Treasuries erased losses as German and French finance ministers meet before a summit of regional leaders to discuss ways to contain the European debt crisis, stoking demand for government debt.
U.S. 10-year yields rose earlier on speculation record-low yields may limit demand as the government auctions $99 billion of coupon-bearing debt this week starting tomorrow. The U.S. will start this week
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Investors fled stocks and made a rush toward the safety of U.S. Treasuries Thursday, sending 10-year yield to a record low close, as worries about Greece’s future in the eurozone continued to escalate.
The Dow Jones industrial average () dropped 156 points, or 1.2%, and the S&P 500 () lost 20 points, or 1.5%. The day’s retreat marked the fifth day of declines for the Dow and S&P 500.
The Nasdaq () closed in the red for a fourth consecutive session, shedding 60 points, or 2.2%.
All three indexes ended at the lowest levels since January.
Concerns about Greece’s place in the 17-nation eurozone continued to build, pushing investors toward U.S. government debt, which is perceived as a safe haven investment. The yield on the 10-year Treasury was 1.706% Thursday, the lowest closing level on record.
Greece downgraded deeper into junk
European leaders voiced support Wednesday for keeping Greece in the body, but said the debt-ridden country must stick with unpopular austerity measures if it wants to continue receiving help.
Greek voters rebelled against those measures in the May 6 elections, denying the ruling coalition — which had agreed to the bailout terms — the votes needed to form a new government. Greek voters will go to the polls again on June 17.
Though the ability to form a governing coalition remains uncertain, the main fear is that an anti-austerity ruling party could cause the bailout deal to unravel, leading to a Greek default and an exit from the euro.
Citing the "heightened risk that Greece may not be able to sustain its membership of Economic and Monetary Union," Fitch Ratings downgraded Greece’s credit rating by one notch to CCC.
Adding to those concerns, the European Central Bank has suspended its lending to some Greek banks that need to sufficiently boost their capital.
Meanwhile, a growing number of depositors are withdrawing their money amid worries that their savings could be converted to a devalued currency if Greece drops the euro.
The rapid withdrawals add pressure on the Greek banking system, which is the "primary trigger for some from of the eurozone break-up," said Jonathan Loynes, chief European economist at Capital Economics.
Investors remain worried about what a Greek exit from the eurozone would mean for global financial systems.
"Not surprisingly, concerns are growing that bank runs could soon become a regular feature in other troubled countries in the region deemed at risk of following Greece’s lead," said Loynes.
Adding to Europe’s troubles, Spain got yet another slap in the face Thursday, when Moody’s Investors Service downgraded sixteen Spanish banks including giants Banco Santander and BBVA, saying the Spanish government’s "ability to provide support to the banks has reduced." Earlier the ratings agency downgraded four of the country’s regional governments.
Stocks finished in the red Wednesday, as positive economic data in the U.S. failed to counter increasing pessimism over Greece’s fiscal woes.
Companies: Facebook ()priced its initial public offering at $38 a share after the closing bell Thursday. Shares of Facebook will begin trading Friday on the Nasdaq.
The offering raised $16 billion, making it the most valuable tech IPO in history.
Facebook’s IPO price: $38 per share
Retail giants Wal-Mart (, Fortune 500) and Sears Holdings (, Fortune 500) were among the biggest gainers Thursday. Wal-Mart, the nation’s largest retailer, posted stronger-than-expected quarterly earnings and sales.
Rival Sears also reported a profit, even as sales declined, thanks to a boost from selling real estate assets. The retailer also announced it was looking at a partial spin-off of its Canadian operations.
Shares of JPMorgan Chase (, Fortune 500) fell Thursday, a day after the director of the FBI confirmed his agency had launched an initial investigation into a $2 billion trading loss suffered by the bank.
Economy: Initial jobless claims were unchanged in the week ended May 12 from the revised figure of 370,000. The number came in weaker than expected.
Foreclosures fell for the third straight month in April, reaching the lowest level since 2007, according to tracking service RealtyTrac.
A Philadelphia Fed report showed that regional manufacturing unexpectedly plunged in May for the first time in eight months. The Philly Fed index fell to -5.8 from 8.5 in April. Economists were expecting the index to increase to 8.8. Any reading below zero indicates weakness.
The index of leading indicators, which gauges the economy’s performance over the next three to six months, was also discouraging. The index fell 0.1% in April, disappointing economists who expected it to rise 0.2%.
World markets: European stocks slid on Thursday. Britain’s FTSE 100 () and the DAX () in Germany slipped 1.2% and France’s CAC 40 () fell 1.1%.
Most Asian markets ended higher following a report that showed the Japanese economy grew 1% in the first quarter, which was much better than forecasts. Tokyo’s Nikkei () gained 0.9% on the news, while the Shanghai Composite () rose 1.4%. Hong Kong’s Hang Seng () slipped 0.3%.
Currencies and commodities: The dollar fell against the Japanese yen, but edged higher against the euro and British pound.
Oil for June delivery edged down 25 cents to settle at $92.56 a barrel.
Gold futures for June delivery rose $38.30 to settle at $1,5574.90 an ounce.
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Stocks plunged Friday after the government reported that hiring slowed sharply last month. The report confirmed investors’ fears that the U.S. economic recovery is faltering.
The losses in the market were widespread. The Dow Jones industrial average lost 168 points and the Nasdaq composite had its worst day since Nov. 9. Both the Nasdaq and the Standard & Poor’s 500 index closed out their worst weeks of the year. The Dow had its second-worst.
The dollar and U.S. Treasury prices rose as investors dumped risky assets and moved money into lower-risk investments. Energy stocks were among the hardest hit after the price of oil fell below $100 a barrel for the first time since February. Only one of the 10 industry groups in the S&P 500 rose, utilities, which investors tend to buy when they’re nervous about the economy.
“The jobs numbers were a disappointment,” said Phil Orlando, chief equity strategist at Federated Investors.
It was the third straight daily loss for the Dow, but it’s too early to know if it’s the start of a correction in the market. Even after its 1.4 percent decline this week, the Dow is still up 6.7 percent this year.
Investors are on edge about Europe once again as France and Greece both hold elections over the weekend. In France the socialist candidate Francois Hollande has a chance to unseat the incumbent Nicolas Sarkozy, who has been at the forefront of fashioning Europe’s efforts to prevent its share currency from collapsing.
Crude oil plunged $4 to $98.49 a barrel on worries that demand would drop because of a weakening world economy. It was the first time oil has dropped below $100 since February 13.
The late slump in the week was a stark contrast to Monday, when the Dow closed at its highest level more than four years, propelled by a report that showed a pickup in manufacturing. All that become a distant memory after a slew of poor economic reports were released in the rest of the week.
On Thursday major retailers including Costco and Macy’s reported that April sales inched up less that 1 percent, the worst performance since 2009. Thursday also brought news that U.S. service companies expanded their business more slowly in April.
The Dow closed down 168.32 points, or 1.3 percent, at 13,038. All 30 companies that make up the index fell, led by Bank of America and Cisco.
The S&P 500 slipped 22.47 points, or 1.6 percent, to 1,369, while the Nasdaq index fell 67.96 points, or 2.2 percent, to 2,956.
For the week, the S&P lost 2.4 percent, the Nasdaq 3.7 percent.
The yield on the benchmark 10-year Treasury note dropped sharply to 1.88 percent from 1.92 percent late Thursday as demand increased for safe investments payday loan lenders. The yield hasn’t settled that low since early February.
The culprit for the distress in financial markets was a report from the Labor Department Friday showing that U.S. job growth slumped in April for a second straight month. The 115,000 jobs added were fewer than the 154,000 jobs created in March.
Job creation is the fuel for the nation’s economic growth. When more people have jobs, they have more money to spend.
Orlando noted that the first few months of the year were marked by a number of abnormal conditions including an uncharacteristically warm January and February. That led to a spurt in hiring which usually occurs in spring.
Retail sales and hiring were also affected by an earlier Easter, which fell on April 8 this year, 16 days earlier than last year. That pushed some retail sales ahead to March, leaving April’s numbers weaker than they might have been. Retailers also blamed a late Mother’s Day for pushing some sales out of April and into May. Unusually warm weather in February and March also pulled forward some sales that would have normally occurred in April.
“The surge in hiring and spending that usually occurs in March through April, occurred earlier in the year this year,” said Orlando. “We have to wait for economic numbers from May and June to get a better idea of the underlying strength of this economy.”
After the price of oil fell, energy company stocks turned lower in response. Southwestern Energy Co. fell 7 percent and Marathon Oil Corp. fell 3 percent.
In other trading:
_ Warnaco Group Inc. dropped over 6 percent after the clothing maker lowered its 2012 forecast and said that its first-quarter net income fell, hurt by the weak European economy.
_ Aon Corp. fell almost 6 percent after the insurance broker reported first-quarter net income fell 3 percent due to higher costs and unfavorable currency exchange rates.
_ LinkedIn Corp. rose 7 percent after announcing late Thursday that its first-quarter profit more than doubled, topping expectations. The social networking company also announced an acquisition.
_ Tilly’s Inc. climbed 8 percent in the clothing retailer’s debut on the New York Stock Exchange. Tilly’s sells surf-inspired and casual West Coast-styled clothing and accessories.
_ Einstein Noah Restaurant Group Inc. soared 19 percent after the owner of bagel chain Noah’s Bagels said it is considering strategic alternatives, including a possible sale of the company
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Bank of England Governor Mervyn King said central bank officials are prepared to take unpopular measures to prevent banking excesses from undermining financial stability and economic growth.
Europe may add an annex to its budget treaty spelling out how countries can boost growth as the bloc shifts its emphasis on tackling the debt crisis, a German government official said.
Steps to raise competitiveness along with structural reforms are likely to feature in the prescriptions for growth, with a target date for completion by the June 18-19 Group of 20 leaders
A feud over the riches of South Korea’s Samsung business empire has erupted in public as family members prepare to take an inheritance battle to court.
Lee Kun-hee, chairman of Samsung Electronics Co., which is the flagship company of the Samsung conglomerate, is facing off against his older brother, a sister and a nephew’s wife who all want a bigger piece of the Samsung cake.
The court battle might upset a dynastic succession in Samsung’s leadership as it could result in the unraveling of a cross-shareholding structure that allows Lee Kun-hee to control the group as a minority shareholder.
Lee, who is South Korea’s wealthiest individual, on Tuesday took the rare step of publicly attacking his brother, Lee Meng-hee, declaring on YTN television that the 81-year-old “has been already kicked out from our home.” Lee Meng-hee had earlier called his brother “greedy” and “childlike.”
Battles for control of Chaebol, South Korea’s family-controlled industrial groups that wield immense power over the economy, are not uncommon but it is unusual for the internal wrangling to become public.
Lee Meng-hee filed a lawsuit in February, demanding more than 700 billion won ($613 million) of shares in Samsung Life Insurance Co. and other companies. Similar claims followed by Lee’s older sister and the wife of a dead nephew.
Lee Kun-hee, the third son of Samsung founder Lee Byung-chull, was tapped in 1979 by his father to lead what would become South Korea’s most valuable company. The decision apparently disappointed Lee Meng-hee who later wrote in his autobiography that he had thought his father would turn over the throne to him.
The 70-year-old Samsung chairman has refused to settle the dispute out of court. A date for the first hearing in the case will be announced after the court reviews responses from Samsung, said lawyer Jeong Jin-su of Yoon & Yang LLC, which represents the three plaintiffs.
The family members have taken to public denunciations that are being lappped up by local media.
“I’m trying to retrieve my property that Lee Kun-hee has been hiding for 25 years,” his sister Lee Suk-hee said in a statement released by the law firm.
Spain will restore border checks and suspend the treaty that makes the EU frontier-free for travelers as it hosts a European Central Bank meeting next month.
An Interior Ministry official said Friday the so-called Schengen Treaty will be suspended right before and during the May 3 meeting in Barcelona. The bank’s governing council meets outside its Frankfurt headquarters periodically.
Spain is suspending the accord because it believes large numbers of protesters will come to Barcelona, in particular people from Italy and Greece, which are reeling under austerity measures guaranteed fast personal loans.
The official spoke on condition of anonymity in line with ministry policy.
Barcelona saw riots during a March 29 general strike. A beefed-up police presence is planned for the ECB meeting.
The number of people seeking U.S. unemployment benefits suggests hiring is slowing.
The Labor Department said Thursday that weekly applications dipped last week by 2,000 to a seasonally adjusted 386,000. But that was only after the department revised up the previous week’s data to show 8,000 more people applied for benefits than first estimated.
The four-week average, a less volatile measure, rose last week by 5,500, to 374,750. That’s the highest level in three months, although it is still 9 percent lower than the level from September.
Applications have started to tick up in recent weeks after months of steady declines. When applications fall below 375,000, it generally suggests hiring will be strong enough to lower the unemployment rate.
Some economists said temporary layoffs stemming from the spring holidays have inflated the figures. Many school employees are laid off during spring break and are eligible to file for benefits.
“What we’re seeing in the numbers is not unusual at this time of year,” said Carl Riccadonna, an economist at Deutsche Bank. Applications will likely fall in the coming weeks, he added.
Others said the gains may not only reflect seasonal adjustments.
“Discouraging news on initial jobless claims suggests job growth is slowing,” said Jennifer Lee, an economist at BMO Capital Markets. “Still growing, mind you, but at a slower pace.”
Hiring weakened in March after a fast start this year. Employers added only 120,000 jobs in March _ half the pace of the previous three months.
Many economists downplayed the weak March figures, noting that a warmer winter may have led to some earlier hiring in January and February. They have noted that the economy has added an average of 212,000 jobs per month in the January-March quarter, well ahead of last year’s pace.
The unemployment rate has fallen to 8.2 percent in March from 9.1 percent in August. Part of the drop was because people gave up looking for work. People who are out of work but not looking for jobs aren’t counted among the unemployed.
Lower benefit applications indicate that companies are cutting fewer jobs. And economists note that unemployment benefit applications are at a much lower level than they were last year, which is a hopeful sign that March’s weak numbers were a temporary lull. Economists say they will have a better sense of the trend in hiring when the government issues the April jobs report next month.
The deal is done, and now the reviews are coming in on Anheuser-Busch InBev’s takeover of the Dominican Republic’s national brewer.
The consensus: Smart, but spendy.
Bernstein Research senior analyst Trevor Stirling calls the $1.2 billion deal for a controlling stake in Presidente parent Cerveceria Nacional Dominicana “strategically attractive,” if also “pricey.”
ABI was already in the market - the Caribbean’s second-largest - with its Brahma label, but by combining two competitors, the brewer will now control 99 percent of all beer sales, which will allow them to “restore a healthy pricing environment” (in other words, beer’s about to get more expensive in Santo Domingo). It’ll also give them a strong platform to keep growing in that part of the world.
Stirling was confident in ABI’s ability to cut costs and make the operation more efficient. But he also noted that, at a price that’s 24 times CND’s earnings before interest, taxes depreciation and amortization, the deal was the most expensive beer merger in recent memory (on an EBITDA basis it cost twice what InBev paid for A-B in 2008, for instance) business card.
Fitch Ratings, too, calls the deal “a strategic positive,” and notes that the terms of the purchase mean that ABI could eventually own a 90 percent stake in CND. The Dominican brewer could “benefit greatly from the expertise” at InBev, which has a “great track record of integrating acquisitions and increasing profitability.”
“But at what a price!” wrote Beer Business Daily, which, like several other outlets reports that interest from Heineken drove up the price tag for CND. Still, BBD wrote “La Maquina (The Machine) continues to feed on what acquisitions they can get done out there.”
European officials travel to Washington this week seeking a bigger global war chest to combat the debt crisis as Spain
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