01/31/06: The Greenspan Era Ends With Increased Interest Rates
SUSIE GHARIB: On Alan Greenspan`s last day at the Federal
Reserve, policymakers raised interest rates for the consecutive 14th time.
The Federal funds rate is now at 4.5 percent, Greenspan`s last stamp on Fed
policy after serving 18 1/2 years as chairman of the central bank.
Meanwhile, on Capitol Hill today, Ben Bernanke was confirmed to succeed
Greenspan. He officially takes over tomorrow. We have two reports
tonight: looking at the Fed`s latest rate hike; and the challenges facing
Bernanke as the nation`s 14th chairman of the Fed. We begin with Erika
Miller in New York.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Greenspan era
came to an end today, as the central bank chairman presided over his last
meeting to set interest rates. But Wall Street is betting this will not be
the end of the current cycle of rising rates, which began in June 2004.
The central bank ratcheted up its Federal funds target rate by 1/4
percentage point to 4 1/2 percent. The move was widely expected and is
part of a campaign to lift borrowing costs to more normal levels.
BRIAN FABBRI, CHIEF ECONOMIST, BNP PARIBAS: It`s the 14th move in
the last two and a half years. It raised the funds rate from 1 percent,
which is clearly too low, to 4.5 percent, probably is right in the middle
of peoples` forecasts for where this neutral equilibrium rate is.
MILLER: Traders spent much of the afternoon scrutinizing the statement
accompanying the Fed`s decision for any clues about the outlook for rates.
In it, the Fed removed previous language suggesting further rate hikes
would be quote measured. The committee also said quote, some further policy
firming may be needed, end quote. Experts say those changes are designed
to give incoming Fed Chairman Ben Bernanke a clean slate.
NEAL SOSS, CHIEF ECONOMIST, CREDIT SUISSE: Now they`ve dropped the
language of measured, it gives them much more flexibility to not act, or to
act in some other size depending on the circumstances that present
themselves now.
MILLER: Some analysts predict Bernanke will want to establish his
inflation fighting credentials right away by raising rates at the next
meeting on March 28. Others predict he will raise rates, not to prove
himself, but because the economy needs it. Economists are confident data
in the next few weeks will paint a positive picture of the economy, further
strengthening the case for another rate hike. In particular, they are
looking to Friday`s employment report to signal a recovering labor market.
Erika Miller, NIGHTLY BUSINESS REPORT, New York.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright
(c) 2005 Community Television Foundation of South Florida,
Inc. ALL RIGHTS RESERVED. Terms of use.
01/31/06: Bracing For Ben Bernanke's Beginning
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is Darren
Gersh in Washington. The Senate easily confirmed Ben Bernanke as Fed
chairman today. Hurdle number one cleared. Now it`s on to hurdle number
two: winning the votes of the people who set interest rate policy, the
members of the Federal Open Market Committee or FOMC.
GREG VALLIERE: I`m told in the last few years, Alan Greenspan
basically would go to an FOMC meeting and say, this is what`s going to
happen. This is what the statement will look like. It`s not going to be
the same for Bernanke. He`s going to have to schmooze with members. He`s
going to have to get a consensus. So he`s going to have to play a more
political role within the Fed than Greenspan did.
GERSH: That job has became easier because last week, President Bush
made two new picks to fill out vacancies on the Federal Reserve board.
Former Fed Governor Laurence Meyer says the nominations fit into a pattern
of selecting experts in banking and financial regulation, but not interest
rates and the economy.
LAURENCE MEYER, VICE CHAIRMAN: The Fed today is light on monetary
policy and macroeconomics. The board is light on that. And this is sort
of an example of why the chairman is so powerful in terms of the FOMC.
These people will be important contributors around the table. They`ll be
thoughtful, but they`re not going to challenge the chairman, not going to
provide the alternative points of view in the monetary policy debate that I
think would be so useful.
GERSH: For now, financial markets don`t seem interested in new views
at the Fed. Investors have put their faith in Bernanke because they
believe he will follow the path Greenspan laid out.
MARK ZANDI, CHIEF ECONOMIST, MOODY`S: Namely, don`t do anything
quickly or rash, move in a very orderly way, let markets know what you`re
thinking and why you plan to make a move well before you actually do it.
GERSH: Bernanke is expected to do even better with another
constituency, the public, where Greenspan often sounded like, well,
Greenspan. Bernanke has promised clear explanations for why the Fed is
raising or lowering interest rates.
PHILLIP SWAGEL: And to the extent that there is someone there who is
more willing to explain those decisions to the American people broadly, I
think that`s a good thing.
GERSH: Under Bernanke, the Fed might lose some of its mystery. And
that may put average citizens on a more equal footing with Wall Street
analysts when it comes to understanding one of the nation`s most important
economic institutions. 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. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
1/31/06: Reaction To The Interest Rate Increase
SUSIE GHARIB: More now on that interest rate hike by the Federal Reserve
today. Joining us now for more analysis, Michelle Girard, senior economist
at RBS Greenwich Capital Management and Mike Holland of the money
management firm Holland and Company. Hi, Mike, hi, Michelle. Nice to have
you on the program.
MICHELLE GIRARD, RBS GREENWICH CAPITAL MGMT: Hi Susie.
MIKE HOLLAND, CHAIRMAN, HOLLAND & CO: Hi. Susie.
GHARIB: Michelle, I`d like to begin with you and first get your
reaction about the Fed decision. Did the Fed do the right thing today? And
also, what`s your take on that policy statement?
GIRARD: Well, I do think that they did the right thing. I think the
economy continues to face some upside risks with inflation, but away from
that, I think the statement was what we all focused on, and, you know, they
did what we thought in terms of taking out some of the forward-looking
language, as we`ve been referring to it, to give the new Fed chairman
complete flexibility when he comes in to assess the economy, to assess
monetary policy conditions and to move however he sees best fit.
GHARIB: Mike, what was the message from the markets today?
HOLLAND: Excellent question, Susie, because the markets basically
said, as Michelle was just implying, that Alan Greenspan had given a very
good heads-up to the markets as to what to expect. They fulfilled it,
including the wording and I think the markets are fully expecting -- I
think it`s a 70 percent probability for one more interest rate hike. And
if all of that comes to pass, it will be a very smooth transition.
GHARIB: Michelle, you heard our report about Ben Bernanke taking
over on March 28. That will be his first in terms of presiding over his
first official Fed meeting. Do you think that it`s going to be at that
meeting that he will stop raising rates or do you think he has to prove
himself as an inflation fighter?
GIRARD: I don`t think he feels the need to prove himself as an
inflation fighter. I think the Fed`s decision in March is going to be
dependent on how the economy looks, and if the economy continues to show
good momentum, I think the Federal Reserve under the new Fed chairman will
take action. Our expectation is after a somewhat soft growth pace in the
fourth quarter, the hurricanes were really a factor, we`re going to see
very strong growth in the first quarter and so I think that the Fed is
going to end up raising rates -- that the new Fed chairman will raise
rates, not again to prove himself but because that`s what the economy is
going to dictate.
GHARIB: Mike, the new Fed Chairman Ben Bernanke isn`t really well
known on Wall Street, doesn`t have many connections with the Wall Street
community, and now the economy is in pretty good shape as he takes over.
What do you think that Wall Street is expecting from him? What would they
like to see?
HOLLAND: Well, Susie, I think Wall Street`s done a cram course on
Bernanke as well as what he`s written, as well as what he`s done for the
past 15, 20 years. And I think at this point, the markets are very
comfortable with him. He`s been astute academically, as well as
politically. He`s done some things at Princeton and in Washington that
give people some very good solace that he is going to be able to do exactly
what Alan Greenspan did in terms of making the public feel good about
what`s going on. But also I think he`s got an open mind about not just
inflation, but he`s been an expert on something called deflation, which the
Chinese are now beginning to talk about. So I think if he`s around for as
long as Alan Greenspan, he may see a lot of different things and we need
someone who has an open mind.
GHARIB: Mike what, do you think that the changes at the Fed with
Bernanke in charge as chairman will mean for individual investors?
HOLLAND: I think it`s a good thing because I think he won`t -- the
thing we have to worry about and our history is the Federal Reserve can do
some very significant damage to the economy and to the markets when it has
made mistakes and they`ve made some huge mistakes over the past 50 years.
Under Greenspan, we didn`t have any huge mistakes. We had some mistakes
that some people carped (ph) about in 1999, 2000, maybe over tightening.
But overall, I don`t believe Bernanke -- at least his history would
indicate -- would make a big mistake. That would be out of character.
GHARIB: Let me get forecasts from both of you for 2006. Michelle,
you first, where do you think the Fed fund rates will be by the end of
2006?
GIRARD: I think Mike may have a heart attack, but I think that the
Fed is going to keep raising rates and I think we`re going to go up a full
percentage point from here and it really is based on the fact the economy
looks so strong and the inflation rate now is right at the upper end of the
Fed`s comfort zone. There`s not a lot of wiggle room, so I think they`ll
have to take policy a little bit further than people think right now. It
won`t throw the economy into recession, but it will keep inflation in
check.
GHARIB: And, Mike, your forecasts for the market, for the Dow and
the NASDAQ for 2006.
HOLLAND: Let me put down my defibrillator here. My chest has
stopped hurting. I hope it doesn`t go above 4 3/4 and if it does what
Michelle does, all bets are off for me. But I think that the path of least
resistance for the stock market continues to be up. We`ve had a laggard
stock market in the U.S. versus the rest of the world, Susie, as you`ve
been reporting over the months and I think the U.S. stock market,
particularly some of the big multinationals, probably are going to play
some serious catch-up. So I think that the bond market, probably the
longer bonds probably trade up in yield a little bit. The stock market goes
up I think significantly.
GHARIB: OK, I`m going to have to cut you off there, but thanks a lot
Mike and Michelle both of you, for coming on the program.
GIRARD: Thanks Susie.
HOLLAND: Thank you Susie.
GHARIB: We`ve been speaking with Michelle Girard, senior economist
RBS Greenwich Capital Management and Mike Holland of Holland & 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.
1/31/06: Commentary: Workers Are Losing Big In The Tug Of War
SUSE GHARIB: Tonight`s commentator says American workers have been getting the
short end of the stick in recent years, but employers may be the ones that
get eventually stuck. Here`s Allan Sloan, Wall Street editor of "Newsweek"
magazine.
ALLAN SLOAN, WALL STREET EDITOR, NEWSWEEK: If you wait long enough,
you see that what comes around goes around. A few years ago, employers
were whining about how they couldn`t hire good help on their terms.
Newspapers and magazines were filled with stories about how companies had
to pay up to hire the people they wanted. Now, of course, things have
totally changed. Workers are getting squeezed, pensions are being frozen,
benefits are being cut. Companies hire people part time to avoid giving
them health insurance.
Except for very high- paid types, wages on average haven`t kept up
with inflation. Instead of pensions, lots of workers are being offered
better 401(k) plans. But trust me, even a great 401(k) is way less
valuable than a pension and much cheaper for companies. In addition, it
transfers the risk of investing the money to employees, who generally do a
pretty bad job of it. There`s a danger in all this tromping of the
workforce and not just to employees. It`s that what goes around comes
around. If business doesn`t cut employees some slack, it will pay when the
cycle turns.
One day, demographics or politics or both, will put workers in
control again. If they`re still feeling bitter toward employers, things
could get real ugly real quick. Extending a gracious hand to employees may
hurt profits in the short run. But in the long run, it will greatly soften
the inevitable backlash and prove to have been the smart thing to do, as
well as the right thing. I`m Allan Sloan.
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.
1/31/06:"Last Word"-The Changing States of The State of The Union Address
SUSIE GHARIB: And finally, tonight`s state of the union address by
President Bush has some interesting history. George Washington for
example, delivered the first one on January 8, 1790. Thomas Jefferson did
away with a speech altogether and dispatched his message in writing to
lawmakers. Calvin Coolidge`s 1923 state of the union speech was the first
to be broadcast on radio. Harry Truman`s in 1947 was the first one that
was televised. Lyndon Johnson shifted the speech from the afternoon to the
evening and that was in order to get a larger TV audience. And then in
1986 Paul, the state of the union speech was postponed for the first time
and only time and that was after the space shuttle "Challenger" tragedy.
KANGAS: Yet, 20 years ago last week. It was a terrible morning.
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.
1/31/06: "Paul Kangas' Stocks In The News"
PAUL KANGAS: Stocks opened lower on investor uncertainty about the Federal
Reserve and what President Bush would say in tonight`s state of the union
address. At the outset of trading, the Dow fell 30 points, the NASDAQ lost
13. The market trimmed losses after the Conference Board said its January
consumer confidence index rose to a three-year high. But that Fed rate
hike and hesitation ahead of the president`s speech tonight led to a lower
close. The Dow industrial average fell 35 points to 10,864.86. The NASDAQ
Composite was down nearly a point at 2305.82, while the Standard & Poor`s
500 index dropped 5.42 ending at 1280.08. Over in the bond market, the 10-
year note was up 3/32 to 99 27/32, putting the yield at 4.52 percent.
Big board volume leader on 27.9 million shares, Time Warner (TWX)
down $0.02. As we reported yesterday, media mogul Frank Biandi (ph) is
joining Carl Icahn to elect board directors for Time Warner and Biandi
himself is considered a possible new chairman of the board.
General Electric (GE) down $0.18.
Followed by Pfizer (PFE) $0.26 loss there.
ExxonMobil (XOM) down $0.36.
Fifth in volume was Lucent Technology (LU) with a $0.03 drop.
Then Boston Scientific (BSX) bucking the trend with a $0.97 gain.
HSBC bank downgraded the stock however from "over weight" to "neutral" and
cut its price target from $31 to $23 a share. However, optimism remains
the company will not be hampered in its acquisition of Guidant by antitrust
concerns.
EMC Corp (EMC) down $0.26.
Goodyear Tire (GT) major loser, down $3.12. Goodyear said its
fourth quarter results will be about the same as a year ago and Deutsche
bank securities downgraded the stock from "hold" to a "sell."
Bank of America (BAC) down $0.25.
Johnson & Johnson (JNJ), tenth in volume, was off $0.86.
Alcoa (AA) a big Dow stock, up $0.97. UBS financial upgraded it from
"neutral" to "buy." And you`ll notice we do not have any written comments
below the charts today due to technical problems.
Let`s have another look at another Dow stock, Altria (MO), parent of
Philip Morris, down $1.57. Its fourth quarter profits were up about 18
percent to $1.09 a share versus $0.94 last year, but the company was out
with a rather disappointing 2006 earnings guidance statement and that`s
what hurt the stock.
Merck and Company (MRK) a $0.04 gainer. Fourth quarter earnings
$0.51 versus $0.50 a year ago. Sales however were flat. Fourth quarter,
excluding one time charges, $0.64 a share, $0.02 better than the Street
estimate. And incidentally, former Merck chairman Ray Gilmartin has agreed
to a plaintiff`s lawyer`s request that he testify at a New Jersey Vioxx
trial slated to begin in late February.
Unum Provident (UNM), the reinsurance company, down $3.70. Fourth
quarter operating earnings lower than expected at $0.43, although higher
than last year`s $0.39, but Bank of America brokerage downgraded the stock
from "buy" to just a "neutral" rating.
Haemonetics (HAE) up $7.64. Third quarter earnings $1.02, although
$0.52 of that was a one-time gain, but it`s still way up from $0.42 a year
ago and the company boosted its 2006 earnings guidance.
Archer Daniels Midland (ADM) up $2.76. Second quarter earnings
nicely higher, $0.56 versus $0.48 a year ago. Sales were up 3 percent.
And Harsco (HSC) a $6.04 gain there. Fourth quarter earnings jumped
to $1.23 versus last year`s $0.84, nice move.
Google (GOOG) topped the active list. It closed up $5.84 in regular
trading, but after the close, Google out with fourth quarter results $1.54
a share of earnings and that was $0.23 below the Street estimate. In after
hours trading, Google stock I saw as low as $374. That`s almost $60 lower
than the close you see here.
Microsoft (MSFT) up $0.15.
$0.51 gain in Apple Computer (AAPL).
Intel (INTC) down $0.40.
And then fifth in volume, Cisco Systems (CSCO) a $0.32 loss there.
Yahoo! (YHOO) was off $0.64.
But Sepracor (SEPR) jumping $8.53. The drug research firm in with
first quarter earnings of $0.82 versus a loss of $0.33 last year. The
Street was looking for earnings of only $0.04.
Verisign (VRSN) $0.71 gain.
Sandisk (SNDK) up $1.07.
And Amgen (AMGN) was up $0.57.
A new issue today, H&E Equipment (HEES), construction equipment,
that`s their business, 10.9 million share IPO priced at 18, opened at
$20.31, the high $23.33 and that`s just about where it closed.
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.
01/31/06:
Market Stats
NET PERCENT
CLOSE CHANGE CHANGE
DOW CLOSE 10864.86 -35.06 - .3
HIGH 10923.45
LOW 10862.14
NASDAQ COMP. 2305.82 -.96 -.0
HIGH 2311.83
LOW 2292.95
VOLUME 1,981.5
PREVIOUS 1,680.8
UP VOLUME 854.3
DOWN VOLUME 1,111.2
DOW TRANSPORTS 4367.54 +13.05 + .3
DOW UTILITIES 413.84 +.13 + .0
CLOSING TICK +839
S&P 500 1280.08 -5.12 - .4
S&P 100 578.77 -2.90 - .5
MIDCAP 400 781.02 +4.46 + .6
REUTERS/CRB 348.66 -1.40 - .4
NYSE COMPOSITE 8106.55 +1.30 + .0
VALUE LINE 436.56 +.66 + .2
RUSSELL 2000 733.20 +2.33 + .3
DJW 5000 12953.63 -25.80 - .2
U.S. TREASURIES
5-YEAR NOTE 4.25%
Jan. 15,2011 99 3/32 unch. 4.46
10-YEAR NOTE 4.50%
Nov. 15,2015 99 27/32 +3/32 4.52
30-YEAR NOTE 5.375%
Feb. 15, 2031 110 5/32 +12/32 4.68
LEHMAN BROS.
LONG BOND INDEX 1749.98 +.14
DOW CLOSE 10864.86 -35.06 - .3
ADVANCES 1785
DECLINES 1549
NEW HIGHS 299
NEW LOWS 31
NET PERCENT
NYSE MOST ACTIVES 4PM CLOSE CHANGE CHANGE
TWX Time Warner 17.53 -.02 -.1
GE General Electric 32.75 -.18 -.6
PFE Pfizer 25.68 -.26 -1.0
XOM Exxon Mobil 62.75 -.36 -.6
LU Lucent Tech 2.64 -.03 -1.1
BSX Boston Scientific 21.87 +.97 +4.6
EMC EMC Corp 13.40 -.26 -1.9
GT Goodyear Tire 15.64 -3.12 -16.6
BAC Bank Of America 44.23 -.25 -.6
JNJ Johnson & John. 57.54 -.86 -1.5
NASDAQ CLOSE 2305.82 - 0.96 - .0
VOLUME 2,388.1
PREVIOUS 1,968.0
ADVANCES 1636
DECLINES 1411
NASDAQ ACTIVES
GOOG Google 432.66 +5.84 +1.4
MSFT Microsoft 28.15 +.15 +.5
AAPL Apple Computer 75.51 +.51 +.7
INTC Intel 21.26 -.40 -1.8
CSCO Cisco Systems 18.57 -.32 -1.7
YHOO Yahoo! 34.38 -.68 -1.9
SEPR Sepracor 56.91 +8.53 +17.6
VRSN Verisign 23.75 +.71 +3.1
SNDK SanDisk 67.36 +1.07 +1.6
AMGN Amgen 72.89 +.57 +.8
AMEX CLOSE 1860.83 + 21.94 + 1.2
INDEX SHARES
DIA DIAMONDS TRUST 108.27 -.64 -.6
QQQ NASDAQ 100 42.00 -.19 -.5
SPY S&P DEP.RECEIPTS 127.50 -.94 -.7
STOCKS IN THE NEWS
AA Alcoa 31.50 +.97 +3.2
MO Altria Group 72.34 -1.57 -2.1
MRK Merck & Co 34.50 +.04 +.1
UNM UnumProvident 20.33 -3.70 -15.4
HAE Haemonetics 52.00 +7.64 +17.2
ADM Archer-Daniels 31.50 +2.76 +9.6
HSC Harsco 79.22 +6.04 +8.3
HEES H&E Equipment 23.10 +5.10 +28.3
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