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Week in Review

TOP STORIES -- June 22-27

June 29, 2003|From Times Staff and Wire Services

Fed Cuts Key Rate by a Quarter-Point

Federal Reserve policymakers cut short-term interest rates a quarter-point to a 45-year low of 1% and signaled they are ready to cut still further to head off deflation and ensure a return of robust growth.

The drop in the signal-sending federal funds rate -- the interest banks charge one another for overnight loans -- was less than the half-point cut many had expected. It suggested the Fed is not quite as concerned about deflation as it indicated last month. But the cut reflected how nervous policymakers are about the economy's fragile condition.

Policymakers said that though recent economic data showed "a firming in spending, markedly improved financial conditions and labor and product markets that are stabilizing," the economy "has yet to exhibit sustainable growth."


Stocks End Week Down Despite Fed's Move

Wall Street was unimpressed by the Fed's decision to cut its key interest rate for the 13th time since January 2001.

Major stock indexes suffered their first losing week in more than a month, and yields on Treasury securities rose sharply on expectations that the central bank's rate-cutting binge is at -- or at least near -- an end.

Equity investors said they want to see more evidence that the economy is improving, though stocks have rallied strongly since March. Even with last week's 2% loss, the Standard & Poor's 500 index is poised to notch a 15% gain for the second quarter, its best since 1998.

The Dow Jones industrial average fell 2% for the week, breaking a four-week winning streak. The technology-laden Nasdaq composite index fell 1.2% but is still up 21% for the second quarter, which ends Monday.


Regulators Uphold Disputed Energy Pacts

The Federal Energy Regulatory Commission ordered more than 60 power firms and utilities to show why they should not be forced to return profits allegedly gained via illegal manipulation of the California electricity market.

The action ratchets up the pressure on Dynegy Inc., Enron Corp., the Los Angeles Department of Water and Power and others previously accused of rigging the system and deepening California's 2000-01 energy crisis.

But the commission said California must honor $12 billion in long-term electricity contracts negotiated at the height of the energy turmoil. The state could be forced to pay now-lofty prices to some of the companies accused of harming the market. Gov. Gray Davis vowed to appeal in federal court.

Firms and municipal entities accused of manipulative behavior disputed the allegations.


Record Labels Say They Will Sue File Sharers

Unable to stamp out Internet music piracy through education or threats, the record labels said they would sue thousands of people who share songs online.

The Recording Industry Assn. of America said it plans to spend the next month identifying targets among the estimated 57 million people using file-sharing networks in the U.S., focusing on those offering a "significant" number of songs for others to copy. Then, in August, RIAA will file its first lawsuits, President Cary Sherman said.

Many in the music industry had hoped to avoid hauling potential customers into court. And critics, including some record label and online music executives, questioned whether a legal offensive addresses the industry's fundamental problems.


Idec, Biogen to Merge in $6.4-Billion Stock Deal

San Diego-based biotech firm Idec Pharmaceuticals Corp. agreed to buy Biogen Inc. for $6.4 billion in stock in what the companies described as a "merger of equals."

The companies said the merger would broaden their sources of revenue, expand development of new drugs and eliminate overlapping costs. That probably would mean some staff cuts, said a Biogen spokesman who didn't elaborate.

The combined company, to be called Biogen Idec Inc., would be the third-largest biotechnology concern behind Amgen Inc. and Genentech Inc., with annual sales exceeding $1.5 billion.

The merger must be approved by shareholders and regulators. Idec and Biogen said they expected to close the deal by the end of this year.


Firms, Insurers May Pay $1 Billion for IPO Losses

More than 300 companies and their insurers have reached a tentative settlement that would pay $1 billion to investors who lost money in initial public stock offerings in the late 1990s, setting the stage for a larger legal battle between investors and Wall Street investment banks.

The companies, mostly tech upstarts, and their insurers would be dropped from 309 class-action suits that allege investors were hurt by unsavory IPO practices. Investors say they unwittingly overpaid for IPO shares that plunged as the bull market collapsed in early 2000.

The deal "takes a financial monkey off our backs," said Jeffrey Rudman, an attorney who represented many companies.

The deal must be approved by the companies' boards and by U.S. District Judge Shira Scheindlin in New York, a process that could last into next year.


Vivendi Receives Bids for Entertainment Assets

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