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Lou Dobbs Moneyline
Dow Rallies 194.02 to 10,423.17; Nasdaq Soars 73.83 to 1,916.80; Cisco Systems Stands Out on Wall Street
Aired August 24, 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.
JAN HOPKINS, GUEST HOST: Good evening. In tonight's headlines, a powerful rally on Wall Street: Nearly a quarter trillion dollars in market value created. Triggering the rally: Cisco Systems. The stock soared, along with its rivals, after CEO John Chambers said last night that business had "stabilized."
And new home sales surged nearly 5 percent in July. Economists had expected sales to decline.
Let's take a look at what our reporters are working on tonight, beginning with Christine Romans -- Christine.
CHRISTINE ROMANS, CNN CORRESPONDENT: Jan, a huge rally today on Wall Street. The first winning week of the month for stocks.
PETER VILES, CNN CORRESPONDENT: The president today defended his economic forecast, and told Congress to back off on any plans for new spending.
JEN ROGERS, CNN CORRESPONDENT: The standout story on Wall Street today: In a word: Cisco.
STEVE YOUNG, CNN CORRESPONDENT: Microsoft in a race with regulators, is shipping its crucial Windows XP to manufacturers just as the antitrust case gets shipped to a brand-new judge -- Jan.
HOPKINS: Thanks, Steve. Those stories are coming up on MONEYLINE.
We begin tonight on Wall Street. Stocks today surged. It was the biggest rally in over a month. Investors were clearly enthusiastic after Cisco last night suggested that business may have hit bottom. That propelled the Nasdaq and the Dow. Gains in the four Dow tech stocks accounted for a third of today's 194 point rally. Let's check in with Christine Romans at the New York Stock Exchange -- Christine.
ROMANS: A powerful Friday rally, a friendly Friday, traders were saying on Wall Street, and it really didn't let up. You look at the Dow Jones Industrial Average, it rallied all session and closed not far from the best levels of the day, up 194 points. That is almost 2 percent on the week. Now, driving the Dow Jones Industrial Average Overall were a handful of names that really did well. Big Blue up almost 4 on general tech bullishness tied to Cisco and the idea that if the market turns you are going to want to own Big Blue chip tech names. Microsoft releasing its Windows XP. 3M leading the old economy names, and Home Depot, indicative of what was going on in the retailers today.
The idea was there was some anticipation on Wall Street that things were going to get better in the equities markets. You could see that, as folks bought the brokerage stocks. Some of these names have been very close to 52 week lows, and now they rallied very sharply here today. Merrill Lynch, Morgan Stanley Dean Witter, Lehman Brothers, Goldman Sachs all of them doing very, very well here.
You had broad-based buying really, only some of the banking stocks faltering here a bit today, Jan. Folks now say the most important thing, of course, is follow-through on Monday.
HOPKINS: I guess the brokerage stocks rallied on rally on Wall Street. They liked that increased volume and price movement,right?
ROMANS: Yes, a proxy for the idea that things are going have to get better for stock markets.
HOPKINS: Thanks, Christine Romans at the New York Stock Exchange.
The rally today was broad-based for both the Dow and the Nasdaq. All but seven of the Nasdaq 100 biggest stocks ended the day higher. Jennifer Rogers is at the Nasdaq marketsite -- Jen.
ROGERS: Hi, Jan. It was indeed a powerful rally here at the Nasdaq, our best since July 12. If you take a look at the intraday chart, we gaped up at the open a steady rally, closing at our highs for the session, up 73 points. The level, 1,916, up 2.6 percent for the week there, 4 percent for the day.
If you look at the stocks that really led the charge, Cisco, definitely the story of the day. Cisco up nicely nearly up $1.50 on volume of about 40 percent above its average. And Cisco, giving legs to many other stocks. We saw Juniper Networks up more than 6 percent bouncing off a 52-week low it hit earlier this week.
Extreme Networks up more than 16 percent. We also saw gains among communications chips with exposure to Cisco. They count Cisco among their customers. AMCC up more than 11, and PMC Sierra up nearly 9 percent. The strength really across the board. The sectors, here at the Nasdaq that were winners: hardware was up more than 6 percent. The chips were up more than 6 percent. Software, Microsoft, helping out there, up more than 6 percent, and the networkers getting a boost from Cisco, up more than -- up 6 percent.
And finally those Internet names coming in, also helping the Nasdaq here. EBay which was down for the last two days here, getting some big gains here today. It was up nearly 4. And we also saw some strength in the biotech names for the third day here. A little bit of leadership from that very volatile group. It is pretty depressed right now. we have seen some buyers come in here and bump up those levels. But overall, a very strong day here at Nasdaq. As Christine said, we'll see if we can follow it up on Monday -- Jan.
HOPKINS: Thanks, Jen Rogers at the Nasdaq.
The strong housing report helped fuel today's market rally. But that wasn't the only economic news out today. And President Bush today addressed the economic slowdown as he faces critics who say the surplus has been squandered. Peter Viles has our report.
(BEGIN VIDEOTAPE)
VILES (voice-over): At a news conference in Texas the president used his administration's preferred term for the current slump, a "correction."
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I think our economy has very strong underpinnings. We are certainly going through a correction.
VILES: He defended his forecast for a recovery to 3.2 percent growth next year. A Philly Fed survey yesterday found economists predicting only 2.6 percent growth.
BUSH: We are right in the middle as I understand. We picked a number that seemed reasonable. Let's just -- but the facts are, our economy has slowed down. We had an anemic 1 percent growth over the last 12 months. There is no question the economy slowed down, and therefore, Congress must adjust its spending attitudes.
VILES: And if the administration is wrong, about next year?
BUSH: If I'm off by a point or two then Congress can adjust their sights.
VILES: And in conclusion...
BUSH: We have a very strong economy. Our economic -- let me say we've got a strong economic potential, we could have a very strong economy again.
VILES: The president spoke on a day of mixed economic numbers. The housing market continued its remarkable run, new home sales rising 4.9 percent to an annual rate of 950,000, the biggest percentage increase in that reading this year.
But orders for durable goods slipped again, down 6/10 of a percent, the third decline in four months.
JOHN RYDING, BEAR STEARNS: We have a manufacturing sector that continues to suffer from declining capital spending. Inventory liquidation and both of those things were evident in the July data. So the two forces fight to a standstill and growth is going absolutely nowhere at the start of the third quarter. (END VIDEOTAPE)
VILES: Another not so cheerful note today: Bankruptcies. The Federal Court System reported today that personal and business bankruptcies together rose to a record high level in the second quarter, just over 400,000 filed. That is up 9 percent from the first quarter, 25 percent from a year ago -- Jan.
HOPKINS: Still mixed readings from the economy.
VILES: Very much mixed. It's almost like the stock market in a trading range. The economy in a range. We don't break out to the negative or to the positive.
HOPKINS: Thank you, Peter.
Gasoline prices have been declining from their springtime highs. But there's some fear that another price spike is dead ahead. Gas futures today soared nearly 5 percent to the highest close since mid- June.
Citgo is saying that its Chicago area refinery would be closed for as long as six months after a recent fire.
My first guest tonight believes we are seeing a stealth bull market: Stocks performing well outside of the tech sector. There was nothing stealth about today's rally. Joining us now, Prudential analyst Ralph Acampora. Ralph, welcome.
RALPH ACAMPORA, PRUDENTIAL SECURITIES: Hi, Jan.
HOPKINS: You have been very bullish on the market. Is this the beginning of a move that, you know, really could be something? Or is it another one of these head fakes?
ACAMPORA: Are we talking about the Dow moving up? Yes.
HOPKINS: And the Nasdaq, both of them moved.
ACAMPORA: I think today you had a lot of short covering which started the move. But you notice that after lunch, after the market backed off, it ended at the high of the day. So I don't think it was just short covering. So I think you are going to get some follow- through next week and I think it is going to be a pretty good run, short term.
HOPKINS: Short term, can't we have a good run through end of the year and recover some of these losses?
ACAMPORA: That is the big question. For me as technical analyst, I have to see the confirmation. For me, a move above 2,350 on the Nasdaq would be very, very good.
HOPKINS: We are not there, we are just about 1,900.
ACAMPORA: Well, we have about 3-400 points left. So between now and then we have a short term rally. But the longer term sustainable -- to answer your question -- I have to see above the May highs. If I don't then we are back in the trading range.
HOPKINS: But you are saying that we are seeing a stealth rally going on outside of the indexes. What do you mean?
ACAMPORA: If you remember what happened at the end of June, the first half of the year was in, the report card came in, and the people that were up, the portfolios that did well, were value stocks, small and mid-cap names, this is where it has gone into -- it is the mundane companies. It is not just technology. I tell everybody, you know, get a new life!
Look for other names. Barnes & Noble, we have got a lot of stocks that are doing very, very well.
HOPKINS: But technology is such a big part of the indexes, and so many people are still in technology. Do you think that they should be getting out or what?
ACAMPORA: I think it is too late for most technology stocks. If you haven't sold the Ciscos and the Intels, too late. Play the rallies. They are tradable. But Jan, I don't think they are going to go back to their highs for a long, long time. So they are in their own little trading range.
Do you remember when the market was going up in the good new economy days, and we were always complaining that it was just a handful of stocks? Well it is those same handful of stocks that are giving the averagers a hard time this time. It is the majority of stocks that are going up. That is where markets are.
HOPKINS: So we need to look at more mundane names?
ACAMPORA: Absolutely. Barnes & Noble, Dial Corp.
HOPKINS: Makes soap?
ACAMPORA: Yes. We are talking about American Standard. They make toilet bowls. These are the kinds of stocks that are doing well.
HOPKINS: Johnson & Johnson, on your list, Barnes & Noble, Consolidated Edison, International Paper. These are real old economy stocks.
ACAMPORA: Old economy and some of them very large cap like Johnson & Johnson, a utility like Con Edison. It is across the board, Jan. I like it. HOPKINS: You have written a book about the next megabull market. You still believe that people should own stocks. It is just that they need to pick the right ones at this point.
ACAMPORA: When I finished literally writing the manuscript of that book was April of last year. If we went back to April of last year it was just after the peak in the Nasdaq. Do you know what the average stock on the New York Stock Exchange was selling at, if you took technology out -- was selling at 12 times earnings. That book came out at the bottom of the market, not the bottom of the Nasdaq, and it says you have to rotate. That's exactly what's happened. I'm happy.
But it's not across the board, and the problem is that so many people still own technology, and they're buried, unfortunately.
HOPKINS: Ralph Acampora, Prudential Securities, thanks.
ACAMPORA: Thanks.
HOPKINS: There's been a settlement in the $1 billion lawsuit against Bridgestone/Firestone. The suit was filed by a woman in Texas who was left in a wheelchair after her Ford Explorer overturned. For more on the settlement, we're joined now by Ed Lavendera, who's in McAllen, Texas -- Ed.
ED LAVANDERA, CNN CORRESPONDENT: Jan, there have been a lot of people around the country who have been closely watching this trial, because this was supposed to be the first time that a jury would decide whether or not a Firestone Tire, a Wilderness AT tire, to be more specific, was to blame for a Ford Explorer rollover accident March of last year. Forty-year-old Marisa Rodriguez is confined to a wheelchair and she will not be -- she will have to learn to walk again.
Her family settled with Firestone today for $7.5 million, that's according to sources at CNN. Her family says that this money will go a long way and will make her financially secure to be able to take care of all medical costs the rest of her life.
Now, Firestone attorneys say they were able to reach this settlement because they call it a fair deal, and they say that they will continue throughout this entire trial -- they've attacked the design of the Ford Explorer. They say it was the design of the Ford Explorer that caused this car to roll over and cause the injuries to the Rodriguez family. Firestone says it will not change its strategy as it moves ahead in other cases around the country.
(BEGIN VIDEO CLIP)
KNOX NUNNALLY, BRIDGESTONE/FIRESTONE ATTORNEY: Anyone that would sit through this trial and listen to the evidence that was introduced, and I think it was drawn very persuasively on behalf of Firestone, would not be able to go away without agreeing, that one, the Firestone product, their tire, was not the problem that caused this accident. That it was clearly a problem associated with the vehicle, and that the vehicle had a problem which led to this accident.
(END VIDEO CLIP)
LAVANDERA: Ford and Firestone were sued in this case, but before this case went to trial, Ford settled with the Rodriguez family. They paid $6 million, so they had no attorneys here, throughout a week and a half of testimony, to defend the Ford Explorer. And attorneys for the Rodriguez family, who have other cases pending against the tire maker and Ford, say that when a case will eventually come to trial and a jury will eventually make its decision on who is to blame in these rollover accidents that have happened all across the country, and they say when that happens, it will be like a nuclear explosion in the courtroom.
Ed Lavandera reporting live from McAllen, Texas. Jan, back to you.
HOPKINS: So, Ed, question. Do you think that both sides got a little nervous that the jury was taking so long to decide this case?
LAVANDERA: Neither side would come out and answer a lot of those questions, specifically. But there are so many cases still pending, and quite honestly, all the observers that we've spoken to in the last two weeks, say that what happened here was really going to be what a lot of people looked at as these other cases. There are still about 200 pending against Firestone and Ford. So there's no question that what this jury would have said, it would have sent a signal throughout the country. And specifically, they would have looked at those punitive damages. And what the jury would have put in that box, had they ruled against Firestone, that would have been something that -- it's hard to say at this point now, given what has happened today, but that is something that attorneys and families across the country have really been looking at.
HOPKINS: Thanks, Ed Lavandera, live in McAllen, Texas.
As we said, a little bit of news from Cisco last night helped drive the markets a lot higher today. Bruce Francis takes a look at the "Cisco effect."
(BEGIN VIDEOTAPE)
BRUCE FRANCIS, CNN CORRESPONDENT (voice-over): Just 16 days after releasing last quarter's numbers, Cisco says the current quarter is just as predicted. That didn't impress analyst Michael Perica.
MICHAEL PERICA, GRUNTAL & CO.: This three-week trend really doesn't give us strong insight and/or confidence that the company is really going to make the quarter.
FRANCIS: But it did impress investors around the globe.
UNIDENTIFIED MALE: Good news travels fast, and this is what tech believers want to hear.
FRANCIS: Cisco helped fuel rallies from Tokyo to London. The faint praise from Chambers rewarded the company's stock as well. Cisco's market cap soared by more than $9 billion. Investors are hungry for good news on technology stocks, and starved for encouragement on Cisco.
DAVID BRADY, STEIN ROB FUNDS: Things were getting bad in the March-April time frame, and then they were getting bad at a slower pace in, you know, June, July time frame. And now we're beginning to hear companies say that things are stabilizing, or they understand the demand curve now. So, that absolutely is encouraging.
BERNADETTE MURPHY, KIMELMAN & BAIRD: I think it's probably because the tech sector of the market, you don't need me to tell you this, is so oversold. And I think that anyone interested in technology stocks has just been searching and searching for some positive information.
FRANCIS: Among the traditional four horseman of the Nasdaq -- Cisco, Microsoft, Dell and Intel -- Cisco is the most badly beaten, down 77 percent from its all-time high. And Cisco was still the most widely-held stock in Merrill Lynch accounts as of the end of June.
(END VIDEOTAPE)
FRANCIS: So it seems a generation of investors who witnessed the tech boom of the '90s still want to believe that the can-do company, that also lost the most on the Internet bust, can rise again and bring the sector along with it. Or this could be just another sucker's rally -- Jan?
HOPKINS: And I think they're hoping that it goes back to the highs, but that might not happen anytime soon.
FRANCIS: Not anytime soon. I don't hear any predictions like that.
HOPKINS: Thanks, Bruce Francis.
Microsoft today released Windows XP, with fanfare, to PC companies for installation on their machines. At nearly the same time, the antitrust case moved back to a lower court. A new judge was appointed to decide what to do about the company, which was found to be a predatory monopolist.
Steve Young has the story.
(BEGIN VIDEOTAPE)
I think all we have to do is give them the thumbs up, Bill.
BILL GATES, CEO, MICROSOFT: All right. Let's do it.
YOUNG (voice-over): Microsoft called the shots and fed them by satellite, spreading the visual word that Windows XP, the company's new operating system, is en route to PC companies for a late October launch. Some said Microsoft is trying to outrun regulators.
JASON MAHLER, COMPUTER & COMMUNICATIONS INDUSTRY ASSN.: They are trying to beat the clock of the judicial system, which is working, obviously, toward them making changes in future editions of Windows. And they're trying to get the product out the door, get it into the market, make it more or less a fait accompli.
(BEGIN AUDIO CLIP) KOOL AND THE GANG (singing): Celebrate good times, come on!
(END AUDIO CLIP)
YOUNG: There wasn't that much to celebrate. In Washington, the Court of Appeals sent the Microsoft antitrust case back to U.S. District court. A new judge, Colleen Kollar-Kotelly, has been randomly assigned to decide how to control the company.
HARVEY SAFERSTEIN, MINTZ LEVIN: It's possible that somebody still makes some type of temporary injunctive action with regard to XP. That might be the judge's first test.
HOPKINS: Kollar-Kotelly is described by one Washington lawyer as bright, with views straight down the middle, extremely efficient. And so is Microsoft's marketing machine. One billion dollars is expected to be spent promoting Windows XP while the trial goes on, half from Microsoft, half from its PC partners. The company can easily afford megabuck promotions. Its awash in more than $30 billion cash. It spends a lot on product development, but the PC companies bear the brunt of Microsoft's distribution costs.
CHRIS JONES, MICROSOFT: They take that CD and use it. There's also a set of tools that go along with it, that enable them to quickly and easily install the operating system in the way they choose.
(END VIDEOTAPE)
YOUNG: Microsoft may be more spooked by retail trends than government regulators. As of June, PC sales were off 21 percent, the first down year since the industry's birth -- Jan.
HOPKINS: Thanks, Steve.
A stellar session for Microsoft today. It soared nearly $3. That translates into nearly $16 billion in market cap.
Coming up next on MONEYLINE, drug companies hoping to gain fast approval for new drugs are hitting a major roadblock. We'll tell you why some say the FDA could be part of the problem.
The UAW shuts down Mitsubishi's only U.S. plant. We'll tell you what's behind the first U.S. auto strike in nearly four years.
And then a piece of pop history goes on the market. We'll tell you what they're asking for Madonna's childhood house. That's when MONEYLINE returns.
(COMMERCIAL BREAK)
HOPKINS: Lifesaving drugs can mean huge profits to drug companies. Getting swift FDA approval can be the difference between life and death for a struggling company. But with an increasing amount of drugs being recalled due to harmful side effects, some drug companies are finding the approval process slower than usual. Fred Katayama has more. (BEGIN VIDEOTAPE)
FRED KATAYAMA, CNN CORRESPONDENT: Companies are racing to develop the next blockbuster drug. But analysts say they are facing a new costly roadblock -- regulatory delays for approval. Last month, regulators asked Genentech for more data on its asthma drug Xolair. And that had its investors breathing hard.
The stock sank nearly 16 percent that day, and that of its collaborator Tanox tanked even more, down 44 percent. Companies hesitate to criticize regulators publicly, but have complained privately to Congress. The industry trade group known as Pharma says it's monitoring the situation to check whether there is a conservative trend toward increasing data requirements. It is a big concern at Isis Pharmaceuticals, which has 11 compounds in development.
DR. STANLEY CROOKE, CHAIRMAN AND CEO, ISIS PHARMACEUTICALS: We are at the point in the emergence of this technology where a delay at the FDA is a high quality problem.
KATAYAMA: After shrinking by more than half over the last decade, the average time for approving a new drug increased by five months last year, to more than 17 months. At the current rate, analysts say, drug approvals could fall as much as 40 percent this year.
(BEGIN VIDEO CLIP)
KATAYAMA: Have you been delaying or slowing your review process at all?
DR. SANDRA KWEDER, ACTING DIRECTOR, FDA DRUG EVALUATION: Absolutely not. The time that it takes us to review the applications has not changed.
(END VIDEO CLIP)
KATAYAMA: What has changed, Dr. Kweder contends, is the number of applications for priority drugs, which require fast approvals. They fell sharply last year, lengthening the average time for a review. And she says some companies are take longer to cough up the requested data.
Some analysts say the FDA has raised the bar for approving a new drugs, a charge the agency denies. They think regulators have become much more sensitive to safety, given the recent rash of high-profile drugs pulled from the market. More than half of the 24 drugs the agency recalled in the last two decades occurred in the last five years. Analyst Joe Dougherty says the heightened focus on safety has delayed approvals of at least eight biotech and drug products so far this year.
JOE DOUGHERTY, LEHMAN BROTHERS: It's an issue also for patients. I mean, I think there are, you know, people who have serious disease who need these drugs and need them as soon as they can get them. I think it is also, obviously, a financial issue for the industry, in that it is -- it raises the expense of drug development and makes people ultimately reluctant to commit new capital to the area.
KATAYAMA: President Bush has yet to nominate a new FDA commissioner, a seat vacant since January. A Senate Health Committee staffer says the drug approval issue will be a significant topic during confirmation hearings. Fred Katayama, CNN Financial News, Rockville, Maryland.
(END VIDEOTAPE)
HOPKINS: In our corporate news, American Airlines says its pilots' union rejected its fast-track contract proposal. It would have provided immediate raises for pilots and a new contract by June. But the pilots' union says the offer did not address safety concerns, like pilot time on duty.
The union represents more than 11,000 American Airlines pilots. U.S. Federal Trade Commission has approved the Amerisource Health plan to buy rival Burgen Brunswig. The deal leaves just three major drug distribution companies controlling nearly 90 percent of the market. Amerisource and Burgen announced plans to merge back in March in a deal valued at almost 2.5 billion.
Wedding resource company theknot.com had a not-so-blissful announcement today: it's been delisted from the Nasdaq. The company's common stock will continue to trade on the Nasdaq over-the- counter bulletin board. Theknot's Web site is the busiest on-line wedding destination. Its stock traded at $10 a share when the company went public about two years ago. Yesterday it closed at 60 cents per share.
A retired Air Force sergeant has been charged with spying. 38- year-old Brian Regan was arraigned this afternoon. Regan worked for the agency in charge of spy satellites, giving him access to classified information. Officials did not name the country Regan's suspected spying involved.
United Auto Workers launched its first auto strike in nearly four years today. 2,800 union workers at the Mitsubishi plant in Normal, Illinois walked off the job this morning. Issues on the table include pay, benefits and safety. The first UAW -- or rather, the last UAW strike was against General Motors in 1998.
And there's some pop history up for grabs in Michigan. Singer Madonna's childhood home is on the block. It's the house the Material Girl called home from age six on. It's up for auction on eBay. The minimum bid being asked is $324,000. As of the time we went on air, there were no material offers.
Coming up in the next half-hour of MONEYLINE, housing starts go through the roof. One group of stocks fall through the floor as a result. We will tell you what sector was hurt. Then, still working out the details of a deal for Hyundai's financial business. The price tag: almost $1 billion dollars. We'll talk to one of the deal's key players.
(COMMERCIAL BREAK) HOPKINS: Good news from Cisco Systems, last night helping close out Wall Street's week on a positive note. The Dow Jones Industrial Average adding nearly 2 percent, for its highest close in more than a month. Advancing issues led declining issues by a 19 to 11 margin.
Among the most active stocks today: EMC, the network storage concern, picking up 1 1/2 on that upbeat news from Cisco. K-Mart dropped, also getting a lot of attention, still dropping after saying yesterday that it will be cutting prices to attract more customers. Financial stocks were big movers today, Citigroup adding 1 1/2, on hopes the economy could be improving.
The Nasdaq also having its best day in more than a month, picking up 73, or 4 percent on the day. Advancing issues leading declining issues by a margin of three to two. Cisco Systems easily one of the most active stocks, Cisco adding 1 1/2 on its upbeat outlook. There was a lot of interest in Microsoft as well, Microsoft jumping close to 3, as it released its new Windows XP, and its antitrust case went back to a lower court.
For a look at what we can expect next week, we turn to Christine Romans. She is at the New York Stock Exchange -- Christine.
ROMANS: Hi there, Jan.
I'm not quite sure what was more vigorous today, the rally or the discussion about whether it can be sustained on Monday. A lot of folks saying they would like to see another triple-digit gain back-to- back before they would really feel like the markets have rejected some of those April levels tested this week.
But overall the bulls say they will take this Friday rally and they will see what they can add on to it on Monday. They do point out it could be vulnerable, since some folks are saying this might have just been short covering, it might have needed more volume here today to be really too convincing.
Let's look at some of the events coming up next week that could change people's mind as they head into the week. Monday, we get existing home sales, Tuesday there is the August consumer confidence index from the Conference Board, this could be interesting. Wednesday, a second quarter GDP. Most folks are telling me they expect pretty much a flat reading for growth in the economy in the second quarter, but this one could be interesting if it goes negative. There are concerns that the R-word could end up in newspaper headlines and spook investors.
Thursday, we get personal income and spending, and Friday, July factory orders. Also, University of Michigan sentiment and some other sort of minor regional kind of sentiment gauges, but really a pretty jam-packed week in terms of the economy. The question is that is this going to be driving sentiment or are we going to go back to this earnings type malaise that really gripped the markets over the fast pew weeks?
So, Jan, folks talking about and relishing today's rally, at least the bulls are. The bears are saying, well, they want to see a little bit more before they will be convinced that we are not going back and test the April levels -- Jane.
HOPKINS: But it's a good way to go into the weekend.
ROMANS: It sure is.
HOPKINS: Thanks, Christine.
Today's rally on Nasdaq was a strongest among the biggest high- tech names. The Nasdaq composite gaining 4 percent, the Nasdaq 100 jumping 5.5 percent. Jennifer Rogers is at the Nasdaq marketsite -- Jen?
ROGERS: Hi there, Jan. Well, it was a very strong rally here, our best since the middle of July. But you heard it from Christine and you will hear it here again, the story really is we'll take it, thank you very much for the rally, but I mean, is this really here to stay?
Not a lot of traders thinking that we have turned a corner here, that we are off and never going to look back. A lot of people think there are many down days ahead for this market. It is nice to close out at the highs for the session and go into the weekend, but still, is this a trend that is going to continue?
The other question, did the shorts step in really pumping up this rally? Was Cisco enough to carry the whole day? Jan, you were talking about this with Ralph Acampora earlier -- shorts definitely something of a caution in trader's minds right now.
And of course, the Labor Day lull. Yes, that is coming up, it is on people's minds. I was over at the trading floor for lunch today, talking to traders, people are already on vacation, next week more people will be on vacation likely, volume could be light, we could see exaggerated moves.
You heard from Christine that the economic news cycle is supposed to pick up. We also have a mid-quarter update coming to us courtesy of Sun Microsystems. That also could have some interesting news out of it. We will just have to wait and see what comes from all of that, and if we get any follow-through. That is the word of the day, follow-through, and also Cisco. And if that happens on Monday, the bulls will definitely be happy -- Jan.
HOPKINS: Definitely, you were leading the charge today at Nasdaq. Thanks, Jennifer Rogers.
Well, one stock extending a recent rally on the Nasdaq is Intuit. The software maker adding more than $3 today. It's up more than 30 percent this week. Intuit attracting investors after saying that business conditions are improving.
Viro-Pharma jumping 17 percent today, part of a broad rally in biotechs. Viro-Pharma's experimental treatment for the common cold showing promise in recent tests. And Electronics Boutique up more than $4 a share today. Merrill Lynch upgrading that stock of the video game retailer after it posted better-than-expected results. Shares tonight trading at an all-time high. Sales are up sharply due to strong demand for Sony's Playstation II game console.
South Korea has announced a deal to sell the financial units of Hyundai Group to a consortium led by AIG and financier Wilbur Ross. It's a deal that Ross and AIG have been working on with South Korean government officials for more than a year. Wilbur Ross joins us now here in New York. Welcome.
More than a year, and then at the last minute there is a question about the price, right?
WILBUR ROSS, W.L. ROSS & COMPANY: Well, there is always a last- minute question in Korea. They have made negotiating into an Olympic sport.
HOPKINS: But price you would think would be kind of early on when you are negotiating, not after you think you already have signed a deal?
ROSS: Right, well, two-thirds of the companies, namely two of the three, price has been settled. At the very last minute, the board of Hyundai Securities, instead of giving us the 7,100 price that we wanted prices it at 8,940, so hopefully they will come to their senses and therefore won't blow the whole deal.
HOPKINS: So for you, what's the attraction?
ROSS: The attraction is several things. Korea is a very rapidly growing economy over long periods of time.
HOPKINS: Not now, though.
ROSS: No, but for them a recession is 3 percent growth, which would look pretty good for the U.S. Second, they have a very high propensity to save there, so financial products have a very good market place. And the Hyundai Group is the largest distributor of financial products in the country.
HOPKINS: But there have been problems with this company. The former head of it accused of manipulating prices and a whole lot of other things?
ROSS: Well, that's right, but as you know, we only invest in things that have been distressed, because that often creates a very good opportunity for the new people to turn them around.
HOPKINS: Now, you have a big investment in Japan, you actually own a bank.
ROSS: Yes, we bought the bank back in February.
HOPKINS: And how is it doing so far? ROSS: Well, it's doing very, very well. Its very first month, it earned 573 million yen.
HOPKINS: But the Japanese economy is still in the doldrums, the market is now at the levels that it was in 1984. What gets all of that going?
ROSS: Well, we are very much in love with the new Prime Minister Koizumi. I think he is the first real agent for change that Japanese has had in a high official position since the bubble burst at the end of 1990. We think he truly will make sort of harsh love for the country, and they believe the citizens of Japan have been up for that long before their leaders.
His predecessor leaders who were eight prime ministers in the last 10 years, none of them really had original ideas. Mr. Koizumi does.
HOPKINS: So you're quite confident that these investments in Japan are going to pay off?
ROSS: Oh, yeah. We are quite excited about the prospects, because we think the economy is very much at a bottom, and as you probably know, the worse hit of all are golf club memberships. They are down more than 90 percent in value from the peak. Real estate is back to more or less 1983 levels, and that is approximately where the stock market is as well.
HOPKINS: Right. What a huge up and down. What about the U.S.? You invest in distressed properties. Are you starting to see them here?
ROSS: Oh, sure. In -- as recently as five years ago, more or less one company a day would go into default. One company a week, sorry. Now it's roughly one company a day is going into default. So the real problem is a capacity problem for the distressed industry.
HOPKINS: So you are buying things like Xerox debt?
ROSS: Yes, we have been buying Xerox's debt, we have been buying bonds of Crown, Cork & Seal, a whole variety of companies -- Burlington Industries -- that have been very, very depressed and are often yielding more than 20 percent.
HOPKINS: Wilbur Ross, thanks for joining us.
ROSS: Thank you.
HOPKINS: Just ahead on MONEYLINE: The latest housing figures showing surprising strength, that stocks in a related sector showing surprising weakness today. We will tell you all about it. Also, after a big Friday rally, what's in store for the markets in the coming weeks? We'll ask our roundtable of market experts. Ralph Acampora will rejoin us for that discussion as well.
(COMMERCIAL BREAK) HOPKINS: One sector under a lot of pressure today: savings and loans firms, or thrifts. Today's housing figures were surprisingly strong, but analysts doubt that mortgage lenders can continue to profit from the boom.
Among the concerns: The Fed may be coming to the end of its easing cycle. Also, customers are moving to adjustable rate mortgages and away from fixed-rate mortgages. For some firms, that's less profitable. One of the most volatile of the thrifts today was Golden West Financial. It fell more than $6 a share. Also trading lower on heavy volume was Washington Mutual, Providian, Dime Community, and FirstFed.
Just ahead on MONEYLINE, a big day for the markets, but what can they do for an encore? We'll get a look at what you should keep an eye on in the days and weeks ahead.
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HOPKINS: When we return, we will wrap up the week and look ahead in our roundtable discussion. We will tell you why the economy and doggie bags could be tied at the hip.
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HOPKINS: Time now for our Friday roundtable on the market. And joining me tonight is Ralph Acampora, along with Bruce Francis, Christine Romans, from the New York Stock Exchange, Steve Young, and Peter Viles.
Christine I want to start with you, and I want your opinion. You were telling us what the traders were saying about what happens next week with this rally. Now that we have most of the earnings behind us, do you think investors are going to come in and buy stocks?
ROMANS: You know, I think today was a really interesting day in the market. You know that phrase "don't just stand there, do something" well, I think this summer at least, the motto often street has been, "don't just do something, stand there." And that is what's been going on.
Today, they weren't standing there. They were buying, traders told me their phones were ringing, they were having good orders. More than a billion shares changing hands here, I guess Monday really is the litmus test. People are telling me, if you can scare some of the shorts and if you can encourage some of the buyers on Monday and Tuesday of next week, maybe it will hold.
So too soon to say it will hold, but this is the first day of what we need to see in 3 or 4 days to convince us.
HOPKINS: So let's bring in Bruce. Cisco was the reason behind all of this, just a little bit of encouraging news from Cisco.
FRANCIS: Just a little, too, Jan. And remember, just because things stopped getting bad, that is not same as things getting better. And that doesn't mean that that trend is going to continue. It is just 16 days since Cisco last gave us some kind of guidance. We have one little data point next week, Sun Microsystems giving us their midquarter update. That might not be much, but we got a lot out of a little today. So let's stay tuned for that.
HOPKINS: So, Peter Viles, what will the economy tell us? To help, or to hurt?
VILES: Well Bruce talked about a data point. We have a very big one on Wednesday which is the revised GDP number for the second quarter. What we have in front of us is 7/10 of a percentage point growth. There is a lot of discussion that that number may come in negative. If that does, you can't avoid having a very big discussion of whether or not we are in a recession.
Now, if it does come in positive we'll have dodged the bullet in the second quarter and the question is how are we in the third? Not, obviously, stronger but there is a real danger there Wednesday that if we have a negative number, we have to have a discussion: Is this now a recession?
HOPKINS: Steve, you look at Microsoft. The stock was up a lot today on the launching of Windows XP. Microsoft is now owned by so many funds and individuals, is it going to keep rallying? Is it going to provide the legs for the market.
YOUNG: Yes. Up more than 2 bucks today it probably drifts up next week. But the dark horse is Judge Kollar-Kotelly. And whether anybody tries to get some kind of injunction and just what tone she may set in the court, we'll find that out next week.
HOPKINS: Ralph Acampora, you think that we have had a stealth rally going on, people will become more aware that the markets rallying again?
ACAMPORA: Yes, I think they're aware that there are the stocks doing better than technology, No. 1. No. 2, there's an awful lot of skepticism. I heard it around tonight, listening to everybody talking about market and whether the market will follow through. And I think you get a follow-through Monday.
HOPKINS: So let's bring others in.
What do you think about what Ralph's saying, Bruce?
FRANCIS: I think follow-through is key. I think that's what you want to see. We did see the Nasdaq close on what looked like to me an uptick, and on strong volume right at the end. That's a positive.
Was that short-covering? How much short-covering was going on?
(CROSSTALK)
ACAMPORA: There was initial short-covering in the morning, not in the afternoon. After lunch you don't short-cover, and especially going into a weekend, you don't end that high on a Friday unless you feel pretty optimistic.
FRANCIS: So that's a sign you like, then.
ACAMPORA: Yes, I like that. That combination's good for Monday.
HOPKINS: Christine, one final thought from you.
ROMANS: You know, Pete's really got something with this GDP report. I've heard so many people talking about what it means, if anything, if we do get a negative print on that second quarter GDP. Some people say it's rear view mirror stuff, other people say, wow, the headlines and the top stories and all those news shows could really spook investors and consumers. So that's coming up on Wednesday.
HOPKINS: But you know, we could have a lot of headlines in papers talking about a positive rally on Wall Street, and that could set the tone for next week, is that right, Ralph?
ACAMPORA: That's true.
HOPKINS: Well, and as we get into Labor Day, then more people are coming back and more decisions are made about portfolios, aren't there?
ACAMPORA: And it's not the next couple days, really, it's what happens in September and October; and that's the key. And I think the jury is out on that one.
HOPKINS: Ralph Acampora, Peter Viles, Steve Young, Bruce Francis and Christine Romans, thank you all.
Coming up next, a look at your e-mail, and "Ahead of the Curve."
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HOPKINS: One stock to watch next week: Hughes Electronics. News coming after the bell that Hughes is cutting 10 percent of its workforce, and will take an unspecified charge.
Plenty of market-moving news on tap next week. Existing home sales on Monday, consumer confidence Tuesday, and Wednesday the all- important look at second quarter GDP. Expectations calling for growth to be revised downward, placing the economy at greater risk of recession.
Please join us on Monday when the CEO of Xerox, Anne Mulcahy, will be one of our guests. And of course, LOU DOBBS MONEYLINE will be on the air a half an hour earlier beginning Monday. Our new time is 6:00 to 7:00 Eastern.
Time now for a look at some of your messages. John in Phoenix says after all the pain in the market in the past year, he's firmly in the pro-Greenspan camp. Quote: "The Nasdaq's speculative bubble needed bursting for the long term health of the stock market," end quote. Seda in New York wants us all to just admit we're in a recession. Quote: "I've been watching my portfolio go down for the past 12 months. If it's not a recession, then what do you call it?" end quote.
L. Louie in Plano, Texas says some brave soul has to stand up and say we're not going to take it anymore. Quote: "If everybody is sitting around and waiting for the turn, what's the impetus that will get business investment, and the rest of the economy and the stock market, growing again?" end quote.
Roy thinks MONEYLINE should get the ball rolling. Quote: "I'm tired of hearing and reading about bad news. Can't you make an exception next week and give your faithful listeners a ray of hope by broadcasting only good news? Tell us the glass is half full for a change."
On to my interview with the CEO of Krispy Kreme and the company's plan to expand in Canada, where there are more donut shops per capita than anywhere else, John in Nova Scotia questions the move. Quote: "Competing with Tim Horton's is an extremely bold endeavor. The only time I've seen a police cruiser at a competitor's donut shop was because there was a hold up," end quote.
Please e-mail us, we love hearing from you. Our address is MONEYLINE@CNN.com.
And finally this evening: corporate profits, unemployment rates and consumer confidence all give us a glimpse of how the economy is doing. But one often overlooked indicator could be doggie bags. The National Restaurant Association says one in five diners asking for doggie bags; that's up from two years ago. Industry consultants say that diners used to be too embarrassed to ask for doggie bag; now they pay the chef a compliment and then ask to take their leftovers home.
And that's MONEYLINE for this Friday evening. Thanks for joining us. I'm Jan Hopkins; good night from New York.
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