Stocks were rising Thursday after the Federal Reserve’s pledge to keep interest rates low for a prolonged period and strong earnings from several corporate heavyweights.
The Dow Jones Industrial Average was rising 45.1 points at 12,802. The S&P 500 was up 3.3 points at 1,329, and the Nasdaq was up 6.5 points at 2,824.
Stocks closed higher Wednesday after the Federal Open Market Committee announced its decision to hold interest rates low until late 2014.
Markets continued to receive some cheer from the Federal Reserve’s announcement to keep interest rates at very low levels until late 2014 to stimulate the U.S. economy. Although the announcement highlighted ongoing struggles in the economy, it also indicated that the Fed is willing to step in and help.
In corporate news, Caterpillar, the construction and mining equipment maker, handily beat expectations Thursday. The company’s fourth-quarter earnings, excluding items, came in at $2.32 a share, while analysts expected a profit of $1.73 a share. Caterpillar reported record revenue of $17.24 billion, higher than the forecast for $16.05 billion. For 2012, Caterpillar expects earnings of $9.25 a share, or a range of $68 billion to $72 billion.
Telco giant AT&T beat estimates as sales of the iPhone soared to a record high. The company gained 717,000 subscribers on monthly contracts, while iPhone activations soared to 7.6 million. Earnings fell to 42 cents a share, slight short of the forecast for 43 cents. However, sales rose 3.6 percent to $32.5 billion, beating the expectation for $31.95 billion. AT&T withdrew its $39 billion proposal to buy T-Mobile USA in December after regulators said the deal would decrease competition in the sector.
Meanwhile,3M Co reported higher-than-expected quarterly earnings on Thursday as demand from industrial and transport markets offset weak sales to makers of consumer electronics.
The maker of Post-It notes, Scotch tape and components for consumer electronics reported net earnings of $954 million, or $1.35 per share, compared with $928 million, or $1.28 per share, a year earlier.
Analysts on average were expecting a profit of $1.31 a share, according to Reuters report.
Sales rose 6 percent to $7.1 billion, matching Wall Street estimates. 3M’s industrial and transportation segment sales jumped 14 percent, reflecting healthy auto, aerospace and energy markets, among others, as well as acquisitions. Sales at 3M segments that make office supplies and health and safety also rose.
Revenue fell, however, in the display and graphics segment, hurt by what 3M called “deteriorating” demand for consumer electronics. Its electro and communications also posted lower sales.
Minneapolis-based 3M affirmed its forecast of 2012 earnings between $6.25 and $6.50 per share, saying it would focus on its bottom line in the near-term in a slower growth environment .
3M has said acquisitions would boost this year’s results. This month, it moved to expand its office supply business with the $550 million cash purchase of Avery Dennison Corp’s office and consumer products unit, which includes Avery labels and HI-LITERS markers
Lawmakers Want CBN To Halt Naira Devaluation
The House of Representatives has asked the Central Bank of Nigeria (CBN), to urgently put in place a policy to check further devaluation of the naira to the United States dollar and other international legal tenders.
The House decried that while the Nigerian currency was losing value, others in Africa were appreciating.
At the plenary on Wednesday, the House unanimously adopted a motion moved by the Deputy Chairman of the Committee on Pensions, Mr Bamidele Salam, which warned the CBN of the implications of further devaluing the naira.
The motion was titled, ‘Matter of urgent public importance on the need for the Central Bank of Nigeria to urgently put in place monetary policies to stop the free fall of the naira against the dollar and other international legal tenders’.
Salam recalled that the CBN governor, Godwin Emefiele, while addressing the Bankers’ Committee at a summit on the economy in Lagos earlier in February, informed the committee about the naira devaluation against the dollar.
The lawmaker also quoted Emefiele as saying at the summit that the official exchange rate stood at N410 to the dollar.
“That is 7.6 per cent weaker than the rate of N379 published on the central bank’s website,” Salam noted.
According to the lawmaker, while the value of the naira relative to the dollar had declined by nine per cent in the last six months, the South African rand and Ghanaian cedi had appreciated by 11.4 per cent and one per cent, respectively.
Salam also recalled that the CBN adopted multiple exchange rates in 2020, in a bid to avoid an outright devaluation.
He noted that the official rate used as a basis for budget preparation and other official transactions differed from a closely controlled exchange rate for investors and exporters known as the Nigerian Autonomous Foreign Exchange Rate Fixing Methodology.
He stressed that the naira had traded in a tight range between N400 and N410, while the NAFEX rate was different from the parallel market, considered illegal by the CBN, where the naira closed at 502.
Salam said, “The House is concerned that devaluation is likely to cause inflation because imports will be more expensive any imported goods or raw material will increase in price; aggregate demand increases, causing demand-pull inflation. Firms/exporters have less incentive to cut costs because they can rely on the devaluation to improve competitiveness.
”The concern is that the long-term devaluation may lead to lower productivity because of the decline in incentives.
”The House is further concerned that devaluation of the naira makes it more difficult for Nigerian youths especially in the IT sector, whose businesses are online and must necessarily transact businesses in the US dollars.
“It also reduces real wages. In a period of low wage growth, a devaluation that causes rising import prices will make consumers feel worse off “.
Four West African Countries To Buy Nigeria’s Unutilised Electricity
Four West African countries, Niger, Togo, Benin and Burkina Faso, are collaborating to buy the unutilised power produced in Nigeria.
The Chairman of the Executive Board of the West African Power Pool (WAPP), Sule Abdulaziz, disclosed this at the WAPP meeting on the North core project in Abuja, on Wednesday.
Abdulaziz, who is also the acting Managing Director of the Transmission Company of Nigeria (TCN), said the four countries were collaborating to make the power purchase from Nigeria through the North core Power Transmission Line currently being built.
He explained, “The power we will be selling is the power that is not needed in Nigeria.
“The electricity generators that are going to supply power to this transmission line are going to generate that power specifically for this project. So, it is unutilised power”.
He said Nigeria was expecting new generators to participate in the energy export for the 875km 330KV Northcore transmission line from Nigeria through Niger, Togo, Benin to Burkina Faso.
Abdulaziz said, “In addition, there are some communities that are under the line route, about 611 of them, which will be getting power so that there won’t be just a transmission line passing without impact”.
The WAPP chairman noted that the project, funded by World Bank, French Development Council and the African Development Bank, had recorded progress, adding that the energy ministers would be addressing security issues for the project at another meeting in Abuja.
He said, “Nigeria has the greatest advantage among these countries because the electricity is going to be exported from Nigerian Gencos (generation companies).
“So, from that, the revenue is going to be enhanced and a lot of people will be employed in Nigeria”.
The Secretary-General, WAPP, Siengui Appolinaire-Ki, said the cost of the project was about $570 million, adding that part of the investment in each country would be funded by that particular nation.
According to him, the countries in the partnership, including Nigeria, are also being supported by donors.
He said the funding agreement was ready as partner countries were awaiting the disbursements.
Appolinaire-Ki, however, said the donor agencies had said they needed a Power Purchase Agreement between the buying and the selling countries to be executed before releasing the fund.
Reps Probe N275bn Agric Loans Under Yar’Adua, Jonathan, Buhari
The House of Representatives has resolved to investigate the disbursement of loans and credit facilities by the Federal Government in the agriculture sector since 2009.
The period under review covers the administrations of the late Umaru Yar’Adua, Goodluck Jonathan as well as the present President, Muhammadu Buhari.
The resolution was sequel to the unanimous adoption of a motion moved by Hon. Chike Okafor at the plenary last Wednesday, titled ‘Need to investigate disbursements of all agricultural loans/credit facilities to farmers from 2009 to date to enhance national food security’.
Okafor said, from 2009 to date, the Federal Government had approved the disbursement of funds to farmers in various schemes to the tune of over N275billion, ranging from Commercial Agricultural Credit Scheme to the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending, to help farmers improve agricultural production and guarantee food security in Nigeria.
The lawmaker also noted that apart from increasing food supply, the schemes were to grant agricultural loans to large and small-scale commercial farmers to lower the prices of agricultural produce, generate employment and increase foreign exchange earnings.
He said, “The House is aware that since the approval, most farmers have not been able to access the loans due to stringent requirements being demanded by banks from prospective borrowers and the alleged siphoning of over N105billion meant for farmers by management of NIRSAL.
“The House is concerned that food production has not attained the expected level, despite the approval of over N275billion facilities to farmers.
“The House is worried that the projected diversification of the economy from oil production to agricultural production and increase in agricultural output, food supply and promoting low food inflation will not be achieved if farmers are unable to access loans meant to increase agricultural production”.
Adopting the motion, the House resolved to mandate the Committee on Banking and Currency to “investigate disbursements and compliance of all agricultural loans/credit facilities to farmers from 2009 to date to enhance national food security in the country”.
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