Linda O'BRYON: No rate cut from the Federal Reserve today, and that was not good news for Wall Street. The NASDAQ plunged 112 points to a new yearly low; the Dow tumbled 61 after triple-digit gains earlier. Investors were disappointed and surprised that the Fed passed up a chance to cut rates, only indicating it might lower rates in the future. Here's Suzanne Pratt with the news and analysis.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Federal Reserve policymakers led by Alan Greenspan were widely expected to hold interest rates steady at today's meeting, and that's exactly what they did. But in what was something of a surprise, the Fed signaled it was ready to cut rates soon, if needed, to keep the U.S. out of a recession. It did that by abandoning its so-called "restrictive bias," and dramatically shifting to one that now favors an easing, a 180-degree flip-flop in policy.

WILLIAM SULLIVAN, SR. ECONOMIST, MORGAN STANLEY DEAN WITTER: This is highly unusual, and it demonstrates their concern about how quickly the economy is losing momentum as the year comes to a close.

PRATT: Even though the change in the Fed's policy directive went further than many economists predicted, investors were still somewhat disappointed. Stocks sold off on the news, as some market professionals admitted that they wished the Fed would've done more.

BRUCE STEINBERG, CHIEF ECONOMIST, MERRILL LYNCH: I think they didn't want to shock the markets too much. I mean, if it were me, I would have eased today. I have to admit to you. I think that an easing is called for right now, and they basically admitted that. But I don't think they wanted to act too precipitously.

PRATT: The last time the Fed cut rates was in 1998, in response to a global economic slowdown triggered by Asia's financial crisis. The next time, economists say, it will be the slowing U.S. economy that pushes the Fed to lower rates, something most now agree will happen early next year.

STEINBERG: I think they're going to go in the 25-basis-point increments that they have traditionally moved in. I think there will be a move in January, probably another move in March, and then later in the spring, and then maybe in the summer again. But they'll be strung out over the first half of next year.

PRATT: The Fed's first meeting of next year is a two-day affair scheduled for January 30 and 31. By then, economists say, Fed policymakers should have an idea how fourth-quarter earnings are shaping up, and whether the economy is slowing too much. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.

Nightly Business Report transcripts are available on-line post broadcast.  The program is transcribed by FDCH. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc., Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. © 2000 Community Television Foundation of South Florida, Inc.

LINDA O'BRYON: Well, Susie, the economy was also a topic of discussion today for President Elect George W. Bush and the man he will replace in a month. Mr. Bush and President Clinton met today at the White House for over an hour. The President Elect has been talking recently about his concerns the nation may be on the edge of a recession, but Mr. Clinton made it clear he sees things differently.

WILLIAM J. CLINTON, PRESIDENT OF THE UNITED STATES: A recession is two quarters in a row of negative growth. I don't think we're going to have that. But we couldn't keep up five percent growth a year, you know, forever. So most of-I think 49 of the 50 blue chip forecasters think that growth will be 2.5 percent or better next year, and that'll keep unemployment low.

O'BRYON: A senior Bush aide says the President Elect will keep a wary eye out for any troublesome signs in the economy.

GHARIB: Well, let's find out what Tom Galvin is keeping his eye on. He joins us live from the trading floor of C.S. First Boston, where he is Chief Market Strategist. Hi, Tom.

THOMAS GALVIN, CHIEF MARKET STRATEGIST, CREDIT SUISSE FIRST BOSTON: Hello, Susie.

GHARIB: Well, it was a tricky day trying to figure out what the Fed was trying to tell us. Do you think that the Fed made a mistake today by not cutting interest rates?

GALVIN: Well, I think the Fed, quite honestly, if it was a stock, did not meet the whisper number, which obviously was looking for a rate cut. They came in as planned in terms of just changing the bias towards an easing stance. However, obviously the market has tired of anxiety. They want something now not later. They wanted liquidity in the marketplace and they didn't get that and obviously as a result stocks backed off the recent recovery we saw over the past period.

GHARIB: So what does Wall Street need to see happen at the next Fed meeting in January?

GALVIN: Well, first of all, I think there is a lot to be seen between now and the end of January. Credit spreads, as evidenced by 10-year swap spreads, Fannie Mae (FNM) two year bonds, AAAs, BBB bonds, lower gray quality areas, they have already started to see a significant rally, a reversal in the credit spread problem that we saw earlier this year, and as a result, the credit and capital markets are beginning to do what the Fed has wanted them to do. The Fed wants to keep bullets in the guns so that they have ammunition to do something. They're clearly going to cut rates at the end of January. They'll see more evidence about the economy, but the capital markets, the credit markets have already started to do some of that work for them and equity investors need to realize that process has begun and therefore you need to get involved with the stocks today.

GHARIB: But a lot of people I was talking to today were saying that they need to see a half percent cut in interest rates. If they get less than that or nothing at all, what does that mean for the markets and for the economy?

GALVIN: There's going to be a lot of economic data points between now and the end of January to judge whether 25 or 50 and where we are in terms of credit markets and the capital window reopening to judge whether or not 25 or 50 is necessary. You know, right now mortgage applications are up 20 percent year over year. Refinancings are up 95 percent. The mortgagee market has already led the other credit markets in beginning to provide liquidity to individual consumers. So we're starting to see some pockets of the economy finding some cushion right now. Other durable goods purchased areas haven't found that yet and that's where we really need to see the Fed step in and we will get that at the end of January.

GHARIB: Tom, I was just looking at your report that came out yesterday and you look pretty bullish. Your forecast for the NASDAQ for 2001 is 4,000 and your forecast for the Dow is 12,650.

GALVIN: Look, you know, what the world needs is love and liquidity. I'm not kidding myself. Those are stretch goals. I just think this year was a valuation recession, not an economic recession. I do think the credit crunch obviously spiraled down growth in the U.S. economy but next year we will see a reversal of the drags that pulled us. Interest rates, oil prices and over ordering of components, whether it was in retail or in computers, are all going to reverse course next year and that's going to provide a better framework for re-acceleration in the economy and profit and a better life for stocks. Meanwhile, valuations are at three or four year lows depending on how you look at it and that's an opportunity.

GHARIB: OK, let me talk a little bit about the opportunities. In your report you say that you like tech, health care, financials and telecom. Give us the name of a few stocks that you would recommend to investors.

GALVIN: Well, again, looking at who was hurt by the credit crunch, it was the three sectors, tech, telecom and financial. Specifically, Nokia (NOK), Celestica (CLS), Applied Micro Circuits (AMCC) and Morgan Stanley Dean Witter (MWD) I think would be the credit crunch reversal candidates for next year.

GHARIB: OK, thank you so much for coming on the show.

GALVIN: Thanks, Susie.

GHARIB: We really appreciate it.

GALVIN: Great.

GHARIB: My guest tonight, Tom Galvin of C.S. First Boston.

Nightly Business Report transcripts are available on-line post broadcast.  The program is transcribed by FDCH. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc., Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. © 2000 Community Television Foundation of South Florida, Inc.

12/19/00: How To Pry Open Japanese Wallets

LINDA O'BRYON: Well,in Japan, as in the United States, consumers drive the economy. Now, new surveys show Japanese consumers are regaining economic confidence after bankruptcies, sinking stock prices and a recession. But as Lucy Craft reports from Tokyo, they may not have enough confidence to open up their wallets again.

LUCY CRAFT, NIGHTLY BUSINESS REPORT: Meet Junko Ujihashi, 37 years old. For the last few years, Ujihashi and her husband, a small businessman, have been obsessed with saving, not spending. They abandoned plans to buy a second home, gave up vacations and just everything else except necessities. Ujihashi says she has never been so anxious about the future as now because the once unthinkable has become a very real possibility.

JUNKO UJIHASHI, HOUSEWIFE: I didn't think my husband's company would be out of business, but since especially two years ago, it, I thought could happen. It really could happen even to my husband's company. If it happened, what are we going to do? So I'm getting, I was getting worried about our life.

CRAFT: And to manage the economy, Ujihashi, like most Japanese consumers, is intent now on socking away as much of her disposable income as possible for her retirement and son's education. Thus, Japan's dilemma. For recovery to take hold, households have to start spending again. Nowadays rattled consumers just aren't buying.

MATTHEW POGGI, ECONOMIST, LEHMAN BROTHERS: The government has done very little to try to either improve the outlook for the future of most of the Japanese households. You know, Japanese households are very worried about their pension positions. They're very worried about the state of the government's finances and at a very more base level they're worried about, like I said, the viability of the various, you know, companies.

CRAFT: The situation is especially dire, say analysts, for middle aged workers. This segment is critical to private expenditure, air conditioning for more than half of all households. Yet it is middle aged workers who nowadays have the greatest disincentive to spend.

RONALD BEVACQUA, ECONOMIST, COMMERZ SECURITIES/JAPAN: If you're in your 40s and your 50s, not only are you faced with uncertain employment conditions now, not only is your income being drained off or siphoned off to pay for your home, but you can't even be sure that once you retire you'll actually have a decent lifestyle because you don't know if your corporate pension will be there or the government social security system will be there in the same way.

CRAFT: For the last 50 years, Japanese leaders have favored producers at the expense of consumers. Politicians lavished money on public works and tightly regulated the economy, leaving households to foot the bill. But now with consumers finally rebelling at the voting booth analysts say politicians have no choice but to reform the economy to benefit consumers and restart growth. Lucy Craft, NIGHTLY BUSINESS REPORT, Tokyo.

Nightly Business Report transcripts are available on-line post broadcast.  The program is transcribed by FDCH. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc., Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. © 2000 Community Television Foundation of South Florida, Inc.


12/19/00:Commentary: The Word On Recession

SUSIE GHARIB: That economic R word, recession, is on the mind of tonight's commentator. Here's Charles Schultze, Senior Fellow at the Brookings Institution.

CHARLES SCHULTZE, COMMENTARY: Virtually all of the economic indicators confirm a spreading slowdown in the American economy. The Federal Reserve's year and a half campaign to convert an unsustainable boom into slower but steady growth is having results. Now the pessimists are crawling out the woodwork and predictions of a hard landing are multiplying. Spokesmen for the new administration are talking about the need for a tax cut to avert a potential recession. Let's keep our cool. Managing the economy with monetary policy doesn't have the precision of brain surgery. In 1994, the Fed raised interest rates very sharply to slow the economy and carried it off successfully. But for several quarters in early 1995, GDP growth averaged only a little over one percent before speeding up again to a higher rate. I'm not predicting it, but something like that or even a little worse could happen for several quarters in the current slowdown without threatening continued prosperity. Most important, the Fed is maneuvering for a soft landing in an economy in which inflation has been well contained. Unlike some other past periods when inflation got out of hand, the Fed now has full freedom to lower interest rates sharply and will do just that if it's needed to guard against the slowdown going too far. The landing gear may bounce on the runway a few times, but the odds are good we'll have a soft landing. I'm Charles Schultze.

Nightly Business Report transcripts are available on-line post broadcast.  The program is transcribed by FDCH. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc., Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. © 2000 Community Television Foundation of South Florida, Inc.


12/19/2000: Paul Kangas' Wall Street Wrap Up

SUSIE GHARIB: The Fed meeting created a tumultuous and confusing day of trading on Wall Street. At the open, stocks got off to a mixed start: the Dow outperforming the NASDAQ, but not by that much. That changed after the first hour, when a tech rally pushed up the NASDAQ by 43 points. The Dow would have been higher were it not for SBC Communications (SBC), a Dow component. The stock sold off in reaction to an earnings warning. The Dow even briefly dipped into the minus column, but then turned positive throughout the lunch hour. Throughout the lunch hour actually, investors became more enthusiastic about buying as they waited for the Fed: the Dow rallied up as much as 135 points just before the Fed announcement. But once that announcement came out at 2:15 Eastern Time, investors were confused by the Fed's directive, and you can see how stocks sold off. Within five minutes, the Dow cut its triple-digit gain, and the NASDAQ turned negative. But as investors digested the news, stocks rebounded. Then, in the last hour of trading, the markets reversed again as investors had second thoughts about the Fed news, and worried more about the economic outlook. By the closing bell, the Dow erased its triple-digit gain, losing 61 points to 10,584. The NASDAQ turned 180 degrees from a strong morning rally, and then in afternoon sell-off the Composite lost 112 points, to 2511 - that's a new 16-month low.

Big board volume today 1.3 billion shares. That's up a bit from yesterday.

Transports had a good day, up 38.

Utilities rose a point.

And the Closing Tick slightly bearish at -118.

In the broader markets, the S&P 500, the 100 and the MidCap were all off more than one percent.

And the CRB Index down a fraction.

The NYSE Composite and Value Line both are down over three points.

The Russell fell 4 1/2.

And the Wilshire lost almost 190.

In the bond market today, traders shrugged off the news from the Fed, and Treasuries dipped slightly. Bond traders were already looking toward the next Fed meeting in January for a possible change in policy. With traders focused on the Fed, they ignored news that the U.S. trade deficit shrank in October to $33.2 billion. Running down the numbers for you.

The 5-year note fell 2/32.

The 10-year lost 5/32.

The 30-year lost 16/32.

And the Lehman Brothers Treasury Bond Index was down 8 1/4 points.

It sure was a topsy-turvy day for the blue chips today. The Dow lost just over 61 points to 10,584.37. Advancers and decliners were just about even. As for highs and lows, 231 stocks hit a new 52 week high, 117 new lows.

Looking at the most actives, Citigroup rose $0.88 on hopes that financials will benefit now that the Fed has indicated it's ready to cut interest rates.

SBC Communications (SBC) fell almost 13 percent, down $6.75. As I said earlier, investors sold off the stock when this Baby Bell warned today that earnings and revenues in 2001 will come in lower than Wall Street estimates. Merrill Lynch also cut its forecast by $0.05 to $2.55 a share.

Compaq (CPQ) gained $0.61.

But Nortel Networks (NT) fell about $3.

And Pfizer (PFE) added $0.94. It's agreed to extend its research deal with Oxford Glycosciences to develop a treatment for Alzheimer's Disease.

EMC (EMC) was unable to break its losing streak, down nearly 3 today. A week ago, it was trading at $90.

Lucent (LU) dipped $0.19.

Conseco (CNC) bounced back, gaining $1.56. Looks like the turnaround is on track at this company. The company said today that it's selling its 29 percent in Argosy Gaming's (AGY) Riverboat Casino for $260 million.

Nokia (NOK) was unchanged, but it traded as high as $49 today, helped by a bullish growth forecast for cell phones made by its rival, Deutsche Telecom (DT).

And AOL (AOL) continued to slide, losing another $1.38 after yesterday's 14 percent drop.

Among the widelies, AMR (AMR) dropped $1.50.

Family Dollar Stores (FDO) was off $3.31 on a Goldman Sachs downgrade.

Goldman Sachs (GS) itself surged $3.44 on word of stronger than expected earnings. Fourth quarter profits rose about nine percent, $1.50 a share. That was $0.12 more than estimates.

But Morgan Stanley Dean Witter (MWD) lost $0.25 on disappointing earnings, $1.06 a share, $0.23 below Wall Street estimates.

Union Pacific (UNP) chugged higher, rising more than $3, and that helped the Dow Transports. Salomon Smith Barney upgraded the stock today to "buy" from "neutral," but it did cut fourth quarter estimates by $0.07 a share.

And Verizon (VZ) lost about $4. It was hurt by that SBC warning that we told you about.

Looking at today's big movers, Chase Industries (CSI) soared about $3 on news that its largest shareholder has made a cash tender offer to buy the company for $10.50 a share.

Solectron (SLR) rose more than $5 after reporting better than expected first quarter earnings, $0.31 a share. That was $0.03 higher than estimates.

Millipore (MIL) rose $5. It has entered into a strategic alliance with Applera (ABI) to develop next generation high speed technology for protein analysis.

Tektronix (TEK) jumped $2.75. It got a million dollar order for equipment from Hughes Network Systems.

Park Electrochemical (PKE) fell over $14. Investors sold the stock on word that Merix (MERX), another circuit board maker, warned that its earnings in the second half will miss estimates.

And CDI (CDI) plummeted $1.69 to a new 52 week low. This recruitment firm expects fourth quarter earnings to be as low as $0.02 a share. The Street was counting on $0.52.

Over on the NASDAQ, another low point, down 113 to 2,511. As for volume, 2.3 billion shares and decliners outpaced advancers two to one.

Cisco (CSCO) was the most active on the NASDAQ, down $1.19 today.

CIENA (CIEN) plunged more than $23 on concern that its deal to buy Cyras Systems will dilute 2001 earnings.

Microsoft (MSFT) lost $3.

Sun Micro (SUNW) fell $1.63.

And as for Intel (INTC), it edged up $0.19.