France to relax austerity as recession bites

French President Francois Hollande is under pressure to accelerate economic reforms even as recession means the country will need more time to reduce government borrowing.

LONDON (CNNMoney)

The European Commission published new forecasts showing that the eurozone economy would shrink by 0.4% in 2013, slightly worse than its previous estimate of 0.3%. The 17 countries in the eurozone contracted 0.6% in 2012.

France, the region's second largest economy, was back in recession in the first quarter of 2013, the commission said, and would contract by 0.1% over the year as a whole. The French government still expects the economy to grow slightly this year.

"The French government forecast is in our view overly optimistic," EU finance chief Ollie Rehn said at a news conference.

The European Central Bank cut interest rates for the first time in 10 months Thursday as hopes of a recovery later this year fade.

Unemployment continues to hit new record highs, inflation has fallen way below the central bank's target and recession is spreading to core countries including France and the Netherlands.

Recent survey data even point to troubling weakness in Germany, the only one of the eurozone's five biggest economies still expected to grow this year.

EU policymakers are pinning their hopes on a recovery in exports to lead to a return to modest growth in the second half of this year. But the prolonged recession has forced them to allow some countries to reduce debt more slowly to avoid making matters worse.

Spain, stuck in recession for 21 months and with unemployment at 27%, has been given two more years to bring its budget deficit to below 3% of gross domestic product.

Stagnation in France means it too will need similar leeway, Rehn said.

"Considering the economic situation, it may be reasonable to extend the deadline by two years and to correct the excessive deficit at the latest by 2015 in France," he said.

The extra time should be used to introduce new reforms to product and labor markets and the French pensions system, he added.

"That is key to unlocking the growth potential that France so badly needs," Rehn said.

France's budget deficit will rise to 4.2% of GDP next year from 3.9% in 2013 unless policies change, according to the European Commission. Germany is forecast to balance its budget next year, after running a small surplus in 2012.

Economists are becoming increasingly concerned at the growing divergence between France and Germany, historically the twin motors of the EU economy and political integration.

Related: Hard-up France sells presidential wine

French President Francois Hollande, who was elected a year ago after campaigning to put growth before austerity and introduce higher taxes on the rich, has seen his approval ratings fall sharply as unemployment continues to climb.

In recent months he has begun to reform labor markets and pensions, and announced plans to cut capital gains tax. But he is moving too slowly for some, and his government continues to send mixed messages.

Plans for a 75% tax on incomes above a million euros are being redrafted to apply to large companies rather than individuals, and this week the government used its stake in France Telecom to prevent the company selling video site Dailymotion to Yahoo.

France Telecom has lashed out at the intervention, saying it should have been left to the company's management to decide on the deal.

First Published: May 3, 2013: 9:10 AM ET

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April jobs report: Hiring picks up

NEW YORK (CNNMoney)

The economy added 165,000 jobs in April, according to the Labor Department. That was more than the 140,000 jobs economists expected, and it marked an improvement over March.

The even bigger story, though, came from large revisions to earlier numbers. It's a common practice for the Labor Department to revise its data for the two prior months, and this time, those revisions showed an additional 114,000 jobs were added in the U.S. economy over February and March alone.

Previously, March hiring had looked particularly weak, with only 88,000 jobs added that month. Now, the Labor Department says 138,000 jobs were added in March.

February job growth, which had already looked solid, now looks even stronger. About 332,000 jobs were added in February, making it the strongest month for hiring since the Census hired temporary workers in 2010.

The report goes a long way "toward soothing fears of another spring slowdown," said Paul Ashworth, chief U.S. economist for Capital Economics. Stocks jumped, and the S&P 500 climbed above the 1,600 level for the first time ever, following the report.

The strongest job growth in April came from restaurants and bars, which added 38,000 jobs; temporary services, which added 31,000 jobs; and retailers, which added 29,000 jobs. On the flip side, the government is now the biggest drag on the job market. Overall, federal, state and local governments cut 11,000 jobs in April.

The bigger picture, however, remains static. About 11.7 million people remain unemployed -- a number that only includes those who have looked for work in the prior four weeks. Workers who have given up on the job market are not counted.

The unemployment rate fell to 7.5% in April, but that's still high compared to historical levels. Before the recession hit, the unemployment rate was 4.5%.

"This is a classic 'hold-steady' report -- enough job growth to keep the unemployment rate stable but not much more," said Heidi Shierholz, economist with the Economic Policy Institute. "In good times, this would be fine, but at a time like this, it represents an ongoing disaster."

Overall, the U.S. economy lost 8.7 million jobs in the financial crisis, and since then has added about 6.2 million jobs back.

Once you factor population growth into the mix, Shierholz estimates there is still a gap of 8.6 million jobs missing from the U.S. economy. If hiring keeps up at its current pace, it will take about five more years to get back to a pre-recession job market.

First Published: May 3, 2013: 8:44 AM ET

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S&P tops 1,600 on jobs report

Click for more market data.

NEW YORK (CNNMoney)

The S&P 500, Dow and the Nasdaq all jumped more than 1% right out of the gate. Stocks finished higher Thursday as well.

The gains came on the back of jobs data that was not too bad, not too good, but just right.

The U.S. economy added 165,000 jobs in April, according to the government's latest monthly jobs report. The unemployment dipped to 7.5% from the prior month's rate of 7.6%.

Both numbers were better than expected, easing concerns about a summer slowdown in the economy. But the unemployment rate remains well above the level at which the Federal Reserve has said it will take the market's punch bowl away.

"Conditions are still less than ideal, but the economy continues to grind forward and progress is being made," said Jim Baird, chief investment officer for Plante Moran Financial Advisors.

The jobs data overshadowed less encouraging economic data released Friday.

Factory orders fell 0.4% in March, according to the Census Bureau. The report was worse than expected and came after a 1.9% drop in February. The Institute for Supply Management said its index of activity in the services sector fell in April, but remained above the level indicating growth.

Warren Buffett's investment firm Berkshire Hathaway (BRKA, Fortune 500) is scheduled to release quarterly earnings after the market close.

Related: Fear & Greed Index gets greedy again

LinkedIn (LNKD) shares plunged after the professional-networking site offered weak second-quarter guidance.

AIG (AIG, Fortune 500) shares rose after the insurer reported earnings that beat expectations Thursday.

Related: Waiting for the bond bubble to pop

European markets climbed higher in midday trading, despite a grim economic forecast from the European Union.

The EU trimmed its forecast for the eurozone gross domestic product, to a decline of 0.4% in 2013. The forecast for 2014 was also trimmed, to a gain of 1.2%.

Asian markets ended higher. The Shanghai Composite added 1.4% and the Hang Seng increased 0.1%. Japan's Nikkei was closed for a holiday.

First Published: May 3, 2013: 9:42 AM ET

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What an Internet sales tax will cost you

Legislation, which the U.S. Senate is expected to vote on next week, would allow the 45 states with sales taxes (and the District of Columbia) to require large online retailers to collect tax on purchases.

NEW YORK (CNNMoney)

The Senate is expected to vote on legislation next week that would allow the 45 states (and the District of Columbia) that charge sales tax to require online retailers to collect taxes on purchases made by their residents. If approved, the bill will move to the House.

So how would the passage of the "Marketplace Fairness Act" affect your online shopping? A lot depends on where you live. From California to New York, here's a look at what you can expect.

What does the bill propose?

Big brick-and-mortar retailers with an online presence, such as Wal-Mart (WMT, Fortune 500), already charge sales tax for web purchases. But in many states, you can still shop tax-free at Internet-only retailers like Amazon.com (AMZN, Fortune 500) or Overstock.com (OSTK).

Currently, these online sellers are only required to collect tax in states where they have a physical presence, such as a store or warehouse. But under the proposed law, states would be able to require online sellers to collect sales tax if they have sales of at least $1 million in states where they don't have operations.

Is this a new tax?

No. While some opponents of the bill argue that it constitutes a tax increase, in most states you're already supposed to be paying taxes on all online purchases.

Related: Impact of Internet sales tax on online commerce

Most states require you to pay a so-called "use tax" when a sales tax wasn't collected at online checkout. But few people actually do so.

How much more would I have to pay?

In some cases, nothing.

In recent years, some states have passed laws forcing major online retailers to collect sales tax, while others have inked individual agreements directly with Amazon.com to collect taxes on purchases made by residents of certain states.

If you live in Arizona, California, Kansas, Kentucky, New York, North Dakota, Pennsylvania, Texas and Washington -- states where the Internet giant has warehouses -- you are already paying taxes on Amazon purchases. And some states, like New York, have laws that require any online retailer with a so-called in-state "affiliate," such as marketers who link to the retailer's site, to collect taxes on purchases.

If you're a resident of a state that doesn't charge any sales tax, like Montana or New Hampshire, then your online shopping bills would also stay the same.

In many states, however, you will pay more. How much more depends on the rates set by state and local governments. For example, a $1,000 television sent to New Jersey will carry a $70 tax, while a resident of Maine would pay $50 in sales tax on the same purchase.

Will all online retailers be charging a sales tax?

No. Smaller retailers likely won't meet the $1 million threshold for out-of-state sales.

That means the necklace you buy from a budding entrepreneur in another state on Etsy.com or the movie poster you snag in someone's auction on eBay (EBAY, Fortune 500) will likely remain untaxed.

Will all products be taxed?

It all depends on the sales tax laws where you live.

In general, states tax the purchase of so-called "tangible goods," but there are often a laundry list of exceptions. For example, in New Jersey all clothing is tax-free. Meanwhile, clothing items and footwear that cost less than $110 are not taxed in New York.

Related: The true price of "free" online college courses

Want to buy an American flag to hang outside? Some states like Connecticut and Wisconsin won't charge a tax on American or state flags, for that matter.

Prescription medications or grocery products, like milk or raw chicken, are often tax-free but other food products, such as prepared food or junk food, will often get hit.

What about digital music, streaming movies and e-books?

Like other products, the Marketplace Fairness Act wouldn't create any new taxes on so-called "digital goods," but it would let states enforce the laws they have in place already.

Washington state, for example, has a digital goods sales tax that applies to everything from streaming music and movies to e-books. Florida, meanwhile, taxes streaming video but not digital books.

Many sellers already collect these taxes. For example, if you live in Washington, where Amazon.com is based, you're already paying tax on digital purchases. Apple (AAPL, Fortune 500) already collects sales tax for iTunes purchases in states where digital music is taxed, according to its website. And Netflix (NFLX) also already collects tax where applicable.

To find out what items are taxed in your state and at what rate, contact your state's tax and revenue agency. A map with links to the 50 state tax websites can be found here.

First Published: May 3, 2013: 6:17 AM ET

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Huawei won't hang up on U.S. smartphone market

SHENZHEN (CNNMoney)

Huawei made its name selling telecom equipment, and specializes in building the routers and switches needed for national communication systems. But it's been unable to crack the U.S. hardware market, with several attempts falling foul of regulators.

Huawei's ultimate goal was to sell its equipment to American providers like AT&T and Verizon -- a lucrative business with the potential to boost profits.

But lawmakers are worried that granting Huawei access to American networks could open the door to hackers or spies from China -- charges that Huawei has strenuously denied.

Late last year, Congress issued a report that was very critical of the company's activities -- effectively shutting Huawei out of the infrastructure market.

But Huawei also makes smartphones, and has spent billions in an effort to produce devices that can compete in a crowded international marketplace. The phones are being sold in the U.S., where they have captured a small share of the market.

Richard Yu, CEO of Huawei's Consumer Business Group, told CNN that the company remained committed to the American market. "Gradually, step by step, more and more people will trust Huawei," Yu said. "I think with a brand, the most important thing is trust."

Still, sales in America make up only a sliver of Huawei's $35 billion annual revenue, and the company has little brand recognition. Even consumers familiar with Huawei products can have trouble pronouncing the company's name.

Related story: Sprint and SoftBank vow to drop Huawei equipment

The Shenzhen-based company isn't limiting its ambitions to the U.S. market. It also wants to chip away at Samsung and Apple's global dominance.

It's working: In the fourth quarter of last year, Huawei shipped 10.8 million smartphones, jumping ahead of Sony, Nokia and smaller Chinese firm ZTE, according to research firm IDC. Huawei trailed only Apple (47.8 million units) and Samsung (63.7 million units).

Huawei has shown flashes of innovation along the way, releasing a water-resistant model and the world's thinnest smartphone. It also pioneered a phone that features a very large display.

"In the past everyone understood that the best smartphones were from Apple, or later Samsung," Yu said. "But starting from this year on, we want more and more people to understand the best smartphone is from Huawei."

First Published: May 3, 2013: 6:26 AM ET

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Avoid the slow bond market meltdown

As the economy heats up, the bond market is at risk for a correction. Here's how you can limit the damage of a slow meltdown.

(Money Magazine)

With the benchmark 10-year note still paying below 2%, there's little room for yields to go anywhere but up. When that happens, bond values will fall.

A bubble, though, suggests a market set to burst at any moment. It's not likely soon. The Federal Reserve is committed to holding interest rates, and thus bond yields, low for at least two more years. As Pimco bond guru Bill Gross recently put it: "Armageddon is not around the corner."

Instead of a bubble popping, think of a block of ice gradually melting away. The economy is warming up again, albeit slowly. And while growth can be a boon for stocks, it's a hazard for bondholders.

Eventually a strong economy will allow the Fed to let rates rise and also draw investors away from the relative safety of bonds and into riskier opportunities. The market has already offered a preview of that: Since last summer, as the 10-year Treasury yield went from 1.4% to 1.9%, long-term government bonds lost 9%.

Related: 6 high-dividend, blue-chip stocks

Because of their razor-thin yields, Treasuries are the most exposed to rate shifts. Losses could easily spill over into the rest of your fixed-income portfolio, however. With the right strategy for each kind of bond you own, you can limit the pain without entirely giving up on yield.

TREASURIES

The risk: You hardly need a crystal ball to guess where Treasury returns are headed. The best predictor of future annualized returns for government bonds has been the current 10-year yield, says Doug Ramsey, chief investment officer at the Leuthold Group. So with a sub-2% yield, "you're in store for a very long period of disappointing results," he says.

And that's before inflation.

Consumer prices have thus far been tame, but pressure tends to build only after unemployment sinks below 7% and factory capacity tops 80%, says James Swanson, chief investment strategist for MFS.

At its current pace, the economy is likely to hit those thresholds by the end of this year. And even a modest 2.5% inflation rate would leave you with losses in real terms.

What to do: Shorten up. There are still plenty of dangers lurking in the U.S. and global economies (most recently Cyprus banks), so there's good reason to hold a ballast position in Treasuries, however paltry the returns. But bonds with longer maturities are risky now.

The "duration" -- a measure of interest rate sensitivity -- for the Vanguard Long-Term Treasury Fund (VUSTX) is more than 15 years, meaning a one-percentage-point rise in rates could lead to losses of around 15%. By comparison, the duration for the Vanguard Short-Term Treasury (VFISX) is only about two years.

CORPORATES

The risk: As income-starved investors raced into these bonds last year, the difference in yield between high-quality corporates and Treasuries collapsed from nearly three percentage points in late 2011 to 1.3 points, a near-record low.

"Corporate bonds are now exposed to higher interest rate risk," says Carl Kaufman, manager of the Osterweis Strategic Income Fund.

The strengthening of the economy has reduced credit risk -- the possibility of a company's missing its coupon payments. Don't be complacent, though. As companies have grown more confident, they've been adding more debt to their balance sheets. And today's low yields mean you aren't getting much as a reward for taking the added credit risk of lending to a private company instead of Uncle Sam.

What to do: First, diversify. A simple way to reduce credit risk is to hold the debt of lots of different companies -- for instance, by buying a mutual fund instead of an individual bond.

Related: Understanding different types of bond funds

The only problem with this approach is that it limits your options for managing interest rate risk. One classic reason to buy individual bonds is that you can plan to hold on to them until they mature and pay off their full value. That way it's easier to ignore day-to-day price swings brought on by rate changes.

A relatively new kind of exchange-traded fund lets you combine the advantages of a fund and individual bonds. They invest in a collection of similarly dated bonds and hold them to maturity, after which your original investment is returned to you.

You can easily "ladder" these bond funds, matching maturities to the dates when you'll want to tap the money. For instance, with $25,000 to invest, you can put $5,000 each into Guggenheim BulletShares Corporate ETFs maturing in: 2015 (BSCF), 2016 (BSCG), 2017 (BSCH), 2018 (BSCI), and finally 2019 (BSCJ). That will give you a slightly lower duration than an intermediate-term bond fund.

HIGH-YIELD

The risk: The average yield of a junk bond -- one with a great enough chance of defaulting that it gives investors a fat payout -- is about 5.8%. So a rise in benchmark interest rates isn't the main worry here.

"The bigger threat is deteriorating credit," says Anthony Valeri, fixed-income strategist for LPL Financial.

As with high-grade bonds, a stronger economy is making companies more aggressive and willing to let financial strength slip. That's a much more serious problem with bonds already in the junk zone.

Earlier this year Standard & Poor's reported more credit downgrades of junk bond issuers than upgrades for the first time since the financial crisis. Leveraged buyouts -- in which companies pile on lots of debt to finance acquisitions -- are staging a comeback too. Emboldened issuers have even been reducing contractual protections for their bondholders, says Thomas Carney, fixed-income manager at Weitz Funds.

What to do: Improve your credit quality. Stick with a fund that keeps at least 80% of assets in bonds rated B, BB, or higher. Fidelity High Income (SPHIX), with an average yield of 4.8%, fits the bill and has beaten most of its peers over the past five and 10 years.

MUNICIPAL BONDS

The risk: As the economy has grown, state government tax receipts have increased for 11 consecutive quarters, so credit risk is less of an issue with munis than it was a few years ago.

But that means yields have fallen, and interest rate risk has risen. After accounting for the tax breaks municipal bondholders enjoy, the effective yield on a high-quality 10-year muni (for an investor in the 28% bracket) is down to about 2.6%.

At such high prices and low rates, "munis will move more in lockstep with Treasuries than they have in recent years," says LPL's Valeri.

What to do: Trim your stake by about five to 10 percentage points. "There are other opportunities in the taxable market that give you similar types of after-tax returns with less interest rate risk," says Jack Chee, senior research analyst at Litman Gregory Asset Management.

For instance, he points to Kaufman's Osterweis Strategic Income (OSTIX), which can invest in a variety of types of bonds. The fund holds a fair share of high-yield debt, but Kaufman takes little interest rate risk, currently holding duration at 2.7 years. When the Fed finally decides to turn up the heat, that approach should help investors keep their cool.

You can't hide when rates rise

When interest rates spike really sharply -- like the two-point rise in 1994 -- all kinds of bonds hurt.

Total return in 1994
Long-term Treasuries	-7.6%
Municipal bonds	-5.2%
Intermediate-term corporates	-2.7%
Intermediate-term Treasuries	-1.8%
High-yield bonds	-1.0%

Source: Morningstar

First Published: May 3, 2013: 6:35 AM ET

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The Chrysler-Fiat reversal of fortune

(Fortune)

The year 2007 resonates in Chrysler history for another reason: It was on May 14 that DaimlerChrysler publicly conceded the failure of its cross-ocean , cross-cultural merger by announcing the sale of 80.1% of the Chrysler Group to Cerberus Capital Management for $7.4 billion. At the time of the sale, Chrysler was worth only a fraction of its pre-merger 1998 price, and its fortunes only declined from there. Lehman Brothers went bankrupt a year later, and in the ensuing downturn the government was forced to pump billions of dollars into Chrysler in 2008 and 2009 before it filed for Chapter 11 bankruptcy reorganization on April 30, 2009.

The company nearly died on the operating table. As Steven Rattner related in his book Overhaul, the question of what to do about Chrysler was debated at nearly every meeting of the government's auto task force. After a close vote among economic advisers, the decision about its survival went to the Oval Office, where President Obama decided that Chrysler should be saved. "It was better to invest $6 billion for a meaningful chance that Chrysler would survive than to invest several billion dollars in its funeral," was the rationale, according to Rattner. Further cliff-hanging negotiations were required before the government agreed to pass 20% of Chrysler along with operating control along to Fiat, in exchange for Fiat's technology and management expertise.

Whatever contributions Fiat technology has made to Chrysler are hard to measure, but the impact of Fiat's management has been undeniable. Chrysler sales, which had fallen from 2.3 million in 2005 to only 931,402 in 2009, have rebounded smartly and reached 1.7 million last year. Under previous owners Daimler and Cerberus, Chrysler had been starved of investment and left with the weakest product line in the industry. CEO Sergio Marchionne smartly identified where he could most upgrade Chrysler's cars and trucks with the fewest resources and set Chrysler on its 37-month run. Though its passenger car lineup still lags the industry's best, Chrysler is now fully competitive in pickups and sport utility vehicles.

In other words, instead of being liquidated at the cost of some 300,000 jobs, Chrysler is now a viable company, thanks to Marchionne and Fiat -- which makes it all the more difficult to comprehend the heat of the dispute now consuming Detroit. Where once Fiat rescued Chrysler, now Chrysler is in a position to rescue Fiat, and it drives some people nuts.

MORE: 6 greenest cars made in America

That idea may have seemed far-fetched in 2009 but it is reality today, and Chrysler won't be the only company helping out a European carmaker. General Motors' (GM, Fortune 500) and Fords' (F, Fortune 500) North American operations are supporting Opel and Ford of Europe respectively. Europe's financial crisis combined with its aging demographic and the intransigence of labor unions in the face of overdue cuts in factory capacity have pushed even mighty Volkswagen into a tailspin.

With Europe deep in recession, Fiat, never a strong player to begin with, is drowning, and Chrysler is in the position of extending a life preserver. Fiat now owns 58.5% of Chrysler, and Marchionne wants to buy the remaining 41.5%. Owning 100% of Chrysler would allow him, under his agreement with the government, to finally integrate the two companies on one balance sheet. Chrysler is banking cash while Fiat is burning it, so Chrysler's cash would, in effect, be used to prop up Fiat.

To complicate matters, and to further inflame Detroit passions, the remaining 41.5% that Marchionne wants to buy is owned by a UAW voluntary employee beneficiary association trust (VEBA). The stock was given to the UAW as part of the 2009 government bailout to pay for retiree health care expenses. But there is a difference of opinion about the value of those shares. The UAW trust says they are worth $11.5 billion. Marchionne wants to pay quite a bit less: $4.68 billion.

The dispute has stirred emotions in Motown, where labor unionists fear that a settlement tilted toward Fiat will suck money out of their health care benefits. Indeed, the whole notion of American dollars bailing out an Italian company rankles some. Wrote popular blogger Peter De Lorenzo this week: "Gifted Chrysler by the U.S. Government and funded on the backs of you and me, the U.S. taxpayer, Marchionne is now using Chrysler to sustain that miserable excuse of a car company called Fiat."

MORE: 10 big car brands that bit the dust

What's been forgotten in the controversy is that it wasn't only Fiat that got a sweet deal in the Chrysler bankruptcy; the UAW did too. Here's how it went: According to one analysis, Chrysler's first-line secured creditors got only 29 cents on the dollar; its second-line secured creditors got nothing. Neither did its suppliers By law, the UAW, which figured it was owed $8.8 billion for the VEBA, should have gotten stiffed too. Its claim came after all the secured creditors. But Rattner's team didn't see it that way. Instead it awarded the VEBA 55% of the shares in the reorganized Chrysler, along with a note for $4.6 billion.

Rattner points out that the stock was held by the VEBA and not the union, and carried no voting rights. He goes on: "Most of the equity was unspoken for. We calculated that the UAW was taking a significant cut in its health care claim, at least 40%. Yes, the UAW accepted pain and risk."

A judge in Delaware will decide whose numbers to use: Marchionne's or the union, or something in between. Neither side should be aggrieved; they are both well ahead of where they would have been if the chips had fallen just a bit differently.

A ruling that falls closer to the union's claim would put it out of reach of Fiat's ability to finance. Still, you have to put your money on Marchionne. Having been trained as an accountant, he knows his numbers. He has proved on numerous occasions that he is a fearsome negotiator. And he seems determined to create an automotive enterprise with the scale to compete in the 21st century.

As he told analysts and reporters this week, "Whether we're the sixth or the largest car company in the world as a result of all this, it really does not matter. We are not running to league tables here. The only thing that does matter is that we do have within the combined entity, sufficient mass and sufficient geographic coverage to call ourselves a global car company."

Here's betting he will.

First Published: May 2, 2013: 10:22 AM ET

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15-year mortgage rate hits record low

Mortgage rate for 15-year fixed loan falls to 2.61% in latest week, Freddie Mac says.

NEW YORK (CNNMoney)

The 15-year fixed rate fell to 2.57% from 2.61%. A year ago, it stood at 3.07.

The most popular mortgage, the 30-year fixed rate, came in at 3.35%, a drop of 0.05 percentage point and only 0.04 percentage point above its record low set the week of November 21, 2012.

The rates provide a welcome boost to the housing market and to the overall economy, according to Frank Nothaft, Freddie Mac's chief economist.

"Residential fixed investment added to overall economic growth over the past eight consecutive quarters and contributed more than 0.3 percentage points in growth over the first three months of this year," he said. "[N]ear record low mortgage rates should further drive the housing market recovery over the near term."

Related: 5 best markets to buy a home

Existing homeowners are some of the biggest beneficiaries of the falling interest rates. The 15-year, fixed loans are popular with borrowers seeking to shorten their loan terms -- saving themselves on total interest payments. The record low rates enable them to do that without increasing their monthly payments very much.

Calculator: Was my home a good investment?

Borrowers with three-year-old, 30-year fixed-rate loans at 5% would have a monthly payment of about $537 for every $100,000 borrowed, and would pay out a total of about $93,000 in interest over the course of the mortgage. Switching to a 15-year at 2.57% would increase the payment only to $670 a month but the total interest paid out would come to less than $21,000.

Mortgage refinance applications rose 1.8% last week, according to the Mortgage Bankers Association, and account for about 75% of all applications for mortgages.

First Published: May 2, 2013: 10:15 AM ET

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Stocks bounce back

Click chart for more market data.

NEW YORK (CNNMoney)

The Dow Jones industrial average rose 0.5%, the S&P 500 gained 0.3%, while the Nasdaq added 0.7%.

As stocks bounce back from Wednesday's 1% sell-off, here are five things to know:

1. Jobless claims fall to 5-year low: First-time claims for unemployment benefits fell to the lowest level since January 2008, surprising economists who were expecting an increase and signaling further improvement in the job market. The good news comes ahead of the government's key monthly jobs report due Friday.

Economists surveyed by CNNMoney are expecting the report to show the economy added 140,000 jobs in April, up from 88,000 in March. They're expecting the unemployment rate to remain at 7.6%.

Click here for more on stocks, bonds, currencies and commodities

2. ECB cuts rates to record low: The ECB cut its key interest rate for the first time in 10 months in a bid to prevent the eurozone from falling even deeper into recession. The central bank was under intense pressure to cut rates.

European market were mixed in afternoon trading, but had been rallying since mid-April in anticipation.

The ECB's move follows the Federal Reserve's decision Wednesday to keep buying $85 billion worth of bonds a month, as part of its effort to stimulate the recovery. The central bank pointed to a high unemployment rate and low inflation as reasons to maintain its pace.

The Fed said it stands ready to either "increase or reduce the pace" of those purchases in response to economic activity.

Related: Fear & Greed Index idling in neutral

3. GM is doing a little better in Europe. General Motors (GM, Fortune 500) shares jumped more than 4% after the automaker's earnings showed progress in stemming losses in Europe, where a worsening recession has resulted in the worst industrywide auto sales on the continent in 20 years. GM CEO Dan Akerson pointed to cost-cutting measures and the successful introduction of new models for the improved performance.

In other earnings news, Yelp (YELP) shares surged after the review site reported a narrower loss and sales that topped estimates.

Facebook (FB) shares rose 3% after the company's sales jumped 38% in the first quarter, boosted by its growing mobile ad business. Facebook investors are laser-focused on mobile, which the social media company has said is the key to its future success.

Results are due in the afternoon from AIG (AIG, Fortune 500), Kraft Foods (KRFT) and LinkedIn (LNKD).

4. ING makes a lackluster debut on Wall Street: Shares of ING (VOYA) rose 0.4% on their first day of trading on the New York Stock Exchange. The U.S. arm of the Dutch bank raised $1.3 billion in its initial public offering, which priced below the expected range.

5. Intel gets a new CEO: Intel (INTC, Fortune 500) said that Brian Krzanich, currently the chipmaker's chief operating officer, will become the company's new CEO on May 16.

Current CEO Paul Otellini announced in November that he would be stepping down this month after 38 years at the company, the final eight of which were at its help.

First Published: May 2, 2013: 10:28 AM ET

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Warren Buffett is bullish ... on women

Warren Buffett with the late Katharine Graham of the Washington Post at his 50th-birthday party in 1980

(Fortune)

In the flood of words written recently about women and work, one related and hugely significant point seems to me to have been neglected. It has to do with America's future, about which -- here's a familiar opinion from me -- I'm an unqualified optimist. Now entertain another opinion of mine: Women are a major reason we will do so well.

Start with the fact that our country's progress since 1776 has been mind-blowing, like nothing the world has ever seen. Our secret sauce has been a political and economic system that unleashes human potential to an extraordinary degree. As a result Americans today enjoy an abundance of goods and services that no one could have dreamed of just a few centuries ago.

But that's not the half of it -- or, rather, it's just about the half of it. America has forged this success while utilizing, in large part, only half of the country's talent. For most of our history, women -- whatever their abilities -- have been relegated to the sidelines. Only in recent years have we begun to correct that problem.

Despite the inspiring "all men are created equal" assertion in the Declaration of Independence, male supremacy quickly became enshrined in the Constitution. In Article II, dealing with the presidency, the 39 delegates who signed the document -- all men, naturally -- repeatedly used male pronouns. In poker, they call that a "tell."

Finally, 133 years later, in 1920, the U.S. softened its discrimination against women via the 19th Amendment, which gave them the right to vote. But that law scarcely budged attitudes and behaviors. In its wake, 33 men rose to the Supreme Court before Sandra Day O'Connor made the grade -- 61 years after the amendment was ratified. For those of you who like numbers, the odds against that procession of males occurring by chance are more than 8 billion to one.

Watch an interview with Warren Buffett on women, work, and other wisdom

When people questioned the absence of female appointees, the standard reply over those 61 years was simply "no qualified candidates." The electorate took a similar stance. When my dad was elected to Congress in 1942, only eight of his 434 colleagues were women. One lonely woman, Maine's Margaret Chase Smith, sat in the Senate.

Resistance among the powerful is natural when change clashes with their self-interest. Business, politics, and, yes, religions provide many examples of such defensive behavior. After all, who wants to double the number of competitors for top positions?

But an even greater enemy of change may well be the ingrained attitudes of those who simply can't imagine a world different from the one they've lived in. What happened in my own family provides an example. I have two sisters. The three of us were regarded, by our parents and teachers alike, as having roughly equal intelligence -- and IQ tests in fact confirmed our equality. For a long time, to boot, my sisters had far greater "social" IQ than I. (No, we weren't tested for that -- but, believe me, the evidence was overwhelming.)

The moment I emerged from my mother's womb, however, my possibilities dwarfed those of my siblings, for I was a boy! And my brainy, personable, and good-looking siblings were not. My parents would love us equally, and our teachers would give us similar grades. But at every turn my sisters would be told -- more through signals than words -- that success for them would be "marrying well." I was meanwhile hearing that the world's opportunities were there for me to seize.

So my floor became my sisters' ceiling -- and nobody thought much about ripping up that pattern until a few decades ago. Now, thank heavens, the structural barriers for women are falling.

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Still an obstacle remains: Too many women continue to impose limitations on themselves, talking themselves out of achieving their potential. Here, too, I have had some firsthand experience.

Among the scores of brilliant and interesting women I've known is the late Katharine Graham, long the controlling shareholder and CEO of the Washington Post Co. (WPO) Kay knew she was intelligent. But she had been brainwashed -- I don't like that word, but it's appropriate -- by her mother, husband, and who knows who else to believe that men were superior, particularly at business.

When her husband died, it was in the self-interest of some of the men around Kay to convince her that her feelings of inadequacy were justified. The pressures they put on her were torturing. Fortunately, Kay, in addition to being smart, had an inner strength. Calling on it, she managed to ignore the baritone voices urging her to turn over her heritage to them.

I met Kay in 1973 and quickly saw that she was a person of unusual ability and character. But the gender-related self-doubt was certainly there too. Her brain knew better, but she could never quite still the voice inside her that said, "Men know more about running a business than you ever will."

I told Kay that she had to discard the fun-house mirror that others had set before her and instead view herself in a mirror that reflected reality. "Then," I said, "you will see a woman who is a match for anyone, male or female."

I wish I could claim I was successful in that campaign. Proof was certainly on my side: Washington Post stock went up more than 4,000% -- that's 40 for 1 -- during Kay's 18 years as boss. After retiring, she won a Pulitzer Prize for her superb autobiography. But her self-doubt remained, a testament to how deeply a message of unworthiness can be implanted in even a brilliant mind.

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I'm happy to say that funhouse mirrors are becoming less common among the women I meet. Try putting one in front of my daughter. She'll just laugh and smash it. Women should never forget that it is common for powerful and seemingly self-assured males to have more than a bit of the Wizard of Oz in them. Pull the curtain aside, and you'll often discover they are not supermen after all. (Just ask their wives!)

So, my fellow males, what's in this for us? Why should we care whether the remaining barriers facing women are dismantled and the fun-house mirrors junked? Never mind that I believe the ethical case in itself is compelling. Let's look instead to your self-interest.

No manager operates his or her plants at 80% efficiency when steps could be taken that would increase output. And no CEO wants male employees to be underutilized when improved training or working conditions would boost productivity. So take it one step further: If obvious benefits flow from helping the male component of the workforce achieve its potential, why in the world wouldn't you want to include its counterpart?

Fellow males, get onboard. The closer that America comes to fully employing the talents of all its citizens, the greater its output of goods and services will be. We've seen what can be accomplished when we use 50% of our human capacity. If you visualize what 100% can do, you'll join me as an unbridled optimist about America's future.

This story is from the May 20, 2013 issue of Fortune.

First Published: May 2, 2013: 6:47 AM ET

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