UPI NewsTrack Business

Markets go from mixed to mush Wednesday

NEW YORK, Sept. 21 (UPI) -- U.S. markets took a sudden dive Wednesday afternoon after the Federal Reserve announced it would shift its portfolio to help keep long-term interest rates low.

Gliding along in a familiar wait-and-see pattern typically seen while Fed policymakers are in session, the market suddenly went from mixed to mush after the Fed announced the plan, which three out of 10 voting members of the Open Market Committee opposed.

The Fed said it would keep the size of its portfolio steady, but trade in short term securities for long-term securities, a move intended to signal to companies long-term interest rates would fall.

Investors weren't buying.

By close of trading on Wall Street, the Dow Jones industrial average lost 283.82 points, 2.49 percent, to 11,124.84. The Standard & Poor's 500 index lost 35.33 points, 2.94 percent, to 1,166.76. The Nasdaq composite index added 52.05 points, 2.01 percent to 2,538.19.

On the New York Stock Exchange, 474 stocks advanced and 2,588 declined on a volume of 3.9 billion shares traded.

The benchmark 10-year treasury note rose 22/32 to yield 1.868 percent.

The euro fell to $1.3576 from Tuesday's $1.3701. Against the yen, the dollar rose to 76.68 yen from Tuesday's 76.45 yen.

In Tokyo, the Nikkei 225 index added 0.23 percent, 19.92, to 8,741.16.

In London, the FTSE 100 index shed 1.4 percent, 75.30, to 5,288.41.

In GOP rebuff, Fed calls for a twist

WASHINGTON, Sept. 21 (UPI) -- The U.S. Federal Reserve said Wednesday it would swap $400 billion in short-term securities for an equal amount of long-term notes.

The move is called an operational twist. It will keep the size of the Fed's portfolio unchanged, but the greater slant toward long-term securities is expected to put downward pressure on long-term interest rates.

Effectively, the move is a stimulus measure designed to convince corporations that long-term borrowing is a viable business option.

The Fed's Open Market Committee said in a statement that "economic growth remains slow."

The various anemic sectors of the economy are familiar.

"Unemployment remains elevated. Household spending has been increasing at only a modest pace in recent months," the Fed said.

In addition, the Fed said, "longer-term inflation expectations have remained stable," a signal that additional stimulus to the economy would not create a destructive pattern of higher prices.

The move rebuffs Republican leadership on Capitol Hill.

In a letter to Fed Chairman Ben Bernanke delivered Tuesday evening, Senate Minority Leader Mitch McConnell, Senate Republican Whip Jon Kyl, House Speaker John Boehner and House Majority Leader Eric Cantor said, "We have serious concerns that further intervention by the Federal Reserve could exacerbate current problems or further harm the U.S. economy," The New York Times reported.

It was a rare moment of direct political pressure on the central bank that prides itself on being independent when it comes to monetary policy.

But some had expected some move, given the badly stumbling economic recovery.

"I just don't think the Fed will sit idly as momentum fizzles in this recovery," Credit Suisse economist Dana Saporta told the Times before the announcement.

In describing details of the move, the Fed said it would "purchase, by the end of next June, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of treasury securities with remaining maturities of 3 years or less."

Paramount project to create 7,300 jobs

HOLLYWOOD, Sept. 21 (UPI) -- Paramount Pictures Corp. said it will renovate its Hollywood studio with a $700 million investment that will create 7,300 temporary jobs.

When the renovation is complete, the famous studio would then have 5,500 permanent workers, said Frederick Huntsberry, the company's chief operating officer, the Los Angeles Times reported Wednesday.

The plan includes development of 1.4 million square feet of production space, including offices.

The project is expected to take 20 years to complete.

Brad Grey, chief executive officer of Viacom Inc., which owns Paramount, said, "This is a wonderful way to reinvest in what brought us to the party."

Some say the company's Hollywood campus is long overdue for new investment, which went slack for decades when Paramount "had bad management and bad films," said Ann Gray, an architect.

The new goal, the Times said, is to create a safe environment for the creative process.

"Frank Mancuso (former company president) said creative people are very insecure. We want an environment where they feel secure enough to be as creative as they can be," Gray said.

The project is contingent on approval from the city, the Times said.

On long odds, home sales rise

WASHINGTON, Sept. 21 (UPI) -- Existing U.S. home sales rose 7.7 percent in August despite tight credit and a shaky economy, the National Association of Realtors said Wednesday.

The group said sales rose in the month "despite headwinds."

Total sales of single-family homes, townhomes, condominiums and co-ops rose to a seasonally adjusted annual rate of 5.03 million in the month, from an upwardly revised 4.67 million in July.

The tally for August was 18.6 percent higher than the 4.24 million sales pace of August 2010.

NAR Chief Economist Lawrence Yun said, "Some of the improvement in August may result from sales that were delayed in preceding months, but favorable affordability conditions and rising rents are underlying motivations."

For August, the national median price for all housing types was $168,300, down 5.1 percent from August 2010.

In addition, for the month, foreclosure sales rose to 31 percent of sales, up from 29 percent in July, but down from 34 percent in August last year.

Total inventory of existing homes fell 3 percent at the end of the month to 3.58 million existing homes for sale, a 9.5 month supply at the current sales pace.