Business Highlights

AP News
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Posted: Feb 23, 2011 6:40 PM
Business Highlights

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Investors snap up cheap homes, new buyers miss out

WASHINGTON (AP) _ Home sales are starting to tick up after the worst year in more than a decade. But the momentum is coming from cash-rich investors who are scooping up foreclosed properties at bargain prices, not first-time homebuyers who are critical for a housing recovery.

The number of first-time buyers fell last month to the lowest percentage in nearly two years, while all-cash deals have doubled and now account for one-third of sales.

A record number of foreclosures have forced home prices down in most markets. The median sales price for a home fell last month to its lowest level in nearly nine years, according to the National Association of Realtors.

Lower prices would normally be good for first-time homebuyers. But tighter lending standards have kept many from taking advantage of them. With fewer new buyers shopping, potential repeat buyers are hesitant to put their homes on the market and upgrade.

Cash-only investors are most interested in properties at risk of foreclosure. They can get those at bargain-basement prices.

Sales of previously occupied homes rose slightly in January to a seasonally adjusted annual rate of 5.36 million, the Realtors group said Wednesday. That's up 2.7 percent from 5.22 million in December.

Still, the pace remains far below the 6 million homes a year that economists say represents a healthy market. And the number of first-time homebuyers fell to 29 percent of the market _ the lowest percentage of the market in nearly two years. A more healthy level of first-time homebuyers is about 40 percent, according to the trade group.

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Oil prices hit $100 per barrel

NEW YORK (AP) _ Oil prices hit $100 per barrel for the first time since 2008, driven by growing concerns about global supplies, as Libya's Moammar Gadhafi continued to lose his grip on the oil-rich country.

Similar uprisings in Tunisia and Egypt earlier this month already had markets on edge before protests escalated in Libya, which has the biggest oil reserves in Africa. The rebellion widened Wednesday as protesters overwhelmed government buildings and advanced around Tripoli, the capital.

French oil giant Total said it started to wind down its oil production in Libya, which produced an average of 55,000 barrels per day last year. That follows similar moves by other oil companies working in the country.

Libya's biggest oil producer, Eni, idled operations that produce 244,000 barrels of oil and gas per day. Spain's Repsol-YPF and Austrian oil company OMV also suspended operations. Germany's Wintershall said it suspended operations that produced up to 100,000 barrels of oil per day. Evacuations of oil company employees and their families continue.

Barclays Capital estimates that as much as 1 million barrels per day of production has been shut down so far. In January, Libya produced almost 1.7 million barrels per day of oil and natural gas liquids, according to the International Energy Agency.

The production losses will be felt mostly in Europe. Ireland relies on Libya for 23 percent of its oil imports and 22 percent of Italy's oil imports are from Libya. The U.S. imported only about 51,000 barrels per day from Libya, less than 1 percent of its total crude imports.

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Troubled banks rise to highest level in 18 years

WASHINGTON (AP) _ The number of banks at risk of failing made up nearly 12 percent of all federally insured banks in the final three months of 2010, the highest level in 18 years.

The Federal Deposit Insurance Corp. said Wednesday that the number of banks on its confidential "problem" list rose to 884 in the October-December quarter, up from 860 in the previous quarter. Those are banks rated by examiners as having very low capital cushions against risk.

Twenty-two banks have failed so far this year. And more banks are at risk, even as the FDIC reported the industry's highest earnings as a group since the financial crisis hit three years ago.

Only a small fraction of the 7,657 federally insured banks _ about 1.4 percent with assets of more than $10 billion _ are driving the bulk of the earnings growth. They are the largest banks, including Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co.

The big banks accounted for about $20.6 billion of the industry earnings of $21.7 billion in the fourth quarter. The total earnings compared with a net loss of $1.8 billion in the same quarter of 2009. The agency said bank earnings were buoyed in the latest quarter by reduced charges for soured loans.

Most of the big banks have recovered with help from federal bailout money and record-low borrowing rates. On the other side, many smaller banks are struggling.

Last year, 157 U.S. banks were brought down by the soured economy and mounting loan defaults. That was the most in one year since 1992, the height of the savings and loan crisis. They were mostly smaller or regional banks. The failures compare with 25 in 2008 and three in 2007. They cost the federal deposit insurance fund an estimated $21 billion in 2010.

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NY: Wall Street 2010 bonuses estimated at $20.8B

ALBANY, N.Y. (AP) _ Wall Street paid an estimated $20.8 billion in bonuses to New York City securities industry employees for 2010, the first full year after the national recession officially ended, New York state Comptroller Thomas DiNapoli said Wednesday.

The number reflects an industry shift toward deferred compensation and higher base salaries, DiNapoli said.

The estimate of bonuses is down 8 percent from $22.5 billion actually paid in 2009. But it is $500 million more than DiNapoli's bonus estimate a year ago. Bonuses extended into March and April last year, beyond the traditional season.

The estimate was about one-third less than the 2007 bonuses before the financial crisis. In 2008, Wall Street firms gave out $17.4 billion in bonuses even though that year was one of its worst.

The comptroller's report said Wall Street profits of broker-dealer operations of New York Stock Exchange member firms totaled $27.6 billion in 2010, second only to $61.4 billion in 2009 when the industry benefited from massive federal bailouts and low interest rates.

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Ford to recall 150,000 F-150 pickups over air bags

WASHINGTON (AP) _ Under government pressure, Ford Motor Co. said Wednesday it will recall nearly 150,000 F-150 pickup trucks to fix air bags that could deploy without warning, a fraction of the vehicles the government contends should be called back and repaired.

The recall covers trucks from the 2005-2006 model years in the United States and Canada for what the Dearborn, Mich., company calls a "relatively low risk" of the air bag deploying inadvertently.

The government, however, has urged Ford to recall 1.3 million F-150s from the 2004-2006 model years, citing 77 injuries from air bags deploying accidentally. The recall is being closely watched because Ford's F-Series pickup truck is the best-selling vehicle in America.

Ford's leaders have made safety a cornerstone of the company's revitalization, but the truck recall represents the latest safety issue to confront the automaker.

Ford has recalled more than 600,000 Windstar minivans in the U.S. and Canada since August to fix rear axles that can corrode and break, an issue still under investigation by the National Highway Traffic Safety Administration. During the past decade, Ford recalled more than 10 million vehicles, including the F-Series pickup, to repair a cruise control switch system that was linked to engine fires.

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Apple shareholders nix CEO succession disclosure

CUPERTINO, Calif. (AP) _ Apple shareholders rejected a proposal Wednesday that called for the company to disclose a succession plan for its chief executive.

The rejection came a month after Apple CEO Steve Jobs went on an indefinite medical leave for unspecified problems _ an absence that could be related to his previous bout with pancreatic cancer or his 2009 liver transplant. Jobs did not attend the meeting, which was led by Chief Operating Officer Tim Cook and general counsel Bruce Sewell.

Apple Inc. announced the preliminary vote on the nonbinding proposal at its annual shareholders meeting at the company's Cupertino headquarters. The company did not provide the voting breakdown.

The Central Laborers' Pension Fund, which owns 11,484 shares of Apple stock, called for a succession plan in case Jobs leaves as CEO.

The proposal didn't ask Apple to name whom it planned to appoint, but it wanted the company to come up with a three-year plan for changing leadership and an emergency plan. The plan would be reviewed annually by Apple, and a report on it would be shared with stockholders.

Like many shareholder proposals, even if this one passed, it would only have served as a formal request that Apple share its succession plan, not a requirement.

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Bank of England split on interest rates widens

LONDON (AP) _ Another Bank of England policy maker has voted for an interest rate rise _ heightening expectations that the central bank will announce a hike in coming months.

Minutes from February's Monetary Policy Committee meeting released on Wednesday show that a third member of the nine-strong grouping has backed a rate rise. The remaining six members voted to keep rates at the current record low of 0.5 percent.

One of those six also voted to restart the bank's program of boosting the money supply, or so-called quantitative easing.

Policy makers have been increasingly split on the direction of monetary policy following surging inflation and a shock decline in the economy in the final quarter of last year.

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TJX 4Q profit falls 15 pct with store closings

NEW YORK (AP) _ More people shopped at TJMaxx, Marshalls and HomeGoods discount stores in the fourth quarter, but their parent company said its net income fell 15 percent, dragged down by costs to close its A.J. Wright stores.

The company, which sells name-brand clothing and home fashions at a discount, said its overall sales growth is slowing, and it forecast first-quarter performance below analysts' expectations.

TJX Cos, based in Framingham, Mass., also said Wednesday that it plans to repurchase $1.2 billion of its stock this fiscal year and raise its dividend. Its shares fell almost 2 percent.

The retailer reported net income of $334.4 million for the three months that ended Jan. 29. That compares with $394.9 million in the same period last year.

Excluding one-time items, the company posted net income of $1.05 per share, beating the average forecast from analysts surveyed by FactSet for adjusted earnings of $1.01 per share.

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Retailers: Home owners spending more on renovation

Home owners are starting to spend more on home-improvement projects despite the weak housing market, quarterly results from Lowe's Cos. and Home Depot show.

Lowe's said Wednesday its fourth-quarter profit rose 39 percent as its shoppers spent slightly more per visit.

The results beat Wall Street estimates, but Lowe's cautioned that consumers are still holding back and gave a first-quarter forecast that could miss analyst expectations. Its shares fell nearly 3 percent in midday trading.

CEO Robert Niblock said in an interview with The Associated Press that he expects Americans to remain somewhat cautious throughout 2011, as home prices are expected to bottom near the end of the year, according to economic forecasts.

The results come as The National Association of Retailers said rising number of distressed sales forced home prices down to their lowest level in nearly nine years, a troubling sign for the struggling housing sector.

On Tuesday, Home Depot reported strong earnings and revenue growth and raised its earnings outlook.

However muted, the positive results show home-improvement retailers are seeing signs of life from shoppers as they take on projects around the house that were delayed during the consumer spending slowdown and recession.

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Insurer WellPoint board debuts quarterly dividend

INDIANAPOLIS (AP) _ Flush with cash from a strong finish to 2010, WellPoint Inc. has become the latest health insurer to announce it will reward shareholders with a sizable payout.

The Indianapolis insurer on Wednesday unveiled a plan to spend about $400 million this year on its first cash dividend, even as managed care companies warn that the massive health care overhaul passed last year by Congress will squeeze their businesses in the coming years.

Big health insurers used to offer token annual dividends amounting to only a few cents. But that started to change when UnitedHealth Group Inc. _ the largest health insurer based on revenue _ said last spring it would spend about $560 million over 12 months as it started paying quarterly dividend payments of 12.5 cents per share.

Earlier this month, Aetna said it will start paying a 15-cent quarterly dividend. Then on Wednesday, WellPoint's board declared a quarterly cash dividend of 25 cents per share, payable March 25 to shareholders of record as of March 10.

The steady cash flow from larger dividends can make a company's stock more attractive to investors. This is especially true in the managed care sector, where investors have worried about how companies will be affected by the overhaul.

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4 Credit Suisse bankers charged in tax case

McLEAN, Va. (AP) _ Four bankers with Zurich-based Credit Suisse Group were indicted Wednesday on conspiracy charges, accused of helping U.S. taxpayers hide as much as $3 billion in assets from the IRS.

Arrest warrants have been issued for all four, who are believed to be in Switzerland: Marco Parenti Adami, Emanuel Agustoni, Michele Bergantino and Roger Schaerer. All are Swiss citizens except for Adami, who is Italian.

Prosecutors allege in the indictment that the conspiracy goes back as far as 1953. The indictment alleges that as of late 2008 Credit Suisse was maintaining thousands of secret accounts for U.S. customers with as much as $3 billion in assets.

The indictment itself does not specify the bank as Credit Suisse, but a law enforcement official with knowledge of the case confirmed the bank's identity to The Associated Press. The official insisted on anonymity because he was not authorized to speak publicly on the case.

Public documents unconnected to the case also identify some of the bankers as Credit Suisse employees. Credit Suisse itself is not charged in the indictment.

The indictment claims the bankers discouraged customers from participating in a 2009 amnesty program offered by the Obama administration, in which U.S. taxpayers could avoid criminal prosecution if they came forward with information on their secret accounts and agreed to pay a penalty. ___

By The Associated Press

The Dow Jones industrial average lost 107.01 points, or 0.9 percent, to 12,105.78. The Dow has fallen 285.47 points, or 2.3 percent, over the past two days. It was the largest drop since Aug. 12.

The S&P 500 fell 8.04, or 0.6 percent, to 1,307.40. The Nasdaq composite fell 33.43, or 1.2 percent, to 2,722.99.

West Texas Intermediate crude for April delivery jumped $2.68, or 2.8 percent, to settle at $98.10 per barrel in New York. Earlier in the day, prices hit triple digits for the first time since Oct. 2, 2008. WTI has soared 18 percent since Valentine's Day.

In London, Brent crude added $5.47, or 5 percent, to settle at $111.25 per barrel on the ICE Futures exchange. Brent, which is used to price oil in Asia, Europe and other global markets, passed the $100 mark on Jan. 31.

In other Nymex trading in March contracts, heating oil added 11.3 cents to settle at $2.9166 per gallon and gasoline gained 12.1 cents to settle at $2.8677 per gallon. Natural gas picked up 2.9 cents to settle at $3.936 per 1,000 cubic feet.