A Glimmer of Global Growth

The Wall Street Journal leads its Business & Finance news box with word that "tentative signs of life in global trade" have begun to buoy growth forecasts in the United States and China, as Bloomberg and Reuters report that stock indices closed the week down, marking the fourth straight week of declines. The Commerce Department said Friday that U.S. exports grew 1.6 percent in May, while imports fell 0.6 percent, movement that prompted the trade deficit to narrow to its lowest level in almost nine years. "The report prompted economists to revise up their estimates of second-quarter gross domestic product. Some even suggested the economy might have grown slightly in the second quarter," the WSJ says. The trade gap decreased to $26 billion in May, compared with April's $28.8 billion. China's newest figures, aired by the state-run Xinhua News Agency, showed that the country's exports in June fell 21.4 percent from a year earlier, a smaller drop than May's 26 percent decline. Upon the news, Goldman Economist Yu Song noted that Chinese growth will be faster than the nearly 8 percent the firm predicted earlier in the week. Trade is "becoming less of a drag on the overall economy while domestic-demand growth has been gaining strength," according to the report.

Bloomberg chalks up stocks' lackluster results to a "deeper-than-estimated slide in consumer confidence," which "added to concern the economic recovery will be delayed." News that CIT Group, a 101-year-old lender to almost a million mostly small and midsize businesses in the United States, including Dunkin' Donuts, may default on an upcoming $1 billion payment due in August and has been denied by the Federal Deposit Insurance Corp. to guarantee its bond sales—a story that leads the Wall Street Journal's front page—dragged down its stock 18 percent. Chevron Corp.'s (CVX.N) warnings yesterday about its quarterly results due to the weaker dollar also helped pull down indices while tech shares, including Yahoo (YHOO) and MEMC Electronic Materials (WFR), which received analyst upgrades, helped stanch the bleeding.

According to Reuters, "some analysts are starting to anticipate a prolonged pullback in stock prices, especially if corporations disappoint investors as the earnings season unfolds." Yesterday, the Dow Jones industrial average drooped 36.65 points, or 0.45 percent, to 8,146.52. The Standard & Poor's 500 Index lost 3.55 points, or 0.40 percent, falling to 879.13. The tech-heavy Nasdaq Composite Index gained 3.48 points, or 0.20 percent, rising to 1,756.03. For the week, the Dow was down 1.6 percent, the S&P 500, 1.9 percent, and the Nasdaq, 2.3 percent.

The New York Times leads its Page One business news with a report on how the traditional housing market, "the one that involves willing buyers and sellers" (as opposed to the rash of foreclosed home sales) "is still dead, with transactions lower than they have been for decades." And it's not even the recession that's holding up the deals, says the Times, but rather rules that make it almost impossible for formally qualified borrowers to get mortgage loans. Take Inna Komarovskaya, a recent dental school graduate with a good credit score, a six-figure income. Komarovskaya was prepared to put an "ample down payment" down on a Boston condo, but was unable to get the necessary loans. Much of the issue for "entrepreneurial buyers" like Komarovskaya is that Fannie Mae, which is "so dominant in the lending market that its rules set the standard, has recently toughened its lending standards by counting only 70 percent of the value of stocks and mutual funds when determining a buyer's assets. It previously counted 100 percent. "No one is advocating a return to the lax lending standards of 2006, when buyers with no income or documentation could get loans. But many people say they believe lenders and the government, in correcting the excesses of that era, have gone too far in the other direction," the paper writes.

In a move that makes it seem as if American International Group (AIG) is preparing to put up its fisticuffs, the insurance firm and money manager has been discussing with President Obama's compensation czar whether the company should pay about $250 million in promised bonuses, some of which would go to top executives in the next few days, the Washington Post reports. On the table is also whether to pay out promised bonuses, adding up to $200 million or so, to retain executives at AIG Financial Products, "the unit whose complex derivative contracts nearly wrecked the insurance giant last fall." Employees' contracts that guaranteed the bonuses that had the public in an uproar last year also promise "similar payments" in March 2010, and "AIG has been examining the issue in hopes of preventing another debacle," the paper says. The firm is seeking consent from Kenneth Feinberg, who was appointed last month to oversee the compensation of top executives at the seven firms that have received the largest federal bailouts, to provide the company with "political cover." However, "the bonuses do not officially fall under his purview ... because they were promised last year," and Feinberg has been charged "with shaping only current and future compensation," the Post explains. Nevertheless, Feinberg in the hot seat.

In other financial-firm news, Reuters has word that expected gains at Goldman Sachs, to be reported in upcoming quarterly results on Tuesday, has put the bank in a tough position. "If earnings are too good critics may lambaste it for ramping up risk too much and embracing a hedge-fund-like model that could make it vulnerable to big market swings. If they fall short, investors may accuse the firm of failing to live up to its reputation for being more aggressive and intelligent than its rivals." Reuters says. Analysts polled by Thomson Reuters expect Goldman to post a net income for common shareholders of $3.54 a share, down from a pro-forma $4.58 a year earlier. Still, the results "would best a surprisingly strong first quarter in which Goldman reported net income of $3.39 per share," the news service says.

Finally, Bloomberg takes a look at the new General Motors Co. (GMGMQ), which, now that it has emerged from bankruptcy, is "eliminating layers of management to speed up decisions as it emerges from the remains of bankrupt General Motors Corp." The automaker plans to whittle its brands down to four from eight, have about $11 billion in U.S. debt, and be run by a smaller suite of executives, CEO Fritz Henderson said yesterday. The company completed its government-led restructuring in 39 days—three days fewer than it took Chrysler Group LLC and three weeks sooner than GM had anticipated. Bob Lutz, GM's former new-vehicle chief, has returned as vice chairman, responsible for "all creative elements of products and customer relationships," the company said. Lutz will report to Henderson and be part of a new executive committee even though he had been scheduled to retire at the end of this year. The company has also merged two strategy boards into one eight-member panel and in doing so eliminated the positions of regional presidents, including Troy Clarke in North America. Nick Reilly, previously chief of GM's Asia-Pacific region, will run all GM's international operations and report to Henderson. GM will cut salaried employment by 20 percent, and the number of U.S. executives will shrink by 35 percent "to help meet Henderson's goal of shedding management layers to speed decision making," Bloomberg reports. Henderson said there are more personnel changes to come.