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CNN Live At Daybreak

America's New War: Traders Find Victory in Uninterrupted Trading

Aired September 18, 2001 - 08:36   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.
PAULA ZAUN, CNN ANCHOR: Joining us right now is Andy Serwer of "Fortune" magazine to put this all into perspective.

All right, let's talk about the statistic everyone is throwing around this morning: this is the single largest point drop ever on the Dow, not the single largest percentage drop.

ANDREW SERWER, "FORTUNE" MAGAZINE: That's right.

ZAUN: Historically, where does it fit in?

SERWER: Well, like you're saying, largest point drop, not the largest percentage drop; it was only the 14th largest percentage drop, so that sort of alleviates the fear and anxiety out of that.

It was a very down day obviously yesterday on Wall Street. There's a lot of fear and trepidation, however, that is tempered by the fact that the system worked, that we traded.

Overnight, the Nikkei rose a bit, markets in Europe are weak, and futures this morning are weak, although they have come back a little bit. There is a tremendous amount uncertainty, Paula, and you know, that's the old song on Wall Street: There is nothing worse than uncertainty in the markets. That is a very bad thing. Traders are going to look to digest what's happening in corporate America as we go forward, companies are starting to come forth and say that they're businesses are going to be weak, that their earnings are going to be down, and that is not a good thing for Wall Street and for the economy.

ZAUN: So what do you expect the market to do today? I mean, we hear all this news from the airline industry today, which is not good, about more talk of layoffs, furloughs?

SERWER: Right. And we're hearing bad news from all kinds of companies this morning. JB Hunt, the trucking company, warned; Computer Associates, the giant software company, suggested its business will be weak. This stuff continues to roll in.

I suspect the market will be a bit weak at the open, but, you know, it's just impossible to say, we could see a snapback rally. Fred Katayama pointed out that often the second can be worse. There is a tremendous amount of uncertainty, and as I said, nothing is worse for Wall Street than uncertainty.

ZAUN: But what could possibly be fueling any kind of uptick today, given what you are saying is going on in corporate America?

SERWER: Well, there are some good signs. I mean, yesterday defense stocks rose tremendously, stocks like Raytheon, Northrup, Lockheed, they were up, companies that would...

ZAUN: Well, that was a given.

SERWER: Yes, companies that would benefit. There are also some other things. People have been suggesting that concerns about heating oil supplies may be alleviated now because there won't be so much use for jet fuel. So people are looking for silver linings here.

Overall, though, Paula, let's face it, there is not a lot of good news out there for the economy, and layoffs, particularly in the airline industry, are fairly significant, tens of thousands of people.

ZAUN: You've talked a lot about the airline industry, but there are also some other stocks that plummeted that caught your eye yesterday. You want to share some of those observations with us?

SERWER: Right. Very interesting, three of the top four stocks on the New York Stock Exchange, most active stocks, were actually media and entertainment stocks, including AOL-Time Warner, parent company of this network, Disney, and if you include General Electric, which owns NBC. Why is that? Well, that's because advertising revenues are very weak, a lot of this coverage that you all have been watching is advertising free; that hurts these companies, at least it's perceived as such on Wall Street.

Also, casino and gaming stocks, hotel stocks, there's concerns there won't be as much leisure travel, those were also hit bigtime yesterday.

ZAUN: Let's back to the media stocks for a moment. You can begin to see that not only the broadcast networks but the cable networks are beginning to insert commercials. What did they lose last week by not running advertising?

SERWER: Well, the reports are that they lost hundreds of millions of dollars collectively. You know, it's a wonderful thing for Americans to be able to watch that and watch uninterrupted coverage like that, but these companies do take a hit. But I think there is a responsibility to put as much coverage on as we can.

ZAUN: Before we let you go, a quick reaction to the president urging more government spending to stimulate the economy yesterday. We had never heard the president say that before. What is likely to be the impact of that today?

SERWER: Well, I think that's a huge positive for the economy. Ultimately, I don't know if it will be reflected in the stock market. Of course, it's incredibly ironic that President Bush seems to be suggesting government spending. We never thought we'd hear that kind of thing from this president, but these are very, very special circumstances, Paula, and they call for extraordinary measures.

ZAUN: Andy Serwer, thank you. Stay with us all morning long, we need your help here this morning.

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