The Ticker

Judge stalls ruling on airline bankruptcy

Lawyers for American Airlines pressed a judge yesterday to approve the company's plan to merge with US Airways and exit bankruptcy protection, but the judge delayed a ruling because of the federal government's lawsuit against the merger.

The U.S. Justice Department Tuesday filed a lawsuit against the merger, which it said would hurt competition and increase prices for consumers by leaving four airlines controlling more than 80 percent of the U.S. air-travel market.

Judge Sean Lane delayed a decision on the plan until at least Aug. 29.

Facebook tests mobile payment app

Facebook plans to test a mobile payment service that lets users make purchases inside mobile applications using payment information they have added to their account on the social network.

Facebook Inc. said yesterday that it is working on a "very small test" and the company said there is no set schedule for making the service available to users. The service would use payment information that shoppers store on Facebook to automatically complete checkout forms of certain mobile apps. Then the app would process the purchase.

Ford to cut hybrid mileage estimates

The U.S. government may change the rules for the gas mileage estimates that car buyers see on window stickers after finding that fuel economy figures for Ford's C-Max gas-electric hybrid were inflated.

The Environmental Protection Agency, which monitors mileage testing, said yesterday that it will cut the C-Max's combined city-highway mileage estimate by nearly 9 percent to 43 mpg, from 47. Ford Motor Co. will change its window stickers to reflect the correct estimate and said that it will compensate drivers for the difference.

C-Max buyers will get a $550 check, while those who leased will receive $325.

THE OUTLOOK

• Commerce Department releases housing starts for July.
• Labor Department releases second-quarter productivity data.

THE SHUFFLE

• J Barrett & Co. is announcing that Kate Chapman has joined the agency in its Beverly Cummings Center office. Chapman, who served in the military as a medic in Iraq and in personal security with a private firm, also has a strong background in finance and sales.
• Nixon Peabody LLP has hired Richard J. McCarthy as its new chief financial officer. McCarthy oversees the global firm's financial operations including legal project management, accounting, tax, financial planning, compliance and risk management.

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Low sales dampen trading

Stocks spiraled downward yesterday on lower than expected sales forecasts from key companies and fears the Federal Reserve would soon start scaling back its $85 billion bond-buying program, but experts said the one-day drop in the markets wasn't a cause for concern.

The Dow Jones Industrial Average dropped 225.47 points, or 1.5 percent, to 15,112.19 while the Standard & Poor's 500 index dropped 24.07 points, or 1.4 percent, to 1,661.32. It was the Dow's worst day in nearly two months.

"This is exactly what should be happening," said Christine Armstrong, senior vice president at Morgan Stanley. "This is a healthy, regular thing. It's not a crisis, it's not an emergency. When you look at what's going on, it's good, it's healthy."

The slump in the stock markets were in part a reaction to subpar earnings reports from two giant companies: Wal-Mart and Cisco Systems.

The world's biggest retailer cut its estimates for annual sales and profits, citing shoppers who are spending less.

And Cisco Systems late Tuesday released a revenue forecast that was weaker than expected and announced plans to cut 5 percent of its workforce, about 4,000 employees, as sales slow. The computing company said it plans to focus on research and development. It was unclear if any of the three Cisco locations in Massachusetts, which have research and development divisions, would be affected by the layoffs. The Massachusetts Executive Office of Labor and Workforce Development had not received a notification from Cisco, which is required for significant numbers of layoffs.

The government said yesterday that the number of Americans applying for unemployment benefits dropped to 320,000 last week. Combined with other positive economic news recently, investors were concerned the central bank soon would end its stimulus program supporting the economy.

"We are having a taper tantrum," Armstrong said, referring to the Fed's strategy to slow the bond purchases that have been credited with keeping interest rates down.

"Taper fears are probably front and center," Jim Russell, senior equity strategist for U.S. Bank Wealth Management, told Bloomberg.

Armstrong said the dip yesterday and the inevitable tapering is part of the recovery process.

"This is all part of this economic improvement."

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’EEI assures duo after boss axed

WEEI morning men John Dennis and Gerry Callahan — blindsided by the firing of boss Jason Wolfe yesterday — said they have been assured that station suits want them to be "part of the solution" to the once-dominant sports station's ratings woes.

Callahan, a Herald sports columnist, said Entercom Boston general manager Jeff Brown told him and Kirk Minihane, who was added to the morning show in February, that "we're going nowhere." And Dennis, who is on vacation this week, said Brown called him after Wolfe got the ax to reiterate that the morning show was not in any danger.

"I take him at his word," Dennis said. "I'm not worried. I'm fine with what we've done so far, but almost everyone who gets into this business knows that at some point it will come to an end and whenever that day comes, I'll be fine with that too."

Wolfe, WEEI's vice president of programming and operations, who oversaw the station during years of Boston radio dominance, was shown the door yesterday, the victim of spiraling ratings and competition from 98.5 The Sports Hub, the upstart that stole much of the longtime sports-talker's audience.

Immediately, speculation began about the future of 'EEI's longtime morning drive duo, who were partnered and supported by Wolfe but whose ratings have slipped since the emergence of CBS-owned Sports Hub.

"That is everyone's first question," Brown told the Herald. "There's no fait accompli regarding Dennis and Callahan, no imminent shoe to drop on Dennis and Callahan."

But others speculated that the departure of Wolfe means the current morning show is on borrowed time.

"I think they have to do something," said one station insider, referencing the duo's dwindling numbers.

In the most recent ratings period, The Sports Hub's top-rated morning show, Toucher and Rich, dominated with a 13.4 share. Dennis and Callahan finished fifth with a 6.0. The Sports Hub was No. 1 overall with men age 25-54, both stations' target audience, while WEEI was fifth, according to Arbitron.

However, both Dennis and Callahan have a year remaining on their contracts and the station's move last February to dump longtime afternoon drive host Glenn Ordway didn't do anything to improve numbers.

There were reports yesterday that Brown's choice to replace Wolfe is Kevin Graham, program director at KFAN in Salt Lake City. Brown declined to discuss it other than to say he will make an announcement in the next couple of days.

Whoever succeeds Wolfe will have a major rebuilding project. All three of WEEI's daytime shows — morning drive, middays with Mike Mutnansky and Lou Merloni, and afternoon drive with Mike Salk and Michael Holley — lag behind The Sports Hub's shows.

Wolfe's successor will have to try to figure out how to increase listeners and decrease station costs — a tough act to pull off especially given the fact that WEEI is saddled with a whopping 10-year, $200 million contract to air Red Sox games that runs for three more years. The station also has the broadcast rights to the Celtics.

Brooming Ordway likely saved Entercom a bundle in salary costs and, at the time, former 'EEI announcer Pete Sheppard predicted that the station will cut even further, eliminating most local programming in favor of syndicated ESPN content. But Brown said he believes the 'EEI "ecosystem" is strong.

"At the end of the day we want to make it better," he said, "and we are going to work to make it better."

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Many left waiting for bombing insurance $$

Scores of insurance claims either have been closed without payment or remain open four months after the Boston Marathon bombings, leaving business owners and residents in limbo, according to the state Division of Insurance.

Of the 207 claims reported as of July 26, 84 claims were closed with a total of 
$1.17 million in payments, and 76 were closed without payment. The remaining 47 claims were still pending.

"We're still fighting for money," said Brett Fodiman, one of the owners of the Forum Bar and Restaurant. "No one's helped us out. We hired an adjuster to help us manage all our losses. If the city and state were involved, it might speed things up. But for now, this battle is still going on."

Sheila Dillon, director of the city's Department of Neighborhood Development, said the department registered more than 500 businesses in the affected area and asked them to name their insurance carriers. The department helped about 80 of those businesses with insurance issues, often using local attorneys donating their time.

"We asked (insurers) for a very high-level point person, flexibility and speed," Dillon said.

But for some businesses, payment has been elusive.

"We're still in talks; it's an ongoing thing," despite help from a lawyer the city provided, said Anthony Liquori, owner of Escape Salon, which was closed for nearly a week.

To date, the Division of Insurance has received four complaints — three from businesses and one from a Watertown resident, said Amie O'Hearn Breton, a division spokeswoman.

"All of them have been resolved favorably through the division's assistance," she said. "The division was able to recover additional monies for the affected consumers."

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Heat’s a bit off on high apartment prices in Boston

It is no secret that rents for apartments in Boston are expensive, making it difficult for tenants to find affordable places to live.

According to Trulia's latest report released in July, rents in Boston rose 4.1 percent compared to the same time last year. The average monthly rent for a two-bedroom apartment in the Boston area is $2,275 and vacancies still are in the 3 percent range.

But there may be some relief for people looking for a place to live.

"This September rental market has loosened up a bit," said broker Joseph Baglio of Back Bay Residential. "There is more availability and less 'panic' to find a place than there was last year."

According to Multiple Listing Service, last year there were 705 apartments for rent in Boston in August (for a September move-in) compared to 978 on the market this year, a 28 percent increase.

"There has been some softening with a few of the larger buildings paying some of the broker fees to bring in clients such as Garrison Square and Landmark Square," Baglio said. And some of the private landlords, who thought they would be able to push rents again this year, have to roll back prices a little to get the apartments filled."

Frank Carroll, principal of Boston Realty Net said, "This spring was very busy with people securing apartments for September in April, May, June. Many renters, especially in the more affordable studio and one-bedroom apartments, were staying put, trying to avoid moving costs."

Construction of new rental properties in Boston, such as Factory 63, the Kensington and Gatehouse 75, have finally come to fruition this year to create supply and ease potential renters' frustrations. Also contributing to Boston's rental inventory were many individual investors, buying single properties for cash and renting them out, Carroll said.

"We saw a number of cash buyers this spring, looking to purchase property, such as a condo in Boston, either as an investment or for a family member to live in at a later date."

Boston is still seeing some softness in the high-end market.

"A stunning two-bedroom home in Battery Wharf on the Waterfront has stayed on the market since early May with a $9,100 per month price tag," Baglio said.

Carroll said, "More affordable neighborhoods, such as South Boston, where you can get a two-bedroom in the $2,000s, turn much faster; where in the Back Bay, a two-bedroom would be about $4,500 and those higher price rentals move slower."

Some good news to ease the Sept. 1 crunch, Carroll said, is "that both apartment owners and renters want to avoid the September 1st rush and are staggering the leases to an August date, middle of September or even October date."

Even better news is that next year more newly constructed apartments will be complete, helping to ease the tight supply of apartments in Boston.

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

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Gas price, payroll tax choke retail spending

Weaker-than-expected same-store sales at U.S. Walmarts point to a lower-income customer who's hampered by higher payroll taxes and gas prices, and not benefiting from an improved jobs market and wage gains.

"Low-income and middle-income consumers are living paycheck to paycheck almost," said analyst Ken Perkins of Swampscott's Retail Metrics. "They don't have a lot of excess money to spend on discretionary items, and they're buying to need."

With $469 billion in annual revenue as the world's largest retailer, Wal-Mart Stores Inc., also the parent company of Sam's Clubs, is seen as an economic bellwether because it accounts for about 10 percent of non-auto U.S. retail sales.

Same-store sales at U.S. Walmarts — sales at stores open at least a year, a key retail measure — fell 0.3 percent in the second quarter ended July 26 compared to the prior year period. Wall Street expected a 1 percent increase. Company revenue missed projections for the fifth consecutive quarter.

"The environment is making it very difficult for Wal-Mart to grow sales," John Zolidis, a Buckingham Research Group analyst, wrote in a report yesterday. "We believe this reflects pressures on lower-income consumers ... ."

The Bentonville, Ark.-based Wal-Mart also lowered its forecast for the current quarter and full year. It now expects flat same-store sales at U.S. Walmarts for the current quarter, which includes the back-to-school shopping season.

"Our expectations for the back half of the year are through a lens of cautious consumer spending," CFO Charles Holley said.

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State jobless rate shows growth halt

The state's jobless rate is at the highest level since September 2011, continuing a pattern of slowing economic growth, experts said.

The rate for July rose to 7.2 percent, the Executive Office of Labor and Workforce Development said yesterday.

"It appears job growth has basically come to a halt in Massachusetts," said Christopher Geehern of Associated Industries of Massachusetts.

The latest numbers are consistent with the state's economic growth rate, which fell to 0.8 percent during the second quarter, Geehern said.

"The slowing of state growth that began in the second quarter appears to be continuing," said Michael D. Goodman, of the Department of Public Policy at the University of Massachusetts Dartmouth.

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L'Oreal makes $843M bid for Chinese skincare brand

HONG KONG — French cosmetics giant L'Oreal is making an $843 million takeover offer for skincare company Magic Holdings to help it expand in China's fast-growing beauty market.

Magic Holdings International Ltd. is the "ideal fit" for L'Oreal SA's existing China business and the deal also gives Magic an "ideal partner" to expand into new markets, the companies said in a joint filing Thursday.

Magic is the market leader in the rapidly expanding product category of facial masks, with 26 percent market share last year, according to AC Nielsen data.

"Facial masks are one of China's beauty market's fastest growing areas with very promising development prospects," L'Oreal said in a statement. "L'Oreal intends to develop this Chinese brand by contributing its science based expertise."

Emerging markets such as China have become increasingly important for the French cosmetics maker, which is trying to counter stagnant growth in its traditional markets. Last year the Paris-based company made more money from "new markets," which include Asia, Latin America, the Middle East, Africa and Eastern Europe, than from North America or Western Europe.

China's economic growth has slowed from double-digit rates but remains much higher than developed economies.

Magic's sales rose 29 percent last year to $200 million.

The French company is offering 6.30 Hong Kong dollars (81 cents) for each Magic share. Magic's stock price soared 18 percent on the Hong Kong stock exchange to HK$5.98 on Friday.

Six key shareholders holding 62.3 percent of Magic are already supporting the deal, which needs approval from China's Ministry of Commerce.

L'Oreal has 3,500 staff, a research center and two factories in China.

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US builders broke ground on more homes in July

WASHINGTON — U.S. developers broke ground on homes at a faster pace in July. But the rise was all due to apartment construction, which is typically volatile. By contrast, builders began work on fewer single-family homes — the bulk of the market — and sought fewer permits to build them.

Friday's report from the Commerce Department suggests that home building is maintaining its recovery but might be starting to be restrained by higher mortgage rates.

Builders began work on houses and apartments at a seasonally adjusted annual rate of 896,000 in July, the department said. That was up 6 percent from June, though below a recent peak of more than 1 million in March. Construction began on 26 percent more apartments but declined 2.2 percent for single-family houses.

The dip in single-family starts comes after other measures of the housing market have flattened or declined. It may signal that higher loan rates have begun to weigh on housing, which has otherwise steadily recovered since earlier last year.

Mortgage applications by potential homebuyers have fallen 15 percent since the end of April. Signed contracts to buy homes slipped in June after reaching a six-year high in May.

The average rate on the 30-year loan was 4.4 percent this week — a full percentage point higher than in early May. Mortgage rates spiked in June after Chairman Ben Bernanke indicated that the Federal Reserve could slow its bond purchases later this year. The bond purchases have kept long-term interest rates low, encouraging more borrowing and spending.

"There's no doubt that rising rates have had an effect," said Dan Greenhaus, chief global strategist at BTIG, an institutional brokerage.

Some smaller homebuilders have said it's become more difficult for them to get loans to build. They also say that limited supplies of finished lots and a lack of skilled workers have become barriers to faster construction.

Last month, D.R. Horton Inc., the nation's largest homebuilder, said its sales pace declined in May, when rates began to move up.

Still, Greenhaus suggested that the effect on housing so far has been far less than what economists might have expected after a 1-point rise in the average 30-year fixed mortgage rate.

Others note that demand for new homes remains strong even as supply is tight. That trend has pushed up prices and should encourage more construction.

"Should we be concerned? Not yet," said Patrick Newport, a housing economist at IHS Global Insight. "There is just a big gap between supply and demand right now, and I think higher mortgage rates won't cancel that out."

Over the past 12 months, the home construction data still look strong: Builders broke ground on 15 percent more single-family homes in July than a year earlier. And including apartments, housing starts have surged 21 percent in the past year.

Applications for permits for future home construction also rose in July, though solely because of apartments. Permits rose 2.7 percent to 943,000, thanks to a 13.5 percent jump in apartment permits. Permits for single-family homes dipped 2 percent but are still near the five-year high reached in June.

Overall housing starts remain below the 1.5 million-a-year rate that's consistent with a healthy market.

Builders are more optimistic than at any time in nearly eight years, and Americans are buying new homes at the fastest pace in five years. Both trends should spur more construction.

A measure of homebuilder confidence rose for a fourth consecutive month in August to nearly an eight-year high. The National Association of Home Builders/Wells Fargo builder sentiment index, released Thursday, rose to 59 from 56 in July. That is the highest level since November 2005. A reading above 50 indicates that more builders view sales conditions as good rather than poor.

Though new homes represent only a fraction of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to NAHB statistics.

Despite the lift from housing, the economy has been sluggish this year. It expanded at just a 1.7 percent annual rate in the April-June quarter after a 1.1 percent annual rate in the first three months of the year.

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GOP votes to ban NBC, CNN from presidential primary debates

Republican National Committee members voted today to ban NBC and CNN and their affiliates from their presidential primary debates if the networks don't ax planned specials on potential White House contender Hillary Clinton which the GOP said "amounts to little more than extended commercials."

The unanimous vote, taken this morning at the RNC's summer meeting at the Westin Waterfront, makes good on threats by RNC chairman Reince Priebus, who today called the network's decisions "nonsense."

"These programming decisions are an attempt to show political favoritism and put a thumb on the scales of the next presidential election," a copy of the resolution reads.

Priebus argued today that there are "plenty of other outlets" to broadcast the debates. With the vote, the GOP also vowed to sanction any primary debates the networks sponsor.

"We'll still reach voters, maybe more voters," he said. "But CNN and NBC anchors will just have to watch on their competitors' networks. The media overplayed their hand this time."

The decision drew an almost immediate response from Democrats, who questioned if the GOP "will ever be serious about outreach."

"It seems that Republicans don't get," DNC press secretary Michael Czin said in a statement released minutes after the RNC completed its vote. "If they truly want to connect with a broader audience, they need an agenda that fights for the middle class and is inclusive. Sadly, it appears that with today's vote, their approach is to actually speak to even fewer voters."

Developing ...

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