Thursday, May 7, 2009

Quick Notes for the Day - May 7

The Fed & Regulations - The Federal Reserve will be a more forceful bank regulator in the future as a result of the current banking crisis, Federal Reserve Board Chairman Ben Bernanke said this morning. The crisis generated "extensive introspection" at The Fed, Bernanke said. The conclusion was that there is a need for "heightened vigilance and forcefulness" on the part of supervisors, he said. Bernanke defended the bank stress tests as "rigorous." Despite its failings, the Fed doesn't want to give up any of its regulatory powers, Bernanke said. The Fed chairman repeated that Washington needs new powers to address the risks to the financial system as a whole. Some members of Congress want this authority to be given to the Fed.

ECB Cuts Its Rate - The European Central Bank (ECB) cut its key interest rate by a quarter point to 1%, a new low for the Frankfurt-based central bank that sets interest rate policy in the euro zone.

Bank of England Purchasing Bonds - The Bank of England on Thursday held interest rates at record-low levels at 0.5%, as anticipated, but surprisingly increased its bond purchase program to 125 billion pounds from 75 billion pounds.

Wal-Mart April Sales Up - Wal-Mart said Thursday that its April sales rose 5%, exceeding its own projection and analysts' 2.9% average estimate. Sales at Wal-Mart stores in the U.S. rose 5.9%, exceeding estimates, helped in part by the Easter calendar shift and an acceleration of traffic and strength in seasonal and discretionary items. Home products had positive sales. The company expects second-quarter to face "challenging comparisons" to the year-earlier quarter, which benefited from the stimulus checks. Sam's Club sales were up 0.3%, missing estimates of a 1.8% gain as jewelry and furniture sales remained soft. The wholesale club chain also was hurt by the closing of stores on Easter Sunday. Meanwhile, the H1N1 swine flu outbreak has affected operations at Walmex in Mexico, Wal-Mart said. Looking forward, Wal-Mart said it will no longer report monthly sales.

Initial Jobless Claims Drop - First-time claims for state unemployment benefits fell to the lowest level since late January, the Labor Department reported Thursday, in a sign that a peak may have been passed. The number of initial claims in the week ending May 2 fell 34,000 to 601,000. The four-week average of these initial claims fell 14,750 to 623,500. However, the level of ongoing claims continues to reach record highs, with a gain of 56,000 to reach 6.35 million in the week ending April 25. The four-week moving average of continuing claims also hit yet another record high, rising 125,250 to 6.21 million. The U.S. insured unemployment rate, which represents the portion of all workers covered by unemployment insurance who are collecting benefits, rose to 4.8% (the highest level since December 1982).

Productivity Rises in 1st Quarter - Productivity rose in the first quarter as firms slashed their workforce, outpacing the drop in output, the Labor Department reported Thursday. Productivity in the nonfarm business sector - output per hour worked - rose at a seasonally adjusted annual rate of 0.8% in the quarter as output fell 8.2%, while hours worked fell 9% (the largest drop in hours since 1975). Economists had expected no change in productivity, and a 3% gain in unit labor costs. Compared with the first quarter in the prior year, productivity was up 1.8%, while unit labor costs rose 2.4%. Within manufacturing, productivity fell 3.4%, while output fell a record 22.4% and hours declined a record 19.7%. The data go back to 1987. Unit labor costs in manufacturing rose 16.7%.

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