SUSIE GHARIB: The Fed does it again, cutting interest rates for the ninth time this year. The Federal Reserve trimmed short term rates by 0.5 percent to the lowest level since John F. Kennedy was president. On Wall Street, stocks initially fell on the news and then reversed course rallying in the final hour of trading. The Dow ended up 113 points, while the NASDAQ added 11. Here's Suzanne Pratt with more on the Fed decision.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: For security reasons, Fed Chairman Alan Greenspan took a far less visible path into work today, one in which he was almost completely shielded from public view. But his actions on interest rates, as well as those of fellow policy makers, were anything but secretive. At about 2:15 this afternoon, the Fed announced it was cutting interest rates for the ninth time this year, the second time in just over two weeks. Policy makers slashed the Federal funds rate by half a percentage point bringing it to 2.5 percent-its lowest level since the early 1960s. The discount rate dropped by the same amount, to 2.0 percent. Some economists applaud the aggressive nature of today's move.

JOHN RYDING, SR. ECONOMIST, BEAR STEARNS: I'm thankful because the markets have pretty much priced in the Fed going by half a point. And had the Fed thought that its actions of cutting rates two weeks ago would have been enough, that they only cut rates by a quarter, I think we'd have seen a more adverse reaction in the equity markets.

PRATT: In a statement explaining today's decision, the Fed said the devastating attacks of September 11th "significantly heightened uncertainty in an economy that was already weak." The central bank also said the economy still faces greater risk of weakness than inflation, a signal it's prepared to cut rates further in the near future. But some economists worry that lower interest rates alone won't revive an ailing economy.

ROBERT BRUSCA, CHIEF ECONOMIST, ECOBEST: I really don't think that you want to raise false hopes that this economy can be turned around quickly. We've got this coming. We've got fiscal stimulus packages, yet we're just in the beginning of probably some kind of major consumer retrenchment. And I don't know whether you can stop this with these kinds of conventional tools.

PRATT: The next Fed meeting is scheduled for November 6. Many economists expect Fed officials will continue to take an fairly aggressive approach to monetary policy, cutting rates at that meeting and perhaps again in December. Suzanne Pratt, "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.

10/02/01: Reaction To The Rate Reduction

SUSIE GHARIB: Back to our top story: that Fed rate cut. With me now to analyze the Fed decision, Hugh Johnson. He's chief investment officer of First Albany and Michelle Girard, Treasury market analyst with Prudential Securities and they are joining us live from midtown Manhattan. Michelle, let me begin with you. Since the terrorist attack, the Federal Reserve has now cut Fed funds rate by a full percentage point. Is that enough to compensate for the damage that's been done to the economy?

MICHELLE GIRARD, TREASURY MKT. STRATEGIST, PRUDENTIAL SECURITIES: Well, it certainly will provide a cushion. But I think, as was noted earlier, it's probably not correct to assume that we're going to see an immediate impact, positive impact on the economy. Let's face it. Consumers are still worried about their own personal safety. They don't want to fly. They don't want to go to crowded malls and so it's going to be I think a good couple of months before consumers get out there, take advantage of the low interest rates.

GHARIB: Hugh, let's talk a little bit about what happened in the stock market. It looks like there was a delayed reaction to the rate cut. First stocks went down and then they picked up. What do you make of all that?

HUGH JOHNSON, CHIEF INVESTMENT OFFICER, FIRST ALBANY: Well, that's really a positive sign, quite frankly, to get the market doing that well. We're starting to get a message from the market that-and we need a lot more than we've gotten so far-a message that, indeed, in time this very high level of stimulus that we've got in the pipeline, stimulus in the form of lower interest rates since last January from the Fed and now we've got fiscal stimulus in the form of obviously tax rebates and spending increases at the federal level, all of that in time is going to work and the market's starting to send us a signal that, indeed, that might be first or second quarter of next year. You can only hope for that. But I like the signal I'm getting from the stock market.

GHARIB: Michelle, the Federal Reserve in their policy statement strongly hinted that there are still risks to the economy of more weakness and that there will be more rate cuts to come. We're already at 2 ½ percent on that federal funds rate. Is the Fed getting to a dangerous level that the rates are getting so low?

GIRARD: Oh, no. I mean it is absolutely true we're at the lowest level of the funds rate since 1962 and I think more significantly we actually have the funds rate lower than the rate of inflation for the first time since early 1990. So this is very stimulative, but it's exactly what the economy needs. It's what the Fed needs to do now to provide as much liquidity as necessary to meet an increase in demand in dollars that we're seeing at this time. It's appropriate and as Hugh said, when you look at the stimulus we're getting from the Fed and the government, it all bodes very well for the economy looking ahead to next year.

GHARIB: All right, let's look, though, at what a lot of people are saying. There's a lot of fear. There's concerns about the threat of war. There's companies who are reporting earnings warnings. Consumers, as you were saying, Michelle, are very fearful about shopping or spending money. So where are you seeing all the positives, both of you?

GIRARD: Well, right now there aren't very signs of positive factors and unfortunately there probably won't be with respect to the economic data between now and year end. I know I'm looking for, like most, a negative third quarter growth rate and a fourth quarter numbers. But you remember, the markets anticipate-and as Hugh was talking about, looking ahead, the prospects for growth are actually improved and that may be what the markets start to price in before too long.

JOHNSON: And that's the interesting thing. I mean Michelle's saying, which is quite right, is there's a lot of negative news coming at us. GDP likely to be negative third quarter, fourth quarter, a lot of companies telling us their sales and earnings well below estimates and really dismal. And if the stock market-and this gets back to what happened today or what's happened really for the last week-if the stock market can move up this so-called wall of worry, it's a very positive sign telling us, yes-

GHARIB: But what has to be done-

JOHNSON: -- things are dismal now but given time things are going to get better.

GHARIB: But what has to be done to reassure investors so they have that confidence, Hugh?

JOHNSON: Well, what has to happen is you've got to start to see some light at the end of the tunnel and it doesn't come from you. It doesn't come from me. It comes from folks like Jeff Amelt (ph) getting up and saying look, you know, I'm going to meet my numbers this year 2001 and 2002. Companies saying that look, sales and earnings prospects, business is dismal, but it's not quite as dismal as you might think. It's not quite as dismal as the prior quarter. That'll give you the light at the end of the tunnel.

GHARIB: OK, Hugh, we just have 30 seconds left. The last question to you. What are you telling investors? What should they do with their portfolios? Should they add to them? Should they wait it out? Should they bail out?

JOHNSON: We've got all of the conditions for the end of a bear market, start of a bull market. What I need is confirmation from the markets themselves. I need two or three weeks of positive market behavior before I raise my allocation to the equity markets. Investors have got to give us the right signal.

GHARIB: All right, we're waiting for that signal. Thank you very much Hugh and Michelle, both of you. And my guests tonight, Hugh Johnson of First Albany and Michelle Girard of Prudential Securities.

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.

10/02/01: Zero Percent Financing Seems To Be Jump Starting Auto Sales

SUSIE GHARIB: September wasn't a great month for the nation's big three auto makers. Daimler Chrysler (DAJ) said its U.S. sales fell by 28 percent. At General Motors (GM) sales were down three percent and Ford (F) was off almost 10 percent. Ford also warned its third quarter earnings would come in below analysts' expectations. And as Diane Eastabrook reports, analysts say that Ford probably won't be alone in reporting lower numbers.

DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Marciann Sweig wasn't ready to replace her 1993 Saturn with a new sport utility vehicle until she saw deals offering zero percent financing.

MARCIANN SWEIG, CONSUMER: You know, it's really, you know, a lot of money to spend and the financing can get to be a lot of money. So I figured, you know, this is the time.

EASTABROOK: Dealers say the zero percent financing programs rolled out two weeks ago by G.M., Ford and Chrysler are bringing some buyers back to showrooms. The deals were launched after auto sales plunged roughly 25 percent the week after the terrorist attacks. But analysts say the programs could darken the financial picture for the big three.

SCOTT SPRINZEN, AUTO ANALYST, S&P RATINGS SERVICES: There is going to be a stiff price to pay for those programs. Volume is being maintained to some extent, but it's questionable whether the incremental volume is really adding to profits.

EASTABROOK: While U.S. vehicle sales began the year stronger than most industry watchers expected, they began slipping in late spring. Last year, the big three sold a record breaking 17.4 million vehicles. Analysts expect that number will drop to around 16 million this year and could fall even more next year. Some analysts are calling on the U.S. auto industry to close plants and cut costs in other areas.

TRAVIS PASCAVIS, AUTO ANALYST, MORNINGSTAR: General Motors actually cut $3.5 billion last year, giving us a lot of confidence going forward. Ford, on the other hand, hasn't cut costs in the last two years. It's been battling a lot of the recall issues with Firestone/Bridgestone. It's been holding it back.

EASTABROOK: Capacity cuts could help manufacturers eliminate some incentives which have been eroding profits. Bt some dealers say that could be a tough sell if consumers become more cash strapped.

BILL STASEK, CHEVROLET DEALER: People are expecting some type of a rebate on just about any vehicle that they look at.

EASTABROOK: Some analysts say the shaky economy coupled with steep incentives could keep the stocks of U.S. auto companies under pressure for at least a year and possibly even longer. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Wheeling, Illinois.

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.

10/02/01: One On One With John Rekenthaler, Director of Research for Morningstar

PAUL KANGAS: The third quarter of this year certainly wasn't a great one for individual stocks or most mutual funds either. So just how bad was the damage for mutual fund investors? Joining us from Chicago is John Rekenthaler, Director of Research for Morningstar. John, welcome back to NIGHTLY BUSINESS REPORT.

JOHN REKENTHALER, DIRECTOR OF RESEARCH, MORNINGSTAR: Thank you, Paul.

KANGAS: First, was it really the worst quarter for mutual funds since the crash of '87 as we've been hearing?

REKENTHALER: It was the worst quarter for stock mutual funds since 1987. It's sad but true.

KANGAS: Well, let's see if there were any bright spots among the various among the various fund categories, and it looks like bond funds of just about any type were the place to be.

REKENTHALER: People do forget about bond funds. The news in bond funds was excellent. In fact, most government funds were up three to five percent for the quarter.

KANGAS: Right. Not big gains percentage wise, but a lot better than what happened to the stock funds by and large, right?

REKENTHALER: Absolutely. I think anybody who made three or five percent felt pretty smug.

KANGAS: Right. And now moving back to stocks, let's look at the best performing equity funds with assets of at least $50 million. Look at those huge gains. What did these folks do?

REKENTHALER: They have fur and claws. That's their secret. These are so-called bear funds, funds that profit by shorting the stock market. In fact, in some cases these funds are leveraged so they might go up twice as much as the market goes down, and obviously they were in the perfect environment.

KANGAS: But they waited a long time, didn't they?

REKENTHALER: Yes, they did. Unfortunately the long-term track record for these funds is pretty awful.

KANGAS: Well, now, taking a longer range view, it seems that Rydex Venture 100 was on a roll, more than tripling over the one year period. And then going out five years, the top fund continued to be Wasach Micro Cap.

REKENTHALER: That's right. Over the one year period, the bear funds still reigned, or are still the leaders. But when you look out five years now you get into funds that are long. And these are funds typically that actually had a fair amount of technology stocks in the past, but probably lightened up recently.

KANGAS: All right, let's see now how the largest funds did between July and September. Oh, boy, and it looks like even the biggest ones got badly mauled by the big bear.

REKENTHALER: There was no escape in the third quarter for any major, any large sized stock fund. There were a few funds that managed to keep their losses to the upper single digits, but that's about as good as things got.

KANGAS: John, finally, looking forward, do bond funds continue to look like a safer haven than the equity fund?

REKENTHALER: I believe they do. I wish I could give you other news, but I do think we're at least a quarter away in the overall stock market and therefore with stock funds for making a rebound.

KANGAS: All right. Any other thoughts here before we leave you?

REKENTHALER: Hold the course. I think it's, the turnaround is coming early next year, but it's going to take a little while to get there.

KANGAS: All right. John, thanks very much for being with us. We appreciate it.

REKENTHALER: OK, thank you, Paul.

KANGAS: My guest, John Rekenthaler, Director of Research for Morningstar.

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.

10/02/01: Paul Kangas' Wall Street Wrap Up

PAUL KANGAS: Stocks on Wall Street opened moderately higher today in an extension of yesterday's late upturn, which cut as much as a 115 point deficit in the Dow Industrial Average to only a 10.75 point closing loss and also reduced NASDAQ's losses. After about 20 minutes of trading this morning, the Dow rose 45 points, NASDAQ up 18. The market then went into a mid-morning fade as traders did a little position shuffling ahead of the Fed's interest rate decision due out in early afternoon. Growing confidence that another 0.5 percent rate cut was in the offing soon helped the Industrial Average move to a 52 point gain just before noontime when the NASDAQ Index posted a 22 point advance. Stocks backed down again prior to the 2:15 p.m. Fed announcement, and when it came, the Dow first rallied about 20 points, then fell 30 points, with NASDAQ going through similar gyrations. Suddenly though, blue chip buyers came on strong, apparently in the belief this rate cut would jump start the economy. The Dow Industrial Average surged to a closing gain of 113.76 points, or 1.3 percent, putting it at 8,950.59. The NASDAQ Composite climbed a more modest 11.87 ending at 1492.32.

Big board volume picked up just a little bit on the rally, 1.28 billion shares and more than twice as much up volume as down volume.

The Dow Transport Index up 28.28.

Utility Index rose nearly 5 1/4 points.

The Closing Tick modestly bullish at +326.

Standard & Poor's 500 up just over 12 3/4 points.

Almost a 6 1/4 point rise in the 100.

The MidCap 400 up a little over 5 1/3.

And the Bridge Futures Price Index down .69.

A gain of 6.77 in the New York Composite Index.

Value Line up 3.39.

The Russell2000 Small Cap Index rose 4.19.

And the broadly based Wilshire 5000 up 110 2/3 points or 1.2 percent.

Bond prices responded positively to that rate cut by the Fed, especially when it hinted there may be more reductions ahead. The longer end of the market rallied nicely after President Bush said that any economic stimulus package would not be so large as to push long-term interest rates higher. A firm dollar and lower new York oil futures also helped tax free and corporate issues close up eighths and quarters on average and the Treasury market ended higher across the board.

5-year notes rising 6/32.

Bellwether 10-year note up 9/32, with the yield at exactly 4 ½ percent.

30-year bond up 24/32.

And the Lehman Brothers Long-Term Treasury Bond Index rose 9.28.

A blue chip rally on Wall Street shifted into high gear late in the session, lifting the Dow Jones industrial average to a 113 3/4 point closing gain, 1.3 percent, and the broader market higher by just about a 2 to 1 margin. And for the best ratio we've seen between new yearly highs and lows in a long time, 74 versus 88.

Compaq Computer (CPQ) topped the active list on 20.3 million shares. It traded as low as $7.71. After the close yesterday, as we reported, the company said instead of $0.05 in earnings it will have a third quarter loss of $0.05 to $0.07 a share.

Qwest Communications (Q) lost $0.90. Bank America Brokerage downgraded it from "strong buy" to "buy."

General Electric (GE) moved up $0.41. The company today formally ended its attempt to take over Honeywell (HON). But it did buy some of Honeywell's smaller assets.

EMC (EMC) was down $0.10.

Citigroup moved up $0.50, fifth in big board volume.

Cendant (CD) down $0.49.

Pfizer (PFE) edged up $0.40 a share.

AOL Time Warner (AOL) rising $0.13.

And as Compaq goes, so goes merger-or proposed merger partner Hewlett-Packard (HWP), down $0.35.

And Nokia (NOK) fell a $0.05.

Abercrombie & Fitch (ANF) moving up $1.40. The company says third quarter earnings will be about the same as last year's $0.43 a share. That seemed to satisfy Wall Street.

Baxter International (BAX) losing $2 a share after the UBS Warburg Brokerage downgraded it from "strong buy" to just a "hold."

Boeing (BA) was up $1.85. As the company indicated yesterday, it did today close the deal to sell China 30 of its 737 commercial aircraft. The price was about $1.6 billion.

Calpine (CPN) moved up $3.05 on news Moody's Investor Service has upgraded all of the company's $9 billion in debt to investment grade.

Hillenbrand Industries (HB) moved up $2.40. Third quarter earnings, $0.65, well up from the last year's $0.54. Revenues up 4 ½ percent. Standard & Poor's upgraded Hillenbrand's stock from "hold" to "accumulate."

And finally, Texas Instruments (TXN) down $1.85, an example that the chip stocks are still in the doghouse.

Mastec (MTZ) up $1.19, one of the best percentage gainers. The company's policy is not to comment on its stock movement. The company builds and installs internal and external communications facilities. No news on the wires.

Champion Enterprises (CHB) up $1.13, positive reaction to the rate cut. This is the home builder.

And then HEICO (HEI) gained $2 a share. The company manufactures aerospace products and obviously the stock responding to a positive article yesterday in "Business Week's" online Web site.

Blockbuster Entertainment (BBI) gained $2.63. The company has become the official retail sponsor of the National Football League All Star balloting.

Fair Isaac (FIC) down $5.84. It's a leading provider of global information solutions. The company didn't call us back. No news on the wires. And in September there were signs of quite a bit of insider selling, however.

McGraw-Hill (MHP) down $6.40. The company sees 2001 earnings up only six to eight percent, not the double digit growth that it had earlier projected. Merrill Lynch downgraded it from "accumulate" to "near term neutral." Alex Brown Brokerage cut 2001 estimates from $3.05 a share to $2.65.

NASDAQ trading a gain very modest, a little less than 12 points. Volume up on the rally, though. 19 stocks higher for every 15