AP Business Highlights
On Wednesday January 26, 2011, 6:29 pm EST
Fed says economy needs
$600B bond-purchase program
WASHINGTON (AP) --The
economy isn't growing fast enough to lower unemployment and still needs help
from the Federal Reserve's $600 billion Treasury bond-purchase program.
That was the assessment
Wednesday of Fed policymakers as they ended their first meeting of the year.
The Fed made no changes to the program, and the decision was unanimous.
The decision came from a
new lineup of voting members that includes two officials who have criticized
the bond purchases. They have said the purchases could eventually ignite
inflation or speculative buying in assets like stocks.
The bond-buying program is
intended to lower rates on loans and boost stock prices, spurring more spending
and invigorating the economy. Chairman Ben Bernanke faces the challenge of
trying to boost hiring and growth without creating new economic threats.
The tax-cut package that
took effect this month is easing pressure on the Fed to stimulate growth through
its bond purchases. The measure renewed income-tax cuts and cut workers' Social
Security taxes, boosting their take-home pay.
The Fed's assessment of the
economy was nearly identical to its last meeting in December. Fed policymakers
seemed to downplay recent improvements in the economy including stronger
spending by consumers and more production at factories.
Instead, the Fed noted that
the economy continues to faces risks. The biggest: that high unemployment will
damp consumer spending, which accounts for 70 percent of national economic
activity.
No stemming red ink:
Federal deficit to hit $1.5T
WASHINGTON (AP) -- Far from
slowing, the government's deficit spending will surge to a record $1.5 trillion
flood of red ink this year, congressional budget experts estimated Wednesday,
blaming the slow economic recovery and last month's tax-cut law.
The report was sobering new
evidence that it will take more than President Barack Obama's proposed freeze
on some agencies to stem the nation's extraordinary budget woes. Republicans
say they want big budget cuts but so far are light on specifics.
Wednesday's Congressional
Budget Office estimates indicate the government will have to borrow 40 cents
for every dollar it spends this fiscal year, which ends Sept. 30. Tax revenues
are projected to drop to their lowest levels since 1950, when measured against
the size of the economy.
The report, full of nasty
news, also says that after decades of Social Security surpluses, the vast
program's costs are no longer covered by payroll taxes.
The budget estimates will
add fuel to the already-raging debate over spending and looming legislation
that would allow the government to borrow more money as the national debt nears
the $14.3 trillion cap set by law. Republicans controlling the House say
there's no way they'll raise the limit without significant budget cuts,
starting with a government funding bill that will advance next month.
New-home sales in 2010 fall
to lowest in 47 years
WASHINGTON (AP) -- Buyers
purchased the fewest number of new homes last year on records going back 47
years.
Sales for all of 2010
totaled 321,000, a drop of 14.4 percent from the 375,000 homes sold in 2009,
the Commerce Department said Wednesday. It was the fifth consecutive year that
sales have declined after hitting record highs for the five previous years when
the housing market was booming.
The year ended on a
stronger note. Buyers purchased new homes at a seasonally adjusted annual rate
of 329,000 units in December, a 17.5 percent increase from the November pace.
Still, economists say it
could be years before sales rise to a healthy rate of 600,000 units a year.
Netflix's star shines in
4Q, adds 3.1M subscribers
SAN FRANCISCO (AP) --
Netflix Inc.'s video subscription service topped 20 million customers during
the fourth quarter to help push its earnings beyond analyst expectations and
burnish its reputation as a stock market star.
The results announced
Wednesday are the latest evidence of Netflix's increasingly important role in
the distribution of home and mobile entertainment. As Netflix's influence has
risen, so has its stock price. The shares tripled last year to give Netflix a
higher market value of nearly $10 billion -- more than some of the studios that
supply the content for its DVD-by-mail and Internet video streaming service.
The lofty valuation has
intensified the pressure on Netflix to keep attracting subscribers at a rapid
pace.
Netflix delivered in the
fourth quarter by reeling in 3.1 million subscribers, by far the most during
any three-month period since its service launched in 1999. The performance also
exceeded the most optimistic predictions of its own management.
The company, based in Los
Gatos, Calif., believes the current quarter could be even better. It expects to
gain as many as 3.7 million more subscribers by the end of March.
Boeing says 2011 profit
hurt by 787, defense cuts
MINNEAPOLIS (AP) -- Boeing
Co. said on Wednesday that its 2011 profit will be hurt by delays to its new
787 and higher pension expenses.
Those factors plus smaller
profit margins drove Boeing shares down more than 3 percent.
The airplane builder and
defense company also said its fourth-quarter profit fell 8 percent to $1.16
billion. Revenue dropped 8 percent to $16.55 billion.
Boeing is being hit by
several tough-to-manage forces. The 787 is running three years late, and
earlier this month it pushed back delivery of the plane from February until at
least July. Pension expenses are rising. And the Pentagon as well as overseas
governments are tightening defense spending. Half of Boeing's revenue is from
defense and space-related work.
It plans to deliver 485 to
500 airplanes in 2011. That includes 25 to 40 of the new 787s and its revamped
747, split about equally between the two planes.
Starbucks net income up 44
percent in 1Q
PORTLAND, Ore. (AP) --
Starbucks Corp. says its growing popularity with coffee drinkers around the
world helped boost its first-quarter net income nearly 44 percent.
The Seattle-based coffee
giant reported after the market closed Wednesday that it earned $346.6 million,
or 45 cents per share, for the quarter that ended Jan. 2. That's up from $241.5
million, or 32 cents per share, earned in the same quarter last year.
Revenue rose nearly 8
percent to $3 billion.
The results beat analysts'
average estimates of 39 cents per share on revenue of $2.93 billion, according
to FactSet.
Starbucks says more
customers came into its stores and spent more during the quarter as it improved
its product lineup and in-store experience. The company also said its improved
operating profits and margins offset the impact of unusually high coffee costs.
China ups minimum wages, as
inflation persists
SHANGHAI (AP) -- Many
Chinese cities are raising minimum wages for workers, fanning inflationary
pressures while also seeking to soothe frustrations over price hikes.
The double-digit increases
in major manufacturing centers like Guangdong, and the cities of Shanghai,
Tianjin and Beijing follow wage hikes last year that have further raised labor
costs, accelerating a shift by makers of inexpensive goods to lower cost places
like Vietnam and Indonesia.
Shortages of workers in
some areas and strikes and other protests by disgruntled young workers have
also prompted authorities to push minimum wages higher, with most localities
expected to follow suit.
A report released last week
by the American Chamber of Commerce in Shanghai said that 85 of the companies
responding believed that rising costs are hurting China's competitiveness
compared with other developing countries.
China retains massive
advantages such as the standard of its infrastructure and its own huge market,
which increasingly is the focus of foreign companies manufacturing there. But
surging costs for labor, land, energy and materials have prompted many making
low-cost items such as toys, shoes and clothing to move some production to
other parts of the developing world.
Treasury: GM shares could
be sold over 2 years
WASHINGTON (AP) -- The head
of the government's bailout program says the Treasury Department hopes to sell
its remaining shares of General Motors stock over the next two years.
Timothy Massad, the senior
Treasury official managing the government bailout fund, told a congressional
hearing that there is now a path forward for Treasury to sell its remaining
shares in GM over the next two years if market conditions permit.
The Treasury Department
trimmed its stake in GM to 26.5 percent of the company, down from 61 percent,
when it sold $23.1 billion of GM stock at an initial public offering in November.
Facebook to let advertisers
republish user posts
NEW YORK (AP) -- Facebook
users who check in to a store or click the "like" button for a brand
may soon find those actions retransmitted on their friends' pages as a
"Sponsored Story" paid for by advertisers.
Currently there is no way
for users to decline this feature.
Facebook says this lets
advertisers promote word-of-mouth recommendations that people already made on
the site. They play up things people do on the site that might get lost in the
mass of links, photos, status updates and other content users share on the
world's largest social network.
The new, promoted posts
would keep the same privacy setting that the original posting had. So if you
limit your check-ins to a specific group of friends, only these same friends
would see the "Sponsored Story" version later.
The promoted content will
appear on the right side of users' home pages, not in their main news feed.
That's where regular ads, friend requests and other content are located.
Involving users in
advertisements without their consent has been a thorny issue for Facebook. Marc
Rotenberg, executive director of the Electronic Privacy Information Center,
said in this case the company is making money off a person's name or likeness
without their consent.
By The Associated Press
The Dow Jones industrial
average gained 8.25 points, or 0.1 percent, to end at 11,985.4. It reached as
high as 12,020 in morning trading.
The Standard and Poor's 500
index rose 5.45, or 0.4 percent, to 1,296.63. The Nasdaq composite index jumped
20.25, or 0.7 percent, to 2,739.50.
Benchmark oil for February
delivery rose $1.14 to settle at $87.33 a barrel in afternoon trading on the
New York Mercantile Exchange.
In other Nymex trading in
February contracts, heating oil rose 7.47 cents to settle at $2.6713 a gallon,
and gasoline added 8.6 cents to settle at $2.4566 a gallon. Natural gas for
March delivery gained 1.1 cents to settle at $4.501 per 1,000 cubic feet.
In London, Brent crude rose
$2.66 to settle at $97.91 a barrel on the ICE Futures exchange.