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CNN Live At Daybreak

Greenspan Testimony, Economic Numbers, Profit Reports Will Rock Stocks

Aired July 18, 2001 - 08:05   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.
CAROL LIN, CNN ANCHOR: We are looking at Wall Street and the economy from top to bottom today, here on CNN. It is a very important day, with Alan Greenspan testifying before Congress at 10:00 this morning. And in less than a half hour, we've got some key figures on the state of the economy: The consumer price index is coming out and housing starts are coming out. We've got earnings reports all day on some of the most widely held companies -- probably in your portfolio.

CNNfn's Chris Huntington is here, to kind of lay it out for us.

Chris, let's start with these important earnings reports. You've got AOL Time Warner, Ford, Boeing, Coke, just to name a few. Are you expecting any surprises?

CHRIS HUNTINGTON, CNN CORRESPONDENT: Well, the big focus today will be on IBM, which is due to report after the close of trading today. But you mentioned a few. In fact, this week alone, we're going to hear from more than half of the Dow 30 companies. We have heard from GM, Caterpillar, Intel, Ford, and as you mentioned, America Online. All of those companies reported earnings lower than the same period a year ago, but better than what was expected. And really on Wall Street these days, it's a game of expectations. And many of these companies are exceeding the lowered expectations, so that's good for the markets. Nonetheless, the companies are reporting, on the whole, lower profits.

LIN: The consumer price index, the CPI, might be kind of interesting. It's a measure of how urban consumers are spending their money. What are you anticipating here?

HUNTINGTON: Well, the word on inflation this year is that it is still very, very tame. And the CPI measures a basket of goods that we all buy, everything from food and fuel to transportation and housing costs, measured, as you mentioned, in the 85 major urban areas. It's expected only to tick up about 0.1 percent. Annually now, the CPI is running at about 3.6 percent. So it's fairly modest on the inflation front.

LIN: And are some categories within that basket of goods more significant to the economy, more significant to our pocketbook, than others -- say housing versus clothing, or otherwise?

HUNTINGTON: Well, the CPI is broken down into a whole variety of categories. They actually look at what they call the core CPI, which, for a curious reason, excludes food and energy prices, which are seen as very volatile and can change quite a great deal month to month. However, of course, food and fuel are staple items and really some of the most important for all of us.

But there is no particular weighting one way or another for any particular item. The overall CPI is probably the best measure, because it does include those important categories of food and fuel.

LIN: But a critical category today: housing starts. You wonder whether people are still building houses to sell to all these people who are losing their jobs.

HUNTINGTON: It's amazing, but the housing and real estate sector has been one of the strongest in the economy, propping up the economy in many respects. And the expectations today, the latest word on housing starts -- this is groundbreaking on new home building -- is it's expected to stay very, very strong, at about an annual rate of 1.6 million units. It's defying economic gravity, almost.

And there is concern however that, as you mentioned, mounting layoffs, particularly in the industrial sector, will begin to erode that furious buying in the real estate market.

LIN: We'll see what happens.

Thank you very much, Chris Huntington...

HUNTINGTON: You're welcome.

LIN: ... preparing us for a big day here.

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