White House confident Bernanke to be confirmed

01/24/2010

WASHINGTON (Reuters) - White House senior advisers voiced confidence on Sunday that Federal Reserve Chairman Ben Bernanke would be confirmed by the Senate for a second term.

"The president is very confident that the chairman will be confirmed," David Axelrod said on CNN's "State of the Union" program. "The readings he's getting from his conversations are that Chairman Bernanke will be confirmed."

In a sign of concern about a surge of opposition to Bernanke's renomination, President Barack Obama contacted the Democratic Senate leadership on Saturday to make sure there were enough votes.

Uncertainty about the Senate's confirmation of Bernanke rattled investors last week, contributing to the worst three-day slide for U.S. stocks in 10 months.

Bernanke's second term appeared at risk on Friday after two Senate Democrats announced their opposition.

Bernanke's critics say the Fed failed to prevent the recent financial crisis, the worst since the Great Depression, and fought the meltdown in a way that favored the financial industry at the expense of ordinary citizens.

With congressional elections in November, many lawmakers are unwilling to take any stand that appears to benefit Wall Street, particularly after Tuesday's Republican upset for the Massachusetts Senate seat that had been a Democratic stronghold for decades.

But Obama heard from Senate Democratic leader Harry Reid that there was a lot of support for Bernanke, another senior Obama adviser, Valerie Jarrett, told NBC's "Meet the Press."

The Senate's top Republican, Mitch McConnell, also told "Meet the Press" he believed Bernanke would win bipartisan support, but would not say whether he would vote for the central banker.

MORE REPUBLICANS WEIGH IN

Some Republicans have moved to block Bernanke's confirmation, forcing Senate leaders to secure a super-majority of 60 votes in the 100-member chamber to advance the nomination.

"I think we need a fresh start," Republican Senator John Cornyn told "Fox News Sunday," saying he would oppose Bernanke.

Senator John McCain, the Republican presidential candidate who lost to Obama, said on CBS' "Face the Nation" program he was "both skeptical and leaning against" Bernanke's confirmation.

But Republican Senator Orrin Hatch told CNN he would vote for Bernanke partly out of worry of the nominee the administration would choose in his place.

"There are some things I don't agree with that have been done, but I think he basically has -- has all of the ability to do it," Hatch said. "I'd be terrified of having him replaced by this administration. You never know what you're going to get."

Bernanke, who was first named as chairman by former Republican President George W. Bush, was nominated to a second term by Obama in August.

Axelrod on CNN defended Bernanke's handling of the financial crisis.

"We're still in a fragile state here, even though the economy is growing, and we need his leadership," Axelrod said.

"He has been a very steady hand in this crisis. He's taken initiatives that have been important in terms of stabilizing the economy."

The unemployment rate currently stands at 10 percent, with more than 15 million Americans out of work.

Bernanke losing some support in Senate

01/24/2010

NEW YORK (CNNMoney.com) -- With only a week left before Federal Reserve Chairman Ben Bernanke's first term ends, whether the Senate has the 60 votes needed to overcome opposition remains in question.

And the White House and Senate leaders are starting to scramble, as more Democratic senators say they plan to vote against giving Bernanke a second term as Fed chief.

Sen. Barbara Boxer, D-Calif. and Sen. Russell Feingold, D-Wis., both said Friday that they plan to vote against Bernanke. Several other Democratic senators told CNN they're undecided.

"It is time for a change -- it is time for Main Street to have a champion at the Fed," Boxer said in a statement. "Dr. Bernanke played a lead role in crafting the Bush administration's economic policies, which led to the current economic crisis. Our next Federal Reserve Chairman must represent a clean break from the failed policies of the past."

It's not clear whether Bernanke's confirmation is in jeopardy, because he is likely to garner some Republican support. In the Senate Banking Committee, four Republicans voted to confirm Bernanke, crediting him for saving the economy from a second Great Depression.

Some Democratic senators issued statements of support over the weekend, including Senate Banking Committee chairman Chris Dodd, D-Conn., and John Kerry, D-Mass. (More in CNN's Political Ticker.)

But the Senate can't even start the process of considering Bernanke until 60 senators sign off, because a few senators who oppose his confirmation filed official "holds" delaying the process.

"The math to 60 -- at this point -- looks bad for Bernanke," wrote Chris Krueger, an analyst for Concept Capital Washington Research Group in a report. "Chaos is reigning on the Hill right now and Democratic members are in severe anxiety over their own re-elections."

Some are really starting to wonder whether Bernanke will be confirmed before Feb. 1. If the vote is delayed, there's a question as to whether Bernanke can be temporarily re-appointed as acting chair. If not, Fed Vice Chair Donald Kohn would serve as acting chairman.

Senate leaders were unsure Friday how the votes were going to play out or when they'd start the procedure to force a vote.

Even Senate Majority Leader Harry Reid issued a statement late Friday saying he'd support Bernanke, but "my support is not unconditional."

The White House is also getting involved, although spokesman Bill Burton declined to "engage in hypotheticals" about whether the president believed Bernanke's confirmation was in trouble.

"He continues to think that he's the best person for the job, and will be confirmed by the United States Senate," Burton said to reporters earlier Friday on Air Force One.

Bernanke has always had his critics in the Senate. Bernie Sanders, a left-leaning independent from Vermont who often votes with the Democrats, and Jim Bunning of Kentucky, Sanders' political opposite, are two of the most vocal.

Up until Tuesday, insiders believed that Bernanke had locked up more than 60 votes necessary to break a Senate filibuster. In December, he won solid support from the Senate Banking committee.

450,000 at risk in foreclosure-prevention program

01/23/2010
NEW YORK (CNNMoney.com) -- Hundreds of thousands of troubled homeowners who are making lower mortgage payments on a trial basis are at risk of being kicked out of President Obama's foreclosure-prevention program.

Companies that service the mortgages have until Jan. 31 to review all trial modifications that have been underway for several months under the Home Affordable Modification Program (HAMP), according to a Treasury Department guideline issued late last month. The Treasury Dept. said it would issue new guidelines next week, but wouldn't give details.
During the review period, servicers must determine whether borrowers have made all their payments and have handed in all the necessary paperwork. Those who haven't will get letters giving them 30 days to comply.

The goal is to clear up the backlog of borrowers stuck in trial modifications, in which a homeowner's monthly payments are lowered to no more than 31% of pre-tax income.

Some homeowners have spent seven or eight months waiting to hear if they qualify for a permanent adjustment to their mortgages.

This directive, however, has some bank regulators concerned.

"About 450,000 homeowners currently have HAMP trial modifications and have demonstrated a willingness and ability to make timely payments for at least three months," said Richard Neiman, superintendent of the New York State Banking Department.

"Now, unfortunately and very alarmingly, these same homeowners face the prospect of foreclosure strictly on account of documentation issues," he said.

Paperwork has proved a major stumbling block for the president's foreclosure-prevention program. Homeowners complain that their servicers continuously lose the documents they send in, while financial institutions argue that borrowers have not been sending in their paperwork.

Aware of the problem, Treasury officials said they plan to issue new guidance to servicers next week that will help expedite the conversion of borrowers in the trial period to permanent modification. It may also lighten the documentation requirements.

Converting to permanent modifications
Under fire for the low number of people receiving long-term help, the Treasury Department in late November ramped up pressure on servicers to convert borrowers to permanent modifications.

Some 66,500 people have received permanent adjustments, with another 787,200 homeowners in trial modifications.

Under the president's plan, delinquent borrowers are put into trial modifications for several months to make sure they can handle the new payments and to give them time to submit their financial paperwork.

Once the modification becomes permanent, servicers, investors and homeowners are eligible to receive thousands of dollars in incentive payments.

Overall, about three-quarters of people are making their payments on time, according to the Treasury Department.

Treasury officials already lightened the documentation requirements in the fall in hopes of speeding up the conversion process. But more needs to be done, Neiman said.

For instance, Treasury should accelerate its implementation of a standardized documentation form and the creation of a Web portal that will allow homeowners to track the receipt of the paperwork, he said. Also, it should allow servicers more flexibility in accepting alternative documents.

If this isn't done, a lot of homeowners could soon face foreclosure, he said.

"This is a real concern to borrowers, particularly borrowers who've continued to make payments for three, four, five, even seven months," Neiman said.

Stocks: Trying to reverse the slide

01/24/2101
NEW YORK (CNNMoney.com) -- After the worst week on Wall Street in almost a year, investors will return to work looking for greater clarity -- from Washington, from the banks and from corporate America.

The Dow plunged 4% last week, its worst week since March 6, 2009, the bottom of the bear market.



Stocks got hit from all sides: The White House's proposal to impose more restrictions on banks; China's moves to rein in economic growth; and questions about whether Federal Reserve chairman Ben Bernanke will win confirmation for a second term. His first term ends Jan. 31.

"Obama talking about banking, China talking about limiting lending and the questions about Bernanke all added a level of uncertainty to the market that wasn't there before," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.

That uncertainty sparked the selloff last week, but it doesn't mean that it will continue in the week ahead.

"This was a scary pullback, but we've seen a series of these 5% to 7% selloffs since the market bottomed in March of last year," Detrick said.

"Each time investors used that as an opportunity to put more money back in place and I think you can still give the bull market the benefit of the doubt," Detrick said.

The week ahead brings the latest Federal Reserve policy meeting, the first reading on fourth-quarter GDP growth, the president's State of the Union address and profit reports from a host of major companies.

Company financial results: More than a quarter of S&P 500 companies are due to report results this week, including Dow components Microsoft (MSFT, Fortune 500), Chevron (CVX, Fortune 500), DuPont (DD, Fortune 500) and Verizon (VZ, Fortune 500).

Ford Motor (F, Fortune 500) is expected to report a big profit versus a loss a year ago. Yahoo (YHOO, Fortune 500) is expected to report a drop in profits and Amazon.com (AMZN, Fortune 500) to report a rise.

So far, strong results have been met with indifference by investors. Google (GOOG, Fortune 500), IBM (IBM, Fortune 500), Intel (INTC, Fortune 500) and American Express (AXP, Fortune 500) all reported better-than-expected results, only to see their stocks tumble.

In the wake of the big stock rally of 2009, investors are looking for more than just improved earnings on the back of cost-cutting.

"The overwhelming majority of big companies have sold off after their earnings even if the results were good," said Donald Selkin, chief market strategist at National Securities.

"This historic rally may have discounted all the good earnings and now the companies are going to have to work to earn further stock gains," he said.

So far 18% of the S&P 500, or 92 companies, have reported results. Earnings are on track to have risen 193% from a year ago and revenue 5%, according to the latest from Thomson Reuters. But a lot of that is due to easy comparisons to an abysmal fourth quarter of 2008, the worst in history, according to Thomson.

A lot of the improvement this quarter is especially due to a big comeback for the financial sector. Strip out financial results and year-over-year S&P 500 earnings are up just 9% and revenue growth is flat.

The Fed: The Federal Reserve's two-day meeting gets underway Tuesday, with an announcement on interest-rate policy expected Wednesday afternoon. The Fed, led by Chairman Ben Bernanke, is widely expected to vote to hold interest rates steady at historic lows near zero.

However, as always, what the bankers say in the statement about the health of the economy will be key, especially if they hint at when they might begin to raise interest rates.

A sustained period of historically low interest rates -- combined with the infusion of trillions of dollars into the financial system -- has been credited with helping the country avert a bigger disaster. The Fed's actions are also seen as having boosted the stock market in the past 9 months.

But some dissent in the Senate about whether or not Bernanke should serve a second term could cloud the meeting.

In December, Bernanke received a vote of confidence from the Senate Banking Committee. However, some Democratic Senators say they plan to vote against approving a second term, leaving White House and Senate leaders struggling to rummage up the needed support.

In addition to the Federal Reserve, investors will also be focused on the week's economic news including reports on housing, employment, consumer confidence and durable goods orders. The biggest report of the week is the first reading on GDP growth in the fourth-quarter, due out Friday.

On the docket
Monday: Sales of existing homes are expected to have fallen to a 6 million unit annual rate in December from a rate of 6.54 million units in November, according to a consensus of economists surveyed by Briefing.com. The report from the National Association of Realtors is due out in the morning.

Tuesday: The consumer confidence index from the Conference Board is due out shortly after the start of trading. The index is expected to have dipped to 52.9 in January from 53.3 in December.

The S&P/Case Shiller Home Price index, covering 20 of the largest metropolitan areas in the nation, is expected to show that prices fell 5.2% in November from the previous month.

The Congressional Budget Office has its 2010 budget and economic outlook press briefing, starting at 11:00 a.m. ET.

Wednesday: New home sales likely rose in December to a 370,000 unit annual rate from a 355,000 unit annual rate in November, according to forecasts. The report from the census bureau is due out shortly after the start of trading.

The weekly crude oil inventories report from the government is due in the morning, while the Fed announcement is due in the afternoon.

Reportedly, Apple will unveil its much-anticipated new Tablet computer in San Francisco in the afternoon.

The World Economic Forum begins in Davos, Switzerland, and runs through Sunday.

In the evening, the President gives the State of the Union address, starting at 9:00 p.m. ET.

Thursday: December durable goods orders are expected to have risen 2% in the month versus a rise of 0.2% in the previous month.

The weekly reading on initial jobless claims is also due although no estimates were available at the time of this publication.

Friday: The initial reading on gross domestic product growth in the fourth quarter is due out Friday morning from the government. GDP is expected to have grown at a 4.6% annualized rate after growing at a 2.2% rate in the third quarter.

The consumer sentiment index from the University of Michigan is due shortly after the start of trading. The index is expected to have risen to 73 in late January from 72.8 in early January.

Goldman Sued by Pension Fund over Bonus Plans

January 8, 2010
REUTERS

Goldman Sachs was sued on Thursday by an Illinois pension fund seeking to recover billions of dollars of bonuses and other compensation being awarded for 2009, saying the payouts harm shareholders.

In a lawsuit filed in New York state supreme court in Manhattan on behalf of shareholders, the Central Laborers' Pension Fund said Goldman had by Sept. 25 set aside nearly $17 billion for compensation and might pay out more than $22 billion for the year. It said this "highlights the complete breakdown" of corporate oversight.

The lawsuit contends that Goldman's revenue for the year was artificially inflated by government bailouts of the banking industry and the insurer American International Group, as well as a change in Goldman's fiscal year.

Such sums, and Goldman's practice of continuing to pay out nearly 50 percent of net revenue as compensation, show "scant regard" for the interests of shareholders, it said.

Goldman spokesman Michael DuVally called the lawsuit "completely without merit." Other defendants are Chairman and Chief Executive Lloyd Blankfein, Chief Operating Officer Gary Cohn, Vice Chairman J. Michael Evans, Chief Financial Officer David Viniar, and 10 directors.

An individual shareholder, Ken Brown, filed a similar lawsuit in the same court on Tuesday.

Goldman has in recent months been faulted by banking critics who say it is one of the biggest beneficiaries of government efforts to shore up a financial system that seized up in September 2008, and who consider its pay awards outsized.

The bank repaid its $10 billion of bailout money last year, and thus is no longer subject to related curbs on pay.

Concern about financial industry pay generally is expected to rise over the next few months as companies release their proxy statements and hold annual meetings.

Other unions have also criticized Goldman conduct. Last month, the International Brotherhood of Teamsters had accused Goldman of making derivatives trades that would benefit from a bankruptcy by trucking company YRC Worldwide.

In its lawsuit, the Illinois fund is seeking damages sustained by shareholders, restitution from executive officer defendants, corporate governance changes and other remedies.

Goldman Sachs shares doubled in 2009 and have risen more than 5 percent in 2010, but are 29 percent below their record high set in October 2007. They closed Thursday up $3.41, or 2 percent, at $177.67 on the New York Stock Exchange.

Job-Creation Hopes Dashed; 85,000 Shed in December

January 8, 2010
REUTERS

U.S. employers unexpectedly cut 85,000 jobs in December, government data showed on Friday, cooling optimism on the labor market's recovery and keeping pressure on President Barack Obama.

The Labor Department said November payrolls were revised to show the economy actually added 4,000 jobs rather than losing 11,000 as initially reported. With revisions to October, however, the economy lost 1,000 more jobs than previously estimated over the two months.

The unemployment rate was unchanged at 10 percent in December. Analysts polled by Reuters had expected nonfarm payrolls to be unchanged last month and the unemployment rate to edge up to 10.1 percent.

"The American economy is clearly not going to burst out of the gate with growth and job creation but it will perform better than its major competitors in Europe and Japan," said Joseph Trevisani, chief market analyst at FX Solutions in Ridgewood, N.J.

U.S. stock futures turned negative on the data, while government bond prices erased losses. The U.S. dollar fell against the euro.

High unemployment is one of the toughest domestic challenges facing Obama. The administration's success in getting people back to work will shape prospects for Obama's political future.

Obama's popularity has steadily fallen, knocking his approval ratings down to around 50 percent. This could dim the election prospects for his Democratic Party in the November congressional elections. Obama is scheduled to make a statement on the economy at 2:40 p.m.

For the whole of 2009, the economy shed 4.2 million jobs, the department said.

Still the job market continued to show broad improvements last month, with a number of sectors showing gains.

Professional and business services added 50,000 positions, while education and health services increased payrolls by 35,000. Temporary help employment rose by 47,000.

Manufacturing payrolls fell 27,000 after dropping 35,000 in November. The construction sector lost 53,000 jobs, while the service-providing sector shed only 4,000 workers.

The average workweek was unchanged at 33.2 hours, while average hourly earnings increased by $18.80 from $18.77 in November.

The state of the job market is among the key factors that will determine the timing of the Federal Reserve's first interest rate increase since cutting benchmark overnight borrowing costs to near zero percent in December 2008.

The U.S. central bank has vowed to keep rates low for an extended period, and the jobs data supported that expectation

Capmark’s Troubles Highlight Plight of Many CRE Lenders

1/8/2010
NREI

With more than $1.6 billion in second-quarter losses and plans to sell off its most viable business operations, Capmark Financial Group Inc. provides a painful example of the turmoil plaguing many large lenders to the commercial real estate industry.


In its second-quarter report published earlier this month, the Horsham, Pa.-based commercial real estate finance company disclosed an agreement to sell its mortgage banking origination and servicing businesses to Berkadia III, a partnership owned by Warren Buffett’s Berkshire Hathaway Inc., and Leucadia National Corp., for $450 million. Later that week, rating agencies lowered Capmark’s credit ratings to reflect the company’s likelihood of defaulting on its cumbersome debt.


“This has been long coming,” says Edward Mermelstein, managing partner at Manhattan-based law firm Edward A. Mermelstein & Associates. “Anyone who has a good overview of the market has been expecting Capmark, as well as other companies of the same size, to either head into bankruptcy or somehow be repositioned or acquired.”


Selling Capmark’s mortgage-origination and loan-servicing units will enable those businesses to retain their value while the remaining banking and investment business units are wound down, sold piecemeal or stabilized, according to analyst Jeff Zaun, associate director at Standard & Poor’s. The rating agency left Capmark’s commercial mortgage servicer rankings unchanged when it lowered Capmark’s long-term credit rating to CC from B-minus on Sept. 4.


“In our view, the originate-to-distribute model is still viable,” Zaun says. “Large funds are going to want real estate exposure and they are not going to want their own origination shops.”


What happens to the rest of the company? Most likely, Capmark will either file for bankruptcy protection or will hammer out agreements with its lenders outside of bankruptcy court. Even if the company comes to an agreement with lenders, however, those lenders won’t be getting their full return under original terms, so the company is expected to default on its debts to some degree in either scenario. That likelihood is reflected in recent downgrades by Standard & Poor’s and by both Moody’s Investors Service and Fitch Ratings.


Although Capmark has made progress this year toward restructuring, deteriorating commercial real estate fundamentals and a spike in loan delinquency rates have overshadowed improvements in the company’s structure. In its second-quarter report, Capmark explains that growing numbers of its borrowers have been unable to obtain replacement financing to satisfy their matured loans, resulting in a growing number of defaults. Commercial real estate fundamentals, too, are eating away at property values and accelerating the rate of default.


Capmark isn’t alone in its struggles to deal with crippling defaults. Just this month, on Sept. 11, government regulators closed down Chicago-based condominium construction lender Corus Bank. Earlier this year, parent company Corus Bankshares reported that it had roughly $2 billion in non-performing loans.


According to a Fitch report published Aug. 18, the agency assigns a negative credit outlook to nearly half of the 20 largest U.S. lenders it rates, and a major concern contributing to those negative outlooks is the potential of further deterioration in loan portfolios with a specific emphasis on commercial real estate.


As lenders seek liquidity through distressed sales, and as bankruptcies mount, private buyers are circling to snatch up deals. Attorney Mermelstein has clients that are already poring over some of Corus’ properties in Miami and other markets where condominium development burned hottest.


Mermelstein offers a simple system for investors who want to determine which lenders are most likely to join the ranks of distressed sellers or be forced into bankruptcy liquidations. The writing is on the wall – or on the fence, to be exact.


“Lenders that are highly exposed in Miami, New York and other areas of the country that have had a tremendous amount of new construction in the last couple of years are the lenders that are most exposed,” he says. “You can drive from unfinished project to unfinished project, and looking at the names of the lenders on the gates, you basically know who’s in jeopardy of going under.”

Private Equity Fundraising Lowest Since 2004

January 7, 2010
NREI

Private equity fundraising sank to a five-year low in 2009, having its worst year since 2004, with only $246 billion raised by 482 funds worldwide
According to a new study by researcher Preqin, that level of activity is down 61% from the $636 billion raised in 2008, and a drop of 62% from the record $646 billion raised in 2007.

The fourth quarter of 2009 was the slowest period for the year, with only $35 billion raised by 75 funds – the lowest quarterly total since Q3 2003.

“Fundraising conditions have been extremely challenging in 2009, with a significant number of investors holding back from making new investments,” says Tim Friedman, head of communications at Preqin. He notes that the latest survey, conducted in December 2009 and including more than 100 leading LPs, found that that only 60% of investors have made new commitments in 2009, with many of these institutions investing in far fewer funds than in previous years.

Here are a few of the study’s highlights:

• Of the $246 billion raised in 2009, buyout funds raised the most capital, with $102 billion raised by 84 funds. 170 venture funds raised $27 billion, while 96 real estate funds raised $41 billion.


• In Q4 2009, 13 buyout funds closed with an aggregate $14 billion, 24 venture funds closed with $4 billion, and 17 real estate funds closed with $7 billion.


• Funds focusing primarily on North America raised the most in commitments over 2009, with 228 funds raising an aggregate $145 billion. 136 funds focusing primarily on Europe raised $74 billion, while 118 Asia and Rest of World funds raised $27 billion. In Q4 2009, North American funds raised $19 billion, European funds $11 billion, and Asia and Rest of World funds $5 billion.


• The largest fund to close during 2009 was CVC European Equity Partners V, which closed early in the year with €10.75bn in commitments. The vehicle invests in mid-market companies in Europe.


• The largest fund to close in Q4 2009 was Clayton Dubilier & Rice VIII, a buyout fund targeting companies in North America and Europe. It closed at the very end of 2009 with total commitments of $5 billion.


• The average length of time taken for a fund to reach a final close has increased dramatically over the last two years, and now stands at more than 18 months for funds closed in 2009, up from one year for funds closed in 2007.


• Over the course of 2009, 60% of private equity investors surveyed made at least one new commitment to a private equity fund, while 40% of investors did not make any new commitments.


• Just over half of investors plan to make their next commitment to a private equity fund in the first half of 2010, and 16% plan to wait until the second half of the year.

“Although the recovery in the public markets and adjustment in private equity fund valuations has alleviated the denominator effect that many investors were suffering from at the start of 2009, we are finding that many backers of private equity funds have fundamentally altered their attitudes towards the asset class,” says Friedman.


“We are seeing investors focusing more on understanding the state of their existing portfolios and spending considerably more time when considering new vehicles. Negotiating terms and conditions has become more of a key concern, and we are seeing a trend away from the bigger mega-buyout funds towards more of a focus on smaller mid-market and regionally focused vehicles.”


“Although investors are in a much clearer position now than at the start of 2009, the chances of a return to the fundraising levels seen in 2007 and 2008 are very slim. As a result of the lack of distributions that they have received from existing investments, investors have less capital available to commit to new funds, and although the majority of investors will be active in 2010, it will be at a lesser rate than in recent years. It will not be until we see the market for exits recover significantly that we will see annual private equity fundraising attaining $500bn-plus levels once again.”

CMBS Delinquencies Rise to All-Time High in December, But Bond Spreads Narrow

January 8, 2010
National Real Estate Investor


Call it the winter of discontent for the troubled U.S. commercial mortgage-backed securities (CMBS) market. The loan delinquency rate climbed 42 basis points in December to reach 6.07%, making history in the process.


The percentage of loans 30 days or more past due climbed above 6% in December for the first time ever, according to commercial real estate data and analytics firm Trepp LLC.

“It is a scary threshold to have breached,” says Manus Clancy, senior managing director at New York-based Trepp, which tracks some 60,000 CMBS loans totaling $725 billion. “We continue to add 35 to 45 basis points of additional delinquencies per month, so that [trend] really doesn’t seem to be subsiding at all.”


Clancy says that he wouldn’t be surprised if the delinquency rate were to steadily rise to near 8% by mid-2010, but he is quick to point out that Trepp generally doesn’t forecast this type of information.


The hospitality sector continues to be the most troubled performer, although it showed a slight improvement over the prior month. The delinquency rate on CMBS hotel loans registered 13.87% in December compared with 14.07% in November.

The Chapter 11 bankruptcy filing by Extended Stay America in June 2009 accounts for approximately 3.5% of the high delinquency rate among CMBS hotel loans, according to Clancy.

“But you see weakness throughout the hotel sector. It doesn’t matter whether it’s high-end or economy. Everybody is showing lower RevPAR (revenue per available room) and lower occupancies. It’s just not a great story.”

By property type, the multifamily sector posted the second highest delinquency rate in December (9.27%), followed by retail (5.50%), industrial (3.98%), and office (3.42%).

One striking data point is that loan delinquencies for retail rose 72 basis points in December, the largest monthly increase among any major property type.

But the trends in the industrial and multifamily arena were nearly as unsettling with delinquencies rising 65 and 49 basis points, respectively.

While the office sector posted the lowest delinquency rate of any major property type, delinquencies were still up 28 basis points in December.

Possible green shoots

One positive sign is that office rents in some major metros appear to be bottoming out, points out Clancy. “They are not falling as much anymore. That said, they’ve taken some really big hits.”

But there is an even bigger green shoot emerging. While much ink has been devoted to the wave of maturing CMBS loans that many borrowers could find difficult to refinance, three deals completed in the fourth quarter of 2009 are cause for optimism.

In the first commercial mortgage deal sold under the federal government’s Term Asset-Backed Securities Loan Facility (TALF) program, Developers Diversified Realty successfully completed a $400 million bond offering in November.

The risk premium paid to CMBS investors on the triple-A rated class was 140 basis points over swaps. The relatively tight spread served as evidence that investors were willing to jump back into the game on a highly selective basis.

Spreads industry-wide on the super-senior CMBS tranche — the top-rated debt in a bond structure — have narrowed considerably over the past year, according to Trepp.

Spreads on the super senior portion of 10-year CMBS issued from 2005 through 2007 narrowed from 1,200 basis points over Treasuries in February 2009 to below 493 basis points in December 2009.

That was a big victory for the CMBS market, emphasizes Clancy, but uncertainty lingers. “It’s unclear at this point what kind of floor is being placed on those spreads by the TALF program, by the Public-Private Investment Program (PPIP) and so forth,” says Clancy.

“Where would [the spreads] be without the government initiatives? While it’s a bright sign and is evidence that the government programs have had an impact, it’s hard to say where these deals would trade without the underlying support.”

The other two CMBS refinancing deals completed in the fourth quarter of 2009 were not tied to TALF. In mid-December, Coral Gables-based Flagler closed on a $460 million CMBS loan covering its 44 office and industrial properties in Florida.

Banc of America Securities helped Flagler securitize the loan, which was the first non-government supported CMBS issued in 18 months.

Also in December, JP Morgan Chase & Co. sold $500 million of CMBS backed by the Inland Western Real Estate Trust. The deal was reportedly oversubscribed.

According to Reuters, the two top-rated classes in the Inland Western deal sold at yield premiums of 150 basis points to 205 basis points above an interest-rate benchmark, or about one-third of the spread on existing CMBS made at the height of the real estate boom.

While no one is certain how much issuance the U.S. CMBS marketplace will generate in 2010, Clancy is hopeful. “I think it would be great if we got up to $1 billion per month again over the next six months. We started to see these three deals in the late part of 2009. I thought it was a great sign.”

Mortgage Bond Rally May End, Rates Rise as Fed Stops Purchases

Dec. 31 (Bloomberg) -- Mortgage bonds are poised to slump after a record rally as the Federal Reserve’s unprecedented buying of $1.25 trillion of the securities ends as soon as March, driving up interest rates on new home loans.

Analysts at BNP Paribas SA, Credit Suisse Group AG and JPMorgan Chase & Co. say the extra yield over benchmark rates that investors demand to hold the securities will widen as much as half a percentage point as the Fed stops purchasing. The 11- month-old program has reduced yields, which guide lending rates, by about 1 percentage point, BNP estimates.

The Fed has been buying at “way” narrower spreads than “where the private sector would be willing to” invest, said Doug Dachille, chief executive officer of New York-based First Principles Capital Management LLC, which oversees about $8 billion of fixed-income investments.

Rising yields mean loan rates are likely to end 2010 almost 0.75 percentage point higher than they are currently, based on forecasts for government bonds and spreads, adding to challenges for a housing market struggling to recover from its worst slump since the 1930s. Fed Chairman Ben S. Bernanke’s goal this year has been to lower the costs for consumers to borrow and help bolster the economy as banks curbed lending.

Excess Returns

So-called agency mortgage bonds guaranteed by companies such as Fannie Mae and Freddie Mac returned 4.8 percentage points more than Treasuries this year, their best performance in at least 20 years, according to Barclays Capital index data. Last year, the debt returned 2.15 percentage points less than government notes.

The Fed began purchases in the $5.4 trillion market of securities guaranteed by government-supported Fannie Mae and Freddie Mac or federal agency Ginnie Mae in January, acquiring a net $1.1 trillion so far.

Yields on Washington-based Fannie Mae’s current-coupon 30- year fixed-rate mortgage bonds were 4.53 percent yesterday, below the average of 5.59 percent in the five years through 2008, according to data compiled by Bloomberg.

The bonds yield 0.74 percentage point more than 10-year Treasuries, compared with the average of 1.27 percentage point over the past five years, and as high as 2.38 percentage points in March 2008. The spread was 0.68 percentage point on Nov. 24, the narrowest since 1992.

Bank Demand

Banks will probably buy more of the securities as that gap widens, limiting increases, according to John Anzalone, head of research and trading for mortgage bonds at the institutional unit of Atlanta-based asset manager Invesco Ltd.

“Banks are buying Treasuries right now, so you’ve got to figure at some point” mortgage bonds will be in demand, said Anzalone, whose firm oversees $414 billion in assets. “The question is just how far” spreads need to widen, he said.

Commercial banks’ holdings of Treasury and agency debt excluding mortgage securities rose $93.9 billion since June 30 to $424.7 billion, while their investments in agency mortgage bonds expanded $16.3 billion to $1 trillion, Fed data show.

Mortgage-bond yields help determine what lenders must charge consumers on home loans to make a profit when selling the debt, which in turn provides cash for new lending. Yields on the agency mortgage bonds are guiding rates on almost all new U.S. home lending following the collapse of the non-agency market in 2007 and a retreat by banks.

Falling Rates

The rally in the bond market has helped pushed the average rate on a typical 30-year fixed mortgage to a record low of 4.71 percent in the week ended Dec. 11, according to McLean, Virginia-based Freddie Mac. While the rate has since risen to 5.05 percent, it’s below the average of 6.05 percent last year and as high as 8.64 percent in May 2000.

Signs that housing may have bottomed are emerging. Sales of existing homes jumped 7.4 percent to a 6.54 million annual rate in November, the highest since February 2007, the National Association of Realtors said Dec. 22 in Washington. The S&P/Case-Shiller index of home prices in 20 U.S. cities rose 0.4 percent in October from September, the fifth consecutive gain.

Obstacles to a recovery include 10 percent unemployment; expiring tax credits for buyers; as many as 10 million looming foreclosures; and a plan to tighten standards at the Federal Housing Administration, the U.S. mortgage-insurance agency involved in about a third of loans for home purchases, according to analysts including Merrill Ross at BGB Securities Inc. Arlington, Virginia, and Laurie Goodman of Amherst Securities Group in New York.

Housing Doubts

The Fed may decide to continue purchasing mortgage bonds if the rebound in the property market proves short-lived, Invesco’s Anzalone said. Bernanke said in Dec. 3 testimony to Congress that officials “will have to see how the economy is evolving and whether or not we need to do more.”

While the S&P/Case-Shiller index shows home values are rising after a record 33 percent drop from 2006, Pacific Investment Management Co. mortgage-bond head Scott Simon said such data is misleading because of a temporary curb on home seizures tied to government anti-foreclosure efforts that will reverse next year.

Newport Beach, California-based Pimco’s Total Return Fund, the world’s biggest bond fund, cut holdings of mortgage securities as the Fed bought, to 12 percent in October, the lowest since at least 2000, from 62 percent on Dec. 31, according to the firm’s Web site. Government debt rose to 63 percent in September, the most in five years, before falling to 51 percent.

Treasury Purchases

The central bank stopped buying Treasuries in the last week of October. Since then, the yield on the benchmark 10-year note has risen to 3.79 percent from 3.50 percent. It will rise to 3.97 percent by the end of next year, according to the median estimate of 60 economists and strategists surveyed by Bloomberg.

It’s unlikely the Fed’s exit will create “dramatically” higher mortgage rates, said William Cunningham, global head of credit strategies and fixed-income research at the investment unit of Boston-based State Street Corp., the world’s largest money manager for institutions.

Cunningham cited tighter mortgage-bond spreads after the Fed’s purchases slowed in October. Issuance fell at the same time as a result of lower refinancing and home buying, meaning the Fed reduction “really hasn’t had the detrimental impact a lot of people were anticipating,” he said.

Supply Outlook

Limited supply is likely to help the market next year too, he said. Issuance of agency mortgage bonds may fall 20 percent in 2010, according to New York-based Citigroup Inc.

“The disruption, relative to the swings we’ve seen over the past year, should remain relatively muted,” said Roger Bayston, a senior vice president in San Mateo, California-based Franklin Templeton Investment’s fixed-income group, which oversees more than $200 billion of bonds. “I don’t think anybody wants to see higher mortgage rates, given the fragility of the housing market and broader economy at this time.”

All parts of the credit market may suffer if Bernanke retreats, after tight spreads on mortgage securities pushed bond buyers into debt such as low-rated company bonds and mortgage securities without government backing, according to JPMorgan.

“We can see the Fed’s footprints indirectly in many other markets as healing has spread,” Matt Jozoff, a New York-based mortgage-bond analyst at JPMorgan, wrote in an outlook report for 2010.

The mortgage-bond market also may face challenges from policies at Fannie Mae and Freddie Mac, even after the Treasury on Dec. 24 gave them more time to shrink their own holdings of the bonds. They are set to begin buying defaulted and modified mortgages from the securities they guarantee at a faster pace, according to Credit Suisse. That may hurt bonds with relatively high coupons, which Pimco’s Simon said are most overvalued.

Mortgage Rates in U.S. Rise to Highest in Four Months

Dec. 31 (Bloomberg) -- Mortgage rates in the U.S. rose to the highest since August, raising the prospect that the budding housing recovery will stall as home buying becomes more costly.

The rate for 30-year fixed U.S. home loans rose to 5.14 percent for the week ended today from 5.05 percent, mortgage finance company Freddie Mac said. That’s the fourth consecutive weekly increase. A record low of 4.71 percent was reached in the week ended Dec. 3. This week’s average 15-year rate was 4.54 percent, the McLean, Virginia-based company said today in a statement.

“If you start to see rates heading toward 6 percent, that will create some political attention,” said Donald J. Rissmiller, chief economist at Strategas Research Partners in New York. The important thing to watch is what happens to rates in the period after the holidays, which is usually a slow time for housing sales and refinancing, Rissmiller said.

Rising mortgage rates may hamper the nation’s economy and housing market as it becomes more expensive for consumers to buy homes or refinance existing loans. A Federal Reserve program to purchase as much as $1.25 trillion in securities backed by home loans helped reduce mortgage rates this year. The program is scheduled to end in the first quarter of 2010.

The bond purchases from Fannie Mae, Freddie Mac and Ginnie Mae, which buy mortgages from lenders and package them into bonds, brought down yields on the securities this year and allowed lenders to reduce mortgage rates while still selling the securities at a profit.

The Mortgage Bankers Association’s index of applications to purchase a home or refinance a mortgage fell 11 percent for the week ending Dec. 18, the first decline in a month, as both purchases and refinancing weakened. The Washington, D.C.-based group didn’t issue data for the week ending Dec. 25 because of the U.S. holidays. Its next data release will be Jan. 6 for the prior two weeks.

U.S. Jobless Claims Drop to Lowest Level Since 2008

Dec. 31 (Bloomberg) -- Fewer Americans than anticipated filed claims for unemployment benefits last week, pointing to an improvement in the labor market that will help sustain economic growth next year.

Initial jobless claims fell by 22,000 to 432,000 in the week ended Dec. 26, the lowest level since July 2008, Labor Department figures showed today in Washington. The number of people collecting unemployment insurance fell in the prior week to 4.98 million, and those receiving extended benefits jumped.

Companies are retaining staff as sales improve and production picks up. Gains in consumer spending, which accounts for 70 percent of the economy, may encourage more hiring in coming months, helping to bolster the rebound from the worst recession since the 1930s.

“It’s boding well for outright job growth,” said Stephen Gallagher, chief U.S. economist at Societe Generale in New York, who forecast claims would drop to 430,000. “It seems that some of the layoffs that took place in the early part of the year were excessive.”

Treasury securities fell after the report, pushing the yield on the benchmark 10-year note up to 3.89 percent at 10:41 a.m. in New York from 3.79 percent late yesterday. The Standard & Poor’s 500 Index was down 0.3 percent to 1,123.45.

Unexpected Drop

Economists forecast claims would rise to 460,000 from a previously reported 452,000, according to the median of 29 projections in a Bloomberg News survey. Estimates ranged from 430,000 to 490,000.

“What we’ve seen is definite stability and just a hint toward things trying to get better,” Jeffrey Joerres, chief executive officer of Manpower Inc., said in a Bloomberg Television interview today. The world’s second-largest provider of temporary workers, is experiencing “slow but steady increases in people who are out on assignment,” he said. “It’s a little in every office, which is a good sign because it’s broad-based.”

A Labor Department spokesman said last week’s figures were “consistent” with recent trends and were not influenced by any unusual factors. Even so, the week of the Christmas holiday is difficult to adjust for seasonal variations, he said.

The four-week moving average of initial claims, a less volatile measure, dropped to 460,250 last week from 465,750 the prior one. Claims are down from a 26-year high of 674,000 in the week ended March 27.

Continuing claims decreased by 57,000 in the week ended Dec. 19, reaching the lowest level since February. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs.

Extended Benefits

Today’s report showed the number of people who’ve use up their traditional benefits and are now collecting extended payments climbed by about 199,000 to 4.82 million in the week ended Dec. 12. Twenty-nine of the states and territories where workers are eligible to receive government extension have begun to report that data, a Labor Department spokesman said. Two states have started reporting data on the latest emergency extension, he said.

President Barack Obama this month signed into law legislation that included a stopgap provision to ensure that unemployment benefits weren’t cut off over the holidays.

The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 3.8 percent in the week ended Dec. 19, today’s report showed.

State Breakdown

Twenty-seven states and territories reported a decrease in claims, while 26 reported an increase. These data are reported with a one-week lag.

The government is scheduled to release its December payrolls report on Jan. 8. In November, the economy lost the fewest jobs since the recession began two years ago and the unemployment rate receded to 10 percent from a 26-year high of 10.2 percent the prior month.

Even so, Americans are concerned about their financial future. Fewer consumers in December believed their incomes will increase over the next three to six months, the Conference Board’s confidence report this week showed.

Warren Buffett’s Berkshire Hathaway Inc. is among companies that slashed employment in 2009. The Omaha, Nebraska-based company last week said it cut 21,000 workers from its payroll amid a slump at the firm’s manufacturing and retail units. The company and its subsidiaries now have about 225,000 workers, it said in regulatory filings.

Companies in U.S. Expand at Fastest Pace Since 2006

Dec. 30 (Bloomberg) -- Companies in the U.S. expanded in December at the fastest pace in almost four years, signaling the economic recovery is gaining speed heading into 2010.

The Institute for Supply Management-Chicago Inc. said today its barometer rose to 60, exceeding the most optimistic estimate of economists surveyed by Bloomberg News and the highest level since January 2006. The gauge, in which readings greater than 50 signal expansion, showed companies boosted production and employment as orders climbed.

Stimulus programs and discounting have propelled a rebound in global sales that is reducing stockpiles, which may spur manufacturers to further increase production in coming months. Caterpillar Inc. is among companies that may recall dismissed staff, pointing to gains in employment that will drive consumer spending, which accounts for 70 percent of the economy.

“Manufacturing is now moving into recovery,” said David Sloan, senior economist at 4Cast Inc. in New York, whose estimate was the highest among economists surveyed. “Inventories are rebuilding and exports are looking strong, with the Asian economies looking firmer and the dollar weak.”

Stocks drifted between gains and losses. The Standard & Poor’s 500 Index was little changed to close at 1,126.42.

Exceeds Estimates

Economists projected the Chicago index would drop to 55.1 from 56.1 in November, based on the median estimate of 53 projections in the Bloomberg survey. Forecasts ranged from 52 to 58.5.

The group’s gauge of orders climbed to the highest level in more than two years and its measure of employment showed growth for the first time since November 2007, the month before the recession began. Indexes of production and order backlogs also improved.

Caterpillar, the world’s largest maker of bulldozers and excavators, will bring back some laid-off workers next year as sales improve, said Chief Executive Officer Jim Owens.

“We’ll gradually begin to call people back and to rebuild our overall sales and ability to ship product,” Owens said in a Dec. 11 interview with Bloomberg Television. “I think it will gradually begin to pick up as 2010 unfolds.”

Caterpillar cut about 18,700 full-time jobs and about the same number of temporary workers since December 2008 as the global recession reduced demand. The Peoria, Illinois-based company predicts 2010 sales will increase as much as 25 percent from the midpoint of the 2009 forecast range.

Early Indicator

Economists watch the Chicago index for an early reading on the outlook for overall U.S. manufacturing, which makes up about 12 percent of the economy. The group has said their membership includes both manufacturers and service providers, making the gauge a measure of overall growth.

The Tempe, Arizona-based Institute for Supply Management’s factory index probably rose this month to 54 from 53.6 in November, according to a survey median. That report is due Jan. 4.

The world’s largest economy expanded at a 2.2 percent pace from July through September after a yearlong contraction that was the worst since the 1930s, figures from the Commerce Department showed last week. Economists surveyed by Bloomberg forecast growth to pick up to a 3 percent pace in the fourth quarter and average 2.6 percent for all of 2010.

Exports rose for the sixth month in October as economies worldwide rebounded from the global economic slump. A 13 percent drop in the dollar since March 5 against a basket of six major currencies also making American goods more competitive to overseas buyers.

Inventories Increase

Inventories at U.S. companies rose in October for the first time in more than a year, the government said Dec. 11, a sign firms are boosting production in line with rising sales.

United Parcel Service Inc. Chief Executive Officer Scott Davis said Dec. 2 that shipping demand was starting to improve as companies rebuild inventory and consumers began holiday shopping. UPS, the world’s largest package-delivery company, is considered a bellwether for the economy because it handles goods ranging from auto parts to electronics to clothing.

“Inventory has gotten real low,” Davis said in a Bloomberg Television interview. “We think there will be some replenishment of inventories going forward, so the outlook is much better.”

Commodities Heading for Best Year Since 1970 on Chinese Demand

Dec. 31 (Bloomberg) -- Commodities headed for their best year since at least 1970, led by a doubling in copper, sugar and lead prices, as Chinese demand compensated for the steepest slump in the global economy since World War II.

The S&P GSCI Index of 24 raw materials rose 51 percent, its best annual gain according to data on Bloomberg going back to 1971, as of 8:57 a.m. in New York. That outpaced the 28 percent gain in the MSCI World Index of stocks in 23 developed nations and 3.5 percent decline in Treasuries, according to Bank of America Merrill Lynch indexes. The S&P GSCI Total Return Index climbed 14 percent this year.

China, the biggest consumer of commodities such as copper and iron ore, expanded 9 percent this year, according to the median estimate of economists surveyed by Bloomberg. The nation imported record amounts of both raw materials this year, making up for weaker demand from countries such as the U.S., whose economy is forecast to contract 2.5 percent, and the euro zone, with a projected 4.1 percent drop. Commodities drew record investment of $60 billion this year, Barclays Capital estimates.

“If you look at the theoretical or global portfolio of assets that are out there, the percentage of commodities allocation is tiny, less than 1 percent,” said Kevin Norrish, a commodities analyst at Barclays Capital in London. “If you look at what investors think that they should have, clearly that would suggest there’s a lot of potential for growth.”

The Reuters/Jefferies CRB Index of 19 commodities has advanced 24 percent this year, heading for the biggest jump since 1973.

Lead Surges

Lead was the best performer among the main industrial metals traded on the London Metal Exchange this year, advancing 142 percent. The metal rose 387 percent this decade, making it the winner according to calculations by Bloomberg on Dec. 30 for 36 exchange-traded raw materials. Copper added 140 percent this year and 290 percent over the decade.

Lead for delivery in three months recently added $4, or 0.2 percent, to $2,415 a metric ton on the LME. Copper gained 0.6 percent to $7,375 a ton, paring a climb to the highest price in almost 16 months.

A report due tomorrow will probably signal the fastest expansion in Chinese manufacturing since April 2008, based on the median forecast in a Bloomberg survey of economists. The nation’s central bank will maintain a “moderately loose” monetary policy because 2010 will be a crucial year for strengthening the recovery, Governor Zhou Xiaochuan said today.

Among precious metals, gold rose 25 percent and headed for its ninth consecutive annual gain, the longest winning streak since at least 1949. The metal strengthened as a weaker dollar spurred investor demand for a hedge against the currency. The U.S. Dollar Index, a gauge against six counterparts, declined 4.6 percent this year.

Platinum, Oil

Gold for immediate delivery was 1 percent higher at $1,104.23 an ounce. Platinum added 57 percent and palladium jumped 116 percent in 2009 as investors anticipated improving consumption of the metals used in autocatalysts.

Crude oil advanced 78 percent this year and 210 percent for the decade. The Organization of Petroleum Exporting Countries, accounting for 40 percent of global oil supply, reduced output in response to the worldwide economic slump.

The fuel for February delivery gained 0.2 percent to $79.41 a barrel on the New York Mercantile Exchange.

U.S. crude-oil inventories dropped 1.54 million barrels to 326 million barrels in the week to Dec. 25, Energy Department data showed yesterday. Distillate fuel and gasoline supplies also declined.

Raw sugar traded in New York gained 129 percent on expectations that harvests in Brazil and India, the biggest producers, would be damaged by excess rain or drought. Sugar was the decade’s second-best performer, rising 341 percent. Wheat retreated 10 percent and corn added 2.3 percent this year.

U.S. Stocks Retreat to Trim Biggest Yearly Rally Since 2003

Dec. 31 (Bloomberg) -- U.S. stocks fell as an unexpected decrease in jobless claims added to evidence the economy is strengthening enough to allow the Federal Reserve to withdraw more stimulus programs.

Hewlett-Packard Co. and Caterpillar Inc. lost at least 0.9 percent to lead the Dow Jones Industrial Average lower. The S&P 500 trimmed its 2009 gain to less than 25 percent after this year’s surge left it trading at 25 times its companies reported earnings, the most expensive level since 2002.

The S&P 500 lost 0.2 percent to 1,124.2 at 10:47 a.m. in New York. The Dow slipped 31.29 points, or 0.3 percent, to 10,517.22. Asian shares and stocks in the U.K. and France advanced, while most European markets, including Germany and Switzerland, were closed.

“There might be some fatigue in the stock market, despite momentum,” said Joseph Saluzzi, co-head of equity trading at Chatam, New Jersey-based Themis Trading LLC. “Jobless claims numbers show we’re heading in the right direction. However, you have to be careful with those weekly figures because they have a lot of seasonality and volatility. It’s also a double-edged sword. The better the economy gets, the more likely the Fed will raise rates.”

The S&P 500 has rebounded 66 percent from a 12-year low in March after governments around the world enacted stimulus measures to end the recession.

VIX Tumbles

This year’s rally has driven down the cost of protection from losses. The VIX, as the Chicago Board Options Exchange Volatility Index is known, has tumbled 75 percent to 20 since soaring to an all-time high of 80.86 in November 2008. It measures the cost of using options as insurance against declines in the S&P 500.

The S&P 500 has declined 23 percent since the end of 1999, its first drop for a decade since the 1930s. Including reinvested dividends, investors lost 0.9 percent a year since 1999, the first decade of negative annualized returns in the index’s history stretching back to 1927, according to S&P analyst Howard Silverblatt.

“The new year will probably end up being a good year,” Sam Stovall, chief investment strategist at S&P, told Bloomberg Radio. “Earnings are supposed to start picking up this quarter. We’ll probably see about a 10 to 15 percent gain in the S&P 500 in the second year of this bull market.”

YRC Worldwide Inc. slumped 11 percent to 89 cents. The largest U.S. trucking company said bondholders agreed to swap their debt for equity in the largest U.S. trucker, enabling the company to avoid a bankruptcy filing that may have resulted in liquidation.