64 INTERNATIONAL ECONOMY
THE GUARDIAN, Friday, April 26, 2013
Growth records extend U.S. debt ceiling deadline HE U.S. Treasury T Department may have more time than economists previously estimated before the government’s debt limit is reached as changes in tax policy and an economic rebound boost federal revenue. The date the nation hits the ceiling on borrowing could be pushed back as far as mid-September to Sept. 30 from a previous estimate of late August to midSeptember, Steve Bell, senior director of economic policy at the Bipartisan Policy Center in Washington, said in an interview. A later deadline would give Congress more time to debate lifting the cap and postpone any vote until after the August recess. President Barack Obama in February signed legislation suspending the $16.4 trillion debt limit through May 18. The Treasury uses so-called extraordinary measures to push the deadline further. Treasury Secretary Jacob J. Lew said last week Congress should “extend the debt limit to remove any uncertainty” and declined to estimate when the ceiling would be reached. “A solid economy is certainly part of the story,” said Lou Crandall, chief economist at Wrightson Icap LLC in Jersey City, New Jersey. “Underlying fiscal trends are somewhat stronger than I had anticipated a few months ago.” As a result, the Treasury is likely to have “a slower cash burn rate this summer than originally seemed likely,” he said. Receipts in the six months through March totaled $1.2 trillion, up 12.4 percent from the October-March period a year earlier, according to Treasury data. Individual income-tax payments advanced 14.7 percent, while corporate profit taxes gained 18.6 percent, the data showed. Those two
categories accounted for about 55 percent of total revenue in the first half of the current fiscal year. Government spending totaled $1.8 trillion in the six months through March, leaving a fiscal year-to-date deficit of about $600 billion, the data showed. Nancy Vanden Houten, a policy analyst with Princeton, New Jersey-based Stone & McCarthy Research Associates, said in an interview that more than half of this year’s higher revenue is related to expiration of the payroll tax cut at the end of last year and “some shifting
of income to avoid higher tax rates in calendar year 2013.” A smaller part, perhaps three to five percentage points of of the 12 percent jump in receipts, “reflects underlying growth in the economy,” she said. The debt limit is one of the thorniest political issues in Washington. In 2011, the Obama administration and Republicans debated for months before raising the ceiling in August of that year. Standard & Poor’s downgraded the U.S. three days later, citing political gridlock in Washington and
the nation’s long- term fiscal challenges. U.S. Treasuries rallied afterward, with the 10-year note yield touching a record low 1.379 percent in July 2012. Benchmark 10-year notes yielded 1.72 percent at 12:10 p.m. today in New York. The Treasury in 2011 staved off a debt limit breach for about three months by taking steps including declaring a “debt- issuance suspension period” under the statute governing the Civil Service Retirement and Disability Fund. That allows the U.S. to redeem existing Treasury securities held by
that fund as investments. The U.S. unemployment rate has declined to 7.6 percent in March from 8.2 percent a year earlier, and the S&P 500 Index has increased for the past five months. Lawmakers let marginal income-tax rates increase on taxable income of married couples above $450,000 and individuals above $400,000. Those changes increased the top tax rate on ordinary income to 39.6 percent and raised the top tax rates on capital gains and dividends. The law also reimposed limits on itemized deductions and personal
exemptions for top earners. Fannie Mae and Freddie Mac may also contribute to extending the debt limit by sending profits to the Treasury in June. Such a decision by the government-controlled mortgage companies “is a big wild card that could change the timing of the debt limit by quite a bit,” Vanden Houten said. The debt limit will increase on May 19 to account for the deficits that accrued during the suspension period. The Treasury will have to use its extraordinary measures unless the limit is raised or
U.S. Treasury Department
U.S. stocks rise amid jobless claims, earnings reports NITED STATES. stocks rose, U extending a rally in the Standard & Poor’s 500 Index to a fifth day, as earnings from United Parcel Services Inc. to Cliffs Natural Resources Inc. topped estimates and jobless claims fell. Cliffs Natural soared 17 percent and UPS climbed 2.4 percent. Akamai (AKAM) Technologies Inc. rose 19 percent as revenue and profit beat estimates. 3M Co. (MMM) slid 2.9 percent as profit trailed forecasts and the company cut its full-year outlook amid a slowing global economy. Qualcomm Inc. lost 5.7 percent after forecasting profit that may miss some analysts’ projections. The S&P 500 (SPX) advanced 0.4 percent to 1,585.03 at 3:14 p.m. in New York. The gauge has risen 2.8 percent since April 18. The Dow Jones Industrial Average climbed 25.26 points, or 0.2 percent, to 14,696.53 today. Trading in S&P 500 stocks was 21 percent higher than the 30-day average during this time of day. “The majority of companies are continuing to beat expectations, so that’s a good sign,” Peter Jankovskis, who helps oversee $3 billion as co-chief investment officer of Lisle, Illinois-based Oakbrook Investments LLC, said by telephone. “The jobless claims
were better-than-expected, so that’s providing some support.” Some 59 S&P 500 companies post earnings today. Of the 236 companies that have published results so far in this reporting season, 73 percent have exceeded analysts’ earnings estimates while 55 percent missed on revenue, data compiled by Bloomberg show. Profit at S&P 500 companies dropped 1.1 percent in the first three months of the year, according to analyst forecasts compiled by Bloomberg. That would mark the first year-overyear decrease since 2009. Applications for jobless benefits fell by 16,000 to 339,000 in the week ended April 20, according to Labor Department data released today in Washington. Economists in a Bloomberg survey had a median estimate of 350,000 claims. In the U.K., the economy grew 0.3 percent in the first quarter, more than economists’ forecast, avoiding a triple-dip recession. Twenty-four of 40 economists surveyed by Bloomberg expect the European Central Bank to cut its benchmark interest rate by a quarter percentage point to 0.5 percent next week. The S&P 500 has surged 134 percent from a 12-year low in 2009 as corporate earnings
beat analyst estimates and the Federal Reserve embarked on three rounds of bond purchases to spur economic growth. The benchmark gauge is less than 10 points away from an all-time high of 1,593.37 reached on April 11. Central bank policy makers have been voicing support for extending record stimulus as inflation cools and 11.7 million Americans remain jobless. That marks a shift from last month’s meeting, when the bankers debated the timing of a possible reduction in bond buying. The Federal Open Market Committee will meet April 30-May 1. “The market is really looking at continued easing by the Fed,” Greg Woodard, a portfolio strategist at Manning & Napier in Fairport, New York, said by phone. His firm had $45.2 billion under management at the end of 2012. “They’re looking for signals of when the Fed is going to start to reverse that. Our view is that probably it’s going to be some time away.” The Chicago Board Options Exchange Volatility Index (VIX), or VIX, increased 1.1 percent to 13.76. The CBOE opened for trading three-and-a-half hours late today after a problem with its computer systems shut the derivatives market. Nine out of 10 industries in
the S&P 500 advanced as phone and raw-materials companies climbed the most, rising at least 1.1 percent. Energy companies slumped 0.1 percent as a group. Cliffs Natural jumped the most in four years, adding 17 percent to $21.34. The largest U.S. iron-ore producer idled some mines to reduce operating costs in the first quarter and adjusted earnings beat analysts’ forecasts. UPS climbed 2.4 percent to $85.47. The world’s largest package-delivery company posted higher first-quarter earnings than analysts estimated as deliveries of online purchases increased. The company handles more than 16 million packages and envelopes a day worldwide, making it a bellwether for the economy. Akamai, which helps customers deliver online content faster, surged 19 percent to $42.98 after reporting firstquarter revenue and profit that topped estimates as Internet traffic increased more than expected. An index of homebuilders climbed 2.5 percent as all of its 11 members gained. PulteGroup Inc. jumped 5.3 percent to $20.74. The largest U.S. homebuilder by revenue reported earnings that beat analyst estimates as an accelerating housing recovery fueled sales and led to higher prices.
Dow Chemical (DOW) Co. advanced 5.7 percent to $34.01. The largest U.S. chemical maker by sales posted firstquarter profit that beat analysts’ estimates as lower prices for natural gas increased earnings from plastics. Biogen Idec Inc. added 3.8 percent to $213.93. The fourthlargest U.S. biotechnology company by market value raised its full-year forecast as first-quarter net income increased on a tax benefit. Regeneron (REGN) Pharmaceuticals Inc. climbed 3 percent to $216.84. The maker of the eye medicine Eylea will replace MetroPCS Communications Inc. in the S&P 500 after the close of trading on April 30, S&P said. 3M fell 2.9 percent to $104.80. The maker of products ranging from Scotch tape to dental braces reduced its annual earnings forecast after quarterly profit trailed estimates for the first time in 1 1/2 years amid a slowing global economy. The company, which made 65 percent of 2012 revenue outside the U.S., gets fewer dollars when converting sales from countries with weaker currencies into its results. Qualcomm (QCOM) lost 5.7 percent to $62.25. The biggest seller of semiconductors for mobile phones forecast fiscal
third-quarter net income of 80 cents to 88 cents a share as average phone prices come under pressure. Analysts on average had projected earnings of 87 cents, according to data compiled by Bloomberg. Exxon Mobil Corp. slipped 1.3 percent to $88.28, ending a five-day, 3.9 percent gain. The world’s largest company by market value said sales fell 12 percent to $108.8 billion in the first quarter. Widening chemical margins made up for lower crude production and prices, helping Exxon post an unexpected profit increase. Intuit (INTU) Inc. slid 11 percent to $57. The maker of tax and financial-planning software cut its full-year earnings forecast. JPMorgan Chase & Co. downgraded the shares to neutral from overweight, the equivalent of a buy rating. Safeway Inc. tumbled 14 percent, the most since 2003, to $24.23 after the grocer reported first-quarter same-store sales that were lower than it previously estimated. Zynga Inc. sank 7.3 percent to $3.11. The biggest maker of online social games forecast second-quarter sales that may fall short of some analysts’ estimates as revenue from mobile titles fails to make up for a drop in users playing its games on Facebook Inc.’s website.