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Interview: Price of energy
>> with the price of energy, metal and lumber rising this year, companies have had to adjust. the nation’s largest packaging company is smurfit-stone container. the company’s chief financial officer, charles hinrichs, says it’s had to raise prices to cover the surge in commodities. he explained to erin burnett where the higher prices are coming from.

>> in 2003, our energy costs were up dramatically, up by $70,000 from 2002. in 2002, natural gas costs continued high and they’re up 8% through the end of september. in addition, we’ve had higher recycled fiber costs which impacted our costs in 2003 by $17 million negatively and recycled fiber costs are up about 23% in the first half of 2004 over the 2003 average. so it’s these types of cost pressures that are causing us to increase our prices. we’ve got two price increases in container board that are being implemented. we’re up about 24% year over year. and now we’re implementing prices in corrugated boxes, our packaging products.

>> what sort of push-back have you received from customers on price increases? when we hear about companies that do more plastic packaging, they’ve been cutting forecasts saying raw material costs are rising and they’re not able to pass along price increases. why do you think you’re able to push these price increases through for your box packaging?

>> well, erin, most of this is cost push but we’ve also had price decreases over the past three years as a result of declining demand for corrugated boxes. as manufacturing has moved offshore, corrugated box sales have declined in terms of volume by 6%. since the year 2000. so we’ve been working hard at smurfit stone and as the industry to reducing our high cost capacity and trimming inventory levels. now inventories are in balance, demand has picked up nicely in the second half of 2003 and we’re beginning to push through price increases to recover some of the cost increases. i think our customers expected to see some cost increases in 2004.

>> when do you think you’re going to return to the level of demand that you talked about back in the year 2000?

>> we may, it may take us several years to get there, erin. the loss in demand was caused by manufacturing moving to china and other locations in asia. we’re beginning to see some recovery in demand which is typical in the early phase of economic recovery. some inventory replenishment. so demand for corrugated packaging is up 3.8% to a year-to-date basis through august and continues to be strong in the third quarter. average box shipments were up in july and august by 4% on average.

>> you just talked about some of the issues you’ve been faceing with demand, coming from a shift in demand coming from asia. do you at smurfit-stone have a strategy to start making boxes that perhaps could serve the asian market where you see the biggest increase in demand?

>> yes, we do, erin. we have four box plants in china now that we own through a joint venture. i think our current strategy is best executed by using our packaging solution centers where we have offices in bentonville, arkansas, and in hong kong to help our u.s. and north american-based customers design their packaging, whether it’s produced in asia or north america, so it has a uniform look and performance.

>> that was erin burnett earlier today with the c.f.o. of paper products maker smurfit-stone, charles hinrichs, and shares have gained 32% in the past 12 months. executive search form korn/ferry is experiencing strong demand. we spoke to the c.e.o. earlier and paul riley says he sees recruiting in all industries increase, with managing hiring up 40% to 50%. he said today’sgatinges were a surprise in that he expected a bigger number and he doesn’t know why there’s a disconnect.

>> we’re seeing solid, solid growth. again, in every region of the world. maybe south america is slower. but asia up over 50%, europe over 40%, the u.s. up over 40%, canada. we see it all over the world and i think it’s led by the u.s. expansion which i think is real.

>> he added that some companies are waiting until after the election to add jobs but most of them are not. martha stewart begins serving her five-month prison sentence today. the founder of martha stewart living omnimedia surrendered to authorities at a federal prison in west virginia early this morning. after her release, she’ll serve five months of home detention. she was convicted of obstruction of justice in march. jure jurors found she lied to authorities about why she sold imclone stock. and the braves have won their division for the 13th consecutive year but they haven’t sold out their playoff games.

>> in atlanta, two things remain the same. the braves won the division for the 13th consecutive year and the team hasn’t sold out either of the first two playoff games. that is one of the subjects of this week’s “money & sports” segment. joining us from our atlanta bureau is mike buteau. division titles are nice here. but the attendance problems must concern the team’s front office. if they can’t sell out a couple of postseason games, what’s the point?

>> you would think it would be a big concern but it’s almost become an expected here in atlanta. they make the playoffs 13 years in a row and everybody keeps waiting for the nlcs, the championship series, the second round to roll around and it hasn’t rolled around as often as they would like so people seem to be waiting for the next round, waiting for the championship series and world series but it hasn’t come four out of the past five years so right now the series is tied up and people hope this might be the year they move on and when you’re the braves management, the ticket prices for the first round don’t make that much of a difference. you get to the second round, they jump dramatically and the world series jumps even more but the braves more importantly this year are concerned about their payroll and they slashed that by about $25 million this year, in turn, that will cut their overall losses to $10 million this year from $34 million last year so that’s the biggest news when it comes to the braves and the front office, their concern about the payroll and the loss and the loss this year won’t be as bad as it has been in years past.

>> it’s been a different year for the braves. some have been surprised to see that the braves are even playing there’s four reasons they’re in it―the mets, the expo, the marlins and phillies. what are they doing to try to really boost things over there? try to get more audience in the seats?

>> it’s interesting, they’ve gone about a whole change of the franchise image. in years past, there was glavine, grux greg maddux and gary sheffield. now they have charles thomas and j.d. drew. he’s a hustling player and that’s the image they’re going for, a team that hustles and wants to win and doesn’t rely so much on names and salaries and they’re trying to sell that to the fans in atlanta. it has sold a little bit but it’s only the first year of that remgating effort. we’ll have to wait until next year to get a gauge as to whether or not they’ll buy into it.

>> names like larry, for one. the the super bowl halftime show will be sponsored by ameriquest. has the halftime show become more sought after because of what happened with janet jackson?

>> i’m not sure companies are looking to be sorveted with a wardrobe malfunction but it created more attention on the halftime show. it moved into that realm of, well, this is a break in the action, let’s refill our bowl of chips, and it was becoming a spectacle but now there’s the chance of something unexpected might happen so ameriquest latches on to the halftime show.

>> but won’t it go to the opposite, going from nudity to some kind of “up with people” type thing and be board to death.

>> the nfl is trying to keep it new and interesting. they’ll be involved in the actual production of it and who’s performing. they’ll not go back to “up with people” but they’re not going to push the envelope and let the m tv version as they did in the past.

>> yet another sport has found a reason to institute a five-second delay and that is nascar with dale earnhardt jr.’s expletive on nbc. are we going to look at delays for all sports some day?

>> it seems to be moving that direction. in sports there’s that five-second delay and you don’t even know about it. i was at the braves the other night and i was looking at the espn broadcast and it was five seconds late. now something like this with dale earnhardt, they let you know it will be a five-second delay so you can’t hide it.

>> thank you very much, mike buteau in atlanta. coming up next, we’ll look ahead to a busy week for earnings and the economy. a calendar of events, keep you up to the minute after a quick break.

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Listen Market briefing --- Lane (fast)
G.E. --- Bob (fast)
London markets --- Mark (slow)
>> the dow jones industrial average down by 70 points at 10,055 -- g.e. shares on the move after the company said third-quarter earnings were in line with analysts’ estimates. bob bowden has the details after filing this report.

>> general electric profits rose 11% in the third quarter as acquisitions and economic growth spurred the biggest quarterly sales increase since jeff immelt took over as chief executive from jack welch. the headline number, g.e. third-quarter net income was 38 cents a share up from 36 cents a share in the same period a year ago. the 38-cent figure met analysts’ estimates. third-quarter revenue of 38.27 billion was 15% higher than last year and exceeded the analysts’ estimates of $38.1 billion. general electric raised the low end of its full-year forecast to a range of $1.57 to $1.60. for next year, g.e. forecasting 10% to 15% earnings growth and if you back out per-share figures from that forecast, that amounts to $1.73 to $1.84 a share, presenting a midpoint a half penny above the analysts’ estimates. chairman jeff immelt made bullish remarks. comments from the conference call, first, jeff immelt is hiring, sales and marketing , technical and service employees and sees that hiring in 2005. he sees dividends rising more or less with g.e. earnings and third, immelt says g.e. has been able to raise prices across many units, particularly equipment businesses. immelt has agreed to more than $60 billion in acquisitions in higher growth areas such as healthcare, consumer credit and water treatment. meanwhile, he’s sold more than $14 billion in less profitable financial areas such as insurance and g.e.’s satellite business. mike blatt is portfolio manager with chemung canal trust and reacted to g.e.’s forecast of 10% to 15% earnings growth in 2005.

>> i think the double-digit growth is kind of baked in well, not baked in but the acquisition of amersham and nbc universal gives them headwinds to reach that but if you take a longer term look at it, by getting rid of the lower return businesses, it will increase their return on capital which has suffered over the last three or four years.

>> year to date, general electric shares have been the sixth best performers among the dow industrials. they are up about 9% year to date.

>> bob bowden reporting. and for the day, shares of general electric down 21 cents at $33.74. let’s now look at what’s expected for the markets next week in europe. mark barton has the report from london.

>> starting with economic matters, u.k. producer prices released for the month of september. economists expect the cost of goods leaving british factories to rise 2.8% in the month as producers pass on some of the costs of higher energy prices to customers. the fastest economic growth in almost four years is allowing some manufacturers to raise prices, reflecting the higher cost of oil and metals. the bank of england’s monetary policy committee has lifted rates five times since november to ward off inflation. in august, the bank said consumer price growth may breach its 2% target in two years. on the corporate front, deutsche lufthansa releases traffic figures for september. in august, europe’s third biggest airline reported a 13.9% rise in passenger numbers as it increased seating capacity and flights. this week, goldman sachs cut earnings estimates at european airlines saying record high oil prices will boost costs for the companies. in august, the international air transport association said airlines may lose as much as the combined $6 billion this year if oil prices stay above $44 a barrel. just sticking with travel, swiss international airlines reports september traffic figures. switzerland’s national carrier reports a 20% fall in passenger numbers in august after it cut routes to save money. last month, the airline said it signed a credit facility for $257 million, allowing it to take the necessary steps to compete. swiss international created from swissair almost three years ago had planned to join the one world carrier airlines with a.m.r.’s american airlines and british airways until talks broke down. for bloomberg news in london, i’m mark barton.

>> well, markets friday in europe declined. but the report didn’t hurt the bond market any. a check on 10-year notes on the day yielding 4.13%, up 29/32, nearly a full point. still ahead, raw material stocks have been reaping rewards for investors. paper company smurfit stone container is one of the winners. we’ll hear from its chief financial officer after this break.

Interview: AT&T
at&t two decades ago employed more than a million people across the u.s. yesterday’s decision to cut their work force 20% by year end reflects its decline. the move comes as it retreats from the residential phone business.% of course, the residential phone business alive and well with at&t spinoffs including the regional bells, bellsouth, s.b.c. and others. brian sullivan spoke with david dorman about the change.

>> it was related to a regulatory decision that made it difficult for us to compete with the incumbent bell companies. on the business side, we control more of our own destiny and it’s about scale. we have the scale of operation to have low unit costs and our profitability is significantly above all the other players in the traditional long distance space. we compete with the bells in the business market but they don’t have the coverage we do and they’re not global.

>> let’s talk about internet telephony, then. how do you avoid price deflation on a massive scale in voice-over i.p.

>> if you look at the bask cost drivers around the internet telephony application, voip, than what you see in dracial telecom, there are big differences. prices are lower because the technology offers a lower cost so you can’t relate one to the other except at the consumer level, they’re paying dollars so right now you see i.p. services undercut traditional services dramatically. i think that trend will continue and as players get scale, prices will come down more.

>> i asked you this a couple of months ago, so many people in america are at&t stockholders right now. why should they hold on to at&t stock?

>> what at&t is today and very different than what we have been in the past, we are the premier business communications services provider.

>> even with the exit out of consumer?

>> absolutely. businesses services to people like the i.b.m.’s of the world, the exxon-mobils of the world, chevrontexacos, the large global enterprise customers depend on us for data communications, voice communications and the like. that’s not a market that will go away. it’s transforming and we’re transforming with it. we believe that over the next several years, consolidation in this industry will occur, not necessarily through business combination but through the fact that the number of players out there will go down, just basic economics will drive it.

>> you said that you’re going to analyze uses of what you call surplus cash. can we expect a dividend increase coming from at&t?

>> i wouldn’t go that far but our objective has been to have maximum financial flexibility meaning we are not a slave to our balance sheet. we have paid off more than 50% of our debt over the last couple of years from our peak several years ago, going from $65 billion down to as we said in our announcement last night, less than $7 billion of net debt.

>> are you done issuing debt?

>> we don’t have plans to issue debt. we’re buying debt back and will complete debt buyback this year and once that’s complete, then we’ll decide how we’ll deploy the excess cash, whether buyback stock, dividends, investing more in the business.

>> are you in active talks to sell the company?

>> no.

>> would you listen if approached?%

>> if someone looks at our company and says, gee, this is a terrific business. we are obligated in working for our shareholders to entertain things that make sense and have our board think about it but at the current time, our view is we have to be really focused on what we’re doing and our announcement yesterday indicates we are.

>> verizon gave optmim to the telecom industry a couple of days ago, saying they’ll increase capital spending. you have excess cash flow. where is your money going to go in reinvesting into the capital structure of at&t?

>> the most important thing for us is to have a new set of products and services that meet the needs of global customers so we’re investing in that―i.p. services, managed services and hosting and the like centered around i.p., and secondly, having an operating environment, systems and support that touch our customers that are the most efficient and effective. we’ve been spending our money to get easier to do business with and that’s paying big dividends for us. we don’t feel constrained in our ability to do that based on our current cash positions and we are significantly outspending our peers. verizon announced they will build fiber to the home in certain markets that are capital intensive and their wireless business is growing dramatically and i wouldn’t be surprised if they increased capital spend as a result.%

>> that was david dorman earlier today on bloomberg television. shares up on the day by 14 cents at $15.18. at&t has declined about 25% this year as profit tumbled. oracle chief executive larry ellison testified that he considered lowering his $7.7 billion hostile bid for peoplesoft because of a shrinking market for business software. ellison is testifying in a lawsuit against peoplesoft over the company’s poison pill defense which could make the takeover too expensive to pursue. ellison has been pursuing peoplesoft since june of 2003. shares in friday’s session fell more than 2.5%. the nasdaq composite suffered its largest decline in almost two months friday. coming up, we’ll look at the day’s biggest movers there at the market site. and shares of krispy kreme fell more than 8% during friday’s session. a formal investigation into the donut maker’s accounting practices has been opened like a box of doughnuts.

在线播报
Listen Market briefing --- Lane (fast)
Job report --- Peter (slow)
NYSE --- Julie (slow)
Oil prices --- Su (fast)

welcome to “world financial report.” we’re glad you’ve joined us, i’m lane bajardi in new york. the unexpected slowdown in jobs and a fourth straight day of record oil prices weighed on u.s. benchmark indexes. the dow jones industrial average down on the day by 70 points at 10,055. the s&p 500 lower by .75% or 8.5 points. and the nasdaq down 28.5 points, 1.5%, settling at 1919. he labor department reports u.s. employers added fewer workers in september than economists expected. the report raises questions about the strength of the economy and it expected to be a hot topic as the presidential election date nears. bloomberg’s peter cook has detail it’s jobs and filed this report.
>> a lot of disagreement going into the jobs report as to what it would show given the hurricanes and other factors in september and the headline number did not meet economists expectations. the economy added 96,000 jobs in september, the median forecast of our survey of economists heading in was 148,000. also, the august figure was revised down to 128,000 from the original figure of 144,000. looking at the manufacturing sector, economists expected job gains there. instead, there was a loss of 18,000 jobs and the august number was revised down, as well. the c.e.o. of the world’s largest executive search firm says the numbers don’t match what he sees in the economy.

>> we were expecting a bigger number but from our standpoint, we’re seeing great demand in all the recruiting sectors and we may be leading that charge with reported last quarter 40% growth year on year but we see it in all the staffing companies so from a client perspective, c.e.o.’s are saying they’re hiring, economically they’re opt mirk―optimistic about the future.

>> the labor department says hurricanes in the south slowed employment growth but not enough to have a material effect on the treasury report. treasury secretary john snow points to the unemployment rate, holding steady at 5.4% in september and says what’s important is the labor market is moving in the right direction.

>> the economy is in a recovery. 13 straight months of job pickup. and we’re on the right path. we’re not satisfied, but we’re clearly on the right path. the economy’s turned the corner and is going the right way.

>> part of the economy he’s talking about is doing well in the boardroom but if you live on a pay stub, your wages are flat, energy costs are at record high numbers, healthcare costs have gone up by 1/3 under this administration, college costs are up by 1/3 and personal bankruptcies are up by 1/3.

>> democratic presidential candidate john kerry calls the numbers disappointing and his advisers say it will be a hot topic tonight at kerry’s second debate with president bush. one other piece of good news for the president in this report, a preliminary revision of the 12 months ending last month shows the economy added 236,000 more jobs than first thought in that 12-month period. in washington, peter cook, bloomberg news.

>> and the jobs report had a definite effect on the treasury market . u.s. treasury notes rising for the first day in four. speculation that the federal reserve may only raise its benchmark interest rates once more this year. the 10-year note, yield at 4.13%, up on the day nearly a full point. semiconductors led stocks lower. julie hyman has a wrap of the week’s trading from the new york% -stock exchange.

>> stocks ended the week lower and ended the day lower, though not at the lows of today’s session. a number of factors driving us down today. we had three main elements, first, the jobs report this morning which came in weaker than expected. oil rising once again to a record. we also had semiconductors, in particular, putting a lot of pressure on the market . for the week, the dow ended lower by a little more than 1%. the s&p also ended lower 1%. i wanted to look at the energy stocks because they were gaining in today’s session, one of the few bright spots in the market . however, oil put pressure on the rest of the market as a whole. semiconductors, in particular, also falling. advanced micro devices lost a court bid for sealed documents in a case accusing intel of anti-competitive practices in europe. incidentally, intel is out with earnings next tuesday. some of the other semiconductor companies down today included texas instruments, national semiconductor as well as micron. as for the jobs report, it had a direct impact on employment services stock so we awe manpower falling, korn/ferry international and robert half. g.e. came out with profit, falling in today’s session although the company said third-quarter profit was up 11% and matched analysts’ estimates and narrowing their forecast for the year to the upper end of their previously announced range. however, it looks like the general weakness in the market affected g.e. also, they saw weakness in media holdings, notably nbc. i’m julie hyman, bloomberg news at the new york stock exchange.

>> in another big story today, oil at yet another record. crude rising to a record $53.40 after the louisiana offshore oil port shut because of rough seas, limiting the arrival of shipments to the u.s. looking at today’s close, $53 .31, up 64 cents or 1.2%. looking ahead to next week, most traders and analysts predict still higher prices. more than 70% of those surveyed by bloomberg say crude oil futures will continue to rise next week. su keenan reports some traders are starting to talk about the possibility of oil at $100 a barrel. su?

>> well, this latest survey from bloomberg shows that respondents are significantly more bullish and giving never before heard estimates for how high oil prices could go. of the 45 traders and analysts surveyed by bloomberg, 73% predict new york oil futures will rise beyond today’s record price, going into next week. this is the biggest margin in favor of a gain in the six months that bloomberg has been conducting the survey. barkley capital’s analyst says there are so many different supply-related factors driving the rally, we could see oil at $70 a barrel by the end of the year.

>> unlimited potential. we could see $60, $70 and if all worst case worst-case scenarios happen, $100 is not outside the realm of possibilities.

>> the analysts for refco say the new and higher worst-case scenario prices for oil come from a confluence of events, such as the potential supply disruptions in nigeria and norway.

>> it’s the confluence of events, the fact that we don’t have a great deal of spare capacity within opec right now and if we get nigeria or venezuela or a bigger strike in norway, it’s that impacting that with the fact that demand is very strong right now so you have to keep an eye a number of things right now, a number of small potser boiling in the oil world, which is giving us this cocktail of higher prices.

>> what a cocktail. he says in the event of such a major disruption, which he doesn’t see happening, all bets for oil prices are off. the latest supply concerns involve the third shutdown this month of the louisiana offshore oil port. it handles about a million barrels of crude oil a day, 10% of u.s. imports. fimat’s michael fitzpatrick says we can’t afford to lose one drop of oil. robert froehlich is telling investors who want to ride the rally to invest in stocks.

>> one of the neat ways to play it is you look at the energy sector, at the material sector and if you’re concerned that energy has had its run, which we don’t think it has, look at the material sector because that’s a great way to play what’s going on in the commodities because that’s the stock market proxy for commodity prices.

>> what’s happening in commodity prices as oil futures are up 79% in the past year.

>> su keenan, thanks. 20 years ago, at&t had more than 1 million people on its payroll. yesterday, the company announced that by year end it will employ only 40,000 people. over the years there were many spinoffs to other companies that employ many people. coming up, we’ll bring you the bloomberg news interview with at&t chief david dorman about their future.

Interview: Airbus
>> the u.s. and european union file dual complaints with the world trade organization, arguing that government subsidies given to boeing and airbus violate trade rules. they threaten to disrupt the financing each company uses to develop aircraft. ralph crosby is the chief executive of the european arm of the parent company of airbus and spoke with michael mckee about why he vehemently disagrees with the u.s. claims.

>> any time this kind of dispute happens, it’s unfortunate.

>> but you are selling a lot of aircraft these days, 305 last year compared to boeing’s 281, yet you get a subsidy meant for start-up countries in europe. is that fair?

>> your assertion is wrong. there is no subsidy meant for start-up companies. what we’re talking about say method for creating a level playing field between two different methods of government support for commercial aircraft manufacturers.

>> this was an agreement put in place in 1992, i believe, when the u.s. agreed to allow subsidies for airbus because the company was in a launch mode, was trying to get going. have the circumstances chanked? do you still need the kind of money you get from the governments of europe?

>> well, again, your facts are wrong. that’s not the reason that this agreement was reached. the agreement was about two different systems where commercial aircraft manufacturers are supported by their governments in two ways. in one case, it’s by repayable loans, the impact on air bus and eads. on other side, there are supports provided by agencies such as nasa and the department of defense for the products that u.s. manufacturers, in this case, boeing, developed.

>> so you say and i assume that the world trade organization will decide whether or not i’m right or wrong, but you say at this point that boeing gets more subsidies than you do?

>> no, no, no. i said it’s about an even playing field and in this case you have two different types. one is repayable loans, the other is supports which are not repayable but go directly to the companies. we’re not the one that’s raising the issue but i’ll tell you that we believe that if there must be adjustments, they need to be made on both sides.

>> why do you think either company would need subsidies? why couldn’t you both stand on your own?

>> it’s all about the way governments operate. these are important industries with strategic implications on both sides and rather than saying there won’t be any, which was one of the options, it’s one of the options in the past and going forward, the decision in 1992 was to have this mechanism and the mechanism, as i said, recognized that both sides were receiving benefit from the governments that regulated their activities.

>> an e.u. official said today that the likely course of action is for the w.t.o. to rule against both sides. how would that strike you?

>> look, i’ll leave that to the governments to decide. what we want and what we believe is that there ought to be a level playing field and either way is fine. but the subisition and the implication that airbus or eads or on the european side that there are inec witt―enec wits developed, that’s not true.

>> so if both are ordered to cut subsidies, that’s ok with eads?

>> it is, indeed. let me point out, in our balance sheet, all of these loans are carefully displayed and all of those loans are repaid. none have been forgiven and none have been defaulted and i’ll tell you for the latest program we have, the 8-380, the large aircraft, where the large share of the loans exist, the interest rate we’re paying is greater than 7%. it’s hard for me to understand how that’s a subsidy.

>> boeing today, in a statement, said they hope that these complaints will lead to a new negotiated agreement between the two governments. is that your hope, as well? do you think that’s a possibility?

>> i hope so. we don’t need this kind of dispute. we have enough issues transatlantickically and frankly this healthy competition in aerospace and quite frankly transatlantic cooperation in% -defense are what we need to bind the communities together.

>> that was ralph crosby of eads north america speaking with michael mckee. u.s. house and senate negotiators agreed to replace a $50 billion tax break for exporters ruled illegal by the world trade organization.% there will be a $77 billion tax cut for manufacturers and incentives for u.s. companies to expand abroad. the export tax break triggered accelerated european union sanctions on u.s. products that reached 12% this month. the bill may go to house and senate voting tomorrow. it’s not just oil, the prices of many industrial metals like copper and steel have been forging rallies, moving stocks. that story is coming up.

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Listen Market briefing --- Bob (fast)
Fannie Mae --- Peter (slow)
NYSE --- Julie (slow)
Crude futures --- Su (fast)
welcome to “world financial report.” i’m bob bowden. in his first public response to allegations of accounting irregularities, fannie mae’s top executive disputes the allegations and defends the company a actions. franklin raines comments came at a hearing held by the house financial services committee on capital markets and peter cook joins me live from the hill with the latest. peter?

>> bob, it’s been a sometimes% heated exchange between fannie% mae c.e.o. franklin raines and

>> the hearing started with ofao’s director testifying, saying fannie mae has engaged in a prolonged and concerted effort to mismanage earnings.

>> the stakes are too high to just forgive past sins. if any company, especially a government sponsored enterprise, is allowed to get away with this type of accounting misconduct, then no regulator can do its job and no investor is safe.

>> the allegation that the company’s books may have been manipulated in a way to boost executive compensation has drawn attention from members of the subcommittee throughout the course of the day. some members have seized on that allegation as evidence of the need for congress to pass legislation increasing oversight of the government sponsored enterprises like fannie mae and also freddie mac. other subcommittee members have risen to the defense of fannie mae, saying this a rush to judgment on the part of ofao and saying all the facts need to be considered before action is taken by congress or regulators in the case. that is something that franklin raines has maintained throughout the course of his testimony. in the end, he says the s.e.c. will decide whether or not fannie mae’s accounting in question was correct. certainly not the final chapter in this story.

>> thank you. fannie mae shares up 2.2% today, their fourth consecutive rally session. moving on, the world’s second largest biotech drugmaker, genentech, out with earnings for the third quarter and boosting its full-year forecast. shares in the extended hours trading, pulling up that graphic, genentech up 2.8% in after hours at $51.68. higher sales of avastin boosted profit 52% last quarter. net income climbed to almost $239 million from $152 million a year before. excluding items, genentech earned 24 cents a share, exceeding analysts’ estimates. revenue increased 47% to $1.2 billion, matching estimates. ahead of the report, shares of genentech fell 88 cents to $50 .25 and have gained 7% this year. stocks rose on the day as optimism about third-quarter earnings overshadowed record oil prices. alcoa led gains and earnings ruts are doe out tomorrow. it was the third rally session out of the last four and green arrows for the dow, s&p and nasdaq. the nasdaq, the winner, up .8% -- stocks led higher by oil company today. many of those stocks hit record highs. for more on today’s trading action, here’s a report from julie hyman at the big board.

>> the dow and s&p both ending the session at the highs of the day and actually a―speaking of highs, we had a lot of record highs in energy stocks today. that was the group that outpaced the move we saw in the overall market as we saw the price of oil climbing above $50 a barrel. the energy index, the best performer within the s&p 500. exxon-mobil hitting an intraday high in the session. a number of others, as well, conocophillips and chevrontexaco among them. we saw the oil and gas drillers, in particular, performing well today. some of the best performers within that group including transocean, rowan, nabors and noble. material stocks doing quite well today, in contrast to yesterday when we saw oil rising and materials taking a hit. that group, the second best performer within the s&p 500, the materials index. a lot of the metals stocks performing well today and hitting record highs, including phelps dodge, alcoa rising today ahead of earnings tomorrow. dow transports once again hitting a five-year high in today’s session. they’ve done that over the past few sessions. a lot of folks talking about the correspondence or lack thereof between the rise of oil and the rise in transport stocks. we talked to lawrence pretour -- cretoura at cloveer capital about the phenomenon and he said the volumes are symbolic of a good sign as transport companies pass on higher energy costs to clients and he sees it as positive at this stage in the economy and the stock market . i’m julie hyman, bloomberg news at the new york stock exchange.

>> more on crude oil prices setting new highs. today, the u.s. energy department said initial supplies rose less than expected and stockpiles of heating oil plunged. the report pushed crude futures above $52 in new york trading, setting a record close for a second day. su keenan has more on the rally and joins me on set.

>> and the rally also included home heating oil futures up 75% from a year ago. the department of energy predicts the average user in the northeast part of the united states will pay 38% more than last winter and that’s in the case of a normal winter. today’s inventory report showed supplies of heating oil and diesel supplies plunged last week and while the government report shows crude oil supplies grew more than a million barrels, that’s about half what analysts surveyed by bloomberg expected. goldman’s analyst believes a cold winter will push prices higher.

>> if you had a cold winter, we would expect to see prices higher than this. you probably have a one in four shot of seeing $60.

>> he says supply concerns, especially after the last hurricane, have sent crude futures up 70% this year. burnham securities mordecai abeer says it’s impossible to put a ceiling on the price of oil.

>> a good one to ask because nobody would give you a correct answer on that. your guess is as good as anybody to go to $60 to $80 a barrel to take the worst-case scenario. if there is revolution in saudi arabia.

>> and it is the bear’s view that globally, there is no shortage of supply and prices should come down to $40 a barrel. oppenheimer’s fadel gheit.

>> in a bull market in oil prices, that is supported more by speculation than by fundamentals and a correction is overdue, it doesn’t mean it will happen tomorrow or next week but eventually it will happen and it will be steep.

>> fadel gheit is a bear. friedman billing ramsey’s rasheed is not, raising his estimate for oil to $39 a barrel, and the trend higher is sustainable.

>> thank you. when we return, one lawyer says in terms of big cases, they don’t come bigger than this. the u.s. is squaring off against the european union over subsidies for boeing versus airbus. we’ll hear from ralph crosby, chief executive of the parent company of airbus.

The thoughts on the high price of oil
>> finance ministers and central bankers from the group of seven industrialized nations gather in washington later this week. oil, interest rates and china likely to be among top issues discussed. michael mckee spoke with treasury secretary snow who, of course, will host the event beginning with his thoughts on the high price of oil.

>> these current price levels are most unwelcome. they’re too high. and it’s clear that if they persist, they will slow down the world economy. i think they’re out of line with underlying fundamentals and i trust that there will be a movement back towards lower price levels that reflect the fundamentals. i’m pleased by what opec and the saudis have indicated they will do. but certainly this is your -- you’re right, you’re absolutely right, this is a matter for intense discussion among the g-7 and the largeer i.m.f., world bank community that meets this weekend.

>> you have ministers from saudi arabia and middle eastern countries meeting with the g-7. any particular message to them, any particular request from them?

>> well, you’re right. we are meeting with the g-7. the g-7 has invited the ministers from the middle east to meet with us. and among other things, that will certainly be on the agenda. we’ll ask them to be as forthcoming as they can be to stretch and try to respond to this current situation by increasing output levels. they have been responsive in the past and i think they’ll continue to be responsive.

>> one of the concerns people have had that pea were talking―we were talking about earlier with prominent economists is the damage higher oil prices could do to the world. how do you see the global economy going into the g-7 meeting?

>> the global economy, mike, is about as strong as it’s been in 15 or 20 years. growth rates are the highest we’ve seen in many years. there are no crises, no financial crises anywhere. there are no recessions anywhere all the major economies are doing reasonably well and growth rates for the world economy as a whole are the highest in 15 or 20 years. so overall, i’d say things are very positive.

>> oil prices are not a crisis at this point?

>> no, but they clearly create headwinds for the world economy. they’re unwelcome. they’re not helpful. and they will not create, in my view, a recession but they certainly take something off the otherwise high g.d.p. growth rates.

>> along with the ministers from the middle east, you’ll meet with the chinese for the first time at the g-7 meeting. what’s the message there? are you going to tell them they’re not doing enough at this point to help ease global trade tension?

>> well, we’re going to urge them on with their w.t.o. com pliance requirements. we’ll talk to them about the need to deal with intellectual piracy, continue to open up markets and in particular we’ll talk to them about currency flexibility and the need for them to continue and accelerate the path to greater flexibility in their currencies.

>> they are doing well or not doing well enough in creating grart flexibility?

>> we’ve talked about this before, mike. they’re making some concrete progress.

>> where could i see that, sir? you have talked about that before but where does it show up? we see the trade deficit with china get larger.

>> in terms of the flexibility of the currency, mike? look at the fact that there have been a number of financial market openings. look at the fact that they’re taking action to clear up the problem of the non-performing loans. look at the fact, they’re allowing more non-chinese financial institutions into their markets . and look, finally, at the fact that they’ve entered into an agreement with the chicago mercantile exchange to put in place hedging forward market hedging on their currency. that’s not something you do if you intend to maintain a peg indefinitely.

>> all right, on we go. delta air lines says it will cut pay 10% for most employees to reduce costs. this as the company tries to avoid filing for further bankruptcy protection. the airline is raising the employee cost of healthcare coverage, reducing vacation time and ending a subsidy for retiree medical benefits. the pay and most of the benefit changes occur at the beginning of next year. motorola also at the same time is going to cut 1,000 jobs as the company prepares to spin off its computer chip making business. the move will cost $50 million in severance payments. the cuts are the deepest since chief executive ed zander joined in january. he took the semiconductor unit public in july and plans to spin it off by the end of the year, making some of the jobs redundant. he’s brought in new managers and cut costs as he steps up motorola’s rivalry with nokia. wall street begins coverage of google. we’ll take a closer look at the research calls. who likes google? all that and more up next.

在线播报
Listen Market briefing --- Matt (slow)
Hurricane --- Su (fast)
NYSE --- Bob (fast)
welcome back to the “world financial report.” i am matt nesto. let’s begin with oil. you can’t not talk about oil prices continuing their climb to never-before-seen prices. today, concerns about oil supplies in nigeria as well as here at home pushed crude futures in new york. intraday high of $50.20, twice. late in the afternoon before famentering at the close to $49.90, still a record closing high. tomorrow promises more volatility for oil trading. we’ll learn whether u.s. stockpiles fell for the ninth straight week during to hurricane disruption su keenan, gloating from our personal oil bet, joins us with the detail.

>> matt did not think it would hit $50. wednesday’s inventory report could show that u.s. oil stockpiles have fallen to the lowest level in 30 years. the report by the energy department is expected it show oil stockpiles fell by 3.7 million barrels in part due to hurricane ivan’s damage. that’s the median estimate in a survey by bloomberg and if that’s the case, the ninth straight week of declines. supply concerns have helped drive crude oil futures more than 75% higher in the past year, 77% as of today. one group of analysts say prices head higher from here. cambridge energy research associates says prices may rise well above $50 a barrel as demand soars. former vice chairman at the federal reserve says that will hurt the economy.

>> i think it’s too bad. it won’t do the economy any good. i’m not a chicken little. i don’t think it will cause the economy to head into recession but it will clip the wings of growth. oil up at this level could certainly take a point or so off of growth for a year or two.

>> you won’t find disagreement from lawrence lindsey, former chief economic adviser to president bush, but he does not think rising energy prices hurt the recovery.

>> i think the best rule of thumb for oil is that the $10 increase in the price of oil takes about .4% off g.d.p. growth. that’s not good but on the other hand i think it’s something that the u.s. economy can survive.

>> among today’s latest developments, saudi arabia, the world’s largest oil exporter, said they can pump more oil to make up for shortages. the use of two new oil fields allows them to make up for output by 5% and nigeria’s oil adviser does not expect any disruptions from that country’s oil disruption to result from rebel clashes. nigeria is the fifth largest supplier of oil that u.s. refiners need.

>> thank you very much. checking on the other energy movers here today―natural gas, the headline stealer, up almost 9% in u.s. trade. unleaded gasoline also higher by about .9% and heating oil up about .7%. that runup in crude oil futures is impacting energy stocks. valero, one of the big names moving in the ancillary groups. valero, the largest independent oil refiner. we’ve seen energy, the macro group move, and then you get into the majors, for example, as shown by the amex oil index, you get to the exploration companies, the drillers, the tool makers, the oil service companies. the whole group benefiting here as the market goes. starting with valero, we heard from the c.e.o., the company raised its current third-quarter forecast to at least or more than $3 a share. a couple of weeks ago they saw it at $2.50. so valero shares higher today. if you look at the stock, it’s interesting to look at valero because they only came public in 1997 but the chart i put together here shows the runs of the record high really kicking off from right here. this is just about two years ago. it’s about october of 2002, the stock trading about 24 bucks a share, now just about at 80. it has more than tripled during that period of time. also worth taking a look at is the fact that the oil refiners―oil and gas refiners versus the majors have outperformed the amex oil index. so you see the yellow and white line. the yellow line is oil refiners up 78% in one year. the price of nymex crude futures up 75% and relatively lagging behind, only half as much, 45% higher, is the amex oil index. which was strong today, 11 of 13 members rising. key movers include names like repsol, amerada hess, unico sunoco and conocophillips. it’s worth noting who didn’t participate in a broad-based rally. total, the french oil company, as well as shell transport and royal dutch, the two pieces that make up the royal dutch-shell group, year to date, just quick, 67% higher for amerada, sunoco and oxdontle and conoco and marathon pushing the group higher. with oil reaching $50, stock extended gains in the afternoon as caterpillar raised its annual sales forecast -- bob bowden is at the big board an hour after the close with late-breaking news.

>> earnings that broke after the closing bell, selectron, maker of circuit boards, reporting quarterly operating earnings of% -four cents a share, matching the analysts’ estimates. the company forecasting first-quarter operating profit in the range of four to six cents a share, a penny below the six-cent consensus analysts’ estimates. shares after hours down 1% for selectron shares. an hour before the closing bell, we got the breaking news on caterpillar, raising 2004 sales forecast to a gain of 30%. the previous forecast was a gain of 25% and we see the move there late in the session when caterpillar did that, you see the shares finishing up 3.75%, one of the best two performing dow industrial stocks along with alcoa. delta air lines wants to cut costs to avoid bankruptcy, increasing the amount employees will have to pay for healthcare coverage, it will cut vacation time scpen force a 10% pay cut for delta executives. the price up 13% and a relief rally for other airlines, as well, on the day, as many have been hit hard, other airline names gaining 3% or more. snap on tools with a genuinely bad day, cutting its 2004 earnings forecast by 25%, the worst percentage loser of the s&p 500. and i finish with my nesto special, a small cap stock with a big move. this is blue-green corporation, they don’t cell algae but acquire, develop and market time share resort locations, including myrtle beach and aruba. the stock rose after a second analyst with oppenheimer covering the stock with a buy rating. and the company has posted better than 30% earnings growth for six consecutive quarters. that’s my piece on blue-green corporation, my nesto special.

>> the conspiracy theorists will go nuts with the blue shirt and green suit i’m wearing here today.

>> oh, come on.

>> we’ll forward the emails to you.

>> ok.

>> on we go. consumer confidence fell on worries about slow hiring and rising oil prices. the conference board’s september reading fell to 96.8 down from 98.7 last month.

>> when you look at employment, jobs plentiful, down significantly. jobs hard to get, up significantly. and so people very nervous about the job picture. of course, energy prices are also a factor in this. the iraq war is also a factor in this.

>> looking at the bond market reaction today, a mixed market because the 10-year was down, the two-year and five-year little changed here today. the government plans to sell $24 billion in new two-year notes tomorrow. stay tuned for that. treasury secretary john snow says persistent high oil prices will slow down global economic growth. we’ll hear from him on oil and get a preview on the upcoming g-7 meeting when we return.

The fundamentals of earnings
>> time warner and comcast are considering expanding and may together make a bid to acquire bankrupt cable operator adelphia. earlier today, the two reached an agreement to allow comcast to cut its stake in time warner’s cable unit. analysts say purchasing adelphia ‘s business may speed up that joint venture. the two companies say they’re exploring the possibility, but it’s early in the process. adelphia has divided cable system into seven regional groups it says will be sold at auction. the benchmark stock indexes finished the day lower as crude oil surged to a record high. joining me for insight into today’s market action is steve massocca, co-c.e.o. and head of trading with specific growth equities, joining me from san francisco. it seemed like an oil story today. how much of that is getting into the fundamentals of the market at this point to the point where we don’t react just to headlines on oil but it affects the fundamentals of earnings?

>> well, i think the often-quoted statistic that oil is a much smaller percentage of the economy than it was in the 1970’s probably means that the fundamental impact outside of a few sectors is probably low. there’s certainly, i think, a high degree of psychological impact on the office and―on the market and it’s one of the issues creating the decline we’ve experienced in recent days.

>> will it keep the market trading lower? will it be the focus or can we get back to things like the presidential election, earnings growth, that sort of thing?

>> i think the presidential election is also part of the reason there’s been a decline and the rally earlier in the month discounted it fact that it appeared bush was sailing to victory. that doesn’t appear to be in doubt but i think that was priced into the market so the outcome of the debates will probably be the next factor in that. certainly, if oil continues to be higher, that will hurt the market but i think it’s only one of the issues in front of the market and i would say the third issue, it appears right now that earnings season isn’t going that great and these 20-plus percent earning gains from previous quarters, that streak probably in jeopardy in the third quarter, causing concern with the market , as well.

>> volatility had gone way down and turned around in the middle of the month. what’s making people so nervous right now? what’s the main issue, oil?

>> i think oil is an issue. i think the weakness in the economy, despite what the fed says, it appears that the soft patch in the summer is continuing. we’ve had three monthly declines in leading indicators―durable goods was poor the other day. it just appears that what was thought to be simply a summer slowdown we would rebound from, that rebound is not happening and has people concerned.

>> we’ve had 11 quarters of rising g.d.p. 1.7 million jobs created since the first of the year, largest increase in industrial output in six or seven years and unemployment way down and people still say the economy is not good and they’re worried about it.

>> well, i don’t think people are saying that the economy of the previous nine months is poor. i think the concern is the expectation for the next nine months so what―what the bears say, anyway, is that the reason the economy was good over the last year was monetary stimulus from extremely low interest rates, that that changing on the short end, and fiscal stimulus from tax cuts has worked its way through the system now, the tax cuts being temporary in nature and the unsuccessful attempt to make them permanent and people are concerned the economy will be poor in the next six to 12 months creating a decline in the market .

>> how do you invest in this climate where uncertainty seem it is to be all?

>> i think you did hit the nail on the head when you said it’s probably not all that bad. i think people are concerned the economy will slow down. i think short term, we probably have more of a decline to go in the market in the next few days. i think we’re getting close to oversold levels on both large cap and small cap stocks. probably time for a trader, anyway, to put money to work here with―i see maybe a 1% or 2% further decline in the market and i think it will be time to buy stocks again.

>> so this is a washout, a little bit of a correction, not really a secular decline?

>> i still think we’re in a trading range and i don’t see news on the horizon that, barring the horrific terrorist event or some kind of unexpected global catastrophe, i think the market ‘s going to continue to be in this trading range and i think we’re getting to the low end of the trading range and it’s time to buy and as the market approaches the high end of the trading range, i’d be looking to sell again. i think that’s how you play the market right now.

>> thank you very much, steve masoma―massocca.the world’s biggest bank has named sallie krawcheck the highest ranking woman on wall street. we’ll look at the job swap, next.

在线播报
Listen Market briefing --- Matt (slow)
Interview: SANFORD BERNSTEIN---GRAY, JONATHAN---Analyst
NYSE --- Bob (fast)
Hurricane --- Su (fast)
welcome to “world financial report.” i’m michael mckee. fannie mae will correct its accounting and boost capital to a level 30% above the required minimum. the moves come after its federal regulator found errors raising doubts about the validity of earnings. we welcome sanford c. bernstien analyst, jonathan gray. you brought with you a display to show us how difficult it will be for fannie mae going forward.

>> this is the accounting rule, one rule called fas-133, the number of the accounting on, pinion that fannie mae was found technically not to be in compliance with, the head of the accounting board himself has called it a bad accounting standard. it’s so complicated that it’s very difficult to apply and different accounting firms have different interpretations. that said, once they comply with regulators, demand for new capital, will reduce earnings in the next year or two but to levels we still find attractive.

>> so in your opinion, we shouldn’t lose faith in fannie mae management?

>> the allegations against fannie mae remain to be proven, in my mind. i do know that the accounting rule itself takes account of losses of $5 billion on debt while ignoring gains of $12 billion on mortgages because it doesn’t fall under this particular complicated accounting rule. i believe fannie mae is well run from an economic standpoint, it’s a very profitable, sound, safe business that unfortunately, apparently, is going to be punished by its regulator, whether the reasons are legitimate or not. we think the business is safe and sound and still a safe investment.

>> how are they going to raise capital?

>> they already have more capital than the minimum they’re required to hold. they’ll stop growing their balance sheet and probably reduce the volume of mortgages they hold over the course of the next year by perhaps as much as $90 to $100 billion, in my mind. this could cause disruptions in the mortgage market , may raise mortgage rates somewhat versus what they otherwise would have been.

>> if they restate, how big is that likely to be?

>> i don’t know. honestly, i don’t think it particularly matters.% i think this is a little technical. i think from an economic standpoint, i think that we -- the earnings they’ve reported are by and large the earnings they have earned. i think the earnings power going forward―we were looking for more than―we were looking for $8 or $9 a share in earnings each of the next two years. we would now expect the company to report $7 to $7.50 a share in earnings less, but still the company. this is not going to lead them to have to make any big personnel changes or kind of undergo the changes that we saw freddie mac go through?

>> i don’t know about the personnel and changes. i think the company itself as a business and investment would survive senior personnel changes.

>> you don’t think investors will put the pressure on for a big change?

>> i honestly don’t know. i think it’s critical to the investment case. i think the company’s behavior and its prospects are not likely to be materially affected by a change in management if there were to be one.

>> thank you very much, jonathan gray, analyst with sanford c. bernstien, talking about fannie mae. oil weighing on investors’ minds. the dow falls below 10,000 for the first time in nine weeks. the dow jones industrials with a 59-point loss on the day -- for more on today’s trading action, we bring in bob bowden at the big board. robert?

>> with crude oil reaching an all-time high, many of the energy stocks rallied particularly early in the morning and then we saw deterioration in stock prices throughout the day, although many set 52-week high marks. this is a list of a couple of pages, all stocks that fell on the day but all hit 52-week highs early in the morning when we first heard of the high oil prices, including baker hughes, b.j. services, weatherford international and teekay shipping. the commerce department reported that august new home sales came in at 1.18 million, higher than expected. these two homes both rallied on the day. k.b. shares hit an 18-year high since they began trading in 1986. moving on, m.d.c. holdings, not in the s&p 500, but shares of that homebuilder hitting a 20-year high. those shares up 1.7% on the day and up nine of the last 10 sessions. tom i hilfiger shares down strongly on the day. they had a great year in 2003, up 113%. so far in 2004, down 28% and down 22% on this monday session. the company received a grand jury subpoena requesting documents on commission payment s. delta air lines, the worst performing stock in the s&p 500, down 10%. this stock has lost over half of its market value in the last 30 day was trading. delta air lines down almost 10%. that’s the latest from the nyse, bob bowden, bloomberg news.

>> in economic news, new home sales in the u.s. surging 9.4% in august, reaching an annual rate of almost 1.2 million, sales boosted by mortgage rates. treasury notes rose on speculation a surge in energy prices may slow economic growth and we won’t see those kind of housing numbers again. the 10-year note finishing up 5/16, the yield down four basis points to 3.99%. a closer look at new supply concerns that drove today’s energy rally. there are concerns about rebel attacks in nigeria and a white house spokesman says the energy department might receive new oil loan requests from refiners hurt by hurricane disruptions. su keenan has been on hurricane-energy-nigeria watch all day.

>> oil prices already flirting with $50 a barrel and it goes higher in the view of boon picken, oil more likely to rise to $60 than fall to $40. the billion dollar energy-related hedge fund has tripled its value this year and pickens correctly predicted oil would rise to $50 a barrel. nariman behravesh of global insights does not see $ 60-a-barrel oil as out of the question.

>> i think it’s entirely possible in the next few hours or day we could get above 50 but unlikely we would stay there because the supply-demand balance suggests between the $42 to $43 range.

>> fimat’s john kilduff, who predicts oil would rise as high as $53 a barrel, says the winning streak for oil investors has been like none other, but we’re not popping the corks as we did for dow 10,000, he says.

>> it has taken the edge off on economic growth and that is likely to continue. we have said that a decline in the price of oil down toward the low 40’s or high 30’s probably necessary for an equity rally to be sustained so it is a problem here at 50, no doubt about it.

>> greg mankiw, economic adviser to president bush, says the oil rally hurts but does not halt the u.s. economic recovery.

>> standard economic models suggest that a $10-a-barrel spike in oil prices would reduce g.d.p. by .3% to .5% over the course of a year or two.

>> in the past year, oil futures have rallied 75%. mike, we’ll monitor those prices from here.

>> su keenan. stocks headed lower as concern grew that higher oil prices will dampen earnings growth. steve massocca, co-c.e.o. and head of trading with pacific growth equities, joins us next.

Asia-Pacific Region --- Gene (slow)
European markets --- Mark (slow)
>> already. as promised, for a look ahead at what might be moving markets in asia-pacific region, gene otani putting to this report.

>> a busy economic week ahead for japan with industrial figures out wednesday, the consumer prices. industrial production probably rose .6% in august after stalling in july. exports were up for the first month in three, which probably encouraged manufacturers to raise output. rising demands has promised companies, including honda, to hire more workers. the jobless rate probably fell in july. and economists think confidence among japanese manufacturers has probably peaked at a 13-year high. the bank of japan survey is expected to rise from 23 to 22 in the previous quarter. japan’s six-year bounce of deflation shows no signs of coming to an end. the core consumer prices probably fell .2% in august from a year earlier. australia’s trade deficit may have narrowed in august from the second largest on record. rising demand from china and elsewhere is boosting demand for commodities. the deficit probably narrowed to $195 billion australian dollars to $2.9 5 billion in july. taiwan’s central bank may raise benchmark rate to the highests in two years. the government needs to lower rates to spur spending as exports to u.s., japan and china slow. the bank’s meeting is thursday. yainl’s economic growth probably slowed to 6.7% in the second quarter and production slowed from the record it reached a year earlier. g.d.p. is released thursday. and that’s what’s expected in the week ahead in the asia-pacific region. now back to you.

>> back to me and off to london we go for a preview of what will be moving european markets and my colleague, mark barton, has this report.

>> now coming up on monday, the german ifo survey may show a drop in business confidences amid rising unemployment and almost record oil prices. it kicks off a week of reports on confidence, manufacturing, employment and inflation that will provide investors with a good indication on the global economy state as we enter into the last quarter of the year. later in the week, figures from france will probably also show a fall in business confidences. the exception may come from italy where manufacturers’ confidences probably rose after the deal between al italia and unions. in the u.k., we get more information on the housing market . the british banker’s association releases mortgage approval data. economists say approvals probably fell in august as higher borrowing costs hit home. the bank of england has hiked rates five times since last november. in corporate news, a board meeting of karstadtqelle. they kick off a busy week for retailers, followed by a press conference on tuesday when a new chief executive will provide his strategy to improve profit. he may announce the sale of the mortgage bank and the closure of some unprofitable stores. on thursday, we’ll get earnings from one of karstadtqelle’s biggest competitor, h&m, likely to report higher third quarter profit as it cons opening stores. h&m says it expects sales to double in four years as it expands store space by 15% a year. among other retailers reporting in the week, house of fracer, kesa electrical posts first half numbers on wednesday, galleries lafayette with first half numbers on thursday and gordon brown speaks to the annual labour party conference in brighton on monday. all to come.

>> on we go. royal phillips electronic is the first europe―or the first of europe’s major chipmakers to join its u.s. and asian competitors in predicting slower sales t. company reduces its third quarter revenue forecast as demand waned, joining texas instruments and intel and taiwan semiconductor. rockefeller analyst jimmy chang expects another round of downwards estimate revisions from chipmakers on a slowdown in the third quarter.

>> this quarter is going to be relatively more muyed than usual. we’re just looking at the inventory correction right now. the next shoe to drop is pricing. because while buyers figure out that there is excess capacity, they want to renegotiate the pricing and, therefore, pricing will come down. and at the same time, capacity has been ramping up.

>> now other analysts, at least one, in fact, have said that global sales growth may slow to 20% in the second half down from 31% in the first six months of the year. agere systems planning to cut more jobs. the company’s already eliminating about 4,000 positions in two years. and now the maker of semiconductors for mobile phones says it will give us some details on those job cuts next week. agere has struggled to make money ever since it was spun off by lucent. 2001 customers postponed orders and licensing revenue has tumbled and the share price has, too. it’s down 23.2% today. major league baseball’s montreal expos may be inching to america. we’re going to have more on that story in money and sports. next.

在线播报
Listen Market briefing --- Matt (slow)
Nasdaq --- June (slow)
NYSE --- Bob (fast)

>> welcome back to “world financial report.” i’m matt nesto. the weekly winning streak is over for the s&p 500. six weeks of gains over this week. but today, both the dow and the s&p finished higher on a friday. the nasdaq down, lead loser by semiconductors. bonds also lower for the second day in a row t. 10-year low yield inching back above 4%. similar gains for the five and the two with strong durable goods numbers giving investors the belief that the feds is more likely to raise rates. hurricane jeanne may cause $2 to $4 billion of damage in florida this weekend, according to a loss estimate by storm modeler equi-cat. insurers also face $14 to $17 billion of losses from charley and frances and ivan. and if jeanne hits, it would mark the first time in florida’s recorded history that four hurricanes have battered the state the same year. still, companies are better table withstand storm losses thaten a decade ago because of a catastrophe fund, rate increases, higher deductibles and more reinsurance for themselves. well, chicago’s largest money manager was fired by the state of illinois today, the board of investment. ending a 20-year relationship with three of the state’s five public pensions. northern trust lost the job after the illinois board said the money management firm incorrectly reported commissions. northern trust allegedly overstated the percentage of fees paid to minority and women-owned brokerage firms. it denies any misreporting. the illinois board hired state street as the new custodian and index fund manager. the business generates about $3.5 million a year in fees with the funds holding a combined $2.4 billion in assets. the nasdaq closed down for the first time in three days. june grasso has details on today’s trading with this report from the nasdaq market site.

>> tech stocks pulled the nasdaq down to snap a two-week-long winning session. some of the tech stocks were imclone shares, down after s.g. cowen said erbitux sales may be hitting a wall. analyst eric smid says a survey of 27 oncologies show sales of drug in august fell 27% compared with july. it’s imclone’s only product. and some tech shares have been losing ground today after coming out with disappointing forecasts. palmsource, the maker of software for palm hand held computers says it will miss analyst estimates because of reduced orders. sales may fall as low as $18.9 million. it was cut to hold from buy at stanford group. electroscientific industry shares fell the most in four years after the maker of equipment to test electronics components said first quarter profit was less than analyst estimates. the company earned 36 cents a share in the quarter, 10 cents lower than the average analyst estimate. there were some stocks and companies that did well today. one of them was peoplesoft. it gained. the european trades commission will rule on oracle’s nearly $8 billion hostile bid takeover for peoplesoft before the end of october. now earlier this month, oracle won permission for a u.s. judge toll proceed with the hostile takeover that peoplesoft said was designed to kill the company. another company that gained on individual news was monster worldwide. it is the most used internet site for help wanted advertising and, according to piper jaffray report, it will report better-than-expected earnings this quarter as profit margins increased. i’m june grass doe, bloomberg news at the nasdaq market site in times square.

>> accept core helps to get its sleeping pill astora, approved by the f.d.a. later this year. once that happens, the drug will probably debut in january, join ago $4 billion marketplace to treat insomnia. sepracor has never made a profit since it started selling shares to the public 13 years ago.

>> it is possible we’ll be profitable next year. we expect to be for 2006. the launch costs with launching a drug like astora are going to be significant and we obviously want to do a lot of direct-to-consumer advertising and we don’t want to be constrained by profitability next year as we try to maximize the sales of drug.

>> inform, he says, they’re not concerned about competition from other branded sleeping drugs such as ambien. sales up 70% since march when it received a letter from the f.d.a. scug suggesting that the drugging is near full approval. california will require a new cars and trucks emit less carbon monoxide, becoming the first state to regulate exhaust tied to global warming and, at the same time, setting the stage for a fight with automakers such as general motors. the rules are aimed at cutting carbon monoxide emissions from automobiles 30% by 2016, beginning with model years sold in 2000 9. governor arnold schwarzenegger has said he backs the regulation, but the alliance of auto manufacturers representing g.m. and ford say the program will cost california’s consumers $6 billion a year for modifications and do little to slow global warming. feds exis looking to china for further growth. the company requesting permission to add six flights a week to southern china starting in two years. that’s on top of 12 weekly flights they expect to add shortly. the u.s. department of transportation must approve the question and fedex may also add a regional base in southern china. more than 40% of the nation’s exports come from that area. well, coming up next, we’re going to get previews of likely market moving events from our bureaus in london and tokyo. so, stay with us. the next continues.

Profit builders --- Mike

>> well, in our series called "profit builders" we've been spotlighting firms that can boast the most over their bottom lines. today, we're zeroing in on an oklahoma-based oil and natural gas driller, units corporation. the stock has delivered annual income growth of almost 86% for five years. mike schneider spoke with the chief executive and began by asking him if the profit momentum like that can continue.

>> well, it's very difficult to maintain that level of growth. we accomplished it by basically sticking to our primary business, we were basically have two segments in our business. drilling for third parties, drilling company and unit petroleum and those businesses obviously with increasing gas prices have performed very well and we're delighted with them.

>> how much, if you can break it down a bits, it may be difficult, but when gas prices go up, say, $1 a barrel, oil prices go up $1 a barrel, how directly impacted are you by that? >

> well, indirectly. our business-we are basically focused on the natural gas industry. the bulk of our rigs drill for natural gas. the bulk of our production is natural gas and while there is generally a correlation that's not as close as it used to be with oil and gas prices, we are more impacted by natural gas prices.

>> natural gas last year, we heard all sorts of stories about shortages, we might not be able to get through the winter. what does it look like this winder?

>> well, the storage will get full every year. it depens on what price that gas is and gas is certainly responding. we've had, i think, a paradigm shift in natural gas prices from the $2 level toll the $4 to $5 level and the $4 to $5 level is stimulating significantly greater drilling and greater capital investment by exploration companies. and those are both very positive events for our company.

>> the recent hurricanes, which have been blamed for much of the run-up in specific oil prices, but in energy prices as a whole, how much has that impacted you?

>> that didn't impact us at all. we're totally an on shore company and certainly the industry was impacted by several platforms that are out in the gulf. but as far as units is concerned, we were not impacted.

>> taking a look at the u.s. economy overall, what do you see, what do you anticipate and how do you expect that to affect you?

>> well, the economy is always the big gorilla. that it's the controlling factor and we think the economy, for the next several years, is going to be-have a slow, but steady upwards movement and we think that the economy will be very favorable for our business during that period of time.

>> and if it is favorable, how does that affect you, for instance, with acquisitions? you have made them. will you continue to make them?

>> we will-we will continue to look at expanding both sides of our business as long as we can do it economically. the economics obviously are the driving factor and as long as we can add to our rig fleet or oil and gas production, we will certainly continue to do so.

>> and you have acquisitions planned at this point?

>> well, acquisitions are very difficult to plan. we're always alert to opportunities and we have made a cup of acquisitions this year. in fact, we've made three acquisitions this year. but whether or not we make any next year depends on the opportunities.

>> and before i have to let you go, hiring. do you anticipate hiring or in terms of the job scene, how will that be impacting you?

>> well, personnel is one of the major factors that is a detriment in our business today. inversely, all sides of the business. we do not have enough technical people, geologists, geo physicists, line men, engineers in the business. we definitely need to have an influx of new young people into the business. the average age for geologists in the houston geological society, for instance, is 49. we definitely need people there. on the rig side of our business, we very much struggle to keep people employed there. we have a high degree of turnover. it's a business we've always had a high degree of turnover, but with accelerating utilization and accelerating number of rigs, keeping personnel is a major problem for us.

>> all right. just for the record, the tulsa, oklahoma based company, as of the end of last year had about 1900 employees. you see the shares up 2% today, within a fraction of an all-time high set earlier in the week. despite the recent declines in stock prices, investors continue to put money into mutual funds. the latest estimates from afments m.g. data service show investors added about $2.1 billion to stock or equity mutual funds for the weekending on wednesday. that is the fivet straight week of inflows for stock funds, also up from $1.7 billion last week. most of money went into funds investing in u.s. stocks, by comparison, taxable bond funds took in about half that amount. global stocks may be poised for a-to break their quarterly winning streak on spiking oil prices. that story up next.  
在线播报
Listen Market briefing --- Matt (slow)
Oil beat --- Su (fast)
NYSE --- Bob (fast)
>> welcome to "world financial report." i'm matt nesto. we mentioned it, crude oil rose to a record closing high today on concerns about supply. oil futures in new york finishing the session above $48 at $88.88 a barrel and the latest survey by bloomberg news finds 59 traders and analysts expect prices to move higher next week. that's the most bullish response since late august and respondents say that crude oil futures could touch $50 a barrel. here is su keenan on the oil beat again with details.

>> it was the seventh straight day of higher pries and looks like we're entering a phase that will take the price to unbelievable highs. that is a direct quote from one of the 41 analysts and traders surveyed by bloomberg news on the direction of oil prices. take a look. 24 of the analysts and traders surveyed predict an increase in crude oil futures next week. 14 expect a decline. three said prices will be little changed. supply concerns remain with the nation's oil stockpiles now close to a three-decade low due to hurricane ivan. and refiners are increasing their purchases to make up for disrupted supplies. crude oil futures have rallied more than 70% from this time last year. wendell perkins, who oversees $800 million of the johnson family of funds in wisconsin, sees trouble ahead.

>> it's very possible that we could see the price of oil go over $50 a barrel, which psychologically is a barrier. it is still our belief that oil will settle back down into the low 40's. but the longer term concern is still there about the oil price issue and its ongoing impact on not only economic activity, but clearly on earnings. this is a concern that will be in the market for quarters to come.

>> quarters to come, he says. well, oppenheimer and company's fie dell gate represents a bearish view. he is talking about days to come and telling clients there'ss no where for oil to go but lower. mackenzie financial sees prices falling in the longer term, the next year and a half.

>> in our estimation, in any normal environment, we should see the higher end of a range, say $30 to $35, perhaps given the current tightness, something closer to $35 to $38. but it's still down $10 or more from here.

>> and david spika of westwood holdings, expects lower prices, but continued supply concerns and that is why he's still bullish on energy stocks.

>> lower expectation for oil in 2005 is $35 a barrel. admittedly, that is a conservative estimate when the futures market is the pricing in $45 a barrel and we're at $48 today. if you look at where energy stocks are valued today, they're being valued of oil assuming $30 or less per barrel.

>> meanwhile, the energy department says it will make short-term loans of oil from the petroleum reserve, as two refiners face with storm-related oil productions. a shell group says it will receive 1.4 million barrels from the reserve. in russia, president vladamir putin says his government has no plans to nationalize the country's biggest oil exportser, yukos. he did say that state-run oil companies can bid for yukos assets if they're sold to cover the $7 billion tax bill that the government wants paid.

>> unbelievable. 59% of our analysts expecting oil to top $50 next week. we'll see. we'll talk about it a week from today. appreciate it, su. on to economics we go. orders for dirblee goods rose this august by the most since march, a sign that manufacturing could be gaining momentum. if you excludes orders for transportation equipment, the less volatile durable goods orders rose more than 2%. in fact, 2.3% overall orders at u.s. factories fell by half a percent last month, mainly because of a decline in aircraft orders. economist steven stanley says today's numbers are a positive signal.

>> these orders numbers are all over the map from one month to the next. you have to look at the trends and things, i thought, have been a little disappointing in june and july so i'm encouraged to see a nice number in august. it looks like once again the idea that we're coming back from the soft patch.

>> also today, a sign that the housing industry is slowing, but still strong. sales of previously owned homes fell for the second month in a row. they were down about 2.7 % in august, rising home prices may be keeping potential buyers on the sidelines. they're up 24% over the year. still, those sales remain very close to record levels. well, the durable goods report gave investors some optimism in early going today. the soft economic patch perhaps ending. that sent the s&p and dow higher. let's look at the numbers here today. you're just about eight points higher for the dow, works out to .8%. s&p can't quite get two points that. works out to .1% higher. but the nasdaq falling almost seven points on the day, brings you down just about .4% on the day. well, the s&p closed higher today as the government report suggested strength in manufacturing. for more on the trading action, bob bowdon has this report from the big board.

>> oil-related stocks were many of the stars on friday, particularly the oil field services stocks and the drillers. here is a list of a few that rallied. halliburton rallying for a second day after the company said it may sell its k.b.r. unit, involved with some of the controversial accounting practices in iraq. that stock, halliburton, up seven out of the last eight sessions. valero shares up 3% today. marathon oil up 2.3%, benefited from its smith barney upgrades to buy. that stock at a five-year high and noble corp, up 2.6%. the drop continued for fannie mae shares, down for their fifth consecutive session, after fannie mae fell 6.5% wednesday, 5% yesterday, falling another 2.4% today. news yesterday that a federal regulator is claiming c.f.o. tim howard for vie lating accounting rules and hitting fannie mae after the close of yesterday, news of a shareholder lawsuit. speaking of down stocks, maytag continued their fall after the news that high steel prices will cut into that swedish maker's profits and maytag shares down eight consecutive sessions, 5% yesterday and 5% today. whirlpool object fractionally affected by that news from electrolux. as you see there, down .6%. the airlines were killed today over that $48 a barrel oil that we finished above in the new york mercantile exchange. delta shares down over 8%. a.m.r. shares down 7%, as you see there. certainly airlines getting hurt by the high oil prices. that is the latest from the nyse. i'm bob bowdon, bloomberg news.

>> simply put, we saw treasuries falling today after the durable goods report. that added to speculation that the federal reserve will raise interest rates, at least one more time by the end of the year. the 10, the five, the two, all falling pushing those yields up from earlier lows. two days down in a row, in fact, for the treasury market . as the third quarter winds down, there is a major performance discrepancy emerging. the s&p 500 down about 2.5% this quarter, while treasuries are on track for their best quarter in about two years. he's take a look at the terminal. i want to show you a historic thing that we haven't seen in at least 40 or 50 years can. this is the feds target rate one time, two time, three times the rise there and then you see, of course t 10, five and two-year going down. you don't see-we have never seen this happen before. this is the broken bond market theory that we have been talking about here on this program. if you take a look at the last three rate hike cycles, this never happened before, the last one, as you see here, occurring june '99 to november '99, all moving pretty much in tandem. if you look at the one prior to that, january '94, to may '94, the feds target rate up, up, up and then the bonds dutifully, obligingly following suit. one more example to belabor the point, march '88 to august '88, this chart will show you raise, raise, raise, raise. up it goes. you can see the yields a little bit of a hesitation for that longer pause there. but still the up trend in tech. never have we seen the bond market do this where an initial rate hike or three of them, in fact, was met by a decline in the treasury yields. so, you've lived history if you are buying hold fixed investor. if you are a bond trader, chances are, because there were a few people that called that decline in rates, chances are you're smarting right now. well, stay with us. we're going to spotlight one of our profit builders, unit corporation. the stock has delivered annual income growth of almost 90% for five years. we're going to hear what the c.e.o. has to say for that success, next.

Martha Stewart

>> it was one of those cases where you could see the things the jury considered in reaching its verdict on martha stewart and peter bacanovic and rejected the testimony and charges that% -related to the evidence about which larry stewart testified so it had no impact and the judge, i think, fairly and properly ruled on that.

>> certainly it had a public relations impact that must not have made you very happy.

>> i'm not really in the public relations business. obviously, there's an aspect of law enforcement that is public relations because it's important for the public to know what we're doing, it's important for the public to know what type of conduct will be tolerated and not. and i think it's very important for the public to know that, really, our judicial system has to be completely sterile of any sort of misconduct.

>> what about, again, take another case, hollinger and conrad black. i gather hollinger has put out an internal 500-page report investigating alleged improprieties there. is that the kind of thing that the company would bring to your attention or that would come to your attention?

>> the hollinger case is not one with which i'm personally familiar but i can speak generally about companies self reporting and obviously that's something we think is very important for how we proceed in any corporate fraud investigation, and the self reporting has increased over time, which i think is a very, very good barometer of how i think good corporate citizenship is on the rise on some level.

>> the influence of organized crime, traditional mafia families on wall street, dealing particularly in penny stocks, has anything developed in that area recently?

>> you know, the timing that first came out was 1997 when we first brought the largest case of the mob's involvement on wall street really exploiting the over indulgent penny stock market and doing a lot of pump-and-dump schemes and i think the impact our cases had and that was not the only one, first of several, really had an impact on the mob and what i'd say that they're completely out of the market ? no, but certainly in no way, shape or form are they involved to the degree we saw back then. but in short answer, is the mob out? no. where there's a buck to be made, you'll find the mob.

>> let's talk about terrorism. you've been one of the key terrorist prosecutors. where do you see the fight against terrorism at the moment?

>> if a guy is associated with the mob or a member of the mob and he does so much as commit a traffic violation, we're going to prosecute him and make it as hard as possible to operate because as much as he can live within his ability to operate, you're going to take a swipe at organized crime and that's the approach we're taking with terrorism. to go back and look, what is it that are the types of activities that are likely to facilitate a terrorist-in-waiting. and you look at immigration fraud, credit card fraud, you look i at identity theft and those are the types of things where you're going to find that you stir up activity there and prosecute those crimes, it makes it much more difficult for terrorists or people who would engage in terrorist activities to be mobile and facilitate the crime that they may be considering or planning with their confederates.

>> kelley says the capture of terrorists overseas may lead to new cases here and he says that if osama bin laden is caught, he is already under indictment in new york.

>> two days ago we heard from the "new york daily news" that mark burnet and martha stewart might be teaming up to do tv programming, he, of course, famous for the creation of "survival" and now the company is stating that the two will link up. and they say now that we're able to anticipate her return, the collaboration will bring excitement and surprise to their original how-to programming and also interesting, they've issued mark burnett a warrant to buy 2.5 million shares at $12.59. the stock just about at $15 right now.

>> he obviously thinks she has ingredients to be the ultimate survivor. her sentence allows her to work 48 hours a week for the five months she's at home. maybe she's allowed to make the tv program while she's serving her prison time. their tv studios are in westport, connecticut, and she's in danbury in the home arrest portion of it.

>> she'll do it in the backyard.

>> the spring planting, how-to programming, the ultimate survivor.

>> and maybe beating the average 12 to 25 cents per hour wage for a prisoner.  
在线播报
Listen Market briefing --- Matt (slow)
NYSE --- Julie (slow)
Fedex beat --- Su (fast)
welcome back to "world financial report." i am matt nesto. crude oil soared, no question about it, after a report showed that u.s. inventories declined for the eighth straight week. supplies fell over nine million barrels to 270 million last week according to the department of energy. analysts expected them to drop, on average, by about seven million. there were estimates up to an 11 million barrel drop but seven was the median. the damage from hurricane ivan was worse than first thought. seven platforms were destroyed, according to the u.s. minerals management survey, up from a previous forecast of four. all of this adds to concerns about supply.

>> the problem is we have this strong global demand picture that's only getting stronger and just a continuing myriad of supply problems from literally around the world that contributes to a extreme tightness in the market causing the price spikes we're seeing.

>> price check, aisle one, 3.4% higher for nymex oil futures. unleaded gasoline, 4% higher and heating oil 3% higher today and natural gas little changed. natural gas was up 8% yesterday. disruptions from hurricane ivan pushed the oil inventory lower, a risk that analysts at energy merchants says that refiners are buying everything in sight on supply worries. diving into the bloomberg terminal, if we can, we'll look at the work i did today on oil and the various things. there's a zigzaggy line and you see the department of energy and american petroleum weekly oil inventory data, juxtaposed, the white line is the d.o.e. what you see is the fact that oil inventories, at least by the d.o.e., are just about less than 3% above their all-time low or about three million barrels. the oil inventory number at 269 million today. if i stretch out the graph, it has a different look and gives you an idea of the down trend that we have been seeing. you can see five years' worth of data and it shows you from the high we set in the middle part of june to where we are today. so seasonally, some traders say this is not normal for inventories to be at this level this time of year but others are concerned as we approach that all-time low in inventories, especially with the situation far from resolved in the middle east and new problems arising in other parts of the world, namely russia and south america. also worth looking at today, is the precipitous rise in the price of oil and also how oil stocks have performed but interestingly, worth looking at, is the fact the yellow line is the s&p 500, how it really hasn't been beaten up as bad as some might have expected. you hear a lot of times traders saying oil prices are killing the market . folks, we're back almost to the all-time high. the white line is nymex crude, 80% higher in 12 months. the amex oil index below that, 40% higher in 12 months. the s&p 500 eight% higher in 12 months. the case that oil prices are killing stocks is hard to make when you look at this chart. last but not least, another of the reasons the oil stocks are attractive are high yields and low p.e.'s. the highest dividend yielding of the 13 stocks in the amex oil index, all 13 of which traded higher today. estimated p.e.'s, all about 30% below the average, 16.5% of the s&p 500 companies. stocks fell after a disappointing forecast from fedex and we mentioned the surge in oil prices. people trying to sell that. the indexes, 1.3 for the dow, 1.4 for the s&p and 1.8% lower on the nasdaq. treasuries rose with the yield on the 10-year note below 4%. we haven't seen that since april fool's day. the yen, euro and pound all fell. stock markets had their biggest drop in six weeks today in a broad-based decline. the breadth in the s&p 500 was 10 to one negative, 10 stocks fell for each that rose. julie hyman has more along those lines with this report from the big board.

>> the dow and s&p both experiencing their biggest drop since august 6 in today's session. it was, indeed a broad-based decline and all 30 companies in the dow jones industrials fell today, 455 in the s&p 500 stocks declined and about 1,745 stocks declined within the russell 2000. we want to note that all 24 industry groups within the s&p 500 were trading lower today. really hit by a double whammy today, we had higher oil prices, again getting near the $50-a-barrel range and we had a number of companies coming out with disappointing results. the high price of oil hitting the semiconductors in particular today, seen as vulnerable to economic weakness and that could be caused by the recessing price in oil. we saw teradyne, micron, analog devices and texas instruments trading lower today. noting with regards to oil, this morning i spoke with todd lioni, head of listed trading at s.g. cowen and he said we haven't been trading on oil so much as of late but as it reaches $50 a barrel, it's a concern. we had earnings from morgan stanley that were disappointing, pushed down the group and other brokerages declined today, as well. we saw everything from merrill lynch to a lot of the brokers and dealers today declining, companies like merrill lynch, as well as some of the other morgan stanley competitors like jeffries and legg mason falling today. and also finally wanted to touch quickly on wendy's. that company came out today with the third-quarter earnings forecast missing analysts'% l estimates and other fast food chains fell, as well, including mcdonald's, yum brands, both declining today. i'm julie hyman.

>> fedex says rising demand for package delivery service helped it double quarterly profit, citing a surge from business in international clients. su keenan on the fedex beat% l today talking about the trend for these companies.

>> well, matt, the nation's second largest package carrier sees a steady increase in global demand after air shipments from china rose by more than half last quarter, fedex boosted flights there more than 50%. the c.e.o. says that gives his company more opportunities to grow in the future. this also indicates that fedex is taking market share from united parcel service. ground shipments rose 16%. net income in the fiscal first quarter more than doubled to $330 million or $1.08 a share, meeting analysts' estimates. even so, shares took their biggest fall since december. you see the one-year chart with shares down 4% after trading at an all-time high of $88.90 on monday. fedex helped lift the dow jones presentation average to five-year highs earlier this week. a.g. edwards donald broughton says investors may have expected an increased outlook after the company boosted its forecast four times in the past year.

>> this company has great expectations raised consistently and the stock, let's face it, has outperformed the overall market , up over 30% for the year and the s&p is relatively flat so you have fund managers% l looking at a chance to lock in profit and momentum players that decided to leave.

>> morgan keegan's analyst says fedex is part of a bigger story, on the strength of the economy despite rising oil costs.

>> the bottom line is business is good for virtually every freight company right now. volumes are very strong and the need to get product into the customers' hands right now is generating good revenues and good profits for transportation companies despite the fact that oil is higher, i think and customer demand is so strong, businesses need to pay the higher prices.

>> the story of businesses paying higher prices to ship goods includes united parcel service which raised its third-quarter outlook in july and also yellow roadway. fedex boosted full-year earnings last august but a penny below the thomson financial estimate. >

> thank you. allan dodds frank back next with more of his interview with u.s. attorney david kelley.

The negative rates --- Tom Keene

>> the rise of crude was over, think again. it hit a one-month high today. supply concerns, analysts and traders speculating that russian exports could be disrupted after utilities cut power to yukos, russia's top oil producer. looking at the price, above $47 a barrel again, up 75 cents, almost 1.7%. energy brokers point out that the nearly 10% gain in the past seven sessions could lead us to the $50-a-barrel price within the next few weeks. energy broker steven brees says he doesn't see anything to stop it anymore, adding that the other movers to watch include unleaded gasoline, heating oil and natural gas almost 7% higher on the day. verizon wireless won't take part in a planned mobile phone director and won't publish the numbers of their 40 million cellular customers. testifying on capitol hill today, the chief executive officer told lawmakers why.

>> this industry has not published wireless phone numbers. we did this consciously for the sake of preserving customers' privacy and control over their bills and discouraging interruptions from unwanted calls.

>> starting as soon as next month, other carriers, at&t wireless, cingular and sprint will compile a database of numbers for customers who let details be included. verizon wireless c.e.o.'s putting verizon at odds with the six largest carriers who plan to let their 101 million customers opt into the industry's first public director of cell phones. mr. strigl criticizes the director as a way of exposing customers to spam.

>> we think our customers view their cell phones as the one place where they do not face intrusions, why they have control over who calls them and to whom they give the number.

>> several analysts estimate that it may cost verizon wireless $2 billion in annual sales the service may generate if they choose not to participate. verizon wireless shares ended the day up almost 1%. even with today's increase by the fed, short-term rates adjusted for inflation are still negative, still below zero. as part of our "chart of the day," we bring in editor-at-large tom keene to talk about the negative rates.

>> what that is is the nominal rate minus inflation and there's many theories to use and it gets confusing. andy bevin from goldman sachs out of london today wrote a piece on their view on bonds and had fascinating insight that the u.s. bond market is starting to act a little bit like what we've seen in japan over the last decade. goldman sachs was not saying the economy is like japan, but with the negative interest rates, we can go to the chart and look at them, it looks like japan. here's 20 years of the three-month treasury bill, less year-over-year inflation and you can see the negative real rates in the orange box. back in the 1990's, the blue line, the average interest rate, real rate, over the last 20 years, 1.93%, the normal rate, if you will. here's the plunge with the federal reserve's accommodative policy to boost job growth and get the economy going again. what devon is saying is we've got what's called a flat yield curve with the difference between the two-year and 10-year is moving around flatter, similar yields. we have negative real rates and it sums up to a very interesting environment. goldman sachs is looking for rates to go up at some point here.

>> saying the u.s. economy is like japan's, not only its bond market ?

>> not so much the economy, the market . he's specific about this. they're not saying it's like the japanese recessions we've all come to know, but our bond market has curious attributes such as a disregard for fiscal policy, like some of the things we've seen from japan.

>> john barry was talking about the current account deficit, that's a disregard for fiscal policy.

>> some would say, yeah, i think that the summation of all these things begins to look japan-like. but goldman sachs not looking for low sustained rates, they're looking for rates to come up as the economy recovers.

>> when you use this analysis, the nominal rates, the real rates, where does that suggest rates are going?

>> higher. what we're hearing from people is this will work out, the fed will boost up rates, the economy will recover and real rates, inflation-adjusted rates, will come up.

>> how high do they have to come up to get to a positive number.

>> two full percentage points.

>> from where we are now?

>> from where we are now.

>> 3% to 3.75?

>> yes.

>> thank you, tom keene. stay with us, martha stewart said she wanted to put her nightmare behind her and they're taking her up on the offer. we'll have details on that next.  
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Listen Market briefing --- Matt (slow)
NYSE --- Julie (slow)
Fed beat --- Su (fast)
welcome to the "world financial report." i'm matt nesto. fiscal third-quarter profits at goldman sachs and lehman brothers rose more than wall street expected and analysts say that will pressure morgan stanley and bear stearns. tomorrow, earnings there are forecast to come in lower.

>> looking at the results today, it makes it likely bear stearns and morgan stanley will report numbers better than most expected. but that's a double-edged sword, the negative side being that goldman crushed the number today and raised the bar for morgan stanley and bear stearns tomorrow.

>> analysts expect morgan stanley to report a bigger decline than its peers and all of those numbers coming before today's results. greg miles filed this report.

>> morgan stanley chief phil purcell may report weaker profits as rising interest rates and slowdown in stock trading hurt investment banking. most of the industry is suffering from a slowdown in equity and bond trading and morgan stanley may feel it more. one reason, the firm's large retail brokerage force of nearly 11,000 brokers. after earnings rose 35% in the first quarter and 63% in the second, morgan stanley's profit may have fallen at least 15% to $1.1 billion or 96 cents a share, according to thomson financial.

>> there's a great deal of uncertainty reflected in the equity markets where there appear to be investors on the sidelines, not participating.

>> trading volume on the new york stock exchange fell in august to its fullest in more than two years. the slowdown resulted in lower commissions for more than 10,000 of morgan stanley's brokers.

>> the retail business, particularly this summer, has really hit the skids, slowing down considerably. morgan will be hurt and that could be a short-term issue if we get a perk up in equities heading into fall.

>> the federal reserve decision to increase interest rates starting in june is hurting bond staels sales at morgan stanley. the firm underwrote $3 billion of bonds in the quarter, down 21% in a year ago. on the investment banking side, morgan stanley helped manage stock sales by $7.8 billion during the quarter, twice the amount of last year and included the $1.9 billion i.p.o. of google. a bright spot for morgan may be energy trading. according to analyst james mitchell at buckingham research, that unit generates about 1/4 of the firm's fixed income trading revenue and they benefit from higher oil prices. back to you.

>> headlines on wendy's, adjusting its third-quarter and full-year earnings per share forecast. they-they're now seeing earnings per share for 2004, $2.25 to $2.30 a share down from $2.32 to $2.37 so it's as much as a dime below the current full-year estimate for the quarter. it's all because of beef costs, which they say are averaging them $1.39 a pound. bear stearns chief executive james cane says that the company may-may also say that the company's earnings fell as bond trading dropped. the firm's u.s. bond offerings tumbled 57% in the last quarter as the fed raised interest rates for the first time in four years. a decline in underwriting suggests a plunge in debt trading, making almost half of bear stearns second-quarter revenue. they may say fiscal third-quarter profit fell to $278 million, or $1.98 a share. $278 million down from $313 a year ago or $2.30. cayne is concentrating more on stocks and expanding into securities clearing, which makes loans to clients to pay for trade. stocks rose after the federal reserve said the economy regained traction. looking at number today -- stocks gapped higher after that fed decision and also got a boost from earnings news and julie hyman has that wrap-up report from the big board.

>> the dow and s&p not closing at the highs of the session, but certainly much higher than before the fed decision and statement. even though the decision, as well as what was contained in the statement, were widely anticipated, investors were encouraged by the fact that the fed said the economy is gaining traction. looking at the charts for the dow and s&p, you can see where they spiked around 2:15 when the fed decision came out and came down, but still above the start of the day. corporate profit news from goldman sachs and lehman brothers with fiscal third-quarter profit up at lehman up 5%, beating analysts' estimates. at goldman sachs, also beating estimates. both of these companies relying more on debt trading fees and commodities trading fees, money management fees rather than traditional trading revenue. also today, wanted to check on the home homebuilders, profit news from k.b. home where fiscal third-quarter profit was up 20%. falling mortgage rates fueling sales there. do want to note k.b. home rose to a record today. d.r. horton,hoff, ryland and lennar all gaining and pulte homes rose to a record today because of k.b. and the home starts report. oil stocks doing well today, energy leading the gains much of the day. the energy index up 2.6% and a lot of these stocks reaching record highs. exxon-mobil with its biggest gain in five months' time, hitting a record high today. chevrontexaco, conoco phillips and occidental, among the others, as well as oil drillers, included in the record highs today. i'm julie hyman, bloomberg news at the new york stock exchange.

>> going to return to the fed decision today. the unanimous decision to raise rates by a quarter of a point, 1.75%. also restating a pledge to carry out any further increases at that previously used cliche, measured pace. i guess i can say cliche, it's been used so much, right, su? su keenan is on the fed beat today.

>> measured pace still in the game. let's talk about what's going on and that's that economists are carefully reading the fed's statement for clues for the next meeting in november. the fed says that monetary policy remains accommodative with underlying inflation expected to be low, such policy can be "moved at a pace that is likely to be measured." there's that word matt likes so much. and the fed says output growth appears to have regained traction and labor market conditions have improved modestly. former fed governor, lyle gramley, says today's widely expected interest rate increase, the third this year, was designed to, in his words, not rock the boat.

>> they've announced a measured pace and doing that over time so this step today is just one more in the process of moving the funds rate back towards a more neutral level. >

> bank one's diane swonk applauds the fed's wording on inflation. the fed says "despite the rise in energy prices, inflation and inflation expectations have eased in recent months."

>> i think at the moment, they're not overly concerned about inflation and they think they have room to catch it if it were to accelerate but they have to get a head start, getting the fed funds rate to 2% and continuing to move from there gets them towards their goal of keeping a stable economy, strong growth, getting the employment markets going again without reiggating inflation in the near term and this federal reserve wouldn't hesitate to move more aggressively if inflation picked up in a year.

>> bear stearns economist said that will happen as commodity prices are rallying.

>> we expect that in 2005, as inflation ticks higher and we think that obviously that's clearly contrary to the fed's view, if inflation is higher than the fed expects, we think they'll accelerate rate hikes and we could see as much as 50 basis points of rate hikes per quarter.

>> pimco's paul mcculley disagrees and was surprised to see the benchmark 10-year note moving higher in reaction.

>> i have to admit that the market 's response to the fed today was perplexing to me because the fed is on a march to get back to a positive real short-term interest rate and they didn't get a signal today that they are close to the end of the market .

>> mcculley's view, the fed is close to the end of raising rates.

>> thanks, su. we only have 20 seconds to tell you bonds were mixed today and gains in the 10-year, but two-year and five-year bonds fell today. coming up, the fed raised rates. we'll look at that on an inflation-adjusted basis.

Hitting a 3 1/2-year high
Interview: Qualcomm

>> after hitting a 3 1/2-year high tuesday, shares of qualcomm fell for a third day in a row this week, down more than 3.5% in friday's trade after the company raised questions about the way it accounts for royalty payments. the company also said while this quarter's sales will miss the high end of previous forecasts, profit may top expectations. su keenan was on the qualcomm beat today and summed it up.

>> it's a lot for investors to sort through, but they appear to be focused on the accounting issue. qualcomm maximum a large portion of its revenue from the licensing of its wireless cell phone technology. until now, it's recorded estimates of these so-called royalty payments as revenue. month says in advance. qualcomm says an accounting change could result in a one-time revenue reduction of roughly $300 million in the fourth quarter. that changed, together with falling chip prices, will likely hurt next year's revenue.

>> average selling prices for their chip business, which is really represents about 60% of their overall revenues still to date, it looks like the overall pricing is declining from what they were getting previously of about $22 per chip. now it seems like they're getting more like the mid $2 per chip, so that definitely impacts their overall revenue stream.

>> qualcomm also narrowed its fourth quarter sales forecasts, saying year-over-year growth will be as much as 62%, other than the previous range of 57% to 65%. this adds to evidence of a slowdown in demand for electronics, both texas instruments and intel recentlyly lowered their outlook. state street's chief market strategist says excess capacity remains a key issue for technology stocks.

>> you're not going to get the kind of rally that people are looking for until you get the nod from the company that they see a significant, sustained pickup in demand.

>> and back to qualcomm. shares are up 44% year to date. earlier this week, they were at their highest price in three years. matt?

>> yep, excellent stuff. thanks, su. appreciate it. the nasdaq composite climbed for the sect day in seven. june grassor has details on today's trading from the nasdaq site in sometimes square.

>> one of the industry groups leading the nasdaq higher today was the computer index, as it has been all week. some of the leaders in that group, intel, microsoft, oracle, and yahoo. and two of the stocks that were leading movers by percentage in the nasdaq today, cintas and biomet. cintas, the maker of airlines for uniforms and hotels, said earnings will be as much as $1.80 a share on sales of $3 billion to $3.2 billion. analysts had expected an average profit of $1.78 a share on $3.06 billion in revenue. biomet, the maker of orthopedic devices, reported fiscal fourth quarter profit up six cents a share, and that beat the estimate by one cent. the philadelphia semiconductor index has been leading the nasdaq higher today. some of the leading movers there were xilinx and maxim integrated. world airways advanced today after it signed an agreement for about $23 million to ship cargo between germany and china. two companies that were downgraded today, cisco systems and ebay. cisco systems was cut to equal weight from overeight at lehman brothers, citing mixed industry trends in august and september.  
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Listen Market briefing --- Matt (slow)
>> well, after spending a billion dollars over the last four years to field its jaguar racing team in the formula one series, ford has changed its minds. they've never won a race for their billion dollars. they're pulling out, they're closing their team, selling it off at the end of the season, and that's the top story in this week's "money and sports." we're joined by our bloomberg news reporter who's out in detroit today, incidentally, coincidencely maybe we'll say. so ford abandoning us. they said after four years and a billion dollars, never won a race.

>> yeah, essentially, there's the key. they never won a race, and you're spending a billion dollars. you want to have something to show for it. although winning the race isn't exactly what they were interested in. it certainly would have helped promote the brand a little bit, but since they bought jaguar and jackie stewart's racing team in 2000, it's been pretty expensive. this is going to result in over 1,000 lost jobs, so interesting, when they leave formula one, it's going to leave the race circuit with only nine teams, so formula one is going to look pretty hard to fill another team to get somebody to fill in for ford and jaguar.

>> they say horseracing is the sport of kings, but i got to believe that formula one can't be far behind. i mean, are there-are there other people in sight that might be possible buyers? i believe ford bought the team from jackie stewart.

>> correct. and there are some interested parties. nobody really willing to go on record yet, and it's an expensive proposition. and it's really something that's going to take some time. as you said in the beginning, it's not the type of sport where you just put something together. you get a team on the track, and you hope to compete. there's a lot of investment that needs to be best here, and ford, as we said, didn't win a race, so maybe it served its purpose for them. it got the brand out there a little bit, but they're taking a step back now.

>> ok, let's switch gears and talk baseball here. the red sox, people often talk about them, and you talk about red sox records, the fact they haven't been to the world series since 1918, but they're in the record books, at least for their own franchise, thanks to their loyal fans, present company included.

>> yeah, the interesting thing with the red sox, not only are they winning on the field, but you can say they're winning at the turnstiles, too. they sold out every home game this season, 81 in a row for the first time in 103 years they haven't sold out. you look at fenway park, and you say it's a small park, 35,000 people there. how come they're not selling out? but anticipation for this year is as high as it's ever been. they're only the fourth team ever to semiout. anticipation is building up in the boston area. very surprising that it's been 103 years, but just the remaining 5,000 tickets sold earlier this week, so they guaranteed that 81-game sellout.

>> a small park, but a full park as they say. so you're in michigan as opposed to your typical atlanta resident. so you're up there to cover the ryder cup. but detroit is kind of changing, it's not the motor city, it's the sports city. what's going on?

>> absolutely. when you talk to people around the town, they're pretty excited about the ryder cup being here this week. but you look next year what's coming here, they got the major league all-star game in 10 months, and you have the super bowl coming here in 2006, you have in 2008, the pga championship, which is the fourth golf major of the year will be back here oakland hills. then in 2009, they cap it off with the final four, ncaa basketball. so yeah, detroit undergoing a bit of a sports renaissance. everybody in town very happy to talk about it and shed the image that detroit has had over the past years.

>> all right. good stuff. always a pleasure to have you. that is mike buteau, one of our reporters here at bloomberg news. audiences in london are turning out to see places plays about the iraq war, and defense secretary donald rumsfeld, we're going to give you the details of this peculiar little story, up next.