AP Business Highlights
Wednesday July 2, 6:44 pm ET

Stocks drop after new record for oil prices

NEW YORK (AP) -- Wall Street resumed its sell-off Wednesday after oil hit a new record and a bearish analyst report renewed concerns that General Motors Corp. could run out of cash.

The stock market's pullback, which accelerated in the final hours of the week's last full trading session, left the Dow Jones industrial average officially in bear market territory, with the blue chips having fallen more than 20 percent from their October highs.

Oil surged to new records above $144 a barrel as the government reported a bigger-than-expected drop in U.S. supplies and as investors worried about tensions in the Middle East.

Fears that GM could go so far as to declare bankruptcy only added to investors' unease. The stock closed below the $10 mark for the first time since September 1954, when Dwight Eisenhower was president. Investors shrugged off better-than-expected sales figures from June and fretted about the company's cash needs.

Honda grows while US auto industry falters

DETROIT (AP) -- When consumers astonished the U.S. auto industry two months ago by quickly shunning trucks and going for gas mileage, the biggest beneficiary ended up being Honda Motor Co.

The No. 2 Japanese automaker, with the most fuel-efficient model lineup in the industry, never put both feet into the U.S. truck market, instead focusing on slow-but-steady growth with popular cars like the Civic and Accord.

It paid off in June. While its major competitors reported double-digit sales declines and burgeoning truck and sport utility vehicle inventories, Honda had a modest 1 percent sales increase. Its car sales were up almost 20 percent from the same month last year, and the Civic and Accord were among the industry's top sellers.

But while Honda may look like it can peer into the future, the company's top U.S. executive says it is well-positioned for $4 per gallon gasoline because it always has emphasized small, fuel-efficient vehicles.

GM shares fall below $10 for first time since 1954

NEW YORK (AP) -- Shares of General Motors Corp. plunged Wednesday to close below $10 for the first time in more than half a century, on worries about the company's cash needs and speculation about a possible bankruptcy protection filing down the road.

GM shares fell $1.77, or 15.1 percent, to close at $9.98. Their session low of $9.96 marked their lowest point since Sept. 13, 1954, when they hit $9.92, according to the Center for Research in Security Prices at the University of Chicago. The price is adjusted for splits and other changes.

The drop came after a Merrill Lynch analyst cut his rating for GM to "Underperform" from "Buy" and slashed his price target for the company to $7 from $28, saying that the decline in automotive sales has been more severe than anyone expected and will likely continue through next year.

Oil prices rise to record high above $144

NEW YORK (AP) -- Oil prices shot to a new record above $144 a barrel Wednesday as the government reported a bigger-than-expected drop in U.S. supplies and the threat of conflict with Iran weighed on traders' minds.

The latest spike means a barrel of crude has gone up by about half since the end of last year, when oil was going for $96 a barrel. Retail gasoline prices climbed to a record of their own in the U.S.

The Energy Department's Energy Information Administration said crude oil supplies fell by 2 million barrels last week, or about 800,000 barrels more than analysts surveyed by the energy research firm Platts predicted.

However, the report offered a mixed picture of energy use by the world's thirstiest oil consumer. Gasoline supplies unexpectedly grew by a considerable amount, and demand continued to slide -- suggesting that record fuel prices are prompting a real shift in Americans' driving habits.

Fugitive hedge-fund swindler surrenders in Mass.

NEW YORK -- A hedge fund swindler who set off a national manhunt when he faked his suicide to avoid reporting to prison surrendered Wednesday to Massachusetts police after three weeks in which authorities suspected he was hiding out in RV parks and highway rest areas. Authorities say his own mother helped broker the surrender.

Samuel Israel III, 48, walked into the police station in Southwick, Mass., about 9:15 a.m. wearing a colored T-shirt and shorts, identified himself and said he was a fugitive wanted by the federal government, officials said.

Israel disappeared June 9 just hours before he was to report to prison to begin serving a 20-year sentence handed down in April for his role in the collapse of the Bayou hedge funds.

Israel's SUV was found abandoned on a bridge over the Hudson River in suburban New York City with the words "Suicide is Painless" -- the theme song for the "MASH" television show -- scrawled in dust on the hood.

Factory orders see 0.6 percent gain in May

WASHINGTON (AP) -- Orders to U.S. factories turned in the slowest performance in three months in May as a surge in demand for commercial aircraft was not enough to offset weakness in autos, heavy machinery and steel.

Factory orders rose by 0.6 percent in May, less than half the gains turned in during April and March, the Commerce Department reported Wednesday. It was the poorest showing since factory orders had fallen by 0.4 percent in February.

Analysts said the figures for the past three months have been inflated by big increases in the cost of refined petroleum and related products such as chemicals, which have been soaring because of the rising cost of global oil prices.

American could cut 900 flight attendant jobs

DALLAS (AP) -- American Airlines says it could cut 900 flight attendant jobs as it reduces flights to cope with record high fuel costs.

The Fort Worth-based airline expects to reduce jobs for pilots and mechanics too, but it hasn't released numbers yet.

American, the nation's largest carrier, said Wednesday that job cuts were necessary "to overcome near-term challenges and secure our company's long-term future."

American parent AMR Corp. said in a regulatory filing Wednesday it will take a charge of $70 million to cover severance costs for reducing its work force of 82,000, including the flight attendant jobs.

Further, AMR said, reduced flying and other cutbacks will lead the company to take a non-cash accounting charge of about $1.1 billion to $1.2 billion for the just-concluded second quarter. That charge covers the reduced value of the company's MD-80 and Embraer RJ-135 aircraft fleets.

UnitedHealth cuts 4,000 jobs and 2008 outlook

MINNEAPOLIS (AP) -- UnitedHealth Group Inc. cleared its decks of bad news on Wednesday, announcing a lower profit outlook, a restructuring that will trim 4,000 jobs and a $900 million payout to settle a class-action lawsuit over options backdating.

UnitedHealth said its restructuring would change operations on every level to focus more on regional coverage.

Analysts saw the announcements as perhaps the end of a long rough patch for UnitedHealth, the nation's second-largest health insurer.

The company has been wrestling since 2006 with the backdating scandal, which led to the forced departure of CEO Bill McGuire, who helped build UnitedHealth into a managed-care powerhouse.

Circuit City shares fall as Blockbuster yanks bid

RICHMOND, Va. (AP) -- Circuit City Stores Inc. plummeted to historic lows in trading Wednesday after Blockbuster Inc. withdrew its takeover bid, causing investors to question the consumer electronics retailer's future.

The company, which has lost 86 percent of its stock from its 52-week high of $15.33, says it will continue to review strategic alternatives, but said that doesn't require Blockbuster's presence.

Blockbuster pulled its bid to buy Circuit City on Tuesday night, citing market conditions. The Dallas-based movie-rental chain had proposed a more than $1 billion deal in April with the plans to create a 9,300-store chain to sell electronic gadgets and rent movies and games.

By The Associated Press

The Dow fell 166.75, or 1.46 percent, to 11,215.51, the lowest close since August 2006. It now stands 20.82 percent below its Oct. 9, 2007, record of 14,164.53. The last bear market ended in October 2002.

Broader stock indicators also posted big losses after showing gains for much of the morning. The Standard & Poor's 500 index fell 23.39, or 1.82 percent, to 1,261.52, while the technology-laden Nasdaq composite index fell 53.51, or 2.32 percent, to 2,251.46.

Light, sweet crude for August delivery rose as high as $144.32 on the New York Mercantile Exchange shortly after the regular trading session ended. The contract also notched a new closing record, settling at $143.57 -- a full $2.60 above the previous high from a day earlier.

Oil first traded above $100 a barrel in January. It hit the previous trading high of $143.67 Monday.

In other Nymex trading, heating oil futures rose 12.8 cents to settle at $4.0715 a gallon, while gasoline futures rose 3.6 cents to settle at $3.5494 a gallon. Natural gas futures fell 11.6 cents to finish at $13.389 per 1,000 cubic feet.

In London, Brent crude futures rose $3.59 to settle at $144.26 on the ICE Futures exchange.