Economic Calendar

Friday, May 11, 2012

U.S. Posted Budget Surplus of $59.1 Billion in April

By Meera Louis - May 11, 2012 1:28 AM GMT+0700

The U.S. government posted a budget surplus in April, the first in more than three years, as tax revenue climbed and spending dropped.

Receipts topped outlays by $59.1 billion compared with a deficit of $40.4 billion in April 2011, the Treasury Department said today. Economists projected a $35 billion surplus, according to the median estimate in a Bloomberg News survey. It was the first surplus since September 2008 and the biggest since April 2008.

“The total federal budget deficit is slowly shrinking,” said Steven Wood, president of Insight Economics LLC in Danville, California. “However, this improvement has been halting, due largely to erratic economic and employment growth.”

President Barack Obama, in his campaign to win a second term, is trying to make the case that while the recovery has been uneven, the U.S. is making progress. The administration has said won’t accept any of the dozen spending bills House Republicans are working on unless they agree to abide by a budget deal reached last year.

The dispute may lead to a government shutdown shortly before the November elections unless lawmakers agree on legislation to keep agencies operating in the 2013 fiscal year, which starts Oct. 1.

Obama Budget

Republicans rejected President Barack Obama’s $3.8 trillion election-year budget plan, saying it didn’t go far enough to reduce the deficit or boost economic growth.

Estimates of the April budget outcome ranged from roughly in balance to a surplus of $60 billion in a Bloomberg survey of 23 economists. April has been a surplus month in 44 of the past 58 fiscal years, the Treasury Department said.

The non-partisan Congressional Budget Office estimated this week the April surplus would reach $58 billion. The CBO said in a report dated May 7 that the results were influenced by shifts in the timing of certain payments.

Receipts increased 10 percent from the same month last year to $318.8 billion, today’s Treasury Department report showed. Over the same period, spending dropped 21 percent to $259.7 billion.

Obama’s proposed budget would initially boost the U.S. economy though later in this decade it would become a drag on growth, the CBO said April 20.

Between 2018 and 2022, the administration’s plan would cut growth by 0.5 percent to 2.2 percent, according to the analysis.

To contact the reporters on this story: Meera Louis in Washington at

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


Romney Apologizes After Report He Bullied Fellow Student

By Lisa Lerer - May 11, 2012 6:13 AM GMT+0700

Mitt Romney apologized today for high school pranks that may have pushed the boundaries into bullying, including an incident in which he led a group of boys in pushing down a screaming fellow student who frequently was taunted about his suspected homosexuality.

“Back in high school, I did some dumb things, and if anybody was hurt by that or offended, obviously I apologize,” the presumptive Republican presidential nominee said in an interview on Fox News Radio. “I don’t recall the incident myself,” he said in a later interview on Fox TV.

Mitt Romney with his family after his father was elected Governor of Michigan, November 7,1962. Photograph: AP Photo

An article published by the Washington Post today disclosed the incident, saying the student, John Lauber, was often teased because others presumed he was gay. It attributed accounts of the group -- including Romney shoving Lauber and cutting his long blond hair -- to five fellow students at the all-boys private Cranbrook School in Michigan. One former student described the attack as “vicious” and another called it “senseless.”

The Post reported that another student, Gary Hummel, a closeted gay at the time, said his efforts to speak in class were punctuated by shouts of “Atta girl” from Romney.

Romney, 65, said he didn’t remember either incident.

“I had no idea what that individual’s sexual orientation might be,” he said of Lauber. “That was the furthest thing from our minds back in the 1960s,” he said earlier.

Adopting Children

Romney, in his later interview, expressed support for the right of gay couples to adopt children. “I also know many gay couples are able to adopt children,” he said. “That is fine.”

The account comes amid a national conversation about gay rights, after President Barack Obama announced his support for same-sex marriage in an interview with ABC News yesterday. Romney opposes gay marriage and says domestic partnership rights should be determined by individual states.

The Post story lit up social networking sites, including Twitter, and is being spotlighted by a website called the New Civil Rights Movement that is popular with gays. The words “Romney” and “bully” were both included in about 13 Twitter messages per minute today, according to, a website that tracks traffic.

In an effort to tamp down the reaction, Romney aides set up the Fox radio interview so he could respond to the allegations. As the candidate did so, campaign aides sought to get former high school friends to publicly share their more positive recollections of Romney, according a staffer.

Not Mean Spirited

Andrea Saul, a spokeswoman for the campaign, told the Post that “anyone who knows Mitt Romney knows that he doesn’t have a mean-spirited bone in his body.”

The Post also quoted fellow students, including a former girlfriend, who described Romney as an industrious leader at Cranbrook, where children from the state’s wealthiest families ate in a chandeliered dining room and studied in reading rooms decorated with frescoes and marble friezes. Romney attended the school while his father, George, headed American Motors Co. and he served as governor of the state.

Romney said marrying his wife, Ann, whom he met while at Cranbrook, and going on a Mormon mission in France changed him into a “very different person.”

Romney, who graduated from high school in 1965, questioned how much of a candidate’s background is fair game, given that the incidents in question happened close to 50 years ago. He said he prefers the campaign focus on bigger issues facing the country, including the economy, energy and Iran’s nuclear development.

High School Talk

“There’s going to be some that want to talk about high school,” the former Massachusetts governor said in the Fox News interview. “Well, if you really think that’s important, be my guest.”

Campaigning in Omaha, Nebraska, today, he made no reference to the report or gay marriage as he delivered a 10-minute version of his standard stump speech.

“The problem with the president is his policies are a fallback to the liberal ideas of the past,” Romney told voters at a riverfront restaurant. “These old liberals thought that you could spend and spend and borrow without consequences.”

The federal debt, he said, “is unacceptable.”

“It’s bad economics; it’s bad policy. I think it’s immoral,” he said.

Continuing an effort by his campaign to woo women voters, Romney praised the work of female business owners and his wife, who spent her life raising the couple’s five children.

“I appreciate the contributions of all mothers of all ages and all stages. So thank you to the mothers of this country,” he said to applause.

Earlier in the day, about 500 supporters paid at least $250 --- and $2,500 for a photo with Romney -- to attend a campaign fundraiser at an Omaha hotel.

To contact the reporter on this story: Lisa Lerer in Washington at

To contact the editor responsible for this story: Jeanne Cummings at


S&P 500 Rises From 2-Month Low on Greece Government Talks

By Rita Nazareth - May 11, 2012 4:02 AM GMT+0700

The Standard & Poor’s 500 Index (SPX) rose, rebounding from the lowest level in two months, as Greece attempted to form a new government and a decline in American jobless claims helped allay concern of a labor market setback.

Wells Fargo & Co. (WFC) and U.S. Bancorp rose at least 1.4 percent to pace gains in banks. News Corp., the media company run by Rupert Murdoch, and Monster Beverage Corp. (MNST), an energy- drink maker, rallied more than 4.8 percent as earnings beat estimates. Cisco Systems Inc. (CSCO) sank 10 percent as its forecasts disappointed investors. S&P 500 futures fell 0.5 percent at 5:01 p.m. as JPMorgan Chase & Co. (JPM) slumped 3.8 percent after saying one of its divisions had “significant” mark-to-market losses.

May 10 (Bloomberg) -- David Gerstenhaber, president and founder of Argonaut Management LP, talks about the equity market and investment strategy. He speaks with Betty Liu, Dominic Chu and Sheila Dharmarajan on Bloomberg Television's "In the Loop." (Source: Bloomberg)

The S&P 500 rose 0.3 percent to 1,357.99 at 4 p.m. New York time. The Dow Jones Industrial Average added 19.98 points, or 0.2 percent, to 12,855.04. The Nasdaq-100 Index (NDX) dropped 0.2 percent to 2,616.24, led by Cisco, which comprises 3.1 percent of the measure. About 6.6 billion shares changed hands on U.S. exchanges, almost in line with the three-month average.

“They are still talking in Greece and that brings some relief,” said Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama. “The crash off the cliff in terms of an extreme political alliance didn’t play out today. In the U.S., jobless claims didn’t surprise negatively. That was seen as a positive.”

U.S. equities joined a global rally and the euro halted an eight-day slump, its longest since 2008. Greece’s Evangelos Venizelos, the socialist Pasok leader and former finance minister, said his goal is to form a government that keeps the nation in the euro area. Investors also watched economic data as initial claims for jobless benefits fell to a one-month low.

Political Turmoil

Greek political turmoil extended into a fourth day after the inconclusive May 6 elections, with coalition talks deadlocked, raising the possibility that another election will have to be held as early as next month. The standoff has reignited European concerns over Greece’s ability to hold to terms of its two bailouts negotiated since May 2010.

“There’s an attempt to patch things together in Greece,” said Michael Strauss, who helps oversee about $27 billion of assets as the chief investment strategist at Commonfund in Wilton, Connecticut. “They will try to stay in the euro, though I’m not sure they can. Greece is a failed chemistry experiment even if they put something together.”

Banks had the biggest gain in the S&P 500 among 24 groups, adding 1.5 percent, as a measure of European lenders rallied. The KBW Bank Index (BKX) rose 1 percent as 22 of its 24 stocks advanced. Wells Fargo climbed 1.7 percent to $33.19. US Bancorp (USB) increased 1.4 percent to $31.91.

Bernanke on Banks

Federal Reserve Chairman Ben S. Bernanke said the U.S. banking system is stronger and more resilient while still facing challenges on credit quality and liquidity.

“Banks still have more to do to restore their health and adapt to the post-crisis regulatory and economic environment,” Bernanke said today in a speech at the Chicago Fed’s annual conference on banks. As the economic expansion proceeds, “a financially stronger banking system will be well positioned to expand its lending.”

Some corporate reports also helped drive stocks higher today. Per-share profits have topped projections at about 70 percent of S&P 500 companies that reported results since the start of the earnings season.

News Corp. (NWSA) climbed 4.9 percent to $20.32 after revenue growth at its cable networks and film studio helped it exceed analysts’ third-quarter profit estimates. The owner of Fox Broadcasting and Fox News derives at least 70 percent of its annual profit from television, and is working to expand in markets outside the U.S. with investments in pay-TV operators.

International Markets

Monster Beverage surged 9 percent to $71.17. Net sales rose 28 percent to $454.6 million as Chief Executive Officer Rodney Sacks expands into international markets, including Hong Kong and Macau last month.

Big Lots Inc. (BIG) gained 1.4 percent to $36.73. The discount retailer was raised to the equivalent of buy at Barclays Plc. The share-price estimate is $43.

Technology shares had the biggest decline in the S&P 500 among 10 industries, falling 0.8 percent, as 47 out of its 71 stocks retreated. The group comprises 20 percent of the S&P 500.

Cisco, the largest maker of computer-networking equipment, tumbled 10 percent to $16.81. Chief Executive Officer John Chambers said orders from big companies fell in the third quarter, and it’s taking longer to sign large deals with corporate customers. Cisco is also concerned about demand from Europe, India and government agencies, he said.

Rival Juniper Networks Inc. (JNPR) plunged 4.9 percent to $18.07. Inc. (CRM), the biggest provider of online customer- management software, sank 9.1 percent to $135.44.

Higher Offer

Avon Products Inc. (AVP) dropped 3.3 percent to $20.89. Coty Inc. raised its offer to acquire Avon to about $10.7 billion, or $24.75 a share, and said Warren Buffett’s Berkshire Hathaway Inc. will provide financing as the perfume-maker seeks to draw Avon into negotiations. Avon traded below Coty’s offer, suggesting investors aren’t convinced the bid will succeed.

MEMC Electronic Materials Inc. sank 25 percent to $2.45, the lowest level since November 2001. (WFR) The second-largest U.S. polysilicon maker posted a first-quarter loss 20 times greater than a year earlier as solar sales fell by more than one-third. Inc. (PCLN) dropped 5.3 percent to $681.11. The biggest U.S. online travel agency by market value forecast second-quarter earnings that trailed analysts’ estimates.

Pessimism about stocks rose to the highest level since October and optimism plunged to an eight-month low, according to a survey from the American Association of Individual Investors.

Bulls vs Bears

The proportion of investors who anticipate a decline in the next six months jumped 13.6 percentage points to 42.1 percent in the past week, according to the Chicago-based company, which has tracked individual investors’ projections since 1987. Bullish sentiment, or expectations that stocks will rise over the next six months, slumped 10 percentage points to 25.4 percent, the data showed.

It’s the fourth time in the past five weeks that bearish sentiment has topped its average of 30 percent, according to the survey. While many technical analysts usually see a surge in pessimism as a contrarian sign that will give way to a rally, AAII Vice President Charles Rotblut said it may not be high enough compared to historical levels.

“A bearish sentiment reading above 50 percent would be a stronger contrarian signal,” he wrote.

To contact the reporter on this story: Rita Nazareth in New York at

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


JPMorgan Loses $2 Billion in Chief Investment Office

By Dawn Kopecki and Michael J. Moore - May 11, 2012 4:59 AM GMT+0700

JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon said the firm lost about $2 billion on synthetic credit securities after an “egregious’” failure in its chief investment office, which the bank says focuses on hedging.

“This portfolio has proven to be riskier, more volatile and less effective as an economic hedge than the firm previously believed,” the New York-based company said today in a quarterly securities filing. JPMorgan declined 5.5 percent to $38.50 in extended trading at 5:55 p.m. in New York.

James "Jamie" Dimon, chief executive officer of JPMorgan Chase & Co. Photographer: Scott Eells/Bloomberg

May 10 (Bloomberg) -- Charles Lieberman, chief investment officer at Advisors Capital Management LLC, talks about JPMorgan Chase & Co.'s loss. Chief Executive Officer Jamie Dimon says the firm lost about $2 billion on synthetic credit securities after an "egregious" failure at its chief investment office. Lieberman speaks with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

May 10 (Bloomberg) -- JPMorgan Chase & Co. said losses tied to the chief investment office are bigger than the company projected. Bloomberg’s Erik Schatzker and Adam Johnson reports on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

May 10 (Bloomberg) -- JPMorgan Chase & Co. said it lost about $2 billion tied to synthetic credit securities after positions taken by its chief investment office were riskier than expected. Bloomberg’s Erik Schatzker and Pimm Fox report on Bloomberg Television’s “Taking Stock.” (Source: Bloomberg)

The chief investment office has been transformed in recent years under Dimon into a unit that makes bigger and riskier speculative bets with the bank’s money, according to five former employees, Bloomberg News reported April 13. Some bets were so big that JPMorgan probably couldn’t unwind them without losing money or roiling financial markets, the former executives said.

Bloomberg News first reported April 5 that London-based trader Bruno Iksil had amassed positions linked to the financial health of corporations that were so large he was driving price moves in the $10 trillion market.

After the Bloomberg report, Dimon on a conference call said the news coverage was “a complete tempest in a teapot.”

The losses disclosed today were “a little bit to do with the article in the press,” Dimon said, without specifying who in the bank oversaw the trades. “I also think we acted a little bit too defensively” to the reports.

‘Flawed, Complex’

Synthetic credit products are derivatives that generate gains and losses tied to credit performance without the owner buying or selling actual debt. The losses occurred as the company sought to unwind a portfolio of the instruments used to hedge JPMorgan’s credit exposure.

“In hindsight, the new strategy was flawed, complex, poorly reviewed, poorly executed and poorly monitored,” Dimon said.

JPMorgan said the losses were partly offset by gains from the sales from its available-for-sale credit portfolio, resulting in a net loss for the firm’s corporate division, which includes the CIO, of about $800 million after taxes. The losses could widen or narrow during the rest of the quarter, Dimon said.

The bank is “repositioning” the synthetic credit portfolio, and the CIO “may hold certain of its current synthetic credit positions for the longer term,” the firm said.

To contact the reporter on this story: Dawn Kopecki in New York at

To contact the editor responsible for this story: David Scheer at


Biden Said to Apologize to Obama for Gay Marriage Remarks

By Mike Dorning - May 11, 2012 5:19 AM GMT+0700

Vice President Joe Biden apologized to President Barack Obama for making remarks that prompted the president to disclose his support for same-sex marriage before he planned to, according to an administration official.

Biden delivered the apology to the president yesterday morning, before Obama gave an interview to ABC News in which he said he’s had a change of heart and now supports legal gay marriage, the official said.

Biden’s remarks in a May 6 broadcast of NBC’s “Meet the Press” that he is “absolutely comfortable” with same-sex marriage forced the president to speed up his timetable for revealing his position, administration officials said.

“The president has been the leader on this issue from Day One and the vice president never intended to distract from that,” Kendra Barkoff, Biden’s press secretary, said in an e- mail. The New York Times reported the apology earlier.

In the ABC News interview in which he revealed his change in stance, Obama said Biden “probably got out a little bit over his skis” in making his remarks “out of a generosity of spirit.”

While Obama said he would have preferred to announce his stance “in my own way, in my own terms,” there were no hard feelings.

“All’s well that ends well,” Obama said.

Setting Timing

Administration officials who briefed reporters on the president’s decision to make public his support for same-sex marriage said Obama had changed his stance earlier this year. The president and about a half-dozen aides were still deliberating the time and place for the announcement when Biden made his remarks on “Meet the Press.”

The president’s advisers knew that Biden, though speaking on his own, would effectively be voicing a new policy when the recorded interview aired, according to the officials.

Gay rights advocates stepped up pressure on the White House for Obama to take a stand in favor of same-sex marriage following broadcast of Biden’s statement. Education Secretary Arne Duncan also expressed his support when asked about the issue the day after Biden’s statements aired.

While Obama’s spokesman, Jay Carney, said on May 7 he didn’t have any update on the president’s previous declaration that his view was “evolving,” other members of Obama’s team were working on ways to present the issue.

Interview Set

On May 8, before Obama left Washington for a trip to Albany, New York, to talk about the economy, Obama’s communications office called ABC News to arrange the interview, officials said.

Biden has previously stepped on the administration’s message with public statements.

At a retreat for Democratic House members in February 2009, shortly after taking office, Biden told his audience about an Oval Office conversation on reviving the economy, saying, “if we do everything right, if we do it with absolute certainty, we stand up there and we make really tough decisions, there’s still a 30 percent chance we’re going to get it wrong.”

A week later, Obama was asked about it at a White House news conference.

“You know, I don’t remember exactly what Joe was referring to, not surprisingly,” Obama said to laughter. He said his vice president “may have been suggesting” that “given the magnitude of the challenges that we have, any single thing that we do is going to be part of the solution, not all of the solution.”

In March 2010, an open microphone picked up Biden whispering into Obama’s ear before he signed landmark health- care legislation, “This is a big f----ng deal.”

To contact the reporter on this story: Mike Dorning in Washington at

To contact the editor responsible for this story: Steven Komarow at