Economy perked up in the summer

NEW YORK (CNNMoney)

Gross domestic product -- the broadest measure of economic activity -- rose at a 2.8% annual rate in the third quarter, according to the Bureau of Economic Analysis.

That marked the fastest growth in a year and was stronger than economists had anticipated.

Spending on both housing and commercial real estate boosted growth, as did consumer spending on goods ranging from groceries to cars. Businesses also built up their inventories.

Meanwhile, federal budget cuts held back growth for the fourth consecutive quarter. That said, the drag is starting to wane, and over the summer, state and local governments ramped up their spending and investments enough to compensate for federal cuts.

It's unclear whether that will continue. This report does not yet reflect the government shutdown in October, which put thousands of federal workers temporarily out of a job and halted some government work for 16 days.

"The economy is trying to run at a faster pace, but lawmakers keep throwing up speed-bumps," said Sal Guatieri, senior economist for BMO Capital Markets.

While 2.8% growth is stronger than the 1.9% economists were expecting, it's still not considered robust enough to bring down the unemployment rate fast enough.

Economists generally hope for at least 3% growth each year to bring the unemployment rate down by one percentage point.

At the end of September, 11.3 million people said they could not find work, and the unemployment rate stood at 7.2%.

First Published: November 7, 2013: 9:13 AM ET

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Cadillac CTS named Motor Trend Car of the Year

NEW YORK (CNNMoney)

The new CTS is larger than the previous version, but retains the rear-wheel-drive design and performance that made it popular with critics.

"Our judges were particularly impressed by the CTS's responsive powertrains and masterful balance of smooth ride and sporty handling," said Motor Trend editor-in-chief Ed Loh.

To capture the top prize, the Cadillac beat out 21 other completely new or substantially redesigned models considered by the magazine.

After testing the cars at the Hyundai proving grounds in the southwest California desert, the magazine's staffers narrowed the list to just seven finalists. In addition to the CTS, the BMW 4-series, Chevrolet Corvette, Jaguar F-type, Kia Forte, Mazda3, Mazda6 and Mercedes-Benz S-class all advanced to the final round.

Those cars were then tested on roads and highways around the town of Tehachapi, Calif. After further debate, the writers and editors selected the winner by secret ballot.

The cars were judged on six criteria: Design advancement, engineering, efficiency, safety, value and performance.

"The CTS's intended function was to take the fight to BMW, Mercedes-Benz and Audi -- and win. And it has," the magazine said in its review of the Cadillac.

CNNMoney review - American luxury is back

The CTS is available with a 272-horsepower turbocharged 4-cylinder power plant, a 321-horsepower V6 and a 420-horsepower turbocharged V6. The CTS is also the first Cadillac to offer an eight-speed transmission.

Motor Trend called the four-cylinder engine "the most surprising," saying that if offers "class-leading power with competitive fuel economy."

This is the second time a Cadillac CTS has won the award. It also took top honors in 2008.

For the new model year, General Motors (GM, Fortune 500) made the CTS bigger and more expensive to compete directly against cars like the Mercedes-Benz E-class and BMW 5-series.

Motor Trend named the Subaru Forester its SUV of the Year in October and Truck of the Year will be announced next month.

Last year's Motor Trend Car of the Year winner was the Tesla Model S.

First Published: November 7, 2013: 9:23 AM ET

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Stocks hit record as investors await Twitter

NEW YORK (CNNMoney)

The Dow Jones industrial average edged up to another new record, while the S&P 500 rose above its all-time closing high reached last week. The Nasdaq also gained ground.

Investors and traders were eagerly anticipating Twitter's (TWTR) debut on the New York Stock Exchange Thursday morning. Twitter priced its initial public offering at $26 a share late Wednesday, raising $1.8 billion.

Upbeat economic data fuels optimism: Investors were encouraged by a report that showed the U.S. economy perked up slightly this summer, driven largely by businesses re-stocking their shelves, a rise in consumer spending, and the ongoing housing recovery.

Gross domestic product -- the broadest measure of economic activity -- rose at a 2.8% annual rate in the third quarter, according to the Bureau of Economic Analysis. That marked the fastest growth in a year and was stronger than economists had anticipated.

A separate report showed initial jobless claims declined for the fourth straight week, falling by 9,000 to 336,000.

ECB unexpectedly cuts rates: In Europe, it's all about the European Central Bank. The ECB said it cut a key interest rate to 0.25%, a sign of how fragile the European economic recovery is. European stock markets made modest gains in afternoon trading, keeping them near five-year highs.

Related: Fear & Greed Index is back to extreme greed

Earnings continue to roll in: Whole Foods (WFM, Fortune 500)shares sank more than 10% after the organic grocer cut its 2014 earnings and sales forecasts.

Qualcomm (QCOM, Fortune 500) shares fell 4% after posting quarterly earnings that fell short of expectations.

Walt Disney (DIS, Fortune 500), Groupon (GRPN) and Priceline.com (PCLN, Fortune 500) are set to report quarterly results after the market close.

J.C. Penney (JCP, Fortune 500) shares jumped after the troubled retailer announced an increase in same-store sales for October.

Tesla (TSLA) shares tumbled again following reports of yet another fire in one of its Model S electric cars.

First Published: November 7, 2013: 9:45 AM ET

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Time Warner earnings lifted by TV networks

Time Warner earnings were up despite a drop in studio revenue and income.

NEW YORK (CNNMoney)

Time Warner posted improved third-quarter earnings Wednesday, crediting higher advertising revenue and cable system fees at its TV networks. The media conglomerate is the parent of HBO, TBS and CNN (as well as CNNMoney).

The improvement overcame a drop in revenue and profit at the company's studio unit, which includes Warner Bros. But much of the drop was due to the unfavorable comparison to the year-earlier period, when the hit Batman movie "The Dark Knight Rises" was released.

Time Warner reported a 15% jump in income from continuing operations to $944 million, which was better than expected. It achieved the result despite essentially flat revenue.

Shares of Time Warner (TWX, Fortune 500) were higher in premarket trading following the report.

Related: China's $8 billion plan to rival Hollywood

Time Warner is in the process of spinning off its Time Inc. magazine unit. Time's revenue and profit declined, but were not included in the company's operating results.

The company reiterated that its full-year earnings per share should post a mid-teen percentage increase after excluding the results from Time Inc.

First Published: November 6, 2013: 7:53 AM ET

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Rich investors sitting on a pile of cash

High net-worth families believe stocks will continue to rise but have nearly 40% of their portfolio in cash, compared to just 25% in stocks.

NEW YORK (CNNMoney)

According to a recent Citi Private Bank survey of more than 50 representatives from large family offices, which manage assets on behalf of high net-worth families, nearly two-thirds of wealthy investors think it's more likely that the stock market will go up at least 10% over the coming year than lose value.

But these investors have, on average, almost 40% of their portfolio allocated toward cash. Stocks only averaged 25% of their portfolios. The rest are in bonds and alternative investments such as commodities and real estate.

What gives?

Steven Wieting, global chief investment strategist, with Citi Private Bank, said that even the world's richest people are still suffering from "the scars of the 2008-2009 downturn." As a result, these people are "under-invested bulls."

Related: The most unequal place in America

While the group of investors surveyed expect an annual 8% long-term return on their investments, their current allocation would only get them about 4% a year, according to Wieting.

The more cautious asset allocation from wealthy investors comes at a time when many other individual investors are plowing into stocks.

In fact, investors are on track to put the most money into stock mutual funds and exchange traded funds since the technology bubble burst in 2000, according to data from investment research firm TrimTabs.

Related: Squeezed middle class looks to dollar stores

Individual investors have also been a major factor behind the rise in shares of Tesla (TSLA) during the latter half of this year. A recent Bank of America Merrill Lynch reports showed that while institutional investors began shrinking their stake in Tesla in July, retail investors continued to buy the stock.

Wieting, like many of his clients, thinks the stock market will continue to head higher. But he expects the pace of future market gains to be slower than the past five years. After all, valuations for stocks are now far from the depressed levels they were at in the aftermath of the financial crisis.

Still, Wieting notes that the market has some catching up to do. While earnings per share are nearly 30% above the levels they were at in 2007, stock prices are only 10% above their 2007 peaks.

And even through profit growth may slow, earnings are still going in the right direction. Wieting said profits should go higher -- along with stocks -- since "the U.S. economic expansion isn't over."

First Published: November 6, 2013: 8:11 AM ET

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Stocks regain momentum

NEW YORK (CNNMoney)

The Dow Jones industrial average, the S&P 500 and the Nasdaq all rose about 0.4% in early trading. Stocks ended mostly flat Tuesday.

Health insurer Humana (HUM, Fortune 500) reported better than expected earnings before the bell. CNNMoney parent Time Warner (TWX, Fortune 500) topped earnings forecasts and reaffirmed its guidance for the year.

Of the 374 companies in the S&P 500 that have reported earnings so far, 69% have topped analysts' expectations, according to S&P Capital IQ.

But Tesla (TSLA) shares plunged after the electric car maker's third-quarter results were not as strong as investors were hoping for.

CBS (CBS, Fortune 500), Whole Foods (WFM, Fortune 500) and SolarCity (SCTY) are due to report earnings after the closing bell.

Investors will also keep tabs on Twitter (TWTR) once the market closes. The social media site, which has more than 230 million users, is widely expected to price its initial public offering this evening and begin trading on Thursday.

The IPO market has been booming as stocks trade near all time highs. The S&P 500 has gained 24% so far this year, extending a bull market that started in March 2009.

Related: Main Street may avoid Twitter

Looking ahead to the rest of the week, investors are awaiting the U.S. October jobs report from the Bureau of Labor Statistics. The report, due out Friday morning, has a strong influence on market sentiment.

Investors are zeroing in on the economy as they attempt to gauge when the Federal Reserve will begin to slow the pace of its $85 billion per month stimulus program.

The Fed is expected to stay on hold until sometime next year, but any sign of improvement in growth, particularly in the job market, could stoke concerns about an early exit.

Related: Fear & Greed Index nearing extreme greed

On Thursday both the European Central Bank and the Bank of England will announce interest rate decisions. The ECB is under pressure to cut rates to a new low.

European markets were moving higher in morning trading. The CAC 40 in Paris was leading the way with a 0.9% gain. But it was a mixed picture for Asia's stock markets.

First Published: November 6, 2013: 9:51 AM ET

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JPMorgan paying $5.1 billion to Fannie, Freddie over mortgages

It's been a rough year for JPMorgan.

NEW YORK (CNNMoney)

The bank has also been in talks with the Justice Department and other government officials over another potential settlement based on similar claims. That settlement will likely be even more expensive for JPMorgan.

The claims relate to conduct at JPMorgan and at Bear Stearns and Washington Mutual, which JPMorgan purchased in 2008. At issue are allegations that the firms sold risky mortgages and mortgage securities while misrepresenting their quality.

Among the purchasers were Fannie Mae and Freddie Mac, the government-backed housing finance giants that required a massive bailout in 2008 when their housing investments soured.

The deal was announced by the Federal Housing Finance Agency, which has overseen Fannie and Freddie since their 2008 rescue.

Agency head Edward DeMarco said the accord "provides greater certainty in the marketplace and is in line with our responsibility for preserving and conserving Fannie Mae's and Freddie Mac's assets on behalf of taxpayers."

"This is a significant step as the government and JPMorgan Chase move to address outstanding mortgage-related issues," DeMarco said.

The firm reached the agreement without admitting or denying wrongdoing.

Related: More banks in crosshairs

JPMorgan will pay $4 billion to resolve claims related to the alleged misrepresentation of mortgage-backed securities -- investment products created by bundling payments from individual loans.

It will also repurchase $1.1 billion worth of mortgages sold to Fannie and Freddie between 2000 and 2008 that the firms say do not meet their quality standards.

JPMorgan (JPM, Fortune 500)said the settlements "are an important step towards a broader resolution of the firm's [mortgage-backed-securities]-related matters with governmental entities, and reflect significant efforts by the Department of Justice and other federal and state governmental agencies."

JPMorgan acquired Washington Mutual in 2008 after the failed bank had been taken over by the Federal Deposit Insurance Corporation. It's unclear whether JPMorgan will be able to pursue reimbursement claims with the FDIC for the portion of the settlement related to WaMu.

This issue has been a point of contention in JPMorgan's negotiations with the Justice Department, which wants to prevent the bank from passing on any settlement costs.

Securities sold by WaMu accounted for roughly $1.15 billion worth of the FHFA settlement.

Related: Half of nation's foreclosed homes still occupied

Investors initially shrugged off the news, which has been rumored for weeks. JPMorgan shares were up slightly in after-hours trading Friday, and have gained 20% so far this year.

JPMorgan is just one of 18 banks sued by the FHFA back in 2011 over the alleged misrepresentation of mortgage-backed securities, and is only the fourth to reach a settlement.

UBS (UBS) agreed to a settlement with the FHFA in July for $885 million. The agency has also settled with Citigroup (C, Fortune 500) and General Electric (GE, Fortune 500) for undisclosed sums.

JPMorgan is large enough to easily absorb the settlement costs. It's the biggest bank in the nation, with assets of $2.5 trillion and net income of $21.3 billion in 2012.

The bank has been buffeted by legal problems in the past few months, however.

It has paid over $1 billion in fines in connection with last year's "London Whale" trading debacle, and $80 million more over its allegedly unfair credit card billing practices.

In July, the bank agreed to pay $410 million to settle charges that it manipulated electricity prices in California and the Midwest. It is also facing scrutiny over its hiring practices in China and its alleged involvement in the Libor rate-fixing scandal.

JPMorgan posted a loss for the third quarter based on its massive legal expenses. CEO Jamie Dimon called the loss "painful" and warned that litigation costs could continue to be a drag on earnings for several quarters.

First Published: October 25, 2013: 5:26 PM ET

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