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CNN Live Today

Analysis of Sell-Off on New York Stock Exchange and Other Markets

Aired July 15, 2002 - 13:41   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.
KYRA PHILLIPS, CNN ANCHOR: The economy is the big headline today, especially with the sell-off on the New York Stock Exchange and other markets.

Charles Payne of Wall Street Strategies joins us now from New York with his take on the situation. We will hit a couple things that we haven't talked about yet throughout the day.

Charles, good to see you.

CHARLES PAYNE, WALL STREET STRATEGIES: Thank you.

PHILLIPS: What do you think about Bush's speech today, saying, hey, things aren't so bad. At the same time, the Dow is tanking as he is speaking.

PAYNE: I was pretty disappointed with it. First and foremost, last week after the speech, it was evident even as the speech was finishing up that Wall Street or investors weren't happy with it. We know the GOP is a get-tough organization, we know -- we have come to expect they would have longer prison sentences.

I think one of the problems is they didn't make changes, or Bush really didn't address the need for changes within the rules themselves. A lot of these companies that are bad people or have done bad things, per se, haven't broken a law, per se, or at least were able to work and operate within a shadows or gray areas of the rules. So I think investors need to feel confident their defined rules, when they -- or when they come back to the stock market, if they do.

PHILLIPS: So do you think the focus should be more on regulation or lack thereof versus corrupt mind sets?

PAYNE: Well, there is no doubt that everybody wants their pound of flesh right now. There is a lot of blood lust out there, and people will probably have to go to prison before investors feel better. But that doesn't change the financial situation that people lost a lot of money, and it doesn't change the fact that if you get back into the stock market, you want the playing field to be a lot more level than before. So I think really the heart of the matter is changing the rules and regulations.

A week ago, Merck had a division that booked 12 billion in revenues, never collected the money, but it all was within generally accepted accounting principles. So this type of stuff cannot happen in the future.

PHILLIPS: Let's talk about this report of business inventories.

PAYNE: It's really interesting, because today's session, I think, really was defined by the business inventory report for May, which hasn't gotten a lot of coverage because of the Bush speech. Before that, the futures were indicating that stocks were going to open higher, not meaning they will stay there, but for at least a moment, they were going to be higher to begin with.

We have a situation in this country where there is still a large chance or major chance we dip into a double dip recession, and really the difference will be whether or not the U.S. consumer can keep it going.

Now, the U.S. consumer saved the day last year. But can they keep it going? Will they continue to spend, particularly when their portfolios have gone down rather dramatically, particularly when unemployment is at record levels, particularly when there is so much fear. Last week, we had a sentiment number out there that suggested that people in this country are very afraid.

Are they going to continue to spend? Well, business inventories in May actually creep up a little bit. We expected them to creep down. That's not a good sign, and I think that sort of set the tone for the market.

PHILLIPS: So what are some other stories that are not making headlines? I guess good and bad. Maybe we should start with the bad.

PAYNE: Well, I guess on the bad side as we're coming into the earnings period where companies report their earnings for the second quarter, and I don't know that a lot of companies will be able to say things look great in the future. A lot of companies are going to beat the current earnings estimates only because they have been ratcheted down so low, that's that's not necessarily an Olympian feet.

Right now, what we really need is some sort of guidance for the future of visibility. This is the same thing that happened last year. In the second quarter, investors sort of assumed that the worst is over, but when that wasn't confirmed with corporate America and with the conference calls, the market began to slide again. That's probably -- my greatest fear is that we're not going to get a lot of visibility during this earning's season, and that will continue to scare investors.

So there are problems that go beyond the headlines, beyond the corruption. And really the fundamental problems of the market are what has to addressed before we can get some sort of relief in the stock market.

PHILLIPS: Charles Payne of Wall Street Strategies. I hope we do feel that relief.

Thanks, Charles.

PAYNE: So do I. Thanks.

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