Credit Ratings Cut for 9 Euro Zone Countries

Standard & Poor’s downgraded the debt ratings of France, Italy and seven other European countries on Friday. The action may have more symbolic than fundamental financial impact but served as a reminder that Europe’s economic woes were far from over. The downgrades may also be a blow to the euro zone’s ability to fight off a worsening debt crisis.

S&P ended France and Austria's AAA status and also downgraded Italy's and Spain's credit rating by two notches and did the same for Portugal and Cyprus. The rating agency also cut ratings on Malta, Slovakia and Slovenia.

In December S.& P warned that it might downgrade many of the 17 nations that share the euro, largely because it said European politicians were moving too slowly to strengthen the monetary union and because the euro zone’s problems were propelling Europe toward its second recession in three years. Read more about S&P cutting credit ratings for 9 Euro Zone Nations.

U.S. sells 10-year notes at record lowest yield

A new landmark was set Wednesday for U.S. Treasury bond supply. The Treasury Department sold $21 billion, 10-year notes at a yield of 1.90%, the lowest level ever at auction. The auctioned yield is the rate the U.S. government pays to borrow cash in capital markets.

The Treasury received bids totaling $69.04 billion and accepted $21.00 billion. Primary dealers were awarded $9.29 billion, while indirect bidders--a category that includes foreign central bankers--were awarded $8.04 billion.

Bidders offered to buy 3.19 times the amount of debt sold, compared to an average of 3.15 times at the last four comparable auctions. Indirect bidders bought 38.3% of the sale, below the average of 46.9% of recent sales. Direct bidders, a group which includes domestic money managers, made up for the shortfall by purchasing another 17.4%, compared to 10% on average.

Central Bank supplied $76.9 billion to Treasury in 2011

The central bank transferred $76.9 billion in earnings to the U.S. Treasury during 2011. The transfer is slightly less than the record $79.3 billion transferred in 2010.

The Federal Reserve said it earned $83.6 billion in interest income from its massive portfolio of securities, which includes Treasury debt and mortgage securities. The Fed has been buying assets as part of a quantitative-easing program, an unconventional monetary policy designed to lower long-term interest rates and boost economic growth.

The transfers in the past two years are about twice the pre-quantitative-easing levels. Under Fed policy, residual Fed earnings are distributed to Treasury after covering expenses.

Unemployment drops to 8.5 percent in December

The unemployment rate is at its lowest level in nearly three years thank to hiring boost in December. The Labor Department says employers added a net 200,000 jobs last month and the unemployment rate fell to 8.5 percent, the lowest since February 2009. The rate has dropped for four straight months. The drop in unemployment rate gave the economy a boost at the end of 2011.

For all of 2011, the economy added 1.6 million jobs, better than the 940,000 added in 2010. The unemployment rate averaged 8.9 percent last year, down from 9.6 percent the previous year.

U.S. Equity Market Ended the Year Unchanged

The U.S. stock market just ended the year almost unchanged. On the final trading day, Friday, Dec. 30, 2011, the Standard & Poor’s 500-stock index closed at 1,257.60 with a 0.4 percent loss for the day. The S&P 500, a benchmark index for the U.S. broad equity market, statistically unchanged for the year, from 1,257.64 on Dec. 31, 2010 to 1,257.60 on Dec. 30, 2011, which is just 4 ticks difference or  a decline of 0.003% for the year.

Meanwhile the Dow Jones industrial average fell 0.6 percent on the final day and was up 5.5 percent for the year, closing at 12,217.56.

U.S Economic Indicators 3Q 2011

The U.S. economy grew more slowly in the summer than previously thought because consumers spent less than the government had first estimated. The Commerce Department says the economy grew at an annual rate of 1.8 percent in the July-September quarter. That was the fastest growth this year, up from 1.3 percent in the April-June quarter. But it was down slightly from last month's estimate that the economy was expanding at a 2 percent rate in the summer.

But economists expect growth in the current October-December quarter to be stronger. They think the economy is growing at an annual rate of more than 3 percent in the final three months of this year. That would be the fastest pace since a 3.8 percent performance in the spring of 2010.

Credit is Easing: Loans Rose 10% in Q3

U.S. bank credit is growing at the fastest pace in three years, giving the Fed confidence in the economic expansion’s staying power.

Until the second quarter, the banks had been more interested in shoring up their balance sheets than lending since the start of the financial crisis. Banks raised their levels of equity capital after the U.S. Federal Reserve 2009 stress tests revealed weakness in their assets because of the housing slump and the deepest recession since the 1930s.

In the third quarter financial institutions increased commercial and industrial loans by an average annual pace of almost 10 percent, the highest since the comparable quarter in 2008, according to Fed data. The latest numbers show seasonally adjusted loan growth of 15 percent in October and 6.1 percent in November.