AP
Business Highlights
Tuesday December 16, 7:09 pm ET

Fed cuts target for key rate to record low

WASHINGTON (AP) -- The Federal Reserve cut its target for a key interest rate to the lowest level on record and pledged to use "all available tools" to combat a severe financial crisis and prolonged recession.

The central bank on Tuesday said it had reduced the federal funds rate, the interest that banks charge each other, to a range of zero to 0.25 percent. That is down from the 1 percent target rate in effect since the last meeting in October. Many analysts had expected the Fed to make a smaller cut to 0.5 percent.

Were the regulators and the regulated too close?

WASHINGTON (AP) -- Financial wizard Bernard L. Madoff didn't just fool investors. He also conned the nation's top securities regulators, who investigated his business last year and apparently missed the fact that he was running a $50 billion Ponzi scheme.

The SEC's enforcement division looked into Madoff's business in 2007. The agency did not refer the matter to commissioners for legal action. What did the investigators find and why didn't they look harder? The SEC isn't saying anything beyond a brief statement it issued Friday revealing the 2007 probe.

White House pressed from right, left on car rescue

WASHINGTON (AP) -- Conservative Republicans admonished the White House Tuesday not to use bank-bailout billions to rescue distressed U.S. automakers, and a key Democrat demanded the government get veto power over the companies' business decisions as a condition of any aid.

The Bush administration said it was still evaluating options and suggested any deal would require major concessions by all sides. Complicating its task, lawmakers in both parties -- having failed in their efforts to push a $14 billion auto rescue through a bailout-weary Congress -- were pressing for an array of terms and conditions they said should be part of any Plan B.

Stocks surge as Fed pledges broad economic support

NEW YORK (AP) -- A surprised Wall Street bolted higher Tuesday after the Federal Reserve's historic decision to further slash interest rates and provide broad support to revive the troubled economy.

The Dow Jones industrials surged 360 points to 8,924.14 and broader indexes jumped more than 5 percent after the central bank said it will use "all available tools" to jump-start the economy. It also set its target for the rate at which banks lend to each other to a range of zero to 0.25 percent, the lowest level on record.

Demand for long-term government bonds increased and pushed yields to record lows.

Goldman Sachs posts first loss since going public

NEW YORK (AP) -- Goldman Sachs Group Inc. on Tuesday reported its first quarterly loss since it went public in 1999, losing $2.29 billion during its fiscal fourth quarter, but investors seemed unfazed and sent its shares higher.

The loss proves the turmoil in the financial markets has tripped up even the best-run financial institutions. The New York-based bank has long been considered the premier investment bank on Wall Street, and in recent quarters, the sturdiest amid the turmoil.

Consumer prices drop more than expected

WASHINGTON (AP) -- A record plunge in consumer prices in November puts pressure on the Federal Reserve to act decisively to guard against a debilitating bout of deflation.

Consumer prices, an inflation barometer, last month fell by the largest amount on records going back 61 years as energy costs posted nearly double the decline of the previous month, the Labor Department reported Tuesday.

In other economic news, the Commerce Department reported that construction of new homes fell in November by 18.9 percent, the biggest drop in a quarter-century.

Crude sinks despite talk of OPEC production cuts

UNDATED (AP) -- Oil prices fell Tuesday after OPEC powerhouse Saudi Arabia said oil production would be cut by 2 million barrels per day to stem declining crude prices.

OPEC, expected to slash production levels Wednesday, has hinted that it may have to "shock" markets to stabilize prices. But oil traders and brokers appear to have expected talk of an even bigger cut.

Light, sweet crude for January delivery fell 91 cents to settle at $43.60 a barrel on the New York Mercantile Exchange.

Former Gen Re executive gets 2 years in prison

HARTFORD, Conn. (AP) -- The former chief executive of General Re Corp. was sentenced Tuesday to two years in prison and fined $200,000 for his role in a scheme that cost shareholders of American International Group Inc. more than $500 million.

Ronald Ferguson, 66, of Fairfield, was convicted in February of conspiracy, securities fraud, mail fraud and making false statements to the Securities and Exchange Commission. He also must serve two years of supervised release after the prison time.

Best Buy 3Q profit sinks, offers staff buyouts

MINNEAPOLIS (AP) -- Best Buy Co. Inc., the nation's biggest consumer electronics retailer, said Tuesday that its third-quarter profit sank 77 percent as it faced dramatic changes in consumer spending.

The company also said it will offer massive buyout packages to about 4,000 employees at its headquarters while slashing spending in a bid to cut costs, news that the sent the retailer's stock soaring.

Executives called the past three months the "most challenging consumer environment" in the retailer's history.

Adobe 4Q profit grows, revenue essentially flat

SAN JOSE, Calif. (AP) -- Adobe Systems Inc., best known for its Photoshop and Acrobat software, said Tuesday its fiscal fourth-quarter profit grew 11 percent, at the high end of the guidance it gave this month.

The company also reaffirmed its outlook, sending its shares up more than 10 percent in after-hours trading.

The San Jose-based company posted a profit of $245.9 million, or 46 cents per share, from September through November. Excluding one-time items such as restructuring charges and an income tax benefit, Adobe earned 60 cents a share.

By The Associated Press

The Dow rose 359.61, or 4.20 percent, to 8,924.14 after having been up about 100 in subdued trading.

Broader stock indicators also rose. The Standard & Poor's 500 index advanced 44.61, or 5.14 percent, to 913.18, and the Nasdaq composite index rose 81.55, or 5.41 percent, to 1,589.89.

The Russell 2000 index of smaller companies rose 30.28, or 6.69 percent, to 482.85.

Light, sweet crude for January delivery fell 91 cents to settle at $43.60 a barrel on the New York Mercantile Exchange.

In London, January Brent crude rose 8 cents to $44.68 a barrel on the ICE Futures exchange.

In other Nymex trading, gasoline futures rose less than a penny to settle at $1.04 a gallon. Heating oil also gained less than a penny to $1.4603 a gallon while natural gas for January delivery gained 10.6 cents to settle at $5.751 per 1,000 cubic feet.