SEC puts in new ‘circuit breaker’ rules

June 10, 2010

SEC puts into place new ‘circuit breaker’ rules to prevent repeat of May 6 stock market plunge

Marcy Gordon, AP Business Writer, On Thursday June 10, 2010, 5:44 pm EDT

WASHINGTON (AP) — Federal regulators on Thursday put in place new rules aimed at preventing a repeat of last month’s harrowing “flash crash” in the stock market.

Members of the Securities and Exchange Commission approved the rules, which call for U.S. stock exchanges to briefly halt trading of some stocks that make big swings.

The major exchanges will start putting the trading breaks into effect as early as Friday for six months. The New York Stock Exchange will begin Friday’s trading session with five stocks: EOG Resources Inc., Genuine Parts Co., Harley Davidson Inc., Ryder System Inc. and Zimmer Holdings Inc. The exchange will gradually add other stocks early next week, expecting to reach by Wednesday the full number that will be covered.

The Nasdaq stock market plans to have the new program fully in place on Monday.

The plan for the “circuit breakers” was worked out by the SEC and the major exchanges following the May 6 market plunge, which saw the Dow Jones industrials lose nearly 1,000 points in less than a half-hour.

Under the new rules, trading of any Standard & Poor’s 500 stock that rises or falls 10 percent or more in a five-minute period will be halted for five minutes. The “circuit breakers” would be applied if the price swing occurs between 9:45 a.m. and 3:35 p.m. Eastern time. That’s almost the entire trading day. But it leaves out the final 25 minutes before the close — a period that often sees raging price swings, especially in recent weeks as the kind of volatility that marked the 2008 financial crisis returned.

The idea is for the trading pause to draw attention to an affected stock, establish a reasonable market price and resume trading “in a fair and orderly fashion,” the SEC said.

On May 6, about 30 stocks listed in the S&P 500 index fell at least 10 percent within five minutes. The drop briefly wiped out $1 trillion in market value as some stocks traded as low as a penny.

The disruption “illustrated a sudden, but temporary, breakdown in the market’s price-setting function when a number of stocks and (exchange-traded funds) were executed at clearly irrational prices,” SEC Chairman Mary Schapiro said in a statement. “By establishing a set of circuit breakers that uniformly pauses trading in a given security across all venues, these new rules will ensure that all markets pause simultaneously and provide time for buyers and sellers to trade at rational prices.”

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Federal Reserve sees slightly better 2010 economy

May 19, 2010

Fed’s new economic forecast paints brighter picture of growth and employment for rest of year

Martin Crutsinger, AP Economics Writer, On Wednesday May 19, 2010, 3:08 pm EDT

WASHINGTON (AP) — Federal Reserve officials have a slightly brighter view of the economy than they did at the start of the year.

Fed officials say in an updated forecast that they think the economy can grow between 3.2 percent and 3.7 percent this year. That’s an upward revision from a growth range of 2.8 percent to 3.5 percent in their January forecast.

The Fed’s latest forecast sees the unemployment rate, now at 9.9 percent, dipping to between 9.1 percent and 9.5 percent by year’s end. In the January forecast, the Fed didn’t think unemployment would dip below 9.5 percent this year. The Fed prepared the latest forecast for its late-April meeting.

The Fed predicts an inflation gauge tied to consumer spending — excluding volatile food and energy costs — will rise just 0.9 percent to 1.2 percent this year. In January, the officials forecast an increase in prices of 1.1 percent to 1.7 percent.

The Fed’s updated outlook was prepared at its last meeting, April 27-28, and released Wednesday. It’s roughly in line with an Associated Press survey of leading economists done about a month earlier. According to the AP’s survey, the economy will grow 3 percent this year, and the unemployment rate will inch down to 9.3 percent by year’s end.

The Fed’s new outlook represents the middle range of forecasts of officials on the Federal Open Market Committee. That’s the group of Fed board members and central bank presidents who meet eight times a year to set interest rates.

At four of those meetings, including the April session, the central bank updates its economic outlook.

The Fed left its forecasts for next year and 2011 and the longer-run expectations mainly unchanged from January.

The Fed described the changes in economic growth in 2010 as a “modest” upward revision. The minutes said the figures available for the April meeting on consumer spending and business outlays were “broadly consistent with a moderate pace of economic recovery.”

But the Fed stressed that the economic recovery is expected to remain moderate, with the unemployment rate falling only gradually.

“Participants continued to expect the pace of the economic recovery to be restrained by household and business uncertainty, only gradual improvement in labor market conditions and slow easing of credit conditions in the banking sector,” the Fed minutes said.


Gold hits record near $1,150/oz as dollar slips

November 18, 2009

Wed Nov 18, 2009 5:13am EST

By Jan Harvey

LONDON (Reuters) – Gold hit a fresh record high near $1,150 an ounce on Wednesday, boosting precious metals across the board, as a dip in the dollar index added to momentum buying as prices broke through key technical resistance levels.

In non-U.S. dollar terms, gold also climbed, hitting multi-month highs when priced in the euro, sterling and the Australian dollar.

Spot gold hit a high of $1,147.45 and was at $1,146.05 an ounce at 0948 GMT, against $1,141.50 late in New York on Tuesday.

U.S. gold futures for December delivery on the COMEX division of the New York Mercantile Exchange also hit a record $1,148.10 and were later up $7.10 at $1,146.40 an ounce.

“Yesterday the market took a breather and tested below $1,130 very quickly, (but) a few physical related bargain hunters were lined up to grab the dip,” said Afshin Nabavi, head of trading at MKS Finance in Geneva.

The market is being underpinned by fresh interest in gold from the official sector, he said, after a recent major bullion acquisition from India and smaller buys by the central banks of Mauritius and Sri Lanka.

The acquisitions underlined gold’s appeal as a portfolio diversifier, especially in an environment where further dollar weakness was expected, analysts said.

The dollar eased back on Wednesday from its biggest rise in three weeks in the previous session, as traders awaited U.S. inflation data due at 1330 GMT.

The dollar index, which measures the U.S. currency’s performance against a basket of six others, was down 0.37 percent, while the euro/dollar exchange rate firmed.

Other commodities also climbed, with oil rising back toward $80 a barrel and copper to 13-1/3 month highs near $7,000 a tonne. Both are being lifted by the weak dollar.

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Dow closes above 10,000 for 1st time in a year

October 14, 2009

DJ comeback: Stock market’s best-known barometer closes above 10,000 for 1st time in a year

By Sara Lepro and Tim Paradis, AP Business Writers
5:08 pm EDT, Wednesday October 14, 2009

NEW YORK (AP) — When the Dow Jones industrial average first passed 10,000, traders tossed commemorative caps and uncorked champagne. This time around, the feeling was more like relief.

The best-known barometer of the stock market entered five-figure territory again Wednesday, the most visible sign yet that investors believe the economy is clawing its way back from the worst downturn since the Depression.

The milestone caps a stunning 53 percent comeback for the Dow since early March, when stocks were at their lowest levels in more than a decade.

“It’s almost like an announcement that the bear market is over,” said Arthur Hogan, chief market analyst at Jefferies & Co. (JEF) in Boston. “That is an eye-opener — ‘Hey, you know what, things must be getting better because the Dow is over 10,000.'”

Cheers went up briefly when the Dow eclipsed the milestone in the early afternoon, during a daylong rally driven by encouraging earnings reports from Intel Corp. and JPMorgan Chase & Co. (JPM) The average closed at 10,015.86, up 144.80 points.

It was the first time the Dow had touched 10,000 since October 2008, that time on the way down.

“I think there were times when we were in the deep part of the trough there back in the springtime when it felt like we’d never get back to this level,” said Bernie McSherry, senior vice president of strategic initiatives at Cuttone & Co.

Ethan Harris, head of North America economics at Bank of America Merrill Lynch (BAC), described it as a “relief rally that the world is not coming to an end.”

The mood was far from the euphoria of March 1999, when the Dow surpassed 10,000 for the first time. The Internet then was driving extraordinary gains in productivity, and serious people debated whether there was such a thing as a boom without end.

“If this is a bubble,” The Wall Street Journal marveled on its front page, “it sure is hard to pop.”

It did pop, of course. And then came the lost decade.

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