Fed Raises GDP Forecast To 3.2%-3.7%The Federal Reserve at the end of April predicted the U.S. economy would this year grow more than previously forecast, but inflation was seen remaining tame until 2012 due to slack left from the recession.
Minutes of the Fed's policy-setting meeting April 27-28, which were released with the usual lag Wednesday, showed the U.S. central bank predicting the economy would expand between 3.2% and 3.7% in 2010. That's up from a January forecast that gross domestic product would grow between 2.8% and 3.5%.
Although Fed officials see the economy strengthening, they expect inflation to remain subdued and unemployment still high over the next couple of years. That puts the central bank in a strong position to keep short-term interest rates at a record low for a while to bolster the recovery.
With the slack from the worst recession in 80 years forecast to keep unemployment above 9% this year and inflation below 2% through 2012, Fed officials repeated at their last meeting they expect short-term interest rates to remain close to zero for an "extended period."
Figures out Wednesday showing underlying inflation slowing in April to 0.9%, the lowest annual rate since 1966, reinforces the Fed's view that rates can stay at ultra-low levels.
EU To Discuss Short-Selling Ban
The European Commission on Wednesday responded to Germany's unilateral ban on a market practice viewed by some as pure speculation with a call for coordinating such regulations throughout the European Union.
"These measures will be even more efficient if they are coordinated at European level," said Michel Barnier, the European Commissioner for financial regulation.
Barnier was reacting to the German regulator's decision to outlaw naked short selling--a practice that involves selling financial instruments without first borrowing them or ensuring they can be borrowed.
"It is important that member states act together and that we design a European regime to avoid regulatory arbitrage and fragmentation both within the EU and globally," Barnier said, adding that the issue should be discussed at a meeting of EU finance ministers Friday.
Dodd Drops Derivatives Proposal
U.S. Senate Banking Committee Chairman Christopher Dodd has dropped a controversial derivatives proposal he offered Tuesday after it met stiff resistance from an unusual coalition of Wall Street bankers and liberal Democrats, his spokeswoman said.
"Dodd will not bring up the derivatives amendment he had filed," said the spokeswoman, Kiristin Brost.
The backlash came after the Connecticut Democrat tried to craft a provision to strip out another controversial part of the financial overhaul bill, which would have forced big banks to spin off their derivatives operations into affiliates. The Federal Reserve, Federal Deposit Insurance Corp,. and Treasury Department had criticized this provision, which was originally offered by Senate Agriculture Committee Chairman Blanche Lincoln (D., Ark.), and Dodd thought he found a way to fix it.
His amendment would have delayed for two years any ban on derivatives trading and given the Treasury Secretary the ability to quash the proposal outright.
The chairman and chief executive of General Motors Co. has warned employees they still have more work to do and must remained focused on turning around the auto maker even after GM reported its first quarterly profit in three years.
"Achieving our first quarterly profit as a new company and achieving positive cash flow are important milestones," Edward E. Whitacre Jr. said in an email to employees, which was confirmed by GM. "We are making progress and moving in the right direction, but we have more work to do."
The auto maker on Monday beat expectations of industry analysts, reporting income of $865 million in the first three months of the year and generating $1 billion in cash.
The performance has GM executives in the unusual position of playing down optimism over the auto maker's results in an effort to keep employees focused and to avoid inflated expectations from outsiders.
Novartis To Pay $250M In CaseA jury on Wednesday awarded $250 million in punitive damages to a class of current and former female employees of Novartis AG's (NVS, NOVN.VX) U.S. unit after finding earlier this week that the unit engaged in gender discrimination.
The jury of five women and four men made the award two days after finding Novartis Pharmaceuticals Corp. engaged in a pattern or practice of discrimination against its female sales force in pay and promotions.
On Monday, the jury also found the company engaged in discrimination against pregnant women with respect to the terms and conditions of their employment.
"The jury has spoken and sent a message to Novartis and all other corporations in America: They cannot continue to get away with the discrimination and the systemic problems that have been going on for so long," said David Sanford, a lawyer for a group of women who sued the company.
Sanford said he believes the award is the largest punitive damages award in a gender discrimination case.
Target Net Up 29% On Strong Sales
Target Corp. (TGT) lifted hopes that consumers are coming out of their shells by posting strong first-quarter results that reflected spending on less-essential items and people's ability to pay down debt. The discount retailer also said it should at least meet Wall Street's expectations for the second quarter and full year.
Target's relatively upbeat report came a day after rival Wal-Mart Stores Inc. (WMT) said it experienced soft business in the U.S. during the first quarter and indicated its domestic sales environment would remain challenging.
Customers are showing a greater willingness to buy more than necessities, Target said, with more-profitable areas such as apparel and home goods starting to see some pickup.
Target also said its credit-card unit was able to whittle away more bad debt as payments are improving.
"Clearly, the economy and consumer sentiment have improved since their weakest point in 2009," Chief Executive Gregg Steinhafel said on a conference call with analysts.
Cement Blew Up Through Well
New details about a deadly oil-rig explosion in the Gulf of Mexico emerged on Wednesday as the owner of the rig suggested that cement blew up through the well and said that federal regulators didn't oversee tests of a critical safety device.
Transocean Ltd. (RIG) Chief Executive Steve Newman, whose company owns and operated the rig leased by BP PLC (BP, BP.LN), told lawmakers that he was aware of reports that a vessel alongside the rig reported receiving cement-like debris on its decks after the explosion.
"For the well, the cement that's in the well, to have thrust upward from where it was installed, up through the well bore, out to the rig, out from the rig and onto the deck of this vessel I think is an indication of the magnitude of this catastrophe," Newman told the U.S. House Transportation Committee.
The panel is the latest to probe the events leading up to the April 20 explosion and the response. An underwater pipe below the Gulf of Mexico is still leaking oil.
Consumer Prices Drop 0.1%
U.S. consumer prices fell in April from March, the first monthly drop in a year, while underlying inflation remained flat, giving the Federal Reserve leeway to keep interest rates at a record low level.
The Labor Department said in a report Wednesday the seasonally-adjusted consumer price index fell 0.1% last month, the first drop since March 2009, as energy prices declined. In March, consumer prices were up an unrevised 0.1%.
Underlying consumer prices, which strip out volatile energy and food items and are closely watched by the Fed, were unchanged for the second month in a row in April.
Economists surveyed by Dow Jones Newswires were expecting the headline inflation rate to remain unchanged and the core consumer price index to rise by 0.1%.
The Senate is delaying a scheduled vote on whether to end debate on legislation overhauling U.S. financial regulation. Some Democratic senators are requesting action on amendments that would further crack down on Wall Street.
The vote had been planned for 2 p.m. EDT Wednesday, but will now take place at 3:15 p.m. EDT or later.
Pending are several proposals that would further restrict bank activities, including an amendment by Sen. Maria Cantwell (D., Wash.) that would re-impose Depression-era rules barring banks from affiliating with investment firms.
Senate Majority Leader Harry Reid (D., Nev.) announced the delay on the Senate floor.
Apotex Launches Generic Lipitor
Canadian generic drug maker Apotex Inc. said it has launched generic version of Pfizer Inc.'s (PFE) cholesterol-lowering drug Lipitor, overcoming the name-brand drug's patent protection by inventing its own crystal form.
Apotex said its product, Apo-Atorvastatin, is a "100% Canadian made product" in terms not only of research and development and tablet manufacturing, but also chemical synthesis.
It said Lipitor is the largest product to be genericized in Canadian history, and has annual sales of about C$1.2 billion.
Lipitor is one of the world's top-selling drugs.
GE: Climate 'Improving But Volatile'
General Electric Co. (GE) Chief Executive Jeff Immelt provided an upbeat assessment of the conglomerate's growth prospects Wednesday, even as he described the overall business environment as "improving but volatile."
Immelt said GE's earnings, which slumped 31% in the first quarter, will start growing again beginning in the current quarter. He also said orders for new equipment and services should be up this quarter after falling in the first quarter.
"We're going to see really strong earnings growth over the next couple of years," Immelt said, speaking during an Electrical Products Group conference in Florida.
He reiterated that the company plans to increase its dividend next year, saying it will target a payout ratio of about 45%. He also said GE will restart "opportunistic" share buybacks by the end of this year.
Probe Focuses On Futures Liquidity
The pullback by just six trading firms from a key futures contract may have exacerbated the volatility that rocked U.S. markets on May 6, according to regulators.
The role of a small number of firms in providing liquidity to the S&P e-mini futures traded on the electronic platform run by CME Group Inc. (CME) is among the multiple lines of inquiry being pursued in the aftermath of the still-unresolved market tumult.
U.S. stock and futures authorities are probing the links between securities prices and related derivatives contracts, and how they factored into the whipsawing of markets on May 6.
Honeywell To Buy Sperian For $1.4B
Honeywell International Inc. (HON) announced plans to acquire Sperian Protection SA (SPRXF, SPR.FR) for $1.4 billion, scuttling the deal U.K. buyout firm Cinven (CVN.YY) had reached to buy the French personal-protection equipment company.
The U.S. conglomerate has agreed to pay EUR117 ($143) a share to French ophthalmic lens maker Essilor SA's (EI.FR) and Ginette Dalloz. They own 15% and 13% of Sperian, respectively. Honeywell will proceed with the takeover if it gets regulatory clearance and 57% of Sperian's shares outstanding are tendered in favor of the deal. With the support of Essilor and Dalloz, the company is halfway there.
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