Business and Finance

Orders for U.S. durable goods fell in January by the most in three years, led by a slowdown in demand for commercial aircraft and business equipment.

Bookings (DGNOCHNG) for goods meant to last at least three years slumped 4 percent, more than forecast, after a revised 3.2 percent gain the prior month, data from the Commerce Department showed today in Washington. Economists projected a 1 percent decline, according to the median forecast in a Bloomberg News survey.

The expiration at the end of 2011 of a tax incentive allowing full depreciation on equipment purchases may have prompted a slowdown in investment at the start of this year. At the same time, a strengthening auto industry may help keep factories at the forefront of the expansion that began in June 2009.

Daniel Macias is the face of Silicon Valley seldom seen by those who don’t live there.

When he was 19, he wasn’t starting what would become one of the world’s most successful tech companies, like Mark Zuckerberg did at that age when he founded Facebook. Macias spent his 19th birthday behind bars, where he’d been sentenced for assault.

Now 20, Macias spent a recent day learning to build houses as part of a construction job training program near Facebook’s headquarters. He hopes to join the carpenters union when he finishes the program.

“If I wasn’t going to school, I would have been in the streets,” Macias said.

Money and jobs abound in Silicon Valley for people with the right high-tech or business skills. For those who don’t, the Great Recession has meant the same challenge as anywhere else in the country.

Facebook moved into its new offices on the former campus of Sun Microsystems along San Francisco Bay not long before announcing plans for an initial public offering. Inside, employees wrestle with the enviable problem of what to do with their money once the IPO makes them overnight millionaires.

A short drive down the road, East Palo Alto saw the number of murders double from four to eight, a significant spike for a city of just 28,000 people. Average income hovers just under $18,000 annually, compared to more than $66,000 for Silicon Valley as a whole. The unemployment rate in December was 17 percent, compared to 8.3 percent region-wide.

Those disparities stem in part from the complicated histories of the small cities that span the Highway 101 corridor threading through the heart of Silicon Valley, and in part from national economic trends that have spared few struggling communities. They also reflect some changes unique to the most recent tech boom, fueled by social media, cloud computing and mobile apps.

As per capita income rises in region, the median income has fallen, suggesting that as some people are getting richer, more are making less. The percentage of students in Silicon Valley public schools receiving free or reduced-price lunches has increased steadily over the past several years, an indication of hard times for more families.

Data on these economic trends are collected every year in the Silicon Valley Index, compiled by local nonprofit analysts. This year’s report highlighted the recovery of the region’s high-tech economy as wildly successful companies like Facebook go on hiring sprees.

But that recovery has not had the same ripple effect on the region as a whole compared to previous tech booms, said Russell Hancock, head of Joint Venture, one of the groups behind the index.

In the past, companies like Hewlett-Packard Co. and Lockheed Martin Corp. brought mid-level jobs to Silicon Valley along with the expected science, engineering and management positions, Hancock said. But globalization has sent the manufacturing jobs overseas online pay day loans. Meanwhile, information technology has made once-plentiful clerical and office positions obsolete.

“The technologies that we invented here have actually eliminated entire classes of jobs,” Hancock said. Without those jobs, the prospects for workers without high-end tech skills have become even more challenging:

“If you took away tech, our region would look like any other region, maybe even worse,” he said.

The contrast between the haves at Facebook and the have-nots in East Palo Alto nearby has stirred some tension. City Councilman Carlos Romero is pushing for the company to do more to address traffic and the resulting air quality issues created by the influx of new workers. He also worries that especially after Facebook’s IPO, newly flush employees will start buying up the city’s relatively affordable real estate close to their offices and send housing prices spiraling higher than low-income residents can afford.

“This is not about making sure that Facebook doesn’t come into the community,” Romero said. “This is about making sure East Palo Alto is not left out.”

Nearly half of Facebook’s employees take some form of alternative transportation, and the company is placing a hard cap on the number of vehicles allowed on and off campus to keep traffic down, said Facebook spokesman Tucker Bounds. Facebook has also been working with local developers on efforts to build housing for employees on vacant land near the campus to lessen the impact on the existing housing market, Bounds said.

Facebook has initiated some outreach into the surrounding community, including support for the program where Macias is learning to be a carpenter, known as JobTrain.

Kail Lubarsky, director of marketing at JobTrain, said no graduates have gotten jobs with Facebook yet, but she said she’s working with the company in hopes of establishing an internship program. JobTrain has culinary arts training that could lead to jobs for students in Facebook’s cafeterias. But the real goal is to place students in entry-level jobs that could let them advance to join the ranks of the in-demand coders, designers and executives who thrive most in Silicon Valley.

At JobTrain, some students said they were gunning for Facebook jobs. But many said they were simply grateful for the chance to start over, to get a foothold in an economy that has challenged many of them, even in a place where on paper the recovery is in full swing.

Macias said he sees parallels between his effort to get ahead and the Facebook employees up the road, whom he sees as average people who worked hard and succeeded.

“They took advantage of opportunities,” he said.

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The number of Americans filing first-time claims for jobless benefits last week held at a four- year low and consumers became more confident, indicating an improving labor market may boost household spending.

Applications (INJCJC) for unemployment insurance benefits were unchanged in the week ended Feb. 18 at 351,000, the fewest since March 2008, Labor Department figures showed today. The Bloomberg Consumer Comfort Index rose to minus 38.4 in the week to Feb. 19, the strongest reading since April 2008.

Oil prices hit a new nine-month high Thursday as the dollar fell and gas pump prices climbed closer to $4 a gallon across much of the country.

Benchmark crude prices rose by $1.55 to end the day at $107.83 per barrel in New York. That’s the highest price since May 4 of last year. Brent crude increased by 72 cents to finish at $123.62 per barrel in London.

The rise in oil prices has helped push retail gasoline prices to record levels for this time of year. Benchmark crude has increased 9 percent so far in 2012, and gas pump prices are up about 5 percent.

Retail gasoline prices added another 3 cents Thursday for a national average of $3.61 a gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular has already topped $4 in California, Hawaii and Alaska. Gasoline is nearly $3.90 per gallon in New York and Connecticut. Analysts think we could see a national average of $4.25 a gallon by April.

The ongoing tension between western nations and Iran is continuing to drive oil prices higher.

Iran, the world’s third-biggest oil exporter, already has cut off shipments to Britain and France, and it may halt exports to other European countries. Iran also has threatened to close the Strait of Hormuz, a crucial waterway in the Persian Gulf through which one-sixth of the world’s seaborne exports flow every day.

Experts doubt Iran will try to dramatically cut shipments, given its dependence on oil sales. About half of the country’s revenue comes from crude. But many investors are snapping up oil contracts in case tensions escalate further.

“The Iranian influence remains as a major driver” in oil prices, independent analyst and trader Jim Ritterbusch said.

In addition to an oil embargo set to start this summer, European Union leaders said Thursday that the EU is preparing regulations that will put further financial pressure on Iran by keeping its banks from using a major financial clearinghouse no fax cash advances.

Oil prices got an extra boost Thursday afternoon as the dollar fell against the euro and other major currencies. Oil is priced in U.S. currency and tends to rise as the dollar falls and makes crude cheaper for investors with foreign money.

Oil prices are higher even though U.S. petroleum demand has been tanking compared to a year ago. The Energy Information Administration said Thursday that demand has dropped 6.7 percent for oil, and 6.1 percent for gasoline. The U.S. remains the world’s biggest oil consumer, but government data show that demand is growing the most overseas in developing countries like China.

Meanwhile, the price of natural gas fell after the government said supplies remain significantly higher than average for this time of year. Natural gas futures on Thursday fell by 2 cents to finish at $2.62 per 1,000 cubic feet in New York.

A boom in North American shale drilling has filled underground storage facilities across the country. The Energy Information Administration says supplies are more than 40 percent higher than the five-year average.

Major natural gas producers recently cut back on production, as prices linger around a 10-year low. But analysts say they’re not doing enough to reduce the glut.

“There’s still an avalanche of gas available right now,” said Gene McGillian, a broker and oil analyst at Tradition Energy.

In other energy trading, heating oil rose 2 cents to finish at $3.29 per gallon and gasoline futures rose by 3 cents to end at $3.11 per gallon.

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The Obama administration will release details tomorrow on its proposal to reduce the 35 percent corporate tax rate and eliminate tax breaks, said administration officials familiar with the plan.

The Treasury Department will outline the proposal, according to the officials, who briefed reporters on condition of anonymity. They didn

After a week dominated by hopes and fears about Greece, investors will continue to follow the plight of the nation at the center of Europe’s debt crisis as it enters another crucial week.

Investors will also have a full slate of data on the U.S. economy to sift through next week, which could vie with jitters about a default by debt-stricken Greece.

Stocks sank Friday after eurozone finance ministers postponed a decision on additional bailout funds for Greece, saying the government’s latest austerity program does not go far enough.

The Greek Parliament voted in favor of the politically unpopular reform package late Sunday, paving the way for the ministers to sign off on a second bailout worth €130 billion when they meet Wednesday.

Meanwhile, violent protests against the austerity measures continued over the weekend in Athens.

In addition to parliamentary approval, Greece needs to identify an additional €325 million in spending cuts. And political leaders must provide binding assurances that they will follow through on the reforms even after elections are held later this year.

The concern is that Greece will default on a €14.5 billion bond redemption in March if the government cannot secure additional bailout funds.

Friday’s retreat pushed the major indexes lower for the week. The Dow Jones industrial average () and the S&P 500 () both lost 0.5% last week, while the Nasdaq () eased 0.8%.

Despite the down week, stocks have been sailing higher this year. The Dow is up nearly 5% so far in 2012. The S&P 500 has gained nearly 7% and the Nasdaq has rallied over 11% year to date.

In the United States, investors will take in a series of key economic indicators next week, including January retail sales, a regional manufacturing index, a report on new home construction, as well as producer and consumer inflation data.

Bernanke: Housing problems hold back recovery

On Wednesday, the Federal Reserve will release minutes from its January policy meeting, when the central bank broke new ground by releasing interest rate forecasts and an explicit target for the rate of inflation.

The Fed has been cautious about the outlook for the economy, pledging to hold interest rates at historic lows through late 2014. But investors have been more optimistic, focusing on a better-than-expected reports on the job market and fourth quarter gross domestic product. 

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Congress is getting ready for another round of sparring over whether to extend the 2 percentage point payroll tax cut past its Feb. 29 expiration. Consider it a warm-up for the main event later this year, likely after the November election.

The Bush tax cuts are set to expire at the end of 2012. If Congress does nothing, most people who work and lots of people who don’t will see higher taxes starting Jan. 1.

The fight to come has sky-high stakes - a possible tax increase of over $200 billion a year imposed on an economy that may still be struggling for traction. Come November, voters will have their chance to swing the outcome.

The wealthy have the most at risk. For instance, the estate tax will be much higher for people who die after New Years Eve.

Now, estates up to $5 million are exempt from the estate tax, also known as the death tax. That exemption drops to $1 million next year. The top tax rate on estates would jump to 55 percent from 35 percent.

“This is insanity. There are 70 tax code items that expired last Dec. 31 and 38 more that expire at the end of this year. The future of all these items is up to the lame duck Congress and it’s anybody’s guess what will happen,” said Dan Connors, an enrolled agent at the Buenger Doyle Tax Service in Granite City.

President George W. Bush and Congress gave the vast majority of wage-earners a break when they trimmed tax rates across the board in 2001 and 2003.

Everybody who actually pays income taxes benefited when the bottom tax bracket was cut to 10 percent from 15 percent. But higher brackets were cut as well. As a result, the higher a person’s income, and the more they gain from investments, the more dollars they saved on taxes. The top bracket, for couples earning more than $388,000, fell to 35 percent from 39.6 percent.

Taxes on dividends and capital gains were cut too, to a maximum of 15 percent. If the cuts expire, the rate on capital gains will go to 20 percent, while dividends will be taxed as ordinary income.

A couple with a child earning $60,000 from wages saves about $1,000 under the Bush tax cuts, according to a calculator supplied by the Tax Foundation. A couple earning $300,000, with $20,000 of that in investment income, saves $6,800. A couple earning $1 million, with $200,000 from investments, saves about $71,000.

But the poor will also lose if all the tax cuts expire. The earned income tax credit for the working poor will become less generous. The $1,000 child tax credit would be cut in half, and people who owe no taxes would no longer get a refund check because of it.

If the deadline draws close with no action, expect some churning in the financial markets. Dividend stocks have been the most popular investments on Wall Street for most of the past year as investors yearn for yield. Higher dividend taxes would subtract some appeal.

People with big capital gains on stocks would be tempted to sell them late this year to avoid the tax hike.

For now, tax advisers are telling their clients to sit tight and watch closely.

“Both parties know that the worst possible outcome would be for the Bush tax cuts to completely go away,” said Bob Jones, CEO of Central Trust in Clayton.

Taxes will be a campaign issue, but the betting is that serious bargaining will wait until after the election.

The major Republican presidential candidates would generally extend the Bush cuts, and then some. Mitt Romney would kill the estate tax and eliminate taxes on investment income for most investors.

Newt Gingrich would give taxpayers a choice of paying under the current system or at a new 15 percent tax rate. Rick Santorum would lower income tax rates further and triple the exemption for children.

President Barack Obama would preserve the Bush tax cuts only for families earning less than $250,000, while adding new taxes on people earning $1 million or more.

The debate will feel like “groundhog day all over again,” says Mark Luscombe, principal analyst at CCH, a tax analysis and software company. The Bush cuts were originally to expire in January of last year, when the recession was biting deeper, but Congress and Obama agreed to extend the cuts for two years.

If re-elected, Obama won’t agree to another punt, Luscombe predicts. After all, he doesn’t have to run again. If there is no agreement, all the Bush tax cuts would disappear on Jan. 1.

“This could be the last year of relatively low tax rates,” says Luscombe.

Todd Sivia, an estate planning attorney in Edwardsville, thinks heirs to large estates are at risk, given the government’s projected $1.1 trillion deficit this year.

“History shows that, when we’re deep in debt, we always re-establish the estate tax and it comes back with a vengeance,” Sivia says.

Lawyers have long experience in avoiding or delaying the estate tax. Tactics include gifts and establishing trusts to move assets between generations.

Sivia notes that higher estate taxes could turn grandparents more generous, as they try to pass on more of their wealth through gifts while living.

The prospect of higher income tax rates could motivate people who have been thinking of converting a regular IRA into a Roth IRA. Such conversions mean paying taxes on the IRA now, in trade for tax-free growth in a Roth. They can be a good move for people with many years to retirement.

Upper income people are due for a tax hike anyway, regardless of whether the Bush cuts are extended. The health care reform law of 2010 established a “Medicare surtax” that takes effect next year, notes Bert Schweizer, principal at Buckingham Asset Management in Clayton.

The complex tax applies to singles earning over $200,000 and $250,000 for married couples.

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Time Warner Inc. reported fourth-quarter earnings Wednesday that rose from a year earlier and beat Wall Street’s expectations, largely due to the final Harry Potter movie.

The company also hiked its dividend and announced a new share buyback.

Shares of Time Warner (, Fortune 500) rose more than 2% in early trading.

Time Warner’s sales rose 5% to $8.2 billion, topping analysts’ forecasts of $8.1 billion. The growth was led by 7% revenue growth at Warner Bros., thanks to the DVD and Blu-ray release of Harry Potter and the Deathly Hallows: Part 2, the final installment of the wildly successful series.

The film’s DVDs, which went on sale in November, ranked within the top three selling DVDs domestically in 2011, and helped offset lower revenues from the silver screen releases and television license fees.

While Harry Potter’s days at the box office have come to an end, Time Warner CEO Jeff Bewkes said the franchise will live on and be a source of strength for the company.

Time Warner rakes in licensing fees for The Wizarding World of Harry Potter from theme park Universal Orlando, owned by NBCUniversal.

The park is set to expand in Florida, and a second Wizarding World of Harry Potter will open at the Universal Studios Hollywood theme park in California, bringing in more fees starting in 2014.

Bewkes also noted the excitement building up for The Dark Knight Rises, which will mark the end of Christopher Nolan’s Batman trilogy. Midnight IMAX shows for the July release are already selling out, he said.

Time Warner’s television networks were also strong performers during the fourth quarter. Revenue climbed by almost 5% at the networks, which include CNN, HBO, TBS, TNT and truTV.

Sales from subscriptions at the television networks edged up 5% while advertising sales ticked up 2%. Meanwhile, content revenue spiked 16% thanks to higher sales of HBO’s original programming, which includes "True Blood" and "Game of Thrones."

But revenue at Time Warner’s publishing unit, Time Inc. declined 1%, as sales from subscriptions decreased and advertising sales remained flat during the quarter business cards design.

The New York-based parent company of CNNMoney.com and Fortune said its net income rose to $773 million, or 76 cents per share, up just 0.5% from the same quarter in the prior year.

Adjusted net income, the commonly used profit metric for media companies, rose 25% to $946 million, or 94 cents per share. Analysts polled by Thomson Reuters were looking for earnings per share of 87 cents.

Separately, Time Warner said it is raising its quarterly cash dividend by 11% to 26 cents per share, and announced a $4 billion stock repurchase program.

Throughout 2011, the media giant has repurchased approximately 144 million shares, for about $4.9 billion, helping its stock jump more than 12% in 2011.

For 2012, the company said it expects adjusted EPS growth to be in the low double digits, from a base of $2.89 in 2011. That would compare to 20% growth in adjusted EPS in 2011.

"We’re investing aggressively in programming, production and marketing," said Bewkes, adding that the company is focusing on expanding its international presence.

Movie ticket sales hit 16-year low

For the full year, Time Warner booked a $2.9 profit and an 8% jump in revenue to $29 billion. Both topped Wall Street estimates. Adjusted net income rose 12% to $3.1 billion, or $2.89 per share. Analysts polled by Thomson Reuters were looking for earnings per share of $2.82.

The company’s TV networks and Warner Bros. divisions both reported a 9% jump in revenue for 2011, primarily due to sports programming, including the NCAA basketball tournament, that aired on TBS, TNT and truTV and the Harry Potter movies.

Rival media conglomerate Walt Disney (, Fortune 500) also posted a better-than-expected profit late Tuesday, but revenue growth fell short of expectations. News Corp. (, Fortune 500) opens its books after the closing bell Wednesday. 

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World stock markets were mixed Monday as fears of a Greek debt default dampened the euphoria from a stronger-than-expected increase in U.S. jobs.

Benchmark oil fell to near $97 per barrel while the dollar rose against the euro and the yen.

European stocks fell in early trading as Greece’s coalition government was facing another day of tough negotiations with international lenders to reach a deal for Athens to receive a euro130 billion ($171 billion) emergency bailout.

The deal is vital for Greece to avoid bankruptcy as it cannot cover a euro14.5 billion ($19.1 billion) bond repayment due March 20.

Britain’s FTSE 100 slipped 0.3 percent to 5,883.86. Germany’s DAX fell 0.4 percent to 6,739.95 and France’s CAC-40 lost 0.8 percent to 3,399.17. Wall Street also was headed for a lower opening, with Dow Jones industrial futures down 0.3 percent to 12,751 and S&P 500 futures shedding 0.4 percent to 1,333.20.

Asian shares closed higher on the heels of a data released Friday that showed U.S. unemployment had fallen to its lowest in three years, suggesting a stronger recovery in the world’s No. 1 economy that could benefit the region’s exporters.

Japan’s Nikkei 225 index rose 1.1 percent to close at 8,929.20, its highest closing in more than three months. South Korea’s Kospi was marginally higher at 1,973.13.

Hong Kong’s Hang Seng lost 0.2 percent to 20,709.94, slipping into negative territory as investors began to cash in some of their investments as the talks in Greece dragged on.

“We hit 21,000 and now there is profit-taking, because there is still potential bad news from Greece,” said Jackson Wong, vice president at Tanrich Securities in Hong Kong. “The Greek debt talks are still going on, and no one knows if significant bad news will come out of there.”

Australia’s S&P ASX/200 added 1.1 percent to 4,296 while benchmarks in Singapore, mainland China and the Philippines also rose. Taiwan’s and Indonesia’s main indexes fell.

On Friday, the Dow Jones industrial average was propelled to its highest close since May 2008 after the U.S. Labor Department said the economy added 243,000 new jobs in January, the strongest job growth in nine months.

That helped to push the unemployment rate down to 8.3 percent and the number of unemployed down to 12.8 million.

Noting that a similar gain occurred in April 2010, only to be followed by a negative trend, analysts at DBS in Singapore said, “Stay optimistic but keep a few grains of salt close at hand.”

Falling unemployment in the U.S. is likely to be good news for Asia, as it suggests stronger consumer demand for the region’s exports of clothing, cars, consumer electronics and other goods.

Among Japanese shares, Panasonic Corp. soared 6.3 percent and Mazda Motor Corp. jumped 6.9 percent. Camera maker Nikon Corp. shot up 11.2 percent after revising upward its net pretax profit for the current business year, Kyodo News reported.

Chinese shipping companies, which also stand to benefit from increasing exports, also rose. Hong Kong-listed China Shipping Container Lines rose 5.1 percent. China COSCO Holdings gained 4.9 percent.

Benchmark oil for March delivery was down 66 cents to $97.19 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.48 to finish at $97.84 per barrel on the Nymex on Friday.

In currencies, the euro fell to $1.3059 from $1.3153 late Friday in New York. The dollar rose to 76.66 yen from 76.55 yen.

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The European Central Bank is considering using its bond holdings to bolster Greece