Toyota Motor chief executive Akio Toyoda apologized Friday for the problems that led to the company’s recall of more than 8 million cars. But he did not announce any solution for brake problems of its popular Prius hybrid.
Toyoda, the grandson of the company’s founder, made his first public appearance in the two weeks that the company has faced a growing crisis over the safety and quality of its vehicles.
The recall affected 8.1 million vehicles worldwide and will cost the company an estimated $2 billion in repair costs and lost sales due to a sticking accelerator. Toyota has not said how much the new problems with the braking system in the Prius will cost it, though.
Toyoda said an investigation of the Prius problems is under way, and a decision on whether there will be another recall will be announced as soon as possible.
The company also announced Friday it is looking at the brake systems of the latest Lexus hybrid vehicles as well as a Japanese model called the Sai — because they use the same system as the one on the 2010 Prius.
But Toyoda denied the company has been trying to hide problems with the brakes from safety officials in the United States and Japan. Still, he admitted Toyota needed to do more to assure customers about the safety of its vehicles.
"I feel we are in stormy weather," he said. "Under this situation, [we] must regain customer trust. Tackle the problem. My role is to carry it out. We lacked customer perspective. It’s very unfortunate."
Not going far enough. But one expert said Toyota and its chief made a mistake by not announcing a recall for the Prius, especially since it now is clear there is a problem that will eventually need to be fixed.
"What we heard this morning was more foot dragging," said Michelle Krebs, senior analyst for auto sales Web site Edmunds.com. "They still are not very forthcoming. I think it’d be in their best interest to do a recall, and get it all behind them."
Other experts agreed that Toyota is suffering greater damage by not getting all the bad news out as quickly as possible.
"For reasons we may never learn, Toyota appears to be pulling their bandage very slowly, and therefore keeping their recall situation…firmly in the public eye," said James Bell, executive market analyst for Kelley Blue Book.
Krebs said that while most Toyota customers appear to be staying loyal to the brand for now, the damage being done to its image could hit future sales. She believes Toyota’s estimates of a loss of 80,000 sales in North America and another 20,000 in Europe due to the recall are probably too low.
"My impression is they are fairly tone deaf about how significant this is in the U.S.," she said. "I don’t think they have a good sense of what it’s going to cost them in terms of reputation and sales."
She added that problems with the Prius are a particularly tough blow to Toyota — even though the number of hybrids affected is insignificant compared to the 8.1 million vehicles recalled due to the gas pedal concerns.
"The Prius is so important to them. It’s the pinnacle of their technological knowledge and engineering prowess. Now that image has been tarnished," she said.
Toyoda has faced harsh criticism over the last two weeks about his lack of public appearances during the crisis. Krebs said it was important for him to finally speak to the public.
The tone of the news conference, which took place late Friday night in Japan, was very out of character with what is normally seen at corporate press conferences in Japan. Reporters did not show the typical deference to a top executive. Some demanded answers about why there is no leadership and why the company was dodging questions.
Toyoda said the company would set up a committee to examine problems that led to the recall and said the company would cooperate with U.S. authorities who are looking into problems with Toyota vehicles.
"Believe me, Toyota’s cars are safe," he said.
No solution yet for brake problem. The company has admitted it had a problem with the software controlling the anti-lock braking system of the 2010 model year Prius. The company said earlier this week that it has changed the software for cars produced since January, and it is looking into what to do with the vehicles already on the road.
Jesse Toprak, analyst with TrueCar.com, said the delay in announcing a recall for the Prius is a sign that fixing vehicles already on the road won’t be as simple as fixing ones coming off the assembly line. But he said Toyota would be better off announcing the recall even if a solution is not finalized.
"Normally it would have been better off to wait for a solution. It doesn’t help your image to say you don’t know how to fix your own cars. But these are not normal times for Toyota," he said.
The 2010 model year Prius went on sale in the middle of last year. There are an estimated 37,000 of the cars on the road in the United States, and more than 200,000 worldwide. It is the best-selling vehicle in Japan and Toyota’s fourth-best selling model in the U.S.
There have been 124 reports of problems with the brakes on the Prius in the United States, according to the National Highway Transportation Safety Administration, which Thursday announced it had launched a formal defect investigation into the car. There have been reports of four accidents involving the Prius brakes, two of which had injuries, although there have been no reported fatalities.
Toyota, which achieved steady market share growth in the United States due to its reputation of strong vehicle quality and safety, has been criticized by U.S. Transportation Secretary Ray LaHood for being slow to respond to the latest problems. LaHood said Toyota did not move on the accelerator recall until pushed to do so by U.S. safety officials.
The Prius brake problem causes a delay of about a second in the brakes engaging, but during a second a car traveling 60 m.p.h. can travel almost 100 feet.
While Toyota (TM) has far greater financial resources than most of its rivals, especially its U.S. rivals General Motors, Ford Motor (F, Fortune 500) and Chrysler Group, the quality issues do pose a financial challenge for the company. Friday credit rating agency Standard & Poor’s placed its debt on credit watch, meaning it faces the risk of a downgrade that could raise its borrowing costs.
"Standard & Poor’s believes that these developments may affect the company’s reputation for quality, weakening its competitive position," it said in the announcement.
CNN’s Kyung Lah contributed to this report.
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Toyota’s suspension of U.S. sales of some of its top-selling models — amid intense pressure from the federal government — deals a blow to the automaker’s reputation for quality.
Toyota Motor Corp. announced late Tuesday it would halt sales of certain models — including the Camry and Corolla sedans and the RAV 4 crossover — to fix gas pedals that could stick and cause unintended acceleration. Last week, Toyota issued a recall for the same eight models affecting 2.3 million vehicles.
Toyota is also suspending production at six North American car-assembly plants beginning the week of Feb. 1. It gave no date on when production could restart.
Toyota insisted the problem — sudden, uncontrolled acceleration — was "rare and infrequent" and said dealers should deal with customers "on a case-by-case basis."
Officials under President Barack Obama said they pressed Toyota to protect consumers who own vehicles under recall and to stop building new cars with the problem.
David Strickland, the administrator of the National Highway Traffic Safety Administration, told reporters in Washington that the Transportation Department had been in regular
communication with Toyota about the recall.
"Toyota was complying with the law. They consulted with the agency. We informed them of the obligation, and they complied," Strickland said. He wouldn’t address why Toyota failed to stop selling the vehicles five days earlier when it announced the recall.
Across the country, Toyota dealers —swamped by calls Wednesday from drivers — said they were concerned the move would hamper sales. They hoped parts to fix the problem could be distributed quickly.
John McEleney, who owns a Toyota dealership in Clinton, Iowa, said the sales stoppage affects about 60 percent of the inventory on his lot.
He said he was hopeful Toyota would come up with a fix soon — especially because the longer a vehicle stays on a dealer lot, the more money a dealer pays in interest fees.
"Short-term, it’s going to be difficult," McEleney said. "It will certainly set us back, but I think the impact will be very short-lived."
Still, Tom Seeger, president of Seeger Toyota in Creve Coeur, said the automaker did the right thing by suspending sales of affected models until the problems are corrected.
"I am just unbelievably impressed by the decision Toyota has made out of concern for safety," he said.
Seeger said Toyota dealerships would provide loaner vehicles for owners whose vehicles show symptoms of the problems. No one had brought such a vehicle back to Seeger Toyota by late Wednesday, he said.
Gerry Hogan, sales manager at Jay Wolfe Toyota of West County in Ballwin, said: "We’ve had calls, but it’s not as bad as I thought it would be. We’ve sold thousands of these Toyotas, and I haven’t seen one (with the gas pedal problems) yet."
Meanwhile, rental car companies Avis Budget Group and Clayton-based Enterprise Holdings on Wednesday said they were pulling thousands of Toyota models covered by the recall.
Enterprise Holdings, which controls the Enterprise, National and Alamo brands, said it would pull an unspecified number of Toyota models from its fleet, accounting for about 4 percent of the cars it has in service. The company also will stop selling used Toyotas while the automaker finds a fix for the problem.
The suspect parts are made by a U.S. supplier, but they are also found in its European-made vehicles. Toyota said it hasn’t decided what to do there.
Sean Kane, director of Safety Research and Strategies, a consumer group that conducts research into motor vehicle safety issues, said his firm has identified 2,274 incidents of sudden unintended acceleration in Toyota vehicles leading to at least 275 crashes and 18 deaths since 1999.
The firm cites as sources the National Highway and Traffic Safety Administration, direct reports from drivers and incidents mentioned in lawsuits. Toyota would not confirm the numbers.
The supplier of the gas pedals used in the recalled car and trucks, CTS Corp. of Elkhart, Ind., said it knew of only a few cases of drivers having problems with accelerators. It said it’s working with Toyota to design a new pedal.
Also late Wednesday, Toyota said it will add 1.09 million vehicles in the United States to an earlier recall over the risk of accelerator pedals becoming stuck in the floor mats.
The fresh recall would affect five models — 2008-2010 Highlander, 2009-2010 Corolla, 2009-2010 Venza, 2009-2010 Matrix, and 2009-2010 Pontiac Vibe, which is built on a Toyota platform. Toyota has already recalled 4.2 million vehicles in the U.S. over such problems. About 1.7 million vehicles fall under both recalls.
Two years ago, Toyota beat out General Motors Co. to become the world’s largest automaker. Now it is stopping some sales in its biggest market, the U.S., when it desperately needs to sell cars here after reporting its first-ever annual loss last year.
John Wolkonowicz, a longtime auto analyst with IHS-Global Insight, said Toyota is fortunate in that it has a loyal customer base — primarily baby boomers who have been buying Toyotas for decades. That, he said, will help minimize the sales impact in the short term.
"But it will further impede their ability to get the younger buyers that they so dearly want to get into the Toyota fold," Wolkonowicz said.
The sales halt calls into question the aggressive growth strategy pursued under former company president Katsuaki Watanabe, a cost-cutting expert, who led the Japanese automaker to the No. 1 spot in global vehicle sales in 2008, analysts say.
The automaker’s problems in the U.S. may be an extension of the spate of quality problems that plagued Toyota several years ago in Japan, its home market, during the aggressive growth strategy pursued under Watanabe.
In 2006, the Japanese government launched a criminal investigation into accidents suspected of being linked to vehicle problems, though no one was charged. Watanabe later acknowledged overzealous growth was behind the quality problems.
Watanabe was replaced last year by Akio Toyoda, the grandson of Toyota’s founder.
The problems hit Toyota extra hard because it has touted quality for years to gain advantage over competitors, said Brenda Wrigley, chair of the public relations department at Syracuse University’s S.I. Newhouse School of Public Communications.
"Quality was their differentiator, and now it’s their Achilles heel," she said.
The Associated Press, Detroit Free Press and Robert Kelly of the Post-Dispatch contributed to this report.
Haitian Prime Minister Jean-Max Bellerive told an aid conference in Montreal that his country needs help with a “colossal” reconstruction from the Jan. 12 earthquake that left the nation in shambles.
“Haiti will need massive support in the medium and long term from its partners in the international community,” Bellerive said today at the conference attended by 20 governments and multi-lateral organizations. “The challenge will require that we do more, that we do better and certainly that we do differently.”
Aid groups called on those attending the meeting to cancel the Caribbean nation’s $890 million foreign debt. The meeting, to discuss long-term reconstruction and plan a full donor conference in March, is being hosted by Canadian Foreign Affairs Minister Lawrence Cannon. The U.S. is represented by Secretary of State Hillary Clinton.
Haiti was already the poorest country in the Western Hemisphere before the temblor, which killed more than 150,000 people and destroyed a third of the buildings in the capital, Port-au-Prince. The country’s infrastructure, including the water system, has collapsed and the government is unable to deliver services. Relief groups and foreign military forces are trying to reach the estimated 3 million of Haiti’s 9 million people affected by the quake.
‘Path to Development’
The donor nations’ plans must aim to “bring the country back on the path to development,” Bellerive said in a speech to the group. “Going back to the status quo ante is not an option.”
Reconstruction will have to include moving some people out of shantytowns that have overrun the capital, and fostering economic development outside Port-au-Prince, he said.
“The Haitian government is at work in precarious conditions, but it is able to provide the leadership the Haitian people expect of it in the colossal challenges on the way to development,” Bellerive said.
Most government offices and computer systems were destroyed the quake.
The U.S. has taken control of aid deliveries through Haiti’s sole international airport, and the United Nations has taken responsibility for the country’s security
Cannon said the delegates at the conference support the Haitian government’s effort to join in the reconstruction planning. Today’s meeting will help set out a “coherent” and “consistent” approach for supporting Haiti in advance of a major conference to be held in coming months.
‘Ready to Help’
“Your role is key, and your voice is clear guaranteed payday loans. We stand ready to help,” Cannon said.
Haiti’s foreign debt must be cancelled immediately, “accompanied by urgent action to support farmers and prevent a man-made food crisis exacerbating the hardship,” Oxfam Executive Director Jeremy Hobbs said in an e-mailed statement.
Cancelling debt is “indispensable to help the government of Haiti marshal the most resources possible” to rebuild the country, said Eric Faustin, president of Regroupement des Organismes Canado-Haitiens pour le Developpement, a Montreal- based non-profit aid group that focuses on Haiti.
Rescuers today wound down operations seeking survivors among the wreckage, and the UN reported that security in Port- au-Prince “remains calm but fragile, with isolated instances of looting.”
More than 150,000 bodies have been buried and 200,000 residents of Port-au-Prince have left the city, the New York Times reported Jan. 23, citing Marie-Laurence Jocelynn Lassegue, Haiti’s culture and communications minister.
Aid Groups
UN humanitarian chief John Holmes and UN development head Helen Clark are attending the Montreal meeting, along with representatives from the International Monetary Fund and the Inter-American Development Bank. Other participating nations include Japan, Mexico, Costa Rica, France and Spain.
Japan will pledge $70 million in aid at Montreal, Chief Cabinet Secretary Hirofumi Hirano told reporters today in Tokyo. The nation, which has the world’s second-biggest economy, had initially pledged $5 million, compared with the U.S. pledge of $100 million and $10 million promised by South Korea.
Japan also intends to send about 300 members of its Self- Defense Force to Haiti, serving with the UN peace-keeping troops, Hirano said.
Norway today doubled its humanitarian aid to Haiti to 200 million krone ($34 million).
Venezuela, Nicaragua and Bolivia said they will boycott the meeting to protest the U.S. military’s presence in the Caribbean, according to the German news service Deutsche Presse Agentur.
Former Cuban President Fidel Castro wrote in the official Cuban newspaper Granma that U.S. troops have “occupied” Haiti. The U.S. bolstered its presence in the country and offshore to 11,000 soldiers and sailors last week to help provide humanitarian assistance and security.
Heartland Bank sold its ownership in Heartland Payment Systems 10 years ago, but the Clayton-based bank didn’t quite escape involvement in the payment company’s massive computer security breach.
A $60 million settlement announced last week has the bank acting as a middle-man, passing settlement and fine money from the payment company to Visa, the credit card company, and other companies that issue credit cards.
A year ago, computer hackers broke into Heartland Payment’s computer system, compromising 130 million credit card accounts. Credit card issuers across the country, including Heartland Bank, replaced the compromised credit cards for customers.
Heartland Payment Systems, based in New Jersey, processes credit card payments for small and mid-sized merchants. Heartland Bank helped found the company in 1997, but sold its ownership in 2000.
However, Heartland and KeyBank of Cleveland remained as bank "sponsors" of the payment company. When Visa imposed a $780,000 fine, Heartland Bank and KeyBank paid it and collected the money from the payment company, according to a filing by the payment company with the Securities and Exchange Commission.
In the settlement, the payment company will pay up to $60 million to reimburse credit card issuers that absorbed costs because of the security breach. The payment company intends to borrow $53 million of that.
The settlement, if finalized, would let Heartland Bank, KeyBank and the payment company off the hook for any claims resulting from the hacking incident. Heartland Bank executives could not be reached for comment. The privately held bank had $967 million in assets as of September, ranking it a mid-sized player in the St. Louis banking market. It earned $1.7 million in profit in the first nine months of last year.
In a filing with the SEC in November, KeyCorp, KeyBank’s parent company, said it sponsored Heartland Payment’s participation in Visa and MasterCard. KeyBank said Heartland Payment had indemnified it against losses, but that KeyBank could face "significant" costs if the payment company can’t pay.
Campbell Soup Co. reported that its first-quarter profit rose 17 percent with the help of lower costs from increased efficiency in getting its products from its plants to store shelves, as well as lower prices for grain ingredients. Earnings were $304 million, or 87 cents per share, up from $260 million, or 70 cents per share, a year ago. But revenue fell 2 percent to $2.2 billion with dips in sales for most categories, ranging from condensed soup to Prego pasta sauce.
Hewlett-Packard said cost cutting helped its profit jump 14 percent in the fourth quarter despite an 8 percent revenue decline. H-P got higher profit from Electronic Data Systems Corp., a tech services company H-P bought for $13.9 billion last year to better compete against IBM Corp. The world’s top seller of personal computers earned $2.4 billion, or 99 cents a share, compared with $2.1 billion, or 84 cents a share, a year earlier. Revenue was $30.8 billion, down from $33.6 billion. Analysts had expected earnings of $1.13 a share, on revenue of $30.4 billion, according to a consensus survey by Thomson Reuters.
Tyson Foods Inc. said it made strides in the meat business this year and predicts more improvements next year. The world’s largest meat producer, based in Springdale, Ark., said a hefty impairment charge in its beef business left it with a loss for the fourth quarter. But all of its business units, including chicken and pork, were profitable, when excluding the $560 million noncash charge. The company lost $455 million, or $1.22 a share, compared to a profit of $48 million, or 13 cents a share, a year ago. Excluding the charge, Tyson would have earned 28 cents a share, two cents better than analysts had forecasted. Revenue inched higher to $7.21 billion, up $13 million from a year ago.
British Airways’ pension fund deficit could yet scupper its planned merger with Spain’s Iberia, as the UK airline still has to agree the size of the multi-billion pound shortfall with the fund’s trustees.
Iberia, which on Friday posted a bigger than expected nine-month operating loss, agreed with BA on Thursday to create a group with a combined market value of $7 billion as they continue to battle the worst industry downturn in decades.
But BA’s pension deficit was one of the main stumbling blocks in the 16-month merger talks and was a key negotiating point for Iberia, which is reserving the right to back out of the deal if the funding hole turns out to be bigger than the 3 billion pounds ($5 billion) which analysts have forecast.
BA pension trustees undertook a triennial review of the pension scheme earlier this year but the results have yet to be announced, with BA saying it expects to agree a figure with the trustees in the next two to three months.
“The market will be looking at the discount rate used by BA’s trustees to calculate its pension liabilities. You’d expect them to use a favorable one to help push the deal through though, especially since the deficit is bigger than its market value right now” a London-based analyst said.
“There’s still a risk that the deal will fall through. It’s all hanging on BA’s negotiating weight with the trustees over its pension,” a Madrid-based equities sales trader said.
By 1200 GMT Iberia’s shares were 2.4 percent lower at 2.16 euros, after Thursday’s 12 percent gain, while BA was 1.4 percent higher at 217.8 pence.
Some analysts said they were surprised that the terms of a deal had even been announced before the pension issue has been resolved faxless payday loan.
Analysts believe BA could insure all or part of its liabilities through a buy-out deal with a specialized insurer or hedge specific risks such as the longevity of pensioners through a swap deal or pledge contingent assets such as its real estate.
The new company will combine British Airways’ strong position in Europe-to-North America traffic with Iberia’s Latin American business, and will potentially be reinforced by a planned alliance with AMR Corp’s American Airlines.
So far the deal looks set to give BA shareholders 55 percent of the new company, effectively giving it control, but the balance of power remains in question and could shift in Iberia’s favor depending on the outcome of BA’s talks with trustees over its pension deficit.
The BA-Iberia format mirrors the ground-breaking 2004 merger of Air France and KLM, which airline industry executives describe as a back-office merger designed mainly to slash costs.
Under this model, the airlines would maintain their own fleets and networks, which operate under the banner of national traffic rights, but would be owned by a common holding company.
“This is a five-year plan to get through the crisis and generate cash, and then BA will firmly take the driving seat,” said Enrique Quemanda, Chief Executive of boutique investment firm ONEtoONE.
The pair, who have targeted annual synergies of about 400 million euros by the end of the fifth year, will combine BA’s strong position in north Atlantic traffic with Iberia’s Latin American business, which will potentially be reinforced by a planned alliance with American Airlines.
The U.S. jobless rate unexpectedly jumped to 10.2 percent last month, a 26-1/2-year high, adding to pressure on the Obama administration to do more to tackle unemployment even as signs of recovery mount.
The Labor Department said on Friday that employers cut 190,000 jobs in October, more than the 175,000 markets had expected but fewer than the 219,000 jobs lost in September.
Job losses for August and September were revised to show 91,000 fewer jobs were lost than previously reported, taking some of the sting out of the report.
While the revisions hinted at some improvement, economists had expected the jobless rate to rise to 9.9 percent from September’s 9.8 percent. A wider gauge of labor-market slack that includes unemployed Americans who have given up looking for work hit a record 17.5 percent.
Speaking at the White House, President Barack Obama said the administration was considering infrastructure investments and business tax cuts to aid the economy’s recovery.
“I can promise you that I won’t let up until the Americans who want to find work can find work and all Americans can earn enough to raise their families and keep their businesses open,” he said. For a graphic of the jobless rate over time, please see: here
Stocks on Wall Street ended higher after initially falling as investors looked past the jump in the jobless rate and focused instead on the moderation in payroll losses. .N
U.S. Treasury debt prices rose as traders saw the data as supporting a prolonged period of low interest rates.
“Unfortunately, the problem is becoming deeper and more protracted,” Mohamed El-Erian, chief executive of bond giant Pacific Investment Management Co (PIMCO) told Reuters.
“It’s not just the increase in the headline number,” he said. “It’s also about the longer-term nature of unemployment, the increase in underemployment and the prospect for only a very gradual recovery,” he said.
While Obama sees job creation as his top priority, the scope for further steps to boost the economy is limited by record budget deficits.
Rising unemployment could pose problems for the Democrats who control Congress as they head into elections in November 2010. This week, Republicans wrested control of two state governorships away from Democrats in races where the weak economy figured prominently.
“President Obama promised jobs during his campaign for president and the elections in Virginia and New Jersey on Tuesday were a clear referendum on his failure to deliver on this promise,” Republican National Committee Chairman Michael Steele said in a statement reacting to the jobs report.
ECONOMY GROWING, LABOR MARKET LAGS
The U.S. economy grew at a 3.5 percent annual rate in the third quarter, likely ending the most painful recession in 70 years, but the jobs data suggested employers are wary of the prospects for a strong, sustained recovery.
Some 18 million smart meters are set to make their way into American homes as part of the economic stimulus plan focusing on energy efficiency, Energy Department officials said Tuesday.
The meters, which are designed to more effectively communicate with utilities and appliances, and help consumers manage their electricity more efficiently, are being distributed by utilities around the country with partial funding from the federal government that was allocated under the stimulus plan.
The 18 million meters represent roughly 13% of all electricity meters nationwide. Ultimately, the administration hopes to distribute 40 million smart meters over the next few years.
The smart meters are part of a wider government effort to upgrade the nation’s aging utility grid. The government announced $3.4 billion in funding Tuesday to help move the country toward a so-called smart grid. Utilities are putting in another $4.7 billion in matching funds.
According to the White House, these investments could reduce U.S. electricity use by 4% a year.
The money is part of nearly $100 billion in spending and tax cuts the government authorized under the stimulus plan for a variety of energy projects faxless payday advance.
Other projects announced Tuesday include the modernization of electric substations and transmission centers.
All told, 100 projects were announced Tuesday in 49 states that are expected to create tens of thousand of jobs across the country. The White House billed it as the largest single energy grid modernization effort in the country’s history.
Experts have long said the country needs to update its electricity grid, much of which was built during the early part of last century, if it is to deliver power more efficiently and handle electricity generated from sources such as wind and solar.
The funding announced Tuesday is just a fraction of what experts say is needed to build new transmission lines, computerize substations and meters, and build storage devices for a modern utility grid.
Stocks dipped Tuesday as a stronger dollar and some disappointment about DuPont and Coca-Cola’s results gave investors a reason to retreat from the recent rally.
A weaker-than-expected housing market report added to the downward pressure.
The Dow Jones industrial average (INDU) lost 50 points, or 0.5%, according to early tallies, after ending the previous session at the highest finish since Oct. 3, 2008.
The S&P 500 (SPX) index lost 7 points, or 0.6%, after ending Monday’s session at the highest point since Oct. 2, 2008. The Nasdaq composite (COMP) fell 13 points, or 0.6%, after ending the previous session at the highest point since Sept. 26, 2008.
After the close, Yahoo (YHOO, Fortune 500) reported higher quarterly earnings that beat forecasts on weaker revenue that also beat forecasts.
Also after the close, Sun Microsystems (SUN, Fortune 500) said it was cutting 3,000 jobs related to its purchase by Oracle (ORCL, Fortune 500).
Tuesday brought quarterly results from five Dow components: DuPont, Pfizer, Coca-Cola, Caterpillar and United Technologies. Apple and Texas Instruments were among the names who reported after the closing bell Monday.
Stocks gained Monday, with the Dow reclaiming 10,000 in response to a weak dollar, higher commodity prices and some earnings optimism. But the path higher over the last week has been choppy as investors have sifted through a mix of profit reports. That choppiness put pressure on stocks Tuesday.
"I’m impressed we’ve managed to stay above 10,000 as I would have expected a bigger pullback after the last few days," said Gary Webb, CEO at Webb Financial Group.
Webb said that after better-than-expected quarterly results last week from the likes of Goldman Sachs (GS, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Intel (INTC, Fortune 500) raised investors’ expectations for the reports this week. As such, even companies that have reported strong results this week have seen a mixed stock reaction.
"When we see an economy that’s going in the right direction at a stronger pace, we’ll see a more positive reaction to the profit reports," he said.
Since bottoming at a 12-year low on March 9, the S&P 500 has risen more than 62%. But some worry that the Dow’s move above 10,000 has been a ruse and that investors should beware.
"We’ve traded up on some optimism about the global recovery and there are technical reasons why the market could keep rallying," said Brian Battle, vice president at Performance Trust Capital Partners.
However, he said that a lot of the improvement in the economy and profits is being clouded by the enormous amounts of government stimulus. "Once you remove all the stimulus, the underlying economy is not as strong."
Wednesday brings reports on crude inventories, state-by-state unemployment rates and the release of the Fed’s "beige book" report on the economy. Fed Governor Daniel Tarullo speaks about the economy in Washington D.C., starting around 1 p.m. ET.
Wells Fargo (WFC, Fortune 500) and eBay (EBAY, Fortune 500) are the biggest companies reporting quarterly results Wednesday.
Blue-chip results: DuPont (DD, Fortune 500) reported higher third-quarter earnings that topped estimates on weaker revenue that missed forecasts. The chemical maker used cost-cutting to temper the impact of weak sales and surging crude and energy costs.
Looking forward, DuPont narrowed its full-year earnings guidance to a per-share range of between $1.95 and $2.05. Shares fell 2.2%.
Coca-Cola (KO, Fortune 500) reported modestly higher third-quarter earnings that met estimates on weaker revenue that missed forecasts. The company was hit by weaker sales amid the impact of the recession.
Coke was also hurt by the comparatively strong dollar, at least versus a year ago. A stronger dollar hurts companies like Coke because the majority of its profit comes from sales overseas. Those sales then convert back to less U.S. dollars. Coke shares fell 1.3%.
Pfizer (PFE, Fortune 500) reported higher third-quarter earnings and weaker revenue, both of which surpassed analysts’ estimates 24 hour payday loan. Although the maker of Lipitor, Viagra and other drugs saw a decline in sales due to the recession, that was offset by aggressive cost-cutting. Shares fell 0.3%.
Caterpillar (CAT, Fortune 500) reported weaker quarterly earnings that topped estimates on weaker quarterly revenue that missed forecasts, due to lower sales. But the heavy-equipment maker also lifted its full-year earnings forecast to a range of $1.10 to $1.30 per share, versus its previous guidance of 95 cents per share. Caterpillar gained 3%.
United Technologies (UTX, Fortune 500) reported weaker quarterly earnings and revenue that missed estimates. Looking forward, the company said it expects earnings of $4.10 per share, in the middle of its previous guidance. UTX runs jet engine maker Pratt & Whitney, Otis elevators and other businesses. Shares were little changed.
Tech results: Late Monday, Apple (AAPL, Fortune 500) reported fiscal fourth-quarter revenue and earnings that easily beat analysts’ estimates, thanks to strong sales of Macintosh computers and iPhones.
Apple also forecast current-quarter revenue in a range of between $11.3 billion and $11.6 billion, versus the $11.4 billion analysts are forecasting. Apple forecast earnings per share of between $1.70 and $1.78 versus the $1.91 analysts’ predict.
Shares rallied as high as $204 in after-hours trading Monday, an all-time high. On Tuesday, shares gained $8.90 or 4.7% to close at $200.60 per share.
Texas Instruments (TXN, Fortune 500) also reported results after the close Monday. The chipmaker reported weaker quarterly earnings and revenue that topped estimates. Shares gained 0.6% Tuesday.
Other results: Boston Scientific (BSX, Fortune 500) reported a profit versus a year-ago loss, but results were shy of forecasts. The medical device maker also cut its full-year 2009 earnings forecast due to slower sales of defibrillators and other products.
Shares fell 15.7% in very active NYSE trading.
Economy: Housing starts rose to a 590,000 unit annual rate in September, versus a revised 587,000 in the previous month. Economists expected starts at a 610,000 unit annual rate.
Building permits, a measure of builder confidence, rose to a 573,000 unit annualized rate in September from a revised 580,000 unit annualized rate in August. Economists surveyed by Briefing.com thought starts would rose to 595,000 unit annualized rate.
The Producer Price Index (PPI), a measure of wholesale inflation. PPI slipped 0.6% in September versus forecasts for a flat reading. PPI rose 1.7% in the previous month. The core PPI, which strips out volatile food and energy prices, fell 0.1% after rising 0.2% in the previous month. Economists thought it would rise 0.1%.
World markets: Global markets were mixed. In Europe, London’s FTSE 100 lost 0.7%, France’s CAC 40 lost 0.5% and Germany’s DAX lost 0.7%. Asian markets ended lower.
Bonds: Treasury prices rallied, lowering the yield on the 10-year note to 3.34% from 3.38% late Monday. Treasury prices and yields move in opposite directions.
Currency and commodities: The dollar gained versus the euro and the yen, reversing the direction after its recent slide versus a basket of currencies.
U.S. light crude oil for November delivery fell 52 cents to settle at $79.09 a barrel on the New York Mercantile Exchange, after ending the previous session at the highest level in a year.
COMEX gold for December delivery rose 50 cents to settle at $1,058.60 an ounce. Gold has surpassed records repeatedly this month due to the weak dollar and longer-term worries about inflation.
Market breadth was negative. On the New York Stock Exchange, losers topped winners two to one on volume of 1.24 billion shares. On the Nasdaq, decliners topped advancers by over two to one on volume of 2.15 billion shares.
A final proposal for new fuel economy standards was unveiled Tuesday in a joint announcement by the Department of Transportation and the Environmental Protection Agency.
The regulation requires all passenger cars and light trucks sold in the United States to get an overall average of 35.5 miles per gallon by model year 2016. By that year, cars will be expected to average about 39 mpg and 30 mpg for trucks.
Current fuel economy standards for new cars are 27.5 mpg for cars and 23.1 mpg for trucks.
The new standards were originally announced in May by the Obama administration, before some details were finalized.
The agencies predict that the changes will ultimately save 1.8 billion barrels of oil by 2016. That’s roughly what the country goes through in about 86 days, according to numbers from the Energy Information Administration.
Fuel economy will be increased gradually beginning with model year 2012 vehicles and continuing through model year 2016. The standards will apply only to newly purchased vehicles, not vehicles already on the road.
"American drivers will keep more money in their pockets, put less pollution into the air, and help reduce a dependence on oil that sends billions of dollars out of our economy every year," said EPA Administrator Lisa Jackson in a statement.
The proposed plan is expected to add about $600 to the cost of a car, administration officials said in May. That was on top of $700 added by other fuel economy increases passed by Congress in 2007 get a free credit report. But consumers should be able to save enough in gas to make up for the cost. The EPA estimates that the new standards will save auto buyers about $3,000 over the ownership life of a new vehicle.
As it stands now, Corporate Average Fuel Economy, or CAFE, standards are administered by the National Highway Traffic Safety Administration, which is part of the DOT. The new rules will be administered jointly by the NHTSA and the EPA. The EPA is responsible for formulating the fuel economy figures shown on new car window stickers and used by shoppers. The EPA also regulates exhaust emissions.
The new proposal represents a big shift in how the government regulates fuel economy. Fuel economy standards used to be considered solely as away to reduce oil consumption. But these new regulations are also aimed at reducing greenhouse gas emissions like CO2.
Other pollutants can be cleaned out of a car’s exhaust by its catalytic converter, but currently there is no way to remove CO2 from a car’s exhaust. The only way to reduce CO2 is by reducing the amount of fuel that a car burns.
For years environmental groups pressured both the EPA and the powerful California Air Resources Board to regulate greenhouse gas emissions from vehicles.
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