Pentagon braces for budget cut hardship

The Navy has canceled maintenance of 30 ships at shipyards to prepare for March 1 budget cuts, according to the defense department, which is also letting go up to 46,000 temporary employees.

WASHINGTON (CNNMoney)

And the Pentagon says that's just the beginning.

Washington agencies are reluctantly dealing with the consequences of Congress' inability to stop massive spending cuts scheduled to begin March 1. The so-called "sequester" is expected to hit Defense particularly hard, slicing $490 billion from the department's budget over the next decade.

The defense industry has been preparing for the massive budget cuts for months -- a fact reflected by the 0.1% annual rate decline in the nation's economy in last year's fourth quarter. The contraction was largely due to a 22% drop in defense spending.

In March, the Pentagon will have to make due with $45 billion less, officials say.

Defense Secretary nominee Charles Hagel told a Senate confirmation hearing Thursday that the cuts threaten military readiness, calling them "very dangerous" to national security.

Related: U.S. can afford $500 billion in (smart) defense cuts -- opinion

In a recent briefing with reporters, Deputy Secretary of Defense Ashton Carter gave more details of Pentagon preparations. Besides laying off the temporary workers:

-- The department has a civilian hiring freeze in place, which is a big deal for an agency that hires 1,000 to 2,000 a week.

-- The Navy has canceled plans to tune up 30 ships scheduled for maintenance later this year.

-- The Air Force is only entering into short-term contracts for supplies.

-- The Navy has cut all conferences and nonessential travel, according to a Navy memo.

If the budget cuts actually kick in, some 800,000 employees will have to stay home -- and with no pay one day each week -- from late April through September. That amounts to a 20% pay cut for civilian workers.

"Obviously, this is a terrible thing to have to do to our employees and to the mission," Carter said. "But it's necessary, because it'll save $5 billion. We have to find that money."

When the budget ax falls in March, high-profile, popular military programs will likely be canceled through Sept. 30, including Blue Angel shows and Fleet Weeks, according to a Navy memo.

The cuts to some parts of Defense end up being higher than 9.4%, because President Obama has exempted military personnel and veterans' affairs from the sequester.

And Pentagon staff points out that the cuts and furloughs are devastating to veterans, who make up 44% of the agency's civilian workforce.

First Published: February 4, 2013: 5:17 AM ET

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Biggest budget busters: Spending or tax cuts?

What's to blame for the big growth in federal debt? The fact is both spending and taxes play a role.

NEW YORK (CNNMoney)

Neither is quite right. The fact is both spending and taxes play a role.

Take the past four years. Annual deficits topped $1 trillion. One of the big culprits: The financial crisis and recession. When the economy fell through the floor, revenues plunged to near 60-year lows, while spending rose to near 60-year highs as Congress sought to combat the downturn.

Congress and President Obama also approved large temporary tax cuts and extended old ones.

But those weren't the only causes. "The growing debt also reflects an imbalance between spending and revenues that predated the recession," Congressional Budget Office director Doug Elmendorf noted in Senate testimony last summer.

In other words, tax cuts and new spending that lawmakers don't offset can increase the budget imbalance for years to come.

Looking ahead to the next 10 years, a key reason for anticipated deficits are several measures in the fiscal cliff deal struck over New Year's. That deal made a decade's worth of tax cuts for the vast majority of Americans permanent, and it included other changes that will lighten many Americans' tax burden.

Related: Automatic spending cuts more likely now

Two provisions alone will reduce revenue by an estimated $3.3 trillion: Extending the Bush-era tax cuts for those making less than $450,000 and giving middle- and upper-middle-income families permanent relief from the Alternative Minimum Tax -- also known as the wealth tax.

That $3.3 trillion will likely account for almost half of the expected 10-year deficit between now and 2023. The official estimate will be included in a Congressional Budget Office report due on Tuesday.

Spending will play a role, too, of course. The retiring of the Baby Boomer generation will be in full swing over the next decade. At least 10,000 Baby Boomers are turning 65 every day; by 2030, 18% of the country will be at least 65 years old, up from about 13% today, according to the Pew Research Center.

So Medicare and Social Security costs will go up, while discretionary spending -- which is what funds most government programs other than the entitlements -- is on track to fall to a 50-year low as a share of the economy.

The real takeaway? "Either you're not taxing enough to pay for entitlements. Or you're spending more on entitlements than you're willing to raise revenue for," said Joshua Gordon, policy director of the Concord Coalition, a deficit watchdog group.

Growth in entitlement spending will accelerate after the next decade. The aging of the population will be the major reason for that acceleration over the next 25 years or so, Gordon notes. But then the biggest problem becomes the persistently high rates of growth in health costs, which typically have outpaced economic growth.

The potentially good news is that health care spending has slowed in the past three years, though it's not clear yet how much of the slowdown is due to the recession and how much reflects industry and consumer response to the new health reforms.

One thing is becoming increasingly clear, however.

"Given the aging of the population and the rising cost of health care, attaining a sustainable budget for the federal government will require the United States to deviate from the policies of the past 40 years," Elmendorf noted in a blog post.

There are four tough choices on offer: raise tax revenue well above its 40-year average; make big changes to future seniors' benefits; shrink everything else the government funds from defense to food stamps to education; or, some combination of the above.

First Published: February 4, 2013: 5:32 AM ET

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Why unemployment stretches are getting shorter

The average length of unemployment dropped by nearly three weeks.

NEW YORK (CNNMoney)

The reason is likely because many people ran out of unemployment benefits so they stopped looking for work, experts said.

"People are getting frustrated and are giving up," said Adam Hersh, economist with the Center for American Progress.

The average duration of unemployment was 35.3 weeks in January, down from 38.1 weeks in December and 40.2 weeks a year earlier, according to the latest monthly jobs report from the Bureau of Labor Statistics.

There are other indications that the ranks of the long-term unemployed are thinning. The median duration of employment, which is less affected by those who've been out of work for many months or years, was 16 weeks in January, down from 18 weeks in December.

And the number of people out of work for at least six months fell to 38.1%, down a percentage point from the previous month. December was the first month this figure fell below 40% since the end of 2009.

Related: When unemployment runs out

The cause of the big drop likely stems from the fact that federal extended jobless benefits were curtailed in several states in January because their unemployment rates improved, said Claire McKenna, policy analyst at the National Employment Law Project. To receive unemployment checks, the jobless must look for work, which keeps them in the labor force. And since there was no notable uptick in employment, it's not likely that the majority of them got jobs.

Unemployment benefits last up to 73 weeks, but their duration in each state depends on its jobless rate. Residents in Georgia, Mississippi and South Carolina, for instance, are getting 10 fewer weeks of checks as of January because of the improving rate. Five other states also saw the duration of the benefits shrink in January.

Once they are no longer eligible for benefits, many may stop applying for jobs because they don't see any opportunities, McKenna said. So they are no longer considered unemployed under the Bureau of Labor Statistics criteria, leading to an improvement in the average duration of unemployment.

This phenomenon is one reason to maintain -- or even lengthen -- federal extended benefits, which have been in place since mid-2008, labor advocates said.

One school of thought believes that extended benefits keep the unemployment rate high because they discourage people from accepting offers. But the fact that the long-term unemployed are likely just dropping out of the labor force shows that they still need support, said Dean Baker, co-director of the Center for Economic and Policy Research.

"The benefits are not holding them back from taking jobs," Baker said. "You take away their benefits and now they aren't working. They have to struggle to get by."

Have you taken a job retraining program? Did you get a job or are you still unemployed? Let me know at tami.luhby@turner.com. You could be profiled in an upcoming CNNMoney story.

First Published: February 4, 2013: 5:39 AM ET

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Big money betting big on housing

The latest sign of a housing boom: investors are clamoring to buy up homebuilding stocks, homes, and undeveloped land.

NEW YORK (CNNMoney)

Hedge funds and private equity firms have been rushing in to buy up companies and assets in every part of the housing supply chain, including undeveloped land, homebuilders, foreclosed homes, and building parts manufacturers.

One of the most notable moves is coming from hedge fund manager John Paulson, best known for his big (and lucrative) bets against subprime mortgages in 2006 and 2007.

Now, he's turned his attention to snapping up undeveloped land in areas hardest hit by the housing crisis. "Land is the accordion in the home building equation," said Michael Barr, who runs Paulson's real estate investments. "It falls the most in a downturn, but also rises the most in an upturn."

Over the past two years, Paulson & Co has bought up enough land in California, Arizona and Nevada to build up to 25,000 homes and is aggressively scouting for more, according to Barr.

Related: Home prices post biggest jump in 6 years

Private equity firms are also getting in on the game.

Blackstone Group (BX) spent $2.7 billion last year to buy 17,000 single family homes, post-foreclosure, around the United States and plans to continue ramping up those efforts in 2013.

Pine River Capital Management took real estate investment trust Silver Bay Realty Trust (SBY) public in December. Silver Bay, which acquires, renovates, leases and manages single family homes, has already purchased more than 2,500 homes in areas hard hit by the housing crisis. In a recent SEC filing, Silver Bay said that it plans to purchase 3,100 more homes.

And in a sign of investors' growing appetite for a piece of the housing market, shares of publicly traded homebuilders have been soaring. PulteGroup (PHM), KB Home (KBH), and Lennar (LEN) are all trading near 52-week highs. Pulte's shares have more than doubled over the past year, while the KB Home and Lennar's shares have nearly doubled.

And for the first time since 2004, homebuilders are testing the IPO waters.

Tri Pointe Homes (TPH), which builds single family homes in California and Colorado raised $232 million through an IPO last week. Shares of the company, owned by Starwood Capital, rallied 20% on their first day of trading.

Related: Home building surges 12%

Others are lining up.

Scottsdale, Ariz., homebuilder Taylor Morison has filed to go public and is expected to kick off its investor roadshow in the next few weeks. And building supply company Boise Cascade, jointly owned by PE firm Madison Dearborn and OfficeMax (OMX, Fortune 500), plans to make its public debut next week.

Investment bankers and IPO investors say they expect more homebuilders to go public this year. "As the sector rotates back into favor again, it makes sense for housing companies to monetize," said Brad Miller, co-head of global equity syndicates at Deutsche Bank.

Brad Geisen, CEO of Foreclosure.com, which keeps a database of foreclosures around the nation, said he's been seeing a lot of interest from investors looking to buy up large numbers of foreclosed properties over the past three months.

"A lot of investors see a short window of opportunity where there's good inventory on the market at bottom market prices," said Geisen. "No one knows how long it will last, so these investors are trying to buy as much as they can right now."

First Published: February 4, 2013: 5:27 AM ET

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Foxconn's China workers to get more union rights

Foxconn staff in China have been demanding better conditions for years.

LONDON (CNNMoney)

The company, headquartered in Taiwan, said employees would get the chance to vote for representatives free from management influence, and top officials would be elected by secret ballot.

Foxconn has been under fire for harsh labor conditions at its Chinese plants. The company makes an estimated 40% of the world's consumer electronics gadgets, including parts and products for Apple (AAPL, Fortune 500), Intel (INTC, Fortune 500), Microsoft (MSFT, Fortune 500)and Cisco (CSCO, Fortune 500).

Pressure on Foxconn to act intensified after Apple joined the Washington-based Fair Labor Association at the start of 2012. The FLA went on to criticize Foxconn for several labor-rights violations, including requiring its employees to work excessive overtime and paying salaries that were too low to cover basic living expenses.

Workers went on strike in October in protest over conditions on the iPhone 5's production lines, a month after 40 people were injured in a protest that forced the temporary closure of another plant. A series of suicides at Foxconn factories in 2010 sparked a wave of publicity about unsafe facilities.

Related: China will be Apple's top market

Foxconn said it was introducing the new measures in line with an action plan agreed to with the FLA following its March 2012 assessment.

It said it would increase the number of representatives of junior employees on all union committees, and look to raise awareness of the union by distributing pamphlets explaining the changes across all Foxconn sites.

"Following the pamphlet's publication, all Foxconn campuses have been carrying out elections to increase the number of junior employee representative positions," it said in a statement. "The management is not involved in any aspect of this election."

Related: Uneven recovery for China's factories

The election of the chairman and other members of the group-wide union leadership would be held every five years by secret ballot, it added.

Foxconn has had a union in China since 2007, and held elections for representatives in 2008 and 2011. It says 70% of elected representatives at its mega-campus in Shenzhen are frontline workers and 30% are other staff and management.

But it faces a tightrope walk between increasing worker democracy and satisfying the need of its western clients for improved conditions, and protecting its relationship with China's leaders, who would view the emergence of truly independent unions as a threat.

"Our hope is that our efforts in implementing these reforms will not only benefit Foxconn, but also help lift the standards and practices for our industry in China," Foxconn said.

The FLA's investigation found a large majority of workers were unaware of the union's activities and collective bargaining agreement, the majority of members of union committee were managers and that candidates for election were often supervisors or senior staff nominated by managers.

First Published: February 4, 2013: 7:52 AM ET

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Stocks: Market looks to keep momentum

Click on chart for more premarkets data.

NEW YORK (CNNMoney)

The Census Bureau will release data on factory orders for December at 10 a.m. ET. U.S. stock futures were lower ahead of the opening bell on Monday.

Firms including Royal Caribbean Cruises (RCL) and media company Gannett (GCI, Fortune 500) will report quarterly results before the bell. Yum! Brands (YUM, Fortune 500) will report after the close. Disne (DIS, Fortune 500)y and B (BP)P will release quarterly results on Tuesday.

Shares of Dell (DELL, Fortune 500) were slightly lower in premarket trading on talks the company could go private early this week. Microsoft (MSFT, Fortune 500) is reportedly poised to assist in financing the deal.

Facebook (FB) shares were also lower in early morning trading, as the social networking site marked the ninth anniversary since its inception.

Fear and Greed Index

U.S. stocks rallied Friday, with the Dow closing above 14,000 for the fist time since October 2007.

European markets were lower in morning trading. Asian markets ended mixed. The Shanghai Composite added 0.4% and Japan's Nikkei advanced 0.6%, while the Hang Seng declined 0.2%.

First Published: February 4, 2013: 3:58 AM ET

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After Bratz, will this be the next 'it' doll?

Pinkie Cooper, the newest fashion dolls from Bratz inventor Carter Bryant, are set to hit stores nationwide in late summer.

NEW YORK (CNNMoney)

Meet "Pinkie Cooper." The 9-inch fashion doll is part human, part English cocker spaniel and a student at New York City's World of Original Fashion academy, or WOOF! for short.

Like her Bratz predecessor, Pinkie Cooper is a fashionista. She likes to hang out and "travel" with Ginger and Pepper -- two doll friends who are also part-human, part-pup -- and her pet dog "L'il Pinkie."

A lot is riding on Pinkie Cooper's little plastic shoulders. Its inventor, Carter Bryant, has poured thousands of dollars and hours into his latest creation. Its distributor, a small toymaker called The Bridge Direct, has sunk millions into bringing Pinkie Cooper to stores nationwide. Meantime, for the $3 billion U.S. doll market, the question is whether Pinkie can repeat what Bratz first did -- crack through Barbie's dominance.

Related Story: 10 things you'll pay more for in 2013

Bryant, an independent inventor, and his sister Anjanette Abell started working together on the project in 2009. His idea: Create a doll that was sweet, cute, stylish and looked like Abell's real cocker spaniel named Pinkie Cooper. Also, compared to Bratz, Pinkie Cooper would be "more sophisticated, glamorous and not as edgy," he said.

While Bryant perfected his sketches, Abell focused on building Pinkie Cooper's "look."

"I spent a lot of time finding the right fabrics for her clothes and helped bring her character to life," she said.

Pinkie Cooper is definitely unique, said Gerrick Johnson, toy industry analyst with BMO Capital Markets. "When you put a dog's head on a human body, you've already crossed over to something that's we haven't seen before in fashion dolls," he said.

Competitors that come closest are Mattel's hugely popular Monster High dolls, who look like daughters of famous monsters, and MGA Entertainment's Novi Stars, fashion dolls that look like aliens, Johnson said.

But will little girls fall in love with Pinkie Cooper like they did with Bratz?

Jay Foreman, founder and CEO of Florida-based The Bridge Direct, which is producing and marketing the dolls, certainly hopes so.

Related Story: When baby products meet high-end robotics

"Pinkie Cooper is our single biggest product launch in our four-year history," said Foreman. If the doll is a hit, it could potentially generate hundreds of millions in sales and propel his $40 million business into the big leagues. He plans to roll the dolls out in July in stores nationwide -- as well as 20 other countries.

Foreman's track record so far in launching hit toys is impressive. Before he founded The Bridge Direct, Foreman was the mastermind behind the launch of Spice Girls dolls in the U.S. Another toy company he founded, Play Along, successfully launched Britney Spears dolls. In late 2010, The Bridge Direct launched Justin Bieber dolls, generating more than $100 million in sales. Not bad for a 50-employee firm.

Foreman thinks chances are good that Pinkie Cooper will succeed. "She's unusual. Like Bratz, she has the potential to break the mold," he said. Major toy retailers like Toys R Us, Target (TGT, Fortune 500), Wal-Mart (WMT, Fortune 500) and Kmart (SHLD, Fortune 500) have already ordered Pinkie Cooper dolls and will stock them in late summer, he said.

But, Foreman acknowledges, "ultimately our livelihood is based on the whims of 4- to 8-year-olds."

Pinkie Cooper could be a big hit or fall flat, agreed Johnson. "But at least she's an example of the risk and innovation that the toy industry badly needs right now."

First Published: February 4, 2013: 6:08 AM ET

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$214,000 real estate bet a big risk for couple

Too many homes? Thomas and Narichica Handy, 39 and 38, are split on whether they should add more real estate.

NEW YORK (Money Magazine)

A year later, duty called. Deployed to Afghanistan, the military couple turned the house into a rental.

It's a pattern they've repeated over the course of several more moves.

Now they hope the income from their four rental properties scattered around the country will allow Thomas to retire from the military before age 50 and pay for college for their kids, Thomas III, 6, and Hannah, 2. (Narichica, who goes by Richie, left the military in 2006 and is now a schoolteacher.)

The Handys believe the housing market is more likely to appreciate over the long term than stocks, and neither gets an employer match.

They stopped contributing to their retirement plans a few years ago and funnel 10% of their income into a savings account, which they use to fund real estate purchases.

Thomas will get a military pension of half his pay, and the couple expect that two of the properties will be paid off before he retires. He'll also get $30,000 for his kids' college, thanks to GI Bill benefits.

Related: Couple with $455,000 playing it too safe

For now, though, the homes kick out only a small income when fully rented, and the Arizona house lacked a tenant for four months last year.

Occupations: Army major; teacher

Goals: Retire from the military within 10 years, fund college for two kids

Total income: $147,000

Total assets: $383,700
Retirement savings: $141,000
Home equity: $214,000
Cash: $24,000
529 college savings plans: $4,700

THE PROBLEM

Betting too much on real estate is a risky proposition, says Kathy Stepp, a principal with Stepp & Rothwell in Overland Park, Kans. "One long-term vacancy could torpedo everything," she notes.

THE ADVICE

Take a break from real estate. Hold off on buying more homes, says Stepp.

She understands the Handys' frustration with the stock market but points out that since the couple bought their first house in 2003, the S&P 500 has gained an average of about 7% a year while the housing market declined. "Look at stocks over the long run," she urges.

Richie sides with Stepp: "More properties would spread us too thin," she says.

Related: A couple's 5-year plan to pay off $96,000 in debt

And the real estate fund that accounts for 11% of the couple's retirement savings needs to go.

Thomas isn't convinced: "We have a lot in real estate, but this market is low," he says.

Create a flexible account. Nearly all Thomas and Richie's wealth is tied up in retirement accounts and houses. "They can't access their cash if they need it," says Stepp.

She suggests the Handys save in a taxable account using low-cost, tax-efficient index funds so they won't be stuck with big capital gains bills but can tap some of the money if they need to (such as for college). Once they've built up that account to the level of their real estate equity, they can go back to saving in retirement accounts.

Related: Five top-rated 529 plans

Assuming a 3% annual increase in rents, the fully rented homes should earn about $30,000 a year a decade from now.

That, plus a part-time job and his pension, should allow Thomas to retire from the military early.

Add another stopgap. Their $24,000 emergency fund might not cover unexpected maintenance costs on their homes. A home-equity line of credit can serve as a backup.

Good idea, says Thomas: "We'll start the paperwork right away."

First Published: February 4, 2013: 9:24 AM ET

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Beer pong: AB InBev to fight hard for Modelo

The U.S. government is trying to block a deal that would bring Modelo and Budweiser under the same corporate umbrella.

NEW YORK (CNNMoney)

The Justice Department filed a complaint Thursday in federal court seeking to block AB InBev from acquiring full ownership of Modelo, arguing that the combined company would control about 46% of the $80 billion U.S. beer market.

According to the government, the merger would eliminate competition and allow AB InBev to raise prices.

AB InBev quickly shot back, saying in a statement that the government's claim "is inconsistent with the law, the facts and the reality of the market place." The company said it was "confident" in its position and would "vigorously" defend the merger in court.

Despite the posturing, there were reports Friday that talks between AB InBev and the Justice Department had resumed. The Justice Department declined to comment. AB InBev did not respond to requests for comment.

AB InBev first announced plans in June to buy the remaining shares of Modelo that it didn't already own for about $20 billion. Under the terms of the deal, Modelo would sell its 50% stake in a joint venture it had with Constellation Brands (STZ). The joint venture, called Crown, distributes Modelo beers in the United States.

The goal was to avoid antitrust issues by giving Constellation complete control of Crown. But the move did not satisfy the Justice Department, which called it "a façade of competition between AB InBev and its importer."

Shares of AB InBev have recovered somewhat after plunging on Thursday, when the lawsuit was announced. But investors seem to believe that Constellation has the most to lose. The company's stock has fallen more than 15% since Thursday.

While AB InBev has pledged to fight the case, many analysts expect it to make some concessions in order to win regulatory approval.

Specifically, AB InBev could give up the option it has, once every ten years, to buy the rights to distribute Modelo brands in the United States. AB InBev could also strengthen Constellation's competitiveness by selling it some of Modelo's facilities in Mexico.

Related: Big Beer's response to craft: If you can't beat 'em, join 'em

But the company is not known to back down from a fight, said Joe Thompson, president of the Independent Beverage Group, an industry organization based in Fayetteville, Ga.

"They didn't get to be the biggest brewer in the world by rolling over," he said.

Meanwhile, it remains to be seen whether the government will grant AB InBev any concessions.

Daniel Sokol, a professor specializing in antitrust law at University of Minnesota, said the government's complaint suggests the Justice Department believes it has a strong case.

The document outlines a strategy the Justice Department has used to win antitrust cases in the past, including the use of internal company documents to "skewer executives," he said.

"What wins in court is when you have bad documents and a story to tell a judge," he said. "They seem to have nailed that."

The Justice Department used a similar strategy in its case against the proposed merger of AT&T (T, Fortune 500) and T-Moble last year, as well as the victory it scored against H&R Bock (HRB) and TaxAct in 2011, Sokol said.

In any event, the merger will probably be tied up in court for some time, notes Ken Perkins, an analyst at Morningstar.

"It is difficult to assess the probabilities of the different outcomes of this situation with a high level confidence at this point, but a lengthy fight in federal court appears likely," he said.

The deal includes a $650 million break-up fee that AB InBev would have to pay Modelo, but the cost of a drawn-out court battle could also add up quickly for the companies.

Nonetheless, analysts are confident that AB InBev will eventually prevail.

"I think the deal will still go through," said Thompson. "It makes too much sense."

First Published: February 4, 2013: 10:08 AM ET

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Dow backs off 14,000

Click for more market data.

NEW YORK (CNNMoney)

The Dow Jones industrial average was down more than 90 points. On Friday, the Dow closed above 14,000 for the first time since October 2007, putting an all-time high in sight. The S&P 500 fell 0.6% and the Nasdaq lost 0.5%.

European markets were also under pressure, with shares in London, Paris and Frankfurt all down more than 1%.

The selloff comes after a strong rally in January. The Dow gained 5.9% in January, making it the best performance for that month since 1994. Given the recent strength, many analysts had suggested that stocks were due for a pullback.

Meanwhile, investors found little solace in economic data and corporate results released Monday.

The Census Bureau said new orders for manufactured goods rose 1.8% in December, which was weaker than expected. Economists had forecast a 2.4% increase in orders, according to estimates from Briefing.com

Royal Caribbean Cruises (RCL) reported a fourth-quarter loss, but said it expects demand to improve this year in North America, while Europe will remain weak. Gannett (GCI, Fortune 500) shares fell 5% after the media company said earnings excluding restructuring costs rose in the fourth quarter.

Yum! Brands (YUM, Fortune 500) will report after the close. Disney (DIS, Fortune 500) and BP (BP) will release quarterly results on Tuesday.

Shares of Dell (DELL, Fortune 500) were down 1% despite more reports that the company could go private early this week. Microsoft (MSFT, Fortune 500) is reportedly poised to assist in financing the deal.

Facebook (FB) shares were also lower in early morning trading, as the social networking site marked the ninth anniversary since its inception.

Herbalife (HLF)shares plunged after the New York Post said the company is being investigated by the Federal Trade Commission.

Shares of BlackBerry, formerly Research In Motion, began trading under a new ticker symbol, BBRY. The stock surged nearly 10%.

Fear & Greed Index still showing Extreme Greed

Asian markets ended mixed. The Shanghai Composite added 0.4% and Japan's Nikkei advanced 0.6%, while the Hang Seng declined 0.2%.

Oil prices sank 1.6%, while gold prices were also lower. The yield on the 10-year U.S. Treasury note was unchanged at 2%. The U.S. dollar gained versus the euro, but lost value against the British pound and Japanese yen.

First Published: February 4, 2013: 9:43 AM ET

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