Top 10 Business Stories Of '98
It was the year of Mr. Chairman (as in Greenspan) and Mr. Butts (as in Big Tobacco). Of emerging market shocks, and shocking Internet stocks. Of rich oil mergers and depressing crude prices. Of the landmark government assault on Bill Gates and Microsoft, and the sweet revenge of Steve Jobs and Apple.
Here is a list of the year's Top 10 business stories as compiled by the editors of CBS MarketWatch:
1. Monetarists firmly in control
Presidents and captains of industry alike revere Alan Greenspan & Co. as the most powerful institution on Earth, and it's easy to see why after a year like 1998. The Federal Reserve Board's role in managing the ups and downs certainly left us in awe. Greenspan's monetary policy-makers steered the U.S. away from the turmoil that wreaked havoc elsewhere (and might otherwise have gotten worse.) With three bold cuts in short-term interest rates, and the occasional public ruminations of its 72-year-old chairman, the Fed led the way back to sanity in the face of the ongoing global economic crisis, the Long-Term Capital Management fiasco, the market's late-summer sell-off, countdown to the euro, congressional elections and the storm damage wrought by Hurricane Monica. The record: historically low interest rates, steady if slow economic growth, another double-digit percentage gain on the stock market and the lowest unemployment rates since man first walked the moon - all with invisible inflation.
2. Overseas shocks: No easy answers
From Russia to Rio, spasms on emerging markets around the globe once again kept the international financial system embroiled in crisis. For one explosive week in late September, the world instantly learned how hedge funds - an investment firm catering to the world's richest clients - lost their shirts on high-risk loans to developing countries that ran out of hard foreign currency. Time and again throughout the year, U.S. markets trembled as the IMF, G-7, Paris Club and other Western-led creditors scrambled - and failed - to resuscitate the sickly patients. Multibillion-dollar programs stopped the bleeding in South Korea and Thailand, but they're still gasping for air in Russia, Indonesia, Malaysia and Brazil. For that, and because Japan still can't get its own financial sector in order, the world's second-largest economy, still wallows its worst recession since the atomic bomb fell. Investors looking at fresh currency crunches overseas had every reason to wonder whether this was finally going to be year the Asian contagion forced the U.S. economy into bed rest.
3. Internet stocks redefine gold rush
Not since the gold rush have so many adventurers made so much in such a short time. It's the attack of the "dot.coms," and the clamor for a stake in their prospective fortunes has catapulted the American Stock Exchange Intenet Index up 58 percent since we last sang Auld Lang Syne. The narrower Goldman Sachs Internet Index tripled. High-fliers like Amazon (AMZN), America Online (AOL), EBay (EBAY) and UBid (UBID) have forced seasoned analysts to scrap traditional valuation models in favor of more speculative measures such as stock price as a multiple of anticipated sales. Trading in these shares (often by day traders flitting in and out in a seven-hour time frame) also inflamed market volatility, in some cases leading broad-market retreats and declines. Now that AOL is a component of the benchmark Standard & Poor's 500 Index, the market formally will have to come up with a way to gauge the value of Internet stocks.
4. Commodities in the commode
Who says copper and heating oil are boring? OK, lots of folks. But the depressed prices of petroleum products, pork bellies, precious metals and other basic commodities in fact speak to the far-reaching impact that global deflation sparked by Asia's economic crisis has had. The CRB Index, a basket of key commodities prices, is down 17 percent for the year and scraping a 20-year-low, led by crude and hogs and gold. Between the mergers forced on the oil business to the rally in transportation company stocks, the trend has reverberated through about every industry. It has also touched the fortunes of many an investor - not to mention those stubborn gold bugs, farmers and anyone who likes a good BLT now and then.
5. Merger masters: Richer and Rockefeller
Mergers captured lots of attention and for good reason. All of the 10 biggest mergers in history were announced in 1998, and you had to pony up financing in the $30 billion range as a minimum requirement to get into that club. Epitomized by the $87 billion Exxon-Mobil deal - which reunited the two biggest chunks of Rockefeller's old oil empire - this year broke new ground in top-tier marriages: Germany's Daimler-Benz picked up Chrysler for a cool $33 billion, the first foreign incursion into Motor City. The year's mergers also served as another measure of dizzying valuations of stock, the currency of choice for mega-mergers these days. And look at how much richer those deals have gotten: Before this year, the record pact was the WorldCom acquisition of MCI Communications way back in October 1997 for a measly $29.1 billion. This year gave us Citigroup (C), the ultimate embodiment of Wall Street power that hitched Citicorp to Travelers Group for $37 billion and went all the way up. Telecom tie-ups: AT&T's bid (T) for TCI (TCOMA), SBC's (SBC) buyout of Ameritech (AIT). And more banking blockbusters: See NationsBank-BankAmerica (BAC) and Wells Fargo-Norwest (WFC)
6. IPOs: To Infinity and beyond
Dozens of companies took one small step onto Wall Street, and an unprecedented out-of-the-this-world leap to the moonIn a stunningly uneven year for IPOs, EBay, Inktomi, Infospace, GeoCities bolted into the record books with stellar first-day trades, only to be dwarfed by massive gains in subsequent weeks of mania touched off by their sensational debut-trades. Mostly Net-oriented names, they also triggered big run-ups in relatively old Internet stocks like AOL, Yahoo and most notably Amazon. But several established companies also dipped into the IPO fountain of youth. They set records too, in terms of how much money was raised, as investors richly rewarded spin-offs like DuPont's Conoco, News Corp.'s Fox Entertainment and CBS Corp.'s Infinity Broadcasting. Still, the market was uneven, with the IPO market suffering its worst slump in two decades after the stock market's summer siesta. And there was little short of cyberspace that caught investors' fancies.
7. U.S. vs. Microsoft
Not since the pioneer trustbusters took Standard Oil to the chopping block has Washington gone after a company in such a far-reaching antitrust case. It's also a sign of the times - the first big competition question for the Internet Economy. Although the outcome's up in the air, the action is almost certain to shape the future regulation of technology.
8. Viagra mania
Every so often, a consumer brand name comes along and knocks the socks of investors, who get so turned on that the stock of the company takes on a life of its own. Well few products turn on mom and pop investors like Viagra, the wildly popular anti-impotence drug that made Pfizer (PFE) one sexy performer -at least for a while. After vigorous second-quarter sales, the third quarter was a tad disappointing.
9. Big Tobacco's settlement - finally
For the first time, most states and the federal government brought suit against an industry that hitherto had never paid out a dime in damages to any plaintiff seeking to recover costs from its so-called nicotine-delivery products. Take a look into the hazy past.
10. Apple's triumphant comeback
Under "interim" leader Steve Jobs, shares more than tripled after the struggling innovator that set off the computer revolution launched a new laptop and a hot-selling line of desktops - the iMac, which sought to capitalize on the popularity of the Internet. The hot machines weren't enough to generate a sales increase. Revenue kept falling. And the company still can't find a permanent CEO. But Apple managed to post profits by cutting costs, including its staff and once-fat R&D budget.
Written By Alexander Davis, news editor of CBS MarketWatch