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Lou Dobbs Moneyline
Dow Makes Incredible Comeback; Software Business, Nasdaq Continue to Struggle; Plunge in Producer Prices Causes Economists to Fear Deflation
Aired August 10, 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.
ANNOUNCER: From the heart of New York City, this is Lou Dobbs' MONEYLINE. Here now, Lou Dobbs.
LOU DOBBS, CNN ANCHOR: Good evening. In tonight's headlines, a volatile session on Wall Street today, the Dow tumbling more than 100 points, then ending up 117, but the Nasdaq closes lower for a sixth straight session. And producer prices plunged in July, causing some economists to fear deflation. And the deadly heat wave continues to broil parts of the country. We'll have a report for you and take a look at Midwestern farmers who are watching their crops wither.
Let's check in now with our reporters and find out what they're working on this evening -- Christine.
CHRISTINE ROMANS, CNN FINANCIAL NEWS CORRESPONDENT: Lou, a dramatic turnaround for the Dow Industrials, all but four Dow stocks ending the session higher.
GREG CLARKIN, CNN FINANCIAL NEWS CORRESPONDENT: And no dramatic turnaround for the Nasdaq, where it fell after a top analyst warned the software business will continue to struggle.
KITTY PILGRIM, CNN FINANCIAL NEWS CORRESPONDENT: A trade battle between the U.S. and Canada comes to a head over lumber. We'll look at the impact on U.S. home builders.
STEVE YOUNG, CNN FINANCIAL NEWS CORRESPONDENT: Just 20 years ago and facing a midlife crisis, the PC marks an anniversary as the industry ponders an uncertain future.
SUSAN LISOVICZ, CNN FINANCIAL NEWS CORRESPONDENT: Ticket prices up, concert attendance down. Many consumers are choosing to stay home to hear their favorite acts -- Lou.
DOBBS: Susan, thanks. All of those stories and more coming right up.
We begin tonight with a troubling report on wholesale prices. The producer price index for the month of July plunged nearly 1 percent, that is the biggest decline in that index in nearly eight years. In a solid economy, that decline wouldn't be a concern, but in a slowing economy, some now fear we could see deflation, that is falling prices that slam profits at companies selling those goods.
And the reaction today in the bond market: the 10-year up 13 ticks in price, and the yield at nearly 5 percent. The 30-year rose 14 ticks, the yield there 5.5 percent.
On Wall Street today, stocks early on tumbled across the board in large measure in reaction to that producer price index report. But also, a fresh report on software business from Goldman Sachs analyst Rick Sherlund. Sherlund's report kept the Nasdaq down throughout the session, but the Dow managed a strong rebound. Christine Romans with the story from the New York Exchange -- Christine.
ROMANS: You're right, Lou. First, there was a big sell-off in the morning, but it's how the market behaved on that sell-off that actually caused the rally, the Dow and the blue chips managing to pop once you didn't see the Dow fall significantly below 10,200. In fact, when you look at the chart of the Dow's action, it bumped down against that 10,200 level just a couple times, rejected it, and then moved higher. Once it got through 10,300, it moved solidly higher to a triple-digit advance, up 117 points.
Now for the week, the Dow still down about 0.9 percent here, the S&P 500 joining in today's rally, but faring worse on the week, down about 2 percent. Folks overall still concerned about the economy and corporate profits and what next week might hold, but at least for the end of the week, Lou, stocks did get that pop.
DOBBS: Christine, thank you very much.
Analyst Rick Sherlund today not only slashed estimates on several software companies, but he also described his struggle in making any prediction. Sherlund said, quote: "Estimating results has been like catching a falling knife," end quote. Clearly, his report hurt the Nasdaq, which fell for a sixth straight session, the first time that's happened in two months. Greg Clarkin now at the Nasdaq marketsite -- Greg.
CLARKIN: And Lou, Sherlund's report really did set the tone of trading early on. Now, seeing that the software business was continuing to weaken, that really rattled technology investors, and there was a key point hit in the day, at about 10:15 this morning. Now, volume had picked up significantly, the Nasdaq was at its session lows, down about 47 points, it was trading at 1,915, that's a level it hasn't seen since about April 17, and traders said that was kind of the moment of truth, whether they were going to drive this thing lower into the 1,800s or would it find some support.
Well, it found some support, and as you can see from this graph, the Nasdaq ended up the day coming back toward break-even late in the session, but traders really say this was kind of a technical-driven rally. It broke through that 1,935 support level, found support around 1,915 or so, and then made its way back. So, today, there were a lot of worries early on, but, Lou, at the end of the day, outside the software stocks, some of those other stocks had come nicely back. The Nasdaq, though, finishing with a very weak week, down better than 5 percent -- Lou. DOBBS: OK. Thank you very much, Greg. Greg Clarkin.
In Washington today, the Justice Department asked an appeals court to block Microsoft's efforts to keep a trial court from considering penalties against the company. Microsoft wants to see that the Supreme Court hears its own appeal first, the company challenging a decision that upheld a finding of monopolistic practices. The Supreme Court may consider Microsoft's request this fall at the earliest, just as the company rolls out its much- anticipated, much-ballyhooed Windows XP.
Well, today's report on wholesale prices underscores Jeremy Siegel's belief that the Federal Reserve should cut interest rates to at least 3 percent. And professor Siegel joins us now from Philadelphia.
Jeremy, good to have you with us.
JEREMY SIEGEL, WHARTON SCHOOL OF BUSINESS: Good evening, Lou.
DOBBS: This market, this week -- the Nasdaq, down just about 6 percent, the Nasdaq off...
(AUDIO/VIDEO GAP)
DOBBS: ... with another 50-basis point cut?
SIEGEL: If they do, that would mean that there is a lot more weakness, so any enthusiasm for those low -- more stringent cuts will be offset by the concern about what that means for earnings and the economy.
DOBBS: What cut you would recommend to Mr. Greenspan?
SIEGEL: Well, you know I have been very aggressive on wanting to lower it back in January.
DOBBS: Right.
SIEGEL: I said they should go to 4 percent. I think definitely 3 percent. It was 3 percent in 1992, kept it there for 18 months, and that finally what got our economy going again in '94. And look at the inflation. An inflation news today means he can safely move it down again.
DOBBS: So, even though it's a sign of weakness, you want that 50 basis points?
SIEGEL: Oh, absolutely. I think it's important for the market.
DOBBS: That inflation report, the producers price index today, the sharpest decline we have seen in just about eight years, what does that portend?
SIEGEL: Most of that was energy. Actually, I think that's a good news. The core rate was actually up 0.2, so I'm not worried about deflation in the future, and I think this gives a latitude for the Fed to make more aggressive cuts.
DOBBS: And if we are to be patient with this market for some time, is your -- give us your advice to investors.
SIEGEL: Well, you know, I have always warned about that technology, and I still think the greatest uncertainty is in that sector. Do not overweight that sector. I think there is even more bad news to come.
DOBBS: Don't overweight it. Those who still have -- who have ridden this market down, is it a time for them to actually consider getting out of technology?
SIEGEL: Well, maybe as a tax loss, you could get out of technology. Yeah, I mean, it's a question of balancing your portfolio. In no other market over the last two years has diversification really paid. And whenever you overweight a sector, you take too much risk, and those people who overweighted technology have paid the consequence of that.
DOBBS: We began with you referencing the last time you were here some six weeks ago, Jeremy. We talked then about a recovery based on historical trends that would suggest September would be just about right, if indeed we have seen the bottom. Do you still believe that?
SIEGEL: No, I haven't -- you cut me off.
DOBBS: Jeremy, can you hear me?
SIEGEL: No, I'm sorry, I didn't catch that last one.
DOBBS: It was such a good question, too, Jeremy. Let me try it again.
SIEGEL: OK.
DOBBS: The question is, the last time that we talked, you referenced six weeks ago, you were talking about the five-year -- five-month, rather, sort of average from the lows in the market to recovery. Do you still believe that's pretty much the paradigm here?
SIEGEL: Well, I said that that has been the average, and if we don't see that recovery, the market was going to get disappointed, and that is exactly what we are seeing now. It doesn't look like a September-October turnaround, and that's why we have had a backup in the market. I still believe those April-March lows will hold, but this turnaround is going to be slower than they thought, and as a result, the market is not going to go anywhere.
DOBBS: OK. Jeremy Siegel, as always, good to talk with you.
SIEGEL: Thank you very much, Lou.
DOBBS: Money manager Alan Bond has been arrested again. This time, he is charged with fraud involving illegal allocation of trades between his clients' accounts and his own. Bond is still awaiting trial on charges of taking kickbacks on brokerage fees from accounts he managed for institutional clients. It's yet another stunning turn of events for Bond, once an up-and-comer on Wall Street and a frequent guest on "Wall Street Week."
Allan Dodds Frank has the story.
(BEGIN VIDEOTAPE)
ALLAN DODDS FRANK, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): Even while awaiting trial for allegedly taking kickbacks, Alan Bond, the man on the right, was working from this building and had retained client accounts worth $230 million. According to the criminal and civil complaints, Bond placed buy and sell orders during the day, then committed fraud by cherry picking. That is, by illegally allocating the trades after the market closed.
KELLY BOWERS, SEC ENFORCEMENT: Considering the losses based on the day the trades were made, the clients lost about $10 million, while the profitable trades resulted in Bond getting a profit of about $6.5 million.
FRANK: His handling of those accounts, which cleared through Neuberger Berman, raised suspicions.
JOHN COFFEE, COLUMBIA UNIVERSITY LAW SCHOOL: This alleged fraud wasn't detected by the government, by the SEC, but by the defendant's own brokers, who seemed to have been so embarrassed by the bold-faced nature of his trading that they called the SEC up and turned him in.
FRANK: Bond allegedly defrauded an Alabama Transit Workers Union's fund and clients from Maryland and Virginia. From March 2000 until now, they lost another $45 million as their portfolios shrank.
RANDY MASTRO, FORMER FEDERAL PROSECUTOR: There are now two separate but related sets of charges, on which Alan Bond has to defend himself, so it creates a lot more pressure on a defendant under those circumstances to try and reach a plea disposition.
FRANK (on camera): Bond is now in jail, awaiting a hearing next week. Prosecutors are expected to ask to keep him behind bars until trial, on the grounds that he is a flight risk and might commit further fraud.
Alan Dodds Frank, CNN Financial News, New York.
(END VIDEOTAPE)
DOBBS: Well, around much of the country, this week's record temperatures eased somewhat, but it was still brutally hot in large parts of the country. Heat advisories were in effect for Washington, New York, Richmond, Virginia, Wilmington, North Carolina. And power companies are asking residents there to conserve.
But thunderstorms from the Mid-Atlantic to the Northeast this afternoon bringing some relief from the heat. Temperatures are forecast to come down over the weekend. The hot and dry weather blanketing the Midwest is damaging the nation's corn and soybean crop. The Agriculture Department today lowered its estimates for those crops, as many industry analysts expected. Lisa Leiter reports from Chicago on how those farmers are coping.
(BEGIN VIDEOTAPE)
LISA LEITER, CNN FINANCIAL NEWS CORRESPONDENT (voice-over): The government confirmed what Ron Frieders has already knew.
RON FRIEDERS, FARMER: The ear should be longer and it should be wider around.
LEITER: Crops are now suffering from the blistering heat and lack of rain. And they were already off to a bad start in late spring, when the Midwest was so unseasonably cold and wet that many newly planted crops stopped growing. The government today lowered its outlook for corn by 2 percent from a month ago, predicting the smallest crop in four years. Estimates also fell for soybeans, but for now farmers are still expected to harvest a record crop.
FRIEDERS: Corn suffers the most when it loses more moisture than the roots can take up, and with the ground being so dry it doesn't have the moisture there to replenish it.
LEITER: Some say it's the worst dry spell in more than a decade.
RICK FELTES, DIRECTOR OF RESEARCH, REFCO: It clearly appears worse than 1995, certainly worse than last year. And in both of those years, corn and soybean production from the August crop report to the final continued to decline.
LEITER (on camera): Hot and dry means higher prices in the commodities pits here at the Chicago Board of Trade, where weather is always a key focus.
(voice-over): Prices surged on the latest USDA report, and traders say they will keep climbing unless the weather improves.
STEVE BRUCE, TRADER: Any kind of real bad weather again that means heat, no rain, or an early frost, we could see much more dramatic increases.
LEITER: If hot and dry weather continues, higher prices may be the only consolation for farmers like Ron Frieders, struggling to keep their fields alive.
Lisa Leiter, CNN Financial News, Chicago.
(END VIDEOTAPE)
DOBBS: In tonight's "Technology Watch," stem cell research companies retreating after yesterday's run-up -- those stocks sharply lower today, following the president's decision to allow limited federal funding of the controversial research. Mr. Bush says he will allow government funding for research using existing lines of stem cells, but not for embryos created specifically for scientific purposes. StemCells, Geron, Aastrom Biosciences and Cryo-Cell, all falling on the day.
Checking the public reaction to the president's decision: a CNN- "USA Today"-Gallup poll completed immediately after that speech showed half of all Americans surveyed agreed with the president's decision
Still ahead here on MONEYLINE, a milestone for an icon of the digital age. Also, why lumber is at the heart of a cross-border conflict. The summer concert season leaving many promoters hoping for a lot more sizzle at the box office.
And tonight, we'll hear from a man who has advised presidents and nations on how to navigate the global financial system.
(COMMERCIAL BREAK)
DOBBS: An earthquake measuring 5.5 in magnitude jolted California today. That quake hit at 1:18 Pacific time this afternoon, centered near Portola in Plumas county. It could be felt -- it was felt 50 miles away in Sacramento and in Reno, Nevada. No reports of injuries or damage.
Space shuttle Discovery lifted off this afternoon, heading into orbit with a new crew for the International Space Station.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: Three, two, one, booster ignition, and liftoff of Discovery, carrying the third crew of...
(END VIDEO CLIP)
DOBBS: The shuttle took off at 5:10 Eastern this afternoon, the launch taking place five minutes ahead of schedule as NASA tried to beat out those approaching thunderstorms over Florida. Discovery is carrying a new three-person crew. They will spend the next four months on Space Station Alpha.
And millionaire Steve Fossett continuing his balloon flight across the Pacific, making steady progress in his mission to go around the world all by himself in that big balloon. Fossett passed Tahiti today, sailing at an altitude of about 21,000 feet. His balloon, the Solo Spirit, moving along at about 50 miles per hour. He left the Western coast of Australia Saturday. This is his fourth attempt to circumnavigate the globe.
The State Department has reissued its warning about travel to Israel, the West Bank and Gaza, cautioning U.S. citizens not to travel there. The department cites a heightened threat of terrorist incidents. The move follows the suicide bombing yesterday in Jerusalem that killed 15 and injured 100 people. There has been a travel warning in effect since early January.
New tensions over the skies of Iraq today, U.S. and British aircraft attacking three Iraqi air defense sites. Pentagon officials tell CNN that the targets included a communications node, located southeast of Baghdad, part of a fiber-optic network, and today's air strikes were on a similar -- rather smaller scale than the last major attack that took place back in February.
Crude oil prices today spiked higher, following an upward revision on global demand for OPEC oil and heightened tensions in the Middle East. The International Energy Agency in its monthly report reporting that demand should be up by another 400,000 barrels a day this year. That report comes just a couple of weeks before OPEC is expected to cut production by another million barrels a day. And in New York trading, a barrel of light sweet crude, up 41 cents, settling at $28.05 a barrel.
A cross-border battle between the United States and Canada. The Bush administration saying it will slap a significant tariff on Canadian lumber, after the Commerce Department found the industry being unfairly subsidized. Kitty Pilgrim reports now on why home builders in this country may pay the price of that border tension.
(BEGIN VIDEOTAPE)
PILGRIM (voice-over): Blame Canada. The cost of building a home may run $1,200 dollars, with the U.S. government slapping a 19.3 percent duty on Canadian softwoods, the kind of lumber used for housing.
MICHAEL CAROLINER, NATIONAL HOME BUILDERS ASSOCIATION: I don't think that this is going to derail the strength in housing, but I think it is going to cause some disruption for builders and for other people in the downstream industries, and it's going to mean higher cost for home buyers.
PILGRIM: Those tariffs are expected to take effect by August 20. The United States imports a little more than one-third of its construction lumber supply, and 94 percent of the imports come from Canada. Those imports have risen more than 15 percent from the first to the second quarter of this year.
The lumber pits in Chicago had a hectic day, selling off slightly by day's end on the disappointment that the duties would not be higher. The U.S. lumber industry had requested duties as high as 78 percent. Canada is appealing the ruling. Financial analysts say it is going to be a long battle, so there is no clear play on any of the stocks.
MARK WILDE, DEUTSCHE BANK: This is I think a relatively short- term fix, and I think a real resolution to this broader issue of kind of Canadian-U.S. lumber trade sits out in the middle of next year.
PILGRIM: Some U.S. producers, like International Paper and Weyerhaeuser, actually have operations in Canada, so it's a mixed blessing. Exclusively U.S.-based Georgia-Pacific and Louisiana Pacific may see some benefits from higher lumber prices.
(END VIDEOTAPE) PILGRIM: Analysts say this has the potential to become a nasty trade dispute, but ultimately Canada should be able to supply more lumber to the United States, but on terms both countries are comfortable with -- Lou.
DOBBS: It sounds like the end result here is that contractors will be spending more for supplies and home buyers will be spending more for their homes.
PILGRIM: That is the short-term prospect for now, Lou.
DOBBS: All right, Kitty thank you. Kitty Pilgrim.
Concerns about a global slowdown hitting investors around the world this week, troubling news emerging from Asia and Europe. Bob Hormats, vice chairman, Goldman Sachs International, joins me now. Bob, good to have you with us.
BOB HORMATS, GOLDMAN SACHS INTERNATIONAL: Good to be here, Lou.
DOBBS: In particular, the news on Germany: not good, obviously that country is teetering on the verge of recession. What do you make of it?
HORMATS: Well, you're right, Germany is slowing down. It's the biggest economy in Europe, and the problem is that all of Europe, which felt that it could be insulated from this global slowdown, is now feeling the brunt of it. And since it's a big market for American products, particularly capital goods, it will have a direct effect on us as well.
DOBBS: How soon will we see that effect, and what will it be?
HORMATS: Well, actually, we are already beginning to see, and I think one thing to bear in mind is that exports account for a larger portion of GDP than housing sales and auto sales combined, so weak exports in Europe and Asia and other parts of the world really does hurt the American economy, particularly the manufacturing sector, that is also adversely affected by strong dollar.
DOBBS: And in terms of the European Union, the -- that economy, extraordinarily important, because we basically have a trade balance with that...
HORMATS: That's right. We have been doing pretty well with Europe, as opposed to some countries in Asia. The other part of it is...
DOBBS: Like Japan.
HORMATS: Like Japan, for instance, and Japan, for instance, is a good example. They are all -- the Asian economies, except for China, are all deteriorating. Europe we thought might do a little bit better.
The other problem, of course, is not just trade, but we've got a lot of American companies that are actually invested in Europe, and their own sales out of their subs and their branches and their factories has deteriorated as well.
DOBBS: Foreign direct investment is often a part of the equation no one pays much attention to.
HORMATS: Absolutely. But for many companies, it's actually bigger than their exports, and therefore will directly and adversely affect their profits.
DOBBS: We mentioned Japan and Asia, that region, what do you see there?
HORMATS: Well, I don't see anything very good. Japan is probably in its fourth recession in the last 10 years, the second biggest economy in the world. The Bank of Japan has been pressed by the government to be more stimulative, the problem is that the return on capital in Japan is very low, they have a lot of bad loans on the books...
DOBBS: Impact on the United States.
HORMATS: Impact is negative. We have come to sort of live with or learn to live with a weak Japan, so there is nothing of surprise there, but it's just a general negative for our exports.
DOBBS: Huge trade deficits, the largest trade deficit with China, what is the likely prospect there?
HORMATS: Well, the advantage is that China at least is still growing, and China is able, unlike Japan, to generate internal demand to offset some of the weakening of export, so that even though Chinese exports have weakened to the rest of the world, China's economy remains relatively strong and they're still buying American capital goods.
DOBBS: So in summation, basically, the markets are dwindling for U.S. exports abroad, and there is no likelihood that those economies abroad will be offsetting any of the weakness in the U.S. economy?
HORMATS: That's exactly -- they have come to rely on sales to the United States to get them out of their period of weakness, they can't sell as much here anymore, and they are going to get weaker. They can't generate the domestic demand to offset that.
DOBBS: Bob, thanks very much. Bob Hormats.
Well, 20 years ago this Sunday, IBM marketed its first personal computer. The rest is business history. Steve Young now with a look at what the PC industry promised, what it delivered, and where they are headed now.
(BEGIN VIDEOTAPE)
YOUNG (voice-over): It's relatively small, so you could say the Bendix G15 back in 1950s almost qualified as a personal computer, but its price tag was $60,000. In the 1970, the Altair computer kit put a gleam in Bill Gates' eye. Then some guys named Jobs and Wozniak thought different, but it wasn't until 1981 that the PC became legitimate.
RICHARD SHAFFER, TECHNOLOGIC PARTNERS: If it came from IBM, it was a serious business product, and that at the time was where the money was coming from, the business buyers.
ROD CANION, FOUNDER, COMPAQ COMPUTER: When IBM introduced their PC, one of the things that just really became clear was, this is going to change the industry, it is going to cause it to explode. And I was about the right age -- if I'm ever going to start a company, I better do it now.
YOUNG: The PC promised us the paperless office. Well, get a load of a colleague's office next to mine. Analysts say what happened to the paperless office was, until recently we never had the technology we could put in our pocket and carry away.
Economists used to have pillow fights about whether PCs increased productivity, but this economist and most others now agree: mission accomplished, except for two hitches.
ESTHER DYSON, RELEASE 1.0: The guy next to you is more productive too, so it doesn't give you a competitive advantage, it just means you have to do more to catch up. And the second is, from a company's point of view, the same issue -- the competition exists.
YOUNG: Despite the increasing gaggle of handheld gizmos, most experts agree 20 years from now the PC will still be around, it just won't look like or act like anything we have today.
ROB ENDERLE, GIGA: It is more of a partner, it's less of a hurdle, it is virtually invisible as far as an obstacle, and I probably can't live without it. That's what I'm looking for in the PC of the future.
(END VIDEOTAPE)
YOUNG: The acronym DWIM sums up the dream personal computer of 2021. It will be a PC so smart, Lou, it will be able to do what I mean.
DOBBS: DW -- I get it!
YOUNG: It's cool.
DOBBS: All right. It's very cool, and I would expect nothing less, Steve. Thank you. Steve Young.
Well, still ahead here on MONEYLINE, the summer wash-off of some of the music industry's hottest acts, we will be telling you about that. And one electronics retailer hits a low mark. We'll check out what's happening at Radio Shack. Also, a triple-digit bounce for the Dow 30. We'll have all of the day's action on Wall Street, coming right up. (COMMERCIAL BREAK)
DOBBS: On Wall Street, from a triple digit loss to a triple digit gain for the Dow. The Dow making a solid recovery, closing up more than one percent on the day. The Nasdaq finished lower for the sixth straight session. Strength from blue chips, such as 3M, Alcoa, International Paper helping to drive the Dow's turnaround. The Dow up 117 points, as I said, before the week. The Dow posting a loss, down about one percent.
And it was a mixed day for technology stocks. And gains in chips offset by weakness in software and Internet stocks. The Nasdaq fell nearly seven points, settling at 1956. That is the lowest close since April 17. And for the week, the Nasdaq losing almost six percent.
Taking a look now at some widely helds, Merck and Johnson and Johnson among the big winners today, each closing up more than $1 a share. Shares of Oracle down about five percent. That after Goldman Sachs lowers its earnings estimates. Oracle expected to reported quarterly results later this month.
And over on the Big Board, market breadth positive. Advancers did beat out decliners by a margin of about five to three. And on the Nasdaq, negative. Decliners beating out advancers by also a narrow margin.
Now taking a look at what investors and traders may expect next week on Wall Street, Christine Romans at the New York exchange -- Christine.
ROMANS: Hi, there Lou. Well, technicals and charts took center stage here today and the fact that the Dow rally above 10,200, holding that level and rejecting it is something that the bulls are looking to see if it can follow through on Monday. But there is plenty of fundamental information next week to dig through.
Among them, a lot of things in the line up in terms of economic data. We are going to get a retail sales number on Tuesday for July. We're also going to get industrial output and capacity utilization on Wednesday. Then Thursday comes July's CPI, that's the Consumer Price Index, a housing starts number and the latest weekly jobless claims. Friday, caps the week with the University of Michigan Consumer Sentiment report and an international trade number.
And don't forget, plenty of earnings next week as well, including a handful of Dow components. Home Depot, Wal-Mart, Hewlett Packard. Also on deck next week is Analog Devices. And there are some retailers, some other computer chip makers and some food companies as well. So the earnings flood will continue a little bit next week after taking a break this week. Plenty of fundamental things for people to look at, to try to figure out what's going on in different sectors and what's going on in the economy as a whole -- Lou.
DOBBS: You know, as you went through that list of reports we can expect next week, I didn't see anything there would be particular buoyant for investor mood? ROMANS: Absolutely, these are mostly numbers for July as well. And as we know, folks think that June and July, judging from that Beige Book, were still really tough for the economy, bumping along along the bottom is what some people are hoping is the best.
DOBBS: Those specialists and traders at the major brokerages can't be happy to -- can't be very happy at all, in fact, with what Jeremy Siegel was saying, which is, don't expect much that's positive for some time.
ROMANS: Yes, you know, even the technicians who are really happy about today, they say they're not going to get too excited until the Dow can reach 10,600. That's a ways to go.
DOBBS: Absolutely. Thank you very much, Christine.
Taking a look at what's facing technology investors over the next week, Greg Clarkin at the Nasdaq market site -- Greg.
CLARKIN: Now Lou, there's a couple of things our traders and investors will be watching next week. One is just a kind of general trading pattern. We talked a lot about these support levels today of 1935. The Nasdaq slicing right through that in the early going today. So basically, it buckled but it didn't break.
And there was a real moment of truth, according to traders, right after 10 when, you know, there was a real hedging as to whether or not this Nasdaq was going to go down to the 1800s or bounce a little bit. It bounced a little bit. They took some solace in that, but really no fundamental shift in philosophy or attitude towards these technology stocks. They still expect to get more bad news before they get good news.
Now next week, there are some technology companies out with earnings as well. Some big names, as a matter of fact. On Tuesday, we'll have Applied Materials, the big chip equipment company. They're expected to give basically a snapshot of the health of the chip business. BEA Systems, the software company, been real actively traded lately. There's a lot of jitters over their earnings report and what management may or may not say in that conference call.
And then Dell will be out on Thursday. And we have a couple other tech companies in there as well. And one thing to keep an eye on is next week. Late in the trading day, what we see with these technology companies when they report after the close of trading is really kind of wholesale selling in the sector. People just want to step aside, wait until the company gets their earnings report out and has their conference call before making any kind of moves. So watch for some selling pressure late in the day -- Lou.
DOBBS: Greg, we were hearing a lot of people talking about a 1965 support level. We're at 1956.
CLARKIN: Exactly, shattered right through 65, went down through 35. Today the fact that it kind of hit 1915, that incredibly low level and then kind of came back, did give some folks some support that you know, the trading range may have been extended a little bit on the bottom, but still, it basically held a little bit.
So they're just kind of making up the rules as we go.
(LAUGHTER)
DOBBS: Well, I suppose it's Wall Street and they're entitled to do that and...
CLARKIN: Exactly, it's summer. It's slow.
DOBBS: We shouldn't be surprised that they do. All right. Thank you very much, Greg.
Topping tonight's "MONEYLINE Movers," United Therapeutics jumping more than $5 a share. An advisory panel recommending FDA approval of the company's first drug. It's a treatment for pulmonary hypertension. The company also narrowing its second quarter loss. Pixar up nearly $2.25 a share. The digital animation studio reporting better than expected earnings. And Pixar raising its full year forecast, anticipating a strong response, to its upcoming film "Monsters."
Rambus up 11 percent today. That after a district court ruled in its favor. A Virginia judge dismissed charges that Rambus committed fraud when seeking patents for some high speed chips. Once a Nasdaq high flier, shares of Rambus have tumbled more than 90 percent from a 52-week high.
In tonight's "MONEYLINE Focus," we'll have some perspective on the week and the week ahead.
Joining me now is Jan Hopkins. Good to see you, Jan. And Christine Romans coming back from the New York Stock Exchange. Professor Jeremy Siegel joining us from Wharton. And Bob Hormats being good enough to stick around. And Greg Clarkin, where are you? And what happened to Greg? But anyway. Good of you all to stick around.
Let me start, if I may, with you, professor. You said it's a time for caution. Don't expect much. Bottom-line advice to investors, what should they be doing with their money right now? Because they're being inundated. Analysts saying this is going to work, this is not going to work. Give us your pure pristine view of it all?
SIEGEL: First of all, lower your expectations for stocks this year. Stay very well diversified. Do not overweight the technology, no matter how cheap they look. And a lot of those prices look cheap. There are actually some I think junk bonds that are looking kind of attractive there.
DOBBS: Junk bonds?
SIEGEL: Believe it or not. There's still some value there.
DOBBS: What happened to pristine and... (LAUGHTER)
SIEGEL: Well, government -- Lou, you said early on, the 10 year dropped below five percent.
DOBBS: Right, right, that's incredible.
SIEGEL: And now that can't be value for investors today. I still think there's going to be a value tint to the market because I think what's happened to technology -- and I think also the tremendous concern about the quality of earnings in the technology sector.
DOBBS: Right.
SIEGEL: People are going to go to where they see them.
DOBBS: OK. Let me turn to you, Jan. Your thoughts? You've been following this market throughout the week?
JAN HOPKINS, CNN CORRESPONDENT: And it was an interesting day today. Actually a lot of optimism. And the question is, is this rally at the New York Stock Exchange going to continue on Monday. We have 200 point turnaround, which is pretty significant. Maybe if investor expectations are lowered a little bit, as we start talking about preserving wealth. I thought that was interesting last night on MONEYLINE. We could be getting a bottom here and moving forward.
But as Jeremy Siegel said, maybe we shouldn't expect the same kind of returns that we've had in the past.
DOBBS: Well, let me ask Christine. Didn't we have a bottom back in March and April? And now Jan's talking about...
HOPKINS: No, but you have to have a double bottom.
(LAUGHTER)
HOPKINS: You have to get there twice, right?
DOBBS: We have to. Are we there, Christine?
ROMANS: Yes, I am. You're right. You know, a lot of folks keep talking about this bottom in March, but they're talking today about the fact that all of these markets, the average and the two big indexes manages to hold above their July loads. And they see that as pretty important, but it's interesting to put it in a little bit of perspective. One trader came up to me tonight and he said, "You know, listen, 1,500 more points to go on the upside before I'm flat on the Nasdaq." You know, that's a big move.
DOBBS: Bob Hormats?
HORMATS: Well, I think we've got -- Jeremy Siegel put it very well. We shouldn't have very big expectations about the future here. We've got a lot of overcapacity. There's still a lot of inventory. And Fed policy, which people count on to stimulate the economy, is not working as it has in the past. The banks are very stingy on credit. The dollar has been rising, which is negative.
DOBBS: How about advice to investors? Tell them exactly what...
HORMATS: I think investors should be cautious, look for good values, but don't hurry into the market unless you find really good values.
DOBBS: Are we really saying here, may I say this -- address this to you both, Jeremy and to you, Bob, are we really telling investors back off the market? Is that what you're really saying?
HORMATS: I'm not saying back off. I'm saying be very cautious about going in.
DOBBS: Jeremy?
SIEGEL: Lou, the question is are you going to go back to your three percent money market fund?
DOBBS: Right.
SIEGEL: That ain't very good either.
DOBBS: Right.
SIEGEL: There aren't a lot of safe, good choices left.
DOBBS: Well, and more is the pity, but it's a delight...
SIEGEL: You're satisfied with stocks that may not have a great year, it's still better than a money fund.
DOBBS: Absolutely.
HORMATS: And down the road, they'll be better long run.
DOBBS: Bob, delighted.
HORMATS: Yes.
DOBBS: Thank you very much, Christine. Jan, thank you all.
And just ahead, we'll be taking a look at how to take advantage of a competitor's weakness. Why some are saying that Best Buy is a good buy and its rival a victim of its own success. We'll sort all of that for you. And poor tickets and the industry can't blame a slowing economy.
(COMMERCIAL BREAK)
DOBBS: The worst performing sector today, electronics retailers. Analysts saying Best Buy continues to gain market share over Radio Shack because it has a better product mix. Best Buy shares have more than doubled this year, but they slipped two percent today. While Radio Shack closed down as well, hitting a new two-year low, in fact. Analysts are concerned Radio Shack is the victim of its own success, after expanding into home satellite, computers and wireless. And those segments no longer growing.
RadioShack, once considered the least economically sensitive of the electronics retailers because it sells high margin items like batteries. And Circuit City Electronics Boutique and Cablevision also moving lower on the day.
Next here on MONEYLINE, a slow season for concert ticket sales and why the music industry and not just the slowing economy is to blame. We'll also be taking a closer look at a business that relies heavily on your income. I'll be talking with a consummate Hollywood insider, the editor of "Variety," Peter Bart about the state of the movie business.
(COMMERCIAL BREAK)
DOBBS: Coming up next on MONEYLINE, why the concert business has itself to blame for a lot of empty seats in arenas all across the country. And we'll have the outlook for the rest of the entertainment business from Peter Bart, who's the editor-in-chief of "Daily Variety" and now a MONEYLINE regular contributor.
(COMMERCIAL BREAK)
DOBBS: Music events and concerts, a business worth nearly $2 billion a year, but the economic slowdown is hurting that industry. Poor ticket sales aren't just affecting more mature rockers. The latest top 40 stars also in trouble.
But as Susan Lisovicz reports from the site of the Newport Jazz Festival, it's not just the economy that's to blame.
(BEGIN VIDEOTAPE)
LISOVICZ (voice-over): Madonna is a sell out, even with face value tickets at $250. U2 grossed $69 million on its recently concluded North American tour. Dave Matthews is averaging $2 million at each concert.
But the concert business is not all right this summer. Rod Stewart has played to half empty houses. Janet Jackson sales are spotty. The Backstreet Boys are playing to smaller venues and not always selling out.
Pollstar, a company that tracks concert attendance says ticket sales in dollars for the top 50 acts were down 12 percent in the first six months of the year. The total number of tickets sold was down even more, 15 percent.
GARY BONGIOVANNI, EDITOR-IN-CHIEF, POLLSTAR: It's a combination of factors, but probably the biggest one is the general downturn in the economy. Concert tickets are something that people buy out of their discretionary income. And there's less of it around these days. And that's coupled with the fact that overall ticket prices are higher.
LISOVICZ: Much higher. Ticket prices which averaged $21 in 1991 have more than doubled since. The average price now is nearly $47. Aerosmith, Eric Clapton and Radiohead are among House of Blues acts this summer. Jay Marciano says their sales have not declined from last year.
JAY MARCIANO, PRESIDENT, HOB CONCERTS: We're being careful about how we price our shows. We like to have a ticket price point for every concert buyer. Everyone seems to be focused on the high priced tickets, but the fact of the matter is, is we usually have four to five different prices for every concert we offer.
LISOVICZ: Ray Charles, Natalie Cole and Diana Crawl are among the marquee names at this year's Newport Jazz Festival, which is seeing ticket sales off about 13 percent from its 15 year average.
(END VIDEOTAPE)
LISOVICZ: Concerts used to be immune to downturns in the economy, but with the average ticket price approaching $50, even some of the biggest names in the business are facing something of a consumer backlash. Tonight's open of the Newport Jazz Festival, by the way, features legendary drummer Roy Haynes and the vocalist Diana Crawl. And Lou, by the way, it is a sell out.
Back to you, Lou.
DOBBS: Susan, I am still upset by -- about learning that Rod Stewart isn't selling out. What's going on?
LISOVICZ: He hasn't had a big hit. He hasn't had a big hit in years, and that's a problem. You need something to push the crowd.
DOBBS: Well, we've got a weekend to get over it. All right, thanks, Susan Lisovicz.
LISOVICZ: Sure.
DOBBS: Well joining me now to take a closer look at the entertainment business, someone who's been associated with it for many years. He is the editor-in-chief of "Daily Variety," a leading voice in the industry. Peter Bart, who joins us from our studios in Los Angeles.
Peter, good to have you with us.
PETER BART, EDITOR-IN-CHIEF, "VARIETY": Thank you.
DOBBS: This -- let's talk about this summer's movies. My wife has just informed me we have a number on slate this weekend. But about the time I get interested in a movie, it seems to have moved on. What's going on?
BART: Well, this is the summer of the one weekend wonder. That is to say, a picture opens to big business. Even if it gets to be number one on the chart, it doesn't stay there. It's gone within two or three weeks. By week two, on average, business is off 50 to 60 percent. DOBBS: Wow.
BART: You know, your stock gurus were talking about lower expectations to the market. I think lower expectations for movies would be an item as well.
DOBBS: These are big budget movies. Can they really -- can they succeed on that basis?
BART: You know, they can and they can't. I mean, basically, the lack of shelf life is costing a redefinition of the basis economics of the industry. For one thing, exhibitors are basically kaput because the exhibitors piece, the theater owners piece of the pie goes up second or third and fourth week. It begins maybe an average of 30 percent of the take.
So by the time a picture really gets to be profitable for a theater owner, it's history. Also you know, Lou, you have to spend so much more to advertise and market a picture in week one if you know that there's no shelf life.
DOBBS: Yes, and without shelf life, I mean, I guess all of the economics start colliding. In terms of this summer, what has been the biggest movie in terms of being able to sustain beyond one weekend if there has been. And in terms of box office?
BART: Well, the only two pictures that are sustained beyond a week are "Pearl Harbor" and "Mummy Returns." Now there's a chance this weekend, this is the ultimate sequel weekend because you have "Rush Hour 2."
DOBBS: Right.
BART: And "American Pie 2." The battle of the sequels. Both of them are like most sequels a little sort of assembly line made, you know? But I think "Rush Hour 2" might sustain and become the third picture of some that make it two weeks. But compared this with the days that, you know, "ET" would hang in there for 8 to 10 weeks. It's kind of pathetic.
DOBBS: Right. Well, Peter Bart, you've just mentioned two of the movies that my wife says we're headed to. So...
BART: You're going to see "ET"?
DOBBS: Absolutely. Peter Bart, good to have you with us. And we look forward to you being with us every Friday evening here on MONEYLINE. Peter Bart of "Variety."
BART: Thank you.
DOBBS: Thanks. Coming up next, we'll take a look at your e-mail and ahead of the curve.
(COMMERCIAL BREAK) DOBBS: In economic news next week, we'll be focusing on the consumer price index for July. We'll have industrial production. The Michigan Consumer Sentiment report. We'll also be hearing from Hewlett-Packard, Home Depot, Wal-Mart, three Dow components, their earnings next week. K-mart, Dell and Applied Materials as well.
Let's take a quick look if we may at some of your comments.
Arthur Mones in Arizona wondering why we use such strong language in our reporting. He writes, "Why do we hear about a brutal recession in manufacturing? Is that really an accurate description of the situation?"
Well, Arthur, after 12 consecutive months of contraction, little sign if any of improvement, it sure looks that way, not to include all of the job losses as well.
Robert Eldrige also chimes in from Holland, Michigan. He runs a manufacturing operation supplying truck and trailer parts. And he says that "demand has fallen off as much as 60 percent in some market segments against 1999, certainly spelling recession for our industry."
So yes, our strong language is more than justified. Robert also says he would like to hear more from Mort Zuckerman, who was a guest here last night.
He writes, "Mr. Zuckerman's comments regarding a rocky period for the next six months hit it right on the mark."
And Nicholas Saunders in Los Angeles says he may have an answer to something we all find puzzling. That is, customers who cash their rebate checks at Wal-Mart are spending about 25 percent of their money, while at Wal-Mart Sam's Club, they're spending 80 percent of the check. Nicholas writes in to say, "They tend to purchase goods in larger quantities and therefore, spend more money per visit at Sam's."
Well, folks at Wal-Mart and Sam couldn't explain it, but Nicholas, I think you may have a pretty good answer there. But remember, Sam's is a club and Wal-Mart says people shop clubs for a whole different reason. Sort of throw that into the mix.
Also the ratio of Wal-Marts stores to Sam Clubs is about five to one.
On to our coverage of the blistering heat wave across most of the country and its effect on the economy. Ken writes in saying he was surprised to see me interview John Davis, a meteorologist at one of the top brokerage firms.
"A meteorologist," he writes, "at Salomon Smith Barney? Are you kidding me? Maybe Sandy Weill, who is the head man at the company that owns Salomon Smith Barney is suggesting the market and the weather have something in common. Both are entirely predictable."
Well, Ken, the way the markets and weather have been performing, you may be right, but I'd still give just a slight edge to those meteorologists over those trying to predict the markets in terms of accuracy right now, but thanks for writing in.
Send us your comments. E-mail us at MONEYLINE@CNN.com. And that is MONEYLINE for this Friday evening. We thank you for being with us. I'm Lou Dobbs. We hope you have a very pleasant weekend. Good night from New York. "CROSSFIRE" is coming up next.
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