White House wants business to aid in debt cap fight (Reuters)

WASHINGTON (Reuters) – Worried that Congress will not act in time to raise the country's borrowing cap, the Obama administration is enlisting the business community to persuade lawmakers that a default will have dire consequences.

Outgoing White House economic adviser Austan Goolsbee is set to talk to a slew of business representatives this week, according to a person with knowledge of the meeting.

The meeting will mark the second time in less than a month that Goolsbee has tried to get businesses to ratchet up the pressure on Congress to raise the nation's $14.3 trillion debt limit before August 2, when the Treasury says it will no longer be able to pay the government's bills.

"The White House wants the business community to pull its weight," said one person familiar with the administration's thinking who was on Goolsbee's initial conference call on the subject.

There is a "profound misperception" among some lawmakers that a temporary default will not imperil the fragile economy, said the person, who was not authorized to speak on behalf of the administration.

Calls to the White House seeking comment on the effort were not immediately returned.

The flash point for the White House came when famed investor Stanley Druckenmiller said he could tolerate a brief debt default if it forced lawmakers to reach a deal to slash future budget gaps. This year's deficit is projected to hit $1.4 trillion.

The comments from Druckenmiller, a former hedge fund manager and longtime ally of George Soros, appeared to lend credibility to the belief of some Republicans that the administration was fear mongering about the consequences if Congress failed to move quickly to raise the limit on how much the government can borrow.

Less than a week after Druckenmiller told the Wall Street Journal that a default would not be the "catastrophic" event administration officials claimed, the White House called on some of its Democratic friends in corporate America.

"It really scared the administration that a brand name was saying that (default) was not a big deal," said a financial services industry source who also was on the Goolsbee call in May.

During the call with about 60-70 executives from large and small firms across the country from financial services to manufacturing, Goolsbee likened the debt talks and potential market fallout to a smoldering fire pit in Iran and said one could only get so close before his clothes would catch fire.

The message from Goolsbee, according to the participant, was, "We know markets will react negatively, but don't know how close we can get before they start reacting negatively."

The White House economic adviser cited a study by centrist think tank Third Way that said default would drive the country into a second recession -- a statement Treasury Secretary Timothy Geithner would later make in a letter to Congress.

So far, U.S. markets have shown little concern over the budget stalement in Washington with investors apparently confident lawmakers will lift the debt ceiling in time. The yield on the benchmark 10-year Treasury note hovered around 3 percent on Tuesday, indicating strong demand.

Still, the United States' largest foreign creditor, China, warned that U.S. lawmakers contemplating a technical default, or a delay in interest payments, are "playing with fire".

UNCONVINCED

Conservative Republicans, who helped shift control of the House of Representatives to their party in elections in November, remain unconvinced that there will be terrible fallout if the August 2 deadline is missed.

"A lot of my supporters, a lot of my friends... are making sure that I know that I can't raise the debt ceiling until there is a good plan moving forward to (curb spending,)" said Representative Stephen Fincher of Tennessee.

Fellow Republican Mike Pompeo said there were bankers in his district in Kansas who were watching the negotiations closely and wanted to make sure Congress "got it right," adding that he was more convinced than ever that raising the debt limit without big spending cuts would be wrong.

Publicly, President Barack Obama and his economic team have been warning lawmakers for months that missing payments on any of the government's obligations could push interest rates sharply higher and throw the economy back into recession. They say Republicans would shoulder the blame if that happened.

Lobbying groups for powerful companies such as JPMorgan Chase, Bank of America and Caterpillar Inc, have tried with little success to persuade lawmakers -- and the public -- that a debt default would be unthinkable.

Republican Representative Nan Hayworth of New York said the majority of her constituents have told her that they would prefer that the debt ceiling not be raised.

"I have assured them that it will be accompanied by substantial measures to stop adding to the debt as fast as possible," she said.

(Additional reporting by Laura MacInnis)

Business Highlights (AP)

WASHINGTON – ___

Retail sales fell for first time in 10 months

Americans bought fewer cars in May, pulling retail sales down for the first time in nearly a year.

Sales among U.S. retailers fell 0.2 percent last month, the Commerce Department said. It was the first decline after 10 straight increases.

Auto sales dropped 2.9 percent, the largest decline since February 2010. But excluding the weak car sales, retail sales rose 0.3 percent.

The slump in retail sales was the latest report signaling that the economy has lost momentum. Consumers are struggling to deal with high gasoline prices and a slowdown in hiring. While the surge in gas prices eased in May, pump prices are still significantly higher than a year ago.

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Wholesale prices rise at slowest pace in 10 months

Wholesale prices rose at the slowest pace in 10 months in May, as food costs fell and gas prices rose by the smallest amount in eight months. The figures suggest U.S. consumers could see some relief from rising prices soon.

The Producer Price Index, which measures price changes before they reach the consumer, increased 0.2 percent in May, the Labor Department said Tuesday. That's down sharply from a 0.8 percent rise in April and a 0.7 percent increase in March.

Over the past 12 months, the index has risen 7.3 percent. That's the largest such increase since the 12-month period that ended in September 2008.

Excluding volatile food and energy, the so-called "core" index also increased 0.2 percent. The gain was driven by higher prices for plastics, clothing and new cars. The core index has risen 2.1 percent in the past year.

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New rules to cut confusion on sunscreen claims

Help is on the way if you're confused by the maze of sun protection numbers and other claims on sunscreens.

Starting next summer, you can start looking for SPF 15 and above bottles and tubes with the label "broad spectrum" and feel confident they're lowering your risk of skin cancer.

Under new rules published Tuesday, sunscreens will have to filter out the most dangerous type of radiation to claim they protect against skin cancer and premature aging. "Broad spectrum" is the new buzzword from the Food and Drug Administration to describe a product that does an acceptable job blocking both ultraviolet B rays and ultraviolet A rays.

If a sunscreen doesn't protect against both, or the sun protection factor is below 15, then it has to carry a warning: "This product has been shown only to help prevent sunburn, not skin cancer or early skin aging."

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Google invests $280 million to spur home solar

NEW YORK (AP) — Google is making its largest investment yet in clean energy in an effort to help private homeowners put solar panels on their rooftops.

The $280 million deal with installer SolarCity is the largest of its kind. SolarCity can use the funds to pay for a solar system that it can offer to residents for no money down. In exchange, customers agree to pay a set price for the power produced by the panels.

Google earns a return on its investment by charging SolarCity interest to use its money and reaping the benefits of federal and local renewable energy tax credits.

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Business stockpiles rose for 16th month in April

Businesses added to their stockpiles for a 16th consecutive month in April. But their sales grew at the slowest pace in 10 months, supporting other data that show the economy weakened this spring.

Supply levels grew 0.8 percent in April and sales rose for a 10th straight month, the Commerce Department said Tuesday. But the 0.1 percent sales increase was the smallest since sales fell 0.5 percent in June of last year.

Economists said the decline in sales growth was not a concern because the ratio of inventories to sales remains at historically low levels. It would take only 1.26 months to exhaust current stockpiles at the April sales pace. That compares with a high of 1.48 months hit in early 2009 when sales were plunging during the recession and businesses were caught with unwanted stockpiles.

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Survey: CEOs expect hiring, spending to grow

NEW YORK (AP) — More than half of the chief executives of large U.S. companies said they expect to spend and hire more over the next six months despite slower economic growth.

The Business Roundtable said Tuesday that 51 percent of CEOs polled expect to increase hiring. Last quarter's level of 52 percent had been the highest since the trade group began surveying its members in 2002.

The survey began in mid-May and ended on June 3, the day the government released a May jobs report, which showed a steep pullback in hiring by employers. The unemployment rate rose to 9.1 percent.

The survey drew responses from 135 CEOs.

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Nokia, Apple settle drawn-out patent dispute

HELSINKI, Finland (AP) — Nokia Corp. on Tuesday notched a valuable win against rival Apple Inc., with the U.S. company agreeing to pay the Finnish handset maker a one-time sum to settle long-standing patent disputes as well as royalties for current licenses.

Espoo-based Nokia said that the deal "will result in settlement of all patent litigation between the companies, including the withdrawal by Nokia and Apple of their respective complaints to the US International Trade Commission."

The companies have been locked in a long-running legal battle over patent claims, with each side accusing the other of infringing on patents that cover features such as swiping gestures on touch screens and the built-in "app store" for downloading updated programs.

Market watchers say Tuesday's settlement is crucial for Nokia, which has been trying to restrict unlawful use of its innovation base as it struggles amid stiff competition in the smart phone sector, including from Apple's iPhone, RIM's Blackberry and Asian manufacturers.

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J.C. Penney names Apple retail executive as new CEO

NEW YORK (AP) — J.C. Penney Co. is looking to bite into the magic of Apple.

The department store chain has named Ron Johnson, who pioneered Apple Inc.'s retail stores, its next CEO. He will succeed Myron Ullman III in November, the retailer said Tuesday.

During his 11 years at Apple, Johnson led Apple's retail stores and has been credited with developing the popular Genius Bar, where customers can get hands-on technical support for their Mac, iPad or other devices.

Johnson, 52, will report to Ullman, who will become executive chairman. Johnson will also join J.C. Penney's board of directors in August.

Ullman has been CEO and chairman since December 2004.

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Best Buy 1st quarter net income falls

MINNEAPOLIS (AP) — A renewed focus at Best Buy on hot-selling gadgets and a larger presence in China pushed the retailer's first-quarter results beyond what Wall Street had expected, vaulting shares as much a 7 percent higher Tuesday.

Yet even as industry analysts lauded the nation's largest specialty electronics store for its ability to keep costs down and maintain its financial outlook, they also see a threat to margins going forward, with consumers increasingly heading online or to discount stores for the best deals.

Mainstays like flat screen televisions and DVDs are no longer selling like they once did, and Best Buy has shifted quickly to capitalize on consumer favorites like smart phones and the iPad2 to draw them back in, either in stores or to the company website.

Yet the company has had to spend more to promote its top products and while revenue climbed, profits are under pressure.

Net income fell 12 percent to $136 million, or 35 cents per share, compared with $155 million, or 36 cents per share, last year. That bested consensus estimates by 2 cents, according to analysts polled by FactSet.

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Avis, Budget brands to unite worldwide in $1 billion deal

DETROIT (AP) — Car rental company Avis Budget Group Inc. said Tuesday it will take over Avis Europe in a $1 billion deal, raising the possibility that Avis Budget may back away from a bidding war for U.S. rival Dollar Thrifty.

The move reunites Avis Europe, which separated from Avis in the 1980s, combines the Avis and Budget brands worldwide, and creates what the company said is the largest publicly traded rental car business in the world.

Avis Budget has been in a tug-of-war for more than a year with rival Hertz to buy Dollar Thrifty Automotive Group Inc., and the European acquisition is an indication that Avis Budget is moving away from the pursuit.

In a statement announcing the deal, Avis Budget said it has made progress with U.S. anti-trust regulators in talks about the Dollar Thrifty acquisition, but the European deal would be the company's priority.

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By The Associated Press(equals)

The Dow Jones industrial average rose 123.14 points, or 1 percent, to close at 12,076.11.

The Standard & Poor's 500 index rose 16.04, or 1.3 percent, to 1,287.87. The Nasdaq composite index rose 39.03, or 1.5 percent, to 2,678.72.

Benchmark West Texas Intermediate crude for July delivery gained $2.07, or 2.1 percent, to settle at $99.37 per barrel, rebounding from Monday's decline on the New York Mercantile Exchange.

In other Nymex trading for July contracts, heating oil added 2 cents to settle at $3.1258 per gallon, while gasoline futures gained 6.78 cents to settle at $3.0646 per gallon. Natural gas lost 6.5 cents to settle at $4.581 per 1,000 cubic feet.

Stocks fall as protests in Egypt intensify

Stocks fall as protests in Egypt intensify

Concerns about violent protests in Egypt are pushing the broad stock market lower.

Analysts and traders worry that political instability could spread to other countries in the Middle East and affect the global oil market.

Retail companies, however, are up nearly 1 percent after chains Gap, Limited Brands and Costco beat Wall Street's January sales expectations. Economists expected that snowstorms affecting much of the country would cut into revenue.

Among other positive economic reports, the Labor Department said fewer people applied for unemployment benefits for the first time last week.

The Dow Jones industrial average fell 8 points, or 0.1 percent, to 12,034 in midday trading. The S&P 500 fell 3 points, or 0.2 percent, to 1,301. The Nasdaq composite fell 3 points, or 0.1 percent, to 2,746

Shoppers shook off snow, retailers gained in Jan

Shoppers shook off snow, retailers gained in Jan

Retailers reported surprisingly solid January revenue gains Thursday that swept away fears that snowstorms in much of the country had chilled sales.

The reports, which are being compared with a respectable January 2010, offer encouraging signs that consumer spending is maintaining the momentum of the strong holiday season.

Many retail chains, including Costco Wholesale Corp, Victoria's Secret parent Limited Brands and Macy's Inc., posted gains that beat Wall Street expectations.

Luxury merchants Nordstrom Inc. and Saks Inc. also were bright spots as the affluent, encouraged by the rallying stock market, continue to lead the spending recovery.

The International Council of Shopping Centers index of 32 stores showed a robust 4.8 percent increase for January, well above the 1.5 percent to 2 percent range projected earlier in the week. January's pace was above the 3.1 percent gain in November and capped retailers' fiscal year that averaged a 3.5 percent increase.

The figures are based on revenue at stores opened at least a year for Jan. 2 through last Saturday. It is considered a key indicator of a retailer's health because it excludes the effects of stores that open or close during the year.

"Retailers weathered the storm both literally and figuratively," said Michael P. Niemira, chief economist at the International Council of Shopping Centers. "It is a signal that underlying consumer demand is pretty solid."

Among the notable stragglers was Target Corp., whose business was below expectations, particularly in the South and Northeast.

J.C. Penney Co. reported an unexpected revenue decline; officials blamed lower levels of winter clearance compared with last January, as well as bad weather.

January is the least important month of the year for retailers because they use the month to clear out winter goods to make room for spring merchandise. Still, the strength brightened fiscal fourth-quarter profit outlooks from Limited Brands, J.C. Penney and teen retailer Wet Seal Inc.

In recent weeks, analysts had reduced their estimates as a series of snowstorms in several parts of the country kept shoppers at home and left them with little appetite for spring clothing.

Some retailers noted in their reports that snow did curb some spending. Underlying consumer strength remained strong, adding hopes for a sustainable economic recovery.

Shoppers got out more than expected, replenishing their wardrobes with boots, coats and other winter items to weather the storm as they took advantage of deals, said Ken Perkins, president of RetailMetrics LLC.

Another factor in boosting January's sales index was the stellar performance of both Costco and Limited Brands, which combined contributed about 1.7 percentage points to the index, Niemira estimated.

Consumer spending was the main reason the economy grew at an annual rate of 3.2 percent in the final three months of 2010, the Commerce Department said Friday. It was up from 2.6 percent the previous quarter and the best since the start of last year.

Costco had a 10 percent gain in revenue at stores opened at least a year; Analysts surveyed by Thomson Reuters expected an increase of 7 percent.

Target Corp. had a 1.7 percent increase in revenue at stores opened at least a year, slightly below the 1.9 percent gain that Wall Street projected. This marked the second consecutive month of disappointing results.

CEO and Chairman Gregg Steinhafel said business was particularly weak in the South and Northeast, regions hit hard by snowstorms. He said Target is still counting on expanded food sections and its 5 percent discount for those who pay with its credit or debit card should drive increases this year.

Among department stores, Macy's, powered by its focus on exclusive merchandise and by its moves to tailor merchandise to local markets, posted a 2.6 percent gain. That was better than the 2.1 percent estimate from Wall Street.

"While sales in January were restrained by the series of snowstorms that caused widespread store closing along the East Coast and in the Southeast U.S., we continued to benefit from the underlying strength of our business," Terry J. Lundgren, chairman, president and CEO, said in a statement.

J.C. Penney had a disappointing 1.2 percent decline. The company said top-performing regions were the Southwest and Northwest. The snow-laden Northeast and Southeast were weaker.

Nordstrom enjoyed a 4.8 percent gain, while Saks Inc., had a 4.4 percent increase.

Limited reported a stellar 24 percent gain in revenue at stores opened at least a year and boosted its profit outlook for the fourth quarter. Business was helped by a twice-a-year sale at Victoria's Secret that moved to January from December, but the results continued a long streak of big gains.