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Lou Dobbs Moneyline
Dow Advances 46.57 to 10,392.52; Nasdaq Climbs 11.43 to 1,930.32; Dell Reports Second-Quarter Loss
Aired August 16, 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 the New York City, this is LOU DOBBS MONEYLINE. Here now, Lou Dobbs.
LOU DOBBS, CNN ANCHOR: Good evening. After-the-bell results from two of the world's largest technology companies. Dell reporting a loss while Hewlett-Packard sees its profits plunge almost 90 percent. During the regular trading session, stocks staged a turnaround. The Nasdaq ended the day higher despite a huge decline in shares of Ciena. I'll be talking with Ciena's chief executive officer. And consumer prices in July took the biggest tumble since the mid-'80s.
We'll have the late reaction to those after-the-bell profit reports for you in just a moment, but first let's preview what our reporters are working on this evening.
Christine Romans at the New York Exchange -- Christine.
CHRISTINE ROMANS, CNN CORRESPONDENT: Lou, a sluggish session that ended well for the Dow industrials. The average moved higher in the final hour.
GREG CLARKIN, CNN CORRESPONDENT: And the Nasdaq advances as well, but no turnaround for Ciena: Its shares lose nearly a third of their value after the company issues a profit warning.
PETER VILES, CNN CORRESPONDENT: A huge profit decline at Hewlett-Packard, but a couple of bright spots nonetheless in today's earnings report -- Lou.
DOBBS: We'll be looking forward to those bright spots, Peter. Thanks and all of that coming up on MONEYLINE.
On Wall Street today, stocks struggled for most of the session. A warning from optical networker Ciena rattling technology stocks, which have been battered, as you know, over the past two weeks. But stock prices across the board managed to rebound late in the trading session.
Christine Romans with a look at why -- Christine.
ROMANS: Well, Lou, for most of the day it was the same old story: economic and earnings malaise. But the last hour or so of the trading day, you saw, whether it was short covering and oversold balance, or institutions buying before options expiration, whatever the reason, the Dow up 46 points, less than half a percent, volume more than a billion shares. And the advance-decline line was positive.
Building products did well here. So did some technology names. And the consumer products group did very well, led by Procter & Gamble. A lot of folks talking about the moderating strength of the U.S. dollar, particularly against the euro. They say that's good news for names like Procter & Gamble, Estee Lauder, Colgate, Gillette and others.
Also, though, looking at those drilling stocks: oil services companies. Those fell today, giving back some of the ground they earned on Wednesday on that favorable supply report. Lehman Brothers questioning the sustainability of that rally, saying they suggested investors sell into any rally. It looks like investors were taking that advice. And Lou, Enron active again today, down another $3.
Back to you.
DOBBS: Christine, thanks.
By far, the most active issue on the Nasdaq today, Ciena, after Ciena issued a profit warning. The stock plummeted on volume, more than five times its average.
Greg Clarkin at the Nasdaq marketsite with that story -- Greg.
CLARKIN: And Lou, in talking with traders and strategists today, they said there was no fundamental shift in philosophy or anything this afternoon. So what we may have been looking at in the Nasdaq was more of a technical recovery than anything else.
Take a look at the trading chart. You'll see it bounced off 1,880 about three times: just before 10:00, just after 10:30, and then around 1 o'clock or so. Now, that was an area that some folks expected to find support, and it did indeed find support at 1,880.
About 1 o'clock is when the semiconductor stocks really kicked it. If you take a look at the Philadelphia semiconductor index, you'll see it really mirrors the moves by the Nasdaq.
Now, the chip stocks have been trading at the low end of a trading range. Analysts tell us this has become a real favorite trading vehicle of people, and that may have been what led the market higher for technology stocks.
One stock that didn't recover, Ciena, down sharply, about 30 percent, on its profit warning. Juniper Networks was down in sympathy. We had Brocade, the storage company, down, and a related company, McData also lower.
But take a look at some of the comeback kids. Let's start with Microsoft. It rebounded almost $4 from its session low to the closing level of 64.62, up better than a buck. Oracle, much the same story. Intel and Xilinx, two of the chip stocks that posted nice afternoon gains, Lou. Back to you.
DOBBS: Greg, thank you.
Both Dell and Hewlett-Packard are moving in different directions in after-hours trading. Jennifer Westhoven at the Instinet trading desk with that story -- Jennifer.
JENNIFER WESTHOVEN, CNN CORRESPONDENT: Hi, Lou. Well, we'll start off with Hewlett-Packard. That stock is trading higher, up 47 cents after its earnings report. So it's essentially defying the weakness that we're seeing coming from Dell. After its earnings report and cautious statement about sales going forward, Dell shares down 55 cents at $24.83. That's a loss of about 2.2 percent, and also surprising considering this stock sold off pretty sharply in the days heading up to this report.
Still, the comments coming from them still seem to be something of a surprise to investors. It is also taking down many of those big- cap stocks that Greg was just talking about as comeback kids. Cisco, Oracle, Intel and Microsoft all trading slightly lower here after hours.
Finally, we'll just mention Scientific Atlanta. That stock is down sharply, more than $4 a share. That's nearly 20 percent. They're saying that big cable companies aren't deploying the new digital services that Scientific Atlanta makes the set-top boxes for -- Lou.
DOBBS: Jennifer, thanks.
Well, a losing quarter, as we said, for Dell Computer. The world's biggest PC maker losing $101 million for the quarter. And when you take out one-time items, Dell earned 433 million. That would match Wall Street expectations. Dell, of course, has been hurt badly by the slump in PC demand and a price war.
Bruce Francis has been analyzing the report since it was released.
Bruce, is this as bad as it looks?
BRUCE FRANCIS, CNN CORRESPONDENT: We could have the beginnings here, Lou, of a disconnect in the PC industry. More on that in a moment.
Dell bragged on its conference call of gaining market share during a horrendous period for most technology vendors. And Dell believes that those gains will stick when tech spending picks up again, but that won't happen for a while.
Let's take a look at Dell's outlook for the third, or current, quarter. Earnings per share should come in flat, 15 or 16 cents. Revenues they expect to be flat to down 5 percent. And operating margins should be stable despite what has been a bruising price war led by Dell itself. Dell Vice Chairman Kevin Rollins says that the tech slowdown isn't over and analyst Ashok Kumar thinks Dell gets credit for navigating the tech turbulence.
(BEGIN VIDEO CLIP)
KEVIN ROLLINS, VICE CHAIRMAN, DELL COMPUTER: I think we believe that the slowness that we've seen in the economy really has not stopped yet and has not abated. So we believe that it's prudent to set those kinds of targets going into the next quarter, fairly similar to what we set going into Q2.
(END VIDEO CLIP)
(BEGIN VIDEO CLIP)
ASHOK KUMAR, U.S. BANCORP PIPER JAFFRAY: I think the industry will be or the market will be a lot more forgiving of Dell, because they are the only company to have executed in this very difficult environment. And Dell is the No. 1 player worldwide in desktops and notebooks, No. 2 in worldwide PC market, PC server market share. So they are the best-positioned company in order to participate in the recovery if and when that happens.
(END VIDEO CLIP)
FRANCIS: On a conference call, CEO Michael Dell is sounding a bit more cautious on the months ahead than his biggest supplier, Intel. Dell says he doesn't see any big drivers of demand in the third quarter, and that's when Microsoft's Windows XP is scheduled to be introduced. Dell says that he doesn't believe that corporate customers will be big buyers until the spring of 2002.
So got to be patient, Lou, according to Dell.
DOBBS: Well, patient but really these results are just a continuation of the trend, a PC slump, a slump in performance for the PC makers.
FRANCIS: And not a rebound driven by Windows XP in the second half. And I see a bit of disconnect between the guidance Intel has been giving and what Dell is saying here tonight.
DOBBS: And in terms of Office XP, which -- which Microsoft introduced, we have heard almost nothing about the performance of that product. How's it doing?
FRANCIS: Office XP just been out there a few months. I think you've got to wait for Windows XP to really get the take rates up on both of those. We'll get more on that, of course, when Microsoft gets their next earnings report from this quarter.
DOBBS: OK. Bruce, thanks. Bruce Francis.
Also out after the bell, as we said, Hewlett-Packard earnings. Hewlett-Packard reported a sharp decline in both earnings and revenue. Profits plunged nearly 90 percent. That's a stunning decline for one of the world's biggest and most important technology companies. It is yet another setback for CEO Carly Fiorina.
She was brought in to reinvent HP. Instead, HP's business has only deteriorated.
Peter Viles has the numbers, the forecast and the report.
(BEGIN VIDEOTAPE)
VILES (voice-over): After warning Wall Street to expect an awful quarter, Carly Fiorina and Hewlett-Packard managed to beat lowered expectations, reporting pro forma earnings of 11 cents a share, actual earnings of a nickel. The consensus estimate from First Call was 4 cents pro forma. But still this was a huge drop from 49 cents a year ago. Revenue was in-line, down 14 percent at 10.1 billion. Net income, 111 million, also a sharp drop.
But a bright spot, gross margins came in at 25.9 percent, above recent guidance. There was, however, little guidance about when technology as a whole will turn around.
SHELBY SEYRAFI, A.G. EDWARDS: I think all companies right now are sort of shying away from trying to predict what the bottom is, and I think that's because earlier predictions by many companies sort of have not panned out. I think they realize that the next quarter or two any way are still going to be difficult.
VILES: In a conference call, HP said, quote: "Market conditions remain far too dynamic to predict outcomes; it's fair to say we don't see any improvement in the market before 2002"; pointed out year- over-year revenue decline could exceed 14 percent in the fourth quarter; and responding to a "Barron's" article, said the PC business continue to be a valuable asset to HP.
This was Fiorina's worst quarter since she came to the company two years ago. In that time, the company's shares are down 45 percent. The Nasdaq composite has fared better as have competitors IBM and Sun Microsystems. But competitor Compaq has been hit every bit as hard.
(END VIDEOTAPE)
VILES: Hewlett-Packard has already announced 6,000 job cuts, but said today it has only reduced its head count so far by 1,500, which means the cost-cutting will continue apace in the current financial quarter -- Lou.
DOBBS: And Carly Fiorina picked a really lousy time to take over HP and reinvent it.
VILES: Yeah. I'm not sure you could have timed it any worse. And to some extent, a lot of this call was not about how bad things are. It's about how they're operating in this environment, told a few success stories -- some big contracts they had won with Volkswagen, Enron. So they are focusing on executing even if the overall environment isn't giving them any help.
DOBBS: Well, the margins at least are somewhat encouraging in all of this.
VILES: Sure. A little Higher than recent guidance. A number of analysts we spoke with were pleased with that.
DOBBS: OK. And I'm sure Carly Fiorina would like to rethink the timing one more time. Thanks, Peter.
Reports out today show the Fed should have no trouble in lowering interest rates further when they meet next week. Consumer prices for the month of July fell 3/10 of a percent. That is the largest decline in the CPI in 15 years -- energy prices plunging. When you take out food and energy, the CPI actually rose 2/10 of a percent. The Philadelphia Fed reporting that the regional manufacturing sector has weakened further in August as compared to a month ago. The sector has been contracting now for nine straight months.
And housing starts, jumping nearly 3 percent in July. Building permits, however, down nearly 2 percent. The reaction in the bond market: prices up, yields falling. The yield on the 10-year today hit a four-month low.
Today's rally on Wall Street was modest at best, but both the Dow and Nasdaq did end the session at their highs. And my guest tonight says the markets have bottomed out.
Money manager Frank Cappiello joins me now from Baltimore.
Good to have you with us, Frank.
FRANK CAPPIELLO, MCCULLOUGH, ANDREWS & CAPPIELLO: Hi, Lou.
DOBBS: You think this is a bottom?
CAPPIELLO: Well, we're groping for the bottom, and we're still declining in the economy, but the declining is slowing down. This is supposed to be the quarter, Lou, when we change and shift into high gear, and we're still going down. So it is a disappointment.
But there are a lot of things in place that are going to give a recovery. Lower interest rates are on the way again. We've got a lot of money supply being pumped out there: $2.2 trillion in cash literally in money market funds. All of these are pluses, but it takes time.
DOBBS: All of these are pluses. They're, if you will, the externals for what could be a rebound, a recovery, if you will, in the markets. But in terms of the real economy, is there enough strength being demonstrated right now -- and nearly everything we look at, of course, is -- is history. But is there enough strength being demonstrated in this economy to give you some high level confidence that we're going to see a market recovery?
CAPPIELLO: Well, the one thing that encourages me, Lou, is the action of the semis, the semiconductor stocks. They usually lead technology out. And as you've noticed, in the past of couple weeks, they've firmed up nicely. And they were ready for a run and then they stopped.
But it is encouraging that we're getting a bottoming on the semis, and that to me is a good sign.
But you've got to remember, Lou, everything we're seeing is in a past tense. What the market is probing for is the next six months. And if we do get earnings in the first quarter of next year, the market should take off very shortly.
DOBBS: And what, in your judgment, would be the smartest approach for investors to take here, Frank?
CAPPIELLO: Well, at this point, I think you've got to go for the big, solid companies, and I think techs are cheap. So we should go somewhat to tech.
I would start with ExxonMobil. That's a good, solid company. They can make money no matter where the price of oil is: 2 1/2 percent yield, something like 16 times earnings, very attractive.
Then we come to Intel, Microsoft, two of my favorites. IBM would be the third. All of these are solid companies, beginning to do better in the market.
And then I have a sort of an attitude that the consumer will do as well in the fall. So Federated Department Stores -- owns Bloomingdale's, Macy's -- and they're coming on track.
DOBBS: Good. Frank Cappiello, as always, good to talk to you. Thank you.
CAPPIELLO: My pleasure, Lou.
DOBBS: Well, movie makers make a move on the Web to stop piracy. Five studios are now banding together. They're in a joint Internet film venture. And for a fee, you'll be able to download movies on your PC, just like you do now with music. The studios say that fee would be about the same as pay-per-view rates.
Hollywood's hoping this new service, with its major movie releases, will put an end to the Web's free movie sites or outright movie piracy.
Coming up next on MONEYLINE, Ciena loses nearly a third of its stock price today. We'll be talking to the company's CEO about what happened and what he expects to happen.
Oregon -- Oregon has called out the National Guard to battle those raging wildfires. We'll have the latest for you.
And those sharks are back on the Florida coast. What are they doing now to tourism?
And what were these astronauts doing outside the space station high above the planet Earth? We'll have the story.
And then, tensions remain high tonight in the Middle East. Is the Bush administration doing enough? We'll be talking with a former defense secretary about what he thinks. Bill Cohen next.
(COMMERCIAL BREAK)
DOBBS: Oregon has called out the National Guard to battle those raging wildfires that have gripped 11 Western states. Oregon has now been battered by hundreds of blazes over the past few days, as has indeed the entire region. And those troops will be helping firefighters who are not only battling the heat, but now they are battling exhaustion as well.
Overall, more than 21,000 men and women are fighting 42 major fires. Those blazes have already scorched a half-million acres. Officials say if conditions don't improve soon, more troops will be called in next week as is provided for under the declaration that a level 5 state of emergency exists in the region.
Tropical Storm Chantal is bearing down tonight on the Caribbean islands. Chantal is expected to hit the Windward Islands tonight. She's only a couple of hundred miles from Barbados tonight. Warnings are up throughout that region. And this is the third tropical storm of the season. Forecasters say Chantal has a very good chance of becoming a dangerous hurricane within the next day or two.
Well, more sharks have been spotted in Florida. Scores of sharks have been seen swimming in the waters off Sarasota. This follows a similar sighting this week up the shore near Tampa.
Terri Behling at the Mote Marine Library and Laboratory says this is not unusual. She says the black-tip sharks normally migrate in these waters at this time of year, following the warm water and the food supply south.
As for tourism, so far no problems reported there. But visitors have been advised to exercise caution and stay out of the water when reasonable to do so.
High above South America, Steve Fossett continues to make history tonight. The millionaire balloonist is now over Argentina. He is more than halfway to his goal of ballooning around the world solo. Fossett's been up there more than 11 days. That is a record for a solo flight. The only problem he is facing now is oxygen. His supply of oxygen is running low, because the first half of his trip has taken longer than expected.
A little higher up, a long spacewalk for a couple of astronauts. David Barry and Patrick Forrester spent more than six hours outside the Discovery shuttle. They were adding equipment and conducting experiments outside Space Station Alpha. The pair will take another space walk Saturday. They will then add more gear to the station.
By the way, it has been more than 1,000 days since the first piece of the orbiting station was first launched. It looks like the Big Dipper could be holding a big surprise: another solar system in fact. Astronomers have found two planets circling a star similar to our sun. That sun could be 7 billion years old and the planets are about the size of Jupiter, and they are orbiting that sun in very close to a circular orbit much like our own solar system. And this system is the closest to ours that has been discovered so far.
Closer to home, the White House today saying the economy will grow. It will grow more than 3 percent next year, and that this year's Social Security budget surplus will be as high as $160 million. This as the Congressional Budget Office says the Bush administration will have to tap Social Security funds in order to make ends meet.
Major Garrett has more on the story from the White House.
MAJOR GARRETT, CNN CORRESPONDENT: Lou, the White House has been under considerable pressure to prove to skeptical congressional Democrats that in fact it will not tap into the Social Security trust fund this budget year. The White House says it's found a way. How? Well, by relooking at some of the accounting in how Social Security tax revenue had been counted before.
They rechecked the numbers, found an extra $5.6 billion. They had to make some subtractions for deficits in the Postal Service and what they're going to leave on the table for Congress to spend this year is $4.3 billion. White House Press Secretary Ari Fleischer told CNN how they found the money.
(BEGIN VIDEO CLIP)
ARI FLEISCHER, WHITE HOUSE PRESS SECRETARY: We found that there should be more money attributed to Social Security than was previously thought. In other words, Social Security had been shortchanged in 1998 and 1999 and 2000. More money came in for Social Security than the government accountants thought, and that will be fully and fairly reflected.
(END VIDEO CLIP)
GARRETT: That fully and fair reflection of Social Security money will also leave Congress more money to spend this year, which the White House says will make sure it will not tap into that Social Security trust fund.
Of course, Lou, this is largely symbolic. No benefits would be affected, but it's been a huge issue in Washington. Democrats and Republicans trying to move they know how best to protect Social Security -- Lou.
DOBBS: Well, Major, that's exciting, and especially when you can find money like that. That's lot of found money, isn't it?
GARRETT: Well, the issue -- and the White House sort of says, look, it wasn't found in the sort of literal sense of reaching deeper into your pants pocket on a Monday morning after a long weekend, so to speak. But what they did is, you know, when the dollars come into the federal government, they're not, well, this one goes to Social Security, this one goes to the Medicare trust fund, this one goes to general revenue. So they restruck all the numbers, and when they did that, they found that basically Social Security had been shortchanged 5.6 billion. So, that's how they say they found it.
DOBBS: It's good to be a rich nation. Major, thanks. Major Garrett.
GARRETT: Indeed.
DOBBS: Tensions in the Middle East remain high. World leaders want the United States now to do more to stop the escalating violence. President Bush tried today. He met with Israel's Ariel Sharon, but the prime minister said his country is gearing up for a drawn-out battle with the Palestinians, should that be necessary.
Former secretary of defense in the Clinton administration, William Cohen, joins us now. And Bill, it's good to have you here.
WILLIAM COHEN, FORMER SECRETARY OF DEFENSE: Great to be here, Lou.
DOBBS: What is your -- what is your sense of what has happened? Is the Bush administration doing enough to stop the cycle of violence in the Middle East?
COHEN: Well, certainly President Bush feels that his administration is doing as much as it can or should. That is not the perception on the part of many in the Middle East, especially the Arab countries. But it takes two to make a peace, and what we have to have is a commitment to the Mitchell Report. And it seems to me what Chairman Arafat has to do is to be willing to stop the violence and to agree, and the Israelis, stop the settlements, have a cease-fire, cooling-off period, and getting back to negotiations.
One of the problems, it seems to me, also that is inherent in this is that the moderate Arab states, they're suggested losing some of their support for the United States by virtue of what's happening in the Middle East. They have to also become more involved.
If you go back to Camp David, in which President Clinton tried to bring about a peaceful agreement, there were no Arab states who supported Chairman Arafat. So the question was, could he make a deal or did he want to make a deal? But no one rallied to his support to say this was at least 90 percent of what we want. So yes, the United States could do more and should do more, but the moderate Arab states also have to do more.
DOBBS: And you just heard Major Garrett report on the money that has just been found. They scrubbed the numbers, as Major Garrett reported. And we found another 5 or 6 billion dollars. Does this warm your heart and make you feel reassured that the lockbox is still intact, and Social Security and the federal budget surplus is intact?
COHEN: I have always been astonished at the lost-and-found department at the...
(LAUGHTER)
... at the Office of Management and Budget. I think Houdini may be the only person who could break that secret as to how to get into that lockbox to find 6 or 7 billion dollars from time to time, or lose it.
DOBBS: And in terms of trade right now with Europe, the economy is weakening obviously in Europe, and much of the rest of the world, but specifically with Europe. Trade tensions, which reached a height with the GE-Honeywell blocked deal. What is your perception about how things are going now? Is there a higher level of reason and less hot- headedness, if you will, in the discussions?
COHEN: Well, I think what we're seeing, the effects of globalization. The world has become much smaller through technology having miniaturized the globe. What takes place in the United States, we are the driving force of the economic prosperity. And when we start to suffer, the world starts to suffer as well. And we are interconnected.
And so the notion that somehow Europe could remain separate and apart from the United States, have prosperity without the United States enjoying that prosperity as well, I think that notion, to the extent that it took hold in any circles, has been pretty much dashed.
DOBBS: A changing reality, focusing perhaps better some minds on both sides of the Atlantic.
Bill, thanks. Bill Cohen.
Well, a quick comment now from one of our viewers. Dimitris in California writing: "On Wednesday's show, Barton Biggs of MSDW gave the bearish call to sell stocks now. Judging from the amazing track record of the so-called 'experts' in recent years, my conclusion is that now is the time to jump head-first back into the market."
Well, I can't argue with your assessment of those expert calls over the last couple of years on the market. We'll have more on your comments later here in the broadcast.
Coming up next on MONEYLINE, the Nasdaq making a comeback. Can it make it two in a row? We'll take a look at the prospects. And I'll be talking with the chief executive officer of Ciena. His company's stock lost a third of its price today. We'll have his view of the future for his company, his investors and this economy.
And what is the future for casual Friday? Well, Allan Chernoff says you might want to pull some of your old ties and coats out of retirement. This may not be the time for casual dress. He'll have the report. Stay with us.
(COMMERCIAL BREAK)
session turnaround, a move higher in the chip sector helping both the Nasdaq and Dow snap three-day losing streaks. The Dow finishing up 46 points today, in moderate trading there. Market breadth, positive, advancers beating decliners by an eight to seven margin.
Among the most actives on the Big Board today: Enron, losing another $3 at $36.85 at the close. The stock is still reeling from the unexpected resignation Tuesday of former president and CEO Jeff Skilling. Johnson & Johnson today tumbling more than $2, the company's Centocor unit adding a tougher warning to its rheumatoid arthritis drug Remicade. Studies have shown that the drug increases the risk of infection.
And Procter & Gamble, up more than $2, that stock getting a lift from the dollar's decline, which is seen as a positive for companies that rely heavily on foreign sales.
On the Nasdaq, stocks were swept off their lows in late trading, reversing a 2 percent loss earlier in the session. The Nasdaq gaining 11 points, finishing at 1,930. Market breadth, as you see there, negative, however, decliners beating advancers by a slim margin.
Taking a look at some of the most actives today on the Nasdaq: Ciena, sliding more than $8 a share, closing at $19.62. Earlier today, the optical equipment maker slashed its forecasts for this year and next, all because of an industry-wide slump. The chief executive officer of Ciena, Gary Smith, will be joining us here later in the broadcast. And ONI Systems falling more than $1 a share, in part because of Ciena's warning. And Brocade Communications, also closing lower in sympathy, down more than $2 a share a day, after reporting a 40 percent decline in its quarterly profits.
Now, for a look at what's shaping up for tomorrow, Christine Romans at the New York Exchange -- Christine.
ROMANS: Lou, it was an encouraging end to the day today, this Thursday trade day, but Fridays, as you know, in August on Wall Street have been very quiet. We'll watch to see if there's some economic data tomorrow before the bell that can inspire some trading action.
We're going to get June international trade numbers, looking for a trade gap around 29 billion. This is largely and it's mostly affecting the dollar and the fixed income markets and then thirdly the stock market.
Also, we're going to be looking for Michigan consumer sentiment, the University of Michigan private survey on consumer sentiment. Lots of folks have been watching this one of late, because the consumer is so important in holding up these markets, and an options expiration, Lou, tomorrow, could spark a little bit of volatility. Maybe that would be the reason we could probably finally get some price action, but they're not looking for a very big volume here -- Lou.
DOBBS: OK, Christine. And now, we turn to Greg Clarkin for a look at what investors on the Nasdaq should be looking for -- Greg.
CLARKIN: Hi there, Lou. You know, tomorrow morning, it's going to be interesting to see Dell's impact, really -- the stock trading down in after-hours, and that could set the tone for trading tomorrow morning.
But at this point, a lot of traders have said that they didn't expect to hear really any good news out of Dell. That would have been the best-case scenario. That wasn't the case, so that may have a bit of a muted impact on trading tomorrow morning.
Also, it is a Friday in the summertime, late summer at that, so we expect to see light volume. That could really kind of make the market a little bit vulnerable to some sharp swings.
Overall today, what we got a sense was really kind of a sigh of relief among a lot of traders, a lot of investors, really. This morning, at one point when the Nasdaq was down around 1,879 or so, there was a really sense that the market was kind of on edge. Actually, that's the word that one trader used. And at that point, it did find support there, rallied from there. The chips really led the way in the afternoon.
So, folks did take a lot of solace out of this that the market was able to come back this strongly. Whether it has sustainability or not, that's going to be the question for tomorrow morning -- Lou.
DOBBS: The perennial question. Greg, thanks. Greg Clarkin.
Another casualty of the high-tech collapse -- this time, in the publishing business. The "Industry Standard," which was the standard of the industry, that magazine is shutting down, according to company insiders. The high-tech magazine has seen its advertising page count fall more than the Nasdaq over the past year, and calls to the "Industry Standard" today went unanswered. Voice mails come on which say, quote, "we are on company-wide summer vacation."
In other corporate news tonight: More cuts under way at Ames department stores. The department store chain plans to slash 2,000 jobs. It will close 47 stores, because of the slowing economy. And Ames has already shut down more than 30 stores and cut about 2,000 jobs over just the past year.
A shift in strategy in the proxy fight for Computer Associates. Renegade shareholder billionaire Sam Wyly taking himself out of the running to be the firm's chairman. That after the Computer Associates' management won backing from two shareholder advisory firms. Wyly is now asking for four seats on CA's board, that's down from his previous plan to remove all 10 directors. Computer Associates is scheduled to elect a new board at a shareholders meeting set for August 29.
And Bayer, delaying plans to list its shares in New York next month. The German drug company saying it's postponing that listing until next February because of last week's withdrawal of Baycol. That anti-cholesterol medication has been linked to 52 deaths worldwide.
Mortgage interest rates are falling toward their lowest levels of the year. Lisa Leiter reports from Chicago.
(BEGIN VIDEOTAPE) LISA LEITER, CNN CORRESPONDENT (voice-over): Wally Raineri has been sitting on the fence all year, waiting for the right time to buy a new home.
WALKIRIS RAINERI, HOME BUYER: Because the home we wanted to buy was a lot more than what we had right now, the interest rates were really important to us.
LEITER: For Raineri and many others, now is the right time, with mortgage rates dropping to their lowest levels of the year. The average 30-year fixed rate loan fell below 7 percent this week for the first time since March, to 6.96 percent. Those rates are revving up home sales in August, typically a slow month for real estate.
JOHN VENERIS, OWNER, REALTY EXECUTIVES: We are seeing people coming into the marketplace when normally they would have waited until next spring. So, this is something we think we are going to have a nice, strong fall season.
LEITER: More and more homeowners are responding to the low rates by refinancing. Refinancings have surged four-fold from a year ago, at their highest level since 1998.
MARY GLAVIN, PROF., MORTGAGE PARTNERS: I have doubled my numbers just in the two weeks of production, I have handed in as much business as I did the whole month of July. So, it has been phenomenal. It's great.
LEITER: The Mortgage Bankers Association predicts this will be a record year for mortgages, with more than $1.5 trillion loaned, much of it for refinancing. And because of people like Wally Raineri, it is expected to be near a record year for home resales.
DAVID LEREAH, NATIONAL ASSOCIATION OF REALTORS: These historic low mortgage rates are the primary factor for why the housing market is standing tall, while the rest of the economy is slipping toward a recession.
LEITER (on camera): The drop in mortgage rates surprised some analysts, convinced the economy would bottom out by now and long-term interest rates would rise. But with weak economic reports still pouring in, mortgage rates may fall even lower.
Lisa Leiter, CNN Financial News, Chicago.
(END VIDEOTAPE)
DOBBS: Coming up next on MONEYLINE, as techs fall out of favor in the market, so does casual dress on Wall Street. And Ciena shares plunging today after Ciena warns for this year and next. We'll take a closer look at the network equipment maker next here on MONEYLINE.
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DOBBS: A decent quarterly report from Ciena today overshadowed by the company's dire forecast for the future. The networking equipment maker topping Wall Street's estimates by a penny, earning 17 cents a share. Revenue nearly doubled, by the way, to almost $460 million.
But shares of Ciena today plunged after Ciena slashed its forecasts for the remainder of the year and next, blaming market conditions. Taking a look at the sector, Ciena today plunged $8.50, while Cisco, Nortel, Lucent and Juniper Networks all managed to -- rather, Lucent, Nortel and Cisco all managed to eke out a gain, while Juniper fell another $2 a share.
It has been a rough year for Ciena, shares have plunged 81 percent from its 52-week high of $151. Despite this, on a conference call earlier today, Ciena executives said while the telecom equipment market is likely to continue slowing, demand for its part of the market should improve.
Joining me now from Washington, Ciena's new chief executive officer, Gary Smith. Gary, good to have you with us.
GARY SMITH, CEO, CIENA: Good evening.
DOBBS: These results at first blush defy any imagination that the stock would fall this far today. Did it surprise you?
SMITH: Well, I think, you know, nothing surprises me what happens in the stock market. But you know, from a business point of view, we're a very sound business. I mean, we're still forecast to grow, you know, 85 to 90 percent of our revenues this year, and we're still forecasting and guiding to grow next year, which I think is an extraordinary performance, you know, when you compare it to a lot of our competitors. We're continuing to take constant market share from the larger Legacy, Voice vendors.
DOBBS: And that growth, apparently, the judgments of those on Wall Street, the mavens and gurus, not enough to justify the multiple you were at before today's market decline. How do you feel about that?
SMITH: Well, I think, you know, their judgment obviously has to be their judgment. What we're doing is running a business and taking market share, and we believe that the fundamentals of the industry are sound, the demand from an end-user point of view is still for more capacity, the Internet still only reaches less than 5 percent of the world population.
So, we think the demand is there, and the kind of products that Ciena has are very attractive to our customers. We had six new customers in this quarter alone, we doubled some of our metro revenues and we were declared market leader in this whole next generation space just a week ago by many of the analysts.
DOBBS: In May, you were reaffirming guidance, now we have guidance suggesting obviously some weakness going forward. How confident -- let's talk about that V word, visibility. How confident are you as CEO that you can see clearly into the next eight to nine months? SMITH: Well, you know, obviously we have no crystal ball. We've talked to our customers and we listened to them very carefully, and you know, taking the strength of the product areas that we have, you know, we evaluate and make our best judgment and we guide accordingly.
I mean, many of our competitors are not even giving guidance right now. We don't think the situation is that dire, and we believe that we can still grow in this environment, as we have done for -- all year. You know, we've grown our business and will grow our business by 85 to 90 percent. So, one can never have ultimate confidence, but I think it's absolutely our best view right now.
We are positioned very differently than a lot of our competitors, in that our products reduce costs and operating costs for our customers, and that's really where the telecom space is going right now.
DOBBS: And you, whether advancing technology within that space and bringing efficiency or not, you're in that space and you're getting punished for it, don't you agree?
SMITH: I think we are. It's probably the overall space, but I think what investors and Wall Street need to do is look under the covers there and really see what's going on and who's winning and who's losing. Because I think in any fundamental shift in technology, which is what we're going through, there are absolutely going to be winners and losers, and we intend to be a winner.
DOBBS: And in terms of being a winner, investors wanting to be winners are looking and saying, are you going to be making cost reductions as your competitors are -- irrespective of your growth ramp -- are you going to be reducing your costs, are you going to be laying off, as have some of your competitors? How important is cost control in this environment, irrespective of your own performance?
SMITH: Cost control and prudent expense management is something that we've always done, and we will continue to invest in our business and in our people and we see no reason to take those steps right now.
DOBBS: OK. Gary Smith, good to have you with us here on MONEYLINE.
SMITH: Thank you, Lou.
DOBBS: And coming up next on MONEYLINE, Wall Streeters investing in new wardrobes, as casual dress seems to be going out of fashion, along with those disappearing profits. That story when MONEYLINE continues.
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DOBBS: Still to come on MONEYLINE, Wall Street goes retro. Talk of ditching all of that casual clothing for the traditional suit and tie. We'll have the story for you. Also, we'll take a look at your comments, next on MONEYLINE. We'll be right back.
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DOBBS: We have a hot Wall Street rumor to tell you about tonight, one that has nothing at all to do with the markets. It's more about fashion than finance. Allan Chernoff tonight on the style of the street.
(BEGIN VIDEOTAPE)
ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): The latest rumor on Wall Street: Talk that business casual may go the way of the dot- com boom after Labor Day.
UNIDENTIFIED MALE: That rumor has been floating around a little bit.
UNIDENTIFIED MALE: It's been floating around for September.
UNIDENTIFIED MALE: I've been hearing some rumors, you know, probably by the end of the year we're going to have to go back to the business formal wear.
CHERNOFF: Some Wall Streeters already are getting suited up for the fall.
UNIDENTIFIED MALE: Now everyone is going back to suits supposedly.
CHERNOFF: Style-conscious women argue the retirement of khakis can't come soon enough.
UNIDENTIFIED FEMALE: I don't know, maybe it's the single guys that are having problems. They have no women to help them.
CHERNOFF: New York's top men's stores predict it's a given -- pinstripes are coming back.
MICHAEL CELESTINO, BARNEY'S NEW YORK: We have definitely been in contact with some of those brokerage firms just to offer our support. The belief is that the summer will be over and it's back to real business.
JOE GROMEK, PRES. & CEO, BROOKS BROTHERS: I've spent a lot of time with Morgan Stanley recently and with Davis Polk. And both of those companies are casual, and we joke about the fact that the memo will be out shortly, and come Labor Day they'll be back in suits.
CHERNOFF: Only one problem: All of Wall Street's top investment firms tell MONEYLINE they have no plans to change dress policy. Business casual will live beyond Labor Day.
(on camera): So why do the rumors persist? Here's one theory: Long-suffering men's retailers may be borrowing an old-Wall Street technique: put an idea in play, and hope that it becomes self- fulfilling.
Alan Chernoff, CNN Financial News, New York. (END VIDEOTAPE)
DOBBS: It's being billed as the world's longest yard sale, 450 miles long. More than 4,000 vendors -- quite a yard -- and more than a quarter of a million browsers. They are all gathered to buy crafts and food and clothes along U.S. Highway 127 which is from Alabama through Kentucky.
The event is 15-years-old. It's so popular, three Tennessee counties have widened their roads to accommodate the traffic.
And here's a fella who found a way to beat the heat in Spokane, Washington. That is a 1,500 pound bull moose. It wandered into Randy Longmeier's back yard. He found the pool. He found the pool entertaining and had himself quite a little swim. Just when folks began to worry that he wouldn't leave, the now refreshed moose decided to climb out of the pool --to climb out of the pool slowly -- very slowly, one does not want to exit the pool too quickly -- and refreshed, simply walked away ever so gingerly over the lawn furniture and shrubbery and had himself a very fine visit.
We just had to share that with you. It has nothing to do with business but we kind of liked it. Hope you did to.
Coming up next we will take a look at your e-mails and "Ahead of the Curve."
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DOBBS: Tomorrow Hewlett-Packard, watch that stock, after the bell today reporting earnings that did not meet expectations. Dell in line with forecasts. Those two stocks of course to watch tomorrow. Reports on the economy as well that will include the trade deficit report tomorrow, the University of Michigan's Consumer Sentiment Survey for August.
And we will be joined here by Derek Duke, who is a retired colonel of the U.S. Air Force and the head of American Seashore Under Recovery. He will join us to talk about whether there is a hydrogen bomb lying in the sea off the coast of Georgia and whether his company is the right one to recover it, if it does exist.
And now taking a look at your comments: Mitchell Friedman writes: "Lou keeps talking about the tax rebate. Why does he keep referring to this as a rebate? I am sure he is aware that this is a tax advancement on 2001 taxes and should report it as such."
Mitchell, not exactly. The according to the Internal Revenue Service calls the money an advance payment of a 2001 tax credit. It is a reduction of tax, and not taxable income on the federal return. And it is by any other name, a rebate, and in fact an advanced rebate.
Barry Kafman of Tucson writes: "Those investors not exposed to the large cap growth stocks of yesteryear, are doing quite well in the stock market this year. I believe you should bring this to the attention of your viewers and refrain from reading letters from the fools who bought into the new economy hype looking for solace."
Barry, you have a point in nearly every respect. The Wilshire 5000 is down only about 10 percent year to date, while the Nasdaq has lost 22 percent. We enjoy hearing from you at MONEYLINE@CNN.com.
One personnel note before we go, we are delighted to tell you that Kathleen Hays will be joining us here on MONEYLINE next month as our economics correspondent. Kathleen will be joining us from CNBC, and we look forward to her debut here on MONEYLINE in September. We hope she enjoys here vacation until then.
That is MONEYLINE for this Thursday evening. Thanks for joining us. I'm Lou Dobbs. Goodnight from New York. "CROSSFIRE" is next.
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