By Emily Jane Fox @CNNMoneyInvest January 20, 2013: 10:53 AM ET

NEW YORK (CNNMoney)

Investors are heading into the shortened trading week with a deluge of technology focused quarterly financial reports on tap.

U.S. markets will be closed Monday in observance of Martin Luther King, Jr. Day.

Earnings season will pick right back up again on Tuesday, as several tech giants, including Google (GOOG, Fortune 500), IBM (IBM, Fortune 500)and Verizon (VZ, Fortune 500), release their quarterly reports.

The barrage of tech earnings will continue throughout the week, with AT&T (T, Fortune 500), Microsoft (MSFT, Fortune 500), Netflix (NFLX) and Nokia (NOK) following.

The most hotly anticipated report will come from Apple (AAPL, Fortune 500) on Wednesday.

The iPhone and iPad maker already warned that its profit margins would come down significantly during the final three months of the year thanks to higher production costs tied to all of its new products, including the iPhone 5 and the iPad mini. Less-expensive products, like the iPhone 4S and iPad mini, also make up a growing portion of Apple’s sales mix.

While expectations are all over the map, some analysts anticipate a year-over-year decline. That would mark Apple’s first drop in profits in nine years.

Overall, S&P 500 companies are expected to report earnings growth of 3.8% for the last three months of 2012, according to S&P’s Capital IQ.

In economic news, several pieces of data on the housing market are due throughout the week, including existing and new home sales and the MBA mortgage index.

The housing market has continued to pick up steam throughout the recovery, as record-low mortgage rates spur demand for homes. A recovering job market and a tapering off of foreclosures have also given the market a boost.

Last week, all three major indexes logged a third straight week of gains, with the Dow Jones Industrial Average and S&P 500 climbing to their highest levels since December 2007. The Dow gained 1.2%, the S&P 500 rose 1% and the Nasdaq added 0.3%.

(Reuters) – U.S. mortgage lenders making higher-priced loans to consumers must have properties appraised and provide borrowers a free copy of the report, under new rules released by six financial regulatory agencies on Friday.

The rule is part of an overhaul of mortgage market regulations, as U.S. officials try to prevent the types of industry abuses that contributed to millions of home foreclosures and helped spark the 2007-2009 U.S. financial crisis.

Lenders making loans with interest rates above a certain threshold, which do not meet the “qualified mortgage” definition set by regulators last week, will be required to have a certified appraiser visit the interior of the property, the regulators said.

In an effort to crack down on property flipping, regulators said creditors also must obtain a second appraisal if the difference between what the seller paid for the property and what the consumer will pay exceeds certain levels.

Six agencies approved the appraisal rules, which were called for by the 2010 Dodd-Frank financial oversight law and which will take effect in January 2014.

The Federal Deposit Insurance Corp, Consumer Financial Protection Bureau, Federal Reserve, Federal Housing Finance Agency, National Credit Union Administration and Office of the Comptroller of the Currency all signed off on the rules.

(Reporting By Emily Stephenson; Editing by Neil Stempleman)

(Reuters) – A low-cost space dwelling that inflates like a balloon in orbit will be tested aboard the International Space Station, opening the door for commercial leases of future free-flying outposts and deep-space astronaut habitats for NASA.

The Bigelow Expandable Activity Module, nicknamed BEAM, will be the third orbital prototype developed and flown by privately owned Bigelow Aerospace.

The Las Vegas-based company, founded in 1999 by Budget Suites of America hotel chain owner Robert Bigelow, currently operates two small unmanned experimental habitats called Genesis 1, launched in 2006, and Genesis 2, which followed a year later.

BEAM, about 13 feet long and 10.5 feet in diameter when inflated, is scheduled for launch in mid-2015 aboard a Space Exploration Technologies’ Dragon cargo ship, said Mike Gold, director of operations for Bigelow Aerospace.

“It will be the first expandable habitat module ever constructed for human occupancy,” Gold said.

A successful test flight on the space station would be a stepping stone for planned Bigelow-staffed orbiting outposts that the company plans to lease to research organizations, businesses and wealthy individuals wishing to vacation in orbit.

Bigelow has invested about $250 million in inflatable habitation modules so far. It has preliminary agreements with seven non-U.S. space and research agencies in the United Kingdom, the Netherlands, Australia, Singapore, Japan, Sweden and the United Arab Emirates.

“The value to me personally and to our company is doing a project with NASA,” Robert Bigelow said. “This is our first opportunity to do that. We do have other ambitions.”

NASA, which will pay Bigelow Aerospace $17.8 million for the BEAM habitat, also is interested in the technology to house crew during future expeditions beyond the space station, a $100 billion research complex that flies about 250 miles above Earth.

“Whether you’re going to the surface of the moon or even Mars, the benefits of expandable habitats are critical for any exploration mission,” Gold said.

The lightweight, soft-skinned inflatable, made of materials similar to Kevlar, has several advantages over traditional metallic space dwellings. BEAM, for example, weighs about 3,000 pounds (1,361 kg), less than a third of traditional, similarly sized space modules, so it can be launched for a fraction of the cost.

RADIATION EVENTS

It also offers a potentially safer radiation environment than metal structures, which can produce body-piercing secondary heavy particles during solar storms and other cosmic radiation events.

The U.S. space agency studied inflatable space habitats for humans in the 1990s under a NASA program called TransHab. The tests included blasting a model structure with bullet-like projectiles to see how well it would withstand micro meteoroid and orbital debris hits. The material proved space-worthy, though budget and political issues prompted the project’s cancellation in 2000.

Bigelow later licensed the technology from NASA and spent millions of dollars more to develop it.

“It’s one of our classical roles to advance technology so the private sector can utilize it. In this case, we’re going to be able to benefit from it again,” said NASA deputy administrator Lori Garver.

BEAM will be attached to the station’s Tranquility connecting node and inflated with pressurized air to form a rigid, cylinder-shaped, balloon-like dwelling.

Garver said there are no firm plans for what the station’s six live-aboard crew members will do with their spare room.

Initially, NASA and Bigelow are interested in getting information about how the structure withstands radiation and maintains a stable temperature in orbit, and also whether the fabric mildews or becomes a place where contaminants in the station’s air collects.

Beyond the test flight, Bigelow’s commercial business is dependent on the development of space taxis to fly company personnel and guests into orbit. NASA likewise is looking to the private sector to fly its astronauts to and from the space station, a service now solely provided by Russia at a cost of more than $60 million per person.

NASA is investing in three companies – Boeing Co, Space Exploration Technologies, also known as SpaceX, and Sierra Nevada Corp – in hopes of having at least one space transportation system ready to fly before the end of 2017. The space station, a project of 15 nations, currently is funded through 2020.

Bigelow has agreements with Boeing and SpaceX for launch services, if and when they become available. SpaceX plans a test launch with company astronauts before the end of 2015, and Boeing’s first piloted flight is pegged for 2016.

(Editing by Tom Brown, Dan Grebler, Kevin Gray and David Gregorio)

Apple’s iOS and Google’s Android rule the fast-growing smartphone market, but upcoming operating systems want to muscle in on their turf.

By Rachel Metz on January 15, 2013

The next time you go shopping for a smartphone, you might see some unfamiliar software on the screens lining store shelves.

The smartphone market is dominated by Apple’s iPhone and devices running Google’s Android software, with Microsoft and RIM hoping to carve out the remaining market share for their new Windows Phone 8 and BlackBerry 10. But several completely new operating systems will soon be available.

Manufacturers, carriers, and other parties have realized how important the mobile operating system is in providing control over the modern computing experience. Apple and Google are able to sell apps and digital content through the stores tied to their mobile operating systems, causing users to become “locked in” to their ecosystem of hardware and software.

Now, competitors—and some free-software proponents—hope to capture some of the same success, or at least stop the two juggernauts from gaining too much power. They recognize that an environment dominated by just two players could stifle innovation and give the leaders too much power over carriers, handset makers, and users themselves.

Today, according to IHS iSuppli, close to 46 percent of cell-phone users worldwide have smartphones, and 87 percent of those phones run either Google or Apple software. Both handset makers and carriers want more options, says David Yoffie, a professor at Harvard Business School.

Yoffie notes that Android was originally seen as an unbiased player with no hardware or sales revenues from handsets—a software “Switzerland”—but Google’s purchase of Motorola’s handset business makes the software more threatening to other hardware makers, and he believes this is leading a number of them to consider alternatives. New entrants include Tizen, a platform that’s supported primarily by Samsung and Intel; Firefox OS, created by the Mozilla Foundation, which makes the Firefox Web browser; and a version of the free, open-source Ubuntu Linux operating system designed for smartphones. There are also several efforts under way to revive Hewlett-Packard’s critically acclaimed webOS (see “Can HP’s webOS Rise from the Ashes?”).

While Android can be modified, its development is still controlled by Google. So an alternative could make it easier for a carrier, or a technology giant like Samsung, to show off its own services and content—potentially helping it gain a more substantive relationship with smartphone buyers.

Even with interest from smartphone makers and wireless carriers, any would-be mobile operating system faces the challenge of establishing a healthy application ecosystem. Tizen, Firefox OS, and Ubuntu are all counting heavily on Web-based HTML5 apps (see “New Mobile OSs May Mean the End of the Closed App Store”), which they hope will make it easier for developers to make apps that can work on multiple platforms. This could encourage more coders to support nascent operating systems.

Tizen, which grew out of Nokia’s MeeGo platform and (like Android) is based on the open-source Linux operating system, may have the best chance of success. Along with Samsung and Intel, its supporters include the wireless carriers Sprint, Vodafone, and NTT Docomo; electronics maker Panasonic; and the Chinese telecommunications company Huawei. The software is still under development, but a video of a Tizen developer conference held last year shows novel features such as 3-D-type effects (photo browsing takes on the look of a spiraling cascade of images, for example).

The Mozilla Foundation and Canonical, the company behind the Ubuntu operating system, are both likely to be hoping that their alternatives will provide a more open mobile environment where no companies dominate. Firefox mobile apps are essentially Web pages, and the Firefox team came up with ways for Firefox OS to access all the hardware on a smartphone running the software. Even the phone’s dialer acts as an app, says Chris Lee, Mozilla’s product lead for the OS.

Lee says Firefox OS phones will be low on built-in memory at about 256 megabytes of RAM, and many will include a microSD slot so users can pop in their own memory card to store music, photos, and videos. He adds that the first phones are expected to cost around $100 (in line with lower-end Android smartphones) and will be made by the electronics maker TCL Communication Technology and the Chinese telecommunications company ZTE. These devices are expected to be available in the first half of this year, initially in Brazil, where they will be sold by the wireless carrier Telefonica’s Vivo brand.

Strategy Analytics senior analyst Scott Bicheno thinks Firefox’s strategy could pay off, especially in areas where Telefonica has a strong presence. “There’s still plenty of growth in the rest of the world at lower price points,” he says. However, the developing world also presents a potential problem for the Firefox OS: access to reliable high-speed wireless networks. The OS is highly dependent on its users’ access to the Web, but many developing economies still don’t have robust networks.

Lee says this is definitely a challenge, but that the OS does allow some functionality offline. Firefox OS has already managed to get some major app makers on board: Lee says it is working with the likes of Facebook, Twitter, and Google, along with local app developers in various other markets.

Canonical has even more ambitious hopes for Ubuntu. Although it hasn’t publicly named hardware or wireless partners, Canonical project manager Richard Collins says Ubuntu hopes to have between 5 and 10 percent of the smartphone market by 2016 (see “Ubuntu to Offer Smartphone Operating Software”).

To reach this goal, Ubuntu is targeting the high and low ends of the smartphone market in the developing world. High-end smartphones running the OS will also be able to act as Ubuntu PCs when docked with a keyboard, mouse, and monitor. Collins says the company will work with a hardware manufacturer and mobile operator on getting the Ubuntu phone to market; it aims to ship its first phones by the beginning of next year.

Even with a well-stocked app larder, underdog operating systems won’t find it easy to grab major market share. Still, there’s always an opportunity in a market growing so rapidly. While less than half of the world had a smartphone in 2012, IHS iSuppli expects 56 percent of cellphone users to be swiping and tapping on smartphones by the end of this year.

A new study suggests that some of the hearing loss caused by noise exposure can be reversed with drugs.

By Susan Young on January 15, 2013

Listen up, live music fans. The hearing loss caused by exposure to loud noise can be at least partially reversed with drugs, according to a study published by U.S. and Japanese researchers last week in the journal Neuron.

The work is the first proof that a drug can spur regeneration of the mammalian ear’s sound-detecting hair cells, which can be damaged by noise exposure. While the hair cells of some animals, such as birds, can regenerate on their own, the hair cells of humans and other mammals cannot. The cells may be damaged by infection or as a side effect of certain drugs as well as after exposure to loud noises.

Previous research has hinted that gene therapy might be able to induce regeneration in the adult mammalian ear. Now, Albert Edge, a stem cell biologist at the Massachusetts Eye and Ear Infirmary and Harvard Medical School, and colleagues have shown that a chemical compound can do the same by stimulating supporting cells to develop into new hair cells.

The drug used in the study inhibits the activity of a protein called Notch, which Edge’s lab and others had previously shown prevents supporting cells from turning into hair cells. “It’s like taking the brakes off the car,” says Edge.

The drug was first developed to treat Alzheimer’s disease, but it failed—partly because inhibiting Notch, which regulates many genes within the body, causes side effects.

In the study, an oral dose of the drug improved hearing and increased the number of hair cells in deaf mice, but it also had significant side effects. So the team tried delivering the drug directly to the inner ear, where it should be unlikely to reach the rest of the body, says Edge. “When we treated [the mice] with the local delivery of the drug, they seemed perfectly healthy,” he says. “But before this would be able to be used in patients, we would have to make sure of that.”

A month or so after treating the mice, Edge—working with stem cell biologists Kunio Mizutari and Masato Fujioka of Tokyo’s Keio University School of Medicine in Japan—found that some of the supporting cells in the animals’ ears had turned into hair cells. The mice that received this treatment recovered about 20 percent of their hearing at low frequencies, says Edge.

The results are an important confirmation of previous indications that regeneration is possible in adult mammalian ears, says Alan Cheng, an ear, nose, and throat doctor and scientist who studies hair cell regeneration at the Stanford School of Medicine. “But it will require a lot more work to validate its utility in different models of damage—to say in any definitive way that patients can benefit from it,” he says.

To see how much the drug improved hearing, the researchers placed a small amplifier into each animal’s ear canal and, working in a soundproof room, looked for electrical activity in the brain stem in response to sounds. “The mice, before treatment, don’t respond no matter how much sound we put in,” says Edge. After the treatment, however, the team could detect electrical activity in response to loud, low-frequency sounds.

There is still a lot of work to be done before this drug, or a similar compound, could be used to treat human patients. “The recovery of hearing that we found is quite small,” says Edge. “In human terms, the mice went from profoundly deaf to being able to detect fairly loud sounds at a low pitch.” Next, the team will explore whether the drug can regenerate hair cells damaged by trauma other than noise, such as exposure to toxins.

Cheng also notes that while the mice were given the drug soon after noise exposure, most people will not seek diagnosis or treatment until long after the damage occurs. Hearing loss in humans generally isn’t diagnosed “until days or weeks have passed,” he says. “Whether the treatment is useful in a delayed fashion has to be teased out.”

By Ben Berkowitz

Jan 18 (Reuters) – If the latest week of earnings season has told investors anything, it is that strong banks and energy companies are getting stronger, while weaker banks and technology companies are far from conquering the challenges they have faced in the last few years.

Any sense of optimism for 2013 has to be tempered by a steady decline in earnings growth forecasts, as well as a recent rise in companies making mass layoffs in attempts to get costs further under control.

With U.S. economic growth anemic and the uncertainties of the “fiscal cliff” still reverberating, companies that went into the fourth quarter of 2012 with some sense of momentum seem to have kept that up, while those that were on the wrong foot to begin with did not get much help.

“The takeaway is that earnings appear to be mimicking the economic recovery,” said Tom Sowanick, co-president and chief investment officer at Omnivest Group LLC.

JPMorgan Chase & Co, the largest U.S. bank by assets, posted a 53 percent rise in fourth-quarter profits on growth in lending and a decline in bad loan costs. Goldman Sachs Group Inc, the largest U.S. investment bank, crushed Wall Street estimates on increasing client activity and smaller payouts to its bankers.

Meanwhile both industrial heavyweight General Electric Co and oilfield services leader Schlumberger Ltd handily beat expectations on still-booming demand for oil and gas equipment and services.

But the challenged got no relief.

Citigroup, the third-largest U.S. bank, badly missed estimates, striking such a cautious tone that analysts made no effort to hide their disappointment with the new management. Lender Capital One Financial Corp missed estimates after setting aside more money for credit card defaults.

Chipmaker Intel Corp, facing slack demand for personal computers, beat estimates because of a low tax rate and then forecast revenue and capital spending that unnerved investors. AT&T Corp warned of a $10 billion charge because its pension plan returns are weaker than forecast.

Market strategists like Doug Cote at ING Investment Management in New York say earnings season has been mixed at best, though there is always the potential for that to change with next week’s crop of results.

MORE BAD NEWS COMING

All totaled, with 13 percent of the S&P 500 companies having reported fourth-quarter results as of Friday morning, 62 percent have beaten expectations, precisely in line with a typical quarter as computed since the mid-1990s.

But their profit growth has been lackluster at best. Blended fourth-quarter earnings growth (factoring in what has been reported and what is estimated to come) now stands at 2.5 percent, according to Thomson Reuters data. Less than four months ago, the expectation was that fourth-quarter earnings would grow almost 10 percent.

That may be why forward-looking earnings forecasts are getting so weak so quickly.

As of now, S&P 500 companies are expecting profits to growth 3.5 percent in the first quarter of this year, the data show. That figure was 4.3 percent at the start of January and 7.1 percent last October.

The slide, in other words, shows no sign of abating, and the trend holds equally true for second-quarter growth forecasts.

“I think it’s a reflection of a very flat economy right now. I think that companies might have been a little more hopeful that the economy was going to be stronger than it is,” said Bryant Evans, portfolio manager at Cozad Asset Management. “I think companies are pushing back better earnings to later in the year or early next year.”

DEBT AND JOBS

Some companies blamed the ongoing weakness in Europe, which has moved past the worst of its debt crisis but is still struggling with the aftermath.

Johnson Controls, the largest U.S. auto part supplier, warned lower auto production in Europe would eat into results this quarter, sending shares lower even after it beat estimates for the last quarter.

Others, like Citigroup, warned they were taking a cautious posture because of the ongoing uncertainty over the next financial crisis facing the U.S. Congress: the country’s ability to borrow more to pay its obligations.

“What we would like to see now is how the U.S. deals with the ongoing debt ceiling debate,” Chief Financial Officer John Gerspach said on a conference call Thursday. The government is due to hit that ceiling as soon as mid-February, stirring fears of a debt default if it is not raised.

Some companies are reacting to the uncertainty by cutting jobs, hoping to save their way to stronger profits. Just this week, custody bank State Street Corp said it would cut 630 positions worldwide and Procter & Gamble cut 150 jobs in Europe. They join previous job-cutters like American Express , which is slashing 5,400 posts.

Even Cirque Du Soleil, the Canadian circus company known for its imaginative high-wire productions, said this week it would cut 400 jobs amid rising costs and currency pressure.

But the week’s biggest loser might have been Jamie Dimon, the chief executive of JPMorgan. Despite the record profits his bank posted, Dimon was taken to task by the company’s board for lax oversight, which led to huge trading losses last year.

The result? A bonus cut that cost Dimon more than $10 million.

(Reuters) – The number of Americans filing new claims for unemployment aid hit a five-year low last week and residential construction surged in December, the latest signs that the U.S. economic recovery remains on track.

The reports on Thursday showed the economy was weathering an uncertain fiscal environment surprisingly well. Still, growth in the fourth quarter was likely subdued with only a modest pick-up expected in the first three months of this year.

“While growth has been slow, the damage done from the uncertainty surrounding the fiscal cliff was not sufficient to topple the recovery,” said Millan Mulraine, a senior economist at TD Securities in New York.

The fiscal cliff refers to a wave of deep government spending cuts and tax increases, part of which was avoided after a last-minute agreement by U.S. lawmakers. A fight over raising the government’s borrowing limit looms.

Initial claims for state unemployment benefits fell 37,000 to a seasonally adjusted 335,000, the lowest level since January 2008, the Labor Department said. It was the largest weekly drop since February 2010 and ended four straight weeks of increases.

While problems adjusting the data for seasonal fluctuations might have exaggerated the decline, economists said the report still suggested an improvement in sluggish labor market conditions and the economy as a whole.

“Having taken a pinch of salt, however, we would suggest that the trend in claims generally show no pickup in layoff activity around the turn of the year,” said John Ryding, chief economist at RDQ Economics in New York.

A separate report from the Commerce Department showed housing starts jumped 12.1 percent last month to their highest level since June 2008. Permits for future home construction were also the highest in about 4-1/2 years.

Stocks on Wall Street ended higher on the fairly upbeat jobs and housing data, with the broad Standard & Poor’s 500 index hitting a five-year high. Commodity prices also firmed, but U.S. government bond prices slumped.

The dollar rallied to a 2-1/2-year high against the yen.

HOUSING GAINING TRACTION

Though warm weather likely helped, the data was confirmation of the improving housing market tone, and home building made gains across all four regions. Groundbreaking also increased for both single-family homes and multi-family units.

Builders started 780,000 houses in 2012. While still low by historical standards, it was the third straight year of gains in home construction. Housing is no longer a drag on the economy and residential construction is expected to have contributed to growth last year for the first time since 2005.

“The housing recovery has steam. Interest rates are rock-bottom low, inventories of new and existing homes are lean, and the economy is creating jobs,” said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts.

Newport said they expected starts to rise to 970,000 this year. The reports came on the heels of data this week showing solid retail sales and manufacturing growth in December.

But weak exports, a slow pace of inventory accumulation and the reversal of a surge in defense spending probably slowed growth to below a 2 percent annual pace in the fourth quarter.

In a reminder that the outlook for the economy remained shaky, a third report showed factory activity in the U.S. mid-Atlantic region contracted this month as new orders tumbled.

The Philadelphia Federal Reserve Bank said its business activity index fell to -5.8 from 4.6 in December. A reading below zero indicates contraction in manufacturing in eastern Pennsylvania, southern New Jersey and Delaware.

“Manufacturing has slowed but it’s still growing. I’m not going to read too much into this until I see other regional surveys,” said Gus Faucher, a senior economist at PNC Financial Services in Pittsburgh.

The claims data covered the survey week for the January data for the closely watched nonfarm payrolls report. The four-week moving average of new jobless claims, a better measure of labor market trends, fell 6,750 to 359,250, suggesting some improvement in labor market conditions.

Job growth has been gradual, with employers adding 155,000 new positions in December. The unemployment rate held steady at 7.8 percent last month. High jobless is likely to keep the Federal Reserve on an expansionary monetary policy path.

Atlanta Fed President Dennis Lockhart said on Thursday the Federal Reserve will very likely need to continue its large-scale asset purchases into the second half of this year.

(Additional reporting by Jason Lange in Washington and Richard Leong in New York, editing by Chizu Nomiyama)

Chemical producers abandoned the U.S. in droves. Cheap natural gas is luring them back.

• By Kevin Bullis on January 9, 2013

People predicting a manufacturing renaissance in the United States usually imagine whirring robots or advanced factories turning out wind turbines and solar panels. The real American edge might be in something entirely more mundane: cheap starting materials for plastic bottles and plastic bags.

The plummeting price of natural gas, which can be used to make a vast number of products, including tires, carpet, antifreeze, lubricants, cloth, and many types of plastic, is luring key industries to the United States. Just five years ago, natural gas prices were so high that some chemicals manufacturers were shutting down operations here. Now the ability to access natural gas trapped in shale rock formations, using technologies such as hydraulic fracturing and horizontal drilling, has led to a surge in natural gas supplies that have lowered American gas prices to a fraction of prices in other countries (see “King Natural Gas”).

Over the last 18 months, low U.S. gas prices have prompted plans for the construction of new chemical plants for the production of ethylene, ammonia for fertilizer, and diesel fuels. Dow Chemical, for example, plans to spend $4 billion to expand its U.S. chemicals production, including a new plant, due to open in 2017, in Freeport, Texas. The plant will make ethylene from the ethane found in many sources of natural gas. (The last such plant to be built in the U.S. was completed in 2001).

The impact of the resurgence is being felt most strongly in the $148 billion market for ethylene, the world’s most high-volume chemical, and the foundation for many other industries. It’s used to make bottles, toys, clothes, windows, pipes, carpet, tires, and many other products. Since ethylene is expensive to transport over long distances, a new ethylene plant is typically integrated with a facility to convert it into polyethylene for plastic bags or ethylene glycol for antifreeze.

In the U.S., it currently costs $300 to make a ton of ethylene, down steeply from $1,000 a few years ago. According to an analysis by PricewaterhouseCoopers, it currently costs $1,717 to make it in Asia, where plants depend on high-priced oil instead of natural gas, and $455 per ton to make ethylene in Saudi Arabia, using a combination of ethane and butane. (Ethylene plants are also being built in Qatar, which, like the U.S., has very cheap natural gas.)

Over the last two years, manufacturers have announced plans to add 10 million metric tons of ethylene capacity in the United States by 2019. Those plans represent a 10 percent increase in global ethylene production and also account for close to half the industry’s planned expansions in all countries.

The impact of cheap natural gas on manufacturing could extend beyond the production of various chemicals. Using natural gas as an energy source, rather than a chemical feedstock, could significantly lower costs for manufacturers who use a lot of energy, such as steel makers. (The steel industry is booming already for another natural gas-related reason—it’s supplying gas producers with pipes.) What’s more, cheap natural gas is prompting a shift away from petroleum based-fuels for trucking. Some companies are switching to trucks that burn natural gas directly. Eventually, even diesel trucks could be using fuel made from natural gas. The South African company Sasol plans to build a huge $14 billion plant in Louisiana partly to convert natural gas to diesel, potentially lowering fuel costs for conventional vehicles as well.

Overall, cheaper chemicals, cheaper steel, and cheaper transportation could make the U.S. a far more attractive place for a wide range of industries.

Michael Levi, a senior fellow at the Council on Foreign Relations, says energy doesn’t exceed 5 percent of costs in most industries—not enough to make gas prices decisive for most companies choosing where to build manufacturing plants. Where cheap energy could matter most, he says, is giving existing U.S. factories a new reason not to close or move offshore. “Cheap natural gas might do more to keep existing manufacturing plants open than it will to get people to build new ones,” says Levi.

Just how long U.S. natural gas will stay relatively cheap is not clear. For capital investments to pay off, say analysts, oil prices need to stay high, and gas prices low, for years to come. That means chemical makers could still shift their plans. For instance, Sasol will reassess the economics of its planned plant for converting natural gas into diesel in 2014 before it breaks ground.

The materials could make batteries that store more than twice as much energy as lithium-ion ones.

U.S. Census figures don’t lie: About 59 percent of retail businesses started by 2005 were gone by 2010. And in the eyewear business, the odds are especially difficult as one major company, Luxottica, dominates the manufacturing and distribution market. (The Italian company owns Oakley, Ray-Ban and Persol, along with Sears Optical and Lenscrafters.)

Profiled in October on “60 Minutes,” the company founded by Leonardo Del Vecchio is now the world’s largest eyewear company, worth an estimated $8.5 billion. Luxottica designs and retails more than 80 percent of the world’s major eyewear brands.

Yet two small New York City eyewear companies-one old, one new-have embraced their own individual principles to turn profit in an incredibly competitive market space. The upstart on the block, Warby Parker, opened in 2010. But it has already grown more than 500 percent after hitting its first year’s sales target for $95 eyewear in three weeks.

Then there’s Moscot, a family-run company now in its fourth generation. It has literally grown from Hyman Moscot’s single pushcart in 1899 to a worldwide symbol of Big Apple sophistication. Yet it’s done so without swank ad agencies or a big-name fashion photographer. (Co-president Wendy Simmons handles Moscot fashion shoots.)

Reuters spoke with executives at Warby Parker and Moscot to learn about practices and principles that led them to innovate and thrive while competing against such big company. Their perspectives shed light on how to win in a cramped retail sector.

Warby Parker: Lost glasses lead to a found vision

While backpacking in Thailand, future Warby Parker co-founder Dave Gilboa lost his glasses. Returning to the United States for a semester at the University of Pennsylvania’s Wharton School, he wasn’t sure how much it would cost to replace them. That’s when sticker shock hit: $700 for a new pair.

“I had just bought an iPhone 3G for $200,” Gilboa recalls. “It didn’t make any sense that a magical phone that did things nobody could’ve imagined cost $200, and these glasses that used the same basic technology for 800 years cost $700.”

Instead of swallowing his eyewear ire, Gilboa pondered like any good business student: Why did prescription glasses cost so much? That’s when he learned about Luxottica’s iron grip on the market. And with three Wharton classmates, he co-founded Warby Parker, bootstrapped out of a Penn campus apartment on a simple premise: What if you could do a nimble end-around past Luxottica and sell prescription eyewear online for $95 a pair?

Here’s what they discovered: Less than 1 percent of eyeglasses were being sold online. And here’s how they leaped into the breach: They developed a “virtual try-on” system that can take your photo though your computer, and let you model a frame, in as fast as a minute.

“We were excited by the idea of disrupting an industry that had been overcharging consumers for decades,” Gilboa says. “When we talk to other folks interested in entrepreneurship, we ask them to think about the frustrating parts of their own lives, identify those parts, and see if there’s a better way to do things. The best businesses solve problems, and we want to be active problem solvers.”

Moscot: A family frame of reference

Co-president Harvey Moscot grew up behind the counter of the family’s Orchard Street store in New York, alongside his uncles, grandfather and father. As early as age 8, he fitted screws into eyeglass frames.

“When we interact with customers, we try to make them feel like family,” says Moscot, an optometrist who officially joined the business in 1986. “That’s the only frame of reference that I’m comfortable with.”

The twin themes of family and generations permeate every aspect of Moscot’s identity. Go to their website, and you’ll see a “Celebrating Living/History” gallery. It features Moscot wearers who run family businesses spanning four or more generations.

“Family is part of our DNA,” says Simmons. “Some employees have been here for 40 years, and if you question people across the board, they’ll tell you it percolates through the entire organization. It really changes everything we do. The brand is the people.”

The Warby Parker playbook: four friends, collaboration and a gutsy PR gamble

Many business experts will tell you it’s dumb to go into business with friends. Gilboa certainly heard his share of that at Wharton. “But we decided to ignore all of that,” he says, laughing. “And I definitely encourage people to do it. When you start a business, realize that you’ll spend 24 hours a day with these people, and it might be bizarre to make that commitment to someone who doesn’t know you well.”

Gilboa and his co-founders, Neil Blumenthal, Jeffrey Raider and Andrew Hunt, grew to value collaboration. Now ensconced in a Soho office, Warby Parker has no physical walls between departments. “We knocked them down,” Gilboa says. “We encourage people to collaborate, to be part of an open environment.”

That kind of team play led the foursome to invest part of their combined life savings on a big gamble early on. They contracted a top fashion PR firm, Bradbury Lewis, to help them get press. Soon they landed in GQ and Vogue, taking Warby Parker from unknown to renowned at warp speed.

Warby Parker doesn’t release official sales figures, but it gives away one pair of glasses for everyone it sells-and to date, it’s given away more than 300,000 pair.

Through all the founders’ success, “our friendship was the most important thing,” Gilboa says. And we’re all still great friends.”

The Moscot playbook: Hands on, hearts and guts, humor

Moscot expects to sell approximately 50,000 pairs of glasses in 2012 in 41 countries. So as a doctor and successful executive, Harvey Moscot is well past the point of waiting on customers.

Yet every Saturday, you’ll find him on the floor of Moscot’s retail shops, doing exactly that.

Moscot says it’s how he stays in touch with what consumers like and how they want to be treated. As he puts it, “You’ve got to have boots on the ground.”

That approach translates to how Moscot handles everything from fashion photo shoots tomarketing campaigns. It’s all done in house, with input from everyone in the company.

“Harvey and I run the business on our hearts and our guts,” Simmons says. “So many business owners get wrapped up in what books or consultants tell them they should do. You either look at what everyone else is doing, or you put your head down, put out a great product, provide great customer service and move forward.”

And if you can laugh, and make customers laugh, so much the better. One Moscot brainstorming session for a metal frame line caused Simmons to blurt out the phrase “heavy metal.” That led to a photo shoot at a Brooklyn heavy metal bar, Duff’s, with artists such as Alex Skolnick (Testament), Chris Adler (Lamb of God) and Jesse Leach (Killswitch), all recruited via Facebook.

“It was a bad joke that became a good idea,” Simmons says. “Humor, fashion and history are part of everything we do.”

Postscript: Giving back as a major mission

Companies large and small love to put on dog-and-pony shows about giving and community involvement. Yet for Warby Parker and Moscot, charitable work defines them almost as much as their eyewear.

Warby Parker’s Blumenthal was a former director of VisionSpring, which gave glasses to people living on less than $4 a day. He was a driving force behind the company’s policy, from the outset, to give away one pair of glasses through VisionSpring for each one sold.

And if you can’t find Harvey Moscot at a retail store or in his office, chances are he’s giving eye exams to underprivileged kids through the Boys’ Club of New York, or tending to the Moscot Mobileyes Foundation, which seeks to eliminate financial and logistical barriers to quality medical eye care.

While Warby Parker wants to make money, “We also want to be an inspiration to other small businesses,” Gilboa says.

And as for Harvey Moscot, the foundation work is how he thanks the city that put his company on the map: “As a New York company, we’re really indebted to New York.”

(The author is a Reuters contributor)

(Editing by John Peabody, Ryan McCarthy and Brian Tracey)