostate cancer that is “not remotely life threatening.”

Mark Zuckerberg, the 27-year-old founder of Facebook Inc. (FB), the world’s largest social-networking company, is 25th on the ranking. Based on a roughly $100 billion valuation the Menlo Park, California-based company was trading at in the private market when it ceased trading April 3, Zuckerberg may be worth $20.5 billion, or about 25 percent less than previous estimates, once Facebook holds its initial public offering.

Tax Obligations

The reason: Facebook will issue more than 500 million shares of its Class B stock at the offering, diluting Zuckerberg’s ownership to 21 percent after he exercises 120 million options and sells about 42 million shares to cover the tax bill associated with the gain from those options.

Lee Shau Kee, who has said he would swap 99 percent of his wealth for 30 years of time, ranks 26th in the world and second in Hong Kong with a net worth of $19.8 billion. Lee, 84, has gained $2.6 billion this year after shares of Henderson Land Development Co., the developer he founded, rose 17 percent.

Cheng Yu Tung, the third-richest person in Hong Kong, has a net worth of $18.8 billion. The owner of Chow Tai Fook Jewellery Group Ltd. (1929) and property company New World Development Co. Ltd., 60, is ranked 30th in the world. His net worth is down 6.2 percent so far this year.

India, Australia

Lakshmi Mittal, the India-born chairman of ArcelorMittal (MT), the world’s biggest steelmaker, is in 28th place with $19 billion. In addition to his 41 percent stake in ArcelorMittal, the 61-year-old London resident owns hundreds of millions of dollars in U.K. real estate.

Gina Rinehart, the Australian mining heiress, is worth $18.7 billion, putting her in 31st place on the index. Rinehart, 58, the daughter of the man who discovered the mines that made Australia the world’s biggest iron ore exporter, owns perpetual royalty rights to some of Rio Tinto Ltd. (RIO)’s Hamersley mines in addition to other iron-ore and thermal coal deposits throughout the country.

Three of her four children have taken legal action in an effort to remove her as guardian of the family trust. Last month, she lost a bid to keep details of the family litigation private. Newly released documents indicate her four children may have a stake worth as much as $4.7 billion in the trust.

Li Ka-shing, 83, ranks as the richest person in Asia with a net worth of $23.9 billion.

Usmanov Tops Akhmetov

Ukrainian tycoon Rinat Akhmetov, 45, ranks 36th. His $18 billion fortune is derived from closely held metallurgy, mining and energy holdings owned through System Capital Management JSC. In government auctions held between November 2011 and March 2012, Akhmetov’s DTEK Holdings Ltd. acquired control of significant Ukrainian state coal and energy assets at prices that helped push up his net worth up by more than $3.5 billion since the auctions began.

Alisher Usmanov, the 58-year-old Muscovite who controls the Metalloinvest metals and mining company and Digital Sky Technologies, became Russia’s richest person after lucrative technology investments in Facebook, Groupon and Zynga pushed his fortune to $19 billion, up $1.6 billion this year.

Gennady Timchenko, who controls a portfolio of international energy and oil trading assets, the largest of which is a 45 percent stake in Gunvor Group Ltd., is worth an estimated $12.1 billion. He became acquainted with Russian President-elect Vladimir Putin in the early 1990s when Putin was serving as deputy mayor of St. Petersburg. Putin also was chairman of a judo club Timchenko co-founded.

Chocolate Empire

Michele Ferrero, who owns the closely held Ferrero SpA chocolate empire, is Italy’s richest citizen with $21.9 billion. Since 1949, he has been the family leader of the global chocolate and confectionery company that makes Nutella, Tic Tac and Ferrero Rocher.

Alberto Bailleres, the second-richest man in Mexico behind Slim, is worth $18.5 billion. His net worth has soared $1.3 billion this year. While his most-valuable asset, Industrias Penoles SAB, Mexico’s largest silver producer and a miner of gold, has only gained 1 percent in 2012, Bailleres, 80, has benefited from a strengthening currency. The Mexican peso is the best performer among major currencies this year, up 5.7 percent against the dollar.

Iris Fontbona, the matriarch of Chile’s richest family, ranks 34th. Fontbona, her three children and two heirs from the late Andronico Luksic’s previous marriage, control a combined fortune of $18.4 billion. The family owns copper producer Antofagasta Plc (ANTO) and, through holding company Quinenco SA (QUINENC), interests in banking, beer and shipping.

40th Place

Jorge Paulo Lemann is the second-richest man in Brazil with a net worth of $15.9 billion. He ranks last on the ranking.

The 72-year-old tripled his latest investment after he and his partners at 3G Capital Inc. sold a 29 percent stake in Burger King Holdings Inc. this month for $1.4 billion, valuing the fast-food chain at $4.8 billion. As part of their 2010 leveraged buyout, 3G put up $1.5 billion in equity and loaded at least $2.5 billion of debt onto the company’s balance sheet.

Carl Icahn didn’t make the cut. The activist investor, 76, has a net worth of $15.6 billion based mostly on his stakes in Icahn Holdings, a hedge fund he closed to outside investors in 2011, and publicly traded Icahn Enterprises LP. (IEP)

Icahn last week sued Amylin Pharmaceuticals Inc. (AMLN), in which he is the third-largest shareholder, demanding records related to a $3.5 billion takeover offer by Bristol-Myers Squibb Co. as he seeks to start a proxy fight against Amylin’s board.

Ricardo Salinas, 56, also fell short. His stake in Grupo Elektra SA plunged 25 percent in the past week, leaving him with a net worth of $15.8 billion. The retail and banking conglomerate posted its biggest two-day drop since at least 1994 as new Mexican stock-exchange rules threaten to cut the company’s weight in the benchmark index. Salinas’s stake in the company has dropped $4.4 billion since April 11.

To contact the reporters on this story: Alexander Cuadros in Sao Paulo at; Devon Pendleton in New York at

To contact the editor responsible for this story: Matthew G. Miller at


Apple IPhone 5 May Debut in October, Analyst Munster Says

By Adam Satariano - Apr 20, 2012 4:26 AM GMT+0700

Apple Inc. (AAPL)’s next iPhone is likely to be introduced in October and will feature a new body design and work with faster wireless networks, according to Gene Munster, an analyst at Piper Jaffray Cos. (PJC) who had expected an August release for the top-selling smartphone.

In a note today, Munster wrote that October is more probable after chipmaker Qualcomm Inc. (QCOM) announced it is having trouble meeting demand for components that the analyst expects to be included in a new iPhone. The supply constraints, along with Verizon Wireless reporting a drop in iPhone sales, contributed to a 3.4 percent decline in Apple shares today.

iPhone 4S in New York City. Photographer: Justin Sullivan/Getty Images

April 19 (Bloomberg) -- Gene Munster, an analyst at Piper Jaffray Cos., talks about the outlook for the release of Apple Inc.'s next iPhone. He speaks with Jon Erlichman on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

The iPhone is Apple’s top-selling product, accounting for 53 percent of its sales in the quarter that ended last December. Apple hasn’t discussed plans for the next version’s release. Munster, who has correctly predicted the release of previous Apple products, said in the note that Qualcomm’s radio chips that allow for faster connection to the Internet will be included in the next-generation iPhone.

Apple released the iPhone 4S, the current version, in October of last year. Munster said the release of the new model should lead investors to raise their projections for financial results in the quarter ending in December 2012. The analyst wrote that he had previously modeled for the iPhone to be unveiled in August.

LTE Wireless

By working with new so-called long-term evolution, or LTE, wireless networks being built by carriers such as AT&T Inc. and Verizon Wireless, iPhone users would have a faster connection for data-heavy tasks such as browsing the Web, watching videos and downloading files.

Cupertino, California-based Apple, the world’s most valuable company, fell to $587.44 at the close in New York. The shares have risen 45 percent this year. Qualcomm, after disclosing its supply shortages late yesterday, fell 6.6 percent to $62.57 today.

Verizon Wireless, the second-biggest U.S. phone network, said iPhone sales fell to 3.2 million from 4.3 million in the previous quarter, when the 4S model was released.

To contact the reporter on this story: Adam Satariano in San Francisco at

To contact the editor responsible for this story: Tom Giles at


More Americans Than Forecast Filed Weekly Jobless Claims

By Shobhana Chandra and Lorraine Woellert - Apr 20, 2012 4:48 AM GMT+0700
Michael Nagle/Bloomberg
Job seekers wait in line to enter the Dr. King career fair in Brooklyn, New York.

More Americans than forecast filed claims for jobless benefits and sales of previously owned homes unexpectedly dropped, indicating the almost three-year-old economic expansion may be moderating.

Jobless claims fell by 2,000 to 386,000 in the week ended April 14 from a revised 388,000 the prior period, Labor Department figures showed today in Washington. The median forecast of 47 economists surveyed by Bloomberg News called for a drop to 370,000. Purchases of homes fell 2.6 percent to a 4.48 million annual rate in March, the National Association of Realtors reported in Washington.

Job seekers at the Dr. King career fair in the Brooklyn borough of New York on April 12, 2012. Photographer: Michael Nagle/Bloomberg

April 19 (Bloomberg) -- U.S. jobless claims fell by 2,000 to 386,000, more than forecast, in the week ended April 14 from a revised 388,000 in the prior period that was higher than initially estimated, Labor Department figures showed today in Washington. Michael McKee and Betty Liu report on Bloomberg Television's "In the Loop." (Source: Bloomberg)

April 18 (Bloomberg) -- U.S. Treasury Secretary Timothy Geithner talks about the outlook for the U.S. economy, tax reform and China's currency policy. He speaks at the Brookings Institution in Washington. David Ignatius of the Washington Post, moderates the discussion. (Source: Bloomberg)

Job seekers fill out paperwork while waiting to speak to a recruiter at the New York Career Fair in New York. Photographer: Scott Eells/Bloomberg

Stocks declined as the claims data bolstered Federal Reserve concerns that growth may not be fast enough to sustain improvements in the job market that have helped push unemployment to a three-year low. Other reports today showed that an index of leading indicators rose for a sixth month and consumer confidence improved, while manufacturing in the Philadelphia area grew at a slower pace.

“The economy has slowed a notch,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, who is the most accurate forecaster of existing- home sales for the two years through February, according to data compiled by Bloomberg. “We’re just not going to be able to duplicate the growth we saw in the first quarter.”

The Standard & Poor’s 500 Index fell 0.6 percent to 1,376.92 at the 4 p.m. close of trading in New York as the data overshadowed better-than-forecast earnings at Bank of America Corp. and Morgan Stanley. The yield on the 10-year Treasury note was little changed at 1.97 percent.

Germany, Japan

Other reports today offered signs of strength for the global economy.

Germany’s economy, Europe’s largest, will expand 0.9 percent this year, up from a prior estimate of 0.8 percent, four leading economic institutes, including Munich-based Ifo, said today in their twice-yearly economic outlook for Chancellor Angela Merkel’s government. The economy will grow 2 percent in 2013, they said.

Japan reported the fastest export growth in a year and a smaller-than-expected trade deficit, aiding prospects of a sustained recovery for the world’s No. 3 economy.

In the U.S., estimates for jobless claims in the Bloomberg survey ranged from 350,000 to 390,000. The Labor Department revised the previous week’s figure up from 380,000. After being revised to 370,000 from an initial estimate of 360,000, the week before that was revised back to 362,000, today’s data showed.

Revising Figures

States are revising the figures more than usual and as of now there is no explanation for the changes, a Labor Department spokesman said. The repeated revisions may make it more difficult to determine the trend in claims.

Companies trimming their workforce include Cracker Barrel Old Country Store Inc. (CBRL), which runs country store-themed restaurants. The company said on April 17 that it has cut 20 positions to reduce costs, and severance and other charges may decrease third-quarter earnings by 5 cents a share.

Employers added 120,000 jobs in March, half as many as in February and the fewest in five months, according to payrolls figures released on April 6. The jobless rate fell to 8.2 percent from 8.3 percent the prior month as people left the workforce. Still, the economy has added 635,000 jobs since December.

“Recent labor market data provide an example of the uneven pattern of economic activity,” Federal Reserve Bank of Cleveland President Sandra Pianalto said in an April 16 speech in Lexington, Kentucky. “Monthly ups and downs like these make it hard to confirm the underlying pace of job creation.”

Soft Spot

Residential real estate remains the economy’s soft spot, challenged by stricter lending standards, lower home values and the threat of more foreclosures.

Sales of existing single-family homes decreased 2.5 percent to an annual rate of 3.97 million in March. Purchases of multifamily properties, including condominiums and townhouses, fell to a 510,000 pace from 530,000.

Existing-home sales, tabulated when a contract closes, climbed to 4.26 million last year, from 4.19 million in 2010. Demand peaked at 7.1 million in 2005 during the housing boom. In 2008, sales totaled 4.1 million, the least since 1995.

There were some bright spots in the report. The median price of a previously owned home rose 2.5 percent to $163,800 from $160,600 in March 2011.

Borrowing Costs

Cheaper financing is doing its part to sustain home sales. The average rate on a 30-year fixed mortgage fell to 3.88 percent last week, close to the record-low of 3.87 percent reached in February, according to Freddie Mac data.

To help hold down borrowing costs like mortgage rates, Fed policy makers last month said they will continue to swap $400 billion in short-term securities with long-term debt to lengthen the average maturity of the central bank’s holdings, a move dubbed Operation Twist. The program is scheduled to come to a close by the end of June. Policy makers next meet on April 24- 25.

Separately, the New York-based Conference Board said its gauge of the outlook for the next three to six months climbed 0.3 percent after a 0.7 percent gain in February that was the biggest in 11 months. The median forecast of economists surveyed by Bloomberg News called for a rise of 0.2 percent in March.

Manufacturing in Philadelphia

The Federal Reserve Bank of Philadelphia’s general economic index decreased to 8.5, the lowest level since January, from 12.5 in March. Economists forecast the gauge would dip to 12, according to the median estimate in a Bloomberg survey. Readings greater than zero signal expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware.

Another regional report this week showed that manufacturing in the New York area expanded in April at the slowest pace in five months.

“If the regional manufacturing economies are slowing, it signals the national manufacturing economy is slowing as well,” said Neil Dutta, an economist at Bank of America in New York.

Slower economies in Europe and China may restrain exports and limit bookings to American factories, which have been the mainstay of the expansion. At the same time, a pickup in motor vehicle sales in the first quarter remains a source of strength.

Consumer confidence is holding up, another report today showed. The Bloomberg Consumer Comfort Index was minus 31.4 in the period ended April 15, compared with minus 32.8 over the previous seven days. The reading equaled that from two weeks earlier as the best since March 2008.

More Optimism

Gains in confidence raise the odds that consumer spending will continue to grow and benefit companies like Bed, Bath & Beyond Inc. (BBBY) and Toyota Corp. At the same time, five million more Americans are unemployed now than when the recession began in December 2007, showing why cheerier outlooks will be difficult to sustain.

Men, college graduates, homeowners and households earning more than $50,000 a year were among the groups for which confidence climbed last week to the highest level in four years. For those making from $50,000 to $74,999, the index jumped to the highest level since January 2008.

There was also a political element as sentiment for registered Democrats rose last week to the best level since August 2007, and that for independents climbed to the highest since December 2007. The index for Republicans last week was 38 points lower than its average dating back to 1990.

Retail Sales

Retail sales rose more than forecast in March as Americans snapped up everything from cars and furniture to clothes and electronics. The 0.8 percent gain was almost three times as large as projected by the median forecast of economists surveyed by Bloomberg and followed a 1 percent advance in February, Commerce Department figures showed this week.

Toyota this month raised its forecast for 2012 industrywide U.S. sales of cars and light trucks, citing rising sentiment.

“We’re starting to see improvement in consumer confidence and, combined with rising fuel prices and aging vehicles, the market is starting to move,” Bob Carter, Toyota’s group vice president for U.S. sales, told reporters on April 5 at the New York auto show. “It’s happening quicker than anyone thought.”

To contact the reporters on this story: Shobhana Chandra in Washington at; Lorraine Woellert in Washington at

To contact the editor responsible for this story: Christopher Wellisz at


Buffett Joined by 12 Families Pledging Wealth to Charity

By Alexander Cuadros - Apr 20, 2012 12:51 AM GMT+0700

Twelve families promised to donate most of their wealth to philanthropy, joining the Giving Pledge initiative started by Warren Buffett and Bill and Melinda Gates.

The families include hedge-fund manager Bill Ackman and his wife Karen, Tesla Motors Inc. (TSLA)’s billionaire owner Elon Musk and film producer Steve Bing, according to an e-mailed statement from the initiative.

Warren Buffett, chairman of Berkshire Hathaway Inc., left, and Bill Gates, of the Bill and Melinda Gates Foundation. Photographer: Nelson Ching/Bloomberg

William "Bill" Ackman, founder and chief executive officer of Pershing Square Capital Management LP. Photographer: Peter Foley/Bloomberg

Arthur M. Blank, Edgar M. Bronfman, Glenn and Eva Dubin, Red and Charline McCombs, Michael Moritz and Harriet Heyman, John and Ginger Sall, Henry and Susan Samueli, John A. and Susan Sobrato, John Michael Sobrato, and Ted and Vada Stanley also signed the pledge.

“They come from different backgrounds, but share a common desire to see positive change in our world,” Buffett said in the statement. “We’ve said from the beginning that this is a long-term effort, but I’m particularly pleased to see continued momentum in encouraging greater and more thoughtful philanthropy.”

Buffett, 81, is the third-richest man in the world, according to the Bloomberg Billionaires Index, a daily ranking of the wealthiest people on Earth. He has a net worth of $44.6 billion. Gates, 56, ranks second with a $62.7 billion fortune.

To contact the reporter on this story: Alexander Cuadros in Sao Paulo at

To contact the editor responsible for this story: Matthew G. Miller at


Bank of America Beats Analyst Estimates as Trading Jumps

By Hugh Son - Apr 20, 2012 4:07 AM GMT+0700

Bank of America Corp., the second- largest U.S. lender, posted a first-quarter profit that was more than most analysts predicted amid a rebound in trading and better credit quality.

Profit excluding certain one-time items increased about 40 percent to $3.7 billion, or 31 cents a diluted share, from $2.6 billion, or 23 cents, a year earlier, based on data released in a statement today. That beat the average per-share estimate of 27 analysts surveyed by Bloomberg of 12 cents. Net income, which includes accounting charges, fell to $653 million, or 3 cents a share, from $2.05 billion, or 17 cents.

Bank of America Corp. in Charlotte. Photographer: Chuck Burton/AP Photo

April 19 (Bloomberg) -- Paul Miller, an analyst at FBR Capital Markets, talks about Bank of America Corp. first-quarter profit released today. The second-largest U.S. lender said profit excluding certain one-time items rose about 40 percent to $3.7 billion, or 31 cents a diluted share. Miller speaks with Erik Schatzker and Stephanie Ruhle on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

April 19 (Bloomberg) -- Brian Charles, an analyst at RW Pressprich & Co., discusses Bank of America Corp.'s first-quarter earnings reported today. The second-largest U.S. lender said profit excluding certain one-time items rose about 40 percent to $3.7 billion, or 31 cents a diluted share. Charles talks with Betty Liu on Bloomberg Television’s “In the Loop.” (Source: Bloomberg)

March 9 (Bloomberg) -- Brian Moynihan, chief executive officer of Bank of America Corp., talks about the U.S. economy and the bank's asset mix and business strategy. He spoke yesterday with Bloomberg Television's Betty Liu at the Women in the World conference in New York. (Source: Bloomberg)

Chief Executive Officer Brian T. Moynihan has said he’s counting on trading units run by Thomas K. Montag to revive income and had warned he would cut costs more deeply if results didn’t improve. The business responded with its first profit in three quarters and positive trading revenue every day amid the best start for the Standard & Poor’s 500 Index in 14 years and a lull in Europe’s debt crisis.

“You had very favorable tailwinds in the fixed-income markets and so trading revenues are very strong for this universe right now,” Charles Peabody, an analyst at Portales Partners LLC in New York, said in a Bloomberg Radio interview. “There’s no question the earnings that are being reported are very good -- the question is the sustainability.”

Bank of America, based in Charlotte, North Carolina, slipped 15 cents, or 1.7 percent, at 4:15 p.m. in New York after gaining as much as 2.8 percent earlier during the session.

Trading Results

Global markets, the bank’s trading operations, posted a $798 million profit, compared to a $768 million loss in the fourth quarter and a $1.39 billion profit a year earlier. The division’s latest results include a $1.4 billion charge related to its debt, more than three times bigger than a similar accounting charge a year earlier.

Sales and trading revenue excluding accounting adjustments more than doubled to $5.2 billion in the first quarter from $2 billion in the fourth quarter, and advanced from $5 billion a year earlier, the bank said. The tally for the most recent three months was the third-highest since the takeover of Merrill Lynch in 2009, according to the company.

Fixed Income

Revenue from fixed income, currency and commodities excluding adjustments rose to $4.1 billion in the first quarter from $1.3 billion in the fourth quarter and $3.7 billion a year earlier, according to the statement.

“We saw improved profitability in all of our businesses this quarter compared to the fourth quarter of last year,” Moynihan said in the statement.

The $2.42 billion provision for credit losses was the smallest since the third quarter of 2007, according to the bank. The real estate unit’s loss narrowed to $1.15 billion from $2.4 billion a year earlier as the firm set aside less for mortgage repurchases.

The provision for loan repurchase demands dropped to $282 million from $1 billion, with revenue increasing to $2.7 billion from $2.1 billion a year earlier. The bank reclassified $1.85 billion of home equity loans as non-performers, responding to new regulatory guidance on how to treat junior liens when first mortgages are overdue. The bank said the sum was already covered by reserves.

Companywide revenue narrowed 17 percent to $22.3 billion from $26.9 billion, the bank said. Total loans and leases slipped to $913.7 billion from $932.9 billion in the fourth quarter.

Behind the Numbers

Fair value and debt valuation adjustments totaled about $4.8 billion before taxes, according to the bank. Comparisons with last year were also skewed by one-time pretax gains of $1.2 billion on buying back debt and trust preferred securities and $800 million each from equity investment income and sales of debt securities. Pretax litigation expenses subtracted $800 million and one-time retirement-related costs were about $900 million.

The adjusted profit excludes the $4.8 billion negative valuation adjustments in the first quarter and a charge of $943 million a year earlier, and is based on a 37 percent tax rate provided by the lender. With one-time items removed, earnings per share may have been closer to 17 cents a share, Paul Miller, an analyst at FBR Capital Markets, said during an interview on Bloomberg Television with Erik Schatzker.

“So, still a good number, but nowhere near as good as that 31 cents, and that’s what people are going to start to focus on,” Miller said.

Moynihan, 52, had told investors to expect the second phase of his efficiency plan, dubbed Project New BAC, to be in place this month. The firm most recently was scrutinizing investment banking, trading and wealth management. The first part, which examined retail banking, targeted 30,000 job reductions.

New Structure

Bank of America reorganized its reporting lines this month, combining deposit, credit-card and small business units into a new consumer-and-business banking division led by co-Chief Operating Officer David Darnell, 59. He also oversees real estate and wealth-management units.

Operations run by Montag, 55, the former Goldman Sachs Group Inc. trading head promoted to co-chief operating officer in September, were split into global markets and banking units. The banking unit incorporates parts of a former stand-alone business that catered to larger corporations with more than $50 million in annual revenue.

The lender has surged 58 percent this year in New York trading through yesterday, the best in the Dow Jones Industrial Average, as capital improved and the firm passed the Federal Reserve’s stress test. Moynihan sold more than $50 billion in assets to boost capital and simplify the firm since taking over in 2010.

Divestments Ahead

Moynihan has said that he will focus on selling home loans to customers of the firm’s domestic retail bank and wealth- management division. At the same time, he’s seeking to divest wealth-management units outside the U.S., a person with direct knowledge of the process said this week. The businesses operate in Europe, Asia, the Middle East and Latin America.

JPMorgan Chase & Co. (JPM) and Wells Fargo & Co., (WFC) the No. 1 and No. 4 biggest banks by assets, reported first-quarter earnings last week that exceeded analysts’ estimates on a rise in mortgage fees. The firms may have benefited as Bank of America retreated from selling mortgages after its 2008 takeover of Countrywide Financial Corp. saddled it with more than $40 billion in costs.

The lender saw its share of originations drop to 5.6 percent in the fourth quarter from 10 percent in 2011’s third quarter and 24.7 percent in 2007, according to a February note from FBR Capital Markets.

To contact the reporter on this story: Hugh Son in New York at

To contact the editors responsible for this story: David Scheer at; Rick Green at


Galleon Insider Figure Gets Probation After Leniency Bid

By Patricia Hurtado - Apr 20, 2012 2:14 AM GMT+0700
Louis Lanzano/Bloomberg
Gautham Shankar, right, former trader with Schottenfeld Group LLC, at federal court with his attorney Frederick Sosinsky in New York on April 18, 2012.

A former Schottenfeld Group LLC employee was sentenced to probation after telling a judge he gave New York’s homeless thousands of dollars earned from an insider-trading scheme tied to the Galleon Group LLC scandal.

Gautham Shankar, 38, who worked for Goldman Sachs Group Inc. (GS) before joining Schottenfeld as a trader, was ordered yesterday by U.S. District Judge Richard Sullivan in New York to serve three years of probation, including the first six months in home confinement. In addition to his plea for leniency, former Goldman Sachs colleagues, clients and his parents’ housekeepers sought mercy for Shankar, convicted in 2009 of fraud in the biggest hedge fund insider crackdown in U.S. history.

Shankar, who faced as long as 37 months in prison, collected less than $450,000 from his crimes, which took place while he was working at Schottenfeld, his lawyer said. The judge also fined him $25,000 and directed his forfeiture of $448,437.

Shankar, of New Canaan, Connecticut, was one of more than 20 people charged by the U.S. in overlapping insider cases involving Galleon founder Raj Rajaratnam. Rajaratnam is serving an 11-year prison term after being convicted of 14 counts of conspiracy and securities fraud.

Pleaded Guilty

Shankar, who pleaded guilty to conspiracy and securities fraud, admitted that he passed and profited from illegal tips he obtained from Zvi Goffer, a former Galleon employee, and Thomas Hardin, a former analyst at Lanexa Global Management LP.

Sullivan said it was important to reward Shankar for cooperating early in the government’s investigation. Shankar assisted prosecutors for more than a year before the charges were filed, Assistant U.S. Attorney Andrew Fish told Sullivan yesterday.

“The key variable for me is not only that you’re a good person, but it’s that you cooperated early,” the judge said. “You did it substantially and you did it in a timely way that allowed the government to pursue investigations.”

Shankar’s lawyer, Frederick Sosinsky, said yesterday that his client didn’t keep a $5,000 payment he received from a co- conspirator as a result of an insider-trading tip and instead gave the money to the homeless.

Large Sums

“As the government learned during its meetings with Mr. Shankar, he has always, quite literally, given large sums of money away to the homeless on the streets of New York, including cash given to him by his co-conspirators for passing tips from Hardin,” Sosinsky wrote in a court filing.

“From bringing the homeless a cup of coffee in the morning and sharing time with them to handing them hundreds of dollars at a time, Mr. Shankar has always been unable to simply walk past those in the most distress,” Sosinsky said.

“I’m sorry for the pain that I’ve caused everybody,” Shankar told Sullivan before he was sentenced. “I’m truly sorry for my actions and involvement for the past four years have been difficult.”

Sullivan said he was troubled by anecdotes about Shankar’s largesse and questioned Shankar’s motives for engaging in the scheme.

“‘You don’t make a charitable donation with insider- trading proceeds,” he said. “What he did with his illegal proceeds is less important to me.”

Goldman Colleagues, Clients

Shankar’s wife, Maureen, asked Sullivan to impose a term of probation, citing her husband’s good works. She said Shankar always stopped to speak to the homeless outside Grand Central Terminal during their daily commute into the city and gave shirts and money for a homeless man’s surgery.

“One thing I want you to understand about Gautham is that he is not a materialistic, greedy person,” Maureen Shankar wrote. “In fact, quite the opposite is true!”

Sosinsky submitted more than 50 letters to the court written on Shankar’s behalf, including two from former Goldman Sachs colleagues, three from former Goldman Sachs clients and two by housekeepers who worked for his parents.

During his time at New York-based Goldman Sachs, Shankar contacted “buy side” clients and provided research to analysts, his lawyer said in court papers. He worked on the sales desk at Goldman Sachs from July 2000 until February 2003.

“I ask that you show mercy when sentencing Gautham,” said Rudy Glocker, a former colleague. “I realize we all must pay for our mistakes, and I know Gautham’s atonement is real.”

“Gautham and I were in the training program together at Goldman Sachs,” said Chris Haroun, a former co-worker. “If I could summarize his character in five words, it would be as follows: ethical, kind, minimalist, selfless and generous.”

‘Substantial’ Assistance

Fish said yesterday Shankar provided “substantial” assistance to the Federal Bureau of Investigation’s probe of insider trading at hedge funds, resulting in criminal charges being filed against numerous individuals.

When Shankar was approached by the FBI, he “immediately” agreed to cooperate, Fish said. He told investigators about receiving cash from Goffer and David Plate, a former Schottenfeld trader, as well as payments he made to Hardin, the prosecutor said.

“He agreed to cooperate in May 2008, when we were in a covert investigation, for more than a year he had to keep this all secret,” Fish said. “Shankar really opened us to a chain of insider-trading prosecutions, so I think he should get some credit for that.”

Shankar recorded telephone calls for the FBI with Goffer and his brother, Emanuel Goffer, Plate, trader Michael Kimelman, former Galleon trader Franz Tudor and Hardin, Fish said.

Roomy Khan

Based on Shankar’s recordings, Hardin began to cooperate, Fish said, and told the U.S. about tips he obtained from Roomy Khan, a former Intel Corp. (INTC) executive. Khan later pleaded guilty and became a key cooperator for the government against Rajaratnam.

Hardin also told the U.S. about a separate insider-trading scheme involving Karl Motey, an independent consultant who also pleaded guilty and agreed to cooperate with the U.S., Fish said.

Motey later agreed to work secretly for the FBI, posing as a hedge fund manager and wearing a body wire as part of the federal crackdown of so-called expert networking firms.

Shankar declined to comment after court.

“We’re relieved that this chapter of Mr. Shankar’s life is over,” Sosinsky said.

The case is U.S. v. Shankar, 09-cr-996, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Patricia Hurtado in Manhattan federal court at

To contact the editor responsible for this story: Michael Hytha at