Week in Review
Encouraging Data Help Lift Major Stock Indexes
Upbeat economic news gave stocks a lift last week, helping major indexes notch their biggest weekly gains since spring.
A midweek report that manufacturing grew in September for the third straight month sparked the broadest market rally in 2 1/2 years. And Friday’s report that the economy added jobs last month for the first time since January sparked another rally in stocks.
Although the U.S. economy created jobs in September, the unemployment rate remained at 6.1% and factories continued to shed workers. The Labor Department said employers added 57,000 people to the nation’s payrolls last month. The figures were slightly better than economists had anticipated.
Bonds took it on the chin as yields, which move in the opposite direction of prices, soared on fears that economic growth will lead to higher interest rates.
For the week, the Dow Jones industrial average gained 2.8% and the Nasdaq composite index jumped 4.9%, their biggest weekly rises since May. The Standard & Poor’s 500 index added 3.3%, its largest weekly advance since April.
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Philip Morris, in a First, Settles With Fire Victim
Breaking with long-standing practice, Philip Morris has paid $2 million to settle the case of a child who suffered disfiguring burns in a fire allegedly caused by a smoldering cigarette.
The agreement marks the first time that Philip Morris has agreed to pay damages in a personal injury case. Cigarette makers have long refused to settle such claims, fearing a wave of lawsuits. Philip Morris said its settlement in Texas did not signal a tactical shift.
The settlement, reached secretly in May, resolved a nearly nine-year legal battle over responsibility for injuries to Shannon Moore, who was 21 months old and asleep in her car seat when her mother’s parked Buick erupted in flames. In the suit filed in Texas state court, lawyers blamed the fire on the defective design of a Marlboro 100 cigarette.
Philip Morris contended that there was no proof a cigarette caused the fire but settled after several failed attempts to get the case dismissed.
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9th Circuit Court Oks Arbitration Agreements
Employers can compel workers to sign arbitration agreements surrendering their right to sue in court over racial and sexual discrimination, the U.S. 9th Circuit Court of Appeals ruled in San Francisco.
In the 8-3 decision, the court explicitly overturned a ruling it rendered five years ago.
Until now, the 9th Circuit had been the only circuit court to have ruled that employers could not force workers to sign arbitration agreements as a condition of getting a job.
But in a decision written by Judge A. Wallace Tashima, the majority found that the court’s earlier ruling was contrary to Congress’ endorsement of alternative dispute resolution when it passed the Civil Rights Act of 1991.
Judge Stephen Reinhardt, who wrote the 1998 decision that was overturned, issued a blistering dissent: “The majority announces precisely the type of callous anti-civil rights, pro- employer decision that Congress condemned when it enacted the Civil Rights Act of 1991.”
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First Guilty Plea in Mutual Funds Probe
The first guilty plea came in the widening investigation of trading schemes involving shares of mutual funds, as a former employee at prominent hedge fund Millennium Partners admitted to making illegal after-hours trades.
Steven B. Markovitz, 41, who pleaded guilty to a felony count of securities fraud in New York Supreme Court in Manhattan, is the second person charged with criminal violations stemming from late trading -- the most flagrant abuse alleged by New York Atty. Gen. Eliot Spitzer when he announced his probe a month ago. Markovitz agreed to cooperate with Spitzer’s office.
With the help of unspecified brokers, Markovitz bought mutual fund shares after the 4 p.m. market close in New York but at prices set at the end of that day’s session, the complaint said. Markovitz, who left the Millennium fund in September, could face up to four years in prison.
Markovitz’s attorney declined to comment, as did a spokesman for Millennium, which has not been charged.
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Good Guys Agrees to Be Bought by CompUSA
Mexican billionaire Carlos Slim’s CompUSA Inc. agreed to acquire Good Guys Inc. for $55.3 million in cash, making good on his desire to expand into the highly competitive consumer electronics industry.
Although the size of the deal is relatively small, analysts and industry experts say the deal portends the next wave in retailing high-tech gadgets and services: combining personal computers with home entertainment systems that control everything from a house’s lighting and heating to its music and video capabilities.
If the deal is approved by shareholders and regulators, Alameda, Calif.-based Good Guys and its 71 stores in the Western United States would become a subsidiary of Dallas-based CompUSA
CompUSA is controlled by the Slim family, one of Latin America’s richest clans.
CompUSA has agreed to purchase Good Guys for $2.05 a share, a 37% premium over the stock’s Sept. 26 closing price. CompUSA also has invested $5 million in the electronics chain in the form of two-year convertible notes.
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Davis Signs Workers’ Comp Legislation
Gov. Gray Davis signed a package of bills aimed at controlling soaring costs in the ailing state system for compensating injured workers.
Davis and supporters said the workers’ comp legislation would save California businesses as much as $5.7 billion a year. The bills aim to control costs by several means, including limiting visits to chiropractors and physical therapists and expanding use of generic drugs.
Republican lawmakers dismissed the legislation as insignificant, a refrain picked up recently by Republican gubernatorial candidates vying to replace Davis in Tuesday’s recall election. Business groups also expressed reservations.
A key insurance rating organization cast doubt on whether the reforms would generate the hefty savings and premium rollbacks trumpeted by the legislation’s backers.
The Workers’ Compensation Insurance Rating Bureau said its actuaries identified about $4 billion of annual cost reductions in the reforms. Backers of the overhaul legislation called for further analysis.
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Reliant Agrees to Pay $50-Million Settlement
Reliant Resources Inc. of Houston agreed to pay as much as $50 million to resolve allegations that it squeezed electricity supplies to California and other states during the energy crisis, federal regulators said.
The settlement with the Federal Energy Regulatory Commission is the largest in the agency’s history. The terms call for Reliant to pay $25 million over three years and as much as $25 million from the sale of below-cost electricity generated by three of its California power plants.
The money would go into a fund to compensate ratepayers. Some California officials criticized the settlement as inadequate.
The agreement, approved by FERC’s three commissioners, wraps up the bulk of the allegations against Reliant stemming from the energy crisis of 2000-01.
Reliant did not admit to wrongdoing in accepting the settlement.
FERC Chairman Pat Wood III said he expected other companies to settle to avoid the cost of continuing to fight charges of market manipulation.
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FCC to Implement FTC’s ‘Do-Not-Call’ Registry
National “do-not-call” rules to cut down on unwanted telephone solicitations are expected to go into effect after all -- but under the auspices of a different federal agency.
Federal Communications Commission Chairman Michael K. Powell said his agency would enforce the anti-telemarketing program that would put more than 50 million phone numbers off limits to most solicitors.
The future of the “do-not-call” registry was cast in doubt when two U.S. judges blocked the Federal Trade Commission from enforcing it.
The FCC is stepping in because “the law gave the FTC the ability to establish the list and told the FCC to coordinate rules and work with FTC on enforcement,” FCC spokesman Richard Diamond said.
Because the courts barred only the FTC from enforcing the list, the FCC will assume the primary role.
California officials vowed to get a state registry running as quickly as possible.
For a preview of this week’s business news, please see Monday’s Business section.
