LOS ANGELES, Calif. - Embattled Los Angeles Clippers owner Donald Sterling lost his attempt to block the $2 billion sale of the team to former Microsoft CEO Steve Ballmer.
In allowing the deal to go forward, Superior Court Judge Michael Levanas sided Monday with Sterling's estranged wife, Shelly Sterling, who negotiated the record sale after the NBA banned the 80-year-old billionaire for making offensive remarks about blacks.
Shelly Sterling sought the probate judge's approval to ink the deal after taking over the family trust that owns the team because doctors found Donald Sterling had signs of Alzheimer's disease and couldn't manage his affairs.
The judge said Shelly Sterling had negotiated a good deal and the removal of her husband as a co-trustee was in good faith and not part of a secret plan to seize the team.
Shelly Sterling hugged her lawyer and wept after the judge explained his ruling from the bench.
"I can't believe it's over," she said. "This is the best thing."
An unusual provision of the ruling bars Donald Sterling from seeking a court-ordered delay of the sale as he appeals. His lawyers plan to seek permission from an appellate court to file an appeal.
Sterling was not in court for the ruling. Bobby Samini, one of his lawyers, said Sterling reacted calmly to the news and told his lawyers they had to keep battling on other fronts. Sterling testified during the case that he would fight the NBA until his death.
With lawsuits pending in state and federal courts, the ruling in Los Angeles County Superior Court is unlikely to put an end to the bizarre saga that began in April when a recording surfaced of Sterling scolding his young girlfriend for bringing black men to Clippers games.
The NBA moved quickly to ban Sterling for life and fined him $2.5 million.
Sterling was apologetic after the audio recording went viral, but his mea culpa backfired when he criticized Lakers great Magic Johnson, who had been photographed with Sterling's girlfriend, as a bad role model for kids because he had HIV. Sterling was roundly condemned from locker rooms to the Oval Office, where President Barack Obama called Sterling's remarks "incredibly offensive racist statements."
With the NBA threatening to seize the team and auction it, Sterling initially gave his wife of 58 years permission to negotiate a sale but then refused to sign the $2 billion Ballmer deal, which would be a record price for an NBA team. He said he would sue the league instead and then revoked the trust, which his lawyers said effectively killed the deal.
The nonjury trial held over several weeks focused mainly on whether Shelly Sterling properly removed her husband as a trustee and whether her actions carried any weight after he revoked the trust.
Donald Sterling claimed his wife had deceived him about the medical exams. His lawyers argued Monday that Shelly Sterling's lawyers were in cahoots with the doctors who examined him and that his wife conspired with NBA Commissioner Adam Silver to remove him from the trust.
"There's no evidence, I'll repeat that as loudly as you allow," attorney Maxwell Blecher said during closing argument, his voice rising. "There's no evidence that Mr. Sterling was incapable of carrying out his duties as a co-trustee."
Levanas said there was no credible evidence that Sterling was defrauded.
Blecher said he was deeply disappointed in the judge's legal analysis.
The ruling Monday was tentative until the judge files it in writing.
NBA spokesman Mike Bass said in a statement that the league was pleased and looked forward to the transaction closing as soon as possible.
At the conclusion of his lengthy ruling, Levanas envisioned what might happen if Donald Sterling remained the owner.
Citing testimony of Clippers interim CEO Richard Parsons, he said the team would go into a "death spiral." Sponsors would withdraw, players would quit and coach Doc Rivers would leave.
"The Clippers would suffer a massive loss of value if the team survived at all," Levanas said.
The judge was adamant that a team owned by Donald Sterling would not draw a price anywhere near the "stunning" $2 billion pledged by Ballmer. Sterling, a lawyer who made a fortune as a landlord, bought the team in 1981 for $12 million.
"Ballmer paid an amazing price that can't be explained by the market," he said.
On the witness stand, Shelly Sterling was more credible than her husband, who was more evasive, gave inconsistent answers and presented wild fluctuations of damage estimates, Levanas said.
He noted that the couple presented genuine professions of love for each other despite Donald Sterling's outburst calling his wife a "pig" after she testified.
Outside of court, his wife said she thought her husband would be happy with the ruling. She said she thinks he will ultimately drop his antitrust suit in federal court against the NBA and the lawsuit he filed in state court against her, Silver and the league.
Her lawyer wasn't so sure. Asked what might stop the deal, Pierce O'Donnell said: "Donald."
"He never met a lawsuit he didn't like," he quipped.
Bruce Givner, a Los Angeles tax attorney who handles celebrity cases, said he thinks Sterling's lawsuits will fail and an appeals court won't care about the probate case.
"I think the sale is going to go through," Givner said. "I suspect the NBA is ready to move very quickly. They want to get rid of Sterling like a canker sore. Nobody wants him around except the people that are charging legal fees to continue this charade."
AP Special Correspondent Linda Deutsch contributed to this report.
RICHMOND, Va. - Reynolds American Inc. said Tuesday that its profit rose by 6.7 per cent in its second quarter as higher cigarette and smokeless tobacco prices helped to offset a decline in the number of cigarettes it sold.
The Winston Salem, North Carolina-based company said it earned $492 million, or 92 cents per share, in the period ended June 30, up from $461 million, or 84 cents per share, a year ago.
Adjusted earnings were 89 cents per share, topping analyst estimates of 87 cents per share, according to Zacks Investment Research.
The nation's second-biggest tobacco company reported revenue, excluding excise taxes, of $2.16 billion, down from $2.18 billion a year ago. Wall Street predicted $2.22 billion in revenue.
Its shares rose 28 cents to $56.95 in early trading Tuesday.
Earlier this month, Reynolds announced plans to buy Newport cigarette maker Lorillard Inc. for $25 billion. The tie-up would create a formidable No. 2 tobacco company in the U.S. behind Richmond, Virginia-based Altria Group Inc. It also creates a powerhouse in menthol cigarettes, which are becoming a bigger part of the business and gives the combined company some breathing room even as people smoke fewer cigarettes every year.
The maker of Camel and Pall Mall cigarettes said its R.J. Reynolds Tobacco subsidiary shipped 8 per cent less cigarettes during the quarter, compared with an estimated decline of 5.5 per cent for the industry as a whole.
Volumes for Camel fell more than 4 per cent and volumes for Pall Mall decreased 6 per cent. The brands account for more than 60 per cent of the company's total cigarette volume.
But Camel's market share increased 0.4 percentage points to 10.2 per cent of the U.S. market, while Pall Mall's market share grew 0.1 percentage points to 9.3 per cent.
The number of Natural American Spirit cigarettes sold by its Santa Fe Natural Tobacco subsidiary grew nearly 8 per cent.
Tobacco companies are also focusing on cigarette alternatives such as snuff, chewing tobacco and electronic cigarettes as tax hikes, smoking bans, health concerns and social stigma make the cigarette business tougher.
Shipments of its Grizzly and Kodiak smokeless tobacco brands fell less than a per cent. The brands had a 34.4 per cent share of the U.S. retail market, though that market is tiny compared with cigarettes.
The company said the national rollout of its Vuse brand electronic cigarette is progressing and is in about 21,000 stores. The second wave of the brand's expansion is set for early September. Reynolds noted it is spending more to expand and promote the brand, which will be its sole e-cigarette once it sells Lorillard's Blu e-cig brand to U.K.'s Imperial Tobacco as part of the deal.
Reynolds American also narrowed its 2014 adjusted earnings forecast to a range of $3.35 to $3.45 per share. Its previous outlook was $3.30 to $3.45 per share. Analysts polled by FactSet expect $3.35 per share.
Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum .
AP Business Writer Michelle Chapman contributed to this report from New York.
WASHINGTON - House Republicans have agreed to vote on a slimmed-down bill to address the immigration crisis on the U.S.-Mexico border by sending in National Guard troops and speeding unaccompanied migrant youths back to Central America.
The bill will cost $659 million through the end of this fiscal year, far smaller than the $3.7 billion requested by President Barack Obama and a sharp reduction from the $1.5 billion initially proposed by the House spending committee.
The cuts were designed to win over skeptical conservatives and give lawmakers something they could pass before leaving Washington at the end of this week for their annual August recess.
"I think there's sufficient support in the House to move this bill," House Speaker John Boehner told reporters Tuesday after meeting with rank-and-file lawmakers on the issue. "We have a little more work to do though."
Boehner said the bill would come to a vote on Thursday.
Numerous House Republicans have said in recent weeks that they did not want to go back to their districts to face voters without acting to deal with the crisis of tens of thousands of kids and teens showing up at the South Texas border, many fleeing vicious gangs and trying to reunite with family members.
Lawmakers said Tuesday that the measure appeared to enjoy widespread support, although some conservatives said they remained opposed.
"Frankly, we need to show that we can act and act thoughtfully, responsibly and quickly," said Rep. Tom Cole, R-Okla. "Clean up the mess that the administration has created. I think the worst thing for us would have been to write a blank check which the president wanted us to do."
Associated Press writers Donna Cassata and Alan Fram contributed to this report.
WASHINGTON - U.S. consumers are more confident about the economy than they have been in nearly seven years.
The Conference Board's confidence index rose to 90.9 in July from an upwardly revised 86.4 in June. The July reading is the highest since October 2007, two months before the Great Recession officially began.
It was the third straight increase in the index. Economists said that strong job growth has helped boost consumers' assessment of current conditions and also improved their outlook on jobs and the economy.
Conference Board economist Lynn Franco says that the improvements in consumers' confidence and expectations about the future indicate that the recent strengthening in overall economic growth should continue in the second half of the year.
A big one-time gain and a tax benefit helped drugmaker Merck & Co. more than double second-quarter profit, improve its profit forecast and top analysts' expectations.
The maker of popular Type 2 diabetes pill Januvia said Tuesday that net income increased to $2 billion, or 68 cents per share, from $906 million, or 30 cents per share, in the same quarter a year earlier.
Merck, based in Whitehouse Station, New Jersey, said its earnings, adjusted for one-time gains and costs, were 85 cents per share. Analysts surveyed by Zacks Investment Research expected 81 cents.
Merck recorded a $741 million gain from AstraZeneca PLC, which exercised its option to buy out Merck's interest in the British drugmaker's heartburn drugs Nexium and Prilosec.
The world's fourth-biggest drugmaker's revenue fell 1 per cent to $10.93 billion, still $220 million above Wall Street expectations.
CEO Kenneth Frazier said on a conference call that Merck favours smaller acquisitions â€” like its $3.85 billion purchase of hepatitis C treatment developer Idenix Pharmaceuticals Inc., expected to close this quarter â€” and is not looking for a deal enabling it to move its legal headquarters to a country with a lower tax rate.
That strategy, called inversion, is suddenly hot in corporate America. The U.S. has the world's highest corporate tax rate, 35 per cent, but pharmaceutical companies here generally pay well under 30 per cent.
Chicago-based drugmaker AbbVie Inc. just reached a $55 billion deal to combine with British counterpart Shire PLC and incorporate in Britain.
BernsteinResearch analyst Dr. Timothy Anderson wrote to investors that Merck "will likely have another flattish year in 2014 in terms of financial performance but then growth should return more consistently."
Merck noted it expects by early next year to launch two new drugs awaiting approval: long-delayed suvorexant for insomnia and pembrolizumab for advanced melanoma. The latter is part of the promising new class of drugs that stimulate the immune system to identify and attack cancer cells.
Meanwhile, Merck got U.S. approval in April for two tablets to gradually reduce grass and ragweed allergies, and in May for anticlotting drug Zontivity.
Sales of Merck's prescription drugs fell 2 per cent to $9.09 billion. Top sellers were Type 2 diabetes pills Januvia and Janumet, up 2 per cent at $1.58 billion, and cholesterol medicines Zetia and Vytorin, up 6 per cent to a combined $1.13 billion.
Merck's consumer health segment had the biggest sales increase, up 19 per cent to $583 million. In May, Merck agreed to sell that to Germany's Bayer for $14.2 billion. It includes Claritin and the Coppertone sun-care line.
Merck said it expects full-year sales of $42.4 billion to $43.2 billion and profit of $3.43 to $3.53 per share, excluding one-time items. In January, it forecast $3.35 to $3.53.
In morning trading, Merck shares were up 72 cents at $58.69. They have increased 20 per cent in the last 12 months.
Follow Linda A. Johnson at www.twitter.com/LindaJ_onPharma.
BlackBerry is bulking up its security assets with the acquisition of anti-eavesdropping firm Secusmart, which developed technology to protect the smartphones of German government officials, including Chancellor Angela Merkel.
The Waterloo, Ont.-based company revealed plans to add extra power to its mobile security foundation on Tuesday at an event held in New York.
Chief executive John Chen said buying Secusmart addresses growing concerns about threats to individual privacy and national security.
"We are always improving our security solutions to keep up with the growing complexity of enterprise mobility, with devices being used for more critical tasks and to store more critical information, and security attacks becoming more sophisticated," Chen said Tuesday in a news release.
Financial details of the agreement were not disclosed and BlackBerry (TSX:BB) said the acquisition still faces some conditions, including regulatory approval.
The move positions BlackBerry against competitors like Apple and Samsung, which have been making inroads into mobile security, an area that BlackBerry once almost exclusively dominated.
Secusmart provides high-level voice and data encryption for governments, businesses and telecommunications service providers. The company developed special technology for BlackBerry 10 phones that were distributed to several German government agencies, ministries and leaders such as Merkel.
Corporate security has become a hot topic after businesses like Target Corp. faced massive data breaches that saw private information of its customers stolen. On Tuesday, the Canadian government announced that Chinese hackers infiltrated computer systems at the National Research Council.
With more government agencies and businesses relying on smartphones to transfer confidential information, the likelihood of third parties obtaining private information has increased.
"We see significant opportunities to introduce Secusmart's solutions to more of BlackBerryâ€™s government and enterprise customers around the world," said Secusmart managing director Hans-Christoph Quelle.
While it wasn't immediately clear how BlackBerry benefits from having Secusmart under its umbrella, the security developer could help build an all-encompassing infrastructure that would be the foundation of BlackBerry's future.
BlackBerry executives have placed a greater emphasis on moving into the "Internet of Things,'' a buzzy phrase used to describe the technology which connects various objects to one network. Still in its infancy, it's widely expected that more devices used throughout our daily lives â€” from automobiles to fridges â€” will be linked on a network which allows remote access and control of information.
In 2010, BlackBerry acquired QNX Software Systems, an Ottawa-based company that develops technology for the automotive industry, including dashboard systems that connect directly with a driver's mobile phone.
Since its acquisition, QNX has played a key role in creating BlackBerry's latest smartphone operating system and a separate one developed specifically for medical devices.
Independent technology analyst Carmi Levy said the acquisition of Secusmart marks a step forward for BlackBerry as it tries to launch a return to profitability by focusing on its loyal enterprise customers, rather than the more fickle consumer market.
"In and of itself it doesn't complete BlackBerry's security road map, but it is a solid move that sets the stage quite nicely for additional, similarly-themed moves," Levy said in an email.
"As a key pillar of its fast-coalescing security strategy, it serves an important purpose as both an indicator of how much the company has changed since John Chen came aboard, and where he intends to take it next."
Chen was hired last year to reshape BlackBerry, cut costs and lead an effort to find a better footing in the highly competitive tech sector. Since joining the company in November, he has hired several executives from software maker Sybase, a struggling company he helped reshape into a profitable operation focused on mobile business technology.
BlackBerry also plans to launch a new program designed to monitor the security of apps installed on its devices.
The company said BlackBerry Guardian will protect users from malware and privacy issues by scanning for any unusual activity and reacting accordingly.
"If we identify a suspicious app, we investigate and take whatever action is needed to protect BlackBerry customers, including either denying the app or removing it from BlackBerry World," wrote David MacFarlane, senior director of BlackBerry security, on one of the company's blogs.
BlackBerry Guardian will monitor apps available on its BlackBerry World store as well as ones distributed through the Amazon Appstore, which will be available this fall on phones, giving users easy access to thousands more of the most popular Android apps and games.
Shares of BlackBerry fell 11 cents to $10.64 near midday on the Toronto Stock Exchange.
TORONTO - The Canadian dollar was sharply lower Tuesday morning as the greenback strengthened on the back of a strong reading on consumer confidence.
The loonie declined 0.46 of a cent to 92.13 cents US.
The U.S. Conference Board reported that its Consumer Confidence Index jumped to 90.9 in July from 85.2 in the prior month. It's the highest level since October 2007.
Other data showed that U.S. home prices rose in May from a year earlier at the weakest pace in 15 months. The Standard & Poorâ€™s/Case-Shiller 20-city home price index increased 9.3 per cent in May, down from 10.8 per cent in the previous month.
Meanwhile, the U.S. Federal Reserve started its two-day meeting on interest rates.
The Fed is expected to keep its key interest rate near zero for some time to come. But while markets have generally expected the Fed to move in mid-2015, economic performance has improved to a point where it is thought the central bank could move earlier.
Elsewhere on the economic front, on Wednesday traders will take in the latest economic growth readings from Canada and the U.S. That will be followed by a report Thursday on Chinaâ€™s manufacturing industry that will give investors an update on the health of the worldâ€™s second biggest economy.
And on Friday, the U.S. will release its monthly jobs data. Analysts estimate that the U.S. labour market added between 235,000 and 255,000 jobs in July.
On the commodity markets, the September crude contract in New York was down 88 cents to US$100.79 a barrel.
September copper eased two cents to US$3.23 a pound while August bullion gained $3.40 to US$1,306.70 an ounce.
TORONTO - When Lise Cartwright grew tired of a string of full-time office jobs, she turned to the Internet to see if there were any writing gigs she could try on the side.
She started dabbling in some side projects, and within 18 months, she'd quit her job and founded her own freelance company.
"I love being able to work from home, set my hours. It's just having the ability to set a schedule, and if something happens and you need to change something you can just move stuff around," said Cartwright, who works as writer and coaches others freelancers through her website, www.outsourcedfreelancingsuccess.com.
"Yes, I have clients, but they're not micro-managing me. They hand you the work and they just leave you to it."
It may not be a set-up that works for all industries, but as more people seek flexibility at work and try to juggle the demands of family life and expense of child care, she said, they are choosing to be their own boss.
Cartwright is part of a growing trend of self-employed and contract workers which, according to some US figures, make up nearly 15 per cent of the workforce and is expected to climb to nearly 20 per cent by 2020.
In Canada, the latest data from Statistics Canada shows that self-employment rose by 23,400 in June as the unemployment rate rose to 7.1 per cent in June. Figures also show that in 2009, 1.8 million Canadians worked in some type of temporary job, which accounted for 12.5 per cent of paid employment, with contract positions accounting for just over one-half of temporary jobs and professionals making up a large proportion of contract employees.
But while the web and social media have made it easier to establish a business and market your services, the trend toward a freelance economy doesn't come without a downside.
While people like Cartwright chose the freedom that comes with a freelance lifestyle, the broader trend stems from a push by companies themselves, said Ann Frost, an associate professor of organizational behaviour at the Ivey Business School with Western University.
"It's companies that have decided, 'we would prefer to pick and choose when we'd like to pay people for certain services, and we're not going to have them on as full-time employees on a regular basis,'" she said.
"The result of that is this growing class of freelance employees but that's probably not most of their own choice to be in that position."
It also does little to help the growing income gap or the overall economy, as people working several freelance jobs lack the purchasing power they may have had in more stable positions that disappeared during the recession, she said.
"People are much more insecure, (there's) a lack of benefits, lack of pension, lack of being able to save," Frost said.
"(It's) basically living contract to contract."
Steve Cunningham, CEO of Polar Unlimited, a digital marketing company and Readitfor.me, an e-learning start-up that summarizes business books, hires freelancers in addition to his regular staff when a project demands it.
He says they are crucial to small businesses and in high demand.
"Having a freelancer available allows you to juggle those ups and downs that naturally happen in a small business in a way that doesn't require you to keep a full-time staff member and carry that cost on a full-time basis," he said.
"Projects do come along where (some aspects) may lie somewhere outside of your core expertise. The advantage of having freelancers who have different skill sets (is that it also) allows you to take on those projects."
Joe Issid, a contributor with job site Monster.ca who has had his own publishing company and is now an executive at another, notes contract work can also be useful for millennials who can't find a full-time job in their field.
Freelance work can allow them to get real world experience and earn some money until they land a full-time job, he said, although relying solely on that type of employment can also mean there's a lack of corporate identity - for the company as well as for the freelancers themselves.
"They may run the risk of getting lost in that world for a really long period of time and really not establish any real roots," said Issid.
"If your entire career is based on working the freelance model you may lose the sense of community, the sense of belonging to something," he said.
Follow @maurinor on Twitter.
Aetna's second-quarter profit climbed more than 2 per cent, as gains from an acquisition helped the health insurer top expectations and raise its 2014 earnings forecast again.
But the Hartford, Connecticut, company's shares slipped Tuesday after it also reported a higher medical cost measurement than analysts expected and a slight performance dip for its health care segment, the biggest part of its business.
The insurer said a better performance from its group life and disability business helped grow earnings in the quarter, as did an additional month of results from Medicare and Medicaid coverage provider Coventry Health Care, which Aetna bought last year for $6.9 billion.
But the health care segment's operating earnings, which exclude investment gains and losses, slipped about 1 per cent to $584.3 million. Aetna's medical-loss ratio for its commercial health coverage, which basically measures the percentage of premiums spent on medical care and some other costs, climbed to 80.6 per cent from 79.1 per cent.
"The headline numbers looked fine, but a deeper look into second quarter results is less flattering," Citi analyst Carl McDonald said in a research note.
Overall, earnings for the nation's third-largest health insurer climbed to $548.8 million, or $1.52 per share, from $536 million, or $1.49 per share, in last year's quarter.
Adjusted earnings came to $1.69 per share. That topped average analyst expectations of $1.61 per share, according to Zacks Investment Research.
Aetna's operating revenue, which also excludes investment gains and losses, climbed 25 per cent to $14.5 billion revenue That also beat average Wall Street expectations for $13.97 billion.
The insurer's enrolment climbed about 5 per cent, compared with last year's second quarter, to top 23 million people. A small part of that gain came from the health care overhaul, the massive law that aims to cover millions of uninsured people.
Aetna Inc. has added about 600,000 people so far this year through the overhaul's public insurance exchanges, which began accepting enrolment last fall and help people find coverage often with help from income-based tax credits.
Aetna participated in 17 individual insurance exchanges, making it one of the largest players in that new market. The company said Tuesday it will only expand into one more, an exchange in Georgia, for coverage that starts in 2015. Competitor UnitedHealth started off much more slowly, participating in only four exchanges this year, but it plans to add as many as 20 for 2015.
Aetna Chief Financial Officer Shawn Guertin said his company plans more measured growth in part because it's still learning about the newly insured population, most of whom only started coverage in April and May.
"We wanted to get substantial experience to learn and to figure out how to serve this population as best we could," he said.
Aetna now expects full-year adjusted earnings to range between $6.45 and $6.60 per share, up from its April forecast of $6.35 to $6.55 per share.
Analysts expect, on average, earnings of $6.50 per share, according to FactSet.
Aetna shares fell nearly 4 per cent, or $3.32, to $81.50 in midday trading, while broader indexes were nearly flat. The company's stock had already advanced 24 per cent since the start of the year, as of Monday's close, and set several new all-time high prices.
WASHINGTON - This much is clear: The Federal Reserve will make another cut this week in its monthly bond purchases, which have been aimed at keeping long-term loan rates low.
This much is not: When will the Fed start tightening its interest-rate policy to thwart any runaway inflation? How will it do so? And when will the Fed start paring its enormous $4 trillion-plus investment portfolio â€” a step that will put upward pressure on interest rates?
On those questions, expect no definitive signals Wednesday, when the Fed issues a statement after a two-day policy meeting. In many ways, the improving U.S. economy no longer needs so much help from the central bank: Hiring is solid, and unemployment is on the cusp of a nearly normal 6 per cent rate. Manufacturing is strengthening. Consumers are voicing renewed confidence.
Yet in other ways the economy the Fed will assess this week is less than fully healthy. The housing rebound appears to be faltering. Workers' pay remains flat. Turmoil overseas poses a potential threat. And even the sinking unemployment rate isn't as encouraging as it seems: It's dropped in part because many people have given up on their job searches or retired early. The government doesn't count people as unemployed unless they're actively seeking work.
Accordingly, the Fed is expected to reaffirm its plan to leave its key short-term rate at a record low near zero "for a considerable time" after it ends its bond purchases.
"The economy is doing a little bit better, but there are still a lot of risks out there," said David Wyss, an economics professor at Brown University, noting global turmoil from Ukraine to the Middle East.
The statement the Fed will release will almost surely announce a sixth $10 billion cut in its monthly bond purchases to $25 billion. Chair Janet Yellen told Congress this month that the Fed intends to end its new purchases by October. By then, its investment portfolio will be nearing $4.5 trillion â€” five times its size before the financial crisis erupted in September 2008.
After the crisis struck, the Fed embarked on bond purchases to try to drive down long-term rates and help the economy recover from the Great Recession. Even after its new bond purchases end, the Fed has said it will maintain its existing holdings, which means it will continue to put downward pressure on rates.
The Fed has kept its target for short-term rates near zero since December 2008. Most economists think it will start raising rates by mid-2015, though some caution that the Fed could do so sooner if the economy keeps generating jobs at a robust pace â€” five straight months of 200,000-plus increases.
Still, in testifying to Congress, Yellen stressed that at 6.1 per cent, the unemployment rate still exceeds the Fed's target of 5.2 per cent to 5.5 per cent. And she noted that high levels of long-term unemployment and weak wage growth are still a problem.
Mark Zandi, chief economist at Moody's Analytics, said chronically lagging pay growth, in particular, will stop the Fed from raising rates before 2015. By then, Zandi said, "the unemployment rate will be well below 6 per cent, the amount of slack in the labour market will be winding down and we should start to see better wage growth."
Yellen attributed the struggling housing rebound in part to last year's rise in mortgage rates, which occurred after the Fed chairman at the time, Ben Bernanke, began discussing possible cuts in bond purchases later in the year. Investors were jolted by the prospect of reducing the purchases â€” a step the Fed didn't take until December â€” and sent long-term bond rates up.
"The Fed really wants to be careful and tread cautiously this time," said Diane Swonk, chief economist at Mesirow Financial.
Many think the Fed will first signal an impending rate hike by modifying the phrasing it's used at each meeting this year: That it plans to keep short-term rates at record lows "for a considerable time" after its bond buying ends.
Vincent Reinhart, chief economist at Morgan Stanley and a former top Fed economist, recalled the last time the Fed started raising ratesâ€” in 2004 â€” after a prolonged period of low rates. Back then, he noted, the Fed said it planned to keep rates low for a "considerable period." It modified that wording six months before its next rate increase by saying it would be "patient in removing policy accommodation."
Many analysts expect a similar word change before any rate increase this time.
Besides discussing short-term rates, Fed officials this week will likely debate how to unwind their investment holdings. They face a delicate task in shrinking the portfolio to more normal levels without destabilizing markets. The Fed's bond purchases allowed it to inject money into the financial system, which wound up as reserves held by banks and helped keep loan rates low.
To reverse that process and raise borrowing rates, the Fed is considering a variety of tools. One would be to increase the interest it pays banks on excess reserves they keep at the Fed.
David Jones, author of a new book on the central bank's 100 year history, said any new exit details might not be revealed until the Fed releases the minutes of this week's meeting in three weeks.
Those minutes, Jones said, "may be the most interesting thing to come out of the meeting."
CALGARY - Talisman Energy, which has been approached by Spain's Repsol about possible deals, says it lost US$237 million during the second quarter.
The net loss amounted to 23 cents per share, compared to a profit of $97 million, or nine cents per share, during the same period a year earlier.
Stripped of unusual items, Talisman posted a loss of a penny per share, missing the average analyst estimate of a four-cent profit, according to Thomson Reuters.
Cash flow was $567 million, up eight per cent year-over-year and in line with analyst expectations of 55 cents per share.
The Calgary-based company (TSX:TLM) is to hold a conference call Tuesday afternoon with analysts, who are likely eager to learn more about discussions have been held with Repsol.
Responding to market speculation, Talisman confirmed last week it had been approached by Repsol about various potential transactions, but offered no guarantee that a deal will be done.
The company has for years been the subject of takeover speculation, but observers say Repsol is likely more interested in scooping up individual Talisman assets rather than buying the whole package.
Following the expropriation of its Argentinian holdings in 2012, Repsol has signalled it would look for growth in countries that are members of the Organization for Economic Co-Operation and Development, but good chunk of Talisman's portfolio does not fall into that category.
As well, Talisman's offshore holdings in the U.K. and Norway sectors of the North Sea have faced a litany of operational challenges and have been a significant drag.
Talisman has been in restructuring mode since late 2012, when former TransCanada boss Hal Kvisle took over as CEO. Kvisle expects his tenure to end this year.
Talisman is now focused on two core regions: the Americas, which includes North American shale deposits and Colombian oilfields, and southeast Asia. It aims to sell $2 billion in assets over the next 12 to 18 months, the proceeds of which will be used to bolster its balance sheet.
In its financial results, Talisman said Tuesday that reasons such as an after-tax impairment charge and hedging losses weighed on its bottom line.
Total revenue was $1.24 billion compared with $1.19 billion in the same quarter last year.
Total production was 375,000 barrels of oil equivalent per day, up four per cent year-over-year.
Production of lucrative liquids from Talisman's core areas was up 20 per cent from a year earlier.
Follow @LaurenKrugel on Twitter
Pfizer's second-quarter earnings plunged 79 per cent from last year, when the world's second-largest drugmaker booked a $10 billion-plus gain from a business spinoff.
The New York company said Tuesday it earned $2.91 billion, or 45 cents per share, down from $14.1 billion, or $1.98 per share, last year. Adjusted earnings totalled 58 cents per share, a penny more than analysts expected.
Revenue slipped 2 per cent to $12.77 billion, $300 million above forecasts.
Among Pfizer's top medicines, sales climbed 16 per cent to $1.32 billion for pain and fibromyalgia treatment Lyrica and 14 per cent to $1.1 billion for its Prevnar vaccines against pneumonia and other infections. Pfizer noted increased generic competition to multiple Pfizer drugs, plus the end of some revenue-producing partnerships, cut revenue $850 million in the quarter.
Pfizer Inc. is best known for creating medicines for the masses, including the erectile dysfunction pill Viagra, Prevnar and cholesterol fighter Lipitor, which was the world's top-selling drug for a decade.
CEO Ian Read has been selling noncore assets and reducing costs to free up money for research on diabetes, cancer and other complex disorders needing better treatments.
Over the past three years, Pfizer divested its capsule-making and nutrition businesses. In June 2013, it spun off its remaining stake in its animal health business as a new company, Zoetis Inc., receiving an after-tax $10.6 billion gain.
Then in May, British drugmaker AstraZeneca rejected Pfizer's $119 billion buyout proposal, which would have been the largest deal in pharmaceutical history. Besides gaining AstraZeneca's drugs and pipeline, Pfizer wanted to move its legal headquarters to England to get a lower tax rate than it faces in the U.S., a strategy called "inversion" that is suddenly hot in corporate America.
In an interview, Read said Pfizer continues to look at deals of all sizes, with three goals: improving its portfolio of new and experimental drugs, limiting overlap in research and sales forces, and lowering its tax bill, as inversion would do.
"There is a limited number of companies" that meet all three aims, Read said.
He said the company continues to push the federal government to reform the corporate tax structure, which taxes companies at a high 35 per cent, including profits made overseas and brought back to the U.S. Most other countries tax businesses only on profits made inside their borders, putting U.S.-based companies at a disadvantage, Read said.
Pfizer noted it's awaiting U.S. approval of a meningitis B vaccine and will apply next month for approval of its highest-profile experimental drug, palbociclib for advanced breast cancer.
Erik Gordon, an analyst and professor at University of Michigan's Ross School of Business said the 13 per cent jump in research spending in the quarter "may scare investors who are wary of Pfizer's spotty record in turning internal R&D into successful products."
The company reaffirmed its 2014 forecast for adjusted earnings of $2.20 to $2.30 per share. Analysts expect $2.24.
In afternoon trading, Pfizer shares were down 15 cents at $29.95. ___
Business Writer Tom Murphy in Indianapolis contributed to this story.
Follow Linda A. Johnson at www.twitter.com/LindaJ_onPharma
TORONTO - The Toronto stock market pushed higher Tuesday, helped by positive earnings news and improved U.S. consumer confidence data.
The S&P/TSX composite index rose 42.64 points to 15,487.86.
The Canadian dollar was down 0.35 of a cent to 92.24 cents US.
U.S. markets were positive but off session highs after the European Union adopted tough new sanctions on Russia over that country's continued support of Ukrainian rebels, who have been blamed for the downing of an airliner by a missile earlier this month.
An EU official said the measures include an arms embargo, and a ban on the sale of dual use and sensitive technologies, such as advanced energy technology equipment. Under the financial sanctions, Russian state-owned banks will be banned from selling bonds or equities with a maturity of over 90 days in European capital markets.
New York's Dow Jones industrials gained 14.2 points to 16,996.79, the Nasdaq gained 16.63 points to 4,461.54 and the S&P 500 index added 0.81 of a point to 1,979.72.
Indexes had earlier advanced after the U.S. Conference Board reported that its Consumer Confidence Index jumped to 90.9 in July â€” the highest level since October 2007.
WestJet (TSX:WJA) was a major gainer on the TSX, up $1.26 or 4.6 per cent to $28.68 as the airline beat forecasts for profit and revenue as it posted net earnings of $51.8 million, or 40 cents per share, up from C$44.7 million, or 34 cents a share, a year earlier.
George Weston Ltd. (TSX:WN) reported a quarterly net loss of $208 million, or $1.71 per share, compared with a net profit of $97 million, or 68 cents per share, in the same quarter of 2013 as it digests the acquisition of Shoppers Drug Mart by subsidiary Loblaws. Total sales were $10.59 billion compared with $7.52 billion and its shares advanced $1.20 to $87.03.
And Talisman Energy (TSX:TLM) posted a loss of $237 million, or 23 cents per share, compared with a profit $97 million, or nine cents, per share in the same quarter of 2013. Its shares added 10 cents to $11.82.
It is a very heavy week for Canadian corporate earnings news, with the accent on the resource sector. Several big names from the energy and gold mining sectors are reporting, including heavyweights Barrick Gold (TSX:ABX), Suncor Energy (TSX:SU) and Cenovus Energy (TSX:CVE).
However, with the energy sector up 18 per cent so far in 2014, further gains could be elusive.
"I think with oil trading around $100, with all the geopolitical risk out there keeping the oil price firm, that most of the good news is already in the energy name," said Paul Taylor, chief investment officer, asset allocation, for BMO Global Asset Management Canada.
A major decliner in New York was Herbalife Ltd. The seller of supplements and weight loss products on Monday reported quarterly profit that decreased by 17 per cent. Its shares plunged 11.5 per cent to US$59.72.
The tech sector fell 0.8 per cent with BlackBerry (TSX:BB) down 19 cents to $10.56 as the company said that it will acquire anti-eavesdropping security firm SecuSmart for an undisclosed amount. The German company provides high-level voice and data encryption.
The base metals sector was up 1.15 per cent while September copper eased two cents to US$3.22 a pound.
The TSX energy sector gained 0.17 per cent with the September crude contract in New York down 88 cents to US$100.79 a barrel.
The gold sector declined 0.15 per cent as August bullion faded $5 to US$1,298.30 an ounce.
WestJet Airlines is preparing for the arrival of new low-cost competitors including Southwest Airlines by taking steps to expand its regional service and add wide-body planes to its fleet to access new international routes.
Chief executive Gregg Saretsky said the Calgary-based carrier's formula since 1996 has been to stay lean and keep fares low.
"So to the extent that there are other lower cost operators that see opportunities, they're going to be met with a pretty strong response from WestJet and our people are ready for any challenge," he said Tuesday after reporting record second-quarter results that beat analyst forecasts.
The airline's profits surged nearly 16 per cent to $51.8 million or 40 cents per diluted share for the three months ended June 30. That compared with a profit of $44.7 million or 34 cents per share a year ago.
Revenue increased 10.3 per cent to $930.3 million from $843.7 million in the second quarter of 2013.
Analysts on average had expected the airline to earn a profit of 28 cents per share, according to estimates compiled by Thomson Reuters.
WestJet's shares hit an all-time high of $29.11 and were up 4.45 per cent, or $1.22 at $28.64 in afternoon trading on the Toronto Stock Exchange.
Saretsky said the airline is continuing to study whether to offer lower base fares, but add baggage fees. A decision isn't expected before year-end.
WestJet has been increasing the revenue from ancillary fees passengers pay to upgrade seats or obtain other benefits. Non-ticket revenues increased 17 per cent in the quarter to $10 per passenger. That still lags U.S. airlines, but Saretsky said he's very optimistic of increasing those revenues.
The airline expects to bring in more than $80 million in ancillary revenue this year.
"We'll be ready to meet whatever competitor wants to come to take us on and Southwest is a very good competitor, but our job is to make sure that WestJet is in a position to be a fierce competitor as well," Saretsky said during a conference call.
Southwest's CEO recently said it is eyeing Canada, along with Hawaii, Alaska, Central America and northern South America as possible destinations for its international expansion. Canada Jetlines Ltd. of Vancouver and Jet Naked of Calgary are also musing about launching their own low-cost airline services.
Saretsky said Canadian airlines already face competition from low-cost carriers like Allegiant and Spirit Airways, that lure about five million Canadians a year to cross the border to fly from U.S. cities like Buffalo, N.Y., Burlington, Vt., and Bellingham, Wash.
A large fuel tax increase in Ontario will cost the airline up to $15 million a year when fully implemented in three years and only make the situation worse, the airline said.
WestJet announced Tuesday that it will add at least four used Boeing 767-300ERW aircraft. The first two planes will initially be used on routes between Alberta and Hawaii during the winter beginning in late 2015, replacing the smaller Boeing 757s flown on its behalf by Thomas Cook.
The bigger planes can fly further than WestJet's current fleet of Boeing 737s and allow it to compete with Air Canada (TSX:AC.B) on more routes.
The airline said it expects to expand its operation into overseas markets starting in the summer of 2016 but won't say if it will move beyond Europe to include Asia or other markets. WestJet began flying between St. John's, N.L., and Dublin last month.
The airline wouldn't immediately provide financial details about the planes, but Saretsky said more can be added, if required.
RBC Capital Markets analyst Walter Spracklin said the second-quarter results were driven by strong demand in Canada and on U.S. routes.
The improved yield "bodes well for the overall pricing environment," Spracklin said.
Costs excluding fuel were up 1.9 per cent, but less than the company's guidance for three to four per cent.
"Overall, it was a strong quarter for WestJet which highlighted both the carrier's strong operations, as well as the robust demand environment," he wrote in a report.
The airline also announced Tuesday that it has exercised options for five additional Bombardier (TSX:BBD.B) Q400 turboprops, as it expands its WestJet Encore regional service to Eastern Canada.
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