Fiscal talks fail, U.S. stumbles toward steep cuts

The U.S. government stumbled headlong on Friday toward wide-ranging spending cuts that threaten to hinder the economic recovery, after President Barack Obama and congressional leaders failed to find an alternative budget plan.

Put in place during a bout of deficit-reduction fever in 2011, the automatic cuts can only be halted by agreement between Congress and the White House

"This is not going to be an apocalypse,” Obama told reporters at the White House  Friday. "It's just dumb. And it's going to hurt. It's going to hurt individual people, and it's going to hurt the economy overall."

A deal proved elusive in talks at the White House on Friday as expected, meaning that government agencies will now begin to hack a total of $85 billion from their budgets between Saturday and October 1. Financial markets in New York shrugged off the stalemate in Washington.

Democrats predict the cuts, known as "sequestration," could soon cause air traffic delays, furloughs for hundreds of thousands of federal employees and disruption to education.

While the International Monetary Fund warned that the belt tightening could slow U.S. economic growth by at least 0.5 of a percentage point this year, that is not a huge drag on an economy that is picking up steam.

Obama was resigned to government budgets shrinking.

"Even with these cuts in place, folks all across this country will work hard to make sure that we keep the recovery going, but Washington sure isn't making it easy," he said after meeting Republican and Democratic congressional leaders.

At the heart of Washington's persistent fiscal crises is disagreement over how to slash the budget deficit and the $16 trillion national debt, bloated over the years by wars in Iraq and Afghanistan and government stimulus for the ailing economy.

Obama wants to close the fiscal gap with spending cuts and tax hikes, but Republicans don't want to concede again on taxes after doing so in negotiations over the "fiscal cliff" at the New Year.

"The discussion about revenue, in my view, is over. It's about taking on the spending problem," House of Representatives Speaker John Boehner said on leaving the meeting.

The billions of dollars in cuts that go into effect on Saturday will probably be phased in over the coming weeks and months. Agencies from the Pentagon to the Department of Education have begun making plans to notify employees who will have to take unpaid days off.

Administration officials say the cutbacks in staffing will affect everything from air-traffic control to border security, preventive health screenings and prosecution of criminal cases. The automatic cuts were harsh by design, meant to force Republicans and Democrats into a bigger budget deal that reduces deficit spending.

No matter how Obama and Congress resolve the 2013 battle, this round of automatic spending cuts is only one of a decade's worth of annual cuts totaling $1.2 trillion mandated by the sequestration law.

Given the current absence of a deal, Obama is required to issue an order to federal agencies by midnight to reduce their budgets. The White House budget office must send a report to Congress detailing the spending cuts.

The Justice Department has already sent notices of furloughs that will begin April 21 at the earliest to some 115,000 workers, including at the Federal Bureau of Investigation.

Unlike previous fiscal dramas, the sequestration fight is not rattling Wall Street.

U.S. stocks rose moderately on Friday, with the Dow Industrials closing up 35 points, as data showed manufacturing expanded at its fastest pace in 20 months in February. Despite being up more than 7 percent this year, and near a record high, the discord in Washington has not prompted traders to cash in gains.

"Most of us believe that sequestration is not something that will make us fall off the cliff, since the cuts will be worked in relatively slowly," said Bill Stone, chief investment strategist at PNC Wealth Management in Philadelphia.

Poll shows GOP beraing blame

Read More..

Frustrated McIlroy walks off course at Honda

PALM BEACH GARDENS, Fla. (AP) — Whether his pain was mental or dental, Rory McIlroy walked off the course in the middle of his round Friday at the Honda Classic and invited even more scrutiny of golf's No. 1 player.

McIlroy already was 7-over par through eight holes when he hit his second shot into the water on the par-5 18th and didn't bother hitting another shot. He shook hands with Ernie Els and Mark Wilson, turned in his scorecard and walked straight to the parking lot.

McIlroy told three reporters who followed him that he's "not in a good place mentally."

An hour later, his management company issued a statement that the 23-year-old McIlroy couldn't concentrate because of a sore wisdom tooth.

His abrupt departure only added to the sloppy start to his young season, and raised concerns with the Masters just more than a month away. In three tournaments, he has missed the cut in Abu Dhabi, lost in the first round of the Match Play Championship and withdrew after 26 holes at PGA National.

"His demeanor looks a little different," said Graeme McDowell, one of his best friends. "I felt like he was a little off with his golf swing on the range. There were a few moans and groans coming from the bay next to me. It's normally a display. It's normally a clinic. It's superlatives coming from the coach and the caddie. That's the sign of a guy who's lacking a little technique in his swing and a little belief in his game."

In the parking lot, McIlroy was asked three times if anything was wrong physically and he said no. Golfweek magazine reported he was near tears.

"There's not really much I can say, guys," McIlroy said. "I'm not in a good place mentally, you know?"

Els also hit into the water on the 18th and was complaining to a rules official about the muddy conditions of the fairway when he figured out McIlroy was through.

"I was dropping my ball and I realized he wasn't dropping his ball," Els said. "I thought maybe his ball crossed further up (the hazard). When I hit my fourth shot, he just came up and said, 'Here's my card. I'm out of here.'"

McIlroy, who last year won the Honda Classic to go to No. 1 in the world for the first time, apologized to the tournament for his "sudden withdrawal."

"I have been suffering with a sore wisdom tooth, which is due to come out in the near future," McIlroy said. "It began bothering me again last night, so I relieved it with Advil. It was very painful again this morning, and I was simply unable to concentrate. It was really bothering me and had begun to affect my playing partners."

He was seen eating a sandwich on the 18th fairway.

"I'm a great fan of Rory's, but I don't think that was the right thing to do," Els said.

Told about McIlroy's statement about the sore wisdom tooth, Els softened his stance, not wanting to judge another player's pain.

"I didn't see anything, but if he had a toothache, that's what it is, you know?" Els said. "Hey, it's tough. If you ask him how he's feeling now, he's obviously feeling terrible for what's happened this morning."

"I didn't notice anything," Wilson said. "He wasn't playing the way the world No. 1 plays normally. Didn't hit the ball where he wanted to, and he's a true gentleman, though. He ... wasn't treating Ernie and myself in a different way. He was upset with his golf and I guess he had enough for the week."

McIlroy, coming off a year in which he won a second major with a record, already set himself up for scrutiny when he left Titleist to sign an equipment deal with Nike that was said to be worth upward of $20 million a year. Instead of taking a long winter break, he spent much of December trying to adjust to his new clubs. McIlroy said Tuesday it wasn't the clubs; his swing was out of sorts.

"I'm sure the guy has got a lot on his mind," McDowell said. "When you start trying to prove things to other people and you stop playing for yourself, it's a dangerous place to be. ... Any player would have did what he's done with regard to the equipment change. He's one of the most talented players I've ever seen. Once he starts believing in himself, he'll be back."

McIlroy won the PGA Championship by a record eight shots last year, making him the youngest player since Seve Ballesteros in 1980 to win two majors. McIlroy won the U.S. Open in 2011 by eight shots with a record score.

Nike introduced him with blaring music and a laser show in Abu Dhabi, but it's been all downhill from there.

After rounds of 75-75 in Abu Dhabi, he took a four-week break and spent time with tennis girlfriend Caroline Wozniacki. He was eliminated at Match Play in a sloppy performance by both of them. McIlroy returned to Florida and played 36 holes with Tiger Woods at The Medalist.

He said on Tuesday that it was no time to panic so early in the season.

"Even though my results haven't revealed it, I really felt like I was rounding a corner," McIlroy said. "This is one of my favorite tournaments of the year and I regret having to make the decision to withdraw, but it was one I had to make."

It looked more like McIlroy was sinking than rounding the corner, not difficult to do on a course with so many water hazards. And he found plenty of them.

McIlroy, who opened with a 70, hit two poor chips that led to double bogey on No. 11, and a wild tee shot to the right led to a bogey on the 13th. His round really unraveled on the par-4 16th, when he hit his tee shot to the right and into the water, took a penalty drop and then came up short of the green and into the water again on his way to a triple bogey. He three-putted from 40 feet on the 17th, running his first putt about 10 feet by the hole, for a bogey to go 7 over.

And then came the approach on the 18th that found water for the third time on his short day.

McIlroy is scheduled to play next week in the Cadillac Championship at Doral, which has no cut, and then the Houston Open. But on the first day of March, he left having completed only round of competition.

"I didn't think much of the equipment change. We've all made equipment changes before," said Els, who has used three brands of clubs to win majors. "I think there was a bit of criticism somewhere, and then I think he's further responding to that, and I think he's got a bit of pressure coming on him that way. I thought he played quite well yesterday. I thought he was pretty close to playing good golf, and unfortunately this morning ... hopefully he gets it together. We've got next week, got four rounds there. Such a talented player. He'll get it figured out."

Geoff Ogilvy always preached caution about rushing to judgment of Boy Wonder. A year ago, McIlroy missed the cut in four out of five tournaments, including the U.S. Open. He won four times from August to November, including the PGA and two FedEx Cup playoff events.

"Everyone is being a little hard on the equipment," Ogilvy said. "He has a plan. He had a plan last year, and it all worked out for him. He had a rubbish year, really, until late summer. In May, everyone was throwing him under the bus and everyone was claiming him at the end of the year.

"He'll probably go win the Masters by eight and we'll all go, 'He knew what he was doing.' "

It was the second straight year one of golf's biggest stars failed to finish a tournament on the Florida swing. Woods withdrew after 11 holes on the final round at Doral last year because of tightness in his Achilles tendon, raising questions about the seriousness of his recurring leg injuries. He won Bay Hill two weeks later.

Read More..

WHO: Slight cancer risk after Japan nuke accident

LONDON (AP) — Two years after Japan's nuclear plant disaster, an international team of experts said Thursday that residents of areas hit by the highest doses of radiation face an increased cancer risk so small it probably won't be detectable.

In fact, experts calculated that increase at about 1 extra percentage point added to a Japanese infant's lifetime cancer risk.

"The additional risk is quite small and will probably be hidden by the noise of other (cancer) risks like people's lifestyle choices and statistical fluctuations," said Richard Wakeford of the University of Manchester, one of the authors of the report. "It's more important not to start smoking than having been in Fukushima."

The report was issued by the World Health Organization, which asked scientists to study the health effects of the disaster in Fukushima, a rural farming region.

On March 11, 2011, an earthquake and tsunami knocked out the Fukushima plant's power and cooling systems, causing meltdowns in three reactors and spewing radiation into the surrounding air, soil and water. The most exposed populations were directly under the plumes of radiation in the most affected communities in Fukushima, which is about 150 miles (240 kilometers) north of Tokyo.

In the report, the highest increases in risk are for people exposed as babies to radiation in the most heavily affected areas. Normally in Japan, the lifetime risk of developing cancer of an organ is about 41 percent for men and 29 percent for women. The new report said that for infants in the most heavily exposed areas, the radiation from Fukushima would add about 1 percentage point to those numbers.

Experts had been particularly worried about a spike in thyroid cancer, since radioactive iodine released in nuclear accidents is absorbed by the thyroid, especially in children. After the Chernobyl disaster, about 6,000 children exposed to radiation later developed thyroid cancer because many drank contaminated milk after the accident.

In Japan, dairy radiation levels were closely monitored, but children are not big milk drinkers there.

The WHO report estimated that women exposed as infants to the most radiation after the Fukushima accident would have a 70 percent higher chance of getting thyroid cancer in their lifetimes. But thyroid cancer is extremely rare and one of the most treatable cancers when caught early. A woman's normal lifetime risk of developing it is about 0.75 percent. That number would rise by 0.5 under the calculated increase for women who got the highest radiation doses as infants.

Wakeford said the increase may be so small it will probably not be observable.

For people beyond the most directly affected areas of Fukushima, Wakeford said the projected cancer risk from the radiation dropped dramatically. "The risks to everyone else were just infinitesimal."

David Brenner of Columbia University in New York, an expert on radiation-induced cancers, said that although the risk to individuals is tiny outside the most contaminated areas, some cancers might still result, at least in theory. But they'd be too rare to be detectable in overall cancer rates, he said.

Brenner said the numerical risk estimates in the WHO report were not surprising. He also said they should be considered imprecise because of the difficulty in determining risk from low doses of radiation. He was not connected with the WHO report.

Some experts said it was surprising that any increase in cancer was even predicted.

"On the basis of the radiation doses people have received, there is no reason to think there would be an increase in cancer in the next 50 years," said Wade Allison, an emeritus professor of physics at Oxford University, who also had no role in developing the new report. "The very small increase in cancers means that it's even less than the risk of crossing the road," he said.

WHO acknowledged in its report that it relied on some assumptions that may have resulted in an overestimate of the radiation dose in the general population.

Gerry Thomas, a professor of molecular pathology at Imperial College London, accused the United Nations health agency of hyping the cancer risk.

"It's understandable that WHO wants to err on the side of caution, but telling the Japanese about a barely significant personal risk may not be helpful," she said.

Thomas said the WHO report used inflated estimates of radiation doses and didn't properly take into account Japan's quick evacuation of people from Fukushima.

"This will fuel fears in Japan that could be more dangerous than the physical effects of radiation," she said, noting that people living under stress have higher rates of heart problems, suicide and mental illness.

In Japan, Norio Kanno, the chief of Iitate village, in one of the regions hardest hit by the disaster, harshly criticized the WHO report on Japanese public television channel NHK, describing it as "totally hypothetical."

Many people who remain in Fukushima still fear long-term health risks from the radiation, and some refuse to let their children play outside or eat locally grown food.

Some restrictions have been lifted on a 12-mile (20-kilometer) zone around the nuclear plant. But large sections of land in the area remain off-limits. Many residents aren't expected to be able to return to their homes for years.

Kanno accused the report's authors of exaggerating the cancer risk and stoking fear among residents.

"I'm enraged," he said.

___

Mari Yamaguchi in Tokyo and AP Science Writer Malcolm Ritter in New York contributed to this report.

__

Online:

WHO report: http://bit.ly/YDCXcb

Read More..

Incomes see largest drop in 20 years

U.S. consumer spending rose in January as Americans spent more on services, with savings providing a cushion after income recorded its biggest drop in 20 years.

Income tumbled 3.6 percent, the largest drop since January 1993. Part of the decline was payback for a 2.6 percent surge in December as businesses, anxious about higher taxes, rushed to pay dividends and bonuses before the new year.

A portion of the drop in January also reflected the tax hikes. The income at the disposal of households after inflation and taxes plunged a 4.0 percent in January after advancing 2.7 percent in December.

The Commerce Department said on Friday consumer spending increased 0.2 percent in January after a revised 0.1 percent rise the prior month. Spending had previously been estimated to have increased 0.2 percent in December.

January's increase was in line with economists' expectations. Spending accounts for about 70 percent of U.S. economic activity and when adjusted for inflation, it gained 0.1 percent after a similar increase in December.

Though spending rose in January, it was supported by a rise in services, probably related to utilities consumption. Spending on goods fell, suggesting some hit from the expiration at the end of 2012 of a 2 percent payroll tax cut. Tax rates for wealthy Americans also increased.

The impact is expected to be larger in February's spending data and possibly extend through the first half of the year as households adjust to smaller paychecks, which are also being strained by rising gasoline prices.

Economists expect consumer spending in the first three months of this year to slow down sharply from the fourth quarter's 2.1 percent annual pace.

With income dropping sharply and spending rising, the saving rate - the percentage of disposable income households are socking away - fell to 2.4 percent, the lowest level since November 2007. The rate had jumped to 6.4 percent in December.

Read More..

Groupon founder Andrew Mason fired; shares jump

Groupon on Thursday ousted its CEO, company co-founder Andrew Mason, replacing him with two current directors amid increasing heat about the deal site's disappointing financial performance.

In a letter to employees, Mason said he was fired, with a playful and self-deprecating addition: "If you're wondering why ... you haven't been paying attention."

"From controversial metrics in our (initial public offering) to two quarters of missing our own expectations and a stock price that's hovering around one quarter of our listing price, the events of the last year and a half speak for themselves," Mason continued. "As CEO, I am accountable."

As far back as November, Groupon and Mason were forced to respond publicly to a report that he would lose his job. Reports surfaced at the time that Groupon's board was considering replacing Mason with a more experienced CEO to lead the Chicago-based daily deal company's turnaround.  

The board said it's searching for a permanent replacement. For now, Executive Chairman Eric Lefkofsky and Vice Chairman Ted Leonsis will share the task of running the company.

The company said its earnings expectations for the first quarter and full year outlined on Wednesday remain unchanged.

Investors appear to applaud the executive change, driving shares up in after-hours trading after a brutal regular session in which the stock lost a quarter of its value. Shares had plummeted in continuing fallout from a weaker than expected earnings report and forecast on Wednesday. The stock jumped 8 percent after hours on the news and was at $4.70, up nearly 4 percent, at 5 p.m.

Groupon, which was founded in 2008, was once a red-hot company that sparked a number of deal site competitors by marketing discounts on local services such as spas and restaurants to millions of online subscribers.

It turned down a nearly $6 billion buyout offer by Google in 2010 that at the time was thought to undervalue the company. A year later, it ended its first day as a public company worth $16 billion.

But it has lost about three-quarters of its value since it went public. On Thursday, its market capitalization was less than $3 billion, according to Capital IQ.

Mason has come under fire for a series of missteps including controversy during its IPO and not finding a quick enough solution for its financial problems.

The scrutiny of Groupon was tremendous, given the "high-flying" nature of the company and the culture created and fostered by Mason, observers said.

That culture turned from a lovable quirk to a major liability as the company ran into controversy over its poorly received Super Bowl ads two years ago and a series of missteps before its IPO. Then, within months of its public debut, it disclosed an accounting flaw that forced it to restate financial results.

The larger question surrounding Groupon -- the long-term viability of its basic business model -- remains. The company has been expanding offerings beyond its core daily deals, where growth has slumped.

On Wednesday, the company posted a fourth-quarter net loss of $81.1 million, or 12 cents a share, missing Wall Street's expectations for a profit. Revenue for the quarter was up 30 percent, in line with analysts' views.

Groupon also warned Wednesday that its turnaround would take time, suggesting it will likely cut employees and overall expenses.

Reuters contributed to this report.

GRPN data by YCharts

Read More..

WHO: Slight cancer risk after Japan nuke accident

LONDON (AP) — Two years after Japan's nuclear plant disaster, an international team of experts said Thursday that residents of areas hit by the highest doses of radiation face an increased cancer risk so small it probably won't be detectable.

In fact, experts calculated that increase at about 1 extra percentage point added to a Japanese infant's lifetime cancer risk.

"The additional risk is quite small and will probably be hidden by the noise of other (cancer) risks like people's lifestyle choices and statistical fluctuations," said Richard Wakeford of the University of Manchester, one of the authors of the report. "It's more important not to start smoking than having been in Fukushima."

The report was issued by the World Health Organization, which asked scientists to study the health effects of the disaster in Fukushima, a rural farming region.

On March 11, 2011, an earthquake and tsunami knocked out the Fukushima plant's power and cooling systems, causing meltdowns in three reactors and spewing radiation into the surrounding air, soil and water. The most exposed populations were directly under the plumes of radiation in the most affected communities in Fukushima, which is about 150 miles (240 kilometers) north of Tokyo.

In the report, the highest increases in risk are for people exposed as babies to radiation in the most heavily affected areas. Normally in Japan, the lifetime risk of developing cancer of an organ is about 41 percent for men and 29 percent for women. The new report said that for infants in the most heavily exposed areas, the radiation from Fukushima would add about 1 percentage point to those numbers.

Experts had been particularly worried about a spike in thyroid cancer, since radioactive iodine released in nuclear accidents is absorbed by the thyroid, especially in children. After the Chernobyl disaster, about 6,000 children exposed to radiation later developed thyroid cancer because many drank contaminated milk after the accident.

In Japan, dairy radiation levels were closely monitored, but children are not big milk drinkers there.

The WHO report estimated that women exposed as infants to the most radiation after the Fukushima accident would have a 70 percent higher chance of getting thyroid cancer in their lifetimes. But thyroid cancer is extremely rare and one of the most treatable cancers when caught early. A woman's normal lifetime risk of developing it is about 0.75 percent. That number would rise by 0.5 under the calculated increase for women who got the highest radiation doses as infants.

Wakeford said the increase may be so small it will probably not be observable.

For people beyond the most directly affected areas of Fukushima, Wakeford said the projected cancer risk from the radiation dropped dramatically. "The risks to everyone else were just infinitesimal."

David Brenner of Columbia University in New York, an expert on radiation-induced cancers, said that although the risk to individuals is tiny outside the most contaminated areas, some cancers might still result, at least in theory. But they'd be too rare to be detectable in overall cancer rates, he said.

Brenner said the numerical risk estimates in the WHO report were not surprising. He also said they should be considered imprecise because of the difficulty in determining risk from low doses of radiation. He was not connected with the WHO report.

Some experts said it was surprising that any increase in cancer was even predicted.

"On the basis of the radiation doses people have received, there is no reason to think there would be an increase in cancer in the next 50 years," said Wade Allison, an emeritus professor of physics at Oxford University, who also had no role in developing the new report. "The very small increase in cancers means that it's even less than the risk of crossing the road," he said.

WHO acknowledged in its report that it relied on some assumptions that may have resulted in an overestimate of the radiation dose in the general population.

Gerry Thomas, a professor of molecular pathology at Imperial College London, accused the United Nations health agency of hyping the cancer risk.

"It's understandable that WHO wants to err on the side of caution, but telling the Japanese about a barely significant personal risk may not be helpful," she said.

Thomas said the WHO report used inflated estimates of radiation doses and didn't properly take into account Japan's quick evacuation of people from Fukushima.

"This will fuel fears in Japan that could be more dangerous than the physical effects of radiation," she said, noting that people living under stress have higher rates of heart problems, suicide and mental illness.

In Japan, Norio Kanno, the chief of Iitate village, in one of the regions hardest hit by the disaster, harshly criticized the WHO report on Japanese public television channel NHK, describing it as "totally hypothetical."

Many people who remain in Fukushima still fear long-term health risks from the radiation, and some refuse to let their children play outside or eat locally grown food.

Some restrictions have been lifted on a 12-mile (20-kilometer) zone around the nuclear plant. But large sections of land in the area remain off-limits. Many residents aren't expected to be able to return to their homes for years.

Kanno accused the report's authors of exaggerating the cancer risk and stoking fear among residents.

"I'm enraged," he said.

___

Mari Yamaguchi in Tokyo and AP Science Writer Malcolm Ritter in New York contributed to this report.

__

Online:

WHO report: http://bit.ly/YDCXcb

Read More..

'Girls Gone Wild' files for bankruptcy over debts

LOS ANGELES (AP) — The company behind the "Girls Gone Wild" video empire has filed for bankruptcy in a move it says is an effort to restructure its legal affairs after several disputed court judgments.

GGW Brands LLC and several subsidiaries filed for Chapter 11 bankruptcy on Wednesday in Los Angeles, listing more than $16 million in disputed claims.

The largest claim is $10.3 million that Wynn Resorts Limited is seeking from the company for judgments entered against "Girls Gone Wild" founder Joe Francis over a gambling debt and statements he has made about the casino and its founder, Steve Wynn.

Francis no longer owns the company, which has made a fortune selling videos and magazines of young women flashing their breasts.

"Girls Gone Wild" issued a statement that it is financially strong but needed to "re-structure its frivolous and burdensome legal affairs."

Read More..

Economic expansion weakest since 2011

The U.S. economy barely grew in the fourth quarter although a slightly better performance in exports and fewer imports led the government to scratch an earlier estimate that showed an economic contraction.

Gross domestic product expanded at a 0.1 percent annual rate, the Commerce Department said on Thursday, missing the 0.5 percent gain forecast by analysts in a Reuters poll.

The growth rate was the slowest since the first quarter of 2011 and far from what is needed to fuel a faster drop in the unemployment rate.

However, much of the weakness came from a slowdown in inventory accumulation and a sharp drop in military spending. These factors are expected to reverse in the first quarter.

Consumer spending was more robust by comparison, although it only expanded at a 2.1 percent annual rate.

Because household spending powers about 70 percent of national output, this still-lackluster pace of growth suggests underlying momentum in the economy was quite modest as it entered the first quarter, when significant fiscal tightening began.

Initially, the government had estimated the economy shrank at a 0.1 percent annual rate in the last three months of 2012. That had shocked economists.

Thursday's report showed the reasons for the decline were mostly as initially estimated. Inventories subtracted 1.55 percentage points from the GDP growth rate during the period, a little more of a drag than initially estimated. Defense spending plunged 22 percent, shaving 1.28 points off growth as in the previous estimate.

There were some relatively bright spots, however. Imports fell 4.5 percent during the period, which added to the overall growth rate because it was a larger drop than in the third quarter. Buying goods from foreigners bleeds money from the economy, subtracting from economic growth.

Also helping reverse the initial view of an economic contraction, exports did not fall as much during the period as the government had thought when it released its advance GDP estimate in January. Exports have been hampered by a recession in Europe, a cooling Chinese economy and storm-related port disruptions.

Excluding the volatile inventories component, GDP rose at a revised 1.7 percent rate, in line with expectations. These final sales of goods and services had been previously estimated to have increased at a 1.1 percent pace.

Business spending was revised to show more growth during the period than initially thought, adding about a percentage point to the growth rate.

Growth in home building was revised slightly higher to show a 17.5 percent annual rate. Residential construction is one of the brighter spots in the economy and is benefiting from the Federal Reserve's ultra easy monetary policy stance, which has driven mortgage rates to record lows. (Reporting by Jason Lange; Editing by Andrea Ricci)
 

Read More..

White House, Republicans dig in ahead of budget talks

Speaker of the House John Boehner tells Scott Pelley in a "CBS Evening News" interview that a budget deal is now out of his hands.

WASHINGTON—

Positions hardened on Wednesday between President Barack Obama and Republican congressional leaders over the budget crisis even as they arranged to hold last-ditch talks to prevent harsh automatic spending cuts beginning this week.

Looking resigned to the $85-billion in "sequestration" cuts starting on Friday, government agencies began reducing costs and spelling out to employees how furloughs will work.

Expectations were low that a White House meeting on Friday between Obama and congressional leaders, including Republican foes, would produce any deal to avoid the cuts.

Public services across the country - from air traffic control to food safety inspections and education - might be disrupted if the cuts go ahead.

Put into law in 2011 as part of an earlier fiscal crisis, sequestration is unloved by both parties because of the economic pain it will cause, but the politicians cannot agree how to stop it.

A deal in Congress on less drastic spending cuts, perhaps with tax increases too, is needed by Friday to halt the sequestration reductions which are split between social programs cherished by Democrats and defense spending championed by Republicans.

Obama stuck by his demand that Republicans accept tax increases in the form of eliminating tax loopholes enjoyed mostly by the wealthy as part of a balanced approach to avoiding sequestration.

"There is no alternative in the president's mind to balance," White House spokesman Jay Carney told reporters.

Obama wants to end tax breaks for oil and gas companies and the lower "carried interest" tax rate enjoyed by hedge funds.

But Republicans who reluctantly agreed to raise income tax rates on the rich to avert the "fiscal cliff" crisis in December are in no mood for that.

"One thing Americans simply will not accept is another tax increase to replace spending reductions we already agreed to," said Senate Republican leader Mitch McConnell.

In one of the first concrete effects of the cuts, the administration took the unusual step of freeing several hundred detained illegal immigrants because of the cost of holding them.

Republicans described that move by Immigration and Customs Enforcement as a political stunt aimed at scaring them into agreeing to end the sequestration on Obama's terms.

Carney denied the White House had ordered the release.

Friday's White House meeting will include McConnell and the other key congressional leaders: Senate Democratic leader Harry Reid, House of Representatives Democratic leader Nancy Pelosi, and House Speaker John Boehner, the top U.S. Republican.

'BELATED FARCE'?

But the chances of success were not high.

One congressional Republican aide criticized the White House for calling the meeting for the day the cuts were coming into effect. "Either someone needs to buy the White House a calendar, or this is just a - belated - farce. They ought to at least pretend to try."

Unlike during other fiscal fights in Congress, the stock market is taking the sequestration impasse calmly.

Read More..

Apple CEO says he feels shareholders' pain, urges long view

CUPERTINO, California (Reuters) - Apple Inc CEO Tim Cook on Wednesday acknowledged widespread disappointment in the company's sagging share price but shared few details about its secretive product pipeline and touched only briefly on a raging debate about how best to reward shareholders.

The world's most valuable technology company headed into its annual shareholders' meeting at its headquarters on shakier ground than it has been accustomed to in years, since the iPhone and iPad helped vault the company to premier investment status.

A declining share price has lent weight to Wall Street's demand that it share more of its $137 billion in cash and securities pile - equivalent to Hungary's Gross Domestic Product, and growing - a debate now spearheaded by outspoken hedge fund manager David Einhorn.

Einhorn was not spotted at the meeting at the company's headquarters at 1 Infinite Loop in Cupertino. Cook repeated that the company's board remained in "very very active" discussions about options for cash sharing, and said he shared investors' dissatisfaction over the stock price.

"I don't like it either. The board doesn't like it. The management team doesn't like it," Cook told investors.

"What we are focused on is the long term. This has always been a secret of Apple."

By focusing on the long term, revenue and profit will follow, he said.

Apple had the "mother of all years" last year with growth, in terms of dollars, outpacing that of Microsoft Corp, Google Inc, Nokia and several other major technology companies combined, Cook said.

Cook -- who was re-elected to the board with 99.1 percent of shareholder votes -- added that the company was working on new product categories, but, as usual, would not elaborate.

Speculation is rife on Wall Street and in Silicon Valley that the iPhone maker is working on a project to revolutionize the television and TV content, or a smart "iWatch."

Apple's stock was down 0.25 percent to $447.86 in afternoon trade. It is now down more than 35 percent from its $702.10 September peak.

SHARE AND SHARE ALIKE

Cook presided over Wednesday's staid affair in his typically even-keeled manner. Despite a slipping share price, dissatisfaction on the Street over its cash allocation and uncertainty over its product pipeline, shareholders re-elected the entire board, and Cook won more than 99 percent of the vote in preliminary results.

Cook got the most votes, followed by Walt Disney Co's Bob Iger, who won re-election with 99 percent of shareholder votes. Former Avon Products Inc CEO Andrea Jung, who stepped down after botching several attempts at restructuring the cosmetics company, received the fewest votes of the group, with 84.6 percent of shareholders voting yea.

Carol Shoaff, an Apple shareholder for about the past five years, said after the meeting that she was confident in Apple's leadership and the company was on the right path.

"I think he's good," she said, referring to Cook. "I don't think Steve Jobs would have left him in charge if he didn't believe in him."

Members of the Service Employees International Union protested outside the headquarters to get Apple to reconsider hiring of securities contractor SIS.

Apple's annual shareholder meetings have seemed more like celebrations in recent years. Since the company came out with its first iPhone in 2007, the company multiplied in market value until it peaked in September.

Then Samsung Electronics and Amazon.com Inc began seriously eroding its market share in 2012, powered by arch-rival Google Inc's Android software. On March 14, Samsung will launch the Galaxy SIV smartphone, the latest iteration of a flagship smartphone that helped it dethrone Apple from the top of the industry.

Institutional investors want Apple to share a greater chunk of its cash and securities pile, a demand growing increasingly strident with the company's stock wallowing at levels untested since the start of 2012.

Einhorn is advocating "iPrefs," preferred stock that will carry a perpetual 4 percent dividend to boost returns while not hampering cash flow.

On Friday, Einhorn won an important legal victory that strengthened his hand. His Greenlight Capital secured an injunction that invalidated shareholder voting on a proposal to scrap Apple's power to issue preferred stock at its discretion.

Apple says this would enhance governance. But the hedge fund manager argued it could complicate efforts to issue preferred securities in the future.

Cook said again on Wednesday that Einhorn's lawsuit - regardless of its efficacy - was a "silly sideshow." The underlying principle of cash distribution was something he and the board took seriously, he added.

The proposal was not put forth on Wednesday but Apple shareholders and representatives from the California Public Employees Retirement System and the Nathan Cummings Foundation spoke in favor of it at the meeting.

CalPers, owner of 2.7 million Apple shares, had supported the so-called Proposal 2. Senior Portfolio Manager Anne Simpson said it was unfortunate the measure could not be put forward.

"We know there is hot debate going on with cash," Simpson told the assembled shareholders. "We are willing and happy to wait."

NEW HQ TO BE DELAYED

Cook, who took over from late company co-founder Steve Jobs in 2011, answered a variety of questions from shareholders, including some on Apple's new headquarters, labor conditions in its factories and product plans.

One shareholder also asked why there was no bathroom in an Apple retail store in Santa Monica, Calif. Cook, acknowledging that it was an important point, said he will look into it.

On the new headquarters, Cook said the company plans to break ground later this year and occupy the facilities in 2016, a delay from the original 2015 target date.

The meeting largely followed the script with no distractions. Shareholders voted down two shareholder proposals, both of which were opposed by Apple's board. One wanted Apple leadership to hold more stock, the other was a proposal to create a board committee on human rights.

(Writing by Edwin Chan; Editing by Lisa Von Ahn, Tim Dobbyn and Dan Grebler)

Read More..