Market briefing---Lane (medium)
NYSE---Deb (fast)
Consumer spending---Su (fast)
>> welcome back to “world financial report”. i’m lane bajardi in new york. recapping the day on wall street the dow jones industrial average down a half percent, 48 points at 9,128. the s&p 500 settling at 1,000 even, 3.5 points lower, down 1/3 of a percent. nasdaq composite barely moving, down sles than 1/10 of 1%. big board actives, altria group leading the way as the parent of cigarette maker philip morris fell 3.5% after an illinois court ruled a judge lacked the authority to lower the deposit of a $10 billion judgment. with earnings season in full swings we are getting insight into who is helping prop up this economy. deborah kostroun has more on that.
>> lane, obviously the consumer has been the one going out and refinancing their mortgages. that certainly helping out many of the earnings. and in fact if you like things like snowmobiling, it may be hard to think about that in the dead of summer, but also maybe jet skiing. not company that makes these products, po layer ris industries, actually coming out with earnings today. this was the biggest net gainer at the new york stock exchange. they are also the number two maker of four wheel and six wheel all terrain vehicles. they came out and said their second quarter profit rising 5.5% aided by international sales, also demand for its new victory vegas motorcycle, po layer ris and harley-davidson saying they are benefitting from the u.s. demand for leisure vehicles even as u.s. car and light truck sales declined in the first half of this year. also po layer is saying the increase in sales of the company all terrain vehicles recovering from a first quarter slowdown. harley-davidson will release quarterly earnings tomorrow. polaris increasing their earnings estimate for the full year. as we are talking about the consumer, if you move over to some of the industrials like eaton, eaton reported their earnings today. this is the maker of auto parts, hydraulics and airplane systems. they say they expect no growth for the rest of this year. they said for the second half they don’t anticipate any significant growth in their end markets. that’s according to the c.e.o. alexander cut ler saying in a press release saying office construction, electrical products and farm equipment are flat to down, despite the company’s earlier forecasts for moderate growth. so some big differences that the consumer seems to be growing on things like leisure products. but at least in some of the industrials for things like farm equipment and also electrical products, they don’t seem to be growing, at least for eaton. other stocks that we are looking at at least for tomorrow, that is going to be automaker ford. they will be releasing their earnings tomorrow, and that stock was up today. in fact, ford looking at possibly making a second consecutive quarterly profit. that as chief executive william clay ford trying to speed up those cost cuts. back to you, lane.
>> deborah kostroun at the big board. mortgage refinancing, the boom may be over. franklyn rain tells bloomberg news refinancing applications fell 15% and will continue to drop from record levels. su keenan has more on the outlook and how it might affect consumer spending.
>> as you know, throughout the downturn in the economy, millions of americans boosted their spending power by refinancing homes at record low interest rates. that spending fueled the economy. the washington based home ownership alliance says mortgage refinancing effectively added 20% of the real growth in g.d.p. last year. now there are signs the refi boom is slowing down t two largest u.s. mortgage buyers, they are fannie mae and freddie mac, forecast that refinancing will fall by at least half in 2004 as interest rates continue to move higher. franklin raines, the chief executive of fannie mae, says the dropoff is already apparent.
>> we’ve seen applications come down by 15% just in the last week for refinances. so i think we may have seen the peak of the refinance boom. we’ll see that taper off going into next year. and i think as we see that taper off, we’ll begin to see some of these short-term holders of mortgages begin to sell out their positions.
>> the jason trenert, managing director at international strategy and investments says the bear case on the economy is that this dropoff in refinancing activity will hurt consumer spending. he disagrees saying the benefits from refinancing, lowering your monthly mortgage payment go on long after a refinancing boom has ended. other economists say the improving economy, lower tax rates and reduced inflation will also continue to bolster consumer spending. mickey levy, chief economist in banc of america securities says, “people tend to spend what they make, and he’s forecasting an increase in disposable income. mark vit ner, meanwhile, senior economist at wachovia securities in charlotte, north carolina, says while refinancing helped stimulate the economy during bad times, it has never been a key driver of growth in expansion. vit ner says refinancing levels will still be considered above normal even if they fall 50% from current near record levels. according to freddie make data, a decline of 51% which is what they are projecting would put the 2004 refinancing market on about the same level as in 2001. lane.
>> su keenan. now we have an update on the vivendi bidding. vivendi rejecting mgm’s $11.5 billion offer. they cite a person familiar with the talks and they go on the say that they were apparently turned off by mgm’s demand for additional financial data according to a person familiar with the situation speaking. metro-goldwyn-mayer on the move, up a penny right now on word that they may be out of the bidding process, depending on this particular story that has not been confirmed by other m.g.m. or vivendi. asian stocks may move for a third day on optimism u.s. companies will continue to report higher earnings.
