Nation roundup for October 23
Bankruptcy for Detroit weighed
DETROIT (AP) — Thousands of Detroit streetlights are dark. Many more residents have fled. Donors are replacing ambulances that limped around for 200,000 miles. Millions in debt payments have been skipped.
Is there really any doubt the city is broke?
A judge starts exploring that question Wednesday in an unusual trial to determine whether Detroit indeed is eligible to scrub its books in the largest public bankruptcy in U.S. history.
Unions and pension funds are claiming the city failed to negotiate in good faith before filing for Chapter 9 protection in July.
A city isn’t eligible for a makeover unless a judge finds that key steps have been met, especially good-faith talks with creditors earlier this year.
It’s a critical decision: If Detroit clears the hurdle, the case would quickly turn to how to solve at least $18 billion in debt and get city government out of intensive care.
“It’s a crucial point in the case,” said lawyer Chuck Tatelbaum, a bankruptcy expert in Fort Lauderdale, Fla. “There will be others, but this is the go or no-go. … If there was ever a poster child for what Congress decided when they enacted Chapter 9, it’s for a city like this.”
Apple unveils new Macs, iPad
SAN FRANCISCO (AP) — Apple Inc. is refreshing its iPad lineup and slashing the price of its Mac computers ahead of the holiday shopping season, as it faces an eroding tablet market share and growing competition from rival gadget makers.
Apple unveiled a new, thinner, lighter tablet called the “iPad Air” along with a slew of new Macs Tuesday at an event in San Francisco.
The iPad Air weighs just 1 pound, compared with 1.4 pounds for the previous version. Apple marketing chief Phil Schiller called the tablet a “screaming fast iPad.” He said it is eight times faster than the original iPad that came out in 2010.
The iPad Air will go on sale Nov. 1 and start at $499 for a model with 16 gigabytes of memory. Apple plans to phase out its third and fourth generation iPads while the iPad 2, which launched in 2011, continues selling at $399.
A new iPad Mini, meanwhile, will be available later in November starting at $399 for a 16-gigabyte model. It has a retina display designed to give it a clearer, sharper picture and the same 64-bit chip that powers the iPad Air.
S.F. transit strike comes to end
OAKLAND, Calif. (AP) — Trains in the San Francisco Bay Area were running again Tuesday after a tentative deal capped six months of contentious labor negotiations and two strikes that disrupted hundreds of thousands of daily commutes.
Limited Bay Area Rapid Transit train service began again around 6 a.m., two hours later than BART had said it would and not in time to prevent many commuters from turning to alternative transportation.
BART officials hoped trains would be running at full service in time for the afternoon commute. BART is the nation’s fifth-largest rail system, with an average weekday ridership of 400,000.
Morning traffic at the San Francisco-Oakland Bay Bridge toll plaza was snarled, and BART stations were emptier than normal, with a few people dotting platforms as news spread that the strike had ended.
S&P 500 reaches another record
NEW YORK (AP) — The prospect of more economic stimulus from the Federal Reserve pushed the Standard & Poor’s 500 index to a fourth consecutive record close Tuesday.
Investors also were encouraged by strong earnings from major U.S. companies such as Whirlpool, Delta Air Lines and Kimberly-Clark.
The U.S. economy added 148,000 jobs in September, the Labor Department reported Tuesday, lower than the 180,000 jobs forecast. The report was delayed for 2½ weeks because of a 16-day partial government shutdown.
Analysts are also expecting the upcoming jobs report for October to be weak because the shutdown may have dampened hiring.
In the absence of stronger jobs growth, the economy will struggle to grow quickly and that means the Fed is unlikely to stop its stimulus effort anytime soon.
“We’ve probably got another relatively soft report ahead of us,” said Jeff Kleintop, Chief Market Strategist for LPL Financial. “That’s likely to keep the Fed on hold for some time and the market seems to like that.”
The Fed has been buying $85 billion of bonds a month to keep long-term interest rates low and spur economic growth. The stimulus has been a key driver of a 4 ½-year rally in stocks that has pushed the S&P 500 index and Dow Jones industrial average to record levels this year.
On Tuesday, the S&P 500 index rose 10.01 points, or 0.6 percent, to 1,754.67. The Dow gained 75.46 points, or 0.5 percent, to 15,467.66. The Nasdaq composite advanced 9.52 points, or 0.2 percent, to 3,929.57.
Investors are also watching company earnings for the third quarter.
S&P 500 companies are forecast to report average earnings growth of 3.5 percent for the third quarter, according to the latest estimate from S&P Capital IQ. That would be the slowest rate of growth since the third quarter a year ago.
While growth has slowed, about two-thirds of companies are reporting earnings that are beating forecasts from Wall Street analysts.
“So far, the bottom line earnings are beating the reduced expectations,” said Darrell Cronk, a regional Chief Investment Officer for Wells Fargo Private Bank.
Netflix had a volatile day.
The company’s stock opened higher after Netflix reported late Monday that its earnings quadrupled and it attracted more subscribers in the third quarter. The gains faded throughout the day and the stock closed down $32.47, or 9 percent, at $322.52.
The stock has gained 248 percent this year, making it the second-best performer in the S&P 500 after Best Buy. Despite the good results, analysts at Jefferies Group say Netflix’s valuation is hard to justify given the cost of content, heavy competition and likelihood that the company will have to raise capital to fund its operations.
In government bond trading, the yield on the 10-year Treasury note fell to 2.52 percent, its lowest level since late July, from 2.60 percent late Monday.
The yields on long-term Treasury notes are used to set the rates on consumer loans such as mortgages. Falling rates should help the housing sector by keeping the cost of home financing low.
The drop in yields “is very much supportive for the mortgage markets,” said Anastasia Amoroso, Global Market Strategist at J.P. Morgan Funds. “That is definitely a tailwind for the housing market and the consumer.”
Homebuilders K.B. Home rose 62 cents, or 3.7 percent, to $17.19. D.R. Horton climbed 56 cents, or 3 percent, to $19.23
Stocks of homebuilders also got a boost from a report that showed spending on U.S. construction projects rose at a solid pace in August, helped by further gains in residential building.
In commodities trading, the price of crude oil fell $1.42, or 1.4 percent, to $97.80 a barrel as recent data indicated there is plenty of supply to meet current demand. The price of gold rose $26.80, or 2 percent, to $1,342.60 an ounce.
Among stocks making big moves:
— Whirlpool rose $15.22, or 11.6 percent, to $146.19 after the company said its third-quarter net income more than doubled.
— Delta Air Lines rose 80 cents, or 3.2 percent, to $25.49. The airline made more than a billion dollars in the third quarter as more passengers paid a little bit extra to fly. Delta also said it was seeing strong holiday bookings.
— Kimberly-Clark rose $4.14, or 4.2 percent, to $102.97 after the maker of Kleenex tissues and Huggies diapers said its third-quarter net income rose 6 percent.
— Coach fell $4.08, or 7.5 percent, to $50.10 after the maker of luxury handbags and accessories said its quarterly net income fell. The company is struggling with weaker sales in North America.
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