On
Friday January 28, 2011, 6:55 pm EST
More robust spending helps economy gain
steam
WASHINGTON (AP) -- The economic recovery
is now consistently picking up speed, and American consumers are the ones
pushing the gas pedal. They increased their spending late last year at the
fastest pace since 2006.
The question now is whether they can
spend enough this year to make the economy grow even faster and finally bring
down unemployment. It's up to them because the housing market and government
spending aren't offering much help.
A more active consumer was the main
reason the economy grew at an annual rate of 3.2 percent in the final three
months of 2010, the Commerce Department said Friday. It was up from 2.6 percent
the previous quarter and the best since the start of last year.
That level of growth would be great news
in a healthy economy that only needed to hold steady. But with unemployment
still at 9.4 percent a year and a half after the Great Recession, steady is not
good enough. By some estimates, the economy would need to grow 5 percent for a
whole year to significantly bring down the unemployment rate.
Still, the recovery has gained steam
since a difficult patch last spring. Economists now think 2011 will be a
pivotal year when consumers can finally be counted on to power the economy to
stronger growth.
A one-year cut of 2 percentage points in
the Social Security payroll tax is a big reason why economists predict
Americans will keep spending enough that the economy will grow more strongly
this year.
Ford stock falls after company misses
expectations
DEARBORN, Mich. (AP) -- Ford Motor Co. is
the most profitable it's been in a decade, since the days when Americans were
snapping up SUVs. But maintaining that momentum -- and meeting the high expectations
of buyers, workers and investors -- will be a big challenge in the coming year.
Ford got a taste of that Friday. Despite
reporting a profit for 2010, the company's stock fell more than 13 percent to
close at $16.27. Investors were disappointed that the results fell short of
expectations. Ford also posted an 80-percent drop in fourth-quarter net income,
missing forecasts and ending two years of better-than-expected results.
It was clear Ford won't have much room
for error as it tackles nagging problems, from the huge loans it took out to
fund its turnaround to its upcoming labor talks to its stodgy, slow-selling
Lincoln brand.
Workers saw 2 percent rise in wages and
benefits
WASHINGTON (AP) -- Workers saw their
wages and benefits rise slightly faster in 2010 than 2009, but the gain was
still the second-lowest increase in nearly three decades.
Wages and benefits increased 2 percent
last year after a 1.4 percent increase in 2009, the Labor Department reported
Friday. Both years were the smallest gains on Labor Department records that go
back 28 years.
The modest gains reflect a severe
recession which pushed millions out of work and depressed the bargaining power
of those with jobs. While weak wage gains mean low inflationary pressures, it
also leaves households with less income to boost consumer spending.
Analysts believe labor costs will be
constrained as long as unemployment remains elevated. The unemployment rate in
December stood at 9.4 percent. Many economists believe it will still be around
9 percent a year from now.
The Labor Department's Employment Cost
Index measures wages, salaries and benefits -- which include health insurance
and pensions.
Fitch downgrades Egypt outlook to
negative
CAIRO (AP) -- Fitch Rating on Friday
revised down its outlook for Egypt, dropping it to "negative" as mass
protests in the country turned violent, engulfing the capital and other cities
in a serious challenge to President Hosni Mubarak's 30-year rule.
Fitch said it was holding steady Egypt's
other ratings, including its long-term foreign currency issuer default rating,
which was held at the investment grade BB+. The revision comes after the
Egyptian stock exchange's benchmark EGX30 plummeted about 17 percent in two
days, a drop fueled by investor panic over the Tunisia-inspired protests that
erupted Tuesday in the Arab world's most populous nation. The demonstrations
have focused on the economic disparity in the country, spiraling food prices
and the grinding poverty that afflicts nearly 40 percent of Egypt's 80 million
people.
Analysts have downplayed the likelihood
that President Hosni Mubarak's regime would be ousted as a result of the
protests. But the mass rallies in which tens of thousands have clashed with
riot police have pushed to the surface latent concerns about Egypt and raised
questions about the economic impact on the country.
The unrest appears to have already hit at
least one U.S. oil company. Apache Corp., which has extensive operations in
Egypt, has seen it's shares slide about 7 percent, wiping out $3 billion in
market value, since Thursday in a drop analysts linked to the unrest in Egypt.
Spanish Cabinet OKs raising retirement
age to 67
MADRID (AP) -- Spaniards were hit with
another bitter dose of austerity Friday as the Cabinet approved raising the
retirement age from 65 to 67 to reassure jittery markets that the country can
handle its heavy debt burden.
With the European sovereign debt crisis
still festering and international investors wary, Spain, like many European
countries, has little option but to cut costs. The once-booming nation is
struggling to crawl out of recession after its property market collapsed and
its unemployment rate is above 20 percent, a eurozone high.
The deal gave Prime Minister Jose Luis
Rodriguez Zapatero a bit of breathing space as he presides over a struggling
economy and trails conservatives in the polls with a general election just over
a year away and local and regional elections in May.
The proposal was negotiated with unions
and backed by them -- a victory for Zapatero's Socialist government.
Spain unemployment rate up again to 20.3
pct
MADRID (AP) -- The government says
Spain's unemployment rate rose back above the 20 percent level in the fourth
quarter, to 20.3 percent, the highest since 1997.
That compares to about 19.8 in the third
quarter, already the highest in the eurozone.
The figures released Friday by the
National Statistics Institute show Spain's unemployment rate has now risen for
four straight years.
In the last quarter of 2010 the number of
unemployed people increased by 121,900 to nearly 4.7 million.
The jobless rate was above 20 percent for
all of 2010 except for the small drop in the third quarter to 19.8 percent.
Regulators shut small banks in Okla, Wis
WASHINGTON (AP) -- Regulators have closed
small banks in Oklahoma and Wisconsin, lifting to nine the number of bank
failures in 2011 following last year's toll of 157 taken down by the weak
economy and piles of soured loans.
The Federal Deposit Insurance Corp. on
Friday took over First State Bank of Camargo, Okla., with $43.5 million in
assets, and Evergreen State Bank, based in Stoughton, Wis., with $246.5 million
in assets.
Bank 7, based in Oklahoma City, agreed to
assume the assets and deposits of First State Bank. McFarland State Bank of
McFarland, Wis., is acquiring the assets and deposits of Evergreen State Bank.
The failure of First State Bank is
expected to cost the deposit insurance fund $20.1 million; the failure of
Evergreen State Bank is expected to cost $22.8 million.
Chevron exiting coal mining
CHEYENNE, Wyo. (AP) -- Petroleum giant
Chevron Corp. said Friday it plans to get out of the coal industry by the end
of the year.
The decision came after the company
determined that new coal technologies were developing too slowly to make
staying in the industry a good strategy, Chevron Mining Inc. spokeswoman
Margaret Lejuste said.
One of the technologies is known as
coal-to-liquids, in which coal is processed into diesel, gasoline or other
fuels.
Chevron intends to sell off three coal
mines in Wyoming, New Mexico and Alabama. The sites include the company's open
pit mine outside Kemmerer in western Wyoming, which has been on the market for
about a week.
Sara Lee to split into 2 businesses
PORTLAND, Ore. (AP) -- Sara Lee Corp. is
splitting into two public companies, completing its evolution from conglomerate
to a smaller business more tightly focused on food and drinks.
The company said Friday that the deal is
the best way to provide shareholder value in the long-run. Stockholders will
receive a special $3 dividend and their shares will split to give them an
interest in each company.
Sara Lee, based in Downers Grove, Ill.,
will keep its name and current location with one company, which will
concentrate on its North American retail and food service businesses. That
includes brands such as Jimmy Dean, Ball Park and Hillshire Farm, as well as
Sara Lee frozen desserts. These operations generated about $4.1 billion in
revenue during Sara Lee's latest fiscal year.
A second company, which has not been
named but is being called CoffeeCo, will focus on the company's international
bakery and beverage businesses.
The split, expected to conclude next
year, will complete Sara Lee's multi-year transformation from a maker of
everything from shoe polish to cheesecake into a company devoted solely to food
and beverages.
Comcast to take over NBC Universal
LOS ANGELES (AP) -- The nation's largest
cable TV company, Comcast Corp., was set to take control of NBC Universal on
Friday after the government shackled its behavior in the coming years to
protect online video services such as Netflix and Hulu.
The deal's closing was to occur shortly
before midnight EST Friday, Comcast spokesman John Demming said.
The takeover gives the cable-hookup company
51 percent control of NBC Universal, which owns the nation's fourth-ranked
broadcaster, NBC; the Universal Pictures movie studio and related theme parks;
and a bevy of cable channels including Bravo, E! and USA.
The combination had raised fears that Comcast
might abuse its control of NBC Universal to favor its most valuable customers:
the 23 million who rely on it for cable TV service and the 17 million who pay
for Internet connections.
But the Justice Department and Federal
Communications Commission imposed conditions that prevent Comcast from keeping
to itself NBC Universal's popular shows such as "The Office" and
movies including "Despicable Me" for the next several years.
Goldman Sachs boosts pay for Blankfein, 4
others
NEW YORK (AP) -- Goldman Sachs Group Inc.
has more than tripled the salary of CEO Lloyd Blankfein to $2 million, and also
granted raises to four other top executives.
The investment bank said in a Securities
and Exchange Commission filing on Friday that its board's compensation committee
set the new base salary for Blankfein, effective Jan. 1. His previous salary
had been $600,000.
The committee set salaries at $1.85
million for four other executives. They are Chief Operating Officer Gary Cohn;
Chief Financial Officer David Viniar and Vice Chairmen Michael Evans and John
Weinberg.
The filing didn't elaborate on the
reasons for the raises. The salaries don't include other forms of compensation
the executives can receive, such as stock options.
By The Associated Press
The Dow Jones industrial average fell
166.13 points, or 1.4 percent, to close at 11,823.70. That's the worst one-day
drop since Nov. 16.
The Dow lost 0.4 percent for the week
after eight straight weeks of gains.
The Standard & Poor's 500 index fell
23.20, or 1.8 percent, to 1,276.34. All 10 company groups within the S&P
index fell. The S&P fell 0.5 percent for the week.
The Nasdaq composite fell 68.39, or 2.5
percent, to 2,686.89. The index was not updated nearly an hour after the market
opened due to technical problems. The Nasdaq lost 0.1 percent for the week.
Benchmark oil rose $3.70, or 4.3 percent,
to settle at $89.34 a barrel on the New York Mercantile Exchange. Oil rose as
high as $89.73 a barrel at one point.
In other Nymex trading in March
contracts, heating oil gained 3.9 cents to settle at $2.6942 a gallon, gasoline
added 7.27 cents to settle at $2.4859 a gallon and natural gas picked up 4
cents to settle at $4.323 per 1,000 cubic feet.
In London, Brent crude added $2.03 to
settle at $99.42 a barrel on the ICE Futures exchange.