Better than expected earnings by the investment firm Goldman Sachs
helped push U.S. stocks slightly higher on Tuesday. But mixed economic
data kept the market in check. The second quarter results for the
nation's largest surviving securities firm easily surpassed
expectations. But larger than expected
increases in wholesale prices are stoking worries about inflation.
predicted that Goldman Sachs would post earnings of more than $2
billion in the second quarter. Instead, the U.S. investment firm
reported a profit of $3.4 billion.
Although the impressive
results drew cheers from investors, a government report showing a
nearly 2 percent jump in the producer price index, which measures the
average change in price for domestic goods, tempered enthusiasm on Wall
Financial historian and author Charles Geisst says big
profits for a firm that took in $10 billion in government bailout funds
last year might upset taxpayers. "No one likes obscene profits in times
like this. But on the other hand, Americans do like money," Geisst
said. "And they admire firms that take a risk in order to get a profit."
investment firm is among the first to pay back its government loans.
It also managed to set aside more than $6 billion for employee bonuses.
says Goldman Sachs succeeded by making profits the old fashioned way -
by taking risks and buying and selling volatile commodities like oil.
"The taxpayer looks at this and thinks, 'We are getting back to
normal,' which is not the case right now; it's a matter of risk
taking," he explains. "Extreme risk produces extreme profit and vice
versa. But this gives a consumer some heart at the same time."
Treasury Secretary Timothy Geithner has warned that a full economic
recovery will take time. But on Tuesday, he told Arab business leaders
in Dubai that the global recession is showing signs of easing.
rate of decline in economic activity has slowed, business and consumer
confidence has started to improve, the housing markets are showing some
signs of stability, the cost of borrowing, the cost of credit, has
fallen significantly," Geithner states.
Despite an improving economic forecast, many large banks, including Citigroup and Bank of America, are still struggling.
Tuesday, President Barack Obama sounded a note of caution, saying that
unemployment will likely continue to rise before the job market
improves. Last month's jobs report showed that nearly one in ten
American workers are unemployed.