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Moneyline News Hour

Dow Rises 60.50 to 9,856.53; Nasdaq Climbs 49.33 to 4,897.17; Price of Crude Oil Drops Sharply; Sam Wyly Defends His Political Ads

Aired March 8, 2000 - 6:30 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

WILLOW BAY, CNN ANCHOR: Tonight, a less than inspiring rebound after the Dow's worst day in years. We'll look at where main street investors can find safety in the storm.

STUART VARNEY, CNN ANCHOR: From panic buying to manic selling in the oil pits, but will a welcome retreat in prices really last?

BAY: Your medical history, online and vulnerable to prying eyes. Are your health care secrets revealed when you go on the Web? Our special series continues.

VARNEY: And who wants to be a jillionaire? The oracle of Omaha.

(BEGIN VIDEO CLIP)

WARREN BUFFETT, CHAIRMAN, BERKSHIRE HATHAWAY: I'm ready. I'll take "Brady Bunch" trivia for 200.

(END VIDEO CLIP)

VARNEY: But Warren Buffett needs a lifeline to become a quiz show sensation.

ANNOUNCER: This is THE MONEYLINE NEWS HOUR. Reporting tonight from New York, Willow Bay and Stuart Varney.

VARNEY: Good evening, everyone.

Stocks today gained across the board after yesterday's ferocious sell-off.

BAY: But the gains were hardly enough to dispel the anxiety on Wall Street. As one money manager put it, investors spent the day sifting through the rubble of yesterday's carnage in search of bargains. That, along with an encouraging pull-back in oil prices sent the Dow up nearly 125 points. But the enthusiasm faded by the closing bell, the index ending up just 60. For the Nasdaq, it was the reverse, the index taking a triple-digit dive before climbing back to close up nearly 50.

Rhonda Schaffler has more on a tepid recovery for stocks.

(BEGIN VIDEOTAPE) RHONDA SCHAFFLER, CNN CORRESPONDENT (voice-over): Investors tested the waters with limited buying today on the heels of yesterday's bone-jarring tumble. Surprisingly, old-economy stocks came out ahead: Alcoa, International Paper, Kodak, and Caterpillar were each up on the day.

This year's beaten down drug sector was slightly resurrected, helped by some upbeat brokerage comments: Merck rose almost 3, Johnson & Johnson gained 4, Warner-Lambert and American Home Products also ended higher. But there was no rebound for Procter & Gamble shares, which shed another $3, and was the most actively traded stock for a second day.

AL GOLDMAN, AG EDWARDS: It's a very selective market, and it has been for about two years now. In fact, we have more losers than winners this year, but it's interesting, those that are up are up more than those that are down are down. So you've been rewarded if you've been in the right stocks.

SCHAFFLER: Rewards, however, didn't come to the oil sector today, talk that OPEC and non-OPEC oil producing nations have agreed to increase production sent the price of crude tumbling almost 9 percent to just over $31 a barrel. Oil stocks responded with a late session sell-off: Schlumberger lost more than 5, TransOcean Offshore fell better than 5 1/2, Texaco and Halliburton were also lower.

The Nasdaq had its share of volatility today. The big movers, however, were to the downside. Biotech stocks lost almost 5.5 percent, semiconductors tumbled about 2 percent. Some strategists expect the market's divergence to continue.

ROBERT STOVALL, PRUDENTIAL SECURITIES: The market now is in sort of a double orbit. I mean, you've got the new-age stocks swirling around, up higher, looks like the fundamentals don't matter too much, just the concept or the thesis, and then the standard stocks are very susceptible to downturns on bad news or even flat news.

(END VIDEOTAPE)

SCHAFFLER: Fear of the Fed, as one expert puts it, is gripping the market and keeping traders jittery. A quarter point hike is expected and discounted for later this month. But investors are getting nervous that a May hike could slow the economy down too much, legitimizing today's flight to quality into the old-economy stocks -- Willow.

BAY: Rhonda Schaffler reporting from the big board.

VARNEY: For the Dow, today's session was indeed a letdown for investors hoping for a decisive rebound. For the Nasdaq, today's session was marked by some pretty wild swings.

Charles Molineaux has more now from the Nasdaq market site -- Charles.

CHARLES MOLINEAUX, CNN CORRESPONDENT: Well, yes, Stuart, investors in technology snapped right back into their familiar pattern of buying on the dips and boosted the Nasdaq Composite index out of a steep dive. The Nasdaq started the day off with that rally, then sold off 200 points from its high, then bounced back for a 49-point gain at the close. Chalk this one up to the crossover affect again. Strategists say investors once more took their cues from the old- economy stocks of the Dow as they sank, then recovered, unleashing again the appetite for technology names.

Computer stocks led this market higher with a 1.7 percent rally thanks to strong gains by the likes of Sun Microsystems, and Oracle, as well as Microsoft, Dell, and a raft of Internet companies which regained their footing and rose 2 percent. E-tailers like eBay gained ground, it was up 13 percent. Infrastructure name Inktomi picked up, as did PSI Net.

Chip stocks were the one sector that resisted yesterday's sell- off. Today, they missed out on the rally and fell 1.7 percent. Chip big-cap Intel was down even after it rolled out its new one gigahertz Pentium III chip. Novell sank, as did Lattice Semiconductor.

The high-flying biotechnology stocks were pummeled once again, down almost 1 1/2 percent. Nextel Therapeutics needed therapy, it fell 18 percent, so did Genron Pharmaceuticals. A good idea of this volatility of these technology stocks certainly comes out over the past couple of sessions between yesterday's high of over 5,000 and today's low, the Nasdaq composite covered a range of 5 percent.

Reporting live from the Nasdaq market site, Charles Molineaux for CNN.

BAY: As the Dow industrials hover near bear market territory, the bluest of the blue chips are already there and it's a who's who of the old economy. Caterpillar down 47 percent from its 52-week high. McDonald's and DuPont both down 38 percent. Merck is off 35 percent. And Coca-Cola is down 33.

But even some so-called new economy names are under water on Wall Street. Amazon.com has slid 44 percent from its high. America Online has lost 43 percent, under pressure since it announced plans to merge with the parent of this network, Time Warner. Yahoo! down almost 30 percent. EBay off more than 20. And CMGI down 15 percent.

VARNEY: Well, even the stalwart stocks on the Dow, like G.E., IBM, Wal-Mart, Home Depot, they're suffering double-digit percent declines this year. You might think that would -- that, that would send small investors flocking to their local brokerage to sell stocks. Not so.

As Ceci Rodgers reports, that's not exactly what's happening.

(BEGIN VIDEOTAPE)

CECI RODGERS, CNN CORRESPONDENT (voice-over): These investors lined-up at the Charles Schwab office on Chicago's Magnificent Mile, not to cash out or even switch mutual funds, but to add to their accounts or open new ones. UNIDENTIFIED FEMALE: I do have some friends that are some big investors, at my level big investors, and they are real excited about the way things are going and they have a lot of ideas, so, you know, I kind of want to get involved myself.

RODGERS: Tax season is adding to the excitement. The average federal refund is up 8 percent this year. And if inflows are any indication, people are investing some of that money in mutual funds. Nearly $40 billion poured into stock funds in January. That's a record. And analysts say inflows have nearly kept pace in February and early March.

UNIDENTIFIED MALE: We're setting records in history, you know, in terms of the growth, so I figure I might as well jump into it and see what happens.

RODGERS: Taking the plunge the day after the Dow industrials' 374 point drop. Since the beginning of the year, the Dow has lost 14 percent of its value. At the same time, high-tech stocks and the Nasdaq have surged to all-time highs. An investor couldn't be blamed for being confused, but these investors appear anything but.

UNIDENTIFIED FEMALE: I think a lot of stocks are overvalued, and I really expected it, even though our portfolio is down in the six figures. But it is not that bad. It is going to come back. Stocks always come back -- always.

RODGERS (on camera): So far, small investors are keeping their cool amid the stock markets' gyrations. If they're worried about anything, it's that they'll miss out on the market's next big move to the upside.

Ceci Rodgers, CNN Financial News, Chicago.

(END VIDEOTAPE)

BAY: Next on MONEYLINE, struggling to jump on the B-to-B bandwagon.

VARNEY: Question: Will IBM's new alliance jump-start the company's e-commerce strategy? That story is next.

BAY: And later, the campaign ads that infuriated John McCain. Who's the money man behind them? You'll meet him tonight on MONEYLINE.

(COMMERCIAL BREAK)

VARNEY: Checking tonight's "MONEYLINE Movers": Watchguard Technologies soared 12 1/2. Warburg Dillon Read raised its 12-month price target on the security software maker to $90 a share.

Netro moved up more than 15 after it introduced another broadband wireless access system. The new system expands Netro's products to cover four of the most commonly licensed frequencies in the broadband wireless market. Two IPOs: Firstworld Communications up eight on its debut. It provides Internet and communication services. And IPrint.com up 5 3/4 on its first day of trading. That company offers Web-based printing services to small businesses and to consumers.

BAY: Another hook-up in cyberspace: Oracle, Chevron and McLane plan to create their own online marketplace for convenience stores and small businesses. The new service will be called Retailersmarketexchange.com, and it will help convenience stores and their suppliers conduct business online.

Shares of Oracle soared more than eight. It recently announced plans to power a similar online exchange for the auto industry. Chevron fell nearly one, and Wal-Mart up 3/4. It owns convenience store distributor McLane company.

VARNEY: IBM turning to e-commerce leaders Ariba and i2 in a bid to jazz up the technology giant's Internet strategy. As part of the three-way alliance, IBM is taking minority stakes in both i2 and Ariba.

IBM shares today up more three points. Ariba gained 6 1/2. i2 Technologies soared more than 22.

Bruce Francis has the story.

(BEGIN VIDEOTAPE)

BRUCE FRANCIS, CNN CORRESPONDENT (voice-over): "Big Blue" needed to play catch-up and fast in the high-velocity world of corporate e- commerce, especially business-to-business purchasing or procurement.

CHUCK PHILLIPS, MORGAN STANLEY DEAN WITTER: Customers in the market already knew that, that they didn't have expertise in the front end on the procurement. The only question was what were they going to do about it and were they going to wait two years to be a player. And this solves the problem.

FRANCIS: By working with younger, more nimble e-commerce software companies i2 and Ariba, IBM gets a chance to sell products and services to business customers who are eagerly bulking up on e- commerce-related technology.

WILLIAM ETHERINGTON, IBM: We believe that our opportunities are at all levels. Of course, all of these markets need to run on world- class servers and world-class storage, which plays to our strength.

FRANCIS: For i2 Technologies, there's strength in numbers.

SANJIV SIDHU, CEO, I2 TECHNOLOGIES: Now we can bring broader capability. We can bring Ariba to the table. We can bring IBM to the table in conjunction with i2.

FRANCIS: But each member of the alliance disputes any notion that they're trying to play catch-up with Commerce 1 and Oracle, which have grabbed headlines lately with high-profile exchanges with the "Big Three" automakers and major retailers.

KEITH KRACH, CEO, ARIBA: It just seemed like such a natural to bring together the leader in each one of our respective areas. And it's also, you know, our customers have been asking for that. So I think it's just a natural. There's nothing reactionary about it. It's very proactive.

FRANCIS: Oracle dismisses the threat, saying that the combined technology won't work.

LARRY ELLISON, CHAIRMAN & CEO, ORACLE: IBM trying to get them all to work together we think is technically impossible.

(END VIDEOTAPE)

FRANCIS: But Big Blue is betting that it is possible, and it's going to be the farm. IBM is giving the alliance a kick-start by moving its own $45 billion procurement program, the fifth-biggest in the U.S., to Ariba and i2 Technology -- Stuart.

VARNEY: Bruce, this sounds like it is really a significant challenge to Oracle. Is it?

FRANCIS: It certainly is a big challenge, but this game is in the very early stages. It's not over yet by a long shot.

VARNEY: Well said. Bruce Francis reporting.

BAY: Still ahead on MONEYLINE, some say it's the start of the biggest trade fight in years.

VARNEY: President Clinton asks Congress to back free trade with China. We'll have that story after the break.

(COMMERCIAL BREAK)

BAY: Checking some of the stocks that hit 52-week lows today: Clorox, Gillette, Hertz, Loews, and the publisher behind "Better Homes and Gardens" magazine, Meredith Corporation.

The battle over trade with China, shifting into high gear. President Clinton today sent legislation to Congress which would give China permanent trading privileges with the United States. It also helps clear the way for Beijing to join the WTO.

The president is calling on Congress to pass the bill as soon as possible, before it gets stalled on election-year politics.

(BEGIN VIDEO CLIP)

WILLIAM J. CLINTON, PRESIDENT OF THE UNITED STATES: If you believe in a future of greater openness and freedom for the people of China, you ought to be for this agreement. If you believe in a future of greater prosperity for the American people, you certainly should be for this agreement.

(END VIDEO CLIP)

BAY: House and Senate leaders say they expect the legislation to pass despite stiff opposition from labor unions and their Democratic allies.

VARNEY: Time now to check on the day's top stories outside the world of business. With that, Wolf Blitzer and the "MONEYLINE News Digest" -- Wolf.

WOLF BLITZER, CNN ANCHOR: Thanks, Stuart. The aftermath of Super Tuesday our top story tonight. Republican George W. Bush and Democrat Al Gore are celebrating resounding victories. But Democrat Bill Bradley is set to quit the White House race after a series of defeats. Aides say Bradley will announce tomorrow he's ending his run and will endorse Al Gore, who beat Bradley in every state contest.

Republican John McCain may also leave the race following a crushing loss to George W. Bush, who won eight primaries. Aides tell CNN McCain is tentatively talking about ending his campaign perhaps as early as Friday.

Also tonight, Memphis police are investigating a shooting at a burning house which left four dead and two others injured. Police say a man stepped out of the house and shot at firefighters called to the scene, killing two of them and a sheriff's deputy. Another deputy fired back, wounding the alleged gunman, who's in custody tonight. A woman's body was found in the garage.

And in Florida, a massive auto wreck east of Tallahassee has left three people dead, 21 injured. Highway patrol officials want to find out whether smoke from a nearby forest fire contributed to the 22- vehicle crash. Hazardous materials experts have cleaned up an acid spill from a truck involved in the accident -- Stuart.

VARNEY: Wolf, I take it that Mr. McCain's exit looks highly likely for this Friday?

BLITZER: Looks highly likely, but it wants -- the McCain people say they want it to be on his terms. They are certainly looking for some signal, some concessions from the Bush campaign that the issues most prominently put forward by McCain over these past several months, especially campaign finance reform, will be high on George Bush's agenda. And they're still talking behind the scenes amongst themselves how to do that.

VARNEY: So they're discussing then what impact Mr. McCain will have on the Bush campaign.

BLITZER: Right. And McCain is holding all of this very, very close to his vest. Even some of his closest advisers here in Washington have not been brought into the discussions yet.

VARNEY: Wolf Blitzer, thank you very much indeed.

BAY: Coming up, his attack ads put John McCain's environmental credentials in the spotlight. Now the focus is on the man who made them.

VARNEY: Up next, Texas billionaire Sam Wyly on Bush, McCain, and a campaign controversy that's not gone away yet.

(COMMERCIAL BREAK)

S @@ | q BAY: Primary voters in California, New York and Ohio faced a blitz of attack ads this past week blasting John McCain for his environmental record. The ads, $2 1/2 million of them, came from an organization called Republicans for Clean Air, a group created just over a week ago by Sam Wyly, a Texas billionaire and a major contributor to Governor George Bush.

As Allan Dodds Frank explains, it's a connection and an advertisement the Bush campaign might like to forget.

(BEGIN VIDEOTAPE)

ALLAN DODDS FRANK, CNN CORRESPONDENT (voice-over): George W. Bush won in New York, California and Ohio, and this advertisement may have helped.

(BEGIN VIDEO CLIP, POLITICAL ADVERTISEMENT)

NARRATOR: Last year, John McCain voted against solar and renewable energy. That means more use of coal-burning plants that pollute our air. New York Republicans care about clean air. So does Governor Bush.

(END VIDEO CLIP)

FRANK: The so-called "issue ad" and the two men who paid for it angered Senator John McCain.

MCCAIN: We're going to send a message to two sleazy Texans who put --who put 2 1/2 -- who put at least $2 1/2 million -- who put at least $2 1/2 million, $2 1/2 million running attack ads against me.

FRANK: Only after McCain's campaign began complaining did Sam and Charles Wyly, two prominent supporters of Texas Republicans, identify themselves as the men behind the ads, ads that said they were paid for by Republicans for Clean Air.

Rob Allyn created the issue ad for the Wylys.

ROB ALLYN, ALLYN & CO.: We've achieved 100 percent of Mr. Wyly's goals, which is to promote clean air issues and an awareness of the candidates' records on clean air within the Republican Party.

DANIEL WEISS, SIERRA CLUB: If they were trying to be honest about it, they would have said this is the Wyly brothers trying to promote George Bush for president.

FRANK: Sam Wyly is a pioneer in the Bush campaign, meaning he pledged to raise at least $100,000 for the candidate. Last month, the Wyly brothers sold their Dallas-based software company, Sterling Software, to Computer Associates for $4 billion. And they sold Sterling Commerce to SBC Communications for 3.9 billion.

The Wylys have $100 million invested in GreenMountain.com, a company specializing in windmill and solar energy.

(on camera): That interest in alternative energy may explain the Wyly's motivation for making the ads, but McCain still wants the government to determine whether they were really part of the Bush campaign.

Allan Dodds Frank, CNN Financial News, New York.

(END VIDEOTAPE)

VARNEY: As Allan mentioned, Wyly's current endeavor is something called GreenMountain.com, which, as he said, produces energy from renewable sources. And it is concern for the environment, Mr. Wyly says, that prompted the issue ads.

Joining me now from Texas in his first TV appearance since the controversy began is Sam Wyly.

So welcome to MONEYLINE. Good to have you with us.

SAM WYLY, CHAIRMAN, GREENMOUNTAIN.COM: Thank you.

VARNEY: Let's get straight to it, shall we. You're a man of great wealth, and some believe that you are buying a disproportionate impact on an election. One man, one vote, that's one thing, but one man, $2 1/2 million worth of ads is quite another. Any comment?

WYLY: Well, that's not true. What we're doing is just like you're exercising your rights to the free press that's contained in the Constitution. We're exercising our rights to free speech that are contained in the Constitution.

Our mission was to get the issue of clean air accomplished through clean energy into the political debate. We're rather bored by a lot of things they've been talking the about. So these ads, you didn't run the whole ad. If you had seen it, there was one senator who voted against renewables and solar energies; there was one governor who clamped down on these dirty old coal-burning plants in Texas.

And most -- the greatest part of the dirty air that comes out of industry comes out of the making of electricity. Everybody knows that cars create air pollution, but most people don't know that the greatest source of industrial air pollution is the making of electricity. And for 30 years, the owners -- these monopolies who own these dirty old coal plants have had a free ride. They haven't had -- they haven't had to meet any clean air laws. And these...

VARNEY: Can I just...

WYLY: Sure, go ahead and interrupt.

VARNEY: I'm sorry to interrupt, but I've got to be blunt again. You run GreenMountain.com as a company that has renewable energy sources.

WYLY: Right.

VARNEY: Now, if -- if rules governing emissions...

WYLY: We know what the rules are. There are rules...

VARNEY: If those rules, sir, were changed at the federal level, GreenMountain would stand to gain considerably. I put it to you that there is an appearance here that you're attempting to buy a change in policy at the federal level if your man is elected.

WYLY: The rules that are in place have been put in place by monopolies in every state, in every state of the nation with money that is just more vast than anything we -- that's -- we can anyway match. They have enormous clout in the statehouses, and these rules permit these old coal plants to -- to trespass -- they put that dirty -- that dirty pollution -- they trespass on the clean air rights of all Americans. And they don't have to pay the cost.

If they were paying something like...

VARNEY: If Mr. Bush is elected president, do you think that -- if Mr. Bush were elected president, do you think the rules will be changed in favor of GreenMountain?

WYLY: I have no idea.

VARNEY: Are you -- is that what...

(CROSSTALK)

WYLY: I would hope that -- I would hope that the new president and the new Congress will look at what we're saying. We're saying that these dirty old coal plants -- you either need to apply new technology and clean them up or you need to shut them down. But it's not fair for them to be dumping their cost of dirty air on to all of us, including me and including you.

Your air is dirty. My air is dirty. And it comes from these dirty old coal plants that are floating the dirty air up to New York.

VARNEY: Will you make other political commercials in the run-up to the election in November?

WYLY: We might. I hope every senator and every congressman who is running is looking at what we said. Here is a senator what voted against renewable solar energy, and here is a governor who clamped down on -- on these dirty old coal plants. And only three governors have done that. I say that's strength and that's catching a governor doing something right, and you're complimenting him on what he did. And that's -- we might do that again.

VARNEY: Sam Wyly, we thank you very much indeed for joining us here on MONEYLINE. Come back and join us again. Thank you, sir. OK, I think Mr. Wyly's left us, and we thank him very much for joining us, Mr. Wyly. We'll be back with more on MONEYLINE in just one moment.

(COMMERCIAL BREAK)

BAY: In tonight's headlines, investors do what they always do after a major plunge: jump back into stocks. But just how convincing was today's recovery? If old-economy stocks are too risky and new economy stocks too pricey, where should you put your money? We'll get some ideas for managing this market. And your most sensitive health care information at someone else's fingertips, as our special look at Internet privacy continues.

VARNEY: First, more on our top story: a plunge in prices, the kind that Wall Street and consumers actually like. We're talking about oil, which made its biggest one-day drop in more than a year, a day after rocketing above $34 a barrel. That on the mere hint that one of the world's major oil producers is considering raising production. In New York trading, Light Sweet Crude oil sank $2.87 to $31.26 a barrel, retreating from nine-year highs.

More on the story from Fred Katayama.

(BEGIN VIDEOTAPE)

FRED KATAYAMA, CNN CORRESPONDENT (voice-over): All around the pit, traders signaled, sell, sell, sell, as several other signs raised the prospects of more oil coming onto the market. Prices for Light Sweet Crude nosedived after Iran hinted it has shifted its stance in favor of boosting oil production after meeting with Saudi Arabia's oil minister. Both nations said timely supplies were necessary to balance the market.

JAMES FALVEY, DRESDNER KLEINWORT BENSON: They're going to do it on a gradual basis. They want a soft landing for the oil price.

KATAYAMA (on camera): Also driving oil prices lower, traders were surprised by a report from the American Petroleum Institute showing crude oil supplies rose much more than expected last week. Plus, gasoline supplies rose for the first time in four weeks.

(voice-over): Add to that comments by Energy Secretary Bill Richardson. He said he sees oil prices stabilizing after the OPEC ministers meeting this month.

BILL RICHARDSON, ENERGY SECRETARY: It's too early to tell what they will do March 27, except that they will increase production. That is good news for us.

KATAYAMA: And so he predicted gas prices will not hit $2 a gallon, but even in they do...

FADEL GHEIT, FAHENSTOCK & CO.: Gasoline prices even at $2, adjusted for inflation, will be less than half what they were 20 years ago. KATAYAMA: Investors cheered the crude price drop, sending the Dow Transports up nearly 4 percent. Back at the oil pits, one trader predicts prices are close to topping out.

DAVID NUSSBAUM, INDEPENDENT OIL TRADER: Thirty-five dollars, I think. I'd be surprised to see it go higher than that.

KATAYAMA: But other traders are still concerned, noting Richardson himself hedged his bets by talking to non-OPEC nations about hiking production in the event of a negative outcome at the OPEC meeting.

Fred Katayama, CNN Financial News, New York.

(END VIDEOTAPE)

BAY: That oil retreat helped the Dow claw back from yesterday's 374-point freefall. The sigh of relief was practically audible across lower Manhattan this morning when it became clear stocks were not in for another wild ride. Both the Dow and the Nasdaq recovered, but the rally was less than enthusiastic.

Peter Viles explains.

(BEGIN VIDEOTAPE)

PETER VILES, CNN CORRESPONDENT (voice-over): After their fourth- biggest loss in history, the blue chips got an unexpected boost from falling oil prices, but the Dow's rally was weak. Again, the Dow was outgained by the Nasdaq, and its rally did not convince analysts the worst is over.

LEAH MODIGLIANI, MORGAN STANLEY DEAN WITTER: We think there is a further downside to go. This is a risky market. Valuations have gotten very high here, but there are still some interesting stocks to buy.

VILES: The dip in oil prices boosted airline stocks. Winners there included Delta, AMR and U.S. Airways. Drug stocks also rallied, led by Bristol-Myers Squibb and Schering-Plough. But the Dow typically does much better than this on the day after a big loss. After its biggest one-day loss, the Dow bounced back 61 percent and 56 percent they day after its second-biggest loss. But after Tuesday's rout, the Dow regained only 16 percent, and it was not a broad-based recovery. Procter & Gamble slipped again, as did other consumer stocks, including Gillette, Colgate-Palmolive and Clorox.

NANCY TENGLER, GLOBAL ALLIANCE VALUE INVESTOR: The thing that's troubling so many investors, and particularly older investors that have, you know, more than five or 10 years, when you see a company like P&G lose 50 percent of market value in two months, that's not supposed to happen.

VILES: The combination of higher rates and higher energy prices has even some high-tech bulls bracing for a Nasdaq pullback. FRANK HUSIC, HUSIC CAPITAL MANAGEMENT: I think there will be a correction in the Nasdaq this year, without a doubt. And you know, most likely fears are likely to be if they keep on putting up interest rates and you continue to see a proliferation of earnings disappointments among bigger companies, then there will be a general concern about a slowdown in the economy.

VILES (on camera): Another sign of how weak this bounce-back rally really was, on the Big Board, 48 stocks hit new 52-week highs and 254 hit new 52-week lows.

Peter Viles, CNN Financial News New York.

(END VIDEOTAPE)

BAY: It wasn't a wild ride on Wall Street, but it wasn't quite a smooth one either. After inching higher at the open, the Dow fell as many as 64 points. By the afternoon, it turned around, closing up 60 points at 9856. Behind that rally, strong gains for IBM, Microsoft, Merck and Johnson & Johnson. But holding the Dow back, American Express, down more than 4.

The Nasdaq overcame a triple-digit deficit to stage a rally of its own. The index climbed nearly 50 points to end at 4897, once again within striking distance of a record. Today's Nasdaq standouts include Oracle, up more than 8 on its business to business e-commerce venture with Chevron and Wal-Mart. Internet stocks like eBay and Inktomi did well. But recent high-fliers, like JDS Uniphase and Applied Materials, lost ground.

VARNEY: Stocks recovered, yes indeed, even in the face of more evidence that the economy is growing gangbusters and more reasons for the Federal Reserve to hike interest rates. The Federal Reserve's regular survey of regional economic conditions showed signs of strength across the economy. That strength, however, has led to tight labor markets. And the Fed says labor shortages created increased wage pressures during the first two months of this year. The Central Bank said, however, overall inflation muted still. Consumer spending, that was as strong as ever, with retail sales meeting or exceeding expectations. But there were signs of something of a slowdown in the housing market.

Next on MONEYLINE, if you're despairing of your mutual fund returns, returns this quarter, you probably do not own Kobrick funds.

BAY: We'll talk with Fred Kobrick on how he is shattering the market averages.

Stay with us.

(COMMERCIAL BREAK)

BAY: In tonight's "MONEYLINE Focus": managing one of the most complex markets Wall Street has seen in years. With the S&P 500 down almost 7 percent this year, index funds aren't as attractive as they used to be. So is it a stock picker's market? Fred Kobrick hopes so. "USA Today" has honored the tough-as-nails fund manager for the third year in a row, naming his Kobrick Capital Fund to its list of 25 all- star funds. The fund showed a nearly 90 percent return over the past 12 months. And year to date, it is up 26 percent, even as so many stocks are in a bear market. It's no surprise that Kobrick's top holdings are all tech, including, BEA Systems, Motorola, Ciena, E-Tek Dynamics and Oracle.

Joining us now from Boston, Fred Kobrick, manager of the Kobrick Capital Fund.

Fred, welcome back.

FRED KOBRICK, KOBRICK CAPITAL FUND: Thank you. Nice to be here.

BAY: So how do you do it? How do you beat the averages so consistently? What does it take?

KOBRICK: I think it's a combination of using old-fashioned, good, solid stock picking, buy and sell disciplines that were used for two decades, and using them in a new-age economy. A combination of that is a powerful cocktail.

BAY: So old-fashioned stock picking in technology stocks, new economy stocks?

KOBRICK: Absolutely.

BAY: You -- in '99, you shifted your strategy to embrace new- economy stocks. How have you changed your strategy for 2000?

KOBRICK: Well, we're going to try and simply use the same core strategy of going for top earnings growth in tech companies that aren't centered on the product as much as who fulfills the customer needs and the customer's love, but looking for the best valuations, and that means that in some cases, we trim some software companies and we buy Internet enablers, or we put more money into telecommunications, chip companies, but the core strategy right now remains the same, and some of the stocks are different.

BAY: In '99, you did well with CMGI, Vitesse Semiconductor, PMC Sierra, still have significant holdings in those stocks?

KOBRICK: We have holdings in those stocks, but I would say that we have moved our top holdings in addition to what you just showed to stocks like Veritas and VeriSign. Oracle certainly has moved up as they have championed Internet software and moved into B-to-B spaces, so we have made changes.

BAY: You say you have trimmed some companies or lightened up on some. Can you give us some names?

KOBRICK: Well, clearly, one of the areas that was disappointing to me last year was the personal computer area. We took small losses. We got out. And I would say that of those stocks, the only one that I would champion right now and that we bought back toward the end of the year -- we bought back Dell at 36. BAY: Why are you so confident in Dell? Where do you think it is headed? It obviously has not been performing terribly well.

KOBRICK: No, people, I think, underestimate that the second half of this year. Intel, another good stock, is going to have two to three new processors. P.C. volume should be better than people think. And Michael Dell also has Internet storage and Internet application ambitions, and he's a great executor, so I think there are a number of things that will come together.

BAY: Are there any old-economy stocks as part of your mix?

KOBRICK: Well, I think some of, you know, the tweeter and old- fashioned retailer, but really a great retailer of high-end electronics. CBS, I think Mel Karmazin absolutely understands how to put CBS in the forefront of media. I think General Motors and -- but they will employ new-economy stocks, and I think that we are on the verge right now of a century change in the way companies like General Motors and our whole economy is going to relate to how to produce things and what really is valued.

The way you produce it today is going to be valued more than what you produce, the knowledge in what you produce is going to flow through to valuations, whether it's gene sequences or computer codes, they are much more valuable today than things like wheat, oil, and metal.

BAY: Fred, we have one second left before you go, what would you buy tomorrow morning, one name?

KOBRICK: I would probably buy Ciena and Optical Networking.

BAY: Fred Kobrick, thanks for joining us.

KOBRICK: Great to be here, thanks, Willow.

VARNEY: I think you got two out of the question.

BAY: I know.

VARNEY: Here is what's ahead on MONEYLINE, the IPO wonder direct from Tokyo.

BAY: Why Crayfish dazzled in its market debut. That story is next.

(COMMERCIAL BREAK)

VARNEY: Checking some of MONEYLINE'S -- checking, I should say, some of tonight's other movers: Bristol-Meyers Squibb jumped more than 5 points. PaineWebber upgraded the drug maker, saying it trades at a 25 percent discount on the S&P 500 and could hit $65 within a year.

Jackpot Enterprises up 7 1/4. It will start J-Net Ventures, that's a $100 million fund that will invest in Web-related B-to-B and e-service companies. Payless Shoe Source gained more than 6 1/2, trading at nine times its daily volume. The footwear retailer will buy back 25 percent of its outstanding shares. Today, the company also raised this year's earnings growth target to 20 percent.

And then there is Crayfish, it more than quadrupled on its market debut, up 101.5. The Tokyo-based company provides e-mail services to small and medium-sized businesses in Japan.

BAY: A mid-size oil exploration firm is trying to push its way into the big leagues. Occidental Petroleum today said it's buying Altura, an oil and gas partnership owned by BP Amoco and Shell. The price tag: more than $3.5 billion. Occidental says the purchase will immediately boost its global production by 36 percent.

VARNEY: Yet more headlines from the telecom triangle: Qwest Communications confirms its still in talks with a major telecom firm. That's in response to reports it had said discussions had ended with Deutsche Telekom. Shares of Qwest Communications down 2 1/2 today, Deutsche Telekom down 2 3/4, U S West gained 1.5.

BAY: In other corporate headlines: a disappointing holiday season for one of the world's leading toy retailers. Toys 'R' Us said fourth quarter profits fell nearly 25 percent. Despite the weak results, Toys 'R' Us still managed to beat Wall Street estimates by 6 cents a share. Its stock gained nearly 1.

Cybex Computer and APEX joined forces today. The two network equipment makers agreed to merge in a $1 billion stock swap. The deal is expected to close in the third quarter. Shares of APEX finished the day up more than 6, Cybex Computer up more than 2.5.

VARNEY: Now, that slump in oil prices, and a major downgrade turned yesterday's hot sector into a big loser today. Oil services firms fell all across the board, after DLJ cut its rating on the group, saying it expects oil prices to pull back sharply in the next few weeks: Schlumberger, Halliburton, TransOcean, Cooper Cameron, and R&B Falcon, all of them posted losses.

BAY: Coming up, our special series: "Net Privacy: Who Is Watching You?"

VARNEY: Just ahead: the health care industry transformed by the Internet. But some say going to the digital doctor can be bad for your health and we're going to tell you why.

(COMMERCIAL BREAK)

BAY: From computerized record keeping to medical Web sites, health care has increasingly gone digital. The benefits are many: Web-based doctor visits, paperwork reduction, online advice. But what if your most private medical concerns didn't stay private? What if the Net allows your boss, your co-worker or potential employer access to those secrets?

In tonight's installment of "Net Privacy: Who Is Watching You?" Steve Young explains why going online may be hazardous to your health.

(BEGIN VIDEOTAPE)

STEVE YOUNG, CNN CORRESPONDENT (voice-over): It's become standard practice in the health care industry to put patient records online so they can be shared with affiliates, off-site physicians or state departments of health. But now even some hospitals are starting to wonder just how healthy that is.

KAREN ROSENDALE, COLUMBIA PRESBYTERIAN MEDICAL: Any hospital can secure it in their own environment, but as soon as you go to that outside source, you're dependent: The onus is on them to have the same secure measures.

YOUNG: Patients' rights groups are worried too about the possible misuse of information like the drugs you take, medical prognosis or sexual orientation.

TWILA BRASE, CITIZENS' COUNCIL ON HEALTH CARE: We're talking about things here that may embarrass a person, things that may cause him to lose their social standing, things that may cause him to lose their job.

YOUNG: A recent Georgetown University study found that some of the Internet's most popular destinations, health Web sites, may pose a greater risk than hospital online systems. The researchers say many of the sites have been sharing the most sensitive personal information without disclosing what they're up to.

JANLORI GOLDMAN, HEALTH PRIVACY STUDY: What we found was, across the board, health Web sites are not adequately protecting privacy. And in fact where they do have privacy policies, their policies don't match up with their actual practices.

YOUNG: Researchers found some health Web sites covertly sell other companies the right to run banner ads, which lets them collect sensitive information.

RICHARD SMITH, HEALTH PRIVACY STUDY: They're really almost like little microphones listening in to where you're at, at the Web. And so if you're at a medical Web site looking at something, a particular area, say like how to stop smoking, that information then goes back to the banner ad company.

YOUNG: Then there are so-called "health assessment tests," ostensibly to help people understand more about their medical conditions. But the researchers found some sites post questionnaires without disclosing they come from other companies. And researchers say one site, HealthCentral, accidentally leaked some personal information to the banner ad company DoubleClick. Its competitor, 24/7 Media, has backed away from trying to harvest medical information for marketing purposes, at least for now.

DAVID MOORE, PRESIDENT & CEO, 24/7 MEDIA: I can understand there being even higher scrutiny of that kind of data than you would find for any other type of data. So, that would probably be the last area that we would tackle.

YOUNG: The Web sites argue that putting patients' medical records online eliminates duplicate records, and unnecessary phoning and faxing, and could cut $280 billion from the 1.2 trillion the nation spends each year on health care.

DR. CHARLES SAUNDER, HEALTHEON/WEBMD: We help strengthen the relationships between various individuals in health care, between patients and doctors, between physicians and their health plan and so forth so that it's a more efficient medical community.

YOUNG: By far the biggest such site, WebMD, which advertises on CNN and provides medical information to the network, says its security technology can -- quote -- "virtually approximate a Fort Knox." But many experts wonder about assurances like that.

BRASE: Anytime your medical data is in electronic format, and particularly put on the Internet, which is available to the world, it can't be considered secure.

SMITH: I think we need some legal protections in the area of medical records online, and before we have those, I think it's -- it's not the most prudent thing to put them up on the Internet.

YOUNG (on camera): It's been a struggle to get bipartisan support on federal legislation. Capitol Hill staffers tell MONEYLINE a law covering Internet medical privacy is unlikely before the fall.

Steve Young, CNN Financial News, New York.

(END VIDEOTAPE)

BAY: For more on the digital privacy issue, check out cnnfn.com. Meanwhile, MONEYLINE's series continues tomorrow with an in-depth look at how you can protect yourself when you go online and what you can do if your privacy is violated.

VARNEY: Here's what we have for you next on MONEYLINE: Why did Warren Buffett have to phone-a-friend for a stock tip? Yes, the final answer is coming up.

BAY: And "Ahead of the Curve": some of what you need to know tonight before the markets open tomorrow. You are watching MONEYLINE.

(COMMERCIAL BREAK)

BAY: Checking some of what investors will be focused on tomorrow: quarterly results due out after the closing bell from Internet incubator CMGI. Also on tap tomorrow: profit reports from National Semiconductor, H.J. Heinz, and Land's End.

And keep an eye on Redback Networks. Late today, the networking equipment maker announced a two-for-one stock split. In after-hours trading, its shares jumped nearly $20.

VARNEY: And finally tonight, Warren Buffett has been a big loser on Wall Street lately. But the famed value investor was a big quiz show winner on "Who Wants to Be a Jillionaire?" Now that's a spoof produced by a recent Omaha Press Club benefit.

Mr. Buffett was asked: "What is the sure-fire investment for the new millennium? Is it (a) cherry coke futures, (b) anything dot.com, (c) blackjack at a local casino, or (d) value investing with the wizard of Omaha?"

(BEGIN VIDEO CLIP)

BUFFETT: I don't really believe much in investing in futures. And that dot.com, you know, the Internet is a passing fad. The...

(LAUGHTER)

Blackjack might be OK if they'd let me count cards, but I don't think they allow that. And to tell the truth, value investing hasn't been working very well for me lately. So...

(LAUGHTER)

PAT HAZEL (ph), OMAHA PRESS CLUB: It has not.

BUFFETT: I think I'm going to use a lifeline.

HAZEL: Oh, you are? All right. Now, we've already polled our audience. So, that leaves 50-50 and phone-a-friend. Which would you like, sir?

BUFFETT: I'll take phone-a-friend.

(PHONE RINGING)

HAZEL: Hello.

BILL GATES, FOUNDER, MICROSOFT: Hello.

HAZEL: Hello, sir. This is Pat Hazel with Omaha Press Club's "Who Wants to Be a Jillionaire?" Warren Buffett has chosen you as a phone-a-friend lifeline, and he needs you to help answering an investment question.

GATES: Not again.

(LAUGHTER)

(END VIDEO CLIP)

VARNEY: Well, Mr. Gates dodged a direct question and he ended up choosing his own answer: e. That is a diversified investment that included both Pokemon and Regis Philbin.

Well, clearly he wouldn't have chosen Berkshire Hathaway. Stock in Buffett's investment vehicle down 40 percent over the past 12 months. And that's your final answer.

BAY: That is MONEYLINE for this Wednesday. I'm Willow Bay.

VARNEY: And I'm Stuart Varney. Thanks for joining us. Good night from New York. "CROSSFIRE" is next.

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