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CNN Live At Daybreak

Market Analysis for the Week

Aired September 10, 2001 - 07:11   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.
VINCE CELLINI, CNN ANCHOR: We are just a couple of hours away from another Monday morning opening on Wall Street. Traders and investors are sizing up a jittery market that saw the Dow drop 2 1/2 percent on Friday. The question for this morning, what now for Wall Street and the larger economy?

For some insights, we turn to Brian Finnerty of Unterberg Tobin in New York. He takes the bullish view this morning. And Beth Belton of "Business Week" magazine is in Washington with us and the bearish outlook.

Good morning to both of you.

BRIAN FINNERTY, C.E. UNTERBERG TOBIN: Good morning.

CELLINI: Well, the forecast now is doom and gloom, Brian. We have people with a lot of fear out there. So why jump into the market?

FINNERTY: Well, we don't know if we want to be jumping in. What we want to do is be watching the market and buying selectively. You know, the old adage, and I don't want to make it too simple, but it used to be buy low, sell high. Stocks are certainly low. The Nasdaq's down 30 percent from the beginning of the year until now. The Dow Jones is down almost 12 percent and the S&P is down almost 20 percent.

I know it's all relative. They were probably too high. But they have come down considerably and I think they more than reflect the break in corporate profits that has happened. So I think stocks are probably fairly valued here and it's time to be investing for the future.

CELLINI: Well, Beth, what is your perspective?

BETH BELTON, "BUSINESS WEEK": Well, I think if you look at price relative to earnings on an historical basis, they're probably about 25 percent still too high, which means we may have a way to go down yet. And also, September and October are typically rough months in the market. So the next few weeks may not be very pretty.

CELLINI: Dow and Nasdaq futures are down this morning. For the lay person, what exactly does this mean and how will this affect the markets? FINNERTY: Well, maybe I can jump in there.

CELLINI: Sure, Brian?

FINNERTY: The futures generally reflect what has happened previously. Friday we got a pretty big shock in terms of the employment figures when unemployment jumped from 4.5 percent up to almost five percent, 4.9, and a lot of jobs were cut out and more and more people were out. And the investors were thinking that well, the consumer is holding this economy up.

As consumers lose their jobs, their confidence fades and spending stops or slows. So that was a big shock to the market. So the overseas markets are down in anticipation of the lower opening here. But I suspect we're in a bottoming process of the market here and I don't know that we'll go too much lower. We may retest those old April lows even as we speak this morning and then I would suspect that's probably going to be about it. I'm not saying we're going to spring right back up, but we are making a bottom in here.

CELLINI: OK, Beth, let's pick up on that. Have we bottomed out and how severe is this downturn right now?

BELTON: Well, we haven't gone off a cliff yet but we're a lot closer than we were a few weeks ago. And while it's hard to say for sure whether we've bottomed, I'm not convinced that we have. I think you're going to have a situation where the market, the negativity could start to feed on itself and as you start to get more demands for redemptions from mutual funds, as institutional investors start to get a little bit more worried, you could have a pickup in the selling.

CELLINI: President Bush, speaking over the weekend, talking about letting the stimulus package take effect, let the tax rebates and the interest rate cuts eventually kick start things. There's even talk of a capital gains tax cut. Brian, do you think all of this is basically on track? Will that pick things up?

FINNERTY: Well, I don't know if the fiscal stimulus is really quite enough right now to fix things up. I do, however, think that monetary policy, and by that we're talking about the Fed now and the Fed's rate cuts, which have been extremely aggressive and we do believe there's more to come, are going to help.

I also think a capital gains cut coming down, I think Senator Kerry was talking about that, and that's coming from the Democratic side, I think that would be a big positive for the markets if that, in fact, were to be talked about very seriously right now.

CELLINI: Beth, let me ask you this. You know, so much of this now, the economy has become a political football, the Republicans saying that this is still a Clinton economy, at least until the end of the month, while the Democrats are saying you know what, President Bush? Step up to the plate. You're the man right now.

So how do individuals kind of weave through all of the political talk that's associated with the economy? BELTON: I think the way for the average person to look at it is regardless of the talk that's going on in Washington right now, at least from a political perspective, it's just talk. There's not a whole lot of anything that President Bush or Congress can do in the near term that's going to have any impact on the markets or the economy.

The Fed, I agree with Brian, is on the job. I think they're going to continue to be aggressive. And as far as President Bush stepping up to the plate, ironically I think the fact that he's been so silent on the economy for so long now and is really focusing in and aware of how serious things are getting may actually start to scare consumers.

CELLINI: Finally, we only have just a few seconds, Brian and Beth, the future. October is historically not a great month to bounce back, but give us a near future forecast. First, Brian.

FINNERTY: I think we've probably come close to making a bottom. We'll waffle around a little bit in here. I think October will surprise us. I look for November and into the end of the year to be strong in anticipation of corporate profits rising in the first quarter of next year.

CELLINI: And Beth?

BELTON: I think it's possible that the Nasdaq could easily break below 1,500 before we're finished with this. And as for the Dow, I don't know. I think we have another several hundred points that we could touch before we start to see a rebound.

FINNERTY: It could happen today.

CELLINI: Well, I hope some good news is on the horizon.

Thank you, Brian Finnerty and Beth Belton, for joining us this morning.

BELTON: Thank you.

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