Daily Market Commentary for April 11, 2012
The U.S. Justice Department filed an antitrust lawsuit accusing Apple Inc. as well as, five major publishers, of conspiring to fix the prices of e-books. (read more at Millennium-Traders.Com)
The Federal Reserve said on Wednesday in the Feds Beige Book, that the U.S. economy continued to grow at a 'modest to moderate pace' over the last month. The term is the same adjective used to describe the economy in the prior two reports. Every region covered by the Fed's 12 districts grew, ranging from 'modest' in the Cleveland and St. Louis regions to a 'faster pace' in the Kansas City area.
The U.S. Treasury Department reported Wednesday that the U.S. government ran a budget deficit of $198 billion in March. The March figure pushed the deficit up to $779 billion for the first six months of fiscal 2012. The deficit for the first half of fiscal 2012 is lower than the one recorded in the same period in 2011, but the government remains on track to post another deficit of more than $1 trillion for the entire 2012 fiscal year
Boston Federal Reserve Bank President Eric Rosengren on Wednesday said prime money-market funds, which make up a big chunk of the $2.7 trillion industry, have structural problems that could amplify a future financial crisis if further reforms are not adopted. "Some prime funds have taken on significant credit risk - at times incurring losses that necessitated the support of the parent or sponsor of the fund, and in one case substantial government support," said Rosengren. The Securities and Exchange Commission may soon propose new capital restrictions on money funds, coupled with limitations or fees on redemptions by consumers or other money fund purchasers. Rosengren added that with 'appropriately calibrated' capital and redemption policies. the incentive for investors to run would be greatly reduced. The move would reduce the risk that investors would not receive the full value of their redemptions, he added. Comments from Rosengren come after Fed chairman Ben Bernanke on Monday evening reiterated his concerns about money funds.
On Wednesday, Kansas City Fed President Esther George said the most important step in restoring market discipline to the financial system would be to eliminate too-big-to-fail policies, including taking advantage of a provision in the Gramm-Leach-Bliley Act that would force divestitures or termination of new activities within 180 days if a financial holding company isn't well managed or capitalized. George also said bank capital standards, in particular leverage requirements tied to equity capital, need to be strengthened as she fretted about the lengthy transition period of Basel III. Risk-based capital standards is a concern of George because banks are quick to arbitrage whatever standards there are and because it is hard to say risk weights have been accurate measures of risk. George supported the implementation of the Volcker Rule and added there may be more financial activities that are incompatible with public safety nets.
The U.S. Labor Department said Wednesday that the prices paid for goods imported into the U.S. climbed higher by 1.3% in March, mainly because of higher oil costs. Compared to a revised 0.1% decrease in February, import prices in February were originally reported up 0.4% and fuel costs surged higher by 4.3% as the price of oil soared. Excluding fuel prices, import prices rose by only 0.3% last month. The price of U.S.- made goods exported to other nations, rose 0.8% in March.
President Barack Obama on Wednesday touted the controversial and, in many quarters unpopular, 'Buffett rule' that would force the wealthiest Americans to pay taxes at the very least at the same rate as regular wage earners. In a twist aimed to needle conservative opposition, Obama said the principle was once supported by a 'wild-eyed socialist, tax-hiking, class warrior' named Ronald Reagan, who once said it was 'crazy' that loopholes allowed millionaires to avoid paying their share of taxes. Congress should approve the so-called Buffett Rule, President Barack Obama reiterated on Wednesday, keeping up a push for what he calls tax fairness. The rule, named after Berkshire Hathaway chairman Warren Buffett, would require millionaires to pay at least 30% of their income in taxes before charity. Speaking in Washington, Obama said a vote next week in Congress is an opportunity for lawmakers 'to stand up for the middle class and make the tax system fair'.
On Wednesday, Tim Fox, a judge in Arkansas, slapped Johnson & Johnson with a fine of more than $1.1 billion following a jury ruling that the company's Janssen subsidiary hid risks associated with Risperdal, an antipsychotic drug. Judge Fox found that Johnson & Johnson committed about 240,000 violations of the state's Medicaid fraud law, one for each Risperdal prescription issued to Medicaid patients over a 31/2-year period, with each violation carrying a $5,000 fine. Johnson & Johnson said it was 'disappointed' with the decision and plans to appeal.
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