Will Greece be the next Lehman Brothers? Find out more about this and other top news stories of the day.
Shareholders Sue JP Morgan Chase
JPMorgan Chase and the bank's Chief Executive Officer, Jamie Dimon, face two separate lawsuits filed by shareholders on Wednesday in response to recently disclosed trading losses totaling $2 billion, USA Today reports. The FBI has also opened a preliminary investigation into possible criminal activity by the firm.
JP Morgan has attributed the losses to a failed hedging strategy. Lawsuits filed in New York yesterday claim that JPMorgan changed its risk model without telling investors, a shift that was misleading and led to losses, according to USA Today.
Europe Debt Crisis Overshadows Housing Data
The S&P 500 Index fell for a fourth consecutive day, despite better-than-expected reports on U.S. industrial production and housing activity, according to Bloomberg News. Concern over Europe’s debt crisis overshadowed the encouraging data, driving the index down 0.4 percent to 1,324.83 at the market close.
Financial stocks were the biggest losers among the S&P’s 10 sectors, and J.C. Penney Co. posted its biggest loss ever, a drop of 20 percent on disappointing quarterly earnings, according to Bloomberg.
The Dow Jones Industrial Average fell 0.3 percent to 12,598.55.
Facebook to Raise Size of IPO
Facebook Inc. investors have expanded the size of the company’s initial public offerings to 421 million shares, according to Bloomberg News, noting that the company on Tuesday increased the share price range to $34 to $38.
The IPO has a market value as high as $104 billion, the largest IPO by a high-tech company, said Bloomberg, noting analysts’ concerns that the expanded offering may signal concerns over earnings growth for the social media company.
Yesterday,General Motors Co. – the nation’s biggest automaker - announced it would no longer advertise on Facebook, and the company last week said advertising sales are not growing apace with gains in users, according to Bloomberg.
Is Greece the Next Lehman Brothers?
Outgoing World Bank President Robert Zoellick likened the Greece debt situation to the collapse of Lehman Brothers in 2008, an event that roiled global financial markets, during a speech on Wednesday at the Economic Club in Washington, DC, according to CNN Money.
Zoellick expressed concern over the ripple effects Greece’s departure would have on the rest of the Eurozone, particularly Spain and Italy. Zoellick said he has called for greater capital investment in the European Investment Bank, which serves the European Union, to address potential illiquidity in European economies.
Fed Likely to Hold Steady
The Federal Reserve is unlikely to deviate from its current course, according to minutes of the April meeting of the Federal Open Market Committee that were released on Wednesday, The New York Times reports. The policy-making committee of the nation’s central bank intends to continue efforts to keep interest rates near zero, but could alter its policy should economic conditions shift significantly.
The Fed also plans to expand its meeting schedule to eight two-day sessions, from the current schedule of four one-day sessions and four two-day sessions, The Times reports, in an effort to foster discussion among committee members.
Skechers Agrees to Settle Toning Shoe Complaints
Skechers has become the second maker of toning shoes to settle complaints that the company implausibly claimed that the shoes could deliver toned bodies without the wearer having to set foot in a gym, The New York Times reports. Skechers has agreed to pay $40 million in restitution to consumers, following Reebok, which in September agreed to refund consumers $25 million to settle a complaint that it made false claims about its EasyTone shoes.
The settlement was announced yesterday by the Federal Trade Commission, which said that Skechers had even claimed the shoes could help consumers lose weight. According to The Times, toning shoes were once the fastest-growing segment of the athletic shoe market but sales fell by half in 2011 to $550 million.
Skechers has denied making false claims, but said it settled the FTC claim in efforts to avoid costly and time-consuming litigation. The settlement allows Skechers to continue to sell and promote its toning shoes.