Jin Liqun, chairman of China Investment Corp.
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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.
Payday loans can be risky because of the chance of identity theft. It is important to make sure that payday loan lenders are legitimate.
Japan
The reputation that Jamie Dimon honed for decades on Wall Street has been severely damaged in a matter of days.
In the 1980s and 1990s, he was the protege of banking industry legend Sanford Weill. In the early 2000s, he took over Bank One, an institution few believed was fixable, and restored it to a profit.
And in 2008 and 2009, at JPMorgan Chase, Dimon built a fortress strong enough to stay profitable during the financial crisis.
His zeal for cost-cutting and perceived mastery of risk did more than keep JPMorgan strong enough to bail out two failing competitors, Bear Stearns and Washington Mutual. It gave him a kind of street cred during the post-crisis years, when he lashed out at regulators who sought to rein in banks, and Occupy Wall Street protesters who raged against them.
Now all that is on the line.
Dimon had to face stock analysts and reporters on Thursday and confess to a “flawed, complex, poorly reviewed, poorly executed and poorly monitored” trading strategy that lost a surprise $2 billion.
The revelation caused traders to shave almost 10 percent off JPMorgan’s stock price the following day and brought a shower of complaints from industry observers and lawmakers who said banks needed tighter scrutiny.
Making the black eye worse for Dimon, the loss came in derivatives trading, the complex financial maneuvering that _ on a much greater scale _ led to large losses and dissolved banks during the financial crisis.
Dimon “staked so much of his reputation on creating this perception of being the ultimate, infallible risk manager,” said Simon Johnson, a former chief economist of the International Monetary Fund who is now a professor at MIT. “And along comes this huge mistake.”
Dimon, 56, grew up in the Queens borough of New York City, the grandson of a Greek immigrant. His father was a stockbroker who worked for many years at Merrill Lynch.
After college and business school, Dimon turned down an offer from the venerable investment bank Goldman Sachs. Weill had been Dimon’s father’s boss at a previous job and recruited the younger Dimon to American Express.
Weill became Dimon’s mentor. When Weill left American Express in 1986, Dimon followed him to Commercial Credit Co., a sleepy finance firm that catered to middle-class clients.
Weill went on to buy a host of companies, including Smith Barney and Travelers, and Dimon led some of those divisions. The empire-building culminated when Travelers merged with Citicorp to form Citigroup in 1998, the largest U.S. bank at that time.
Dimon was the heir apparent but had started to clash with Weill. Weill was insecure about Dimon’s growing assertiveness, and Dimon often showed his temper in meetings. Weill fired Dimon in 1998.
Dimon spent time reading biographies of statesmen and took up boxing lessons to let off steam. In 2000, he became CEO of Bank One, a Chicago bank that was losing money. By 2003, he had turned the bank around, and in 2004 it merged with JPMorgan Chase. Dimon became CEO of JPMorgan in 2006.
By that time, Dimon had lived through several industry crises, including the savings and loan meltdown of the late 1980s, a Russian debt default in 1998 and the dot-com stock bust of the early 2000s.
Dimon was not the man responsible for any of those, of course, as he is for the $2 billion error.
His admission of the mistake this week left some analysts asking whether his grip is slipping, and the bank’s more than $2 trillion in assets have become too big for him to manage.
More likely, some other analysts said, it is a statement about how, three and a half years after the crisis, banks still conduct impossibly complex trades that are difficult to track.
“If even Jamie gets it wrong managing a $2 trillion bank, what does it say about banks where management is far inferior?” said Mike Mayo, a bank analyst at the brokerage CLSA and author of the book “Exile on Wall Street.”
Just a few weeks ago, while answering questions from stock analysts, Dimon dismissed media reports of big market-moving trades by JPMorgan as a “complete tempest in a teapot quick payday loans.”
He admitted Thursday that he should have been paying better attention. Asked to what, he first said trading losses then said, “There was some stuff in the newspaper and a bunch of other stuff.”
Dimon’s signature trait has been cost-cutting, an attribute that helped the banks he led squirrel cash away. At Bank One, after finding out how many newspaper subscriptions the bank paid for, he is reported to have told an executive: “You’re a businessman; pay for your own Wall Street Journal.”
That low tolerance for profligacy kept the banks he managed strong enough to weather any crisis. Now, Dimon says the trade that was conducted is so complex that the losses could easily get worse.
JPMorgan’s $2 billion loss was caused by trades that were meant to hedge, or protect, the bank from trading losses that could occur in the investments of the bank’s corporate treasury.
The amount of the loss was small for an institution of JPMorgan’s size _ it cleared $19 billion in profit last year _ but will hurt its second-quarter earnings and was an embarrassment. It rattled the industry, too. Other bank stocks fell as much as 4 percent Friday.
“It puts egg on our face, and we deserve any criticism we get,” Dimon said at a hastily convened conference call with investors to reveal the losses.
During the crisis in 2008, Dimon drew wide praise for keeping his bank healthy, including from President Barack Obama and billionaire investor Warren Buffett. One biographical book that was released soon after the financial crisis was titled “Last Man Standing.”
In the years since, other Wall Street bankers and CEOs have cowered as the public backlash against bankers and their bonuses has grown. But Dimon, who made $23 million last year, according to an Associated Press calculation, used his stature to become the most outspoken banking CEO.
He attacked any obstacle that came in his way or his company’s _ especially regulations aimed at stopping banks from taking the kinds of risks that precipitated the financial crisis. Dimon viewed them as impediments to the bank’s ability to make a profit.
He did not even spare the Federal Reserve chairman, Ben Bernanke, or one of his iconic predecessors, Paul Volcker. At times, his outspokenness took on a swagger that raised eyebrows.
At a public forum last year, Dimon pointedly challenged Bernanke to defend his regulatory drive, which he said was going to slow down the U.S. economic recovery.
Earlier this year, Dimon said in a Fox Business Network interview: “Paul Volcker, by his own admission, has said he doesn’t understand capital markets. … He has proven that to me.”
One of the most respected Fed chiefs, Volcker has championed a law that restricts banks from trading with their own money.
Since Thursday, Dimon has contended the trades in question were meant to manage the bank’s financial risk, not turn a profit, and thus would not be subject to the so-called Volcker rule.
Outside analysts have been more skeptical, and the mistake has breathed energy into the push to toughen financial regulations. Dimon did say that he should have been paying closer attention.
“We know we were sloppy. We know we were stupid. We know there was bad judgment,” he told NBC News on Friday in an interview to air Sunday on “Meet the Press.”
He said he did not know whether laws had been broken and invited regulators to look into the matter. “But we intend to fix it and learn from it and be a better company when it’s done,” he added.
Most analysts gave Dimon kudos for coming clean on the trading loss, but few disagreed that his reputation had taken a severe hit.
Said Nancy Bush, longtime bank analyst at NAB research, and contributing editor at SNL Financial: “Jamie certainly cannot be standard-bearer for the banking industry anymore.”
After a precipitous four-year plunge in its share price, Research In Motion Ltd. has tumbled from its perch as Canada
Online practice tests for medical board exams. A system to trade recyclable materials. “The Hulu of foreign TV.”
Those are a few of the startups that received $50,000 Arch Grants Monday, winners of the first round of a new program designed to boost entrepreneurship in St. Louis. In all, 15 companies were awarded $750,000 in grants, which come with professional services and office space downtown.
The startups come from a mix of industries and backgrounds. Several are affiliated with other startup incubators in St. Louis. Four are moving here from elsewhere, including one from Costa Rica.
They were picked from more than 400 applicants from around the world, and most of the winners made it to Monday’s ceremony, where they gathered on a big staircase for the award presentation.
One of the people on that staircase was Dan Garcia. He’s a senior at Washington University, studying chemical engineering. He’s also director of science at Saturnis LLC, which is trying to commercialize a process for turning turn biomass into fuel for trucks and other vehicles.
Winning the grant is a big help, Garcia said, and will anchor his company in St. Louis – near plant research giants like Monsanto – for the forseeable future.
That’s the idea, said Jerry Schlichter, an attorney who co-founded the Arch Grants, to give companies with potential the chance to grow here in St. Louis, instead of going elsewhere for funding.
“We want to change the game here in St. Louis for entrepreneurs,” he said.
The event was held on the 10th floor of a downtown office building, with, fittingly, a picture-window view of the Arch. It was packed with bankers and biotech executives and other business leaders from around St. Louis. Gov. Jay Nixon was there, to talk about the importance of small business in growing Missouri’s economy.
Many of those business leaders – and Nixon’s Department of Economic Development – had kicked in money to fund the program. Arch Grants so far has raised just under $3 million in pledges, and plans more rounds of annual awards.
That money goes a long way, said Schlichter. It also sends a message that St. Louis is serious about startups.
“We’re building a community around entrepreneurship here,” he said. “The message we want to send is that St. Louis is the place, the place, to be for entrepreneurs.”
And to help pound that message home, they enlisted one of St. Louis’ best known entrepreneurs, Square co-founder Jim McKelvey, to address the crowd. McKelvey, who’s an advisor to the Arch Grants and helped judge the entrants, noted that starting a company from scratch can be “a lonely process.” But, he said, the people in that room want to help, and he hoped that message would resonate.
“We understand what it’s like in St. Louis, and we’re committed. Come to St. Louis, and you’ll be among friends,” McKelvey told the winners.
“Now get back to work.”
————–
Winners
Companion Pharma Inc. (veterinary medicine)
Food Essentials (Food labeling data analysis)
Graematter, Inc. (regulatory database)
IDC Projects (mobile, location-based social gaming)
Iveria TV (foreign-language TV streaming)
Labor Voices (crowd-sourced supply chain intelligence)
Material Mix (Exchange platform for trade in recyclables)
Med Preps (tests and flash cards for medical board exams)
Observable Networks (Network security and management)
Obsorb (small business work platform for web, smartphone and tablet)
Pharos Scientific (medical imaging)
Saturnis LLC (creating fuel from biomass)
simMachines (search engine technology)
Techli (blog for digital startup community in Midwest)
Unique Metal Solutions (pipe systems for food/beverage processing)
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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Show off a new gadget to your friends or family and inevitably one person in the group will declare, "Soon they’ll just plug these things directly into your brain!" And everyone will laugh, as if they’ve never heard that joke before.
It’s no joke.
An Intel-commissioned white paper released Wednesday on the future of mobile technology concludes that connected devices interfacing with the human brain is an inevitability.
Here’s how the paper’s authors, from consultancy Booz Allen Hamilton, put it: "As convergence continues across device types, functions, and capabilities, the melding of mobile technologies directly into the human body becomes the logical next step."
They add: "By harnessing the processing power and capabilities of mobile devices, for example, our biological brain will be augmented exponentially by a digital counterpart."
Don’t expect to plug your iPhone directly into your cranium in the next few years. There’s a few remaining steps on the path toward turning us all into cyborgs.
First, "form factors" need to die. If you can do it on your computer at work, you should be able to do the exact same thing on your smartphone, or even your glasses.
Processor speeds need to continue rising, and computers need to improve their natural-language support so we can interact with our devices like we would with another human being. Also, security has to advance so that devices can recognize their owners, eliminating the need for passwords.
It sounds like far-off sci-fi stuff, but all of those evolutions are in the works today.
Microsoft (, Fortune 500) is starting to show progress on its vision of one converged operating system for all devices. IBM (, Fortune 500) is making incredible strides in its Watson technology that can "understand" natural human language. Google’s (, Fortune 500) latest Android phones can recognize their owners’ faces to unlock their devices, and both Google and Microsoft are working on wearable computer displays.
Related story: 5 new looks for your future PC
So that’s step one: a lag-free operating system that anyone can use intuitively to perform any computing task.
Step two: Interfacing with the body. These kinds of interfaces are already operating in a relatively rudimentary way, with implants and pacemakers. But in its paper, Intel suggests that the link-up will be much more robust.
How robust? Well, have you seen The Matrix?
"With thoughts able to be delivered seamlessly to the cloud and data projected in real time onto our vision … our bodies and minds will become the devices with all of the associated benefits," the paper’s authors write.
You’ll literally be "plugged-in" to the cloud, so your brain will have access to all the information on the Internet. You’ll never again forget a name or miss a meeting. You won’t have to get a routine check-up from a doctor, either, since your gadgets will monitor your vital signs and test your blood for you.
Of course, for every wonderful benefit, there’s an equally scary potential consequence.
Think about all the privacy issues we have today with sites like Facebook. Now imagine giving people the capability to record everything they see and hear and immediately post it to the Internet. The human race could turn into something like Star Trek’s Borg, who can access the entire network and literally knew everyone’s thoughts.
Plus, how would exam-taking work? If people begin to rely on their connectedness like a crutch, can it just be turned off or wiped out for security purposes?
We’d better be prepared to answer these questions, because Intel (, Fortune 500) says it’s coming soon, whether we like it or not.
"While the future is never certain, a future where humans are infused with mobile technology where we are part of the device, our own bodies and brains part of the technology, and where there are no barriers to pure capability, is becoming more believable by the day," Intel’s paper concludes.
For the first time since the start of 2008, bonds were the only investments to provide positive returns amid renewed concern the global economy is slowing and as widening deficits in Europe threaten contagion.
Fixed-income assets — from Australian government debt to U.S. Treasuries to global junk bonds — gained 0.7 percent last month including reinvested interest, according to Bank of America Merrill Lynch index data. The MSCI All-Country World Index of stocks lost 1.1 percent including dividends while the Standard & Poor
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.
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