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Lou Dobbs Moneyline
Dow Advances 79.29 to 10,320.07; Nasdaq Climbs 14.34 to 1,881.35; Excite@Home Facing Delisting, Bankruptcy
Aired August 20, 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, the strongest rally in more than a week on Wall Street, but it was another classic August performance, one of the lightest trading days of the year.
And today, an encouraging report on the direction of the economy, the index of leading economic indicators rising in July for a fourth straight month.
And Toys "R" Us reports a quarterly loss of $29 million, matching Wall Street expectations as the company spent money to renovate stores. I'll be talking with the company's CEO, John Eyler, in just a few moments.
We have a lot to tell you about tonight, a solid advance on Wall Street, as I said, and a vote of and develop confidence for an embattled technology executive, and fears that a former Internet high flyer is about to go under.
We begin with Steve Young -- Steve.
STEVE YOUNG, CNN CORRESPONDENT: Lou, one of the oldest and best- known Internet companies is in mortal jeopardy -- Excite@Home.
PETER VILES, CNN CORRESPONDENT: The Teflon CEO of the high-tech world, Carly Fiorina, wins a declaration of 100 percent support from the board of Hewlett-Packard.
TIM O'BRIEN, CNN CORRESPONDENT: There's been plenty of hand- wringing about the drop in the surplus, but some economists say we should be glad the surplus is in decline.
KITTY PILGRIM, CNN CORRESPONDENT: An economic trend that is both rare and disturbing, the world's biggest economies are slowing at the same time.
DOBBS: Thanks, Kitty.
All of that and more coming right up. On Wall Street today, stock prices advanced across the board, the Dow up nearly 80 points. All but seven of the Dow 30 stocks ended the day higher. And were it not for losses in one stock, that of General Motors, the Dow would have ended up more than 100 points on the day.
Christine Romans at the New York exchange -- Christine.
CHRISTINE ROMANS, CNN CORRESPONDENT: Lou, a little buying went a very long way in the market here today, mostly because volume was so light on this August Monday.
Take a look at the performance of the Dow Jones Industrial Average, up 79 points, 10,320, encouraged by that economic report, also by a strong quarterly showing by Loew's, and scattered talk that maybe, just maybe, the Fed might do 50 tomorrow.
Look at drugs stocks, they did very well today, one of the winning groups. Merck, a Dow component, up about 2 percent on the day, in the news today because Merck Medco, one of its units, has substituted generic Prozac for 80 percent of patients who use home delivery, just a week after generic Prozac hit the market. Even Eli Lilly, the maker of Prozac, moving higher here today, that whole group doing well.
Also watching auto stocks. This is the opposite performance there. Big losses across the board. Goldman Sachs has a note saying eating from the same oat bag, lowering the forecast for GM and Ford, saying eroding market share and higher costs were biting into profits there. Also some of those auto parts suppliers not doing well. A lot of different analysts out today with negative comments on that sector -- Lou.
DOBBS: Thank you very much.
The latest mutual fund figures showing that investors pulled more money out of stock funds than they put in during the month of July. That net outflow from stock mutual funds, $1.5 billion. It was the first outflow since March.
Lipper says bond funds took in a net of nearly $7 billion in July. That was the biggest inflow since January.
The Nasdaq today scored a much-needed rebound after a brutal session Friday. Amanda Lang at the Nasdaq Marketsite with the story -- Amanda.
AMANDA LANG, CNN CORRESPONDENT: Lou, much needed indeed. This was a market that fought for every advance. The market today was really an internals story, Nasdaq ending the day 14 points higher, 1881 was the level. But look at the fighting over that water line, the breadth of this market, which started the day negative, ended basically neck and neck, little bit positive.
Networking stocks really in focus here, Extreme Networks taking a huge hit after a downgrade by Morgan Stanley, Morgan cutting it to neutral from outperform. The trouble isn't specific to Extreme necessarily. They're still going to make their quarter. But longer term, growth rates have to come in. That hit the whole sector. But look at Cisco, the giant was up because Juniper Networks may not be hurting as much as had been thought.
Chip stocks moved the other direction. That was a bright spot in the market together, TriQuint Semi getting an upgrade by S.G. Cowen. That sent all of the semiconductor stocks higher, particularly in the communications group. As you know, chips watched very closely, leading us out of this tech slump -- Lou.
DOBBS: Thank you very much, Amanda.
A lot of stocks moving in after hours trading now. Jennifer Westhoven at the Instinet trading desk with that update -- Jennifer.
JENNIFER WESTHOVEN, CNN CORRESPONDENT: Hi, Lou.
Well, we'll focus in on two of them moving down. We're going to start with Agilent, which makes electronics testing equipment. They came out with third quarter earnings.
The loss there, better than expected, but going to the fourth quarter, the company says it sees a loss, a big shortfall, compared to what Wall Street had been looking for, saying that sales falling, company also saying it will cut 4,000 jobs. That's about 9 percent of its work force. And the stock taking a pretty good tumble there, $2.34, that's a 9 percent loss.
That said, it is not pulling the QQQs into negative territory. Those, of course, tell us a bit about Nasdaq sentiment.
Also want to touch on an American Eagle retailer, second quarter earnings in line, but it said for the third quarter, coming out with a sales forecast, apparently not up to snuff for investors. That stock down more than $4 a share. That is a 13 percent loss.
That said, the mood on the trading floor much better than Friday afternoon, as you can imagine -- Lou.
DOBBS: That must have been quite a Friday afternoon. Thanks very much, Jennifer.
Shares of Toys "R" Us climbing more than 7 percent on the session, despite posting a loss for the second quarter. The toy retailer meeting Wall Street expectations, a loss of 15 cents a share, sales climbing 2 percent to $2 billion, just over $2 billion. Much of that loss because of major remodeling that the company is undertaking with about 200 of its stores.
But Toys "R" Us shares today added $1.62 after the company confirmed it will return to profitability by the fourth quarter.
Joining me now, the chairman and CEO, John Eyler. John, good to have you with us.
JOHN EYLER, CHAIRMAN & CEO, TOYS "R" US: Thank you, Lou. DOBBS: It's a strange thing to say, I suppose, with that kind of loss, but congratulations on those results.
EYLER: Well, we're making progress.
DOBBS: That's some indication of the times we're living in. These are tough times. Are you finding it any easier to find visibility here?
EYLER: Not really. The last six, seven months have been about as tough a stretch in retailing as I've seen since 1987, frankly, although in the last six weeks, we're starting to see some real strong glimmers that the efforts that we're making are starting to pay off in more than one of our divisions, in fact, in three of our divisions.
DOBBS: And those three divisions?
EYLER: Well, we're seeing a glimmer in Toys "R" Us, certainly the turnaround in Kids "R" Us is very encouraging to us, and Babies "R" Us continued strong performance. Actually, I'd be remiss, we had the best month we've had in a long time in international as well.
DOBBS: Despite this environment that is described variously as pre-recession or at least a severe slowing.
EYLER: Well, we were pretty pleased to break even on sales in Toys U.S. and to pick up a couple of percent totally. In this economy, that's a real achievement when you're remodeling stores at the rate of about 70 at a time.
DOBBS: And in terms of your international performance, most people are lamenting the strength of the dollar. You're managing to stand up to that.
EYLER: Well, we had in local currencies an increase of over 4 percent for the quarter, which, again, if you look internationally, is pretty strong performance.
DOBBS: Indeed.
And John, the remodeling, when will it be finished?
EYLER: Oh, I'll tell you, we will remodel a store a day for three years to go through all the Toys "R" Us stores. But by this holiday...
DOBBS: That's what -- I was trying to do a little math on that.
EYLER: It's a pretty long process. But in the last 14 months, we will have remodeled 415.
DOBBS: And what do you expect to be the impact on -- what's your return on investment for that?
EYLER: Well, the return on investment criteria that we use is EDA, and the basic hurdle is 10 percent there. But we expect to do far better than that on these remodels.
DOBBS: Well, good. And as you look at your online adventures, particularly with Amazon.com, how big a component of your future success will that be?
EYLER: Well, we reported today that our online business quadrupled in the second quarter, and we have gone from being ridiculed in the holiday season of 1999 to being the best in the space in 2001 and have by far the largest share in toys on the Internet.
DOBBS: And you expect that to expand by how much?
EYLER: Well, we expect to more than double last year's volume, and we also have brought a Babies "R" Us and Imaginarium online, so we have a family now.
DOBBS: And Imaginarium, how's it doing?
EYLER: Imaginarium is terrific. It's really bringing inside our stores of that learning store capability, so Mom can buy what she wants to buy and what the kids want in the same store.
DOBBS: You mentioned the words, holidays and shopping. Never too early, we're at the end of August. How does it look?
EYLER: Oh, it's never too early to shop, Lou.
DOBBS: Words to live by. How does it look for you right now?
EYLER: We actually are quite enthusiastic about holiday. We had an excellent holiday season last year, but we are far better prepared this year. And this is also going to be a very strong video game year, and as the largest sellers of video games in the world, this is a very big boost to our business.
DOBBS: OK. John Eyler, thank you very much. Good to see you.
EYLER: Thank you, good to see you.
DOBBS: Well, a humbling day for an Internet mainstay. Excite@Home, the broadband service and global portal, warning it may not stay in business through the end of this year. It is facing a cash crunch. It could wind up being delisted by the Nasdaq, in fact.
Steve Young has the story -- Steve.
YOUNG: Lou, Excite@Home, on the weakness of its 10K file today with the Securities and Exchange Commission, began a meltdown. Its accountants, Ernst and Young, cited, quote, "substantial doubt about the company's ability to continue as a going concern." A few pages later, a company with operating losses and negative cash flow since it began said, quote, "Our existing cash and other liquid assets may not be sufficient to fund operations through the end of 2001."
The impact on a stock that traded close to $100 in its heyday back in February of 1999 was stunning. In one brutal day, Excite@Home fell 46 percent. It's below the buck, dollar minimum a stock must maintain over six weeks to avoid a Nasdaq delisting.
(BEGIN VIDEO CLIP)
TONY PERKINS, "RED HERRING": But sometimes these early pioneers like @Home end up with all the arrows in the back, and it's hard for them to stand up while the market finally catches up with reality.
(END VIDEO CLIP)
YOUNG: AT&T is watching with a long face. When it bought the TCI cable system, AT&T acquired a 23 percent economic stake in Excite@Home and a voting stake of 74 percent. AT&T had no comment, but Standard and Poor's added to the pain, cutting Excite@Home's credit rating and convertible subordinated debt to just a few notches above default.
If it fails, Excite@Home would be one of the most prominent dot- bombs yet -- Lou.
DOBBS: Well, this is not only a prominent dot-com, perhaps on the verge of becoming a dot-bomb, but it is also a template, a model, for the future, high speed, broadband, a great amount of content, very aggressive preparation for the new world of fast connections. What do you make of it?
YOUNG: It's a sobering tale thus far. Everybody says they want broadband, but it's getting built out very slowly. Only about 10 percent of users with Internet have it. It's going to take longer than we thought.
DOBBS: OK, Steve, thanks. Steve Young.
Signs of an improving economy from the July index of leading economic indicators. The Conference Board's report climbed 0.3 percent last month. That is the fourth increase in a row. The index considered a somewhat reliable indicator of the economy's health over the next three to six months. That report comes just a day ahead of the Fed's meeting on interest rates. The Fed is widely expected to cut interest rates for a seventh time this year, bringing the Fed funds rate to its lowest level in seven years.
But eight months after the first interest rate cut, the economy remains weak. Lisa Leiter takes a look at what, if anything, the Fed is actually accomplishing.
(BEGIN VIDEOTAPE)
LISA LEITER, CNN CORRESPONDENT (voice-over): It is the most aggressive rate-cutting campaign Alan Greenspan ever launched, six rate cuts since January aimed at jump-starting a faltering economy. But it's not packing the punch anyone expected. Eight months later, the S&P 500 is still down 11 percent for the year, corporate earnings are bleak, and the economy is still sluggish.
BILL DUDLEY, GOLDMAN SACHS: This is a cycle of an investment boom, where we did too much investment, we overshot, and now we're in the middle of a big, powerful investment bust. That investment bust cannot be cured just by lower interest rates. It takes time for that overhang of capital to be worked off. And there's not much the Fed can do about that in the short term.
LEITER: But there are signs the rate cuts are starting to have an impact. The dollar is weakening, hitting a three-month low against the yen. That helps struggling exporters. And long-term bond yields last week sank to their lowest level since March, dropping mortgage rates and other consumer borrowing costs.
Economist Brian Wesbury says the rate cuts are taking so long to work because rates were so high to begin with.
BRIAN WESBURY, GRIFFIN, KUBIK, STEPHENS, AND THOMPSON: It wasn't until April that they got rates low enough to help the economy. And if we start the clock then and wait six to nine months from that point, we won't see the economy bounce back until late this year or early in 2002.
LEITER (on camera): Because the economic news may get worse before it gets better, some economists believe the Federal Reserve will leave the door open to cut interest rates at least once more before the end of the year.
Lisa Leiter, CNN Financial News, Chicago.
(END VIDEOTAPE)
DOBBS: Hewlett-Packard's CEO, Carly Fiorina, has an impressive resume, of course, including overseeing Lucent's IPO back in 1996 and its eventual spinoff from AT&T. But ever since joining Hewlett- Packard a little over two years ago, she's clashed with company culture, presided over substantial job cuts, and an almost 80 percent decline in the company's stock price.
Despite all of that, Hewlett-Packard's board members have assessed the environment in which she's had to lead the company and decided they will stand by her.
Peter Viles has the report.
(BEGIN VIDEOTAPE)
VILES (voice-over): In two years, Carly Fiorina has seen the good, the bad, and the ugly of being a CEO, from an audience with the incoming president to unsolicited advice on how to break up her own company.
The sniping has grown so loud, Fiorina's board is answering with a vote of confidence. Board member George Keyworth telling MONEYLINE tonight, quote, "We think Carly's done exactly what we want. We're making a lot of progress, and we think there are a lot of good things to come." Board member Sam Ginn telling "The Financial Times," quote, "The health of the company of the whole is much better than it was two years ago." SHEBLY SEYRAFI, A.G. EDWARDS: There's a growing chorus of disenchanted investors who are voicing their concerns about Miss Fiorina, especially her management over the last year. My personal feeling, though, is that the majority of the problems at Hewlett are not related to Miss Fiorina.
VILES: Fiorina came in as a sky's-the-limit superstar from Lucent, hired to jump-start the growth rate at H-P. Now that Lucent and so many other technology stocks have deflated, her job is to cut costs and weather the storm. Investors loved the first job and have hated the second one.
DANIEL KUNSTLER, J.P. MORGAN: There was so much excitement about her, which was probably, you know, just as bloated as some of the negative sentiment is, you know, is today. And as a result, she has certainly come under, you know, a certain amount of pressure. You know, whether, whether or not there are, you know, some persistent calls for, you know, for the departure of the Hewlett-Packard CEO, I actually think that the answer is no.
(END VIDEOTAPE)
VILES: Carly Fiorina has received a significant vote of confidence from the rank and file at Hewlett-Packard, 80 percent of the company's workers, or rather 80,000 of the company's 93,000 workers have accepted voluntary pay cuts or time off, saving the company $130 million this year -- Lou.
DOBBS: That's quite a statement.
VILES: It sure is, and it shows that they believe, if not in Carly, certainly in the Hewlett-Packard way, which she has managed to keep alive these two years.
DOBBS: I can't think of another CEO who's had to deal with more, because people forget, Hewlett-Packard wasn't in exactly great shape when she took on this job.
VILES: No, the challenge was to get the growth rate up. They were being sprinted past by competitors, and did accomplish that in the first year. And then, of course, everybody's growth rate has slowed in this environment.
DOBBS: Slowed doesn't seem like quite the word for it. But Pete, thank you very much. Peter Viles.
Well, many investors are on the lookout for any positive signs in these markets. And one important market indicator is signaling -- are you ready? -- that stocks are due for a bounce-back. Today's modest gains could be just the beginning. Perhaps. Maybe.
Allan Chernoff with the story.
(BEGIN VIDEOTAPE)
CHERNOFF (voice-over): The pounding that the stock market has taken in recent weeks has triggered a bounce-back signal from an important indicator, saying the stock market is deeply oversold. It's the Arms Index, also known as the Trend, invented by analyst Dick arms. It says over the past two weeks of trading, declining stocks have gotten more than 1.5 times their share of the volume, 1.6 times, to be exact.
DICK ARMS, ARMS ADVISORY: It's only happened seven times before in history. This is the eighth time in the history that we can look at, saying that the market is ready for a rally. So I think we have to pay attention.
CHERNOFF: It happened twice in the '70s, three times in the '80s, and only once in the '90s. Each time it signaled an advance.
RICK BENSIGNOR, MORGAN STANLEY: It's telling us we're really quite oversold right now, and historically, when we've gotten the 10- day moving average above about 150, we've typically had some very good performance short term, immediately following that.
CHERNOFF: Earlier this year, at the end of March, the indicator triggered the same signal right near the market bottom. In the weeks that followed, the Dow climbed 19 percent, the Nasdaq composite rebounded 20 percent.
(END VIDEOTAPE)
Of course, those gains haven't lasted, so keep in mind, the Arms Index is best used as a short-term index of when the market is oversold or overbought. When the index reaches extremes, as it has now, it has a very good track record. But that's no guarantee.
And like other technical indicators, the Arms Index says absolutely nothing about the fundamentals of the market, nothing about the possibility of improving corporate profits, which we will need to see for a long-term recovery -- Lou.
DOBBS: So we can't take this to the bank either?
CHERNOFF: I don't think you can take any stock market indicator to the bank, unfortunately.
DOBBS: Now, when you the Arms Index at 1.5 now, at 1.6, what do you -- what does that mean, exactly?
CHERNOFF: It means that the down stocks are getting more than one and one-half times their share of the volume in the market.
DOBBS: On a 50-50 basis.
CHERNOFF: Indication of oversold market.
DOBBS: Right, OK. Thank you very much. And I guess everybody's hoping, except the shorts, of course, that Mr. Arms has got it right.
Coming up next here on MONEYLINE, rain is forecast for the northwestern states. Will it be enough to stop those raging wildfires? We'll be updating you on that.
And will anything stop the shark attacks in Florida? What's going on there? There were still more over the weekend. We'll have that story.
Mexico is preparing as tropical storm Chantal bears down. Will she go to hurricane status? We'll look and see.
And Sin City's economy is, despite everything else, red hot. We'll take a closer look tonight at what keeps Las Vegas rolling in the dough.
(COMMERCIAL BREAK)
DOBBS: In the news tonight, police in California are searching for a 27-year-old man suspected of fatally stabbing his wife and four other relatives. It happened in a Sacramento suburb. Police say that Nikolay Soltys, a Ukrainian immigrant, first killed his wife, then went to another location, where he then killed his aunt, his uncle, and two cousins, a 9-year-old girl and 10-year-old boy. All of the victims were stabbed to death.
The sheriff's department says witnesses saw Soltys leaving both locations driving in a silver Nissan Altima. Investigators say they don't yet know the motive for the attacks.
Fires are still burning in the Northwest this evening, but some relief may be on the way. Wildfires have scorched a half-million acres in the Western United States, but temperatures have cooled down. Rain is forecast for tomorrow. But firefighters aren't certainly sensing any relief yet. There is concern that high winds could rise, and that, of course, would fan the flames, and the rains could lead, we're told, even to mud slides and avalanches.
A rash of shark attacks over the weekend in Florida, six surfers were nipped during a contest near Daytona. None of the bites were life-threatening. Officials closed the New Smyrna beaches anyway. That water literally teeming with sharks during that surfing contest. This is amateur video of those sharks in about three feet of water, which makes one wonder what anyone would be doing in that water. Experts say almost half the world's shark attacks this year have occurred along this single stretch of Florida coastline.
And there is a big shark story out of New Hampshire tonight, two fishermen pulling in an 846-pound Mako shark. They were 19 miles off shore. It took them more than two hours to pull it in. The 10-foot shark was nearly half the size of their boat. Sharks are common in the area, but officials say this one was four times the normal catch.
Tropical storm Chantal tonight churning up the waters near Mexico. That storm is packing winds of almost 70 miles an hour. Heavy rains are drenching Cancun, and Chantal is expected to go ashore in the Yucatan Peninsula within the next several hours. Some forecasters are concerned that she may become the first hurricane of the season. Two Americans and a Russian commander are heading home after more than five months in space aboard Space Station Alpha. Americans James Voss and Susan Helms caught a ride on the Space Shuttle "Discovery" today. They are scheduled to arrive in Florida Wednesday. The shuttle "Discovery" dropped off supplies and the replacement crew before undocking from Station Alpha.
The Concorde could be back in the air by the end of this summer. British and French officials say they're ready to recertify those supersonic planes. The 12 SST aircraft have been made safer on the outside. They've also been spruced up, we're told, on the inside. The Concordes were grounded after last year's crash near Paris, where 113 people died, that as an Air France jet went down during takeoff. That plane's fuel tank ruptured by debris on the runway.
Today Republicans went on the offensive, saying they will not touch the Social Security or Medicare portion of the budget. That in response to Democratic charges that a shrinking budget surplus and lagging economy will increase pressure to do just that.
Tim O'Brien has more on the shaping up of the battle of the budget.
(BEGIN VIDEOTAPE)
O'BRIEN (voice-over): Most people think money in the bank is a good thing, especially in hard times. But the guiding principles for consumers may be quite different from what they are for the national economy.
Democrats and Republicans have been at one another's throats over the shrinking budget surplus, with Democrats accusing Republicans of breaking the bank, endangering Social Security. Yet many economists say when times are tough, protecting the surplus is not what the country needs.
BRUCE BARTLETT, NATIONAL CENTER FOR POLICY ANALYSIS: Absolutely not. The -- what you want to do is reduce the size of the surplus. If you look in any economics textbook, it will tell you that surpluses are -- have a depressing effect on the economy, and deficits have an expansionary effect. And that's why generations of economists have criticized, for example, Herbert Hoover for raising taxes in 1932 in the middle of the recession -- or the Depression, and thereby exacerbating the effect of the slowdown and making it much worse.
O'BRIEN: Bartlett and other economists view massive spending programs such as welfare and unemployment compensation as automatic stabilizers that provide not only hope but spending money that can help keep consumer confidence up, reinforcing the economy. And, say economists, it's the decline in growth that causes the greatest drain on the surplus.
WAYNE ANGEL, BEAR STEARNS: There's just no question but what the surplus was going to go away with this kind of growth, regardless of the tax rate cuts.
(END VIDEOTAPE)
O'BRIEN: Who or what is responsible for the drain on the surplus may be the wrong question. The better question, say some economists, is whether government largesse, be it in the form of a tax rebate or some other government program, will be effective in reviving the economy. The rationale, wherever the surplus goes, once the economy recovers, the surplus will follow -- Lou.
DOBBS: I love that expression, Tim, government largesse. Those words somehow don't go together, do they?
O'BRIEN: Not these days.
DOBBS: No, OK. Thanks, Tim. Tim O'Brien.
Coming up in the next half hour on MONEYLINE, if you don't think sin sells, well, we suggest you take a look at Las Vegas. We'll take a very close look at one of the country's best-performing economies.
The world's economies are not performing quite as well. How will the problems over there affect the economy over here?
And signs of a brighter economy lifting the markets today. A turnaround, or just a one-day breather?
And our guest, Doug Cliggott, says there won't be a turnaround until the second quarter of 2002.
(COMMERCIAL BREAK)
DOBBS: A modest rally on Wall Street today, following Friday's sharp sell-off. But volume today light, and several factors helped boost the markets today, including a report from the conference board suggesting a stronger economy over the next six months. The Dow up nearly 80 points and on the big board, advancing issues beat out decliners, but again by a small margin. Checking some of the most actives on the session, shares of Lucent up more than a dime in heavy trading. Japanese electric company FEJ Holdings outlining how it will fund its purchase of Lucent's fiber optic business.
Auto shares continued their decline, triggered by Ford's profit warning last week. Ford shares down $1.30 after several brokerages lowered ratings or estimates on the company. Other active issues on the big board: shares of EMC down 15 cents to just over $16, currently trading 85 percent below its 52-week high. And a small run-up for technology stocks, the Nasdaq up 14 points, and again, light trading volume. Declining issues beating out advancers by a four-to-three margin.
Checking out some of the most active on the Nasdaq: Metromedia shares jumping 25 percent after a group of lenders agreed to a $150 million financing. Excite@Home, as we told you, those shares dropping 46 percent today on a report from Ernst and Young that questions whether the Internet access provider and portal can remain afloat. Other active stocks include JDS Uniphase, its shares dropping on news that FEJ holdings will sell off its stake in that company. And as I said just a moment ago, that money will then go to help FEJ buy Lucent's fiber-optic business.
The Fed widely expected to cut interest rates tomorrow, but by only 25 basis points. For a look at how investors and traders are expected to react to that Fed action, Christine Romans at the New York Exchange -- Christine.
ROMANS: Lou, if history is any guide, tomorrow morning is going to be very quiet and maybe a little bit choppy as folks wait to see what the Fed says. That decision comes at 2:15 p.m. eastern time. And how is Wall Street expected to react? Well, stocks will be watching the Fed. 25 basis points is expected. 50 basis points -- a cut of that magnitude, a lot of traders are telling me, would spark a rally. That's widely seen as a very outside chance.
The bias commentary as always is key, folks expecting the Fed to say they stand ready to continue to ease if necessary, that the risk in the economy is still tilted to the down side. But any even minor change in that wording could send stocks for a loop either higher or lower. Now, lots of folks are telling me they expect 25, and because so much focus now is on earnings and not the Fed, Lou, it could be really a nonevent.
DOBBS: And most of the earnings news, obviously, nearly all of the earnings news behind us, so it's shaping up as a what, Christine?
ROMANS: A nonevent. Unless there's a surprise. Watch that wording in the Fed commentary, though.
DOBBS: You got it, Christine. Thank you very much. Christine Romans.
For a look over the Nasdaq, Amanda Lang is at the Nasdaq marketsite -- Amanda.
LANG: Lou, this has been a market that's in search of a catalyst. We did eke out some modest gains today. Market watchers say, though, the economy still very much in focus and it is a mixed message. Many market watchers saying confusion abounds. Leading economic indicators pointing to a nice upturn, but manufacturing still in recession, tech companies believed to be even worse off, running at 60 percent capacity for tech manufacturers versus 76 for the overall economy.
And chip stocks -- we watched them surge today. Will they continue that? Closely watched as group because they're seen as the top of the food chain for tech, they'll lead us out of the wilderness. Beware of false rallies. A couple of market watchers today telling me this is a market that could well send us higher only to pull back, right up until October.
And as Christine says, what will Fed say? We think we know what it'll do, but watch the commentary. Indeed, watch to see where anybody can get any hope at all that they may move before October. We're beginning to hear some sounds about that. Lou.
DOBBS: Amanda, thank you very much. Topping tonight's MONEYLINE movers, Lowe's gaining nearly $3 a share today. Profits at the number-two home improvement retailer were up 18 percent. That beat Wall Street's expectations. Lowe's expanding in large markets, trying to lure customers from its rival Home Depot. SBC Communications up more than $1 a share. SBC seeking federal approval to offer long-distance phone service in Missouri and Arkansas. The markets of those states worth some $2 billion.
Ciena losing nearly 4 percent, one of the most actives, and Lehman Brothers downgrading the stock following last week's profit warning for this year and next. The brokerage warning even more downside is possible, and shares of Ciena trading near their 52-week low. They are down nearly 80 percent so far this year.
Doug Cliggott has been bearish for quite some time, and he remains cautious, if not bearish. And he recently cut his S&P 500 year-end targets. He's not expecting a recovery until the second half of next year. Joining me now, Doug Cliggott of J.P. Morgan. Doug, good to have you here.
DOUG CLIGGOTT, J.P. MORGAN: Thanks for having me here.
DOBBS: This, the market rallies today, shouldn't our spirits be buoyed and we can sort of assume that the worst is behind us?
CLIGGOTT: We'll have a lot of up days over the next two, three, four months. I think what we're really concerned about is, in point of fact, people grasping on one days' events, on one week's events, and trying to extrapolate that.
DOBBS: Let's take a look at one day event -- a one day event. Tomorrow the Fed will cut or not cut, 25 or 50 basis points, presumably 75 is out of the question. Is it a nonevent?
CLIGGOTT: It's certainly not a nonevent. But for us, it really isn't a crucial event. Why we've had such a cautious stance on the market for over a year is a mixture of two things. First, valuations were just extremely high. And then once those started to come back to earth, we started to see a very, very powerful decline in profits, really across the board.
DOBBS: Right.
CLIGGOTT: Fed policy matters, but it will take a long time, in our view, before earnings really improve.
DOBBS: Earnings, as you look back over the last -- well, actually the last year and a quarter, there's not much good here to look at. We've been negative since the fourth quarter of 2000. We're going to have some rather tepid comparisons in the third quarter, most likely. What is it going to take to make us look good and feel good, here?
CLIGGOTT: I think it's going to take a combination of two things. And this is just classic profit cycle analysis. First, a lot of companies still have to get a lot of costs out. They built up a lot of costs, both in people and in physical infrastructure when they really expected growth to be running at very rapid rate as far as the eye could see.
DOBBS: Investors, what kind of return should they be looking for here? We have come from 1999 -- I love to think about this -- 1999, in terms of the Nasdaq, a 85 percent appreciation. I like that. When will we back to that?
CLIGGOTT: Not in our lifetime.
DOBBS: I was afraid you'd say that, Doug.
CLIGGOTT: I think something like 5, 6, 7 percent is the type of return that we should plan on. If we do better than that, great.
DOBBS: Give us your stock selections for investors who do have the stomach for what you say is recovery that won't be here for, what? Nine months, six to nine months, but nonetheless feel compelled to seek some returns?
CLIGGOTT: We would emphasize stocks that are growing earnings today and that sell us things that we need to buy. We like health care stocks, two health care names we like are Pharmacia and Baxter. We like consumer staples, stocks like Pepsi, Procter & Gamble, and we're still fans of energy stocks.
We like El Paso Energy and Natural Gas Pipeline. They're generating very strong cash flows. Energy is something we need. Did we get a bit overboard on how high energy prices would go? I think we did. But realistically, when the economy comes back, it's hard for us to imagine a stronger economy without fairly strong energy prices.
DOBBS: And I presume that you're looking at those stocks as investments for the long-term?
CLIGGOTT: I would think at least the next two or three years. We're not looking to trade stocks every week.
DOBBS: So we don't have to worry about a momentum play here.
CLIGGOTT: Not in our framework, no, sir.
DOBBS: Doug, good to see you. Doug Cliggott.
Dow Jones. AP tonight reporting that J.P. Morgan now expects to cut up to 8,000 jobs, 9 percent of its work force. J.P. Morgan CFO saying last month that the job cuts would significantly exceed the original figure of 5,000. No comment tonight from J.P. Morgan on those numbers.
In other corporate news, Ames department stores filing for chapter 11 bankruptcy. Just last week, Ames announcing plans to cut 10 percent of its discount stores, resulting in 2,000 layoffs. Its remaining 400 stores will remain open as it reorganizes in bankruptcy.
Japanese chip and computer maker Fujitsu slashing more than 16,000 jobs, cutting nearly 10 percent of its worldwide work force by next March. Most of those layoffs coming from its North American and Southeast Asian units, the turnaround plan resulting in a $2.5 billion charge.
Job cuts extending beyond technology. Ford's CEO, Jacques Nasser, hinting more layoffs may be on the way, slimming vehicle production if the economy doesn't pick up. That follows Friday's announcement of plans to eliminate up to 10 percent of the salaried employees, about 5,000 employees.
Still ahead here on MONEYLINE, what's it going to take to pull the world's biggest economies out of a slump? Well, let's take a look at retailing.
And later, a golden nugget in an otherwise leaden economy. Can the boom times continue at America's gambling mecca? We'll find out.
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DOBBS: More than American investors in markets are awaiting word from the Fed tomorrow. The entire world, in fact, is dependent on a U.S. recovery to get worldwide growth moving again.
Kitty Pilgrim now takes a look at the global economy and what might get it all moving.
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PILGRIM (voice-over): The world economy is clearly slowing and the answer to growth may be in a bar code. It all rests on consumers. The driver of growth for the United States, the consumer, a big reason why other economies, such as Japan and Germany, are lagging: the consumer's tight grip on the wallet.
STEPHEN ROACH, MORGAN STANLEY: In many respects, this is the first recession of the modern day era of globalization. The world is more connected than ever before, through trade flows, through financial capital flows, through globalized supply chains linking technology production platforms in Asia to American consumers.
PILGRIM: The $33 trillion world economy will grow just 2 percent this year after hitting a 17-year high just last year. So, in nine months, the world has gone from boom to bust. Recognizing the problem was the first step.
CLARK WINTER, CITIGROUP PRIVATE BANK: The U.S. recognized the problem as being one of economic slowdown and moved to act, and the Europeans thought they had inflation and acted rather to fight inflation. I think they missed the boat and their timing was off.
PILGRIM: Global equities have been falling like a stone in the last year. Germany, the UK, France, Hong Kong, Singapore, Korea, Japan and Brazil, all posting double-digit losses. And worries over Argentina defaulting on $128 billion in public debt -- many fear a contagion sell-off if Argentina does not get extra help from the IMF. FRANCIS FREISINGER, MERRILL LYNCH: If we don't get a strong package in the next week or two, the chances for deterioration are significant. And Argentina represents around a fifth of all emerging market debt, so a problem there is a problem for all emerging markets.
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PILGRIM: Now, the world is unusually dependent on the United States right now. The U.S. share in the global economy, by IMF standards, is a little more than 20 percent. So now more than ever, the entire world is watching the Fed and waiting for recovery -- Lou.
DOBBS: We'll find out more tomorrow.
PILGRIM: We will.
DOBBS: Kitty, thanks.
Coming up next here, the economic slowdown seems to have side- stepped sin city. We'll take a look at the ever-prosperous Las Vegas and examine whether it can maintain its impressive growth in the midst of economic slowdown. Back in a moment.
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DOBBS: Las Vegas remains the fastest-growing city in the country, thanks to its tireless stream of tourists. At least 2/3 of the city's economy relies on tourism, and so far the industry, doing very well. In fact, the city's popularity has resulted in a real estate boom, both residential and commercial. And despite a slowing national economy, Las Vegas continues to shine.
Casey Wian with the report.
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CASEY WIAN, CNN CORRESPONDENT (voice-over): From bargain-priced single family homes to multimillion-dollar luxury condos, residential construction in Las Vegas continues to boom, despite the national economic slowdown. Even the model home at the $600 million Turnberry Place development development exhibits Vegas-style showmanship.
ANNOUNCER: You're just in time for another spectacular Las Vegas sunrise.
BRUCE WEINER, PRESIDENT, TURNBERRY PLACE: I think many things about Las Vegas have changed. Las Vegas has not only expanded but it has upgraded itself. It seems Las Vegas has been a place where the more you build, the more people come.
WIAN: And build they have. During the late 1990s, Las Vegas- area resorts added 25,000 new hotel rooms, a 25 percent increase in just four years. Las Vegas is now preparing to deal with the hangover from its late 1990s building party. The first remedy: a massive public transportation project designed to ease its notorious traffic congestion. Last week, officials broke ground on the $650 million monorail project that will run parallel to the Strip. While new casino construction has slowed dramatically, infrastructure improvements are accelerating.
KEITH SCHWER, UNIVERSITY OF NEVADA, LAS VEGAS: Indeed, what is keeping our economy moving at a very rapid rate during 2001 is a lot of catch-up investment and expenditure.
WIAN: Despite sharp economic slumps in places that are home to many Vegas visitors, such as Northern California and Asia, hotel occupancy rates and casino revenues remain strong.
THOMAS GALLAGHER, PRESIDENT & CEO, PARK PLACE ENTERPRISES: Last Sunday, for example we were -- I shouldn't say it, but we were walking people from Caesar's because it was overbooked down the Strip to a competitor because we didn't have enough rooms.
JASON ADER, BEAR STEARNS: Vegas is one of those products that's less sensitive to the business cycle. It's kind of like alcohol or tobacco consumption. When you compare Vegas to all other areas of hospitality, and when you broaden it further to all areas of the U.S. economy, I would say Vegas is probably one of the few bright spots out there.
WIAN: But shadows are growing. The Rio, owned by Harrah's, has laid off nearly 200 workers this year and is cutting back its high- stakes gambling operations. The $1.2 billion Aladdin property is only generating about 60 percent of the cash it needs to make debt payments. Bankruptcy is a possibility. And this month, the smaller Maxim shut down. Finally, one side effect of a decade as the nation's fastest growing city and home to hundreds of thousands of transplanted Californians: Las Vegas now faces federal penalties unless it reduces its smog.
Casey Wian, CNN financial news, Las Vegas.
(END VIDEOTAPE)
DOBBS: Taking a look at weekend box office, "American Pie 2" pulled off a feat for the first time in quite some time, keeping the number one spot for two weekends running, bringing in $21 million. Another sequel, New Line Cinema's Rush Hour 2, maintaining its number two spot for the second straight weekend. The action comedy starring Chris Tucker and Jackie Chan pulling in just over 19 million. "Rat Race," starring Whoopi Goldberg, bringing in about 12 million for its debut. The others are "The Princess Diaries" rounding out the top five.
Coming up next on MONEYLINE, we'll take a look at your e- mail and "Ahead of the Curve."
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DOBBS: Here's what's on tap tomorrow. The Fed expected to cut interest rates by perhaps another 25 basis points. Quarterly profit reports due from Sycamore Networks, Saks, Staples, Target and Talbots. And Ed Yardeni of Deutsche Bank joins me to talk about the Fed's rate decision.
Many of you are writing in with an opinion on interest rates on the eve of the Fed's meeting. Jose Martin wrote in saying that the market has already factored in a 25-basis point cut. But the market and economy continue to head south. If Mr. Greenspan was bold enough to ruin both with his heavy-handed increases last year, why not a 75- bases point cut?
Well, let's say it may save both, and his place in history.
G.S. Gill writes in to say it's time for Alan Greenspan to get off the consumer's back, writing, "We consumers can't seem to make Greenspan happy. First, too exuberant. Now, too pessimistic. Just like an overdemanding parent, nothing pleases him."
And Mike Aldimassi writes in from Laguna Beach, California, saying: "Don't blame him. The popping of the Internet bubble for the current market decline and Greenspan misdiagnosing the economy's health for the last 18 months."
Forget the bubble, Stefan Fialka writing from Germany. He says we can learn a lot from a balloon, the one piloted by Steve Fossett. For a few days, the Nasdaq rises and there is hope for an end to the bearish trend. Then it goes back down again. And every new try is a new hope.
That's very lyrical. I like that. It's always good to hear from you. Write in moneyline@cnn.com. Please include your name and state.
That is MONEYLINE for this Monday evening. Thanks for joining us. I'm Lou Dobbs. Good night from New York.
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