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American Morning

Some Economists Optimistic About Recovery

Aired November 07, 2001 - 09:33   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.
MILES O'BRIEN, CNN ANCHOR: A bit of a titanic rally on Wall Street yesterday. The Dow up 150 points. More tonic for the markets seems to be the cuts in interest rates. It keeps going down. How low can it go. CNN's Kathleen Hays joins us with a little bit more on that and what to look ahead for today. Hello Kathleen.

KATHLEEN HAYS, CNN FINANCIAL CORRESPONDENT: Good morning, Miles. Well, I guess first we're going to look ahead and see if that amazing rally yesterday after the Fed cut interest rates for the tenth time this year will continue. It's key short-term rate, that's called the Fed funds rate, is now 2%. It's 4 1/2 points lower than it was at the beginning of the year. We started 6 1/2%. This is one of the most aggressive rate-cutting moves the Federal Reserve has made since the very deep recession of 1981-82. And you know, a lot of people aren't even convinced we're in recession.

So I think people are more hopeful that this is going to revive the economy. One thing we can see a lot of, just in the last week or so, is that mortgage refinancing applications are once again going through the roof. Purchase index up as well. So there are some hopeful signs now.

There's a very interesting story on the front page of the "Wall Street Journal" today is the U.S. like Japan. Our interest rates are so low. Could we possibly spoon like Japan. Most economists I talked to say no. Our banking system is in better shape. We have a much more flexible economy. It's tough when people lose their jobs, but you know what, if you can lay people off, and lay them off quickly, you have flexible economy. You maybe go through short-term pain, but you get a long-term recovery. So, I think there's a lot of optimism building even though, Miles, some people think there's probably some more tough times ahead. Certainly on the economy, and maybe even on the stock market.

O'BRIEN: All right. Well, you sound a little bit more positive than the last time I spoke to you, which is good to hear, Kathleen. Let me ask you this. One -- a pair of stocks to be looking at today, Hewlett-Packard and Compaq. Hewlett-Packard was going to pick up Compaq. And then some folks who own stock in Hewlett-Packard who certain names happen to be Hewlett -- in the Hewlett-Packard company -- have said no to that idea. And that scuttles that. So, what should we look for in those stocks?

HAYS: Well, yesterday, Hewlett-Packard went up because the raft on the deal all along has been, and as the Hewlett family is saying, we think that this is going to push us further into the PC -- the personal computer business where there's a glut, where there's a lack of demand. Where there's so much competition that it's just not a lucrative business. What Hewlett-Packard is known for is its printers. And they're afraid that it's going to dilute their lucrative printer business.

Now, what's interesting is that the board, including the Hewlett family, had voted for the transaction. Now, they're saying, "look, it's a bad transaction. We don't think it's the right way to go. We oppose it. We're going to try to convince other people to oppose it too." So far what is interesting also -- I love these Wall Street soap operas. They are still supporting Carly Fiorina, who has been such a stellar, high profile CEO. Not opposing her opposing the transaction, the board unanimously -- with the exception of the Hewlett-Packard -- raising this question, saying they support Carly as well. So there's a question over Miss Fiorina, and I think also, maybe, some question over the transaction now, because more and more Wall Street's coming to doubt it as well.

O'BRIEN: A soap opera we'll call, "As the Hard Drive Spins."

HAYS: Ooh, I like it.

O'BRIEN: All right, Kathleen Hays, by the way, I neglected to mention that you're at a Fortune conference in Manhattan. Bunch of CEOs there. Very notable CEOs. And, it's all for good cause, right? Just briefly tell me about it.

HAYS: Well, it was organized after the September 11th attacks. You don't usually think of CEO conferences being fund-raisers. But this is a benefit, and some very high-profile people. We'll be speaking to Jeffrey Immelt, the newly anointed head of GE. Michael Dell is here. Andrea Jung of Avon. Gordon Bethune of Continental Airlines. A very interesting line up. I get the chance to sit down and talk to them face-to-face throughout the day. So, very exciting day for me. And another worthy effort for the victims of the September 11th attacks. Miles, back to you.

O'BRIEN: All right. We're glad it's -- sounds like a good line up for a good cause. Thanks very much. Kathleen Hays in Manahattan. Appreciate it. Paula.

ZAHN: If I'm not mistaken, I think some of our bosses might be there today.

O'BRIEN: They might be there. Yeah.

ZAHN: Hey Kathleen, are you still with us?

HAYS: Yes.

ZAHN: Did you -- are you going to be talking to Time-Warner folks today, too?

HAYS: Well, Mr. Steven Case is going to be here tomorrow, and we've still got our fingers crossed. He hasn't exactly made a date with us yet, but Paula, put in a good word.

ZAHN: Well, I just thought I'd give you the opportunity to mention his name, since you mentioned all these other corporate heads.

(CROSSTALK)

O'BRIEN: Paula was just thinking about your career.

HAYS: Of course, thank you.

ZAHN: All right, good luck with that interview tomorrow.

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