Dow Declines 151.74 to 10,240.78; Nasdaq Tumbles 63.31 to 1,867.01; Ford Announces Layoffs
ANNOUNCER: From the heart of New York City, this is LOU DOBBS MONEYLINE. Here now, Lou Dobbs.</s>LOU DOBBS, CNN ANCHOR: Good evening. In tonight's headlines, stock prices plummet. The Dow hits a one-month low, the Nasdaq drops to a new four-month low. Hurting the Dow and Nasdaq today, the shares of Microsoft. An appellate court rejected Microsoft's bid to delay the remedy portion of the antitrust case against Microsoft. And shares of Ford plunged today, Ford announcing as many as 5,000 layoffs and slashing profit estimates. We'll have complete coverage of what was a very difficult day on Wall Street. Now let's check in with our reporters to see what they're working on. Christine Romans at the New York exchange, Christine.</s>CHRISTINE ROMANS, CNN CORRESPONDENT: Lou, stocks fell at the opening bell and kept going, the Dow down more than 200 points at its low before recovering some of its losses.</s>GREG CLARKIN, CNN CORRESPONDENT: And the Nasdaq today hit harder than the Dow, all but nine of the Nasdaq 100 ending the day lower.</s>STEVE YOUNG, CNN CORRESPONDENT: A legal setback for Microsoft, the remedy part of the trial will go on without delay.</s>KITTY PILGRIM, CNN CORRESPONDENT: TV networks are pushing the envelope in a quest for ratings, and advertisers are beginning to balk.</s>TIM O'BRIEN, CNN CORRESPONDENT: The dollar has fallen against major foreign currencies for weeks, but U.S. exporters say it is still too strong, putting them at a global disadvantage.</s>FRED KATAYAMA, CNN CORRESPONDENT: Ford cuts thousands of jobs in a bid to make the company more competitive, but Wall Street reacting more to a cut of a different kind. Lou?</s>DOBBS: Fred, thank you. We'll have all of that coming right up for you. Our top story tonight, a dismal day on Wall Street. Stock prices tumbled, closing out a losing week for both the Dow and Nasdaq. Ford today sparked selling in auto stocks, that after Ford said it was slashing jobs and its profit estimates. Microsoft tumbled after an appellate court rejected its request to delay remedy hearings in its antitrust battle. And losses in the four Dow technology stocks and General Motors accounting for 40 percent of the Dow's 151-point loss today. Christine Romans at the New York exchange. Christine.</s>ROMANS: Lou, it was a bitter end to the trading week, the Dow tripping early in the session and stumbling for most of the day, ending down 151 points, 10,240, the lowest close since July 10. Take a look at the week's performance for some of the major indexes, the Dow down 1.69 percent, the S&P; 500 down better than 2 percent, transports falling more than 1 percent. But look at the small cap Russell 2000, it edges up just slightly. So why the malaise overall on Wall Street? Folks keep looking at those earnings warnings. Today we heard from Ford. Gap beat the Street, but then warned on its current quarter. Scientific Atlanta withdrawing its guidance for the current quarter and the year. And more news of layoffs, companies trimming their work forces. This has sparked worries on the Street. Analog Devices, Accenture, General Semiconductor, Ford, Boeing, of those names, only Accenture moving higher here today, Lou. In fact, you saw losses in financials, retailers, tech names, building products. The only buying anywhere here, gold stocks, chemical stocks, and tobacco stocks. That's defensive. Lou?</s>DOBBS: OK, Christine, thank you. The Nasdaq today falling twice as much as the Dow. It was the worst one-day decline, in fact, for the Nasdaq in more than a month. Greg Clarkin at the Nasdaq. Greg?</s>CLARKIN: And Lou, the Nasdaq now closed at 1867. That is the first time it's closed below 1900 since April 11, on the week the Nasdaq losing better than 4.5 percent. And today we saw widespread selling, all the sectors were hit. They were hit extremely hard. Take a look at Dell Computer. It was a catalyst this morning after it issued a profit and sales warning. Dell down sharply on the day. Microsoft down to tech selloff as well as its legal setback, Cisco Systems, Sun Microsystems lost ground as well. Yesterday we saw the chip stocks really kind of ride to the rescue of the Nasdaq. Not the case today. Chip stocks were down, and they stayed down. Applied Materials, Broadcom, KLA-Tencor, and Linear Technologies all down sharply on the day. And Lou, in speaking with traders this week, you really saw a shift from the talk of basically, When will the market rebound? The talk now is, Will the Nasdaq go back to those April 4 lows of 1638? That's really something on everybody's minds at the moment.</s>DOBBS: OK, Greg, and trading light again today. How much weight should we give to these losses, given the low trading volume?</s>CLARKIN: You do see sharp, sharp swings in either direction on the low volume, Lou, but still the psychology at this point is incredibly negative. The fact that it wasn't on heavy volume, a lot of folks didn't take a lot of solace there. They still saw widespread selling today on light volume. And either way, this was just not a good session.</s>DOBBS: All right. Thank you, Greg Clarkin. Ford today losing more than $3 billion in market cap, that after announcing as many as 5,000 job cuts. Ford also cut profit estimates dramatically for the full year. This another painful moment for the number two car maker. The Firestone controversy continues. And earlier this week, Ford agreed to settle a massive lawsuit over defective ignitions. Fred Katayama has the story now.</s>KATAYAMA (voice-over): One of every 10 of these salaried workers at Ford will soon have to clean out their desks. Ford will slash up to 5,000 white collar jobs, mostly through early retirement. That will result in a charge of $700 million in the fourth quarter. Calling it "a necessary action," Ford's CEO, Jack Nasser, said the job cuts will help boost the company's efficiency and make it more competitive. But the cut in jobs was eclipsed by a cut in its outlook. The company warned earnings for the full year would plunge more than 40 percent short of analysts' targets. That caused Ford's stock to skid to a new 52-week low, slamming other car stocks as well.</s>DOMENIC MARTILOTTI, BEAR STEARNS: And the other companies are going to come out and say their earnings are going to be weaker than expectations are out there. So this could be the tip of a bunch of preannouncements for the third quarter.</s>KATAYAMA: Ford's sales overall are heading downhill faster than those of its rivals, and it's losing market share as a result, sliding 1.8 percent points over the past year. It slapped incentives to spruce up sales, and those higher marketing costs are also hurting earnings. Expect more restructuring.</s>JOHN CASESA, MERRILL LYNCH: I think this is the beginning of a process that will probably take a year or more to get this company more competitive for a more difficult environment.</s>KATAYAMA: Standard and Poor's put Ford and GM today on credit watch, indicating a strong possibility it'll lower their debt ratings.</s>DOBBS: Is this an indication, Fred, that we may be seeing a break in the consumer here, suggesting that car sales are going to back off, the consumer retreating a bit?</s>KATAYAMA: Right, Lou. You know, it's been a strong year for the first half of the year so far, but analysts are now fearing that with the rising rate of unemployment and also problems of incomes at the consumer level, that consumers are starting to cut back. And that's why some of those stocks really fell today.</s>DOBBS: And Ford, while they're talking about improving efficiencies and cutting back on their expenses, that's obviously just simply further contraction for this economy to deal with.</s>KATAYAMA: That's right.</s>DOBBS: Fred, thanks. Well, the government today announcing the trade deficit for June widened. Experts -- exports, rather, hit the lowest level in 16 months. A key reason, the strong dollar, the strong dollar making U.S. products more expensive overseas, of course. And while the dollar has fallen in recent weeks against other currencies, it hasn't fallen enough to satisfy many big internationals. They continue to press the Bush administration for some relief. Tim O'Brien reports from Washington.</s>O'BRIEN (voice-over): The decline in exports is old news to companies like Dupont, which reported a 2 percent decline in worldwide sales last quarter. Gillette had a 4 percent decline. So did International Paper, export sales down 4 percent. And they all blame the strong dollar. Since 1995, the dollar is up 70 percent against the German mark, 50 percent against the yen, and the resulting drag on exports has left many U.S. companies reeling. Last month, the National Association of Manufacturers urged President Bush "to stop the economic hemorrhaging by acting to ensure that the value of the dollar will be consistent with economic reality and market conditions."</s>DAVE HUETHER, NATIONAL ASSOCIATION OF MANUFACTURERS: What we've asked so far is just for the administration to recognize that the dollar is overvalued, and that's as far as we've gone at this point.</s>O'BRIEN: Some analysts say even that could be risky, that any administration rhetoric about the dollar being overvalued could trigger a decline that may be hard to control.</s>WILLIAM DUDLEY, GOLDMAN SACHS: It's probably too late to scrap the strong dollar policy, because if they were to do so, they might provide a very severe decline in the dollar, which might be worse than the disease, because it could destabilize financial markets.</s>O'BRIEN: But Treasury Secretary Paul O'Neill defends U.S. policy on the dollar and had this to say to those complaining about how it affects U.S. competitiveness.</s>PAUL O'NEILL, TREASURY SECRETARY: People who are really good at what they do, they're producing value and don't spend a lot of time haranguing somebody else about why they're not successful. They make themselves successful.</s>O'BRIEN: In his former post as chairman and CEO of another multinational corporation, Alcoa, Paul O'Neill might have viewed the dollar differently. But now he is emphatic. The dollar is strong, it's going to stay that way. Lou?</s>DOBBS: And now we'll see what the markets have to say about that, Tim. Thanks. Tim O'Brien from Washington. Bonds today rallied after the trade deficit numbers were released, and those bond prices moved higher as stock prices on Wall Street tumbled. The 30-year issue up almost a full point in price, while the 10-year had its biggest gain in more than a week. The yield there, 4.94 percent. That is a five-month low. Today's session on Wall Street not a comforting way to go into the weekend, but my guest tonight says investors should take the long view. He sees a strong recovery by the beginning of next year. Chuck Kadlec, strategist at J&W; Seligman, joins us now. Chuck, good to have you with us.</s>CHUCK KADLEC, J&W; SELIGMAN: Lou, good to be here.</s>DOBBS: We're sitting here now with new lows. It looks like we're going to -- very close to testing some new lows in the stock market. Give us some comfort here.</s>KADLEC: Well, what's happening today was in many ways produced by the Federal Reserve policies late last year, certainly not the only thing, but one of the single most important events was the Fed kept interest rates too high too long. As late as December, remember, they thought the economy was too strong. And now, of course, we find out it was already sinking into this dramatic slowdown.</s>DOBBS: Sort of the obligatory boilerplate, always following an FOMC meeting about the persevering in the fight and diligence against inflation. That's sort of gone away. You're right, I mean, do you think that Alan Greenspan has gotten a bit of a free ride here in terms of monetary policy being too strong or too long?</s>KADLEC: He has. He's probably as good as it gets. What it -- I think today's situation really underlines the debate we're just hearing now again on the dollar's strength, the weakness of the Brazilian real, the current potential currency crisis in Latin America. Once again, it's time to begin an earnest dialogue on restoring a monetary standard for the United States dollar based on a price rule. Here are the benefits. One, inflation, predictably, under 1 percent. Two, low and stable interest rates. For small business, a prime rate of 4.5 percent. For American families, fixed mortgages, 30-year fixed mortgages, under 6. For U.S. corporations, they could borrow 10-year money under 5. This is normal in the United States for periods of peacetime, especially when we're running budget surpluses.</s>DOBBS: Historically.</s>KADLEC: Historically, it's normal, absolutely.</s>DOBBS: In terms of what the Fed has to deal with, in terms of what the Bush administration has to deal with, I think you would agree with me, the price</s>KADLEC: I think they've indicated it's not going to be the first priority. I think the first step would begin to move away from a strong dollar to a strong and stable dollar. It made sense to talk about a strong dollar when we had inflation of 3, 4, or 5 percent. Now as we restore price stability to the U.S. economy, why would you want a strong dollar? That means deflation. What you want is price stability. That would say a strong and stable dollar.</s>DOBBS: In terms of the influence on markets here, Chuck, what do you expect for the market for the next year?</s>KADLEC: Well, there are certain things that are catalysts that can bring us out of these doldrums. First, better monetary policy. The Fed has begun to ease. We do see some relief of the dollar pressure and commodity prices. This is pivotal.</s>DOBBS: Right.</s>KADLEC: Second, we will get another tax rate reduction on January 1 of 2002. It's modest, but it's in a positive direction. Third, the decline of the price of oil, of course, in the price of gasoline helps American consumers. So I think you're going to see the economy begin to show some recovery in the latter part of the third quarter, more evidence of recovery in the fourth quarter, better than 50-50 chance we can be at growth rates above 3 percent again sometime during the first half of next year.</s>DOBBS: And, of course, the Bush administration calling for that now, after having revised lower their growth estimates for this year. The market, the stock market, an intelligent place to be as an investor right now?</s>KADLEC: Long term, I think this is an enormous buying opportunity for people who are investing for the next two to five years, at a minimum. You know, it's not a heroic assumption to get back to 3 percent growth. If you just stop the inventory correction, if you just stop the decline in capital spending and keep it at today's lower levels, you quickly get above 3 percent growth rates.</s>DOBBS: When you stop -- when, as you put it, stop the inventory correction, once we work through that inventory correction, I don't think we want to stop it quite yet, do we?</s>KADLEC: Well, we want to work through it. So companies again produce as much as they sell. That alone would add 1 percent to growth rates. But the longer term view for the U.S. economy is strong. What we're going through is one of these cases where U.S. monetary policy purposefully attacked our prosperity and our growth.</s>DOBBS: Right.</s>KADLEC: So what Alan Greenspan said, he said he was going to bring it to a stop, he did. Now he's trying to undo the damage that he visited upon our portfolios.</s>DOBBS: Are you ready for a little irrational exuberance?</s>KADLEC: I'd just settle for some positive growth and reasonable market valuations, absolutely.</s>DOBBS: Yes, Chuck, thank you very much for being with us.</s>KADLEC: Good to be here, Lou.</s>DOBBS: Appreciate it. Well, Microsoft today lost another court battle. An appellate court decision means the remedy part of the antitrust trial against Microsoft will resume in September. A new judge to take over that case could be named by the end of this month. Steve Young with a report.</s>YOUNG (voice-over): Instead of heeding Microsoft's request that it put a lower court on a leash, the court of appeals put Microsoft in its place. And that's squarely back before the district court, before the Supreme Court decides in October whether to consider Microsoft's complaint that district court judge Thomas Penfield Jackson was biased and his entire antitrust ruling against the company should be thrown out. The court of appeals said Microsoft misconstrued its legal burden and failed to demonstrate the harm of returning the case to the district court in seven days.</s>HARVEY SAFERSTEIN, MINTZ LEVIN: In effect, what it's doing is lobbying that Supreme Court, saying, Microsoft is just dead wrong about what we did, and here's the reasons why they're wrong.</s>YOUNG: Soon after the case returns to the district court, a new judge will be appointed, the third after Stanley Sporkin and Penfield Jackson, to hear more testimony about how to rein in the company found guilty of abusing its Windows monopoly, and to consider other charges. A Justice Department spokesman said, "We are pleased" with the court of appeals decision. A Microsoft spokesman said the company regrets it but is "prepared to move ahead." What Microsoft is really keen to move ahead with is its scheduled October 25 launch of Windows XP, its most important operating system in six years. The federal government and 18 states suing Microsoft haven't ruled out trying to get an injunction or temporary restraining order against the controversial product.</s>RICHARD BLUMENTHAL, CONNECTICUT ATTORNEY GENERAL: We need to develop a strategy that offers consumers the most immediate kind of remedy to the monopolistic power that Microsoft has misused, and to prevent Microsoft from repeating what seems to be the same kind of misconduct.</s>YOUNG: The latest setback puts more pressure on Microsoft to seek a negotiated settlement, but the company and prosecutors won't say if settlement talks are now under way. Lou?</s>DOBBS: Why not?</s>YOUNG: Well, they say that doesn't serve the talks.</s>DOBBS: The purpose of settlement.</s>YOUNG: That's right.</s>DOBBS: Should that be, a talk is under way?</s>YOUNG: Microsoft also has one last Hail Mary, as the antitrust lawyers say. They could try to hunt down William Rehnquist on the Supreme Court for a stay. But that's very unlikely.</s>DOBBS: All right. Terrific. Steve, thank you. Steve Young. Well, straight ahead here on MONEYLINE, U.S. troops joining in that battle against the wildfires raging in the Western states. We'll let you know tonight if there is any relief in sight. And the Windward Islands catching something of a break. But now the tropical storm Chantal is bearing down on Jamaica. Another shark attack in the Bahamas, we'll have the latest for you on what's been a summer of shark scares. And Steve Fossett's quest for world records in ballooning has ended. We'll tell you why he didn't make it all the way around the world. And a guest who says there's a nuclear bomb lurking off the course of Georgia, and a congressman who says he's wrong. They'll be here to discuss the issue.