AP Business Highlights

Tuesday February 24, 2009, 6:19 pm EST

Bernanke: economy suffering 'severe contraction'

WASHINGTON (AP) -- The economy is suffering a "severe contraction," Federal Reserve Chairman Ben Bernanke told Congress on Tuesday. But he planted a glimmer of hope that the recession might end this year if the government managed to prop up the shaky banking system, and Wall Street rallied.

Bernanke said the economy is likely to keep shrinking in the first six months of this year after posting its worst slide in a quarter-century at the end of 2008.

Bernanke said he hoped the recession will end this year, but that there were significant risks to that forecast. Any economic turnaround will hinge on the success of the Fed and the Obama administration in getting credit and financial markets to operate more normally again.

Stocks up on Bernanke remarks; focus now on Obama

NEW YORK (AP) -- Federal Reserve Chairman Ben Bernanke has given Wall Street a double dose of reassurance. Now it's President Barack Obama's turn.

Bernanke told Congress on Tuesday the recession might end this year, and that regulators aren't planning to nationalize banks. The news alleviated some of investors' worries about the economy and the banking industry, and lifted the Dow Jones industrial average and Standard & Poor's 500 index off their lowest levels since 1997.

And investors are hopeful that Tuesday night, Obama will provide specifics about his plans to stabilize the financial system and further stimulate the economy. Anticipation of his remarks helped drive beaten-down financial shares up sharply.

Consumer confidence plummets to new low in Feb.

NEW YORK (AP) -- Americans' already battered confidence in the economy went into free fall in February, sinking to new lows as consumers grow more fearful over massive job cuts and shrinking retirement accounts.

The New York-based Conference Board said its Consumer Confidence Index, which was down slightly in January, plummeted more than 12 points in February to 25, from the revised 37.4 last month. That was well below the 35.5 level that economists surveyed by Thomson Reuters expected.

The index, which had hovered in the high 30s over the past few months, broke new lows since it began in 1967. A year ago, the consumer confidence reading stood at 76.4.

Home prices post record annual decline in 4Q

NEW YORK (AP) -- Home prices tumbled by the worst annual rate on record in the fourth quarter, two housing indexes showed Tuesday, and the slope of decline steepened in all but a handful of battered cities.

The Standard & Poor's/Case-Shiller U.S. National Home Price Index plunged more than 18 percent during the quarter from the prior-year period, the largest drop in its 21-year history.

Meanwhile, the Federal Housing Finance Agency said Tuesday that home prices dropped more than 8 percent in the quarter from a year earlier, its largest annual decline on record since 1991.

Retailers report dismal 4th qtr, gird for future

NEW YORK -- Retailers marched out a series of cheerless results Tuesday for their most important season of the year, the fourth quarter, when consumers seem to have put off buying almost anything they had a choice about.

From Macy's to Target and RadioShack, Home Depot to Office Depot, companies are laying off workers, renewing promotions of their low prices and closing stores and whole divisions to deal with record-low consumer confidence and projections of another year of slow sales. Analysts say more is yet to come.

Target said Tuesday that it is responding by expanding its food offerings and bolstering its private-label lines. It also said in January that it will cut 9 percent of its headquarters staff, close a distribution center and reduce new-store openings.

Macy's Inc. reported that its fourth-quarter profit fell nearly 59 percent. But those results beat analyst expectations, and Macy's shares rose 12 percent Tuesday.

The Cincinnati-based retailer announced this month that it will cut 7,000 jobs, almost 4 percent of its work force, cut capital spending, reduce its contributions to its employees' retirement funds and slash its dividend to preserve cash.

Northern Trust faces scrutiny for event spending

NEW YORK (AP) -- Northern Trust Corp., a bank that received $1.6 billion in government funds, is facing scrutiny for hosting parties and other events connected to its sponsorship of a professional golf tournament.

Reports of the parties brought a swift protest from Washington, with Democratic lawmakers pressing the bank to return the money spent on the events, and Sen. John Kerry proposing legislation restricting banks that received government funds from hosting, sponsoring or paying for conferences or entertainment events.

Many banks that received money as part of the government's $700 billion government package passed last fall have come under heavy criticism from politicians in Washington in recent weeks about their spending habits -- from hosting conferences to buying corporate jets -- after obtaining the funds.

The Chicago-based custody bank was the title sponsor of the Professional Golfers' Association of America's Northern Trust Open that was played last week at Riviera Country Club in suburban Los Angeles.

Official: Obama to name commerce pick Wednesday

WASHINGTON (AP) -- An administration official says President Barack Obama has settled on former Washington Gov. Gary Locke as choice for commerce secretary.

The official said the president will announce his choice Wednesday

Locke was the nation's first Chinese-American governor when he served two terms in the Washington statehouse from 1997 to 2005.

Obama's choice of Locke comes less than two weeks after his most recent pick, Republican Sen. Judd Gregg of New Hampshire, backed out.

Another of Obama's picks for the job, New Mexico Gov. Bill Richardson, withdrew after the disclosure that a grand jury is investigating contracts in his state.

Auto task force meets with lawmakers

WASHINGTON (AP) -- An Obama administration task force considering the fate of General Motors Corp. and Chrysler LLC is discouraging bankruptcy protection as an option for the struggling companies, two senators said Tuesday.

Michigan Democratic Sens. Carl Levin and Debbie Stabenow said they argued against bankruptcy as a way to restructure GM and Chrysler. In meetings Tuesday with members of the panel, the lawmakers said Obama's team did not push bankruptcy as a viable choice.

Obama's auto task force is trying to restructure GM and Chrysler by March 31 and the panel is expected to meet with GM and Chrysler executives later this week. If the companies fail to make a convincing case during the next six weeks, the administration could pull the loans and essentially force the companies into bankruptcy protection.

Oil makes a run at $40 on stock market coattails

SIOUX FALLS, S.D. (AP) -- Energy prices rose on the coattails of broader financial markets Tuesday as investors shook off more bad housing news and a dismal government report suggesting that consumer confidence is in free fall.

Light, sweet crude for April delivery staged a late-session rally to settle up $1.52 at $39.96 on the New York Mercantile Exchange. Oil prices have failed to settle above $40 for more than two weeks and inventories of crude are surging toward record levels.

The Dow Jones industrials rose 236 points Tuesday.

Consumers and businesses have slashed spending on energy and on Wednesday, the government is expected to report that U.S. inventories of unused crude continued to grow over the past week.

By The Associated Press

The Dow Jones industrials rose 236.16, or 3.32 percent, to 7,350.94. On Monday, the major indexes tumbled more than 3 percent, including the Dow, which fell 251 points and hit its lowest close since May 7, 1997.

Broader stock indicators also rebounded Tuesday. The S&P 500 index rose 29.81, or 4.01 percent, to 773.14. On Monday, it logged its lowest finish since April 11, 1997.

The Nasdaq composite index rose 54.11, or 3.90 percent, Tuesday to 1,441.83, while the Russell 2000 index of smaller companies rose 17.90, or 4.54 percent, to 412.48.

In other Nymex trading, gasoline futures rose 4 cents to settle at $1.0837 a gallon, while heating oil rose 3.3 cents to settle at $1.2082 a gallon. Natural gas for March delivery gained 14 cents to settle at $4.236 per 1,000 cubic feet.

Brent prices rose $1.51 to settle at $42.50 on the ICE Futures exchange in London.