TOP STORIES -- OCT. 6-11
Wall Street Breaks Its Losing Streak
A big surge Thursday and Friday allowed Wall Street to break its six-week losing streak.
The two-day rally pushed the Dow industrials up 7.7%, erasing earlier losses and giving the Dow a 4.3% gain for the week. The rally also lifted the benchmark Standard & Poor’s 500 index, which on Monday brought the loss from its March 2000 peak to 48.6%--the deepest bear market since the Great Depression.
Stocks rallied despite tepid economic news and a mixed bag of corporate profit reports, as well as continuing worries over war with Iraq. Analysts were cautious about predicting whether the rally would continue into this week, when earnings reporting season begins in earnest.
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Bush Wins Injunction Ending Port Lockout
President Bush won an emergency injunction to end the 10-day lockout at 29 West Coast ports that had inflicted billions of dollars in damage.
Using his authority under the 1947 Taft-Hartley Act, Bush requested the emergency order after a White House panel informed him that “seeds of distrust” had so poisoned relations between shipping lines and dockworkers that the two sides were unlikely to reach an agreement on their own.
U.S. District Judge William Alsup this week will consider extending his temporary order, which would mandate an 80-day cooling-off period retroactive to Oct. 8.
The injunction allowed billions of dollars’ worth of cargo that had piled up at the ports during the shutdown to start moving into supply chains.
Meanwhile, representatives of the International Longshore and Warehouse Union and the Pacific Maritime Assn. employer group said they expected negotiations with a federal mediator to resume this week.
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Senate Panel Says SEC Missed Enron Signs
A Senate panel investigating Enron Corp.’s collapse said the Securities and Exchange Commission missed early signs of financial abuses at the energy giant, raising questions about whether the agency is “effectively functioning as the lead market watchdog that it is meant to be.”
The probe by the Governmental Affairs Committee found a “systemic and catastrophic failure” by those charged with protecting investors -- including stock analysts, credit rating firms and the SEC, according to the committee’s report.
Enron’s financial collapse and filing for bankruptcy protection, which followed disclosures that it used off-the-books partnerships to hide debt, spawned a frenzy of congressional hearings, contributed to passage of sweeping accounting reforms and led this month to the arrest of Andrew S. Fastow, the company’s former chief financial officer, on charges of fraud.
Some of the harshest criticism was directed at the SEC, whose chairman, Harvey L. Pitt, has been accused of not being aggressive enough in rooting out corporate wrongdoing -- although many of the shortcomings highlighted in the committee’s report date to before Pitt took over as chairman in August 2001.
Separately, Democratic congressional leaders called on President Bush to remove Pitt, whom they accuse of opposing a tough candidate to head a new oversight board at the accounting industry’s behest. Bush continues to stand by him.
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FCC Blocks EchoStar’s Buyout of DirecTV
The Federal Communications Commission blocked EchoStar Communications Corp.’s proposed $16-billion buyout of satellite television rival DirecTV, declaring the harm to consumers would be “staggering.”
The FCC’s four commissioners brushed aside EchoStar’s last-minute offer to amend the merger and decided that a combination of the nation’s No. 1 and No. 2 satellite television companies would stifle competition and innovation, lead to higher prices for consumers and hurt the quality of service.
“The combination of Echo- Star and DirecTV would have us replace a vibrant competitive market with a regulated monopoly,” FCC Chairman Michael K. Powell said. “This flies in the face of three decades of communications policy.”
The decision marks the first time since 1967 that the FCC has voted to halt a major merger.
Analysts said it sets the stage for a potentially massive legal battle, either between the government and the two companies, or between the two companies themselves, fighting over who is to blame for the merger’s collapse.
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Brazilian Markets Reel as Leftist Wins Vote
A leftist candidate’s victory in the first round of Brazil’s presidential election sent local markets reeling amid deepening pessimism over whether Latin America’s biggest country can avert a debt default and economic implosion that could spill into neighboring countries.
Workers’ Party candidate Luiz Inacio Lula da Silva took 46.4% of the vote, short of the 50% needed to win outright but enough to make his ascension to the presidency a virtual certainty after an Oct. 27 runoff.
Brazil’s currency and main stock index, the Bovespa, hit three-year lows.
Worries about a Lula victory have been weighing on markets since the spring. Throughout his campaign, he has remained vague about whether he would renegotiate Brazil’s $260-billion public debt load and dismantle the free-market economic scheme implemented by current President Fernando Henrique Cardoso.
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Blue Cross Plans to Rate More Physicians
Blue Cross of California, one of the nation’s largest health insurers, said it would begin keeping a quality scorecard on thousands of physicians and pay bonuses to those who meet high standards of care.
The incentive program is part of a growing movement nationally to hold health providers more accountable for the quality as well as the cost of care. In recent years, almost all of the quality focus has been on HMOs.
The program will apply to many of the 43,000 California physicians in Blue Cross’ preferred provider organization, or PPO, which has more than 4 million members.
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Two Americans Win Nobel in Economics
Two American academics won the Nobel Memorial Prize in Economic Sciences for applying psychology and experimental research to such conundrums as why stock markets form “bubbles” and why people think they can sell an item for more money than they will pay to buy it.
Daniel Kahneman, 68, a psychology professor at Princeton University, and Vernon L. Smith, 75, a professor of economics and law at George Mason University in Virginia, will share the $1.1 million that goes with the prize.
Each man’s work represents a distinct challenge to classical economic theory, in which individuals always act rationally and there always is a single price on which buyers and sellers can agree.
Receiving the Nobel Prize for medicine was MIT scientist H. Robert Horvitz, co-founder of Idun Pharmaceuticals, a small San Diego company that has an exclusive license on his discoveries, including his Nobel-worthy work on the “cell death” gene.
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Cadiz Water Storage Project Canceled
The board of the Metropolitan Water District voted to abandon a project by Cadiz Inc. to build a multimillion-dollar water storage facility in the Mojave Desert.
The MWD cited, among other concerns, the Santa Monica-based company’s questionable financial strength and doubts that the district could be adequately protected against the possibility of a Cadiz default on its joint obligations.
Cadiz suggested that the MWD may have violated its contract with the company by killing the project before formally reviewing its environmental impact report. It was not known what action the company would take, if any.
The project’s demise places the company under a financial strain that raises the question of whether it can survive. The project was to generate an estimated $500 million to $1 billion in revenue for the company over the next 50 years.
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Former Executive With Ovitz Files Lawsuit
Onetime super-agent Michael Ovitz is being sued again by a former top executive.
Cathy Schulman, the former president of Ovitz’s film production division at now-defunct Artists Management Group, said in court papers that her former boss flew into a “rage” and fired her for telling auditors that she suspected Ovitz of “improperly allocating” film company funds.
The lawsuit, which seeks more than $4 million in damages for wrongful termination and breach of contract, also accuses Ovitz of denying her producing credits and fees.
The lawsuit filed in Los Angeles County Superior Court comes nearly six months after Ovitz was sued by the former president of his television division.
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For a preview of this week’s business and economic news, please see Monday’s Business section.
