11/05/01: Cisco Shows Strength In A Struggling Economy

PAUL KANGAS: Anticipation was the word on Wall Street today. Stocks soared ahead of the after-the-bell earnings report from Cisco Systems and tomorrow's Federal Reserve decision on interest rates. The Dow jumped 117 points and the NASDAQ Index rose almost 48 points. And the news from Cisco was good. The networking giant beat the Street with fiscal first quarter earnings of $0.04 a share, $0.02 better than estimates. But that was down sharply from last year's $0.18 per share. Cisco Chairman John Chambers says he's cautiously optimistic about the second quarter, and sees revenues flat to up slightly with slightly meaning very low single digit growth. Cisco shares rose on that news in after-hours trading, almost a dollar higher than the closing price.

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.

11/05/01: Fed Watchers Are Watching For Another Rate Reduction

SUSIE GHARIB: Federal Reserve policy makers meet tomorrow morning to decide what's next for interest rates. Economists expect them to cut rates for the tenth time this year. Erika Miller reports.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: For most Fed watchers, it is not a question of whether the Fed will cut interest rates tomorrow, but rather by how much. Two-thirds of economists surveyed expect a 50 basis point cut. They argue that bold action is required immediately to pull the economy out of recession

RICHARD RIPPE, CHIEF ECONOMIST, PRUDENTIAL FINANCIAL: The economy had been sluggish before the U.S. was hit with these terrorist attacks on September 11th, but those attacks have tipped us over into outright recession. And I think under those circumstances, the Fed will want to do whatever it can to minimize the effect of this shock.

MILLER: He also says a smaller move could prompt a steep sell-off in stocks, further hurting consumer confidence. But not everyone believes the Fed must act so aggressively. There are plenty of Fed watchers who still believe the Fed will want to save some ammunition and cut by 25 basis points instead.

RICHARD BERNER, CHIEF US ECONOMIST, MORGAN STANLEY: I think you can make a case for them going only 25. To begin with, they have lowered rates significantly since the tragic events of September 11th by 100 basis points.

MILLER: The Fed has already slashed rates nine times this year, for a total of four percentage points. Economists say the full impact of those rate cuts will not be felt until next year anyway. Plus, they say Congress is likely to pass another fiscal stimulus plan which would further boost economic growth. The one thing Fed watchers agree on is the importance of the statement accompanying the Fed's decision tomorrow.

BERNER: I think it will be quite important to listen to what they say. If they're convinced, for example, that inflation is going to go even lower than what they thought before, then one could interpret what they say as leaving the door even wider open for further ease.

MILLER: Most economists are confident the Fed will trim rates at least another 25 basis points at the December 11th meeting, and some are betting there will be more moves early next year. 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.

11/05/01: The Fed Forecast With David Jones, Chief Economist of Aubrey Lanston

SUSIE GHARIB: Paul, our guest expects the Federal Reserve to cut interest rates by 1/2 percent tomorrow, and believes that will be the last rate cut for the year. Joining us live from Miami, David Jones. He’s chief economist for Aubrey Lanston. Hi, David.

DAVID JONES, CHIEF ECONOMIST, AUBREY G. LANSTON & CO.: Nice to be with you Susie.

GHARIB: Nice to have you with us. Tell us why you think the Fed is going to cut by half a percent tomorrow.

JONES: Well, I think those numbers Paul just cited were part of the story. As we saw in the piece, there was a very weak economic story, particularly those employment numbers for October where we lost 415,000 jobs in terms of payrolls and where that unemployment rate moved up sharply to 5.4 percent from 4.9 percent. Against that background, against the reality of a recessionary economy, I think the Fed has to move aggressively.

GHARIB: We’ve been getting a lot of disappointing economic reports recently. Do you think the employment report is going to be the influential factor on whether the Fed cuts by ¼ percent or ½ percent?

JONES: I think it is. I think the Fed has two things that it’s worrying about. I don’t think it was shocked by the employment numbers, but I think it had to recognize that those are convincing evidence of a recession. The other thing is, the Street has come around to the view that it’s more likely to be a 1/2 point, rather than ¼ of a percentage point. I think the Fed will follow the lead. I think the last thing the Fed wants to do is disappoint the Street in its action tomorrow.

GHARIB: You’ve said a couple of times since we’ve talked that we’re in a recession, even before this GDP report came out, showing a decline. What is this recession going to be like? Can you put it in perspective with past recessions?

JONES: It’s very difficult. Some people talk about a V-shaped, sharp decline, particularly in the current quarter I’m guessing down maybe 4 to 5 percent in terms of real GDP after the .04 percent decline in the third quarter. Other people would have it more of a U-shaped process. I guess the best feeling would be that we’re going to move down sharply in the current quarter, maybe down again mildly in the first quarter of next year. Probably won’t be until the second half of next year that we’ll start to see real strength in the economy. I’m guessing it’ll take a year before we get back on our feet in terms of growth. I don’t know whether you call that a U-shape, maybe a W, but…

GHARIB: The whole alphabet.

JONES: The whole alphabet.

GHARIB: When you look at the fourth quarter, what we’re in now, how difficult an economic situation is this going to be?

JONES: It’s serious. I think consumer confidence has been breached. I think business spending is pulling back. We saw it again in the third quarter numbers. Huge drop in business investment. We have to remember this is a business-led decline even before the September 11th terrorist attacks. And it’s sort of a boom/bust investment cycle an it’s always difficult to pull out of those. There’s no quick fix, even in terms of Fed rate cuts. The only good news here is that we will be getting a big fiscal stimulus package, mainly in terms of tax cuts, but also some spending increases too. We’re going to need both Fed and budget stimulus to get out of this mess.

GHARIB: Well it’s interesting you bring that up. I’ve heard that a lot from many market strategists who are somewhat optimistic because the Fed and the government are working together to revive the economy. But do you think that investors and the general public have lost confidence in the Federal Reserve and Mr. Greenspan to turn around the economy?

JONES: It’s a frustrating process. Look back, Susie. The Fed started at a 6 ½ percent overnight rate. If I’m right tomorrow they’ll go from 2 1/2 percent down to 2 percent, the lowest in many decades. We still haven’t seen much from their efforts. We do have to remember though the housing sector has been doing much better than most would have thought, with low interest rates and also even spending on automobiles is holding up. So maybe the way we can say it is if the Fed had not done all of this easing, the economy would be in even worse shape.

GHARIB: One real quick question. We just have about 15 seconds left. The Fed policy statement that will accompany the Fed’s decision tomorrow, do you expect any change?

JONES: I think they will hint. I don’t see any change in the bias. I think it will still be toward more ease. But I think the Fed will say that we’re probably at a moment where they’re getting near the end of their easing moves, particularly given the lagged effect of all the easing before and the stimulus from the budget side.

GHARIB: All right. We’ll see what happens tomorrow. Thank you so much David, for coming in to talk to us.

JONES: Thank you.

GHARIB: We’ve been speaking with David Jones of Aubrey Lanston.

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.

11/05/01: Massachusetts Is Unsettled By The Proposed Microsoft Settlement

PAUL KANGAS: Tomorrow morning, the judge in the Microsoft antitrust suit will meet with representatives of the 18 state attorneys general to discuss the government's proposed settlement of the case. But one of those states went on the record today as being flatly opposing the deal. Stephanie Woods reports.

STEPHANIE WOODS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Massachusetts Attorney General Tom Reilly says the proposed settlement between the Justice Department and Microsoft is disastrous.

TOM REILLY, ATTORNEY GENERAL, MASSACHUSETTS: The proposed agreement entered into by the Justice Department and Microsoft to me is just a license for Microsoft to crush its competition.

WOODS: Reilly and other critics of the deal say it is riddled with loopholes, doesn't last long enough, and lacks enforceability. But most of the 18 states are expected to endorse the proposed settlement. A source familiar with the discussions says New York's attorney general will sign onto the deal, making it difficult for the remaining states to litigate the case.

ERIK OLBETTER, POLICY ANALYST, SCHWAB CAPITAL MARKETS: It's very difficult for any parties to argue against an established settlement that two sides have come to. And particularly if it's only a few states and the majority of states actually join with D.O.J., it becomes that much harder to say that in fact all of those parties with all of their antitrust experience are, in fact, wrong.

WOODS: And Massachusetts' attorney general acknowledges it's an uphill battle.

REILLY: We know what we're up against, and it's not exactly a position you would want to be in in terms of resources and in terms of money, but it is what it is. And we're not done yet.

WOODS: Tomorrow, a handful of the 18 states plan to ask Judge Colleen Kollar-Kotelly to find that the proposed settlement is not in the public interest. Still, that may not make much difference. Analysts say the states may get some technical changes to the proposed settlement, but any changes aren't expected to be substantial. 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.

11/05/01: Commentary: Post Terrorist Attack Energy Issues

SUSIE GHARIB: Tonight's commentator says that the terrorist attacks on September 11th should change our view of one very important aspect of our economy: energy. Here's Alan Blinder, partner of the Promontory Financial Group, and former vice chair of the Federal Reserve.

ALAN BLINDER, COMMENTARY: As a card carrying economist, I never thought I'd find myself arguing that the United States should become self sufficient in energy. But September 11th changed everything. We economists believe in the virtues of international trade. Since oil can be obtained much more cheaply in the middle east than here, standard arguments show that it's more efficient to import oil and export things we make better like aircraft, computers and wheat. As straight economics, it makes no more sense to wean ourselves from imported oil than it does to wean ourselves from imported textiles or imported sneakers. But more than economics is involved here. We knew this before the attacks. But recent events leave no doubt that our dependence on foreign oil weakens or geo-political hand quite seriously. Our alleged friends in Saudi Arabia are a case in point. They've been so uncooperative that we should be telling them to take a walk. But of course we need the oil. And that's where the economics comes rushing back. Energy independence for the United States would be very expensive, which is precisely why economists have long scoffed at the idea. To make a serious dent in our appetite for imported oil, we may have to break several traditional taboos, like relying more on nuclear energy, and levying much higher taxes on fossil fuel. Ideas like those have been considered un-American up to now. But as I said, September 11th changed everything. Let the debate begin. I'm Alan Blinder.

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.

11/05/01: Paul Kangas' Wall Street Wrap Up

PAUL KANGAS: The stock market opened with a spirited rally in anticipation the Fed would indeed cut rates again tomorrow while Cisco would report encouraging results after the close today. In a steady advance, the Dow Industrial Average jumped to a 152-point gain by 10:30 this morning, recouping a good part of last week's loss of 221 points. The NASDAQ Index posted a 45-point gain which easily wiped out last week's deficit of 23 points. The early upturn faded just slightly during the rest of the morning after the national purchasing manager's October index for activity in the service sector fell sharply. At 12:30 p.m., The Dow's gain eased to 97 points. NASDAQ was still up 40 points. The market's resilience in the face of bad news once again impressed investors and they moved back to the buy side for the rest of the session, lifting the Dow Industrial Average to a closing gain of 117.49 points putting it at 9441.03. The NASDAQ Index rose 47.92 ending at 1793.65.

Big board volume moved up a tad from last Friday and up volume exceeded down volume by a wide 8 to 3 margin.

The Dow Transport Index up just over 38 points.

Utility Index had a good day, rising nearly 8 points.

And the Closing Tick still modestly bullish at +449.

Standard & Poor's 500 up 15 2/3 points.

Nearly a 6 3/4 point rise in the 100.

The MidCap 400 up just over 6 points.

Bridge Futures Price Index down .53.

A gain of nearly 6 1/4 in the New York Composite.

Value Line rising 4.86.

Just about a 4 1/2 point advance in the Russell2000 Small Cap Index.

And the broadly based Wilshire 5000 up 140 1/3 points.

Bond prices moved broadly higher today in reaction to that purchasing managers report showing a sharp contraction in the service sector, which seemed to guarantee another aggressive cut in interest rates by the Fed tomorrow. The market was also still being driven higher by last week's decision by the Treasury not to sell any more 30-year bonds.

At the close then, tax-free and corporate issues were up 1/4 to 1/2 point on average and Treasuries were higher across the board.

A 7/32 gain in the 5-year note.

10-year note up 11/32.

The 30-year bond up another 1 23/32, bringing the yield down to 4.85 percent.

And the Lehman Brothers Long-Term Treasury Bond Index gained almost 15 points.

EMC (EMC) topped the active list on 27.1 million shares, gaining $1.41. The company's teaming up with Oracle (ORCL) to safeguard customers against data corruption. There was also a positive article about EMC in the new "Barron's" magazine.

AOL Time Warner (AOL) up $1.48. The company is in an Internet marketing initiative with Burger King.

Enron (ENE) down a dime. It was the subject of negative and positive comments in "The Wall Street Journal's" Heard on the Street" column today and "Barron's" suggests Royal Dutch mighty be a suitor of Enron.

Liberty Media A (LMC) up $0.27.

Baxter International (BAX) down $2.67. The company says one of its dialyzers was flawed and may have caused as many as 51 deaths. The company's pulled the product from the market permanently. It will take $150 million charge to cover litigation and other costs.

General Electric (GE) moved up $0.81.

Lucent Technologies (LU) a $0.21 gain. The company is co-developing speech recognition products with a company called E-Digital Corp.

AT&T (T) moved up $0.23.

Citigroup © a rise of $0.34, tenth in volume.

Qwest Communications (Q) gained $0.53.

General Motors (GM) rising $1.53 even though Prudential Securities cut its 2002 earnings estimate from $1.80 down to $1.60.

Goldman Sachs (GS) representing a very firm financial group today, up $2.46.

Goodrich (GR) gained $0.88. The company says it's going to get about $5 billion worth of business from Lockheed's (LMT) big jet fighter project. It'll be making the landing gear for that aircraft.

Guidant (GDT) moved up $1.85. The company received FDA approval for its Galileo system treatment for instent restinosis.

And then ICN Pharmaceuticals (ICN) rising $1.24. CIBC World Markets began covering the stock with a "strong buy" today.

KLM Royal Dutch (KLM) air, down $0.93, traded as low as 8 during the day. UBS Warburg lowered its price target from 20 euros down to 10 euros per share. Goldman Sachs issued an "under perform" rating.

BMC Industries (BMM), a 50 percent gain with that $1 move today. Of course it was in the 30s back in the late '90s. The company makes plastic eye wear lenses and things like that. And the treasurer told us the company is instituting a number of cost cutting measures to build up earnings next year.

Administaff (ASF) had a good day, up $5.64. Third quarter earnings came out at $0.30, up from $0.25 last year in line with Street estimates. Revenues up 13 percent.

Telemig Part (TMB), this is a Brazilian telecom, that whole market, Bovespa Index, up (ph) 6.8 percent and that's in reaction to hope that Argentina's new economic plan will avert default.

Royal Caribbean (RCL) up $1.24. Last Tuesday that company reported third quarter earnings of $0.82 a share, $0.10 above the Street estimates. Stock's been strong ever since.

IT Group (ITX) in the waste management business, down $1.02. Last Tuesday this company reported a third quarter loss of $0.05 a share and that stock has been weakening ever since.

OMI (OMM) which is in the oil tanker business, down $0.65, big percentage loss (ph). These are third quarter earnings out today, $0.11, down from $0.38 a year ago and the company projected slow business ahead.

NASDAQ trading, nearly a 48-point gain in the Index. Volume moved up nicely from last Friday, about 21 stocks up for every 14 lower.

Microsoft Corp. (MSFT) topped the active list, up $1.87. You heard the news earlier.

And Cisco Systems Inc. (CSCO) was up around oh, $1 higher than that after the market closed on those better than expected earnings.

Intel Corp. (INTC) moved up $0.68. Sun Microsystems (SUNW) gained $0.62. JP Morgan added the stock to its fo