Back to the same record but its a different stock market

NEW YORK — Stock investors had to go on a harrowing round trip over the last seven months, but the market may be in a healthier place after it.The S&P 500 index of big U.S. stocks is back to a record high, closing above 2,930 on Tuesday for the first time since Sept. 20. On the way, though, it took investors on a terrifying plunge of nearly 20%, amid worries that the economy would tip into recession. After hitting bottom in December, stocks took off on a nearly mirror-image rally .Even though the S&P 500 is back at the same level, analysts say many of the market’s vital signs look different today than in late September.Worries about a possible recession have dimmed, in large part because of a change in stance by the Federal Reserve. That has many investors predicting more gains for the market this go-around, despite risks still hanging over stocks, such as the still simmering global trade war and slower growth for economies and corporate profits around the world.Here’s a look at some of the changes for the market, and one big similarity, between then and now:— AN EASIER FEDERAL RESERVEThis is the biggest difference by far, investors say.Last autumn, the Federal Reserve was deep into its plan to gradually raise interest rates, after having kept them pinned at nearly zero for years. Higher rates would slow the economy, but it would also reduce the risk of higher inflation and the job market was in much better shape than in the aftermath of the Great Recession. When the S&P 500 set its record on Sept. 20, the Fed was a week away from raising its key short-term rate by a quarter of a percentage point for the seventh time in eight quarters.But those and other moves by the Fed raised worries along Wall Street that the central bank was moving too fast and could push the economy into recession.“I was feeling very cautious on the market last fall because you were seeing a lot of straws in the wind that the Fed was too tight,” said Margie Patel, senior portfolio manager at Wells Fargo Asset Management. “Even though rates were low, you could see housing and autos looking weak, and in the stock market, every now and then, you’d see a sector of the stock market plunge for really no reason.”In December, the Fed raised rates again and said another two increases may come in 2019. But officials changed their outlook early this year, following the plunge in stock prices, and officials pledged to be patient in raising rates. Then, in March, the central bank said it may not raise rates at all in 2019.The easier tone sent the yield on the 10-year Treasury’s yield, which affects rates for mortgages and other loans, down to 2.57% from 3.07% in late September. That’s a boost for the economy, as well as for stock prices.“Recession, I think it’s off the radar now,” Patel said.— BOTTOMING GROWTH EXPECTATIONSCompanies are in the middle of telling investors how much profit they made during the first three months of 2019, and analysts have prepped for disappointment. Wall Street is forecasting a drop of more than 3% for S&P 500 companies, the first decline in nearly three years.That’s a concern for investors because stock prices tend to track profits over the long term. But analysts expect growth to return and accelerate as the year progresses. After hitting bottom in the first quarter, analysts expect S&P 500 profit growth to ramp back up to 8.5% in the fourth quarter thanks to stronger than expected revenues.Economic data has been improving around the world, which is raising optimism.When the S&P 500 set its record last fall, dueling import taxes by the United States and China threatened global growth, higher mortgage rates were hurting home sales and the initial October jobs report hinted at slower hiring.Now, U.S.-China trade tensions have dialed down, even if underlying conflicts are unresolved. Mortgage rates have fallen, home sales have recovered somewhat and the labour market has been solid, on average.The economy still appears on course for slower economic growth this year than the roughly 3% pace achieved in 2018, with economists outside of the Trump administration generally pegging the annual gain at closer to 2%. But investors see a much lower risk of recession in 2019.— A LESS EXPENSIVE MARKET, THOUGH STILL NOT CHEAPStock prices may be back to where they were in September, but they don’t look quite as expensive by some measures of value.One of the main ways that analysts measure the value of a stock is to measure its price against the company’s earnings. In September, the S&P 500 was trading at 20.6 times its earnings per share over the prior 12 months. That was well above its average of 16.3 over the prior 15 years.Today, the S&P 500 is still trading above its long-term average, but not by as much: It’s closer to 18.7.— STILL HESITANT INVESTORSWhen interest rates are low for a long time, the concern is that it will inflate a bubble. Two decades ago, investors piled into dot-com stocks and pushed them to prices that markets now see as ludicrous. In the middle of the last decade, it was housing prices that soared too high, too fast.So far, at least, investors are still hesitant to pile into stocks. This is actually a reason the market may be primed for more gains, some analysts say.Investors have pulled more money out of U.S. stock funds in the last few months than they’ve put in, according to the Investment Company Institute. If those skeptical investors come back to stocks, it could provide a further lift.Of course, many risks still remain for markets, and few analysts are predicting the S&P 500 to continue rising in a straight line, as it has for much of 2019. Negotiations on the U.S.-China trade war are still ongoing. Low interest rates have encouraged U.S. companies to gorge themselves on debt, and some ideas percolating in Washington, such as universal health care, could drag down corporate profits.Still, many investors are feeling better about the market’s health this go-around, most of all because the easier Fed has helped diminish threat of recession.“This 2,900 is better than the 2,900 we had a few months ago,” said Steve Chiavarone, equity strategist at Federated investors.___AP Economics Writer Josh Boak contributed to this report.Stan Choe, The Associated Press read more

Like bombs Bankrupt companys air bags still out there

by Tom Krisher, Dee-Ann Durbin And Mari Yamaguchi, The Associated Press Posted Jun 26, 2017 3:43 pm MDT Last Updated Jun 26, 2017 at 7:40 pm MDT AddThis Sharing ButtonsShare to TwitterTwitterShare to FacebookFacebookShare to RedditRedditShare to 電子郵件Email FILE – This July 6, 2016, file photo, shows the logo of Takata Corp. at an auto supply shop in Tokyo. Drowning in a sea of lawsuits and recall costs, Japanese air bag maker Takata Corp. is expected to seek bankruptcy protection in Tokyo and the United States early Monday, June 26, 2017. (AP Photo/Shizuo Kambayashi, File) ‘Like bombs’: Bankrupt company’s air bags still out there Takata’s lethally defective air bags proved to be the company’s undoing Monday. But it could take years to get the dangerous devices off the road in the U.S. and around the world.Crushed by lawsuits, fines and recall costs, the Japanese auto parts supplier filed for bankruptcy in Tokyo and Delaware and will sell most of its assets for $1.6 billion to a rival company. A small part of Takata will continue to manufacture replacements for the faulty air bag inflators.The problem, though, is that 100 million of the Takata inflators worldwide have been recalled, 69 million in the U.S. alone in the biggest automotive recall in American history. It will take the industry years to produce that many replacements.In the meantime, millions of car owners are forced to nervously wait for someone to fix a problem blamed for at least 16 grisly deaths worldwide, 11 of them in the United States. Many owners have been put on waiting lists by their dealers until the parts arrive.“The big problem is the air bags are still out there. They’re like bombs waiting to explode,” said Billie-Marie Morrison, the lawyer for a young Las Vegas woman grievously injured by an exploding air bag in March.In fact, the last batch of U.S. repairs is not scheduled to begin until September 2020, according to the National Highway Traffic Safety Administration, which is overseeing the recall.“I don’t think I have any options,” lamented Marv Muller, the owner of a 2009 Subaru Impreza. “It’s really bad.”Muller, a recruiter in New York, received a letter in January saying his car needed to have its passenger air bag repaired. He contacted a Subaru dealer, only to be told it didn’t have the parts.He was put on a waiting list and told he would have his car repaired in June. It hasn’t happened yet.In the U.S., more than 16 million inflators have been repaired so far, or 38 per cent of the total. In Japan, 70 per cent have been replaced, according to Takata. That’s partly because Japan won’t renew vehicle registrations unless recalls have been completed.Because of the type of chemical propellant used by Takata, the defective air bags can inflate with too much force and spew deadly shrapnel at drivers and passengers. Takata sold the inflators to 19 automakers, including Toyota, Subaru, BMW, Honda, Ford and Nissan.Takata’s bankruptcy filing clears the way for most of its assets to be taken over by Key Safety Systems, a Chinese-owned company based in suburban Detroit.Takata President Shigehisa Takada said that with the company rapidly losing value, fiing for bankruptcy was the only way it could carry on.“We’re in a very difficult situation, and we had to find ways to keep supplying our products,” Takada said.Victims and their families fear the bankruptcy filing could leave little money left over to compensate them. Earlier this year, Takata pleaded guilty to federal fraud charges and agreed to pay $1 billion for concealing the defect for years. The penalties include $850 million in restitution to automakers, $125 million for victims and families and a $25 million criminal fine.“Filing for bankruptcy is going to protect Takata financially, but it’s not going to protect drivers who have been injured or are going to be injured,” Morrison said.Morrison’s 19-year-old client Karina Dorado was injured when the air bag in her 2002 Honda Accord deployed during an otherwise minor crash. Morrison said Dorado underwent several operations to repair neck and vocal cord injuries, but her voice will never sound the same.Dorado’s car was found to have a defective Takata air bag that had been taken from another vehicle.That illustrates another one of the headaches for regulators and automakers, who may never be able to trace all of the inflators that need to be repaired.Lawmakers say the U.S. government needs to do a better job of ensuring the vehicles are fixed. Sen. Bill Nelson, a Florida Democrat, pointed out that the Trump administration has yet to appoint someone to lead NHTSA.In a statement, NHTSA said it has been assured by Takata that the bankruptcy won’t disrupt the flow of repair partsThe safety agency is also making sure older cars are fixed first, since the chemical Takata used in the air bags, ammonium nitrate, degrades over time, especially in hot, humid climates.That worries Angela Dickie, 47, of Charleston, South Carolina, who owns a 2012 Volkswagen Passat with a Takata air bag.While her vehicle is not as old as the 2001-03 model year vehicles that are considered a priority for repairs, it still makes Dickie nervous to drive it. She said Volkswagen also refused to provide her with a rental car while she waits for a repair.“By the grace of God I drive the vehicle every day, just like every other person that has these vehicles, because we don’t have an option,” she said.__AP Writers Marcos Martinez in Miami , Ken Ritter in Las Vegas, Joseph Pisani in New York and Elaine Kurtenbach in Tokyo contributed to this report. read more