Business Highlights

AP News
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Posted: Aug 12, 2011 5:53 PM
Business Highlights

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Shoppers lift economy, but will they keep spending?

WASHINGTON _ The economy might not be on the brink of another recession after all.

Consumers, who drive most economic growth, spent more on cars, furniture, electronics and other goods in July _ and more in May and June than previously thought. That burst of activity is encouraging because it shows many Americans were willing to spend despite high unemployment, scant pay raises, steep gas prices and diminished wealth.

If it keeps up, the economy might rebound after growing at an annual rate of just 0.8 percent in the first half of 2011.

That's a big if.

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Dow finishes wild week on an up note

NEW YORK _ The wildest week in Wall Street history ended with a second day of gains.

The Dow Jones industrial average finished Friday with a gain of 125 points. Most other times it would have been a fairly big day. By this week's standards, it was a sleeper. Friday capped a week when the blue-chip index had four 400-point swings in a row for the first time in its 115-year history.

Trading was frantic across financial markets all week. The yield on the 10-year Treasury note hit a record low. Gold briefly topped $1,800 per ounce. Nearly every one of the 500 stocks that make up the Standard & Poor's 500 index ended down midweek.

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After a wild week for stocks, what to do?

NEW YORK _ Is it time to sell everything or buy with abandon?

Investors can't make up their minds. This week was one of the most volatile in the history of Wall Street. The Dow Jones industrial average swung more than 400 points four days in a row _ down, then up, then down, then up.

Its frightening, but experts say investor psychology is probably distorted because memories of the financial meltdown of 2008, when stocks lost half their value, are fresh.

Their advice: Hold tight. It's not time to sell, but it's probably not time to pour money into stocks, either.

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French growth sputters to a halt in 2nd quarter

PARIS _ The French government was put under further pressure to cut deeper into spending after figures Friday showed growth in Europe's second biggest economy ground to a halt in the spring, in another sign that the global economy is facing rising recessionary threats.

With the worse-than-expected French growth figures suggesting a possible budget shortfall this year, government ministers may have to find additional savings ahead of a key meeting with President Nicolas Sarkozy on Aug. 24.

The flat growth reported in the second quarter of the year was attributable to a slump in consumer spending and exports, and came as policymakers scramble to soothe investor concerns that the country could be the next major economy to lose its coveted AAA credit rating.

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Advertising slowing down with economy uncertain

LOS ANGELES _ While many businesses have been searching for signs of an economic recovery, big media conglomerates were enjoying a robust revival _until quite recently.

For the likes of Disney, CBS, NBCUniversal and News Corp., advertising revenue growth _which slumped during the Great Recession _ had come roaring back in 2010. But now, as consumer sentiment dampens and the economy shows signs of another recession, ad revenue growth is beginning to slow again.

Two advertising agencies have cut forecasts in the past month. Media companies head into an uncertain final half of 2011, as investor worries have sent their stock prices tumbling.

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FBI: Mortgage fraud still prevalent, hard to catch

WASHINGTON _ Mortgage fraud remains widespread in the depressed housing market, with perpetrators motivated by high profits and little risk of getting caught, the FBI said Friday.

The FBI's annual report on mortgage fraud said such schemes are particularly resilient and hard to discover, and their total cost is unknown. Real estate firm CoreLogic says more than $10 billion in loans were made with fraudulent application data in 2010, the report noted.

Fraud last year stayed at levels seen in 2009 as the housing market remained in distress, providing ample opportunity for schemes, the report said. It predicted that perpetrators would "continue to seek new methods to circumvent loopholes and gaps in the mortgage lending market."

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J.C. Penney posts flat 2Q profit

NEW YORK (AP) _ J.C. Penney Co. reported a flat second-quarter profit on Friday as the department store retailer aggressively marked down prices on fashions to get its middle income shoppers to keep spending in an increasingly uncertain economy.

The company also issued third-quarter profit guidance that fell well below Wall Street estimates and said back-to-school shopping is starting later this year. It declined to offer a full-year outlook amid stock market turmoil fueled by fear about the economy and the downgrade of the federal debt.

Penney, like many stores catering to middle-to-lower-income shoppers, faces increasing uncertainty heading into the two most important retail seasons of the year _ back-to-school and the winter holiday season.

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Appeals court strikes health insurance requirement

ATLANTA _ A federal appeals panel struck down the centerpiece of President Barack Obama's sweeping health care overhaul Friday, moving the argument over whether Americans can be required to buy health insurance a step closer to the U.S. Supreme Court.

The divided three-judge panel of the 11th Circuit Court of Appeals concluded Congress overstepped its authority when lawmakers passed the so-called individual mandate, the first such decision by a federal appeals court. It's a stinging blow to Obama's signature legislative achievement, as most experts agree the requirement that Americans carry health insurance _ or face tax penalties _ is the foundation for other parts of the law.

The 207-page opinion, written by Chief Judge Joel Dubina and Circuit Judge Frank Hull, found that lawmakers cannot require residents to "enter into contracts with private insurance companies for the purchase of an expensive product from the time they are born until the time they die."

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Wall Street's ride compounds states' pension fears

ALBANY, N.Y. _ Wall Street's volatility has hit state pension funds just as they were beginning to recover from the recession, turning what was merely a troubled forecast into a potentially stormy future for taxpayers who are on the hook for billions in unfunded liabilities for government retirees.

As for the millions of government clerks, engineers, janitors, teachers and firefighters in the retirement systems, they are protected by law or, as in New York, by the state constitution, to be backed up by tax dollars if necessary.

Their benefits remain safe for life in guaranteed "defined benefit" pension plans that are disappearing in the private sector, where most employees are left to fend for themselves with 401(k) plans that they mostly or entirely fund themselves.

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Alabama county rejects settling $3.1B in debt

BIRMINGHAM, Ala. _ Leaders of Alabama's most populous county voted unanimously Friday to reject a settlement with Wall Street creditors to pay off more than $3.1 billion in debt and bought more time to avoid what would be the largest municipal bankruptcy ever filed.

The five members of the Jefferson County Commission also unanimously approved a resolution to give the commission president and finance chair until Sept. 16 to personally negotiate a deal.

The county has been trying to avoid filing bankruptcy over more than $3.1 billion in sewer system debt for three years.

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Honda to build new factory in Mexico

DETROIT _ Honda Motor Co. plans to build an $800 million factory in Mexico to make small cars for customers in North America, the company said Friday.

The plant, near Celaya, Guanajuato, north of Mexico City, is expected to open in 2014 and will employ 3,200 workers from the region, Honda said in a statement. It will make up to 200,000 subcompact cars and engines per year, the company said.

Honda now sells the subcompact Fit in North America, importing it factories in Japan. The company would not say if it will build the Fit at the new factory, but said it tries to build vehicles in regions where they are sold.

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By The Associated Press

The Dow Jones Industrial average finished Friday with a gain of 125.71 points, or 1.1 percent, to 11,269.02. It finished the week down 1.5 percent after being down as much as 6.3 percent for the week.

The broader S&P 500 index rose 6.17 points, or 0.5 percent, to 1,178.81. It finished with a the week down 1.7 percent.

The technology-focused Nasdaq composite rose 15.30, or 0.6 percent, to 2,507.98. It lost 1 percent for the week.

After gaining early, prices for benchmark West Texas Intermediate crude ended the day down 34 cents at $85.38 per barrel on the New York Mercantile Exchange. In the past two weeks, WTI'S price has fallen about $12. Investors are concerned about global economic growth, ongoing financial problems in Europe and signs of a slower economy in China, a huge consumer of oil and other commodities.

In London, Brent crude rose 1 cent to $108.03 a barrel on the ICE Futures Exchange.

In other Nymex trading, heating oil rose 0.45 cent to finish at $2.9037 a gallon, gasoline fell 0.51 cent to finish at $2.8222 a gallon and natural gas futures fell 4.8 cents to finish at $4.06 per 1,000 cubic feet.