Coca-Cola’s Net Income Rises Despite a Drop in Revenue

Muhtar A. Kent, the chief executive of the world’s largest soft drink company, said in a conference call with analysts and investors that Coca-Cola would proceed by investing in its brands and seeking acquisitions.

“There’s some headwind in emerging markets, but we believe they are very temporary” because the middle class in those countries is growing, he said.

In the third quarter, Coca-Cola’s net income rose 6 percent to $2.45 billion, or 54 cents a share, from $2.31 billion, or 50 cents a share, a year earlier.

Excluding one-time items, the company reported earnings of 53 cents a share, in line with the expectations of analysts surveyed by Thomson Reuters.

Revenue fell 3 percent, to $12.03 billion from $12.34 billion, slightly below analysts’ estimates of $12.05 billion. The decline was largely a result of weaker-than-expected currencies in many emerging markets and the costs of revamping bottling operations in Brazil and the Philippines.

Coca-Cola’s chief financial officer, Gary P. Fayard, said he expected currency weaknesses to lower operating income by 5 to 6 percent in the fourth quarter.

A Morningstar analyst, Thomas Mullarkey, said he was encouraged by Coke’s global growth, which reached 2 percent overall, as well as the popularity of the Coca-Cola brand in North America.

“Soda is not doing great overall in the U.S.,” he said, “but the Coke brand is the leading soda brand, and so the company continues to push it forward.”

Mr. Kent said the Coke brand was resilient, helping the company deliver a record 181 billion beverage servings in the quarter.

In North America, sales volume increased 2 percent overall, largely because of the strong performance of Coke’s nonsoda offerings. Sales of noncarbonated drinks like juices and bottled water rose 5 percent, and teas, which include Honest Tea and Fuze, had double-digit percentage growth. Sales of sparkling drinks in the region were flat.

U.S. Consumer Spending Rises as Wages Lift Family Income

American families spent 0.3 percent more last month than the month before, which was in line with expectations, Commerce Department data showed on Friday.

Higher wages drove incomes up 0.4 percent, the most since February. Analysts said the increase could drive faster spending in the months ahead.

Rising wages and spending also appeared to give businesses a little more leverage to raise prices, with inflation outside food and energy picking up in August. That could bolster the case for the U.S. Federal Reserve to move forward with winding down a bond-buying stimulus program.

"This acceleration in core inflation will likely be encouraging to the Fed," said Millan Mulraine, an economist at TD Securities in New York.

The data backs the view that tax hikes and federal budget cuts are dragging on the economy less as the year goes on. Washington increased tax rates in January and slashed the federal budget in March.

But Wall Street and the Fed have appeared increasingly concerned that political gridlock in Washington could trigger a government shutdown next week and perhaps a debt default after mid-October, either of which could deliver blows to the economy.

Worries about the future are also rising among families.

U.S. consumer sentiment slid in September to its lowest level in five months as Americans saw higher interest rates and sluggish economic growth ahead, according to the final reading of the Thomson Reuters/University of Michigan's consumer survey.

The data had little impact on sentiment among investors, who remain preoccupied with the potential for fiscal crises. U.S. stocks fell and the dollar closed in on a seven-month low.

SOME BRIGHT SIGNS

The data from last month, however, was modestly upbeat.

Even after taking into account tax bills and price increases, incomes rose in August by the most since March.

"The pick-up in income growth in August suggests that consumption growth may even accelerate in the fourth quarter," said Paul Ashworth, an economist at Capital Economics in Toronto.

Indeed, the recent gains in consumer spending, while still modest, appear to have stopped a worrisome cooling of inflation.

Economists warn that if inflation runs too low an economic shock could tip the economy into a spiral of falling prices and wages.

Core prices, stripping out volatile food and energy prices, rose 0.2 percent in August, up from a 0.1 percent gain in July, according to the Fed's favored gauge.

Analysts pointed out that annualized readings for core inflation over the past few months now appear to be trending higher, suggesting a turning point may have been reached.

Still, annual inflation is lower than it was at the start of the year, according to both headline and core measures. These both came in at 1.2 percent in August, well below the Fed's 2 percent target.

(Reporting by Jason Lange; Additional reporting by Luciana Lopez in New York; Editing by Krista Hughes)

Credit Card Use Falls; Borrowing for Cars and School Rises

Consumers increased their borrowing by $10.4 billion in July from June to a record of $2.85 trillion, the Federal Reserve said on Monday. That followed a gain of $11.9 billion in June.

A category that includes auto loans and student loans increased $12.3 billion in July to a record $2 trillion. But a measure of consumers’ credit card debt fell by $1.8 billion to roughly $850 billion. That followed a $3.7 billion decline in the credit card category in June.

July consumer borrowing illustrated economic trends that have surfaced since the recession: Americans are using credit for their most urgent needs, while forgoing debt for discretionary purchases.

The auto and student loan category was up 8.1 percent from a year earlier and rose in every month but one since May 2010. But credit card debt has barely changed in the last year and was nearly 17 percent below its peak, in July 2008, seven months into the recession.

Slow job growth and small wage gains have made many Americans more reluctant to charge goods and services. That could restrain consumer spending, which accounts for 70 percent of economic activity. Americans may also be hesitant to take on more high-interest debt because of higher Social Security taxes.

At the same time, the weak economy is sending more people back to school. The Federal Reserve’s consumer credit report does not separate student loans and auto loans. But the Federal Reserve Bank of New York quarterly report on consumer credit shows student loan debt has been the biggest factor in borrowing increases since the recession officially ended in June 2009.

Economists expressed hope that as the impact of higher Social Security taxes fades, consumer spending will strengthen in the second half of this year. That forecast also counts on steady job growth to bolster income gains and support higher spending.

But some forces continue to restrain growth, including thousands of federal furloughs, which depressed income growth in July. And job growth has been weaker than first thought.

The Fed’s borrowing report tracks credit card debt, auto loans and student loans but not mortgages, home equity loans or other loans secured by real estate.

Manufacturing Index Rises

The U.S. manufacturing sector grew last month at its fastest pace in more than two years, with the Institute for Supply Management's (ISM) index of national factory activity rising to 55.7 in August from 55.4 the prior month.

That comfortably beat expectations for 54, with the index at its highest since June 2011.

A reading above 50 indicates expansion in the sector.

"This was an unambiguously positive report, signaling a further acceleration in manufacturing momentum in August," said Millan Mulraine, director of U.S. research and strategy at TD Securities in New York.

New orders also marked their best level in more than two years, with that sub-index jumping to 63.2 from 58.3.

The reading for new orders minus inventories, a way to extrapolate so-called final demand, marked its highest in more than three years, as well. That measure of demand has now risen for three straight months, potentially adding more evidence to support a Fed pullback in bond buying.

Employment, however, slipped to 53.3 from 54.4.

Jobs data are especially important to the Fed, which wants to see the unemployment rate closer to 6.5 percent. It is currently 7.4 percent.

The manufacturing data helped accelerate a slide in Treasuries prices on Tuesday, with U.S. 10-year notes down one point and 30-year bonds down two points.

U.S. construction spending rose in July, too, climbing 0.6 percent to an annual rate of $901 billion, the Commerce Department said. The growth rate was above the median forecast in a Reuters poll of analysts.

In addition, demand picked up in the U.S. manufacturing sector in August, a separate report showed.

Financial data firm Markit said that while its final U.S. Manufacturing Purchasing Managers Index eased to 53.1 from July's reading of 53.7, a pickup in new orders and a drop in inventories pointed to faster growth ahead.

"Inventories of finished goods showed the largest fall since 2009 as some companies reported that demand often exceeded production," said Markit chief economist Chris Williamson. "Factories will need to ramp up production to replace depleted inventories given this order book growth."

Faster global growth could help persuade policymakers at the U.S. Federal Reserve to slow their massive bond purchase program soon.

The bank is now buying $85 billion per month in Treasuries and mortgage-backed securities, but policymakers have hinted at exiting from the strategy as the U.S. economy grows strong enough to stand on its own.

A more vigorous U.S. economy could nudge the Fed closer to a pullback as soon as its next meeting on September 17-18.

But with U.S. data still often painting a mixed picture, that potential September exit could yet change.

Investors are awaiting the August nonfarm payrolls report, due on Friday, for more clarity on the health of the U.S. jobs market.

Other data on Tuesday and earlier in the week also pointed to more robust global growth.

In China, domestic demand helped the services sector grow steadily in August, suggesting government measures have started to steer Asia's biggest economy out of its longest slowdown.

European factory data also pointed to growth in August, including faster-than-expected manufacturing growth in Britain.

The survey was especially welcome after a long economic stagnation in the U.K., which earlier this year flirted with a triple-dip recession.

(Reporting by Luciana Lopez; Editing by Chizu Nomiyama and Andrea Ricci)

Consumer Spending Barely Rises; Inflation Is Benign

Spending, which accounts for more than two-thirds of U.S. economic activity, could struggle to regain momentum as other data on Friday showed consumer sentiment fell this month.

The reports added to a number of signs that have suggested a loss of steam in the economy early in the third quarter after a fairly sturdy performance in the April-June period even in the face of higher taxes and lower government spending.

"There has been a lot of optimism about the economy accelerating in the second half of the year as the fiscal drag waned. The latest data suggests that's not happening," said Michelle Girard, chief economist at RBS in Stamford, Connecticut.

The Commerce Department said consumer spending ticked up 0.1 percent, restrained by weak outlays on utilities and automobiles. Adjusted for inflation, spending was flat.

It is not likely to rebound anytime soon. A separate report showed the Thomson Reuters/University of Michigan's consumer sentiment index slipped to 82.1 in August from 85.1 in July.

The drop reflected concerns about higher borrowing costs. Long-term interest rates have risen more than a percentage point over the last three months in anticipation of the Fed scaling back its support for the economy.

"Less confident individuals don't become more active shoppers," said Joel Naroff, chief economist at Naroff Economic Advisers in Holland, Pennsylvania. "That does not bode well for growth."

U.S. financial markets were little moved by the data as investors kept a wary eye on developments in Syria. Stocks were trading lower, while U.S. Treasury debt prices were up. The dollar touched a four-week high against a basket of currencies.

With demand tepid, inflation pressures were subdued last month. A price index for consumer spending edged up 0.1 percent, slowing from a 0.4 percent rise in June.

Over the past 12 months, prices have risen only 1.4 percent. While that is the biggest increase since February, it is well below the Fed's 2 percent target.

Excluding food and energy, the price index for consumer spending nudged up 0.1 percent after advancing 0.2 percent in June. For the fourth month running, core prices were up just 1.2 percent from a year ago.

INFLATION BELOW TARGET

The lackluster spending and soft inflation data would argue against the U.S. central bank trimming the $85 billion in bond purchases it is making each month to keep interest rates low.

Many economists, however, believe the Fed will decide to begin tapering its buying, or quantitative easing, at its September 17-18 policy meeting.

"This does nothing to alter our view of tapering," said Eric Green, chief economist at TD Securities in New York. "Fear of unquantifiable financial risks within a QE regime that offers diminishing returns is driving the policy agenda, not strong growth and inflation."

The economy grew at a 2.5 percent annual pace in the second quarter, quickening from a 1.1 percent rate in the first three months of the year.

Economists said it was now unlikely that consumer spending this quarter would even match the second quarter's 1.8 percent growth pace. Wall Street banks such as Goldman Sachs, Barclays and RBS lowered their third-quarter GDP growth estimates by as much as half a percentage point to as low as a 1.5 percent rate.

Consumer spending continues to be constrained by sluggish wage growth. Income ticked up 0.1 percent in July after rising 0.3 percent in June.

Both private and government salaries fell last month. Furloughs at federal agencies as part of Washington's belt-tightening reduced salaries by $7.7 billion last month.

With spending matching income growth, the saving rate - the percentage of disposable income households are socking away - held at 4.4 percent.

(Reporting by Lucia Mutikani, additional reporting by Steven C Johnson in New York; Editing by Andrea Ricci)

Samsung’s Profit Rises, but So Does the Competition

Samsung, which is based in Suwon, South Korea, said net income rose to 7.77 trillion won, or $6.9 billion, from 5.19 trillion won a year earlier. Sales rose to 57.46 trillion won, from 47.6 trillion won.

But the report showed a decline in earnings from the first quarter in Samsung’s mobile phone business despite the introduction of a new flagship model, the Galaxy S4.

Though the S4 has been selling at a brisk pace, it has fallen short of some analysts’ expectations. Promotional events like an introductory gala for the S4 at Radio City Music Hall have driven up marketing costs, while rivals continue to roll out competing models.

“The strong growth streak for the smartphone market is expected to continue in the third quarter, albeit at a slower pace,” Samsung said in a statement.

Market reaction to the report from Samsung was muted because the company issued an earnings forecast earlier this month; the results reported Friday were broadly in line with that outlook, though below previous expectations.

The results from Samsung follow the earnings report from the company’s chief rival, Apple, which showed similar trends in the smartphone business.

Apple reported earnings that beat Wall Street expectations, but its profit declined from a year earlier and its revenue was flat. While Apple’s posted strong iPhone sales in the United States, the company showed weakness in China and in sales of iPads.

In recent months, the shares of Apple and Samsung have been hammered by investors, who worry that even as the companies report continued growth in sales of smartphones, they will struggle to maintain their momentum.

“In a way, Apple and Samsung have become victims of their own success,” Pete Cunningham of the research firm Canalys said before the Samsung results were released. “When these companies report many billions of profits every quarter, it’s hard to say they are doing anything wrong.”

Many say the high end of the smartphone market, which Samsung and Apple dominate, is looking saturated. Most wealthy consumers in developed markets already own such devices, so growth is increasingly occurring in lower-price brackets in developing markets, where Apple does not compete.

Samsung, with a broader product range, may be better positioned, analysts say, though it faces stiff competition at the low end of the market from Chinese makers.

For expensive phones, the companies face renewed competition from Sony, HTC and Nokia, though analysts say innovations in smartphone design and technology are becoming more incremental.

“If you combine all these players and look at what they are doing, it’s hard for Samsung or Apple to keep growing market share,” said Bryan Wang, an analyst at Forrester Research. “But the expectations for both companies are still high.”

IDC, a research firm, said Samsung’s share of the smartphone market slipped to 30.4 percent in the second quarter, from 32.2 percent a year earlier.

Samsung’s smartphone sales rose by 43.9 percent, outpacing Apple, which showed a 20 percent gain. But smaller smartphone makers that focus on lower-cost devices did even better, with Lenovo and LG, for example, more than doubling their sales.

“The smartphone market is still a rising tide that’s lifting many ships,” said Kevin Restivo, senior research analyst at IDC, in a statement. “Though Samsung and Apple are the dominant players, the market is as fragmented as ever. There is ample opportunity for smartphone vendors with differentiated offerings.”

While Samsung does not break out the number of devices it sells on a quarterly basis, another research firm, Strategy Analytics, estimated that the company shipped 76 million smartphones in the second quarter, 56 percent more than a year earlier and more than double Apple’s total of 31.2 million.

With growth picking up in the low end, Strategy Analytics said, the smartphone market over all is expanding faster than it was a year ago. That helps Samsung in another way, because the company also is the world’s biggest producer of semiconductors, an important component in smartphones and other electronic devices.

Samsung said operating profit in its semiconductor division rose to 1.76 trillion won from 1.03 trillion won a year earlier, as it experienced strong demand from its own mobile business, as well as from other phone makers to which it supplies chips.

But Samsung said its television business was hurt by sluggish demand in Europe, where an economic recovery has struggled to take hold.

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Nudged by Gas Prices, Wholesale Inflation Rises

Wholesale prices rose 0.8 percent in June compared with May, when prices rose 0.5 percent, the Labor Department reported on Friday. It was the biggest gain since a 1 percent increase in September and was driven by a 7.2 percent surge in gasoline prices.

Outside of the volatile energy and food sectors, core inflation was up just 0.2 percent in June.

Core prices have risen 1.7 percent over the last 12 months. Aside from sharp swings in gas prices, inflation has increased very slowly over the last year, giving the Federal Reserve the room to keep interest rates low to lift the economy.

The government’s Producer Price Index measures inflation before it reaches the consumer. Consumer prices have been rising at a modest rate as well. Over the 12 months ending in May, consumer prices outside of food and energy were up just 1.7 percent, below the Fed’s 2 percent target for inflation.

For June, energy prices at the wholesale level were up 2.9 percent, reflecting the big increase in gas prices. It was the biggest increase since February.

Food costs rose 0.2 percent in June, a moderation after a larger 0.6 percent May increase in food that had been driven in part by a surge in the price of eggs. For June, egg prices retreated, falling 26.8 percent, the biggest one-month drop in seven years.

The wholesale price of passenger cars rose 0.8 percent in June, the biggest increase since November 2011, but most other categories showed moderation. Furniture prices were up 0.3 percent.

Total wholesale prices were up 2.5 percent in June compared with a year ago.

Euro Zone Joblessness Rises

The jobless rate in the 17 countries that belong to the euro zone was 12.1 percent in May, adjusting for seasonal effects, according to a report from Eurostat, the European Union statistics agency. That figure compared with 12 percent in April, which was revised down from 12.2 percent reported earlier. Based on the revised figures, May unemployment was at a record high.

Eurostat estimated that 19.2 million people in the euro area were jobless in May, an increase of 67,000 from April. For all 27 countries in the European Union, the unemployment rate was unchanged at 10.9 percent. The European bloc expanded to 28 countries on Monday when Croatia officially joined.

Joblessness in the euro zone has been rising almost without interruption since early 2008, when the financial crisis began, declining only briefly at the beginning of 2011. And analysts see little prospect for a sustained decline anytime soon.

While economists expect the euro zone economy to stabilize in the course of this year, growth will most likely remain too slow to generate large numbers of jobs.

“The measure that offers the greatest potential for job creation in the short to medium term is an easing of credit conditions,” Marie Diron, an economist who advises the consulting firm Ernst & Young, said in a statement. “This would allow companies to invest and as a result recruit in the euro zone.”

The European Central Bank will hold its monetary policy meeting on Thursday, but it is not expected to introduce more stimulus to the euro zone economy. A cut in the benchmark interest rate, to 0.25 percent from a record low of 0.5 percent, is possible, but many say it would be unlikely to do much to encourage lending in troubled countries like Spain and Italy.

Banks in those countries are trying to cope with rising numbers of bad loans and are reluctant to lend no matter how cheaply they can borrow from the European Central Bank. And the central bank remains reluctant to effectively print more money, as the Federal Reserve in the United States and Bank of England have done, because of opposition from Germany to more aggressive action.

Eurostat also reported on Monday that inflation in the euro zone rose to 1.6 percent from 1.4 percent because of a surge in energy prices. While inflation remains below the central bank’s target of about 2 percent, the uptick is likely to provide a further argument against increasing the benchmark interest rate.

Compounding the bank’s challenge, the numbers released showed that there remained a big difference in economic performance among euro zone countries. These differences make it difficult for the central bank to form a monetary policy that is appropriate for all members.

Unemployment rates in Spain and Greece were about 27 percent in May, with youth unemployment remaining well above 50 percent. In contrast, unemployment in Austria was 4.7 percent and in Germany was 5.3 percent. Both had youth jobless rates below 9 percent.

If there was any good news, economists said, it was that unemployment may not go up much more.

“An end to the euro zone labor market downturn is not yet imminent,” Martin van Vliet, an economist at ING Bank, said in a note to investors. “However, with the recession across the euro zone petering out, the peak in unemployment should not be too far away, either.”

Mountain of Petroleum Coke From Oil Sands Rises in Detroit

Detroit’s ever-growing black mountain is the unloved, unwanted and long overlooked byproduct of Canada’s oil sands boom.

And no one knows quite what to do about it, except Koch Carbon, which owns it.

The company is controlled by Charles and David Koch, wealthy industrialists who back a number of conservative and libertarian causes including activist groups that challenge the science behind climate change. The company sells the high-sulfur, high-carbon waste, usually overseas, where it is burned as fuel.

The coke comes from a refinery alongside the river owned by Marathon Petroleum, which has been there since 1930. But it began refining exports from the Canadian oil sands — and producing the waste that is sold to Koch — only in November.

“What is really, really disturbing to me is how some companies treat the city of Detroit as a dumping ground,” said Rashida Tlaib, the Michigan state representative for that part of Detroit. “Nobody knew this was going to happen.” Almost 56 percent of Canada’s oil production is from the petroleum-soaked oil sands of northern Alberta, more than 2,000 miles north.

An initial refining process known as coking, which releases the oil from the tarlike bitumen in the oil sands, also leaves the petroleum coke, of which Canada has 79.8 million tons stockpiled. Some is dumped in open-pit oil sands mines and tailing ponds in Alberta. Much is just piled up there.

Detroit’s pile will not be the only one. Canada’s efforts to sell more products derived from oil sands to the United States, which include transporting it through the proposed Keystone XL pipeline, have pulled more coking south to American refineries, creating more waste product here.

Marathon Petroleum’s plant in Detroit processes 28,000 barrels a day of the oil sands bitumen.

Residents on both sides of the Detroit River are concerned that the coke mountain is both an environmental threat and an eyesore.

“Here’s a little bit of Alberta,” said Brian Masse, one of Windsor’s Parliament members. “For those that thought they were immune from the oil sands and the consequences of them, we’re now seeing up front and center that we’re not.”

Mr. Masse wants the International Joint Commission, the bilateral agency that governs the Great Lakes, to investigate the pile. Michigan’s state environmental regulatory agency has submitted a formal request to Detroit Bulk Storage, the company holding the material for Koch Carbon, to change its storage methods. Michigan politicians and environmental groups have also joined cause with Windsor residents. Paul Baltzer, a spokesman for Koch’s parent company, Koch Companies Public Sector, did not respond to questions about its storage or the ultimate destination of the petroleum coke.

Coke, which is mainly carbon, is an essential ingredient in steelmaking as well as producing the electrical anodes used to make aluminum.

While there is high demand from both those industries, the small grains and high sulfur content of this petroleum coke make it largely unusable for those purposes, said Kerry Satterthwaite, a petroleum coke analyst at Roskill Information Services, a commodities analysis company based in London.

“It is worse than a byproduct,” Ms. Satterthwaite said.“It’s a waste byproduct that is costly and inconvenient to store, but effectively costs nothing to produce.”

Murray Gray, the scientific director for the Center for Oil Sands Innovation at the University of Alberta, said that about two years ago, Alberta backed away from plans to use the petroleum coke as a fuel source, partly over concerns about greenhouse-gas emissions. Some of it is burned there, however, to power coking plants.

The Keystone XL pipeline will provide Gulf Coast refineries with a steady supply of diluted bitumen from the oil sands. The plants on the coast, like the coking refineries concentrated in California to deal with that state’s heavy crude oil, are positioned to ship the waste to China or Mexico, where it is burned as a fuel. California exports about 128,000 barrels of petroleum coke a day, mainly to China.

Tony McCallum, a spokesman for the Canadian Association of Petroleum Producers, played down the impact of Keystone XL. “Most of the Canadian oil earmarked for the U.S. Gulf Coast is to replace declining heavy oil imports from Mexico and Venezuela that produces the same amount of petcoke, so it doesn’t create a new issue,” he wrote in an e-mail.

Much of the new coking investment has gone into refineries in the Midwest to allow them to take advantage of the oil sands. BP, the British energy company, is building what it describes as the second-largest coke refinery in Whiting, Ind. When completed, the unit will be able to process about 102,000 barrels of bitumen or other heavy oils a day.

And what about the leftover coke? The Environmental Protection Agency will no longer allow any new licenses permitting the burning of petroleum coke in the United States. But D. Mark Routt, a staff energy consultant at KBC Advanced Technologies in Houston, said that overseas companies saw it as a cheap alternative to low-grade coal. In China, it is used to generate electricity, adding to that country’s air-quality problems. There is also strong demand from India and Latin America for American petroleum coke, where it mainly fuels cement-making kilns.

“I’m not making a value statement, but it comes down to emission controls,” Mr. Routt said. “Other people don’t seem to have a problem, which is why it is going to Mexico, which is why it is going to China.”

“One man’s junk is another man’s treasure,” he said. One of the world’s largest dealers of petroleum coke is the Oxbow Corporation, which sells about 11 million tons of fuel-grade coke a year. It is owned by William I. Koch, a brother of David and Charles.

Lorne Stockman, who recently published a study on petroleum coke for the environmental group Oil Change International, says, “It’s really the dirtiest residue from the dirtiest oil on earth,” he said.

Rhonda Anderson, an organizing representative of the Sierra Club in Detroit, said that the mountain’s rise took her group by surprise, but it had one benefit.

“Those piles kind of hit us upside to the head,” she said. “But it also triggered a kind of relationship between Canada and the United States that’s allowed us to work together.”

Berkshire Hathaway Profit Rises 51%

Results beat expectations, and were released after Berkshire shares earlier in the day closed at a record high. On Saturday, Warren E. Buffett, the company’s chairman, and Charlie Munger, the vice chairman, will field shareholder questions at the company’s annual meeting in its hometown, Omaha.

Net income increased to $4.89 billion, or $2,977 per Class A share, from $3.25 billion, or $1,966 a share, a year earlier. Operating profit increased 42 percent to $3.78 billion, or $2,302 a share, from $2.67 billion, or $1,615 a share.

Revenue rose 15 percent from a year ago to $43.87 billion.

Analysts on average expected profit of $1,996 a share, according to Thomson Reuters.

Book value a share, Mr. Buffett’s preferred measure of growth, increased 5.5 percent from year end to $120,525 per Class A share, and Berkshire’s cash stake grew over that period to $49.09 billion from $46.99 billion.

About $12 billion of cash is being used to finance a purchase by Berkshire and Brazil’s 3G Capital of the ketchup maker H. J. Heinz.

Operating profit from insurance operations, including the Geico car insurance and General Re reinsurance businesses, doubled to $1.7 billion from $845 million.

Nearly all of the improvement came from underwriting, where profit rose to $901 million from $54 million, in part because of a $255 million pretax gain in its reinsurance business.

Operating profit from noninsurance business rose 12 percent to $2.25 billion from $2 billion.

Berkshire owns more than 80 business units that sell things like athletic apparel, chemicals, furniture and ice cream. It also owns tens of billions of dollars of common stocks like Coca-Cola, International Business Machines and Wells Fargo.

In trading on Friday, Berkshire Class A shares closed up $2,047, or 1.2 percent, at $162,904. Its Class B shares closed up $1.34, or 1.2 percent, at $108.64.

Study Finds Health Care Use Rises With Expanded Medicaid

New results from a landmark study, released on Wednesday in The New England Journal of Medicine, go a long way toward answering those questions. The study, called the Oregon Health Study, compares thousands of low-income people in Oregon who received access to Medicaid with an identical population that did not.

It found that those who gained Medicaid coverage spent more on health care, making more visits to doctors and trips to the hospital. But the study suggests that Medicaid coverage did not make those adults much healthier, at least within the two-year time frame of the research, judging by their blood pressure, blood sugar and other measures. It did, however, substantially reduce the incidence of depression, and it made them vastly more financially secure.

“There was this view that Medicaid coverage would not do much for the low-income uninsured, either because they had access to charity care or because Medicaid is not good insurance,” said Amy Finkelstein of the Massachusetts Institute of Technology. “This rejects that notion entirely.” Her work on the Oregon study contributed to her receipt last year of the John Bates Clark Medal, a laurel for younger economists considered second only to the Nobel Memorial Prize in Economic Science for those in the profession.

Currently about 50 million Americans, nearly all them poor, receive health care coverage under Medicaid, a federal program administered by the states. But most states do not provide Medicaid coverage to adults without disabilities or dependent children, no matter how poor they are.

Health economists anticipate that new enrollees to the Medicaid program will swell the country’s health spending costs by hundreds of billions of dollars over time. In 2014, at least 18 states and the District of Columbia will provide coverage to all adults with incomes below 133 percent of the federal poverty line. That currently would translate to coverage for all individuals with incomes below about $15,000 and for households of four people receiving less than about $31,000.

Many more states might join in the expansion in the coming months or years. The Affordable Care Act, President Obama’s health care law, has the federal government pay for a large majority of the increased Medicaid costs in perpetuity, making the financial burden on states much smaller.

The unique Oregon study came about when the state found itself with enough money to provide additional Medicaid coverage to about 10,000 low-income adults. Many times that number qualified.

Rather than deny coverage to all Oregonians, the state established a lottery, to distribute coverage randomly. That gave economists and other social scientists a once-in-a-lifetime chance to perform a randomized control experiment — the gold standard in medical and scientific research, but a rarity in much of social science — isolating the effect that coverage had on health and broader well-being.

An earlier round of results from the Oregon Health Study analyzed assessments of health and well-being reported by study participants, as well as data from hospitals and credit agencies. This second major set of results stems from biometric data collected at in-person visits with participants. A huge team of researchers collected blood samples, blood pressure readings and weight measurements from thousands of Oregonians; about half of them had won access to Medicaid in a lottery and half had not.

The researchers found that Medicaid coverage did not significantly affect the prevalence or diagnosis of hypertension or high cholesterol, or the use of drugs used to treat those conditions. It significantly increased the probability that a person would receive a diagnosis of diabetes and be treated, though it did not reduce blood sugar levels noticeably.

Where Medicaid seemed to have the strongest measured impact was on depression. Getting Medicaid coverage reduced the probability of a positive screening by more than 30 percent.

“The authors are almost tilting the spin on the story to be a little more pessimistic than I would have been,” said John Holahan of the Urban Institute, responding to the new findings.

“There are some positive effects on health,” he said, calling the effect on depression “especially strong.”

Confirming previous findings released by the researchers, the new round of results found that adults covered by Medicaid increased their use of a broad number of health services, like mammograms and cholesterol tests. That increased their medical spending by about 35 percent, compared to adults who did not win Medicaid coverage in the lottery.

Some researchers had theorized that getting Medicaid coverage would lead to a spike in use of medical services by low-income adults. Once covered, they might visit the doctor, have conditions checked out and treated, then stop using medical services as much.

But the second set of results from the Oregon study shows that is not the case. There is no spike in use of health services, nor is there any decline later on. Rather, use of the health system increased, and that increase persisted between the first year and the second year of the study.

“They go to the doctor more often, they visit the hospital more often, they use more prescription drugs, they are more likely to use preventive care,” said Katherine Baicker, a Harvard professor, co-author of the study and former economic adviser to President George W. Bush. “There is no evidence of a spike of utilization from pent-up demand.”

MasterCard Profit Rises but Revenue Misses Estimates

Visa reported rising growth in the key U.S. market in contrast to MasterCard, which has suffered as some of its biggest issuers, including Citigroup Inc, struggle.

Visa stock rose 2.2 percent in after-hours trading while shares in MasterCard, which reported earlier in the day, closed down 2.4 percent on the New York Stock Exchange.

Both reported purchase volume increases of 9-10 percent from a year earlier, after adjustment for currency fluctuations, but MasterCard said its growth was slowing in the United States, the biggest market.

Annual growth in MasterCard's U.S. purchase volumes eased to 4.6 percent from 7.1 percent in the previous quarter. Visa's annual growth edged up to 4.1 percent from 3.0 percent. (http://link.reuters.com/xep77t)

As well, MasterCard was downbeat about coming months.

"In the U.S., the second quarter right now looks a little bit dodgy, but there could be some upside going into the second half of 2013 as far as U.S. economic growth is concerned," MasterCard Chief Executive Ajay Banga said on a post-earnings conference call.

Visa raised its fiscal 2013 earnings forecast to around 20 percent in earnings per share from a previous outlook for gains in the high-teens.

Consumer sentiment across the globe has remained muted, given the uncertainty in Europe and China's slowing growth. U.S. consumer spending has taken a hit from higher payroll taxes.

MasterCard said it signed a memorandum of understanding with China's Alibaba Group, Asia's largest e-commerce company, to offer epayment services to potentially 800 million Alibaba customers.

Both MasterCard and Visa are trying to capture new business as consumers turn increasingly to cards and digital payments instead of cash.

They are also experimenting with mobile payments as they fear losing business to upstart technology companies.

Digital wallets are electronic versions of real wallets that store card and bank information and can be used to buy things online quickly and anonymously. They are increasingly being used on smartphones to shop in retail stores, posing a threat to networks such as MasterCard, Visa and American Express.

Visa's net profit fell to $1.27 billion (815.7 million pounds) from $1.29 billion a year earlier. But, on a per-share basis, profit rose to $1.92 per Class A share from $1.91, after share buybacks.

Total operating revenue rose 15 percent to $2.96 billion.

Analysts on average had expected a profit of $1.81 per share on revenue of $2.85 billion, according to Thomson Reuters I/B/E/S.

MasterCard net income rose to $766 million, or $6.23 per share, in the first quarter, from $682 million, or $5.36 per share, a year earlier.

Analysts on average were expecting the company to earn $6.18 per share, according to Thomson Reuters I/B/E/S.

Revenue rose 8.4 percent to $1.91 billion but fell short of the average analyst estimate of $1.93 billion.

Visa shares were up 2.2 percent at $169.64 in after market trade on Wednesday.

MasterCard shares closed down 2.3 percent at $539.82 on Wednesday. They had previously risen about 6 percent this year.

(Editing by Rodney Joyce)

DealBook: Wells Fargo Profit Rises 22%

Justin Sullivan/Getty ImagesA Wells Fargo branch in Daly City, Calif.

Wells Fargo posted a 22 percent increase in first-quarter profit on Friday as the bank, which is the nation’s largest home lender, continued to notch record gains even while its mortgage machine slowed.

The bank, which benefited from recent effort to curb expenses, reported earnings of $5.2 billion, or 92 cents a share, compared with $4.25 billion, or 75 cents a share, in the period a year earlier. The results outpaced estimates of analysts polled by Thomson Reuters, who had forecast earnings of 88 cents a share.

For Wells, which is based in San Francisco, it was the 13th consecutive rise in quarterly earnings and the eighth consecutive record.

“Wells Fargo delivered outstanding first-quarter 2013 results for our shareholders,” the bank’s chief executive, John G. Stumpf, said in a statement.

In a downside for the bank, however, its revenue slipped slightly, to $21.3 billion, compared with $21.6 billion in the period a year earlier.

And the bank’s mortgage business, riding years of record gains, finally showed it was unable to sustain the gains.

The bank’s mortgage banking income, for example, slipped 3 percent. And while handling $109 billion in mortgage originations might be a feat for some banks, it represented a 16 percent drop for Wells Fargo.

The results could present problems for Wells Fargo, whose fortunes rise and fall with the mortgage market. The bank now creates roughly a third of all mortgages in the country.

The results could also signal a flattening out of the broader mortgage market. As the Federal Reserve cut interest rates in recent years, it prompted millions of borrowers to refinance their home loans to reduce costs.

Now, that pipeline of borrowers could dry up, unless interest rates once again drop significantly or the housing market makes a fuller recovery. Refinancing accounted for 65 percent of Wells Fargo’s mortgage origination in the first quarter, down from 76 percent in the period a year earlier.

Still, the bank’s lending business showed some signs of strength. In the first quarter, that business helped lead the growth, as the banks overall loan portfolio grew 4 percent. And profit in the community banking division, which includes Wells Fargo’s retail branches and mortgage business, climbed 24 percent, to $2.9 billion.

“Loans and deposits demonstrated continued growth in a challenging economic environment,” Mr. Stumpf said.

But the strong returns were spread across the bank. The unit that caters to corporations showed improvement, with profits rising 9 percent. The bank also reported a 14 percent profit gain in its wealth management business.

It was a welcome sign for the banking industry.

Wells Fargo, along with JPMorgan Chase, kicked off bank earnings season. Citigroup, Goldman Sachs and other Wall Street giants will report next week.

Consumer Spending Rises, Indicating Sturdy Growth

The data on Friday also showed a rebound in income growth, putting the economy in a better shape to deal with tighter fiscal policy, particularly $85 billion in across-the-board federal government spending cuts, known as the "sequester."

"The economy is in a good place now in terms of momentum and strength, and it will need it as the government spending cuts will take something off growth as the year progresses," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.

Consumer spending increased 0.7 percent last month after a 0.4 percent rise in January, the Commerce Department said.

Though part of the increase in spending, which accounts for about 70 percent of U.S. economic activity, was because of higher gasoline prices, Americans also bought long-lasting goods such as automobiles and spent more on services.

Gas prices at the pump increased 35 cents a gallon last month.

After adjusting for inflation, spending was up 0.3 percent after advancing by the same margin in January. As a result, economists said consumer spending in the first quarter was on track to record its fastest growth pace since 2010.

"It appears that consumer spending actually accelerated in the first quarter despite the tax hikes implemented at the start of the year," said Daniel Silver, an economist at JPMorgan in New York.

Some economists bumped up their first-quarter economic growth estimates.

Barclays raised its gross domestic product forecast by 0.7 percentage point to 3.3 percent. Macroeconomic Advisers lifted their estimate by three-tenths of a point to 3.5 percent.

The economy grew at only a 0.4 percent annual pace in the fourth quarter.

A separate report showed households this month shrugged off the deep government spending cuts, focusing instead on a steady labor market improvement, which is starting to boost wages.

The Thomson Reuters/University of Michigan's index of consumer sentiment rose to 78.6 from 77.6 in February.

"Consumers have discounted the administration's warning that economic catastrophe would follow the reductions in federal spending, and consumers have renewed their expectation that gains in employment will accelerate through the rest of 2013," said survey director Richard Curtin.

And they have reason to be optimistic. Income increased a healthy 1.1 percent after tumbling 3.7 percent in January.

Personal income had increased sharply in December as businesses rushed to pay dividends and bonuses before tax hikes took effect this year. That also skewed income data for January.

U.S. financial markets were closed for Good Friday and will reopen on Monday.

LITTLE SIGN OF FISCAL DRAG

A 2 percent payroll tax cut expired on January 1 and tax rates for wealthy Americans also went up. The consumer spending and sentiment reports were the latest to show little sign the tighter fiscal policy has been a major drag on the economy.

Employment growth gained steam in February, factory activity touched a 1-1/2 year high and first-time filings for jobless benefits have only increased modestly so far in March.

Last month, the income at the disposal of households after inflation and taxes increased 0.7 percent after dropping 4 percent in January.

With income growth outpacing spending, the saving rate - the percentage of disposable income households are socking away - rose to 2.6 percent from 2.2 percent in January.

The higher gasoline prices pushed up inflation, with a price index for consumer spending rising 0.4 percent after being flat for two straight months. February's increase in the PCE index was the largest since August.

But a core reading that strips out food and energy costs rose only 0.1 percent after increasing 0.2 percent in January, showing no sign of underlying inflation pressures.

Over the past 12 months, inflation has risen 1.3 percent after a similar gain in the period through January.

Core prices were up 1.3 percent, well below the Federal Reserve's 2 percent target. They also had risen 1.3 percent in the 12 months through January.

The benign inflation picture should give the U.S. central bank room to continue with its monetary stimulus as it seeks to boost job growth.

The Fed said last week it would maintain its monthly $85 billion purchases of mortgage and Treasury bonds until it saw a substantial improvement in the job market.

"This is plenty of ammunition for all those Fed officials, who currently do not want to scale back the degree of monetary accommodation," said Harm Bandholz, chief U.S. economist at UniCredit Research in New York.

"For investors this must look like Goldilocks: Better economic data and ongoing monetary accommodation at the same time."

(Reporting by Lucia Mutikani, additional reporting by Luciana Lopez in New York; Editing by Neil Stempleman)

S.&P. Rises for 4th Day, a Light One

Stocks finished modestly higher on Wednesday, with the Standard & Poor’s 500-stock index up for a fourth consecutive session, although volume was one of the year’s lowest on the day ahead of the Thanksgiving holiday.

About 4.76 billion shares were traded, as compared with the year-to-date daily average volume of 6.5 billion shares.

Investors welcomed news that a cease-fire was declared to end the flare-up in violence between Israel and Hamas, though the lack of a deal to release emergency aid for Greece limited the market’s advance.

Investors also remained anxious about the mandatory tax increases and spending cuts that would go into effect in the new year if a deal was not reached to prevent it. Policy makers are not expected to get back to negotiations until after Thanksgiving.

The Dow Jones industrial average gained 48.38 points, or 0.38 percent, to end at 12,836.89. The S.& P. 500-stock index added 3.22 points, or 0.23 percent, to finish at 1,391.03. The Nasdaq composite index rose 9.87 points, or 0.34 percent, to close at 2,926.55.

Fears that the tax and spending discussions in Washington could be drawn out or yield no resolution have been at the forefront of investors’ minds in recent weeks. Combined with concerns about the euro zone’s continued debt problems, the worries had driven a sell-off that has taken more than 5 percent off the S.& P. 500 since Election Day in early November.

Interest rates were steady. The Treasury’s benchmark 10-year note fell 4/32, to 99 16/32, and the yield rose to 1.68 percent from 1.67 percent late Tuesday.

St. Jude Medical shares tumbled 12.2 percent to $31.37 after an inspection report from health regulators raised new safety concerns about one of the company’s leads that are used with implantable defibrillators, analysts said.

A modest gain in International Business Machines helped the Dow outperform the other indexes. I.B.M. rose 0.6 percent to $190.29.

Another Dow component, Hewlett-Packard, climbed 2 percent to close on Wednesday at $11.94, recouping a small slice of Tuesday’s loss, when the stock slid to a 10-year low after the computer and printer maker reported a $5 billion charge related to what it called accounting improprieties at Autonomy, a British software company that H.P. bought last year.

At least two brokerage firms have cut their ratings on H.P.’s stock, while analysts at several firms lowered their price targets.

The market did not derive much direction from the day’s economic data, with initial jobless claims falling last week, as expected.

On Thursday, the stock markets in the United States will be closed for Thanksgiving, and on Friday, they will close at 1 p.m.

Chrysler Profit Rises 80 Percent

DETROIT — Chrysler, the third-largest Detroit automaker, said on Monday that its third-quarter profit rose 80 percent on the strength of new models, less debt and steadily growing sales in both American and international markets.

The company said it earned $381 million in net income, up from $212 million in the same period a year ago. Revenue for the quarter was $15.5 billion, an 18 percent increase from $13.1 billion in the same period last year.

The results could be seen as the latest evidence that Chrysler’s improbable comeback from its government bailout and bankruptcy was not only sustainable, but accelerating.

“We’ve changed the conversation at Chrysler Group,” said Sergio Marchionne, the chief executive of both Chrysler and its Italian parent, Fiat. “We continue to work feverishly and are pleased to see that our all-consuming aspiration for excellence is translating into results.”

Chrysler’s solid results are propping up the faltering European operations of Fiat, which was scheduled to release its third-quarter earnings on Tuesday.

Mr. Marchionne may announce new moves to cut losses at Fiat, which is struggling to cope with the steepest decline in sales in Europe in nearly 20 years.

But there’s no need anymore to fix Chrysler, which has repaid its debt to the American taxpayers and totally revamped its product lineup since emerging from bankruptcy in 2009.

The company said its worldwide sales increased 12 percent in the third quarter to 556,000 vehicles. For the first nine months of the year, it sold 1.7 million vehicles, up from 1.4 million in the same period in 2011.

Before its financial collapse, Chrysler relied mostly on its pickups, S.U.V.’s and minivans to contribute the bulk of its profit. The company was particularly vulnerable to swings in gas prices, which drove consumers to buy smaller, more fuel-efficient passenger cars from other manufacturers.

With the assistance of Fiat technology and parts, Chrysler has broadened its lineup to include a compact car, the Dodge Dart, which gets 40 miles per gallon of gas. The company is also putting more efficient engines into its bread-and-butter models like the Jeep Grand Cherokee and Chrysler 300.

Mr. Marchionne on Monday reaffirmed Chrysler’s full-year targets of $1.5 billion in net income and global shipments of 2.3 million vehicles.

Chrysler’s balance sheet also continues to improve as its business grows. The company said it had $11.9 billion in cash at the end of the third quarter, compared with $9.5 billion in the same period a year ago.

The company’s net industrial debt was $693 million at the end of the quarter, considerably lower than the $2.86 billion in debt on its books a year ago.

Chrysler’s two American rivals, General Motors and Ford, are expected to report lower earnings for the third quarter than a year ago, primarily because of growing losses in the troubled European car market. Ford was scheduled to report on Tuesday and G.M. on Wednesday.

Apple Profit Rises 24% on iPhone 5 Sales

That forecast for the holiday quarter was the main blemish on an otherwise solid financial report. Apple said its fiscal fourth-quarter profit jumped 24 percent, largely because of a surge in sales of the iPhone, a product that now accounts for nearly half of the company’s sales.

The quarter ended Sept. 29 was the first to reflect sales of the iPhone 5, which was introduced Sept. 21. Apple has struggled to deliver enough of the devices to meet customer demand, making them tough to find in many retail stores. The company’s shares have fallen 9 percent since the product hit the market, in part because of investor concerns about short supply.

In a conference call with analysts, Timothy D. Cook, Apple’s chief executive, said that demand for the new iPhone was “extremely robust” and that the company had a significant number of back orders for it. He said production had picked up substantially since earlier this month.

The profit report was slightly below analysts’ expectations, and Apple’s stock was largely unchanged in after-hours trading. It fell 1.2 percent to $609.54 in regular trading.

Underscoring how drastically Apple’s business has been transformed by mobile products, revenue from the iPhone rose 56 percent to $17.13 billion, making up 48 percent of the company’s total revenue. It sold 26.9 million iPhones, 58 percent more than a year earlier.

Apple said its net income was $8.22 billion, or $8.67 a share, compared with $6.62 billion, or $7.05 a share, a year ago. Revenue for the period rose 27 percent to $35.97 billion, and revenue for the full fiscal year was $156.5 billion. To put that in perspective, Apple’s revenue for the year exceeded that of Microsoft, Google and Facebook combined.

Analysts surveyed by Thomson Reuters had expected Apple to report earnings of $8.75 a share and revenue of $35.8 billion. The results were well ahead of Apple’s own forecast of $7.65 a share in earnings and $34 billion in revenue for the period.

It was the company’s projections for its current holiday quarter that raised eyebrows among investors. The company forecast earnings of $11.75 a share and revenue of $52 billion for the period, typically its biggest of the year. That implied a gross profit margin of 36 percent, lower than the 40 percent margin Apple reported in the fourth quarter, said Rob Cihra, an analyst at Evercore Partners.

Apple executives attributed the decline to higher costs associated with building its new products, which tend to get less expensive over time as Apple gets better at manufacturing them. While this pattern is familiar, the company said the sheer magnitude of its product-line overhaul made the decline in gross margin more severe. In addition to the new iPhone and iPods, Apple has announced new Macs and a smaller version of the iPad, called the iPad Mini.

Mr. Cihra said the company might be lowballing its estimates. “They have a history of beating their guidance,” he said.

Apple said its revenue from the iPad rose 9 percent to $7.51 billion.

As with most Apple products, the iPad Mini’s arrival was widely anticipated after months of rumors and leaks about the product in the news media. Mr. Cook said the rumors led people to postpone tablet purchases.

At the iPad Mini event, Apple hinted that sales of the iPad had been slower than expected when it revealed that the company had sold 100 million of the devices since their introduction two years ago, causing some analysts to trim their forecasts for the quarter.

“I think on balance it was pretty in line with reduced expectations,” said Toni Sacconaghi, an analyst at Bernstein Research.

At a starting price of $329, the iPad Mini is more expensive than many people were hoping, and well above the sub-$200 bar for smaller tablets set by Amazon and Google. But the device could still open the iPad to a new swath of customers who were put off by the larger size of the original.

Consumer Price Index Rises 0.6% on Surge in Gasoline

Other data showed only mild underlying inflation pressures, potentially giving the Federal Reserve room to keep interest rates low to boost the economy.

The U.S. economy has shown signs of faster growth in recent months but Tuesday's reports highlighted some of challenges faced by the economy.

"There are still a lot of global headwinds," said Jonathan Basile, an economist at Credit Suisse in New York.

The Fed said U.S. factory output rose only a modest 0.2 percent in September, which many analysts said was a sign the cooling global economy is weighing on American manufacturers.

The increase in output was not enough to make up for a sharp decline in August, and manufacturing production fell at a 0.9 percent annual rate in the third quarter.

The European debt crisis has been weighing on the global economy, denting demand for goods produced by manufacturers from China to the United States. U.S. exports fell 1 percent in August.

Also, business investment has recently cooled in the United States, putting another drag on factories. This is probably due to worries over the global economy and the possibility the U.S. government could cut spending and raise taxes next year.

"At a time when the economy needs all the help it can get, business spending is stalling," Wells Fargo said in a research note.

MILD CORE

U.S. stocks traded higher on Tuesday as strong earnings from key companies soothed fears about the global economy, while yields on Treasury debt rose.

In a separate report, the Labor Department said a surge in the cost of gasoline pushed the country's Consumer Price Index up 0.6 percent in September.

Higher costs at the pump force many American consumers to cut back on other spending, although retail sales data for September released on Monday pointed to a pick-up in consumer spending despite higher fuel costs.

The government said weekly earnings for workers were flat in September when adjusting for inflation.

Crude oil and gasoline prices rose over the summer as the United States and its allies raised pressure on Iran over its nuclear program. Prices for gasoline have comes down slightly in recent weeks, which could ease pressure on consumers this month.

The inflation report also showed that prices outside food and energy - seen as a barometer of inflation trends - rose only 0.1 percent in September for the third straight month.

"The Fed can confidently focus on propping up the economy because inflation is not a problem," said Cary Leahey, an economist at Decision Economics in New York.

The Fed said last month it would buy $40 billion in mortgage-backed securities every month until the jobs outlook improves substantially.

Another report suggested the Fed's stimulus plan was gaining traction in the housing sector. Home-builder sentiment rose to a fresh six-year high in October, the National Association of Home Builders said.

In the 12 months to September, overall consumer prices increased 2 percent, the fastest pace since April and up from 1.7 percent in August. Core prices also rose 2 percent in the year through September, up a tenth of a point from August's reading.

While most economists don't see inflation threatening the U.S. economy, some believe the Fed would tolerate prices rising faster than the central bank's 2 percent target over the shorter term to allow stronger economic growth as the country recovers from the 2007-09 recession.

Allowing this view to blossom, the Fed said in September it would keep interest rates low for a long time even after the economy strengthens.

"Core inflation was low and unthreatening (in September), but in truth neither matters to a Fed monetary policy committed to lowering unemployment," said Joseph Trevisani, a market strategist at Worldwide Markets in Woodcliff Lake, New Jersey.

(Additional reporting by Alister Bull in Washington and by Ryan Vlastelica and Richard Leong in New York; Editing by Andrea Ricci)