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Interview: Drug stocks

>> the u.s. economy growing at a 3.8% annual rate in the final three months of 2004, up .7 of a point from the original calculation a month ago. bruce kasman is head of economic research at j.p. morgan and joins us from their offices in new york with his reaction to the numbers. the number was expected to be higher. any surprises in why, though?
>> not really. i think we had broad based improvement in just about every component in activity. it was a surprise that consumer spending was weaker and business investment was stronger but most of that was a sense that some of the car sales and trucks in the fourth quarter were really investment by companies, less than by consumers. it was broad based, healthy and more or less as expected.

>> one of the things people were looking for in the report was whether or not we would see a big jump in business investment that you mentioned because there were expiring tax credits. we did get the business investment. what have you seen since then? will this fall off into this quarter?

>> it doesn’t look like it. woo had an important are durable goods number this week suggesting orders and shipments continue to run strong and all of the business surveys, both on spending and hiring, continue to stay strong so i think there’s a possibility of a little pullback but the strong, basic message is that the corporate sector is in gear in providing fuel for economic expansion at this stage?

>> any concerns about consumer spending?

>> some of it was just recall clation of whether it was businesses or consumers spent on cars. the basic message is consumer spending is strong and i think an important underlying message in the report was that we got wage and salary income actually revised up, now running over the last two quarters. it tells us the consumer is strong and there’s fuel coming from the corporate sector in terms of labor and income to keep the consumer moving ahead.

>> we get a big report next friday on jobs. we were talking with tom keene about how people are revising their forecasts higher. where are you and what do you think contributes this month to the jobs report?

>> we’re being a little bit cautious here, looking for what i think is a healthy 200,000 gain but we’re not putting all that much emphasis on the high frequency indicators, which have been quite positive. we think they’re more an indication the trend is improving rather than you’ll get a big increase in the february gain relative to the last two or three months.

>> we do see at 225, though, a big jump from where we have been. is it going to be a secular or just a short-term move?

>> i think the basic message, when you look at all of the labor market indications, is that things have been reasonably healthy. the underlying trend in payrolls has been about 175,000 per month and it looks like it’s stepping up so we’re declined to think the―inclined to think the trend may be moving up to a 200,000 pace with healthy labor income generated alongside the job gains.

>> alan greenspan said the economy had gotten through the period of high oil prices and oil prices have gone up. are we in danger of oil being a restraining factor?

>> i think oil will be a restraining factor and as we go through the end of the first quarter, we will see consumers moderate a bit here. but i think it’s a very big difference, keeping energy prices between $45 and low 50’s and moving from 30 to 50 was a big spike in gasoline prices which is what we saw last year. it’s a restraining force but less of a restraining force than what we saw last year at this time.

>> the big question then, of course, is whether the fed, if the economy is picking up and it looks like there’s strength throughout the economy, do they keep going and if they do, how far do they go?

>> it’s been our view that the fed will complete the normalization process this year. we think fed funds rates are going up above 4% by the end of the year. however, i don’t think there’s a rush here or that we should expect the fed to pick the pace up any time soon and i think the steady course of 25 basis point rate hikes for a while coming from the fed.

>> do they keep the language?

>> i don’t think there’s concess on the committee to change the language but at some point they’ll have to make a decision that they’re close enough towards the end of the process to take out the notion of measured and also the message that policy rates are accommodative. we think we’re at least two or three meetings away from that decision coming.

>> we have 30 seconds left. we have had a strong performance in the markets this week, good economic data. let me leave everybody nervous and ask you what your one fear is?

>> is that as we continue to have good economic news and continue to see the fed move, whether the interest rate environment will remain quite as benign as it has been. it’s clearly been a big support for the economy but it runs the risk, if it begins to move on the longer end higher, that we could see negative feedback.

>> thank you very much, bruce kasman, head of economic research at j.p. morgan. the international olympic committee sized up the big apple for the 2012 olympics this week. mike buteau joins us from atlanta with the reaction and the next steps. “money & sports” is next.

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>> welcome back “world financial report,” michael mckee. green means go home on a good note. the dow jones industrials finishing up by 93 points on the day, 10,842. the s&p 500, about 11 points higher, 1211, the close there, at a high for 2005 but not for the year yet. the nasdaq also up on the day, by 14 points, 2065. a week from today, we’ll get february’s labor report and recently, some economists have sharply raised their forecasts. time for our regular look at the “chart of the day” with bloomberg news editor-at-large, tom keene.

>> we talked about this yesterday. and i really rarely repeat a story but this bears repeating. we saw that help-wanted index, tea leaves of a surprise yesterday, and all the economists in the last hours bringing up estimates as they prepare for next friday’s report is is a well known chart, carol massar runs this at 8:30 in the morning on the friday when the data comes out. the change in non-farm payrolls, the zero count line and the slow-motion recovery up to the blue circle which is credit suisse first boston’s big jump up yesterday. we’re starting to see lots of big numbers. even merrill lynch, david rosenburg, who’s more cautious, 240,000. that’s a big number.

>> what does csfb call for?

>> 275,000. and deutsche bank, 275,000. i think as we go through monday and tuesday into next week, we’ll see the bloomberg survey flush out and pick up a little as we see many different tea leaves indicating a buoyant labor market .

>> why do you think they think things are turning around now in the labor market ?

>> so many months of guessing wrong. the number one thing they’re seeing from the reports we get in is finally time has moved. time has healed a lot of the wounds of overinvestment in the 1990’s, rationalizations out of the shock of september 11 and shock of recession and the one message that’s consistent is you hear time has moved on, we’re farther out. it is 2005, a long way from 2001.

>> you mentioned them being wrong, i’m going to put up another “chart of the day,” my turn here. the white line is the bloomberg estimate and the red and yellow lines are the numbers that have come through, the revision in the actual number and you can see how far off they are.

>> it’s a tough number to pick. the number i can remember in my head, the number can be 100,000 off each way and yet you can still say you were right. so the numbers to remember, as we look towards that important repeat, 225,000, plus or minus 50,000 or 100,000 and the tendency is up going into next week.

>> bloomberg news editor-at-large, tom keene, thank you very much. we want to find out what’s going on with oil prices. in 2004, surging oil tapped the market ‘s gains. now that oil is revisiting $50 a barrel, some investors say it’s deja vu for the market . that’s the subject of “taking stock.” what’s the significance of the $50 oil in the stock market we’ve seen?

>> it’s a meaningful level looking at the trends. tuesday, oil surpassed $50 for the first time this year, the s&p and dow had their biggest drops of the year. last year, when oil was at $50 or higher, there was a strong correlation with down days in stocks. a negative one correlation means that oil and stocks move in complete opposite directions. last year, when oil was at $50 or higher, it was negative .82, when it was below $50, it was negative .65 so there’s a much higher correlation when oil is above $50 than when it’s below.

>>ised good news for energy stocks, but what about for other companies? how concerned are investors that oil will start to show up on the bottom line.

>> wal-mart and fedex have said they are blatantly concerned and that’s obvious, because for wal-mart, the more customers spend on gasoline, the less they spend at their stores and fedex’s concern is due to increased fuel prices, companies like delta obviously would be concerned with increased fuel prices. you also have economists that are looking at economic growth and they’re forecasting $40 to $45 oil. with oil in the $50 range, they’ll have to bring down the economic forecasts and bring down our expectations for consumer spending.

>> exxon-mobil today raised by prudential. what other stocks are people buying with oil at these levels and which ones will they avoid?

>> again, people are already expecting slowing profit growth in retailers. so as long as oil is staying higher than levels previously expected, you would expect them to decrease their weighting more in retailers. energy stocks, the obvious play, as stocks like exxon and conoco keep hitting record highs. other places people may be considering they’re going into may be consumer staples where profits should stay at relatively normal levels even with higher oil.

>> any other factors overshadowing energy or is that the story right now?

>> that seems to be the story and people are looking ahead to the jobs report next week and that’s always significant and can always overshadow higher oil and any time you get a strong earnings number, people may say, we can get through this.

>> thank you very much, bloomberg news energy reporter, ari levy. investors got good news on the american economy today. does the g.d.p. data suggest stronger economic growth in 2005? we’ll ask head of economic research at j.p. morgan.

Interview: Wachovia securities

>> both the s&p 500 and dow finished up for the week, despite higher oil prices. doug sandler, chief equity strategist from wachovia securities, joins us from his office in richmond, virginia, for a closer look at stocks. thanks for joining us. it was a good prediction of yours that january would be a rough month for stocks. we head next week into march. how does it look?

>> going forward, well, i guess for the long term, we’re really looking at a market that trades in a range. that means you have to look a little harder, work harder for opportunities. energy is a great example. there are folks and portfolios that made a lot of money this month provided you were in the right place. so we think there are still pockets of opportunity, but it’s a matter of finding them.

>> let’s talk about energy. energy stocks certainly led the market higher this week. do you stay with that play or at this point is it played out?

>> i would tell you it depends how cute you want to be. our view is we think energy prices will be higher and energy stocks will be higher. if you’re wondering, do i buy a stock today, energy stock, and maybe in the next couple of weeks will i look hard or stupid, it’s hard to tell at this particular moment because of the run we have in energy stocks. but you move that horizon out a couple of months, i think you’ll look smart in a few months. i think you might get a better opportunity to buy these stocks in the next couple of weeks after a little bit of a pullback. energy stocks tend to trade on greed and fear. right now people made a lot of money and we’re in the greed stage. i feel you might get a better chance to buy them but continue to look for positions because you’ll look spart in a few months.

>> what about telecoms, we see a lot of consolidation. any value you see there?

>> i don’t see a lot of value in telecom. particularly, you’re talking about the traditional land line companies. our view in telecom is you’re actually probably better off -- if what you’re looking for in telecom is stability of revenues in companies with high barriers to entry, i think you’re better off in utilities, you can get similar growth or better growth, similar valuations and you give up a little bit in dividends, but in most cases, you make that choice to come down a little bit in dividend, it’s actually going to pay off so we like the utility space for the telecom investors out there that are traditional telecom, grandma and grandpa, utilities are a better buy at these levels.

>> we we see interest rates going up, focus on the federal reserve, alan greenspan testimony next week. what about financials?

>> i think there are pockets of opportunity in financials. you mentioned mergers, a great example is the m&a firm. i don’t like playing mergers by trying to figure out who gets bought next because it’s too risky. number one, if the firm you look at doesn’t get bought and the second risk is the takeout premium into the stock price. so i like to play the m&a advisers, the goldman sachs of the world, and we own that stock. these are the kinds of companies because no matter what happens with the merger, whether the firm you think will be purchased gets purchased, whatever happens, the adviser gets paid and i think the m&a advisers are still reasonably cheap here.

>> alan greenspan goes to the hill next week and will be asked about the economy. he’s been sanguine. we saw reaction to the g.d.p. report. do you we―do we continue to see good news priced in?

>> our view on the economy, it’s slow and steady. for those people that are expecting a hot economy, i think they’re going to be disappointed and those expecting recession, they’ll be surprised to the upis ide. in the end, i think things chug along pretty nicely here, interest rates stay in a range and your question on the economy in general, is where you get the periods where people think inflation is coming back aggressively, i think you want to buy some of the financials. a great example was the beginning of the week when you could have bought utilities significantly cheaper than they ended today. people thought inflation was coming back and on wednesday we had good inflation data and lo and behold, the financials capped a good run

>> we have greenspan on wednesday, jobs on friday. anything else that is market moving next week that you can anticipate?

>> people will watch the price of oil and there’s not a lot of other news coming out, there’s not a lot of earnings announcements so the market will probably chug along with the motion it’s going now. i think you’re going to find pockets and that’s what we’re trying to do every single day.

>> thank you very much, doug sandler, chief equity strategist at wachovia securities. there was movement in the markets this week but the s&p 500 largely unchanged when it was all over. our bob bowden will join us next with what that says about prevailing investor sentiment.
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ebbers intends to take the witness stand next week in his conspiracy trial, according to his attorney. the lawyers announced their intent to call their client to the witness stand during the hearing in new york federal court. ebbers will be subject to cross examination by prosecutors who may provide additional evidence against him. the defense is seeking to rebut testimony from former chief financial officer, scott sullivan. sullivan said ebbers directed an $11 billion fraud at worldcom. ebbers is charged with fraud, conspiracy and filing false statements and faces a maximum of 25 years in prison. worldcom is now m.c.i. shares fell friday as investors showed disappointment with qwest’s revised bid to buy the company. we told you on thursday the nation’s fourth largest local phone carrier was sweetening the terms of the previous offer but not giving shareholders more money. su keenan has more on the reaction so far. su?

>> let’s start with a review of the bid. there are two key revisions to qwest’s offer for m.c.i. they offer to pay shareholders more cash up front and add insurance for investors in case their stock falls. that was the case today. look at qwest, tumbling more than 8% by the close. the total value of qwest cash and stock bid, including a special dividend when the deal closes, remains unchanged at $24.60 a share. qwest c.e.o. richard notebaert said the deal would win faster approval from the f.c.c. and require fewer m.c.i. assets to be sold and m.c.i. shareholders would keep a a bigger stake in the combined company were the offer accepted. m.c.i.’s c.e.o. michael capellas was quick to react, saying the company will do its “utmost” to complete a combination with verizon, which he calls the right partner. federated’s katie glass itys m.c.i. shareholders ofnt a higher cash offer but says qwest will likely get the attention of the m.c.i. board which did not acknowledge the first offer.

>> it gives qwest at least a seat at the table in that the m.c.i. board will be forced to take a long, hard look at this deal and come back and say which one is really the best for their shareholders. now, if verizon is eager to own the m.c.i. assets, they can turn around and make a counter offer. i think we’re at the beginning of the game rather than the end.

>> capellas told investors on today’s conference call that m.c.i.’s board will review qwest’s $8 billion revised bid while pressing ahead with verizon, which has made an offer roughly 20% lower than qwest’s. shareholders have urged capellas to push for more money, they don’t think either offer is large enough.

>> the u.s. economy is growing faster than previously thought in the final months of 2004. a 3.8% annual rate is the new estimate from the commerce department, up .7% from the original calculation a month ago, making for a 4.4% increase in output of goods and services for all of last year, the best showing since a 4.5% jump in 1999. the average of forecasts for this year, 3.6%, closer to the average for the past decade. in the bond market , there was reaction on the long end -- u.s. sales of previously owned homes unexpectedly fell .5% in january. sales of existing homes last month totalled 5.94 million on an annualized basis. the national association of realtors revised its data back to 1989 after realizing it had been overestimating sales. analysts say altogether the january figures show housing still looks good. stocks moved higher on the g.d.p. news. for more on today’s trading action, here’s a report from deborah kostroun at the new york stock exchange.% 

>> it was a record-breaking day in many ways at the new york stock exchange. the dow is now at its best level of the year and that’s all thanks to an impressive performance by energy stocks. energy stocks of all stripes dominated the stock market again. the market cap of the world’s biggest company, exxon-mobil, crossed 400 billion dollars. chevrontexaco, conocophillips also soared. investors are putting to rest any fears that crude oil prices will plunge this year.

>> many of these companies can make excellent profits even if the price of oil drops into the 30’s. obviously, in the 50’s, that’s pretty attractive.

>> industries with the ability to raise prices also moved close to or reached all-time highs. oil tankers, oil services, coal, steel, homebuilders and h.m.o.’s were all bid higher. the economy also gave stocks a lift. fourth-quarter economic growth was revised up to nearly 4%. the g.d.p.’s inflation gauge hardly changed.

>> we see this more as a goldie locks scenario. we think returns, earnings on the equity side are good, quality of earnings are good, margins might be down a bit but with fixed income rates the way they are, equities look attractive.

>> coal with its biggest jump in six months, attracting shoppers with cosmetics at kohl’s and cutting costs. h&r block shares, fees from filling out tax returns up 11% last quarter. and it’s all that demand, demand, demand leading to all the record highs we saw in today’s session, not only through integrated oil but also the oil tankers and oil services and coal stocks. i’m deborah kostroun at the new york stock exchange. bloomberg news.

>> robert gray has details on today’s nasdaq trading from the nasdaq marketsite. he’s in times square.

>> the nasdaq composite index closing at the highs of the session on friday to close out this presidents’ day week, higher for the week, erasing gains we saw earlier on tuesday and wednesday. the semiconductors were leading the rally for the second straight day. the semiconductor index, philadelphia semiconductor index, the s.o.x. now higher for the year by 2% after the gains we’ve seen over the past couple of days. kla-tencor helping to lead the gains, the semiconductor production equipment maker making bullish comments at a goldman sachs conference. broadcom announcing its first  ever stock buyback for up to $250 million on thursday, carrying over into friday’s session and marvell technology, rising after it came out with earnings a penny higher than the analysts’ estimates. speaking of gainers, synaptics surging after confirming in an s.e.c. filing it will provide its touch-wheel technology in the new ipod lineup for apple. this stock was cut in half earlier this year on concern it would not provide that for the ipod. that stock surging some 16% in friday’s session. some of the worst performers in friday’s session were satellite radio stocks. sirius and x.m. satellite radio. robert beck at bear stearns outlining the concerns on these two stocks. a billboard report that howard stern fans may not move to sirius in drove when is 3 moves over there. the s.e.c. is investigating trading in sirius around the time it announced the stern show was moving. sirius also buying the rights to nascar. some investors wonder figure they paid too much and whether x.m. will have to overpay to get the next series of rights that are up and x.m. delaying the launch of a new satellite. a positive catalyst for them with the successful launch of that satellite, sirius c.e.o. mel karmazin addressing investors next week and investors don’t believe that officials will be implicated in any illegal trading of that stock.

>> we want to recap the day on wall street, sending everyone home happy. the dow jones industrials higher by 93 points if you want to round, 10,842, putting the dow in positive territory for 2005. the s&p 500 finishing up on the day by 11 points, 1211, not quite making it to a 2005 high, but still for the year. nasdaq up by 14 on the day, 2065. the benchmark indexes as we say, finishing the day higher. we’ll look and see if the momentum will continue next week. we’ll ask doug sandler with wachovia securities, next.

Interview: Drug stocks

>> singapore telecom expects most of its customers to use high-speed mobile phone handsets ahead of its three-year target. it introduced 3g mobile phone services yesterday. haslinda amin spoke with singtel chief executive, poh chuan lim.

>> it has shifted slightly and recently we have seen the way that manufacturers have brought in more models of handsets. you can tell they are putting a lot of r&d resourcesinto it. this is good because it means more choices, lower prices, it also means more capabilities that can fully exploit the 3g technology so we have buildup. i would say that our previous projection of three to five years may change. it may be sooner than three to five years but we don’t know until this thing is more firm, until we see more development put in place in the market . they are talking about six to 12 months there will be these handsets coming to the market but until we see them and test them in our network, we can’t make a true projection. but the initial projection remains true. first year, unlikely a major impact. hopefully within a shorter period than three to five years, we’ll see more contribution coming back to us.

>> given that you’re expecting to meet goals earlier, can we say that maybe you’ll see the numbers in two to three years?
>> hopefully.

>> looking at your market share, currently singtel mobile has 40% of the cell phone market . do you expect 3g services to help it grow to maybe 50% or beyond?

>> market share is beginning to be coming quite meaningless. if you were to look at market share today, it’s the aggregation of post- and pre-paid customers. likely, you’ll hold more than multiple post-paid accounts but pre-paid, i’m suspicious. if i hold three pre-paid card, does that mean i have three pre-paid customers? i think this is distorted so if you look at market share in reality, i think one should look at revenue market share rather than subscriber market share. in fact, some operators are already looking at average margin per user, average revenue per user because even revenue becomes scary when you look at the way some people compute revenue. in our case, for example, our revenue is net with commission in the pre-paid market . in other operator, the revenue is inclusive of commission so it leads to a different accounting and gives a different picture altogether. but we are looking at market share more as a reference and today are tracking at 43% for our post rate, 80% of our base, and continuing to be more in terms of revenue contribution so obviously, 3g in the initial months, will mainly focus on the post-paid customers. it will help to increase the usage in terms of data. we’ve been tracking well on data usage on post-paid customer base. with 3g, with the highest fee and lower price we’re announcing today, 30% cheaper than traditional g.p.s., obviously, we’ll encourage more data usage and more applications and therefore more providers coming into the market , hopefully translated into higher usage and revenue on a per-user basis on data if not just on voice.

>> do you expect a price war to develop when your rival comes on board?

>> they have not announced data prices yet, i think. they have announced video core price and obviously ours is the same for local calls. will there be a price war? i can’t predict what my competitors will do.

>> do you expect a price war?

>> there have been examples they have been irrational. if they want a price war, i say good luck to them because they will not be able to withstand it. if you were to cut below the current voice rate, the direct impact on the bottom line, it’s not just a case of winning more market share.

>> can we expect profit margins to fall given that your prices are lower than your competitors?

>> we are not working towards diluting our margin, obviously. i think singtel as a company has been quite clear that we aim to preserve our margin and we are always very conscious about managing costs so obviously in working out the business case and now business projection, we are driving toward not diluting margin but increasing volume or increasing subscriber usage.

>> given what you have just said, how long will it take you to recover your investments in 3g? [laughter]

>> that’s a good question but like i said, these are all tantamount to giving financial guidance which we are not as liberty to do.

>> singtel mobile’s chief executive, poh chuan lim. consumer confidence reports from the university of michigan and conference board may move markets , but should they? i will teak with a―speak with a former federal reserve official up next.

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outpost in asia. why singtel mobile expects high-speed mobile phone services to catch on. and do consumer confidence reports really matter? we’ll hear from a former fed official. the dollar stages a comeback after japan, korea and taiwan say they’re not selling the u.s. dollar portions of their more than $1.25 trillion in for-ex reserves. traders interpreted u.s. consumer price figures to mean inflation remains tame and the fed will not speed up the pace of rate increases. oil prices close at a four-month high, holding above $51 a barrel. kuwait’s oil minister says opec may be forced to boost production. australian gasoline light and brambles may be active after earnings reports. we’ll go straight to stuart kelly in sydney. it appears today’s the busiest for companies’ profit reports there in australia?

>> it certainly is. we expect reports from 28 companies today, some of those have already reported this morning, keeping us on our toes here. brambles industries reported late yesterday. it said first-half profit climbed 71% to 234 million australian dollars, slightly under the 230 million that analysts surveyed by bloomberg expected. interesting to see what the share price will do today because the company did say second-half growth will slow. merrill lynch, in a report this morning, said it expected the shares to rise 7% in the next 12 months to $8.10 a share. publishing and broadcasting has reported this morning, the owner of australia’s top-ranked television network, saying first-half profit rose 24% to $339.7 australian. that included a gain from the sale of the company’s stake in wizard mortgage corp. if you take the gain out, $61 million, the profit comes in at 278 million, somewhat under the 288 million australian dollars that analysts surveyed by bloomberg news expected. australia gas and light said first-half profit rose more than fourfold to 887 million dollars, with a capital return to shareholders of 515 million australian dollars. also looking elsewhere, insurance australia group, nation’s biggest car and home insurer, said first-half profit rose 48% to 446 million after surging stock market boosted investment earnings and also macquarie infrastructure group turned to a 582 million australian dollar profit from a loss of 386 million last year. interesting to see what those share price moves do. i’ll return with an update shortly after the market opens in 20 minutes or so from now. back to you.

>> thank you, stuart. fannie mae says its federal regulator uncovered more accounting errors, raising concern about the soundness of the government-chartered business. the regulator examining whether fannie mae improperly sold mortgages. the mortgages were supposed to be held to maturity. those mistakes will likely result in a profit restatement. apple computer cuts the price of the ipod mini by 20% and introduces new models, cutting the price of the 4 gigabyte ipod mini and a new version of the 60 gigabyte stores photos and as many as 16,000 songs. it may help apple widen their lead over competitors such as dell. for news outside the business word, ron madison returning with us from tokyo.

>> u.s. president george w. bush and german chancellor gerhard schroeder agree that iran must not have nuclear weapons. the two showed solidarity on the issue, saying they would cooperate to persuade iran to abandon the pursuit of nuclear weapons, agreeing that diplomacy must be given a chance.

>> diplomacy is just the beginning. iran is not iraq. we’ve just started the diplomatic efforts and i want to thank our friends for taking the lead and we will work with them to convince the mulas that they need to give up thrower ambition―nuclear ambition.

>> france, germany and the u.k. have been in talks with iran. iran agreed to suspend enrichment of uranium. the u.s. prohibits american companies from investing in iran. president bush has arrived at the final stop of his tour, slovakia, to meet with the nation’s president as well as hold talks with russian president vladimir putin. bush is expected to express concern about russia’s continued support of iran’s construction of a heavy water nuclear reactor. putin said last week that russia will continue to help iran on the 800 million dollar project, dismissing opposition from the u.s. and european allies. a u.k. court finds british soldiers guilty of abusing iraqi soldiers. the three stood trial in a court martial in germany. the trial at the british court brought to light about 20 pictures showing british soldiers humiliating iraqi civilians, sparking outrage in the u.k., where the pictures were compared with photographs of u.s. guards abusing and humiliating inmates at the abu ghraib iraqi prison. southern california has received a much needed respite after seven days of storms dumped a year’s worth of rain on the region. the u.s. national weather service says california will have a brief dry spell for the rest of the week. recent mudslides are blamed for at least nine deaths and has caused at least $100 million in damage. an official in los angeles said the city has no seen this much rain in more than a century. that’s the latest look at world news. back to you.

>> thank you, ron. singapore telecom taps into the high-speed mobile handset market . the chief executive will tell us more.

Interview: Drug stocks

>> higher energy prices drew the attention of nasdaq investors on tuesday. that meant transports led the index lower. robert gray has details from the nasdaq in new york.

>> the nasdaq closing on the lows of the session today, the fourth straight day of declines for the nasdaq. it is first of those four, i should note, that have been above the three-month daily average volume-wise, something to keep in mind, that market technicians would see as a bearish sign, heavier volume on a down day. down volume outpaced up volume significantly, as well. we did see higher oil prices, also playing out in the market . taking the transports lower, the weakest group in the session. we saw that playing out with the truckers. expediters international, yellow, j.b. hunt, c.h. robinson, all lower. airlines lower, as well, jetblue, nearly a two-year low for jetblue during the session. ryanair a.d.r.’s also trargged trading lower, northwest and sky west, as well. semiconductors with bullish notes early in the session, smith barney raising semiconductor stocks to overweight from market weight, boosting the chip stocks early in the session. but we did see them give back all of those gains as the semiconductor index did finish the session lower today and we did hear other bullish comments out but those did not carry over. sirius satellite radio, one of the worst performers on the nasdaq 100. chief executive mel karmazin saying that no company officers have been subpoenaed in connection with the company’s agreement to higher howard stern. the “new york post” reported that a frequent stern guest has been looking into insider trading surrounding his appearances with howard stern and the announcements that stern’s show is moving to sirius satellite. sirius paying $107.5 million for the rights to broadcast nascar stock racing beginning in 2007. that’s a look at the nasdaq. i’m robert gray.

>> warburg pincus says it invested about $1 billion of equity in indian companies. the buyout firm reports it has earned more than three times its 1999 investment of $300 million in the mobile phone company. the company’s co-president says the opportunities in places like india are evolving rapidly. warburg pincus has focused these investments since establishing asian offices over a decade ago. the i.m.f. says hong kong may be able to balance its budget two years ahead of schedule. the international lender says surging tax receipts and revenue from land sales may allow the city to eliminate its shortfall in the year ending march 2007. the report recommends hong kong start a sales tax to diversify government revenue. the fund predicts the city’s growth will slow to 4% this year following 8.3% expansion in 2004 santos and c.s.l. are among companies that reported earnings this morning. we’ll go to stuart kelly, our stock reporter in sydney. take us through the earnings reports.
>> good morning. there are plenty of earnings reports out this morning. c.s.l., world’s second largest maker of blood products, said first-half net income rose sixfold to 160 million australian dollars, beating the 138 million australian dollars that analysts surveyed by%  bloomberg were expecting. the company said it would buy back 10 million shares, or 5% of the company’s total capital. santos limited reported this morning, australia’s third biggest oil and gas producer, saying full-year profit rose 16% to 380 million australian dollars, easily beating that estimated by analysts surveyed by bloomberg. also maine group said first-half net income fell 18% to 40 million. still, that managed to beat the 33.5 million that analysts expected. we can expect a rise in all three of those shares today.

>> what is the benchmark index likely to do today?

>> well, the benchmark index’s futures contract is down about .6%, a relatively sharp drop compared to the past month or so. if stocks fall today, there could be two reasons. firstly, a sharp 5.8% surge in oil prices to above the $51 barrel mark in new york overnight could weigh on sentiment. some of the consumer-related stocks, particularly retailers such as harvey norman, coles myer and wesfarmers. investors has been anticipating a rise in interest rates next month, the first such interest rate rise since december 2003. we are awaiting a wages report coming out around about 11:30 a.m. sydney time that could very well weigh on the central bank’s thinking. so keep an eye out for that, catherine. that’s all for me. i’ll have an update a little bit later.

>> our next guest thinks the australian central bank will raise rates as early as march 2. we’ll learn what that means for the economy from the head of market economics at national australia bank.

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u.s. consumer confidence falls%  for the first time in three months. we’ll be talking about that and more with an economist in new york. the headlines―the bank of korea sends the u.s. dollar lower against 30 currencies. south korea’s central bank says it will add to non-dollar denominated foreign reserves. the dollar fall 2% against the korean won, the biggest loss in three months and dropped against the euro. oil vaults to a four-month high, closing above $51 a barrel for the first time since october. colder-than-expected weather and weaker u.s. dollar sent crude higher. rising oil prices knocked u.s. stocks lower. the dow and s&p 500 registered their biggest losses since august. all three of the major u.s. stock market indexes are now lower for the year. american airlines and continental win and delta loses when it comes to flying to china. the u.s. government awarded licenses for flights to china to a.m.r.’s american airlines and continental. each airline won the right to fly seven weekly round-trips to china. they join united and northwest as the only u.s. passenger airline with direct routes to china. the department of transportation shut out delta, fedex, u.p.s., northwest and polar air won rights to fly three cargo flights to china each week. the u.s. and china agreed to expand their aviation agreement. u.s. consumers are more skeptical about what the next six months will bring. the conference board’s index showed americans were the most optimistic about their current conditions than at any time since september 2001. stephen stanley joins us with more from new york, chief economist with r.b.c. capital markets . the conference board’s consumer confidence index fell in february. how concerned should we be?

>> the confidence numbers have been fairly steady the last couple of months and certainly if you look at consumer spending in the second half of 2004, it was tremendously strong. so i think these levels of consumer confidence are consistent with robust consumer spending.

>> the proportion of consumers that saw jobs as hard to get fell to its lowest since may 2002. what does today’s report tell us about the larket?  labor market ?

>> i think labor market conditions are improving gradually and we feel, in particular, since the turn of the year, that firms will be more interested in hiring people. we didn’t see it in the january payroll numbers and i think that was partly a function of poor weather and one-time factors. i think we’ll start to see better job gains in the months to come and that certainly is corroborated by this number as well as the drop in unemployment claims and other indicators we’ve been watching.

>> what would that mean for consumer spending in the next three to six months?

>> i think consumers will continue to spend. the pace of spending in the second half of 2004 was extraordinary and i don’t know we’ll necessarily keep up with that pace but i think we’ll continue to see healthy gains in consumer spending in 2005 and certainly the, aboutetter the job situation, the more consumers will be in a position do so because incomes will be rising.

>> what will the january c.p.i. data out later today tell bus inflationary pressures?

>> well, i think after last friday’s p.p.i. report, this will be a really important report for the markets because up until now, we really weren’t that worried about inflation. the fed continued to tell us, hey, don’t worry about it, inflation will be well contained and all of a sudden we have a bad inflation number and we’ll see if it carries forward to consumer prices. if it doesn’t, it’s something the fed won’t worry too much about because they’re focused on core consumer prices but i think there’s a real possibility -- our forecast is for .2% increase and that, i think, would be fine, but there’s a real possibility of a .3% increase and if we got that, i think it would certainly raise an eyebrow at the fed and be something the markets will be very concerned about.

>> when the fed raised overnight lending rates in the past, long-term interest rates rose, as well, but this time around, we’re not seeing that. why is this happening? what does that tell us?

>> that’s a great question. chairman greenspan calls it a conundrum. i’m certainly puzzled by it myself and i think everybody is. if you get the answer, let me know, we’ll start an investment fund. i think part of it is―has to do with technicals within the market . there’s a lot of demand for long-dated paper in the u.s. market and in addition to that, i think there are more fundamental things going on. i think people in the market are skeptical about whether the recovery can last, how far is the fed going to go before the economy starts to taper off? i think most people in the markets would believe that pretty soon the fed will get to a rate level that’s going to start to weaken the economy. we think the fed will end up having to go a little bit more but that’s a debate to be played out over the course of the year in the markets .

>> the central bank in south korea said in a february 19 report to a parliamentary committee that it will invest in higher yielding currencies like the australian and canadian dollars. what do you think this will mean for the u.s. bond market ?

>> well, it’s certainly something the markets are paying a lot of attention to and not just korea, but a number of the asian central banks, particularly, obviously, the bank of japan and china, as well, are large holders of treasuries so the markets get skittish when we hear rumors of diversification out of dollar holdings and certainly you saw that in the reaction of the dollar today, as well, maybe to some degree in the treasury market . it will be something that folks in the market will be watching and in fact that’s one of the technical factors i alluded to that has held up the u.s. treasury market in the last year or so.

>> what about for oil? prices surged above $51 a barrel in new york to its highest in almost four months. is there a risk higher oil prices may derail global growth, including the u.s. economy?

>> that’s certainly a risk. i think we’re all pleasantly surprised last year by the resilience of certainly the u.s. economy and more broadly, the global economy, in the face of tremendous increases in the price of oil. so i think we have more confidence now than we might have, say, 12 months ago, in the face of rising oil prices but it’s certainly something we’re going to watch. for me, it wouldn’t matter very much how long oil prices stayed at these levels or even if they go higher, if it lasts. we’ve seen brief spikes that have not persisted and those tend not to have a big impact on the consumer. it’s only when oil stays this high and starts to feed through into gasoline prices and some of the other things that consumers actually buy that it becomes more of a concern and so we’ll have to see how it plays out over the next month or two.

>> stephen, we have 30 seconds. what will be the catalyst for two-year yields to begin falling

>> for yields to begin falling? i think you’d have to see some indication of either the economy weakening, i guess mainly if the economy weakens and we start to price in a scenario where the fed’s not going to tighten as much, which is certainly counter to what we’re looking for, that would have to be the driver because i think yields at the short end are mainly pegged off of what people think the fed doll.

>> all right. we have to leave it there, thank you very much for joining us, stephen, stephen stanley of r.b.c. capital.

Interview: Drug stocks

>> bluescope steel may decide in the next four months whether to invest in a partnership with indian tata. bluescope’s chief financial officer brian kruger told our correspondent that the steelmaker will charge customers more to cover rising expenses.

>> we saw significant increase in steel pricing, which contributed largely to the result, but as well as that we had an excel anti-operational performance across all of our businesses so those two things combined meant we delivered a record result for the first half% -of the year.% 

>> what’s your outlook for the second half?

>> the outlook is that there will be offsetting factors. we think demand will continue to be strong for all of our products and businesses and we think prices will continue to be strong. there are offsetting factors -- continued high raw material costs in the second half of the year. there are other restructuring activities underway which may involve charges but all in all, we think the second half of this year will be very similar to the first half of this year.

>> what are you doing to absorb high raw material costs?

>> a range of factors. obviously, we are aiming to operate the plants as efficiently as we can. but at the end of the day, they are costs we are faced with. to some extent, they will be borne out in higher steel prices, and are one of the things driving higher steel prices around the globe at this point in time.

>> what’s bluescope’s forecast for hot rolled steel this year?
>> that’s one of the things we don’t comment on so there are obviously a range of forecasts out there but we typically don’t provide the market with forecasts for what we think our hot rolled prices will do.

>> what’s your outlook for margins for the rest of the year?% 

>> i think there will be offsetting factors at the margins that will mean our margins in the second half of the year will be consistent with where they were in the first half.

>> china’s industrial production in january rose at the slowest pace in three years. what’s your outlook for china in 2005?

>> we’re quite optimistic about china. it’s coming off significant growth rates. our view is that provided in the medium to longer term that china continues to grow in the high single-digit type growth rates, we’d be very comfortable with that.% 

>> the company is starting a joint venture in india. how is that doing and what form would that joint venture take?

>> the study is going well. we are investigating a joint venture with tata steel, one of india’s leading steel companies. we expect the study on the joint venture to be completed in the next three to four months. if we moved forward, we would look to build a metallic coating and painting line with tata in india. it’s a very―we’re very happy to have that opportunity to work with a steel company in india and it’s exciting for us.

>> what kind of investment would bluescope make in that joint venture?

>> that’s a good question. in total, we think the joint venture or the origininally planned investment for the joint venture would be in the region of 300 million australian dollars so our share of that on the basis of a 50-50 joint venture would be around 150 million australian.

>> how important would that market be for bluescope?

>> it could become very important. we hope this is the first step in further growth in india. india has very low levels of steel consumption per capita at the moment and we think india is really one of those regions in the globe where we may see steel consumption increase quite rapidly.

>> where else is bluescope planning on investing this year?

>> the majority of our investment will be in the asian region, including china. that’s why the recently announced growth projects have their focus. we’re also looking at growth projects here in australia. we’ve recently announced the new painted steel facility in western sydney and we’re excited about that opportunity.

>> with a record second half expected, what other capital management initiatives can the board consider?

>> i think that’s a matter for the board to consider in the second half of the year. what i can tell you is that we’re certainly very focused on capital management and making sure that our balance sheet is structure as best as it can be and that we continue to look at ways of returning funds tax effectively to our shareholders.

>> would that include a special dividend?

>> i think it could include a range of capital management initiatives and special dividends is one of those.

>> brian kruger, bluescope’s chief financial officer. we’ll talk to the chief executive of bluescope’s rival onesteel later this morning on “bloomberg now” at the times seen on your screen. onesteel says first-half profit rose 27%, raising pricesase construction boom in its home market boosts demand for steel. net income came in at 57.9 million australian dollars or $45.7 million u.s. sales rose 21%. that interview is coming up at about 10:00 local time in tokyo. still to come, is japan in recession? the latest g.d.p. figures say yes. but the country’s central bank says the economy is recovering. we’ll speak with a strategist at societe generale securities about whether the bank of japan is too optimistic.

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may rise this week on expectations economic data may show german business confidence rising to an 11-month high. the u.k.’s top finance official visits china. gordon brown says china and the u.k. share the same economic agenda. there’s no sign microsoft will settle its european antitrust case. the judge overseeing the case says there’s no indication the e.u. will withdraw its case, including a near $650 million fine against the world’s largest software maker. insurance company promina group and game machine maker aristocat are among those companies that reported earnings this morning. we’ll go to stuart kelly for more from sydney. take us through the details there.
>> it’s all about profits this morning. let’s first talk about the two you’ve mentioned. aristocrat leisure, world’s second biggest maker of slot machine, said it turned to a full-year profit of $74 million australian dollars after surging sales of gaming machines in the u.s. it had a loss of 106 australian last year. the results beat the company’s own october forecast of between 150 and 170 million dollars. the company said it would return to shareholders the equivalent of 21 cents a share. that is subject to a tax ruling. also, australia’s second biggest auto and home insurer said full-year profit rose 54% to 458 million dollars after it sold more policies and stock markets boosted investment income, beating the 444 million dollars that analysts surveyed by bloomberg news were expecting. the company also said it would return as much as 250 million dollars back to shareholders in the first half. these capital returns have become something of a theme in the australian stock market the last couple of reporting seasons. it is also one of the reasons why the benchmark index is trading only about 20 points or so away from its record high. moving on, we’ve had reports this morning from a.p.n. news and media, saying profit rose 24% to 128 million, failing to match analysts forecasts of 129 million, but only marginally. also, onesteel today said first-half profit rose 27% to 57 million australian dollars. we’re expecting results today from investra, pacifica group and oil search. before i go, keep an eye out for macquarie bankshares, australia’s biggest-listed investment banker late yesterday said full-year profit will be at least 40% higher than the same period a year ago. those shares are already at a record but we could almost certainly expect them to rise somewhat higher again today. that’s all from me, catherine. i will see you later for an update.

>> thank you, stuart. breaking news out of south korea. the jobless rate for january is at 3.6%. seasonally adjusted. that is unchanged from december’s 3 1/2 year high. rising unemployment makes south koreans unwilling to spend. the government is trying to boost local consumption by cutting taxes and interest rates. finance minister said last month the government may not meet its 5% economic growth target this year unless domestic spending increases. philippine stocks fell the most in the world yesterday on expectations lawmakers may reject the plan to raise taxes. higher taxes are aimed at narrowing the government’s budget deficit which is 87% of economic output. our reporter, haslinda amin, in singapore, has more on the story. good morning. what are investors saying about the decline?

>> good morning. they say the decline shows investors want to see a cut in the philippine budget deficit. they also say there’s still a lot of work to do in the area of fiscal reform. the country needs to narrow its deficit to boost confidence in its ability to pay bonds and loans. moody’s investor service last week cut the philippine debt rating two levels to b-1, four notches below investment grade. an asian equity asset manager in hong kong says never underestimate the philippines’ capacity to disappoint. he says expectations lawmakers may reject tax raising plans highlights the difficulties of passing significant tax adjustments. now, the house of representatives last month approved a government proposal to raise the tax to 12% from 10%. that would increase collections by an estimateed 640 million dollars. early optimism the government was making progress on tax collection helped the confidence index rise 14% this year. the benchmark is the sixth best performer. cathy?

>> what are the analysts now saying about the outlook for the philippine peso?

>> some analysts say the currency’s decline may be limited as overseas investors will still keep putting money into the nation’s stocks. overseas investors were net buyers of philippine equities for the 10 days through february 18. some exchange figures show they bought a total net of $43 million. iron chung, head of asia’s sovereign and currency strategy at abn amro in singapore says we’ve seen strong inflow into most of the asian markets . she likes the thai and philippine markets which have seen robust consumption. she expects the peso to rise to 54.2 against the dollar at the end of march and 53.5 at the end of june. and, cathy, that is it for the moment. i’ll be back in an hour with cosco singapore’s fourth-quarter earnings.

>> thank you. the c.f.o. of australia’s largest steelmaker will share plans for expansion. learn how bluescope steel plans to attack the china market .

Interview: Drug stocks

>> continuing our discussion of the economy and potential headwinds it may be facing, one of them could be the record deficits and reliance on foreigners to finance the debt. the current account deficit, broadest measure of trade, is running nearly $600 billion a year, about 6% of g.d.p. to put that number into perspective, it takes nearly 1.8 billion dollars in foreign capital to finance the deficit and maintain the value of the dollar. so far, that hasn’t been a problem based on the latest inflow data from the treasury. international investors bought more than $61 billion worth of u.s. corporate bonds, stocks and treasuries in december. but things could change in a hurry. we spoke with columbia university professor and nobel laureate joseph stiglit, here’s what he had to say.

>> it’s one of the biggest challenges, there are others, and they’re all interlinked. the deficit, the fact that we’re borrowing so much in the global market , in the long run, it’s hard for an economist not to conclude that real interest rates will rise. if real interest rates rise, then, the housing market , which has been very inflated by low interest rates, may come down.

>> some other red flags, he’s looking at, include the dearth of individual savings. during alan greenspan’s tenure as fed chairman, personal savings rates have gone from an average of 7% to 1% and much of that has to do with low interest rates which has encouraged consumers to take on more debt by investing in homes. and prices have risen sharply in many parts of the country. could the 30-year bond make a comeback? new pension fund rules proposed by labor secretary elaine chao may force the treasury to revive sales of 30-year bonds, bring back the 30-year. possibly. the labor department says the decline in stock prices and interest rates has cut the value of pension plan assets, leaving them underfunded by $450 billion. the new rules, if passed, would force fund managers to better match long-term liabilities with assets and one way do that may be to buy longer term securities. president bush can check one thing off his second-term agenda priority list, he’s signed a class-action bill into law.

>> the class-action fairness act ends marks a critical step to ending the burden of litigation on every american worker, business and family. by beginning the important work of legal reform, we’re meeting our duty to solve problems now, not to pass them to future generations.

>> companies including ford, pfizer and allstate lobbied congress for the overhaul in order to cut legal costs. under the new law, most claims seeking at least $5 million would be moved from state to federal court. judges will be required to assess the fairness of settlements and any deals that resulted in a loss for consumers because of legal fees would be banned. president bush says the class-action bill signed today is only the first step in cutting frivolous lawsuits. he wants congress to take a medical malpractice and asbestos-related claims. jeremy segal is a professor at the wharton school at the university of pennsylvania. his new book “the future for investors” says fast growing industries aren’t the best investment and historically shrinking sectors and slowing growth industries have always outperformed. professor joined us earlier to explain.
>> we found that over time only 1/3 of the return to a given sector could actually be attributed to whether that sector was growing or not. the energy sector, for instance, which has shrunk dramatically over the last 50 years, provided above-average returns, better than technology, better than finance, better than expanding sectors.

>> he strongly recommends investors start buying overseas companies, especially large ones.

>> i’d say 40% of your portfolio now should be global, should be outside the united states. that’s where the growth is going to be and if you’re looking long term, i think that’s going to be a winning combination.

>> see burst on to the scene 10 years ago when he published his book “stocks for the long run” in 1994. in this week’s edition of “money & sports,” we’ll talk about hockey. the national hockey league, the nhl, if they ever drop a puck again, you may not be watching it on espn. plus, a popular hip-hop artist is entering the world of sports. we’ll talk about that with mike buteau in “money & sports.”

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>> welcome back “world financial report,” i’m matt nesto. let’s talk about how wall street finished up on a friday. mixed market , no big changes for the indexes today. we saw big moves in drug stocks and energy, more specifics on that in a bit. you can see the s&pand dow both higher but the nasdaq down just over two points. for the week, a lot of red arrows. g.m.’s highly anticipated new car may not be selling so well. the company is delaying extra production runs of the new g6 and boosting incentives for customers. adrian cox has more.

>> thank you, matt. g.m. launched its g6 sedan with great fanfare last year when oprah winfrey gave away dozens of the cars to the studio audience in september. now the company says it’s delaying production of the g6 coupe and convertible in michigan by two months in july and will extend a planned shutdown at a factory in texas that makes the suburban and tahoe. g.m. says sales are holding up quite well and the company is building up inventory of the g6 ahead of the spring selling season, as inventory of the car is 110 days and the g6 is more profitable than the older cars it replaced. the company says it is ready to go on a product offensive in the next couple of years. the “wall street journal” says the carmaker has started offering incentives worth as% -much as $4,000 as well as 0% financing for 36 months to attempt customers into buying the cars. g.m. is relying on the new models to lift sales after losing market share in america for the second straight year last year. its share price has fallen more than 30% since the beginning of last year. at the same time, asian carmakers such as toyota captured a record 35% share. incentives may not be enough, says the president of genta capital management in los angeles. sooner or later, he says g.m. will have to take a hard look at combining brands to combeat with japanese rivals.

>> thanks so very much. also worth noteing, semiconductor stocks rallying this month and gains may continue for the group as orders rise and inventories fall. that’s the subject of our “taking stock” today and here is danielle sessa. what’s going on? the semis are turning?

>> great move in february, second only to energy stocks in terms of gains for the month and there are signs, some investors say, that the worst is behind for the semiconductor stocks. last year, they were the biggest decliners in the s&p, an index of chip stocks down 22%. the big problem was inventory. companies, chipmakers, chip equipment makers, they were having more and more product build up in factories because earlier in the year they flooded the market with product and the end demand wasn’t there, so that was the reason for the drop we saw last year in the second half. intel, as it’s reducing inventory levels, they said in january it’s down to 2.2 billion from a record 3.2 billion they had in the second quarter. altera and xilinx forecasting a sequential increase in sales this quarter.%  those are the things investors are looking at saying, hey, we may be at the bottom and investors want to step in and buy the stocks before there’s an upswing in fundamentals.

>> so analysts stepping forward, saying now is the time. the group is still down 20% over 12 months, certainly off of the lows but still down.

>> yes, it is and starting this month we had credit suisse first boston recommend investors buy global chip stocks, citing valuations, the companies cheap on a price-to-book basis. analysts at s.g. cowen also saying when this group moves, it will move quickly, evidence of the big gain we had this month, saying investors should buy these stocks ahead of the turn in fundamentals.

>> i’ve talked in the past about how technology isn’t necessarily the biggest weighted group in terms of the market moving but it leads the market up and down and we’re seeing technology again, at least as defined by chip stocks, in a rising market . is this rally expected to continue or what is needed, do you hear, from people, to keep the rally in chip stocks rolling.

>> bottom line, you need demand coming back from the end demand. the consumers buying more things using chips and more orders from the companies and you need a better environment. growing economy around the world. if the fed stopped raising interest rates, that would also help things out, if oil came down, as well, these are macro things investors are looking at. on the charts, technically, traders and investors who watch these things, say there is more room to run in these stocks because the prices have come down and analysts keep cutting down their earnings estimates so, really, any surprises we have will be on the plus side because all the bad news is priced in.

>> let me pull up some fundamentals, looking at the philadelphia semiconductor index. too much data to put on the screen, but on the forward p.e. basis, this group trading at 27 times, you’re still paying the premium for the growth rates of some of these companies but that doesn’t appear to be scaring away buyers here?

>> no. many investors i talked to said, the group is more expensive compared to the s&p 500 but if you look out further and the earning potentials of these companies on the long-term basis, they’re a little bit cheaper.

>> do you get a feel for cap-ex, we focus a lot on who’s spending and the different technology sectors. what do you hear along those lines?

>> intel said they would spend more money this year compared to last year on equipment and intel being the biggest chipmaker, that has to be a good sign for the industry.

>> danielle, good to have you on, danielle sessa on our stocks team with bloomberg news. we’ll be back. we’ll take a break and get in line to come back with more news.

Interview: Drug stocks

>> on the economics front, u.s. whole sale prices rose in january led by higher costs for cigarettes, cars and trucks. core producer prices, excluding food and energy costs, were up .8% last month, the sharpest jump in more than six years and higher than the average forecast by economistsr. the gauge overall up by .3%, matching forecasts. consumer confidence maygating, the university of michigan consumer survey has it down a full point from january’s measure. bond market reaction was all about inflation today and weakness was the tune. yield now up to 4.26 at the 10-year -- stocks were little changed statistically, the indexes here today but the main driver in the market was drugs and energy stocks surging in the face of weakness in financials. brian pears, head of equity trading at victory capital management, joins us from cleveland to discuss the outlook for the market here today. brian, you can’t not look at energy and drug stocks. energy has been steady and chugging along and now drug stocks, some have been saying, well, prior to today, it’s time to look at drug stocks so if you had missed out on energy and drug stocks or energy, you’re sunk and now you have drug stocks. how do you play this volatile, narrow, advancing market ?

>> you know, it’s been a very difficult market to play, matt. really, before today, energy worked fairly well, utilities had a rough day today but utilities have worked well. material stocks have come on of late with the dollar weakness and today with the inflation news bullish for inflation anyway. i don’t know how you play this market . we bumped up earlier this week against the 52-week highs on most of the mange indices but -- major indices, but it’s been such a narrow rally, if you’re in the wrong groups, you’re suffering.

>> if you look at the weekly take on the s&p 500 industry groups, there are a few movers all total for the week but the reality is, it’s focused on energy, up 4.5% on the week and materials, pharma and biotech coming on a little bit thanks to today, up 1.4%. i guess i’m trying to get more specific. are there strategies or do you just―since you can’t know what’s going to be the hot group, do you try to get in when it’s moving and take a little nibble on a hot group?

>> energy is probably the best place to start with to talk about that. really, middle of last year when oil started to take off, people moved into energy stocks. the commodity rallied up to $55 a barrel in terms of oil. and there were a lot of doubters about the long-term―longevity of the move in oil prices or in energy. i think what we might be seeing is some sort of a secular rotation into energy stocks and materials probably, as well, two groups that for a long time have been underrepresented in the s&p 500 in terms of sector weightings for the past 20 years, in fact, and they have really suffered at the hands of financials and technologies and what-not. i think what we’re seeing is probably the unfolding of a long-term shift out of financials and technology stocks, into energy, into materials and you’ll get short-term moves but the major trends seem to be in place now.

>> brian, i need you to clarify one thing. energy has been the hot group for more than a year. it’s been the top performer by almost any measure, year to date, one week, one month, 12 months, six months. so why is it suddenly people returning to energy? i would assume they’re already there if it’s on top?

>> it’s really a question of the time frame over which we’re talking about this, of course. when you look at it over the course of the year, the groups have done better, the performance in the market has been in energy stocks but in terms of sector representation, for example, those who invest by owning what the s&p 500 owns, they’re still underrepresented relative to financials. financials are still around 25% of the s&p 500 in terms of their representation. energy is still down in the 10% range, maybe slightly higher than that so that if you want to talk about a secular move out of financials where financials over the long term suffer and into energy stocks, you’ll probably see people own more just like definition.

>> this is a case of apples and oranges, folks, because brian is talking about the economic sectors, there’s 10 of those and under that the financials account for 20% of the s&p 500 and energy would be the seventh largest weighted group for about 8%. as you said, about 8% more. so, the financial thoughts, inflation a huge story today?

>> definitely a huge story. there have been hints of it of late. we’ve worried that the fed may be hinting more about inflation being a problem going forward. i think we all have to look for the reaction in the bond market . a tough day today on inflation and the bond market will guide that discussion.

>> brian pears, appreciate it, head of equity trading at victory capital management. a number of companies have announced spinoffs of their businesses―american express and sara lee to name a couple. we’ll discuss that and more next.
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Listen Market briefing --- Matt (slow)
Vioxx --- Peter (slow)
NYSE --- Deb (slow)
committee ruled that the company’s vioxx painkiller, which was withdrawn september 30, the largest drug recall ever, the panel ruled it offers enough benefits to support its sale in the u.s. meanwhile, the f.d.a. says pfizer’s celebrex, the world’s best-selling prescription arthritis drug, should carry the stiffest label warning saying the medication elevates the heart attack risk and risk of stroke. pfizer shares up 7% today. peter cook will join us from the f.d.a. in maryland in a moment with details. first, let’s bring you the closing numbers on wall street, the dow up 30 points, pushed in large part by merck. s&p also higher today, just barely, though, and the nasdaq finishing down .1%. for the past five days, consecutive decliners there, as you see, three red arrows, .1%, .3% and .8% lower. off to maryland, f.d.a. headquarters, with peter cook standing by as we wrap up the celebrex-vioxx day.

>> here in gaithersburg, maryland, where the f.d.a. advisory panel has been meeting looking at the scientific and medical evidence at the risks associated with cox-2 drugs, so-called painkillers. they recommend that vioxx, which merck pulled on september 30, and pfizer’s two drugs, celebrex and bextra, should remain on the market but with new restrictions on their use, labels and advertising. if the f.d.a. accepts the recommendations, it means that vioxx could return to the market despite evidence it raises the risk of heart attack and stroke in patients taking the drug for longer than 18 months. some panelists said vioxx’s benefits for specific patients convinces then it should be on the market .

>> vioxx is the only thing available for pediatric g.r.a. and since our major risk is cardiovascular, i’m persuaded by the argument that i would hate to remove something that would benefit a population at a low cardiovascular risk.

>> the panel concludeed that celebrex and bextra from pfizer should stay on the market with restrictions. the vote for celebrex was 31-1 in favor. the margin for indexra was -- bextra was 17-13 with two abstentions.

>> the powerful commentary yesterday was public comments, rheumatologists, clearly desiring these therapies despite the risks. they want to deal with the risks but they want the pain relief so the f.d.a. will listen to the public as well as the panel and keep the drugs on the market .

>> that is the question, what does the f.d.a. do with the recommendations? generally speaking, the f.d.a. follows guidance of its advisory panels. merck has issued a statement saying merck has appreciated the opportunity to present data at the advisory committee meeting and they look forward to discussions with the f.d.a. when i asked the spokesperson how soon the painkiller could be back on the market , they said it’s too early to speculate.

>> thank you very much, appreciate it. we mentioned stocks here finishing on a down note or a mixed note or for a down week, deb kostroun has a wrap of the trading action with this report from the big board.

>> if we gave out an award for the most volatile stocks in friday’s session, it would have to go to the pharmaceutical stocks. all the news coming from the f.d.a. hearing in washington really moving around merck under pfizer on the day, especially earlier. however, by the close of trading, both stocks putting in a strong performance. in fact, that s&p pharmaceutical index, one of the biggest gainers behind energy in the s&p 500. speaking of energy stocks, some investors say that exxon-mobil xxon-mobil’s dethroning of general electric as the world’s largest company shows the importance of energy industry. the change in leadership comes after exxon-mobil shares rallied 14% this month compared to g.e.’s 1% drop. last month, g.e. led in market value by $49 billion. financial stocks, including bank of america, morgan stanley and citigroup, took a tumble for a third straight day on concern that alan greenspan will keep raising interest rates. a lot more concern following that report on inflation at the wholesale level. the p.p.i. core rate left .8% last month, its biggest increase in six years. what we saw on the day, treasury notes fell and yields rose.

>> in all the inflation numbers, they’re all moving higher, much higher than they were three months ago, six months ago and a year ago. today’s number might be overstated but it continues the trend we’ve seen.

>> merger fever continued with word that talks between may and federated department stores are back on. the “wall street journal” says the owner of macy’s and bloomingdale’s is close to striking a deal with may, the owner of lord and taylor and marshall field’s. shares of may rose as much as 7% on the news. the phone company that owns 82% of u.s. cellular corp. says it may want to buy the rest of the shares it doesn’t already own. telephone and data stock fell on news while u.s. cellular shares rose as much as 12%. i’m deborah kostroun at the new york stock exchange.

>> that’s the list of trading. let’s look at the over-the-counter markets here today. the nasdaq finishing down, the worst of the big three indexes today, down two points, .1% on the session. volume, the lightest of the year, the pundits tell me, at 1.6 billion shares. m.c.i.’s largest shareholder is undecided on the merits of a merger with verizon. the news comes after qwest says it might sweeten its competing offer for the long-distance carrier. bob bowden joins me now with more on this merger triangle in telecom. bob?

>> thank you, mr. nesto. carlos slim is the mexican billionaire who is,000 m.c.i.’s largest shareholder with a 13% stake. his spokesman on friday said this, we are studying very carefully the deal. we prefer to make a comment whenever we are ready. earlier, qwest c.e.o. richard notebaert confirmed that m.c.i. hadn’t responded to his original acquisition offer, writing in a letter yesterday to m.c.i. directors -- qwest said regulators would approve its merger with m.c.i. at least six months sooner than it would approve a verizon purchase, although that was questioned by legg mason analyst blair levin today. qwest c.e.o. notebaert said m.c.i. shareholders would own 40% of the shares if that merger happened compared to m.c.i. shareholders owning 5% of a verizon-controlled company. tim gilbert said moment sum certainly shifting back towards qwest. qwest now stands at chance of at least making verizon return to the table. could qwest substantially increase its offer for m.c.i.? that’s the word used by u.b.s. analyst in a note citing qwest management as having indicated they had arranged financing to support a substantial increase. on friday, m.c.i. shares rallying on talk of the increased offers for its business to the tune of 8% in that straight-line intraday rise. as for the suitors, qwest, the company attributed to having momentum, up almost 3% on the day with verizon shares down 1%. matt nesto, back to you.

>> thank you very much. in other news, the former c.f.o. at boeing was sentenced to four months in prison. michael sears convicted of deceiving the government by offering a job to a pentagon official as they negotiated a $23 billion defense contract. sears was also ordered to pay $250,000 fine and he’ll perform 200 hours of community service. he pleaded guilty november 15 to conspiring to violate federal conflict of interest laws in his employment talks with former air force weapons acquisition chief darlene druyun who herself is prison time, nine months’ worth. boeing shares today, long since separated from these two, down 1.6%. when we return, we’ll get a trader’s perspective inside today’s market action and look at where stocks will head in the future. brian pears with victory capital management is our guest after the break.

Interview: Thinkequity

>> expect isolated showers in the city clearing in the afternoon with increasingly sunny periods. ron madison joins us in tokyo with news outside the business world. good morning, ron.

>> u.s. lawmakers begin a push to enforce sanctions against iran. a house committee held hearings on a bill that would punish foreign countries from doing business in that country. iran and syria say they will work together to confront threats against them. this is video of iran’s vice president meeting syria’s prime minister in tehran. tehran’s foreign minister talked about the alliance.

>> iran and syria have some common interests. this does not mean that they’re going to establish a united front. but we have all to help and cooperate with each other from european side, from countries in the middle east to solve the problems and crisis that the whole middle east is facing.

>> the united states has accused iran of seeking to produce nuclear weapons. in lebanon, now,, hundred dollars of thousands turn out to pay respects to the country’s former prime minister. weeping mourners marched along side the coffin carrying the body of rafik hariri, killed two days ago in a blast that left at least 14 others dead. many blame syria for having a hand in harari’s killing. syria has instead condemned the assassination. the u.s. did recall its u.s. ambassador to syria in response. the associated press says philippine troops took control of a rebel stronghold in the country’s south. the a.p. says hundreds of government soldiers seized a training camp that was used by islamic fighters on the island. the camp trained followers of jailed muslim leader ezrati, whose group is blamed for bombings that killed at least 10 nationwide this week. north korea marks the birthday of its leader with pageantry and a feast. plenty of dancing as the nation celebrated kim jong il’s 63rd birthday. the associated press reports that they dined on venison as part of the cell celebrations. that’s the latest look at world news. back to you.

>> thank you, ron. an unprecedented ad blitz just before christmas and some deep discounts likely gave wal-mart’s fourth-quarter profit a lift by some 15%. that kind of growth would be the biggest in three quarters for the world’s largest retailer. wal-mart is scheduled to report before new york trading on thursday.%  the company will probably say profit rose to $3.13 billion or 74 cents a share, the average estimate of analysts surveyed by thomson financial. sales likely rose 11% to $82.8 billion. analysts and investors say it was the ad blitz and price cuts that saved the quarter. for the full year, wal-mart’s same-store sales growth was its lowest in a decade. a year some called a disappointment.

>> they didn’t have ipod this past holiday. they didn’t offer warranties on their expanded program and projection screens and televisions and consumer electronics so there are issues there. they’re not as fast at checkout as i’d like them to be. there are issues they need to address.

>> buchanan rates wal-mart a buy, saying inventory controls and rising gross margins will lead to 14% earnings growth this year but that’s less than what long-time wal-mart investors are used to. profit growth averaged 14% for the past four years, down from 19% growth during the previous four years. wal-mart’s stock price is little changed this year and has underperformed the standard & poor’s 500 index for three of the last five years. shareholders say the stock reflects the challenge of maintaining historic growth rates at a company with $287 million annual sales.

>> here’s a company that was growing their earnings in excess of, call it 20%. and then also, now, we’re seeing those numbers come down. that’s really effectively part of the law of large numbers.

>> koskuba says wal-mart’s global expansion generating 35% of those sales will be key interest during the conference call. the dollar rises the most in more than three weeks against the yen after alan greenspan signals further rate increases. we’ll discuss the outlook for the dollar and rates with the administrative strategist in boston.
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Listen Market briefing --- Brian (slow)
NYSE --- Julie (slow)
London market --- Matt (slow)

welcome to “live” from hong kong, i’m catherine yang. we’ll have some of greenspan’s comments and new york market reaction for you in a moment. also coming up on the show, in the middle of our week-long focus on japan, economic figures show the nation is in the midst of its fourth recession in 13 years. still, the man some call mr. yen says, don’t use the r-word.

>> i don’t think we have entered recession again. it is a slowdown and slowdown was faster than anticipated.

>> find out when mr. yen expects japan to recover when we hear from the former vice minister for international affairs in 50 minutes. the dollar strengthens after greenspan’s comments. and later, moody’s chief executive will look ahead for what’s next in interest rates and the u.s. economy. the dollar gained and bonds fell as investors interpreted greenspan’s remarks as an indication the fed has no intention of ending its string of interest rate increases.
>> in the seven months since i last testified before this committee, the u.s. economic expansion has firmed, overall inflation has subsided, and core inflation has remained low.

>> the dollar jumped to its biggest gain against the yen in more than three weeks and strentsened against the euro, as well. these are live market quotes on the screen. greenspan also urged congress to cut the nation’s record budget deficit.

>> besides market pressures which appear poised to stabilize and over the longer run, possibly to decrease the u.s. current account deficit and its attendant financing requirements, some forces in the domestic u.s. economy seem about to head in the same direction. central to that adjustment must be an increase in net national savings. this serves to underscore the imperative, to restore fiscal discipline.

>> greenspan’s calls to cut the deficit failed to spur the bond market . treasuries fell after greenspan said interest rates are fairly low. traders interpreted the message to mean the central bank may raise rates higher than some have anticipated. the chief investment officer of%  the world’s largest bond fund expects the fed to remove the reference to measured rate hikes when the benchmark reaches 3.25%.

>> my sense is that, given recent economic statistics and the rather optimistic nature of his presentation this morning, that that measured clause will continue to be within the context of fed statements for at least the next meeting and maybe one after that.

>> the fed’s next policy meeting is march 22. hewlett-packard’s first-quarter profit remains almost unchanged as competition intensifies. revenue rose on holiday sales of printers and personal computers. net income rose .7% to $943 million or 32 cents a share. sales rose nearly 10%, only half the gains that rival dell achieved in the same period. the world’s biggest printer maker and number two personal computer maker company struggled to boost sales and profit after dell took over the biggest p.c. maker and began selling printers. hewlett-packard ousted chief executive carly fiorina as she failed to produce the profits she promised. in after-hours’ trading, hewlett-packard is up 2%. oil rises to more than $48 a barrel after opec says global oil consumption will increase more than expected this year. china is expected to lead the surge in demand. opec predicts world oil use will rise to 84 million barrels a day. chinese oil consumption is expected to rise to seven million a day. boone pickens, whose hedge fund has more than $1 billion in energy investment, sees growth in china outpacing that in japan and says global oil production will not increase.

>> the world supply today is about 83 million barrels a day, that’s it. you can’t―there’s nothing you can reach back, pull it off the shelf and say, you know, got another million here, two million here. i don’t think it’s there. i think you have it maxed out.

>> opec last year did not predict the jump in demand from china and lowered production quotas in march, increasing targets too late in june and august and oil currentlied to more than $55 a barrel in october. the surge in oil prices boosted energy-related shares on wall street. u.s. stocks closed near where they started the day. the dow, s&p 500 and nasdaq were little changed. asian stocks fall in u.s. trading after a government report showed japan’s economy unexpectedly fell into recession last year and oil prices surged to more than $48 a barrel. advantest and mitsubishi tokyo financial group led declines while the rise in crude helped oil-related stocks like petrochina. the bank of new york indexes are all down and nikkei futures are pointing to a lower start when the tokyo market begins trading. japan will probably keep interest rates near zero today to pull the economy from its fourth recession in 13 years. economists we surveyed expect the bank of japan will maintain% -a policy of boosting the money supply to spur spending. that survey came before figures showed japan’s economy contracted three straight quarters. policymakers have promised to keep rates near zero until the six-year bout of falling prices ends. the bank of japan announces the decision around noon tokyo time. japanese stocks fall in new york trading. some of the stocks to watch today, vican industries cut to in line from outperform at goldman sachs. daikin rose on wednesday. mitsui engineering wins a contract to build a plastics plant in iran. the contract award from iran’s national petrochemical. iran is expanding its petrochemical industry to meet rising demand in asia. mitsui fell three yen on wednesday in tokyo. another stock reaction to watch is yahoo japan. the operator of the portal will split shares two for one. and in other asian markets , watch australia’s largest life insurer, turning to profit for the first time since 2001. a.m.p. had a full-year profit after earnings investments rose and costs fell. shares fell .9% on wednesday. and singapore, mandarin oriental international says profit rose sevenfold last year to $27.8 million. increased sales and recovery in hong kong business boosted earnings at the hotel chain. profits surged 13fold with sales in the stake of a european logistics company helping earnings and in hong kong, standard chartered profit increased 35%. the company set aside less money for loans that may have not been repaid. the lender makes 2/3 of its profits in asia. a.m.p. turns to profit, saying sales in investment earnings increased and costs fell. it will pay a second-half dividend of 13 cents a share. full-year net income came in at $934 million. that compares to a 5.5 billion australian loss in 2003. chief executive officer has slashed debt and cut costs. australia’s asx 200 index surged 25% last year, boosting a.m.p.’s investment, income and funds. the world’s largest retailer may report its biggest profit increase in three quarters. what analysts are expecting wal-mart to say.

Interview: applied materials & amat

>> applied materials said% first-quarter profit more than tripled and sales rose at the slowest pace in five quarters as chipmakers curbed expansion. net income increased to 17 cents a share. sales rose to $1.78 billion from $1.55 billion. applied materials or amat is the world’s largest maker of semiconductor producing equipment. our next guest has an overweight weighting on the stock. nikolay tishchenko joins us for reaction, an analyst with global crown capital in san francisco. good to have you with us, nikolay. amat says second-quarter orders may fall to as much as 10% from the first quarter, also expecting earnings per share of as much as 17 cents. what do you make of amat’s guidance?

>> first of all, the guidance at applied materials is better than anyone expected. even our expectations for the next fiscal quarter ending in april of 2005 was lower. we believe that the guidance is very bullish for applied materials and for the rest of capital equipment stocks. the names like kla-tencor, lam research, a.s.m. and others. the reason is simple. what applied materials told on the call, in other words, we are in the trough and further on, we have recovery of capital equipment industry and this is not a surprise at all because what we have here, the demonstration of economics of semiconductor manufacturing in large volume laying in favor of capital equipment stocks. the semiconductor industry has no other way than increase their spending on their capital equipment during 2005 and this is our forecast. we forecast that in 2005 capital spending will grow as opposed to some expectations that capital spending would be flat to down. this is bullish for applied materials and other players in capital equipment so we are confident with our rating of overweight in applied materials and others.

>> has it bottomed out this quarter?
>> no, but it’s likely that orders have bottomed in the first calendar quarter ending in march and it is likely that we’ll see recovery of the orders starting in the second quarter, calendar quarter of 2005.

>> so, overall, should we believe the chipmakers that say the slowdown in profits and earnings was only an inventory correction and temporary?

>> yes, it is. and there were some important signs. if you look during the inventory correction in the second half of 2004, average selling prices for semiconductor devices didn’t go down. they were actually up. this is a sign of health. the only caution that you have in your mind is how the end market will play out but so far, the outlook for the global economy is optimistic and this is the argument in favor of growth of demand of semiconductors, mostly in units and this will drive purchases of capital equipment by chipmakers.

>> how has splinter done in his attempts to broaden the company’s sources of revenue by increasing the service business?

>> applied materials is the single largest manufacturer in―of capital equipment. and it’s very difficult for applied materials to outgrow the industry. and the move into services business is a natural move for the company that wants to grow. applied materials is very good at―applied materials is very good in their applications and this is why they were able to grow by increasing their services business. it’s lower gross margin business but operating margin is very good. it’s approaching the systems growth margins.

>> do you see changes any time soon on the overweight rating on amat following today’s earnings and outlook?

>> no. we believe that the trend is up, talking about applied materials. and we believe that the industry will see growth of capital equipment market for the next two or three quarters. the outlook is actually bullish.

>> how strong will demand be for customers seeking to upgrade their production to machines using the newer 300 millimeter wafers?

>> the demand will be almost entirely driven by purchases of 300 millimeter tools and the reason for this is very simple. it’s the demand from economics of volume of semiconductors. you look at what is happening right now in the industry, the industry is significantly shifting the demand for 300 millimeter-capable tools and the reason for this is economical. if we believe that the end markets will remain healthy in 2005 and going further into 2006, chipmakers will have to buy 300 millimeter-capable tools to provide the i.c. unit output necessary for the end market and because of this, we believe that the outlook for applied materials and other capital equipment stocks is very good.

>> nikolay, good to speak with you, thanks for that. nikolay tishchenko of global crown capital in san francisco.% -coming up, sony is not only about play station games and movies. it also runs one of japan’s 10 biggest pension funds and you may be surprised where the fund manager is putting some of the billions.

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Listen Market briefing --- Cathy (slow)
Parkway --- Haslinda (slow)

>> welcome back. this is “live” in hong kong. i’m catherine yang. here are the headlines. japan releases its first-quarter g.d.p. in less than two hours. we’ll bring you the figures as they break as we continue our week-long focus on japan. applied materials first-quarter profit more than tripled as orders declined. applied materials said sales slowed as customers held back orders to clear stockpiles. b.h.p. billiton reports better-than-expected first-half profit with net income more than doubling with growing demand in china driving up prices of copper and iron ore. b.h.p. billiton’s first-half profit more than doubled to $2.8 billion. surging demand in china boosts prices for raw materials like copper and iron ore. we’ll go to stuart kelly, our stock reporter, for more from sydney. what reaction can we expect in the market from b.h.p. results?

>> as you said, b.h.p. billiton reported a short time ago, saying first-half profit more than doubled on surging demand for raw materials particularly from china. the result came in at $2.8 billion u.s. that beats analysts’ forecasts by 10% or so. also, the a.d.r.’s of b.h.p. billiton shares in new york rose about 1.9%, so it’s just two indication that’s shares may rise somewhat again today. however, there is another tad more interesting side of the coin. you may remember, on february 3, rio tinto group reported profit more or less the same as b.h.p.’s this morning. the shares have since fallen 2.3%, that’s rio’s shares, after a 22% year-long rally. at the time, merrill lynch did warn that some investors may take that opportunity to take some cash out of the stock. now, we’re pointing out that b.h.p. shares have risen about 45% in the past 12 months. so it begs the question whether investors will start to think the same there. catherine?

>> now, we’re also expecting profit reports from woodside petroleum. what’s. expected there?
>> woodside petroleum is australia’s second biggest oil and gas producer after b.h.p. billiton. it’s expected to report first-half profit at around about 11:30 a.m. sydney time. we’ll bring that to you then. but so far, analysts are expecting the company to say second-half profit rose 41% to $282 million u.s. because of record oil prices. also, an interesting development in the market this morning around boral, australia’s biggest building materials maker. it’s been one of the stock exchange’s biggest star performers in the past two years, rising 41% as the economy has surged. now, concerns of an interest rate rise have sparked a fall in the shares today. credit suisse started a buy on the shares, though. that’s all from me, catherine.

>> thank you. parkway holdings reports first-quarter profit after singapore stocks close today. the hospital may say 2004 hospital rose because of admissions and demands of specialized medical services. haslinda amin has a preview. what are analysts estimating?

>> good morning. those surveyed by thomson financial expect profit to rise to 29.5 million dollars from 20.4 a year earlier. parkway is benefiting from the accelerating economy as it recovers from the sars outbreak. singapore’s g.d.p. is projected to have grown 8.1% last year, the fastest pace in four years. still, parkway’s trying to attract more overseas patients amid a limited domestic market of four million. the healthcare provider is focusing on providing treatments for critical illnesses. it’s offering high-end services such as liver and bone marrow transplants at the singapore hospitals. cathy, it said recently that demand will rise as most people delayed getting medical treatment during the economic downturn and are now returning to hospitals for services. separately, the singapore government estimates an increase of a million foreign patients annually by 2012. analysts say parkway will benefit from the pickup. cathy?

>> the company is also expanding into the region, which includes china, india and thailand, among others. what are the prospects for the company? what are analysts saying?

>> it’s early to assess parkway’s overseas plans. some analysts say that the market has identified a new, not just to parkway, but to foreign healthcare companies in general. one analyst told me that, in the case of china, it already has its own established healthcare system so it will be difficult for parkway to penetrate into the market . for the next two to three years, businesses in singapore will still drive the company’s growth and expansion will be contributed by foreign patients, especially those from indonesia. the emergence of low-cost carriers in asia will encourage patients to the island for medical treatment. the analyst says the challenge is to be more competitive. hospitals in the region are increasingly offering similar services at lower prices. cathy?

>> thank you, haslinda. microsoft is planning to offer an internet browser that improves online security. the new version of the internet explorer aims to block so-called spy ware which can collect data from internet users.

>> it’s slowing down machines, causing pop-ups people don’t want, it’s compromising our privacy. this is a very serious problem. a lot of malicious code out there preying on these systems.

>> internet attacks and security breaches are causing users to switch to other products such as a browser by fire fox. microsoft plans to launch a new anti-virus program this year to compete with trend micro, mcafee and symantec.

>> we applaud microsoft’s security initiatives. they are very necessary. but in my opinion, not sufficient for large enterprise. they don’t offer across-platform heterogeneous solution and genetically they may be incapable of doing so.

>> microsoft has made changes in its online security plans in the past three months and in december picked japan’s trend micro to provide anti-virus services for hot mail and earlier this month, his microsoft bought sybari. up next, applied materials said first-quarter profit more than tripled but sales growth slowed. we’ll speak with an analyst in san francisco.

Interview: Thinkequity
>> 10 past the hour. we turn our attention to semiconductor stocks. the philadelphia semiconductor index has gained some ground in the past month. and still down about 15% for the year and still underperforming the broader market . one analyst who says now is a good time to get in is eric ross of thinkequity partners. several stock upgrades recently and we will talk about that and the whole sector. good of you to come on in.

>> appreciate it.

>> still down but things are looking up. how so?

>> the reason it’s been down is because of inventory and pricing pressures related to inventories. our checks in asia two weeks ago when we were there suggest the inventory is burning off faster than people have expected suspect may be done in the second quarter.

>> what do you think―ascribe that to?

>> the demand has held up a little bit better than people would have expected in the first quarter. we think the chinese new year buying will soak up a little bit more of that and some of the companies actually just didn’t buy as much. that’s why the semiconductor companies didn’t see as good of fourth quarter and are seeing a flat first quarter.

>> does seasonality apply or variations with the normal seasonal pattern?

>> that’s a great question. seasonal in the end markets but for the semiconductor companies we’re seeing a little bit of a flatness and instead of seeing a big fourth quarter and a much lower first quarter.

>> i understand there are some rush orders being reported here as well, what’s that?

>> definitely. we talked to a number of the found rice. even though some customers had cut back drastically in the fourth quarter, they are seeing march orders rush which is better than people expected.

>> is this out of the blue or had you seen this a while back or any way to anticipate this?

>> everybody was expecting at some point the inventories would burn off. what we were seeing in september, october and november is inventories were a lot worse than people expected. as soon as we started hearing some of the company commentary and the first quarter we started to hear demand at the end of the fourth quarter, we were expecting that inventories may have been burning off. that’s why we went to asia, specifically to find this out.

>> where are we going from here? smooth sailing or choppy?

>> choppy for a little bit. what will happen first is the news flow is going to turn a little bit more positive from a little bit more negative and we will start to see some of the companies start to come up. we will not be straight shots at the moon from here. also end markets will be a little slower this year. strengthening in 2006 but not a traditional up cycle.

>> the mid quarter update will be disconcerting to some?

>> it will be better than what we’ve heard in the reporting season for the fourth quarter.

>> let’s talk about some of your picks. you have a number of companies that we have put some charts together on. and first of all intel. the big guy.

>> of course. we upgraded it from accumulate to buy.

>> why?

>> the big driver for these guys will be the mobile p.c. they have dominated. they continue to gain share there and the transition to their new product which is the -- that platform is executing perfectly. just excellent. i can’t believe how well it’s executing.

>> and you are seeing demand?

>> we are seeing demand. they continue to see shortage of some intel chips even though dell is not seeing it, a preferred customer. everyone else is scrambling. >> could this be a problem?

>> we think of it as a positive because they are producing as much as they possibly can so margins will be pretty good.

>> and mips. tell us about mips.

>> this is an interesting one. mips is an i.p. play that plays into most of the digital media consumer electronics that we see out there. the digital tv set top boxes, recordable d.v.d.’s, video game consoles.

>> everything that everybody wants right now.

>> exactly. people associate it with the communications bubble of 2000. really a high-powered processor that was used for a lot of the communications products and now being used for digital entertainment.

>> a doubting thomas would say it’s a small stock. doubled in the last month.

>> maybe more.

>> why jump in now?

>> if you look at valuation and growth rate, below where the group is trading. we’ve been very conservative and estimates will come up as well. we any it will be a slow, steady climber, maybe not a double in the next six months but 30% to 40% upside from here.

>> intersil. technology used in flat panel displays. we have seen a lot of flat zphranl displays.

>> our analog analyst has upgraded this and think they are gaining share from some of the big guys, from linear and maxim. and they’re definitely seeing the strength in flat panel displays. also flat panel televisions. so these guys are set to start to come up faster than the rest of the analog group.

>> we hear a lot about the market to be flooded with cheap flat panel stuff. could that hurt them?

>> that’s good for them. the real price that causes the price for flat panels to be high is the glass price. that’s come down dramatically. a lot of capacity in asia. the panel prices should come down 40% to 50% alone.

>> and some disclosure on the companies you mentioned. your positions in them or holdings?

>> i don’t own any of it personally. our company does not own anything and we don’t do investment banking for them.

>> we appreciate your time and input. eric ross of thinkequity partners. we will take a break. 16 past the hour. more on the chip sector ahead. carol massar will talk live with the c.e.o. of qualcomm. in our next hour here on bloomberg tv. and coming up next, the greenspan testimony preview, live from washington, don’t go away. we’ll go back outside again. shall we go outside? i think we will. there it is. it’s too nice a day not to. we are talking about temperatures in the 50’s today in new york city. spring fever strikes a little bit early. i’m directing from the set. back in a moment.

在线播报
Listen Market briefing --- Brian (slow)
NYSE --- Julie (slow)
London market --- Matt (slow)

>> from new york city, i’m mike schneider. this is the “morning call” . brian sullivan on assignment today. we have of the second hour of our program. the european markets higher right now, the 10-year down a couple of ticks. more on the markets still to come but our top story on this tuesday morning involves verizon once again and its offer to buy m.c.i., facing some roadblocks, new ones this morning. in addition to f.c.c. approval, m.c.i. must get shareholders to say yes to the deal. no surprise there of course but three of m.c.i.’s top six shareholders are not happy. they say verizon’s offer undervalues the company. and that m.c.i. should reconsider quest’s higher bid or stay independent. one of the unhappy shareholders is leon cooperman of omega advisors. he said m.c.i. does not have to make a deal right now.

>> m.c.i. could not only survive but thrive on its own. it’s generating a lot of cash, free cash flow, strong balance sheet, no company issues in my opinion. and i think that verizon underpaid for what they’re getting. and hopefully quest or someone else could improve upon the offer.

>> shares of m.c.i. fell yesterday, partly because the deal included dividends, already promised to investors. the recent consolidation in telecom may lead to changes at the federal communications commission. this is according to “the new york times,” reports now the deals will force the commission to address a number of its policies. one of the topics it must decide on is how long distance service is packaged and paid for. another area up for discussion, expanding broadband services. and even with all the possible changes, most analysts say the deals will be approved. warren buffett and george soros making news this morning by increasing their bets on cable tv companies in the u.s. both billionaire investors are taking advantage of falling stock prices to buy into the top two cable operators. buffett’s berkshire hathaway doubled its stake in comcast to 10 million shares in the fourth quarter. soros, fund management, bought 2.6 million shares of time-warner last quarter. since hitting their 52-week lows in august both companies have rebounded. and they’re attracting new customers with features including video on demand and digital video recorders. retail sales may have fallen last month. the first time we will have seen that since august. economists say a drop in car sales is leading the overall decline. car sales fell 12% in january. automakers were cutting back on incentives. but if you exclude the auto sales economists are forecasting a gain in january retail sales. we will find out for sure. the report is due to be released at 8:30 this morning washington time. about 90 minutes from now. how retail will be impacting trading today, julie hyman standing by live at the new york stock exchange to set up the day for us. good morning, julie.

>> good morning, mike. retailers are already in focus this morning and investors are looking at this number as a signal on the economy. an important signal on the economy and consumer spending. they’re wondering if retail sales are starting to slow down a little bit. they have really held up well even as we’ve seen the economy not necessarily doing well. i talked to russ could say tritch―russ koestrich, is the consumer pulling back or is the spike in personal incomes, caused by the microsoft special dividend, spill over into retail sales, so very much in focus with not just the overall retail sales figure but also with wal-mart earnings which will be out on thursday along with that of target. so that is in focus really centrally in investor sights today. already we are seeing some retailers’ share fall back a little bit in european trading. we’re watching wal-mart as well as home depot, both of those stocks are trading weak over in europe. we’ll see if in a trend continues this morning and what happens when the number comes out. incidentally for the year to date thus far, retailers have not fared very well, if you look at the s&p 500 index of retailers, it’s down just about 4%. one of the worst performers. one of the best performers in 2004, up 22%. if you look at a wider index of these retailers you also see that it’s trading lower. the supercomposite that includes more mid and small caps down, up 21% last year. both of these indices if you look at their individual components, about an even number of stocks that are up and down on the year. e-bay one of the big drags here. it’s down the most thus far in 2005. 28% after rising 80% in 2004. also we wanted to bring those numbers on quest communications. mike was just talking about telecom. quest has definitely been in-income with its competition and its bid for m.c.i. quest posting a six cent loss excluding some items. that is actually less than what analysts had been looking for. so better than what analysts had been looking for. revenue coming in a little bit light of analyst estimates. mike, back to you.

>> all right, julie. thank you very much. about six minutes past the hour. european stocks moving higher as well. matt miller joining us from london right now to look at some earnings results and a whole lot more.

>> a lot of earnings out. the world’s biggest maker of household appliances is electrolux. it will spin off an outdoor products unit and close factories at a faster pace to try and boost profits. profits did fall in the fourth quarter, 37%. that’s because of rising steel prices. and better than analysts expected and knows shares surged 11% in stockholm this morning. v.g. group shares also rose after the former u.k. natural gas monopoly said it beat analyst expectations as well. those shares hit another record high today after b.g. reported a 16% rise in fourth quarter profit. it also raises production targets for 2006 and raised its quarterly dividend 12%. markets up across the board after a down open. a quarter percent gain on the ft-se as well as the cac and the dax as oil producers and health care stocks boost the indexes. a couple of german earnings stories as well. both posting profits from losses in the year earlier period. first off commerzbank with a profit of $129 million in the quarter after it boosted lending income and trimmed loan losses. both good things for a bank to do. shares rose 1%. and munich re, the world’s largest reinsurer, posted $2.3 billion full-year net income after a recovery at its main unit ergos. munich re said reinsurance rates stablized at a high level in january contract talks when about two thirds of its business was due for renewal. those shares rose as well after falling with other insurers this morning. in economic news, germany is teetering on the brink of a recession. the country’s economy unexpectedly contracted in the fourth quarter. as domestic spending fell and exports failed to make up the difference. g.d.p. fell 0.2% from the third quarter when it didn’t grow at all. economists had expected growth actually of 0.2%. the same figure. but on the positive side. a global economic slowdown, the urebes’ appreciation and the highest unemployment since world war ii have held back germany’s export-led recovery. back to you in new york.

>> thanks very much. we’ll take a break. still ahead things are looking better for semiconductor companies. have they turned the corner on their biggest problem? we’ll identify the problem and talk about that and a whole lot more. eric ross of thinkequity partners will be here. let’s take a look outside our window. beautiful sunrise here in lower manhattan. it is february. but there is a hint of spring on the way. pitchers and catchers have reported in florida and arizona. hope springs eternal, mets fans. back in a moment.