Finance topics

U.S. stock futures are falling as traders close out what could be the worst quarter since the peak of the financial crisis.

Fears about a European debt crisis with potentially catastrophic consequences have weighed on markets since the spring. Economic data are mostly weak. Major stock indexes have fallen more than 10 percent. The Standard & Poor’s 500 index is down 12 percent _ the most since the final quarter of 2008.

The government reports before the market opens on consumer spending and personal incomes in August easy to get unsecured personal loans. Economists expect spending edged up after rising in July.

At 7:33 a.m. Eastern time, S&P 500 futures were down 14, or 1.2 percent, at 1,143. Dow futures were down 118, or 1.1 percent, at 10,981. Nasdaq 100 futures were down 22, or 1 percent, at 2,168.

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Federal Reserve Chairman Ben Bernanke says the United States and other rich nations could re-learn a few lessons from developing countries: Adopt disciplined budget policies, embrace free trade, make public investments and support education.

Bernanke’s speech about the explosion of growth in the developing world was largely academic. But in his conclusion, he appears to criticize U.S. lawmakers and others in developed countries who he says have failed to embrace some key economic principles.

Bernanke has cautioned U.S. lawmakers against cutting deficits too quickly to reduce budget deficits. He has said that could put the fragile economy at risk.

In his speech, Bernanke suggests many emerging countries have enjoyed three decades of strong economic growth with support from their governments. .

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The Securities and Exchange Commission is considering taking civil action against Standard & Poor’s for its rating of a 2007 mortgage debt offering low rates payday advance. Such action could be just the first shot in a legal assault against the major credit rating agencies.

The three major agencies

Someone is about to play the fool _ Wall Street analysts or investors.

For months, analysts who write reports praising or panning stocks have been saying they were cheap. Investors were unconvinced, buying one day, selling the next. Last week, they mostly sold, and stocks got cheaper yet.

The Dow Jones industrial average rose slightly Friday but closed the week down 6.4 percent, its worst showing since the depths of the financial crisis three years ago. In the broader Standard & Poor’s 500, the selling pushed down all variety of stocks _ sexy high techs and staid utilities, risky small companies and cash-rich big ones.

Stock prices compared to expected profits are now nearly as low as they were in March 2009, a 12-year nadir that marked the beginning of one of the greatest bull markets in history.

Have investors sold too much, as they did back then?

“I’d be buying the market,” says Citigroup’s chief U.S. strategist Tobias Levkovitch, who warned that prices were too high in the spring. Says Harris Private Bank’s Jack Ablin, who sold $6 billion or so of stock in August, “We’re sharpening our pencils to figure out when to get back in.”

Who’s right _ or who’s about to play the fool _ may turn on earnings, or rather, analysts’ estimates of how fast they will grow.

Recently, they’ve been cutting them for companies in the S&P 500 as fears of another recession spread. But they’re still predicting they will earn 13 percent more earnings in the three months through September than they did in the same period a year ago, according to data provider FactSet. That would mark the eighth straight quarter of double-digit gains. And for the full year, analysts say earnings will hit a record.

“You can throw toss (those estimates) in the garbage,” says Peter Boockvar, equity strategist at brokerage Miller Tabak & Co. “Will Greece go bankrupt? What will be the extent of the global economic slowdown? I can’t get that out of an analyst report.”

If history is any guide, more cuts from analysts are coming.

One ominous sign: Those who changed their estimates this month chose to cut them more than six out 10 times, according to Citigroup. Early last month, raised estimates outnumbered lowered ones by nearly the same ratio.

Analysts are easy to bash. They usually tend to far too optimistic, cheering on stocks long after they’ve headed down. Now they want us to believe that companies can continue making record profits in the face of falling housing prices, tightfisted consumers, sputtering U.S. growth and a European debt crisis that is pushing a crucial market for U.S. exports closer to recession.

But it’s worth remembering that it’s been the naysayers, the investors, and not the optimistic analysts, who’ve mostly been wrong lately.

At the start of the bull market, investors worried that companies couldn’t generate enough profits in such an anemic economy. Then companies cut expenses to the bone, and profits soared. Investors next worried that companies wouldn’t be able to sell more, and that profits were bound to fall. And then companies defied expectations again with higher revenue, much of it overseas.

In fact, if anything, analysts haven’t been optimistic enough. For several quarters, nearly three out four companies have posted profits greater than analysts had estimated, FactSet says.

At Friday’s close, the S&P 500 was trading at 10.6 times analyst estimates for earnings over the next 12 months. That’s low for this so-called earnings multiple, which could mean stocks are cheap. When stocks bottomed on March 9, 2009, they were trading at 10.4 times estimated earnings. The 10-year average is 15.

Of course, the multiple might not look so appetizing in hindsight if companies’ results show the estimates were too high.

That won’t be clear at least for another two weeks when companies start reporting third-quarter results. But already investors are getting a taste of might be in store.

On Thursday, FedEx Corp., the world’s second-biggest package delivery company, met earnings expectations for the three months that ended in August. But it cut its target for full-year earnings, citing a slowdown in shipments from Asia. The stock fell to a two-year low.

Then, after the markets closed, some good news. Nike, the world’s largest athletic shoe maker, posted surprisingly strong earnings. It cited robust sales in India and China. The stock rose 5.3 percent Friday.

“The highest growth for companies has been in the emerging markets,” says John Butters, senior earnings analyst at FactSet. “We’re getting mixed signals.”

The good news is that even if analysts ended up playing the fools this time, stocks could still rise.

Harris Private Bank’s Ablin says analysts are “out to lunch” with their cheery projections. But he thinks investors may have overreacted, too. He says they’re selling as if earnings will fall 20 percent or so next year, which he thinks won’t happen.

“Investors are so dour, reality could surprise,” he says.

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Under pressure from skeptical financial markets, the world’s economic powers scrambled on Saturday for ways to keep Europe’s debt crisis from spiraling out of control.

The continent’s financial woes grabbed the attention of the policy-setting committees of the 187-nation International Monetary Fund and the World Bank during the lending institutions’ annual meetings.

Treasury Secretary Timothy Geithner told the IMF panel that the debt crisis posed the most serious threat to the global economy and that failure to take bold action raised the risk of domino-style defaults by heavily indebted European countries.

He said the European Central Bank should try to ensure that governments pursuing sound reforms could get loans at affordable rates and that European banks have access to the capital they need to operate. The ECB is the central bank for the 17 nations that use the euro as a common currency.

Global financial markets plunged this week on fears of a possible default within weeks by Greece on its government debt and on worries a default would cause runs on major European banks with heavy exposure to Athens’ debt.

“The threat of cascading default, bank runs and catastrophic risk must be taken off the table. Otherwise, it will undermine all other efforts, both within Europe and globally,” Geithner said. “Decisions as to how to conclusively address the region’s problems cannot wait until the crisis gets even more severe.”

Geithner was one of a number of finance leaders demanding forceful action.

Mark Carney, the head of Canada’s central bank, called for “overwhelming” the problem with a big increase in Europe’s rescue fund for heavily indebted countries.

In an interview with CBC radio, Carney suggested that a European financial stability fund should be increased from 440 billion euros to 1 trillion euros. At current exchange rates, that would be the equivalent of expanding a $590 billion fund to $1.35 trillion.

“You need a big pot of money,” he said.

For Christine Lagarde, who took over as head of the IMF in June, the debt crisis was a tough first test. Lagarde has warned that without strong and collective action, the world’s major economies risk slipping back into recession.

To avoid that, finance officials of the Group of 20 major economies pledged on Thursday to “take all necessary actions to preserve the stability of banking systems and financial markets.”

But private economists have questioned whether the plan goes far enough to deal with market concerns that a Greek default is a virtual certainty.

German Finance Minister Wolfgang Schaeuble said a second bailout package for Greece may have to be re-evaluated because of Athens’ problems in fulfilling earlier financial promises.

This re-evaluation could include changing the terms of the voluntary contribution from banks and other private investors to Greece’s rescue, two European officials said.

One of the officials said that Germany and other rich eurozone nations, including the Netherlands and Austria, are now pushing for an “orderly default” by Greece. That would entail losses for investors that go beyond the 21 percent cut in the face value of government bonds foreseen under the voluntary contribution. The officials spoke on condition of anonymity because of the sensitivity of the issue.

The comments underline how confidence is eroding among core eurozone countries over whether they can actually save Greece. The Greek debt is close to 160 percent of its gross domestic product and its economy looks set for a fourth straight year of recession.

Stock markets in Europe and the U.S. recouped some of their previous day’s hefty losses Friday, but investors remained skeptical about whether the world’s leading economies can keep the global economy from going over the cliff.

Despite the modest gains Friday, the worries are piling up for investors. The Federal Reserve warned this week that the American economy is in significant difficulty, while there were several downbeat European and Asian economic indicators.

Sung Won Sohn, an economics professor at California State University’s Martin Smith School of Business said the great concern is that if Greece doesn’t make further painful cuts in government spending and ends up defaulting on its debt, the shock waves will rock big banks in Europe.

He said this would cause fearful investors to sell bonds of other heavily indebted countries such as Italy and Spain, countries with much bigger economies.

“The fear in markets is that the problem will spread to bigger economies such as Spain and Italy. Europe would not have the resources to handle a crisis of that magnitude,” Sohn said.

The finance officials at the Washington meeting said they believed that the 17 nations that use the common euro currency were getting the message they needed to move more quickly to reform their surveillance procedures and increase economic support.

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Associated Press writers Martin Crutsinger and Luis Alonso Lugo in Washington and Sarah DiLorenzo in Paris contributed to this report.

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Since James Carrington landed the lead role at the Donald Danforth Plant Science Center, the center has seen an infusion of cash, adding to an already impressive endowment. In January, the Danforth Foundation announced its final gift to center

The International Monetary Fund says the global financial system is more vulnerable than at any point since the 2008 financial crisis.

Risks to banks and financial markets have increased in recent months, the global lending organization said in a report Wednesday. The European debt crisis is affecting its banking system to the point where banks may pull back on lending to conserve cash, which threatens to worsen growth in the region.

Meanwhile, there are growing doubts that the U.S. lawmakers can forge the political consensus needed to reduce its growing budget deficits. Rising deficits were a key reason Standard & Poor’s downgraded long-term U.S. debt last month.

European leaders should quickly implement an agreement reached in July that provides the region’s bailout fund with more flexibility, while the U.S. and Japan must phase in steps to reduce their deficits, the IMF said.

“Risks are elevated, and time is running out to tackle vulnerabilities that threaten the global financial system and the ongoing economic recovery,” the IMF said in its semi-annual Global Financial Stability report.

The report is the second warning from fund in as many days. On Tuesday, the IMF sharply cut its growth forecasts for the global economy, the United States and Europe for this year and 2012.

The 187-member group is holding its annual meeting at the end of this week in Washington. The meeting brings together finance ministers and central bankers from around the world.

The IMF has been stepping up its pressure on Europe to resolve its financial problems, which the fund sees as major threats to the global economy. Political squabbling between European leaders has interfered with the region’s ability to reach a sustainable solution, the report said pay day loans.

Olivier Blanchard, the IMF’s chief economist, said Tuesday that “Europe must get its act together.” He criticized its leaders for being “one step behind the action.”

The IMF contributed $41 billion to a $150 billion rescue package for Greece assembled by European leaders in May 2010. Officials from the IMF and European Central Bank are reviewing Greece’s progress in cutting its government budget deficit before providing the next installment of funds from that loan.

Europe’s larger banks, which hold substantial amounts of Greek and other troubled government bonds, should boost their capital reserves, the IMF said. That would protect them in case the bonds lose more of their value or Greece defaults on its debts.

The capital should come from private markets, the IMF said. But if that isn’t available, governments should provide the funds.

In the United States, policymakers should take steps to improve the financial position of U.S. households, the report said. One way to do that would be to reduce mortgage debt for those Americans who owe more on their homes than they are worth. About one-quarter of U.S. homeowners are in that position. Reducing that debt burden would improve consumer demand and support growth, the report said.

“Restoring confidence in the stability of the U.S. housing market is the key to bolstering the prospects for U.S. banks,” which have been hurt by slower growth, the report said.

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The United Auto Workers union won $5,000 signing bonuses, the possibility of sweeter profit-sharing checks and guarantees of more union jobs as part of a new four-year contract with General Motors Co., two people briefed on the talks said Saturday.

The deal, reached late Friday, also includes a $2- to $3-per-hour-pay raise for entry-level workers over the life of the contract and the promise of more jobs, the people said.

Both persons asked to remain anonymous because the details of the contract haven’t been reviewed by all local union leaders.

In addition, workers could get profit-sharing checks that are larger than the roughly $4,000 they received based on the company’s earnings last year. But the formula was changed so it is based only on GM’s North American financial results, said the people.

The GM deal will serve as a template for contracts that still must be negotiated with Chrysler Group LLC and Ford Motor Co. It would set the pay and benefits for 112,500 U.S. auto workers. It also will set the bar for pay and benefits at nonunion auto companies and other industries across the country.

The contract is the first since GM and Chrysler received government bailouts to make it through bankruptcy protection in 2009.

The UAW and GM would not give details of the contract. Union President Bob King said Friday that he won’t talk about them until local union leaders are briefed on the pact Tuesday in Detroit.

Workers have to approve the contract before it can take effect. A vote is expected within 10 days.

The union said in a statement Friday that the pact includes some of its major goals, including improvements in profit-sharing, new jobs and better health care benefits.

The deal also will include creative ways to cut GM’s hourly labor costs, which at $56 are still higher than those at nonunion U.S. plants owned by foreign competitors.

GM was the first of the Detroit Three to reach agreement with the UAW. Chrysler is likely to be next, followed by Ford, where little progress has been made in negotiations so far.

The UAW announced the GM agreement just after 11 p.m. EDT Friday, after a little more than seven weeks of closed-door bargaining.

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A magnitude-6.6 earthquake shook the east coast of Japan off Honshu early Saturday morning, the U.S. Geological Survey reported. No tsunami warning was issued, and no damage or casualties were immediately reported.

The 4:26 a.m. Friday (1926 GMT Thursday) quake was shallow, at 22.6 miles (36.3 kilometers) beneath the surface, the USGS said.

The USGS said the quake hit some 67 miles (108 kilometers) southeast of Hachinohe, in Honshu, Japan, and about 356 miles (574 kilometers) northeast of Tokyo, Japan

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The United States is about to adopt the Canadian way of granting patents for new inventions, which may not necessarily be a good thing.

That is the opinion of some people from the arcane field of intellectual property rights, which is nowhere near as glamorous as what viewers see on Dragon