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Lou Dobbs Moneyline
Fed Cuts Interest Rates; Dow, Nasdaq Up>
Aired October 02, 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.
JAN HOPKINS, HOST: Good evening, everyone. I'm Jan Hopkins in for Lou Dobbs. It has been three weeks since terrorists attacked America. Today, as the hunt for Osama Bin Laden intensified, the U.S. moved to repair some of the damage.
President Bush announcing plans to reopen Reagan National Airport. The closing there has nearly crippled the Washington area economy. American Airlines today slashing coach fares by up to 50 percent, the first major carrier to slash prices to draw travelers back to the skies.
The Federal Reserve cutting interest rates to help spark the nation's economy, which was suffering before the attacks. That Fed cut the tonic that Wall Street needed, helping to lift the markets as they try to recover from their record losses two weeks ago.
New York City holding a billion-dollar bond sale to help pay for the rebuilding from the attacks, which nearly destroyed the world's financial center. We'll also hear from former Treasury Secretary Nicholas Brady on the Bush administration's efforts to revive the economy.
We'll also hear from the CEO of Europe's largest air defense company on what the attacks have meant to his business. And we'll hear from Fred Alger of Fred Alger management, whose losses in the World Trade Center attacks went far beyond business.
But first, here are the latest developments in "America's New War." Defense Secretary Donald Rumsfeld travels to the Middle East this evening. We'll have a live report from Washington in just a moment. The Bush administration plans to use radio and television broadcasts to persuade the Afghan people that any military action targeting Osama Bin Laden, his terrorist organization, and the Taliban, is not aimed at Afghan civilians.
President Bush announced that Reagan National Airport will be back in operation on Thursday. Reagan National is located in Virginia near the Pentagon. It is the only airport that remains closed since the September 11th attacks.
British Prime Minister Tony Blair had tough words for the Taliban today.
(BEGIN VIDEO CLIP) TONY BLAIR, PRIME MINISTER OF GREAT BRITAIN: As for the Taliban, they can surround the terrorists or face the consequences. In any action, the aim will be to eliminate hardware, cut off their finances, disrupt their supplies, target their troops -- not civilians. We will put a trap around the regime. I say to the Taliban: Surrender the terrorists or surrender power. That is your choice.
(END VIDEO CLIP)
HOPKINS: Meanwhile, the Taliban is asking to see evidence linking Osama Bin Laden to the terrorist attacks. This after the U.S. began sharing information with some of it allies. The Bush administration says it will not negotiate with the Taliban.
For more on President Bush's message to the Taliban and Secretary of Defense Donald Rumsfeld's trip to the Middle East, we're joined by Kelly Wallace at the White House.
KELLY WALLACE, CNN WHITE HOUSE CORRESPONDENT: Hello there, Jan. We heard from Defense Secretary Donald Rumsfeld just a short time ago. He announced that he would be traveling to four important countries when it comes to this international coalition against terrorism. He'll be going to Saudi Arabia, Oman, Egypt and Uzbekistan, which neighbors Afghanistan. The secretary saying he will be taking a different message to each country.
All the White House will say, Jan, is that the secretary will be sharing information with these countries and also continuing to consult with U.S. allies.
Meantime, the White House quickly dismissing the latest claims coming from the Taliban. The Taliban leaders say they will negotiate with the U.S. if the U.S. turns over evidence. And earlier today more tough talk from President Bush after a meeting with Congressional leaders, the president saying that he won't setting any deadline for the Taliban to act. Mr. Bush saying, quote, "we will act on our own time."
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: There is no timetable for the Taliban, just like there are no negotiations. I have said that the Taliban must turn over the Al-Qaeda organization living within Afghanistan and must destroy the terrorist camps. They must do so. Otherwise, there will be a consequence.
(END VIDEO CLIP)
WALLACE: And in one other development, the White House saying it very much welcomes the comments of British prime minister Tony Blair today. Senior administration officials telling CNN that the administration did see that speech in advance and that it was "fine with it" even though the prime minister definitely going a big step further. The prime minister basically telling the Taliban either surrender the terrorists or surrender your power. Jan, as you know, the official line from this White House continues to be that the president wants the Taliban to act, although he has not specified any of the consequences that the Taliban regime could face. Jan, back to you.
HOPKINS: Thanks. Kelly Wallace at the White House.
While the Bush administration was focusing on Osama Bin Laden and the Taliban, Alan Greenspan was working on the economy. The Federal Reserve cutting interest rates for the ninth time this year. The half-point reduction lowered the short term rate to 2.5 percent. That is the lowest level since John Kennedy was in the White House. Kathleen Hays joins us now. That's low.
KATHLEEN HAYS, CNN CORRESPONDENT: It is. And the Fed has been busy this year, haven't they? Nine interest rate cuts. They started cutting interest rates on January 3. A lot of people seeing the weakness that was gathering in the economy thought they might start in December. January third, January 31, a series of rate cuts that have taken, as Jan just said, that federal funds rate -- that's the key short-term rate, it's an overnight bank lending rate -- down to this low level.
In fact, at this level, at 2.5 percent, it is now on par with the inflation rate, bringing the real fed fund rate close to zero, which many economists say is needed to turn the economy around. In its statement, the Fed focused -- like many of us -- on the terrorist attacks. They said, "The risks are weighted mainly toward conditions that may generate economic weakness in the foreseeable future."
Actually, this is the part of the statement that references what the Fed thinks it may do next. The Fed is clearly worried about the consumer. Again, worried about what the terrorist attack will do to consumers' psyche. Again, they said that "the terrorist attacks have significantly heightened uncertainty in an economy that was already weak." They followed that up by saying, as many experts do, there is a risk now that consumers and businesses could pull back on spending.
(BEGIN VIDEO CLIP)
ALAN BLINDER, FORMER VICE CHAIRMAN, FEDERAL RESERVE: In 1980 there was a quarter in which Jimmy Carter urged Americans to put away their credit cards and spend less. And some of them actually did. In that quarter the GDP fell at an eight percent annual rate. I don't know if that is going to happen in this quarter, but it might happen. That's the kind of danger that the Fed needs to guard against.
(END VIDEO CLIP)
HAYS: Auto sales for the month of September came out and they were not looking so good. Let's take a look. Chrysler down 28 percent. Ford down nearly ten percent. General Motors sales down only three percent. Of course, General Motors has been very aggressive. Zero interest rate, low interest rate financing. In fact, GM officials saying that in the final week of September, they actually saw their sales pick up. This is some good news. I thought it was so interesting, Jan, you mentioning the airlines. American Airlines finally cutting fares by 50 percent. I think a lot of people have been saying, make it cheap enough for me to fly and I'm going to feel a lot more like getting back on a plane.
HOPKINS: So it's interesting. GM auto sales actually increasing the last week in September.
HAYS: I've asked so many people. Are we too negative now? Are we overreacting as we often do? Too optimistic when things are good, too pessimistic. Some people say, it's hard to say. But the Federal Reserve is just not going to make the mistake of doing too little if more is needed. If they do too much, they can always start taking it back next year.
HOPKINS: Thanks. Kathleen Hays. The Bush administration also trying to do its part to turn the economy around, including offering tax breaks to businesses. Tim O'Brien has more on that.
(BEGIN VIDEOTAPE)
TIM O'BRIEN, CNN CORRESPONDENT: The White House meetings between President Bush and Congressional leaders have become almost a ritual since the September 11th attacks -- a unified and very public effort to get the economy back on track.
The White House is not expected to draw up its own detailed package, but it already providing general guidelines of what it finds acceptable.
BUSH: The best way to stimulate demand is to give people some money so they can spend it.
O'BRIEN: And how to do that? The administration wants tax breaks that might encourage business spending. Democrats don't necessarily oppose that, but also want, among other things, immediate help for those who lost their jobs as a result of the Trade Center attacks.
REPRESENTATIVE RICHARD GEPHARDT, HOUSE MINORITY LEADER: We do need to deal with these displaced workers, and that is another big concern. We got a lot of people going out of work.
O'BRIEN: And Republicans agree with that. There is also agreement that any new stimulus package must be big enough, perhaps as much as a $100 billion, to make a real short term-difference, but not so large as to cause unacceptable deficits or fuel inflation later. And there is consensus on the need to act. The president brushed aside questions about whether the country has already sunk into a depression.
BUSH: You know what? You let the money crunchers tell us that.
O'BRIEN: But one of the president's own money crunchers said it probably has, the first such concession by any high administration official. GLENN HUBBARD, CHAIRMAN, COUNCIL OF ECONOMIC ADVISORS: ...the probability of two quarters of negative growth is high. And I think the third quarter is likely to be particularly adversely affected and likely the fourth.
(END VIDEOTAPE)
O'BRIEN: The emerging question now is not so much whether we are in a recession but when might we get out of it. Many analysts believe it could be early next year, but the answer will be turn on how well and how quickly the White House and Congress can work together on a meaningful economic stimulus package.
HOPKINS: Capital gains tax cuts on the table or off?
O'BRIEN: Capital gains is not on the table. It's just too controversial, and it's very important that they act in a bipartisan manner. It's possible, but very, very slim.
HOPKINS: Thanks. Tim O'Brien in Washington. Is the Bush administration on the right economic track? Let's ask former Treasury Secretary Nicholas Brady. What do you think? Is this the right thing to be doing?
NICHOLAS BRADY, FORMER TREASURY SECRETARY: I think they are concentrating on the right things, Jan, I really do. I think we know very little about reversing out of a boom. We've been in a speculative bubble. My view of it is you ought to hit it with a 2 by 4. You ought to try to do everything. I think the interest rates cuts ought to be more, still more. Obviously, there will be spending coming from homeland defense.
I would cut to withholding taxes. I see no reason not to cut the capital gains, if you're trying to increase consumer confidence. If somebody wanted to say, "don't do that," I'd say, "if you're smart enough, go ahead. Try it your way then." But I would do both.
The last thing I would do is take look a look at some of the items that could be expense. Shorten the depreciation schedules, let them expense it this year. What we've got to do, it seems to me, is get the consumer of last resort, the American consumer back spending again. And I think program like that, which I think could put -- I don't know personally, but I think the Bush administration is headed that way. You have to hit it with a two by four.
HOPKINS: We've never had this combination of things, is that right?
BRADY: I think that's right. There isn't anybody -- there aren't any resident scholars on how you behave when you're coming down out of a speculative bubble. And so put all the forces together: monetary, governmental. Cut taxes. And I think that's way to do it.
HOPKINS: So the Federal Reserve has been very aggressive cutting rates, but you think they should really go to zero. We're at 2.5 percent. BRADY: I do, Jan. I think that the bottom of the last recession in '90, if my memory serves, we had negative real interest rates of one percent. We still have some to go. Let's keep going.
HOPKINS: If it turns out that they overdo it, then we can take all of this back?
BRADY: I don't think overdoing it is the problem now. I think you have got to get the consumer of last resort spending again. Get his confidence back. And I think an all points bulletin will do it.
HOPKINS: What about, as we were talking about, airlines are starting to cut fares. Hotels are saying that people are starting to come back and fill rooms and travel. Do you see signs that things are starting to turn?
BRADY: I'm not a good judge of that. If you keep pushing on all fronts that's the thing to do. This is coming out of a speculative bubble. Nobody knows exactly how to do it. Press the accelerator down. I'm not scared a bit of spending some government money at this point in time.
HOPKINS: Are you heartened by the fact that this seems to be a bipartisan effort?
BRADY: I think so. I can't see why there wouldn't be. Because I think it's a national problem. And I think the president has rallied everybody around. I think it is a bipartisan effort.
HOPKINS: It's interesting. Robert Rubin, former Treasury Secretary, has been involved in meetings. Paul O'Neill, the current Treasury Secretary, has not been in those meetings with Congress. Where is he in all this?
BRADY: I saw that stuff in the press today. I don't know why anybody is starting that. He's hard at work. He's not a guy that goes around trying to get his name in the newspaper. He's working hard with the president and the economic advisers. The fact that he's not up on the Hill blowing his own horn doesn't mean anything. He's doing fine.
HOPKINS: And it's OK to bring in a former Treasury Secretary to get more ideas?
BRADY: Sure. Why not?
HOPKINS: Because we need all the ideas we can get, is that it?
BRADY: It's an unknown science and we ought to draw on everybody.
HOPKINS: In the end, are you optimistic?
BRADY: I'm optimistic in the long run, because I think we can do the thing we did back in 1990. If you get the American economy free so it will itself provide the impetus to get prosperity back, that will work.
HOPKINS: Nicholas Brady, former Treasury Secretary. Thanks for joining us.
BRADY: Thanks, Jan.
HOPKINS: Still ahead tonight on MONEYLINE: the Federal Reserve cuts interest rates and stocks take off. We'll tell you what was behind today's Wall Street rally. We'll also have a report on New York City and a massive billion-dollar bond sale that's drawing a lot of patriotic support. And we'll take a look at business travel, and why some companies are grounding their workers. It's all ahead tonight on MONEYLINE.
(COMMERCIAL BREAK)
HOPKINS: Wall Street ended up today, celebrating yet another interest rate cut. The Dow Jones Industrial Average ending with a gain of more than 113 points. Christine Romans has more from the New York Stock Exchange. It wasn't that way all session, though, Christine?
CHRISTINE ROMANS, CNN CORRESPONDENT: No, it wasn't, you're right. They celebrated, but it was late in the session. Let me show you what the Dow did on the day. It started firm overall. A little choppy. And the then they did that Fed wait, and then the Fed came out and cut interest rates. And there was a big yawn until suddenly some buyers stepped in when they saw that the sellers were going to push the market into negative territory. Suddenly you had a triple-digit rally on your hands.
This comes despite the fact earnings warnings abounded again today. A lot of folks on Wall Street taking a close, close look at what's happening to some of these companies. Compaq Computer -- remember, it warned after the bell yesterday -- this one down two percent on the day. McGraw Hill, the publisher, down sharply. Office Depot down. Summit Properties -- this is a REIT, a real estate investment trust, down six percent.
Bucking some bad news, though -- and this is a key -- this next group of stocks. Ford warns and ends higher. NewsCorp warns as well, ends higher. Viacom comes out and says that they expect about $500 million in costs because of the September 11th attacks. It ends higher. And Abercrombie and Fitch, the specialty retailer, also ending higher today.
Traders tell me, Jan, that's pretty key. If you can get some of these stocks starting to do better on bad news, that might be a sign that the buyers are in control here on Wall Street. Again, it's a very day-by-day kind of story that we're watching today. And tomorrow we'll have to see how Nortel and its warning fares in the market -- Jan.
HOPKINS: Thanks. Christine Romans at the New York Stock Exchange.
The Nasdaq adding nearly 12 points. Greg Clarkin has more from the Nasdaq Marketsite -- Greg.
GREG CLARKIN, CNN CORRESPONDENT: Jan, I'll tell you, a little more pessimism when we count some of the Nasdaq traders today. You saw the modest rally on the Nasdaq. And we had a very similar trading pattern to the Dow today. We did see the Nasdaq go into a real quiet period in midday.
Volume tapered off as they awaited this announcement from the Fed. Then they got the announcement. It actually drove stocks a little bit lower. The Nasdaq was down about seven points before 3:00 before coming back and finishing with not even a one percent gain.
There were some bright spots scattered out there. We saw a lot of bright spots in the software sector. Siebel Systems -- the company was having an analyst meeting today. They did not offer any additional guidance for the quarter. That is taken to mean that the quarter is on track. Siebel is up nicely on the day, up better than two bucks.
Microsoft gained. Oracle posted a minor gain, Peoplesoft also rose higher. On the down side, the chip stocks really what held the Nasdaq back in the afternoon from participating in a broader rally. The semiconductor index was sharply lower. And you can see Intel was down 47 cents. And then a lot of the hardware stocks remained weak. Dell, Apple and Sun all posting losses on the day.
So at this point, Jan, a lot of folks took the rate cut today in stride and kind of focusing again on the preannouncements, the warnings. And really they are going to pick through those preannouncements and just see how badly companies have been affected by the events of September 11 and that's what a lot of traders say that's what their real focus is on at this point. They expected a rate cut, they got it. The Nasdaq really a just a minor gain today.
HOPKINS: And Nortel also will weigh on that market, right? For tomorrow.
CLARKIN: Without a doubt, Jan. We're going to see a lot of the networking stocks, the fiber optic-related companies tomorrow probably under some pressure if Nortel comes under an additional selling pressure.
HOPKINS: Thanks. Greg Clarkin at the Nasdaq.
Jennifer Westhoven is taking a look at what's going on in after hours activity from the Instinet Trading Desk. Jennifer, what about Nortel? How is it trading?
JENNIFER WESTHOVEN, CNN CORRESPONDENT: Hi, Jan. Of course, it is trading lower at $5.01 a share. That makes it down about 28 cents a share, of course, after it said that after it takes all those restructuring charges and other charges it will lose $3.6 billion in the third quarter, more than the amount of sales it will have for the quarter. A disappointing $3.5 billion.
And what seems like a classic case of downsizing, it is upping the number of job cuts to 45,000 and also saying it's lowering its sales targets every quarter to about $4 billion a quarter -- it used to be $5 billion a quarter -- so that it can break even.
We did have some flashes of optimism, among them Priceline. The company said that in the third quarter revenues were coming in at the high end of its forecast and that it is now selling 82 percent of the amount of products as it was selling before the attacks, which it says is a rebound that is doing better than that company expected. It is seeing strong gains, up nearly a dollar, adding 93 cents a share to $4.60. After the bell, the tone overall was definitely to the negative side. There were a handful of warnings; more than 10. That was really far more than the number of better-than-expected preannouncements that we saw here after the bell.
HOPKINS: Thanks, Jennifer. I guess Priceline selling some airline tickets.
Coming up tonight on MONEYLINE, the aftermath of the terrorist attacks. New York City holding a billion-dollar bond sale to pay for rebuilding. You won't believe the response. We'll have a report. We'll also have a report on business travel, and how many companies are keeping their employees closer to home. And with security at U.S. borders getting tighter, several trucking companies are struggling. That story and more, straight ahead on MONEYLINE.
(COMMERCIAL BREAK)
HOPKINS: The September 11th terrorist attacks could cost New York City up to $60 billion. The city holding a billion-dollar bond sale to recoup some of that cost. Not surprisingly, there's been an outpouring of support. Peter Viles has the story.
(BEGIN VIDEOTAPE)
PETER VILES, CNN CORRESPONDENT: If a sale of municipal bonds could be emotional, this was. Many of the buyers and sellers work near the trade center and have friends buried there. The mayor of New York, so often in the center of recovery efforts, emerged as the chief salesman.
RUDOLPH GIULIANI, MAYOR OF NEW YORK CITY: I'm not usually in the business of selling bonds. I this think it would be a very nice symbolic gesture if people bought those notes.
VILES: With that weekend appeal, the mayor helped drive demand for a special $1 billion issue of one-year recovery notes. Demand from retail investors jumped from $66 million on Friday, before the mayor's appeal, to $321 on Monday. Institutional investors snapped up the other $613 million today.
DAN KEATING, BEAR STEARNS: We had an order from an individual who has never bought municipals before. And he came in for five million. He was a first-time buyer. I think he did it out of patriotism, to tell you the truth.
VILES: Patriotism and faith in the city helped price these bonds at a premium, driving down interest rates. The last time the city sold one-year notes in August, it paid 2.47 percent. When the state of California sold one-year notes last week, it paid 2.2. New York paid just 2.13 this week. Demand was also helped by falling interest rates and the bear market in stocks, which makes the reliability of municipal bonds more attractive.
ALEXANDRA LEBENTHAL, PRESIDENT, LEBENTHAL AND COMPANY: Considering that we're in a time of declining interest rates and extremely low interest rates, evidenced by the Fed's activity today, patriotism probably took second seat to a good deal.
(END VIDEOTAPE)
VILES: Two percent interest may not sound like such a good deal, but remember, these bonds are triple tax free -- no federal, no state, no local taxes -- which makes them roughly equivalent to earning 3.9 percent on a taxable investment -- Jan.
HOPKINS: And it's very short-term. Longer-term municipals are much higher.
VILES: Oh, sure. They're up in the five percent range.
HOPKINS: Presumably, a $60 billion price tag, the city has to come back with more bond offerings in the future.
VILES: The city is going to get a lot of federal aid. It's going to get billions of dollars in federal aid. But so far, only 126 million has actually been given to the city. The city has immediate costs. It needs to pay those firefighters and the police their overtime. They can't say, "Well, we're not going to get the money until next spring." So they have some immediate costs and they went market and did pretty well.
HOPKINS: Thanks. Peter Viles.
The airline industry continuing to suffer. With fewer travelers, American Airlines late today offering huge discounts, saying it will cut coach fares by up to 50 percent. Swissair suspending all of its flights indefinitely after running out of cash. Thousands of jobs are now at risk and hundreds of passengers have been stranded.
Despite the slowing travel environment, Boeing inking a $1.6 billion deal today. Boeing selling 30 commercial aircraft to China, beating out rival Airbus for a contract. UAL, parent of United Airlines, buying luxury jets at the same time it accepts billions of government funds and plans to lay off 20,000 workers. UAL buying 30 business jets built by Dassault Aviation for about $20 million for each one.
And with U.S. airlines flying nearly half empty, United is trying to lure passengers back on board. United is slashing business fares through the end of the year by 25 percent to 50 percent. Checking investor reaction: Boeing gaining nearly two dollars. UAL edging higher. AMR and Delta also gaining. Despite that back-to-business fare, airlines have another factor to worry about when trying to lure back their most profitable customer: a ban on business travel. Kitty Pilgrim has that part of the story.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN CORRESPONDENT: Forget the breakfast meeting in Paris or the sales conference in Cairo. The corporate world is hunkered down around the speaker phone and few companies are flying internationally.
MARIANNE MCINERNEY, NATIONAL BUSINESS TRAVEL ASSOCIATION: Companies note two items to us. First is that they're anticipating future military action and do not want to put their travelers at risk. And the second is just general safety and security, making sure that as an American traveler you are safe in those regions you are going out to.
PILGRIM: The U.S. State Department has issued travel warnings on half a dozen new countries since the September 11th attacks, including Pakistan, Tajikistan, Kyrgyz Republic, Turkmenistan, Yemen, and Indonesia. Indonesia is the latest, the most populous Muslim country in the world. Despite its official posture of supporting the U.S., there is worry about random acts against Americans or American business.
Companies such as GM have prohibited travel to the Middle East. Honeywell is also discouraging nonessential travel to that region. Toyota Manufacturing North America says all travel, domestic and international, is running only a third of what it was before the attacks. Dutch-based Unilever has North America on its list of no-fly zones, as well the Middle East.
International security consultant Robert Strang says it's not fear of attack. The new worry is that executives will get stuck if there's a military action.
ROBERT STRANG, PRESIDENT, STRANG HAYES CONSULTING: It's not as if they are fearful of flying, but they are fearful, in fact, of being stuck in another country and not getting back to run their businesses here in the U.S. So until the next shoe drops, people have decided just to sit back, wait and be cautious.
(END VIDEOTAPE)
PILGRIM: Because many multinationals cannot continue to put the crimp on travel, many say this is just a temporary measure. The only problem is, there is no telling just how long temporary could be. Jan.
HOPKINS: A lot of video conferencing.
PILGRIM: There is a lot of video conferencing, and they are exploring the reaches of technology, as business is wont to do when they are confronted with new opportunity. HOPKINS: Thanks, Kitty. There's a lot of pressure in Washington to try to get those business travelers back in the air. Lawmakers hope an airport security bill will help, but talks about that measure have hit a snag, centering on the people who screen airport luggage. Kate Snow joins us with more from Capitol Hill. Kate.
KATE SNOW, CNN CONGRESSIONAL CORRESPONDENT: House negotiators have been meeting throughout the afternoon to try to work out an airline security bill. But we're told that they're at an impasse now, and the issue, as you pointed out, is security screeners -- whether they should be federal employees or not.
President Bush last week, when he introduced his ideas about airport security, said that he would like to see the federal government in charge of security, responsible for security, but that those employees who stand at the gates and stand there and do security screening could in fact be contract employees, private companies doing that work. House Republicans agree with that point of view. They say there's no need to create a new federal bureaucracy to do that kind of work.
But now we have a problem because Democrats in the House saying that they will insist that those employees be federal employees. Republican aides say they are now waiting to hear from the White House, hoping the White House will send them some sort of a signal whether they should back off of this or keep insisting on the president's point of view on this one.
Short of that, we're told the Republican majority leader will go ahead and put several different options out there on the House floor and allow the members to basically debate this out on the House floor this week. Jan, that's important. Because as you recall, for the past couple of weeks we've seen a real uniformity of purpose up here on Capitol Hill. Not a lot of arguing in public. Everything's been set beforehand and then they take it to the vote and it's pretty much unanimous. On the airline bailout, for example. On the economic package, the aid package that was passed. That's unlikely to happen now with this bill, Jan, because of this disagreement.
HOPKINS: What about the Senate?
SNOW: The Senate, interestingly has its own version of an airline security bill. And they do have a quite bit of agreement. Their version, different from, again, what the President wants.
Their version would allow for larger airports to have federal employees doing the security screening, but smaller airports in the United States would be able to use state or local enforcement, not private companies, but law enforcement at the state or local level. So again, that's another option that's out there.
Senate side feels that they have a lot of support for that. And of course, the Senate, controlled by Democrats. So they could go ahead with that version as early as Thursday, we're told -- Jan.
HOPKINS: Thanks, Kate Snow in Washington. The trucking industry, under heightened security since the September 11 attacks. Just last week, the FBI warned trucking companies about potential terrorist threats, prompting the industry to increase safety precautions, especially carriers transporting hazardous materials. Profits could suffer as a result.
But so far, truckers say it's a price they're willing to pay.
Casey Wian has the story from Castaic, California.
(BEGIN VIDEOTAPE)
CASEY WIAN, CNN CORRESPONDENT (voice-over): This California highway patrol trucking checkpoint is busier than usual. More trucks and drivers are being inspected because federal investigators warn the industry could become a target and tool of terrorists. The CHP is sending 500 inspectors throughout the state, checking driver credentials and cargo.
The story's the same nationwide, especially for trucks carrying hazardous materials.
(on camera): Hazmat permits are required for a range of materials, from seemingly benign household products, such as laundry detergent and point, to obviously dangerous materials, such as gasoline, fertilizer and chemicals.
(voice-over): Tom Wilson says he's been stopped twice in two weeks. Normally, it's once every few months. But he says, he doesn't mind.
TOM WILSON, TRUCKER: These things could be hijacked, just like anything else. And you're 9,000 gallons of gasoline or 8,000 gallons or diesel, you run into something, you've got one heck of a bomb there, you know.
WIAN: Nikolaus Tanklines is trying to prevent that. It's instructing drivers on security procedures and investing in security systems.
BILL BURGEMASTER: We're currently working on a surveillance system to be installed here in our facility, as well as even the keys for our vehicles before they were kept in a drivers room just hanging. And now we're installing a key lock box.
WIAN: Chemtrans, which hauls a variety of hazardous chemicals, is also tightening security. And it wants more government screening of drivers.
REGINALD LATHAN, PRESIDENT, CHEMTRANS: The industry has industry never seen anything like this. And so we are very, very concerned. And we are very, very serious about taking preventative measures. But we also don't know if those preventative measures will be adequate.
WIAN: For truckers, time lost to added inspections and security procedures can be costly, because federal regulations only allow them to drive 10 hours a day.
Nikolaus Tanklines estimates driver delays, security precautions and potential insurance rate hikes will cut the company's profit 10 percent this year. For now though, most truckers seem willing to sacrifice profits for protection and patriotism.
Casey Wian, CNN Financial News, Castaic, California.
(END VIDEOTAPE)
HOPKINS: Coming up on MONEYLINE, the latest developments in America's new war. We'll also talk to the CEO of the second largest air defense company in the world, and ask him what effect the September 11 attacks have had on his company's business.
We'll also talk to a guest who sees government spending in the wake of these attacks as a good thing for the economy.
ANNOUNCER: Next, Jan is joined by Fred Alger, chairman and president of Fred Alger Management.
(COMMERCIAL BREAK)
HOPKINS: Now for the latest developments on America's new war. A bipartisan group of 11 congressmen says the United States should provide financial support and weapons to anti-Taliban forces in the region. The group traveled to several European countries and met with members of the Afghan rebel forces, as well as the exiled Afghan king.
The State Department says it's received information that symbols of American capitalism in Italy might be targeted next month. The State Department is urging U.S. citizens to maintain a high level of vigilance. President Bush announced that Reagan National Airport will reopen on Thursday.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: There really is no greater symbol than America's back in business than the reopening of this airport.
(APPLAUSE)
After all, this is the airport that brings our nation leaders to Washington to do the people's business.
HOPKINS: Reagan National is located near the Pentagon and is the only airport that has remained closed since the September 11 attacks.
German intelligence officials tell CNN that they intercepted a phone call the day of the attacks in which two followers of Osama bin Laden applauded the deadly strikes.
A special task force on airport security is recommending stronger cockpit doors and additional security training for crew members. It's also recommending giving crew members access to nonlethal defensive capabilities in hijack emergencies.
Meanwhile, the government is investigating trading activities in 38 companies, including major airlines in connection with the attacks. It's checking for any unusual trading in company stocks to determine whether individuals had advance knowledge of the attacks and used it for profit.
A late day surge on Wall Street, capping off a volatile session. The Federal Reserve cut rates for the ninth time this year to 2.5 percent. That's a move that was widely anticipated. Stocks sold off initially after the news, before changing course by day's end.
More companies hit new 52-week lows than 52-week highs. Among the new lows on the big board: AES, Gateway, Qwest, and Mcgraw-Hill.
On the Nasdaq, more than 170 companies hit new 52-week lows, among them Applied Materials, Ciena, Redback and Tellabs.
The Dow finished the day up more than a percent, to close at 8,950. At the New York Stock Exchange, advancing issues led declining issues by a 2-to-1 margin.
Checking out some of the most active issues, Compaq shares dropping 17 cents one day after warning of a third quarter loss. Shares of EMC dropping a dime. The company's now trading nearly 90 below its 52-week high. Shares of Nokia lost a nickel on the session. The company stands 70 percent below its 52-week high.
The Nasdaq gained nearly one percent on the day to close just under 1,500. Advancing issues led declining issues by nearly four-to- three. Taking a look at some of the most active issues on the Nasdaq, Intel shares fell along with the rest of the sector. The chipmaker closing down nearly 50 cents a share. It was a decent session for software issues, Oracle finishing higher on the day. And shares of Nextel finished down 35 cents. That company currently off 85 from its 52-week high.
The leading sector in the market today was security software, stocks recovering from recent losses. The biggest gainer in that group, Checkpoint Software, up nearly 10 percent. The airline industry's efforts to attract passengers by offering steep discounts and the scheduled reopening of Reagan National Airport, giving that sector a lift.
Retail also higher. Wal-mart saying it will meet profit targets.
Sectors losing ground today, book publishers. Mcgraw-Hill warning profits will fall short of estimates. Also lower, chip equipment makers and alcoholic beverages. California wine-maker Robert Mondavi lowering earnings guidance. That stock losing more than 15 percent today.
The markets finishing higher, following the Federal Reserve's decision to slash interest rates. That's the ninth cut in just 10 months. But the Dow and the Nasdaq remain sharply lower since the Federal Reserve began aggressively cutting rates in January. Let's go back to our correspondents following the market action.
Christine Romans at the New York Stock Exchange and Greg Clarkin at the Nasdaq. Let's begin with Christine.
ROMANS: Well, Jan, let me start with the good news. A very diverse and broad, different array of stocks and sectors moving higher here today, to power that 113 point rally on the Dow.
Some of the big board winners. Take look at this. US Airways up 66 cents on a $5.00 stock. A lot of optimism about the reopening of Reagan National Airport. Home Depot up more than a point.
Retail stocks are doing well. A lot of folks saying that Wal- mart is going to come out and continue a very aggressive store expansion plan. That's got to say a lot about confidence in the American consumer. Lockheed Martin up dollar $1.39. This stock's up almost $7.00 since September 11 and up about 25 percent so far this year. So the defense stocks continue to do well. Exxonmobil up about 90 cents. The whole oil patch doing well here today overall.
Now here's the bad news. Tech doldrums continue and specifically, in telecom. Over the past year, Nortel Networks is down 88 percent. Lucent, Alcatel and Tellabs, also these telecom makers, they're all down dramatically.
Nortel, as you know, had this huge warning after the bell here today. The question is, what kind of fallout will there be tomorrow for Nortel and its competitors? As you know, sometimes those competitors can actually gain a little bit of ground, you know, at the risk of what's happening to their competitors. But we'll watch to see the whole group moves lower or if there's some that actually find some bargain-hunting tomorrow, just given the sheer magnitude of the losses so far this year -- Jan.
HOPKINS: Thanks. Christine Romans at the New York Stock Exchange.
Strength in software stocks pushed the Nasdaq higher. The Nasdaq gained nearly 12 points. Greg Clarkin joins us from the Nasdaq marketsite.
So the Fed rate cut helped, too?
CLARKIN: It certainly didn't hurt. But you know, it's interesting. There wasn't too long ago that you called trading desks and you get a lot of excitement, a lot of anticipation on the day that the Fed was expected to cut rates.
And at this point though, speaking with traders, they almost took it in stride today, almost something of a routine event, given the fact that we've had nine in about the last 10 months or so, but certainly doesn't hurt the cause.
And folks who were heartened to see the Fed doing pretty much what they expected. But here's really what they're talking about now. Their shift is turning back to the corporate news. They're expecting to get additional warnings and then the actual earnings reports themselves for the third quarter.
So they'll really be picking through that, to see what the impact from September 11 will be on the various technology companies, the various technology sectors. The chips really critical and crucial to any kind of move up by the Nasdaq.
Today, they didn't participate. They actually sold off in about the last 90 minutes of trading. And that really held the Nasdaq back from achieving a better performance today, outside of the 11 points or so that it gained.
Now that said, they were heartened by the fact that there were some software winners. We had Siebel Systems out there today, in an analysts meeting, not offering any additional guidance for the quarter. That was taken to mean that the quarter is on track.
We did see those software security firms doing nice business. One of them yesterday reaffirmed their quarter. So there have been some bright spots out there. And a lot of folks point back to a couple weeks ago. JDS Uniphase came out and said that they were starting to see their business stabilize.
So they're looking for, basically, to get a sense of just how bad the third quarter is and what the fourth quarter will be. But at this point, Jan, the traders say one thing that's really weighing on their minds is you have to go back to last Tuesday for the last time the Nasdaq closed above 1500, and right now sits a few points shy of that.
HOPKINS: We'll see what happens tomorrow. Greg Clarkin at the Nasdaq.
My next guest is pleased that the government is now willing to spend the surplus. He believes the idea of a "lock box" to protect Social Security was causing the recessionary environment in the first place.
Fred Alger joins me now. Welcome.
FRED ALGER, CHMN., PRESIDENT, FRED ALGER MGMT.: Hello, Jan.
HOPKINS: So you're pleased that the government is doing everything that it can to get the economy going, along with the Federal Reserve?
ALGER: Absolutely. I mean, a combination of tax cuts plus spending can chew up the surplus, which has been having a very deflationary effect on the economy. And the reason, I think, the economy's slipped into recession.
HOPKINS: And you think that the stock market will respond eventually to all of the stimulus?
ALGER: Oh, I think so. I think that by next summer, the economy should be growing briskly and of course, the stock market leads the economy. So certainly by next year, we should be moving nicely in a good strong stock market as well.
HOPKINS: So do we have to wait? Are investors kind of waiting for word from companies that things are changing, that their fortunes are changing? Or is it just kind of consumers and everyone else kind of feeling a little better?
ALGER: Well, I think it's the market always, leads and anticipates change. I mean, I think that's one of the interesting aspects about the stock market. And I think the action of the market, I think this is probably the first time the Fed has actually cut rates and the market has gone up, rather than down. And so, I think investors are sensing a change for the better.
HOPKINS: And -- but usually it's what, six months ahead of time that the stock market?
ALGER: Typically, but it may be, you know, we may get nine months this time. The market -- there's no fix rules, but it does lead. And I think it's anticipating a change for the better.
HOPKINS: Now you're in a very difficult situation. Your firm lost 35 of 55 people in New York in the World Trade Center attacks. You lost your brother. You're in the process of hiring people, trying to get back into business. You, yourself, coming back into the business. How's it going?
ALGER: It's going extremely well. Over the years, we've trained dozens and dozens of analysts. And we've been able to go to alums, our best alums and recruit them back to the firm. And I think within 10 days, we'll be able to announce that we're back, at the senior level, back fully staffed.
HOPKINS: And you had backup facilities and you have another place that you can go now? Is that right?
ALGER: Right. Well actually, we're going back to New York today or -- either today or tomorrow. We'll sign the lease for space back in Manhattan. We had actually anticipated, not anticipated, but feared that a terrorist attack might occur. So we had 50 miles from New York, in Morristown, New Jersey, we'd actually created a backup facility with full backup for back office, as well as for a research group.
So half of our company's been operating out of there. And at the same time, our main administrative offices have been in Jersey City, New Jersey.
HOPKINS: You have about $15 million -- billion that you managed.
ALGER: That's right.
HOPKINS: Have you managed to hold on to all of that?
ALGER: Yes we have. We have a couple of few accounts that have put us sort of on stand by, waiting to see how we kind of recreate our firm. And we hope to get those accounts back. HOPKINS: Thank you. Thanks for joining us. And we're sorry for your loss. We miss David, your brother.
ALGER: Thank you. Thank you.
HOPKINS: Topping tonight's MONEYLINE movers, Mcgraw-Hill tumbling nearly 6.5. The terrorist attacks pushing the publishing company's third quarter and full year earnings below expectations. Calpine gaining more than $3 a share. Earlier today Moody's upgraded nearly all of the company's debt to investment grade. And following that announcement, the independent power company said it planned to raise another $1.35 billion from a bond sale. That's in addition to the $3.5 billion already raised from debt sales this year.
Inktomi gaining more than 20 percent. The Internet software company says it will meet its fourth quarter guidance, though it's still posting a loss. Inktomi also cutting 150 jobs and taking a $13 million charge. Its stock price nearly evaporating as the dot-com bubble burst, shares plunging 97 percent over the last 52 weeks.
In other corporate news, Germany's Bayer buying Crop Science from Aventis for $6.6 billion, including debt. The deal making Bayer a leader in the agro-chemical market. Bayer's stock suffering since it withheld its leading cholesterol drug in August, after it was linked to more than 50 deaths.
Xerox selling four plants to Flextronics in a $220 million deal that covers more than $1 billion in annual manufacturing costs. Xerox also is planning to stop production at two U.S. plants.
While many retailers struggle in the wake of the terrorist attacks, Wal-mart says its sales remain on target. The world's largest retailer plans to open 50 new stores next year, and as many as 185 new superstores. The move will increase Wal-mart's retail space by nearly 10 percent.
Coming up on MONEYLINE, as the nation and the world prepares for the war on terrorism, we take a look at a leading aerospace firm. The CEO of EADS joins me next.
(COMMERCIAL BREAK)
HOPKINS: Airplane manufacturers are under major pressure as the airline industry sits in a brink of bankruptcy. In the past few weeks, Boeing has laid off thousands of workers. Its main competitor, Airbus, has yet to cut jobs, but the company says it has ordered a hiring freeze.
Joining me now is Philippe Camus. He's the chief executive officer of EADs, a majority owner of Airbus and also a defense contractor. Welcome to New York.
PHILLIPE CAMUS, CEO, EADS: Thank you, Jan.
HOPKINS: What about business? Have you had cancellations of commercial airplanes as people would expect given this climate? CAMUS: Well, we are in a situation where we are the anchor of the commercial aircraft business. We have a very strong background. And we admitted any cancellations is back, but we are anticipating, of course, due to the tragic events of 11th of September, that we should face cancellations or some postponement.
HOPKINS: But you're also a defense contractor. Are you seeing orders pick up for things like helicopters and fighter jets?
CAMUS: Yes, for helicopters. We have many requests from public agencies, for example, law enforcements or Coast Guards or Customs to buy more helicopters, because it has clearly situated concerns.
HOPKINS: And some of the other defense products, fighter jets, etcetera, are you expecting more orders?
CAMUS: Yes, because we shall need, I mean -- the transatlantic alliance will need more capacities for long range, (INAUDIBLE) for global projection. We're anticipating, for example, orders for military transformer craft, for mission aircraft.
HOPKINS: Now your company, the Airbus part of the company, had decided on a strategy of building large planes, the Airbus 380 with more than 550 passengers per plane. Has this event made you rethink this idea that people would want to travel on a plane with two decks and more than 500 people on the plane?
CAMUS: First I would like to tell you that we are very confident in the long-term future of the airline industry. And everybody needs to travel, even if now there are some reluctance to travel by aircraft.
We are quite sure after some -- a period of turmoil, passenger will come back. And that will feed this growth of the airline traffic percentage. And it's really adapted to the future. We shall deliver it in 2,006. And it will be a very low cost operating aircraft and it will address clearly the needs for the airlines to have a low cost in the future.
HOPKINS: But you haven't rethought the idea of whether people want to travel with so many other passengers with increased security and the difficulty of getting on and off planes?
CAMUS: This will be the first craft post 11 of September. So it will be equipped with all the new technologies which are available and on which we are working in order to improve the safety in the aircraft.
HOPKINS: Now Airbus or Boeing announced some contracts today with China. We heard from analysts that a lot of American airline companies might feel more patriotic and want to buy Boeing rather than Airbus. Have you been hearing that at all?
CAMUS: No. I see that first we are a global company. Airbus is providing workload for 100,000 American people. And so you know, in our modern world, we are, we have some relation on both sides of the Atlantic Ocean.
HOPKINS: Thanks very much. Philippe Camus, the CEO of EADS, which is the parent company of Airbus. Thanks.
CAMUS: Thank you, Jan.
HOPKINS: Coming up next, U.S. Postal Service makes a show of support with a patriotic new stamp. And we'll take a look at what's ahead tomorrow.
(COMMERCIAL BREAK)
HOPKINS: Wolf Blitzer coming up at the top of the hour. Here's Wolf with the preview.
WOLF BLITZER, HOST, "WOLF BLITZER REPORTS": Thank you, Jan. Coming up at the top of the hour, we'll have the latest developments as America targets terrorism. I'll talk with NATO Secretary General George Robertson. I'll also get a psychological profile of Osama bin Laden by a former CIA analyst who studied him for years.
And during our "CROSSFIRE" debate, Bill Press and Tucker Carlson will look at airport security. Who should be in charge, a one hour "WOLF BLITZER REPORTS" up next -- Jan,
HOPKINS: Thanks, Wolf.
Time now for a look at some of your e-mail. Many of you writing in about the airline industry and efforts to get people flying again.
Instead of a multibillion dollar bailout, Patrick Unkst asks, "Why doesn't the government send taxpayers $300 travel vouchers good on an any airline?"
Patrick, you may have found a use for your tax rebate, if you received one and didn't already spend it.
Matthew Barbaro in Michigan says he has high praise for American Airlines' chairman and CEO Donald Carty, for taking a pay cut. "That," Matthew says, "is called corporate leadership and sacrifice. Hopefully other CEOs will follow suit."
Looks like some have no choice. Cisco Systems this week said that top executives will not receive bonuses for 2001. But don't feel very sorry for CEO John Chambers. He received stock options that could be worth more than $300 million.
With GDP figures showing the economy still grew in the second quarter, Dave Simpson wonders why we don't hear headlines like, "the record U.S. expansion continues." He says, "Are you manipulating our facts?" No, it's hard to go forward by looking in the rear-view window. Wouldn't you prefer to know where the economy is going, not where it was in the last quarter?
Finally, Alinde O'Malley says advertisers should stop the somber tone they recently adopted. She writes, "We're inundated with this tragedy and will not get back to reality if we keep dwelling on it. Depressed people don't shop. We need humor."
Please send us your comments. Our e-mail address: moneyline@cnn.com. That's MONEYLINE for this Tuesday evening. Thanks for joining us. I'm Jan Hopkins in for Lou Dobbs.
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