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Market Meltdown; Fed Makes Interest Rate Cut; Dems Trade Jabs During Debate; Wicked Winter Woes; Inmate Could be Freed, DNA Points to Different Killer; A Day of Reckoning, Padilla Sentenced on Terror Charges
Aired January 22, 2008 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
HEIDI COLLINS, CNN ANCHOR: Less than an hour ago, the Federal Reserve announced a startling key interest rate cut, .75 percent. The action, a response to the threat of recession. Here's what the nation's treasury secretary had to say just a few moments ago.
Good morning once again everyone. I'm Heidi Collins. We have a lot to talk about today. That is the economy. A breathtaking move as we are talking about today to get this economy pumped up and get you to spend. The Federal Reserve announced just a few moments ago to cut that interest rate .75 percent. We want to go ahead and get reaction from all of our CNN correspondents who are standing by to talk about this.
But first, let's listen for just a moment to the nation's treasury secretary and what he had to say just a few moments ago.
(BEGIN VIDEO CLIP)
HENRY PAULSON, TREASURY SECRETARY: I think it's very constructive, and when I think it shows to this country and the rest of the world is that our central bank is nimble and is able to move quickly to respond to market conditions. And I think that should -- that should be a confidence builder.
(END VIDEO CLIP)
COLLINS: How will investors respond? We are less than 30 minutes now from the opening bell on Wall Street. And we have our financial troops in place, as mentioned, for what could be a real nail-biter of a day. Susan Lisovicz will have the mood on the floor of the New York Stock Exchange. Gerri Willis looks at what it all means for your investment and your retirement savings. Ali Velshi has the big picture and the bigger question, what's next? So we want to begin with Susan Lisovicz.
Susan, good morning to you.
SUSAN LISOVICZ, CNN CORRESPONDENT: Good morning, Heidi.
I was going to say this was going to be a terrible Tuesday. I'm going to change that. I think it's going to be a traumatic Tuesday. This is very rare that the Federal Reserve makes a decision inter- meeting on interest rate cuts. It's a big move, a 75-basis point move. We couldn't find the last time that the Fed cut this aggressively. The traders on the floor say the last time was 1984. The last time the fed made these kind of intermittent moves was in 2000 when the economy was not only not undergoing a recession but we had the attacks of 2001. September 17th, 2001 was the last time the Fed made this kind of intermittent move.
Having said that, as the treasury secretary said, it's suppose to instill confidence in the markets. That's one of the things it's supposed to do. It's not doing that. We're still looking at a very steep drop when this market opens in 28 minutes. One of the traders just said, here it comes. The train is coming off the tracks. A few minutes ago, Dow Futures looked like we were going to see a 600-point drop which would not be the biggest point drop we've ever seen. But it certainly would be a steep drop coming off of several weeks of steep drops, Heidi.
COLLINS: You got that right. All right. Susan, stand by. We'll be talking with you throughout the morning.
Want to take a moment to get now to Ali Velshi traveling with the Election Express to talk more about this.
Ali, what's the deal? Is it too late?
ALI VELSHI, CNN SENIOR BUSINESS CORRESPONDENT: You know, I got to tell you, the frustration out there, Heidi, is that the Fed says -- Ben Bernanke said last week in his testimony, we don't see a recession coming. We see an economic slowdown. Guess what? Nobody believes that. Nobody in America believes that and very clearly for the last two nights, nobody overseas believes it either. Then President Bush came out with his stimulus proposal on Friday. Guess what? Nobody thinks it's enough. Nobody thinks it's going to keep America out of a recession.
For so long, Heidi, we've been saying that even if America goes into a recession, even if the U.S. consumer slows down, other economies around the world are so strong that they can hold things up. It seems that may not be the case and that's the concern of people around the world.
This isn't just about sub-prime and the write-downs of sub- prime. This is about, is there enough spending out there in the world to keep things going. As you know, as we've discussed many times, nobody spends money like Americans spend money. That's why you saw this fed rate cut this morning because the idea is that the rate comes down, to 3.5 percent. They dropped it .75 percent -- 3.5 percent. Add three percent to that to get the prime rate, 6.5 percent.
That means you just got a discount on your adjustable rates that are tied to prime. Your credit cards, some of your adjustable loans. And as the Chicago board of trade opens and bonds start trading you'll see interest rates on mortgages start to come down possibly. As a result you have more money to spend. Hopefully you go out and spend that and keep the economy going. Many think too little, too late.
COLLINS: All right. Very good, Ali. We're going to come back to you in a little bit. I want to take a moment to get to CNN's personal finance editor Gerri Willis who is also standing by.
Really, Gerri, the question is, what do I do? The guy at home, sitting, watching this now and this unprecedented move by the fed. What do I do with my money? Is there something different?
GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Can I talk about the good news first? Cutting rates is good for consumers. If you have a variable rate loan out there, a home equity line of equity, a variable rate credit card or maybe an adjustable rate mortgage about to reset. This is a very big rate cut for you. You'll be paying less on your bills. That is very good news out there. The other big thing people are worried about this morning is their 401(k).
What can I look forward to? What is this going to mean for my 401(k)? I have to tell you, the worst thing to do right now is to sell into the teeth of the downturn. Stock pros call it, trying to catch a falling knife. If you are selling while prices are going down, it's just bad news because at the end of the day, you're going to reinvest in the market and you'll probably have to pay more for those stocks. Cooler heads will have to prevail for consumers today. I know a lot of people in the markets are very, very upset. For consumers, it's sit tight and wait it out.
COLLINS: All right, Gerri, thanks so much. We'll check in with you later on throughout the morning as well.
Want to take a moment to get back to Susan Lisovicz on the floor of the New York Stock Exchange with more on the good aspects because it's nice to hear some of the good things.
What you got there, Susan?
LISOVICZ: First of all, to echo Gerri's sentiments. First of all, you know, this is a cycle. It's a painful cycle, but it is a cycle. And these are things, as one trader just remarked as he walked past me, we've been through this before.
And in a sense, what sometimes needs to happen, and this might be the day, is you have just an extreme sell-off; something that is called capitulation. Big point loss, big volume and you get to a level where you start buying again. And that is historically what's happened and that may happen again today where people are just going to start nibbling and to Gerri's point, of course most people aren't day traders.
Most are saving for long term. Most people aren't taking out their money for tomorrow. They don't need it tomorrow. It's long term and there may be some bargains ahead. But these are the kind of things that people are talking about. The kind of global sell-off we've seen is something that may end up in a really big day and that may be the start of a temporary bottom where you can start building again, Heidi.
COLLINS: All right, Susan Lisovicz on the floor of the New York Stock Exchange. Appreciate that. And some of the good points to all of this which we'll also focus on today as those numbers get ready to go up, down, who knows where, come about 9:30 today of course when the stock market opens the day of trading. Susan, thank you.
Stay with us. We'll be following all these twists and turns on this big day. And minutes from now, this opening bell. Later, we'll break it down more. What do these numbers really mean for your wallet? Stay with CNN throughout the day, your best source of information about the economy.
Well, it got downright unpleasant. The front-runners on the attack during a democratic debate on CNN last night. Here now senior political correspondent Candy Crowley, part of the best political team on television.
(BEGIN VIDEOTAPE)
SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: Wait, no, Hillary, you just spoke ...
SEN. HILLARY CLINTON (D), PRESIDENTIAL CANDIDATE: I did not say anything about Ronald Reagan.
CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: You think this race isn't personal? Then you didn't watch.
OBAMA: While I was working on those streets watching those folks see their jobs shipped overseas, you were a corporate lawyer sitting on the board of Wal-Mart.
CROWLEY: They read their OPO research, used it frequently and never gave an inch.
CLINTON: I was fighting against those ideas when you were practicing law and representing your contributor Rezko in his slum landlord business in inner city Chicago.
CROWLEY: Also John Edwards was there.
JOHN EDWARDS (D), PRESIDENTIAL CANDIDATE: I also want to know on behalf of voters in South Carolina, this kind of squabbling, how many children is this going to get health care?
CROWLEY: So, first victim, that high-minded campaign on the issues. And even when they did get down to it, hostilities simmered, each accusing the other of distorting the truth. An economic stimulus plan; Obama said Clinton changed hers to match his. She said it wasn't so. Fiscal responsibility, she said he can't pay for his plans. He said it wasn't the truth. On health care ...
EDWARDS: There's nothing wrong with us arguing about this. But I believe that there is not a single man, woman and child in America who is not worthy of health care.
CROWLEY: It was two on one. Edwards and Clinton have health care plans that mandate insurance for everyone with government subsidies for those who can't afford it. Obama's plan pivots on offering the same subsidies but driving down costs so people can afford health insurance.
OBAMA: The mandate on families to buy health insurance that they can't afford, and if they don't buy it, you find them or in some other way take money from them.
CROWLEY: The Clinton campaign thinks this is a winner. It's one of her favorite subjects.
CLINTON: I think that the whole idea of universal health care is such a core democratic principle that I am willing to go to the mat for it.
CROWLEY: But mostly, this was a debate dominated by the dynamics a race with big stakes.
CLINTON: Senator Obama, it is very difficult having a straight- up debate with you because you never take responsibility for any vote.
CROWLEY: And two candidates with raw nerve endings.
OBAMA: These are the kinds of political games we are accustomed to.
CLINTON: Wait a minute. Wait a minute.
CROWLEY: Candy Crowley, CNN, Myrtle Beach, South Carolina.
(END VIDEOTAPE)
COLLINS: It's all or nothing in Florida. Republicans fighting over the winner take all stakes; 57 delegates. No split like previous primaries. Rudy Giuliani has been banking on a Florida win. But John McCain has momentum from his weekend victory in South Carolina. And don't forget about Mitt Romney. Or Mike Huckabee; although Huckabee may want to forget the comments from one of his star supporters attacking John McCain's age.
(BEGIN VIDEO CLIP)
CHUCK NORRIS, ACTOR: John, I feel, at 72, to take over the presidency, you know, look at the presidents in the past. Look at George W. Look how he's aged in seven years. He's aged three to one in seven years. Bill Clinton ages three to one. Former President Bush who I was with a lot I saw him age a lot in those years. I'm thinking if John takes over the presidency at 72, and if he ages three to one, how old will he be in four years? He'll be 84-years-old.
(END VIDEO CLIP)
COLLINS: Dangerous talk in retiree rich Florida. McCain's response? He says he'll have his 95-year-old mother wash out Chuck Norris' mouth with soap. Good response.
Not playing nice, though, was last night's democratic tussle a sign of things to come in this campaign? We'll talk with Massachusetts Governor Deval Patrick coming up in just a few minutes.
For more on the presidential candidates and their next stops, go to CNNpolitics.com. It's your one-stop shop for all things political.
Heavy snow in upstate New York. No problem. We'll just bring out the plows from the garage. Wait? Where's the garage?
(COMMERCIAL BREAK)
COLLINS: For whom the bell polls. The answer, you and your wallet. Wall Street's opening bell in a few minutes. Hold on. It could be a breathtaking day.
(COMMERCIAL BREAK)
COLLINS: Plenty of fireworks in last night's CNN democratic debate if you like that kind of thing. Some voters might be left with a sour taste in their mouths. Massachusetts Governor Deval Patrick is a supporter of Barack Obama. He is joining us from Boston this morning.
Governor, good morning to you.
GOV. DEVAL PATRICK (D), MASSACHUSETTS: Good morning, Heidi. How are you this morning?
COLLINS: I am great. Thanks. The big story, obviously, today is certainly the economy. We, in fact, have some sound from all of the candidates and what they said on this issue last night. Let's go ahead and listen to that first.
(BEGIN VIDEO CLIP)
OBAMA: We could be sliding into an extraordinary recession unless we stimulate the economy immediately.
CLINTON: The president's proposed stimulus package is not adequate. It is too little, too late.
EDWARDS: Fifty million Americans. They are low income Americans and moderate Americans. They are completely left out of his stimulus package.
(END VIDEO CLIP)
COLLINS: Governor, tell us more about what Barack Obama is saying on the economy.
PATRICK: Well, I think he appreciates the fact that it's consumerism and consumption that is driving a large part of our economy right now and that consumer confidence is down. And, frankly, we've got leadership in the white house that is not able to stimulate that consumer confidence. So the kinds of investments in education, in infrastructure, in helping to rebuild this country and making those commitments now, rather than waiting until we have a new president, will make a difference. COLLINS: All right. What's he going to say about the fed rate this morning?
PATRICK: Say it again, Heidi.
COLLINS: What is he going to say about this fed rate cut that was just announced this morning?
PATRICK: I think that's probably good news. But the question is not just the affordability of credit, but the willingness of entrepreneurs to take advantage of those new terms to make the investments. And that has a whole lot to do with consumer confidence. And we do need leadership that is going to bring us that confidence. That's the kind of leadership I think Barack Obama will bring.
COLLINS: All right. Obviously, we know the next step in this process is the South Carolina primary. It's coming up on Saturday. How crucial is this to Senator Obama?
PATRICK: I think it's very important for all the candidates. I think that's why the appreciation of the stakes being high and everybody being tired is probably why they were so cranky last night.
COLLINS: Cranky? That's good TV, isn't it?
PATRICK: Well, I hope not. Listen, I think -- I think what the public wants, what we're so hungry for is a focus on ideas and optimistic vision, the kind that Senator Obama has brought throughout the campaign. I was in South Carolina over the weekend, Saturday and Sunday, and anticipation is high. I think the turnout will be high and we're working real hard to bring a victory home for Senator Obama.
COLLINS: As you just mentioned, there were quite a bit of fireworks last night. I will spare you playing all that sound again. But you do wonder, whenever that happens, and we expect it every election cycle. We certainly expect it. Does it get in the way of the message? Particularly, I got to ask you about John Edwards and how he sort of sat on the side and said you guys go at it. I'm going to talk about some of the issues.
PATRICK: Well you know, I commend all of the candidates for trying to get back to the issues. I think Senator Obama is feeling like many of us the frustration of some of the more unwarranted attacks from some of his other candidates. And I think that at least one of the other candidates was on the attack. But, listen, we all want, all of us, want the kind of positive message, the fresh attitude, and approach and the new kind of politics that Senator Obama is offering. And I am counting on that being the prevailing tone of this campaign.
COLLINS: You yourself have an interesting story because I know that you worked for President Clinton's justice department. Yet you chose to endorse Barack Obama. Why did you do that?
PATRICK: It was a tough choice. I have tremendous respect for President Clinton and for Senator Clinton. I think she's been a strong candidate and has run an almost flawless campaign. But I want our next president to be about tomorrow. I want our president to be a visionary leader, able to articulate that vision and motivate people to reach for it.
And I want that vision to be broad and ambitious and unifying. And we get in Senator Obama a once in a generation type of leadership, that type of leadership. And that's why I'm so excited about his campaign and so hopeful that we will see the opportunity before us to seize that kind of leadership and let it carry us forward.
COLLINS: Governor Deval Patrick of Massachusetts, enjoyed talking with you. Thanks for being on the program.
PATRICK: Great being with you, Heidi. All the best.
COLLINS: All right. You, too.
That is just one side of the story, of course. The other side will be coming up a little bit later on in this show when we talk with Clinton campaign co-chairman, Indiana Senator Evan Bayh.
Millions of you this morning dealing with dangerous winter weather. First stop, Fulton, New York, where three feet of lake effect snow hit. Locals are used to heavy snow of course. But the city's public works building collapsed from the weight of it. Workers got out okay, but the snow plows did not.
Snow plus drivers going too fast? A bad mix in Minnesota. 110 crashes, 20 rollovers were reported in a 12-hour period. A police officer was dealing with one accident when another car hit him. The officer's legs were trapped. Rescuers got him out and took him to the hospital.
Residents of Beloit, Wisconsin, are calling this the worst winter flooding they've ever seen. A thaw and then a deep freeze caused large chunks of ice to form on the river. The ice then pushed the river water into people's homes forcing some of them to have to evacuate.
Jacqui Jeras is standing by now in the weather center with more on all of this. Boy Jacqui, not a lot of good news to report out there.
JACQUI JERAS, AMS METEOROLOGIST: It's not terrible. You know, I guess nationwide we don't have any huge storm systems. One of the biggest things that we're deal with right now is just the cold air that's in place. It's really gripping much of the nation. In fact, just about everybody is going to see temperatures at least five degrees below normal today. And when you have that cold air and a little weak system moving across the country, you start getting worried about a little bit of a wintry mix.
Right now in Nashville, you are doing okay. You have the light rain coming down. Your temperature's at 35 degrees. So you know you're kind of hovering near that mark and we can't rule out the possibility of a little snow or sleet mixed in later on this afternoon. Looking for temperatures to stay cool throughout much of the week. You get beyond maybe say 6:00 or so and we think you'll be in the clear altogether. In fact, you can see here you are on the back edge of some of this very light precipitation right now.
But you head a little farther to the east and north. That's where we see some of that pink and white beginning to show up. And the good news with all of this is at least it's relatively light. Hopefully it won't be too bad for your travel today. One of the big things to keep in mind, it's always the bridges and the overpasses that tend to ice up first. And so we've got some advisories which are in effect here in some of the mid Atlantic Appalachian chain. There you can see Baltimore, Washington, down towards Richmond, even into Charlotte seeing some of those winter weather advisories for today.
A lot of cold air spilling in back behind it. If you thought it's been cold the last couple of days, that reinforcing shot of cold air coming in here through today behind that cold front and temperatures tomorrow are going to be lucky to get out of the single digits for many across the upper Midwest.
In fact, Minneapolis struggling to get above the goose egg, about one for a high tomorrow; 15 in Chicago and look at all that cold air spilling down to the southeast. You are a little more modest into parts of Texas and the southwest. We've got a big weather-maker here across the west, too, an upper low bringing in plenty of rain across California. We'll tell you a lot more about that system coming up when I see you again -- Heidi?
COLLINS: Hey Jacqui, the parents were supposed to return home to Minnesota. They said, forget it. We're staying here in the Atlanta area.
JERAS: Weather is not so great.
COLLINS: Not so great. All right, Jacqui. We'll check back later on. Thank you.
Just minutes now until the opening bell and Wall Street orders decaf. Will a surprise rate cut from the fed calm jitters?
(COMMERCIAL BREAK)
COLLINS: A Colorado man who spent almost ten years in prison for killing a woman could walk away a free man. A hearing gets underway this morning for 36-year-old Tim Masters. A special prosecutor is expected to ask that he be freed and his murder conviction and life sentence overturned. Back in 1999, Masters was convicted of killing a woman nearly 12 years earlier when he was 15. Now a special prosecutor says DNA evidence points to someone else. A judge will decide whether to free him and whether there will be a new trial.
Also in court today, Jose Padilla. He was convicted in August of supporting al Qaeda. Today, he learns his fate. A federal judge in Miami will hand Padilla his sentence and it could be life in prison. Two co-defendants will also be sentenced. Padilla has been in custody since 2002. Back then, he was accused of plotting to explode a radioactive dirty bomb. Those charges were dropped and are not part of this trial. Following the story of course all morning long, we will be bringing you the ruling when it happens.
For whom the bell tolls. The answer, you and your wallet. Wall Street's opening bell in a few moments but hang on because it could be kind of a rollercoaster ride.
(COMMERCIAL BREAK)
COLLINS: You are in the CNN NEWSROOM. I'm Heidi Collins. Tony Harris is off today. A white-knuckle day on Wall Street and the fed makes a big move. Just about an hour ago, the Federal Reserve announced a startling key interest rate cut, .75 percent.
With the opening bell just a few moments away, will the investors see the move as too little, too late? We have our financial troops covering all the angles. Susan Lisovicz has it at the New York Stock Exchange. Gerri Willis looks at what it means for your investments and retirement savings and Ali Velshi has the big picture and the bigger question, what's next? We want to begin though with Susan on the floor of the stock exchange.
Hey there, Susan.
LISOVICZ: Hi there, Heidi.
COLLINS: Just seconds away.
LISOVICZ: Seconds away. A smattering of applause on the trading floor because a couple of members of the victorious New York Giants are ringing the opening bell. But what we're looking at is just a -- the last couple of weeks, all these 200-point drops we saw are a warm- up act for what we're expecting. And that is a huge drop in the first few minutes of trading that followed a global wave of selling over the last two days.
This despite the fact that an hour ago, the Federal Reserve in a rare, dramatic, aggressive move, cutting interest rates by 75 basis points to 3.5 percent. That is something that affects most consumer loans. That federal funds rate.
But the market is not responding. We're seeing a sell-off in the first seconds of trading. Why is that? A lot of pent-up selling. The market was closed yesterday in honor of Martin Luther King's birthday. But also, more bad news from big banks.
Wachovia and Bank of America weighing in with their quarterly earnings. Bank of America and Wachovia seeing 95 percent and 98 percent drop in their earnings in the last few months. But as one trader told me today, we're down 200 points now, not even one minute into trading, Heidi. It's not where you open. It's where you close.
COLLINS: Very good point there, Susan. All right. Here we are already down 250 from just seconds ago when Susan said down 200. We are resting now at 11858 as you can see for yourself. Ali Velshi standing by with more information on this. Well, you know, Ali, a lot of people are just saying, what is causing this? Why is this happening?
VELSHI: Well, there are a couple of reasons. One is that investors around the world are saying, don't worry about what your Fed chairman says about there's no recession coming. There's a recession coming. And if American consumers get weak, it's going to hurt the rest of the world, because there's nobody who shops like American consumers.
Look at that. 320 points. I want you to look at that board for a second, Heidi. There's something I want you to look at. You see that 318, 327 now. Look over on the side. It's got up volume and down volume. Look at the difference. The down volume is 42 million shares right now. The up volume, 1.5 million shares.
That means there are no buyers in this market right now. And until you find buyers, until you find people who say, you know what? There is some hope. It's getting better. They are getting out of their shares. This is the world saying there is a recession coming. Come clean, own it and make a decision as to what you are going to do about it.
That .75 of a basis point cut is going to help some people because it brings the prime rate down. The bed rate is 3.5 percent. The prime rate is now 6.5 percent. So your loans connected to prime rate just got a little bit cheaper today. Does that mean people are going to take that money and go out and buy things? That's what the Fed is hoping -- Heidi?
COLLINS: Boy, when are we going to see some type of relief, though? Obviously, it takes a while to see this impact once a Fed rate is cut. I mean, it's not going to be immediate.
VELSHI: Yes. Well, what you'll see, you'll see two things. One is the immediate response and we're just waiting to get this in. We're 376 points now. You're going to see the major banks in the United States announce an immediate cut in their prime rate. That should be happening now within the next -- look at that.
We've now crossed 400 points to the down side. But a Fed rate cut does take time to work its way into the system because it's the rate at which people borrow money. So it often takes up to 12 months, sometimes even longer to help the system, which is why, Heidi, the complaint from a lot of people is that it's too little, it's too late and the Fed is in denial.
And that's why, after a .75 percent cut, the first time since 1984 that that has happened, inside of a meeting, U.S. got a Dow Jones that is down 450 points right now in the first few minutes of trading. I mean, that is what -- they are not believing that the Fed and the government has control of the situation.
COLLINS: So, Ali, what about the emergency stop? I mean, when does the first one go into effect? VELSHI: Well, the -- this drop goes into effect immediately. So we're going to hear, as I say, from banks momentarily that they are cutting their rates, their prime rates.
Now, that doesn't get to everybody. It doesn't get to your credit card or your loan by the end of the day. Sometimes it's at the end of the billing cycle. And it's not entirely clear that this is going to make people go out and spend money. What's happening is people are losing confidence in the economy and that's what's stopping them from spending money.
COLLINS: But what about the trading stops? The emergency stop as far as trading goes?
VELSHI: Oh, it's going to be -- it's a while. It would like to be about three times this drop. Susan probably has the exact numbers. But I think you got to get, with this market, you probably got to get below 1,000, a drop of more than 1,000. I'm just looking at the biggest drops that we've seen in a long time.
We're not, you know, we're not in the top five of drops at the moment. But I got to tell you, we're 100 points or so away from that. We're just two minutes into trading. So hopefully that optimistic trader who told Susan it's not where you start, it's where you finish, that's looking at the glass half full.
COLLINS: Yes. In fact, we want to get back to Susan. It is true, though, Susan. I mean, there's a lot that could happen during the day. I like to be optimistic, too. What's the mood there on the floor right now?
LISOVICZ: Well, there actually is a lot of confusion. I was talking to traders, why was there not an improvement in the Dow futures, which is a reliable indicator of where the market would open. After the Fed took this move, everybody was screaming for it. And there were a couple of things.
One is people were saying like we got to work this through. This may take some time and some people are actually saying too little, too late. Another thing is that, you know, this is a global phenomenon here. You know, we've seen a global market sell-off. And one of this -- a couple of traders mentioned this to me. We need to see other central banks, like the European Central Banks, make a move as well to help alleviate this situation.
But just to -- I want to just echo something that Ali was saying quite correctly. This is not the biggest market drop ever. This is a steep drop and it's coming after a couple of few weeks of steep drops.
For the market to even close, to halt trading, we would need to see a drop of 1350 points in the Dow Industrials, Heidi. So there's your half -- your glass half full. We're a long way off from that. We're not seeing a 10 percent drop. What we are looking at, though, just quickly, is the level I'm looking at is 11332. At that point, the Dow Jones Industrials would go into a bear market. A 20 percent drop from its all-time highs last fall, Heidi. COLLINS: OK. Well, it's going to be very, very important for us today to keep all this in perspective. And I appreciate you saying that. We should remind everybody that some of the numbers that we were looking at, as Susan was mentioning, the Dow futures were expected to be down about 500 or so.
So certainly, it seems strange that we didn't see a completely different number right off the top here with the news of the Fed cutting the rates. But we are sitting at 439. Dow Jones Industrial Averages to the negative.
We want to go ahead and get to Gerri Willis now, who has more information on. As I said before, Gerri, you and me and what we do in all of this. Is it more patience, more waiting around?
WILLIS: Well, let me put something into perspective a little bit here. You are looking at these numbers. You see those numbers on the big board and you think, oh, my goodness. We're just at the start of this recession. What is it going to be like when we're really in it?
Well, I'm going to tell you. This works differently than you might expect. The stock market looks forward. It's anticipating what's coming. That means stocks typically fall before the recession even starts and somewhat into the recession, but then they slowly start to come back.
And we have some numbers we want to show you here, about some averages that have been taken through the last nine recessions. Before the recession, that's when you saw the big drop. And then there's recovery after the recession. So the market here is anticipating what's going to happen. It's looking forward. It's seeing the worst. But at some point, it's going to start looking for earnings and seeing them from some companies. And stocks will start to rebound.
For the individual investor out there, it is not time to panic. It's time to think about, do you own the right stocks? Is your asset allocation correct? Do you own the right stocks versus bonds? Am I holding the right categories of investments, not, can I unload all my stocks right now because if you do, the likelihood is that you will be trying to catch a falling knife as the pros say. You'll be in a market selling as prices are plummeting. That's the worst case scenario for individual investors -- Heidi?
COLLINS: So two quick questions. If you do decide that you don't have the right stocks. I mean now, a good time to buy the ones you don't have.
WILLIS: That's right. That is precisely true. Stocks are on sale. And if you want to put money to work here in this market, I think it's a good idea.
Here's how I do it and how a lot of people who have consumers out there do it. You put money in at regular intervals over time. You don't work off of headlines like this. You make sure that you are investing regularly and putting your money to work over time so that you bring down your average cost of investment. It's all about what you pay for that investment to start with.
COLLINS: OK, what is this news mean, though, in particular for retirement accounts because, obviously, if you are older and you're looking very closely to, you know, retirement, the numbers are a little bit different for you.
WILLIS: Well, these are the people who are at most risk today. If you are retiring tomorrow, next week, obviously, I'm hoping you've already changed your asset allocation and you don't have absolutely everything in stocks. You know, that's what you're watching over time. You're watching how close am I to retirement and what is the mix of investments that I want given the fact that I'm 20 years from retirement, 10, 5.
So at the end of the day, you really can't play this game that the professional investors are playing, which is selling into the stock market drop. And you don't have to. You don't have clients clamoring for you to sell stocks. You can afford to sit steady here and make sure you take care of yourself.
COLLINS: All right, Gerri. Thank you so much for that. I think that's on a lot of people's minds today when we see numbers like this. Ali Velshi, standing by again to talk a little bit more about maybe what we could look forward to today.
What else we may see, Ali?
VELSHI: The sun setting. I think we can look forward to that today.
COLLINS: Excellent. Thank you.
VELSHI: Looks like we're stabilizing. I mean, look at that. We're gone off 400 points. Who would've thought that we'd be seeing that's actually good news. It looks like these markets, at least for the first few minutes, stabilizing. We're now better than a 400-point loss.
Gerri is absolutely right. You pull the trigger on a market like this. You lock in your losses. Now, that is not to say to this market is not going lower. But I think the perspective these markets go down but over time they tend to go up. What you do need to do is really look at your own situation and say are you in a position? Are you invested in a way that takes advantage of an economy that could be going into recession?
You have to make that decision for yourself. Whether you think you're headed for a recession. But remember, people do buy consumer staples. They buy agricultural products. We are looking at a world where oil prices, even though they've come down substantially today, are still very high. So there's still a market for renewable energy. We still use a lot of oil.
China and India continue to grow and use aluminum and wheat and things like that. So it is not that when the market is down, you have to bail out of the market and put your money in your mattress. There are ways to do this. So if there's nothing else you do today, let this scare you a little bit. I'm going to disagree with Susan and Gerri on one thing.
Be alarmed enough to actually call your broker, your investment adviser or go on to money.com or any of these Web sites where they've got a 101 on investing in markets. Take this as an opportunity to learn and make some smart decisions.
Some of the best investments have been made as we head into bear markets, as the markets go down. You're not going to find the bottom of that market. Somebody is but we'll never going to know where it is until it's done.
So even if you buy stocks at this level, they could go lower. But we're looking at a market that is shaking out right now. There may be more to come, at least for today. Hopefully, there's no new catalyst of news. We're finding that we're coming back up a little bit. We're still 400 points off, but remember, this is a market. If it weren't a market, there would be no excitement in it. Today is the excitement for people who are involved.
COLLINS: Yes. Something like that. Excitement. I don't know if it's the kind we love.
VELSHI: I'm trying to give you a half full thing. Everybody else is.
COLLINS: There you go. All right, Ali Velshi. Yes, yes. Ali Velshi, thanks so much for that.
Gerri Willis still standing by as well to offer a little bit more about our personal finances which, obviously, is something we are all interested in today -- Gerri?
WILLIS: Well, you know, we're looking at these stocks right now. And I know people are panicking and they're wondering what to do.
COLLINS: They are freaking out.
WILLIS: They are freaking out and we're here to say, don't panic. Don't take your money out of the market. I got to say I think it's time to put some money to work. You want to think about where you should be investing in times like these, because the pros are panicking even more than you are.
You know, you can see it right there on the big board. They are concerned. They are worried. You have to take advantage of what they are going through right now. This is your time to take the reins and make sure you have what you need when you retire.
COLLINS: Now, I think you're absolutely right about that. What if you are just really aren't very good at that. Just give us some of the very basic, first couple of steps you need to do. Because, obviously, if you are looking to buy new stocks right now, you are a little afraid that they're not going to perform either. We got to look at that history, right? WILLIS: Well, I think, you know, at the end of the day, the easiest thing to do is for folks to go out and buy index funds. Particularly, if you're nervous about the markets to make sure you were adequately allocated.
You know, one of the things that a lot of individual investors missed, they are 100 percent invested in domestic markets and they completely ignore markets that are not here. Asia, Europe, they're not looking at those markets. That's a typical mistake to make. You shouldn't be doing it now. It's a global economy as we've been seeing. You need to make sure you've got a little thing in every pot, not just everything in one big pot -- Heidi?
COLLINS: Diversify. We know that word.
WILLIS: That's right.
COLLINS: All right. Gerri Willis, appreciate that.
Well, we appreciate all of the insight from Ali Velshi and Susan Lisovicz as well. And we're going to be talking with everybody all morning long as we continue to watch those numbers. We will have them up for you throughout the morning, so that you can keep your eye on them as much as you want to throughout the program.
Stock markets taking big hits. Washington takes big action. Will it help? A top economist, ahead right here in the CNN NEWSROOM.
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COLLINS: All right. Let's go ahead and take a look at the Dow Jones Industrial Averages. Now, down about, what is this, 20 minutes into trading, 15 minutes into trading by 363 points. Resting at 11737.
Obviously, I'm sure you have heard by now that the Fed slashed two key interest rates by .75 percent points. This was unprecedented. A move that happened in between two different meetings concerning the economy.
Let's get this straight, though. The federal funds rate is one of these rates that was cut. It impacts how consumers pay on their credit card debt, home equity lines of credit and auto loans. And then, they also lowered the discount rate.
Again, important to know the difference here, which is what it caused banks to borrow money directly from the central bank. So as we continue to watch these numbers -- now up a bit, if you will, to down 338. And as confusing as that sounds. Again, the big word recession. Most people saying that we are now in one. We will continue to watch these numbers and have some more analysis all day long here in the CNN NEWSROOM. Certainly, the story of the day.
We will also have, as you can see there in the bottom right-hand corner of your screen, the Dow Jones Industrial Averages throughout the program, again, so you can keep your eye on what's happening. Something else happening in California. The Oscars just a month away. But the nominations are out today. So who got the nod last hour? Well, CNN's Kareen Wynter knows. She is in Beverly Hills this morning.
Kareen, Good morning to you. We're going to pretend like the stock market isn't happening and maybe just talk about the movies. What the heck?
KAREEN WYNTER, CNN ENTERTAINMENT CORRESPONDENT: Oh, Heidi, we have great news for you, of course, coming to you from Beverly Hills. Let's run down quickly just the categories in terms of, you know, who won what, starting with a best actor.
George Clooney got a nomination for "Michael Clayton." Also Daniel Day-Lewis, "There Will Be Blood." Also, he also won best actor to motion picture at the Golden Globes. Johnny Depp, "Sweeney Todd," Tommy Lee Jones in "The Valley of Elah" and Viggo Mortensen in "Eastern Promises".
As for best actress, that category, Cate Blanchett picked up a nod for "Elizabeth: The Golden Age," Julie Christie in "Away From Her," Marion Cotillard in "Ma Vie en Rose," Laura Linney in "The Savages" and Ellen Page in "Juno."
And finally, the big one, motion picture. "Atonement," which also won the best picture at the Golden Globes. "Juno," "Michael Clayton," "No Country for Old Men" and "There Will Be Blood."
Now, you know, we can't talk about nominations without talking about the broadcast itself. Will it go on with the writers strike? And joining me this morning, Mr. Gil Cates. Thank you so much for joining us. You executive produce.
GIL CATES, ACADEMY AWARDS EXECUTIVE PRODUCER: No, I'm just the producer.
WYNTER: The producer? Still a great title. What's going to happen? You know, it's a big question with the telecast?
CATES: Yes, it is. And the show, obviously, will go on. You know, when you think about the Oscars, the Oscars reflect what's happening in the country. So if you look at an Oscar show 20 years ago, you'd see what people wore, what they said, you want to know the music they listened to, the films they watched. And the same is going to be true of this year.
Thirty years from now, when someone looks back on the 2008 Oscar show, they're going to see a show that was affected by the writers strike, was not affected by the writers strike or maybe there will be no writers strike. So, I mean, I'm optimistic. I understand the meeting this morning. I hope they come to a settlement. But if not, yes, the show will go on.
WYNTER: The bottom line, it won't be canceled? CATES: No, it won't be canceled. And I think it's going to be an interesting show because it's the 80th anniversary of the Oscars. So that we have a lot of great stuff that's happened on Oscar shows in the past. We have a lot of wonderful films that have been made in the last 80 years. And it's a birthday for Oscar.
WYNTER: And quickly, Jon Stewart will be hosting this year. Are you working with him? Has it been tricky just with, you know?
CATES: He's great. He is great. He did the show. The last time I did it which was two years ago. He's a lot of fun. He's got great energy. And I know he's thinking hard about what he's going to do.
WYNTER: Mr. Gil Cates, always a great pleasure. All right, we'll send it right back to you, Heidi.
COLLINS: All right. Kareen, thanks so much.
It's going to be interesting, to say the least, to find out if that show will go on as they say. Kareen Wynter, thanks so much. Appreciate it.
We just want to remind you, we are watching the Dow Jones Industrial Averages today. We're watching a lot of things regarding the economy, of course. There you have it. 302 points to the negative, which is -- it's up a bit, people. It's only been 20 minutes, but boy, right off the top there.
I think we saw it go down as much as about 450 points or so. So again, now we're at 297. So we'll continue to watch it for you and keep our eye on that.
Meanwhile, we want to talk a little bit about the weather. Upstate New York, they get a lot of snow there, right? But what happens when you can't get to the snow plows?
(COMMERCIAL BREAK)
COLLINS: All right. Let's take a check again. We're looking at the Dow Jones Industrial Averages today to give us an indication of what could be happening as the Feds announced this rate cut, just about an hour or so ago.
Two key interest rates slashed by .75 of a percentage points. We are now seeing the trading day opening and about 25 minutes into that trading day. Dow Jones Industrial Averages down about 274 points. We will keep our eye on it for you, of course.
CNN's Jacqui Jeras standing by in the weather center now. And talking about the not-so-sunny California.
(WEATHER REPORT)
COLLINS: America's first black president. Was it Bill Clinton?
(BEGIN VIDEO CLIP)
SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE: I would have to investigate more, you know, Bill's dancing abilities and some of this other stuff before I accurately judge whether he was, in fact, a brother.
(END VIDEO CLIP)
COLLINS: Best of the CNN Democratic debate in the NEWSROOM.
(COMMERCIAL BREAK)
COLLINS: Good morning, everybody, I'm Heidi Collins. Stay informed all day in the CNN NEWSROOM. Here's what's on the rundown.
The Fed makes a surprise interest rate cut, 30 minutes into the trading day. Wall Street isn't buying it quite yet.
Our guest and correspondents are looking behind the numbers and what they mean.
Zingers fly, tempers flare, Democrats debate on CNN ahead of the South Carolina primary. We've got the fallout.
And Hollywood reveals the nominees for the 80th Academy Awards. But who's got a date with the Oscar today. Tuesday, January 22nd, you are in the CNN NEWSROOM.
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