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The struggling chain, which operates, 500 stores, will likely close at least 150 stores, according to a separate report by Bloomberg News.

Several private equity investors are considering whether to provide a junior loan to the company, according to the report.

Bloomberg cited unidentified sources for its story.

Borders said on Sunday it would seek to preserve cash by delaying its January payments to vendors and landlords as it tries to complete a debt restructuring.

Borders last week secured a $550 million credit facility from GE Capital, a unit of General Electric Co, under several conditions, including that it close stores and arrange financings with other lenders, vendors and landlords.

It also warned it might have to file for Chapter 11 bankruptcy if it failed to meet those conditions.

Analysts have faulted Borders for being ill equipped to adapt to bookbuyers' migration to digital formats and for having too many stores in an age when many shoppers prefer to buy even paper books on line from retailers like Amazon.com Inc

The chain operates 500 namesake superstores in addition to the smaller Waldenbooks chain. About three-quarter of its superstore leases expire in 2017 and beyond, according to a regulatory filing.

Borders is late comer to the ebooks market, a rare source of growth in the publishing world, launching its ebook store eight months after its larger rival, Barnes & Noble Inc, and nearly three years after Amazon.com.

Sales at stores open at least a year have plunged in recent years, with overall company sales down 37.3 percent in the last three years.

Borders did not immediately return several calls for comment.

Its shares fell 35.6 pct to 47 cents in regular trading on the New York Stock Exchange on Tuesday.

After hours, shares fell further to 38 cents. They hit an all time low of 35 cents in December 2008.

(Reporting by Tom Hals; additional reporting by Phil Wahba in New York; Editing by Steve Orlofsky)

The stronger U.S. auto sales results pointed to a recovery in American consumer demand and a return of easier lending terms by banks, auto executives and analysts said, despite the threat of higher oil prices ahead.

Meanwhile, major automakers reported a strong start to 2011 outside the United States, soothing concerns about slower demand in growth-engine markets like India and a bumpy recovery in the developed markets of Europe.

The major risk, analysts said, remains the prospect that higher oil prices could crimp demand or send consumers scrambling toward the kinds of small vehicles that are typically less profitable for automakers.

"We're still not at the oil prices that would tilt the industry," said Nationwide chief economist Paul Ballew. "If oil prices don't trip us up, Detroit should have a pretty good year."

GM posted a 22 percent sales gain, pushing its market share above 20 percent.

It was the first time the top U.S. automaker had taken market share in six months and came along with a jump in sales of pickup trucks and SUVs, the heavy vehicles that remain GM's bread and butter.

GM's sales gain came as it stepped up spending on incentives to lure consumers, although the automaker vowed that it would not return to its much-criticized practice of buying market share with zero-percent financing and other discounts that undercut the resale value of its cars.

"We're not going to return to the days of driving production with incentives. We know that's not going to be a recipe for success for us," GM's sales chief, Don Johnson, told reporters and analysts.

Chrysler, which is pushing toward an initial public offering of stock in the second half of 2011, had a 23 percent sales gain.

Other major automakers trailed with double-digit sales gains: Toyota Motor Co gained 17 percent; Honda Motor Co and Nissan Motor Co were up 15 percent; Ford Motor Co gained 13 percent.

(Additional reporting by Gilles Guillaume in Paris, Hyunjoo Jin in Seoul and Sumeet Chatterjee in Mumbai; writing by Kevin Krolicki; Editing by Vinu Pilakkott, Andrew Callus and Matthew Lewis)

The Institute for Supply Management's monthly manufacturing survey fits into a pattern of steadily improving data and comes ahead of Friday's closely watched U.S. payrolls report expected to show the U.S. economy added jobs for a fourth straight month.

The ISM manufacturing index climbed to 60.8 in January, the highest reading since May 2004 and well above analysts expectations. A reading above 50 indicates expansion.

The ISM's employment index reached its highest level since April 1973, although that wont necessarily equate to higher levels of hiring in the near term.

"I still would caution that the employment number is more about the willingness to hire, rather than an increase in the absolute numbers," said Norbert Ore, chair of the ISM manufacturing business survey committee in Atlanta, Georgia.

"At the end of the day it doesn't equate to a large number of jobs," he said.

The prices paid component of the index jumped to 81.5 from 72.5 the prior month and coincided with signs of rising inflation around the globe as firms ramp up production.

"It's a good number," said Gary Thayer, chief macroeconomic strategist at Wells Fargo Advisors in St. Louis, Missouri. "Manufacturing is outperforming other parts of the economy, but we're also seeing some inflationary seeds in costs rising.

Inflation-sensitive U.S. Treasury debt prices extended losses after the data, while the S&P 500 stock index climbed more than 1 percent.

Underscoring the uneven nature of the recovery, however, a separate report from the U.S. Commerce Department showed construction spending fell in December to its lowest level in more than 10 years as housing continues to struggle.

The Federal Reserve has argued that continued asset purchases are needed under its $600 billion program in order to support an economy that, while showing signs of improvement, is still far from full health.

The Commerce Department said on Tuesday U.S. construction spending dropped 2.5 percent to an annual rate of $787.9 billion, the lowest level since July 2000.

The most recent gross domestic product growth figures showed the U.S. economy gathered speed in the fourth quarter to regain its pre-recession peak with a big gain in consumer spending and strong exports.

The economy grew at a 3.2 percent annual rate in the final three months of 2010 after expanding at a 2.6 percent pace in the third quarter, the Commerce Department said on Friday.

(Additional reporting by Ellen Freilich; Editing by Padraic Cassidy)

"In less than two years from the recession, they already think they can exceed peak earnings," said BB&T analyst Kevin Sterling.

The economic bellwether's fourth-quarter adjusted operating profit rose to $1.08 per share, up 44 percent from a year ago and topping the $1.05 per share expected by analysts, according to Thomson Reuters I/B/E/S.

"This is a combination of strong volumes, which are clearly a good indication for the U.S. and even the global economy, but also tells me that UPS is really getting pricing and all that pricing leverage is flowing through to the bottom line," he said.

The 3 cent-per-share difference largely reflected a gain from the sale of a logistics unit.

Revenue rose to $13.42 billion from $12.38 billion.

UPS handles 6 percent of the U.S. GDP and 2 percent of global GDP in its trucks and planes, the company said, so its shipment trends give a tangible picture of consumer demand.

The company revised its 2011 profit forecast upward to a range of $4.12 to $4.35 a share, up 16 percent to 22 percent from its 2010 adjusted results, which would surpass its prior peak earnings set in 2007.

UPS's shares have gained about 20 percent in the past year. That tops the rise of 14.4 percent for FedEx Corp, the second- largest package delivery company, but lags the 27 percent gain in the Dow Jones Transportation Average .

FedEx Corp shares rose nearly 2 percent in premarket trading. FedEx in December also raised its fiscal full-year outlook on record holiday shipments, business in Asia and growth from emerging markets.

(Reporting by Lynn Adler, editing by Maureen Bavdek)

The Institute for Supply Management's January manufacturing index is due at 10 a.m. EST. Economists in a Reuters survey expected a reading of 58.0 versus 58.5 in December.

At the same time, the Commerce Department will report on December construction spending. Economists look for construction spending to be unchanged, compared with a 0.4 percent rise the prior month.

Investors appeared to shrug off the tumultuous events in Egypt, as more than 200,000 Egyptians poured into central Cairo in the biggest demonstration so far in an uprising against President Hosni Mubarak's authoritarian rule.

"The market is resuming its on-track performance to its key 1,300 level," said Andre Bakhos, director of market analytics at Lek Securities in New York.

"The situation in Egypt seems to be contained, giving investors renewed optimism that a resolution will be found. For the most part, economically speaking, data has been conducive to further market gains."

S&P 500 futures rose 4.8 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures gained 25 points, and Nasdaq 100 futures were up 12.25 points.

Pfizer Inc was set to post quarterly earnings Tuesday, and the company's new boss, Ian Read, will likely be asked to defend the company's 2012 forecast.

Archer Daniels Midland jumped 4.1 percent to $34 in premarket trading after the agribusiness group reported stronger-than-expected quarterly earnings on rising grain prices and robust global demand.

Other companies set to report include United Parcel Service Inc and Electronic Arts Inc.

U.S. automakers were set to report January sales, which were expected to increase from a year ago but slip from December. The data was expected to reflect a gradual recovery for the auto industry after the recession and the worst sales performance in nearly three decades.

European shares rose as confidence about the global economy gathered pace following upbeat euro zone manufacturing data while strong earnings from ARM and Infineon lifted technology firms.

Asian stocks advanced 0.8 percent, led by resource shares as strong U.S. factory data and surging commodity prices offset fears about the unrest in Egypt.

(Reporting by Chuck Mikolajczak; editing by Jeffrey Benkoe)

The shares dropped 1.9 percent to 476 pence by 0921 GMT, putting it among the biggest losers in the blue-chip FTSE 100 index.

BP held out the prospect of long-term growth via new exploration partnerships and a fresh focus on getting oil and gas out of the ground, but this was overshadowed by a court hearing due later on Tuesday at which the company's partners in TNK-BP will seek an injunction to block BP's planned Arctic exploration joint venture with Russian state-controlled Rosneft.

"The company has clearly pinned its hopes on Russia, but the new JV has already gone wrong, antagonizing the TNK-BP partners ... There remains substantial uncertainty surrounding the company," said Dougie Youngson, analyst at Arbuthnot Securities.

BP said it would pay a fourth-quarter dividend of 7 cents per share and 42 cents per American depositary share -- in line with analysts' expectations, but only half of what it was paying before the spill disaster.

"The re-introduction of the dividend is good news for investors (even at its much lower level), but it is likely to prove inflammatory to U.S. Gulf Coast senators whose communities are still being impacted by the spill," Youngson said.

HIGHER TAX RATE

BP said fourth-quarter replacement cost (RC) net income was $4.61 billion, as a big rise in oil prices outweighed a 9 percent drop in oil and gas production.

Excluding one-off items of $250 million, RC net income came in at $4.36 billion, behind the $5.09 billion average forecast given by nine analysts polled by Reuters.

RC net income excludes gains or losses related to changes in the value of oil inventories and as such is comparable with U.S. net income.

BP said the weaker than expected results were partly due to a higher than expected tax rate.

The company also flagged that the pain from the oil spill continued to be felt, adding another $1 billion to its earlier $40 billion estimate of the total bill. Analysts had recently started to cut their estimates of the oil spill bill.

Offering a pointer to future growth, BP said it would sell two refineries in the United States, halving its capacity there, and invest more in oil and gas exploration.

It said it would increase significantly its investment in exploration and would seek new partnership opportunities.

It said it was on track to meet its target of up to $30 billion of divestments by the end of 2011.

(Writing by Sophie Walker; Editing by David Holmes)

Brent crude oil futures steadied after topping $100 a barrel overnight for the first time since 2008, adding to concerns of a global fuel price spike even as policymakers in many emerging economies struggle to contain soaring food prices.

Data released in China showed manufacturing input prices were rising quickly, keeping pressure on the government to tackle inflation.

Figures from South Korea showed consumer inflation in January rose more than expected at the upper end of the central bank's target. Inflation in Indonesia was also higher than targeted, triggering pressure for rate rises, while in Thailand the rate dipped from December but the outlook for further policy rate rises remained unchanged.

The euro inched back up near a two-month high after a jump in euro zone inflation fueled expectations of an interest rate increase and as worries about Egyptian unrest abated slightly. The common currency stood at $1.3720.

Analysts said the euro could rise further, especially if European Central Bank President Jean-Claude Trichet talks tough on inflation after a Thursday policy meeting.

Japan's Nikkei share index and the MSCI index of Asian shares outside of Japan rose 0.16 percent and 0.23 percent respectively, with shares of energy and resource companies outperforming.

Relief that turmoil in Egypt was not escalating helped provide a floor for the market.

"Investors are finally able to focus on corporate earnings and some stocks are set to benefit from expectations for their results and forecasts," said Masumi Yamamoto of Daiwa Securities Capital Markets.

Sentiment was supported by U.S. data showing factory activity in the Midwest hit a 22- year high in January as orders surged and employment prospects brightened, providing further signs that the economy would stay on a solid growth path this year.

Strong earnings reports and boosted mergers and acquisitions activity also prompted investors to take a more sanguine view of events in Egypt and renew purchases of riskier assets.

The Dow Jones industrial average closed up 0.68 percent overnight, while the Standard & Poor's 500 Index gained 0.87 percent.

Brent crude hovered just above $100 after soaring as high as $101.73 overnight, while U.S. crude futures steadied above $92.

Saudi Arabia said OPEC was concerned by unrest in Egypt, where protesters seeking the removal of President Hosni Mubarak planned a "million-strong" march on Monday, but saw no need for an immediate boost in output as there was no oil shortage.

London copper rallied to a record $9,832 on Tuesday and tin also rose to an unprecedented $30,400 a tonne and shanghai copper hits its highest in nearly four years.

January numbers will also reflect a pullback in spending by shoppers, after they opened their wallets during November and December, helping U.S. retailers post their best holiday sales in six years.

Retail chains ranging from Target Corp to J.C. Penney Co to Saks Inc will report January sales on Wednesday and Thursday. January is the final month in the retail sector's fourth quarter.

Sales at stores open at least a year, or same-store sales, are forecast to rise 2.8 percent compared with a rise of 3.3 percent last year, according to Thomson Reuters data. (For a related graphic: r.reuters.com/kup77r )

"It looks like kind of a lackluster month," Nomura analyst Paul Lejuez said. "It is a clearance month typically. Usually we like to see some cooperation from the weather to sell some full-price spring merchandise."

That did not happen, particularly in the Northeast, where snowstorms "probably set people back a way in terms of thinking about buying spring products," Lejuez said.

Across the United States, this was the coldest January in four years and the snowiest in six years, said Scott Bernhardt, chief operating officer of Planalytics, which provides weather data for businesses.

"Clearly, this type of weather is not conducive to spring selling, and we believe negatively impacted sales in January," Janney Capital Markets analyst Adrienne Tennant said.

Fewer discounted goods in a typically promotional month could also have kept bargain-hungry shoppers away.

"Retailers came out of the holiday season clean on inventory, leaving little clearance in a typically promotional month," Goldman analyst Adrianne Shapira wrote.

January is the smallest contributor to sales in the retail fourth quarter as shoppers generally pull back after the shopping binge during the peak of the holidays.

"Consumers were impacted by post-holiday credit card statement shock after having spent more freely on discretionary merchandise over the holidays this year," Deutsche Bank analyst Bill Dreher said in a note.

WINNERS AND LOSERS

U.S. retailers that offer exclusive yet affordable merchandise will likely stand out from the pack in January, a theme that has played up prominently across the retail spectrum in the holiday shopping season.

"Companies that did well in December will also do well in January," Lejuez said, citing examples of Limited Brands Inc -- parent of the Victoria's Secret and Bath & Body Works chains -- and off-price chain Ross Stores Inc.