AIG Said to Mull Leaving Maiden Lane Headquarters

American International Group Inc. (AIG), the insurer rescued by U.S. taxpayers, is weighing a move from its headquarters at 180 Maiden Lane in lower Manhattan, said two people with knowledge of the company’s planning.

The approximately 2,000 employees there may be transferred to other locations as part of a cost-saving consolidation, said one of the people, who asked not to be identified because the deliberations are private. An AIG-owned property at 175 Water St., within walking distance from Maiden Lane, is among the buildings that may absorb the workers, the person said.

AIG’s departure would add to vacancies in lower Manhattan, including space in the World Trade Center and World Financial Center. The Maiden Lane property is co-owned by SL Green Realty Corp. (SLG) and Moinian Group, which have listed about 850,000 square feet (79,000 square meters) in the building as available in May 2014, according to CoStar Group Inc. (CSGP)

“The downtown market is facing an absolute glut of space,” said Aaron Jodka, manager of U.S. market research at CoStar, a Washington-based real estate data service. “Tenants are going to have their choice of space, and it’s going to be very challenging in that environment for landlords to be aggressively pushing rents.”

AIG has less need for space as Chief Executive Officer Robert Benmosche shrinks the company and sells units to pay back a U.S. bailout that swelled to $182.3 billion. The New York- based insurer had 57,000 employees worldwide as of Dec. 31, down from 116,000 three years earlier.
AIG’s Commitment

“No final decisions have been made regarding the 180 Maiden Lane lease,” Jim Ankner, a spokesman for AIG, said in a phone interview today. “We are committed to preserving AIG’s presence in New York City.”

Lower Manhattan’s class A office vacancy rate may climb to 17.4 percent by the end of next year from 8.8 percent at the end of June, according to data from Cassidy Turley, a commercial property brokerage with offices in New York.

One World Trade Center, which the Durst Organization is leasing on behalf of owner Port Authority of New York and New Jersey, has about 45 percent of its 3 million square feet still unrented, according to its developers. Larry Silverstein’s 4 World Trade Center has 1.2 million square feet available, and Brookfield Office Properties’s World Financial Center has about 3 million square feet up for lease after former Merrill Lynch & Co. leases expire next year, according to CoStar.
‘Actively Exploring’

AIG leased more than 800,000 square feet at 180 Maiden Lane as of Dec. 31, SL Green, New York’s largest office landlord, said in its annual report. When SL Green bought its 49.9 percent stake in 180 Maiden last year, it underwrote the deal as if AIG wasn’t going to stay, Andrew Mathias, president of New York- based SL Green, said yesterday on a conference call discussing second-quarter results.

“We’re actively exploring the possibilities of both a redevelopment of the asset and bringing it to the market for new tenants,” Mathias said.

“If there’s any management team out there that will lease up their space, I have more confidence in SL Green,” said Mitchell Germain, an analyst at JMP Securities LLC in New York. “They recognize the market on a positive and on a negative. They see the deficiencies in the market, and they clearly will make sure their product is priced accordingly.”
Tokyo Property

The Maiden Lane property became AIG’s principal office after the company struck a deal in 2009 to sell its previous headquarters at 70 Pine St. to Kumho Investment Bank, a South Korean firm, and Youngwoo & Associates, a Manhattan-based developer. AIG also sold a Tokyo office property to Nippon Life Insurance Co. for about $1.2 billion.

Eric Gerard, a spokesman for Moinian, referred questions regarding the AIG lease to SL Green. Heidi Gillette, an SL Green spokeswoman, didn’t respond to a voice mail.

AIG has said it’s working to cut general and administrative expenses by about $1 billion from 2010 levels by the end of 2015. That’s part of aspirational goals AIG laid out in a 2011 filing, which include increasing its return on equity to at least 10 percent.

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Orders Signal Slowdown in U.S. Business Spending: Economy

A slump in June orders for equipment such as computers and machinery signals U.S. business investment will probably cool in the second half of the year and contribute less to the economic expansion.

Bookings for non-defense capital goods excluding aircraft, a proxy for future corporate spending, dropped 1.4 percent, the third decrease in the past four months, according to Commerce Department data issued today in Washington. Another report showed claims for unemployment benefits declined more than forecast last week, which may have resulted from difficulty adjusting data for seasonal shutdowns of auto factories.

Softening overseas demand, slowing U.S. consumer spending and gridlock in Washington over fiscal policy may prompt businesses to put off replacing old equipment, hurting profits at companies like Xerox Corp. (XRX) A report tomorrow is projected to show the world’s largest economy expanded in the second quarter at the weakest pace in a year.

“Business investment has definitely shifted lower,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC in New York. The European debt crisis and fiscal cliff “will put downward pressure on orders, which will translate into weaker growth in the U.S.”

Stocks jumped today as European Central Bank President Mario Draghi said the central bank will do whatever it takes to preserve the euro. The Standard & Poor’s 500 Index climbed 1.7 percent to 1,360.02 at the 4 p.m. close in New York. Treasury securities fell, sending the yield on the benchmark 10-year note up to 1.43 percent from 1.40 percent late yesterday.
Draghi’s Statement

Draghi’s statement at the Global Investment Conference in London today suggested the ECB may intervene in bond markets after a surge in yields of Spanish and Italian securities threatened the existence of the 17-nation currency union.

The U.S. Commerce Department’s report showed total orders for durable goods, those meant to last at least three years, climbed 1.6 percent for a second month, exceeding the median forecast of economists surveyed by Bloomberg News that called for a 0.3 percent gain. The increase was paced by bookings for civilian aircraft and military hardware that are often volatile.

Orders excluding the volatile transportation category unexpectedly dropped 1.1 percent in June, the most in five months. Demand for computers and communications equipment slumped 4.9 percent last month, while orders for machinery decreased 1.1 percent.

Bookings for non-military capital goods excluding aircraft fell at a 3.1 percent annual rate in the second quarter, the first decrease since the same period in 2009, when the U.S. was still in a recession.
Little Momentum

“Global activity has shifted lower,” said Porcelli, who correctly projected the gain in total orders. “It is difficult for demand to gather much momentum at this stage.”

The report contained better news for estimates of business investment last quarter. Shipments of non-military capital goods excluding aircraft, used in calculating gross domestic product, increased 1.2 percent in June after rising 1.1 percent the prior month.

“The strength in underlying shipments bodes well for business investment in Q2, although the weakness of orders suggests that firms have become more uncertain about the outlook for demand,” Peter Newland, an economist at Barclays Capital in New York, said in a note to clients.

Xerox, the Norwalk, Connecticut-based provider of printers and business services, cut its full-year profit forecast as the economic slump in Europe crimped demand for technology.
‘Economic Uncertainty’

“The economic uncertainty has created more pressure especially in Europe and especially in our technology business,” Ursula Burns, chief executive officer, said on a July 20 conference call with analysts.

The economy grew at a 1.4 percent annual rate, down from a 1.9 percent rate in the first quarter, economists forecast a Commerce Department report tomorrow will show, according to the median estimate in a Bloomberg survey. Consumer spending probably rose at a 1.3 percent pace following a 2.5 percent gain in the first three months of the year.

First-time applications for jobless benefits fell 35,000 in the period ended July 21 to 353,000, the Labor Department said. Economists forecast 380,000 claims, according to the median estimate in a Bloomberg survey.

The report extended a period of volatility typically seen in July. Changes in the annual auto plant shutdowns that occur this time of year have made it difficult to adjust the data for seasonal variations, the Labor Department has said.
Employment Outlook

Statistical noise aside, slowing economies in Europe and China, which have reduced global demand for goods, may continue to curb employment. The U.S. presidential election and a looming battle over tax cuts and government spending may also be making businesses reluctant to hire.

“All in all, the labor market is gradually healing,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “We’ve got to take this report with a grain of salt. The jobs market is still tough and we’re setting ourselves up for a soft second half of the year.”

Other reports today showed consumer sentiment fell last week and Americans signed fewer contracts last month to buy previously owned homes.

The Bloomberg Consumer Comfort Index fell to minus 38.5 in the week ended July 22, the lowest level in two months, from minus 37.9 in the previous period. An index of the buying climate, one of the three components of the index, fell to minus 44.7, its lowest reading since May.
‘Deep Funk’

“Household opinion on the state of the American economy remains mired in a deep funk that does not bode well for the spending outlook for the remainder of the year,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. “A further deterioration in the BCCI buying index suggests a soft labor market and tepid income gains point to a further loss of momentum in the household sector early in the third quarter.”

The index of pending purchases of existing homes decreased 1.4 percent in June to 99.3 after a revised 5.4 percent gain in May that was less than initially reported, figures from the National Association of Realtors showed.

A lack of inventory may be hurting the market even as record-low mortgage rates make buying a home more affordable.

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U.S. Stocks, Commodities Gain on Draghi Pledge as Euro Advances

U.S. stocks snapped four days of losses and commodities rallied after European Central Bank President Mario Draghi pledged to preserve the euro. The 17- nation currency strengthened against the dollar by the most in almost a month.

The Standard & Poor’s 500 Index climbed 1.7 percent at 4 p.m. in New York for the biggest gain in almost two weeks. S&P 500 futures added 0.1 percent as of 5:38 p.m. The Stoxx Europe 600 Index (SXXP) jumped 2.5 percent. The euro appreciated 1 percent to $1.2282 as the dollar weakened against 15 of its 16 major peers. The S&P GSCI gauge of 24 raw materials rose 0.2 percent and oil advanced for a third day. Spain’s 10-year bond yield tumbled 45 basis points to 6.93 percent after reaching the highest in the euro era yesterday.


Draghi suggested policy makers may intervene in bond markets as surging yields in Spain and Italy threaten the existence of the currency bloc. 3M Co., Visa Inc. and Sprint Nextel Corp. gained after posting better-than-estimated quarterly results.

Draghi “dampened some of the fears that something was going to come apart imminently,” said James Paulsen, the chief investment strategist at Minneapolis-based Wells Capital Management. His firm oversees about $320 billion. “He’s basically saying there’s still a lot of will of the ECB leadership to do whatever it takes to keep this thing together.”
Euro Climbs

The euro rose as much as 1.4 percent, the most since June 29, after touching $1.2043 on July 24, the lowest since June 2010. The dollar was little changed at 78.21 yen and higher- yielding currencies including the New Zealand dollar strengthened most against their major peers.

Italy’s two-year note yield fell 88 basis points to 4.06 percent. Rates on Germany’s 10-year bonds climbed six basis points to 1.32 percent, and yields on similar-maturity Treasuries increased three basis points to 1.43 percent.

3M, the maker of products ranging from dental braces to commercial sealants, rose 2.1 percent. Second-quarter profit beat analysts’ estimates as gains in efficiency helped trump a drag from foreign-exchange rates. Visa (V) advanced 3.7 percent. The company has benefited from a consumer shift from cash to electronic payments that shows no signs of abating.

Sprint Nextel rallied 20 percent. Sales at the wireless carrier were bolstered by customers spending more on data plans. Zynga Inc., the biggest developer of games played on Facebook (FB) Inc., plunged 37 percent on disappointing profit.

Facebook slumped 8.5 percent ahead of its first quarterly results since selling shares to the public. After the market closed, it tumbled 9.5 percent at 5:38 p.m. in New York as the company posted a narrower profit margin amid surging costs.
Earnings Season

More than 60 companies in the S&P 500 reported results today. Of the 278 index members to have reported results this quarter, 72 percent have topped analysts’ projections, according to data compiled by Bloomberg.

Applications for jobless benefits decreased by 35,000 in the week ended July 21 to 353,000, Labor Department figures showed. Economists forecast 380,000 claims, according to the median estimate in a Bloomberg survey. Bookings for goods meant to last at least three years rose 1.6 percent for a second month, a report from the Commerce Department showed. The median forecast of economists surveyed by Bloomberg News called for a 0.3 percent gain.

A gauge of U.S. speculative-grade corporate debt risk fell the most in almost a month. The Markit CDX North America High Yield Index, a credit-default swaps benchmark used to hedge against losses on high-yield debt or to speculate on creditworthiness, fell 15.8 basis points, the biggest drop since June 29, to a mid-price of 597.1 basis points, according to prices compiled by Bloomberg.
Sugar, Copper

Oil added 0.5 percent to $89.39 in New York. Copper advanced 0.5 percent and gold rose 0.4 percent. Raw sugar fell the most in more than four weeks in New York as dry weather at top producer Brazil helped accelerate harvesting and boost output this month.

European stocks rose for the first time in five days. Unilever (UNA), the world’s second-largest consumer-goods maker, rallied 5.6 percent in Amsterdam as sales growth beat analysts’ estimates. Rolls-Royce Holdings Plc, the world’s second-largest maker of aircraft engines, rose 6.7 percent as underlying pretax profit topped forecasts.

Royal Dutch Shell Plc, Europe’s biggest oil company, dropped 2.3 percent in London after reporting a bigger decline than projected in second-quarter earnings. Siemens AG, the region’s largest engineering company, slid 1.2 percent after saying its full-year earnings goal has become harder to reach.

The MSCI Emerging Markets Index added 1.3 percent. China’s Shanghai Composite Index fell 0.5 percent, the lowest level since March 2009 as speculation the government will maintain real-estate curbs overshadowed a State Council plan to develop the nation’s central provinces.

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Senate panel clears intel bill with tight curbs on leaks

Budget legislation passed by the U.S. Senate intelligence committee authorizes a crackdown on security leaks, including curbs on how many officials can talk to the media and steps to punish unauthorized disclosures, lawmakers said on Wednesday.

The Intelligence Authorization Act for Fiscal Year 2013, passed the Democratic Party-controlled committee by a 14-1 vote on Tuesday, Chairman Dianne Feinstein and Vice Chairman Saxby Chambliss said in a statement.

Media reports in recent months based on high-profile leaks about U.S. cyber-warfare against Iran, procedures for targeting militants with drones and a double agent who penetrated a militant group in Yemen have angered U.S. lawmakers.

The vote came five days after Defense Secretary Leon Panetta ordered senior Pentagon officials to begin monitoring major U.S. news media for disclosures of classified information in an effort to stop the release of government secrets.

"Leaks of classified information regarding intelligence sources and methods can disrupt intelligence operations, threaten the lives of intelligence officers and assets, and make foreign partners less likely to work with us," said Feinstein, a Democrat from California.

"The culture of leaks has to change," she said in a joint statement with Chambliss, a Georgia Republican.

According to their statement, key provisions aimed at stemming leaks include requirement that the executive branch notify Congress when disclosing intelligence information to the public.

The legislation restricts the number of intelligence community employees authorized to communicate with the media and prohibits current and former intelligence officials from signing certain contracts with media organizations.

The bill, which requires passage by both chambers of Congress to become law, also requires the director of national intelligence to beef up its system for investigating leaks and to strengthen intelligence agencies non-disclosure agreements and penalties for unauthorized leaks.

Chambliss called the leaks provision a "strong step toward stemming the torrent of leaks" and said it was negotiated with the House of Representatives.

"I urge the administration to reject the status quo and work with Congress to pass these and any other needed changes into law," he said.

Attorney General Eric Holder appointed two chief federal prosecutors last month to spearhead an investigation into suspected leaks of classified information amid allegations the White House made the disclosures to boost President Barack Obama's re-election chances.

Republican presidential candidate Mitt Romney on Tuesday blamed the White House for leaks to the media about the raid that killed al Qaeda leader Osama bin Laden and cyber-warfare aimed at slowing Iran's nuclear program.

"This conduct is contemptible," Romney said. "It betrays our national interest. It compromises our men and women in the field. And it demands a full and prompt investigation, with explanation and consequence," Romney told a convention of the Veterans of Foreign Wars.

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Visa Profit Beats Estimates as Credit-Card Spending Climbs

Visa Inc. (V), the world’s biggest bank- card network, posted a fiscal third-quarter profit that beat analysts’ estimates as credit- and debit-card spending rose.

Adjusted net income for the three months ended June 30 climbed to $1.06 billion, or $1.56 a share, from $883 million, or $1.26, a year earlier, the San Francisco-based company said today in a statement. The average estimate of 34 analysts surveyed by Bloomberg was $1.45 a share. Adjusted profit excludes a $4.1 billion provision tied to the company’s settlement of a U.S. antitrust lawsuit.

Visa, led by Chief Executive Officer Joseph W. Saunders, 66, has benefitted from a consumer shift from cash to electronic payments that shows no signs of abating, while parrying challenges to its business model. Visa, MasterCard Inc. (MA) and some of the biggest U.S. banks agreed this month to settle the lawsuit brought by merchants who accused the financial firms of rigging credit-card fees.

“Visa once again reported solid global growth in payments volume, cross-border transactions and processed transactions outside the U.S.,” Saunders said in the statement. “We are pleased that we were able to come to a resolution in the merchant litigation.”
Temporary Cut

The accord includes $6.6 billion in payments to retailers and a temporary cut in fees that banks earn on each transaction. Visa’s $4.4 billion share of the settlement would be covered by an escrow account established in cooperation with U.S. banks that owned the company before its 2008 initial public offering. Purchase, New York-based MasterCard, which reports results next week, said the settlement would cost it $790 million.

Visa reported a net loss including the litigation provision of $1.84 billion, or $2.74 a share, compared with net income of $1.01 billion, or $1.43, a year earlier.

Visa climbed 2.2 percent to $124.91 at 5 p.m. in extended trading in New York. The shares have climbed 37 percent in the past 12 months, the third-best performance in the 71-company Standard & Poor’s 500 Information Technology Index after Seagate Technology Plc and Apple Inc. MasterCard’s 30 percent gain ranks fourth.
Profit Outlook

The company updated its profit outlook, saying annual earnings-per-share growth would be in the “low twenties,” up from a May forecast of “high teens to low twenties,” according to the statement.

Saunders also overhauled Visa’s fee structure on debit cards after new U.S. rules took effect in October. The limits on debt-card fees and processing, mandated by the Dodd-Frank Act, may have helped MasterCard wrest market share from Visa, which handled about triple the amount of such purchases than its smaller rival in the fiscal year ended Sept. 30.

The U.S. Justice Department’s antitrust division issued a civil investigative demand on March 13 asking Visa for information about the new strategy, Saunders said in May.

Saunders has said he intends to generate more than half of Visa’s revenue from outside the U.S. by 2015, up from 44 percent in fiscal 2011.

Visa’s share of worldwide purchase transactions on credit and debit cards, including those processed by Visa Europe Ltd., fell 1.1 percentage points last year to 64.67 percent as MasterCard’s share grew by almost 0.5 percentage point to 25.57 percent, according to the Nilson Report, an industry newsletter based in Carpinteria, California.

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Caterpillar Echoing Wall Street Rebuts Gross’s Pessimism

Caterpillar Inc. (CAT), among the first companies to ring warning bells about the recession in 2007, isn’t subscribing to the pessimism of investors such as Bill Gross even while moderating its global growth projections.

A U.S. recession this year is unlikely and the economy will probably grow slightly more than 2 percent, down from an April forecast for about 3 percent, Caterpillar said yesterday in its second-quarter earnings statement. The climate is different than in 2008 because short-term interest rates are lower, central banks are prepared to inject more liquidity and the U.S. housing market is slowly improving rather than falling off a cliff, the company said.

“The good news is, this doesn’t feel like 2008,” Chief Executive Officer Doug Oberhelman said in the statement.

Caterpillar has a track record of accurate forecasts. In October 2007 it said the U.S. may fall into a recession, in contrast to the outlook of companies including Ford Motor Co., DuPont Co. and Intel Corp. at the time. Caterpillar, considered a U.S. bellwether because it’s the world’s largest maker of construction and mining equipment, proved to be correct as the economy experienced a slump that began in December 2007 and ended in June 2009.

Caterpillar’s projections this year are more in sync with the majority view of economists and contrast with comments made by Gross in a July 16 Twitter post. Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said the U.S. is “approaching recession when measured by employment, retail sales, investment and corporate profits.”
‘Muddle Through’

Improvement in the U.S. economy, a “muddle through” scenario for Europe and China trying to ramp up investments with its slowdown bottoming will produce a pickup in world growth later this year and into 2013, Bob Baur, chief global economist for Principal Global Investors, which manages about $260 billion, said in a telephone interview.

Caterpillar, while lowering the upper end of its sales forecast partly on a “weaker” global economy, raised its 2012 profit outlook and said actions to spur growth have begun in several countries.

Brazil late last year began lowering interest rates and China’s investment initiatives should help growth later this year and into 2013, the company said. In Europe, the central bank’s monetary easing and a commitment to solving the debt crisis are improving the euro zone’s long-term outlook, the company said.
‘Growth Prospects’

“We understand the world economic horizon is hazy,” Ed Rapp, chief financial officer of Peoria, Illinois-based Caterpillar, said in a video posted on the company’s website. “We are encouraged by the pro-growth actions by governments and central bankers throughout the world that are intended to stimulate world economic growth prospects moving forward and out into 2013.”

Prospects for growth in the U.S. likely will improve next year if there is more clarity on issues such as taxes and health care, Rapp said yesterday in an telephone interview.

Global growth will average 2.5 percent this year, lower than the expansion of more than 3 percent it forecast in April, Caterpillar said.

“We are planning for a world that is growing anemically in the next 24 months,” Oberhelman said yesterday on a conference call to discuss his company’s earnings. “We are not planning for an implosion.”
‘Modest Signs’

A majority of economists forecast the world’s largest economy may avoid a recession even as growth decelerates amid a cooling job market.

Federal Reserve officials predict a U.S. expansion of 1.9 percent to 2.4 percent this year, with unemployment stuck in a range of 8 percent to 8.2 percent. The probability of a U.S. recession within the next 12 months held at 20 percent this month, according to the median forecast of economists in a Bloomberg News survey taken from July 6 to 10.

“We should see a little faster growth in the second half,” said Baur, who is based in Des Moines, Iowa. “The U.S. is still on a healing path. I don’t see a recession imminent on the horizon.”

U.S. housing, the industry that helped trigger the recession, is stabilizing. Fed Chairman Ben S. Bernanke, in testimony to Congress last week, said growth in construction and historically low mortgage rates are among “modest signs” of a housing recovery, even as some buyers show concern about personal finances and the broader economy and have difficulty meeting lending standards.
Bright Spot

Caterpillar forecast housing starts will exceed 750,000 units this year. While down from its prior forecast of 800,000 units, the prediction represents the best level since 2008.

The auto industry remains a bright spot in the U.S. Economic growth is helping drive sales for Ford as more consumers trade in their older vehicles for newer models, said Alan Mulally, chief executive officer of the Dearborn, Michigan- based carmaker. In the first half of the year, annualized U.S. vehicle sales rose to 14.6 million from 12.8 million a year ago, according to Ford (F), which includes medium- and heavy-duty trucks.

“Even though it’s a slower recovery than we’ve had from past recessions, we’re seeing that expansion of around 2 percent to 2.5 percent,” Mulally said of the U.S economy on a conference call yesterday.
‘Fragile’ World

FedEx Corp. (FDX), the world’s largest cargo airline, last month forecast 2.2 percent U.S. economic growth this year, up from a projection of 2.1 percent in March. The company, which carries everything from mobile devices to pharmaceuticals, said it expects the economy to accelerate to 2.4 percent in 2013, contingent on the U.S. avoiding a significant tax increase.

Boeing Co. (BA) Chief Executive Officer and Chairman Jim McNerney said yesterday “the world is a fragile one economically.”

“Despite slower global economic growth and a range of uncertainties, including the European sovereign debt crisis, we continue to see positive worldwide expansion in air traffic,” McNerney said on an earnings call with analysts.

Not all companies are sanguine. United Parcel Service Inc. (UPS), the world’s largest package-delivery company, said on July 24 that a gradual deceleration of business-to-business shipments reflects a softening of the U.S. economy in the second half of 2012 from earlier this year. UPS predicted the U.S. economy will slow to 1 percent growth in the last six months of the year.
‘Too Optimistic’

“Right now, the estimates are a little too optimistic,” UPS Chief Financial Officer Kurt Kuehn said July 24 in a telephone interview. “We’re not trying to ring the alarm bell, but we do think that there’s probably a little more likelihood that the numbers will turn lower than estimates.”

Caterpillar climbed as much as 4.9 percent earlier yesterday in New York trading after it posted record profit and sales in the second quarter.

Still, the stock dropped as much as 1.4 percent midday because investors were concerned about macroeconomic risks and that rising inventories may hurt the company if the situation worsens, Larry De Maria, a New York-based analyst for William Blair & Co. who has a buy rating on the company, said in an e- mail yesterday.

At the close yesterday, Caterpillar rose 1.4 percent to $82.60.

“Although we think that macroeconomic concerns could continue to be a driver of the stock in the near term, we think today’s results demonstrate the company’s ability to execute at a high level,” Barclays Capital analysts led by Andy Kaplowitz said yesterday in a note.
Slower Growth

Kaplowitz, based in New York, said in a telephone interview that Caterpillar has “tended to err on the side of optimism in its recent forecasts,” which has worried investors.

“The expectations around the U.S. economy were for slower growth and Caterpillar was going to have to moderate its comments,” said Kaplowitz, who has a buy rating on the shares. “That’s what Caterpillar has done.”

“Investors believe the U.S. economy is choppy and slower growing than we believed a few months ago,” Kaplowitz said. “But growth is not stopping. There are still some drivers of growth.”

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U.S. Stocks, Commodities Drop on Greece Concern, Profits

U.S. stocks dropped for a third day and commodities slid as speculation increased that Greece may miss debt reduction targets and United Parcel Service Inc. cut its profit forecast. German bonds fell after Moody’s Investors Service lowered the outlook on the nation’s Aaa rating.

The Standard & Poor’s 500 Index (SPX) sank 0.9 percent to 1,338.31 at 4 p.m. New York time. Futures on the equity gauge retreated 0.5 percent after regular trading as Apple Inc. (AAPL)’s profit missed analysts’ projections. The euro depreciated 0.4 percent to $1.2069 and slid for a fifth day against the yen. The yield on the 10-year German bund climbed six basis points to 1.24 percent after matching the record low of 1.127 percent yesterday. A gauge of U.S. company debt risk rose for a third day. S&P’s GSCI gauge of 24 raw materials fell 0.5 percent.

UPS, the world’s largest package-delivery company, and Whirlpool Corp., the biggest appliance maker, declined after reporting quarterly profit that trailed analysts’ estimates. Moody’s lowered the outlooks on the Aaa credit ratings of Germany, the Netherlands and Luxembourg yesterday, citing the “rising uncertainty” about Europe’s debt crisis.

“Europe continues to be less than positive,” Stephen Auth, the New York-based chief investment officer for equities at Federated Investors Inc., which manages $363.6 billion, said in a telephone interview. “People are looking at UPS as another sign the global economy is in a soft patch.”
Apple Misses

Apple sank 4.8 percent after the close of U.S. exchanges. The world’s largest company by market value posted profit and sales that fell short of analysts’ projections for only the second time since 2003 as customers held off on iPhone purchases while waiting for a new model to be introduced later in the year.

Moody’s left Finland as the only country in the 17-nation euro region with a stable outlook for its top ranking. Chancellor Angela Merkel’s government said Germany will remain Europe’s haven during the financial crisis, pushing back against Moody’s decision. The risks in the euro zone are “not new” and Germany remains “in a very sound economic and financial situation,” the Finance Ministry said.

The euro area is ready to act to help Spain as the country’s borrowing costs soar, Luxembourg Finance Minister Luc Frieden said. While Frieden said no work is being done for a bailout of the Spanish government, policy makers in the 17- country euro area must be prepared to move quickly.
Spanish Bonds

Spain’s benchmark 10-year bond yield reached a euro-era record of 7.625 percent earlier. Italy’s 10-year bonds fell for a third day after a report showed services and manufacturing in the euro region shrank in July. Government debt from the Netherlands dropped as its outlook was also lowered by Moody’s. Ten-year Treasury yields slipped two basis points to 1.40 percent.

“Europe’s recession is deepening and spreading to the core, including Germany,” said Kit Juckes, head of currency research at Societe Generale SA in London. “For investors, fearful of downgrades even to core debt, the path of least resistance will be to look outside Europe and hope that the U.S. data is a little stronger.”

Stocks extended losses after a Reuters report cited European Union officials saying Greece was seen missing targets for reducing debt. German Vice Chancellor Philipp Roesler said over the weekend that Greece was unlikely to be able to meet its obligations under the bailout program.

The S&P 500 pared losses in the final hour of trading after the Wall Street Journal said the U.S. Federal Reserve is moving closer to taking steps that may support economic growth. Fed Chairman Ben S. Bernanke told senators last week that the central bank is prepared to act to boost growth if the labor market doesn’t improve.
Euro, Yen

The euro weakened 0.7 percent to 94.34 yen. The Japanese currency rose versus all of its major peers as investors sought safety even as the nation’s government said it’s ready to combat its strength.

The Markit CDX North America Investment Grade Index, a credit-default swaps benchmark used to hedge against losses on corporate debt or to speculate on creditworthiness, increased 2.3 basis points to a mid-price of 115.7 basis points, according to prices compiled by Bloomberg.

Investors watched second-quarter corporate results. Sales rose an average 2.9 percent in the second quarter among 147 companies in the S&P 500 that have reported results so far, according to data compiled by Bloomberg. Only 40 percent of the reported companies have topped analysts’ estimates on sales, while 73 percent have beaten on profit, the data show.
UPS, Whirlpool

UPS (UPS) slumped 4.6 percent. The company is seeing revenue decline as it seeks to expand in Europe with the $6.5 billion acquisition of TNT Express NV. Whirlpool retreated 7.5 percent. The home appliance maker reported second-quarter earnings excluding some items of $1.55 a share, missing the average analyst estimate in a Bloomberg survey of $1.69.

DeVry Inc., a provider of education services, tumbled 25 percent after saying it plans to cut 570 jobs amid declining enrollment.

The Chicago Board Options Exchange Volatility Index, also known as the VIX, gained 8.8 percent to 20.26, the highest level since June 15.

The Stoxx 600 lost 0.5 percent. Elan Corp. sank 12 percent in Dublin after an experimental Alzheimer’s treatment developed with Pfizer Inc. and Johnson & Johnson failed to improve symptoms of dementia in a study.

Corn futures fell 0.9 percent, soybeans slumped 3.3 percent and wheat lost 3.7 percent. Rain may fall in parts of Iowa and Illinois this week and next, and the Midwest might get showers in the next 11 to 15 days, reducing severe moisture deficits, Commodity Weather Group LLC in Bethesda, Maryland, said in a report.

Oil rose for the first time in three days as clashes in Syria raised tension in the Middle East and a preliminary reading of a Chinese purchasing managers’ index showed it would be at the highest level since February. Crude futures gained 0.4 percent to settle at $88.50 a barrel on the New York Mercantile Exchange.

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Fed official highlights benefits of flexible QE: FT

An open-ended round of quantitative easing that could be adjusted to suit economic conditions should be considered if the Fed launches a fresh round of monetary stimulus, a top policy official in the Federal Reserve said in an interview with the Financial Times.

There is "pretty significant" downside risks to the U.S. economy from the euro zone crisis, John Williams, president of the Federal Reserve Bank of San Francisco, said in an interview with the Financial Times on Monday.

"The main benefit from my point of view is it will get the markets to stop focusing on the terminal date and also focusing on, ‘Oh, are they going to do QE3?'" he is quoted as saying.

If the Fed launched another round of quantitative easing, Williams said that buying mortgage-backed securities, rather than Treasuries, would be more advantageous.

"There's a lot more you can buy without interfering with market function and you maybe get a little more bang for the buck," he said.

He said the Bank of England's "funding for lending" scheme, which will provide cheap funding for British banks that increase their lending to households and businesses, would not work in the United States.

Williams is regarded as close to the center of gravity on the rate-setting Federal Open Market Committee, of which he is a voting member this year. The FOMC will conclude its next meeting on August 1.

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Nasdaq Boosts Payout Pool in Facebook IPO to $62 Million Cash

Nasdaq OMX Group Inc. (NDAQ), second- biggest U.S. stock exchange owner, revamped its proposal to compensate brokers that lost money in the public debut of Facebook Inc. (FB), boosting the payout to $62 million cash.

The amendment, which follows criticism from Wall Street market makers and exchanges about the original plan, increases the compensation pool from $40 million and does away with a proposal to credit most of the money through reduced trading costs, according to a statement yesterday. Member brokers who accommodated retail customers will get paid first, according to a person familiar with the matter who asked not to be named because the discussions are private.

“We deeply regret the problems encountered during the initial public offering of Facebook,” Nasdaq OMX Chief Executive Officer Robert Greifeld said in the statement. “We failed to meet our own high standards based on our long history of providing outstanding technology to our members and exchange customers. We have learned from this experience and we will continue to improve our trading platforms.”

Delays and malfunctions on the Nasdaq Stock Market were the first signs of trouble in the May 18 Facebook initial public offering that burned investors, spurred losses on Wall Street and prompted lawsuits against the company, its exchange and the underwriters. At today’s close of $28.76, the stock remains down 24 percent from the price set by underwriters, although it has recovered from its low of $25.87 in June.

In May, Greifeld acknowledged “poor design” in software put the opening auction that set the price for the first traded shares into a loop that delayed its completion.
Public Comment

The exchange operator plans to submit the updated accommodation plan to the U.S. Securities and Exchange Commission. The public will be able to comment and the SEC must approve it before implementation. Nasdaq OMX said it expects all compensation will be provided within six months.

Among securities firms expected to seek recompense is Knight Capital Group Inc. (KCG) The Jersey City, New Jersey-based broker and market-making firm reported second-quarter earnings this week that fell 79 percent, including a loss on the Facebook IPO. Without the loss and excluding a pretax investment gain, profit would have risen 5.3 percent, the company said.

“We have been in reasonably consistent dialogue with Nasdaq,” CEO Thomas Joyce said during a July 18 conference call following the earnings report. “We’re going to be all eyes and ears waiting to watch and read and hear about what they suggest in their filing.”
Market Making

Citadel LLC, the Chicago-based investment firm run by Ken Griffin, lost as much as $35 million in its market-making unit, according to a person with knowledge of the firm.

Facebook was sold by underwriters at $38 on May 17. The pricing of the first public transaction, a trade known as the IPO cross, took a half hour longer than Nasdaq OMX planned the next morning. About 30 minutes after that, the market owner reported an issue confirming trades from the opening auction with the brokerages that placed them.

Order updates and cancellations totaling 30 million shares were submitted into the auction as a technical issue was being repaired between 11:11 a.m. and 11:30 a.m. New York time, Greifeld told reporters on May 20. About half may involve “some level of dispute,” he said.

An error prevented execution reports for the shares that entered the auction, as well as those that were ignored, from being disseminated immediately to brokerages, the company said.
IPO Cross

Some orders submitted before 11:30 a.m. received executions at prices different from the $42 IPO cross, causing buyers to pay more and sellers to receive less than they should have, Nasdaq OMX said in another May 21 notice. A portion of those deemed ineligible for the IPO auction were later re-entered into the market by Nasdaq’s systems, the exchange said.

The program Nasdaq announced on June 6 said the payment plan would cover three kinds of orders placed during the IPO cross: sales priced at $42 or less that weren’t executed; purchases priced at $42; and certain types of sell orders that should have participated in the cross and were entered into the market at 1:50 p.m. New York time on the day of the offering, receiving less than $42.

Orders eligible would only include those submitted before 11:30 a.m. New York time that were disadvantaged by Nasdaq’s technical error and those in which the member firm was uncertain of the outcome of the trade request. Orders that don’t qualify for compensation include “losses that are attributed to execution message delays when in fact an outcome was already certain,” Eric Noll, the executive vice president for transaction services at Nasdaq OMX, said in a webcast on June 6.

Nasdaq added a fourth category yesterday: orders to buy shares above $42 that firms tried to cancel and received executions in the cross will also be included, the statement said. The claims in this category will be reduced by 30 percent in calculating the trading loss, Nasdaq said.

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S&P 500 Has First Back-to-Back Weekly Gain Since June

U.S. stocks rose this week, with the Standard & Poor’s 500 Index posting its first back-to-back gains since June, as earnings from International Business Machines Corp. (IBM) to Baker Hughes Inc. beat estimates and Federal Reserve Chairman Ben S. Bernanke said he’s prepared to add stimulus.

The benchmark index snapped a three-day rally today amid concern Europe’s crisis is intensifying. Baker Hughes surged 16 percent this week to lead energy shares to the biggest gain among the 10 S&P 500 industry groups. Technology stocks rose 1.9 percent as IBM climbed 3.5 percent and EBay Inc. (EBAY) jumped 12 percent amid better-than-expected earnings. Financial companies had the biggest retreat after Bank of America Corp. (BAC) and Morgan Stanley (MS) sank more than 9 percent amid disappointing results.

The S&P 500 added 0.4 percent to 1,362.66 during the week, extending its gain for the year to 8.4 percent. The Dow Jones Industrial Average climbed 45.48 points, or 0.4 percent, to 12,822.57, the biggest weekly gain since June 29.

“There is this euphoria that maybe things are starting to turn around,” Linda Bakhshian, a money manager with Federated Investors in Pittsburgh, said in an interview this week. Her firm oversees $363.6 billion. “Expectations were pulled back. Companies are beating and the market is happy again because things are not that bad.”

Optimism about corporate earnings and monetary stimulus has sent the S&P 500 up 6.6 percent from a low on June 1. Profits (SPX) have exceeded analyst forecasts at about 73 percent of the 118 S&P 500 companies that have reported quarterly results so far, according to data compiled by Bloomberg. Apple Inc., Exxon Mobil Corp. and about 170 other S&P 500 companies are scheduled to announce earnings next week.
Earnings Projections

Analysts ratcheted down their projections for second- quarter profits at the start of earnings season, forecasting a decrease of 2.1 percent, compared with an increase of 4.4 percent at the beginning of this year, data compiled by Bloomberg show. By the end of this week, their outlook improved and they now estimate a 1.6 percent decline.

Stocks rose early in the week after Bernanke told senators that the central bank is prepared to act to boost growth if the labor market doesn’t improve. Disappointing data added to evidence the world’s largest economy is slowing, with reports showing that retail sales unexpectedly slid, manufacturing in the Philadelphia region contracted for a third month, claims for unemployment benefits rose and an index of leading economic indicators declined more than forecast.
‘Boost Growth’

“The assumption is that the Fed is going to continue to try to do what it can to boost growth, or at least continue conditions that could give it a chance,” Dean Gulis, who oversees about $3.5 billion as a fund manager at Loomis Sayles & Co. in Bloomfield Hills, Michigan, said in a telephone interview this week.

Europe’s debt crisis and concern about a global economic slowdown continued to loom over the markets. The S&P 500 fell 1 percent from a two-month high today after Spain said the recession will extend into next year and the region of Valencia prepared to seek a rescue from the central government. Xinhua News Agency said China will seek to keep a “firm grip” on the real estate market to prevent a rebound in housing prices, intensifying concern an economic slowdown could reduce demand for raw materials.

An S&P 500 index of energy shares advanced 2.6 percent this week. Baker Hughes (BHI) jumped 16 percent to $45.59. The third- largest oilfield-services company reported per-share profit that beat analysts’ estimates by 30 percent, the most since at least 2001, data compiled by Bloomberg show.
IBM Climbs

Technology companies added 1.9 percent for the second- biggest increase among the 10 groups in the S&P 500. IBM climbed 3.5 percent to $192.45. The world’s biggest computer-services provider boosted its full-year earnings forecast after second- quarter profit beat analysts’ estimates, helped by a decade-long shift to higher-margin software sales.

EBay advanced 12 percent to $44.85 for the biggest gain since September. The world’s largest Internet marketplace reported sales and profit that topped analysts’ estimates as more U.S. consumers shopped for new items on the site.

SanDisk Corp. (SNDK) surged 16 percent, the most since April 2010, to $38.70. The maker of flash memory for mobile devices exceeded analysts’ per-share earnings estimate by 14 percent, the most in a year, according to data compiled by Bloomberg.

Google Inc. (GOOG) climbed 6 percent to $610.82. The owner of the world’s most popular search engine said second-quarter revenue surged 35 percent, helped by its acquisition of Motorola Mobility Holdings and as more users clicked on advertisements.
Intel, AMD

Intel Corp. added 1.1 percent to $25.52. The world’s largest semiconductor maker reported second-quarter profit that topped analysts’ estimates while scaling back its annual sales forecast. Advanced Micro Devices Inc. (AMD), a rival of Intel, tumbled 14 percent to $4.22 after predicting a revenue decline amid market-share losses and diminished demand for personal computers.

Walgreen Co. (WAG) surge 13 percent to $34.60 for the biggest rally since 2000. The largest U.S. drugstore chain renewed a contract to provide Express Scripts Inc. (ESRX) customers with prescriptions, ending a dispute that contributed to an 11 percent decline in the retailer’s quarterly profit.

Financial shares fell 2.4 percent as a group, the most in seven weeks. Wall Street’s five biggest banks reported the worst start to a year since 2008, with combined first-half revenue falling 4.5 percent to $161 billion, the lowest since $135 billion four years ago. The firms blamed the decline on low interest rates and a drop in trading and deal-making.
Headcount Cuts

Bank of America sank 9.6 percent to $7.07 for the biggest loss since November. The lender said demands for buybacks from mortgage-bond investors and insurers surged more than $6 billion in the second quarter to $22.7 billion. Record claims for refunds on faulty mortgages cast doubt on whether improvements in the lender’s real estate operations will last, according to Paul Miller, an analyst at FBR Capital Markets.

Morgan Stanley reported a 50 percent drop in earnings on the biggest decline in trading revenue among Wall Street firms and said it will cut headcount by 4,000 this year. The stock slumped 9 percent to $12.78 for the week.

Chipotle Mexican Grill Inc. (CMG) plunged 19 percent, the most since its 2006 initial public offering, to $316.98 after second- quarter sales trailed analysts’ estimates. Slower U.S. consumer spending hurt the chain’s sales with smaller gains as the year proceeded, Chief Financial Officer Jack Hartung said on an analyst call. Extreme weather may boost food costs later this year and next, Hartung said.

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Stocks Drop With Commodities on Growth Concern

European stocks fell, paring their longest stretch of weekly gains in six years, and commodities dropped as China pledged to keep property curbs and amid concern Europe’s debt crisis is dragging on global growth. The euro weakened and Treasuries advanced.

The Stoxx Europe 600 Index (SXXP) slipped 0.3 percent at 9:47 a.m. in London, trimming a seventh weekly advance. Futures on the Standard & Poor’s 500 Index lost 0.2 percent. The S&P GSCI gauge of commodities slid 0.4 percent and oil in New York declined 0.4 percent. The euro slipped 0.2 percent versus the dollar and yen and German two-year note yields were less than zero for the 11th consecutive day before European finance ministers hold a conference call to set terms for Spain’s bailout. Thirty-year Treasury yields fell two basis points to 2.59 percent

“It’s natural to see the market take a breather after such a positive week for stocks,” said Giovanni Leonardo, a fund manager at Swiss & Global Asset Management Ltd. in Zurich, where he helps manage the equivalent of about $7.1 billion. “A better-than-expected start into the reporting seasons helped improve investor sentiment. Nevertheless, the situation remains fragile as the political decisions due to be taken in the coming months could heavily impact investor behavior.”

China won’t relax property control policies and will instead seek to keep a “firm grip” on the real estate market to prevent a rebound in housing prices, Xinhua News Agency said. General Electric Co., the world’s biggest maker of jet engines, power generation equipment and health-care imaging devices, will release its results today. Earnings at U.S. companies exceeded analyst estimates at 71 percent of the 110 S&P 500 companies that have reported quarterly results so far, according to data compiled by Bloomberg.
Vodafone Drops

The Stoxx 600’s decline pared this week’s advance to 2 percent. Its seventh weekly advance is the longest run since January 2006. Vodafone Group Plc (VOD), Europe’s largest mobile-phone company, slid 2.1 percent after posting quarterly service revenue that trailed analysts’ estimates.

The S&P 500 has risen for the past three days, bringing this week’s increase to 1.5 percent. Microsoft Corp. (MSFT) climbed 1.9 percent in German trading after reporting a bigger gain in multiyear software deals than analysts predicted last quarter. Google Inc. rallied 2.6 percent after the owner of the world’s most popular search engine said revenue surged 35 percent.

Commodities retreated for the first time in eight days. Oil was down to $91.91 a barrel and zinc fell 1.1 percent. Corn was the biggest gainer, rising 1.3 percent to $7.8825 a bushel.

The euro slid to $1.2257 per dollar and 96.35 yen, heading for a fourth weekly drop against its Japanese counterpart.

The yield on 10-year Treasuries dropped two basis points to 2.59 percent. Reports yesterday showed U.S. initial jobless claims were higher than estimated and measures of manufacturing activity and sales of existing homes missed estimates.

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S&P 500 Reaches Two-Month High on Earnings as Oil Gains

U.S. stocks rose, sending the Standard & Poor’s 500 Index to a two-month high, amid better- than-estimated earnings and speculation that disappointing economic data will lead the Federal Reserve to add stimulus. Oil surged, while crops rallied as a drought intensified.

The S&P 500 increased 0.3 percent to 1,376.51 at 4 p.m. in New York, its highest close since May 3. Ten-year Treasury yields rose one basis point to 1.50 percent. The Dollar Index, a gauge of the currency against six major peers, lost 0.2 percent after gaining as much as 0.1 percent. Oil rallied 3.1 percent to a two-month high of $92.66 a barrel. Soybeans reached a record and wheat climbed to the highest since 2008 as the worst U.S. drought since 1956 scorched fields.

Equities started the session higher following better-than- forecast earnings at companies from International Business Machines Corp. (IBM) to EBay Inc. Stocks briefly turned lower as reports showed existing home sales unexpectedly declined, the Conference Board’s gauge of leading economic indicators fell more than forecast and the Federal Reserve Bank of Philadelphia said its manufacturing gauge shrank for a third straight month. The rally resumed amid speculation the reports will boost chances of more quantitative easing from the Fed.

“The tug-of-war continues,” said Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama. “Earnings reports have been positive, but weakening economic data has tempered investor enthusiasm,” he said. “Always waiting in the background is the increasing possibility of another round of QE.”

Stocks have rallied for three straight days after Fed Chairman Ben S. Bernanke outlined to the Senate Banking Committee various options to ease policy further, including more purchases of Treasuries and mortgage-backed securities and altering the Fed’s language on the outlook for interest rates.
Earnings Season

Earnings have exceeded analyst forecasts at about 71 percent of the 102 companies in the S&P 500 that reported results this month, according to data compiled by Bloomberg. Profits are down 0.7 percent for the group and projected by analysts to have decreased 2.1 percent for the entire index in the second quarter, which would mark the first year-over-year decrease since 2009.

Indexes of technology and consumer-discretionary companies rose more than 1 percent to lead gains among the 10 main industries in the S&P 500 (SPX) today.
IBM Jumps

IBM jumped 3.8 percent and added 54 points to the Dow Jones Industrial Average. (INDU) At $195.34 a share, IBM is the highest- priced stock in the Dow and accounts for 11.4 percent of the price-weighted average. The company’s decade-long shift to higher-margin software sales helped IBM overcome a slowdown in technology spending last quarter and boost its full-year earnings forecast.

EBay surged 8.6 percent to $43.95, the highest price since 2006, after sales and profit topped estimates as more U.S. consumers shopped for new items on the site.

The S&P 500 has rallied almost 8 percent from a five-month low on June 1, bringing it about 3 percent away from a four-year high reached in April. The rebound came after the index tumbled 9.9 percent from April 2 through June 1, approaching a so-called correction of 10 percent.

The Stoxx Europe 600 Index (SXXP) advanced 1.1 percent to the highest level since April 3 as Electrolux AB and Akzo Nobel NV (AKZA) climbed more than 6 percent after earnings topped estimates.
European Stocks

Sandvik AB (SAND), the world’s biggest maker of metal-cutting tools, rallied 6.1 percent in Stockholm after reporting second- quarter profit that beat estimates on manufacturing demand in North and South America. Remy Cointreau SA surged 6.2 percent to a record as France’s second-largest distiller had first-quarter revenue growth that exceeded projections.

Oil advanced to a two-month high on rising concern that the Middle East will lose stability and speculation governments will act to spur economic growth. Israeli Prime Minister Benjamin Netanyahu threatened a forceful response against Iran, which he blamed for a suicide attack in Bulgaria that killed Israeli tourists, and as Syrian government forces battled rebels in Damascus. China has “relatively large” room to boost fiscal spending to support economic growth, a government researcher said.

Soybean futures for November delivery on the Chicago Board of Trade rallied 2.4 percent to $16.5825 a bushel and reached as high as $16.7375. Wheat jumped as much as 3.9 percent to $9.38 a bushel, the most since August 2008, while corn retreated from near a record.
Drought Worsens

More than half of the contiguous U.S. states were in moderate to extreme drought at the end of June, the highest percentage since December 1956, according to the National Climatic Data Center.

United Nations Certified Emission Reduction offsets for December dropped as much as 5.1 percent to a record 2.82 euros a metric ton on the ICE Futures Europe exchange in London as European Union officials struggle to cope with an oversupply of carbon permits.

Spain’s 10-year bond yield rose five basis points to 7.01 percent, increasing for a sixth straight day. The nation sold bonds due in 2014 at an average yield of 5.204 percent, compared with 4.335 percent when they were last sold on June 7. It sold five-year notes at 6.459 percent, compared with 6.072 percent on June 21 and seven-year securities at an average yield of 6.701 percent.
Spanish Debt

Demand for the two-year debt was 1.9 times the amount sold, compared with 4.26 last month and the bid-to-cover for the 2017 securities was 2.06, compared with 3.44 in June, the Bank of Spain said.

Rates on Austrian, Belgian and French debt touched record lows amid demand for sovereign debt considered to be safe.

The MSCI Emerging Markets Index (MXEF) of equities in developing nations climbed 1.2 percent to post its biggest gain in a week and reach its highest level since July 6. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong jumped 2.4 percent, the most this month. China’s Premier Wen Jiabao will probably decide to reduce banks’ reserve requirements and encourage corporate lending as the cabinet meets to discuss efforts to revive economic growth, the swap market indicates. Benchmark indexes in South Korea and Taiwan gained more than 1.4 percent. Russia’s Micex Index jumped 0.6 percent as oil gained. The ruble strengthened 1.1 percent against the dollar.

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Fed Beige Book Says Growth Was ‘Modest to Moderate’ in June

The Federal Reserve said the economy expanded at a “modest to moderate” pace in June and early July, as retail sales and manufacturing cooled in some regions.


“Manufacturing activity continued to expand slowly in most districts,” the Fed said today in its Beige Book business survey, which is based on reports from its 12 district banks. “Employment levels improved at a tepid pace.”

The New York, Philadelphia, and Cleveland districts “noted that activity continued to expand, but at a slower pace since the last report, while Richmond cited mixed activity.”

The report, which gives central bankers anecdotal evidence on the economy two weeks before they meet in Washington, supports Fed Chairman Ben S. Bernanke’s view that the U.S. lost momentum in the first half of 2012. Bernanke, in a second day of congressional testimony today, repeated that progress on unemployment may be “frustratingly slow” and the Fed is ready to take further action to boost the recovery if necessary.

“Overall, the report is tepid,” Diane Swonk, chief economist at Mesirow Financial Inc. in Chicago, said in an interview on Bloomberg Radio’s “The Hays Advantage” with Kathleen Hays. “It really echoes what the chairman has been telling us for the last two days, and that is that economic outlook is not looking too great. The economy has slowed.”

The Atlanta, St. Louis, and San Francisco districts were described as having “modest growth,” while Boston, Chicago, Minneapolis, Kansas City, and Dallas were “advancing moderately.” By comparison, in the June 6 report, seven districts were growing “moderately” and just one was reported to have slowed.
Shares Rise

Stocks held gains after the report. The Standard & Poor’s 500 Index advanced 0.7 percent to 1,372.47 at 2:37 p.m. in New York after housing starts increased at the fastest rate in almost four years and companies from Intel Corp. (INTC) to Honeywell International Inc. reported profit that beat estimates. The benchmark 10-year Treasury yield declined three basis points, or 0.03 percentage point, to 1.48 percent.

Today’s Beige Book reflects information collected on or before July 9 and summarized by the Atlanta Fed.

“Retail sales increased slightly in all reporting Districts except Boston and Cleveland, where sales were categorized as flat, and New York, where sales softened,” the report said.
FOMC Meeting

The policy-making Federal Open Market Committee meets for two days starting July 31. The group voted last month to extend Operation Twist, a program intended to push down long-term borrowing costs by extending the maturities of assets on the Fed’s balance sheet. As many as four policy makers were “quite receptive at this time” to more asset purchases, Atlanta Fed President Dennis Lockhart said July 13, citing minutes of the June meeting.

Retail sales unexpectedly declined in June for a third straight month, a sign that limited progress in job creation is holding back the biggest part of the economy, Commerce Department figures showed July 16.

The U.S. added 80,000 jobs in June, and the unemployment rate remained at 8.2 percent, the Labor Department reported July 6. Growth in private payrolls was the weakest in 10 months. The figures underscore Bernanke’s concern that growth may not be fast enough to lower unemployment stuck above 8 percent since February 2009.

“Consumers across the globe continue to feel the effects and impacts of prolonged uncertainty in Europe, the further cooling of the economy in China, and a protracted recovery here in the United States,” Coca-Cola Co. (KO) Chief Executive Officer Muhtar Kent said in a conference call yesterday. The Atlanta- based company is the world’s biggest soft-drink maker.
Housing, Construction

The Beige Book said housing reports were “largely positive as sales and construction levels increased and home inventories declined.” In addition, “Rental markets continued to strengthen.”

“We have seen modest signs of improvement in housing,” Bernanke said in his testimony to Congress. “In part because of historically low mortgage rates, both new and existing home sales have been gradually trending upward since last summer.”

At the same time, he said, tight lending standards are making it difficult for would-be home-buyers to get financing, and an overhang of vacant homes is diverting demand from new construction.
Housing Starts

Housing starts rose 6.9 percent to a 760,000 annual pace after a revised 711,000 rate in May that was faster than initially estimated, the Commerce Department reported today. The median forecast of 79 economists surveyed by Bloomberg News called for a 745,000 rate.

“Manufacturing activity continued to expand slowly in most Districts, and Cleveland, Atlanta, Chicago, and Kansas City cited slight increases in production levels,” the Fed said. “However, several districts reported a deceleration in new orders.”

Manufacturing in the U.S. unexpectedly shrank in June for the first time since the economy emerged from the recession three years ago, the Institute for Supply Management’s index showed July 2.

The recovery over the past three years has been marked by periods of solid growth followed by disappointing slowdowns, Fed Kansas City Bank President Esther George said July 16. “It looks like this summer’s slowdown will be no exception to that” and annual growth will be “not much beyond 2 percent.”

The U.S. economy will probably expand 2.1 percent in 2012 and 2.2 percent in 2013, according to the median of 72 economists surveyed by Bloomberg News July 6 to July 10.

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U.S. Stocks Gain With Treasuries, Commodities; Euro Falls

U.S. stocks rose for a second day amid better-than-estimated earnings and a jump in housing starts. Treasuries climbed while the dollar fell against most peers and natural gas led commodities to a sixth straight gain.

The Standard & Poor’s 500 Index added 0.7 percent to 1,372.78 at 4 p.m. in New York and the Stoxx Europe 600 Index closed up 1.1 percent. Ten-year Treasury yields dropped one basis point to 1.49 percent. German two-year notes rose after the nation sold 4.17 billion euros ($5.1 billion) of the securities with a negative yield for the first time, and the government’s five-year rate declined to the lowest ever. The euro halted a three-day advance to trade 0.1 percent lower.

Intel Corp. climbed 3.3 percent to pace the advance in technology companies and Honeywell International Inc. (HON) surged 6.7 percent to help lead industrial shares up after profits topped analyst estimates. U.S. housing starts jumped 6.9 percent to the highest level since 2008. Federal Reserve Chairman Ben S. Bernanke testified to Congress for a second day on the state of the economy, telling lawmakers in the House that monetary policy has helped growth and the job market.

“Earnings have been a mixed bag so far but given the healthy state of corporate America with cash on the balance sheets and valuations undemanding, we can weather this environment in terms of share prices,” Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages about $54 billion, said in a telephone interview. “Looking at the markets, all I can see in them is the Bernanke bid.”
Bernanke Watch

Stocks rallied yesterday, sending the S&P 500 up 0.7 percent, after Bernanke told the Senate Banking Committee that policy makers are studying options for further easing that may include additional asset purchases. Bernanke today said central bankers are capable of removing record stimulus from the financial system and raising interest rates when needed to avoid triggering inflation.

“It will be a similar pattern to what we’ve seen in previous episodes where the Fed cut rates, provided support for the recovery, and when the recovery reached a point of takeoff where it could support itself on its own, then the Fed pulled back, took away the punch bowl,” Bernanke told the House Financial Service Committee as part of his semi-annual testimony to Congress.

The Fed said the economy expanded at a “modest to moderate” pace in June and early July, as retail sales and manufacturing cooled in some regions, according to the central bank’s Beige Book business survey today, which is based on reports from its 12 district banks.
Market Leaders

Technology shares surged 1.9 percent as a group and industrial companies added 1.7 percent to lead gains among the 10 main industries in the S&P 500. Intel’s earnings of 54 cents a share topped the average analyst estimate of 52 cents. The company said revenue will increase 3 percent to 5 percent in 2012, lower than an earlier prediction for growth in the high single-digit percentages.

Intel had the biggest gain in the Dow Jones Industrial Average, followed by gains of more than 2 percent in Cisco Systems Inc., Microsoft Corp., International Business Machines Corp. and Hewlett-Packard Co.
‘Not Disastrous’

“Intel lowered guidance but it was not unexpected and not disastrous,” Michael James, a managing director of equity trading at Wedbush Securities Inc. in Los Angeles, said in an e- mail. “Pessimism (INTC) was pretty high and we’re now seeing people both covering and getting long some names. Intel’s leading the the technology group higher.”

EMC Corp. surged 9.4 percent after the software company said Pat Gelsinger will succeed Paul Maritz as chief executive officer of VMware Inc. Maritz will return to EMC, which owns 79 percent of VMware, as chief strategist. VMWare jumped 12 percent.

Honeywell rallied 6.7 percent after the maker of flight controls and thermostats reported better-than-estimated results driven by sales in its aerospace unit. Amphenol Corp., a maker of fiber-optic cables, and W.W. Grainger Inc., a distributor of building maintenance supplies, surged more than 11 percent for the biggest gains in the S&P 500 after releasing improved earnings forecasts.
Earnings Season

The S&P 500 has climbed for two straight days after slumping in seven of the previous eight sessions. The index is down more than 3 percent from a four-year high in April amid concern the economic recovery was slowing while investors braced for what is projected to be the first drop in quarterly earnings in almost three years.

Earnings have exceeded analyst estimates at 72 percent of the 68 companies in the S&P 500 that have reported results so far, according to data compiled by Bloomberg. Profits have slumped 3.3 percent for the group and the entire index is projected to report a 2.1 percent decrease in earnings.

Credit Suisse Group AG (CSGN) cut its year-end forecast for the S&P 500 to 1,425 from 1,440, citing the potential of a U.S. recession induced by so-called fiscal cliff. Andrew Garthwaite, global equity strategist, said he sees a 10 percent chance of the economy contracting should lawmakers do nothing to prevent about $607 billion of tax increases and spending cuts from kicking in at the end of the year.

The dollar weakened against 10 of 16 major peers, losing more than 0.3 percent versus the Japanese yen, Swedish krona and Australian dollar. The U.S. currency was little changed at $1.2284 per euro.
Commodities Gain

Natural gas surged as much as 8 percent, leading gains in 22 of 24 commodities tracked by the S&P GSCI Index, amid predictions of a smaller-than-normal increase in stockpiles. Cattle futures and hogs gained more than 2 percent on speculation that the declining U.S. herd size caused by rising feed costs will lead to a shortage of supplies.

Wheat rose for a sixth straight session on forecasts that dry weather will persist for the next week, further cutting the condition of U.S. crops.

Among European stocks, Credit Suisse jumped 4.5 percent after it announced measures to cut costs and boost capital by 8.7 billion Swiss francs ($8.9 billion). Puma SE tumbled 4.8 percent after Europe’s second-largest sporting-goods maker cut forecasts for sales and profit in 2012.

Analysts are cutting European profit forecasts at the fastest rate since 2009 as the region heads for a recession and growth in China slows for a sixth quarter.
European Yields

U.K. five-year note yields fell six basis points to 0.49 percent after Bank of England minutes indicated policy makers may reconsider the case for an interest-rate cut.

Germany’s two-year note yield dropped one basis points to minus 0.06 percent, while Finnish two-year yields fell below zero for the first time. Spain’s 10-year bond yield rose 14 basis points to 6.96 percent as the securities dropped for a fifth day.

The MSCI Emerging Markets Index declined 0.2 percent, halting a three-day gain. China’s Shanghai Composite Index rose 0.4 percent. The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong dropped 0.9 percent. South Korea’s Kospi index slid 1.5 percent while Taiwan’s Taiex Index and the Philippine Stock Exchange Index lost more than 1 percent.

Chinese Premier Wen Jiabao said the nation’s labor situation will become more “severe,” stoking bets he’ll announce measures to spur growth as the State Council meets.

“There are expectations for more measures to boost the economy at the State Council meeting so investors are using that as a reason to buy,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million.

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U.S. drought wilts crops as officials pray for rain

Oppressive heat and a worsening drought in the Midwest pushed grain prices near or past records on Wednesday as crops wilted, cities baked and concerns grew about food and fuel price inflation in the world's top food exporter.

Soybean prices at the Chicago Board of Trade set a record high and corn closed near a record as millions of acres of crops seared in triple-digit heat in the Corn Belt. Corn fields have been plowed up in many locations for lack of rain. Now soybeans, which develop later than corn, are in the bull's eye.

"I get on my knees everyday and I'm saying an extra prayer right now," Agriculture Secretary Tom Vilsack told reporters after briefing President Barack Obama. "If I had a rain prayer or a rain dance I could do, I would do it."

Vilsack said the drought was getting worse for hard-hit farmers and the wilting crops will mean higher food prices.

"Part of the problem we're facing is that weather conditions were so good at the beginning of the season that farmers got in the field early, and as a result this drought comes at a very difficult and painful time in their ability to have their crops have good yield," Vilsack said.

Drought conditions now extend over more than 60 percent of the lower 48 states, the government said. The Department of Agriculture on Wednesday extended drought aid to an additional 39 counties designated as primary natural disaster areas, bringing such aid to a total of 1,297 counties across 29 states.

Vilsack said rising grain prices would mean meat and poultry prices will be higher this year and next, although the inflation may be delayed as farmers start culling their herds due to high feed prices and meat supplies stay adequate.

But the outlook for higher food prices could add up to another headache for Obama as he faces a November election with high joblessness and slower economic growth.

Hard-hit livestock producers and other groups want the Environmental Protection Agency to give oil refiners a waiver from the mandate to blend ethanol into gasoline, arguing demand for the corn-based fuel was driving up corn prices. About 40 percent of the U.S. corn crop now is used to produce ethanol.

But Vilsack said there was no need for such action as yet.

"There is no need to go to the EPA at this time based on the quantity of ethanol that is in storage," he said.

The U.S. drought is expected to be felt worldwide as the world's biggest grain exporter struggles with shortfalls. The United States exports more than half of all world corn shipments and is also the single top exporter of wheat and soy.

"The dramatic rise in grain prices in the past few weeks is shaping up to be a serious financial blow for wheat importing countries," one German trader said on Monday.

"African and Middle Eastern countries are now facing painful rises in import bills."

WEATHER OUTLOOK STILL HOT AND DRY

Forecasters were calling for scattered showers on Wednesday evening in some parts of the east coast and Midwest. But relief was seen as too little and too late for many of the key areas of the central Plains and Corn Belt.

"There are no soaking rains in sight, nothing to relieve the drought," said World Weather Inc meteorologist Andy Karst. "There will be some light rains today through Friday in the eastern Midwest."

Iowa and Illinois, which produce about a third of U.S. corn and soybeans, continued to swelter on Wednesday in temperatures at or above 100 degrees (37.8 degrees Celsius) with little to no rain forecast.

Corn prices have jumped more than 50 percent in the last month as the crop wilted in many locations during its key growth stage of pollination.

Corn for September delivery at the Chicago Board of Trade closed at $7.95 a bushel, near last summer's record high of $7.99-3/4. Soybeans for August delivery closed at $16.85-1/2, a new record high.

"Now, it's soybeans' turn. The next two weeks will be critical for them. There is a chance for catastrophic problems in soybeans," said grains analyst Don Roose of Commodities in Des Moines, Iowa

"The summer of 2012 is on pace to finish third hottest on the list of 62 summers since 1950," said Steven Root, a meteorologist with WeatherBank Inc. "But it is still in the running for number two or one."

In many parts of the country, power grids were under pressure from demand on air conditioning but most were holding up. In New York City, Consolidated Edison reduced its power voltage in some Manhattan neighborhoods, resulting in brownouts.

Low water levels in many lakes and rivers were hampering transportation, with hydroelectric plants tapping water in locations like Arkansas and the Army Corps of Engineers issuing warnings to consumers about water levels.

Water usage for lawns and recreation continued to see restrictions in many areas of the country.

In crop areas, farmers saw further headaches from plant diseases like fungus and crop pests like spider mites on soybeans or rootworms or Japanese beetles in corn that appear in hot weather.

But one silver lining in many areas from weeks of drought was a pleasant surprise: fewer mosquitoes, which lack moist breeding places. "I can live with that part of the drought," said Scott Trout as he left a playground in Westwood, Kansas, with his wife and two children.

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Goldman Sachs Cuts Pay as Revenue Drops to Lowest Since 2005

Goldman Sachs Group Inc. (GS) cut jobs and money to pay employees and will seek $500 million in additional cost reductions this year after first-half revenue fell to the lowest since 2005.

Compensation, which includes salaries, benefits, bonuses and the expense of deferred pay awarded in prior years, dropped 14 percent to $7.29 billion in the first six months, the New York-based bank said today in a statement. Revenue in the same period dropped 14 percent to $16.6 billion.

Lloyd C. Blankfein, 57, has cut 1,000 jobs this year to counter the slowest first-half since before he became chairman and chief executive officer in mid-2006. Trading, which contributed about 60 percent of the bank’s revenue in 2011, dropped 6 percent in the first half from a year earlier. Blankfein said last month he thinks the slowdown is a temporary reaction to the financial crisis.

“We’re very cognizant of the returns our shareholders get versus what our employees get,” Chief Financial Officer David Viniar said on a conference call with analysts. Compensation will probably be the primary target for additional cost reductions, he said. The bank will add junior employees and will try to strike a balance to avoid losing talent, he said.

“If we cut our comp very dramatically in one year, it would help our returns, but we live in a competitive environment,” he said. “We still have people leaving for multiyear offers” from rival banks and other financial firms.
Average Employee Pay

The first-half compensation expense, at 44 percent of revenue, is enough to pay each of Goldman Sachs’s 32,300 employees $225,789 for the first six months of the year. The firm set aside $8.44 billion a year earlier, which was 44 percent of revenue and equal to an average $237,662 for each of the 35,500 people employed by Goldman Sachs at the time.

The last time Goldman Sachs generated less revenue in the first half was 2005, when the company made $11.2 billion, according to company reports. The firm, which reported it had about 21,800 full-time employees at the end of the fiscal first half in 2005, began including consultants and temporary staff in its employment numbers in 2009. The firm is the fifth- biggest U.S. bank by assets.

JPMorgan Chase & Co. (JPM), the largest U.S. lender, cut first- half compensation expenses at its investment bank 16 percent to $4.91 billion, or 35 percent of revenue. That would be enough to pay each of the 26,553 workers in the unit an average of $184,989 for the period.

In the first half of 2011, JPMorgan allocated $5.86 billion for compensation in the unit, or 38 percent of revenue. That was enough to pay an average $211,358 for each of the 27,716 employees at the time.

Figures for average pay don’t represent what any employee actually receives and are calculated by dividing the total compensation expense by the number of employees.

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HSBC Probe Results in Promises Regulator, Bank Will Clean Up Act

HSBC Holdings Plc (HSBA) executives apologized for opening their U.S. affiliate to a river of Mexican drug lords’ cash, and the U.S. regulator that failed to stem the flow vowed to prevent a repeat.

“I deeply regret we did not act sooner and more decisively,” Comptroller of the Currency Thomas Curry said at a day-long hearing yesterday of the Senate Permanent Subcommittee on Investigations. He said his agency, which regulates HSBC’s U.S. arm, is partially responsible for letting Europe’s largest bank give terrorists, drug cartels and criminals access to the U.S. financial system and will take “a much more aggressive posture.”

Calling the Office of the Comptroller of the Currency a “lapdog not a watchdog,” Senator Tom Coburn of Oklahoma, the senior Republican on the panel, accused the agency of seeing weaknesses in the bank’s money-laundering safeguards and being “at a loss” to act. Curry, who took office in April, said the OCC will step in when a bank accumulates deficiencies, and has changed its policy to count repeated compliance failures against a bank’s safety-and-soundness rating.

Six current and former executives of London-based HSBC displayed a united front of contrition at the hearing, with compliance chief David Bagley announcing in front of the senators that he will step down from his post. Bagley said his bank “has fallen short of our own expectations.” HSBC shares dropped 1.7 percent to 547.40 pence in London trading yesterday, limiting its gains this year to 11.5 percent.
Risk ‘Sinkhole’

“Some international banks abuse their U.S. access,” said Senator Carl Levin, the Michigan Democrat who heads the subcommittee, saying these transgressions were bad enough to warrant a reconsideration of the bank’s charter. “The end result is that the U.S. affiliate can become a sinkhole of risk for an entire network of bank affiliates and their clients around the world playing fast and loose with U.S. rules.”

Senate investigators focused on New York-based HSBC Bank USA NA as a “nexus” for U.S. dollar services and transfers. Coburn pointed out that HSBC isn’t alone and that “similar problems exist at other banks.”

Paul Thurston, head of HSBC’s retail banking and wealth management unit and former chief of the Mexico unit, said the company is closing the unit’s U.S. dollar accounts in the Cayman Islands, a jurisdiction that Levin said is “known for secrecy and money laundering.”

HSBC bolstered its presence in Mexico in 2002 by buying the nation’s fifth-largest bank, Grupo Financiero Bital SA, better known as Bital. Senate investigators found that Bital had a history of deficiencies in anti-money-laundering controls. Thurston described the business side in the Mexican bank “overriding” its compliance side.
335-Page Report

From 2000 to 2009, HSBC gave its lowest risk rating to Mexico despite “overwhelming information” that it posed a high risk for drug trafficking and money laundering, investigators wrote in a 335-page report accompanied by 529 pages of HSBC e- mails and other documents. Mexican clients included casas de cambio, or currency-exchange firms, which U.S. authorities say often launder money.

Wells Fargo & Co. (WFC)’s Wachovia Bank unit paid $160 million in 2010 to resolve a criminal probe that cartels were using such exchange houses to launder cash.

HSBC’s Mexican bank shipped $7 billion in bulk cash to the firm’s U.S. bank in 2007 and 2008, leaving U.S. and Mexican authorities concerned cartels were the source, the report said.

In 2007, the head of Latin America compliance sent an e- mail to a colleague condemning the Mexican affiliate for “rubber-stamping unacceptable risks,” according to the report.

“What is this, the School of Low Expectations Banking?” the executive, John Root, wrote in the e-mail.
Exit Interview

Leopoldo Barroso, a former HSBC anti-money-laundering director, told company officials in an exit interview that he was concerned about “allegations of 60 percent to 70 percent of laundered proceeds in Mexico” going to affiliates, investigators wrote.

In 2008, the Mexican unit carried a years-old backlog of 3,659 accounts meant to be closed, according to a 2008 e-mail from Warren Leaming, who was an HSBC legal adviser. He said 675 of those accounts were suspected of money-laundering activity.

Some of HSBC’s alleged dealings with state sponsors of terror and Mexican drug dealers were reported in July 2005 by Bloomberg Markets magazine, which documented bank ties to Iran, Libya, Sudan and Syria.

HSBC’s U.S. unit “offers a gateway for terrorists to gain access to U.S. dollars and the U.S. financial system,” according to the subcommittee’s report.
Links Ignored

The lender ignored links to terrorist financing among its customer banks, including Riyadh, Saudi Arabia-based Al Rajhi Bank (RJHI), which had ties to terror groups through its owners, the report said. Mohammad Al Yami, an Al Rajhi spokesman, didn’t respond to an e-mail requesting comment.

The report also cited HSBC’s violations of Treasury Department sanctions on dealings with Iran. The U.S. is seeking to isolate Iran from the global banking system through sanctions enforced by the Office of Foreign Assets Control, or OFAC.

HSBC executives discussed those sanctions in e-mails cited in the report. Bagley wrote after the Sept. 11, 2001 terror attacks that the bank should pay attention to proposed legislation to extend U.S. reach over foreign banks, “particularly if we are unfortunate enough to process a payment which turns out to be connected to terrorism.”

He wrote: “Some of the routes traditionally used to avoid the impact of U.S. OFAC sanctions may no longer be acceptable.”
Iranian Transactions

An outside audit by Deloitte LLP showed that 25,000 transactions totaling more than $19.4 billion involved Iran, according to the report. Of those, as many as 90 percent passed through the bank’s U.S. accounts with no disclosure of ties to Iran, the report shows. Senate investigators documented similar transactions involving North Korea, Cuba, Sudan and Burma.

Bank documents also showed HSBC’s U.S. unit cleared transactions through at least six Iranian banks.

Since 2009, the U.S. Justice Department entered deferred- prosecutions agreements with six banks over OFAC violations, including ING Groep NV (ING), Barclays Plc (BARC), ABN Amro Holding NV, Credit Suisse Group AG (CSGN) and Lloyds Banking Group Plc. (LLOY) Most violations involved stripping information from wire-transfer documentation to hide the role of a banned person or country.

HSBC has said that it’s cooperating with investigations by the Justice Department and other agencies into possible Iran sanctions violations. It’s also cooperating in unrelated probes by the Justice Department and Internal Revenue Service into whether it helped Americans evade taxes through HSBC India.

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Needles found in sandwiches on four U.S.-bound Delta flights

Delta Air Lines Inc said it was working with federal authorities after what appeared to be sewing needles were found in food on four U.S.-bound flights that left Sunday from Amsterdam, injuring one passenger.

The needles were found in sandwiches made by the airline's Amsterdam caterer, Gate Gourmet, Delta spokeswoman Chris Kelly said in an email Monday. The FBI and Netherlands officials are investigating, as are officials from Gate Gourmet, Delta said.

"Delta is taking this matter extremely seriously and is cooperating with local and federal authorities who are investigating the incident," the airline said in a statement.

"Delta has taken immediate action with our in-flight caterer at Amsterdam to ensure the safety and quality of the food we provide onboard our aircraft," the statement said.

One person on a flight to Minneapolis was injured but declined medical treatment.

A suspected sewing needle was also found in a sandwich by a passenger on an Atlanta-bound flight. A U.S. air marshal found another while flying on another Atlanta-bound flight.

Another apparent needle was found aboard a Seattle-bound flight in a sandwich that had not been served.

Gate Gourmet is a subsidiary of gategroup Holding AG, one of the largest independent global providers of airline passenger products and services.

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Needles found in sandwiches on four U.S.-bound Delta flights

Delta Air Lines Inc said it was working with federal authorities after what appeared to be sewing needles were found in food on four U.S.-bound flights that left Sunday from Amsterdam, injuring one passenger.

The needles were found in sandwiches made by the airline's Amsterdam caterer, Gate Gourmet, Delta spokeswoman Chris Kelly said in an email Monday. The FBI and Netherlands officials are investigating, as are officials from Gate Gourmet, Delta said.

"Delta is taking this matter extremely seriously and is cooperating with local and federal authorities who are investigating the incident," the airline said in a statement.

"Delta has taken immediate action with our in-flight caterer at Amsterdam to ensure the safety and quality of the food we provide onboard our aircraft," the statement said.

One person on a flight to Minneapolis was injured but declined medical treatment.

A suspected sewing needle was also found in a sandwich by a passenger on an Atlanta-bound flight. A U.S. air marshal found another while flying on another Atlanta-bound flight.

Another apparent needle was found aboard a Seattle-bound flight in a sandwich that had not been served.

Gate Gourmet is a subsidiary of gategroup Holding AG, one of the largest independent global providers of airline passenger products and services.

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Obama says he won't apologize for Bain attacks

President Barack Obama will not apologize to Republican presidential candidate Mitt Romney for raising questions about his tenure and the timing of his departure from private equity firm Bain Capital, the Democrat said in an interview published on Sunday.
Romney demanded an apology last week after Obama's campaign suggested he may have broken the law by misrepresenting his position at private-equity firm Bain Capital, part of an assault on the former executive's business career and personal wealth that may be hurting him in the polls.
"No, we won't be apologizing," Obama said in an interview with a Virginia television station WAVY.
"Mr. Romney claims that he's Mr. Fix-it for the economy because of his business experience. And so I think voters entirely legitimately want to know, well what exactly was that business experience?" Obama said.
Chicago Mayor Rahm Emmanuel, Obama's former chief of staff, was more succinct.
"Stop whining," Emmanuel said on ABC's "This Week" program. "If you want to claim Bain Capital as your calling card to the White House, then defend what happened at Bain Capital."
Romney has argued that the economic expertise he developed as an investor, manager and consultant make him a better choice than Obama to kick-start an economy that has been slow to recover from the 2007-2009 financial crisis.
But Romney's record at Bain is also shaping up to be something of a liability. Democrats have highlighted companies that went bankrupt or shipped jobs overseas under Bain's ownership to argue that Romney is only concerned with helping his fellow millionaires, not working people.
Romney's campaign has said he should not be held responsible for many of those decisions because they occurred after he took a leave of absence from Bain in February 1999 to oversee the 2002 Olympic Winter Games in Salt Lake City.
But Romney continued to claim in regulatory filings that he was still in charge of Bain through 2002, according to documents that have surfaced over the past week. Bain and Romney officials say it took several years to sort out the terms of his departure but that he was not involved with the company's day-to-day operations during that time.
"He actually retired retroactively at that point. He ended up not going back to the firm after his time in Salt Lake City," Romney senior adviser Ed Gillespie said on NBC's "Meet the Press" program.
DISTRACTION?
Obama's campaign has accused Romney of being responsible for the firing of workers and bankruptcies at Bain-owned companies during those years.
"So, you know, as president of the United States, one of the things I've learned ... was anything that happens on my watch is my responsibility. That's what people expect. Harry Truman said 'the buck stops with me' and I think, understandably, people are going to be interested in are you (Romney) in fact responsible for this company that you say is one of your primary calling cards for your wanting to be president," Obama sad in the interview.
An Obama spokeswoman suggested last week that Romney could have committed a felony if he signed forms saying he was in charge of Bain when he was not -- which prompted the apology demand from Romney.
Democrats have also criticized Romney for setting up bank accounts in offshore tax havens and refusing to release more information about a personal fortune that is worth as much as $250 million.
The attacks may be resonating with voters at a time when Romney is still largely undefined in the eyes of the public. Several polls released in June found that Romney's negative ratings have risen in states where Obama and Democratic groups have attacked the former Massachusetts governor.
Romney allies said the attacks were an attempt to distract voters' attention from the fact that Obama has failed to counter high unemployment and sluggish economic growth during his three and a half years in the White House.
"The president can talk all he want about this, but it's the economy and jobs that are going to address this election," Republican Senator Kelly Ayotte, seen as a possible vice presidential running mate for Romney, said on ABC's "This Week" program.
The Romney campaign released a new television ad relying on footage of journalists talking about how Obama's negative tactics this year contrasted sharply with the message of hope and change he campaigned on four years ago.
"This is not the candidate of hope and change, this is a candidate who is hoping to change the subject," Republican Representative Paul Ryan, another possible vice presidential candidate, said on CBS's "Face the Nation."

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