US tech earnings weigh on markets

LONDON — Disappointing earnings from two U.S. technology giants weighed on global markets Friday after a stellar run that has seen Wall Street's main indexes post a series of all-time highs.

Stocks around the world have had a solid week, especially after U.S. Federal Reserve Chairman Ben Bernanke indicated that the central bank's monetary stimulus may remain in place for longer than many in the markets had been predicting.

As a result, investors were looking for a reason to book some profits ahead of the weekend and the earnings figures from Google and Microsoft gave them that opportunity, despite a solid report from General Electric.

Google's quarterly report showed its average ad rate fell from the previous year for the seventh consecutive quarter. In an unexpected turn, the decline deepened for the first time in a year.

Microsoft booked a large write-off to its Surface RT business after it slashed prices on the tablets to stimulate demand this week. Its quarterly earnings results also showed that Windows 8, an operating system designed to bridge the divide between PCs and tablets, has been so poorly received that it contributed to a revenue drop in the operating system software unit.

The bad news for Microsoft continued into Friday with its stock losing more than a tenth of their value. By lunchtime in New York, the company's shares were down 10.6 percent at $31.66.

"Results from technology companies have generally been poor with eBay and Intel also missing expectations," said Fawad Razaqzada, technical analyst at GFT Markets. "Overall, however, most of the S&P 500 companies who have reported their results have beaten earnings expectations; though, one has to be wary of jumping to conclusions because it is merely early days still."

In Europe, the FTSE 100 index of British shares closed Friday barely changed on the day, off 0.04 percent at 6,630, while Germany's DAX fell 0.07 percent to 8,331. The CAC-40 in France was down 0.06 percent at 3,925.

Shares on Wall Street made little headway in morning trading thanks to the disappointing results from Microsoft and Google. By midday, the Dow was down 0.2 percent at 15,513.17 while the broader S&P 500 was off 0.09 percent at 1,687.

Stock markets, particularly in the U.S., have had a bumper month following a bout of jitters prompted by uncertainty over when the Fed will start reducing its monetary stimulus.

The Fed has been buying $85 billion of financial assets a month in the hope of reducing long-term borrowing rates and shore up the U.S. economy. Bernanke has said that the so-called tapering will begin when a number of economic indicators point to a clear recovery path. The prospect that it may remain for longer has been greeted positively by investors who have grown used to the stimulus money floating around markets.

"Despite the weakness in stocks this morning, global equities are still on track to post a fourth week of gains, helping to underpin the generally bullish feeling in the market of late," said David White, a trader at Spreadex.

Earlier in Asia, markets closed mostly lower following the tech reports in the U.S. and amid worries over the Chinese and Japanese economies, the world's number 2 and 3.

Japan's Nikkei 225 shed 1.5 percent to 14,589.91 while Hong Kong's Hang Seng added just 0.1 percent to 21,362.42. Seoul's Kospi wavered between gains and losses, finishing 0.2 percent down at 1,871.41. China's Shanghai Composite index fell 1.5 percent to 1,992.65.

In currency markets, trading was steady with the euro up 0.26 percent at $1.3139 while the dollar was down 0.2 percent at 100.32 yen.

Meanwhile in the oil markets, the price of benchmark New York crude was 32 cents lower at $107.48 a barrel.

____

Cerojano contributed from Manila, Philippines.

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Spain corruption protesters clash with Madrid cops

MADRID — Thousands of protesters demanding the resignation of Prime Minister Mariano Rajoy demonstrated Thursday night in Madrid, and what started as a peaceful event turned violent toward midnight after riot police clashed with some protesters, resulting in at least several people arrested and injured.

The protesters jammed downtown streets outside the Madrid headquarters of the ruling Popular Party, insisting that Rajoy should leave office because of allegations he received payoffs from a slush fund before his party won elections in 2011. Thousands more also demonstrated in Barcelona.

Shortly before midnight, groups of protesters in Madrid clashed with police wielding batons. An Associated Press photographer saw one protester with his face bloodied, a police officer hurt by a flying projectile and at least two protesters arrested by authorities.

The demonstrations came after opposition leaders this week called for Rajoy to explain himself before Parliament or face a censure vote.

Rajoy on Monday brushed off demands he should resign after text messages emerged showing him comforting a former political party treasurer under investigation over a slush fund and secret Swiss bank accounts. The treasurer has claimed Rajoy took under-the-counter payments, accusations denied by Rajoy.

The spectacle of alleged greed and corruption has enraged Spaniards hurting from austerity and sky high unemployment.

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Security experts to test phone anti-theft locks

SAN FRANCISCO — The top prosecutors in San Francisco and New York say they are bringing in state and federal security experts to test the newest anti-theft features designed to thwart the surge of stolen smartphones nationwide.

San Francisco District Attorney George Gascon and New York Attorney General Eric Schneiderman announced Thursday the security experts will be in San Francisco to test Apple's iPhone 5 with its activation lock and Samsung's Galaxy s4 with Lojack for Android.

Gascon said the experts will treat the phones as if they were stolen and try circumventing its anti-theft features to draw their own conclusions on its effectiveness.

"We are not going to take them at their word," the prosecutors said in a joint statement Thursday. "Today we will assess the solutions they are proposing and see if they stand up to the tactics commonly employed by thieves. "

Last month, Gascon and Schneiderman met in New York City with representatives from Apple Inc., Samsung Electronics Co. Ltd., Google Inc. and Microsoft Corp. as part of their "Secure our Smartphones" initiative urging them to create a "kill switch" to render stolen smartphones inoperable.

The prosecutors said they "asked the companies to commit to develop effective solutions to this national crime wave and install them on all new products within one year."

Almost 1 in 3 robberies nationwide involves the theft of a mobile phone, according to the Federal Communications Commission, which is coordinating the formation this fall of a national database system to track cellphones reported stolen.

"Together, we are working to ensure that the industry imbed persistent technology that is effective, ubiquitous and free to consumers in every smartphone introduced to the market by next year," the prosecutors said.

Samsung officials said in a statement Thursday that they appreciated the opportunity to work with Gascon's security experts.

"We plan to take what we learn from the tests today to explore opportunities for further enhancements to our solution," the company said. "We look forward to continuing to work with DA Gascon and his team toward our common goal of stopping smartphone theft."

Representatives from Apple declined to comment.

Nearly 175 million cellphones — mostly smartphones — have been sold in the U.S. in the past year and account for $69 billion in sales, according to IDC, a Massachusetts-based research firm.

Lost and stolen cellphones cost consumers more than $30 billion last year, according to a study cited by Schneiderman in June. In New York, police have coined the term "Apple-picking" to describe thefts of the popular iPhone and other mobile products like iPads.

Phone thefts comprise 40 percent of all robberies in New York City, authorities said. In San Francisco, half the robberies were phone-related last year.

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Once-mighty Motor City files for bankruptcy

DETROIT — Once the very symbol of American industrial might, Detroit became the biggest U.S. city to file for bankruptcy Thursday, its finances ravaged and its neighborhoods hollowed out by a long, slow decline in population and auto manufacturing.

The filing, which had been feared for months, put the city on an uncertain course that could mean laying off municipal employees, selling off assets, raising fees and scaling back basic services such as trash collection and snow plowing, which have already been slashed.

"Only one feasible path offers a way out," Gov. Rick Snyder said in a letter approving the move.

The filing marked a turning point for city and state leaders, who must now confront the challenge of rebuilding Detroit's broken budget in as little as a year.

Kevyn Orr, a bankruptcy expert hired by the state in March to stop the city's fiscal free-fall, said Detroit would continue paying its bills and employees.

But, said Michael Sweet, a bankruptcy attorney in Fox-Rothschild's San Francisco office, "they don't have to pay anyone they don't want to. And no one can sue them."

The city's woes have piled up for generations. In the 1950s, its population grew to 1.8 million people, many of whom were lured by plentiful, well-paying auto jobs. Later that decade, Detroit began to decline as developers starting building suburbs that lured away workers and businesses.

Then beginning in the late 1960s, auto companies began opening plants in other cities. Property values and tax revenue fell, and police couldn't control crime. In later years, the rise of autos imported from Japan started to cut the size of the U.S. auto industry.

By the time the auto industry melted down in 2009, only a few factories from GM and Chrysler were left. GM is the only one with headquarters in Detroit, though it has huge research and testing centers with thousands of jobs outside the city.

Detroit lost a quarter-million residents between 2000 and 2010. Today, the population struggles to stay above 700,000.

The result is a metropolis where whole neighborhoods are practically deserted and basic services cut off in places. Looming over the crumbling landscape is a budget deficit believed to be more than $380 million and long-term debt that could be as much as $20 billion.

In recent months, the city has relied on state-backed bond money to meet payroll for its 10,000 employees.

"It's an embarrassment, number one, to come to the realization that we're actually in this situation," said Kevin Frederick, an admissions representative for a local career training school. "Not that we didn't see it coming. I guess we have to take a couple of steps backward to move forward."

Orr made the filing in federal bankruptcy court under Chapter 9, the bankruptcy system for cities and counties.

He was unable to persuade a host of creditors, unions and pension boards to take pennies on the dollar to help with the city's massive financial restructuring. If the bankruptcy filing is approved, city assets could be liquidated to satisfy demands for payment.

Orr said Thursday that he "bent over backward" to work with creditors, rejecting criticism that he was too rigid. "Anybody who takes that position just hasn't been listening."

The bankruptcy could last through summer or fall 2014, which coincides with the end of Orr's 18-month appointment, he said.

Snyder determined earlier this year that Detroit was in a financial emergency and without a plan for improvement. He made it the largest U.S. city to fall under state oversight when a state loan board hired Orr. His letter was attached to Orr's bankruptcy filing.

Creditors and public servants "deserve to know what promises the city can and will keep," Snyder wrote. "The only way to do those things is to radically restructure the city and allow it to reinvent itself without the burden of impossible obligations."

A turnaround specialist, Orr represented automaker Chrysler LLC during its successful restructuring. He issued a warning early on in his tenure in Detroit that bankruptcy was a road he preferred to avoid.

Some city workers and retirement systems filed lawsuits to prevent Snyder from approving Orr's bankruptcy request, said Detroit-area turnaround specialist James McTevia.

They have argued that bankruptcy could change pension and retiree benefits, which are guaranteed under state law.

Others are concerned that a bankrupt Detroit will cause businesses large and small to reconsider their operations in the city. But General Motors does not anticipate any impact to its daily operations, the automaker said Thursday in a statement.

Detroit has more than double the population of the Northern California community of Stockton, Calif., which until Detroit had been the largest U.S. city ever to file for bankruptcy when it did so in June 2012.

Before Detroit, the largest municipal bankruptcy filing had involved Jefferson County, Ala., which was more than $4 billion in debt when it filed in 2011. Another recent city to have filed for bankruptcy was San Bernardino, Calif., which took that route in August 2012 after learning it had a $46 million deficit.

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The Ticker

Detroit files for bankruptcy

Detroit yesterday became the largest city in U.S. history to file for bankruptcy, as the state-appointed emergency manager filed for Chapter 9 protection.

A number of factors — most notably steep population and tax base declines — have been blamed on Detroit's tumble toward insolvency. Detroit lost a quarter-million residents between 2000 and 2010. A population that in the 1950s reached 1.8 million is struggling to stay above 700,000. Much of the middle class and scores of businesses also have fled the city, taking their tax dollars with them.

Mass. jobless rate climbs to 7 percent

The state's unemployment rate rose yesterday, further narrowing the employment gap between the state and the rest of the country.

Massachusetts added 2,800 jobs in June, but the unemployment rate rose to 7 percent, the Executive Office of Labor and Workforce Development said yesterday.

While the state unemployment rate remains below the national rate, the state's unemployment is only .6 percent less than the national rate, compared to 1.2 percent lower in January.

Senators make deal on student loans

Student borrowers will see interest rates reduced to levels near those that expired last month under a deal announced by Senate lawmakers yesterday, potentially ending a battle over college costs that had divided Democrats and threatened to leave students with sharply higher costs.

South Station to get new bar

Commuters in South Station hoping to do something other than eat in the food court and stare at the train schedule will finally get their chance.

Bar and restaurant chain Tavern in the Square will be opening an "airport style" bar in the center of South Station, according to restaurant management.

The 750-square-foot location will have televisions, roughly 40 seats ­— bar and table — and will offer 50 draft beers and a limited menu of Tavern's most popular items.

TODAY

 General Electric Co. reports quarterly financial results.

 Christine Ward, left, has been named director of operations for Raising A Reader Massachusetts, an early literacy nonprofit organization. Ward joined the organization in 2010 and continues to work in Operations and Human Resources, helping the organization expand across the state and double the size of the team.

 Intarcia Therapeutics announced the hiring of Dr. Eddie Li to the newly created position of vice president and global head of regulatory affairs. Li brings more than 20 years of experience in regulatory affairs to Intarcia.

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Arts festivals drawing lots of business to Hub

Officials plan to build on this summer's string of business-boosting arts festivals by bringing even more outdoor summer fun to downtown Boston and city neighborhoods next year.

"We absolutely want to keep what we have, but there's always room for expansion," said Chris Cook, director of arts, tourism and special events. "We're already looking at opportunities to layer in different arts experiences next year."

Cook pointed to the free, nine-day Outside the Box inaugural festival, which ends Sunday, as a model. The event features 200 performances and has attracted thousands of people daily to Boston Common and City Hall Plaza, despite this week's sweltering weather.

"The city needed it," said Ted Cutler, the festival's founder, adding with a reference to the April 15 bombing, "Since the marathon, there's been a cloud over the city. This helped lift it."

In addition to raising people's spirits with art, music and dance, Outside the Box has boosted sales at some local businesses.

Steve Heeley, CEO of Earl of Sandwich, Boston Common's only year-round restaurant, and Lindo DeFarias, manager of Sal's Pizza on Tremont Street, both estimated that sales have been up 50 percent since the festival began.

Rosemarie Sansone, president of the Downtown Crossing Business Improvement District, said she only hopes that future events will be more spread out across the city. And with next weekend's FIGMENT Boston, she'll get her wish. The event returns to the Rose Kennedy Greenway for the third year, bringing more than 100 interactive art projects, dance performances and music.

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Board backs off firing Market Basket’s CEO

A victorious Arthur T. Demoulas emerged from a marathon 13-hour Market Basket board meeting late last night, where no vote was taken to remove him, to be greeted by throngs of cheering employees.

"Artie T.! Artie T.!" employees chanted, as one hoisted the embattled supermarket CEO on his shoulders.

"You're the best!" Arthur T. Demoulas told them. "I never want to leave you!"

Directors with a new majority that were seen as aligned against the CEO had met behind closed doors all day and into the night at an Andover hotel as employees, customers and other Demoulas loyalists lined the half-mile road to the property.

Company shareholders led by cousin Arthur S. Demoulas — both Arthurs are sons of the company's two co-founders — last month won a court order that forced yesterday's meeting after directors supporting the CEO failed to attend two prior ones at which his proposed removal was on the agendas.

The detractors had alleged fiscal recklessness and lack of accountability by Arthur T. Demoulas, according to court documents that describe his management as dictatorial. Demoulas' supporters, meanwhile, say opposing shareholders have supported borrowing 
$1.5 billion for a shareholder payout at the expense of Market Basket's 22,000 workers, employee profit-sharing plan and low prices that undercut its competitors. But the meeting ended with no motion to remove Arthur T. Demoulas.

The CEO said in a statement: "I am pleased with today's result. I hope to work constructively with the Board going forward. It is my desire to continue to look out for the best interests of our customers and employees. Together we have built a fine organization and I am extremely proud of you. Thanks to everybody for their tremendous outpouring of support."

The company operates 71 Market Baskets in Massachusetts and New Hampshire, with revenue of 
$4 billion last year, up from $2.48 billion in 2007.

Employees at the rally were steadfast in their loyalty to Demoulas, who's been CEO since 2008. An estimated 2,000 people sporting signs and shirts in his support greeted Demoulas as he drove up to yesterday's 9:30 a.m. meeting.

"If it's not broken, don't fix it," said John Conway, 56, a 35-year employee who manages the Portsmouth, N.H., store and was among the throng of Arthur T. supporters yesterday.

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Upscale units in Hub offer pedalling perk

Does watching the Tour de France make you want to jump on a bike?

Related Companies and Zagster, a Cambridge-based company that provides bicycles, have launched a bike-sharing program, making Related Companies the first real estate company to offer the pedalling perk.

Bikes will be located initially in 10 of Related's New York City and Boston properties — including the Hub luxury rental building One Back Bay.

Readily available bicycles offer a way to go out for appointments and errands as well as on social trips to a restaurant or to visit friends.

"Residents will be able to experience the ultimate in convenience while exercising, running errands and living green," said Daria Salusbury, senior vice president of Related, who leads the company's luxury residential leasing operations.

"Related understands the changing dynamics of today's urban resident, who is very interested in sustainable, convenient and efficient transportation," said Timothy Ericson, co-founder and CEO of Zagster. "By offering Zagster, Related can meet their residents' needs while providing Related a key differentiator in a highly competitive market."

The bike-share program continues Related's foray into groundbreaking advances in sustainability and lifestyle services.

"We see bikes as analogous to the pool or gym at these properties," he said. The benefit to the customer is that Zagster maintains the bikes and storage area.

Just as Zipcar has become a much-sought amenity for urban professionals looking for places to live, he thinks Zagster will influence people looking for apartments or office space.

"We think Zagster will be like Zipcar and become a factor in deciding where they live, work and visit," he said.

Ericson sees Zagster as complementary rather than competitive with city bike-sharing services, such as Boston's Hubway.

"We actually have more interest from clients in cities that have bike sharing programs like Hubway. Bike sharing systems are all about short trips that are one way. Ours are for longer trips, commuting, etc." Ericson said.

Zagster offers riders the Breezer Uptown, an award winning bike known for its lightweight yet durable construction, specifically designed for city riding. All bikes will be located on property in garages or parking structures.

Each bike also comes equipped with a basket so, Ericson said, "You can't go Thanksgiving shopping, but you can certainly do your daily shopping." With an attached flexible lock, riders can park their bikes wherever they want, allowing the ultimate in convenience.

Added Ericson: "We set it up to be completely hands off for the properties. If someone shows up and there is a flat tire, or someone hasn't returned their rental, they fill out an incident report and we go out and fix it."

Jennifer Athas is a licensed real estate broker. Follow her on 
Twitter @Jenathas

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Boston Globe bidder files suit vs. ex-partner

Two media bigs who teamed up to try to buy The Boston Globe in 2011 are now engulfed in a long and pricey breach of contract dispute, as former Time Inc. CEO Jack Griffin is suing Orange County Register publisher Aaron Kushner for up to $10 million in New York Civil Supreme Court, according to court filings.

Griffin — now part of a local group comprised of cousins and former Globe owners Stephen and Benjamin Taylor hoping to buy the broadsheet — is accusing Kushner of stiffing him on payouts after his company, 2100 LLC, acquired the Orange County Register and six other newspapers last year.

Kushner, a former greeting-card merchant from Wellesley, first hired Griffin as a senior adviser at a rate of $600 an hour to consult on the group's possible acquisition of the Globe in June 2011, according to court documents.

The Globe deal never happened, but one year later Kushner's group bought Freedom Communications, which included the West Coast papers.

Griffin alleges the two agreed that he'd be appointed a director and officer, get a one-year consulting contract for $250,000 and a 3.449 percent stake in the company, which, based on the company's then-$5.8 million value, would be worth $200,000.

But six days later, 2100 revalued itself at $89 million and Griffin's share in the company was diluted to 0.225 percent, the lawsuit claims.

Griffin insists in the suit that Kushner relied on Griffin's "name, reputation and contacts" to execute the Freedom deal.

But Kushner's lawyer, Seth L. Levine, vowed to "vigorously" fight the claims.

"Mr. Griffin's lawsuit is frivolous and entirely without merit," said Levine. "His efforts to extract from 2100 Trust and Mr. Kushner an exorbitant sum which he never earned and to which he was never entitled is totally inappropriate."

A spokesman for Griffin said he was a "visible" member of the 2100 leadership team.

"Despite using Mr. Griffin's name, credentials and significant insights gained from working three decades at the highest levels in the publishing industry, 2100 Trust did not compensate Mr. Griffin nor did it grant him equity in the company or name him as a Director, according to its obligations and representations," said Al Minahan.

Judge Barbara Kapnick refused Kushner's motion to dismiss on all four counts earlier this year.

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SEC rejects $18M deal with Falcone, hedge fund

WASHINGTON — The Securities and Exchange Commission has rejected an $18 million settlement that would have banned billionaire hedge-fund manager Philip Falcone from the securities industry for two years.

Falcone and Harbinger Capital Partners were told Thursday that SEC commissioners voted down the settlement, according to a filing Friday by parent company Harbinger Group Inc. The SEC's enforcement staff had proposed the deal in May.

The deal sought to settle civil fraud charges by fining Falcone and hedge-fund firm Harbinger Capital $18 million. The SEC has accused Falcone and the firm of using fund money to pay his taxes and favoring some clients over others.

The filing didn't say why the deal was rejected. SEC votes on enforcement actions occur in closed sessions.

As part of the deal, Falcone and the firm neither admitted nor denied the allegations. It also allowed him to continue to own Harbinger Capital, although the firm would have been overseen by an independent monitor.

Falcone is also CEO and chairman of Harbinger Group, a publicly traded company that sells Rayovac batteries, George Foreman grills and Farberware appliances.

Spokesmen for the SEC and Falcone didn't immediately respond to requests for comment.

In a lawsuit filed in June 2012, the SEC alleged that from 2006 through early 2008, Falcone manipulated the market for high-yield, high-risk bonds issued by a company called Maax Holdings Inc. Using fund money, Falcone bought many of the bonds to shrink the supply on the market and drive up prices, the SEC said.

The SEC also said Falcone and Harbinger Capital secretly gave some investors in his fund the right to cash out of their holdings. In exchange, the favored investors gave Falcone and the fund permission to bar the other investors from being able to cash out, according to the SEC. It said that arrangement was hidden from Harbinger's directors.

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