On Thursday February 3, 2011, 6:05 pm EST
Shoppers shook off the snow
in January, stores say
NEW YORK (AP) -- Americans
didn't stop splurging after the holidays.
They braved snowstorms and
shopped in force in January, handing retailers like Costco, Victoria's Secret
and Macy's surprisingly strong sales.
Along with two encouraging
economic reports -- the biggest service sector expansion in five years and a
plunge in weekly unemployment claims -- the sales figures offered more evidence
Thursday that the economic recovery is picking up speed.
Consumer spending has been
improving for more than a year now, and this holiday season was the strongest
for stores since 2006, before the Great Recession, according to the council.
Sales figures for January showed that shoppers weren't spent out after
Christmas.
The council's index of 32
stores showed a robust 4.8 percent increase for the month, well above the
expected 1.5 to 2 percent. Analysts were worried that snowstorm after
snowstorm, particularly in the Northeast, might have kept shoppers at home.
The figures cover Jan. 2
through Saturday for stores that have been open at least a year.
Consumer spending accounts
for about 70 percent of U.S. economic activity, so how shoppers behave is an
important measure of economic health. The next question is whether they will
shell out full price for spring items, which are starting to show up in stores.
There's no special occasion to spur spending after Valentine's Day until
Easter, which this year falls on April 24, three weeks later than in 2010.
Fast growth in service
sector points to more jobs
WASHINGTON (AP) -- Activity
at manufacturing and service companies has reached a level not seen since
before the recession, suggesting a stronger year for hiring.
Some economists are even
hopeful that Friday's employment report may be better than first thought, based
on new economic data reported Thursday.
The service sector, which
employs nearly 90 percent of the work force, is expanding at the fastest pace
in five years. Factories are cranking out goods, retail sales are up, and many
companies are nearing the point where they can no longer expand without more
employees.
Rate on 30-year fixed
mortgage rises to 4.81 pct.
NEW YORK (AP) -- The
average rate on the 30-year fixed mortgage edged up this week as bond yields
increased.
Freddie Mac said Thursday
the average rate rose to 4.81 percent this week from 4.80 percent the previous
week. It hit a 40-year low of 4.17 percent in November.
The average rate on the
15-year loan slipped to 4.08 percent from 4.09 percent. It reached 3.57 percent
in November, the lowest level on records starting in 1991.
Rates have been little
changed this year after spiking more than half a percentage point in the last
two months of 2010. Investors sold off Treasury bonds during that time, driving
yields lower. Mortgage rates tend to track the yield on the 10-year Treasury
note.
High foreclosures, job
worries and expectations that home prices will fall further have kept many
potential homebuyers on the sidelines. Historically low mortgage rates haven't
been enough to jumpstart the housing market.
Bernanke: More jobs needed
for real recovery
WASHINGTON (AP) -- The
United States can't fully recover from the worst recession in decades until
hiring improves, Federal Reserve Chairman Ben Bernanke said Thursday.
The economy is
strengthening, and will likely grow at a faster pace this year as more
confident consumers and companies spend more, Bernanke said in a speech to the
National Press Club. But he warned that growth won't be strong enough to
quickly drive down high unemployment.
His remarks suggest the Fed
will stick with its program to prime the economy by purchasing $600 billion of
Treasury bonds by the end of June.
The Fed chief also issued a
stern warning to Congress and the White House to come up with a plan to reduce
the government's bloated budget deficits. And he told Congress not to play
political games with the Treasury Department's request to boost the
government's borrowing authority beyond the current $14.3 trillion statutory
cap.
On the hiring front,
Bernanke said it will take several years for unemployment to return to more
normal levels. Last month, the Fed chief was more specific, saying it would
take four or five years for the unemployment rate to drop to a historically
normal level of around 5.5 percent or 6 percent.
ECB leaves rates on hold as
inflation simmers
BERLIN (AP) -- Inflationary
pressures in the 17-nation eurozone remain in check despite a spike in prices
on the back of higher energy and commodity costs, the European Central Bank's
president said Thursday -- an assessment that was less hawkish than many
expected and prompted the euro to fall sharply.
Jean-Claude Trichet's
comments came after the bank's governing council decided unanimously to leave
its main interest rate unchanged at 1 percent for the 21st consecutive month.
That decision was expected.
Merck posts 4Q loss due to
restructuring charges
Merck & Co. shares
tumbled Thursday after it stunned investors by withdrawing its oft-repeated
profit forecast for 2013 and giving lower-than-expected guidance for this year.
It blamed pricing pressures, troubles with a crucial experimental drug and the
need to invest for the future.
The drugmaker posted a $531
million fourth-quarter net loss due to $3.9 billion in charges, but beat
anticipated results on strong sales growth from its key drugs and ones acquired
along with Schering-Plough Corp. 15 months ago.
Besides big inventory
write-offs and restructuring costs from that deal, Merck took a charge of $1.7
billion before taxes to cover diminished prospects for anti-clotting drug
vorapaxar, which was seen as a potential blockbuster. The company last month
said that due to dangerous increased bleeding in the brains of patients who'd had
strokes, it would halt one late-stage study of the drug and remove some
patients from a second, continuing study.
Merck shares tumbled 92
cents, or 2.7 percent, to $32.90.
Merck, the world's
second-biggest drugmaker behind Pfizer Inc., said pricing pressures from U.S.
health care reform and European government health programs have increased and
will keep rising, echoing other drugmakers.
Pfizer faces similar price
pressures and more severe generic competition but is cutting its 2012 research
budget nearly 20 percent and will essentially do more with less.
Kellogg says 4Q earnings
up, higher prices coming
PORTLAND, Ore. (AP) --
Kellogg Co.'s fourth-quarter net income climbed 7 percent despite falling
volumes as the world's biggest cereal maker lowered costs and raised prices.
It was a difficult and
disappointing year for Kellogg, which struggled with intense competition, lower
cereal sales and major food recalls. But there were signs that 2011 may be
better for Kellogg, and its shares rose in trading Thursday.
Kellogg, which makes
Frosted Flakes, Pop Tarts and other foods, is increasing its investment in new
product development by 25 percent after scaling back during the recession. It
also will spend more on auditing suppliers and testing raw materials to avoid a
repeat of a major cereal recall and problems with its Eggo waffle distribution
that hammered its results.
It is also increasing
prices on some of its products to offset higher ingredient costs. The company
already put some increases in place during 2010 but those are expected to
continue through the year as the cost for corn and wheat soar.
Many businesses are
deciding to boost prices to contend with higher costs. Whirlpool Corp. and
Swedish rival Electrolux AB both said Wednesday that they were increasing
prices because their raw material costs are on the rise. And consumer product
makers Colgate-Palmolive Co. and Procter & Gamble Co. both said last week
that they are likely to increase prices to cope with higher commodity costs.
Kellogg's price increases
also helped make up for softer sales volume during the period.
AXA Rosenberg paying $242M
to settle case on code
WASHINGTON (AP) -- An
investment firm is paying $242 million to settle civil fraud charges that it
hid an error in its computer code that resulted in losses for its clients,
federal regulators said Thursday.
The settlement with AXA
Rosenberg Group announced by the Securities and Exchange Commission is among
the largest for the agency and is the first of its kind.
The SEC said senior
managers at two AXA Rosenberg affiliates knew about an error in the code for
the quantitative investment model used to manage clients' assets. The agency
says the error disabled a key element of the model for managing risk.
The agency said senior
managers ordered others to conceal the error and failed to fix it, causing $217
million in client losses.
AXA Rosenberg, based in
Orinda, Calif., is owned by French insurance company AXA SA. AXA Rosenberg,
neither admitted nor denied wrongdoing in settling the case but did agree to
refrain from future violations of the securities laws.
The use of quantitative
models has proliferated on Wall Street.
Glaxo posts Q4 loss on
Avandia charge
LONDON (AP) --
GlaxoSmithKline PLC, the world's second largest drug maker by revenue, reported
a fourth-quarter loss on Thursday after taking a previously-flagged massive
charge to provide for U.S. litigation over its diabetes drug, Avandia.
But the London-based
company also had good news for investors, reinstating its share buyback program
and increasing its full-year dividend payment as it banked on a stronger
pipeline of potential drugs to boost future earnings.
Glaxo posted a net loss of
690 million pounds ($1.12 billion) for the three months to Dec. 31, compared to
a profit of 1.63 billion pounds a year ago, after taking a 2.2 billion pound
charge to settle claims relating to Avandia and past U.S. sales practices.
European regulators ordered
Avandia off the market and the U.S. Food and Drug Administration restricted its
use last September because of evidence that the drug increased the risk of
heart attacks.
MADRID (AP) -- Spain has
successfully raised euro3.5 billion ($4.83 billion) at a debt auction, with
lower interest rates reflecting easing market fears over the country's ability
to manage its debt.
The Treaury raised euro1.89
billion in three-year bonds with the average interest rate down to 3.25 percent
from 3.72 percent in the last such auction on Dec. 2.
It sold euro1.61 billion in
five-year bonds with the rate down to 4.04 percent from 4.54 percent in
January.
Demand was strong, at twice
the amount offered for three-year bonds and nearly twice the offer for the
five-year bills.
The sale was the first
since ratings agency Standard & Poor's on Tuesday maintained Spain's AA rating
and praised government measures to get the economy moving after nearly two
years of recession.
By The Associated Press
The Dow Jones industrial
average rose 20.29 points, or 0.2 percent, to 12,062.26. The Nasdaq composite
rose 4.32 points, or 0.2 percent, to 2,753.88.
The S&P 500 -- the
benchmark for most U.S. mutual funds -- gained 3.07 points, or 0.2 percent, to
close at 1,307.10.
West Texas Intermediate
crude for March delivery lost 32 cents to settle at $90.54 per barrel on the
Nymex. In London, Brent crude lost 58 cents to settle at $101.76 per barrel.
Natural gas for March
delivery fell 9.2 cents to settle at $4.337 per 1,000 cubic feet on the New
York Mercantile Exchange.
In other Nymex trading for
March contracts, heating oil lost 1.33 cents to settle at $2.7674 per gallon
and gasoline futures gained less than a penny to settle at $2.5034 per gallon.