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Lou Dobbs Moneyline
Dow Plummets 234.99 to 9,605.85; Nasdaq Declines 17.94 to 1,687.70; Jobless Rate Rises to 4.9 Percent in August
Aired September 07, 2001 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LOU DOBBS, CNN ANCHOR: Good evening. Topping tonight's news, investors suffer through yet another ugly session on Wall Street. The markets plunging on word that this country's unemployment rate is rising. Despite that, President Bush remains bullish on the economy and the prospects of recovery. And today, the first day of retirement for Jack Welch.
Just how good was he, really? We'll take a look at his extraordinary career by the numbers. Now, a look at our top stories tonight. We begin with Fred Katayama -- Fred.
FRED KATAYAMA, CNN CORRESPONDENT: Lou, technology companies aren't so sure about their prospects. And many of them are afraid to predict what might happen even a month from now.
KITTY PILGRIM, CNN CORRESPONDENT: The week in global markets couldn't have be worse. And there was absolutely no relief in any industrialized economy in the world -- Lou.
DOBBS: Thank you, Kitty. We will be joined by Labor Secretary Elaine Chao to talk about the unemployment report. Market analyst Ron Hill joins us to tell us what investors should worry about now. And we'll hear from Robert Hormats about worries all around the world.
Our top story, the nation's unemployment picture. The unemployment rate rising to 4.9 percent last month. That's the highest level in four years and the biggest percentage monthly increase in 15 years. Meanwhile, 113,000 jobs were lost. The manufacturing sector again the hardest hit. And that news sent bond prices higher today. The 30 year bond gaining 12/32, while the 10- year note added a half point in price pushing the yield down to 4.79 percent.
Wall Street didn't like the employment rate, but there were mixed views in Washington, where the White House was quick to respond, President Bush reassuring Americans he still believes the economy will rebound by the end of the year. Democrats disagree.
Tim O'Brien takes a look at the economic debate.
(BEGIN VIDEOTAPE)
TIM O'BRIEN, CNN CORRESPONDENT (voice-over): The dismal unemployment numbers were reverberating through the White House, as well as Wall Street, with President Bush wasting no time reminding reporters that whatever problems the economy faces today did not originate under his watch.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: Too many people are losing their jobs as a result of a slowdown that began when Dick and I were campaigning across our country last summer.
O'BRIEN: But the president appeared willing to assume responsibility for getting the economy back on track.
BUSH: Any American out of work is too many Americans out of work. I want the American people to know that we're deeply concerned about the unemployment rates and we intend to do something about it.
O'BRIEN: With so few clear answers to the country's economic problems, perhaps it isn't surprising that Mr. Bush wasn't taking questions. But in his brief remarks, he did call on Congress to enact an energy program aimed at lowering energy costs and creating new jobs and to give him trade promotion authority to open up new foreign markets for American products.
House Democrats, however, blame the president for making a bad situation worse.
REP. RICHARD GEPHARDT (D-MO), MINORITY LEADER: I think the real slowdown has begun in the last six months. I think the economy has reacted to the president's budget plan, and I don't think it has been a positive reaction.
O'BRIEN: Of course, it's not all bad news. Consumer confidence and spending remain high, and there is evidence that the fed's rate cuts this year have helped to bring down interest rates on home and car loans.
(END VIDEOTAPE)
DOBBS: For more now on the employment picture, Labor Secretary Elaine Chao joins me from Washington, D.C. Secretary Chao, good to have you with us.
ELAINE CHAO, LABOR SECRETARY: Thank you.
DOBBS: This rate had to be a surprise even to the Labor Department. Was it?
CHAO: We don't get out information any sooner than anyone else. While we watch the situation very carefully, again we don't have inside information. But it's a surprise. The market was expecting about 4.7. so it was higher than expected and it was disappointing. I think President Bush had a very important message to our nation today.
In retrospect, the administration's tax cut proved to be very wise and very timely. And secondly, the president has a national energy plan that is pending before Congress. That will be a very important package for the Congress to pass. Because it would provide much needed stimulus to the weakening economy. And I dispute also the previous speakers allegations that the economy began to soften six months ago.
It really began to soften last year. And this was a point that the administration was very concerned about. We raised our concern about the economy in February of this year and we were thought to be naysayers.
DOBBS: Secretary Chao, there is -- it is indisputable, it is empirical that the unemployment rate has risen steadily from 3.9 percent last October to the current 4.9 percent over the course of that period, so whether that's a political debate or not, the facts are that is what occurred.
CHAO: But there are other obvious -- as you know -- there are many other economic indicators which reflect the growth of the economy. And the slowdown really began last summer.
DOBBS: Right, and what I'm interested in here, Secretary Chao, while it is fascinating in Washington to hear Republicans and Democrats blame each other for what is...
CHAO: No, no, I was just trying to set the record straight.
DOBBS: And I quite concur with you in that interest, but the fact is that this unemployment rate has risen to this level from last October. Is it the department's judgment that this trend is going to continue?
CHAO: Well, of course we hope not. And it's hard to say. It is really anyone's guess. I think the added stimulus to the economy would be very healthy. Having some kind of an energy plan that would reduce the cost of energy and the price of energy to business and consumers will be very helpful. Also the president's national energy plan would create several hundred thousand new jobs and that would of course be welcomed as well.
DOBBS: The impact on numbers here: this is a large increase, in fact, the largest increase we have seen in 15 years in the unemployment rate. Is it your sense that because we saw a revision higher last month that these numbers are any more accurate than the previous report that had to be revised?
CHAO: Well, these numbers are revised every month. The department issues a particular number and then midway through the month we reassess the numbers again and adjust them as necessary. It think what is happening here also is we've gone through a summer period. August is traditionally a quirky month because of all the temporary workers, people who withdrew from the labor force because of the vacation schedules of their family members or spouses or whatever.
So we might have absorbed more this month. And I am thinking that next month the unemployment numbers probably will not be as striking and they will probably be around this area if not better.
DOBBS: Secretary Chao, thanks for being with us here on MONEYLINE. CHAO: Thank you.
DOBBS: Today's unemployment report the latest blow to already battered investors. The Dow Jones Industrials falling another 234 points today, the Nasdaq composite fell 17 points. That is a market loss of more than $212 billion today. The Dow's loss in this short, but painful week, close to 350 points. The Nasdaq's weekly loss, more than 130 points.
The Nasdaq losing 3 percent while the Dow Jones Industrials fell 6 percent on the week.
For a look now at today's action on Wall Street, Christine Romans and Greg Clarkin. Christine, let's begin with you.
CHRISTINE ROMANS, CNN CORRESPONDENT: Lou, investors were already nervous and then they got a 4.9 percent unemployment rate this morning and clearly the sellers came out of woodwork. Fleeing stocks for the relative safety of bonds. Take a look at the Dow, losing 234 points on the day bringing the week's losses to 3 1/2 percent.
The selling was pretty wide spread. Look at some of these Big Board losers. AOL TIME WARNER down 8 percent. Lehman cutting its revenue expectations for 2002 citing a soft ad market, a lack of earnings visibility. Later today Liberty Media's John Malone coming out and saying, AOL has made a proposal for AT&T broadband. AOL shares getting hit.
Boeing down on a downgrade by Morgan Stanley. Home Depo and GM also hurt today. People are concerned about the consumer, especially if the jobs market is going to continue to weaken. Cyclicals, heavy industry stocks also hurt today.
Take a look at the S&P 500. It was the lowest close since October 1998. We have now pulled below some of these important March and April levels from this year in the broader S&P 500 index. Traders are saying it's very key to watch what happens at this point. Back to you.
DOBBS: Thanks, Christine. The Nasdaq has been down in eight of the past nine sessions. As I said, it lost 3 percent this week. Greg Clarkin from the Nasdaq marketsite -- Greg.
GREG CLARKIN, CNN CORRESPONDENT: And Lou, this week was only 4 trading sessions long, but it felt a lot longer to a lot of those technology traders. The Nasdaq now just 49 points away from its closing lows in April. Today's trading really was softened a bit when you compare the Nasdaq to the Blue Chips at least.
The selling was softened by some of the comments we have heard from technology companies over the last 24 hours. We had Intel yesterday not saying anything dramatically bad. We had Dell Computer this morning with much the same comments. No vast new bad news out of Dell. And National Semiconductor, saying they were encouraged by their booking trends. So that gave a nice underpinning of support. And you can see what some of the movers did on the day. Intel, right around break even all day. Gave back a little toward the close. Was down 23 cents, but Dell was up better than 2 1/2 percent at different points today. It gave back again at the close but still finished higher. Sun Microsystems shaking off recent weakness as did Oracle. And the KLA-Tencor, the chip equipment company, we did see nice strength today throughout the chip sector, so that sector one of the winners today.
And later on in the show I'll tell you why some traders believe that just maybe today may mark the beginning of a turnaround for the technology stocks.
DOBBS: I can't wait to hear that one, Greg, thanks. Greg Clarkin.
Alan Chernoff now with a check of after hours activity from the Instinet trading desk -- Alan.
ALAN CHERNOFF, CNN CORRESPONDENT: Hi, Lou. As you know, sometimes in the post market, people try to step in and find a little bargain after a big day of selling. But not much evidence of that happening today.
Let's get to a few quotes. Intel down another 5 cents from the 4:00 p.m. Eastern time close, 25.84. Microsoft down 15 cents at 55.25; and finally, Oracle down another 2 cents at 11.05. That stock yesterday hit a 52-week low. So, Lou, we're ending the session, going into the weekend with really not much sign of hope just yet. Back to you.
DOBBS: And we'll have Oracle's earnings next week, so that will be another interesting part of what promises to be an interesting week. Allan, thanks very much. Allan Chernoff.
Well, is the worst over for the semiconductor industry? That's a multibilllion-dollar question for investors, and many believe the worst is over, but not many are willing to say just long before the good times return. Bruce Francis with the story.
(BEGIN VIDEOTAPE)
BRUCE FRANCIS, CNN CORRESPONDENT (voice-over): A week's worth of new data, and the same question that has puzzled investors for months. Has the semiconductor business hit bottom? Intel says its third quarter looks just about normal, and it's on track to sell about $6.4 billion worth of chips.
And consider this upbeat report from Fairchild Semiconductor.
KIRK POND, CHAIRMAN AND CEO, FAIRCHILD SEMI.: We do business not only with computers, but with telecom, industrial, automotive, consumer. And so in aggregate, these businesses are all doing somewhat better.
FRANCIS: But at National Semiconductor, Brian Halla is more cautious. BRIAN HALLA, CHAIRMAN AND CEO, NATIONAL SEMI.: We held short of calling a turn, because I think it's just too dependent now on what's the end consumer demand for PCs and handsets and products like that, and that's an unknown still.
FRANCIS: Demand for semiconductors is uneven right now. For example, chip companies that sell to personal computer makers are doing better.
But look at the cell phone business. Motorola just warned of a disastrous loss and Ericsson issued a gloomy outlook. And networking companies, also big buyers of chips, haven't been sending out signals of renewed strength either.
But the stocks tell another story. While down dramatically from last year's highs, chip stocks have held on to more of their value over the last three years, up about 200 percent, as measured by the Philadelphia Stock Exchange Semiconductor Index, compared to about flat for the Nasdaq.
DOUG LEE, BANC OF AMERICA SECURITIES: The institutional investors don't disagree that things are bottoming. I think the problem is, we don't know what the slope of the recovery looks like. We don't know if we're going to be back off into the races next year, or is it just a slow, gradual recovery.
(END VIDEOTAPE)
FRANCIS: Lee is neutral on the segment, and notes that at the bottom of the last cycle in 1998, chips stocks traded at 2.5 times book value. The average right now, Lou, twice that. So maybe some more room to go.
DOBBS: Suggesting some room for adjustment, Bruce?
FRANCIS: Either the companies better grow into these valuations, or -- you guessed it -- their prices have got to come down on some of these stocks.
DOBBS: Bruce, thanks. Bruce Francis.
The uncertainty Bruce was describing is certainly not limited to simply the chip sector. The fear of forecasting pervades the entire technology industry now. Fred Katayama joins us with that story -- Fred.
KATAYAMA: Well, Lou, tech companies issued off-the-chart growth projection when times were sunny. But unlike meteorologists, they are shying away from forecasting altogether, just because today's business climate is so unpredictable.
On Wednesday, Microsoft said Wall Street had misunderstood its message contending it did not reaffirm guidance regarding the fourth quarter. On Thursday, Motorola said it will not offer a fourth quarter prediction until October and will not issue a forecast for 2002. And today, Fairchild Semiconductor said it's too early to talk about the fourth quarter.
All of a sudden, executes of technology companies are gun-shy to make forecasts. At Salomon Smith Barney's tech conference this week, executives making presentations focused instead on the far-off future and on new products.
(BEGIN VIDEO CLIP)
JOHN JONES, SALOMON SMITH BARNEY: We have leadership basically saying lots of neutral verbiage, lots of long-term verbiage. They are hoping that their new protect cycles will help. They are working hard to downsize their organizations, but because they have been wrong over the last couple of quarters, they are unwilling, appropriately so, to forecast anything positive going forward, and the investment community is looking for something positive to hang on to.
(END VIDEO CLIP)
KATAYAMA: This evasiveness over forecasting isn't necessarily a bad thing. Earnings tracker Chuck Hill of First Call says the companies are right not to make forecasts when they truly can't see the future, adding that it was wrong of them to guess when business was rosy.
But that won't satisfy Wall Street. Investors desperately want indicators, so the lack of precise predictions could undermine investor confidence, and that, market strategists say, will bring more volatility to tech stocks -- Lou.
DOBBS: It's in some ways the last bastion of the old bad days, if you will, the idea that Wall Street would expect investors to support a stock price and a company without visibility on what they can expect in the way of earnings.
KATAYAMA: Right, Lou. And now, instead, you know, these folks who were so easy at just giving any number that they predict about rosy projections now are shying away from doing anything. Two or three months from now, they won't touch it.
DOBBS: Well, investors I think are a lot smarter than some people on Wall Street may think. All right. Fred, thanks.
Well, in other corporate news tonight, Morgan Stanley is preparing to face sexual discrimination charges. The federal government expected to file a suit against the firm as early as next week. Shares of Morgan Stanley today falling almost $1.5.
Verizon adding a penny a share today, Verizon hiking the cost of pay phone calls from 35 to 50 cents; increased cell phone and calling card use putting a dent into pay phone activity, as you might expect.
Starbucks turning 30 years old today, believe it or not. Its stock dropping 12 cents on the day. Starbucks started as a single Seattle coffee shop back in 1971 -- now, there are more than 4,500 Starbucks all around the world, while the company's market cap has grown to $6 billion. Compare that to the rise of fast food giant McDonald's -- in its 45-year history, McDonald's claims 28,000 locations, with a market cap of nearly $39 billion. Shares of McDonald's losing 44 cents today.
Straight ahead here on MONEYLINE, Jack Welch says goodbye to General Electric after 41 years. We'll take a look at the career of the man many called the greatest CEO of our time.
Western wildfires are driving people from their homes in California. We'll tell you how firefighters are faring in their efforts to contain those blazes.
Then, our economic problems are not confined certainly to these shores. In fact, they're all around the globe.
(COMMERCIAL BREAK)
DOBBS: Firefighters tonight struggling to get the upper hand on two wildfires in California. One of them broke out yesterday near Oroville in Butte County. That fire forced people to leave about 200 homes; scorched more than 6,000 acres. Fire officials say it's only about 5 percent contained. Meanwhile, a fire is still raging in Calaveras County near Yosemite National Park. That fire damaged a canal structure that supplies water to four towns. The fire is now about 40 percent contained, we're told.
The State Department tonight is warning of possible terrorist attacks on American facilities in Japan and South Korea. The U.S. embassy spokesman in Tokyo described the threat as "credible," but did not say when or where a possible attack might occur. There is a combined total of about 85,000 U.S. troops in Japan and South Korea. Despite that warning, American forces have not been placed on higher alert.
The U.S. Army is retiring some of its oldest and most venerable combat helicopters, the Huey and Cobra. The Army is trying to streamline its helicopter fleet from 4,500 to 3,500 aircraft by 2003. Those aircraft were used extensively during the Vietnam War. The Army plans to raise the reliability of the remaining fleet and speed up the purchase Comanche helicopters, those made by Boeing's Sikorsky.
And in tonight's "Powering America" segment, the Government Accounting Office may decide to subpoena documents relating to the White House's energy policy. The GAO says it has not yet received adequate information from the administration on just who consulted in drafting the energy plan. The White House says that information is not a matter for public review. The GAO says it's never filed a lawsuit to retrieve information.
The Pentagon tonight saying five companies have been awarded a defense contract totaling $5 billion. The work involves destroying former Soviet nuclear arms. The contract will be shared by Brown & Root Services of Halliburton, Raytheon, Bechtel National, Parsons Delaware, and Washington Group International. That contract, which runs through 2006, part of a decade-old effort to help safety dispose of former Soviet weapons. Well, as we reported to you, President Bush is urging Congress to grant him fast-track authority to negotiate trade deals. But if the president's hoping to get a boost from countries such as Japan, as his treasury secretary yesterday suggested, he just may have to look elsewhere.
Kitty Pilgrim has the story.
(BEGIN VIDEOTAPE)
PILGRIM (voice-over): It's a mess out there. This week, the global economy looks worse than ever. In Japan, the second-largest economy in the world, second-quarter GDP shrunk 3.2 percent on an annual basis, sparking a severe sell-off in Asian markets. Moody's Investor Service says it's considering lowering its credit rating on Japan's long-term debt. But what scares economists most, the IMF is starting an audit of the banking system.
FRED BERGSTEN, INSTITUTE FOR INTERNATIONAL ECONOMICS: If they get a significant run on banks, renewal of the Japan premium in international markets, and some bank closures, which I think is quite possible, that would pull down Asia as a whole, and that would weaken about one-third of the world economy.
PILGRIM: Don't look to Europe for any help. The markets have been tanking in a week of carnage. The DAX in Germany down 8 percent, the CAC Quarante in Paris down 6 percent, and London's FTSE down 5 percent.
And a broad index of European stocks, the FTSE Euro 300, fell 2.5 percent Friday to its lowest level in 2 1/2 years.
A 10-day trading chart of world markets looks like it fell off a cliff. Interest rate cuts don't seem to be working.
JAY PELOSKY, MORGAN STANLEY: In August, you had central bank easings in Japan, the U.S. and Europe, the first time in 15 years that you've had all three central banks cut in the same month. Equity markets didn't react positively at all. That's a sign that investors are saying, "If I can't see corporate stabilization, I have to get more liquidity to make me feel better."
(END VIDEOTAPE)
PILGRIM: But after this week in world markets, investors aren't feeling better at all. There is no relief from any industrialized economy out there, and Friday's snapshot of the U.S. economy only serves to reinforce those fears -- Lou.
DOBBS: Kitty, thank you. Well, we're joined now by international economist and vice chairman of Goldman Sachs International, Robert Hormats. Bob, good to have you here.
ROBERT HORMATS, VICE CHAIRMAN, GOLDMAN SACHS: Good to be back, Lou.
DOBBS: How bad is it, in your estimation, in Japan first of all?
HORMATS: Japan is terrible. As Kitty's report indicated, they have negative growth. They're probably in a recession, their fourth in 10 years. Confidence is down. The markets are down. Investment's down. It's a real economic disaster.
DOBBS: And the implications for the United States?
HORMATS: Well, Japan is our biggest overseas trading partner. Obviously, Canada and Mexico are bigger. But Japan is big, and if Japan continues to be in a period of great economic weakness, they'll buy fewer goods from the United States. And because demand in Japan is so weak, they're trying to sell as many goods as they can into our own market, which tends to provide more competition here.
DOBBS: And in Europe, those economies are not doing terrifically well. Germany, the largest economy, struggling. How dire would you say the prospects are there?
HORMATS: Europe isn't as bad as Japan, but they're experiencing very weak growth. They're really almost on the brink of a recession, almost negative growth in most European countries.
The Germans are experiencing, as are most Europeans experiencing, increased unemployment, and that's a big problem for them. And also, they've had a huge inventory correction. They had a lot of excess inventories. Inventories have dropped like a stone, so they have a lot of negativism too. But the consumer has actually held up reasonably well in Europe as the consumer has here.
PILGRIM: In terms of domestic demand, though, in Europe, it has been declining. Isn't that a big problem for U.S. exporters?
HORMATS: You're absolutely right. It's a big problem for American exporters, because we sell a lot of capital goods there. We sell consumer goods there. And of course, as you know, there are a lot of American companies that are invested in Europe and selling in Europe from their plants there. And that translates back into weaker profits and weaker earnings for American companies that sell abroad and produce abroad. So it's a big negative for a lot of big American multinational corporations.
DOBBS: And now we're starting to hear about synchronicity -- the idea that Japan weaker, Europe weaker at the same time the U.S. economy has weakened -- suggesting real problems in the outlying months for...
HORMATS: That's exactly right. This is the first time we've had a synchronized decline in growth in the major Western economies since the 1980s. It's an unusual occurrence, and it means that there's no one who's going to be able to export to anyone else to get themselves out of this period of economic weakness.
DOBBS: All right, enough bad news. How are we going to get out of this?
HORMATS: Well, I think we need more fiscal stimulus in the near term. The...
DOBBS: Are you a Keynesian?
HORMATS: I am a Keynesian now. Monetary policy can't do it all. The Kennedy tax cut of 1964 was a cut that provided a stimulus of 1.5 percent of GDP. This tax cut is a puny 0.4 percent of GDP. We need to do more short-term stimulus.
DOBBS: (UNINTELLIGIBLE) you were an aggressive Republican on these things.
HORMATS: Well, I think you can't be...
(LAUGHTER)
... can't only be a monetarist these days.
(LAUGHTER)
And we shouldn't worry so much about the Social Security surplus. All it does is retire Treasury debt.
DOBBS: I have -- I have to ask you this. You've served in administrations of both parties' leadership. Do you find this just laughable, this idea of the Democrats trying to quibble and trying to lay blame for the slowdown on the Bush administration, the Bush administration trying to lay blame back on the Clinton administration? Have we reached a point where the parties think that our viewers and voters are that dumb?
HORMATS: Well, it really is -- it's bad for confidence. You're absolutely right. The blame game is a ridiculous game. They should both avoid being, as they are now, painted into a corner. They're both saying they want to protect Social Security, and the way to protect it is to increase growth, use some of this surplus to stimulate the economy. Then you get more growth. In the long run, you'll protect Social Security.
The problem with...
DOBBS: Hallelujah for bipartisanship, but not...
HORMATS: Get behind this and cut taxes some more, and there are a lot of ways you can do it.
DOBBS: Bob Hormats...
HORMATS: All right?
DOBBS: I like your policy. All right, thanks for being with us.
HORMATS: Good to be with you.
DOBBS: Still ahead here, a look at the career of Jack Welch. He's got some pretty good policies. He officially ended his reign at General Electric today, but his impact on corporate America will be felt for generations.
It is the end of what was an ugly week on Wall Street. Where do investors go from here? We'll find out from our panel of experts. And our next guest says you might want to stay home Monday, but after that, get ready to load up with money and go out there and buy stocks. He says the worst may be over. Stay with us.
ANNOUNCER: Up next, Lou talks with strategist for Brown Brothers Harriman Ron Hill.
(COMMERCIAL BREAK)
DOBBS: A disappointing session capping off a disappointing week. Stock prices tumbled today after an unexpected jump in the unemployment rate. Both the Dow and Nasdaq at five-month lows, while the S&P 500 closed at a three-year low. More than $200 billion in market cap lost on Wall Street today. And on the Big Board, more than 150 stocks hit new 52-week lows. Among them: Cigna, Goldman Sachs, Merrill Lynch, and Qwest Communications. Nearly 250 stocks on the Nasdaq hit 52-week lows -- that's right, 250 -- including CMGI, Redback Networks, Palm and Veritas Software.
All but four of the Dow 30 stocks finished lower on the day. That index down more than 2 percent on the session to finish just over 9,600. For the week, the Dow down nearly 3.5 percent. On the Big Board, declining issues beating advancers by a margin of better than two to one again.
And among the most active issues today: shares of Compaq finishing higher for the first time since its deal with Hewlett- Packard was announced. Shares of General Electric down more than 2 percent. This, Jeffrey Immelt's first day as chairman and CEO, replacing Jack Welch. Home Depot also active today, the retailer falling 6 percent.
The Nasdaq dropped 1 percent on the day, down more than 6.5 percent for the week. Declining issues again swamping advancers by a two-to-one margin. Among the Nasdaq most actives: Intel lower in heavy trading; Intel confirming it will hit the lower end of its earnings targets. Cisco Systems also finishing lower; the company saying it still sees several difficult quarters ahead. Shares of Applied Materials finishing higher on the day, SG Cowen saying it believes the chip equipment industry has reached stability.
Well, the weakest sector in the market today: consumer electronics. Shares of Circuit City were hammered. Circuit City saying same-store sales plunged 20 percent last month. That pulled almost every stock in the group lower. Also, weaker household appliances -- Maytag and whirlpool big losers there. And Boeing's fall to a new 52-week low, hitting aerospace stocks. On the upside: metal producers, as gold prices today rose. Also moving higher: chip equipment; Intel's mid-quarter update apparently soothing some investors. And the security software sector making a slim gain today.
A bitter ending to a brutal week on Wall Street, the Dow plunging nearly 350 points over four sessions, the S&P 500 dropping to a three- year low.
Now let's go back to our correspondents who follow these markets: Christine Romans, Greg Clarkin.
And Christine, as usual, let's begin with you.
ROMANS: Lou, I've got to tell you, we were watching the Dow sell off strongly here today, and folks kept looking at the bond prices, watching the bond market rally as people priced in expectations the Fed is going to cut interest rates. And those Fed hopes started to spread here and people started talking, before you know it, about chances for maybe an inter-meeting move.
Futures showing a 25 percent -- or, a 25-basis point October cut. They're pricing in a 50-50 chance for another cut this fall after that. And hope is spreading for an inter-meeting move. Why? Well, surprise, surprise, the two surprise rate cuts this year have both sparked major rallies on Wall Street. They didn't last very long, but traders down here are saying it might have to take an inter-meeting move by the Fed to really get people excited about stocks again.
DOBBS: OK Christine. It's interesting, though, that we have seen, after seven rate cuts, a continued decline in both the Dow, the S&P and as well, of course, the Nasdaq; so I don't know how hopeful people should be about that.
ROMANS: Well, I'll tell you, cooler heads point that out and they say that it shows sort of the desperation building in this market at this point.
DOBBS: Yes. Christine, thank you.
The Nasdaq today moved briefly into positive territory, but not for long. For the week, the Nasdaq down 6.5 percent.
Greg Clarkin, what do you make of it?
CLARKIN: Well, I'll tell you, Lou, in calling around to traders today asking them, why is the Nasdaq holding up so well compared to the blue chips today, we were given a couple reasons. One, you did have some fairly lukewarm comments out of Dell and out of Intel, so that helped things. But also a lot of traders said, really, take a look at the Nasdaq 100. that is the 100 biggest stocks on the Nasdaq. It is far and away dominated by technology companies. And they say at this point the Nasdaq 100, they believe, maybe has hit a bottom. It broke through its April closing lows twice today -- once right around the open, about 9:45 or so, and then once again at 1:00 this afternoon.
Now, that April 4 low is 1,348 for the Nasdaq 100, and it closed today at 1,354. So it was heading back to kind of retest that. But they're very encouraged by the fact that the Nasdaq 100 was able to kind of fall through those April 4 lows and then come back a little bit. They feel that possibly the Nasdaq has already been hit as hard as it's going to be hit. And just a glimmer of hope here, Lou, they believe that maybe this is the start of a bit of a turnaround for these technology companies.
DOBBS: Now, are these the same people who have been looking at the support levels and possibilities as we've watched the 30 percent decline here?
CLARKIN: I have to admit, some of them indeed are, Lou. But they do feel that the Nasdaq 100 is a good barometer of where some of these companies may be heading.
DOBBS: You know, I think a lot of people are getting to the point -- a number of investors are getting to the point of "show me the money."
CLARKIN: Without a doubt. It's "put up or shut up."
DOBBS: Greg, thanks a lot.
CLARKIN: OK.
DOBBS: Ron Hill points out that unemployment levels tend to peak after economies bottom. And if this trend holds true, today's weaker- than-expected labor report may actually turn out to be good news. Ron Hill joins us now.
Ron, good to have you with us.
RONALD HILL, BROWN BROTHERS HARRIMAN: Nice to be here, Lou.
DOBBS: Let's talk about the good news. Do you believe that this is the bottom?
HILL: We think that perhaps the industrial economy is probably bottoming here in August. We had hoped for a July bottom, but today's employment data made that almost impossible.
DOBBS: Right. Unemployment, of course, these numbers are lagging indicators. But as we continue to see this onslaught of layoffs, it's very unlikely that we're going to see unemployment decline any time soon.
HILL: Right, but all we need to do is actually see the initial claims for unemployment insurance slow down. They've come back from 450,000 to 400,000; we'd like to see that drop below 350,000. That's probably your best coincident indicator for the economy right now as you look for the turn.
DOBBS: And in terms of the market, we -- now we've got another 6 1/2 percent off the Nasdaq, we've got the S&P tonight at a three-year low, we have the Dow off another couple -- 3 percent on the week. This does not feel good. Should it be considered the end?
HILL: I don't think it feels good because going through bottoms like this are never good. You know, Greg's report mentioned that we're testing those late-March early-April lows. We've come back, we've broken through on the S&P at the mid-cap. So the breadth has broken down in here. This is a bad sign. I think you'll see some follow-through selling on Monday.
DOBBS: Follow-through selling Monday. Tuesday?
HILL: Tuesday, if we're going to come out of this, we're going to be looking for a good sharp rebound. That's the way, normally, a lot of these sell-offs, especially the panicky ones will end.
DOBBS: And we're getting earnings reports next week. We're getting a lot of economic reports out next week.
HILL: That's right. We're starting to get -- you know, we'll get -- some of the inflation data is starting to come through. We've got a lot of good stuff coming up. But the key thing, I think, is people have to have some confidence coming back into this market that, in fact, as you say with the technology sector, they believe that things have stabilized, and they're ready to pop.
DOBBS: Let's establish confidence and take a look at your previous stock recommendations and take a look -- then ask you how your -- what you're looking at now. Applied Materials, back on July 10 it's off about 6 percent; coal is off 10 percent; let's see -- Lowe's off 5 percent. You were doing right up -- you were doing pretty doggone well right up to B.J.'s Wholesale Club, 17 1/2 percent. But every dog has got to have fleas, right Ron?
HILL: Absolutely. And of course, what's happened here is I think you're running out of the big running consumer discretionary, which was doing well, and you're going to technology.
DOBBS: You're sticking with those?
HILL: Yes, and I think we're probably shifting more to technology at these points rather than the consumer...
DOBBS: Whoa! Give us two great technology names.
HILL: Well, I like KLA-Tencor in the equipment area, and I think probably also Intel.
DOBBS: OK. Ron, as always, great to have you with us.
HILL: Thank you, Lou.
DOBBS: Up next here: A business legend retiring; a look at Jack Welch's career at GE. The company's transformation under his tenure, next.
And our Friday roundtable; Ron Hill joins our roundtable to give us some perspective on this turbulent week. Stay with us.
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DOBBS: Jack Welch today officially stepped down as chairman and CEO of General Electric. Welch's retirement ends a remarkable run, one that made him America's most revered, respected, and at times reviled business leaders. There are many ways to take a look at what Jack Welch has meant to GE and to American business. We're going to do it Jack Welch's way. Tonight, Peter Viles takes a look at his career by the numbers.
(BEGIN VIDEOTAPE)
PETER VILES, CNN CORRESPONDENT (voice-over): The Jack Welch story is about passion and ambition, but it's also about numbers -- big numbers, like $399 billion, the amount of market value he created in 20 years, which means he made an awful lot of people rich.
JACK WELCH, FORMER CEO, GE: Our largest share owners are employees. They own $35 billion of GE stock, and to see our employees have a change of life, second cars, kids' education -- that will absolutely be the highlight of my career.
VILES: $12.7 billion, GE's earnings last year, more than eight times the earnings Welch inherited. Eighty-one thousand layoffs in his first five controversial years on the job, when he earned the nickname "Neutron Jack," the name that bugs him to this day.
WELCH: So, I want an apology from everybody that ever called me Neutron Jack. We have more people today than we did when I started officially, and I would like you to all take that back immediately!
VILES: 5,096 percent, that's the return on GE stock, with dividends, in the Welch era, more than three times the return on the S&P 500. Nine hundred ninety-three acquisitions in the Welch era, including RCA, which came with the trophy property of NBC. Honeywell would have been 994, but we'll get to that.
Four hundred and eight businesses sold, because he said every business presents three options: You can fix it, sell it or close it. Seventy-four victories for professional golfer Greg Norman. Now, why is that relevant? Because Jack Welch actually beat Norman once in a head-to-head golf match.
Forty-one years he worked at General Electric, and he has the lopsided portfolio to prove it.
WELCH: The guy that owns more GE stock, I think than most of you, is me. I don't own anything else. GE stock going up is all my kids and I got.
VILES (on camera): Sixteen letters in a word you will not find in the dictionary, but Jack Welch uses it a lot. The word is "boundarylessness," which he uses to describe a company without any bureaucratic walls.
(voice-over): Fourteen different books about Welch now available on Amazon, including his book, "Straight From the Gut," number three on the not-yet-published list.
Seven companies were more valuable than GE when Jack Welch took over. They were AT&T, IBM, Exxon, Schlumberger, Standard Oil of Indiana, which became Amoco, Standard Oil of California, which became Chevron, and Shell. Five passions that he wore on his sleeve: Golf, good wine, the island of Nantucket, the Boston Red Sox, and, of course, General Electric.
Four defeats, big and small: The EPA's decision to dredge the Hudson River and send GE the bill, the European surprise that killed the Honeywell merger, the XFL and the Joseph Jett scandal at Kidder Peabody.
WELCH: When I learned about Joe Jett, shaving Friday morning, was not the most pleasant moment of my life.
VILES: Three groups of workers in the world, according to Jack. "The top 20, the vital 70 and the bottom 10." He said: "Cherish the first, teach the second, and if they don't improve, get rid of the third." Two words he's always hated: Bureaucracy and formality. He changed the GE dress code to business casual every single day.
One man to fill his shoes: Jeffrey Immelt.
WELCH: He's got leadership. People like him a lot. He's a great person, good to his toes.
VILES: And zero: Companies that tonight are worth more than the General Electric that Jack Welch led.
Peter Viles, CNN Financial News, New York.
(END VIDEOTAPE)
DOBBS: And a reminder to join us next week here on MONEYLINE, where the man himself, Jack Welch, will be here to talk about his new book. And I will give you just a little bit of an advanced tip: It's a great book. Stay with us.
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DOBBS: Still ahead on MONEYLINE, we'll gain some perspective from our experts on this interesting week on Wall Street. Our Friday roundtable, coming right up.
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DOBBS: Joining me for our weekly roundtable on these markets: Ron Hill, Bob Hormats, Jan Hopkins, Christine Romans, Greg Clarkin. Jan, how nervous should we be about next week?
HOPKINS: Well, Lou, it's feeling pretty bad at the exchange. It's really difficult to go through this day after day, and I think there's still probably a little more selling to go. We don't have irrational pessimism yet. We may get there. And we may get close. And we may...
DOBBS: This is rational.
HOPKINS: This is rational, right. And I think what Greg said is interesting: It looks like the Nasdaq is looking better than the Dow at this point.
DOBBS: Did you hear that, Greg? You're getting support!
CLARKIN: Indeed I did, Lou. Actually, Jan, I'll tell you, a lot of traders do believe that, yeah, you're going to see some more selling, but the Nasdaq right now is only a handful of points away from its April lows that 100 has already tested those lows today, so they do see a glimmer of hope there. But let's face it, we're facing the confessional season, and profit warnings could sidetrack anything for a couple of days.
DOBBS: Christine, you're going to be a part of that confessional season there at the Big Board. How bad will it be?
ROMANS: Well, listen, we already got the S&P at a three-year low. I mean, people are really running the numbers there -- down 29 percent from its high back in March. People are worried that there could be further to go, that the other indexes have to -- have to catch up, Lou.
DOBBS: You know, after hearing all of that I want to turn quickly to Ron Hill, because he has a more optimistic outlook.
HILL: The key thing will be to get a really good bounce off the bottom when we hit it. And I think that is early next week. If we don't go through those April lows and go soaring back, then we are going to have to rethink. Investors should be willing to look at both sides -- what do I do if it goes up? What do I do if those April lows become a ceiling and we go down again?
DOBBS: Which way do you think it will go, Bob. You look at it from an international viewpoint.
HORMATS: I am still pessimistic in the near term. I think there have been a few false bottoms. Confidence is really declining. People used to have a lot of confidence that Federal Reserve policy would get us out of it. They have lost a lot of confidence. I think over the medium term it will begin to look better, but it is so hard to predict -- the turn -- it is so hard to predict the bottom at this point.
DOBBS: A lot of money lost by people trying to pick bottoms.
HORMATS: That is right.
HOPKINS: Watch GE stock. That is what Gail Dudack was saying to me today. If it starts really falling precipitously, the Fed will come and in lower rates immediately. It happened the last time.
DOBBS: Just because GE stock falls?
HOPKINS: Yeah, because it is really a key to liquidity in the market. It is what people sell if they have to get out.
DOBBS: All right. Jack Welch's timing is interesting, and Jeffrey Immelt is probably scratching his head. HORMATS: The Fed not only has to lower rates, but give us some confidence it is going to work. So far the average person is not confident that it will. Most economists are, but most investors are beginning to have doubts.
DOBBS: Ron, you get last word.
HILL: We've got to believe that it is going to come through to earnings and I still think that is where the economy comes in. And investor confidence, which is still quite weak out there, people have to believe before they want to buy.
DOBBS: Well, that is what I'm -- I am stunned by, is that there is still a lot of -- bloviation on Wall Street. It is still about earnings and visibility is no longer a defense.
HILL: That is indeed true and of course regulation FD doesn't help but the other thing is the economy being a little weak. But I think we are going to start seeing a decrease in the year-over-year losses, and then it is going to start to head to positive again. That is what brings stock prices...
DOBBS: Starting Tuesday.
HILL: Starting Tuesday, watch that rebound, Lou. It is all technical at the bottom.
(CROSSTALK)
DOBBS: Greg, Christine, Ron, Bob, Jan, thank you all very much. Coming up next, we will take a look at your e-mail and a look ahead to next week.
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DOBBS: Next week we have the Producer Price Index for August, Industrial Production and Capacity Utilization, Import/Export Prices, and the University of Michigan Consumer Sentiment Report. All of those out next week. It is going to be quite a week.
Jack Welch, formerly of GE, and DENNIS KOZLOWSKI, Tyco's chief executive officer, they will join us here early next week.
Time now for a look at some of your thoughts. Keith Kowalski in Las Vegas asks if Microsoft and the Nasdaq are joined at the hip. He points to a three-month chart showing a striking resemblance between the two. He writes, "I heard Microsoft now accounts for something like 10 percent of the Nasdaq. Is this true?"
You're about right. Microsoft currently accounts for about 11 percent of the index's value. Microsoft has actually added $65 billion in market cap this week, so it has helped the Nasdaq. Not bad when you consider other heavily-weighted stocks like: Intel, Cisco, Oracle, and Sun Microsystems have obliterated more than $360 billion in market cap over the same period. That evaporation of wealth is the reason why Thomas says, cutting the capital gains tax won't help anybody. He writes to say, "Get real. How could lowering the tax on capital gains put money into the economy if there are no capital gains to tax?"
And finally, Michael Friedman in California says he thinks stocks are in a free-fall because of irrational gloom. He writes to ask: "Have the bears lost touch with things as badly as the bulls once did?"
Send us your comments. Our e-mail address: moneyline@CNN.com.
And for this Friday evening, that is MONEYLINE. Thanks for joining us. I'm Lou Dobbs. Good night from New York.
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