Economy Is 'Leveling Out,' Bernanke Says

Chairman Ben S. Bernanke rendered his most positive assessment of the economy yet in a speech Friday and gave credit in part to his own institution's handling of the worst economic crisis in decades.

The U.S. and global economy "appear to be leveling out," Bernanke told an audience of some of the world's leading economists and central bankers, and "prospects for a return to growth in the near term appear good." He warned, however, that the recovery is "likely to be relatively slow at first," with unemployment declining only gradually.

The idea that the economy is starting to improve was bolstered Friday by a report that sales of existing homes soared 7.2 percent in July to the highest level in two years. Bernanke's comments and the housing news sent Standard & Poor's 500-stock index up 1.9 percent to a new high this year.

But the meat of Bernanke's speech was not about the stabilizing economy, but rather an extensive defense of the Fed's handling of the financial crisis and recession. It is part of a broader effort to shore up confidence in the central bank, which has come under fire in Congress and in public opinion polls for its role in various bailouts.

And it comes as speculation heats up over whether President Obama will reappoint the chairman when his term expires Jan. 31.

"History is full of examples in which the policy responses to financial crises have been slow and inadequate," Bernanke said at the annual symposium sponsored by the Kansas City Fed. By contrast, in the current crisis "policymakers in the United States and around the globe responded with speed and force to arrest a rapidly deteriorating and dangerous situation." link.....

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Clothing makers beat estimates, but outlooks mixed

Phillips-Van Heusen Corp (PVH.N), Gymboree Corp (GYMB.O) and Hot Topic Inc (HOTT.O) posted better-than-expected quarterly results on Wednesday but gave disappointing outlooks, sending shares of the clothing manufacturer and retailers down in after-hours trade.

But shares of Limited Brands Inc (LTD.N) rose 1 percent after the operator of the Victoria's Secret and Bath & Body Works chains forecast a full-year profit range that was better than analysts were expecting.

At Limited Brands, adjusted earnings of 19 cents in the second quarter beat the 16 cents expected, on average, by Wall Street. Net income fell 27 percent to $74.3 million.

Earlier on Wednesday, Perry Ellis International (PERY.O), known for its men's clothes, reported a narrower-than-expected loss and forecast full-year profit above Wall Street estimates, sending shares up 17 percent to $10.45.

Phillips-Van Heusen, a manufacturer that owns the Calvin Klein brand, said its adjusted profit was 60 cents per share, above the 44 cents analysts expected, according to Reuters Estimates. The company cited cost cuts, tightened inventory and strength in its wholesale and retail sportswear businesses.

The company raised its earnings forecast for the full year to a range of $2.30 to $2.40 per share from a prior view of $2.05 to $2.30 per share.

Still, the new range did not reflect an equal gain from the strong second-quarter performance, suggesting that the company was being somewhat conservative in its projections, said Wedbush Morgan analyst Jeff Mintz.

The company's shares fell 1 percent to $34.85 after hours.

At Hot Topic, which sells rock n' roll-inspired apparel, accessories and music, a quarterly net loss per share was a penny better than expectations, while a third-quarter earnings outlook fell just below Wall Street's view. Shares fell 2.2 percent after hours.

Wall Street Strategies analyst Brian Sozzi wrote that Hot Topic faced difficult comparisons with the prior year on margins and same-store sales in light of last year's launch of clothes tied to the successful "Twilight" series. link.....

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Wells Fargo is sued over home equity lines of credit

A federal lawsuit filed against Wells Fargo & Co.'s banking unit Tuesday accuses the company of slashing borrowers' home equity lines of credit based on flawed automated software that exaggerated how much the value of their properties had fallen.

The suit says federal law requires a lender planning to reduce a line of credit to reappraise the underlying property or to have "another sound basis for reducing or suspending the credit line."

Instead, the Wells Fargo banking unit employed "unreliable computer models" that generated "artificially deflated" home values, according to the complaint brought by homeowner Michael Hickman of Westmont, Ill.

The suit, filed in U.S. District Court in Chicago, asks the court to certify it as a class action representing all borrowers nationwide whose situations are similar to Hickman's.

"In this economy, what Wells Fargo and other lenders are doing to everyday customers like Michael Hickman is simply unconscionable," plaintiff attorney Jay Edelson of Chicago said in a news release announcing the lawsuit.

Edelson's firm has similar suits pending against Citigroup Inc. and JPMorgan Chase & Co., including Washington Mutual Bank, which was acquired by JPMorgan last year.

Wells Fargo said it had not fully reviewed the lawsuit.

A statement released by Des Moines-based Wells Fargo Home Mortgage said: "We are confident in our fair and responsible lending practices, including how we determine home equity credit limits available to customers depending on the amount of equity in their home. Our controls are based on contractual and regulatory guidelines and include a fair appeals process."

The lawsuit "appears to mischaracterize credit controls designed to sustain homeownership," Wells Fargo said.

Home equity lines of credit are a type of second mortgage that can enable homeowners to draw against a property's increased value to pay for home improvements, college expenses, vacations or anything they wish. They typically carry lower interest rates than credit cards, and the interest may be tax deductible, making them an especially attractive alternative. link.....

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Brazil Petrobras Total July Gas, Oil Prod +3.2% Vs Year Ago

With offshore oil platforms returning to production following maintenance, Brazilian energy giant Petrobras (PBR) posted a 3.2% rise in total natural gas and oil production in July against the same month a year ago, the company said Tuesday.

Gas and oil production from both domestic and overseas sites rose 3.2% from July of 2008 to 2.498 million barrels of oil-equivalent, or BOE, per day, the company said.

The company's total domestic oil and gas output in July was 2.254 million BOE, up 2.7% from July of 2008.

Petrobras' domestic production of crude oil in July was 1.938 million BOE, up 3.8% from the same month a year ago.

Overseas, Petrobras enjoyed an 8.5% year-on-year rise in total natural gas and oil output to 243,707 BOE per day, the company said. The increase was due to two new wells in Nigeria.

On the domestic front, Petrobras said production was favored by increased output at the Marlim and Marlim Leste offshore sites in the Campos Basin following completion of routine maintenance at platforms there. link.....

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OIL FUTURES:Crude Settles +3.7% As Equities Rise

Crude oil futures prices rose 3.7% Tuesday, led by a rebound in U.S. equities prices.

Light, sweet crude oil for September delivery on the New York Mercantile Exchange settled $2.44 higher at $69.19 a barrel. The rise was the biggest since July 31. ICE North Sea Brent crude oil for October delivery settled up 2.6%, or $1.83, at $72.37 a barrel.

The recovery in share prices provided the spark for the turnaround in crude, which had fallen 5.3% over the previous two days to its lowest settlement since July 29.

"The two-day downswing resulted in some oversold conditions and risk-taking is coming back in the market in the form of higher commodity and equity prices," said Adam Klopfenstein, senior market strategist at Lind-Waldock.

September crude, which expires at Thursday's settlement, traded to a high of $69.58 a barrel, coming just short of settling above its 10-day moving average, which would be a clear technical sign pointing to still further gains.

"Closes above the 10-day moving average crossing at $69.75 are needed to confirm that a short-term top has been posted," said Tony Rosado, a broker at GA Global Markets.

The October contract, which will become the spot contract Friday, is attracting more trading volume, and settled at $71.09 a barrel, up 3.3%, or $2.28.

Following Tuesday's settlement, the American Petroleum Institute reported a surprise steep 6.134 million-barrel drop in crude oil stocks, while a rise was expected. September crude jumped 89 cents from the settlement, to $70.08 a barrel, the highest intra-day level since Friday.

The API also said gasoline stocks fell 847,000 barrels and distillate stocks rose by 1.529 million barrels. Refiners lifted operations relative to capacity by 0.9 percentage point, the API said.

The market will look for confirmation of the API data when the Energy Department's Energy Information Administration releases its weekly data at 10:30 a.m. EDT on Wednesday.

With September crude near its expiry, October crude challenge resistsance near $72.25 a barrel if the EIA confirms the decline in crude, Rosado said.

Analysts surveyed by Dow Jones Newswires expect that data for the week ended Aug. 14 will show crude stocks rose by 1.5 million barrels, amid a slim 0.2 percentage-point rise in refinery operations relative to capacity. Gasoline stocks are expected to show a drop of 800,000 barrels, while distillate stocks (heating oil/diesel) are expected to rise by 500,000 barrels.

September RBOB gasoline futures traded to a high of $2.0150 a gallon, and settled at $2.0002 a gallon, up 4.87 cents, or 2.5%, the biggest single-day gain since Aug. 3 and its highest level since Aug. 12. The contract ended just below its 10-day moving average of $2.0076 a gallon, which would have confirmed that a near-term floor had been put in place, Rosado said. link......?

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