TOP STORIES -- Aug. 15-20
Markets Get Lift Even as Oil Prices Surge
Stocks got a lift Friday, securing the second straight winning week for blue-chip indexes, as investors reacted to an apparent breakthrough in the fierce standoff at an Iraqi mosque.
The news from the war front also helped interrupt the recent surge in oil prices. Oil prices breached $49 a barrel for the first time Friday morning before falling back to close at $47.86.
Many economists see $50 crude as a danger area in further depressing economic growth.
But some strategists said Wall Street’s recent rally reflected anticipation among investors that crude could soon break to the downside now that it has reached the $50 range. The divergence between stock and oil prices also reflects the fact that the initial shock factor from the run-up in crude has subsided.
For the week, the Dow Jones industrial average rose 2.9%, the Standard & Poor’s 500 index was up 3.2%, and the Nasdaq composite index jumped 4.6%. It was the second up week for the Dow and S&P; 500, and the Nasdaq reversed two weeks of losses.
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File-Sharing Firms Win Appeals Court Ruling
Three years after it effectively shut down Napster on charges of music piracy, a federal appeals court blessed a new generation of online file-sharing networks and scolded the entertainment industry for trying to stretch copyright law to thwart innovation.
The decision by a three-judge panel of the U.S. 9th Circuit Court of Appeals was a defeat for major record labels and Hollywood studios, which fear that runaway online piracy of songs and movies could destroy their businesses.
And it was a victory for developers of rapidly evolving technologies that are changing how people get their entertainment.
The 9th Circuit panel unanimously affirmed a lower-court decision issued last year that the companies behind the Grokster and Morpheus networks didn’t violate copyright law, even though many of the people who use the networks did.
The same appeals court came to a different conclusion about the pioneering Napster service in 2001. The court held Napster responsible for its users’ illegal activity because its central computers tracked songs available for downloading.
But today’s file-sharing networks have no central computers. The companies behind them cannot even monitor users, let alone rein them in, Judge Sidney R. Thomas noted in his opinion for the appeals panel.
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Google Shares Jump in First Days of Trading
Investors lifted shares of Google Inc. into the triple digits in their stock market debut -- and carried the spirits of Silicon Valley along for the ride.
Google’s stock gained 18% to $100.34 on its first day of Nasdaq trading. The Mountain View, Calif., search engine company ended the session Thursday with a market value of $27.2 billion.
The first-day bounce was a vindication for Google’s co-founders, who bucked Wall Street convention by using an unorthodox stock auction to hand over 7% of their company to the public.
A day earlier, the initial public offering was thrown into doubt as slack investor demand and grousing from Wall Street professionals prompted the company to slash its offering price as much as 37%, to $85 a share.
But Google’s stock, trading under the ticker symbol GOOG, soared above $100 on the first trade and held strong all day.
Google stock continued to climb on Friday, ending the day at $108.31.
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Ports Draw Applicants in Lottery for Jobs
The ports of Los Angeles and Long Beach began the process of turning more than 300,000 applications from around the world into 3,000 high-paying dockside jobs.
Inside an auditorium at the Los Angeles port’s administration building, a bin the size of a small school bus held hundreds of thousands of postcards. The prize in this particular lottery: steady, nonunion jobs paying up to $28 an hour.
There were two drawings. First, 9,000 postcards from the general public were drawn. These were mixed in with an equal number of “industry” cards that had been handed out by union members and shipping line representatives.
The arbitrators then drew an initial batch of 3,000 cards -- raw material for the first round of testing, training and hiring. Officials said they planned to keep 12,000 to 14,000 applicants in reserve in case they are needed.
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Consumer Prices Fall 0.1% as Energy Costs Dip
A sharp drop in gasoline prices took the sting out of inflation last month, the government reported, but analysts said volatile energy costs still posed an economic threat.
The Labor Department said its consumer price index fell 0.1% in July. July’s decline followed increases of 0.6% in May and 0.3% in June, fueled largely by rising pump prices. Although economists expected price pressures to ease last month, the outright decline took many by surprise.
The sense of relief may prove fleeting, however, some economists cautioned. Consumer price inflation is running at an annual rate of 4.1% this year. With crude oil prices setting records in recent days, analysts said the CPI was likely to resume its upward march this month.
Excluding food and energy, “core” prices rose 0.1% in July, the same as in June.
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L.A. County Home Prices Cool Off a Bit
Last month, for the first time in seven months, the pace of home price appreciation in Los Angeles County finally slowed. The median price clocked in at $406,000, a 23.8% increase from July 2003.
It was the most sluggish rate of increase since December, when the median -- the point at which half of houses in the county sold for more, half for less -- was 23.7% higher than a year earlier. The median was down nearly 2% in July from June, when it hit a record $414,000.
The July numbers “may be an indication that the market is cooling a little bit,” said John Karevoll, chief analyst with DataQuick Information Systems, a La Jolla firm that compiles monthly housing statistics. “But ... it’s like the surface temperature of the sun cooling a notch.”
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SEC Restricts Funds’ Incentives to Brokers
Federal regulators voted to bar mutual fund firms from giving brokers lucrative trading business as an incentive to peddle their funds to investors.
The practice, known as “directed brokerage,” has been criticized as a thinly disguised kickback that inflates trading costs and encourages brokers to tout funds based on how much trading business they get, instead of recommending funds that are best for their clients.
The Securities and Exchange Commission voted 5 to 0 to ban the practice.
The new rule does not affect “hard-money” cash payments to brokerages, though the SEC staff is considering whether further reforms are necessary.
The ban on directed brokerage deals will take effect in about three months. Separately, the commission also voted to require fund companies to disclose new information about their portfolio managers, including how they determine their pay.
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United Warns That It May End Pension Plans
United Airlines said it probably would cancel its pension plans in hopes that the move would help the carrier emerge from bankruptcy proceedings.
United, a subsidiary of UAL Corp., already has stopped making contributions to its four pension plans. They are $8.3 billion short of what would be needed to fully fund future retiree obligations, according to the Pension Benefit Guaranty Corp., the agency that insures corporate pension plans and stands to inherit United’s obligations if the airline scraps its plans.
In a U.S. Bankruptcy Court filing, United said that because it was so short of cash, “termination and replacement of United’s defined-benefit pension plans likely will be required” if it hoped to raise the new financing it needed to get out of bankruptcy.
No final pension decision has been made, the carrier said, adding that it “remains willing to consider any alternative to pension termination.”
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State Senate Approves Boost in Minimum Wage
The state Senate approved a two-step increase in the hourly minimum wage that would boost it to $7.75, the highest in the United States.
The bill, which passed on a party-line vote in the Democrat-controlled Senate, is expected to win an easy final tally in the Assembly before going to Gov. Arnold Schwarzenegger this week. A Schwarzenegger spokeswoman said the governor had not taken a position.
The California Chamber of Commerce, the California Restaurant Assn. and small-business organizations are orchestrating letter-writing drives, urging the governor to veto the hike. The business groups estimate that the 15% increase would cost employers $2.08 billion annually.
Assemblywoman Sally Lieber (D-Mountain View), who sponsored the bill in the lower house, said she hoped that Schwarzenegger would sign the bill as a way of polishing his populist image.
The bill would raise the $6.75 hourly minimum by 50 cents to $7.25 an hour on July 1, 2005, and to $7.75 on July 1, 2006. The federal minimum is $5.15 an hour.
For a preview of this week’s business news, please see Monday’s Business section.
