On Tuesday March 1, 2011, 6:11 pm EST
Bernanke seeks to ease
lawmakers' inflation fears
WASHINGTON (AP) -- Federal
Reserve Chairman Ben Bernanke boldly predicted to Congress on Tuesday that
rising oil prices will cause only a brief and modest rise in consumer
inflation.
If he's wrong, as some
lawmakers suggested to him, the risks are high: a weaker economy and elevated
consumer inflation.
Bernanke's credibility is
at stake, too. His duties as Fed chief require a balancing act: Leading the
economy to stronger growth while making sure inflation doesn't rise too high.
Appearing before the Senate
Banking Committee, Bernanke faced sharp questions about whether rising gasoline
prices could spread dangerous inflation through the economy. He said he did not
think so.
Still, persistently higher
prices could shake consumer confidence, prompting consumers to reduce spending.
And that would weaken the economy, he acknowledged.
Gas prices jumped over the
weekend to a new nationwide average of $3.37 a gallon. That's 26.7 cents a
gallon more than a month ago. Food prices in January rose at the fastest since
the fall of 2008.
GM leads auto sales jump
with 49 percent increase
DETROIT (AP) -- The U.S.
auto sales recovery picked up steam last month with all major car companies reporting
double-digit gains.
General Motors Co. led the
way with a whopping 49 percent U.S. sales jump compared with February of last
year, followed closely by Toyota Motor Corp. with a 42 percent gain.
Nissan Motor Co. and Honda
Motor Co. had gains of 32 percent and 22 percent, while Hyundai Motor Co. sales
went up 28 percent.
Chrysler Group LLC and Ford
Motor Co. showed much smaller increases, but Chrysler sales were still strong
with a 13 percent increase and Ford came in at 10 percent.
The companies said Tuesday
that consumers snapped up both cars and trucks, buoyed by a gradually improving
economy, and the U.S. automakers pointed to strong sales of new models. But the
sales gains, especially for GM, were juiced by sweeter financing and lease
deals. While analysts weren't ready to declare a price war -- and GM denied
starting one -- they noted an increase in the deals customers were offered.
The auto industry website
TrueCar.com estimated that automakers raised incentives 5 percent from January
to February to an average of $2,708 per vehicle. Chrysler, Ford, Nissan and
Toyota all sweetened deals by more than 6 percent for the month, the site said.
Manufacturing growing at
fastest pace in 7 years
WASHINGTON (AP) -- U.S.
manufacturers expanded at the fastest pace in nearly seven years last month,
but a sudden rise in the price of raw materials could threaten their profits.
The Institute for Supply
Management said Tuesday that its index of manufacturing activity rose to 61.4
in February, up from 60.8 the previous month. That's the highest reading since
it reached the same level in May 2004. The ISM's index bottomed out at 33.3 in
December 2008, its lowest point in nearly 30 years.
Any reading above 50
indicates expansion. The manufacturing sector has now expanded for the past 19
months.
The rebound in
manufacturing is gaining momentum, the report showed. The new orders index rose
to a seven-year high. A measure of order backlogs rose to its highest level in
a year. And inventories are shrinking, both at manufacturers and their
customers. All are signs that factory output is likely to keep growing.
Ex-Goldman director charged
with insider trading
WASHINGTON (AP) --
Depicting moment-to-moment detail, the Securities and Exchange Commission on
Tuesday laid out civil fraud charges linking a former Goldman Sachs board
member to the biggest hedge fund insider-trading case ever.
It's a portrait of
corporate board meetings leading to secret phone calls, to stock-trading orders
and finally to huge illicit profits made within hours.
The SEC charged Rajat
Gupta, who has also served on the boards of Procter & Gamble and the parent
company for American Airlines. Gupta was a guest at President Barack Obama's
first state dinner.
But at the height of the
financial crisis, Gupta passed along privileged financial information that
helped enrich the target of the government's sweeping probe, the SEC alleges.
A pivotal moment came on
Sept. 23, 2008. Gupta listened via teleconference as the Goldman Sachs board
approved an offer from Warren Buffett's Berkshire Hathaway to invest $5 billion
in the banking giant.
Seven minutes before the
stock markets closed, Gupta hung up the call. He dialed Raj Rajaratnam. The two
men spoke briefly.
Within a minute, Rajaratnam
directed his hedge fund, the Galleon Group, to buy 175,000 shares of Goldman
stock. The next day, he would sell them. His profit: nearly $1 million.
J. Crew shareholders
approve $3B buyout deal
NEW YORK (AP) --
Shareholders of preppy clothing seller J.Crew Group Inc. have approved a $3
billion deal to be taken private by two investment firms.
The $43.50-per-share buyout
by private-equity firms TPG Capital and Leonard Green & Partners is
expected to close on or near next Monday. J. Crew CEO Millard (Mickey) Drexler,
the former Gap Inc. chief credited with turning J. Crew around since coming
aboard in 2003, will remain with the company.
Questions about how the
deal was negotiated by Drexler had raised concerns the deal might not be
approved. Proxy advisory firm Institutional Shareholder Services last week had
recommended against the deal.
Hedge fund Mason Capital
Management's managing member Michael Martino wrote to J. Crew's board on Feb.
11 and asked it to hold out for a higher offer. The firm has a 7.5 percent
stake in J. Crew, which is based in New York. They said they would vote against
the offer, according to an SEC filing.
China's manufacturing eases
on tighter credit
SHANGHAI (AP) -- China's
manufacturing boom slowed further in February as authorities tightened controls
on credit to cool inflation and factories eased output, especially of food and
textiles.
The state-affiliated China
Federation of Logistics and Purchasing said Tuesday that its purchasing
managers index, or PMI, dipped to 52.2 last month, from 52.9 in January and
53.9 in December.
Despite declining for three
months, the reading has remained above 50, the benchmark for expansion, for two
straight years.
A second, competing survey,
the HSBC China Manufacturing Purchasing Managers Index, fell to a seven-month
low of 51.7 in February from 54.5 in January.
The HSBC survey covers 400
companies, while the federation's monthly reports measure data from 820
companies across a range of industries and is an indicator of future trends.
Consumer inflation rate
rose to 4.9 percent in January from 4.6 percent the month before, driven by a
10.3 percent jump in food prices, despite repeated moves to tighten credit.
Inflation hit a 28-month high in November, though analysts expect price pressures
to continue in the coming months.
Saudi exchange leads drop
in Mideast markets
CAIRO (AP) -- Saudi
Arabia's main benchmark stock index took an almost 6.8 percent dive on Tuesday,
in a drop fueled by mounting unrest in neighboring Gulf countries and reports
of the arrest of a prominent Shiite cleric in the Sunni Muslim nation.
The Saudi All Shares Index
slid nearly 7.8 percent before rebounding slightly to close the day 6.78
percent down at 5,538 points. The slide built on an almost 6 percent decline over
the past two days and brought the market's year-to-date losses to almost 16.5
percent. Much of that loss accrued over the past three days.
Other Gulf exchanges that
take their cues from the Saudi market had closed by the time the exchange in
Riyadh had changed course from a session-starting gain and shifted deep into
the red. Whatever moderate gains the other markets posted Tuesday were likely
to be erased on Wednesday, analysts said.
The unrest in the Arab
region, brewing for the past few weeks, has spread to the Gulf nations, raising
concerns that it could affect the OPEC kingpin. Saudi Arabia sits atop the
world's largest reserves of conventional crude and crude traders and investors
are worried that anti-government demonstrations in the kingdom could cause a
supply cut that would send global oil prices to stratospheric levels.
Outages for Bank of
America's online customers
NEW YORK (AP) -- Customers
of Bank of America Corp. were again having problems accessing their accounts
online Tuesday.
It was the second outage
for the Charlotte, N.C., company in less than two months.
The latest outages, which
began Monday and hadn't been resolved by early Tuesday evening, were the result
of system upgrades over the weekend, said Tara Burke, a company spokeswoman.
Burke declined to say whether the bank had anticipated that the upgrades would
disrupt service. But she said no customer information was compromised.
Bank of America, the
country's largest bank, has 29 million online banking customers.
By The Associated Press
The Dow Jones industrial
average lost 168.32 points, or 1.4 percent, to 12,058.02.
The Standard & Poor's
500 index fell 20.89, or 1.6 percent, to 1,306.33. The Nasdaq composite fell
44.86, or 1.6 percent, to 2,737.41.
Benchmark West Texas
Intermediate for April delivery gained $2.66 to settle at $99.63 per barrel on
the New York Mercantile Exchange. In London, Brent crude gained $3.62 to settle
at $115.42 per barrel on the ICE Futures exchange.
In other Nymex trading,
heating oil added 8.46 cents to settle at $3.0235 a gallon and gasoline rose
9.07 cents to settle at $2.9834 per gallon. Natural gas for April delivery fell
16.4 cents to settle at $3.873 per 1,000 cubic feet.