Best Buy buyout push ends

NEW YORK (CNNMoney)

Schulze, who owns about 20% of Best Buy's shares, said in August he was leading a group that wanted to take the company private. The company had given him until Thursday to present a qualified offer.

On Friday, Best Buy CEO Hubert Joly said the deadline passed without an offer from Schulze.

Shares of Best Buy (BBY, Fortune 500) rose more than 5% in early trading. The company announced better than expected sales and operating profit in the latest quarter, although earnings were lower than a year earlier.

The company has been moving forward with its turnaround efforts even as Schulze tried to put together a deal for the company.

Best Buy hired Joly as its CEO in August, and he has announced moves to close stores and cut staff. He also introduced a price matching guarantee designed to combat the loss of sales to online rivals such as Amazon (AMZN, Fortune 500).

Schulze resigned from the Best Buy board in last June following revelations that CEO Brian Dunn had had an inappropriate relationship with a female co-worker. Dunn resigned several months earlier, and after that the board found Schulze "acted inappropriately" by not telling the board's audit committee about Dunn's relationship when he learned of it.

First Published: March 1, 2013: 10:12 AM ET

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Europe's jobless crisis deepens

Italian unemployment is at a 21-year high and angry voters registered their protest earlier this week

LONDON (CNNMoney)

Official European Union figures published Friday showed unemployment in the eurozone hit a record high of 11.9% in January as the recession grinds on, and young people are paying a particularly heavy price.

Some 19 million people are out of work in the eurozone, 3.6 million of them under the age of 25, meaning nearly one in every four young people are without a job.

Compared with the same month a year earlier, the jobless total in the eurozone has increased by 1.9 million, with the depressed economies of southern Europe suffering the most.

Greece has an unemployment rate of 27%, while Spain is at 26.2% and Portugal is at 17.6%.

Italy is experiencing its highest level of unemployment in 21 years, and youth unemployment rose rapidly over the past 12 months to nearly 39%.

Italian voters backed the anti-austerity movement of Beppe Grillo in far greater numbers than expected earlier this week, depriving mainstream parties of a parliamentary majority and raising questions about the country's commitment to economic reform.

Related: Italy avoids panic at bond auction

The eurozone's third-largest economy is also its second most indebted after Greece. It is expected to contract further in 2013, making it harder for the next government to bring the €2 trillion debt mountain down to more sustainable levels. Annual debt servicing costs are currently about 5% of gross domestic product.

With the wider eurozone economy forecast to shrink again this year, and governments locked into further deficit-reduction programs, analysts warn that more pain is yet to come.

"Rising unemployment and public spending cuts will continue suppressing domestic demand, which along with export weakness will contribute to further economic contraction and more job losses throughout the year," noted the London-based Center for Economics and Business Research.

First Published: March 1, 2013: 11:28 AM ET

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Strong February auto sales reported

NEW YORK (CNNMoney)

The world's major auto makers reported sales for February on Friday that were up solidly from a year prior and last month, though slightly short of analyst estimates in most cases.

Early results suggest sales should still come in at an annual rate above 15 million for the month. If they do, it will mark the fourth straight month they've topped that benchmark, after falling below it in every month since March 2008.

"It's been really impressive how consistent the stability of the recovery has been," said Jesse Toprak, an analyst with TrueCar.com.

Related: Rebooting the dashboard

The pent-up demand that has built up since the recession and the slow economic recovery is now starting to release. An improving employment picture and better financing opportunities for car buyers are helping spur a rebound in sales.

General Motors (GM, Fortune 500) led the way in February with 224,314 vehicles sold, up 7% from a year prior. Ford (F, Fortune 500) was next with 195,822, up 9%.

Toyota (TM) had 166,377, and Chrysler hit 139,015, both up 4%.

Truck sales appear to have been particularly strong, Toprak said, in an encouraging sign for the economy. Sales of GM's full-size pickups increased 28% in February, while sales of Ford's F-Series pickups rose 15%.

"Small businesses are buying the bulk of the full-size trucks, and there's a great correlation between pickup sales and the housing market," he said.

CNNMoney's Chris Isidore contributed reporting.

First Published: March 1, 2013: 12:19 PM ET

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Michigan to take over Detroit city government

NEW YORK (CNNMoney)

The takeover is short of a formal bankruptcy, but it will include appointing an emergency manager who would have many of the same powers as a bankruptcy judge. It could mean throwing out contracts with public employee unions and vendors that the city can't afford, and could lead to further cutbacks in already depleted city services.

Detroit has 10 days to appeal Snyder's decision that there is a financial emergency in the city. Snyder said he has a "top candidate" for the manager post, but that he won't announce it until after the appeals period has passed.

Snyder, a Republican, insisted the emergency manager is the best way to deal with the problems facing the city's operations.

"The current system has not been working. We have not stopped the decline," he said. "This is time for us not to argue or to blame, but to come together as Detroit, Mich., not Detroit vs. Michigan, and bring all of our resources to bear."

The U.S. auto industry, long associated with the city, has enjoyed a resurgence in the last few years since General Motors (GM, Fortune 500) and Chrysler Group went into bankruptcy and received federal bailouts. But the auto turnaround has done little to help Detroit's finances. While GM's headquarters are in downtown Detroit and there is still a concentration of auto plants and suppliers in southeastern Michigan, there are relatively few facilities within the city limits.

Related: Best car sales in five years

A week ago, a state review board issued a report saying the city faces a cash shortfall of more than $100 million by June 30, and that long-term liabilities, including unfunded pension liabilities, exceeded $14 billion. Detroit has been borrowing to continue operations and would have fallen about nearly $1 billion short last year if it hadn't issued new debt.

"One of the things that needs to happen is all creditors need to be called to table, asking something from everyone," Snyder said when asked if Detroit would get relief from the debt it owes those who own the city bonds. He said he hoped different payment schedules could be worked out for those who are owed money.

Under Michigan law, the emergency manager is expected to stay in place for at least 18 months. Snyder agreed with a questioner who said that is not enough time to solve the city's problems, but said it should be enough time to implement a plan and put a "structural process" in place.

The review team said that while the mayor and city council deserve credit for some difficult financial reforms, "those reforms are too heavily weighted toward one-time savings and apply only to non-union employees who represent only a small portion of the city's overall wage and benefit burden."

The review team therefore found that an emergency exists in the city "because no satisfactory plan exists to resolve a serious financial problem."

That report set the stage for Snyder to announce the takeover. Snyder has made many decisions unpopular with Democrats in the state, including signing a "right-to-work" strongly opposed by unions. The state takeover of Detroit is very unpopular with many residents in the state's largest city, especially its unions. Neither Mayor Dave Bing nor any member of the city council attended Snyder's announcement Friday, which was made at a town hall meeting where residents had the opportunity to ask questions.

-- CNN's Dana Garrett contributed to this report

First Published: March 1, 2013: 10:17 AM ET

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Dish: CBS made 'Big Bang Theory' star delete Hopper tweet

Kaley Cuoco, star of 'The Big Bang Theory,' tweeted that the Dish Hopper was 'amazing.' The tweet was later deleted.

NEW YORK (CNNMoney)

The latest drama comes after Kaley Cuoco, star of CBS's hit show "The Big Bang Theory," sent a sponsored tweet on Wednesday about the Dish Hopper DVR. Dish (DISH, Fortune 500) had paid her to tweet that the Hopper was "amazing" and "awesome."

CBS (CBS, Fortune 500) and many other broadcasters are currently locked in a legal battle with Dish over Hopper's ad-skipping technology.

Cuoco's tweet has since been deleted, and Dish sent out a press release calling attention to that.

"It's disappointing that CBS -- once the exemplar of editorial independence and innovation -- continues to use its heavy hand to hold back progress from consumers," Dish CEO Joe Clayton said in a statement.

CBS shot back with its own strongly worded denial: "Once again, Joe Clayton demonstrates his dubious gift for hyperbole and hucksterism. No demands were made, but it's clear that Dish's culture of fabrication is alive and well."

A CBS spokesman said separately that the company did not contact Cuoco "at all."

The Cuoco kerfuffle comes a few weeks after CBS-owned tech site CNet put the Hopper on an awards shortlist. CBS stepped in, forcing CNet to remove the Hopper from consideration -- and banning the site from reviewing "products manufactured by companies with which we are in litigation with respect to such product."

Dish is also mired in lawsuits with Comcast's (CMCSA) NBC, News Corp.'s (NWS) Fox, Disney's (DIS, Fortune 500) ABC and other networks over the Hopper, which lets users record up to six channels at once and automatically skip commercials for primetime network shows.

"The Big Bang Theory" is produced by Warner Bros. Television, a subsidiary of CNNMoney parent company Time Warner. (TWX, Fortune 500)

First Published: March 1, 2013: 12:35 PM ET

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Stocks gain for week, inch toward all-time highs

Click the chart for more stock market data.

NEW YORK (CNNMoney)

The Institute for Supply Management's manufacturing index rose to 54.2, a surprise improvement from January's 53.1 and the best reading since June 2011.

The Dow Jones industrial average and Nasdaq rose 0.3%, while the S&P 500 edged up 0.2%, recovering from nearly 1% declines earlier in the day. The Dow is now less than 1% away from its all-time high reached in 2007, and the S&P is off less than 4%.

The day's gains helped all three indexes finish the week with modest gains. The Dow rose 0.6%, while the S&P 500 edged up 0.2%. The Nasdaq ticked up 0.3%.

The strong manufacturing report "takes a little bit of the sting away from the sharp decline in personal income in January," said Jim Baird, chief investment strategist for Plante Moran Financial Advisors.

The Commerce Department reported that personal income fell 3.6% in January, which was the steepest month-to-month drop in 20 years and much worse than economists were expecting. Personal spending notched up 0.2%, as expected.

Related: Spending cuts: When they'll really bite

While manufacturing activity continues to pick up, the near-term outlook for the economy remains murky, said Baird, noting that the consumer sector is particularly vulnerable.

"Confidence has been improving, but the looming cuts in federal spending could throw some cold water on that emerging optimism," he said.

Assuming that no last-minute deal is reached, $85 billion in automatic spending cuts will go into effect Friday, although it may be weeks or months before that pain is felt.

In other economic news, the University of Michigan's final edition of consumer sentiment for February came in better than expected at 77.6. A government report showed that construction spending declined 2.1% in January.

Related: Best Buy buyout push ends

On the corporate front Friday, Best Buy's (BBY, Fortune 500) stock gained ground after the electronics retailer reported its quarterly revenue rose slightly year-to-year, despite the closure of 49 stores.

Best Buy also announced that founder Dick Schulze will not buy out the retailer. Schulze, who owns about 20% of Best Buy's shares, was leading a group that wanted to take the company private. The company had given him until Thursday to present a qualified offer, but CEO Hubert Joly said the deadline passed without an offer.

Groupon (GRPN) shares rallied after the daily deals site announced that embattled CEO Andrew Mason would be replaced.

Gap (GPS, Fortune 500) shares edged up following fourth-quarter earnings Thursday that beat expectation s.

Shares of Salesforce.com (CRM) gained following strong earnings announced after the bell.

Following the closing bell, Warren Buffett's Berkshire Hathaway (BRKA, Fortune 500) raised its per-share book value 14.4% in 2012, less than the S&P 500's 16% total return. Shares were flat after hours.

Fear & Greed Index: Greed is good

Meanwhile, investors also digested lackluster economic data out of Europe and Asia.

Eurostat reported eurozone unemployment edged up to 11.9% in January. Italy's unemployment was slightly lower, at 11.7%, but its youth unemployment has reached a staggering 38.7%.

In Asia, China's Purchasing Managers Index fell to 50.1 in February from 50.4 in January, signaling a stalling economic recovery.

European markets and Asian markets ended mixed Friday.

The dollar rose versus the euro, the British pound and the Japanese yen.

Oil and gold prices inched lower.

The price on the 10-year Treasury rose, pushing the yield down to 1.85% from 1.89% late Thursday.

First Published: March 1, 2013: 9:48 AM ET

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State Department sees no environmental red flags on Keystone route

NEW YORK (CNNMoney)

If the company behind the pipeline, TransCanada, follows all the rules, its "construction and normal operation" of the pipeline should pose no major risks, the State Department said in its draft environmental impact statement. That statement is now open for a 45-day public comment period. The Obama administration will make its decision about the pipeline later this year, likely in mid-summer.

The project was delayed last year because of concerns about how it would affect Nebraska's sensitive Sand Hills region. The Obama administration -- which needs to approve the project because it crosses an international border -- turned down those plans, forcing TransCanada to draft a new proposed route.

The pipeline has touched off an intense debate in the United States. Supporters like it because it will carry 830,000 barrels a day of oil from Alberta, Canada, to the U.S. Gulf Coast, potentially reducing imports from other, more volatile areas. Its construction will create an estimated 5,000 jobs, according to the State Department. TransCanada forecasts even higher job growth.

Related: America has an energy boom. Now what?

Opponents hate it because oil from Canada's oil sands region produces 5% to 30% more greenhouse gases than other types of conventional crude. Extracting oil from the sands also uses massive amounts of water and can result in deforestation. Transporting it runs the risk of spills.

The State Department report did take into account the environmental impact of the sands' heavy oil, which it said is 17% dirtier than the average barrel of oil used in the United States. However, it also said that not building the pipeline would not significantly limit oil sands development, or U.S. consumption of heavy oil.

If Keystone is not constructed, that oil would be still be extract and used, State believes. It would simply be transported to buyers by rail or other means instead of through the pipeline.

The report was not well-received by environmentalists.

"It's a good thing this is a draft," said Susan Casey-Lefkowitz, international director at the Natural Resources Defense Council. "Certainly the public is going to have a lot to say in response."

First Published: March 1, 2013: 5:28 PM ET

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4 myths about the spending cuts

NEW YORK (CNNMoney)

So we'll try to set the record straight on at least a few oft-repeated misconceptions.

Myth 1 - Obama is to blame for the spending cuts: No. In fact, both sides got behind the idea and time has been wasted playing the blame game.

The so-called sequester was part of the deal to resolve the ugly debt ceiling fight that had dominated Washington for months in 2011.

The idea to include the measure first came from the administration, according to Bob Woodward's book The Price of Politics. But both chambers of Congress agreed to it by passing the Budget Control Act in August 2011, and President Obama signed it into law.

Since then neither party has made a serious effort to meaningfully negotiate a sequester replacement with their colleagues across the aisle.

(Related: Obama signs order triggering cuts)

Myth 2 - The world will be noticeably different on Saturday: It really won't.

The sequestration order on Friday will start the ball rolling on the across-the-board cuts federal agencies must make.

But it will take a little while for those cuts to be executed. And once they are -- assuming Congress does nothing to override them -- the ramifications will be felt over months, not a few weeks.

For instance, hundreds of thousands of federal workers will be furloughed -- but the duration and timing of those furloughs will vary. Some will start in April. Others over the summer.

And general public awareness of the cuts is likely to be delayed and uneven, since not everyone will be directly or even indirectly affected by every cut.

Myth 3 - It's not hard to cut $85 billion: That would be a fair point to make if the $85 billion were really being pulled from funding across all parts of the $3.5 trillion federal budget.

And it would be an even fairer point if the cuts were made strategically so as not to undercut what's working efficiently, and gratuitously dinging economic growth in the process.

But that's not how the sequester will work.

The $85 billion in funding is being cut mostly from the smallest part of the budget pie -- discretionary spending, which has already been subject to lower spending caps in the past two years.

Related: When the spending cuts will really bite

And it must be cut from funding over seven months -- March 1 to Sept. 30 -- as opposed to a full 12 months' of funding for the fiscal year. That means the percentage cuts to programs will need to be steeper.

To make matters worse, agencies will have little discretion about what gets cut since the sequester mandates that the cuts be made by the same percentage to every non-exempt area. Efficient programs will be axed right along with bloated or duplicative ones.

"The sequester mechanism was drafted in order to prevent flexibility by imposing the cuts all the way down to the program, project and activity level. The point was to make sequester so unpalatable that it would force Congress to address difficult choices," budget expert Charles Konigsberg said.

Well, clearly that hasn't worked so far.

Myth 4 - The cuts will hurt the economy badly, or they won't be a big deal: The economy will be affected. Just how badly no one can say with certainty.

The baseline assumption: The spending cuts, if kept in place all year, will reduce economic growth for 2013 by 0.6 percentage points and reduce the number of full-time jobs created by 750,000, according to the Congressional Budget Office.

Even counting the cuts in combination with the tax increases approved in the fiscal cliff deal and expiration of the payroll tax cut, the CBO estimates the economy would still grow at an inflation-adjusted 1.4% this year.

That's hardly recession territory. But it's tepid growth for what is supposed to be an economic recovery.

And some worry the consequences of the cuts may be worse than expected because of the knock-on effects that aren't always taken into account.

First Published: March 1, 2013: 11:28 AM ET

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Obama signs order triggering spending cuts

NEW YORK (CNNMoney)

Known officially as sequestration, the president's order canceled $85 billion in federal funding over the next seven months.

As required, the White House budget office also sent to Congress a report detailing the magnitude of cuts that federal agencies will have to make.

In aggregate, defense spending must be cut by 13% over the next seven months and nondefense programs must be cut by 9%. Those percentage cuts will apply to all non-exempt programs, projects and activities.

(Related: 4 myths about the cuts)

In dollars, the spending reduction must be split evenly between defense and nondefense -- as a result, each category will lose nearly $43 billion in funding.

Some key areas of spending will be protected from the budget ax -- most notably military personnel, Medicare and Social Security benefits, as well as Medicaid and food stamps.

The funding reductions would come primarily from what's known as discretionary accounts, which make up the smallest part of the overall federal budget, accounting for a little over a third of all spending.

Discretionary spending supports a vast array of federal agencies from the FBI to the FDA to the National Transportation Safety Board, as well as education programs across the country.

The actual dollars cut from these and other areas varies widely since their normal funding levels do as well.

Navy operations and maintenance, for instance, will take a nearly $3.5 billion hit. National Science Foundation research funding will drop $290 million. The Nuclear Regulatory Commission will lose $52 million. And the Affordable Housing Program will see its budget cut by $10 million.

Few would dispute Obama's characterization of the cuts. In fact, it's one of the few things about the so-called sequester that Democrats and Republicans agree on. They failed to agree on how to replace them, however.

Both chambers of Congress passed the sequester as part of the deal that put an end to the ugly fight over the debt ceiling in 2011.

(Related: When the cuts will really bite)

The cuts were designed to be so distasteful that they would spur lawmakers to approve a smarter approach to deficit reduction. But they've failed to do so.

The cuts will result in many if not most federal workers furloughed for some period of time. And federal contracts and grants will be curtailed or not renewed. That, in turn, will create delays in services, travel hassles, less border security, fewer food inspections, interrupted medical research and less disposable income that has buoyed local communities.

Such ramifications will deliver a blow to economic growth, but not a fatal one -- a point the president acknowledged Friday.

"Even with these cuts in place, folks all across this country will work hard to make sure that we keep the recovery going. But Washington sure isn't making it easy," Obama said.

(Impact: IRS furloughs to spare tax season)

Congress will get another chance to forge an agreement over replacing the cuts this month, as lawmakers duke it out over spending levels for the rest of this fiscal year. They have until March 27 to approve a new funding bill. If they don't, the government will shut down, with the exception of essential services.

If they succeed in replacing the cuts by then, the disruption caused by the sequester may be limited, since its ramifications will unfold over several months as opposed to a few weeks.

First Published: March 1, 2013: 8:50 PM ET

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Medicare doctors' pay to be cut

Automatic spending cuts will trigger a 2% cut in Medicare reimbursement -- a reduction that experts say could make it harder for some patients to get care.

NEW YORK (CNNMoney)

Under the so-called sequester, Medicare payments to health care providers, health care plans and drug plans will be reduced by 2% starting April 1, according to the Centers for Medicare & Medicaid Services.

The bottom line is that doctors who treat Medicare beneficiaries will only be reimbursed 98 cents on every dollar for a vast array of services. Reimbursement for low-income beneficiaries is exempt.

Overall, the cut will mean $11 billion less for doctors, hospitals and other providers in 2013. Last year, the agency doled out more than $500 billion in such payments.

A 2% cut may not seem large, but Medicare payments to doctors have been lagging, said Dr. Jeremy Larazus, president of the American Medical Association.

Related: Doctors: Why we can't stay afloat

"Over the last 12 years, Medicare payments to physicians have increased by only 4%, while the cost of providing care has jumped 20%," said Lazarus.

The cuts could make it harder for patients to get care, Lazarus added. "One in five Medicare patients already is facing difficulties in finding a doctor to take them. If you cut their pay, this access problem will only get worse."

The threat of payment cuts isn't new for doctors who treat the nation's 47 million Medicare patients.

Federal law already triggers annual Medicare cuts to keep the program financial sound. But Congress has stepped in and blocked those cuts -- which now stand at 29% -- from happening more than two dozen times over the past decade.

Related: Doctors going broke

Dr. David Wilt is an internist at a primary care group practice in Kansas City. About 60% of patients treated at his practice are Medicare beneficiaries.

Wilt agrees with Lazarus that Medicare patients are having a tougher time finding doctors. It's happening at his practice, which has already stopped seeing Medicaid patients because of "abysmal reimbursement rates."

"At some point, we will do what we have to if it means keeping the practice afloat," said Wilt. "This includes reducing the number of patients whose payments are too low for us to run our business."

Dr. Jeffrey Cain, president of the American Academy of Family Physicians, is concerned that the 2% cut will catch on with private insurers, too.

Related: Military town in trouble

"Most private insurers base their payment rates on Medicare. We anticipate that they will also reduce reimbursement by 2%," he said

If this happens, Cain said doctors with small practices will take a greater hit.

"Small practices, especially in rural areas, are small businesses that run on razor thin margins," he said. "These cuts will force them to make a choice. Do we keep seeing the elderly or do we keep our practice afloat."

First Published: March 2, 2013: 7:40 AM ET

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