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Lou Dobbs Moneyline
Dow Climbs 402.63 to 9,918.05; Nasdaq Rockets 146.20 to 1,785.00; Positive News From Dell Rallies Investors
Aired April 05, 2001 - 18:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WILLOW BAY, CNN ANCHOR: Can you say, rebound? Today, at least, investors can. This is MONEYLINE for April 5th, 2001.
A stampede of bulls on Wall Street, the Dow and Nasdaq soar to one of the best sessions in history for stocks. Helping to spark the rally: welcome news from Dell Computer. Michael Dell says that his company's prospects aren't as bleak as elsewhere in the tech sector.
Plus: President Bush offers prayers and regrets for a lost Chinese pilot, but no sign of a breakthrough in winning the release of that U.S. spy plane and its crew.
ANNOUNCER: This is MONEYLINE. Reporting tonight from New York: Willow Bay.
BAY: Hello, everyone and welcome to MONEYLINE. We begin tonight with Thursday thunder on Wall Street, it was one for the record books. A rally so strong, it almost made investors forget about the pain in their portfolios.
Propelling today's turnaround? Positive news from stalwarts of the old economy and the tech sector. The Dow soared 402 points, its second highest point rise in Dow history, to close at 9,918. Volume? More than 1.3 billion shares.
That rise extended to the broader market, the S&P surging 48 points, or more than 4 percent. But the biggest winner, hands down, the Nasdaq, up 146 points, or nearly 9 percent to 1,785. That was the third biggest rise, in percentage terms, in Nasdaq history.
But before you get carried away, the biggest rally came earlier this year, a 14 percent surge on January 3rd. And -- well, we know what's happened since then.
We have extensive coverage of this dramatic day, beginning with Kitty Pilgrim, who's standing outside the Nasdaq marketsite with a look at what sent stocks on tear today -- Kitty.
KITTY PILGRIM, CNN CORRESPONDENT: Willow, it was a relief rally in every sense of the term. Just one day ago, the Nasdaq hit its lowest close since October of 1998, and the Dow took a one-day walk in the woods with the bears. Well, today, it was a totally different story. (BEGIN VIDEOTAPE)
PILGRIM (voice-over): A flurry of good news sent the market into a buying frenzy. Dell started the upward momentum by reassuring investors it will meet first-quarter forecasts. Then Alcoa, the first Dow component to report, beat consensus estimates with first-quarter earnings up 16 percent. On top of that, Yahoo! got the coveted "buy" rating from Lehman Brothers, all a buy signal to the market that has been depressed.
WALT CZAICKI, BANC OF AMERICA CAPITAL MANAGEMENT: Certain things about battered market rallies are is that they can be quite powerful, and this can take us for quite a ride here in the near-term, because we have come from a condition where the markets were really oversold on the near-term basis. You can make a good argument for that.
PILGRIM: Big Board winners included EMC, IBM, AOL, parent company of this network, Texas Instruments, and Alcoa. The Nasdaq was on fire with the stock that started it all, Dell, followed by Intel, Applied Materials and Microsoft.
CHARLES WHITE, AVATAR ASSOCIATES: The fact that Dell now says that they're not going to disappoint becomes the catalyst for everybody, but they say it with the caveat that says, listen, there's still four weeks left in the quarter, so we think we're going to make it, but we're still not sure.
PILGRIM: Even those battered Internet stocks were big winners after Yahoo!'s upgrade, eBay and Doubleclick posting on strong gains.
Investors clearly were looking to buy, yet some on Wall Street urge caution, as the quarterly results are just starting to come in.
(END VIDEOTAPE)
PILGRIM: Earnings were very much the focus today, and tomorrow the spotlight will be back on the Fed. Before the open of the market, we have the March employment report, expected at 4.3 percent.
John Metaxas will join us from inside the Nasdaq marketsite a little later in the show, but for now, back to you, Willow.
BAY: Kitty, a little bit of relief, we will take it.
As Kitty mentioned, Dell helped set the day's stellar tone when the PC maker met with Wall Street analysts, and assured them that earnings remain on track. Technology correspondent Bruce Francis was inside the meeting, and he has this report.
(BEGIN VIDEOTAPE)
BRUCE FRANCIS, CNN TECHNOLOGY CORRESPONDENT (voice-over): Dell doesn't have any positive financial projections beyond the current quarter, a disappointment to press and analysts gathered for a semiannual briefing. But in many ways it is the same old Dell, gaining market share profitably, not something, its founder and CEO says, competitors can claim.
MICHAEL DELL, CEO, DELL COMPUTER: We feel quite confident that we will continue to grow much faster than our industry, and that we will be able to maintain significant profitability in almost any series of competitive scenarios.
FRANCIS: Dell doesn't even believe the high-tech business is in a recession.
DELL: In fact, I would suggest that if you took out the effect of the telecom and the dot-com, you would see a continuing gradual growth in the use of information technology products.
FRANCIS: Influential analyst Dan Niles says that the weak economy could actually help a low-cost manufacturer like Dell.
DAN NILES, LEHMAN BROTHERS: Now, with the overall macroeconomic environment being more difficult, companies are really watching the dollars they spend. So, price to performance is more important, and that really plays to Dell's gain.
FRANCIS: While Dell shares are still less than half of their peak last year, they are up more than 45 percent from where they started 2001. Dell is not expected to report its quarterly results until May 10th. When it does, the company says it will meet its financial targets of earnings of 17 cents a share and $8 billion in revenue, figures that were lowered earlier this year.
Some analysts, though, are still concerned, saying that as Dell cuts prices, it will also cut into profit margins.
WALTER WINNITZKI, JP MORGAN CHASE: There is a cost for them, and the cost is that it comes with lower margins, and that in my opinion, represents a real change from Dell's model over the past 10 years, and it raises some questions.
(END VIDEOTAPE)
FRANCIS: Well, one thing Dell doesn't have to worry about: a lot of spare equipment coming out of those failed dot-coms. Dell says that it didn't sell to those group of companies before, so it has less of those computers selling now on eBay -- Willow.
BAY: Bruce, a little more good news, we'll take it. Bruce Francis, thanks.
Today, investors looked past their worries about corporate profits, but that calm may not last. After the bell, Sycamore Networks and Extreme Networks became the latest companies to warn of weakness, both saying that they will lose money this quarter.
Sycamore stock in after hours is off 2 3/4. It also announced job cuts. And Extreme Networks fell $2.15 after the bell. So, of course, the question is, can stocks build on today's gains, or was this a one-session wonder?
So, we are going to put that question to Brian Finnerty, head of Nasdaq trading at C.E. Unterberg Towbin. Brian, how bad was the bad news after the bell tonight? What do you think that means tomorrow?
BRIAN FINNERTY, C.E. UNTERBERG TOWBIN: Tough question, Willow. But I got to tell you, the Sycamore and Extreme was worse than bad, it was a bit of a disaster. And it shows us that -- I was all optimistic at the...
BAY: Why was it a big disaster?
FINNERTY: Well, it shows us there's going to be a lot of pricing pressure in the optical sector here. And you know, over the course of the day, those stocks didn't act really super great. Semiconductors acted very, very well. A lot of other groups acted well. Dell led those PC stocks a lot higher. JDS Uniphase was only up 2. Lucent was up a little bit...
BAY: What does that tell you?
FINNERTY: Well, it says that there's still ways to go in the optical sector. There's still a glut, there's still big inventories, and there's going to be pricing pressure to get rid of that stuff that's on the shelves.
BAY: I think a ways to go is probably the operative term, all the way around. But OK -- so, terrible news out of those two. What about the Dow news? How positive was it, or was it simply the fact that it was the first glimmer of hope that we've seen?
FINNERTY: Well here -- I think the market was -- we pushed it so hard, it had to spring up. And then, I think the Dell news came up, almost coincident with the fact that the market -- the Dell wasn't super great. They said, hey guys, this quarter is OK, we don't know what's going to happen down the road, and we're not going to tell you, because we don't know.
Again, that visibility problem going forward, and Dell is also going to try to capture market share, and how are they going to do it? Cutting prices. That's going to hurt their margins going forward as well.
We've got price problems everywhere, least in the PC and the semiconductor area, most with the fiber-optics and the telecommunication areas.
BAY: Market watchers were citing a little bit of good news from good analysts' comments about Yahoo! and eBay.
FINNERTY: Well, Lehman Brothers came out and recommended Yahoo! today, which was a little bit of a shock, and we got some great news there because those stocks have really been left for dead, and really don't see much of a sign of life. But I guess they have been overdone on the downside. Well, having settled this bad stuff that I said, I was very encouraged by the action today. I really was. And you know, all I heard before the market opens, well, when do we sell, don't buy this opening, it will be too high, they'll pull back, we'll buy them lower. They never got lower, and some serious money plowed into the market mid-day and late in the day, so that's a healthy sign.
BAY: A healthy sign that there is pent up demand for buying?
FINNERTY: That there is a pent up demand for buying, and there's a lot of cash out there, and there is a lot more out there, that when it wants to come in, it will.
BAY: Brian Finnerty, we'll take a good day when we get them, because...
FINNERTY: Absolutely.
BAY: Thanks.
Still to come on MONEYLINE: President Bush expresses regret over a lost Chinese pilot. We'll get the latest on diplomatic efforts aimed at easing tensions over that U.S. spy plane and its crew.
And we'll talk to one influential senator at the heart of the tax debate: Democrat John Breaux of Louisiana. Plus, we'll hear from one of Wall Street's boldest bulls, Ed Kerschner, on why this may be one of the best stock buying opportunities ever.
(COMMERCIAL BREAK)
BAY: Diplomatic efforts picked up steam today to resolve the standoff over a U.S. spy plane and its crew detained in China. Senior White House correspondent John King has the latest -- John.
JOHN KING, CNN WHITE HOUSE CORRESPONDENT: Well, Willow, indications tonight from a variety of sources throughout the administration that perhaps some progress imminent in this 5-day-old standoff.
Some indications, but no guarantees, we're told by senior administration officials, that U.S. diplomats on the ground in China should be able to get a second meeting with those 24 crew members. It is now Friday morning in China. U.S. officials say the next few hours will put to the test what they believe to be progress in this private diplomacy. Again, five days ago, now, that EP-3 made the emergency landing in China.
For the first time, U.S. officials say they're speaking to their Chinese counterparts instead of shouting at each other, as one person put it tonight. And out in public today, the president of the United States, who has said in the past his first and foremost goal is to win the release of that crew, adopted a much more conciliatory tone. That part of the administration's effort to engineer an diplomatic break through.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I regret that a Chinese pilot is missing and I regret one of the airplanes is lost. And our prayers go out to the pilot, his family. Our prayers are also with our own servicemen and women, and they need to come home.
(END VIDEO CLIP)
KING: A statement of regret there from the president, but still the administration insisting there will be no apology from the United States. And while they won't acknowledge so publicly, senior administration sources telling CNN that in those discussions with the Chinese, the U.S. side explaining one reason it won't apologize, by showing evidence, the U.S. side says, that Chinese planes in the past have flown dangerously close to those U.S. surveillance planes.
(BEGIN VIDEO CLIP)
ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: The reason we have said -- what the United States government has said what it said about the apology is based on information that we have, and I'm not going to go beyond that.
(END VIDEO CLIP)
KING: China's ambassador, once again at the State Department today. Again, officials on both sides, in the United States and China, saying there are some positive developments out of this diplomacy, but as day six of this standoff dawns in China, administration officials acknowledging that the American public will grow restless if it doesn't see fruit from that diplomacy quite soon -- Willow.
BAY: John King from the White House tonight. Thank you.
President Bush today also came out in defense of his budget one day after the Senate voted to trim the size of the president's $1.6 trillion tax cut.
Jonathan Karl has an update from Capitol Hill -- Jonathan.
JONATHAN KARL, CNN CORRESPONDENT: Well, Willow, Republicans are fighting furiously here to revive the president's tax cut here in the Senate, even as the Senate's No. 2 Republican acknowledges that as the Senate approaches its vote on the president's budget outline tomorrow, Democrats seem to have the momentum.
(BEGIN VIDEO CLIP)
SEN. DON NICKLES (R-OK), ASSISTANT MAJORITY LEADER: Maybe the people that want to tax and spend are on a roll. I looked at the amendments that have been offered the last couple of days. My friends on the Democrat side, they've offered, one, two, three, four, five amendments to significantly have higher taxes and higher spending. They won on one of them yesterday. I consider that a setback and I hope to repair that damage before we're done, by tomorrow night.
(END VIDEO CLIP)
KARL: But as Democrats pointing to that vote last night where $450 billion was slashed out of the president's tax cut, say that the president's tax cut, as originally proposed, is simply dead here in the Senate.
(BEGIN VIDEO CLIP)
SEN. CHUCK SCHUMER (D), NEW YORK: The bottom line is this, the president shot too high. He put too much of the surplus into tax cuts. And while it would be impossible for anyone to predict how that's going to work out, I would bet my bottom dollar that the 1.6 trillion, or we call it 2.6, when you add in all the other factors, but the amount the president proposed will not stand.
(END VIDEO CLIP)
KARL: With that vote expected tomorrow, time is certainly running out on the White House. The White House simply does not have the votes yet to pass that tax cut because two Republicans have defected. With those two Republican defections, White House lobbyists up here and Republican leaders are furiously trying to win over at least one or two Democrats to support the president's budget. They know they may have to compromise to get that, to make that happen.
And Willow, even once that is done and we have this final vote tomorrow on the budget outline, that doesn't guarantee a tax cut, because this is simply a nonbinding outline. The Senate won't get around to a final vote on the actual tax cut until May at the earliest.
Willow, back to you.
BAY: So, Jon, what are the -- Jonathan, what are the odds that we do get that final vote tomorrow? I know you say that the Republicans are struggling to shore up votes, to bring up that Harken Amendment again. What are their chances at this point?
KARL: We fully expect to get a final vote tomorrow unless something unforeseen happens. And what Republicans are hoping to do is come around with one, what they call a wraparound amendment, which will essentially throw everything out that they've talked about, and put on something new, something they can get 51 votes.
And they're looking at a couple of Democrats, especially Ben Nelson of Nebraska, and Max Cleland of Georgia, to come on board. Those Democrats have said they will not come on board at $1.6 trillion, the size of the president's tax cut as proposed, but they believe that if they can come down a little bit, the White House talking about maybe coming down to 1.4 trillion, that they can get this done.
BAY: Jonathan Karl, it'll get interesting there once again tomorrow. Thank you.
Coming up, we'll have more on the Senate tax debate from a man at the center of the action, Louisiana Democrat John Breaux.
(COMMERCIAL BREAK)
BAY: My next guest has emerged as a key player, a coalition- builder in the U.S. Senate. At the moment, he is giving the White House a serious headache as it tries to push through the president's tax plan. Senator John Breaux of Louisiana joins us now from Washington. Senator, welcome.
SEN. JOHN BREAUX (D), LOUISIANA: Willow, how are you?
BAY: Good. Now, you have supported Republicans in their proposals in the past, that's why they like you so much. Why not support the president on this $1.6 trillion tax plan, why is the compromise somewhere around 1.2 trillion worth the battle?
BREAUX: Willow, I think people in Washington have to quit thinking of the Congress as the Final Four or the Super Bowl. It doesn't always have to be a winner and loser. There's a win, win situation that can come out of this debate. I want the president to be a winner, I would like the Congress to be a winner. And more importantly, the American people. The better thing to do is get a budget where you can get 60, 65 votes on a reasonable tax cuts and everybody wins.
BAY: Do you think you have the votes for this compromise number?
BREAUX: No, I don't. I think what I offered is a $1.25 trillion tax cut across the board for all Americans, not that it was going to pass, but that it would indicate there's sufficient support for what I offered to indicate that neither the existing Democratic proposal nor the president's proposal has sufficient votes to pass, which indicates they have to work with both sides and they need to sit down and negotiate, not try to pick off one member from this side and one member from that side with promises.
But to try to actually negotiate something that would be a real resounding victory. For instance, if you had a have a $1.3 trillion tax cut, where 65 or more members of the Senate voted for it. That would be a real victory for everyone. It would show the culture of Washington has been changed, which is what I think President Bush got elected on.
BAY: Will we have a -- will American taxpayers have a sense tomorrow night heading into the weekend of the numbers that you all have arrived at?
BREAUX: Well, I think they'll have an indication. I think, obviously, this is something that whatever number passes, the United States Senate has to go to conference with the House of Representatives. So, I think you'd have a range of a tax cut between the House and the Senate, knowing that we're going to have to negotiate with our colleagues over on the house side.
I think the good news is we'll ultimately come up with an across- the-board tax cut over a trillion dollars for all Americans. That's enough good work in that type of a package where everybody should say the American people won for at change.
BAY: I'd like to shift gears, if I may, Senator, and just ask you a question about the standoff with China right now. There seems to be increased sentiment in Congress that, if this standoff continues, there will be increasing support for selling those high- tech arms to Taiwan and in fact, there maybe some sort of reconsideration of China's trade status. Are things heating up that much in Congress?
BREAUX: I don't think so, Willow. And I don't think it should. I think Congress right now should basically stay out of it. I think that we should have the president and his negotiating team, Secretary of State Colin Powell, his national security advisers, they're the ones and ambassador should be involved in handling this delicate situation.
You can't have 535 members of Congress, each trying to act as a secretary of state in this very tense and very difficult situation. I think it would be a huge mistake. And I don't see it happening right now. You'll have some members of Congress which will introduce legislation and bills and resolutions, disapproving what happened.
And we're all concerned. All of us disapprove of them holding our plane and our airmen, but we should not use this as an occasion to legislate hastily, let our negotiators and President Bush do the negotiations.
BAY: Of course, we do hope to see that situation resolved very quickly. Senator Breaux, thank you for your time this evening.
BREAUX: Thank you.
BAY: Moving to tonight's tech watch: a closer look at the sectors leading today's tech resurgence, the fact that computer and Internet stocks gained on positive news about Dell and Yahoo! may not surprise you, but the actual numbers when you take a look at them are impressive.
The Goldman Sachs Internet Index up more than 15 percent. The Philadelphia Semiconductor Index jumped almost 13 percent. The Nasdaq Computer Index added more than 11 percent, followed closely by the Amex Networking Index. That's not bad for one day of gains.
Coming up on MONEYLINE, we'll have much more on this breathtaking day for stocks, and we'll talk to one Wall Street veteran who says, now is the time to buy.
Plus, wireless, the theme of Comdex, we'll head to Chicago and Jeff Flock, who will give us a special look at this year's convention.
(COMMERCIAL BREAK)
BAY: After four days of keynote speakers and tech displays, Comdex 2001 is winding down in Chicago. Jeff Flock gives us the highlights.
(BEGIN VIDEOTAPE)
JEFF FLOCK, CNN CORRESPONDENT (voice-over): Not a lot of glitz, glamour and gadgets at the spring Comdex, but if there is a theme, Willow, it is wireless. For example, the pocket spider: this is a modem that attaches to your PDA. Gives you essentially the entire Internet experience on your PDA. We have CNNFN called up right now. The cool thing about this too, is it has its own battery, which means you don't suck the battery dry on your PDA.
Speaking of PDA, here's another one interesting. This one runs on the Linux operating system, which essentially labels, they brag, for you to hack the operating system, change it around as you want it.
Also, speaking of wireless, this is the Metro web pad, this is a prototype right now. But essentially will be available at some point and if you're in the right city, it will enable you to take this, pick it up, carry it around the house to the bathroom or out to the Starbucks.
It looks like it gives you pretty much everything, and in fact it does, With a little stylus on here, you get a keyboard up and you could do pretty much everything wirelessly. One of the themes at the spring Comdex. Willow, that's the latest. Back to you.
BAY: Thanks, Jeff. Coming up on MONEYLINE, more on today's market fireworks, as the Dow and Nasdaq skyrocket to one of their best performances on record.
(COMMERCIAL BREAK)
BAY: In tonight's headlines: After days of red arrows on Wall Street, both the Dow and Nasdaq soar, setting records along the way. Helping fuel the rally, reassuring news out of Dell computer. The box maker surging 13.5 percent after saying it will hit sales and earnings targets for the first quarter. And in tonight's workplace 2001, the Jetsons meet the office cubicle. We'll take a look at what the workspace of the future may look like.
But first, more on the staggering rally on Wall Street. A solid session across the board with 29 out of 30 Dow components finishing in the plus column. The index posted its second best point gain ever, climbing 402 points, or more than 4 percent to finish at 9,918. Some of the biggest gainers on the day: IBM, Microsoft, 3M, United Technologies and Hewlett Packard.
A solid session for the broader market as well. The S&P 500 gaining 48 points, or more than 4 percent to close at 1,151. But it was the Nasdaq that took Wall Street by storm, posting the third- largest percentage gain ever. The index up a whopping 9 percent, or 146 points, to 1,785. Dell Computer played a big part in sparking today's rally. We head now to the Nasdaq marketsite in Times Square.
John Metaxas joins us with all the details -- John.
JOHN METAXAS, CNN CORRESPONDENT: Willow, this is a market that has been made very nervous by earnings warnings. It was deeply oversold, so when Dell Computer came out and said that they would meet their number the reaction was elation. Yes, there was some short covering, but some long-term buyers did step in. That accounted for the third best day ever in Nasdaq history, up 146 points.
Dell Computer leading the market higher, up nearly 14 percent on the day. Even though Dell refused to say what their yearly results would be because they can't quite tell. It's an issue of visibility. Wall Street concentrated on the positive, however. Yahoo! also a positive, the stock up 24 percent on the day.
The analyst of Lehman Brothers, Holly Becker, upping her rating to a buy, saying there's downside protection in terms of a possible take over target in Yahoo! Anything computer related surged today. The chips were fantastic. Intel up 13 percent on the day. And, in fact, all the big caps up strongly. Cisco Systems gaining 9 percent. Cisco had announced they were discontinuing a router line, and that was a positive for the likes of Ciena.
Ciena surging 10 percent on the day. S.G. Cowan said Ciena's environment is less competitive because of the Cisco news. As we look at the 6 day chart you see the sharp gain today, but take it back to last Friday, and for the week the market is down 55 points, or 3 percent. So a very nice turn around today, but a lot of work has to be done before analysts are willing to proclaim this bear market over -- Willow.
BAY: You've got that right. John Metaxas at the Nasdaq. Thanks.
Just when investors started to celebrate, more earnings warnings came after the closing bell today. Jen Rogers is at Instinet with after hours trading action -- Jen.
JEN ROGERS, CNN CORRESPONDENT: Willow, the mood changed here very quickly. A groan went out on the trading floor when we heard from Sycamore Networks. They came out warning for the third quarter, saying they look to report a loss, not the profit that the street was looking for. They also said they're cutting 13 percent of their work force citing slower than expected customer orders. The stock fell over 3. It pared back those losses. Now it's and down 2 7/16, at 6 5/8.
Now we had some light trading in a couple of Big Board stocks. Among those, Agilent. Agilent falling more than $3. The company coming out and lowering revenue guidance for the second quarter, also, cutting employee pay temporarily by 10 percent. This, in order to avoid across the board lay-offs. Another Dow mover, Philip Morris up 42 cents here, at 46.65 after the bell. There was a favorable ruling for the tobacco industry in a case involving a former flight attendant and second-hand smoke.
But a rather bumpy session here -- Willow.
BAY: OK, Jen, we will not hold all that negative news against you. Thanks. At the end of January, UBS Warburg strategist, Ed Kerschner, told investors: "Don't fight the Fed, don't fight a cheap stock market," and said the markets offered one of the best buying opportunities ever. Since then, even with today's gains, investors have hacked hundreds of points off the Dow and the S&P, about 1,000 points off the Nasdaq. So today, when I spoke with Ed Kerschner, I asked him if he was wrong.
(BEGIN VIDEOTAPE)
ED KERSCHNER, UBS WARBURG: We've been wrong. We've been wrong for -- look, in October we 10 percent undervalued and by December, January, as you said, we were 20 percent undervalued. Now we even have 25-30 percent under valued. Markets sometimes -- actually, markets are always inefficiently priced, and you have to realize that when they get cheaper they are not telling you something's different, they're telling you they're cheaper.
Just like when they went up, the new economy stocks, you know, you were right to get out of them, last December or January or February or March. The fact that they were going up was not telling you that there was something new, they were telling you they were mispriced. So, yes you have got to be willing to be wrong for, sometimes months at a time, to be right overtime.
BAY: Are you holding true to you're outlook -- the S&P by the end 2001 at, what is it, 1,715?
KERSCHNER: 1,835 year end '02 is a target number that we can see 18 months from now. I feel very comfortable with that. Can we hit the 1,715 in between? Absolutely. Do I have a high conviction? No. A lot higher from here? Yes; 1835 year end '02, you might not be surprised to actually see us talking with that level at that point.
BAY: We keep hearing this over and over and over again. Not a lot of visibility. You're essentially saying the same thing.
KERSCHNER: There never was visibility. It's one of the lies. Last year if a company said we'll earn a dollar and an analyst would whisper we'll earn $1.10, and then they earned $1.20, we applauded the fact that neither the management nor the analyst really had a clue what they were going to earn.
So now, here we are a year later, the company says well, we could earn a buck, and the analyst says well maybe they'll only make 90 cents and we earn 80 cents, so we curse the fact that neither the analyst nor the management knew what they could earn. We don't really know single points. There's a lot of variations around a trend.
What good analysts do, they say look, we could go above it, below it, but here's what the normal is. That's what good managements do. They understand where they will be over 3 to 5 years, actually a lot better than where they'll be over the next three to six months.
BAY: So you think the market is undervalued. You think this is a buying opportunity. Does that mean that your advice to investors is go ahead, take a look, do a little shopping?
KERSCHNER: I think to say that the market is undervalued and this is a buying opportunity is an understatement. The market is extraordinarily undervalued. This is a sensational buying opportunity, among the best I've seen in 25 years in the business. Don't try to time it. You can't catch bottoms. When it gets very cheap you buy it. We want to buy it now. We wanted to buy it three months ago, but now it's even cheaper. That doesn't mean that we're wrong, it means the opportunity is better.
BAY: What does that mean, then, or what can you tell us then about where people should be buying, where they should be looking?
KERSCHNER: You want to buy where a lot of the damage is done the most but the companies are for real. A lot of - the "E" economy -- the new "E" metrics, they were invalid, the dot-com world. But along with them a lot of good companies, the Ciscos the Hewlett Packards, the Motorolas the Intels, I want to be there.
I also want to be in the consumer. The consumer's fine. We got good numbers our of Bed Bath and Beyond, companies like Home Depot. I mean, these are places you want to be, good growth, established companies, historical track records that say they know how to make money. They'll make money as things get better over the next 12 to 18 months.
BAY: Ed Kerschner, thank you as always.
KERSCHNER: You're welcome.
(END VIDEOTAPE)
BAY: Coming up on MONEYLINE: Political struggle versus big business. How will the recent stand-off between the United States and China impact trade? We'll explore that and a whole lot more next, with the former ambassador to China, James Sasser.
(COMMERCIAL BREAK)
BAY: The standoff continues between the United States and China. Today, President Bush offered his regrets for the loss of a Chinese pilot, although he did stop short of an apology.
But trade between the two nations has only continues to grow, and as Casey Wian reports, that is despite some tough diplomatic and political situations over the last few years..
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice-over): In 1997, Congress and the Justice Department investigate allegations that China tried to influence the 1996 U.S. presidential election. That year, U.S. trade with China grows 19 percent to $75 billion.
1998: Loral is investigated for transferring military missile technology to China. Trade with China grows another 13 percent to $85 billion.
1999: Los Alamos weapons lab scientist Wen Ho Lee is arrested and jailed on suspicion of spying for China. He later pleads guilty to a single count of mishandling national security information. Later that year, an American B-2 mistakenly bombs the Chinese embassy in Yugoslavia, killing three. U.S.-China trade jumps again to $95 billion.
2000: Chinese authorities sentence a U.S. resident investigating alleged human rights abuses against the Falun Gong spiritual group to three years in prison for spying. Trade with China explodes, passing the $100 billion mark for the first time.
2001: a U.S. spy plane collides with a Chinese fighter jet and lands on Chinese soil. The plane and two dozen crew members are detained. China is expected to remain the United States' fourth- largest trading partner.
MARK GROOMBRIDGE, CATO INSTITUTE: I would say this is probably the second most serious incident we've had with China, the first being obviously the accidental bombing of the embassy in Belgrade during the Kosovo crisis. So this is a mid level earthquake, but I don't think it'll have a serious long-term economic impact on our bilateral relationship.
WIAN: That may be because despite political rhetoric by hard- liners on both sides, China and the United States are becoming more economically dependent on each other. Twenty years ago, Mega Toys imported less than 10 percent of its product from China; now, 90 percent.
CHARLIE WOO, CEO, MEGA TOYS: We have seen many ups and downs in the U.S.-China relationship in the past 10 years. But in the long run, the business concerns always win out.
WIAN: Take another example: the case of the China ocean shipping company COSCO. The port of Long Beach, California was planning to build a big container terminal to support COSCO's expansion plans on the site of a closed naval base. But congressional conservatives worried about Chinese spies convinced Congress to block the deal, though even that's not likely to stop COSCO's growth.
(on camera): COSCO, for now, remains at its original terminal at the Long Beach port. But because another shipping line will soon be moving, a terminal that's three times as large will be available for COSCO's expansion. And since it's not on federal land, Congress appears powerless to stop it.
(voice-over): Even when political troubles threaten business interests, capitalism does often prevail.
Casey Wian, CNN Financial News, Long Beach, California.
(END VIDEOTAPE)
BAY: After reading the tea leaves so successfully for us on Tuesday, we asked the former ambassador to China, James Sasser, to join us once again this evening. Ambassador, welcome back.
JAMES SASSER, FORMER U.S. AMBASSADOR TO CHINA: Thank you.
BAY: Tonight on his trip to Chile, President Jiang Zamen, when asked, repeated his call for an apology from the U.S. Now today, as we know, President Bush expressed regrets but stopped short of apologizing. Will China's president accept anything less than an apology?
SASSER: Well, it depends on how you define an apology. At some point, the China may simply say that the expression or regrets are enough, and they will say to -- in China that the Americans have apologized.
I do believe that we may be seeing some light now at the end of the tunnel. A number of Chinese diplomats that I have seen and talked to -- they are more cheerful today. They are more accommodating. And I think this may mean that, perhaps, we may be seeing the end of this in the not-too-distant future, but I emphasize "may."
BAY: Well, that's interesting, because John King, our correspondent at the White House, tonight reported that he had been hearing things like "progress is imminent." What is going on that, as you say, is making these folks seem a little bit cheerier?
SASSER: Well, I think that a number of initiatives have come out of our State Department. I think Secretary Colin Powell, delivering a letter, which was to go to Vice Premier Qichen who visited here just a week-and-a-half ago, and who is really the architect of Chinese foreign policy, particularly as far as the United States is concerned.
I think that letter contained some new initiatives. And so -- all of this, I think, gives us some hope, and the fact that there have been positive statements from the Chinese to the effect they approved of this statement of regret by the secretary of State and also by the president of the United States.
BAY: What do you read into Jiang Zamen's trip out of the country? There are two schools of thought here. One that it's a negative, and it makes it tougher to secure the release of those servicemen. The other is a positive, that you know, if he's out of the country, he does in fact, expects this to be resolved. What's your take?
SASSER: That's difficult. Yeah, that's a very difficult question to answer. Initially, I was disturbed because I know that he will have to sign off on this decision when it's made. But also, this trip has been planned for a long, long time. And the Chinese always stick to their plans, unless something -- very grave situation arises, and obviously they don't categorize this as that kind of a situation.
I would rather him be in China, but I think the situation can be resolved with him out of China, with him signing off on it before it's done.
BAY: Ambassador Sasser, we hope you are right, and we thank you for joining us this evening.
SASSER: Thank you very much.
BAY: Up next on MONEYLINE: golf, the latest nexus of business and sports. A look at the Masters, next.
(COMMERCIAL BREAK)
BAY: In tonight's "Sector Report": golf. One of the most storied tournaments in sports, the Masters, started today in Augusta, with some of the most famous faces in golf on the green. Tickets to the event sold for $4,000 a piece, and some go for up to $15,000.
Looking at some stock market plays at the golf sphere: Nike, of course, it's making serious inroads in golf thanks to a five-year, $100 million contract with Tiger Woods. Fortune Brands, maker of the best-selling Titleist balls, trolled up one billion in golf equipment sales in 2000, and signed up last year's Masters champion, Vijay Singh. And Calloway, the world's number one maker of golf clubs, including the Big Bertha, counts Colin Montgomery among its devotees.
So far this year, Calloway and Fortune Brands are up more than 12 percent, while Nike is down about 30 percent. MONEYLINE will be right back.
(COMMERCIAL BREAK)
BAY: In today's corporate headlines: Suiza foods, the nation's largest dairy processor, is buying Dean Foods for $1.5 billion in cash and stock. The combination would control more than 30 percent of the U.S. milk market. Both stocks gained on the news.
Two not-guilty pleas in the Cendant fraud case: Walter Forbes, former CEO, and Kirk Shelton, former vice chairman, both charged with accounting fraud that led to billions in losses for Cendant. A tentative trial date is set for March 2002.
And, effective immediately, Winstar Communications is firing 2,000 employees, or 44 percent of its work force. The news comes just hours after the telecom giant Qwest confirmed it has no intention of acquiring Winstar.
For those keeping score, a study released today said U.S. firms announced nearly 163,000 layoffs in March, and almost 407,000 so far this year.
Also today, Vivendi's Universal Music and Sony Music teamed up for an on-line music service called Duet. That will be available by subscription over Yahoo!.
Earlier, CNNfn caught up with Vivendi boss Jean-Marie Messier, who said that Napster, which got into trouble for copyright infringement, was no longer the only name in Web music.
(BEGIN VIDEO CLIP) JEAN-MARIE MESSIER, CEO, VIVENDI UNIVERSAL: Jets is ready to license and to make affiliate agreements with any on-line platforms which respect the artist's rights and copyrights, and which has a secure technology. We are just waiting for Napster to achieve that.
(END VIDEO CLIP)
BAY: Vivendi stock today rose nearly 2.
In tonight's "Workplace 2001": the evolving work space. Susan Lisovicz visits an exhibit at New York's Museum of Modern Art to give us a glimpse into the future.
(BEGIN VIDEOTAPE)
SUSAN LISOVICZ, CNN CORRESPONDENT (voice-over): There is the bed in business, in which the pillows multi-task as keyboards and speakers, the vending machine that dispenses seeds enhancing creativity and concentration. And there is the cafeteria-slash- boardroom.
UNIDENTIFIED FEMALE: The digital place mat gives access to the World-Wide Web.
LISOVICZ: These are prototypes of the future workplace as displayed at New York's Museum of Modern Art. Ergonomically-correct tools are but a minor theme in the exhibit "Workspheres." Ada Tolla says the lack of privacy in the workplace was one reason for the module her studio calls Inspi-retainer (ph).
ADA TOLLA, DESIGNER, LOT/EK: You can go from a very isolated position in which you are by yourself working to a joined position, where a team of people can work together and collaborate and share information and share images.
LISOVICZ (on camera): Workspheres takes the position that while work determines our lives, in the future, the way we live may help shape the way we work. That means designers had to examine some of the most common trends of the 21st century: working at home, working from the road, and working in the age of the corporate cubicle.
(voice-over): In personal skies, the worker can personalize a communal workspace by dialing up a specific ceiling, while the chair assumes the characteristics of the person sitting in it.
But perhaps the most profound change in the modern workplace is that work can go anywhere.
HANI RASHID, COLUMBIA UNIVERSITY: The work sphere has become our kind of -- our environment that we carry with us everywhere we go. In fact, we turn our airplane seats into work environments, we bring our work home with us, we, in fact, are immersed in our work sphere.
LISOVICZ: And that blurring boundary between work and life has created new problems. PAULA ANTONELLI, CURATOR, WORKSPHERES: There's a sense of inadequacy or incapability of organizing one's life. That's why one of commissions in particular was devoted to having a new way to schedule appointments, and to schedule life.
LISOVICZ: Which is why some designs in Worksphere employ a low- tech device, a door for fatigued workers to get away from it all.
Susan Lisovicz, CNN Financial News, New York.
(END VIDEOTAPE)
BAY: Up next, "Ahead of the Curve." Stay with us.
(COMMERCIAL BREAK)
BAY: Taking a look at some of what could move the markets tomorrow, the March employment report. The jobless rate is expected to rise to 4.3 percent with 58,000 new jobs added to the nation's payrolls.
Staggering gains in the stock market today. Two weeks ago, our financial editor Myron Kandel called a market bottom. He joins us now with Brian Finnerty of C.E. Unterberg, Towbin.
Gentlemen, big day tomorrow.
FINNERTY: I think tomorrow's a key day, Willow, especially on the heels of this big rally we had today. You know, you mentioned 4.3 percent unemployment. Just prior to that, you mentioned 407,000 layoffs so far this year. (UNINTELLIGIBLE) That's a lot of layoffs. I have to believe this number's going to be higher that 4.3 percent.
BAY: Thank you for listening and taking notes. We love that.
I wrote them down. But that's a lot of layoffs!
BAY: Do you think that number is going to surprise folks by coming in on the upside, and then what happens?
MYRON KANDEL, CNN FINANCIAL EDITOR: Well, then, I think the market will react in two ways. One is they'll say, this means if it comes in higher, as Brian says, and that's a good possibility, that this will put pressure on the Fed to cut interest rates.
FINNERTY: So bad news will be good news, you're saying. Which is the way of Wall Street.
KANDEL: But, the other hand, they might say, well, that makes the economy worse than we thought it was, and therefore that's bad news and will mean increased pressure on corporate earnings.
FINNERTY: So then bad is bad. So, see, the market can't have it both ways. What I think is going to happen tomorrow is the bad news will come out. Some of the bulls will say, maybe the Fed will cut right now. The Fed -- I don't think the Fed's going to cut until the May 15th meeting. That sends the market back down tomorrow, and that might be the dip that you buy.
(CROSSTALK)
BAY: OK. You disagree? Or you have to save that for tomorrow? OK.
That is MONEYLINE for this Thursday. I'm Willow Bay. Good night from New York. "CROSSFIRE" is next.
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