Japan approves biggest budget to thwart crisis

apan's government approved its biggest-ever budget on Wednesday to try to revive an economy hurt by the global financial crisis and U.S. data was expected to give further evidence of the worsening recession.

Governments across the world have tried to boost spending to ease a recession ushered in by a credit crisis in the United States when a housing market boom turned sour.

"Japan cannot avoid the tsunami of the world recession, but it can try to find a way out," Japanese Prime Minister Taro Aso told a news conference, in which he illustrated the government's stimulus plan with a diagram of a three-stage rocket.

"The world economy is in a once-in-a-hundred-years recession. We need extraordinary measures to deal with an extraordinary situation."

Japan's cabinet approved a record 88.5 trillion yen ($980.6 billion) budget for the next fiscal year starting in April.

The plan boosts overall spending, excluding debt servicing costs, by 9 percent compared with this year's initial budget and aims to accommodate part of 12 trillion yen in extra spending on government stimulus packages.

But the budget could be held up in a divided parliament because of Aso's sinking public support and weakening control over the Liberal Democratic Party.

Germany is also increasing spending. But Europe's biggest economy plans to limit to 25 billion euros ($34.97 billion) a second package of stimulus measures, a regional political said.

The program's scope is less than the 40 billion euros previously reported for new projects.

Chancellor Angela Merkel is under pressure to do more to boost Germany's economy, already in recession, and politicians and economists have attacked the 31 billion euros-worth of measures already pushed through as insufficient.

DEVALUED

Further east, countries have also sought to interest rate cuts and spending plans to try to stave off the downturn.

Poland's central bank said it was likely to cut rates further in 2009 because economic growth could be more than halved.

In neighboring Russia, a central bank source confirmed the ruble had been devalued for the seventh time in a month and a deputy interior minister said the country faced an increasing number of unrest due to crisis measures.

"The situation may be exacerbated by a growth in protests, arising from the frustration of workers over the non-payment of wages or those threatened with dismissal," RIA news agency quoted Deputy Minister Mikhail Sukhodolsky as saying.

European Central Bank chief Jean-Claude Trichet said markets were failing to value the measures taken to ward off what he called a situation unprecedented since World War Two.

"There is an underestimation in the financial sphere of the very great importance of the decisions that were taken," Trichet told said in a speech at a Paris think-tank on Tuesday.

He called on governments in the euro zone to be wary of piling on debt to fund stimulus packages, saying it would do little to boost confidence in the economy or the markets.

ECB Governing Council member and Austrian central bank head Ewald Nowotny told television that further interest rate cuts at the European bank could not be ruled out.

In the United States, home to the credit crisis, further evidence of how deep it has fallen into recession is expected with the release of weekly jobless claims, November durable goods and November personal income and consumption.

Consumption is likely to have fallen 0.7 percent, while durable goods orders probably dropped 3.0 percent versus a 6.9 percent decline in October, according to Reuters surveys.

Economists forecast 560,000 new filings for jobless benefits in the week to December 20, compared with 554,000 in the prior week.

With the housing-led economic slump on track to be the longest and deepest in about 60 years, more companies are expected to cut jobs to battle a sharp fall in demand and tight access to credit.

Across the United States almost 2 million workers have lost jobs this year, driving the unemployment rate to 6.7 percent.

On Tuesday, U.S. data pointed to a record drop in existing home sales and prices last month, pushing Wall Street lower. Shares in Europe also weakened, with a weaker crude price hitting energy companies.

YRC cancels debt tender, announces leaseback deal

YRC Worldwide Inc (YRCW.O) said on Wednesday it canceled a debt tender because its union workers have not yet ratified a wage reduction. The U.S. trucking company also announced a $150.4 million contract to sell and lease back some of its facilities.

The company is also holding talks with its banking group on modifying some terms of its credit agreement, the company said in a filing with the U.S. Securities and Exchange Commission.

YRC said in late November it would spend up to $100 million on buying up to $230 million in debt at a discount. But in Wednesday's filing, the Overland Park, Kansas company said it canceled the tender because the union had not agreed to a wage reduction by the time the tender expired on Dec 23.

Under the lease back deal with NATMI Truck Terminals LLC, YRC will pay $21.1 million to lease the facilities, with increases subject to changes in inflation.

YRC, the No. 1 U.S. trucking company, also said that up to Nov 30, its fourth quarter daily tonnage at its national and regional businesses fell 11.8 percent and 11 percent, respectively.

Like the rest of the U.S. trucking sector, YRC's sales have been hit hard by the slowing U.S. economy, pushing down freight volumes and forcing trucking companies to cut prices to get business.

Markets point to flat open after economic data

Stocks headed for a flat open on Wednesday, with futures little changed ahead of an abbreviated holiday session, as investors digested a mixed bag of data to gauge the extent of deterioration in the economy.

A government report showed U.S. consumers cut spending for the fifth straight month in November and their incomes shrank, pointing to deeper recessionary pressures. Spending fell by 0.6 percent and income slipped by 0.2 percent where Wall Street analysts surveyed by Reuters had expected a spending drop of 0.7 percent and forecast flat incomes.

Durable goods orders fell 1 percent for November, less than the 3 percent decline forecast by analysts surveyed by Reuters. Another government report measuring initial applications for unemployment benefits showed a 30,000 jump last week to a 26-year high of 586,000 versus the 556,000 in the prior week.

"I don't think we are going to have any major reassessment of the U.S. economic situation based on today's data," said Daniel Katzive, Director of Global Foreign Exchange at Credit Suisse in New York. "We had a slightly better-than-expected durables report but higher weekly (jobless) claims. All in all, the scenario remains pretty weak."

S&P 500 futures rose 2.5 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 19 points, and Nasdaq 100 rose 0.5 point.

In corporate news, Wal-Mart Stores Inc (WMT.N) said late Tuesday that it had settled 63 class action lawsuits that accused the world's largest retailer of wage violations for a minimum of $352 million but no more than $640 million.

Insurer American International Group (AIG.N) said it would halt the merger between its two Japanese life insurers, AIG Star Life Insurance and AIG Edison Life Insurance as it plans to sell shares in the companies under its global restructuring.

February crude futures slid 4.1 percent on Wednesday, ahead of data expected to show an increase in oil stocks.

European shares edged lower in early trade on Wednesday, tracking losses on Wall Street after grim U.S. economic data in the previous session, but volumes were expected to remain thin in the shortened session ahead of the Christmas break. Asian shares finished lower, relinquishing earlier gains that analysts attributed more to picking up of sold-off shares than solid conviction.

U.S. stocks fell in thin trading on Tuesday on data showing further deterioration in the housing market, while worry over weak consumer spending weighed on retailers in the final stretch of the key Christmas shopping season. The S&P and Dow closed at their lowest levels in nearly three weeks.

Volume was expected to be light throughout the week shortened by the Christmas holiday and markets will close early on Wednesday.

With just five trading days remaining in the year, the broad S&P 500 is down more than 41 percent for the year. The annual decline is surpassed only by the 47.1 percent fall in 1931 during the Great Depression.

November personal spending falls 0.6 percent

Consumer spending fell for a fifth straight month in November, the longest weak stretch in a half-century, while incomes declined under the weight of massive job layoffs.

The Commerce Department reported Wednesday that consumer spending fell by 0.6 percent last month, slightly smaller than the 0.7 percent drop that economists had expected.

Americans' incomes fell by a worse-than-expected 0.2 percent. It was the first decline since July and reflected in part the fact that more than a half-million jobs were cut in November as the recession deepened.

The 0.6 percent drop in consumer spending followed an even larger 1 percent fall in October. However, the steep plunge in gasoline prices, which is actually good news for consumers, made the declines look worse. Excluding price changes, consumer spending would have dropped by 0.5 percent in October and actually risen by 0.6 percent in November. The November increase excluding inflation was the best showing in more than three years.

Still, economists think the overall trend for consumer spending is down, given the problems facing the economy including the longest recession in a quarter century, a severe financial crisis that has cut off access to credit for millions of borrowers and a massive wave of job layoffs.

All of those troubles have left retailers braced for what could be their worst holiday shopping season in decades.

Economists don't think the hard times will end any time soon. The government reported Thursday that the overall economy, as measured by gross domestic product, was declining at an annual rate of 0.5 percent in the July-September quarter and analysts believe the contraction will accelerated in the current quarter. Some are forecasting that GDP will plunge at an annual rate of 6 percent, which would be the worst showing in 26 years.

Many analysts say GDP will also fall in the first and second quarters next year before beginning a modest rebound in the summer. If that forecast turns out to be accurate, it would make the current recession, which began in December 2007, the longest in the post World War II period.

The economic weakness is helping to keep inflation under control. A price gauge tied to consumer spending fell by a record 1.1 percent in November, the second monthly decline. Excluding the cost of energy and food, the price index was unchanged last month.

Over the past 12 months, consumer prices are up 1.4 percent, the smallest 12-month change since August 2002.

Economists closely watch consumer spending because it accounts for two-thirds of total economic growth. For the July-September quarter, the government reported Tuesday that spending had fallen by 3.8 percent, the biggest quarterly setback in 28 years.

Analysts say the fourth quarter could turn in an even worse performance, given that the recession has intensified. The economic problems facing households have translated into weak holiday shopping for retailers.

Michael P. Niemira, chief economist for the International Council of Shopping Centers, is forecasting that sales at established stores in November and December will be down 1.5 percent to 2 percent — making this the weakest holiday season since at least 1969.

Retailing giant Wal-Mart Stores Inc. is one of the few bright spots in the current environment. Some merchants including AnnTaylor Loft were already sending out e-mails to customers promoting after-Christmas discounts that can be enjoyed now.

BCE hires broker to buy back up to $40M of shares

BCE Inc., Canada's largest telecommunications company and parent of Bell Canada, said Wednesday it will use a broker to repurchase its stock in a previously announced buyback of up to 40 million shares.

BCE, based in Montreal, said the "automatic share purchase plan" will allow the broker to buy shares at any time, even when the company itself would be barred by law from doing so.

The 40 million shares represent about 5 percent of the company's outstanding stock as of Dec. 5. The buyback plan began Tuesday and will close Dec. 22, 2009, the company said.

In premarket trading, BCE shares fell 45 cents, or 2.4 percent, to $18.32.

New jobless claims jump more than expected

New claims for unemployment benefits rose more than expected last week, the government said Wednesday, as layoffs spread throughout the economy, more evidence the labor market is weakening as the recession deepens.

The Labor Department reported that initial requests for jobless benefits rose to a seasonally adjusted 586,000 in the week ending Dec. 20, from an upwardly revised figure of 556,000 the previous week. That's much more than the 560,000 economists had expected.

That's also the highest level of claims since November 1982, though the work force has grown by about half since then.

Separately, consumers cut spending for the fifth straight month in November, a report by the Commerce Department showed. The 0.6 percent drop in consumer spending last month followed an even larger 1 percent fall in October. the steep plunge in gasoline prices, which is good news for consumers, made the declines look worse.

Excluding price changes, consumer spending would have dropped by 0.5 percent in October and actually risen by 0.6 percent in November. The November increase excluding inflation was the best showing in more than three years.

Still, economists think the overall trend for consumer spending is down, given the problems facing the economy. They include a severe recession, a financial crisis that has cut off access to credit for millions of borrowers and a massive wave of job layoffs.

The government reported Tuesday that the overall economy, as measured by gross domestic product, was declining at an annual rate of 0.5 percent in the July-September quarter. Analysts believe the contraction will accelerate in the current quarter. Some are forecasting that GDP will plunge at an annual rate of 6 percent, which would be the worst showing since 1982.

The Commerce Department said Wednesday that orders for large manufactured goods dropped by 1 percent, less than the 3 percent economists had expected. The decline was led by a huge drop in orders for aircraft and a decrease in the automotive sector.

A Labor Department analyst, meanwhile, said auto-related layoffs were a factor behind the rise in jobless claims. The four-week average of initial claims, which smooths out fluctuations, rose to 558,000. That's the highest since December 1982, when the economy was emerging from a steep recession.

There was some improvement in the number of Americans continuing to seek unemployment benefits, which dropped slightly to 4.37 million from 4.39 million the previous week. Wall Street economists had expected the number to increase to 4.4 million.

Economists consider jobless claims a timely, if volatile, indicator of the health of the labor markets and broader economy. A year ago, initial claims stood at 353,000.

The elevated level of new jobless applications is just one of several signs that the labor market has deteriorated rapidly in recent months.

The Labor Department said earlier this month that employers cut a net total of 533,000 jobs in November, sending the unemployment rate to 6.7 percent, the highest in 15 years.

Mass layoffs are taking place in a wide range of industries. Industrial conglomerate Textron Inc. on Tuesday said it has cut 2,200 jobs, while technology services provider Unisys Corp. said Monday it will eliminate 1,300 jobs. Sovereign Bancorp Inc.'s bank unit said last week it is laying off 1,000 employees.

Bush pardons former Nevada gambling executive

A former Nevada gambling company executive who pleaded guilty 13 years ago in a case involving a Louisiana video poker scandal and organized crime investigation has been granted a pardon by President Bush.

Alan Stephen Maiss, former president of Bally Gaming Inc., was among 19 people pardoned by Bush on Tuesday.

Maiss, in a deal with prosecutors, pleaded guilty in U.S. District Court in New Orleans on Dec. 20, 1995, to two counts of misprision of a felony, or failure to report a crime.

He was sentenced to one year of probation and fined $5,000.

Maiss did not immediately return a phone message left by The Associated Press at his Reno home seeking comment on his pardon.

The charges stemmed from Bally Gaming's involvement in the 1990s with two video poker distributors, Worldwide Gaming of Louisiana and Louisiana Route Operators. Federal prosecutors claimed the companies were fronts for mob figures seeking to gain a foothold in Louisiana's video poker industry.

Maiss' pleas surrounded his alleged knowledge that Worldwide Gaming was being operated illegally by Christopher Tanfield, who did not have a Louisiana gambling license.

In all, 25 people were convicted in the case, including Tanfield.

Prosecutors never charged Maiss with knowingly dealing with or causing Bally to deal with organized crime. Bally was later acquired by another company.

At Maiss' sentencing, court documents show the judge noted "the government has recognized the defendant's substantial assistance in the prosecution of other defendants."

Maiss appealed his case five years later and sought to withdraw his guilty pleas, saying the convictions "severely restricted" his ability to work as an investment broker or adviser.

A three-judge panel from the 5th U.S. Circuit Court of Appeals denied his appeal in 2002.

Lear adopts shareholder-rights plan

Lear Corp.'s board approved a plan to reduce future tax liability and restrict ownership changes at the auto-parts supplier.

The plan preserves the value of certain tax assets linked to net operating loss carryforwards that allow companies to apply current operating losses to future years' profit to reduce tax liability, Lear said Tuesday.

The board acted to limit shareholders' purchases because Lear's ability to use the carryforwards would be restricted based on certain ownership changes, the Southfield, Mich., company said.

The plan would dilute voting power for shareholders who increase their stakes more than 4.9 percent of outstanding shares. For shareholders who already own more than 4.9 percent of the shares, the trigger that would dilute voting power if they increase their stakes in the company by half of 1 percent or more.

The plan is scheduled to expire in December 2018.

Other companies have recently adopted similar shareholder-rights plans. Homebuilder Ryland Group Inc. said Tuesday its board approved a plan aimed at reducing future tax liability and restricting future ownership changes of the company.

In connection with its shareholder plan, Lear declared a dividend of one preferred share purchase right for each outstanding common share, payable to holders of record as of Jan. 2.

On Dec. 12, Lear withdrew its 2008 earnings outlook after the Senate failed to pass an emergency $14 billion rescue of the U.S. auto industry. Days later, the Bush administration approved a package.

In addition, Moody's Investors Service cut its ratings on Lear, citing vehicle-production cuts by the Detroit automakers. The ratings agency reduced Lear's corporate family and probability of default ratings to "B3" from "B2." It also cut the company's senior secured term loan to "B2" from "B1."

The ratings agency affirmed Lear's senior unsecured notes at "B3." All the ratings are non-investment grade.

Last month, Lear announced it will close its Newark, Del., factory and lay off all 136 workers.

House's Auto Bill Comes Under Republican Fire

WASHINGTON -- The House-approved rescue of the nation's auto makers came under fire from top Republicans in the Senate on Thursday, adding to uncertainty about the proposal's fate.

Rescue efforts suffered a major blow when the Senate's top Republican vowed to oppose the bill. "This proposal isn't nearly tough enough," said Senate Minority Leader Mitch McConnell (R., Ky.).

Mitch McConnell

Calling for stronger provisions to ensure reforms at the auto companies, Mr. McConnell also said he opposed the bill on ideological grounds. "A government big enough to give us everything we want is a government big enough to take everything we have," he said.

But Senate Democrats pushed ahead with plans for a vote on the $14 billion aid package as soon as Thursday afternoon. "We have danced this tune long enough," Senate Majority Leader Harry Reid (D., Nev.) told colleagues in the morning.

During a press conference announcing key members of his health-care team, President-elect Barack Obama appealed to lawmakers for passage of a rescue bill for the auto industry. The package now under consideration in Congress is a "step forward," he said.

Mr. Obama insisted that the government can't just stand by and watch the industry collapse. which would have a "devastating ripple effect" throughout the economy. He also told reporters in Chicago that he understands the "anger and frustration" over the situation in which the auto companies find themselves.

Early debate on the Senate floor indicated serious obstacles remain before supporters of the auto aid proposal can marshal the 60 votes needed to ensure passage. The package passed the House on a 237 to 170 vote Wednesday night, with Democrats providing most of the support.

Some Republicans assailed the bill for giving too much authority to a presidential designee known as an "auto czar" to oversee the industry's restructuring. The House bill is "based on a concept that the bureaucracy can run the free-enterprise system better than the free-enterprise system can, and it doesn't work," Sen. James Inhofe (R., Okla.) said on the Senate floor.

Sen. John Ensign (R., Nev.) said the auto czar would inevitably be influenced by politics. "A bailout would invite all sorts of meddling by lawmakers to have the companies carry out their own sort of pet policies," adding that a bankruptcy judge would be the appropriate authority to oversee the Big Three's restructuring.

Others said the bill's language was too vague to ensure fundamental reforms at General Motors Corp., Ford Motor Co. and Chrysler LLC.

Sen. David Vitter (R., La.) renewed his pledge to use "every tool" available to block the proposal "because so much is at stake, because we need to get it right." The bill "doesn't demand the fundamental core restructuring that is absolutely necessary for these companies to survive," he said.

He voiced support for alternative proposals such as one put forth by Sen. Robert Corker (R., Tenn.).

Sen. Corker said his proposal would provide immediate assistance to Chrysler and GM under the condition that the manufacturers work with creditors to reduce their debt by two-thirds by March 15. If that deadline weren't met, the companies would be required to file for bankruptcy protection. He said that union leaders and auto executives have expressed openness to those conditions.

The House bill was forged over five days of negotiations among top presidential aides and the Democratic congressional leadership. But congressional Republicans have complained they were left out of the process and expressed serious opposition.

Auto allies suggest they may need 12 to 15 Republican votes in the Senate to overcome procedural objections that would endanger the proposal.

—The Associated Press contributed to this story.

Ohio governor presents dire budget cut scenario

COLUMBUS, Ohio (AP) - Ohio would close state parks and prisons, raise tuition at public colleges by $2,000 and leave local school districts without money to meet payroll under the governor's worst-case budget scenario released Thursday.

In a plea for federal aid, Gov. Ted Strickland said he created the scenario to show how bad things could be without help from Washington. Governors from around the U.S. are seeking tens of billions of dollars to help with day-to-day operating costs, in addition to requests for Medicaid and infrastructure projects.

Ohio faces a $7.3 billion deficit in the next two years based on current tax revenue projections, which are heading downward as all major economics indicators have plummeted.

Without Washington's help, state agencies would need to cut 25 percent off their current funding levels if the state wants to preserve Medicaid, a tax reduction and continue making debt payments, Strickland said.

The dire picture foreshadows what is sure to be one of the most challenging budget-crafting environments lawmakers have faced in recent Ohio history.

A Republican-controlled Senate, a Democratic-controlled House and a Democratic governor will have to decide what to cut, what to spare and whether they need to do anything to increase revenue.

Policy debates are likely to ensue, especially in the area of how the state handles its inmate population, which increasingly consists of offenders only in prison for a brief time.

Strickland has said a tax increase would further harm an already damaged economic environment, but has stopped short of completely ruling out the option.

Some Republicans say it's unrealistic to maintain Medicaid funding levels when the state-federal health care program for low-income individuals makes up about 40 percent of the state budget.

Strickland's worst-case budget projections would:

_ Reduce the amount the state spends per student on college education by $1,987 to its lowest level in recent history. Ohio already ranks poorly among states in affordable cost to attend state colleges and universities.

_ Eliminate 5,237 positions at the state prisons department, including corrections and parole officers. Ohio also would close six institutions at a time when prisons are already crowded.

_ Cut job creating programs at the Department of Development just when the state needs it the most. The department might also close a number of its foreign trade offices, which help open countries to exports from Ohio companies. Exports are the one bright spot for the hard-hit manufacturing industry, which has been able to take advantage of the weak U.S. dollar.

Sweden unveils $3.4 billion aid package for autos

STOCKHOLM, Sweden (AP) - The Swedish government on Thursday unveiled a 28 billion kronor ($3.4 billion) support package for the nation's ailing auto industry, but insisted it won't buy Volvo or Saab from their U.S. owners.

The plan offers credit guarantees, emergency loans and research funds to boost companies in the "Swedish automotive cluster," the center-right government said.

It was announced just hours after the U.S. House of Representatives approved a bill to get $14 billion in emergency loans to the struggling U.S. auto industry.

Democrats and the White House hoped the bill could be enacted by week's end, but it is jeopardized by opposition from Republicans in the Senate.

Car makers Volvo and Saab have appealed to the Swedish government for support because of the financial woes of their U.S. owners, Ford Motor Co. and General Motors Corp., which are focusing on saving their American brands.

Powerful labor unions have also pressured the government to save Sweden's auto industry, which since June has shed about 10,000 jobs, or 7 percent of its work force.

The government said its support package was needed to safeguard "the continued success of the Swedish automotive industry," even if the industry's crisis deepens. It also called for quicker development of green technology.

The plan, which needs approval by lawmakers, includes a maximum of 20 billion kronor in credit guarantees to automotive companies, and up to 5 billion kronor in rescue loans to bail out companies in crisis. The government said it would also earmark 3 billion kronor for research and development in the automotive sector.

Asked at a news conference whether the government could guarantee the survival of Volvo and Saab, Finance Minister Anders Borg said that was not its responsibility.

"The owners are responsible for the survival," Borg said. "We lay the foundations so that the Swedish automotive cluster has very good conditions to develop."

Ford has said it intends to offload Volvo, by either selling the Swedish automaker or spinning it off into a separate company, while GM said it "expedited and strategic review" of Saab.

The Swedish government reiterated it was not interested buying the two brands, and that the measures were based on discussions with the "U.S. automotive industry and conclusions drawn by current or any new owners."

The plan was welcomed by corporate and union leaders.

"We've talked all autumn about how important the vehicle industry is for Sweden, and so we have to see this as a victory," said Michael Blohm, a union representative at Volvo Cars in Goteborg.

Volvo Cars spokeswoman Maria Bohlin said the move showed Swedish politicians were willing to fight to save Swedish jobs.

The government said the plan was in line with the proposals in the European Commission's economic recovery plan under which companies can raise loans in the European Investment Bank. The EIB has promised to lend Europe's automotive industry a total of euro16 billion ($21 billion) for the development of greener solutions and production.

Seahawks-Rams game on Fox gets local TV blackout

ST. LOUIS (AP) - Fox's broadcast of the St. Louis Rams' game against the Seattle Seahawks this weekend will not be televised locally after failing to sell out 72 hours before kickoff. It's the fifth time in the last three seasons the franchise failed to sell out.

The Rams sold out their first 100 games after moving to St. Louis in 1995. The streak was broken on Dec. 24, 2006, against the Washington Redskins. Three games were blacked out last season, although the first six home games this year were sold out.

A team spokesman said Thursday a few thousand tickets remained unsold for Sunday's game.

The game matches 2-11 teams. The Rams have lost seven in a row and the Seahawks have dropped six straight.

Fox is a unit of News Corp.

Stanley Works cutting 2,000 jobs, closing 3 plants

NEW YORK (AP) - Tool maker Stanley Works said Thursday it will cut 2,000 jobs and close three manufacturing facilities, citing weakness in its construction and industrial segments and the effect of a stronger dollar. The company also cuts its 2008 earnings forecast.

Stanley said the job cuts amount to 10 percent of its total work force and will also involve elimination of layers of management. A spokesman said the company has not yet disclosed which of its 45 plants it will close.

Its stock fell nearly 3 percent in afternoon trading.

Stanley said the depth of decline in its construction and industrial segments has been worse than in previous recessions. This implies its markets are facing an "exceptionally severe" contraction, the company said.

"While these actions are difficult and affect valued Stanley employees, we feel it is imperative to move decisively to manage through the steep global economic decline we are currently experiencing," Chief Executive John F. Lundgren said in a statement.

Stanley is the latest tool and industrial products maker to feel the effects of the economic downturn. On Monday, Illinois Tool Works Inc., based in Glenview, Ill., cut its full-year and fourth-quarter profit forecast, citing the weak economy, the rising dollar and restructuring costs.

Stanley announced the cuts as the government issued a series of gloomy reports on the broader economy. The Labor Department said Thursday that jobless claims surged to their highest level in 26 years last week.

New Britain, Conn.-based Stanley said most of cuts and plant closures will take place in December and will result a pretax charge of about $80 million, or 70 cents per share, in the fourth quarter.

The company hopes the cuts and closures will save $115 million in 2009.

Stanley Works also cut its 2008 earnings outlook, citing the difficult economy. The company said it now expects earnings between $3.30 per share and $3.40 per share, excluding the fourth-quarter charges. Previously, the company said it expected to earn $3.75 per share for the year.

Analysts polled by Thomson Reuters expect a full-year profit of $3.72 per share, on average. Such estimates typically exclude one-time charges.

The cuts come two months after Stanley reported a third-quarter profit that rose 80 percent from the previous year. The company said then it had raised prices on its products to offset economic weakness and a soft housing market.

Stanley Works shares fell 92 cents, or 2.7 percent, to $33.40 in afternoon trading. The stock has traded in a 52-week range of $24.19 to $52.18.

Florida justices reject product liability appeal

TALLAHASSEE, Fla. (AP) - The Florida Supreme Court has dismissed the appeal of a $545,000 award in a tobacco case that also may affect liability claims for other "inherently dangerous" products.

The ruling Thursday let stand the verdict against Liggett Group Inc.

A jury found the Chesterfield cigarettes a Broward County woman smoked before she contracted lung cancer had a flawed design.

Liggett manufactures the brand. The company argued the verdict should be reversed because the woman wasn't required to prove Liggett could have made a safer cigarette.

Several business groups sided with Liggett in court papers. They are worried the case will affect other products such as motorcycles, knives, gasoline and personal watercraft.