Business Blog Posts

The dispute is between British financier Guy Hands' Terra Firma and Citigroup over Hands's $6.4 billion buyout of legendary music company EMI in 2007.

Hands's Terra Firma Capital Partners accuses Citi banker David Wormsley and Citigroup of duping Hands into thinking there was a rival bid in the offing by private equity firm Cerberus Capital Management for the EMI company he coveted. As it turned out, there were no other offers.

The Financial Times and Wall Street Journal reported that the judge presiding over the case on Wednesday threw out one of three premises that supported Terra Firma's claim for about $8 billion, and asked that the firm's lawyers withdraw another, reducing the amount of potential damages to about $2 billion.

According to a court document, the court determined on Wednesday that the methodology used by a Marianne deMario, listed in Terra Firma's witness list, as applied to the issue of lost profits from the investment was "insufficiently reliable" to allow her to testify about those kinds of damages.

The plaintiff also withdrew its proffer of testimony by her on the issue of "locked in damages," the document said.

DeMario had calculated 'lost profits damages' of 4.4 billion euros which it was claimed Terra Firma would have earned on the money it invested in EMI, had it been put to use elsewhere, a separate court document said.

Terra Firma has been seeking as much as $8 billion in damages for its fraud claim at the trial, which started on October 18 and is expected to end on November 5.

The deal has come to reflect some of the worst aspects of the credit boom, when companies were loaded with debt.

If Terra Firma loses at trial, it could be forced to hand over EMI to creditor bank Citigroup, which provided 2.6 billion pounds ($4 billion) in loans for the acquisition. The bank's reputation for facilitating such deals could suffer if the jury decides Hands was defrauded.

Terra Firma and Citi declined comment.

The case is Terra Firma et al v Citigroup et al, U.S. District Court for the Southern District of New York, No. 09-10459.

Business lobbies, worried Japan is lagging behind rivals such as South Korea in free trade deals, want Prime Minister Naoto Kan to offer to take part in the U.S.-led Transpacific Partnership (TPP) when he hosts the November 13-14 Asia-Pacific Cooperation (APEC) summit, which President Barack Obama will attend.

The government is set to announce basic guidelines for free trade deals this week ahead of the APEC summit. But many ruling Democratic Party lawmakers fear fallout from the TPP on Japan's long-protected and politically powerful farmers.

The Nikkei said the government would express its willingness to join negotiations for the TPP, which would eliminate tariffs on goods traded within the zone, in basic guidelines for Japan's free trade and economic partnership deals, for which it aims to get cabinet approval on Friday.

To address concern among farmers, the government also aims to compile a medium-term plan for reforms in agriculture and other key areas, details of which will be fleshed out after the APEC meeting, the newspaper added.

The government is expected to offer measures aimed at bolstering the international competitiveness of Japan's agricultural sector such as support for exports. It also plans to expand income subsidies to farmers, Nikkei said.

Even if Japan shows interests in participating in the TPP negotiations, it needs to get approval from other nations involved in TPP talks, including the United States, Singapore and Australia, to join talks.

Adding Japan, one of the world's largest economies, would greatly increase the potential market-opening gains of the proposed pact. But it could also complicate the negotiations because of U.S. industry concerns about lowering remaining tariffs on Japanese-made autos, and Tokyo's previous resistance to opening its rice and other agricultural markets.

(Reporting by Yoko Nishikawa; Editing by Chris Gallagher)

The central bank was designed to be above political influence. But its policy decisions are not completely immune to the political environment.

A more conservative Congress would reduce the already slim chance that more fiscal support will come, putting the burden squarely on the Fed's shoulders to shore up a limp economy.

Douglas Holtz-Eakin, an economist who advised John McCain during his unsuccessful 2008 presidential campaign, said normally the Fed keeps quiet around elections to avoid any semblance of political involvement.

This time, the central bank sent a clear signal that it intended to take action, and investors are convinced the move will come this week in the form of relaunching asset purchases. This week's policy-setting meeting lasts two days, so the Fed's announcement will come on Wednesday, just after the election.

"It looks to me a bit desperate," Holtz-Eakin said, adding that he was not convinced another round of money printing would do much to stimulate the economy.

"I would have liked to see them hold on to their ammunition in case we really need it."

President Barack Obama's Democratic party is expected to lose its majority in the House of Representatives, while the Democrat-controlled Senate may move closer to a 50-50 split.

Republicans have made opposition to last year's $814 billion stimulus package a central plank of their election campaign, tapping into voter dissatisfaction with the slow pace of recovery and weak job market.

The White House, recognizing there is probably not enough political backing, has said little about additional stimulus. However, two former Obama administration officials -- ex-Budget Director Peter Orszag and former Economic Adviser Christina Romer -- have pressed hard for more help.

"The necessary shifts in fiscal policy are extremely unlikely to happen," Orszag wrote in the New York Times last week. "So we're left relying on monetary policy ... which may create more problems than it solves."

Orszag warned that the Fed's easy money makes government borrowing unusually cheap, leaving Congress less inclined to tackle medium-term deficit cuts that he thinks are essential to a sustainable recovery.

OH YEAH, THE JOBS REPORT

This week brings a veritable feast for central bank watchers. In addition to the Fed, the European Central Bank and Bank of England hold their meetings on Thursday, and the Bank of Japan brought forward its next policy review to Thursday and Friday, heightening speculation that it may ramp up its own asset-buying program after the Fed's announcement.

No policy changes are expected from the ECB or the BoE, particularly after last week's surprisingly strong reading on Britain's third-quarter economic growth.

After a two-month rally in the stock market, some investors are about to see if they get what they wished for: more Republicans in Congress and lots of cheap money.

The U.S. stock market has priced in the Republicans gaining ground in Tuesday's midterm elections, an outcome widely seen as more business-friendly, as well as the Federal Reserve pumping billions into the economy through Treasury debt purchases. The Fed's statement on Wednesday afternoon at the end of its two-day policy meeting is widely anticipated for details of the central bank's economic stimulus plan.

Jobs will be a touchstone, with the high U.S. unemployment rate figuring into the campaign rhetoric of Democrats and Republicans alike in the midterm elections. The federal government's non-farm payrolls report, due on Friday, is expected to show a gain of 60,000 jobs in October, compared with September's loss of 95,000 jobs, according to economists polled by Reuters. The U.S. unemployment rate, however, is seen holding steady at 9.6 percent.

More earnings from S&P 500 companies and a steady stream of top-tier economic indicators will give investors more evidence of the economy's health throughout the week.

A series of foreign central bank meetings also is on tap.

But these numbers will serve mostly as backdrop to the outcome of the elections and the Fed meeting.

With so many variables in the week ahead, Wall Street professionals are unusually reticent to call the market,

Only one thing seems for sure: Volatility will play a major role.

Traders expect the week to end with a swing of around 2.5 percent in either direction, based on options activity in the SPDR S&P 500 fund (SPY.P). While that is not out of the ordinary, traders could see significant volatility during the week as events unfold.

"It will probably be a very volatile and very active market because there are a lot of moving parts," said John Praveen, chief investment strategist of Prudential International Investments Advisers LLC in Newark, New Jersey.

FIREWORKS AFTER THE FED?

If there are fireworks, they will probably come after the Fed's two-day meeting. On Wednesday, the meeting will conclude with a statement at 2:15 p.m. That could create a dead period for markets at the start of the week, especially if the elections' results are in line with predictions.

Expectations of the size of the Fed's purchases of U.S. government bonds have been coming down in recent days. That has kept the stock market locked in a tight range, but it has also opened the door for upside surprises.

"Two weeks ago, the Fed was definitely poised to disappoint the market," said Burt White, managing director and chief investment officer of LPL Financial in Boston. "Now, it's much more balanced, and maybe even leaning toward a slight surprise."

The three plans, which were filed Friday with Delaware's Bankruptcy Court, will compete for creditor support against the company's proposed plan.

Like the company's plan, the proposals allow for Tribune's businesses, such as the Los Angeles Times and Chicago Tribune, to exit bankruptcy while creditors fight over how to apportion blame for its bankruptcy.

Tribune, which also owns 23 television stations, filed for bankruptcy just a year after real estate developer Sam Zell bought the company with billions of dollars in debt.

Tribune has proposed a reorganization plan based on a settlement among lenders JPMorgan Chase & Co and hedge funds Oaktree Capital Management and Angelo, Gordon & Co.

Under their plan those three would end up controlling the company.

The Tribune plan tries to avoid many potential lawsuits by putting a value on legal claims and settling with bondholders, whose roughly $2 billion in investments were essentially wiped out by the bankruptcy.

A hedge fund holding a large portion of those bonds, Aurelius Capital Management, clearly has no intention of accepting Tribune's settlement offer and it filed one of the competing plans.

The other plans were filed a group holding senior loan claims and Marathon Asset Management LP and King Street Capital LP, which hold bridge loan claims.

The plans mainly differ from the company's by foregoing settlements and pursuing legal claims against lenders, particularly the banks that loaned the money for the second part of Zell's two-step leveraged buyout.

In July, a court-appointed examiner found the second part of Zell's buyout might be determined to be fraudulent.

LAWSUIT FILED

In conjunction with their bankruptcy plan, the group of senior lenders also filed a lawsuit against JPMorgan, Merrill Lynch, Citicorp and Bank of America. They said in the lawsuit the banks arranged $3.7 billion in Tribune loans in 2007 they knew the company could never repay.

"The Lead Banks knew that this financing was barred by the terms of the Credit Agreement and it was tainted with fraud and other misconduct," the lawsuit, which was filed late on Friday, said.

Representatives for the JPMorgan, Bank of America and Merill Lynch were not immediately available to comment on the lawsuit. Citicorp declined to comment.

Investors kept trading to a minimum this week in anticipation of next Wednesday's announcement. Activity the last several weeks has been heavily influenced by hopes for a large round of asset buying.

While earnings have largely taken a back seat to macroeconomic data, Microsoft Corp's (MSFT.O) stock rose 1.5 percent to $$26.67 a day after its profit beat estimates on higher sales of its flagship software.

Investors are betting on volatility to rise after Wednesday's announcement and have been hedging against unexpected outcomes from the Fed meeting, as well as Tuesday's midterm elections. The CBOE Volatility Index .VIX climbed about 13 percent this week, even as stocks rose marginally.

"There's no getting around how big of a week next week is, and it could be an inflection point either up or down," said Max Bublitz, chief investment strategist at SCM Advisors in San Francisco.

The midterm elections have also garnered investor attention, with polls indicating a Republican takeover of the U.S. House of Representatives.

On the downside, Dow components Chevron Corp (CVX.N) and Merck & Co (MRK.N), fell after posting quarterly results. Chevron fell 2.2 percent to $82.61 on a weaker-than-expected profit, while Merck lost 1.8 percent to $$36.28 after its sales disappointed investors.

The Dow Jones industrial average .DJI added 4.54 points, or 0.04 percent, to 11,118.49. The Standard & Poor's 500 Index .SPX shed just 0.52 of a point, or 0.04 percent, to 1,183.26. The Nasdaq Composite Index .IXIC edged up just 0.04 point, or 0.00 percent, to 2,507.41.

For the week, the Dow dipped 0.1 percent while the S&P 500 edged up only 0.02 percent and the Nasdaq added 1.1 percent.

A HEALTHY OCTOBER

For the month of October, though, it was a solid upswing, with the S&P 500 gaining 3.7 percent, while the Dow advanced 3.1 percent and the Nasdaq jumped 5.9 percent.

U.S. economic growth edged up as predicted in the third quarter, but not enough to chip away at high unemployment or change expectations of more monetary easing from the Federal Reserve next week.

In another snapshot of the economy, the Thomson Reuters/University of Michigan's survey showed that consumer sentiment weakened slightly in October, dropping to its lowest level in almost a year.

The week of November 1 marks the final peak week of the third-quarter earnings season, as 94 S&P 500 companies and two Dow components are expected to report.

With 335 S&P 500 companies having reported so far, some 77 percent have beaten earnings estimates. That is just shy of the record beat rate of 79 percent in the third quarter of 2009, according to Thomson Reuters data.

The conglomerate, India's largest listed company, has been investing overseas in shale gas assets and has been looking to widen its businesses beyond petrochemicals, refining, oil and natural gas exploration, and retail.

"Improved refining margins and high operating rates at all our manufacturing facilities led to a record quarter," Chairman Mukesh Ambani said in a statement.

"We are focused on identifying opportunities that leverage India's unique demographic and market potential," he said.

Controlled by Ambani, the world's fourth-richest man according to Forbes magazine, the company has struck three shale gas joint ventures with U.S. firms so far this year.

The company also made a dramatic return to the telecoms business with a $1 billion acquisition of Infotel Broadband, the only company to win a nationwide license for broadband wireless spectrum in a government auction this year.

Reliance is pumping about 55-60 million cubic meters of gas a day from KG D6, off India's east coast, and the country's oil secretary said in July the company would be able to pump gas at full capacity during the year to March 2013.

Gross refining margin at Reliance's flagship refining business in the September quarter was $7.9 per barrel, up from $7.3 per barrel in April-June and in line market estimates of $8 per barrel.

The margins, a key measure of profitability, stood at $6 a barrel in the year-earlier quarter. The refining margins have been trending higher after having halved in the December 2009 quarter.

Reliance said net profit rose 28 percent to 49.23 billion rupees ($1.1 billion) in the fiscal second-quarter ended September 30 from 38.52 billion a year earlier. The profit was the company's highest since the December 2007 quarter.

A Reuters poll had forecast quarterly net profit of 48.3 billion rupees.

Shares in Reliance, valued at nearly $81 billion, have risen 0.6 percent so far in 2010, lagging a nearly 15 percent gain in the main BSE index .BSESN.

(Additional reporting by Devidutta Tripathy and Manasi Phadke; Editing by Muralikumar Anantharaman and Tony Munroe)

Saskatchewan, where fertilizer producer Potash Corp is based, wants Ottawa to reject the Anglo-American mining giant's $39 billion offer, the largest takeover bid of 2010.

It says a deal would rob Canada of a key strategic resource, as well as cutting jobs, Saskatchewan's tax take and its royalty payments, and it says the provinces of Alberta, Manitoba, New Brunswick and Quebec also oppose the bid.

Alberta, Manitoba and Saskatchewan alone account for 48 of the 142 seats the ruling Conservatives hold in the House of Commons, and the minority government needs those seats to stay in power.

"How do you overcome the strategic concern? ... This is more important going forward for the country than maybe it ever has been because the world is prizing food security and energy security," Saskatchewan Premier Brad Wall said in Toronto.

"Isn't it time that we maybe got a little bit circumspect about deals that involve this size of a reserve and this size of a company? I guess that's our position."

Potash Corp is the world's biggest producer of its namesake crop nutrient, demand for which is soaring as food prices climb and demand for fertilizers rise. It has flatly rejected BHP's $130 a share offer as inadequate.

Potash Corp stock was up just over 2 percent at $145.75 on the New York Stock Exchange. The shares spiraled above BHP's the offer price in August, when BHP launched its bid, and have stayed above that level, signaling that investors expect a higher offer to emerge.

POLITICAL CHALLENGE

The issue of whether to approve the offer has become a huge political challenge for the federal Conservative government, which has said it would meet a legal deadline of midnight on November 3 (0400 GMT November 4) to approve or block it.

In comments that appeared to make a delay highly unlikely, federal Industry Minister Tony Clement said a decision would come "sometime between a minute from now and midnight November 3."

If the government blocks the bid, it risks damaging Canada's reputation as a country that's open to foreign investment.

But accepting it might drive voters in Saskatchewan and in other provinces to other parties, jeopardizing the Conservatives' chances of staying in power after a federal election widely expected in the first half of 2011.

Speaking later to CPAC television, Clement said foreign investment had traditionally been a net benefit to Canada, bringing jobs, competition, innovation and production.

"We can't close our borders, and nor would we want to, because different companies may want us to export to other countries, or invest in other countries," he said.

Next week's events could signal shifts in both monetary policy and legislative direction, leading investors to be cautious and largely disregard Thursday's corporate earnings and economic reports.

"You've certainly got a lot of people now nervous that what happens when they talk will be disappointing, and they should be concerned, because I don't know what (Fed policymakers) are going to say that is going to save the world," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

A look at exchange-traded funds based on some broad market indexes and sectors showed premiums for November out-of-the-money puts outweighed equally spaced call contracts for most instruments. Overall U.S. put volume rose 21.3 percent on Wednesday, while the CBOE Volatility Index .VIX logged its fourth consecutive session of gains, up 1.8 percent.

Thursday's session also brought about a breakdown in the recent inverse correlation between stocks and the dollar, as stocks slipped and the dollar index .DXY shed 1.1 percent against a basket of currencies.

"That correlation hasn't broken in quite some time. That could be disturbing a few people," added Saluzzi.

The Dow Jones industrial average .DJI dropped 20.36 points, or 0.18 percent, to 11,105.92. The Standard & Poor's 500 Index .SPX shed 0.16 points, or 0.01 percent, to 1,182.29. The Nasdaq Composite Index .IXIC gained 0.93 points, or 0.04 percent, to 2,504.19.

3M slid 6 percent to $84.95 and pulled the Dow lower after the diversified manufacturer reported quarterly earnings that just beat expectations, but trimmed its outlook due to costs from recent acquisitions.

New claims for unemployment benefits fell unexpectedly in the latest week, and this more encouraging reading on the labor market, along with the weak dollar, gave stocks an early boost.

However, investors remained cautious about making big bets ahead of the outcome of the mid-term elections and the Fed's announcement. Fed policymakers are set to meet on Tuesday and Wednesday.

Anticipation of a Fed move has been a driver of recent market action as investors speculated over the size and time frame of further stimulus. Equity investors have bet that more easing will invigorate an economic recovery and lift asset prices.

Since the beginning of September, the S&P 500 is up 12 percent.

Most leading economists expected the Fed to buy between $80 billion and $100 billion in assets per month under a new program to bolster the struggling economy, a Reuters poll found.

(Additional reporting from Doris Frankel; Editing by Jeffrey Benkoe)

Both Halliburton and BP were aware of flaws in the cement slurry, similar to the one used to seal the well, as early as March 8, "but neither acted upon that data," according to the National Oil Spill Commission's chief counsel, Fred Bartlit.

Halliburton had run a series of tests that showed the material was unstable, the letter said.

Shares of Halliburton fell sharply after the report's release. The stock tumbled as much as 16 percent before recovering some losses. Halliburton shares were off 11 percent, or $3.33 at $31.09 in afternoon trade on the New York Stock Exchange.

The cost to insure Halliburton's debt also jumped on the news.

The industry has developed tests to identify faulty cement jobs in offshore wells, but "BP and/or Transocean personnel misinterpreted or chose not to conduct such tests at the Macondo well," Bartlit wrote.

Tests conducted by industry cement experts show that "the foam cement used at Macondo was unstable," Bartlit wrote in a letter to co-chairs Bob Graham and Bill Reilly. "Halliburton (and perhaps BP) should have considered redesigning the foam slurry before pumping it at the Macondo well."

In an e-mailed statement, Halliburton said it is reviewing the report and will publish a response later on Thursday. A BP spokesman had no immediate reaction.

The report supports long-standing claims by BP that it shares the responsibility for the April 20 incident with its Macondo partners, including Swiss-based Transocean Ltd, which owned the doomed Deepwater Horizon rig.

BP's Macondo well ruptured on April 20, killing 11 rig workers and causing more than 4 million barrels of oil to spew into the sea.

The spill marred the coasts of four U.S. Gulf states, prompted a ban on new deepwater drilling and left BP's image in tatters in the United States, home to 40 percent of the London-based oil giant's business.

(Additional reporting by Anna Driver in Houston and Braden Reddall in San Francisco)

(Reporting by Chris Baltimore; Editing by Stacey Joyce)

The selloff in commodities also halted with copper, which dropped more than $200 a tonne on Tuesday, its steepest decline since late June, gaining $28 to $8,328 a tonne.

Financial markets have been volatile this week as speculation intensifies over how much the Federal Reserve is likely to spend to pump up a faltering recovery and whether such new measures will be carried out swiftly or phased in over time.

Analysts expect choppy market action to persist in the lead up to the November 2-3 policy-setting meeting.

The latest Reuters survey showed most leading economists expect the Fed to buy between $80 billion and $100 billion worth of assets per month, with estimates for how much it will eventually spend varying from $250 billion to $2 trillion.

In a similar Reuters poll of primary dealers on October 8, dealers mostly forecast the total size of the new program at $500 billion to $1.5 trillion.

Market participants have begun to scale back expectations of the Fed's intentions. The Wall Street Journal said on Wednesday the Fed is likely to unveil an asset-purchase program worth a few hundred billion dollars over several months.

It said officials want to avoid a "shock and awe" approach in their announcement, expected next week. The MSCI index of Asia Pacific stocks outside Japan rose 0.6 percent .MIAPJ0000PUS, having slid nearly 2 percent on Tuesday -- its biggest one-day percentage fall since late June. Still, it remained close to a 28-month high hit last week.

"It's going to remain volatile. If nothing else, markets are a bit overbought short term," said Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney.

Japan's Nikkei stock average .N225, which was spared the selloff seen in the region on Tuesday, slipped 0.1 percent, while Australia's S&P/ASX 200 index .AXJO rose 1.1 percent and Korea's KOSPI .KS11 gained 0.1 percent.

Among the top performers, shares in Canon Inc (7751.T) rallied more than 4 percent, after the world's largest maker of digital cameras posted strong quarterly results and raised its full-year outlook.

"Shares of firms with bullish earnings are being snapped up, but that hasn't spread to similar stocks or sectors as investors are generally more concerned about the implications from today's BOJ meeting and the U.S. Federal Reserve meeting next week," said Mitsuo Shimizu, deputy general manager at Cosmo Securities.

In Australia, upbeat earnings helped drive ANZ shares (ANZ.AX) up 3.2 percent, while bourse operator ASX (ASX.AX) climbed about 2 percent after two days of sharp losses due to uncertainty over Singapore Exchange's (SGXL.SI) $7.9 billion bid.

The MSCI's emerging market stock benchmark .MSCIEF edged up 0.1 percent.

DOLLAR PAUSES

With the uncertain outcomes of the U.S. elections and a Fed meeting next week, traders positioned themselves for more volatile markets. The CBOE Volatility index .VIX rose 2.4 percent and was up for the third consecutive day.

Materials stocks, which have rallied in recent weeks on expectations of heavy stimulus, were the day's biggest decliners. The S&P Materials index .GSPM lost 0.9 percent.

In recent sessions, investors reduced their bets on the size and timetable of the Fed's potential purchases of Treasury debt. The Wall Street Journal furthered those expectations after reporting the Fed hoped to avoid a "shock and awe" approach.

"People are using that as a reason to take profits after what has been a very strong couple of months for equities," said Tim Holland, co-portfolio manager of Aston/TAMRO Diversified Equity Fund in Alexandria, Virginia.

Among the materials sector's biggest percentage decliners, Freeport McMoRan Copper & Gold Inc (FCX.N) slumped 2.8 percent to $95.50, and AK Steel Holding Co (AKS.N) dropped 3.4 percent to $12.40.

The rise in volatility suggests growing caution among investors. TD Ameritrade chief derivatives strategist Joe Kinahan said investors have been hedging gains through use of options in equity index and exchange-traded funds.

"They don't necessarily want to be out of their current positions," Kinahan said. "By buying protection and hedging recent gains against their current positions, investors now have the ability to pull the cord on the downside."

The Dow Jones industrial average .DJI dropped 43.18 points, or 0.39 percent, to 11,126.28. The Standard & Poor's 500 Index .SPX lost 3.19 points, or 0.27 percent, to 1,182.45. But the Nasdaq Composite Index .IXIC gained 5.97 points, or 0.24 percent, to 2,503.26.

The Nasdaq advanced as Broadcom Inc(BRCM.O) jumped 11.7 percent to $41.56 a day after it unexpectedly forecast a potential rise in fourth-quarter revenue.

Consumer products maker Procter & Gamble Co's (PG.N) quarterly profit beat expectations, helped by strength in emerging markets. The Dow component rose 0.4 percent to $63.08.

The day's economic data was mixed, with sales of new U.S. single-family homes rising more than forecast in September, while demand for durable goods, excluding aircraft, unexpectedly fell in the same month.

U.S.-listed shares of Argentine companies surged following reports of the death of Nestor Kirchner, the country's former president. Kirchner, who was also the husband of Argentina's current president and viewed as a contender for the post in next year's election, was perceived as unfriendly to big business.

The ADRs of Transportadora de Gas Del Sur SA (TGS.N), the operator of Argentina's dominant natural gas pipeline system, soared 9.6 percent to $4.35, while IRSA Investments and Representations Inc (IRS.N) jumped 7.6 percent to $14.98.

Volume was light, with about 7.8 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below the year-to-date moving average of 8.75 billion.

Declining stocks outnumbered advancing ones on the NYSE by a ratio of about 2 to 1, while on the Nasdaq, eight stocks fell for every five that rose.

(Reporting by Chuck Mikolajczak; Additional reporting by Doris Frankel; Editing by Jan Paschal)

The company's shares fell about 2 percent in after-market trading.

"It was maybe not the blowout quarter some investors were expecting," said Signal Hill analyst Mayank Tandon. "I think it's understandable that we're seeing some profit-taking, given that the results were good but not great."

The company also authorized a $1 billion share repurchase and said it expected net revenue to grow 11 percent to 15 percent in its coming fiscal 2011 year.

Chief Executive Joseph Saunders said in an statement that Visa plans to continue investing to expand its business, despite a "very challenging business environment."

Visa and rival MasterCard Inc (MA.N) do not lend at all and were relatively insulated from the massive credit losses that affected banks during the financial crisis. But now they are facing increasing U.S. regulatory scrutiny over their processing businesses.

The new U.S. Dodd-Frank financial reform law will restrict the processing fees that Visa and MasterCard earn from debit card transactions. This month, both companies also settled a Justice Department antitrust lawsuit over their processing rules.

"There's been so much fear that has been built into Visa and MasterCard in general ... I think the concerns over Visa and the industry were overblown by investors," said Jim Tierney, the chief investment officer of W.P. Stewart, which owns shares of both networks.

Visa's shares fell more than 20 percent this past summer, as investors worried that the law would cut deeply into its future profits. The shares have rebounded somewhat since Visa settled the lawsuit, but are still about 10 percent lower than before the law's fee restriction provision was first introduced.

The debit card industry is also awaiting further rules from the Federal Reserve, which will define exactly how the law restricts processing. Visa said on Wednesday it will have a better idea of how its future profits will be affected after seeing those rules.

But "investors had high expectations -- they wanted more clarity," said Evan Staples, equity analyst with First American Funds, which owns Visa shares.

"Some idea of what could or could not happen would have been more positive," he said.

SPENDING AGAIN

Visa, the world's largest credit and debit card processing network, reported net income of $774 million, or $1.06 per share, on Wednesday for its fiscal fourth quarter, ended September 30. That compared with $514 million, or 69 cents per share, a year earlier.

Analysts on average had expected Visa to earn 94 cents per share, according to Thomson Reuters I/B/E/S.

AIG said on Monday that Benmosche had cancer and was receiving aggressive chemotherapy, but intended to stay in his job and work a full schedule. Doctors and governance experts have said he could find it difficult, however, to both run the company and pursue treatment.

AIG's board, which met Wednesday, said Miller would step in if Benmosche "would become unwilling or unable" to continue in his job. He would stay until the company found a permanent replacement in the job.

Miller is a corporate turnaround specialist who has run a number of companies and was immediately seen after Monday's news as a potential short-term CEO for AIG. The company has been making substantial progress in paying down its bailout but still owes the U.S. government around $100 billion.

Miller, who was nominated to the AIG board last year, took over as chairman on July 14 from Harvey Golub. Golub left abruptly after tensions with Benmosche, who told the board that their working relationship as chairman and CEO had become "ineffective and unsustainable."

Miller served in a number of corporate restructurings, heading Delphi Corp, Bethlehem Steel, Federal-Mogul, Waste Management and Morrison Knudsen. He was also a director at UAL Corp during its reorganization.

The board's move to set a decisive plan about how Benmosche would be succeeded in the short- and long-term is likely to silence corporate governance critics who said the company did well to announce his illness but should have gone further in explaining how it would replace him.

But the board also said it was comfortable with its current succession planning timetable, which contemplates Benmosche staying on until 2012. It plans to look at both internal and external candidates for the job.

"The process would then be concluded when, over the next two years, it is appropriate to name Bob's eventual successor," the board said in its statement, which it said was issued unanimously.

(Reporting by Ben Berkowitz and Paritosh Bansal; Editing by Phil Berlowitz)

Broader markets were little changed at midday as an encouraging reading on consumer confidence helped discretionary shares, offsetting the impact of weak revenue forecasts from drugmaker Bristol-Myers Squibb Co (BMY.N) and chip manufacturer Texas Instruments Inc (TXN.N). Investors view top-line growth as an indicator of economic activity.

U.S. Steel Corp (X.N), AK Steel Holdings Corp (AKS.N) and ArcelorMittal, the world's No. 1 steelmaker (MT.N)(ISPA.AS) all sold off after reporting results. Both U.S. Steel and ArcelorMittal also forecast a soft patch extending to the end of the year.

So far this earnings season, "there haven't been many misses or drastic news to the downside, except for U.S. Steel," said Jay Suskind, senior vice president at Duncan-Williams in Jersey City, New Jersey.

"If economies continue to grow slowly while commodity prices rise, material companies like that could have some problems."

The Dow Jones industrial average .DJI was down 5.91 points, or 0.05 percent, at 11,158.14. The Standard & Poor's 500 Index .SPX slipped 0.18 points, or 0.02 percent, at 1,185.44. The Nasdaq Composite Index .IXIC added 8.71 points, or 0.35 percent, at 2,499.56.

On the upside, Ford Motor Co (F.N) rose 1.6 percent to $14.37 and touched a six-month high after quarterly profit topped estimates and it paid down a big chunk of debt.

Broadly, equities continued to take their cue from the U.S. dollar, which steadied with the dollar index .DXY up 0.6 percent. Stocks and the greenback have formed an inverse relationship, exacerbated by expectations the U.S. Federal Reserve will embark on another round of economic stimulus.

U.S. Steel shed 4 percent to $40.56, while AK Steel slumped nearly 5 percent to $12.72. The Dow Jones U.S. Steel index .DJUSST lost 2.1 percent, while the S&P Materials index .GSPM dipped 0.5 percent.

Dow component International Business Machines Corp (IBM.N) rose 0.6 percent to $140.74 after boosting its stock buyback program.

DuPont and Co's (DD.N) earnings beat expectations and the chemicals giant raised its full-year profit view. Still, shares of the Dow component fell 2 percent to $46.76.

Bristol-Myers was down 1.3 pct to $26.80, while Texas Instruments slipped 0.7 pct to $28.78.

Consumer confidence rose more than expected, helping discretionary shares, even as confidence remained near historically low levels. The S&P Consumer Discretionary index .GSPD rose 0.5 percent.

Earlier, data showed single-family home prices fell for the second straight month in August, hovering near recent lows after the expiration of popular homebuyer tax credits.

(Editing by Jeffrey Benkoe)

The reports reinforced the belief that the U.S. Federal Reserve will embark on another round of monetary policy stimulus to support the economic recovery next week.

U.S. consumer confidence rose slightly in October but remained near historically low levels as concerns about the labor market persisted.

The Conference Board, an industry group, said its index of consumer attitudes rose to 50.2 in October from a revised 48.6 in September.

The U.S. unemployment rate remains stubbornly high at 9.6 percent, according to the Labor Department.

The Federal Reserve, which has already injected $1.7 trillion into the economy by purchasing mortgage-related and government bonds, next meets on November 2-3. Another round of quantitative easing, dubbed 'QE2', is expected to focus on Treasury debt.

The weak labor market is one of the primary reasons why the housing market remains weak.

Prices of U.S. single-family homes fell for a second straight month in August, hovering around recent lows after the expiration of popular homebuyer tax credits, according a Standard & Poor's/Case-Shiller home price report on Tuesday.

"At this point the big factor out there is the foreclosure situation and it certainly doesn't look very good. We have a lot of excess supply to work through, a lot of potential foreclosures and what appears to be an increasing legal mess," David M. Blitzer, chairman of the index committee at Standard & Poor's, said in an interview with Reuters Insider.

"It's going to take quite a while to get housing back on its feet," he said.

The housing market has been struggling since home buyer tax credits expired earlier this year. To take advantage of the tax credits, buyers had to sign purchase contracts by April 30. Contracts originally had to close by June 30, but that was extended by three months.

U.S. stocks were little changed with the S&P 500 stock index down 0.08 percent. U.S. Treasury debt fell in price, while the U.S. dollar extended gains versus the euro.

Another report on Tuesday showed home price gains in August. The U.S. Federal Housing Finance Agency home price index is calculated using purchase prices of houses financed by Fannie Mae and Freddie Mac.

The housing market, however, remains highly vulnerable to setbacks and most economists believe a recovery will be elusive until the labor market improves.

(Editing by Andrea Ricci)

Ford, which expects to be solidly profitable this year, said it repaid $2 billion of debt in the third quarter, expects to pay off a debt to a union retiree healthcare trust fund on Friday and has launched an offer to encourage holders of two issues of its convertible notes to exchange them for shares, in an effort to further reduce its debt.

Ford shares, which touched a six-month high on Monday, were up 1.8 percent in afternoon trading after the release of the earnings results and debt-reduction plans, as the Dow Jones Industrial Average was essentially flat.

The automaker said it now expects cash on hand in its automotive business to at least match its debt by the end of 2010 -- a year ahead of a forecast it gave in July.

"Overall, we are moving from fixing the fundamentals of our business and weathering the downturn to growing the business profitably around the world," said Alan Mulally, who became Ford chief executive officer four years ago.

Ford, which posted losses totaling $30 billion from 2006 through 2008, borrowed $23.5 billion in late 2006 to support its turnaround, leaving it with much heavier debt loads than rivals General Motors Co and Chrysler Group LLC.

Dearborn, Michigan-based Ford last had an investment-grade credit rating in May 2005. Ratings agencies have raised Ford in recent months with its reporting of continued profits, and now have it overall two notches below investment grade.

Morningstar analyst David Whiston said Ford's debt reduction, elimination of non-profitable brands such as Volvo and Jaguar to concentrate on its mass-market Ford brand, and higher-quality vehicles have made a difference in results.

"They are making better vehicles that people want to pay up for, even in the small-car segment," Whiston said.

Ford introduced a Fiesta subcompact to the U.S. market earlier this year and plans to begin broad sales of a redesigned Focus compact car in early 2011 in a major upgrade of its lineup with smaller, better-equipped cars than in the past.

Mulally said this change toward more profitable sales at Ford is a key move in the past few years.

"Not too long ago, we were a discounted brand in the smaller- and medium-sized vehicles," said Mulally in a conference call with analysts.

Ford Chief Financial Officer Lewis Booth said sales remain strong and profit margins high for F-series pickup trucks, led by the F-150, which remains the best-selling vehicle in the United States.

Ford completed the sale of Volvo to China's Geely Automobile Holdings Ltd in August and has announced plans to phase out the Mercury brand, leaving it with additional resources to focus on the restoration of its Lincoln luxury brand.

The introduction of vehicles such as the redesigned Taurus and the Fiesta have allowed Ford to increase its average sale price significantly, contributing to profits and helping it increase its U.S. market share.

The slide in the greenback continued after a weekend meeting of the Group of 20 stopped short of setting targets to reduce trade imbalances. Bets the Fed will stimulate growth by effectively printing money to buy assets has weakened the dollar, which in turn has lifted commodity prices.

"We have a lower dollar, we have low and benign interest rates, and you can't beat that combination for reflating the economy or stock prices," said Hugh Johnson, chief investment officer of Hugh Johnson Advisors LLC in Albany, New York.

Equities and the dollar have formed an inverse relationship, so as the dollar drops, equities often advance. Since September 1, the S&P has risen 13 percent while the dollar index .DXY, which measures its value against major currencies, has lost 7.4 percent.

The S&P materials sector .GSPM, which is particularly sensitive to the weak dollar, gained 1.7 percent and was the index's best performing group. Freeport-McMoRan Copper and Gold Inc (FCX.N) advanced 2.2 percent to $96.07.

But stocks finished the session well off their highs as the dollar came off its lows late and the euro pared gains.

"It's all about the currency -- the dollar strengthened and euro faded," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.

"Commodities, including copper, also did the same thing, their gains were lost toward the market close."

The Dow Jones industrial average .DJI gained 31.49 points, or 0.28 percent, to 11,164.05. The Standard & Poor's 500 Index .SPX added 2.54 points, or 0.21 percent, to 1,185.62. The Nasdaq Composite Index .IXIC advanced 11.46 points, or 0.46 percent, to 2,490.85.

The benchmark S&P 500 index ended at its highest since May 3.

In a research report, Goldman Sachs said the Federal Open Market Committee is almost certain to announce renewed monetary easing at its November 2-3 meeting.

Goldman analysts calculated the Fed may have to buy up to $4 trillion in assets to achieve desired growth and inflation targets.

Further boosting materials stocks was Eastman Chemical Co (EMN.N), which climbed 5.1 percent to $82.59 after it agreed to sell three plants to Mexican conglomerate Alfa (ALFAA.MX) for $600 million.

After the closing bell, chipmaker Texas Instruments Inc (TXN.N) shed 0.4 percent to $28.86 while biotech company Amgen Inc (AMGN.O) lost 0.6 percent to $57.60 after posting quarterly results.

During the session, Office Depot Inc (ODP.N) and tobacco company Lorillard Inc (LO.N) rallied after posting stronger-than-expected profits. Office Depot also said that its embattled chief executive would be stepping down, sending the stock up 3.5 percent to $4.79. Lorillard advanced 1.3 percent to $85.14.