TOP STORIES -- Aug. 1-6
Payrolls in July Show Lackluster Growth
The nation’s payrolls grew by an anemic 32,000 new jobs in July, suggesting that the economy is stuck in the summer doldrums three months before voters elect a president.
Analysts were expecting the economy to add 215,000 to 247,000 jobs in July.
The latest snapshot on employment growth, in a report by the Labor Department, showed the smallest gain in hiring since December.
The unemployment rate, however, fell to 5.5% last month, from 5.6% in June.
The Labor Department also revised its figures on job gains in the two previous months to 78,000 in June and 208,000 in May, for a combined 61,000 fewer jobs being created in those months than previously estimated.
The Federal Reserve is still expected to boost interest rates by one-quarter point at its next meeting on Tuesday, economists said. But if other economic data suggest that the economy is cooling in the current quarter, that would make it less likely there would be further rate increases this year, they added.
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Stocks Fall as Investors Worry About Economy
Stocks plummeted and investors rushed into Treasury bonds Friday as the July employment report triggered widespread fear that the economy is headed for a sharp slowdown.
The Dow Jones industrial average tumbled 147.70 points, or 1.5%, to 9,815.33, the Standard & Poor’s 500 index dropped 1.6% and the Nasdaq plunged 2.5% in a broad-based sell-off in heavy trading. All of the major indexes ended at their lowest levels since last year.
As money fled stocks some of it went into Treasury bonds, driving the yield on the 10-year T-note from 4.40% to 4.22%, the lowest since April.
Many market experts insisted that the moves in both stocks and bonds were overdone. The economy, many say, may be slowing, but it isn’t heading into a new recession.
But some bears say stocks could be headed much lower if economic data in coming weeks are anemic and if oil prices don’t come down.
Oil fell only slightly on Friday, losing 46 cents to $43.95 a barrel.
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FCC Approves TiVo Anti-Piracy Technology
Over the objection of the entertainment industry, regulators approved technology that allows TiVo subscribers to send recorded television shows over the Internet.
The decision by the Federal Communications Commission is expected to encourage consumer electronics companies to offer digital devices that give users more control over how and where they watch the programs they record.
TiVo Inc.’s TiVoGuard was among 13 anti-piracy technologies the FCC certified.
The Motion Picture Assn. of America and the National Football League supported competing technologies from Microsoft Corp., Sony Corp. and 10 other applicants that limit the redistribution of recorded digital TV shows to within a single household. They balked at TiVoGuard, which lets subscribers zap recorded broadcasts over the Internet to as many as nine playback devices, provided all of the devices share the same TiVo customer account.
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Franklin to Settle Fund Trading Charges
The parent of Franklin and Templeton mutual funds agreed to pay $50 million to settle civil fraud charges that it allowed abusive trading of fund shares.
The Securities and Exchange Commission said San Mateo, Calif.-based Franklin Advisers Inc., a unit of the nation’s fourth-largest fund company, let more than 30 favored clients engage in “market timing” of fund shares from 1996 through 2001, contrary to what it told average investors. But the $50 million is much smaller than amounts some of Franklin’s rivals have paid to end similar probes.
Although the settlement ended the SEC’s probe of trading misconduct, the agency continuies to investigate payments Franklin made to brokerages as incentives to sell its funds.
In a statement, Franklin didn’t admit or deny wrongdoing, but said it agreed to ethics reforms, including hiring a senior staffer to review potential conflicts of interest and an ombudsman to handle any concerns raised by its own employees.
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July Retail Sales Stalled by Gas Prices
Retailers reported a mostly ho-hum July, the second straight month of tepid sales, as steep gasoline prices and scanty clearance racks gave consumers fewer reasons to spend.
Retail sales overall rose 2.6% for stores open at least a year, according to the Goldman Sachs retail composite index. That was just slightly above the firm’s conservative estimate of a 2.5% gain.
Some apparel merchants, notably San Francisco-based Gap Inc. and Foothill Ranch-based Wet Seal Inc., fared considerably worse. Gap said sales fell 5% from July 2003 with declines in all its divisions -- Gap, Banana Republic and Old Navy. Wet Seal said sales fell 14.7%.
As a group, specialty apparel sellers fell 0.5%, according to the Goldman Sachs index.
The July sales could also be a sign that the nation’s economic performance in the third quarter may be no better than its lackluster growth this spring.
Wal-Mart Stores Inc., which posted a July same-store sales gain of 3.2% mostly because of healthier sales at its Sam’s Club discount stores, said it remained cautious about sales in August.
Discounter Ross Stores Inc. said sales skidded 5%.
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State High Court Rules on Wine Labeling
The California Supreme Court, saying that it wanted to “provide stricter protection to consumers,” forbade all winemakers from using the “Napa” name or similar regional appellations on their labels unless 75% of the grapes in the bottle were actually grown in those places.
Only one company, Bronco Wine Co., is believed to have taken advantage of a federal loophole allowing relatively few vintners to use the place-name designations even when most grapes were harvested elsewhere. The decision could require Bronco to change the names of three labels -- Napa Ridge, Napa Creek Winery and Rutherford Vintners.
A lawyer for Bronco said the company would continue to challenge the requirement on constitutional grounds, including commercial free-speech rights. The court’s ruling will not be enforced until these other challenges play out.
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Tenet’s Loss Widens Amid Restructuring
Tenet Healthcare Corp. reported a wider second-quarter loss because of hefty restructuring charges and uninsured patients’ mounting bills and said subpoenas had been served regarding hospitals in Louisiana, Missouri and Tennessee.
The nation’s second-largest for-profit hospital company, which has been the target of civil and criminal investigations since 2002, also said its chief financial officer, Stephen Farber, had decided to quit and return to work on Wall Street. Tenet said its plan to move to Dallas from Santa Barbara played a role in Farber’s decision.
The second-quarter loss was $426 million, or 91 cents a share, compared with a loss of $195 million, or 42 cents, a year earlier. The latest results reflected one-time charges totaling $543 million, or 78 cents a share. Revenue fell 3.3% to $2.57 billion.
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Cox Enterprises Plans to Take Cable Firm Private
Cox Enterprises Inc. made a nearly $8-billion offer to take its cable television business private.
The family-owned media company already controls 62% of the publicly traded shares of Cox Communications Inc., the nation’s fourth-largest cable TV provider, which serves 6.3 million cable subscribers nationwide -- about 800,000 in Southern California.
In a statement, Cox Enterprises Chief Executive James Cox Kennedy, who is also chairman of Cox Communications and grandson of the founder of Cox Enterprises, said an “increasingly competitive environment” had convinced the parent company that additional investments would be “best made through a private structure.”
Atlanta-based Cox Enterprises proposed buying the 38% of the cable company that it doesn’t own for $32 a share.
News of the bid sent the shares surging past the offer price. On Friday, shares fell 10 cents to $33.15 on the New York Stock Exchange. Some analysts predicted that Cox Enterprises would have to sweeten its bid to $35 to $38 a share.
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Anthem Sues in Bid to Save WellPoint Deal
Anthem Inc. sued state Insurance Commissioner John Garamendi for allegedly overstepping his authority when he blocked part of Anthem’s $17-billion acquisition of WellPoint Health Networks Inc.
Anthem is asking a Los Angeles County Superior Court to set aside Garamendi’s July 23 decision to reject its application for control of a WellPoint subsidiary, Blue Cross Life & Health Insurance Co. Although it affects only a small part of the deal, Garamendi’s move threw the entire transaction into limbo.
Garamendi based his decision in part on broad concerns about the effect of the deal on healthcare in the state. Thousand Oaks-based WellPoint insures 7 million Californians.
In its lawsuit, Anthem contended that the commissioner was trying to set broad healthcare policy instead of narrowly interpreting insurance law.
The California insurance code provides a clear mandate to deny a merger that the commissioner deems “not fair and reasonable to policyholders,” Garamendi said.
For a preview of this week’s business news, please see Monday’s Business section.
