Credit markets: Debt woes tarnish two titans
Two icons of American business, General Electric and Berkshire Hathaway, lost their “pristine” AAA credit ratings last week, said Erik Holm in Bloomberg.com. Standard & Poor’s cut GE’s rating to AA, citing “concern about losses on financial instruments” held by GE Capital, the company’s finance unit. The other major rating service, Fitch, downgraded Berkshire, saying that the company’s portfolio of “volatile” securities could destabilize the firm’s capital. Fitch also concluded that Berkshire would be “at risk” if it lost the services of chairman and CEO Warren Buffett.
Markets took GE’s downgrade in stride, said Maurna Desmond in Forbes.com. In the first trading session after the change was announced, GE shares rose 13 percent to $9.57 and helped lift the Dow Jones industrial average by 3.5 percent, or almost 240 points. “Debt downgrades are usually unwelcome news in the stock market, because the associated higher borrowing costs can hurt a firm’s ability to raise funds.” But many investors apparently had expected GE’s rating to go even lower, and they remain confident in the company’s overall financial strength.
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Housing: Signs of life?
Housing starts jumped 22 percent in February to an annualized rate of 583,000 homes, the biggest increase since 1990, said Shobhana Chandra in Bloomberg.com. But analysts said hopes for a housing rebound were probably premature. Almost the entire increase was confined to condominiums and apartment buildings, leaving builders of single-family homes on the sidelines. Toll Brothers, the largest U.S. builder of luxury housing, this month reported its sixth consecutive quarterly loss, while Hovnanian, another large builder, disclosed its 10th consecutive down quarter.
Media: Murdoch shuffles the executive deck
News Corp. CEO Rupert Murdoch “boldly revamped his executive superstructure” last week, said Patrick Goldstein in the Los Angeles Times. Following the departure of “longtime No. 2 man Peter Chernin,” Murdoch put executives from the company’s Fox film units in charge of his “lucrative but endangered profit center,” Fox TV. Jim Gianopulos and Tom Rothman of 20th Century Fox will now oversee TV as well as film production. Peter Rice will move from the top spot at the Fox Searchlight film unit to oversee the Fox TV network.
Energy: OPEC won’t cut production
“Facing a global recession and falling oil demand,” OPEC this week agreed to maintain its current output, fearing that tighter supplies could choke off an economic recovery, said Steven Mufson in The Washington Post. But the cartel urged member countries to comply with a previously announced cut of 800,000 barrels a day. “We don’t want to hurt the international economy, but at the same time we don’t want to hurt ourselves,” said Kuwaiti oil minister Sheikh Ahmad al-Sabah.
Medical devices: Pacemaker death toll increases
Medical-device maker Medtronic has linked 13 patient deaths to a faulty heart device recalled in 2007, said Janet Moore in the Minneapolis Star Tribune. At the time of the recall, Medtronic placed the number of deaths at five. Medtronic recalled the Spring Fidelis, a wire that connects a defibrillator to a patient’s heart, after physicians reported that it sometimes fractured, “causing the device to unnecessarily shock patients” or stop working. Removing the wire, though, can be as dangerous as leaving it in place.
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