Friday AM January 25th, 2008

Mortgage interest rates falling...Labor Department reports decline in new applications for unemployment benefits...President Bush signs bill providing for closer scrutiny of security impact of foreign investments...

Between weak economic news and the surprising rate cut by the Federal Reserve, mortgage interest rates are falling. Finance giant Freddie Mac says benchmark 30-year, fixed-rate mortgages have dropped to the lowest level in nearly four years. It puts the averages this week at 5.48 percent, down from 5.69 percent last week. Freddie Mac says the average is at the lowest point since March 2004. For 15-year fixed, the average this week is 4.95 percent, down from 5.21 percent last week. On one-year adjustable rate mortgages, the average is put at 4.99 percent. That is compared to 5.26 percent last week. Freddie Mac says it is the fourth straight week of declines in mortgage rates.

The number of laid-off workers filing claims for unemployment benefits has fallen for the fourth straight week. The Labor Department says new applications for unemployment benefits dropped by 1,000 last week to 301,000. That's the lowest level in four months. The decline was unexpected. Analysts had been forecasting an increase of 19,000. The string of falling claims is a welcome sign after a December jump in the unemployment rate to five percent.

A law signed into effect by President Bush calls for closer scrutiny of the security impact of foreign investments. The executive order reflects changes that Congress implemented following the uproar in 2006 over a plan by Dubai-owned DP World to manage six of the largest ports in the U.S. The deal fell through after lawmakers argued the administration and the agency responsible for reviewing security issues had not fully considered all of the security concerns. The new law extends the scope of the review to cover deals involving critical infrastructure and energy. It requires a second-stage review investigation of most proposed acquisitions by state-owned companies.

Congress is stepping up pressure on the Bush administration to force U.S. contractors in Iraq to better protect their employees from crimes. House Judiciary Committee Chairman John Conyers of Michigan has met privately with Deputy Defense Secretary Gordon England and Attorney General Michael Mukasey. The Associated Press reports Conyers has pressed for tougher rules for contractors. The recent meetings followed a December hearing that Conyers convened on allegations from Jamie Leigh Jones. She claimed she was raped by co-workers while working in Iraq in 2005 for Houston-based KBR-Halliburton. Also, 111 U.S. House members have signed a letter to the State and Defense Departments saying Defense Department employees who commit crimes are accountable under U.S. law. Among the signers was Houston Congressman Ted Poe, who helped bring Jones home from Iraq. Jones formerly lived in Conroe.

Oilfield services company Allis-Chalmers Energy says it's acquiring Bronco Drilling for almost $438 million in cash and stock. It's the third combination in the increasingly competitive industry in as many months. The deal also would continue a trend of Houston-based energy companies targeting counterparts in neighboring Oklahoma, where Bronco is based. The total purchase price includes $280 million in cash and $158 million in stock. The deal is expected to close midyear, making Bronco Drilling a wholly owned subsidiary of Allis-Chalmers. Allis-Chalmers provides services and equipment to oil and natural gas exploration and production companies. Bronco provides land drilling and other services to exploration and production outfits.

Houston-based Pride International says it will build a third ultra-deepwater drillship under a five- to seven-year contract worth as much as $1.2 billion with Petroleo Brasileiro. The drillship will be built by Samsung Heavy Industries in South Korea, with delivery planned for 2011. The rig will cost about $720 million.

The University of Texas M.D. Anderson Cancer Center has formed an alliance with Delaware-based Astra Zeneca to study neuropathic pain caused by cancer chemotherapy, according to the Houston Business Journal. They plan to focus on the identification of neurobiological differences between cancer patients who develop chemotherapy-induced pain and patients who experience little or no pain, to develop new treatments to prevent pain and chemotherapies with less severe pain-related side effects.

Ford says it will offer buyout and early retirement packages to all 54,000 U.S. hourly workers in an effort to cut more jobs and replace workers with those making a lower wage. CEO Alan Mulally says the new round of buyouts was negotiated with the United Auto Workers union. He says the first round will be offered immediately to workers who had been employed at already closed plants in Atlanta, St. Louis, Edison, New Jersey and Norfolk, Virginia. Ford reported narrowing its losses in the fourth quarter and for all of last year. It says the outlook for sales in the U.S. remains grim. Ford lost $2.8 billion in the fourth quarter, narrower than a $5.6 billion loss in 2006. The full-year loss of $2.7 billion was also significantly better than in the previous year.

American Airlines has upgraded its Web site to let customers check in for flights and look at itineraries on their web-enabled cell phones. Fort Worth-based American announced it will expand the service this spring to let customers book flights, change reservations and request upgrades from a Web-enabled device. American says its Web site recognizes users of mobile devices and directs them to a mobile version of the Web site. The nation's largest carrier says content is more condensed than on the regular site for users of desktop or notebook computers, but it's designed to be navigated from a mobile device.

Updated figures on university endowments reveal a growing number of newly rich schools. The Associated Press reports the latest endowment figures come from a college business officers group known as Nacubo. There are 76 colleges and universities with endowments that have passed $1 billion, including 16 new members like Georgetown and the Universities of Oklahoma and Missouri. But five at the top each have nearly $6 billion more than any school outside that group: Harvard ($35.6 billion), Yale ($22.5 billion), Stanford ($17.2 billion), Princeton ($15.8 billion) and the University of Texas System ($15.6 billion). Harvard pays full professors on average about $177,000, compared to about $106,000 at the average public research university. UT Chancellor Mark Yudof says the Texas System's $15.6 billion endowment is the largest by far of any public university.

Downloaded music is up, but not far enough to cover the collapse of CD sales around the world. Record companies' revenues from digital sales are up 40 percent over the past year. But the industry's trade group says that doesn't come close to making up the billions lost to music piracy. Illegal downloads outnumber those sold by 20-to-1. The International Federation of the Phonographic Industry says CD sales fell 11 percent between 2005 and 2006, and are likely to show more losses in 2007. The group says digital downloads account for 15 percent of the world's music sales, with more than 500 legally licensed music sites selling around six million tracks of music. Japan continues to drive the digital market, with consumers using cell phones to download music.

Fitch Ratings cut its ratings on Southwest Airlines debt. Fitch cited the Dallas-based carrier's plan to buy back more shares and weak conditions in the airline industry. But Fitch left Southwest's debt at an investment-grade level. The ratings of most U.S. carriers are lower; so-called junk status. Fitch cut Southwest's default, senior unsecured debt and bank borrowing ratings one notch, to "A-minus'' from "A.'' Fitch says the ratings cover about $1.6 billion of current Southwest borrowing. The move came one day after Southwest said it plans to buy back up to $500 million of its own shares. The ratings service maintained a negative outlook on Southwest, indicating that more downgrades are possible.

AT&T says gains in its wireless business and broadband Internet sales growth helped its fourth-quarter earnings grow by 63 percent over the previous year's quarter. The nation's largest telecommunications company says its net income for the quarter came in at $3.1 billion. Revenue nearly doubled to $30.35 billion. During the same period of 2006, the company earned $1.9 billion. The results of that quarter didn't include earnings of BellSouth because AT&T's takeover wasn't completed until final days of the period. Revenue in the fourth quarter nearly doubled, but most of the growth came from the takeover of BellSouth. The massive integration of BellSouth and Cingular Wireless, which had been a joint venture by AT&T and BellSouth, is on schedule. AT&T says the cost savings continue to be better than initially expected. AT&T is also reaffirming its previous earnings growth guidance for the current year. San Antonio-based AT&T pointed to gains in its wireless business and growth in its broadband Internet sales.

Kimberly-Clark said that its fourth-quarter profit dipped nearly six percent because of charges for cost cuts. The Irving-based maker of Kleenex tissue and Scott paper towels reports net income of $456 million, for the quarter ended December 31st. Revenue rose 11 percent to $4.76 billion helped by strong sales in the personal care division. Analysts predicted revenue $4.65 billion for the quarter. Kimberly-Clark says it'll likely earn between $1.05 and $1.08 in the first quarter, including charges for cost reductions.

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