AP Business Highlights

  • Wednesday March 4, 2009, 6:56 pm EST

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Fed survey: economy deteriorated in Jan., Feb.

WASHINGTON (AP) -- After a dismal start to 2009, business people see more pain ahead, expecting no improvement in economic conditions till late this year at the earliest.

Their pessimism was evident in the Federal Reserve's latest snapshot of business activity nationwide. It showed sharp cutbacks affecting both blue-collar jobs that once churned out construction equipment and white-collar professionals like business consultants and accountants.

From factories in Cleveland to high-tech firms in Texas and California, the Fed's beige book reported widespread production declines.

Services sector shrank in Feb., 5th straight month

WASHINGTON (AP) -- A private measure of the services sector shrank in February for the fifth straight month as layoffs mounted, the recession deepened and the outlook for any recovery this year grew darker.

The Institute for Supply Management, a Tempe, Ariz.-based trade group of purchasing executives, said Wednesday that its services index fell to 41.6 last month from 42.9 in January. The February reading was slightly above economists' expectations.

But any reading above 50 signals growth, while a reading below 50 indicates contraction. The index has fallen steadily since August as the economy deteriorated, hitting a record low in November.

Obama administration launches housing plan

WASHINGTON (AP) -- The Obama administration kicked off a new program Wednesday that's designed to help up to 9 million borrowers stay in their homes through refinanced mortgages or loans that are modified to lower monthly payments.

Borrowers, however, are being advised to be patient in their efforts to get help because mortgage companies are likely to be flooded with calls.

Government officials, launching the "Making Home Affordable" program also acknowledge that the initiatives are only a partial fix for a sweeping problem that has helped plunge the U.S. economy into the worst recession in decades. In fact, tens of thousands of homeowners in some of the most battered real estate markets -- concentrated in California, Florida, Nevada and Arizona -- won't be eligible for the two programs.

Stocks jump after 5 days of heavy selling

NEW YORK (AP) -- Stocks broke a five-day losing streak Wednesday as hope spread that China and the U.S. are taking convincing action to restart their economies.

Prices for key commodities such as oil and copper also soared, lifting shares of industrial companies like Alcoa Inc. and Caterpillar Inc.

Wall Street followed the lead of overseas markets, which rose sharply on optimism over the possible Chinese economic stimulus plan. The Dow Jones industrial average rose 149.82, or 2.2 percent, to 6,875.84.

Ford to cut $10B in debt with cash, equity offer

DEARBORN, Mich. (AP) -- Ford Motor Co. said Wednesday it will try to eliminate up to $10.4 billion of its debt by offering debtholders cash and stock as the troubled automaker continues to restructure amid a severe automotive sales downturn.

The Dearborn-based company and its financial arm are putting up $2.2 billion in cash and about 500 million shares of stock to entice holders of bonds and secured-term debt into the swap. The company said reducing the debt will cut the amount it pays in interest and put it in better position to compete with General Motors Corp. and Chrysler LLC.

GM and Chrysler also are trying to swap debt for equity as a requirement of the $17.4 billion in government loans they have received. Ford said Wednesday that it still does not intend to seek government loans.

Obama orders major changes in federal contracting

WASHINGTON (AP) -- Reversing Bush policy, President Barack Obama ordered an overhaul of the way the government hands out contracts Wednesday, promising to curtail no-bid awards that have led to waste, abuse and corruption investigations.

Obama joined Republican Sen. John McCain, his presidential campaign rival, and other lawmakers to announce an executive memorandum that commits his administration to a new set of marching orders for awarding contracts. Obama said "the days of giving defense contractors a blank check are over" and said changes could save up to $40 billion a year.

One area in particular that is targeted is no-bid contracts, which the administration is seeking to change so that there will be more competition for government-paid work.

Oil rises above $45 as inventories fall

NEW YORK (AP) -- Oil prices jumped 9 percent Wednesday as global stock markets rallied and the government reported crude levels in U.S. storage houses unexpectedly shrank.

Benchmark crude for April delivery rose $3.73 a barrel to settle at $45.38 on the New York Mercantile Exchange, its highest close in six weeks. Oil prices shot up as high as $45.76 a barrel earlier in the day.

The Energy Department's Energy Information Administration said crude inventories dropped by 700,000 barrels, or 0.2 percent, to 350.6 million barrels, for the week ended Feb. 27. Analysts had expected a boost of 2.2 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Supreme Court rejects limits on drug lawsuits

WASHINGTON (AP) -- The Supreme Court forcefully rejected calls Wednesday for limiting consumer lawsuits against drug makers, upholding a $6.7 million jury award to a musician who lost her arm to gangrene following an injection.

The decision is the second this term to reject business groups' arguments that federal regulation effectively pre-empts consumer complaints under state law.

Diana Levine's right arm was amputated after she was injected with Phenergan, an anti-nausea medicine made by Wyeth Pharmaceuticals, using a method that brings rapid relief, but with grievous risks if improperly administered.

In a 6-3 decision, the court turned away Wyeth's claim that federal approval of Phenergan and its warning label should have shielded the company from lawsuits like Levine's.

Ex-Gen Re executive gets 1 year in prison

HARTFORD, Conn. (AP) -- A former senior vice president at General Re Corp. was sentenced Wednesday to a year and a day in federal prison for an accounting fraud scandal that artificially propped up the stock price of insurer American International Group Inc.

Christopher Garand, 61, was also fined $150,000 for his role in the case, which authorities say cost AIG shareholders more than $500 million. He is one of five former executives convicted in the case.

Federal prosecutors say New York-based AIG paid Stamford-based Gen Re in a secret deal to take out reinsurance policies with AIG in 2000 and 2001. They say the scheme propped up AIG's stock prices and inflated reserves by $500 million with the goal of quelling criticism by analysts and concerns by investors.

UBS says 47,000 Americans had accounts

WASHINGTON (AP) -- UBS AG now says it had about 47,000 accounts held by Americans who didn't pay U.S. taxes on their assets, but Switzerland's biggest bank isn't providing the names of any more of them to the U.S. government.

UBS official Mark Branson confirmed the figure of 47,000 accounts as of Sept. 30, at a Senate hearing exploring the fight over secrecy and alleged tax evasion.

Branson says nearly all the accounts have been closed.

By The Associated Press

The Dow Jones industrial average rose 149.82, or 2.2 percent, to 6,875.84.

Broader indexes also rose. The Standard & Poor's 500 index added 16.54, or 2.4 percent, to 712.87. On Tuesday, the S&P 500 index fell to its first close below 700 since October 1996.

The Nasdaq composite index gained 32.73, or 2.5 percent, to 1,353.74. The Russell 2000 index of smaller companies rose 10.29, or 2.9 percent, to 371.30.

Benchmark crude for April delivery rose $3.73 a barrel to settle at $45.38 on the New York Mercantile Exchange.

In other Nymex trading, gasoline for April delivery rose 6.22 cents to settle at $1.3816 a gallon, while heating oil gained 3.49 cents to settle at $1.2145 a gallon. Natural gas for April delivery rose 5.8 cents to settle at $4.340 per 1,000 cubic feet.

In London, Brent prices added $2.42 at settle at $46.12 on the ICE Futures exchange.