Reports reflect Fed's message of stronger economy
WASHINGTON (AP) – The U.S. housing recovery is strengthening. Factories are getting more orders. And Americans' confidence in the economy has reached its highest point in 5 1/2 years.
That brightening picture, captured in four reports Tuesday, suggests that the economy could accelerate in the second half of the year. It underscores the message last week from the Federal Reserve, which plans to slow its bond-buying program this year and end it next year, if the economy continues to strengthen. The Fed's bond purchases have helped keep long-term interest rates low.
Investors appeared to welcome the flurry of positive data. The Dow Jones industrial average rose 100 points, and broader stock indexes also ended the day up. Those gains made up only a fraction of the markets' losses since Chairman Ben Bernanke said last week that the Fed will likely scale back its economic stimulus within months – a move that would send long-term rates up.
AP Survey: Bernanke comments surprised investors
WASHINGTON (AP) – Stock and bond prices have been sinking because investors were caught off-guard and were alarmed by the Federal Reserve's signal that long-term interest rates are headed higher.
That's the view that emerges from an Associated Press survey of economists late last week. A majority of the more than two dozen economists polled support the Fed's plan to start slowing its bond purchases later this year, if the U.S. economy continues to strengthen. Higher long-term rates will likely result.
But in the short run, traders fear that higher rates could slow growth and that the Fed might be moving too fast to slow its stimulus, according to many of the economists. Some also think investors perceived a shift in the Fed's timetable for curtailing its low-rate policies.
Speaking too clearly can have a price for leaders
WASHINGTON (AP) – For U.S. policy makers, events that seem at first like positive developments can sometimes unexpectedly bite back.
When federal budget deficits finally began to shrink in early spring as recovery from the Great Recession advanced, economic growth started inching down – not up.
And when Federal Reserve Chairman Ben Bernanke suggested last week that continued economic gains might allow the central bank to begin withdrawing financial life supports "later this year" – a statement that sounded like good news – it triggered a multiday sell-off in the stock and bond markets.
It's not just economic policy. Foreign policy under President Barack Obama also hit a few recent snags.
While in Europe, Obama reached out to Russia to negotiate new reductions in nuclear arsenals of both countries – and drew a quick rebuff from Moscow. Obama also welcomed a new initiative for peace talks with Afghanistan's Taliban militants. But Afghan President Hamid Karzai renounced the formula the next day and refused to participate in the talks.
Obama's climate plan takes aim at coal plants
NEW YORK (AP) – America is slowly moving toward cleaner sources of energy and using less of it overall. President Barack Obama's plan to fight climate change will accelerate those trends.
The plan aims to reduce power-plant emissions of carbon dioxide, increase America's reliance on natural gas and renewables and make trucks, homes and businesses more efficient.
Some parts of the plan will take months to work out and years to go into full effect. The most ambitious part of the plan seeks to rein in one of the biggest sources of carbon dioxide emissions: coal-fired power plants. Obama will direct the Environmental Protection Agency to create the first-ever federal limits on these emissions, which trap heat in the earth's atmosphere.
Men's Wearhouse escalates battle with founder
NEW YORK (AP) – Men's Wearhouse escalated a public battle with its founder and former pitchman George Zimmer on Tuesday, trying to explain why it fired the man who still represents the clothier in many shoppers' minds.
The company said in a statement that its board parted ways with Zimmer because he had difficulty "accepting the fact that Men's Wearhouse is a public company with an independent board of directors and that he has not been the chief executive officer for two years." One bone of contention was that he wanted to sell the company to an investment firm.
On paper, Zimmer's ability to take back control of the company he founded seems limited. But to his fans, he's already winning. Customers are turning to the company's Facebook and other social media outlets to express their outrage. Many were threatening to boycott the chain.
Ultimately shoppers themselves could determine what happens next. Zimmer, 64, who founded the company in 1973, has been one of advertising's most recognizable faces with his slogan: "You're going to like the way you look. I guarantee it."
Chinese workers holding US boss say wages unpaid
BEIJING (AP) – Chinese workers keeping an American executive confined to his Beijing medical supply factory said Tuesday that they had not been paid in two months in a compensation dispute that highlights tensions in China's labor market.
The executive, Chip Starnes of Specialty Medical Supplies, denied the workers' allegations of two months of unpaid wages, as he endured a fifth day of captivity at the plant in the capital's northeastern suburbs, peering out from behind the bars of his office window.
About 100 workers are demanding back pay and severance packages identical to those offered 30 workers being laid off from the Coral Springs, Florida-based company's plastics division. The demands followed rumors that the entire plant was being closed, despite Starnes' assertion that the company doesn't plan to fire the others.
IG: IRS credit cards used for wine, pornography
WASHINGTON (AP) – Poor oversight by the Internal Revenue Service allowed workers to use agency credit cards to buy wine for an expensive luncheon, dorky swag for managers' meetings and, for one employee, romance novels and diet pills, an agency watchdog said Tuesday.
Two IRS credit cards were used to buy online pornography, though the employees said the cards were stolen. One of the workers reported five agency credit cards lost or stolen.
IRS employees used agency credit cards to make more than 273,000 purchases totaling nearly $108 million in 2010 and 2011, according to the report by the Treasury inspector general for tax administration.
Barnes & Noble's loss more than doubles
NEW YORK (AP) – Sales plummeted at Barnes & Noble bookstores in the latest quarter and its Nook e-book devices failed to keep up with competitors, pushing the company to a net loss that more than doubled from a year ago.
The largest traditional U.S. bookseller said Tuesday that it will stop making its own Nook color touchscreen tablets, a move intended to stem the losses it's suffering in its digital unit.
It said it will continue to make its more basic, black-and-white e-readers but farm out tablet manufacturing to a third party.
Walgreen 3Q profit jumps but misses estimates
Walgreen Co.'s fiscal third quarter earnings jumped 16 percent, but its shares tumbled Tuesday as investors fretted over sluggish sales outside the drugstore chain's pharmacies and other troubling trends.
The Deerfield, Ill., company missed Wall Street forecasts, and its earnings grew largely because of the comparison with last year's quarter, when a business split hurt its results.
Several analysts said they were surprised by a weaker-than-expected expansion in this year's quarter of Walgreen's gross margin, which is a basic measure of profitability. That could indicate that the nation's largest drugstore operator is losing a boost it was getting from generic drugs, said Edward Jones analyst Judson Clark.
Carnival sees fewer bookings, replaces its CEO
NEW YORK (AP) – Passengers remain hesitant to book cruises, despite deep discounts. But that didn't stop Carnival Corp. from eking out a $41 million second-quarter profit thanks to lower fuel costs and the timing of some administrative expenses.
The Miami-based company also announced Tuesday that Micky Arison, who has been CEO since 1979 and is the son of Carnival co-founder Ted Arison, is being replaced by Arnold W. Donald, who has been on the company's board for the past 12 years. Arison will continue as chairman.
The profit was nearly triple the $14 million the world's largest cruise company earned during same period last year, a quarter in which it suffered steep losses on fuel-price bets in derivatives.
By The Associated Press(equals)
The Dow Jones industrial average rose 100.75 points, or 0.7 percent, to 14,760.31. The Standard & Poor's index rose 14.94 points, or 1 percent, to 1,588.03. The Nasdaq rose 27.13 points, or 0.82 percent, to 3,347.89.
In New York benchmark oil for August delivery rose 14 cents to end at $95.32 a barrel. Brent crude, used to set prices for oil used by many U.S. refineries to make gasoline, rose 10 cents to end at $101.26 a barrel.
Natural gas lost 9 cents to finish at $3.65 per 1,000 cubic feet. Heating oil rose less than a cent to end at $2.86 a gallon. Wholesale gasoline was unchanged at $2.73 a gallon.