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Lou Dobbs Moneyline
Dow Declines 151.74 to 10,240.78; Nasdaq Tumbles 63.31 to 1,867.01; Ford Announces Layoffs
Aired August 17, 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, stock prices plummet. The Dow hits a one-month low, the Nasdaq drops to a new four-month low.
Hurting the Dow and Nasdaq today, the shares of Microsoft. An appellate court rejected Microsoft's bid to delay the remedy portion of the antitrust case against Microsoft.
And shares of Ford plunged today, Ford announcing as many as 5,000 layoffs and slashing profit estimates.
We'll have complete coverage of what was a very difficult day on Wall Street.
Now let's check in with our reporters to see what they're working on.
Christine Romans at the New York exchange, Christine.
CHRISTINE ROMANS, CNN CORRESPONDENT: Lou, stocks fell at the opening bell and kept going, the Dow down more than 200 points at its low before recovering some of its losses.
GREG CLARKIN, CNN CORRESPONDENT: And the Nasdaq today hit harder than the Dow, all but nine of the Nasdaq 100 ending the day lower.
STEVE YOUNG, CNN CORRESPONDENT: A legal setback for Microsoft, the remedy part of the trial will go on without delay.
KITTY PILGRIM, CNN CORRESPONDENT: TV networks are pushing the envelope in a quest for ratings, and advertisers are beginning to balk.
TIM O'BRIEN, CNN CORRESPONDENT: The dollar has fallen against major foreign currencies for weeks, but U.S. exporters say it is still too strong, putting them at a global disadvantage.
FRED KATAYAMA, CNN CORRESPONDENT: Ford cuts thousands of jobs in a bid to make the company more competitive, but Wall Street reacting more to a cut of a different kind.
Lou?
DOBBS: Fred, thank you.
We'll have all of that coming right up for you.
Our top story tonight, a dismal day on Wall Street.
Stock prices tumbled, closing out a losing week for both the Dow and Nasdaq. Ford today sparked selling in auto stocks, that after Ford said it was slashing jobs and its profit estimates.
Microsoft tumbled after an appellate court rejected its request to delay remedy hearings in its antitrust battle.
And losses in the four Dow technology stocks and General Motors accounting for 40 percent of the Dow's 151-point loss today.
Christine Romans at the New York exchange. Christine.
ROMANS: Lou, it was a bitter end to the trading week, the Dow tripping early in the session and stumbling for most of the day, ending down 151 points, 10,240, the lowest close since July 10.
Take a look at the week's performance for some of the major indexes, the Dow down 1.69 percent, the S&P 500 down better than 2 percent, transports falling more than 1 percent. But look at the small cap Russell 2000, it edges up just slightly.
So why the malaise overall on Wall Street? Folks keep looking at those earnings warnings. Today we heard from Ford. Gap beat the Street, but then warned on its current quarter. Scientific Atlanta withdrawing its guidance for the current quarter and the year. And more news of layoffs, companies trimming their work forces. This has sparked worries on the Street.
Analog Devices, Accenture, General Semiconductor, Ford, Boeing, of those names, only Accenture moving higher here today, Lou. In fact, you saw losses in financials, retailers, tech names, building products. The only buying anywhere here, gold stocks, chemical stocks, and tobacco stocks. That's defensive.
Lou?
DOBBS: OK, Christine, thank you.
The Nasdaq today falling twice as much as the Dow. It was the worst one-day decline, in fact, for the Nasdaq in more than a month.
Greg Clarkin at the Nasdaq. Greg?
CLARKIN: And Lou, the Nasdaq now closed at 1867. That is the first time it's closed below 1900 since April 11, on the week the Nasdaq losing better than 4.5 percent. And today we saw widespread selling, all the sectors were hit. They were hit extremely hard. Take a look at Dell Computer. It was a catalyst this morning after it issued a profit and sales warning. Dell down sharply on the day.
Microsoft down to tech selloff as well as its legal setback, Cisco Systems, Sun Microsystems lost ground as well.
Yesterday we saw the chip stocks really kind of ride to the rescue of the Nasdaq. Not the case today. Chip stocks were down, and they stayed down. Applied Materials, Broadcom, KLA-Tencor, and Linear Technologies all down sharply on the day.
And Lou, in speaking with traders this week, you really saw a shift from the talk of basically, When will the market rebound? The talk now is, Will the Nasdaq go back to those April 4 lows of 1638? That's really something on everybody's minds at the moment.
DOBBS: OK, Greg, and trading light again today. How much weight should we give to these losses, given the low trading volume?
CLARKIN: You do see sharp, sharp swings in either direction on the low volume, Lou, but still the psychology at this point is incredibly negative. The fact that it wasn't on heavy volume, a lot of folks didn't take a lot of solace there. They still saw widespread selling today on light volume. And either way, this was just not a good session.
DOBBS: All right. Thank you, Greg Clarkin.
Ford today losing more than $3 billion in market cap, that after announcing as many as 5,000 job cuts. Ford also cut profit estimates dramatically for the full year. This another painful moment for the number two car maker. The Firestone controversy continues. And earlier this week, Ford agreed to settle a massive lawsuit over defective ignitions.
Fred Katayama has the story now.
(BEGIN VIDEOTAPE)
KATAYAMA (voice-over): One of every 10 of these salaried workers at Ford will soon have to clean out their desks. Ford will slash up to 5,000 white collar jobs, mostly through early retirement. That will result in a charge of $700 million in the fourth quarter.
Calling it "a necessary action," Ford's CEO, Jack Nasser, said the job cuts will help boost the company's efficiency and make it more competitive.
But the cut in jobs was eclipsed by a cut in its outlook. The company warned earnings for the full year would plunge more than 40 percent short of analysts' targets. That caused Ford's stock to skid to a new 52-week low, slamming other car stocks as well.
DOMENIC MARTILOTTI, BEAR STEARNS: And the other companies are going to come out and say their earnings are going to be weaker than expectations are out there. So this could be the tip of a bunch of preannouncements for the third quarter.
KATAYAMA: Ford's sales overall are heading downhill faster than those of its rivals, and it's losing market share as a result, sliding 1.8 percent points over the past year. It slapped incentives to spruce up sales, and those higher marketing costs are also hurting earnings.
Expect more restructuring.
JOHN CASESA, MERRILL LYNCH: I think this is the beginning of a process that will probably take a year or more to get this company more competitive for a more difficult environment.
KATAYAMA: Standard and Poor's put Ford and GM today on credit watch, indicating a strong possibility it'll lower their debt ratings.
(END VIDEOTAPE)
Some analysts say, expect Ford to get tougher with its suppliers, reduce capital spending, possibly cut more salaried workers, and close an assembly plant. Ford's chief financial officer said on the conference call today, "Nothing is off limits."
Lou?
DOBBS: Is this an indication, Fred, that we may be seeing a break in the consumer here, suggesting that car sales are going to back off, the consumer retreating a bit?
KATAYAMA: Right, Lou. You know, it's been a strong year for the first half of the year so far, but analysts are now fearing that with the rising rate of unemployment and also problems of incomes at the consumer level, that consumers are starting to cut back. And that's why some of those stocks really fell today.
DOBBS: And Ford, while they're talking about improving efficiencies and cutting back on their expenses, that's obviously just simply further contraction for this economy to deal with.
KATAYAMA: That's right.
DOBBS: Fred, thanks.
Well, the government today announcing the trade deficit for June widened. Experts -- exports, rather, hit the lowest level in 16 months. A key reason, the strong dollar, the strong dollar making U.S. products more expensive overseas, of course. And while the dollar has fallen in recent weeks against other currencies, it hasn't fallen enough to satisfy many big internationals. They continue to press the Bush administration for some relief.
Tim O'Brien reports from Washington.
(BEGIN VIDEOTAPE)
O'BRIEN (voice-over): The decline in exports is old news to companies like Dupont, which reported a 2 percent decline in worldwide sales last quarter. Gillette had a 4 percent decline. So did International Paper, export sales down 4 percent. And they all blame the strong dollar.
Since 1995, the dollar is up 70 percent against the German mark, 50 percent against the yen, and the resulting drag on exports has left many U.S. companies reeling.
Last month, the National Association of Manufacturers urged President Bush "to stop the economic hemorrhaging by acting to ensure that the value of the dollar will be consistent with economic reality and market conditions."
DAVE HUETHER, NATIONAL ASSOCIATION OF MANUFACTURERS: What we've asked so far is just for the administration to recognize that the dollar is overvalued, and that's as far as we've gone at this point.
O'BRIEN: Some analysts say even that could be risky, that any administration rhetoric about the dollar being overvalued could trigger a decline that may be hard to control.
WILLIAM DUDLEY, GOLDMAN SACHS: It's probably too late to scrap the strong dollar policy, because if they were to do so, they might provide a very severe decline in the dollar, which might be worse than the disease, because it could destabilize financial markets.
O'BRIEN: But Treasury Secretary Paul O'Neill defends U.S. policy on the dollar and had this to say to those complaining about how it affects U.S. competitiveness.
PAUL O'NEILL, TREASURY SECRETARY: People who are really good at what they do, they're producing value and don't spend a lot of time haranguing somebody else about why they're not successful. They make themselves successful.
(END VIDEOTAPE)
O'BRIEN: In his former post as chairman and CEO of another multinational corporation, Alcoa, Paul O'Neill might have viewed the dollar differently. But now he is emphatic. The dollar is strong, it's going to stay that way.
Lou?
DOBBS: And now we'll see what the markets have to say about that, Tim.
Thanks. Tim O'Brien from Washington.
Bonds today rallied after the trade deficit numbers were released, and those bond prices moved higher as stock prices on Wall Street tumbled. The 30-year issue up almost a full point in price, while the 10-year had its biggest gain in more than a week. The yield there, 4.94 percent. That is a five-month low.
Today's session on Wall Street not a comforting way to go into the weekend, but my guest tonight says investors should take the long view. He sees a strong recovery by the beginning of next year.
Chuck Kadlec, strategist at J&W Seligman, joins us now. Chuck, good to have you with us.
CHUCK KADLEC, J&W SELIGMAN: Lou, good to be here.
DOBBS: We're sitting here now with new lows. It looks like we're going to -- very close to testing some new lows in the stock market. Give us some comfort here.
KADLEC: Well, what's happening today was in many ways produced by the Federal Reserve policies late last year, certainly not the only thing, but one of the single most important events was the Fed kept interest rates too high too long. As late as December, remember, they thought the economy was too strong. And now, of course, we find out it was already sinking into this dramatic slowdown.
DOBBS: Sort of the obligatory boilerplate, always following an FOMC meeting about the persevering in the fight and diligence against inflation. That's sort of gone away.
You're right, I mean, do you think that Alan Greenspan has gotten a bit of a free ride here in terms of monetary policy being too strong or too long?
KADLEC: He has. He's probably as good as it gets. What it -- I think today's situation really underlines the debate we're just hearing now again on the dollar's strength, the weakness of the Brazilian real, the current potential currency crisis in Latin America. Once again, it's time to begin an earnest dialogue on restoring a monetary standard for the United States dollar based on a price rule.
Here are the benefits. One, inflation, predictably, under 1 percent. Two, low and stable interest rates. For small business, a prime rate of 4.5 percent. For American families, fixed mortgages, 30-year fixed mortgages, under 6. For U.S. corporations, they could borrow 10-year money under 5.
This is normal in the United States for periods of peacetime, especially when we're running budget surpluses.
DOBBS: Historically.
KADLEC: Historically, it's normal, absolutely.
DOBBS: In terms of what the Fed has to deal with, in terms of what the Bush administration has to deal with, I think you would agree with me, the price (UNINTELLIGIBLE) -- or putting a fixed value against the dollar is probably not going to be one of the first priorities.
Would you agree with that?
KADLEC: I think they've indicated it's not going to be the first priority. I think the first step would begin to move away from a strong dollar to a strong and stable dollar. It made sense to talk about a strong dollar when we had inflation of 3, 4, or 5 percent. Now as we restore price stability to the U.S. economy, why would you want a strong dollar? That means deflation. What you want is price stability. That would say a strong and stable dollar.
DOBBS: In terms of the influence on markets here, Chuck, what do you expect for the market for the next year?
KADLEC: Well, there are certain things that are catalysts that can bring us out of these doldrums. First, better monetary policy. The Fed has begun to ease. We do see some relief of the dollar pressure and commodity prices. This is pivotal.
DOBBS: Right.
KADLEC: Second, we will get another tax rate reduction on January 1 of 2002. It's modest, but it's in a positive direction. Third, the decline of the price of oil, of course, in the price of gasoline helps American consumers.
So I think you're going to see the economy begin to show some recovery in the latter part of the third quarter, more evidence of recovery in the fourth quarter, better than 50-50 chance we can be at growth rates above 3 percent again sometime during the first half of next year.
DOBBS: And, of course, the Bush administration calling for that now, after having revised lower their growth estimates for this year.
The market, the stock market, an intelligent place to be as an investor right now?
KADLEC: Long term, I think this is an enormous buying opportunity for people who are investing for the next two to five years, at a minimum. You know, it's not a heroic assumption to get back to 3 percent growth. If you just stop the inventory correction, if you just stop the decline in capital spending and keep it at today's lower levels, you quickly get above 3 percent growth rates.
DOBBS: When you stop -- when, as you put it, stop the inventory correction, once we work through that inventory correction, I don't think we want to stop it quite yet, do we?
KADLEC: Well, we want to work through it. So companies again produce as much as they sell. That alone would add 1 percent to growth rates. But the longer term view for the U.S. economy is strong. What we're going through is one of these cases where U.S. monetary policy purposefully attacked our prosperity and our growth.
DOBBS: Right.
KADLEC: So what Alan Greenspan said, he said he was going to bring it to a stop, he did. Now he's trying to undo the damage that he visited upon our portfolios.
DOBBS: Are you ready for a little irrational exuberance? KADLEC: I'd just settle for some positive growth and reasonable market valuations, absolutely.
DOBBS: Yes, Chuck, thank you very much for being with us.
KADLEC: Good to be here, Lou.
DOBBS: Appreciate it.
Well, Microsoft today lost another court battle. An appellate court decision means the remedy part of the antitrust trial against Microsoft will resume in September. A new judge to take over that case could be named by the end of this month.
Steve Young with a report.
(BEGIN VIDEOTAPE)
YOUNG (voice-over): Instead of heeding Microsoft's request that it put a lower court on a leash, the court of appeals put Microsoft in its place. And that's squarely back before the district court, before the Supreme Court decides in October whether to consider Microsoft's complaint that district court judge Thomas Penfield Jackson was biased and his entire antitrust ruling against the company should be thrown out.
The court of appeals said Microsoft misconstrued its legal burden and failed to demonstrate the harm of returning the case to the district court in seven days.
HARVEY SAFERSTEIN, MINTZ LEVIN: In effect, what it's doing is lobbying that Supreme Court, saying, Microsoft is just dead wrong about what we did, and here's the reasons why they're wrong.
YOUNG: Soon after the case returns to the district court, a new judge will be appointed, the third after Stanley Sporkin and Penfield Jackson, to hear more testimony about how to rein in the company found guilty of abusing its Windows monopoly, and to consider other charges.
A Justice Department spokesman said, "We are pleased" with the court of appeals decision. A Microsoft spokesman said the company regrets it but is "prepared to move ahead."
What Microsoft is really keen to move ahead with is its scheduled October 25 launch of Windows XP, its most important operating system in six years. The federal government and 18 states suing Microsoft haven't ruled out trying to get an injunction or temporary restraining order against the controversial product.
RICHARD BLUMENTHAL, CONNECTICUT ATTORNEY GENERAL: We need to develop a strategy that offers consumers the most immediate kind of remedy to the monopolistic power that Microsoft has misused, and to prevent Microsoft from repeating what seems to be the same kind of misconduct.
(END VIDEOTAPE) YOUNG: The latest setback puts more pressure on Microsoft to seek a negotiated settlement, but the company and prosecutors won't say if settlement talks are now under way.
Lou?
DOBBS: Why not?
YOUNG: Well, they say that doesn't serve the talks.
DOBBS: The purpose of settlement.
YOUNG: That's right.
DOBBS: Should that be, a talk is under way?
YOUNG: Microsoft also has one last Hail Mary, as the antitrust lawyers say. They could try to hunt down William Rehnquist on the Supreme Court for a stay. But that's very unlikely.
DOBBS: All right. Terrific. Steve, thank you. Steve Young.
Well, straight ahead here on MONEYLINE, U.S. troops joining in that battle against the wildfires raging in the Western states. We'll let you know tonight if there is any relief in sight.
And the Windward Islands catching something of a break. But now the tropical storm Chantal is bearing down on Jamaica.
Another shark attack in the Bahamas, we'll have the latest for you on what's been a summer of shark scares.
And Steve Fossett's quest for world records in ballooning has ended. We'll tell you why he didn't make it all the way around the world.
And a guest who says there's a nuclear bomb lurking off the course of Georgia, and a congressman who says he's wrong. They'll be here to discuss the issue.
(COMMERCIAL BREAK)
DOBBS: The wildfires out West are worsening even as more help to fight them arrives. A thousand U.S. troops have joined the battle in the Western states. Forty-two major fires there have chewed up more than half a million acres. Twenty-two thousand firefighters waging war against those fires for a week.
The situation not likely, however, to improve soon. The forecast for the Northwest this weekend calls for dry lightning. The fear is, of course, that lightning could spark even more blazes.
And Chantal is back. Late today, forecasters reinstated Chantal's tropical storm status. Last night she nearly washed out over the Windward Islands, but not before sparking lightning that killed two men in Trinidad. And now, with renewed strength, Chantal is picking up strength. She is barreling down on Jamaica, the Honduras, and Mexico.
And there's been another shark attack in the Bahamas, this one not far from a similar incident two weeks ago. The latest victim, a 43-year-old American. He was bitten on the leg while snorkeling. Doctors say his injuries are not serious. In an earlier incident, an American lost part of his leg when he was attacked. He and his wife were celebrating their 10th wedding anniversary.
Steve Fossett's quest has ended. The millionaire brought his balloon down in Brazil today well shy of his goal of soloing around the world. Still, Fossett stayed in the air longer than any other single balloonist ever has. This was Fossett's sixth attempt at the world record. Will he try again?
STEVE FOSSETT, BALLOONIST (on phone): It's really tough, when my team has spent their entire summer preparing this balloon system for me in Australia. It would just be really tough to put together a 100 percent effort like that again. And it's a difficult life. I mean, the conditions up there were really difficult. And I wouldn't speculate as to whether or not I'd be willing to make another try.
DOBBS: Well, this try was done in by rough weather and low oxygen supplies.
The suspicion that a major American advertiser put pressure on a broadcast network has the media industry abuzz. Procter and Gamble refusing to advertise on a controversial episode of the CBS network show "Family Law." The question is, did anyone step over the line? And what is the line?
Kitty Pilgrim has the story.
(BEGIN VIDEOTAPE)
PILGRIM (voice-over): They are making a federal case out of it. "Family Law," the CBS dramatic series, sometimes deals with tough subjects, such as abortion, gun control, and the death penalty, sometimes topics Procter and Gamble would rather not be associated with.
Back in March, P&G decided not to advertise on certain episodes of "Family Law." The firestorm came in the rerun season, with the suggestion that P&G pressured CBS to choose other shows for the rerun. It's an allegation CBS denies. Quote, "CBS does not program its network based on directives from advertisers, and in fact, neither Procter and Gamble nor this agency asked for or suggested these changes," unquote.
Says P&G, quote, "We do not tell a network to put on a different show. If we did not advertise in the particular episode the first time it ran, we are not in the rerun," unquote.
So if that's the case, what is the problem? Advertising executives like Michael Jeary say this situation could be a glimpse of the future.
MICHAEL JEARY, DELLA FEMINA ROTHSCHILD JEARY: This is probably an isolated case that will be connected to the next isolated case.
PILGRIM: Here's why. The entertainment and advertising psychology are diverging. Networks are competing for viewers with edgier, more controversial shows that draw ratings, yet large corporations, the bill payers of the industry, by nature tend to be squeamish about out-of-the-box subject matter on TV.
(END VIDEOTAPE)
Now, some worry this is the crack in the dam. With the up-front market for advertising for the fall TV season off some 15 percent, competition for ad dollars is intense. And the hope is that networks won't cave in to corporate pressure to water down the content.
Lou?
DOBBS: It seems like a rather clear-cut situation, though. An advertiser has a right to decide what they're going to advertise on, and the network has a right to decide whether or not they're going to run a program.
PILGRIM: It seems pretty clear-cut. And in fact, when we contacted both parties involved, it seemed absolutely crystal clear they made the decision back in March. However, there is this divergent mentality that's going on in the industry, and everyone's quite worried that the extreme broadcasting will clash with the conservative advertisers in a not-so-great economic climate.
DOBBS: OK. Sounds like America to me, people making choices. Thanks, Kitty.
Tiger Woods finds himself in the rough for the first time ever. He may not make a major tournament cut, although tonight his odds are looking somewhat better, just when he was counted out. So far, the diversity explosion in golf that he was supposed to bring seems not to have happened.
Casey Wian has the story.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice-over): This three-part golf course in San Diego used to be the turf of local drug dealers. Now it's a place where local kids can learn and play golf for free. Here, 34 languages are spoken within a five-mile radius, and average family income is under $20,000 a year.
ERIC MURRAY, PRO KIDS GOLF: What we really hope to do is to give kids, through the medium of golf, an opportunity to make better lives for themselves.
WIAN: Who's your favorite pro golfer?
COREY MONTGOMERY, 13-YEAR-OLD GOLFER: Tiger, I like him. I like the way he plays. WIAN: Already, 13-year-old Corey Montgomery dreams of joining Tiger Woods on tour. When Woods burst on the scene four years ago, he was expected to attract younger, more diverse players to the game. But despite efforts by golf organizations, corporate sponsors, and Tiger himself, golf remains a game dominated by older wealthy white men.
The average U.S. golfer is a 41-year-old Caucasian male making about $72,000 a year, little changed from four years ago. The percentage of minority golfers is also nearly unchanged, and junior golf participation rates are down 10 percent.
(on camera): Golf in general is in a slump. According to the National Golf Foundation, June marked the 11th consecutive month in which golf participation rates declined.
(voice-over): More people may be watching Tiger on television, but few are trying to emulate him.
MIKE GALESKI, CALLAWAY GOLF: People really say, This guy, wow, he is a hell of an athlete. That is a tremendous draw to the game. So they're watching Tiger play golf. But they themselves are not necessarily out playing the game or learning the game. But many that do find that there are some barriers in this game.
WIAN: Barriers include cost, access to courses and practice facilities, and the difficulty of mastering the game. Organizations like The First Tee are trying to knock down those barriers. Its goal, introducing a half million mostly minority kids to the game by 2005.
JOE LOUIS BARROW, JR., THE FIRST TEE: I think golf does need to be more creative and innovative in terms of how it's approaching the game and introducing the game to many people. I think if people are patient, they're going to see that the diversity's going to take time.
WIAN: Corey's instructors say statistics don't reflect what's happening in places like this, where, given the opportunity, a new, diverse generation is ready to take up the game and help revive a stagnant industry.
Casey Wian, CNN Financial News, San Diego.
(END VIDEOTAPE)
DOBBS: And coming up in the next half hour of MONEYLINE, another down day, another down week. Is Wall Street just down, or down and out? We'll be talking with a panel of experts.
And the dot-bomb explosion rips through the magazine industry. We'll take a look tonight at the fallout.
And is there an armed nuclear bomb sitting off the coast of Georgia? We'll try to find that out as well.
(COMMERCIAL BREAK) DOBBS: A dramatic sell-off on Wall Street today capping a difficult week for investors. The Dow Industrials ending the day down more than 1 percent, finishing the day and week at 10,240. All but five Dow components finishing lower. On the Big Board, declining issues led advancing issues 2 to 1.
Checking out the most actives today, Global Crossing topping the list dropping more than 5 percent after the Defense Department canceled a major contract with Global Crossing.
And shares of Nokia finishing at $17, just about 50 cents from its low for the year. Other active issues on the Big Board, EMC closing the day at $16.50 a share. Heavy volume there. Ford shares active on the news we told you earlier, the company announcing layoffs and lowering profit estimates.
Checking out the tech issues, the Nasdaq finishing the day off more than 3 percent finishing the day and week at 1,867. Declining issues beating advancers 2 to 1. And the most actives on the Nasdaq today, Dell shares heavily traded after its weak quarterly results. Microsoft also active on the session. That after an appellate court rejected its request to delay proceedings.
Other active issues on the session, Broadcom falling more than $4 a share. Heavy trading there on news of a slowdown in the set-top box industry. Broadcom makes chips for use in those digital set-top boxes.
Now, for a preview of what lies ahead, Christine Romans rejoins us from the New York Stock Exchange.
Christine, in terms of next week, can we expect an uptick in volume? ROMANS: Oh, a lot of people are hoping so, Lou. But a lot of folks also saying that historically, it is not until after Labor Day, before you start to see volume come back in here. And they say Tuesday, Wednesday, Thursday, are the big trading weeks. Monday and Friday are usually light.
Light volume today, 980 million shares, that is sort of light to moderate. And it is less volume than we saw yesterday on a 46 point uptick in the market. So that is maybe some good news for the bulls overall, but the chartists, the technicians clearly drawing some new lines on their charts, Lou.
DOBBS: Christine in terms of those specialists who are down there and talking about it being busy, and some of the investors being away on vacation for August, and so forth, are the specialists on vacation?
ROMANS: They are here. They are trying to get some of this work done. A lot of them are actually skeleton crews here, but some of the guys I talk to down here tell me they are doing scattered business. You take a look at Abercrombie & Fitch for example, guys at that post said that it was this week that they saw some pretty record volume there. So there are some scattered areas where, based on earnings news, you are seeing some story stocks moving.
But overall folks are saying it feels really quiet. Though you look at this kind of decline...
DOBBS: Skeleton crew? Did you say skeleton crew?
ROMANS: I said skeleton crew.
DOBBS: You said no one was on vacation.
ROMANS: You know, a lot of folks here are up in the office. Some of the guys are what I call on the floor, they are actually in their office, their not actually...
DOBBS: Oh, they are ready to move in to action should they be needed. all right.
ROMANS: I think so.
DOBBS: Christine, thanks. Christine Romans.
And now we go to the Nasdaq. Greg Clarkin. Greg, volume there, are you expecting an uptick, expect that you are really going to see lot of action?
CLARKIN: Highly unlikely, Lou. A lot of folks are saying they don't expect to see any kind of activity until after Labor Day. It averaged 1.3 billion shares on the Nasdaq through, so far in August. That is exactly what it hit today. The next two weeks a lot of folks are not expecting to see any kind of big pickup in volume.
DOBBS: Should we give just give you a couple of weeks off here, Greg? What's the deal?
CLARKIN: This is too much fun covering this. I don't want to leave.
(LAUGHTER)
DOBBS: I assure you, we were just kidding about giving you the time off.
CLARKIN: You know, it's painful talking to a lot of these folks. I was talking to one gentleman who has been on trading desks -- well on Wall Street about 40 years and on a trading desk in New York for a number of years and he says this is just an incredibly painful market to go through.
He has been through downturn before, he goes, I don't know what it is about this one, maybe watching the young guys go through for the first time, but it is tough.
DOBBS: I want to retract right away any discussion of time off. I already owe Christine two bucks. I don't want to get into trouble on time-off as well. Thanks, Greg. Topping tonight's "MONEYLINE Movers," the Gap falling nearly $2. The largest clothing chain in the country reporting a 52 percent drop in its second-quarter earnings. And gap warning third quarter profits may fall below last year's results.
Scientific Atlanta down nearly $4 a share. The maker of those set-top boxes for cable television withdrawing first-quarter and year 2002 guidance, due to slowing subscriber growth. Kohl's up nearly a dollar and a half a share. The discount chain reporting a 35 percent rise in second quarter earnings. Expansion plans despite an economic slowdown. Kohl's launching more than 100 new stores. And over the past 52 weeks, shares of Kohl's remaining virtually unchanged.
Oil prices sharply lower today. In fact at a 3-week low. The price of oil plunging on fear that the sluggish economy could continue to hurt demand and there are rumors are swirling in the markets that OPEC may cut production again when oil ministers meet September 1. The price of light sweet crude falling 77 cents. Crude now at $26.68 in the New York Merck.
Is there a nuclear bomb on the coast of Georgia? Something was dumped in the waters back in 1958. The question is exactly what.
Retired Air Force Colonel Derek Duke insists it was an intact complete nuclear bomb. An M-15 hydrogen bomb in fact. If so, that bomb is 100 times more powerful than the one dropped on Hiroshima.
Congressman Jack Kingston of Georgia insists that only the shell casing was dropped. Both men join us tonight from Savannah, Georgia. Gentlemen, good to have you with us.
Derek, let me begin, if I may, with you because you believe, obviously, that this is an armed bomb by which you mean a plutonium trigger, a capsule is still associated with the bomb, is that correct?
DEREK DUKE, AIR FORCE COLONEL (RET.): Well Lou, let me be very careful. Congressman Kingston has been at my side the entire time that the Air Force has been investigating this. And he has the completed Air Force report that was issued July 11 of this year.
DOBBS: Yes, Derek, so do I. I am asking for your opinion, sir.
DUKE: Well, in my opinion, I believe there is substantial doubt as to the conclusion reached in this report. I have had people privately from inside the government tell me that that is, in fact, not the case. And these are people in the position to know.
One of the problems has been tracking the capsule that was assigned to this weapon, for that particular evening. There is some difficulty in doing that. And that is part of the problem that I have with it. Plus the fact that this was the height of the Cold War, and it was a normal procedure as witnessed by -- on CNN already at the townhall meeting on February 15 and Tybee Island, where they passed a resolution to find it because of the controversy surrounding whether the capsule my or may not have been there. DOBBS: Let me do this, if I may, Derek, let me turn to the congressman. Congressman, Derek has just pointed out that you have received a study from the Air Force, and that study delivered I believe July 11. Another study completed last September.
Are you firmly convinced now, Congressman, that this bomb is not a so-called complete bomb? Do you feel there is no possibility of a mistake here?
REP. JACK KINGSTON (R), GEORGIA: Let me say this. As a member of Congress, particularly one who doesn't have a background in the Air Force or bombs and munitions, I have put all the burden on the Air Force, and the Department of Energy, and the Corps of Engineers and all government agencies responsible for this, and I said look, I don't know, but you damn sure better be right.
And so after nearly a year Derek came to me about this last August, and they did a pretty exhaustive study and they said, we don't believe that there was any nuclear weapon on this bomb. We traced the chain of custody, went through the Atomic Energy Commission.
DOBBS: Congressman, we should point out to our viewers, right here that in 1966 the federal government, the Military, the Air Force, said that this was an armed complete nuclear bomb. Is that not correct?
KINGSTON: Well there was some testimony in there, but generally, the chain of custody said that it was not. This was a mod-0 a mod-0 has to have the nuclear warhead attached to it, and that there was no proof that there was one attached to it. The frustration has been for Derek Duke and for me as that we have other people kind of on a hearsay basis, saying maybe it was, but we haven't had anyone who would come forward.
And that is why after four lead agencies with the federal government looked at it, you have to say OK, I believe you.
DOBBS: Let me ask this of both of you and we are running out of time, and if you could be very succinct, I would certainly appreciate it. I know our viewers would, because it is an important issue. The fact is that this bomb is sitting there with uranium in it approximately 400 pounds of TNT explosive as well. There is a risk of pollution. One can argue over the level of risk, and the degree. But why not simply go out find it and resolve this, Congressman?
KINGSTON: What they have told me is they looked back in 1958 for six weeks. They had 100 people, three ships looking for it. Now even with more advanced technology they still can't pinpoint it except for in a 20-square-mile area, and it would be a 23 million dollar expenditure to try to find it. They believe it is so wedged down deep in the Earth surface that it is safer to leave it there.
And I said what if it is my family and my anchor of the boat that falls on it. Would it cause it to explode and they said there was zero possibility of that.
DOBBS: Derek, do you think that that's prohibitive then?
DUKE: No, I do not, Lou. That's where I greatly differ with the Air Force and the conclusions in their report. They said it was very a dangerous item. I think by the sheer admissions that they make in their own report, we should find it: The prudent man would say we should find it.
I have let the Air Force know that through our investigation, which includes the original naval search commander that's still alive (UNINTELLIGIBLE) and is on my consultant staff that we probably have narrowed it down to an exact impact point.
But again, due to the political nature of this and the extreme sensitivity of it, we're not willing to disclose that until we have some arrangement with the Air Force that it should be looked for.
DOBBS: I.e., money.
KINGSTON: Well, let me say this: What we are saying is keep this open. If we have the technology to pinpoint this bomb, you know, let's go after it. And so we haven't shut the door: We're going to continue to work with Derek and continue to work with the Air Force on it. But as of right now, they're saying it is not worth the expenditure. The bomb is safe, and environmentally speaking, it's better left untouched.
DOBBS: Congressman...
DUKE: Lou, if I might add one thing...
DOBBS: We've got -- make it real quick.
DUKE: ... it may not be money. It may not be money. This is an issue of if that weapon is out there with a capsule, it could have substantial effect on the policy of the United States with strategic weapons. We've got a very important ballistic missile defense system that's politically being pushed forward now, and I think this could have a factor on that decision.
DOBBS: Derek Duke, Congressman Kingston, thank you very much, gentlemen, for being with us to try to help us elucidate this issue. Appreciate it.
Well, coming up next on MONEYLINE, "The Industry Standard," the latest victim of an advertising slowdown, a look at that troubled industry tonight. Also, some insight into these difficult markets: a preview of next week's Fed meeting in which the decision will be taken whether to lower interest rates again. And our Friday roundtable coming right up.
(COMMERCIAL BREAK)
DOBBS: A continuing shakeout in the magazine industry: 25-year- old "Working Woman" magazine going on hiatus amid a restructuring, and this one day after "Industry Standard" shut down publication. The magazine's demise yet another example of the weakening advertising market.
Allan Chernoff has the story
(BEGIN VIDEOTAPE)
ALLAN CHERNOFF, CNN CORRESPONDENT (voice-over): For a quarter of a century, "Working Woman" magazine has provided support and education as its readers entered the work force and climbed corporate ladders.
But a decline in advertiser support now has led to a layoff of the magazine's staff and the parent company being put on the auction block.
JAY MACDONALD, WORKING WOMAN NETWORK: ... March of 2000, the first even was the devaluation and Wall Street's devaluation of all the Internet companies. Following the devaluation of the Internet companies, the capital markets dried up for those companies that were wishing to raise money for Internet-based ventures.
CHERNOFF: Yesterday, "Industry Standard" magazine ceased publication, a victim of the dot-com bust. Its recent issues, a sliver of what they were last year.
JONATHAN WEBER, EDITOR IN CHIEF, "THE INDUSTRY STANDARD": We rode a huge boom in all things related to Internet and technology. I think we did a very good job of chronicling that boom. And when that turned to bust, we were in a position similar to many of the -- many of the companies that we cover actually.
CHERNOFF: The list of prominent titles disappearing from magazine stands is growing this year, including "Business 2.0," being folded into "E-Company Now," "Consumers Digest," "George," and "Individual Investor."
The collapse in dot-com advertising, which accounted for nearly $1 1/2 billion last year, has been the hardest fall in the magazine ad slump. Technology ads overall are down by one-quarter so far this year.
Among the losers seeing a collapse in ad pages and revenues: "Wired," "Inc." and "Fast Company."
But it's not just a technology slump. Ads from retailers are also down nearly 25 percent so far this year.
JON FINE, "ADVERTISING AGE": What has surprised everybody is how quickly things have just literally fallen off the cliff. Magazine executives across a wide variety of titles will tell you that they've never seen an ad fall-off like this in terms of steepness and suddenness.
(END VIDEOTAPE)
CHERNOFF: Still, some magazines are managing to have banner years, especially traditional women's names like "Good Housekeeping," "Harpers Bazaar," and "Marie Claire." In part, that's because ads for toiletries, cosmetics and drugs are all up sharply this year -- Lou.
DOBBS: OK, Allan, thank you, and you'll be right back when we wrap up the week on Wall Street and preview what lies ahead. Stay with us.
(COMMERCIAL BREAK)
DOBBS: Well, now our roundtable, and let me begin, if I may, Christine Romans at New York Exchange -- the Fed meeting next week, interest rates, how big a part will it play in the direction of the stocks on the Big Board?
ROMANS: You know, a lot of people are talking about it, but pretty much everyone telling me they expect 25 basis points of a rate cut and maybe a signal that the Fed will cut again, so I mean is that already factored in? And usually, the day before a Fed meeting, it can be brutally quiet. Couple that with the fact that it's August, Lou, it might not have that big of an impact.
DOBBS: Greg, I'm sure the Nasdaq will have quite the inverse effect.
CLARKIN: Lou, at this point, you know, these guys will welcome anything that will give a spark of activity, but traders say, you know, they haven't seen a real big lasting impact from the Fed cuts obviously on the markets, so they are not expecting any great things here.
They are more concerned about getting through Labor Day and then hitting September. Keep in mind, the second half of September is when you should get the onslaught of profit warning. A lot of tech companies are going to be blaming Europe for the third quarter weakness, so at this point -- and then, you run into October, Lou, which, you know, we all know, historically...
DOBBS: Wait a minute, before you get us to Christmas, OK -- I'm going to have to cut you off. But we are going to be back next Friday as well, so maybe you can get us through Thanksgiving, Christmas, a little Halloween.
CLARKIN: You got it.
DOBBS: Allan, your view.
CHERNOFF: Well, it looks like Greenspan has to play lifeguard once again, certainly the swimmers on Wall Street seem to be under water right now.
DOBBS: Oh, that's a good way to put it. Jan, can you top the metaphor?
HOPKINS: Well, I think that we should look at mortgage rates. They are actually coming down below 7 percent, because bonds are coming down, so the bond market is finally reacting to these Federal Reserve rate cuts.
DOBBS: Especially the 10-year bonds, right?
HOPKINS: And the two-year ones, but maybe -- maybe the bond market is going to help us out more than the Fed this time around.
DOBBS: Well, somebody needs to help us out, don't you think, Chuck?
KADLEC: Absolutely, and the way to watch the Fed is not the Fed funds rate that is in the market, the way to watch the Fed is to watch commodity prices, especially the price of gold. If the price of gold continues to rise modestly, that says the Fed is providing money the world economy needs. If it starts to fall again, I don't care where interest rates are, we are in for more trouble.
DOBBS: We're starting to get a little -- a little rise back in gold prices.
KADLEC: A little rise, reassuring that is the Fed is actually reflating, taking back some of the deflation that it imposed on the economy during the first half of the year.
DOBBS: And those 10-year notes Jan was talking about.
(CROSSTALK)
KADLEC: ... oh, I'm sorry, the two-year under the Fed's funds rate.
DOBBS: Two years, a the 10-year, it's starting to look good, under 5 percent. We're starting to get a little break.
KADLEC: There is nothing like price stability to help a good, strong economy get better.
DOBBS: Here we go again, Chuck. Your monetary policy price -- we're going to get that dollar fixed.
KADLEC: Not fixed, but stable, so people can use it as a real tool of commerce.
DOBBS: You got it. Chuck, thanks a lot.
KADLEC: Thanks, Lou.
DOBBS: Panel of experts -- notice how you're a panel of experts now -- thank you very much. Appreciate it, as always, guys.
Coming up next here, e-mails and "Ahead of the Curve."
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DOBBS: Well, next week it's the Fed's show. On Tuesday, we will hear about interest rates, and on the corporate front, we will be getting a quarterly earnings from K-Mart, Agilent, Krispy Kreme, amongst others. J.P. Morgan market strategist will be here Monday night, and all of that coming right up here Monday as we get set for the big Fed meeting.
Now taking a look at your comments. Joe Chewcaskie writing: "America has seen all the interest cuts take place, and we are expecting another. Yet the mortgage interest rates have not seen any drop. They are still at 7-plus percent. Is there something wrong with this picture?"
Well, actually, Joe, as we reported to you earlier, mortgage rates have indeed declined. In fact, just this week, falling below 7 percent. Those mortgage interest rates, as you know, are closely tied to the 10-year, which is currently at a five-month low below 5 percent, so finally, we are all getting a break on those mortgage interest rates.
Wally has a comment on a story we reported to you last night regarding Social Security, the White House intending to change accounting practices that will free up billions of dollars in additional revenue. Writing, quote: "I guess these new accounting methods are the fuzzy math we heard about during the past campaign. If we only had fuzzy math on our portfolios, we'd all be millionaires."
Well, actually, Wally, remember, it's the government doing that fuzzy math, and I'm not sure any of us want the government handling our portfolios, but we get your point.
Jack Vant from Boise writes: "No matter how poorly the market may be performing, there is a positive result each day -- that is, it brings us one day closer to the eventual turnaround."
Jack, that's a great thought on which to end the week. We thank you for sharing it with us.
And we'd love to hear from you. E-mail us at moneyline@cnn.com.
And a programming note: Earlier here on MONEYLINE, you heard Treasury Secretary Paul O'Neill talk about the dollar -- well, you can hear that entire interview with the treasury secretary tomorrow, 5:30 p.m., on CNN's "EVANS, NOVAK, HUNT & SHIELDS."
For tonight, that is MONEYLINE. We thank you for joining us, I'm Lou Dobbs, have a very pleasant weekend. Good night from New York, "CROSSFIRE" is next.
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