Business Blog Posts

In his State of the Union address to Congress, the president proposed a five-year freeze on some government spending to tackle the budget deficit.

Obama also called on lawmakers to work with him to cut the corporate tax rate, and simplify the tax code by eliminating loopholes favorable to specific industries while lowering overall rates.

"The corporate tax proposal might have a beneficial effect on the market but these things have long journeys before being accomplished," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.

"Overall, I don't think there was anything surprising tonight and I don't expect much market reaction tomorrow."

S&P 500 futures rose 0.9 points and were slightly above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures gained 4 points, and Nasdaq 100 futures added 2 points.

U.S. Treasury bond futures traded modestly lower on profit-taking.

During regular equity trading on Tuesday, Wall Street ended little changed after a late rally offset disappointing results from blue chips 3M and Johnson & Johnson.

The Dow Jones industrial average .DJI finished down 3.33 points, or 0.03 percent, at 11,977.19. The Standard & Poor's 500 Index .SPX was up 0.34 point, or 0.03 percent, at 1,291.18. The Nasdaq Composite Index .IXIC was up 1.70 points, or 0.06 percent, at 2,719.25.

(Additional reporting by Richard Leong; Editing by Kim Coghill)

Earnings, excluding certain items, totaled $670 million, or $3.42 per share, up 77 percent from $379 million, or $2.39 per share, a year earlier. Revenue jumped 61 percent to $2.49 billion.

And with markets on an upswing, the $3.6 trillion behemoth created when Chief Executive Laurence Fink bought Barclays Plc's BARCBB.UL investment unit for $15 billion just over a year ago finally appears to be paying off for investors.

"People can see that they've been able to execute and integrate all these platforms now," said Elizabeth Bramwell, manager of the Sentinel Growth Leaders fund, which owns BlackRock shares. "They have the ability to offer a diversity of products and geographic diversity that's just unparalleled."

Anticipating improving results, the shares of New York-based BlackRock have gained 16 percent over the past three months, closing at $193.58 on the New York Stock Exchange on Monday. The biggest upsurge followed Fink's comments at a conference last month that fourth-quarter profits would be "very strong."

Still, the stock price remains well below $226.74, its close on December 1, 2009, when the deal for Barclays Global Investors was completed. Contrasted with BlackRock's 15 percent loss since then, the Standard & Poor's 500 Index has gained 16 percent.

It has taken a while for investors to catch on to the merits of the deal. BlackRock's operating margin excluding some items has been lower than expected when the deal was in process in 2009. The margin hit 40.7 percent in the fourth quarter but for all of 2010 was 39.3 percent, less than the 40 percent or more investors expected.

Fink has said he is plowing money back into the firm and warned investors in October that margins were unlikely to reach the 40 percent level in 2011. One key spending project, to allow BlackRock's managers and customers to cross trades on a private network known as a dark pool, is expected to begin operations later this year.

The firm's indexed equities unit has also been hurt by the drop-off in securities lending since the financial crisis. And low interest rates curtailed income from the firm's short-term cash management accounts.

Some investors have also been concerned with the amount of merger-related withdrawals from the combined firm, which totaled $121 billion in 2010, according to BlackRock. Many stemmed from clients who previously had accounts with both firms before the merger and felt uncomfortable leaving the same amount with one firm.

Fink has taken to calling the withdrawals merger "dis-synergies," the opposite of the usual corporate lingo extolling merger synergies.

Analysts who track BlackRock follow the firm's preferred measure of profitability, which excludes costs from merger integrations and closed-end fund launches. Costs from compensation programs related to Bank of America Corp's (BAC.N) Merrill Lynch and PNC Financial Services Group Inc (PNC.N), both still shareholders in the firm, are also excluded.

Using generally accepted accounting principles, BlackRock earned $657 million, or $3.35 per share, in the fourth quarter, up from $256 million, or $1.62 per share, a year earlier.

(Reporting by Aaron Pressman; editing by John Wallace)

* The U.S. Federal Open Market Committee begins its two-day meeting on interest-rate policy. The Fed, in a statement due around 2:15 p.m. EST on Wednesday, was widely expected to acknowledge improving economic conditions marked by signs of life among consumers and factories.

* At 7:45 a.m. EST, ICSC/Goldman Sachs will release chain store sales for the week ended January 22, versus the prior week. In the previous week, sales fell 0.1 percent.

* BlackRock Inc (BLK.N), the world's largest asset manager, is expected to report healthy gains in fourth quarter profit and revenue on Tuesday, aided in no small measure by the global stock market rally.

* Other major companies to report results on Tuesday include Yahoo (YHOO.O), Johnson & Johnson (JNJ.N), DuPont (DD.N), 3M Company (MMM.N) and Harley-Davidson (HOG.N).

* At 8:55 a.m. EST, Redbook releases its Retail Sales Index of department and chain store sales for January versus December. In the prior period, sales were down 0.6 percent.

* Britain is to give News Corp (NWSA.O) a final chance to avoid a prolonged and costly investigation into its proposed $12 billion buyout of BSkyB (BSY.L), in a move that is likely to draw criticism from rivals.

* At 9 a.m. EST Standard & Poor's is set to release its S&P Case/Shiller Home Price Index for November. Economists expect a drop of 0.8 percent versus a 1.0 percent fall in the previous month.

* A package of U.S. tax cuts should give a lift to a global economic recovery that had already begun to gain speed late last year, the IMF said as it revised its world growth forecast higher.

* At 10 a.m. EST, the Federal Housing Finance Agency issues Home Price Index for November. In October, the index rose 0.7 percent.

* Also at 10 a.m. EST the Conference Board releases January consumer confidence. Economists in a Reuters survey expect a reading of 54.3 compared with 52.5 in December.

* Resource-related stock will be in focus, with U.S. oil falling for a second straight session as an expected rise in U.S. stocks and a weak technical outlook weighed on prices.

* The FTSEurofirst 300 .FTEU3 index of top European shares was flat in morning trade after gaining earlier in the session, while Japan's Nikkei average .N225 ended 1.2 percent firmer.

* On Monday the Dow Jones industrial average .DJI ended up 108.68 points, or 0.92 percent, at 11,980.52. The Standard & Poor's 500 Index .SPX was up 7.49 points, or 0.58 percent, at 1,290.84. The Nasdaq Composite Index .IXIC was up 28.01 points, or 1.04 percent, at 2,717.55.

(Reporting by Atul Prakash; editing by Sophie Walker)

In an updated World Economic Outlook, the International Monetary Fund said the global economy would likely expand 4.4 percent this year, a touch higher than the 4.2 percent forecast in October. It expects growth of 4.5 percent in 2012.

But in an update to its Global Financial Stability Report, the Fund said the effective size of Europe's financial rescue fund needed to be increased and that its banks need rigorous stress-testing to help restore market confidence.

"Problems in Greece, and now Ireland, have reignited questions about sovereign debt sustainability and banking sector health in a broader set of euro-area countries and possibly beyond," it said as it released the reports in Johannesburg.

The worry is that the European Financial Stability Facility, which has a headline value of 440 billion euros but an effective lending capacity of around half that, could be wiped out if a larger European economy needs rescuing.

There have been EU discussions on beefing up the fund so it can lend the full amount, but there has been resistance from Germany, which says it must be part of a wider set of measures expected in March.

The IMF said Europe's banks needed further stress-testing to ensure they could withstand a shock. Non-viable banks should be closed, it said.

The link between weak balance sheets of European banks and governments was a primary reason why the International Monetary Fund said global financial stability was still at risk nearly four years after the financial crisis struck.

LIFT TO RECOVERY

The Fund forecast a lift to a global economic recovery which began to gain pace in 2010 from a package of U.S. tax cuts enacted late last year. It said a separate stimulus package in Japan would also help.

"More generally, signs are increasing that private consumption... is starting to gain a foothold in major advanced economies," it said.

Advanced economies have been a drag on global growth since the financial crisis erupted and the IMF said they still posed the biggest risk to recovery.

It revised up its 2011 growth projection for advanced economies to 2.5 percent, but warned the pace was not sufficient to make a dent in high unemployment. It said rich nations needed to keep loose monetary policies to bolster growth.

"As long as inflation expectations remain anchored and unemployment stays higher, this is the right policy from a domestic perspective," it said.

The Fund forecast U.S. growth at 3.0 percent this year, a sharp upward revision from its 2.3 percent October forecast for the world's largest economy.

The decline in trust in business in the United States stood in contrast to an overall worldwide increase, driven by surging confidence in rapidly developing economies including Brazil and India, the Edelman Trust Barometer found.

Just 46 percent of Americans said they trusted business, down from 54 percent in 2009, the study found, reversing a sharp bounce in confidence that came in the wake of a brutal financial crisis.

"The rebound last year was a little bit of euphoria, 'We've got through the worst of it,' and a little bit of a dead-cat bounce," said Matthew Harrington, chief executive of Edelman U.S., the public relations firm that performed the study, which was released on Tuesday.

"What we have got this year is more of the reality that this is going to be a long slog," Harrington said.

Worldwide, some 56 percent of respondents said they trusted business, up from 54 percent the pervious year. Respondents in Brazil, India and France drove the overall increase in confidence.

In Brazil, some 81 percent of respondents said they trusted business, up from 62 percent a year ago.

"It's a clear sense of optimism, and it's speaking to the fact that their economies are doing well, that businesses -- both home-grown as well as businesses from abroad -- are investing in their countries," Harrington said.

After briefly declining in 2009 during the recession, Brazil's economy snapped back in 2010, growing at a estimated 7.4 percent rate. By contrast, the U.S. economy is struggling with persistently high unemployment -- which has remained above 9 percent for 20 months -- and some analysts look for GDP to grow around 2.5 percent this year.

BANKS SLIDE, AUTOMAKERS SOAR

The public trust in banks plunged in the wake of a crisis that saw huge financial institutions including Bank of America and Citigroup Inc turn to Washington for financial support. Just 25 percent of Americans and 16 percent of Britons said they trusted banks to do the right thing.

In contrast, people in the United States, the United Kingdom, China and India said they trusted the auto sector, following the successful initial public offering of General Motors Co. That marked a sharp shift for an industry that in the United States had also been put on life support by the government during the downturn.

That change, Harrington said, reflected a belief among the public that automakers were starting to tackle their problems.

"If you look at the last year, the auto industry has been a bit of a phoenix rising from the ashes, not only in getting their financial house in order, but also innovating, placing some real bets and R&D dollars on hybrids, electric (vehicles)," Harrington said.

In addition to the GM IPO, the past year has seen automakers unveil energy-efficient electric vehicles including GM's Chevy Volt and Nissan Motor Co's Leaf, which use less fuel and emit less carbon dioxide than traditional cars.

Respondents expressed the most confidence in the tech industry, which was also the top ranked sector last year. The findings are based on a telephone survey of 5,075 college-educated, upper-income people, in 23 countries surveyed from October through January.

(Editing by Steve Orlofsky)