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American Morning

GDP Figures Spread Tremendous Psychological Overhang

Aired August 29, 2001 - 09:42   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.
DARYN KAGAN, CNN ANCHOR: Let's talk the economy and what these figures mean to you. The latest figures on the U.S. economy show it was barely creeping along during the second quarter. The gross domestic product, which came out this morning, showing the economy growing at the rate of two-tenths of a percent.

Joining us to talk about what that means is our Jack Cafferty. He's at the financial news desk in New York.

Jack, good morning.

JACK CAFFERTY, CNN FINANCIAL NEWS: Daryn, how are you?

KAGAN: I'm doing OK, and apparently the economy is doing -- I mean, .2 is not gang busters, but it is a lot better than a lot of people were expecting to see this morning.

CAFFERTY: Tremendous psychological overhang to this number. In fact, if you had the window this morning you could hear Wall Street breathe a big sigh of relief. It's a heartbeat, but it's not very much of one.

The original reading, the advance look at second quarter GDP, was up 0.7. There was a great fear that we would slip into negative territory this morning, and the classical definition, of course, of a RESSA: is two consecutive quarters of negative GDP growth.

So when we came in barely above the flatline, that was taken as very good news and probably more than even it should have been.

The markets are operating in a bit of a vacuum here, so they're seizing on these little pieces of information that come along as being perhaps more important than they are.

KAGAN: Well, let's look at some of those numbers right now, and our viewers can follow along at the bottom of the screen. Right now the Dow up 19, the Nasdaq up five. Not a lot of movement, but again, the markets have only been open for about 13 minutes.

CAFFERTY: And the futures, which trade ahead of the opening bell had been negative right up until 8:30 when this GDP report came out.

But if you look back at the market over the last three or four days, you can see how it's hanging on these little pieces of economic news. Last Friday we had a triple-digit gain on the Dow when we got better-than-expected new-home sales. Then Monday, existing home sales came in weaker than expected, the market sold off about 40 points. Yesterday we had that disturbing and disappointing consumer confidence survey, that took the market down triple digits; I think the market lost 160, the Dow. And now this morning we got better-than-expected GDP news, so looks like the markets are taking that as a positive.

But in fact, none of these things is an indication that we're out of the woods as far as the economy is concerned, that's still very much an open question.

KAGAN: And Jack, just looking ahead, what's that next little nugget that investors will be looking for?

CAFFERTY: One of the economists I talked to this morning said watch retail sales on September 14; it will be a good indication of whether those tax-rebate checks are being spent. And if the retail sales numbers comes in good shape, that could be a sign that maybe, maybe, the worst is behind us.

KAGAN: September 14, it's a date.

CAFFERTY: That would be four days after I start my new program on CNN.

KAGAN: Yes. You want to get your quick little plug in here?

CAFFERTY: I'm going to take advantage of this opportunity to plug the new show.

KAGAN: OK.

CAFFERTY: Beginning September 10 "CNN MONEY MORNING" from 6:00 to 7:00 on both CNN and CNNfn. And we invite all your viewers to join us. We'll have a little news, little market, a little economy, a couple of laughs, and...

KAGAN: And a lot of Jack.

CAFFERTY: Well, and some other people. I got a...

KAGAN: You have friends.

CAFFERTY: ... a gang that will come with me. I have two or three, yes.

KAGAN: Good. Very good. Well, tune in to see Jack and his friends starting September 10.

CAFFERTY: Thanks, Daryn.

KAGAN: Good to see you and good luck with the show.

CAFFERTY: Thanks a lot.

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