By Ryan Vlastelica
NEW YORK (Reuters) - U.S. stocks closed more than 1 percent higher on Wednesday after Senate leaders said they had a deal to reopen the federal government and raise the debt ceiling, which would avoid the threat of a debt default.
U.S. Senate Majority Leader Harry Reid and Senate Republican leader Mitch McConnell said senators had come to an agreement that will reopen the government through January 15 and raise the debt ceiling until February 7. The House of Representatives planned to vote on the measure later in the day.
The day's gains brought the S&P 500 within a few points of its all-time closing high of 1,725.52 on September 18. Volume has been below average, however, as many investors stayed on the sidelines until a resolution of the fiscal issues was official.
"It looks like we'll get through this, which brings the market a bit of a reprieve. Not only is this a relief rally, but we're still in an environment with a very accommodative monetary policy, which provides a tailwind," said Judy Moses, portfolio manager at Evercore Wealth Management in San Francisco.
Gains were broad, with all 10 S&P 500 sectors solidly higher, led by financial stocks, which rose 2.1 percent. Other groups tied to the pace of economic growth, including energy, also jumped. Crude oil rose 1 percent while gold was essentially flat.
In another sign of easing concerns, the CBOE Volatility index sank 21 percent in its biggest daily drop since August 2011. However, the index remains up about 12 percent over the past four weeks.
About 78 percent of stocks traded on the New York Stock Exchange ended higher while 69 percent of Nasdaq-listed shares closed up.
After the market closed, IBM
American Express Co reported a 9.3 percent rise in earnings after the bell on Wednesday, but shares were flat in extended trading.
The Dow Jones industrial average was up 205.82 points, or 1.36 percent, at 15,373.83. The Standard & Poor's 500 Index was up 23.48 points, or 1.38 percent, at 1,721.54. The Nasdaq Composite Index was up 45.42 points, or 1.20 percent, at 3,839.43.
While the issues in Washington continued to be the market's primary driver, analysts said the focus would likely turn to the third-quarter earnings season.
"In general, revenue growth has been challenged, and especially in technology shares there's been low revenue growth," said Moses, who helps oversee $4.7 billion in assets.
With 11 percent of S&P 500 companies having reported, about 57 percent have topped profit expectations, below the historical average of 63 percent. The number of companies topping revenue forecasts has also been below the historical average.
Investors will be closely watching for any sign that the government shutdown and debt ceiling impasse had a negative impact on results or forecasts. David Joy, who oversees about $703 billion in assets as chief market strategist at Ameriprise Financial in Boston, said he expected political uncertainty to erode earnings expectations.
"To me the market has yet to reflect the reality of the economic damage and the psychological damage this has done," Joy said. "I think it's awfully aggressive to think fourth-quarter earnings are going to be up 9 percent, given the shutdown ... my instinct is to sell into this rally."
In its Beige Book report, the Federal Reserve said U.S. growth continued to chug along at a "modest to moderate pace" in September and early October, providing the fullest update on the economy since a government shutdown halted publication of most data.
Intel Corp's
Bank of America Corp
Shares of Yahoo
J.P. Morgan Chase & Co
(Additional reporting by Steven Johnson; Editing by Kenneth Barry and Nick Zieminski)
A biker rides past the U.S. Capitol on Monday. Lawmakers are negotiating over plans to raise the federal debt ceiling amid warnings that the government soon won't be able to pay its debts in full.
A biker rides past the U.S. Capitol on Monday. Lawmakers are negotiating over plans to raise the federal debt ceiling amid warnings that the government soon won't be able to pay its debts in full.
If you don't pay your electric bill on time, you'll probably get charged a buck or two in interest. As long as you pay off the balance in a reasonable amount of time, your lights will stay on.
So why is it such a big deal that the Treasury Department may soon be unable to pay all of its bills on time?
U.S. Treasury securities are used as both currency and collateral for countless financial transactions around the world. Think dozens per minute.
Right now, Treasurys are almost as liquid and secure as cash. If investors are at all nervous that they might not be honored, this could have a cascading effect that will cause stock markets to tumble, the dollar to lose value and unemployment to rise.
"If Treasury bonds were no longer seen as risk-free, that would have implications for virtually all collateralized loans, which is a huge proportion," says Phillip Swagel, a University of Maryland economist who served as assistant Treasury secretary for economic policy under President George W. Bush.
"If people couldn't hold Treasurys, they would have to hold a lot of cash," he says. "We don't want people to feel like they have to hoard cash to make transactions."
Still A Big 'If'
Note that Swagel is still using the word "if." No one knows whether time will run out on the Treasury Department's authority to raise money.
Technically, it ran out in May, but the department has been able to keep juggling since then. The nominal deadline Congress and President Obama have been working with is Thursday, when the Treasury says it will be unable to borrow any more money by issuing bonds.
Treasury says it will bump up against the $16.7 trillion federal debt ceiling and have to handle payments basically on a cash basis. With that date in mind, the House and Senate keep going back and forth about how and whether to raise the debt ceiling.
There's been a lot of debate about whether breaching the debt ceiling spells real trouble. In theory, Treasury can prioritize paying bondholders over other obligations — the so-called Pay China First strategy. Treasury says it lacks the software and expertise to pull that off, even if the administration decides it wants to.
It's possible that, just using daily incoming tax receipts, Treasury won't really run out of money until Nov. 1, when, among other things, Social Security recipients will be expecting their checks.
But economists are worried that even if Treasury doesn't default on any bonds right after midnight on Thursday, financial markets will grow extremely wary. Already, it costs more for Treasury to borrow money on a short-term basis than for, say, 10 years. Normal prices are inverted because investors are nervous about being paid back over the next month or so.
The date to worry about, in other words, may have nothing to do with Treasury's own drop-dead date and everything to do with when investors start panicking because they don't believe a solution will be hammered out in time.
No one can predict exactly when that would be. It's not in red on the calendar, like how many shopping days until Christmas.
But once panic sets in, things will go bad quickly.
"Markets could go into bedlam," says Mark Zandi, chief economist with the research firm Moody's Analytics. "I don't know that we have to go to Nov. 1 before there's chaos."
2008 All Over Again
It could be like 2008, only worse. Back then, the collapse of the brokerage firm Lehman Brothers triggered financial panic and a stock market crash.
The reason was that lending became extremely tight because investors became wary of most types of collateral. Why lend money based on a firm's assets if you couldn't trust those assets still had value?
The one thing that kept lending going at all, in fact, were Treasurys. They were seen as highly liquid and perfectly safe and reliable.
That's what's being put at risk in the present situation. If Treasurys are not seen as rock-solid, panicky financial markets won't know where to turn. All manner of transactions would be put on hold.
"If Treasurys should become the point of concern, not only would you have a huge problem in terms of undermining the critical linchpin of finance, but what's worse is you couldn't solve the problem by adding Treasurys, which is what we did [in 2008]," says Jason Seligman, a former Treasury staff economist who teaches at Ohio State University.
Dollars themselves would lose value, because Treasurys have to be purchased using U.S. currency. If there's less demand for Treasurys, there will be less demand for dollars.
"The entire financial system of the U.S. and the world is anchored in the idea that the government is good at paying off debts," says Matthew Shapiro, a University of Michigan economist.
The Country That Cried Wolf
Everyone is worried about how this would all play out over the coming weeks and months. If there is a debt default, a recession seems all but guaranteed.
But even if there's not — even if there is some last-minute deal that at least punts the problem a few weeks or months into the future — the fact that Washington is again cutting things so close could have lasting repercussions anyway.
Remember, when Congress flirted with not lifting the debt ceiling back in 2011, it wasn't until after lawmakers had cut a deal that the U.S. bond rating was downgraded.
It might not take a formal downgrade from a rating agency to make investors more skeptical about Treasurys.
Back in 1979, there was an almost inadvertent bond default that had to do with Treasury's back-office functions not being able to get up to speed in time following another game of debt-ceiling chicken. Even failing to pay off a fairly small amount of bonds for a brief period of time significantly raised the amount of interest Treasury had to pay creditors for some months.
"We thought there was nothing safer than Treasurys, but we're basically inviting ourselves to be regarded by financial markets as risky, as a country that doesn't keep its promises to pay," Shapiro says.
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ShareContact: John Cramer
john.cramer@dartmouth.edu
603-646-9130
Dartmouth College
The Wari, a complex civilization that preceded the Inca empire in pre-Columbia America, didn't rule solely by pillage, plunder and iron-fisted bureaucracy, a Dartmouth study finds. Instead, they started out by creating loosely administered colonies to expand trade, provide land for settlers and tap natural resources across much of the central Andes.
The results, which appear in the Journal of Anthropological Archaeology, shed new light on how early states evolved into empires in the region that became the Inca imperial heartland. A PDF of the study is available on request.
The study is the first large-scale look at the settlement patterns and power of the Wari civilization, which flourished from about AD 600-1000 in the Andean highlands, well before the Inca empire's 15th century rise. Relatively little is known about the Wari -- there are no historical documents and archaeologists are still debating their power and statecraft. Many scholars think the Wari established strong centralized control -- economic, political, cultural and military like their Inca successors to govern the majority of the far-flung populations living across the central Andes. But the Dartmouth study suggests that while the Wari had significant administrative power, they did not successfully transition most colonies into directly ruled provinces.
"The identification of limited Wari state power encourages a focus on colonization practices rather than an interpretation of strong provincial rule," says Professor Alan Covey, the study's lead author. "A 'colonization first' interpretation of early Wari expansion encourages the reconsideration of motivations for expansion, shifting from military conquest and economic exploitation of subject populations to issues such as demographic relief and strategic expansion of trade routes or natural resource access."
The results are based on a systematic inventory of archaeological surveys covering nearly 1,000 square miles and GIS analysis of more than 3,000 archaeological sites in and around Peru's Cusco Valley. The data indicate Wari power did not emanate continuously outward from Pikillacta, a key administrative center whose construction required a huge investment. Instead, the locations of Wari ceramics indicate a more uneven, indirect and limited influence even at the height of their power than traditional interpretations from excavations at Wari sites.
###
The study was supported by the Fulbright-Hays Doctoral Dissertation Research Abroad Fellowship Program, Skaggs Foundation, Organization of American States, National Science Foundation, National Geographic Society, National Endowment for the Humanities, John Heinz III Charitable Trust, and Wenner-Gren Foundation.
Broadcast studios: Dartmouth has TV and radio studios available for interviews. For more information, visit: http://www.dartmouth.edu/~opa/radio-tv-studios/
Share
AAAS and EurekAlert! are not responsible for the accuracy of news releases posted to EurekAlert! by contributing institutions or for the use of any information through the EurekAlert! system.
ShareContact: John Cramer
john.cramer@dartmouth.edu
603-646-9130
Dartmouth College
The Wari, a complex civilization that preceded the Inca empire in pre-Columbia America, didn't rule solely by pillage, plunder and iron-fisted bureaucracy, a Dartmouth study finds. Instead, they started out by creating loosely administered colonies to expand trade, provide land for settlers and tap natural resources across much of the central Andes.
The results, which appear in the Journal of Anthropological Archaeology, shed new light on how early states evolved into empires in the region that became the Inca imperial heartland. A PDF of the study is available on request.
The study is the first large-scale look at the settlement patterns and power of the Wari civilization, which flourished from about AD 600-1000 in the Andean highlands, well before the Inca empire's 15th century rise. Relatively little is known about the Wari -- there are no historical documents and archaeologists are still debating their power and statecraft. Many scholars think the Wari established strong centralized control -- economic, political, cultural and military like their Inca successors to govern the majority of the far-flung populations living across the central Andes. But the Dartmouth study suggests that while the Wari had significant administrative power, they did not successfully transition most colonies into directly ruled provinces.
"The identification of limited Wari state power encourages a focus on colonization practices rather than an interpretation of strong provincial rule," says Professor Alan Covey, the study's lead author. "A 'colonization first' interpretation of early Wari expansion encourages the reconsideration of motivations for expansion, shifting from military conquest and economic exploitation of subject populations to issues such as demographic relief and strategic expansion of trade routes or natural resource access."
The results are based on a systematic inventory of archaeological surveys covering nearly 1,000 square miles and GIS analysis of more than 3,000 archaeological sites in and around Peru's Cusco Valley. The data indicate Wari power did not emanate continuously outward from Pikillacta, a key administrative center whose construction required a huge investment. Instead, the locations of Wari ceramics indicate a more uneven, indirect and limited influence even at the height of their power than traditional interpretations from excavations at Wari sites.
###
The study was supported by the Fulbright-Hays Doctoral Dissertation Research Abroad Fellowship Program, Skaggs Foundation, Organization of American States, National Science Foundation, National Geographic Society, National Endowment for the Humanities, John Heinz III Charitable Trust, and Wenner-Gren Foundation.
Broadcast studios: Dartmouth has TV and radio studios available for interviews. For more information, visit: http://www.dartmouth.edu/~opa/radio-tv-studios/
Share
AAAS and EurekAlert! are not responsible for the accuracy of news releases posted to EurekAlert! by contributing institutions or for the use of any information through the EurekAlert! system.
Villagers eat at a temporary cyclone shelter in Chatrapur, India, on Saturday. India evacuated nearly 1 million people before Cyclone Phailin made landfall. The effort appears to have paid off. As of Tuesday, there were fewer than 30 deaths.
Villagers eat at a temporary cyclone shelter in Chatrapur, India, on Saturday. India evacuated nearly 1 million people before Cyclone Phailin made landfall. The effort appears to have paid off. As of Tuesday, there were fewer than 30 deaths.
The massive cyclone that hit the eastern Indian state of Orissa over the weekend destroyed tens of thousands of homes, but killed fewer than 30 people.
Another big cyclone struck the same state in 1999; 10,000 people were killed.
What was different this time? Though it's not a perfect apple-to-apples comparison, there are a number of key differences in the way India prepared and responded to the latest cyclone.
Technology, for one. Here's Reuters:
"Technological advances since 1999 mean that forecasters can accurately predict weather patterns seven days in advance. The advent of mobile phones has also made a huge difference. ... At the time of the 1999 cyclone, there were less than 2 million mobile phone users in the whole of India: today, about 25 million people in [Orissa] alone — 60 percent of the state's population — carry a phone."
And, as The New York Times reports, "Even many of the poorest villages now have televisions, and India's numerous 24-hour news channels have blanketed the nation's airwaves with coverage of the storm."
Bureaucracy
India's bureaucracy, not typically known for its efficiency, got its act together ahead of Cyclone Phailin.
Officials traveled through coastal regions of Orissa and neighboring Andhra Pradesh state, warning residents to take refuge in government shelters. After the storm, they distributed food to those displaced and tarps for makeshift shelters.
As one civil servant told Reuters: "That's the first thing I asked, that I be completely authorized to take decisions at my own level." That official, in turn, allowed those under him to act without authorization.
Lessons Learned
Third, the state learned lessons from the disaster in 1999. This time, nearly 1 million people were evacuated — some of them forcibly — from their homes.
In 1999, Orissa had only about 20 cyclone shelters. This time around, the state provided evacuees with shelter.
Again, Reuters: "Both [Orissa] and Andhra Pradesh now have disaster management departments, both have built hundreds of cyclone shelters along the coast, and drills are conducted regularly so people know what to do when an alert is issued."
The Times reported that India's response to Phailin demonstrated how the country had changed.
"Change can come slowly to India. The caste system still predominates, grinding poverty remains endemic and clean water is rare. But the effective response to the threat this weekend demonstrates that Indians are transforming their country, particularly in the ways that they communicate and get their news."
Challenges Ahead
But it's important to point out that such successes are still not that common.
As recently as June, flooding in the northern state of Uttarakhand killed more than 6,000 people.
And even in states like Orissa and Andhra Pradesh, there are inefficiencies. The Wall Street Journal reported that many measures of a $240 million National Cyclone Risk Mitigation Project, put in place after the 2004 Indian Ocean tsunami, have yet to be implemented.
And, the newspaper warned, while the toll from Cyclone Phailin has been low, it "could climb if the millions stranded without enough food and clean water are not taken care of."
By Atossa Araxia Abrahamian
NEW YORK (Reuters) - More than half of low-wage workers employed by the largest U.S. fast-food restaurants earn so little that they must rely on public assistance to get by, according to a study released on Tuesday.
This ends up costing U.S. taxpayers billions of dollars a year, the study said.
Data from the U.S. Census Bureau and public benefit programs show 52 percent of fast-food cooks, cashiers and other "front-line" staff had relied on at least one form of public assistance, such as Medicaid, food stamps and the Earned Income Tax Credit program, between 2007 and 2011, researchers at the University of California-Berkeley and the University of Illinois said.
In a concurrent report, the pro-labor National Employment Law Project found that the 10 largest fast-food companies in the United States cost taxpayers more than $3.8 billion each year in public assistance because the workers do not make enough to pay for basic necessities themselves.
"It doesn't matter whether you work or shop at McDonald's or not, the low-wage business model is expensive for everybody," said NELP policy analyst Jack Temple, who worked on the report. "Companies ... are basically pushing off part of their costs on the taxpayers."
The studies follow large nationwide demonstrations in August, when fast-food workers went on strike and protested outside McDonald's, Burger King and other restaurants in 60 U.S. cities, demanding a "living wage" of $15 per hour.
The U.S. fast-food industry generates sales of $200 billion a year. The companies have long said that mostly young people do the entry-level work of flipping burgers or making milkshakes and that these positions are stepping stones to higher-paying jobs. However, the NELP found that the median age of a fast-food worker was 28, Temple said.
McDonald's Corp and Burger King Worldwide Inc did not respond to requests for comment. Wendy's Co declined to comment, and Yum Brands Inc did not immediately provide a comment.
The Employment Policies Institute, which has opposed calls for higher fast-food wages in the past, said in a statement that the reports "ignore economic evidence that dramatic wage hikes would make fast food workers worse off" when employers "replace employees with less-costly automated alternatives."
LOW-WAGE RUT
U.C. Berkeley labor economist Sylvia Alegretto, who worked on the report from her school and the University of Illinois, said the economic recovery did not make life much easier for these workers, who are stuck in a low-wage rut.
"They took it on the chin when the economy was bad, and now that it's better, wages aren't going up," Alegretto said. "In fact, they're making less than their counterparts were 50 years ago."
Alegretto said her team was "very conservative" in estimating the number of low-wage workers, counting only those who worked more than 10 hours a week for at least 27 weeks a year.
The median wage for front-line fast-food workers is $8.94 per hour, according to the NELP's analysis of government data. Many of these jobs are not full-time.
Twice as many fast-food workers enroll in public aid programs than the overall workforce because of the low wages, limited work hours, and skimpy benefits their jobs afford them, according to the Berkeley study.
But even those who work full-time are struggling. More than half of these families are enrolled in public assistance programs, the researchers said. This costs taxpayers nearly $7 billion per year, more than half of which is in health insurance costs.
Overall, families with a working member account for 73 percent of all enrollments, amounting to two-thirds of all public benefits spending, the study said.
In other types of service work, such as maintenance, laundry and personal services, the researchers found that one-third of employees are enrolled in public assistance programs, as were about 30 percent of workers in the retail and hospitality sectors.
The time frame of the Berkeley study includes the 2007-2009 recession and the subsequent years of slow economic growth. During that time, the number of workers eligible for public assistance increased in some states.
(This version of the story changes "Medicare" to "Medicaid" in paragraph 3.)
(Reporting by Atossa Araxia Abrahamian; Editing by Lisa Von Ahn and Bob Burgdorfer)
Ready to walk down the aisle . . . once she puts some clothes on! Kat Graham looked smoking hot while hitting the beach in Santa Monica, Calif. with fiance Cottrell Guidry on Monday, Oct. 14. The 24-year-old Vampire Diaries actress showed off her slim body in a strapless neon pink and black bikini.
Graham went for a stroll along the shore while holding her adorable tiny dog Izzy. Actor Guidry walked alongside his bride-to-be, and went shirtless in just a pair of rolled-up jeans.
PHOTOS: Hollywood's hottest bikini bodies
After confirming reports she was engaged in June, Graham opened up to Us Weekly about wedding planning at the Teen Choice Awards in August. "It's been hard because I've been on the road," she explained. "Between shooting Vampire Diaries, I've been touring for my new single that just came out, 'Power.' So I've been doing all the different radio shows, so it's been hard to sit down and plan. I've been literally all over the place."
Kat Graham kisses fiance Cottrell Guidry while heading to the beach in Santa Monica, Calif. on Oct. 14.
Credit: PacificCoastNews.com
Graham did tell Us, however, that she had already started a new diet to get in shape. "I don't know if it's for the wedding, but I've gone on this whole organic kick," she shared. "I did a whole thing of blood tests and I have completely changed my diet. I eat a lot of steamed veggies, lean meats. I'm staying away from sugar. It's extremely hard, especially when you don't have a cheat day. My nutritionist has cut me off of bread. It's very hard and it makes you crazy!"
The hard work paid off and Graham said she was feeling good. "I don't really weigh myself, but I'm definitely more lean and I have more oxygen," she explained. "I don't need to take as big of breaths."
The CW star also told Us that she's not a bridezilla and isn't worried about picking out her wedding dress. "I know the shape I want, so that's easy," she said. "I can do that in a day!"
