AP
Business Highlights
Tuesday August 26, 6:12 pm ET

Consumer outlook up, housing bottom may be near

NEW YORK (AP) -- Americans felt better about the economy in August, as a barometer of sentiment posted the biggest boost in two years amid falling gas prices. Two reports suggested that a bottom could be nearing for the housing market, but economists caution it's too early to proclaim that the worst is over.

The Conference Board, a private research group, said Tuesday that its consumer confidence index rose to 56.9, up from a revised 51.9 in July. That's the largest gain since August 2006, and is ahead of the 53 expected by economists surveyed by Thomson/IFR.

It's also the second month in a row that sentiment improved, after a six-month slide since January -- but it remains about half what it was a year ago, and worries about the job market persisted.

Glimmers of good news in housing reports

NEW YORK (AP) -- While no one is ready to call the bottom of the worst housing collapse in decades, there were glimmers this week that the severity could be waning.

Reports Tuesday showed the glut of newly built homes on the market fell to a five month low last month, while the decline in home prices is starting to ease, and in some cities values are even starting to rise. What's more, existing home sales rose slightly from June to July, according to data Monday.

But there are still very serious risks to any housing turnaround.

The closely watched Standard & Poor's/Case-Shiller home price index tumbled a record 15.4 percent during the quarter from the same period a year ago.

Likewise, a government report Tuesday showed second-quarter home prices falling by 4.8 percent, also a record.

FDIC: 117 troubled banks, highest level since 2003

WASHINGTON (AP) -- The number of troubled U.S. banks leaped to the highest level in about five years and bank profits plunged by 86 percent in the second quarter, as slumps in the housing and credit markets continued.

Federal Deposit Insurance Corp. data released Tuesday show 117 banks and thrifts were considered to be in trouble in the second quarter, up from 90 in the prior quarter and the biggest tally since mid-2003.

The FDIC also said that federally-insured banks and savings institutions earned $5 billion in the April-June period, down from $36.8 billion a year earlier. The roughly 8,500 banks and thrifts also set aside a record $50.2 billion to cover losses from soured mortgages and other loans in the second quarter.

Stocks mixed on higher oil, consumer data

NEW YORK (AP) -- Wall Street ended mixed Tuesday as concerns about the path of Hurricane Gustav sent oil prices higher and offset a better-than-expected reading on consumer confidence. Comments from the Federal Reserve about rising inflation added to the market's uneasiness.

The Fed's release of minutes from its Aug. 5 meeting showed that the central bank remains concerned about creeping inflation and that it expected it would need to raise interest rates to try to contain rising prices.

Number of uninsured drops; poverty holds steady

WASHINGTON (AP) -- The number of people without health insurance fell by more than 1 million in 2007, the first annual decline since the Bush administration took office, the Census Bureau reported Tuesday. Incomes edged up for the middle class while poverty held steady.

The numbers represent a scorecard on President Bush's stewardship of the economy at the kitchen-table level. But they only went as far as the end of last year, before the current economic downturn started gathering force. Although there were some bright spots, it was a mixed picture.

While the overall poverty rate held steady at 12.5 percent, poverty did rise among some groups.

Jury awards Mattel $40 million in lawsuit

RIVERSIDE, Calif. (AP) -- A federal jury awarded Mattel Inc. $40 million in damages on Tuesday in a federal copyright lawsuit that pitted the house of Barbie against MGA Entertainment Inc., the maker of the saucy Bratz dolls.

Damages were awarded for contract interference and copyright infringement. No punitive damages were ordered against MGA.

FAA says communication breakdown delaying flights

ATLANTA (AP) -- An electronic communication failure Tuesday at a Federal Aviation Administration facility in Georgia that processes flight plans for the eastern half of the U.S. was causing hundreds of flight delays around the country.

An FAA Web site that tracks airport status showed delays at some three dozen major airports across the country.

FAA spokeswoman Kathleen Bergen in Atlanta said there were no safety issues and officials were still able to speak to pilots on planes on the ground and in the air.

Fed: Rates not too low; next move likely to be up

WASHINGTON (AP) -- Even as they grappled with inflation worries, most Federal Reserve officials at their August meeting didn't believe the Fed's key interest rate was too low given harder-to-get credit conditions straining consumers and businesses alike.

Documents, released Tuesday, provided insight into the Fed's thinking at the Aug. 5 meeting, when central bank policymakers decided to hold its key rate steady at 2 percent for the second straight meeting.

But looking ahead, the next direction for rates is probably up, according to the documents.

Oil prices rise as Hurricane Gustav nears Gulf

NEW YORK (AP) -- Oil prices swung higher Tuesday as Hurricane Gustav struck Haiti, raising concerns that the storm could slam into major oil operations in the Gulf of Mexico.

However, the price rise was tempered by a stronger dollar and a report from the Energy Department showing even slower fuel demand than many traders thought.

Citi pays $18M for questioned credit card practice

NEW YORK (AP) -- Citigroup Inc. will pay nearly $18 million in refunds and settlement charges for taking $14 million from customers' credit card accounts, California's attorney general said Tuesday.

Citigroup will make refunds to the 53,000 customers affected, and pay $3.5 million in damages and civil penalties to the state of California, which had been investigating the questionable practices for three years, the attorney general said.

The bank will also pay 10 percent interest to California customers, who accounted for $1.6 million of the money "swept" out of accounts and into a Citi fund between 1992 and 2003.

Hog producer Smithfield Foods swings to 1Q loss

MILWAUKEE (AP) -- Smithfield Foods Inc. swung to a loss in its fiscal first quarter as high commodity costs hurt the nation's largest pork producer and processor. The commodities market is so volatile, its chief executive said Tuesday, the company doesn't even want to try to predict its future earnings.

Costs for key ingredients like corn and soybean meal were up more than 33 percent in the quarter and the price it took to raise hogs soared 25 percent. The hog production sector lost $38.8 million -- down from a profit of $93 million a year ago -- on the higher costs.

Smithfield said it lost $12.6 million, or 9 cents per share, in the period, down from a profit of $54.6 million, or 41 cents per share, a year earlier. The company said the loss was due in part to a $20.1 million write-down in the value of commodity contracts, which hurt earnings by 15 cents a share.

Ford to spend $75M to retool plant for small cars

WAYNE, Mich. (AP) -- Demand for Ford Motor Co.'s Focus and other small cars has been superheated ever since gas prices headed toward $4 per gallon in May, and since then, Ford hasn't been able to build the Focus quickly enough.

On Tuesday, though, the automaker took two steps toward further cranking up Focus production, announcing that it would sink $75 million into the body-making part of an SUV factory next door to the Wayne Assembly Plant, where the Focus is built.

If demand stays strong, the SUV plant will quickly start producing Focus bodies, eliminating what is now a bottleneck that is slowing production.

By The Associated Press

The Dow Jones industrials rose 26.62, or 0.23 percent, to 11,412.87. The blue-chip index crossed in and out of positive territory throughout the session.

Broader indexes were mixed. The Standard & Poor's 500 index rose 4.67, or 0.37 percent, to 1,271.51; the Nasdaq composite fell 3.62, or 0.15 percent, to 2,361.97.

After dropping as low as $112.36 per barrel in overnight trading, light, sweet crude for October delivery ended the day up $1.16 to settle at $116.27 a barrel on the New York Mercantile Exchange.

In Nymex trading, natural gas futures jumped 45.3 cents to settle at $8.278 per 1,000 cubic feet. Heating oil futures rose 5.85 cents to settle at $3.2099 a gallon, while gasoline prices gained 8.74 cents to settle at $2.9697 a gallon.

Brent crude on London's ICE futures exchange rose 60 cents to settle at $114.63 a barrel.