President Obama announced Tuesday over $8 billion in federal support for two new nuclear power plants in Georgia, setting the stage for what could be the first completed reactor in this country in over three decades.
The money, coming in the form of loan guarantees, is going to build two new reactors at Southern Company’s Vogtle plant facility, located some 170 miles east of Atlanta.
In announcing the grant at an electrical worker’s union hall in Maryland, Obama used to occasion to tout the benefits of nuclear power.
"Nuclear energy remains our largest source of fuel that produces no carbon emissions," said the president. "To meet our growing energy needs and prevent the worst the worst consequences of climate change, we’ll need to increase our supply of nuclear power. It’s that simple."
But Obama’s speech made clear the move is also deeply political.
The money is part of $18.5 billion in loan guarantees for nuclear power approved under the 2005 energy bill. This grant is the first slice of money to be awarded.
President Obama has increased the amount of money available for nuclear loan guarantees to over $54 billion in his 2011 budget.
The increased funding is part of an effort to win Republican support for the president’s overall energy plan, which includes building more nuclear plants as well as making fossil fuels more expensive in an effort to cut greenhouse gases and make renewable energy more competitive.
"Those who have long advocated for nuclear power, including many Republicans, have to recognize that we will not achieve a big boost in nuclear capacity unless we also create a system of incentives to make clean energy profitable," Obama said. "As long as producing carbon pollution carries no cost, traditional plants that use fossil fuels will be more cost-effective than plants that use nuclear fuel."
Passing legislation to make fossil fuels more expensive and clean energy more profitable is a centerpiece of the Obama administration’s domestic agenda.
A bill designed to do just that narrowly passed the House last summer, but faces stiff opposition in the Senate from lawmakers that are concerned about its cost to the economy, or don’t believe in global warming. The Senate is expected to take up the matter sometime this year.
The Georgia plant
Southern Company is one of a handful of power producers that has been vying for this federal funding over the last few years.
Preliminary construction work on new reactors has already begun at a few sites around the country, including the Georgia plant. But the U.S. Nuclear Regulatory Commission hasn’t issued a final permit at any of the facilities.
Winning the government loan backing is a major breakthrough for Southern, and underscores just how expensive and risky building a new nuclear facility is.
Nuclear plants have been subject to massive cost overruns in the past, and without government support even those in the industry recognize a new plant would not be built.
The Georgia expansion is estimated to cost $14 billion, and is scheduled to be completed in 2017.
When originally built late 1980s, the plant was expected to have four reactors and cost $975 million, according to the Atlanta Journal Constitution. The final price tag for two reactors was $9 billion.
The new construction in Georgia is expected to create 3,500 jobs building the plant and 800 permanent jobs once the facility is complete, according to a Southern Company press release.
Each new reactor is expected to produce 1,100 megawatts of electricity, enough to power over 800,000 homes.
Too expensive?
Opponents of nuclear power claim the plants are too expensive to build, and fear government support will distort the power market in this country for years to come.
They also fear the plants will be the target of a terrorist attack, and say there is still no plan for what to do with the waste.
Supports contend the plants will get far cheaper after the first few are built, and will be a good source for clean, domestic power.
The Energy Department has stopped building a permanent waste disposal site at Nevada’s Yucca mountain, but says the waste can be safety stored on-site in pools or concrete bunkers for many decades until another site is found.
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The question is being raised more and more: Can Toyota recover its reputation?
There is no simple answer. The automaker once enjoyed exceptional renown. In addition to being the largest and most profitable auto company on the planet, Toyota was the most studied and copied. Its production system became a benchmark and a model for competitors to emulate around the world.
On top of that, Toyota (TM) was known for always putting the customer first, hence its passion for building cars with the highest quality and reliability. The automaker obsessively studied car buyers to find out what they wanted and then provided it for them. It became a leader in new vehicle segments like crossovers, and new technologies like gas-electric hybrids.
But when a crisis arose in the form of complaints about unintended acceleration, Toyota didn’t know what to do. Rather than make a forthright statement about the problem, its history, and its proposed solution, the automaker responded with obfuscation, delay, blame-shifting, and denial.
Not until last August, when a Lexus driven by an off-duty California highway patrolman rolled over and burst into flames, killing the driver and three members of his family, did the issue reach widespread public awareness. And when the time came to apportion responsibility for the incident and outline a new direction for the company, top Japanese executives were nowhere to be seen. When president Akio Toyoda first came forward to take responsibility and promise solutions, he seemed to do so with reluctance.
Compare that to the Tiger Woods scandal. Like Toyota, Woods had a reputation for excellence that far exceeded other golfers.
Like Toyota, Woods was widely emulated for his faultless behavior and superb sportsmanship.
Like Toyota, Woods initially put out a story about his wife, a golf club, and the shattered windows of his SUV that bore little relation to reality.
Like Toyota, the news about Woods’ missteps was allowed to trickle out day by day without being effectively refuted.
Like Toyota, Woods refused to make a public appearance to apologize for his misdeeds (and still hasn’t), preferring to issue press releases instead.
And like Toyota, Woods promised to mend his ways, without offering any convincing evidence of exactly how he will do that.
Just as Toyota has seen sales crumble and its used car values plummet, Woods has been abandoned by his corporate sponsors and shunned by other golfers business cards design.
Does this mean that Tiger and Toyota have seen their reputations permanently destroyed? Witnessed the domination of their respective enterprises ended? Are about to be permanently consigned to the ranks of the disgraced and the second-rate?
The betting here is that the answer to all three questions is "no."
Tiger Woods remains one of the best golfers in history, and assuming he can regain his form and start to win again, his fans will return.
The American public has a short memory, an inclination to forgive, and a willingness to extend second-chances. History is full of examples. After declaring he was leaving politics in 1962, Richard Nixon came back and was elected president in 1968. There have lately been reports that Eliot Spitzer, who resigned in disgrace as governor of New York two years ago, is considering a comeback of his own, thanks to an understanding electorate.
The same is true with Toyota, although the reasoning is more economic and less emotional.
American customers want to buys cars they like, and if they decide they still like Toyotas, they will continue to buy them. Ford (F, Fortune 500) was rattled by the Explorer-Firestone tire crisis in 2001, but it eventually recovered because the Explorer was a popular SUV.
Rehabilitation comes down to dollars and cents. If Toyota can convince shoppers that it still offers a strong value, then they will find their way to Toyota dealers.
The critical ingredient that is still missing from the rehabilitation of both Tiger and Toyota is that convincing personal apology. Tiger hasn’t been seen in public since the night of the accident and needs to make a believable account of his behavior along with a statement of his determination to change.
Likewise, Toyota president Akio Toyoda, as well as his management team, must make a complete explanation of their response to unintended acceleration and answer a comprehensive set of questions from outside experts. Only then will its slate be wiped clean, and Toyota will be free to begin the long process of rebuilding its reputation.
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JetBlue inaugurated new service between Orlando and Montego Bay, Jamaica, on Feb. 8 with a daily round-trip flight out of Orlando International Airport.
Montego Bay is the 23rd nonstop destination served by JetBlue from Central Florida. The airline offers flights to six other destinations in the Caribbean and Latin America: Bogota, Colombia; Cancun, Mexico; Nassau, Bahamas; San Jose, Costa Rica; Santo Domingo, Dominican Republic; and Aguadilla, Ponce and San Juan, Puerto Rico.
JetBlue Airways (Nasdaq: JBLU) currently serves 60 cities with 600 daily flights.
MIAMI — The nation’s roughly 1 million paid tax preparers will soon be regulated by the Internal Revenue Service, which plans to require competency tests and registration with the government.
The new regulations don’t kick in this year, in part because of the size of the undertaking, IRS Commissioner Doug Shulman said Monday. But the agency will soon send letters to 10,000 preparers with a record of errors on returns.
About 80 percent of taxpayers use a tax preparer or tax software to complete their annual returns. Most are unregulated, unless they are attorneys, certified public accountants or agents who represent taxpayers before the IRS.
More people are turning to preparers or software for help with their taxes as the tax code becomes more complex, he said.
"If we can have preparers fill out taxes right, the American people are well-served," Shulman said. "We’re going to get accurate returns and collect the right amount of money."
Concern about unscrupulous and untrained tax preparers has been longstanding, said Karen Reinagel, president of the Florida Society of Enrolled Agents, a group of tax professionals authorized by the federal government to represent taxpayers in dealings with the IRS. "The taxpayer has no idea if they’ve got the proper education, if they’ve kept up with continuing education," Reinagel said.
People expect hair dressers and auto mechanics to have passed certain tests and acquired certain licenses, and they may assume as much about their tax preparers.
"But if they’re not registered or licensed they don’t have to have an education," Reinagel said. "They wouldn’t think they would have to ask."
The system will be paid for through user fees by tax preparers who register with the government and take the IRS competency tests business card templates.
Eventually, the IRS said, it will have a searchable database for taxpayers to consult before working with a preparer.
Shulman said his agency was already studying potential regulations for tax preparers before recent criticism about abuse of large tax credits offered through federal stimulus laws.
In a report last month by the inspector general for tax administration, as of July 25, about 74,000 taxpayers had wrongly claimed $504 million through the first-time home buyers tax credit that was expanded in last year’s federal stimulus law. The credit pays $8,000 to first time buyers and $6,500 to current owners if they buy a new home.
"Any time there’s a large, refundable tax credit, you’re going to see fraud _ people trying to claim the credit where it’s not earned," Shulman said.
The EITC _ Earned Income Tax Credit _ for low-income individuals and families is also a source of fraud. The credit offers up to $5,600 to those who qualify. Shulman praised that program as having lifted more people out of poverty than any program in the country.
In addition to the new regulations for preparers, IRS agents will visit thousands of tax preparers, sometimes without advance notice. Some agents will pose as taxpayers to gauge what kind of advice a preparer offers. These visits will begin this year.
And the IRS has set up a task force to review tax preparation software and review businesses that offer refund advances.
The rules won’t apply to volunteers who help low-income families and individuals prepare their taxes. But those who work at Volunteer Income Tax Assistance Program already must pass a test before working on others’ returns.
Bennett Goldworth thought he was set for life when he retired three years ago at age 50. He bought a waterfront apartment at the high-end Four Seasons Condominium in Fort Lauderdale, and said goodbye to New York and his job selling real estate.
"I felt I had everything I wanted in life, which was great," said Goldworth.
A decade of investing with Bernard Madoff had given Goldworth the financial security to enjoy the "good life" in Florida, until Madoff’s arrest last Dec. 11. "I didn’t just have money stolen, I had my whole life stolen," he said.
Today the condominium is in contract to be sold. Goldworth is living with his father in Manhattan and grateful to be back at the Corcoran Group selling homes again.
He’s also among the first to receive a full half-million dollar insurance settlement from the Securities Investor Protection Corporation (SIPC), which insured direct accounts of Bernard L. Madoff Investment Securities. "I’m one of the fortunate ones," said Goldworth at his office where fellow realtors all were trying to sell million-dollar apartments. "I was very happy, very pleased."
But, other Madoff victims — like Judy and Don Rafferty, senior citizens who’ve had to come out of retirement — have gotten nothing.
"I felt as though we were cheated. I felt violated," said 67-year old Judy who now works as a legal assistant.
The Raffertys for years had withdrawn what they believed were earnings from their Madoff account. The trustee overseeing restitution, Irving Picard, says the Raffertys withdrew more than they invested and are therefore entitled to nothing, even though their account also was insured by SIPC for up to $500,000 payday loans.
"They changed the rules in the middle of the game which I don’t think is fair at all," complained Rafferty.
It is fair, argues Goldworth who maintains, "The net winners should be in the back of the line. First thing that should be addressed is that everyone get back everything they invested."
Rafferty counters, "He got his money back, why wouldn’t he feel comfortable? It’s the people who haven’t gotten their money back that are not happy."
The majority of Madoff investors are not happy. More than 16,000 investor claims have been filed, SIPC President Stephen Harbeck said Thursday. So far, Picard and his staff have reviewed 11,563 of them and approved only 1,647 — just 14%.
Even for those victims whose requests have received an ‘OK’, the bulk of the funds are not guaranteed: only $561 million — 12% of the allowed claims — is being funded by SIPC.
Some Madoff investors are suing Picard, charging him with breach of fiduciary trust for denying them a SIPC insurance payment.
Those lawsuits are especially troubling to Goldworth who believes legal battles will further delay the Trustee paying out claims. "It’s very counterproductive," he said.
India must loosen foreign investment rules in insurance, banking and retail to create more jobs and accelerate economic growth, the Organization for Economic Cooperation and Development said.
The South Asian nation’s policies to attract overseas investors remain “restrictive in comparison with a majority of OECD countries,” the Paris-based organization said in a report titled “OECD Investment Policy Reviews: India.”
India limits New York Life Insurance Co. and other foreign insurers to a 26 percent stake in local companies and bars retailers including Wal-Mart Stores Inc. from opening outlets in the world’s second-most populous country. The OECD called for an improvement in the “investment environment” in India, which the World Bank places 133rd among 183 countries in a ranking based on the ease of doing business.
Indian Prime Minister Manmohan Singh told investors in New Delhi last month that the country had received foreign direct investment of $121 billion since 2001 and that it isn’t a “large number given the scale of our economy.” The flows were less than a quarter of the $566 billion that China attracted during the period.
“India may be able to better achieve its objectives through non-discriminatory policies rather than sectoral restrictions on foreign investment,” OECD Secretary-General Angel Gurria said in the report.
A plan to raise the foreign-direct-investment ceiling in insurance to 49 percent has been stuck in parliament for more than three years and is currently being debated by a group of all political parties.
Bank Access
In retail, local laws are aimed at protecting small shops in Asia’s third-largest economy. India permits overseas chains such as Wal-Mart to operate as wholesalers and sell groceries and other goods to businesses such as supermarkets, department stores and restaurants payday loans. They are barred them from opening stores or buying stakes in supermarket chains.
In banking, India’s central bank postponed in April a plan to review granting greater access for foreign lenders into the economy. The Reserve Bank of India regulates the entry of foreign banks and even limits expansion of their branches to 12 a year, the OECD said.
“Growth could be accelerated by the enhanced productivity from increased foreign investment,” the report said. “In banking, insurance and especially retail distribution, the influx of FDI could help raise incomes in the agriculture sector while increasing the choice and lowering living costs.”
Economic Growth
The OECD said that while growth and investment in India has been “impressive” since 1991, when Prime Minister Singh as finance minister opened the nation’s economy to foreign investors, income inequalities among states have increased.
India’s economic growth has averaged 8.5 percent each year since 2004 after expanding at a 6 percent pace during the 1990s. India’s investment rate has more than doubled to 35 percent of gross domestic product since 1991.
The OECD called upon poorer states in India to cut bureaucracy to attract more investment and spur growth.
“While the central government has reduced the number of approvals needed for new investment, there remains a need to streamline administrative procedures at the state level,” according to the report.
The OECD also called on India to improve the judiciary, whose capacity to handle cases such as those related to intellectual property rights “in a timely manner remains insufficient.”
After relatively modest growth in the third quarter, Finance Minister Jim Flaherty says he's optimistic that Canada's economy will pick up the pace into next year.
Flaherty said Tuesday he believes the domestic economy will show more strength in the remainder of this year and into 2010, eclipsing the slow climb out of a recessionary environment that has characterized the recovery so far.
"We hope that we will have a continuation of growth at a greater pace in (the fourth quarter)," Flaherty said in Toronto at an announcement unveiling federal stimulus spending money to help renovate Maple Leaf Gardens.
"We are certainly more optimistic about economic growth in 2010."
Economists generally agree that Canada's economy is going to grow in the near term but that the climb will be sluggish in the coming months as the global economy struggles toward recovery.
"Over the next six months we're in a recovery phase," Warren Jestin, the chief economist at Bank of Nova Scotia (TSX: BNS), said in an interview after making a presentation at a Toronto economic conference on Tuesday.
He said inventory adjustments, particularly in the auto sector, will drive growth as companies ramp up production.
"Auto production is starting up and government projects are finally getting into the ground. In general, that will lead us into another phase that will tend to be one of probably sustained growth, but not as strong a growth as we used to think was normal," he said.
Jestin warned that developed countries could risk weakening again as stimulus packages start to run their course, and economies attempt to operate with waning government assistance. Many economists caution that the economy is still walking a knife's edge between recovery and another downturn.
Statistics Canada offered some cause for optimism about next year on Monday when it reported that Canada's real gross domestic product inched ahead in the third quarter at an annualized rate of 0.4 per cent, marking an end to the recession in this country.
However, a report released Tuesday by CIBC (TSX: CM) said that key metropolitan areas in Canada are still feeling the financial pinch.
CIBC, which compiles a metro monitor index, said that 10 of the country's top 25 urban areas showed negative growth in the third quarter.
"On a year-over-year basis, our index continued to trend downward," said Benjamin Tal, a senior economist at CIBC.
"More than two-thirds of Canadian GDP is generated in Canada's major cities. So the tale of those cities is the tale of the economy."
The report said nine of the 10 cities that experienced negative growth were in Ontario and Quebec, which have both been battered by years of weakness in the manufacturing and forestry sectors and hurt by lower demand for their products in the United States and a stronger loonie.
"Calgary and Edmonton, which until recently were the stars of our index, (are) losing ground rapidly and currently hardly above water in terms of overall economic momentum," Tal added.
Jestin said that long-term growth will be mild in Canada over the next couple years, near two-and-a-half per cent, while emerging economies like China and India will grow closer to a rate of seven to nine per cent. Jobs will also see a gradual pickup, Jestin said, with the country adding net new jobs in 2011.
But "they're going to be different jobs than in the past," he cautioned.
"Additional jobs created are probably going to be in areas that are small firms, medium-sized firms and very specialized in their markets. (They will be) less focused on the U.S., more focused on niche markets."
Jestin said the Canadian economy is running stronger than south of the border, though exporters are facing heavy headwinds, with sales volumes down 20 per cent in the summer over a year earlier.
Shares in banks, builders and companies part-owned in the Middle East fell around the world on Thursday and investors sought safety in government bonds on worries about Dubai’s ability to pay its debts.
Sterling fell as exposure focused on UK banks, and euro zone government bond futures hit their highest level since late April, breaking out of the trading range that has been in place since June as risk aversion prompted by the crisis kicked in.
“The Dubai story is weighing heavily on stock markets and people are looking to safe-havens so there’s some flight to quality again,” said Charles Berry, a trader at LBBW.
The euro broke above 91 pence for the first time in a month to hit a high of 91.29 pence.
“There are concerns regarding the extent of the exposure of the UK banks to Dubai, hence sterling is coming under pressure,” said Ian Stannard, currency strategist at BNP Paribas.
European bank shares fell over 3 percent on concern about potential exposure. Dubai said on Wednesday that two of its key firms, Nakheel and Dubai World, plan to delay repayment on billions of dollars of debt.
Companies where Middle Eastern investors own big stakes, such as the London Stock Exchange were also hit by concern the holdings could be cut to meet obligations at home.
By 1020 GMT the DJ Stoxx European bank index .SX7P was down 3.5 percent at 221.7 points.
The fall was led by HSBC, Standard Chartered, Barclays, Deutsche Bank and Royal Bank of Scotland, whose shares all fell over 4 percent.
In Seoul, shares in construction issues fell, with Samsung C&T leading losses as investor concerns focused on Dubai’s once booming construction sector.
A Samsung C&T spokesman said that the company was currently working on a $350 million project awarded by Nakheel in 2007.
“So far, we have not had any problems with the project,” he said.
Shares in Hyundai Engineering & Construction were down 4.41 percent and Samsung Engineering fell 2.16 percent as of 0458 GMT.
Nakheel’s NAKHD.UL Islamic bond prices extended losses, falling 12 points to 72, their lowest since February, according to Reuters data.
DEBT DELAY
The Toronto stock market closed slightly lower Friday, pressured by falling energy stocks as demand concerns and a rising U.S. dollar pushed crude prices down.
The S&P/TSX composite index shed 20.97 points to 11,579.33, down for a second day on another rising tide of concern about whether the market has advanced too quickly relative to the strength of the economic rebound.
"Investors seem to need a constant reassurance with where we are in the economic recovery," said Brett D'Arcy, chief investment officer at CBIZ Wealth Management Group in San Diego.
"We just haven't gotten it in the past few days."
But the market advanced 171.65 points or 1.5 per cent this week on the way to a solid gain for November after a short-lived spell of pessimism sent the TSX down about four per cent for October.
"We're going to get periods of consolidation and the markets aren't going to go straight up," said Colin Cieszynski, market analyst at CMC Markets Canada.
"To have consolidations from time to time are not unheard of and, to be honest, they're healthy for the markets. You don't want to see the markets going straight up all the time."
The Canadian dollar was down 0.56 of a cent to 93.47 cents US as Federal Finance Minister Jim Flaherty said the Conservative government doesn't plan to undertake major new spending initiatives in next year's budget. Rather, it will continue with the $61 billion in stimulus spending announced in January.
There was also disappointment surrounding the latest earnings report from computer maker Dell Inc. The company said Thursday that its net income dropped 54 per cent to US$337 million in the latest quarter amid signs the company isn't fully benefiting from the computer industry's fledgling recovery.
Dell's numbers missed Wall Street's forecasts. However, it said it is seeing improvement in some areas even as it repeated an earlier prediction that a meaningful rebound in technology spending by businesses won't come until next year. Its stock was down $1.58 or 9.96 per cent to US$14.29.
The Toronto energy sector was down 0.67 per cent as oil moved lower for a second day. The December crude contract on the New York Mercantile Exchange dropped 74 cents to US$76.72 a barrel. Canadian Oil Sands Trust (TSX: COS.UN) declined 64 cents to $29.55.
The gold sector was off 0.54 per cent even as the December contract on the Nymex closed up $4.90 to a record US$1,146.80 an ounce. Kinross Gold (TSX: K) faded 32 cents to $20.39.
The base metals sector was down 0.37 per cent as the December copper contract rose 2.7 cents to US$3.108 a pound. HudBay Minerals (TSX: HBM) lost 46 cents to C$15.23.
The TSX tech sector was the biggest gainer, up 0.72 per cent with Research In Motion Ltd. (TSX: RIM) advancing 95 cents to $63.66.
The TSX Venture Exchange added 7.12 points to 1,408.06.
New York markers were also weak as demand for safe havens rose following Dell's report and as European Central Bank president Jean-Claude Trichet said the ECB plans to start reining in some of its stimulus programs. Hiking borrowing rates could help keep inflation in check but could also slow improvement in the economy.
Investors seeking safety pushed into the U.S. dollar. A strengthening dollar curtails foreign demand for commodities, which are traded in dollars. It also can depress U.S. exports, which become more expensive as the dollar rises.
The Dow Jones industrial average closed down 14.28 points to 10,318.16 but gained a slight 47.69 points for the week.
The Nasdaq composite index lost 10.78 points to 2,146.04 and the S&P 500 was off 3.52 points to 1,091.38.
American homebuilder D.R. Horton Inc. also was a letdown as it reported that its fiscal fourth-quarter loss narrowed as it took smaller writedowns on its inventory. Even as its losses shrank, revenue fell 42 per cent as the housing market remained unsteady and its shares dropped $1.88 or 15.35 per cent to US$10.37.
In other corporate news, Agrium Inc.'s (TSX: AGU) reluctant U.S. takeover target, CF Industries Holdings Inc. (NYSE: CF), made headway in a hostile bid of its own Friday, installing its nominees on the board of Terra Industries Inc. (NYSE: TRA). CF's efforts to buy out its U.S. rival for US$4.1-billion have been met with resistance from Terra's board and management since January.
Agrium, the Calgary-based fertilizer giant, has been doggedly trying to buy CF since February, making its nearly US$5-billion offer conditional on CF dropping its pursuit of Terra. Agrium shares were up 37 cents at $61.13.
Stocks recovered from early losses Tuesday, closing at 13-month highs for the second day in a row, as strength in commodity-linked shares offset weakness in the retail sector.
The Dow Jones industrial average (INDU) rose about 30 points, or 0.3%, to close at 10,437.42. The S&P 500 (SPX) gained 1 point to close above the key 1,100 level. The Nasdaq composite (COMP) advanced 0.3% to end at 2,203.78.
All three indexes are at their highest levels since October 2008.
Stocks opened lower and struggled for most of the day as the dollar regained ground against rival currencies, reflecting a decreased appetite for risky assets.
The tone improved in the last few hours of trading as oil and gold prices reversed direction. Oil closed above $79 a barrel, while gold edged up to settle at a fresh all-time high.
The rebound in commodity prices boosted shares of energy and materials companies. But gains were limited by weakness in the retail sector after Home Depot and Target offered cautious earnings outlooks.
Tuesday’s economic news was mixed. Government data showed inflation at the wholesale level remains subdued, while industrial production was weaker than expected in October.
Ryan Larson, senior equity trader at Voyager Asset Management, said the stock market continues to look to the dollar for direction.
"The main story has been the dollar trade," he said. "When the dollar is weak, investors take on more risk. If it’s strong, they take the risk off."
The dollar has wallowed near a 15-month low against rival currencies in recent weeks as investors take advantage of U.S. interest rates near zero percent to fund bets in more risky stock and commodities markets.
However, after pushing the major indexes up some 30% from the lows of early March, investors have become wary of placing big bets as the economic outlook remains cloudy.
"The economy is growing, but shows a loss of momentum given the recent round of economic and corporate data," said Nick Kalivas, vice president of financial research at MF Global.
Investors will digest reports on consumer prices and initial construction of new homes Wednesday morning. Later in the week, the government will report on the number of Americans filing first-time claims for unemployment benefits.
Stocks rallied Monday as investors bet on the weak dollar and Federal Reserve Chairman Ben Bernanke said interest rates will remain low amid a slow recovery.
Economy: The government reported that the Producer Price Index, the key measure of inflation for manufacturers, edged up 0 cash till payday.3% in October. Core PPI, which excludes volatile food and energy prices, fell 0.6%.
The PPI was expected to have risen 0.5% for the month, according to a consensus of economist opinion from Briefing.com. The core was expected to have edged up 0.1% in October.
Before the start of market trading, the government also reported that industrial production rose 0.1% last month versus a forecasted 0.4% increase. In September, production rose 0.7%. Capacity utilization rose by 0.2 percentage point to 70.7%, a rate slightly below economists’ expectations for 70.8%.
Companies: Home Depot (HD, Fortune 500) reported a decline in third-quarter earnings to 41 cents per share from 45 cents in the year-ago quarter. While the results were better than 36 cent per share profit that analysts had expected, the company said it expects earnings for the full year to be down 13%.
Discount retailer Target (TGT, Fortune 500) reported an 18% increase in third-quarter profit, helped by gains in the company’s credit card portfolio. But Target, which had suffered declining profits for the last eight quarters, remained cautious about the outlook for holiday spending.
TJX (TJX, Fortune 500), which owns the T.J. Maxx and Marshalls chains, reported a larger-than-expected quarterly profit on increased consumer demand for discount products. The company said it expects profit from continuing operations of 65 cents to 71 cents per share in the fourth quarter. Analysts surveyed by Thomson Reuters are forecasting a profit of 71 cents per share in the fourth-quarter.
On the higher end, Saks (SKS) reported a quarterly profit, surprising analysts who were expecting the company to report a loss. However, the results were driven mostly by cost-cutting, and the company offered a cautious outlook.
International markets: The Nikkei and the Hang Seng each closed lower by a fraction of a percent. European markets ended with losses of less than 1%.
Other markets: Treasury prices rose, with the yield on the 10-year note falling to 3.33%.
The weak dollar recovered a little Tuesday. The dollar index, which measures the U.S. currency against a basket of rivals, was up 0.7% to 75.38 from 74.92.
Oil prices rose 24 cents to settle at $79.14 barrel in New York.
The price of gold closed at an all-time high of $1,139.40 an ounce, up 20 cents from Monday’s record close of $1,139.80.
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