On the Money: Fed’s rate cuts strike savers’ pocketbooks

NEW YORK (AP) — Just when bank customers were finally getting something reasonable for their hard-earned savings, the party is coming to an end. After several years of increasing the meager interest they paid on savings accounts and certificates of deposit, banks are starting to trim their offerings to savers. The declines are slight, usually less than 0.25 of a percentage point, but the trend is certain to continue for at least the next six months to a year, experts say. Blame the Federal Reserve, which cut interest rates in July and is widely expected to cut them again this year to help insulate the economy from the Trump administration’s trade disruptions and to support the stock market. U.S. President Donald Trump has repeatedly attacked the Fed for failing to cut rates aggressively, and has used his criticism to link the Fed’s moves with outcomes of the stock market. However, while nearly all households have savings accounts, a tiny minority own the vast majority of stocks. “There’s a lot more economic certainty and thoughts of a potential economic slowdown, and that’s been driving a lot of banks to cut back on what they’re offering to customers,” said Ken Tumin, founder of banking news site Some banks didn’t wait for the Fed to cut rates. Earlier this summer Goldman Sachs cut Marcus’ online savings rate to 2.15 percent from 2.25 percent, while competitor Ally cut its rate from 2.2 percent to 2.1 percent. The average online-only bank now offers an interest rate of around 1.68 percent. After the Great Recession, savers looking to safely store their cash and make a modest return had few, mostly terrible options. The Federal Reserve cut its benchmark interest rate to zero and kept it that way for years. It was not uncommon to see a big bank like Bank of America or Wells Fargo offer 0.02 percent or even 0.01 percent on a traditional savings account. Even online savings accounts, which typically offer rates far higher than brick-and-mortar establishments, offered only 1 percent. Banks didn’t have to offer enticing rates because they largely didn’t need deposits. Lending slowed considerably after the Great Recession, and new regulations kept banks from lending too dangerously, so the need for deposits to fuel that lending waned. But as the economy recovered, however, and the Fed steadily raised interest rates from near-zero to 2.50 percent at its highest level, banks started offering more to savers. Banks also started offering more loans, which in turn meant the competition for deposits heated up. But that competition for deposits is now dwindling and banks are not as willing to pay for long-term deposits as they used to. For example, six months ago an average bank was willing to pay 2.24 percent for a five-year CD. That’s declined now to 2.16 percent. The decline is small, but expected to continue downward. Savers looking for new places to lock-away money and get some sort of yield should check out no-penalty CDs offered by banks like Marcus, Tumin says. While the rate is not much higher than what a customer might get in an online-only savings account, no-penalty CDs allow a customer to lock in a rate for a year. If the Federal Reserve does cut interest rates again this year or next year, at least a saver would have locked in that higher yield and there would be no penalty for pulling the money out in most cases. Lower interest rates have been good news for some, however. Big banks cut their so-called prime rate almost immediately after the Fed’s July rate cut. That means lower interest costs for borrowers, as the prime rate is typically used to determine the interest rate on credit cards. Mortgage rates have also declined, with the average 30-year fixed-rate mortgage now averaging around 3.81 percent, compared to 4.44 percent in March.

Stocks close flat as investors wait for Friday's jobs report

NEW YORK (AP) — Stocks closed mostly unchanged on Thursday, as an earlier rally in oil prices faded and investors waited for the release of a closely watched jobs report on Friday. The Dow Jones industrial average rose 9.45 points, or less than 0.1 percent, to 17,660.71. The Standard & Poor's 500 index fell 0.49 of a point, less than 0.1 percent, to 2,050.63 and the Nasdaq composite lost 8.55 points, or 0.2 percent, to 4,717.09. As the week comes to a close, the market's focus is turning to the U.S. jobs report for April due out Friday. Investors will be watching closely to see if it could have any impact on the Federal Reserve's plans for raising interest rates at its next policy meeting in June. Economists expect the report to show jobs grew by 200,000 last month while the unemployment rate stayed at 5 percent. A private sector jobs report released by ADP on Wednesday showed that private employers created only 156,000 jobs last month, which was significantly below economists' estimates. Ahead of Friday's numbers, investors remain reluctant to make any significant bets. Several traders and strategists have said there is no major catalyst to move the market higher at the moment. "There's just too many unknowns right now, and there's nothing to get people going in the market. The jobs numbers may provide some guidance," said J.J. Kinahan, chief strategist at TD Ameritrade. Crude oil prices gave up much of an early gain that had been driven by concerns that production could be impacted by a massive fire that swept through the Canadian oil sands hub of Fort McMurray, Alberta. Benchmark U.S. crude oil rose 54 cents, or 1.2 percent, to $44.32 a barrel on the New York Mercantile Exchange. Brent crude, used to price international oils, was up 39 cents at $45.01 a barrel in London. Oil had been up nearly 4 percent earlier in the day. Despite what turned out to be a relatively modest rise in oil prices, energy companies were still the best performing part of the market. The energy component of the S&P 500 rose 0.7 percent. A number of companies fell after releasing earnings and forecasts that didn't impress investors. Electric car maker Tesla sank $11.03, or 5 percent, to $211.53 after reporting a much wider loss than Wall Street analysts were expecting. The company suffered parts delays for its new Model X SUV. Cereal maker Kellogg sank $1.97, or 2.6 percent, to $75.05 after reporting declines in both sales and earnings in the first quarter. SeaWorld sank 98 cents, or 5 percent, to $18.49 after reporting a wider first-quarter loss as expenses climbed. In other energy commodities, wholesale gasoline rose less than 1 cent to $1.49 a gallon, heating oil was unchanged at $1.33 and natural gas fell 7 cents to $2.076 per thousand cubic feet. Bond prices rose, sending yields lower. The yield on the 10-year Treasury note fell to 1.74 percent from 1.78 percent a day earlier. The euro fell to $1.1404 from $1.1498 and the dollar rose to 107.28 yen from 106.93 yen. In metals, gold fell $2.10 to $1,272.30 an ounce, silver rose 3 cents to $17.33 an ounce and copper fell 3 cents to $2.15 a pound.  

Crude falls, Virgin soars on purchase by Alaska Air

NEW YORK (AP) — U.S. stocks fell slightly in quiet trading Monday as investors worked through several company announcements and prepared for the start of company earnings releases. Health care companies were solidly higher. Global markets rose modestly. The Dow Jones industrial average lost 55.75 points, or 0.3 percent, to 17,737. The Standard & Poor's 500 index lost 6.65 points, or 0.3 percent, to 2,066.13 and the Nasdaq composite lost 22.75 points, or 0.5 percent, to 4,891.80. While stocks have recovered most their losses from earlier in the year, investors remain somewhat pessimistic about the market in the near term, especially ahead of the quarterly earnings reporting season, which unofficially beings next week with results from aluminum mining company Alcoa. Profits of companies in the S&P 500 are expected to drop 8.5 percent from a year ago, according to data from FactSet, with most of that decline coming from the oil and gas sector. This is despite the continually positive economic reports out of the U.S., including last week's jobs numbers and manufacturing data. "While the economic fundamentals are good, investor sentiment is still quite negative," said Samantha Azzarello, a global market strategist at J.P. Morgan Funds. The low expectations for company earnings mean that stock values remain relatively high. Investors are paying roughly $18.63 for every dollar of earnings in the S&P 500, well above the $14 to $15 they typically pay. "You're going to need a big improvement in companies' results for stocks to move higher," said Kristina Hooper, head of U.S. investment strategies at Allianz Global Investors. Stocks were not as impacted by a noticeable drop in oil prices on Monday, continuing a trend that started last week. Benchmark U.S. crude fell $1.09, or 3 percent, $35.70 a barrel on the New York Mercantile Exchange. Brent crude, used to price international oils, lost 98 cents to $37.69 a barrel in London. Weeks earlier, a sharp drop in oil prices could have reverberated far more greatly on the stock market. Azzarello says the breakdown in oil's influence on stocks could ultimately be a good thing. "The market just had to work itself out," Azzarello said. In individual company news, Virgin America jumped $16.20, or 42 percent, to $55.11 after the company agreed to be bought by Alaska Air Group. Shares of Alaska Air fell $3.09, or 4 percent, to $78.92. JetBlue, which had bid for Virgin as well, fell 92 cents, or 4.3 percent, to $20.41. Tesla Motors rose $9.40, or 4 percent, to $246.99 after the company announced it had received 276,000 preorders for its highly anticipated Model 3, which is to be unveiled on Thursday. Bond prices rose slightly. The yield on the 10-year Treasury note fell to 1.76 percent from 1.77 percent. The euro was mostly unchanged at $1.1397 while the dollar fell to 111.26 yen from 111.73 yen. In other energy markets, heating oil fell 4 cents to $1.089 a gallon, wholesale gasoline futures fell 2 cents to $1.377 a gallon and natural gas rose 4 cents to $1.998 per thousand cubic feet. In the metals markets, gold fell $4.20 to $1,219.30 an ounce, silver fell 10 cents to $14.94 an ounce and copper fell 2 cents to $2.14 a pound.

Stocks stage a late-day turnaround, helped by weaker dollar

NEW YORK (AP) — U.S. stocks staged a rapid comeback in late-afternoon trading Wednesday, helped by a surge in the price of oil and a decline in the U.S. dollar. Chipotle Mexican Grill fell sharply as the company disclosed a federal investigation into its E. coli outbreak, and Yahoo sank as the troubled Internet company announced layoffs and plans to sell businesses. KEEPING SCORE: The Dow Jones industrial average rose 183 points, or 1.1 percent, to 16,336 as of 3:30 p.m. Eastern. The Standard & Poor's 500 index rose eight points, or 0.4 percent, to 1,911 and the Nasdaq composite fell 11 points, or 0.3 percent, to 4,504. A FISTFUL OF (WEAKENED) DOLLARS: A sharp decline in the dollar against the major other currencies was helping the market to rebound. The U.S. dollar index was down 1.5 percent, a large move for the foreign exchange market, with nearly that entire decline happening in afternoon trading. Many U.S. companies have been complaining that the appreciation of the dollar was eroding their earnings by making U.S. exports less profitable. A weaker dollar also tends to send commodity prices higher. That was a relief to investors as well since a plunge in the price of crude oil has been decimating profits at energy companies. The price of U.S. crude oil jumped $2.40, or 8 percent, to close at $32.28 a barrel, which helped lift up energy stocks. Metals like gold, silver and copper all rose more than 1 percent. SAFETY: Investors are still putting money into traditional safe-havens: stocks that pay high dividends, U.S. government bonds, and precious metals. The Dow Jones utility index, a basket of 15 utility companies, rose 1.4 percent. That index is up more than 8 percent this year. Utilities and other companies that pay large dividends are popular at times of uncertainty because they provide a regular return and are large, mature businesses that tend to stand up well during economic downturns. Some traders are taking that a step further. "I've been telling clients to be in all cash," said Ian Winer, co-head of equities trading at Wedbush Securities. "There's too much credit risk out there, S&P 500 earnings could be down this year and it seems an increasing possibility that the U.S. could be in a recession in 2017." CUTBACKS: Yahoo slumped $1.91, or 6.6 percent, to $27.15 after the company announced late Tuesday it would cut 1,700 jobs and sell some of the company's struggling businesses. ON A DIET: Chipotle fell $20.40, or 4 percent, to $455.20 after the company said the E. coli outbreak at its stores hurt sales more than anticipated. Chipotle also disclosed it was now under investigation by Federal regulators over the outbreak. CURRENCIES: The euro rose against the dollar to $1.1151, the dollar fell against the Japanese yen to 117.14 yen, and the dollar fell against the British pound to $1.4641.  

US stocks edge mostly lower as energy prices plunge again

NEW YORK (AP) — The stock market was able to recover from steep losses to close slightly lower on Monday as investors looked past another drop in the price of oil and renewed concerns about U.S. and Chinese economic growth. Oil and gas companies remained in the red. The fact that utility and other high-dividend stocks were among the better performers should be seen as a sign that many investors still want to play it safe, traders said. The Dow Jones industrial average fell 17.12 points, or 0.1 percent, to 16,449.18 after being down roughly 150 points earlier in the day. The Standard & Poor's 500 index fell 0.86 points, less than 0.1 percent, to 1,939.38 and the Nasdaq composite rose 6.41 points, or 0.1 percent, to 4,620.37. Stocks had been lower most of the day after separate reports showed manufacturing slowing last month in both the U.S. and China. The reports initially caused a sell-off in commodities, notably energy and industrial metals like copper. The price of U.S. benchmark oil plunged $2, or 5.9 percent, to $31.62 a barrel in New York. Natural gas also fell about 6 percent. But as the trading day drew to a close, investors began to buy up utilities and other dividend-paying stocks. The Dow Jones utility index, a collection of 15 utility companies, rose nearly 1 percent on Monday. Telecommunications stocks, another traditional dividend play, posted the second-biggest gain in the S&P 500. J.J. Kinahan, chief strategist at TD Ameritrade, said part of the reason dividend stocks did better than the rest of the market was speculation that the Federal Reserve, faced with a more uncertain economic environment, would likely not raise interest rates as fast as investors had thought at the beginning of the year. Dividend stocks perform poorly in a rising interest rate environment, because the value of the yield on dividend stocks gets worn away as yields rise on bonds and other dividend-paying investments. "We're looking at probably only two (interest rate) raises this year instead of four, and that makes dividend stocks look relatively attractive again," Kinahan said. Energy stocks, not surprisingly, were the biggest losers on Monday, following the price of oil lower. The energy component of the S&P 500 fell nearly 2 percent, versus the nearly flat performance of the broader market. Southwestern Energy declined 39 cents, or 4.4 percent, to $8.50, Transocean dropped 63 cents, or 6 percent, to $9.79 and Chesapeake Energy fell 18 cents, or 5 percent, to $3.21. In other company news, Alere jumped $16.91, or 46 percent, to $54.11 after Abbott Laboratories announced it was purchasing the health care company, which is focused on diagnostics, for $5.8 billion. Abbott Labs shares rose 60 cents, or 2 percent, to $38.45. Alphabet shares jumped $42.40, or 5.6 percent, to $794.40 in aftermarket trading after the company's results solidly beat analysts' expectations. With the post-market gain, Alphabet, the parent company of Google, is now the largest company by market capitalization, ahead of Apple. U.S. government bond prices fell. The yield on the 10-year Treasury note rose to 1.95 percent. The dollar fell to 121.02 yen from 121.10 yen on Friday. The euro strengthened to $1.0893 from $1.0829. Prices for precious and industrial metals closed mixed. Gold rose $11.50 to $1,127.90 an ounce, silver gained 10 cents to $14.34 an ounce and copper slipped a penny to $2.06 a pound. In other energy trading, wholesale gasoline lost 4.9 cents to $$1.083 a gallon, heating oil fell 4.2 cents to $1.037 a gallon and natural gas plunged 14.6 cents to $2.152 per 1,000 cubic feet. In London, Brent crude fell $1.75 to $34.24 a barrel.  
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