AP
Business Highlights
Thursday August 7, 6:57 pm ET

Jobless claims hit highest point since March 2002

WASHINGTON (AP) -- The nation's jobs market sent a fresh cry of distress as the number of newly laid off people unexpectedly hit the highest level in more than six years, a Labor Department report showed Thursday.

The faltering economy and tight credit have forced companies to cut back, and as the job market shrinks, consumer spending may dwindle, too. Companies are laying off workers as they struggle with slowing customer demand, harder-to-get credit and high costs for fuel and other raw materials.

New applications filed for unemployment benefits rose last week by a seasonally adjusted 7,000 to 455,000, the department said in its weekly report. That was the most since late March 2002, when the job market was struggling mightily to get back on its feet after the 2001 recession.

Retailers report mixed sales results in July

NEW YORK (AP) -- The outlook for the back-to-school shopping season seemed grim Thursday, as retailers' July sales reports showed an increasing shift toward buying necessities like food and household supplies at discounters and away from discretionary spending on clothing.

With the benefits of the government stimulus checks fading and jobless claims at a 6-year high, the big worry is how much shoppers -- squeezed by high gas and food prices -- will retrench in the critical months ahead.

Wal-Mart Stores Inc., the world's largest retailer, and Costco Wholesale Corp. posted solid gains, while many mall-based apparel stores including Limited Brands Inc. and Gap Inc. suffered even deeper declines. Luxury stores like Saks Inc., which operates Saks Fifth Avenue, also struggled with weaker sales as even affluent shoppers pull back.

ECB, BoE leave interest rates unchanged

FRANKFURT, Germany (AP) -- The European Central Bank and the Bank of England left their benchmark interest rates unchanged Thursday under conflicting pressure from higher inflation and mounting concern about growth.

Speaking to reporters after the ECB left its interest rate unchanged at 4.25 percent, ECB President Jean-Claude Trichet warned that inflation -- which reached 4.1 percent in the euro zone in July -- would remain well above its preferred level of about 2 percent for some time, but also acknowledged worries about growth across the euro zone.

The ECB last month moved to cool inflation by hiking borrowing costs for the first time in a year to 4.25 percent. The Bank of England has left rates unchanged at 5 percent since April, when it reduced its benchmark figure by a quarter of a percentage point.

Stocks fall on worries about financial sector

NEW YORK (AP) -- Wall Street tumbled Thursday as further troubles in the financial sector, higher unemployment and lackluster retail sales touched off fresh concerns about the economy. The Dow Jones industrials skidded nearly 225 points, while bond prices shot higher as investors once again sought the safety of government debt.

The stock market's pullback erased most of the 370-point gain the Dow logged the prior two sessions and shows the lack of solid conviction behind many of investors' recent bets. The Dow fell to 11,431.43.

Heading the list of worries, insurer American International Group Inc. reported a loss of more than $5 billion, while weak sales reports from Wal-Mart Stores Inc. and other retailers added to investors' unease.

Oil prices rise after Turkish pipeline fire

NEW YORK (AP) -- Oil prices jumped back above $120 a barrel Thursday, halting a steep three-day slide after Kurdish rebels claimed responsibility for a fire at key Turkish pipeline that supplies Western countries.

Light, sweet crude for September delivery rose $1.44 to settle at $120.02 a barrel on the New York Mercantile Exchange, after prices alternated between positive and negative territory. Gasoline futures also rose, while heating oil and natural gas futures finished lower.

At the pump, retail gas prices tumbled further overnight. A gallon of regular fell on average just over a penny to $3.849, more than 6 percent off record-highs above $4 a gallon reached last month, according to auto club AAA, the Oil Price Information Service and Wright Express.

Citigroup returning billions to investors

WASHINGTON (AP) -- Citigroup Inc. will buy back more than $7 billion in auction-rate securities and pay $100 million in fines as part of settlements with federal and state regulators, who said the bank marketed the investments as safe despite liquidity risks.

Citigroup will buy back the securities from nearly 40,000 investors nationwide under separate accords announced Thursday with the Securities and Exchange Commission, New York Attorney General Andrew Cuomo and other state regulators. The buybacks are not expected to cause significant losses for Citigroup; they must be completed by November.

The nation's largest financial institution also will pay $50 million each in civil penalties to New York state and the North American Securities Administrators Association.

Bank of America subpoenaed over sale of securities

NEW YORK (AP) -- Bank of America Corp. revealed Thursday that it has received subpoenas and requests for information from various state and federal regulators regarding its sale of auction-rate securities.

In a filing with the Securities and Exchange Commission, the Charlotte, N.C.-based bank said subsidiaries Banc of America Investment Services Inc. and Banc of America Securities LLC are cooperating fully with the requests.

A related individual federal action as well as several related Financial Industry Regulatory Authority arbitrations have also been filed, the bank said.

EPA denies Texas governor's ethanol waiver request

LUBBOCK, Texas (AP) -- The Environmental Protection Agency on Thursday denied a request from Texas Gov. Rick Perry to cut the federal ethanol mandate in half for a year.

Perry spokeswoman Allison Castle said EPA Administrator Stephen Johnson spoke to Perry about his waiver request by phone shortly before Johnson announced the agency's decision publicly Thursday.

An energy bill passed in December required 9 billion gallons of ethanol to be blended into gasoline this year and about 11 billion gallons next year. Perry asked the EPA in April to drop the Renewable Fuels Standard requirement to 4.5 billion gallons because demand for ethanol is raising corn prices for livestock producers and driving up food prices.

Toyota 1Q profit falls on US weakness, strong yen

TOKYO (AP) -- Toyota said Thursday that its fiscal first-quarter profit plummeted 28 percent, and the automaker stuck to its forecast that full-year profit will fall for the first time in seven years as it faces more problems from the weakening U.S. market.

Toyota Motor Corp., which had been riding on the success of its fuel-efficient cars, has consistently posted growing profit since it started reporting under U.S. accounting standards. And there's no previous comparable data that shows its annual profit has ever fallen.

But sliding North American sales, a strong yen and rising material costs have battered the earnings of Japan's top automaker, which is on track to end ailing General Motors Corp.'s 77-year reign as the world's top automaker.

By The Associated Press

The Dow fell 224.64, or 1.93 percent, to 11,431.43.

Broader indicators also slid Thursday. The Standard & Poor's 500 index fell 23.12, or 1.79 percent, to 1,266.07, and the Nasdaq composite index fell 22.64, or 0.95 percent, to 2,355.73.

Light, sweet crude for September delivery rose $1.44 to settle at $120.02 a barrel on the New York Mercantile Exchange.

In other Nymex trading, heating oil futures slipped 0.43 cent to finish at $3.2336 a gallon, while gasoline prices rose 5.34 cents to settle at $3.0027 a gallon. Natural gas futures fell 20.2 cents to close at $8.571 per 1,000 cubic feet.

In London, September Brent crude rose 86 cents to settle at $117.86 a barrel.