Financial thoughts

Financial literacy has nothing to do with how well you score on tests of your knowledge.

You may be asked to define the Rule of 72 (the number of years it takes your money to double at a given interest rate) or the factors that go into calculating your creditworthiness. The problem with such tests is that they’re based on facts – and facts change.

A legitimate tax avoidance strategy today can be viewed as tax evasion next year. Soon, you’re getting demands from the Canada Revenue Agency for thousands of dollars in back taxes. You can score 100 per cent on a financial literacy survey and still lose money because you put your trust in bad people, companies or investments.

Trust is easily won in Canada.

Take the recent news about Montreal adviser Earl Jones, who’s alleged to have spent millions of dollars that his clients gave him to manage.

In photos, the 67-year-old with the full head of white hair looks trustworthy. Clients felt they were in good hands and didn’t bother to call the Quebec financial regulator to see if Jones was registered and covered by a compensation fund (which he wasn’t). I’m not blaming the victims here. I’m blaming a system that allows financial advisers to operate outside of a mandatory regulatory regime.

Canadians have a sense of entitlement. There’s a feeling that government rules are in place to keep us safe from fraud and wrongdoing. If you believe there’s a fund to protect you in an insolvency, you’ll probably let your guard down and get complacent. You won’t take time to check the credentials of those to whom you entrust your savings.

Here’s a way to boost financial literacy. Let’s make Canadians more suspicious. Let’s work on changing attitudes, not teaching more stuff. Let’s encourage everyone to ask about the downside risks and the worst possible scenario auto car loan. Let’s develop a checklist of questions to ask – and tick off as answered – before people sign any paperwork or agree to any large purchases.

Questions such as:

What if I get sick or I can’t work anymore? Can I get my money back early without a penalty?

What if the company goes under? What if the principals go to jail?

What if the stock market goes down and stays down for a few years?

What if interest rates go down to zero?

What’s the worst possible loss I can have on my investment?

You may have to counteract your own optimistic tendencies about returns that look too good to be true. An investment yielding double-digit rates carries more risk than one yielding 2 to 3 per cent.

It won’t be guaranteed, for sure, and it won’t be a loan.

About 2,800 people in British Columbia fell victim to the Eron Mortgage fraud in the 1990s.

A study by Simon Fraser University professor Neil Boyd found more than a third of Eron investors thought they were providing a loan with a guaranteed rate of return.

Those who saw themselves as lenders lost almost twice as much as those who viewed themselves as investors – an average of about $76,000, in contrast to an average of $43,000.

Decisions to invest often take place without a strong base of knowledge and, most important, without a critical analysis.

"It will ultimately be a well-informed and skeptical investor who is least likely to be victimized by the fraudulent dishonesty" of men such as those behind Eron Mortgage, Boyd concluded.

Next week, do financial literacy and accounting go together?

eroseman@thestar.ca

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HAZELWOOD — Seventy years ago this summer, James S. McDonnell opened his new company, McDonnell Aircraft Corp., at Lambert Field.

McDonnell wasn’t from here but his choice came down to St. Louis and Memphis, Tenn. McDonnell chose St. Louis and moved his family here from Baltimore. And the rest, one might say, is aviation history.

Top executives of the Boeing Co. on Thursday marked those first 70 years of Boeing and its predecessors — McDonnell Aircraft and McDonnell Douglas Corp. — in St. Louis. The celebration was attended by hundreds of employees, local political leaders and organized labor.

Boeing’s defense arm is the second-largest employer in the St. Louis region with about 16,000 workers.

While celebrants focused mostly on the local history of military aircraft and weapon manufacturing, elected officials made a familiar plea for continued funding of the C-17 Globemaster III transport plane and the F/A-18 Super Hornet. The two Boeing-built aircraft are threatened by a shift in Pentagon spending priorities.

Secretary Robert Gates proposed capping U.S. orders for the C-17 at the 205 already in use or in production and a scaled-down purchase of F/A-18s in next year’s budget.

But Congress provided funding for eight more C-17s in this year’s emergency war spending bill.

Last week, Sen. Christopher S. "Kit" Bond, R-Mo, co-authored a letter seeking funding for a dozen more of the Boeing-built transporters in next year’s defense appropriations bill.

"We’re fighting hard," said Bond. "I would hope we could get 15 C-17s. With a tight budget, that may be much. I would like to see a multiyear (purchase) for the F/A-18s. We can make it more efficient for Boeing … if we give them a plan for buying over several years. And that makes it cheaper for the taxpayers."

Bond added that there is a "minimum amount of high enthusiasm" for such a deal in the Pentagon.

Sen. Claire McCaskill, D-Mo., said she has heard military members speak in glowing terms about the capabilities of the F/A-18s and C-17s.

"Pound for pound, dollar for dollar, capability, reliability, you have built a tremendous fighter jet," McCaskill said of the Super Hornet.

George Roman, St. Louis regional executive of Boeing Integrated Defense Systems, and John Van Gels, St. Louis senior site executive, said the fate of federal spending on the aircraft will become clear this fall.

"It’s a long fight still," Roman said.

Boeing shares rose $4 to $51.82 a share on Thursday amid news that its long-delayed 787 Dreamliner passenger jet should be ready for its first flight by the end of this year.

"While there is no question that the execution of this program has had its challenges, … the 787 … remains on track to be a game changer for our airline customers," Boeing President and CEO Jim McNerney said in a conference call on Thursday.

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Treasury prices bounced around breakeven on Tuesday as Wall Street climbed higher and the first of three debt auctions slated for the week was met with solid demand.

Wall Street cheered two better-than-expected reports on the economy, applauded President Obama renominating Ben Bernanke to the Federal Reserve, and absorbed new deficit estimates. And when stocks rally, investors tend to pull funds out of the safe haven of government bonds.

The Conference Board’s Consumer Confidence Index rose to 54.1 in August, flying past economists’ expectation of 48. Home prices increased 2.9% in the three months ended June 30, according to the latest S&P/Case-Shiller report, marking the first quarter-over-quarter improvement in three years.

President Obama ended speculation over who would head the Federal Reserve, nominating current Chairman Ben Bernanke for a second term.

"The President just confirmed his reappointment of Ben Bernanke as Fed Chairman. Good idea, Mr. President," said Kevin Giddis, the head of fixed income sales, trading and research at Morgan Keegan, in a research note. "To introduce a new variable at this point in the process would be dangerous on many fronts."

The White House now expects the 10-year budget deficit to reach $9.05 trillion, roughly $2 trillion more than it estimated earlier in the year, according to a report released by the Office of Management and Budget.

The Obama administration has been funding a multi-pronged rescue effort for the economy that has stretched from Wall Street mega-banks to the clunker in your driveway.

In the process, Uncle Sam has racked up a record-sized debt load. To raise cash to fund various government bailout programs, the Treasury has been selling its debt.

The new announcement of the decade-long deficit projection did little to move the Treasury markets. "Budget deficits usually never meet their projections over that long a period of time," said Mary Ann Hurley, vice president of fixed income trading at D.A. Davidson.

$109 billion in auctions: Just this week, the Treasury is scheduled to auction off $109 billion worth of debt. The market watches the auctions closely to take a pulse on demand - in particular from foreign buyers, a key component of the demand for Uncle Sam’s debt.

On Tuesday, $42 billion of 2-year notes hit the chopping block. This was the first of three closely watched auctions to happen this week, and it had a bid-to-cover ratio of 2.68, with almost $113 billion worth of bids coming in for $42 billion worth of debt available.

Wednesday, the government is set to sell $39 billion of 5-year notes, and Thursday, Treasury will sell $28 billion of 7-year notes.

Demand for U.S. government bonds has held up relatively well during the recession because investors consider Treasurys to be one of the safest places to park cash in times of uncertainty — because Treasurys are backed by the government, the thinking is that Uncle Sam will make good on those debts.

Yields and prices move in opposite direction so when investors seek the safe haven of Treasurys, expect to see prices rise and yields decline.

Yields on the benchmark 10-year note have been hovering around 3.4% recently but just a little more than two months ago, that yield topped 4% — a level not seen since mid-October — signaling underlying inflation fears.

Buyback continues: In an effort to spur demand, the government started buying back its own debt. The $300 billion so-called quantitative easing program aims to keep demand in the Treasury marketplace healthy in order to keep yields low.

Home mortgage rates move in tandem to Treasury yields. High mortgage rates discourage home buyers. The housing market caved in on itself as home prices dropped and credit markets cinched. To keep housing on the track to recovery, the government would like to keep Treasury yields - and by extension mortgage rates - low.

Monday, the government bought $6.1 billion worth of debt that expires between May 2011 and April of 2012. Wednesday, the Fed will make the next installment of its debt buyback, purchasing an undisclosed amount of debt that matures between Aug. 15, 2026, and Aug. 15, 2039.

Debt prices: The benchmark 10-year note was up 2/32 to 101-1032, and its yield was 3.47%. Bond prices and yields move in opposite directions.

The 30-year bond added 5/32 to 104-3/32, and its yield rose to 4.26%.

The 2-year note was down 1/32 to 99-3/32, and its yield edged up to 1.05%.The yield on the 3-month bill dipped to 0.16%.

Lending rates: Bank-to-bank lending hover at historically low levels, a positive indication of for once-frozen pipelines of credit.

The three-month Libor ticked very slightly lower to 0.38%, according to Bloomberg.com. The overnight Libor rate was also nearly unchanged at 0.23%.

The London Interbank Offered Rate — or Libor — is a daily average of rates that 16 different banks charge each other to lend money. The closely watched benchmark is used to calculate adjustable-rate mortgages. More than $350 trillion in assets are tied to Libor. 

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Forget Madison Avenue’s claims about the cleaning power of household detergents. Steward Advanced Materials, a 30-employee company in Chattanooga, promises to mop up mercury, lead and even nuclear waste from soil and water.

Steward’s SAMMS compound (an acronym for "self-assembled monolayers on mesoporous supports") consists of nanoscale pores that lab technicians can tweak to make them absorb and bind to any toxin. The result: a harmless cornstarch-like compound that can be disposed of in any landfill, according to the Environmental Protection Agency.

"When it comes to removing industrial toxins, we don’t have great options," says EPA chemist Warren Layne. "But this stuff will do it."

SAMMS was invented in the early 1990s by Glen Fryxell and Shas Mattigod, researchers at a government lab in Richland, Wash. Problem was, they could produce it only in tiny batches.

Enter Steward, which visited the lab in 2005 for a presentation and left with exclusive manufacturing rights. As a demonstration, the company cleaned a 27-year-old 300-gallon tank of radioactive sludge at a government lab in Idaho.

The first SAMMS powder — Thiol-SAMMS, available now — tackles mercury, which is regulated by the EPA and 26 states. Steward also offers a number of customized solutions. One filters contaminated streams, while another is aimed at hospitals and dental offices. Industrial-scale versions are available for chemical plants, coal-fired power plants, mining operations and oil rigs. Compounds that remove arsenic, cadmium, copper, platinum and selenium are in the works; one version could someday remove gold and silver from ore.

Says Robert Jones, Steward’s former vice president of product development: "There is an almost unlimited number of potential applications."  

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Warner Chilcott, an Irish drugmaker that specializes in contraceptives and female hormone treatments, will buy Procter & Gamble Co’s pharmaceuticals business for $3.1 billion, the companies said on Monday.

P&G’s branded drugs, including osteoporosis treatment Actonel and Enablex for overactive bladder, have annual sales of $2.3 billion. Warner-Chilcott’s annual revenue totals about $1 billion.

“The acquisition transforms Warner Chilcott into a global pharmaceutical company, expands our presence in women’s health care, establishes us in the urology market in advance of the anticipated launch of our erectile dysfunction treatments, and adds gastroenterology therapies to our product portfolio,” Warner Chilcott said in a release.

P&G has failed to realize its ambition of becoming a major force in pharmaceuticals, although Actonel is one of the world’s top-selling treatments for prevention of fractures in post-menopausal women.

Cincinnati-based P&G, best known for its vast array of household consumer products such as Tide detergent and Crest toothpaste, said it was selling its branded medicines to “prioritize” investments in its consumer health care businesses.

The companies said the majority of the 2,300 employees in P&G’s pharmaceuticals unit are expected to transfer to Warner Chilcott.

“For Warner Chilcott, the acquisition expands its presence in existing specialty pharmaceutical markets and provides access to new physician offices in 14 countries,” the companies said.

Warner Chilcott said it expects the deal to close in November and be financed through borrowings.

P&G said the deal will give it a one-time after-tax gain of $1.4 billion, or 44 cents per share. But it also expects profit to be reduced by 10 cents to 12 cents per share in fiscal 2010 due to lost earnings from the pharmaceuticals business.

(Reporting by Ransdell Pierson; editing by John Wallace)

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Wal-Mart is recalling about 1.5 million Durabrand DVD players because of a potential for the device to burst into flames, the U.S. Consumer Product Safety Commission said Thursday.

Wal-Mart (WMT, Fortune 500) received 12 complaints of the DVD players overheating; in five of the cases, the overheating caused a fire that damaged property, according to a statement from the CPSC. No injuries have been reported.

The DVD player, imported from China, was sold at Wal-Mart stores from January 2006 through July 2009 for $29.

The DVD player came with a remote control and is silver with a U-shaped opening at the top to insert the DVD free credit report without a credit card.

Consumers should stop using the DVD player immediately and return it to Wal-Mart for a full refund.

For additional information, contact Wal-Mart at (800) 925-6278 between 7 a.m. and 9 p.m. CT Monday through Friday, or visit the Web site at http://walmartstores.com/.  

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Initial construction of U.S. homes edged lower in July following a surge in the previous month, according to government figures released Tuesday.

The report had some modest indications of stabilization. "A mixed bag this time around," said Mike Larson, real estate and interest rate analyst at Weiss Research, in a research note.

Housing starts fell to a seasonally adjusted annual rate of 581,000, down 1% from a revised 587,000 in June, the Commerce Department said.

Economists were expecting housing starts to increase to an annual rate of 599,000 units, according to a consensus estimate gathered by Briefing.com.

The recession has cut deeply into consumer demand and access to financing. Housing starts for July were 37.7% lower than the July 2008 rate of 933,000.

Meanwhile, applications for building permits, an indication of future construction activity, dipped 1.8% to a seasonally adjusted annual rate of 560,000 in July. Economists were looking for the forward-looking measure to increase to an annual rate of 577,000 units.

Building permits were 39.4% below the July 2008 rate of 924,000.

"Construction activity remains low, historically speaking," said Larson. "But evidence continues to mount that the worst of the declines for this cycle are behind us low cost car insurance."

Single-family strength: One indication of strength was single-family housing starts, considered the core of the housing market, which managed to gain 1.7% in July after rising sharply the previous month. Single-family building permits rose 5.8% in July.

As the single-family segment showed signs of improvement, however, the multi-family segment continued to get hit hard, pulling topline numbers lower.

Going forward, Larson predicts the construction market will continue to struggle because of the oversupply of foreclosed properties available at bargain basement prices.

"Buyers still have plenty of homes to choose from, and distressed and foreclosed properties will continue to flood the market well into 2010," said Larson.

Regionally, the Midwest was the only part of the country with an increase in the rate of new homes being constructed, posting a 12.9% gain from June.

The Northeast suffered the most severe pullback, with housing starts down 16.3%. Starts dipped 1.4% in the South and 1.6% in the West. 

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California will have enough cash to stop issuing IOUs on Sept. 4, almost one month earlier than expected, the state controller said Thursday. That’s also the date when people and companies can redeem their IOUs with the state treasurer.

The controller’s office has issued 327,000 IOUs worth a total of $1.95 billion so far.

The Golden State was forced to start handing out IOUs on July 2 after Gov. Arnold Schwarzenegger and lawmakers failed to close a $24 billion budget deficit. Controller John Chiang had to start issuing the vouchers so the state would have enough money to cover debt payments and fund education. It was the first time the state issued IOUs since 1992, though it did delay payments in February during another cash crunch.

Even after the governor signed a budget agreement in late July, the controller’s office had to determine when there’d be enough money in the state coffers to end the IOU issuance. Since the budget was signed, Chiang has issued 100,000 IOUs totaling more than $800 million.

"Along with short-term loans that are routinely obtained in the fall, this spending plan should provide sufficient cash to meet all of California’s payment obligations through the fiscal year," Chiang said payday loan.

The IOUs were sent to the state’s vendors, county social service agencies and residents expecting tax refunds. The state’s biggest banks accepted them until July 10, but then most cut them off, hoping to bring lawmakers and the governors to the negotiating table.

They were told they could redeem the paper on Oct. 2 or when the state had enough money in the bank, whichever came first. They will be paid an annual interest rate of 3.75%.

California still isn’t out of its hole: The state will need to borrow $10.5 billion to meet California’s cash needs for the fiscal year, Chiang said. Ending the IOUs on Sept. 4 is contingent on the state obtaining a $1.5 billion loan by Aug. 28, which the state treasurer assured the controller will happen.  

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President Obama and his fellow southpaws have cause for celebration this week: Thursday marks the 18th annual International Left-Handers Day. But for entrepreneur Margaret Majua, founder of Lefty’s San Francisco, every day is an occasion to give thanks for lefties.

Majua spotted an ad two years ago for a strange-looking writing instrument called the Yoropen. Shaped like a grasshopper, the pen was touted as a writing boon for left-handed people because its design allowed lefties to see what they’d just written without smearing it.

"At first I thought it was pretty creepy-looking," she says. "Then I thought it might just be weird enough to sell."

Her instinct paid off. The Yoropen is now one of the bestselling items at Lefty’s San Francisco: The Left Hand Store, which Majua opened in March 2008 on San Francisco’s iconic Pier 39, adjacent to Fisherman’s Wharf.

Lefty’s is one of the world’s only brick-and-mortar stores catering to the left-handed. It continues a San Francisco tradition: Thirty-one years ago, Left Hand World pioneered the market, opening on Pier 39 in a tiny 350-square-foot space. The store closed a decade later, but it spawned a solid fan base. The landlord searched for a tenant to continue the store’s theme in the original location, but found no takers — including Majura, a serial retailer who opened her first Pier 39 enterprise, a refrigerator-magnet store, in 1986. Since then, she’s created more than 20 themed specialty stores in tourist destinations such as Las Vegas, Hawaii and Disney World.

Armed with that experience, Majua decided it was time to take the left-handed leap. Fueling her commitment was the discovery that the very few retailers selling left-handed products stocked only items that were already commercially available.

"No one had developed a product line," she says, adding that she wasn’t impressed with what was already on the market. "I knew I had to fill the store, but I also wanted the stuff to look good together. I’m fascinated by merchandising."

As part of her reinvention plan, Majua — who is right-handed — invested about $100,000 to develop a Lefty’s product line of 20 stationery items, such as spiral notebooks, sketchbooks and memo pads, all with the spirals on the right side. She is also developing a dozen kitchen tools, including vegetable peelers, pancake turners, and measuring cups, which are scheduled to be available as gift sets at the end of the year.

"Smaller companies don’t have the financial resources to develop products for left-handers, and larger companies don’t see this as a big enough market," Majua says. "I saw it as niche I could fill payday advance lenders."

Left-handed icons

It’s a niche with a star-studded history. Only an estimated 10% to 15% of the population is left-handed, but the roster includes such luminaries as Leonardo da Vinci, Bill Gates, and five of the last seven U.S. presidents. Lining Lefty’s walls are framed pictures of left-handed celebrities such as Beethoven, Mozart, Judy Garland and Alexander the Great.

Even pop culture is represented. Sandwiched between Queen Victoria and Mark Twain is Ned Flanders, the left-handed character on The Simpsons who runs his own retail store, The Leftorium. In Lefty’s, Flanders has his own 14-inch plush doll, as well as a $5 refrigerator magnet — and he’s been outselling President Obama, who’s represented on a t-shirt with the tag line "Obama is a leftie."

"Customers who don’t know President Obama is left-handed ask us if the tag line refers to his politics," says Kelly Kempczenski, Lefty’s manager. Like Obama, the store’s sales staff are all left-handed, and love demonstrating Lefty’s products for the curious or the desperate.

"Many left-handers have already adapted to regular products, but half of the people who try one of our left-handed products buy it," says Kempczenski, recalling how her elementary school teacher tried to make her use her right hand. "I use left-handed pens and scissors myself, and they’re really useful."

They also sell well. Pens and pencils for lefties account for 25% of Lefty’s sales, with that strange-looking Yoropen — available in four styles in the $6 to $60 price range — responsible for half of Lefty’s pen sales. Notebooks are also popular, especially during back-to-school season. About 20% of Lefty’s revenues come from online purchases, where the average order totals $60.

Majua projects that Lefty’s 2009 revenues will reach the high six-figures. Early next year, she’s planning to move the store to a new location 100 feet away with nearly triple the space. She’ll need it to stock an expanded range of left-handed kids’ products, including guitars, baseball mitts and golf clubs.

She’s also considering selling her custom products to other left-handed retailers. "My ego doesn’t want to, but business reality will probably dictate I will," she says.

There’s another motivation at work as well, she concedes: "My staff has made me really aware of how customers really appreciate the products, which has inspired me to design and stock more of them." 

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Stocks sustained gains Wednesday after the Federal Reserve held interest rates near historic lows and signaled the economy has finally started to stabilize.

The Dow Jones industrial average (INDU) added 120 points, or 1.3%, giving up bigger gains. The S&P 500 (SPX) index rose 11 points, or 1.1%. The Nasdaq composite (COMP) advanced 29 points, or 1.5%.

Wall Street rallied leading up to the Fed announcement as signs of improvement in the housing market pushed investors back into stocks following a two-day retreat.

The market seesawed a bit after the announcement, with the Dow, Nasdaq and S&P 500 pushing toward fresh 2009 highs, before trimming those gains by the close.

"The Fed reinforced what investors already knew, that the economy has gotten a little better," said James Barnes, fixed income portfolio manager at National Penn Investors Trust.

"But until we see more news that either reinforces the belief that the recovery is here or says we’ve gone too fast too soon, you’re not going to see a bigger reaction."

Thursday preview: July retail sales are due in the morning. The Commerce Department report is expected to show modest growth. Sales likely rose 0.7% after rising 0.6% in June, according to economists surveyed by Briefing.com. Sales excluding volatile autos are expected to have risen 0.1% after rising 0.3% in June.

Wal-Mart Stores (WMT, Fortune 500) reports its results before the start of trade. The Dow component is expected to have earned 86 cents per share, as it did a year ago.

Thursday also brings the weekly jobless claims report from the Labor Department and readings on July import and export prices and June business inventories

Focus on the Fed: As expected, the central bank on Wednesday held the fed funds rate, a key short-term bank lending rate, at historic lows near 0%. The Fed first cut the rate to that level last December to help the struggling economy, which had already been in a recession for a year.

In the closely watched policy statement, the Fed said it will maintain exceptionally low interest rates for an extended period of time. The bankers said that although economic activity is likely to remain weak, activity is "leveling out" and financial market conditions appear to have improved.

The statement has a slightly more positive tone than in recent months, but it continued to indicate caution, said Stephen Stanley, chief economist at RBS Securities.

"They’re saying that things are improving, but mostly in line with their forecasts," Stanley said. "It is a little more optimistic in tone, in tune with the recent data."

Recharging the advance: The stock advance was broad-based, with financial, technology and other shares rebounding after sliding Monday and Tuesday. Stocks had fallen in anticipation of the Fed meeting, with investors cashing out after several up weeks.

"Mostly I think you’re seeing a continuation of what we’ve seen this summer, where when you have a selloff for a few days, they use it as a way to get back in," said Ron Kiddoo, chief investment officer at Cozad Asset Management.

With the exception of a pullback in late June, the S&P 500 has basically been on the rise for five months. Since bottoming in early March, the index has gained 50% through the end of last week.

Housing: The median home price plunged a record 15.6% during the second quarter, versus a year earlier, according to a report from the National Association of Realtors fast cash.

But on a more upbeat note, the median home price rose 4% in the quarter versus the first quarter of 2009, rising to $174,100 from $167,300.

In another positive sign, homebuilder Toll Brothers (TOL) said the number of signed contracts rose in its just-completed quarter for the first time in four years, although the dollar value of the contracts fell. The luxury homebuilder also said the percentage of cancelled contracts dropped versus a year ago. Shares gained 14.4% Wednesday.

Economy: A majority of economists think the recession has now ended, according to a Wall Street Journal survey conducted over the last few days. With manufacturing starting to pick up and the housing market closer to stabilizing, GDP is expected to grow modestly in the third quarter, after falling for four straight quarters.

The trade gap widened to $27 billion in June, the Commerce Department reported. The deficit stood at $26 billion in May, a 10-year low. The deficit was expected to widen to $28.7 billion in June, according to a consensus of economists surveyed by Briefing.com.

Company news: After the close Tuesday, Applied Materials (AMAT, Fortune 500) reported a fiscal third-quarter loss versus a profit a year ago on weaker revenue. However, the results were better than what analysts were expecting.

The chipmaker also said it would at least break even in the fiscal fourth quarter and potentially post a profit of up to 4 cents per share. Analysts expect a loss of 5 cents per share. AMAT shares gained 3.3% Wednesday.

Among stock movers, gains were broad-based, with 28 of 30 Dow components rising. The Dow’s leaders were Exxon Mobil (XOM, Fortune 500), Chevron (CVX, Fortune 500), Boeing (BA, Fortune 500), IBM (IBM, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Travelers Companies (TRV, Fortune 500), Caterpillar (CAT, Fortune 500) and United Technologies (UTX, Fortune 500).

Market breadth was positive. On the New York Stock Exchange, winners topped losers seven to three on volume of 1.23 billion shares. On the Nasdaq, advancers topped decliners by nine to four on volume of 2.19 billion shares.

Bonds: Treasury prices tumbled, raising the corresponding yields as investors reacted to a mixed government debt sale. Treasury’s auction of $23 billin in 10-year notes showed demand roughly in line with recent levels, but not as strong as that seen last month.

The selloff pushed the yield on the benchmark 10-year note to 3.71% from 3.67% late Tuesday. Treasury prices and yields move in opposite directions.

The government is auctioning $75 billion in debt this week as part of its efforts to reduce the deficit and fuel its recovery efforts.

Treasury’s Tuesday auction of $37 billion in three-year notes saw stronger demand than other recent auctions. On Friday, Treasury sells $15 billion in 30-year bonds.

Oil and gold: U.S. light crude oil for September delivery rose 71 cents to settle at $70.16 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery rose $4.90 to settle at $952.50 an ounce.

Other markets: In global trading, European markets rallied and Asian markets tumbled.

In currency trading, the dollar fell versus the euro and gained against the Japanese yen. 

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