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NEW YORK - Newspaper publisher McClatchy Co.'s second-quarter earnings tumbled 44 percent as ad revenue continued to shrink in its key markets.

McClatchy, whose papers include the Miami Herald and Sacramento Bee, said Thursday the market for ad spending will not improve until the current economic slump abates.

"Whether revenues improve from recent trends depends upon the direction of the overall economy," Chairman and Chief Executive Gary Pruitt said in a statement.

In the latest quarter, the Sacramento, Calif.-based company said net income slid to $19.7 million, or 24 cents per share, from $35.2 million, or 43 cents per share, a year ago.

The results adjusted to exclude one-time items fell to $17.3 million, or 21 cents per share. That matches the average estimate of analysts surveyed by Thomson Financial.

Revenue dropped 16 percent to $489.7 million and missed Wall Street's projection of $495 million. Advertising revenue fell 17 percent and circulation revenue fell 5 percent.

Ad sales "continued to be hurt by the weak economy and the secular shift in advertising to the internet," Pruitt said.

With jobs shrinking and employers posting most positions online, revenue from classified ads fell 28 percent, with employment notices down 39 percent in the quarter. The housing market's swoon helped real estate ads drop 37 percent.

Revenue from McClatchy's online properties jumped 12.5 percent and accounted for nearly 12 percent of the total — up more than 4 percentage points from the same period last year.

Newspaper publishers are looking for ways to make enough money from their Web sites to offset the declines in more-lucrative print ads.

McClatchy said it is boosting online sales staff and paying more incentives to get salespeople to sell Web ads along with higher-commission print ads. It also has combined responsibility for print and online sales under a single executive.

Meanwhile, the company continues to trim costs — including trimming its staff by 1,400 positions, or 10 percent — and said it will "look at additional cost-saving measures as necessary."

Its shares rose 24 cents, or 4.8 percent, to $5.22 in morning trading. They are still near the lower end of their 52-week range of $4.45 to $26.77.

NEW YORK - Regional bank National City Corp. on Thursday reported a $1.76 billion loss for the second quarter, as mortgage loans soured and it took a big charge related to previous acquisitions.

Over the past year, mortgages have increasingly defaulted, forcing banks to set aside more cash to cover current and future losses. National City was no exception as its geographic footprint — mainly the Midwest and Florida — has been among the hardest hit by the downturn in the housing cycle.

For the quarter ended June 30, the bank reported a loss of $1.76 billion, or $2.45 per share, compared with a profit of $347 million, or 60 cents per share, in the second quarter of 2007.

The results included a $1.1 billion goodwill impairment charge related to previous acquisitions. Goodwill typically reflects the value of an intangible asset such as a brand name.

Excluding the goodwill charge, the loss was 94 cents per share, according to a National City spokeswoman.

That compares with a loss of 26 cents per share, on average, expected by analysts polled by Thomson Financial. Analysts typically exclude one-time charges from their estimates.

The bank increased its provision for loan losses, more than tenfold, to $1.59 billion, from $145 million last year. Loan-loss provisions cover both current-quarter charge-offs and additional reserves held to cover future losses. Charge-offs are loans written off as not being repaid.

The Cleveland-based bank said the larger provision reflects additional loss reserves for loans secured by residential real estate. The reserves include a $478 million supplemental reserve on loan holdings it is liquidating, including construction loans to individuals, and broker-sourced nonprime mortgage and home equity loans.

Net charge-offs shot up to $740 million, more than seven times the $98 million in the 2007 quarter. National City said $527 million of the charge-offs reflected consumer loans associated with products or origination channels, like broker-sourced subprime mortgage loans and construction loans to individuals, that it no longer handles.

Subprime mortgages are loans given to customers with poor credit history.

Non-performing assets more than tripled to $3.13 billion, from $848 million last year.

National City's provision for loan losses more than offset its net interest income during the second quarter. Net interest income measures the difference in how much it costs a bank to borrow money and how much it receives from lending money to customers.

National City's net interest income before loan-loss provisions was $1.02 billion, compared with $1.1 billion during the year-ago period. After the loss provision, the bank actually had an interest expense of $571 million during the second quarter.

Non-interest income at National City, revenue derived from fees and other charges, fell to $431 million from $764 million last year. Like the rest of National City's business, non-interest income was hindered by mortgage woes. The company lost $146 million on hedging of mortgage servicing rights during the quarter.

Because of the continued deterioration in the mortgage and credit markets, National City raised $7 billion in new cash from a group of investors led by Corsair Capital LLC to shore up its capital base. Banks have increasingly tapped private equity markets and offered new shares of stock to help raise money to offset the mounting mortgage-related losses.

National City also slashed its dividend to 1 cent from 21 cents during the quarter to help strengthen its capital position.

The fresh cash was sufficient to help improve National City's capital ratios and the bank is unlikely to need new capital anytime soon,

"We have more than enough capital to see us through this period," National City's chief executive, Peter Raskind, said in a conference call with the media. "We have no intention or plan or need at this point to raise capital."

Shares of National City rose 34 cents, or 7.2 percent, to $5.05 in morning trading.

Regional competitors such as Fifth Third Bancorp have also struggled with the weakening mortgage market.

Like National City, Fifth Third raised new capital and cut its dividend in the second quarter to help shore up its capital base. Fifth Third raised $1 billion through the issuance of convertible preferred stock, raised an additional $1 billion through the sale of assets and slashed its dividend by nearly two-thirds to 15 cents from 44 cents.

Earlier in the week, Fifth Third reported a loss of $202 million.

Fifth Third's results were hurt by a sharp increase in its loan-loss provisions as well.

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AP Business Writer Eileen AJ Connelly in New York contributed to this report.

DALLAS - Southwest Airlines Co. earned a profit in the second quarter and beat Wall Street expectations by continuing to rely on financial deals that lowered its fuel costs.

Revenue increased by 11 percent, as Southwest raised fares.

But in a nod to high fuel costs and other problems facing the airline industry, growth-oriented Southwest said it might not grow at all next year.

Southwest said Thursday it earned $321 million, or 44 cents per share, up 15 percent from a year ago, when the airline earned $278 million, or 36 cents per share.

Excluding special items, Southwest said it would have earned $121 million, or 16 cents per share. That beat analysts' forecast of 12 cents per share, according to a survey by Thomson Financial.

Shares of Southwest fell 45 cents, or 2.8 percent, to $15.43 in morning trading. Other airline stocks also fell as the price of oil rose.

Dallas-based Southwest posted its 69th straight profitable quarter while many other airlines lost money, and it is mostly because of fuel hedging — financial transactions that Southwest uses to lock in lower prices for most of its fuel.

The transactions earned $511 million in the quarter, nearly double the company's entire profit.

Despite its string of profitable quarters, Southwest is under pressure to control costs and boost sales as its fuel-hedging contracts expire over the next few years.

"We cannot stand still," Chairman and Chief Executive Gary C. Kelly said. "We must continue to make the necessary adjustments to adapt to higher jet fuel prices and restore our profit margins."

Southwest has raised fares and cut service on less-productive routes while adding flights where it can take advantage of rivals' weakness, such as in Denver.

In a concession to high fuel costs, it has also scaled back growth plans to 4 percent or less for 2008 — other carriers are slashing U.S. capacity — and Kelly said it might not increase capacity next year.

Revenue in the second quarter rose to $2.87 billion from $2.58 billion a year earlier.

Even with fuel hedging, Southwest was hit by soaring energy costs. It paid an average $2.19 per gallon for jet fuel, but the going price on spot markets last week was nearly $4 per gallon. By comparison, American Airlines, with a much smaller fuel-hedging program, paid an average of $3.17 per gallon in the second quarter.

Southwest has hedged about 80 percent of its third-quarter fuel needs, down from 90 percent a year ago. The coverage falls to 70 percent next year, 40 percent in 2010 and 20 percent in 2011 and 2012 — with steadily rising prices as well.

HOUSTON - Oil producer Occidental Petroleum Corp. said Thursday its second-quarter profit rose 62 percent, as record crude prices and higher production boosted results.

The Los Angeles-based company earned a record $2.29 billion, or $2.78 per share, in the April-June period, compared with $1.41 billion, or $1.68 per share, in the year-ago quarter.

The company said revenue jumped 61 percent to $7.12 billion from $4.41 billion a year ago.

Analysts polled by Thomson Financial on average expected earnings of $2.75 per share on sales of $6.77 billion in the most recent quarter.

Occidental said earnings at its oil and gas arm shot to $3.81 billion from $1.66 billion a year ago, lifted by record crude prices, higher natural gas prices and increased production.

Daily oil and gas production averaged 588,000 barrels of oil equivalent a day in the second quarter, up from 558,000 barrels a day a year ago.

Occidental said its realized price for crude oil in the second quarter was $110.12 a barrel, nearly double the price last year. Its domestic natural gas price rose to $9.99 per 1,000 cubic feet from $7.07 per 1,000 cubic feet in the second quarter of 2007.

For the first six months of 2008, Occidental's earnings grew to $4.14 billion, or $5.01 a share, from $2.62 billion, or $3.11 a share, a year ago.

Sales increased to $13.13 billion from $8.42 billion.

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On the Net:

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INDIANAPOLIS - Drug maker Eli Lilly & Co. posted a 44 percent increase in second-quarter earnings as sales growth was helped in part by the weaker dollar.

Lilly reported net income of $958.8 million, or 88 cents per share, compared with $663.6 million, or 61 cents per share, in the same quarter last year.

Excluding one-time costs for restructuring and other items, the company's earnings were 99 cents per share in the latest period.

Revenue increased 11 percent to $5.15 billion from $4.63 billion. A little over half that increase was due to the effects of the weaker dollar, and the rest to higher unit sales.

The results narrowly missed Wall Street earnings. Analysts polled by Thomson Financial expected earnings of $1 per share on revenue of $5.03 billion. Such estimates typically exclude one-time items.

Sales of Lilly's top-selling drug, the anti-psychotic Zyprexa, rose 2 percent to $1.24 billion. The antidepressant Cymbalta, Lilly's No. 2 seller, had another strong quarter, with sales rising 26 percent to $654.4 million primarily on strong demand.

Cymbalta sales also rose 37 percent in the first quarter. Lilly's fastest-growing drug also is approved to treat diabetic nerve pain, fibromyalgia and generalized anxiety disorder.

Cialis, Lilly's erectile dysfunction treatment, saw sales increase 24 percent to $362 million.

The company lowered its full-year earnings guidance, including one-time items, to between $3.79 and $3.94, down from prior estimates of $3.90 to $4.05. But company spokesman Mark Taylor said its outlook for adjusted earnings, which analysts follow, did not change from the range of $3.85 to $4.

Analysts surveyed by Thomson Financial expect $3.94 per share.

The National Association of Realtors reported Thursday that sales dropped 2.6% last month to a seasonally adjusted annual rate of 4.86 million units. That's more than double the expected decline. It leaves sales 15.5% below where they were a year ago.

The downward slide in sales is depressing prices, too. The median price for a home sold in June has dropped to $215,100, down by 6.1% from a year ago. That was the fifth largest year-over-year price drop on record.

The drop in sales pushed inventories of unsold single-family homes and condominiums to 4.49 million units, up 0.2%. That represented a 11.1 month supply at the June sales pace, the second highest level in the past 24 years.

Sales were down in all regions of the country except the West, which posted a 1% sales increase. Sales fell 6.6% in the Northeast, 3.4% in the Midwest and 3.1% in the South.

Analysts say that until the inventory level is reduced to more normal levels, the slump in housing is likely to persist. The inventory level is being driven higher by a massive wave of mortgage foreclosures, however.

Seeking to address the housing crisis, Congress is moving to pass a sweeping package of rescue measures. The plan includes support to keep as many as 400,000 homeowners from losing their homes to foreclosure and a federal lifeline to bolster troubled mortgage giants Fannie Mae and Freddie Mac.

The House passed the bill Wednesday and the Senate is expected to pass the proposal in coming days, sending it to President Bush. The president has dropped a threatened veto over a portion of the bill.

Lawrence Yun, chief economist for the Realtors, said that the housing rescue bill should play a major role in helping the housing market to rebound. He said an especially significant feature is a tax break worth up to $7,500 for first-time home buyers who purchase between April 9 of this year and July 1, 2009.

Yun estimated that up to 3 million first-time home buyers could qualify for that tax break, providing a significant boost to sales at a critical time.

"I think we are very near to the end of the housing downturn," Yun said.

Other private economists are not as optimistic. They worry that the relief supplied by Congress will not be enough to relieve the pressure weighing on housing and the overall economy now.

The complaint says three employees made about $1 million through manipulation of crude oil, gasoline and heating oil futures on the NYMEX.

On its website, Optiver describes itself as "a leading independent global arbitrage group with offices in Sydney, Chicago, Hong Kong, Taipei and ... Amsterdam," where it was founded, in 1986.

The increase, from $5.85 to $6.55 per hour, is the second of three annual increases required by a 2007 law. Next year's boost will bring the federal minimum to $7.25 an hour.

Workers like Walter Jasper, who earns minimum wage at a car wash in Nashville, are happy to take the raise, but will still struggle with the higher gas and food prices hammering Americans.

"It will help out a little," said Jasper, who with his fiancee support a family of seven, and who earns the minimum plus commissions when customers order premium car-wash services.

The bus fare he pays each day to get to work already went up to $4.80 this spring from $4. "I'd like to be on a job where I can at least get a car," he said.

Last week, the Labor Department reported the fastest inflation since 1991 — 5% for June compared with a year earlier. Energy costs soared nearly 25%. The price of food rose more than 5%.

So the minimum wage hike is "a drop in the bucket compared to the increases in costs, declining labor market, and declining household wealth that consumers have experienced in the past year," Lehman Brothers economist Zach Pandl said.

The new minimum wage is less than the inflation-adjusted 1997 level of $7.02, and far below the inflation-adjusted level of $10.06 from 40 years ago, according to a Labor Department inflation calculator.

Twenty-three states and the District of Columbia have laws making the minimum wage higher than the new federal requirement, a group covering 60% of U.S. workers, according to the Economic Policy Institute, a think tank.

"You get desperate, because you can't really pay for everything," said Gladys Lopez, 51, a garment worker from Adjuntas, Puerto Rico, who makes military uniforms and has earned the federal minimum for 18 years.

She says she would need to make at least $50 more a week to pay all her bills and take care of her 84-year-old mother, whom she supports.

When the minimum wage rises again next year, catching up with more states, more than 5 million workers will get a raise, said Lisa Lynch, dean of the Heller School for Social Policy and Management at Brandeis University.

Some small businesses are already making plans to raise prices to offset the higher wages they have to pay their workers.

David Heath, owner of Tiki Tan in College Station, Texas, said the increase will force him to raise prices for his monthly tanning services by about 12%. Tiki Tan had been paying its employees $6 per hour.

"There just isn't any room for profit, and so this is why prices will have to go up," he said, citing the wage increase and higher fuel costs. "I have to recoup those costs."

The increase in the minimum wage could push food prices even higher by rising the pay for agricultural workers, said Brian Bethune, chief U.S. economist at consulting firm Global Insight.

But he said he did not expect the change to have a major impact on the economy because recent increases in productivity, which enables companies to produce more with fewer workers, are keeping labor costs in check.

That makes it unlikely the minimum wage increase will trigger a "wage-price spiral," in which workers facing higher costs demand more pay, which in turn causes companies to raise prices higher, sending inflation coursing through the economy.

And most businesses, even restaurants and other service sector companies, already pay above the minimum wage anyway. Dan Whitaker, general manager at Anis Bistro in Atlanta, a casual French restaurant, said employees earn at least $8 an hour.

"You can't get a dishwasher for minimum wage," he said.

Subpoenas have been issued in recent months to all three companies, seeking e-mails, phone bills, financial records and other information, according to a report in Thursday's Los Angeles Times that cited unnamed sources with direct knowledge of the subpoenas.

Investigators also have begun looking at whether Countrywide and its former chairman, Angelo Mozilo, gave mortgage breaks to influential friends, including members of Congress, the Times reported.

The newspaper said U.S. Attorney's spokesman Thom Mrozek declined to say whether any of the firms are being investigated. A call to his office before hours on Thursday was not immediately returned.

Countrywide had been the nation's largest originator and servicer of home loans. California, Illinois and the city of San Diego are suing the company over its lending practices.

Bank of America bought Countrywide in a deal approved by the lender's shareholders late last month.

New Century had been the second-largest originator of subprime loans in the country before seeking Chapter 11 bankruptcy protection in April 2007. Subprime loans are those made to borrowers with poor credit repayment records.

Federal regulators seized IndyMac's assets on July 11. The bank is the largest regulated thrift in the nation to fail, regulators said.

The FBI told The Associated Press last week that it is investigating IndyMac.