Business Highlights

AP News
Posted: Feb 24, 2011 6:56 PM
Business Highlights


New-home sales in January drop 12.6 pct

WASHINGTON (AP) _ Sales of new homes fell significantly in January, a dismal sign after the worst year for that sector in nearly a half-century.

New-home sales dropped to a seasonally adjusted rate of 284,000 homes last month, the Commerce Department said Thursday. That's down from 325,000 in December and less than half the 600,000-a-year pace that economists view as healthy.

Bad winter weather likely hampered some sales, although the industry has been struggling since the housing bubble burst in 2006.

Last year was the fifth consecutive year that new-home sales have declined after hitting record highs during the housing boom. Buyers purchased 322,000 new homes last year, the fewest annual total on records going back 47 years. Economists say it could take years before sales return to a healthy pace.

Builders of new homes are struggling to compete in markets saturated with foreclosures. High unemployment and uncertainty over home prices have kept many potential buyers from making purchases.

Poor sales of new homes mean fewer jobs in the construction industry, which normally powers economic recoveries. On average, each new home built creates the equivalent of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.


GM posts 1st full-year profit since 2004

DETROIT (AP) _ In a remarkable financial U-turn, once-bankrupt General Motors recorded its first profitable year since 2004 and is tantalizingly close to reclaiming its title as the world's No. 1 automaker.

The company faces a bumpy road ahead: Gas prices are rising, GM has only a few new models and its European operations are still losing money.

Still, the automaker's $4.7 billion profit for 2010 was impressive, especially considering where it has been. The company lost more than $80 billion in the five years before its bankruptcy and needed a government bailout to survive. It emerged in the summer of 2009 cleansed of huge debt and costly labor contracts, returned to the stock market in November, and managed to make money even with auto sales near historic lows.

The annual profit, fueled by strong sales in China and the U.S. as the global auto market began to recover, gave GM its best year since 1999, when it made $6 billion at the height of the pickup truck and sport utility vehicle boom.

GM executives predicted the automaker would build on last year's earnings as sales continue to rise, especially in North America.

With a good performance by GM this year, the U.S. government could recover more of its $49.5 billion bailout, nearly half of which has been repaid. And GM could even retake the title of world's largest automaker, held by Toyota since 2008.


Fewer people sought unemployment aid last week

WASHINGTON (AP) _ Fewer people requested unemployment benefits last week, pushing the average number of applications over the past four weeks to the lowest level in more than two and a half years.

Applications for unemployment benefits dropped by 22,000 last week to a seasonally adjusted 391,000, the Labor Department said Thursday. It was the third decline in the past four weeks.

The four-week average for applications, a less volatile figure, fell to 402,000. That's the lowest number since late July 2008 and a hopeful sign that the job market is slowly improving.

The downward trend in applications indicates that layoffs are dropping steadily. But economists are still unsure when employers will begin hiring enough to make a dent in the 9 percent unemployment rate.

Applications below 425,000 tend to signal modest job growth. But they would need to dip consistently to 375,000 or below to indicate a significant decline in the unemployment rate. Applications for benefits peaked during the recession at 651,000.


Average rate on 30-year mortgage dips to 4.95 pct.

NEW YORK (AP) _ The average rate on the 30-year fixed mortgage fell below 5 percent this week, as investors sought more Treasury notes amid growing tension in the Middle East.

Freddie Mac said Thursday that the average rate on the 30-year loan slipped to 4.95 percent from 5 percent. It hit a 40-year low of 4.17 percent in November.

The average rate on the 15-year fixed home loan fell to 4.22 percent from 4.27 percent. It reached 3.57 percent in November, the lowest level on records dating back to 1991.

Mortgage rates tend to track the yield on the 10-year Treasury note. It fell this week as investors shifted money out of stocks and into safer assets amid escalating violence in Libya.

Even though rates are two-thirds to three-quarters of a percentage point higher than their lows just three months ago, they remain at historically low levels.

Still, rates have done little to boost the housing market. Buyers are reluctant to purchase because of high foreclosures, tight lending standards, job concerns and expectations that home values will continue to fall.


Durable goods orders excluding airplanes drop

WASHINGTON (AP) _ Orders for long-lasting manufactured goods outside of transportation fell in January by the largest amount in two years.

Orders for durable goods excluding transportation fell 3.6 percent last month, the biggest drop since January 2009, the Commerce Department reported Thursday.

A key category viewed as a proxy for business investment spending was also down by the largest amount in two years.

Total durable goods orders rose 2.7 percent but that increase was driven by a huge rebound in orders for commercial aircraft, an extremely volatile category.

Manufacturing has been one of the standout performers during this recovery and economists expect that to continue despite the January weakness. January orders totaled $200.5 billion, considered a healthy level by economists and 25 percent above the recession low hit in March 2009.

The January rise in total orders was the first increase after three straight monthly declines. However, all the strength reflected a big surge in orders for aircraft after big declines in November and December. In January, orders for commercial aircraft rose to $7.4 billion, far above the December level of $148 million. Orders for autos and auto parts were up 0.4 percent in January.


Target's 4Q profit rises 11 pct on solid holiday

NEW YORK (AP) _ Solid holiday sales and improvements in its branded credit card business helped Target's fourth-quarter profit rise almost 11 percent, but a company official cautioned Thursday that the economy is a "wild card."

The discounter said two major initiatives _ offering more food and giving shoppers a 5 percent discount if they use Target Corp.'s branded cards _ would help drive a key measure of revenue growth for this year to its highest level in several years.

And Target, which is based in Minneapolis, is forecasting strong growth overall. It expects its annual revenue to top $100 billion in six or seven years, compared with $67 billion last year, and it expects its earnings per share to double in that period.

The company forecast lower earnings for fiscal 2012 than Wall Street was expecting, but investors appeared to focus on the long term. Target shares rose 3.5 percent, or $1.74, to close at $52, still near the low end of their 52-week range from $48.23 to $60.97. They were unchanged after hours.


Sears 4Q earnings fall, adjusted results top Street

HOFFMAN ESTATES, Ill. (AP) _ Sears Holdings Corp.'s fourth-quarter net income fell 13 percent, but adjusted results topped Wall Street's expectations thanks to continued strengthening at its Kmart stores.

Fixing the long-running weakness at Sears will be the challenge for new CEO and President Lou D'Ambrosio, named to the post Wednesday.

The retailer led by billionaire Edward Lampert reported Thursday that it earned $374 million, or $3.43 per share, for the period ended Jan. 29. That compares with $430 million, or $3.74 per share, a year earlier.

Adjusted earnings were $3.67 per share, beating the $3.60 per share that analysts surveyed by FactSet predicted.

Revenue dipped 1 percent to $13.14 billion mostly because of fewer stores and lower revenue at stores open at least a year. But the performance still managed to top Wall Street's $13.02 billion.

The performance is not that much of a surprise for the retailer, as last month Sears signaled that it expected to post fourth-quarter numbers that would be better than what Wall Street analysts had forecast. It is the company's first profit since the first quarter.


Freddie Mac posts $1.7B loss for Q4

WASHINGTON (AP) _ Government-controlled mortgage buyer Freddie Mac managed a narrower loss of $1.7 billion for the October-December quarter of last year. But it has asked for an additional $500 million in federal aid _ up from the $100 million it sought in the previous quarter.

Freddie Mac also posted a $19.8 billion loss for all of 2010.

The government rescued Freddie Mac and sibling company Fannie Mae in September 2008 to cover their losses on soured mortgage loans. It estimates the bailouts will cost taxpayers as much as $259 billion.

Freddie Mac's October-December loss attributable to common stockholders works out to 53 cents a share. It takes into account $1.6 billion in dividend payments to the government. It compares with a loss of $7.8 billion, or $2.39 a share, in the fourth quarter of 2009.

The company said the recovery of the housing market is still fragile.

Fannie Mae and Freddie Mac own or guarantee about half of all mortgages in the U.S., or nearly 31 million home loans worth more than $5 trillion. Along with other federal agencies, they played some part in almost 90 percent of new mortgages over the past year.

Fannie and Freddie buy home loans from banks and other lenders, package them into bonds with a guarantee against default and sell them to investors around the world.


Toyota recalls 2.17 million vehicles in US

WASHINGTON (AP) _ Toyota Motor Corp. recalled 2.17 million vehicles in the United States on Thursday to address accelerator pedals that could become entrapped in floor mats or jammed in driver's side carpeting, prompting federal regulators to close its investigation into the embattled automaker.

The Transportation Department said it had reviewed more than 400,000 pages of Toyota documents to determine whether the scope of the company's recalls for pedal entrapment was sufficient.

Toyota has now recalled more than 14 million vehicles globally to fix gas pedals and other safety problems since 2009. The company has received intense scrutiny from the government since August 2009, when four people were killed in a high-speed crash involving a Lexus near San Diego.

U.S. regulators largely cleared the company earlier this month, saying that electronic flaws were not to blame for reports of sudden, unintended acceleration that led to hundreds of complaints.


By The Associated Press

The Dow Jones industrial average fell 37.28 points, or 0.3 percent, to 12,068.50.

The Standard & Poor's 500 index fell 1.30, or 0.1 percent, to 1,306.10. The S&P was down for a third straight day.

The Nasdaq composite bucked the trend. It rose 14.91 points, or 0.6 percent, to 2,737.90.

Benchmark West Texas Intermediate crude for April delivery fell 82 cents to settle at $97.28 on the New York Mercantile Exchange.

In other Nymex trading in March contracts, heating oil fell 2.34 cents to settle at $2.8932 per gallon and gasoline added 0.72 cent to settle at $2.8749 per gallon. Natural gas lost 6.4 cents to settle at $3.872 per 1,000 cubic feet.

In London, Brent crude added 11 cents to settle at $111.36 on the ICE Futures exchange. Brent prices almost reached $120 per barrel earlier in the day.