PAUL KANGAS: Stocks rallied today in anticipation of after-the-bell earnings reports from tech titans IBM and Intel. The Dow gained 36 points. The NASDAQ rose 25. Intel posted a huge drop in third quarter earnings, down 76 percent to $0.10 a share. But that was right in line with estimates. Intel says it is dealing with a weak US economy and the major drop in personal computer sales. It predicts the fourth quarter will look much like the third: revenues in the $6.5 billion range and earnings of $0.10 a share. But analysts note Intel did not comment about next year.

ED ROSS, SR. RESEARCH ANALYST, THOMAS WEISEL PARTNERS: No one has any visibility of what's going on, and particularly in the PC cycle when you're looking at the first half of the year which is traditionally seasonally weak, that you clearly don't have a sense of what's going to happen in the first half, plus you don't know where the level of base is going to be set for the fourth quarter.

KANGAS: Meanwhile, big blue posted a 19 percent drop in profits during its third quarter. But IBM still managed to beat the Street by a penny with earnings of $0.90 a share. IBM credits cost cutting and strong software sales for the better-than-expected results, and says the fourth quarter will be "challenging." Chairman Lou Gerstner says today's report reflects a shift in IT spending from buying hardware like PCs to buying software solutions.

GHARIB: Well, Even before IBM and Intel released their scorecards, Wall Street was already analyzing earnings news from three other Dow components: United Technologies (UTX), Johnson & Johnson (JNJ), and Caterpillar (CAT). And as Suzanne Pratt reports, their results were mixed.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: There's no question that United Technologies is feeling the effects of the September 11th terrorist attacks. Today, the conglomerate said it plans to cut 5,000 jobs, or more than 3 percent of its workforce, to cope with a downturn in the civilian aviation market. Nonetheless, third quarter profits for the parent of Pratt & Whitney were in line with expectations. In fact, UTX earned $1.12 cents a share in the period which ended September 30, $0.14 ahead of last year.

NICHOLAS HEYMANN, ELECTRICAL EQUIPMENT ANALYST, PRUDENTIAL FINANCIAL: I don't think there's problems here that are so huge that they can't be you know, resolved and particularly given that this management understands, you know, the new way of doing business in the digital economy is with a digital business model. I think they understand the value of information.

PRATT: Profits at Johnson & Johnson also rose in the third quarter, aided by US sales of prescription medications. J&J beat the slightly lowered consensus estimate by $0.02, earnings $0.50 a share-and exceeding last year's performance. Investors bid up J&J's stock on the news. Still, companies with disappointing earnings had a disappointing day. Shares of Caterpillar slipped after the heavy equipment manufacturer reported results below expectations. Citing higher expenses, Caterpillar earned $0.59 a share, three pennies shy of both the consensus and last year's numbers. The company also forecast a larger-than-expected decrease in full-year profits because of economic uncertainty.

JOHN INCH, MACHINERY ANALYST, BEAR STEARNS: Cat, like other companies are talking about a scenario that looks to 2002, I think weak in the first part of the year and then heading toward more substantive recovery in the second half of the year. What we would say is that I think this last downturn over the past year has tied everybody, investors included, that these companies really don't have much visibility beyond the next couple of months.

PRATT: Earnings will continue to flood Wall Street tomorrow. Among the highlights on the calendar: AOL Time Warner (AOL), J.P. Morgan Chase (JPM), Ford (F) and Citigroup. 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.

10/16/01: Checking Into The Hotel Industry With Hilton CEO, Stephen Bollenbach

PAUL KANGAS: Oh, incidentally, we'll go on and talk about the hotel industry, which has been struggling since the September 11th terrorist attacks. And of course it's seeking financial aid from Washington. But the chief executive officer of Hilton Hotels is upbeat about a quick recovery, and is opposed to a government bail out. Joining us now live from Los Angeles, Stephen Bollenbach.

STEPHEN BOLLENBACH, CEO, HILTON: Hello.

KANGAS: Hello. Mr. Bollenbach?

BOLLENBACH: Yes.

KANGAS: Can you hear me?

BOLLENBACH: I can.

KANGAS: I think we've lost contact with Susie in New York. She's there now. OK, Susie, come on in.

GHARIB: Thank you very much, Paul. It looks like we were having a little bit of technical difficulty.

KANGAS: Yes.

GHARIB: It's a pleasure to have you on the program, Mr. Bollenbach.

BOLLENBACH: Thank you.

GHARIB: Sorry for the confusion there. Let's begin with occupancy rates and how they're doing at Hilton. I know that they dropped dramatically after the September 11 attacks but can you give us an update on how things are going at the Hilton Hotels right now?

BOLLENBACH: Yes. Actually, it's recovering very, very quickly. Particularly in the hotels where air travel is not a big factor, we're back to close to the levels we were before the terrorist attacks. So, you know, immediately after the attacks we said we were managing for recovery and I think that's what we're seeing is a very rapid recovery.

GHARIB: Obviously it's a very uncertain environment and it's tough to make predictions, but how much longer do you think it's going to be before Hilton is back to where it was pre-September 11?

BOLLENBACH: Well, what we've said is that we expect that there's going to be a recession and the hotel business will probably recover quickly to the levels that we ran in 1999. And that was a pretty good year for us. And then we'll just have to see how this downturn in the economy plays out.

GHARIB: And in 1999, the occupancy rates were something like 70 percent and right now they're running around 60 percent for your hotel chain, is that correct?

BOLLENBACH: It depends on the particular brand that we have. Some of ours are above that. But we'd be in the mid-60s.

GHARIB: But still, the mid-60s, while it doesn't sound so bad, it's still not at the high levels of pre-September 11 and yet you still have the same expenses. What is this going to do to your margins and your earnings?

BOLLENBACH: Well, we really don't have the same expenses. You know, a lot of our expenses are a function of the volume at the hotels. And so expenses do drop with the volumes. But our profits will be reduced significantly, particularly here in the fourth quarter, no doubt about that.

GHARIB: Do you anticipate layoffs?

BOLLENBACH: We don't, the way the hotel business works is you schedule people based on demand so people aren't going to get as many hours in as they would typically get, but we don't anticipate layoffs of the core staff. We think the business is going to recover very quickly and we need to have all of our people here when the business comes back.

GHARIB: Well, when is that business really going to come back? We've heard a lot of businesses have been cutting back on business travel. A lot of companies cutting back on business travel and when they cut it could go on for some time. What's going to be the impact of that on Hilton?

BOLLENBACH: Well, we'll make a little less money than we normally do. But I think that the federal government is going to pump a lot of money into the economy. I think that as we go into next year we're going to see a rapid recovery in the economy and the hotels benefit from that. And the other thing that's going to help the hotel business is there's not going to be much in the way of new supply, because you're going to see that people are nervous about new investment and that's going to cut down the supply side of our equation.

GHARIB: Now, the hotel industry, as we said at the beginning of this segment, has been lobbying for some kind of financial aid from the government and you've been opposed to it. While you favor economic stimulus, you don't favor necessarily a bailout package like the airlines got. Tell us why not.

BOLLENBACH: Well, I think it sends the wrong message. First, we don't need a bailout like the airlines did need a bailout. The planes simply weren't going to fly if they didn't get some money. That's not happening in the hotel business. Our profits will be squeezed for a short period of time but we don't need the money. And I think it distracts from the message that we want to send to the government, who always helps the travel and tourism business. We want them to concentrate on helping the economy, helping travel and tourism and not distract by asking for money.

GHARIB: OK. Well, we really appreciate you talking to NIGHTLY BUSINESS REPORT this evening. Thank you so much.

BOLLENBACH: OK. Glad to do it.

GHARIB: We've been speaking with Stephen Bollenbach, CEO of Hilton Hotels, live from Los Angeles.

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.

10/16/01: Turbulence On Capitol Hill Over Airline Security

PAUL KANGAS: Also of concern to travelers tonight, the issue of airport security. On Capitol Hill, both Republicans and Democrats agree airport security needs to be tightened, but they disagree on just how to do it. Stephanie Woods reports.

STEPHANIE WOODS, NIGHTLY BUSINESS REPORT CORRESPONDENT: At mid-morning, Washington's Reagan National Airport is normally bustling with crowds. Today it is nearly empty. The airport has cut back 75 percent of its flights due to security concerns. And even with heightened security, some frequent fliers are still anxious.

UNIDENTIFIED FLYER: I'm going to have to fly in the next couple of weeks for business, which I do every week, and I'm apprehensive.

UNIDENTIFIED FLYER: I think as a flying passenger I'd feel more comfortable if the government was employing the people who are inspecting the bags.

WOODS: It seems there are more politicians, media and union representatives here for a news conference than there are flying passengers. House Minority Leader Richard Gephardt chose this location to point the finger at Republicans for holding up the airport security bill.

REP. RICHARD GEPHARDT, MINORITY LEADER: We have not taken adequate steps to give people maximum safety in the skies. This inaction has damaged our economy and people's confidence in one of our most important parts of our transportation system.

WOODS: The key sticking point? Democrats want the government to take over airport security, including making passenger and baggage screening employees federal workers. Republicans want federal oversight of airport security, but with a private workforce.

REP. JOHN MICA, R- FLORIDA: So we've got to have a better federal operation in the first place and not necessarily create an even bigger federal bureaucracy that many times we've seen in the past federal bureaucracies aren't the most responsive.

WOODS: Analysts say policy details matter little to investors. What they want is a new airline security law to restore consumer confidence about flying.

ERIC OLBETTER, POLICY ANALYST, SCHWAB WASHINGTON RESEARCH: Anything that Congress can do to reassure the public that it's safe to fly, that they are protecting the skies, is viewed as a huge positive. It's more important, quite frankly, than anything else we've seen come out of Washington in regards to the airlines.

WOODS: The Senate has already passed a bill that makes airport security personnel federal employees. The House could take up its version of the bill with a private workforce next week. Analysts expect a compromise to be hammered out by mid-November. Stephanie Woods, NIGHTLY BUSINESS REPORT, Washington.

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.

10/16/01: Commentary: Are Capital Gains The Way To Gain Control Over The Economy?

SUSIE GHARIB: There are lots of ideas in the works to spark the nation's sagging economy. But tonight's commentator says cutting capital gains taxes should not be one of them. Here's Irving R. Levine, Dean of International Studies at Lynn University and former Chief Economics Correspondent for NBC News.

IRVING R. LEVINE: Congress is considering a capital gains tax cut as part of a package to jump start the stalled economy. But that would be the wrong tax cut at the wrong time for the wrong reasons. Supporters argue that cutting the capital gains tax would enable companies to raise capital by selling new shares to investors attracted by the lower tax. But at a time of excess capacity and falling consumer demand, few companies need more capital to invest in new equipment. Supporters also say that a lower tax would give the market a boost because it would encourage people to buy stocks. But instead, stocks could plummet if investors rush to sell stocks in which they still have capital gains. Supporters claim that reducing the tax would increase revenue for the U.S. Treasury because more people would cash in their paper profits. Capital gains do produce a lot of revenue, $118 billion last year, but the market has lost about $2 trillion in value this year so investors now hold fewer gains to cash in than a year ago. Finally, the main shortcoming of a capital gains tax cut is that it won't put money quickly into every taxpayers' pocket, and that is what is needed most to revive consumer confidence and get people spending again. I am Irving R. Levine.

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.

10/16/01: Paul Kangas' Wall Street Wrap Up

PAUL KANGAS: Buyers took the upper hand on Wall Street on today's opening, thanks in part to encouragement from yesterday's late rally which turned about a 100-point midday loss in the Dow Industrial Average into a 3 1/2 point closing gain and also helped the NASDAQ Index trim its loss to only 7 points. Solid earnings increases from Johnson & Johnson, United Tech, and Bank One (ONE) early on, also helped the Dow post a 51 point gain at 10 a.m. while the NASDAQ Index was up 22 points. The market lost its bullish luster for the rest of the morning due to growing caution ahead of those after the bell reports from IBM And Intel. Investors were also disappointed by lower results posted by Caterpillar, Maytag (MYG) and Kimberly-Clark (KMB). At 12:30 p.m., the Dow fell to a 29-point loss. NASDAQ was down a fraction. Selling pressures eased as afternoon trading progressed and then we saw some optimism about IBM and Intel's earnings. That helped the market firm up. The Dow Industrial average bounced back with a closing gain of 36.61 points putting it at 9384.23. The NASDAQ Index came in with a gain of 25.76 points ending at 1722.07.

Big board volume moved up on the day, 1.21 billion shares and nearly a 2 to 1 ratio of up volume over down volume, not quite.

The Dow Transport Index had a pretty decent gain of 34 1/2 points.

Utilities up 4.77.

The Closing Tick moderately bullish at +786.

Standard & Poor's 500 up just over 7 1/2.

Nearly a 3 3/4 point run up in the 100.

The MidCap 400 gained just over 5 points.

Bridge Futures Price Index up just over 1 point.

A gain of nearly 3 1/2 in the New York Composite.

Value Line rising 3.39.

A gain of 4.44 in the Russell2000 Small Cap Index.

And the broadly based Wilshire 5000 up just over 77 1/2 points or 8/10 of a percent.

Bond prices extended yesterday's gains, getting an early boost from the report that September US industrial production fell 1 percent. That was its 12th straight monthly decline, suggesting even lower interest rates might be needed to jog the economy. Bonds were also supported by more safe haven buying caused by the widening anthrax scare. A $0.29 per barrel drop in November New York oil futures also helped tax-free and corporates gain 1/8s and 1/4s while the Treasury market rose across the board.

5-year notes up 6/32.

The 10-year notes up 10/32.

30-year bond rose 11/32.

And the Lehman Brothers Long-Term Treasury Bond Index up just over 9 1/2 points.

Well, stocks showed a little life late in the session today and got most of the major averages in the plus column, including the Dow, up 36.61. The broader market nicely higher, by a 19 to 11 margin, and 60 new yearly highs as against only 36 new lows.

AT&T Wireless (AWE) topped the active list on 19.8 million shares, down $0.56. Fulcrum Global Partners Brokerage began coverage with a "sell" recommendation, interestingly.

Then Broadwing (BRW), this is the company that owns Cincinnati Bell, down $3.83. It traded as low as $10.75. A third quarter loss reported today of $0.15 and revenues were up 13 percent. The Robert Baird Brokerage downgraded it from "strong buy" to "market outperform."

Lucent Technologies (LU) moved up $0.12.

Sprint PCS Group (PCS) down $1.28. Fulcrum Global also made some negative comments about this stock.

Johnson & Johnson (JNJ) up $1.05 on that 16 percent rise in third quarter earnings you heard about.

GE (GE) lost $0.39.

But Citigroup up $1.29. The company's board has approved a $5 billion stock buyback and third quarter earnings, as you heard, are due out tomorrow.

EMC (EMC) edged up $0.35.

AOL Time Warner (AOL), whose earnings are due out tomorrow, showed no change.

Nortel Networks (NT) edged up $0.11.

Bank One (ONE) up $2.46. Third quarter earnings out today, up 30 percent to $0.64 versus last year's $0.56.

But Caterpillar (CAT) down $0.17 on that five percent drop in third quarter earnings.

Diamond Offshore (DO) up $1.24, a big jump in third quarter earnings, $0.38 versus only $0.08 last year. Revenues up a hefty 47 percent.

Forest Laboratories (FR) fell $5.61 even though second quarter earnings out today $0.43, way up from $0.28, $0.02 above the Street estimate. But the stock had a sharp recent run-up so apparently some selling on the good news.

Kimberly-Clark (KMB) fell $4.48. The company sees third quarter earnings around $0.80 versus $0.84 a year ago. Standard & Poor's downgraded it from "hold" to "avoid."

And United Tech (UTX) up $0.98. It traded as high as $55.05 on those third quarter earnings of $1.12, right in line.

World Fuel Services (INT), one of the better percentage gainers, up $1.94. A spokesman gave an upbeat outlook because the company's aircraft and ship refueling business is getting quite a boost from the U.S. military buildup.

AmeriCredit (ACF) up $2.69. That's got to be a technical rebound. The stock hard hit last week, down $13.50 on Thursday and Friday alone on concerns about consumer credit quality.

Graco (GGG) up $3.16. Third quarter earnings $0.53, down from $0.59 a year ago. But the company is upbeat on the outlook for its profit margins.

And CANTV (VNT) up $1.77. This is Venezuela's biggest telecom company. It's trying to fight off a hostile takeover bid from AES Corporation (AES). So the board approved an extra cash dividend of $4.89 per American Depositary share and a 15 percent stock buyback.

Downey Financial (DSL) down $4.99. Third quarter earnings sharply lower, $0.77 versus $0.93 a year ago. The company cites heavy loan prepayments because of the sharp drop in interest rates.

And investors turned a cold shoulder to CryoLife (CRY), down $4.30, even though third quarter earnings were $0.14, up from $0.12 and a $0.01 above the Street estimate. But that's got to be profit taking. This stock has had a nice run-up in anticipation of the better earnings.

NASDAQ trading, a 25 3/4 point gain in the Index, 1 ½ percent. Volume up to 1.8 million shares. 21 stocks higher for every 14 lower.

Microsoft (MSFT) topped the active list, edging up $0.39.

Then Intel (INTC) closed up $0.58. But after the hours it was trading as high as $25.55 on that inline earnings report.

Cisco (CSCO) up $0.76.

QUALCOMM (QCOM) dropped $0.70.

Juniper Networks (JNPR) moved up $2.43, fifth in NASDAQ dollar volume.

A $0.03 gain by eBay (EBAY).

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