AP
Business Highlights
Wednesday July 16, 6:52 pm ET

Inflation watch: Consumer prices jump in June

WASHINGTON (AP) -- In the latest shock wave to hit the economy, consumer prices rose 1.1 percent in June from the month before, far faster than the expected rate of 0.7 percent and almost double the reading from May, the Labor Department said Wednesday.

The only time in the past quarter-century that monthly inflation has been that high was in September 2005, when prices jumped 1.3 percent, mostly because Hurricane Katrina shut down oil refineries and energy prices spiked.

Consumer prices are up 5 percent over the last 12 months, the fastest one-year change since 1991.

Bernanke says Fannie, Freddie in no danger of failing

WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke told Congress Wednesday that troubled mortgage giants Fannie Mae and Freddie Mac are in "no danger of failing."

The Fed chief made his remarks to the House Financial Services Committee, his second day on Capitol Hill where he briefed lawmakers on the problems plaguing the economy.

The Fed and the Treasury Department on Sunday came to the rescue of mortgage giants Fannie Mae and Freddie Mac, offering to throw them a financial lifeline. The two companies hold or guarantee more than $5 trillion in mortgages -- almost half of the nation's total-- and are major sources of financing for the mortgage market.

Stocks soar on drop in oil, Wells Fargo report

NEW YORK (AP) -- Wall Street at least temporarily shrugged off some of its many concerns Wednesday and bounded higher thanks to a drop in oil prices. The Dow Jones industrial average rose 276 points, or 2.5 percent, posting its best daily gain in three months.

The Standard & Poor's 500 index also gained 2.5 percent, while the technology-dominated Nasdaq composite index surged 3.1 percent. Investors exited government bonds and back into stocks as it appeared that the slowing economy will curtail demand for fuel and, in turn, energy costs.

In addition to sinking oil prices, investors found relief in a decision by Wells Fargo & Co. to boost its dividend that helped counter some of the market's concerns about the health of banks. The bank's move to raise its payout, along with its tamer-than-expected profit decline, was seen as a bullish sign for the troubled sector.

Oil tumbles again; Prices fall over $10 in 2 days

NEW YORK (AP) -- Oil prices settled sharply lower for the second time in a row Wednesday, leaving crude more than $10 cheaper in just two days of frenzied trading and prompting speculation that the hard-charging market may be running out of steam.

Light, sweet crude for August delivery fell $4.14 to settle at $134.60 a barrel on the New York Mercantile Exchange, after earlier sinking as low as $132. The drop follows a $6.44 sell-off Tuesday, crude's biggest since the Gulf War.

The two-day slide of $10.58 a barrel marks a dramatic turnaround in crude prices, which as recently as Friday traded at record highs above $147 a barrel. But even with this week's sell-off, prices remain about 80 percent above where they were a year ago and up about 40 percent from the start of the year.

FBI looking into IndyMac Bancorp

WASHINGTON (AP) -- The FBI is investigating failed bank IndyMac Bancorp Inc. for possible fraud, an official said Wednesday of the government's latest target following the collapse of the nation's subprime mortgage market.

It was not immediately clear how long the FBI's probe of the bank has been ongoing -- or whether it was opened before last Friday's takeover of IndyMac by the Federal Deposit Insurance Corp.

The investigation appears to be is focused on the company and not individuals who ran it, a law enforcement official told The Associated Press. The official spoke on the condition of anonymity because he was not authorized to speak publicly about the investigation.

Wells Fargo profit drops, but dividend rises

NEW YORK (AP) -- Wells Fargo gave anxious investors a pleasant surprise Wednesday, reporting a profit drop that was milder than anticipated and lifting its quarterly dividend by 10 percent.

Wells Fargo's second-quarter profit fell 22 percent as more customers at the nation's fifth-largest bank failed to pay back their loans. But it raised its dividend to 34 cents from 31 cents -- at a time when many other financial institutions are slashing theirs to preserve capital.

The San Francisco-based company's shares soared $6.72, or 32.8 percent, to close at $27.23 after tumbling alongside other financial stocks over the last several days on worries about more U.S. mortgage losses and bank failures.

Wells Fargo has now logged three straight quarters of profit declines. But the bank has been weathering one of the nation's worst credit crises much better than most of its competitors, in part because it had less exposure to the subprime mortgages whose failure undermined the financial sector.

Delta, AMR post combined $2.5 billion 2Q loss

ATLANTA (AP) -- There are signs overall demand for flying within the U.S. is softening, but industry observers insisted that will not stop rising fares, more fees and fewer domestic flights.

That point was underscored as Atlanta-based Delta Air Lines Inc. reported a $1.04 billion loss in the April-June quarter and Fort Worth, Texas-based AMR Corp., the parent of American, posted a $1.45 billion loss for the quarter. One-time charges and unprecedented fuel costs impacted both airlines, which saw their shares soar as their results beat Wall Street expectations and oil prices dropped.

The two carriers have posted combined net losses of $9.2 billion since the start of the year.

Fares have risen across the country since January over 20 percent, and much higher in smaller cities, according to Rick Seaney of FareCompare.com. Oil prices have doubled in the last year.

EBay 2Q profit rises 22 percent but outlook soft

NEW YORK (AP) -- EBay Inc. said Wednesday that its second-quarter profit jumped 22 percent, as the online auction company enjoyed strong growth in its e-commerce sites and its PayPal payments service.

But eBay's outlook for the current quarter was softer than analysts had been forecasting, and the auction company's shares fell 6 percent in after-hours trading. The stock had gained 4.5 percent in regular trading to close at $28.10.

San Jose, Calif.-based eBay earned $460 million, or 35 cents per share, compared with $376 million, or 27 cents per share, in the year-ago quarter. Excluding certain items, eBay earned 43 cents per share.

That beat Wall Street's forecast for 41 cents per share.

Fed: Members thought next rate move would be up

WASHINGTON (AP) -- Worried about rising inflation, Federal Reserve officials at their meeting in June thought the Fed's next move on interest rates was likely to be up.

Documents released Wednesday provided insights into the Fed's thinking at the June 24-25 session, when they ended a nearly yearlong string of rate reductions, aimed at bolstering a teetering economy. At that time, Fed Chairman Ben Bernanke and his colleagues were increasingly concerned that galloping energy and food prices could spread inflation through the economy, so they left the Fed's key rate at 2 percent.

However, with all the economic uncertainty, the timing of any such increase was far from clear, the documents suggested.

By The Associated Press

The Dow Jones industrial average rose 276.74, or 2.52 percent, to 11,239.28.

Broader stock indicators also rose. The S&P 500 index advanced 30.45, or 2.51 percent, to 1,245.36, and the Nasdaq rose 69.14, or 3.12 percent, to 2,284.85.

Light, sweet crude for August delivery fell $4.14 to settle at $134.60 a barrel on the New York Mercantile Exchange, after earlier sinking as low as $132.

In other Nymex trading, heating oil futures shed 7.8 cents to settle at $3.841 a gallon while gasoline futures lost 10.54 cents to settle at $3.2794 a gallon. Natural gas futures fell 7.9 cents to settle at $11.398 per 1,000 cubic feet.

August Brent crude fell $2.56 to settle at $136.19 a barrel on the ICE Futures exchange in London.