12/13/05: Interest Rate Hike #13
SUSIE GHARIB: The Federal Reserve raised interest rates for
the 13th time today. But the central bank signaled it`s in the final phase
of its year-and-a-half-long campaign of rate hikes and Wall Street
responded with a rally. The Federal funds rate is now at 4.25 percent
after today`s quarter point increase. Suzanne Pratt takes a closer look at
the Fed`s action.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was a
foregone conclusion on Wall Street that the Federal Reserve would hike
interest rates today, as it has done at every monetary policy meeting for
the last 18 months. The Federal funds rate, an overnight bank lending
rate, now stands at 4.25 percent. When the Fed began raising rates in June
of last year, it stood at a mere 1 percent, the lowest level in nearly 40
years.
JOSHUA FEINMAN, CHIEF ECONOMIST, DEUTSCHE ASSET MANAGEMENT: I think
the Fed still feels that the overall stance of monetary policy and
financial conditions is providing support to the economy, not as much
clearly as it was a year or so ago, but still providing some support.
PRATT: Somewhat surprising, however, to financial markets were the
changes the Fed made to its post-meeting statement. In particular, for the
first time in almost four years, Alan Greenspan and company did not
describe monetary policy as accommodative. That means policymakers no
longer believe short-term interest rates are stimulating the economy. To
financial markets, that omission suggests rate hikes are coming to an end.
Fed watchers are less certain. Instead, many say the Fed has done a
masterful job of hedging its bets.
LAURENCE KANTOR, CHIEF ECONOMIST, BARCLAY`S CAPITAL: Now they`ve left
their policy options completely open, because now they`re just saying that
to keep the risks balanced, we need to keep hiking rates. But they are not
telling you when they are going to stop.
PRATT: Fed policymakers also retained the much talked about measured
language in the statement. The word "measured" has come to mean quarter
point rate hikes at each meeting. But some experts now say keeping the
measured move reference suggests rate hikes will extend beyond the Fed`s
next meeting in late January.
KANTOR: The Fed is not ready to tell the market yet when they are
going to stop, most likely because the Fed doesn`t know when it`s going to
stop.
PRATT: The January meeting will be the last for Greenspan, who has led
the Fed for nearly two decades. Not only is he credited with steering the
economy through several rough spots, but experts say his tenure is
noteworthy for its improving transparency with financial markets. Suzanne
Pratt, NIGHTLY BUSINESS REPORT, New York.
GHARIB: More now on that interest rate hike by the Federal Reserve
today. Joining us for more analysis Michelle Girard, senior economist at
RBS Greenwich Capital Management and Mike Holland, New York money manager
of his own firm, Holland and Company. Hi, Mike, hi, Michelle.
MICHELLE GIRARD, SENIOR ECONOMIST, RBS GREENWICH CAPITAL MANAGEMENT:
Hi, Susie.
MIKE HOLLAND, CHAIRMAN, HOLLAND & COMPANY: Hi, Susie.
GHARIB: Hi to both of you. Michelle, let me begin with you. Let`s
get your analysis and interpretation of what the Fed said today in that
policy statement.
GIRARD: Well, the policy changes or the statement changes were what
was most significant and they actually did more than we thought. They
removed any references to accommodation, so they were signaling that they
think rates are, you know, close to neutral. They`re not stimulating or
restraining the economy. But, you know, very importantly, as it was
mentioned in the package, they did still indicate that some further
measured firming and policy was likely. So even though they`re close to
neutral, they still see enough risk that they`re going to continue to raise
rates in early 2006.
GHARIB: Mike, you agree with all that?
HOLLAND: I do, Susie and importantly, the stock market and the bond
market agreed with it and they voted today positively. Both the bond
market and the stock market was up in price, and the idea that the Fed
won`t make the mistakes it`s made a couple of times in our recent past,
that it over -- that it tightens too much and overreacts to an inflation
bogeyman that isn`t even there.
GHARIB: Why should the market interpret it that way, Mike? I mean why
the confidence that the Fed is not going to make a mistake here?
HOLLAND: I don`t think it`s confidence yet, Susie. I think there`s
been a fear. I think there`s a reduction in the fear. I think Michelle
had it exactly right. They still have the possibility for screwing it up,
but I don`t think they`ll necessarily do that and this is a good indication
that they may not mess it up.
GHARIB: So, Michelle, you talk about neutral and we`ve talked about
this many times in the past, when we analyze these Fed meetings, what is
neutral? Where do you think is going to be the end point?
GIRARD: Well, the question is not only what is neutral, which, you
know, in the Fed`s mind, is somewhere say around 4.5 percent, but will it
be OK to stop at neutral or will the Fed ultimately have to keep raising
interest rates further than neutral in order to keep inflation from
eventually, you know, kind of, you know, boiling up? Now, you know, they
have very much indicated that the future policy decisions are going to be
much more dependent on the economic statistics than they have been in the
past, so, really, it`s going to depend on how strong the economy looks as
to how far they ultimately raise rates. We think the economy is going to
stay very strong in 2006 and we even see inflation creeping up a bit. So
our feeling is that they probably are going to have to take rates up a
little bit more than people are currently expecting.
GHARIB: Mike, do you think that the markets are focused on a magical
number? Is it going to be 4.3 percent? Is it going to 4 3/4 percent on that
key interest rate, the Federal funds rate?
HOLLAND: That`s a great question, Susie because I think the answer is
no. I don`t think there`s any special number. I think that it`s just that
it`s not a bad number. A bad number is something in excess of what it has
to do. I think, as you said, if they get to 4 3/4 maybe some bulls would
be upset with that, but I think overall the market just wants an end, a
closure to this. We`ve had 13 interest rate rises. The stock market has
done OK. The bond market has done fine, but I think if we get an over-
reaction to an inflation nemesis which still isn`t present -- we`ve seen
this movie before. That`s what the market is worried about, to the extent
that not a number, necessarily, but the fact there`s closure in the not too
distance future.
GHARIB: Let`s talk about the January meeting. It`s Greenspan`s last
meeting. It`s Ben Bernanke`s first meeting. I think he`s going to be
attending that meeting, right, Michelle?
GIRARD: Well I think he`s not supposed to take over until February 1,
so Fed Chairman Greenspan - exactly -- will finish out this meeting. It`s
not expected that Bernanke will attend this meeting. It`ll be interesting.
I mean the conclusions that we can draw from the statement will be somewhat
less clear. Even if they say measured again, sort of signaling that
they`re likely to raise rates again in March, when the new Fed chairman
takes over, that may or may not be the way he wants it to go. Our feeling
is there actually won`t be much of a disconnect, that the new Fed Chairman
Bernanke will operate policy very much along the lines of what the Fed
Chairman Greenspan has done and that, particularly, in the nearly term, the
transition, Bernanke is going to work to keep the transition as smooth as
possible.
GHARIB: Let me just go to Mike just to wrap things up here. Is there
anything that from what you heard today from the Fed and how the markets
reacted that you would be making changing in the way you`re managing your
portfolio? What should people be doing differently if anything?
HOLLAND: I`m actually a little more optimistic as a result of today as
the markets showed Susie. There was continuing concern about possible
mistakes by the Fed. Bernanke we have to remember, with respect to what
Michelle just said was, not too long ago talking about deflation as a
concern, the not-too-distant past and we have no concrete evidence
whatsoever in the serious numbers that we have a serious inflation problem
whatsoever. So I think that you can become more constructive about
equities and possibly have a surprise to the upside because you saw maybe a
preview of coming attractions today.
GHARIB: All right, thank you, both, Mike Holland, Michelle Girard, we
really appreciate it.
GIRARD: Thanks, Susie.
HOLLAND: Thank you Susie.
GHARIB: We`ve been speaking with Michelle Girard, senior economist at
RBS Greenwich Capital Management and Mike Holland of Holland and Company.
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) 2005 Community Television Foundation of South Florida,
Inc. ALL RIGHTS RESERVED. Terms of use.
12/13/05: Retailers Will Still Have Something To Celebrate This Year
PAUL KANGAS: Elsewhere on the economic front, retail sales were weaker than
expected last month, fueled by retreating prices at the gas pump. Today
the Commerce Department reported retail sales rose 0.3 percent in November.
Economists had expected a 0.5 percent rise. Excluding auto purchases, sales
actually fell 0.3 percent. Economists think today`s numbers still point to
a happy holiday season for retailers.
BRIAN FABBRI, CHIEF ECONOMIST, BNP PARIBAS: It looks to me as though
all of the holiday-related kinds of activities, whether it be eating and
drinking places or department store sales or electronics sales or home
building sales, all of that was extremely robust and in fact it looks like
the holiday season should be getting a very big boost from the November
sales data.
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) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
12/13/05: Medical Technology Takes A Giant Step Toward the Future
SUSIE GHARIB: The nation`s baby boomers begin reaching age
60 starting in January. Many of them are hoping to turn back the clock, at
least when it comes to their health. New technologies can play a role in
that progress, as Stephanie Dhue discovered when she attended a White House
conference on aging today.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Beds that let
nursing staff or family far away, monitor seniors, systems that test
Parkinson`s patients from home, and medicine cabinets that reorder your
prescriptions all promise to make health care better and more cost-
effective.
ERIC DISHMAN, CHAIRMAN, CENTER FOR AGING SERVICES TECHNOLOGIES: We`ve
got a huge market opportunity, but also a huge challenge to figure out how
do we use technologies to help keep people healthy and happy in their own
homes, and we`re realizing that if we can actually do early detection of
disease, prevention of disease, that`s where the real cost savings are
going to come from.
DHUE: So instead of a patient scribbling down notes of their blood
pressure or glucose levels at home, IBM is piloting a system that lets
patients transmit their vital signs to a server where the readings can be
shared with doctors and nurses.
MARIA EBLING, IBM RESEARCH: By doing this automatically, it allows
the care provider to see a very accurate representation of the readings.
DHUE: Intel is testing in-home devices to measure the progress of
Parkinson`s disease. It`s also testing a watch that can sense a person`s
location and beam messages prompting seniors to take their medicines. Spry
Software is taking seniors` interest in the solitaire game free cell to
monitor their mental state.
DEVIN WILLIAMS, SPRY SOFTWARE: What we saw is an opportunity to take
the natural phenomenon of people really enjoying games, even elders, and
figuring out how we could derive some important metrics out of it to be
able to assess for cognitive decline, while also helping to give them a
tool to keep their minds sharp.
DHUE: In touch health uses wireless broadband technology to allow
specialists to visit multiple patients from one location. If I were a
doctor, I could visit patients this way, either faster or more frequently.
DHUE: With the population of seniors expanding and with it the demand
for health care, experts say companies are looking at a market opportunity
worth billions. Stephanie Dhue, 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. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
12/12/05: Commentary: What's Got The Economy on a Roll
SUSIE GHARIB: Tonight`s commentator says the economy has been on a roll in recent
years. But watch out if it stops rolling. Here`s Charles Schultze, senior
fellow at the Brookings Institution.
CHARLES SCHULTZE, SENIOR FELLOW EMERITUS, BROOKINGS INSTITUTION: Over
the last four years, employment expanded slowly. Despite large productivity
gains, real wage rates for workers also grew slowly, while the share of
income going to corporate profits rose much more rapidly than usual. Yet
despite the slow growth of wage and salary incomes, consumer spending
increased handsomely. Early on, large tax cuts helped fuel this growth.
More recently consumers found another way to raise spending in the face of
lagging wage and salary incomes.
The sharp rise in home prices since the year 2000 produced huge gains
in the equity value of household real estate, relative to consumer income
amounting to some $2.5 trillion, even after deducting the increase in
mortgage debt. With low mortgage rates and fees, homeowners extracted some
of that increased equity in cash to support consumption spending, through
home equity loans, refinancing and raising the amount of their existing
mortgages and by other means.
A large portion of the capital gains from rising home values are still
untapped and mortgage borrowing could help keep consumption growing nicely
for a while even with continued weak growth in wage incomes. But this kind
of expansion is particularly subject to a slowdown should there by a major
rise in mortgage interest rates and should the rise in home prices come to
a sudden halt. On balance the outlook is good, but it holds risks. I`m
Charles Schultze.
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) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
12/13/05:Last Word: Sir Richard Branson's Newest Out of This World Venture
SUSIE GHARIB: And finally tonight, space is the next frontier for Richard
Branson and his company, Virgin Galactic. The entrepreneur and the state
of New Mexico today took the wraps off plans to build a space port there.
It`s a $225 million project, to be built mostly underground near Truth or
Consequences. Virgin will have a 20-year lease on the facility and pay the
state a million dollars a year. It looks like the launch pad will be busy
Paul. Virgin already has a waiting list of 38,000 people from 126
countries who want to fly into space and all of them have coughed up a
deposit for a seat.
KANGAS: Well, a deposit is one thing but the full fare is out of this
world. I think it`s $200,000.
GHARIB: I know. It would be great to do it.
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) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
12/13/05:
"Paul Kangas' Stocks In The News"
PAUL KANGAS: Positive thinking cushioned an opening downturn in
stocks caused largely by a rise in oil prices. The Dow fell 10 points at
the outset of trading, NASDAQ down four. The blue chips improved after
Procter & Gamble held an upbeat forecast and also Lehman Brothers reported
strong earnings. Just before the Fed announced the rate hike, the Dow was
up six points, but the hint that an end to the tightening is near triggered
a solid rally. The Dow closed up almost 56 points at 10,823.72. The
NASDAQ Composite gained four points to 2265 even and the Standard & Poor`s
500 up exactly seven points to 1267.43. In the bond market, the 10-year
note rose 7/32 to 99 25/32, putting the yield at 4.53 percent.
Big board volume leader on a hefty 53.8 million shares, Pfizer (PFE)
doing very well today, up $1.37 in the wake of yesterday`s announcement of
a 26 percent boost in the quarterly dividend to $0.24 a share. Investors
clearly liked that.
Then Best Buy Co (BBY) down $5.90. The company reported third quarter
earnings of $0.28 a share, $0.02 below the Street estimate, also cut full
year guidance from the Street estimate of $2.17 to as low as $2.05 and as
high as $2.15. Prudential downgraded Best Buy from "overweight" to
"neutral." CS First Boston downgraded it from "outperform" to "neutral."
ConocoPhillips (COP) down $2.95. The company`s going to have to come
up with a hefty $35.6 billion in cash and stock to acquire Burlington
Resources and we`ll see that in just a moment.
Cendant (CD) down $1.83. The company sees fourth quarter earnings of
$0.23 a share. That`s at the low end of its previous projection.
Fifth in volume was Time Warner (TWX) with a $0.10 gain.
Burlington Resources (BR) itself up $3.57. Conoco`s buyout bid comes
with $46.50 a share in cash plus about 3/4 of a share of Conoco. Today that
deal has a value of about $88.50 per share to Burlington shareholders.
EMC Corp (EMC) down $0.52.
Followed by General Electric (GE) with an $0.08 loss, even though GE
reaffirmed that it will earn $1.72 this year.
Lucent Technology (LU) edged a penny higher.
And Citigroup (C) tenth in volume up $0.76 a share.
General Motors (GM) losing $0.76. Yesterday Standard & Poor`s cut the
company`s credit rating again and suggested today that the restructuring
plan may not be sufficient to avoid bankruptcy.
Procter & Gamble (PG) another Dow stock, up $1.60. The company sees
better than expected second quarter sales and sees earnings at about $0.69
a share. That`s roughly $0.02 better than the Street was expecting.
Altria Group (MO), the parent company of Philip Morris, up $1.52.
That`s on speculation there will be a favorable Illinois Supreme Court
decision this Thursday.
Then we see Lehman Brothers Holdings (LEH) edging $0.33 higher, not a
big gain, but the stock as you can see has had a big run up in anticipation
of the fourth quarter earnings, which came in strongly, $2.76, up from
$1.96 last year and $0.12 better than the Street was expecting there.
Cooper Company (COO), the healthcare products firm had sharply lower
fourth quarter earnings of only $0.22, down from $0.79 last year. The
company cited acquisition expenses and more shares outstanding and all of
that offset a 69 percent rise in revenues in the period.
Rohm & Haas (ROH) specialty chemical firm up $3.02. The company has
set up a restructuring plan which includes the closure of five facilities.
Sabre Holdings Corp (TSG) the big travel firm up $1.41. The company
sees 2006 earnings at $1.70. The Street was looking at only $1.59, much
better than expected there.
Alaska Air Group (ALK) however down $1.41. The company plans a 5.7
million share stock offering which of course represents potential dilution
of earnings.
Google (GOOG) topped the active list, up $4.88. The company`s
expanding its workforce into Ireland.
Microsoft (MSFT) $0.32 loss.
Apple Computer (AAPL) a $0.07 gain.
Intel (INTC) a $0.06 rise.
And Dell (DELL), fifth in volume, was up $0.50 a share.
Cisco Systems (CSCO) a $0.02 drop.
Sirius Satellite Radio (SIRI) lost 45 percent, fairly big percentage
drop after Bank of America downgraded Sirius from "neutral" to "sell" on a
valuation basis.
Yahoo! (YHOO) was up $1.12.
Qualcomm (QCOM) a $0.64 gain.
And Amgen (AMGN) showed no change, tenth in volume.
New issue today DealerTrack Holdings (TRAK), this is a software
company for the automotive industry. Ten million shares offered at $17,
opened at $19.75, the high $20, backed down a bit, but still had a very
good opening day of trading.
And Cutera Inc (CUTR) tumbling $14.81. The company makes laser
products for hair removal among other things and a Federal court denied the
company`s request for a summary judgment in its patent dispute with Palomar
Medical Technology.
And those are the stocks in the news tonight
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) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
12/13/05:
Market Stats
NET PERCENT
CLOSE CHANGE CHANGE
DOW CLOSE 10823.72 +55.95 + .5
HIGH 10871.51
LOW 10751.36
NASDAQ COMP. 2265.00 +4.05 +.2
HIGH 2271.85
LOW 2254.92
VOLUME 1,778.9
PREVIOUS 1,406.7
UP VOLUME 1,062.7
DOWN VOLUME 678.7
DOW TRANSPORTS 4088.03 -2.67 - .1
DOW UTILITIES 412.84 +5.06 + 1.2
CLOSING TICK +576
S&P 500 1267.43 +7.00 + .6
S&P 100 578.23 +3.26 + .6
MIDCAP 400 746.29 +1.07 + .1
REUTERS/CRB 335.62 +1.92 + .6
NYSE COMPOSITE 7825.00 +34.01 + .4
VALUE LINE 418.59 +.62 + .2
RUSSELL 2000 689.03 -.51 - .1
DJW 5000 12709.58 +54.28 + .4
U.S. TREASURIES
5-YEAR NOTE 4.50%
Nov. 15,2010 99 25/32 +4/32 4.43
10-YEAR NOTE 4.50%
Nov. 15,2015 99 26/32 +7/32 4.53
30-YEAR NOTE 5.375%
Feb. 15, 2031 109 15/32 +11/32 4.73
LEHMAN BROS.
LONG BOND INDEX 1740.74 +1.82
DOW CLOSE 10823.72 +55.95 + .5
ADVANCES 1886
DECLINES 1481
NEW HIGHS 203
NEW LOWS 147
NET PERCENT
NYSE MOST ACTIVES 4PM CLOSE CHANGE CHANGE
PFE Pfizer 22.31 +1.37 +6.5
BBY Best Buy Co 43.94 -5.90 -11.8
COP ConocoPhillips 58.20 -2.95 -4.8
CD Cendant 16.55 -1.83 -10.0
TWX Time Warner 17.79 +.10 +.6
BR Burlington Res 86.07 +3.57 +4.3
EMC EMC Corp 13.61 -.52 -3.7
GE General Electric 35.47 -.08 -.2
LU Lucent Tech 2.76 +.01 +.4
C Citigroup 49.44 +.76 +1.6
NASDAQ CLOSE 2265.00 + 4.05 + .2
VOLUME 1,929.1
PREVIOUS 1,702.7
ADVANCES 1487
DECLINES 1575
NASDAQ ACTIVES
GOOG Google 417.49 +4.88 +1.2
MSFT Microsoft 27.13 -.32 -1.2
AAPL Apple Computer 74.98 +.07 +.1
INTC Intel 26.72 +.10 +.4
DELL Dell 32.88 +.50 +1.5
CSCO Cisco Systems 17.50 -.02 -.1
SIRI Sirius Satellite 7.01 -.45 -6.0
YHOO Yahoo! 41.20 +1.12 +2.8
QCOM Qualcomm 45.84 +.64 +1.4
AMGN Amgen 77.46 unch. unch.
AMEX CLOSE 1764.85 + .29 + .0
INDEX SHARES
DIA DIAMONDS TRUST 108.39 +.67 +.6
QQQ NASDAQ 100 42.05 +.18 +.4
SPY S&P DEP.RECEIPTS 127.31 +.84 +.7
STOCKS IN THE NEWS
GM General Motors 22.29 -.76 -3.3
PG Procter & Gamble 58.51 +1.60 +2.8
MO Altria Group 74.03 +1.52 +2.1
LEH Lehman Bros 128.50 +.33 +.3
COO Cooper Cos 46.00 -3.75 -7.5
ROH Rohm & Haas Co 49.19 +3.02 +6.5
TSG Sabre Holdings 23.47 +1.41 +6.4
ALK Alaska Air Group 35.14 -1.41 -3.9
TRAK DealerTrack Hldgs 19.25 +2.25 +13.2
CUTR Cutera 28.25 -14.81 -34.4
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