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American Morning

America's New War: How Will Traders React?

Aired September 17, 2001 - 09:02   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: We head straight down to the New York Stock Exchange, a lot of news made this morning, Americans could look forward to a .5 percent rate cut.

Lou, what you do you think the impact of that rate cut will be?

LOU DOBBS, CNN CORRESPONDENT: I think the impact, while helpful, Paula, will not determine certainly the direction of this market. It does improve the environment, an environment that can stand, of course, all of the help that it can possibly receive. But that 50- basis-point cut, that half-point cut is just not going to be significant in terms of what happens here, at least in the early hours of trading.

We're starting to see some indication of selling pressure that will be facing these men around the trading posts when we open in just about 27 minutes. We are getting some strong indications of selling on the ADRs for U.S. stocks that are traded here overseas. We are -- in Instinet trading, we see Microsoft, Intel, Oracle, Cisco, all of those stocks in early Instinet trading are off 6 percent. Now, again, those are not -- that's not a particularly liquid market, but it is an indication perhaps it won't be that severe, but certainly there is an indication.

And we know, because of the nature of this terrorist attack, that the airline industry and the fact that it has been curtailed in the last six days, we knew that it would be under pressure and indeed it is. On the Instinet trading desk those stocks are down significantly. In the case of SkyWest and Frontier, two small air carrier, their shares off more than 20 percent in early indications.

So that 50-basis-point rate cut has a lot of work to do to influence the outcome here.

ZAUN: There is a lot of debate over a congressional or potential Congressional bailout of the airline industry, Lou. How much trouble is the American airline industry in today?

DOBBS: Well, it's in significant trouble. Airports closed. As you know, Reagan National Airport in Washington D.C. is closed. Continental, Delta, both have curtailed their schedules by 20 percent. We are expecting obviously more layoffs. Continental announcing the layoffs last week of some 13 thousand employees. They are in difficult trouble. They have about one month's cash on hand. So there will be some assistance required by the federal government, and indeed, the Congress, the House of Representatives is already working very hard to put together an appropriate package. Whether that takes the form of classic bailout or an extension of guarantees or loans, we don't know, but it will be there and it will be significant.

ZAUN: All right. If you look at front page of the "Wall Street Journal," which I know you did today, economists are saying that a recession may be unavoidable. But earlier this morning you were touching on consumer-confidence levels. Do you expect consumer spending to freeze?

DOBBS: Consumer spending certainly won't freeze, but it has obviously been affected by the reduction in air travel last week, the fact that people could not open their businesses and buy products here on the lower part of Manhattan; that's a small part of a larger macrocosm that is the economy.

But at the same time, we saw in a recent CNN-Gallup poll, President Bush's approval ratings have been never higher, the American people are obviously united in what the president has called -- what he has called "a new war," a war against international terrorism. So we can't make these judgments too early. There are a lot of positive indications, but we also, in this free market democracy have a lot to work through; that's going to begin at 9:30 here, Paula, as we watch these stocks begin trading for the first time in less than a week.

ZAUN: Well, we're going to join you for that moment. And we're also going to join you when a moment of silence follows that opening bell.

Thanks, Lou, for the update.

I was struck by a trader behind you who appeared to be holding an American flag in his crossed arms.

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