In other news, the Federal Reserve indicated that the recession might be easing up but said the labor market remains soft, and Microsoft announced a long-awaited partnership with Yahoo.
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In other news today, the Federal Reserve reported the economy appears to be stabilizing in some parts of the country. At the same time, the regional survey found the labor market remains extremely soft.
President Obama addressed the issue today during a town hall meeting in North Carolina.
U.S. PRESIDENT BARACK OBAMA:
Here's what's true: We have stopped the freefall. The market's up, and the financial system is no longer on the verge of collapse.
So there's no doubt that things have gotten better. We may be seeing the beginning of the end of the recession, but that's little comfort if you're one of the folks who've lost their job and haven't found another.
Another report underscored lingering problems. The Commerce Department said factory orders for big-ticket goods fell in June by the most in five months.
And Wall Street lost ground. The Dow Jones Industrial Average dropped 26 points to close at 9,070. The Nasdaq fell more than 7 points to close at 1,967.
A major business deal shook the Internet world today. Software giant Microsoft announced a 10-year partnership with Yahoo, the Web's second-largest search engine. NewsHour senior correspondent Ray Suarez has our report.
With the announcement, Microsoft moves closer to its goal of challenging Google's dominance as the Internet search engine of choice.
Google currently handles 67 percent of the world's Internet searches, while Microsoft and Yahoo have just 11 percent of the market between them.
Under the partnership, Microsoft will not pay anything to Yahoo upfront, but Yahoo will get to keep 88 percent of the revenue from all search ad sales on its site for the first five years.
Today's long-awaited deal means Microsoft's new upgraded search engine called Bing will power the searches done on the Yahoo site. That will deliver to Bing the second-largest search engine audience on the Internet.
Just last year, Microsoft made a $47 billion bid to buy Yahoo outright, but the offer was refused. Yahoo is now valued at $22 billion.
Also last year, Google tried to buy Yahoo, but the U.S. Justice Department ruled that combination would control too much of the search engine market and violate federal antitrust laws.
Google issued a measured response to today's news. A spokesman said, "Competition brings about great things for users. We're interested to learn more about the deal."
Market analysts said the agreement was a steal for Microsoft.
ED MOLTZEN, Computer Reseller News Magazine:
Yahoo wins the ability to stay an independent company with a huge new friend, a huge new ally in Microsoft, which can help them concentrate on other things, where they think they can be more successful, but, really, the big winner here has to be Microsoft.
On Wall Street, shares of Yahoo fell 12 percent over disappointment there's no immediate windfall for the company. Microsoft shares were up 1 percent. The deal is expected to close early next year, if federal officials give their approval. It could take another two years before users around the world could fully reap the benefits.
On Iraq, there was word some U.S. combat forces may be leaving sooner than anticipated. It came from Defense Secretary Robert Gates. As he left Iraq, he said the security situation there was "better than expected."
Elsewhere, Iraqi forces were in a standoff with an Iranian opposition group at a camp north of Baghdad. Seven of the Iranian exiles died in a raid yesterday. The group released this video said to show Iraqi troops clashing with residents of the camp, but government officials denied there were deaths.
ALI AL-DABBAGH, Iraqi government spokesman (through translator): The Iraqi government is determined to extend its sovereignty over all areas and locations previously controlled by foreign forces. Camp Ashraf is not exempt from this decision; however, the Iraqi government is dealing with members of this camp in a humanitarian way.
The U.S. military said it played no role in the raid. Iran praised the action, but said it should have come sooner.
Dozens of people across the United States will face charges in a major Medicare fraud investigation. At least 30 people, including doctors, were arrested today in New York, Boston, Louisiana, and Houston. The alleged scams included charging Medicare for thousands of dollars of food and medical devices that patients never received.
A government advisory committee called today for pregnant women to be first in line for swine flu vaccines this fall. The group made recommendations to the Centers for Disease Control. The British medical journal, the Lancet, reported pregnant women run a much higher risk of severe illness and death from the swine flu virus, also known as H1N1.