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Lou Dobbs Moneyline
Dow Tumbles 40.82 to 10,382.35; Nasdaq Declines 4.30 to 1,912.41; Housing Sales Fall 3 Percent in July
Aired August 27, 2001 - 18:00 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. In tonight's headlines, home sales falling 3 percent in July, a bigger decline in existing home sales than economists had expected. Stocks today struggled after a powerful rally Friday. The Dow today down 40 points and the Nasdaq losing four. And the manufacturing and services industries expecting fourth-quarter hiring levels to be at or near levels not seen since the last recession. That according to the staffing firm Manpower.
A quick note tonight. Consolidated Edison here in New York has experienced a power outage that affects our New York studios. So we ask you to please bear with us if this broadcast looks a little different tonight. With that in mind, let's check in with our reporters. We begin with Lisa Leiter in cooler Chicago. Lisa?
LISA LEITER, CNN CORRESPONDENT: Lou, a hint of weakness in what's been the most resilient part of the economy: housing. I'll have that and the day's other economic news.
JOHN KING, CNN WHITE HOUSE CORRESPONDENT: A new budget report from the Congress is contradicting the White House and intensifying the political debate. Massive layoffs and desperation deals make this a season that memory chip makers won't soon forget.
KITTY PILGRIM, CNN CORRESPONDENT: The dead IPO market is about to pick up, and they have a lot of ground to cover. This has been the weakest year for IPO's in a decade.
FRED KATAYAMA, CNN CORRESPONDENT: A Madison Avenue makeover for a 226-year-old landmark: The U.S. Postal Service -- Lou.
DOBBS: Fred, thank you. All of those stories coming up tonight on MONEYLINE.
We begin with troubling news about this economy. Home resales in July dropped more than economists had expected. The housing sector has been a lone pocket of strength in the economy. Today's report shows that consumers may -- may -- be pulling back. And the drumbeat of layoff announcements continued today, both here and abroad. Lisa Leiter has the report from Chicago.
(BEGIN VIDEOTAPE)
LEITER (voice-over): Home resales in July posted their biggest drop in three months, a weaker report than expected. Sales fell 3 percent to an annual rate of 5.17 million units, still on track for a near-record year. But the report does raise questions about whether people will keep buying homes if they're worried about losing their incomes.
STEPHEN SLIFER, LEHMAN BROTHERS: People are worried that we as consumers taken on too much debt. And there's going to be a lot of layoffs, and that by gosh, just a few months down the road, that we can't possibly keep up this pace of spending. I'm not quite sure I agree with that. I mean, interest rates have come down a lot. And mortgage rates these days are sort of in the seven, seven and a quarter percent area. That's pretty cheap.
The week kicked with more layoff announcements. Farm equipment maker Deere will cut 2000 jobs. In Japan, Toshiba is slashing 19,000 jobs, and there are reports Hitachi also will cut 20,000 jobs worldwide. A new survey by hiring firm Manpower suggests there are likely more layoffs to come. 11 percent of companies plan to cut jobs in the final three months of the year. Only 24 percent plan to add workers; manufacturing hiring hasn't been this bad since the past two recessions, and the once-resilient services business now puts hiring plans at recession levels as well.
CARL TANNENBAUM, ABN AMRO: It's clear that firms are being very conservative in their hiring practices and looking for that formula that will get their bottom line back into shape. Until we see some signs that sales and margins are improving, I'm afraid that employment is just not going to benefit that much.
(END VIDEOTAPE)
LEITER: This gloomy outlook comes just two days ahead of a critical economic report: The second-quarter growth revision. And if that number is negative, some economists say it could be psychologically damaging to consumer confidence and could undermine efforts for an economic recovery -- Lou.
DOBBS: Lisa, thank you. Lisa Leiter.
On Wall Street today, stocks failed to maintain the momentum after Friday's big rally. The lack of follow-through has been a persistent problem for the markets this summer. Stocks have not gained in back-to-back sessions in more than a month now. Christine Romans is at the New York Exchange -- Christine.
CHRISTINE ROMANS, CNN CORRESPONDENT: Lou, one trader tonight saying he's not sure if we should congratulate the market for at least essentially holding Friday's rally, or whether we should criticize the market for not following through. Whatever side of the camp you're on, many of the bulls telling me they are disappointed that once again we could not get follow through in the market. The Dow closing about 40 points below the 10,400 mark.
But Lou, it was a very quiet volume day on Wall Street here today, fewer than 900 million shares changing hands. It was your typical August Monday. And that means a lot of folks are not thinking you could read much of anything into today's action at all, and they expect that to continue through the week, even though we have a pretty heavy data calendar. We have Home Depot on the downside here, there was a negative analyst comment in "Barron's" magazine over the weekend. Also that housing number that Lisa told you about helped drag down Home Depot as well as some of those building stocks. But for the most part, Lou, a very quiet, quiet session to start the week on Wall Street.
DOBBS: As you say, what has become a typical Monday performance of light trading and little movement in the indexes. But I'm curious about this idea of either chastising or applauding markets on their performance. Is that a groundswell of opinion down there?
ROMANS: They want to talk about just about anything down here. Today it was the weather, it wasn't really the markets, Lou. Lot of cheering for your team, whether it's the market going higher or lower. But not a lot of action. No one is putting their money where their mouth is.
DOBBS: OK, Christine, thanks. Christine Romans.
There was, as Christine said, little follow-through on Wall Street anywhere. But one key sector did build on Friday's gains: chip stocks. Jennifer Rogers is at the Nasdaq marketsite and has more on that for us -- Jen.
JENNIFER ROGERS, CNN CORRESPONDENT: Hi, there, Lou. Chips were able to build on their gains from Friday. They were up 6 percent on Friday, 2 percent today. But they were not able to keep the index in positive territory. If we go back -- take a look at the wall. You can see just how flat a day it really was here, hugging the waterline for most of the day. We did a have a break up in positive territory. But most traders I talked to around then weren't too wowed by that rally. It lost it all and a little more, down to 1912, down $4.
Here's the stocks. The Philly Semiconductor Index you can see up 11 points. All 16 components in it were in the green for the day. Let's take look at a couple of those. Intel the world's biggest chipmaker -- just a small gain, but still in the green, coming out (UNINTELLIGIBLE) Pentium 4 chip. Rambus with some nice gains here, the biggest gainer in the stocks, up 30 percent. That new chip out of Intel going to be using some Rambus technology.
We also saw continued gains in some of the chip equipment names. They were good last week on that book to bill, coming out positive, and we saw those gains continue here today. Applied Materials up 0.8 percent. Novell is more than 2 percent. And we also saw KLA-Tencor up more than 1 percent. But volume very light here as well, just like you saw down at the New York Stock Exchange. In fact, this was the fourth-lightest trading day of the year, the full session trading day. And of the four in the top, all four of them are Mondays in August -- Lou.
DOBBS: There must be something to this pattern, Jen. In this market today, there seem to be really no stories at all. You had mentioned the chip sector continuing to show at least some strength, but overall no striking performance at all in any sector or group.
ROGERS: Exactly. You call around asking, what are the story stocks? What can we -- what's moving? And people really just talking about the chips. A couple people were talking about the biotechs. Those have really been on a roll, last week in positive territory. But no star performances here really moving the market.
DOBBS: Jen, thanks. Jen Rogers.
My guest tonight expects a strong fourth quarter rebound, with the Dow moving above 11,700 by the end of this year. The record for the Dow 11,722, set in January of last year. David Alger joins me now. David, good to have you with us.
DAVID ALGER, ALGER FUNDS: Great to be here.
DOBBS: David, this market as we've -- we've grown accustomed to seeing -- not (UNINTELLIGIBLE) through the summer, lot of talk about summer rallies. We are now ending this summer. Give us your best characterization of this market as you see it now?
ALGER: Well, I think the market has been very boring, actually. August has been a horrible month, except for of course Friday. But I think that's fairly characteristic of what we're seeing. We're waiting for the economy to pick up or show some signs that it will. I think we're starting to see that, and I think the fourth quarter is going to be really terrific.
DOBBS: Why do you expect such a -- what I take to be a dramatic performance in the fourth quarter, from what you've said?
ALGER: I think what we've seen is that the economy is starting to stabilize. I mean, if you look at the numbers, some numbers are up, some numbers are down, but basically it's going sideways. So what I'm thinking is with the tax refund, and the interest rate cuts, in the fourth quarter we could have the consumer coming on really strong. And I think that will really spur the market.
DOBBS: David, no one would want you to be more right than I would, I assure you. But we're hearing from a number of the retailers that those tax rebate checks, frankly, are not having the impact that they had both hoped and expected. We have heard from Lawrence Lindsey, the president's top economic adviser in the White House, that he expects unemployment to rise to 5 percent by year's end. We have this latest report today, showing that the consumer is, at least for the month of July, retreating from the housing market somewhat. What gives you such confidence?
ALGER: I'm not sure that's true about the housing market. I mean, yes, it's true, the numbers we got today were not favorable. But on the other hand, housing starts have been strong. It's only one month worth of data. And also, I think we have to see the full effect of the tax rebates coming through the system. I don't think (UNINTELLIGIBLE) do it.
DOBBS: And in terms of the consumer, you expect the consumer, he and she, to remain invigorated and pressing this economy forward?
ALGER: I do. I don't -- I think that the unemployment rate is irrelevant. I mean, I think that's a lagging indicator and always has been. So what I think is going to happen is that in fact by, you know, sort of midway through September, October, we 're going to start to see the economy, economic numbers moving up. And I think that's going to be very bullish for the market.
DOBBS: Does that include, your view, that earnings -- corporate earnings -- will surge here?
ALGER: I don't think they're going to surge, but what I do think is going to happen is that in the September quarter there are going to be surprisingly few preannouncements, because analysts have ratcheted their expectations down so dramatically that I think what's going to happen is that when earnings come out, they're going to be pretty much on expectation. So the confession season, if you will, is going to be surprisingly benign.
DOBBS: Well, the poor investor here has been treated to something, if you will, of Chinese water torture, whether it be in terms of expectations and lowered expectations in terms of those earnings, but the disappointment in those corporate earnings just continues and continues. We are approaching almost a year of what is a corporate earnings recession. You expect that to actually break, leaving aside the expectations -- the actual performance?
ALGER: I think it will start to break through next year. I think the fourth quarter we're going to see some positive earnings comparisons. And I think for technology sector, which of course is the main focus of the Nasdaq, I think that start to really come on next year when we have the good year-to-year comparisons.
DOBBS: Well, David, I want to ask you what looks good to you, and your recommendation to our viewers in terms of stocks that they invest in. But I want to, if I may, address the stocks that you were recommending on June 13th when you were last with us. Now, I mentioned that we had a power outage here. Con Ed had a power outage and they're working very hard to fix that, but we're losing a lot of graphics and things here because of it. So I want to show you the high-tech version, David, and our viewers. This is -- these are your high-tech picks: Sun Microsystems, EMC, eBay, Calpine, Stillwell, the S&P on 5 percent of that period. Are you staying with those recommendations? Some of them such as EMC down 45 percent during this period. Calpine off 26 percent?
ALGER: There's no question they were bad stocks, but of course August was very, very punitive for gross stocks in general and technology stocks. And remember these stocks are very volatile. They can come back so rapidly when things turn around. Calpine is still one of our favorites. EBay is one of our favorites, EMC, I think will eventually come back -- I hope. And Sun Microsystems as well. I think we really need the technology stocks to turn. It's only two months, and it was a very bad one month in there, so I'm not too disappointed. DOBBS: But David -- I don't know if you can see this, but we are (UNINTELLIGIBLE) high-tech rendering of your stock recommendations from your last appearance so that you will -- you will have it. If you could see that, David, this is the finest that technology can bring us with low power here in our New York studios. What are you looking -- are you sticking with those stock picks at this point, and do you have others you would you add to it?
ALGER: I am. I do like all of those companies. I would also add, certainly, Tyco, too. It's one of our favorites. And, you know, we have a lot of stocks that we like. We own 212 among all our funds. But I think all of those companies are good, and I think they'll do well over the next, say, six to 12 months.
DOBBS: David, like many people, I'm hoping that your forecast and outlook is the correct one. As always, we appreciate you taking the time to share your thoughts with us here on MONEYLINE.
ALGER: I'm delighted to be here, even under these circumstances.
DOBBS: David, thank you. David Alger.
Topping tonight's MONEYLINE movers, Biopure. It surged than $4.5 a share. A study showing the biotech company's substitute blood product, Hemopure, is as safe as blood from human donors. Biopure plans to file for FDA approval by the end of the year.
Northrop Grumman today gaining more than $2 a share. Northrop's electronic systems unit is consolidating some facilities acquired through its purchase of Litton industries. As a result, the company is cutting 500 jobs. That's about 5 percent of its California work force. Blockbuster down more than $1.5 today. A "Barron's" article over the weekend raising concern that the growth of Blockbuster's "Internet Video on Demand" may slow video rental chain business. Shares of Blockbuster are trading now just below their 52 week high.
In other corporate news tonight, John Deere saying it plans to get out of the consumer products business, ending production on things such as chainsaws and trimmers under its Homelite brand name. The farm equipment maker is also scaling back its construction and forestry division, and it plans to cut an additional 775 jobs. That's on top of the 1200 job eliminations announced in June. Deere's Homelite division lost more than 70 million dollars last year. Deere hopes to sell that unit by October.
IBM saying its scientists have reached a computer milestone. IBM scientists have created a computer circuit made up of single carbon atoms. IBM hopes this discovery will lead to faster, smaller computer chips. The carbon processors are about 1,000 times thinner than a human hair.
The chip industry's search for a way through this current slowdown has prompted another round of merger talks and talk of more layoffs. Senior Technology Correspondent Bruce Francis has the report.
(BEGIN VIDEOTAPE)
BRUCE FRANCIS, CNN CORRESPONDENT (voice-over): Germany's Infineon may merge its memory chip operations with Toshiba's, part of an effort that Toshiba is making to cut cost. Toshiba is eliminating some 19,000 jobs from its worldwide operations. Toshiba's president says that its memory chip business needs a partner. He told reporters in Japan, "This is one business that has gotten away from economic principles." Rivals NEC and Fujitsu have felt the pinch (UNINTELLIGIBLE) as jobs. Memory chips are found in a wide range of devices from high end computers to cell phones. As inventories have piled up, prices have crashed over the past year.
JOSEPH OSHA, MERRILL LYNCH: The 128 megabit chip -- I mean, that part is trading for less than a tenth of where it was a year ago. So it's pretty awful. What that's driving, though, is positive, which is companies getting out of the business. So the problem we have right now is too much inventory, especially on the balance sheets of the big suppliers like Micron and Samsung.
FRANCIS: Those low prices for memory chips are good news for PC makers, who are getting lower prices on another key component, the microprocessor. Intel is introducing its fastest chip to date, a blazing 2 gigahertz Pentium. The company is also discounting heavily, in hopes of stimulating demand. And rival AMD is scrambling to keep its prices competitive. That ongoing price war could be one factor that contributes to improving fortunes of the chip industry by the fourth quarter. Chris Chaney believes that improvement will be temporary.
CHRIS CHANEY, A.G. EDWARDS: That's going to be sort of a letdown to people that wanted to see these stocks show a continuous rally. They may sell into that strength, and then I think we're going to see a sustainable recovery in the second half of next year.
(END VIDEOTAPE)
FRANCIS: Timing the semiconductor recovery been frustrating for investors, and the past few months have been marked with false starts and conflicting calls by analysts. But the rewards can be huge, since chip stocks have led tech revivals in the past -- Lou.
DOBBS: No recovery until the second half of next year?
FRANCIS: That's what some people are saying. Yes, sir.
DOBBS: All right. Bruce, thank you very much. Speaking of technology, we're going to be joined by Ann Mulcahy, the new president and CEO of Xerox, here later. We'll also explain to you why she's one of our new heroes here at MONEYLINE.
And next on MONEYLINE, we'll be talking about Social Security, the budget and the politics of government spending. Our guest tonight, Senate Budget Committee Chairman, Senator Kent Conrad. We'll be talking about reports that the federal government may tap the Social Security fund to the tune of $9 billion. The United States loses a very expensive spy plane, but the military says it's not concerned. We'll have that story for you. And "American Pie II" eating up the competition. Once again. We'll tell you how this movie put Universal Pictures in the history books. It's all ahead, and a lot more, on MONEYLINE.
(COMMERCIAL BREAK)
DOBBS: The Congressional Budget Office says the government will have to dip into Social Security funds to make ends meet. The CBO report conflicts with White House figures that suggest there is enough money to go around without touching Social Security. The CBO numbers were due to be released tomorrow, but they leaked out today. For more on the numbers and for reaction from the Bush camp, we're joined by Senior White House Correspondent John King, who's just outside the president's ranch in Crawford, Texas.
KING: Well, Lou, the conflict over those numbers -- the CBO, Congress saying that the government will have to dip into Social Security this year. The White House -- the Office of Management Budget saying no, there will be a modest non-Social Security surplus. Those numbers will dominate the budget debate that await the president and the Congress when Congress returns in September. The White House rushing out today to defend its numbers, but also saying in the context of a two trillion dollar budget -- the fact that the White House and Congress, those estimates are only about ten billion dollars apart -- really not that significant. The White House Budget Director Mitch Daniels telling us earlier in the day, by no means will the government's Social Security program be touched at all because of this.
(BEGIN VIDEO CLIP)
MITCH DANIELS, WHITE HOUSE BUDGET DIRECTOR: It's a practical matter. Social Security will not be touched, benefits will be delivered on schedule and in full. The trust fund will grow substantially, and by exactly the same amount as if the surplus was a little more or a little less, so Social Security is sacrosanct, as it's always been, and it will be while George Bush is president.
(END VIDEO CLIP)
KING: Now, the White House says (UNINTELLIGIBLE) in the surplus is the slowing U.S. economy, but Democrats who for months have been saying that Bush tax cut was too big rushed out today, seizing upon these new numbers and saying, "I told you so."
(BEGIN VIDEO CLIP)
REP. JOHN SPRATT (D), SOUTH CAROLINA: We're just beginning to see the numbers. They confirm what we expected. We're very much at the stage, if I can borrow the phrase from Apollo 13 of saying, "Houston, we got a problem." Except maybe now we should say, "Crawford, we got a problem."
(END VIDEO CLIP) KING: But the White House says that's unfair, and that the Democrats ignoring their own history. As this debate unfolds in September, Lou, look for Democrats -- the Republicans, excuse me -- to roll out a vote the Democrats took in the Senate not that long ago when they voted for an even bigger short-term immediate tax cut package than the one that ultimately became law. Among the Democrats voting for that bigger 85 billion dollar tax cut, Senator Kennedy, Senator Clinton. Your guest later in the program, the Budget Committee Chairman Senator Conrad. Obviously, the dispute over the numbers will be -- dominate the political debate over the budget this fall -- Lou.
DOBBS: John, thank you very much. John King from Crawford, Texas.
For more now on the CBO and White House numbers, we are joined by Senator Kent Conrad. He is the Democratic chairman of the Senate Budget Committee. He is senator of North Dakota. Senator Conrad, thanks for joining me.
SEN. KENT CONRAD (D-ND), BUDGET COMMITTEE: Good to be with you, Lou.
DOBBS: John King, our senior White House correspondent, just pointed out that in the midst of all this you did vote for a even larger tax rebate, tax cut. What do you make of that?
CONRAD: Well, that's exactly true. We did that to strengthen the economy, to give real lift to the economy. You may recall that the president proposed almost no tax help this year to the economy. But what we didn't do, is we did not support transferring 33 billion dollars by the gimmick of delaying corporate tax receipts for two weeks to make next year look better. So that's what our Republican friends did. That's what the president advocated, and that's what really got us in even worse shape this year (UNINTELLIGIBLE) the bullet.
DOBBS: Senator, as you put it, what got us in worse shape this year, certainly some causal basis has to be laid to the economy itself. This slowing economy has had a drastic effect on federal tax receipts, has it not?
CONRAD: Absolutely. And that's why some of us thought we should have had more of a tax cut this year (UNINTELLIGIBLE) tax cut over the ten years. I think what's really being missed here (UNINTELLIGIBLE) is that the president's talking about relatively small sums. The real numbers are much larger. Just over the next five years, the president's plan has us raiding Medicare and Social Security trust funds by over $200 billion. Most of that is at a time when he is forecasting strong economic growth. So he said he promised not to raid Social Security. Then he said he promised not to do it when we were in recession.
The fact is, his plan is going to have us raiding Medicare and Social Security when he is forecasting strong economic growth. I think that's where we ought to pay attention, and that's what we ought to be concerned about for the long-term.
DOBBS: Senator, as we talk about this, we're really talking about nine billion dollars, in this instance, out of a two trillion dollar federal budget. That works out to about 0.5 percent, about half of 1 percent in terms of the calculation, at least as I make it. What is the real argument here about? Because these are getting to be very fine hairs for both the Republicans and the Democrats to split. What is it really about?
CONRAD: What it's really about is at the end of 2006, we will have $1 trillion more of national (UNINTELLIGIBLE) and what we were going to have what before (UNINTELLIGIBLE) spending plan passed. So what we're really talking about is that the burden on future generations is going to be much greater. Because just in 2006, instead of having a 1.3 trillion dollar national debt, it's going to be 2.3 trillion dollars. So we're talking about not small amounts of money, we're talking about big amounts of money.
DOBBS: (UNINTELLIGIBLE) budget that the White House seems delighted is constrained. The president making it clear he thinks that this is one way to curtail (UNINTELLIGIBLE) excessive federal spending?
CONRAD: Well, it's curious of him to make the point, because the only one (UNINTELLIGIBLE) forward and asking for more money that's in the budget is the president himself. He's asking for $18 billion more next year. None of that is in the budget. Over the next ten years, he's asking for $200 billion more. By the way, none of that is in the calculations I just gave you. That's not even counted. So the fact is, this problem is big, it's getting bigger, and the president himself is largely responsible.
DOBBS: OK. Senator Kent Conrad, we thank you for joining us, and it looks it's going to be a very interesting fall in Washington, D.C. as this battle shapes up between the White House and Congress. Thank you very much, Senator.
CONRAD: Good to be with you.
DOBBS: The United States has lost a spy plane over Iraq. The $3 million pilotless Predator may have been shot down, as Iraq has claimed. Or, as the Pentagon suggests, it may have crashed. The plane had just flown a reconnaissance mission in the so-called No-Fly Zone of Iraq. Officials say they will not try to recover the aircraft. Meanwhile, U.S. warplanes have bombed Iraq's air-defense systems again, this bombing in response to artillery fire from Iraq. Saddam Hussein claims today's raid killed one civilian.
Another shark attack shuts down a popular Florida beach once again. New Smyrna Beach was closed after a surfer was bitten this weekend, the ninth attack in a little over a week. Beach patrols also spotting a school of 20 sharks swimming in the area. Despite all of that, a few surfers defied orders and they headed back into the water.
The weather system called Dean has powered back up to tropical storm status. Forecasters say Dean could reach hurricane strength sometime tonight. At last word, the tropical storm was centered about 500 miles south of Cape Race, Newfoundland and heading northeast at about 18 miles per hour. Forecasters say Dean is a threat to maritime traffic, but not land.
Just ahead on MONEYLINE, Xerox has had duplicate problems this year, including an SEC investigation and a recent management shakeup. I'll be talking with Xerox's CEO Anne Mulcahy about plans for the future. The U.S. (UNINTELLIGIBLE) a new look and a new way of delivering (UNINTELLIGIBLE) rain, sleet, snow, et cetera. And we'll show you why "back to school" means big bucks for two industrious college students, courtesy corporate America, when MONEYLINE continues. We'll be right back.
(COMMERCIAL BREAK)
DOBBS: Another down day on Wall Street. Wall Street concerned by news that existing home sales are down, and that John Deere is getting out of the consumer product businesses. That left the Dow Jones Industrial Average with a 40-point loss on a day of very light trading, 837 million shares changed hands.
Declining issues did beat out advancers by an eight to seven margin, and a lot of familiar faces among the most actives today on the Big Board. Nortel Networks adding 5 cents on rumors it may sell its Clarify unit (audio interrupt) its purchase price, and the Nasdaq slipping more than 4 points on the day, finishing at 1912, decliners there beating advancers by a margin of four to three, Microsoft among the most actives on the Nasdaq today, Microsoft ending 26 cents higher, that after saying it will delay the Japanese launch of its X- Box game to next February to focus on the U.S. launch coming in November.
For a look at what might move the markets tomorrow, we turn to Christine Romans at the New York exchange -- Christine.
ROMANS: Hi there, Lou.
And folks are hoping for some movement of any sort. We do have sort of a heavy data calendar for the rest of the week, so the good news is, this very quiet Monday trading session is behind us, and we've got four more (audio interrupt) to get that long Labor Day holiday weekend.
But we're going to get (audio interrupt) here tomorrow. It is the August Conference Board consumer confidence figure (audio interrupt) saying for some time now, everybody's concerned about the consumer, whether he or she is hanging in there, even amid signs of a sluggish economy.
So we'll get that gauge tomorrow. And it is expected to be a little bit stronger than we have seen in the past couple of months. So we'll be watching for that.
We get a couple of other consumer gauges later on in the week, Lou, but mostly people are now talking about low-volume trading strategies. You know, this is not anything that people haven't -- have never seen before. I mean, it's very quiet. And one thing I keep hearing over and over again, Lou, is that old adage on Wall Street, never short a dull market.
In fact, there's something in the Traders' Almanac that does something like this, You know that a pizza's going to come if you order it, just like a market recovery. You just don't know when it's going to come and how hot or cold it's going to be. And that's one of the pieces of advice I got from a trader yesterday.
DOBBS: The pizza strategy, OK.
ROMANS: There you go.
DOBBS: A low-volume trading strategy, all right.
ROMANS: All right.
DOBBS: Christine, thanks.
Let's go back to the Nasdaq, Jen Rogers -- Jen.
JEN ROGERS, CNN CORRESPONDENT: Hi there, Lou.
We're -- well, low volume is definitely the talk here as well. New York Stock Exchange and the Nasdaq seeing very low volume. There are really two different camps of traders that I've been talking to today. Some traders say that in this low volume you're going to possibly see some exaggerated moves, some big swings. I talked to one trader (audio interrupt) for the session today, and he said to me, "A little bit of wind will blow a boat a long way on a day like today."
Now, we did end up giving up the gains here. We didn't see too much volatility. But that possibly speaks to what we might see the rest of the week.
Other traders, though, saying, You know what? The problem is not just that we have a lot of the players out, but that we have a lot of the decision makers out. So it's not just the quantity of people out, but you can say, could say the so-called quality of people that are missing from the Street this last week before Labor Day, and that that's why we might see possibly some bigger swings -- Lou.
DOBBS: OK, so tonight we have, Jen, a pizza metaphor and we have a boat metaphor. This is (audio interrupt). All right, Jen, thanks. Jen Rogers.
ROGERS: Thanks.
DOBBS: Well, many companies, of course, have been hurt by the slowing global economy, including amongst them Xerox. But the company has other challenges as well, including an SEC accounting investigation, $10 billion of debt, and recent management shakeups. Xerox forecasting another losing quarter before it expects to return to profitability in the fourth quarter, pushing shares of Xerox to levels not seen in more than a decade. Anne Mulcahy was named president and CEO 27 days ago after 25 years with the company, and joins me now, one day ahead of Xerox's shareholder meeting.
Anne, good to have you with us.
ANNE MULCAHY, PRESIDENT & CEO, XEROX: Nice to be here.
DOBBS: I want to tell our viewers right off the bat that Anne is now one of my heroes. As I mentioned, Consolidated Edison having a -- Con Ed had a power outage, so we're in extreme conditions here, if you will, at least in television terms. She offered to walk up the 22 flights of stairs because the elevators aren't working in our studios here in New York City, and my hat's off to you, Anne.
MULCAHY: Well, we were willing to do it...
DOBBS: That's great.
MULCAHY: ... no problem.
DOBBS: And it's great to have you with us.
MULCAHY: Thanks very much.
DOBBS: Twenty-seven days into the job, a company that is beleaguered on so many fronts. Do you still have a feeling of exhilaration as you now have the helm?
MULCAHY: Well, certainly a feeling of exhilaration now is much stronger than it might have been a year ago, since we've taken a lot of the actions and really strengthened the company considerably over the last year with our turnaround plans.
So as we project forward now, we really feel very confident about the company's return to strength and profitability.
DOBBS: You have another losing quarter in front of you, this one, your forecast calling for profitability in the fourth quarter. What's going to be your driver?
MULCAHY: Well, certainly we've been very focused and aggressive (audio interrupt) for structuring in the company, and we're seeing the flow-through of that. And although we anticipate returning to profitability in Q4, we've seen consistent improvement throughout the year.
So certainly the cost actions continue to benefit us at a time when the top line is not as strong as we would have liked with regard to certainly the economic conditions. So a lot of this is just about getting more efficient and more disciplined about executing.
DOBBS: You're driving a company that is challenged on a number of fronts, as we've mentioned, and as you well know.
MULCAHY: Yes. DOBBS: Do you have -- let's go to the very popular term visibility. Do you feel you have sufficient visibility as the CEO to know where Xerox will be in a year?
MULCAHY: I do. I think we've really been focused on really the restructuring of the company, making decisions about where Xerox's strengths are, focusing on our core businesses, and ensuring that we reduced a lot of the cost from a lot of the peripheral parts of the business. So the piece that we have visibility to is really how to continue to meet expectations, particularly from a bottom-line point of view.
I think the difficult part of visibility right (audio interrupt) when the economy turns, and we've had a little bit of a head start in ensuring that we're really (audio interrupt) cost based, so that we can still improve our results.
DOBBS: Do you have further cost-cutting reductions in plan?
MULCAHY: Yes, we're in the midst of a turnaround plan. We've certainly done a lot to date. We announced our intent to take a billion dollars out of the cost base by the end of this year. We're well on our way, and we'll exceed those expectations.
DOBBS: Nine billion dollars in debt due next year. Are you satisfied that you have adequate refinancing available to you?
MULCAHY: Yes. I think, first of all, we've reduced quite a bit of our debt this year. Our debt's down over (audio interrupt) from the beginning of the year. We're continuing to be cash-flow-positive now, so we're really addressing a lot of the financial concerns that we had.
A very important action for us is the outsourcing of our financing business, which represents the largest portion of our debt. That's well under way, and clearly we'll be prepared to make some announcements about that in our fourth quarter.
DOBBS: You want to give us a preview of anything you're going to say to the shareholders? (audio interrupt)
MULCAHY: Well, I think our communication with the shareholders really is to tell them we're on track, to really communicate where we are against our turnaround plan, and to provide the confidence that we're really going to be delivering to expectations going forward.
DOBBS: Terrific. Anne, thank you very much for being with us.
MULCAHY: It's a pleasure, Lou.
DOBBS: We wish you all the very best.
MULCAHY: Nice to be here, thanks so much.
DOBBS: Anne Mulcahy. Thank you. Still ahead here on MONEYLINE, the Post Office sporting a new look. We'll take a look at the latest effort to streamline its business. It is also losing a well-known slogan, a logo, (audio interrupt) and a unique way tonight (audio interrupt) education, students spreading the word to a captive audience, corporate America innovating once again.
(COMMERCIAL BREAK)
DOBBS: We want to apologize to you again, as we said, a power outage here, Con Ed working very hard to fix that power outage in New York City, affecting, obviously, our studios, and in many ways responsible for some technical problems that we weren't even aware of, including some audio problems we're told about. We, of course, apologize to you for any interruption in the quality of the audio that you're receiving at home and ask only for your patience. And we thank you for putting up with us. Again, our apologies.
Well, one part of the transportation sector hit hard by the current downturn is package delivery firms, companies such as FedEx, UPS, and Airborne Freight. FedEx is responding to the weak demand now by teaming up with the U.S. Postal Service. It started shipping some of their mail today, in fact.
While it's a big deal for FedEx, it's also a critical step for the Post Office.
Fred Katayama reports.
(BEGIN VIDEOTAPE)
KATAYAMA (voice-over): The eagle tagline is flying away for good. The U.S. Postal Service is replacing it with an old (audio interrupt), the blue mailbox, and on billboards, using images like this rural frontier, the agency boasts it is everywhere, so you can be anywhere.
In trying to serve people everywhere while saving money (audio interrupt) also launched its venture (audio interrupt) Federal Express. FedEx will carry some of its mail, a move that could save $1 billion over seven years.
DEBORAH WILLHITE, U.S. POSTAL SERVICE: We're trying to act more like a business, cutting costs, trying to innovate, trying to expand our services, trying to be more responsive to the needs of the American people, and still do that basic government service that people have come to know and appreciate.
KATAYAMA: It sponsored the winner of the Tour de France and partnered with Mailboxes Etc. to sell some of its services. Its Movers' Guide is full of ads.
But the agency estimates it'll lose up to $1.6 billion this fiscal year. The growth rate of first class mail has shrunk as people turn to e-mail and online bill payment services. And fuel costs have soared. Critics charge the biggest problem is its (audio interrupt) more than 800,000 employees. Labor costs, they say, eat up three-fourths of its revenues, versus 42 percent at FedEx.
EDWARD HUDGINS, CATO INSTITUTE: When the Postal Service was first organized in 1970, about 80 percent of it (audio interrupt) revenues went to labor costs. Today it's almost the same. In other words, billions of dollars of new investment to modernize has not brought down their labor costs.
KATAYAMA: Expect a restructuring announcement next month.
(on camera): While the eagle logo will remain, critics say the agency is emphasizing the wrong icon. An eagle, they say, symbolizes speed and efficiency a lot more than a stodgy old mailbox.
Fred Katayama, CNN Financial News, New York.
(END VIDEOTAPE)
DOBBS: Just ahead here on MONEYLINE, we'll tell you about an unusual solution for students seeking to pay those college tuitions. We'll tell you how two young entrepreneurs are paying for their education, and how corporate America is involved. We'll be right back.
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DOBBS: It may be difficult to remember the last time you could say the phrase "red hot IPO" without an overwhelming sense of irony. But the climate for new issues appears to be improving as we move into the fall. And some of those that have come to market this year are actually doing pretty well.
Kitty Pilgrim has the story.
(BEGIN VIDEOTAPE)
PILGRIM (voice-over): This summer, there was barely a pulse in the IPO market in its worst slump in a decade. The market has become much more skeptical of companies with a strong pitch but a weak balance sheet.
But September, it seems, will find some half a dozen issues ready to price, analysts saying companies are coming to market better prepared and with stronger financials.
UNIDENTIFIED MAN: Today it is a different game. Today it is about a company that can very easily be seen to be growing, both in revenue, if there are losses, they have to show a history, an ongoing history where the losses are diminishing. And they are working towards profitability in the very near future.
PILGRIM: In terms of volume, IPOs are lagging substantially this year. Only 9 percent of market share, compared to typically 20 percent in previous years. Of the top five IPOs this year to date, two are health care, Select Medical, up 120 percent, Unilab Corporation, up 70 percent, manufacturing company Verisity is up 80 percent, business service firm Simplex is up 84 percent, and Williams Energy is up 74 percent.
Williams has the advantage of going public in January, ahead of the market meltdown.
UNIDENTIFIED MAN: We were assured by the banking community that worked with us on it that they felt the market would be very receptive. We found that it was. It was substantially oversubscribed.
PILGRIM: IPOs coming in September, Lawson Software, Principal Financial Group, and Express Jet, a division of Continental Airlines.
(END VIDEOTAPE)
(audio interrupt) offerings are likely to do well coming up, and some of the high-tech companies are starting to test the waters again -- Lou.
DOBBS: I'm still in the show-me camp, though.
PILGRIM: Yes, well, many people are.
DOBBS: Kitty, thank you very much. Kitty Pilgrim.
Well, today is the first day of class at most colleges on the West Coast. Two entrepreneurial students have found a unique way to pay for their college education (audio interrupt) They have persuaded a credit card company to sponsor their education. That, in return for being on-campus spokesmen for the company.
Casey Wian has the story from Malibu, California.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice-over): Chris Barrett and Luke McCabe are typical college freshmen. The New Jersey guys are going to school in southern California, Chris at Pepperdine in Malibu, and Luke at USC in L.A. Both want to learn how to surf, and both are vague about career plans.
CHRIS BARRETT, COLLEGE FRESHMAN: Luke wants to be a rock star.
LUKE MCCABE, COLLEGE FRESHMAN: Yes, (inaudible) entertainment industry.
WIAN (on camera): And how about you, Chris?
BARRETT: Well, we'll see what happens.
WIAN (voice-over): Like most freshmen, there's excitement moving into the dorm, nervousness before the first class. What makes Chris and Luke unique is how they're paying for all this.
MCCABE: We wanted to just try and find a different way to go to school, because obviously we couldn't afford it ourselves.
BARRETT: And schools are about $35,000 to $40,000 a year, and we saw, like, sports stars and musicians getting sponsored to do what they do. So we thought, Why can't we get sponsored to go to school?
WIAN: They convinced credit card giant First USA to pay for tuition, room, and board, while Chris and Luke promote financial planning and the company on campus.
DOUG FILAK, SENIOR VICE PRESIDENT, MARKETING, FIRST USA: We found Chris and Luke via their Web site, thought that their approach was very innovative. They're smart, they're financially responsible. And we thought this is a really good way for us to help promote that message.
WIAN: Last year, the percentage of college students with credit cards rose to 78 percent compared with 67 percent two years earlier. Average college credit card debt jumped 46 percent to more than $2,700.
KATHY MCNALLY, NATIONAL FOUNDATION FOR CREDIT COUNSELING: This is probably not a whole lot different from Coke and Pepsi vying to get a college campus contract, because if young people drink one or the other during those formative years, they're going to probably continue drinking that soda for the rest of their lives. And I think if it doesn't exploit the students, and if it is an educational vehicle, it can be worthwhile.
WIAN: For now, First USA has committed to the spokesguys, as they call themselves, for one year, with possible annual renewals.
(on camera): The deal could be worth $150,000 over four years for both Chris and Luke and ensure that they graduate from college debt-free. That's as long as they practice what they preach and don't run up big credit card bills.
Casey Wian, CNN Financial News, Malibu, California.
(END VIDEOTAPE)
DOBBS: Good for them.
Coming up next, a look at your e-mail and Ahead of the Curve.
(COMMERCIAL BREAK)
DOBBS: Well, taking a look at what we should concern ourselves with tomorrow, the consumer confidence report for August will be out tomorrow. Economist (audio interrupt) from July. H&R Block and the Sports Authority are expected to report their quarterly earnings.
And now, taking a look at some of your thoughts, Karen Stevens writes in wondering if we're ignoring the fact that not all investors are suffering at the very same level. She writes: "An informal survey of a dozen friends and co-workers shows an average loss of 8 to 12 percent. One even had a gain of 3 percent." Well, Karen, your experience proves once again, it's a stock- picker's market, even though the S&P 500 is down significantly over the past year, almost two-thirds of the stocks in the S&P index are actually higher. Some of the top performers, Health South and H&R Block.
And Mike, in Yuma, Arizona -- which, by the way, is where I started in the television news business -- says consumers are caught in a catch-22 situation. He writes, "Consumers are criticized for a low rate of saving, but if consumer spending is two-thirds of GDP, then what would happen if we all stopped spending?"
Mike, we don't even want to think about what would happen if we stopped spending.
Please send us your comments. E-mail us at moneyline@cnn.com. We always enjoy hearing from you.
And for tonight, that is MONEYLINE. Thanks for being with us. I'm Lou Dobbs. Good night from New York. "CNN FIRST EVENING NEWS" is next with Bill Hemmer, (audio interrupt).
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