US service firms grow at fastest pace since August

WASHINGTON — U.S. service firms grew more quickly last month as production, hiring and new orders increased, adding to signs that the economy is accelerating after dipping at the start of the year.

The Institute for Supply Management said Wednesday that its service-sector index rose to 56.3 in May, the best reading since August 2013. The figure is an improvement from the 55.2 posted in April. Any figure above 50 indicates expansion.

The report points to solid growth after a brutal winter caused the economy to shrink 1 percent during the January-March quarter. The gains in new orders and the backlog of existing orders suggest a faster rate of hiring in the months ahead as businesses rush to meet the demand.

"With this level of activity and new orders in the pipeline, employment is going to have to come up," said Anthony Nieves, chairman of the ISM's services survey committee. "There is no way that companies will be able to sustain a good level of output if they don't have the bodies to do it."

The services survey covers businesses that employ 90 percent of the workforce, including retail, construction, health care and financial services firms. The ISM is a trade group of purchasing managers.

New orders rose for the fifth consecutive month, up 2.3 points to 60.5 and the highest reading since January 2011. The production component also climbed to 62.1, its strongest level since December 2010. Of the 18 industries surveyed in the report, only the mining sector contracted last month.

Several other economic reports indicate that the economy is gaining momentum. The ISM's separate survey of manufacturers on Monday rose to 55.4 in May. Both production and orders notched solid gains.

Auto sales improved in May as well. On Tuesday, Chrysler, General Motors, Nissan and Toyota all reported double-digit sales gains year-over-year. Ford's sales rose a better-than-expected 3 percent, while Hyundai's were up 4 percent.

The government issues its May jobs report on Friday. Employers added 288,000 jobs in April, and the unemployment rate fell to 6.3 percent. Economists expect 220,000 jobs were created in May, according to a FactSet survey.

But payroll processer ADP said Wednesday that private employers pulled back on hiring in May, adding just 179,000 jobs.

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Uninspiring economic reports send stocks lower

NEW YORK — Stocks are opening lower on Wall Street as traders found little to like in the latest batch of reports on the U.S. economy.

Handbag and luxury accessory maker Coach slumped 3 percent in early trading. TripAdvisor also fell 1.6 percent.

Protective Life Corp. jumped 18 percent on news that the company would be bought by the Japanese insurer Dai-ichi Life Insurance for $5.7 billion.

The Standard & Poor's 500 index fell three points, or 0.1 percent, to 1,921 in early trading Wednesday.

The Dow Jones industrial average lost 31 points, or 0.2 percent, to 16,689. The Nasdaq composite fell five points, or 0.1 percent, to 4,229.

In economic news, payroll company ADP reported a pullback in hiring at private companies, and the U.S. trade deficit jumped to a two-year high.

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A new 'Destiny' for non-sequel video games at E3

LOS ANGELES — Don't call it a comeback.

The recent success of "Titanfall" and "Watch Dogs" has laid the foundation for several new video games that don't contain numbers in their names to be hyped at next week's Electronic Entertainment Expo, the gaming industry's annual trade show. With anticipation building for several all-new titles, have game developers finally found the cure for sequelitis?

The industry has long mined popular games like "Call of Duty," ''Super Mario Bros." and "Final Fantasy" for a chain of spinoffs and sequels, but change is afoot ahead of this year's E3. The flashy trade show, expected to draw more than 48,000 attendees, will be populated by more original titles than in recent years.

The sci-fi shooter "Destiny," alternate history adventure "The Order: 1886," cartoony shoot-'em-up "Sunset Overdrive" and man-versus-monster match-up "Evolve" could steal attention away from the latest crop of "Call of Duty," ''Halo" and "Assassin's Creed" games, the same way that then unheard-of "Watch Dogs" and "Titanfall" did the past two years at E3.

Despite such triumphs, original games likely won't outnumber sequels at E3. There's a plethora of new installments scheduled to be promoted across the cavernous halls of the Los Angeles Convention Center, including the latest editions of "The Sims," ''Fable," ''Call of Duty," ''Far Cry," ''Metal Gear Solid," ''Dragon Age" and "Assassin's Creed" series.

"We're at the beginning of a hardware cycle, and we'll be at our annual show where we love to introduce new brands, so I think that means we'll have a higher combination of new brands than what you might have seen at E3 over the past three or four years," said Tony Key, senior vice president of sales and marketing at "Watch Dogs" publisher Ubisoft.

"Watch Dogs," an open-world action game that casts players as a vigilante hacker roaming around Chicago, sold 4 million copies after it debuted last week, becoming gaming's best-selling "new IP." That's industry-speak for original intellectual property — essentially a game that's not a sequel or licensed from an existing entertainment franchise.

By showcasing the game's unique ability to "hack" into the virtual city's infrastructure, as well as other players' sessions, "Watch Dogs" cemented itself as the most talked-about game of E3 when Ubisoft unveiled it two years ago. Bungie, the studio responsible for the original "Halo" games, hopes for similar buzz for "Destiny."

"We have a new IP," said Eric Osborne, community and marketing relations manager at "Destiny" developer Bungie. "We're not forgetting that we have a lot of people to convince that what we're building is amazing. We're convinced over here, which is why we're gonna roll a 'beta' (test version) out in July and let people experience a huge chunk of the game for themselves."

Similar to the "Halo" games, "Destiny" is a first-person shooter set in a sprawling sci-fi galaxy, but unlike the developer's previous series, "Destiny" requires gamers to always play online and team up to take down foes. Activision Blizzard Inc. is spending $500 million to market and develop the game — an unprecedented monumental bet on a title with no proven track record.

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Online:

http://www.e3expo.com

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Follow AP Entertainment Writer Derrik J. Lang on Twitter at http://www.twitter.com/derrikjlang .

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US trade deficit at two-year high in April

WASHINGTON — The U.S. trade deficit jumped to a two-year high in April, as exports declined and imports surged to a record high.

The deficit rose to $47.2 billion in April, up 6.9 percent from an upwardly revised March deficit of $44.2 billion, the Commerce Department said Wednesday.

Exports dropped for the fourth month out of the past five, falling 0.2 percent to $195.4 billion. Meanwhile, imports climbed 1.2 percent to an all-time high of $240.6 billion, reflecting record shipment levels of foreign-made cars, food, computers and other goods.

A wider trade deficit can act as a drag on growth because it means U.S. companies are earning less from their overseas markets. But it could also indicate rising U.S. demand as the country shakes off the effects of a harsh winter.

"We're obviously wary of falling back on using the weather as an excuse again, but the extreme cold winter, coupled with the drought in California, does partly explain why the U.S. is suddenly importing a lot more food and exporting less," said Paul Ashworth, chief U.S. economist at Capital Economics.

In 2013, the trade deficit declined by 11.4 percent to $476.4 billion. The result was led in part by a boom in U.S. energy production that cut America's dependence on foreign oil while boosting petroleum exports to a record high.

A larger trade gap in the first three months of this year compared to the fourth quarter shaved nearly a full percentage point from growth. Gross domestic product shrank at an annual rate of 1 percent in the first quarter, also hurt by less business stocking of store shelves and a severe winter that disrupted consumer spending and factory production.

But economists expect a strong bounce back in the current April-June quarter. Some estimate that growth could hover around 3.8 percent as the trade deficit narrows and stronger hiring boosts household incomes and consumer spending. However, the bigger-than-expected trade deficit in April may cause analysts to trim those forecasts a bit.

Many analysts say growth will remain strong at a rate around 3 percent in the second half of the year.

A domestic energy boom may help narrow the trade gap further this year. U.S. petroleum exports rose to an all-time high in 2013. The stronger production also lowered America's dependence on foreign oil, cutting petroleum imports by 10.9 percent. In April, imports of petroleum fell 2.2 percent to $29.8 billion, while U.S. petroleum exports rose 3.1 percent to $11.8 billion.

The deficit with the 28-nation European Union hit a monthly record of $14 billion in April as imports from that region hit an all-time high.

America's trade gap with China jumped 33.7 percent to $27.3 billion in April, the largest gap since January. The U.S. deficit with China is the largest with any country, and this year's imbalance is running ahead of last year's record pace. That is putting pressure on the Obama administration to take a tougher stand on what critics see as unfair trade practices by China.

They say Beijing is manipulating its currency to keep it undervalued against the dollar. That makes Chinese goods cheaper in the United States and American products more expensive in China.

The administration last month announced it had won a major victory before the Geneva-based World Trade Organization in a case in which the United States had challenged China's imposition of penalty tariffs on the sale of $5 billion in U.S.-made vehicles in China.

Also in May, the Justice Department charged five Chinese military officers with hacking into U.S. companies' computer systems to steal trade secrets. The case was viewed as evidence of the increased commercial strains between the world's two biggest economies.

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US stocks drift lower after hiring weakens

NEW YORK — Stocks moved slightly lower in early trading Wednesday after a private jobs report suggested that U.S. employers pulled back on hiring last month.

KEEPING SCORE: The Dow Jones industrial average lost 16 points, or 0.1 percent, to 16,706 in the first 30 minutes of trading. The Standard & Poor's 500 index fell a point to 1,923 and the Nasdaq composite lost a point to 4,233.

JOB WATCH: The payroll processor ADP said U.S. businesses slowed their hiring last month, adding just 179,000 workers to their payrolls. That's the weakest hiring in four months and well below what economists had expected.

The report suggests the government's monthly jobs report, due out Friday, could reveal a modest slowdown in hiring. Economists believe U.S. employers added 220,000 jobs in May, a pullback from April, which ended with a surprisingly strong 288,000 job additions.

INSURANCE DEAL: Protective Life jumped $10.53, or 18 percent, to $69.25 after Japanese insurance company Dai-ichi Life said it would buy the company for $70 a share, or $5.7 billion.

BONDS AND COMMODITIES: In the market for U.S. government bonds, the yield on the 10-year Treasury was little changed at 2.60 percent. The price of oil rose 64 cents to $103.30 a barrel.

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Fatal accident at Kellogg, Idaho, silver mine

KELLOGG, Idaho — A worker was killed in a mine shaft accident Monday afternoon at the Sunshine Mine near Kellogg, in northern Idaho, officials said Tuesday.

The Mine Safety and Health Administration says the miner died about 2 p.m. Monday after becoming caught between a mine shaft and an elevator-like device called a skip.

Agency spokeswoman Amy Louviere says two miners were on top of the skip when it moved before one was clear. She says the second miner avoided injury.

A corporate spokeswoman in Denver, Monica Brisnehan (BRIHS'-neh-han), said Tuesday she could not identify the victim or release details of the accident. It's being investigated by local authorities and the Mine Safety and Health Administration.

The agency has dispatched investigators to the mine.

The mine is not in production. Brisnehan says it has been in "care and maintenance mode" since the company acquired it three years ago.

There was a fire in the mine in 2012 and 12 people were safely evacuated. Ninety-one men were killed in a 1972 fire in the Sunshine Mine.

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Automakers see big US sales gains in May

DETROIT — Brisk demand for SUVs and pickup trucks — and five sunny weekends — likely pushed U.S. auto sales to a seven-year high in May.

Chrysler, Nissan and Toyota all reported double-digit sales gains over last May. Even General Motors, battling bad publicity from a mishandled recall, surprised with a 13 percent sales increase.

Ford's sales rose a better-than-expected 3 percent. Of major automakers, only Volkswagen's sales fell. Volkswagen sales were down 15 percent as the brand prepared to launch the new Golf compact car.

May is traditionally a strong month for the auto industry. This year's calendar, with five weekends, gave it an extra boost. Sales were particularly strong the last weekend of the month, automakers said.

Analysts were expecting sales to rise 7 percent to 8 percent to 1.56 million in May, helping erase doubts about the strength of the industry. January and February sales were weaker than expected as consumers spent more time shoveling snow than shopping.

"We're still recovering from the low first-quarter numbers that we saw," said Jeff Schuster, executive vice president of forecasting for LMC Automotive, an industry consulting firm. "It's the continued recovery in the summer selling season, kind of everything aligning in the month of May."

Schuster said last month's sales were strong even without big discounts by automakers. Car buying site TrueCar.com estimated incentives were flat from last May and up 4 percent from April to $2,677 per vehicle. TrueCar said Hyundai, Kia and Honda had the biggest increases in incentives in May. Chrysler, GM and Nissan offered fewer deals.

GM said May was its best month since August 2008. Sales of its GMC Yukon and Buick Encore SUVs more than doubled, and buyers snapped up the new Chevrolet Corvette. GMC Sierra pickup sales gained 14 percent, while Chevrolet Silverado sales rose 8 percent.

Toyota's sales increased 17 percent over last May. Nissan's sales jumped 19 percent on strong demand for new vehicles, including the Sentra small car and Rogue SUV.

Chrysler's sales rose 17 percent, boosted by strong demand for the new Jeep Cherokee small SUV. Chrysler said its Jeep brand sales jumped 58 percent and set an all-time monthly sales record, with 70,203 vehicles sold in May.

Ford said it was a record month for the Fusion sedan and Escape SUV, which both topped 30,000 in sales. Sales for the Lincoln luxury brand gained 21 percent as the new MKC small SUV went on sale.

But Ford's truck sales dropped 4 percent as the automaker cut back on incentives. Ford said it's trying to manage pickup truck inventories in preparation for plant shutdowns as it changes over to its new aluminum-clad F-150 pickup, which is due out later this year. Ford plans to close its truck plants for a total of 13 weeks this year. It would normally make around 90,000 trucks in that time.

"If we really wanted to, we could sell more trucks in the near term, but we've got to manage this thing through," said Joe Hinrichs, Ford's Americas chief.

Auto sales have led the uneven U.S. economic recovery for the last few years, and Schuster expects that to continue. But the pace is expected to slow as annual sales top a natural peak of around 16 million. U.S. auto sales totaled 15.6 million in 2013, up from 10.4 million at the depths of the recession in 2009.

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US factory orders up for third month in April

WASHINGTON — Orders to U.S. factories rose for a third consecutive month in April, adding to evidence that manufacturing is regaining momentum after a harsh winter.

Orders increased 0.7 percent in April, pushed higher by a surge in demand for military hardware, the Commerce Department reported Tuesday. That followed a 1.5 percent increase in March and a 1.7 percent climb in February.

The improvements followed two big declines in January and December, which partly reflected a harsh winter. A key category viewed as a proxy for business investment plans fell by 1.2 percent in April, though that drop came after a 4.7 percent surge in March.

The three solid monthly gains in factory orders should provide support to the overall economy, which is expected to stage a robust rebound in the April-June quarter.

The economy, as measured by the gross domestic product, shrank at an annual rate of 1 percent in the January-March quarter, reflecting winter storms that disrupted business activity. But in the current quarter, analysts estimate GDP will advance at an annual rate as high as 3.8 percent.

Economists say that growth will remain strong in the second half of this year as consumer spending benefits from rising employment, which is providing households with more income.

The report on factory orders showed that demand for durable goods, items expected to last at least three years, increased 0.6 percent in April. Orders for nondurable goods such as paper and chemicals rose 0.7 percent in April after a drop of 0.5 percent in March.

The overall increase reflected a sharp rise in demand for defense products including airplanes and communications equipment. Excluding defense, orders fell 0.1 percent in April.

Transportation orders grew 1.4 percent despite the fact that orders for commercial aircraft, a volatile category, dropped 7.9 percent and demand for autos and auto parts slipped 0.2 percent.

Demand for machinery fell 2.8 percent, with orders for construction equipment down 7.2 percent. Orders for computers dropped 13.2 percent, while demand for electrical appliances and other electrical products rose 1.3 percent.

Economists expect factory activity will strengthen in coming months, helped by rising consumer demand and a rebound in U.S. export sales.

The Institute for Supply Management reported Monday that its manufacturing index showed a rise in May to a solid reading of 55.4. Any reading above 50 indicates expansion in the manufacturing sector.

The data suggested that manufacturing is expanding at a healthy pace and should help the economy recover from its weak start at the beginning of the year.

In other encouraging news, a separate report this week showed that the contraction in China's manufacturing sector eased in May. It was the latest sign that the slowdown in the world's second biggest economy is stabilizing.

China's economy has slowed from double digit rates of expansion, with growth falling to 7.4 percent in the first quarter as leaders try to reduce dependence on trade and investment in favor of domestic consumption. The slowdown had raised concerns about export growth in other nations including the United States.

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Panera swears off artificial ingredients

NEW YORK — Panera says it will remove artificial colors, flavors, sweeteners and preservatives from its food by 2016, a reflection of the growing distaste people are showing for such ingredients.

The chain of bakery cafes, which has about 1,800 U.S. locations, is making the pledge as part of a "Food Policy" it is unveiling Tuesday that outlines its commitment to "clean" and "simple" ingredients.

The announcement comes at a time when Panera Bread Co. is facing slowing sales growth and working to jumpstart its business through a variety of means, such as revamping the sometimes confusing way people order and get food and switching baking hours to the daytime to create a homier feel in cafes.

The unveiling of Panera's sweeping "Food Policy" also underscores how positioning foods as natural has become a marketing advantage, regardless of whether it brings any nutritional benefits. Part of the attraction for customers is that they feel better about what they're eating, sometimes because they don't feel as guilty about how many calories they're consuming.

Chipotle, for instance, has gained in popularity in part by portraying itself as a more wholesome alternative to traditional fast-food chains like McDonald's. Even Subway recently said it would stop using azodicarbonamide in its breads. The ingredient was dubbed the "yoga mat" chemical after a petition by Vani Hari, who runs FoodBabe.com, noted it was used to make yoga mats.

Still, declaring foods as being natural or free of artificial ingredients has the potential to invite criticism and even legal troubles.

A lawsuit filed in November, for instance, alleges that Whole Foods Market uses a "spectacular array" of artificial ingredients in some of its store-brand products, despite the grocer's promise that the products contain "nothing artificial."

Panera also isn't swearing off genetically modified ingredients, another issue that is gaining attention in certain circles. Unlike Chipotle, which says its menu will soon be free of GMOs, Panera uses too many different ingredients to be able to make that claim.

And neither chain has any plans to stop selling fountain sodas from Coca-Cola and PepsiCo, even though the drinks are sweetened with high fructose corn syrup.

As for the rest of its menu, Panera says it's about halfway through the removal of artificial ingredients. It's still looking for ways to removes the artificial colors used in its bakery icings, for instance, and is testing a smoked ham in select markets that doesn't use artificial preservatives.

"We decided it was time to put all this into a clear and concise policy," Ron Shaich, Panera's founder and CEO, said in an interview.

Ten years ago, for instance, Panera announced that it would use chicken raised without antibiotics, a move Shaich said helped significantly drive sales.

Panera's new policy also states the chain's commitment to "transparency," meaning it will make it easy for people to see the ingredients and nutritional content of its food. It also says it will work to have a "positive impact" on the food system, such as by supporting North American suppliers whenever possible.

Whether the new policy helps attract more customers is yet to be seen.

Last year, Panera's sales rose 2.6 percent at company-owned locations open at least a year. That was down from 6.5 percent in 2012 and 4.9 percent in 2011.

This year, the St. Louis-based company is forecasting sales growth of 2 to 3.5 percent.

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Follow Candice Choi on Twitter at @candicechoi

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Stocks drift lower; Hillshire bidding war heats up

NEW YORK — U.S. stocks are heading lower in late-morning trading Tuesday, a day after major indexes reached new highs.

KEEPING SCORE: The Dow Jones industrial average dropped 45 points, or 0.3 percent, to 16,699 as of 11 a.m. Eastern. The Standard & Poor's 500 lost four points, or 0.2 percent, to 1,921 and the Nasdaq composite fell 10 points, or 0.2 percent, to 4,227. On Monday, both the Dow and S&P 500 hit record highs for the second straight day.

THE HUNT FOR HILLSHIRE: Deli meat and hotdog maker Hillshire Brands rose $4.61, or 9 percent, to $58.20. The company said it will hold separate talks with Tyson Foods and Pilgrim's Pride, who are currently in a bidding war to buy Hillshire. Pilgrim's Pride late Monday raised its bid to $55 a share, $5 more than what Tyson Food's offered last week. Hillshire was trading several dollars above Pilgrim's bid, a sign that investors believe both Pilgrim's Pride and Tyson are willing to offer much more for Hillshire.

NOT A TREAT: Krispy Kreme slumped after the doughnut chain cut its forecast for earnings this year, citing higher costs and fewer sales than previously estimated. The company's stock fell $2.38, or 13 percent, to $16.61.

FACTORY ORDERS: Orders to U.S. factories rose for a third consecutive month in April, adding to evidence that manufacturing is regaining momentum after the harsh winter. Factory orders rose 0.7 percent in April, better than the 0.5 percent rise that economists had expected.

BONDS: In the market for U.S. government bonds, the yield on the 10-year Treasury rose to 2.57 percent from 2.53 percent late Monday.

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