TOP STORIES -- May 30-June 4

Stock Market Ends Week on Upbeat Note

Blue chips rallied to wrap up their second straight winning week, as traders took heart in the latest evidence of a thriving U.S. labor market.

Along with the Labor Department’s report showing that nonfarm payrolls grew by a better-than-expected 248,000 in May, analysts said rosier sales guidance from semiconductor giant Intel Corp. and a decline in oil prices contributed to investor optimism.

“The market has regained its footing,” said Dick Green, president of investing website Briefing.com in Chicago. Although analysts increasingly expect the Federal Reserve to launch a campaign of raising interest rates this month to keep the economy from overheating, “the market has priced most of that in,” Green said.

For the week, the Dow Jones industrial average rose 0.5%, and the Standard & Poor’s 500 index gained 0.2%. It was the second straight up week for both indexes. The Nasdaq composite index lost 0.4%, its first weekly loss after two weeks of gains.

*

May Payrolls Rise; Prior Gains Revised Upward

U.S. employers added a net 248,000 jobs in May and previous months’ gains were revised upward, extending a hiring streak that could provide President Bush with a net increase in employment by election day.

Last month’s increase was higher than many economists had expected and followed revised net gains of 353,000 in March and 346,000 in April, the Labor Department reported.

The unemployment rate remained unchanged at 5.6%.

After bottoming out in August, payroll employment has posted nine straight monthly gains, restoring 1.4 million of the net 2.6 million jobs lost during the first 31 months of Bush’s presidency.

If hiring continued at its recent pace, it would erase the remaining deficit by November, denying Democrats the opportunity to portray Bush as the first president since Herbert Hoover to finish his term with fewer jobs than when he began.

Meanwhile, gasoline prices have been setting records and interest rates are beginning to rise, leaving voters with a somewhat muddled picture of the nation’s economic performance.

*

Viacom President Quits Amid Power Struggle

An uneasy alliance between two of the entertainment industry’s most powerful executives ruptured with the resignation of Viacom Inc. President Mel Karmazin, whose relationship with Chief Executive Sumner Redstone had been strained since their companies merged in 2000.

Karmazin, 60, had headed CBS before its merger with New York-based media giant Viacom.

Succeeding Karmazin at Viacom are MTV Networks CEO Tom Freston and CBS Television CEO Leslie Moonves. The two men, named co-presidents and co-chief operating officers, are pitted in a contest to succeed Redstone. Redstone said he would step down as CEO within three years.

One source close to Karmazin said the executive learned that Redstone was not planning to name him as his successor as part of a planning process underway at the board level. In a conference call with reporters, however, Redstone said it was Karmazin who took himself out of the running with his resignation.

A day later, Viacom entertainment chief Jonathan Dolgen resigned, acknowledging that the shift in leadership had left no room for him at the top.

*

Cartel Says It Will Raise Quotas for Oil Output

OPEC raised production quotas and pledged further increases to rein in the cost of crude oil. The cartel’s meeting didn’t provide quite the kick to output that some had hoped for, but it nonetheless helped soothe anxious traders enough to send down the price of oil.

The news from the Organization of the Petroleum Exporting Countries was bolstered by an Energy Department report that imports boosted U.S. gasoline inventories and pushed crude oil stocks to their highest level in two years. Taken together, the rise in fuel supplies and the drop in crude costs could soon translate into lower prices at the pump, some analysts said.

OPEC increased its official production ceiling by 2 million barrels a day, or about 8%, in July, with plans to raise quotas by an additional 500,000 barrels a day in August if necessary.

The deal among cartel members appeared to be a compromise between Saudi Arabia, which had proposed an increase of 2.5 million barrels, and countries like Iran and Venezuela that feared a plunge in prices. OPEC will meet in Vienna on July 21 to review the new quota.

*

Jury Orders Ford Motor to Pay $368.6 Million

A San Diego jury socked Ford Motor Co. with a punitive damages verdict that brought to $368.6 million the total damages awarded in the case of a San Diego woman paralyzed in the rollover wreck of her Explorer sport utility vehicle.

The punitive damages of $246 million came two days after the jury awarded $122.8 million in compensatory damages to Benetta Buell-Wilson, 49, and her husband, Barry Wilson, after finding that her 1997 Explorer was defective because of its instability and weak roof. It was the first damage award against Ford involving a rollover of an Explorer.

“We will definitely appeal,” a Ford spokeswoman said. “We can appreciate the empathy this jury felt for the plaintiff, but this was an extremely severe crash initiated by the driver, and any SUV would have rolled over under similar circumstances.”

Buell-Wilson offered to waive $100 million of the punitive damages should Ford agree to recall all Explorers through the 2001 model year to improve their stability and roof strength.

Ford is expected to file post-trial motions asking Superior Court Judge Kevin Enright to slash the damages, which a Ford lawyer called “patently unconstitutional.”

*

Wal-Mart Details Plan to Raise Employee Pay

Wal-Mart Stores Inc. said it would launch a series of initiatives to improve pay and opportunities for its 1.1 million U.S. workers, a move that analysts said was aimed at countering growing criticism of the company’s labor practices.

The company, facing lawsuits alleging gender discrimination and poor treatment of workers, said changes would include docking management pay for failure to achieve diversity goals and restructuring hourly workers’ job classifications and pay.

At the company’s annual shareholders meeting in Fayetteville, Ark., Chief Executive Lee Scott said that no employee’s pay would be cut under the new program and that some employees would see raises.

But based on the size of Wal-Mart’s workforce, some analysts said it would be difficult to institute a significant wage increase.

“It’s a powerful PR play, and while it’s an admirable initiative, it’s probably still not enough to keep the Wal-Mart head-of-household worker above the poverty line,” said Burt P. Flickenger of Strategic Resource Group, a New York retail and marketing consulting firm.

*

New Jersey Drops Charges Against Pimco

The New Jersey attorney general dropped charges of improper mutual fund trading against Newport Beach-based bond fund giant Pimco, while the company’s sister firm PEA Capital agreed to pay $18 million to settle similar charges involving stock funds.

The resolution is a victory for Pimco’s Bill Gross, the prominent bond fund manager, who had publicly attacked the New Jersey case against his operation. He insisted that Pimco had done nothing wrong.

The New Jersey case, filed in February, lumped Pimco and PEA Capital with other mutual fund companies that had allowed investment firm Canary Capital Partners to engage in market timing, the fast-paced trading of fund shares, allegedly to the detriment of buy-and-hold investors.

Both Pimco and New York-based PEA are owned by German insurance giant Allianz but are managed separately.

New Jersey Atty. Gen. Peter C. Harvey said the decision to drop the case against Pimco was based on information his office had received since the suit was filed in February. He declined to say what that information was.

*

Anschutz Buys Fox’s Interest in Staples Center

A company controlled by Denver billionaire Philip Anschutz has purchased Fox Entertainment Group’s 40% interest in Staples Center, paving the way for work to begin on a massive $1-billion addition to the area surrounding the arena.

The deal, estimated at about $200 million, gives Anschutz’s entertainment and development company, AEG, greater control of the downtown arena and surrounding 28 acres.

It plans to build a 4-million-square-foot development called L.A. Live, which could house a theater, hotels, restaurants, stores, offices and residential units.

Plans also are expected to include radio and TV facilities for broadcasters that would compete with Fox. Construction could begin by year-end.

Fox will keep its ownership share of the Fox Sports Sky Box restaurant at the arena. Fox sports-oriented shows will continue to be broadcast from its Staples Center studio.

From Times Staff

*

For a preview of this week’s business news, please see Monday’s Business section.