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Lou Dobbs Moneyline
Dow Declines 145.93 to 10,174.14; Nasdaq Tumbles 50.05 to 1,831.30; Fed Cuts Interest Rates a Quarter Point
Aired August 21, 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.
LOU DOBBS, CNN ANCHOR: Good evening. The Federal Reserve slashes interest rates for the seventh time in eight months. Policy- makers cut the target interest rate by 25 basis points to 3 1/2 percent. On Wall Street a solid rally evaporated following the Fed decision. The Dow tumbled 145 points, the Nasdaq fell 50 points. And eight people have been arrested in a scheme to defraud McDonald's by rigging its Monopoly promotion and other games.
It was a brutal session on Wall Street. Both the Dow and Nasdaq plummeting to the lowest levels of the summer, that after the Fed decision.
Let's look at what our reporters are working on tonight. We begin with Allan Chernoff -- Allan.
ALLAN CHERNOFF, CNN CORRESPONDENT: Thank you, Lou. The reaction on Wall Street to the Fed: Not enough. Stocks reversed course and closed sharply lower.
KELLI ARENA, CNN CORRESPONDENT: An FBI bust in a most unusual case: at least eight suspected of stealing more than $13 million by rigging promotional games at McDonald's.
PETER VILES, CNN CORRESPONDENT: Fed policy-makers said it again today: Consumers appear to be hanging in there, but at what cost to retailers?
SUSAN LISOVICZ, CNN CORRESPONDENT: And a David versus Goliath fight is rocking the music world. I'll tell you all about it -- Lou.
DOBBS: Susan, thank you. Those stories coming right up on MONEYLINE.
We begin with the Fed slashing rates once again. Policy-makers cut the benchmark interest rate by a quarter point to 3 1/2 percent. That's the seventh cut this year, the most intensive campaign ever waged by Fed Chairman Alan Greenspan to avoid recession.
Tim O'Brien reports from Washington.
(BEGIN VIDEOTAPE)
TIM O'BRIEN, CNN CORRESPONDENT (voice-over): The financial world waited breathlessly to learn what Alan Greenspan and the Fed would do, but there were no surprises. The quarter-point cut was widely anticipated. And the Fed's rationale had a familiar ring: Household demand has been sustained, but business profits and capital spending continue to weaken, and growth abroad is slowing, weighing on the U.S. economy. Greenspan could have said the same thing at any time this year.
ALAN BLINDER, FORMER FEDERAL RESERVE VICE CHAIRMAN: Well, it's very clear that he's been worried for some time, and continues to be, about corporate profitability, the catastrophe that's playing out in the tech sector, and investment more generally.
O'BRIEN: The Fed said, "The easing of pressures on labor and product markets is expected to keep inflation contained." And it concluded, as it did in June, that "The risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future." That, however, does not necessarily signal another rate cut when the Fed next meets in October.
MIKE RYAN, UBS PAINEWEBBER: Our view is that the odds are less than 50-50 that the Fed goes down in October. That's the first time we've said that since this cycle began. This time, we think the odds have now tilted in favor of the Fed remaining sidelined in October.
O'BRIEN: Merrill Lynch also puts the odds for another rate cut in October at about 50-50, saying the previous cuts are finally taking hold.
GERALD COHEN, MERRILL LYNCH: You have seen a significant pickup in refinancing activity. You have seen lower interest rates on mortgages, on Treasuries.
(END VIDEOTAPE)
O'BRIEN: In its statement, the Fed used language strikingly similar to the language it used last June when it also cut rates one- quarter of a point. There are a number of possible explanations, among them, despite everything the government has done this year to ignite the economy, so far, like the Fed's words, not much has changed -- Lou.
DOBBS: Tim, thank you. Tim O'Brien.
The Fed today cut the Fed funds rate to its lowest level since the spring of 1994. And $145 billion of market value was wiped out today on Wall Street. Allan Chernoff has more on investor reaction.
(BEGIN VIDEOTAPE)
CHERNOFF (voice-over): Instant reaction from traders at CIBC world markets: more of the same! Another expected interest rate cut, another gloomy assessment of the economy from the central bank. Initially, some traders even called the Fed's rate cut "a non-event."
MICHAEL PALAZZI, CIBC WORLD MARKETS: It means that we are going to still trade in a pretty tight range. It looks like any sort of earnings disappointment will continue to wreak havoc on individual stocks.
CHERNOFF: But the Fed's continuing focus on the economy's troubles did catch investors' eyes. Minutes before the Fed announcement, the Dow was up 50 points. Minutes later, it was into negative territory and kept dipping.
Wall Street had been hoping the Fed might highlight signs that the economy is responding to the interest rate-cutting campaign under way since the beginning of the year. Instead, the central bank offered more justification for its monetary policy easing, pointing to the continuing decline in corporate spending and profits. And if the Fed's medicine hasn't helped the patient, much of Wall Street fears there could be more pain coming.
ED MCMAHON, MERRILL LYNCH: We're going through September and October, normally tough times for the marketplace here. So here we've had six or seven rate cuts, we're waiting for a catalyst, but we're going into the third quarter preannouncement, so it's going to be very tricky on how the market reacts.
CHERNOFF: Especially hard-hit today: semiconductor and software stocks, technology names that in the past have led the market higher as the Federal Reserve was easing.
(END VIDEOTAPE)
CHERNOFF: Fed watchers warn it takes six to nine months for central bank interest rate cuts to work their way through the economy. Usually the stock market climbs in anticipation of an economic pickup, but it's been eight months now and impatient investors are still waiting and hoping to see results -- Lou.
DOBBS: Today it appears the investors sold on the news of that interest rate cut?
CHERNOFF: Yes, which often does happen. When it's a surprise cut, the market often pops up. But as you say, the news was baked in.
DOBBS: That's right. Allan, thank you very much. Allan Chernoff.
The Dow today closing at its lowest level since April 16th. And the decline was broad based: all but three of the Dow 30 stocks ended lower on the day. Christine Romans is at the New York Exchange -- Christine.
CHRISTINE ROMANS, CNN CORRESPONDENT: Hi there, Lou. There was more than just the Fed to talk about today, but not much. Let's take a look at how the Dow performed. It was higher much of the session right up until 2:15 p.m. Eastern time when we got that Fed decision, a yawn and then a big sell-off. The Dow down 1.4 percent on the day. 145 points on the downside.
Earlier on traders were picking through a report from Abby Joseph Cohen of Goldman Sachs. She cut her her S&P 500 earnings estimates for 2001 and 2002. She cut her S&P 500 year-end target to 1,500. She kept her Dow target at 12,500. Now, there was some scattered buying here, oil, oil services, you saw pharmaceutical buying as well. For the most part, Dupont, Merck, International Paper, the only bright spots in the Dow -- Lou.
DOBBS: Thank goodness for that old economy.
ROMANS: Absolutely.
DOBBS: Thanks. Christine Romans.
The Nasdaq today fell nearly 3 percent. The Nasdaq has plunged 12 percent over the last 13 sessions. Jennifer Rogers now at the Nasdaq Marketsite -- Jen.
JENNIFER ROGERS, CNN CORRESPONDENT: Hi, there, Lou. The morning session provided little excitement and not much traction either way. But if you'll look at the intraday chart that all changed just about 2:15. We were in a narrow trading range for most of the day, just 12 points, but we blew that wide open to close down 50 points, or 2.6 percent .
We had a number of stocks that were in the green before the Fed announcement, and then when the Fed came out we saw them all slip lower. Among those Microsoft, Intel, Oracle. eBay had nice gain. It was up more than $1 before the Fed came out, falling $2.50. Amazon, which was upgraded today, was up earlier. But despite that upgrade lost ground, down more than 50 cents. And there were a bunch more names where those came from -- Lou.
DOBBS: OK, Jen, thank you very much. Jennifer Rogers.
Let's take a look at the stocks that are moving in after hours trading. Jennifer Westhoven is at the Instinet trading desk.
JENNIFER WESTHOVEN, CNN CORRESPONDENT: Hi, Lou. Well, we're going to start off with General Motors. The company came out backing a third-quarter forecast that is slightly better than what Wall Street was looking for. This is a bit of optimism. The sector that has really been battered since Ford warned last week and said it would cut up to 5,000 jobs.
Lots of worries in this sectors overall. The flip side of the good news from GM, for U.S. workers. They said that they would cut more than their goal of 10 percent of their salaried and contract workers. The other -- that stock is up $1.10, $56.8. The other stock that we are keeping our eye on is the parent of this network, AOL, after the company came out and said it would cut 1,200 jobs in its Internet unit, take a third quarter charge of 100 to 125 million and another 500 jobs in its joint venture with Netscape. That stock trading flat to lower -- Lou.
DOBBS: Thank you very much, Jennifer.
A host of retailers reporting earnings today. Their generally cautious comments about the third quarter led to an across-the-board sell-off in retailing shares. Peter Viles now on the health of the retailing industry.
(BEGIN VIDEOTAPE)
VILES (voice-over): Watch closely, you're about to see a firefight in the computer price war. It broke out on the "Today Show" this morning.
UNIDENTIFIED MALE: I have two deals on a desktop computer and a laptop computer that I was able to get with the companies and offer them to "Today Show" viewers.
VILES: The companies were Compaq and Dell. Compaq firing first with a new laptop for $999. For an extra dollar, you get a printer. Dell firing back with a new desktop for $699, and the printer is free. The price war is squeezing retailers such as Staples.
TOM STEMBERG, CEO, STAPLES: Things like the furniture business and the computer business, industry wide you're seeing declines 20- to 40 percent in many of those categories. And clearly, we can't do much to fight that tide.
VILES: It's a theme that is rippling across retail, from pc's to blue jeans, price wars, and investors are getting worried. Tuesday's selloff dragged down Wal-Mart, Target, Home Depot, Talbot's and American Eagle, which has heavy exposure to a feared glut of denim.
FRANK BADILLO, PRICE WATERHOUSE COOPER: Retailers are being victimized by what I am describing as a new recession, a different sort of recession from the past, a different downturn that's characterized by deflation in the retail sectors.
VILES: And the Federal Reserve said Tuesday that, "household demand has been sustained." But it appears retailers are helping to sustain it with lower prices.
BOB BUCHANAN, A.G. EDWARDS: My bet is the consumer will hang in there, but you're going to have to tease him with low prices, and it's just going to kill some of these guys with higher cost structures.
(END VIDEOTAPE)
VILES: One retailer not known for low prices feeling the pain in the second quarter: Sachs, announcing after the bell that revenue fell 8.5 percent in the quarter. Sachs posting a loss of $42 million. That, however, slightly better than street expectations -- Lou.
DOBBS: Better than expectations, but we are still dealing with the reality of the levels. We're seeing some sign that the consumer may be weakening here aren't we?
VILES: Sure, the consumer has been carrying this economy for a while and it appears it's getting a little tired.
DOBBS: Peter Viles, thank you very much.
The 25-basis point interest rate cut from the Federal Reserve came as no surprise to economist Ed Yardeni. But he says earnings matter more than interest rate levels. And so far, earnings are problematic.
Ed Yardeni from Deutsche Bank Securities joins me now. Good to have you with us.
ED YARDENI, DEUTSCHE BANK SECURITIES: Thank you, Lou.
DOBBS: No surprise.
YARDENI: No. Everybody expected it.
DOBBS: Was it the right thing?
YARDENI: It was the right thing. The Fed was in a no-win situation. They had to give us at least a quarter, everybody expected it. If they give us 50 then everybody would have wondered what's going on, do they know something we don't? Maybe things are much worse than anybody thinks.
DOBBS: To me it's amusing the statement that the Fed put out that the bias is toward economic weakness here. We haven't had any indication that the bias would be otherwise have we?
YARDENI: Actually, this message was shorter than the previous one. It was almost like yada, yada, yada, the same thing as before -- ditto I should say, maybe.
DOBBS: Ditto, I wish like many people that we could get to a new piece of originality by the fed. How soon will we that?
YARDENI: Things haven't changed in the economy. We do have a profits recession and the profits recession has led to disastrous capital spending recession, a tech wreck if you will. Technology is capital spending.
And the thing that has really held up well is unemployment. I think we have a lot of risk of the second half of the year that we may see more layoffs. That's why the retailers are suffering.
DOBBS: Lawrence Lindsey, the president's principal White House economic adviser talking about a 5 percent unemployment rate by year's end. That would add quite a number of employed to the rolls. Do you agree with his view?
YARDENI: Yes, I do. The 5 percent is still a pretty low unemployment rate, so we shouldn't get too upset. Ninety-five percent of us -- hopefully that will include you and me -- will still have jobs and interest rates will be a lot lower. It won't be that bad.
If you look around the situation is not all that awful, it may be just that we stay in this kind of lackluster environment through the end of the year, maybe even until early next year.
DOBBS: We talked in the late 90s about a stealth bear market in certain sectors of the market, then a stealth bull market. Do we have a stealth recession here?
YARDENI: I think we do in many ways. We certainly have a recession in important parts of California. I think we are going to see more if that that on Wall Street here in New York. The auto industry had a problem a few months ago. I think they are going to have a problem again.
Globally it's a recession. So we live in the global community it's affecting our exports for example. So, I think there's a stealth recession out there.
DOBBS: Your best judgment on when we are going to see this economy begin growing?
YARDENI: I think when we all agree that the times are better, it probably won't be until the second half of next year. I think we have another six to 12 months where things are going to be, like I said, lackluster -- not real terrible, not very good.
DOBBS: Also true with the markets?
YARDENI: I think -- I mean really, the Dow has been going nowhere fast for about two years now and I think it is telling us, the markets earning is challenged.
DOBBS: OK, Ed Yardeni. Good to have you with us.
YARDENI: Thank you, Lou.
DOBBS: One of the biggest gainers on the New York Exchange today was Guidant. The medical device maker entering into a deal with privately held Cook Incorporated to speed up efforts to a bring a new stent onto the market.
Stents are tiny mesh tubes used to prop open clogged arteries. What makes the new stents different is that they are coated with drugs. The process reduces the possibility of the artery becoming blocked again.
Johnson & Johnson currently leads the market. Shares of Guidant heavily traded today with shares gaining more than 10 percent. Johnson & Johnson down a fraction on the day.
Coming up next on MONEYLINE, the FBI arrests eight people for rigging McDonald's "Monopoly" promotion games. We'll have that story for you. And the man with the artificial heart goes public. We'll tell you all about it.
Antitrust charges "rocking" the concert world. We will have the latest for you and what is shaping up to be a bruising battle. And later, the publisher of "Maxim" is out with a new product. We'll find out more about it. All of that straight ahead on MONEYLINE.
(COMMERCIAL BREAK)
DOBBS: As many as eight people won't pass "Go," but they may be going to jail. Eight people arrested today for allegedly rigging McDonald's "Monopoly" and other promotional game. Kelli Arena joins us now with the story -- Kelli.
ARENA: Lou, the scam dates back to 1995. More than $13 million worth of grand prizes were allegedly won by co-conspirators in the scheme.
(BEGIN VIDEO CLIP)
JOHN ASHCROFT, ATTORNEY GENERAL: ... are charged with fixing the outcome of several of McDonald's contests by controlling the distribution of the high value prize pieces, such as the $1 million grand prize pieces. Many Americans are familiar with these contests: "Monopoly," "Who Wants To Be A Millionaire," and other promotional games.
(END VIDEO CLIP)
ARENA: Here's how the scheme worked. McDonald's contracted Simon Marketing to administer its promotional games. An employee at the security department of Simon Marketing, a man named Jerome Jacobson, provided winning game pieces to his friends.
They in turn recruited people to act as winners. After the so- called winners received money, they shared a portion with their recruiters, who, in turn, cut a deal with Jacobson. It's important to note that McDonald's is in no way implicated in the scheme. The FBI was tipped off about a year ago, and says that McDonald's has fully cooperated.
(BEGIN VIDEO CLIP)
JACK GREENBERG, CHAIRMAN & CEO, MCDONALD'S: ... stunned. However, we agreed immediately to cooperate fully with the FBI in an effort to insure our customer interests were protected. And today we're pleased to see this objective accomplished.
(END VIDEO CLIP)
ARENA: McDonald's says to right the wrong, it is launching an instant giveaway for customers to win prizes worth $10 million between August 30 and September 3 in a McDonald's instant cash giveaway.
When the FBI investigation is concluded, McDonald's says it will launch another game to be sure the customers have an opportunity to win any additional dollars taken. The investigation continues, and FBI sources tell us that they expect even more arrests.
DOBBS: Kelli, this is a remarkable story. This had been going on for a number of years, hadn't it?
ARENA: That's right, since 1995 the FBI said it was going on. They only got tipped off about a year ago when someone had heard about the scheme, called the FBI and then they said McDonald's kept the game going for some time so they could put the wiretaps it, get necessary court orders to investigate. And the result is eight people arrested, more to come.
DOBBS: What was the dollar amount that the FBI thinks is involved here?
ARENA: Well they think so far that they've uncovered about a little more than $13 million that has been that has been diverted, so to speak, away from legitimate cash prize winners. There was a car involved and so on, but mostly cash.
DOBBS: I love the FBI since of humor in all of this as well as doing a highly effective job, this operation to shut this down. The FBI named "Final Answer" the operation. Kelli, thank you. Kelli Arena.
The world's first self-contained artificial heart patient went public today. Robert Tools met the press for the first time since his landmark surgery. The 59-year-old said it is great to have a second chance at life.
(BEGIN VIDEO CLIP)
ROBERT TOOLS, ARTIFICIAL HEART RECIPIENT: I have a choice. I could sit at home and die or come here and take a chance. I decided to come here and take a chance. And my family went along with me.
(END VIDEO CLIP)
DOBBS: Robert Tools received his new heart on July 2. Doctors say that he and his heart are doing well.
A massive hunt tonight under way for the man accused of five California murders. Police found the car driven by Nikolay Soltys last night in Sacramento. Today, they posted a $10,000 reward for his capture. Soltys is accused of killing his pregnant wife and four other relatives. Police believe that he took his 3-year-old son with him.
Mexico -- Tropical Storm Chantal has hit Mexico. She washed the shore near Cancun last night. The storm downed power lines and trees, but doing far less damage than had been feared. Now the weakened storm is heading toward the Gulf of Mexico. Forecasters saying that she might regain some strength in those warmer waters.
And a major storm lashing western Japan. That storm has grounded airline flights and has halted train service as well, being blamed for at least two deaths. The storm has been downgraded from typhoon status. It is expected to slam into Tokyo as soon as tomorrow morning.
President Bush says there's enough money in the budget to go around, specifically for preserving Medicare and Social Security. Mr. Bush talked in Independence, Missouri today, the hometown of late President Harry Truman, the first president to propose national health insurance. President Lyndon Johnson also signed Medicare into law in Independence. Today, Mr. Bush said entitlement programs, education and the military are true priorities, but he cautioned against overspending.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNTIED STATES: Now this tax relief has laid the foundation for expanding economic growth. And now we must resist the temptation of a bigger threat to growth, and that's excessive federal spending. The biggest threat to our recovery is for the Congress to overspend. We have the funds to meet our obligations, so long as they resist the temptation to spend.
(END VIDEO CLIP)
DOBBS: The president's speech comes at the same time the Democrats unveiled ads accusing Mr. Bush of jeopardizing the health of Social Security and Medicare.
Well, for more now on the shrinking budget and how the Pentagon is likely to feel shortchanged, I'm joined by William Cohen, chairman and CEO of the Cohen Group, former defense secretary in the Clinton administration. Bill, good to see you.
WILLIAM COHEN, FORMER SECRETARY OF DEFENSE: Good to be here, Lou.
DOBBS: No problem. We have got plenty of money to go around, Donald Rumsfeld at defense can have missile defense, we can have tax rebates, and life goes on. Do you buy this?
COHEN: Well, I do agree with President Bush that we need to take care of the military, that we have to see to it that we modernize that military, make sure that we have a quality of life for our troops, so one of the first priorities has to be taking care of the military, and as the president said yesterday, also education.
But that's where the battle lines are going to be drawn, so to speak, in the fall between the Democrats and Republicans. Democrats accusing the president of cutting the social programs, cutting too much on taxes, and President Bush then saying, big spending in Congress.
DOBBS: This government certainly, as you as a long-time public servant, elected official and student of history -- this country governs from the center, but I can't recall a time at which we've seen such a coalescing of views on priorities -- health, education, even tax rebates and tax cuts. What's going on?
COHEN: Well, I think both parties realize that you do govern from the center. No matter what takes place during presidential primaries, you go slightly to the right of center for Republicans, left of center for the Democrats, but you have to come back to the center to govern. That's where most people live. That's where you have to govern from.
DOBBS: It's sort of unexciting to see all of the partisan rancor over what are very marginal issues.
COHEN: Sort of like academic policies I guess on the school campuses, as Virginia Wolf once taught us.
DOBBS: In terms of the Bush administration backing away from the Clinton administration plan to reduce plutonium -- this 100 tons of plutonium, the great fear was that it could be at risk in the world. The Bush administration saying they're not too interested in pursuing it. What do you think?
COHEN: Well, this could be a case of being penny-wise and plutonium foolish, because that 100 tons of plutonium is weapons-grade plutonium, and if there are a few areas where we can cooperate with Russia, one is called the cooperative threat reduction program, the so-called Nunn-Lugar program, to help the Russians and the United States reduce the amount of nuclear weaponry in the world between our two countries.
But also, this program that President Clinton initiated, that was to help fund the reduction, the conversion over of that plutonium into either commercial use or to make it unusable. That's a program worth preserving, and for us to walk away from that, to say there's new technology -- which I'm not aware of has been developed -- to say that we can do that I think is a mistake.
DOBBS: And this week, "Newsweek" magazine out with a story on Donald Rumsfeld, on what he has learned as defense secretary from his previous stint as defense secretary, backing away apparently from the avowed dramatic cuts that he was going to bring, telling the commanders and the heads of each service that they're going to have to manage it. This is a quite a reversal for him, is it not?
COHEN: Well, with power and position comes responsibility, and that's true for presidents and secretaries of state and defense, that there are a number of promises made, pledges made during the course of the campaign that had to be modified, if not totally altered.
This is a situation in which I think that Secretary Rumsfeld is finding that we have got commitments to keep today as well as prepare for tomorrow, and it's very hard to take one without the other and try -- you have to balance some, and that's what he's doing right now, or seeking to do right now. You can't cut one and then think you can just invest in the future and lose the requirements you have for today.
DOBBS: William Cohen, thank you. Good to see you, Bill.
Coming up in the next half hour here: Static for a major radio station owner. Does clear channel control too much of the concert industry? A new magazine has hit the racks. We'll be talking with the publisher of "Maxim" about his newest addition. And the Fed, of course, cutting interest rates, stocks hitting the skids. We'll tell you why. And John Manley of Salomon Smith Barney will be here to tell us if there's any end to the pain.
(COMMERCIAL BREAK)
DOBBS: Stocks tumbled in the late-session trading after the Fed announced its much-anticipated quarter-point interest rate cut. The Fed also saying economic weakness continues to pose a threat, implying more rate cuts could be on the horizon. The Dow fell 145 points, the Dow tonight at 10,174. All but three of the Dow 30 stocks finishing the day lower. And on the Big Board, declining issues swamped advancers by a three-to-two margin.
Checking out the most actives: General Electric dropping more than $1 in heavy trading. GE currently trading more than 30 percent below its 52-week high.
A substantial decline on the Nasdaq today. Nasdaq shares -- that index dropping 3 percent on the day, finishing at 1,831. Declining issues beating advancers by a margin of two-to-one. Cisco Systems topping the most actives on the Nasdaq. The Fed's comments about continued weakness in capital spending weighed apparently rather heavily on that stock. Cisco shares down 5 percent on the day.
Well, many investors hoping for a delayed rally on Wall Street tomorrow, following the Fed's decision. For that look ahead, Christine Romans at the New York Exchange -- Christine.
ROMANS: Hi there, Lou. Well, the bulls would love to see a day two reaction, a rally in stocks tomorrow. After all, I mean, isn't lower -- aren't lower interest rates supposed to be good for the stock market?
Well, if had been making that bet so far this year, it would not have turned out to be so. Take a look at the Dow and the Fed on the day that it has cut rates. The day of interest rate cuts, the Dow has risen just three times in those seven session. Today after a Fed rate cut, the Dow has been up four of the six sessions that have been the day after, so I guess if there is a chance for any kind of reaction on the upside, it looks like it might be better for tomorrow.
But folks here a little bit concerned about a couple of things, Lou. That is, the amount of volume on the downside here today. A lot of it came in after 2:15. It was aggressive on the downside. Also the fact that now the Dow has joined the S&P and the Nasdaq, Lou, below those July lows.
DOBBS: And with this low volume, there's not much hope here for a real swing tomorrow, do you think?
ROMANS: Well, if it does come, it would come on lower volume than we've seen today, certainly. Today was a Fed-induced rally, more than a billion -- or Fed-induced volume rally I guess, more than a billion shares, but folks are expecting it to turn quiet again.
DOBBS: We're bragging about just over a billion shares now on the Big Board, are we?
ROMANS: I know. We are bragging. More than a billion.
DOBBS: All right. Christine, thanks. Christine Romans.
Now, we turn to Jen Rogers for a look at what investors on the Nasdaq should be looking for -- Jen.
ROGERS: Well, of course, Lou, any time you have a sell-off, traders start talking about what else might rally the next day. So, that's definitely on people's minds this evening.
Like the Dow, as Christine was saying, the Nasdaq has rallied four out of the six times after a Fed decision. We will see if they're able to do that. Now, one thing that might be able to lead a little bit of footing to any rally that we see is TriQuint Semi, after the bell the company coming reaffirming their guidance for the third quarter, also for the fourth quarter, over Instinet. We have seen the stock regaining a little bit of its gains -- lost in the regular session of $1.50 or 8 percent from its 4:00 close, although it's still in the red for the day.
Also tomorrow, very important, will we get leadership from the chips. The semiconductor index a cause of concern, definitely in the spotlight today. If you take a look at the intraday chart, it started selling off after that 2:15 announcement. Off sharply, one of the main culprits traders pointed to for the lost on the Nasdaq today. It rallied yesterday, was unable to follow through today, will it be able to lead us any higher tomorrow? Definitely one of the questions that we'll just have to wait and see until tomorrow's trading action -- Lou.
DOBBS: Jen, thank you very much. Jen Rogers.
Topping tonight's "MONEYLINE Movers," high quality leather goods maker Coach up 92 cents a share, that after an upgrade from UBS Warburg. The brokerage saying it believes the company can sustain a 20 percent annual growth rate.
Shares of tea and health food maker Hain Celestial Group dropping $2.71 a share. The company saying fourth quarter profits below forecasts, because of an increase in marketing spending.
And shares of American Eagle Outfitters plummeting, $9.06. The clothing retailer warning it will fall short of Wall Street expectations, and American Eagle shares are currently trading well below a 52-week high.
Well, John Manley has been cautious about the markets, and rightly so. Since the Fed first began cutting interest rates this year, the Dow has fallen more than 4 percent, while the Nasdaq's has plunged just about 20 percent. John is here now to tell us all about it and what we can expect. John, good to see you.
JOHN MANLEY, SALOMON SMITH BARNEY: Good to be back, thank you.
DOBBS: You kind of thought there would be a bit of a summer rally, didn't you?
MANLEY: I thought there was going to be a summer rally. I thought most of the bad news was out. And we keep squeezing the rock and getting more juice out of it. DOBBS: This market right now, as we've heard from Jen Rogers and Christine Romans over at the Big Board, there's just nothing driving this market right now?
MANLEY: You said very light volume -- there's no direction, there is no sense of purpose. You know, there are numbers that people say Wall Street analysts were looking for this number, no one has any confidence at this point in time, so I think we'll have to wait to see what happens in September.
DOBBS: What I hear as I listen to Wall Street speaking sometimes in muted terms, is less vigor, less enthusiasm about the fact that March and April were the lows. What do you think?
MANLEY: I still think there's a good chance they were. I would say definitely three or four weeks ago. The rules don't seem to be working. You know, we play odds in this business to a certain degree, and this happens 80 percent of the time, this happens 90 percent. We're in sort of the one-off situation right now.
I still tend to think -- I think (UNINTELLIGIBLE) was right, I think that at the short term, earnings matter more than interest rates. But ultimately, interest rates do affect earnings too.
DOBBS: At this point, one's almost led to ask how -- we are just -- we've seen a retreat in business investment, we've seen these rates drop and we know it takes six to nine months at the earliest to have an impact. But even with these lower rates, what will they drive here? We still have stubbornly high mortgage interest rates, even though we're in the midst of a boom in refinancing and sales, we still have high consumer credit rates, very high credit card rates. What's going to drive us here?
MANLEY: Well, it is still up to the consumer to a certain degree. The consumer -- I think the Fed has been successful in one thing, which is keeping the consumer going. The best analogy I can think of to what's going on is that an idea of sort of a 19th century disease, when you couldn't cure it -- just keep the patient alive and sooner or later he or she will cure themselves.
The Fed can't attack the direct problem here, which is a weakness in capital. They can keep us going until it gets better.
DOBBS: And let's take a look -- I want to ask you what your stock recommendations are. You're still buying stock in this market?
MANLEY: I'm buying stocks. I'm buying bonds too, but I'm buying stocks.
DOBBS: OK. Let's talk about that in a minute. Last we talked, that was back on June 13, I believe -- these were the stocks you recommended. If we can see those. There they are: Tyco, Alcoa, GE, which to me is a huge surprise, Schlumberger, Intel -- those stocks not faring well. Just -- what do you think happened there?
MANLEY: Well, you know, what I tried to do is structure the portfolio, I generally do it with a six- to 12-month horizon. And on that basis, I still like them. I still believe that we have very severely reduced economic expectations on Wall Street. And if you give it six to 12 months to work out, I think those stocks will tend to move higher. I think expectations will for the economy be higher in six to 12 months than they are right now.
DOBBS: And when do you think we'll start to see a kick in earnings?
MANLEY: Well, I think probably -- it's getting pushed back, but my guess is the comparisons by the first quarter should be a little bit easier. And at some point in time, we start to discount that. You know, we were talking before about when I was on last time -- it's going to get less bad before it gets somewhat better. I think that's the case to a certain degree.
I still think we're in a bottoming progress. Like the topping process, like most things on Wall Street, it takes longer than I and most people anticipated it will.
DOBBS: There's almost a mood now on Wall Street -- when I hear you talk about earnings being -- growth being deferred into next year, two months ago that would have been a disappointing outlook. Now, just to hear that there's prospect of earnings growth kind of excites me, John. What do you see as good investments here for -- would you like to add to those recommendations?
MANLEY: Everyone I mentioned there I still think is a good long- term buy. The ones I will probably mention at this point in time -- I think Lincoln National is a very good story, this fairly small financial services corporation, but a good exposure in the annuity business, I think that's attractive.
I tend to think that other areas -- I think technology can have its moments. I think IBM is still a good story in here, very, very good value at this point in time. I think that's a pretty good place to be. Health care -- there's going to be some problems with the pharmaceuticals on a very short-term bases, but if the Fed really has to push, this could work out well, so I think Pfizer or even Amgen will be a very interesting story at this point in time as well.
I suppose if I had to add on top of that, I would probably add one more financial. I think Bank One is a very strong story at this point, a good turnaround story.
DOBBS: Jamie Dimon will be pleased to hear that, the CEO. John Manley, thank you.
Coming up next here on MONEYLINE, we'll take a look at one publisher who is defying an advertising recession. And later, David and Goliath, a small town promoter taking on a media giant. We'll tell you how the battle is going next on MONEYLINE.
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DOBBS: Advertising dollars are drying up. It is one of the most difficult advertising markets in decades, one publisher defying all of that is Dennis Publishing. It produces well-known titles like the top-selling men's magazine, "Maxim."
A recent "Fortune" poll finding investment bankers are more likely to read "Maxim" cover to cover than "BusinessWeek." Dennis Publishing's latest offering: "The Week." Despite the naysayers, founder Felix Dennis says he's convinced it'll be a wild success, and Felix Dennis joins me now.
Felix, good to have you with us. The success of "Maxim" is extraordinary by almost any definition. When you launched it, did you think it would be doing this well?
FELIX DENNIS, CHAIMAN PUBLISHING: We did -- "Maxim" just over four years old and -- four and a half years old -- and we did a business plan that did touch on four years. And we thought about now, we might be struggling up to a million copies. So, we exceeded our own expectations and we are about 2.6 million now.
DOBBS: The leading men's publication by far.
DENNIS: America has driven "Maxim" in the rest of the world now, so it is just beating the hell out of the competition. And Germany now, just launched there as well.
DOBBS: And your advertising, in terms of the U.S. market continues to hold up?
DENNIS: Yes. We've been very surprised about is this. "Maxim" -- I think what happened is that in a tough advertising environment advertisers tend to flee to the places where they know they're going to get a good bank for their buck. With "Maxim" it's rock solid. There is no discussion or argument that they are going to be reaching ten million men.
In a sense we're gaining from a flight to the rock, if you want.
DOBBS: And as the maven now...
DENNIS: I don't think I'm the maven.
DOBBS: ... do you see the end of this advertising slump in sight?
DENNIS: For magazines generally and media generally, I have to be honest and give you the bad news and I know you've had plenty of that in the next few days, but I'm afraid I do not see the end of it and I think it is going to go on. We have a tough six months, at least, in front of us and probably a tough year.
DOBBS: And of course you couldn't anticipate the depth of this downturn when you launched both "The Blender" and "The Week."
DENNIS: We had a reasonable idea that it was on the way and we would have launched anyway. There is never a good time to launch a magazine. Magazines are just like taking a vacation: It's always a bad time. You just have to stick to your own schedule. In the end, "The Week" is such a fantastic idea and is such a strong product in Britain, where we have launched it before, I had to launch it.
DOBBS: A summation of the week's best stories?
DENNIS: Yes, basically, "The Week" is a very simple concept and was originally devised by Mr. Lose, of "TIME" magazine and he changed -- they changed the magazine over the years and it is basically a digest of all the news for the last week, culled from literally hundreds of newspaper around the world.
DOBBS: And what the world also needs is another music magazine.
DENNIS: Yes. The world needs "Blender," right. Well, I've been told -- whenever I see a huge target, do you know what I think? Do you know what I honestly think about a magazine like "Rolling Stone"?
DOBBS: I'd love to know.
DENNIS: "Rolling Stone" is a huge whale that's been in the same lagoon for so long that it's actually been harpooned 50 times but doesn't know it yet. I just can't understand why any young man -- I'll be very honest with you -- I think it is a great magazine for me to read, but that magazine isn't made for me to read.
So I am trying to do music magazine that does cover music for young people.
DOBBS: Well, Felix, congratulations on your success and thanks for being here, and I hope you find the end in sight to that advertising downturn.
DENNIS: And so do I, Lou. Thanks very much.
DOBBS: Coming up next here: Why some independent concert promoters say Clear Channel is drowning the competition. And they say that is also a matter of the law.
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DOBBS: A legal battle is brewing between concert promoting giant, Clear Channel, and a small independent company. This has the all the ingredients of a Hollywood movie: Stables of music stars, millions of dollars, and allegations of a monopoly unfairly crushing the competition.
Susan Lisovicz with the story.
(BEGIN VIDEOTAPE)
LISOVICZ (voice-over): Concert promoter Jerry Michelson is checking the grounds of Denver's new football stadium for its first event: a sell-out concert by the Eagles.
Michelson says it's his own long run, 30 years that's keeping him afloat in a business that has recently become dominated by one colossal player.
JERRY MICKELSON, JAM PRODUCTIONS, CO-OWNER AND PRESIDENT: It's tough to compete against someone like Clear Channel, when they have so many other things to offer which we can't offer. And at many times we think it's unfair and anti-competitive.
LISOVICZ: And so does another independent promoter, Nobody In Particular Presents, which staged this concert by country folk artist Nancy Griffith at Denver's Botanic Gardens. It filed an antitrust lawsuit this month against Clear Channel, the behemoth that produces more than 26,000 live events a year.
JESSE MORREALE, NOBODY IN PARTICULAR PRESENTS: It's definitely a scary thing to undertake. We're definitely David and they're definitely Goliath. It was a question of survival.
LISOVICZ: Clear Channel not only operates a network of more than 135 venues, it also owns more than 1,100 radio stations in nearly 300 markets in which to promote them. The suit alleges Clear Channel uses its stations to play its own artists while limiting the airspace of artists promoted by competitors. Clear Channel's chairman, Lowry Mays, says the lawsuit has no grounds and that the company hasn't violated any laws.
Clear Channel's rise to power has been fueled by the government's own doing, the deregulation that allowed it to acquire many more radio stations as well as SFX, one of the world's biggest producers of live entertainment.
HARVEY SAFERSTEIN, ANTITRUST LAWYER, MINTZ LEVIN: We usually see those cases being taken over by the government, because it's so difficult for a private plaintiff acting as a competitor suing another competitor. The courts are not very keen and they have not fared well in the past.
LISOVICZ: Deregulation was supposed to increase choice and lower prices. Many competitors say Clear Channel is proof of the exact opposite.
OWEN KURTIN, ANTITRUST LAWYER, SALANS: If it turns out the government, in allowing this wave of acquisitions to take place by Clear Channel, allowed it to amass market power to the extent where it was able to hold hostage independent concert promoters, and that the government's policy in allowing these kinds of acquisitions to take place caused that, then it could be a very important case indeed.
(END VIDEOTAPE)
LISOVICZ: One Clear Channel competitor noted that the government did not allow United Airlines' purchase of U.S. Airways because they would have had too much market share, when government deregulation allowed Clear Channel to control an even bigger share in the concert business -- Lou.
DOBBS: Susan, fascinating story. Thank you. Susan Lisovicz.
Coming up next, we'll take a look at your e-mail, and "Ahead of the Curve."
(COMMERCIAL BREAK)
DOBBS: This word just in to CNN. The manhunt for Nikolay Soltys, who is accused of killing his pregnant wife and four other relatives, that manhunt intensifying tonight, a $10,000 reward posted for his capture.
Sacramento sheriff's deputies have just informed the public that they have found the body of his 3-year-old son, whom they believe that Nikolay Soltys took with him after murdering those five other people.
Turning to tomorrow, we're going to be watching the markets, General Motors, of course, will be out with its earnings. It's announcing European restructurings and we'll look at all of that. In late day trading, by the way, General Motors up more than $1. Ford CEO, Jacques Nasser will be deposed in Dearborn, Michigan, by the way, about tire-related wrecks involving Ford Explorers.
Tomorrow night here we'll be joined by Michael Holland, the chairman of Holland and Company to talk about the direction of these markets.
Now time for a look at some of your thoughts. Many of you tonight taking aim at Federal Reserve Chairman Alan Greenspan. Tough words from Robert Kautzmann who wrote in to say, "Alan Greenspan has done a miserable job at the Fed over the past two years. He killed the technology engine that caused productivity to rise and fuel a long period of solid growth without inflation. He should go!" He then writes, "Don't you find it rather hypocritical on the part of the Fed to try pumping up this economy they were responsible for bringing down. Never should we allow so few to cause so much hardship to so many."
And David in Cedar City, Utah. He writes, "Tell the Fed to stop the water torture. Why don't they just lower rates by 50 points?" And Bryan Hammer in Denver, Colorado, wrote one of the few notes we have defending the chairman: "Be patient, people. We act like children in the car saying, are we there yet? Are we there yet?"
Finally, on the question of whether the tax rebate is really a rebate or an advance on future credits, David in San Francisco writes: "You can call it whatever you like. It was always the taxpayers' money, and not the government's."
And you are absolutely right. Send us your comments. E-mail us at moneyline@cnn.com.
And for tonight, that is MONEYLINE. Thanks for being with us. I'm Lou Dobbs. Good night from New York.
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