Business Blog Posts

Jobs are considered a lagging indicator. They typically recover many months after the economy comes out of a recession, and this cycle was no exception. So will troubles in Japan, Libya and elsewhere push up U.S. unemployment later this year?

"The U.S. economy is headed for another soft patch brought on by the double shock," said IHS Global Insight chief economist Nariman Behravesh, referring to Japan and upheaval in the oil-producing Arab world.

Assuming oil prices stabilize and Japan's reconstruction and recovery begin in the next few months -- as most economists currently expect -- Behravesh says the soft patch will likely be short-lived. If he's right, the impact on the labor market should be minimal.

Friday brings the March employment report, and economists polled by Reuters are looking for growth of about 188,000 jobs, with the unemployment rate holding steady at 8.9 percent.

This employment report carries a bit more uncertainty than usual because it arrives before some of the early indicators economists rely on to fine-tune their forecasts.

Normally, the jobs report is released after the monthly Institute for Supply Management readings on manufacturing and services, both of which contain employment measures.

Not so this time.

The ISM manufacturing survey comes out on Friday, about 90 minutes after the jobs data, and the services report won't be released until the following week.

That leaves Thursday's weekly jobless claims report as the best guide, and the trend there has been "heartening," said Deutsche Bank economist Brett Ryan.

He said payrolls historically have not turned significantly higher until weekly jobless claims broke below the 400,000 barrier. The four-week moving average, which smooths out weekly volatility, has been below that threshold in four of the past five weeks.

That makes him a bit more optimistic than most about Friday's employment figures. He thinks they will show a gain of 200,000 jobs, with the unemployment rate dipping to 8.8 percent

JOBS TRUMP OIL?

Even with the benefit of all the early clues, economists have not had much success in predicting the jobless rate in recent months. It has fallen by more than expected in each of the prior three months, coming down nearly a full percentage point since November. Indeed, the labor market has been among the few positive surprises lately.

Paul Ashworth, an economist with Capital Economics in Toronto, said the U.S. economy "appeared to have everything going for it headed into the new year" before the run-up in food and energy prices and the Japanese earthquake.

The two will be speakers at an event set for Wednesday at the U.S. Chamber of Commerce, the country's largest business lobbying group, in its Corinthian-columned headquarters situated within view of the White House.

Warren, 61, is an earnest Harvard Law School professor brought up in Oklahoma, while Dimon, 55, is a consummate New York City insider and one of Wall Street's richest CEOs.

He was once a close adviser to President Barack Obama on financial regulation policy, but has become a vocal critic of the administration's efforts, especially since passage in 2010 of the Dodd-Frank Wall Street reforms.

She is helping the administration set up the Consumer Financial Protection Bureau (CFPB), a watchdog called for by Dodd-Frank to shield consumers from abusive practices in the mortgage and credit card businesses.

The remarks by Warren and Dimon will generate headlines, although analysts said other financial regulation news this week will have more impact on banks and the markets.

"The big event next week in Washington is the long-anticipated release of the rules implementing the Dodd-Frank risk retention requirement," said Brian Gardner, a senior policy analyst at investment firm Keefe Bruyette & Woods.

Under Dodd-Frank, mortgage lenders that sell loans as securities -- a practice known as securitization -- must keep at least 5 percent of the credit risk on their books.

The measure, requiring lenders to have "skin in the game", is meant to help restore lending discipline that went out the window during the securitization-fueled real estate boom at the root of the 2007-2009 financial crisis.

The Federal Deposit Insurance Corp will hold a meeting on Tuesday to consider a risk-retention rule proposal, as well as a related measure to allow some exemptions.

LIVING WILLS

The FDIC will also consider a proposal on living wills for large banks and financial firms, another Dodd-Frank measure. Such wills are meant to tell regulators how to shut down an institution on the brink of collapse in an orderly way, averting the need for bailouts or bankruptcies.

Less than three years after taxpayers rescued Wall Street and the big banks from their worst crisis since the Great Depression, bank executives, the chamber and many Republicans in Congress are on the attack against Dodd-Frank.

Another committee hearing on Wednesday in the House of Representatives will give Republicans a platform to question Dodd-Frank and the costs of complying with it. The reforms were pushed through Congress last year by Democrats over the opposition of Republicans and bank lobbyists.

The same lobbyists are now trying to weaken Dodd-Frank at the agency implementation level, while Republicans seek to cut the budgets of agencies putting the reforms into practice, and offer bills to repeal or amend parts of it.

St. Louis Federal Reserve President James Bullard was commenting on the Fed's promise to keep interest rates low for an "extended period" to blunt the effect of recession.

"The conventional wisdom policy response to a negative shock is to promise a longer 'extended period'," St. Louis Federal Reserve President James Bullard said, according to slides he was due to present in Marseille, France on Saturday.

"This may work -- but it may also encourage a liquidity trap outcome," he added in the slides, part of a presentation entitled 'Reducing Deflationary Risk in the U.S.'.

"A better policy response to a negative shock is to expand the QE program," he added, referring to the quantitative easing, which he said have been successful in the United States and Britain.

Bullard, who is a not a voting member on the Fed's policy setting panel this year, is viewed as a centrist on the spectrum of supporters or opponents of aggressive Fed actions to boost the economy.

The global economic recovery is continuing, Bullard said, adding: "During the recovery process, economies are susceptible to further negative shocks."

(Writing by Paul Carrel)

Wall Street analysts boosted their price targets on Oracle Corp (ORCL.O) shares after the business software maker late Thursday forecast a rise in sales of new software in its fiscal fourth quarter. The optimistic view fueled hopes that a global resurgence in technology spending remained intact.

The stock rose 4.7 percent at $33.66 in premarket trade.

BlackBerry maker Research In Motion Ltd (RIM.TO)(RIMM.O), however, said earnings would slip as it spends heavily on the launch of its PlayBook tablet, sending its stock down 12.1 percent at $56.35 premarket.

On the economic front, investors will keep an eye on the final reading of fourth-quarter gross domestic product at 8:30 a.m. EDT. Economists in a Reuters survey expected a reading of 3.3 percent, compared with a preliminary 2.8 percent.

The Thomson Reuters/University of Michigan consumer sentiment survey is due at 9:55 a.m. EDT.

S&P 500 futures were up 3.5 points, and 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 46 points, and Nasdaq 100 futures rose 8 points.

Further gains above the widely watched S&P 500 resistance level of 1,300 "is likely to trigger more buying heading into quarter-end (and) into the first few weeks of April," said Robert Sluymer, an analyst at RBC Capital Markets LLC in New York.

U.S. stocks rose Thursday on optimism about upcoming earnings and as investors bought the quarter's top performers, lifting the S&P 500 above the technical level. The S&P 500 is up 2.5 percent so far this week, and the Dow has gained 2.6 percent. Nasdaq has put on 3.5 percent.

Standard & Poor's downgraded Portugal's credit ratings two notches to its second lowest investment grade rating and said it could cut again by one notch as early as next week, depending on the final shape of the euro zone bailout fund. S&P followed a two-notch cut by Fitch.

(Reporting by Angela Moon; editing by Jeffrey Benkoe)

At least 12 brokerages raised their price targets on the company's shares, which were up at $33.60 in pre-market trading. They closed at $32.14 on Thursday on Nasdaq.

"Oracle is well-positioned with its deep software stack, strong sales execution...The acquisition of Sun places Oracle as a datacenter player providing a complete integrated stack of hardware and software," Bank of America said in a note to clients.

Oracle, whose products are used to manage databases and automate businesses, ventured into high-end servers and other hardware with its $7.5 billion acquisition of Sun Microsystems last year.

Like IBM and Cisco Systems (CSCO.O), Oracle and HP are aiming to provide the infrastructure for companies to move toward "cloud computing," where data is handled remotely in data centers rather than on premises, deploying resources better and cutting costs.

FBR Capital Markets said Oracle's upcoming suite of business management software, dubbed Fusion, should allow it to take market share from rivals.

The brokerage said Oracle's integrated software and hardware portfolio has opened up new end markets and opportunities beyond its somewhat mature traditional business.

On Thursday, Oracle delivered quarterly results and forecasts that beat Wall Street expectations. The company also forecast a 4 to 14 percent rise in sales of new software in the fourth quarter.

The company also boosted its quarterly dividend by 20 percent, matching rival SAP's (SAPG.DE) recent increase.

Oracle, which derives 5 percent of its revenue from Japan, has said its building in the quake-hit country was undamaged and it did not expect the disaster to hurt fourth-quarter results.

"In addition, Oracle does not expect any supply chain issues presumably related to a relationship with Fujitsu Ltd (6702.T) to manufacture SPARC processors in Japan," JP Morgan said in a note.

(Reporting by Sayantani Ghosh and Isheeta Sanghi in Bangalore)