US financials offer little hope of growth

Further problems at American Airlines and the latest batch of financial results on Wall Street gave further evidence that the much anticipated return to growth in corporate America is faltering, at best.

The US stock market is also likely to be unsettled by the news last night that Alan Greenspan, the 77-year-old chairman of the Federal Reserve, will undergo surgery today for an enlarged prostate. The Fed was quick to point out that tests have shown he does not have cancer and plans to be back at work later in the week.

AMR Corporation, American's parent, appeared to again be flirting with bankruptcy over a dispute between unions and management. The Transport Workers Union, which represents engineers and other ground staff, yesterday demanded a new vote on $1.8bn (£1.15bn) of wage cuts and other concessions, after similar calls from flight attendants.

Don Carty, American's chief executive, last night admitted he had made a big mistake by awarding retention bonuses to senior executives while asking workers to make sacrifices.

"The largest airline in the world doesn't do anything by half," he said. "We agreed the largest consensual savings in history and then I made a mistake, and of course it was a big one." Earlier shares in AMR closed down $1.15 at $3.85.

Yesterday Whirlpool, the largest maker of home appliances and an important indicator of consumer confidence, reduced its full-year earnings forecast owing to falling demand. Wal-Mart, the biggest retailer in the world, said April sales at stores open for at least a year were at the low end of forecasts, while another staple of US shopping malls, department store group JC Penny, said sales were falling at a sharper rate than expected.

In the past week Microsoft, General Motors, Coca-Cola and Ford have all either lowered forecasts or cautioned against expectations of a quick return to growth rates seen before the downturn of recent years.

There were pockets of good news. Southwest Airlines, the discount carrier, posted a first-quarter profit of $24m, up from $21m a year ago. It only serves the US and has been less affected by the war in Iraq or Sars fears. Hasbro, the toy maker, reported first quarter profits of $1.2m, helped by core brands such as Play-Doh and Transformers, against a $17.1m loss a year ago.

There were also better results at drugs maker Merck and industrial conglomerate 3M. Merck earned $1.71bn in the first quarter against $1.63bn a year ago. 3M, which makes Post-it notes, reported an 11% rise in first quarter profits.