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U.S. core capital goods order up, but worries linger

WASHINGTON (Reuters) – Orders for long-lasting U.S. manufactured goods excluding transportation unexpectedly rose last month as did a gauge of business spending plans, but that will probably not change views that factory activity is slowing.

Other data on Thursday showed an unexpected increase in the number of Americans filing new applications for unemployment benefits last week. The run-up in claims, however, likely does not signal a fundamental shift in labor market conditions.

The Commerce Department said on durable goods orders excluding transportation rose 1.1 percent, the largest increase since May, after falling 1.9 percent in December.

Economists polled by Reuters had expected this category to fall 0.3 percent after a previously reported 1.3 percent decline in December. Durable goods are items from toasters to aircraft meant to last three years or more.

U.S. stock index futures turned positive on the data. Prices for U.S. Treasury debt were little changed.

The increase last month reflected a surge in orders for computers and electronic products, fabricated metal products and defense capital goods.

Outside these three components, details of the report were weak, with declines in orders for machinery, primary metals, electrical equipment, appliances and components, and transportation equipment.

Data such as industrial production and regional factory surveys have suggested that manufacturing hit a soft patch in recent months.

Part of the slowdown reflects unusually cold weather that has disrupted activity. Manufacturing is also cooling as businesses work through a massive stock of unsold goods that was accumulated in the second half of 2013.

As result, they are placing fewer orders with manufacturers, holding back factory production. In January, shipments of durable goods fell for a second straight month and inventories rose 0.3 percent after increasing 0.9 percent in December.

A plunge in aircraft orders at Boeing and a drop in motor vehicles orders saw orders for transportation equipment falling 5.6 percent in January. It was the second straight month of declines in this volatile component.

Boeing reported on its website it received orders for only 38 aircraft last month, sharply down from 319 planes in December.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rose 1.7 percent after dropping by a revised 1.8 percent in December.

Economists had expected orders for these so-called core capital goods to slip 0.5 percent last month after a previously reported 0.6 percent fall in December.

Shipments of core capital goods, which are used to calculate equipment spending in the government’s measure of gross domestic product, fell 0.8 percent last month.

December’s shipments were revised to show a 0.3 percent increase instead of the previously reported 0.6 percent rise.

Economists attributed the gain in December to businesses pushing through spending before the year-end expiration of tax incentives.

In a separate report, the Labor Department said initial claims for state unemployment benefits increased 14,000 to a seasonally adjusted 348,000. Claims for the prior week were revised to show 2,000 fewer applications received than previously reported.

Economists polled by Reuters had forecast first-time applications for jobless benefits slipping to 335,000 in the week ended February 22, which included the Presidents Day holiday.

While last week’s increase pushed them to the upper end of their range so far this year, it probably does not signal labor market weakness as claims tend to be volatile around federal holidays.

The four-week moving average for new claims, considered a better measure of underlying labor market conditions as it irons out week-to-week volatility, was unchanged at 338,250.

An unusually cold winter has clouded the labor market picture, with job growth braking sharply in December and recovering only marginally in January.

A third month of weak hiring is expected after snowstorms slammed the densely populated regions of the country during the survey week for February nonfarm payrolls.

The claims report showed the number of people still receiving benefits after an initial week of aid rose 8,000 to 2.96 million in the week ended February 15.

The so-called continuing claims have been elevated in recent weeks and some economists say the cold weather could be preventing many recipients from going out to search for work and companies to delay hiring.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

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Yellen nods to cold weather, says unclear impact on economy

(Reuters) – Federal Reserve Chair Janet Yellen said on Thursday the central bank would be on alert to make sure recent signs of weakness in the U.S. economy are due to cold weather and storms, and not signals of a more fundamental slowdown.

“Since my appearance before the House committee, a number of data releases have pointed to softer spending than many analysts have expected,” Yellen, who took the reins at the Fed on February 1, told a Senate Banking Committee hearing, referring to a February 11 testimony.

“Part of that softness may reflect adverse weather conditions, but at this point it’s difficult to discern exactly how much,” she added. “In the weeks and months ahead, my colleagues and I will be attentive to signals that indicate whether the recovery is progressing in line with our earlier expectations.”

After more than five years of ultra accommodative policies in the wake of the recession, the Fed is taking the first steps to wind them down. It modestly trimmed a bond-buying program in each of the past two months and, according to forecasts, it plans to raise interest rates some time next year as long as the economy continues to improve.

While Yellen has made clear there is a high bar for the Fed to shelve its plan to keep trimming the purchases, heavy snow storms and cold snaps have hit U.S. employment, retail sales and manufacturing in recent months.

The world’s largest economy has added less than 200,000 jobs in the last two months, well below expectations, prompting economists and investors to speculate the Fed might not cut the purchases by an additional $10-billion at a policy-setting meeting March 18-19.

The bond-buying is now running at $65 billion per month.

On Thursday, Yellen reinforced that the Fed expects to continue drawing down the program and shelve the purchases some time in the fall. She repeated the purchases are not on a pre-set course, and the Fed would reconsider its plan if there were a “significant change” to the economic outlook.

But first the Fed needs to get a “firmer handle” on whether the soft data is due to weather or some more fundamental slowdown, Yellen said.

Interest rates have been near zero since the worst of the financial crisis in late 2008; the Fed has meanwhile swollen its balance sheet to more than $4 trillion in a further attempt to stimulate investment, hiring and growth in the United States.

The severe weather has also depressed residential construction and industrial production in January, and put a damper on home resales last month.

(Additional reporting by Krista Hughes; Editing by Chizu Nomiyama and Chris Reese)

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Wall Street flat after Yellen remarks, J.C. Penney soars

NEW YORK (Reuters) – U.S. stocks were little changed on Thursday as comments from Federal Reserve Chair Janet Yellen failed to provide clarity on the impact of a harsh winter on recent economic weakness, while concerns rose over turmoil in Ukraine.

Addressing the Senate Banking Committee, Yellen said some economic data had been weaker since she spoke to the House of Representatives on February 11, but that it was difficult to say how much of that was due to weather. Yellen also confirmed that the central bank would keep to its stimulus-trimming schedule.

The theory that some recent lackluster data was due to the weather rather than worsening fundamentals had helped investors shrug off the data and recently took the SP 500 to a record high. However, the benchmark index has struggled to break decisively above its 2013 year-end closing level of 1,848.36, and trading could take a more pronounced turn to the downside on indications the economy is slowing.

In the latest economic report, orders for durable goods fell 1 percent in January, a drop that was less than forecast. However, jobless claims unexpectedly rose in the latest week.

“Durables came in better than feared, but it is difficult to tell what the weather impact was, and what the impact of an actual slowdown might be,” said Joseph Tanious, global market strategist at J.P. Morgan Asset Management in New York. “I think we’re in a cyclical slowdown now, and the weather isn’t helping, although it should create pent-up demand.”

Geopolitical tensions mounted after armed men seized the regional government headquarters and parliament in Ukraine’s Crimea and raised the Russian flag. Ukraine’s parliament appointed former economy minister Arseny Yatseniuk as prime minister, while ousted leader Viktor Yanukovich said he was still president in a statement sent to Russian news agencies from an unknown location.

The Ukraine uncertainty spurred investors to head for the safety of U.S. Treasuries, where yields fell to two-week lows.

“As an investor, you need to weigh the possibility of something going wrong against the probability of something going right,” said Tanious. “It is a headwind to sentiment, but unless it has a big impact on oil, which I don’t expect, we should work through it.

The Dow Jones industrial average .DJI was up 6.52 points, or 0.04 percent, at 16,204.93. The Standard Poor’s 500 Index .SPX was up 0.69 points, or 0.04 percent, at 1,845.85. The Nasdaq Composite Index .IXIC was up 6.54 points, or 0.15 percent, at 4,298.61.

Both J.C. Penney Co Inc (JCP.N) and Best Buy Co Inc (BBY.N) jumped after posting strong results, with Penney late Wednesday forecasting more improvement in its comparable sales and gross profit margin this fiscal year and Best Buy posting adjusted earnings that topped forecasts.

Penney surged 21 percent to $7.23 while Best Buy advanced 5.4 percent to $27.22. The SP retail index .SPXRT dipped 0.1 percent following a five-day rally.

Also on Thursday, Sears Holding Corp (SHLD.O) reported a quarterly loss that narrowed from the year-ago period, sending shares up 5.1 percent to $42.48, and Kohl’s Corp (KSS.N) said it expected modest sales gains in its new fiscal year and reported a lower fourth-quarter profit. Shares of Kohl’s rose 1.3 percent to $55.14.

(Editing by Bernadette Baum)

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Turkey likely to order Lockheed F-35 fighters in 2015

ANKARA (Reuters) – Turkey is likely to start ordering F-35 fighter jets built by Lockheed Martin Corp (LMT.N) from 2015 onwards and it will start with two orders initially, Turkey’s undersecretary for state-run defense industries Murad Bayar said on Thursday.

“We will start F-35 orders either this year or the next. Right now, it is likely to be next year,” Bayar told reporters. “We will initially order two. The delivery time will be, depending on the orders, probably in 2017-2018.”

Turkey had already announced it plans to buy 100 F-35 jets for $16 billion. Bayar said he expected the deliveries of 100 aircraft to be completed within 10 years.

The F-35, considered to be the world’s most expensive weapons program at $396 billion so far, was designed to be the next-generation fighter jet for the U.S. forces.

It is being built by the United States, Britain and seven other co-development partners – Italy, Turkey, Canada, Australia, Denmark, Norway and the Netherlands.

Separately, Bayar said Turkey was aiming to achieve results in April on its talks with China over the purchase of long-range missile defense systems, a move highly criticized by Turkey’s NATO allies.

In September Turkey chose China’s FD-2000 missile-defense system over rival offers from Franco-Italian Eurosam SAMP/T and U.S.-listed Raytheon Co (RTN.N). It said China offered the most competitive terms and would allow co-production in Turkey.

U.S. and NATO officials have raised concerns with Turkish officials about the decision to buy the system from CPMIEC, a company hit by U.S. sanctions for sales of items to either Iran, Syria or North Korea that are banned under U.S. laws to curb the proliferation of weapons of mass destruction.

“Our talks with China are ongoing. We have extended the bidding until the end of April. We are aiming to get results in early April on this,” Bayar said.


Bayar also said Turkey will seek compensation over the late delivery of the A400 military transport plane after Airbus (AIR.PA) failed to meet some of its contractual obligations.

“My message to Airbus is that it should first focus on fulfilling the terms of the contract. There is no additional bargaining here. The contract, even with the amended version, requires the fulfillment of certain technical qualities and we have had to hold these talks because these requirements were not completely fulfilled,” Bayar said.

On Wednesday, Airbus chief executive Tom Enders said bargaining was behind the delay and that it was ‘unbearable’ that the company was still negotiating with Turkey over the plane.

“The aircraft is ready to go. It is instantly, operationally fit for flight. I find the situation increasingly unacceptable,” Enders told reporters.

Bayar said he still expected the aircraft, which was supposed to have been delivered to Turkey at the end of last year, to arrive in March but Turkey was going to ask for compensation.

“Of course there has been a delay in the delivery schedule and there will be compensation because of this. This will be the financial dimension,” Bayar said.

Meanwhile, Bayar said Japan had told Turkey that it will not allow the export of a Japanese tank engine to third parties without its permission.

His comments came after Japanese media reported that a deal between Turkish Prime Minister Tayyip Erdogan and his Japanese counterpart Shinzo Abe was struck in May, during Abe’s visit to Turkey, on the supply of engines, but that Turkey’s desire to export to third parties was likely to block the deal.

Bayar said that the potential purchase of the engine for Turkey’s Altay tank was dropped for now.

“We have agreed with Japanese authorities to leave this topic off the agenda and focus on other areas of cooperation.”

His comments appeared to close the door on a potential deal for Mitsubishi Heavy Industries (7011.T) to supply engines for the Altay tank being developed by Turkey’s Otokar (OTKAR.IS).

(Additional reporting by Nobuhiro Kubo and Tim Kelly in Tokyo; Writing by Humeyra Pamuk and Daren Butler; Editing by Stephen Powell)

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Calls grow louder for ECB to print money: Reuters poll

(Reuters) – The European Central Bank may be forced to print money this year to fight off deflation risks and boost what remains very fragile economic growth, according to a growing minority of economists polled by Reuters.

A third – 26 of 78 economists – have also penciled in a cut in the refinancing rate from the current 0.25 percent at the ECB’s March 6 meeting. Most expect a reduction of 5 to 15 basis points mirroring the Bank of Japan’s interest rate moves.

That is the strongest view for an easing in policy in Reuters polls since November last year when the ECB surprised markets by cutting the benchmark rate by 25 basis points.

But most agree that the ECB has nearly run out of options with rates and will need to look to more aggressive policy measures, such as purchasing sovereign bonds as the U.S. Federal Reserve, Bank of England and Bank of Japan have done.

Although still a minority view, 19 of 63 economists polled this week expect the central bank eventually to launch its own version of such stimulus and expand its balance sheet.

In the last Reuters ECB survey only a handful, 8 of 64, placed a greater than fifty percent probability of such a move.

But with data pointing to a deceleration in price growth throughout the monetary union, even in No. 1 economy Germany, and with overall economic activity languishing well below potential, that view is changing.

The ECB’s primary mandate is to maintain the inflation rate at a little below two percent but price growth in the euro zone has averaged well below that for well over a year now.

Germany reported on Thursday that EU-harmonized annual inflation decelerated more than expected to 1.0 percent year-on-year in February from 1.2 percent the previous month while it was up 0.5 percent on the month, less than the 0.7 percent forecast in a Reuters poll.

“The case for quantitative easing has gained traction among investors since continued inflation weakness may get distorted by high unemployment, sub-par growth and chronic credit market weakness,” said Lena Komileva, economist at G+ Economics.

ECB policymakers, including President Mario Draghi, have so far played down the threat of a deflation and steered clear of indicating what form of quantitative easing could be undertaken if the risk intensifies.

That lack of clarity showed among forecasters in the poll.

While most said the central bank could stop selling back the securities it buys – known as “sterilization” – a few said it could buy sovereign bonds or conduct another long-term refinancing operation with a maturity of more than three years.

“Central banks are generally reluctant to buy government bonds, and the issues are more complex for the ECB than for others,” economists at BNP Paribas wrote in a note this week.

For example, Germany’s Bundesbank, the national central bank of the euro zone’s strongest member, remains staunchly opposed to QE.

“ECB President Mario Draghi has expressed a preference for buying private sector assets, but there are complications in terms of technical complexity, pricing and the amount of available assets. We conclude that some such purchases (sovereign bonds) are likely.”

BNP Paribas is nonetheless predicting the ECB to first launch 300-500 billion euros in QE in the second half of this year.

But based on the ECB’s peers’ experience, whether or not huge asset purchases actually boosts inflation is at best unclear.

Inflation has remained subdued in the U.S. and to a lesser extent, the UK, where central banks have purchased over $3 trillion and 375 billion pounds of securities respectively since Lehman Brothers collapsed in 2008 and triggered the financial crisis.

The Bank of Japan has been printing money for the better part of two decades, aggressively stepping it up in late 2012 and the only certain impact has been to boost share prices. Inflation there remains dangerously low too.

Economists also predicted the deposit rate to be kept on hold at zero percent at the meeting. Only six said the ECB will trim the deposit rate to negative, which would mean charging banks for parking money with it.

A majority of economists also expect the ECB to downgrade inflation forecasts for 2014 and leave growth estimates unchanged when it releases its quarterly staff projections at next week’s meeting.

For 2015, it will likely keep both growth and inflation forecasts unchanged, economists said.

(Polling and analysis by Ishaan Gera and Sarbani Haldar; Editing by Ross Finley/Jeremy Gaunt)

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U.S. safety regulators open probe of GM’s handling of recall

DETROIT (Reuters) – U.S. safety regulators have opened an investigation into whether General Motors Co reacted fast enough in its recall of more than 1.6 million cars over an ignition-switch defect linked to 13 deaths in crashes.

“The National Highway Traffic Safety Administration has opened an investigation into the timeliness of General Motors’ recall of faulty ignition switches to determine whether GM properly followed the legal processes and requirements for reporting recalls,” the safety agency said in a statement released on Wednesday.

GM could face a maximum fine of $35 million if it failed to notify NHTSA within five days of a recall after learning of a vehicle safety defect.

The recall was to correct a condition that may allow the engine and other components including front airbags to be unintentionally turned off.

The Detroit company previously said the weight on the key ring, road conditions or some other jarring event may cause the ignition switch to move out of the “run” position, turning off the engine and most of the car’s electrical components.

NHTSA urged owners to follow GM’s recommendation to “use only the ignition key with nothing else on the key ring” when operating the vehicle and seek the repair as soon as replacement parts become available. NHTSA said it will monitor the recall and take additional action as needed.

On Tuesday GM more than doubled its recall related to the issue, saying it was “deeply sorry” and that the company was reviewing its recall process, acknowledging it was not as “robust as it should have been.

GM said then that it was aware of 31 reported incidents, including 13 front-seat fatalities, involving frontal crashes in which the condition may have caused or contributed to the front airbags not deploying.

Earlier this month, GM said it was recalling 778,562 Chevrolet Cobalt and Pontiac G5 compact cars from model years 2005 through 2007. On Tuesday, it added 842,103 Saturn Ion compact cars from 2003 through 2007 model years, Chevy HHR mid-sized vehicles from 2006 and 2007, and the Pontiac Solstice and Saturn Sky sports cars from 2006 and 2007.

GM no longer makes any of the affected cars.

It previously said it is working with suppliers to increase production of replacement parts and accelerate the process. Dealers will replace the ignition switch at no charge.

GM said the ignition switch torque performance may not meet company specifications. The involved parts were made in Mexico, according to documents previously filed with the U.S. National Highway Traffic Safety Administration.

Of the cars recalled, 1,367,146 vehicles are in the United States, 235,855 are in Canada, 15,073 are in Mexico and 2,591 were exported outside North America, according to GM.

(Reporting by Ben Klayman in Detroit; Editing by Chizu Nomiyama)

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Credit Suisse staff group demands CEO apologize for U.S. testimony

ZURICH (Reuters) – A group representing Swiss bankers demanded an apology from Credit Suisse boss Brady Dougan on Thursday after he said the practice of helping Americans conceal their wealth was the work of a few dishonest employees.

The American-born CEO told a U.S. Senate subcommittee on Wednesday that he and other top managers were not aware a small group of Credit Suisse private bankers had helped U.S. customers evade taxes with offshore accounts.

“The evidence showed that some Swiss-based private bankers went to great lengths to disguise their bad conduct from Credit Suisse executive management,” Dougan told the senators.

He said the wrongdoing appeared to have taken place before 2009 despite “industry-leading compliance measures” at the bank.

The body representing staff at Credit Suisse and other Swiss banks reacted with astonishment to Dougan’s comments, saying it was “hardly credible” that the bank’s bosses knew nothing of the practices.

“It was common knowledge that tax evasion was the strategy, a business model pursued by many banks for a long time,” the Schweizerischer Bankpersonalverband said in a statement.

It said Dougan’s comments “vilify lots of employees that had nothing to do with offshore U.S. banking”, and demanded he apologize to the bank’s 46,000 staff.

Dougan’s comments may have been motivated by efforts to lessen the bank’s penalties in the U.S., but he still owes staff an explanation, the employee group said.

More than 22,000 Americans were using Credit Suisse to park combined assets of $12 billion at one time, according to a report released by the U.S. Senate ahead of Wednesday’s hearings.

The Senate subcommittee alleged Credit Suisse bankers held secret meetings in luxury hotels and used hidden elevators to help foreign clients hide their wealth, a practice that one senator said belonged in a spy novel, not a bank.

Credit Suisse management has accepted responsibility for wrongdoing by its staff, while rejecting any suggestion that it was bank policy to help foreign clients hide their wealth from their governments.

When the bank sent data on employees to U.S. prosecutors investigating its U.S. dealings last year, some staff voiced outrage and went to court to prevent Credit Suisse from releasing the data.

Credit Suisse last week settled charges levied by the U.S. Securities and Exchange Commission, admitting to wrongdoing and paying $196 million in fines. But a settlement with the Justice Department is not imminent, a person familiar with the matter has told Reuters.

Credit Suisse is one of 14 Swiss banks being probed by U.S. prosecutors over taxes, after UBS became the first major bank to agree a settlement over the charges. Two smaller Swiss banks, Wegelin Cie and Bank Frey, have had to close as a result of the U.S. investigation.

(Reporting By Katharina Bart; editing by Tom Pfeiffer)

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Freddie Mac profit moves U.S. housing bailout further into black

WASHINGTON (Reuters) – Freddie Mac (FMCC.OB) said on Thursday it will soon send the U.S. Treasury a $10.4 billion dividend after posting a ninth straight quarterly profit, putting taxpayers further into the black on their bailout of the mortgage giant.

When it makes the payment next month, Freddie Mac will have paid about $81.8 billion in dividends in return for the $71.3 billion in support it received from the Treasury when it was bailed out during the financial crisis.

The nation’s second-largest mortgage finance company earned a net income of $8.6 billion in the three months ended December 31, paving the way for the payment. The income brought earnings for 2013 to $48.7 billion, its highest ever annual profit. It had net income of $11.0 billion a year earlier.

Freddie Mac and sibling company Fannie Mae (FNMA.OB) have operated under federal conservatorship since 2008.

The duo, which had been teetering on the brink of insolvency, must now turn over any profits to the Treasury as dividends on the controlling stake the government took when it bailed them out. They cannot repurchase the government’s share.

Last week, Fannie Mae reported record annual earnings and said it would ship $7.2 billion to the Treasury, putting taxpayers ahead on its bailout for the first time. Freddie Mac had broken even in the prior quarter.

When they make their latest dividend payments, taxpayers will have received $202.9 billion for their support, $15.4 billion more than the $187.5 billion provided in bailout funds.

The companies, which own or guarantee 60 percent of all U.S. home loans, have been helped by a housing recovery that has lifted prices and kept a lid on defaults. Their return to profitability also allowed them to reverse write-downs of certain tax-related assets, leading to large one-time windfalls.


“The year and quarter were extremely strong,” Donald Layton, Freddie Mac’s chief executive officer, said on a call with reporters. “These levels of income are not sustainable,” he cautioned.

The company said it is seeing a moderation in home price growth that will impact future earnings.

“We generally think we will be profitable, but we could easily have a quarter here and there where we are not,” Layton said. “We do not believe we’re repeating the sins of the past.”

No one expected the two companies to become profitable again so quickly, but when home prices surged in 2012, they were able to recover more money than expected on soured loans.

The sizable dividend payments have complicated a debate on the companies’ future.

To avoid ever having a taxpayer-rescue again, the Obama administration and lawmakers on Capitol Hill have vowed to wind them down and revamp the housing finance system.

The Senate is working on a bipartisan bill that would ensure a government backstop for the market remains in place in times of crisis, an approach favored by the White House. A Republican-backed bill in the U.S. House of Representatives would limit federal mortgage guarantees more sharply.

The companies don’t make loans but instead buy them from lenders and package them into securities they sell to investors. In doing so, they provide a steady source of mortgage funds.

Investors including Perry Capital and Fairholme Funds have sued the government, challenging the bailout terms that force all quarterly profits from Fannie Mae and Freddie Mac to be swept into the Treasury’s coffer. A federal judge granted Fairholme a motion to conduct discovery in its lawsuit against the Treasury Department on Thursday, a ruling that allows the investment firm to seek evidence in its case.

Separately, housing and consumer advocates have filed lawsuits arguing that some of the profits should go into an affordable housing trust set up just before the crisis.

The litigation is expected to drag on for years, as is the congressional effort to remake the housing finance system.

(Reporting By Margaret Chadbourn; Editing by Nick Zieminski)

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Best Buy profit beats, set to cut costs more; shares jump

(Reuters) – U.S. retailer Best Buy Co Inc (BBY.N) reported a better-than-expected quarterly profit on Thursday and announced more aggressive cost cuts this year, sending its shares up nearly 6 percent in morning trading.

The results heartened investors who had been concerned about profits being squeezed during the fourth quarter, the most heavily promoted and discounted holiday-shopping season since the recession. Shares jumped 5.7 percent to $27.29 on the New York Stock Exchange.

Best Buy had slashed prices throughout the holidays to thwart competition from Wal-Mart Stores Inc (WMT.N), Inc (AMZN.O) and other chains, and had last month warned of a bigger-than-expected drop in quarterly operating margins.

“The quarter was less bad than everyone expected,” said BBT Capital Markets analyst Anthony Chukumba, who was encouraged by Best Buy’s efforts to court online shoppers and rein in costs.

The world’s largest consumer electronics chain said it would more aggressively cut annualized costs, by about $1 billion. It originally planned to cut costs by $725 million in North America, a target it has exceeded by $40 million.

Under Chief Executive Hubert Joly, a turnaround expert, Best Buy has stripped away layers of management, cut jobs and costs, shuttered unprofitable stores and boosted cash by selling its stake in a European joint venture with Carphone Warehouse Group Plc (CPW.L).

Still, Chukumba said the company has further fat to cut and expects the retailer to work on trimming corporate overhead expenses and personalizing its marketing.

Earlier this week, the New York Post cited an inside source as saying the retailer could lay off more 2,000 managers. Best Buy declined comment on the report.

The company earned a net $310 million, or 88 cents a share, from continuing operations in the fourth quarter ended February 1. That follows a net loss of $461 million, or $1.36 a share, a year earlier.

Excluding special items, it earned $1.24 a share. The special items included restructuring and asset impairment charges and the tax impact of Best Buy Europe sales.

Analysts, on average, expected a profit of $1.01 a share excluding items, according to Thomson Reuters I/B/E/S.

Sales fell 3 percent to $14.47 billion, missing analysts’ average estimate of $14.66 billion.

Comparable store sales, comprising revenue at stores, websites and call centers operating for at least 14 full months, fell 1.2 percent.

The company, which recently started shipping directly from its 1,400 stores to compete with rivals Amazon and Wal-Mart, said comparable online sales grew 25.8 percent at its domestic unit.

(Editing by Bernadette Baum)

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