11/12/01: Wall Street Bought The Rumor & Sold The Facts On The American Airlines Crash

SUSIE GHARIB: America was shaken again today; an American Airlines (AMR) plane crashed this morning just after takeoff from New York's JFK Airport. All 260 people aboard the Airbus jet were killed; six people on the ground are missing. The crash comes just two months after the September 11th terrorist attacks, but so far government officials say today's devastating event was an accident. The news sent shock waves through Wall Street and the already battered airline industry. We have two reports this evening, beginning with Scott Gurvey in New York.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: The first thought of most New Yorkers upon hearing of the crash was "not again." And the second was "this had better be just an accident." It will be sometime before the exact cause is known but immediately this terrorism weary city shut down its airports, closed its tunnels and bridges and sent fighter jets up to patrol the skies. The stock markets opened sharply down and then recovered to close mixed. The major averages had just struggled their way back to levels seen prior to the terrorist attack two months ago. Today airline stocks, hotel stocks, anything having to do with travel and tourism fell in the wake of the crash and the prospect of still more uncertainty.

ALAN ACKERMAN, MARKET STRATEGIST, FAHNESTOCK & COMPANY: Today's air crash has sent shock waves through the country. It compelled some people who were uncertain about how much higher the market would go to sell stocks. But stocks are up from their lows of the day. So what we're really dealing with today is higher anxiety levels and a lower market, but there's no panic to be seen. There's just another feeling that this is a tough break.

GURVEY: This tough break and the reaction to it is seen as further evidence of the fragility of the markets, not the kind of reaction needed to restore lagging confidence. 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.

11/12/01: The American Airlines Crash Injures The Airline Industry

STEPHANIE WOODS, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is Stephanie Woods. The crash comes as the airlines are still struggling in the wake of the September 11th tragedy.

DONALD CARTY, CHAIRMAN & CEO, AMERICAN AIRLINES: As you would imagine, today's news comes at a difficult time for the nation, a difficult time for the airline industry, and a very difficult time for American Airlines. Given the changed world we live in today, it will be as important as it has ever been to quickly and to accurately determine the cause of this accident.

WOODS: Investigators from the National Transportation Safety Board are treating the crash as an accident, not a crime, suggesting it was not a terrorist attack. Analysts say that's the best the airlines can hope for now.

PHILIP BAGGALEY, AVIATION ANALYST, STANDARD & POOR'S: There will be, at a minimum, a near-term loss of traffic and concerns aside from the human tragedy, but since people are so focused on terrorism, if there is another explanation, that's not good news, but it's less bad news than it would be if there's a link to the events of September 11th.

WOODS: With more than $2 billion in cash and $8 billion in assets to use as collateral, American Airlines is not in immediate financial danger, but analysts say the longer term health of the industry depends on the results of the investigation.

DARRYL JENKINS, AIRLINE ANALYST, THE GEORGE WASHINGTON UNIVERSITY: If they can come up with a determination very quickly, like by the end of the week-even if it is mechanical-I think people will fly through this one, and it will just have minimal impact. The longer it takes the N.T.S.B. to come to some sort of a preliminary determination, then the longer the damage will be to the airline industry.

WOODS: A preliminary determination could come soon; the flight data recorder has already been discovered and officials say there is no immediate evidence of terrorist involvement. 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.

11/12/01: Senate Minority Leader Trent Lott Speaks Out About The Airline Security Bill

SUSIE GHARIB: One of Washington's powerful leaders witnessed the dramatic reversal in the markets first hand. Senate Minority Leader Trent Lott opened trading at the NASDAQ this morning, and then rang the closing bell at the New York Stock Exchange this afternoon. When I talked to Senator Lott, I asked him if today's airline crash will pressure Congress to approve the airport security bill.

TRENT LOTT, SENATE MINORITY LEADER: There's no question that people are going to be ill at ease again about air travel and aviation travel in America is an important part of our economy. We need to encourage people to be able to fly for the holidays, Thanksgiving, the day before Thanksgiving, the busiest day of the year traditionally. We need that to happen. So I think there will be additional pressure on the Congress to go ahead and pass that legislation.

GHARIB: Senator Lott, how soon do you think we'll see an airport security bill?

LOTT: I think we'll see the bill agreed to this week. It certainly should be done this week and go to the president's desk and he'll be able to sign it hopefully right before Thanksgiving. That won't guarantee instantaneous total security. You're still leaving (ph) with human beings and human fallacies. But it will say to the American people we've doing everything we can. We're moving aggressively and I think that would be positive.

GHARIB: Senator, almost every person that I interview in the investment community is basing their forecast for the stock market and the economic on an economic stimulus package. Should they still be counting on that?

LOTT: Yes, because the president has asked for it. He is going to insist on it. The House wants to do it. The Senate wants to do it. We disagree about exactly how to do it but at some point after everybody has sort of made their statement, we'll do I hope like we did in the immediate aftermath of September 11th with the disaster package, the airline loan package, the anti-terrorism package. It's not easy.

GHARIB: Why is it taking so long?

LOTT: We're still arguing over what is the best way. Obviously there has been some disagreement, for instance, about how to deal with unemployment compensation, and this health care coverage. We want to make sure that unemployed people have access to get to keep their health coverage. And you're dealing with a lot of money. You're talking between 75-$100 billion probably minimum. Let's make sure we do that right.

GHARIB: Are you prepared to work all through this week and next week and into Thanksgiving to get it done?

LOTT: I think that the best thing to do is to try to get something through the Senate and then give the staffs time to meet and work on it next week. We're going to have to come back after Thanksgiving anyway because of some of the appropriations bills. Defense appropriation will not be completed. I do think there is something worse than not having a bill, and that's a bad bill, a bill that spends billions of the people's money and does not have economic growth or job security stimulus impact.

GHARIB: There's considerable debate on what's the best way to stimulate the economy. Some people feel giving tax breaks to businesses is not such a good idea because there's so much excess capacity out there and if they get these breaks they're not going to invest more. What do you think?

LOTT: I think you should have rate cuts for individuals up and down the line and not try to say oh no, we'll just do it at the low end. You want to make sure, you know, that people at all levels have additional money of their own money for investment. But I also think that you need to look, everybody seems to agree, regardless of party or philosophy, that some acceleration of depreciation would be helpful.

GHARIB: Senator, some of the analysts that I've been talking to are kind of concerned that with this economic stimulus package dragging along, that if it comes out around Christmastime, it will be less effective.

LOTT: The Congress has been moving at mach speed on all these issues since September 11. the issues we have dealt with would ordinarily have taken not weeks but months, sometimes even years. And as long as we get it done and make sure that it actually has a stimulative effect on jobs creation and growth, if it's the, you know, the first week in December, that will be fine. If it's the second week in December, that will be fine. The only bad thing would be if we don't get it done.

GHARIB: When do you think we'll get a bill?

LOTT: I actually think it'll be, you know, after Thanksgiving, probably the first week or so of December.

GHARIB: Thank you very much, Senator Lott.

LOTT: OK. Thank you.

GHARIB: We appreciate your talking to NIGHTLY BUSINESS REPORT.

LOTT: All right. My pleasure.

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.

11/12/01: Corporate America Now Bracing For Crisis With Contingencies

PAUL KANGAS: Today's plane crash in New York only reinforces to the business community the lessons learned in the September 11 attacks. Financial firms are now working to prevent major disruptions for any reason in the future. Jeff Yastine reports.

JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Another lesson for Wall Street on the toll of business operations brought on by the attacks. That's led to a whole round of discussions at industry forums like this one focused on business contingency planning. It's an effort to see how business was disrupted by the attacks and how to avoid those kinds of disruptions if a future manmade or natural disaster shook Wall Street again.

PAUL HONEY, GLOBAL CONTINGENCY PLANNING DIRECTOR, MERRILL LYNCH: I think the 11th was a wake up call. I don't think anyone in the industry could have predicted that event and I'm sure we'll be focusing on this a lot going forward. The important thing to note is that the industry came back and it came back very quickly and in a controlled manner.

YASTINE: Industry experts, though, did note some problems. They say the September attacks showed there were plenty of backups built into Wall Street firms' computer systems, but the planning just didn't go far enough. In some cases, the primary and backup data transmission lines for firms were located next to each other in the same underground conduits.

CHARLES McQUADE, CHAIRMAN & CEO, SECURITIES INDUSTRY AUTOMATION: The contingency planners at each of the firms and at the exchange and in our case, as well, need to think through very clearly, beyond the backbone communications requirements, how they assure they always have redundant facilities and backup facilities in the event the next target, for example, is another major central office for a phone company.

YASTINE: One effort already under way as a result of the attacks, a backup trading facility for the New York Stock Exchange which could be switched to and setup for trading at short notice. Analysts say you can expect more such efforts in the wake of September's events. Jeff Yastine, NIGHTLY BUSINESS REPORT, Miami.

GHARIB: Still ahead on NIGHTLY BUSINESS REPORT, zero percent financing has meant a booming business for new car dealers, but for dealers selling used cars, it's been more of a bust than a boom. We'll tell you why.

11/12/01: Zero Interest Financing Is Leaving Used Cars In The Dust

SUSIE GHARIB: Those zero percent new car financing programs will be around a little bit longer. General Motors (GM) said today it is extending its plan through January 2. Interest refinancing has been so successful that dealers have lower than normal new car inventories. But as Diane Eastabrook reports, it's a much tougher sell for used cars.

DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: At this suburban Chicago Ford dealership, used vehicles outnumber new ones two to one. Usually it's the other way around. The glut of previously owned cars, along with good deals, attracted Joe and Barb Kurczodyna. They may surprise their 16-year-old daughter with a car for Christmas.

JOE KURCZODYNA, CAR SHOPPER: We're seeing rebates and also lower financing, you know, 3.9, 5.6.

EASTABROOK: Dealerships are swamped with pre-owned vehicles because zero percent financing has been encouraging consumers to trade in their old wheels for new ones. And some of these used vehicles aren't that used. It's not hard to find a 2-year-old or even a year-old car or truck. The avalanche of used cars onto dealers' lots is beginning to erode their prices. Analysts say in the month of September, when zero percent financing began, used car prices fell about two percent over the previous month. Analysts anticipate used vehicle prices will weaken further and could impact new car prices, as well.

DAVID BRADLEY, AUTO ANALYST, J.P. MORGAN CHASE: Obviously, there's a spread between new and used car prices and to the extent that used car prices get cheap, the used car alternative becomes more attractive relative to the new car alternative. So the new car price has to drop to be competitive.

EASTABROOK: Bradley also says when used car prices drop, trade-in values do, too, requiring buyers to come up with more cash for new vehicles. With that in mind, analysts say new car sales could nosedive dramatically when manufacturers end zero percent financing programs. Some dealers are already scrambling to find more used cars to keep their businesses thriving.

JOHN GUIDO, SR., CO-OWNER, ARLINGTON HEIGHTS FORD: If you look at a late model 2002 or 2001 and they're $5,000 or $6,000 less money than a brand new one, that makes a big difference as far as payment for a customer. And there's still a lot of buyers out there that look for deals in January and February.

EASTABROOK: But with so many consumers buying so many vehicles now, some industry watchers wonder if there will be a strong market for any car after the first of the year. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Arlington Heights, Illinois.

11/12/01: Commentary: Three Steps To Economic Recovery

SUSIE GHARIB: In tonight's commentary, a simple question: why can't the Fed fix the economy? There isn't a simple answer, according to our commentator. Here's John Makin, Resident Scholar of the American Enterprise Institute.

JOHN MAKIN, COMMENTARY: The U.S. economy is in recession. Growth is negative and employment is falling at the fastest rate since 1980 when President Jimmy Carter imposed damaging credit controls on the economy. How can the economy be collapsing after the Fed has slashed short-term rates to two percent? Because this is a different recession. The usual recession is purposely caused by the Fed when it raises interest rates to slow down demand growth and control rising inflation. The economy recovers when the Fed allows rates to fall. But this time supply overheating, too much investment in plant and equipment, not demand over heating, caused the recession. Lower interest rates won't help and falling prices are hurting profits and forcing more layoffs. We are at the start of a serious recession rather than close to the end of a V-shaped recession, as many are hoping. What should investors do in this environment? There are three things. First, don't heed the siren call to buy stocks because recovery is just around the corner. It isn't. Second, global deflation means lower interest rates, so buy government bonds, either in the United States and Europe. Deflation and falling interest rates will push bond yields down by about another percent, providing a nice capital gain to their owners. Finally, don't panic. The global economic contraction will be sharper than expected, but once we get through it, probably some time during the second half of next year, there will be many opportunities for those who have wisely held cash or low risk government bonds. I'm John Makin.

11/12/01: Paul Kangas' Wall Street Wrap Up

PAUL KANGAS: Because the airliner crash in Queens occurred 13 minutes before Wall Street opened for trading, stocks headed sharply lower from the outset as investors feared a replay of the terror that gripped the nation on September 11th might be in the offing. At 10:30 this morning, The Dow Industrial Average tumbled 180 points. NASDAQ Index down 30 points. The market soon stabilized thanks to, partly to relative low volume on the sell off, because of the Veterans Day holiday which had many banks and Federal agencies closed. Also buyers began to come off the sidelines by mid-day when crash investigators seemed to be suggested that the crash was not linked to terrorists, but perhaps rather to mechanical failure. By 2 this afternoon then, the Dow cuts its loss to only 29 points and the NASDAQ Index posted a 15-point gain. An upbeat outlook from CIENA Corporation (CIEN) helped the tech-laden NASDAQ market stay in slightly positive ground for the rest of the session but the blue chip sector did fade and it sent the Dow Industrial Average to a closing loss of 53.63, ending at 9554.37. The NASDAQ Index managed to hold onto a closing gain of 11.65 at 1840.13.

Big board volume fell below the billion share mark because of the Veterans Day partial holiday and about a 5 to 4 ratio of down volume over up volume.

The Dow Transport Index as you might expect very weak, down 48 points, the airlines leading the way.

The Utility Index fell 1.21.

But the Closing Tick rather bullish at +662.

Standard & Poor's 500 fell just about 2 points.

A loss of 1.86 in the 100.

And the MidCap 400 managed to gain 1.81.

CRB Bridge Futures Price Index down .84.

A loss of 1 1/2 in the New York Composite.

The Value Line edging up .46.

Russell2000 Small Cap Index gained 2.38.

And the broadly based Wilshire 5000 down just 7.30.

There was no bond trading today and of course the markets were closed for the Veterans Day holiday.

The market once again demonstrated good resilience against some very bad news. The Dow Industrial Average off only 53 and about 2/3 points after being down nearly 200 and the advance/decline ratio almost in a stand-off, just a few more issues down than up. And we see 77 new yearly highs as against only 31 new lows. Enron (ENE) topped the active list on 29 1/2 million shares, moving up $0.61. Over the weekend, Dynegy did agree to acquire the company for a little over one quarter of its shares for each share of Enron and today that would be worth about $11.90.

General Electric (GE) in there with a $0.98 loss. The air bus that crashed today was equipped with G.E. jet engines.

Compaq Computer (CPQ) down $0.07.

AOL Time Warner (AOL) a $0.67 loss. But after the close, Sony (SNE) announced that it's in a broadband pact with AOL Time Warner.

Then you see Dynegy's (DYN) stock doing very well, up $5.55. The CEO says the Enron acquisition will help Dynegy achieve 15 to 20 percent earnings growth over the next three years.

EMC (EMC) down $0.14.

Disney (DIS) down $0.24, although this morning it was up as high as $19 a share after the Alex Brown Brokerage upgraded it from "market perform" to "buy." Then it faded.

The NASDAQ Cubes (QQQ) were up $0.27.

And Corning (GLW) up $0.12.

Lucent Technologies (LU) dropped a $0.01, tenth in Big Board volume.

Abercrombie & Fitch (ANF) moved up $1.26 after Morgan Stanley upgraded it from "outperform" to a "strong buy."

Agilent Technologies (A) down $0.16. The company's Chief Financial Officer, Robert Walker, is resigning to pursue other interests.

AMR (AMR), parent of American Airlines, down $1.65. It traded as low as $15.40 today early, just after the crash.

IBM (IBM) was up $0.78. Believe it or not, that was the best dollar and cents gainer in the Dow Industrial Average.

Royal Caribbean (RCL), the cruise line, down $0.92 on concerns about travel safety, obviously.

And United Technologies (UTX) down $1.76. That was the biggest point loser in the Dow Industrial Average.

National Processing (NAP) one of the better percentage gainers, up $2.38. The company did not return our calls. It's a leading provider of merchant credit card processing. And we did learn the firm did land a multi-year contract with Humana (HUM) last week.

FTI Consulting (FCN) up $2.48. A spokesman said no corporate developments to account for that, but he does say the company's business is bankruptcies and crisis management. We have plenty of that these days, don't we?

Titan (TTN) down $2.82. Friday, A.G. Edwards downgraded it from "strong buy" to "buy" and Davenport Securities downgraded it from "buy" to just "accumulate."

And Four Seasons (FS), at the high end of the hotel business, down $3. Friday the company reported third quarter earnings of $0.51 and also warned of a slowdown in its business that it expects over the next several quarters. Today, Morgan Stanley, Robertson

Stevens and ABN Amro Brokerages all downgraded the stock.

And we see two more weak airlines, Delta (DAL) dropping $2.72.

And Continental (CAL) off $1.60.

NASDAQ trading, a gain of 11.65 in the Index and volume up about 80 million shares from Friday. And six more issues closed up than down.

Microsoft (MSFT) topped the active list, up $0.58.

And Cisco (CSCO) rising $0.06.

Followed by Intel (INTC), which gained a $0.50.

CIENA (CIEN) moving up $1.65. The company expects to meet fourth quarter earnings estimates of $0.04