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Lou Dobbs Moneyline
Dow Falls 0.34 to 9,605.51; Nasdaq Advances 7.68 to 1,695.38; Qwest Warns of Lower Profits
Aired September 10, 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. Checking our top stories tonight, the Bush administration and Congress are waking up to the problems that this economy is causing. Both sides are putting more effort now into addressing the slowdown, while many officials say it may take months for the tax cuts and interest rate cuts to turn this economy around.
Today Qwest Communications warning of lower profits through next year. The long-distance carrier also cutting 4,000 jobs as it battles this slowing economy.
Tiremaker Michelin North America also cutting jobs -- 2,000 jobs. Michelin cutting costs to offset big drop in tire demand. And these are the other stories we are looking at tonight.
We begin with Christine Romans -- Christine.
CHRISTINE ROMANS, CNN CORRESPONDENT: Lou, the Dow Jones ending today a fraction lower, but it could have been worse. It had been down more than 100.
GREG CLARKIN, CNN CORRESPONDENT: The Nasdaq comes out a winner, breaking a four-session losing streak. The composite still just 57 points away from its closing low for the year.
JENNIFER WESTHOVEN, CNN CORRESPONDENT: Xilinx the most actively traded stock after-hours. We will tell you what's got that stock on the move.
HILLARY LANE, CNN CORRESPONDENT: Blockbuster switches focus from VHS to DVD. I'll tell you what is behind that move.
DOBBS: Thanks, Hillary. We will also be talking tonight with Defense Secretary Donald Rumsfeld, who will spell out his plans to streamline the Pentagon. Lakshman Achuthan spells out his views on the state of this economy. Alan Ackerman will be here to tell us what the government can and cannot do fix the economy.
The spike in unemployment during August was a bombshell on Wall Street and of course in Washington. Democrats have suddenly seized on the data, launching a rancorous fight over who is to blame for the slowing economy. Now apparently willing to join in on a Republican solution.
Tim O'Brien reports from Washington.
(BEGIN VIDEOTAPE)
TIM O'BRIEN, CNN CORRESPONDENT (voice-over): With all 435 House seats up for grabs in next year's Congressional election, President Bush's prescription for the country's declining economy is sure to have consequences, political as well as economic. So far, little has worked. And last week's gloomy employment report has led some analysts to warn that consumer confidence, the mainstay of the economy, may be the next casualty.
RANDALL DODD, ECONOMIC STRATEGY INSTITUTE: The time to act is now. The longer you wait, consumer confidence is going to grow worse, business outlook will grow worse, and it will be much harder to get...
O'BRIEN: Republicans say the administration program needs more time, and may yet include other remedies, like cutting payroll taxes, and capital-gains taxes.
SEN. TRENT LOTT (R-MS), MINORITY LEADER: It may be necessary for us to act on the capital gains rate cut, because it will clearly cause a growth in the economy -- it always does -- and, as an aside brings in more revenue to the government, particularly in first couple years.
SEN. KENT CONRAD (D), NORTH DAKOTA: What we need is a tax cut that will put money in people's pockets, quickly. Capital gains tax doesn't do that. Second, in the current investment environment, people are unlikely to go out and sell stocks that are at very depressed levels.
O'BRIEN: Conrad says the administration's tax rebate was too small to have any impact, and the long-term cost of the president's tax cut is too expensive. And what should Congress do now? One political economist says: nothing.
LESLIE ALPERSTEIN, WASHINGTON ANALYSTS: My guess is that what is in place is appropriate. We've got our tax cut, and I think anything that the Congress does now will probably be viewed as messing up.
O'BRIEN: Alperstein predicts the economy will be turning around by early next year at the latest. The timing will be critical, as it could set the frame -- frame the debate for elections that follow. Lou?
(END VIDEOTAPE)
DOBBS: Tim, thank you very much. Tim O'Brien from Washington.
Also in Washington, the defense secretary today declared war on Pentagon bureaucracy. Donald Rumsfeld is in the midst of a sweeping and controversial review of the military, and his speech today made clear that reform will include Defense Department job cuts. Secretary Rumsfeld joins me now from Washington. Mr. Secretary, good to have you with us.
DONALD RUMSFELD, SECRETARY OF DEFENSE: Thank you, Lou. Good to be here.
DOBBS: (UNINTELLIGIBLE) once said to me that bureaucracy is a state of mind. And that state of mind, as you well know, better than I suspect anyone, gripped the Pentagon for a very long time. Will you be able to -- do you believe -- to change the culture there?
RUMSFELD: Oh, I think we will. You know, if you think about it, in the private sector a company that fails to adapt to new circumstance fails and dies. In government, it can't die. So it goes on. So the incentive to adapt is much less. We need to fashion incentives and disincentives that will enable us to be much more innovative and much less bureaucratic. We've got wonderful people here who want this place to work well for the taxpayer, and we have to be respectful of taxpayer's dollars. So I think we will be successful.
DOBBS: Successful -- you pointed out today in your speech, as you have previously -- that if you achieve savings of only five percent, the Pentagon budget is so vast that would save some $18 billion dollars. How quickly can you save that 5 percent? Because you have about two million employees. No company in the world has anything approaching that.
RUMSFELD: Well, it takes some time. And indeed, as you know, sometimes you need to invest the money up front to make savings. For example, we're going to have to revamp our financial system so that we can actually understand what's take place. At the present time, the financial systems are not capable of tracking some $2.6 trillion worth of transactions.
DOBBS: Not capable? How soon could they be made capable?
RUMSFELD: Well, it looks like we've got a good chunk in the budget to get after it, and it looks to me like it could take two, three, four years. So during that period of time could it cost us some money. On the other hand, we can increase our so-called tooth-to-tail ratio rather smartly, I think. We can take what I believe to be a very reasonable 15 percent cut in the tail, in the headquarters staffs, as opposed to our forces. We've got a lot of people who want to do that. They recognize that these layers of bureaucracy here slow us down, make us less innovative. We are not as capable of dealing with problems in the time frame that is necessary. So I think we'll get a lot of good support.
DOBBS: A lot of good support -- you pointed out the president has indeed mandated these changes. Nonetheless, also as you are pointing out, it is difficult mission by any stretch of the imagination. What is the first guidepost here? The first benchmark that we'll see -- the date the point to say, "Donald Rumsfeld is succeeding or not succeeding as he revamps the bureaucracy in the Pentagon."
RUMSFELD: Well, there can be so many pieces to what we are doing, but one of the first things that will happen is the -- we brought in three service secretaries, who all have proven track records in the private sector. They are determined. They are experienced. They are talented. And I have every confidence that they will be successful. They are going to be announcing significant changes in how the secretariats function with the military staffs in the Army, the Navy and the Air Force in the period immediately ahead.
Second, we will be seeing the effects of a 15 percent cut of headquarters over a period immediately ahead. And in addition, we are going to establish some ways to measure -- you know, what you measure improves, it gets better. Once you establish those metrics and announce them and track them, good things happen.
DOBBS: As you know, Mr. Secretary, "Time" magazine, other publications have basically pronounced your efforts to overhaul the Pentagon and to eliminate the bureaucracy as already defeated. Do you -- do you want to comment on those early forecasts?
RUMSFELD: Well, you know, if you are not -- if you are not -- if you are doing something, somebody is not going to like it. And there is no question but that when you set out to take an enormous bureaucracy like this, and to try to bring it into the 21st century, there are going to be a lot of people who are not going to like it, because it is going to affect their circumstances. But, you know, that is the way it is in life. We are just going to plow ahead. If there is a struggle, so be it. We are ready for it.
DOBBS: Mr.Secretary, good have you with us. Thank you.
RUMSFELD: Thank you, Lou.
DOBBS: Defense Secretary Donald Rumsfeld. Well, today it was a difficult and volatile session on Wall Street, the Dow Jones at one point down more than 100 points. But after a day's movement in prices, the indexes didn't budge much. The Nasdaq ended higher for only the second time in 10 sessions and both averages are still trading near their spring lows. But again, as I said, not much movement in those indexes today. Christine Romans and Greg Clarkin kick off our market coverage tonight. Christine, with you at the New York Stock Exchange.
ROMANS: Lou, the S&P 500 did manage to break a four-session losing streak, but just barely. The Dow Jones industrial average ended just about exactly where it started. Pent-up selling afflicted the market early, but then the bottom fishers stepped in when the bottom didn't fall out, and the Dow Jones closed flat. Still, it stopped last week's sell-off.
But the worry is that the worst is not behind us. Look what Lehman Brothers' Jeff Applegate said today. He says there will be another leg down in the economy, and profits -- the trough in stocks lies ahead, not behind. He cut his earnings expectations for the S&P for this year and next, also his year-end targets for the S&P 500 and the Dow Jones industrial average.
Also holding the bulls back here, the confession season is just getting under way. Already 407 companies have warned for third quarter. That is on track to make a record, and Wall Street sees profits falling 17 percent for S&P 500 companies in the period. So that is a back drop that has folks a little bit nervous. Still, chatter again today, Lou, about the Fed and whether it could come in with some sort of intermeeting move. J.P. Morgan is predicting that is likely. This week, 25 basis points. Traders on the floor are saying they would like to see it, but they think the Fed is going to look at the rest of the data and wait until October 2. Lou?
DOBBS: How much lower do you think the averages could go, Christine, if the Fed cut interest rates again?
ROMANS: If it's a surprise there could be knee-jerk rise up. But you're right, the Fed has been cutting all year and it hasn't helped very much at all. In fact, it's hurt more than anything else.
DOBBS: I think we should also point out that Jeff Applegate posting a 4 percent gain in the S&P 500. That doesn't at first, of course, sound like much, but that means the S&P 500 actually would have to gain about 26, 27 percent from here by year's end to meet that 4 percent, right?
ROMANS: Absolutely. He sees 11,500 on the Dow as well, so we'd have to see some sort of rally heading into the end of year for those to be met. It is interesting stuff.
DOBBS: Christine, thanks as always for providing such interesting "stuff," as you put it.
The Nasdaq, as I said, did budge -- but barely, managing a seven- point gain, breaking a four-session losing streak as well. Greg Clarkin has the story for us from the Nasdaq marketsite -- Greg.
CLARKIN: Lou, this was hardly anything to get excited about today. Some traders said actually it was more aggravating than anything, in that they believe that it delays the inevitable, they believe there will be another bout of selling to hit the tech stocks sparked by some profit warnings that could be in next couple weeks. But all in all, the Nasdaq did gain almost eight points. It closed at 1695.
Some of the big winners today included companies that supply chips and circuits into the wireless business, into the telecommunications devices. One of those companies posted a nice gain today was Anadigics. It was up 19.4 percent, and this despite the fact the company said it will lose more than expected for the quarter, but revenue will be higher than expected due to the strength of its wireless business.
Now take a look at some of the related stocks, such as RF Microdevices, which came out today and said that its quarter is shaping up better than expected, and that is due to the strength in the wireless arena. That stock a big gain. And related company TriQuint Semiconductor also posting a gain. Microsoft up about four percent on a report in "The Wall Street Journal" that the company is drafting a new proposal for another round of settlement talks in its antitrust battle.
And then Yahoo!, on the back of U.S. Bancorp-Piper Jaffray upgrade, was up almost nine percent or so, closing outs 1174 on the day. So Internet stocks, wireless stocks among winners today. But Lou, all in all, a lot of folks not excited by the activity today at all.
DOBBS: You said traders were aggravated, is that right?
CLARKIN: Yes. You know, it's really interesting to see the pessimism among the traders.
DOBBS: We don't want those traders aggravated. Calm them down. Relax them a little bit.
CLARKIN: That's tough to do.
DOBBS: Thanks, Greg. Greg Clarkin.
Jennifer Westhoven is at the Instinet trading desk now, with after hours trading activity for you. Jennifer, what's new?
WESTHOVEN: Hi, Lou. We're going to start off by talking about @home, which is kind of an example of how far the mighty have fallen at times. The stock is trading up two cents, at 39 cents a share, and it is up even after it said its CFO is departing to pursue other opportunities. Only last week this company dodged a potential problem with a large creditor. And of course they are in high-speed Internet access, so interesting to take a look at them.
Xilinx, though, is the most actively traded stock by far here -- communications chip. It is down by about a percent after it gave its midquarter update. Lots of tech companies come out, hold these with analysts. It is down 14 cents -- excuse me -- it dropped further since then. It's down 36 cents at $36.01 a share, so that's one to keep your eye on tomorrow. Again, very active trading in that.
And finally, we just want to mention Gateway, which reminds us that it is closing all of its operations, nearly, in Ireland and in Britain. About 900 jobs in Ireland. And just a reminder of how problems at U.S. companies certainly affect the world economy. Lou.
DOBBS: And Jennifer, as fast as Xilinx appears to be moving there, maybe we better keep eye on it throughout the evening. Jennifer, thanks a lot. Jennifer Westhoven.
Friday's unemployment report inspired considerable gloom and doom among some politicians and economists, but there were some upbeat comments today from the Federal Reserve. Those officials' coming at the annual meeting of the National Association for Business Economics -- yes, there really is such an organization -- in New York.
Allan Chernoff was there. Allan.
ALLAN CHERNOFF, CNN CORRESPONDENT: That's right, Lou, there is an organization, and they got an optimistic view from some public officials today. People from the Federal Reserve, two presidents of local Fed banks -- and in fact, they were Federal Reserve bank President William Poole of St. Louis and also Anthony Santomero of Philadelphia.
Both argued that the economy has yet to feel the full effects of the central bank's interest rate cutting. They say the economy appears on its way to recovery. The St. Louis Fed president endorsed a forecast for stronger growth from the National Association for Business Economics.
(BEGIN VIDEO CLIP)
WILLIAM POOLE, ST. LOUIS FEDERAL RESERVE: There is consensus forecast that the economy's low spot is this quarter, maybe even last quarter; that that is the low point of growth. And that seems to me to be a very sensible outlook.
(END VIDEO CLIP)
CHERNOFF: That forecast calls for economic growth this year of 1.6 percent and a pickup next year to 2.7 percent. Two thirds of the economists surveyed argue there should be economic rebound before the end of the year. The chairman of the Council of Economic Advisers, Glenn Hubbard, said the turn will come in the fourth quarter. There were, however, a few sobering comments. Anthony Santomero of the Philly Fed cautioned that the Federal Reserve is like a doctor: it can only help cure some illnesses.
(BEGIN VIDEO CLIP)
ANTHONY SANTOMERO, PHILADELPHIA FEDERAL RESERVE: There are circumstances where policy action takes a while to have an effect. And there are circumstances where in fact it is difficult for us to respond as quickly as we would like.
(END VIDEO CLIP)
CLARKIN: Economist Henry Kaufman was also sober, saying the economy's future to some degree lies in the hands of the stock market.
(BEGIN VIDEO CLIP)
HENRY KAUFMAN, PRESIDENT, HENRY KAUFMAN AND COMPANY: I think there is a slowdown, a good part of the slowdown in consumer spending from here on will depend on the performance of the equity markets.
(END VIDEO CLIP)
CHERNOFF: Kaufman described the economy as an airplane that had been cruising at 40,000 feet, and is now barely in the air, at about 1,000 feet. Lou.
DOBBS: Allan, you've got to reconcile this for us. Is it a doctor or is it an airplane? I can't figure out which.
CHERNOFF: Well, each economist has his own analogy. And they did use them.
DOBBS: The Fed like a doctor?
CHERNOFF: Yes, yes.
DOBBS: I love it.
CHERNOFF: They referred to doctors, medicine, a long analogy he used.
DOBBS: All right. And they have quite disparate views. Thank you very much, Allan. Allan Chernoff. Well the debate over the economy's fate, of course, is fierce. But most economists now agree at least on one thing: consumers will be the deciding element in this economy as to whether or not we avoid recession. And a report today from the Fed suggests that consumers may be pulling back. The Fed said consumer credit was virtually unchanged in July. Analysts had expected an increase. July's results follow a near two billion decline in June. That was the first decline, by the way, since 1997.
Consumer spending hinges on job security. And my next guest tonight says unemployment has never jumped this far this fast without the economy falling into a recession. Lakshman Achuthan, now a regular MONEYLINE contributor -- he'll be here every week -- from Economic Cycle Research. Good to have you with us.
LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INSTITUTE: Thank you.
DOBBS: Let's start with the NABE. I wish that organization could figure out a new trade style if you will. But that group of economists. Anything there? We heard Allan's comments -- any headline from your perspective?
ACHUTHAN: Well, it is rather expected when you have a consensus forecast, they tend to do quite well. In between turning points. However, around turning points, the errors systematically become quite larger, because there is a breakdown in the types of relationships that people are watching. So this is kind of as expected.
DOBBS: How much you would put on consumer spending at this point? That report being flat after a two billion dollar decline?
ACHUTHAN: Right. I would put a lot on that. The consumer has helped to mitigate this downturn this year. And if they begin pulling back -- and we're seeing some anecdotal evidence that they are -- then there's not a lot holding the economy up. And we continue in the cyclical downturn we have.
DOBBS: Lakshman, as you say "pulling back." But in some ways these consumers are being pushed back. That 4.9 percent unemployment rate Friday -- that doesn't look particularly encouraging.
ACHUTHAN: No. Well put. They are being pushed back. Consumers had been coming up beyond the call of duty here, in a very tough environment. We have never had a rise of more than 4/10 of one percent in the unemployment rate outside of a recession. Now we are seeing a one point rise -- more than twice that. And that is a recessionary condition.
DOBBS: It's actually better than year-to-year, isn't it? It is 3.9 percent from last October, and we are at 4.9 percent now. That is strong. And 4/10 increase in this latest report when we expected something like .1 or 0.2.
ACHUTHAN: You see a number of things that are disturbing. You see the pervasiveness of job loss across industries. Outside of the manufacturing sector, the rest of the economy is becoming sick, to jump on the doctor analogy.
DOBBS: I was hoping you would avoid that one!
ACHUTHAN: Too easy . I'm sorry.
DOBBS: OK.
ACHUTHAN: But the other thing that I'd like to point out...
DOBBS: If it's good enough for the Fed, it's good enough for you.
ACHUTHAN: There you go. But I would point out that people say employment is a lagging indicator. That is half true. The unemployment rate, when it troughs and moves up like it does, that is a leading indicator of recession. It has a seven-month lead on average. It could be longer or shorter, but that is consistent with a recession.
DOBBS: So what in the unemployment rate indicates recession?
ACHUTHAN: The rise. The troughing in October at 3.9 and then the subsequent rise up...
DOBBS: Anything from trough forward...
ACHUTHAN: Of that magnitude.
DOBBS:...of that magnitude. A magnitude of ...
ACHUTHAN: Of over 4/10 percent. And that is what we have here, so it's consistent.
DOBBS: OK. Lakshman, thanks very much.
ACHUTHAN: Thank you.
DOBBS: As we will continue to ask you to watch this very carefully for us. Lakshman Achuthan.
ACHUTHAN: Sure.
DOBBS: Coming up next, Hurricane Erin is drenching the Bahamas. We will tell you what the mainland is getting ready to experience. The economy may be a bust, but the housing market is booming. And we'll tell you exactly where in our next report. And Blockbuster shaking things up. We will tell you what's behind the company's big charge and its move from tapes to DVDs. It's all ahead right here on MONEYLINE.
(COMMERCIAL BREAK)
DOBBS: The National Hurricane Center now says Hurricane Erin will not hit the United States directly -- or Canada directly, as things now look --but they do say that parts of New England could get hit with pounding, heavy surf. Erin today skimmed Bermuda, knocking down trees and powerlines, but there were no reports of serious injuries or damage. At last word, Erin was about 600 miles south of Nova Scotia, moving northwest at eight miles per hour.
In Japan hundreds of people are hunkering down in makeshift shelters as Typhoon Danas edges toward the main island of Honshu. Two people have been killed, four other are missing in mudslides triggered by torrential rains accompanying the storm. Thousands of travelers are also stranded. Typhoon Danas is expected to hit coastal areas as early as tomorrow.
An earthquake delivered a bit of dinnertime scare to a number of people in Los Angeles. The 4.2 earthquake was centered one mile east of Beverly Hills. People living from San Fernando Valley to Orange County reported feeling that tremor yesterday evening. There were no injuries reported.
This economy may by slowing, but so far the real estate market has remained relatively strong. And in places like Orange County, California, in fact, it is so strong that people are literally lining up around the block for the chance to buy a home. Casey Wian has the story.
(BEGIN VIDEOTAPE)
UNIDENTIFIED FEMALE: We got from how many -- 63 down to 28, so...
CASEY WIAN, CNN CORRESPONDENT (voice-over): Lori Shlegal is plotting strategy. The Huntington Beach homeowner wants to buy a new home in a market so hot she has camped out for 36 hours just to get her name on builder priority list.
LORI SHLEGAL, HOME BUYER: We bought a home two years ago, did quite well on it. We bought brand new. We decided wanted to go little larger and closer to the ocean, so we are going to take our profits and get what we really want.
WIAN: What everyone here really wants is to go home. But they are not willing to give up a chance at a prime piece of the nation's hottest residential real estate market.
UNIDENTIFIED MALE: She and I are going to be here the next two nights...
PHILIP YASSKIN, CHRISTOPHER HOMES: We knew there was high interest level. We didn't think people would be so enthusiastic about the properties that they would actually camp out for four days waiting just to get a priority number.
WIAN: Orange County home prices have jumped 14 percent in the past year. The median price now nearly $360,000. Even with the slowing economy, 39,000 new jobs were created in Orange County during the past 12 months. Only 9,000 new homes were built here. That imbalance is expected to keep prices high for the foreseeable future.
JOHN BURNS, MEYERS GROUP: I'm expecting Orange County to stay near the top. I think we have had our -- we have our tech sector here which has obviously taken a hit. We have also got strong financial services sector, a strong pharmaceutical sector. We are fairly diversified.
WIAN: That optimism is convincing thousands of people, including laid-off tech workers, to become realtors. Membership in the Orange County Realtors Association has more than doubled since 1997.
DAVID SILVER-WESTRICK, ORANGE COUNTY ASSOCIATION OF REALTORS: We have all had listings in which we could get four, five, six offers. Sometimes the property would go for more than the asking price.
WIAN: Real estate veterans know any hot market can cool quickly, and existing home sales have slowed recently. Still, prices remain high, unlike other investments.
UNIDENTIFIED FEMALE: Stock market, again, it's just been like this. Property values in Orange County have been -- have sustained themselves.
WIAN: With her name on the list, Shlagel heads home, confident she's investing time and money wisely.
SHLAGEL: We are out of here. Yea!
WIAN: Casey Wian, CNN Financial News, Huntington Beach, California.
(END VIDEOTAPE)
DOBBS: After record-setting sales in the first half of this year, the national housing market is expected to slow. Despite that, the National Association of Realtors says the median price for new homes will be about $178,000 for this year. That would be a 5 percent increase over a year ago.
Coming up in the next half hour of MONEYLINE, Blockbuster makes a major move into DVDs. Does that mean that VHS tapes are heading the way of those good old eight tracks? Then, we'll tell you about the gold-glove battle for Gucci. If you own the stock, you are a winner. We'll tell you why next. And forget about tax cuts and Social Security lockboxes. My next guest knows how the government can fix this economy. And he'll share that with us when we return.
Announcer: Up next, Lou speaks with market strategist Alan Ackerman.
(COMMERCIAL BREAK)
DOBBS: A rocky day on Wall Street ending with the markets little changed. A slow start following last week's big sell-off. On the New York Exchange, nearly 200 companies hit new 52-week lows today, including Dow components Boeing and Dupont. Sony and United airlines also hitting new lows.
On the Nasdaq, about 250 companies today hit new 52-week-lows. And among those, Ciena, Exodus, Sun and Sycamore. A flat close on the Dow, the index falling less than a point on the day, ending just over 9600. Declining beating out advancers by a margin of about two to one.
Among the most active issues on the Big Board today, EMC climbing after the company released a new line of computer software and hardware. Qwest Communications up nearly 10 percent today, that after announcing plans to cut 6 percent of its work force.
The company also lowering its revenue projections for the rest of the year. And investors, by golly, they liked that turnaround concept.
Shares of Compaq and Hewlett-Packard both lower today. Investors continue to be unimpressed with the proposed acquisition of Compaq by Hewlett-Packard. Both companies are working hard to gain support, launching an e-mail and telephone campaign, as well coming with new ads.
The Nasdaq up 7 points on the day, closing just under 1700. Declining issues again beating advancing issues by just about two to one. Among the most actives today on the Nasdaq, shares of Oracle managing to climb nearly 40 cents. Oracle set to report quarterly results this coming Thursday.
Shares of Intel finished up nearly 20 cents, a day of heavy trading. The company is trading just $4.00 above its 52-week lows. And shares of Qualcomm up nearly $1.50. That after Credit Suisse First Boston raised its rating to a buy from a hold.
And taking a look at some of the winning and losing sectors of the day. Among the worst performing groups, fiber optics components down more 5 percent today. Amici Systems, losing more than a quarter of its value, after warning it would post a larger than expected loss.
Corning, Ciena also dragging the group lower. Electronic retailers down 4 percent today. Shares of Circuit City down another dollar after plunging 20 percent Friday, that on disappointing same- store sales figures.
Kodak, leading photo equipment stocks lower today, that after shifting management of its struggling consumer imaging operations.
And on the upside, Philip Morris, lifting tobacco higher. Oil and gas drillers up -- move up on the day. HMOs gaining more than a percent. Prudential upgrading the sector, saying the group has less to fear under the Bush administration. And Gucci topping MONEYLINE movers tonight. Gucci shares surging more than $2.50. Two of the richest men in France reaching a deal over Gucci, ending a two year battle. That agreement gives Francois Pinot, the owner of PPR, control of the Italian luxury house. Mcdonald's losing more than a dollar, following news of the first case of mad cow disease to strike Japan. That pushing Salomon Smith Barney to outline risk of a slowdown in the Japanese hamburger market.
J.C. Penney falling more than $1.00 a share today. The retailer planning to sell $500 million of convertible notes. It may sell another $100 million if there is enough demand. J.C. Penney expects to use the proceeds to meet upcoming debt maturities.
Shares of J.C. Penney have more than doubled, by the way, so far this year. In fact, up 113 percent. Well, Alan Ackerman argues that an increase in capital spending is needed to stimulate this economy. And as you could tell from tonight's broadcast, this economy do something. Alan believes a boost would do more to revive the economy than further tax-cut proposals now being considered in Washington.
Alan, good to have you with us.
ALAN ACKERMAN, FAHNESTOCK & CO.: Lou, it's good to be with you.
DOBBS: Let me ask you first of all, what makes you think a capital gains -- what would that do?
ACKERMAN: I think essentially people are looking to be assured that they've got liquidity ahead. Many people have borrowed against their homes. Many people have not got other things to borrow against. An awful lot of equities are tied up with big profits still. And some people would like to liquefy. I think they also want to diversify their portfolio.
But it's an important thing to recognize that banks only lend when they think the economy is going to be good.
DOBBS: Right.
ACKERMAN: So we've got a lot of tight credit around.
DOBBS: A lot of tight credit. We've got a record number of personal bankruptcies in the most recent quarter. What do you make of this market, with all of this as the background and environment for the markets?
ACKERMAN: Well, I think it's really three categories we deal with now, bulls, bear and bewildered. We've got a great number of people who are sitting on the sidelines, who don't know what to do. And one can't blame them. We've got an earnings visibility, actually we're back in a struggle for investment survival, and earnings are MIA right now. I think people are really looking for visibility. And they're in no hurry to buy until they're sure earnings are going to be ahead.
DOBBS: And would you recommend that they buy without that visibility?
ACKERMAN: I would not.
DOBBS: And what stocks have enough visibility, Alan, for you to think about buying them?
ACKERMAN: I think two areas look attractive. One is energy and the other is education. In the energy side, I like Ocean Energy, which was up 73 percent against Standard & Poor's last year. It's a takeover candidate. It's in the oil and gas business. My feeling is, it'll be taken out at $30 or better. They have good earnings.
DOBBS: OK, well Alan, I'm going to bring in, if I may, Christine Romans at the New York Exchange, Greg Clarkin at the Nasdaq. And welcome back to join us here for a roundtable on what's going on. Because as we mentioned, this market in the context of this economy, with investors unable to make sense of what is -- continued reports of a lack of visibility and an economy that continues to defy -- to just about defy every economist in the country with the exception of Lakshman. It's very difficult environment.
ACKERMAN: Yes, it is. As tough as I've ever seen it.
DOBBS: Is it really?
ACKERMAN: Yes, it really is and I've been in the business for 41 years.
DOBBS: Now you're making me nervous.
ACKERMAN: Well, I make myself nervous every morning when I get up.
DOBBS: When do think we're going to see the markets themselves rise from these levels?
ACKERMAN: That's a tough call and I think everybody's trying to find the bottom. Everybody's trying to divine the place to dip in and own stocks. But I think it's not a bad idea to begin to buy now, but stay with stocks that are blocks of granite, stocks that can survive the worst of tremors below.
DOBBS: All right, Christine, do you know any specialists down there who are thinking that way?
ROMANS: Well, you know, it's interesting, Lou, because this morning, traders were telling me they came in early, they ate a good breakfast. A couple of different firms, seriously, had meetings this morning about what to do if the Dow was down 300 points. And they were surprised that that really didn't happen.
But one thing, you know, I've been meaning to tell you, you look at some of these stocks and how far they've come down. Nortel Networks, $1,000 in that stock a year ago is now worth $65. Traders here told me that that's about the same amount of money you'd get if you put $1,000 into Budweiser, the beer, not at stock. And you got the can deposits back.
So that's the kind of thing people are talking about down here.
DOBBS: Who did the calculation? That's what I want to know.
ROMANS: Yes, some guys down here on a very busy day. Isn't that scary?
DOBBS: Well, they're having a great breakfast and obviously, some rather interesting afternoons.
Greg, is everybody over at the Nasdaq well-fed as well?
CLARKIN: They're trying to maintain their appetites here, Lou. But I tell you, as to your question about blocks of granite, I think that's one of the problems today is that what folks consider blocks of granite have proven to be very, very -- you know, crumbling in fact.
And that has really led a lot of investors just to kind of shake their heads, as you mention, bewildered. But what they're looking for now is little pockets of strength. We saw that with the wireless companies today, the companies that make those chips in circuits to feed into the wireless handset, they're all talking about revenue increases, unexpectedly sharp revenue increases.
DOBBS: Revenue increases? We haven't heard that for a while. What do you make of that, Lakshman?
ACHUTHAN: Well, that sounds good to me.
DOBBS: Wait a minute, I want to write this down. Locksmith likes revenue increases.
ACHUTHAN: I like that, but we need to see more of that. We need to see businesses getting to areas where an increase in revenue leads to an increase in profit, which will lead to an increase in capital spending. That's where we need to get.
DOBBS: How soon do we get there with these markets? When will we see these markets turn in your view?
ACHUTHAN: I think the earliest that I see the economy coming back is sometime this winter. And that's a very tentative outlook because we're going against a global downturn. Now the stock market won't miss that. It'll go up a few months before that.
DOBBS: OK, well, let's go over to Jennifer Westhoven at the Instinet. Maybe Lakshman, this has occurred. Maybe we've got a turnaround right now in after hours trading. Is that true, Jennifer?
WESTHOVEN: No, we don't, Lou. And I'm -- let me tell you, I'm really relishing the thought of being the messenger as we head into warnings season here.
DOBBS: Well, we're there. WESTHOVEN: Yes. So many of them come after the bell, too, that that's going to be just great. Today we got Allied Waste. It's down 7 percent .
DOBBS: Oh boy.
WESTHOVEN: Yes.
DOBBS: Well, we're going to have as you all know, quite a few more of those -- as we go into confession season here, as we wrap up the final month of the quarter. That's another element for this market and all investors to start digesting more corporate earnings warnings as we move to the end of this quarter.
Well, turning to other corporate news tonight. Thank you all very much for your views. More consolidation in the energy sector to report tonight. Dominion Resources buying Louis Dreyfus Natural Gas for $2.3 billion. The deal a cash, stock, assume debt deal. Dominion raising its natural gas reserves and energy business. It expects this deal to double its energy trading and sales volumes, by the way.
More layoffs are hitting corporate America. Qwest Communications slashing 4,000 jobs. That's about 6 percent of its work force. The voice and data services company lowering its targets through next year, trimming its capital spending plans as well.
Job cuts are spreading through old economy companies as well. Tire maker Michelin North America cutting 2000 jobs there. That's about 7 percent of its work force. Michelin is cutting operating costs, trying to offset weak tire demand. Its parents company, Francis Michelin Group, taking a $100 million charge. Dominion dropping more than $2.00 on the day and Louis Dreyfus gaining nearly $6 on the day, while Qwest with what investors are taking as a turnaround story, moving up nearly $2 a share.
DOBBS: Coming up on MONEYLINE, Americans say I want my DVD. And Blockbuster is giving it to them. We'll have the latest on the company's new strategy. And consumer power, the key to avoiding a recession. I'll ask regular contributor about what Washington can do to bolster confidence.
(COMMERCIAL BREAK)
DOBBS: Back on January 3, the Fed surprised everyone with the first of what were to be seven interest rate cuts. Many economists have predicted we would begin seeing signs of recovery before the end of this year, but my guest says that hope is wildly optimistic given the latest unemployment figures.
Rik Kirkland joins me now, the manager editor of "Fortune" Magazine and a regular MONEYLINE contributor now. Good to have you with us, Rik.
RIK KIRKLAND, "FORTUNE": Thanks, Lou, good to be here.
DOBBS: At this point, do you think Washington can do much? KIRKLAND: Not really. I think Washington is very slow to get its act together. And they're still debating the last war, which is the notion of an endless budget surplus. And that's not the situation we're facing now.
DOBBS: Yes, suddenly the Democrats and the Republicans, CBO and the White House, they had all agreed there's $10 trillion out there in perpetuity and suddenly?
KIRKLAND: Well, part of this is they don't -- the numbers are never any good. Washington never gets these forecasts right. Rudy Pinner used to run the Congressional Budget Office, did a study. Found out the average error is $120 billion over the last decade. That's over 1 percent of GDP. How big was Bush's tax cut, $38 billion?
DOBBS: Right.
KIRKLAND: When you're off that way, it's tough to...
DOBBS: At least for this year.
KIRKLAND: For this year, yes.
DOBBS: And in terms of the interest rates cuts themselves, seven of them, we just haven't seen the impact. One can argue that we haven't seen the impact as we might've expected. Do you think we will soon?
KIRKLAND: We'll see some kind of impact. It'll help keep things from getting worse. My question is, is it really going to be enough to stimulate demand again? You've compressed five years of capital spending into the boom during '99 and 2000.
DOBBS: Right.
KIRKLAND: Economies overseas are either in recession or heading that way. There's no demand in Europe. Asia sent all their stuff to us. They've got no domestic demand there. So it's up to the consumer. The consumers a little overleveraged and tapped out. It'd be nice if Washington would start thinking about maybe actually stimulating the economy again, but they're hung up in the surplus.
DOBBS: On the surplus. And at least they're starting to talk today, the suggestion Trent Lott, that they'd be willing think about a payroll tax cut. Do you think that's constructive?
KIRKLAND: Might help. Might help. I mean, obviously, you wish. In retrospect, you've done more than $38 billion, giving the way the economy's turned out this year.
DOBBS: And just a week ago, the Democrats were complaining that the Republicans had done too much. This is a very time compressed economy we have right you now.
Rik Kirkland, great to have you with us. KIRKLAND: Thanks.
DOBBS: Look forward to seeing every week.
KIRKLAND: Great.
DOBBS: Thanks.
Coming up next on MONEYLINE, the demise of the VHS tape. It may be here thanks to Blockbuster. And a sluggish beginning to the fall movie season. That story and lot more still ahead on MONEYLINE. Stay with us.
(COMMERCIAL BREAK)
DOBBS: DVDs are now catching on. And Blockbuster wants to accelerate it. The country's biggest video chain saying it will cut back on its VHS inventory to open up shelf space for digital video cassettes and players. The company also to take a $400 million dollar charge for the third quarter. $50 million in the fourth, in order to account for all of the changes that are necessary. VHS tapes, as a result, could be heading the way of the eight track.
Hillary Lane has the report.
(BEGIN VIDEOTAPE)
LANE (voice-over): Sumatee Persad, is a living, breathing example of why Blockbuster is changing.
UNIDENTIFIED MALE: $14.06.
LANE: An early fan of DVD, she can't always get what she wants.
SUMATEE PERSAD, DVD CONSUMER: It's still a small quantity, but compared to when they initially came out, which is I think around '97, still a lot.
LANE: And when a renter or buyer like Persad can't find her choice, she goes elsewhere.
GARY SHAPIRO, CEO, CONSUMER ELECTRONICS ASSOCIATION: Well, if Blockbuster doesn't have the selection that consumers want, they go on the Internet and they buy them themselves. So what Blockbuster's announcement is simply a reflection of marketplace reality.
LANE: VHS titles outnumber DVDs by 10 to 1, but the landscape is changing at time warp sweep, pushed along by retailers like Blockbuster, who have begun selling not only movies, but machines.
JOHN ANTIOCO, CEO, BLOCKBUSTER: We're just using hardware as a promotion to get people to transition to DVD.
LANE: DVD is shaping to be fastest growing consumer electronics product of all-time, beating even the CD player. Manufacturers, including Sony, Toshiba, and JVC, sold a million units by their second year and forecast sales of 12.5 million units this year, putting DVDs in a fifth of American homes in just five years. By comparison, it took the VCR more than a decade to reach 20 percent penetration, although in the mid 1970s, the home entertainment trend was just beginning.
(END VIDEOTAPE)
Now it's unlikely that DVD will altogether replace VHS in the near future, because the basic DVD machines still lack one important feature, they don't record. Though a recent survey from the Consumer Electronics Association found that only 40 percent of VCR owners actually record on their machines.
Lou, I think it's because they don't know how to work them.
DOBBS: That could possibly be. All right, Hillary, thank you.
Well, "The New York Times" called it a frantic, graceless confusion, devoid of magic and playfulness. Those movies critics have a lot of fun, don't they? That did not stop moviegoers from going to "The Musketeer" and making it the top grossing film of its debut weekend in what was a slow beginning to the fall movie season.
It's a film that received better reviews and it cost far less to make. And it came in second. "Two Can Play That Game," it's called. Took in more $8 million. Rounding out the top five: "Rock Star," "Jeepers Creepers," and still "The Others."
Coming up next, why some of you think that perhaps we should focus on some better news. We'll take a look at your e-mail and I'll look ahead at tomorrow.
(COMMERCIAL BREAK)
DOBBS: Tomorrow Vitesse Semiconductor, after the market close, the company warning it expects to lose 12 to 15 cents a share, compared to previous expectations of a loss of 9 cents. Quarterly results of from H.J. Heinz and Neiman Marcus are due out tomorrow as well. Jack Welch, the CEO of the century, will be our guest here tomorrow night to talk about his new book, "Jack, Straight from the Gut."
And now taking a look at your comments. Alex writing in with a question about one of our new colleagues, writing to ask, "When will Kathleen Hays join MONEYLINE?" Well, in fact, she will join us one week from tonight, September 17th. And we're of course, all eager to welcome her aboard.
On to the markets and the economy, several viewers criticizing us and the media as a whole for focusing too much on bad news. One particularly harsh message, "All that I have been hearing from you guys is sob, sob, sob. Has it never occurred to you that this sob stuff only serves to upset the consuming public? I hear nothing but the grumpys. What about the sectors that aren't in the pits?>
Fair enough. Let's take a look at some of those pockets of strength tonight. The top five best performing industries year to date, office equipment up nearly 50 percent. Toys, consumer services, both up more than 30 percent. Auto parts, precious metals, both higher by more than 20 percent.
We can also mention that communications technology has dropped nearly 65 percent. And oil drilling down more than 40 percent, but I won't.
And just to show you, you can't please everyone, Jeffrey in Montreal writes in to say he seems to think we aren't bearish enough. He writes, "I'm tired of all the hype that this is the bottom. In fact, we should be hearing the presses start printing the official line. We're in a recession."
And finally, Stephan in Austria writing into us to say, "Lou, in my opinion, the only recession proof industry will be analyzing the recession."
Well, Stephan, you could well be right. Please send us your comments at Moneyline@cnn.com. For tonight, that is MONEYLINE. We thank you for being with us. I'm Lou Dobbs. Good night from New York. "THE FIRST EVENING NEWS" coming right up.
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