Opening Bell: 10/4 (Moody’s cuts Yonkers rating; IBM thrives; Manufacturing posts modest rise)

The lead story of the Wall Street Journal: “Market Nears Bear Territory.”

Good Tuesday Morning!

Driving the day: Moody’s Investors Service cuts Yonkers’ bond rating by two notches, down to Baa1, just three levels above “junk” status, and reduced Yonkers’ outlook to negative from stable (previously, the city’s bond rating had been A2, the sixth-highest investment-grade rating). In its report, Moody’s said that projected budget gaps through 2015 and unsettled collective bargaining contracts with city employees would continue to represent challenges for city government officials.

Two things of note to take from this news: (1) First, mayoral elections in less than a month, it presents brand new challenges to whoever takes over for Mayor Phil Amicone. Yonkers has been riding a hot streak as of late with its Ridge Hill development, waterfront development and activity around the County Center; this puts a bit of a damper on that. (2) Second, the report foreshadows more difficulties to come for many of the state’s municipalities, with Moody’s analysts pointing to the 2 percent tax cap, saying that they will continue to monitor the impact of the new cap on any municipal debt issuance.

Stock Outlook: European indicators are continuing to fall this morning, which means more bad news for U.S. stock indexes. Also, watch for a reaction to Fed Chairman Ben Bernanke’s testimony before Congress at 10 a.m.

As an aside, note that the stock market has been falling consistently on European woes and not on a perceived decline of U.S. companies’ values. Whenever Europe starts to turn itself around, U.S. markets will be poised for big gains with the currently undervalued state of many S&P 500 companies.

By the Numbers: 1.3% – as in, the increase in construction spending for the month of August, an encouraging sign given what we know about August job numbers. Notably, public construction spending rose 3.1 percent (with residential construction up 0.7 percent).

Headlines:

Small businesses that are hiring say the biggest challenge is finding qualified workers. In a survey of 133 executives who attended Inc.’s 500|5000 Conference (i.e., businesses that have posted strong growth numbers), 40 percent of those queried said that finding qualified workers was the biggest challenge, versus just 13 percent who cited the sluggish economy and 16 percent who cited difficulties securing capital. (Inc.)

IBM is targeting mid-sized acquisitions as it continues to post strong growth numbers, one executive told Bloomberg News. IBM recently passed up Microsoft Corp. as the world’s second-most valuable tech company behind Apple.  (Bloomberg)

U.S. manufacturing index rises unexpectedly in September on strong gains in exports. (Bloomberg)

Fannie Mae knew of abuses, report says, citing a lack of oversight at the Federal Housing Finance Authority (the report was authored by the FHFA’s inspector general).  (NY Times)

Sports Blink: With the Yankees on the brink of playoff elimination, A.J. Burnett will get the start in Game 4. Be sure to remove any sharp objects from the vicinity of the television…

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Opening Bell: Wednesday 9/27 ($4.4 billion investment; Health care premiums up; Union rejects deal)

Driving the day: Yesterday, Gov. Andrew Cuomo was joined by former President Bill Clinton to announce a $4.4 billion joint investment by five major tech companies, including IBM, Intel, GLOBALFOUNDRIES, TSMC, and Samsung to pursue nanotechnology in New York state. Also included: the state will be investing $400 million in the SUNY system to promote nanotechnology research and development there. All told, we are looking at the creation of at least 2,500 high-paying, high-tech positions and 2,000 construction jobs; and at the retention of another 2,500 existing jobs in Albany, Canandaigua, and East Fishkill. Notably, nearly 1,000 of those tech-related positions will be created in Westchester’s backyard at IBM’s East Fishkill and Yorktown Heights facilities (IBM alone is responsible for $3.6 billion of the total promised investment dollars).

Stock Outlook: U.S. futures are up, but with most European indexes either flat or down slightly and with durable goods orders slowing, look for Wall Street to back off its two-day hot streak.

By the Numbers: 12, as in the number of days the current protest against Wall Street’s financial companies has been ongoing, with roughly 100 arrests made.

They Said It: “Clearly, in the developed world – Europe, U.S., and Japan – the economy is slower, but there is reasonable activity there and the emerging world is still quite strong,” General Electric Co. CEO Jeffrey Immelt told reporters, saying that he doesn’t see a double-dip recession occurring.

Headlines:

> Cuomo, New York state dealt a blow as state’s second-biggest union rejects contract, making imminent layoffs likely (New York Times).

> The New York Times reports health care premiums are way up – and worker contributions to health care costs are on the rise as well (New York Times).

Sports Blink: In baseball, both wild card spots are in a dead heat, with the Red Sox tied with the Rays and the Cardinals tied with the Braves (both the Sox and the Braves blew big leads over the past couple weeks). If either race remains tied after tonight’s games – number 162 of the season – the teams will face off in a one-game playoff.

UPDATE FROM ALBANY – $4.4 billion joint investment announced involving IBM, Intel, others

In a speech at this morning’s “New York Open for Business” conference in Albany, Gov. Andrew Cuomo announced that the state had entered into agreements providing for investments by IBM, Intel, GlobalFoundries, TSMC, and Samsung with a combined value of $4.4 billion.

The investments will be aimed at the development of nanotechnology, and will create or retain at least 6,900 jobs, according to Cuomo. Included therein are nearly 1,000 high-paying, high-tech jobs that will be created at IBM’s East Fishkill and Yorktown Heights locations.

More on this in the upcoming issue of the Westchester County Business Journal. Stay tuned.

Quiet week marked by positive signs

I’m sure much of Westchester will jump-start its annual Labor Day exodus to Long Island, the Jersey Shore and Cape Cod on the early side (well, maybe not Long Island, where residents are still waiting on power to be restored) so without further delay, here’s the Week in Review (Labor Day Edition):

FIRST – THE GOOD NEWS…

> The Institute for Supply Management’s factory index of manufacturing activity for August came in at 50.6, well above projections of 48.5 (a number >50 shows expansion while a number <50 represents contraction).

> Jobless claims declined by 12,000 last week to 409,000 (lower than projections of 410,000) following the resolution (for now at least) of the Verizon labor dispute.

> Lost amidst news surrounding the proposed Google and AT&T mergers, IBM acquired two data analysis firms (Algorithmics for $347 million and i2 for an undisclosed amount).

AND FOR THE NOT SO GOOD NEWS…

> Irene left her mark on the county, but as images of the damage in upstate NY and Vermont have surfaced over the past several days, it is safe to say that Westchester’s business owners are better off than many. That said, the economic damage from this one will be felt for some time…

  • Yesterday Gov. Cuomo put the cost estimate of Irene for the entire state at roughly $1 billion. Realistically, the final cost for businesses is going to be significantly higher than that – perhaps as much as double that initial estimate – one the extent of the flooding is surveyed over the coming weeks and the lost business (due to repairs, closures) is accounted for.  
  • Con-Edison hasn’t made many new friends this past week among Westchesterites, with many portions of the county still waiting for power to be fully restored.
  •  Insurance companies have apparently done well for themselves; typically insurance companies can be expected to foot half the total bill for hurricanes etc., but in this case forecasters are projecting insurance costs ranging from 30-40%.

> Regardless of their results on the field, the Mets come into the holiday weekend big losers after a proposed $200 million deal with investor David Einhorn for a 33% stake in the team fell through.