Archive for the ‘AP-Business’ Category
A “perfect storm” gathered during The Great Recession that sank much of the global shipping industry. (more…)
WASHINGTON (AP) — Americans bought more previously owned homes in April, a hopeful sign that the weak housing market is gradually improving.
The National Association of Realtors says home sales rose 3.4 percent last month to a seasonally adjusted annual rate of 4.62 million.
That brings home sales back near the pace in January and February – which was the best winter for sales in five years. Still, sales are well below the nearly 6 million per year that economists equate with healthy markets.
A mild winter encouraged some people to buy homes earlier. That drove up sales in January and February, while making March weaker.
The median price for homes sold in April rose to $177,400, up 10.1 percent from a year ago.
Modest increases in home sales are the latest sign that the market could be starting to turn around nearly five years after the housing bubble burst.
The sales pace in January was the highest since May 2010 – when a popular home-buying tax credit expired. Builders are more confident and are starting to builder more homes. Mortgage rates have never been cheaper. And the job market is improving, which has made more people open to buying a home.
Employers have added 1 million jobs in the past five months. And unemployment has dropped a full percentage point since August, from 9.1 percent to 8.1 percent in April.
Still, many would-be buyers are having difficulty qualifying for home loans or can’t afford the larger down payments being required by banks.
Have you ever wondered about who runs that company that makes that status bag? You know the bag that wears the LV Logo. He is the richest man in Paris. (more…)
The great kingdom that lies along the banks of the river Niger is Nigeria. A woman controls the wealth of this natural resource rich nation. (more…)
BRUSSELS (AP) — Denmark’s finance minister says she and her European Union counterparts are close to a deal to force banks to build up bigger capital cushions against financial shocks.
Early Thursday, after more than 15 hours of debate, Margrethe Vestager said only a few “technical issues” needed to be ironed out before the ministers’ next meeting in two weeks.
The EU is in the process of writing an international agreement on capital defenses for banks into European law that regulators hope will prevent a repeat of the 2008 financial crisis.
The so-called Basel III deal would force lenders to increase their highest-quality capital gradually from 2 percent of the risky assets they hold to 7 percent by 2019. An additional 2.5 percent would have to be built up during good times.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.
BRUSSELS (AP) – European finance ministers were divided Wednesday on how the region’s banks can protect themselves from future financial shocks.
The European Union is in the process to writing an international agreement on capital defences for banks into European law. This would determine the level of risk Europe’s banks can take and what regulators can do to ensure that financial crises like the one brought on by the collapse of U.S. investment bank Lehman Brothers in 2008 do not happen again.
The so-called Basel III deal would force banks gradually to increase their highest-quality capital – such as equity and reserves – from 2 percent of the risky assets they hold to 7 percent by 2019. An additional 2.5 percent would have to be built up during good times.
But several countries, including the U.K. and Sweden, want to require their banks to build up even higher defenses without having to go to the European Commission, the EU’s executive arm in Brussels, for approval. There was also some disagreement over what should count as capital. Some countries are warning that Europe could be seen as softening banking rules at a time when it is already under close scrutiny from international investors.
“If we duck the challenge of implementing Basel we could face very important challenges to confidence in Europe this year,” warned George Osborne, the U.K.’s Treasury chief.
Basel III was agreed by the world’s leading economies after the 2008 financial crisis demonstrated that many banks did not have enough of a capital cushion to absorb sudden losses on loans and other risky activities. Once agreed, the new rules would apply to more than 8,300 banks in Europe, forcing them to build up billions in extra capital by selling shares or assets or reining in bonuses and dividends.
The 2008 financial panic that followed Lehman’s collapse hit Europe hard. Between 2008 and 2010, governments across the 27-country-bloc spent (EURO)4.6 trillion ($6.1 trillion) propping up struggling banks.
What complicated efforts even more was that the open borders in the EU allow banks to operate freely across the bloc, but when lenders ran into trouble it was national governments – and taxpayers – who had to foot the bill. While the EU is now striving for a single set of banking rules, there is still no pan-European bank resolution fund that could relieve national governments.
The U.K., which had to save three major banks, has seen its debt load almost double since 2007. Meanwhile much smaller Ireland had to seek an international bailout to help stem the losses of its domestic lenders. And many economists fear that the economic recession in Spain may soon reveal massive bank losses there.
Now, the U.K. is leading a group of countries that want to be able to force their own banks to have bigger defenses than the ones prescribed by the pan-European rules without first getting approval from Brussels.
“We should make it clear that the crisis did not originate exclusively from weak fiscal policy. It originated also from insufficiently strong banks,” said Polish Finance Minister Jacek Rostowski. “So therefore a group of countries including Poland, the Czech Republic, Sweden and the United Kingdom are very determined to see that banking systems in the future should be as healthy as we expect the fiscal side, the budgetary side, to be kept.”
That demand is opposed by France and the Commission, which fear that jacking up capital requirements in one country could force banks based there to cut down lending by their foreign subsidiaries. That, they argue, could hurt small states that don’t have a big domestic banking system.
To bridge the divide between the two camps, Denmark, which currently holds the EU presidency, has proposed a compromise that would allow national regulators to require an extra capital buffer of 3 percent. Anything beyond that would have to be approved by the Commission in Brussels, which would examine not only the level of risk in the home state but also the potential impact in neighboring countries.
After several hours of public discussion, finance ministers retreated into bilateral talks. A possible compromise could include requiring not the Commission, but another European supervisor – the European Systemic Risk Board, which is led by the European Central Bank President Mario Draghi – to approve higher national buffers.
If they cannot find agreement Wednesday, several ministers said they hoped a deal could be struck at their next meeting in two weeks. Once finance ministers have struck a deal, they have to negotiate a final agreement with the European Parliament.
Don Melvin contributed to this story.
AP Photo/Richard Drew
NEW YORK (AP) — When hiring slumps, so do stock prices.
That was at least the message investors sent Wednesday, when they ignored flashes of positive news about the economy and instead homed in on troubling reports about jobs in the U.S. and Europe.
The Dow Jones industrial average fell as much as 87 points after a company that tracks payrolls said the U.S. added far fewer jobs in April than in March. The Dow ended the day down 10.75 points, at 13,268.57.
It was a turn from the day before, when investors chose to focus on a couple of positive reports on U.S. manufacturing and sent the Dow up 66 points to its highest close in more than four years.
While the market’s day-to-day fluctuations may be difficult to predict, some investors say they’re certain that stocks will generally climb for the rest of the year. As justification, they cite strong first-quarter earnings.
Of the 330 companies on the S&P 500 that have reported first-quarter earnings, 77 percent have beaten the estimates of stock analysts, said John Butters, senior earnings analyst at FactSet, a provider of financial data.
“The market has room to run,” said Karyn Cavanaugh, market strategist with ING Investment Management in New York. “It doesn’t always go up in a straight line.”
The Standard & Poor’s 500 fell 3.51 points to 1,402.31. The Nasdaq composite index was the outlier. It fell throughout the morning, then finished up 9.41 points at 3,059.85.
The report on private sector hiring weighed on investors, who see jobs as the key ingredient to an economic recovery.
The payroll processor, ADP, said U.S. businesses added 119,000 jobs in April, down from 201,000 in March. The government releases its monthly figures, which include the public sector, on Friday. The two reports can vary sharply.
Another jobs report from Europe underscored the gravity of the continuing debt crisis there. The 17 countries that use the euro reported that unemployment rose to 10.9 percent in March, the highest since the euro launched in 1999.
Markets fell across most of Europe, including Germany and Greece.
There was also good news out of Europe, even if it didn’t seem to sway investors. Standard & Poor’s lifted Greece’s credit rating out of default, noting how the country had recently secured a massive writedown on its debt to private investors.
Germany also reported that the number of people seeking work in April slipped below 3 million, a psychologically important barrier that it hasn’t broken in that month for two decades.
AP Photo/Alvaro Barrientos
LONDON (AP) — The 17 countries that use the euro are facing the highest unemployment rates in the history of the currency as recession once again spreads across Europe, pressuring leaders to focus less on austerity and more on stimulating growth.
Unemployment in the eurozone rose by 169,000 in March, official figures showed Wednesday, taking the rate up to 10.9 percent – its highest level since the euro was launched in 1999. The seasonally adjusted rate was up from 10.8 percent in February and 9.9 percent a year ago and contrasts sharply with the picture in the U.S., where unemployment has fallen from 9.1 percent in August to 8.2 percent in March. Spain had the highest rate in the eurozone, 24.1 percent – and an alarming 51.1 percent for people under 25.
Austerity has been the main prescription across Europe for dealing with a debt crisis that’s afflicted the continent for nearly three years and has raised the specter of the breakup of the single currency. Three countries – Greece, Ireland and Portugal – have already required bailouts because of unsustainable levels of debt.
Eight eurozone countries, including Greece, Spain and the Netherlands, have seen their economies shrink for two straight quarters or more, the common definition of a recession.
Economies are contracting across the eurozone as governments cut spending and raise taxes to reduce deficits. That has prompted economists to urge European Union policymakers to dial back on short-term budget-cutting and focus on stimulating long-term growth.
“The question is how long EU leaders will continue to pursue a deeply flawed strategy in the face of mounting evidence that this is leading us to social, economic and political disaster,” said Sony Kapoor, managing director of Re-Define, an economic think-tank and policy advisory company.
In a nod to shifting attitudes about austerity, European Central Bank president Mario Draghi recently called for a “growth pact” in Europe to work alongside the “fiscal pact” that has placed so much importance on controlling government spending.
Bailout fears have intensified in recent months as Spain, Italy and other governments face rising borrowing costs on bond markets, a sign that investors are nervous about the size of their debts relative to their economic output. Austerity is intended to address this nervousness by reducing a government’s borrowing needs, but there has been a negative side effect: As economic output shrinks, the debt burden actually looks worse.
Economists recommend pro-growth measures including reducing red tape for small businesses, making it easier for workers to find jobs across the eurozone and breaking down barriers that countries have created to protect their own industries. Some economists go a step further and say governments should actually increase spending while economies are so weak – and make reining in deficits a longer-term goal.
The central bank has tried to reinvigorate Europe’s financial system by lowering interest rates and extending $1.3 trillion in cheap, three-year loans to banks. Banks have used some of the money to purchase government bonds, which briefly eased pressure on countries’ borrowing costs. But interest rates on Spanish and Italian bonds have crept even higher in recent weeks.
Across Europe, austerity has come in the form of layoffs and pay cuts for state workers, scaled-back expenditures on welfare and social programs, and higher taxes and fees to boost government revenue.
Winds sent old newsprint soaring like white kites caught in the updraft along the concrete corridors of Wall Street, in October 29, 1929. The world had just begun to feel the horrendous pain of the Great Depression. (more…)
AP Photo/Paul Sakuma
NEW YORK (AP) — Hewlett-Packard Co. is combining its printer and PC divisions as it tries to overcome dragging profits, growing competition and the lack of clear identity.
The move announced Wednesday will help the company streamline its business and save money to invest in growing areas. HP, a Silicon Valley pioneer, is hoping a renewed focus on innovation will re-establish the 73-year-old company as a technology trailblazer
“We have got to place a few bets where we can fundamentally change the name of the game,” HP CEO Meg Whitman told shareholders Wednesday at the company’s annual meeting in Santa Clara, Calif. The Associated Press monitored a webcast of the meeting.
Whitman said printing remains one of the areas where HP can still make its mark. First, though, she said the company needs to trim its expenses, describing the combination of the PC and printing division as a “perfect example” of her streamlining plans.
“We are going to have to save to get growth going again at HP,” Whitman told shareholders.
Wednesday’s restructuring is one of the first major steps that Whitman, formerly eBay Inc.’s chief, has taken since she took the top job at HP in September. Her predecessor, Leo Apotheker, had wanted to sell or spin off the PC business, a plan that contributed to his ouster after 11 months on the job. Under Whitman, HP decided to keep the unit after all.
AP Photo/Brian Witte
ANNAPOLIS, Md. (AP) — As if gas prices weren’t high enough, several states across the U.S. are looking to raise fuel taxes they say are needed to pay for roads and bridges that are outdated, congested and in some cases, dangerous.
Maryland’s governor is proposing a phased-in 6 percent sales tax by 2 percent a year, which would raise about $613 million annually when fully implemented. Iowa is considering raising its current 21-cent-per-gallon tax by either 8 cents or 10 cents.
Such proposals were hard to even contemplate during the recession and its immediate aftermath. Now, states forced to grapple with the problem are running into record-high gas prices for this time of year and lingering effects of the recession.
In Maryland, lawmakers are questioning whether the time is right for such an increase, which is never popular even in good fiscal times.
“They understand that it’s needed,” Delegate Tawanna Gaines, a Democrat, said when asked about the proposal last month, on a day when the national average price of gasoline hit $3.65 a gallon. The average price of gas on Monday pushed toward $3.80 a gallon. “They get that, but they basically believe that you can’t get blood out of a turnip. It’s going to be a very, very tough sell.”
Maryland Gov. Martin O’Malley, a Democrat, is quick to point out that the state hasn’t raised its gas tax since 1992 – and the flat tax doesn’t buy nearly as much as it once did. But some lawmakers say they are getting significant pushback from residents who are calling their offices to express opposition at a time when Maryland, like most other states, is still trying to bounce back from the recession.
O’Malley’s plan would delay a 2 percent annual increase if gas prices rise by more than 15 percent in a fiscal year. Lawmakers also say Maryland’s $1.1 billion deficit is creating another obstacle, because his challenging budget plan includes a variety of other tax increases that legislators will be considering.
Other states also are looking at increasing revenue streams for transportation projects after years of neglect.
Michigan Gov. Rick Snyder, a Republican, is calling on lawmakers in his state to raise $1.4 billion more for transportation needs. In Arkansas, voters may be asked to consider raising two taxes to help pay for the state’s roads. In Iowa, a commission named by Republican Gov. Terry Branstad recommended late last year that the fuel tax be increased.
In Michigan, state lawmakers in both parties are considering higher fuel-related taxes and vehicle registration fees to raise more than $1 billion of the $1.4 billion the governor is seeking. Rep. Rick Olson, a Republican who supports the revenue increases, contends it’s a matter of trying to avoid larger expenses later, if maintenance is deferred.
“It’s certainly going to be difficult, and no one argues that we need $1.4 billion,” Olson said. “The longer we wait, the more it is going to cost us.”
In both Maryland and Michigan, business groups have been supportive of raising revenue for transportation.
Rich Studley, president of the Michigan Chamber of Commerce, said Michigan’s transportation system is crucial to three top industries in the state, including manufacturing, agribusiness and tourism.
AP Photo/Matt Rourke
DIMOCK, Pa. (AP) — Tugging on rubber gloves, a laboratory worker kneels before a gushing spigot behind Kim Grosso’s house and positions an empty bottle under the clear, cold stream. The process is repeated dozens of times as bottles are filled, marked and packed into coolers.
After extensive testing, Grosso and dozens of her neighbors will know this week what may be lurking in their well water as federal regulators investigate claims of contamination in the midst of one of the nation’s most productive natural gas fields.
More than three years into the gas-drilling boom that’s produced thousands of new wells, the U.S. Environmental Protection Agency and the state of Pennsylvania are tussling over regulation of the Marcellus Shale, the vast underground rock formation that holds trillions of cubic feet of gas.
The state says EPA is meddling. EPA says it is doing its job.
Grosso, who lives near a pair of gas wells drilled in 2008, told federal officials her water became discolored a few months ago, with an intermittent foul odor and taste. Her dog and cats refused to drink it. While there’s no indication the problems are related to drilling, she hopes the testing will provide answers.
“If there is something wrong with the water, who is responsible?” she asked. “Who’s going to fix it, and what does it do to the value of the property?”
Federal regulators are ramping up their oversight of the Marcellus with dual investigations in the northeastern and southwestern corners of Pennsylvania. EPA is also sampling water around Pennsylvania for its national study of the potential environmental and public health impacts of hydraulic fracturing, or fracking, the technique that blasts a cocktail of sand, water and chemicals deep underground to stimulate oil and gas production in shale formations like the Marcellus. Fracking allows drillers to reach previously inaccessible gas reserves, but it produces huge volumes of polluted wastewater and environmentalists say it can taint groundwater. Energy companies deny it.
The heightened federal scrutiny rankles the industry and politicians in the state capital, where the administration of pro-drilling Gov. Tom Corbett insists that Pennsylvania regulators are best suited to oversee the gas industry. The complaints echo those in Texas and in Wyoming, where EPA’s preliminary finding that fracking chemicals contaminated water supplies is forcefully disputed by state officials and energy executives.
Caught in the middle of the state-federal regulatory dispute are residents who don’t know if their water is safe to drink.
EPA is charged by law with protecting and ensuring the safety of the nation’s drinking water, but it has largely allowed the states to take the lead on rules and enforcement as energy companies drilled and fracked tens of thousands of new wells in recent years.
In Pennsylvania, that began to change last spring after The Associated Press and other news organizations reported that huge volumes of partially treated wastewater were being discharged into rivers and streams that supply drinking water. EPA asked the state to boost its monitoring of fracking wastewater from gas wells, and the state declared a voluntary moratorium for drillers that led to significant reductions of Marcellus waste. Yet a loophole in the policy allows operators of many older oil and gas wells to continue discharging significant amounts of wastewater into treatment plants, and thus, into rivers.
The state’s top environmental regulator, Michael Krancer, says Pennsylvania doesn’t need federal intervention to help it protect the environment. He told Congress last fall that Pennsylvania has taken the lead on regulations for the burgeoning gas industry.
“There’s no question that EPA is overstepping,” Katherine Gresh, Krancer’s spokeswoman, told the AP. “DEP regulates these facilities and always has, and EPA has never before shown this degree of involvement.”
The American Petroleum Institute urged the Obama administration last week to rein in the 10 agencies it says are either reviewing, studying or proposing regulation of fracking.
“The fact is that there is a strong state regulatory system in place, and adding potentially redundant and duplicative federal regulation would be unnecessary, costly, and could stifle investment,” API Vice President Kyle Isakower said in a statement.
EPA says public health is its key focus and insists it is guided by sound science and the law.
NEW ORLEANS (AP) — BP agreed late Friday to settle lawsuits brought by more than 100,000 fishermen who lost work, cleanup workers who got sick and others who claimed harm from the oil giant’s 2010 Gulf of Mexico disaster, the worst offshore oil spill in the nation’s history.
The momentous settlement will have no cap to compensate the plaintiffs, though BP PLC estimated it would have to pay out about $7.8 billion, making it one of the largest class-action settlements ever. After the Exxon Valdez disaster in 1989, the company ultimately settled with the U.S. government for $1 billion, which would be about $1.8 billion today.
BP still has to resolve claims by the U.S. government, Gulf states and its partners in the doomed Deepwater Horizon project, in which pressure from a well a mile below the ocean’s surface blew up a massive drilling rig, killing 11 men and spewing oil into the sea for nearly three months. That could add billions of more to its tab.
BP said it expects the money to come from the $20 billion compensation fund that it previously set out. According to the Deepwater Horizon Oil Spill Trust, current total trust assets are approximately $9.5 billion.
The spill exposed oil industry failings, forced BP chief executive Tony Hayward to step down after his repeated gaffes and led to new lexicon in American vocabulary as crews used innovative attempts to plug the spewing well, such as the top kill and the junk shot.
The spill soiled sensitive tidal estuaries and beaches, killing wildlife and shutting vast areas of the Gulf to commercial fishing. After several attempts to cap the well failed, engineers finally were successful on July 15, halting the flow of oil into the Gulf of Mexico after more than 85 days.
The main targets of litigation resulting from the explosion and spill were BP, Transocean, Halliburton and Cameron International, maker of the well’s failed blowout preventer. BP, the majority owner of the well that blew out, was leasing the rig from Transocean.
The Justice Department sued some of the companies involved in the ill-fated drilling project, seeking to recover billions of dollars for economic and environmental damage. The department opened a separate criminal investigation, but that probe hasn’t resulted in any charges.
BOSTON (AP) — Las Vegas casino owner Steve Wynn unveiled details Friday of a proposed Massachusetts resort casino he hopes to develop near the home of the New England Patriots.
Wynn mailed a brochure and 20-minute DVD to thousands of Foxborough households explaining the proposal, which has met resistance from many residents who are worried that it will add to traffic congestion and crime in the town about 25 miles south of Boston.
An artist’s rendering depicts a sprawling, six-story building that resembles a rustic lodge, rather than a high-rise Las Vegas-style casino. It would be built on vacant land across from Gillette Stadium that would be leased from Patriots owner Robert Kraft.
Wynn, the billionaire CEO of Wynn Resorts Ltd, had earlier pledged that the proposed casino would fit the character of the town and would not be as large or flashy as the typical Las Vegas casino.
In a letter accompanying the brochure and DVD, Wynn said the casino would benefit the town “both socially and economically.” He said the plans included a luxury hotel, convention space, more than 5,000 covered parking spaces, a public skating rink, high-end shops, a spa, fine dining and casual restaurants, and a performance theater.
The casino would create more than 4,000 permanent jobs and about 10,000 construction jobs, Wynn wrote, and it would generate between $10 million and $15 million for Foxborough that could be used to lower property taxes or invest in other town services. He also said an agreement could be reached with the town to cover public safety and other costs associated with the casino and that a study would be done to determine the traffic impact.
“We’re excited by the design and the unique opportunity the Wynn Resorts project presents for long-term economic growth in Foxborough,” Kraft Group spokesman Dan Krantz said.
“Since bringing forth the idea in December of last year, Wynn Resorts has followed through on a commitment to generate renderings and estimate the resort’s direct tax benefits. As we anticipated, the design and decor assimilates to its surroundings, and is likely in stark contrast to the Las Vegas-style high-rise that some may have envisioned,” he said.
Stephanie Crimmins, a spokeswoman for the group No Foxboro Casino, said casino opponents had anticipated that Wynn would launch a public relations blitz aimed at the hearts and minds of residents.
“We fully expected all along that they were going to send out some really fancy brochures,” Crimmins said.” It is certainly not going to change my mind or the minds of most people in the community.”
AP Photo/Petros Giannakouris
ATHENS, Greece (AP) — The ratings agency Moody’s downgraded Greece to the lowest rating on its bond scale late Friday, following a deal with private investors that would see them ultimately lose an estimated 70 percent of their holdings in Greek debt.
Moody’s lowered Greece’s sovereign rating to C from Ca, arguing that the risk of default remains high even a bond-swap deal with banks and other private investors, due to be completed this month, is successful.
It said it would “re-assess the credit risk profile” after Greece issues the new bonds.
Ratings agency Standard & Poor’s took similar action on Feb. 27.
The swap deal aims to cut euro107 billion ($144 billion) from the country’s debt, and would see private investors lose more than half the face value of their Greek bonds in exchange for new ones issued with more favorable repayment terms for the crisis-hit country.
The exchange is an integral part of a second bailout package for Greece by other eurozone countries and the International Monetary Fund.
“Looking ahead, the EU program and proposed debt exchanges will reduce Greece’s debt burden, but the risk of a default even after the debt exchange has been completed remains high,” Moody’s said.
“Moody’s believes that Greece will still face medium-term solvency challenges: its stock of debt will still be well in excess of 100 percent of gross domestic product for many years, the country is unlikely to be able to access the private market once the second assistance package runs out, and its planned fiscal and economic reforms will still face very significant implementation risks.”
BANGKOK (AP) — Asian stock markets rose Wednesday, powered higher by the strongest close for U.S. stocks since before the 2008 financial crisis.
Japan’s Nikkei 225 index rose 1.3 percent to 9,846.46 and Hong Kong’s Hang Seng added 0.5 percent to 21,685.33. South Korea’s Kospi gained 1.4 percent to 2,031.43. Australia’s S&P/ASX 200 rose 1.2 percent to 4,313.90.
Benchmarks in Singapore, Taiwan, Indonesia were also higher. Mainland Chinese shares were little changed.
Surging consumer confidence helped push the Dow to close at 13,005.12 on Tuesday. The last time the benchmark closed above 13,000 was in May 2008, four months before the fall of the Lehman Brothers investment bank and the worst of the financial crisis.
Investors are also anticipating the Federal Reserve’s so-called Beige Book report on economic activity which is due Wednesday. The report is expected to reflect a slowly improving U.S. economy.
“A plethora of positive developments helped to buoy markets overnight … a jump in US consumer confidence to its highest since February 2011 gave equity markets and risk assets in general a lift,” said analysts at Credit Agricole CIB in Hong Kong.
AP Photo/Mark Lennihan
NEW YORK (AP) — Americans are feeling better about the economy again, but will it last this time?
A widely watched barometer of consumer confidence surged in February to its highest level in a year as Americans took note of improving job prospects among friends and family and falling unemployment, which is now at a three-year low.
The brighter assessment released Tuesday by a private research group reflected a more upbeat attitude for the nation generally as the economy picks up. That is a boon for President Obama as he seeks re-election. Polls, including a recent Associated Press-GfK survey, show the Democratic incumbent is beginning to benefit politically from improved views of the economy.
“The economy is getting momentum. Clearly, shoppers are more optimistic about their job prospects,” said Amna Asaf, economist at Capital Economics.
The rising confidence among consumers gave confidence to Wall Street, too, helping it to reclaim the last of the ground it held before plunging into the depths of the Great Recession. The Dow Jones industrial average closed above 13,000 on Tuesday for the first time since May 19, 2008, four months before the fall of Lehman Brothers investment bank and the worst of the financial crisis.
Jack Ablin, chief investment officer at Harris Private Bank, called it “a momentous day for investor confidence.”
Tuesday’s gain puts the Dow 1,160 points below its all-time high, set Oct. 9, 2007. The Great Recession began two months later.
The milestone could draw some fence-sitting investors back into the market and add to the gains, said Brian Gendreau, market strategist at Cetera Financial Group.
But consumer confidence is still below the level of a healthy economy, and trouble could lie ahead. Rising gas prices could sully shoppers’ mood and derail the economic recovery. There are also fears about a nuclear showdown with Iran and the festering European debt crisis. Those worries could hurt demand for U.S. imports and make American companies pull back in hiring.
The confidence index is closely watched because consumer spending constitutes 70 percent of U.S. economic activity.
The big question mark is the price of gasoline, which Asaf said has climbed 20 cents per gallon since the confidence survey concluded two weeks ago.
The price of gas is a big issue because it has an immediate effect on shoppers’ pocketbooks, particularly low- to middle-income households that are already squeezed by higher costs for basics such as food.
The average U.S. price of a gallon of gasoline was $3.69, according to the Lundberg Survey of fuel prices released Sunday.
The Conference Board’s Consumer Confidence Index now stands at 70.8, significantly higher than the expected 63. A reading of 90 or above indicates a healthy economy. But the index has not reached that level since December 2007, when the recession began.
Still, Tuesday’s numbers were closer to levels that indicate a stable economy than to the danger zone that would suggest trouble.
WASHINGTON (AP) — Heads up: Drones are going mainstream.
Civilian cousins of the unmanned military aircraft that have tracked and killed terrorists in the Middle East and Asia are in demand by police departments, border patrols, power companies, news organizations and others wanting a bird’s-eye view that’s too impractical or dangerous for conventional planes or helicopters to get.
Along with the enthusiasm, there are qualms.
Drones overhead could invade people’s privacy. The government worries they could collide with passenger planes or come crashing down to the ground, concerns that have slowed more widespread adoption of the technology.
Despite that, pressure is building to give drones the same access as manned aircraft to the sky at home.
“It’s going to be the next big revolution in aviation. It’s coming,” says Dan Elwell, the Aerospace Industries Association’s vice president for civil aviation.
Some impetus comes from the military, which will bring home drones from Afghanistan and wants room to test and use them. In December, Congress gave the Federal Aviation Administration six months to pick half a dozen sites around the country where the military and others can fly unmanned aircraft in the vicinity of regular air traffic, with the aim of demonstrating they’re safe.
The Defense Department says the demand for drones and their expanding missions requires routine and unfettered access to domestic airspace, including around airports and cities. In a report last October, the Pentagon called for flights first by small drones both solo and in groups, day and night, expanding over several years. Flights by large and medium-sized drones would follow in the latter half of this decade.
Other government agencies want to fly drones, too, but they’ve been hobbled by an FAA ban unless they first receive case-by-case permission. Fewer than 300 waivers were in use at the end of 2011, and they often include restrictions that severely limit the usefulness of the flights. Businesses that want to put drones to work are out of luck; waivers are only for government agencies.
But that’s changing.
Congress has told the FAA that the agency must allow civilian and military drones to fly in civilian airspace by September 2015. This spring, the FAA is set to take a first step by proposing rules that would allow limited commercial use of small drones for the first time.
Until recently, agency officials were saying there were too many unresolved safety issues to give drones greater access. Even now FAA officials are cautious about describing their plans and they avoid discussion of deadlines.
“The thing we care about is doing that in an orderly and safe way and finding the appropriate … balance of all the users in the system,” Michael Huerta, FAA’s acting administrator, told a recent industry luncheon in Washington. “Let’s develop these six sites – and we will be doing that – where we can develop further data, further testing and more history on how these things actually operate.”
Drones come in all sizes, from the high-flying Global Hawk with its 116-foot wingspan to a hummingbird-like drone that weighs less than an AA battery and can perch on a window ledge to record sound and video. Lockheed Martin has developed a fake maple leaf seed, or “whirly bird,” equipped with imaging sensors, that weighs less than an ounce.
Potential civilian users are as varied as the drones themselves.
Power companies want them to monitor transmission lines. Farmers want to fly them over fields to detect which crops need water. Ranchers want them to count cows.
Journalists are exploring drones’ newsgathering potential. The FAA is investigating whether The Daily, a digital publication of Rupert Murdoch’s News Corp., used drones without permission to capture aerial footage of floodwaters in North Dakota and Mississippi last year. At the University of Nebraska, journalism professor Matt Waite has started a lab for students to experiment with using a small, remote-controlled helicopter.
“Can you cover news with a drone? I think the answer is yes,” Waite said.
The aerospace industry forecasts a worldwide deployment of almost 30,000 drones by 2018, with the United States accounting for half of them.
“The potential … civil market for these systems could dwarf the military market in the coming years if we can get access to the airspace,” said Ben Gielow, government relations manager for the Association for Unmanned Vehicle Systems International, an industry trade group.
The hungriest market is the nation’s 19,000 law enforcement agencies.
Customs and Border Patrol has nine Predator drones mostly in use on the U.S.-Mexico border, and plans to expand to 24 by 2016. Officials say the unmanned aircraft have helped in the seizure of more than 20 tons of illegal drugs and the arrest of 7,500 people since border patrols began six years ago.
Several police departments are experimenting with smaller drones to photograph crime scenes, aid searches and scan the ground ahead of SWAT teams. The Justice Department has four drones it loans to police agencies.
“We look at this as a low-cost alternative to buying a helicopter or fixed-wing plane,” said Michael O’Shea, the department’s aviation technology program manager. A small drone can cost less than $50,000, about the price of a patrol car with standard police gear.
Like other agencies, police departments must get FAA waivers and follow much the same rules as model airplane hobbyists: Drones must weigh less than 55 pounds, stay below an altitude of 400 feet, keep away from airports and always stay within sight of the operator. The restrictions are meant to prevent collisions with manned aircraft.
Even a small drone can be “a huge threat” to a larger plane, said Dale Wright, head of the National Air Traffic Controllers Association’s safety and technology department. “If an airliner sucks it up in an engine, it’s probably going to take the engine out,” he said. “If it hits a small plane, it could bring it down.”
Controllers want drone operators to be required to have instrument-rated pilot licenses – a step above a basic private pilot license. “We don’t want the Microsoft pilot who has never really flown an airplane and doesn’t know the rules of how to fly,” Wright said.
Military drones designed for battlefields haven’t had to meet the kind of rigorous safety standards required of commercial aircraft.
“If you are going to design these things to operate in the (civilian) airspace you need to start upping the ante,” said Tom Haueter, director of the National Transportation Safety Board’s aviation safety office. “It’s one thing to operate down low. It’s another thing to operate where other airplanes are, especially over populated areas.”
AP Photo/Alvaro Barrientos
MADRID (AP) — Daniel Lorente has worked construction, flipped burgers at McDonald’s, been a camp counselor, telemarketing representative and doorman.
But Lorente’s part-time jobs never lasted more than seven months: He was laid off from each one as Spain’s economic gloom deepened into a historic crisis. Now the 21-year-old is staring into a dead-end future.
“How am I going to make it if I don’t have a steady job, to pay a mortgage, for example?” asks Lorente. “Or for a wedding, or anything involving a big expense? You can’t get anywhere.”
Lorente is stuck among Spain’s “Lost Generation” of 20-somethings, with no work and no real prospects in sight: Roughly half of all Spaniards between 16 and 24 are jobless, the highest level among the 17 nations that use the euro. It’s a devastating picture of blighted youth that threatens to distort Spain’s social fabric for years to come, dooming dreams, straining family structures and eroding the well-being of a rapidly aging population.
“This puts the whole welfare state at risk,” said Gayle Allard, a labor market specialist at Madrid’s IE Business School. “The young people who are coming on the market now are the lost generation. They are losing the advantage of their youth and energy and that does not come back.”
The staggering jobless figures – 48.6 percent for Spaniards between 16 and 24; 39 percent for those ages 20-29 – hold dire consequences for a country that grew accustomed to prosperity on the back of a property boom that collapsed in 2008.
The 1.6 million unemployed teens and young adults in the nation of 47 million risk never having a decent start to a career. They probably won’t accumulate assets like their own homes or savings until they are in their 40s. And they then will likely face much higher taxes to maintain Spain’s costly social welfare system.
What’s more, they’re expected to put off having children or have fewer than their parents, slashing a birth rate that’s already declining just as Spain’s large baby boom generation begins to retire. That means fewer people to absorb the costs of caring for the swelling ranks of pensioners.
“It’s a historic waste,” Allard said. “The economy has not been transformed into a higher-productivity economy even though all those educated young workers were available for the task. I would not be surprised if eventually they rebelled against the tax burden.”
Anger and frustration among young adults have already taken root. Thousands erected protest camps last spring and summer in Madrid and Barcelona in illegal tent cities set up in central plazas. Unrest erupted again last week when students in Valencia protesting austerity cuts clashed with riot police, generating nationwide demonstrations against alleged police brutality.
Some Spaniards fear that Spain’s relatively new democracy, launched in 1978 after decades of dictatorship, may become threatened if an entire generation ends up convinced they will never attain the same lifestyle as their parents.
“The main risk for the country is we could lose a generation who go away and the young people who stay will have less education, condemning Spain to crisis for many years to come,” said Ricardo Ibarra, the 27-year-old president of The Spanish Youth Council, which represents groups for young adults.
“In 10 years we could have populism instead of democracy, and we cannot waste our democracy and throw it away.”
Segundo Gonzalez – a 23-year-old university student majoring in economics – says the only job offers he has received are for menial positions, for no more than eight hours a week with monthly pay of euro300 ($400).
“If those of us who should be entering employment have to leave the country or can’t get a job, or can only get poorly paid and low-tax work, it’s going to be very complicated for us to be able to sustain our parents’ pensions,” said Gonzalez.
“Future prospects are very complicated, bleak.”
In a scene mirrored nationwide, Lorente lives at home with his mother and an unemployed 28-year-sister. Like many other young Spaniards, he thinks Spain’s economy is so bad as it heads toward recession for the second time in four years that he might not be able to move out until he hits 40.
But with the overall unemployment rate now at a eurozone high 22.8 percent, even family support networks are being eroded – as young people find they can rely far less on handouts and shelter from mom and dad.
AP Photo/Richard Drew
NEW YORK (AP) — Stocks are closing their worst day this year after Greece hit a roadblock on its way to a critical bailout.
The Dow Jones industrial average is finishing down 89 points, or 0.7 percent, at 12,801. The broader Standard & Poor’s 500 is down nine points to 1,343. It is the first losing week for the index this year.
The Nasdaq composite is closing down 23 points at 2,904.
Stocks fell all day on news that European finance ministers were insisting that Greece cut even more in wages and spending if the nation hopes to get bailout money to pay its creditors.
Three stocks fell for every one that rose Friday on the New York Stock Exchange. Volume was light with just 3.5 billion shares trading hands.
AP Photo/Henny Ray Abrams
NEW YORK (AP) — On a normal day, 4 billion shares of stock change hands on the New York Stock Exchange. One in 10 belongs to a single company. It’s not McDonald’s or IBM, both of which have been on a tear.
It’s Bank of America – bailed out by the government three years ago, reviled for being part of the mortgage frenzy that helped wreck the economy and selling for not much more than an ATM fee.
When the market goes up because of positive news about the economy, Bank of America stock shoots up past the stocks of other big banks. When traders get worried about Greek debt, Bank of America takes the biggest plunge.
The big swings are not driven by a fundamental bet that the bank will be more profitable because the economy is getting better or a real concern that it will lose more money than others if there is a default in Greece.
Instead, Bank of America is the stock of the moment for high-frequency trading, the supercomputer-driven buying and selling that barely existed a few years ago and now accounts for as much as two-thirds of U.S. trading.
The bank’s single-digit stock price and flood of shares on the market – three times as many as its nearest big-bank competitor – make it an attractive target for hedge funds and banks that employ high-powered, computerized trading.
“The movement of Bank of America stock on most days has nothing to do with Bank of America,” says Joseph Saluzzi, co-founder of brokerage firm Themis Trading.
In other words, the stock moves because it moves. Bank of America stock has risen or fallen 1 percent or more on 20 days this year. The Standard & Poor’s 500 index has only done it three times.
For the year, Bank of America is up 46 percent, best of the 30 stocks that make up the Dow Jones industrial average. Big banks collectively are up 15 percent.
In high-frequency trading, investors use computer algorithms to exploit small changes in a stock’s price. If a computer can seize on a stock like Bank of America a fraction of a second faster than the rest of the market, it can book a tiny profit.
Those pennies add up over tens of millions of shares a day to produce big gains. And when computers rush to buy or sell a stock like Bank of America, it can result in accelerated moves in the stock price. Buying leads to more buying, selling to more selling.
Bank of America is part of the Standard & Poor’s 500, and therefore held in mutual funds in the retirement accounts of millions of Americans. And mutual fund managers hate high-frequency trading.
Not only does it make the stocks in their portfolios more volatile, but fund managers fume that high-frequency computers can detect their stock orders, step in to change the price of a stock slightly and pocket a small profit.
“It has nothing to do with the fundamentals,” says Leon Cooperman, a billionaire investor, chairman of hedge fund Omega Advisors and former CEO of Goldman Sachs Asset Management.
For computers to move in and out quickly, there must be enough shares available to trade. Bank of America has a truckload – 10.5 billion shares outstanding, compared with 3.8 billion for JPMorgan Chase and 2.9 billion for Citigroup.
The stock traded as high as $15.31 last year. Then investors, worried about how deep the bank’s mortgage problems might be, drove it below $10 in July. High-frequency traders pounced, and Bank of America’s volume exploded. It was 147 million shares last summer. On Thursday, 477 million shares changed hands.
The low price put it in the sweet spot for high-frequency trading. If a high-frequency operation is trading blocks of 100 shares at a time to capitalize on a 1-cent change, there’s a lot less risk working with a $5 stock than a $500 one.
It makes Bank of America “a juicy trade at very little risk,” says Adam Sussman, director of research at Tabb Group, a markets advisory firm.
In 2009 and 2010, Citigroup, then part-owned by the government, was in the same spot. Its price was in single digits, and it seesawed day to day. It was often the highest-volume stock – as many as 500 million shares changing hands in one day.
Last year, Citi reduced the number of shares by exchanging one share for every 10. That brought its stock price up – $33 on Wednesday – and high-frequency traders stopped flocking to it. Volume on a normal day has dropped to 50 million.
Bank of America went the opposite way in November and December and sold 400 million more shares to the market to raise $3.5 billion and improve its financial stability.
Today, some investors – the human ones – are buying Bank of America because they like CEO Brian Moynihan’s efforts to shore up the company’s finances. Other investors won’t touch it because they are afraid of the billions Bank of America is still spending to fight mortgage lawsuits. Charles Bobrinskoy, director of research at Ariel Investments, even calls the company “unanalyzable.”
But none of those groups is driving the stock. Some days, it moves with little or no tangible reason.
On Jan. 5, the stock jumped 8 percent with no explanation. The Wall Street Journal blogged that the stock was rising on “reports/rumors/blind hopes” about President Barack Obama appointing a new head to the federal housing agency.
NEW ORLEANS (AP) — The rig owner involved in drilling the ill-fated well that blew out in the Gulf of Mexico and spewed more than 200 million gallons of oil will not have to pay many of the pollution claims because it was shielded in a contract with well-owner BP, a federal judge ruled on Thursday. The ruling comes as BP, the states affected by the disaster and the federal government are discussing a settlement over the nation’s largest offshore oil spill.
The decision may have spared Transocean from having to pay potentially billions of dollars in damage claims. However, U.S. District Judge Carl Barbier said the driller still is not exempt from paying punitive damages and civil penalties that arise from the April 20, 2010, blowout 100 miles off the Louisiana coast. Those penalties could amount to billions of dollars.
Law experts were split over who is a clear-cut winner.
BP has been pursuing agreements with multiple parties to reach settlements that would make an upcoming trial involving hundreds of spill lawsuits in New Orleans unnecessary, or at least resolve as many of the issues as possible.
The Justice Department also is involved, working with the states to create an outline for a settlement that would resolve their potentially multibillion dollar claims against BP and the other companies involved in the disaster, Alabama Attorney General Luther Strange told The Associated Press.
Justice led a meeting last week in Washington among the states in an effort to formulate an agreement that would satisfy government and state claims, including penalties and fines, Strange said. He also indicated if there is a settlement that officials are discussing what to do with the $20 billion fund set up by BP to pay victims.
The lead attorneys for individuals and businesses suing BP were not at the meeting.
According to Strange, a federal magistrate judge has been asked to expedite settlement discussions. The Louisiana attorney general’s office said in a statement to the AP that it is in settlement discussions with BP, which would not comment on any deals in the works. A first phase of the trial is set for Feb. 27 to determine liability for the spill.
“The closer you get to a trial date, the more pressure builds to reach a settlement,” Strange said.
Despite the decision, BP claimed victory and said Barbier’s ruling “at a minimum” left Transocean facing “punitive damages, fines and penalties flowing from its own conduct.”
Transocean spokesman Lou Colasuonno said in an emailed statement that the company was pleased to see its position affirmed.
AP Photo/Mike Groll
NEW YORK (AP) — A different kind of F-word is stirring a linguistic and political debate as controversial as what it defines.
The word is “fracking” – as in hydraulic fracturing, a technique long used by the oil and gas industry to free oil and gas from rock.
It’s not in the dictionary, the industry hates it, and President Barack Obama didn’t use it in his State of the Union speech – even as he praised federal subsidies for it.
The word sounds nasty, and environmental advocates have been able to use it to generate opposition – and revulsion – to what they say is a nasty process that threatens water supplies.
“It obviously calls to mind other less socially polite terms, and folks have been able to take advantage of that,” said Kate Sinding, a senior attorney at the Natural Resources Defense Council who works on drilling issues.
One of the chants at an anti-drilling rally in Albany earlier this month was “No fracking way!”
Industry executives argue that the word is deliberately misspelled by environmental activists and that it has become a slur that should not be used by media outlets that strive for objectivity.
“It’s a co-opted word and a co-opted spelling used to make it look as offensive as people can try to make it look,” said Michael Kehs, vice president for Strategic Affairs at Chesapeake Energy, the nation’s second-largest natural gas producer.
To the surviving humans of the sci-fi TV series “Battlestar Galactica,” it has nothing to do with oil and gas. It is used as a substitute for the very down-to-Earth curse word.
Michael Weiss, a professor of linguistics at Cornell University, says the word originated as simple industry jargon, but has taken on a negative meaning over time – much like the word “silly” once meant “holy.”
But “frack” also happens to sound like “smack” and “whack,” with more violent connotations.
“When you hear the word `fracking,’ what lights up your brain is the profanity,” says Deborah Mitchell, who teaches marketing at the University of Wisconsin’s School of Business. “Negative things come to mind.”
AP Photo/Gregorio Borgia
PARIS (AP) — France was stripped Friday of its top-notch credit rating and rumors swirled in financial markets that its debt-burdened neighbors would be next, complicating Europe’s efforts to solve its financial crisis.
Finance Minister Francois Baroin told a French TV station that France had been downgraded by one notch by credit rating agency Standard & Poor’s. That would mean a rating of AA+, the same as the United States since it was downgraded last summer.
Rumors coursed through the markets that Austria and Italy could be downgraded next, perhaps as early as the end of the day’s stock trading in New York. S&P had warned 15 European nations in December that they were at risk for a downgrade.
Baroin said France had received a change to its rating “like most of the eurozone,” referring to the 17 European nations that use the euro currency, but there was no confirmation from S&P that any other nation had been downgraded Friday.
A credit downgrade would escalate the threats to Europe’s fragile financial system and raise the costs at which the affected countries – some of which are already struggling with heavy debt loads and slow economic growth – borrow money.
AP Photo/Paul Sakuma
WASHINGTON (AP) — A sign that Europe’s crisis has begun to weigh on the U.S. economy emerged Friday from a report that exports to the continent sank in November – far more than overall U.S. exports did.
Europe, which consumes nearly one-fifth of America’s exports, may already be in a recession. A weakening Europe could further shrink demand for American goods and slow the U.S. economy just as the job market has started to strengthen.
“The decline in our sales to Europe was fairly large and may be the start of a longer-term trend in declining exports to the continent,” said Joel Naroff, chief economist at Naroff Economic Advisors.
The U.S. trade deficit rose 10.4 percent in November to $47.8 billion, the Commerce Department said.
Higher oil prices were the main reason the deficit widened. Oil rose above $100 per barrel in November. It had been as low as $75 a barrel the previous month. More expensive oil drove the value of imports up 1.3 percent, to a record $225.6 billion.
Overall exports dropped 0.9 percent to $177.8 billion. American exports to Europe fell much more sharply – nearly 6 percent.
Economic growth weakens when exports decline because factories tend to produce fewer goods. And U.S. companies earn less. Friday’s trade report led some economists to cut their growth estimates for the October-December quarter.
Many economists had expected growth to be stronger after seeing more hiring, an increase in company stockpiles and faster production at U.S. factories. Most had been predicting that the economy would grow this quarter at an annual rate of roughly 3 percent.
But Paul Dales, senior U.S. economist for Capital Economists, said he now expects growth to be closer to 2 percent, in part because of the weaker trade report and also because of December’s disappointing retail sales.
“The widening in the U.S. trade deficit in November … is perhaps the first real sign that the crisis in Europe and the more general global slowdown is starting to take its toll on the U.S.,” Dales said.
AP Photo/(AP PHOTO/DARREN HAUCK)
WASHINGTON (AP) — Unemployment is higher than it’s been going into any election year since World War II.
But history shows that won’t necessarily stop President Barack Obama from reclaiming the White House.
In a presidential election year, the unemployment trend can be more important to an incumbent’s chances than the unemployment rate.
Going back to 1956 no incumbent president has lost when unemployment fell over the two years leading up to the election. And none has won when it rose.
The picture is similar in the 12 months before presidential elections: Only one of nine incumbent presidents (Gerald Ford in 1976) lost when unemployment fell over that year, and only one (Dwight Eisenhower in 1956) was re-elected when it rose.
Those precedents bode well for Obama. Unemployment was 9.8 percent in November 2010, two years before voters decide whether Obama gets to stay in the White House. It was down to 8.7 percent in November 2011, a year before the vote. It fell to 8.5 percent in December and is expected to fall further by Election Day.
Obama can take comfort in President Ronald Reagan’s experience. In November 1982, the economy was in the last month of a deep recession, and unemployment was 10.8 percent, the highest since the Great Depression. A year later, unemployment was down to 8.5 percent. By November 1984, it was still a relatively high 7.2 percent, but the downward trend was unmistakable. Reagan was re-elected that month in a 59-41 percent landslide.
“A sense that things are on the mend is really important to people,” says Andrew Kohut, president of the Pew Research Center. The trend holds up even when the changes in unemployment are slight. President Bill Clinton was re-elected handily even though the unemployment rate was only 0.2 percentage points lower in November 1996 than it had been two years earlier and was the same as it had been a year before.
Under Obama, unemployment peaked at 10 percent in October 2009, nine months into his presidency, before it began coming down in fits and starts. Along the way it stayed above 9 percent for 21 straight months.
AP Photo/J. Scott Applewhite
WASHINGTON (AP) — President Barack Obama is highlighting companies that have returned jobs to the U.S. and he says that’s one more way of putting people back to work.
The White House plans a forum Wednesday, called “Insourcing American Jobs,” that will bring together business leaders who shifted work back home. The president said Saturday in his weekly radio and Internet address that the event will discuss ways business leaders can return more jobs to the country.
“We’re heading in the right direction. And we’re not going to let up,” Obama said on the heels of the government reporting Friday that the unemployment rate fell to 8.5 percent in December.
Obama noted that the jobs report showed the economy added more than 200,000 private sector jobs last month and that more than 3 million private sector jobs had been added during the past 22 months. He said the nation was “starting 2012 with manufacturing on the rise and the American auto industry on the mend.”
The president said the U.S. couldn’t return “to the days when the financial system was stacking the deck against ordinary Americans,” citing his decision to install former Ohio Attorney General Richard Cordray as the director of the new Consumer Financial Protection Bureau while the Senate was on break, circumventing Republican opposition to the appointment.
It’s a bittersweet way for investors to begin a new year.
On the one hand, economic news in the U.S. has been getting steadily better. This holiday shopping season is shaping up to be the best since the Great Recession; the housing market is showing signs of life and even the job market is on the mend.
Then, there’s Europe. The region’s leaders have failed again to convince investors that they will be able to prevent a breakup of their 17-nation currency union. Greece could still default on its debt, causing huge losses for banks in France and elsewhere that hold Greek bonds. Investors fear that could cause a financial panic to spread around the world, like what happened in 2008 after the U.S. brokerage Lehman Brothers collapsed.
In the U.S., too, there are plenty reasons for investors to be cautious. Many companies are still wary of hiring, and banks are afraid to turn on the lending spigots.
Who better to guide investors during these uncertain times than Bob Doll, who helps oversee $3.6 trillion in assets as chief investment officer at the world’s biggest money manager, BlackRock.
Doll recently spoke with The Associated Press about how 2011 worked out for investors, what he’s optimistic about in 2012 and what he’s worried about. He’s hopeful that Europe can stick to its goal of greater fiscal austerity. But he acknowledges that – like his own New Year’s resolution of losing 15 pounds – enforcing the outcome is the tricky part.
Here are excerpts from the conversation, edited for clarity.
Q: How does 2011 stack up for you?
A: We entered the year hopeful. Global economies were looking better. But the tsunami disaster in Japan cast a bigger shadow on global growth than a lot of people initially thought. Then there were big political upheavals in the Middle East with the Arab Spring. Those political and social issues contributed to a rise in oil prices that didn’t help the fledgling U.S. economic recovery. Then Europe kept coming back as problem. All the wild cards that showed up were on the negative side. The year started high on hopes that were dashed.
AP Photo/Nam Y. Huh
NEW YORK (AP) — Boarding an airplane has never been safer.
The past 10 years have been the best in the country’s aviation history with 153 fatalities. That’s two deaths for every 100 million passengers on commercial flights, according to an Associated Press analysis of government accident data.
The improvement is remarkable. Just a decade earlier, at the time the safest, passengers were 10 times as likely to die when flying on an American plane. The risk of death was even greater during the start of the jet age, with 1,696 people dying – 133 out of every 100 million passengers – from 1962 to 1971. The figures exclude acts of terrorism.
Sitting in a pressurized, aluminum tube seven miles above the ground may never seem like the most-natural thing. But consider this: You are more likely to die driving to the airport than flying across the country. There are more than 30,000 motor-vehicle deaths each year, a mortality rate eight times greater than that in planes.
“I wouldn’t say air crashes of passenger airliners are a thing of the past. They’re simply a whole lot more rare than they used to be,” says Todd Curtis, a former safety engineer with Boeing and director of the Airsafe.com Foundation.
The improvements came even as the industry went through a miserable financial period, losing $54.5 billion in the past decade. Just to stay afloat, airlines eliminated meals and added fees for checked luggage.
But safety remained a priority. No advertisement of tropical beaches can supplant the image of charred metal scattered across a field.
There are still some corners of the world where flying is risky. Russia, the Democratic Republic of the Congo and Somalia have particularly high rates of deadly crashes. Russia had several fatal crashes in the past year, including one that killed several prominent hockey players. Africa only accounts for 3 percent of world air traffic but had 14 percent of fatal crashes.
Still, 2011 was a good year to fly. It had the second-fewest number of fatalities worldwide, according to the Flight Safety Foundation, with 507 people dying in crashes. Seven out of 28 planes in fatal crashes were on airlines already prohibited from flying into European Union because of known safety problems. (There were fewer fatalities in 2004 – 323 – but there were also fewer people flying then.)
There are a number of reasons for the improvements.
– The industry has learned from the past. New planes and engines are designed with prior mistakes in mind. Investigations of accidents have led to changes in procedures to ensure the same missteps don’t occur again.
– Better sharing of information. New databases allow pilots, airlines, plane manufactures and regulators to track incidents and near misses. Computers pick up subtle trends. For instance, a particular runway might have a higher rate of aborted landings when there is fog. Regulators noticing this could improve lighting and add more time between landings.
– Safety audits by outside firms. The International Air Transport Association, an industry trade group, started an audit program in 2003. Airlines prove to the industry and each other that they have proper maintenance and safety procedures. It’s also a way for airlines to seek lower insurance premiums, which have also dropped over the past 10 years.
AP Photo/Richard Drew
NEW YORK (AP) — Stocks rose Thursday morning after the government reported that the number of claims for unemployment benefits remained at a level consistent with modest job growth. Contracts to buy homes rose to the highest level in a year and a half.
The four-week average of unemployment claims fell to a three-and-a-half-year low of 375,000, an indication that hiring could pick up.
The National Association of Realtors says its index of sales agreements jumped 7.3 percent last month. The news sent stocks of home builders sharply higher. PulteGroup Inc., Lennar Corp. and Masco Corp. all rose close to 4 percent.
The Dow Jones industrial average rose 75 points at 12,227 at 10 a.m. It fell nearly 140 points the day before.
The S&P 500 was up 7 points at 1,257, and is at breakeven for the year. The Nasdaq composite index rose 6 at 2,596.
Europe’s debt woes weighed on currency markets. The euro fell to its lowest level against the dollar this year and a decade-low against the Japanese yen. At one point the euro’s value against the dollar hit $1.28, the lowest level since September 2010.
AP Photo/Pier Paolo Cito
ROME (AP) — Italy’s borrowing costs fell for a second day Thursday but the country’s new premier said his government has more to do before it convinces financial markets it can manage the heavy debts that have made it the focus of the eurozone crisis.
Mario Monti said he was encouraged by the bond auctions at which the interest costs paid out by Italy to bond investors eased. He said his government of technocrats, in office for just a month and a half following the resignation of Silvio Berlusconi, was preparing a package of measures to get the Italian economy moving again, including efforts to boost competition and liberalize the labor market.
“Yesterday and today went pretty well, this is encouraging,” Monti said at a news conference after the Italian treasury tapped investors for around euro7 billion ($9.2 billion). “But we absolutely don’t consider the market turbulence to be over.”
The amount raised, however, was less than the euro8.5 billion ($11 billion) maximum sought and contributed to ongoing weakness in the euro, which fell to a 15-month low against the dollar of $1.2866.
The most keenly awaited result from Thursday’s batch of auctions was the euro2.5 billion ($3.3 billion) sale of ten-year bonds at an average yield of 6.98 percent. That’s lower than the record 7.56 percent it had to pay at an equivalent auction last month, when investor concerns over the ability of the country to service its massive debts became particularly acute.
However, the country’s borrowing rate on the key 10-year bond remains uncomfortably close to the 7 percent level widely considered to be unsustainable in the long run. Greece, Ireland and Portugal all had to request financial bailouts after their 10-year bond yields pushed above 7 percent. In the secondary markets, Italy’s yield continues to hover around the 7 percent mark.
“Investors are still waiting for more progress on the reform front to ensure Italy can improve its muted growth and productivity performance since the adoption of the euro,” said Raj Badiani, a senior economist at IHS Global Insight.
AP Photo/Paul Sancya
WASHINGTON (AP) — The number of people seeking unemployment benefits rose last week after three weeks of decline.
Even with the gain, applications remained at a level consistent with modest hiring. And the broader trend over the past month suggests job growth could pick up further in the new year.
Weekly applications increased by 15,000 to a seasonally adjusted 381,000, the Labor Department said Thursday.
The four-week average, a less volatile measure, dropped for the fourth straight week to 375,000. That’s the lowest level since June 2008.
“Despite the rise in the weekly claims data, the longer-term trend … suggests that the recovery in the labor market is maintaining its momentum,” said Michael Gapen, an economist at Barclays Capital, in a note to clients.
Applications generally must fall below 375,000 – consistently – to signal that hiring is strong enough to reduce the unemployment rate.
While layoffs have fallen sharply since the recession officially ended two and a half years ago, many companies have been slow to add jobs.
Economists caution that the figures can be volatile around the holidays. The data for seven states, including California and Virginia, were estimated because of the Monday holiday, a Labor Department spokesman said. Those estimates have in the past proven reliable, the spokesman said, and haven’t required major revision.
Hiring has improved in recent months. Employers have added an average of 143,000 net jobs a month from September through November. That’s almost double the average for the previous three months.
Next year should be even better. A survey of 36 economists by the Associated Press this month found that they expect the economy will generate an average of about 175,000 jobs per month in 2012.
More small businesses plan to hire than at any time in three years, a trade group said earlier this month. And a separate private-sector survey found more companies are planning to add workers in the first quarter of next year than at any time since 2008.
AP Photo/Richard Drew
Technology stocks fell Wednesday, dragged down by a weak earnings report from the business software maker Oracle Corp.
Broad market indexes were flat. The Dow Jones industrial average eked out a gain of 4 points after having been down 104 points at midday.
Technology stocks in the Standard & Poor’s 500 index fell 2 percent. Oracle plunged 12 percent after the business software company said it was struggling to close deals.
The rare earnings miss by Oracle seemed to reinforce worries that businesses and the government may cut back on technology spending. Especially worrying was a weak 2 percent gain in new software licenses, a key sign of demand from other businesses. Oracle had predicted gains of as much as 16 percent.
Those worries hurt other big technology companies. IBM Corp. was by far the biggest loser in the Dow, falling 3.1 percent to $181.47. A bright spot was the BlackBerry maker Research In Motion Ltd., which jumped 10 percent to $13.78 on rumors that it might be a takeover target.
Investors also had more to worry about from Europe. New data showed extensive lending from the European Central Bank to European banks. The initial reaction to the $639 billion in lending by the ECB was positive, but then worry set in that Europe’s banks needed so much help in the first place.
“Long-term, people were a little bit concerned that banks needed more money than we thought they did,” said Joe Bell, a senior equity analyst with Schaeffer’s Investment Research.
The Dow edged up 4.16 points, less than 0.1 percent, to close at 12,107.74. On Tuesday the Dow jumped 337 – its biggest gain this month – on a strong bond sale in Spain and a surge in new home construction in the U.S.
The Standard & Poor’s 500 rose 2.42 points, or 0.2 percent, to 1,243.72. Outside of the 2 percent decline for technology companies, prices rose or were flat in the rest of the S&P 500’s 10 sectors.
AP Photo/Mark Lennihan
WASHINGTON (AP) — Some say they’ll spend less on groceries. Others expect to cut back on travel. For many, there would be fewer meals out.
Across the country, Americans are bracing for another financial hardship: smaller paychecks starting in January, if Congress doesn’t break a deadlock and renew a Social Security tax cut.
The tax cut, which took effect this year, benefits 160 million Americans – $1,000 a year, or nearly $20 a week, for someone making $50,000, as much as $4,272 or $82 a week for a household with two high-paid workers.
The tax cut is set to expire Jan. 1. If lawmakers don’t renew it for 2012, analysts say the economy would slow as individuals and families looked for ways to spend less.
“Of course, it changes my plans,” said Craig Duffy, an information-technology worker from Philadelphia and new father of twins. Duffy said his family already has tightened spending, so “we’ll have to find a way to cut back.”
That might mean canceling a planned trip to visit the twins’ grandparents in Wisconsin, Duffy said.
The tax cut is part of legislation that would also renew benefits for the long-term unemployed. If the unemployment benefits aren’t renewed, starting in January nearly 6 million people would lose weekly checks averaging about $300 – the main source of income for most of them.
House Republicans have rejected a Senate-passed bill that would extend the payroll tax cut for two months and let the long-term unemployed continue to receive benefits during that time. That plan would give lawmakers time to work on a yearlong extension.
But most lawmakers have left Washington, and no negotiations are scheduled before the year ends.
If Congress doesn’t renew the two measures for 2012, analysts say the economy’s growth would slow by as much as 1 percentage point.
Less money in paychecks means less consumer spending, which powers the U.S. economy. Many people who say they already depend on each paycheck for living expenses say they can’t cut spending deeply. Instead, they’ll trim at the edges, wherever they can.
“It will limit my spending from week to week,” said Jennifer Stempel, an office manager from Denver.
Stempel said that could mean making fewer impulse buys at the grocery store, packing her lunch each day and rejoining a carpool she quit after gas prices declined this year.
“I was starting to relax about (travel expenses), but now I don’t know,” Stempel said.
Michael Allara of Raleigh, N.C., said a higher tax would further pressure his family, which includes three small children.
“I’m already trying to save as much as I can to pay for college,” Allara said. “I don’t know where the money would come from.”
The tax cut lowered the Social Security tax on incomes of up to $106,800 from 6.2 percent to 4.2 percent. It’s meant a maximum savings of $2,136 for an individual.
Without a deal, Americans would begin 2012 facing a tax increase just as an election year begins.
Smaller paychecks and reduced spending would coincide with a still-vulnerable period for the U.S. economy. Though growth has strengthened in the final months of 2011, some analysts say the gains might be hard to sustain. Workers’ pay isn’t rising much. And Europe may be on the verge of a recession that would undermine the American economy.
“A failure to extend the payroll tax holiday and the extended unemployment benefits would be a serious hit to the economy,” said Mark Zandi, chief economist at Moody’s Analytics. “The risk of a recession would rise and be uncomfortably high, particularly early next year, when the fallout from Europe’s troubles will be the greatest.”
AP Photo/Vickie D. King
WASHINGTON (AP) — The economy is ending 2011 on a roll.
The job market is healthier. Americans are spending lustily on holiday gifts. A long-awaited turnaround for the depressed housing industry may be under way. Gas is cheaper. Factories are busier. Stocks are higher.
Not bad for an economy faced with a debt crisis in Europe and, as recently as this summer, scattered predictions of a second recession at home. Instead, the economy has grown faster each quarter this year, and the last three months should be the best.
“Things are looking up,” says Chris Rupkey, chief financial economist at the Bank of Tokyo-Mitsubishi UFJ.
When The Associated Press surveyed 43 economists in August, they pegged the likelihood of another recession at roughly one in four. The Dow Jones industrial average was lurching up or down by 400 points or more some days.
There was plenty of reason for gloom. A political standoff over the federal borrowing limit brought the United States to the brink of default and cost the nation its top-drawer credit rating.
Most analysts now rule out another recession. They think the economy will grow at an annual rate of more than 3 percent from October through December, the fastest pace since a 3.8 percent performance the spring of 2010.
Many economists still worry that the year-end surge isn’t sustainable, in part because the average worker’s pay is barely rising. And Europe may already be sliding into a recession that will infect the United States.
The outlook could darken further if Congress can’t break the impasse blocking an extension of a Social Security tax cut for 160 million Americans and emergency unemployment benefits.
Yet for now, the economy is on an upswing that few had predicted:
– JOBS: The number of people applying for unemployment benefits came in at 366,000 last week, down from a peak of 659,000 in March 2009. Even in good economic times, the figure would be between 280,000 and 350,000.
Employers have added at least 100,000 jobs five months in a row, the longest streak since 2006. And the unemployment rate fell from 9 percent in October to 8.6 percent last month, the lowest since March 2009.
Small businesses are hiring again, too, according to the National Federation of Independent Business.
Business is up at AG Salesworks in Norwood, Mass., which helps technology companies like Motorola find new customers. The firm has hired 26 workers to restore its staff to 56, erasing the job cuts from the recession. CEO Paul Alves plans to add an employee or two a month as long as growth continues.
“I do see more confidence than I saw 12 months ago,” Alves says. “But it’s good, not great. Robust isn’t the word I’d use.”
– SPENDING: The holiday shopping season has turned out better than anyone expected. Sales from November through Saturday were up 2.5 percent. Americans have spent $32 billion online, 15 percent more than a year ago. Retails sales were up in November for the sixth month in a row. People are spending, in particular, on clothes, cars, electronics and furniture.
– CONSUMER CONFIDENCE: Americans felt better about the economy in November than they had since July, according to the Conference Board, a business group that tracks the mood of consumers.
The board’s consumer confidence index climbed 15 points to 56 in November, the biggest one-month jump since April 2003. During the Great Recession, the index fell as low as 25.
“It seems like the confidence of the traditional American consumer is higher right now,” says Jim Newman, executive vice president of operations at the digital marketing company Acquity Group, which has added 100 jobs since summer.
– GAS: Falling prices at the pump have freed more money for consumers to spend on appliances, furniture, vacations and other things that help drive the economy. The national average for regular unleaded has sunk to $3.21 a gallon since peaking at $3.98 in May, according to the AAA Daily Fuel Gauge.
– INVENTORIES: Businesses are restocking shelves and warehouses, more confident that customers will buy their products. In October, their inventories were up 8.7 percent from a year earlier. An increase in inventories is expected to account for perhaps a third of growth this quarter.
The battered housing market might be showing signs of recovery. Home construction rose more than 9 percent in November from October, driven by apartment building. And the National Association of Realtors said Wednesday that sales of previously occupied homes rose 4 percent in November.
AP Photo/J. Scott Applewhite
WASHINGTON (AP) — The Senate passed legislation Saturday extending a Social Security payroll tax cut and jobless benefits for just two months, handing President Barack Obama a partial victory while setting the stage for another fight in February.
It also brought a peaceful end to a year-long battle over spending by passing a $1 trillion-plus catchall budget bill that wraps together the day-to-day budgets for 10 Cabinet departments and military operations in Iraq and Afghanistan. The House passed the measure Friday, and the White House has signaled that Obama will sign it.
The renewal of the 2-percentage-point cut in the Social Security payroll tax for 160 million workers and unemployment benefits averaging about $300 a week for the additional millions of people who have been out of work for six months or more is a modest step forward for Obama’s year-end jobs agenda.
As a condition for GOP support of the payroll tax measure, Obama has to accept a provision that forces him to decide within 60 days whether to approve or reject a proposed a Canada-to-Texas oil pipeline that promises thousands of jobs.
Obama didn’t reference the pipeline issue in a brief appearance at the White House after the vote. He welcomed the Senate’s passage of the payroll tax cut and unemployment insurance extension and said it would be “inexcusable” for Congress not to extend them for the rest of 2012 when lawmakers return from their holiday break.
The budget bill, passed 67-32, heads to the White House for Obama’s signature; the payroll tax measure won a 89-10 tally that send it back to the House – where many Republicans only reluctantly support it – for a vote early next week.
A spokesman for House Speaker John Boehner, R-Ohio, would not predict whether the House would accept the Senate payroll tax measure, saying GOP leaders would have to discuss it with the rank and file. But Democrats assume Senate Republicans would not have allowed the short-term measure to advance without a signal from Boehner that the House would go along.
Democratic and GOP leaders opted for the short-term extension of the payroll tax and jobless benefits measure after failing to agree on big enough spending cuts to pay for a full-year renewal. The measure also provides a 60-day reprieve from a scheduled 27 percent cut in the fees paid to doctors who treat Medicare patients.
SAO PAULO (AP) — A Brazilian judge has revoked a decision that had halted some work on a massive hydroelectric dam in the Amazon jungle.
Federal judge Carlos Eduardo Martins halted construction on the $11-billion, 11,000-megawatt Belo Monte Dam in September, saying it would harm fishing on the Xingu River, which feeds the Amazon.
But on Friday, he ruled that construction could proceed because the Norte Energia consortium that is building the dam showed that the flow of the river would not be altered in a way that would harm the habitat of fish.
The judge’s ruling has been posted on the court’s website.
When completed, the dam would be the world’s third largest behind China’s Three Gorges dam and the Itaipu, which straddles the border of Brazil and Paraguay.
The government has said it will be a source of clean, renewable energy, and that it will help fuel the country’s economy.
But environmentalists and indigenous groups say the dam would devastate wildlife and the livelihoods of 40,000 people who live in the area to be flooded.
Celebrities including British rock star Sting, film director James Cameron and actress Sigourney Weaver have joined activists in lobbying against the dam.
AP Photo/Amy Sancetta
BENTONVILLE, Ark. (AP) — Wal-Mart has opened an internal investigation to determine whether its overseas operations have complied with U.S. federal law as it pertains to permitting, licensing and inspections.
The Bentonville, Ark., retailer offered few details about the investigation in a quarterly report filed Thursday with the Securities and Exchange Commission.
The company said that it opened the investigation after reviewing policies, procedures and internal controls tied to its global anti-corruption program. It said that it is taking “appropriate remedial measures.”
“We are taking a deep look at our policies and procedures in every country in which we operate,” said Wal-Mart spokesman Dave Tovar in an email. “As a result of information obtained during that review and from other sources, we have begun an internal investigation related to compliance with the” Foreign Corrupt Practice Act.
BANGKOK (AP) — Asian stocks rose Wednesday amid growing optimism that European leaders will approve aggressive plans by the end of the week to rescue the region from a debt crisis that has roiled financial markets for months.
Japan’s Nikkei 225 rose 0.8 percent to 8,645.72 and South Korea’s Kospi added 0.9 percent to 1,918.99. Hong Kong’s Hang Seng gained 0.8 percent 19,105.51. Australia’s S&P/ASX 200 climbed 0.8 percent to 4,296.80.
On Wall Street, stocks mostly rose Tuesday on a report that European leaders might create a second bailout fund to supplement the one they have already agreed to. The second fund would nearly double the capacity of Europe’s financial rescue programs, the Financial Times reported.
The plan involves allowing the existing 440 billion euros bailout fund to continue running when a new 500 billion euros facility comes into force in mid-2012, almost doubling the rescue system’s firepower, Stan Shamu of IG Markets wrote in a report. “This latest move might just be the ‘bazooka’ Europe needs to appease markets.”
Asian stocks tumbled Tuesday, hours after Standard & Poor’s credit ratings agency warned that it might downgrade 15 of the 17 countries that use the euro – even Germany, which has a top AAA rating and Europe’s strongest economy.
AP Photo/Ted S. Warren
SEATTLE (AP) — Boeing’s Machinists union votes Wednesday on a four-year contract extension that would ensure a long stretch of elusive labor peace as the new version of the 737 is built in Washington state.
The union announced last week that it reached a tentative deal following secret talks initiated by the company. If workers ratify the pact, as expected, the Machinists say they’ll drop their National Labor Relations Board complaint over Boeing’s decision to open a nonunion plant in South Carolina.
The relationship between Boeing Co. and the union’s 28,000 workers in Washington, Oregon and Kansas has been contentious, to say the least. The Machinists have gone on strike in 1987, 1995, 2005 and 2008, the last being a 58-day bruiser that helped delay delivery of the new 787 and cost the company dearly.
“It’s been a rough ride the last 25 years,” said Robley Evans, a forklift driver and union official. “To think about having five years of labor peace and not the standard stuff we go through, it’s good. We’re hopeful this is the new way of negotiating.”
The deal calls for annual wage increases of 2 percent, cost-of-living adjustments, an incentive program intended to pay bonuses between 2 percent and 4 percent, a ratification bonus of $5,000 for each member, and improvements in the pension program. But it also would raise workers’ share of health costs.
Crucially for the union, it would ensure that jobs for Boeing’s updated 737 line – the 737 Max – stay in the Puget Sound region. Boeing said in July it was studying other locations for the new 737.
Industry analyst Wayne Plucker, of the San Antonio, Texas, research firm Frost and Sullivan, said the agreement is good for both sides. Considering the looming Defense Department budget cuts that threaten defense contracts across the industry, Boeing is going to need solid performance from its commercial airplanes division, Plucker said.
“Boeing needs a peaceful time,” he said. “Their competition with Airbus and their challenges to come on the defense side made it kind of a pivotal thing to have a quiet, peaceful time, labor relations-wise.
“It’s also a big deal for the Machinists union. They got the agreement that the 737 will be done in Seattle – that’s a huge deal. There are far more of them built than there ever will be of the 787. So it’s a win for the union, and for the Seattle area.”
NEW YORK (AP) — Citigroup Inc. is eliminating 4,500 jobs in its latest effort to cut costs. The bank will take a $400 million charge in the fourth quarter as a result.
Citigroup’s CEO, Vikram Pandit, disclosed the job cuts at an investor conference Tuesday. The cuts represent about 1.5 percent of its global workforce of 267,000. Pandit said the cuts would be made over the next few quarters.
Other banks have also been cutting staff. Last month, Swiss lender UBS told investors it is downsizing its investment bank to 16,000 people by 2016 from the current 18,000 as the bank tries to reduce its exposure to risk. In September, Bank of America Corp., based in Charlotte, N.C., said it would cut 30,000 jobs over the next few years.
Pandit also warned that Citigroup will take a $500 million hit to revenue from an accounting-related charge related to the changing value of its debt.
Citi and other banks took accounting gains in the third quarter because the cost of its debt fell in the bond market. Since the bank could theoretically buy back its debt at a lower cost, accounting rules require that a gain be recorded.
WASHINGTON (AP) — Facing bankruptcy, the U.S. Postal Service is pushing ahead with unprecedented cuts to first-class mail next spring that will slow delivery and, for the first time in 40 years, eliminate the chance for stamped letters to arrive the next day.
The estimated $3 billion in reductions, to be announced in broader detail on Monday, are part of a wide-ranging effort by the cash-strapped Postal Service to quickly trim costs, seeing no immediate help from Congress.
The changes would provide short-term relief, but ultimately could prove counterproductive, pushing more of America’s business onto the Internet. They could slow everything from check payments to Netflix’s DVDs-by-mail, add costs to mail-order prescription drugs, and threaten the existence of newspapers and time-sensitive magazines delivered by postal carrier to far-flung suburban and rural communities.
That birthday card mailed first-class to Mom also could arrive a day or two late, if people don’t plan ahead.
“It’s a potentially major change, but I don’t think consumers are focused on it and it won’t register until the service goes away,” said Jim Corridore, analyst with S&P Capital IQ, who tracks the shipping industry. “Over time, to the extent the customer service experience gets worse, it will only increase the shift away from mail to alternatives. There’s almost nothing you can’t do online that you can do by mail.”
The cuts, now being finalized, would close roughly 250 of the nearly 500 mail processing centers across the country as early as next March. Because the consolidations typically would lengthen the distance mail travels from post office to processing center, the agency also would lower delivery standards for first-class mail that have been in place since 1971.
Currently, first-class mail is supposed to be delivered to homes and businesses within the continental U.S. in one day to three days. That will lengthen to two days to three days, meaning mailers no longer could expect next-day delivery in surrounding communities. Periodicals could take between two days and nine days.
About 42 percent of first-class mail is now delivered the following day. An additional 27 percent arrives in two days, about 31 percent in three days and less than 1 percent in four days to five days. Following the change next spring, about 51 percent of all first-class mail is expected to arrive in two days, with most of the remainder delivered in three days.
The consolidation of mail processing centers is in addition to the planned closing of about 3,700 local post offices. In all, roughly 100,000 postal employees could be cut as a result of the various closures, resulting in savings of up to $6.5 billion a year.
Expressing urgency to reduce costs, Postmaster General Patrick Donahoe said in an interview that the agency has to act while waiting for Congress to grant it authority to reduce delivery to five days a week, raise stamp prices and reduce health care and other labor costs.
The Postal Service, an independent agency of government, does not receive tax money, but is subject to congressional control on large aspects of its operations. The changes in first-class mail delivery can go into place without permission from Congress.
After five years in the red, the post office faces imminent default this month on a $5.5 billion annual payment to the Treasury for retiree health benefits. It is projected to have a record loss of $14.1 billion next year amid steady declines in first-class mail volume. Donahoe has said the agency must make cuts of $20 billion by 2015 to be profitable.
It already has announced a 1-cent increase in first-class mail to 45 cents beginning Jan. 22.
“We have a business model that is failing. You can’t continue to run red ink and not make changes,” Donahoe said. “We know our business, and we listen to our customers. Customers are looking for affordable and consistent mail service, and they do not want us to take tax money.”
Separate bills that have passed House and Senate committees would give the Postal Service more authority and liquidity to stave off immediate bankruptcy. But prospects are somewhat dim for final congressional action on those bills anytime soon, especially if the measures are seen in an election year as promoting layoffs and cuts to neighborhood post offices.
Technically, the Postal Service must await an advisory opinion from the independent Postal Regulatory Commission before it can begin closing local post offices and processing centers. But such opinions are nonbinding, and Donahoe is making clear the agency will proceed with reductions once the opinion is released next March.
“The things I have control over here at the Postal Service, we have to do,” he said, describing the cuts as a necessary business decision. “If we do nothing, we will have a death spiral.”
The Postal Service initially announced in September it was studying the possibility of closing the processing centers and published a notice in the Federal Register seeking comments. Within 30 days, the plan elicited nearly 4,400 public comments, mostly in opposition.
-Small-town mayors and legislators in states including Illinois, Missouri, Ohio and Pennsylvania cited the economic harm if postal offices were to close, eliminating jobs and reducing service. Small-business owners in many other states also were worried.
“It’s kind of a lifeline,” said William C. Snodgrass, who owns a USave Pharmacy in North Platte, Neb., referring to next-day first-class delivery. His store mails hundreds of prescriptions a week to residents in mostly rural areas of the state that lack local pharmacies. If first-class delivery were lengthened to three days and Saturday mail service also were suspended, a resident might not get a shipment mailed on Wednesday until the following week.
“A lot of people in these communities are 65 or 70 years old, and transportation is an issue for them,” said Snodgrass, who hasn’t decided whether he will have to switch to a private carrier such as UPS for one-day delivery. That would mean passing along higher shipping costs to customers. “It’s impossible for many of my customers to drive 100 miles, especially in the winter, to get the medications they need.”
-ESPN The Magazine and Crain Communications, which prints some 27 trade and consumer publications, said delays to first-class delivery could ruin the value of their news. Their magazines are typically printed at week’s end with mail arrival timed for weekend sports events or the Monday start of the work week. Newspapers, already struggling in the Internet age, also could suffer.
AP Photo/Rick Rycroft
SYDNEY (AP) — Australia’s ruling party voted Sunday to overturn a long-standing ban on exporting uranium to India, despite fierce opposition from critics who argued such sales are unsafe because India has not signed the Nuclear Nonproliferation Treaty.
Prime Minister Julia Gillard urged members of her center-left Labor Party during its annual conference to allow the exports in the interest of the national economy, arguing there are safeguards in place to ensure the uranium would be used for peaceful purposes.
“We need to make sure that across our regions we have the strongest possible relationships we can, including with the world’s largest democracy, India,” Gillard said. “That’s why today we should determine to change our platform and enable us, under safeguards, to sell uranium to India.”
The party’s vote to amend an executive policy does not need parliamentary approval.
Australia holds 40 percent of the world’s known uranium reserves. It does not sell uranium on the open market and bans nuclear power generation at home.
But it sells uranium only for the purpose of power generation under strict conditions banning any military applications in bilateral trade agreements with the United States, China, Taiwan, Japan, South Korea and several European countries.
Australia’s previous conservative government started negotiations with energy-hungry India on uranium sales. But the Labor government immediately ended the talks when it came to power in 2007, ruling out exports unless New Delhi signed the Nuclear Nonproliferation Treaty.
Gillard had previously noted that the U.S. lifted a “de facto international ban” on nuclear cooperation with India in 2005 when it signed a deal with New Delhi to trade uranium and work together on civil atomic power generation.
AP Photo/Ted S. Warren
WASHINGTON (AP) — Factories are producing more. Construction is growing. People are buying more cars. The holiday shopping season is off to a strong start.
Normally, all that would suggest a bright outlook for the economy. Problem is, employers still aren’t hiring much, the number of people seeking unemployment benefits remains high and Europe’s debt crisis poses a grave threat to the future.
Thursday’s mixed economic picture came a day before the government will report on unemployment and job growth for November. That report is expected to show a modest net gain of 125,000 jobs, scarcely enough to keep up with population growth. The unemployment rate is projected to remain 9 percent.
Analysts say the economy remains locked in a good-but-hardly-good-enough position: It’s growing consistently, yet too weakly to induce employers to hire aggressively.
“The economy is picking up momentum as we close out 2011,” said Neil Dutta, an economist at Bank of America Merrill Lynch. At the same time, it faces “an ongoing flu in Europe” and other challenges, such as uncertainty about future taxes and spending in the United States, Dutta said.
For now, factories are expanding. The Institute for Supply Management, a trade group of purchasing managers, says its manufacturing index rose to 52.7 in November, up from 50.8 in October. Any reading above 50 indicates expansion. Factories have grown for 28 straight months.
Manufacturers are slightly more hopeful about the next few months because of cheaper raw materials and healthy demand, said Bradley Holcomb, head of the ISM’s survey committee.
Still, he said, companies have tempered their outlook because of concerns about whether the economy will grow consistently, uncertainty about federal taxes and regulation and fear that Europe’s debt crisis may trigger a global economic panic.
Mark Vitner, an economist at Wells Fargo, suggested that employers are reluctant to hire freely because the U.S. economy’s future appears hazy.
For one thing, a Social Security tax cut that provided an average $1,000 in extra cash this year for about 160 million Americans could expire at year’s end. Republican lawmakers did take steps Thursday to extend the cut, along with emergency unemployment benefits. But it’s still uncertain whether the money will be renewed.
In addition, the Obama administration’s health care reform could slow hiring next year, Vitner said, because it will require companies to provide coverage by 2013 or pay a fine.
And any worsening of Europe’s financial crisis could cause U.S. and European banks to cut back on lending and hoard cash. That would slow the economy.
Concerns about a credit crunch led the Federal Reserve and five other central banks to take coordinated action this week to lower the cost of dollar loans in Europe and elsewhere.
AP Photo/Michael Probst
FRANKFURT, Germany (AP) — The central banks of the wealthiest countries, trying to prevent a debt crisis in Europe from exploding into a global panic, swept in Wednesday to shore up the world financial system by making it easier for banks to borrow American dollars.
Stock markets around the world roared their approval. The Dow Jones industrial average rose almost 500 points, its best day in two and a half years. Stocks climbed 5 percent in Germany and more than 4 percent in France.
The action appeared to be the most extraordinary coordinated effort by the central banks since they cut interest rates together in October 2008, at the depths of the financial crisis.
But while it should ease borrowing for banks, it does little to solve the underlying problem of mountains of government debt in Europe, leaving markets still waiting for a permanent fix. European leaders gather next week for a summit on the debt crisis.
The European Central Bank, which has been reluctant to intervene to stop the growing crisis on its own continent, was joined in the decision by the Federal Reserve, the Bank of England and the central banks of Canada, Japan and Switzerland.
“The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity,” the central banks said in a joint statement.
China, which has the largest economy in the world after the European Union and the United States, reduced the amount of money its banks are required to hold in reserve, another attempt to free up cash for lending.
The display of worldwide coordination was meant to restore confidence in the global financial system and to demonstrate that central banks will do what they can to prevent a repeat of 2008.
That fall, fear gripped the financial system after the collapse of Lehman Brothers, a storied American investment house. Banks around the world severely restricted lending to each other. Investors panicked, resulting in a meltdown in stocks.
In October 2008, the ECB, the Fed and other central banks cut interest rates together. That action, like Wednesday’s, was a signal from the central banks to the financial markets that they would be players, not spectators.
This year, investors have been nervously watching Europe to see whether they should take the same approach and dump stocks. World stock markets have been unusually volatile since summer.
The European crisis, which six months ago seemed focused on the relatively small economy of Greece, now threatens the existence of the euro, the common currency used by 17 countries in Europe.
There have also been signs, particularly in Europe, that it is becoming more difficult to borrow money, especially as U.S. money market funds lend less money to banks in the euro nations because of perceived risk from the debt crisis.
European banks cut business loans by 16 percent in the third quarter. And no one knows how much European banks will lose on their massive holdings of bonds of heavily indebted countries. Until the damage is clear, banks are reluctant to lend.
Banks are also being pressed by European governments to increase their buffers against possible losses. That helps stabilize the banking system but reduces the amount of money available to lend to businesses.
“European banks are having trouble borrowing in general, including in dollars,” said Joseph Gagnon, a former Fed official and a senior fellow at the Peterson Institute for International Economics. “The Fed did the Europeans a favor.”
The central banks are reducing by half a percentage point – to about 0.6 percent – the rate they charge banks for short-term dollar loans. The lower rate is designed to get credit flowing again. Dollars are the No. 1 currency for international trade.
The Fed had offered dollar swaps from December 2007, when world financial markets were weakening because of fear about subprime mortgages, until February 2010. It reopened the program in May 2010, as European debt concerns grew, and planned to end it Aug. 1, 2012.
Wednesday, in addition to lowering the interest rate on dollars borrowed, the Fed extended the program to Feb. 1, 2013. If it works, the rates on dollar loans will drop, and stock and bond markets will calm down.
“It shows that policymakers are on the case,” said Roberto Perli, managing director at the International Strategy & Investment Group, an investment firm. He said it has symbolic value even if it does not have a big impact on credit markets.
On the eve of “Cyber Monday,” online retailers reported an even stronger start to the holiday shopping season than brick-and-mortar stores.
Research firm comScore reported on Sunday that e-commerce spending jumped 26 percent on Black Friday, the day after Thanksgiving, compared with the same day a year ago. ComScore reported $816 million in online sales for the day, up from $648 million.
The 26 percent growth rate for online sales compares with a 7 percent retail sales increase reported for Black Friday by ShopperTrak, which gathers data from individual stores and shopping malls. At $11.4 billion, the brick-and-mortar sales total still dwarfs the online total.
Gian Fulgoni, comScore chairman, said in a statement that e-commerce enjoyed a banner day, despite some analysts’ predictions that early store openings on Black Friday could hurt online sales.
“With brick-and-mortar retail also reporting strong gains on Black Friday, it’s clear that the heavy promotional activity had a positive impact on both channels,” Fulgoni said.
Thanksgiving is also a big day for online sales, and comScore reported an 18 percent increase this year compared with a year ago, with $479 million in sales.
Online sales also have been strong throughout November. Online sales through Saturday rose 15 percent compared with the same period a year ago, according to comScore, which is based on Reston, Va. Through the first 25 days of the month, online sales have totaled $12.74 billion.
PARIS (AP) — An “overhaul” of European treaties is needed to help restore market confidence in the eurozone’s ability to reduce high state debt and deficits, the French budget minister said Sunday.
Valerie Pecresse said a new governance pact among eurozone members could include “real regulators, real sanctions” to help restore confidence in the currency union.
Speaking on Canal Plus TV, she said the eurozone’s biggest economies – France, Germany and Italy – want to be the “motor” of a more integrated Europe.
“We won’t restore confidence unless we show proof – very quickly – about the unflailing solidity and solidarity of the eurozone,” Pecresse said.
Pecresse said each country must rid itself of the debt and deficit problems that are behind the continent’s deepening debt crisis.
German media reported this weekend that German Chancellor Angela Merkel and French President Nicolas Sarkozy are pushing for swift legal changes that would force eurozone members to comply with strict rules for budget discipline, like tough and easily enforceable sanctions for violators.
Sarkozy and Merkel have argued that the European Union’s treaties must be amended to guarantee a strict enforcement of the currency zone’s growth and stability pact.
Treaty changes, however, are complicated to engineer and take a lot of time – probably more than the troubled eurozone currently has with markets doubting the solidity of several member states such as Italy.
One alternative could be a treaty between the governments involved, which would later be merged into EU law – as has happened before with Europe’s Schengen visa-free travel agreement, German newspapers Welt am Sonntag and Bild reported.
The new initiative could be announced as early as this week and concluded early next year, Welt am Sonntag reported.
NEW YORK (AP) — The world’s bond buyers have turned on Europe’s deeply indebted governments and fled to another deeply indebted government across the Atlantic — the U.S. As a result, U.S borrowing costs have plunged to historic lows while rising rates in Europe have many worried about a catastrophic financial crisis.
The European debt crisis has made the U.S. Treasury market the world’s most popular spot for bond investors. But Kathleen Gaffney, co-manager of the $19.1 billion Loomis Sayles Bond fund, refuses to join them.
Gaffney concedes that over the course of a few months or even a year, it might look like a bad move. The Loomis flagship fund dropped 5 percent in the three months starting in July, while the benchmark bond index gained 3.8 percent. Like bond giant Bill Gross at Pimco, she avoided U.S. government debt and refused to follow the rest of the world into Treasurys this summer. The Treasury rally has pushed the Barclay’s index up 7 percent this year, compared with her fund’s 3 percent gain.
But Gaffney is used to getting the big picture right. The $19.1 billion Loomis Sayles Bond fund she helps manage has rewarded investors with an average 10 percent return each year for a decade. Morningstar and Lipper both rank it in the top tier of bond funds.
So Gaffney plans on sticking to her call. With Treasury yields below 2 percent, U.S. government debt isn’t worth the risk. And what if other bond buyers eventually sour on U.S. Treasurys just as they have European government debt? For now, she’d rather buy corporate junk bonds.
In a recent interview, Gaffney talked to The Associated Press about why she avoids Treasurys, the prospect of another credit-rating cut for the U.S. and the appeal of Canada.
Q: If you could go back in time and get a chance to do it all over again, would you load up on Treasurys and sell them back to everybody else in August?
Nope. Not at all. We’re not trying to win a popularity contest. It’s really about the yield. You’ll never get good long-term returns if you park your money in bonds paying less than 2 percent. The best way to have success is to follow your long-term perspective.
Q: So how much in Treasurys do you hold now? Your benchmark index is about 50 percent Treasurys.
We have no Treasury position in the fund. None of any kind. It’s been that way since March. They’re the least attractive asset class for the long term. They’re return-free (they pay less than the annual rate of inflation). They’re also very risky because rates will eventually go up.
Q: How do you replace U.S. government bonds?
The alternative that we’ve found is Canadian government bonds. They make up about 9 percent of our fund. It’s a deep market. But it’s really the natural resources that we like. Countries that export natural resources such as oil and metals are tied to rising commodity prices. They can protect against inflation. We also like Australia and New Zealand. Like Canada, their government budgets are in sound shape. And they export more than they import.
Q: Will the Congressional supercommittee’s failure to reach an agreement on $1.2 trillion in budget cuts affect the Treasury market? Automatic cuts are supposed to start in 2013, but some Republicans have said they’ll try to stop that from happening.
The concern is what do they do now. I think Congress is going to find a way to repeal the automatic spending cuts. The rating agencies would not look kindly upon that. We’d be looking at another downgrade for U.S. Treasurys. After the downgrade from S&P in August, Treasurys continued to act as a safe haven. This time the market may not be as kind.
MOSCOW (AP) — Russia’s state-controlled natural gas company on Friday bought the remaining stake in Belarus’ gas pipeline system to become its sole owner in a move that strengthens Moscow’s control over gas exports to the West.
Russia is the main ally and sponsor of Belarus’ authoritarian President Alexander Lukashenko, but Lukashenko had been reluctant to yield control over the pipeline network and other Belarusian economic assets in the past, accusing Russia of trying to erode his nation’s sovereignty.
Lukashenko’s hand, however, has been softened recently by a severe economic crisis that has weakened his power and made him more prone to compromise.
Russia’s Gazprom already owned 50 percent in Belarus’ pipeline operator, Beltransgaz, and had been eager to gain full control. It said in a statement after the signing that it had agreed to pay $2.5 billion for the remaining 50 percent stake.
Russia provides about a quarter of the natural gas that Europe consumes with 80 percent of it going through Ukraine. The rest is shipped through Belarus and Turkey.
Moscow has sought to win control of existing transit routes and build new export pipelines bypassing its neighbors in order to secure its hold on energy supplies to Europe, its main export market.
Past pricing disputes between Ukraine and Belarus have led to disruptions in energy supplies to customers in the European Union, prompting EU nations to intensify a search for alternate supply routes.
AP Photo/Charles Dharapak
MANCHESTER, N.H. (AP) — Confronting Republicans, President Barack Obama on Tuesday dashed into the home of the nation’s first presidential primary, urging GOP lawmakers to support a payroll tax cut next week and stand by their own pledges not to increase taxes.
Obama sought to steal the spotlight from Republican presidential contenders who have blanketed the political battleground with anti-Obama messages while tending to a state expected to be heavily contested in the next year’s general election.
“The next time you hear one of these folks from the other side … talking about raising your taxes, you just remind them that ever since I’ve got into office, I’ve lowered your taxes, haven’t raised them,” Obama said at a high school gymnasium. “That’s worth reminding them.”
The president said “in the spirit of Thanksgiving,” Democrats in Congress would offer Republicans another chance next week to consider a plan to extend and expand the cut in payroll taxes that fund Social Security. Obama said it would save the typical middle class family about $1,000 in taxes.
“Don’t be a Grinch. Don’t vote to raise taxes on working Americans during the holidays,” Obama said.
Even as he sought to draw a bright line with Republicans over taxes, Obama was reminded about the unhappiness among some in the Occupy Wall Street movement. As he began to speak, Obama was briefly interrupted by protesters who screamed, “Mic check!” and then chanted, “Mr. President – over 4,000 protesters, over 4,000 protesters, have been arrested.”
Obama paused to let the demonstrators speak. “No, no, no. That’s OK,” Obama said. The crowd then sought to drown out the protesters with chants of “Obama!”
Working the crowd after the speech, Obama was handed a note from the protesters that amounted to a script of their chant. Captured in photographs, the note said peaceful demonstrators had been arrested while “banksters” destroy the economy “with impunity.”
The note urges Obama to stop the assault on protesters’ First Amendment rights and says his “silence sends a message that police brutality is acceptable.”
Presidential hopeful Mitt Romney, meanwhile, was airing his first TV ads in the Granite State, a spot sharply critical of Obama’s economic record. The former Massachusetts governor also ran ads in New Hampshire newspapers that say to Obama, “I will be blunt. Your policies have failed.”
Traveling to New Hampshire, White House spokesman Jay Carney swiped at the ad, which plays audio of Obama from the 2008 presidential campaign declaring “if we keep talking about the economy, we’re going to lose.”
Obama, however, was quoting the campaign of Republican presidential candidate John McCain, a distinction the ad doesn’t make and that alters its meaning. In fact, the Romney campaign statement announcing the ad includes Obama’s full quote: “Sen. McCain’s campaign actually said, and I quote, if we keep talking about the economy, we’re going to lose.”
“Seriously? I mean, an ad in which they deliberately distort what the president said?” Carney said. “It’s a rather remarkable way to start. And an unfortunate way to start.”
New Hampshire, with only 4 electoral votes, has been a key target in recent presidential elections. Republican George W. Bush carried the state in 2000, but Democrats took it back in 2004. Obama lost the 2008 New Hampshire primary in a surprise to Hillary Rodham Clinton but bounced back to win the state in the general election.
Billy Shaheen, a longtime Democratic operative in New Hampshire and the husband of Sen. Jeanne Shaheen, said Republicans’ huge gains in the state during the 2010 midterm elections served as a wake-up call for the state’s Democrats.
“After the 2010 election, New Hampshire got a taste of what the tea party can do, and it’s not happy. I think an undercurrent exists that’s ready to be tapped for the 2012 election,” he said. “We’re not proud of what has been going on in the state capitol, and we’re getting ready. We let our guard down in 2010, but we’ve come too far to go back.”
AP Photo/Richard Drew
NEW YORK (AP) — Stock indexes drifted between gains and losses Tuesday after the government lowered its estimate of economic growth in the third quarter. Higher borrowing costs for Spain also renewed worries about Europe’s debt crisis.
Hewlett-Packard Co. sank 2.8 percent, dragging down the Dow Jones industrial average. H-P lowered its earnings forecast for the 2012 fiscal year after the market closed Monday. The tech giant said it was being “cautious,” citing Europe’s debt crisis and weak consumer spending.
The Commerce Department said the U.S. economy grew at a 2 percent annual rate in the July-September period, down from its initial estimate of 2.5 percent. Economists had expected the figure to remain unchanged.
The Dow Jones industrial average was down 30 points, or 0.3 percent, at 11,516 as of 2 p.m. Eastern. The Dow had been down as many as 113 points shortly before noon. After H-P, aluminum maker Bank of America Corp. had the biggest fall among the 30 stocks in the index, 2 percent.
The Standard & Poor’s 500 index was down 2 points at 1,191. Both the Dow and S&P briefly turned slightly higher in early afternoon trading.
The S&P has lost 5.2 percent over the past week on worries that Spain could get dragged into Europe’s debt crisis and as Congress neared a deadlock over cutting the U.S. budget deficit.
GEORGETOWN, Guyana (AP) — Guyana has signed a $1 billion agreement with a Canadian-based company for what the government says is the largest private mining investment for the South America country.
Toronto-based Guyana Goldfields Inc. said the Aurora Gold Project agreement signed Friday is the first large-scale gold mining license that Guyana has issued since 1991.
The government said it is expected to create more than 1,900 temporary and permanent jobs and Guyana Goldfields CEO Patrick Sheridan said it is expected to generate $1.6 billion in government revenues at a time of record gold prices.
The company announcement said it will pay a mining royalty of 5 percent when gold sells for $1,000 an ounce and 8 percent when the price is greater. It will also pay a corporate income tax of 30 percent.
The agreement is for 20 years, with provisions for extension.
The company said construction should start early next year and the mine and mill should be operating by early 2014.
Guyana’s government on Friday also announced a $138 million contract with the Beijing-based China Harbor Engineering Co. to build a new airport terminal and add more than 3,200 feet (1,000 meters) to the main runway at the country’s principal airport, Cheddi Jagan International.
AP Photo/J. Scott Applewhite
WASHINGTON (AP) — With a special deficit-reduction supercommittee floundering, the top Republican in Congress warned Thursday that he won’t permit savings from winding down the wars in Iraq and Afghanistan to pay for President Barack Obama’s jobs spending agenda.
Democrats on the deficit panel proposed last week to use war savings to pay for a $300 billion jobs program along the lines President Barack Obama wants, plus take steps to protect the upper middle class from the alternative minimum tax and extend financing for doctors who treat Medicare patients.
“I’ve made it pretty clear that those savings that are coming to us as a result of the wind down of the war in Iraq and the war in Afghanistan should be banked, should not be used to offset other spending,” said House Speaker John Boehner. But the Ohio Republican did not address whether war savings could be used to extend expiring tax cuts such as popular business tax breaks or Obama’s expensive proposal to renew payroll tax cuts that expire at the end of December.
Boehner also said he’s frustrated that all six supercommittee Democrats have yet to unite around a specific plan, even though there’s now less than a week before the panel’s official deadline.
“They’ve never really put paper on the table. It’s very frustrating,” Boehner said.
By all accounts, the deficit panel is at a stalemate.
Despite small steps in recent weeks toward addressing core solutions to the nation’s intractable deficit problem, such as new taxes and curbs on the growth of enormously expensive government benefit programs, both sides said further progress had come to a halt.
Less than a week remains before a Thanksgiving deadline for the panel to vote on a plan cutting deficits by at least $1.2 trillion over a decade. Whatever remaining hope there was appeared to have washed away Wednesday after both Democrats and Republicans on the 12-member panel traded rhetorical salvos about whether the other side was negotiating in good faith.
AP Photo/Vincent Yu
PARIS (AP) — Global stocks slid further Thursday, as investors worried that Europe’s debt crisis was intensifying and spreading to larger countries in the 17-nation eurozone.
Bond investors pushed up borrowing rates for Spain and also for France, where the spread, or extra yield, demanded compared to safe-haven German bonds widened to a record 2 percentage points.
Meanwhile Germany’s chancellor Angela Merkel again brushed aside pressure for a quick-fix solution to the euro crisis despite the mounting market tensions, arguing that spreading debt liability could ruin Europe’s competitiveness and a massive European Central Bank bond-buying drive wouldn’t resolve its problems.
The German chancellor argued in a speech Thursday to an economic conference that rather than look for quick fixes, Europe needs to consider growth-promoting measures that don’t immediately cost money, such as labor-market reforms – and that such measures will require patience.
The results of a Spanish debt auction soured sentiment. The country paid nearly 7 percent to raise euro3.56 billion ($4.8 billion) in 10-year bonds, the highest rate since 1997 and a level seen as unsustainable over the long term.
Demand was relatively weak. The amount of debt sold came in under the euro4 billion maximum target set by the Treasury and the bid to cover ratio was 1.54, compared to 1.76 last time.
“The results of the Spanish bond auction are revisiting familiar fears for investors,” said David Jones, chief market strategist at IG Index.
After the auction, yields on Spanish 10-year bonds shot up to 6.75 percent on the secondary market. That was 4.88 percentage points above the yield of the equivalent benchmark German bund. However, the yield dropped back to end the day at 6.44 percent on mooted bond-buying from the European Central Bank, which never comments on the speculation.
France too saw its borrowing costs rise, after it raised euro6.98 billion ($9.41 billion) at an auction of mid-term bonds that saw strong demand.
Italian bond yields ended the day a little lower at 6.81 percent after new premier Mario Monti vowed to focus on restoring growth, while warning that the end of the euro “would cause the disintegration of the united market.”
AP Photo/Seth Perlman
NEW YORK (AP) — Hardly a day goes by without some politician or pundit pointing out that companies are hoarding cash – roughly $3 trillion of it. If only they would spend it, the thinking goes, the economy might get better.
But the story is not as simple as that. Though it seems to have escaped nearly everyone’s notice, companies have piled up even more debt lately than they have cash. Financial experts say it makes companies more vulnerable than they look.
“The record cash story is bull market baloney,” says David Stockman, a former U.S. budget director.
U.S. companies are sitting on $358 billion more cash than they had at the start of the recession in December 2007, according to the latest Federal Reserve figures, from June. But in the same period, what they owed rose $428 billion.
Companies borrow money all the time, of course. They borrow to build factories, cover expenses, even make payroll. The problem: Debt doesn’t go away. A business can cut costs during a recession. But it can’t just shred the IOUs.
Heavy debt means companies could have to dip into those reserves of cash to pay their lenders. And when interest rates eventually go up, companies will have to spend more money just to service the debt.
In the last recession, which ended in June 2009, small businesses that depended on credit cards and bank loans got slapped with higher rates just as sales began to drop. Some got cut off all together.
Peter Boockvar, equity strategist at Miller Tabak & Co., says business debt is too high even if the U.S. manages to stay out of a second recession. If economic growth doesn’t pick up, “they’ll be more bankruptcies, and more defaults,” he predicts.
Even if companies used cash to pay off what they owe, they would be left with plenty of debt – in fact, an amount equal to 83 percent of all the goods and services they produce, according to Federal Reserve data for incorporated businesses.
That’s an improvement from March 2009, the low point of the Great Recession, when companies owed 95 percent. To stay afloat, companies tapped credit lines at banks, increasing debt while they were bringing in less money. They burned through cash to meet expenses.
Before the recession, though, you have to go back at least six decades to find a time when companies owed so much compared with what they produce, says Andrew Smithers, a London consultant who has written extensively about debt.
DUBAI, United Arab Emirates (AP) — Dubai’s fast-growing airline Emirates kicked off the Middle East’s biggest airshow Sunday with a huge order for 50 Boeing 777s, marking the U.S. aircraft maker’s biggest-ever single order in dollar terms.
Emirates and Boeing Co. valued the unexpectedly large deal for an extended range version of the 777-300 at $18 billion – the total by list price – though the carrier is unlikely to pay that much. Airlines typically negotiate big discounts, especially when buying in bulk.
Emirates has an option to buy another 20 777s as part of the order. That would push the deal’s face value to $26 billion.
The deal further establishes Emirates as Boeing’s best customer for the twin-engine 777, a workhorse of the carrier’s long-haul fleet.
Emirates has 95 777s in service and already had another 40 on the order books. That means it now has nearly as many of the twin-aisle planes on order as it operates.
“The 777 has really served Emirates very well in terms of the seat cost, especially when we see that the fuel price today is very high,” Emirates Chairman and CEO Sheik Ahmed bin Saeed Al Maktoum said in announcing the deal.
Earlier this month, Emirates posted a profit of $225 million for the first half of its fiscal year. That was a 76 percent decline from what it made during the same period a year earlier, a drop it linked in part to soaring fuel prices.
Although the Gulf airlines are the among the world’s most ambitious in expanding their fleets and routes, a deal the size of the Emirates contract had not been expected at the airshow, which began Sunday. It and rivals such as Abu Dhabi-based Etihad and Qatar Airways have a massive backlog of planes already on order.
AP Photo/Manu Fernandez
BERLIN (AP) — Prosperous Germany has a surprising message for sinking Greece: Help Wanted.
With a shrinking labor force and buoyant economy, Germany desperately needs skilled workers to keep its industrial engine churning forward. Increasingly, it’s seeking them from Greece and other European laggards like Spain and Portugal where unemployment is soaring amid fears of financial implosion.
Germany quickly overcame the financial meltdown that started in 2008 and unemployment is now at a 20-year low of 6.6 percent. Companies are so desperate to fill skilled labor shortages that the government has taken to organizing matchmaking sessions between German firms and job seekers from crisis-hit countries.
Greek civil engineer Christos Kotanidis moved to Erlangen in southern Germany three months ago and quickly found work with industrial giant Siemens.
The 33-year-old’s former company in Saloniki put him on part-time earlier this year because, struck by the financial crisis, it could no longer afford to pay full salaries. It took Kotanidis only six weeks to land a full-time position in Germany.
“I decided to look for a job in Germany because it has a stable economy,” Kotanidis said. “In Greece the economic situation is bad now, but the future looks even worse.”
Unemployment in Greece is currently at 16.7 percent, but among young people it is even higher with more than 42 percent of people under 24 not finding any work. In Spain, overall unemployment hovers at around 20 percent, and more than 45 percent of people under the age of 25 are without a job. Portugal, Italy and Ireland, the other countries bearing the brunt of the debt crisis, also have bleak employment pictures.
There are no hard numbers on how many professionals from Europe’s crisis zone have been hired in Germany. Immigration to Germany has shot up by 13 percent in the past five years, and more than half of the newcomers are from within the European Union. EU citizens do not need to apply for a visa or work permit if they take a job within the bloc.
WASHINGTON (AP) — Wholesale businesses reduced their stockpiles in September for the first time in nearly two years, while their sales rose. The trend could be a good sign for future factory output because manufacturers will have to produce more if demand keeps rising.
The Commerce Department says wholesale inventories dropped 0.1 percent, the first decline since December 2009. The decline occurred largely because companies cut their stockpiles of nondurable goods, such as agricultural products, petroleum, and clothing. Inventories of durable goods, such as autos, furniture and machinery, rose.
AP Photo/Richard Drew
NEW YORK (AP) — The Dow Jones industrial average lost more than 240 points in early trading after Italy’s borrowing costs soared.
The yield on the benchmark Italian government bond spiked above 7 percent, a sign that investors are losing faith in the country’s ability to repay its debt. Analysts say Italy will not be able to refinance its debt at current rates, which will force it to either enact deep austerity measures or to receive financial assistance to prevent a default.
Greece, Portugal and Ireland required bailouts when their bond yields rose above 7 percent. But unlike those countries, Italy’s $2.6 trillion in debt is too large for other European nations to bail out.
AP Photo/Roberto Monaldo
ROME (AP) — Financial markets pounded Italy on Wednesday, sending a clear message that they want Premier Silvio Berlusconi out immediately despite his plan to stick around a little longer.
Berlusconi has pledged to resign after the Italian parliament passes the financial reforms that European officials have been demanding for months. The process can take up to two weeks – and even though the opposition vowed Wednesday to speed that up, markets were clearly wary of what might transpire in the meantime.
“Berlusconi is the supreme political maneuverer. And no one will believe he has resigned until, yes, he has done so. Simple as that,” said Jan Randolph, head of sovereign risk analysis at IHS Global Insight “He survived confidence votes before and he has made comebacks. No one really believes he is gone until he is gone.”
Italy’s key borrowing rate spiked well above the 7 percent level that eventually forced other eurozone countries like Greece and Portugal to seek bailouts, surging to a high of 7.40 percent, up 0.82 of a percentage point from the previous day.
No one is suggesting that Italy is headed for an immediate bailout. Randolph said it will take a while for the higher borrowing rate to cause problems for Italy’s “mountain of debt.”
But the markets are whipping up a catastrophic scenario, something analysts say is the only thing that can make sure Berlusconi budges.
“With a catastrophic scenario – and it seems we are facing now a catastrophic scenario – maybe Berlusconi can be pushed to support a new government. Or maybe his party will crumble,” said Roberto D’Alimonte, a political analyst at Rome’s LUISS University.
In the event Italy’s respected president cannot form a new government after Berlusconi officially resigns, the billionaire will remain on as a caretaker prime minister with fewer powers but still in office until elections can be held, D’Alimonte said. February is the earliest date being floated.
That is exactly what the markets don’t want.
Noted economist Nouriel Roubini, who has lived in Italy, expressed a similar view on Twitter: “Yields at 7%: markets are telling Berlusconi to leave NOW. They don’t buy his scheme of pretending to leave in 2 weeks after budget is passed.”
D’Alimonte said the markets want a technical government, led by former EU competition commissioner Mario Monti, who now runs the prestigious Bocconi University. Berlusconi and his allies claim such a solution would be undemocratic, however – ignoring the fact that any plan to put in Berlusconi’s hand-picked successor, former justice minister Angelino Alfano, would also be undemocratic.
AP Photo/Richard Drew
NEW YORK (AP) — U.S. stock indexes wobbled between small gains and losses in afternoon trading Monday as investors worried that Europe’s debt crisis would spread to Italy.
Italy’s borrowing rates spiked Monday to the highest level since the country adopted the euro. Unlike Greece, Portugal or Ireland – all of which received financial lifelines – Italy has too much debt to be rescued by its European neighbors. Prime Minister Silvio Berlusconi has rejected suggestions that he resign to make way for more cost-cutting.
Concerns about Italy outweighed a deal Greece’s two main political parties reached over the weekend to share power in a new government. The move increases the likelihood that the country will move ahead with austerity measures it promised to implement as part of a financial rescue agreement with lenders. That relieved investors by reducing the chances of an imminent default by Greece, which would rattle financial markets and cause losses for major European banks.
Europe’s debt crisis continued to take investor’s attention away from relatively good news about the economy and U.S. companies. “Every day it seems like it’s the butting of heads between whatever the latest rumor is out of Europe with good economic data and corporate earnings,” said Karyn Cavanaugh, a market strategist with ING Investment Management. “It’s overshadowing the fact that earnings are on track to be the best year ever.”
WASHINGTON (AP) — The leaders of the Senate Armed Services Committee say counterfeit electronic parts, mostly from China, are flooding the supply chain for the Pentagon.
Sens. Carl Levin and John McCain said Monday that the panel’s investigators found about 1,800 cases containing more than 1 million suspect parts. Levin said the cases are “just the tip of the iceberg.”
WASHINGTON (AP) — Just as 55 million Social Security recipients are about to get their first benefit increase in three years, Congress is looking at reducing future raises by adopting a new measure of inflation that also would increase taxes for most families – the biggest impact falling on those with low incomes.
If adopted across the government, the inflation measure would have widespread ramifications. Future increases in veterans’ benefits and pensions for federal workers and military personnel would be smaller. And over time, fewer people would qualify for Medicaid, Head Start, food stamps, school lunch programs and home heating assistance than under the current measure.
Taxes would go up by $60 billion over the next decade because annual adjustments to the tax brackets would be smaller, resulting in more people jumping into higher tax brackets because their wages rose faster than the new inflation measure. Annual increases in the standard deduction and personal exemptions would become smaller.
Despite fierce opposition from seniors groups, the proposal is gaining momentum in part because it would let policymakers gradually cut benefits and increase taxes in a way that might not be readily apparent to most Americans. Changes at first would be small – the Social Security increase would be cut by just a few dollars in the first year.
But the impact, as well as savings to the government, would grow over time, generating about $200 billion in the first decade and much more after that.
The proposal to adopt a new Consumer Price Index was floated by the Obama administration during deficit reduction talks in the summer. Now, it is one of the few options supported by both Democratic and Republican members of a joint supercommittee in Congress working to reduce government borrowing.
The committee of six Democrats and six Republicans is struggling to come up with a plan to reduce government red ink by at least $1.2 trillion over the next decade. Changing the inflation index alone would put them a sixth of the way there.
“I think the thought process behind this is, slip this in, people won’t understand it,” said Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare.
Richtman’s group is spending about $2 million on radio, TV and direct mail ads to fight cuts in Social Security and Medicare. His message to Congress: “Don’t believe that taking this approach to cutting Social Security will not be noticed. You will pay for it.”
AP Photo/Richard Drew
NEW YORK (AP) — Worries that a planned Greek referendum could scuttle a plan to resolve Europe’s debt crisis rattled markets Tuesday morning. The Dow Jones industrial average plunged nearly 200 points, and European stock indexes fell broadly. The dollar and U.S. government bond prices rose as traders moved into assets considered safe.
The Greek government shocked financial markets with news that it would put its unpopular cost-cutting plan to a public vote. If it’s defeated, the country could drop the European currency and default on its debt, which would put the European banking system and regional economies at risk of another crisis.
“The Greek referendum puts the connections between European countries at risk, from free-trade agreements to the common currency,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.
BERLIN (AP) — Germany and France say the leaders of the eurozone and the International Monetary Fund will meet to discuss ways to implement a new rescue package for Greece agreed last week.
Chancellor Angela Merkel’s office said Tuesday she and French President Nicolas Sarkozy agreed to hold talks on Greece with the EU, the IMF and eurozone leaders Wednesday.
It said another unscheduled meeting is also planned with the Greek government ahead of the summit of the G-20 most developed nation in Cannes, to be held Thursday and Friday.
Doubts about Greece’s package arose after Premier George Papandreou on Monday called for a referendum on the deal eurozone leaders hammered out last week. The package includes having private holders of Greek bonds write off 50 percent of their holdings of Greek debt.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.
ATHENS, Greece (AP) – Europe’s days-old plan to solve its crippling debt crisis and restore faith in the global economy has been thrown into chaos by the Greek prime minister’s stunning decision to call a referendum on the country’s latest rescue package.
A ‘no’ vote could cause a devastating disorderly debt default in Athens that would cause bank failures across Europe, new recessions in the developed world and see Greece leave the common euro union.
Global stock markets plunged Tuesday, particularly in Europe, with the Athens exchange down a massive 6.8 percent on worries the turmoil could bring down the government.
Months of uncertainty over the vote, to be held early next year, will threaten the stability of larger economies like Italy, which saw its borrowing rates rise sharply on Tuesday but would be too expensive to rescue.
The turmoil will also hinder European leaders’ efforts to implement their anti-crisis measures, such as getting countries like China to contribute to their expanded bailout fund and convincing banks to accept bigger losses on their holdings of Greek debt.
WASHINGTON (AP) — Manufacturing growth slowed in October from the previous month, a troubling sign that factories are struggling in the weak economy.
The Institute for Supply Management says its manufacturing index dropped to 50.8, down from 51.6 in September. Any reading above 50 indicates expansion.
Measures of production and exports fell and a gauge of employment dipped. On a positive note, survey respondents say raw materials prices fell sharply.
Factories were among the first businesses to start growing after the recession officially ended in June 2009. The manufacturing sector has grown for 27 straight months, according to the index.
However, factory activity slowed this spring. Consumers cut back on purchases in the face of higher prices for gas and food. And the March earthquake in Japan disrupted supply chains, which slowed U.S. auto production.
The index hit a two-year low of 50.6 in August, contributing to fears that the economy was at risk of slipping into recession. A gain in September was among data that helped calm those worries. Last week, the government said that the economy expanded at an annual pace of 2.5 percent in the July-September quarter, the best quarterly growth in a year.
DETROIT (AP) — Honda says parts shortages from flooding in Thailand have forced it to cut car and truck production by 50 percent in the U.S. and Canada.
The company says the cutback will run at least through Nov. 10 as it tries to find other sources for parts made in Thailand.
Honda Motor Co. also says it will stop all production in the U.S. and Canada on Nov. 11, and all Saturday overtime work will be canceled through November.
The company says the December sale date for a new version of the popular CR-V crossover vehicle could be delayed by several weeks.
AP Photo/Richard Drew
NEW YORK (AP) — Despite being known as a jinx month for the stock market, this October is shaping up to be one of the best months on record. The main reason is progress in Europe toward containing that region’s debt crisis.
The Standard & Poor’s 500 index has gained 12 percent for the month, which puts the broadest stock-market measure on track for its best month since January 1987. Despite a decline early Monday, the Dow Jones industrial average is still up 10.8 percent in October, its best month since August 1982.
The big breakthrough on Europe came early Thursday of last week, when European leaders reached a far-ranging agreement to shore up the region’s banks and prevent a debt crunch in Greece from bringing down the financial system there.
But a lack of many key details in the plan has made markets jittery again, and on Monday fresh reminders of how the Europe crisis can affect U.S. financial institutions helped bring the market lower.
AP Photo/Richard Drew
NEW YORK (AP) — Stocks are surging in early trading after European leaders agreed on a deal to slash Greece’s debt.
The U.S. economy grew between July and September at its fastest rate in a year, and Dow Chemical Co. became the latest big company to report stronger earnings.
Global markets soared Thursday after the European agreement, which is aimed at preventing a two-year debt crisis there from dragging the world into another recession.
Ten minutes after the opening, the Dow Jones industrial average jumped 256, or 2.2 percent, to 12,125. The S&P 500 rose 32, or 2.6 percent, to 1,274. The Nasdaq rose 67, or 2.5 percent, to 2,718.
Treasury yields are rising as investors feel less need for safer investments.
AP Photo/ALESSANDRO DELLA BELLA
NEW YORK (AP) — A former board member of Goldman Sachs and Procter & Gamble pleaded not guilty Wednesday to federal charges accusing him of acting as “the illegal eyes and ears in the boardroom” for a friend, a billionaire hedge fund founder sentenced this month to 11 years in prison in the biggest insider trading case in history.
The case, built partially on wiretaps used for the first time in insider trading, has offered unprecedented insight into greed at the highest levels of Wall Street. The arrest of Rajat Gupta took it one step higher.
NEW YORK (AP) — The price of oil fell after the death of Libyan dictator Moammar Gadhafi, although it should take months for Libya’s oil industry to recover and for the full impact to be felt on world markets.
Oil fell $1.08 to $85.03 per barrel in New York on Thursday. At the pump, the price of gasoline was flat at about $3.47 a gallon.
Before the Libyan civil war, Libya had exported 1.5 million barrels of oil a day, or 2 percent of global demand. When Libya stopped exporting most of that oil eight months ago, it helped push the price of oil to $114 a barrel.
AP Photo/Evan Vucci
WASHINGTON (AP) — President Barack Obama says he wants to make sure millionaires are taxed at higher rates than their secretaries. The data say they already are.
“Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett. There is no justification for it,” Obama said as he announced his deficit-reduction plan this week. “It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million.”
On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government.
The 10 percent of households with the highest incomes pay more than half of all federal taxes. They pay more than 70 percent of federal income taxes, according to the Congressional Budget Office.
AP Photo/Richard Drew
NEW YORK (AP) — Stocks are tumbling as investors worry that Greece won’t qualify for a new installment of emergency funds in time to avoid defaulting on its debt.
Investors also appear pessimistic about a Federal Reserve policy decision expected Wednesday. The Fed has hinted it might take new economic stimulus measures. But many analysts think they won’t be announced this week.
President Barack Obama on Monday called for $1.5 trillion in new taxes to help reduce the U.S. deficit, saying “we can’t just cut our way out of this hole.”
In midmorning trading, the Dow Jones industrial average is down 185 points, or 1.6 percent, at 11,324. The Standard & Poor’s 500 index is down 19, or 1.6 percent, at 1,197. The Nasdaq composite is down 22, or 0.9 percent, at 2,599.
AP Photo/PETROS GIANNAKOURIS
VOULIAGMENI, Greece (AP) — Greece will try to avoid international “blackmail and humiliation” by speeding up reforms and civil-service staff cuts, the finance minister said Monday, hours before holding an emergency teleconference with creditors.
Greece’s international bailout creditors stepped up the pressure at the start of a crucial week in the nearly two-year debt crisis, urging the government to do more to heal its finances. Global markets were skeptical, however, and stocks fell sharply on fears Athens will default on its mountain of debt.
Out of patience with the Socialist government’s delays on promised reforms, Greece’s partners and creditors are threatening to cut the cash lifeline without which the country would go bankrupt in less than a month.
Athens is struggling with a deepening recession that is eating away at the impact of its austerity measures while also causing unemployment and public anger to grow.
International debt inspectors will talk to finance chief Evangelos Venizelos around 1600 GMT.
“We expect the Greek authorities to explain, in particular, how they intend to close the fiscal gaps in 2011 and 2012 and how they plan to proceed with the structural reforms and privatizations,” said Amadeu Altafaj Tardio, a spokesman for the European Commission.
Initially, Athens said the teleconference would be followed by a ministerial meeting under Prime Minister George Papandreou, who canceled a scheduled trip to the U.S. on Saturday. But government spokesman Elias Mossialos later said in an interview with Real FM radio that the meeting could be moved to another day depending on the course of separate talks between Venizelos and his fellow ministers.
Ahead of the discussions, Venizelos said the government still seeks to generate euro3 billion ($4.1 billion) more revenues next year than it spends, before counting the cost of interest on existing debts.
Greece’s economy is expected to contract by about 5.5 percent this year – more than the 3.5 percent earlier assumed – and a further 2.5 percent in 2012, according to new government and IMF estimates.
“The country cannot go forward without the true implementation of major structural reforms – we have delayed them,” Venizelos said at a conference south of Athens, adding that achieving the 2012 target was vital.
TORONTO (AP) — Canada plans to fight the Buy American provisions in the new U.S. jobs package proposed by President Barack Obama and is surprised and frustrated that the issue has come up again, Canada’s trade minister said Wednesday.
Obama’s proposed $447 billion package includes a requirement that all “iron, steel, and manufactured goods” used in public buildings or works be supplied by American firms. The bill would allocate more than $100 billion toward the renovation of schools, the construction of roads and bridges and improving transit.
Trade Minister Ed Fast said the provisions are not acceptable to Canada and said history shows protectionist measures stall growth and kill jobs.
AP Photo/Henny Ray Abrams
NEW YORK (AP) — A promise by European leaders to help Greece avoid default sent stocks sharply higher Wednesday for the third straight day.
The leaders of Greece, France and Germany agreed in a teleconference that Greece was an “integral” part of the 17-country bloc that uses the euro. Greece also said it would stick to agreements to trim its debts, a condition for getting more financial help. The statements were intended to calm fears that Greece was headed for default or might be forced to drop the euro.
The Dow Jones industrial average rose 140.88 points, or 1.3 percent, to close at 11,246.73. The Dow sank as many as 112 points within the first hour of trading, then rose steadily through the rest of the day.
AP Photo/Michael Dwyer
SANTA ANA, Calif. (AP) — It’s early in the morning on the 10th anniversary of the nation’s worst terrorist attack, and John Wayne Airport starts to hum with the mundane rituals of airline travel.
Passengers occupy themselves with smartphones, laptops and fast-food breakfast. Travelers in line for security whip out driver’s licenses and boarding passes. Flight attendants call out names of passengers to check in at the counter. Someone left a belt at the X-ray. Could you please claim it?
Yet the date’s significance is palpable, here and at other airports around the world.
At Boston’s Logan Airport, where the jetliners that brought down the World Trade Center took off, ticket agents, baggage screeners and other workers paused at 8:46 a.m. for a moment of silence to mark the time the first plane struck the twin towers. At the Tampa, Fla., airport, an honor guard of law enforcement officers carried flags while a bagpiper and a bugler played.
AP Photo/Alexei Druzhinin
LONDON (AP) — British Prime Minister David Cameron arrives in Moscow on Sunday trying to secure crucial new trade and warmer ties with an often difficult ally, some five years after the poisoning death of a Kremlin critic in London revealed bitter differences.
Cameron is making the first visit to Russia’s capital by a British leader in six years, and will hold the first talks by any British official with Prime Minister Vladimir Putin in more than four years – hoping to revive relations ahead of the ex-president’s possible return to power in a 2012 election.
In one hiccup ahead of the visit, Russia’s Embassy in London said its website was brought down in an apparent cyberattack. The embassy said on Twitter it had launched a mirror – or alternative – website.
AP Photo/Nikolas Giakoumidis
THESSALONIKI, Greece (AP) — Greece will meet ambitious savings targets despite a deepening recession this year, the prime minister said Saturday, to secure the continued flow of international rescue loans that are protecting the debt-crippled country from a catastrophic bankruptcy.
As George Papandreou delivered his annual, keynote speech on the economy in Greece’s second-largest city of Thessaloniki, police on the streets outside clashed with violent demonstrators as more than 25,000 people – from taxi-drivers to sports fans – joined a wave of anti-austerity protests.
Two people were arrested and nearly 100 people detained, police said, while at least two demonstrators were injured during the clashes in the northern port city.
“We will push through all the major changes our country has needed for years,” Papandreou said in a nationally televised address. “And we will take whatever other decisions are needed, we will do whatever is necessary to keep the country on its feet.”
AP Photo/Lionel Cironneau
MARSEILLE, France (AP) — Wealthy countries and international lenders promised more money Saturday to encourage democratic reforms in Arab nations, promising at least $58 billion.
After Tunisia and Egypt ousted their authoritarian regimes earlier this year, eight of the world’s most developed economies along with rich Arab countries and a raft of development banks had pledged in May to give $40 billion in support to their nascent democracies and hopefully keep them on the path to open government.
Those uprisings set off a cascade of revolts across the Middle East, and the Group of Eight and others are now increasing their pledges and expanding the recipients to include Morocco and Jordan.
WASHINGTON (AP) — A tentative thumbs-up.
That was the assessment Thursday night from economists, who offered mainly positive reviews of President Barack Obama’s $447 billion plan to stimulate job creation.
Some predicted it would put hundreds of thousands of people back to work next year, mainly because a Social Security tax cut for workers would be deepened and extended to small businesses.
“Payroll tax cuts are very powerful,” said Allen Sinai, chief economist of Decision Economics. “They provide a boost to direct income and, in turn, spending, which is important to growth.”
Mark Zandi, chief economist at Moody’s Analytics, estimated that the president’s plan would boost economic growth by 2 percentage points, add 2 million jobs and reduce unemployment by a full percentage point next year compared with existing law.
The heart of Obama’s plan is an expansion of the Social Security tax cut, which took effect this year and is scheduled to expire by year’s end. The tax cut now applies only to workers; it reduces their Social Security tax from 6.2 percent to 4.2 percent. Employers still pay the 6.2 percent rate.
Obama would renew the tax cut for a year and deepen it: He would drop workers’ Social Security tax to 3.1 percent.
Under his bigger tax cut, an extra $1,550 would go to taxpayers earning $50,000 a year. The Social Security tax is imposed on the first $106,800 of taxable income. That means the maximum savings would be about $3,300 for an individual and $6,600 for a couple.
AP Photo/Andy Wong
BEIJING (AP) — U.S. Ambassador to China Gary Locke said Friday a stronger U.S. economy is in China’s interest and he will promote trade and human rights as the new envoy in Beijing, a focal point for U.S. diplomacy.
“The highest priority of the United States today is to create jobs for Americans and revitalize our economy. Given our economic interdependence, a stronger American economy is in the economic self-interest of the Chinese people,” he said to university students.
A former commerce secretary, Locke is the first Chinese-American to hold the post. It’s become increasingly important as China’s economy, now the world’s second-largest, grows steadily, and the United States fitfully copes with high unemployment.
AP Photo/J. Scott Applewhite
WASHINGTON (AP) — President Barack Obama is challenging congressional Republicans to back an aggressive plan to cut payroll taxes in an effort to revive the economy and entice employers to hire more workers.
Obama wants to extend and expand a payroll tax cut that is scheduled to expire at the end of the year. He reminded lawmakers that if they fail to act, they will be allowing taxes to increase on nearly every worker who earns a wage, starting in January.
That is a prospect the president wants to avoid as he embarks on a tough re-election fight, with unemployment stuck at 9.1 percent.
AP Photo/Pat Wellenbach
NEW YORK (AP) — Parents have a new goal this back-to-school shopping season: Buy their kids the name brands they want without spending like it’s 2007.
After the recession began in late 2007, cost-conscious consumers sought out the cheapest shirts and shoes they could find at merchants like Wal-Mart and Target to keep their budget in check. But these days, value is the name of the game.
Shoppers who are just as concerned about style and quality as price are flocking to factory outlets, where they can snag Gap, Nike, Vans and other designer clothes and accessories for 25 to 70 percent off. In fact, a quarter of parents said they plan to do the bulk of their back-to-school shopping at factory outlets and discount stores, compared with just 16 percent planning to do so at malls, according to the American Express Spending and Saving Tracker.
AP Photo/Alexander F. Yuan
BEIJING (AP) — Chinese millionaire Su builds skyscrapers in Beijing and is one of the people powering China’s economy on its path to becoming the world’s biggest.
He sits at the top of a country – economy booming, influence spreading, military swelling – widely expected to dominate the 21st century.
Yet the property developer shares something surprising with many newly rich in China: he’s looking forward to the day he can leave.
Su’s reasons: He wants to protect his assets, he has to watch what he says in China and wants a second child, something against the law for many Chinese.
The millionaire spoke to The Associated Press on condition that only his surname was used because of fears of government reprisals that could damage his business.
China’s richest are increasingly investing abroad to get a foreign passport, to make international business and travel easier but also to give them a way out of China.
AP Photo/Koji Sasahara
LONDON (AP) — Wall Street braced for losses on Tuesday after world stock markets took a beating over fears that the U.S. economy was heading back into recession.
Any troubles in the world’s largest economy cast a long shadow over the markets, and a report Friday that the U.S. economy failed to add any new jobs in August caused European and Asian stock markets to sink sharply Monday.
That jobs figure was far below economists’ already tepid expectations for 93,000 new U.S. jobs and renewed concerns that the U.S. recovery is not only slowing but actually unwinding. U.S. hiring figures for June and July were also revised lower, only adding to the gloom.
The full impact of the jobs report will hit U.S. markets on Tuesday, since trading there was closed Monday for the U.S. Labor Day holiday.
GENEVA (AP) — Swiss banking officials lashed out Monday at the possibility of yet another tax treaty with the United States aimed at handing over the details of more Americans suspected of using Swiss banks to cheat on their taxes.
The chairman of the Swiss Bankers Association, Patrick Odier, urged the Swiss people and the government to “put up a united front” and work out a solution that applies to all countries. He said that U.S. and Swiss politicians must work with existing accords.
“The solution must be globally applicable, be definitive and correspond to existing Swiss law,” Odier told the association at a meeting in Basel, Switzerland, according to his prepared remarks. “A second bilateral treaty has to be avoided and the U.S. needs to respect this.”
A double taxation agreement was approved by Switzerland in 2009 but is still awaiting ratification by the U.S. Senate.
AP Photo/JOE RAYMOND
WASHINGTON (AP) — The job market is even worse than the 9.1 percent unemployment rate suggests.
America’s 14 million unemployed aren’t competing just with each other. They must also contend with 8.8 million other people not counted as unemployed – part-timers who want full-time work.
When consumer demand picks up, companies will likely boost the hours of their part-timers before they add jobs, economists say. It means they have room to expand without hiring.
And the unemployed will face another source of competition once the economy improves: Roughly 2.6 million people who aren’t counted as unemployed because they’ve stopped looking for work. Once they start looking again, they’ll be classified as unemployed. And the unemployment rate could rise.
MADRID (AP) — One of Spain’s largest media groups says Cuba has revoked the accreditation of its longtime correspondent on the Caribbean island for alleged bias and negative reporting, the latest in a series of steps by the communist government targeting foreign journalists and news organizations.
El Pais said Sunday that 47-year-old Mauricio Vicent has reported from Cuba for the newspaper El Pais and the radio network Cadena SER – both part of Grupo Prisa – for 20 years. He is married to a Cuban woman and has children born on the island. It was not clear whether the revocation of his accreditation meant Vicent would have to leave the country, or if he was just barred from reporting.
Cuba’s international press center informed Vicent his permit was withdrawn “irrevocably,” according to El Pais.
Several phone calls to Vicent went unanswered Sunday, and Cuba’s government did not immediately respond to requests for comment.
AP Photo/Marcio Jose Sanchez
WASHINGTON (AP) — Employers stopped adding jobs in August, an alarming setback for an economy that has struggled to grow and might be at risk of another recession.
The government also reported that the unemployment rate remained at 9.1 percent. It was the weakest jobs report since September 2010.
Stocks tumbled on the news. The Dow Jones industrial average sank 245 points soon after trading began.
A strike by 45,000 Verizon workers lowered the job totals. Those workers are now back on the job.
The weakness in employment was underscored by revisions to the jobs data for June and July. Collectively, those figures were lowered to show 58,000 fewer jobs added. The downward revisions were all in government jobs.
AP Photo/Luca Bruno
CERNOBBIO, Italy (AP) — Business leaders and finance experts gathered in Italy offered a downbeat assessment of the global economy Friday – with several predicting another recession due to a calamitous cocktail of sluggish growth, eurozone dysfunction, and financial market volatility.
The year’s events – from natural disasters and violent uprisings to fears of debt defaults – have not only sent shock waves through the financial world but also caused a slump in confidence among consumers and industry.
“There is a significant probability of a double-dip recession,” pronounced New York University economist Nouriel Roubini, in opening remarks that lived up to his nickname of “Dr. Doom” – earned for forecasting a financial crisis years before the 2008 crash, even as many reveled in the boom times.
AP Photo/Bruce Smith
More than 400,000 homes and businesses lost power Saturday as Hurricane Irene slammed into the East Coast.
Winds of up to 80 miles per hour whipped ashore Saturday morning, ripping power lines from poles and snapping trees in half. Hospitals, emergency call centers and other crucial facilities were holding up, but officials said it could get much worse as Irene churns north.
Gasoline supplies were falling as drivers top off their tanks on their way out of town. Pump prices rose about 3 cents per gallon overnight in New Jersey and Pennsylvania.
The power losses were most heavily concentrated in Wilmington and Wrightsville Beach, N.C., where Progress Energy reported 250,000 customers without power, mostly residences.
“We expect those numbers to increase,” Progress spokeswoman Julia Milstead said.
AP Photo/Craig Ruttle
NEW YORK (AP) — Travelers across the country are facing days of grief ahead as thousands of flights are being cancelled because of Hurricane Irene.
Airlines are scrapping more than 8,300 flights this weekend from North Carolina to Boston, grounding passengers as Irene sweeps up the East Coast. There were more than 3,600 cancellations on Saturday alone.
All New York City-area airports closed to arriving flights at noon on Saturday, when the city’s public transportation system shut down. The biggest airlines, United Continental Holdings Inc. and Delta Air Lines Inc., canceled thousands of flights each. Ronald Reagan Washington National Airport and Washington Dulles International Airport were both open as of noon, but most flights had been cancelled.
GENEVA (AP) — The CEO of a Chinese-owned solar panel maker says the Group of 20 summit in November will emphasize ways to invest in “green growth” to boost renewable energy and tackle climate change.
Suntech Power Holdings Co. CEO Shi Zhengrong told The Associated Press on Thursday the G-20 advisory panel he chairs will recommend that leaders of “traditional economies” boost solar, wind and other alternative energy sources, even in dire financial times.
He said the group of the largest economies in the world would be asked to adopt “action plans” and form a private-public investment vehicle to invest in sustainable energy.
Shi said Germany and Switzerland could achieve plans to phase out nuclear power by replacing 30-50 percent of that energy with solar and wind sources “if they install enough capacity.”
AP Photo/Paul Sakuma
SAN FRANCISCO (AP) — It’s easy to forget now, but Apple’s magnetism was once confined to a cult-like following of geeks seduced by the elegance and simplicity of the company’s computers.
Over the past decade, though, Apple has emerged as a trendsetter and a wealth-making machine – the rare company that appeals to the cool cats hanging out in hip cafes and the fat cats looking to make another killing on Wall Street.
In the process, Apple has left an indelible mark that extends far beyond that first personal computer Steve Jobs and Steve Wozniak introduced 35 years ago. Since then, Apple has transformed the music, retailing, marketing and cellphone industries. Now, it’s engineering yet another evolution in computing with the increasingly popular iPad tablet.
Those achievements have endeared Apple to the masses, turning its product announcements into the technology industry’s latter-day version of a Beatles concert and turning its familiar logo into an emblem of exquisite taste.
AP Photo/Charles Dharapak
NEW YORK (AP) — Warren Buffett is coming to the rescue of another fallen giant.
Buffett’s Berkshire Hathaway announced Thursday that it would invest $5 billion in Bank of America Corp., giving a much-needed vote of confidence in the struggling bank.
The bank’s stock had plunged 52 percent in the past year on concerns over the bank’s mortgage problems and worries that it would have to sell large amounts of stock to shore up its balance sheet.
Investors’ confidence in the bank took another blow this month as its mortgage headaches got even worse. On Aug. 8, American International Group Inc. sued Bank of America for more than $10 billion, saying the bank deceived AIG by selling it overvalued mortgage-backed securities.
Much of the Charlotte, N.C. bank’s problems stem from its 2008 purchase of Countrywide Financial Corp., the country’s largest mortgage lender. Bank of America has been under heavy pressure from investors for selling them securities based on mortgages that later lost value.
The bank paid a total of $12.7 billion earlier this year to settle claims that it sold investors faulty mortgage investments. Investors have become worried that the bank would have to pay out even more to settle future claims.
Buffett, one of the most successful and respected investors of all time, has lent his credibility to several other icons of American business at times when investors’ confidence in them was waning. His investments have usually proven to be both prescient and profitable.
Buffett pumped $5 billion into Goldman Sachs Group Inc. at the height of the 2008 financial crisis, helping to reverse a crisis of confidence in the investment bank and the U.S. banking system in general. He also invested $3 billion in General Electric Co.
Those investments, which paid annual dividends of 10 percent, wound up being lucrative. Berkshire made $2 billion from the Goldman investment alone. Unlike the Bank of America deal, those companies approached Berkshire seeking financial help and the stamp of approval that came with the endorsement of the legendary investor.
Buffett said in a statement Thursday he called Bank of America’s CEO Moynihan to ask about investing because he considered the bank a strong, well-led company.
Berkshire will receive a dividend of 6 percent on his investment in Bank of America. Berkshire will get 50,000 preferred shares and warrants to purchase 700 million shares of common stock at $7.14 per share. Buffett can exercise the warrants at any time in the next 10 years. If he does, it would make him the banks largest shareholder with a stake of 7 percent.
An hour after the deal was announced, Buffett had already made a profit on paper of $500 million on the stock warrants thanks to a surge in Bank of America’s stock price. After closing at $6.99 Wednesday, the stock jumped 87 cents or 12 percent to $7.86 Thursday. Bank of America’s stock traded as high as $15 in January, before its mortgage woes worsened.
Buffett’s investment in Bank of America sent the stocks of other banks higher too. Citigroup Inc. rose 2.7 percent and Morgan Stanley rose 3.4 percent.
Berkshire also holds investments in several other banks. One of Berkshire’s biggest stock investments is a 16 percent stake in Wells Fargo & Co. Berkshire also holds stakes in US Bancorp, M&T Bank Corp. and the Bank of New York Mellon Co.
AP Business Writers Christina Rexrode and Josh Funk contributed to this story.
AP Photo/Matt York
WASHINGTON (AP) — The number of people who bought new homes fell for the third straight month in July, putting sales on track to finish this year as the worst on records dating back half a century.
Sales of new homes fell nearly 1 percent in July to a seasonally adjusted annual rate of 298,000, the Commerce Department said Tuesday. That’s less than half the 700,000 that economists say represent a healthy market.
Housing remains the weakest part of the economy. Last year was the worst for new-home sales on records that go back nearly 50 years.
While new homes represent less than one-fifth of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs and $90,000 in taxes, according to the National Association of Home Builders.