NEW YORK

NEW YORK Stocks advanced solidly Thursday, led by strong gains among the blue chips and mortgage lender Countrywide Financial Corp., which signaled a possible thawing in the credit markets with the announcement that it had lined up additional financing.

The Dow Jones industrial average rose by more than 130 points after General Motors Corp. surged 10 percent following reports that talks between the automaker and workers over the thorny issue of healthcare costs have perhaps been fruitful. Meanwhile, McDonald's Corp. closed at an all-time high after boosting its dividend and bond prices fell sharply.

Investors, who have been nervous about the economic fallout from rising mortgage defaults and tightness in the credit markets, were relieved to hear that Calabasas-based Countrywide the nation's largest mortgage lender secured $12 billion in credit.

"It appears that this credit crunch may not be as bad as some people thought," said Charles Norton, principal and portfolio manager at GNICapital, crediting the Countrywide news with lifting overall investor sentiment.

The Dow rose 133.23, or 1.00 percent, to 13,424.88.

Broader stock indicators also advanced, although more modestly. The Standard & Poor's 500 index rose 12.39, or 0.84 percent, to 1,483.95, and the technology-heavy Nasdaq composite index rose 8.99, or 0.35 percent, to 2,601.06.

Government bond prices fell sharply as stocks advanced. The yield on the 10-year Treasury note, which moves opposite its price, jumped to 4.48 percent from 4.41 percent late Wednesday.

MICHIGAN

UAW picks GM as potential strike target

DETROIT The United Auto Workers union has picked General Motors Corp. as the lead company and potential strike target in contract negotiations with the Detroit Three, two local union officials said Thursday.

The officials, who requested anonymity because the talks are private, said their locals received notice Thursday afternoon that GM would be the lead.

Contracts between the UAW and GM, Chrysler LLC and Ford Motor Co. expire at midnight tonight.

Normally, the union negotiates an agreement with the lead company, which becomes the pattern for the other two. Industry analysts consider GM's financial condition to be the strongest of the three.

Spokeswomen at Ford and Chrysler confirmed Thursday that those companies have agreed to indefinite contract extensions with the union. The extensions can be canceled by either side with three days' notice.

WASHINGTON, D.C.

U.S. deficit running lower than a year ago

The federal deficit is running sharply lower than last year even though spending in August set an all-time high, the government reported Thursday.

The Treasury Department said the deficit through the first 11 months of this budget year totaled $274.4 billion, down 9.8 percent from the same period a year ago.

Analysts believe that the deficit for all of 2007 will actually be even lower because they are forecasting a sizable surplus in the final month, reflecting in part timing issues that caused about $44 billion in Social Security and Medicare payments that normally would have been made in September to be shifted into August.

The Congressional Budget Office is forecasting that when this budget year wraps up Sept. 30, the deficit will total $158 billion, down by 36.2 percent from last year's $248.2 billion.

Jobless claims rise for sixth time in 7 weeks

The number of laid-off workers filing claims for unemployment benefits rose last week in another worrisome sign that the labor market is weakening.

The Labor Department reported Thursday that new claims for unemployment benefits rose by 4,000 last week to 319,000. It marked the sixth increase in the past seven weeks and was a further sign that the economy is feeling the effects of a steep slump in housing and a spreading credit crisis.

The government reported last week that employers cut 4,000 jobs from payrolls in August, the first monthly job decline in four years. The net decline came as a surprise. Analysts had been expecting an increase of 110,000 jobs, in line with growth this year.

In other bad news, the number of jobs created in June and July was trimmed by 81,000, indicating that the labor market was not performing as well as had been thought.

The surprisingly bad report increased worries that the current economic recovery, now in its sixth year, could be in danger of falling into a recession.

Overcharging by rail lines reported

Five major freight rail companies overcharged customers by more than $6.5 billion under the guise of fuel surcharges, according to a study commissioned by businesses that accuse U.S. railroads of anti-competitive behavior.

"This is the greatest train robbery of the 21st century," said Jack Gerard, president and chief executive of the American Chemistry Council, which represents about 90 percent of the nation's chemical makers. The amount was more than double what some railroad customer groups had expected.

The council commissioned an economic analysis to be released Thursday that found the railroads' fuel surcharges were excessive by more than $6.5 billion between 2005 and the first quarter of 2007. The study was based on regulatory filings and other estimates for Union Pacific Corp., Burlington Northern Santa Fe Corp., Norfolk Southern Corp., Kansas City Southern and CSX Corp.

Cephalon says pain drug improperly used

Shares of drug maker Cephalon fell sharply Thursday after the government disclosed company warnings that improper use of its severe pain treatment has caused several deaths.

In letters to physicians sent Monday, Cephalon said errors by healthcare professionals prescribing the drug, Fentora, have had sometimes fatal results. The Food and Drug Administration posted two such letters to its Web site.

Cephalon spokeswoman Stacey Beckhardt said the company has received three reports of patients dying after physicians improperly prescribed Fentora.

Cephalon is one of several drug companies under investigation by Congress for allegedly promoting its drugs for uses not approved by the FDA. Earlier this year, the House Oversight Committee ordered Cephalon to turn over all promotional materials for Fentora and an earlier version of the drug, Actiq.

The Connecticut Attorney General's office is conducting a similar investigation of the company.

Doctors are allowed to prescribe medications for any use they deem appropriate, although companies are only allowed to market products for uses approved by the government.

FDA approved Fentora last year to treat "breakthrough pain," or intense bursts of pain, experienced by cancer patients already taking more conventional pain killers.

CALIFORNIA

Countrywide's borrowing capacity boosted by $12 billion

CALABASAS Countrywide Financial Corp. boosted its borrowing capacity by $12 billion as the mortgage lender struggles to weather the slowdown in the housing market, the company said Thursday.

The move came after the largest U.S. home lender borrowed $11.5 billion and sold a $2 billion stake to Bank of America in recent weeks so it could keep operating its retail banking and mortgage businesses.

Countrywide said it arranged the $12 billion in additional borrowing capacity through new or existing credit agreements.

Shares of Countrywide rose $2.31, or 14 percent, to $18.93 Thursday.

Countrywide also saw a 17 percent drop in its new home loans for August compared with the same period last year. The amount of funding totaled $34 billion. The company processed $2.3 billion in loan applications a day, a decline of 12 percent.

Countrywide said the declines reflect current problems in the mortgage industry, which include slipping home values and decaying credit quality.

Loans in the pipeline at the end of August shrank to $52 billion from $64 billion at the end of August 2006.

Teacher to be expelled from Carl's Jr., Hardee's TV ad

LOS ANGELES A short-skirted, gyrating teacher in a hamburger TV ad has been expelled for conduct unbecoming a corporate spokesmodel.

Fast-food chains Carl's Jr. and Hardee's have pushed the bounds of good taste before with TV ads featuring Paris Hilton, Hugh Hefner and a woman riding a mechanical bull while chomping a burger.

But their most recent ads featuring a teacher who dances on her desk and touches her backside while rappers in the classroom talk about her "flat buns" has apparently gone too far.

Carpinteria-based CKE Restaurants Inc., the chains' parent company, will edit the character from the ad after receiving loud complaints from educators.

The company, which has never altered previous ads despite complaints, said this situation was different.

"The ad was intended to be humorous and irreverent," said Brad Haley, executive vice president of marketing. "Since it seemed to be missing the mark with too many people, it justified making a change."

NEW YORK

Consumers could face up to 10 percent hike in toy prices

NEW YORK U.S. consumers will be bearing the cost of safer toys, but not until after this year's Christmas season.

Shoppers can expect price increases up to 10 percent next year to pay for increased vigilance by toy makers and stores after more than 3 million lead-tainted toys from China were recalled worldwide since June. That means a $6.99 Barbie doll could go up to about $7.70, or a $70 child-friendly digital camera could retail for almost $80.

Analysts said the increases are unlikely to hit until at least January because toys for Christmas have already been ordered.

From wire reports