AP Business Highlights

Thursday March 5, 2009, 6:37 pm EST

WASHINGTON (AP) -- The number of new jobless claims and the total number of people receiving unemployment benefits both dropped more than expected last week, though they remain at elevated levels and are unlikely to fall substantially in the coming months.

Few economists expect a turnaround in the battered labor market anytime soon with companies laying off thousands of workers weekly.

Still, the tally of initial requests for unemployment benefits fell to 639,000 from the previous week's figure of 670,000, the Labor Department said Thursday. Analysts expected a smaller drop to 650,000.

Retailers report sales declines in February

NEW YORK (AP) -- After hibernating since last fall, shoppers may be carefully crawling out of their caves to restock their pantries and buy a few more necessities.

Retailers released figures Thursday showing that sales kept falling in February, but not nearly as much as in January -- possibly indicating that business could be stabilizing. But analysts say that's hardly enough to call the beginning of a recovery.

They caution that the better-than-expected reports were helped by better inventory control and point to Wal-Mart's surging sales as a sign that more people may simply be shifting their spending to cheaper stores. The rift between discount stores and luxury merchants widened in February as shoppers kept worrying about the economy.

Europe, UK cut rates; UK expands money supply

LONDON (AP) -- Europe's two leading central banks cut interest rates to record lows Thursday to boost their recession-mired economies, but as rates near their floor all eyes turned to a radical alternative move by the Bank of England to effectively create new money.

The half a percentage point cuts by both the European Central Bank and the Bank of England took rates down to 1.5 percent and 0.5 percent as both banks battle to stimulate growth amid lower consumer spending, rising unemployment and falling exports from the world economic crisis.

Dow plunges 281 as investors worry about banks, GM

NEW YORK (AP) -- Investors fled Wall Street again, driven by worries about the nation's big banks and General Motors Corp.

Stocks ended at 12-year lows Thursday, more than wiping out the previous day's rally. Investors wrestled with more disheartening economic data, new concerns about GM and relentless uncertainty about the financial system. Short selling ahead of the government's Friday employment report exacerbated the losses, slashing 281 points from the Dow Jones industrials and sending all the major indexes down more than 4 percent.

The Dow fell 281.40, or 4.1 percent, to 6,594.44, its lowest close since April 1997.

GM's auditors raise the specter of Chapter 11

DETROIT (AP) -- Of all the words in General Motors Corp.'s 402-page annual report, none is more jarring than two written by the company's auditors: "Substantial doubt."

The doubt, according to Deloitte & Touche LLC, is about whether GM can overcome its staggering losses and generate enough cash to stay in business, or remain a "going concern" as accountants would say.

GM concedes in the report filed Thursday that it's on the edge of bankruptcy and won't be able to avoid it unless it gets more government money and successfully executes a huge restructuring plan.

Mortgage woes break records again in 4Q

NEW YORK (AP) -- A stunning 48 percent of the nation's homeowners who have a subprime, adjustable-rate mortgage are behind on their payments or in foreclosure, and the rate for homeowners with all mortgage types hit a new record, new data Thursday showed.

But that's not the worst of it.

The reckless lending practices in states like Florida, California and Nevada that were the epicenter of the housing crisis are no longer driving up the nation's delinquency rate. Instead, the foreclosure crisis now is being fueled by a spike in defaults in states like Louisiana, New York, Georgia and Texas, where the economies are rapidly deteriorating and thousands are losing their jobs.

Obama welcomes allies, skeptics to health summit

WASHINGTON (AP) -- President Barack Obama summoned allies, skeptics and health care figures of all stripes to the White House Thursday to debate ideas for overhauling the nation's costly system and declared, "The status quo is the one option that is not on the table."

The big Washington session -- Obama called it a health care summit -- and meetings to follow around the country show the new president's push for universal health care coverage will be more open and inclusive than the Clinton administration's failed attempt of 15 years ago.

Ex-KB Home CEO indicted on fraud charges

LOS ANGELES (AP) -- The U.S. attorney's office says the former chairman and CEO of KB Home has been named in an indictment charging him with conspiring to defraud the homebuilder and shareholders through a stock option backdating scheme.

The U.S. attorney for the Central District of California said Thursday Bruce Karatz faces several counts of mail, wire and securities fraud and making false statements in reports filed with securities regulators.

Prosecutors also accuse Karatz of concealing the scheme to inflate the value of his stock options from an internal investigation.

Citigroup stock falls below $1 a share

CHARLOTTE, N.C. (AP) -- Shares of Citigroup Inc., once the nation's most powerful bank, fell below $1 a share Thursday.

The stock fell to 97 cents in late morning trading, down 16 cents or 14.2 percent from Wednesday.

New York-based Citi has lost more than 85 percent of its value so far this year, and is down more than 95 percent from a year ago as the bank was pummeled by the financial market crisis.

Citigroup's shares will remain on the New York Stock Exchange. Last week, the NYSE relaxed its listing rules to allow stocks that fall under $1 to still be listed and traded on the exchange.

GE rises after CFO defends company finances

NEW YORK (AP) -- General Electric Co. stock Thursday posted its first gain of the week after its chief financial officer said the company's troubled GE Capital unit will earn a profit this year.

Keith Sherin's comments came after four straight days of declines during which shares of the Fairfield, Conn., conglomerate tumbled to an 18-year low on concern about how much exposure GE Capital has to toxic debt.

Those worries, which have fueled speculation that GE will need to secure outside funding, have chopped shares by about 60 percent since the beginning of the year.

By The Associated Press

The Dow fell 281.40, or 4.1 percent, to 6,594.44, its lowest close since April 1997.

Broader indicators also tumbled. The S&P 500 index dropped 32.95, or 4.6 percent, to 679.92, its lowest close since September 1996. The Nasdaq composite index fell 52.30, or 3.9 percent, to 1,301.44.

The Russell 2000 index of smaller companies fell 21.49, or 5.8 percent, to 349.77.

Light, sweet crude for April delivery fell $1.77 to settle at $43.61 a barrel on the New York Mercantile Exchange. In London, Brent prices tumbled $2.48 to settle at $43.64 on the ICE Futures exchange.

In other Nymex trading, gasoline for April delivery fell 6.89 cents to settle at $1.3127 a gallon, while heating oil fell 5.47 cents to settle at $1.1598 a gallon. Natural gas for April delivery tumbled 25.2 cents to settle at $4.088 per 1,000 cubic feet.