U.S. Consumer Credit Rises in February on Student Loans

April 07, 2011, 3:31 PM EDT

By Vincent Del Giudice

(Updates with economist?s comment in fourth paragraph.)

April 7 (Bloomberg) -- U.S. consumer borrowing rose for a fifth straight month in February on an increase in non-revolving credit as education loans expanded, the Federal Reserve reported today.

Credit climbed $7.62 billion, the most since June 2008, to $2.42 trillion after increasing a revised $4.45 billion in January, the Fed said in Washington. The February figure exceeded the median economist forecast of a $4.7 billion increase in the measure of credit card debt and non-revolving loans, according to a Bloomberg News survey.

The second consecutive drop in revolving credit, which includes credit cards, indicates Americans remain reluctant to take on more debt even as the economy and job market improve. In addition, rising fuel and food prices are limiting people?s buying power, raising the risk that consumer spending, which accounts for about 70 percent of the economy, will cool.

The increase in loans for education shows that ?people are going back to school to improve their skills,? said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit. ?We expect consumer spending to continue growing. The recovery has the strength to continue.?

The total increase reflected an $8.2 billion non-seasonally adjusted rise, to $349 billion, in the federal government category of borrowing, which includes school loans.

Estimates from 33 economists in the Bloomberg survey ranged from a $2 billion decrease to an $8 billion gain. The revised January reading was lower than the initial figure of $5 billion.

Credit Breakdown

Revolving debt, which includes credit cards, decreased $2.71 billion in February, according to the central bank?s statistics. Non-revolving debt, including educational loans and borrowing for autos and mobile homes, rose $10.3 billion for the month, the Fed said.

While the Fed?s policy-setting Federal Open Market Committee said March 15 that the economy is on a ?firmer footing,? New York Fed President William Dudley, the panel?s vice chairman, said April 1 that the U.S. recovery is ?still tenuous? and the jobless rate ?much too high? at 8.8 percent. The central bank is buying $600 billion of Treasuries through June in an effort to boost growth with the benchmark rate close to zero since December 2008.

Moody?s Investors Service raised its outlook for the credit card industry to ?stable? from ?negative? last month, citing a recovery in card issuers? ?asset quality and profitability in an improved economic environment.?

Discover Profit

Discover Financial Services, benefiting from a rebound in its card-lending business, reported a record fiscal first- quarter profit and raised its dividend last month. Its write- offs for loans deemed uncollectible fell to 5.8 percent in February from 9.1 percent a year earlier.

In the auto industry, U.S. vehicle sales rose 6.7 percent in February to an annual rate of 13.4 million, the fastest since August 2009, before slipping in March to 13.1 million. General Motors Co. said sales rose 46 percent in February as discounts and new financing options lured buyers. Ford Motor Co. and Chrysler Group LLC also reported February gains.

?We continue to believe that the economy is going to continue to stay on its current course of slow but steady recovery,? Don Johnson, vice president of U.S. sales for General Motors, said during an April 1 conference call. ?With credit availability improving, continuing historically low interest rates and pent-up demand, we continue to believe that consumers are going to be returning to showrooms in even greater numbers this year.?

The Fed?s report doesn?t track debt secured by real estate, such as residential mortgages and home equity lines of credit.

--Editors: Scott Lanman, Vince Golle

To contact the reporter on this story: Vincent Del Giudice in Washington at vdelgiudice@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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SEC unveils plan to reduce market volatility (Reuters)

WASHINGTON (Reuters) ? The Securities and Exchange Commission unveiled a long-awaited plan designed to protect the markets from volatile price swings following the May 6 "flash crash."

The so-called "limit up-limit down" proposal, announced by the SEC on Tuesday, would require trades in U.S.-listed stocks to be executed within a range tied to recent prices.

If approved, it would replace existing single-stock circuit breakers that were implemented through a pilot program shortly after the flash crash. The circuit breakers halt trading in hundreds of stocks and ETFs when their price moves 10 percent or more during a rolling five-minute period.

The SEC has been working closely with the exchanges and the Financial Industry Regulatory Authority to come up with market structural fixes to prevent a repeat of the May 6 flash crash, which temporarily wiped out about $1 trillion in paper value in the stock market.

"Upgrading our trading parameters will help our markets retain the confidence of investors and companies," said SEC Chairman Mary Schapiro in a statement.

The proposed new limit up-limit down plan, which has been in the pipeline now for awhile, would prevent listed securities from being traded outside of a specific price band.

It is meant to serve as a more sophisticated mechanism for addressing market volatility. Although the circuit breakers have helped, they have also been triggered by erroneous trades.

Most recently, the potential holes in the circuit breaker program were exposed after 10 new exchange-traded funds suffered their own "mini" flash crash last Thursday. The new ETFs were not covered by the circuit breakers and some of them fell by as much as 98 percent.

Nasdaq OMX Group Inc was forced to cancel the trades, and the incident raised concerns that the measures taken by the SEC since the flash crash were not enough to prevent extreme market movements.

Tuesday's proposed price band for the limit up-limit down proposal would be set at a percentage above and below the average price of the security over the preceding five-minute period, the SEC said.

For stocks that are currently covered by the existing circuit breakers, the plan sets the percentage at 5 percent. Other stocks not covered by circuit breakers would be subject to a 10 percent threshold.

The SEC said these percentage bands would be doubled in the opening and closing periods of the market, and broader bands would apply to stocks if they are valued below a $1.00.

If a stock is unable to trade within the designated price band for more than 15 seconds, a five-minute trading pause would kick in.

Traders on Tuesday had a mixed reaction upon hearing about the SEC's plan.

Stephen Massocca, a managing director at Wedbush, said the percentage thresholds for the limit up-limit down plan strike him as " a bit narrow."

"You would need a wider band than that. Overall, I don't see anything dramatically different here," he said.

Others, however, said the plan will be a help.

"These rules, whether good or bad, will bring investors' confidence back to the market," said Larry Peruzzi, a senior equity trader at Cabrera Capital Markets.

The SEC said that the exchanges and FINRA are asking the agency to approve a one-year pilot program for the limit up-limit down plan. The public will get 21 days to comment on it.

Separately, the agency also is continuing to work with the Commodity Futures Trading Commission and the markets to recalibrate market-wide circuit breakers that apply across securities and futures.

(Reporting by Sarah N. Lynch, Additional reporting by Angela Moon, Rodrigo Campos and Jonathan Spicer; editing by Bernard Orr; editing by Carol Bishopric)

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Our Debt Binge Is Ending ? And The Middle Class Will Get Clobbered

The world is coming to the end of a 50-year debt supercycle, John Mauldin says, and the austerity required to put us back on solid financial footing will hammer ordinary Americans.

Mauldin, a financial analyst and the author of ENDGAME: The End Of The Debt Supercycle And How It Changes Everything, thinks that the the US will soon be forced to confront the fact that it has borrowed way too much in the past few decades and must severely cut back.

The US's $1.6 trillion-a-year deficit, Mauldin believes, must quickly be cut to about $300 billion a year, or the US will face a debt crisis. And given that our current government can barely find ways to chop $30 billion of spending from the 2011 budget, these cuts are going to be painful.

What will the forced austerity mean for ordinary Americans?

Higher taxes and significantly reduced Medicare and Medicaid spending, for starters, Mauldin says. And then cuts to almost everything else in the budget, including military spending and education.

In other words, as has so often been the case in the past couple of decades, the middle class will bear the brunt of the impact.

See Also: Budget Battle Will Likely Lead to Crisis and Recession, Says John Mauldin

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Jobless Claims Remain Below 400,000 for 6th Week

Jobless Claims Remain Below 400,000 for 6th Week

The Department of Labor reported today that initial jobless claims fell by 10,000 for the week ending April 2, bringing the four-week moving average down by 5,750 to 389,500 (see chart).� For the first time since July 2008, the four-week average for jobless claims has remained below the benchmark 400,000 level for six consecutive weeks, and provides additional evidence that conditions in the labor market are gradually improving.�

According to Reuters:

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U.S. Consumer Credit Rises in February on Student Loans

April 07, 2011, 3:31 PM EDT

By Vincent Del Giudice

(Updates with economist?s comment in fourth paragraph.)

April 7 (Bloomberg) -- U.S. consumer borrowing rose for a fifth straight month in February on an increase in non-revolving credit as education loans expanded, the Federal Reserve reported today.

Credit climbed $7.62 billion, the most since June 2008, to $2.42 trillion after increasing a revised $4.45 billion in January, the Fed said in Washington. The February figure exceeded the median economist forecast of a $4.7 billion increase in the measure of credit card debt and non-revolving loans, according to a Bloomberg News survey.

The second consecutive drop in revolving credit, which includes credit cards, indicates Americans remain reluctant to take on more debt even as the economy and job market improve. In addition, rising fuel and food prices are limiting people?s buying power, raising the risk that consumer spending, which accounts for about 70 percent of the economy, will cool.

The increase in loans for education shows that ?people are going back to school to improve their skills,? said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit. ?We expect consumer spending to continue growing. The recovery has the strength to continue.?

The total increase reflected an $8.2 billion non-seasonally adjusted rise, to $349 billion, in the federal government category of borrowing, which includes school loans.

Estimates from 33 economists in the Bloomberg survey ranged from a $2 billion decrease to an $8 billion gain. The revised January reading was lower than the initial figure of $5 billion.

Credit Breakdown

Revolving debt, which includes credit cards, decreased $2.71 billion in February, according to the central bank?s statistics. Non-revolving debt, including educational loans and borrowing for autos and mobile homes, rose $10.3 billion for the month, the Fed said.

While the Fed?s policy-setting Federal Open Market Committee said March 15 that the economy is on a ?firmer footing,? New York Fed President William Dudley, the panel?s vice chairman, said April 1 that the U.S. recovery is ?still tenuous? and the jobless rate ?much too high? at 8.8 percent. The central bank is buying $600 billion of Treasuries through June in an effort to boost growth with the benchmark rate close to zero since December 2008.

Moody?s Investors Service raised its outlook for the credit card industry to ?stable? from ?negative? last month, citing a recovery in card issuers? ?asset quality and profitability in an improved economic environment.?

Discover Profit

Discover Financial Services, benefiting from a rebound in its card-lending business, reported a record fiscal first- quarter profit and raised its dividend last month. Its write- offs for loans deemed uncollectible fell to 5.8 percent in February from 9.1 percent a year earlier.

In the auto industry, U.S. vehicle sales rose 6.7 percent in February to an annual rate of 13.4 million, the fastest since August 2009, before slipping in March to 13.1 million. General Motors Co. said sales rose 46 percent in February as discounts and new financing options lured buyers. Ford Motor Co. and Chrysler Group LLC also reported February gains.

?We continue to believe that the economy is going to continue to stay on its current course of slow but steady recovery,? Don Johnson, vice president of U.S. sales for General Motors, said during an April 1 conference call. ?With credit availability improving, continuing historically low interest rates and pent-up demand, we continue to believe that consumers are going to be returning to showrooms in even greater numbers this year.?

The Fed?s report doesn?t track debt secured by real estate, such as residential mortgages and home equity lines of credit.

--Editors: Scott Lanman, Vince Golle

To contact the reporter on this story: Vincent Del Giudice in Washington at vdelgiudice@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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Searching for Value on the High Seas

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These aren't good times to be an ocean shipper.

The Baltic Dry Index, which measures the rates charged by bulk transporters such as DryShips (Nasdaq: DRYS) and Diana Shipping (NYSE: DSX), has fallen from a peak above 4,000 in May to 1,043 today. It has declined by nearly 60% just in the past three months, and it's taken the share prices of many fleet operators down with it.

The following companies have fallen between 12% and 40% in the past year and are likely to report some pretty ugly numbers in the coming quarters. But if you look past the near future, you may find some considerable long-term value in owning a carefully selected ocean carrier. Most now trade for significantly less than the price of their ships, and many can be had for less than the cash flow they generated over the past three years, which was a depressed environment to begin with. And things just may be on the cusp of turning around.

A new beginning?

Company Name	Market Cap	Price/3-Year Average OCF	Price/Book	Debt/Equity	52-Week % Performance
DryShips	$1.5 billion	3.67	0.52	97%	(12%)
Diana Shipping	$945 million	4.80	0.85	30%	(12%)
Navios Maritime (NYSE: NM)	$492 million	4.32	0.48	219%	(22%)
Genco Shipping (NYSE: GNK)	$403 million	1.64	0.37	163%	(40%)
Excel Maritime (NYSE: EXM)	$378 million	1.93	0.23	70%	(19%)
Eagles Bulk Shipping (Nasdaq: EGLE)	$256 million	2.46	0.39	174%	(18%)
Paragon Shipping (NYSE: PRGN)	$161 million	2.09	0.33	72%	(30%)

Data from Yahoo! Finance, Morningstar, and author's calculations. As of 1/30/11.

Even as commodities have continued their strong performance, dry bulk shipping has suffered from a confluence of woes. For starters, the worldwide cargo shipping fleet is estimated to grow by 18% this year, and that forecast has sparked fears of oversupply. It also hasn't helped that Australia, a major exporter of iron and coal, has seen its exports hampered by excessive flooding. Analysts have estimated that these floods may eventually cause more than 30 percentage points of decline in the Baltic Dry.

With any luck, these matters will be temporary, and they will shortly blow over. Some observers are expecting a new record in goods shipped this year, and so long as the demand for commodities continues to soar, shippers should work through this eventually.

Granted, there are considerable risks. Investors looking to navigate through these waters should know that high levels of debt are all too common in this industry. Small changes in value therefore have a disproportionate equity effect. It's also difficult in such an environment to keep up with debt payments during prolonged periods of slowdown.

The industry has also become heavily dependent on China. The Chinese consume more than 50% of the world's iron ore and import more than one 150 million tons of coal each year to satisfy their domestic demand. A slowdown in China could very quickly bring with it a drop in shipping demand.

But despite the potential headwinds, one has to get excited about these historically cheap valuations. Many of these businesses trade at only a fraction of their five-year average price-to-book values. Investors believing in the strength of commodities may find that with a little bit of due diligence, an investment in the shipping industry may turn into a profitable adventure.

For related Foolish content:

• China's Risk to Your Portfolio in 2011
• Is DryShips the Perfect Stock?
• Cliffs Dives Deep Into Iron Ore for Asia

Keep up with the latest Foolish coverage of shipping stocks, or any other stocks you'd like to follow. Just add the stocks you're interested in to My Watchlist.

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Who Wins and Who Loses If the Government Shuts Down

Unless Republicans in Congress and President Obama can agree on budget legislation to keep the federal government running, a shutdown at midnight Friday looms. But given the relatively tiny sum separating the Republicans and Democrats, the whole shebang is a silly sideshow to the real issue ? getting America's millions of unemployed back to work.

Ostensibly, the two sides are now just $7 billion apart -- a mere 0.5% of 2011's $1.5 trillion budget deficit. The New York Times reports that the Democratic side had comprised, agreeing to a $33 billion budget cut, while the Republicans surprised their opponents Tuesday with a demand for $40 billion in cuts.

The good news is that a government shutdown is not a sure thing. The New York Times reported that Thursday the Republican House would vote on a measure to keep the government going for another week and fund the Pentagon through the end of September while cutting the budget by $12 billion. However, Democratic lawmakers consider that a measure a non-starter.

So if all this budgetary brinkmanship and political theater does lead to a shutdown, what will happen next? Results from a recent poll and the details of a review of the government's shutdown plan suggest that a shutdown will produce a few clear winners, some who break even, and a lot more losers.

The Winners

• The Koch Brothers, billionaire owners of the privately-held chemical conglomerate Koch Industries: Through their Americans for Prosperity Foundation, they provided at least $45 million to finance the Tea Party, according to The New Yorker, and they must be thrilled with the power of their money to morph Washington into a machine that can't say no to their agenda. However, given the growing unpopularity of the Tea Party, this may be the Kochs' last hurrah. (As former eBay (EBAY) CEO Meg Whitman learned after spending $142 million of her own money to lose the California governor's race, a willingness to spend vast quantities of your own money is not a guarantee of electoral success.)
• People getting audited by the IRS: They will enjoy a delay in that painful scrutiny, because the IRS will suspend auditing people's returns.

The Break-Evens

Some things will keep going if the government is shut down. Among those are the following, according to the New York Times:

• The Post Office
• Social Security and Medicare beneficiaries
• Air traffic controllers
• Lawmakers
• The Federal Reserve (it doesn't get its funding from Congress)

The Losers

There will be plenty of losers if the government shuts down, among them:

• The Troops: Members of the military will continue to defend our country and fight its battles, and the government will incur an obligation to pay them -- but they won't get their checks until after a budget is signed;
• Civilian federal workers: Between 800,000 and 1.9 million government employees will be furloughed;
• American investors: It will be open season for anyone wanting to defy the Securities and Exchange Commission, because it will be mostly shut down;
• Tourists: If you are on vacation and want to visit a national park or museum, you won't be able to get through the locked gates; and
• Old-fashioned tax filers waiting for refunds: If you file a paper return and are expecting a refund -- sorry, you'll have to wait. For electronic filers; however, payments will still be forthcoming.
• Consumer-oriented businesses: Companies large and small that rely on average consumers to buy their products and services will see sales slow down as millions of government workers stop drawing salaries and start tightening their belts to ride out the shutdown.

Some of the politicians in Washington may not seem to care much about the repercussions of a shutdown. But they do care about themselves -- and more specifically, how all this will affect their chances of being reelected. In that vein, a new Wall Street Journal/NBC News poll has some interesting results. It suggests that Republicans -- particularly those in the so-called Tea Party wing of the party -- are taking a hit in popularity thanks to the budget battles.

• 44% of the 1,000 Americans polled had a negative attitude towards the Tea Party, and since January, the percent with very negative feelings about it had jumped from 24% to 30%;
• The Tea Party has lost ground among its base. The percentage of those saying they support it has fallen from 30% last November to 25% now; and
• A record 67% of those polled said they don't support the Tea Party.

Why do we have government anyway? It does a good job of running the military, and it has managed to keep payment systems going -- although not as smoothly as I would like. It is also a fairly good protector of consumers from the risks of businesses that might otherwise deliver dangerous products in pursuit of profit. Whether government programs are the best way to pay for health care or retirement expenses isn't clear to me.

But one thing isn't unclear at all: If a government shutdown occurs, it will be a political stunt focused on affecting the 2012 election results. The numbers being battled over will have virtually no impact on reducing America's budget deficit. And if a shutdown lasts for any length of time, it could hurt prospects for solving the biggest problem we face -- getting 13.5 million unemployed Americans back to work.

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Kudos To Paul Ryan And The GOP For Acknowledging Our Budget Mess

Rep. Paul Ryan's (R-WI) plan to cut the budget deficit makes some laughable assumptions and leaves many questions unanswered:
Namely, where the $4.4 trillion of the $6.2 trillion of "savings" are going to come from.

Ryan doesn't have the balls to actually specify these cuts: He just proposes capping federal spending at 20% of GDP. In the absence of specifics, saying that the plan will save $6.2 trillion over 10 years is misleading.

But Ryan and the Republicans deserve a lot of credit for at least acknowledging the huge fiscal mess the United States is in and proposing specific long-term remedies for dealing with it.

For the last several years, the United States has acted as though it can have everything forever: All the services and benefits everyone wants while also cutting taxes. The country's $1.6 trillion ANNUAL deficit, combined with debt approaching 100% of GDP (which doesn't even factor in future healthcare and Social Security liabilities) reveal that this is a pipe dream. (See: A Short Course On Why The US Is Screwed)

What can't go on forever won't. Our leaders have a duty to acknowledge the problem and propose a way out--even if the solutions are temporarily unpopular.

(That's what true leadership is, by the way: Doing the right thing even when it's unpopular, and finding a way to get folks to follow and support you because you can make them understand that it's the right thing).

The Republicans and Paul Ryan are at least taking steps in this direction. They are acknowledging our problem and proposing concrete steps to deal with it.

The Democrats, meanwhile, are just stuffing their heads in the sand.

This year's budget negotiations are pretty much irrelevant. Whether this year's budget cuts $30 billion of spending or $60 billion, the savings will be a rounding error on the overall deficit.

The Democrats have yet to even acknowledge the massive long-term problem the country faces, let alone propose to solutions to it.

We understand and respect the concern about whacking the budget in the midst of a fragile recovery--it's a valid one. If the Democrats were defending the minor cuts in this year's budget by proposing them in conjunction with a compelling long-term plan, we'd be more sympathetic.

As it is, we can only conclude the following: The Democrats are still dreaming of a perpetual free lunch. (And they'll do and say anything to get re-elected.)

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Long US shutdown would hit economy: Analysts (AFP)

WASHINGTON (AFP) ? A US government shutdown of a few days would not hurt the economy, but a lockup of three weeks or more would hit growth, especially in the nation's capital, economists said Thursday.

With Congress still arm-wrestling over budget cuts as a midnight Friday deadline loomed, the country faced the imminent prospect of some 800,000 "non-essential" government workers being sent home without pay.

The shut down would spell a loss for government workers of around $2 billion each week, cash that filters through the economy via mortgage payments, grocery shopping and trips to the cinema.

Cuts in government services could cripple small entrepreneurs waiting on government aid to build, while Wall Street would be left without an all-important rudder supplied by regular economic data releases.

National parks from the Grand Canyon to Yellowstone would close, hitting the restaurants, hotels and shops that depend on their visitors.

But Gus Faucher, director of macroeconomics at Moody's Analytics, said a short lockout would not have a lasting effect.

"If this lasts a few days, a week or less, I don't think it will have much economic impact," he said.

The previous shutdown in 1995 "didn't appear to have affected the economy at all," he said.

Nomura Securities economists however calculated the three-week 1995 shutdown reduced quarterly US economic growth by 0.09-0.17 percentage points per week.

A three-week lockout of workers, according to Faucher, would begin taking a toll.

More and more businesses would be left waiting for permits and rulings and contractors would struggle to keep staff on as they go for longer without payment.

But the biggest hit could be in the very place where the budgets are decided: Washington.

Some 13.7 percent of the area's workers are directly employed by the federal government, compared to two percent nationally, according to Moody's Analytics.

Officials in Fairfax county, Virginia, just outside of Washington, were already anticipating some impact on their 1.1 million population.

Thirteen percent of Fairfax residents are employed directly by the federal government; 22,000 federal workers go to offices in the county.

The county's thousands of small and large contractors make it the largest recipient of federal procurement funds in the country.

"In general, we largely escaped the great recession, largely because of our dependence on government contracting," country supervisor Pat Herrity said.

"That could turn around and bite us."

A short shutdown would not have much overall impact, except on the smallest companies, like restaurants who serve the lunchtime crowds from government-heavy offices, he said.

"In business, uncertainty is not your friend. If you are a small vendor, do you order food for the next week?"

Roy Meyers, an budget expert at the University of Maryland-Baltimore County, points to another hidden cost.

He said that government contractors may have begun figuring a shutdown into their own work as early as January, when the newly Republican-dominated House of Representatives started work on the budget.

Some would build a risk premium into their bids; others might place a hold on hiring new people.

"The anticipatory impacts of the shutdown are just as important."

It can be small per contractor, "but it adds up," he said.

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How a Government Shutdown Affects Your Tax Refund

On Thursday, Senate Majority Leader Harry Reid announced that there will likely be a government shutdown effective Friday at midnight. In response to the deadline, the U.S. Office of Personnel Management has posted information on its website indicating that federal employees whose salaries are funded through annual appropriations won't be able to work and will be furloughed, unless their duties qualify under the law as "excepted" to continue to work during periods of lapsed appropriations. That means approximately 800,000 government workers will be asked to stay home until the budget crisis is resolved. And yes, that includes those government workers at the Internal Revenue Service.

Don't get too excited, though. The IRS Commissioner, Doug Schulman, has announced that a government shutdown will not affect the due date for federal income tax returns. Tax Day is still April 18, 2011.

Even though the due date remains the same, there will be some noticeable changes if the government does shut down. Chief among them: There will be a delay in processing paper returns, which are those returns taxpayers mail through the U.S. Postal Service or have submitted using a private delivery service. A delay in processing will likely mean that there will be a significant lag in your refund if you submit a paper return this year or if your return must be processed manually because you are claiming a first-time homebuyer's credit or the newly refundable adoption credit.

Fortunately, most taxpayers have already submitted their tax returns. As of March 25, the IRS reported receipt of 82,760,000 individual returns; total receipts are expected to hover around 140,000,000. About one-third of all individual tax returns for the year will be mailed between now and Tax Day, April 18. Most of those taxpayers won't be seeking a refund, however. Statistically, taxpayers expecting to receive a tax refund file early in the season; those taxpayers expecting to pay a tax bill tend to put it off toward the end of the season. That is proving true this year since, according to IRS data, approximately 85% of taxpayers who have already filed received a refund.

While delayed tax refunds may be cause for concern for some taxpayers, others are getting a reprieve. With nonessential workers on furlough, audits and collections activities are likely to slow down.

Of course, these actions are all dependent on an actual government shutdown. How likely is that to happen? Consider this: The fiscal year is 189 days old and Congress has yet to pass a budget. Instead, Congress has passed six -- yes, six -- short-term spending bills. The first proposed budget was submitted by President Obama last year, an amazing 431 days ago. There has been no real movement since. Nobody knows for certain what will happen next ... but don't be surprised to see a "Closed" sign on the IRS doors next week.

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Stocks fall after another earthquake hits Japan (AP)

NEW YORK ? Stocks fell Thursday after a 7.4-magnitude earthquake struck off the coast of northern Japan. The losses moderated slightly after a tsunami warning was lifted.

The Dow Jones industrial average fell as many as 96 points in morning trading before recovering some of its losses. Japan's stock market had already closed by the time the earthquake struck.

The quake rattled investors, partly since it struck near the same area as the massive earthquake that triggered devastating tsunami on March 11. Stock indexes pared their losses after the impact of the latest quake appeared to be less than initially feared.

The Dow fell 56 points, or 0.4 percent, to 12,367 in afternoon trading. The broader S&P 500 fell 5, or 0.4 percent, to 1,330. The Nasdaq composite index fell 5, or 0.2 percent, to 2,795.

In the U.S., economic news was mostly positive. The Commerce Department said 382,000 people applied for unemployment for the first time last week. That was the third drop in four weeks. The decline in applications suggests layoffs are slowing.

Major retailers also reported better-than-expected sales for March at stores that have been open at least a year. Analysts had predicted declines because of cold weather and higher gas prices.

Costco Wholesale Corp. rose 4 percent after reporting a 13 percent gain in sales. Limited Brands Inc. rose 1 percent after it said its revenue increased 14 percent because of strong sales at its Victoria's Secret stores. Nordstrom Inc. and Macy's Inc. also rose about 1 percent.

Bed Bath & Beyond Inc. rose 11 percent, the most of any stock in the Standard & Poor's 500 index. The home furnishings retailer posted strong results late Wednesday and said it expected earnings to rise 10 percent to 15 percent this year.

Constellation Brands Inc. rose 6 percent. The maker of Robert Mondavi wine and Svedka vodka recovered from a loss in the same quarter a year ago and reported a double-digit increase in wine sales in North America.

KLA-Tencor fell 5 percent, the most out of any company in the S&P 500. The chip manufacturer gets 14 percent of its revenues from Japan.

Netflix, Inc. also fell, dropping 3 percent a day after the home-entertainment company announced its decision to pay nearly $1 million per episode to stream the TV series "Mad Men." Dish Network Corp. emerged as a new competitor after announcing it would buy Blockbuster Inc. out of bankruptcy.

Bond prices rose, sending their yields lower. The yield on the 10-year Treasury note fell to 3.54 percent from 3.55 percent late Wednesday.

The European Central Bank raised its main interest rate by a quarter point to 1.25 percent, a day after Portugal asked for a bailout. The Bank of England kept its main interest rate unchanged at 0.5 percent.

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Tsunami worries mount as new earthquake hits Japan

An earthquake measuring 7.4 on the Richter scale has rocked Japan. The epicentre of the quake is of Japan's northeastern coast, and 40 kilometers under-water. The Japan meteorological agency has issued a tsunami warning for a wave of up to one meter. CNBC's Charles Haddock shares details on the tragedy.

Below is a verbatim transcript of Charles Haddocks report. Also watch the accompanying video.

Tokoyo was rattled by the earthquake even though it was some 200 miles away. The epicenter of this 7.4 earthquake was about 70 miles from Fukoshima and the local Tsunami warning has been issued for the area. Now, the area around Fukoshima was build to withstand a 25 foot surge of water. The problem was that the 9.0 earthquake that hit about 4 weeks ago was a 45 foot wave. Therefore, it should be able to withstand the wave. They were just about ready to make some progress in cleaning up and getting the cooling system back in order at the Fukoshima plant. It is know yet what this earthquake has done to that effort.

TEPCO has certainly taken a beating, but no company or country has been through something like this an earthquake of a magnitude of 9.0, tsunami and then a nuclear leak in three to four reactors. They are doing the best they can. They have had some missteps along the way. However, in this week they were making progress. They were able to stop that leak of radioactive water into the Pacific Ocean. They were injecting nitrogen gas into the containment buildings to try to stabilize the atmosphere for the reactors. They still have a lot of water pooling around the reactors and the buildings. They have to get rid of that before they can get in and really repair the infrastructure of the reactor units, try to stabilize them before they can permanently shut them down for good.

It is too early know about casualties from their fresh earthquake. Earlier in the day, they had made a significant effort to try to enter the 12 mile radius around the nuclear plant to try to find more victims from the massive tsunami that swept the region. They wanted to be able to get the bodies out of there before they deteriorated too much and try to bring some condolence to the families of the victims there. That effort obviously has been suspended for the night. We dont know what the earthquake has done to the infrastructure around Fukoshima. Are the roads wiped out? Are the railroads still in a mess? Its night time and information from that region has been hard to get in the best of times. Its certainly not coming forth tonight.

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Bankrupt Blockbuster Bought By DISH Network ? Look Out, Netflix?

Satellite TV operator DISH network has outbid several other suitors for the assets of video-rental chain Blockbuster, which were auctioned off in bankruptcy court yesterday.

DISH paid about $321 million for the company, which has about 1,700 store locations.

What will DISH do with Blockbuster?

DISH CEO Charlie Ergen hasn't laid out any specific plans yet, but he will presumably use the chain in at least a few ways.

First, the Blockbuster stores can serve as local sales and service outlets for the DISH service. Second, DISH subscribers might be able to rent Blockbuster's DVDs or stream movies online, allowing DISH to compete directly with Netflix--one of the companies that helped put Blockbuster out of business.

And so what does the deal mean for Netflix?

In the short-term, probably very little. Netflix won its war with Blockbuster a few years ago, and it has since amassed a stunning 20 million subscribers to its US DVD and streaming service. As Netflix CEO Reed Hastings recently spelled out in this interview with me, Netflix is laser-focused on offering its $8-a-month streaming service, rather than competing in pay-per-view or movie sales the way many of its online competitors are doing. This simple value proposition has resonated with customers, and Netflix's subscriber base has boomed in the past two years.

In the longer term, the DISH-Blockbuster combination will add yet another big competitor to a crowded and noisy market, in which satellite companies, cable companies, Apple, Amazon, Facebook, Netflix, Hulu, networks, and studios are all fighting for control of premium video distribution of the future.

Right now, Netflix is by far the most successful of the new entrants, but the industry is changing fast. And the DISH-Blockbuster combination may create another player that everyone needs to pay attention to.

See Also: EXCLUSIVE INTERVIEW WITH REED HASTINGS: Netflix's Market Opportunity Is Bigger Than You Think

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Three Key Trends for Women's Clothing Retailer Ann Taylor

The online sales of adult apparel in the U.S. grew almost 10% in 2010, far outstripping the 1.9% growth in the overall apparel market, according to research firm NPD's February 2011 report on the US apparel market. This is great news for Ann Inc. (formerly Ann Taylor Stores Corp.) as well as retailers Aeropostale, American Eagle Outfitters, J.Crew Group, and Limited Brands.

We currently have a $28.46 Trefis price estimate for Ann Taylor, which is about in line with the current market price. Below are the 3 key trends that we believe have significant implications to ANN's business.

Online Apparel Retail Growing at Double Digit Rate

Ann Taylor witnessed tremendous growth in its online channel with sales for both Ann Taylor and LOFT e-commerce increasing by more than 50%. Identifying the increasing significance of its online channel and the tremendous growth potential it offers, Ann has planned a significant investment of $25 million in its online channel for 2011 and expects to derive an increasing share of its sales from the e-commerce channel.

We believe, Ann Taylor's e-commerce revenues will continue to increase at a double digit rate of 15% going forward. You can drag the chart above to see the impact of different e-commerce sales growth scenarios on ANN's stock.

Saturation of Women's Apparel Market in the U.S.

The women's apparel market in the U.S. is mature and has historically witnessed a low but stable growth rate of just over 2% annually. However, after a decline of 5% in 2009 during the recession, women have once again led the way in the fashion apparel market increasing women's apparel sales by close to 3% in 2010.

However as both of Ann's primary brands approach market saturation, ANN has been working on new outlets for its products like factory stores and online stores and newer fashion styles in order to keep growth from stalling.

As a result, we estimate that Ann Taylor's revenue per square foot will slow in the future keeping in line with the overall growth in the women's apparel market in the U.S.

Increasing Competition from Department Stores & Specialty Retailers

The women's apparel retail industry is highly competitive, with the number of players increasing year after year. While ANN has made progress by upgrading its Ann Taylor store and fine-tuning its Loft brand, expanding market share may prove to be difficult as the company faces increasing competition from department stores (Nordstrom, Macy's) and specialty retailers (Chico's FAS, Talbots, Abercrombie & Fitch, Limited Brands, GAP).

See our complete analysis of Ann Taylor.

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Jobless claims fall, retail sales stronger (Reuters)

WASHINGTON (Reuters) ? New claims for jobless benefits fell last week and retailers racked up much stronger-than-expected sales in March, signs that high fuel prices have not knocked the economy off its growth path.

Initial claims for state unemployment aid slipped 10,000 to 382,000, the Labor Department said on Thursday, a touch below economists' expectations and firmly beneath the 400,000 level associated with steady jobs growth.

Other data showed shoppers shrugged off higher gasoline prices last month to boost sales at many retailers as improving labor market conditions encouraged discretionary spending.

Same-store retailer sales had been expected to decline for the first time since August 2009, in part because Easter falls three weeks later than last year, delaying some spending.

"The claims report is one more piece of evidence that the general labor market is improving," said Patrick O'Keefe, head of economic research at J.H. Cohn in Roseland, New Jersey.

"The economy is growing and employers are no longer laying off workers because of a weakening in the general economic conditions but rather they doing so for normal business reasons."

The claims data underscored the strengthening labor market tenor and came on the heels of a report last week showing employers added 216,000 jobs in March, with the unemployment rate falling to a two-year low of 8.8 percent.

Last week, the four-week average of unemployment claims, a better measure of underlying trends, fell 5,750 to 389,500.

With the labor market conditions firming, consumers are feeling a little more confident to loosen their purse strings.

Sales at stores open at least a year rose 1.7 percent in a tally of 25 retailers, topping expectations of a 0.7 percent decline, according to Thomson Reuters.

GASOLINE TO DISTORT RETAIL SALES

The stronger-than-expected same-store sales bode well for the government's overall retail sales report for March, which is scheduled for release next week and is expected to be heavily influenced by the high gasoline prices.

They offered some relief after other data on consumer spending suggested a moderation in the pace of economic growth early in the year after a fairly brisk pace in the fourth quarter.

Consumer spending -- which accounts for about 70 percent of U.S. economic activity -- got off to slow start in the first two months of 2011 -- held back by bad weather. Rising gasoline prices also took spending away from other sectors.

The stronger-than-expected same-store sales were little boosted by inflation, given the nature of the merchandise which economists said was less sensitive to the high energy prices.

"Consumers have held back for a long time, there is a certain amount of pent-up demand. Wage growth isn't much, but we are also seeing an increase in income because of an increase in job growth," said Steve Blitz, a senior economist at ITG Investment Research in New York.

"Job growth also means that for those who are employed there is reduced concern about being laid off so the pent up demand is coming out."

With the latest fall, initial claims for jobless benefits are now beneath the 400,000 level, which is generally associated with steady job growth, for four weeks in a row.

The four-week average has held below that mark for the sixth straight week. Economists say both measures need to drop to about 300,000 to signal a strong labor market recovery.

Signs of improvement in the jobs market were also evident in the number of people still receiving benefits under regular state programs after an initial week of aid, which fell in the week ended March 26 to the lowest level since October 2008.

However, long-term unemployment remains a major problem.

A total of 8.52 million people were claiming unemployment benefits under all programs in the week ended March 19, the latest week for which data is available.

"While the labor market has stabilized and employment may be increasing, it's not increasing so rapidly that previously unemployed people who were claiming benefits are returning to work at a fast clip," said J.H. Cohn's O'Keefe.

(Additional reporting by Jessica Wohl in Chicago; Editing by Neil Stempleman)

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