TOP STORIES -- March 16-22
Invasion of Iraq Sets Off a Rally on Wall Street
Early gains by U.S.-led forces in the war with Iraq sparked a big rally on Wall Street, where key stock indexes enjoyed their biggest weekly gains in more than 20 years.
The Dow Jones industrial average climbed 8.4%, its biggest weekly rally since October 1982 -- the early days of the 1980s bull market. The benchmark Standard & Poor’s 500 index rose 7.5%, and the Nasdaq composite index added 6%.
The gains pushed the Dow and the S&P; 500 into positive territory for the year and brought Nasdaq’s year-to-date gain to 6.5%.
The Dow has gained almost 13% since March 13, when investors began to bet that the long-delayed U.S. attack on Iraq finally would take place and that it would result in a swift victory for the U.S.-led coalition. European markets also have rallied sharply.
As stocks stormed ahead, oil and gold prices plunged and yields on Treasury bonds surged. Investors had sought safety in these areas as uncertainty over Iraq roiled world markets.
Meanwhile, the dollar, which had fallen against the euro and the Japanese yen in the weeks leading up to the war, also rebounded as it became clear the U.S. would go ahead with its attack on Iraq.
Fed Leaves Interest Rate Unchanged at 1.25%
Federal Reserve policymakers voted to leave their signal-sending interest rate at a four-decade low of 1.25%, saying that -- with war looming -- they couldn’t figure out which way the economy was headed.
The decision by Fed Chairman Alan Greenspan and his colleagues on the Federal Open Market Committee had been expected.
Commentators noted that the Fed was in a particularly serious bind in deciding whether to say anything about the economy.
“The committee does not believe it can usefully characterize the current balance of risks with respect to the prospects” for growth and price stability, the central bankers said in their statement. “Rather, the committee has decided to refrain from making that determination until some of those uncertainties abate.”
Officials could cut interest rates before their next scheduled meeting May 6 if the war or a terror attack disrupts the financial system or if the economy weakens.
Gasoline Prices Rise at a Slower Pace
Gasoline prices continued to rise in California and across the nation but at a slightly slower pace amid signs that prices soon could level out.
In California, prices rose 6.1 cents to a statewide average of $2.145 a gallon for regular, a 2.9% increase. The nationwide average ticked up just 1.6 cents to $1.728 a gallon, according to federal figures.
Analysts, however, saw good news on several fronts. Crude oil prices dropped to $34.93 a barrel, a five-week low, and gasoline for April delivery fell 1.33 cents, or 1.3%, to $1.0271 a gallon on the New York Mercantile Exchange.
The 6.1-cent-a-gallon increase for the week ended Monday came after a 7.2-cent jump for the week ended March 10 and a 9-cent jump for the previous week, according to the Department of Energy.
Median Home Prices in County Hit Record High
The median home price in Los Angeles County hit a record $284,000 in February, surging 19.8% from a year ago as low mortgage rates continued to keep buyers in the market, according to housing figures.
Sales slipped 4%, but most brokers said the market remained robust overall.
Orange County remained the region’s highest-priced market as the median jumped 21.1%, to $384,000, according to DataQuick Information Systems Inc.
In Riverside County, the median sales price rose 18%, to $236,000, and the San Bernardino County median increased 10.7%, to $176,000. The Ventura County median rose 14.9%, to $348,000, and San Diego County posted the region’s biggest increase: a 23.5% jump, to $357,000.
State, El Paso Reach $1.7-Billion Settlement
El Paso Corp. agreed to pay $1.7 billion to settle complaints that the Houston-based pipeline operator withheld natural gas supplies from California and sent prices to record levels during the energy crisis in 2000-01, state officials said.
Under the preliminary agreement, El Paso, which has denied wrongdoing, would pay with a mixture of cash, stock and natural gas over 20 years. A total of $1.4 billion would reach ratepayers, who saw their electricity rates rise as much as 40% during the state’s energy crisis, according to state Atty. Gen. Bill Lockyer and Gov. Gray Davis.
Oregon, Nevada and Washington would receive about $100 million of the settlement. Other parties, including the Los Angeles and Long Beach municipal utilities, would receive portions of the total.
Gateway, Solectron Announce Job Cuts
Retrenchment in the technology industry continued as computer manufacturer Gateway Inc. announced that it would eliminate 1,900 jobs and close 80 retail stores by the end of this month. Electronics equipment maker Solectron Corp. said it would lay off 12,000 people.
Gateway’s cuts represent about 17% of its workforce and 28% of its stores around the country. When the layoffs are complete, the Poway, Calif.-based company will have 9,300 employees.
A Gateway spokesman declined to say how many of the jobs to be cut were in California, where the company has fewer than 1,000 people on its payroll.
Gateway lost $309 million last year on sales of $4.2 billion.
A spokeswoman for Solectron, which is based in Milpitas, Calif., said the layoff of about 16% of its workforce would occur over the next several quarters.
The company already had cut more than a third of its staff, dropping from 114,000 three years ago to its current 74,000. It said it did not know where the jobs would be lost. It has operations in Cypress and facto- ries throughout the Americas, Europe and Asia.
Solectron also forecast a loss for its fiscal third quarter, the ninth in a row.
Tenet to Shed Hospitals, Cut Jobs and Expenses
In an effort to bolster profit and restore investor confidence, Tenet Healthcare Corp. said it would close or sell 14 hospitals, cut expenses by $100 million and adopt certain accounting changes.
One hospital Tenet plans to shed is in California -- Santa Ana Hospital Medical Center, a 69-bed hospital that has underperformed financially and will be shuttered. The 13 others, spread through seven states, are expected to fetch as much as $900 million. Their sale would leave the Santa Barbara-based chain with 100 hospitals, including 39 in California.
The retrenchment and other moves are part of a broad overhaul of operations in the wake of numerous government investigations of Tenet’s Medicare billing and other business practices.
Tenet, the nation’s second-largest for-profit hospital chain, said the actions would help it operate more efficiently.
The company said that its expense-cutting steps would include an undisclosed number of layoffs and a reduction in travel costs and other corporate expenses.
Barry Diller Bids Adieu to Vivendi Universal
Entertainment mogul Barry Diller resigned as chairman and chief executive of the U.S.-based movie, TV and theme park unit of French giant Vivendi Universal. He acknowledged that investors were “concerned and confused” about his dual role as head of Vivendi Universal Entertainment and USA Interactive, his sprawling electronic commerce company.
Although the timing surprised Hollywood insiders, Diller’s decision was not entirely unexpected, given that his position had been billed as temporary.
Still, the development marks a dramatic turn of events from six months ago, when speculation was widespread that Diller would emerge as a pivotal player in the fate of Universal’s entertainment assets -- possibly even as the buyer. That prospect grew unlikely as Diller confronted several factors, analysts and company executives say. Chief among them was pressure from USA Interactive shareholders for him to focus on his electronic commerce holdings.
Diller also had a falling-out with Vivendi Universal CEO Jean-Rene Fourtou over how to unravel the complex relationship created last year when Diller sold his USA Networks to Paris-based Vivendi.
Viacom’s Top 2 Execs Overcome Stalemate
Viacom Inc. President Mel Karmazin agreed to remain in his role for three more years under a compromise with Viacom’s chief executive and controlling shareholder, Sumner Redstone. The accord ended more than a year of intense speculation about Karmazin’s future.
The two executives agreed to checks and balances that allowed them to overcome a stalemate that had bogged down negotiations. Karmazin had refused to remain at the company if his powers were diluted, and Redstone was unwilling to allow his second in command to retain broad powers, including bypassing him and reporting directly to the board.
Employment contracts that the two have signed return significant powers to Redstone but protect Karmazin’s authority to run Viacom on a daily basis.
The two executives have had difficulties sharing power since becoming partners nearly three years ago, after the merger of Viacom Inc. and CBS Corp., where Karmazin was CEO.