TOP STORIES -- June 22-27

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.”

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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.

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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.

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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.

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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.

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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.

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Vivendi Receives Bids for Entertainment Assets

The contest for Vivendi Universal’s entertainment empire shifted into high gear, with the French conglomerate drawing bids from four media companies and investment groups.

Consortiums headed by Vivendi Vice Chairman Edgar Bronfman Jr. and oil tycoon Marvin Davis each offered to buy Universal’s entertainment holdings for about $15 billion, sources said. Liberty Media Corp. and Metro-Goldwyn-Mayer Inc. submitted offers of more than $10 billion each, sources said.

The bidders and Vivendi declined to comment.

General Electric Co.’s NBC submitted a letter of interest but stopped short of a bid. Viacom Inc. has told Vivendi it will make an offer for some of the U.S. media assets in a second round of bidding, sources said.

The offers are expected to be reviewed by the board this week, with a second round of negotiations expected in mid-July.

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Former Boeing Workers Face Criminal Charges

U.S. prosecutors filed criminal charges against two former Boeing Co. engineers accusing them of stealing trade secrets, escalating a probe into allegations that the company illicitly obtained Lockheed Martin Corp. documents to win a multibillion-dollar missile contract.

Kenneth Branch and William Erskine were charged in U.S. District Court in Los Angeles with conspiracy, theft of trade secrets and violation of the federal Procurement Integrity Act. According to an affidavit, Erskine recruited Branch, who worked for Lockheed at the time, to bring proprietary Lockheed documents to Boeing. In exchange, the affidavit says, Branch was promised a higher-paying job at Boeing.

Branch and Erskine are expected to be arraigned next month. If convicted of all three counts, they each would face up to 15 years in prison and fines of as much as $850,000. Neither Branch nor Erskine could be reached for comment.

The criminal filing may bolster a civil lawsuit Lockheed filed recently.

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‘Do Not Call’ List Helps Fend Off Telemarketers

The federal government hopes to put a chill on cold-calling with a national registry that allows people to fend off telemarketers peddling everything from home improvements to credit cards to newspaper subscriptions.

President Bush announced the creation of a nationwide “do not call” list people can use to fend off the telemarketers. The list, on which Americans will be able to register their phone numbers, is part of a yearlong crackdown on telemarketing, which has ballooned into a $700-million-a-year business that generates 100 million calls a day.

When the new rules take effect this fall, telemarketers who ring or fax numbers on the list will face fines of $11,000 per call.

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Nike Reports Weak Trends in U.S. Business

Sneaker giant Nike Inc. reported disappointing trends in its core U.S. business, including especially weak sales at Foot Locker stores.

A 10% decline in Nike’s U.S. business in so-called futures orders, which represent merchandise to be delivered in the next six months, surprised analysts. Nike shares fell $3.85, or 6.8%, to $53.08 on the New York Stock Exchange on Friday.

The declines were driven by unexpectedly weak sales of Nike shoes at Foot Locker Inc., the dominant U.S. sneaker retailer that has feuded with Nike over the last year about sharing advertising costs and other issues. Excluding Foot Locker sales, Nike’s U.S. futures orders probably increased 3% to 4%, executives said.