NEW YORK, Nov 16 (Reuters) - Billionaire Warren Buffett's Berkshire Hathaway Inc on Monday revealed new investments in Nestle AG and Exxon Mobil Corp and that it has nearly doubled its investment in Wal-Mart Stores Inc.
In a U.S. Securities and Exchange Commission filing reporting U.S.-listed equity holdings as of Sept. 30, Berkshire said it held 3.4 million American depositary receipts of Nestle, the world's largest foodmaker, worth $144.7 million.
It also reported owning 1.28 million shares of Exxon Mobil, the world's largest oil company, valued at $87.6 million.
Berkshire also boosted its stake in Wal-Mart, the world's largest retailer, 90 percent from three months earlier, to 37.8 million shares worth $1.86 billion from 19.9 million shares.
While the companies are all household names, their shares have lagged the broader U.S. stock market since the market bottomed in March. Buffett favors undervalued stocks, and regularly buys even when economic conditions are weak.
'The general market has rocketed higher, but it may be that these businesses haven't participated as well,' said Justin Fuller, an analyst at Midway Capital Research & Management in Chicago and author of the Buffettologist.com blog.
Berkshire also reported new investments of $96.3 million in trash hauler Republic Services Inc, and $1.35 million in insurer Travelers Cos.
Omaha, Nebraska-based Berkshire did not immediately return a request for comment.
Buffett, the world's second-richest person, does not publicly discuss what he is buying and selling, or ordinarily explain purchases and sales revealed in quarterly SEC filings.
Monday's SEC filing includes investments made by Berkshire subsidiaries, including a portfolio at the car insurer Geico Corp overseen by Lou Simpson. Buffett has said investors should not assume all the reported investment decisions are his.
A separate SEC filing revealed that Berkshire had begun amassing its Exxon stake by the second quarter. The SEC occasionally lets Buffett delay disclosing investment activity so investors cannot copy him while he is buying and selling.
Soros Asset Management, overseen by billionaire George Soros, in a separate SEC filing revealed a stake in Berkshire itself and increased stakes in many blue-chip companies.
WHITHER KRAFT
Fuller said the Nestle stake appears surprising given Berkshire's reported $3.63 billion stake in Kraft Foods Inc , which last week launched a hostile bid for Britain's Cadbury Plc.
Yet he said Nestle could help Berkshire 'diversify away from Kraft. It is the classic Berkshire-type business in that it is easy to understand, and which has many good brands that people like to buy.'
He also said the added Wal-Mart stake 'makes more sense at a time consumers are more price-conscious,' while the Exxon stake could be 'indicative of Berkshire's large bet in energy. If you believe as Buffett does that more inflation is on the horizon, then it makes sense.'
Berkshire this month agreed to buy the 77.4 percent of railroad operator Burlington Northern Santa Fe Corp it did not already own for $26.4 billion.
While Berkshire on Sept 30 still owned shares of railroad operators Norfolk Southern Corp and Union Pacific Corp , Buffett has said he has sold these.
The value of Berkshire's disclosed portfolio of U.S.-listed equities grew 16 percent from the second quarter to $56.55 billion from $48.95 billion. Berkshire bought a net $1.45 billion of equities in the quarter.
Berkshire also reported increased stakes in Wells Fargo & Co and lowered stakes in oil company ConocoPhillips , credit rater Moody's Corp, NRG Energy Inc , SunTrust Banks Inc and health insurer WellPoint Inc.
It also reported no stake in Eaton Corp, after holding 2 million shares of the manufacturer of hydraulics and electrical control systems three months earlier.
Buffett has transformed Berkshire since 1965 into a roughly $160 billion conglomerate with close to 80 companies selling such things as candy, car insurance, ice cream and underwear.
In Monday trading, Berkshire Class A shares closed up $945 at $103,000, and its Class B shares rose $20.50 to $3,431.50.
Tuesday, November 17, 2009
U.S. Dollar Has A Long Way To Fall
China's right, the U.S. government wants to inflate its way out of debt.
Gold is soaring Monday, trading at $1131 per ounce. President Obama is in China, calling for a new relationship. New relationship, indeed! On the surface of this visit everyone is smiling. Immediately below surface the dollar is falling--again.
There is tremendous global finger-pointing today. Liu Mingkang, head of China’s CBRC, said that the combination of a weak dollar and low U.S. interest rates has spawned: "A huge carry trade” that was having a “massive impact on global asset prices … [It] is boosting speculative investment in stock and property markets and will pose new, real and insurmountable risks to the global recovery and particularly to the recovery in emerging markets."
Mr. Liu implied that the U.S. was purposely inflating away its massive debt. On the other hand IMF head Dominique Strauss-Kahn suggested that China must float her currency to ease the pain of her Asian neighbors and the European Union countries.
There are no "best" alternatives. Raising interest rates in the U.S. would be extremely painful and would derail the recovery. The U.S. needs at least 5% growth in GDP to support its huge and increasing debt load. Raising U.S. rates to defend the dollar is political nonstarter.
Last Tuesday China said, somewhat begrudgingly, that it would allow the yuan to appreciate. China now pegs the yuan to the U.S. dollar. This announcement was likely in response to pressure from China’s Asian neighbors (Thou Shalt Not Beggar Thy Neighbor). The Euro Union leaders have also felt the pain of a jointly weaker dollar and yuan. Time will tell how serious China is about the floating the yuan. Today once again the dollar is weaker--across the board--except for the yuan, where the peg has been maintained.
Wednesday the press was full of "dollar strength" rhetoric. Treasury Secretary Geithner said the U.S. needs a strong currency. "I believe deeply that it’s very important to the United States, to the economic health of the United States, that we maintain a strong dollar … Because of the important role the dollar plays in the international financial system, we bear a special responsibility for trying to make sure that we are implementing policies in the United States that will sustain confidence."
How many times have we heard this statement from Washington? There is a growing global fear that the U.S. greenback is beginning a longer and inexorable slide and that the reserve position of the U.S. currency will come under pressure. There is no replacement for that dollar reserve role today, and there may not be for a long time.
Fred Bergsten recently wrote in Foreign Affairs (Nov.-Dec. 2009) that it is clearly "in the best interest of the U.S." to move away from its sole role as keeper of the reserve currency. Running large external deficits in a reserve-currency country continually ignites bubbles. Rising deficits combined with a reserve currency causes inflows and lower rates. Professors Kenneth Rogoff and Niall Ferguson (Harvard) suggested on Bloomberg (Oct. 29) that the fiscal imbalances in the world are now greater than ever. U.S. fiscal policy and the existence of the reserve-currency status of the U.S. dollar are igniting the next round of bubbles. There may be very good reason why China tied its currency to the dollar and encouraged its citizens to buy gold and silver. Professor Ferguson foresees a sharp 10% selloff in the U.S. dollar from this level (75.04) and then a long, gradual decline. He also sees an imminent "tipping point" because of the evolving fiscal situation.
The U.S. needs inflation more than any country in the world. Bergsten recently said that given current relentless spending plans in Washington by 2030 the CBO projects the net debt will rise to $50 trillion and servicing that debt will require $2.5 trillion each year. At some point this service is unsustainable. The dollar will fall, long rates must rise to attract new capital, and inflation will reassert itself.
Why does the Fed want inflation? It is very simple: If you carry a lot of debt, inflation is your friend. The dollar will not be. We like the currencies of the commodity countries. Once again we quote Professor Ferguson, who says we are on the cusp of a 500-year event. He believes that China will be the engine that eventually emerges. "China is in the early phase of a massive buying spree to get the commodities she needs. … Load up on copper, load up on anything the Chinese want … the safest one-way trade you can make."
We think that the long-term dynamics of a falling dollar combined with the Chinese commodity-buying spree are good reasons to buy hard assets, not only gold and silver. Mining shares in the Canadian markets are good places to start. The loonie--definitely headed back to par-- and beyond. Please act accordingly.
Where do gold and silver prices head from here? As you can see, gold has continued its tremendous breakout since Sept. 1. It has risen from $958 to $1130 this AM (17.9%). Silver during this period has performed about as well. Copper is above the $3.03 per pound range this a.m. The real question: Is this a dollar carry trade bubble or is this the result of the world seeking protection from fiat currencies in hard assets and perhaps the nascent beginnings of a move toward a new currency standard? Are we slouching to Bethlehem to be reborn?
We think the hard assets need a rest here. But why fight the trend--it is indeed your friend here. Until there is some clarity on the U.S. fiscal policy and the Chinese peg to the dollar the imbalances will continue to build in the global financial system.
In the meantime we think Goldcorp ( GG - news - people ) is significantly undervalued. We like the up and coming gold stocks such as Goldcorp, Ventana Gold, Galway Resources and Antioquiain Colombia's prolific gold districts. On the silver front Quaterra Resources ( QMM - news - people ) announced last week that it is now infill drilling its silver discovery at Nieves in Mexico. We think this could double Quaterra’s silver resources from its current level of 17 million ounces. We own shares of Goldcorp and Quaterra Resources.
Gold is soaring Monday, trading at $1131 per ounce. President Obama is in China, calling for a new relationship. New relationship, indeed! On the surface of this visit everyone is smiling. Immediately below surface the dollar is falling--again.
There is tremendous global finger-pointing today. Liu Mingkang, head of China’s CBRC, said that the combination of a weak dollar and low U.S. interest rates has spawned: "A huge carry trade” that was having a “massive impact on global asset prices … [It] is boosting speculative investment in stock and property markets and will pose new, real and insurmountable risks to the global recovery and particularly to the recovery in emerging markets."
Mr. Liu implied that the U.S. was purposely inflating away its massive debt. On the other hand IMF head Dominique Strauss-Kahn suggested that China must float her currency to ease the pain of her Asian neighbors and the European Union countries.
There are no "best" alternatives. Raising interest rates in the U.S. would be extremely painful and would derail the recovery. The U.S. needs at least 5% growth in GDP to support its huge and increasing debt load. Raising U.S. rates to defend the dollar is political nonstarter.
Last Tuesday China said, somewhat begrudgingly, that it would allow the yuan to appreciate. China now pegs the yuan to the U.S. dollar. This announcement was likely in response to pressure from China’s Asian neighbors (Thou Shalt Not Beggar Thy Neighbor). The Euro Union leaders have also felt the pain of a jointly weaker dollar and yuan. Time will tell how serious China is about the floating the yuan. Today once again the dollar is weaker--across the board--except for the yuan, where the peg has been maintained.
Wednesday the press was full of "dollar strength" rhetoric. Treasury Secretary Geithner said the U.S. needs a strong currency. "I believe deeply that it’s very important to the United States, to the economic health of the United States, that we maintain a strong dollar … Because of the important role the dollar plays in the international financial system, we bear a special responsibility for trying to make sure that we are implementing policies in the United States that will sustain confidence."
How many times have we heard this statement from Washington? There is a growing global fear that the U.S. greenback is beginning a longer and inexorable slide and that the reserve position of the U.S. currency will come under pressure. There is no replacement for that dollar reserve role today, and there may not be for a long time.
Fred Bergsten recently wrote in Foreign Affairs (Nov.-Dec. 2009) that it is clearly "in the best interest of the U.S." to move away from its sole role as keeper of the reserve currency. Running large external deficits in a reserve-currency country continually ignites bubbles. Rising deficits combined with a reserve currency causes inflows and lower rates. Professors Kenneth Rogoff and Niall Ferguson (Harvard) suggested on Bloomberg (Oct. 29) that the fiscal imbalances in the world are now greater than ever. U.S. fiscal policy and the existence of the reserve-currency status of the U.S. dollar are igniting the next round of bubbles. There may be very good reason why China tied its currency to the dollar and encouraged its citizens to buy gold and silver. Professor Ferguson foresees a sharp 10% selloff in the U.S. dollar from this level (75.04) and then a long, gradual decline. He also sees an imminent "tipping point" because of the evolving fiscal situation.
The U.S. needs inflation more than any country in the world. Bergsten recently said that given current relentless spending plans in Washington by 2030 the CBO projects the net debt will rise to $50 trillion and servicing that debt will require $2.5 trillion each year. At some point this service is unsustainable. The dollar will fall, long rates must rise to attract new capital, and inflation will reassert itself.
Why does the Fed want inflation? It is very simple: If you carry a lot of debt, inflation is your friend. The dollar will not be. We like the currencies of the commodity countries. Once again we quote Professor Ferguson, who says we are on the cusp of a 500-year event. He believes that China will be the engine that eventually emerges. "China is in the early phase of a massive buying spree to get the commodities she needs. … Load up on copper, load up on anything the Chinese want … the safest one-way trade you can make."
We think that the long-term dynamics of a falling dollar combined with the Chinese commodity-buying spree are good reasons to buy hard assets, not only gold and silver. Mining shares in the Canadian markets are good places to start. The loonie--definitely headed back to par-- and beyond. Please act accordingly.
Where do gold and silver prices head from here? As you can see, gold has continued its tremendous breakout since Sept. 1. It has risen from $958 to $1130 this AM (17.9%). Silver during this period has performed about as well. Copper is above the $3.03 per pound range this a.m. The real question: Is this a dollar carry trade bubble or is this the result of the world seeking protection from fiat currencies in hard assets and perhaps the nascent beginnings of a move toward a new currency standard? Are we slouching to Bethlehem to be reborn?
We think the hard assets need a rest here. But why fight the trend--it is indeed your friend here. Until there is some clarity on the U.S. fiscal policy and the Chinese peg to the dollar the imbalances will continue to build in the global financial system.
In the meantime we think Goldcorp ( GG - news - people ) is significantly undervalued. We like the up and coming gold stocks such as Goldcorp, Ventana Gold, Galway Resources and Antioquiain Colombia's prolific gold districts. On the silver front Quaterra Resources ( QMM - news - people ) announced last week that it is now infill drilling its silver discovery at Nieves in Mexico. We think this could double Quaterra’s silver resources from its current level of 17 million ounces. We own shares of Goldcorp and Quaterra Resources.
Singapore Export Decline Eases Amid Gradual Recovery
Nov. 17 (Bloomberg) -- Singapore’s exports failed to recover as strongly as expected in October, giving policy makers a reason to be wary about exiting stimulus measures too soon.
Non-oil domestic exports dropped 6.1 percent from a year earlier, after a revised 7.3 percent contraction in September, the trade promotion agency said in a statement today. The median forecast of 10 economists surveyed by Bloomberg News was for a 0.2 percent gain.
The improvement in exports “has been gradual so far,” Brian Jackson, a senior strategist for emerging markets at the Royal Bank of Canada in Hong Kong, said in an e-mail. “This suggests that Singapore authorities will be cautious about the outlook for recovery and will want to keep a lid on currency appreciation against the dollar.”
The central bank said last month it will maintain a zero appreciation stance in its currency policy, after opting for a de-facto devaluation of the Singapore dollar in April to help reverse a collapse in exports. The global recovery “remains fragile” and growth in the coming quarters may be uneven, Asia- Pacific Economic Cooperation ministers said last week.
Singapore’s benchmark stock index fell 0.4 percent as at 2:19 p.m. today. The island’s currency was little changed at 1.3858 against the U.S. dollar.
Not All ‘Rosy’
“It is beginning to look as though not everything in Singapore’s garden is rosy right now,” Robert Prior-Wandesforde, a Singapore-based senior economist at HSBC Holdings Plc., said in an e-mail. “It’s most likely to prove a pause for breath after what has been an extremely rapid period of growth but clearly the situation needs watching closely.”
Singapore’s stock index has surged 57 percent this year as a global economic recovery increases sales at companies including Chartered Semiconductor Manufacturing Ltd. Improving exports are needed to sustain Asia’s emergence from the world recession after the region’s governments pumped more than $950 billion into their economies and cut interest rates to revive growth.
Japan’s economy expanded at the fastest pace in more than two years in the third quarter, led by a rebound in domestic demand, a report showed yesterday. The annual 4.8 percent increase in gross domestic product was the second straight advance after the nation’s deepest postwar recession.
Growth Forecast
Singapore’s government has raised its 2009 economic forecast twice this year after cutting corporate taxes and unveiling record spending to revive growth. The island’s $182 billion economy grew 0.8 percent in the third quarter from a year earlier, the first expansion in more than a year, according to an advanced estimate last month.
The country may report a smaller 0.5 percent increase in third-quarter GDP from a year earlier when it releases final estimates on Nov. 19, according to the median forecast of eight economists surveyed by Bloomberg News.
“Our base case scenario of a gradual global demand recovery and benign inflation environment remains intact,” said Alvin Liew, an economist at Standard Chartered Plc in Singapore.
Singapore’s non-oil exports fell a seasonally adjusted 12.6 percent last month from September, when they rose a revised 2.9 percent, today’s report showed.
Electronics shipments dropped 13.8 percent in October from a year earlier to S$4.85 billion ($3.5 billion), easing from a 14.4 percent decline in September. Non-electronics shipments, which include petrochemicals and pharmaceuticals, fell 0.5 percent in October after declining a revised 2.5 percent in September. Pharmaceutical shipments gained 24.8 percent.
The performance of Singapore’s pharmaceutical industry is volatile as production swings by companies such as Sanofi- Aventis SA can cause industrial output to fluctuate from month to month. Drug companies sometimes shut plants for cleaning before making different products.
Non-oil domestic exports dropped 6.1 percent from a year earlier, after a revised 7.3 percent contraction in September, the trade promotion agency said in a statement today. The median forecast of 10 economists surveyed by Bloomberg News was for a 0.2 percent gain.
The improvement in exports “has been gradual so far,” Brian Jackson, a senior strategist for emerging markets at the Royal Bank of Canada in Hong Kong, said in an e-mail. “This suggests that Singapore authorities will be cautious about the outlook for recovery and will want to keep a lid on currency appreciation against the dollar.”
The central bank said last month it will maintain a zero appreciation stance in its currency policy, after opting for a de-facto devaluation of the Singapore dollar in April to help reverse a collapse in exports. The global recovery “remains fragile” and growth in the coming quarters may be uneven, Asia- Pacific Economic Cooperation ministers said last week.
Singapore’s benchmark stock index fell 0.4 percent as at 2:19 p.m. today. The island’s currency was little changed at 1.3858 against the U.S. dollar.
Not All ‘Rosy’
“It is beginning to look as though not everything in Singapore’s garden is rosy right now,” Robert Prior-Wandesforde, a Singapore-based senior economist at HSBC Holdings Plc., said in an e-mail. “It’s most likely to prove a pause for breath after what has been an extremely rapid period of growth but clearly the situation needs watching closely.”
Singapore’s stock index has surged 57 percent this year as a global economic recovery increases sales at companies including Chartered Semiconductor Manufacturing Ltd. Improving exports are needed to sustain Asia’s emergence from the world recession after the region’s governments pumped more than $950 billion into their economies and cut interest rates to revive growth.
Japan’s economy expanded at the fastest pace in more than two years in the third quarter, led by a rebound in domestic demand, a report showed yesterday. The annual 4.8 percent increase in gross domestic product was the second straight advance after the nation’s deepest postwar recession.
Growth Forecast
Singapore’s government has raised its 2009 economic forecast twice this year after cutting corporate taxes and unveiling record spending to revive growth. The island’s $182 billion economy grew 0.8 percent in the third quarter from a year earlier, the first expansion in more than a year, according to an advanced estimate last month.
The country may report a smaller 0.5 percent increase in third-quarter GDP from a year earlier when it releases final estimates on Nov. 19, according to the median forecast of eight economists surveyed by Bloomberg News.
“Our base case scenario of a gradual global demand recovery and benign inflation environment remains intact,” said Alvin Liew, an economist at Standard Chartered Plc in Singapore.
Singapore’s non-oil exports fell a seasonally adjusted 12.6 percent last month from September, when they rose a revised 2.9 percent, today’s report showed.
Electronics shipments dropped 13.8 percent in October from a year earlier to S$4.85 billion ($3.5 billion), easing from a 14.4 percent decline in September. Non-electronics shipments, which include petrochemicals and pharmaceuticals, fell 0.5 percent in October after declining a revised 2.5 percent in September. Pharmaceutical shipments gained 24.8 percent.
The performance of Singapore’s pharmaceutical industry is volatile as production swings by companies such as Sanofi- Aventis SA can cause industrial output to fluctuate from month to month. Drug companies sometimes shut plants for cleaning before making different products.
U.S. Economy: Sales Rebound From Year’s Biggest Drop
Nov. 16 (Bloomberg) -- Retail sales in the U.S. rebounded more than forecast as demand for autos climbed, and a regional gauge of manufacturing showed expansion for a fourth month, easing concern the recovery will cool after government incentives end.
Purchases increased 1.4 percent in October after a 2.3 percent drop in September that was larger than the previously estimated, Commerce Department figures showed today in Washington. The Federal Reserve Bank of New York’s general economic index, where positive readings signal growth, fell to 23.5 this month from a five-year high of 34.6 in October.
Stocks added to a global rally after the reports signaled rising demand at retailers from discount chain TJX Cos. to luxury store Saks Inc. may foreshadow a better holiday shopping season, while General Motors Co. said demand is holding up this month. Fed Chairman Ben S. Bernanke today said “headwinds” of reduced credit and a weak labor market will probably restrain the recovery.
“Consumers are looking relatively resilient,” said Michael Feroli, an economist at JPMorgan Chase & Co. in New York, who projected sales would increase 1.3 percent. “They are spending a little more freely, which bodes well for the holiday season. Given the backdrop of the labor market, this is actually as good as one can hope for.”
Stocks Rise
Benchmark stock indexes reached 13-month highs, led by energy producers as crude oil prices climbed. The Standard & Poor’s 500 Index rose 1.5 percent to close at 1,109.3. Shares of retailers including Nordstrom Inc. and Saks rallied.
“Significant economic challenges remain,” Bernanke said in a speech to the Economic Club of New York. “The flow of credit remains constrained, economic activity weak, and unemployment much too high. Future setbacks are possible.”
A Commerce Department report today also showed inventories at U.S. businesses fell in September to the lowest level in almost four years, signaling orders will rise in coming months as spending picks up.
The 0.4 percent decrease in stockpiles was smaller than anticipated and brought the value of goods on hand down to $1.3 trillion, the fewest since November 2005. Sales decreased 0.3 percent, reflecting a slump in demand for autos that was reversed last month.
Forecast, Revision
Retail sales were projected to rise 0.9 percent after an originally reported 1.5 percent decline in September, according to the median estimate of 66 economists in a Bloomberg News survey. Forecasts ranged from gains of 0.4 percent to 1.8 percent.
Excluding autos, sales increased 0.2 percent, less than anticipated, after a 0.4 percent gain in September.
Sales at automobile dealerships and parts stores jumped 7.4 percent in October after a 14 percent plunge the prior month that was larger than previously estimated.
Auto demand is stabilizing after plunging to a three- decade low earlier this year. GM and Ford Motor Co. last month had their first combined sales gain in three years, helping the industry rebound from a plunge in September. Overall sales climbed to a 10.5 million annual rate from 9.2 million.
Fritz Henderson, GM’s chief executive officer, said in a Bloomberg Television interview today that November’s sales pace will be about the same as last month’s.
Broad-Based Gains
Car dealers aren’t the only retailers to see improvement. Sales climbed at clothing, department and health and personal care stores, along with Internet retailers and restaurants, today’s report showed. Furniture, electronic and building supply stores all showed declines, signaling the rebound in housing will be slow to develop.
Sales at stores open at least a year climbed last month from a year earlier at Framingham, Massachusetts-based TJX, owner of T.J. Maxx and Marshalls stores that sell designer goods at discounted prices. Luxury chains Saks and Nordstrom also showed gains, helping the retail industry report its biggest same-store sales increase since July 2008.
Wal-Mart Stores Inc., the world’s largest retailer, raised its annual profit forecast while predicting U.S. sales may be little changed this quarter. Bentonville, Arkansas-based Walmart plans to cut prices weekly, and offer discounts on items such as flat-panel televisions to win holiday shoppers.
“While the economy remains challenging for our customers and therefore for Walmart sales, I continue to be encouraged by both our traffic and market-share gains,” Chief Executive Officer Mike Duke said on a pre-recorded conference call last week.
Exports, Inventories
Exports that have increased five straight months, a weaker dollar and lean inventories have combined to keep factories busy. Economic growth will be stronger over coming quarters than previously anticipated reflecting the pickup in manufacturing, according to a Bloomberg survey of economists taken Nov. 2 to Nov. 9.
Consumer spending will be slower to rebound as unemployment exceeds 10 percent through the first half of 2010, economists surveyed projected.
Payrolls fell by 190,000 in October and the jobless rate jumped to 10.2 percent, topping 10 percent for the first time since 1983. Concern about jobs and incomes pushed consumer sentiment down to a three-month low in November, according to a report from Reuters/University of Michigan last week.
Purchases increased 1.4 percent in October after a 2.3 percent drop in September that was larger than the previously estimated, Commerce Department figures showed today in Washington. The Federal Reserve Bank of New York’s general economic index, where positive readings signal growth, fell to 23.5 this month from a five-year high of 34.6 in October.
Stocks added to a global rally after the reports signaled rising demand at retailers from discount chain TJX Cos. to luxury store Saks Inc. may foreshadow a better holiday shopping season, while General Motors Co. said demand is holding up this month. Fed Chairman Ben S. Bernanke today said “headwinds” of reduced credit and a weak labor market will probably restrain the recovery.
“Consumers are looking relatively resilient,” said Michael Feroli, an economist at JPMorgan Chase & Co. in New York, who projected sales would increase 1.3 percent. “They are spending a little more freely, which bodes well for the holiday season. Given the backdrop of the labor market, this is actually as good as one can hope for.”
Stocks Rise
Benchmark stock indexes reached 13-month highs, led by energy producers as crude oil prices climbed. The Standard & Poor’s 500 Index rose 1.5 percent to close at 1,109.3. Shares of retailers including Nordstrom Inc. and Saks rallied.
“Significant economic challenges remain,” Bernanke said in a speech to the Economic Club of New York. “The flow of credit remains constrained, economic activity weak, and unemployment much too high. Future setbacks are possible.”
A Commerce Department report today also showed inventories at U.S. businesses fell in September to the lowest level in almost four years, signaling orders will rise in coming months as spending picks up.
The 0.4 percent decrease in stockpiles was smaller than anticipated and brought the value of goods on hand down to $1.3 trillion, the fewest since November 2005. Sales decreased 0.3 percent, reflecting a slump in demand for autos that was reversed last month.
Forecast, Revision
Retail sales were projected to rise 0.9 percent after an originally reported 1.5 percent decline in September, according to the median estimate of 66 economists in a Bloomberg News survey. Forecasts ranged from gains of 0.4 percent to 1.8 percent.
Excluding autos, sales increased 0.2 percent, less than anticipated, after a 0.4 percent gain in September.
Sales at automobile dealerships and parts stores jumped 7.4 percent in October after a 14 percent plunge the prior month that was larger than previously estimated.
Auto demand is stabilizing after plunging to a three- decade low earlier this year. GM and Ford Motor Co. last month had their first combined sales gain in three years, helping the industry rebound from a plunge in September. Overall sales climbed to a 10.5 million annual rate from 9.2 million.
Fritz Henderson, GM’s chief executive officer, said in a Bloomberg Television interview today that November’s sales pace will be about the same as last month’s.
Broad-Based Gains
Car dealers aren’t the only retailers to see improvement. Sales climbed at clothing, department and health and personal care stores, along with Internet retailers and restaurants, today’s report showed. Furniture, electronic and building supply stores all showed declines, signaling the rebound in housing will be slow to develop.
Sales at stores open at least a year climbed last month from a year earlier at Framingham, Massachusetts-based TJX, owner of T.J. Maxx and Marshalls stores that sell designer goods at discounted prices. Luxury chains Saks and Nordstrom also showed gains, helping the retail industry report its biggest same-store sales increase since July 2008.
Wal-Mart Stores Inc., the world’s largest retailer, raised its annual profit forecast while predicting U.S. sales may be little changed this quarter. Bentonville, Arkansas-based Walmart plans to cut prices weekly, and offer discounts on items such as flat-panel televisions to win holiday shoppers.
“While the economy remains challenging for our customers and therefore for Walmart sales, I continue to be encouraged by both our traffic and market-share gains,” Chief Executive Officer Mike Duke said on a pre-recorded conference call last week.
Exports, Inventories
Exports that have increased five straight months, a weaker dollar and lean inventories have combined to keep factories busy. Economic growth will be stronger over coming quarters than previously anticipated reflecting the pickup in manufacturing, according to a Bloomberg survey of economists taken Nov. 2 to Nov. 9.
Consumer spending will be slower to rebound as unemployment exceeds 10 percent through the first half of 2010, economists surveyed projected.
Payrolls fell by 190,000 in October and the jobless rate jumped to 10.2 percent, topping 10 percent for the first time since 1983. Concern about jobs and incomes pushed consumer sentiment down to a three-month low in November, according to a report from Reuters/University of Michigan last week.
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