Business Highlights
Monday, April 7th, 2008
WASHINGTON It’s a Herculean task: revamping a financial regulatory system dating back to the Civil War to deal with 21st century crises imperiling the country.Under an ambitious Bush administration plan, the Federal Reserve would take on the unwieldy role of uber cop in charge of financial market stability. Other regulatory agencies could see their influence diminished.The proposal won’t fix the host of economic and financial problems that threatens to plunge the United States into a deep recession, but it might help guard against future troubles. It would take years and a lot of political wrangling - in Congress, on Wall Street, in statehouses and elsewhere - to implement all the changes envisioned.Yet, the initiative, formally announced Monday, casts a fresh spotlight on the best way to protect the country from financial catastrophes in an intricate web of complex, often-changing financial products and the wide array of financial players using them in the United States and beyond. That debate probably will take center stage in the next president’s administration.—Stocks gain on last day of quarterNEW YORK (AP) - Wall Street managed a moderate gain in the final session of a dismal first quarter Monday, but stock prices and the major indexes still ended the first three months of 2007 with massive losses, the casualties of the still continuing credit crisis. The Standard %26 Poor’s 500 index, the benchmark for many widely held investments such as mutual funds, suffered a loss for the quarter of nearly 10 percent.The blip upward came from a better than expected reading in the Chicago Purchasing Managers Index, which is considered a precursor to the Institute for Supply Management’s manufacturing survey on Tuesday. The index rose to 48.2 in March from 44.5 a month earlier; economists had been expecting a reading of 47.3, according to Dow Jones Newswires. Though the number topped forecasts, a figure below 50 nonetheless indicates a contraction in manufacturing activity.The market’s reaction, however, was likely not as enthusiastic as it might seem from Monday’s gains by the major indexes. Price movements tend to be skewed when volume is as light as it was Monday.It was a difficult quarter on Wall Street, with financial companies’ ongoing credit market losses and the flagging economy wiping out many investors’ appetite for stocks. While the market saw a number of up days during the quarter, the overall trend was sharply lower, with reports of asset write-downs and shaky financial companies pummeling the market - in particular, the near-collapse of Bear Stearns %26 Cos. in mid-March.—Pernod Ricard buys maker of AbsolutSTOCKHOLM, Sweden (AP) - Spirits group Pernod Ricard SA is adding Swedish flavor to a liquor cabinet stacked with Scotch whisky, French champagne and Cuban rum with its $8.34 billion purchase of the state-owned maker of Absolut vodka.The company said Monday it was delighted to add the premium vodka brand to its assortment of drinks, after the Swedish government accepted its bid for Absolut’s parent company, Vin %26 Sprit.The Swedish government celebrated the higher-than-expected price tag for Vin %26 Sprit, but investors were less exuberant, sending shares in France-based Pernod Ricard down 4.3 percent to $103.03 in Paris.Sweden said it selected the Pernod Ricard bid on Sunday over three other offers, by U.S.-based Fortune Brands Inc., Bermuda-based Bacardi Ltd. and an investment group controlled by Sweden’s Wallenberg family.—Less corn could mean higher food pricesWASHINGTON (AP) - From chicken nuggets to corn flakes, food prices at grocery stores and dinner tables could be headed even higher as farmers cut back on the land they’re planting in corn this spring.Corn prices already are high, and a drop in supply should keep them rising. Combine that with the huge demand for corn-based ethanol fuel - and higher energy costs for transporting food - and consumers are likely to see their food bills going up and up.Farmers are now expected to plant 86 million acres of corn this year, the Department of Agriculture predicted Monday, down 8 percent from last year, which was the highest since World War II.Corn is almost everywhere you look in the U.S. food supply. Poultry, beef and pork companies use it to feed their animals. High fructose corn syrup is used in soft drinks and many other foods, including lunch meats and salad dressings. Corn is often an ingredient in breads, peanut butter, oatmeal and potato chips.—Merck, Schering-Plough sink on VytorinNEW YORK (AP) - Shares of Merck %26 Co. and Schering-Plough Corp. fell to record lows Monday, as analysts warned new clinical data would cause sales of their blockbuster cholesterol drug Vytorin to fall further.The companies market Vytorin through a joint venture, but earlier this year, partial results from a clinical study showed that it was no more effective at limiting plaque buildup than Merck’s Zocor, a drug that is already available in generic form. Full results of that study were released Sunday.Vytorin is a combination of Zocor and Schering-Plough’s drug Zetia.Schering-Plough shares plunged as low as $14, touching their lowest levels since August 1996. Merck shares fell as low as $36.82, their lowest since June 2006.Leading physicians are now recommending the use of older drugs called statins before putting patients on Vytorin. Many physicians had prescribed Vytorin in lieu of higher doses of statins because of what some said was an undue fear of side effects.— HUD chief resigns amid criminal probeWASHINGTON (AP) - HUD Secretary Alphonso Jackson, his tenure tarnished by allegations of political favoritism and a criminal investigation, announced his resignation Monday amid the wreckage of the national housing crisis.He leaves behind a trail of unanswered questions about whether he tilted the Department of Housing and Urban Development toward Republican contractors and cronies.The move comes at a shaky time for the economy when soaring mortgage foreclosures imperil the nation’s credit markets.Some Congressional Democrats had pushed for Jackson to leave.House Speaker Nancy Pelosi, D-Calif., said HUD will be called on to work with Congress on assisting refinancing for borrowers faced with imminent foreclosure.—Oil prices slide, retail gas hits recordNEW YORK (AP) - Prices surged at the gas pump, hitting a new record Monday even as crude oil accelerated its slide amid a broad-based commodities sell-off.The average price for a gallon of regular unleaded rose to $3.287, according to AAA and the Oil Price Information Service. Prices were highest in Hawaii and California, where the average price topped $3.60 a gallon.Gasoline prices are expected to keep rising as the summer driving season brings with it greater demand for the fuel. Last year, prices peaked in May before backtracking; with gasoline already at a record it will like only continue its advance.If crude oil prices, which set records of their own during March continue their advance, that will also add to the cost of gasoline at the pump.On Monday, however, light, sweet crude for May delivery dropped $4.04 to settle at $101.58 a barrel on the New York Mercantile Exchange, adding to a decline of nearly $2 a barrel on Friday. Even so, prices finished the first three months of the year 5.8 percent higher than where they started; crude set a record of $111.80 in March before giving up ground.—Citi splits consumer banking, card unitsNEW YORK (AP) - Citigroup named a veteran retail banker Monday to head its North American consumer banking unit, splitting it off from its credit-card business as Citi struggles to become profitable again after suffering its biggest quarterly loss in its 196-year history.The latest move is the biggest sign yet that CEO Vikram Pandit, appointed in December, wants to fix Citi’s major parts rather than sell them off to raise cash - at least for now.It also shows what steps Pandit would take to attract more consumers to Citi’s retail banking unit.Citi’s worst problems are in its investment banking segment, which made huge losing bets on the mortgage industry. But its bread-and-butter business of lending to and collecting deposits from average people has also been underwhelming shareholders.Citi is ubiquitous throughout the United States, but in recent years has lost customers to rival banks such as JPMorgan Chase %26 Co. and Wachovia Corp.—Major indexes rise, commodities slip as quarter endsOn the last day of the quarter, the Dow Jones industrial average rose 46.49, or 0.38 percent, to 12,262.89.Broader stock indicators also rose. The S%26P 500 index advanced 7.48, or 0.57 percent, to 1,322.70, and the Nasdaq composite index rose 17.92, or 0.79 percent, to 2,279.10.Light, sweet crude for May delivery dropped $4.04 to settle at $101.58 a barrel on the New York Mercantile Exchange, adding to a decline of nearly $2 a barrel on Friday. Even so, prices finished the first three months of the year 5.8 percent higher than where they started; crude set a record of $111.80 in March before giving up ground.In other Nymex trading, heating oil futures fell 5.58 cents to settle at $3.0492 a gallon, while gasoline futures sank 10.07 cents to settle at $2.6163 a gallon. Brent crude futures fell $3.47 to settle at $100.30 a barrel on the ICE Futures exchange in London.
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