American Express to cut 7,000 jobs

Looks like the start of financial news will be on the down side again today. American Express is in the news today announcing layoffs of 7,000 people.
Let's see here now, everyday this week a company has announce layoffs. Sooner or later there won't be anyone working. I mean this is outrageous, is anybody job secure anymore?

In a stark acknowledgment of the tough times ahead in the credit card industry, American Express Co. said Thursday that it plans to cut 7,000 jobs, or about 10 percent of its worldwide work force, in an effort to slash costs by $1.8 billion in 2009.

The New York-based credit card issuer said it is also suspending management level salary increases next year and instituting a hiring freeze.

The job cuts will be across various business units, but will primarily focus on management positions, the company said.

Additionally, American Express said it plans to scale back investments in technology and marketing and business development, and streamline costs associated with some rewards programs. The company also expects to cut expenses for consulting and other professional services, travel and entertainment and general overhead.

As a result, American Express plans to take a restructuring charge of between $240 million and $290 million in the fourth quarter.

The company has been gearing up for a big restructuring for some time, first announcing in July that it planned to reduce overall costs and staffing levels, and take a related charge during the second half of the year.

"We've been engaged for the past few months in an intensive, companywide review of priorities and staffing levels," said Kenneth I. Chenault, chairman and chief executive, in a statement. "The re-engineering program we announced today will help us to manage through one of the most challenging economic environments we've seen in many decades. It will also put us in position to ramp up investment spending as economic conditions improve so that we can take advantage of the substantial opportunities that will be available to us over the medium to long term."

Last week, American Express reported a better-than-expected 24 percent decline in third-quarter profit. But the report echoed recent results from JPMorgan Chase & Co., Citigroup Inc. and Capital One Financial Corp. showing that the credit card environment is worsening as cardholders have trouble paying off debt and pull back their spending.

Even a company like American Express, which prides itself on catering to a more well-heeled clientele, is not immune.

The company's customers tend to be more affluent than those of other card companies, but they are more heavily concentrated in California and Florida, where the slumping housing market is taking a toll. American Express also has a higher percentage of small-business customers, and small businesses tend to miss payments more than individuals, executives have said.

"Cardmember spending is likely to remain soft," Chenault said in a statement last week. "Loan growth will be restrained, in part because of the steps we are taking to reduce credit risks, and credit indicators are likely to reflect the continued downturn in the economy and throughout the housing sector."

American Express has been able to finance its operations amid the tight credit markets, but the efforts have been tougher and more costly.

Shares rose $1.23, or 4.9 percent, to $26.44 in morning trading. Shares have traded between $20.50 and $61.55 in the past 12 months.

Stocks turn higher as investors hunt for bargains

Wall Street turned higher in erratic trading Thursday as investors, while still nervous about growing signs of a weakening economy, picked up bargains from stocks that were beaten down in a two-day selloff. The Dow Jones industrial average rose 180 points and outpaced the gains of other major indexes as energy stocks bounced higher from a drop in oil.

There was little confidence behind the buying; investors were attracted to stocks that were pummeled in two days of selling that sliced nearly 750 points off the Dow. There is a growing belief on the Street that the economy is either in a recession or headed for one despite government relief efforts and gradual improvements in world credit markets.

With its move higher, Wall Street is living up to predictions that trading will remain volatile for some time to come as investors try to test whether the market has formed a bottom.

"It's people coming in that see tremendous value, but for a more sustainable advance I think we need more time," said Steven Goldman, chief market strategist at Weeden & Co. in Greenwich, Conn.

Wall Street digested a rush of corporate news. Goldman Sachs Group Inc. is preparing to cut about 10 percent of its work force, according to a person briefed on the plan who requested anonymity because the company hadn't publicly disclosed details of the plan.

Meanwhile, drugmaker Eli Lilly and Co. said it booked a loss for the third quarter on a charge of almost $1.5 billion for an expected settlement of an investigation into the marketing of its top-selling drug, Zyprexa. Dow Chemical Co. said its quarterly profit rose 6 percent, helped by price hikes that offset a nearly 50 percent increase in raw materials and energy costs.

A snapshot of the labor market signaled that it continues to weaken. The Labor Department reported Thursday that new applications for unemployment benefits rose 15,000 last week to a seasonally adjusted 478,000. That was slightly above analysts' estimates of 470,000. Jobless claims above 400,000 are considered a sign of recession. A year ago, claims stood at 333,000, the department said. Analysts caution, however, that the weekly readings can be volatile.

Investors viewed the data as more evidence that the financial crisis is battering the economy and forcing companies to cut back. Market anxiety was already high as investors sift through a batch of corporate forecasts that has stirred intense unease about the health of the global economy.

Thomas J. Lee, U.S. equities strategist at JPMorgan Chase & Co. in New York, cautioned that the market will need to rein in its sharp swings before some investors will feel confident enough to return.

"I don't think anyone can buy and sell stocks right now with conviction," he said.

The Dow rose 182.47, or 2.14 percent, to 8,701.68 after earlier falling 125 and rising more than 277. On Wednesday, the Dow lost 514 points as investors worried that the global economy is poised to weaken. That was on top of a 231-point loss Tuesday.

Broader stock indicators also rose after showing early declines. The Standard & Poor's 500 index advanced 15.35, or 1.71 percent, to 912.13, and the Nasdaq composite index rose 4.55, or 0.28 percent, to 1,620.30.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 460.5 million shares.

Credit markets continued to show signs of slow improvement, although figures released Thursday suggested a return to more normal market conditions will take time. The rate on three-month loans in dollars -- known as the London Interbank Offered Rate, or Libor -- was unchanged at 3.54 percent. The rate fell to that level on Wednesday and is the lowest since Sept. 24.

Demand for short-term Treasury bills, regarded as the safest assets around, was little changed. The three-month Treasury bill yielded 1 percent, down from 1.01 percent late Wednesday. The levels are a notable improvement from the 0.20 percent seen last week, when investors were willing to trade the slimmest of returns for a safe place to keep their money.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.65 percent from 3.60 percent late Wednesday.

The dollar was mixed against rival currencies after jumping to multiyear highs Wednesday, while gold prices fell.

Light, sweet crude rose $1.73 to $68.48 on the New York Mercantile Exchange. The contract on Wednesday fell to a new 16-month low as big increases in U.S. crude and gasoline stocks fed beliefs that the economic downturn is eroding demand for energy.

The rise in oil gave a lift to energy companies and helped ease some worries about the economy, according to Ryan Larson, head of equity trading at Voyageur Asset Management, a subsidiary of RBC Dain Rauscher in Chicago. While the stock market often cheers a drop in oil, recent declines have worried some investors that they portended a falloff in economic activity.

"You're seeing a connection between oil and the markets, and we're seeing a bounce," Larson said. "The market is thinking maybe the slowdown might not be as imminent as we first thought, or maybe its priced into the market."

Oil fell Wednesday to its lowest level in 16 months, hurting energy stocks. But the rebound sent them higher Thursday. Exxon Mobil Corp. rose $3.82, or 5.9 percent, to $68.39, while Chevron Corp. advanced $3.77, or 6.1 percent, to $65.51.

Goldman Sachs fell $7, or 6.1 percent, to $107.71. Eli Lilly rose $1.30, or 4.1 percent, to $33.41, while Dow Chemical rose $1.65, or 7.5 percent, to $23.76.

The Russell 2000 index of smaller companies fell 1.80, or 0.36 percent, to 500.17.

Overseas, Japan's Nikkei stock average fell 2.46 percent. Britain's FTSE 100 fell 0.25 percent, Germany's DAX index fell 1.50 percent, and France's CAC-40 lost 1.57 percent.