Return to Transcripts main page

American Morning

America Recovers: Stocks Drift Downward

Aired October 05, 2001 - 11:41   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.
BILL HEMMER, CNN ANCHOR: Checking on the markets now. They are still down as we checked in last hour at the New York Stock Exchange.

Christine Romans still watching the numbers. Mostly red at this point anyway. Christine, good morning.

CHRISTINE ROMANS, CNN CORRESPONDENT: You are right, they are red for now at least. This after a trio of tech warnings and a report showing the job market weakened sharply, even before the September 1th attacks.

Sun Micro Systems, Advanced Micro Devices and Gateway Computer all say they will post wider than expected quarterly losses, and that's unnerving investors who felt encouraged earlier this week by positive news from tech giants Cisco and Dell.

Right now the Dow Jones Industrial Average tumbling 28 points or so. It's tech components like IBM, Microsoft and Intel are under some pressure. But it's not just the techs. Names like Home Depot and 3M are also pulling the Dow lower.

The Nasdaq meanwhile is shedding more than 1 percent. Shares of Sun Micro are losing nearly 4 percent. The company not only warned on its numbers, the server maker also said it's cutting nearly 4,000 jobs, 9 percent of its workforce.

Of course, Bill, a weak jobs picture was already in focus before Sun's announcement. Unemployment held steady at 4.9 percent in September, but U.S. employers slashed nearly 200,000 jobs. That is doubled what economists had expected. The report does not include all of the layoffs in the aftermath of the terrorist attacks. So October's employment report is likely to be much worse. Some economists believe the jobless rate could rise to near 6 percent over the next few months.

And investing legend Warren Buffet says he thinks the country is already in a recession, and he predicts that it probably will be, in his words, relatively deep and extended. The comments were posted on a web site of his holding company, Berkshire Hathaway. Buffet's investment wisdom made him a multibillionaire and attracted a legion of followers. That's why we care what he says.

That's the latest from Wall Street. Bill, back to you. HEMMER: All right, Christine. Thank you. You talked about those job numbers. Let's bring more in now about it. Ken Goldstein, an economist from The Conference Board, a research group that tracks consumer confidence and the pulse of the U.S. economy.

Ken, good morning to you.

KEN GOLDSTEIN, ECONOMIST, THE CONFERENCE BOARD: Good morning.

HEMMER: You sat in this chair five minutes ago and said we're in it. You mean recession?

GOLDSTEIN: I think the recession started in the third quarter.

HEMMER: And has it gotten deeper, one would assume, over the past three and a half weeks? Or how do you gauge that at this early point?

GOLDSTEIN: I think the point to make is that we got into a recession in the third quarter, before we get to September 11th, which probably would have gone into the fourth quarter anyway. With September 11th, that may well be adding another six months to this whole down turn.

HEMMER: Which begs the question, how can you gauge at this point, or can you, the depth of that damage to the economy?

GOLDSTEIN: You can't. You can only guess at it. You can only guess at where we would have been without September 11th, and then try to add what impact of that will be.

HEMMER: The job numbers, Christine just talked about them, we mentioned them throughout the morning here. Are they very significant at this point, coming out in August prior to 9-11?

GOLDSTEIN: Well, see if you go all the way back to July, we were -- in July we thought maybe the economy was bottoming out. August told us no, that's not the case. September confirmed that. Again, September, largely is excluding what happened on September the 11th.

HEMMER: As you look at all of this federal spending, the billions and billions proposed out of Washington, could that make a difference or not, Ken?

GOLDSTEIN: It makes a difference in terms of making it less severe and less prolonged than it otherwise would be. But the key here is both monetary policy, what we do with interest rates, and what we do with fiscal policy does not work instantaneously.

HEMMER: The rate cuts we've seen, 9 now in total for the year 2001. Do you have a measure as to whether or not there's -- oftentimes, we're told when Fed cuts come, that it takes a while to work itself into the system.

Is there a possibility that right now, knowing the nine cuts have come, that they have gone too far at this point? GOLDSTEIN: I don't think they've gone too far. I think the thing we need to remember is that they are not just doing this for the domestic economy, but the global economy is also weakening. So, not just the Federal Reserve, but central banks across the globe are working.

But again, these things don't work instantaneously.

HEMMER: When people talk about pessimism and a bad economic mood, how bad truly is it?

GOLDSTEIN: It won't have been that bad on September 10th. Certainly after September 11th, there is a strong severe fear; not only about the impact of what happened, but also the terrible chance that there could be another episode.

HEMMER: Ken Goldstein, thank you much.

And the markets hate uncertainty. We know that.

Thank you, Ken, very much.

GOLDSTEIN: Thank you.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com