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Lou Dobbs Moneyline
Dow Advances 30.17 to 9,949.75; Nasdaq Climbs 13.75 to 1,805.43; Factory Orders Rise in July
Aired August 31, 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.
ANNOUNCER: From the heart of New York City: this is LOU DOBBS MONEYLINE.
Here now: Lou Dobbs.
LOU DOBBS, CNN ANCHOR: Good evening.
In tonight's headlines: the first winning session of the week on Wall Street. Stocks staged a modest advance; and one reason: an encouraging report on the economy. Factory orders in July rose unexpectedly, and both Cox and Comcast have decided to stop selling Excite@home's high speed Internet service. It is yet another dire development for the once high-flying company and stock.
Well, stocks moved higher today, closing out what was otherwise a brutal August on Wall Street.
Let's check in now with our correspondents for a look at what they're working on tonight.
We begin with Peter Viles -- Pete.
PETER VILES, CNN CORRESPONDENT: Lou, with stocks closing in on their springtime lows, we'll look back at what went wrong in the summer of 2001.
KITTY PILGRIM, CNN CORRESPONDENT: Forget about the bottom line, sales are what count; and we'll talk about top-line revenue as a benchmark for tech companies.
SUSAN LISOVICZ, CNN CORRESPONDENT: A blockbuster fight in Hollywood, and it doesn't involve actors, directors or unions. I'll explain.
CASEY WIAN, CNN CORRESPONDENT: Twenty-seven million Americans will hit the road this Labor Day weekend, and most will find higher gas prices, but not as high as many feared earlier this year. We'll tell you why -- Lou.
DOBBS: Casey, thank you. And all of that and more coming right up here.
On Wall Street today stocks rose across the board, but that's little comfort for battered investors. Today ended the worst week of the summer for the Dow Jones Industrials. It also closed out what has been a terrible month for stocks overall.
Christine Romans is at the New York exchange, and she has more on the today's trading -- Christine.
CHRISTINE ROMANS, CNN CORRESPONDENT: Lou, after four down days, a minor advance for the Dow Jones Industrial Average to close out the trading week. Some of the bulls said it was a respectable; some of the bears said it was a meager last gasp for a dying summer market.
Take a look at how the Dow fared here: Rallied 117 points early on in this session on that favorable factory orders and technical buying. But then the selling just took over; the buying petered out. The Dow closed up just 30 points, and below the 10,000 mark.
Now to be fair, there were folks on the floor saying the broad- based buying here today looked pretty good. Although there wasn't a lot of volume behind it, they saw retailers, financials, all kinds of different groups moving higher.
But take a look at the market for the week: still down 4 1/2 percent on this trading week. And when you look at the month, it was even worse, down something like 5 percent. In fact, Lou, to find any winners on Wall Street, you've got to dig deep in the defensive names. The winners: tobacco, mining, soda and soap. That's where investors made money in August -- Lou.
DOBBS: OK, Christine, thank you.
The so-called four horsemen of the Nasdaq: Microsoft, Intel, Dell and Cisco all managing to move higher today. But the gains were relatively small, and all were hard-hit over the week. Cisco this week down 12 percent, erasing more than $15 billion in market cap.
Greg Clarkin at the Nasdaq marketsite with the story -- Greg.
GREG CLARKIN, CNN CORRESPONDENT: And Lou, you know you had some interesting cross-currents in the marketplace today. You had that better-than-expected comic figure, but on top of that then you had Novellus, the big chip equipment company, coming out and saying that revenue and earnings would be slightly below forecast. But in the end, you factor in the fact that it was the day before the holiday weekend, and you really had kind of an indifference greeted to both of these pieces of news as the day wore on.
The Nasdaq Composite posting just a modest gain; it gains 13 points, 8/10 of 1 percent. It does boost it back over the 1,800 level to 1.805. But we saw some of the big names today come back slightly. Let's take a look at Sun Microsystems. That stock began the week trading at almost $15 a share; it ends the week at $11.45 -- it does gain a couple pennies today.
Cisco Systems comes back slightly. Oracle, Intel and Microsoft also posting minor gains. But overall it was just a tough, tough week for the Nasdaq Composite. The composite losing about 5.8 percent on the week.
And, again, it was a week that was really marked by heavy, heavy selling today. Traders were somewhat disappointed that you didn't get more of a technical bounce; but then again, a lot of folks said, you know, don't read a lot into this. It is the day before a holiday weekend. When people get back next week they expect to see a whole other set of circumstances grip the market -- Lou.
DOBBS: Greg, we're all paid to read a lot into these things; what do you mean?
CLARKIN: Well, OK, let's not read too much into is, and let me read into next week, actually. A lot of traders say you know, listen, people are going to be re-engaged in the marketplace. They don't know whether that's a good thing, actually.
DOBBS: All right, take a few days off and be prepared to read diligently next week.
CLARKIN: Sure.
DOBBS: Greg, thanks; Greg Clarkin.
DOBBS: Around Memorial Day, Wall Street optimists often talk of a summer rally. It turned out this summer to be just that, and it usually is just that. Summer, in fact, is usually the worst- performing season for stocks, and this summer certainly was abysmal. Stocks have sold off sharply after peaking in May on hopes that the economy would be just about ready to recover.
Peter Viles now takes a look back at the events that sabotaged any hopes for a summer rally.
(BEGIN VIDEOTAPE)
VILES (voice-over): In late May the coast looked clear; cheered by a deal on a huge tax cut, investors staged a spring rally, driving the Dow above 11,300, up 21 percent from its March low; the Nasdaq to 2,305, up 40 percent from its low.
But then a political curveball: The Republicans lose the Senate when Jim Jeffords of Vermont bolts the GOP. The Dow falls 151 points on fears of the political fallout.
CHUCK HILL, FIRST CALL: It's certainly going to have a negative impact on the health care area and on the energy and utility sector.
VILES: Mid-June the Dow is jolted by the collapse of the GE- Honeywell merger, but a bigger story rocks the markets and tells investors technology spending is in a free-fall. Nortel takes a stunning $19 billion write-off.
PAUL SAGAWA, SANFORD BERNSTEIN: This $19 billion write-off basically eliminates all profit that the company delivered since 1983. I mean, this really is enormous. VILES: June 25, the Fed cuts rates again, but this time only by a quarter point. The Dow falls 100 points. Late July, a flood of job cuts: 7,000 at JDS Uniphase, 20,000 at Lucent, 6,000 at Hewlett- Packard.
JOHN CHALLENGER, CHALLENGER, GRAY & CHRISTMAS: These layoffs are shocking. They're unprecedented in the size. We've seen more layoffs this year through June than we saw all of last year.
VILES: August 7 Cisco reports a huge drop in earnings and still won't predict when the turnaround will come.
(BEGIN VIDEO CLIP, "LOU DOBBS MONEYLINE," AUGUST 7)
DOBBS: Is the worst over for Cisco and for the technology sector?
JOHN CHAMBERS, CEO, CISCO SYSTEMS: Well, you never can be sure of that.
(END VIDEO CLIP)
VILES: Then this week, amid news the economy has slowed to 0.2 percent growth, hints of weakness in housing, consumer confidence and consumer spending rocked the market.
(END VIDEOTAPE)
VILES: So the tally for the summer slump so far: The Dow, as 9,949, has lost 12 percent from it's May peak; the Nasdaq has lost 21 percent from its May peak -- Lou.
DOBBS: So when does it pick up?
VILES: When does it pick up? Greg doesn't have the answers at the Nasdaq; I don't have them either.
DOBBS: I thought I would try anyway, Pete.
A fascinating look back; a little mournful, but what the heck.
VILES: Yes, well...
DOBBS: It's what it is.
VILES: ... they thought they had priced this in when they had that springtime rally, and events dictated otherwise.
DOBBS: Well, let's hope it puts it all in context. Pete, thanks.
Well, my guest tonight says investors have overreacted to the mostly pessimistic economic news out this week. Eugene Profit of the Profit Funds joins me now.
Eugene, good to have you with us. EUGENE PROFIT, PROFIT FUNDS: Good to be here, Lou.
DOBBS: And congratulations on the performance of your fund.
PROFIT: Thank you.
DOBBS: The fact is that overreaction to bad news here. What does that look like?
PROFIT: Well, I think it's -- we're looking for the economy to improve. The Fed has lowered rates, and we think that generally takes six to nine months. But investors have had such a negative reaction because of the downturn in the technology sector, that they're expecting too much; they expect it to be over already.
I think that the economy has moved out three months from being -- improving; you starting to see improvement in the manufacturing sector. So I think by the end of year we'll be back on track.
DOBBS: And over the course of those months between now and the beginning of the year, what do you expect to happen?
PROFIT: Well, I think that you're going to see the market continue to move sideways. i think that next week, against the earnings preannouncement season, if we can avoid any more large names like Sun Microsystems coming out with negative preannouncements -- we won't. But if we are able to match that against some positive news, I think that we'll get through it.
DOBBS: In the allocation of your funds, what percentage in technology.
PROFIT: About 16 percent currently.
DOBBS: And the news on Sun Microsystems, did it surprise you? How did you react as...
PROFIT: The depth of it did surprise me. I think that we were beginning to hope that you'd start to see positive news. You saw a little bit of positive news out of Microsoft and Intel. Cisco began to talk a little bit positive, even though there was a lack of visibility. So for Sun to come out and say that there was no way that they'd come close to their earnings in September, it made you go back and reevaluate your entire technology holding.
DOBBS: Right. What stocks do you like in this sideways-moving market over the next few months, and a recovery in the beginning of the year?
PROFIT: Well, it's a broad-based list. I like Globe Marine. You have a stock there that's trading at a very low multiple. It's sales growth is very high. I like Symantec. I like Intel, which is one of four horsemen that you mentioned earlier...
DOBBS: Sticking with Intel?
PROFIT: Absolutely. We also like Home Depot here. And AOL-Time Warner we like. We like Disney as well.
So there's just a complete basket of stocks. But we're long-term investors. We look over 24 to 36 months and we think that the economy is coming out of its downturn and over the next 24 months will do very well.
DOBBS: Terrific. Eugene Profit, good to have you with us.
PROFIT: Thank you, Lou.
DOBBS: Well, mounting trouble tonight for yet another high-speed Internet service provider. This time it's Excite@home. Two major cable partners are pulling their support as a deadline for a loan repayment looms. Two years ago Excite@home's stock was trading above $100 a share. You can buy it now for about 40 cents.
Bruce Francis has the story.
(BEGIN VIDEOTAPE)
BRUCE FRANCIS, CNN CORRESPONDENT (voice-over): Excite@home says that cable partners Comcast and Cox are terminating their distribution agreements. That's a blow for Excite@home, since Comcast and Cox are the company's second- and third-largest cable operators after AT&T. The company says it's hiring an unnamed financial adviser to explore its options, including bankruptcy.
ROB LANCASTER, THE YANKEE GROUP: This is really going to be a black eye for high-speed cable, which has been really beating up on DSL recently, because of some of the troubles that DSL providers have had in the last year or so.
FRANCIS: DSL stands for digital subscriber line, a rival high- speed Internet technology offered by telephone companies. So far, Excite@home has been winning the broadband war, even as it appears to be losing the financial battle for its life.
But the company lost more than $1 billion in the first half of 2001 alone, is struggling under $850 million in debt, and says it needs more money before the end of the year. Excite@home is also facing a demand from one creditor, Promethean Asset Management, to repay a loan immediately. Excite@home says it won't pay off the note now, but is talking to the lender.
The company was formed by the merger of portal Excite and Internet access provider @home in 1999.
FRED MORAN, JEFFERIES & CO: @home ended up spending hundreds of millions of dollars on infrastructure to help support the cable modem endeavor, and in so doing accumulated a tremendous amount of debt, while their acquisition of Excite caused them to have ongoing losses, and causing them to accumulate even more debt.
(END VIDEOTAPE)
FRANCIS: It won't be easy for Excite@home's cable partners to go it alone on Internet access, and the company's national infrastructure is valuable, experts say. But preserving Excite@home's status as a solvent, independent company now is as doubtful tonight as it's ever been -- Lou.
DOBBS: What is the judgment point for Excite@home?
FRANCIS: They have to get more financing by the end of year. The situation they're in now...
DOBBS: Do they have cash to get through the end of the year?
FRANCIS: They do not. They do not appear to. They said back in July that they do need to get additional funding.
DOBBS: And further problems for Michael Armstrong and AT&T.
FRANCIS: It was the jewel in the crown of that acquisition.
DOBBS: Bruce, thanks.
Well, just ahead here on MONEYLINE, we'll tell you about a blockbuster battle between movie rental companies and Hollywood. The Fed chairman today speaking out about some new economic challenges that face him trying to understand what this economy is doing. And factory orders rose slightly last month. We'll put that in perspective; economist David Horner will be here to tell us what we can expect. We'll be right back.
(COMMERCIAL BREAK)
DOBBS: Top bankers and economists in Jackson Hole, Wyoming for their annual economic conference. And today, the most powerful banker there is delivered the opening remarks, Fed Chairman Greenspan addressing a key challenge facing policy makers, raising the fact that home prices are rising while stock prices are falling. Greenspan said this is making it more difficult to those policy makers to figure out what consumer sentiment and interest rates have to do with one another.
Well, economists and investors today received some good news about one sector that's been contracting for a year: Manufacturing. Factory orders rose slightly, up 0.1 percent in July --a minuscule gain, perhaps, but most economists had expected a decline. And one gauge of manufacturing activity in the Chicago area soared in August.
But not all the economic reports out today so encouraging, particularly consumer sentiment, which tumbled in August, as measured by the University of Michigan. Joining me now to talk about this economy and the markets and what we can expect, David Horner, financial strategist -- senior financial strategist, in fact, at Merrill Lynch. Good to have you with us.
DAVID HORNER, MERRILL LYNCH: Thank you, Lou.
DOBBS: All of the bright men and women out in Jackson Hole trying to figure things out. What does that mean? They are trying to understand the relationship between home prices and falling prices and stock market and Fed policy.
HORNER: Well, I think what's going in Jackson Hole is a little bit of an attempt to step back and take kind of a longer run, maybe even an academic view of what we need to forecast the economy. I think what Greenspan, Chairman Greenspan is saying basically, is that we have a wealth effect, it comes from people's assists. One of them is housing, another one is stocks, but we are not really sure, because we don't have the data and the ability to measure how much comes from each. Well, that's a longer-run problem.
DOBBS: David, did it occur to you as it did to me, that, you know, if they don't understand that relationship, why in the world did they raise interest rates through '99 and 2000 so aggressively if they weren't concerned about it?
HORNER: Well, they don't have a clear understanding, but they have some understanding. By the way, I'm not sympathetic to people who fault Chairman Greenspan for raising rates too much in 2000, because if you back to the time, people were saying, well, gee, interest rates don't matter, they can't raise them enough to slow this economy down. Everybody was optimistic, and Greenspan warned us years ago about too much enthusiasm could lead to a hangover. We are in that hangover now, and that's not Greenspan's fault.
DOBBS: Through something I suppose in monetary policy terms, it could be called a fit. In '96, he talked about irrational exuberance, that didn't work, so he showed everybody in '99 and 2000 what it was all about.
HORNER: He did, but you know, he let the economy run a long time and get a good head of speed. I mean, we have done a lot better than Europe, for example. We grew at 4 percent for four years in a row, Europe at 2.5 for three or four years in a row.
DOBBS: Well, at this point, we are barely growing, if this second revision in GDP is correct. We've got seven interest rate cuts under our belt for this year. Should we expect more, and will it be sufficient to rely on monetary policy to recharge this economy and markets?
HORNER: Well, we should expect more, because the hangover we're having is going to take a lot to overcome. The tax cuts will help. We will resume growth by the end of the year. But I doubt we'll get the potential growth within the next couple of quarters or so, and so we'll need a low interest rate environment to accommodate the growth over the next year, unlike the high interest rate environment we need to slow growth down in the 1995 to '99 period, so I think rates will come down at least another 50 basis points.
DOBBS: This year?
HORNER: Well, into next year. We're looking for 25 in October, and then possibly one more cut beyond that to kind of solidify or give insurance to the attempt for the economy to grow again.
DOBBS: And in terms of the market's growth? HORNER: You know, I have done an evaluation based on interest rate levels, and I have to say that the market has now come down to value, but it's not cheap relative to the way it often gets at a time like this where it's a deal you can't refuse.
DOBBS: And history suggests that a deal you can't refuse is more attractive.
HORNER: Yes.
DOBBS: OK. Good to have you with us.
HORNER: Thank you.
DOBBS: David Horner.
Well, sluggish economy or not, more than 27 million of us plan to hit the road this Labor Day weekend. According to AAA, that's up a bit from a year ago, and it could be in part because the great summer gas scare turned out to be much ado about nothing. Casey Wian has the story.
(BEGIN VIDEOTAPE)
WIAN (voice-over): Computer consultant Rob Willhite drives all over Southern California for business. Recent gas price hikes are squeezing his profits.
ROB WILLHITE, COMPUTER CONSULTANT: I try to reduce the amount of driving I do for business. Personal use, my driving is way down.
WIAN (on camera): And that's because?
WILLHITE: It's strictly because of gas prices.
WIAN (voice-over): Over the past month, the average price of regular gas nationally has jumped 12 cents a gallon, to $1.52. The reason: Refinery problems in the Midwest and on the West Coast and increased gasoline demand.
But when you consider that in May those same factors sent gas prices above $2 a gallon in some markets and led some analysts to predict $3 a gallon gas this summer, today's prices are a bargain.
PHIL FLYNN, ALARDON: The refiners made gasoline at one of the fastest paces we've ever seen throughout, so we went to a market that was undersupplied to an incredible surplus in supplies, and that was really, really good news. But, just like the budget, the surplus has now disappeared, and prices are starting to move back up once again.
WIAN: While strained refinery capacity has kept prices volatile, they're within a penny a gallon of where they were last Labor Day.
(on camera): According to Triple-A, more than 33 million Americans will take a vacation this weekend, a slight increase over last year. About 80 percent of them will travel by car. (voice-over): In southern California, prices are 12 cents a gallon lower than a year ago, so Triple-A says Labor Day trips will be longer.
UNIDENTIFIED FEMALE: Las Vegas.
UNIDENTIFIED MALE: San Francisco.
WIAN: But gasoline distributor Cosby Oil expects prices to keep rising after Labor Day, because recent wholesale price increases haven't been passed on to consumers.
BOB VAN DER VALK, COSBY OIL: We still have other wholesale customers who are right now paying more for full truck and trailer loads than you could buy 10 or 15 gallons at your favorite station.
WIAN: Most people shrug at higher prices.
UNIDENTIFIED FEMALE: I've got to do what I've got to do. I just have to pay what it is, unfortunately.
WIAN: But others plan action.
UNIDENTIFIED MALE: I don't think I'm going to get an SUV on my next car.
WIAN: Casey Wian, CNN Financial News, Los Angeles.
(END VIDEOTAPE)
DOBBS: Coming up next, thousands of people battle the elements as heavy storms are rolling through the Mid and Southwest. We'll take a look at the damage.
Congress gearing up for a battle over a number of issues next week. We'll tell you what problems lawmakers face and what problems they may create as they return to Washington.
And then a big battle brewing in Hollywood. The outcome could hit you right in the wallet. That story when MONEYLINE continues.
(COMMERCIAL BREAK)
DOBBS: Congress goes back to work next week in the nation's capital, once again focusing on the nation's business. We told you about the shrinking budget surplus, and also about conflicting budget numbers from the Congressional Budget Office and the Office of Management and Budget.
Tonight, what to expect when Congress returns next week. And for that, we turn to Kate Snow, who is on Capitol Hill tonight -- Kate.
KATE SNOW, CNN CORRESPONDENT: Good evening, Lou. Indeed, those numbers the subject of a lot of scrutiny here on Capitol Hill. They return back here to Congress next week after a month long recess, and there's already been a lot of finger-pointing over the last couple of weeks about those numbers, about whether the surplus has dwindled so much that there won't be enough money to pay for key priorities of the president, things like a prescription drug benefit for seniors, things like education reform. Maybe even some additional tax cuts. We've already seen arguments about that, Democrats asking the president to justify how he's going the pay for things, Republicans throwing it back and saying that the Democrats just need not to not spend so much.
We expect to see more of that next week, and in particular, we'll see the two sides sitting down to meet with each other, Lou, at some point. We understand the president trying to get a meeting now with both Democratic leaders in the House and the Senate, to try to work out some of these issues in advance -- Lou.
DOBBS: So you're going to be very busy. I'm just curious about your take. Do you suppose it's going to change the tone a bit? Are Republicans and Democrats trying to blame one another for what we are seeing is a shrinking budget surplus, yet every polls shows the American people blaming both parties equally for this. Do you think it might change the tone, and we might not see quite such a sharp battle line drawn?
SNOW: Oh, no.
(LAUGHTER)
SNOW: I think we'll still see a lot of battle lines. I think that it sets up a political debate. It's something that the Democrats can seize on. You know, they see these shrinking surplus numbers as justification for saying that the tax cut this hasn't worked, and that, in fact, it's put it us in a bad position, it's put the economy in a bad position.
On the other hand, Republicans will continue to trump the tax cut. They'll continue to say the tax cut has -- they've gone home over these last few weeks and seen the tax cut at work. And as I mentioned, Lou, I've learned that Republicans may also, in the House, in particular, where they control things, push for even more tax cuts -- things your viewers will care about. A capital gains tax cut, maybe an R&D tax expansion of that credit. So there are some things that are coming down the pike. It's going to be interesting.
DOBBS: Kate, thank you very much. Kate Snow from Washington.
Well, the death toll now stands at 44 in an explosion in downtown Tokyo. This word in to CNN, that blast occurring in a gambling parlor in a busy Tokyo entertainment area. There is no word on what caused that explosion. Many of those injured suffered burns. With the explosion followed a fire. Some people injured when they jumped out of the building, trying to escape the flames. And fire department officials in Tokyo say they simply don't know yet what caused that explosion.
Mother Nature making her presence felt in Chicago tonight. Heavy rains causing flooding throughout the city. That storm has shut down roads. It led to flight delays at area airports, and it left several hundred residents without power to their homes. In some areas, three inches of rain fell in Chicago within one hour.
It was much the same story in Texas. Houston and San Antonio have been slammed by a slow-moving storm. Flash flood warnings are up for several counties. Those storms dumping as much as six inches of rain on some communities. Several areas between the two cities had to be evacuated. Those floods are just the latest blow to insurance companies. They're still facing claims from earlier tropical storms in Texas. and from those wildfires that have been scorching much of the western United States.
Charges have been filed against a Kansas man in connection with yesterday's train derailment. Police now believe 28-year-old Ricky Alcorn parked a backhoe on the tracks intentionally, near Wichita. The train derailed after hitting the equipment. More than 100 people had to be evacuated from their homes. Alcorn now faces 20 years in prison if convicted.
Coming up in the next half-hour of MONEYLINE: if you invest in technology, we'll tell you why you may want to forget about the bottom line, and instead, look at the top line. And if you believe the economy's bad over here, we'll tell you how bad things are over there, and why what happens around the world now matters greatly to you. And for the past five years, September has begun strong. We'll have a reading on the month ahead with our market roundtable. All of that and more, still ahead on MONEYLINE.
(COMMERCIAL BREAK)
DOBBS: Wall Street finished the day higher, investors latching on to hopeful signs that manufacturing may be finally bottoming out. The Dow picked up 30 points, but still ended the week with a better than 200=point decline.
Advancing issues did edge out decliners by a three-to-two margin on the Big Board. The Nasdaq also ending the day higher by 13 points: still losing more than 100 points on the week. Advancers edging out decliners on the Nasdaq today as a well by a nearly four-to-three margin. And of course, we have a three-day weekend coming up for investors to recharge and refocus, and our correspondents Christine Romans at the New York Exchange and Greg Clarkin at the Nasdaq also get three days of rest before they go charging into the new season on Wall Street.
We begin with Christine Romans -- Christine.
ROMANS: Lou, we're all bullish about that three-day weekend, and traders here as well, because they're hoping that maybe they can turn a page next week and head into maybe a better season for stocks.
Take a look at the most actively traded stocks here at the Big Board today. Except for Liberty Media, all of these stocks were bouncing from pretty sharp losses on the week. Liberty Media up a buck today. Lucent Technologies up 15 cents, but not managing to climb back above $7. GE, the Dow component, up better than 75 cents. AOL-Time Warner, the parent of this network, up a dollar-35. It's been a very rough month, though, for AOL shares, and Pfizer up just a penny here.
But what about September overall? Well, remember, last year, September lost about 500 points in the Dow. The year before that, 1999, September also lost about 500 points. Well, Salomon Smith Barney analyst Tobias Levkovich actually coming out a little bit bullish here today with a note. He actually says a September-October rally is likely. He says yes, September tax-loss sales by mutual funds may be possible in the early part of this season, but he says the cash continues to build and that might ultimately be good for the market. And overall, he says, watching these markets is quite a lot like riding a roller coaster: Even when you're off after you're done, the nausea still continues.
DOBBS: Christine, a weekend to get over all of that, or prepare for it, as you wish.
(LAUGHTER)
Christie, thanks.
Greg Clarkin now takes a look at some of the busiest Nasdaq stocks today -- Greg.
CLARKIN: Well, Lou, you know, it was a fairly slow day in terms of volume. About 1.2 billion shares traded, making it one of the lightest full trading days of the year. But some good individual stock stories. Let's go right to those, and let's start with PrimeSource. This is a printing industry supplier. It's being bought by Fuji Photo Film for $10 a share. You can see the stock ran up sharply, right up almost to that takeout price, closing at 9.78.
Now, we've been telling you about the Excite@home story with Comcast and Cox terminating their agreement to carry those broadband Internet services of Excite. That stock down on the day.
Peoplesoft, meanwhile, rebounding nicely, though. A lot of the software stocks today, after yesterday's sell-off, bouncing nicely, up 2.53 today. And JDS Uniphase posted something of a comeback after those fiber stocks and networkers were hit hard yesterday.
Now, as for what September holds, well, speaking with traders you get a lot of mixed emotions about September. On the one hand, the big players are back. But still, the earnings warnings season really begins in earnest about halfway through the month, and that is not expected to be good news for a lot of those big-name technology companies. A lot of folks wondering who's going to come out and warn.
And then finally, at this point, Christine mentioned that big pile of cash that is sitting on the sidelines. A lot of folks believe that maybe that will lead to some bargain hunting when these players come back. Maybe they'll be looking at the Nasdaq at these 1,800 levels and finding some values that are, you know, irresistible to them. But then there's that other school out there, the pessimists, that believe, you know what, once it cracked through 1,800 the Nasdaq right now stands a good chance of retesting those April lows.
So obviously, the week will unfold next week and we'll get a sense of where things are going for September -- Lou.
DOBBS: Either way, we'll have a terrific market beginning Tuesday. It stays with us no matter what, whether the pessimists or the optimists win out.
Greg, thanks. Have a great weekend.
CLARKIN: Sure, you too.
DOBBS: When sorting through economic and market and corporate numbers, it can be hard to figure out just how well a company is doing on occasion. Wall Street tends to focus on earnings and profitability, the bottom line. But a strong case can be made for taking a closer look at the top line.
Kitty Pilgrim with the report.
(BEGIN VIDEOTAPE)
PILGRIM (voice-over): A deluge of data -- earnings per share, head count reduction, charges and tax write-offs, guidance numbers, whisper numbers, you name it. But a real case can be made for looking at the top line: revenues.
LARRY WACHTEL, PRUDENTIAL SECURITIES: You can manipulate the bottom line. You can't manipulate the top line. You can't manipulate sales. Sales is sales.
Now, you can have accounting gimmicks, you have tax currencies, you have currency plays. You can play around with the bottom line and come up with numbers. But the Street always finds you out.
CHUCK HILL, FIRST CALL THOMPSON FINANCIAL: It's certainly more of a concern when we see the revenue number dropping. I mean, sometimes you can offset it by cutting costs. But you know, most of the time you can't. So, that's why to see the revenue number drop is -- is more ominous than if it was just the earnings.
PILGRIM: In the tech sector, companies whose current estimated revenue will fall some 30 to 40 percent from the same quarter last year -- Sun Microsystems, Cisco, Lucent and Nortel -- stock down 75 percent or more. Companies with 20 to 30 percent revenue decline -- Intel and Compaq -- stock down more than 60 percent, 10 to 20 percent revenue decline -- Hewlett-Packard, Motorola -- stocks down more.
Relatively unscathed in terms of revenue, Dell, IBM, Oracle, and Microsoft, where revenue actually climbed in the last year.
DREW CUPPS, CUPPS CAPITAL: All eyes of investors are on the economy, because if we get an increase of 10 or 15 or 20 percent in revenue, we're going to get a very big snap back in earnings. That's why revenues are important in the big picture.
(END VIDEOTAPE)
PILGRIM: So what is the outlook for revenues? That's the big question. Now, some companies talk about orders going forward, but in this economy, revenues, in the familiar phrasing, have some visibility problems -- Lou.
DOBBS: We'll just keep focusing until we achieve some visibility. Kitty, thanks.
Well, after a week of losses, the retail sector attracting buyers today. The advance led by Circuit City. It jumped more than 8 percent in price today. This week, Circuit City said it would be the first retail store to sell DirecTV's new high-speed Internet service.
And Murphy Oil, one of the Street's biggest losers today, losing more than $5 a share. Murphy Oil warning that profit margins will be squeezed by those lower natural gas prices.
And Novellus Systems dropping more than $2 a share. The chip equipment maker saying orders for the third quarter will be at the low end of Wall Street expectations.
Novellus pressuring the rest of the chip sector, as well, but there were some gains. Lam Research up, but fell nearly a dollar in after-hours trading. Tonight, Lam Research saying it's cutting jobs and taking a charge for the current quarter.
A fight brewing in Tinseltown, one that pits the big studios against the video rental business, and regardless of who wins, the loser could end up being the consumer.
Susan Lisovicz with the story.
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(BEGIN VIDEO CLIP, "HANNIBAL")
ANTHONY HOPKINS, ACTOR: Well, hello, Clarice.
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LISOVICZ (voice-over): "Hannibal," "Shrek," "American Pie 2": three reasons why Hollywood's box office is a $7 billion jackpot. But here's the real blockbuster. VHS and DVD rentals generate more: $9 billion in revenue. Now, the two businesses that share the proceeds are bickering over how to split them.
Rental giant Blockbuster this summer threatened to end its revenue-sharing agreement with the studios. Warner Home Video has warned of retaliatory measure.
SCOTT HETTRICK, "VARIETY": Everybody is kind of, you know, blustering and doing their jockeying for position. You know, Blockbuster has 40 percent of the rental market, and so they've got some clout. And when they want to make a demand, the studios oftentimes have to listen, and that -- that irks them.
LISOVICZ: The catalyst? The growing popularity of DVDs, which are priced lower than videotapes. Blockbuster wants comparable prices on VHS.
Some observers say the war of words is a negotiating stance, seen before in the often tense relationship between the companies that make movies and the retailers that rent them.
BO ANDERSON, VIDEO SOFTWARE DEALERS ASSOCIATION: There is some notion in the studios even today that the middleman somehow siphons off a portion of profits that they could achieve. But what they're ignoring, those that think that, is the tremendous leverage that retail brings.
LISOVICZ: Hollywood continues to work on ways to reach consumers directly from the movie set, as in the recent joint venture that would allow computer users to download rental copies of feature films directly over the Internet.
YAIR LANDAU, SONY PICTURES DIGITAL ENTERTAINMENT: A lot of people watch the movie in the theater and then still go out and buy the DVD and still watch it when it airs on the networks. I think that it is important for us, though, to offer people an honest alternative.
(END VIDEOTAPE)
LISOVICZ: Video on demand could ultimately render video retailers obsolete. Their demise has long been projected, and yet they've become one of Hollywood's most important revenue streams. But with video on demand in its infancy, right now the studios and retailers need each other equally -- Lou.
DOBBS: Susan, thank you.
Well, if you think the United States economy is weak, take a look at the rest of the world. When we come back, we'll take a look at those international economies and find out what it could do for the U.S. economy.
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DOBBS: As our economy struggles, the outlook for international economies continues to deteriorate. Europe is slowing; Japanese unemployment is rising and Latin American economies are struggling under a mountain of debt. Joining me now: Fred Bergsten, the director of the Institute for International Economics. Fred, as we look at the combination of Asia, Europe, the United States, and of course South America, it doesn't look good. How bad is it?
FRED BERGSTEN, DIRECTOR, INSTITUTE FOR INTERNATIONAL ECONOMICS: I think it is very bad. Japan is the second-largest economy in the world. It's facing a real financial crisis. Big banks could fail, there could be real implosion of their financial system that would require them to pull money back from around the world, where they are still big investors. Could have very adverse effect on psychology in world markets.
In South America there is a big IMF effort to rescue Argentina. My own guess is that it probably will not work. The only question is how long it takes until some serious crockery is broken there, too. All this will rebound back on us with our economy soft and our stock market weak already, so it could be a pretty hot fall.
DOBBS: Unlike previous occasions when we have seen this sort of slowdown around the world, our exposure right now in Latin America is relatively limited, is it not?
BERGSTEN: Our exposure in Latin America, other than Mexico, is not great. The risk is contagion. If something got going in Argentina, spilling over to Brazil, into other parts of South America, and then spooking other emerging markets around the world. That, in turn, is a big share of the world economy, close to half now. Dampens world growth further and particularly has these adverse psychological effects on investor markets.
Remember about three years ago, just about this time 1998, Russia defaulted, Brazil devalued, LTCM went into deep trouble. And we had a global liquidity crunch. At that time, however, the U.S. economy was growing strongly. Now it is flat, and that is big difference, and we are therefore much more vulnerable.
DOBBS: And vulnerable is hardly the word to describe the Japanese economy. Now, Fred, the last time you and I talked, you said without question that Japan was your greatest concern. Does it remain so?
BERGSTEN: Yes, and the concern is even greater. The Japanese, despite talk of reform from their relatively new government, have really not done anything. They have not really come to grips with the huge nonperforming loans of the banking system, which probably total close to one trillion dollars. As I said, a couple of big banks could easily fail, there could be a real implosion of their financial system.
They are already in recession. They are already in deflation. As you say, unemployment is skyrocketing. It is the second biggest economy in the world, the linchpin of Asia, which is about one third of the world economy. So the spillovers from there -- financial in the first instance, economic a little more relaxed -- could be very severe.
DOBBS: And with about 10, 15 seconds left here, Fred, what's your outlook for the U.S. economy?
BERGSTEN: Well, despite all of that, I think the U.S. economy is going to pick up as we get toward year end, certainly into 2002. The trade deficit will get worse, but I think the consumer will pull us up. The tax rebates will help, the lower interest rates will help, the lower energy prices will help. So I think we'll struggle back up, but certainly with no help from the rest of the world.
DOBBS: Fred, thank you very much. Fred Bergsten.
Just ahead, our regular Friday roundtable with our panel of experts. After a cruel summer, we'll see if investors can look forward to a better season on Wall Street. Stay with us. (COMMERCIAL BREAK)
DOBBS: Joining us now with their outlook on Wall Street after a summer most investors would rather forget: Fund manager Eugene Profit is kind enough to rejoin us. Peter Viles also back with us. From the New York Exchange, Christine Romans; at the Nasdaq: Greg Clarkin. And Kitty Pilgrim back as well. Kitty, let me begin with you. You are watching what is happening here in terms of both international economies, the markets, and business. What's your outlook for month of September?
PILGRIM: Well, I wish I knew, Lou. But I have to say that the economy, now more than anything, is the focus globally -- the U.S. economy. And this week coming up we have quite a few economic numbers coming up, some of them are key. One is auto sales which has managed to hold up. Construction spending is coming out on Tuesday, wholesale inventories on Friday. And so very much the focus will be on the U.S. economy and how it is performing. And we have a good bit of data coming out next week.
DOBBS: Peter, I think she dodged that. What do you think?
VILES: It strikes me, Lou, we've had a lot of economists on the program the past couple days who do see a recovery. They even say it's third quarter. We have heard about a one, two, three recovery -- one percent growth in the third, two in the fourth and three next year. The market just doesn't seem to be buying it. They want to see it. They want the physical evidence of it.
DOBBS: That visibility issue again.
VILES: Visibility that the companies have complained about. And now investors are complaining they can't see it in the economy.
DOBBS: Christine?
ROMANS: Lots of folks here telling me, Lou, they want to see panic selling. And that sounds like a terrible thing to wish for, but they say that if you could get some really irrational emotion on the downside of the market, then that is when you see a turn. And they are really suspicious of just, you know, how solid the selling was this week. They want to see that -- I guess capitulation is what they are talking about, that we didn't really get back in March. And they want to get it over with, you know?
DOBBS: You know, I would love this talk about capitulation. We've got a market after a 40 percent decline in the year 2000, a Nasdaq that's off 26 percent, a Dow this year-to-date is off 8 percent, and somebody wants a little more pain. You know, I think some of those specialists are -- well, I think they need a weekend off, Christine.
ROMANS: Well, they want a bell to ring to tell them, OK, now it's time to buy, you know.
DOBBS: They want the same thing everybody else wants, they want higher stock prices -- Greg.
CLARKIN: Well, I'll tell you, Lou, you know, one thing these folks are going to be looking at, really focusing on, not just the U.S. economy, but also keep in mind, when a third quarter preannouncements come out, there is a lot of expectations that Europe will be used as an excuse for why business -- or earnings and revenue are not living to expectations, so a lot of the traders are looking for Europe to really be blamed for the third quarter.
Then by the fourth quarter, you know, they're saying the comparisons get pretty easy over the fourth quarter last year, so that's when they expect maybe they will start to see some kind of a turn in some of these stocks.
DOBBS: Well, Eugene Profit is sitting here with me, Greg, so now we are going to find out exactly what's going to happen. Eugene, you just heard Christine talk about capitulation, talking about the one, two, three scenario, which I personally would sign up for. What do you think is going to happen here?
PROFIT: Well I think next week a lot of the indicators on a consumer, the consumer is weaker. But the comparisons for the quarter are easier, and I think that we are going to start to see positive news from some companies. I think that it started off when the economy began showing improvement at the manufacturing sector, OK? And where it's going to end up is that, because you have had Fed decrease some interest rates, you have fiscal stimulus.
It's going to begin impact companies positively. The revenue in some companies is beginning to improve, and by the fourth quarter you will begin to see this. And the market will be ready for good news.
DOBBS: Well, as Kitty Pilgrim reported, I mean, those revenue lines that we saw just -- I mean, those things are dropping like unbelievably. You actually see we are going to see -- we're going to see a rise there?
PROFIT: Yeah, I think so. I think even a company like EMC, which has had very horrible performance this year, the revenue increase is still 38 percent over a 12-month period, so even though it is decreased compared to where it has been over the last five years, it still is very attractive in the slow growth economy, like we are engaging in right now.
DOBBS: So you see September as an up month?
PROFIT: I think it will be. I think it will start off slowly -- with one caveat, that there is a big preannouncement from Microsoft, or someone like that, all bets are off. We're going to go lower.
DOBBS: Eugene, I was so impressed I thought you were going to go out there all the way without any modification. Thank you, everybody, appreciate it. Have great weekends. Thank you. Thanks very much.
Well, coming up next here, horse racing and stocks. Why one viewer says the two aren't altogether different. That and "Ahead of the Curve." Stay with us.
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DOBBS: Well, this is normally where we take a look ahead and tell you what to expect in the markets and the economy. Well, it's Labor Day weekend, so we have decided to dispense with that, just enjoy your weekend.
Let's take a look at some of your thoughts. Lawrence Coleman has written in to say investors should take responsibility for their losses and stop pointing the finger at everyone else. He writes: "No one ever said you have the right to double-digit gains or you are guaranteed not to lose money on stocks." And Lawrence knows what it's like. He says his mutual fund is down 50 percent.
Kent from Kentucky says we should look at the market like the sport of kings -- referring, of course, to horse racing. He writes: "The kings control the markets and the tote boards. If you did the proper research on the company you bought or the horse you bet, then keep buying and bet more when value presents itself. Be a king!" Kent, it's good to be the king, but we wish we had better odds right now.
And Uditha Senaratne in Deep River, Ontario writes: "Lou, I have what I humbly believe is a fitting description of Chairman Greenspan -- he is a bull! A bull in a china shop, that is."
And finally Richard Hoon says: "Smile more, Lou." Well, sure, if you think that will help, be glad to.
Please send us your comments, always welcome at moneyline@cnn.com.
That is MONEYLINE for this Friday evening. We thank you for being with us. I'm Lou Dobbs. Have a very pleasant Labor Day weekend. Good night from New York, "FIRST EVENING NEWS" coming up next with Bill Hemmer.
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