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Interview: San Francisco Based Hedge Fund

>> peter theil co-founded paypal and runs san francisco based hedge fund, clarium capital. suzy assaad spoke with him about investing in technology, beginning with internet companies.

>> i would be careful about investing in a lot of these companies today. i think they’re not going to move much higher through the end of 2005, 2006. there may still be downside risk.

>> why is that?

>> because there are growth challenges at a lost these businesses and the growth has accelerated quite a bit. google is growing quickly but a lot of these companies have been predicated on year-after year compound growth. 45 p.e. or 100 p.e., it works if you’re growing 40% a year or 100% a year but if you’re growing 10% or 15% a year, it’s a lot trickier. i think they’re great businesses but big challenges ahead. one of the interesting dynamics in the internet area this year has been how google has overtaken ebay. if you look at companies by market capitalization and there’s always been one leader. first, netscape in 1997, yahoo overtook netscape, ebay overtook yahoo and now google overtaking ebay.

>> the passing of the baton.

>> it is really an incredible thing and much is linked in with the media because there’s always one company that’s the cool company, the media talks about the most and it really helps them recruit better people, helps them get more customers and it brands them as the leading growth company and it feels like it’s inexorably shifting towards google and that will be the great company for a few years.

>> are you saying, then, that there’s really only one company for investors out there? everybody herds behind one company now in the internet space that they see as the best play as opposed to looking at a range of them?

>> there are many different companies―google, yahoo, amazon, ebay, the four big ones and interactive corporation. >> none of them are doing well except for google.

>> the media can anoint one company as the leading company. there can only be one who’s the king and it’s hard to value these companies, it still is. we have this credible incredible bubble in 1998, 2000, and incredible collapse. really hard to value them as a group.

>> would you buy any of them given how much they’ve come down? do you think these companies have growth to them?

>> i would be careful about buying all of them. if you held a gun to my head and told me i had to buy one, i would probably buy google because the history has been is that when one of these companies becomes a new leader, it has quite a bit of momentum that builds for a number of year, which was true with ebay, yahoo and netscape originally.

>> what do you think of how ebay is using paypal?

>> i think it’s been a great combination, the two companies. there are over 60 million people using paypal service today. more than american express or discover cardholders and they’ve integrated it extraordinarily well and i think there is a decent amount of long-term growth left there so over a number of years, i think the ebay-paypal still has a long way to go.

>> in terms of long-term growth, for the overall industry, where do you think will be the next wave of growth? there was a lot of talk about storage a few years ago. what will be the new it topic for the group?

>> i think we’re going to continue to see―the sector i’m most interested in and know the most about are consumer internet companies and i think we will continue to see that over the next 10, 15, 20 years. it’s a secular shift and there will continue to be great companies started, being started today in silicon valley and elsewhere in the u.s. and around the world and i think that trend will continue for many years to come. i think new online media is an interesting sector that people never quite figured that out and maybe they’ll figure that out at this point. maybe some of the broadband technologies will enable other services that would not have been possible, four, five years ago.

>> that was peter theil of clarium capital. a federal judge today said martha stewart must continue to serve five months in home confinement. the judge refused to modify her prison sentence following her conviction last year of obstructing justice. stewart asked the judge to cut her term of house arrest from five months to roughly 45 days. she’s already served five months in federal prison. the shares at the close down .9%, but up 94% over the past 12 months. after the break, we’ll preview tomorrow’s market action in europe.
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i’m ellen braitman. recapping the day on wall street, it was the slowest day of trading so far this year. investors waiting to see how first-quarter earnings will come in -- microsoft agreed to pay personal computer maker gateway $150 million over four years. this is to resolve legal claims. gateway will release all antitrust claims against microsoft based on past contact. gateway’s claims arose from the u.s. antitrust case in the mid 1990’s where gateway was specifically identified as having been hurt by microsoft. gateway has posted 12 straight quarters of losses and said it would spend that money that microsoft will pay on advertising, sales training, consulting and developing new products to run microsoft software. a check of the shares at the close shows microsoft up .1%. gateway rising 2%. computer shares led the nasdaq lower. robert gray has details on today’s trading from the nasdaq marketsite in times square.

>> it was the lightest day of trading for volume here at the nasdaq so far in 2005. investors and traders saying they are waiting to get more of an indication of how earnings are shaping up. the fed minutes due out tomorrow and economic data throughout the week. scott rothport with lake view asset management saying the short sellers and long positions are complacent. as far as technology, he says no one wants to own tech except for a few names because it is too volatility. we did see apple computer, the worst performer in the nasdaq 100. an article in the “wall street journal” speaking of increased competition from the likes of sony ericsson, introducing a new walkman cell phone which will play the mp-3, competition for the ipod. we also saw bank stocks on the move today. the nasdaq banking index was lower, as well. forr of the top six banks that trade on the nasdaq are reporting earnings this week including the number one, fifth third bank, largest bank on the nasdaq with a $24 billion market cap. those shares were higher, but a different story at hudson city, popular and compass banc shares. the nasdaq biotech index rising slightly, .2% and stocks leading gains including sepracor, cell therapeutics, northfield laboratories and human genome sciences.

>> ford shares traded at a 52-week low. the chief executive slashed the company’s 2005 profit forecast. june grasso has been following the story and has more on the road ahead for ford.

>> thanks so much, ellen. ford shares fell as much as 8.5% today and the yield for the second biggest u.s. automaker notes, the note that matures in 2013 widened to the highest level since the bond was issued. ford said it expects its auto operations to break even at best, backing off an earlier forecast for pretax auto profit of $1.5 billion and there you see the yield and the spread between the note which matures in 2013 and the treasury. what ford is doing is backing off an earlier forecast for pretax auto profit of $1.5 billion and a corporate target of $7 billion next year.

>> i think what ford is reeling from here is an over reliance on sport utilities and big trucks and with competition increasing and gas prices being what they are, that’s what’s causing their problems today.

>> as recently as mid march, ford reiterated its previous forecast after its rival, general motors, cut its 2005 profit forecast by more than half. in january, ford chief william playclay ford―william clay ford jr. congratulated himself for living up to promises he’s made each year since he took over. the automaker went from a $5.5 billion loss in 2001 to a $3.5 billion profit in 2004 after cutting more than 9% of its work force. the reduction in the forecast means a decline of $1 billion in net income from the midpoint to the previous projection according to an estimate. in addition to falling sales of high profit trucks, new cars have yet to deliver a boost. g.m. and ford u.s. sales have been losing market share to asian competitors and car-based s.u.v.’s. the industry is at near record sales and the analyst says ford’s new products will have to be hits because it’s more likely for sales to slow than to grow. fitch ratings changed its outlook on ford to negative today. standard & poor’s, which rates ford debt one level above junk changed its outlook to negative from stable after ford’s announcement, which means it will be likely downgraded.

>> m.c.i. releasing a statement, reacting to verizon’s purchase of carlos slim’s shares in m.c.i. m.c.i. saying that the verizon-carlos slim deal is a private transaction and m.c.i. saying it’s committed to the deal that is in the best interest of all of its shareholders. we’ll have more details when we return. we’ll also hear from peter theil, chairman and chief executive of paypal, running clarium capital.

Interview: Mergers and acquisitions

>> sullivan & cromwell has worked on 35 deals this year, including procter & gamble buying gillette, s.b.c. buying at&t. it makes it the number one mergers and acquisitions advisory law firm in the world. brian sullivan spoke with him about the climate in the industry.

>> i’m not sure many people are in play. a lot of speculation, for example, that a morgan stanley or merrill may be in play. these investment banks are the ultimate elevator companies, the assets go down every night. hard to put a company like that in play. as for merrill, i think people underestimate the incredible job stan o’neal has done there. he’s really made that company a master of its own fate.

>> you think merrill could be a buyer, then?

>> absolutely.

>> what would merrill look to do? would they follow the citigroup model, get more out of straight retail investing into different types of insurance? where does a firm like merrill have pull?

>> i’m not sure that the model of insurance and banking is all that successful. if you look at city, they have been divesting as quickly as they can what remains of the old travelers. so i’m not sure insurance could be the area. i think where they would want to go is to capitalize on their own strength, which is retail.

>> retail banking?

>> perhaps retail banking but anything which touches the retail customer.

>> what about morgan stanley. i know there is difficulty here because sullivan & cromwell does work for morgan stanley. but as far as the firm itself goes, do you think morgan stanley is more likely a buyer or seller?

>> hard to predict at this point. there is the third option, which is a large merger of equals where they could play a very major role in the combined company. but once again, i think that they will ultimately decide what they want to do themselves and won’t be forced to do anything.

>> do you think that a firm like hsbc could make an aggressive move for a company like a morgan stanley?

>> i think it would be very foolish if they did so. you would wind up losing so many of your top quality people very quickly and there has not been a great history of acquisitions of investment banking organization and i think most people would look at, for example, the credit suisse, b.l.j., as a failure.

>> there’s been so much talk about not only hsbc but companies like abn amro, big european and asian companies wanting to get a foothold in the u.s. market . is that a trend?

>> that could be one element. notwithstanding all the regulatory obstacles here, if you have a smart european buyer, they would look at sarbanes-oxley as far less of a barrier than the labor laws in europe and the informal political pressures in europe which preclude the large cross-border mergers in europe so i think the large europeans will be looking at the u.s. companies.

>> do you think sarbanes-oxley as it is right now discourages u.s. companies from merging with each other?

>> i don’t think it does directly. you will see occasional situations where companies, for example, have material weaknesses under 404. that’s going to be a warning sign against a transaction. but in some ways, sarbanes-oxley is actually positive because it gives buyers more confidence in what they’re getting.

>> what could be the big surprise of 2005?

>> i think the big surprise will be, obviously, a transaction at least in financial services that nobody anticipates and if you go year by year by year, if anybody had, for example, if we were here 25 years ago and had said that two of the four largest banks in this country would be in charlotte, north carolina, you would have had me carried away on a stretcher. if you had said 15 years ago that 4 of the five largest banks in new york city would merge and then merge with the largest bank in the midwest, once again, i would have been committed. so you really don’t know but there will be almost certainly something different and exciting.% 

>> are there too many investment banks?

>> i certainly don’t think so. there are actually a fairly small number of the really first-class investment banks. i don’t think we need a lot of consolidation.

>> in five years, hopefully we’ll bring you back on the program, will we see lehman brothers and bear stearns still independent?

>> i think it’s a real possibility. both firms have done splendidly and how does somebody with a 12 p.e. ratio buy somebody with a 17 p.e. ratio.

>> that was rodgin cohen, chairman at sullivan & cromwell, speaking with brian sullivan. they did discuss morgan stanley. we have news on the turmoil at morgan stanley. the former executive seeking to oust chief executive phil purcell wrote again to the company’s board. they want answers to 14 questions about events sparked by a march 28 management shakeup and they’ve offered to meet privately with the board. some investors blame purcell for morgan stanley’s lagging share price as well as profitability. van vanguard group founder john bogle says the current level of uncertainty are a bigger problem for markets than reform.
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warren buffett answered questions for federal and state investigators today at the securities and exchange commission offices in lower manhattan. allan dodds frank was there and joins us with the story.

>> after nearly four hours with state and federal investigators probing the insurance industry, 74-year-old warren buffett emerged from the s.e.c. offices with a smile on his face and his lawyer by his side. buffett told reporters his company was responding to a request for information by the prosecutors investigating the insurance industry. regarded as a cooperating witness by eliot spitzer, buffett’s visit was termed an interview and he was not under oath as he answered questions. as he got into a waiting car, buffett told me “i told them everything i know.” investigators were asking buffett about a deal berkshire hathaway’s general re unit did in 2000 with a.i.g. a.i.g. says that reinsurance transaction may have been improperly accounted for, allowing the company to inflate reserves by $500 million. maurice hank greenberg who ran a.i.g. for nearly four decades is under subpoena to appear at the securities and exchange commission―new york attorney general’s office tuesday morning. david boies, one of greenberg’s lawyers, says greenberg will invoke his fifth amendment right not to incriminate himself. boies said said, “the great number of transactions under inquiry and thousands of documents relevant to the transactions to which mr. greenberg has not been given access have precluded mr. greenberg from adequately preparing for testimony at this time.” the new york attorney general has declined to postpone greenberg’s dropisition -- deposition. greenberg said, “i am willing to accept responsibility and to account for the performance of my duties but i believe that good order and fairness require that i have an adequate opportunity to be advised of the issues to be investigated and my alleged involvement therein.”

>> thank you very much. genentech said first-quarter profit rose 61% on higher sales of avastin and other cancer medicines. net income climbed to $284 million or 27 cents a share. excluding items, genentech earned 29 cents, topping the street estimate by four cents. revenue climbed almost to $1.5 billion from $975 million a year ago. sales of avastin came in at $203 million, falling short of analysts’ estimates of $225 million. checking the shares shows a decline of .1% in extended trading. overall, stocks closed mixed today. the market was withstanding losses tied to ford’s reduced profit forecast as rising oil prices boosted energy shares. in terms of the dow -- here’s bob bowden with more from the big board.

>> usually these light trading days at new york stock exchange are on a friday or maybe even a friday before a three-day weekend but not today, it was a monday, with the lightest trading session of the year. the overall index showing the s&p unchanged, moving less than .01% and the dow jones industrial average down just .1%. there you see the volume at the lowest point of the year, all the way on the left, the last day of 2004. if you take that data point out, the chart showing the lowest point is today’s session, monday, 1.219 billion shares traded. utility and energy stocks were up, material and tech stocks down. ford motor down. after the close of trading on friday, it said it only expects auto operations to break even, at best n.january, it forecast $1.5 billion in pretax auto profit and the tax down 5-- the stock down 5.35% in one session. the auto parts stocks hit on the ford motor news, including delphi, lear, borgwarner and dana moving down. crude oil up .7%, helping marathon oil, amerada hess, b.j. services and o.e.g. resources. circuit city cut prices in december to bring in store traffic and apparently liked the sound of that can circuit city shares up 3%. tech stocks down, including i.b.m., the worst performing stock among the dow industrials today, down 1.6%. the best dow industrial stock, procter & gamble. the company announced increasing its quarterly dividend to 28 cents a share from 25 cents. the best stock in the entire s&p 500, r.r. donnelley, shares up 7%. i’m bob bowden, bloomberg news.

>> bob mentioned the move in energy shares today. crude rose from a five-week low on concern about supplies of gasoline. as you see, those prices at the close, $53.71 a barrel, up .7%. the average u.s. retail price for regular grade gasoline jumped 6.3 cents in the past week to $2.28 a gallon. fuel prices have climbed this year as refiners pass along higher costs for crude. let’s look at the other action today. you see gas did rise .9%, natural gas also higher. heating oil futures down .7%. for the latest in the takeover battle for the number two u.s. long-distance phone company, verizon agreed to buy the 13% stake in m.c.i. owned by the mexican investor, carlos slim, making it the company’s largest shareholder. the move angers other investors because, on a per-share basis, verizon’s offer to buy the block of stock from carlos slim is higher than its bid for the entire company. su keenan has more on the story. su?

>> it gives another definition of what the shares are worth from verizon. verizon’s move to buy a stake in m.c.i. at a premium to its per-share bid for the company could put pressure on the m.c.i. board to seek a higher offer. carlos slim has agreed to sell his more than 43 million shares to verizon at $25.72 a share. that share price is what some of m.c.i.’s other major shareholders are focused on. as you can see there, it’s $2.62 more than verizon’s offer to them through its $7.5 billion bid to buy m.c.i. verizon now becomes m.c.i.’s biggest shareholder, which should make it more difficult for qwest to win support for its almost $9 billion offer. people familiar with the situation say qwest was also in negotiations to buy slim’s stake. while verizon made its latest move with the goal of limiting any increases in its bid, dennis block, a mergers and acquisitions attorney, says it’s now likely verizon pays more.

>> i think they’ve shown they’re very committed. they now have a 13%-plus interest so they’re telling the world they’re going forward. as a matter of strategy, what they really told the world is that they’re going to pay the price at a paid to the larg investor to everybody else.

>> m.c.i. shareholders, such as leon cooper man, says the situation creates two classes of shareholders and they’re demanding the same offer slim received. the rise in m.c.i. stock are another indication that the verizon deal is unlikely to go through under the current terms. frank aquila, partner at sullivan and cromwell, leading firm in m&a, and he says that whether verizon raises the bid is the question on the street today.

>> thank you very much for the story. looking at the bond market , treasury notes rose for a second day. morgan stanley’s head of government bond trading said there is still short covering on the bond market . and here’s what happened in the trade -- a lot of speculation on wall street about likely deals in the financial services industry. we’ll hear from someone else at sullivan and cromwell with perspective on other possible moves.

Interview: Where stocks may be headed

>> oil has been one of the big themes for investors this week and crude oil fell for a fifth day in new york trading on friday, the longest decline since august on signs u.s. inventories will meet increased demand by refiners making gasoline. if we look for the week, a decline of 6.9%, retreating from the record high of $58.28 a barrel reached on monday. half the traders and analysts we’ve surveyed expect prices to continue moving lower next week. in the meantime, a u.s. government report predicts gasoline prices in this country. peak at $2.35 a gallon this month and the energy information administration sees gas average ing $2.28 for the summer. the head of that agency says rising demand will be the main reason. among other movers this week -- gas was a theme for investors this week. our next guest says earnings news will dominate the market next week. phil dow, director of equity strategy at r.b.c. dain rauscher joins us from minneapolis for a look at where stocks may be headed. welcome to the show.

>> good to be with you.

>> we have ford out after the close cutting its 2005 profit forecast. how significant is that for investors given all the bad news that’s already out there in the auto sector?

>> i don’t think it was unexpected. i think there’s an interesting nuance. if you look at the release, they talk about rising costs, rising factors of costs amidst lower demand. if you look at other parts of the economy, you see rising costs but relatively productivity and pricing power, allow being them to pass that along. my sense is that will be a recurring theme we see in first-quarter releases, which means earnings could be better than expected.

>> how much better?

>> my guess―consensus is 7.5% year-over-year gain on top of a 20% gain last quarter so my sense is 10%, something in that neighborhood is in the cards.

>> isn’t that already priced in given that we’ve had 12 quarters now where earnings have beat the average consensus?

>> i’m not sure 10% year-over-year gain in the quarter is priced in. there have been 12 quarters where the reality has been better than expected and it was a surprise every time. here’s how i see it. if we look at the beginning of the year, analysts’ expectations were for about an 8% gain this quarter and they’ve come down to 7.5%. the fed has upgraded their description of economic recovery as solid and talked about pricing power. my belief is that the economy strengthened more than people expected and that will be reflected in the income statements and earnings beginning next week.

>> will earnings will be the focus for investors?

>> the main focus will be guidance. since the advent of sarbanes-oxley, u.s. companies have been good at releasing bad news but don’t know how to release good news. my hope is you’ll see good numbers along with guidance with regard to what companies will do with their cash hoard in terms of reinvestment.

>> what areas have the greatest strength and possibility in terms of giving guidance? i ask that because basic materials expected to account for the bulk of earnings gains.

>> right, and a number of industries pricing power will come to the fore. oil service companies, the companies that drill well for companies, that provide seismic services, are likely to show much better-than-expected numbers due to better pricing power and better demand. my guess, if you look at risk and reward, price for what you pay, real attractive areas right now are healthcare, energy and selected technology companies.

>> in energy, let’s drill down there for a little bit if we can, because you had oil, a big theme this week for investors. how significant will oil and energy stocks be, do you think, during the earnings season?

>> i think you have a huge following in the trading community of these stocks and i understand that a lot of them are beginning to sell after making great gains. i think what’s come out today and in the last month is that it’s highly likely demand will remain strong for some time to come. we saw the world bank estimate of 3% g.d.p. growth globally for the next couple of years. that means demand characteristics will be strong. secondarily, you saw a poll of a broad number of economists saying it would take a price of $80 a barrel to derail this economy so i think we’re in a relatively robust demand environment with relatively limited supply and that means good earnings and stock prices for the energy sector.

>> what weighting are you maintaining in the energy shares? how optimistic are that that they’ll go higher?

>> right now, energy, as a component of the s&p, is around 8%. in the early 1980’s, the high was 28%. our belief is that it could go as high as 14% to 15%. we’d recommend to most people that 10% would be a reasonable starting to place to weight energy at this point in time and also if you’re an individual investor, it’s a way to hedge against the vulnerability of higher prices.

>> phil, thank you very much for joining us, phil dow of r.b.c. dain rauscher. he mentioned healthcare stocks. they are one of the leaders in the s&p this week and some say gains are just beginning.
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the company did not establish a new 2006 target. we will have more on ford in a moment. bloomberg news learned comcast and time warner will purchase adelphia communications for as much as $18 billion. the deal was presented thursday to the judge in adelphia’s bankruptcy case. the sale may be completed within several weeks. su keenan will have details. first, let’s bring you the closing numbers for friday, stocks falling across the board -- to get more on ford right now, the automaker cutting its forecast for this year and next. the announcement came after the end of the regular trading session. ford now says it expects to earn between $1.25 and $1.50 a share, below the company’s previous forecast, also lower than analysts’ estimates. they had been expecting $1.64. ford said it would not make its 2006 target of $7 billion in pretax profit. ford did say first-quarter profit will exceed previous estimates. standard & poor’s revising ford’s credit outlook to negative. this may put more pressure on ford’s stock, already down 25% year to date. looking at the story with the analyst at mcdonald’s investment, joining us on the phone.

>> how big of a surprise is this?

>> i wouldn’t say it’s much of a surprise because you’ve seen many of the automotive suppliers and automakers, particularly general motors, reducing their earnings guidance of the it’s a little surprising because when general motors reduced their earnings guidance a few weeks back, ford reaffirmed its earnings guidance, lowering it to the lower end of the range but here we are a couple of weeks later, reducing it again. it’s a little bit of a surprise, but not dramatic.

>> what could have changed in that period of time?

>> i think what we’re seeing is a lot more incentive activity, particularly on general motors’ side. general motors has a glut of inventory, particularly with trucks, sport utility vehicles and large pick-up trucks. i think general motors is more aggressive on the incentive front and ford is recognizing it will have to match incentives. >> in the press relisa, ngating the news from the company, they’re citing high steel, high oil, healthcare costs, weak dollar. iv. give us your take on what is the biggest challenge for the company?

>> i think the challenge, clearly, ford has high production issues―high inventory issues particularly on their truck lineup. i think they’ll have to take inventories down by reducing production. i think the main impact here is a production impact driven in part by lower sales, in large part, on the sport utility side of the picture.

>> are you surprised we’re not getting revision as part of the announcement having do with production?

>> yes, i am somewhat. although, in talking with the company, the company has said they’re not going to provide updated production information until their earnings call on april 20.

>> we have s&p saying the credit outlook is negative and it could cut the company to junk status at any time. what’s your reaction?

>> not necessarily surprising. general motors is in a similar position right now. the automakers are both struggling with higher intent of levels, lower profitability, so not surprising.

>> given all the bad news out there from the automakers, specifically with g.m. lowering its forecast several weeks ago, what happens to ford shares from here given the 20-plus decline we’ve already seen this year?

>> i’d be surprised if ford performs well in the next quarter or two. i believe they’ll largely trade flat. we could see a small downside but i believe largely flat for the next quarter or two. we’ll see how the back half of the year shakes out. they could perform well due to easier production comps and commodities comps in the back half of the year.

>> what do you think will happen with the bonds?% 

>> i’m not a bond analyst.

>> thank you very much for joining us. in another story, cable stocks boosted as investors anticipate the industry’s two biggest operators will complete a deal to buy adelphia. according to those familiar with the situation, time warner and comcast have agreed to pay as much as $18 billion in cash and stock for the bankrupt cable company. adelphia, which trades as a penny stock, has been at the center of the bidding war. su keenan follows the story and joins us now.

>> we have three other bids for this, this is the highest yet. the sale would mark the final chapter of an almost three-year long bankruptcy story and would give adelphia money to pay part of the $20 billion owed to creditors. the deal, which those familiar with the situation say was presented yesterday to the bankruptcy judge, valued at about $18 billion. the “new york times” breaking it down, saying time warner and comcast will pay about $13.5 billion in cash and $4.5 billion in stock. the transaction would give time warner and comcast roughly five million subscribers in cities including los angeles and miami. those close to the agreement say it could be completed within a couple of weeks. just two days ago, cablevision systems offered $16.5 billion for adelphia. there were two other offers from kohlberg kravis roberts co. and province equity partners. thomas eagan says the rest of the industry’s stocks were rallying because the price was just right.

>> there was concern on the cable stocks that they would pay more than $18 billion and there were a lot of folks that didn’t want to buy into the stocks on that possibility. the fact that it will probably be done roughly in the $17.8 billion range is a positive for the stock without a risk of a massively diluted deal. we like comcast.

>> in his view, comcast is the big winner here. the agreement reached with adelphia’s creditors gives comcast the ability to swap its stake in time warner for a part of the operational asset. eagan says comcast likely picks up two million subscribers in big customers, with tax benefits. adelphia declards bankruptcy after founder john rigas and his sons looted the company of more than $3 billion. a federal judge gave adelphia until the end of the year to decide whether to use an almost $9 billion loan to pay creditors in the event it doesn’t find a buyer.

>> thank you very much for the story. let’s turn our attention to the markets . we had stocks decline today, but from a weekly perspective, stocks had the biggest gains in two months. deirdre bolton has the weekly look.

>> oil prices were the magic ingredient, falling 7% for the week and stocks gained. out of the 24 industry groups on the s&p 500, 19 advanced. household products and healthcare equipment services groups were the two best performing groups. oil and stocks continued their tug of war this week with stocks gaining strength as oil gave ground. household product stocks like gillette, avon and clorox moved higher. pharmacy benefit manager medco and drug-coated stent maker, boston scientific, rallied. h.m.o.’s such as humana and pacific healthcare systems jumped as medicare pays more for services. the start of earnings season lifted markets . aluminum company alcoa and retailer bed bath and beyond reported better-than-expected earnings.

>> the first-quarter earnings season, there was too much pessimism in terms of what the market is expecting to come out of the u.s. corporate landscape for the first quarter. we think that, if anything, the earnings numbers are likely to surprise positively.

>> lower oil prices helped most groups but hurt energy stocks. the year-to-date breakaway leader was this week’s weakest link with the s&p 500 energy index the worst performer. stocks including chevrontexaco, e.o.g. resources and apache lost at least 2% this week. this group is up more than 17% this year, more than three times the gain of utilities. the s&p 500’s next-best performers. back to you.

>> thanks so much. first quarter earnings season gets into full swing next week. hear more from phil dow.

Interview: The outlook for the dollar and the economy

>> james tisch is chief executive of loews and diamond off shore. his companies are involved in a wide variety of industries. earlier today, suzy assaad spoke with him about the outlook for the dollar as well as the economy.

>> called the goldie locks economy, not too hot, not too cold, it’s just right. inflation is very low, growth at 3.5%, 4%, for the time being, things are very good. my guess is the economy will continue to grow at the 3% to 4% rate but inflation will pick up significantly.

>> assuming, then, that interest rates will go much higher and that will skew your goldie locks scenario, now?

>> it eventually will, that’s right. when i mention the goldie locks scenario, that’s for this point in time, not a forecast for the future.

>> what kinds of areas do you think we are going to see strength in? over the medium term outlook, what kind of sectors of the economy do you think will do better than others?

>> i think we’ll continue to see strength in the energy sector because in the energy sector there’s been significant underinvestment for a very long period of time. so it’s going to take a lot of time to recover on that. my guess, also, is that some of our export industries will improve simply because of the dollar’s decline which has been dramatic. recently, the dollar has had strength but in the historic context of the past several years, the dollar has declined a lot and i think that at some point in time, we’ll start to see some improvement in the current account deficit as a result of that.

>> you mentioned that you think inflation is going to be an issue for us down the line, rates will go higher. how does that impact your decision as the c.e.o.? how does that impact your hiring people? are you changing your hiring? are you looking for more people?

>> generally maintaining the same head count. we have six different businesses in six different industries and each one of those is run separately. but for each one of those businesses, we’re generally not increasing our head count. we’re able to accomplish what we’re doing with the same head count.

>> do you think―we’re hearing a lot of people saying, oh, how hiring should be better right now and the economy is doing so well and it’s expect dodd even better and we should be seeing increased employment numbers down the line for 2005. would you disagree with that given what you are seeing and what you’re doing in your own company?

>> my guess is that what we’re going to see for 2005 is employment gains on the order of 150 to 200,000 individuals per month which, again, is sort of a goldie locks number, not too hot, not too cold. it should keep the unemployment rate at about 5% to 5.5% level where it currently is right now.

>> the other issue we’re facing is business reinvestment. what do you do, what are your decisions on bolstering your r&d spending, for example?

>> well --

>> will you increase them, will they stay the same?
>> we do significant capital spending in two of our subsidiaries. one is our diamond offshore subsidiar in the offshore drilling rig business and we recently committed to a $250 million upgrade of one of our rigs combined with the $100 million of capital spending we do every year to keep the rigs operating. we also have capital spending programs in place for our natural gas transmission business. as we grow our system in order to accommodate all of our customers. so we’re seeing actually significant levels of capital spending for us.

>> from your friends, your colleagues, others in the industry, do you get the same sense? are they very much where you are in terms of where this economy is and more importantly, where it’s headed into the rest of 2005 and 2006?

>> i think the people i speak to are relatively sanguine about the economy, about the economic growth continuing in the 3% to 4% area. they’re concerned about certain bubbles they see, including real estate and housing prices. housing prices have grown significantly in a real rate of return sense and that’s giving some of us real pause for concern. the other thing is inflation we’re seeing in many, many commodities. we see it in steel, in oil, in food goods and at some point in time, that’s going to push its way through from producer prices to consumer prices and then my guess is that will happen starting in the second half of the year and then that will give the bond markets and the fed real cause for concern.

>> that was james tisch speaking with suzy assaad. we want to update you on a developing story today. u.b.s., europe’s largest bank, must pay at least $9.1 million in damages in discriminating against a former employee who sued the firm for sex bias. the jury is now awarding $21 million in punitive damages, bringing the total award to $21.9 billion in the sex bias case. we take a break. when we return, we’ll give you a headstart on the likely market moving events in europe tomorrow.

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microsoft saying the resignation of former chief financial officer, john conners, was effective march 31. it was announced back in january that he was departing. john conners going to a venture capital firm. the company, in an s.e.c. filing, saying that resignation was effective march 31. it is half past the hour right now. on wall street today, stocks came off the highs seen in the trading session, however, the dow and s&p showed advances -- that did temper concern that the federal reserve will view rising energy prices as contributing to faster inflation -- time now for the latest in the bidding war over m.c.i. the nation’s second largest long-distance phone company sticking with verizon, accepting a lower bid. the decision comes after qwest refused to comply with a request to raise its bid of almost $9 billion. what is the next move? su keenan says analysts and investors predict the fight will continue. su?% 

>> many are expecting nothing less, ellen. there’s growing anticipation the takeover battle will be hostile. people familiar with the situation say m.c.i.’s directors wanted a $30-a-share bid from qwest and qwest’s chief executive, richard notebaert, refused. m.c.i. officially rejected qwest’s final offer at midnight saying in a statement that qwest refused to sweeten the offer and many customers were opposed to the deal. m.c.i. also says “it remains open to the possibility of further discussion.” while qwest said it would pull its offer if rejected, a number of analysts, such as friedman, billings, ramsey’s michael bohen, say qwest will consider a hostile takeover.

>> i think qwest will put in a hostile bid at this point because qwest needs m.c.i. much more than verizon does. qwest has shown this by bidding over and over again. they’re now at $27.50 versus $23.10, which is where verizon’s bid is. i believe qwest will probably try a hostile because it’s the last option for the company.

>> qwest released a statement saying it is currently weighing its options and shareholders will dictate the next move. qwest has also hired proxy adviser, the altman group, a firm specializing in building shareholder support for hostile takeovers. the company’s c.e.o. made about $10.7 million in total compensation last year, by the way. blalock and partners rick black says qwest’s network and customer reach put it at a competitive disadvantage and as a result, long-distance operations have been dragging down the company’s overall financial performance.

>> they also have a large debt load, about $17.3 billion, which can’t be covered by their current operating capacity so the deal for them is much more a financial gain for them to deleverage their balance sheet as well as a strategic one.

>> both analysts predict the story ends with verizon as the winner in terms of which company winds up with m.c.i. shareholder leon cooperman says if a vote were held today, the m.c.i.-verizon combination would lose. he gets a vote from john paulsen who clearly favors qwest’s offer. the bond market tells a different story. m.c.i. bonds gained on confidence that the combination with verizon represents the stronger company.

>> thanks for the update. turning our attention to the retail sector. sales at u.s. retailers probably rose in march, yet the gain was not as big as it could have been and analysts are blaming gasoline for taking a bite out of retailers. june grasso has the story.

>> retailers across the board are going to report their same-store sales tomorrow and according to the head of the international council of shopping centers, sales probably climbed as much 4.5% last month. it’s the calendar shift of the easter holiday to march from april this boosted sales. he says an earlier easter may have shifted as much as 3% of sales into last month’s numbers.

>> the year-to-year comparison gets inflated for march of this year. it’s a big deal. it’s a big deal every year. it’s typically in the order of 100 to 200 basis points for an individual retailer.

>> on the downside, cold weather and record gasoline prices limited the boost that came from easter. lower income consumers were hurt by rising gasoline prices but it was the cooler, wetter weather that affected almost all shoppers.

>> overall, it’s probably not been a great month for the retail industry but we do think the teen group will stand out as a result largely of spring break business which happens rarld of the weather trends.

>> he says the best performers last month were probably american eagle outfitters and abercrombie & fitch, teen retailers likely to see double-digit increases. high-end stores like nieman-marcus should also do well as they are less affected by gas prices than stores like wal-mart.

>> tomorrow will look very mixed. it will be a high and low-end story with pockets of success, a lot of confusion, a lot of uncertainty considering the volatile month that we had.

>> still, he says it will be a bumpy ride for retailers the next two quarters in light of the surging gasoline prices. back to you.

>> thank you very much. investors would be able to get the disciplinary history of stockbrokers on the internet, that is under legislation approved today by the house of representatives. since 1990, the nasd has had to make information on brokers available through a toll-free number. today’s bill would allow the nasd to put that information online. the measure goes to the senate for action. coming up, an interview of james tisch of loews.

Interview: Timer Warner Cable

>> shares of research in motion trading lower in extended hours. the company says it may miss analysts’ forecasts in the current quarter. research in motion reported a fourth-quarter net less of $2.6 million due to costs in settling a patent dispute. the loss of one cent a share compared with net income of 23 cents a year earlier. sales jumped to $405 million, shy of analysts’ estimates. if you exclude some costs and gains, profit was 71 cents. on that basis, it beat analysts’ estimates of 65 cents a share. the national cable telecom association meeting is underway in san francisco. one of the biggest players there is time warner cable which is the second largest cable operator in the u.s. chairman and c.e.o. sat down with erin burnett.

>> it appears a big focus of the industry meeting has been on convergence and new technologies. what do you think the most significant thing here has been for time warner cable?

>> this industry has just spent the last several years and roughly $95 billion rebuilding our plant. we now have a physical platform that can offer all sorts of new service. what’s really exciting about this show is we see not only our traditional suppliers but also a lot of new entrepreneurs who have ideas for new products and services we can offer. there’s tremendous innovation taking place.

>> what do you think the biggest growth driver is right now for time warner cable?

>> there really are two things. first of all, the broadband business, the sale of high-speed internet access. roughly 20% of homes have passed penetration now, and it’s growing rapidly. we have a long way to go. we just introduced voice service across all of our operating divisions last year and that’s growing rapidly, also.

>> i want to follow up with you on that, one of your chief competitors, brian roberts at comcast, said the next engine for growth is the voip, or phone calls over the internet. over at comcast, they say that is a big priority for 2005. is it your number one priority this year?

>> yes. and i think as you talk across the industry, we’re all at different stages in that. we actually rowland it out last year. our priority now is to get more customers. actually, it uses voip technology but only inside the cable systems so it doesn’t go over the internet, which has all sorts of interference and what have you. it’s voip inside our cable system that uses the existing technology we built for our high-speed data business. when it leaves the cable system, then it’s a regular phone call.

>> how many homes do you expect that to be in by the end of this year?

>> we can’t predict that. at the end of last year, we had over 200,000 customers, adding about 10,000 a week. as we release quarterly results this year, you’ll hear updates. >> one thing i want to ask you about briefly is your relationship with america online. five years after the merger, you’re offering a.o.l. via time warner cable as a broadband service. a lot of investors want you to answer why it took five years. >> right after the merger we started offering a.o.l. in a bundle form and all that we’ve done is evolve the right package for the consumer so we’ve been working with a.o.l. all during the last five years. i think the most recent announcement will be very successful because it involves a.o.l. aggressively moving customers from dial-up to cable, which is going to be good for time warner cable. a.o.l. will get more eyeballs to sell advertising and search, which is good for them, too.

>> when do you expect to formally announce a bid for adelphia?

>> well, adelphia has been in the press a great deal and there is a process underway. everybody knows that we’re part of the process. and i think it’s a bankruptcy so it’s quite complicated and it will come to some fruition. when it does, there’s no particular time table.

>> $17 to $18 billion about right, though?

>> i can’t comment on that.

>> i do want to ask you, time warner, a lot of talk about convergence here. have you and c.e.o. dick parsons ever talked about splitting time warner cable out of a.o.l. time warner?% 

>> dick has been forthcoming about that. there’s an industry consolidation takes place in the cable industry. we would like to be bigger. i think time warner likes its current mix of businesses and doesn’t want to be more weighted in cable. we’re already the biggest part of time warner so a logical outcome is for time warner to have a publicly traded cable company that’s controlled by time warner. so dick has talked about that as a potential outcome. exactly how we get there remains to be seen.

>> that was the chairman and chief executive of time warner cable, glenn britt, speaking with eron burnett. we’ll get an update from europe.
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street where you did see stock market gains for the dow, s&p and nasdaq. the nasdaq closing at 1999, still down 8.1% for the year. a check on u.s. treasuries shows that the 10-year was lower by 3/32 today. federal reserve chairman alan greenspan addressed the market and spoke about energy. he did not address monetary policy in the speech on oil. that was a relief to some investors and traders who expected rising energy prices are contributing to inflation. the two-year note unchanged at 3 the -- 3.72%. gas prices climbed to a record high, however, it is not stopping most consumers from spending at the store. june grasso has been following details about a survey on consumer spending.

>> the consumer is not slowing down from this survey by the international council of shopping centers which found that 59% of households did not reduce spending in march on items like clothing, jewelry and consumer lns yet―electronics, yet many did not go out to eat as often because of rising gas prices. gas prices have added between $6 and $8 to the average consumer’s weekly expenditures compared to last year, according to the survey. the icsc’s chief economist says that has not changed discretionary spending for most.

>> our survey found that the incremental impact from a year ago till now is really basically nothing. it’s the same impact that we saw a year ago and that’s somewhat surprising given the fact that you say, gee, the price of gasoline is considerably higher than it was a year ago.

>> he says gas prices have been offset by about a $14 increase in average weekly earnings in the past year. the rising gasoline prices did cause 40% of consumers to cut back on driving. higher gas prices are having a greater impact on low income households. more than half of the consumers with incomes of less than $25,000 were driving less. for households below the median income, they spend 3.5% of their income on gasoline and that’s why they are hit harder with the gasoline price shock than upper income households.

>> gas prices are making more efficient shoppers out of many consumers. the survey shows they are making fewer shopping trips, but buying more per trip. ellen i.

>> thank you very much for the update. siebel systems out after the close. shares fell in extended trading. a decline of 6.8%. declines are coming because the company said first-quarter sales trailed the forecast. it expects earnings per share of break-even to one cent a share compared to the previous estimate of five cents. it is the world’s largest maker of custom service software. it says sales totalled as much as $300 million in. in january, it said sales would be as much as $345 million. siebel says some deals were delayed in the last days of the quarter and that application license revenue was disappointing. if we look at oracle shares, we do see a decline there, as well. oracle and siebel both produce software for businesses. look for those to be active in trading tomorrow. google and other tech shares led the nasdaq higher in trading on this tuesday. robert gray has details in the nasdaq marketsite.

>> the nasdaq composite index finishing higher for the second consecutive session. google shares were rising today by nearly 2% on the day after an upgrade at lehman brothers to overweight from equal weight. lehman brothers seeing the fundamentals in search remaining strong and google capturing an overall share of the greater search revenue and softness in google shares since the fourth quarter created a compelling buying opportunity. shares of apple computer, one of the biggest gainers in the nasdaq 100, american technology research reiterating their buy rating, highlighting product momentum and the i-mac g-five and power books and see more switchers from windows to the mac platform and american technology seeing the new tiger operating system for the macs to ship out by april, ahead of expectations. shares of dell rising ahead of wednesday’s analyst meeting. shares of american eagle outfitters rising to a record ahead of the monthly staples re―same-store sales release on thursday. on the software side, we did see weak and disappointment for investors. r.s.a. security saying first-quarter profit only eight to 10 cents a share, missing its own january forecast of as much as 15% and the preliminary results also fell short of the averagea estimate of analysts, 14 cents per share. the head of nasdaq trading at wells fargo securities is bearish on the software industry, saying this looks like, from the software companies, it’s an example of what we can expect from more tech companies and this could not only be a software-specific problem, we may see more profit disappointments in the coming days as earnings underway.

>> coming up, time warner, the nation’s second largest cable operator, we’ll hear from the executive in charge of that business about changing technology and how the industry is evolving.

Interview: Real Networks

>> repeating news from morgan stanley. the company is saying it will pursue the sale of its discover unit. you had morgan stanley shares jumping today that the company’s board had approved this. morgan stanley now confirms, saying it will pursue the sale of the discover unit, saying it needs to focus on the securities business. that’s a story that will continue to be developed and analyzed. and real networks are widely used by internet surfers but it is not clear how the company will compete long term with microsoft’s media player and apple’s i-tunes. matt nesto spoke with the chief executive and here’s what he said about the strategy.

>> our overall business grew 32% 2004-2003 and our music business grew triple digits, over 700,000 subscribers at the end of 2004. our view is that the digital music business, like most ofr businesses, is fundamentally on the right side of history as more and more digital, broadband and devices, and it’s subscriptions, our chosen area we’re focused on, we’re number one and ihink we’ll stay number one with great leadership opportunities.

>> presumably you’re focusing on subscriptions because if you did the number of songs downloaded, the super lative might not be as attractive?

>> we think it’s the foundation of how consumers get music. the jukebox in the sky model where the consumer gets as much music as they want with a fee, we offer the same thing. the model when you buy each song for 99 cents, works with building a library but it’s terrible for trying out songs. our average subscriber listens to over 200 different songs a month and the value proposition is 10 times the value versus buying each song individually. we think it’s a long-term model working very well and as more consumers are exposed to it, it will continue to grow.

>> will it be the death knell for the traditional big label recording industry?

>> we think digital is the growth engine for the music business. people want physical product, they want to collect them and have c.d. players in their cars, but digital is the growth engine. if you look at the u.s. music business in 2004, it was the first growth year they had in several and digital was 2% of their revenue and represented basically the core growth engine for the business so we’re bullish on the long-term music industry. there is a challenge on how you go from illegitimate models, piracy, to legitimate services and we’re on the right side of that and the music industry has done a terrific job and we have over a million songs in our library and they’ve opened up the languages pretty broadly.

>> the next big area prone to piracy is movies. obviously, you’re growing that business, as well. what will it take to make movie downloads on the internet popular wide scale?

>> we are in partnership with stars group, we have what’s considered the best product, stars ticket on real, offering access to 200 movies per month on a subscription model for $12.95. movies are bigger to download, 500 megabytes opposed to a song at 5 megabytes so it’s 100 times the storage and transmission time but as more people have broadband and bigger disks and networks to move around the home, that product will build.

>> it almost sounds like that’s technology out of your control. you can’t control consumers’ home computer capabilities.

>> our philosophy is long term. we started the company 11 years ago and launched realaudio 10 years ago. our view was let’s start with audio and move to video and we did this with technology and now consumer services and it’s a long-term view, a cycle that pays back not just in days but in months and years.

>> at some point you have to turn a profit on a full-year basis. when will that happen?

>> we have given guidance for 2005 and we’ve said we expect to do that after the cost of the tort lit litigation we’re in the middle of which many analysts discuss that separately. our business is growing profitably and we’re pleased with our trajectory.

>> are you hiring?

>> we are, in fact. if you want somed me your resume.

>> let’s check what those shares at close. a gain of just over 3%. in the past year, the shares have fallen 8%. aon has a new chief executive. the company hired former mckinzie executive, gregory case, assuming control less than a month after aon agreed to pay $190 million to settle charges from regulators, accused of deceiving clients by steering them to insurers that paid kickbacks. patrick ryan stays on as executive chairman. a check of those shares shows a gain of .3%. coming up, a preview of today’s market and tomorrow’s action in europe.
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stocks rose as oil retreated, the dow up from its lowest level this year. a.i.g. leading a mid-day turnaround after new york attorney general eliot spitzer talked about a civil resolution% -of his accounting probe of the insurance giant of the let’s look at those stock indexes. what you see is the dow average up almost 17 points, again, coming off what would have been its lowest level of the year. and the s&p up just over three points, 1176. the nasdaq up six points at 1991. well, the head of government bond trading at deutsche bank securities says the tendency in the bond market right now seems to be more bearish. traders were reluctant to push prices up for a fifth day after comments from st. louis fed president william poole who said -- “evidence is accumulating that companies are able to raise prices.” in trading today, a price decline of 2/32 for the 10-year -- shares of morgan stanley jumped on a dow jones report the company’s board wants to sell the discover credit card unit. june grasso has been following this story. june?

>> shares of the world’s second biggest securities firm rose as much as 5.7%. the rally comes as eight former morgan stanley executives are taking the fight to oust chief executive philip purcell to a new level, ratcheting up the pressure, the dissidents took out a full-page ad in the “wall street journal” asking employees to contact the former executive, saying the leadership issues moob addressed and resolved. former morgan stanley executives say that purcell’s leadership failures have caused the firm’s shares to lag behind rivals. morgan stanleymorgan stanley stock has been the worst performing ploong the five biggest wall street securities firms, losing almost half its value since the december 2000 high.

>> this company has underperformed its peers. if you go back over the past four years, morgan stanley’s earnings are down over that period, their revenues are down over that period and they have serious problem areas which have not been addressed. bove says the sale of discover card means the dissidents have put enough pressure on the board to move it to action.

>> if the stock price gets high enough and the recognition exists that it will fall dramatically if nothing is done, that will pressure for change.

>> bove says potential buyers for discover include bank of america, j.p. morgan, american express and mbna. other analysts say royal bank of scotland, barclays and capital one financial may be interested in discover card.

>> we had headlines bringing us the latest developments, which is in fact morgan stanley saying it will pursue the sale of the discover unit. this had been widely anticipated. we saw the stock jump on news that the board approved this and morgan stanley now confirming it will pursue the sale of the discover unit. two other headlines on morgan stanley, the company saying that it is naming steven crawford and zoey cruz to its board of directors. it was in the past two days the two were named to be co-presidents of the company. we will bring you the latest developments as we have them. in the meantime, a top story we’re following today has to do with a jump in a.i.g. shares coming on comments from the new york attorney general. we’ll bring in allan dodds frank for the latest.

>> it’s a controversy that continues surrounding the insurance giant, a.i.g., new york attorney general eliot spitzer saying he is confident that a civil resolution can be reached with a.i.g., a resolution of the a.i.g. company reinsurance practices. earlier, a.i.g. shares had been gaining as two analysts upgraded the stock. once the spitzer headlines crossed, gains accelerated. a.i.g. dropped 8% last friday after the “wall street journal” reported the new york attorney general was considering filing criminal charges as a result of possible document destruction. a statement by spitzer followed disclosures that a document dispute erupted at an a.i.g. office in bermuda. last night, the new c.e.o. of a.i.g., martin sullivan, said -- the relevant authorities include the s.e.c. and eliot spitzer. the new york attorney general said -- the documents in dispute concern two offshore companies utilized by greenberg for 2 1/2 decades to help compensate top a.i.g. executives. the 79-year-old greenberg remains in charge of both companies. they are an insurance brokerage named c.v.-star and a company called star international, owning 12% of a.i.g.’s stock. after documents in bermuda were reported destroyed by an a.i.g. attorney, greenberg’s attorneys and the company’s attorneys each tried to take possession of the documents. compromise was reached and the company says the documents are secure. a.i.g. is trying to sort out how to handle compensation, notably stock option retirement bonuses for about 700 top executives who had been given nearly $250 million by star international since 2001.

>> thank you very much for the story. and bob glazer says his business model will trump apple computer.

Interview: Lehman Brothers

morgan stanley says former president stephen newhouse has left the firm 6789 -- he turned down a new position reporting to purcell. the removal of newhouse, a 26-year veteran of the firm, prompted eight of morgan’s old guard to renew calls for purcell’s ouster. checking shares of morgan stanley at the close today, down 38 cents, $56.87. march job gains were the lowest in eight months as manufacturing prices headed higher. will u.s. corporations become more cautious about hiring and spending in months ahead? drew matus is senior economist at lehman brothers and joins us from new york with insight and analysis. welcome, drew. an awful lot of numbers today and as you pointed out, numbers we didn’t even expect. when you put them all together, what’s the picture that emerges of the economy?

>> i think the picture is one of caution with firms being very cautious about hiring given probably higher oil prices, higher input costs more generally. the other point of concern would be inflation. beat saw a pickup in average hourly earnings despite the fact that we got lower job growth than we expected and usually those don’t move opposite of each other. usually with higher job growth, you have higher earnings.

>> speaking of opposite directions, the i.s.m. survey on manufacturing showed a big jump in prices paid. the i.s.m. survey on service industries showed a drop in prices paid. is there an inflation concern out there or is it a mixed picture?

>> you have to remember, manufacturing companies use energy more aggressively than service sector firms do so if you’re manufacturing something right now and you’re buying oil in order to do it, you’re facing higher costs whereas a company like ours, for example, paper and pension, i guess. so there’s different cost structures for both sides of the economy and the manufacturing side is likely to be the one to be hit hardest by energy prices.

>> how much will feed through into the regular economy? manufacturing is smaller than service industries?

>> manufacturing is a lot smaller. we’ve seen that manufacturing companies have very little in the way of pricing power. we’ve had producer prices rising sharply for an extended period of time and we haven’t seen that pick up in consumer prices. the missing link is the feed-through effect from higher energy prices into the core c.p.i. because that’s when the fed will be concerned.

>> the fed was watching for many months the progress of employment. it seemed pleased with the fact that it picked up in recent month, then we get a number like today. how do you think they read that? how do you read it, and is there an explanation for the low number?

>> the explanation would be that we didn’t do a very good job forecasting. the 110,000 was half of what the market consensus was expecting on wall street. so once again, we somehow missed a dip. now, the question is, is this a one-time dip or a new trend? my guess would be that we’re somewhere in between. i don’t think we’re going to get job growth in the 100,000 range for the next couple of months. i think something higher than that is likely, even with higher oil prices so i don’t think the fed will be overly concerned about one number, i think they’ll look at the overall economy which seems to be doing just fine.

>> a number that didn’t get a lot of attention today, the final march number for michigan consumer sentiment, it dipped a little bit. will we continue to see a drop in consumer sentiment that threatens spending perhaps because of oil prices?

>> you might see a continued drop in consumer sentiment about linking it to spending is difficult. if you think back in your own life, you tend to spend more when you get more depressed to feel better. so the linkage between people being more confident and more willing to spend is shaky, at best.

>> how about in terms of job growth? we’re seeing job growth slow, at least this month. do you expect that to send the sentiment indicators down?

>> it’s not going to help things. the conference board indicator is likely to be the one that bears the bigger brunt of that. it’s the one that’s more tightly linked to the labor market . interestingly, inside the employment report, there’s the household survey, too, which is where we get the unemployment rate and that dropped .2% this month and the household survey tells us that we added 357,000 jobs. something weird is going on there with a discrepancy. maybe what will resolve it is seeing how the consumer confidence numbers actually move.

>> 30 seconds left. does the fed retained “measured” for an indefinite period, now? >> i think they keep it for the next two meetings.

>> thank you very much, drew matus, senior economist at lehman brothers. when we return, how does the weak jobs data fit into the long-term view. tom keene will have the “chart of the day” next.
在线播报
Listen Market briefing --- Mike (fast)
Economic reports --- Deirdre (slow)
NYSE --- Deb (fast)
Employment data --- Su (fast)
here’s how crude finished friday’s session, up $1.87, $57.27. unleaded gas also heading to a record today. looking ahead into next week, of the 45 traders and analysts surveyed by bloomberg, almost 60% say they believe the price of oil will fall next week, almost 30% say oil will rise, the rest expect little change. also friday, there were plenty of economic numbers for the markets to digest starting with a march jobs report that shocked economists and investors. employers adding just 110 workers in march, barely half the number forecast. unemployment fell .2% to 5.2%. su keenan will have details and we’ll hear from lehman brothers senior economist, drew matus, on the march report. we’ll also have details on an april’s fool day surprise, the wrong data was released for the prices paid. bob bowden coming up with that, plus, the bond market and fed reaction. here’s how the dollar reacted to today’s news. it finished higher against the yen, euro and the british pound. here are the settling numbers, now. the markets have closed. the dow jones industrials down 99 pints, 10,404 -- economic reports did give investors whiplash. deirdre bolton has the story.

>> stocks jumped at the opening bell as the weak unemployment report eased investor concerns about the threat of thraetion and higher interest rates. stocks fell after the market took a one-2 punch. an increase in the prices paid index of the i.s.m. report and oil prices rising to another record. 22 of the 24 groups that make make up the s&p 500 retreated.

>> that’s the risk out there, that inflation may be somewhat stronger and the concern is that the fed will have to move more abruptly and longer than maybe previously expected.

>> the oil rally also pressured wall street.

>> oil doesn’t seem to slow down. it’s stuck in the mid 50’s but creeping higher and stocks reflect that.

>> harley-davidson, carmaker ford and car parts maker dana all declined. delphi sank to an all-time low. the “detroit news” says the f.b.i. is investigating the company’s accounting practices. best buy shares plunged 8% after the company forecast the slowest quarterly sales growth in almost seven years. there are hopes that first-quarter earnings season will give stocks a lift.

>> between the economy, pricing power and prior expectations of the market having been scaled down, we may be set up for an upside surprise on earnings season here.

>> thomson financial says s&p 500 companies first-quarter earnings growth will be 8.1%, higher than the average for the first quarter of 7.6%. mike, back to you.

>> deirdre bolton. for more on today’s trading action, here’s a report from deborah kostroun at the big board.

>> a lot of news and economic reports coming out on friday’s session impacting the market with all the major averages lower. we did see record oil prices. crude oil closing up $1.87 a barrel. the i.s.m. manufacturing number fueled concerns about higher prices and inflation and the labor department report showed employers added 110,000 workers to payrolls in march, generally half of what economists expected. looking at the record crude oil price and its impact on energy stocks―integrated oil performing quite well. natural gas also performing well. look at a.i.g. year to date. this stock is down 22%. it’s the second worst performer this year in the dow jones industrial average.%  general motors, the worst performer in the dow, down 26%. a.i.g. down 22%. a.i.g. at its lowest level in two years, the worst performer in the dow on friday’s session on concern that investigators may find more accounting problems. the company this week admitted it may have overstated net worth as much as $1.7 billion. retail and best buy on the downward slide, as well, in today’s session. best buy, the second biggest decliner in the s&p 500. they expect their fiscal 2006 earnings to be below analysts’ estimates. some other news in today’s session, car and truck sales. general motors posted its first monthly increase in u.s. sales of cars around trucks in march. toyota and nissan sales surged. however, ford said sales dropped 1.7%. freddie mac falling for a second day. john snow calling on congress to limit growth in the $1.5 trillion combined mortgage portfolios that both fannie mae and freddie mac have in order to cut risk in the financial market . i’m deborah kostroun at the new york stock exchange, bloomberg news.

>> the nasdaq started the second quarter where it ended the first, with a lower close. robert gray has details from the nasdaq marketsite in times square.

>> the nasdaq composite finishing the first day of the quarter with a familiar story, closing lower, near the lows of the session. as the selloff was about to finish for the day, david riggs with federated investors telling me we’re seeing slower economic growth and higher inflation, neither one of those is good for stocks and he is moving to the sidelines. he says the next big move for stocks is probably down, not up. the worst performing groups in the session, biotechs, the worst performers in the quarter and the worst performer in today’s session. also telecom stocks were lower and of course transports were lower as crude oil on the nymex spiking up to another record high today. airline stocks are weaker, facing higher fuel costs. jetblue, skywest and northwest airlines declining. retail stocks, merrill lynch recommending that investors underweight retail groups. some of the reasons for that include higher oil prices and difficult comparis comparisons to last year. some of the stocks falling, american eagle outfitters, urban out50ers among those declining. shares of m.c.i. rising, the number two long-distance phone company agreeing to reopen talks with qwest. qwest sweetened its takeover bid to $9.1 billion. m.c.i. did get a waiver from verizon to hold talks with qwest and verizon could force m.c.i. to ask shareholders to vote on verizon’s buyout bid. at the nasdaq, i’m robert gray.

>> more details on the latest jobs report showing american companies hired new workers at roughly half the forecast rate. economists say rising raw material costs are starting to hurt job growth. bloomberg’s su keenan has more on the story. su?

>> mike, the latest employment data suggesting u.s. companies are more cautious about spending and hiring at a time when we’re seeing gas and oil prices hit never-before-seen levels. 110,000 jobs added in march represents the smallest job growth since last july when talk of the so-called jobless recovery was a key issue in the presidential election. the march payroll additions are barely half what economists forecast. they came in below even the lowest estimate in a bloomberg survey. economist lakshman achuthan is unfazed.

>> april fool’s. month-to-month gyrations aside, we clearly have an economy that is humming along and it fine. you still have this persistent disconnect between what’s going on with the economy and g.d.p. and what’s going on with jobs. every month we see it in the numbers, weakness in manufacturing.

>> let’s look at the weakness in manufacturing. factory payrolls fell by 8,000, the reverse of what wall street economists predicted, a gain of that amount. former federal reserve governor susan phillips calls the greater-than-expected drop in the unemployment rate, 5.2%, the silver lining of the report.

>> any one month, you can get huge volatility from month to month. so i think we have to take that into consideration. but the unemployment drop was very encouraging.

>> j.p. morgan’s bruce kasman says last month’s hiring was weak and he sees it as a message the economy is losing momentum.

>> i think some of the risks that they might have to go more aggressively was reduced but there is still price pressure in the system and the fed’s policy stance needs to be adjusted. steady as you go here, 25 a meeting, but don’t underestimate where the fed has to ultimately go.

>> back to you.

>> su keenan. stay with us, we’ll have more in a moment.

Interview: Tokyo market

>> it’s coming up on a quarter past in sydney. 12 past, to be exact. looks like a beautiful day at the opera house. early fog, remnants giving way to a sunny day and the high temperature, 24 degrees. welcome back to “ live,” 6:13 a.m. in hong kong. asian stocks rose in u.s. trading. higher oil prices lifted energy concerns like petrochina and b.h.p. billiton. taiwan’s united micron climbed after merrill boosted their rating on the stock. the a.d.r. up 11 cents at 3.37 last quote. the bony indexes with two of them up, japan a.d.r.’s south by .15%. the nikkei futures in chicago ended the session at 11,600, about 40 tips south of the other two markets . keep an eye on stocks in tokyo today amidst the release of the tankan out shortly this morning. mazda motor is recalling more than 67,000 minivans in the japanese market to fix faulty shift levers. that can be dangerous, you’ll be whirling around at 8,000 r.p.m. in first gear. sony has formed an l.c.d. venture with toyota to tap rising demand for flat panels used in digital cameras and camcorders. aeon will raise its stake in the operator of a home improfit store. the furniture retail’s full-year net income rose 12% to 8.7 billion. a quick look at other stocks on the focus list on the asian markets today, t.a.c. in thailand added 117,000 users in february,86% more than in the previous month and the philippine government will buy $38 million in shares of san miguel, the food and beverage company, less than half the stock it’s allowed to do so in the company’s rights offer. some analysts believe they may not be going for the whole shabang because of the government’s tight finances. qwest communications raised its takeover bid for m.c.i. to $9.07 billion, turning up the heat on m.c.i. to scrap an agreement to be purchased by verizon for a considerably lower price tag, $7.6 billion. qwest says the offer will be withdrawn by tuesday if m.c.i. doesn’t take it. qwest’s higher offer is the fourth increase in the month and a half battle with verizon. m.c.i. snubbed each of the prior proposals by qwest saying the merger with verizon makes a stronger company. m.c.i. shares rose 2% in new york trading on thursday. checking on world news, we’ll head to ron madison in tokyo. good morning, ron.

>> good morning, bernie. we’re hearing that pope john paul ii’s health has taken a turn for the worse. cnn quotes a vatican source as saying the pope has been administered last rites. a vatican spokesperson said the health started to deteriorate after he developed a higher fever, brought on by a urinary tract infection. the associated press described an alarming lowering of blood pressure that the pope is suffering. he made a brief appearance yesterday at the window of his vatican apartment. the pope has been receives some of his food via a feeding tube inserted through his nose. a decision apparently has been made not to return the pope to the hospital. we will keep you up to date on the latest developments on the health of the pope as headlines continue to cross today n.florida, terri schiavo has died 13 days after doctors removed the feeding tube that was sustaining her. 41-year-old schiavo became the focus of a national debate as her parents and husband fought over keeping her alive. schiavo had been able to care for herself―hadn’t been able to care for herself since her heart stopped in 1990. doctors say she was in a persistent vegetative state since then. michael schiavo petitioned courts for seven years to allow his wife to die, saying she wouldn’t have wanted to be kept alive artificially. an autopsy on schiavo is planned. u.s. president george w. bush says millions of americans are saddened by terri schiavo’s death.
>> laura and i extent our condolences to terri schiavo’s families.%  i appreciate the example of grace and dignity they have displayed at a difficult time. i urge all those who honor terri schiavo to continue to work to build a culture of life where all americans are welcomed and valued and protected, especially those who live at the merc mercy of others.

>> bush reiterated that in cases where there is serious doubt, he says “the presumption should be in favor of life.” a u.s. presidential commission says america’s spy agencies were “dead wrong” about the military threat posed by saddam hussein’s regime in iraq and says the u.s. knows disturbingly little about other nation’s weapons programs and threats posed by adversaries. i’ll have another update at the top of the hour.

>> thank you. coming up, the u.s. dollar fell against the euro and yen on signs that the fed may not be raising rates in the future by the same thresholds traders initially expected. we’ll speak with a strategist in melbourne, victoria, about what he expects greenspan and the fomc to do next.

在线播报
Listen Market briefing --- Bernie (slow)
Crude Oil --- Su (fast)
in a couple of hours, we’ll speak with craig ferguson from the australian new zealand bank where the sentiment towards the yen has been hurt by a barrage of reports out of japan earlier this week, weak industrial production, household spending and the jobless rate weaker than expected. and we’ll speak with lucas chow, executive vice president at singtel. goldman pushed up its prediction on crude oil. we’ll have more on oil in a few moments from new york. looking at the major session on wall street. the dow fell .35%. as for stocks individually that moved on the session today, a.i.g., american international group, one of our key focuses yesterday, the biggest loser among dow components after their debt rate was cut one level by moody’s and standard & poor’s. the world’s biggest insurance company faces higher financing costs and lower earnings. confidence among japan’s big manufacturers probably did not rise in march from the previous three months. economists we surveyed say the bank of japan’s tankan report will show the quarterly index was unchanged from march of last year, reflecting continued concerns that a recovery in the economy may not be durable. manufacturers will also probably say they plan to cut spending in the fiscal year starting today. this is april fool’s day, by the way. still, some manufacturers are optimistic about their outlook.

>> demand is continuing beyond our previous assumptions. this will probably last through 2005, especially for high-quality steel we excel at. these conditions will continue as demand diversifies and higher quality is needed.

>> the bank of japan is due to release the report at 8:50 a.m. this morning in tokyo, or 7:50 in hong kong. we’ll get reaction from jesper koll, the merrill lynch economist in japan. a report showed u.s. jobless claims unexpectedly rose and inflation remain unchanged. currency traders took the figures to mean that the fed may not need to speed up its pace of rate hikes to curb inflation. charles schwab expects rates to rise as high as 4%.

>> the federalable discount rate is 2.75, i guess it is, and it will probably go up to 4%, which impacts other rates.

>> the dollar is currently 107.1750 against the yen and the euro picture with 129-- 1.2963. the yen started rising against the dollar yesterday. yesterday marked the end of the financial year so a number of japanese companies with overseas units started repatriating or sending back their money for the book closing for the 31st of march. for the dollar, we have some smuver in the system. the jobless claims, if that tickles your fancy. there’s the yen again and the dollar heading for its best quarter since 2001 against the euro. u.s. jobless claims, 250,000 last week, about 30,000 ahead of expectations. that’s the highest figure for first-time initial jobless claims since january. the figures come before the employment report, jobs creation report due out later tonight. many eyes watching that. our survey calls for about 215,000 jobs created in march for a second month. the gremlins are out of the system, let’s see if the next one is in tact. yes, indeed, personal spending rose .5% in february, in line with views. robert schiller, economy professor at yale university, says consumers are spending now because they think prices will go higher.

>> the definition of a bubble is a time when prices are supported by the expectations for future price increases and i think that’s what’s happening. people see prices going up and they think i’m going to buy even though it’s expensive and it’s going to go up more.

>> commerce also reported incomes rose less than expected in the month of february. treasuries rose after those government reports indicated inflation held steady. here’s the benchmark 10-year. the yield indicated at 4.48, the price up 17/32. crude oil rose and gas and home heating oil futures surged to records in april. who’s using home heating oil. helping kick off today’s rally, the prediction of analysts at goldman that crude oil futures could reach $105 a barrel. oh, my! su keenan has more on the story. what were they on when they made that prediction, su?

>> well, this is not that far from predictions they’ve made late last year and certainly that number had reverberations in the trading pits today. the goldman sachs analysts saying the oil markets have entered the early stages of a super spike period which could drive prices dramatically higher than previous estimates. they say record prices have failed to curtail surging fuel consumption. as a result, they are raising their upper limit for oil prices from $80 a barrel to $105. ed silliere with energy merchant international futures, says the call grabbed the attention of the entire oil trading community.

>> almost like a self-fulfilling prophecy at that point. they tell all their customers that they believe it’s going to $105, all their customers buy through them and they help drive the price higher. so the trading community will take that and try to jump in front.

>> at one point in new york, oil futures up $2 a barrel. there’s concern u.s. refiners cannot make enough fuels from surging crude supplies. analysts say there’s plenty of crude around, but not enough refining capacity to process it. opec is pumping as much oil as it can and last week the u.s. produceed as much oil last year, creating a new range.

>> the day of the $30-a-barrel oil have come and gone. you’ll have pullbacks on news and volatility related on news items and political events, but with regard to oil, the chinese plan on building more miles of highway than the u.s. has currently in the next 10 years. boone pickens said it would take something like a billion barrels of oil.

>> new york crude futures surged to a record price of $57.60 a barrel on march 17 and are now up 27% year to date. back to you.

>> the way oil is going right now, su, my mom has her hummer h2 on the market for sale. thanks a lot, su keenan in new york. coming up, terri schiavo, the brain-damaged florida woman, who became the focus of national debate, has died. that story is coming up.

Interview: Tokyo market

>> welcome back. it is 9:12 a.m. in sydney. time changes this week so they’re working a little wit early―bit earlier than usual. the back of the sydney opera house. showers, partly cloudy, high temperature 23 in new south wales today. watch out for these stocks in asian markets today. n.a.b., or national australia bank will book ad 205 -- $205 million provision for the period ending in march because of its plans to reduce its work force. indonesia satellite’s profits rose in the last year. the number two telephone nnk operator signing up more mobile phone users as faster growth in the economy has boosted income. profits rose almost 4%, excluding a one-time gain in the year earlier when they sold down a stake in p.p. telecom cellular. the company restated 2003 profits to 6 trillion and 80 billion rupiah to 1.6 trillion to account for the extraordinarily large gains. faster economic growth has encouraged demand for telecommunications in the country where about one person out of six has phone access so plenty of room for the market to grow, say some. india’s economy probably slowed in the fourth quarter because of falling farm output. economists we surveyed forecast growth slowed to 6% from 6.6% from the previous quarter. while farmers suffered the second lowest rainfall in at least 17 years, hurting crop profit. in order to boost growth, the prime minister is relying on manufacturers like a carmaker and service companies like infosys. the government is targeting growth of 6.9% this year, making it the second fastest growing major economy behind china but so far it looks like, if the forecasts are correct, they’re running something behind that clip. at least nine companies are bidding to buy the biggest producer of jinro, south korea’s best-selling liquor. creditors are trying to gain back $2.7 billion for jinro. c.j. corporation, doosan and lolte, among the companies that made offers. merrill lynch is argating the sale and the seoul district court will choose one of the winning bidders. that decision may come as early as today. jinro controls over half of the korean market for sojy, a clear alcohol, usually distilled from sweet potatoes and reportedly packs quite a punch. for world news, ron madison joins us from tokyo. we haven’t done the joji thing yet―sojy.

>> welcome back, bernie. the death death toll from monday’s earthquake in indonesia rising, 518 people confirmed dead in sumatra as well as outlying islands, including nias and simeulue, the hardest hit there. u.n. officials say the death toll is expected to rise. assessment teams are surveying the magnitude 8.7 quake struck areas already devastated by the december 26 earthquake and tsunami, the disaster that left some 270,000 dead. a u.s. appeals court has again refused a request for a hearing by the parents of terri schiavo. the hearing was seen as a last-ditch effort to restore a feeding tube for their brain damaged daughter. yesterday, the appeals court granted the parents more time to file the request. there’s no word about when a decision on that was suppose to have come. 41-year-old schiavo is in her 13th day, now, without food and water. the schindlers have been fighting a seven-year legal battle with this man, terri’s husband, michael schiavo, over whether she should be kept alive. terri schiavo suffered brain damage after a heart attack 15 years ago. the u.s. nominee to lead the world bank meets with european officials in brussels. paul wolfowitz hopes to procure european support for thursday’s world bank vote. the promise to recruit a multinational management team to run the global development lender.

>> look forward to having a truly multinational senior staff, if i am president of the bank. there’s great talent here in europe, there’s impressive people in the developing world and i am going to need all the help i can get so i’m looking forward to that.

>> wolfowitz’s nomination has received a chilly reception in some european capitals. that is the latest look at world news. more “bloomberg live” coming up. we’ll take a quick break.
在线播报
Listen Market briefing --- Bernie (slow)
Crude Oil --- Su (fast)
good thursday morning from hong kong, i’m bernie lo. this is “ live.”%  coming up on the next 60 minutes of the program, the dollar hasened its latest rally that culminated over the last couple of weeks. we’ll speak with a currency strategist from investors bank and trust. what comes next for the u.s. dollar? we’ll also talk about china and its insatiable appetite for metals and copper. we’ll speak with a natural resources splecialist from anz banking corp. we’ll look at where stocks are headed for the coming quarter. economists have concern that growth may be stalling with worse-than-expected industrial production figures yesterday on top of employment and household spending data the day before that disappointed views, as well. hans goetti from citigroup will be here. a.i.g., american international group, says it engaged in false accounting practices over the past 14 years. the biggest insurance company in the world says it may have inflated the company’s net worth by as much as 2%. a.i.g. says it structured transactions with reinsurers, including berkshire hathaway, to manipulate the company’s accounts. a.i.g. is delaying its annual report for the second time and may restate earnings or book a couplative expense―cumulative expense in the fourth quarter of last year. hank greenberg is stepping down as chairman. arthur levitt blamed the insurer for misleading investors.

>> i think when the smoke clears, the viability of the company is not at issue but i think the predictability of its earnings, if you look back over time, will be a lot less so than it would have appeared using these and other devices to smooth earnings.

>> a.i.g.’s statement prompted the ratings agency, standard & poor’s, to lower the company’s aaa debt rating to aa-plus. we’ll speak to the individual at s&p about the cut. u.s. stocks had their biggest rally of the year so far after a report showed that crude oil inventories in the united states rose for a sidenth week running. we’ll look at how u.s. markets closed -- among individual issues on the move, micron led computer shares higher after it reported net income for the second quarter 17 cents a share, beating new ysts’ estimates. and a.m.r., parent of american airlines, raised to a buy from neutral. the benchmark 10-year note rose before reports on inflation later on today in the u.s. the jobs picture on friday, last year, the jobs’ report triggered six of the 10 biggest daily price changes for the 10-year note. the dollar ended its nine-day rally against the japanese currency after a u.s. report showed the economy grew less than expected in q-4. the commerce department reported that g.d.p. expanded 3.8% in the fourth quarter against a 4% expectation. against the euro, we have 1.2915, unchanged. crude oil futures tumbled and then they recovered. a bit of a yo-yo rollercoaster after the latest u.s. report shows the biggest buildup of u.s. supplies since july of 2002. on the new york mercantile exchange, crude futures plunged more than 3% to below $54 a barrel before staging a comeback in the final hours of trading. natural gas, gasoline and heating oil as well as other distillates ended the day higher. su keenan has more on the story. it started as a rough day for you.

>> traders were taken by surprise initially, supplies of crude oil increased for a seventh straight week, double what traders and analysts forecast in terms of a gain. the latest department of energy report in the u.s. shows an almost 5.5 million barrel gain in u.s. supplies. fimat’s john kilduff predicts supplies will continue to rise saying that higher oil prices have encouraged producers to pump at a faster rate. alaron trading’s phil flynn predicted today’s drop in oil prices would be temporary. by the end of today’s session, crude oil had erased all but .5% of its 3% loss.

>> here we are, gasoline is at an all-time record high, it’s not even the summer driving season but yet we’re not seeing demand collapse. i think this is very significant. it tells me the average consumer is used to paying high gasoline prices so they’re not going to be shocked when prices edge up another dime or 20 cents.

>> and they are, indeed, edging up. retail prices for gasoline reached the never before seen price of $2.15 at the pump in the u.s. as of yesterday, according to a.a.a. as for the bigger risk to global demand, risk mueller―rick mueller says there are still bullish factors, including opec’s rising production raising concern about the lack of spare production capacity. nymex crude oil futures have risen 24% in the past three months. bernie?

>> su, thank you very much, su keenan, new york city. in this neck of the woods, asian stocks rose in u.s. trading for the first day in eight. we’re talking about the a.d.r.’s. the slide in crude oil prices easing concern that higher energy costs will lead to a global economic decline. companies including kyocera, toyota, china eastern air leading the gains among the depository receipts. the bank of new york indexes were all three ahead on the session with the winners, the china a.d.r.’s, despite warnings from chinese authorities about a further clamp down on property speculation. we’ll speak about that just ahead. nikkei futures look something like this. chicago pit traders pricing in a start of 11,630, north of osaka and singapore closes yesterday. stocks to watch for in the japanese market today, number four drugmaker in japan has applied to the european medicine agency for approval to sell an anti-seizure drug. and nippon oil raised its full-year profit forecast thanks to increased sales and higher prices for crude oil products. sony has received approval from the european union antitrust regulators for a planned nearly $3 billion purchase of metro-goldwyn-mayer, or m.g.m., that would clear the way for sony to acquire one of the world’s biggest film libraries. a couple of companies owned by hong kong tycoon li ka-shing scheduled to report results today. hutchison whampoa expected to report second-half earnings fell around 67% because of continued losses at the mobile phone businesses like 3g which wiped out and offset gains from asset sales in earnings from reports of the retail division and may have hurt profits at the flagship developer cheung kong. we’re looking for a 37% decline in second-half profits despite a rebound in property prices. second-half earnings at c.k.’s-property-related units like the rose―likely rose 49% li’s five-year gamble on 3g has yet to pay off. we’ll speak to wu mengfei later in the program regarding his expectations for hutchison. china tel comearnings probably slowed because of lower subscriber growth. the company operates one out of every four fixed phone lines in china. analysts surveyed by bloomberg expect net income rose .8%. a growth in the number of subscribers for internet and fixed line is slowing. some say average revenue per user may also continue to fall, as well. after the break, the official toll from the march 28 earthquake off the sumatra coast earlier this week mounts as aid efforts increase. world news coming up.

Interview: Lifting the arms embargo to China

>> with the fed move and the oracle results and a programming note, larry ellison is live on the show later on to dissect the quarterly earnings report with us. but outside of the world of business, we head to ron madison for more.

>> british foreign secretary jack vaw saying momentum is shifting in the european union against lifting the arms embargo to china.

>> officials say china’s recent legislation threatening to use military force against taiwan have set back the plans to lift the ban. the french have been leading the campaign to renew military sales to china. the bush administration has asked the 25-nation bloc to keep the embargo in place to prevent an arms race in the pacific region. the governments agreed back in december to look at ending the ban. fresh hope today that north korea will return to talks aimed at dismantling the nation’s nuclear program. north korean premier met with wen jiabao in beijing on tuesday it is reported that wen jiabao said the talks were the only pragmatic way to resolve the issue. the talks come a day after north korea said it would not beg for talks with the united states. north korea said, february 10, that it has nuclear weapons and at that time rejected a fourth round of talks. the u.s. has been relying on china to bring north korea back to negotiations. arab leaders are meeting in algeria. the event had been billed as historic because of the syrian withdrawal from lebanon. the moves toward peace in israel and the pressure to convert to democracy. several arab leaders are not attending the summit, citing health reasons or disputes. the 13 attending are mostly avoiding the issue of lebanon and democratic reform. they’re also rejecting jordan’s plan to normalize relations with israel. the leaders are focusing more on reforming the arab league itself, endorsing a plan to set up an arab parliament which is an unelected body for the league’s member countries. in the united states, now, the parents of a brain-damaged woman are appealing a federal judge’s ruling not to order their daughter’s feeding tube restored. lawyers for terri schiavo’s parents filed papers in the 11th u.s. circuit court of appeals in atlanta after a federal judge ruled that schiavo’s “life and liberty interests” were protected by the florida court that ruled that the tube could be dissected. the federal judge heard arguments a day earlier. the move came after the u.s. congress and president george w. bush took extraordinary action to authorize court review on the case. that’s the latest look on world news. back to you.

>> thank you very much for that. back to corporate news. alcoa or aluminum company of america will cut 1.5% of its global work force in the next 12 months to cut operating costs and debt. they plan to sell a stake in a norwegian unit for a price tag approaching $900 million after a surge in the cost of power and raw materials led to a drop in fourth-quarter profit. shares of alcoa, last indicated, down 50 cents at $30.96, a drop of 1.59%. general mills says third-quarter profit fell 5% because of taxes from the sale of a unit. net income at the cereal maker came in at $230 million or 58 cents a share. they’re number two after kellogg of battle creek, michigan. sales at general mills rose 3%. the company paid taxes after selling a european snacks unit and changed how it booked some debt. the revenue of the unit that sells cereal to u.s. retailers was unchanged after a price increase led to a drop in shipments. general motors bonds down in new york trading overnight. the carmaker says it will lose financial statert from g.e. the yields of g.m.’s 30-year benchmark bonds widened to as much as 5.13% over comparable u.s. treasuries on par with companies that moody’s and s&p views as junk. g.e. said its credit had not been withdrawn from g.m. g.m. says earlier comments made by its spokesperson were incorrect. bearing point’s c.e.o. says his priority is fixing errors in the company’s financial reporting and that process will take several quarters.

>> the first priority is for us to get our financial reporting in order. it’s embarrassing and inexcusable and we’re going to work diligently and super hard and get these issues resolved once and for all.

>> you took over on monday as chief executive officer of the computer services company which has delayed releasing results for last year and the first quarter of this year. bearingpoint used to be part of the auditing firm, last week said it found accounting errors and weaknesses in accounting. one of the issues for larry ellison at oracle will be integrating retek without you’s help. coming up next, the u.s. dollar rose to a one-month high against the euro and yen. the fed is worried about flaetion. what should investors be concerned about.
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Listen Interview: U.S. rate hikes
in addition to our live interview with mr. ellison, we’ll have in-depth coverage of the fed’s decision and what it means for the markets . we’ll speak with a currency strategist to see if the dollar may get a further boost. the yield gap between the dollar and those of other countries is changing. today’s move by the fomc is the start of things to come, according to our guest. and yesterday we saw the biggest drop in a month on the australian stock market on concerns regarding a local airline. oracle’s third-quarter net income fell 15% to $540 million because of costs from the peoplesoft acquisition. sales, however, surged 18% to just shy of $3 billion, just under the street’s view. profits, excluding costs, beat expectations by a cent. analysts say benefits of the peoplesoft deal will kick in next year when they book a full year following integration. larry ellison, the c.e.o., closed the peoplesoft deal in january after a year and a half battle and won a second victory yesterday, beating germany’s s.a.p. to take over retek. oracle’s offer of $11.25 a share beat s.a.p.’s offer. we’ll speak with larry ellison live at the times on your gene. the dollar is up, bonds down after the fed decided to raise rates as expected and also accompanying the decision by commentary. the fed kept to the language saying it was lifting at a measured pace, lifting the fed funds rate to 2.75%. while the fed signaled its intention to keep raising rates, a more hawkish statement triggered speculation they may get more aggressive, saying pressures on inflation have picked up in recent months. the benchmark 10-year note pushed down -- the manager of the world’s largest bond fund didn’t see the fed’s new wording as shocking.

>> we have higher oil prices, obviously, higher commodity prices. we have the dominant influence of china in terms of the global economy and all of that leads to higher inflation down the road. we have large budget deficits and euroland extending those deficits. these are inflationary portents for the future and this should be no reason for investors to be surprised the fed officially recognized that threat.

>> expectations that u.s. rates will keep rising lifted the dollar for a second four in a row. the dollar quoted at 1.3282 against the euro and 105.64 against the yen. u.s. stocks turned lower after the fed cautioned of inflation risks. the dow, s&p 500 and nasdaq tech index closed down about 1%. stocks rallied early in the session and reversed course, a yo-yo session following the statement from the fed. interest-rate-sensitives fell, including financial stocks, the three biggest banks. higher interest rates cut the value of bonds owned by the banks and tend to hurt demand for mortgages and loans. oil prices down on speculation opec will increase production faster than expected. the cartel agreed last week to boost quotas half a billion barrels a day. the group is talking about a second half a million barrel-a-day increase. the saudi oil minister says that kingdom is pumping 9.5 million barrels a day but they have a million and a half barrels in additional capacity. asian stocks down on the session. chinese shares and computer stocks among the decliners. the bony indexes looked like this, the asia 50 a.d.r.’s down 1.11% and the china a.d.r.’s down about 2%. the bony japanese a.d.r.’s down.74%. the chicago merc. futures pricing in 11,730 or thereabouts. a quick look at the stocks to watch in tokyo. japan tobacco says it will get $15 million to license rights of an hi drug to gilead sciences to all countries outside of japan. fujit says it may sell stock. and kyocera raising its planned second-quarter dividend by 2/3 to 50 yen, planning to pay between 20% and 25% of net income as dividend payout. australia stock market pulled back from record highs yesterday. airlines were front and center on concerns following a virgin blue air earnings warning due to kerosene prices. we’ll head to david tweed in sydney to learn the effect the fed and greenspan may have on the market . the r.b.a. preempted the fed move with their own hike recently. is the u.s. hike that we saw, as expected, likely to affect the mood today?

>> it was the wording of the statement out of the fed where they indicated they are concerned about the prospect of inflation. there is speculation that the fed might accelerate future interest rate increases and that isn’t such good news, really, for australian stocks or for stocks that really rely on the u.s. economy, the world’s largest, and, two, as an export market , and, two, other stocks actually trading there as their main source of income. i’m thinking of companies like news corporation. its stock dropped 2.2% overnight. we saw rinker, a building company in australia, which gets 80% of its profit out of the u.s., that stock down 1.9% in australia yesterday. we want to be looking for that one. james hardie is another one. b.h.p., b.h.p. billiton lost 2.5 -- or 2.2% overnight. there is concern that an increase in interest rates might crimp demand for metals. that said, we did see j.p. morgan increase its earnings forecast for b.h.p. billiton by 4% for this year and 4.4% for next year. they’re factoring into the fact that b.h.p. profit might increase because of the nickel operations of w.m.c. resources, which it hasn’t finished acquiring yet. it does look as if they’re anticipating that acquisition.

>> and outside the issue, of course, of commodities and interest rates and yield gaps, i know there are domestic situational mays.

>> in terms of news today, we expect foodland’s first-half earnings about midday sydney time. this is the last day for fosters to extend its bid for southcorp. we expect foster’s to extend that bid. the southcorp share price is inching lower in recent days, only .6 above the foster’s bid. we have a number of stocks going ex-dividend, trading without the rights to their latest dividends. more than 20, in fact. one is multiplex, upgraded today by merrill lynch. multiplex had a share price drop after it had problems at the wembley’s stadium. but merrill lynch says it’s a buy, raising the recommendation from neutral.

>> thank you, david. we’ll check with you closer to the start of the session. japan’s trade surplus probably shrank in february. economists we surveyed say the surplus may have fallen 4.66%. slowing exports, higher prices of oil imports all contributing to the shrinkage. that trade data is released at 8:50 a.m. tokyo time. we’ll have reaction for you and an economist at hsbc will help us dissect. and inflation figures for singapore and export orders for taiwan released today. after the break, the european union may delay plans to lift its decade and a half arms embargo on mainland china.