Business Highlights

LONDON (AP) — ___

WSJ publisher quits in phone-hacking scandal

Rupert Murdoch accepted the resignation of The Wall Street Journal's publisher and the chief of his British operations on Friday as the once-defiant media mogul struggled to control an escalating phone hacking scandal with apologies to the public and the family of a murdered schoolgirl.

The scandal has knocked billions off the value of Murdoch's News Corp., scuttled his ambitions to take control of lucrative British Sky Broadcasting, withered his political power in Britain — and is threatening to destabilize his globe-spanning business.

The controversy claimed its first victim in the United States as Les Hinton, chief executive of the Murdoch-owned Dow Jones & Co. and publisher of the Wall Street Journal, announced he was resigning, effective immediately. Murdoch's British lieutenant, Rebekah Brooks, stepped down earlier Friday.

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Debt showdown: Obama presses for 'something big'

WASHINGTON (AP) — Struggling to avert an unprecedented national default, congressional leaders jettisoned negotiations on a sweeping deficit-reduction package Friday despite a plea from President Barack Obama to "do something big" to stabilize America's finances.

Instead, lawmakers embarked on competing fallback plans as a critical Aug. 2 deadline neared, a House Republican version given little chance of success, even by some supporters, and a bipartisan Senate approach holding out more promise to avert what Obama called financial "Armageddon."

Late Friday, the Treasury Department announced it was resorting to the final steps in an unusual series designed to avoid exceeding the current $14.3 trillion debt limit. Numerous officials have cautioned that a default will occur if the limit is not increased by Aug. 2, warning also of a calamitous effect on a national economy struggling to recover from the worst recession in decades.

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Economic outlook grim if no debt deal reached

WASHINGTON (AP) — Horror stories are flying about the damage that might be wreaked should Congress and President Barack Obama fail to cut a deal by the Aug. 2 deadline to increase America's borrowing limit. Nearly every American is in harm's way, either directly or indirectly.

Absent a deal by then, the government would find itself tight on cash and unable to borrow — and have to start deciding which of the 80 million bills due in August it should pay and which it should put off.

Tough decisions would come immediately.

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Stocks narrowly miss having worst week in a year

A late rally Friday prevented the stock market from having its worst week in nearly a year.

Investors seemed to largely ignore the ongoing debate in Washington over raising the country's borrowing limit. Troubling questions over Europe's financial health and manufacturing in the U.S. weighed down stock prices for much of the day, overwhelming a very strong earnings report from Google Inc.

Google jumped nearly 13 percent, the most of any stock in the Standard and Poor's 500 index, after the company said its revenue hit a record last quarter. Google's earnings pushed tech stocks in the S&P index broadly higher. Microsoft Corp. and Cisco Systems Inc. each gained 1 percent.

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Down on the farm, investors see big potential

A new breed of gentleman farmer is shaking up the American heartland. Rich investors with no ties to farming, no dirt under their nails, are confident enough to wager big on a patch of earth — betting that it's a smart investment because food will only get more expensive around the world.

They're buying wheat fields in Kansas, rows of Iowa corn and acres of soybeans in Indiana. And though farmers still fill most of the seats at auctions, the newcomers are growing in number and variety — a Seattle computer executive, a Kansas City lawyer, a publishing executive from Chicago, a Boston money manager.

The value of Iowa farmland has almost doubled in six years. In Nebraska and Kansas, it's up more than 50 percent. Prices have risen so fast that regulators have begun sounding alarms, and farmers are beginning to voice concerns.

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8 banks flunk European stress test

FRANKFURT, Germany (AP) — Eight of 90 banks have flunked stress tests that project how they would fare in another recession, and 16 more barely passed, Europe's banking regulator said Friday.

The failing banks should "promptly" take steps to strengthen their financial cushions against losses, the European Banking Authority said as it released the results. They now have to raise a total of euro2.5 billion ($3.5 billion).

The tests are a key element in Europe's fight against the debt crisis. With most market watchers expecting Greece — and possibly the other bailout victims Ireland and Portugal — to eventually reneg on part of their massive debt piles, concerns over what such a default would do to banks around the continent has triggered panic on financial markets in recent weeks.

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Icahn makes offer for Clorox

NEW YORK (AP) — Activist investor Carl Icahn made an unusual offer to buy Clorox Co. this week, presenting himself almost as a disinterested bidder and encouraging the company to try to find a better offer.

The billionaire hedge fund manager sent a letter to Clorox CEO Don Knauss on Thursday offering to pay $76.50 per share in cash, according to a regulatory filing Friday. That's a 12 percent premium to Thursday's closing price.

Clorox shares leapt Friday on the news. However, Icahn seemed more interested in drumming up another buyer, such as Procter & Gamble Co. or Colgate-Palmolive Co., than actually buying Clorox himself.

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Drop in gas prices lowered inflation in June

WASHINGTON (AP) — Consumer prices fell last month for the first time in a year because of a steep drop in gas costs. But Americans paid more for autos, clothes and hotel stays, driving prices outside of volatile food and energy costs up.

The Consumer Price Index fell 0.2 percent in June, the Labor Department said Friday. Gas prices fell 6.8 percent, the steepest decline in two and a half years.

After excluding volatile food and gas costs, core prices rose 0.3 percent. That was the second straight monthly gain and the largest back-to-back increase since the summer of 2008.

Many of the trends driving the increase in the core index are expected to fade by next year.

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Manufacturing flat in June because of weak autos

WASHINGTON (AP) — U.S. auto factories produced fewer goods in June than the previous month, and overall factory production was flat. It marked the third straight month of weak output slowed by supply chain disruptions caused by the Japan crisis.

The Federal Reserve reported Friday that factory production was unchanged last month following a tiny 0.1 percent rise in May. The May data were revised down from an initial 0.4 percent increase.

Auto production fell 2.0 percent in June, after declines in May and April. U.S. automakers have had trouble getting component parts out of Japan in the months after the March 11 earthquakes and tsunami.

Overall industrial production was up 0.2 percent in June.

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Emerging markets help Citigroup post 2Q profit

NEW YORK (AP) — Citigroup Inc. has long boasted of its international scope. It has a presence in 140 countries, more than any other U.S. bank.

Now, its presence in emerging markets is helping the bank overcome sluggish growth in the U.S. and turmoil in the European markets.

Strong growth in loans extended to customers in Asia and Latin America and fewer loan losses in the U.S. helped bolster Citigroup's profits. The company said half of its revenue came from emerging markets in the second quarter. Deposits in Asia and Latin America were up 13 percent, while loans grew 27 percent over the same quarter last year. Nomura Equity Research's banking analyst Glenn Schorr believes Citi's growth will continue to be driven partly by the strength of its overseas loan and deposit growth.

U.S. customers helped improve results in other ways, namely by paying on time.

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By The Associated Press(equals)

The Standard and Poor's 500 stock index finished with a gain of 7.27, or 0.6 percent, to 1,316.14. Most of the gains came in the last hour of trading.

The Dow Jones industrial average added 42.61, or 0.3 percent, to 12,479.73. The Nasdaq composite rose 27.13, or 1 percent, to 2,789.80.

On Friday benchmark West Texas Intermediate crude for August delivery rose $1.55 to settle at $97.24 per barrel on the New York Mercantile Exchange. Brent crude gained $1.00 to settle at $117.26 per barrel on the ICE Futures exchange.

Natural gas rose 16.2 cents to settle at $4.520 per 1,000 cubic feet.

In other Nymex trading for August contracts, heating oil picked up 3.31 cents to settle at $3.118 per gallon and gasoline futures gained less than a penny to settle at $3.1293 per gallon.