As Bush administration officials defended the government's response to the credit crisis Tuesday, there is one immediate and tangible result of their efforts: lower borrowing costs.
The Federal Reserve and Treasury Department have poured billions of dollars into banks in an attempt to increase liquidity and encourage lending. The government has also unveiled other credit-boosting programs, including a purchasing program for short-term business debt and loans in exchanged for toxic assets as collateral.
As a result, lending rates have retreated from historical highs set last month when the credit crisis reached its peak. The 3-month Libor rate fell Tuesday to 2.22% from 2.24%, and the overnight Libor rate held steady at 0.4%, according to Bloomberg.com.
Libor, the London Interbank Offered Rate, is a daily average of interbank lending rates and a key barometer of liquidity in the credit market. More than $350 trillion in assets are tied to Libor.
In testimony before the House Financial Services committee Tuesday, Treasury Secretary Henry Paulson, Fed chief Ben Bernanke and FDIC chairwoman Sheila Bair defended the government's actions thus far, saying lower borrowing costs are a sign that market conditions are improving.
"Quotes for Libor ... have declined in relation to Treasury yields - indicating a slow thaw in the interbank lending market," said Bair in testimony. "While it is clearly too early to declare the end of the crisis in our financial markets, as a result of the coordinated response ... we are making steady progress in returning money and credit markets to a more normal state."
Rates had risen for a several days after Paulson said last week that the government would no longer buy up banks' troubled assets but rather take ownership stakes them. The rise proved to be just a bump in the road, as rates resumed their decline following the Treasury's announcement of more banks receiving liquidity injections.
On Monday, Treasury announced that it had dispersed $33.56 billion to 21 banks in a second round of payments as part of the $700 billion bailout program designed to boost the nation's banking system. The new distribution brings the total to $158.56 billion and 30 banks so far.
Market gauges: As rates held steady, so too did two gauges of banks' confidence in the credit market.
The Libor-OIS spread held at 1.75. The spread measures the difference between actual borrowing costs and the expected targeted borrowing rate from the Fed. It is used as a gauge to determine how much cash is available for lending between banks. The bigger the spread, the less cash is available for lending.
Another indicator, the TED spread, fell slightly to 2.10 percentage points from 2.15 points. The TED spread measures the difference between the 3-month Libor and the 3-month Treasury bill, and is a key indicator of risk. The lower the spread, the more willing investors are to take risks.
Bonds: Treasury prices moved higher Tuesday as more dour economic data led investors to the perceived safety of government bonds.
Finding little in the way of return on investment in other markets, investors have recently placed conservative bets on the bond market. Recession fears and credit crisis anxiety have sent stocks falling in eight of 11 sessions thus far in November. Likewise, bonds have risen in seven of 10 sessions. The bond markets were closed on Veteran's Day (Nov. 11) while equities markets were open.
A government report on inflation for the month of October showed wholesale prices fell by 2.8%. The huge decline showed consumer demand for goods continues to fall sharply. Consumer prices rose 0.4%.
Even as stocks rose Tuesday afternoon on some encouraging quarterly financial results and hopes that the government will bail out automakers, recession fears remained the main driver, sending bonds higher.
In fact, bonds may continue to rise for the rest of the week, which will bring a number of other economic indicators that are expected to be equally as disappointing. Investors likely will continue to seek Treasurys as a safe-haven investment while stocks look for a market bottom.
The benchmark 10-year note rose 16/32 to 101-9/32, and its yield slipped to 3.60% from 3.66% late Monday. Bond prices and yields move in opposite directions.
The 2-year note was up 1/32 to 100-20/32, and its yield fell to 1.18%
The benchmark yield curve, the difference between the 2-year and the 10-year yield, narrowed to 2.40 percentage points, down from a five-year high of 2.54 points set Friday. The yield curve is a key measure of investor sentiment, with a higher curve indicating a weaker economic environment.
The 30-year bond rose 15/32 to 105-21/32, and its yield fell to 4.17% from 4.20%.
The yield on the 3-month bill rose to 0.11% from 0.08%. The yield on the 3-month Treasury bill is closely watched as an immediate reading on investor confidence, with a lower yield indicating less optimism. Investors and money-market funds shuffle money into and out of the 3-month bill frequently as they assess risk in the rest of the marketplace.
Tuesday, November 18, 2008
Wednesday, November 12, 2008
Where the bailouts stand
The government's $700 billion bailout efforts are well underway. It has committed 70% of the first pile of money -- $250 billion and 40% of a second batch of $100 billion.
Still more bailouts are in the air and Treasury Secretary Henry Paulson is set on Wednesday to give an update on his plans.
So far, the government has pledged about $172 billion of that $250 billion to a total of 52 banks, according to Keefe, Bruyette & Woods. That total may actually be higher, since the Treasury is relying on the banks to announce their participation in the program.
Under the Troubled Asset Relief Program (TARP), the Treasury has already sent $125 billion to nine major banks, with JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Wells Fargo (WFC, Fortune 500) leading the pack with $25 billion in federal funding. The 43 remaining banks have been approved for a total of $47 billion in TARP funds, but have not yet received the checks.
That leaves the Treasury with, at most, $78 billion left in the first round of funding. But the government won't just give the money out - banks have to appeal to the Treasury for TARP money.
For the second round of funding, President Bush asked Congress for $100 billion more of the $700 billion approved for the bailout. The Treasury spent $40 billion of that second round funding Monday on insurer AIG (AIG, Fortune 500), as part of a restructured bailout deal for the troubled company.
The Treasury will have to go back to Congress for the remaining $350 billion. If approved, Treasury has been authorized to offer more liquidity injections or buy up toxic assets like mortgage-backed securities from companies. The purchase of mortgage-backed securities is how the Treasury first sold Congress on the proposal, but later decided that capital injections was the more appropriate first step.
But the bailout is not just about banks. AIG has already received TARP funds, and the recent struggles of GM (GM, Fortune 500), Ford (F, Fortune 500) and Chrysler have built momentum for a bailout of the U.S. auto industry. President-elect Barack Obama, House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., all threw their support behind such a move.
Some government officials like FDIC Chairwoman Sheila Bair has called for TARP money to be used to guarantee mortgages backed by private lenders to encourage them to restructure loans to troubled homeowners. The Bush administration's new program to modify mortgages announced Tuesday stopped short of providing direct government financial help.
With the possibility of more bailouts on the way, here is how the government has thus far invested billions of dollars to rescue banks, companies, consumers and their homes.
SAVING WALL STREET
The government has taken these steps to aid financial institutions.
Term-auction facility: $1.5 trillion in loans to banks so far in exchange for otherwise unwanted collateral. The Fed increased its monthly auction limit to $300 billion in October, up from $20 billion when the Fed began the program.
Dollar swap lines: Unlimited dollars to 13 foreign central banks to provide liquidity to foreign financial institutions. The Fed lifted its cap after raising it to $620 billion in October from $24 billion in December.
Bear Stearns: $29 billion in a special lending facility to guarantee potential losses on its portfolio. With the lending facility, JPMorgan was able to step in to save Bear from bankruptcy.
Lending to banks: $77 billion lent on average every day to investment banks, after facility opened to non-commercial banks for first time in March.
Cash injections: $250 billion to banks in exchange for equity stake in the financial institutions in the form of senior preferred shares.
Mortgage-backed securities purchases: Up to $410 billion allotted to purchase troubled assets from banks.
Fed rate cuts: Down to 1% in October 2008, from 5.25% in September 2007.
SAVING MAIN STREET
Consumers are benefiting from the government's actions in recent months.
Stimulus checks: $100 billion in stimulus checks made their way to 140 million tax filers to boost consumer spending and help grow the economy.
Unemployment benefits: $8 billion toward an expansion of unemployment benefits, to 39 weeks from 26 weeks.
Bank takeovers: $13.2 billion drawn down so far from the FDIC's deposit insurance fund after 19 bank failures in 2008.
Rehab foreclosed homes: $4 billion to states and municipalities in assistance to buy up and rehabilitate foreclosed properties.
Student loan guarantees: $9 billion so far in government purchases of student loans from private lenders. Higher borrowing costs made student loans unprofitable for a number of lenders, many of whom stopped issuing the loans.
Money-market guarantees: $50 billion in insurance for money-market funds. The Fed then began to lend an unlimited amount of money to finance banks' purchases of debt from money-market funds. The Fed then agreed to purchase up to $69 billion in money-market debt directly. In October, the Fed said it would loan up to $600 billion directly to money-market funds.
Housing rescue: $300 billion approved for insurance of new 30-year, fixed-rate mortgages for at-risk borrowers. The bill includes $16 billion in tax credits for first-time home buyers. But lenders have been slow to sign on.
Deposit insurance: $250,000 in insurance for interest-bearing accounts, up from $100,000. The FDIC also issued unlimited guarantees on non-interest- bearing accounts and newly issued unsecured bank debt.
SAVING CORPORATE AMERICA
Uncle Sam has intervened to help companies in the following ways.
Business stimulus: $68 billion in tax breaks to corporations to help loosen the stranglehold on businesses trying to finance daily operating expenses.
Fannie Mae, Freddie Mac: $200 billion to bail out the mortgage finance giants. Federal officials assumed control of the firms and the $5 trillion in home loans they back.
AIG: $152.5 billion restructured bailout, including a direct investment through preferred shares, a easier terms on a $60 billion loan, and new facilities meant to take on the companies exposure to credit-default swaps.
Automakers: $25 billion in low-interest loans to speed the industry's transition to more fuel-efficient vehicles.
Commercial paper facility: $243 billion in corporate debt purchased so far by the Fed since its so-called Commercial Paper Funding Facility opened.
Still more bailouts are in the air and Treasury Secretary Henry Paulson is set on Wednesday to give an update on his plans.
So far, the government has pledged about $172 billion of that $250 billion to a total of 52 banks, according to Keefe, Bruyette & Woods. That total may actually be higher, since the Treasury is relying on the banks to announce their participation in the program.
Under the Troubled Asset Relief Program (TARP), the Treasury has already sent $125 billion to nine major banks, with JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Wells Fargo (WFC, Fortune 500) leading the pack with $25 billion in federal funding. The 43 remaining banks have been approved for a total of $47 billion in TARP funds, but have not yet received the checks.
That leaves the Treasury with, at most, $78 billion left in the first round of funding. But the government won't just give the money out - banks have to appeal to the Treasury for TARP money.
For the second round of funding, President Bush asked Congress for $100 billion more of the $700 billion approved for the bailout. The Treasury spent $40 billion of that second round funding Monday on insurer AIG (AIG, Fortune 500), as part of a restructured bailout deal for the troubled company.
The Treasury will have to go back to Congress for the remaining $350 billion. If approved, Treasury has been authorized to offer more liquidity injections or buy up toxic assets like mortgage-backed securities from companies. The purchase of mortgage-backed securities is how the Treasury first sold Congress on the proposal, but later decided that capital injections was the more appropriate first step.
But the bailout is not just about banks. AIG has already received TARP funds, and the recent struggles of GM (GM, Fortune 500), Ford (F, Fortune 500) and Chrysler have built momentum for a bailout of the U.S. auto industry. President-elect Barack Obama, House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., all threw their support behind such a move.
Some government officials like FDIC Chairwoman Sheila Bair has called for TARP money to be used to guarantee mortgages backed by private lenders to encourage them to restructure loans to troubled homeowners. The Bush administration's new program to modify mortgages announced Tuesday stopped short of providing direct government financial help.
With the possibility of more bailouts on the way, here is how the government has thus far invested billions of dollars to rescue banks, companies, consumers and their homes.
SAVING WALL STREET
The government has taken these steps to aid financial institutions.
Term-auction facility: $1.5 trillion in loans to banks so far in exchange for otherwise unwanted collateral. The Fed increased its monthly auction limit to $300 billion in October, up from $20 billion when the Fed began the program.
Dollar swap lines: Unlimited dollars to 13 foreign central banks to provide liquidity to foreign financial institutions. The Fed lifted its cap after raising it to $620 billion in October from $24 billion in December.
Bear Stearns: $29 billion in a special lending facility to guarantee potential losses on its portfolio. With the lending facility, JPMorgan was able to step in to save Bear from bankruptcy.
Lending to banks: $77 billion lent on average every day to investment banks, after facility opened to non-commercial banks for first time in March.
Cash injections: $250 billion to banks in exchange for equity stake in the financial institutions in the form of senior preferred shares.
Mortgage-backed securities purchases: Up to $410 billion allotted to purchase troubled assets from banks.
Fed rate cuts: Down to 1% in October 2008, from 5.25% in September 2007.
SAVING MAIN STREET
Consumers are benefiting from the government's actions in recent months.
Stimulus checks: $100 billion in stimulus checks made their way to 140 million tax filers to boost consumer spending and help grow the economy.
Unemployment benefits: $8 billion toward an expansion of unemployment benefits, to 39 weeks from 26 weeks.
Bank takeovers: $13.2 billion drawn down so far from the FDIC's deposit insurance fund after 19 bank failures in 2008.
Rehab foreclosed homes: $4 billion to states and municipalities in assistance to buy up and rehabilitate foreclosed properties.
Student loan guarantees: $9 billion so far in government purchases of student loans from private lenders. Higher borrowing costs made student loans unprofitable for a number of lenders, many of whom stopped issuing the loans.
Money-market guarantees: $50 billion in insurance for money-market funds. The Fed then began to lend an unlimited amount of money to finance banks' purchases of debt from money-market funds. The Fed then agreed to purchase up to $69 billion in money-market debt directly. In October, the Fed said it would loan up to $600 billion directly to money-market funds.
Housing rescue: $300 billion approved for insurance of new 30-year, fixed-rate mortgages for at-risk borrowers. The bill includes $16 billion in tax credits for first-time home buyers. But lenders have been slow to sign on.
Deposit insurance: $250,000 in insurance for interest-bearing accounts, up from $100,000. The FDIC also issued unlimited guarantees on non-interest- bearing accounts and newly issued unsecured bank debt.
SAVING CORPORATE AMERICA
Uncle Sam has intervened to help companies in the following ways.
Business stimulus: $68 billion in tax breaks to corporations to help loosen the stranglehold on businesses trying to finance daily operating expenses.
Fannie Mae, Freddie Mac: $200 billion to bail out the mortgage finance giants. Federal officials assumed control of the firms and the $5 trillion in home loans they back.
AIG: $152.5 billion restructured bailout, including a direct investment through preferred shares, a easier terms on a $60 billion loan, and new facilities meant to take on the companies exposure to credit-default swaps.
Automakers: $25 billion in low-interest loans to speed the industry's transition to more fuel-efficient vehicles.
Commercial paper facility: $243 billion in corporate debt purchased so far by the Fed since its so-called Commercial Paper Funding Facility opened.
Tuesday, November 11, 2008
Low credit costs, but crunch still here
Lending rates remained around historic lows Tuesday, but don't stick a fork in the credit crunch just yet.
The 3-month Libor rate dropped to 2.18% from 2.24% on Monday, according to Dow Jones, marking the rate's lowest point since Oct. 29, 2004. The overnight Libor rate rose to 0.35% from an all-time low of 0.32%, according to Bloomberg.com.
During the height of the credit crisis last month, 3-month Libor was at 4.82%, and the overnight rate was at an all-time high of 6.88%. Lower rates can boost the strangled credit markets because more than $350 trillion in assets are tied to Libor.
Libor, the London Interbank Offered Rate, is a daily average of what 16 different banks charge other banks to lend dollars in the U.K. and is a key barometer of liquidity in the credit market.
The government has initiated a multitude of programs aimed at easing the stranglehold on credit and encouraging private lending, many of which have helped drive down lending rates. But just because borrowing is cheaper doesn't mean there are a lot of buyers out there.
With anxiety still widespread amid a likely economic recession, two huge corporations demonstrated Monday how the credit crunch is far from over.
Embattled insurance giant AIG (AIG, Fortune 500) announced that it restructured its bailout deal with the Federal Reserve and Treasury Department, giving the company more breathing room to spin off subsidiaries and pay back its $60 billion federal bridge loan. As part of the new package, the expiration on AIG's loan was lengthened to five years from two, as the current credit environment has proven a difficult time to sell off businesses.
Also Monday, AIG reported a loss of $24.5 billion, its biggest quarterly loss ever. CEO Edward Liddy attributed the poor results to "extreme dislocations and volatility in the capital markets" during the three months ended Sept. 8 - a week before the credit crisis gripped Wall Street.
Specialty finance company American Express (AXP, Fortune 500) has also struggled through the credit crunch. Late Monday, the Fed granted "bank holding company" status to AmEx so that the company can gain access to the Fed's emergency lending window to ease its liquidity concerns.
As companies continue to struggle to acquire private financing, they will rely on the government to provide them with the funding they need to stay afloat.
Market gauges: Though credit remains tight, two key gauges of risk sentiment indicated that confidence is returning.
The Libor-OIS spread fell to 1.69 percentage points from 1.8 points on Monday. The spread measures the difference between actual borrowing costs and the expected official borrowing rate from the Fed. It is used as a gauge to determine how much cash is available for lending between banks. The bigger the spread, the less cash is available for lending.
Former Fed chairman Alan Greenspan has said that the Libor-OIS spread will serve as a good gauge for when credit has returned to normal. Though the indicator has fallen from a high of 3.66 points set last month, it is still far above the 0.11 percentage point seen prior to Sept. 15.
Another indicator, the "TED spread," fell to 1.96 percentage points from 2.03 points, falling below 2 points for the first time since the financial crisis gripped Wall Street.
The TED spread measures the difference between the 3-month Libor and the 3-month Treasury bill, and is a key indicator of risk. The higher the spread, the less willing investors are to take risks.
The U.S. Treasury market was closed Tuesday for the Veterans Day holiday.
The 3-month Libor rate dropped to 2.18% from 2.24% on Monday, according to Dow Jones, marking the rate's lowest point since Oct. 29, 2004. The overnight Libor rate rose to 0.35% from an all-time low of 0.32%, according to Bloomberg.com.
During the height of the credit crisis last month, 3-month Libor was at 4.82%, and the overnight rate was at an all-time high of 6.88%. Lower rates can boost the strangled credit markets because more than $350 trillion in assets are tied to Libor.
Libor, the London Interbank Offered Rate, is a daily average of what 16 different banks charge other banks to lend dollars in the U.K. and is a key barometer of liquidity in the credit market.
The government has initiated a multitude of programs aimed at easing the stranglehold on credit and encouraging private lending, many of which have helped drive down lending rates. But just because borrowing is cheaper doesn't mean there are a lot of buyers out there.
With anxiety still widespread amid a likely economic recession, two huge corporations demonstrated Monday how the credit crunch is far from over.
Embattled insurance giant AIG (AIG, Fortune 500) announced that it restructured its bailout deal with the Federal Reserve and Treasury Department, giving the company more breathing room to spin off subsidiaries and pay back its $60 billion federal bridge loan. As part of the new package, the expiration on AIG's loan was lengthened to five years from two, as the current credit environment has proven a difficult time to sell off businesses.
Also Monday, AIG reported a loss of $24.5 billion, its biggest quarterly loss ever. CEO Edward Liddy attributed the poor results to "extreme dislocations and volatility in the capital markets" during the three months ended Sept. 8 - a week before the credit crisis gripped Wall Street.
Specialty finance company American Express (AXP, Fortune 500) has also struggled through the credit crunch. Late Monday, the Fed granted "bank holding company" status to AmEx so that the company can gain access to the Fed's emergency lending window to ease its liquidity concerns.
As companies continue to struggle to acquire private financing, they will rely on the government to provide them with the funding they need to stay afloat.
Market gauges: Though credit remains tight, two key gauges of risk sentiment indicated that confidence is returning.
The Libor-OIS spread fell to 1.69 percentage points from 1.8 points on Monday. The spread measures the difference between actual borrowing costs and the expected official borrowing rate from the Fed. It is used as a gauge to determine how much cash is available for lending between banks. The bigger the spread, the less cash is available for lending.
Former Fed chairman Alan Greenspan has said that the Libor-OIS spread will serve as a good gauge for when credit has returned to normal. Though the indicator has fallen from a high of 3.66 points set last month, it is still far above the 0.11 percentage point seen prior to Sept. 15.
Another indicator, the "TED spread," fell to 1.96 percentage points from 2.03 points, falling below 2 points for the first time since the financial crisis gripped Wall Street.
The TED spread measures the difference between the 3-month Libor and the 3-month Treasury bill, and is a key indicator of risk. The higher the spread, the less willing investors are to take risks.
The U.S. Treasury market was closed Tuesday for the Veterans Day holiday.
Monday, November 10, 2008
Gas prices near $2.25
Gasoline prices fell for the 53rd straight day, according a survey released Sunday by the motorist group AAA.
The average price of regular unleaded decreased to $2.259, a 2.3 cent drop from Saturday, according to the national survey, which is based on credit card swipes at gas stations. Before this week, the last time prices were this low was on February 24, 2007, according to AAA.
Over the last 53 days, prices have sunk $1.59, a 41.4% decrease, according to AAA.
A separate national survey found that gas prices dropped a little more than 48 cents in the last two weeks, continuing a dramatic fall.
It was the second largest drop in the six-decade history of the Lundberg Survey. The previous largest drop was just a few weeks ago, the last time the survey was conducted.
The average price of self-serve, unleaded gasoline in the United States on Friday was about $2.30 a gallon, said publisher Trilby Lundberg.
Demand for gasoline has continued to slip, despite the fall in gas prices. MasterCard's weekly survey of gas station credit card swipes showed demand down 3.9% last week, compared to the same period last year.
Prices have dropped 45%, or almost $1.86, from their record high of $4.114 a gallon set July 17, by AAA's count. The average price per gallon dropped below $3 on Oct. 18, the first time in nearly nine months.
The all-time high average was $4.11, set on July 11, according to Lundberg, and prices have been dropping ever since.
She attributed the price reductions to a drop in crude prices and demand.
By state, Alaska reported the highest average gas prices, $3.298 per gallon, while Missouri boasted the cheapest, at $1.949 a gallon, according to AAA.
Gasoline prices have fallen while average crude prices have done the same in the past four months. U.S. crude for December delivery settled at $61.04 a barrel in New York trading on Friday, down from its high of $147.27 a barrel on July 11.
Only two states, Alaska and Hawaii, have average gas prices above $3 per gallon, while 22 states now report prices below $2.25 per gallon, AAA found.
By city, Lundberg found that Tulsa, Oklahoma, posted the lowest average gas price of $1.89 Friday. The highest averages were $3.14 in Anchorage, Alaska, and $3.09 in Honolulu, Hawaii.
Average prices in some other cities, according to Lundberg:
Detroit, Michigan $2.02
Denver, Colorado $2.15
Atlanta, Georgia $2.16
Boston Massachusetts $2.38
Philadelphia, Pennsylvania $2.41
Los Angeles, California $2.61
The AAA figures are state-wide averages based on credit card swipes at up to 100,000 service stations across the nation. Many drivers have reported even lower prices across the country.
The Lundberg Survey is based on responses from more than 5,000 service stations nationwide.
The average price of regular unleaded decreased to $2.259, a 2.3 cent drop from Saturday, according to the national survey, which is based on credit card swipes at gas stations. Before this week, the last time prices were this low was on February 24, 2007, according to AAA.
Over the last 53 days, prices have sunk $1.59, a 41.4% decrease, according to AAA.
A separate national survey found that gas prices dropped a little more than 48 cents in the last two weeks, continuing a dramatic fall.
It was the second largest drop in the six-decade history of the Lundberg Survey. The previous largest drop was just a few weeks ago, the last time the survey was conducted.
The average price of self-serve, unleaded gasoline in the United States on Friday was about $2.30 a gallon, said publisher Trilby Lundberg.
Demand for gasoline has continued to slip, despite the fall in gas prices. MasterCard's weekly survey of gas station credit card swipes showed demand down 3.9% last week, compared to the same period last year.
Prices have dropped 45%, or almost $1.86, from their record high of $4.114 a gallon set July 17, by AAA's count. The average price per gallon dropped below $3 on Oct. 18, the first time in nearly nine months.
The all-time high average was $4.11, set on July 11, according to Lundberg, and prices have been dropping ever since.
She attributed the price reductions to a drop in crude prices and demand.
By state, Alaska reported the highest average gas prices, $3.298 per gallon, while Missouri boasted the cheapest, at $1.949 a gallon, according to AAA.
Gasoline prices have fallen while average crude prices have done the same in the past four months. U.S. crude for December delivery settled at $61.04 a barrel in New York trading on Friday, down from its high of $147.27 a barrel on July 11.
Only two states, Alaska and Hawaii, have average gas prices above $3 per gallon, while 22 states now report prices below $2.25 per gallon, AAA found.
By city, Lundberg found that Tulsa, Oklahoma, posted the lowest average gas price of $1.89 Friday. The highest averages were $3.14 in Anchorage, Alaska, and $3.09 in Honolulu, Hawaii.
Average prices in some other cities, according to Lundberg:
Detroit, Michigan $2.02
Denver, Colorado $2.15
Atlanta, Georgia $2.16
Boston Massachusetts $2.38
Philadelphia, Pennsylvania $2.41
Los Angeles, California $2.61
The AAA figures are state-wide averages based on credit card swipes at up to 100,000 service stations across the nation. Many drivers have reported even lower prices across the country.
The Lundberg Survey is based on responses from more than 5,000 service stations nationwide.
Thursday, November 6, 2008
Stocks tumble on recession fears
Stocks swooned Thursday, as weak reports on retail sales and jobless claims added to fears of a prolonged recession.
The Dow Jones industrial average (INDU) lost 210 points, or 2.3%, over an hour into the session, after having fallen as much as 221 points earlier.
The Standard & Poor's 500 (SPX) index and the Nasdaq composite (COMP) both declined by around 2.5%.
Stocks fell sharply Wednesday, with the Dow losing close to 500 points and all three major gauges off at least 5% as President-elect Barack Obama's historic victory gave way to worries about the economy he in inherits.
Additionally, stocks, as represented by the S&P 500, had shot up 18% in the seven trading sessions through Election Day. After such a run, Wall Street was vulnerable to a pullback.
October retail sales from the nation's chain stores were mostly abysmal, with some discounters like Wal-Mart Stores escaping the fray. The housing market collapse, credit crunch and strained labor market have all taken their toll on consumers' wallets. Even the recent retreat in oil and gas prices has not had much of a positive impact on consumer spending.
Retail sales: With the exception of discount chain Wal-Mart (WMT, Fortune 500), most retailers saw October sales in line with the bruised economy. Thomson Reuters estimates the monthly sales could be the worst in 8 years. (Full story)
Gap (GPS, Fortune 500) reported a 16% drop in sales at stores open a year or more, a retail industry metric known as same-store sales. Macy's (M, Fortune 500) same-store sales fell 6.3% and the company warned November sales would weaken.
AnnTaylor Stores (ANN) said same-store sales fell 19% from a year ago. The women's clothing retailer also said it was expanding its restructuring program and warned that third-quarter results won't meet forecasts. Shares fell 24%.
Signs of the recession were evident in economic reports released earlier this week. They included dour readings on manufacturing, factory orders and the services sector and the worst monthly auto sales in 25 years.
Jobs: The number of Americans filing new claims for unemployment last week topped forecasts.
The weekly number followed a pair of monthly reports Wednesday that showed the labor market continued to get hammered in October.
The reports were especially worrisome ahead of Friday's big government report. That report is expected to show that employers cut 200,000 jobs from their payrolls in October. Meanwhile, the unemployment rate, which is generated by a separate survey, is expected to rise to 6.3% from 6.1% the previous month.
Other markets: In global trade, Asian markets tumbled on recession fears. European markets were lower in afternoon trading, after European and British central banks announced interest rate cuts.
The dollar gained against the euro and the yen.
COMEX gold for December delivery rose $14.60 to $757 an ounce.
U.S. light crude oil for December delivery fell $3.70 to $61.60 a barrel on the New York Mercantile Exchange.
Gasoline prices fell another 2.5 cents to a national average of $2.34 a gallon, according to a survey of credit-card activity released Thursday by motorist group AAA. The decline marks the 50th consecutive day that prices have decreased. During that same time period, prices dropped by $1.51 a gallon, or 39.2%.
Lending rates: The credit market continued to improve. The 3-month Libor fell to 2.39% from 2.51% Wednesday, a nearly four-year low, according to Bloomberg.com. Overnight Libor rose slightly to 0.33%, bouncing off an all-time low of 0.32% the previous day. Libor is a key interbank lending rate.
The yield on the 3-month Treasury bill, seen as the safest place to put money in the short term, fell to 0.36% from 0.39% Wednesday, with investors preferring to take a small return on their money than risk the stock market. Last month, the 3-month yield reached a 68-year low around 0% as investor panic peaked.
Treasury prices slipped, raising the yield on the benchmark 10-year note to 3.72% from 3.70% Wednesday. Treasury prices and yields move in opposite directions.
The Dow Jones industrial average (INDU) lost 210 points, or 2.3%, over an hour into the session, after having fallen as much as 221 points earlier.
The Standard & Poor's 500 (SPX) index and the Nasdaq composite (COMP) both declined by around 2.5%.
Stocks fell sharply Wednesday, with the Dow losing close to 500 points and all three major gauges off at least 5% as President-elect Barack Obama's historic victory gave way to worries about the economy he in inherits.
Additionally, stocks, as represented by the S&P 500, had shot up 18% in the seven trading sessions through Election Day. After such a run, Wall Street was vulnerable to a pullback.
October retail sales from the nation's chain stores were mostly abysmal, with some discounters like Wal-Mart Stores escaping the fray. The housing market collapse, credit crunch and strained labor market have all taken their toll on consumers' wallets. Even the recent retreat in oil and gas prices has not had much of a positive impact on consumer spending.
Retail sales: With the exception of discount chain Wal-Mart (WMT, Fortune 500), most retailers saw October sales in line with the bruised economy. Thomson Reuters estimates the monthly sales could be the worst in 8 years. (Full story)
Gap (GPS, Fortune 500) reported a 16% drop in sales at stores open a year or more, a retail industry metric known as same-store sales. Macy's (M, Fortune 500) same-store sales fell 6.3% and the company warned November sales would weaken.
AnnTaylor Stores (ANN) said same-store sales fell 19% from a year ago. The women's clothing retailer also said it was expanding its restructuring program and warned that third-quarter results won't meet forecasts. Shares fell 24%.
Signs of the recession were evident in economic reports released earlier this week. They included dour readings on manufacturing, factory orders and the services sector and the worst monthly auto sales in 25 years.
Jobs: The number of Americans filing new claims for unemployment last week topped forecasts.
The weekly number followed a pair of monthly reports Wednesday that showed the labor market continued to get hammered in October.
The reports were especially worrisome ahead of Friday's big government report. That report is expected to show that employers cut 200,000 jobs from their payrolls in October. Meanwhile, the unemployment rate, which is generated by a separate survey, is expected to rise to 6.3% from 6.1% the previous month.
Other markets: In global trade, Asian markets tumbled on recession fears. European markets were lower in afternoon trading, after European and British central banks announced interest rate cuts.
The dollar gained against the euro and the yen.
COMEX gold for December delivery rose $14.60 to $757 an ounce.
U.S. light crude oil for December delivery fell $3.70 to $61.60 a barrel on the New York Mercantile Exchange.
Gasoline prices fell another 2.5 cents to a national average of $2.34 a gallon, according to a survey of credit-card activity released Thursday by motorist group AAA. The decline marks the 50th consecutive day that prices have decreased. During that same time period, prices dropped by $1.51 a gallon, or 39.2%.
Lending rates: The credit market continued to improve. The 3-month Libor fell to 2.39% from 2.51% Wednesday, a nearly four-year low, according to Bloomberg.com. Overnight Libor rose slightly to 0.33%, bouncing off an all-time low of 0.32% the previous day. Libor is a key interbank lending rate.
The yield on the 3-month Treasury bill, seen as the safest place to put money in the short term, fell to 0.36% from 0.39% Wednesday, with investors preferring to take a small return on their money than risk the stock market. Last month, the 3-month yield reached a 68-year low around 0% as investor panic peaked.
Treasury prices slipped, raising the yield on the benchmark 10-year note to 3.72% from 3.70% Wednesday. Treasury prices and yields move in opposite directions.
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