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The Honolulu Advertiser

Posted at 9:30 p.m., Friday, August 24, 2007

Business highlights: Burger King, Home Depot, GM

Associated Press

NEW HOME SALES RISE IN JULY

WASHINGTON — New-home sales turned up and factory orders soared in July, suggesting the economy was on stable footing before a credit crunch took a turn for the worse.

The Commerce Department reported Friday that sales of new homes rose 2.8 percent to a seasonally adjusted annual rate of 870,000 units. The increase came after a 4 percent drop in June.

Another report from the department showed that orders placed with factories for big-ticket goods jumped 5.9 percent in July, the most in 10 months.

The latest batch of economic news was better than analysts had expected. They were forecasting home sales to fall and calling for a much smaller, 1 percent gain in factory orders.

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AFTER CALM WEEK, DOW UP MORE THAN 140

NEW YORK — Wall Street ended its calmest week in a month with a big advance Friday, rising on solid economic readings that countered the bleak sentiment that has blanketed the financial markets. The Dow Jones industrial average rose more than 140 points in a lightly traded session.

Stocks started out flat but jumped following a stronger-than-expected reading on new homes sales for July. That report followed a reading showing orders to factories for big-ticket goods rose sharply in July.

The stock market's gains Friday after several stable or positive sessions suggested that Federal Reserve policymakers and stock market investors have perhaps struck a truce — maybe only a tenuous one — with the Fed acknowledging it stands ready to try to fend off a calamitous seizing up of the credit markets and investors willing to focus on readings on the health of the economy before making decisions.

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MORGAN STANLEY CUTS RETAIL SALES OUTLOOK

NEW YORK — Morgan Stanley on Friday sharply cut its forecast for retail sales growth in 2008, saying U.S. consumer spending will be restricted by declining home values, tighter credit standards and more modest job growth.

Analyst Gregory Melich now expects retail sales to grow 3 percent in 2008, down from a previous forecast of 4.5 percent. That would mark the slowest annual growth in retail sales since 2003.

His forecast assumes average home prices fall about 6 percent from where they are now, leading to about $100 billion less in total consumer spending, half of which he predicts would come from traditional retail categories.

Declining home sales and rising mortgage defaults have sparked fears of a slowdown in spending and forced lending institutions to tighten credit standards. Overall, however, consumers have proven resilient even as prices for gas and food remain high and housing prices decline.

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BURGER KING POSTS 4Q PROFIT

MIAMI — Burger King Holdings Inc. posted a fourth-quarter profit Friday versus a loss a year earlier, fueled by strong late-night and breakfast sales and flashy marketing as it completed its first year as a publicly traded company. Full-year profit rose more than five-fold to $148 million.

Burger King expanded its hours, added a breakfast value menu, opened hundreds of new restaurants and set records in sales over the past year, more signs of improvement in a company that was struggling earlier this decade.

John Chidsey, chief executive of the world's No. 2 hamburger chain, said he wants to double Burger King's net restaurant openings and post a double-digit profit increase in 2008 — but it must effectively manage food costs and fight stiff competition for restaurant diners.

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HEINZ FIRST QUARTER EARNINGS UP 6 PERCENT

PITTSBURGH — H. J. Heinz Co. said Friday its fiscal first-quarter earnings grew 6 percent, driven by double-digit growth in ketchup, beans, soups and Smart Ones meals, and the ketchup maker raised its outlook for the full year.

Net income rose to $205.3 million, or 63 cents per share, from $194.1 million, or 58 cents per share, a year ago. Sales climbed 9 percent to $2.25 billion for the quarter ended Aug. 1 from $2.06 billion in the prior-year period.

Analysts surveyed by Thomson Financial expected profit of 63 cents per share on revenue of $2.23 billion. Last week, Heinz said it anticipated first-quarter earnings of 62 to 63 cents per share, compared with Wall Street's consensus estimate of 55 cents per share.

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HOME DEPOT NEGOTIATIONS CONTINUE

ATLANTA — The Home Depot Inc. and a group of private equity firms are discussing cutting the $10.3 billion price on the company's proposed sale of its wholesale distribution business by about $1 billion, a person with direct knowledge of the situation said Friday.

Talks were continuing Friday on terms of the sale which was to have been completed on Thursday.

The person said Home Depot has made it known to the buyers that it is willing to lower the price agreed to in June, but it was still unclear whether the banks backing the buyers were willing to fund the transaction even at the lower price.

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CHINESE BANKS DISCLOSE CREDIT EXPOSURE

SHANGHAI, China — Chinese banks are just beginning to disclose their exposure to the U.S. subprime mortgage crisis, sending some bank shares plummeting in Hong Kong.

Bank of China saw its Hong Kong stock price fall by as much as 8.1 percent Friday in reaction to the bank's report that it holds $9.65 billion in subprime asset-backed securities and collateralized debt obligations. That's 3.8 percent of its total securities investments.

But in the Chinese mainland, where the state-controlled press ran headlines touting the minimal risks faced by two of the country's biggest banks from the U.S. credit crunch, Bank of China's shares rose Friday.

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CRUDE OIL PRICES RISE

NEW YORK — Crude oil and gasoline prices jumped Friday after the U.S. government said sales of durable goods and new homes rose in July, suggesting the economy may not be slowing as much as investors feared.

Leading to some extra buying late in the day, a report circulated that Chevron Corp.'s Pascagoula, Miss. refinery was canceling crude purchases. The refinery, Chevron's largest in the United States, has been operating at half-capacity after being damaged by a fire last week.

Energy News Today, a trade publication, reported that Chevron canceled a 550,000-barrel Venezuelan crude shipment. Chevron couldn't be reached to comment on the report.

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GM TESTING FUEL TECHNOLOGY

DETROIT — General Motors Corp. says it is testing a new combustion process that could increase fuel economy in conventional engines by up to 15 percent.

The announcement comes as fuel economy has become a increasingly important issue as gasoline prices have risen. Foreign automakers have captured a bigger share of the U.S. market in part by emphasizing fuel efficiency.

The process GM is testing, called homogeneous charge compression ignition, approaches the fuel efficiency of a diesel engine without the need for advanced pollution controls, the company said in a statement.

It is being tested in two drivable concept vehicles, a Saturn Aura and an Opel Vectra, and was to be shown to reporters Friday at GM's proving ground in Milford.