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America's New War: Dow, Nasdaq Fall as Investors Remain Uncertain About the Economy

Aired September 20, 2001 - 15:57   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: Stocks today dropping for the fourth- straight session. Alan Greenspan today confirmed to Congress that the terrorist attacks have disrupted business but he says the long-term outlook remains bright. Investors not impressed today. The Dow Jones industrials suffered another steep triple-digit decline. The Nasdaq, the S&P 500 also extending their losses.

Rhonda Schaffler is at the New York Exchange. Greg Clarkin over at the Nasdaq marketsite following the day's action.

Let's begin with you, Rhonda.

RHONDA SCHAFFLER, CNN CORRESPONDENT: And Lou, what a change from yesterday afternoon at this time there was some relief. The Dow did not finish at its lows of the session. That's what's going on here right now.

You mentioned Alan Greenspan, uncertainty, as Mr. Greenspan talked about the short-term impact. You can see how the market reacted by that chart.

We also have many traders on the floor talking about President Bush's speech at 9:00 Eastern tonight, just on concerns about what Mr. Bush is going to say. One trader said to me he's got to come out hard-hitting because the feeling of uncertainty very much came back into this market. Selling across the board, Lou. The only good thing to say really is that the volume wasn't as heavy as it was at this time yesterday -- Lou.

DOBBS: Thanks, Rhonda. We'll be coming back to you.

The Nasdaq adding a fourth day of losses as well. So far this week the Nasdaq has dropped just about 13 percent.

Greg Clarkin at the Nasdaq marketsite -- Greg.

GREG CLARKIN, CNN CORRESPONDENT: And Lou, not much good you can really say about today's trading. Speaking to one trader, he said, you know, you're asking investors to make decisions against a very big backdrop of uncertainty. And on top of that, every time you get a sense that the market is leveling off or maybe rallying, they're just selling into that rally, not knowing what is coming next.

It is a news-driven market at this point. You can see the choppiness that we saw today.

The composite right now down around 1,471 or so. That is right about the session low, just a few points off the session lows really. So, that is the only slight positive. But again, the composite weakening. Over the last half hour or so, we did see volume pick up a bit, about 1.9 billion shares having traded at the moment -- Lou.

DOBBS: OK. Greg, as we're looking here at these number, the indexes seem to be weakening here in the final hour.

Rhonda, if I may go back to you, as we await the closing bell from the New York Exchange, Rhonda, is there any strength here in the last -- last moments of trading?

SCHAFFLER: Lou, you know, quite frankly there's really not. There's been some scattered buying today in things like utility stocks and oil stocks and some pharmaceutical stocks and food stocks. But as the afternoon wore on, you saw some of that defensive buying even dry up as the Dow plummets here to a...

DOBBS: There's the bell, Rhonda. Just a moment, Rhonda. Sorry to interrupt you.

You are looking at live pictures of the closing bell at the New York Exchange.

Since the markets reopened Monday, the Dow, the Nasdaq, S&P 500 have all plunged 10 percent or more. More than a trillion dollars in market value erased over just the past four trading sessions.

Rhonda Schaffler, I interrupted you. Let's go back to you.

SCHAFFLER: And Lou, you know, when you talk about the money lost in this market, sometimes it's best illustrated when we look at some of these individual stocks, which had been hit so hard.

Let's take a look at companies like United Technologies. This is a company that was hit hardest on Monday when the Dow suffered greatly. Look at that loss so far on the week. It's down 35 percent. Boeing is down 30 percent. Disney, which was the most actively traded stock on the Big Board today, down even as it announced it's buying back shares. It's down 27 percent this week.

American Express also with a very steep loss, although American Express' loss today was a little bit better than what we've seen in the last couple of sessions.

Lou, you were referring to the overall market and the losses there for the Dow Industrials. We're looking at more than a 1200 point drop. The Dow down better than 12 percent so far this week. And the S&P 500, dramatic drop there, down more than 9 percent, Lou, and remaining below 1,000.

DOBBS: You know, Rhonda, looking at the charts you had up there United Technologies, Boeing. Monday, those were looked upon as defensive stocks. And their fate changed rather quickly. SCHAFFLER: It did, indeed. And part of that has to do with the ties to the airline industry. The airline stocks just are not recovering. The Dow Transport Index, Lou, another tripled digit loss for that particular average.

So those airlines continue to get hit hard. And that's why we're seeing United Technologies and Boeing fall off as well.

DOBBS: Terrific. Rhonda, thank you. Rhonda Schaffler.

The Nasdaq finishing the session below 1,500 for the first time since October of 1998. Greg Clarkin -- Greg.

CLARKIN: And Lou, that's right. We're about three year lows or so. One group that really came under a lot of pressure late in the day, as it did yesterday and the day before, the semiconductor stocks. The Philadelphia Semiconductor Index down about 6.3 percent right now. Did a little sporadic kind of buying in some of the biotechnology shares. There were a few there that came out winners on the day.

Well, let's take a look at the big caps. I want to show you what they did on the day, as well as where they stand for the week.

Take a look at Intel. On the week, it's down about 20 percent, down $1.57 today. Microsoft, down almost 11 percent on the week. Sun Microsystems, down almost 18 percent on the week. The list goes on and on.

If you take a look at Dell Computer on the day, that stock was off sharply. On the week, Dell is down 23 percent. They're really the best performing of the big caps today, as well as on the week. Our shares of Oracle, now they just ended their quarter. So analysts speculate that possibly the company -- their stock has had less time to react from potential fallout from the tragedies last week.

Cisco Systems, down 61 cents. Today, it's down 11 percent on the week. Volume was fairly decent today, about 1.9 billion shares. Breadth, well for every one stock making gains today, we had 3 stocks losing ground. So Lou, again, another dismal day in trading. And at this point, traders say, you know, they're just kind of sitting back waiting for the next news event to kind of direct them, but really no support out there, no interest in buying at the moment.

DOBBS: The breadth of the market on the Nasdaq?

CLARKIN: 3 to 1. 3 stocks losing ground, every 1 that was gaining.

DOBBS: OK. Greg, thank you very much, Greg Clarkin.

Well, Alan Greenspan today confirmed to Congress that the terrorist attacks on the United States last week did disrupt the economy. Today, he was on Capitol Hill joined by Treasury Secretary Paul O'Neill and SEC chairman Harvey Pitt. They reported on the affects of that terrorist attack and how the events have affected our financial system. Kathleen Hays is here, listening to what those economic policy leaders had to say. And what's your take?

KATHLEEN HAYS, CNN CORRESPONDENT: Well Lou, I guess it's not surprising that the nation's chief economic spokesman would try to focus on the positive. With so much negative, it's important. They're worried about consumer confidence.

And Mr. Greenspan, when he talked about the positives in the economy noted, "Look, these are tentative early signs that were encouraging before the attacks." Even with the economy very weak this year, the consumer has held up. Businesses have slashed excess inventories. That's necessary to get to the point where they can start producing again.

And in fact, new orders he said recently finally starting to pick up. Again, Mr. Greenspan chose to focus on the economy's resiliency.

(BEGIN VIDEO CLIP)

ALAN GREENSPAN, FED CHAIRMAN: The American economy just kept getting battered and battered and battered, and it was still standing.

(END VIDEO CLIP)

HAYS: Mr. Greenspan, like everyone else, is aware of the negatives. Now certainly this big sell-off in the stock market is an issue. That destroys more wealth. And the wealth effect means when you have less stock market wealth, you spend less.

Let's look at the Fed's own beige book though out yesterday. It's a survey of the nation's economy, compiled from the 12 district banks. It said the economy was weak, maybe even getting weaker.

Today we saw the blue chip survey of economists 81 percent, contrary to Mr. Greenspan's view, said the economy was already in recession before the attacks.

Also Lou, Mr. Greenspan is somewhat worried about the sell-off we have seen in the bond market. When bonds sell off, their prices go down, yields rise. If yields are rising, it'll be more expensive for corporations to borrow, maybe for people to refinance mortgages. And he acknowledges that this is an issue for the Fed as they try to sort out how much monetary and fiscal stimulus is needed.

DOBBS: Right. The Fed chairman seeing we need more information before we create a public policy out of Washington which seems prudent, reasonable, and right. The fact is we're going to be, as consumers, citizens, investors, we're going to be dealing with a period of uncertainty here, irrespective what anyone says?

HAYS: Absolutely. The good news is, so many economists say if the government gets this right with the interest rate cuts, with the spending, tax relief, et cetera, that we could be growing quite smartly, easily by the middle of next year. DOBBS: Terrific, Kathleen, thanks. Kathleen Hays. Well, we'll be back at 6:00 Eastern with "MONEYLINE." CNN's coverage of "America's New War" continues right after this break.

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