Market briefing---Matt (medium)
NYSE---Deb (fast)
Currency:
FleetBoston---Podolsky, Paul---Currency Strategist
Tempus Consulting---Salvaggio, Greg---Currency Strategist
>> welcome to “world financial report.” i’m matt nesto. well, texas instruments, as we said, is higher in extended-hours trading after the company boosted fourth-quarter sales and profit forecasts. the company’s semiconductors run more than half the mobile phones sold last year. the demand for new types of phones with cameras and mp3 audio players is also driving sales. revenue will rise to $2.64 billion to $2.77 billion. in october, texas instruments had predicted sales of about $2.5 billion to $2.7 billion. global crossing filed financial results that show the company had a loss of $25.7 billion for 2000 and 2001. on sales of $7.1 billion. net income for 2002 was $635 million, revenue of $3.1 billion. global crossing is planning to emerge from a bankruptcy filing that cost investors $40 billion. the company hasn’t filed full-year financial statements to the s.e.c. since 2000. well, deborah kostroun has been following this and all the fun and excitement down at the big board today and joins us now from where else, the nyse. take it away, deb.
>> well, matt, obvious lir the dow jones industrial average inching ever so closely to dow 10,000, and one of the things we saw today, the dow hitting a new 18-month high, but not a lot of fanfare in today’s session. the big story there is the volume, coming in at 1.19 billion shares, much lighter than the six-month average of 1.3 billion. so, lighter-than-average volume taking the fanfare out of the fact that we do have this market still increasing in the trend higher. thomas lobe is chairman and chief executive officer at melvin capital management says earnings expectations are across the board increasing. he also is expecting a pretty good stock market through the end of the year. and also earnings growth for companies in the s&p 500 probably reaching 18.5% this year. that is based on surveys by thomson financial. they’re expecting growth to slow down to 12.4% next year. however, even though growth may be slowing down in 2004, it’s still better than the average of 7% we’ve seen over the past 30 years. in today’s session, the s&p energy index at its best level in seven months, one big reason the natural gas and another cold wave of weather will be hitting the northeast part of the united states. energy stocks have been really good performers recently. in addition to energy stocks helping to lift the dow jones industrial average, we also had the industrials performing well. stocks like g.e. also 3m hitting a record high in today’s session. so, what we’ve been seeing recently while technology stocks have been performing well since the low on march 11, we’re seeing this change of leadership into energy and industrial stocks . in addition, we saw financial stocks , some of the best performers in today’s session and financial stocks continue to do well when you’re looking at an environment where you have interest rates at the lowest levels that we’ve seen in the last 45 years, kind of leads us into tomorrow, which of course the fed will be meeting tomorrow and many traders and analysts really kind of not expecting the fed to do anything to interest rates, at least not yet. many of the traders that i talked to like peter henderson of fleet specialists, expect us to have maybe an increase in interest rates next year, either in the second quarter or the second half of next year, but we’ll be looking very closely at what the fed has to say tomorrow. back to you in the studio.
>> thank you very much. of course we have to wait until almost 2:00 in the afternoon to find out what the fed will say. let’s get to the closing numbers here today. the dow, the s&p, and the nasdaq all finishing higher on the day. the volume is slightly below average of what we’ve seen over the last six months ago. 81 economists expect no change tomorrow. currencies, the biggest story of the day. the yen at a three-year high as well. well, in new york, the dollar dropped to a record 1.22 against the euro and fell to its lowest level in more than a decade versus the pound. investors are speculating that the federal reserve will keep its interest rate at a 45-year low in coming months and that will erode the appeal of u.s. investments. joining us to discuss the day’s markets is greg salvaggio, vice president at tempus consulting in washington. greg, tell me, at what level will the decline in the dollar begin to worry the bush administration?
>> i think we’re beginning to start to see the early signs of concern develop. treasury secretary john snow about a half an hour ago came out and addressed that the u.s. still supports a strong dollar. we’re actually looking for the fed to perhaps take some initiative to bolster the dollar tomorrow by altering its policy statement.
>> wait. if we came out a half-hour ago and said he supported a strong dollar, they’re obviously not concerned yet.
>> i think snow’s credibility in the market has been tarnished in the last several months, close to the g-7 meeting in dubai. i think the administration is starting to hear concerns from european officials, particularly the germans stating last week they were prepared to engage in currency sales at particular levels. certainly, the euro at 1.25 is damaging to europe, is not good long run for the u.s., and we think the fed will drop the considerable time clause from its statement tomorrow.
>> so, is 1.25 the dollar there versus the euro is that the level when the pain hits not only in europe, as you said, but here as far as the bush administration and in washington?
>> well, i think the bush administration has been rather lucky. they’ve had their cake and have been able to eat it too. with the dow now approaching 10000, interest rates at historically low levels, the pain hasn’t been felt across the asset spectrum. however, we believe continued dollar lowness could affect everything.
>> the fed meeting tomorrow will hold us hostage although nobody expects them to do anything. the fact remains the statement will come out tomorrow. what if the fed drops its quote, unquote, considerable period clause in terms of how long it’s willing to keep rates unchanged? what will happen in the currency markets?
>> we think the dollar will receive a substantial boost upwards of 2% if they do drop that clause from tomorrow’s statement. that will tell the market that the fed is now beginning to look at inflationary trends, beginning to develop particularly in the energy sector, and is prepared to move higher in the rates at some point next year.
>> i’m sorry to interrupt. what if they don’t drop the clause, the considerable period clause? what are they keeping?
>> dollar weakness will continue.
>> ok.
>> into the unforeseeable future, 1.25 euro beyond that possibly 1.30. we believe that greenspan and the fed is very aware of the long-term ramifications that a weak dollar will have on specifically interest rates and asset market.
>> all right. excellent timing, my friend, because we are short on time. but i do want to thank greg salvaggio, v.p. of trading at tempus consulting in washington for joining us with his insight. biotech stocks have made substantial gains since the beginning of the year, but can that momentum continue in 2004? we’ll ask an expert. his name is went went.
