Banks soar, overall markets are mixed

NEW YORK -- Bank stocks shot higher Friday after an agreement on a financial regulation bill reassured investors that new rules won't devastate financial companies' profits.

Banks outdistanced the rest of the market on a day when the Dow Jones industrial average fell slightly while other major indexes had slim gains.

The legislation imposes new rules on the complex investments known as derivatives, but the rules aren't as strict as investors feared. Analysts said the deal removes a huge cloud that has hovered over the financial industry.

Report: Economic growth is slowing

WASHINGTON -- The Commerce Department said Friday that the economy grew at an annual rate of 2.7 percent in the first quarter, offering its third and final estimate for the period. It was slower than initially thought because consumers spent less and imports rose faster that previously calculated.

Economists anticipate even slower growth ahead as companies bring their stockpiles more in line with sales. Factory output has climbed this year, but it was driven more by businesses replenishing their warehouses after the recession and less by consumer demand.

Pilots report snag in contract talks

CHICAGO -- Pilots for United and Continental airlines said they've hit a roadblock in their negotiations with the two companies.

United parent UAL Corp. is aiming to acquire Continental in a deal it hopes will close by the end of this year. Pilots have been negotiating a deal with the airlines that would have been a precursor to a full joint contract.

The pilots union at Continental said the two sides met Thursday, but talks broke off and no new talks are planned. Neither the union nor the company would elaborate.

United said it still is confident that it can reach a joint agreement.

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KB results suggest tough road ahead

LOS ANGELES -- The home-buyer tax credit party is over and the hangover may be just beginning. KB Home on Friday became the latest homebuilder to report a sharp drop in new home orders in the three months ended in May as federal tax incentives aimed at spurring home sales expired.

The builder's orders plunged 23 percent versus the same quarter last year. On Thursday, rival Lennar reported a 10 percent drop in orders, with the slide taking place entirely in the weeks after the tax credits expired on April 30.

SEC says it thwarted alleged Ponzi scheme

WASHINGTON -- The government said Friday it obtained a court order to halt an alleged $34 million Ponzi scheme targeting federal employees and law enforcement agents nationwide with promises of safe investments in a nonexistent bond fund.

The Securities and Exchange Commission said the order, issued Thursday by a federal judge in Miami, also froze the assets of the estate of the late Kenneth W. McLeod, his consulting firm Federal Employee Benefits Group of Jacksonville, Fla., and an affiliated investment firm.

The SEC alleged that McLeod and the firms defrauded an estimated 260 investors starting in 1988.