LOU DOBBS MONEYLINE
Dow Declines 192.43 to 9,840.84; Nasdaq Plummets 53.37 to 1,705.64; Motorola Warns Earnings Will Fall Short of Expectations
Aired September 6, 2001 - 18:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
LOU DOBBS, CNN ANCHOR: Good evening. Topping today's news, another big sell-off in stocks. Worries about corporate earning sweeping the Street today. The Dow fell 2 percent, the Nasdaq down 31 percent so far this year and Motorola a big reason behind today's stock market decline.
Motorola warning its sales will fall short, also saying it will slash another 2,000 jobs. Motorola blames the slowing chip market. Intel also feeling the pinch of that declining chip industry, but the company assuring investors that its business remains good and that it still expects earnings to meet Wall Street estimates.
Let's look at what our reporters are working on tonight. We begin with Tim O'Brien in Washington -- Tim.
TIM O'BRIEN, CNN CORRESPONDENT: Lou, Microsoft dodges a big bullet. The Bush Administration will not try to break up the company.
SUSAN LISOVICZ, CNN CORRESPONDENT: Discount retailers were big winners last month. Speciality stores were not thanks to bargain hunting back-to-school shoppers.
DOBBS: Thanks, Susan. Also, coming up tonight we will be talking with fund manager Gene Henssler on why good things will come to investors as long as they are patient. Technology analyst Ashok Kumar joins us. He will be translating the outlook offered late today from Intel. And the head of that rare company that can boast double- digit profit and revenue growth in this economy. We will be joined by Vernon Hill, the CEO of Commerce Bancorp.
Our top story tonight, a huge sell-off on Wall Street. The Dow tumbled almost 200 points. The Nasdaq fell 53. The markets losing $250 billion of value today. Investors scared away by profit warnings. Motorola and Pier One Imports among them. There were also fears that the manufacturing may be a slowdown that is spreading. Christine Romans and Greg Clarkin are covering the markets for us. We begin with Christine at the New York Stock Exchange.
CHRISTINE ROMANS, CNN CORRESPONDENT: Lou, it was exactly a five month low for the Dow Jones Industrial Average here and when you look at the day's action, it was persistent selling throughout the day. The Dow closing near the lowest levels of the session at 98.40. Why? Well, signs the economic slowdown may be grinding on after the NAPM non-manufacturing, this is a service sector index, fell in august worse than expected, hitting a 4-year low. Add to that the warning from Motorola and buyers were scared. Look at the big board techs. Motorola down about $2.5. It said sales would be flat. It will lose 5 to 8 cents in the quarter.
Texas Instruments reiterating its previous third quarter outlook, but traders saying that is just not good enough here. National Semiconductor, a rare bright spot. It comes out and says in expects 5-7 percent sales growth for the second quarter. A rare move there of 30 cents on the upside and Hewlett-Packard down another half a dollar here.
Although, Lou, I have to tell you, there's some chatter down here that if Hewlett-Packard and Compaq keep trading near these five year lows, they might become attractive at some point. But today the only attractive things were bonds, insurance, oil and a few defensive names out there.
DOBBS: Well, Christine, it is reassuring to know that at some point Compaq and Hewlett-Packard could become attractive. Thanks a lot, Christine.
The Nasdaq has now fallen in seven of the last eight sessions. That's a loss of more than 200 points. The Nasdaq is now just 67 points away from its low of this year. Greg Clarkin joins us now -- Greg.
GREG CLARKIN, CNN CORRESPONDENT: Lou, this is a market that never stood a chance today. We saw tech shares sell off sharply throughout the session. Lot of factors influencing trading today. First up you had jitters about Intel. That conference call was after the close of trade. Ahead of that conference call there was a lot of concern that the company my issue a warning. That was not the case. But still, that influenced trading today.
There was a big profit warning from Manugistics. This is a business to business software company and that really rattled the entire software sector. On top of that you had a continuation of the flow of negative comments out of Wall Street firms. Today they hit everything from chip equipment to some of the application software companies. And that has a lot of folks wondering are we heading back to retest the April lows.
The Nasdaq today, if you look at the trading pattern, there was a number of times when it got down very close to 1,700, found a little support there, but still, at the close of trading it was back down at those levels. It will be interesting if it does bounce tomorrow.
Here is a couple of stocks we were following today. Let's start with shares of Manugistics: Down $3.16. Oracle also lower. Microsoft, despite getting that break from the Justice Department, losing ground. There is a tough head wind to withstand today with all the selling in the tech sector. Lam Research, hit by the negative comments on chip equipment from Lehman Brothers, and Intel, again, ahead of its conference call, lost $1.37.
And at this point this is the lowest close on the Nasdaq since April 4th's 1,638 close. Lou, back to you.
DOBBS: All right, Greg. Thank you very much.
Shares of Intel down, as you said, on the day. But that was before the mid quarter conference call before it reassured investors that its business is hanging in there. That's despite the weakening economy and despite a weak chip market.
Bruce Francis joins us now with more on the story -- Bruce.
BRUCE FRANCIS, CNN CORRESPONDENT: Thanks, Lou. Intel is sticking with its revenue guidance for the current quarter. Guidance that was so wide though, that you could drive a truck through it. After the bell they said that revenues would be slightly below the midpoint of the range they gave previously.
Now that midpoint was $6.5 billion. First Call right now is looking for 6.4 billion, so that puts Intel's new guidance right in line with what the Street was expecting. On the positive side, Intel said it expects slightly lower expenses in the quarter. And thanks to a faster rate or employee firings and Intel says it is getting a slight break on taxes.
Considering the bearish news from other tech companies we heard today, like Motorola, analyst Paul Leming thinks Intel's news is good.
(BEGIN VIDEO CLIP)
PAUL LEMING, ABN AMRO: You've had a number fairly downbeat comments from companies today and earlier this week. Motorola and Ericsson are two that come to mind. And I think what people really wanted the see out of Intel is no bad news to the downside and we got that today.
(END VIDEO CLIP)
FRANCIS: But the tough sledding is still ahead for the chip giant. September accounts for fully half of the company's revenues in the quarter. And while Intel is cutting prices to stimulate demand, so is rival AMD, and some analysts are concerned that that back-to- school season is off to a slower start.
CFO Andy Bryant says the quarter right now looks like it has just for the past 3 or 4 years and that sounds good the investors -- Lou.
DOBBS: Sounds pretty good to everyone. Thanks a lot, Bruce. Bruce Francis.
Microsoft catching a very big break today. The Justice Department saying it won't try to break up the company. It also won't go after Microsoft on those bundling charges. But surprisingly, that news did not help the stock price. Microsoft ended the day with a loss of close to 2 points.
Tim O'Brien has more. .
O'BRIEN: Some of the Bush Administration leading critics say the Justice Department decision made sense.
SEN. CHARLES SCHUMER (D), NEW YORK: To try to come to a quick settlement either before Windows XP comes out or before it gains such wide predominance that it is the platform indeed makes a great deal of sense to me as long as the settlement has some real teeth.
(END VIDEO CLIP)
O'BRIEN: One antitrust expert was reading "settlement" through the lines.
DAN WALL, LATHAM & WATKINS: I think it is probably the right decision because I think there is more to this story than we know. I think that there's probably already been substantial preliminary negotiations with Microsoft on a settlement.
O'BRIEN: But senior Justice Department officials insist the decision to narrow the case had nothing to do with any settlement talks. That it was motivated instead by the desire to move the case along to a quick resolution.
JONATHAN ZUCK, ASSOCIATION FOR COMPETITIVE TECH. PRO-MICROSOFT TRADE GROUP: I think a best-case scenario is a set of very specific and targeted conduct restrictions that address the remaining concerns of the court of appeals and require a minimal judicial oversight moving forward.
O'BRIEN: The government will now focus its efforts on the remedies for what two federal courts found to be a pattern of antitrust violations, exclusionary contracts and other anti competitive practices.
Some of Microsoft's competitors said they accepted the government's decision as long as it did not signal a retreat on the case.
MIKE PETIT, PROCOMP, ANTI-MICROSOFT TRADE GROUP: As we move into the world of Windows XP, Microsoft continues to regulate this market and that has to be -- that fundamental market power -- has to be taken away from Microsoft.
O'BRIEN: In a written statement Microsoft said, "We really look forward to moving forward to a fair and expeditious resolution of the case."
And some top Democrats were quick to criticize the Justice Department for taking critical litigation options off the table, and suggesting George Bush and other White House officials may have exerted improper influence.
Senior officials in the anti-trust division say the White House was told of the decision but played absolutely no part in reaching it -- Lou.
DOBBS: Tim, thank you very much. And by the way, both Intel and Microsoft in after-hours trading are trading modestly higher.
It was a mixed performance for retailers last month. Back-to- school shoppers rescued discount retailers. But that really hurt specialty stores such as The Gap.
Susan Lisovicz has the story.
LISOVICZ (voice-over): Target said its backpacks hit the bulls- eye. The popular back-to-school accessory drove traffic and sales, which rose nearly 2 1/2 percent in August.
CHARLIE MARINO, TARGET: It was a very strong back-to-school season, a very early back-to-school season. It started in the beginning part of August and it carried right through up until yesterday.
LISOVICZ: Other discounters also cashed in on value-oriented consumers. Wal-Mart's comparable store sales shot up 7 percent.
But gains by the discounters pulled business away from specialty stores. Sales at The Gap plummeted 17 percent.
ARNOLD CARR, WOMEN'S WEAR DAILY: It's so ironic that in an era when so many people who did well, did well because they merchandised fashion and denim well, that would seem to play right into The Gap's hands. But what you have going on at The Gap right now, I'm afraid, is a real loss of focus.
LISOVICZ: And many other specialty stores slid as well, including leather retailer Wilson's, which plunged 17 percent. Outdoor's chain Eddie Bauer whose sales dropped 11 percent. Youth merchant Abercrombie & Fitch, which slumped 10 percent. Intimate Brands down 8 percent and Limited off 4 percent.
ROBERT BUCHANAN, A.G. EDWARDS: Retailing has always been what I call a punch in the nose to business. You've got to punch someone else in the nose and take their market share away. I think we're seeing more of the same now.
LISOVICZ: That leaves some retailers with few options.
DANA TELSEY, BEAR STEARNS: We think that the level of promotions will increase, both on the number of items and also the level of markdown. We think there will be deeper markdowns as we go through the month of September.
(END VIDEOTAPE) LISOVICZ: The Goldman Sachs retail index says retail sales for the last month rose 2.8 percent, and Lou, that's actually the third best month of the what has been a very difficult retail year to date.
DOBBS: We'll take that good news. Susan, thanks.
Well, whether their sales rose or not, all retailers today suffered. Wal-Mart, Sears, Federated, all down almost $2 a share. Tiffany dropping more than $2, and the Gap hit the $4 a share loss.
Despite today's selloff, portfolio manager Gene Henssler says the markets will climb by year's end, and the economy will pick up as well. Right, Gene?
GENE HENSSLER, HENSSLER EQUITY FUND: Absolutely, Lou. There is no question about it. I know I'm on the line here.
DOBBS: In the case of the market itself, we're watching now, as we pointed out, 67 points off below in the Nasdaq, the Dow is still struggling. We are looking for some support here, some strength. Where is it?
HENSSLER: Well, it just seems to me that the economy is turning around. The numbers seem to be showing that. And we have to remember, only half the moneys come out yet from the tax cuts. It takes a while for monetary policy to work, but I look at the numbers, they seem to make sense to me. Generally, the market bottoms three months the money -- we start cutting interest rates, that happened right on the nose. Generally, profits in the economy bottom about six or seven months later, so we're right on target with these numbers, and the market tends to lead the economy by about five months.
DOBBS: So, we should see the market, the Dow at 11,000, and the Nasdaq at 2,000 by mid-October?
HENSSLER: No, I think what we're going to see is for the year we will probably see the markets up 2 percent maybe for the S&P, 4 percent for the Dow and about 2 or 3 percent down for the Nasdaq, if normal is normal. What happens is after we had that third rate cut, it's only been one time in history we haven't seen this kind of movement over a period of time. There's never been a time for rate cuts five, six or seven, where the market wasn't higher later on.
DOBBS: Over the course of the -- as I recall it, 20 times in which we've seen sustained cuts three times.
DOBBS: Only three times has there been a decline in the market. This happens to be one of those years.
HENSSLER: Could be. But what about a fourth rate, or a fifth or a sixth? Those things sort of negate that kind of stuff.
DOBBS: Well, at this point I'll take it. HENSSLER: Yeah, I think everybody will. But keep in mind that August has been the worst month of the year in the '90s, and September, with tax (UNINTELLIGIBLE) has been the worst in history. So, don't expect a lot to be coming out right now, but look for October, November and December. October is the best month of the year in spite of all the crashes that came in October.
DOBBS: So, what should investors do here? This market has been punished. Investors have been punished terribly. Should investors hold until October, is that what you're saying?
HENSSLER: No, they should keep investing all the time. One of the problems is that the only thing I know of, the only place I know where people buy less when the price is cut is in the stock market. It's very important they continue to invest all the time. When the market turns, it turns fantastically fast.
DOBBS: We've got a limited amount of time, but we would love to hear what you would recommend to investors as an investment.
HENSSLER: Well, I would think Applied Materials in technology would be worthwhile. Pfizer in drugs. Ashland in the energy field, and PACCAR in capital goods, they make the big rigs (UNINTELLIGIBLE).
DOBBS: And we hope you're right about this.
HENSSLER: I hope so too. I know I'll be embarrassed the next time I come here.
DOBBS: Gene, we wouldn't do that to you.
HENSSLER: Yes, you would.
DOBBS: Gene Henssler, good to have you with us. Thank you.
Well, straight ahead here, Vicente Fox makes things hot for the United States. He wants immunity for illegal immigrants, President Bush does not. We'll have that story next.
Wildfires are continuing to heat things up in the Western states. Nearly 70,000 acres scorched in one part of Montana. Firefighters there looking for some relief.
And how about a bank open seven days a week? My next guest says it's an idea whose time has come, and he's the one to put it into action.
DOBBS: Commerce Bank Corp is a standout in the industry. In its recent quarterly report, revenues and profits up more than 30 percent -- that's right, you heard me correctly, 30 percent. That overshadows by a long ways the current industry average. And while many of its competitors are consolidating, laying off and cutting back, Commerce is doing just the opposite. One example: Commerce will open its first two branches in New York City next week. It plans to open 28 more. They focus on customer service, they extend business hours, and curb special fees. Joining me now, the man who runs it all, the chairman and president Vernon Hill. Vernon, good to have you with us.
VERNON HILL, CHAIRMAN & PRESIDENT, COMMERCE BANK: Good evening, Lou.
DOBBS: You're opening banks primarily based in the Northeast, but in New Jersey. That's just exactly what New York City needs is another bank, isn't it?
HILL: It is exactly what they need in New York City. We see ourselves as a retailing company, Lou, not as a bank, and we've designed our whole bank experience after the power retailers of America, and it's designed on service and convenience, something that is sadly missing in the banking world.
DOBBS: Well, it's obviously working, and counter to the trend of consolidation. How far do you think you can take this strategy?
HILL: We've grown this bank from zero to $10 billion in assets. As long as we can continue to succeed on a per-store basis, this can be a $100 billion bank.
DOBBS: Well, that's impressive by any standard, and in terms of opening a bank on a Sunday -- have you tried that with great success?
HILL: Every branch we have is open on Sunday throughout America.
DOBBS: Every branch?
HILL: Every branch. And as I said, we model ourselves after the great retailers of America, and we tried to kill every stupid rule. Why shouldn't your bank be open when you want it to be open?
DOBBS: That's the way I feel.
HILL: I mean, just to give you another simple example. Everybody has a jar of coins at home. The banks won't take your coins. We put in every branch location a free self-service coin counting machine, so that we can only take your money but have a little fun.
DOBBS: Oh, that's great. As a matter of fact, that is an annoyance. Come to think of it, I carried some coins to our bank, which I love -- it's a terrific, terrific bank. But they wouldn't take the coins. I said, "I'll have to validate that," I had to have my account number on everything, and like many people I didn't even know our account number.
What do you make of this economy? We ask every CEO here to give us a broader look. First, let's start with the banking industry. We have now had seven interest rate cuts by the Fed. Things are turning, is that improving the banking industry?
HILL: Banking business in general has weathered the storm well. The big problem is, they have no growth, and what's abnormal about our company is we've learned to create a growth model in basically a non- growth banking world. The economy in general, the main street economy in general, we really have not seen much of a downturn. I might even call it a lull. Unemployment is still at 4.5 percent. We just haven't seen much of a problem yet.
DOBBS: Well, it's, as you say 4.5 percent, but with the economy, the GDP as slow as it has through the second quarter, with a lot of a mixed performance, do you think that we're going to be successful in staving off recession?
HILL: Yes, I do. I really do not see the normal signs of recession -- overbuilding, gigantic job losses, except in the high- tech sector, so I don't really see any signs now.
DOBBS: If you separate telecommunications and technology, it isn't really that bad, but that's a huge component of everything, isn't it?
HILL: And that's my view on life too.
DOBBS: All right. Vernon, thanks a lot.
HILL: Thank you very much.
DOBBS: Well, coming up next here: Granting immunity to illegal immigrants. It's an issue that Vicente Fox continues to push, an issue that President Bush continues to resist.
Montana firefighters continuing to battle that blaze; it now looks as if there's a new hope of bringing it under control tonight. And then: The cautionary tale for investors; tonight we have the story for you of a retired couple in Florida who bought into penny stocks, but they ended up giving back all of their gains just when they thought they had hit the jackpot.
That story and more ahead on MONEYLINE.
DOBBS: In the wake of recent deadly shark attacks, a Florida wildlife commission took steps to ban feeding them offshore, that commission voting to stop diving tours from feeding sharks and other marine life. Some experts are now saying that feeding sharks could be encouraging aggressive behavior toward swimmers. So far there have been 41 shark attacks in the United States. And today's vote by that commission will not become law until a public hearing; that hearing is scheduled for November.
In California a fast-moving wildfire near Yosemite National Park: It has forced the evacuation of about 250 homes. The fire broke out yesterday in Calaveras County. It quickly burned part of an above- ground water supply structure that services four towns. More than 800 firefighters are battling the blaze now, and 12 major fires are burning across the West, most -- most -- are now contained.
People from Massachusetts to Delaware this morning reported seeing a sparkling object streak across the morning sky. At first it was thought to be a meteor, but the Naval Observatory later identified it as something other than a meteor. It was a Russian rocket booster. The U.S. Space Command in Colorado Springs, Colorado says the object was not designed to survive reentry and probably burned up before reaching ground. A little adventure in the morning skies.
Mexican President Vicente Fox addressed a joint session of Congress today. He called for a new era of friendship and trust between Mexico and the United States, and he urged joint U.S.-Mexican cooperation on illegal immigration and drug-fighting efforts. President Fox later traveled to Toledo, Ohio, an industrial city with a growing Latino population.
For more now on the president's visit, we are joined by Kelly Wallace at the White House -- Kelly.
KELLY WALLACE, CNN CORRESPONDENT: Well, Lou, the two leaders on their way back to Washington from that trip to Toledo, Ohio; a trip that certainly had some political ramifications. Another example of the Bush administration's efforts to court Hispanic voters.
Now, during their visit to Toledo -- the two men visiting the University of Toledo and a family resource center there. The two men touting the benefits of free trade and the North American Free Trade Agreement between the U.S., Mexico and Canada. Free trade between the U.S. and Mexico now totaled at about $250 billion dollars.
But the biggest issue, or the issue getting the most attention during President Fox's visit to Washington and the United States -- that, his call for an agreement by the end of year to basically give the more than 3 million Mexican immigrants living in the U.S. illegally permanent legal status.
President Bush saying he has heard President Fox's call, but he offered no guaranties on this day, saying it's a complex issue and that Congress must weigh in.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I'm willing to consider ways to -- for a guest worker to earn green card status. And yet I fully recognize there are a lot of people who've stood in line, who've said I'll abide by the laws of the United States. And we're trying to work through a formula that will not penalize the person who's chosen the legal route and at the same time recognize the contribution the undocumented has made.
(END VIDEO CLIP)
WALLACE: Another big issue: conservative critics who believe President Fox's plan would basically reward those immigrants who broke the law to enter the U.S. No one, Lou, really expecting a big agreement by the end of this year, but everyone believing President Fox's visit has increased the urgency on an issue Congress and the president likely to focus on in the months ahead.
Lou, back to you.
DOBBS: Kelly, very comforting language used by the president, talking about guest workers, not referring to these people as illegal aliens, but rather undocumented workers. All of this, I presume, designed to soften some of the tension between the two men over the issue and also to, perhaps, assuage the Latino voting public.
WALLACE: Well, certainly -- you certainly know, Lou, that right off the bat the administration was very concerned that it was sort of being accused of supporting blanket amnesty for Mexican immigrants living in the U.S. illegally. President Bush saying he is against the "A" word.
And so you do see him talking about a guest worker program; maybe finding some middle ground. Allowing more Mexicans to come to the U.S., part of this guest worker program, to work here and, of course, to have some benefits and send that money back to Mexico. It's a way of some middle ground. Obviously a big political issue that -- the fight is just ahead.
Lou, back to you.
DOBBS: Kelly, thanks; Kelly Wallace.
Coming up in the next half-hour: the Nasdaq dropping to its lowest level since early April; that's right, we're testing those April lows. The Dow plunging about 200 points today. We'll have a full wrap-up for you of the day's activity on Wall Street. Then we'll have the story of that retired Florida couple who made a bundle on penny stocks, but now they're feeling severely short-changed. And despite a slowdown in the chip market, Intel holding on. Our next guest suggests maybe its stock is one to hold onto, as well.
ANNOUNCER: Up next, Lou speaks with U.S. Bancorp Piper Jaffray technology analyst Ashok Kumar.
DOBBS: Stocks tumbled on Wall Street today, several factors contributing to the sell-off. And among them: earnings warnings, weak same-store sales figures and signs of some sluggishness in services. Roughly $1/4 trillion lost on Wall Street today, and many new 52-week lows set at both the New York exchange and the Nasdaq.
Among those 52-week lows: Boeing, Disney, EMC, Ford and Nortel. On the Nasdaq: CMGI -- as if it could go lower -- JDS Uniphase, Oracle, Sun Microsystems and 3Com. The Dow dropped back below 10,000 today, all but two of Dow's 30 stocks finishing lower. For the day, the Dow down nearly 2 percent, to 9,840 tonight. And on the Big Board, declining issues led advancing issues by a margin of better than two to one.
Among the most actives today, Motorola traded on heavy volume after Motorola warned it will fall short of Wall Street targets for the quarter. Retailer Gap took a major beating; weak same-store sale figures for August. Hewlett-Packard on the most actives again today; fall-out continues over its proposed deal with Compaq.
A terrible day on the Nasdaq. The index fell more than 3 percent, closing just over 1,700. It's now just about 67 points from its low on the year. Declining issues swamping advancers again by a margin of better than two to one. The most actives: Intel, investors anxious ahead of the company's after-the-bell guidance; Microsoft fell even after the Justice Department said it wouldn't seek to break the company up; and Dell a big loser on the day despite an upgrade from AG Edwards.
And taking a look at today's winning and losing sectors: Telecom equipment and fiber-optic stocks down for the seventh straight session. Global Crossing at an all-time low. Motorola's sales warning today and Alcatel yesterday, adding to the profit concerns that plagued the sector. Chip equipment makers also hit by Motorola's warning. And retailers losing after reporting weak August sales.
Wal-Mart one of the few bright spots. Sales there better than expected, but the stock nonetheless fell along with the rest of the sector. On the up-side today: oil stocks. They rallied on the back of a decline in U.S. oil and gasoline inventories. Also moving higher today: construction and mining stocks; Caterpillar today reaffirmed its earnings outlook.
Now to take a closer look inside Wall Street's plunge, we go back to our correspondents who got to watch it all.
Christine Romans at the New York exchange, Greg Clarkin at the Nasdaq marketsite -- Christine.
ROMANS: You know, Lou, it was a sell-off made all the more nervous by the fact that tomorrow we get the grand-daddy of all those economic reports, the jobs number. And if history serves as any kind of a guide, the last five months, at least, have seen a better that even chance of a triple-digit reaction to that.
Take a look at April 6: The Dow fell, rather, 126 points. The next time May 4, it rallied 154. June and August barely saw moves because they were pretty much in line with expectation. July 6 saw a 200-and-some point decline.
Now, what are they expecting tomorrow? Well, jobs to decrease by about 38,000. Folks are expecting the jobless rate to inch from 4.5 percent. traders here on the floor tell me this is a very nervous market, Lou. And they're expecting, if this is a very weak report, we could be testing some important levels. They say if it's strong, however, the market is oversold and does deserve to rally a bit.
DOBBS: OK, we'll be watching. Thanks Christine.
The Nasdaq today finishing deep in the red, down more than 3 percent.
Greg Clarkin at the Nasdaq marketsite -- Greg. CLARKIN: Hi there, Lou.
I'll tell you, when you speak to traders they say at this point the tape -- the trading activity really is very frightening. And they say, you know, you pick through this carnage, you find a couple good story stocks, you try to pitch those to some folks, and nobody wants to hear about anything at this point outside of selling.
That's what we saw the last two days. The selling over yesterday and today coming on very heavy volume as compared to what we had seen through the last three months or so; 1.8, 1.9 billion shares have been trading.
Now, as for what tomorrow may hold, well the Intel effect is going to be first and foremost. Just what impact will Intel's soothing words, at the moment, at least, have on Wall Street? And then the employment report, as Christine mentioned, will be key.
And really right now the question is: Does the Nasdaq continue to find support at 1,700, or does one more profit bombshell take it below that and go back to those April lows?
And Lou, just quickly I want to show you this chart back here on the wall. This is where we were one year ago today, September 6, year 2000, Nasdaq closed at 4,013. And you can see since then it has been straight downhill. Brings us right down to today at 1,705 -- Lou?
DOBBS: It's been quite a year. Greg, thanks for reminding us; Greg Clarkin.
Well Allan Chernoff joins us now from the Instinet trading desk to tell us what's going on in after-hours trading.
And I suppose there's some considerable focus on your part, Allan, on Microsoft and Intel.
ALLAN CHERNOFF, CNN CORRESPONDENT: Well, no question. Intel, Lou, the most active stock over Instinet after-hours, 1 and 1/2 million shares traded. That's a lot for the post-market trading. And Intel did pop up as high as 27 in the after-market as soon as the news hit the tape on Intel's mid-quarter report. However, it pulled back a little bit and the last trade was up 50 cents from the 4:00 p.m. close at 26.60 and 66.
And also we've got quotes on Cisco Systems, up 15 cents -- $14.55. And Microsoft, as you mentioned, up 49 cents, again, from that 4:00 p.m. close at 56.51 -- Lou.
DOBBS: A little recovery there; not much of a bounce back, though.
CHERNOFF: Exactly. Just a little bit, certainly not making up for the carnage today.
DOBBS: All right Allan, thank you very much. Allan Chernoff. Well, after the bell Intel did confirm its third quarter guidance, saying results are likely to come in near the lower end of the range. One of the very best technology analysts, Ashok Kumar joins us now. And he was on that conference call.
Ashok, give us your reaction to what you've heard from Intel.
ASHOK KUMAR, U.S. BANCORP PIPER JAFFRAY: Lou, as per your comments, the company's guidance came in towards the lower end to $6.2 billion to $6.8 billion range. Now, what the company is seeing is the pre-Windows XP launch build. And it doesn't quite reflect a sell- through, and we need to monitor the situation carefully; if demand does not improve by early October then we could possibly be set up for an inventory correction in the December quarter.
DOBBS: Now that sounds ominous. Is Intel still on your recommended list?
KUMAR: Yes, I think we like Intel long-term. The company's strategic focus on the enterprise back-end side of the market. So that's a multi-year play. I think given the industry consolidation on the PC side with HP and Compaq, the company is very well positioned to play out the enterprise theme.
DOBBS: You brought up HP and Compaq. A lot of controversy over the deal. Obviously, the market to this point really does not like this deal. It hates this deal, I think, is the only way to describe it. How do you feel about the deal?
KUMAR: I think, rightly so, the investors have voted with their wallets. On an individual basis, the companies have not executed well. And as such, there's no precedent in the technology industry that a module of this size has worked in the past. And we do not believe that HP-Compaq will be an exception to that.
DOBBS: You don't think investors should give Intel -- rather Hewlett-Packard and Compaq a pass because what they're doing now isn't working either?
KUMAR: I think that, rightfully so, I think we have to wait and see. But, you know Fiorina's track record is not quite stellar, and she does not have the management team in place to execute this transaction. So I think the skeptics are right on for now. But, you know, I think we could wait and see if this actually makes a difference.
DOBBS: Is there any level here that you would anticipate saying, you know, maybe this is an interesting proposition?
KUMAR: They do -- what they do have is a very strong service portfolio. And if they execute on that, you know, the company could be very well positioned against the likes of IBM and Sun. The service portfolio needs to get built up. They are more focused on the low end of the market. That could be addressed by another acquisition. So I think at these levels if you're 12-month horizon, I think, risk profile should be fairly attractive. DOBBS: Quickly, any other stocks that you would recommend here in this environment?
KUMAR: Playing out the PC team, I think Dell continues to be well positioned if and when demand recovers next year on the back of cyclical recovery in IT spending. We are seeing the bottom in the cell phone handset market, so TI's positioned well in the market as well. They have a -- the stock has a very attractive risk profile. And LSI Logic would fit the same characteristic as well.
DOBBS: Terrific. Good to have you with us.
KUMAR: Thank you.
DOBBS: Still ahead here: The markets may be in a slump -- well, they are in a slump -- but I'll tell you about a stock that has more than doubled. Then: the changing of the guard at General Electric; one of corporate America's greatest leaders ever -- his final day at the helm. And the story of two MONEYLINE viewers' whose short brush with fortune was painful; the abrupt rise and fall of two small investors who enjoyed both good and bad luck. Stay with us.
DOBBS: Topping tonight's "MONEYLINE Movers": Marriott, dropping more than $2 a share. Marriott posting its worst August year-over- year comparison ever. The industry is struggling with the sharp slowdown in business travel, of course. Vivendi dropping more than $4. Rumors swirling that the media conglomerate is looking to buy Yahoo!, that after Lehman Brothers called the Internet portal a good buying opportunity. Vivendi denies even having conversations with Yahoo!
Best Buy gaining more than $1.50 a share. The consumer- electronics retailer saying second-quarter earnings will exceed Wall Street expectations. Best Buy also reporting an almost 3 percent rise in same-store sales for the second quarter. Shares of Best Buy climbing more than 100 percent so far this year, and doubling ain't bad. Outperforming Circuit City, which has risen 41 percent.
Jack Welch, GE's legendary CEO, left work today to begin something called retirement. Welch spent the last two decades at the top of GE, building it into the most valuable company on the planet. Tomorrow, Welch's first official day of retirement. We're told his schedule will include a regular morning workout, lunch at his Connecticut home, and later dinner with a few friends. And my guess is there'll probably be a round of golf in there as well.
Next week, Jack Welch will join us here to talk about his new book, "Jack: Straight From the Gut."
And a rough session overseas: Weakness in many technology issues pushing markets lower in London, Paris, and Frankfurt. London's Footsie index plunged after telecom equipment-maker Marconi suffered its second day of big losses. The company warning for the second time this year. The Footsie finished the day more than 2 percent lower, hitting a three-year low. In France, Marconi's rival Alcatel sold off as well, losing nearly 5 percent on the day, taking the Cac-40 with it. That index at a two-year low after dropping 2 percent today. In Germany, the Zetra-Dax slid more than 3 percent on the day, dropping below 5,000 for the first time in more than two years.
Coming up next here, a small investor hits the jackpot with a penny stock trade, of all things, but his brokerage says it's all a big mistake. His story is next.
DOBBS: Well, as you know, we like to share our viewers' e-mail with us each evening. Tonight, we're focusing on two of our viewers in Florida who sent us a letter asking for our help. This couple thought they had a huge success with a penny stock trade, a penny stock trade that was a big deal just up until the brokerage firm claimed the money wasn't theirs. It's a fascinating story. We sent Allan Dodds Frank to Florida to find out what happened.
ALLAN DODDS FRANK, CNN CORRESPONDENT (voice-over): Joan and Michael Crehan retired to (UNINTELLIGIBLE), Florida a decade ago to live on about $30,000 a year -- their income from pensions and a modest stock portfolio. Joan, a registered nurse, counted on Mike, a former union stage hand, to handle the investments.
JOAN CREHAN, RETIRED INVESTOR: Just show me the money. That's all I want. Tell me when I can go shopping. But no, I don't follow the stocks, but my husband does regularly.
FRANK: Like many investors, the Crehans have watched their portfolio shrink dramatically, from $40,000 to about $10,000 this year alone. Mike favored risky stocks, high-tech companies -- Oracle, Rambus and Internet incubator CMGI. And he bet on a half-dozen highly speculative, small over-the-counter companies known as penny stocks, which often appeal to unsophisticated investors.
One of those penny stocks suddenly seem to produce more than $50,000 in profits in their Fidelity Investment account.
(on camera): So, this was like hitting a lottery?
MICHAEL CREHAN, RETIRED INVESTOR: Right. For us, yes.
J. CREHAN: For us, yes. Yes.
M. CREHAN: You're on a limited income, you know.
FRANK (voice-over): The Crehans celebrated by writing checks, including $1,000 for a special sewing machine for Joan's quilting and $8,000 to pay a credit card bill. But Fidelity soon stunned them by demanding the money back.
M. CREHAN: I got a written letter confirmations of the trades, and then all of sudden, boom, everything is gone. My accounts are frozen until I give them back the $10,000.
FRANK: The puzzle starts with Cardiac Control Systems, a Florida company that made pacemakers. The stock had a bumpy ride, especially over the last five years, and was practically flatlined as the company filed for Chapter 11 bankruptcy in 1999.
Crehan said he made a classic investor's mistake, dreaming he could recover more than $8,000 he had already lost on cardiac stock in the late 1990s by buying more stock at much lower prices. So last year, he bet again. He bought 10,000 shares at 35 cents a piece, then 10,000 more at three cents each, then finally 10,000 shares at a penny and a half a piece. Total investment: $3,950.
But the medical supply company never recovered and is being liquidated by the bankruptcy court in Jacksonville.
(on camera): Cardiac Control Systems sold its headquarters here in Palm Coast, Florida and its intellectual property to satisfy creditors. After that, there is almost nothing left of the company for the common stockholders.
(voice-over): All that remained was the Cardiac name and its base of more than 500 shareholders, the minimum a company needs to be publicly traded. Then a company headquartered in this Dallas, Texas office bought Cardiac's name and shareholders base. The company wanted to trade publicly as Renaissance Acceptance Group, and granted some Cardiac shareholders, includes the Crehans, 100 shares of the new stock, RNAG.
But when Mike Crehan checked his Fidelity account one Saturday, his Cardiac shares, CDCS, were gone, replaced by 30,000 shares of RNAG. So before the market opened the following Monday, Crehan told Fidelity to sell, and they did, confirming the trades.
But on July 10, the Nasdaq Amex market group advised brokerages not to make mistakes trading Cardiac and Renaissance shares. On July 12, another bulletin canceling trades in RNAG.
Fidelity said it had to follow National Association of Securities Dealers rules by canceling Crehan's trades and taking back the money. Two weeks after CNN began investigating, Fidelity wrote the Crehans, blaming the mistake on the Depository Trust Corporation, the company that handles most of the nation's stock transfers.
A Fidelity lawyer wrote the Crehans, "We believe recrediting your account has put you back in the position before DTC issued the incorrect notice. We sincerely apologize for any inconvenience DTC's error may have caused you."
A Deposit Trust spokesman says DTC made the initial stock transfer on instructions from NASD. NASD spokesman Andy McMillan had no comment except to say, "We are aware of the issue and we are looking into it."
So are Florida regulators and the Securities and Exchange Commission. MICHAEL CREHAN: You cannot say it's a little mistake. It's not a little mistake. If it's mistake at all, it's very, very large mistake.
FRANK: The Crehan's have paid Fidelity back and requested arbitration. but their case raises troubling questions about what happens to investors when the bureaucracy which handles stock trades makes a rare mistake.
Allan Dodds Frank, CNN Financial News, Flagler Beach, Florida.
DOBBS: And we will follow the story and keep you up-to-date on how it turns out.
This Sunday, the kickoff of the National Football League's regular season will not feature the regular men in stripes patrolling the field. The NFL Referee's Association rejected leagues latest offer for a 60 percent pay raise. The union wants just about double that.
At their current salary levels, NFL refs still make more per game than their peers in other professional sports.
Coming up next, a MONEYLINE viewer with a bold idea to turn this market around. And we'll take a look at tomorrow.
DOBBS: Tomorrow, the employment report for August. The unemployment rate is expected to edge up. Non-farm payrolls expected to drop by 32,000. And tomorrow, the Secretary Of Labor Elaine Chao joins us. She will talk about that unemployment and the labor market.
Thank you once again for all your e-mail. Another steep sell-off in the markets bringing Robert Kautzmann in Danville, California to write about a way to energize this economy. He suggest the way to do so is to cut the capital gains tax. He says, "JFK did it did it and produced a doubling of capital gains revenues to the U.S. Treasury. It would unlock huge capitol into this economy."
Well, Congress is, in fact, pushing that idea and so far the White House says it wants to see how the current tax rebate program is going before committing to a further cut in the capital gains tax. But the president is keeping an open mind on the issue.
Minnie Tananbaum says it's time to put positive psychology to work. She writes: "It is time to discuss regions sectors and companies that are growing."
Don MacDonald in Vancouver, Canada writes to say, "Lou, give us some good news. There just has to be someone out there hiring making money."
Well, I assure you, we're not ignoring the bright spots tonight. We talked with the chairman of Commerce Bancorp, a company both hiring and making money. We're certainly not adverse to reporting good news; we just wish there was more of it.
Keep your e-mail coming. Our address: MONEYLINE@CNN.com. For tonight, that is MONEYLINE. Thanks for being with us. I'm Lou Dobbs. Good night from New York.
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