www.newsday.com By ANNE D'INNOCENZIO AP Business Writer

February 23, 2003, 1:52 PM EST NEW YORK -- Spring is looking like another tough sell for the nation's ailing retailers. Merchants' hopes for brighter days as spring sales get under way were dimmed by heavy snow that blanketed the Northeast during President's Day weekend, wiping out the much-anticipated sales bonanza needed to jump-start the season. Add the looming uncertainty about war with Iraq and a sluggish job market, and retailers are likely to stay in the doldrums. The latest blow came as department and mall-based apparel stores were grappling with the government's heightened terrorist alert, which made consumers even edgier and sent many on buying sprees for batteries and duct tape at such places as Home Depot Inc. and Wal-Mart Stores. "Consumers are having a hard time getting into spring, not knowing what is going to happen in March and April," said C. Britt Beemer, chairman of America's Research Group in Charleston, S.C. "It's been a yo-yo." In fact, consumers like April Mason and Andrea Tortora said such factors have made them less interested in buying spring apparel, like micro-miniskirts. "It seems too cold and snowy to think about spring clothes. I haven't walked into a department store since right after Christmas when I returned some gifts," said Mason, a 29-year-old public relations executive from New York City. And even though she feels her job is secure, she's sticking to basics because of the political uncertainties. "I won't be buying a pair of expensive sandals," she added. Tortora said she, too, has maintained "a wait-and-see attitude" when it comes to spending on frivolous items, although she did buy a dishwasher, garbage disposal and new faucets for her Cincinnati home. February is when stores clear out winter leftovers and do some regular-price selling of spring merchandise, but this month is winding up to be a wash for many retailers after a weak holiday and January period. Michael P. Niemira, vice president at Bank of Tokyo-Mitsubishi Ltd., now expects same-store sales for February to be up a modest 0.5 percent from a year ago. Same-store sales are sales at stores open at least a year, and are considered an important indicator of a retailer's health. Niemira noted that last weekend's snowstorm, the worst in the Northeast since 1996, shaved about 0.5 percentage points from the monthly sales pace. The bulk of the nation's retailers will be reporting their same-store sales on March 6. President's Day weekend is one of the most important sales days of the year. Niemira estimates that last year, the holiday weekend accounted for 13.1 percent of the total month's sales in the Northeast. And while stores like Macy's, which closed 25 of its 100 stores in its Eastern division on Monday, are repeating President Day sales this weekend, many analysts don't expect merchants to recoup lost business. "A little bit of the business will be recovered, but you never make up the business," said Richard Jaffe, an analyst at UBS Warburg Securities. "Are you going to shop twice (as much) this Saturday? You will or you won't shop." Snowstorm or not, political and economic uncertainties continue to plague retailers, as evidenced by this week's earnings reports from several major merchants. While the good news is that merchants preserved fourth-quarter profits with lean inventory and cost-cutting measures, they still face the problem of inspiring consumers to spend. Robust sales in Wal-Mart Stores' international division helped boost fourth-quarter results, beating analysts' expectations, while increased earnings from its credit card division helped Target Corp. match Wall Street estimates of modest earnings growth. J.C. Penney Co. Inc., which is in the midst of a turnaround, saw profits double in the fourth quarter, helped by strong sales of jewelry, home goods and clothing. Results beat Wall Street expectations. Still, Allen Questrom, chairman and chief executive officer, remained cautious. "As we begin the third year of a very complex turnaround, we face internal challenges and many uncertain external factors, but we believe that each of our businesses will continue to improve," Questrom said in a statement.

www.vheadline.com Posted: Sunday, February 23, 2003 By: Patrick J. O'Donoghue

According to a report in Maracaibo newspaper Panorama, military authorities in Bogota, Colombia have informed the Venezuelan government that a so-called radical wing of Venezuela’s opposition has been attempting to purchase explosives in Colombia.

Unconfirmed sources say the looney fringe’s objective is to blow up a tanker bringing gasoline into Venezuela for domestic consumption as it comes into Maracaibo Port. 

Panorama adds that the idea is to make the planned explosion look like an accident.  The government hasn’t issued any statement on the allegations.

asia.reuters.com Sun February 23, 2003 09:38 AM ET By Neil Chatterjee

LONDON (Reuters) - World oil prices now near two-year highs are set to slide 30 percent in the second half of the year after any U.S.-led war on Iraq, a Reuters poll found.

The survey of 14 oil analysts and consultants, undertaken on Feb. 10-21, projects prices dropping nearly $10 to $22.46 a barrel in the second half of 2003, from $32 a barrel now.

It forecasts $27.53 a barrel for the first half of the year and gives a 2003 average of $24.30, down from $25.03 in 2002. Brent so far this year has averaged $30.98, forcing many analysts to revise forecasts higher.

Prices are expected to slump in the second half after being boosted in recent months by a strike in Venezuela and fears of an attack on Baghdad.

"Once war is over, it will come down pretty sharpish, and Venezuela will be less of a factor," said Matthew Parry of the Economist Intelligence Unit.

Analysts expect prices to slide after a short war in the next few months, a projection which, if borne out, would provide a welcome stimulus to a world economy struggling for growth as energy costs stay high.

"Most people are working on the basis of a big slide later on -- the economic impact will be beneficial," said John Waterlow of consultants Wood Mackenzie.

"The economy needs something to give it a boost -- the simplest way is an oil price drop."

Finance ministers from the Group of Seven wealthiest nations met in Paris on Friday to discuss what can be done to stop the rot in the global economy, following a poor set of U.S. economic data on Thursday.

Economists estimate every $10-a-barrel rise in oil over a year cuts world growth by 0.5 percentage points.

Oil prices have spiralled on worries that conflict with Iraq could spread in the Middle East, which supplies around one third of the world's oil.

First quarter prices have also been boosted by the prolonged strike in Venezuela, which has slashed oil shipments from the world's fifth biggest exporter.

Analysts have upped their price forecasts for the year by about $1.50 a barrel, over six percent, in the past month as the 11-week-old strike helped reduce U.S. crude inventories to 27-year lows.

"The Venezuela strike has tightened stocks considerably, and there'll be a need for stock building in the second quarter," said analyst Lawrence Eagles of brokers GNI-Man.

The U.S. Energy Information Administration said this month that it expected U.S. crude oil to stay above $30 a barrel for the rest of the year, though most analysts see oversupply by the fourth quarter.

OPEC COMPLIANCE?

Oil demand growth will be too sluggish to cope with the increased supply once Venezuelan production recovers and Iraqi output resumes after a war, they said, while non-OPEC countries' output is also on the up.

Differences in second half price forecasts depended on the extent to which oil cartel OPEC could control its production limits.

"We think there will be a significant fall off because of new capacity from the likes of Algeria and Nigeria, which will put increasing strain on OPEC cohesion," said Richard Savage of Bank of America.

"We think it will be higher for longer -- our view is that OPEC can control prices between $22-$28 in the medium term," said an analyst at another bank, which revised its figures upwards this week.

www.bayarea.com Posted on Sun, Feb. 23, 2003 By George Avalos CONTRA COSTA TIMES

War fears ease -- markets rally. War jitters grow -- markets slump.

This back-and-forth, up-and-down gyration has become a familiar dance on the periphery of the Persian Gulf crisis. Some economists say consumers and business executives, along with Wall Street's hotshots, have hedged their bets about buying and investing until they can figure out the end game in the standoff over Iraq.

Nobody knows whether there will be a war. No one can say for sure how a war would play out. Would it be over in a week or two? Even if it's over quickly, might oil fields in Iraq be destroyed, which is what Iraqi leader Saddam Hussein did in Kuwait? Will there be a diplomatic solution or a coup that ousts Saddam, any banned weapons, or both? Will the U.S. military encounter unwelcome surprises that bog down the war's progress?

When one gets down to it, the only thing that's clear is that the outlook is murky.

"The current uncertainty and the worry about the war is already taking a toll on the economy," said economist Tapan Munroe, principal owner of Moraga-based Munroe Consulting Group. "Whether it turns out to be a short war or a long war, that has already happened."

Riding a roller coaster

The volatile nature of consumer, business and investor sentiment is underscored by this year's roller coaster for stocks, which have fluctuated wildly depending on news driven by the Iraqi crisis.

"You see the relief with which investors grasp at the straw of some diplomatic solution," said Dan Van Dyke, an economist with Berkeley-based Rosen Consulting Group. "Any glimmer, just the merest little shift, you see the stock market rally or fall."

The buildup to the last gulf war, which came in the middle of an eight-month recession, produced wild swings in the stock market.

On one memorable day, Jan. 9, 1991, stocks soared while U.S. and Iraqi diplomats held a six-hour meeting in Geneva to attempt to find a last-minute diplomatic solution that could stave off a war. But as soon as the U.S. negotiator emerged to disclose that talks had collapsed, stocks immediately plunged and crude oil prices rocketed higher. Once the war began and it became clear U.S.-led forces had the upper hand over Iraq, oil prices plummeted and stocks rallied to finish the year up 26 percent.

The current economic uncertainty is reflected not only in the swings of the stock market but other economic data. Gross domestic product registered a gain of only 0.7 percent in the fourth quarter, down sharply from the third quarter's 4 percent increase. While industrial production rose in January by the largest percentage since July, consumer confidence fell. Overall retail sales fell 0.9 percent last month, but excluding the volatile automobile category, they posted their biggest gain since September 2000.

A shaky Bay Area

The lack of clarity could be especially harmful to the Bay Area. After all, the region is already the consensus pick as the major urban center with the weakest economy in the nation.

"In the Bay Area, except for security-related technology companies, I'm afraid we're not off our lows yet," Van Dyke said. "We are still reaching for a bottom as far as jobs go in the Bay Area. And the uncertainty surrounding geopolitical events definitely doesn't help."

Still, some consumers say they haven't curbed their spending, despite the lack of a visible end game in Iraq.

"Life goes on," said Debbie DeSantis, who resides in Livermore with her husband and two children. "We're still doing stuff. We ordered a new couch. We go on vacation. We're talking about another vacation. We won't hold back. The only thing we won't rush out to buy is duct tape and plastic."

Bob and Kathy Alpert, Concord residents who own Bentelino's delicatessen in the same city, also say they haven't cut back -- yet.

"We bought some recliners," Kathy Alpert said. "We will probably put in some carpeting or new floors for the living room."

But things could change if a war begins. Uncertainty over the outcome could prompt the Alperts to defer some purchases. The big problem is that the economy isn't all that great right now, especially in the Bay Area.

"Gas prices are going up, and the stock market is going down," Bob Alpert said. "There is a lot of negativism in the air. That doesn't help the attitude of consumers. It hurts our deli. We're down a little bit in our business."

Robert Marshall, who owns Postal Annex in Concord, also sees a slump in business.

"As a business person, I'm worried about everyone cutting back," Marshall said. "I'm seeing a lot of people cutting back on their spending."

The quick fix

While the outcome of the crisis remains uncertain, what does seem clear is that there will be some sort of resolution relatively soon to the current limbo of U.N. weapons inspections. That could cause the pace of economic and financial market activity to accelerate.

"A quick resolution would be a tonic," said Sung Won Sohn, chief economist at San Francisco-based Wells Fargo Bank. "We can get back to business. Oil prices would come down. Consumer and business confidence would be restored. Uncertainty is killing us."

Sohn believes a quick resolution of the crisis means the economy could grow at a 5 percent annual pace, which would be at least twice as fast as what's happening now.

"The stock market would zoom up, and the Dow would gain several hundred points or more in a hurry," Sohn said. "Business capital spending would surge, based on all the pent-up demand. Consumer spending would be even stronger."

Donald Luskin, an economist and chief investment officer with TrendMacrolytics, a consulting firm in Menlo Park, also says he is convinced that some definitive resolution would be beneficial.

"It would certainly help the stock market, and the stock market would help everything," Luskin said. "If you just look at the economy, things are doing fine. The recession is over. But with this pervasive mood of uncertainty, it just depresses things. People do less of everything."

Risks and rewards

Luskin believes some of the problems -- which could continue if the crisis isn't resolved in the near future -- may make entrepreneurs less willing to take risks.

This trend might be appearing in the weak activity in venture capital financing for private companies, as well as the dismal market for initial public stock offerings. Venture funding in the Bay Area during 2002 was down a whopping 45 percent, according to the MoneyTree survey. The market for IPOs remains virtually invisible.

"The constant debate over how to resolve the Iraq situation hurt because it doesn't necessarily affect spending decisions, but it does affect risk-taking," Luskin said.

Why? Partly because of the nature of taking risks, such as starting a business or expanding one.

"Risk-taking is partly economic and partly emotional," Luskin said. "If you're a genius working for Intel, and you have a fantastic new product, you might start your own business if you're in a good mood about the economy. But if you're not in such a good mood, and you're down on things in general, you're generally risk-averse, and you tend not to take any action. The wellspring of economic growth is risk-taking."

Worst-case scenarios

But economists also must ponder the possibility of a grim outcome in a new Persian Gulf war. Analysts can't rule out the possibility that Iraq might attempt to destroy its own oil fields. Even worse, Iraq might attempt to destroy oil terminals in Saudi Arabia.

"As much as I would like to think the war will be short, decisive and quick, there is still concern that there will be complications," Sohn said. "It might not be as easy as 1991. Clearly there are two extreme scenarios, the quick resolution and the messy resolution, and there can be many shades and variations in between."

Iraq under Hussein's rule has become a lesser player in the world oil arena. But any disruption of Saudi supplies might make today's gasoline prices, now typically ranging from $1.80 to $2 a gallon, seem like the good old days.

"We would be talking about a double-dip recession, if the U.S. becomes bogged down in a long war, or the oil fields become an inferno, if there's a massive release of chemical and biological weapons," Munroe said. "You would have economic activity slowing, oil prices going up, and inflation could become a problem."

And it doesn't help that Venezuela is producing about one-third of the oil it normally does because of a strike.

Still, some consumers such as DeSantis won't be held hostage to the outcome of any war, or the geopolitical maneuvering that precedes any battles.

"Who knows what's going to happen?" DeSantis said. "We just have to go day by day, and live our lives."

George Avalos covers the economy. Reach him at 925-977-8477 or gavalos@cctimes.com.

www.whotv.com Sunday,February23,2003,8:49 AM

Caracas, Venezuela-AP -- One of the leaders of the national strike in Venezuela has been placed under house arrest. Carlos Fernandez, president of a business group, was seized by secret police on Wednesday on charges including treason. A judge today struck down the charge of treason but upheld charges of rebellion and incitement to commit offenses.

Strike co-leader Carlos Ortega remains at large. The president of the Venezuelan Workers Confederation teamed up with Fernandez in spearheading the two-month-old work stoppage that has paralyzed Venezuela's vital oil industry and devastated the economy.

Ortega said he was going into hiding after a warrant was issued for his arrest.

The national strike is aimed at ousting President Hugo Chavez.

Copyright 2003 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.