Return to Transcripts main page
Lou Dobbs Moneyline
Dow Advances 35.78 to 10,033.27; Nasdaq Declines 11.77 to 1,759.01; Productivity Rises 2.1 Percent in Second Quarter
Aired September 05, 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. Topping the news tonight, a wild ride on Wall Street for investors. Stocks nose-diving on profit worries, then recovering on positive profit news from Microsoft. Traders seeing little positive about yesterday's merger between Hewlett-Packard and Compaq. Both stocks falling again today on concerns that two wrongs may not make a right. And layoffs fall in the month of August, but so far this year more than a million workers have lost their jobs. That's nearly double the total for all of last year.
Volatility on Wall Street today: Stocks stumbling as techs tumble, but then make something of a comeback because of Microsoft.
But first, a look at other stories we're covering tonight. We begin with Kitty Pilgrim -- Kitty.
KITTY PILGRIM, CNN CORRESPONDENT: Lou, they have traded commodities this way for more than 100 years. It's the American way. And now they face a challenge from the British.
LOUISE SCHIAVONE, CNN CORRESPONDENT: There's a tangle in Washington over the economic outlook, the administration, Congress, and even some new ideas.
FRED KATAYAMA, CNN CORRESPONDENT: With President Vicente Fox in Washington, the spotlight is on immigration. We'll turn the spotlight on day laborers being used in this country -- Lou.
DOBBS: Thank you, Fred.
It was an ugly day on Wall Street, but it could have been far worse: the Dow dropping more than 100 points earlier in the session before recovering. The Nasdaq dropping nearly 60 points at its worst. Worries about profits sending the indexes plunging, but reassuring words from Microsoft bringing everything back.
We begin our market coverage from Christine Romans at the New York Exchange, Greg Clarkin at the Nasdaq marketsite -- Christine.
CHRISTINE ROMANS, CNN CORRESPONDENT: Lou, clearly, volume and volatility starting to come back into this market, but not necessarily direction, at least for the broader market. The Dow, however, managing to put three in a row: three up days in a row, up about 35 points on the day: 10,033 is the level.
Let's take a look at the winners that helped propel the Dow, cautiously I guess, above the break-even line. GE doing well here. Merrill with a note saying that change creates risk: It's the last week of Jack Welch's reign, and GE looks ready, and CE -- the new CEO may have a new game plan.
Coke doing well with food and beverages. Merck up with the drugs today. And Microsoft, trades with the Nasdaq, but it's a Dow component. The strength in Microsoft late helped the average pull positive.
Also, consumer products doing well here. Investors buying household names. Markets have been choppy, these have been predictable winners lately. Avon, close to a 52-week high. Colgate, expecting double-digit earnings growth. Clorox raising -- raising earnings guidance yesterday, seeing more buying today. And Procter & Gamble says it's comfortable with current Street estimates.
Lou, volume coming back in here, but traders say it still feels very nervous, trying to make sense of things.
DOBBS: OK, Christine.
The Nasdaq also down again today. In fact, the Nasdaq down six of the past seven trading sessions. Greg Clarkin surveys today's damage -- Greg.
GREG CLARKIN, CNN CORRESPONDENT: Well, Lou, especially hard-hit today was anything related to the telecommunications field, the networking stocks as Wall Street downgrades, profit warnings and earnings jitters really still plague those stocks.
And sellers definitely had the upper hand today. We saw the Nasdaq down about 55 points by midafternoon or so and then it started to rebound. And in the midst of that rebound, word out of Microsoft that they were on-track to meet their guidance for the quarter, and that helped boost the entire composite basically.
You can see Microsoft on the day up $1.64.
On the down side, though, Cisco Systems closes almost 90 cents lower. Ciena was lower. And the Internet stocks also saw significant weakness today as witnessed by Amazon and Yahoo!.
And one comment on that big wave of selling that we saw about midafternoon, now traders were saying that there was a rumor sweeping through the trading desk that a large hedge fund may have been liquidating their assets. That would explain the big pop we saw in volume. Volume today at 1.9 billion shares. That's the best it's been on the Nasdaq since mid-July, and as one trader put it, it had a liquidation feel to it that was kind of wholesale selling. So, that could be something that's borne out in the next couple of days. But either way, the Nasdaq coming back today with just a minor loss after being down sharply -- Lou.
DOBBS: And Microsoft playing a big part in that, Greg. But what is the big news here about Microsoft? It's been the top performer amongst the technology stocks. What happened today?
CLARKIN: Exactly, Lou, and to tell you the truth, though, in a market that's starved for any piece of good news, this looked like a feast basically. You have the big-name technology stock coming out and saying that they're on track to meet their guidance for the quarter. That was good enough to kind of propel what was already a rebound under way.
DOBBS: OK, Greg, thanks.
Another bad day for Hewlett-Packard and Compaq shares. Investors simply don't like this $25 billion deal, at least yet. Shares of Hewlett-Packard dropping $5 over the past two days. Compaq dropping more than 16 percent since this deal was announced. Usually, the target company rises dramatically. The inverse has occurred here.
Bruce Francis with more the story.
(BEGIN VIDEOTAPE)
BRUCE FRANCIS, CNN CORRESPONDENT (voice-over): The Carly and Mike show on the road in Boston, trying to sell the deal at SG Cowen's tech conference.
CARLY FIORINA, CHAIRMAN & CEO, HEWLETT-PACKARD: Remember the movie "Ghostbusters"? Who you going to call? Now, just think about that. Who are you going to call if you're Intel? Who are you going to call if you're Microsoft? Who are you going to call if you're SAP?
FRANCIS: Who are you going to call if you're an investor? Well, so far, you've been calling your broker and screaming "sell" into the receiver.
After two days of intense selling, Hewlett-Packard stock is off 22 percent and Compaq is down more than 15 percent.
MARK DONAHOE, U.S. BANCORP PIPER JAFFRAY: At this point, if you look at the stock, it's like a grabbing a knife, and that hasn't worked in this marketplace. So my sense is that it has not found a bottom. It may level off here.
FRANCIS: Competitors like Sun love the deal. At the same Cowen conference in Boston, Sun's CFO, Mike Lehman, said, "It's a gold mine for us." That's because while big deals between competitors often cut costs, they also tend to create some confusion and frustration for customers. That's one reason behind two new downgrades today for Hewlett-Packard.
Analyst Mark Specker worries that the going will get toughest for the new HP just when the times get good again for tech. MARK SPECKER, SOUNDVIEW FINANCIAL: I worry that with all the cuts and with trying to put the sales forces together during that time, the Hewlett-Compaq combined entity won't get the sales traction there that some of its competitors might.
(END VIDEOTAPE)
FRANCIS: The combined Hewlett-Packard and Compaq looks like it's trying to be more like IBM. But Soundview's Specker says that if a company looks like IBM and you want to buy it, buy Big Blue and avoid integration heartache at the new HP -- Lou.
DOBBS: And what happened to IBM's stock today?
FRANCIS: IBM was down a little bit today, but IBM has been -- people looking more favorably on it. If you like that model, buy Big Blue, they say.
DOBBS: Well, they may say it, but people are voting here, specifically in the case of Hewlett-Packard and Compaq and IBM again today, they're pushing these stocks down. There's just not any good news in this technology sector.
FRANCIS: Yeah, and integration risk, Lou, it's huge here. This is a massive, massive job to undertake, and I think Specker's point is very key. If tech spending comes back and you're right in the middle of the big stuff with this merger, you're in trouble.
DOBBS: I think they've got all the trouble they can handle in this sector right now.
FRANCIS: I think you've got to watch it.
DOBBS: Bruce, thanks.
Well, while word of that deal between Hewlett-Packard and Compaq took many on Wall Street and around the country by surprise, one analyst had predicted that merger nearly nine months ago, Andrew Neff of Bear Stearns. He also told investors to stay away from the stocks. Not bad, since both stocks, as we've just reported to you, have plunged over the past two days.
And he joins me now. Good to have you with us.
ANDREW NEFF, BEAR STEARNS: Thanks very much, Lou.
DOBBS: Can you hear me?
NEFF: I can hear you. Can you hear me?
DOBBS: I think he can hear me, but I can't hear him. So we have a little bit of a problem here. We're going to return to Mr. Neff in just a moment. Meanwhile, we're going to take this opportunity for a commercial break and be right back.
Bear with us. Thanks. (COMMERCIAL BREAK)
DOBBS: As I was saying, Andrew Neff of Bear Stearns basically called this merger, this acquisition of Compaq by Hewlett-Packard back in January and joins us now. And it's good to have you with us.
Let me begin by asking you, at this point, do you still believe in the idea of this merger being a good thing?
NEFF: Well, I just want to be clear, what we said was we thought the merger was likely. We didn't say it was a good idea. We just thought that...
DOBBS: Right.
NEFF: ... Compaq was the -- needed to do something, and HP was the really only logical partner. So we had -- we were sort of skeptical at the time and we still feel the same way.
DOBBS: And so does the market, because these stocks are dropping in the most unexpected fashion. At least, I think most people are surprised by the fact that a target like Compaq in a deal like this with about a 19 percent premium has lost better than 15 percent, almost 16 percent of its price in two days. Are you surprised?
NEFF: I guess, you know, HP going down is not a surprise. Compaq is now going to sell at a fraction of that based on the exchange ratios. That's not necessarily a surprise.
I think the issue is that you had -- I mean, both companies have issues. The combination doesn't solve the issues that they have.
DOBBS: Why not?
NEFF: What's that?
DOBBS: Why not?
NEFF: Well, the issue for Hewlett was, Hewlett's larger issue was really what we see as underinvesting in technology in the mid- '90s, and also they have too many priorities right now. They need to focus, not do more things. And Compaq's issue really was that they were in a -- they didn't have a history of executing very well since they've acquired Digital, and they need to focus on that. And they were not, say, a leader in their non-PC business, and in the PC business they were not economically a leader either.
DOBBS: You don't think this deal gets done?
NEFF: I think at this point, you know, these deals tend to get done, so it's still -- you know, other deals like this have happened. So I think there's still a good probability it gets done. But there's still a lot of time between now and then.
DOBBS: And you would advise investors to stay away from both stocks? NEFF: Our reaction was this was -- when we did this piece back in January, we had these different scenarios. We said this was the best possible scenario for Dell, and we said that Dell is a better place for investors to be.
DOBBS: And in the technology sector itself, we were watching volatility here that's being restored to the market after the -- the -- well, the demise of what was to have been a summer rally. Volatility is returning to the market. Valuations are still high by historical levels in terms of P/E ratios here that are just still not adjusted. What happens over the next few months in the technology sector in your judgment?
NEFF: Well, I think that you have a -- you have a lack of visibility. But the good news on the other side is that a year ago you had great visibility and you had high valuations. A year later, you've got lousy visibility. There are some signs -- I mean, we've seen it from Sun, EMC, others that things are stabilizing in the U.S. We think the U.S. is a leading indicator of -- excuse me -- of Europe. So we think that, you know, you focus on leaders.
I think in the big picture the downturn is -- the distance between leaders and laggards expands in a downturn.
DOBBS: Andrew Neff, good to have you with us. Thanks for being here.
NEFF: Thank you.
DOBBS: Well, there's been a lot of talk over recent weeks about whether the productivity miracle of the late 1990s was just a mirage. But the latest economic report confirms that productivity remains strong. Productivity, the engine of inflation-free growth, growing at an annual rate of 2.1 percent in the second quarter. That revised lower from the initial reading of 2 1/2 percent, but still remains close to the levels that we saw during the late '90s boom.
Treasury Secretary Paul O'Neill had some optimistic words today about the economy before leaving on his trip to Asia. But he warned that the economy couldn't go it alone, that Japan needs to do its part to help power the global economy.
Louise Schiavone has more.
(BEGIN VIDEOTAPE)
SCHIAVONE (voice-over): The Bush administration appears convinced the economy is coming back.
PAUL O'NEILL, U.S. SECRETARY OF THE TREASURY: We seem to be stabilized, we seem to be improving, and I guess I would say 80 percent of the economics profession would tell you today that the prospects for next year, a growth rate between 2 1/2 and 3 1/2 percent real growth.
SCHIAVONE: But right now, economic weakness means fewer federal dollars to spend.
DAN CRIPPEN, CONGRESSIONAL BUDGET OFFICE: We are -- that is, the economics profession -- notoriously bad about calling turning points in the economy, and we missed this one as much as anyone else.
SCHIAVONE: As the economy has weakened, federal revenues have declined and billions of anticipated surplus dollars have evaporated.
REP. RICHARD GEPHARDT (D-MO), MINORITY LEADER: We ought to go back to the whole budget. We have a new budget situation, we have new numbers, and we need to be able to change the budget we're operating under.
SCHIAVONE: Democrats warn that to meet spending promises, the president may dip into the Social Security surplus by September 30th, the end of the 2001 fiscal year. The Congressional Budget Office agrees.
But the president's budget director says that as long as Congress stays within the Bush budget, Social Security will not be tapped.
MITCH DANIELS, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: This morning, I would say the rebates are only halfway out the door. The latest rate cuts have only recently occurred.
My personal view is that we should take a little time and see how the economy is responding.
SCHIAVONE: Republicans, meanwhile, want a quick cut in capital gains taxes.
(END VIDEOTAPE)
SCHIAVONE: The GOP has the jitters about facing next year's elections without a solid economic rebound. They're convinced that easing up on capital gains would spur investment and give the economy a kick not yet evident from the president's tax rebate -- Lou.
DOBBS: Louise, thank you.
The president receiving his first official state visitor today, Mexican President Vicente Fox. The two leaders have met before and they are old friends. But that doesn't mean they agree on issues such as immigration.
Senior White House correspondent John King at the White House with the story -- John.
JOHN KING, CNN CORRESPONDENT: Well, hello to you Lou. In just a little more than an hour or so, the state dinner, the first state dinner of the Bush presidency, will begin here at the White House, and President Bush will toast his friend, President Vicente Fox of Mexico.
But today, a reminder, as you noted, that getting along doesn't always mean getting things done. The two presidents had hoped to sign a sweeping immigration agreement at this mini-summit. Instead, opposition in the U.S. Congress keeping President Bush from being able to reach an agreement with his Mexican counterpart. And Mr. Fox caught the White House a bit off-guard today. He said he hoped that agreement could be reached by the end of the year.
White House officials say they will shoot for that, but privately many believe that could prove to be wishful thinking. There is a great sense of pessimism in the Congress that that issue could be dealt with this year. Next year, of course, is an election year, so they will continue working on that.
And another issue these two leaders see eye to eye on, free trade. Both holding out the North American Free Trade Agreement as a shining example of how to keep economies going in these tough times. They will take that message on the road tomorrow. President Fox first will address a joint session of Congress, then both presidents travel to Toledo, Ohio to promote free trade as the answer to struggling economies. Quite a deal -- debate about that as well -- Lou.
DOBBS: John, thanks. John King at the White House.
The appeal of employment and prosperity in this country is causing populations to dwindle in towns south of the border. Despite all of that, some ghost towns are becoming boom towns.
Harris Whitbeck with the story.
(BEGIN VIDEOTAPE)
HARRIS WHITBECK, CNN CORRESPONDENT (voice-over): If you're a migrant worker on your home to Susticacan, this is the first thing you see as you drive into town. "Welcome back," the billboard says, "to the land where you were born."
But as you approach the town center, you won't find a large welcoming committee. More than three-quarters of the population has left this small hamlet in the state of Zacatecas to work in the United States.
"Most of the people from here are over there," says 77-year-old Francisco Diaz. All the young men have left. Those left behind are senior citizens, women and small children.
(on camera): But what looks and feels like a ghost town is actually quite prosperous. Migration patterns that have endured for decades and that have intensified in the last few years account for the lack of people and for the apparent wealth.
Susticacan is filled with large two-story homes, and there is a construction boom of sorts. New, fancy houses are going up all the time: built by the dollar sent back by migrants working in the United States.
So who lives in them? For 10 months out of the year, nobody.
Angelica Castro recently remodeled a house she inherited from her great grandmother. She uses it once a year during the town fiesta. The rest of the time she lives as an illegal migrant in Los Angeles, California so her three children can get an American education.
ANGELICA CASTRO, MIGRANT (through translator): The thing I like about it over there is that they learn more things that will be useful to them when they grow up.
WHITBECK: Every year about 28,000 people leave the state of Zacatecas to head to the United States. Ghost towns like Susticacan are everywhere: towns that show prosperity but don't have the people to enjoy it.
Harris Whitbeck, CNN, Susticacan, Mexico.
(END VIDEOTAPE)
DOBBS: Today, U.S. labor leaders appealed to Congress to legalize the status of millions of illegal immigrants. They say it will protect migrant workers from discrimination and poor working conditions. Critics say such a plan would encourage illegal immigration.
Fred Katayama reports on the business of employing day laborers in this country.
(BEGIN VIDEOTAPE)
KATAYAMA (voice-over): It's becoming a common sight in many towns and cities across the country: lines of day laborers, most of them immigrants. They do the back-breaking manual labor many Americans do not want to. But residents often consider them an eyesore and a threat to security and property values.
Here in the hamlet of Farmingville, just outside New York City, the welcome mat does not extend to Mexican day laborers, some of whom gather next to this 7-Eleven. Miguel Hernandez and his fellow laborers are constantly monitored by some residents who demand they leave the neighborhood.
Miguel and other day laborers we interviewed talked under the condition that we not disclose their legal status.
"Many times men pass by," he says, "and boys pass by in cars. They'll throw bottles. Sometimes they'll wave air pistols, and sometimes they'll insult us."
(on camera): Some economists say the United States is dependent on immigrant labor, whether they're welcome or not. A study by UCLA found that undocumented immigrants contribute $300 billion annually to the U.S. economy. That's roughly 3 percent of gross domestic product.
Mexican immigrants contribute a little more than half of that.
(voice-over): One local lawmaker sees day laborers as a hidden resource, especially given the low jobless rate.
PAUL TONNA, SUFFOLK COUNTY LEGISLATURE: You know, how do we get the labor that we need if it isn't for the fact that a large influx of people come to this region who are willing to work hard. They are an incredible resource and make a huge contribution to our local economy.
KATAYAMA: Hard numbers on the day labor population do not exist, but it's estimated at 2 million. A significant number are illegal. The growing immigrant population has become an issue in communities across the nation like Glen Cove, Long Island.
As in nearby Farmingville, immigrant day laborers -- in this case overwhelmingly Salvadoran -- began lining up about six years ago. Residents objected.
PAT BLANCO, EXECUTIVE DIRECTOR, LA FUERZA UNIDA: There was some public outcries, there were some racist incidents. There was some belligerence to it.
KATAYAMA: What resolved the tension, immigrant backers here say, was political leadership. Aided by the local Catholic church, the Glen Cove mayor set up a hiring center where contractors and day laborers can hook up.
JOHN BINGHAM, IMMIGRANT SERVICES DIRECTOR, CATHOLIC CHARITIES: So far, the community centers that were set up for that purpose have succeeded brilliantly in moving the crowds away from places that couldn't accommodate them.
KATAYAMA: Hiring centers have increasingly become a popular solution. Nearly 40 of them serve day laborers nationwide.
Manuel Figueroa visited the Glen Cove center this week, hoping to find some construction work. He earns about $100 on a good day.
"We have protection," he says, "from the weather, the sun and the rain."
Back in Farmingville, local lawmakers shot down a proposal to build a hiring center. So this winter, Manuel will be back, braving the elements and the abuse.
Fred Katayama, CNN Financial News, Farmingville, New York.
(END VIDEOTAPE)
DOBBS: Coming up next, what is the summer of the shark doing to tourism at the beaches? We'll tell you what one Southern governor is doing about it. Then, the Concorde preparing for takeoff after clearing major hurdles. We'll tell you when supersonic travel will return. And Boeing settling into its new headquarters, but will the Windy City help it win a key contract? And will it help its stock price move higher?
ANNOUNCER: After the break, Lou is joined by Boeing chairman and CEO, Phil Condit.
(COMMERCIAL BREAK)
DOBBS: Virginia is forming a shark attack task force. Governor Jim Gilmore wants answers to what caused two recent fatal attacks on Virginia beaches. He wants to know if they were prompted by changes in the environment. A 10-year-old boy was killed Saturday near Virginia Beach. In another attack Monday, a man was killed and his girlfriend critically injured. Governor Gilmore wants to study the impact that this may have on tourism as well.
Tourism in Glacier National Park so far unaffected by a major fire there. Lodges, we're told, are still full. Attractions remain busy. That despite a wildfire that has scorched now 64,000 acres in the area. Firefighters winning a little help from Mother Nature today. Rain began falling on the northwestern part of Montana.
And it looks like the Concorde will be busy by Christmas. Britain and France say those aircraft will take to the air next month. The entire fleet has been modified. All the planes will now have reinforced fuel tanks and stronger tires. The supersonic transports were grounded after a crash last August. An Air France Concorde went down outside Paris, killing 113 people.
Well, Boeing officially opened its new headquarters today in Chicago, months after announcing its decision to pull out of Seattle. It is a crucial time for the aircraft maker as it vies for the Pentagon's contract to develop its joint strike fighter jet. Boeing and Lockheed Martin both hoping to land that deal, worth about $200 billion. That will focus any competitor's attention.
The Pentagon has decided to select just one contractor in order to keep costs down. That's a surprise to many within the defense industry. The decision is expected next month.
Joining me now from Chicago, Boeing's chairman and chief executive officer, Phil Condit. Phil, good to have you with us.
PHIL CONDIT, CHAIRMAN & CEO, BOEING: thanks, Lou. Good to be here.
DOBBS: How does it feel to be a Chicagoan?
CONDIT: Oh, right now it's really great. We've had a great day. I got a chance to talk to a lot of the employees here, and we've just had a tremendous time.
DOBBS: How many employees do you have and now, and how many will you have in the course of the next few months at headquarters?
CONDIT: We've got probably 200 today. We'll be up over 400 by the end of the year.
DOBBS: You have consistently surprised your critics over the course of particularly the last year with both performance in terms of earnings and your stock price. What do you see as the prospects for Boeing in the months ahead?
CONDIT: I -- I am really excited by what I see. We've got a fundamental earnings engine that is running beautifully. We've got growth in a number of our segments, and we've got brand-new business coming online. So I couldn't be happier than I am right now. DOBBS: Now, your business, everyone thinks of you as, first of all -- I shouldn't say everyone -- but most people think of you emphatically as simply an aircraft maker. You describe the company quite differently, focusing instead on space and communications and your defense business. Your defense business, obviously key here will be that joint strike fighter. How does that look to you?
CONDIT: It is going to be a tough competition. Your lead-in was right on. This is a big deal. I think the challenge for us is to put the best proposal on the table. Then the Pentagon's going to make their decision.
DOBBS: And at this point, space and communications, which delivered -- not as robustly as certainly your other divisions, but still in the last quarter doing very well -- how does that look?
CONDIT: It's growing superbly. We made a big investment. Delta IV launch vehicle. That pulled down operating profits, but they're coming out of that development now. Strong growth, great growth, and they're going to be coming up with good margins. So, that part is looking very good.
DOBBS: And which of your newest businesses look most promising to you at this point?
CONDIT: Near term it's Boeing Capital Corp. That leasing business is growing very strong, both capital equipment and airplanes. It's, I think, probably the nearest-term generator of real bottom-line results.
DOBBS: And Phil, I want to turn, if I may, because you sit on the board of Hewlett-Packard, the deal announced this week, Hewlett- Packard to acquire Compaq for $25 billion. The stock -- the stock market suggests investors don't like the deal. How do you as a board member react?
CONDIT: I think, first of all, this is mostly in my view a risk reaction. It is, gosh, are they going to be able to put it together? What about antitrust? All of the issues. I'm convinced that the long-term view is a really strong one, that it makes the company a great player in computing, a great player in imaging, printers, et cetera, a great player in services. And I think that breadth is going to be extremely good for Hewlett-Packard.
DOBBS: OK, Phil, thanks. Good to talk with you as always. Phil Condit.
CONDIT: Thanks, Lou.
DOBBS: See you in a little while.
Coming up in the next half hour here, there were a lot fewer layoffs in August. But don't pop the champagne corks just yet. We'll tell you why.
Then it's like the Revolutionary War all over again, only this time the battle is over oil trading. We'll take a look at that conflict.
And forget irrational exuberance. Our next guest says traders are suffering from irrational panic, and he says, believe it or not. that's a good thing.
(COMMERCIAL BREAK)
DOBBS: The Dow managed a late session recovery, thanks in part to Microsoft. That after Microsoft reaffirmed its financial guidance. But the Nasdaq finished down on the session for the second day in a row and for six of the past seven sessions. Earlier, the Dow slipped by more than 100 points, pulled lower by a second day of selling in Hewlett-Packard and weakness in J.P. Morgan and IBM.
But the Dow closed back above 10,000. And on the big board, decliners still beat advancers 3 to 2. Heavy losses in the telecom sector pressuring the Nasdaq today, kicked off by a Merrill Lynch downgrade. The index closed down nearly 12 points.
Declining issues beating out advancers by a large margin of almost 2 to 1. For a closer look at the market today, let's go to our correspondents at the Nasdaq and the big Board. Christine Romans at the New York Exchange. Greg Clarkin at the Nasdaq.
Christine, let's begin with you.
ROMANS: Well, Lou, with so many twists and turns in the market today, a lot of folks were even surprised the Dow closed higher. And they point out that the S&P closed lower. But let's take a look at the most actively traded stocks here at the big board today.
For a second day in row, Compaq and Hewlett-Packard topping that list. Both of them hitting the lowest level since 1996. A cool reception for their mega merger. Look at Hewlett-Packard, down another 66 cents here today. One trader saying, on reflection, it looks like a deal born out of desperation, not inspiration. That's how Wall Street was reacting.
Lucent also active here today, down about 27 cents. All telecom gear stocks falling after that bearish Merrill report, predicting a slower rebound in handset sales in 2002. Nokia, Tyco International also active.
As for Nortel and AOL Time Warner, the parent of this network, as was also Texas Instruments, down more than a buck. It slipped on that gloomy forecast from its major customer, Ericsson yesterday, an overall tech sell-off there.
Also Motorola active here today. A bearish Merrill note, that telecom note we talked about, including a downgrade at Motorola in citing protracted telecom weakness. Citigroup also very active here today. And volume, Lou, the best we've seen since July 12. Some folks say that hey, that shows there's a turn coming in the market. Others say it's just money managers coming back from the beach.
DOBBS: Thank you, Christine. The Nasdaq finishing down, as I said, for the sixth time in the past seven sessions.
Greg Clarkin at the Nasdaq marketsite. Greg?
CLARKIN: Yes, Lou, you know, the news flow really has been incredibly negative over the last couple of days in terms of technology stocks. Just today, we have the CEO Cisco Systems, John Chambers, speaking in Tokyo, saying that he believes that many as many as half of the 100 biggest companies on the Nasdaq may not be around five years from now. Now you can see Cisco Systems weaker all day.
But really, we saw pressure on that stock, due to a number of other factors as well, some downgrades in the industry, as well as just jitters over earnings. That stock finishing lower.
Sun Microsystems was also one of the bigger percentage losers of the big name tech stocks today, down 32 cents at $10.63. Other actively traded issues included a lot of the shares of networkers. You saw JDS Uniphase losing 18 cents, to close at $6.48. And then, anything related to the wireless business, weak today, witnessed by Nextel. It was down $1.07 today at $10.18.
So if you back here, take a look at the last six days of trading, last Tuesday, closed at 1864. You run that down to today's closing level of 1759. And you are looking at an almost 6 percent loss for the Nasdaq, just over the last six trading days. And Lou, we are heading into what is known as the confessional season, where those preannouncements are expected to come out and hit the marketplace. So at this point, traders are kind of strapping themselves in.
Lou?
DOBBS: And that with the Nasdaq within hailing distance of the low achieved last spring. CLARKIN: Exactly, Lou. Came within less than 100 points today of getting down to that low. At one point, just at 1715 today.
DOBBS: All right Greg, thanks. Greg Clarkin. With a look at what's going on in after hours trading, Allan Chernoff from the Instinet trading desk.
Allan?
ALLAN CHERNOFF, CNN CORRESPONDENT: Thank you, Lou.
First of all, let's talk about Medtronic. After the bell, the company said that it will be offering 1.5 billion of convertible bonds. And that sent the stock lower because, of course, those convertible bonds could be converted to common stock, which could dilute earnings for current shareholders. The stock trading down on the news, down $1.95.
Let's move on to Manugistics, which really was the disaster after the bell, coming off with an earnings warning, saying that it will have loss for the second quarter of between 14 and 16 cents share. The anticipation on the Street had been for a profit of 3 cents a share.
And finally, Oracle closing lower actually after the bell, down by 5 cents a share. Very volatile session for Oracle. Traded in a range during the regular session of 92 cents. A very volatile for Oracle.
Lou, back to you.
DOBBS: In after hours, Allan, is there continued pressure on Hewlett-Packard and Compaq?
CHERNOFF: Actually, there actually is no trading that we have on Hewlett-Packard or Compaq here at Instinet.
DOBBS: Apparently a few people got that out of their system today?
CHERNOFF: Had enough of it, I guess.
DOBBS: OK, Allan Chernoff, thanks.
Lack of experience could be driving these markets lower, according to Ned Riley of State Street Global Investors, who says the younger people on Wall Street haven't seen a downturn like this, and as a result, anxiety is taking over their decision-making.
And Ned says there are a number of goods things going on in these markets right now. And he's here to tell us and those young traders what they should be paying attention to.
Ned, good to have you with us.
NED RILEY, STATE STREET GLOBAL ADVISORS: Good evening, Lou.
DOBBS: Now what about those young people who just don't know what they're doing?
RILEY: Well, I can't say they don't know what they're doing totally, but all I can say is they have not really experienced a period like this. As they never experienced that irrational exuberance that our friend Alan talked about. Neither have they experienced what I call the irrational Depression.
And I think we're in the middle stages, if not the end stages, of the fact that Wall Street still wants to mark down companies that've dropped already 75 and 80 percent, because they're still looking at a quarter by quarter analysis of what's going on.
DOBBS: Right.
RILEY: I think they're missing the forest for the trees on this one. And that when we see the turnaround, and I think there will be a turnaround in this tech area, I clearly think the earnings are going to surprise in the upside and investors are going to be looking at stocks that are substantially higher than they are right now. DOBBS: Well, let's talk about that forest that you see. When will this come and when will this turnaround move us all to higher ground?
RILEY: Well, I think the turnaround is going to be slow in coming, because there's going to be a lot of skepticism out there. But I think one thing that's going to be important about this one, Lou, is that the earnings of a lot of these companies will start probably to stabilize before we see a tremendous surge in demand. And I think that may take place in the first half of the next year, probably even the first quarter
So as the market will anticipate some kind of stabilization in earnings, I think the second kicker will really come from a better demand environment.
I'm not forecasting the kind of demand that we saw in the '90s, simply because I don't think we've got the capacity out there to do that kind of growth. But I do think if these companies can grow at least twice as fast in the Standard & Poor's 500 on a secular basis, people will afford at a premium multiple over a long period of time.
People are kind of measuring against the yardsticks of the '90s. And they don't exist any more.
DOBBS: We're a long way right now from technology having double the growth rate of S&P 500. When do you expect that to happen? You're talking something beyond a recovery now.
RILEY: Yes, I am talking beyond a recovery. And that's a good point, Lou. And I think From that perspective, when you start to look at what the companies are doing today, it's an ugly period out there. Clearly, the layoffs are not helping. And as we know, most of these companies are at zero earnings or 1 or 2 cents a share that they're going to earn in this quarter and probably next.
The bottom line is that these companies are preparing for an environment that shows virtually no growth. I think many of these companies have already talked about a very negligible improvement in the demand side of the curve, whether it's been Ericsson in the wireless business, or whether it's been Intel, or whether it's been Cisco, or whether it's been some of the others. They're not talking about a spectacular growth in 2002. And the interesting thing, too, Lou about this. I just want to make this one other point is the analysts on the street still are trying to grasp at straws of anything the managements are going to throw out. And a lot of these managements, too have not been through a very severe recession for their product lines.
DOBBS: Right. Well, there's that and also what Wall Street has gone through here just in the past two months, when we thought it was behind us presumably. The last time you were here, you recommended these stocks, if we could see those. Cisco Systems, Microsoft, Dell, Citigroup, Merck, Pfizer. I think you have to -- really want to agree that's a Tiffany group. But there's the performance.
RILEY: Yes.
DOBBS: And it has been -- well, the Nasdaq in that period of time fell 15 percent. The Dow just about 4 percent. A little over 6 percent on the S&P 500. A tough period. Are you going to stay with those stocks?
RILEY: Definitely, Lou. And matter of fact, one of the themes that that we try to stick with is that we never try to pick the actual bottom in markets, because of all the years I've been in the business, I haven't found anybody that's consistently done it well over periods of time.
It also brings in the concept of averaging. And the averaging down prospects for these companies will reduce the cost. I think when we come out of the shoot, it's going be the strongest that survive, the strongest that clearly will dominate markets. And I think this Hewlett-Packard/Compaq merger has actually highlighted the fact that Dell comes out stronger, rather than weaker.
DOBBS: OK. Ned Riley, good to have you with us.
RILEY: My pleasure, Lou. Thank you.
DOBBS: Coming up next here. You may have a hard time taking cash out of your local ATM. We'll be telling about that. And the New York Mercantile Exchange clinging to a bit of history in hopes of attracting more clients. We'll have that story for you, when MONEYLINE continues.
(COMMERCIAL BREAK)
DOBBS: Many sectors we report on here, like oil and gas, for example, are traded on a system known as "open cry" buying and selling by shouting orders from a trading pit. Even though computerization has swept the industry, the New York Mercantile Exchange or NYMEX, as it's sometimes called, today began trading a brand new oil contract, the old fashioned way.
NYMEX says the move will help it fight competition from other exchanges by doing what it does best, keeping the faith with open cry.
Kitty Pilgrim with the story.
(BEGIN VIDEOTAPE)
[bell ringing]
PILGRIM (voice-over): There's always a lot of screaming and yelling at the NYMEX, but this time they're really upset. The open pit trading has taken up the challenge of the times, technology. London is planning to trade Brent oil futures electronically in the next year, while the NYMEX doesn't want to give up the way they have traded for the last 129 years, in an open pit. So NYMEX launched its own contract today, to try to take the contract from London's International Petroleum Exchange. NYMEX traders are passionate that their way is better. MARK FISHER, PRESIDENT, MSE CLEARING: You want to buy something, you click it. You want to sell something, just click it. But when you want to go ahead and do a spread between November heating oil and November gasoline, or December crude of one year and December crude two years out, it gets a lot more complicated to use the machine, as it is just to announce a bid and offer in the ring and get filled right away.
PILGRIM: The NYMEX trades some 145,000 contracts a day, compared to London's 70,000. First-day volume on the contract hit a new record, but the British were unruffled.
STEPHEN GUTTERIDGE, INTERNATIONAL PETROLEUM EXCHANGE: I think competition has always been on its way. And now it's here. We're certainly not going to judge this on the basis of the next few days of trading.
(END VIDEOTAPE)
PILGRIM (on camera): Now the NYMEX is making a big commitment to this contract, allowing it to trade free of all clearing fees for the first year. And the traders have an even bigger stake, however, their livelihood.
Lou?
DOBBS: Kitty, thanks. Well, a lot of livelihoods are at stake in this economy. We'll have the latest report next on the economy and why it could indicate a recovery may be farther away than many might expect and hope. And we'll take a look at the most recent mortgage figures and tell you what it says about the state of housing in this country. Stay with us.
(COMMERCIAL BREAK)
DOBBS: Topping tonight's MONEYLINE movers, Kohl's down $2.25 a share, despite a 5 percent jump in August same-store sales. Kohl's also planning to open 24 new stores next month.
Gucci shares surging nearly $7.00. The two-year battle over the Italian fashion house nearing an end. France's richest man, Francois Pinault, is in advanced talks to buy Gucci from luxury powerhouse, LVMH. And that deal expected to be at the $6 billion price tag.
Alcatel dropping more than $1.00 today. The French Telecom equipment maker warning it would have more difficulty posting an operating profit this year, given current conditions in the market. Shares of Alcatel trading at an all time low now, down 84 percent this year alone.
In other corporate news tonight, 2,000 Citibank ATM machines out- of-order tonight. A software problem initially crashed that system at 5:00 p.m. Eastern yesterday, triggered by high cash demands after the long holiday weekend. Service was restored last night, only to fail again this morning. Staples promoting its president and Chief Operating Officer, Ronald Sargent, to CEO. He's been with the company for 13 years. Sargent replaces Staples founder, Thomas Stemberg, who will be appointed executive chairman.
And job cuts at companies falling 32 percent in August, from the previous month, that according Challenger, Gray, Christmas. However, layoffs remain at a strong pace, growing 145 percent compared to August of a year ago.
And more people are applying for mortgages. Now a trade group reporting the number of mortgage loan applications rose nearly 11 percent last week. Refinancing accounting for more than half of the total, an area that has steadily climbed since early July, when 30- year mortgage contract rates began falling. Just yesterday, that same trade group reported more than 4.5 percent of all mortgage holders are behind in payments. That's the highest level since 1992.
The business of tennis dominated tonight by the quarter-final match-up between Pete Sampras and Andre Agassi at the U.S. Open. Agassi may be the quintessential comeback kid, but his coach Brad Gilbert, like many other investors, is looking for a comeback for stocks. MONEYLINE'S Allan Chernoff tracked Gilbert down at the open in New York earlier today.
(BEGIN VIDEOTAPE)
BRAD GILBERT, AGASSI COACH: As I look at my stocks dwindle and they say, "Keep buying on the dip," and I've become the dip man. And a couple of my stocks, Gemstar, Micromuse, AMCO, everything I've got, loser, loser, loser. But one day, you know, if I listen to my son and buy like Krispy Kreme or something like that or buy kid stocks, I'd be doing better. You know, or just pick something. It'd be better than what I've picked.
CHERNOFF: Well, how long do you think it'll take for the Nasdaq to bounce back?
GILBERT: Maybe somebody like Abby Joseph Cohen will come out and say, "Buy everything." You know, we get to people -- Lou Dobbs will come strong, you know tonight, and tell everybody to start buying, you know, panic is over.
DOBBS: Well, not tonight, Brad. We also asked Brad Gilbert for a stock pick and where to put your money. His answer, cash.
Meanwhile, cash is something pro football fans better have lots of when they head to a game this weekend. According to a new survey by Team Marketing Report, the average cost of tickets and concessions is up more than 8 percent from last season. That means a family of four can expect to pay just about $300. A major league baseball game would cost just about half that amount. So at least for now, the NFL is the most expensive spectator sport.
Coming up next, a lot of you weighing in on the Hewlett- Packard/Compaq deal. We'll hear your thoughts, right after this. (COMMERCIAL BREAK)
DOBBS: Tomorrow, more economic reports. August retail sales, weekly jobless claims, and tomorrow Campbell Soup will report its quarterly results. Intel holds its midquarter conference call.
And tomorrow night, we'll bring you the story of two investors who thought they'd hit it big with their stock trades, but instead have ended up in a fight with the brokerage and the clearinghouse and the NASD. We'll tell you how that story turns out tomorrow night here on MONEYLINE.
Well, Wall Street isn't so far buying Hewlett-Packard's $25 billion acquisition of Compaq, and neither are most MONEYLINE viewers.
Ricardo Dawkins in Bronx, New York writing in to say Hewlett- Packard has wedged itself between a rock and a hard place, saying "it cannot compete with IBM or Sun Microsystems at the high end or with Dell at the low end. HPC, Carly Fiorina," he says, "needs to shift gears in her corporate automobile or else she will be the victim of a fatal accident."
Ian Duffield says it's looking more like a train wreck. One has to appreciate these metaphors. "The deal will be a disaster like Nortel, Cisco, JDS Uniphases of the world. Look out below for the goodwill write-offs."
But not everybody says the merger is off the rails. Steven Tutino in Ann Arbor, Michigan writes to say as a customer and shareholder, he's all for it and he's sick of hearing Wall Street trash it, writing "Why don't we trust Fiorina and Capellas and do trust Wall Street analysts?"
Dame Gueye in Atlanta says the problem for the combined company is going to be marketing, not execution. She says it's a mistake to retire the Compaq brand in favor of Hewlett-Packard, saying, "There is a lot of sentimental value attached to the Compaq name. I just hate to see it vanish." Well, it's not gone yet.
Please send us your comments at Moneyline@cnn.com.
And for tonight, that is MONEYLINE. Thanks for being with us. I'm Lou Dobbs. Goodnight from New York. "FIRST EVENING NEWS" next.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
