James Temple, Chronicle Staff Writer

Friday, March 27, 2009

Interest rates on 30-year mortgages dropped to the lowest level on record this week, adding another incentive for home buyers to leap back into the market.

Few in the industry, however, consider falling rates the silver bullet to a real estate recovery. The tumbling economy continues to weigh heavily on consumer psychology.

“Will it help fuel some demand? Sure it will,” said Andrew LePage, analyst with San Diego research firm MDA DataQuick. “Will it be the biggest factor this year? No. Ending the recession, reducing the pace of job cuts and solving the jumbo loan problem will make a much bigger difference.”

Mortgage giant Freddie Mac said Thursday that average rates on 30-year fixed-rate mortgages fell to 4.85 percent, down from 4.98 percent last week. That’s the lowest in the 38-year history of the company’s survey. It’s also nearly 2 percentage points off last year’s peak of 6.63 percent, amounting to consumer savings of about $225 per month on a $200,000 loan.

Rates have marched steadily downward, in lockstep behind bond yields, since the Federal Reserve announced last week it would pump more than $1 trillion into the economy by buying up long-term Treasury notes and mortgage-backed securities.

Home buyers and owners are clearly taking notice. The Mortgage Bankers Association said on Wednesday that its applications index for the week ended March 20 soared 31.4 percent from the prior week. It’s notable, however, that nearly 80 percent of applications came from borrowers seeking to refinance home loans at lower rates rather than purchase homes.

Falling mortgage rates are just one of several carrots dangling in front of those willing to close on homes in this market. The median price in the Bay Area fell below 1999 levels last month, dipping below $300,000, MDA DataQuick reported.

In related news: Typical first-time home buyers are eligible for an $8,000 tax credit passed in the federal stimulus package, most buyers of new homes in California can snag a $10,000 state tax credit, and first-time buyers of new homes are potentially eligible for both.

In this economy, however, incentives go only so far.

“Even though the cost of buying a home has gone down, people’s ability to buy a home has weakened,” said Jed Kolko, associate director at the Public Policy Institute of California. “As people lose jobs, or they don’t get the raises they’d hoped for, this makes it harder for people to buy or stay in their homes.”

In addition, the average 30-year fixed mortgage rate doesn’t apply in all locations and circumstances. In the Bay Area, many homes are priced above $417,000, which automatically tacks on an additional quarter percentage point, said Marc Savoy, a mortgage broker with Pacific Mortgage Consultants in Larkspur.

Jumbo loans, those above the $759,750 limit at which Freddie Mac and sister company Fannie Mae no longer buy or back the mortgages, are even more expensive and difficult to secure. That fact, widely attributed to the lack of secondary buyers for such loans, is believed to be stifling sales in high-priced counties like San Francisco and Marin.

Finally, national average notwithstanding, local lenders don’t have huge incentives to quickly lower their rates because they’ve already been flooded with more applications than they can handle in recent weeks, Savoy said.

In Freddie Mac’s survey, the average rate on a 15-year fixed-rate mortgage dropped to 4.58 percent this week, down from 4.61 percent last week. The rates do not include add-on fees known as points. The nationwide fee averaged 0.7 point last week for all fixed-rate mortgages.

The Associated Press contributed to this report. E-mail James Temple at jtemple@sfchronicle.com.

By Bob Sanders
Like so many other branches of the credit market, lending through the U.S. Small Business Administration, within New Hampshire and elsewhere, has plummeted over the last year. That’s why so much hope is being attached to President Obama’s recently announced $15 billion effort aimed at boosting lending to small businesses

Thus far this fiscal year, New Hampshire banks and financial institutions lent out a total of 161 SBA loans – amounting to $22.7 million – a 40 percent decline from the first five months of the previous year. Nationally, the decline is even worse – closer to a 50 percent drop in lending.

Why is it happening? Small businesses claim that credit has dried up and banks are not willing enough to lend. Local community banks contend that businesses, wary of taking on new debt, are not eager to borrow. 

Whether it is one or the other, or a combination of the two, it has become apparent in recent months that something has to be done to get the small-business credit market moving again. That something is actually a number of things — a complex package that coincides with some major SBA rule changes, all aimed at giving a nudge to both borrowers and lenders.

While no one is predicting that the changes will result in a deluge of credit flowing into the market, most think that they will help.

“It makes lenders a little more confident,” said Wit Jones, state director for the U.S. Small Business Administration in New Hampshire.

“It’s one of the more useful efforts to come out of Washington,” said Jerry Little, president of the New Hampshire Bankers Association. 

According to Little in New Hampshire, “we haven’t seen a severe credit crunch yet, but a lot of businesses have been lying low and not making great plans.”

As the recession continues, he added, “we are approaching a time when talented people who have lost a job will be saying, ‘Maybe this is my shot of being an entrepreneur.” The lending and rules changes, he said, will make the SBA programs “a bit more attractive” for both the lender and the borrower.

The changes don’t just affect SBA loans or even new loans to small businesses. They allow, in some cases, SBA involvement in existing conventional commercial lending. Some even enable businesses with existing SBA loans to receive a refund.

In short, the loan package does three things right away:

•Increases the loan guarantee on some loans to 90 percent.

•Eliminates or sharply reduces fees for just about all loans.

•Offers to buy the SBA guarantee portion on the secondary market.

In addition, the SBA is coming out with new programs as part of the stimulus that would:

•Allow banks to hand out short-term, interest-free government-backed loans to cover six months of payments on a conventional business loan.

•Enable banks to restructure conventional loans involving real estate or conventional equipment to include an SBA-guaranteed portion.

The SBA is also changing its rules in two major ways unrelated to the stimulus package:

•It will make it easier for businesses to refinance some shorter-term conventional loans into longer-term SBA 7(a) loans.

•It will make it harder to finance acquisitions of service-oriented business when the major collateral is a customer base.

President Obama’s plan also features a number of small-business tax changes – extending the loss carryover deduction and lowering estimated tax payments.

In order to understand the lending changes, is best to examine one program at a time.Secondary market
It shows how bad the credit freeze is when you can’t even sell the SBA portion – which is fully backed by the US Government – of a loan to investors, but that is what has happened. 

“We used to get calls once a month to buy our portfolio of loans,” said Lou Guevin, executive vice president of commercial services at Laconia Savings Bank. “We haven’t got those kind of calls in a while.”

For Laconia Savings, and all local banks contacted by NHBR, that hasn’t been a problem. They don’t sell their securities on the secondary market anyway. 

But for finance companies like CIT, the collapse of the secondary makes a big difference. Banks can get their capital from their depositors. CIT raises capital by selling loans on the secondary market.

And it has been these finance companies that have — until the recession hit – been stepping in to buy larger, more risky loans that some banks have been reluctant to touch. 

But whether this second market will help CIT remains to be seen, said Beth Chea, retail account manager for CIT’s Northeast region who operates out of her New Hampshire home. Because CIT pays interest to investors, it charges an up-front premium.

“That’s important — how much that premium is and whether it is beneficial for us to sell the loan,” said Chea. “And I’m not sure what they (the SBA) will offer.”90 percent guarantee
This sounds awfully good, until you realize that the guarantee doesn’t apply to the SBAExpress loan program, which – for most banks – is the most common type of lending. Indeed, in the last two years, nearly three-quarters of the loans (and about a third of the amount) lent through SBA consisted of smaller SBAExpress loans, which are guaranteed at 50 percent.

Banks love the program because it involves less paperwork. Indeed, since most of these loans are granted over the Internet, there’s no paperwork at all. 

The 90 percent guaranteed is only for the more conventional 7(a) loan, which come with up to an 85 percent guarantee for loans below $150,000. That’s not a huge change. 

There is a bigger differential for larger loans of more than $150,000, for which the current rate is 75 percent. But there is a bit of a catch there too, on the maximum loan of $2 million. It turns out the guaranteed portion — $1.5 million — can’t be exceeded, so the largest 90 percent guaranteed loan would be for $1,666,666.

Still, with the average SBA loan over the last 2-1/2 years being just under $160,000, this change could affect a significant number of loans. But community banks, which tend to lend in the smaller range – are not jumping up and down about it.

After all, from where they sit, it isn’t a lack of capital, but a lack of borrowers that’s the problem. But most banks said that it would enable them to go a bit more out on the limb on some of the more risky loans that they would have previously turned down.

“I don’t know how much additional lending we will do under the 90 percent guarantee,” said Jim Tibbetts, president and chief executive of First Colebrook Bank. “But the additional guarantee might make it more palatable.”

“It’s not a big change for us,” said Cathy Schmidt, president and chief executive of Citizens Bank New Hampshire, the state’s largest SBA loan provider, in terms of number of loans made.

Ironically, for some banks, the biggest change might be in the aforementioned SBAExpress program, the very program that it does not directly change at all. Banks might steer some borrowers away from the program because of the 40 percent difference in the loan guarantee, and in these economic times, loans that were once considered safe are now more of a gamble.

“In the future we will probably do less Express loans, because of the increased guarantee,” said David Cassidy, executive vice president and senior loan officer at Bedford-based Centrix Bank.

Tibbetts of First Colebrook agreed: “The other (7a) loans may take precedence with the 90 percent guarantee.”

The 90 percent guarantee will likely make more of a difference to finance companies like CIT, which handles larger and riskier loans.

“I’m pretty optimistic about that, when you are looking at a 10 percent risk, rather than a 25 percent one,” said Chea.Fee reductions
The reduction in fees could have the greatest impact in attracting borrowers to the SBA program by reducing the cost of the loan substantially, New Hampshire bankers said.

The fee can be as high as 3.5 percent on the guaranteed portion of the loan, which on a $1 million loan guarantee comes out to $35,000. Citizens Bank absorbs the fee, said Schmidt, so doing away with it improves “the cost-benefit analysis” of these programs.

Most banks do pass the fee along to their customers. 

There also are substantial fee reductions in the SBA 504 program, which involves loans for commercial property and heavy machinery or equipment.

The fee structure, like the program, is more complex, but the changes could amount to $20,000 savings on a $1 million loan. Centrix, which boasts that it is the state’s top 504 lender, expects the change will help attract more borrowers.

The fee reduction also applies to the SBAExpress program, according to the SBA’s Jones. 

And the fee reduction is retroactive to the date when the stimulus package was passed, Feb. 17. So if you paid fees on a loan issued after that date, you are entitled to a refund. The agency is still setting up refund procedures.More to come
SBA hasn’t made a big deal out of what may perhaps be its most wide-reaching program, since it’s not available yet, but it may have the biggest impact of all, since it applies to traditional non-SBA commercial lending.

Under the proposal, SBA would fully guarantee loans totaling six months of payment on the non-SBA loans – up to $35,000, with no payments for a year and no interest (on the part of the borrower) for four years.

“This is going to be huge,” said Schmidt of Citizens.

There are still many unanswered questions. What type of commercial lending will be eligible? Will it be available for those who don’t have trouble making the payments, or those who are having too much trouble making them? What happens if the loans aren’t paid back at the end of four years?

Another change, not related to the stimulus package, went into effect March 1. While the timing of the change is totally coincidental, said Jones, it has the same affect of shifting traditional loans to SBA, this time through refinancing. 

Before the change, SBA couldn’t transform old debt into an SBA loan without a great deal of difficulty. The rule change allows refinancing if it makes sense for both the bank and the customer, and also does away with requirement that there must be a 20 percent decrease in the borrower’s payments.

Most banks see this as a way of rolling existing debt into a larger project, with the guarantee in place for as much as 90 percent of the whole loan, or as a way to stretch out the payments into a seven-year SBA loan.

“It could make the payments more affordable and free up capital,” said Schmidt.

A similar plan would allow refinancing of real estate or heavy equipment loans into an SBA 504 loans, but the details have yet to be worked out.

The economic stimulus is coming to West VirginiaStory by Ann Ali
Email | Bio | Other Stories by Ann Ali 

The nation’s economic stimulus recovery act is coming to West Virginia, a few small businesses at a time.

As part of the Stimulus Recovery Act, the nation’s Small Business Administration has $730 million on hand to assist in the recovery act and enhance some of its loan programs, according to Rick Haney, business development specialist for West Virginia’s SBA.

“It goes through all the SBA loan programs, so each specific state doesn’t get ‘x’ amount of dollars,” Haney said. “A loan in California is the same as a loan in West Virginia as far as we’re concerned.”

Haney said $375 million from the $730 million has been set aside to reduce and eliminate fees and increase the guarantee amounts.

“The SBA makes all its loans through lenders, and the lenders were getting a 75 percent or 80 percent guarantee,” he said. “We’re giving them up to a 90 percent guarantee … and we also reduced the fees and eliminated the fees for all borrowers.”

Haney said the SBA has expanded its micro-loan program. Only one bank in West Virginia — located near Morgantown — currently grants micro-loans, but Haney said the SBA is negotiating to get a few more in the state.

He said lenders often don’t get a “warm fuzzy feeling” about start-up businesses since they don’t have a record to stand behind. So when the SBA comes in to provide a guarantee, it helps. “We’re like a large insurance policy,” Haney said. “Everybody’s wanting to go back to Main Street — that’s where the recovery is going to be, and we’re happy to provide it.”

He said surety loans also are receiving some help, which may relate to other stimulus funds.

“This gives it to the people doing some of those stimulus projects: the bridges and the roads,” he said. “This gives a little more assurance to companies going out to bid on those.”

He said the SBA’s new program, the American Recovery Capital Loan, will be backed 100 percent by the SBA, and awards as much as $35,000 for borrowers to make payments on any debt that isn’t an existing SBA loan.

“It’s for a small business having difficulties making payments right now,” Haney said. “They can take this and make payments to get back up to speed … and can even use it for credit cards or things like that.”

Haney said borrowers of the ARC loan don’t have to begin paying it back for one year, and they have as many as five years to repay it.

He said the SBA has seen a decline in its lending portfolio during the past year — 60 percent fewer loans than this time last year.

“It slowed down toward the end of last year,” he said. “We’re starting now to see a little pick up, and that alleviates some of the fears of the lenders. They tend to have a catch-22 situation.”

Haney said sending money “back into the system,” could free up funds to hire back employees who may have been laid off and also could start a trickle-down effect when vendors deal with one another.

“This is good funding for us to have, and good funding for the small businesses,” he said. “They’re the lifeblood of the economy. Everywhere you look there’s a small business, and probably in West Virginia, 97 (percent), 98 percent are considered small businesses by our standards.”

Haney said none of the procedures for businesses have changed.

“They just need to go to their lender, and if they’re having any issues or problems, they can contact our office,” he said.

For information about the SBA, participating lenders or available loans, visit sba.gov/wv.

Copyright 2009 West Virginia Media. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

By Joyce M. Rosenberg
The Associated Press

last updated: March 24, 2009 07:11:20 PM

By David Cho and Binyamin Appelbaum
Washington Post Staff Writers
Tuesday, March 17, 2009; D01 

The Obama administration yesterday unveiled a series of measures to help the nation’s small businesses, saying it would spend up to $15 billion to help them get the loans they need to weather the economic crisis.

“Small businesses are the heart of the American economy,” Obama said in announcing the measures. “They’re responsible for half of all private-sector jobs, and they created roughly 70 percent of all new jobs in the past decade. . . . But today, too many entrepreneurs can’t access the capital to start, operate or grow their business. Too many dreams are being deferred or denied by a form letter canceling a line of credit.”

Under the administration’s plan, the government will buy the small-business loans that are clogging the books of community banks and other lenders, allowing the institutions to start lending again. The government will also increase its guarantee of the Small Business Administration’s primary loan program, reducing the amount of money lenders can lose if borrowers default on loans.

The administration will pay for the initiatives with funds from the $700 billion financial rescue program. While that decision was welcomed by lawmakers who have called for more money to be used for Main Street instead of Wall Street, some critics said the government is relying on a broken program that may end up benefiting big banks and lenders more than small businesses.

Through the SBA, lenders would see larger profits and take fewer risks than they would through ordinary loan programs. As a result, lenders could steer borrowers into the SBA program even when they qualify for ordinary loans, said Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University.

“This is a system that rewards banks,” she said.

Treasury Secretary Timothy F. Geithner yesterday admonished the nation’s largest banks for withholding loans to many small businesses, telling the banks that they helped create the current mess and “bear a special responsibility for helping America get out of it” by increasing the flow of credit, especially since they have benefited from massive federal bailouts. He said the administration will now require the country’s top 21 banks receiving federal assistance to include small-business loans in their monthly reports.

“We need you to put that assistance to work for the American economy,” Geithner said at the White House. “Many banks in this country took too much risk, but the risk now to the economy is that you will take too little risk.”

The volume of government-subsidized SBA loans has plummeted, as lenders have been scared away by a rapid rise in defaults.

Bob Coleman, publisher of the Coleman Report, an industry newsletter for SBA lenders, said the government’s willingness to absorb a larger share of banks’ losses should bring lenders back into the market.

“We will have additional losses, but a couple hundred million in losses is an excellent return to retain the jobs that are out there and to create new jobs,” Coleman said. “It makes excellent economic sense to get involved with this process.”

Other analysts said even if the government’s intervention works, its impact may be limited. The SBA program historically accounts for a minuscule share of lending to small businesses — in 2006, about 4 percent of the dollar volume of loans to small businesses.

De Rugy, who has studied the SBA program and testified twice before Congress about its shortcomings, said the program encourages banks to make loans without regard for risk because the loss is mostly covered by the government. She said the administration’s plan to increase the amount of loss covered by the government to 90 percent would make the problem worse, further exposing taxpayers.

“You basically encourage a system that gives an incentive for the banks to lend money without being careful,” de Rugy said. “We’re making this less costly for the banks and less costly for the borrowers, but we’re exposing taxpayers more.”

White House advisers predicted that the $15 billion program for small-business loans could cost the federal government very little as loans are repaid over time. But they acknowledged that the final cost of the program — and how it will end once the economy has recovered — is unknown.

The moves announced yesterday also include the elimination of fees to motivate more lending by banks to small businesses.

Staff writers Michael D. Shear and William Branigin contributed to this report.

Details of plan to rescue housing

Ways to keep people afloat: refinance, modify loans

(03-04) 18:27 PST SAN FRANCISCO – The Obama administration unveiled key details of its housing market rescue program on Wednesday, including a ceiling on mortgages eligible for modification that was raised high enough to potentially help hundreds of thousands of struggling Californians, real estate experts around the state say.

The Making Home Affordable plan, announced last month, is designed to help as many as 9 million U.S. homeowners avoid foreclosure or secure more affordable loans.

It includes two main components: One will allow borrowers who have been making timely payments to refinance into cheaper, fixed-rate loans; the other will encourage lenders to modify monthly mortgage payments for borrowers at risk of default.

Most of the details revealed Wednesday relate to the $75 billion modification program, which is intended to keep up to 4 million struggling borrowers in their homes. Notably, the program will apply to loans with unpaid principal balances of up to $729,750 for an occupied single-family home.

Borrowers were concerned that the figure would be set too low to help many in a high-cost housing state like California, especially in the Bay Area, where as recently as the summer of 2006 median home prices exceeded that threshold in four of nine counties, according to San Diego research firm MDA DataQuick.

“They raised the limit,” said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University in Orange. “That’s good news for Californians.”

Under the modification program, participating loan servicers will be required to evaluate mortgages at risk of default to determine if they qualify for the program. If so, those companies will have to reduce total monthly housing payments to 31 percent of the borrower’s income by reducing the interest rate to as low as 2 percent for five years, extending terms up to 40 years and forgiving part of the principal. Once the lender reaches the 38 percent income threshold, the government will kick in matching funds to help lower it to 31 percent.

To qualify for the program, which runs through 2012, borrowers will have to provide their most recent tax return and two pay stubs and prove “hardship,” such an increasing housing payments or decreasing income.

“The program will help a lot of people directly and a lot of people indirectly by stabilizing prices in neighborhoods,” said Stephen Levy, senior economist at the Center for the Continuing Study of the California Economy in Palo Alto.

A limiting factor is that the program is generally voluntary for loan servicers. But government mortgage companies Fannie Mae and Freddie Mac, which control the majority of the home loans in the United States, are required to follow the guidelines, as are any banks that receive future bailout funds. There are cash incentives to lure additional participants.

Several major banks, including Wells Fargo & Co. of San Francisco and Bank of America Corp. of Charlotte, N.C., announced that they intend to implement the program.

To qualify for the refinance program, loans must be held or securitized by mortgage giants Fannie Mae or Freddie Mac, and the new mortgage and refinancing costs can’t exceed 105 percent of current market value. Previously, Fannie and Freddie generally couldn’t guarantee refinancing for mortgages worth more than 80 percent of a home’s value, making it difficult for many to take advantage of today’s lower interest rates.

This change will have a positive but limited impact in the Bay Area, said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley. He estimated that only 20 to 30 percent of Bay Area home loans are controlled by Fannie and Freddie, because the “conforming” loan cap was $417,000 during the real estate run-up, far below the regional median at the time.

He added that homeowners in states like California, which experienced bigger declines than many areas, should be allowed to refinance even if their homes are 25 percent underwater.

More than 1.5 million homes are seriously delinquent and close to foreclosure.

* GM stock off over 15 pct on possible bankruptcy warning

* Citigroup shares fall below $1, financials drag

* Worries of troubles in finance arm of GE weigh

* Dow off 4.1 pct, S&P off 4.3 pct, Nasdaq down 4 pct

* For up-to-the-minute market news, click [STXNEWS/US] (Updates to close)

By Leah Schnurr

NEW YORK, March 5 (Reuters) – U.S. stocks slid on Thursday with the Dow and S&P falling to 12-year lows as General Motors’ warning of possible bankruptcy and concerns about the banking system’s fate reinforced investors’ reluctance to take on risk.

The previous session’s rally proved fleeting as worries about the financial system’s health hit bank stocks again and investors focused on the possibility that troubles in the finance arm of widely held General Electric (GE.N: Quote, Profile, Research, Stock Buzz) could lead to a debt rating downgrade for the entire company.

GE’s stock was down 0.5 percent at $6.66 after falling to its lowest since 1991 a day earlier. Uncertainty about the exposure of U.S. banks to GE remained a significant concern and the S&P financial index .GSPF fell nearly 10 percent.

Shares of Citigroup (C.N: Quote, Profile, Research, Stock Buzz), once the world’s largest bank by market value, fell as low as 97 cents during the session, trading below $1 for the first time. [ID:nN05328477]. Anxiety rose over whether the bank can be restored to health or whether it will have to be taken over by the government.

“The loss of confidence is pervasive. There isn’t any magic bullet here that’s going to save Citi or Bank of America. The only thing that might save them is if the government comes in and sponsors a bankruptcy,” said John Schloegel, a vice president of Capital Cities Asset Management in Austin, Texas.

The Dow Jones industrial average .DJI fell 281.40 points, or 4.09 percent, to 6,594.44. The Standard & Poor’s 500 Index .SPX lost 30.32 points, or 4.25 percent, to 682.55. The Nasdaq Composite Index .IXIC dropped 54.15 points, or 4.00 percent, to 1,299.59.

General Motors (GM.N: Quote, Profile, Research, Stock Buzz) shed 15.5 percent to $1.86 after its auditors raised “substantial doubt” about the automaker’s viability if it fails to head off losses and stop burning through cash. [ID:nN05319669]

Investors worry that GM’s collapse would send shock waves through the recession-hit U.S. economy, given that it is a major employer and buyer of supplies from auto parts makers.

The Nasdaq closed at its lowest level since March 2003, a month remembered for the beginning of the Iraq war. Both the Dow and S&P 500 are down more than 24 percent for the year so far, with the broad S&P shedding 56 percent from 2007′s all-time high. U.S. stocks have lost around $11 trillion in value since hitting all-time highs in October 2007.

Indexes more than gave back Wednesday’s rally, which was spurred by news of a Chinese economic stimulus plan. But those hopes were dashed on Thursday morning when Premier Wen Jiabao, speaking to parliament, did not announce any expansion of China’s stimulus package.

Moody’s Investor Service said on Wednesday it may cut its ratings on Wells Fargo (WFC.N: Quote, Profile, Research, Stock Buzz) and Bank of America (BAC.N: Quote, Profile, Research, Stock Buzz), helping drive Wells Fargo down 15.94 percent to $8.12 and pushing Bank of America down 11.7 percent to $3.17.

Citigroup’s stock closed at $1.02, down 11 cents, or off 9.7 percent for the day in NYSE trading.

Exxon Mobil (XOM.N: Quote, Profile, Research, Stock Buzz) was the Dow’s biggest drag, dropping 5.3 percent to $62.22 as U.S. front-month crude CLc1 lost $1.77 to settle at $43.61 a barrel, pressured by deteriorating global economic prospects.

On the upside, shares of Wal-Mart (WMT.N: Quote, Profile, Research, Stock Buzz) added 2.6 percent to $49.75 after the world’s largest retailer posted solid monthly sales and raised its annual dividend. [ID:nN05461432]

Grim economic reports signaling more fallout from the recession added to the negative tone ahead of Friday’s key non-farm payrolls report. Data is expected to show the economy shed 648,000 jobs last month, while the unemployment rate is expected to rise to 7.9 percent, according to a Reuters poll of economists.

Indeed, the White House said that it doesn’t expect to see good news out of the jobs report.