Now at 8,001, down 74 points, Rachel

NEW YORK (AP) — Wall Street headed for a lower open Monday as worries about swine flu unsettled markets around the world.
The flu is not yet a global pandemic. The virus is suspected to be responsible for more than 100 deaths in Mexico, but the confirmed cases in the United States and Canada have been mild.
Still, investors are nervous that the flu could spread and thwart economic recovery, particularly in areas that rely on travel and tourism. Spain became the first European country to confirm a case of swine flu, and the European Union health commissioner advised Europeans to avoid nonessential travel to Mexico and the United States.
The virus is striking at a vulnerable time for the stock market and the economy. The Dow has jumped 23.4 percent from its nearly 12-year low on March 9, but stalled last week as investors plodded through a deluge of mixed earnings reports.
Craig Peckham, market strategist at Jefferies & Co., called the swine flu an “easy excuse” for investors to take profits. Underlying the selloff, he said, is the worry that the global economy will take a long time to recover despite recent positive signals.
The rally over the last several weeks “has been about the world getting less bad,” Peckham said. “At a certain point, further gains have to be predicated on things getting fundamentally better, as opposed to less bad.”
Ahead of the market’s open Monday, Dow Jones industrial average futures fell 147, or 1.8 percent, to 7,909. Standard & Poor’s 500 index futures fell 16.20, or 1.9 percent, to 850.30. Nasdaq 100 index futures fell 21.75, or 1.6 percent, to 1,353.25.
Overseas, Japan’s Nikkei stock average rose 0.2 percent, but Britain’s FTSE 100 fell 1 percent in afternoon trading. Germany’s DAX index fell 1.3 percent, and France’s CAC-40 fell 1.5 percent.
Many earnings reports have been better-than-expected. Verizon Communications on Monday, for example, posted first-quarter earnings and revenue that topped expectations despite the weak economy.
But Wall Street is also anxious as it waits for the results of the government’s stress tests of the 19 largest U.S. banks. Regulators briefed bank officials on Friday about the tests, which will determine which banks may need further help from the government, but the results will not be publicly released until May 4.
U.S. government bond prices rose. The yield on the benchmark 10-year Treasury note fell to 2.93 percent from 3.00 percent late Friday. Bond prices move opposite to yields.
The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude fell $2.75 to $48.80 a barrel in electronic trading on the New York Mercantile Exchange.
In corporate news, General Motors Corp. said it will cut 21,000 U.S. factory jobs by next year, phase out the Pontiac brand and ask the government to take company stock in exchange for half GM’s government debt. The automaker’s shares rose 4.7 percent in premarket trading.

Give me a call. Rachel Pritchett, business reporter, (360) 475-3783.

COLUMBUS, Ohio (AP) — Governors have made headlines for refusing at least some of President Barack Obama’s economic stimulus package, but at the local level, cash-strapped cities and counties have been less vocal about turning down money.

But not always.

One of the fastest-growing counties in Ohio rejected the money, joining a scattered group of U.S. communities that say certain funds aren’t needed.

Commissioners in Warren County, a staunchly Republican county northeast of Cincinnati, refused to take $373,400 in stimulus money to buy three new transit buses and make other improvements to the fleet, citing philosophical objections to the spending.

Scott Varner, a spokesman for the Ohio Department of Transportation, which allocated the stimulus money, said the county’s decision was the only rejection in the state that he was aware of.

Warren County also wants to return $1.8 million in stimulus funding to replace windows and roofs on government buildings, making them more energy-efficient.

“We’re in the minority; I know that,” said Commissioner C. Michael Kilburn. “If we need things, we’ll write the check and pay for it.”

Governors of Alaska and four southern states — South Carolina, Texas, Louisiana and Mississippi — refused at least some of Obama’s $787 billion stimulus package, intended to help jump-start the U.S. economy. Cities have generally been more amenable to taking the money.

But in North Platte, Neb., a housing agency this month rejected $600,000 in stimulus funds, saying the money wasn’t needed. The money would have been spent on landscaping and fixing driveways and sidewalks.

The town board in Mount Desert, Maine, turned down a request by Police Chief James Willis to seek $175,000 in stimulus money, which would have paid the salary of an additional officer for three years. The board objected to being on the hook after stimulus funding ran out.

“We’ll just go the way the board wants to go,” said Willis, who presented the plan in early April. The small town has six full-time officers, and Willis said an extra officer would have helped eliminate the need for part-time staff.

Decisions to reject funding can be as important as how to spend it, said Catherine Turcer of the government watchdog group Ohio Citizen Action.

“Despite the fact that the stimulus seems enormous, not everyone can get a piece of the pie,” she said. “All government officials need to think about what they really need.”

One of the reasons that Warren County, home to Kings Island amusement park and other tourist attractions, is financially strong is because government spending was kept to a minimum, said Commissioner David Young.

The county, whose population has soared 28 percent this decade to more than 204,000, didn’t need new buses, so the stimulus money wasn’t needed, either, he said.

The state Transportation Department gave out $29.8 million to rural transit agencies around Ohio — money that will pay for new buses, dispatching equipment and in some cases new buildings.

Young said he doesn’t blame counties that accepted the money.

“Desperate times call for desperate measures,” he said. “However, I do blame politicians in Washington who are playing up to their constituencies by throwing money out like candy.”

Commissioners did allow the Warren County Sheriff’s Office to apply for $237,400 in stimulus money over three years. If granted by the U.S. Justice Department, it will pay for a resource officer at Kings High School in Mason.

TACOMA, Wash. (AP) — The Port of Tacoma says it will have to lay off employees this year because of a decline in shipping.

Port Executive Director Tim Farrell told The News Tribune he didn’t have the number of jobs to be eliminated or a timeline. The port currently has 255 employees.

The staff was sent a memo Friday offering employees the option of leaving early.

NEW YORK (AP) — The anger was evident at Citigroup Inc.’s annual meeting, where shareholders took turns at the microphone to object to how the bank has been operating.

The meeting is usually a well-attended affair lasting many hours as shareholders air their grievances, and Tuesday’s gathering was as somber and full of ire as ever. When Citi Chairman Richard Parsons recognized the five departing members of the board, who include ex-chairman Win Bischoff and former U.S. Treasury Secretary Robert Rubin, one man from the audience yelled out: “Thank God you’ve gone!”

Citigroup CEO Vikram Pandit tried to bring a more upbeat atmosphere to the ballroom at the New York Hilton hotel, emphasizing to shareholders that Citigroup is not the same company it was just a year ago, when it was became clear the bank was buckling under the weight of billions of dollars in bad debt.

In his opening remarks, Pandit said the four new board members would bring “new eyes” to the bank. He also discussed the “new structure” that has split the bank into two parts, and the “new strategy” and “new beginning” that the company is embarking on.

“Citi is one of the great business opportunities of our age,” Pandit said. He added: “I believe to my core that Citigroup has what it takes to rebound, what it takes to rebuild.”

The four nominees include former U.S. Bancorp CEO Jerry Grundhofer; former Bank of Hawaii CEO Michael O’Neill, former Philadelphia Federal Reserve President Anthony Santomero; and William S. Thompson Jr., former CEO of bond investment manager Pimco.

While many shareholders have been calling for change at the board level for years, some say say the new nominations don’t go far enough.

Kenneth Steiner, who said he owns about 10,000 shares, supported a proposal that would require the company to nominate two candidates for every board position instead of just one.

“Right now, it’s a non-election, basically,” Steiner said. “We know who’s going to win.”

Shareholders — many in suits, a few in baseball hats and jean jackets, and one in a beadazzled red satin cap — brought up other issues, too, questioning Citigroup’s underwriting standards for credit cards, the government’s involvement in the bank, executive compensation and the decision to sponsor the New York Mets ballpark, Citi Field.

Evelyn Y. Davis, a long-time shareholder who every year takes several trips to the microphone, called the Citi Field deal the “most stupid thing” and a waste of shareholder money.

Other shareholders called the board “Byzantine,” “communist” and “socialist.”

Steiner said it is ridiculous that a board composed of CEOs and former CEOs gets a say in Citigroup executive’s compensation while shareholders do not.

“It’s like having the Yankees determine the salary of the Mets,” he said.

Through it all, the six-foot-four Parsons remained polite and unflappable as he conducted the meeting from his podium; one shareholder called him a “gentleman.” Pandit was similarly calm on the surface, keeping quiet as he stood at his own podium on the opposite side of the stage.

Parsons, known as an adroit manager, broke the tension at times with humor. When a shareholder asked if any U.S. government representatives were in attendance, he said to laughter from the audience: “If they’re foolish, they can raise their hand.”

Citigroup has gotten $45 billion in government funding, and a portion of that will soon be converted into common shares.

Citigroup last week posted its best quarter since 2007, but still reported a $966 million loss to common shareholders. Before dividends paid to preferred shareholders, Citigroup posted net income of $1.6 billion. The figure relieved investors to some extent — the bank benefited from strong bond trading, low borrowing rates and severe cost-cutting.

But they remain concerned Citigroup could have sharp losses ahead of it. Loan losses and reserve builds for future loan losses amounted to $10 billion. Furthermore, accounting rules allowed Citigroup in the first quarter to take a $2.7 billion gain in its derivatives, because it, counterintuitively, benefited from the declining value of its debt.

Angry shareholders are nothing new to Citigroup. It has been several years since shareholders started calling for the ouster of ex-CEO Chuck Prince as Citi’s stock lagged its peers. That finally happened in late 2007, but was then followed by a string of quarterly losses and three government bailouts.

So this year’s meeting was marked by not only ire, but exhaustion. After about four hours of shareholder commentary on proposals, the audience of several hundred in the midtown Hilton ballroom had dwindled by about half.

“How many more years do you have to sit through a shareholder meeting like this before you get it right? You need a new director core,” said Richard Ferlauto, director of pension and benefits policy for the American Federation of State, County and Municipal Employees. Ferlauto proposed to vote against the board members on Citigroup’s audit and risk committee.

Chuck Jones, who said he owned about 25,000 Citi shares, asked Parsons and the board whether they were betting on Citigroup’s recovery and buying Citigroup shares.

“How many of these directors,” Jones asked, “bought Citi at a dollar a share?”

“I wish I had,” Parsons said with a chuckle. Citigroup’s shares have tripled since dropping to 97 cents in early March.

DETROIT (AP) — General Motors Corp. could get as much as $5 billion more in federal loans, while Chrysler LLC could get $500 million as they race against government-imposed deadlines to restructure, according to a government report filed Tuesday.

The quarterly report by a special inspector general on the auto industry and bank bailout programs says the money will be made available for working capital. GM has until June 1 to complete restructuring plans that satisfy the government’s auto task force, while Chrysler has until April 30.

A person briefed on the plans said Tuesday that the exact amount of the loans have not been finalized and will be worked out with the companies. The person asked not to be identified because the negotiations are confidential.

GM already has received $13.4 billion in government loans, while Chrysler has received $4 billion.

The government’s auto task force rejected both companies’ restructuring plans on March 30 and gave Chrysler until the end of April to make further cuts and take on a partner or face liquidation. If GM doesn’t meet its deadline, it will be forced to restructure under bankruptcy protection.

GM CEO Fritz Henderson said last week that the automaker would need $4.6 billion during the second quarter. A Chrysler spokeswoman said only that the company has not received any more money beyond the initial $4 billion.

The inspector general’s report filed Tuesday says that as of March 31, the Treasury Department had spent $24.8 billion for the Auto Industry Financing Program, out of a projected initial total of $25 billion. The money includes aid to Chrysler and GM, plus their financial arms, Chrysler Financial and GMAC Financial Services.

The Treasury also has estimated that it will spend up to $1.25 billion to guarantee warranties for people who buy Chrysler or GM vehicles during the restructuring period. The program is designed to reassure consumers that their warranties will be honored, according to the report, which was prepared for Congress.

NEW YORK (AP) — A reversal in bank stocks pulled the market higher Tuesday after Treasury Secretary Timothy Geithner told Congress that some banks could be allowed to repay financial bailout funds.

Geithner said the decision on repayments would be left to bank regulators and that “the vast majority” of banks had more capital than they needed.

Stocks had fluctuated earlier Tuesday after a string of lackluster earnings reports and forecasts stoked worries about how quickly the economy can recover. Financial stocks had shown some of the steepest losses.

Banks stocks posted some of the biggest gains after sliding on Monday. JPMorgan Chase & Co. rose $1.69, or 5.7 percent, to $31.38, while Citigroup Inc. rose 22 cents, or 7.5 percent, to $3.16. Goldman Sachs Group Inc. rose $4.14, or 3.6 percent, to $119.15.

In midday trading, the Dow Jones industrial average rose 72.56, or 0.9 percent, to 7,914.29.

Broader stock indicators showed the biggest gains. The Standard & Poor’s 500 index rose 10.53, or 1.3 percent, to 842.92, and the Nasdaq composite index rose 25.41, or 1.6 percent, to 1,633.62.

The KBW Bank Index, which tracks 24 of the nation’s largest banks, rose 3 percent after falling in morning trading.

Geithner said the government’s bank rescue plan “strikes the right balance” by letting taxpayers share the risk with the private sector while at the same time letting private industry use competition to set market prices for the assets.

Geithner wrote in a letter to Elizabeth Warren, head of the Congressional Oversight Panel, that $109.6 billion in resources remain in the government’s $700 billion financial rescue fund. Officials expect the fund will be boosted over the next year by about $25 billion as some institutions pay back money they have received. That would leave $134.6 billion.

But even with the bounce Tuesday investors’ worries about banks aren’t likely to ease soon, some analysts say.

“Nothing has been remedied in the banking sector,” said Dave Rovelli, managing director of trading at brokerage Canaccord Adams. “A lot of these banks, they’re basically making money only because they’re getting money from the government for free.”

The market’s fluctuations and bargain-hunting weren’t surprising for traders after heavy selling Monday and a flurry of corporate comments about the economy. Stocks tumbled more than 3 percent Monday after Bank of America Corp.’s earnings report touched off renewed fears about rising levels of bad debt.

Analysts said some pullback had been in order after stocks surged more than 20 percent from 12-year lows in March.

Bank of New York Mellon Corp., Caterpillar Inc., Coca-Cola Co. and drugmaker Merck & Co. posted results or issued forecasts that fell short of what the market expected. Wall Street is uneasy about some of the reports because analysts had set low expectations after a bruising January in which fourth-quarter results short-circuited a stock rally.

Not all financial stocks moved higher. Bank of New York Mellon’s first-quarter earnings fell a steeper-than-expected 57 percent. The company said it was slashing its dividend to boost capital. The stock fell $2.74, or 9.8 percent, to $25.29.

Construction equipment maker Caterpillar posted better-than-expected earnings but reduced its forecast. The stock had been lower in morning trading but edged higher with the broader market. Caterpillar rose 42 cents, or 1.4 percent, to $30.90.

Coca-Cola fell 99 cents, or 2.2 percent, to $43.34, after its first-quarter earnings fell 10 percent because of restructuring charges and write-downs. The beverage maker’s earnings were in line with Wall Street’s expectations but sales fell short.

Merck reported a 57 percent drop in first-quarter earnings because of a slide in both sales of its drugs and income from its partnership on cholesterol medicines. Merck fell $1.54, or 6.1 percent, to $23.68.

DuPont said its first-quarter profit dropped on falling demand. The chemical company also cut its full-year forecast and said it will increase its efforts to cut fixed costs. DuPont rose $1.12, or 4.2 percent, to $27.86.

In other market moves, bond prices fell. That pushed up the yield on the benchmark 10-year Treasury note to 2.88 percent from 2.84 percent late Monday. The yield on the three-month T-bill rose to 0.14 percent from 0.12 percent Monday.

Light, sweet crude rose 15 cents to $46.03 a barrel on the New York Mercantile Exchange.

The dollar was mixed against other major currencies while gold prices fell.

Overseas, Japan’s Nikkei stock average fell 2.4 percent. Britain’s FTSE 100 slipped 0.1 percent, Germany’s DAX index rose 0.3 percent, and France’s CAC-40 rose 0.2 percent.

By Rachel Pritchett

rpritchett@kitsapsun.com

BREMERTON

The Port of Bremerton is getting close to finalizing a $100,000 pact to offer support services to the clean-tech startup companies it hopes to attract.

Negotiations are in the later stages between the port and Spokane-based Sirti, formerly the Spokane Intercollegiate Research and Technology Institute.

Sirti, an economic-development agency active in the Inland Northwest, could be offering services here by summer, according to Tim Thomson, the port’s acting chief executive officer. Those services include business coaching, access to capital and legal services, to name a few.

The agreement is one of several components of the port’s Kitsap Sustainable Energy and Economic Development (SEED) program that are going forward, despite opposition from one of the three port commissioners, Larry Stokes. SEED is an effort to diversify the local economy, grow clean-tech companies and provide good-wage jobs. 

Not all has been settled in negotiations with Sirti.

Its director, Kim Zentz, said Sirti is insisting that a local person be hired to implement Sirti services, and that the port not ask Sirti to ship a member of its tiny staff here. “We’re frankly still discussing how this would all work,” Zentz said.

Also happening in the SEED initiative:

Incubator building: A new project manager has started looking for ways to make the estimated $7 million building at least a couple million dollars cheaper. But Thomson said it will be difficult to maintain the integrity of the building without more funds.

A portion of another new port building constructed for SEED-type companies is standing empty. It could be used for an incubator or for a Sirti office if the incubator is not built, Thomson said.

Nonprofit: A nonprofit board to oversee the incubator or to take on other SEED roles is still forming. Small-business counselor Rand Riedrich and environmental lawyer Jon Kroman are already members, while Bill Stewart of the Kitsap Economic Development Alliance has left. Port leaders will meet Wednesday with two potential board members, Navy contractor AnnaLee Todd and finance expert William Lemon.

Access road: Construction could start this summer on a small road that would connect the proposed SEED campus to rest of the port. The state-funded project is expected to cost $1.5 million.

The proposed SEED project, in the making for five years, has deeply divided the commission. But outside of Stokes, two of the three commissioners seem to be leaning toward it. Bill Mahan is by far its strongest proponent. Cheryl Kincer appears to lean in support.

Mahan believes the port has answered community concerns about SEED and the project should now go forward.

While a vote among commissioners is not necessary to move the project forward, Mahan believes it would set a clear direction.

“I think it would be a way of getting off the dime and clearing the air, and letting people know what the port’s going to do,” he said.

Stokes wants a public vote on the project and believes most of his constituents would turn it down as unaffordable and unworkable.

He objects to plans for a business incubator when the port has a major new building standing empty.

“OK, now they want to build another building?” he asked.

Stokes also fears that any additional bonding could affect taxpayers just in the Port of Bremerton but nowhere else in Kitsap.

“But I’m losing,” he said.

Bloggers,

The Port of Bremerton is in the end-stages of negotiations with a group to provide a myriad of services for clean-tech businesses that would fall under the SEED umbrella. The group is called SIRTI, formerly the Spokane Intercollegiate Research and Technology Institute. SIRTI could be up and going here by summer. Look for my story here.

Rachel Pritchett

CHARLOTTE, N.C. (AP) — Bank of America Corp. warned of worsening loan default problems Monday even as it posted a first-quarter profit of $2.81 billion. Investors concerned about the banking industry’s health sent financial stocks and the overall market sharply lower.

Although Bank of America said higher revenue from the purchase of Merrill Lynch & Co. helped offset a surge in credit costs, it took a hefty $13.4 billion provision for credit losses during the first three months of the year.

The bank’s stock fell $1.80, or 17 percent, to $8.50 in midday trading as the overall stock market slid. Although last week Wall Street was happy with better-than-expected results from JPMorgan Chase & Co., Goldman Sachs Group Inc. and Citigroup Inc., banking companies generally benefited during the quarter from unusually strong bond trading, a trend not expected to continue while loan problems persist.

Charlotte, N.C.-based Bank of America reported a similar performance during the first quarter.

“Like it or not, capital markets is now a core business for Bank of America, and that has more volatile returns than other businesses,” said Celent banking analyst Bart Narter. “Bank of America is no longer exclusively a retail bank and there can be more fluctuations.”

Bank of America earned $2.81 billion after paying preferred dividends, or 44 cents per share, compared with a profit of $1.02 billion, 23 cents per share, in the year ago period. Analysts surveyed by Thomson Reuters expected profit of 4 cents per share.

Troubled loans, or nonperforming assets, increased to $25.7 billion from $7.8 billion a year ago. The bank also lost $1.8 billion on card services, after posting a profit a year ago.

“Credit is bad and we believe credit is going to get worse before it will eventually stabilize and improve,” Chief Executive Ken Lewis said during a conference call with analysts, noting that the bank continues to face challenges. “Whether that turn is later this year or in the first half of 2010, I’m not going to hazard a guess.”

Lewis has been under intense pressure this year over the Merrill purchase, which closed Jan. 1. Shareholders approved the deal before learning of big losses at the New York-based investment and reports surfaced that Merrill Chief Executive John Thain rushed out billions of dollars in bonuses to Merrill employees in his final days as CEO even as Bank of America was begging the government for aid to complete the deal.

The first quarter results include revenue from the company’s acquisitions of Merrill and Countrywide Financial Corp., which Bank of America did not own last year.

During the quarter, revenue more than doubled to $35.76 billion, mainly from the addition of Merrill. It was also helped by a $1.9 billion pre-tax gain from selling shares it owned in China Construction Bank. Bank of America continues to own about 17 percent of the common shares of the Chinese bank, it said. Analysts expected revenue of $27.13 billion.

However, Bank of America recorded a $13.4 billion provision for credit losses in the first quarter, showing that it is not immune from deteriorating credit quality and growing unemployment. The bank set aside $6.4 billion as additional reserves to cover future losses.

Bank of America has received $45 billion in government funds as part of the Treasury Department’s $700 billion financial rescue package.