Stocks in U.S. Decline, Leaving S&P 500 Index Virtually Unchanged for Year

By Inyoung Hwang and Katia Porzecanski - Dec 31, 2011 5:56 AM GMT+0700

U.S. stocks fell, leaving the Standard & Poor’s 500 Index virtually unchanged for the year, as concern over Europe’s debt crisis overshadowed optimism that the American economy will expand in 2012.

JPMorgan Chase & Co., the largest U.S. bank by assets, paced declines among financial companies after Spain said its budget deficit will be larger than previously forecast. Sears Holdings Corp. (SHLD) retreated 3.4 percent after Fitch Ratings downgraded its long-term default ratings. Freeport-McMoRan Copper & Gold Inc. (FCX) rose 0.7 percent as the price of gold climbed for the first time in more than a week.

The S&P 500 fell 0.4 percent to 1,257.60 at 4 p.m. New York time. The gauge dropped 0.2 percent in the final 10 minutes of trading, erasing its 2011 advance. The Dow Jones Industrial Average lost 69.48 points, or 0.6 percent, to 12,217.56, trimming its gain for the year to 5.5 percent. About 4.1 billion shares changed hands on all U.S. exchanges, the third-slowest full-day session of the year and 45 percent below the three- month average, according to Bloomberg data.

“Everyone kind of had a negative outlook on the year,” Gerry Milligan, co-head of U.S. program trading at Instinet Inc. in New York, said in a telephone interview. “The fact that the S&P ended slightly negative on the year just put a nice end note to a challenging year.”

The benchmark index for American equities capped its smallest annual change since 1947. The measure was poised to extend its two-year annual advance until a two-point decline completed in the final seconds of trading sent the index down 4/100ths of a point for the year. The S&P 500 (SPX) rallied 23 percent in 2009 and 13 percent in 2010.

Strategists’ Forecast

Wall Street strategists’ average forecast at the beginning of the year that the S&P 500 would rise to 1,371 in 2011 proved 9 percent too high, according to a Bloomberg News survey. Forecasters predict the index will advance to 1,348 next year.

Still, both the S&P 500 and the Dow are among the 10 best performers this year among 91 national indexes tracked by Bloomberg. The S&P 500 started the year with a rally, rising as much as 8.4 percent to a three-year high by the end of April and extending its rebound from a March 2009 bear-market low to 102 percent.

The index tumbled throughout the summer as Congress and President Barack Obama struggled over U.S. deficit cuts, and sank further amid concern that Europe’s debt crisis was threatening the global economic recovery. The S&P 500 fell as much as 19 percent from April to its low for the year on Oct. 3.

Market Rebound

The market rebounded amid tumbling valuations and data signaling that the world’s largest economy was weathering Europe’s crisis. The U.S. unemployment rate fell to 8.6 percent in November, the lowest since March 2009, after lingering at 9 percent or above for seven straight months.

The S&P 500’s price-earnings multiple reached the lowest level in more than two years on Oct. 3, falling to 11.6, a 27 percent decline from its high in February of 15.8. The gauge’s valuation closed at 13.2 for the year. An 11 percent rally since the end of September gave the S&P 500 its best fourth quarter since 2003.

The S&P 500 rose 1.1 percent yesterday amid further signs of strength in the U.S. economy. Stock fell today after Spain said its budget deficit will reach 8 percent of gross domestic product this year, more than the previous forecast of 6 percent. Luxembourg’s Jean-Claude Juncker, who leads the group of euro- area finance ministers, said economic growth in the euro region “isn’t good” and economies are only growing in some Asian and African countries.

‘Downside Pressure’

China’s official Xinhua News Agency reported the world’s second-largest economy may face “downside pressure” next year, even though growth will be more than 9 percent in 2011.

“One of the biggest takeaways is that the U.S. did so much better than everybody else,” Howard Silverblatt, the New York- based senior index analyst at Standard & Poor’s, said in a telephone interview. “There was a big variance in the year. The financials and the materials got hit but there were a lot of winners.”

Financial shares fell (SPXL1) the most among the 10 main industries in the S&P 500 this year, losing 18 percent as a group, followed by a decline of 12 percent in raw-material producers. Utilities, consumer-staples providers and health-care companies, among stocks considered the least sensitive to economic prospects, rose at least 10 percent for the top gains.

JPMorgan Chase erased 0.5 percent to $33.25 today, while Citigroup Inc. lost 1.7 percent to $26.31. Financial stocks tumbled 0.6 percent as a group.

Bank of America

Bank of America Corp. (BAC) rose 1.8 percent to $5.56, after falling as much as 1.7 percent earlier. The bank was the year’s worst performer in the Dow as concern about mounting mortgage losses and a global economic slowdown weighed on the second- biggest U.S. lender.

Sears retreated 3.4 percent to $31.78. Fitch downgraded the long-term default ratings of the retailer to CCC from B, after the company said this week it will close as many as 120 Kmart and Sears full-line stores.

AMR Corp. (AMR) tumbled 32 percent to 35 cents for the biggest retreat in the Russell 1000 Index. NYSE Euronext said shares of the parent of American Airlines will be removed from the New York Stock Exchange before trading begins on Jan. 5, following the Fort Worth, Texas-based company’s bankruptcy filing on Nov.29.

Freeport-McMoRan climbed 0.7 percent to $36.79. Gold added 1.7 percent to $1,566.8 an ounce, capping an 11th straight annual gain.

To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net; Katia Porzecanski in New York at kporzecansk1@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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Flurry of Trades in Final Seconds Snatched Away 2011 Advance in S&P Index

By Nina Mehta - Dec 31, 2011 5:12 AM GMT+0700

A two-point decline (SPX) completed in the last seconds of trading sent the Standard & Poor’s 500 Index to a 2011 loss of 4/100ths of a point, ending a two-year streak of gains for the benchmark gauge of American equities.

The measure traded at an average price (SPX) of 1,261.18 during the day and stood at 1,260 with 10 minutes left, up about 2 points from its Dec. 31, 2010, close of 1,257.64. It remained positive for the year with 15 seconds to go at 1,257.91 before slipping to 1,257.60 on the session’s last trades.

“There was a frenzy,” said Stephen Guilfoyle, who works on the floor of the New York Stock Exchange as U.S. economist for Meridian Equity Partners in New York. “You saw people breaking into a run, the old-school nervousness, some shouting. You see that nervousness when orders are coming in the last minute.”

The volatility (SPX) was characteristic of a year in which stocks swung at a daily rate of twice the 50-year average after the S&P 500 reached a three-year high in April. From its peak of 1,263.61, the index plunged 19 percent through Oct. 3 and then climbed back to where it began the year.

This year’s move was the smallest (SPX) since 1947 when the index closed exactly unchanged. Individual stocks were more volatile than in 2009 and 2010, with 55 losing more than 30 percent this year compared with a total of 13 in the prior two.

‘On a Rollercoaster’

“It’s almost like you’re getting on a rollercoaster (SPX), where you get on and it’s a wild ride, and you get off at the exact same point,” Brian Jacobsen, who helps oversee about $209 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin, said in a telephone interview.

About 4.1 billion shares (MVOLUSE) changed hands on all U.S. exchanges today, the third-slowest full-day session of the year and 45 percent below the three-month average, according to data compiled by Bloomberg, as trading slowed before the New Year holiday.

The 2.6-point retreat (SPX) between 3:50 p.m. and 4 p.m. was almost twice as big as the next largest decline for any 10- minute period during the day, data compiled by Bloomberg show. Volume (MVOLUSE) during the period was at least 126 percent greater than in any other comparable interval before the close.

“It looks notable on a chart because the rest of the day was so lame and without any movement whatsoever,” Manoj Narang, founder and chief executive officer of Tradeworx Inc., an automated trading firm in Red Bank, New Jersey, said in a phone interview.

To contact the reporter on this story: Nina Mehta in New York at nmehta24@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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U.S. Growth May Accelerate as Europe Shrinks

By Bob Willis and Timothy R. Homan - Dec 31, 2011 4:55 AM GMT+0700

Rising confidence, fewer firings and gains in holiday sales show the U.S. economy is picking up, defying a slowdown in Europe and much of the rest of the world.

The divergence will become even starker in 2012 as the world’s largest economy accelerates, the 17-member euro area sinks into a recession and growth in emerging markets cools, according to economists like Maury Harris of UBS Securities LLC and Barclays Capital Inc.’s Dean Maki.

“There is a sense of decoupling,” said Harris, chief economist at UBS Securities in New York, whose team was the most accurate in forecasting the U.S. economy in the two years through September. “We can still have a decent year here in the U.S. even with the rest of the world slowing down.”

An improving job market and freer credit may underpin American household sentiment and spending just as the debt crisis in Europe prompts additional belt-tightening overseas. Stabilization in housing will erase a source of weakness at the same time vehicle replacement demand benefits companies like General Motors Co. (GM)

Stocks fell on concern over Spain’s budget deficit. The Standard & Poor’s 500 Index dropped 0.4 percent to 1,257.6 at the close in New York. The benchmark equity gauge was little changed this year.

Investors have been less kind to European equities. The Stoxx Europe 600 Index dropped almost 12 percent in 2011 as the debt crisis spread across the major economies of the euro area.

China and U.K.

Among reports today, manufacturing in China contracted in December for a second month as Europe’s debt crisis slowed export demand. The euro area’s crisis is crimping housing and growth in the U.K. as well, with the average cost of a home dropping 0.2 percent in December, the first monthly decline since August, the Swindon, England-based Nationwide Building Society said in an e-mail.

The extension of a tax cut through February is one reason economists are turning more optimistic on U.S. prospects. The economy will grow 2.5 percent in 2012, up from a prior estimate of 1.9 percent, according to a revised forecast issued on Dec. 23 by Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. The new estimate was based on the assumption that lawmakers will agree to retain the tax break for all of next year, he said in a research note.

JPMorgan projects the combined economies of the countries in the euro area will shrink 0.7 percent next year.

Fewer Jobless Claims

Another reason for optimism is a decrease in firings by U.S. companies that may portend a pickup in hiring in early 2012. Fewer Americans filed applications for jobless benefits in the four weeks through Dec. 24 than at any time since June 2008, according to figures yesterday from the Labor Department.

Less joblessness, rebounding stocks and falling gasoline prices are helping boost confidence. The Bloomberg Consumer Comfort Index reached a five-month high in December.

“We can tell that something is clicking if jobless claims are down and confidence is up,” said UBS’s Harris, who projects the U.S. economy will grow 2.1 percent in 2012.

Maki, chief U.S. economist at Barclays Capital in New York, forecasts 2.5 percent growth next year, up from 1.7 percent in 2011. The euro region will contract 0.2 percent after expanding 1.5 percent, he said.

Europe a ‘Headwind’

“We are diverging significantly as we move into 2012,” Maki said. “Europe is a headwind for the U.S., but we don’t think a European recession necessarily drags the U.S. into a recession.”

One reason is that consumer spending, which accounts for about 70 percent of the economy, has held up this year even as confidence slumped amid growing concern about Europe, the threat of a government shutdown during the mid-year debate on the U.S. debt limit and the downgrade of U.S. Treasury securities by S&P, Maki said.

Housing and auto sales, two areas which slumped during the recession, will probably improve.

Economists at Toronto-based BMO Capital Markets, led by Sherry Cooper, forecasts U.S. home construction will add to gross domestic product in 2012, led by the building of apartments and townhouses. Residential construction detracted from growth from 2006 through 2010 and was little changed this year.

The auto industry will strengthen as Americans replace aging and scrapped vehicles after delaying purchases since the recession, according to economists at Nomura Securities International Inc. in New York. For the number of cars per adult to hold at current levels, sales will need to climb to about a 16 million annual rate in coming years, the group led by Lewis Alexander wrote in a Dec. 5 report.

Auto Sales

Vehicle sales ran at a seasonally adjusted annual rate of 13.6 million in November, according to Autodata Corp.

“We’re encouraged by the industry’s recent performance and the developments that we’ve seen in the economy,” Don Johnson, GM’s vice president for U.S. sales, said on a conference call this month.

The U.S. economy’s ability to weather the mid-year slump in equities and confidence means it will overcome a European slowdown next year, said Vincent Reinhart, chief U.S. economist at Morgan Stanley in New York.

“The most important source of contagion is through financial markets, and we have already felt that,” said Reinhart. Morgan Stanley projects the U.S. will grow 2.2 percent in 2012 while the euro countries shrink 0.2 percent.

“There is a recession in Europe right now, but we aren’t forecasting a full-blown crisis and the euro hangs together,” Reinhart said. “Conditional on that, then the U.S. gets by.”

To contact the reporters on this story: Bob Willis in Washington at bwillis@bloomberg.net; Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz in Washington at cwellisz@bloomberg.net

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U.S Stocks Fall to Trim Yearly Gain

By Inyoung Hwang and Katia Porzecanski - Dec 31, 2011 4:36 AM GMT+0700

U.S. stocks fell, leaving the Standard & Poor’s 500 Index (MXEF) virtually unchanged in 2011 after one of the most volatile years in the market’s history, as concern about Europe’s debt crisis halted a two-year rally in equities. The euro weakened and Treasuries gained.

The S&P 500 fell 0.4 percent today to close at 1,257.60 at 4 p.m. in New York, compared with its 2010 closing level of 1,257.64 and marking the smallest annual change since 1947. The Dow Jones Industrial Average lost 69.48 points, or 0.6 percent, to 12,217.56 to trim its yearly gain to 5.5 percent. The euro slipped 0.1 percent to $1.2944 and slid below 100 yen for the first time in a decade. Ten-year Treasury yields lost two basis points to 1.88 percent. The S&P GSCI Index (SHCOMP) of raw materials retreated 0.1 percent.

Indexes of stocks and commodities had the worst yearly returns since the U.S. financial crisis in 2008, while Treasuries capped their biggest gains since then. The euro had its first back-to-back annual losses versus the dollar in a decade. Spain said today it will cut spending and raise taxes to slash a budget deficit that will exceed its target, highlighting the risks to growth from measures meant to tame Europe’s debt crisis.

“Spain’s numbers show that it’s very difficult to have strong economic performance while you’re trying to deleverage,” Kevin Shacknofsky, who helps manage about $5 billion for Alpine Mutual Funds in New York, said in a telephone interview. “The U.S. economic data has been experiencing some bounce in the last quarter. The negative is still Europe.”

Global equity markets lost $6.3 trillion in value this year as the debt crisis and slowing global economic expansion weighed on demand for riskier assets.

Volatile Year

The S&P 500 started the year with a rally, rising as much as 8.4 percent to a three-year high by the end of April and extending its rebound from a March 2009 bear-market low to 102 percent. The index tumbled throughout the summer as Congress and President Barack Obama struggled over U.S. deficit cuts, and sank further amid concern that Europe’s debt crisis was threatening the global economic recovery. The S&P 500 fell as much as 19 percent from April to its low for the year on Oct. 3.

Data signaling that the world’s largest economy was weathering Europe’s crisis helped the market rebound. The U.S. unemployment rate fell to 8.6 percent in November, the lowest since March 2009, after lingering at 9 percent or above for seven straight months.

The Citigroup Economic Surprise Index (CESIUSD) for the U.S., which measures the rate at which data is beating or missing economists’ estimates, reached a record 97.5 in March before slumping to a two-year low of minus 117.2 in June. The index has since rebounded and rose as high as 85.7 this month.

Top 10 Returns

The S&P 500 had fluctuated above and below its 2010 closing level since the end of October. The S&P 500 and Dow were still both among the 10 best yearly returns among 91 national equity indexes tracked by Bloomberg. Benchmark indexes advanced in only one of 24 developed markets this year, with the 0.6 percent advance in Ireland’s ISEQ Overall Index the only gauge topping the S&P 500.

The Dow alternated between gains and losses of more than 400 points on four days for the first time ever in August. Daily share swings in the S&P 500 averaged 2.2 percent that month, the most for any August since 1932, Bloomberg data show. The index moved an average 1.9 percent a day from May through the end of the year, more than triple the 50-year average of 0.6 percent before the collapse of Lehman Brothers Holdings Inc. in 2008.

Yearly Losses

The Stoxx Europe 600 Index rose 0.9 percent today to trim its 2011 loss to 11 percent. The MSCI Asia-Pacific Index slid 17 percent this year and the MSCI All-Country World Index fell 9.4 percent. Each gauge dropped on a yearly basis for the first time since 2008.

The European benchmark index’s retreat in 2011 was led by a 32 percent drop in banks, the worst performance among 19 industry groups. Financials also were the worst performers in the S&P 500 this year, down 18 percent as a group, with Bank of America Corp. losing 59 percent to lead declines.

“I think the key to 2012 is what happens with the financials,” Mark Bronzo, who helps manage $23.5 billion at Security Global Investors in Irvington, New York, said in a phone interview. “They’ve been underperforming for so long, does this group finally start to participate in the market, or does it continue to underperform? That’s going to go a long way to determining what kind of year we have because it’s a big sector.”

Treasury Rally

Two-year Treasury yields fell three basis point today to 0.24 percent and 30-year yields decreased one basis point to 2.90 percent. Treasuries rose this year as investors sought the relative safety of U.S. government bonds on concern the euro- region debt crisis will worsen.

U.S. debt has returned 9.6 percent in 2011, according to Bank of America Merrill Lynch data, even after S&P cut the nation’s AAA rating on Aug. 5. German bunds also gained 9.6 percent, Japanese bonds advanced 2.1 percent and U.S. corporate debt rallied 7.3 percent. Treasuries beat stocks, commodities and the dollar for the year, even as reports indicate the U.S. economy is recovering.

Italian 10-year bond yields added eight basis points to 7.11 percent today, holding above the 7 percent level that foreshadowed bailouts of Greece, Ireland and Portugal. The debt had its worst year since at least 1992. French 10-year rates climbed six basis points to 3.15 percent, after the nation said it will sell bonds maturing between 2021 and 2041 on Jan. 5.

‘Dire’ Sentiment

“The risks in Europe will get worse before it gets better,” said Matt Brady, an executive director for foreign exchange at JPMorgan Chase & Co. in Sydney. “Risk sentiment is going to be dire as we head into 2012.”

U.K. ten-year gilt yields rose one basis point to 1.98 percent after earlier touching a record low of 1.932 percent. Gilts returned 17 percent on average in 2011, including reinvested interest, the most among 26 government markets tracked by Bloomberg and the European Federation of Financial Analysts Societies.

The S&P GSCI Total Return Index (SPGSCITR)of commodities slipped 0.1 percent today and fell 1.2 percent for the year. Cocoa in New York plunged 31 percent in 2011 on signs of expanding supplies from Ivory Coast, the biggest producer. Cotton lost 37 percent this year amid increasing output and dwindling demand. Copper, often seen as an indicator of economic activity as it is used in construction and automobiles, had its first loss since 2008.

Gold Rebounds

Gold futures rose 1.7 percent to $1,566.80 an ounce today, the first gain in seven days. While bullion gained 10 percent this year, an 11th straight yearly advance, prices have plunged as much as 21 percent since touching a record $1,923.70 on Sept. 6.

Copper climbed 2 percent to $3.436 a pound. Oil today pared a third annual increase, slipping 0.8 percent to settle at $98.83 a barrel, after a second straight month of contraction in Chinese manufacturing spurred concern that demand may slow in the second-largest crude-consuming country.

About two shares advanced for every one that fell in the MSCI Asia Pacific index, which rose 0.5 percent. Japan’s Nikkei 225 Stock Average added 0.7 percent and Hong Kong’s Hang Seng Index gained 0.2 percent.

The Shanghai Composite Index climbed 1.2 percent, its biggest gain in two weeks. The gauge tumbled 22 percent this year, the most since 2008, and extended last year’s 14 percent drop, on concern increases in borrowing costs and Europe’s debt crisis will derail economic growth in the world’s second-largest economy. The index’s 33 percent drop since 2009 makes it the worst performer among the world’s 15 biggest markets.

The MSCI Emerging Markets Index rose 0.1 percent, leaving it down 20 percent for the year.

To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net; Katia Porzecanski in New York at kporzecansk1@bloomberg.net

To contact the editor responsible for this story: Michael P. Regan at mregan12@bloomberg.net

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Hurd Pursued Sex With Jodie Fisher While HP CEO, Just-Released Letter Says

By Aaron Ricadela - Dec 30, 2011 12:01 PM GMT+0700

Former Hewlett-Packard Co. (HPQ) Chief Executive Officer Mark Hurd tried to persuade Jodie Fisher to have sex and kissed and touched her inappropriately while she was a company events contractor, according to a much-contested letter that was ordered to be released by a court yesterday.

During dinners, hotel-room visits and other meetings in cities such as Los Angeles, Atlanta, St. Louis and Madrid between 2007 and 2009, Hurd kissed and embraced Fisher, brushed his hand against her breast and attempted to initiate an affair, according to the letter sent to Hurd on June 24, 2010, by Fisher’s lawyer, Gloria Allred. Hurd, who is now a president at Oracle Corp. (ORCL), wasn’t found to have committed sexual harassment by Hewlett-Packard, and Fisher herself later said the document contained inaccuracies.

“You had designs to make her your lover from the onset using your status and authority as CEO of HP,” Allred said in the letter to Hurd, the contents of which were first reported by Bloomberg News. “At times you would behave professionally seemingly ‘getting’ that she was not going to have sex with you. At other times, not, and you would relentlessly attempt to cajole her into having sex with you.”

The letter, which sought a settlement for sexual harassment, was obtained after a ruling by the Delaware Supreme Court that it should be unsealed as part of the evidence in a shareholder lawsuit against the Palo Alto, California-based company. Hurd’s relationship with Fisher led to his resignation as CEO on Aug. 6, 2010, after a company investigation found he had violated its standards of business conduct. Hurd settled with Fisher the week he resigned.

Hurd’s Aftermath

Since Hurd’s departure, Hewlett-Packard has struggled to revive sales and seen its stock tumble 45 percent. He was replaced last year by Leo Apotheker, who himself was ousted on Sept. 22 and replaced by Meg Whitman.

Allred and Michael Thacker, a Hewlett-Packard spokesman, declined to comment.

In settling with Hurd last year, Fisher and Allred said there was no romantic or sexual affair between the two. Hewlett- Packard’s investigation found that he didn’t violate the sexual- harassment policy.

Fisher told Hurd in a 2010 letter, also obtained by Bloomberg News, that the Allred document had “many inaccuracies in the details” and that the CEO’s behavior didn’t hurt Hewlett-Packard or its reputation.

Contrasting Views

The Allred “letter was recanted by Ms. Fisher,” said Ken Glueck, a senior vice president for Redwood City, California- based Oracle. “She admitted it was full of inaccuracies.”

Allred’s letter portrays Fisher as being nervous in Hurd’s presence because of his advances. In contrast, e-mails from Fisher to Hurd show her enthusiastically discussing her job. The messages, also obtained by Bloomberg News, depict her politely inquiring about Hurd’s family and describing him as “fun” to work with.

The eight-page letter from Allred to Hurd portrays a two- year romantic pursuit of Fisher, an actress and former contestant on the reality show “Age of Love.” She worked as a greeter at Hewlett-Packard events around the world. Her job was to introduce key customers to Hurd at the events.

According to Allred’s letter, Hurd, who is married with two daughters, made sexual advances toward Fisher during dinners and other meetings. During an October 2007 visit to her hotel room at the Ritz Carlton in Atlanta, Hurd twice touched Fisher’s breast and asked her to stay in his room for the night, the letter said. Two months later in a hotel room in St. Louis, he embraced her and quickly kissed her on the lips.

‘Major Strings Attached’

At another meeting, Hurd told Fisher he had girlfriends in New York and San Francisco, according to the letter. He also told her that many women were “crazy about” him, including singer Sheryl Crow, the document said. Jay Cooper, a lawyer at Greenberg Traurig LLP who represents Crow, said he’d never heard her name in connection with Hurd.

At a final meeting in Boise, Idaho, in October 2009, Hurd “grabbed and kissed” Fisher, the letter said. The meetings made her nervous and worried about her employment status, according to the document.

“She felt tired, irritated and depressed, sad and mad with the growing unbending realization that her great new job had some major strings attached,” said Allred, who works at Allred Maroko & Goldberg in Los Angeles.

EDS Deal

Hurd also told Fisher of plans to buy technology services company Electronic Data Systems Corp., a deal that was ultimately completed in 2008 for $13.9 billion, according to the letter. During a meeting in Madrid in March 2008, Hurd walked Fisher to an ATM and showed her his checking account balance of more than $1 million to impress her, the document said.

Amy Wintersheimer, an employment attorney for Hurd at the firm Allen Matkins, said in an e-mailed statement that she sought to keep the letter confidential because it is “filled with inaccuracies.”

“The truth is, there never was any sexual harassment, which HP’s investigation confirmed, and there never was any sexual relationship, which Ms. Fisher has confirmed,” Wintersheimer said.

Hewlett-Packard shareholder (HPQ) Ernesto Espinoza sought the letter, along with company books and records, in a suit aimed at investigating possible corporate wrongdoing in conjunction with the payment of Hurd’s severance package of as much as $40 million, according to court papers.

After Hurd received Allred’s letter, he turned it over to Hewlett-Packard’s general counsel. Espinoza’s lawyer has said publicizing the letter would help “air out” details of Hurd’s departure from the company.

This week’s court decision followed Oct. 12 arguments in Dover challenging a ruling in March by Delaware Chancery Court Judge Donald Parsons Jr. that most of the letter should be released.

To contact the reporters on this story: Aaron Ricadela in San Francisco at aricadela@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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North Korea Threatens South, Tells World Expect No Change From Kim Jong Un

By Sangwon Yoon - Dec 31, 2011 8:06 AM GMT+0700

North Korea warned the world not to expect change from the regime under new leader Kim Jong Un and threatened a “roar of revenge” against South Korean President Lee Myung Bak as Kim was appointed head of the army.

Lee had provoked North Korea by raising security alerts and declining to send an official mission to pay condolences after the Dec. 17 death of Kim Jong Il, the National Defense Commission said in a statement carried by the state-run Korean Central News Agency yesterday. The release came a day after North Korea ended a mourning period for Kim’s death.

“The veritable sea of tears shed by the army and people of the DPRK will turn into that of retaliatory fire to burn all the group of traitors to the last one,” the statement said, echoing rhetoric during Kim Jong Il’s rule. “The DPRK will have no dealings with the Lee Myung Bak group of traitors forever.” DPRK refers to the country’s official name, the Democratic People’s Republic of Korea.

Both Kim Jong Un and Lee face leadership tests that could shape their attitude toward engagement. Kim Jong Un needs to cement his grip on power in a country where the United Nations says one-third of the children are physically stunted from a lack of nutrition. Lee and his ruling party, which rolled back the “Sunshine Policy” of engagement with the nuclear-armed North, have dropped in opinion polls ahead of elections next year.

Army Commander

KCNA reported today that Kim Jong Un was appointed supreme commander of the Korean People’s Army, citing a decision taken yesterday at a meeting of the Politburo of the Central Committee of the Workers’ Party of Korea.

“Standing at the helm of the Korean revolution is Kim Jong Un, the only successor Kim Jong Il,” KCNA reported, citing the Politburo’s statement that called on the people to support the new leader.

North Korea must take a “decisive turn in the drive to build the country into an economic giant and improve the people’s standard of living,” the Workers’ Party central committee and Central Military Commission said in a joint statement today, published by KCNA. The power, coal and metal industries must be developed, foreign trade expanded and the capital, Pyongyang, turned into a world class city, they said.

Kim Jong Il made the country into an invincible political and ideological power and a powerful nuclear weapons state, according to the joint statement.

Economic Measures

Kim Jong Un needs to “prove himself in launching his new regime -- and an economic measure would be the most efficient way of doing that,” said Yang Moo Jin, a professor of North Korean politics at the University of North Korean Studies in Seoul yesterday. “What’s more hard-hitting for North Koreans than policies that affect how they’ll be able to put food on the table?”

In his annual address on Jan. 2, Lee will focus on inter- Korean relations, inflation (SKCIYOY) and unemployment, according to a spokesman at Lee’s office who declined to be named, citing government policy.

North Korea’s 2010 gross domestic product was 30 trillion won ($26.5 billion), one-fortieth the size of South Korea’s, according to estimates by the South’s central bank. North Korea’s economy probably shrank in four of the past five years, the Bank of Korea says. Pyongyang doesn’t release GDP data.

Growth to Slow

South Korea’s gross domestic product nearly doubled to 1,173 trillion won ($1 trillion) from 2001 to 2010. The Bank of Korea forecasts that the country’s economic growth will slow to 3.7 percent next year from 3.8 percent this year.

Lee will take advantage of the transition in the North and announce a more conciliatory stance, said Kim Young Yoon of the Seoul-based Korea Institute for National Reunification. The opposition has blamed Lee for escalating tensions, saying his tough stance provoked hostilities that killed 50 South Koreans in 2010.

Lee scaled back the Sunshine Policy implemented by his predecessor, Kim Dae Jung, when he entered office in 2008, saying that Kim Jong Il’s provocative policies shouldn’t be rewarded.

Lee’s approval rating is at 26.9 percent, according to a poll of 3,750 South Koreans conducted Dec. 19-23 by Seoul-based Real Meter. The margin of error was plus or minus 1.6 percentage points.’’

Nuclear Talks

“The current mood in South Korea is to take advantage of the North’s regime change and improve inter-Korean relations,” Kim said. “The easiest way to do that would be to call for high-level meetings to make way for resumed six-party talks,” he said, referring to a dialogue that is aimed at persuading North Korea to relinquish its nuclear-weapons program and includes the U.S., China, Japan and Russia.

South Korea ordered a “low-level” alert after Kim Jong Il’s death was announced and expressed “sympathy” with the North Korean people, while limiting the number of its citizens who could travel to Pyongyang on condolence visits. Lee said the measures were meant to signal that his country wasn’t hostile toward the North, while Pyongyang issued threats of “unpredictable catastrophic consequences” over the South’s restrictions on visits.

Warship Sinking

Tensions on the Korean peninsula erupted into open conflict in March 2010, when 46 South Korean sailors were killed in the sinking of the Cheonan warship. An international panel blamed the attack on North Korea, which has denied the allegations. Eight months later, the North shelled an island in the Yellow Sea, killing four South Koreans.

North Korea, which has twice detonated a nuclear device, has more than 250 long-range artillery installations along the world’s most fortified border in reach of the Seoul area and its 23 million citizens. North Korea and South Korea remain technically at war after their 1950-1953 conflict ended in a cease-fire.

South Korea plans to set up a fund to raise as much as 55 trillion won to pay for the costs of eventual reunification with the North, South Korean Unification Minister Yu Woo Ik said in an October interview. Yu said the cost may be as high as 269 trillion won, or almost a quarter of South Korea’s 2010 gross domestic product.

While North Korea’s statement yesterday was its most belligerent since Kim Jong Il’s death, an attack is unlikely and it is focused mainly on food aid, said Kim Yong Hyun, a professor of North Korean studies at Dongguk University in Seoul.

“They want resumption of six-party talks more than anything because that’s the only way to get aid that is so crucial,” he said.

To contact the reporter on this story: Sangwon Yoon in Seoul at syoon32@bloomberg.net

To contact the editors responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net; John Brinsley at jbrinsley@bloomberg.net

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Verizon Cancels $2 ‘Convenience Fee’ After Backlash

By Alex Sherman - Dec 31, 2011 5:20 AM GMT+0700

Verizon Wireless (VZ), the largest U.S. mobile carrier, canceled a planned $2 “convenience fee” for online and phone bill payments after a backlash from consumers and scrutiny from the Federal Communications Commission.

The company reversed its decision after just one day in response to customer feedback, according to a statement on its website today. Basking Ridge, New Jersey-based Verizon Wireless had announced the fee yesterday for users who make single bill payments on a month-to-month basis online or by phone.

Customers began criticizing Verizon Wireless on Twitter and Web forums after the company disclosed the fee, with some setting up online petitions and calling for consumers to boycott the carrier. The FCC today said it was “concerned” about the plan and that it would investigate.

“Companies used to think they could get away with putting out unpopular policies,” said Brianna Cayo Cotter, a spokeswoman for Change.org, a website that lets people start online campaigns. “Today, hundreds of thousands of people can mobilize and change policies in a matter of hours. That’s what we’re seeing with Verizon.”

Verizon Wireless customers started more than 35 petitions on Change.org against the fee, including one that was joined by more than 95,000 people within hours.

Last month, a consumer backlash led to Bank of America Corp. canceling a $5-per-month fee for debit card users. In that case, too, consumers used online campaigns to pressure the company.

‘Predatory Practices’

“When consumers speak against what they see as predatory practices, quite often they can help change them,” said Joe Ridout, consumer services manager at Consumer Action, a consumer-rights group. “Verizon responding as soon as they did is a point in their favor. It prevented people from actually being charged and it showed they were listening.”

Verizon Wireless said yesterday it planned to add the fee to address costs it incurs for processing the single payments. The charge wouldn’t have applied to customers who enroll in automatic payment plans, use electronic checks, pay at a Verizon Wireless store, send in checks or pay through online banking websites.

“The best path forward is to encourage customers to take advantage of the best and most efficient options, eliminating the need to institute the fee at this time,” Dan Mead, Verizon Wireless chief executive officer, said in today’s statement.

Verizon Communications Inc., which co-owns the wireless business with Vodafone Group Plc, rose (VZ) 0.2 percent to $40.12 at the close in New York. The stock advanced 12 percent this year.

Verizon Wireless is driving up profit at parent Verizon Communications as it gains users for Apple Inc.’s iPhone and Google Inc. Android devices, which let users browse the Web, watch video and stream music. Third-quarter net income at New York-based Verizon Communications doubled to $1.38 billion from $659 million a year earlier.

To contact the reporter on this story: Alex Sherman in New York at asherman6@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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