2011 September

Unemployment Rates Dropped in Majority of U.S. Cities Despite Zero Job Growth

The Labor Department said on Wednesday that unemployment rates dropped in 237 of the nation’s largest cities. They rose in 103 cities and 32 cities saw no change. Some of these gains can be attributed to agricultural areas where hiring picks up around harvest time.

Most businesses barely hired this summer after the government said the economy barely grew in the first half of the year. Another area where there is a little bit of job growth is the recovering auto industry. Hiring picked up slightly in Detroit and Flint, Michigan.

The cities that showed the most improvement in unemployment rate in August still have very steep unemployment rates. The unemployment rate in Yuba City, CA fell from 18.6 percent in July to 17 percent in August. Yuba City is primarily an agricultural area in northern California. Modesto, CA, home of the biggest winemaker in the world, also saw a big improvement as their unemployment rate dropped over 1%. These gains in jobs in the agricultural market won’t last long because they are seasonal jobs.

If you’re looking for a job, move to North Dakota. Bismark reported the nation’s lowest unemployment rate at 3% followed by Fargo at around 4%.

Halloween Spending-Trick Or Treat?

Trade group National Retail Federation’s 2011 Consumer Intentions and Actions Survey is reporting about 7 in 10 Americans are planning on celebrating Halloween this year. This is the highest percentage in the survey’s history. The survey was conducted by BIGresearch.

The group said 44% of people surveyed plan to dress in costume, compared to 40% last year, the survey showed. Parents also said they will increase spending on children’s costumes to $1 billion from $840 million. Adult costume spending is expected to increase to $1.21 billion from $990 million.

The total for Halloween spending is expected to rise 18% to $6.86 billion. That would set a record for the past seven years. Last year, consumers spent $5.8 billion on Halloween candy, costumes, and party supplies. While the holiday is relatively small compared to others, it does shed light that consumers are willing to spend on non-discretionary items. “Halloween is perhaps the most discretionary holiday of the year,” said John Long of consulting firm Kurt Salmon in an interview. “People want to depart from the real world for a while. Retail, at its heart, is about feeling better.”

Long added that retailers usually set up Christmas displays before Halloween, so with more people going to stores to shop for Halloween-related merchandise, it could also help draw attention and traffic to Christmas merchandise.
There is still a scary component as approximately one-third of the consumers surveyed said the state of the U.S. economy will impact their Halloween plans. To compensate, most of those consumers said they will try to spend less overall, while others stated they will make a costume instead of purchasing one. One can hope Halloween brings lots of treats to the U.S. economy this season.

Reebok Settles False Ad Claims

Reebok International Ltd. has agreed to pay out $25 million in settlement charges that it made unsupported claims about its “toning shoes” providing extra muscle strength, the U.S. Federal Trade Commission said on Wednesday. The penalty will go toward consumer refunds.

The FTC had filed a complaint against Reebok charging that the company falsely claimed in advertising that its EasyTone and RunTone shoes “strengthen and tone key leg and buttock muscles more than regular shoes.”

“The FTC wants national advertisers to understand that they must exercise some responsibility and ensure that their claims for fitness gear are supported by sound science,” said David Vladeck, director of the FTC’s bureau of consumer protection.

According to the FTC, Reebok began making the claims in early 2009 and provided statistics about the supposed benefits of the toning shoes. The FTC charged that in one commercial, Reebok advertised that its EasyTone shoes were proven to strengthen hamstrings and calves as much as 11%. The ad also claimed to tone the buttocks by as much as 28% more than regular sneakers, just by walking.

The payout of the settlement funds will be made available either through the FTC or through a court appointed class action lawsuit.

Reebok International Ltd. is a subsidiary of the German sportswear company Adidas Group (NYSE:ADS) since 2005. Adidas Group share were trading down at 2% this morning.

Amazon Unveils Kindle Fire

Amazon showed off its new tablet at a media event in New York this morning. The new tablet dubbed the Kindle Fire will feature a LCD-backlit touchscreen and will allow users to not only read books like a normal kindle but also stream movies and TV shows. Users can also surf the web and play games from the Amazon app store.

The Kindle Fire will run on an Android mobile operating system built by Google. The Kindle Fire will start shipping on November 15. The big news though was the price point. The Kindle Fire will retail at $199, well below the $300 most analysts expected. This price point will definitely allow Amazon to directly compete with Apple’s iPad.

Amazon also unveiled the Kindle Touch, an updated version of their base Kindle that does away with the keypad in favor of touchscreen navigation. The Kindle Touch will start out at $99 and a 3G version at $149.

Finally, Amazon announced a redesigned version of their original Kindle. This redesigned version will have no touchscreen but retails at $79.

Shares of Amazon jumped over 4% after these announcements and many analysts believe that Amazon is in a good spot to compete with Apple.

Forrester analyst Sarah Rotman Epps had this to say about the Amazon’s announcemnet, “Amazon’s willingness to sell hardware at a loss, combined with the strength of its brand, content, cloud infrastructure, and commerce assets, makes it the only credible iPad competitor in the market.” Most analysts expect Amazon to sell anywhere between 2 and 5 million tablets in the fourth quarter.

Gold, Silver Trying To Recoup Losses

Gold futures were trading between small losses and gains on Wednesday as traders mostly stayed on the sidelines after steep losses for metals in the past few days.

Gold for December delivery edged 50 cents lower to trade at $1,651.90 an ounce on the Comex division of the New York Mercantile Exchange. Gold snapped a four-day losing streak on Tuesday, settling at 3.6% higher as confirmation of an end for a broad-based equities sell off restricted money flows out of gold and other commodities. Gold is still down 10% overall for the month. The precious metal has gained 16% this year, surging to a record $1,923.70 on Sept. 6.

“There is a small but growing group who believe this pullback will prove to be a good buying opportunity,” Edel Tully, a London-based analyst at UBS AG, said in a report. “Gold needs to stabilize after suffering a good deal of reputational damage with recent wild moves.”

Gold is often seen as an alternative currency in times of global economic uncertainty and a refuge from financial risk. London-based industry group GFMS Limited said in a report Tuesday that,”Gold’s appeal as a safe-haven asset remains intact given the uncertainty in global growth and concerns about Europe’s sovereign debt.” The industry group maintained its view that gold prices will hit $2000 an ounce by year’s end.

Silver futures for December delivery advanced $1.56, or 5.2%, to $31.536 an ounce, the biggest gain since July 13. In the previous three sessions, the price tumbled 26%, touching a 10-month low of $26.15.

Greece Will Face Moment Of Truth On Thursday

European Union and International Monetary Fund inspectors are expected to return to Greece on Thursday to ascertain whether Greece has done enough in instituting austerity measures and revamping fiscal policy, in order to secure funds to prevent bankruptcy

Greece’s Socialist government is accelerating budget measures in order to meet the terms of an agreement the country has with the EU and IMF. If Greece has met the terms, a new bailout loan will be handed out in October. The Greek government is set to run out of money by mid-October. Lawmakers opened the door for the visit by passing a property tax bill on Tuesday.

Greece has been under tremendous pressure to speed up budget cuts and other measures to prevent a government default. The “troika” team of inspectors will hold talks on plans to deepen budget cuts and raise taxes which has driven protesters back onto the streets for the first time since June. Under the accelerated strategy, the public workforce will be cut by one-fifth, public wages will be reduced 20%, and pensions will get another 4% decrease on top of the already instituted decrease of 10%. Also, a new real estate tax will continue to 2014, an additional two years.

Hundreds of Greek activists affiliated with the Greek Communists converged on the finance ministry on Wednesday waving a banner saying “We won’t pay!”. They burned bills for a new income tax introduced this summer, while Athens and other parts of the country were hit by transport strikes. On Tuesday, police dispersed about 1,000 protesters with tear gas in Athen’s Syntagma Square, the epicenter of most of the protests. Taxi drivers, bus, and tram operators staged strikes on Wednesday, causing long traffic jams leading into Athen’s city centre forcing tourists scrambling to find rides to the airport. Other trades ranging from craftsmen, printers and tax officials also staged stoppages and activists planned marches on parliament and the port of Piraeus later in the day.

Darden Restaurants 1Q Profit Drops

Darden Restaurants Inc. (NYSE: DRI.N) posted a 6% drop in quarterly earnings but the company has reaffirmed its full-year earnings outlook. The drop was mostly blames on hurricane Irene that hit the east coast of the United States and caused havoc in the northeast during the month of August. The company has been grappling with higher energy and commodities costs. The sluggish economy has prevented the company from raising its prices.

Darden Restaurants In. is the parent company of popular restaurants such as Olive Garden, Red Lobster, and Longhorn Steakhouse, the Capital Grille, Bahama Breeze and Seasons 52.
In fact, it’s no exaggeration to say our biggest brands have become icons themselves. Since opening their first Red Lobster restaurant in Lakeland, FL in 1968, Darden has grown to become the world’s largest full-service restaurant company. Through subsidiaries, Darden Inc. owns and operates 1,900 restaurants, employs approximately 180,000 people and serves more than 400 million meals a year.

The Orlando, FL based company earned $106.8 million for the first quarter. Sales were up 7.54% to $1.94 billion.

The Darden Restaurant franchise was listed as one of the “top 100” companies to work for on the popular Forbes list.

Darden is hoping to drive better performance at its Olive Garden restaurants by returning to proven promotion approaches with the annual never-ending pasta bowl deal launched at the end of August. Analysts say although visibility is low in the near-term, there is potential for the once leading chain to rebound as it shifts its marketing focus to a more value-oriented rather than culinary approach and as it faces easier year-over-year comparisons going forward.

Durable Goods Orders Slip

The Commerce Department reported on Wednesday durable goods orders dipped .01% after a 4.1% jump in July. The results were due to weak demand for automobiles. Economists had forecasted durable goods orders to remain unchanged for August.

Non defense capital goods orders excluding aircraft increases 1.1% last month after a dip of 0.2% for July. Non defense capital goods are a closely watched proxy for gauging business spending. This suggests that businesses are sitting on approximately $2 trillion in cash and not getting overly excited about the recent stock market volatility. Economists had expected a .03% rise in non defense capital goods.

Manufacturing, which has done the heavy lifting for the sluggish economic recovery, is slowing, But, August’s durable goods report pointed to underlying resilience and offered hope output would continue to expand.

Durable goods orders were also held back last month by an 8.5% drop in automobile orders. It was the largest decline since back in February. There was an increase in orders for civilian aircraft of 23.5%.

Unfilled orders for manufactured durable goods in August was up sixteen of the last seventeen months, increasing to $7.6 billion or 0.9% to $878.6 billion. This followed a 0.9% July increase. Transportation equipment, up eight consecutive months, had the largest increase, $6.0 billion or 1.2% to $507.6 billion.

The forecasting panel for the National Association for Business Economics predicts 2.2% growth in the second half of this year. For the full year, it predicts only 1.7% growth. That would be down from the 3% growth last year. That number is well below the pace needed to make a significant dent in the nation’s unemployment rate.

Other manufacturing data has been mixed. While factory output rose in August, nearly all the gain was from a 2.6% rise in the production of autos and auto parts. Regional Fed surveys showed that manufacturing continued to weaken in the Northeast and Mid-Atlantic area in September.

Amazon Set to Unveil Their Tablet on Wednesday

Amazon (NASDAQ:AMZN) is set to unveil their tablet on Wednesday. The name of the tablet is rumored to be the Kindle Fire. Techcrunch is reporting that the Kindle Fire won’t be ready to ship until the second week of November.

It is rumored to have a 7-inch backlit display that looks similar to the Blackberry Playbook. Amazon has also been getting some last-minute deals done with Fox for movies and TV shows through their streaming service which will be a big part of their new tablet.

The price point is going to be an important factor if Amazon hopes to compete with Apple’s iPad. Rumors are swirling that the price will be somewhere between $250 and $300. This will definitely compete well with Apple’s $500 iPad.

Analysts believe that is important for Amazon to get into the tablet market since their media business is shifting to digital format. Steve Weinstin wrote to his clients on Tuesday that, “Without success in tablets, investor growth expectations for 2012 could prove too aggressive and Amazon’s multiple would likely contract.”

Shares of Amazon.com Inc. (NASDAQ:AMZN) are down about 2% today, but on the year AMZN is up around 20%.

Goldman Sachs May Cut Jobs

Goldman Sachs Croup Inc. (NYSE:GS) plans to cut $1.45 million in expenses by the end of this year. This would be $250 million more than was indicated in July. Analysts are worried this will lead to job cuts according to the New York Times newspaper.

Goldman Sachs is the largest United States investment bank. Goldman has already begun the process of laying off employees as part of a restructure plan implemented two months ago. Chief Financial Officer David Viniar said at the time that about 1,000 jobs could be eliminated to cut $1.2 billion in costs. This accounts for approximately 3% of Goldman Sach’s workforce.

Since the announcement by the investment bank two months ago, market conditions have continued to deteriorate leaving banking activity stagnate. Analysts have slashed forecasts for the large investment banks with Wall Street operations. Many analysts are predicting that Goldman Sachs will lose money for the second time in its history as a publicly traded company.

On Monday, the New York Times was reporting that Goldman executives were considering broader measures to try and shore up earnings for the company.

Compensation and benefits have been Goldman’s biggest line-item expense and employees have been bracing for job cuts and pay cuts as well. Goldman Sachs has 35,700 employees that received $15.4 billion in compensation and benefits last year. On average $430,700 was paid out to each employee. By contrast, its chief rival, Morgan Stanley, paid its 62,542 employees $16 billion, or about $256,596 per person, in 2010.

Goldman was up 2.78% near market close today trading at $102.07.

Research In Motion Jumps on Icahn Stake Rumors

Shares of Research in Motion (NASDAQ:RIMM) are up nearly 7% in afternoon trading after rumors that Carl Icahn has taken a stake in the company. BGC Partners tech analyst Colin Gillins told Reuters that traders “are saying Icahn has taken a stake, but nothing is confirmed.” So far there have been no comments from either Icahn or RIM about these rumors.

If the rumors are true, Icahn would likely seek a seat on RIM’s board and would be in favor of strategies that unlock value for shareholders. Such strategies could include a break-up of the company or an outright sale.

Investors have been critical of RIM’s board lately as the company struggles to hold its own in the hyper-competitive smartphone and tablet computer markets.

Here’s what Vic Alboini, chief executive of Jaguar Financial, had to say about these rumors. “If it is true, it is very, very good for the shareholders of RIM because of what he has done previously in catalytic situations that he has been involved in.” Alboni pointed to Icahn’s investment in Motorola as an example of what could happen. Icahn pushed Motorola to split into two companies, Motorola Mobility and Motorola Solutions, and later urged one part of the company to split off its patents. Earlier this year Google acquired Motorola Mobility for $12.5 billion.

RIMM is currently trading at $23.10 with nearly 36 million shares traded.

Technology Stocks Joined Market Rally Today

Technology stocks joined a broader market rally today as investors on Wall Street are easing concerns about the European sovereign debt crisis and Europe’s ability to keep it contained.

The Nasdaq Composite Index jumped 2.1% while the Dow Jones Industrials average has risen above 260 points.

Dow tech-sector components Hewlett-Packard Co., IBM Corp., Intel Corp. and Cisco Systems Inc. all helped power the blue-chip rally. Other notables in the tech sector include Oracle Corp., Google Inc., and Dell Inc.

The Morgan Stanley High Tech 35 Index was up 2.5%, while the Philadelphia Semiconductor Index added 2.7%. Shares of Freescale Semiconductor were up 3.8%. The Austin, TX. based Freescale said it expects third-quarter sales to decline 6% to 8% from the second quarter, compared to a previous forecast of flat to down 3%. The company attributed the revision to “weakness in the company’s industrial and networking businesses.”

Shares of Apple Inc. were slightly higher today after the company took a hit based on rumors iPad shipments were being curtailed.

Share of Amazon fell 2% ahead of its much anticipated reveal of its version of a tablet. Analyst believe if anyone can compete with Apple’s iPad, it will be Amazon with its new Kindle Tablet. Amazon is expected to unveil the new product on Wednesday.

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