HP may oust CEO, hire eBay veteran - source

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Hewlett-Packard CEO Leo Apotheker delivers the keynote address at the HP Summit in San Francisco, California in this March 14, 2011 file photo. 


Republican candidate Meg Whitman smiles at the first of three debates in the California governor's race at the University of California, Davis in this Sept 28, 2010 file photo.


Hewlett-Packard Co's board convened on Wednesday to consider ousting Chief Executive Officer Leo Apotheker after less than a year on the job and replacing him temporarily with former eBay CEO Meg Whitman, a source familiar with the matter said.

HP's board of directors - facing shareholder lawsuits and intensifying criticism from investors - is thrashing out a host of issues, including whether to name Whitman as the interim CEO, the source told Reuters.

The storied Silicon Valley giant is fighting to restore its crumbling credibility. During his 11-month tenure, Apotheker slashed sales forecasts repeatedly, backtracked on promises to integrate Palm's webOS software into devices, and struggled to halt a 50 percent plunge in the share price.

No decisions have yet been made about leadership, the source said on condition of anonymity because of the sensitivity of the issue.

Wall Street roared its approval, sending HP shares up 6.6 percent to close at $23.96, a gain of $3 billion in the company's market value.

If Apotheker is let go, he would be the third CEO in a row to be ousted by the board of the largest US technology company by sales.

Analysts say the odds may have been stacked against Apotheker from the beginning. Venture capitalist Ray Lane, who this year assumed chairmanship of an often-lambasted but powerful board, has argued that previous management underinvested in areas including software and services.

"He was doomed from the beginning," said Ticonderoga Securities analyst Brian White. "The die was cast for whoever stepped into that position."

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Fed warns of big economic risks

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WASHINGTON - The US Federal Reserve on Wednesday moved to counter what it said were significant risks to the US economy with an effort to lower long-term borrowing costs and bolster housing.

The US central bank said it would launch a $400 billion program to weight its $2.85 trillion balance sheet more heavily toward longer-term securities by selling short-term government debt to purchase longer-dated Treasuries.

It also said it would reinvest proceeds from maturing mortgage and housing agency bonds it holds back into the mortgage market, an acknowledgment of just how weak housing remains.

The Fed's action met with a mixed reception in financial markets. Apparently spooked by the central bank's dismal outlook, US stocks sold off. The Standard & Poor's 500 index closed down nearly 3 percent.

Prices for long-term government debt rose, pushing yields lower -- a sign the measures were more aggressive than some investors had expected. The yield on the benchmark 10-year note dropped as low as 1.856 percent, the lowest in more than 60 years.

"Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated," the Fed said in a statement after a two-day meeting. "There are significant downside risks to the economic outlook, including strains in global financial markets."

The US economy grew at less than a 1 percent annual rate over the first half of the year and economists have warned of a heightened risk of recession.

Analysts, however, said the Fed's move might not have a great impact, even if it does lower long-term interest rates.

"The cost of borrowing simply isn't the problem," said Paul Ashworth, an economist at Capital Economics in Toronto. "Businesses don't have the confidence to invest and half of all mortgage borrowers don't have the home equity needed to refinance at lower rates."

Still, faced with a lofty 9.1 percent jobless rate and an escalating sovereign debt crisis in Europe, Fed officials felt they needed to do what they could to try to breathe more life into the sluggish US recovery.

With Fed Chairman Ben Bernanke reluctant to stay on the sidelines, his activism has become a punching bag for politicians as an election year nears. Top Republican lawmakers wrote to Bernanke this week urging the central bank to resist further economic interventions, echoing criticism voiced by Republican presidential candidates.

By shifting their bond holdings into longer maturities, the Fed seeks to "twist" long-term interest rates lower relative to its target for overnight lending, hopefully spurring mortgage refinancing and more borrowing by businesses and consumers.

Not all policymakers were on board with the Fed's latest action. The same three officials that had dissented against a decision in August to bolster a low interest rate pledge also opposed Wednesday's move.

Mohamed El-Erian, co-chief investment officer at PIMCO, the world's biggest bond fund, said the combination of dissents and and a gloomier outlook pointed to a growing policy divide.

Doing the twist

In its statement, the central bank said it will buy $400 billion in securities with maturities of six to 30 years by the end of June 2012, selling an equal amount of debt maturing in three years or less.

The Fed is not alone in its concerns. The Bank of England on Wednesday signaled it was ready to pump more money into the weakening British economy, while Norway's central bank signaled it might refrain from rate increases for longer than previously expected.

The Fed had already embarked far down one of the most aggressive monetary easing paths on record. It cut overnight interest rates to near zero in December 2008 and then moved to more than triple its balance sheet through a series of bond purchases.

After its last meeting on August 9, the Fed said it expected to hold rates at rock-bottom levels at least until the middle of 2013, drawing the trio of dissents.

Critics claim the monetary easing campaign has failed to produce results and warn it could actually cause damage by fueling inflation and debasing the dollar.

"We have serious concerns that further intervention by the Federal Reserve could exacerbate current problems or further harm the US economy," Republican congressional leaders said in their letter to Bernanke, which they released on Tuesday.

The central bank's policies have also become a topic on the presidential campaign trail. Texas Governor Rick Perry, a leading Republican candidate, said any further Fed money printing would be almost "treasonous."

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US jobless claims hit 8-month high

The number of Americans filing for jobless benefits rose to an eight-month high last week and productivity growth slowed in the first quarter, clouding the outlook for an economy that is struggling to gain speed.

Initial claims for state unemployment benefits rose 43,000 to a seasonally adjusted 474,000, the highest since mid-August, the Labor Department said on Thursday.

Claims were pushed up by factors ranging from spring break layoffs to the introduction of an emergency benefits program.

Economists had expected claims to fall to 410,000.

A second report from the department showed nonfarm productivity increased at a 1.6 percent annual rate, braking from a 2.9 percent pace in the fourth quarter. The growth pace was above economists' expectations for 1 percent.

"I think we're in a situation where the markets and the Fed have been too optimistic," said Bob Andres, chief investment strategist and economist at Merion Wealth Partners in Berwyn, Pennsylvania.

"I don't think we're going to fall off a cliff but the road to real recovery and full unemployment is going to take a long time, and people ought to get back into that mode."

US stock index futures extended losses after the jobless claims data, while government debt prices touched session highs the data. The dollar extended losses against the yen, but rose against the euro.

Employment growth seen slowing

The claims data falls outside the survey period for the government's closely watched employment report for April, which will be released on Friday. Nonfarm payrolls increased 186,000 last month, according to a Reuters survey, after rising by 216,000 in March -- which was the most in 10 months.

The anticipated slowdown in hiring is mostly blamed on high food and gasoline prices, which clipped economic growth in the first quarter. Still, the unemployment rate is expected to have held at a two-year low of 8.8 percent.

Last week, even the four-week moving average of unemployment claims -- a better measure of underlying trends -- increased 22,250 to 431,250, the highest since November.

A Labor Department official attributed the surprise surge in claims last week to spring break layoffs in New York, which added 25,000, and the start of an emergency benefits program in Oregon, which brought in new claimants, including some already on the regular programs.

There were also additional claims from the auto sector, the official said, adding that there could have been some small number of claims related to the tornadoes that struck parts of the country.

The New York spring break fell outside the dates the department uses for seasonal adjustments to account for the holiday nationwide.

"The increases are beyond what seasonal factors expected and that is causing claims to go up," the official said.

But the productivity report offered some hope for the labor

While the step back in productivity was flagged by a sharp pull back in economic growth in the first quarter, it also suggested that businesses have probably little room to continue with their cost cutting strategies and may soon need to step up hiring.

Productivity -- which measures hourly output per worker -- rose rapidly in the past two years, peaking at an 8.9 percent rate in the second quarter of 2009. Businesses are estimated to be sitting on $2 trillion in cash.

The economy grew at a 1.8 percent pace in the first three months of this year after expanding at a 3.1 percent rate in the fourth quarter.

The productivity report showed a rebound in unit labor costs, which rose at a 1 percent rate in the first quarter after declining 1 percent in the prior period. Despite the rise in labor costs in the first quarter, wage inflation remains tame amid an 8.8 percent unemployment rate.

High food and energy prices have stoked inflation fears, but Federal Reserve officials see limited scope for a broad pick up in price pressures.

Economists had expected unit labor costs to rise at a 0.8 percent rate in the first quarter. During the first quarter, output rose at a 3.1 percent rate, moderating from 4.4 percent pace in the final three months of 2010.

US CBO says $871b deficit so far in FY 2011

WASHINGTON - The US budget deficit totaled $871 billion for the first seven months of this fiscal year, the Congressional Budget Office said on Friday.

The $871 billion deficit through April was about $70 billion more than the deficit the government incurred during the same period of fiscal 2010, highlighting the severe fiscal stress US President Barack Obama and Congress confront.

Obama to propose $3 trillion in deficit cuts

WASHINGTON - US President Barack Obama will release a plan on Monday calling for more than $3 trillion in deficit cuts over 10 years, with about half of the savings coming from higher taxes on the wealthy and big corporations.

In remarks in the White House Rose Garden at 10:30 am (1430 GMT), Obama will also seek to energize his Democratic supporters with a vow to shield middle-class social insurance programs from large-scale cuts.

"The president will make clear he is not going to support any plan that asks everything of some Americans, nothing of others," said an official who previewed the plan for reporters.

"He'll say that he'll veto any bill that takes one dime from the Medicare benefits seniors rely on without asking the wealthiest Americans and biggest corporations to pay their fair share."

Protesters blocked in bid to 'occupy' Wall Street

Protesters demonstrate in a park near Wall Street against banks and corporations in New York on Saturday. 

NEW YORK - Hundreds of people marched on Saturday near Wall Street in New York in a failed attempt to occupy the heart of global finance to protest greed, corruption and budget cuts.

Plans by protesters to turn Lower Manhattan into an "American Tahrir Square" was thwarted when police blocked all the streets near the New York Stock Exchange and Federal Hall in Lower Manhattan.

The demonstrators had planned to stake out Wall Street until their anger over a financial system they say favors the rich and powerful was heard.

"The one thing we all have in common is that we are the 99 percent that will no longer tolerate the greed and corruption of the one percent," said a statement on the website Occupy Wall Street.

By noon, about 700 people, many carrying backpacks and sleeping bags, had gathered near Wall Street to search for a place to camp amid a heavy police presence.

That was far less than the 20,000 people that the online magazine Adbusters, which launched the movement in July, had hoped to see "flood" the neighborhood for a months-long occupation.

The protesters who did arrive were full of zeal and righteous indignation.

"This is a protest against corporate greed and we come to Wall Street because Wall Street is the Ground Zero for corporate greed," said Julia River Hitt, a 22-year-old philosophy student.

"We are here just to say we are fed up, we are not gonna take it anymore."

The protesters gathered in Trinity Place, some 300 meters from Wall Street, which they hope to turn into the US version of the famous square in Cairo that became the focal point of protests that led to the ouster of Hosni Mubarak in February.

"No more corruption," read one sign a demonstrator brandished. "Wall St Greed, New Yorkers Say Enough," read another.

"I will sleep here. A lot of us we will sleep here," said Steven Taylor, 24 a protester who arrived equipped with a backpack and a sleeping bag.

Youths shared food and discussed the economic crisis in groups of 15 and 20. Others marched around the square.

Among the group was Javier Dorado, a law professor from Spain who compared the protesters with the mass "indignant" demonstrations in his country against high unemployment, welfare cuts and corruption.

Obama to propose 'Buffett Tax' on US millionaires

WASHINGTON - US President Barack Obama, in a populist step designed to appeal to voters, will propose a "Buffett Tax" on people making more than $1 million a year as part of his deficit recommendations to Congress on Monday.

Such a proposal, among suggestions to a congressional supercommittee expected to seek up to $3 trillion in deficit savings over 10 years, would appeal to his Democratic base ahead of the 2012 election but may not raise much in revenues.

White House Communications Director Dan Pfeiffer said on Saturday the tax would act as "a kind of AMT" (Alternative Minimum Tax) aimed at ensuring millionaires pay a minimum rate of tax that at least matches that of middle-class families.

The "Buffett Tax" refers to billionaire US investor Warren Buffett, who wrote earlier this year that rich people like him often pay less in tax than those who work for them due to loopholes in the tax code, and can afford to pay more.

Obama is scheduled to lay out his recommendations in White House Rose Garden remarks on Monday and is expected to urge steps to raise tax revenue as well as cuts in government spending.

Those could include reforms of the Medicare and Medicaid government healthcare programs for elderly and poorer Americans. The White House has already said Obama will not recommend any changes to the popular Social Security federal retirement plan.

Obama, who has been hammered in opinion polls over his handling of the faltering economy, wants to use his plan to counter Republican claims he is a "tax-and-spend" liberal as he campaigns for re-election next year.

Congress is at liberty to ignore his suggestions and Republicans, who control the US House of Representatives, have said that they will not agree to tax hikes.

Investor scrutiny

If the president pushes for tax increases that stand little chance of being passed by a divided Congress, it may help him blame lawmakers for thwarting his plans at a time when the public's opinion of Congress has touched record lows.

But he is also under pressure to show leadership after rating agency Standard and Poor's cut the US AAA credit rating, and as investors scrutinize Washington for evidence it can curb the country's towering deficit and mounting debt.

The supercommittee of six Democratic and six Republican lawmakers must find at least $1.2 trillion in deficit savings before the end of the year to avoid painful automatic cuts, and is mandated to seek savings of up to $1.5 trillion.

Those savings are on top of $917 billion in deficit reduction agreed to in an August deal to raise the US debt limit and Obama wants the supercommittee to go further.

Obama has separately urged the supercommittee to consider $467 billion in tax increases on top of that goal to pay for a jobs bill he unveiled earlier this month.