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American Morning

America's New War: Markets Down Dramatically in Early Going

Aired September 17, 2001 - 09:54   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 ZAHN, CNN ANCHOR: Andy Serwer here to provide perspective on what we heard.

Lou was standing in the right spot this morning, wasn't he?

ANDY SERWER, "FORTUNE" MAGAZINE: They attracted to Lou, I guess, and it's terrific he got comments from all those people. Have you ever seen so many people so excited about a market down 270 points. That's what struck me. But the point, of course that we're working, we're operational. We're back in business. I want to temper things a little bit, and remind people we're only half hour into trading. You've got a long way to go until 4:00.

And the other point I would lake to make just sort of put in perspective about how momentous this day truly is, and to understand that people, business people, business leaders, investors from around the world, China, Europe and the Middle East are all watching the New York Stock Exchange and the U.S. markets to see what's happening right now. So it's truly is remarkable.

ZAHN: I was struck by something Paul O'Neill just said when Lou Dobbs was able to corner him, I guess sort of hard to get out of that area of the exchange. He basically said you can't predict where the U.S. economy is going. But his prediction is -- quote -- "We will set records in the not-too-distant future." Is he overly optimistic or reason to believe that is the case?

SERWER: Well, may be doing a little jawboning. After all, he is an administration official. There's some indication if you look historically what happen during calamities, catastrophes, the market takes a hit and then we come back strong. Six months later, if you look at the Cuban Missile Crisis, if you look at the wars of, you know, Eisenhower heart attack, all the moments in time where the market bounces back.

We were speaking with Arthur Levitt, the former SEC commissioner, and he suggested that this may exacerbate things to downside, but then we may pick up even more, because we will need all this spending to rebuild our economy, to rebuild our infrastructure, and that could actually stimulate the economy and get back out of the downturn even faster and even higher.

ZAHN: The chairman of the New York Stock Exchange perhaps had the most defiant words all day long. You can almost feel the personal toll this has taken on him in a time where he is trying to restore faith and what he has got to do today. I was surprised that no one mentioned the half-point rate cut. Are you? Or do you agree with Lou Dobbs that it's not will not move the markets all that much today?

SERWER: Well, you know, I think it helped the market. You really can't say. I mean, if they hadn't done the rate cut, would the market be down 500 points? So there is probably no control to the experiment, if you will. It probably did have impact in terms of helping the markets psychologically, showing traders, showing investors that the Fed is there on their side, ready to make a preemptive strike, which in a sense what that was. So I think it did have an impact. But I think Lou is right in that, you know, we have seen eight of them now, and it's just another rate cut, but it's a very important one, unexpected, and it gave the market a shot in the arm I think before the open.

ZAHN: I don't know if we can revisit the shot of Lou flanked by the leaders, world leaders, state leaders, surrounded by senators, the governor of the state, the mayor of the state. Tell us a little bit about the psychology of what happened there and the impact it might have, as they all, obviously, had positive messages today?

SERWER: It certainly brought together an incredible nonpartisan group of people. I was speaking with Senator Schumer a couple of days ago. And you know, when something like that happens, people ban together, Republicans, Democrats, Major CEOs working together yes. It's really a tremendous shows of strength and unity. It's absolutely necessary, Paula. You have to come together. The effort made to bring us back so we are trading this morning is truly monumental. It was absolutely necessary for all the people to throw aside differences and get to work together.

ZAHN: As we continue to talk point out for those who probably have better eyesight than I do, throughout the day you will see that Dow and Nasdaq bug to keep you apprised of where the market going. The Dow now down 470 points. It changes every second.

At what point would the market actually be suspended today. What would be the point drop at which that would happen, if that happens?

SERWER: The percent I think change would be over 5 percent at this point. So we're a ways away from that.

ZAHN: I'm not saying that's going to happen, of course, but just for people to keep an eye on this during the day.

SERWER: I think they should, and that's about where they would come in. Now you have to understand, there is so much computer trading these days, a lot of times dropped percentage changes, especially versus treasury bonds, or the Nikkei, other indices, sets up buying and selling strategies.

This is exactly what we expected, Paula, volatile trading and the market down. This is just what we thought would happen.

ZAHN: We obviously had to focus on the opening of the New York Stock Exchange. I think a lot of individual investors out there are wondering, what happens if I had broker that worked in the building, or the companies gone, where's the paperwork. How am I going to do business?

How many people you think are caught in that limbo?

SERWER: Almost everything is backed up now on computers, all over the country. There is very little records. They are very little records that are actually lost, and I think what's happened. I certainly spoke to people and Merrill Lynch. All the Merrill Lynch brokers have been in touch with all clients, reassuring them, we're here for you, we're going to be back in business, and that kind of support I think has a tremendous impact on the investing public.

I think that you will find when the day is done that most of the trading today is being done by institutions rather than individuals.

ZAHN: All right, Andy, please stand by. We're going to check in with you throughout the day.

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