Top 10 Stories / April 16-20
1. Fed Makes Surprise Rate Cut: Federal Reserve policymakers sliced their benchmark interest rate half a point to 4.5%, only a week after signaling that no immediate cut was in the offing. The decision surprised investors, who had concluded that the Fed would not act until its next regular meeting May 15, and triggered sharp gains in the stock markets. It was the fourth half-point cut of the year and the strongest signal yet that the central bank has no intention of letting the sputtering U.S. economy slip into recession. The Fed explained its dramatic move in a statement saying that a combination of stumbling profits and shriveling investment, together with the danger of a spending cutback by stock-shocked consumers and slower growth abroad, “threatens to keep the pace of economic activity unacceptably weak.” Major banks immediately cut their prime lending rates by half a point to 7.5%.
(Peter G. Gosselin)
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2. Stocks Rally on Fed Action: The stock market surged after the Federal Reserve’s rate cut stirred hope that the economy will rebound by year-end. The Nasdaq composite index already had headed upward on more promising news from the tech sector, and upbeat earnings during the week helped feed the rally. The 10.3% jump in Nasdaq and the 4.5% rise in the Dow Jones industrial average convinced some Wall Street experts that a long-awaited market recovery was underway. But others cautioned that stock prices could be weighed down in coming months by faltering corporate profits and a still-weak economy.
(Walter Hamilton)
(Peter G. Gosselin)
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3. CalPERS Boosts Health Insurance Costs: The California Public Employees’ Retirement System approved a 13% hike in health insurance costs, signaling that U.S. workers and their employers can expect dramatic increases in the amount they pay for medical benefits in coming years. After months of negotiations with health maintenance organizations, CalPERS voted 6 to 2 to double members’ out-of-pocket expenses for doctor visits while raising the pension fund’s costs by just 6%. As the nation’s second-largest buyer of health insurance after the federal government, CalPERS generally sets the pace for employers across the country.
(Times Staff Writers)
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4. Yahoo Goes to Hollywood: Struggling to plot a new course after a year of dot-com disasters, Internet bellwether Yahoo reached deep into traditional Hollywood and plucked the ultimate industry insider to lead the company in its quest to become a media giant. Terry Semel, who led the mammoth Warner Bros. studio for two decades with partner Robert Daly, will become chairman and chief executive of Yahoo on May 1. He will replace Tim Koogle, one of the Net’s brightest stars. Koogle transformed the hobby project of two Stanford graduate students into an Internet powerhouse--and then watched its fortunes dwindle.
(A Times Staff Writer)
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5. Writers, Studios Resume Talks: The Writers Guild of America and the Alliance of Motion Picture and Television Producers continued negotiations in an effort to work out a new contract before the current one expires at 12:01 a.m. May 2. Meanwhile, the head of the Teamsters union’s Hollywood unit suggested his members might cross picket lines if writers strike. And Mayor Richard Riordan released a study showing Los Angeles County could lose 81,900 jobs and $6.9 billion in income if writers and actors strike this year.
(James Bates)
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6. Cisco Sales Plunge: Cisco Systems, the computer firm most closely tied to the growth of the Internet, said Monday that sales in the current quarter will drop by 30% from the previous quarter. It will be the first such decline since the company went public in 1990. Cisco, which for a period last year had the largest stock market value in the world, said it couldn’t have predicted such a quick drop-off in corporate demand for its products, which direct the flow of data over the Internet. The company also said it would lay off workers and take a massive $2.5-billion write-down for its unwanted inventory. The news sent Cisco shares down $2.02, or 12%, to $15.18 late Monday, but the shares picked up during the week to close Friday at $19.15 on Nasdaq.
(Joseph Menn)
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7. Tech’s Bad News Improves: Several technology titans reported quarterly earnings that beat grim expectations, offering hope that the industry may be starting to turn around. Microsoft, IBM and Intel were among those exceeding forecasts. Online auction leader EBay handily beat predictions and raised revenue forecasts for the next two quarters. Meanwhile, Apple Computer returned to profitability with a force far stronger than Wall Street expected, sending its shares soaring. Even deeply troubled Xerox cheered investors with a smaller-than-forecast loss. The news wasn’t as bright at Gateway, where losses came in on target. And Nortel Networks said its losses widened dramatically, prompting the company to cut an additional 5,000 jobs.
(Times Staff Writers)
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8. Edison, PG&E; Take Big Charges: Edison International and PG&E; Corp. took huge year-end write-offs of electricity and other charges, leading to net losses of $1.9 billion for Edison and $3.4 billion for PG&E; for 2000. Both companies said they took the charges, which mainly represent high wholesale electricity costs that could not be passed on to customers under a retail rate freeze, because they believed recent regulatory rulings would not allow them to recover these costs. But both utility firms said they remain confident they will eventually get that money back--Edison through a negotiated settlement with Gov. Gray Davis and PG&E; through Bankruptcy Court proceedings.
(Nancy Rivera Brooks)
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9. Profit Picture Looking Better: Profit reports from non-tech corporate giants were mixed but generally better than expected. General Motors and Ford, the top two auto makers, reported profit declines for the first quarter as the slowing U.S. economy trimmed auto sales, but both companies beat Wall Street predictions. Financial giants Citigroup and Bank of America posted smaller-than-forecast earnings declines, and Wells Fargo met estimates. Losses at major airlines were much deeper than expected, but low-fare carrier Southwest reported a profit in line with predictions. Boeing’s profit easily beat expectations as it cut costs and delivered more jets.
(A Times Staff Writer)
10. GM to Begin Coupon Program: General Motors said it will begin mailing notices to current and former owners of 5.8 million older pickup trucks who qualify for discounts of $250 to $1,000 on new GM vehicles as part of a massive class-action settlement. The coupon offer is the centerpiece of a long-delayed settlement of suits filed in 1992 that claimed defective fuel systems made millions of GM trucks more prone to catching fire or exploding in collisions. The cost to GM, which did not admit liability in the settlement, could range from less than $100 million to more than $1 billion, depending on how many coupons are redeemed.
(Myron Levin)
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These and additional stories from last week are available at https://www.latimes.com/business, divided by category. Click on “Money and Investing,” “Entertainment Business” and other topics.
* Please see Monday’s Business section for a preview of the week’s events.
