Gold Futures Climb as Fed Keeps Rates Steady; Silver Advances Gold surged the most in seven months on speculation the Federal Reserve won't rush to raise borrowing costs to curb inflation. Silver also gained. The Fed yesterday kept its benchmark interest rate at 2 percent, even as policy makers acknowledged heightening inflationary expectations. Gold reached an all-time high of $1,033.90 an ounce in March as fuel, corn and other commodities soared and the dollar fell to a record against the euro. "The Fed said that inflation is a major concern, but they're not going to do anything about it, which made gold go ballistic,'' said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois. "The dollar is going to get slammed again.''
Fed signals aggressive rate cutting is done Federal Reserve signals aggressive rate cuts are over; unclear about when rate hikes will come The Federal Reserve's aggressive period of cutting interest rates to keep the country from falling into a recession is over. That point is in general agreement. The trouble starts when you try to figure out what period the Fed has now entered. Could the central bank keep rates unchanged for a considerable period? Yes, many analysts say, predicting that the Fed will leave rates alone until next spring. However, other economists are still worried that the Fed could start ratcheting up rates much sooner than that, especially if this year's surge in oil prices does not soon abate.
Fed Shifts Its Concern to Inflation The Federal Reserve’s policy makers ratcheted up their worries about inflation on Wednesday without abandoning their view that the American economy is weak. They left the key short-term interest rate they control unchanged, ending a streak of rate cuts stretching back to last summer, when the bursting of the housing bubble and the ensuing credit squeeze brought economic growth almost to a halt. At the end of a two-day meeting, the Fed officials voted to hold at 2 percent the short-term federal funds rate, which affects what consumers pay for mortgages, car loans and other credit. In a statement, the 10 policy makers made inflation more of a concern than economic weakness, the first time they had done so in months. Wall Street Sold Auction-Rate to Investors as It Warned Issuers Yanping Cui, 57, says she invested in auction-rate bonds last December at the urging of a broker at UBS AG in Long Beach, California. The same month, UBS told one of the issuers of those securities, a New Hampshire student-loan agency, that the $330 billion market was in danger of failing. That's exactly what happened in February, when mounting mortgage losses forced dealers who underwrote and managed the market for more than 20 years to stop acting as buyers of last resort. Cui was told she wouldn't get her money back until the market recovered.
Housing Aid Bill Passes Senate Test A bill aimed at helping hundreds of thousands of homeowners in danger of foreclosure cleared an important test vote in the Senate on Tuesday, raising the prospects for final passage of an aid bill by mid-summer. By 83 to 9, the Senate agreed to end debate on the assistance package and move to a final vote, which could come very soon. The test vote was considered crucial, since 60 votes were required under Senate rules to bring the debate to a close. Housing legislation still has other obstacles to overcome, notably a veto threat from the White House. Differences between the Senate and the House, which approved a somewhat different housing-rescue bill by 266 to 154 last month, will have to be ironed out. And the senators will have to work out differences among themselves on various amendments to their version.
Americans, Hurt by Rising Gas Prices, Curb Spending, Poll Finds Most Americans say they are feeling the pain from rising gasoline prices and many are tightening their belts in response, a Bloomberg/Los Angeles Times survey shows. "It costs me double to fill up the tank,'' says J.L. Harder, a 75-year-old retiree and poll respondent in Peoria, Texas. ``We don't go on vacation and don't visit the relatives.'' He isn't alone. Seven in 10 of those surveyed say higher gas prices have caused them "financial hardship.'' More than 1 in 3 respondents say they have cut back on their spending over the last six months as oil and food prices surged and unemployment rose.
Oil prices rising after steep fall Oil futures rose sharply Thursday after OPEC's president said oil prices could rise well above $150 a barrel this year and Libya said it may cut oil production. Light, sweet crude for August delivery rose as high as $138.95 a barrel shortly after the New York Mercantile Exchange opened before retreating some to trade up $2.50 at 137.05. Chakib Khelil, president of the Organization of Petroleum Exporting Countries, said he believes oil prices could rise to between $150 and $170 a barrel this summer before declining later in the year. Khelil said he doesn't think prices will reach $200 a barrel. The head of Libya's national oil company said the country may cut crude production because the oil market is well supplied, according to news reports.
American Express sees worsening credit conditions MasterCard shares rose $13.86, or 4.9 percent, to $294.23 in midafternoon trading. American Express had accused the Purchase, N.Y.-based credit and debit card processor of conspiring to discourage some banks from issuing its credit cards. MasterCard said it agreed to make 12 quarterly payments of $150 million to American Express, and plans to book a $1 billion charge related to the settlement in the current fiscal quarter.
Countrywide's Pressures Mount Three States File Legal Actions; Holders Clear Sale The legal and financial pressures on Countrywide Financial Corp. mounted Wednesday as officials in three states filed separate legal actions against the mortgage lender. The actions, by the attorneys general of California and Illinois, and the Washington State Department of Financial Institutions, came on the same day that Countrywide shareholders voted to approve the sale of the company to Bank of America Corp. The all-stock transaction was valued at $4 billion when Bank of America agreed to buy Countrywide in January. But Bank of America shares have since slipped, and the value has fallen to about $2.8 billion. The transaction is scheduled to close on July 1.
Gloom with a view BUILDERS REVISE FORECASTS DOWNWARD The nation's housing market is in worse shape than anytime in more than 50 years, Harvard researchers said this week, and things are particularly bleak for most new-home builders. Even the economist for the California Building Industry Association said Wednesday that a statewide home-building recovery is a long way off. So where does that withering forecast leave thousands of home builders and building industry suppliers who depend on growth to survive?
Commodity Volatility Soaks General Mills Volatile commodity prices are making for soggy results at food manufacturer General Mills. On Wednesday, General Mills reported double-digit sales increases in its fiscal fourth quarter, ended May 25, but a drop in profits as the mark-to-market valuation of certain commodity positions ate into its accounting.
Lennar 2Q loss narrows; sees worsening conditions Lennar posts narrower 2nd-quarter loss, but sees housing market deterioration ahead Homebuilder Lennar Corp., said Thursday its fiscal second-quarter loss narrowed, but the company continued to struggle through the housing market doldrums, posting a 61 percent drop in revenue and taking hefty charges to write down land values and deposits. The Miami-based company, one of the nation's largest builders of residential homes, also said it expects further deterioration in the housing market this year.
Security Matters: I've Seen the Future, and It Has a Kill Switch It used to be that just the entertainment industries wanted to control your computers -- and televisions and iPods and everything else -- to ensure that you didn't violate any copyright rules. But now everyone else wants to get their hooks into your gear. OnStar will soon include the ability for the police to shut off your engine remotely. Buses are getting the same capability, in case terrorists want to re-enact the movie Speed. The Pentagon wants a kill switch installed on airplanes, and is worried about potential enemies installing kill switches on their own equipment. Microsoft is doing some of the most creative thinking along these lines, with something it's calling "Digital Manners Policies." According to its patent application, DMP-enabled devices would accept broadcast "orders" limiting capabilities. Cellphones could be remotely set to vibrate mode in restaurants and concert halls, and be turned off on airplanes and in hospitals. Cameras could be prohibited from taking pictures in locker rooms and museums, and recording equipment could be disabled in theaters. Professors finally could prevent students from texting one another during class. The possibilities are endless, and very dangerous. Making this work involves building a nearly flawless hierarchical system of authority.
Supreme Court Rules That Individuals Have Gun Rights The Supreme Court ruled Thursday that Americans have a right to own guns for self-defense and hunting, the justices' first major pronouncement on gun rights in U.S. history. The court's 5-4 ruling struck down the District of Columbia's 32-year-old ban on handguns as incompatible with gun rights under the Second Amendment. The decision went further than even the Bush administration wanted, but probably leaves most firearms laws intact. The court had not conclusively interpreted the Second Amendment since its ratification in 1791. The amendment reads: ''A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed.'' The basic issue for the justices was whether the amendment protects an individual's right to own guns no matter what, or whether that right is somehow tied to service in a state militia. Writing for the majority, Justice Antonin Scalia said that an individual right to bear arms is supported by ''the historical narrative'' both before and after the Second Amendment was adopted. The Constitution does not permit ''the absolute prohibition of handguns held and used for self-defense in the home,'' Scalia said. The court also struck down Washington's requirement that firearms be equipped with trigger locks.
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