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American Morning

Wall Street Awaits Greenspan Comments

Aired July 18, 2001 - 10:01   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.
LEON HARRIS, CNN ANCHOR: And then, laws of supply, demand and semantics. At any moment now Federal Reserve Chairman Alan Greenspan is going to be speaking. Lawmakers will be listening and world markets will be reacting.

You see the live picture we have set up there from that room where Chairman Greenspan -- as you see there is now prepared to sit down to give his comments any minute now. We're going to begin right now looking -- taking a look at Alan Greenspan's appearance before the House Financial Services Committee. For once, politicians are going to find their words are relatively worthless. Greenspan has shown that his carefully sculpted assessment of the economy can send investors scurrying and markets convulsing. In short, Greenspan is a barometer that can decide the weather to help shepherd this story.

And to lend us some expertise this morning, we turn to CNN Financial News anchor Lou Dobbs, who joins us in New York.

Good to see you. How are you?

LOU DOBBS, "LOU DOBBS MONEYLINE": Good to see you.

HARRIS: Well, let's see. Let me begin by asking you what it is you want to hear Alan Greenspan say this morning?

DOBBS: Well, in New York the markets are -- as you can see on the screen there -- basically somewhat anxious. Both the Nasdaq and the Dow are off just slightly this morning. They had been down more earlier. And we haven't yet seen signs, Leon, that this -- these markets are trembling yet before Fed Chairman Greenspan speaks to the House Financial Services Committee but there certainly is great anxiety surrounding it. That anxiety builds up, of course, because we have seen this market since the beginning of the year fall three percent as measured the Dow, almost 18 percent as measured by the Nasdaq. Investors are obviously concerned. This is an economy that is showing considerable signs of slowdown.

We do have pockets of strength and most investors will be looking for Alan Greenspan to give them guidance as to which they should focus on -- either weakness or strength in this economy. There is an abundance of strength in this economy. Housing starts this morning -- higher. We saw the core rate in the consumer price index basically temperate, moderate at 3.3 percent. So inflation is not a factor and that is always good news when the Fed chairman speaks on monetary policy.

This, of course, the Fed chairman's semi-annual testimony to the House Financial Services Committee on monetary policy. And falling as it does, six interest rate cuts by the Fed in the course of six months beginning back on January 3. All investors will be looking for some sign as to whether the Fed has ended its quest to further lower rates and whether the Fed will be setting the stage to hold steady with interest rates when it meets on August 21 at its next FOMC meeting. The policy setting meeting that the Fed holds to decide the direction of interest rates.

So it is an important moment. It is one in which all investors are interested and all investors certainly will be effected.

HARRIS: Well, is there a general consensus, Lou, on where things stand right now with the chairman and the board itself on interest rate cuts. If it were a swinging door and you were looking at it that way, would we be looking at it opening or closing right now?

DOBBS: Well, Leon, and that's precisely the issue on why there is considerable interest and some anxiety around this testimony this morning because if the Fed chairman ever gives a public nod, if you will, it often comes at these semi-annual testimony appearances before the House and the Senate. The Fed chairman will appear before the Senate Banking Committee next week.

The fact is that there is no clear signal here because, as I said, we have pockets of strength in this economy that is obviously slowing -- a GDP growth rate of one percent. We have seen considerable -- a considerable number of earnings warnings and now, as we move into earnings season, the disappointments in earnings reports from corporate America.

So there just isn't a clear picture, if you will, as to precisely what this economy is doing and where it's headed and that's why the Fed chairman's guidance is so critical here.

HARRIS: Let me ask you something else because I heard some other people wondering aloud this morning about whether or not the Fed chairman's focus would be at all on the strength of the dollar and the effect that's having on overseas markets. Do you think that alone is going to receive much focus?

DOBBS: Well, the dollar is really the preview of the Treasury secretary. The Fed chairman's comments obviously will be important and some particularly manufacturers and exporters who have been hurt and hurt badly by a strong dollar, which makes it very difficult for exports higher priced goods as a result.

There's great interest in that but it's unlikely that the Fed chairman will move into the area of dollar policy because, as I said, that is the preview of the Treasury secretary. Monetary policy specifically in terms of interest rates will probably be more the focus of the Fed chairman's remarks this morning.

HARRIS: As you know we've been tracking the Dow and we will be doing so all day long. I want to take a look real quickly if we can at the graphic that we have that tracks it minute by minute. We've been having this up since trading got underway at the New York Stock Exchange about -- what -- 35 minutes ago or so ago.

DOBBS: Right.

HARRIS: And this -- it seems as though is coming back.

DOBBS: It is coming back and that early reaction was in large measure to the Intel earnings report, which showed a better than 90 percent decline in net income in the most recent quarter. It also follows an Intel guidance from its CFO and its management yesterday suggesting that the semiconductor industry -- the ship industry -- is certainly not going to see a robust recovery in the third quarter.

So that is creating some concern and obviously there is a slump in PC sales. The technology sector -- right here, Leon -- at this moment in time is in one of its worst slumps in history. And that is having a tremendous impact across the entire technology sector and, of course, influencing greatly the Nasdaq.

HARRIS: Well, Lou is -- you're going to stick around and par some of this for us...

DOBBS: Be delighted.

HARRIS: ... throughout the morning. We appreciate you sticking around. So, folks, please do stay around -- Lou Dobbs is going to be with us throughout the morning with market updates for you as well as coverage f Alan Greenspan's comments, which we should get underway any minute now. We're still keeping an eye on that.

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