New orders for long-lasting U.S.
manufactured goods jumped a surprising 1.3 percent in July as
businesses ramped up spending plans and demand for a wide array
of items rose, a government report showed on Wednesday.
Strong demand for manufactured goods may ease some concerns
about sagging U.S. economic growth amid slowing consumer
spending and the long-slumping housing market. While strong
exports have buoyed the factory sector, analysts fear a
strengthening dollar and slowing economies overseas could
diminish that contribution in the future.
"The risk must be that in time the combination of slowing
global growth and a stronger dollar crimps exports, but for now
they are the lifeline," said Ian Shepherdson, an economist for
High Frequency Economics in Valhalla, New York.
Orders for durable goods, items meant to last three years
or more, were up after an upwardly revised 1.3 percent gain in
June, previously reported as up 0.8 percent, the Commerce
Department said. Analysts were expecting durable goods orders
to remain unchanged from the previous month.
U.S. Treasury debt prices fell as the report suggested
resilience despite the deep housing correction and credit
crunch. Major U.S. stock indexes were up about 0.5 percent,
mainly on the strong economic data, but the dollar slipped as
lingering doubts about the banking sector weighed.
Resilient manufacturing could strengthen the argument of
some Federal Reserve officials who have called for higher
interest rates to combat inflation. The Fed has held interest
rates steady at 2 percent since April despite persistently high
inflation as a consensus has prevailed that low rates are
necessary to counter soft labor markets and lingering financial
At the same time, some analysts worry the economy could hit
an air pocket in the second half of the year after being pushed
ahead at a reasonable clip in the second quarter by government
"Most of the increase in capital spending implied by these
data is being undertaken by companies benefiting from the
export boom; the domestic economy remains very weak indeed,"
Transportation orders rose 3.1 percent in July, the largest
gain since February, on a 28 percent rise in civilian aircraft
Orders for machinery and primary and fabricated metals
rose, while demand for computers and appliances waned.
Even when volatile transportation orders were stripped out,
demand for durables rose 0.7 percent. Analysts had expected a
0.5 percent drop in durables orders excluding transportation.
Non-defense capital goods orders excluding aircraft, seen
as a barometer of business spending, jumped 2.6 percent, the
steepest gain since April. Analysts were expecting that
category to decline by 0.1 percent.
In a glimmer of hope for downtrodden housing markets,
mortgage applications rose for the first time in three weeks as
interest rates for 30-year fixed-rate mortgages, the most
common type of home loan, dipped to an average of 6.44 percent
from the previous week.
(Additional reporting by Walden Siew and Jule Haviv in New
York, Editing by Neil Stempleman)
The New York attorney general's office is
probing the relationship between Fidelity Investments and
Goldman Sachs Group Inc. (GS.N) in connection with the sale of
auction-rate securities, the Wall Street Journal said, citing a
person familiar with the investigation.
Investigators are looking at whether Fidelity's
relationship with Goldman may have given the mutual fund giant
an incentive to sell the instruments, the paper said.
The attorney general started focusing on the relationship
after it learned that most of the auction-rate securities sold
by Fidelity were underwritten by Goldman.
These securities offered interest rates that reset
periodically in auctions, but when those auctions failed this
year, investors were stuck holding longer-term debt of
uncertain value. Dealers have been accused of understating the
debt's risk to investors.
Earlier this month, Merrill Lynch & Co Inc (MER.N),
Deutsche Bank (
securities regulators, agreeing to buy back billions of dollars
of auction-rate securities.
The attorney general's office is probing whether Fidelity
may have marketed Goldman-underwritten ARS's because it was
getting other services from the investment bank, the paper
Goldman Sachs was not immediately available for comments.
"There was no incentive for Fidelity to promote
auction-rate securities," the paper quoted Fidelity
spokesperson Anne Crowley as saying. She said 600 Fidelity
accounts held the auction-rate securities.
Goldman Sachs agreed to buy back about $1.5 billion in
auction-rate notes by November 12, and pay a $22.5 million
Goldman's agreement does not cover customers who bought
auction-rate securities from Fidelity. Massachusetts's top
regulator, William Galvin, has called on Fidelity to buy back
all the securities it sold.
Fidelity, which is privately held, has long said it neither
issues nor aggressively markets these securities and that it
expects underwriters who issued the securities to stand behind
(Reporting by Saumyadeb Chakrabarty in Bangalore)
U.S. computer group International Business
Machines (IBM.N) widened its market share lead over rival
Hewlett-Packard Co (HPQ.N) in worldwide server shipments in the
second quarter, researcher IDC said on Wednesday.
IBM had a market share of 33.2 percent, up from 31.1
percent a year earlier, with Hewlett Packard coming in second
with 27.4 percent, down from 28.3 percent.
Sun Microsystems (JAVA.O) followed with 12.5 percent and 11.2
percent of the market, respectively.
Overall global server shipments rose 11 percent in the
second quarter, IDC said.
The market research firm forecast a slowdown in demand for
servers in the second half of 2008, however.
"The pricing challenges many OEMs experienced ... is a
concern as it may foreshadow a slowdown in market demand as
enterprise budgets face further scrutiny in the second half of
2008," the firm said in a statement.
IDC said overall growth in servers was driven by strong
demand for blade, Unix system and IBM System z servers.
(Reporting by Saumyadeb Chakrabarty in Bangalore, editing
by Will Waterman)