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American Morning

America's New War: Market Faring Better Than Expected in Early Hours of Trading

Aired September 17, 2001 - 10:49   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: Let's go back to Andy Serwer, good friend from "Fortune" magazine, to give you an even better perspective of what some of the investors might face in the market.

Let's look at this Dow Jones inconvenience chart, graphic. What does it show us?

ANDREW SERWER, "FORTUNE" MAGAZINE: Well, it shows that we had a precipitous drop at the open, right after the open, actually, and we're clawing our way back a little bit. We were as much as 600 down. We're now down about 460. The Nasdaq was down over 100. We're now down only 74, and you really can say "only" after some of these drops.

You know, it's better than people thought, but it ain't over yet. We got many hours to go. I have seen this go -- 100-point swings in a matter of instants. So it's -- the trend is positive right now. We were talking earlier about this being a critical time where people sort of take stock after the first hour, hour and half of trading, and then sort of develop further strategies. But I would say that the trends are good, basically...

ZAUN: And how about on the Nasdaq front?

SERWER: And you can see there we've really come back a bit from the worst of it.

So, you know, you can't really complain. I mean, compared to what you might have anticipated today, and, again, it is a long -- it's a marathon, not a sprint, and this is day that is great fun to watch, really intriguing, very important in terms of the market working and functioning. And I think that's the most important thing, Paula, the market is functioning. It's working.

We have had no reports of major and serious disruptions, which is a very, very encouraging signs for America investors.

ZAUN: And along the same note, Lou Dobbs says the market is always right.

SERWER: It is always right, it's a reflection of sentiment and where people think the prices of businesses are today. And right now, airline stocks -- the prices of those businesses have been severely marked down. ZAUN: But -- and everybody expected that. I mean, some of these airlines were losing anywhere from $100 million a day to $267 million a day from last Tuesday to now, as these airlines are trying to get up and running, as airports have reopened across the country.

SERWER: I think of all of American industry this is the one that is going to be impacted the most. I mean, you've seen the tremendous layoff announcement from Continental and Delta already. They're talking about possibly being bankrupt by the end of the year. Obviously, massive government intervention is going to be required here to get this business stabilized.

ZAUN: Yes, and House Speaker Hastert basically told these airlines they're going to get it, we are moving that legislation along, he said, to give you some short-term relief. Is that enough to change this picture?

SERWER: It could, actually. That's a very interesting point. You know, people who are selling right now could really be selling at a bottom if a package is announced, a bailout package, a governor panel to oversee these airlines. These airlines are not going to go bankrupt, Paula. We need these airlines to run this country. So in some capacity, they're going to exist, and they're going to exist as private enterprises, too.

ZAUN: It is always very dangerous to try to read the tea leaves in Washington. But in your mind, is it all but inevitable they're going to get this bailout?

SERWER: I think they're going to get bailout, but I also think there's going to be government oversight. I think that the government is going to get their hands in managing how works, because it has to. There has to be a concerted effort in terms of security, in terms of flights. The number of flights probably has to drop in this country. Demand for flights may also drop because people may be concerned about flying. The whole business, and as I said before, no business will be more affected in the wake of this terrible episode than the airline business, and we really don't know how it's going to shake out.

ZAUN: Let's bring in Lou into the discussion now.

Lou, I don't know whether you could hear part of what Andy and I were just talking about, but when you look at these numbers for the airlines, and we'll look at those intraday graphics again, the trend doesn't seem too positive. And we were talking a little bit about Speaker Hastert in interview earlier this morning telegraphing that he's doing whatever he can to move legislation forward to bail out the airline industry. Will that be enough to turn this around?

LOU DOBBS, CNN CORRESPONDENT: Well, to turn around these what are the cases of the two largest carriers, 40 percent declines, better than 30 percent decline in Northwest, no. But will they -- are they necessary, absolutely necessary to keep the airlines moving in this environment in which we're going to see further curtailments in schedules? Absolutely essential. What is the right price? That's what we're finding out in this market now, Paula. ZAUN: So what is that going to do to the telemarketing industry? I know Andrew was saying that if you have fewer flights, you know, at the same time might have less of a demand as well. What will be the impact of this shift?

DOBBS: The shift -- I'm sorry, I didn't understand.

ZAUN: Yes, I just -- you know, you just wonder if there will be more of an emphasis on teleconferencing and other methods of doing business.

DOBBS: Yes, I would assume so. I know a number of companies have already gone to it, they've had to, particularly here in downtown Manhattan and Wall Street, and it's, again, efficiencies in the marketplace, whether they be within these walls here at the New York Exchange, over at the Nasdaq, or whether it be in the way business conducts business at the lowest cost with the maximum effect. We're going to see a lot of it, I'm sure of that.

ZAUN: And one would think, Andy, there's going to be some sort of impact on the rental car industry, the train industry...

SERWER: Absolutely.

ZAUN: ... the fallout, does it lead more volume to them?

SERWER: Absolutely. The rent-a-car businesses have been booming, people have been trying to get a -- particularly in the Northeast corridor, back from Washington over to Boston, it's very hard to get a rent-a-car. I would think this might be a tremendous opportunity for Amtrak because people need to get around, but they may not be able to do it as readily by the airlines.

ZAUN: Lou, if you would, fill us in on the other stocks that are showing some volatility. You mentioned a couple blue chip stocks about a half hour ago. Does that trend continue?

DOBBS: It is continuing. The financials are showing vulnerability here. We have not seen the hotels and cruise lines hit quite as hard as many had expected, and of course, those analysts expecting it to be hit every bit as hard as we've seen the American -- or rather, the airlines be hit this morning. So there's some surprise there. Great weakness, but not to the degree that we might have expected.

The defense stocks, as you would expect, are rallying here.

What we've seen happen in the last 15 minutes, Paula, is the tick has bounced again, it is negative 174, as I'm talking to you right now. Again, it had been negative almost 10 times that, about eight times that. And so we've seen some strength.

Now there's a contest going on on this floor. The contest is between -- rather, among those specialist who believe this is going to be a sustained turn in this market, and they are mustering the will to hang on here rather than sell stocks. And that's what these gentlemen here to the right are doing. (OFF-MIKE) all around me. And we are watching this drama unfold that is the outcry market that performs the specialist market at the New York Exchange. And they are getting very, very intense about it, as you might expect, with the Dow now off 456 and the tick improving just enough and the up volume pick up enough to allow good old motivator in these markets greed to take hold.

ZAUN: All right, Lou, thanks so much. We will come back to you frequently to keep us abreast on what's happening down there at the Dow Jones.

Andy Serwer, thanks you for your time. We will rely on you as well.

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