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CNN LIVE EVENT/SPECIAL

Fed Cuts Rates; Dow, Nasdaq End Higher

Aired October 2, 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.
JAN HOPKINS, CNN ANCHOR: I'm Jan Hopkins in New York. Just minutes before the closing bell, little reaction on Wall Street to the Federal Reserve's decision to slash interest rates by a half a percentage point. The markets are actually higher before the Fed's move, sold off afterwards, only to rise again in the final hour of trading.

They are higher as we heading into the closing bell. Interest rates now stand at the lowest levels since the Kennedy Administration, 40 years ago. Rhonda Schaffler is on the floor of the New York Stock Exchange, Greg Clarkin at the Nasdaq market site. Let's begin with Rhonda.

RHONDA SCHAFFLER, CNN CORRESPONDENT: And Jan, the Dow will close near its session highs, in a rally that actually broadened out as the afternoon went on. There was some indecision right after the Fed announcement, but a lot of buying as we head up to the closing bell. Now, the chart tells the story. The activity came in the final hour very similar trading patterns to yesterday when the market came back late in the session, an encouraging sign. There are some people who are pointing out some things like certain stocks have earnings warnings, and it doesn't take down the whole market as positives for the market overall. And of course at this point the Dow is working its way back to 9,000 -- Jan.

HOPKINS: Thanks, Rhonda. The Nasdaq looks like it will finish the session on the upside as well. Greg Clarkin is at the Nasdaq market site.

GREG CLARKIN, CNN CORRESPONDENT: Jan, the Nasdaq right now about nine points higher, 1,489. It is well off the session highs, which were achieved this morning. It was back over 1,500 believe it or not, but really what is holding the Nasdaq back right now are the semi- conductors. It is very tough to a get meaningful Nasdaq rally without the participation of the semi-conductor stocks.

And they started to move lower after that Fed rate cut announcement this afternoon. So the Nasdaq right now, just kind of holding onto a modest gain, at this point. A lot of folks say the Fed announcement this afternoon just kind of driving home the point that the economy is still very, very weak, and the events of September 11 only weakening it more, and they say that is just another indication of the grim news that they have been dealing with. So at this point, really no short term pop to the technology sector at least -- Jan. HOPKINS: Thanks, Greg Clarkin at the Nasdaq market site. And soon you will be looking at live pictures of the New York Stock Exchange as the exchange gets ready for the closing bell. About 45 seconds before that happens. Today the Federal Reserve slashed interest rates for the ninth time 10 months.

Market edging higher late in the session although selling off after that announcement. But the Dow has fallen more than 17 percent since the Federal Reserve began aggressively cutting rates back in January of this year. And the Nasdaq down more than 35 percent during that period of time when the Fed has been aggressively cutting rates.

We should also point out that today major banks also cutting their prime lending rates. That should help consumers immediately. The closing bell is sounding here at the New York Stock Exchange. A number if the exchange community ringing the closing bell today on Wall Street.

The Dow closing up more than 100 points. The Nasdaq higher as well. Software stocks leading an advance on the Nasdaq. Greg Clarkin is at the Nasdaq, and he can tell us more about what went on there -- Greg.

CLARKIN: Exactly, Jan. You mentioned the semiconductors being a weak link. The software stocks were one of the better performing groups today. Let's take a look at a sampling here. And you'll see some strength at a number of these big name companies. Let's start by showing you shares of Microsoft. They were higher throughout the day. Of course, in the latter part of the session they gained a little bit of a head of steam.

If we could bring up that graphic, you'll see that Microsoft shares, Siebel Systems, Peoplesoft, Oracle shares, all were some of the better performers on the day. Siebel holding an analyst meeting today, offering no new financial guidance. In this environment that's taken as a very positive that the quarter on track. You can see the pop that that stock had. And then Peoplesoft moving nicely higher as well.

As for those chips, I mentioned that shares of Intel were down 51 cents. As for some of the other big name technology stocks, on the downside for the most part. Dell Computer, Cisco and Sun Microsystems all giving back some today. So again, Jan, the big names mostly on the downside with the exception of the software stocks, and the software stocks really are kind of what carried the day here. The Nasdaq finishing with an 11 point gain at 14,912.

HOPKINS: Thanks. Greg Clarkin at the Nasdaq. Now let's go to the New York Stock Exchange. Rhonda Schaffler has the details about the session there.

SCHAFFLER: Jan, we're looking at an impressive triple-digit close right now. You were talking about banks lowering their prime rates earlier. It was in part the financial stocks that helped lead a comeback here. Let's take a look at the top Dow movers. We'll start first with American Express. This particular stock at one point in the trading day was down about four percent, managed to come back significantly with just a loss of about 39 cents. Boeing up better than a dollar, that as the company gets $1.6 billion jet order from China. J&J came back from earlier, steeper losses. Merck looking unchanged here. It too was down a lot more earlier in the session.

Let's take a look at financial stocks in detail. We're going to focus in on the brokerages. Around mid-afternoon the group was pretty weak across the board. But look at this. A decent turnaround, here. Morgan Stanley still down but only by four cents. Goldman, Lehman, Bear Stearns nudging higher. That's impressive when you think that these stocks at one part in the trading day were down more than dollar.

And the brokerage stocks, of course, have suffered mightily this year due to Wall Street's underperformance -- Jan.

HOPKINS: Thanks. Rhonda Schaffler at the New York Stock Exchange. There was a muted response in the bond market to the rate cut by the Federal Reserve. For more on what went on there and what is going on in futures trading in stocks after-hours, Lisa Leiter at the Chicago Mercantile Exchange -- Lisa.

LISA LEITER, CNN CORRESPONDENT: Hi, Jan. A late-day rally. It began on Wall Street. It's certainly catching on here in the futures pit of the Chicago board of trade. Stock futures entering new highs for the session. Noise level picking up right now. S&P futures at their highs for the session. Nasdaq 100 futures getting very close to their highs for the session as well. Traders say the reaction was muted here as well.

Immediately after the Fed decision, trading was very choppy. They rallied, came off a little bit, but in the last half hour buying really picked up here in the stocks users pit, perhaps on the idea that there will be more rate cuts to come from the Federal Reserve. That was the idea that the bond market held on to later in the day, even though the reaction was muted there as well.

Immediately after the decision at the Chicago Board of Trade, the buying picked up there. In the last half hour we're seeing the 30- year bond at 26 right, the yield 5.33 percent. The ten-year note up a quarter point. That yields 4.5 percent. They are counting on more rate cuts by the Fed to come as well. Jan, back to you.

HOPKINS: Thanks. Lisa Leiter in Chicago. As we mentioned, the Federal Reserve, as expected, cutting interest rates today. Kathleen Hays joins us now with a loser look at that decision.

KATHLEEN HAYS, CNN CORRESPONDENT: And widely expected. That obviously then that is why it is muted. But the point is that this should have some impact on the economy. If we take a look back what has happened so far, the federal funds rate -- the Fed's key short- term rate -- stood at 6.5 percent when the Fed started cut rates this year. As you can see, they have cut rates almost every month, many months by a half percentage point. This is a fairly aggressive move by the Federal Reserve. They actually made more individual rate cuts from 89 to 92 when the economy was sinking into recession.

But they are worried about the economy, they are worried about the impact of the terrorist attacks. In fact, they made that very clear in their statement today. They said, "The terrorist attacks have significantly heightened uncertainty in an economy that was already weak. They say that will further dampen consumer and business spending. Of course, business spending, business investment, that has been a worry.

Speaking of consumer spending, we've got the latest news on auto sales. For the month of September, some bad news, but maybe not quite as bad as some might have thought. Daimler Chrysler down 28 percent, Ford down 9.7, GM down three percent. However, GM noted that in the final week of the year, sales were up 22 percent. Apparently their zero interest rate and low-interest rate loans are working. Daimler and Ford doing the same thing, but maybe GM is the one with the most attractive models right now and that in the end is what gets consumers in the store.

HOPKINS: Thanks. Kathleen Hays. That's a look at the economy and the markets. I will be back with "MONEYLINE" at 6:00 p.m. Eastern along with my guest former Treasury Secretary Nicholas Brady. Until then, I'm Jan Hopkins in New York.

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