Holiday Weekend Transitions Into Heavy Week of Data

Here’s hoping Labor Day is restful for you, because we rush right into heavy economic data after it's over.

The highlight of the upcomingweek will, of course, be Friday’s report on payroll jobs and the unemployment rate -- but likely of more interest will be the accompanying data on hourly earnings and hours worked. Last month, while hourly earnings increased measurably, hours worked declined, leading to a fall-off in retail spending and slow growth in total personal consumption spending.

Before we can fully appreciate upcoming data, we have to wade through the numbers of the week just ended. Those included one significant positive surprise: a surge in durable-goods orders. But that was followed quickly by a reminder of the economy’s struggles, with a report Friday that personal income fell in July, the first month-to-month decline in almost three years.

At the same time, personal consumption spending rose by a scant 0.2%, a weak monthly increase, matching the beginning of the fourth quarter of 2007, when the economy contracted.

Friday’s ominous spending report was not the only disappointing number in a week that saw home values continue to decline -- albeit at a slower rate than previous declines. But, the slow spending pace offered a glimpse into how much economic growth will ease in the third and perhaps fourth quarter.

While the unexpectedly large upward revision to second-quarter gross domestic product produced some quick euphoria, the fact that the increase came from an improved trade deficit -- flowing from a weaker dollar -- should have been a clue as to how unsustainable the above-trend growth rate is.

Consumer spending may also contribute less to growth in coming quarters, a possibility suggested not only by the spending report, but income indicators as well. Just as the employment report for July showed that average weekly earnings barely budged, the income-spending report for July showed total income growth has slowed. With tighter lending standards and still-declining home values, continued borrowing to bolster spending becomes less of an option, although consumer interest payments -- Federal Open Market Committee interest rate cuts notwithstanding -- are continuing to rise.

Both existing and new home sales improved in July, according to data reported in the week just ended, but each improvement required an asterisk. In the case of new homes, the data for June were revised sharply downward; in the case of existing home sales, prices fell, a movement which usually affects such sales. Indeed, some of the sales could have been of the same speculative variety that helped spawn the housing debacle.

The week’s data offered not only a first glimpse at third quarter GDP, but in a shorter time frame a basis for forecasting next Friday’s employment report, particularly the movement in payroll jobs.

The weekly report on continuing claims for unemployment insurance -- generally a surrogate for hiring -- showed that from mid-July through mid-August, continuing claims increased by 326,000, the largest month-over-month increase since April 1982, when payroll jobs dropped by 282,000.

The employment report will follow other important data elements, including the anecdotal Beige Book, as we head to the September 16 meeting of the Federal Open Market Committee. The Beige Book might be interesting to track, particularly as we look at the comments coming from districts of Fed presidents who are voting members of the FOMC: Cleveland, Dallas, Philadelphia and Minneapolis. In the last Beige Book, before the Aug. 5 meeting, only Philadelphia reported a weakening economy.

Monday, September 1Labor Day Holiday – No ReleasesGovernor Randall S. Kroszner speaks on The United States in the International Financial System: A Separate Reality? Resolving Two Puzzles in the International Accounts at Central Bank of Argentina 2008 Money and Banking Seminar., Buenos Aires, ArgentinaTuesday, September 2Construction Put in Place (July)June actual: DOWN 0.4%July consensus: DOWN 0.5%ISM Manufacturing Index (August)July actual: 50.0August consensus: 49.51Q actual: 6.35% (all delinquencies) UP from 5.82% (Q-Q)No 2Q consensusFederal Reserve Discount Rate Meeting MinutesWednesday, September 3MBA Application Index (Week ended: August 29)Week Ended August 22: 421.6, UP 0.5%Four-week moving average: 424.8, UP 0.05%No August 29 consensusChallenger Layoffs (August)July actual: 103,312 UP 26.4%No August consensusFactory Orders (July) [Includes Final Durable Goods Report]TotalJune actual: UP 1.7%July consensus: UP 0.1%Ex-transportationJune actual: UP 2.3%July consensus: UP 1.0%Motor Vehicle Sales (August)July actual: 12.55 million (DOWN 1.14 million, 8.3%)No August consensusBeige Book (September 16 FOMC Meeting)Thursday, September 4Monster Employment Index (August)July actual 157.0 DOWN 6.0No August consensusADP Employment Report (August) [BLS Private Sector]July actual: UP 9,000 [DOWN 76,000]No August consensusUnemployment Insurance Claims (Week Ended August 30)August 23 Actual: 425,000 DOWN 10,000August 30 Consensus: 435,000Four-week moving average: 440,250, DOWN 6,000No August 30 consensusProductivity and Costs (2Q - Revised)Preliminary actual: 2.2%Revised Consensus: 2.9%ISM Non-Manufacturing Index (August)July actual: 49.6No August consensus: 49.0San Francisco Fed President Janet Yellen speaks on U.S. Economy in Salt Lake City.Friday, September 5Employment Situation (August)Change in Payroll employmentJuly actual: DOWN 51,000August consensus: DOWN 75,000Unemployment RateJuly actual: 5.7%August consensus: 5.8%MBA Delinquency Survey (2Q 2008) [Tentative Release Date]Average Weekly EarningsJuly actual: +0.3% (6¢)August consensus: +0.3% (5¢)Average Weekly HoursJuly actual: 33.6August consensus: 33.6San Francisco Fed President Janet Yellen speaks on U.S. Economy in Los Angeles.

Mark Lieberman is the senior economist for the Fox Business Network. Prior to joining FOX, he served as first vice president and manager of economic analysis and research at Washington Mutual in New York. Before that, he served as senior vice president at Dime Savings Bank of New York (which was later acquired by Washington Mutual), where he specialized in credit and risk management. He is a member of the Executive Committee of the New York Association for Business Economics. He has a degree in Economics from the Wharton School of the University of Pennsylvania.

Bears Slam the Brakes on Wall Street

The bears put a stop to a string of winning days on the stock market Friday, pushing the Dow 170 points into the red to close out the month of August. The selloff came even though oil prices ended the day in the red, failing to rise on the looming threat of Hurricane Gustav.

Today's Market

The Dow Jones Industrial Average slid 171.22 points, or 1.46% to 11543.96, the Standard & Poor’s 500 dropped 17.85 points, or 1.37%, to 1282.83 and the Nasdaq Composite lost 44.12 points, or 1.83%, to 2367.52. The FOX 50 declined 15.62 points, or 1.68%, to 914.98.

WallStreet found little reason to buy stocks heading into the holiday weekend as the market was spooked by a mixed batch of economic reports and Dell's (DELL) warning of slower tech spending. Friday's selloff reverses a string of wins on the Dow, which had closed in the green for six out of the prior seven trading sessions, adding some 340 points over that span.

General Motors (GM) and Intel (INTC) led the way down on the Dow, falling about 3% each. All 30 components of the Dow ended the day in the red, with insurer AIG(AIG) feeling the least pain, closing just slightly lower.

Wall Street will likely take the day's losses with a grain of salt as volume was very low on the New York Stock Exchange as many traders took money off the table ahead of Labor Day weekend. The NYSE didn't see a day with volume above 1 billion shares this week, contrasting with a typical day's volume of 1.3 billion.

The bears grasped onto a Commerce Department report that showed personal income sank by 0.7% in July -- the largest one-month slide in almost three years. Economists had been expecting a more modest 0.1% decrease. The incomes decline comes at a time when the labor market has weakened considerably and the impact of the government's economic stimulus checks has faded.

The Commerce Department also said personal spending slowed down last month, growing by just 0.2%. Consumer spending is vitally important to economic growth as it accounts for more than two-thirds of the nation's GDP.

While those reports signaled trouble ahead for the economy, the Reuters/University of Michigan consumer sentiment index improved this month to a reading of 63 as gasoline prices tumbled. Economists had been expecting a reading of 62 from July's 61.2 level.

The Nasdaq Composite suffered worse losses than the broader market, diving almost 2% following Dell's (DELL) worse than-expected quarterly loss, which was announced late Thursday. Not surprisingly, Dell led the decliners on the Nasdaq 100, plunging nearly 14%.The news weighed heavily on tech giants like BlackBerry maker Research in Motion (RIMM) and Oracle (ORCL).

Dell, the world's second largest PC maker, posted an adjusted-profit of 33 cents per share, missing analyst expectations by three cents. The company spooked the market by saying it sees declining tech spending in the U.S., a trend it says could spread to Europe and Asia.

The stock market was unable to stage a rally even after crude oil prices erased a rally to close flat. Crude ended up 14 cents to $115.46 a barrel. This marks the second consecutive day where oil prices were unable to make headway despite the looming threat of Hurricane Gustav, which could enter the oil-rich Gulf of Mexico as a category 3 or 4 hurricane.

The energy market kept oil prices from catching fire as many believe the government would open the Strategic Petroleum Reserve if needed.Also, the greenback advanced against rivals, helping to push down the price of dollar-traded commodities like oil.

Corporate Movers

Delphi Corp., the auto parts giant and partner of General Motors (GM), may face liquidation, The Wall Street Journal reported. The No. 1 global auto parts supplier hasn't been able to emerge from bankruptcy protection and may cease to exist as a stand-alone company, the newspaper reported. GM, Delphi's former parent company, could be forced to take over some ofDelphi's plants and find itself on the hook for billions of dollars of its pension plan, according to the Journal.

Boeing (BA) could be facing a strike from its largest labor union after the International Association of Machinists said it will recommend to its members to turn down the defense giant's contract proposal. Boeing had called the offer its "best and final" offer and its rejection could signal a strike for next week. The IAM represents 27,000 workers and a strike could squeeze Boeing by $3 billion a month.

Microsoft(MSFT) unveiled a deal to acquire Greenfield Online (SRVY), a European price comparison company and owner of ciao.com, for $486 million. The move is aimed at improving Microsoft's online business, especially after it failed to acquire Internet giant Yahoo! (YHOO) earlier this year. Microsoft said Ciao has 26.5 million visitors a month, according to ComScore.

Alitalia, Italy's national airline, filed for bankruptcy protection on Friday. It's the first move toward restructuring and downsizing the company. Earlier this week Italy's government changed a law tailored for Alitalia's situation, according to Reuters.

World Markets

The Dow Jones Euro Stoxx 50 Index, an index that tracks the 50 largest companies in Europe, rose 6.21 points, or 0.18%, to a reading of 3365.63. London's FTSE 100 Index, added 35.40 points, or 0.63%, to 5636.60.

On the European continent, the CAC 40 Index in Paris picked up 21.11 points, or 0.47%, to 4482.60 while Germany's DAX gained 1.76, or 0.03%, to 6422.30.

In Asia, Tokyo's Nikkei 225 benchmark index rose 304.62 points, or 2.39% to 13072.87. The Hong Kong's Hang Seng Index added 289.60 points, or 1.38%, to 21261.89

Louisiana Plans Evacuations as Gustav Stalks Gulf

NEW ORLEANS--The solemn ceremonies for the third anniversary of Hurricane Katrina on Friday for the most part were blown away by Gustav, the massive storm that posed the biggest threat to New Orleans since the killer 2005 storm.

An early morning symbolic burial service in honor of the unclaimed bodies left behind by Katrina, and a bell ringing service scheduled for 9:38 a.m. CDT — when the first levee broke inundating the city — were the only events that remained on what would have been a day of remembrance of the devastating storm.

The National Guard was scheduled to begin convoying into New Orleans on Friday, while some nursing homes and hospitals planned to start moving patients further inland and the state began moving 9,000 inmates from coastal lockups.

An evacuation order for New Orleans was likely, Mayor Ray Nagin said, but not before Saturday Meanwhile, residents of areas further south could be told to leave starting Friday, Gov. Bobby Jindal said.

Click here for satellite, radar and tracking maps at MyFOXHurricane.com.

Federal, state and local officials expressed confidence that plans put in place since Katrina would protect residents.

"Ladies and gentlmen, in my estimation, I think we're ready for this threat," Nagin told a news conference Thursday.

The state activated 3,000 Guardsmen on Wednesday, another 2,000 on Thursday, Jindal said. Jindal said he has ordered 1,500 of them to be in New Orleans Friday.

The new troops would beef up the 360 Guardsmen who have been in the city since Katrina helping to police the city.

And as far away as New York City, ambulance companies were preparing to send trucks and crews down to the Gulf Coast. Citywide Mobile Response Corp. spokesman Isaac Newman said his company was dispatching five ambulances along with 15 crew members early Friday from its headquarters in the Bronx.

Projections showed Gustav arriving early next week as a Category 3 storm, with winds of 111 mph or greater, anywhere from the Florida Panhandle to eastern Texas. But forecasts are extremely tentative several days out, and the storm could change course and strength.

Mississippi and Louisiana also were beginning preparations to switch interstate lanes so that all traffic would flow north, in the direction an evacuation would follow.

A problem could be the Louisiana State University football game scheduled for Saturday afternoon in Baton Rouge.

Gov. Jindal said he's not planning to have LSU call off its football team's home opener against Appalachian State. The 92,000-seat Tiger Stadium is sold out and thousands of tailgaters will fill the parking lots around it. But Jindal acknowledged that could change because the of the interference with contraflow.

Nagin said people still living in the small trailers provided by the Federal Emergency Management Agency after Katrina should take immediate steps to plan evacuations.

"Travel trailers are unsafe during heavy winds," Nagin said. "I want all of our citizens to make certain they have a plan for leaving the trailers when advised to do so."

If an evacuation is ordered, the city will also put a curfew in place, Nagin said. Anyone who ignores the evacuation order and is on the streets after curfew will be arrested, he said.

The city said it is prepared to move 30,000 residents in an evacuation; estimates put the city's current population between 310,000 to 340,000 people. There were about 454,000 here before Katrina hit. Unlike Katrina, there will be no massive shelter at the Superdome, in fact, no shelter at all was planned for the city.

The city planned to use city buses to pick up people unable to leave on their own and ferry them to a staging area where they would be moved to shelters in northern Louisiana.

The first 150 of 700 buses to move residents inland arrived at a staging area near New Orleans on Thursday, and officials in Mississippi were trying to decide when to move Katrina-battered residents along the coast who were still living in temporary homes, including trailers vulnerable to high wind.

The planning for a potential evacuation is part of a massive outline drafted after Hurricane Katrina slammed ashore three years ago, flooding 80% of New Orleans and stranding thousands who couldn't get out in time. Officials expressed confidence those blueprints made them ready for Gustav.

"There are a lot of things that are different between now and what we faced in 2005 when Katrina came ashore," said U.S. Homeland Security Secretary Michael Chertoff, who was flying to Louisiana to meet with Nagin and Jindal. "We've had three years to put together a plan that never existed before."

During Hurricane Katrina, Jindal said more than 1 million people were evacuated. But, he said, if the state needs to evacuate residents in both southwest and southeast Louisiana the number could be twice that.

Jindal stressed that is just an estimate because a lot depends on the storm's track and intensity and officials hoped to know more early Friday.

Governors in Mississippi, Louisiana and Texas pre-declared states of emergency in an attempt to build a foundation for federal assistance. Federal officials said resources and personnel to provide post-storm aid were pouring into the Gulf Coast states from other parts of the country Thursday.

Batteries, bottled water, and other storm supplies were selling briskly, and people were filling up at gas stations, worried of spikes in prices and a lack of supply later in the weekend.

Melissa Clark, who lives in neighboring Jefferson Parish, said she's leaving Friday with her family to stay with friends in Clinton, Miss. — evacuation order or not. Her husband, who works in maintenance at a nearby hospital, will stay behind.

"I'm not taking any chances this time," the 35-year-old mother of three teenagers said as she waited fifth in line at a Wal-Mart gas station Thursday.

Not everyone made the same plans. In Alabama, many tourists and residents were taking a wait-and-see attitude, more focused on the Labor Day weekend ahead.

"We plan to sit in a bar and watch the whole thing," joked Greg Lee, a tourist from Clarksville, Tenn. He was grocery shopping with family members, stocking up on cold drinks and planning to stay through the holiday at their beach house at Fort Morgan, down a beach road from Gulf Shores.

Alitalia Files for Bankruptcy Protection

Italy's national airline Alitalia says it has filed for bankruptcy protection, taking the first step in reshaping what has been a failing company.

Alitalia said in a statement Friday that its board had asked the government to appoint an administrator and had declared insolvency to a Rome court.

The airline has been losing almost $3 million a day -- hurt by labor unrest, competition from budget airlines and high fuel prices. Its shares have been suspended from trading since June.

Dow Rides GDP Wave 213 Points Higher

Buoyed by a surprisingly strong GDP report and a sharp decline in oil prices, the blue chips stayed hot on Thursday with a 200-point jump on scant volume.

Today's Market

The Dow Jones Industrial Average rose 212.67 points, or 1.85% to 11715.18, the Standard & Poor’s 500 gained 19.02 points, or 1.48%, to 1300.68 and the Nasdaq Composite picked up 29.18 points, or 1.22%, to 2411.64. The FOX 50 added 14.48 points, or 1.58%, to 930.60.

The day's rally carried the Dow to its sixth positive closing bell out of the past seven trading sessions. The benchmark index has now risen more than 340 points since last Tuesday.

In addition to the relatively strong GDP report and a $2 slide in crude, give credit for the rally to several better-than-expected earnings reports from names like Tiffany (TIF) and Zale (ZLC), as well as a big day for the financial sector. Mortgage giants Fannie Mae (FNM) and Freddie Mac(FRE) extended their win streaks with big gains.

The Dow was led on Thursday by the index's financial components, namely insurer AIG (AIG) and Bank of America (BAC). Financial giants Citigroup (C) and JPMorgan Chase (JPM) weren't far behind. Coca-Cola (KO) was the only blue-chip stock failing to join in the rally.

The Nasdaq Composite didn't enjoy as much strength as the broader indexes but still closed more than 1% higher ahead of PCmaker Dell's (DELL) quarterly results after the closing bell. Level 3 Communications (LVLT) and Amylin Pharmaceuticals (AMLN) led the way up on the Nasdaq 100, jumping 7% a piece. Tech giants eBay(EBAY) and Cisco (CSCO) also closed with solid gains.

It's worth noting that volume on the New York Stock Exchange remains very low. Just 950 million shares exchanged hands on the NYSE on Thursday, compared to a typical day's volume of 1.3 billion.

The positive mood on Wall Street was set by the Commerce Department's gross domestic product report, which measures the growth of the nation's goods and services. GDP was upwardly revised to show the economy grew at a rate of 3.3% last quarter thanks to the economic stimulus package and strong exports. Originally, the government said the economy grew at a more modest pace of 1.9%.Economists had been expecting a smaller bump up to a pace of 2.7%.

In any case, it's a much better reading than the first-quarter's GDP growth of 0.9%. Without the benefit of the stimulus package and as slowing global economies weigh on exports, WallStreet is worried growth could slow considerably or even turn negative over the next two quarters.

Also, the Labor Department said jobless claims fell by 10,000 last week to 425,000 -- the sixth straight week of claims exceeding 400,000, the longest such streak since the summer of 2003. Economists surveyed by Dow Jones Newswires had been expecting claims would have fallen by 12,000. Continuing claims for unemployment jumped by 64,000 to 3.42 million -- the highest level sinceNovember 2003.

Despite a series of scary headlines on Tropical Storm Gustav, crude oil prices took a nose dive on Thursday, ending a three-day win streak. Crude closed down $2.56 to $115.59 a barrel. Earlier in the day oil prices had nearly eclipsed $120 a barrel.

The energy market didn't appear to be overly concerned about Gustav, which weather forecasting firm Planalytics said is "likely to explode into a major hurricane" and threaten U.S. Gulf oil and gas production early next week.

Traders began to bet the government would tap the Strategic Petroleum Reverse after the International Energy Association pledged to release emergency oil supplies if needed. The last time the Energy Department took such a move was three years ago this week when Hurricane Katrina slammed into the Gulf coast.

Corporate Movers

Lehman Brothers(LEH) is facing a “real likelihood” of a hostile takeover by a bank or private equity firm, Ladenburg Thalmann analyst Richard Bove said, according to Reuters. The influential analyst predicted the saga won’t continue much longer, the news agency reported. Separately, Lehman plans to lay off as many as 1,500 employees ahead of its quarterly results on September 15, The New York Times reported. The job cuts would amount to 6% of the struggling investment bank's headcount and add to the 6,000 employees already laid off since June 2007, the newspaper reported.

Toyota (TM) downgraded its global sales forecast by 700,000 vehicles as the auto maker reacts to rising gasoline prices and weaker economic forecasts around the world. The auto maker now sees 2009 sales of 9.7 million vehicles, which would represent a 2% rise in sales from the targets for this year. The 2008 goal of 9.5 million was downgraded just a month ago. Even as sales growth has slowed, Toyota has narrowed the gap between it and the world's No. 1 auto maker, General Motors (GM).

Fannie Mae(FNM) unveiled a management shakeup late Wednesday, including a new chief financial officer, chief risk officer and chief business officer. The mortgage giant's board also gave its chief executive officer a vote of confidence, saying it is "firmly committed" to DanielMudd. Fannie and sister company Freddie Mac(FRE), which back or own more than $5 trillion of U.S. mortgages, have been under pressure to raise capital and avoid a government bailout that could wipe out shareholders.

Tiffany (TIF) beat the Street with second-quarter earnings of 63 cents per share and boosted its full-year earnings outlook, sending its shares soaring. The high-end jeweler said sales rose to $732.4 million. Analysts had been expecting earnings of 55 cents on $728.72 million in sales. Looking ahead, Tiffany boosted its 2008 earnings view by two cents, to a range of $2.82 to $2.92 per share.

Sears (SHLD) posted a 62% drop-off in second-quarter profit, missing analyst estimates. The retailer posted an adjusted-profit of 21 cents per share on sales of $11.76 billion. Analysts had been looking for stronger results of 33 cents per share on revenue of $11.7 billion. Sears sees little help from the economy in the near future, likely resulting in more pressure on sales and profit margins.

Zale (ZLC) lost 15 cents per share in its fiscal fourth quarter but managed to exceed Wall Street’s expectations, boosting its stock to 52-week highs. The jeweler’s revenue rose 6.1% to $456 million. Analysts had been expecting a wider loss of 57 cents per share on $449.13 million in sales. Zale said it sees adjusted-earnings for fiscal 2009 in the range of $1.10 to $1.25 per share, compared to analyst estimates from Thomson Reuters for 90 cents.

William-Sonoma (WSM) posted second-quarter earnings excluding one-time items of 8 cents per share, topping forecasts of 7 cents. The retailer’s revenue slumped 4.6% to $819.6 million, missing calls for $832.40 million in revenue. Shares dove to 52-week lows as the home furnishings company cut its outlook for the third quarter and the full year, hurt by the weak housing market.

Microsoft (MSFT) unveiled Internet Explorer 8 a day ago, a new browser aimed at staving off increasing competition from Mozilla’s Firefox browser. The latest Explorer version includes new security and privacy features and a “smart” address bar. Internet Explorer is the world’s most widely-used browser, comprising 75% of the market share.

World Markets

The Dow Jones Euro Stoxx 50 Index, an index that tracks the 50 largest companies in Europe, rose 60.27 points, or 1.83%, to a reading of 3359.42. London's FTSE 100 Index, added 73.10 points, or 1.32%, to 5601.20.

On the European continent, the CAC 40 Index in Paris picked up 88.41 points, or 2.02%, to 4461.49 while Germany's DAX jumped 99.51, or 1.57%, to 6420.54.

In Asia, Tokyo's Nikkei 225 benchmark index rose 15.29 points, or 0.12% to 12768.25. The Hong Kong's Hang Seng Index dropped 492.43 points, or 2.29%, to 20972.29.

Toyota Cuts 2009 Sales Outlook

Toyota lowered its global sales target for 2009 by 700,000 vehicles to 9.7 million Thursday, showing that even one of the world's most durable automakers is being hurt by rising material costs, a slowing U.S. market and soaring gas prices.

"We have been going at top speed up to now," President Katsuaki Watanabe told reporters at a Tokyo hotel after announcing the numbers. "It is time to set more cautious targets."

Toyota Motor Corp (TM) had previously set a 2009 global sales goal of 10.4 million vehicles.

The lower target would still be a 2% increase from the company's 2008 sales goal of 9.5 million. But even that figure was reduced last month from an initial 9.85 million units.

Toyota has been on such a potent growth track in recent years it is getting closer to ending General Motors Corp.'s (GM) 77-year run as the world's top automaker by sales.

Japan's top automaker sold more than 4.8 million vehicles worldwide in the first half this year, more than its U.S. rival's 4.5 million vehicles. The sales tallies for this year are too close to call, as GM is also struggling with the same industry problems and restructuring its operations.

What is clear from these sales revisions is that Toyota, which had so far averted the serious problems of its money-losing American rivals, is now grappling with the same industry woes.

Watanabe said he saw as "fundamental" the slowdown in the U.S. market as soaring gas prices not only crimps car purchases but drives an unprecedented shift in consumer demand from trucks to smaller fuel-efficient models.

By region, Toyota is projecting stagnant sales next year for both North America at 2.7 million vehicles and Japan at 2.25 million, unchanged from projected sales figures for this year.

Other markets were expected to grow modestly.

In Europe, Toyota plans to sell 1.3 million vehicles, up 4% from a projected 1.25 million vehicles this year. In Asia, it aims for 1.75 million vehicles, up 6% from 1.65 million this year. Sales in other regions are expected at 1.7 million vehicles next year, up from 1.65 million this year.

In his annual outlining of the company's business plan, Watanabe tried to sound an upbeat note by promising green vehicles. He said Toyota will speed up the delivery of a plug-in hybrid -- which can be plugged into regular household electrical sockets -- initially promised for sometime in 2010, to the end of 2009.

Gas-electric hybrids like the Prius deliver better mileage by switching between a gas engine and electric motor, and a plug-in hybrid can travel longer as an electric vehicle, using less gasoline than a regular hybrid.

Watanabe said Toyota is also planning to produce a next-generation electric vehicle in the early 2010s.

Toyota will also start making the Prius hybrid in the U.S., at its Mississippi plant, to meet growing demand for fuel-efficient models, while scaling down production of trucks and other gas-guzzlers there, he said.

The automaker now makes the Prius in Japan and China, though it makes the hybrid Camry sedan in the United States. Toyota has said it is also starting Camry hybrid production in Thailand and Australia in the next couple of years.

Hybrids still make up a small portion of any automaker's sales.

And the latest revisions underline how Toyota's momentum of growth has been shifting to lower gear.

Toyota, which makes Lexus luxury models and the Corolla subcompact, reported a 28% drop in its April-June quarterly net profit. It is forecasting its first full-year profit decline in seven years as it faces more problems from the weakening U.S. market.

Watanabe acknowledged Toyota may be going through a period in which its sales growth momentum was slowing, but he insisted that provided different opportunities for the company.

"It is sad. We had hoped that more people would be buying our cars," he said. "But improving the quality of our cars is our utmost priority. This kind of time can prove important."

Toyota shares closed unchanged in Tokyo at 4,770 yen ($44).

Tiffany 2Q Profit Doubles, Beating Expectations

Jewelry retailer Tiffany says second-quarter profit doubled, beating Wall Street expectations as sales rose by double-digit percentages in Asia and Europe.

The New York-based Tiffany & Co. (TIF)said Thursday it earned $80.8 million, or 63 cents per share, in the three-month period ended July 31. That compares with $40.5 million, or 29 cents per share, in the year-ago period.

Revenue rose 11% to $732.4 million from $662.6 million in the year-ago period.

Analysts surveyed by Thomson Reuters expected profit of 55 cents per share on revenue of $721 million. Those estimates typically exclude one-time items.

The company also raised its outlook for earnings in 2008.

Union Pacific Rerouting New Orleans Trains

NEW YORK--Union Pacific, the nation's largest railroad, is redirecting rail traffic from New Orleans to two other cities in preparation for a possible strike by Tropical Storm Gustav.

Rail traffic that normally flows through New Orleans is being redirected through Memphis, Tenn., and St. Louis, spokeswoman Raquel Espinoza said Thursday.

Espinoza says the company has received word that the floodgates in New Orleans may close on Saturday, which would prevent any rail traffic from moving into or out of the city. Floodgates are used to control the flow in reservoir, river, stream and levee systems.

Union Pacific employees are also moving equipment out of low-lying areas.

Unfazed by Oil, Stocks Make Headway

Wall Street shrugged off a $2 jump in oil prices as the blue chips ended in the green for the fifth day out of the past six thanks to a surprisingly positive durable goods report and a solid day for the financials.

Today's Market

The Dow Jones Industrial Average rose 89.64 points, or 0.79% to 11502.51, the Standard & Poor’s 500 gained 10.15 points, or 0.80%, to 1281.66 and the Nasdaq Composite picked up 20.49 points, or 0.87%, to 2382.46. The FOX 50 added 6.87 points, or 0.76%, to 916.12.

While the blue chips have been on a good run over the past week, it's worth noting that the benchmark index has only picked up some 150 points over that span and most of it has been on incredibly low volume ahead of the holiday weekend.

The Dow was led on Wednesday by telecom AT&T (T) and Bank of America(BAC), each of which enjoyed gains of about 2%. Drug giant Pfizer (PFE) was one of the only blue-chip components failing to join in the day's broad rally.

Wall Street reacted positively to a surprising durable goods reports, which showed orders rose by 1.3% in July. Economists had been expecting orders for these big-ticket items like refrigerators and air conditioners to have declined by 0.4%.

Excluding transportation orders, the Commerce Department said durable goods orders unexpectedly rose 0.7% in July, compared to an expected decline. Excluding defense, durable goods rose by 2.8% -- the largest one-month rise of the year.

“I think those numbers were surprising to a lot of people this morning," Eric Thorne, portfolio manager at Bryn Mawr Trust, told FOXBusiness. “The economy may not be quite as weak as everyone is saying and that could be a catalyst to spark the stock markets here in the second half.”

Financial stocks jumped by nearly 2% on the day with names like Wachovia (WB) and LehmanBrothers (LEH)enjoying even stronger gains.

“The financials have been the key to this market, both on the plus side and on the downside," said Paul Nolte, director of investments at Hinsdale Associates.

As has been the case for much of this week, trading volume on the New York StockExchange was very low, coming in at just over 800 million shares. NYSE volume hasn't crossed 1 billion shares yet this week, compared to a typical day's volume of more than 1.3 billion.

“The volume is telling us there is absolutely zero conviction [in this rally]. The fact is, everyone is on vacation and nobody is putting money to work," NYSE trader Jason Weisberg of Seaport Securities told FOXBusiness. “I’m not going to make a bet when I'm the only one on the playing field."

The stock market managed to make headway Wednesday even as oil prices nearly eclipsed $120 a barrel. Crude closed $1.88 higher to $118.55 a barrel. Oil futures were lifted by the looming threat of Tropical Storm Gustav, which was downgraded overnight from a hurricane but remains a potentially serious threat to the Gulf of Mexico's oil rigs.

According to the National Oceanic and Atmospheric Administration, Gustav is on track to hit Louisiana early Monday as a Category 4 hurricane. "Based on projected track, size and strength of Gustav over the Gulf, the entirety of the Gulf energy production region remains 'under the gun,' and I expect somewhere near 85% of the Gulf energy infrastructure will be shut in along with a significant increase in damage potential," Jim Rouiller, a senior energy meteorologist with weather forecasting firm Planalytics, told Dow Jones Newswires.

Crude stayed hot after the Energy Department reported that crude stockpiles unexpectedly declined by 177,000 barrels last week while gasoline stocks declined by 1.2 million barrels. Energy analysts had been expecting a 1 million barrel increase in crude stockpiles.

Meanwhile, theFederal Deposit Insurance Corp. stayed in the headlines a day after federal regulators revealed their list of "troubled" banks increased last quarter to 117. The FDIC is considering borrowing money from the Treasury to ensure it has enough cash to guide the nation through an expected series of bank failures, The WallStreet Journal reported.

The funds used by the FDIC to reimburse depositors in a bank failure have decreased to $45.2 billion last quarter, an historically low percentage. So far this year, 11 banks have failed, headlined by IndyMac Bank, which squeezed the FDIC out of $8.9 billion.

Corporate Movers

Lehman Brothers (LEH) has reportedly narrowed its list of potential suitors for its asset management business to a trio of private equity firms: Kohlberg Kravis Roberts, Hellman & Friedman and Bain Capital. According to the Financial Times, the embattled investment bank has eliminated Blackstone (BX) and Carlyle from the running. Lehman has sought to raise money by selling its asset management unit, which includes fund manger Neuberger Berman, ahead of more expected quarterly losses.

Fannie Mae (FNM) and Freddie Mac (FRE) extended their win streak to three as Wall Street appears to be less spooked by the specter of a government bailout. Analyst reports from Merrill Lynch and Citigroup in recent days have helped stop the bleeding in the mortgage giants' shares and raise hope that the government won’t be nationalizing the controversial companies anytime soon.

Amylin Pharmaceuticals (AMLN) saw its shares tank after the drug maker reported four deaths tied to Byetta, a diabetes drug it makes with Eli Lilly (LLY). The disclosure comes on top of a pair of deaths that were reported by the FDA last week. Amylin pointed out that the four patients had complicating conditions, which they said were likely the primary causes of death.

Borders (BGP) enjoyed a big day following a better-than-expected earnings report for the second quarter. The bookseller’s adjusted-loss of 31 cents per share topped estimates by two cents.

Talbots (TLB) surged by nearly 30% after the women’s apparel retailer posted in-line second-quarter results and reaffirmed its 2008 outlook. The company lost 34 cents per share from ongoing operations as sales slumped 7.7% to $528 million. For the full-year, Talbots sees earnings excluding items of 47 cents to 52 cents per share.

ConocoPhillips (COP) plans to sell 600 gasoline stations to PetroSun West LLC for $800 million, The Wall Street Journal reported. The move would allow ConocoPhillips to join ExxonMobil (XOM) and other energy companies that have exited the retail gas business. ConocoPhillips is expected to continue refining oil into gas and selling fuel on a wholesale basis to stations, the paper reported. PetroSunWest reportedly intends to add services such as dry cleaning and bill-paying to the existing gas stations.

Chrysler LLC is looking at "strategic options" for its Dodge Viper business after being approached by several third parties interested in the business. Chrysler CEO Bob Nardelli said in a statement that the auto maker would prefer to offer "strong operational and financial support during any potential transaction" to ensure Viper's future and perpetuate its legacy. It's not clear what companies have contacted Chrysler over Viper.

World Markets

The Dow Jones Euro Stoxx 50 Index, an index that tracks the 50 largest companies in Europe, rose 1.73 points, or 0.05%, to a reading of 3299.15. London's FTSE 100 Index, added 57.40 points, or 1.05%, to 5528.10.

On the European continent, the CAC 40 Index in Paris closed up 4.53 points, or 0.10%, to 4373.08 while Germany's DAX lost 19.49, or 0.31%, to 6321.03.

In Asia, Tokyo's Nikkei 225 benchmark index fell 25.75 points, or 0.20% to 12752.96. The Hong Kong's Hang Seng Index gained 408.06 points, or 1.94%, to 21464.72.

Florida Tops First Quarter Mortgage Fraud List

Reported incidents of mortgage fraud jumped 42% nationwide, with Florida reporting the highest number of cases, according to industry data released Monday.

Properties in the Sunshine State accounted for nearly a quarter of all mortgage fraud incidents, the Mortgage Asset Research Institute said. California ranked second, followed by a three-way tie for third among Illinois, Maryland and Michigan.

The report is based on data submitted by MARI subscribers about loans that were originated in the first quarter of this year and have since been classified as fraudulent.

The most common mortgage fraud cases included misrepresenting income, employment history, and debt and assets. Maryland, for example, had an unusually high percentage -- 69% -- of its cases involved tax return and financial statement misrepresentation.

Mortgage fraud has represented about $1 billion in losses over the past decade, the Mortgage Bankers Association has said.

The increase in reported incidents comes as lenders raise credit standards to curb rising foreclosures. Critics charge the industry for being too lax in qualifying risky borrowers during the boom, which fueled an overheated housing market.

But the stricter requirements have done little to curb fraud.

"Tightening credit standards by itself doesn't eliminate fraud," said Merle Sharick, vice president and national manager of business development for MARI, especially in markets that typically attract a lot of speculators like Florida and California.

Oil Rises Above $117 on Storm Concerns

Oil prices rose for a third day Wednesday as Tropical Storm Gustav spun toward the Gulf of Mexico on a possible collision course with offshore oil and gas installations.

Also Wednesday, the Energy Department reported a surprise drop in U.S. crude supplies. However, the report did not seem to be affecting trading as oil investors focused their attention on Gustav.

Royal Dutch Shell PLC and BP PLC said they have begun evacuating some workers from offshore rigs scattered throughout the Gulf, home to about a quarter of U.S. crude production and much of its natural gas.

Though it was too soon to know where the storm would hit, some models showed Gustav taking a path toward Louisiana and other Gulf states devastated by Hurricanes Katrina and Rita three years ago in a double blow that sent energy prices soaring.

"A bad storm churning in the Gulf could be a nightmare scenario. We might see oil prices spike $5 to $8 if it really rips into platforms," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.

Light, sweet crude for October delivery rose as high as $119.63 on the New York Mercantile Exchange before easing back in early afternoon trading to $117.03, still up 76 cents. The contract added $1.16 on Tuesday to settle at $116.27 a barrel.

The storm also boosted natural gas prices, which gained 18.9 cents, or 2.28%, to $8.467 per 1,000 cubic feet.

Gustav struck Haiti on Tuesday as a hurricane, pummeling the impoverished country with 90 mph winds and heavy rain before moving toward Cuba. At least 11 people were killed in Haiti and the Dominican Republic. Gustav was later downgraded to a tropical storm but was expected to regain strength, possibly becoming a dangerous Category 3 storm by next week, forecasters said.

Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill, said a big threat was to oil refineries dotting the Gulf Coast from Texas to Louisiana. A shutdown in refining there would likely lead to a sudden jump in retail gas prices around Labor Day weekend, a time when many Americans take to the road for end-of-summer vacations.

"There's a strong chance that by Friday we could see some fairly significant pump price increases," Ritterbusch said. "Crude can be replaced and brought in via tanker, but bringing a damaged refinery back up again can take a long time, as we saw with Katrina and Rita."

Prices were also supported by a weaker dollar, which boosted the demand for oil among investors who buy commodities as a hedge against inflation.

The euro recovered ground against the dollar Wednesday after hitting a six-month low the previous day. It bought $1.4714 in New York trading, up from $1.4650 Tuesday.

Crude prices have gone up for three straight days, halting a steep, monthlong slide as oil traders at least temporarily shift back toward a focus on short-term market events like Gustav.

But evidence of falling U.S. oil demand is keeping a lid on oil prices. The U.S. Energy Department's Energy Information Administration said Tuesday that year-over-year oil demand was down 5.6% in June.

"We're getting some pretty powerful data that suggests slower growth and higher gasoline prices have really crimped oil demand in the U.S," said David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney.

The Energy Department's Energy Information Administration said in its weekly inventory report that crude stockpiles fell slightly by 100,000 barrels to 305.8 million barrels for the week ending Aug. 22.

That compared to the 1.5 million barrel increase analysts surveyed by energy research firm Platts had expected.

"I think Gustav is overshadowing the EIA report. It doesn't appear to having an impact," Flynn said.

The EIA also said gasoline stocks fell less than expected last week, dropping by 1.2 million barrels compared to the 2.8 million barrels expected by analysts.

Supplies of distillates, which includes heating oil and diesel, were flat at 132.1 million barrels.

In other Nymex trading, heating oil futures rose 8.02 cents to $3.2901 a gallon, while gasoline prices gained 9.43 cents to $3.0645 a gallon.

In London, October Brent crude added $1.55 to $116.18 a barrel.

Thrifts Lost $5.4B in the Second Quarter

Federal regulators say U.S. thrifts lost $5.4 billion in the second quarter and set aside a record amount to cover losses from bad mortgages and other loans.

Data from the U.S. Office of Thrift Supervision show federally-insured savings and loan institutions posted their second-largest quarterly loss ever in the April-June period, after the $8.8 billion loss in the fourth quarter of last year. Heavily focused on mortgage lending, thrifts have been stung by mounting home-loan defaults.

The $5.4 billion quarterly loss compared with net profits of $3.8 billion in the year-ago period, and a loss of $627 million in the first quarter.

The roughly 830 thrifts also set aside a record $14 billion to cover losses from bad mortgages and other loans.