Lebanese militants fire rockets at Israel

Israel potentially faces second front; military operations halted for 3 hours

Mahmud Hams / AFP - Getty Images

Palestinians gather around a destroyed mosque after an Israeli airstrike overnight in Gaza City on Thursday.

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JERUSALEM - Lebanese militants fired at least three rockets into Israel early Thursday, threatening to open a new front for the Jewish state as it pushed forward with a bloody offensive in the Gaza Strip that has killed nearly 700 people.

Two people were lightly injured, and the rockets that exploded in Israel's north raised the specter of renewed hostilities with Hezbollah, just 2 1/2 years after Israel battled the guerrilla group to a 34-day stalemate. Hezbollah started the 2006 war as Israel was battling Palestinian militants in Gaza.

No group claimed responsibility and Lebanon's government, wary of conflict, quickly condemned the rocket fire. Israel fired mortar shells into southern Lebanon in response.

For a second straight day, Israel said it suspended is Gaza military operation for three hours to allow in humanitarian supplies.

Before the lull on Thursday, Israel killed at least eight people in Gaza, including five militants, raising the death toll from its 13-day offensive to 696 people, according to Palestinian medical officials. The offensive is meant to halt years of Palestinian rocket attacks on southern Israel, but with roughly half the dead believed to be civilians, international efforts to broker a cease-fire have been gaining steam.

Retirement home hit
One of the Lebanese rockets went through the roof of a retirement home in Nahariya, about five miles from the border, and exploded in the kitchen as some 25 residents were eating breakfast in the adjacent dining hall. One resident suffered a broken leg, another bruises, apparently from slipping on the floor after emergency sprinklers came on.

"The rocket entered through the roof, hurling the water heaters into the air. It went through bedrooms upstairs and then into the kitchen. There was a serious blast," said Henry Carmelli, the home's manager.

About three hours later, air-raid sirens went off again. Residents in two northern towns reported explosions of incoming rockets, though some reports suggested there had been a false alarm. Police said they were searching for the fallen projectiles.

Israel has repeatedly said it was prepared for a possible attack on the north since it launched its bruising campaign against Hamas militants in Gaza on Dec. 27. Israel has mobilized thousands of reserve troops for such a scenario, and leaders have warned Hezbollah of dire consequences if it enters the fighting.

Lebanese Prime Minister Fuad Saniora condemned both the attacks and Israel's retaliatory fire. The attacks are "the work of parties who stand to lose from the continued stability in Lebanon," Saniora said.

Omer Messinger / AFP - Getty Images An Israeli woman walks in the damaged kitchen of a nursing home after a rocket fired from Lebanon hit the Israeli town of Nahariya on Thursday.

Hezbollah, which did not comment, has said it does not want to draw Lebanon into a new war. Small Palestinian groups, who have rocketed Israel twice since the end of the 2006 war, have recently threatened to open a new front against Israel if the fighting in Gaza continued.

An Israeli Cabinet minister, Meir Sheetrit, suggested that Lebanese splinter groups, not Hezbollah, were responsible. He said the government had no interest in renewing hostilities.

"Even though we have the ability to respond with great force, the response needs to be carefully considered and responsible," Sheetrit told Army Radio. "We don't need to play into their hands."

Shortly after the first rockets fell around the town of Nahariya, five miles south of the Lebanese border, Lebanese TV stations reported Israeli mortar fire on open areas in southern Lebanon. The Israeli military confirmed it carried out "pinpoint fire" in response without elaborating.

Show of solidarity?
Israeli defense commentators said they expected the rocket fire to be a one-time show of solidarity with the Palestinians, not a declaration of war. Still, police said public bomb shelters throughout the north were opened.

Palestinians reported some two dozen airstrikes in Gaza on Thursday. One militant was killed and 10 wounded in Gaza City, while an airstrike in northern Gaza killed three members of a rocket-launching cell, Palestinian medical officials said. The attack took place about 150 yards from a hospital and wounded 12 bystanders. The Israeli army has repeatedly said militants use civilian areas for cover.

Also, there were clashes between Israeli armored forces and Hamas militants in southern Gaza.

The Israeli offensive has reduced Palestinian rocket fire, but not stopped it altogether. Several barrages were reported Thursday, including one strike that damaged a school and sports center in the southern city of Ashkelon, police said. Both buildings were empty.

Wall Street treads cautiously, awaiting data

Dismal retail sales numbers already setting tone for the session

NEW YORK - Wall Street headed for a sharply lower open Thursday as investors absorbed bad news from Wal-Mart Stores Inc., which signaled that even the stronger U.S. retailers are struggling.

The largest U.S. retailer said sales in December at stores open for at least a year rose by 1.7 percent after stripping out fuel, worse than analysts' estimates. Wal-Mart also slashed its forecast for fourth-quarter earnings, and its shares fell in premarket trading.

Consumers have been cutting back spending as the job market deteriorates. According to the median estimate of economists surveyed by Thomson Reuters/IFR, the Labor Department is expected to report Thursday that the number of new claims for jobless benefits jumped last week to 540,000 from 492,000 in the previous week.

As readings on the job market and consumer spending worsen, most on Wall Street are hoping that a stimulus package proposed by President-elect Barack Obama will get congressional approval. Obama said Thursday the nation's recession could "linger for years" unless Congress acts, according to the text of a speech to be delivered at George Mason University in Fairfax, Virginia.

Ahead of the market's open, Dow Jones industrial average futures fell 114, or 1.30 percent, to 8,630. Standard & Poor's 500 index futures fell 11.20, or 1.24 percent, to 894.00, but Nasdaq 100 index futures fell 6.00, or 0.48 percent, to 1,233.50.

In tech sector news, computer maker Dell Inc. said it would slash 1,900 jobs in Ireland, while Lenovo Group, another computer maker, warned it expects a loss for its latest quarter and will lay off 2,500, or 11 percent, of its work force worldwide.

On Wednesday, the Dow fell 245 points on worries about unemployment and a warning from technology giant Intel Corp. about poor business conditions.

Government bond prices rose modestly in premarket trading Thursday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, slipped to 2.47 percent from 2.50 percent late Wednesday. The yield on the three-month T-bill, considered one of the safest investments, was flat at 0.11 percent.

The dollar was mixed against other major currencies, while gold prices fell.

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Dismal retail sales in December

Britain's FTSE 100 was down 1.89 percent in afternoon trading, as the Bank of England cut its official interest rate by half a percentage point to 1.5 percent — the lowest level in its 315-year history. The Fed last month slashed rates to a record-low range of zero to 0.25 percent.

In other European trading, Germany's DAX index fell 1.69 percent, and France's CAC-40 fell 2.10 percent. In Asian trading, Japan's Nikkei stock average fell 3.93 percent, and Hong Kong's Hang Seng index fell 3.81 percent.

Crude oil prices fell 2 cents to $42.61 a barrel in premarket electronic trading on the New York Mercantile Exchange.

TOP 10 Market movers NYSE • Most Active • Top % Gainers • Top % Decliners NASDAQ • Most Active • Top % Gainers • Top % Decliners AMEX • Most Active • Top % Gainers • Top % Decliners Name Volume Price Change % Change State Street Corp 0 42.22 unch 0.00% Allied Capital Corp 0 4.47 unch 0.00% Capital One Financial Corp 0 31.68 unch 0.00% Thermo Fisher Scientific Inc 0 34.92 unch 0.00% Brookfield Asset Management Inc 0 17.12 unch 0.00% Time Warner Cable Inc 2,779,323 21.56 unch 0.00% Windstream Corp 0 8.99 unch 0.00% Allergan Inc 0 40.34 unch 0.00% Comerica Inc 0 18.86 unch 0.00% Big Lots Inc 0 15.16 unch 0.00% Source: MSN Money and ComStock

Obama: Pass stimulus or recession lasts 'years'

President-elect will warn that situation could become 'dramatically worse'

WASHINGTON - President-elect Barack Obama was set to warn Thursday that the nation's recession could "linger for years" unless Congress acts to pump unprecedented sums from Washington into the U.S. economy, making his highest-profile case yet on an issue certain to define his early presidency.

"I don't believe it's too late to change course, but it will be if we don't take dramatic action as soon as possible," Obama said in a speech scheduled to be delivered at George Mason University in Fairfax, Va., outside Washington. Excerpts from his prepared text were released in advance by his transition team.

"A bad situation could become dramatically worse," he added, painting a dire picture — including double-digit unemployment and $1 trillion in lost economic activity — that recalled the days of the Great Depression in the 1930s.

It was the fourth day in a row that Obama has made a pitch for a huge infusion of taxpayer dollars to revive the sinking economy.

His events have increasingly taken on the trappings and air of the presidency, with the speech — coming a full 12 days before he takes over at the White House — a particularly showy move. Presidents-elect typically stick to naming administration appointments and otherwise staying in the background during the transition period between Election Day and Inauguration Day, but Obama has clearly made the calculation that a nation anxious about its economic outlook and eager to bid farewell to the current president, George W. Bush, needs to hear from him differently and more frequently.

Indeed, the economic news is grim.

Consumers and companies are folding under the negative forces of a collapsed housing market, a global credit crunch and the worst financial crisis since the 1930s. The recession, which started in December 2007, already is the longest in a quarter-century.

A report due out the same day as Obama's speech is expected to show that the number of newly laid-off people signing up for state unemployment insurance last week rose to 540,000, up from 492,000 in the previous week. The number of people continuing to draw jobless benefits is projected to stay near 4.5 million, demonstrating the troubles the unemployed are having in finding new jobs.

'More families will lose their savings'
For all of 2008, employers probably slashed payrolls by at least 2.4 million. That's based on economists' forecasts for a net loss of 500,000 additional jobs in December, as well as the job losses previously reported. Some, however, think the number of jobs cut last month will be higher, around 600,000 or 700,000. The Labor Department will release that report Friday.

"For every day we wait or point fingers or drag our feet, more Americans will lose their jobs," Obama said. "More families will lose their savings. More dreams will be deferred and denied. And our nation will sink deeper into a crisis that, at some point, we may not be able to reverse."

A day after the release of a stunning new estimate — that the federal budget deficit will reach an unprecedented $1.2 trillion this year, nearly three times last year's record — Obama acknowledged the new stimulus spending will "certainly add to the budget deficit." He also acknowledged some sympathy with those who "might be skeptical of this plan" because so much federal money has already been spent or committed in an attempt — largely unsuccessful so far — to get credit, the lifeblood of the American economy, flowing freely once again.

Such statements are coded to appeal to budget hawks in both parties, whom Obama wants to win over so that approval of a package draws wide, bipartisan support in the Democratic-led Congress.

To answer their concerns, he promised to allow funding only for what works. He also pledged a new level of transparency about where the money is going. A day earlier, he promised to tackle the out-of-control fiscal problem posed by Social Security and Medicare entitlement programs and named a special watchdog to clamp down on all federal programs.

Obama made broader arguments, too, saying that the private sector, typically the answer, cannot do what is needed now.

Still-evolving package
"At this particular moment, only government can provide the short-term boost necessary to lift us from a recession this deep and severe," he said.

Obama's transition team and Democratic congressional leaders are working daily to hammer out the still-evolving package, expected to total nearly $800 billion. The initial hope had been to have a new stimulus package approved by Congress in time for Obama to sign it upon taking office on Jan. 20. That timeline has slipped considerably, into at least mid-February if not later.

The package is expected to include tax cuts for businesses and middle-class workers, money to help cash-starved states with Medicaid programs and other operating costs, and a huge share for infrastructure building, investments in energy efficiency and a rebuilding of the information technology system for health care. Much of the latter portions of the plan are aimed at what Obama likes to talk about as the need for "reinvestment" and not just "recovery."

"It is not just another public works program," he said in the speech. "It's a plan that recognizes both the paradox and the promise of this moment, the fact that there are millions of Americans trying to find work even as, all around the country, there is so much work to be done."

He also promised action to address the economy's ills beyond the package, such as tackling the massive wave of home foreclosures many experts expect, preventing the failure of financial institutions, rewriting financial regulations and keeping accountable the "Wall Street wrongdoers" who engage in risky investing.

Obama says stimulus proposal could grow

President-elect suggests he won't seek quick repeal of Bush tax cuts

President-elect Barack Obama confirmed to CNBC Wednesday that he plans to lay out a roughly $775 billion economic stimulus plan but indicated that the amount could grow once it gets taken up by Congress.

"We've seen ranges from $800 (billion) to $1.3 trillion," he said in an exclusive interview with CNBC's chief Washington correspondent John Harwood. "And our attitude was that given the legislative process, if we start towards the low end of that, we'll see how it develops."

In the interview, Obama also:

• said he's concerned that the stimulus money "is spent wisely, that there's oversight and that there's transparency."
• hopes the U.S. economy will be growing again in the second half of 2009, though "I don't have a crystal ball."
• indicated that he may not seek a quick repeal of President George W. Bush's tax cuts for people making over $250,000 and will let them expire in 2010.

Obama also said he wants to avoid living in a "bubble" and will pay close attention to how financial markets react to his policies.

"Given the sensitivities of the market, I've got to pay some attention to market psychology," he said. "Because part of what we have right now is such a loss of trust both in the marketplace and in government. Restoring that trust — restoring that confidence — is going to be very important."

'I'm probably not going to be watching the crawl at the bottom of an interview," he added. "What I will be doing is making sure I'm communicating with key market participants on a regular basis, again to explain to them exactly what our plans are—and to solicit from them good ideas."

In a news conference earlier Wednesday Obama said that he was still talking to congressional leaders about his economic stimulus package and that the final price tag would likely be at the high end of estimates.

"We expect that it will be on the high end of our estimates but will not be as high as some economists have recommended because of the constraints and concerns we have about the existing deficit," Obama told a news conference.

Drugmakers aim to polish image with ad blitz (2)

Patient advocacy groups say the voluntary changes will fall short of altering the cozy relationship between doctors and pharmaceutical companies.

"I'm not sure it actually changes the number of meals the industry is providing all that much," said Allan Coukell, policy director of the Prescription Project, a Boston-based nonprofit that often finds itself pitted against drugmakers.

In March, drug companies will also begin following stricter advertising policies. Actors posing as doctors, as well as celebrity endorsers such as artificial-heart inventor Robert Jarvik, will be identified accurately in commercials. Suggestive ads for products such as the impotence drugs Viagra and Cialis will be pulled from day time slots when children are likely to be watching. And ads will contain information on programs designed to help patients understand and afford the medications.

"You're seeing a greater trend toward transparency and openness among pharmaceutical companies to let people know how we do business and what services are available," said AstraZeneca spokesman Tony Jewell. AstraZeneca's spots conclude with a plug for the company's prescription savings program, information that Jewell says helps patients.

'Perception problem'
Tauzin defended direct advertising as a means to not only educate patients about treatments but also alert them to illnesses they may not realize they have. Even so, he recognized the "perception problem" of the ads, a problem he characterized as "you're smoking in bed and the house is on fire."

In a speech last month, Roche Pharmaceuticals chief executive William Burns hinted that the Swiss company may go further than the PhRMA guidelines.

"Direct-to-consumer promotion was the single worst decision for the industry," he said. "When industry says, 'We're spending all the money on [research and development],' but actually it's spending it on DTC advertising to preserve margins, it doesn't get much credibility."

Grassley and consumer watchdog groups say they are far more troubled by sizable industry payments to doctors for activities often labeled as consulting, research or continuing medical education. In addition, they note that the PhRMA guidelines have no enforcement mechanism.

"People are less apt to violate a federal law than a code of ethics of its own profession," Grassley said. He also said companies making biotech drugs, including a number of very expensive new treatments for cancer and other diseases, should not be exempt. So far, the trade group BIO — the Biotechnology Industry Organization — has refused to adopt even the PhRMA code.

The industry's voluntary efforts are "a start, not an end," Grassley said in an interview. "You can't say it's a substitute for what I'm trying to do."

Drugmakers aim to polish image with ad blitz

Facing possibility of more oversight, industry moves to align with reform

The pharmaceutical industry, confronting sluggish growth, low prestige and the prospect of more-aggressive government oversight, is moving on several fronts to burnish its image and align itself rhetorically with the health reform goals of President-elect Barack Obama and the Democratic Congress.

Conceding that it has long been viewed as Republican-dominated, the industry's lobbying arm plans to spend tens of millions of dollars on an advertising blitz promoting Obama-style health coverage for every American. The first spot — sponsored by the drug lobby, consumer and labor groups, and health providers — will be unveiled today.

Beginning this month, drug companies also will voluntarily submit to a host of marketing restrictions in an attempt to preempt stricter regulations that lawmakers in both parties are pursuing.

"We had better self-police and stop doing the things that cause so much criticism, or we're going to get legislated and regulated by government," said W.J. "Billy" Tauzin, the Republican former congressman who runs the Pharmaceutical Research and Manufacturers of America (PhRMA), a trade association. The changes, he said in an interview, are an effort to move away from the industry's "slash-and-burn kind of policy" in response to previous regulatory and legislative efforts.

Even before Obama's victory, the drug lobby took a dramatic political turn: In 2008, for the first time in 18 years, industry contributions to Democrats were on par with money given to Republicans, according to an analysis by the Center for Responsive Politics, a watchdog group.

"PhRMA had been isolated into a one-party camp," Tauzin said. "We're trying to reposition as less of a partisan player."

The maneuvering comes at a time of great stress for America's drugmakers, which have not been enthusiastic proponents of past health-care reform efforts. After double-digit growth throughout the 1990s and much of this decade, the pharmaceutical industry is expected to grow less than 2 percent in 2009, according to the independent research firm IMS Health. Analysts say it will be difficult to improve on that in the next few years, given the weak economy and a dwindling supply of new blockbuster medications coming to market.

Strains in drug lobby?
Equally worrisome to many in the business is the arrival of a Democratic president who, in tandem with a Democratic-controlled Congress, is expected to add muscle to the Food and Drug Administration and press for an overhaul of the U.S. health system.

Some individual companies are moving independently, suggesting strains in the once-unified drug lobby. In mid-December, Merck announced that it was joining a coalition in support of broad health-care reform, including controversial measures to compare the performance and price of medications.

"We understand clearly that we are entering this debate at a time when the pharmaceutical industry's standing is low," Kenneth Frazier, president of Merck's Global Human Health unit, said in a speech. "We face a choice of acting from a place of fear of the potential harms that could occur to us in reform or acting on the hope of what reform could mean to our industry."

On the immediate horizon are two proposed regulatory changes that would dramatically alter how the industry markets its products.

Lavish industry spending
Sen. Charles E. Grassley (R-Iowa) intends to refile a bill requiring drug and biotech companies to report to the federal government all gifts or payments to physicians for research, speeches, travel, consulting or anything else. Companies failing to report would face financial penalties. The bill is in response to lavish industry spending, which critics maintain creates conflicts of interest for doctors.

Rep. Henry A. Waxman (D-Calif.), the incoming chairman of the Energy and Commerce Committee, supports legislation giving the FDA power to selectively ban direct-to-consumer advertising in the initial years a medication is on the market.

"It is in these first few years of a drug's life that drug companies often aggressively market their products," Waxman said in a recent speech. "This increases the number of consumers exposed to safety risks of new products, long before those risks are truly understood."

The drug industry supported a watered-down version of the Grassley bill and has opposed giving the FDA power over ads directed at patients. Instead, PhRMA members have adopted a voluntary marketing code.

Clever marketing
As of the start of this year, about 40 companies agreed to stop distributing notepads, pens, T-shirts, soap dispensers, napkins and other tchotchkes festooned with product logos. Drugmakers describe the gifts as "reminder items" for doctors and nurses who may forget what cholesterol pill or diabetes medication they want to prescribe. But many consumers suspect that the goodies, as well as more extravagant gifts such as travel and meals, lead to medical decisions that have less to do with sound science than with clever marketing.

The voluntary code, which encourages but does not require companies to hire an independent auditor to monitor their compliance, also sets new restrictions on buying meals for physicians. Fancy restaurant dinners are out unless they include a substantive presentation from a medical expert. Food deliveries to a physician's office are still acceptable, as are some meals at conferences.

In 2005, the industry spent more than $6.8 billion on the goodies, meals and other office visits, according to a report in the New England Journal of Medicine.

U.K. slashes interest rates to historic low

Level not seen in 315 years; bank at limits of monetary policy

LONDON - The Bank of England cut official interest rates by a half a percentage point to 1.5 percent on Thursday, the lowest level in its 315-year history as it attempts to ward off a prolonged recession.

The cut means officials are moving closer to the limits of conventional monetary policy after trims totaling 3.5 percentage points since the beginning of October as Britain faces its bleakest year since the early 1990s recession.

The bank’s nine-member monetary policy committee said the world economy “appears to be undergoing an unusually sharp and synchronized downturn.”

“Measures of business and consumer confidence have fallen markedly,” it said in a statement accompanying its decision. “World trade growth this year is likely to be the weakest for some considerable time.”

House prices have suffered their worst year on record, the huge services sector is shrinking at record pace and several major retailers have collapsed as consumers curb spending.

Inflation, meanwhile, is expected to fall from 4.1 percent currently to well below the government’s 2 percent target, heading toward destabilizing negative inflation.

“The Bank of England is now facing another balancing act,” said Hetal Mehta, senior economic adviser to the Ernst & Young ITEM Club. “Six months ago, it was juggling slowing economic growth with soaring inflation. But now the bank has to tread a path between avoiding deflation and a further weakening of sterling whilst doing all it can to soften the impact of the recession.”

A warning in the Bank of England’s latest credit conditions survey that lending to households and businesses is set to fall further in the first quarter of this year is likely to lead to more house price falls, corporate failures, and rising unemployment.

Policy makers are now more worried about inflation falling below target or turning negative. Deflation, a sustained drop in prices, can be disastrous for an economy by discouraging people from spending as wages fall and unemployment rises.

The half a percentage point cut was less dramatic than the 1.5 percentage point trim it announced in November, and lower than the 1 percentage point cut expected by some economists — but still brings the rate down to the lowest level since the Bank of England was founded in 1694.

Yet whether the lower rates will have the desired impact of jump-starting the economy is debatable, as many banks and other lenders have been slow to pass on previous cuts.

Nationwide, the country’s biggest building society, has already said it plans to invoke a “collar” clause enabling it to stop reducing rates on most of its tracker mortgages, which are designed to follow the benchmark interest rate.

In contrast, banks have been quick to pass on the lower rates to savers, who have watched the value of their nest eggs decline in real terms. Lower savings are unlikely to encourage consumer spending.

Meanwhile, Treasury chief Alistair Darling moved to quash speculation that the government was planning to print money to ease the impact of recession after he told the Financial Times in an interview published Wednesday that he was considering a policy of “quantitative easing.”

“Nobody is talking about printing money,” he told reporters after a Cabinet meeting on Thursday. “There’s a debate to be had about what you do to support the economy as interest rates approach zero, as they are in the United States. But for us that is an entirely hypothetical debate.”

Prime Minister Gordon Brown has said that with interest rates close to zero, the government should take fiscal action, hinting at further tax cuts and increased government spending.

Detroit’s auto show likely to be a bit austere

With industry in crisis, automakers plan more businesslike approach

The Detroit auto show is rarely a frugal affair. Costumed dancers, spectacular pyrotechnics and the hottest celebrities all have been used in years past by automakers hoping to make a splash launching their newest vehicles. The no-expense-spared spectacles on the many stages of the city's cavernous Cobo Center often have had the grandeur of full-scale Broadway productions.

Not this year. With the industry in financial dire straits, visitors can expect a new sense of austerity. Instead of business as usual, there will be a more businesslike atmosphere, according to Joe Serra, a senior co-chairman of the industry's premier North American event.

“Instead of all the glitz, glamour and pizzazz this year it’ll be all about getting down to business,” said Serra. “We’ll see less of the frills we’ve seen over the years and more of a business climate, a ‘rolling up our sleeves and going to work’ type attitude.”

Detroit’s newfound rigor is understandable. Any costly spectacles from General Motors and Chrysler could draw harsh criticism after the two automakers got $17.4 billion in emergency federal funding just before Christmas to keep them out of bankruptcy.

The trade show comes hard on the heels of evidence that the worst is far from over for the world's automakers. On Monday manufacturers reported U.S. sales plunged 36 percent in December from year-earlier levels, capping a truly dismal year.

And the Big Three U.S. automakers are hardly out of the woods, even after their hard-won federal bailout package. Chrysler in particular appears unlikely to survive as an independent entity despite $4 billion in federal aid, analysts say.

Even mighty Toyota is reeling, reporting its first operating loss in 70 years and ordering an unprecedented 11-day production halt in Japan.

But automakers — at least the ones who show up — will do their best to put a brave face on things as the century-old North American International Auto Show opens to the media Sunday.

In the end, Burton saw business fall by 6.5 percent for December from a year ago, although he was able to bring in enough money to pay his bills and e

Even mighty Wal-Mart's sales results are disappointing

NEW YORK - December retail sales were so dismal that even mighty Wal-Mart fell short, making it all but certain it was the worst holiday season in four decades.

Wal-Mart reported a disappointing 1.7 percent gain in December sales, prompting the world's largest retailer to cut its quarterly earnings outlook.

Macy's sales at stores opened for more than a year, or same-store sales, dropped 4 percent. Combining November and December, sales fell 7.5 percent, the retailer said. Macy's also announced it was closing 11 stores it said were underperforming at a cost of $65 million to be charged to fourth-quarter results.

Sears Holdings Inc., which operates Kmart and Sears stores, and Limited Brands Inc. are among the many stores that are reporting steep declines in sales at stores opened at least a year. Shoppers, grappling with tightening credit and rising layoffs, focused on smaller purchases and the deepest discounts.

But Costco Wholesale Corp. is reporting a 2 percent gain when the effect of lower gas prices is excluded.

Wal-Mart's December same-store sales rose 1.7 percent, including a 1.9 percent rise at Walmart U.S. and a 0.1 percent rise at warehouse operator Sam's Club. Total sales for the five weeks ended Jan. 1 edged down 0.1 percent to $46.51 billion from $46.57 billion last year.

Analysts polled by Thomson Reuters, on average, had expected a rise of 2.8 percent and Wal-Mart had predicted a rise between 1 percent and 3 percent.

Wal-Mart also said it now expects earnings from continuing operations in the fourth quarter to be 91 cents to 94 cents per share, down from the previous forecast for $1.03 to $1.07 per share. Analysts expect earnings of $1.06 per share.

Small retailers struggle with recession, weather

Consignment store sees bright spot as people flock to discounts

Henry Burton will never know whether the snow that blanketed Seattle during the holiday season was a blessing or a curse.

The unusually heavy snowfall and cold temperatures left many Seattleites snowbound for days right around Christmas and Hanukkah. That meant Burton, owner of Fremont Place Book Co., may have lost customers who would normally have driven to his independent bookstore. But he also gained some who were left to do their holiday shopping on foot and discovered his shop, in Seattle's Fremont neighborhood, for the first time.

Some of those people have since returned to his store, leaving Burton hopeful that he has gained some new regulars.

In the end, Burton saw business fall by 6.5 percent for December from a year ago, although he was able to bring in enough money to pay his bills and even start the year with a bit of savings. Still, he’s not yet sure whether he’ll be writing himself a paycheck this year.

“I may get a little bit, but not as much as I had hoped to,” he said this week.

Like a lot of small retailers, Burton depends heavily on the holiday season to ring up sales — and, like a lot of smaller retailers, this past holiday season proved especially challenging.

Fremont Place Book Co. was one of three small stores featured in a December article about how independent retailers were faring during the 2008 holiday season. This month, msnbc.com is checking back with those retailers — a bookstore, a gift shop and a consignment store — to find out how the season turned out.

Buying cheaper books
For Burton, the weather added another curveball to the already uncertain season, bringing the Seattle area to a virtual standstill and delaying deliveries of special orders for many of his customers.

On the plus side, Burton thinks the weather forced some people to stop and enjoy the holiday season more, and made them more forgiving of things like the delayed orders.

“People just seemed a lot more relaxed about the whole thing,” He said.

Overall, Burton said the shop was as busy as it ever is around the holidays, but people’s shopping habits were different. Burton sold more paperbacks as customers balked at big cookbooks and coffee table books, and calendars weren’t as popular as he had hoped.

“People were buying as many books. They were just buying a lot cheaper books,” he said.

This month, Burton has been paring down his inventory by returning books to distributors and publishers, in order to save money. He’s also working with his landlord in the hopes of keeping his rent from being raised. And he’s already wondering about how things will go this summer, when he typically benefits from tourism traffic.

“We’ll see what happens,” he said. “If there aren’t many tourists around, that could be a problem.”

Weather and economic woes
As soon as business started dropping off last fall, workers at the Artisan Center in Denver refined their holiday strategy in the hopes of appealing to more cost-conscious shoppers. A stronger-than-expected start initially left them hopeful, but then a spate of cold weather combined with the economic woes made them fearful that business could be down as much as 18 percent in December.

But the 32-year-old gift shop, located in the city's upscale Cherry Creek neighborhood, got an early Christmas present when business picked up significantly in the final days before the holiday.

Manager Julie Hayward said the staff also was surprised by a business uptick in the week following Christmas as shoppers who came in to exchange items ended up spending more.

“They would bring back a $20 necklace and get something that was $60,” Hayward said.

The two strong weeks left the shop with a slightly less dour 14 percent drop in business for the month, compared with a year ago. Overall, the store saw a 7 percent drop for the year.

Intel, Job Losses Sink Stocks

Warnings, accounting fraud and an economy in freefall sent stocks plunging on Wednesday.

A warning from Intel (NASDAQ: INTC) and a dramatic drop in private sector employment sent stocks to their worst drubbing in a month on Wednesday.

Intel (NASDAQ: INTC) shares tumbled 6% after the company warned that its fourth-quarter revenues will come in $500 million below estimates.

Satyam Computer Services (NYSE: SAY) plunged more than 90% after the company admitted to a massive accounting fraud, sending Indian stocks 7% lower. Its shares were halted on the New York Stock Exchange before trading began at 85 cents a share, down from Tuesday's $9.35 close.

Massive job cuts at Alcoa (NYSE: AA) and a Time Warner (NYSE: TWX) warning also weighed on stocks, as did ADP's report of a 693,000 loss in private sector jobs last month, a grim preview of Friday's U.S. Labor Department report.

Microsoft (NASDAQ: MSFT), Applied Materials (NASDAQ: AMAT), Nvidia (NASDAQ: NVDA) and Seagate (NYSE: STX) all lost as much or more than Intel's 6% loss.

But Dell (NASDAQ: DELL) and Sun (NASDAQ: JAVA) managed to escape with small gains.

NetScout (NASDAQ: NTCT) soared 27% on its guidance, while Ciena (NASDAQ: CIEN) gained for a second day on a Barclays upgrade.

Activision (NASDAQ: ATVI) also benefited from an upgrade, up 11% on a Piper Jaffray buy rating.

IXYS (NASDAQ: IXYS) fell 12% on a warning.

After the close, EMC (NYSE: EMC) delivered a pleasant surprise by reaffirming guidance.

The Nasdaq tumbled 53 to 1599, the S&P 500 lost 28 to 906, and the Dow fell 245 to 8769. Volume declined to 5.36 billion shares on the NYSE, and 2.07 billion on the Nasdaq. Decliners led by a 30-8 margin on the NYSE, and 20-7 on the Nasdaq. Downside volume was 89% on the NYSE, and 77% on the Nasdaq. New highs-new lows were 11-59 on the NYSE, and 7-27 on the Nasdaq.

Public sector misses green building certificate deadline

Scottish parliament just one of many high profile government buildings that have failed to comply with EU energy efficiency legislation

The Scottish Parliament building is just one of a large number of publis buildings that have failed to obtain an Energy Performance Certificate

The EU system for rating the energy efficiency of public buildings has been labelled "a shambles" by the Association for the Conservation of Energy after a number of the UK's most high profile buildings failed to meet a deadline requiring them to disclose their energy performance.

All public sector buildings were supposed to display an official Energy Performance Certificate (EPC) from 4th January, but many – including the Scottish Parliament building - have not met the deadline.

Chas Booth, senior press and parliamentary officer (Scotland) at the Association for the Conservation of Energy, said the failure was a major embarassment for the government given its repeated calls for improvements in building energy efficiency across the private sector.

"The public sector should be leading by example, and the government must now commit to a planned programme of energy efficiency improvements to ensure this waste and pollution is brought under control," he said.

It is estimated that about half of public buildings have met the deadline and now display EPCs, though no accurate figures have emerged.

John Alker, public affairs manager at the UK Green Building Council, said that the failure of some buildings to meet the deadline should not be interpreted as evidence that the scheme was failing, arguing that its ultimate aim of providing government departments with a clear incentive to cut energy use could still be achieved.

"It's a new idea, and it always takes time to get assessments done – nobody is quite sure who is meant to do what yet," he said. "There is a wide variety of buildings in the public sector meaning they take more time to assess."

Last year, EU legislation requiring homes to have energy certificates was similarly criticised by industry insiders, who claimed that there were not enough qualified assessors available to provide homes with EPCs.

New York investor sues trustee of Madoff's firm

Company invested $10 million six days before accused fraudster's arrest

NEW YORK - A private New York company has sued the trustee who is liquidating accused fraudster Bernard Madoff's firm for the return of $10 million it invested six days before Madoff was arrested.

According to the complaint dated Jan. 1 by Rosenman Family LLC, its managing member, Martin Rosenman, talked to Madoff on the phone on Dec. 3 about investing in his investment advisory fund.

Madoff told Rosenman the fund was closed until Jan. 1, 2009, but he could wire money to an account where it would be held, the complaint in U.S. Bankruptcy Court in Manhattan said.

It said that the family transferred $10 million to a JPMorgan Chase account on Dec. 5.

Madoff was arrested and charged with securities fraud on Dec. 11 and is currently under house arrest.

Authorities have said in court documents that Madoff confessed to running a Ponzi scheme for years that had losses of $50 billion in what would be Wall Street's largest fraud. A Ponzi scheme is one in which early investors are paid off with the money of new clients.

"Family seeks a mandatory injunction requiring Chase to turn over $10 million," the complaint in bankruptcy court said.

"Family demands judgment that the funds deposited by Family in the Chase Account on December 5, 2008 are not property of the debtor's estate and the debtor has no interest in these funds."

The investment adviser's firm, Bernard L. Madoff Investment Securities LLC, is being liquidated under court-appointed trustee Irving Picard, a lawyer.

Rosenman, who is also president of the Stuyvesant Fuel Service Corp in New York, sued Picard and JP Morgan Chase Bank for recovery of his money.

A lawyer for Picard declined to comment. A representative of the bank was not immediately available for comment.

The complaint said that Rosenman had neither invested nor conducted business with Madoff or his firm before the Dec. 3 phone conversation.

IndyMac sold to investor group for $13.9B

Consortium —which includes Michael Dell — buys failed lender

WASHINGTON - A seven-member group of investors has agreed to buy the remnants of failed lender IndyMac Bank, a symbol of the U.S. housing boom and bust, for $13.9 billion, federal regulators said Friday.

IndyMac, which specialized in loans made with little down payment or proof of assets, was seized by the government in July after a run on the bank as the U.S. housing market collapsed.

The Federal Deposit Insurance Corp. said a holding company led by Steven Mnuchin, co-chief executive of private equity firm Dune Capital Management, agreed to buy IndyMac in a deal reached Wednesday and expected to close by early next month.

The investors have formed a partnership, called IMB Management Holdings LP, that includes Dell Inc. founder Michael Dell's investment firm, MSD Capital.

Once the deal closes, the investment group would pour $1.3 billion in new capital into IndyMac and continue to operate the Pasadena, California-based bank, the FDIC says.

"We have assembled a group of experienced private investors in financial services to acquire the former IndyMac and operate it under new management with extensive banking experience," Mnuchin said in a statement. "We will inject significant private capital into IndyMac so that it can once again effectively serve its customers and communities."

Other investors in the partnership include five private equity firms or hedge funds: J.C. Flowers & Co.; Stone Point Capital; Paulson & Co.; a fund controlled by billionaire George Soros' Fund Management; and a fund controlled by Silar Advisors LP.

IndyMac has 33 bank branches in Southern California with about $6.5 billion in deposits, about half the company's total at the time of its failure. Other IndyMac assets include a $157.7 billion loan servicing business, which collects mortgages and distributes them to investors, and a reverse-mortgage company, known as Financial Freedom.

As part of the deal, the FDIC agreed to assume losses on a portion of IndyMac's loans. The new investors would shoulder the first 20 percent of the bank's loan losses, with the FDIC taking on the majority of any losses thereafter. The FDIC used a similar loss-sharing agreement when Downey Savings and Loan Association failed in November.

In return, the IndyMac investors agreed to continue a closely watched home-loan modification program launched by FDIC Chairman Sheila Bair in August that has completed about 8,500 loan modifications so far.

The investors have received preliminary clearance from the federal Office of Thrift Supervision to run the bank as a federal savings association. A final decision is expected in the coming weeks.

Thrifts have been the most troubled regulated institutions during the financial crisis and among the most spectacular failures. By law, they must have at least 65 percent of their lending in mortgages and other consumer loans — making them particularly vulnerable to the housing downturn.

FDIC officials noted that private equity firms have bought up failed institutions before. In the early 1990s, two failed banks — Bank of New England and CrossLand Federal Savings Bank — were sold to private equity firms.

Dune Capital was founded in 2004 by former Goldman Sachs Group Inc. partners Mnuchin and Daniel Niedich.

Flowers, who launched, then dropped, a bid to buy student lender Sallie Mae last year, also is a former Goldman Sachs partner. Paulson & Co. made billions in profits in recent years by betting on the failure of risky home loans.

The IndyMac deal comes as regulators have eased restrictions on such purchases. Previously, private-equity firms could not hold more than a 24.9 percent stake in a bank without becoming a bank-holding company.

The failure of IndyMac, which had $32 billion in assets, was the second-largest last year, trailing only the September failure of Washington Mutual Inc. Losses to the FDIC's bank insurance fund are expected to range between $8.5 billion and $9.4 billion.

The Seattle-based thrift was the biggest bank to collapse in U.S. history, with around $307 billion in assets. Washington Mutual was acquired by JPMorgan Chase & Co. for $1.9 billion.

A total of 25 U.S. bank failures in 2008 compare with three for all of 2007 and are far more than in the previous five years combined. Many more banks are expected to sink this year.

One unresolved issue is IndyMac's relationship with investors in mortgage-linked securities, including Fannie Mae and Freddie Mac, the government-controlled mortgage finance titans.

Private Student Loan Consolidation

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Loan Amount	Assumed Current Payment*	Initial Monthly Payment**	Monthly Savings	Annual Savings
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$50,000.00	$448.33	$347.20	$101.13	$1,213.51
$75,000.00	$672.49	$520.55	$151.94	$1,823.28
$100,000.00	$896.65	$694.07	$202.58	$2,430.96

*Assuming a 15 year loan term, with an original rate of 6.8%
**Assuming extended term of 25 years at same rate of 6.8%
***Interest rate and the resulting monthly payment(s) contingent upon borrower and/or co-signer credit

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Government, ONGC Mittal Energy seal NCMA 2 deal - Trinidad & Tobago

Trinidad & Tobago's government and ONGC Mittal Energy have signed the PSC for offshore block NCMA 2, which covers 1,019km2.

PSC negotiations for deepwater block TTDAA5 and Guayaguay, which is in shallow and deep waters, are expected to be concluded shortly, energy and energy industries minister Conrad Enil said in a speech during the signing ceremony of the NCMA 2 deal.

In 2008, contracts were also signed for block 2(ab) with Tullow-Centrica-Petrotrin and blocks South West Peninsula Shallow and Deep Horizons with Trinidad Exploration and Development and Petrotrin.

All the blocks fall under an E&P bidding round the government launched in 2006.

In the first quarter of 2009, the government plans to open a new E&P round for five gas blocks in the east (ECMA) and north (NCMA) coast marine areas.

Also in the new year, authorities aim to relaunch an E&P round for blocks in the deep Atlantic area.

AMD inside Apple in 2009?

Here's a radical idea: a 2009 Apple computer with an AMD processor.

Improbable?

(Credit: Apple, AMD)

Maybe this isn't in the cards, but it should be. Especially in light of Advanced Micro Devices' upcoming ultraportable platforms.

I see an upscale Netbook-like Apple computer with, let's say, a slightly smaller form factor than the Apple MacBook Air. Maybe an 11-inch or 12-inch design packing low-power (and relatively inexpensive) AMD Yukon or Congo silicon. This would not be a Netbook clone--and would offer much better graphics silicon than a Netbook--allowing Apple to sufficiently differentiate itself.

Or what about an Apple laptop with an upcoming AMD 45-nanometer mobile processor plus ATI Radeon HD 3600-level graphics that slots below the MacBook Pro? I'm sure Apple could find a head-turning way to implement this that would set it apart from the Intel-based hordes.

Or: AMD's 45-nanometer Shanghai or Phenom II in a Mac Pro? Maybe this concept is beyond the pale for the marketing folks at Apple, but it shouldn't be.

And Apple has demonstrated it can buck conventional processor politics. Intel's newest ultra-low-voltage (ULV) Core 2 Duo processors were offered by all the top-tier laptop vendors as an Intel bundle--Intel processor and Intel integrated graphics--until Apple decided to "think different" and up the ante with an Nvidia GeForce 9400M-based chipset.

Needless to say, AMD needs to go where Intel hasn't gone before in 2009. Last year was not a good year for AMD. Aside from its financial difficulties and the spinoff of its manufacturing operations, it couldn't muster a respectable challenge to Intel in server, desktop, or mobile chips. AMD's newest Shanghai processor for servers and Phenom II for desktops should be competitive with Intel offerings, but don't expect any tectonic shift in market share.

So AMD should be targeting Intel vulnerabilities--some of them self-imposed because of Intel's rigid processor segmentation in some areas--as well as exploiting its self-proclaimed advantage: AMD is the only one of the Big Three PC processor suppliers (the other two being Intel and Nvidia) that makes both CPUs and GPUs.

AMD's Fusion strategy should be more than a marketing mantra. Some unsolicited advice: find a truly unique way to fuse together the strengths of the CPU and GPU before Intel or Nvidia beat you to it.

Chip sales slump in November

Global sales of chips sank 9.8 percent in November, underscoring the impact the worldwide economic crisis is having on chipmakers, the Semiconductor Industry Association said Friday.

The San Jose, Calif.-based trade group said worldwide sales of semiconductors fell in November to $20.8 billion, a decline of 9.8 percent from November 2007 when sales were $23.1 billion.

Sales were down 7.2 percent from the $22.4 billion in October, according to the SIA.

Memory chips are putting the biggest damper on growth. Excluding memory, there was a slower year-on-year decline of 4.8 percent to $17.3 billion from $18.2 billion, the SIA said. "The memory market, which has been under severe price pressure throughout the year, has seen sales decline significantly while many other product sectors have year-to-date sales above 2007 levels," SIA President George Scalise said in a statement.

Micron Technology, the largest U.S. maker of memory chips, posted a net loss of $706 million last month due to an oversupply of memory. And Taiwan's memory chip industry has been seeking rescue funds from the government because of deteriorating market conditions.

For the first 11 months of 2008, sales were $232.7 billion, a slight increase of 0.2 percent from the first 11 months of 2007 when sales were $232.2 billion. And excluding memory products, year-to-date sales jumped 5.6 percent.

"We expect the industry will remain the second largest exporter in the U.S. for 2008," Scalise added.

Android Netbooks: Fact or fiction?

A couple of freelance writers for the blog VentureBeat say they have ported Google's Android operating system to an Asus Eee PC. But does this constitute a new trend in Netbooks?

Asus Eee PC: Android next?

(Credit: Asus)

Matthäus Krzykowski and Daniel Hartmann said in a post Thursday that they compiled, in four hours, the open-source Android operating system for an Asus Eee PC 1000H Netbook. The two run a start-up called Mobile-facts.

In somewhat breathless prose here's what the authors conclude about Android on Netbooks: "For (a) myriad of (Silicon Valley) software companies, it means a well-backed, open operating system that is open and ripe for exploitation for building upon. Now think of Chrome, Google's Web browser, and the richness it allows developers to build into the browser's relationship with the desktop--all of this could usher in a new wave of more sophisticated Web applications, cheaper and more dynamic to use."

If this was Verizon or Asus saying this, it would be product news. Otherwise, it remains an interesting experiment. The authors say Intel is one contributor working on the adoption of Android to a notebook, as a partner in Google's Open Handset Alliance.

Indeed, OHA does have a long list of illustrious members, many of them large companies (or entities) like China Mobile, Broadcom, LG, NTT DoCoMo, Nvidia, and Samsung.

Qualcomm is a member too. And, by the way, already has a prototype Netbook running Red Flag Linux on top of its Snapdragon processor. And it is worth noting that Qualcomm claims it has first-tier PC companies planning devices, including Acer, Asus, and Toshiba.

Would Qualcomm partners opt for the Android operating system instead? It is also worth noting that Qualcomm supplied the silicon guts for the T-Mobile G1, the first phone to run Google's Android operating system.

The biggest CEO firings of 2008

Corrupt or simply incompetent? One thing is for sure: They’re out of a job

The bloodletting in the c-suite started in 2007. It still hasn't stopped.

Another year goes by and more chief executives get the ax — probably more than in any previous year. People shook their heads when Charles Prince III at Citigroup and Stanley O'Neal at Merrill Lynch got the boot in 2007. Now it look like they were lucky. They got out just in time.

Martin Sullivan of American International Group (let go in June), Kerry Killinger at Washington Mutual (September) and Richard Fuld of Lehman Brothers (leaving next month) are among the biggest names to be shown the door as a result of the economic crisis.

Their distinguished company includes James Cayne of the now-deceased Bear Stearns and Richard Syron and Daniel Mudd, the former CEOs of the mortgage buyers Freddie Mac and Fannie Mae.

"There are two kinds of CEO firings," says Noel Tichy, a professor at the Ross School of Business at the University of Michigan. "There are the crooks and there are the incompetents." This year the biggest departing names all fell into a gray area in between.

More from Forbes.com Seven ways to ready for layoff time Seven steps to manage layoffs Six signs your CEO needs help Bonus-free bosses

None was as corrupt as the executives embroiled in the infamous Enron and Tyco scandals of a decade ago, but you couldn't just say they were simply stupid either. CEOs in the financial services industry discovered that they had allowed their companies to take suicidal risks with other people's money based on bad or staggeringly incomplete information. Many of them have paid with their jobs.

Despite their prominence, these headline names compose just a small fraction of the 1,361 U.S. CEOs who left their jobs this year through November. That's up from 1,356 in all 12 months of last year. The final 2008 number may prove to be a record, beating the previous one of 1,478 set in 2006, according to data collected by the management consulting firm Challenger, Gray & Christmas.

More on this story

Forbes.com slide show: Big CEO firings of 2008 Companies not giving up perk of corporate jets $1.6 billion went to bailed-out bank execs

What will 2009 hold? Mark Hodak, compensation consultant for Hodak Value Advisors in New York City, compares the current business environment to a sick patient with a fatal fever. "If we continue with the strains that we're dealing with now, we're going to have more departures," he says. "People have no idea how bad it can really get. There's a lot of strain on a lot of companies right now."

Three names stand out ahead of all others for likely rolling next year: Rick Wagoner of GM, Alan Mulally of Ford and Robert Nardelli of Chrysler. But that's assuming their companies can even last long enough for them to get fired.

New York investor sues trustee of Madoff's firm

Company invested $10 million six days before accused fraudster's arrest

NEW YORK - A private New York company has sued the trustee who is liquidating accused fraudster Bernard Madoff's firm for the return of $10 million it invested six days before Madoff was arrested.

According to the complaint dated Jan. 1 by Rosenman Family LLC, its managing member, Martin Rosenman, talked to Madoff on the phone on Dec. 3 about investing in his investment advisory fund.

Madoff told Rosenman the fund was closed until Jan. 1, 2009, but he could wire money to an account where it would be held, the complaint in U.S. Bankruptcy Court in Manhattan said.

It said that the family transferred $10 million to a JPMorgan Chase account on Dec. 5.

Madoff was arrested and charged with securities fraud on Dec. 11 and is currently under house arrest.

Authorities have said in court documents that Madoff confessed to running a Ponzi scheme for years that had losses of $50 billion in what would be Wall Street's largest fraud. A Ponzi scheme is one in which early investors are paid off with the money of new clients.

"Family seeks a mandatory injunction requiring Chase to turn over $10 million," the complaint in bankruptcy court said.

"Family demands judgment that the funds deposited by Family in the Chase Account on December 5, 2008 are not property of the debtor's estate and the debtor has no interest in these funds."

The investment adviser's firm, Bernard L. Madoff Investment Securities LLC, is being liquidated under court-appointed trustee Irving Picard, a lawyer.

Rosenman, who is also president of the Stuyvesant Fuel Service Corp in New York, sued Picard and JP Morgan Chase Bank for recovery of his money.

A lawyer for Picard declined to comment. A representative of the bank was not immediately available for comment.

The complaint said that Rosenman had neither invested nor conducted business with Madoff or his firm before the Dec. 3 phone conversation.