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Lou Dobbs Moneyline

Dow Advances 91.32 to 10,593.72; Nasdaq Declines 11.82 to 2,148.72; Outlook for Manufacturing Improving

Aired July 02, 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.
LOU DOBBS, CNN ANCHOR: Tonight, a gain in the Dow Jones industrials on word that manufacturing is improving. G.E.-Honeywell devolves into an utter fiasco with just hours to go before European Union commissioners vote. Primedia becomes one of America's biggest magazine publishers, buying EMAP's U.S. titles at a cut-rate price. I'll be talking with Primedia's chief, Tom Rogers. And the explosive debate over stem cell research. We'll talk with a leading scientist who says restricting research would be a travesty.

ANNOUNCER: Live from the heart of New York City, this is LOU DOBBS MONEYLINE. Here now, Lou Dobbs.

DOBBS: Good evening. Our top story tonight: signs of improvement in the hard-hit manufacturing sector. Manufacturers have been in the grip of a severe downturn for almost a year, but today's report from the nation's purchasing managers offers some hope that the worst is nearly over. The NAPM index in June showed the sector did contract again for the 11th-straight month, but the index jumped from the previous month and new orders surged.

Also out today: more evidence of strength in consumer demand. Personal spending in May coming in stronger than expected. Growth in spending outstripped the growth in income -- some economists saying that shows consumers are confident about the future.

Bond prices surged because the inflation measures in today's report showed little or no price pressure. The 10-year bond, up 26. The 30-year, up 24 ticks.

Blue chips surging today as well, Wall Street encouraged by the improving picture in manufacturing. The Dow reversed early losses after that manufacturing report was released. The index ended up nearly 1 percent on the day. All but six Dow stocks ending higher.

3M soared even after the company issued a profit warning. But volume was light as investors prepare for the July 4th holiday.

Kitty Pilgrim has the report from Wall Street.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): A Dow rally of enthusiasm on the first day of the second half of the year. Stocks reacted to economic data on the manufacturing sector that came out mid morning. The trading chart of the Dow clearly shows when the news hit the market, and it was a triple-digit rally for much of the afternoon, only flattening slightly by the close.

The Dow ended the day up 91 points. The Nasdaq had a much more subdued trading day, ending down almost 12 points at 2,148, pulled lower by a big drop in Microsoft stock.

NICK ANGILLETTA, SALOMON SMITH BARNEY: We're at the second half of the year. Economic numbers that are viewed as showing that the Fed rate cuts are actually starting to take effect again are viewed positive. So I think overall investors are feeling a little bit better about the numbers.

PILGRIM: Dow gainers included 3M, even though the company reported second-quarter earnings would fall below expectation, and such diverse stocks as Caterpillar, Johnson & Johnson and JP Morgan.

On the Nasdaq, HotJobs climbed higher in reaction to a weekend announcement it would be bought by Monster.com owner TMP Worldwide, which traded lower. Avanex and Lightbridge both warned on earnings and ended the day down as well.

Some market watchers say a summer rally may be in store.

SAM STOVALL, STANDARD & POOR'S: Well, the feeling is that we probably saw the lows in the late March, early April timeframe, and therefore, because most of the surprises are now behind us, that the feeling is that possibly this market could slowly work its way higher.

(END VIDEOTAPE)

PILGRIM: But it was a day for warnings: After the bell, DuPont, the No. 1 U.S. chemical company, warned its second-quarter earnings would be weaker than estimates, joining a group of other chemical companies around the world who have warned -- Lou.

DOBBS: Kitty, thank you very much, Kitty Pilgrim from the New York Exchange.

Well, what would have been the biggest deal in airline history tonight is effectively a dead deal: United pulling out of its $4 billion deal to buy US Airways, United dropping the takeover after struggling for more than a year to win regulatory approval.

Fred Katayama has the report.

(BEGIN VIDEOTAPE)

FRED KATAYAMA, CNN CORRESPONDENT (voice-over): The parent of United Airlines is grounding what would have been the world's largest airline merger. A source close to the deal tells MONEYLINE UAL is dropping its plan to buy US Airways Group for $4.3 billion.

Publicly, the airlines would only say they are, quote, "in discussions regarding the possibility of terminating the proposed merger." The source said UAL thought it would never get the deal past regulators, who feared the airlines combined would dominate traffic in the nation's capital.

The deal between the No. 1 and No. 6 airlines would have left the three largest airlines controlling more than three-quarters of the nation's air traffic. A Justice Department spokesman said it is continuing to review the merger, which the two parties have yet to formally withdraw.

Analysts say regulatory concerns and the unraveling of this union will slam the brakes on future mergers.

RICHARD ABOULAFIA, TEAL GROUP: The creation of the United-US Airways merger would've definitely provided a spurt to further consolidation. People would've recognized there's now 800-pound gorilla out there in the midst and (UNINTELLIGIBLE) almost equaled by the American-TWA combination.

KATAYAMA: The focus now shifts to the future of US Airways. The airline has said in the past that it cannot go it alone, but analysts say US Airways can try to restructure itself or sell itself off in parts.

RAYMOND NEIDL, ABN-AMRO: The most likely alternative, if the current management team is looking for another deal, is to break the carrier up and sell it in pieces. There are a lot of people who'd be interested in the shuttle, various US Airways hubs.

KATAYAMA: Investors have expressed skepticism all along. US Air never traded near its offer price of $60 a share. It's currently trading at one third of that level.

(END VIDEOTAPE)

KATAYAMA: Analysts say United would be better off with a breakup. An acquisition would have hurt UAL's short-term earnings and a breakup would allow United to focus on fixing its problems, such as its customer service and its relationship with its labor unions -- Lou.

DOBBS: Thank you very much, Fred, Fred Katayama.

Well, US Air's stock plunging nearly $3 1/2 a share today. It is down 56 percent from its 52-week high, and United Airlines down 45 cents.

Another deal that's all but dead: GE's takeover of Honeywell. Just hours from now European commissioners are scheduled to vote on the biggest deal of Jack Welch's career, and they are expected to reject it, a stinging blow to GE's legendary CEO as he prepares for retirement.

As this extraordinary drama has played out, critics now say GE underestimated both its competitors and European regulators.

Allan Chernoff with the report. (BEGIN VIDEOTAPE)

ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): General Electric's Jack Welch, the most celebrated chief executive officer of our time. But now the business world is wondering if Welch dropped the ball as he was rushing to score his final basket.

JACK WELCH, CEO, GENERAL ELECTRIC: We feel very optimistic that this is a layup.

CHERNOFF: There's little doubt Welch spoke too soon when he claimed GE's purchase of Honeywell would have no problem passing regulatory review.

WELCH: The businesses have no product overlaps, so there's no government considerations to speak of.

CHERNOFF: Antitrust experts say Welch should have checked with his European attorneys before doing the deal.

LARRY WHITE, NYU STERN: Egos should not be discounted. Jack Welch himself clearly wanted to go out with a major success, and this is leaving him, I think, with a little bit of egg on his face.

CHERNOFF: GE's bid for Honeywell was a rush job, out of necessity. Last October 19th, United Technologies and Honeywell revealed they were discussing "a business combination." Honeywell's board met on Friday the 20th. Jack Welch called Honeywell CEO Michael Bonsignore during the meeting, then faxed him a handwritten offer to buy Honeywell.

Not only did Welch miscalculate how tough European competition commissioner Mario Monti would be in reviewing the deal, but also how determined United Technologies and its CEO would be to block the deal after getting trumped by Welch.

In a "Worth" magazine article on the best CEOs, United Technologies' chief executive George David said, "I hate like hell to lose." The same issue described David as "a classic let's-show-some- discipline-dammit CEO."

United Technologies' Pratt & Whitney division competes with GE in jet engines. Its antitrust lawyers effectively argued to the Europeans that GE's aircraft leasing unit pressures aircraft makers to use GE engines.

STEVEN BUFFONE, GIBSON, DUNN & CRUTCHER: It looks like United Technologies didn't give up. This is a deal that was taken away from them, and with a hard-driving CEO that they looked and explored other options to get the deal back.

(END VIDEOTAPE)

CHERNOFF: Now it appears United Technologies may have the last laugh. The European Commission has scheduled a press conference for tomorrow, where it is expected to announce its vote -- Lou. DOBBS: A negative vote at that.

This deal, everyone is talking about what a defeat this is for Jack Welch and an embarrassment for Michael Bonsignore, but for George David, this is starting to look like a very big victory indeed.

CHERNOFF: Certainly in Europe it is. We'll have to see whether he comes back with another bid. Now the first time around, they took their time to figure out to make a bid and how much to pay for it. So we'll have to see.

DOBBS: They were at -- they were at 40 billion the last time we checked in. We'll see where it goes from here. Thanks, Allan Chernoff.

Well, taking a look at the stocks today: GE up $1.20, Honeywell down 79 cents a share. United Technologies, perhaps in anticipation of a bid for Honeywell, they're down more than $2 a share today.

In Washington, a battle heating up over the diminishing surplus with Democrats and Republicans squaring off over the source of that shortfall.

Senior White House correspondent John King is standing by and has the latest for us -- John.

JOHN KING, CNN CORRESPONDENT: Well, Lou, that's right. The Bush tax cut is the law of the land, those rebate checks and payroll deductions beginning to make their way into the pockets of American taxpayers and inevitably into the U.S. economy. But a continuing debate here in Washington over tax cuts and spending priorities because of new numbers about the surplus.

Not long ago the government saying for the fiscal year that ends this September there would be $275 billion in surplus funds. Now that figure revised downwards to just $200 billion, and of course, the inevitable finger-pointing has begun.

The White House says this is quite simple: The economy has slowed down and with that has come fewer tax receipts. But Democrats saying the tax cut is in itself to blame, at least in part for this, and they're saying they see no alternative for the Bush administration but to dip into some Medicare funds to pay existing government bills. The White House today firing back, saying that's not the case, and the White House press secretary there, there will be no budget crisis if Congress can hold the line on spending.

(BEGIN VIDEO CLIP)

ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: This is a wake-up call to the Congress not to spend tax dollars, because if they spend and go back onto a spending spree, the Congress risks tapping Social Security's money, and Congress should take no step that would put Social Security within reach.

(END VIDEO CLIP) KING: Democrats sense an issue here, and this debate will only intensify when the Congress comes back from this July 4th recess and begins getting about the business, very tough business, of dealing with all those individual government appropriations bills. The White House says the president will be watching, prepared to force the Congress to hold the line on spending -- Lou.

DOBBS: John, setting an early stage for what will be a hot debate this fall. At this juncture, the White House using reference to Social Security. That's -- that's pretty strong fear tactics, isn't it?

KING: Well, these Republicans in the Bush White House remembering what the Clinton administration did in past budget battles, always warning that the Republicans in Congress through their tax cuts would endanger Social Security, would endanger Medicare. Those obviously very politically important programs. Republicans up in the year 2002, telling this White House they do not want to take the blame if the surplus shrinks. So the administration showing to Democrats, even though the Democrats say it's a problem of the Bush tax cut -- the administration saying, no, the problem is spending. We'll see how that fight plays out in the months ahead, again as we go through all those individual appropriations bills.

DOBBS: John, thank you very much. John King from the White House.

Coming up next here, a hot topic in research laboratories and in Congress, the debate over stem cell research. We'll be talking with a top scientist who says the potential is too great to turn away.

And tonight, a CEO on the edge, the man behind Commerce One, a former B2B superstar.

And up next, the publishing executive who's bought up dozens of new magazine titles at what is apparently a bargain-basement price.

ANNOUNCER: After the break, Lou is joined by Primedia chairman and CEO Tom Rogers.

(COMMERCIAL BREAK)

DOBBS: A major deal tonight in the magazine publishing business. Primedia today bought the U.S. titles of Britain's EMAP, paying about a half-a-billion dollars. EMAP paid more than a billion-and-a-half for the assets just three years ago.

Primedia, which publishes amongst other things "New York" and "Seventeen" magazines, will add titles, including "Motor Trend" and "Teen."

Joining me now from Primedia, its CEO, Tom Rogers. Tom, good to have you with us.

TOM ROGERS, CEO, PRIMEDIA: Lou, great to be here. DOBBS: Congratulation on this deal. Now, this by my math looks like about a two-thirds discount to price from three years ago. How could you get them this cheaply?

ROGERS: Well, we are the natural fit for this particular company, and EMAP had run into some real operating troubles in terms of the price they paid and how it fit with their operations, which turned out not to be a very good fit.

DOBBS: Now, what can you do with these assets that they couldn't?

ROGERS: Well, we are now the largest targeted media company in the world. We have a combination of print and video and Internet properties, all focused on narrow interests, whether they're hobbies or passions, some type of consumer pursuits.

EMAP basically had a 60-plus titles that were able to fit in to our overall infrastructure. We can get a lot of costs out of that and a lot of sales upside by combining some of these common categories together.

DOBBS: And in terms of bringing that all together, you're also going to be shutting something, because you're going to, you said, shedding core assets -- or assets, rather, to focus on the core business. How much are you going to try to raise through the sale of assets?

ROGERS: Well, we said we'd be looking to raise at least $250 million through the sale of noncore assets, which we've had a number of approaches on a number of our properties and we have a lot of confidence we can do that.

DOBBS: What are you going to -- what are you thinking about selling?

ROGERS: Well, we haven't indicated exactly what that would be. We have some interesting approaches on the table and we'll consider that.

DOBBS: And in terms of -- in terms of the money for this deal, you're also tapping into some substantial backing here in terms of the equity and the warrants in this. What'll be the effect on Primedia?

ROGERS: Well, the financial structure we came up with is one we're very comfortable with. I had made commitments since coming to the company to take the overall leverage, take the overall debt down. And so it's important to us that we do this on a deleveraging basis. So about half of the consideration here we will fund in the form of debt, about half in the form of equity and the proceeds from these pay-down -- proceeds from these asset sales.

And you put all that together, and we're not only getting something that we think next year will grow at about 35 percent in terms of the EBIDTA cash flow coming from these assets, but will be very deleveraging for the company, improving our overall debt ratios. DOBBS: And its effect on your earnings?

ROGERS: Well, we are basically measured in terms of our EBIDTA, but in terms of our after-tax cash flow, it will be accretive as well. The key thing we've done here is created the second-largest publishing company, and we are not finding the advertising turmoil that most consumer companies are finding right, and this plays to that.

DOBBS: Tom, congratulations on the acquisition.

ROGERS: Lou, thanks for having me. Appreciate it.

DOBBS: Tom Rogers.

Still ahead here, Vice President Dick Cheney, he is back on the job after being fitted with a new heart implant. And up next, controversial medical research that offers new hope for millions fighting fatal disease.

(COMMERCIAL BREAK)

DOBBS: President Bush tonight is under increasing pressure to approve funding for stem cell research involving human embryos. Scientists are trying to advance their knowledge of these kinds of cells, because they can be grown into tissues of various organs, such as the heart or brain. That could, of course, help cure a variety of disorders, from Parkinson's disease to spinal injuries.

And joining us now to take a closer look at this research is Dr. Joseph Antin from the Dana-Farber Cancer Institute. He is one of the world's leading experts in stem cell research.

Dr. Antin, good to have you with us.

DR. JOSEPH ANTIN, DANA-FARBER CANCER INSTITUTE: Thank you very much.

DOBBS: Just as we were coming on the air, I was handed this release from the Congress, a joint statement by House Majority Leader Richard Armey, House Majority Whip Tom DeLay and conference chairman J.C. Watts Jr., saying, quote, "It is our sincere hope the Bush administration makes the right decision on the stem cell issue: to uphold current law and prohibit" -- "prohibit" -- "federal funding of embryonic stem cell research while promoting adult stem cell alternatives."

One of the reasons we've asked you to be here is to try to shed some light on the specific issue of stem cell research itself, its importance, and to separate the politics, but it's impossible. Adult stem cell research, embryonic stem cell research, which is the most promising? Which is the most important to you as a scientist?

ANTIN: Well, principally what's used right now is adult stem cell research. These are cells that exist in various organs, principally in the bone marrow and to some degree in the peripheral blood, and they're used principally for the treatment of leukemia, lymphoma, other malignancies of the blood, although they can also be used to treat a variety of congenital disorders, such as sickle cell anemia, (UNINTELLIGIBLE), congenital disorders of metabolism and immunity.

These cells are readily available to transplant physicians and they have a limited capability of developing into other tissues.

DOBBS: What -- what number of patients inflicted with all of these diseases are benefiting right now from stem cell research, and clinical, obviously, application of that research?

ANTIN: We transplant something in the order of 30,000 patients a year with a variety of blood disorders.

DOBBS: So for them it is hardly an academic or even a political issue. Lives depend on the results of that research, do they not?

ANTIN: It is often lifesaving, yes.

DOBBS: And in terms of the promise -- I want to talk also about the fears concerning embryonic research -- how important is it, how soon can we see the results of it, in your judgment, medically?

ANTIN: Well, I think the principal value of embryonic research is the process, the process of learning how cells develop, how they grow, what controls their fate. This is going to give us huge insights into again, into cancer and various other things.

The use of these cells to grow a new heart or to grow a new liver or kidney I think is far in the horizon. The real benefit from this is to expand our understanding of very primitive and interesting cells that will ultimately give us many further insights into how to treat (UNINTELLIGIBLE) diseases.

DOBBS: As you listen to the argument -- and some of it based on religion, some of it in ideology and politics -- what would -- how do you separate your research and your feelings as a human being with your own philosophy, your own religion as you grapple with the issue of embryonic stem cell research?

ANTIN: Well, at present these cells are destroyed if they're not used, and I think that the hope is that we can take advantage of them and use the knowledge that we glean from studying them to help people who have critical illnesses and who have very shortened survival.

DOBBS: And for whom philosophy and politics matter very little. Dr. Antin, thanks for being with us.

ANTIN: You're welcome.

DOBBS: We appreciate your time.

ANTIN: Thank you.

DOBBS: Well, coming up next, the vice president is heading back to work two days after doctors insert a heart defibrillator. And tonight, a blow to the Japanese economy, businesses there losing faith in the possibility of an economic recovery.

(COMMERCIAL BREAK)

DOBBS: Vice President Cheney, back to work today just two days after surgery to insert a defibrillator into his chest. The device is to detect and correct any changes in Cheney's heart rate, this following his history of heart problems. The vice president told reporters he feels fine. He met with President Bush on national security issues. The vice president gave several interviews on the White House energy plan today.

Well, some tough economic news today from Japan, which is struggling to avoid its fourth recession of the past decade. The Japanese central bank today reporting that business sentiment worsened in the second quarter as companies cut spending in the face of declining profits. The so-called "tankan" survey was in negative territory for the second-straight quarter, meaning big businesses are skeptical that the Japanese economy will recover soon.

Well, the ailing Japanese economy high on the agenda at the weekend summit with President Bush and Japanese Prime Minister Koizumi. The president issued a vote of confidence in his bid to reform the Japanese economy and write off nearly $100 billion in bad debt. President Bush also expressed regret for a series of past incidents involving U.S. servicemen on the Japanese island of Okinawa.

In the latest such incident, a U.S. Air Force sergeant is alleged to have raped an Okinawan woman in a parking lot late last week. Japanese police said they have an arrest warrant for Staff Sergeant Timothy Woodland, who reportedly denied committing the crime. The alleged attack has revived anger among Okinawa residents over the presence of some 26,000 troops on the island.

Well, coming up in the next half hour of MONEYLINE, a "CEO on the Edge." After his software company loses 95 percent of its value, Commerce One's Mark Hoffman.

Also OPEC ministers preparing for tomorrow's policy meeting. We will have a preview for you from Vienna. And the Dow Jones industrials kick off July with a bang. All of the day's action on Wall Street for you next.

(COMMERCIAL BREAK)

DOBBS: Blue chips rally on Wall Street today in a broad-based rally with particular strength in drug and retail. The Nasdaq, however, slightly lower on the day.

Helping boost the Dow, an economic report showing manufacturing may be showing some improvement. And Primedia buying EMAP's U.S. magazine unit at a big discount, making it the second-largest magazine publisher in the United States.

Now, more on the day's market activity: a mixed session on Wall Street. The Dow climbing nearly 1 percent while the Nasdaq finished down. Blue chips gaining strength after the Purchasing Managers' Index for June showed the manufacturing sector may be on the mend. That news helped the Dow, and it turned around from a warming from 3M. The Dow finished the day up 91 points despite that warning.

A more cautious session on the Nasdaq when that index made a couple of efforts to get higher, but ultimately ended the day down, down 11 points. There was some strength in chips and Internets, but not enough to carry the rest of the market. On the Big Board, declining issues beating advancers by a 4-to-3 margin.

Tonight's movers: Kinder Morgan rising a $1.85 a share. The company, which transports natural gas, says it expects to beat or meet profit targets for the year. It also says it will make significant acquisitions within the next two months.

Priority Healthcare down more than $4 a share, the drug distributor saying it will miss earnings expectations because of lower margins and a delay in new products.

And Siebel Systems jumping more than $2 a share today, Merrill Lynch saying the outlook for the e-business software maker is stabilizing, that the pendulum seems to be swinging back in Siebel's favor. Siebel has rallied over the past three months, but is down nonetheless about 40 percent over the past year.

A quiet session on the Nasdaq, and you can be sure the market's leadership was happy about that. Nasdaq trading halted for hours Friday because of a computer glitch in a market still struggling to adjust Friday closing prices in a number of stocks, in a few cases by 50 percent or more.

Steve Young has our report.

(BEGIN VIDEOTAPE)

STEVE YOUNG, CNN CORRESPONDENT (voice-over): The two-hour Friday failure of two of the Nasdaq's main trading systems couldn't have come on a worse day: just as stocks comprising the Russell 2000 index were being readjusted, a once-a-year event.

As a result prices shot up and down wildly. Now, the Nasdaq claims its hard to figure out if investors' lost money on account of the technology glitch alone.

GREGOR BAYLOR, NASDAQ: The pricing on a Russell rebalancing index is sometimes hard to follow anyway, and what's really the determination of what happens with the Russell repricing is the brokers' conversations with the individual investors. And they will have that conversation and make sure that the investors are protected.

YOUNG: Acknowledging that there were price distortions, the Nasdaq has been adjusting the Friday closing price for dozens of issues ever since. In a few cases, the stock of big companies -- including Dell, Microsoft and Gemstar -- underwent small adjustments. But there were other examples of smaller companies in which the recalculated closing prices for the last day of the second quarter went through much wider swings, both up and down. As for what happens now, the Nasdaq says its up to individual broker dealers whether to adjust Friday trades, but security lawyers say the brokers can't pick and choose.

STEPHEN RINEHART, JANKENS & GILCHRIST: Making those adjustments, they have to be very careful that they treat everybody equitably, so they may be forced, in essence, to make everyone unhappy by adjusting all the prices pursuant to Nasdaq determination as to what the prices ought to have been.

YOUNG: Talking to top Nasdaq officials about all this was tough.

(END VIDEOTAPE)

YOUNG: Nasdaq's president today was said to have laryngitis, and after Friday's glitch, CEO Hardwick Simmons left the country. Before departing, Simmons told us both of last week's problems were unrelated and have been fixed, but that doesn't mean something else couldn't go wrong -- Lou.

DOBBS: So where are we in terms of those stocks, those stock prices that still need to be adjusted?

YOUNG: Well, they adjusted about eight or 10 -- actually 30 of them Friday by 6:15, worked over the weekend, continued through today. At my last count, they had adjusted 47 of them. They told me this morning that more would be adjusted. That may be close to the grand total.

DOBBS: Because, as you know, a number of our viewers are more than just a little upset about it.

YOUNG: Yes, they are.

DOBBS: And rightfully so. And Wick Simmons is -- he left the country?

YOUNG: Previously planned trip.

(LAUGHTER)

DOBBS: OK. Steve, thanks a lot.

Well, the Nasdaq today took steps to address conflict of interests among analysts on Wall Street. The NASD rule -- board, rather, approved a rule that would require analysts to disclose potential conflicts of interests when recommending a stock. That includes all public appearances, including television interviews. Analysts would have to disclose their holdings if they themselves or the firms they work for own 5 percent or more of a recommended stock. Wall Street has until August 15th to comment. Any final rule would have to then be approved by the Securities and Exchange Commission.

Today's weakness on the Nasdaq extends a trend that we've seen in the markets so far this year. The Nasdaq is off more than 12 percent and -- year-to-date, and the Dow is down more than 2 1/2 percent year- to-date.

Joining me now, a fund manager who says these are tough times for particularly growth fund managers. Erik Gustafson of Stein Roe & Farnham joins me tonight from Chicago. Good to have you with us, Erik.

ERIK GUSTAFSON, STEIN ROE & FARNHAM: Always a pleasure, Lou.

DOBBS: You have -- you said these are tough times. For whom are they not tough times in this market?

GUSTAFSON: Well, that's a great question, Lou. Unfortunately, unlike the Nasdaq president, I can't plead laryngitis...

(LAUGHTER)

... or that I'm out of the country. Maybe we should try that.

It's been tough out there. There's been no place to hide. Growth managers, we're paid to be 100 percent long growth stocks, and there really hasn't been a lot of shelter in this bear market storm we've seen for 15 months. I think we're just about through.

DOBBS: Just about through. Does that mean that you don't believe we've hit the bottom?

GUSTAFSON: No, I think, Lou, that we have put in a bottom in the April lows, and I think once these Fed rate cuts come in, I think we'll see some stimulus and I think the market will respond.

DOBBS: Well, as you know, we were just talking about the new rules in terms of conflicts of interests for Wall Street analysts. One of the things that we do here is for everyone who projects, forecasts a stock, we offer up the pleasure to that guest, as we are to you tonight, Erik, the opportunity to look at your forecasts and what's happened.

And I'd like to put those up, if we could, for our viewers now. The stocks, the first one is Yahoo! and it has done pretty well. So I'd have to say you're up at about 25 percent since your prediction on that one, your recommendation. And AOL Time Warner, we of course who work here -- and this is of course a subsidiary of AOL Time Warner -- we're delighted to tell you that you've done very well there as well.

(LAUGHTER)

And taking a look at the next one, Target. Now -- now we're going to have to talk about that one, Erik. You're down a little bit over that one.

Let's go to the next one, and that's where we are. Well, let's go to Bed, Bath & Beyond, which is up remarkably since you recommended that stock. And I believe we've got one more here. Kohl's Corp, it's up again slightly.

And I'd say that's a pretty good performance, Erik. So are you sticking with those in this environment?

GUSTAFSON: Well, Lou, thank you. We've had some stocks that worked very, very well for us, and we're particularly pleased with our holdings in AOL and the job that you and all your team is doing.

(LAUGHTER)

But besides that gratuitous plug there, I still like the retail sector. Again, I think the Fed will be successful, Lou, in restimulating the economy. Retail tends to do well in that type of environment. We like Target still. We're still owners and buyers of Target in there. We like Kohl's. We think the media sector, too, will rebound once advertising comes back. Companies will advertise in an improving -- in an improved economic environment.

DOBBS: So you're staying with each one of those recommendations here?

GUSTAFSON: Absolutely. I'd add Liberty Media into the retail also.

DOBBS: You would?

GUSTAFSON: Or into the media mix, pardon me.

DOBBS: I was going to say John Malone is going to wonder how he got into the retail business. But one should never underestimate John Malone, right?

GUSTAFSON: He's got his fingers in a lot of different areas.

DOBBS: Well, Erik, I've got to believe there are a lot of fund managers out there who would like to have as good a record as you do on those recommendations. Congratulation, and we'll be following you all the way through as usual.

Erik Gustafson, good to have you with us.

GUSTAFSON: Always a pleasure, Lou.

DOBBS: Good to have you with us.

Coming up next here on MONEYLINE, tonight's "CEO on the Edge," the head of Commerce One, a software B2B, once a high-flier, now struggling for survival.

And OPEC ministers, they're in Vienna. We'll take a look at what it may all mean for oil production, when MONEYLINE continues.

(COMMERCIAL BREAK)

DOBBS: In corporate news tonight, Comair is back in service after the airline spent three months grounded because of a pilots strike. The Delta unit ratified a contract with its workers on June 22nd, but flights were delayed until the pilots went through mandatory retraining, which seems like a reasonable idea. The airline is currently offering discounts of up to 60 percent to lure customers back.

Sara Lee bidding 2.8 billion for baked goods company Earthgrains: that deal a 55 percent premium over Earthgrain's Friday close and pushes Sara Lee into the No. 2 spot for fresh breadmakers.

On that news, shares of Earthgrains climbing nearly $14 a share, Sara Lee gained 55 cents.

IBM saying it's laying off about 1,000 of its domestic employees from its global services unit, but IBM says it's continuing to hire in global services and will end the year with a net gain in the unit's 150,000 head count.

Tonight's "CEO on the Edge": Mark Hoffman of Commerce One. The business-to-business software company has suffered a major drop in its stock price. Shares are now trading 94 percent below its 52-week high. Part of the problem, big companies electing to put software projects on hold, and of course, a slowing economy.

Peter Viles has our story.

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PETER VILES, CNN CORRESPONDENT (voice-over): Commerce One had a business model that once appeared bullet-proof: Its software creates virtual business-to-business marketplaces, helping big businesses save time and money. But the savings have not arrived yet, and many businesses are putting projects like that on hold.

BOB AUSTRIAN, BANC OF AMERICA SECURITIES: The electronic marketplaces have taken a lot longer to evolve than people had expected, and I think part of that is because of technology and part of that is because of the ambiguity in exactly how public marketplaces will be used by the Fortune 500s.

VILES: As a result, Commerce One revenue, which hit 170 million in the first quarter, will come in at 100 to 120 million in the second quarter, a decline of 29 to 41 percent. The stock is down 96 percent from its peak.

MARK HOFFMAN, CHAIRMAN CEO, COMMERCE ONE: The industry got overhyped for a while, and you know, for a couple of years there. And it's gone -- it was way up -- now it's gone way down. And I think the fact is it's probably underhyped today.

VILES: CEO Mark Hoffman, who co-founded the company, has been criticized for selling Commerce One shares. From February 2000 to May of this year, according to InsiderScores.com, he sold more than a million shares at prices ranging from $77 a share all the way down to $9. Those sales raised $49 million.

Hoffman says he and another co-founder automatically sell stock on a regular basis, regardless of the stock's performance.

HOFFMAN: Because we both have a high percent of our net worth tied up in this company, we've had a -- just a regular selling program that gets triggered automatically during the open periods on a quarterly basis.

VILES: Commerce One lost $228 million in the first quarter, and investors would like to know when it will break even.

HEATHER BELLINI, SALOMON SMITH BARNEY: People want to see it as soon as possible. You know, if you were to say it's going to be pushed out to the end of 2002, I think that's too far away. But realistically, I think it's going to be hard for these companies, Commerce One included, to make profitability by the end of this year.

(END VIDEOTAPE)

VILES: Commerce One has a partnership with Microsoft, but its real lifeline at this point is the German software firm SAP, which last week invested $225 million in Commerce One and now owns 20 percent of the company -- Lou.

DOBBS: The price is right as they say.

Well, let me ask you, I get a kick out of Mark Hoffman talking about the stock was overhyped when it was 97 percent higher, and then he referred to it being underhyped now. What is the correct hype for...

VILES: He believes the whole industry is underhyped, that investors have been too quick to give up on the whole industry, that there is a good industry here, there is some growth here after we get through these tough times.

DOBBS: So there is a correct level of hype here?

VILES: Medium hype.

DOBBS: OK. Thanks a lot.

Well, coming up next on MONEYLINE, Vice President Dick Cheney provides a showcase for medical devices, and it is a showcase attracting investor interest. That story is next.

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DOBBS: In tonight's "Sectors Report": medical equipment. Vice President Cheney's surgery putting lifesaving devices in the spotlight today. The president (sic) fitted with an implantable cardio defibrillator, or ICD. 60,000 of these ICDs were implanted in patients in this country last year. Medtronic, which made Cheney's device, sold half of them. It is a market worth in the region of $2 billion a year.

Analysts say sales will continue to grow rapidly as medical studies show they can be more effective than drugs. Medtronic and other medical equipment stocks trading higher on the day.

Coming up next, OPEC ministers are preparing for tomorrow's meeting in Vienna. We'll be bringing you from Vienna a live preview. Stay with us. (COMMERCIAL BREAK)

DOBBS: In tonight's "Powering America," the Bush administration scaling back plans to lease offshore rights to drill for oil off the Florida coast. The White House bowing to concerns of some environmentalists and the president's brother, Florida Governor Jeb Bush, to keep oil rigs at least 100 miles from the state's beaches. The federal government will still lease about 1 1/2 million acres of the Gulf of Mexico, about 75 percent less than initial proposals.

The oil markets are gearing up for other energy news as OPEC ministers gather for policy meetings tomorrow in Vienna. Charles Hodson with the story from Vienna.

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CHARLES HODSON, CNN CORRESPONDENT (voice-over): Serenity on the surface, uncertainty behind the scenes. As OPEC ministers gathered in Vienna, Austria Monday, it seemed clear they would once again hold their production at the current level of 24.2 million barrels a day.

The crude price is more or less at the cartel's preferred level, but OPEC's leading producer wants to be sure the oil market won't spring any surprises.

ALI NAIMI, SAUDI OIL MINISTER: Well, I think the first thing we need to do is find out what the market looks like. I think we're going to have a very good review. As it stands today, the price is -- within the range of the OPEC basket.

HODSON: There are several wildcards. U.S. oil stocks are high, but will have to be built up as winter nears. And the U.S. economic slowdown is clearly eating into demand for gasoline.

JULIAN LEE, CENTER FOR GLOBAL ENERGY STUDIES: It looks as though the U.S. driving season hasn't really taken off. And I think that what we've seen since the beginning of June is a real slowdown in final consumer demand for gasoline in the U.S.

HODSON: But the biggest wildcard is Iraq. Last month, Baghdad pulled its 2 million barrels a day in crude exports in protests of U.S. and British efforts to rework U.N. sanctions on Iraq. The U.N. Security Council in New York will address the issue on Tuesday. If its decision pleases Baghdad, Iraq may open its taps at once, possibly pushing down prices to the potential dismay of OPEC.

But the cartel says it can compensate for any Iraqi action between meetings if necessary.

ALI RODRIGUEZ, OPEC SECRETARY-GENERAL: If we arrive to a river, we will cross the river. I believe that in this meeting we will maintain the production (UNINTELLIGIBLE) and we have to wait and see what will be the situation.

HODSON (on camera): The OPEC ministerial meeting gets under way on Tuesday with an informal session at this hotel. Ministers will be in no hurry to make a decision that could quickly be overtaken by events in New York.

There is a real possibility that this special session of OPEC could be extended to a second day.

Charles Hodson, CNN Financial News, Vienna, Austria.

(END VIDEOTAPE)

DOBBS: Up next, your e-mails and "Ahead of the Curve."

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DOBBS: Ahead of the 4th of July holiday Wednesday, markets will be closing at 1 o'clock tomorrow. During the shortened trading session, keep an eye on shares of DuPont. After the bell, DuPont warning second-quarter earnings will be short of forecasts.

More economic news out tomorrow, factory orders for May actually expected to go up, to rise in fact 1.2 percent. And as we reported, OPEC ministers meeting in Vienna tomorrow to set oil production levels.

Finally tonight a quick look at your e-mails. On the subject of oil, a question concerning exports from Alaska. A viewer calling himself or herself WL asks: "Does the United States sell any oil from Alaska?" Well, the United States does sell a small portion of that oil produced on Alaska's North Slope. It amounts to less than 5 percent of the oil produced in the state. The crude goes to countries such as Japan and China.

A 1973 law banning exports was lifted five years ago, although several bills have been introduced recently to try to reinstate that ban.

And Edward in Del Ray Beach, Florida writes praising of Vice President Bush (sic) for being back to work and being a model patients, but then asks if Mr. Cheney were "to resign from the vice presidency, who would replace him? Would it be the speaker of the House?" And that a very good question, and we're going to be checking that out very quickly.

So, that is MONEYLINE for this evening. And if would you like to send your comment to us, please e-mail us at moneyline@cnn.com -- cnn.com -- moneyline@cnn.com.

And for tonight, that is MONEYLINE for this Monday evening. Thanks for being with us. I'm Lou Dobbs. Good night from New York. "CROSSFIRE" is coming up next.

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