TOP STORIES -- Dec. 19-24
Wall Street Ends Week With ‘Santa Claus Rally’
The dollar continued its descent, suggesting that more woes await the greenback in 2005. But that wasn’t enough to derail Wall Street’s “Santa Claus rally.”
Most U.S. stock market indexes edged up Thursday in a session that saw the fat man himself ring the closing bell at the New York Stock Exchange.
The Dow Jones industrial average rose for the eighth time in nine sessions, adding 11.23 points, or 0.1%, to 10,827.12. It was a fresh 3 1/2 -year high for the blue-chip index.
The broader Standard & Poor’s 500 index eked out a gain of 0.56 point to 1,210.13, its highest since August 2001.
The technology-dominated Nasdaq composite was up 3.59 points to 2,160.62, nearing the three-year high of 2,162.55 it hit the previous week.
For the holiday-shortened week, the Dow jumped 1.7%, the S&P; 500 rose 1.3% and Nasdaq was up 1.2%.
Bolstered by optimism about the economy, the stock market is on track to post its second consecutive annual gain after sharp losses in 2000, 2001 and 2002.
In low-volume trading overseas, the dollar fell further against its major rivals Friday. The euro hit a record $1.355, up from $1.349 on Thursday in New York.
*
Lockyer Sues Firm Over Mutual Fund Sales
Opening a new front in the state’s attack on investment industry practices, California Atty. Gen. Bill Lockyer sued brokerage firm Edward Jones & Co., claiming it had defrauded investors by failing to properly disclose sales arrangements with a handful of favored mutual fund companies.
The case is the first that Lockyer has brought against a brokerage under a state securities fraud law that took effect Jan. 1.
The suit focuses on the long-standing brokerage practice of selling so-called shelf space to fund companies: Over the last decade, many brokerages have offered to place certain funds on “recommended” or “preferred” lists in return for cash payments or other compensation beyond standard sales commissions.
Lockyer disclosed private e-mails from Jones brokers in which some called the firm’s fund sales agreements “dirty.”
Jones said in a statement that it “plans to vigorously defend itself in the charges brought by the California attorney general.”
*
Tenet Settles Lawsuits Over Heart Procedures
Tenet Healthcare Corp. said it would pay $395 million to settle lawsuits alleging that doctors at its former hospital in Redding performed unnecessary cardiac procedures on more than 750 patients.
The settlement requires Tenet to set up a fund by Friday to compensate patients treated at Redding Medical Center.
The company reached the settlement in the suits as lawyers for the plaintiffs were preparing to take depositions for the first 10 cases, which were scheduled for trial in July.
The average patient payout works out to more than $500,000, excluding legal fees. But the final payments will vary based on the severity of injuries, economic losses, the patient’s age and other factors.
“We believe this settlement is the fair and honorable way to conclude this very sad chapter,” said Tenet Chief Executive Trevor Fetter.
*
Microsoft Loses Fight Against EU Sanctions
A European judge ordered Microsoft Corp. to sell a version of its flagship Windows operating system without a music and video player.
The ruling by Court of First Instance President Bo Vesterdorf in Luxembourg marked the first time in a decade of antitrust litigation that the software giant had been forced to make significant changes to a product.
Vesterdorf rejected Microsoft’s request to temporarily suspend the sanctions imposed in March by the European Commission, and the company promised to comply with his order next month. Microsoft said it would charge the same amount for the operating system with or without Windows Media Player.
As a result, manufacturers may start offering their European customers personal computers equipped with media players from RealNetworks Inc. or Apple Computer Inc.
RealNetworks has paid PC makers in the past to install its player, and it might pay more if Microsoft’s player is excluded.
Unless it fares better in the next step of its appeal of the European Commission sanctions, Microsoft might be forced to take other features out of future editions of the Windows operating system.
*
Grocers, Union Reach Deal in N. California
Three big grocery-store chains reached a tentative union contract with 8,900 employees in Northern California, averting a work stoppage.
The peaceful climax to contract talks could provide a blueprint for ending negotiations between stores and about 30,000 union members in the San Francisco area.
The United Food and Commercial Workers Local 588 in Northern California said the proposed contract with Safeway Inc., Albertsons Inc. and Kroger Co.’s Ralphs chain didn’t include a “two-tier” wage and benefits system. Under a two-tier system like the one in the contract that ended a supermarket strike and lockout in Southern and Central California last winter, new hires are paid less and receive fewer benefits than employees working under earlier contracts.
Safeway, based in Pleasanton, Calif., said it was pleased with the tentative contract but didn’t elaborate. Albertsons declined to comment. Ralphs didn’t return calls.
*
Diageo Wins Bid for Chalone Wine Group
A British company has struck a deal to buy Napa Valley’s Chalone Wine Group Ltd. for $186 million, according to people familiar with the negotiations.
London-based Diageo, which owns the Smirnoff vodka and Guinness beer brands, became the winning bidder after a group that included Constellation Brands Inc., the world’s largest wine company, let a deadline last week expire without submitting a new offer, the sources said.
A clause in the agreement with Constellation allowed Chalone to accept a better offer, and Diageo said it would pay $13.75 a share and assume $65 million in debt. Diageo would have to pay the Constellation group a $2.48-million breakup fee.
*
Disney Settles With SEC in Disclosure Case
Walt Disney Co. settled Securities and Exchange Commission allegations that it failed to tell shareholders in a timely manner that the children of three company directors worked for the entertainment giant and that other board members had financial ties to the company.
The SEC didn’t fine Disney. The Burbank company didn’t admit any wrongdoing in the 2-year-old case, but it promised to “cease and desist” from securities violations in the future.
A Disney spokesman declined to comment.
In the settlement, regulators said Disney should have reported from 1999 to 2001 that three directors at the time had adult children working at the company. Each child made more than $60,000 a year, the threshold for reporting to the SEC, with one making more than $150,000.
The three directors have since left the board.
Disney also was admonished for failing to properly disclose that the wife of a director made more than $1 million a year as an executive at Lifetime cable channel, 50%-owned by Disney.
*
Sales of New Homes Drop 28% in the West
Sales of new homes fell sharply in November, the Commerce Department said, with much of the drop occurring in the West -- providing another sign that the sizzling Southern California housing market is cooling.
The 28% drop in sales of new single-family houses in the 13-state Western region was the steepest monthly percentage decline in 22 years, following a record sales month in October, the agency said.
Nationwide, sales fell 12% to a seasonally adjusted annual rate of 1.13 million units.
November sales typically fall off from October, and monthly reports often are later revised.
Moreover, despite concerns about weakness, the Southern California and national markets for both new and existing houses remain strong, analysts said. Indeed, November sales of new homes in the West -- which fell to a seasonally adjusted annual rate of 321,000 units from 445,000 in October -- were little changed from a year earlier.
In November, the median home price in Southern California rose 24% from a year earlier to a record $415,000, according to research firm DataQuick Information Systems.
*
Macerich to Buy Stakes in 11 East Coast Malls
Macerich Co. did some last-minute holiday shopping, announcing that it had agreed to pay $1.45 billion for controlling stakes in 11 East Coast malls.
The Santa Monica-based real estate investment trust said it would buy Wilmorite Properties Inc. and its operating partnership, Wilmorite Holdings, whose holdings include large malls in McLean, Va.; Freehold, N.J.; and Danbury, Conn.
The Wilmorite malls have annual revenue of more than $2 billion and sales are “increasing very nicely,” Macerich President Arthur Coppola said in a conference call with analysts. Mall rents are below the market rate, he said, and Coppola expects “very significant rent growth” in the years ahead.
The sale is expected to close in March. Terms of the deal call for Macerich to issue $320 million in convertible preferred units to limited partners of Rochester, N.Y.-based Wilmorite. The balance, about $1.13 billion, would be paid in cash, and Macerich has agreed to assume about $882 million of debt.
The acquisition would expand Macerich’s portfolio to 74 shopping malls and give it a substantial presence in the East, where it has been a minor player.
For a preview of this week’s business news, please see Monday’s Business section.
