Stock Market

T. Rowe Price Group Inc. reported yesterday that its second-quarter profit rose 20 percent as the Baltimore mutual fund company continued to attract investment dollars from clients. The company had net income of $162 million, or 58 cents a share, up from $136 million, or 49 cents a share, a year earlier and matching the consensus estimate from Wall Street analysts polled by Thomson Financial. It also notched a new record in assets under management, which rose 8.5 percent during the quarter to $380 billion, the result of a surging stock market and clients adding $8 billion.

The U.S. economy hit the skids in the first quarter, posting its worst growth rate in four years. But the continued spending of consumers and business people has many experts predicting better times ahead. The slumping housing market was named as a primary culprit in a Commerce Department report yesterday showing that the nation's gross domestic product grew at a surprisingly sluggish 1.3 percent annual rate in the January-March quarter, the lowest pace since the first quarter of 2003.

There was a time when investors popped champagne corks to celebrate record-breaking levels in the stock market. But that was in the late '90s, before the technology bubble exploded in March 2000, drenching portfolios with red ink and scaring people into the real estate market. Although the Standard & Poor's 500 index climbed to a record two weeks ago, individual investors barely noticed. And as stocks receded below those highs last week, analysts were attributing that to nervous professionals - like hedge-fund managers - rather than regular folks with IRAs and 401(k)

WASHINGTON -- With his message to the markets not to panic, Federal Reserve Chairman Ben S. Bernanke in effect signaled yesterday that the central bank would again stand ready to try to head off any major financial crisis, analysts say. Bernanke told the House Budget Committee that the economy was in good shape and that the Fed was monitoring the markets in the wake of Tuesday's global stock sell-off. Stock market operations "seem to be working well," he said, adding that "there's a reasonable possibility that we'll see some strengthening of the economy sometime in the middle of the year."

One theory about last season's home run derby staged by Mark McGwire of the St. Louis Cardinals and Sammy Sosa of the Chicago Cubs was that the final total would have been even greater had both men focused from April on maximizing four-baggers.Armchair analysts worry that batting averages and game scores will fall this year because too many players will be trying to beat McGwire's 70-homer record -- and striking out.Investors in mutual funds face a similar risk amid the hoopla about the Dow Jones industrial average at 10,000 and the unprecedented four straight years of more than 20 percent returns by the Standard & Poor's 500 index.

NEW YORK -- At Madison and 36th, an old woman in a porkpie hat and sneakers slips a paper cup into an open taxicab window to beg for money. The cabbie shoves the cup back at her. Doesn't the old lady understand modern economics? These are boom times. Let her make her money in the stock market, like everybody else.Across Madison, people spend $7 a head to walk through the wondrous J. Pierpont Morgan library. Their voices are hushed, as though entering church. In fact, it's a holy place of American capitalism, a storehouse of one man's quest for every snatch of culture that money could buy him: works by Rembrandt and Rubens and Seurat; inscribed tablets from Mesopotamia; a handwritten score by Mozart; a first printing of the Declaration of Independence; a summary of the general theory of relativity in Albert Einstein's own hand.

WE'VE finally heard the best-put argument why cutting taxes now is not only politically dubious, but also economically insane.It goes like this: If we do it the stock market might crash. Case closed, I guess. Anybody really want to test what would happen if a large tax cut triggers fear of an overheated economy touching off higher inflation rates and a more restrictive monetary policy? It's a blueprint for a grizzly of a bear market that would make 1987 look like a minor correction.This is not the ravings of a pro-government big spender who wants to preserve the federal surplus so it can be squandered on social programs.

WASHINGTON -- New York Stock Exchange Chairman Richard Grasso said yesterday that he expects the world's largest stock market to convert to a publicly traded corporation in November to raise cash to buy an electronic trading network and invest in technology."

THIS has been the year of money. The greatest peace-time economy the world has ever seen has given rise to whispers of e-dynasties as millions make a killing in the stock market.Young men and women wake in the morning as ordinary citizens only to go to bed as millionaires, thanks to wildfire IPOs and day trading run amok. CNN fairly trips over itself to bring instant market updates to viewers throughout the day who are, presumably, at work, but not too busy to watch their money grow.If the Dow loses 300 points in one day, network news producers now deem it so important they're likely to interrupt regularly scheduled programming to report it. This represents a somewhat subtle but telling shift in the public's perception of what the stock market is and how it functions.

WASHINGTON -- Paul Volcker, former chairman of the Federal Reserve Board, puts the scale and velocity of America's current wealth-creation in this perspective: In just the first half of this year, the increase in the net worth of U.S. households was approximately equal to the total annual income of the 2.5 billion people of China, India, Russia and Brazil.The political consequences of such an economic fact are difficult to anticipate, but this seems likely: The surge in wealth is a current cause of political tranquillity, and a potential cause of volatility.

Investors of all ages have seen their portfolios take a hit in this bear market. But will losses have a greater effect on younger investors, making them less likely to buy stocks in the future? Some academics think so. With little investing experience under their belt, young investors might conclude they should avoid stocks after last year's market plunge. Yet, if history is any guide, young investors could become big winners if they invest in stocks during a bear market and reap the rewards when those shares appreciate later in a bull market.

As stocks regain lost ground, financial planners say they're getting more calls from old and new clients asking much the same thing: Is it now time to dive back into the stock market? Some callers had bailed out of stocks last year in a panic and now have a bit of sellers' remorse. Others who uneasily stuck with stocks have found new courage to buy more since the widely followed Dow Jones industrial average has gone up nearly 30 percent since early March. David Berman, a financial planner with Berman McAleer Inc. in Timonium, says he has seen a shift in attitude within a matter of weeks.

Even the sourpusses and Eeyores have lightened up. New York University economist Nouriel Roubini, who was talking about a "near depression" last fall and government takeovers of major banks as recently as April, now says "there is light at the end of the tunnel." Economist and New York Times columnist Paul Krugman said in speech last month that "GDP growth in the United States will be positive in the second half of the year," as if he had adjusted the fit of his underwear. Has the economy turned around?

The Obama administration is taking drastic measures to reverse the slumping economy, but one indicator seems to be on the rise: media hyperventilating about the stock market. Predictably, on Fox News we've heard Chris Wallace, Brit Hume, Neil Cavuto and others ruminate about an "Obama bear market." One analyst on Mr. Cavuto's show pointed the stock-blame finger at President Barack Obama on Oct. 20 - two weeks before the presidential election. First of all, the stock market is not the entire economy, nor do the Dow Jones Industrial Average and NASDAQ represent the entire marketplace.

The Wall Street rally last week provided a precious opportunity in a bear market: an exit door for people in need of cash. Typically, when the market has crashed like it has, the last thing investment advisers recommend is selling. They want people to hold on to solid stocks and stock funds and wait for a healthy market. But some people can't wait. They might have locked too much money up in stocks and need cash for bills. Sometimes people have more options than they realize and don't really have to sell.

Still optimistic on voting reform Maryland has been through a years-long process to try to replace the costly paperless, touch-screen voting machines that were first implemented in some counties in 2002 ("Paper voting unlikely," March 4). The governor put funding to purchase an accessible optical-scan system in the State Board of Elections' current budget. This purchase will ultimately be a cost-saving measure. The state currently supports more than 20,000 touch-screen voting units but would need only about 2,000 optical scanners and 2,000 ballot-marking devices under a new optical-scan system.

NEW YORK -Three months after it looked like the stock market had hit rock bottom, the Dow Jones industrial average slumped yesterday to a six-year low. The Dow skidded 89.68 points, or 1.2 percent, to 7,465.95 - sagging below its 7,552.29 mark during the market sell-off in November 2008 and raising worries that share prices overall are poised for another steep fall. The world's best-known market barometer has fallen 15 percent in the seven weeks since New Year's Day and is at its lowest since October 2002.

Weak consumer spending and continuing declines in the stock market hurt fourth-quarter profits of three of Baltimore's major corporations, all of which reported disappointing results yesterday. Power-tool maker Black & Decker is slashing 1,200 jobs worldwide as it anticipates steep sales declines in the coming quarters. The cuts come as the Towson-based company, whose business is heavily dependent on housing and auto markets, reported a 77 percent decline in quarterly earnings. Its stock was hammered, falling $8.09, or 21 percent, to close at $30.65.

TIP 6 You don't have to tap your IRA this year in hopes that you can recover some of your Wall Street losses Older savers get a one-year reprieve in 2009 from having to take distributions from retirement accounts because of the recent stock market turmoil. This helps if you don't need to dip into a traditional IRA, 401(k), 403(b) and 457 plans to live on. You can leave the money untouched, where it may recover from last year's losses. Mandatory distributions from these accounts kick in after you turn 701/2.

Many families could only stand by and watch as their 529 college savings accounts plunged along with the stock market last year. Their hands were tied by an Internal Revenue Service rule that allows account holders to change investments only once a year, or when they switch the account beneficiary. So, if they had made a change in their account early in the year - often the time families make adjustments - they were unable to act again as stocks tanked in the fall. But the IRS, which has been giving taxpayers leeway in other areas because of the severe recession, is doing the same for 529 college savings plans.