Business and Finance

Investors on Wall Street and around the world sold stocks with abandon Thursday, more convinced than ever that the United States and perhaps the globe are headed for a new recession.

The Dow Jones industrial average fell more than 400 points, the second consecutive rout in the stock market since the Federal Reserve announced a change in strategy for fighting the economic slowdown.

One financial indicator after another showed that investors are quickly losing hope that the economy can keep growing. The price of oil and metals, both of which depend on economic demand, fell sharply. Traders bought bonds for safety.

“The probability of going back into recession is higher now than at any point in the recovery,” said Tim Quinlan, an economist at Wells Fargo. He put his odds of a recession at 35 percent, the highest yet.

By early afternoon, the Dow was near low of the day, on what was shaping up to be one of its worst days of the year. At 1:45 p.m. EDT, the average was down 429 points, or 4 percent, at 10,695.

Looking for a safe place to put their money, traders bought American government debt, which they see as less risky than stocks even as the nation wrestles with its long-term budget.

The yield on the 10-year Treasury note hit a record low of 1.76 percent, down from 1.86 late Wednesday. Yields fall as investors buy bonds and send their prices higher.

The Fed, adopting a new strategy to try to get the U.S. economy going, announced Wednesday that it would shuffle $400 billion of its own holdings in hopes of reducing interest rates on long-term loans.

The central bank hopes that allowing people and businesses to borrow money more cheaply will encourage them to spend it throughout the economy, providing a lift that could turn it around.

The Fed statement troubled investors. It offered a bleak assessment of the future of the U.S. economy, saying it sees “significant downside risks to the economic outlook,” including volatility in overseas markets.

“In financial markets, the thinking seems to be: If the Fed is worried, the rest of us ought to be really worried,” said Brian Gendreau, senior investment strategist at Cetera Financial Group.

Economists say the Fed action may help, but probably not much. The only thing that will help is for people and businesses to start spending more money, said Uri Landesman, president of Platinum Partners, a hedge fund.

“Counting on the Fed to get us out of this is a mistake,” he said.

The price of commodities like oil and metals dropped steeply because investors worried that demand for them would fall if the world economy keeps slowing or falls into recession again.

The price of oil fell 6 percent, more than $5 a barrel, to $80.68, its lowest since Aug. 19. The selling reflected concerns that world demand for oil would fall if the economy slows.

The price of silver fell 8.6 percent. And gold fell 3.6 percent. Earlier this summer, gold set one record high after another. Investors wanted it both as a safe place for their money and to cash in on what seemed an unstoppable run.

In a broader reading of the U.S. stock market, the Standard & Poor’s 500 index fell 41 points, or 3 instant payday loan.5 percent, to 1,125. The S&P is barely higher than its lowest point in August, 1,119. Last month was marked by extreme volatility in the market.

The Nasdaq composite fell 86, or 3.4 percent, to 2,452.

Stocks fell sharply even though the New York Stock Exchange executed a rule designed to smooth trading. The exchange invoked Rule 48, which limits how much information is released about stock trades.

Stock volatility rose anyway. The VIX, an index that measures investor fear, rose 8 percent to 40.4, well above average.

It’s common for stocks to move dramatically after the Fed makes a big announcement. But the number of trades that can be made instantly has also gone up in recent years, causing big swings to happen more quickly.

“These major moves are much more compressed, time-wise, than in the past,” Landesman said. “A 5 percent move can now happen in a couple of minutes as opposed to a week or two.”

Some analysts thought the heavy selling was an overreaction.

“The facts show we are not in a recession, and we are not borderline recession,” Chris Rupkey, chief financial economist with Bank of Tokyo-Mitsubishi, wrote in a report Thursday.

The U.S. economy grew at an annual rate of 0.7 percent in the first half of this year, the slowest growth since the end of the Great Recession in June 2009. It would take much healthier growth, 4 or 5 percent, to bring unemployment down significantly.

The government reported Thursday that fewer Americans filed new claims for unemployment benefits last week. But the decline wasn’t nearly enough to raise any real hope that the job market is getting better.

Elsewhere in the world, economic reports weren’t much better. A gauge of European business activity fell to its lowest level since July 2009, and industrial orders in Europe fell in July.

The data suggest that constant gloom surrounding a debt crisis among European nations is causing people and businesses to cut back on spending, which could push the region into recession.

“Odds of Europe falling into recession are uncomfortably high and rising,” said Ryan Sweet, an economist at Moody’s Analytics.

Asian stocks were hammered to start the world’s trading Thursday. The Nikkei index in Japan fell 2.1 percent. The main stock averages fell 2.9 percent in South Korea, 2.6 percent in Australia and almost 5 percent in Hong Kong.

Europe fared even worse. The stock market fell 5.3 percent in France and 5 percent in Germany. Besides the economic headache, Europe is wrestling with how to tame a big debt problem.

In the U.S., FedEx stock fell 9 percent after it said that it would earn less in 2012 than it had expected. The company is seen as an indicator because demand for shipping rises and falls with the economy.

The next big round of corporate earnings reports doesn’t start for several weeks, but many analysts expect big companies can’t sustain the strong profits they have posted for the last few quarters.

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Turbulent financial markets haven’t squelched generosity altogether in 2011, but they do have Americans thinking long and hard about the importance of their assets.

They are reconsidering financial gifts to family members, recalculating value of their property, and reassessing financial components of their wills and estate plans.

Uneasiness permeates just about everything to do with their money online cash advance.

“There’s a little less gifting taking place now because people are feeling less wealthy,” said Bernhard Aaen, a lawyer and accredited estate planner in Redlands, Calif. “I’ve lately had very wealthy people with modest lifestyles become very worried that they are going to outlive their money

A senior White House adviser says Democrats and Republicans must “get out of their comfort zone” to avert a government default.

David Plouffe (pluff) acknowledges on NBC’s “Today” show that President Barack Obama essentially is responsible for the economy. But he says the deep recession wasn’t just “a run of bad luck,” but rather the result of bad government policies by the preceding Republican administration.

He says no deficit reduction deal is likely as long as tax increases are ruled out instant credit report. Asked if the Aug. 2 deadline is real, Plouffe says, “There’s very little debate that that’s going to change. We’re in a danger zone now.”

Plouffe says there can be no deficit reduction deal without some “balance,” meaning tax increases must be considered as well as spending cuts.

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Young demonstrators who camped out in one of Madrid’s busiest squares to protest bleak economic prospects have begun leaving the plaza to squads of municipal cleaners after voting to end more than three weeks of vociferous protest.

The protests began May 15 and spread to cities across Spain and elsewhere in Europe, striking a chord with hundreds of thousands of sympathizers.

Some participants voted to continue the protest against high unemployment and political corruption but a majority raised their hands at meeting Wednesday granting their approval to a proposal to take down the camp at Puerta del Sol opposite town hall personal loans for bad credit.

After midday Sunday cleaners began to move in as activists angry over Spain’s 21 percent jobless rate moved on to other urban locations.

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Stocks are turning mixed in midday trading as oil and other commodities reversed earlier losses.

Crude oil wavered after a report from the International Energy Agency said demand for oil would be lower than previously expected.

Silver dropped more than 3 percent, extending a deep slide from $48.60 at the end of April.

Cisco Systems Inc. fell 5 percent Thursday, the largest drop among companies in the S&P 500 index. The maker of computer networking equipment reported an 18 percent slide in earnings and lowered its profit forecast installment payday loans. It also plans to cut jobs.

The Dow Jones industrial average fell 11 points, or 0.1 percent, to 12,618. The S&P 500 index gained less than 1 point to 1,342. The Nasdaq composite index rose 5 points, or 0.2 percent, to 2,850.

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The election of a majority Conservative government has generated much speculation about the future of digital policies in Canada. It is hard to project precisely what will happen; given the number of open cabinet positions it is not known whether Industry Minister Tony Clement and Canadian Heritage Minister James Moore will remain in their portfolios or move elsewhere. If they stay the course, the Conservative digital policies are strong in a number of areas.

Concerns over the lack of competitiveness in the Canadian telecom market emerged as a campaign issue and a majority government may pave the way for removing foreign ownership restrictions in the telecom market. The Conservatives have consistently focused on improving the competitive environment, and opening the market is the right place to start to address both Internet access (including consumer frustration over usage-based billing) and wireless services.

Addressing the foreign competition issue will be only a piece of the bigger puzzle, however. The government has yet to set targets for universal broadband access and has been mum about the possibility of a set-aside for new entrants as part of the forthcoming spectrum auction. Answers to those questions may come from the much-anticipated digital economy strategy.

The Conservatives have a chance for some easy digital policy wins. Ending the Election Act rules that resulted in the Twitter ban on election night would receive broad support, as would maintaining their opposition to deeply unpopular proposals such as an iPod tax or new regulation of Internet video providers like Netflix.

On the hot button issue of copyright reform, it appears certain that Canada will pass a bill on the fourth try. The last bill had its flaws

In a story May 4 about an attack on Sony Corp.’s PlayStation Network, The Associated Press erroneously reported that Sony knows who is responsible. In a letter to Congress, the company said it does not know who is responsible.

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President Barack Obama plunged into donor-rich New York on Wednesday, his first fundraising sweep of the city since announcing his re-election bid this month, with a lament that he has not seen his wish for less-polarizing politics realized.

“The hope that I had that we’d start coming together in a serious way … has been resisted,” Obama told contributors gathered at the home of financier and former New Jersey Gov. Jon Corzine.

His intention, Obama said, is to make the 2012 campaign an “election in which we’re not just talking slogans …but we are looking soberly at the choices we face.”

The president’s outreach to donors came on a whirlwind day that began by taking on “birthers” who dispute he was born in the United States and producing his detailed birth certificate. He also flew home to Chicago to help pal and supporter Oprah Winfrey close out her syndicated talk show with a “big get” _ an interview with him.

“Today was a fun day,” Obama said as he entered his first fundraising event. “Nobody checked my ID at the door. But it was also a serious day because part of what happened this morning was me trying to remind the press and trying to remind both parties that what we do in politics is not a reality show. It’s serious.”

The three Democratic Party in New York fundraisers were scheduled across midtown Manhattan, including a dinner at The Waldorf-Astoria hotel. Obama was not due back at the White House until the wee hours of Thursday. He was expected to raise between $2 million and $3 million.

In Chicago, Obama and his wife, Michelle, took turns answering Winfrey’s questions during a taped interview at her studio, her show’s first interview with a sitting president and first lady. Winfrey has announced that she’s ending her top-rated program on May 25 after a quarter-century on television.

The Obamas’ interview is scheduled to air on Monday.

The show released one excerpt from the interview, an exchange over his decision to produce his Hawaii birth certificate. Laughing, he said: “Can I just say? I was there, so I knew that I knew I had been born. I remembered it.”

Winfrey’s relationship with the Obamas dates to their days in Chicago, and she lent her credibility and celebrity status to his 2008 presidential campaign with her first-ever political endorsement.

Corzine, who lost his political job in 2009 despite Obama’s efforts to help him get re-elected, is a former chairman and CEO of Goldman Sachs. He has deep ties to the financial industry, which felt battered by Obama’s rhetoric blaming the financial crisis on “fat cat” Wall Street bankers. The industry also chafed at the subsequent overhaul of financial regulations.

Corzine now heads MF Global Inc., a financial services firm, and Obama has begun trying to repair his relations with the business sector.

From Corzine’s home, Obama was heading to Park Avenue for a dinner at The Waldorf-Astoria, followed by a concert-style event at the Town Hall theater primarily for his younger supporters and featuring The Roots, a hip-hop band from Philadelphia.

Since he became a candidate for re-election on April 4, Obama has embarked on an aggressive inaugural fundraising tour that included three events in Chicago on April 14 and six events spread over two days last week in Los Angeles and San Francisco.

Obama raised $750 million for the 2008 campaign and hopes to top that for his re-election.

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Congressional Republicans maneuvered on two fronts Monday in the federal spending showdown, demanding Democrats agree to more than $33 billion in swift cuts to avoid a government shutdown, even as they readied a separate plan to slash deficits by a staggering $4 trillion over a decade. With little progress evident on the first track, President Barack Obama invited key lawmakers to the White House in search of a deal to avoid a partial shutdown Friday at midnight.

“Time is of the essence,” said White House press secretary Jay Carney, announcing plans for the Tuesday meeting.

House Speaker John Boehner of Ohio said he would attend on behalf of Republicans. But he also emphasized in a statement that the $33 billion total often cited “is not enough and many of the cuts that the White House and Senate Democrats are talking about are full of smoke and mirrors.”

Boehner has said repeatedly he does not want a shutdown. Yet a new public opinion poll underscored the political dilemma confronting the leader of a conservative majority swept into power with the support of tea party supporters.

In a survey by the Pew Research Center for the People & the Press, 68 percent of tea party adherents said lawmakers should stick to their principles in the budget negotiations, even if it means the government shuts down.

Yet in the population as a whole, only 36 percent supported that view, according to the survey, and only 38 percent of independents, who comprise a key swing vote in any election.

In remarks on the Senate floor, Majority Leader Harry Reid emphasized a similar point. Tea party Republicans, the Nevada Democrat said, “stomp their feet and call ‘compromise’ a dirty word and insist on a budget that will hurt America rather than help it.”

He said a deeper-cutting House-passed bill “slashes programs for the sake of slashing programs. It chops zeroes off the budget for nothing more than bragging rights.”

The House passed the legislation more than a month ago calling for $61 billion in cuts from current levels.

In addition, that measure includes dozens of proposals not directly related to spending, including curbs on the Environmental Protection Agency and other federal regulatory agencies and a denial of funding to Planned Parenthood.

Unlike the House, the Senate has yet to pass a spending bill to close out the current budget year, now more than half over, and Democrats are divided on how deeply to cut. In several weeks of maneuvering, Congress has agreed on a pair of stopgap bills that cut $10 billion, and Obama has signed them.

While much of the leadership’s attention was focused on the Friday deadline, Republicans also looked ahead to Tuesday’s planned launch of the most far-reaching series of deficit-reduction measures in years.

Rep. Paul Ryan, R-Wis., chairman of the House Budget Committee, has said the blueprint would cut in excess of $4 trillion from the budget, far more than the $2.2 trillion that Obama claimed in his own blueprint and on a par with recommendations of a bipartisan deficit commission last winter.

Other officials said that under Ryan’s proposal, the annual deficit would fall below $1 trillion at the end of the coming fiscal year but would not be erased by the end of the decade.

The deficit is currently projected at $1.6 trillion for the current fiscal year, and the administration estimates that under Obama’s budget, it would drop to $1.1 trillion next year and $774 billion in 2021.

Republican officials said about $1 trillion in savings under their emerging plan would come from changes to Medicaid, the federal-state program that provides health care for the poor.

Spending on hundreds of domestic programs _ the accounts at the heart of the talks to avoid a government shutdown _ would be returned to levels in effect in 2008, at a savings of hundreds of billions of dollars.

One of the most significant changes would occur in Medicare, which provides health care for seniors, but would not affect current beneficiaries or workers age 55 and older.

Once eligible, they would receive Medicare coverage from private insurance companies that operate plans approved by the federal government. No details were available on what level of service would be assured, or how much financial support the government would provide.

At the same time, officials said Ryan intended to propose restoring at least some of the $129 billion in subsidies that Democrats cut a year ago from a private alternative to traditional Medicare that is already in existence.

The Obama administration and other critics maintained that payments to private insurers exceeded the government’s cost for the traditional Medicare program.

The officials who described the recommendations did so on condition of anonymity, saying they were not authorized to pre-empt a formal announcement.

Republicans intend to move quickly to advance their new blueprint. They hope to have the Budget Committee approve it Wednesday and push it through the House next week.

The plan is expected to serve as a rallying point for Republicans who took power in January, but it is also likely to give Democrats a ready target to attack.

Democratic Leader Nancy Pelosi has drawn attention in recent days to public opinion surveys reporting widespread skepticism about fundamental changes in Medicare.

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The world economy can withstand the surge in oil prices sparked by unrest in the Middle East and North Africa so long as the increase proves short-lived, said the International Monetary Fund’s No. 2 official, echoing Deutsche Bank AG and Bank of America Merrill Lynch.

Futures for April delivery climbed to within $2 of $100 a barrel in New York today, and London-traded Brent rose to $108.57, close to the highest since September 2008, as escalating violence in Libya stoked concern supplies from the region will be disrupted. Oil in New York has gained almost 6 percent since Jan. 24, the day before the first anti-government protests erupted in Egypt.

“It’s unlikely it would make a substantial change in the global economic outlook,” John Lipsky, the IMF’s first deputy managing director, told Bloomberg Television’s “Inside Track” today. The Washington-based lender assumed oil would average about $95 a barrel this year when it forecast global economic growth of 4.4 percent for 2011, he said.

Political unrest that has swept from Tunisia to Yemen, Algeria, Bahrain and Iran in the past four weeks is fanning oil’s advance at a time when the global economy is emerging from the deepest recession in more than 50 years. U.S. consumer confidence rose to its highest level in three years this month, according to a report today. Data showed yesterday that German business confidence increased to a record in February.

While an extended $10 advance in oil cuts 0.5 percentage point off U.S. growth over two years, the world’s biggest economy will expand 3.8 percent this year, almost a percentage point more than in 2010, according to Deutsche Bank.

‘Relatively Strong’

“Economies are vulnerable to the oil price, but so far it’s looking like business and consumer confidence are relatively strong,” said Michael Lewis, London-based head of commodities research at Deutsche Bank, which predicts world growth will surpass 4 percent for the second successive year.

At least 250 people died in the Libyan capital Tripoli overnight as protests against Muammar Qaddafi’s leadership spread, al-Jazeera reported. Libya accounted for 4.6 percent of the 29.4 million barrels of oil pumped daily by the Organization of Petroleum Exporting Countries in January, making it OPEC’s ninth-biggest producer, according to data compiled by Bloomberg.

Brent may trade between $105 and $110 a barrel in coming weeks if the unrest continues, and reach a record should the violence spread to larger Middle East producers, such as Saudi Arabia, Goldman Sachs Group Inc. said in a report today. Global expansion would be hurt if there were a sustained surge in oil to about $120 a barrel, according to Deutsche Bank and BofA Merrill Lynch.

Gasoline, Heating Oil

Gasoline and heating oil rose to the highest levels in more than 28 months today, rising more than 5 percent before paring gains. Gasoline for March delivery added 7.36 cents, or 2.9 percent, to $2.6249 a gallon at 11:25 a.m. on the New York Mercantile Exchange. Prices touched $2.681, the highest level since Sept. 25, 2008. Heating oil for March delivery rose 9.87 cents, or 3.6 percent, to $2.8116 a gallon after touching $2.8589, the highest level since Oct. 2, 2008.

The risk of costlier crude is that it may deprive consumers of purchasing power, hurt corporate profits and force central banks to raise borrowing costs to curb price increases. Inflation in China, the world’s biggest energy consumer and fastest growing major economy, was 4.9 percent in January, above the government’s target.

‘Serious Threat’

“The global recovery now faces a serious threat from a sustained oil-price spike,” said David Hufton, London-based managing director at PVM Oil Associates Ltd.

About $10 of the recent increase in the oil price relates to tension in the Middle East and Africa, with the remainder a reflection of the strengthening global economy, said Julian Jessop, chief international economist at Capital Economics Ltd. in London.

“The old rule of thumb was that a $10 increase reduces global growth by half a percent, but if that still held then the world would now be in a deep recession,” said Jessop, a former U.K. Treasury official. “The point is oil prices are high, but the global economy is in a much better position to cope so it’s not too big a problem.”

U.S. government data also show the economy imported less than half of 1 percent of its oil imports from Libya in the past two years.

Hedged

“The good thing is we’re seeing generally positive economic conditions and the higher oil prices we’re seeing don’t seem to be having an impact on the economic climate,” Willie Walsh, chief executive officer of International Consolidated Airlines Group SA, said in an interview today at an aircraft finance conference in Geneva sponsored by ICBI. “Most airlines are hedged.”

Deutsche Lufthansa AG’s hedging contracts for this year mean the airline is saving money when the price of crude oil rises to more than $88, Stefanie Stotz, a Frankfurt-based spokeswoman for the company, said today.

The world recovery would be jeopardized if oil climbed to average $115 a barrel this year and $130 next year, according to analysts at BoA Merrill Lynch. That would return the world’s energy bill as a share of the economy to the 9 percent level of the 1980s, when costlier crude tipped consuming nations into a recession, they said in a Jan. 25 report.

Still, that’s unlikely because energy demand is set to ease by almost half this year to an average of 1.5 million barrels per day, inventory levels are near a five-year high, OPEC nations have more spare productive capacity than in 2008 and more Iraqi crude is on the way, according to the report.

At Risk

Not all economies are safe, say the BofA Merrill Lynch strategists. Turkey, so-called peripheral European economies, India, South Korea and Indonesia could start to suffer if oil averaged $110 to $120 a barrel this year, while a range higher than that would start to pinch Germany, Japan and China.

“We’re hoping capacity will be brought to bear so it will continue to support our economic recovery,” Deputy U.S. Energy Secretary Daniel Poneman told Bloomberg Television.

Mohammad Ali Khatibi, Iran’s governor to OPEC, said the organization is supplying more oil than the world market needs, and it has no plans to call an emergency meeting.

“There are some temporary supply issues, but stocks are high and there is no permanent shortage in supply,” he said.

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