08/31/01: Hoping the Fall Brings a Rise

SUSIE GHARIB: Wall Street finally broke out of its four-day losing streak, ending a miserable week on a positive note. The Dow rose 30 points and the NASDAQ added about 14. But it's been a lousy month for investors. In fact, August turned in the second worst monthly performance for the stock market so far this year. Here's Scott Gurvey with a look back and ahead.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: The best thing that can be said about August is that it is now over; unless, of course, you were a short seller. The tale of the tape shows that for the month, the Dow lost 5 1/2 percent, the S&P 500 5.9 percent and the NASDAQ Composite 10.9 percent. Call it wishful thinking, call it blind faith, call it what you will, but on Wall Street there is almost complete agreement that a turnabout is now at hand. Experts say they see constructive news in the economic data, investor pessimism indicative of market bottoms and unusually large amounts of cash on hand in the accounts of institutional money managers who will return home from vacation next week.

PHILIP DOW, EQUITY STRATEGY DIR., DAIN RAUSCHER WESSELS: These people are paid to manage money, not cash. They should be invested in securities, stocks and bonds and so, my sense is that there's going to be some tough decisions made next week and, odds are that I think a lot of people are going to recognize that this-this is a time probably with opportunity on the horizon rather than more risk.

GURVEY: In fact, over the last 50 years, the S&P 500 has been flat, on average, in August. September has been the worst month with an average 0.3 of 1 percent decline. But many believe this year will defy the historic trend. They say investors have accepted the fact that corporate earnings are a lagging indicator and are now ready to look ahead to an improved profit picture next year.

JOSEPH BATTIPAGLIA, CHIEF INVESTMENT STRATEGIST, GRUNTAL & CO: We were supposed to have a good November and December last year and that didn't happen. So I would look for something different here because now the evidence is starting to mount that the economy has some get up and go, the Purchasing Managers numbers were better than expected on many fronts, leading indicators have been up for four months now, unemployment stays well contained and employment stays full with expanding payrolls, which allows the economy to grow.

GURVEY: Enjoy your long weekend. Next week brings another healthy helping of economic news to digest, ending with the employment report for August on Friday. Scott Gurvey, "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.

PAUL KANGAS: Holiday travelers are in for sticker shock this Labor Day weekend. Gas prices are rising again in many parts of the country. As Diane Eastabrook explains, gasoline supplies are shrinking and some analysts predict prices could head higher for much of the fall.

DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: In Chicago, some motorists feel like they are experiencing a recurring nightmare. Gas prices are again near $2.00 a gallon, just as they were last spring.

GAS CUSTOMER #1 : Moving up, moving up. Not too happy about it, you know.

GAS CUSTOMER #2: They're too high. It is really ridiculous.

GAS CUSTOMER #3: My last tank I filled up it was about $0.40 less a gallon, and that was one tank ago.

EASTABROOK: Tight supplies are pushing up pump prices. The American Petroleum Institute says in the past week US gasoline supplies shrank by nearly seven million barrels. Refinery problems are part of the reason for the shortfall. A fire closed down this facility outside of Chicago a couple of weeks ago and refineries in California and Oklahoma have also had disruptions. But consumers also have been topping off their tanks more. Analysts say summer gasoline demand typically peaks near the July 4th holiday and then tapers off. But that didn't happen this year and some analysts think that could be a good sign.

PHILIP FLYNN, ENERGY ANALYST, ALARON TRADING: It's my belief that this might be the first sign of an economic recovery. We did get these tax checks back, which most people got them by now and it shows that maybe early in the season they were a little bit hesitant about taking a vacation and spending that money, but now this might be an indication that they are taking the trips, they are taking the vacations.

EASTABROOK; Gas prices peaked in May because refineries couldn't make enough new summer blends fast enough to meet demand. Prices bottomed out in July, but began trending up again in August. Many economist think gas prices will decline once the summer travel season ends, but some are open to the possibility that prices could go higher.

DIANE SWONK, CHIEF ECONOMIST, BANK ONE: It isn't out of the range of possibilities given that the manufacturing sector looks like it's at least bottoming out. It's no longer that heavy drag or anchor on prices that it once was.

EASTABROOK: Some analysts say weather could also have a significant impact on gasoline prices. they say a warmer than normal fall could prolong the summer travel season keeping demand for gas strong and pump prices high. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.

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.

08/31/01: "Women Who Win" -A Sneak Preview

SUSIE GHARIB: The markets are closed on Monday for the holiday, so be sure to join us for a special Labor Day look at leadership. The program is called Women Who Win. Here's Linda O'Bryon with a preview.

LINDA O'BRYON, NIGHTLY BUSINESS REPORT CORRESPONDENT: From a leafy corporate campus in Stamford, Connecticut, home of Xerox (XRX) to the suburban Minneapolis twin towers that house Carlson Companies, we profile the leadership styles of two of America's most powerful businesswomen. Anne Mulcahy is the new Chief Executive Officer of Xerox. She heads up a publicly traded firm that has faced great challenges over the last year.

ANNE MULCAHY, CEO, XEROX: I enjoy what I do and I think that shows in terms of a leadership style. Even in the toughest of times, if you don't really have an appetite for what you're doing, I think it's tough to be a great leader.

O'BRYON: Marilyn Carlson Nelson is the CEO of Carlson Companies. It's a business services and solutions provider with some of the best known brands in the world. It's family owned and operated that way, too.

MARILYN CARLSON NELSON, CEO, CARLSON COMPANIES: We see a lot of advantages in having a family owned business. For our employees, there is the continuity, there is a sense of family.

O'BRYON: Both of these women are women who win and you can meet them Monday night right here on NIGHTLY BUSINESS REPORT. I'm Linda O'Bryon.

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.

08/31/01: Market Monitor-Julius Maldutis, Managing Director, CIBC World Markets

PAUL KANGAS: My guest market monitor this week is Julius Maldutis, Managing Director, CIBC World Markets. And welcome back to NIGHTLY BUSINESS REPORT, Julius.

JULIUS MALDUTIS, MANAGING DIRECTOR, CIBC WORLD MARKETS: Thank you, Paul. Delighted to be with you, as always.

KANGAS: Before we start getting into your specialty, the airline industry, I'd like to ask you what official stance your firm, CIBC World Markets, is taking with regard to this very difficult U.S. stock market. I mean are we close to making a major bottom? Is it time to start buying? If so, what? Where do they stand?

MALDUTIS: Basically we believe that the market is as a cyclical low. We've turned more bullish on the market as a whole, with a 75 percent allocation towards equities, essentially based on the fact that we would have recovery in earnings for next year. Our favorite sector obviously is the technology sector. In terms of looking at the economy, we think the third and fourth quarters are going to be really difficult quarters because of the lag in business investment and obviously the Fed is going to take action. But looking at the economy, you know what's interesting is that the airlines tend to be a leading indicator.

KANGAS: Well, there we go. We're going to just dovetail right into your specialty and you think that the airlines, I mean the stocks have been basically grounded, pardon the expression. Are they starting to look better to you?

MALDUTIS: No. I continue to take a very cautious position. Airline stocks as a group were down 25 percent year to date compared to the S&P, which is down about 15 percent. I only have three favorite stocks and those are Southwest Airlines (LUV), its clone West Jet in Calgary, Canada and AirTran AAI (AAI) in Atlanta. I would wait until the third quarter earnings are out.

KANGAS: If there are earnings. I mean, for the second half, I mean do you see some earnings coming out from the big ones?

MALDUTIS: No, I think except Continental Airlines, which I'm watching very carefully. It could be the only one that reports a profit for the third quarter. I think the others are all set for some record losses.

KANGAS: Well, this is the third time that you're actually recommending on this program those stocks, Southwest Air, Airtran and West Jet. And from the original price, they're all way up. Now, from your last visit with us back on March 16, they're about the same as they were. You would buy those three here?

MALDUTIS: Absolutely, because these companies typically make money during recessions because they offer low fares. They have low costs. And consequently business travelers in particular gravitate to these companies.

KANGAS: Does your firm, CIBC, have an investment banking relationship with any of those companies?

MALDUTIS: No, we do not.

KANGAS: All right. Now, one word about-first of all I want to compliment you, incidentally. Last time you were here you said the U.S. Air takeover by United Air (UAL) isn't going to appear and you were right on. You are an expert. That was a good call.

MALDUTIS: Thank you, Paul.

KANGAS: What about the travel agent controversy right now? Are these travel agents, are they going to survive?

MALDUTIS: Yes, they are, because they perform a vital function. Obviously the changing Internet technology is putting pressure for travel agents who provide value and provide a service will be able to charge a fee to the consumer. And keep in mind that distribution costs, which include travel agency commissions, is the third largest cost. So given the pressures that airlines face today it's not surprising that they're seeking to cut those commissions.

KANGAS: On your last visit with us in March you said that the flight delay problem is being worked on by the new Secretary of Transportation Norm Mineta and he's very capable. And we are seeing an improvement, but not necessarily for that reason. Why are we seeing an improvement?

MALDUTIS: Well, the airlines as a result of the huge losses are beginning to cut flights and obviously with the reduction in flights, you have a reduction in delays and all those operating problems.

KANGAS: All right. Now, we know your three favorites, but when do you think would be a good time to start looking at some of the majors like American and United and so forth?

MALDUTIS: Well, the other shoe is going to drop next week when managements begin to report their August traffic results. I think those releases are going to contain warnings about the third quarter results, financial results, and obviously in October they're going to report the actual results. So I would hold off buying the big ones until we get the third quarter earnings releases out of the way.

KANGAS: OK. Very good.

MALDUTIS: Typically-

KANGAS: I'm going to have to cut you off there, Julius. Our time has run out.

MALDUTIS: OK.

KANGAS: But thanks very much for being with us.

MALDUTIS: Thank you.

KANGAS: My guest, Julius Maldutis, Managing Director, CIBC World Markets.

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.

The early upturn was not vigorous enough to draw much of a following off the sidelines, so stocks turned flat as morning trading wore on, especially after International Monetary Fund economists warned about a significant danger of global recession. By noontime, the Dow was hanging on to just a 7 point gain. NASDAQ was down 1 point.

News that the University of Michigan’s August consumer sentiment index fell rather sharply failed to bring on more selling, which impressed some traders to move on to the buy side in afternoon, The move enabled the Dow Industrial average to close with a modest gain of 30.17 points at 9949.75. This week the Dow fell four times, rose only once and had a net overall loss of 473.42 points or 4 ½ percent. The NASDAQ Composite eked out a gain of 13 ¾ points today at 1805.43. This week the composite fell four times as well, rose only once, had a net overall loss of 111 1/3 points or 5.8 percent.

The big board volume declined on the rally unfortunately and about a 5 to 3 margin of up volume over down Volume.

The Dow Transports Index up a little over 6 ½ points.

Utility Index edged up about ¼ point.

But the Closing Tick practical neutral but minus 83.

Standard & Poor’s 500 up a little over 4 ½.

Just over a 3 point rise in the S&P 100.

The MidCap 400 up 3.14.

And a 2 ½ point gain in the CRB Bridge Futures Price Index

New York Stock Exchange Composite Index up just about 1 3/4.

Exactly a 1 1/2 point rise in the Value Line

Russell2000 Small Cap edged up .39.

And the broadly based Wilshire 5000 gaining 43 1/10 points.

The bond market was mixed today, reflecting those mixed reports on the economy, but activity was extremely light and not really indicative of any meaningful trend since trading desks were being manned by just skeleton crews ahead of the long weekend. When this market closed early at 2:00 P.M., tax-free and corporate issues were mostly unchanged, while the Treasury prices ended on a mixed note.

The 5-year notes no change at all.

The 10-year notes fell 6/32.

And the Bellwether 30-year bond managed a gain of 8/32.

And a little loss of .12 in the Lehman Brothers Long-Term Treasury Bond Index.

We finally saw some plus signs. The Dow up 30.17. But for the week down 4 1/2 percent. For the month of August down 5 1/2 percent. Today, about 17 stocks higher for every 14 lower and 114 new yearly highs, 57 new lows.

Liberty Media (LMC) topped the active list on 21.3 million shares, moving up just over $1. Chairman John Mallone said there’s only a 50 percent chance the company’s pending deal to acquire Deutsche Telekom’s (DT) cable network will work out. A.G. Edwards, however, made also some positive comments on Liberty Media.

GE (GE) moving up $0.78.

AOL Time Warner (AOL) up $1.35. There’s speculation the company might bid for Telemundo.

Pfizer (PFE) a $0.01 gain.

Lucent Technologies (LU) dropped from its most active spot six days in a row, now fifth today, up $0.15.

XL Capital Limited (XL) up $1.50. This stock will replace Wachovia (WB) on the Standard & Poor’s 500 on the opening next Tuesday.

Citigroup © was up $0.22.

And EMC (EMC) edged up $0.15.

Global Crossing (GX) a $0.17 gain.

Tenth in volume were the NASDAQ Cubes (QQ), which rose $0.46.

Boeing (BA) was up $0.70 a share. The company said it may cut some 500 jobs because it’s discontinuing the conversion of passenger planes to cargo carriers at its Wichita, Kansas facility.

Disney (DIS) one of the better gainers in the Dow, up $0.80.

Hitachi Limited (HIT) down $3.70. The company is cutting its estimate of its first half results from a profit to a loss. It’s also going to cut 14,700 jobs or 4 1/2 percent of its workforce.

Murphy Oil (MUR) down $5.65. The company sees lower than expected third quarter earnings. It’ll be between $0.80 and $1 a share.

The Street was expecting $1.08. Standard & Poor’s downgraded Murphy’s stock from “accumulate” to just “hold.”

Sony (SNE) down $1.02. The company is going to stop selling certain of its computer terminals in this country because of lackluster demand.

And finally, United Technologies (UTX) stock was the best point gainer in the Dow, up $0.92.

Ackerley Group (AK), a media company, you’ve seen those outdoor ad boards, up $1.62. A company spokesman said no corporate developments to account for that nice strength.

Bunge Limited (BG) up $1.49. This is one of the giants in the grain and oil seed business and Salomon Smith Barney started coverage of the stock with a “buy” and a target of $27 a share.

Peabody Energy (BTU) up $1.55. A spokesman said the company’s forecasting 2002 earnings will rise because of improving demand and pricing for coal, which is going to be used more and more to produce electric power.

The big loser of the day, Royal KPN (KPN) down $0.76 or a little over 20 percent on word that Moody’s may cut the company’s debt rating after merger talks with a Belgian firm ended.

Celanese (CZ) down $2.65. The company cutting its 2001 guidance due to the economic weakness in this country and Europe.

Wallace Comuter Services (WCS) fell $1.40. The company sees lower than expected fourth quarter earnings of only $0.14. The Street estimate was $0.31. The company says revenues will fall five percent.

The NASDAQ Composite Index (COM) up 13 3/4 points, but for the month down 221 points or almost 11 percent. Volume fell on the rally, unfortunately, 19 stocks higher for every 15 lower.

Microsoft (MSFT) topped the active list, moving up $0.11.

Intel (INTC) gained $0.83. Intel’s quarterly results due out next Thursday.

Cisco (CSCC), a $0.32 gain there.

QUALCOMM (QCOM) down $0.74.

NOVELLUS Systems (NVLS