Financial Headlines

Federal Reserve officials are giving preliminary results of the stress tests to banks Friday, and the Fed is also releasing the tests' methodology to the public. The banks might find it hard to raise funds because their troubled assets have soared during the past year. "We're really hesitant to put money into financials," said Douglas Ciocca, a managing director at Renaissance Financial. "The ambiguity is still engulfing the opportunity." Bloomberg (24 Apr.)

The Chinese government owns a substantial portion of U.S. Treasuries, making it the country's biggest creditor. As the U.S. looks to sell huge sums of debt to pay for its economic stimulus, signs are emerging that China might not be as interested as it used to be. Also, People's Bank of China Governor Zhou Xiaochuan recently suggested changing the reserve currency, sparking concerns that the Asian giant is turning its back on the U.S. dollar. The Economist (23 Apr.)

In a desperate attempt to cope with vanishing tax revenue, U.S. states have made broad and deep cuts in spending for public safety, health care, education and social services, throwing police officers and teachers out of work and cutting off the elderly and the poor from benefits. Despite these efforts, states must cut $27.6 billion from their budgets this fiscal year and $67.5 billion from next year's budgets. CNNMoney.com (23 Apr.)

With technology giants such as Apple, Google and IBM beating analysts' earnings estimates, the tech sector is gaining respect for its ability cut costs and hang onto profitability through a serious downturn. Analyst Rob Enderle said high-tech is positioned to respond to changing conditions, and "tech might very well lead us out of the recession." Reuters (23 Apr.)

Experts are divided on whether the recovery of the U.S. economy is headed toward inflation, deflation or stagflation. Analysts said these scenarios call for investment strategies that are quite different from one another. BusinessWeek (23 Apr.)

The U.S. Labor Department said the nation experienced 2,933 more mass layoffs, defined as those impacting 50 or more people, in March compared with February. Since the official start of the recession in December 2007, there have been 31,414 mass layoffs, causing 3.2 million people to lose their jobs. Reuters (23 Apr.)

An unexpected, sharp rise in the European purchasing-managers index, widely followed as a leading economic indicator, points to the possibility that the eurozone has already gone through the worst of the recession and is poised to move in the direction of growth. The composite purchasing-managers index posted its biggest improvement this month since the survey began in 1998. Financial Times (23 Apr.)

The historically high number of vacant houses in the U.S. might give the Federal Reserve some flexibility in deciding when to start pulling liquidity out of the economy, analysts said. "There's just so much slack in the economy, including the high level of vacancies, that the Fed doesn't need to worry about inflation for a while and will have loads of time to remove all the stimulus," said Jim O'Sullivan, senior economist at UBS Securities. Bloomberg (23 Apr.)