Market Indicators Sink Near Spring Lows
In a dispiriting week for stock-market investors who have been hanging on all summer for the long-awaited rebound, key market indicators sank back nearly to their lows of last spring, and a slew of popular stocks hit new 52-week lows.
The Dow Jones industrial average sagged below the crucial 10,000 mark Thursday, the third day in a row that the index lost more than 100 points amid profit warnings and weak economic reports. The best news that some Wall Street pros could offer was that when things feel this miserable, the bottom is generally at hand.
The Dow closed the week down 4.5% at 9,949.75, the first weekly close below 10,000 since April 9.
The Nasdaq composite index, which lost 2.8% on Thursday, ended the week at 1,805.43.
Thomas S. Mulligan
GDP Seen as Bright Spot in Economic Gloom
The numbers last week continued to paint a mixed picture of the economy.
The revised figures for gross domestic product showed that the United States narrowly avoided slipping into negative territory for the second quarter. The GDP fell to an annual growth rate of 0.2%.
Economists saw this as a bright spot, as many had thought the number would be a negative 0.2%. They also hoped shrinking inventories mean that business is ready to restart the productive wheels and bring the U.S. out of the doldrums.
Consumers have been key to keeping the economy out of recession, but new reports indicated that continued layoff announcements could be slowing that engine. The Conference Board’s measure of consumer confidence fell in August to the lowest level since April, rather than rising as analysts expected.
Times Staff Writers
Greenspan Makes Rare Admission of Limitations
Federal Reserve Chairman Alan Greenspan warned that huge swings in the stock market and big changes in home prices are making consumers more unpredictable in their behavior, making it much harder for policymakers to influence the economy.
Greenspan, who is widely admired as a key contributor to a decade of strong economic growth, offered a rare public admission of the limitations of his powers during a speech before financial executives and high-ranking Fed officials.
Traditional accounting systems may be inadequate tools for a computer-dominated high-technology age, the Fed chairman said. Greenspan indicated that he is looking for more data and understanding, rather than different policy approaches.
Robert A. Rosenblatt
Japan’s Stocks Drop to Lowest Level Since 1984
The Japanese stock market fell to levels not seen since 1984, intensifying pressure on economic planners and further eroding already low consumer confidence.
The benchmark Nikkei 225 index fell 1.8% on Wednesday after a government official said it would take at least seven years rather than two to dispose of just half the nation’s bad bank debt. The decline came a day after the nation reported a record 5% unemployment rate.
Bad news from Toshiba Corp. and Hitachi Ltd. added fuel to the Nikkei’s downward move, leaving the index at 10,713.51 by week’s end, its lowest closing level since Oct. 2, 1984.
Times Staff Writers
Japanese Chip Makers Say They’ll Slash Jobs
Major Japanese chip companies announced startlingly deep job cuts as profits continued to erode. Toshiba Corp., the world’s second-largest semiconductor maker, said it would eliminate 18,800 jobs over the next three years, or about 10% of its work force. Instead of a projected profit, the company said it anticipated posting a loss of as much as $958 million this year.
Hitachi Ltd. said it will slash 14,700 jobs, or 4.5% of its work force, and other companies were exploring the sales of major divisions as the demand for memory and processor chips continues to lag behind expectations.
In the U.S., computer makers said they no longer expect the combination of faster Intel chips and Microsoft’s new operating system, Windows XP, to provide a dramatic boost to year-end sales.
Joseph Menn
Gateway to Exit Asia, Cut Up to 5,000 Jobs
Gateway Inc. said it will pull out of Asia and probably Europe, slashing as many as 5,000 jobs, or 25% of its work force, in a drastic bid to emerge from the computer industry slump as a leaner and more profitable company.
The computer maker also will shut a factory and several call centers in the U.S. Gateway said it will redouble efforts to sell services, software and Internet access along with the profit-challenged PCs in its trademark cow-patterned boxes.
Analysts said Gateway would do better without the international operations but expressed doubt that the new steps would be enough to turn the company around.
Joseph Menn
Europeans Pursue Microsoft Inquiry
Microsoft Corp.’s legal woes worsened when European antitrust regulators hit the software company with new allegations about its anti-competitive practices. The company is battling similar charges in a U.S. government lawsuit that is expected to resume Sept. 21 in Washington.
In Europe, antitrust officials said they were broadening an ongoing antitrust investigation to determine whether Microsoft illegally bundled its Media Player, a video and music software program, to its Windows operating system.
Europeans also are worried that Microsoft is leveraging its monopoly over personal computer operating systems to dominate the market for server operating systems.
Microsoft officials deny any wrongdoing and said they hope to settle the charges.
The company has two months to respond, after which it will make its case at a hearing in Brussels.
Edmund Sanders
Dixie Chicks Sue Sony Over Royalties
The Dixie Chicks, one of the world’s biggest-selling music acts, sued Sony Corp. to terminate its contract, accusing the Japanese conglomerate of engaging in “systematic thievery” to “swindle” recording artists out of royalty earnings.
The country-pop singers contend that Sony cheated them out of more than $4 million by underreporting sales figures and overcharging for company services. Sony officials declined to comment on the suit but in earlier legal papers dismissed the Dixie Chicks’ allegations as a “sham” attempt to escape from its record contract.
The company has sued the group, claiming it’s owed damages of more than $100 million for five undelivered albums.
The legal showdown comes just two weeks before the California Senate is set to launch hearings examining record-business practices.
Chuck Philips
Northrop to Eliminate 500 Jobs, 3 Facilities
Northrop Grumman Corp. announced plans to eliminate 500 jobs and shutter three facilities in Southern California as it consolidates after its acquisition of Litton Industries Inc. this year.
The job cuts in the Navigation Systems Division represent 4.5% of Northrop’s California work force. Former Litton facilities in Agoura Hills, Northridge and Goleta will be closed and their operations transferred to Litton’s former headquarters building in Woodland Hills by July 2002.
Although the job cuts were expected, they spell more bad news for aerospace employment in Southern California. In the last year alone, Los Angeles County has lost 4,000 aerospace and high-tech jobs, according to figures from the Los Angeles County Economic Development Corp.
Marla Dickerson
E-Book Suspect Pleads Not Guilty
Russian computer programmer Dmitry Sklyarov was indicted by a federal grand jury, crushing expectations of a quick resolution to the first test of the increasingly controversial Digital Millennium Copyright Act of 1998. Sklyarov pleaded not guilty to four counts of making and marketing a program that allows the infringement of copyright and one count of conspiracy. His employer, Moscow-based ElcomSoft, also was indicted.
The program at issue allows e-book users to transfer and print files, functions that publishers try to restrict to discourage pirating.
Sklyarov’s defenders say the law restricts fair use, which permits work to be copied for personal use, and is therefore an unconstitutional abridgment of free speech.
Sklyarov, who was arrested in July during a visit to a conference in Las Vegas, faces a maximum sentence of 25 years in prison.
David Streitfeld
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Please see Monday’s Business section for a preview of the week’s events.
