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Byline: -- Staff and Wire Services

Consumers cut back on spending

WASHINGTON -- Consumers, battered by surging gasoline prices and rising interest rates, cut back sharply on their spending in May, providing further evidence suggesting the economy is slowing.

It is still an open question whether the slowdown is coming soon enough to keep inflation under control.

The Labor Department reported Tuesday that wholesale prices rose by just 0.2 percent in May, a big drop from the past two months. But core inflation, excluding food and energy, showed an increase of 0.3 percent, faster than analysts had expected.

The Commerce Department reported that retail sales edged up only 0.1 percent last month and would have been in negative territory had it not been for a big rise in the price of gasoline.

Best Buy sales fuel hike in profit

MINNEAPOLIS -- Best Buy Co. Inc., the nation's largest consumer electronics retailer, said Tuesday that cost-cutting and sales of big-ticket items powered a fiscal first-quarter profit increase of nearly 38 percent.

Its shares jumped more than 5 percent.

Best Buy earned $234 million, or 47 cents per share, in the three months ended May 27, up from $170 million, or 34 cents per share, during the same period last year.

Analysts surveyed by Thomson Financial were expecting 36 cents a share.

Revenue jumped almost 14 percent, to $6.96 billion from $6.12 billion.

Sales at stores open 14 months -- a key retail measure -- grew 4.9 percent. Best Buy said the gain was driven by an increase in the average size of each transaction, as customers spent more on flat-panel televisions, music players, and laptop computers.

Sales of older televisions, music, desktop computers and printers all declined.

Northwest, unions concessions OK'd

NEW YORK -- A bankruptcy court on Tuesday approved nearly $550 million in concessions between Northwest Airlines Corp. and two of its unions representing pilots, baggage handlers and ground workers.

The concessionary contract from the pilots union calls for $358 million in givebacks, while Northwest, the No. 5 U.S. carrier, will save $190 million annually with the new pacts with 12,200 baggage and ground workers.

Judge Allan Gropper of the Southern District of New York accepted the separate motions at a court hearing, leaving the Professional Flight Attendants Association, which represents 9,300 flight attendants, alone among the airline's unions without a new package of concessions.

Big profits don't assure investors

NEW YORK -- Posting the biggest investment banking profit since the end of the technology stock boom wasn't enough to convince Goldman Sachs Group Inc. shareholders to hang on to the stock.

Goldman Sachs' overall second-quarter results were impressive -- in fact, the second best in its history. But investors remained unsure how long Goldman could keep the money machine going, and instead fixated on how eroding market conditions could impact future earnings.

Shares still fell $5.75, or 4 percent, to close at $139.25 on the New York Stock Exchange, reflecting Wall Street's nervousness.

In '07, HMO hikes seen in decline

NEW YORK -- Rate increases for health maintenance organizations are set to decline in 2007 for the fourth consecutive year, but still create challenges for employers, according to a report released Tuesday.

Preliminary figures show that HMO rates will jump approximately 11.7 percent next year, down from initial estimates of 12.4 percent in 2006 and 13.7 percent in 2005, said Hewitt Associates LLC, a consulting firm based in Lincolnshire, Ill.

The report was based on a Hewitt Web site that captures initial rates HMOs are offering employers, and the increase could be different after changes in plans, prices and providers. The final average rate increase was 10 percent this year, and Hewitt believes the jump will be around 7 percent or 8 percent next year.

Exec pay prompts fund lawsuits

WASHINGTON -- Big pension funds in the United States, Europe and Australia are suing dozens of companies over the timing of stock options grants to their top executives, an attorney for a firm that is filing the suits said Tuesday.

The pension funds, which hold shares in the companies and include several union-employee funds in the United States, are using a prominent law firm specializing in class-action suits against public companies to bring their cases.

In expanding investigations, at least 39 companies are under scrutiny by the Securities and Exchange Commission or federal prosecutors for possible manipulation of the timing of options grants so that executives could reap a profit.