Moneyline News Hour

Dow Falls 110.61 to 10,413.79; Nasdaq Dives 72.05 to 3,168.49

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

ANNOUNCER: This is MONEYLINE. Reporting tonight from New York, Stuart Varney.

STUART VARNEY, CNN ANCHOR: Good evening, everyone, and welcome to MONEYLINE. Willow is off tonight.

Our top story: A wild Wednesday puts tech investors through the ringer all over again. Three pivotal technology stocks plummeted today: Lucent and Motorola, after issuing profit warnings, and Yahoo! on worries that its revenue is held hostage to a collapsing sector -- that is, the small dot.coms. That led to a tumultuous trading day, not just on the Nasdaq.

That index tumbled 137 points early on to well below its lowest close of the year. That's when the action really began. The Nasdaq rebounded, then it relapsed, but ended down 72 at 31.68. The volume was very strong today: 2.3 billion shares changed hands.

The Dow had a hairy session as well, falling as much as 173 points. It closed at 10,413, down 173 -- at its low, that is. Big Board volume also strong, nearly 1.4 billion shares.

The S&P 500, that fell more than 22 points, and that is more than 1 1/2 percent.

The most active Big Board issue? Lucent, plunging more than 10 points or over 32 percent from its 4:00 p.m. close of yesterday. And that was on volume that was more than four times its daily average.

We have extensive market coverage with Terry Keenan at the Big Board, John Metaxas at the Nasdaq, and beginning with Allan Chernoff here in our studios -- Allan?

ALLAN CHERNOFF, CNN CORRESPONDENT: Thank you, Stuart.

Well, talk about a losing streak: The Nasdaq composite has fallen 15 of the past 17 sessions, down 25 percent -- that is one quarter of its value -- since September 1st. Believe it or not, there are signs we're nearing an end to this slow torture. But that was hard to see today as the market took yet another tumble.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: What time was that at? CHERNOFF (voice-over): Concern is turning to high anxiety among investors, especially in Nasdaq tech stocks. Though Yahoo! reported better-than-expected earnings, the stock was crushed on worries about its reliance on dot.com advertising. Fiber optic companies like JDS Uniphase plunged on fears triggered by Lucent's earnings warning. And virtually all Internet-related names took a pounding as confidence in the sector continues to dissolve.

Lycos and VeriSign joined the list of Nasdaq big-cap losers. Intel has lost more than half its valve in the past six weeks.

NED RILEY, STATE STREET GLOBAL ADVISORS: What we're doing is adjusting to a new level of valuation, and I do think that analysts and portfolio managers are taking a much more realistic appraisal of what they've got in their portfolios.

CHERNOFF: The Nasdaq composite dipped to 3,151 at the open. Buyers stepped in, but the rebound failed, and late in the morning, the composite was down 137 points at 3,103, just above the current support level. The composite regrouped, closing at 3,168, down 72 on the day: 3,100 is key support for the Nasdaq, because that's the low hit in late May, the level technical analysts had argued the Nasdaq had to test before it could resume climbing.

AL GOLDMAN, A.G. EDWARDS: But the market -- and this is the important point -- is deeply oversold. We have the preconditions in place to resume the primary up-trend, and it could be from this level.

CHERNOFF: The biggest stock on the Nasdaq, Cisco Systems, also is bouncing off its key support level of 50, established in May and in late January.

STEVE SHOBIN, AMERICAP ADVISERS: All of the averages -- the Dow, the S&P, the Nasdaq -- are all in major support areas, levels at which buyers have generated confidence in the past. But usually at a strong bottom you will nick, you will undercut at least marginally an important level.

CHERNOFF: Other signs of hope for the Nasdaq, a big increase in bearish sentiment. At the Chicago Board Options Exchange, the total number of puts actually outnumbered calls, a rare occurrence indicating pessimism.

(END VIDEOTAPE)

CHERNOFF: Market analysts agree complacency has now been shaken out of the market. But to be confident of a bottom, technicians say we now need capitulation: investors so fearful, they're dumping stocks and afraid to buy.

That hasn't happened yet, but if it does, you'll hear market pundits say we're hitting bottom. Keep this in mind, however: The technicians are not always right. They're often late in calling a bottom -- Stuart.

VARNEY: Late in calling a bottom. All right, Allan Chernoff. CHERNOFF: 20/20 hindsight.

VARNEY: Yes, indeed. Allan Chernoff, thanks very much.

Well, last night, we told you that Motorola announced third- quarter profits that met expectations. But today, the company said it will not in the future: warning that the fourth quarter, the full year 2000 and 2001 would disappoint. The culprits: the weak euro, tax issues and the most disturbing of all: weakness in worldwide mobile phone shipments.

Motorola's stock plunged nearly five points, nearly 18 1/2 percent, hitting a new 52-week low. That's the worst one-day sell-off for Motorola in nearly five years, according to Ned Davis Research. The volume was more than five times the daily average.

Well, Motorola was second only to Lucent as the day's most active Big Board issue. Let's go now to Terry Keenan at the Big Board with a look at some of the other big-names movers, of which there were plenty -- Terry?

TERRY KEENAN, CNN CORRESPONDENT: That's right, a very busy day here. And I hate to say it, Stuart, but some traders say this was one of the worst sessions we've seen here in a while. In addition to a palpable disappointment that the Nasdaq couldn't hold on to its brief stay in positive territory, from a technical perspective the market looked pretty sick.

We saw selling pretty much across the board in stocks that you would sell if you thought that the economy was going to slow down significantly: in other words, technology, retailers and the economically sensitive issues -- and so they did.

Let's look at some of the Dow movers in addition to that big loss in Intel that Allan just told you about: Hewlett-Packard to the down side, off 3 7/8. AT&T, a multi-year low on that stock, down another 1 5/8. Wal-Mart was down 1 1/16: concerns after Nordstrom announced that it would post a loss for the quarter.

The drug and consumer nondurables were the standouts, attracting some buying interest. Of course, they would hold up better if the economy slows down. Johnson & Johnson having a good day, back up to 96. Proctor & Gamble also adding one and change.

Now, here's one of the technical indicators that traders didn't like: the market breadth, the worst we've seen in weeks: 2 to 1 in favor of decliners while volume was the strongest that we've seen since early summer.

All in all, an afternoon that some fund managers told me had the potential to be a turning point, but I guess it wasn't meant to be -- Stuart.

VARNEY: Terry, I don't want to change a line of thought here, but has anybody been mentioning the Fed and blaming the Fed, which, at its last meeting, did not back off its inflation alert? KEENAN: That's right, and of course, that did cast a pall over the market when that news came out a couple of weeks ago. People are talking about the Fed -- they're mostly talking about the tight credit conditions that we're seeing in the junk bond market, in some bank lending. And it may sound kind of esoteric, but it is having an impact on a lot of stocks here.

Look at some of the dollar volume movers: Lucent, as you said, leading the way, incredible volume in that stock, 100 million shares changing hands.

Here's where the Fed may have some impact in the credit markets: Morgan Stanley Dean Witter reversing a downward trend today, up 3 1/4. Of course, there's been a lot of speculation about its junk bond losses, and finally, the company came out and said today that the effective markdowns in their high-yield portfolio will only have a small impact on earnings in the quarter: about 4 cents a share. That works out to 430 million, and people took that as a positive, and that stock turned around along with some of the brokers.

EMC also managing a fractional gain, one of the few tech stocks to do so. You already told us about Motorola and the problems there, while Nortel was up 15/16. The thinking there is that it might benefit from some of Lucent's problems -- Stuart.

VARNEY: But Terry, you did say that a hundred million Lucent shares traded on this one day. Is that correct?

KEENAN: Yes, incredible volume in that stock. And of course, you know, what we saw was, if you thought after-hours was bad, the selling the next day even worse in this market.

VARNEY: Terry Keenan at the Big Board, thanks.

Well, the Nasdaq today pared its losses significantly by the time trading was over, but that hardly undoes the damage of the past two weeks. The index today ended lower for the fifth-straight session. And listen to this: Over the last nine sessions, it has retreated every day except one.

John Metaxas live at the Nasdaq marketsite with more on what was behind the drama today -- John.

JOHN METAXAS, CNN CORRESPONDENT: Well, Stuart, regarding that issue about finding a bottom in the Nasdaq, one factor which may affect -- I asked a technical analyst today -- is the extraordinary volume we had today on the down side and then in the snap-back rally: 2.3 billion shares changing hands. This was the fourth-most active session ever at the Nasdaq composite.

One possible catalyst for turning out -- turning up the Nasdaq from the bottom today was the fact that at the bottom the semiconductor index had corrected a full 50 percent from its March highs. It's almost as if it were a signal for some investors to come in and buy the chips on the dips, but then that sector petered out along with the rest of the markets, and the gains quickly turned into losses once again at the close.

There are concerns in this market about future earnings, and that was most evident in the Internet sector today after that lower guidance from Yahoo!; their outlook for revenue growth, perhaps, not as strong, amid rising expenses.

The Goldman Sachs Internet index down 8 1/2 percent on the day, and huge losses, as you can see, in the Internet stocks. Amazon down 8 percent today; eBay down 8 percent; Inktomi down 13 percent on the day; Priceline down nearly 20 percent on the day, it's lost 90 percent since the beginning of the year. DoubleClick down 14 percent on the day.

Perhaps, though, there needs to be a change of fundamental sentiment, a view that earnings, next year, will be better before these technical indicators of a bottom can have any meaning -- Stuart.

VARNEY: Now that is John Metaxas at the Nasdaq, thanks John.

Still to come on MONEYLINE, we're going to check in with Amanda Lang for all the after-the-bell market action, including a late report from Advanced Micro Devices.

Plus, General Electric meets the street, but yet it gets caught in a market down draft. Lucent's chief executive, Richard McGinn under fire again. Can this troubled company get back in Wall Street's good graces, and what happens to Mr. McGinn if it doesn't?

And what to buy when tech stocks head south. We'll ask equity strategist Doug Cliggott where he's putting his investors' money when MONEYLINE returns.

(COMMERCIAL BREAK)

VARNEY: General Electric met street expectations for the third quarter, but the shares fell with the rest of the markets, a loss of 1 1/2 points today. The company did earn 32 cents a share, and that is 20 percent higher than a year ago. Revenues hit a record $32 billion in just that quarter fueled by strength in its NBC network and its power systems unit which makes turbines. Well, shares of the Dow component have risen nearly 50 percent since the 52-week low and are trading just below their record high.

After the bell tonight, several more technology companies came out with their earnings. Let's go to Amanda Lang with the very latest on that -- Amanda.

AMANDA LANG, CNN CORRESPONDENT: Finally some good news for you, Stuart, tonight. Advance Micro, No. 2 chip-maker, beat the street by 2 cents, and particularly good news: its chip sales for PCs were strong. The stock was up 1 3/4 after the bell at 23 1/2 on 300,000 shares.

And Applied Micro Circuits was gaining almost eight to 175 5/8. It also beat the street by about 3 cents; revenue is up 156 percent. And Redback networks is falling. There may be some confusion about its net incomes, the top line shows a loss of 250, but look behind that headline number and the pro forma is a 2 cent profit and the street was expecting a two cent loss -- Stuart.

VARNEY: All right; Amanda Lang.

Now, you've been hearing a lot over the past few days about the Nasdaq closing in on its low for the year. But one look at a 52-week chart shows that it is also closing in on its lowest levels since November of last year.

The index erasing the gains in the incredible rally that peaked this past March.

Joining us now: a strategist who was cautious on techs before they started to fall, Doug Cliggott of J.P. Morgan.

Doug, welcome back.

DOUG CLIGGOTT, J.P. MORGAN: Thank you, Stuart.

VARNEY: Let's just look at tech stocks for a second. Do you think it's time to get in now, with these much lower prices, and do some buying? Is it time to do that yet?

CLIGGOTT: We don't think so. If you look at the broad Nasdaq composite, it's roughly 4,400 stocks in it. That's still trading in excess of 100 times current earnings, or...

VARNEY: Wait, wait, wait, wait a second: The average Nasdaq stock is trading at over 100 times this year's earnings?

CLIGGOTT: Well, if you take the composite as a whole...

VARNEY: Yes.

CLIGGOTT: ... market-weight the companies, wrap it together, the composite is trading at about 112 times earnings on today's close.

VARNEY: So what devaluations have to get down before to you would say, "There's value in them there tech stocks"?

CLIGGOTT: Well, it tends to be relative game, Stuart. And when we look at the broader S&P 500, that's trading at about 27 times earnings right now. So you could make the comparison, the typical technology stock is roughly four times as expensive as the non- technology stock. Our technology stocks growth rates, four times faster than everything else.

We think the answer is no. And so we think there's far better opportunities away from technology, even though we are down year-to- date.

VARNEY: You have got two areas, I think, which you like in particular: energy and health care. Let's start with energy: no decline in oil prices, energy prices, right?

CLIGGOTT: Well, there might be some softening in crude oil prices six or nine months from now. But given where prices are right now, what's going on with natural gas prices, you're just seeing an explosion of earnings in the energy sector. And that will give stock prices a very nice cushion, we think.

VARNEY: Health care, you like that too. But there's particular risk there, isn't there?

CLIGGOTT: There is. But I think the essential ingredient in health care is: We need it. If the economy slows, health care earnings will stay very robust. And we think that's a safe haven.

VARNEY: Bottom line for today, though is: The selling ain't stopped yet on tech stocks, correct?

CLIGGOTT: We don't think so, Stuart.

VARNEY: Doug Cliggott, J.P. Morgan, thanks for joining us.

CLIGGOTT: Thank you.

VARNEY: Up next on MONEYLINE: The European Union clears the merger between America Online and Time Warner with just one provision, but it may not pass U.S. scrutiny quite as easily. We'll go back to that.

(COMMERCIAL BREAK) VARNEY: In tonight's MONEYLINE profile: Richard McGinn, chief executive of Lucent Technologies. A history major in college and an adrenaline junkie, McGinn mountain-climbs and competes in "iron man" events. And with Lucent's stock plummeting, he'll need all the strength he can get. Still, McGinn seems to know what's he up against. Once he likened Lucent to a teenaged driver who pulls down good grades, but -- quote -- "from time to time, backs into a pole and cracks a taillight. That's because we're immature" -- end quote.

And MONEYLINE continues in a moment.

(COMMERCIAL BREAK)

VARNEY: Just look at the big names that hit new lows today: AT&T, Gateway, Global Crossing, Lucent Technologies and Motorola -- all of them at new lows.

A major win today for America Online and Time Warner, parent network -- parent company of this network. The European Union has granted approval for their megamerger as long as AOL agrees to sever ties with another media giant. But the stocks were under pressure today, America Online dropping about 2 3/4 and Time Warner fell about 3 3/4.

As the deal continues to face U.S. scrutiny, Susan Lisovicz reports. (BEGIN VIDEOTAPE)

SUSAN LISOVICZ (voice-over): Dominance of the music industry was the big sticking point in clearing AOL-Time Warner's merger by European regulators. First, Time Warner, which owns the giant Warner Music label, dropped its plans for a separate joint venture with Britain's EMI, which would have created a colossal player in the industry.

But the European Union, which earlier this year blocked the proposed Worldcom-Sprint marriage and two other big mergers, wanted another concession. The green light came only after AOL, the world's largest Internet service provider, agreed to sever its ties with the German media powerhouse Bertelsmann.

MARIO MONI, EUROPEAN UNION: This severing of the links between AOL-Time Warner and Bertelsmann will prevent AOL from having access to Europe's leading source of music publishing rights -- therefore, will eliminate the risk of dominance in the emerging markets for online delivery of music over the Internet and software-based music players.

LISOVICZ: Back in the United States, the Federal Trade Commission had no comment about AOL-Time Warner clearance in Europe. But U.S. regulators have already stated their fears that competitors would not have open access to CNN parent Time Warner's coveted high- speed access lines and AOL's Instant Messaging System.

RICHARD STEUER, KAYE, SCHOLER: Things like set-top boxes and who's going to have access to the broadband of cable networks. In addition, AT&T has an interest in Time Warner's cable operations. And that's going to be addressed by the Federal Trade Commission as well.

(END VIDEOTAPE)

LISOVICZ: Antitrust lawyers familiar with the process say that the European Union and the Federal Trade Commission are typically in close contact on these types of cross-border merger approvals, and that the European decision could speed things up in the U.S.

The lawyers say if the FTC grants approval, it would likely involve some sort of consent decree on the critical issue of open access on Time Warner's cable systems and AOL's Instant Messaging System -- Stuart.

VARNEY: And that is Susan Lisovicz reporting. Thank you, Susan.

Let's check how those stocks have fared. Year-to-date, shares of America Online have actually dropped nearly 28 percent while Time- Warner has climbed nearly 13 percent in 2000. The merger, by the way, was announced on January 11th.

In tonight's "Tech Watch," another Web site closing its virtual doors. Amazon.com and Sotheby's will shut down their joint auction site, Sothebys.Amazon.com, and that's going to happen within the next month. Amazon will now add a link to Sotheby's Web site on its auction page and get annual cash payments in return. The news comes amid recent criticism of Amazon's massive diversification plan.

Here's how the two companies fared today: Amazon shed more than 2 1/2 points, way down today. Sotheby's, though, gained a half-point.

Still to come, it is round two for George W. Bush and Al Gore as they face off tonight in the second presidential debate. That story in the "MONEYLINE News Digest" after the break.

(COMMERCIAL BREAK)

VARNEY: Turning to news outside the world of business, the second presidential debate is just hours away. Joie Chen joins us from the CNN Center with the "MONEYLINE News Digest" -- Joie.

JOIE CHEN, CNN ANCHOR: Stuart, thanks. With the elections now less than a month away, the two presidential candidates meet tonight for the second of their three debates. This will be very different from last Tuesday when George W. Bush and Al Gore first faced off. Instead of standing behind podiums, the candidates will be seated at a table, the talk-show format favored by Bush. Aides say the men will adjust their debating styles as well.

The race remains as tight as it has ever been. The CNN/"USA Today"/Gallup tracking poll shows Gore and Bush each drawing 45 percent now.

In the Middle East, U.N. Secretary-General Kofi Annan reports a possible breakthrough in his efforts to stop two weeks of clashes between Palestinians and Israelis. His spokesman said Israeli Prime Minister Ehud Barak and Palestinian leader Yasser Arafat have agreed to hold a meeting with top Israeli, Palestinian and U.S. security officials perhaps as early as tomorrow.

The announcement came after Annan met separately today with Barak and Arafat. The U.N. leader goes to Beirut tomorrow to try to secure the release of three Israeli soldiers captured by Muslim guerrillas.

In Washington, the House of Representatives today approved a plan to ease some aspects of the U.S. embargo against Cuba. The legislation, part of a larger agricultural bill, would allow food and medicine sales to Cuba. But the bill bars any U.S. financing of those sales and also toughens travel restrictions. The Senate takes up the bill tomorrow.

At the Kennedy Space Center in Florida, another attempt to get the 100th space shuttle mission off the ground. It has been delayed three times in just a week because of weather and technical problems. Lift-off is scheduled for 7:17 Eastern tonight.

That's a look at some of the stories we're watching. Stay with CNN for full debate coverage -- Stuart.

VARNEY: That's Joie Chen. Coming up in our next half hour, Lucent shares battered in trading today after issuing yet another earnings warning. Will its troubles lead to a boardroom shake-up? We'll have that for you in a moment.

(COMMERCIAL BREAK)

ANNOUNCER: MONEYLINE continues. Here again, Stuart Varney.

VARNEY: In tonight's headlines: big names, big disappointments and even bigger losses. Profit jitters engulf some of last year's highest flyers, as Lucent, Yahoo! and Motorola take their place in the losers' circle on Wall Street.

So what's a tech investor to do? We ask some of the top names in the business: money manager Roger McNamee and fund manager Dennis McKechnie; they'll answer the pivotal question: have we hit bottom?

Plus, an unprecedented decision from a California court and yet another dent in Ford's reputation: a judge ordering the recall of millions of vehicles.

But first: more on tonight's top story, whiplash on Wall Street. The Nasdaq stages a dramatic comeback after a tumultuous morning which pushed the index below its closing low of the year. But just when you thought it was safe to venture back in, techs tumble again in the final hour of trading.

At its lows of the day, the composite index was down more than 137 points, rattled by bombshells from three tech bellwethers. Lucent issued yet another fourth quarter profit warning. Motorola met third quarter estimates, but warned about its own fourth quarter and profits for the next two years as well. Adding to the jitters, more concerns about advertising dollars at Yahoo!.

Take a look at the wild session: The Nasdaq posted a triple-digit loss within the first two hours of trading. It recovered by mid- afternoon, only to fall again in the last hour, down 72 at the close, ending at 3,168.

The Dow industrials were down as much as 173 points early in session before that index staged its own recovery by mid-afternoon. But, like the Nasdaq, the Dow fell back once again to finish down more than 110 at 10,413. The S&P 500 index also finishing off it's lows of the day, down more than 22 to around 1,364.

Two stocks that did not recover, Yahoo! down more than 17 points to a new 52-week low; and Motorola off nearly five to 21 7/16, also a 52-week low.

But the most active stock on the Big Board was Lucent Technologies. Investors slashed more than $33 billion off of it's market value after the telecom equipment maker issued its third profit warning of the year. Late yesterday, Lucent said fourth quarter profits would fall far short of already reduced estimates, and that next year's earnings would also disappoint. Investors growing increasingly impatient with chief executive Richard McGinn and his plans to turn around this troubled company. Lucent shares tumbled more than $10 to a new two-year low.

Steve Young joins us now with more on this development -- Steve.

STEVE YOUNG, CNN CORRESPONDENT: Stuart, just about everybody was talking about the perils of the second-most widely held stock and the outlook for its embattled CEO.

(BEGIN VIDEOTAPE)

YOUNG (voice-over): January 6, Lucent issues a profit warning. July 20, a second warning. And yesterday Lucent warns for yet a third time.

What's going on? Analysts say that the company has trouble forecasting and meeting customer demand, and something worse: It doesn't have timely data on it's own business units.

KENNETH LEON, ABN AMRO: They do not have adequate reporting systems that can tell them on a given day how business is being generated in each of their areas. Cisco can do that, Nortel can do that.

YOUNG: Cisco automatically takes its own pulse daily, sending critical business data over the Internet to key Cisco executives worldwide.

MICHAEL ASHBY, CISCO SYSTEMS: We have an executive information system which actually gets us bookings information, shipping information, revenue information, all the way down to gross margin, which is updated -- I think it's every three hours at the present moment.

YOUNG: Lucent's jam also reflects its decision to sell equipment to a flood of new, now financially troubled, local telephone competitors. Analysts say these local exchanges, known as C-LECs, will continue to be squeezed as the regional bell phone companies enter the local phone business, too.

Analysts say fixing Lucent could take another year to 18 months.

MICHAEL NEIBERG, CHASE H&Q: What they have is a shortage of products that are in growing areas. And I think as soon as they can spur Bell Labs into rolling out some timely products, I think they can get out of this funk that they're in.

YOUNG: Lucent chairman Richard McGinn, who's been president since '96 and CEO since '97, is under immense pressure now. Some fund managers are calling for his head.

(END VIDEOTAPE)

YOUNG: But most analysts believe he still has the backing of Lucent's eight-member board. Five members have been directors since the company was spun off from AT&T in 1996. Lucent says McGinn held a conference call this morning with 400 of his senior executives. He told them he has no intention of resigning, period -- Stuart.

VARNEY: He is in a tough position, but then again, so are many CEOs at this point, aren't they?

YOUNG: His back is against it.

YOUNG: Steve Young, thank you.

Well, as Steve just reported, the smaller telecom companies, many of which are customers of Lucent, have been at the center of a borrowing frenzy in the high-yield bond market. And as the prices of those bonds have dropped, telecom underwriters, like Morgan Stanley Dean Witter have also taken a hit. But there is an even deeper layer to this story which involves a certain type of telecom.

Terry Keenan goes behind the numbers from the New York Stock Exchange.

Terry, what do you have?

KEENAN: Well, Stuart, believe it or not, these are all connected. A lot of people have never heard of C-LECs, or these, so- called, Competitive Local Carriers, but these companies are the missing piece of a puzzle that has caused stock and bond investors tens of billions of dollars in recent weeks.

We took just one company and put it under the microscope. It's called ICG Communications. Until recently, the Colorado firm had grand plans of building out a vast telecom network, and with good reason: ICG scored an impressive group of investors headed by Shelby Bryan, a fixture on the New York social scene.

The company attracted more than $750 million in stock investments from the likes of John Malone's Liberty Media, and the buyout firm of Hicks Muse earlier this year. But that's not all. Along the way, ICG also wracked up a mountain of debt, selling nearly $2 billion in junk bonds, most of them underwritten by Morgan Stanley. It also borrowed hundreds of millions of dollars from its suppliers; Lucent and Cisco were the biggest there.

So all was well until this summer. As the losses piled up, ICG's stock value was virtually wiped out, plunging from close to $40 to less than 50 cents today, leaving stock and bond holders holding the bag.

Well, Lucent cited credit problems with companies like ICG for its latest earnings shortfall and on Wall Street, Morgan Stanley saw a quarter of its market value wiped out in recent days. Until this afternoon, when the company tried to calm Wall Street nerves by saying its junk bond losses should be fairly limited; Morgan Stanley Dean Witter saying that those losses should come in about 4 cents a share in the current quarter, and that would work out to about less than $30 million. Still, there is billions of dollars in the bad bonds and loans out there, and Wall Street continues to wonder where it will surface next -- Stuart.

VARNEY: Terry, what do you say to the theory this is all the ripple effect from the dot-com crash of April, that this ripple is going through the technology sector all the way through, down the line? What do you say to that?

KEENAN: Well, perhaps it's some of that. It's also a ripple effect of the Federal Reserve really clamping down on credit. As you can tell from the amount of money that ICG could borrow, there was money all over the place for anyone who had an idea.

Not any more after six interest rate increases from the Fed.

VARNEY: But, you know, that's money that's been wiped out in the dot-com sector, it simply isn't there any more.

KEENAN: Yes; and that, of course, is hurting Yahoo! and it's also hurting Lucent and some of those other companies who depended on the dot-coms for business.

VARNEY: That's behind the numbers with Terry Keenan; thanks Terry.

Still to come on MONEYLINE, more on this wild Wednesday, and the terrible 2000. Is there any hope that tech stocks will end the year back in black?

We've put together a market roundtable to answer the question. When we come back: money manager Roger McNamee and fund manager Dennis McKechnie, stay with us.

(COMMERCIAL BREAK)

VARNEY: In tonight's MONEYLINE "Focus": these turbulent techs. Any hopes this summer that the Nasdaq would end the year in positive territory have all but evaporated. On the heels of intense profit jitters, the tech-heavy index has collapsed in the past month-and-a- half.

In fact, since the beginning of September, the Nasdaq is now down nearly 25 percent. Obvious question: Has it hit bottom? Or is there more room to fall? Joining us now to help answer that question, from Stanford, California: money manager, Roger McNamee, and here in our studios in New York, the fund manager of the PIMCO Innovation Fund, Dennis McKechnie.

Gentlemen, welcome to MONEYLINE. Good to have you with us.

DENNIS MCKECHNIE, PIMCO INNOVATION FUNDS: Hi, good to be here.

VARNEY: So the obvious question for to you, Dennis: The tech stock, generally, did we hit bottom today? Or are we headed to Nasdaq 2000? MCKECHNIE: I would say we are certainly not headed to 2000, but it's hard to follow bottom; 3,200 was a test that we did back in May. And so there is some hope that maybe we will retest and hold this level. I would say that the environment is still somewhat murky. And so it is too early to call a bottom. There are a lot of cross- currents that need to get worked through.

I guess one thing that works in a positive sense is the fact that the pre-announcement season has been very, very vigorous. And that may be at the end. We had pre-earnings after the close today. And all three were quite good. And so maybe we are getting into the regularly scheduled. That could help turn the market around.

VARNEY: Same question for you, Roger: Have we hit bottom at this point?

ROGER MCNAMEE, INTEGRAL CAPITAL PARTNERS: Stuart, I am not going to try to predict the future, but I think I will tell you exactly how we are behaving. We are making the assumption that between now and the election -- there's still a fair amount of uncertainty in the market -- but that by the early part of November, we should have seen a lot of very positive earnings reports from technology companies.

We will know who the next president will be. And I think a lot of uncertainty will be gone. The thing I take most comfort from right now is that the sentiment is so incredibly negative in the tech sector, it is hard to imagine it getting much worse. I worry a lot about external events. What's going on in the Middle East is very troubling. I worry a lot about the Fed's behavior and some of the things that started months ago that are now just showing up in the economy.

We do not have the same fundamental tailwind behind tech stocks that we had earlier in the year, or for the past four or five years. And that's very troubling. I think you have to be much more selective today than we have had to be at any time in the last five or six years.

VARNEY: Let's go back to Dennis for a second, because I want to ask you about three specific stocks. Do you see value at Intel at 36, Apple below 20, and Yahoo! in the mid-60s? Do you see value in any of those three stocks?

MCKECHNIE: You know, we're not -- we don't practice value as such. We need the fundamentals to change. And for all three companies, fundamentals had been strong quite before, and now they have turned south for the moment. A lot of that does have to do with the economy. It felt like the economy peaked probably in January or February.

And as that decelerates, all these companies have a massive headwind where they once had a tailwind. And so the fundamentals actually have to change. We are not going to buy a stock just because the price has gone down. We need the fundamentals to improve.

VARNEY: Gentlemen stay where you are, please. We're going to take a commercial break and rejoin you in just a moment. We'll be back.

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(INTERRUPTED FOR BREAKING NEWS)

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VARNEY: ... but would not comment on any details. Bristol-Myers shares rose fractionally despite todays news, but Global Crossing fell nearly 2 1/2 points, hitting a new 52-week low.

Congress has responded in rapid fashion to the Firestone tire troubles. A bill which passed the Senate 20 minutes ago and the House late last night would give the agency in charge of highway safety the power to impose criminal penalties. Under the statute, auto industry executives could go to prison for withholding safety information from the government.

The auto industry says the legislation would lead to confrontation, not cooperation, with regulators. Consumer groups oppose the plan, saying loopholes weaken its effectiveness.

Tonight, another blow to Ford's already battered reputation. Today, a California judge ordered a recall of as many as 1.7 million Ford cars and trucks for a potentially dangerous ignition system flaw. This is the first time a U.S. judge has ever ordered an automobile recall.

Casey Wian has more on the judge's decision and what it means for the No. 2 automaker in the U.S.

(BEGIN VIDEOTAPE)

CASEY WIAN, CNN CORRESPONDENT (voice-over): Some of the most popular cars on the American road throughout the 1980s and '90s -- models like Ford's Taurus, Mustang and Thunderbird -- according to a California judge contain a dangerous condition that could cause an engine stall.

Judge Michael Ballachey ordered up to 1.7 million Fords in California off the road, ruling for consumers in a class action lawsuit.

PAUL NELSON, PLAINTIFF ATTORNEY: He got the fact that Ford had a serious safety defect in millions of cars, that it concealed it from NHTSA through five investigations.

WIAN: The suit claims this electronic ignition module was mounted too close to the engine block, causing potential failure when the engine gets hot. Ford maintains the vehicles are safe.

RICHARD WARMER, FORD ATTORNEY: The record in this case does not establish the existence of a safety problem, and we will demonstrate that in due course in the appellate process.

WIAN: But the judge had stern words for Ford lawyers. JUDGE MICHAEL BALLACHEY, ALAMEDA SUPERIOR COURT: I mean, I just think it defies common sense to suggest that if you take your car out on the freeway, go 70 miles an hour, and turn the motor off, and tell me that that's safe.

WIAN: Ford says Ballachey lacks the legal authority to order a recall. Should his ruling stand, the judge has appointed a referee to determine how the recall would be implemented and how many cars it would cover.

Coming on the heels of the Firestone tire controversy, the decision pushed Ford's stock down a dollar to near a three-year low. Analysts predict minimal near-term financial impact on Ford and applaud the decision to fight.

EFAIM LEVY, STANDARD AND POOR'S: If they believe they're innocent, they have every reason and every right to protest and to appeal. Eventually, the court of consumer opinion is where the final verdict will be.

WIAN: Legal experts say the recall raises troubling issues that could affect the balance of power between branches of the federal government. They say by taking an action normally reserved for lawmakers or regulators, the judge is implying those agencies are not doing their jobs.

(on camera): Ford's ads used to proclaim that at Ford "Quality is job one." Job one now may be convincing congressional investigators that the tire and ignition controversies do not represent a broader pattern of failure to disclose known defects.

Casey Wian, CNN Financial News, Los Angeles.

(END VIDEOTAPE)

VARNEY: Now there's word tonight of yet another box office bomb: not quite the kind you may be thinking of, though. General Cinemas is seeking Chapter 11 bankruptcy protection. It's the latest in a string of theater chains hurt by overexpansion.

The company is closing about 50 theaters with more than 350 screens around the country. Stock in the parent company, GC Companies, today plunged 1 1/2 points. That is more than 50 percent. It's down 96 percent from the high.

Up next, "Ahead of the Curve": some of what you need to know tonight before the markets open again tomorrow. You're watching MONEYLINE.

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VARNEY: Take a look at some of what could move the markets tomorrow. Third-quarter earnings are expected from computer maker Gateway. Investors looking for 46 cents a share, up from 35 cents a year ago. Also reporting tomorrow, General Motors, Juniper Networks and PMC-Sierra. And keep an eye on the share price of Oracle, due to split its stock 2-for-1 tomorrow.

And also watch Ciena. The company meets with analysts tomorrow in Baltimore.

And of course, to stay ahead of the markets tune in to "AHEAD OF THE CURVE" tomorrow morning at 5:00 a.m. Eastern here on CNN.

Just a quick programming note for you: Tomorrow on MONEYLINE, we'll be joined by the president-elect of Mexico, Vicente Fox. From immigration and free trade, to oil prices and economic stability in Mexico, find out what Vicente Fox has planned tomorrow on MONEYLINE at 6:30 Eastern.

And finally, tonight, a day of victory for two U.S. economists, grabbing the highest honor in their field. Daniel McFadden at Berkeley and James Heckman at the University of Chicago captured the Nobel Prize for economics. Both developed ways to study the economic choices people make and why they make them. When cameras caught up with McFadden and his wife, they were still in a state of shock. Look at this.

(BEGIN VIDEO CLIP)

DANIEL MCFADDEN, NOBEL PRIZE WINNER: Well, I picked up the phone. It was 2:30 a.m. I was sound asleep, and I heard this people calling from Sweden with this information. I was shocked.

QUESTION: Did you believe it, Beverly?

BEVERLEE MCFADDEN: I certainly did.

D. MCFADDEN: I think she woke up a lot faster than I did.

B. MCFADDEN: I was bouncing up and down on the bed, trying to muffle the shrieks.

(END VIDEO CLIP)

VARNEY: Well, we're hoping McFadden and Heckman won't fall prey to what could be called the Nobel curse: when good theories go bad in real-life practice. Now last year's winner, Robert Mundell, took the prize for laying the intellectual groundwork for the euro. The common currency has plunged so much that world banks had to intervene last month.

And who could forget 1997's laureates: Robert Merton and Myron Scholes. Their theories helped form the cornerstone for Long Term Capital, the hedge fund that nearly went belly-up, threatening the entire global economy.

That is MONEYLINE. I'm Stuart Varney in New York.

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