AP Business Highlights

 

On Thursday March 10, 2011, 6:21 pm EST

Stocks lift household wealth; companies amass cash

WASHINGTON (AP) -- Americans are spending more of their growing wealth. The economy still needs companies to do the same.

Still lacking the confidence to spend at normal levels, businesses have stockpiled nearly $1.9 trillion in cash, a record, the government said Thursday. Cash now accounts for 13 percent of corporate assets, the highest share since 1984. Economists say the surest way to reduce unemployment would be for companies to spend more of that cash to expand and hire.

The same report, based on data from the last three months of last year, showed households are further rebuilding the wealth they lost in the recession. Americans' net worth grew 3.8 percent, mostly thanks to the rising stock market.

Greater household wealth generally leads Americans to spend more. They increased their spending in the October-December quarter at the fastest pace since 2006. Household net worth came to $56.8 trillion at the end of 2010, even though the value of real-estate holdings fell 1.6 percent, according to the Fed. Last quarter's gain was faster than the 2.6 percent gain in the previous quarter.

But companies are still waiting for signs that the economy and their own businesses are strengthening enough to justify spending aggressively again.

Higher oil prices threaten global economy

WASHINGTON (AP) -- Higher oil prices are slowing global economic growth, and the impact is likely to spread in coming months.

Oil prices helped raise the U.S. trade deficit to a seven-month high in January, when crude prices were $87.50 a barrel. Oil is now trading at more than $100 a barrel, suggesting the gap will widen in coming months. Even fast-growing China isn't immune -- higher oil prices contributed to a rare trade deficit there in February.

Pricier oil dampens consumer spending and that cuts into economic growth. Surging oil prices can also stir up inflation fears, triggering higher interest rates that cut into household and business spending.

The impact is visible in bold numbers each morning on gas station marquees across the United States. Pump prices have risen 13 percent in the past month to a national average of $3.53 a gallon, according to AAA, Wright Express and Oil Price Information Service.

Airlines have also been rapidly raising their fares to offset higher fuel costs. American Airlines said Thursday it is increasing its base fares by $10, the seventh price hike this year by U.S. airlines.

GM chief financial officer resigns unexpectedly

DETROIT (AP) -- The chief financial officer who guided General Motors Co. to its first profitable year since 2004 and led its successful return to the stock market is leaving after being passed over for the top job.

Chris Liddell will step down on April 1 after just 15 months at GM. He'll be replaced by Treasurer Dan Ammann, a former Wall Street banker, the company said in a surprise announcement on Thursday.

Liddell, 52, a former CFO at Microsoft Corp., was once considered a candidate to succeed Chief Executive Ed Whitacre. But GM's board instead picked current Chairman and CEO Dan Akerson when Whitacre made a surprise exit in August.

During a hastily arranged conference call with reporters, Liddell said he had no job lined up, but doesn't want to be a chief financial officer any longer. He said he achieved his goals of pulling off GM's IPO, fixing its accounting problems and getting the company back on sound financial footing.

Unemployment rate falls in 24 states, rises in 10

WASHINGTON (AP) -- The unemployment rate fell or held steady in 40 states in January, the latest sign that hiring is strengthening throughout the country.

The Labor Department said Thursday that the unemployment rate fell in 24 states, the most in seven months, and remained the same in 16. The unemployment rate rose in only 10 states. In December, the rate fell in 15 states and rose in 20.

Employers added to their payrolls in 35 states in January, up from only 15 in the previous month. That's the most to report higher payrolls since October.

Nationwide, employers added 63,000 net jobs in January, and the unemployment rate fell sharply to 9 percent from 9.4 percent. The rate ticked down last month to 8.9 percent and employers added 192,000 net jobs, the most in nearly a year.

More people sought unemployment aid last week

WASHINGTON (AP) -- The number of people seeking unemployment benefits rose last week. But the rise comes after applications hit their lowest level in nearly three years, and economists expect further declines as the economy improves.

Applications increased by 26,000 to a seasonally adjusted 397,000 during the week ended March 5, the Labor Department said Thursday.

The latest report covers the week after the Presidents' Day holiday, when many government offices were closed. Applications usually rise in weeks following holiday-shortened weeks.

Applications below 425,000 signal modest job growth. But they need to fall consistently below 375,000 to signal a sustained decline in the unemployment rate. Unemployment benefit applications peaked during the recession at 651,000.

Economists were encouraged that claims remained below 400,000 for the third straight week.

February federal budget deficit sets record

WASHINGTON (AP) -- The government ran the largest-ever budget deficit for a single month in February. The shortfall kept this year's annual deficit on pace to end as the biggest in U.S. history. The widening deficit reflects the impact of the tax-cut package President Barack Obama and congressional Republicans brokered in December.

As a result, the nonpartisan Congressional Budget Office in January raised its estimate for the annual deficit from $1.1 trillion to $1.5 trillion. It said the tax cuts would add $400 billion to this year's gap. The budget year ends Sept. 30. The tax-cut package extended income tax cuts, reduced workers' Social Security taxes, extended unemployment benefits and accelerated business tax write-offs, among other steps.

February's deficit of $222.5 billion eclipsed last February's previous record by nearly $2 billion. The full-year deficit would exceed 2009's record deficit of $1.41 trillion. And it would mark the third straight year of $1-trillion-plus deficits.

It's unusual for an economy to be running record-high deficits this far into a recovery. The recession that began in December 2007 ended in June 2009. The problem was that the financial crisis and the recession that followed fueled explosive deficit growth.

Rate on 30-year mortgage ticks up to 4.88 pct.

WASHINGTON (AP) -- Fixed mortgage rates were relatively flat this week, with the 30-year loan just under 5 percent.

Freddie Mac says the average rate on a 30-year fixed mortgage ticked up to 4.88 percent from 4.87 percent the previous week. It hit a 40-year low of 4.17 percent in November.

The average rate on the 15-year fixed home loan stayed steady at 4.15 percent from the previous week. It reached 3.57 percent in November, the lowest level on records dating back to 1991.

Wal-Mart expands online order pickup program

NEW YORK -- As competition grows from Amazon.com, Wal-Mart is battling back by expanding a program offering the convenience of shopping online along with same-day gratification. The world's largest retailer is expanding its service that lets shoppers pick up online orders at stores to all of its 3,600-plus locations. It's partly a bid to win back consumers who've gone elsewhere for convenience.

The program appeals to shoppers who want to save time on shopping trips, said Steve Nave, senior vice president and general manager of Walmart.com. Shoppers also don't have to wait several days for shipping -- or pay for it -- and get to shop in the peace and quiet of home.

Wal-Mart Stores Inc., the world's largest retailer, previously offered the service on about 2,000 items in less than a quarter of its stores. Now it will apply 40,000 items, including baby items, toys, electronics, video games and appliances. Groceries are not part of the program.

By The Associated Press

Weak economic news from China, the U.S. and Spain combined with a slump in oil companies sent stocks sharply lower Thursday. The Dow Jones industrial average had its biggest one-day drop since August.

Investors were jarred when China reported a surprise trade deficit. China's exports fell in February as businesses closed for the weeklong Lunar New Year holiday, but imports of higher-priced oil and other goods jumped, widening the country's deficit to $7.3 billion.

Moody's downgraded Spain's debt, re-igniting fears about Europe's debt crisis. In the U.S., the government reported that new applications for unemployment benefits rose more than expected last week.

The Dow Jones industrial average fell 228.48 points, or 1.9 percent, to close at 11,984.61. McDonald's Corp. was the only stock in the Dow 30 that rose.

The Standard & Poor's 500 index fell 24.91, or 1.9 percent, to 1,295.11. The Dow and S&P 500 are still up 3 percent since the start of the year.

The Nasdaq composite fell 50.70, or 1.8 percent, to 2,701.02.

Benchmark West Texas Intermediate for April delivery eventually settled down $1.68, or 1.6 percent, to $102.70 per barrel on the New York Mercantile Exchange.

In London, Brent crude lost 51 cents to settle at $115.43 per barrel on the ICE Futures Exchange.

Natural gas fell 10 cents to settle at $3.83 per 1,000 cubic feet after the government said U.S. supplies are still higher than last year despite a drop in price. U.S. inventories have been growing as new technologies allow companies to tap underground shale deposits.

In other Nymex trading for April contracts, heating oil fell 2.58 cents to settle at $3.0449 per gallon and gasoline dropped less than a penny to settle at $3.0196 per gallon.