High Losses for Penney, but Shares Jump Higher

Shares in the company jumped 8.4 percent after it reported quarterly results that included a slowdown in sales declines and the prospect of rising profit margins during the all-important holiday season.

The spate of promising news suggests that Penney has bought itself some breathing room as it takes on its third self-help campaign in two years. Though the retailer’s executives acknowledged that much work lay ahead, they said repeatedly that the next few months would reflect even more progress.

“We’re making significant strides toward restoring J. C. Penney to its rightful place in retail,” Myron E. Ullman III, the company’s chief executive, said in a conference call with analysts. “It’s hard work, with no quick fixes, but our teams are rising to the challenge and our customers tell us they love the progress we’re making.”

Yet Penney’s revival remains far from certain, with the retailer’s stock still 70 percent lower than it was at the same time two years ago. Its room for error remains small, especially compared with better-performing rivals like Macy’s and Kohl’s.

The company reported an adjusted net loss of $457 million for the three months that ended Nov. 2. That amounted to a loss of $1.81 a share after excluding certain one-time charges and gains. Analysts on average had expected the company to lose $1.77 a share, according to estimates compiled by Standard & Poor’s Capital IQ.

Using generally accepted accounting principles, the retailer lost $489 million, or $1.94 a share. Additionally, total sales fell 5 percent, to $2.8 billion.

But investors and analysts appeared more focused on the future. Sales at stores open at least one year rose just under 1 percent last month, for the first time in nearly two years, a trend that management said it expected to continue through next quarter.

While gross margins fell to 29.5 percent for the quarter from 32.5 percent a year ago, in large part because of steep discounts, executives argued that Penney needed to take the hit to clear out merchandise associated with a previous failed strategy. Those items should be gone by the first quarter of 2014.

Online sales rose 24.5 percent, to $266 million.

Mr. Ullman, who returned to the job of chief executive earlier this year, has been working to undo one of the most prominent failures in recent corporate turnaround history. During the 17-month tenure of Ron Johnson, whom the company ousted this spring, the retailer’s stock plummeted more than 50 percent.

Mr. Johnson’s ambitious plans to eliminate discount sales drove away customers, prompting him to issue an apology in February after Penney reported a $552 million quarterly loss.

Penney became further embroiled in controversy in the summer after Mr. Johnson’s former backer, the hedge fund manager William A. Ackman, publicly feuded with his fellow board members, going as far as to publicly leak confidential director deliberations. Mr. Ackman resigned in mid-August and, two weeks later, sold his 18 percent stake in the company.

Last month, Penney agreed to abandon efforts to sell a broad range of home products designed by Martha Stewart, surrendering in a long-running branding war with Macy’s. The move, which also involved returning 11 million shares in Martha Stewart Living Omnimedia, was another unwinding of Mr. Johnson’s legacy.

Even Penney’s efforts to shore up its future, like the sale of 84 million new shares in late September to help finance the turnaround, prompted a plunge in the stock price. The company wagered that the move was worth the hit, since it now expects to have more than $2 billion in cash and available credit lines by the end of its fiscal year.

Economix Blog: The Audacity of the Fight for Higher Wages

DealBook: Steinway Says It Has Received Higher Bid

Markets End the Week Slightly Higher

Stocks on Wall Street closed slightly higher Friday following a slew of mixed earnings reports, and despite fears that an overhaul of China’s industry could slow down the world’s second-largest economy.

By the end of trading the Standard & Poor’s 500-share index and the Dow Jones industrial average were up less than 1 percent, and the Nasdaq composite was 0.2 percent higher.

Amazon.com reported a loss for the second quarter, but shares rose 2.9 percent.

Beijing has ordered companies to close factories in 19 industries where overproduction has led to price-cutting wars, affirming its determination to push ahead with a painful makeover of the economy. That move followed weak manufacturing data on Wednesday. China’s Shanghai Composite dropped 0.5 percent to 2,010.85.

In Europe, Britain’s FTSE 100 index ended the day down 0.5 percent to 6,554.79 points, while Germany’s DAX fell 0.7 percent to 8,244.91.

France’s CAC 40 bucked the trend, rising 0.3 percent to 3,968.84. It was bolstered by a 3.6 percent rise in the shares of LVMH, the luxury goods maker, after it reported higher earnings. Meanwhile, shares in French media company Vivendi were up 0.6 percent after it agreed to sell most of its majority stake in video games maker Activision.

Over all, trading has been quiet in recent days as a lot of people wait for next week’s meeting of the Federal Open Market Committee in the for guidance on when the central bank will start reducing its monetary stimulus.

Since late last year, the Fed has been buying $85 billion in Treasury and mortgage bonds a month — a move that has kept long-term rates near record lows and supported economic recovery.

In Asia, Japan’s Nikkei 225 index fared worst on Friday, closing 3 percent lower at 14,129.98, due to a big rise in the yen, which risks making the country’s exports less competitive on international markets.

Japan on Friday said consumer prices rose in June for the first time in more than a year, an early sign that the government’s stimulus policies are working. While that is a promising sign in the long-term, the signs of inflation suggest interest rates could eventually increase — higher rates tend to strengthen a national currency. The dollar was down 0.9 percent against the yen, at 98.34 yen.

Elsewhere in the region, Hong Kong’s Hang Seng gained 0.3 percent and Australia’s S&P/ASX 200 rose 0.1 percent.

In energy trading, benchmark crude was down 79 cents at $104.70 a barrel in electronic trading on the New York Mercantile Exchange.

Wall Street Is Mostly Higher

The Standard & Poor’s 500-stock index briefly hit an intraday record high on Monday, led by bank and health care stocks and overcoming declines in consumer shares after McDonald’s reported disappointing earnings.

In afternoon trading, the S.& P. was off its high for the day, up 0.2 percent to 1,695 points. The Dow Jones industrial average was flat, and the Nasdaq composite was 0.3 percent higher.

Financials rose for the 10th day in the past 12, with Bank of America leading the group. U.S.-listed shares of UBS rose 3 percent after the Swiss bank said its second-quarter profit beat forecasts despite a charge to settle a United States lawsuit.

The S.& P. 500 is up more than 18 percent so far this year, reflecting investors’ attraction to equities. Recent data showed funds that hold United States stocks gained $16.96 billion in the week ended Wednesday, the most since June 2008.

“Investors do often chase rallies,” said Peter Jankovskis, co-chief investment officer at OakBrook Investments in Lisle, Ill. “It could be feeding on itself a little bit.”

McDonald’s, the world’s largest restaurant chain, reported weaker-than-expected net income and warned that full-year results would be “challenged” in the face of falling sales in Europe. Shares fell 2.6 percent.

A rise in metal prices boosted materials shares, with Newmont Mining up 5.6 percent to lead gains in the S.& P. materials sector. Spot gold and three-month copper touched one-month highs as the dollar weakened.

The PHLX housing sector index fell 0.8 percent after an unexpected drop in American home resales in June. The data also gave support to bets that the Federal Reserve will extend its rate of bond purchases to support the economy.

“Any type of softness in housing data puts expectations of a Fed taper on the back burner,” said Chad Morganlander, portfolio manager at Stifel, Nicolaus & Co in Florham Park, N.J.

Global markets were generally higher, as election results in Japan strengthened the hand of Prime Minister Shinzo Abe and his economic stimulus policies. The mood was also bolstered by a pledge from the Group of 20 nations on Saturday to adjust their stimulus policies with care and put growth before austerity in order to revive the global economy, which the bloc emphasized remained “too weak.”

The yen strengthened against the dollar and the euro, although that was seen as a temporary bump since the election result was viewed as likely to weaken the yen going forward.

Upbeat results from the Dutch electronics giant Philips and the Swiss Banks UBS and Julius Baer helped European shares shake off a lazy start; the FTSEurofirst 300 index closed 0.1 percent higher.

The euro was slightly higher, at $1.3191.

In Europe’s debt market, benchmark German Bund futures were little changed, while Portugal led gains in periphery euro zone bonds after a weekend move by its president to keep the country’s coalition government intact patched over its recent troubles.

United States crude oil lost $1.60, falling to $106.45 a barrel.

Washington Push for Higher Minimum Wage for Workers Has Walmart Balking

Mayor Vincent C. Gray, who worked hard to lure Walmart, finds himself caught in the middle, and many residents sound less than grateful to lawmakers.

“Those big people in government, they don’t understand my situation,” said Fred Reaves, 45, who is unemployed and said he would gladly take a job at the current city minimum, $8.25.

“Eight-something, it’ll motivate you to start going to work,” Mr. Reaves said as he stood around the Skyland Town Center, a patch of barren asphalt and shuttered stores where Walmart planned to build. “You can start paying some bills. It will help you to come off public assistance.”

On July 10, the City Council passed a “living wage” measure that would require Walmart to pay at least $12.50 an hour, saying it was fighting to protect struggling residents in what has become a high-cost city.

Supporters of the measure say that Walmart, whose revenues in 2012 were $469 billion, can well afford to pay workers more.

“Their net income was $17 billion,” said Vincent Orange, a city councilman who voted for the ordinance. “You don’t want to share a little bit with the citizens? Come on.”

A decade ago, the city gave tax breaks to lure retailers, Mr. Orange said, but now it is booming and can negotiate from strength.

The day before the City Council passed the measure, a Walmart official warned in an op-ed article in The Washington Post that if required to pay $12.50 an hour, the company would cancel three planned stores and consider withdrawing from three projects already under construction.

The next move is up to Mayor Gray, who is weighing a veto.

Officially the mayor has taken no position, but he is widely seen as opposed to the measure. The Council has delayed formally sending it to his desk for action. The measure, called the Large Retailer Accountability Act, would require stores of at least 75,000 square feet that are owned by companies with $1 billion or more in annual revenue to pay the higher minimum wage. Because existing stores and those with unions are exempt, it is seen as squarely aimed at Walmart.

As Walmart, the world’s largest retailer, has sought inroads in major cities, it has faced resistance from local merchants, who fear being undercut, and from officials who say minimum-wage jobs mire workers in poverty.

Democrats on the House of Representatives work force committee produced a report this spring contending that the government subsidizes Walmart because employees earn so little that they qualify for Medicaid, food stamps and housing assistance.

Pedro Ribeiro, a spokesman for Mayor Gray, argued the opposite: minimum-wage jobs help the chronically unemployed take a first step into the work force.

“Yes, Walmart jobs are not great,” Mr. Ribeiro said. “But for some people, it will be their first employment and they’re not qualified to do anything else. We need that entry-level benchmark in the District.”

Washington is experiencing an economic revival, with population growth on a par with Sun Belt cities. But the benefits are not spread evenly. East of the Anacostia River in Ward 7, where two of the Walmart stores, including the Skyland site, are planned, unemployment is 13.9 percent. In nearby Ward 8, it is 20 percent.

Victor L. Hoskins, the deputy mayor for development, said Walmart’s threat to cancel projects if the measure took effect was no bluff. He calculated that 4,000 retail and construction jobs were at stake from three of the projects.

“The question is not $8.25 versus $12.50,” Mr. Hoskins said. “The question is $8.25 versus zero. It’s called no jobs.”

Opposite the Skyland site, on Good Hope Road, Carl Williams, 49, a barber at the Like That salon, whose dozen barbers were bustling on Thursday afternoon, had mixed feelings. He thought $12.50 was a fair starting wage. But he said he would not hesitate to encourage his two daughters to take a job at Walmart for $8.25.

“One who is 21 needs a job real bad,” he said. “She had a baby real young and didn’t finish high school.”

At a nearby Shoe City, the assistant manager acknowledged that Walmart might undercut her prices. But the giant retailer would also increase foot traffic in the neighborhood, which could benefit Shoe City, the manager, Shasherri Hindman, said.

Ms. Hindman, 25, said she started at minimum wage five years ago and worked her way up. “What’s wrong with $8.25?” she said. “I’m totally on Walmart’s side.”

Willie Ford, 39, a carpenter, scoffed at the notion that Walmart could not afford to pay $12.50. “Come on, they’re going to make beaucoup money from this area,” he said. At the same time, he acknowledged that many people in the neighborhood would gladly take a job at $8.25. “Like a newborn baby, you’ve got to crawl before you walk,” he said.

Washington Push for Higher Minimum Wage for Workers Has Walmart Balking

Mayor Vincent C. Gray, who worked hard to lure Walmart, finds himself caught in the middle, and many residents sound less than grateful to lawmakers.

“Those big people in government, they don’t understand my situation,” said Fred Reaves, 45, who is unemployed and said he would gladly take a job at the current city minimum, $8.25.

“Eight-something, it’ll motivate you to start going to work,” Mr. Reaves said as he stood around the Skyland Town Center, a patch of barren asphalt and shuttered stores where Walmart planned to build. “You can start paying some bills. It will help you to come off public assistance.”

On July 10, the City Council passed a “living wage” measure that would require Walmart to pay at least $12.50 an hour, saying it was fighting to protect struggling residents in what has become a high-cost city.

Supporters of the measure say that Walmart, whose revenues in 2012 were $469 billion, can well afford to pay workers more.

“Their net income was $17 billion,” said Vincent Orange, a city councilman who voted for the ordinance. “You don’t want to share a little bit with the citizens? Come on.”

A decade ago, the city gave tax breaks to lure retailers, Mr. Orange said, but now it is booming and can negotiate from strength.

The day before the City Council passed the measure, a Walmart official warned in an op-ed article in The Washington Post that if required to pay $12.50 an hour, the company would cancel three planned stores and consider withdrawing from three projects already under construction.

The next move is up to Mayor Gray, who is weighing a veto.

Officially the mayor has taken no position, but he is widely seen as opposed to the measure. The Council has delayed formally sending it to his desk for action. The measure, called the Large Retailer Accountability Act, would require stores of at least 75,000 square feet that are owned by companies with $1 billion or more in annual revenue to pay the higher minimum wage. Because existing stores and those with unions are exempt, it is seen as squarely aimed at Walmart.

As Walmart, the world’s largest retailer, has sought inroads in major cities, it has faced resistance from local merchants, who fear being undercut, and from officials who say minimum-wage jobs mire workers in poverty.

Democrats on the House of Representatives work force committee produced a report this spring contending that the government subsidizes Walmart because employees earn so little that they qualify for Medicaid, food stamps and housing assistance.

Pedro Ribeiro, a spokesman for Mayor Gray, argued the opposite: minimum-wage jobs help the chronically unemployed take a first step into the work force.

“Yes, Walmart jobs are not great,” Mr. Ribeiro said. “But for some people, it will be their first employment and they’re not qualified to do anything else. We need that entry-level benchmark in the District.”

Washington is experiencing an economic revival, with population growth on a par with Sun Belt cities. But the benefits are not spread evenly. East of the Anacostia River in Ward 7, where two of the Walmart stores, including the Skyland site, are planned, unemployment is 13.9 percent. In nearby Ward 8, it is 20 percent.

Victor L. Hoskins, the deputy mayor for development, said Walmart’s threat to cancel projects if the measure took effect was no bluff. He calculated that 4,000 retail and construction jobs were at stake from three of the projects.

“The question is not $8.25 versus $12.50,” Mr. Hoskins said. “The question is $8.25 versus zero. It’s called no jobs.”

Opposite the Skyland site, on Good Hope Road, Carl Williams, 49, a barber at the Like That salon, whose dozen barbers were bustling on Thursday afternoon, had mixed feelings. He thought $12.50 was a fair starting wage. But he said he would not hesitate to encourage his two daughters to take a job at Walmart for $8.25.

“One who is 21 needs a job real bad,” he said. “She had a baby real young and didn’t finish high school.”

At a nearby Shoe City, the assistant manager acknowledged that Walmart might undercut her prices. But the giant retailer would also increase foot traffic in the neighborhood, which could benefit Shoe City, the manager, Shasherri Hindman, said.

Ms. Hindman, 25, said she started at minimum wage five years ago and worked her way up. “What’s wrong with $8.25?” she said. “I’m totally on Walmart’s side.”

Willie Ford, 39, a carpenter, scoffed at the notion that Walmart could not afford to pay $12.50. “Come on, they’re going to make beaucoup money from this area,” he said. At the same time, he acknowledged that many people in the neighborhood would gladly take a job at $8.25. “Like a newborn baby, you’ve got to crawl before you walk,” he said.

A.M.D. Sees Higher Revenue In Move Into Game Market

Still, A.M.D. said gross margins would fall as it sought a foothold in game consoles.

A.M.D., which for decades has competed against the semiconductor market leader, Intel, in supplying chips for PCs, is rushing to refocus on new markets as consumers buy fewer laptops and more tablets and smartphones.

A.M.D. processors are being used in Microsoft’s coming Xbox One and Sony’s next-generation PlayStation game consoles. These devices are largely behind A.M.D.’s upbeat revenue forecast.

A.M.D. said its gross margin in the second quarter was 40 percent and would fall to about 36 percent in the third quarter. Analysts on average had expected a third-quarter gross margin of 39 percent.

With consumers increasingly playing games on tablets, it is also unclear how many of the new consoles Microsoft and Sony will sell, but optimism about the impact on A.M.D.’s revenue has helped drive its stock up 73 percent since the beginning of April.

Intel warned on Wednesday that it did not expect revenue to grow in 2013 because of slowing PC industry.

Global shipments of personal computers dropped 11 percent in the second quarter, the fifth consecutive quarterly decline in a market that has been devastated by the popularity of tablets.

A.M.D. reported second-quarter revenue of $1.16 billion, down from $1.41 billion a year earlier. It said third-quarter revenue would rise 22 percent, plus or minus 3 percent, compared with the June quarter. That increase would take it to about $1.42 billion.

Analysts, on average, had expected revenue of $1.11 billion in the second quarter and $1.22 billion in the third quarter, according to Thomson Reuters.

A.M.D. posted a net loss of $74 million, or 10 cents a share, in the second quarter, compared with a profit of $37 million, or 5 cents a share, in the same quarter last year.

The company, which is based in Sunnyvale, Calif., said that excluding onetime items, its loss was 9 cents a share, better than the 12-cent loss expected by analysts.

Eyes on Fed, Wall Street Ends Higher on Job Data

Yet many of them are spending a lot of energy trying to get inside the head of Ben S. Bernanke, the Federal Reserve chairman, and making bets on what they think he sees.

Stocks, bonds and currencies around the globe had a chaotic week as traders and strategists reassessed how Mr. Bernanke viewed the economy and whether those views would prompt the central bank to pull back on the bond buying that has supported markets in recent years.

“The market is looking at every piece of incoming data through Fed sunglasses,” said Rebecca Patterson, the chief investment officer at Bessemer Trust. “It’s not what does this data mean, it’s what you think the Fed thinks about this data.”

The middling jobs report on Friday appeared to soothe the nerves of investors for the moment.

Many on Wall Street agreed that the 175,000 jobs created in May was strong enough to keep the economy on a steady path but not so strong as to encourage the Fed to let up on its stimulus sooner than expected. The Fed can afford to be patient.

With this interpretation prevailing, stocks rose in trading on Friday. The benchmark Standard & Poor’s 500-stock index ended up 1.28 percent to close out a week that also experienced one of the worst days of the year.

The sharp movements in stocks, bonds and currencies this week reflect the peculiar anxiety felt by investors. There is confusion over when and by how much the central bank may withdraw its support. But even if there were clear signals about a pullback, there is little precedent for what kind of effect those policies will have on the markets. A decision to pare back the stimulus could be a good thing if the economy is growing fast. But it could also throw markets into disarray given the degree to which investors have come to rely on the Fed’s bond-buying programs over the last five years.

All of which suggests that the markets could be in for a bumpy summer.

“This hasn’t really been seen at this scale ever,” said James Swanson, the chief investment strategist at MFS Investment Management in Boston. “We don’t know how they will get out of it,” he added, referring to Fed officials.

Central-bank watching is not a new sport on Wall Street. But for most of the last few years, many other events, including the European debt crisis and the prospect of a double-dip recession in the United States, have been at least as important as the Fed in driving markets. What’s more, the Fed had been steadily ramping up its bond-buying programs, not looking at cutting back.

The prospect of a reversal came to the fore on May 22, when Mr. Bernanke said in Congressional testimony that he and his colleagues might consider paring back their bond-buying programs “in the next few meetings” if the economy is showing signs of improvement.

As investors have speculated on what exactly Mr. Bernanke meant, and what might prompt him to act, the markets have been on a wild ride. The S. & P. 500 experienced two consecutive weeks in the red for the first time this year as investors prepared for a future without support from Mr. Bernanke.

The bond market has experienced more violent swings because the Fed has supported the economy by buying government and mortgage bonds. In anticipation of the Fed buying fewer bonds, investors sold off all kinds of bonds, pushing up interest rates to their highest level in over a year.

Concerns over a Fed pullback persisted on Friday. Bond prices slumped, pushing the yield, which moves in the opposite direction, on the benchmark 10-year Treasury to 2.18 percent from 2.08 percent on Thursday.

Mr. Bernanke and his colleagues have made it clear that they are not planning to suddenly stop the bond-buying programs that have been so important to investors. Instead, they are likely to “taper” back the $85 billion in bond purchases they are making each month, and could step back up if the economy shows signs of flagging.

There is still significant disagreement on Wall Street about whether the economy will improve enough for Mr. Bernanke to begin this process.

H.P. Earnings Are Higher Than Expected

H.P. reported that net income fell 31 percent to $1 billion, or 55 cents a share, from the year-ago quarter. Revenue fell 10 percent, to $27.6 billion, H.P. said.

“We beat the upper end” of company projections for the quarter, Meg Whitman, H.P.'s chief executive, said in a statement accompanying the earnings. “I feel good about the rest of the year.”

The net income was above the expectations of Wall Street analysts, who mark their revenue and earnings projections based on nonstandard accounting. By those measures, H.P. had net income of 87 cents a share.

Analysts had projected H.P. would make 81 cents a share, on revenue of $28.12 billion, according to a survey of analysts by Thomson Reuters.

H.P., the world’s largest maker of personal computers and printers, has struggled for years with a declining market for PCs, less printer demand and turmoil in its executive ranks.

Ms. Whitman, who took over in September 2011, has said that fixing the company will be a five-year process and has described 2013 as a year of rebuilding before growth accelerates in 2014.

Wall Street Closes Higher

Stocks rose and extended a recent rally on Tuesday, with the Standard & Poor’s 500-stock index and Dow Jones industrial average hitting new highs as investors bet that the market’s upward momentum would continue.

By the end of trading the S.&P. had risen 1 percent, the Dow gained 0.8 percent and the Nasdaq composite was 0.7 percent higher.

Large-cap banks were among the day’s biggest advancers, with Bank of America up 2.8 percent and Citigroup up 2.4 percent. Goldman Sachs advanced 3.3 percent.

Wall Street has climbed for the last three weeks, and is up more than 14 percent so far this year, propelled by some earnings that beat lowered estimates and the Federal Reserve’s easy monetary policy designed to stimulate the economy.

“We’re riding a self-fulfilling prophecy of momentum. There’s no fundamental reason for today’s move, other than the continued easing by the Fed and momentum,” said Paul Radeke, vice president at Minneapolis-based KDV Wealth Management.

While some analysts expect the momentum to wane in the near term, as equities haven’t undergone a significant pullback this year, many say that the long-term trend remains positive as investors continue to use any market decline as a buying opportunity.

“The sheer volume of cash coming in from the sidelines is preventing any kind of correction, even though fundamentally we seem to be getting overbought,” said Mr. Radeke, who helps oversee $400 million in assets.

In company news, Nokia unveiled a new version of its Lumia smartphone line, but shares listed in the United States fell 5 percent.

Shares of Sony listed in the United States jumped 9.9 percent after Daniel S. Loeb, a billionaire hedge fund investor, called on the company to spin off its lucrative entertainment arm.

Tesla Motors, which gained 40 percent last week after lifting its sales outlook, slumped 5 percent.

Your Money: After Hurricane Sandy, Rebuilding Under Higher Flood Insurance

By now, most know how much insurance money they have to work with, though plenty of people are still struggling to get more. But a new federal law that happened to coincide with the arrival of the storm will cause flood insurance premiums to skyrocket and require stricter, and thus more expensive, rebuilding standards.

So in the most devastated communities, families are being forced to make difficult financial calculations: can they afford the new flood insurance premiums, which, at worst, can reach as high as $30,000 a year? Do they have the money to rebuild their homes to the government’s new specifications? Does it even pay to stay?

Some families have already thrown up their hands and put their houses up for sale, while others talk of making the best of really bad options. “This issue is more devastating to more people than Sandy itself, believe it or not,” said Ron Jampel, a resident of the Shore Acres section of Brick, N.J., who started an advocacy group for affected homeowners in New Jersey called Save Our Communities 2013.

Maria Zanetich, who lives across the street from the water in Point Pleasant, N.J., with her husband and two grown daughters, considers her family lucky in many respects: their first floor is still gutted, but they can continue to live on the top floor of their three-bedroom raised ranch. Their insurance premiums will increase sharply, however, unless they elevate their home five feet, which she said could cost more than $100,000 because their home sits on a concrete slab instead of a foundation with a crawl space.

“I paid my flood insurance on time every year, but I didn’t even know that I had a subsidy, much less one that is now being phased out,” said Ms. Zanetich, who provides early intervention services for children with developmental delays. “The insurance moneys that we received will not cover both elevating my house and repairs.”

She and her husband are applying for grant money — they have already received their flood insurance claim payment — and once they hear about that, they can determine their best course of action. “The more that I try to figure it out,” Ms. Zanetich said, “the more I realize that I don’t know what I don’t know.”

Many people with homes built before the first flood maps were drawn — in New York, for instance, that’s Dec. 31, 1974 — have long received flood insurance at subsidized rates that did not reflect the property’s true risk (though only about 20 percent of flood policy holders nationwide receive these subsidies, according to the Federal Emergency Management Agency). Other homeowners were paying lower rates because the agency failed to update the flood maps, which did not do homeowner’s — or taxpayers, for that matter — any favors.

“A lot of the maps are so old, they have become unreliable,” said J. Robert Hunter, who once ran the flood program and is now the director of insurance at the Consumer Federation of America. “It’s not doing you a favor to give a cheap rate, and a year later, your house is gone,” he said, adding that it also encouraged unwise construction in certain areas. “Consumer aren’t helped by misleading maps.”

But some of that is about to change with the new law, enacted last July, which is aimed at strengthening the finances of the National Flood Insurance Program. FEMA runs the program but it is administered by private insurers.

The subsidies on these older properties started phasing out for vacation and second homes at the beginning of the year, and will rise by 25 percent annually until the rates reflect the actual risks. Homes with “severe and repeated” flooding will start to see the higher rates on Oct. 1, and also face 25 percent increases each year. Everyone else with a subsidy can keep it, at least until they sell to another owner or the policy lapses. Other properties may face higher rates when their community adopts a new flood insurance rate map (commonly called FIRMs) that shows a higher risk, but the best way to know is to ask your insurance agent. Preliminary maps are being released in New York and New Jersey in coming months, but they will not be formally adopted until late next year.

The new maps estimate the type of flooding that is likely to occur when a so-called 100-year storm sweeps into a specific area and establish a base flood elevation, or the level at which the water is expected to rise to in a storm. So incorporating those maps into rebuilding plans is important. (Early versions have already been released and are not expected to change much, FEMA officials said.)

The insurance premiums are determined, in part, by where your home stands relative to that base. The higher you go, of course, the less you pay. Consider a single-family home in a zone with a moderate to high risk of a flood, that has a flood policy with $250,000 of coverage: if the home is four feet below the base flood elevation, the homeowner would pay an annual premium of about $9,500, according to FEMA. But if the home was elevated to the base, the premium would cost $1,410. Hoist the home three feet higher, and the premium would drop to $427.

Elevating is challenging, if it is even possible, and then there is the bureaucratic morass many people are forced to push through to figure out how to pay for it all. That’s a major reason Chris Buono and his wife, who have two young boys, used their insurance claim money to pay off their mortgage, sell their damaged home in Silverton, N.J., and buy another house nearby but out of the flood zone.

They researched every possibility of saving their home, even considering lopping off the master bedroom and bathroom so the home could fit in their backyard while they installed wood pilings under the home’s original footprint. “It just kept coming down to a lack of solid answers and insanely varying estimates and the chance the bottom could fall out from under you years later in some way,” Mr. Buono, a professional guitarist, said. “Way too risky.”

He said many people he knew who were trying to elevate were scared about what they were getting themselves into. “How is that getting back to normal?” he said. “Living with a financial gun to your head after you paid to be covered.”

Homes in high-risk areas that have been “substantially damaged,” where repairs cost more than 50 percent of the structure’s value before the storm, must be fixed so that it complies with current law. Flood insurance policies do offer an extra $30,000 for this work, including elevation. But many homeowners said that did not begin to cover the added expense.

That’s the case for Will Martone and his wife, Eileen, both 62, who bought a second home on the water in Toms River, N.J., almost three years ago. They planned to work a couple of more years and retire there. But the storm caused more than $100,000 of damage, and their insurance claim paid less than half that. They have hired an advocate to help them recover more money, but that is only part of their problem. They, too, need to raise their home, since it sits below the level at which floodwaters are estimated to rise in the event of another big storm. If he does nothing, Mr. Martone said, his annual flood insurance premiums will soar to $31,000. If he raises his home by five and a half feet, he’ll pay $7,000 a year. And if he goes two feet higher, that will bring the rate down to $3,500.

They are entitled to collect the extra $30,000, but since their split-level home is on a slab, the costs are astronomical. That “puts me in the category of $150,000 plus,” said Mr. Martone, a district facilities manager for Siemens Industry, “which I do not have readily available. So there’s a good chance I’ll lose this home.”

Both New York and New Jersey have outlined their plans for various recovery programs in recent weeks, including community development block grants, even programs that would buy properties in high-risk areas for their pre-Sandy value. But people like Mr. Jampel, the founder of the homeowner’s advocacy group, say they do not believe there will be enough money to go around.

Yet for many homeowners, that’s their only hope. Emily Burek, 28, whose three-bedroom home in Highlands, N.J., took in nine feet of water, received $15,000 from her insurer thus far. But she said that covered only a third of her damages, and she is required to elevate. “Without any money to do that, I will be forced into foreclosure,” she said. “The town says there will be grant money, but they’ve also said a lot of things that turned out not to be true. So I’m not sure if it’s better that I just give up now and cut my losses.”

Wall Street Edges Higher

The stock market moved slightly higher on Tuesday, recovering from an early slump, after I.B.M. announced in midmorning that it would buy back more stock and raise its dividend.

I.B.M. and other technology stocks, including Apple, helped lead the Standard & Poor’s 500-stock index to another nominal record closing high. The broad-market measure ended April with a 1.8 percent gain, the sixth consecutive month that the S.& P. 500 has moved higher. That is the longest stretch of gains since a seven-month run that started in March 2009, when the market hit a financial crisis low, and ended in October 2009.

Worries about slower economic growth have rattled the stock market during April, but it has consistently bounced back. Brad Sorensen, director of market research at the brokerage firm Charles Schwab, said that was a result of investors having few alternatives.

“Right now it seems like every pullback in the market is seen as a buying opportunity,” Mr. Sorensen said. “People may say they’re getting nervous, but where else are you going to put money at this point? Into Europe with their political issues? Into Treasuries paying less than 1.7 percent?”

The S.& P. 500 edged up 3.96 points, or 0.3 percent, to close at 1,597.57. The Dow Jones industrial average, which had fallen as much as 84 points in morning trading, ended with a gain of 21.05 points, or 0.1 percent, at 14,839.80. The Nasdaq composite index rose 21.77 points, or 0.7 percent, to 3,328.79.

A report of another record high in European unemployment helped drive money into United States government debt, briefly sending the yield on the 10-year Treasury note to its lowest level of the year, at 1.65 percent. By the end of trading, however, the price of the 10-year Treasury note was down 2/32, to 102 30/32, while its yield was unchanged at 1.67 percent.

I.B.M. rose $3.39, or 1.7 percent, to $202.54, after it said it would increase its quarterly dividend by a dime, to 95 cents, and buy back up to $5 billion more of its own stock.

Apple rose $12.66, or 2.9 percent, to $442.78. The company on Tuesday borrowed $17 billion in a record-size corporate bond offering to take advantage of very low interest rates in order to help finance a $100 billion payout to its shareholders.

This earnings season has delivered investors a mixed collection of news. More than half of the companies in the S.& P. 500 have turned in results, and seven of 10 have beaten analysts’ estimates for earnings, according to S&P Capital IQ. Nearly as many, however, have come up short on revenue: Six of 10 have missed analysts’ revenue targets. That suggests companies are getting more of their profits from laying off staff and other cost-cutting efforts instead of from higher sales.

Among the stocks making big moves, Pfizer dropped 4 percent after the drug maker’s results fell short of what analysts had expected. Falling sales of Lipitor, its cholesterol drug, crimped revenue. The drug maker also cut its profit forecast for the rest of the year. Pfizer lost $1.36 to $29.07

Stock in Pitney Bowes, the maker of mailing equipment and software, fell 16 percent after it cut its dividend in half and posted a 58 percent drop in net income. Its shares sank $2.53 to $13.67.

Avon Products gained 4 percent after its quarterly loss was not as deep as analysts had expected. The direct-seller of cosmetics has been cutting staff and scaling back operations in an effort to turn around its business. Shares of Avon rose 92 cents to $23.16.

Economic View: Fed Monetary Policy Drives Best at Higher Speeds

First, what has the Fed done recently? Until September, its bond-buying program was explicitly limited in size and duration. Fed policy makers then replaced it with an open-ended program, whose pace was to be determined by progress in healing the labor market. And they adopted simpler, more positive explanations for their actions — jettisoning the gloomy, expectations-killing language that cited wretched economic prospects to justify every expansionary move.

Then, in December, the Fed surprised markets by replacing its somewhat confusing predictions for interest rates with numerical guidelines. It said it would keep the rate it controls — the federal funds rate — near zero at least until the unemployment rate fell below 6.5 percent or inflation rose above 2.5 percent.

Under the circumstances, it was significant that the policy makers took these actions at all. The economic data that came out before the September meeting were actually better than expected. And, based on forecasts released after the meeting, members of the Fed’s policy-making committee were slightly more optimistic about prospects for employment and output growth than they had been three months before. That they nevertheless adopted a more expansionary policy can be read as an admission that they hadn’t been doing enough earlier.

The pledge to keep rates low, even if inflation edged above 2 percent, is particularly consequential. For the last several years, the Fed has acted as if 2 percent were not just a target but a ceiling that should never be breached. But coming out of a terrible recession, with unemployment excruciatingly high, a period of very rapid growth is needed to repair the damage — and it wouldn’t be surprising for such growth to push inflation a bit over 2 percent. A Fed acknowledgment that 2.5 percent inflation would be tolerable for a short while isn’t a sign that it has lost its commitment to price stability. Instead, it’s a strong statement that it is committed to ensuring a faster recovery.

The more positive language, along with the “we’ll do whatever it takes” approach to bond buying, seems designed to reassure Americans that conditions will improve. This, too, is important. With short-term rates close to zero, the Fed’s main tool is expectations management. If it can persuade people to expect more growth — and yes, a little more inflation — it may help encourage companies to stop sitting on cash and start investing again.

The new policies are improvements, but I don’t want to oversell them. As I suggested in a previous column, a more definitive policy shift — like adopting a new target for monetary policy — would likely have a greater impact on expectations and in stimulating the recovery.

And the new policy’s numerical parameters are too conservative. According to the Fed’s own assessments, normal unemployment over the longer run is well below 6.5 percent. If inflation remains low and unemployment gets down to 6.5 percent, there’s no reason to rush to raise interest rates.

The most pressing problem, though, is that the Fed’s commitment to its new policies appears shaky. Soon after the December meeting, some members of the policy-making committee spoke out against the action — killing some of the positive buzz created by the policy statement and by a spirited news conference by the Fed chairman, Ben S. Bernanke. Also, the minutes of the December meeting showed that some who had voted for the new guidance on the fed funds rate were skeptical about the complementary action on bond-buying.

No one of the Fed’s recent actions is particularly powerful on its own, but together they create a sense of aggressive expansion and commitment to recovery. If the Fed now stops some of them, giving the public a mixed message, the positive effect on expectations could easily evaporate.

So why has the Fed moved slowly, and why are some policy makers threatening to undo the recent actions? In a recent paper, Prof. David Romer of the University of California, Berkeley (my husband), and I found that pessimistic views about the effectiveness and costs of expansionary actions have played a major role in limiting Fed moves over the last few years. Policy makers worry that such actions will do little good and that they could cause inflation, distortions in financial markets and losses on the Fed’s portfolio.

I can’t say for sure that those views are wrong today. We just don’t have enough experience with situations like the current one to have conclusive evidence one way or the other.

But our paper shows that in two periods when the Fed made terrible errors, the same kinds of pessimistic views were present. Faced with the Great Depression of the early 1930s and the high inflation of the early and late 1970s, monetary policy makers did little because they were convinced that action would be ineffective.

Subsequent events proved both decisions wrong. In the 1930s, a propitious gold inflow allowed the administration of Franklin D. Roosevelt to conduct monetary expansion without the Fed. Real interest rates plummeted, expectations improved and investment spending and consumer purchases of durable goods took off — jump-starting the recovery. At the end of the 1970s, a new Fed chairman, Paul A. Volcker, concluded that monetary policy absolutely could reduce inflation, and he led the Fed to raise interest rates to historic highs. The recession that followed was painful, but inflation did come down — and it has been low ever since.

WHEN monetary policy makers meet again at the end of this month, they should keep these historical lessons in mind. At the very least, the Cassandras on the committee might want to reread the policy record from the 1930s. The degree to which some of them sound like their Depression-era counterparts might shock them — and give them pause.

The Fed’s new more aggressive policy shows every sign of being helpful, and there are no indications that the feared costs are materializing. So rather than trimming the policy before it can bear fruit, why not give it a chance?

Even better, why not give it some extra oomph? Rather than just continuing the bond-buying program, accelerate it somewhat. Instead of just reiterating the numerical guidelines on the funds rate, policy makers could follow the suggestion of Narayana Kocherlakota, the president of the Federal Reserve Bank of Minneapolis, that they lower to 5.5 percent the unemployment level at which the Fed starts to consider raising interest rates. And if Mr. Bernanke wanted to be truly aggressive, he could broach the idea that in a weak economy, a strong dollar isn’t necessarily desirable.

The important thing is that hypothetical fears shouldn’t stop the Fed’s evolution. History is on the side of doing more, not standing on the sidelines.

Christina D. Romer is an economics professor at the University of California, Berkeley, and was the chairwoman of President Obama’s Council of Economic Advisers.

Report Urges Higher Pay for Texas Judges

Texas judges haven't gotten a raise since 2005, and they earn less than judges made in 1990 when considering inflation, says a recent report by the Judicial Compensation Commission.

Increasing judicial salaries for district judges, intermediate appellate justices and jurists of the two high courts by more than 21 percent is necessary to attract qualified lawyers to the bench and stop experienced jurists from leaving, says the report.

Former Texas Supreme Court Justice Dale Wainwright says financial considerations factored significantly into his decision to leave the high court in September. For a Supreme Court justice, he says, "The difference between what they are making in the public sector and what they could be making in the private sector can be several million dollars every few years."

Judges and their families make a financial sacrifice so the judge can serve, he says, and the relatively low salary shortens their tenures.

"I have the utmost respect to folks who do public service. … Anything the Legislature can do to help compensate the members of our judiciary better would only improve the bench," says Wainwright, partner in Bracewell & Giuliani in Austin.

Judicial Compensation Commission member Pat Mizell notes that judges' compensation is "extraordinarily low" compared to the pay of private-sector lawyers. For example, the salary of a district judge is much lower than a starting lawyer at his firm, Vinson & Elkins in Houston.

"It's $40- to $50,000 less than what a 25-year-old kid out of law school makes," he says, adding, "We're already in a situation where it is starting to affect the quality of the judiciary. Good judges are having a very difficult time making ends meet under the current salary structure."

The 80th Legislature created the commission, and the governor appoints members, subject to Senate consent.

THE REPORT

The state pays the entire salary of jurists of the two high courts. Intermediate appellate justices and district court judges receive the majority of their salaries from the state, with supplemental pay from counties. The commission recommends increasing state salaries across the board by 21.1 percent to 21.5 percent.

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Shares End Higher on Hope for Fiscal Deal

Traders hung on every word out of Washington on Monday, sending share prices on a jerky path upward on what is usually a quiet day of trading ahead of the New Year’s Day holiday.

It ended up being the best day for American stocks since the middle of November and was enough to push leading indexes into positive territory for December. The Standard & Poor’s 500-stock index finished the day up 1.7 percent, bringing the year’s gains to 13.4 percent. The Dow Jones industrial average was up 1.3 percent for the day and 7.3 percent for 2012.

The government was expected to go over the so-called fiscal cliff on Monday night, when a package of tax increases and spending cuts was set to start being phased in. But the political signals out of Washington convinced many investors that the White House and Congress would avert the changes that would be most damaging to the economy. “By day’s end, the assumption was that a deal was in hand — minor details needed to be worked out, but a finished product would be in the books within the next few days,” said Daniel Greenhaus, chief global strategist at BTIG. “Investors that had spent the last couple of days trading down reversed that trend and took things higher.” 

The market’s jump, much of which occurred after an early-afternoon news conference by President Obama, brought an unexpected end to a day that began with continuing bickering in Washington and a sense of foreboding on Wall Street. American stocks had fallen steadily for most of the last week and opened the day trading down.

Senator Mitch McConnell of Kentucky, the leader of the Republican minority, said late in the day that an agreement was “very, very close.”

Stocks could easily lose their gains if either chamber of Congress is unable to pass the compromise that was being negotiated on Monday. Senators said they were hoping to agree upon legislation and pass it along to the House for a vote on Tuesday. Some details of the agreement were still unclear, and the Republican-controlled House could demand changes.

The stock markets are closed on Tuesday, and most traders will be back at their desk Wednesday morning after a week of vacations and light trading.

Even if there is an agreement, it is unlikely to resolve a separate debate over the limit on the amount the government can borrow. The government hit its self-imposed debt ceiling on Monday, and Treasury Department officials have said they will be able to finance the budget for only a few weeks using emergency measures.

Some Republicans have said they want to use the debate over the debt ceiling to extract more spending cuts from Democrats. Investors are preparing for another bout of volatile trading if that happens.

The year did end with many market strategists in an optimistic mood about the American economy, once the fiscal negotiations in Washington are out of the way.

“While fiscal policy and political gridlock are negatives, there are other factors that remain supportive of growth, including a modest recovery in housing and further improvements in household balance sheets,” BlackRock’s chief investment strategist, Russ Koesterich, said in a note to clients.

The Standard & Poor’s 500 index climbed 1.7 percent, or 23.76 points to 1,426.19. The Dow Jones industrial average was up 1.3 percent, or 166.03 points to 13,104.14. The Nasdaq composite index rose 2 percent, or 59.20 points, to 3,019.51.

Report Urges Higher Pay for Texas Judges

Texas judges haven't gotten a raise since 2005, and they earn less than judges made in 1990 when considering inflation, says a recent report by the Judicial Compensation Commission.

Increasing judicial salaries for district judges, intermediate appellate justices and jurists of the two high courts by more than 21 percent is necessary to attract qualified lawyers to the bench and stop experienced jurists from leaving, says the report.

Former Texas Supreme Court Justice Dale Wainwright says financial considerations factored significantly into his decision to leave the high court in September. For a Supreme Court justice, he says, "The difference between what they are making in the public sector and what they could be making in the private sector can be several million dollars every few years."

Judges and their families make a financial sacrifice so the judge can serve, he says, and the relatively low salary shortens their tenures.

"I have the utmost respect to folks who do public service. … Anything the Legislature can do to help compensate the members of our judiciary better would only improve the bench," says Wainwright, partner in Bracewell & Giuliani in Austin.

Judicial Compensation Commission member Pat Mizell notes that judges' compensation is "extraordinarily low" compared to the pay of private-sector lawyers. For example, the salary of a district judge is much lower than a starting lawyer at his firm, Vinson & Elkins in Houston.

"It's $40- to $50,000 less than what a 25-year-old kid out of law school makes," he says, adding, "We're already in a situation where it is starting to affect the quality of the judiciary. Good judges are having a very difficult time making ends meet under the current salary structure."

The 80th Legislature created the commission, and the governor appoints members, subject to Senate consent.

THE REPORT

The state pays the entire salary of jurists of the two high courts. Intermediate appellate justices and district court judges receive the majority of their salaries from the state, with supplemental pay from counties. The commission recommends increasing state salaries across the board by 21.1 percent to 21.5 percent.

Subscribe to Texas Lawyer

You must be signed in to comment on an article

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Amazon Reports Loss Despite Higher Sales

If Amazon were an ordinary company, investors would long ago have strapped its management to a rocket ship and sent it far, far away.

Amazon said Thursday that it lost money in the third quarter, continuing a trend of unimpressive earnings reports for the retailer. Similar disappointments are causing carnage at some of Amazon’s land-based electronics competitors. But Amazon’s many fans seemed largely unfazed.

The earnings report, released after the market closed, sent Amazon shares down as much as 9 percent in after-hours trading, but they quickly recovered. The stock hit a record high earlier this year, and it trades at an astronomical price/earnings multiple.

What separates Amazon from the competition is that it is not trying to make money. It is instead trying to grow as fast as it can, something it has been doing successfully for 15 years. What was once a cute start-up is now one of the country’s biggest retailers.

Third-quarter revenue was $13.8 billion, a little less than the $13.9 billion that analysts expected but up 27 percent from 2011.

Despite all those customers snapping up Kindles and “50 Shades of Grey,” the company had warned that a loss was coming. Amazon said it lost 60 cents a share in the third quarter, but more than half of that was from its investment in the daily deals site Living Social. The consensus estimate was a loss of 8 cents. Amazon earned 14 cents a share in the third quarter of 2011.

In a conference call with analysts, Tom Szkutak, Amazon’s chief financial officer, declined as usual to shed much light on the company’s plans. With regard to the persistent rumor that Amazon will open some pop-up stores during the holidays to sell Kindle devices, for instance, he said that the company’s current practice of selling through other retailers is “not really a driver of our business.”

Amazon’s strategy of selling as cheaply as it can may be tough on its margins but it is tougher on competitors. Radio Shack missed its earnings forecasts this week, prompting doubts about its viability. The specialty home appliance and electronics retailer H. H. Gregg, which operates 200 stores in the Midwest and Southeast, saw its shares drop 13 percent Thursday. Shares of Best Buy fell 10 percent as the store warned that third-quarter profit would be “significantly lower.”

“Amazon is having a major impact on a number of businesses,” said Jason Moser, who covers Amazon for the Motley Fool investment site and owns shares in the retailer. “We know that chief executive Jeff Bezos is quite patient and has plenty of financial resources. It appears his strategy is working. The third-quarter loss was modest and the long-term implications here are as strong as ever. My faith isn’t dented in the least.”

There are Amazon skeptics. Colin Gillis of BGC Partners published a haiku before the earnings report: “So much revenue, and with all those shipping costs, so little profit.” What his verse lacked in poetry it made up in cogent criticism.

Amazon’s operating margins have been about 2 percent or less for the last year. “Amazon has the lowest operating margin and the highest valuation in our technology company coverage,” Mr. Gillis wrote, adding that “the company is not likely to achieve material leverage off its revenue growth as costs associated with investments into its digital platforms build.”

Furthermore, “the nature of Amazon’s core business is that of a discount retailer, which limits margin upside.” In the second quarter, the analyst noted, Amazon increased revenues by $2.9 billion but income from operations declined by $95 million to $107 million.

The third quarter is mere preamble to the fourth quarter, where Wall Street expects significant revenue growth powered by new Kindle tablets and associated downloads. New warehouses are coming, bringing physical goods to customers so quickly that they will, in theory and no doubt in practice, order more.

Asked about same-day delivery, Mr. Szkutak said on the conference call that the warehouses have “helped improve our delivery speed to customers.” He added, “What I would expect moving forward would be more of the same.”

Shares on Wall St. Move Mostly Higher

Buoyed by good news on housing starts, the Standard & Poor’s 500-stock index rose on Wednesday, heading for its third consecutive day of gains.

Shares of home builders climbed after the Commerce Department said new home construction jumped 15 percent in September, the quickest pace since July 2008, providing a fresh sign of reliance in the housing sector.

Weak results from high-technology bellwethers weighed on the Dow, however. Shares in Intel and I.B.M. fell on Wednesday as investors reacted to earnings reports issued on Tuesday.

Intel offered a weak outlook for fourth-quarter revenue, and its shares dropped 3.2 percent. I.B.M. posted third-quarter revenue that failed to meet analysts’ expectations, leading to a decline of almost 5 percent in its share price. The companies weighed heavily on the Dow and Nasdaq.

In afternoon trading, the Standard & Poor’s 500-stock index was up about 0.4 percent, while the Dow Jones industrial average was down about 0.1 percent. The Nasdaq composite was up 0.3 percent.

Shares of Bank of America, the second-largest American bank by assets after JPMorgan Chase, was 0.5 percent higher after it reported break-even results that exceeded analysts’ estimates.

This week, Citigroup and Goldman Sachs had indicated improvement in the financial sector by posting strong results, but JPMorgan and Wells Fargo disappointed investors.

“There was a lot of pessimism going into earnings season, but over all I’m happy with what I’m seeing,” said Scott B. Schermerhorn, chief investment officer at Granite Investment Advisors in Concord, N.H. “Things seem to be improving for banks.”

He added: “I.B.M. and Intel were weak, but it isn’t surprising to see such globally exposed companies hit by weakness in Europe and emerging markets.”

Toll Brothers, the home builder, rose 4.4 percent on Wednesday as a result of the news on housing starts, while D.R. Horton gained 5.6 percent.

Equities are coming off their best two-day advance in a month, a rise of 1.8 percent. Those gains came as some disappointments early in the earnings season were offset by strong results from bellwethers like Johnson & Johnson.

Still, the first reports from companies in the technology sector, which is closely monitored for what it reveals about business spending, suggested reasons for caution.

Earnings for companies in the S.&P. 500 are expected to fall 2.3 percent from the quarterly reports of a year earlier, with the main culprit being the slowing global economy. But the latest forecast does signal a slight improvement from estimates last week, according to Thomson Reuters data.

DealBook Column: Welcoming Higher Taxes in France, but Not That High

Christian Hartmann/ReutersPresident François Hollande of France.

PARIS — A little over a year ago, some of the most prominent and wealthy executives in France signed a petition seeking higher taxes on themselves. Yes, higher taxes.

“We are conscious of having benefited from a French system and a European environment that we are attached to and which we hope to help maintain,” wrote the group, which included the chief executives of Air France-KLM and Société Générale, and the billionaire heiress to the L’Oréal fortune, among others. “When the public finances deficit and the prospects of a worsening state debt threaten the future of France and Europe and when the government is asking everybody for solidarity, it seems necessary for us to contribute.”

You may know what happened next: François Hollande, the country’s socialist president, proposed a 75 percent marginal tax rate on all income over $1.3 million. (The highest marginal tax rate on the first $1.3 million would be 45 percent, up from 41 percent.) Marginal tax rates on capital gains would rise to as much as about 60 percent.

Now many of the nation’s wealthiest executives — including some who signed the original petition — and entrepreneurs, private equity managers and others who are millionaires, or want to become millionaires, are crying foul. In a sign that executives are moving, or threatening to move, to lower-taxed countries, high-end real estate in Paris is being thrown on the market.

Jean-Paul Agon, chairman and chief executive of L’Oréal, who signed the original petition, has been decrying the new tax rates, saying they are significantly higher than he expected and would damage the country’s economy. Stephane Richard, the chief executive of France Télécom, who also signed the petition, and François-Henri Pinault, the chairman and chief executive of PPR, which owns brands like Gucci and Yves Saint Laurent, sounded off against the tax, too.

Last week, Pierre Chappaz, a French entrepreneur, wrote online, “I do not know a single start-up founder who accept the idea that creating a company, in which it will invest all his savings and years of effort often without a salary, must then give to the State 60.5 percent of gain when he sells his company if he succeeds.” The statement went viral. An online group calling itself Les Pigeons — slang for sucker — has more than 63,000 “likes” on its Facebook page.

The private equity industry is similarly up in arms. The 60.5 percent rate would help perpetuate “the image of a country that does not like achievement and success, and that strikes a confiscatory tax,” an industry group said in a statement.

And then there is Bernard Arnault, the chief executive of LVMH, one of France’s wealthiest men. He recently said he was applying for citizenship in Belgium, setting off a firestorm, including a headline in the left-leaning newspaper, Liberation, that mildly translated as, “Get lost, you rich idiot!”

Mr. Arnault, who is suing the newspaper for “extreme vulgarity and the violence of the headline,” has insisted he is not leaving the country over the new tax regime. He said he would “fulfill my fiscal obligations” to France as a resident, saying that “Our country must count on everyone to do their bit to face a deep economic crisis amid strict budgetary constraints.”

Still, all the anger and angst appears to be pushing Mr. Hollande and his administration to back down, at least slightly. The 75 percent tax will now be effective for only the next two years. And last week, a budget minister, Jérôme Cahuzac, perhaps bowing to pressure from Les Pigeons, said the capital gains treatment on start-ups was “a mistake” and said the government would seek a remedy.

The purpose of the tax is more populist than mathematical: the marginal income tax increase is estimated to raise only about $300 million.

The debate in France raises an important question amid the election campaign in the United States about whether the wealthy should pay more — and by how much. The American billionaire Warren E. Buffett, like some of the French, called for higher taxes on the rich, but he never sought rates at the levels being discussed here in France.

Under President Obama’s proposed Buffett Rule, the wealthiest Americans would have paid no less than 30 percent of all income.

Marginal tax rates in the United States were as high as 94 percent during World War II in 1944 and 1945, but there were so many loopholes that few people paid anything close to that rate. For now, it is capped at 35 percent, unless the Bush tax cuts expire.

So where is the line?

The reality in Europe is that moving from Paris to London may not be that big of a deal, so extreme tax rates could be a deciding factor in where a person or business decides to locate.

But Thomas Piketty and Emmanuel Saez, two French economists who influenced Mr. Hollande, have said that the country’s economic growth won’t be hurt unless the marginal rates on the highest incomes exceed 83 percent.

The idea of soaking the rich is often a popular one. But if there is lesson in the French experience, despite the economic models, it is that there are limits.