SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: The Federal Reserve did it again. Policy makers cut interest rates today for the seventh time this year in an attempt to invigorate the economy. They sliced a key short term rate by a quarter percent to 3 1/2 percent. That's the lowest level since 1994. Well, stocks plunged on the news. The Dow tumbled 145 points and the NASDAQ lost 50. We have two reports tonight looking at the Fed decision and the reaction on Wall Street. We begin with Darren Gersh in Washington.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: In cutting short terms interest rates 1/4 point, Federal Reserve Chairman, Allan Greenspan and his colleagues did exactly what most economist were expecting. No more. No less.

DIANE SWONK, CHIEF ECONOMIST, BANK ONE: The Federal Reserve has come across and said listen, we've got just in time inventories, just in time capital spending and now we're going to ease just in time to hedge ourselves against recession.

GERSH: In its closely watched statement explaining today's action the Federal Reserve's interest rate setting open market committee warned it sees continues risks of economic weakness. On the plus side, the Fed noted household demand has been sustained and inflation remains contained. In the long run the Fed says productivity growth remains favorably. But on the minus side falling business profits and capital spending and slowing growth overseas are all weighing on the U.S. economy. The Fed's outlook was almost identical to its June statement indicating the economy has made little progress over the last two months.

LYLE GRAMLEY, FORMER FEDERAL RESERVE GOVERNOR: This economy is still very close to the edge of recession and that's what the Fed was conveying today in what I conceed is a relatively gloomy statement, but an appropriately gloomy one.

GERSH: The Fed's next meeting is October 2nd and most economists believe today's statement was a clear signal the door is wide open to more interest rate cuts if the economy doesn't pick up.

KIM SCHOENHOLTZ, CHIEF ECONOMIST, CITIGROUP: Earlier this year it was cutting rates aggressively and recently they've shifted to a somewhat slower pace of easing, but they haven't suggested that they're completing their actions. I think there will be another round of easings in October and then interest rates will stay low longer than markets currently discount.

GERSH: Chairman Greenspan and his colleagues have now cut short term interest rates three full percentage points since the beginning of the year, but the economy remains sluggish and they don't know if their rate cut m3dicine is working yet. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is Erika Miller in New York. As word of the rate cut hit Wall Street there was little enthusiasm from traders. While the move was widely expected the Fed statement suggesting the economy remains sluggish triggered selling.

RICHARD BERNSTEIN, QUANTITATIVE STRATEGIST, MERRILL LYNCH: I think that one really shouldn't expect the market to rally on this news substantially until the Fed stops easing and starts telling everybody the economy looks great out in the future we're not there yet.

MILLER: At the Chicago Board of Trade bond prices inched higher as investors were treated to the safety of government securities.

MICHAEL ROSS, BOND TRADER, IBJ LANSTON FUTURES: The bottom line is, you know, the economy still is not picking itself up and money is falling into the Treasury markets and we're seeing that in lower yields across the Treasury curve.

MILLER: The yield on the 10-year note is now below 5 percent. That modest return is still better than the losses posted by major stock index this year. But some experts remain optimistic about stock prices.

MARY FARELL, SR. INVESTMENT STRATEGIST, UBS/PAINE WEBBER: I would expect that between now and year end as long as slow progress gets made on the economy and we do start seeing some improvement then we'll see the market respondent to that.

MILLER: She expects the Fed's earlier rate cut will finally start to have an impact. Plus Americans are only now beginning to spend their tax rebates and the more interest rates fall the more incentive consumers and companies have to borrow and spend. But others on Wall Street are more cautious saying recovery is still many months away.

BERNSTEIN: Expectations have been very optimistic not only in terms of time but magnitude and the effect of this. People thought it was going to happen very quickly and be very strong and so far neither of those appear to be happening.

MILLER: The one thing that experts agree on is that it will take more than interest rate cuts to boost stocks long term. They say it will also take proof that corporate profits are rebounding. Erika Miller, NIGHTLY BUSINESS REPORT, New York.

Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. 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. © 2001 Community Television Foundation of South Florida, Inc.

SUSIE GHARIB: So, will seven be the lucky number for the economy and Wall Street? Joining me with some thoughts on the Fed's seventh rate cut are Michelle Girard. She's Treasury Market Analyst with Prudential Securities. And Mike Holland, money manager of his own firm, Holland & Company. So we're back again to discuss the Fed. Mike, let me begin with you. Every time that we have talked, you've been pretty critical about the Fed's actions and I know you were disappointed with the 1/4 point cut today. Tell us again what's disturbing you?

MICHAEL HOLLAND, PRESIDENT, HOLLAND & COMPANY: Well, this comes from someone who was a cheerleader, Susie, as we've talked about before, for the Fed prior to the last couple of years. They raised the rates too much for reasons that turned out to be wrong reasons, that is, inflation and over heating. They never showed up. Now, having raised them a great deal they've been "aggressive" on the down side at lowering them. They have stayed behind the markets. At this point we have the Two Year Treasury trading almost at the same yield as the current federal funds rate. Normally that rate, that is, the Two Year Treasury, trades higher than the federal funds rate, as it should for the banks to do their business, by 1/2 to 3/4 of one percent. They're still behind.

GHARIB: So you wanted to see even more aggressive action? These 50 basis point cuts that they did at the early part of the year, you still would have liked it to be stronger bigger cuts?

HOLLAND: They went way too high raising them. They were ill advised to do that. Having said that, they then have brought them down by not enough. They have followed the market. There's not enough liquidity in the system yet to cause people to go out and do things. This economy, not just in the U.S. but around the world, is not very good and they're not helping.

GHARIB: Well, let's come back to it. Let's look at the Treasury market. You follow the Treasury market, Michelle. What was the message of the markets today? Treasuries were up.

MICHELLE GIRARD, TREASURY MARKET STRATEGIST, PRUDENTIAL SECURITIES: Yes, Treasury prices were up and yields came down mostly because the equity market really got hit. The market was disappointed not only that there was not a larger rate cut. I honestly think that potentially a 50 basis point rate cut could have had a more negative effect if it made the markets wonder what does the Fed see that we don't see that's got them back on these larger rate cuts. Remember, in June they only cut by a 1/4 point. But that said, the statement that the Fed released announcing the rate cut didn't really express any optimism about growth going forward and I think that's what the equity markets took to most, you know, really took hard and as stocks came down, what we saw were Treasury yields coming down further on this expectation that the Fed is going to have to cut interest rates again.

GIRARD: But let's talk a little bit about that statement. It was a short statement. It acknowledged that the economy is in bad shape, like you were saying, Mike, and it also acknowledged that the global economy is in bad shape. So I guess it comes back to the first question is why isn't the Fed more aggressive?

HOLLAND: Well, going to Michelle's point, the economy stinks. The Fed underlined that. And rates are still too high by a lot of people, including the market. More important than what I say or anyone who talks about it, the stock market and the bond market both say, particularly the bond market, with the yields where they are now, are saying that rates at the Federal Reserve are too high. So having said that, the market wants to see what Michelle was just referring to, which is a possibility of a better economy with the Fed behind us, that is to say the Fed out of the way. Three percent is where it was in '91-'92 with higher Treasury prices. They should be at three percent today.

GIRARD: Although I would say I'm really not that pessimistic on the economy. I really, and I don't really agree as much, as strongly with Michael that the Fed is behind the curve. This Federal Reserve has cut interest rates very aggressively and we've seen Greenspan take rates down three percentage points since the start of the year. We've never seen him do so much.

GHARIB: Well, let me-

GIRARD: We just have to allow some time.

GHARIB: But let me ask you this. Last night our guest, an economist, was saying that he thinks that when the GDP report comes out, the gross domestic product report that comes out next week and that's going to be revised, it'll be revised to show negative growth. So when you say the economy is not in bad shape-

GIRARD: Well, no-

GHARIB: -- what's your definition of bad shape?

GIRARD: The economy is-no, the economy is weak right now. There's no question about that. This could well end up being defined as a recession. But this is old news. That's kind of where we have been, particularly second quarter GDP growth. We've got to be looking ahead between interest rate cuts and tax rate cuts, the fact that energy prices are down and home prices are rising. This economy has a lot going for it and I certainly think that by the end of this year we will see signs of recovery even though it's not evident now.

GHARIB: Mike, you talk to a lot of CEOs. What are they telling you?

HOLLAND: I was thinking as Michelle was talking, if I simply looked at the government numbers, which is what she does for a living, I would be less uncomfortable with where we are economically. When I talk to people who run businesses, not just in the U.S., but around the world, things are not very good. As a matter of fact, they're not good and they're getting somewhat worse. I talked to one of the largest computer company managements just this weekend. They said July was awful. So when it comes to businesses generally when you talk to people who are running retail firms, things are not they're having to give away business.

GHARIB: So in a word or two, because we've got to wrap up here, for the stock market, then, things still look, what? What would you say? What's your outlook?

HOLLAND: I think the stock market predicted just what we're talking about. I believe we're in a recession. We'll look back and they will, they decided-back to Michelle's point-we're in a recession. The stock market said it was. I think both stocks and things that are related to stocks like brokerage houses, they'll do better in the stock market but I think bonds actually at this point are now becoming pricier and I'd stay away.

GHARIB: OK, well, we're going to have to leave it there and we'll talk to both of you hopefully in October for the next Fed meeting. Thank you so much.

GIRARD: Thank you, Susie.

GHARIB: We've been speaking with Michelle Girard of Prudential Securities and Mike Holland of Holland & Company.

GHARIB: AOL Time Warner (AOL) is changing the way it's doing business and cutting jobs again. Late today, the company announced a major restructuring aimed at more tightly integrating its brands. Among the moves, creating a new AOL interactive group and consolidating its Web sites under one umbrella. The plans also call for 1,200 jobs to be cut and an additional 500 jobs will go at its alliance of Netscape and Sun Microsystems (SUNW). And this is the third major round of layoffs at AOL Time Warner since the companies merged back in January. Paul?

Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. 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. © 2001 Community Television Foundation of South Florida, Inc.

08/21/01: Will A Super Size Scam Could Tarnish A Golden Arches Giveaway?

SUSIE GHARIB: A Big Mac sized scam uncovered at McDonald's (MCD). The FBI has arrested eight people for allegedly rigging McDonald's popular game promotions Monopoly and Who Wants To Be A Millionaire. The suspects include the director of security at Simon Marketing . That's the firm hired by McDonald's to handle the promotions. Attorney General John Ashcroft detailed the scheme today that defrauded McDonald's out of more than $13 million in top prizes, including the winning grand prize of a million dollars.

JOHN ASHCROFT, U.S. ATTORNEY GENERAL: The government is charging that a Simon employee, Jerome Jacobsen (ph), embezzled the winning high value game pieces and conspired to have individuals fraudulently claim to be the winners.

GHARIB: Ashcroft says that no McDonald's employees were involved in the scam. The fast food giant has now ended its relationship with Simon Marketing. McDonald's also plans to run a $10 million instant win game over the Labor Day weekend so it can regain customer confidence.

Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. 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. © 2001 Community Television Foundation of South Florida, Inc.

SUSIE GHARIB: There's been a lot of talk lately about the recent strength of the dollar. But tonight's commentator says when it comes to the dollar, talk is one thing and action is another. Here's Charles Schultze, Senior Fellow at the Brookings Institution.

CHARLES SCHULTZE, COMMENTARY: The overseas value of the U.S. dollar has recently fallen somewhat, but it's still quite high by historical standards. There's been much debate about whether that's good or bad for this country and about what our dollar policy ought to be. Well, whatever our wishes, the unwelcome fact is that it's very hard for a country to manipulate its exchange rate without affecting other important goals, sometimes in ways we don't like. For example, by cutting interest rates a lot further, the Federal Reserve could discourage investment by foreigners in U.S. short-term securities. That would probably, although not surely, reduce foreign demand for dollars and drive down its price. But it might also force interest rates excessively low and eventually drive up inflation. Alternatively, the Fed could try to force down the dollar's price by selling dollars in world currency markets. But the amounts involved in official currency interventions are tiny compared to the trillions of dollars that typically change hands each week in world currency markets. Any effect on exchange rates can easily be swamped by the decisions of private traders. Occasionally, currency interventions might help puncture a speculative bubble. But normally, such interventions won't work unless the Federal Reserve also changes interest rates with possibly unwanted effects on domestic inflation or employment. Changing the dollar's value in ways that are acceptable is easier said than done. I'm Charles Schultze.

Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by eMediaMillWorks. 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. © 2001 Community Television Foundation of South Florida, Inc.

PAUL KANGAS, NIGHTLY BUSINESS REPORT ANCHOR: Building upon yesterday's late rally which lifted the Dow industrial average to a 79 point closing gain and the NASDAQ index to a 14 point advance stocks opened modestly higher on Wall Street today as buyers grew more confidant that in the early afternoon the Fed would announce at least 1/4 point in short term rates. In a fairly upturn throughout the entire morning then the Dow moved to a 38 1/2 point gain by 12:30 P.M. while the NASDAQ index was up 10 points. Stocks continued to improve until just before the Fed's rate cut announcement at 2:15 P.M. when the Industrial Average was up 58 points and the NASDAQ up about 12. Despite the expected 1/4 point rate cut the market sold off sharply mainly because the Fed also said its indicators point toward more economic weakness, which is not what Wall Street wanted to hear. Investors showed their disappointment that any near term come back in corporate earnings was not in the offing by selling steadily right to the final bell when the Dow industrial average posted a loss of 145.93 points or 1.4 percent ending at 10,174.14. The NASDAQ index ended with a loss of 50.05. That's 2.7 percent and now stands at 1831.30

Big board volume moved over the billion share mark on the sell off. Not a good sign and a little less than 2 to 1 of down volume over up volume.

The Dow Transports Index down nearly 60 points. The airlines particularly weak.

The Utility index 3/4 of a point.

The Closing Tick neutral at .15.

Standard & Poor's 500 off 14.15.

An 8 34/ point drop in the S&P 100.

The MidCap 400 off about 3 3/4 points.

The CRB Bridge Futures Price Index moved up 3/4 point.

A loss of nearly 4 1/2 The New York Stock Exchange Composite Index

Value Line dropping 4.20.

Russell2000 Small Cap off 6 2/3 points.

And the broadly based Wilshire 5000 tumbled 126 1/2 points or 1.2 percent.

The bond market moved moderately higher today getting its best legs after the Fed made the expected 1/4 point rate cut. Largely because the Fed hints that more economic weakness may be ahead and left the door wide opening for more monetary easing. The other positive was the flight to safety buying triggered by the steep sell off in the stock market. Tax free and corporate issues ended w2ith gains averaging 1/4 point and Treasuries closed higher across the board.

The 5-year notes rising 8/32.

The 10-year notes 9/32.

And the Bellwether 30-year bond up 11/32.

All topped off by the Lehman Brothers Long-Term Treasury Bond Index which barely rose at all, just .08.

Well, we all know that lower interest rates are great for stocks. But not today. Down 146 points on the Dow, 1.4 percent, and the broader market 17 to 13 negative on the decline/advance ratio; 221 new yearly highs, though, and only 56 new lows. But a lot of those new highs are preferred stocks.

Lucent Technologies (LU) topped the active list on nearly 15 million shares, moving up $0.06.

Then Taiwan Semiconductor (TSM) losing $0.97.

General Electric (GE) getting into that $40 range again, down $1.06 today.

NorTel Networks (NT) fell $0.38.

And fifth in volume, Citigroup , down $0.40.

Guidant (GDT) a gainer of $3.70. The Alex Brown Brokerage and Merrill Lynch both upgraded the stock, reacting positively to news the company is in a major distribution pact with Cooke Incorporated . It's a leading stent manufacturer.

The NASDAQ Cubes (QQQ) in there, reflecting the weakness in the high tech market, the NASDAQ, down 1.59.

The Gap (GPS) off $0.46.

And so was EMC (EMC).

And then American International Group (AIG), 10th in volume, moved up $0.09. Morgan Stanley reinstated coverage on AIG with a "strong buy" and a $98 a share target. $98.

Delta Air Lines (DAL) down $1.68, reflecting weakness in the airline group. September New York oil futures, incidentally, were up $0.73 to close at $27.91 a barrel.

IBM (IBM) was the biggest point loser in the Dow Industrial Average, down $2.21.

J.P. Morgan Chase (JPM) down $0.68. The company's going to cut an additional 3,000 jobs, bringing the total to 8,000. That's eight percent of its workforce.

Merck (MRK), believe it or not, was the best dollar and cents gainer in the Dow Industrial Average, up only $0.17.

Scientific Atlanta (SFA) dropped $0.25 even though Merrill Lynch upgraded it from "accumulate" to "long-term buy."

And Target (TGT) down $1.74. The company's second quarter earnings up five percent to $0.30 versus $0.28, in line with Street estimates, but Standard & Poor's downgraded the stock from "accumulate" to just a "hold."

Vector Group Limited (VGP) had a good day, up $3.11. The company owns Liggett Group, Inc. and also is in real estate development. The company had no news today but a spokesman pointed out that last week the company had strong second quarter earnings, $0.37, up from $0.11 the year before.

Calpine (CPN), which is in power generation, up $1.63. Alex Brown repeated a "strong buy" and Goldman Sachs said that stock still belongs on its "recommended" list.

C and D Technologies (CHP) down $6.71. It's a manufacturer of power supplies for computers and telecom products. Second quarter earnings lower than expected, $0.49, the same as last year, and sales dropped 18 percent. The company sees third quarter earnings of only $0.30 a share.

Factset Research Systems (FDS) down $4.74. The company declined to comment on the New York Stock Exchange query as to why the stock dropped so sharply. The company is involved in database services.

Americredit (ACF) down $7.40. The chairman has filed to sell 314,000 of his shares.

And Williams Sonoma (WSN) down $3.39. The retailer of household products said second quarter earnings due out Friday. But

SunTrust Banks (STI) says it sees only break even versus earnings of $0.09 a year ago.

NASDAQ trading, a loss of just over 50 points. Volume picked up on the sell-off, about 13 stocks higher for every 23 lower.

Microsoft (MSFT) topped the active list, down $1.92.

Followed by Intel (INTC), which lost $1.13.

Then QUALCOMM (QCOM) down $1.27. <