AP
Business Highlights
Monday January 12, 6:07 pm ET

NYC judge allows Madoff to remain free

NEW YORK (AP) -- A judge allowed disgraced investor Bernard Madoff to remain free on bail Monday, rejecting an attempt by prosecutors to send him to jail for mailing more than $1 million in jewelry to family and friends over the holidays.

The decision means Madoff will avoid having to leave the comfort of his $7 million penthouse and await trial in a cramped jail cell with nothing but bunkbeds, a sink and toilet. Madoff will remain under house arrest and under the constant watch of security guards.

The ruling further outraged investors who have been clamoring for Madoff to be sent to jail for allegedly carrying out the largest financial fraud in history. They find it shocking that Madoff is free on bail, despite distributing assets that could be used to help repay investors who lost billions.

Alcoa reports $1.19B loss in 4Q on low prices

PITTSBURGH (AP) -- Alcoa Inc., the world's third-largest aluminum company, said Monday it lost $1.19 billion during its fourth quarter as prices and demand for the metal plunged in a troubled global market.

Alcoa's loss highlighted the impact of the weakening world economy on key aluminum markets, such as the construction and auto industries. Prices of the metal, used in everything from cars and aircraft to window frames and beer cans, have fallen steeply along with other commodities since mid-2008.

Alcoa, the first component of the Dow Jones industrial average to post results and considered a bellwether of earnings to come, said quarterly revenue sank 19 percent to $5.7 billion from $7 billion in the year-earlier period.

Stocks tumble as oil falls on economic worries

NEW YORK (AP) -- Wall Street extended last week's slide Monday as investors worried that the quarterly results companies begin releasing this week will signal the economy is in worse shape than feared.

Oil prices helped fuel the pessimism, tumbling 8 percent to a new low for the year as investors bet economic weakness would curb demand. Wall Street normally welcomes falling oil as a boost for consumers who pay less to put gas in their car, but steep drops can touch off deeper fears about the overall economy.

Stocks have sold off since a short-lived rally that started the year crumbled under worries about the economy.

Obama promises changes in use of bailout billions

WASHINGTON (AP) -- Seeking to reassure wary lawmakers, President-elect Barack Obama said Monday he will fundamentally change the way the second half of the $700 billion financial bailout fund is spent, focusing some of the relief on housing and small businesses.

Obama asked President George W. Bush to submit a request to Congress so that the remaining $350 billion would be available quickly after the inauguration next Tuesday. Bush agreed to do so.

Separately, Larry Summers, Obama's choice for National Economic Council director, said the new president intends to broaden the goals of the remaining bailout package and impose tougher restrictions and oversight on how the money is spent.

GM unveils battery plan, may need more loans

DETROIT (AP) -- General Motors Corp., a wounded company living on cash borrowed from the government, didn't behave like one Monday as it unveiled ambitious plans to research and assemble lithium-ion batteries in Michigan and picked a Korean company to supply the cells to power the Chevrolet Volt electric car.

But a top executive raised the prospect that GM will need more federal loans later in the year if the U.S. auto market doesn't improve, saying that the company presented a worst-case scenario to the government last year that would require $18 billion in loans, $4.6 billion more than the Bush administration has granted.

FDIC asks banks to monitor use of bailout money

WASHINGTON (AP) -- Federal regulators are asking financial institutions to monitor their use of government money received under the $700 billion rescue plan and other support. Banks and other financial institutions should track how the federal money or guarantees they received helped them boost "prudent lending" and efforts to help at-risk borrowers avoid foreclosures, the Federal Deposit Insurance Corp. said Monday in a directive issued to the roughly 5,100 state-chartered banks and savings and loans for which it is the primary regulator.

Russia to restart gas pumps to Europe on Tuesday

KIEV, Ukraine (AP) -- Russia's state gas monopoly has promised to resume shipping Europe-bound gas through Ukraine on Tuesday morning, nearly a week after it shut off the taps and forced countless Europeans to huddle cold and resentful in freezing homes.

However, a spokesman for the Gazprom monopoly indicated lingering problems could still prolong the crisis.

More than 15 countries have been the inadvertent victims of a complex and acrimonious wrangle between Russia and Ukraine over gas prices, past debts and allegations of theft. They also jockeyed over an EU-brokered deal to send pipeline monitors to ensure that restored gas shipments reach their destination.

Citi shares fall despite talks with Morgan Stanley

NEW YORK (AP) -- Citigroup Inc.'s stock sank Monday to its lowest levels since November as investors wondered how much more cash the troubled bank will need.

Citigroup Inc., in an effort to raise capital, is hammering out a deal to sell the bulk of its retail brokerage to Morgan Stanley. The joint venture -- expected to be announced later this week -- would lead to an after-tax gain for Citigroup of about $5 to $6 billion, a person close to the negotiations said Monday. The person spoke on condition of anonymity because he was not authorized to discuss the ongoing talks.

But maintaining cash levels that are high enough to make up for upcoming loan losses remains a big challenge for Citigroup.

Oil tumbles below $38 on eve of US earnings season

SIOUX FALLS, S.D. (AP) -- Falling crude demand in the world's largest consuming nation drove oil prices Monday to a new low for the year as the U.S. enters a corporate earnings season expected to be fraught with bad news.

The strained economy outweighed factors that would normally boost the market -- Mideast tensions, signs that OPEC was implementing large-scale production cuts, the ongoing Gazprom-Ukraine gas dispute and a winter season expected to deliver the coldest weather in a decade.

Dell settles with states over financing claims

SEATTLE (AP) -- Dell Inc. said Monday it has agreed to a legal settlement with states that claimed the computer company made misleading financing and service offers to PC buyers.

Dell will pay $3.85 million to at least 46 states participating in the settlement. A portion of the money will be used to reimburse states for legal costs.

Shares of Dell dropped 47 cents, or 4.2 percent, to close at $10.65.

Abbott buying Advanced Medical for $1.36 billion

NORTH CHICAGO, Ill. (AP) -- Medical products and drug maker Abbott Laboratories said Monday it is buying Advanced Medical Optics Inc. for about $1.36 billion plus debt to expand its eye-care offerings, including laser vision correction.

North Chicago, Ill.-based Abbott's $22-per-share offer is more than double Santa Ana, Calif.-based Advanced Medical's Friday closing price of $8.85. Including debt, the deal is worth about $2.8 billion.

Both companies' boards have approved the deal, which will take place through a tender offer. Abbott said the buyout would have no significant effect on earnings in 2009 and would add to profit in 2010.

By The Associated Press

The Dow Jones industrial average fell 125.21, or 1.46 percent, to 8,473.97 after being down as much as 178 in the final hour of trading.

Broader stock indicators also declined. The Standard & Poor's 500 index fell 20.09, or 2.26 percent, to 870.26, and the Nasdaq composite index fell 32.80, or 2.09 percent, to 1,538.79.

Light, sweet crude for February delivery fell 8 percent, or $3.24, to settle at $37.59 a barrel on the New York Mercantile Exchange.

In other Nymex trading, heating oil futures slid 2.5 cents to settle at $1.4724 a gallon, while natural gas for February delivery rose 2.6 cents to settle at $5.542 per 1,000 cubic feet. Gasoline futures dropped 2.7 cents to settle at $1.0841.

In London, February Brent crude fell $1.51 to settle at $42.91 a barrel on the ICE Futures exchange.