11/06/01: The Feds Cut Interest Rates For The 10th Time

SUSIE GHARIB: The Federal Reserve cut interest rates for the tenth time this year, this time by 0.5 percent. Wall Street welcomed the news, reversing losses before the announcement. The Dow jumped 150 points, and the NASDAQ added 41. We have two reports this evening looking at the Fed decision and market reaction. We begin with Darren Gersh in Washington.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: With today's 1/2 point cut, the Fed's benchmark short term interest rate now stands at 2 percent. That's the lowest level since 1961. The Fed also cut the more symbolic discount rate on loans to banks by 1/2 a point to 1.5 percent. In a statement, the Fed explained the aggressive moves saying: "Heightened uncertainty and concerns about a deterioration in business conditions both here and abroad are damping economic activity. For the foreseeable future the risks are weighted mainly toward conditions that may generate economic weakness."

LYLE GRAMLEY, FORMER FEDERAL RESERVE GOVERNOR: It indicates that the Fed thinks we're now in a pretty serious recession. They want to provide ammunition sufficient to give reasonable assurance that we are going to see an upturn in the economy next spring.

GERSH: Altogether, the Fed has now cut interest rates four and a half percentage points since the beginning of the year, and analysts say the door is open to further cuts, even though the Fed's short term rate is now below the current rate of inflation.

STEVEN EAST, CHIEF ECONOMIST, FRIEDMAN BILLINGS RAMSEY: After recessions, inflation falls and CPI could run at 1 percent next year. So with a 1 percent expectation for CPI, Fed funds at 2 percent is still a full point above inflation expectations.

GERSH: After the Fed move, major banks announced they were cutting their prime lending rate to 5 percent, but National Association of Manufacturers President Jerry JasinowskI says he's told Fed Chairman Alan Greenspan the problem is banks are also tightening lending standards or are not lending at all.

JERRY JASINOWSKI, PRESIDENT, NATIONAL ASSOCIATION OF MANUFACTURERS: And the reason they are doing it is they see we are in a recession, and they got the regulators breathing down their neck telling them, "don't make this loan, don't make that loan, and don't make this loan."

GERSH: In its statement, the Fed also cautioned productivity would be held back for a time as the economy shifts resources to beef up security, but Greenspan and company said long-term prospects for productivity growth and the economy remain favorable. Darren Gersh, "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.

11/06/01: Wall Street Rallies After The Rate Reduction

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is Suzanne Pratt. The Fed's decision to cut interest rates for the tenth time this year resulted in a healthy rally on Wall Street. Before the central bank's mid- afternoon announcement, stocks were slightly lower; but by the closing bell, all of the major averages gained solid ground. Still, some experts caution investors not to read too much into today's market action.

BARRY HYMAN, CHIEF INVESTMENT STRATEGIST, EHRENKRANTZ, KING & NUSSBAUM: The first day's reaction is typically not your move of decisiveness. It usually takes a day or two for market players to really understand what the Fed did.

PRATT: In the last few weeks, stocks have enjoyed a powerful run-up. Some experts say the moves were in anticipation of today's aggressive Fed action. In fact, the Standard & Poor's 500 is now back above 1092, which is where it stood before the September 11 terrorist attack. But many are worried the recent rally is unsustainable, and that the market may have gotten ahead of itself.

ROBERT BRUSCA, CHIEF ECONOMIST, ECOBEST: I think it's turning a little bit too soon right now. I think that's one of the things they're trying to get a handle on in the equity market. How soon is the economy going to turn? Is it really going to turn up in the first quarter? Is it going to turn up at the end of the second quarter?

PRATT: Others say investors are becoming less confident about the effectiveness of monetary policy, and with the Federal funds rate approaching zero, there is growing concern that the period of rate cuts is coming to an end. In light of all this uncertainty, experts say stocks are unlikely to gain further ground this year.

HYMAN: We see the market settling into a trading range. We've felt that for a while. We do not see the reasons for the market to add on another major up leg here before the end of the year. Valuations are still not cheap.

PRATT: Beyond valuations, experts say investor psychology is particularly crucial to the market these days. They say many investors are first waiting for signs of stability in stock prices before returning to the market in a big way. 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.

11/06/01: Mike Holland of Holland and Company Analyzes The Rate Reduction

SUSIE GHARIB: Joining us live from midtown Manhattan to analyze the Fed decision, Mike Holland, money manager of his own firm, Holland and Company, and Michelle Girard, Treasury market analyst at Prudential Securities. And it's nice to have both of you with us. Michelle, let me begin with you. Looking at the Fed decision and particularly the policy statement, what do you see was the message of the Fed about the economy?

MICHELLE GIRARD, TREASURY MKT. STRATEGIST, PRUDENTIAL SECURITIES: Well, clearly they're concerned not only about the domestic economy, but about the downturn in business conditions overseas. So that was a little bit different than we've heard before. They didn't express really concern about the consumer which is perhaps a little bit surprising. They've done that in the past. But the bottom line is that nothing they said ruled out rate cuts going forward. So even though they moved aggressively today, we're fully anticipating that we'll see another rate cut before the end of the year.

GHARIB: Mike the stock market rallied yesterday and then again today about all this Fed rate cut talk. What do you think was the message of the market?

MICHAEL HOLLAND, CHAIRMAN, HOLLAND & COMPANY: Well, it was interesting, Susie. You asked about today as well as yesterday. Early in the day the stock market was down as Paul Kangas was just talking about. In fact the market for a brief period they thought the Fed was only going to decrease rates by 25 basis points. The Fed did exactly the right thing by lowering 50 basis points. I think the stock market if not the Federal funds futures market, is looking for further rate cuts as Michelle just said, probably down to 1 3/4, maybe 1 1/2 which by the way the 1 ½ is where the inflation number that Alan Greenspan watches, the deflator number is right now at 1 1/2.

GHARIB: But as we said in our reporting packages earlier in the show, investors seem to be less confident about the effectiveness of these rate cuts. When the Fed started the rate cuts back in January, all the experts were saying it takes six to nine months for these to kick in.

GHARIB: But as we said in our reporting packages earlier in the show, investors seem to be less confident about the effectiveness of these rate cuts. When they started, when the Fed started the rate cuts back in January, all the experts were saying it would take six to nine months for these to kick in. Then we heard well, maybe it's going to be, you know, 10 to 12 months. I don't know what we're going to hear next. But is there a confidence factor here?

GIRARD: Well, you know, I think the timing was a little bit off. People were expecting since they started easing in January we'd see something by the summer. We really didn't get policy into a stimulative posture to get the economy going until this spring. So we shouldn't have been surprised it didn't show up between now and year end. And there is a little bit of a confidence factor. And let's face it, all the stimulus in the world isn't going to get people out to the crowded shopping malls if they're not feeling safe about, you know, feeling good about their own personal safety. But once we kind of all adjust to the new world that we're living, you know, we now are forced to live in, that stimulus will come through. And as, you know, certainly as Michael said, the fact that it's-that the Fed funds rate is equal with the rate of inflation has been very powerful in the past with respect to future growth.

GHARIB: One of the things I hear a lot, Mike, from market strategist as the reason why they're optimistic is that the Fed is working in concert with the government and they're looking forward to this economic stimulus package. Is that going to do the trick? I mean isn't that going to take a while to kick in, too?

HOLLAND: It's going to take a while, Susie. I believe that one of the great things that happened after the September 11 horrific attack was that not only our Federal Reserve, but the other central banks around the world acted in concert, as did Washington by moving quickly to announce a stimulus package. I think that it's going to take a while, but people like Leo Mullen (ph) today, the head of Delta Airlines, for example, said he thought that his business would get back to normal in about eight months, July of next year. It could take that long and if it does take that long I think the stock market anticipates those things. As you just pointed out, the stock market is several months in advance of those kinds of recoveries.

GHARIB: I want to bring up the question about Japan, and I've asked this a couple of times over the past couple of months, saying that if the United States could have a repeat of the Japan economic crisis situation and everybody has sort of said no it's very different here. But look, our interest rates are now getting to two percent. It's getting closer and closer to zero. What do both of you think about the whole Japan issue?

GIRARD: I agree that there isn't really-it's not comparable really to look at Japan, I mean other than the fact that interest rates are low. The biggest problem in Japan is the structural problems with the banking sector. We have to remember here the banking sector is in great shape. It's even unlike how we were in the early 1990s. So that stimulus, you know, that the Fed is supplying is going to be able to get through to the economy. We have to allow some time. But-and that way there's a huge difference between our situation here and what's going on in Japan.

GHARIB: Mike, just to wrap it up here, by the time that we meet in December to talk about the next Fed meeting and whatever they decide to do there, what do you think the markets and the economy, how will they be doing?

HOLLAND: I'm an optimist right now. I think the U.S. itself has never been in a better position in the past 30 years that I've been in the business. I think the U.S. itself is as strong and as united and Washington is doing all of the right things militarily and diplomatically. I think that we probably have a situation here where if we continue to move as we have for the last several weeks, we'll have a substantially higher market. I'm actually a little bit-

GHARIB: OK.

HOLLAND: I'm a little bit less pessimistic than some other people.

GHARIB: It's nice to end on an optimistic note. Thank you both for being with us this evening. We've been speaking with Mike Holland of Holland & Company, and Michelle Girard of Prudential System.

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.

11/06/01: Microsoft Still Has Nine Hurdles To Cross

PAUL KANGAS: Microsoft (MSFT) and the government met in court again today. This was the deadline for 18 states to decide Whether to sign on to the settlement proposed by the Justice Department and Microsoft last week. But as Stephanie Woods explains, by the end of the day, things were far from settled.

STEPHANIE WOODS, NIGHTLY BUSINESS REPORT CORRESPONDENT: At 9:00 a.m., the attorney for the states told Judge Colleen Kollar-Kotelly that even with some minor changes to the agreement over the weekend, the 18 states which are parties to the lawsuit were divided. A third would sign the proposed settlement, a third would not sign on and a third were still undecided. By 1:00 p.m., nine states agreed to the proposed settlement. New York is among them.

ELIOT SPITZER, ATTORNEY GENERAL, NEW YORK: Today what we get is an opening of the marketplace and what we get is a substantial improvement over the deal that was inked by the Department of Justice last Friday.

WOODS: But in court, the changes were described as minor clarifications, a point echoed by the assistant attorney general on the courthouse steps.

CHARLES JAMES, ASSISTANT ATTORNEY GENERAL FOR ANTI-TRUST: To our way of looking at it, the changes are clarifications. I will leave it to others to determine whether they make meaningful substantive changes. They were important to the states who proposed them and we were happy to go along with them because they were consistent with our view of the appropriate remedy.

WOODS: Some of the opposing states may still sign the agreement, but say they are prepared to litigate to get a tougher remedy. They want Microsoft to be under supervision for longer than the five years in the negotiated settlement and they want tougher enforcement mechanisms.

RICHARD BLUMENTHAL, ATTORNEY GENERAL, CONNECTICUT: The settlement reached today reflects the triumph of hope over history. Some of the parties have reached common ground despite a history of legal conflict and despite a history of contentious relationships. That history is due cause for caution and care in reviewing and evaluating any agreement.

WOODS: Observers say it's an uphill battle for the states.

ROBERT LANDE, LAW PROFESSOR, UNIVERSITY OF BALTIMORE: They'll spend literally millions of dollars and get nowhere. That's the downside. The up side is they cannot possibly do any worse the federal government already got.

WOODS: The judge laid out a schedule for hearing the case on separate tracks. The settlement should be reviewed by mid February. The states' litigation is likely to take longer. With the trial on two tracks, it is now in uncharted legal territory. The judge must decide if the settlement is in the public interest and at the same time preside over the states' continuing litigation. 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.

11/06/01: Commentary: Are ID Cards Really The Answer?

SUSIE GHARIB: Tonight's commentator has some thoughts on a topic that is becoming quite controversial these days a national I.D. card. Here's Martin Anderson, Senior Fellow at the Hoover Institution.

MARTIN ANDERSON, COMMENTARY: Every threat to our liberty has always brought proposals to limit our liberties in order to protect our security. The savage destruction of the World Trade Center has bred the latest example. Larry Ellison, the billionaire chairman of Oracle, has proposed a national I.D. card for every American. His rationale is that by giving up our privacy, we can get security. Never mind the billions he would make by maintaining and upgrading those I.D. cards. Mr. Ellison's idea is not only wrong, it is dangerous. A national I.D. card in everyone's pocket would only give us a false sense of security and prevent the government from taking serious steps to give us real security. Take airlines. Many terrorists have clean records before they strike and could easily qualify for an I.D. card. Sophisticated terrorists will make their own cards. An I.D. card will not keep a terrorist off an airplane. We need to do what the Israelis do: check all luggage and suspicious persons, have strong doors protecting the cockpit and armed sky marshals. The cost to liberty of a national I.D. card is great. Soon your medical records, everything from heart trouble to venereal disease to abortion, could be on that card. Everywhere you go, you will be asked to show your I.D. card, so be careful not to lose it. Maybe we should just tattoo a personal number on the inside of everyone's arm. It would be a lot cheaper, counterfeit proof and hard to lose. But it would be dangerous folly. I'm Martin Anderson

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.

11/06/01: Paul Kangas' Wall Street Wrap Up

PAUL KANGAS: Wall Street's blue chip stocks opened modestly lower today under some profit taking pressures, as the Dow Industrial Average fell 48 points at 10:30 a.m. in the wake of yesterday's 117 point closing gain. The NASDAQ Index was up about two points as the tech sector was quite firm following Cisco Systems (CSCO) better than expected late day earnings yesterday. The market then settled into a very narrow trading range as many investors moved to the sidelines to await the Federal Reserve's decision on interest rates to be released around 2:15 this afternoon. The blue chip sector remained modestly lower while the tech-laden NASDAQ market held firm. At 2:00 p.m., the Dow was down 46 points. NASDAQ off about 11 points. And then on the announcement of the cut, buyers steadily moved off the sidelines into action and the ensuing rally lifted the Dow Industrial Average to a closing gain of 150.09 points, or 1.6 percent putting it at 9,591.12. The NASDAQ Index shot up 41.43 points ending at 1835.08, a nice gain of 2.3 percent. And volume increased to 1.346 billion shares on the rally. About a 9 to 4 ratio of up volume over down volume.

Dow Transport Index up nearly 6 1/2 points.

But the Utility Index fell .18.

The Closing Tick decidedly bullish at +972.

Standard & Poor's 500 up just over 16 points.

A 9 2/3 point rise in the 100.

The MidCap 400 up 6.11.

Bridge Futures Price Index fell .18.

And exactly a 6 1/2 point gain in the New York Composite Index.

Exactly a 4 1/4 point rise in the Value Line.

Russell2000 Small Cap up just about 5 1/4 points.

And the broadly based Wilshire 5000 up 147 1/4 points or 1 1/2 percent.

The bond market churned about in a narrow range until the Fed's aggressive 1/2 percent rate cut was announced, and then the shorter-dated issues rallied nicely while profit takers kept the long bond unchanged.

The Fed's signal that more cuts might be ahead helped tax free and corporates rise eighths and quarters on average and the Treasury market did end mostly higher.

5-year notes up 12/32.

The 10-year notes up 13/32.

But the 30-year bond held steady at 105 5/32.

Lehman Brothers Long-Term Treasury Bond Index up 2.62.

Lower interest rates and higher stock prices was the order of the day, the Dow Jones industrial average coming in with a 150 point run-up and just about a 2 to 1 ratio of advancers over decliners. 111 new yearly highs, only 45 new lows.

Enron (ENE) topped the active list today on 29.6 million shares. The stock closed at the lowest it's been since 1992. The "Wall Street Journal" says the firm has been talking with a number of private equity companies to get capital infusion of at least $2 billion.

Compaq Computer (CPQ) down $0.49. We'll get to that in just a moment.

AOL (AOL) slipped in there with a gain of $1.66.

But then Hewlett-Packard (HWP) up $2.92 as the Hewlett family and the Hewlett Foundation plan to vote their stock, which accounts to about five percent of that outstanding, against the company's acquisition of Compaq. But the two companies plan to go ahead with the merger anyway, so there's a feud going on there.

EMC (EMC) up $0.80, fifth in volume.

Health Management (HMA) was down $0.47.

Lucent Technologies (LU) edged up $0.21.

Nortel Networks (NT) up $0.54.

American Tower (AMT) the big loser of the day, down $3.84. The company had a big third quarter loss of $0.65. The Street was only thinking a $0.48 loss and also the company cut its fourth quarter earnings estimate as well as that of next year.

Nokia (NOK), tenth in volume, moved up $0.61 a share.

Bristol Myers (BMY) up $2.49. A U.S. appeals court in Washington ruled U.S. regulators had no right to allow the marketing approval of IVAX's generic version of Bristol Myers' top selling cancer drug called Taxol.

Disney DIS) was down $0.41. Goldman Sachs downgraded it from "market outperform" to just "market perform."

IBM (IBM) the big gainer in the Dow point wise, up $4.22. Legend Holdings (LGHLY.OB), China's biggest computer company, is in a pact to use Big Blue's technology.

Metlife (MET) moved up $0.10 even though it has a 33 percent drop in third quarter earnings, $0.21 versus last year's $0.31. And it looks like the World Trade Tower attack could cost the company about $208 million in claims.

3M (MMM) was the big point loser in the Dow today. The company plans to shift 52 percent of its manufacturing to non-U.S. markets in hopes it'll boost sales there.

Oxford Health (CHP) moved up $2.33. Third quarter earnings nicely higher, $0.85, up from $0.81. That's $0.05 better than the Street was expecting. The company also increased its stock buyback program by $250 million.

Sprint (SPM) was up $2.90 a share. The company's been selected by a subsidiary of Verizon (VZ) to manage services for an advanced data network. The company also held an upbeat seminar for investors.

AirTran Holdings (AAI) up one full dollar. A nice percentage gain, nearly 25 percent. UBS Warburg Brokerage upgraded the stock from "hold" to "strong buy."

Mandalay Resorts (MBG) up $2.03. The company sees third quarter earnings in the $0.32 to $0.34 range. The Street was expecting only $0.07 a share.

Bally Total Fitness (BFT) up $1.25. Third quarter earnings higher, $0.61 versus $0.58 last year. That's $0.03 above the Street estimate.

Alstom (ALS), this is a French based construction services company, down $2.58. Six month earnings down, 4300ths of a Euro versus 4800ths a year ago. The company says it's unlikely to meet its third quarter earnings goal.

And Startek (SRT) down $1.51. Third quarter earnings sharply lower, $0.19 versus $0.35 a year ago. The Street was expecting $0.30 in earnings, incidentally.

NASDAQ trading, a nice gain of nearly 41 ½ points, or 2.3 percent. Volume up to 1.9 billion shares. About 20 stocks up for every 15 lower.

Cisco Systems (CSCO) after those better than expected