LOU DOBBS MONEYLINE
Dow Advances 237.97 to 10,478.99; Nasdaq Climbs 103.70 to 2,075.74; Microsoft's Bullish Revenue Outlook Boosts Tech Stocks
Aired July 12, 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.
JAN HOPKINS, CNN ANCHOR: In tonight's headlines, a powerful rally on Wall Street. The Nasdaq shoots up 5 percent. The Dow puts on its best showing since mid-May, thanks to a series of strong tech reports: led by Microsoft.
A big shakeup on Wall Street. Credit Suisse First Boston dumps its CEO. We'll hear from John Mack, CSFB's new man in charge.
The latest, and greenest, model beemer. But will BMW's new line of hydrogen-powered cars bring in the green at the dealer's showroom.
And the Olympic battle to host the 2008 Games. We'll get reports from the main contenders: Beijing, Paris, and Toronto before Friday's big decision on the host city.
We begin tonight with that triple-digit surge in the Nasdaq, the index gaining 103 points, or more than 5 percent. It is the biggest gain in more than seven weeks. Propelling the gains: a rash of good news from the tech sector, led by the linchpin of the software business: Microsoft. For all the day's action, we go straight to Greg Clarkin at the Nasdaq marketsite -- Greg.
GREG CLARKIN, CNN CORRESPONDENT: Hi there, Jan. It was indeed a powerful rally. You did have a market that was ripe for a rally, according to many traders and analysts, and then you add in the news that at Microsoft its revenue will be higher for the quarter. And then, toss in Motorola saying its earnings were better than expectations, and that was the recipe for a sharp rally today, sending the Nasdaq to a 103 point gain, to close the session at 2,375.
Now all the tech sectors did well today. Let's take a look at some of them and give you an idea of how strong these were. Let's start with the Philadelphia Semiconductor Index, up 8.6 percent. Goldman Sachs Internet Index up 8.1 percent. Goldman Sachs Software Index up 7.7 percent. And Goldman's Hardware Index gaining 7.5 percent.
Again, the story today really was Microsoft, let's go back to the wall and give you an idea of what that stock did on the day. It gained 7.7 percent on the day, a gain of better than $5, trading at 71.60 on the day. We did see widespread strength throughout the big- name technology shares, Sun Microsystems up almost 10 percent. Oracle with a gain of better than 9 percent. Cisco Systems up almost 7. And take a look at RF Micro Devices, gaining 25.5 on the day. This is a company that supplies communications chips, among their clients, Motorola. So Motorola's good earnings were good news for RF Microdevices. And that stock soaring.
Jan, you had a day where the Nasdaq came in below 2000, it goes out just shy of 2100. So it is quite a rally today. The question is, is this sustainable? Can it be carried through to tomorrow and then early into next week -- Jan.
HOPKINS: That's the question we'll try to answer tonight on MONEYLINE. Thanks, Greg Clarkin at the Nasdaq.
That thunderous rally in Nasdaq stocks also extended to the Blue Chips, with the Dow rising 237 points, the biggest point gain since May 16, it was driven by the tech sector.
Jennifer Westhoven has all the action from the New York Stock Exchange.
(BEGIN VIDEOTAPE)
JENNIFER WESTHOVEN, CNN CORRESPONDENT (voice-over): A furious rally in stocks as top technology names -- Microsoft, Motorola, Yahoo! -- said business has been surprisingly strong. But in a twist many traders and analysts were quick to cast doubts on the gains.
MICHAEL BALOG, BANC OF AMERICA SECURITIES: You have Motorola and Microsoft basically coming in in-line to slightly better, and that's all it takes, and it really sets up what you've always known about expectations -- it doesn't take a lot when people are so scared and so nervous.
WESTHOVEN: The Nasdaq shot higher as buyers crowded into big names. It jumped 103, more than 5 percent, to 2075. Semiconductors saw huge gains after Motorola said it would stop losing money before the year is out. And the rally went beyond techs.
General Electric said quarterly profits met forecasts and retailers rose. The Dow Industrials gained 237 to 10,478, its best one-day showing in two months.
Financials gained, but that was another reason traders were skeptical about the rally, because the financials ignored worries Argentina could default on billions of dollars of debt. Those worries were enough to send the safe-haven long bond up sharply and crumble Argentina's stocks and currency. But there were a few traders who said today's rally might have some staying power.
JOHN PICKETT, LABRANCHE & CO.: There's a big difference in activity on the trading floor when you're doing a billion shares a day versus 1.4 billion, which we did today and yesterday. It makes a tremendous difference to me in terms of what I see as the health of the market. A 250-point up day on 1.4 billion shares is pretty convincing to me.
(END VIDEOTAPE)
WESTHOVEN: Many traders said rotation was the name of the game, pulling it out of defensive stocks like drugs and utilities and switching it back into techs. But bulls say they would rather see new money coming in for this rally to stick -- Jan.
HOPKINS: Thanks, Jennifer Westhoven at the New York Stock Exchange.
More tech news after the bell: both Juniper Networks and AMD edging out lowered forecasts by 1 cent a share. Checking after hours reaction: Juniper Networks is up 93 cents after a 16 percent gain in the regular trading session. AMD is up 30 cents.
It may be July 12, but our next guest says the roots of a summer rally are in today's Wall Street surge. We're now joined by Arnie Berman, technology analyst at Wit Soundview.
This summer rally came late, is that what you think?
ARNIE BERMAN, WIT SOUNDVIEW: Just a little late, we had couple of very good rallies in what's been a very difficult, treacherous year for tech investors, and not coincidentally, one of those rallies happened in January just when we exited preannouncement season and went into real report season. The other happened in April exactly at the same time.
So this week has been a limbo week where we finally exited confession season, and started with the real news, and inevitably, that means that the news flow that investors hear about goes from 100 percent bad to just somewhat bad. And that change from all horrible news to somewhat miserable news is enough of a change, that it could engender a very healthy trading rally.
HOPKINS: Now today's rally was really sparked by good news from Microsoft. Is that enough to keep the market going?
BERMAN: It's not enough by itself. But we were going to be greeted by a tremendous amount of news through report seasons. I think what you'll find is, there's a lot of companies out there that have started to see some hopeful signs for the second half. The companies out there that sell technology goods, directly to noncommunications-oriented companies, actually saw much less devastation than they did in the first quarter, so I think we'll be greeted by other good news along the way.
And certainly, there's been good news in the cards of late besides what we saw in Microsoft. We saw a little bit with Motorola today, which is a company that hasn't been able to do much right in the last several years, where they are now actually gaining share in handsets.
The semiconductor giant in Europe ST Microelectronics is the first major chip company today to announce they are writing off finished goods, which is exactly the kind of thing that happened in the end of the cycle, as opposed to near the beginning of the problem. HOPKINS: Well, the next question is, is it more than a summer rally? Are we set to end the year even higher?
BERMAN: I think we'll end the year at higher prices, than we closed at today. Certainly, this has been a very treacherous environment. I think it continues to be treacherous. I don't want to say we're completely out of the woods her -- I don't think we are. We're still in such a momentum-oriented market, that if things out there are getting somewhat better, I think investors for a while will find it irresistible to get involved.
HOPKINS: Thanks very much. Arnie Berman, technology analyst at Wit Soundview.
Another major theme on Wall Street today: retail numbers. A mixed picture from the latest batch of figures. The good news: consumers are stocking up on basic items like toothpaste and household cleaners at discount stores. The bad news: they're not buying much else. Susan Lisovicz has that story.
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SUSAN LISOVICZ, CNN CORRESPONDENT (voice-over): These window displays, where promotional signs, not merchandise, take center stage, tell the story in retail. Whether it's apparel, accessories, beauty products, whatever is for sale this summer is on sale now. Discount stores were the only retailers that scored solid sales figures for the month of June, and analysts say that's not a good sign.
KURT BARNARD, BARNHARD'S RETAIL TREND REPORT: Discounters did very well, but on the other hand, anything even remotely related to apparel, fashion apparel, essentially caved in. I've never seen anything like this in 35 years.
LISOVICZ: Wal-Mart, the nation's largest retailer, saw sales at stores open at least a year shoot up nearly 7 percent. J.C. Penney was a rare standout among department stores. Federated, parent company of Macy's and Bloomingdale's, lagged.
Specialty stores such as Gap and Ann Taylor did even worse. And Ann Taylor warned about the second quarter, saying a bad call on fashion hurt them even more.
RICHARD BAUM, CREDIT SUISSE FIRST BOSTON: We and others were looking for a very strong rebound in the second half, certainly from an earnings standpoint. We were looking for very sharp increases. It's now going to be tougher for that to happen. A number of companies in fact have guided downward.
LISOVICZ: Analysts say the continuing drumbeat of layoffs is weighing on consumer sentiment, despite six interest rate cuts this year and a tax rebate coming this summer. That leaves retailers with few options on how to maintain profits.
DANA TELSEY, BEAR STEARNS: Behind closed doors, my guess is the whole talk is about inventory levels, given that they can't manage the traffic that is walking in or out their store, and it just is so unpredictable. What they can manage is their inventory.
LISOVICZ: Too much inventory of course translates into markdowns, which are cutting into retail profits.
(END VIDEOTAPE)
One analyst says excluding Wal-Mart, June retail sales inched up on average only 1 percent from a year earlier, and last June was not a strong month for retail -- Jan.
HOPKINS: Thanks, Susan. Checking Wall Street reaction to that retail news: Wal-Mart, J.C. Penney up sharply. Federated barley budged, Gap and Ann Taylor higher.
Another sign today the economy is cooling dramatically, more Americans filed for unemployment insurance. Jobless claims hitting the highest level in nine years. Initial jobless claims to the week ending July 7, up to 445.000. This after a litany of layoffs from corporate America.
Also playing a key role in this weeks's move: The auto industry's annual plant shutdown, which temporarily lays off workers so factories can be retooled for next year's models.
A big shakeup today for one of Wall Street's top firms: Credit Suisse First Boston replaced its chief executive Allan Wheat, with former Morgan Stanley executive John Mack. Earlier today I spoke with John Mack. I began by asking whether this move represents a new era for CSFB and whether today's rally in the markets represents a new beginning on Wall Street.
(BEGIN VIDEOTAPE)
JOHN MACK, INCOMING CEO, CREDIT SUISSE FIRST BOSTON: Jan, you know clearly I hope so. But in reality I'm sure that's not the case. I think when the Fed has cut rates half dozen times like they've done, you've had such a sell-off, I think the long-term prospects look very good, not only for the market but clearly for Credit Suisse and Credit Suisse First Boston. So, I'm optimistic, but I don't think it's a new era.
HOPKINS: So, what about the new era in the market? Is it going to be the same things as we saw leading the market in the past, technology, IPOs, the things that your firm has done so well in?
MACK: I don't know the answer again. I think you need to get some of my gurus on this TV show to ask that. But again, you've had a lot of froth in this market for the last five years. We've had a tremendous sell-off, you had the Fed take very decisive action here with these rate cuts.
And you are seeing, on the money market side, lot of cash being built up. So there are a Lot of ingredients in place now to get this market back up. Now will we see it being led by technology, and telcos? My feeling is that's still probably a ways off. I think the market, as you look out, going into next year looks very good. HOPKINS: Now you have a reputation, in fact, you're known as Mack "the Knife," somebody that knows how to cut costs. Do you need to do that as CSFB? The firm has gotten very big in the last few years.
MACK: It certainly has. If you look back in 1996 the firm was 6,000 people. Today it's 28,000 people. There's been one major merger and two or three small acquisitions. Anytime you have mergers like that there are redundancies you need to focus on.
But I think as you look our firm today, via other firms and you look at the comp ratios, there's certainly some room for improvement here on our comp ratios, and one of the challenges I'm going to have is going forward over the next -- it's going to take years, not days -- we're going to have to figure out a way to be more competitive and more in line with our costs.
HOPKINS: One of the things that is kind of overhanging your firm is an investigation into possible kickbacks to get a bigger share of IPOs. Now the fact that you're being named a year after this investigation started, is this an indication that it's about over and it's time to move on?
MACK: Well, I don't know the answer to that. I think the only thing we can do is cooperate with the regulators, make sure that information they need we provide to them. If we learn something in this investigation we don't know now, that we need change certain policies or practices, we certainly will do that. But I think this thing will go on for quite a while.
HOPKINS: And what about Frank Quattrone? He is a big rain maker for the firm, there has been a lot of questions because he's been involved in IPOs business. Does he remain, are you convinced that he's a big part of the firm's future?
MACK: As you may remember, years ago, we worked together and when Frank left my old firm to go somewhere else I was upset about it because he's a good banker. I'm here, we're together again, I hope he stays because he's a great banker, and he's made a huge contribution to the firm.
HOPKINS: Thank you very much, John Mack the new CEO of CSFB.
In tonight's Tech Watch: A second look at Microsoft's major shift yesterday and how it licenses software to PC makers. Microsoft and changing its licensing practices admitted for the first time that it broke antitrust law which an appeals court recently concluded. Now PC companies are sizing up the changes which make Windows more flexible as Microsoft gears up to introduce its next operating system, Windows XP. Steve Young has the story.
(BEGIN VIDEOTAPE)
STEVE YOUNG, CNN CORRESPONDENT (voice-over): Some PC companies say they're pleased they'll be able to add icons to what Microsoft intended to be an iconless Windows XP landscape. But a Hewlett- Packard spokeswoman says H-P's waiting for Microsoft to heed more of the court of appeals ruling as it affects digital imaging and streaming video.
DAN GILMORE, "SAN JOSE MERCURY NEWS": PC manufacturers have been chafing for years about this. They really would like to have some say in how their own manufactured goods look when they go to the consumer.
HARVEY SAFERSTEIN, MINTZ LEVIN: For me, the startling thing is that they're willing to do anything. The history of this case has been a war to the finish. Take no prisoners. Make no concessions.
YOUNG: One PC manufacturer that didn't want to be named says when it first heard Windows XP would have no desktop icons, "we were guarded. It sounded like Microsoft trying to wrest control."
But the PC company says it did research and found its customers really do find icons confusing and it doesn't plan to add any even though it could, now. Instead, it will try to make money with partnership icons on the Windows XP Start Bar. Of course, Microsoft could always change by remote control the way the operating system works after it's installed on PC's.
"You've hit the nail on the head," the PC company says, adding, "that's a challenge."
Analyzing Microsoft's latest move is a challenge for regulators, too.
RICHARD BLUMENTHAL, CONNECTICUT ATTORNEY GENERAL: And the real question is does this announcement indicate a more fundamental and far-reaching change in culture or mind set so that they will stop the kinds of illegal practices that the courts have found, or is it a simply a public relations gesture?
(END VIDEOTAPE)
YOUNG: Analysts say Microsoft may have made its licensing changes to try to forestall legal challenges against the scheduled late October release date of the next generation Windows. Connecticut's attorney general says the states suing Microsoft haven't ruled out seeking an injunction against the product -- Jan.
HOPKINS: Steve, we hear today that New Mexico has reached a settlement with Microsoft. Is that significant?
YOUNG: That was a consumer suit. It's one of many that Microsoft already has settled, but others may be emboldened by the fact Microsoft's now declared to be a monopoly and having abused monopoly.
HOPKINS: Thanks very much, Steve Young.
Coming up: President Bush delivers his remedy for taking the edge off drug costs for seniors. Plus, the changing numbers on the budget surplus. We'll tell the news that fired up the Senate today.
And the Beemer with a burning secret. Find out what is powering one of the most radical cars on the road.
(COMMERCIAL BREAK)
HOPKINS: President Bush today spelling out his plan to give seniors a break on prescription drug costs. It's just one of his ideas on revamping Medicare. The president says discount cards for prescription drugs will be available starting early next year.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Every senior on Medicare can receive a new drug discount card. It won't cost much, at most $1 or $2 a month. And it will work like the card you already have for, say, your groceries: present the card at a participating pharmacy and you'll receive a substantial discount.
(END VIDEO CLIP)
HOPKINS: The card program does not need congressional approval, unlike the president's other ideas for changing Medicare. He outlined those proposals today, including a menu of coverage plans for seniors to choose from.
Senate Democrats went on the attack today, on word of a lower- than-expected budget surplus. The Bush administration acknowledged the surplus for this fiscal year will fall below recent projections. Democrats on the Senate Budget Committee blamed the administration's $1.35 billion tax cut. They said it was intended more to win votes than help the economy.
Tim O'Brien reports.
(BEGIN VIDEOTAPE)
TIM O'BRIEN, CNN CORRESPONDENT (voice-over): There is perhaps nothing President Bush has accomplished that has been more controversial than last May's tax cut. So when the White House Budget Director Mitchell Daniels informed the Senate committee today the surplus is shrinking, Democrats seized the opportunity to lay blame.
SEN. KENT CONRAD (D-ND), BUDGET COMMITTEE CHAIRMAN: The ranking member's suggestion that the tax cut has nothing to do with our facing a deficit this year, I don't think that's just accurate.
O'BRIEN: Only two months ago, the nonpartisan Congressional Budget Office projected a $275 billion surplus for this year. After the tax cut, the CBO estimate dropped to $200 billion. But Daniels said his office now calculates the surplus will only be around 160 billion, the lowest estimate yet. But, he said, still good.
MITCHELL DANIELS, OFFICE OF BUDGET AND MANAGEMENT: Even in the midst of a year-long slowdown in the economy, we continue to accumulate enormous surpluses and to use the extra receipts to steadily reduce the nation's outstanding public debt.
O'BRIEN: Democrats say the tax cut now may force the government to dip into the surpluses generated by Social Security and Medicare. But Daniels disagreed, insisting the refund checks in the mail this summer will be giving the economy a boost.
SEN. HILLARY CLINTON (D), NEW YORK: I think the bottom line is that this is not an economic debate, this is not a fiscal debate, this is a political debate.
O'BRIEN: But with an unusual light touch. White House Budget Director Daniels recently presented the committee chairman with an apple pie, sliced up to show how the surplus might be used. The chairman today reciprocated.
CONRAD: We have a pie, it's somewhat smaller, and it represents the shrinking surplus.
(END VIDEOTAPE)
O'BRIEN: Even at a $160 billion, the shrinking surplus is the country's second largest. Unless, of course, you take away the surplus for Social Security and the surplus for Medicare, in which case there's perhaps no surplus left at all -- Jan.
HOPKINS: Except that those are safe, right?
O'BRIEN: They are supposed to be safe, and the Republicans say they're safe. They said they do have to cut spending, but it will be close. It could fall marginally below what Medicare and what Social Security has saved us, but only marginally -- and in $10 trillion economy, that will be regarded as generally insignificant, at least by the Republicans.
HOPKINS: Now, Tim, there was big news late today on campaign finance reform. It looks like it's being postponed, can you explain?
O'BRIEN: That's exactly correct. The Democrats had hoped they would have enough votes to pass campaign finance reform tonight with the Shays-Meehan bill, which is very similar to the McCain-Feingold bill that has already cleared the Senate. But it didn't happen.
There's difference of opinion about what the rules should be governing debate. Democrats were successful in having those rules voted down, but that prevented any vote on the merits of campaign finance reform. If not dead, it's down for the count, at least until after the summer recess some time in September -- Jan.
HOPKINS: Thanks. Tim O'Brien in Washington.
The International Olympic Committee tomorrow chooses the venue for the 2008 Olympic Games. Of the five cities in the running, the leading contenders are Toronto, Beijing and Paris. At stake: a potential boost for tourism and international prestige and a big price tag for the host.
Tonight, on the eve of the IOC's vote, we profile the three front-runner cities. Up first: Beijing. Mike Chinoy has our report.
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MIKE CHINOY, CNN CORRESPONDENT (voice-over): For China, there is much more at stake in Beijing's Olympic bid than sports. Many Chinese feel it's a judgment on China's place in the world, which explains the overwhelming popular support for the games here. As the capital of the largest nation on earth, a country which has never staged the games and failed in its bid to host the 2000 Olympics, China and its supporters say it's time to give Beijing a chance.
But the country's Olympic ambitions remain clouded by questions about human rights. In recent months, the government has imposed new curbs on Internet use, muzzled several independent-minded newspapers, stepped up its campaign against the Falun Gong spiritual movement and detained several Chinese academics with U.S. connections.
Under these circumstances, critics contend, giving Beijing the games would simply condone repression. Supporters, however, argue that apart form politics, China is becoming an increasingly open society. Holding the Olympics here, they say, would accelerate that process, while rebuffing Beijing, again, will aggravate a deep-seeded sense that China has not been accepted as a great nation by the rest of the world.
Mike Chinoy, CNN, Beijing.
(END VIDEOTAPE)
(BEGIN VIDEOTAPE)
PETER HUMI, CNN CORRESPONDENT (voice-over): If it were up to the romantically inclined, Paris would probably stage every Olympic games. The bid committee plans to take full advantage of just about every well-known city landmark.
CLAUDE BEBEAR, PARIS 2008 BID PRESIDENT: Jumping in front of Les Invalides, fencing in Le Grand Palais. The Eiffel Tower, you will have the beach volley under the Eiffel Tower. You will have the marathon going from one monument to another monument. You will have people cycling on the Champs Elysees.
And with the exception of some of the water sports, all the events would be held within the greater Paris area, allowing easy access for athletes and spectators alike. The estimated $3.3 billion cost to prepare and stage the games would be met by private business and the French taxpayer.
(on camera): In theory, Paris would seem the perfect choice, if it wasn't for one thing: recent Olympic tradition.
(voice-over): Ever since 1952, no two consecutive summer games have been held on the same continent. And with the summer games of 2004 in Athens, Greece, the French capital may have to wait a few more years before being picked.
Peter Humi, CNN, Paris.
(END VIDEOTAPE)
(BEGIN VIDEOTAPE)
BILL DELANEY, CNN CORRESPONDENT (voice-over): Toronto, on Lake Ontario. Sophisticated, first-world, a mostly mild-mannered metropolis, Canadian officials repeat like a mantra it's 2008's risk- free choice.
JEFF EVERSON, TORONTO 2008 OLYMPIC BID: We are the bid of certainty. All of the transportation capacity is here, certainly the broadcast transmission. The air is good, the water's clean -- none of these things will be there in eight years. It's all here in Toronto right now.
DELANEY: Good enough credentials for it to bother many Canadians that much more controversial Beijing still apparent front-runner for the bid.
Canada does have problems of its own, like Toronto Mayor Mel Lastman, who apologized for saying before a trip to Africa, he worried about dancing natives boiling him in a pot.
(on camera): Toronto officials predict an eventual surplus of about $80 million should they get the bid. After all, they say, one more risk-free certainty around here: lucrative television revenues from broadcasting so many events live from North America's Eastern time zone.
Bill Delaney, CNN, Toronto.
(END VIDEOTAPE)
HOPKINS: The decision is tomorrow, and still ahead: we'll tell you about the power surge that spiked the techs and jacked the Nasdaq above the 2,000 mark.
Plus, investors reach for the rip cord in Argentina. We'll have the latest on a crisis Washington is watching closely.
And a BMW that's as clean as it is fast. Find out about a car designed with the planet in mind.
(COMMERCIAL BREAK)
HOPKINS: In tonight's MONEYLINE headlines: a huge rally on Wall Street, fueled by upbeat sales forecast from Microsoft. Three tech companies out with quarterly results after the bell. Both Advanced Micro Devices and Juniper Networks beat street's estimates by a penny, Rambus in line with forecasts.
And campaign finance reform hits a snag in Washington, the House voting 228 to 203 against ground rules Republicans leaders proposed for debate. That stopped the legislation from reaching the House floor.
More now on today's aggressive run-up on Wall Street. Both the Dow and Nasdaq gained at the open, in reaction to that positive news from Microsoft. That in turn tipped off a rally in techs across the board, software, chip and Internet issues leading the pack.
Nasdaq climbing more than 5 percent on the day, pushing it back above the 2,000 mark, the index closing at 2,075. The Dow gained more than 2 percent on the session, the index getting a big boost from a $5 run-up in shares of Microsoft, one of the Dow's stocks. IBM, United Technologies and Caterpillar also big gainers on the day. On the Big Board, advancing issues leading declining issue by a five to three margin.
Topping tonight's "MONEYLINE Movers": Abbott Labs down more than $1, the drug maker losing ground despite profits that were in line with estimates. IDEC Pharmaceuticals losing more than $9, the company saying sales of its non-Hodgkin's lymphoma drug were lower than analysts had expected.
But it was hog heaven for shareholders in Harley-Davidson today, the stock in the legendary motorcycle maker jumping more than 7 percent. It cruised past profit estimates, a slowing economy failing to dent sales. The stock is up more than 30 percent in the last three months. Harley-Davidson plans to unveil a new line of hogs on Monday, the first in 10 years.
Today's broad-based rally on Wall Street is courtesy of some positive earnings news, so is this the beginning of a much-anticipated summer rally? For some perspective, we're joined by Francis Gannon of SunAmerica Asset Management, and Richard Cripps, chief market strategist with Legg Mason.
Frank, you first, is this the beginning of a summer rally, is that all that it takes, some good news from Microsoft to get us off to the races?
FRANCIS GANNON, SUNAMERICA ASSET MANAGEMENT: I think this market has been hit by a bevy of bad news, especially when it comes to negative preannouncement, and finally we had some good news in this market, and it just shows what the power of good earnings news is going to do to this market.
We are waiting for more positive earnings to come, and I think we are all waiting for the economy to trough and earnings to turn around, and it's nice to see Microsoft help us along the way today.
HOPKINS: So, Richard Cripps, do you think that we're in for a summer rally, or should we not trust it yet?
RICHARD CRIPPS, CHIEF MARKET STRATEGIST, LEGG MASON: I don't think so. I think this is more of a sentiment rally. I think markets as -- the markets have gotten very oversold, we had some relatively good news out in the market, and we had short covering and a little bit of interest in buying the market, with the idea that we're in a trading range and we are at the bottom of it, and I think that those highs that we saw in late May are really the target for investors who are buying.
HOPKINS: So, Frank, defend your bullish position.
GANNON: I think I'm bullish over the next several weeks. I think as earnings are being reported, I think you're going to see some good news and you're going to see -- until the end of July. And then I think as people start getting these tax rebates in the mail, it is going to be interesting to see what happens to the consumer by the end of the year, it's going to interesting to see when the turnaround actually comes in the overall economy.
So, I think you've got a window of opportunity here over the next several weeks, and I think that it is going to be powered by better earnings news, at least short term.
HOPKINS: Well, Richard, that's kind of what you're saying as well?
CRIPPS: Yes, indeed. I agree what Frank is saying. I think the idea that this market really gets a lift or gets out of those highs that we say in late May, it's just going to take time. You know, when we get to the first quarter of next year, we really have set up so we should have good, positive earnings comparison.
I think that's what you need for this market to sustain a rise and to break out to -- break out of the trading range.
HOPKINS: So, Frank, what's going to move us, what will be the leaders this time around, is it technology? I mean, certainly it was today.
GANNON: Well, it was today in technology, but I think you have to diversify your portfolio, look at other areas of the market, look at the areas of the market that are going to be affected by a turnaround in the overall economy.
Don't be afraid to look at auto companies, auto parts companies, don't be afraid to look at credit card companies, things that are going to be benefiting as the economy gets better.
(CROSSTALK)
HOPKINS: Credit card companies, though, right now, with an economy that's not doing so well, shouldn't do very well, right?
GANNON: Doesn't make sense, but a company like Providian that's going close to 23 percent and trading at a very cheap multiple versus its peer group I think represents a wonderful opportunity.
HOPKINS: Richard, you see a lot of opportunities in small and mid cap stocks, ones that we generally overlook?
CRIPPS: Yeah. You know, usually small stocks perform very, very well after you've had a period of large stock dominance, like we had from 1995 to the first quarter of 2000, and it's usually a multi-year run that they have, or year process that they do well.
So we think we just had the first year last year as investors rebalanced their portfolio -- being so concentrated in large stocks and the technology, they start to look at the small and mid cap sector, you're going to cause quite a shift into that area, and I think it's going to power a very good move there.
HOPKINS: And what ones particularly do you like?
CRIPPS: You know, it's across the board, the types of names that we want. I think the smaller, the better. I know these are more difficult stocks to buy, stocks with a market cap of $1 billion or below, companies like American Management Systems, Arbitron, Pharmacopeia, Trekks Company, these are good companies with earnings, good balance sheets, and we think they will do quite well.
HOPKINS: Frank, we had a lot of volume today, a lot of people coming into the market. Is that going to continue? Will the money come back, or have investors really been burned?
GANNON: I think investors are waiting for good news, they are -- like I was mentioning before, we are focusing on the fact that we're waiting for the economy to trough and earnings to pick up. And when we start seeing that, money will flow out of the money market funds where it's been parked, and people are waiting for market to better before they start putting money into the market.
But we've also had very light volume on the downside over the past several weeks as well, so to see a high-volume day today I think is important, but I think we have to be careful over the next several weeks, after we get through July, to see what's really going to happen in terms of a long-term picture.
HOPKINS: And final thoughts from you, Richard?
CRIPPS: Well, you know, I think this is a good sentiment rally. We were very, very oversold going into the market here today, but I think that investors still should be choosy in terms of the stocks that they're buying, I think that you're going to have a quarter or two to buy -- to buy -- very good prices.
HOPKINS: Thanks very much, Richard Cripps of Legg Mason and Francis Gannon of SunAmerica Asset Management.
In other corporate news, the proposed deal between UAL's United Airlines and US Airways is entering its final phase. The Justice Department says it's ready to finish its antitrust review of the $4.3 billion deal. The word came just hours after the two airlines said that they would request a final determination. United Airlines recently proposed scrapping the takeover, but US Airways refused, instead calling for the Justice Department to make the final decision.
International Paper cutting another 650 jobs, that's just two weeks after announcing 3,000 layoffs. The world's largest paper maker will shut four mills, blaming a strong dollar and weakening sales.
And a retirement date is set for General Electric's chairman and chief executive. 65-year-old Jack Welch will formally retire on September 7, and GE President Jeffrey Immelt will take his place. Still to come on MONEYLINE: Argentina scrambles to avoid a financial crisis. We'll check out the investment reaction and how it washed up on U.S. shores.
And going green: a new car with zero emissions and plenty of performance.
(COMMERCIAL BREAK)
HOPKINS: Tonight's sectors report: emerging markets. Argentina's stock market today hit by another wave of selling. Investors fearing the country may not be able to pay down a crushing amount of debt. Argentina's government today trying to rally support for deep spending cuts to avoid defaulting on those loans. But it's facing tough opposition especially since Argentina, which is the third largest economy in Latin America, has been mired in a three-year recession.
(BEGIN VIDEO CLIP)
JIM BARRINEAU, ALLIANCE CAPITAL: You're also seeing merging market countries in Eastern Europe and Asia selling off. This is really the most full blown merging market crisis we've seen since Russia in '98.
(END VIDEO CLIP)
HOPKINS: The IMF said today it is not currently considering any more loans for Argentina. The White House reportedly doesn't support further funding. Argentina stocks trading in the U.S. fell sharply. Banks and telecom stocks leading the decline.
The Benchmark Index in Buenos Aires and the Merval, slumping 8 percent today. It had been cut in half over the past two years. Major U.S. banks have lent billions of dollars to Argentina. But they rallied today. Some analysts believe they can weather the current storm. U.S. Treasuries rising, investors seeking the safe haven of U.S. government debt.
Just ahead, a new greener look from BMW, but will environmental conscious pay off in terms of sales?
(COMMERCIAL BREAK)
HOPKINS: In tonight's powering America: a new green machine. BMW today unveiling a fleet of new hydrogen-powered cars. They're being tested on the freeways of California, but like many other zero emission cars, they face a long and bumpy road.
Casey Wian has the story from Los Angeles.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice-over): There's nothing unusual about the top-of-the-line BMW driving through a Hollywood studio parking lot. This has a secret under the hood. Clean-burning hydrogen powers this fleet of BMW 750s. The company brought them to Paramount studios to drum up publicity for what it says could be the next generation of cars.
BURKHARDT GOSCHEL, BMW: Over the past year our fleet has covered more than 80,000 miles in public roads. It's complete reliability.
WIAN: Unlike electric or fuel cell-powered cars, these use hydrogen in a modified internal combustion engine. Its V12 approximates the performance of a standard V8. Except the exhaust is water.
THAD MALESH, J.D. POWER & ASSOCIATES: It would allow them to retain what we believe is the essence of the BMW brand which is the ultimate driving machine. Their advertising tag line. Fuel cells don't make any noise, so for the customer of the BMW they really need to retain the sound they get from an internal combustion engine.
WIAN: But there are huge barriers to hydrogen-powered vehicles reaching consumers. First, a refueling infrastructure is needed, and that would take years and billions of dollars. BMW says government and industry would need to cooperate to make that happen.
California's experience shows how difficult it could be. The state has relaxed laws requiring automakers to sell zero-emissions cars several times. An effort to push electric cars has stalled, because of high prices and slow advances in battery technology.
Still, California plans to require 2 percent of the cars sold by major automakers to be zero emission by 2003. It wants another 8 percent to be ultra-low emission. Many of those so-called hybrid fuel cars are already on the market.
WIAN (on camera): One banking industry executive working with BMW compared future investment opportunities in clean engines to past opportunities in the Internet. That could be considered damming the industry with faint praise.
Casey Wian, CNN Financial News, Los Angeles
(END VIDEOTAPE)
HOPKINS: Let's stay on the car theme.
Last night on MONEYLINE we told you about the remarkable turnaround by the Korean automaker: Hyundai. But a technical problem caused many viewers to miss the story. Many of you e-mailed us, saying you wanted to see it. So tonight, we're offering you a second look. Peter Viles now with a comeback story. We're giving it a comeback of its own.
(BEGIN VIDEOTAPE)
PETER VILES, CNN CORRESPONDENT (voice-over): The brand-new, $6 million Planet Hyundai in Las Vegas, the latest chapter in a comeback story that is the talk of the auto industry.
JOHN CASESSA, MERRILL LYNCH: They've retooled the product. It looks better, it rides better, it is better.
VILES: And it is selling. June was a record month at this Long Island dealership.
TROY CALBRESE, ATLANTIC HYUNDAI: It's been a long haul from years ago, but Hyundai is finally on top of everything. Volume is increasing, and people love driving a Hyundai.
VILES: After busting into the American market with rock-bottom prices in the late '80s, Hyundai sales went into a tailspin. The problem was poor quality that made Hyundai the butt of countless jokes, and turned the brand into a status symbol -- in reverse.
(BEGIN VIDEO CLIP, "GLENGARY GLENROSS")
ALEC BALDWIN, ACTOR: You know why, Mister? Because you drove a Hyundai to get here tonight, and I drove an $80,000 BMW. That's my name.
You see this watch? That watch costs more than your car.
(END VIDEO CLIP)
VILES: The man who rescued this Korean company in America is an Irish immigrant named Finbarr O'Neill, who rebuilt trust with a single promise: a 10-year, 100,000 mile warranty.
FINBARR O'NEILL, PRESIDENT & CEO, HYUNDAI MOTOR AMERICA: We had a problem, people weren't coming into our showrooms. We knew that our quality had gotten considerably better, we knew that the styling was good. But how to attract people to come down to the stores? Well, we thought that a warranty would tell them that we were confident in the quality of the product, and they'd put us on the shopping list -- just come down and take a look.
VILES: They're more than looking. Sales have tripled, from $90,000 in 1998, to a pace of $300,000 this year.
(on camera): Even after this incredible comeback, Hyundai has only 2 percent market share in the United States, but that doesn't begin to measure the headaches it's causing in Detroit, because Hyundai competes so aggressively on price.
(voice-over): Take Hyundai's new SUV, the Santa Fe: base price, just over $20,000, cheaper than the Toyota RAV4, the Mazda Tribute, and the Ford Escape. And in a slowing economy, price does matter.
UNIDENTIFIED MALE: I'll be honest with you, I got a few laughs when I told my friends I was looking at a Hyundai, but I feel the last couple of years, I think they really did a 360, and it seems like they are really ready to please the public.
VILES: There is some fine print in this comeback story, and it's the warranty. It will be several years before it's clear how much it will cost Hyundai to honor that promise.
Peter Viles, CNN Financial News, West Islip, New York.
(END VIDEOTAPE)
HOPKINS: Up next, your e-mails and "Ahead of the Curve."
(COMMERCIAL BREAK)
HOPKINS: Keep an eye on shares of these stocks we've been telling you about. Tech companies AMD and Juniper Networks up in late day trading after beating the forecasts. On the economic front watch for the Producer Price Index. Economists expect the numbers will show inflation at the wholesale level is easing. Also tomorrow: retail sales for June and the University of Michigan Consumer Sentiment Report for July.
Now for your comments. Many viewers sent messages regarding our story on the water troubles in Klamath County. The area is suffering from a severe drought and the government recently cut irrigation to 1,400 farmers in order to protect endanger fish.
Kim Hammerich says: "How can people be expected to just sit by and watch their livelihoods go to pieces?
Another viewer says: "How do you move your family or business to another area, when you're equity is tied up in devalued property?"
And William: "The lives of fish and animals are important but not as important as the lives and rights of the Klamath farmers who were promised water forever by the Roosevelt administration."
Not all comments we received were in support of the farmers, Susan Davis writes: "We need to stick to the original ideals of the Endangered Species Act. We can't take care of earth and save it for future generations if we are not true to conservation efforts."
And Bob says: "The cowboys and farmers are going to move to South America to produce red meat and to Ukraine and other fertile farming areas. Americans will continue to eat well, but at a price."
That is MONEYLINE for this Thursday evening. Thanks for joining us. I'm Jan Hopkins sitting in for Lou Dobbs.
Good night from New York. "CROSSFIRE" is next.
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