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Program: Wednesday, September 1, 2004

Oil Prices Shift Directions
Insurance Companies & Policy Holders Fear Hurricane Frances
One On One With Henry McKinnell- Chairman, Business Roundtable
"Road to the White House"-The Future of Social Security
"Money File"-Washington & Wall Street's Love Hate Relationship
Paul Kangas' Stocks In The News
Market Stats

09/01/04: Oil Prices Shift Directions

SUSIE GHARIB: Here at the New York Stock Exchange, the big board is hosting a party for the Republican National Convention. We apologize for the noise level behind me. Well, now to today's top story. A big jump in oil prices today. They're back up to $44 a barrel. October crude futures surged 4.5 percent, or $1.88, to $44 even, on news of an unexpected drop in U.S. crude oil inventories. This was the biggest one-day gain since June. Suzanne Pratt explains what was behind the move.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Just when it seemed that oil prices were heading toward more palatable levels, things changed today. Supply concerns, which had abated in the last several trading days, were once again front and center in the oil pits. That's after two widely watched reports showed a hefty drop in last week's crude oil inventories, bringing U.S. stockpiles to their lowest level since March.

ERIC BOLLING, INDEPENDENT OIL TRADER: The number came out and showed a substantially higher draw in crude oil inventories than was expected across the board. And we saw the market jump up about $0.50 from there and since then it's just been kind of a buying spree -- a lot of people covering shorts, some additional new longs coming into the market, looking for possibly higher prices.

PRATT: On top of that, there were also reports of an oil pipeline on fire in northern Iraq. And hurricane Frances, which is tracking toward Florida, also raised concerns about possible supply disruptions in the Gulf of Mexico. In the last few weeks, most of the usual supply worries have subsided. As a result, oil prices tumbled from a high near $50 a barrel two weeks ago to yesterday's low of about $42. Before today's rebound, that meant a drop of about 12 percent. Still, most experts say with much of the world's big energy users heading into winter, $40 a barrel is probably the floor for crude in the coming months.

TINA VITAL, OIL ANALYST, STANDARD & POOR'S: Prices are most likely, on a fundamental basis, around the mid-$30 range. But you've got to add a premium in there, and you've got to add some error expectations on demand. So with all being said, it looks like prices are going to be over $40 by the end of this year.

PRATT: Further complicating the energy picture today is news that OPEC will raise its output ceiling at its next meeting on September 15. But most experts do not believe the cartel has much more capacity, so they doubt such a move would have any real impact on prices. 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. Copyright (c) 2004 Community Television Foundation of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.

09/01/04: Insurance Companies & Policy Holders Fear Hurricane Frances

PAUL KANGAS: As Suzanne mentioned, hurricane Frances is barreling towards Florida's Atlantic coast tonight, and is likely to make landfall by Saturday. Insurance companies are keeping a close eye on the storm, since its 140-mile-an-hour winds could be devastating to life and property. As Jeff Yastine reports, it's the second major hurricane to hit Florida in three weeks and that's making everyone nervous.

JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Up and down Florida's Atlantic coast, worried residents converged on home improvement retailers and supermarkets, buying the essentials for getting themselves, and their homes and businesses, through hurricane Frances. Insurance companies are also watching the storm carefully, because if Frances does hit Florida, it would be the second major storm to hit the state in one hurricane season. Hurricane Charley roared through the southwest Gulf coast region just two weeks ago, causing an estimated $6.8 billion in damages. That's small compared to the region's landmark storm event, hurricane Andrew in 1992, which caused $25 billion in damages.

DAMIEN MAGARELLI, CREDIT ANALYST, STANDARD & POOR'S: It clearly would not be something that is expected for the industry. While companies will model aggregate losses, while companies will expect multiple losses, if Frances is of the magnitude of hurricane Andrew, coupled with Charley, that would clearly be one of the more remote scenarios that a company could be expecting.

YASTINE: Insurance companies say they're ready to handle what Frances may bring. The industry's disaster response teams are already in the state, handing out claim checks for hurricane Charley. The amount of damage Frances causes will depend in part on where the storm comes ashore.

LORETTA WATERS, VP COMMUNICATIONS, INSURANCE INFORMATION INSTITUTE: Well, it's the proximity to the coast, how many homes are affected, whether they're expensive homes, whether they're businesses. That will all have a bearing on the price of the losses.

YASTINE: Frances' impact is also being seen in the commodity markets. Orange juice prices, already high from hurricane Charley, took yet another leap today as speculators bet on further citrus crop damage. Cotton prices have also moved higher in recent days on concerns that heavy rains could hurt that crop. And lumber prices moved to new highs as well, because of the impact a major rebuilding effort could have on wood supplies. Late today, Florida's Governor Jeb Bush said the state's catastrophe insurance fund, which was set up more than a decade ago in the wake of hurricane Andrew, was financially stable. But analysts say that fund could dissipate quickly depending on the damage from hurricane Frances. Jeff Yastine, NIGHTLY BUSINESS REPORT, Miami.

09/01/04: One On One With Henry McKinnell- Chairman, Business Roundtable

SUSIE GHARIB: CEOs at the nation's biggest companies are upbeat about the economy. A survey by the Business Roundtable says its CEO members plan to increase hiring and capital spending and expect their sales to grow over the next six months. The CEOs lowered their projection for economic growth in 2004 to 3.4 percent. That was down slightly from a previous estimate of 3.7 percent. Earlier today I talked with the Business Roundtable's Chairman, Henry McKinnell and asked him what was the survey's most important finding.

HENRY MCKINNELL, CHAIRMAN, BUSINESS ROUNDTABLE: Well, the most important finding of the survey is that contrary to what many of us perceived as a pause in economic growth and job creation, the CEO's of the Business Roundtable, the 150 largest companies in America, see additions to employment, strong capital spending and strong economic growth over the next six months. It's good news for the economy.

GHARIB: Mr. McKinnell, I did find that it was interesting that this was the most optimistic survey from this group of CEO's since you have been doing these surveys. What do you think is behind that confidence?

McKINNELL: Well, the economy is clearly in recovery. Economic growth in the first quarter was 4.5 percent. It was 2.8 percent in the second quarter slowing a little bit. What this survey says is that's a temporary pause and the economy will return to high rates of growth. The CEOs are expecting growth for the year of 3.4 percent, additions to employment, strong capital spending and strong revenue growth. It's a good sign for the economy.

GHARIB: So why do you think that consumers aren't feeling that confidence? A survey yesterday was showing that they're very concerned about job growth and today we see that they're very cautious about spending, car sales are down.

McKINNELL: Consumer confidence clearly took a hit in the last two or three months, I think for two factors. One is security risk, the risk of terrorism. The Olympics were peaceful and successful. That should be a positive factor. The Republican National Convention is successful and free of terrorist activities which should be positive. Oil prices haven't been helpful. They've been a tax on the consumer and clearly had an impact both on consumer spending and consumer confidence. Also had an impact on the business community, particularly those industries that are still energy intensive: transportation, utilities, the chemical industry. But we're still positive in spite of those factors for the rest of the year.

GHARIB: Well, given what you've just said, were you surprised that CEOs are expect -- 49 percent of the CEO's you surveyed are expected to increase capital spending over the next six months given that oil prices are so high and that there has been some soft economic data?

McKINNELL: That is not atypical in an economic recovery. Both jobs and capital investment usually lag. Capacity utilization is now 77.5 percent overall by about 80 percent people start to think about expanding capacity. So we're seeing that process under way. And overtime rates have been the highest since the beginning of the recovery and people now have the confidence to start filling those jobs with full time employees.

GHARIB: I know you didn't ask the CEOs a question about the presidential elections but as chairman of the Business Roundtable, I'm just wondering what you're hearing from your membership about what they see as the most important business issue for this election year.

McKINNELL: The most important business issue for the Business Roundtable is health care. We have an opportunity managing differently to both improve the quality of outcomes in health care and significantly reduce the cost.

GHARIB: Mr. McKinnell, on a completely different subject, there was a report today that said that Pfizer is going to be doing away with its widely used discount drug card for the elderly and people have been very puzzled by that. Will you explain what's the thinking behind that?

McKINNELL: That story that we were discontinuing our share card is both untrue and it's politically motivated. In fact what we're doing is we are taking the benefits of the Pfizer for living share card, rolling it into the you share (ph) card, which is our partnership with United Health care which gives people the same benefits of the Pfizer for living share card plus $1800 towards their drug cost, plus we've made the Pfizer for living share card benefits available to all 63 Medicare approved discount cards. So we're expanding the program, not contracting it. I was very disappointed in that report.

GHARIB: Well we appreciate your clearing that up for us. Thank you very much Mr. McKinnell. It's always a pleasure talking to you.

McKINNELL: Susie, thank you.

09/01/04: "Road to the White House"-The Future of Social Security

SUSIE GHARIB:President Bush calls it the ownership society. The idea: if everyone owns a home and investments, they can control their own future. At the core of that vision is Social Security reform. And it will take center stage as the Republicans hold their convention this week here in New York. Tonight, as we continue our look at the candidates and the issues, we focus on Social Security and its future. Darren Gersh reports.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: On the campaign trail, the president has now added a regular appeal to younger voters.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: You ought to be listening very carefully to the debate on Social Security. Baby boomers like me are just fine when it comes to Social Security. Younger workers need to be concerned about the fiscal sanity and fiscal stability of Social Security.

GERSH: Over the next 75 years, Social Security is projected to grow from 4 percent of GDP to almost 7 percent. Numbers like that explain why the president is so eager to reform the system and has already laid out principles for doing so. The president says any reform plan must preserve benefits for current retirees or those close to retirement, must return the system to a sound financial footing, and must include a system of personal accounts.

BUSH: I believe younger workers ought to be able to own a personal retirement account they call their own, so they can pass it on from one generation to the next.

GERSH: The Kerry campaign says personal accounts would force cuts in promised benefits of up to 40 percent.

SEN. JOHN KERRY, DEMOCRATIC PRESIDENTIAL CANDIDATE: And now there are some in Washington who want to put Social Security at risk. Let me say it as plainly as I can. As president, I will not privatize Social Security. I will not cut Social Security benefits.

GERSH: But what happens in 2018 when the system starts to need more money? Advocates for reform say the earlier changes are made, the easier the transition. And they point out that personal accounts replace a promise that may not be kept with real cash in an account. But a former member of the president's commission to strengthen Social Security says the politics of reform have congressional Republicans worried.

BILL FRENZEL, FMR. MEMBER, PRESIDENT'S COMMISSION TO STRENGTHEN SOCIAL SECURITY: They were nervous as could be that we were going to come out with something that would change anything. What they want to do is leave the system alone. They do not want to be accused of tampering with Social Security.

GERSH: For example, critics accuse the president of exaggerating Social Security's problems. According to the Congressional Budget Office, the system is solvent until 2052, and after that can pay 80 percent of promised benefits. Besides, critics say, the president hasn't filled in some key details.

ROBERT GREENSTEIN, EXEC. DIR., CENTER ON BUDGET & POLICY PRIORITIES: If you move some money from Social Security into private accounts, then the hole in Social Security is even bigger. How do you fill that hole? They don't say. Do you do larger Social Security benefit cuts? They don't say.

GERSH: Most likely, the transition to personal accounts would be funded with increased borrowing, which would be paid back as the personal accounts grow. Reformers add, dealing with the problem up front is better than the alternative.

FRENZEL: No system is any good if it's broke.

GERSH: Social Security is one issue where the differences between Democrat and Republican could not be clearer. John Kerry is calling for a tune-up. George W. Bush recommends major surgery. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.

09/01/04: "Money File"-Washington & Wall Street's Love Hate Relationship

SUSIE GHARIB: In the "money file" tonight, the relationship between Wall Street and Washington. Here's Bill Barnhart, financial markets columnist for the "Chicago Tribune."

BILL BARNHART, FINANCIAL MARKETS COLUMNIST, CHICAGO TRIBUNE: There's not much in the markets to talk about, so analysts have turned to the presidential election. Predictions abound about what the outcome will be and what it will mean for investors. Much of the analysis is baseless and contradictory. John Kerry recently scored gains in the Iowa electronic market futures trading on Bush versus Kerry and some commentators said this caused the summer slump in stocks. Yet Democrats, led by Bill Clinton and Harry Truman, presided over the best stock market gains of the 11 presidents since World War II. George Bush may be the first president since the great depression to see annual stock market returns decline. Another myth is political gridlock. For example, if Kerry wins, his initiatives could be hobbled by Republican control of Congress. We're told gridlock is good for investors. But unified government hasn't helped investors under Bush. And there is no statistical evidence that periods of gridlock favor the stock market. So does the election matter? You bet. Investors have a clear choice, but maybe not where you're looking. The outcomes could be most pronounced in Federal regulation and Supreme Court appointments. Unfortunately, it's unlikely that either will get much mention in campaign coverage or Wall Street punditry. I'm Bill Barnhart.

09/01/04: "'Paul Kangas' Stocks In The News

PAUL KANGAS: Blue chip stocks opened slightly lower this morning. The Dow fell about 15 points at the outset, but the NASDAQ managed to gain five. The market improved generally on news that July construction spending rose 0.4 percent to a record high. A small 3 percent drop to 59 in the August ISM manufacturing index was considered a positive. But once again plagued by extremely low volume, the market spent the rest of the day narrowly mixed.

The Dow Industrial Average closed down 5 ½ points at 10,168.46. The NASDAQ Composite managed to gain 12 1/3 points to 1850.41. Standard & Poor's 500 Index up 1 2/3 to 1105.91. The 10-year note fell 1/32 to 101 1/32. The yield at 4.12 percent.

Most active big board issue today was Pfizer (PFE) trading 12.4 million shares, stock losing $0.32.

Lucent Technologies (LU) dropped a nickel.

Bank of America (BAC) an $0.88 loss.

But Boston Scientific (BSX) up $2.55. That's a 7.1 percent rise. The company said its stent sales fell from $207 million in July to $200 million in August after it recalled about 100,000 stents. But it still has 65 percent of the market and it says stent sales are now rebounding nicely. Boston Scientific also said third quarter earnings should come in around $0.45 to $0.47 a share. That's only about a penny below the $0.48 Wall Street estimate.

Texas Instruments (TXN) up $0.23. The tech stocks were fairly firm today.

Forest Laboratories (FRX) down $3.87. The company says its phase III trials of its Alzheimer's drug called (INAUDIBLE) I believe it's pronounced, anyway, the drug failed to show an significant improvements in Alzheimer's patients.

$0.09 gain in General Electric (GE).

ExxonMobil (XOM) up $0.34.

Qwest Communications (Q) rose $0.04.

Tenth in volume Citigroup (C) down $0.13 a share.

Allstate (ALL) losing $1.04. Insurance stocks in general bracing for hurricane Frances, which UBS says could be more disastrous than hurricane Andrew was 12 years ago.

Cooper Companies (COO), the maker of contact lenses and surgical devices, up $5.38. Third quarter earnings came in at $0.70, $0.02 better than the Street estimate and way above the $0.58 last year. Revenues up a respectable 19 percent. Company boosted its 2004 earnings estimate from the $2.57 level up to about $2.59 to $2.61 a share.

Air Products & Chemicals (APD) up $1.39, getting a boost from Bank of America which upgraded it from "neutral" to "buy."

Guidant (GDT) up $1.86. The company won an appeal over St. Jude's Medical in a patent lawsuit about implantable defibrillators.

And then Pope & Talbot (POP) up $0.93. A NAFTA panel ruled that the United States failed to prove Canadian lumber imports hurt U.S. producers, so this improves chances that the duties that Pope & Talbot have been paying will be lifted.

Mobile TeleSystems (MBT), this is Russia's largest mobile phone company, up another $9.63 after gaining $7.86 yesterday when the company reported second quarter earnings more than doubled from last year.

NASDAQ's most active Microsoft (MSFT), a $0.09 gain.

Followed by Intel (INTC) up $0.14.

eBay (EBAY) rose $1.09.

Cisco Systems (CSCO) $0.33 gain.

But Electronic Arts (ERTS), fifth in volume, was down $0.98.

A $0.50 gain in Yahoo! (YHOO).

QUALCOMM (QCOM) down $0.06.

Applied Materials (AMAT) edged $0.16 higher.

And Google (GOOG) down, a little profit taking, $2.12 loss.

Tenth in volume was Dell Incorporated (DELL) gaining $0.63.

Oracle (ORCL), an $0.08 gain. Now a San Francisco court ruled shareholders can proceed with a lawsuit against Oracle, including CEO Larry Ellison, for allegedly making false statements and covering up losses in the second quarter of the year 2000.

Open Text Corporation (OTEX), this is a software firm, plunging $4.85. Company in with sharply lower fourth quarter earnings, $0.16 versus $0.22 last year and the company predicting first quarter earnings will fall to only $0.07 to $0.12 at best and Wall Street was expecting $0.24.

Over on the American Exchange, American Science & Engineering (ASE) up $2.56. The company said it received $19 million in orders for its partial inspection systems from a couple of different governments.

And those are the stocks in the news tonight.

09/01/04: Market Stats

NET PERCENT CLOSE CHANGE CHANGE DOW CLOSE 10168.46 -5.46 - .1 HIGH 10208.27 LOW 10110.65 NASDAQ COMP. 1850.41 +12.31 +.7 HIGH 1859.44 LOW 1833.33 VOLUME 1,142.0 PREVIOUS 1,138.4 UP VOLUME 712.2 DOWN VOLUME 409.8 DOW TRANSPORTS 3106.53 +1.07 + .0 DOW UTILITIES 291.11 +.56 + .2 CLOSING TICK +1016 S&P 500 1105.91 +1.67 + .2 S&P 100 538.60 -.17 - .0 MIDCAP 400 581.37 +4.75 + .8 REUTERS/CRB 279.85 +3.35 + 1.2 NYSE COMPOSITE 6469.86 +15.64 + .2 VALUE LINE 350.84 +2.07 + .6 RUSSELL 2000 552.46 +4.53 + .8 DJW 5000 10748.87 +29.72 + .3 U.S. TREASURIES 5-YEAR NOTE 3.625% July 15,2009 100 30/32 +2/32 + 3.30 10-YEAR NOTE 4.75% May 15,2014 101 3/32 +1/32 + 4.12 30-YEAR NOTE 5.375% Feb. 15, 2031 106 20/32 +2/32 + 4.93 LEHMAN BROS. LONG BOND INDEX 1754.76 +4.72 DOW CLOSE 10168.46 -5.46 - .1 ADVANCES 2059 DECLINES 1231 NEW HIGHS 176 NEW LOWS 7 NET PERCENT NYSE MOST ACTIVES 4PM CLOSE CHANGE CHANGE PFE Pfizer 32.35 -.32 -1.0 LU Lucent Tech 3.08 -.05 -1.6 BAC Bank of America 43.65 -.88 -2.0 BSX Boston Scientific 38.28 +2.55 +7.1 TXN Texas Instrument 19.77 +.23 +1.2 FRX Forest Labs 41.98 -3.87 -8.4 GE GE 32.88 +.09 +.3 XOM Exxon Mobil 46.44 +.34 +.7 Q Qwest Comms 2.93 +.04 +1.4 C Citigroup 46.45 -.13 -.3 NASDAQ CLOSE 1850.41 + 12.31 + .7 VOLUME 1,430.4 PREVIOUS 1,138.4 ADVANCES 1815 DECLINES 1228 NASDAQ ACTIVES MSFT Microsoft 27.39 +.09 +.3 INTC Intel 21.43 +.14 +.7 EBAY eBay 87.63 +1.09 +1.3 CSCO Cisco Systems 19.09 +.33 +1.8 ERTS Electronic Arts 48.80 -.98 -2.0 YHOO Yahoo! 29.01 +.50 +1.8 QCOM Qualcomm 37.99 -.06 -.2 AMAT Applied Matl 16.05 +.16 +1.0 GOOG Google 100.25 -2.12 -2.1 DELL Dell Inc 35.47 +.63 +1.8 AMEX CLOSE 1237.43 + 5.02 + .4 INDEX SHARES DIA DIAMONDS TRUST 101.88 -.01 -.0 QQQ NASDAQ 100 34.29 +.25 +.7 SPY S&P DEP.RECEIPTS 111.32 +.19 +.2 STOCKS IN THE NEWS ALL Allstate 46.17 -1.04 -2.2 COO Cooper Cos 63.33 +5.38 +9.3 APD Air Prods & Chem 53.77 +1.39 +2.7 GDT Guidant 61.66 +1.86 +3.1 POP Pope & Talbot 19.37 +.94 +5.1 MBT Mobile TeleSys 138.99 +9.63 +7.4 ORCL Oracle 10.05 +.08 +.8 OTEX Open Text Co 16.72 -4.85 -22.5 ASE American Science 24.00 +2.56 +11.9

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