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Business Highlights

By The Associated Press
The Associated Press
Wednesday, March 9, 2011; 6:11 PM

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Wholesale inventories and sales rise in January

Businesses at the wholesale level added to their stockpiles in January and their sales jumped by the largest amount in 14 months. But the spike in sales was partially influenced by rising oil prices.

Wholesale inventories rose 1.1 percent in January, the Commerce Department said Wednesday. It was the 12th gain in 13 months.

Sales at the wholesale level rose for the seventh straight month. The 3.4 percent increase was the largest gain since November 2009.

Still, a 10.6 percent rise in demand for petroleum helped drive the jump in sales, reflecting higher oil and gas prices.

The rise in inventories left stockpiles at $436.9 billion. That's 13.1 percent higher than the low reached in September 2009, when companies were slashing their stockpiles to keep costs under control during the recession.

Greater sales should encourage businesses to keep restocking their shelves and drive factory production in the months ahead.

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Mortgage applications spike; home sales still weak

The number of people applying for a mortgage jumped last week. But analysts cautioned that the increase was likely driven by investors, not first-time homebuyers who are needed to help housing markets recover.

The Mortgage Bankers Association says its overall mortgage application index rose 16.1 percent from the previous week, the biggest jump since June. But the index is still far off where it was last spring and summer following four straight months of declines.

The refinance index rose 17.2 percent and the purchase index increased 12.5 percent, to the highest level so far this year. The refinance share of activity increased to 65.5 percent of all applications from 64.9 percent the previous week.

Mortgage rates have been at their lowest levels in decades, but that hasn't helped home sales much.

Mortgage applications will likely fall for the next few months because homeowners with a mortgage are unable to trade up, and cash buyers and investors, lured by low prices and rising rents, represent the bulk of sales, said Paul Ashworth, chief U.S. economist with Capital Economics.

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Walgreen selling pharmacy benefits ops for $525M

NEW YORK (AP) - Walgreen Co. said Wednesday that it is leaving the pharmacy benefits management business, selling that operation to Catalyst Health Solutions Inc. for $525 million in cash and freeing it to focus on its drugstore network, the largest in the United States.

The companies expect to complete the deal by the end of June assuming regulators approve. The pharmacy benefits management business, known as Walgreens Health Initiatives, has never approached the size of Caremark, the pharmacy benefits management business of CVS Caremark Corp., which is Walgreen's largest drugstore competitor. Caremark says it manages prescription benefits for about 60 million people.

Caremark is the third-largest pharmacy benefits manager in the U.S., behind Medco Health Solutions Inc. and Express Scripts Inc.

While Catalyst remains much smaller than those companies, the purchase more than doubles its size. After the deal is complete, Catalyst's total membership will rise to about 18 million from 7 million. The Rockville, Md., company said it will handle about 165 million prescriptions a year, compared to about 80 million previously.

Catalyst shares rocketed $7.12, or 16 percent, to $51.65 in midday trading.

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Dynegy warns it may have to file for bankruptcy

NEW YORK (AP) - Dynegy Inc. said it may have to seek bankruptcy protection if it can't meet certain earnings requirements by its creditors this year.

The power producer also announced Wednesday that it has elected four board members, two of whom were nominated by billionaire investor Carl Icahn's company and one by Seneca Capital - one of Dynegy's biggest shareholders.

Both groups have wrestled for more control over the company. A $665 million takeover offer from Icahn, which was opposed by Seneca, expired last month after it failed to get enough support from shareholders.

Dynegy has been hurt by lower power prices over the last two years.

The company owns power plants that burn natural gas, coal and oil. It sells electric energy and related services to grids and utilities in the Midwest, the Northeast and the West. As businesses shuttered and consumers turned off the lights during the recession to save money, prices for commodities to produce it plunged. Low demand meant utilities weren't able to raise prices to recoup losses.

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EU debt crisis mounts as market strains Portugal

LISBON, Portugal (AP) - Europe's government debt crisis has flared up again in the run-up to two crucial meetings of EU leaders as Portugal had to pay 50 percent more to raise cash in the markets on Wednesday than it had to just six months ago.

Investor tensions grew after the Portuguese government revealed it is paying 5.99 percent interest to raise 1 billion euros ($1.4 billion) in two-year bonds. That was way above the 4 percent demanded at the last similar auction in September and around four and a half percentage points more than the rate Germany has to offer - even though the two countries share the same currency.

The yield on Portugal's 10-year bonds rose a further 0.06 percentage point to 7.68 percent, a euro-era record and above the rates Greece and Ireland saw before accepting bailouts from the EU and International Monetary Fund last year.

The major concern in the markets is that the March 24-25 summit of EU leaders in Brussels will not yield the "comprehensive solution" to the debt crisis that has been trumpeted. There's also a realization that higher borrowing costs will make it far more difficult for countries like Greece and Portugal to grow themselves out of the debt mire they find themselves in.

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American Eagle 4Q earnings up; CEO to retire

NEW YORK (AP) - American Eagle Outfitters Inc.'s fiscal fourth-quarter net income rose 47 percent as the company cut costs faster than sales declined, the teen clothing retailer said Wednesday. Its CEO also announced plans to retire.

CEO James V. O'Donnell's retirement comes at a time when takeover speculation has swirled around the Pittsburgh company. O'Donnell, 70, will stay with the retailer until a successor is chosen and will work through the transition.

American Eagle's stock rose nearly 7 percent. Analysts said the company's business might turning the corner and new management will help rejuvenate the company, which has struggled with sales declines.

O'Donnell started with American Eagle as its chief operating officer in 2000. He became co-CEO in 2002 and CEO in 2003.

American Eagle's earnings climbed to $87 million, or 44 cents per share, for the fourth quarter. That's up from $59.3 million, or 28 cents per share, a year ago. Last year's quarter included a $20.3 million loss from stores it has since closed.

That beat the 43 cents per share that analysts polled by FactSet predicted.

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Exxon CEO says oil prices not yet hurting economy

NEW YORK (AP) - Exxon Mobil CEO Rex Tillerson said Wednesday he doesn't think the recent jump in oil prices is hurting the U.S. economy - yet.

At the same time, he acknowledged that gasoline prices are approaching an uncomfortable threshold for American families.

Oil is about $104 per barrel, and the national average for gasoline is now $3.52 per gallon. Drivers on the West Coast are paying close to $4. And the price is expected to rise through spring and into summer.

Tillerson told reporters at the New York Stock Exchange that in 2008 American families appeared to change their driving and spending habits when gasoline hit $4 per gallon that June. Gas peaked at $4.11 in July that year as oil climbed to $147 per barrel.

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Unemployment in Greece jumps to 14.8 percent

ATHENS, Greece (AP) - Unemployment in Greece jumped to 14.8 percent in December, the Statistical Authority said Wednesday, as painful austerity measures and the financial crisis took a toll.

Greece's largest labor union, the GSEE, called on the Socialist government to ease the measures demanded by European countries and the International Monetary Fund in exchange for euro110 billion ($153 billion) that the country began receiving last May.

© 2011 The Associated Press