Fed preview: More stimulus unlikely for now, but watch Europe

Federal Reserve policymakers are expected to signal Wednesday that they’re sitting on their hands for the time being.

Fed officials will conclude a two-day meeting with a statement at 9:30 a.m. PDT and with a press conference by Chairman Ben S. Bernanke at 11:15 a.m.

Most Fed-watchers believe the statement won’t include any new initiatives to help the economy, despite hints in recent weeks by some officials that the central bank could do more.

Recent market speculation has centered on the idea of the Fed printing money to buy another large chunk of mortgage-backed bonds. The idea would be try to push mortgage rates even lower, which could help spur home purchases and refinancings -- at least for people able to qualify for a loan.

Fed Vice Chairwoman Janet Yellen said on Oct. 21 that another large bond-buying program “might become appropriate if evolving economic conditions called for significantly greater monetary accommodation.”

Despite 9.1% unemployment, however, the economy overall isn’t weak enough to justify another big dose of monetary stimulus via so-called quantitative easing (QE), most economists say. Gross domestic product grew at a 2.5% real annualized rate in the third quarter, slow but not recessionary.

The Fed may not yet have pulled out all the stops, but it has pulled some big ones. In August the central bank took the unprecedented step of indicating that short-term interest rates were likely to remain near zero for another two years. In September the Fed decided to shift more of its massive securities portfolio toward longer-term Treasury bonds to pull down long-term interest rates in general.

“We continue to believe the bar for additional QE is high, as the Fed attempts to conserve its limited ammunition should developments in Europe collapse,” economists at brokerage UBS said in a report Tuesday.

And the Fed, and everyone else, has reason to worry that a European collapse is an increasing risk, after Greece’s latest bombshell Tuesday.

Europe’s seeming inability to end its government debt crisis should make for some interesting questions for Bernanke at his press conference. If the world were to face another 2008-style financial meltdown, what could the Fed do -- other than throw more money at it?

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-- Tom Petruno

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Photo: Federal Reserve Chairman Ben S. Bernanke. Credit: Karen Bleier / AFP / Getty Images

Dow falls nearly 300 points on fear of Europe debt deal blow-up

U.S. stocks were pounded for a second day as Europe's government-debt crisis took yet another turn for the worse.

The Greek prime minister’s surprise call for a national referendum on the country’s European bailout plan triggered selling in equity markets worldwide, leaving the Dow Jones industrial average down 297.05 points, or 2.5%, to 11,657.96 at the closing bell.

After Monday’s 2.3% slump, the Dow now has given back all of last week’s 3.6% surge, and then some. The index is at its lowest level since Oct. 20.

Broader market indexes also plunged in heavy trading. The Nasdaq composite dived 2.9%; the Standard & Poor’s 500 sank 2.8%.

Greek Prime Minister George Papandreou’s shocking decision late Monday to call a referendum on the bailout raised the risk of a thumbs-down by austerity-weary Greek voters. That could mean the end of Greece’s membership in the Eurozone -- and a disastrous default on all of the country’s heavy debt obligations to the rest of the continent.

Global financial markets’ response was visceral because “we thought we had this thing put to bed,” said Phil Orlando, chief equity strategist at Federated Investors in New York.

Some investors ran for the cover of U.S. Treasury bonds, driving the 10-year T-note yield to 1.98%, down from 2.11% on Monday and the lowest since Oct. 5.

Stocks had pared their losses at midday after Socialist lawmakers in Athens said they opposed the idea of a referendum, raising doubts that it could get through parliament. But Papandreou’s spokesman reiterated that the government intended to press ahead with the referendum.

Whether Papandreou’s government will survive, however, remains a critical question. It is likely to face a confidence vote in parliament later this week. If the government falls the Eurozone’s rescue plan might still be thrown into doubt.

In European trading Tuesday, equity markets suffered another mini-crash after their October rally. Italian stocks dived 6.8%, the French market lost 5.4% and the Spanish market slid 4.2%.

Yields on Italian government bonds jumped again, with the 10-year bond yield rising to 6.19%, up from 6.09% on Monday and nearing a new 52-week high. Rising Italian yields show investors are increasingly doubtful about the broader financial rescue plan that European leaders approved Thursday.

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Photo: Protesters dressed as prisoners gather during an event to protest against austerity measures outside the Greek parliament in Athens on Tuesday. Credit: Thanassis Stavrakis / Associated Press

 

 

Insurance group gives top safety ratings to five minivans

An insurance industry trade group has given top safety ratings to five minivans but said two others were not as good.

The Insurance Institute for Highway Safety awarded the 2012 Chrysler Town & Country, Dodge Grand Caravan and Volkswagen Routan — which all share a common structure — and the Honda Odyssey and Toyota Sienna vans its “Top Safety Pick” ranking following evaluations for rollover protection.

To win the ranking, the vehicles go through tests and must have the highest rating of good for frontal, side, rollover and rear crash protection.

The trade group said that two other minivans, the Kia Sedona and the Nissan Quest, “fall short on rollover protection, with the Sedona receiving the lowest rating of poor and the Quest ranking as acceptable."

"Safety-conscious parents shopping for a family hauler should be pleased with today's minivan choices," says David Zuby, the institute's chief research officer. "At the same time, the ratings show that major differences remain in this segment when it comes to protection in a rollover crash."

In 2009, more than 8,000 people were killed in rollover crashes in the United States, according to the insurance group.  That number has fallen as more vehicles have come equipped with electronic stability control, which helps prevent rollovers.  As of the 2012 model year, all new vehicles must be equipped with electronic stability control and anti-lock brake systems.

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-- Jerry Hirsch

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Photo: Volkswagen Routan minivan. Credit: Volkswagen

Bank of America abandons plan to charge $5 debit card fee

Bowing to a national flood of protests, Bank of America Corp. is calling off its plan to charge customers $5 a month for using its debit cards to make purchases -- a strategy that proved a public relations disaster for what once was America's biggest bank.

Analysts had believed the rest of the banking industry would follow BofA in imposing similar fees to make up for new rules restricting the fees banks charge merchants for accepting debit cards.

But instead, the Charlotte, N.C., banking giant finds itself following the lead of a host of rivals who decided last week not to incur the wrath of the American public with debit-card fees.

Bank of America lost its No. 1 ranking in asset size to JPMorgan Chase & Co. at the end of September, though it still has the most total deposits. It announced its decision on the debit fee Tuesday morning in a two-paragraph statement citing "customer concerns and the changing competitive marketplace."

“We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee,” David Darnell, BofA's co-chief operating officer, said in the statement.

“Our customers’ voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.”

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Photo: Bank of America headquarters in Charlotte, N.C. Credit: Getty Images / Davis Turner 

Dow falls nearly 300 points on fear of Europe blow-up

U.S. stocks were pounded for a second day as Europe's government-debt crisis took yet another turn for the worse.

The Greek prime minister’s surprise call for a national referendum on the country’s European bailout plan triggered selling in equity markets worldwide, leaving the Dow Jones industrial average down 297.05 points, or 2.5%, to 11,657.96 at the closing bell.

After Monday’s 2.3% slump, the Dow now has given back all of last week’s 3.6% surge, and then some. The index is at its lowest level since Oct. 20.

Broader market indexes also plunged in heavy trading. The Nasdaq composite dived 2.9%; the Standard & Poor’s 500 sank 2.8%.

Greek Prime Minister George Papandreou’s shocking decision late Monday to call a referendum on the bailout raised the risk of a thumbs-down by austerity-weary Greek voters. That could mean the end of Greece’s membership in the Eurozone -- and a disastrous default on all of the country’s heavy debt obligations to the rest of the continent.

Global financial markets’ response was visceral because “we thought we had this thing put to bed,” said Phil Orlando, chief equity strategist at Federated Investors in New York.

Some investors ran for the cover of U.S. Treasury bonds, driving the 10-year T-note yield to 1.98%, down from 2.11% on Monday and the lowest since Oct. 5.

Stocks had pared their losses at midday after Socialist lawmakers in Athens said they opposed the idea of a referendum, raising doubts that it could get through parliament. But Papandreou’s spokesman reiterated that the government intended to press ahead with the referendum.

Whether Papandreou’s government will survive, however, remains a critical question. It is likely to face a confidence vote in parliament later this week. If the government falls the Eurozone’s rescue plan might still be thrown into doubt.

In European trading Tuesday, equity markets suffered another mini-crash after their October rally. Italian stocks dived 6.8%, the French market lost 5.4% and the Spanish market slid 4.2%.

Yields on Italian government bonds jumped again, with the 10-year bond yield rising to 6.19%, up from 6.09% on Monday and nearing a new 52-week high. Rising Italian yields show investors are increasingly doubtful about the broader financial rescue plan that European leaders approved Thursday.

RELATED:

S&P 500 is at break-even for 2011. Invitation to sell?

Rising Italian bond yields cast doubt on Europe plan

MF Global fails, first U.S. casualty of Europe debt crisis

-- Tom Petruno

Photo: Protesters dressed as prisoners gather during an event to protest against austerity measures outside the Greek parliament in Athens on Tuesday. Credit: Thanassis Stavrakis / Associated Press

 

 

Auto sales: Ford gains 6% in October, but can industry surge last?

Ford Motor Co.'s U.S. auto sales rose 6% in October to 167,803 vehicles, with sport-utility vehicles including the Escape and Explorer selling briskly.

Ford's report came as part of what most analysts expect will be a strong month for auto sales.

General Motors Co. said its U.S sales rose only a modest 2%, to 186.895 vehicles, compared with October of 2010.

But Chrysler Group said its sales rose 27% to 114,512 vehicles, its best October since 2007.

The industry is humming at an annual sales pace of more than 13 million vehicles, the best rate in several years.

While the October sales reports looked good, some in the industry believe the pace isn’t sustainable.

The strong numbers for both September and October represent shoppers who deferred their purchases due to the high prices and shortages in late April through August, said Jeremy Anwyl, chief executive of auto information company Edmunds.com.

Edmunds estimates that the sales of about 200,000 were deferred from earlier this year and that the industry is now playing catch-up.

“Depending on pricing and availability through December, most of this should play itself out by year-end,” says Anwyl. “This suggests we should view sales in October with a degree of caution. The performance over the past few months is not the start of a trend. It is more of a mini-bubble.”

But others believe the industry has some strength heading into the year-end.

“We expect the industry will be approaching 13 million in terms of absolute sales for the year,” said Jonathan Browning chief executive of Volkswagen Group of America. “The momentum is there although it is somewhat fragile” because of mixed economic data and sagging consumer confidence. 

Volkswagen had a particularly good October. Its sales rose 40% to 28,028 vehicles, its best October since 2001. The results did not include the company's Audi brand.

And Browning said the company has already surpassed its annual total for 2010,

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-- Jerry Hirsch

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Photo: 2011 Ford F-150 trucks at a dealership in Glbert, Ariz. Credit: Associated Press

Auto sales: Toyota, Honda slide while rivals post October gains

The biggest Japanese automakers continue to have trouble in the U.S. market.

Toyota said its October U.S. sales fell 8% to 134,046 vehicles. 

The company has struggled to rebound from a series of large recalls and more lately production and inventory disruptions caused by the Japanese earthquake back in March. 

Now both Toyota and Honda are suffering from new problems in their parts supply chain caused by flooding in Thailand.  Both are dialing back production, even at their North American factories.

Honda said its October sales fell 1% to 87,218 vehicles.

However, Nissan North America said its U.S. sale rose 18% to 82,346 vehicles. Its Nissan brand set an October record, increasing 22% for the month. However the company's Infiniti luxury car division went in reverse. Sales fell 14% compared with the same month a year earlier.

The Nissan brand sales were helped by better availability of vehicles compared with Toyota and Honda. Nissan was less affected by production disruptions and inventory shortages caused by the earthquake. 

Any new shortages that develop for Honda and Toyota because of the flooding in Thailand will probably benefit Nissan in the coming months, said Bill Visnic, an analyst with auto information company Edmunds.com.

Other foreign automakers also are doing well in the U.S. market.

Hyundai said its sales rose 23% to 52,402 vehicles. The South Korean automaker's year-to-date sales of 545,316 vehicles broke its full-year sales record of 538,228 set in 2010. The company is on pace to sell more than 600,000 vehicles this year.

Kia, Hyundai's corporate sibling, also had a strong month. It posted its best-ever October, logging sales of 37,690 vehicles, a 21% increase over the same period last year and the company's 14th straight monthly sales record.  It also has surpassed all previous annual sales records, having sold more than 405,000 vehicles so far this year.

Meanwhile, BMW Group reported combined October sales of is BMW and Mini brands reached 27,288 vehicles, an increase of 18% from the same month a year earlier.

“Auto sales are probably the best indicator of economic direction and the critical fourth quarter has made a good start,” said Ludwig Willisch, chief executive of BMW of North America.

Mercedes-Benz USA reported October sales of 24,449 vehicles, a 28% increase from a year ago and the company's highest October U.S. sales on record.

The domestic auto companies all posted gains in October.

Ford Motor Co.'s sales rose 6% to 167,803 vehicles, with sport-utility vehicles including the Escape and Explorer selling briskly.

General Motors Co. said its sales rose only a modest 2%, to 186.895 vehicles, compared with October of 2010.

Chrysler Group said its sales rose 27% to 114,512 vehicles, its best October since 2007.

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-- Jerry Hirsch

Twitter.com/LATimesJerry

Photo: A 2012 Toyota Camry on display at a car dealership in San Jose, Calif. Credit: Associated Press