AP
Business Highlights
Tuesday September 16, 6:27 pm ET

Fed shows tough love; Holds key rate steady

Federal Reserve Chairman Ben Bernanke and his colleagues decided to keep a key interest rate steady Tuesday. They acknowledged stresses in financial markets have grown, though, and hinted they stood ready to lower rates if needed.

Wreckage on Wall Street in recent days did not force the Fed to reverse course and cut rates. The Fed left its key rate at 2 percent for the third straight meeting.

The prime lending rate for millions of consumers and businesses stayed at 5 percent.

Stocks end higher after Fed keeps rates unchanged

NEW YORK (AP) -- Wall Street ended another tumultuous session with a sizable gain Tuesday, partly recovering from its worst sell-off in years after the Federal Reserve said it was keeping interest rates steady.

The central bank soothed fears of a worsening financial crisis even as the market waited to learn the fate of troubled insurer American International Group Inc.

AIG shares fall as it fights for a lifeline

NEW YORK (AP) -- Its future in the balance, American International Group Inc. huddled Tuesday with Federal Reserve officials to find the cash the huge insurer needs to stay in business and avoid igniting more global financial turmoil.

The meetings were being held at the New York Fed, the Fed's point bank on financial crises. As talks went on, AIG shares clawed back some of the ground they had lost during the day but still closed down $1.01 or 21 percent to $3.75.

Barclays seen close to deal for Lehman assets

NEW YORK (AP) -- British bank Barclays PLC plans to unveil a plan to acquire all or part of Lehman Brothers Holdings Inc.'s investment banking and trading operations, a person close to the talks said Tuesday.

The deal, which was expected to be announced by early Wednesday, would throw a lifeline to more than 9,000 Lehman employees whose future was uncertain after Lehman filed for bankruptcy protection on Monday.

Barclays President Robert Diamond has addressed Lehman investment bankers to inform them of his company's intentions, this person said. He spoke on condition of anonymity because a final agreement had yet to be reached.

Goldman posts worst quarter since going public

NEW YORK (AP) -- Goldman Sachs Group Inc., the larger of the nation's two remaining major independent investment banks, on Tuesday reported its worst slump in profits since going public in 1999.

The world's largest investment bank reported third-quarter profit plunged 71 percent from the year-ago period, an almost unthinkable drop for a firm widely described as the smartest on Wall Street.

Goldman's results reflect continuing damage from the ongoing credit crisis that has already vanquished three of its rivals.

Morgan Stanley profit down but tops expectations

NEW YORK (AP) -- Morgan Stanley said Tuesday that its core businesses continue to generate solid profits, as the No. 2 investment bank hurried to convince investors that it is withstanding the financial turmoil that has dramatically changed the face of Wall Street over the past few days.

Although its fiscal third-quarter profit slipped 7 percent, the result surpassed Wall Street's expectations.

Morgan Stanley reported strong performance in its core prime brokerage, commodities and equities businesses.

FDA blocks imports from India's generic drug giant

WASHINGTON (AP) -- The government closed U.S. borders Tuesday to more than 30 generic drugs -- including popular antibiotics and cholesterol medicines -- made by India's biggest pharmaceutical company, citing poor quality in two of its factories.

The Food and Drug Administration's move doesn't end U.S. sales by Ranbaxy Laboratories Ltd. Instead, it blocks imports of generic drugs -- including generic versions of the antibiotic Cipro and cholesterol pill Zocor -- as well as pharmaceutical ingredients made at the two suspect plants.

FDA inspections earlier this year found violations that could lead to contamination, allergic reactions and other problems, and the company hasn't taken proper steps to correct them, said Deborah Autor, director of FDA's compliance office.

Oil prices sink below $92 on Wall Street tumult

NEW YORK (AP) -- Oil prices extended their retreat Tuesday, shedding $10 a barrel in a violent, two-day slide as tumult on Wall Street dims hopes for a swift economic recovery and signals another drop in U.S. energy demand.

Crude, which shot up near $150 a barrel only two months ago, is now down 8 percent for the year.

Meanwhile, gas prices edged higher at the pump, topping $3.85 a gallon amid the aftermath of Hurricane Ike. However, given crude's continuing slide, retail gas was expected to turn lower within a few weeks.

Big fall in energy pushes consumer prices down

WASHINGTON (AP) -- Consumer prices in August posted the first monthly decline in nearly two years as Americans finally got some relief from surging energy prices. But the cost of food and clothing still rose last month and wages over the past year are down.

Consumer prices edged down 0.1 percent last month, the Labor Department reported Tuesday, a significant improvement from a 1.1 percent price spike in June and a 0.8 percent rise in July.

Best Buy 2Q profit slides 19 percent

CHICAGO (AP) -- Best Buy Co. said Tuesday that its second-quarter profit slid 19 percent as it spent money to boost cell phone sales by completing the rollout of its Best Buy Mobile concept to nearly 1,000 North American stores.

Revenue rose, however, as consumers bought more flat-panel TVs, laptops and cell phones, ahead of forecasts.

The nation's largest consumer electronics retailer earned $202 million, or 48 cents per share, for the three months ending Aug. 30. That's down from $250 million, or 55 cents per share, during the same period last year. Revenue rose 12 percent to $9.8 billion.

McClatchy to cut 1,150 jobs, 10 pct of work force

NEW YORK (AP) -- The McClatchy Co. is trimming its payroll by about 1,150 more employees nationwide, or about 10 percent of its work force.

McClatchy made the announcement Tuesday and blamed a "difficult advertising downturn."

The company expects about half of the reductions will come from voluntary buyouts and attrition. It says the job cuts and other initiatives will save $100 million over the next year, not including severance costs of about $20 million.

Kroger profit rises 3.4 percent on sales growth

CINCINNATI (AP) -- Kroger Co., the nation's largest traditional grocery chain, said Tuesday that its second-quarter profit rose 3.4 percent as a slowing economy prompted people to eat at home more often and try more store brands. The results sent the stock up 5 percent.

Kroger has added to frequent-customer incentives for store discounts and cheaper gas at its own stations, along with offering more store-brand items and prepared meals for people trading down in price and cutting back on eating out. The company said sales were strong for its deli, bakery and prepared foods, and that store-label items accounted for a record 26 percent of its grocery sales.

By The Associated Press

The Dow rose 141.51, or 1.30 percent, to 11,059.02, after falling about 100 points immediately after the Fed announcement. The Dow at turns rose and fell as much as 175 points in fractious trading; on Monday, it suffered its largest drop since the September 2001 terror attacks.

Broader stock indicators advanced. The Standard & Poor's 500 index rose 20.90, or 1.75 percent, to 1,213.60, and the Nasdaq composite index rose 27.99, or 1.28 percent, to 2,207.90.

Light, sweet crude for October delivery fell $4.56 to settle at $91.15 a barrel on the New York Mercantile Exchange, after earlier dipping to $90.51, its lowest level since Feb. 8. On Monday, prices closed below $100 for the first time in six months, shedding more than $5 and wiping out all of oil's gains for the year.

In London, November Brent crude fell $5.02 to settle at $89.22 a barrel on the ICE Futures exchange, after earlier dipping to $88.90.

In other Nymex trading, heating oil futures fell 7.15 cents to settle at $2.7197 a gallon, while gasoline prices dropped 16.06 cents to settle at $2.4008 a gallon. Natural gas for October delivery fell 9.5 cents to settle at $7.279 per 1,000 cubic feet.