朗读练习作业

NYSE --- Deb (fast)
Dell --- Greg (slow)

>> news after the bell from fannie mae. this is from fannie mae’s office of federal housing enterprise oversight. , on fayo is saying that fannie mae will likely meet the september 30 deadline to have a 30% capital surplus mandated by the regulator after the company violated rules. news from ofheo, saying fannie mae will meet the capital surplus by september 30. those shares slumped 11%, their biggest fall since 1987. deborah kostroun filed this report from the new york stock exchange.

>> stocks rose after the durable goods orders increased more than forecast, also helping copper prices rise to a record on speculation that demand may rise for copper. copper is used in manufacturing, wiring and construction. stocks like freeport-mcmoran and phelps dodge closed at a record. gold closing at the highest level in 17 years as energy costs soared. crude oil higher today, natural gas also closing at a record. even though the durable goods orders increased, didn’t see a major jump in many of those stocks. one analyst saying the durable goods report very positive but he thinks the focus is on where the economy is going and the biggest fear hanging over the market is gas prices and the effect they’ll have on the consumer. talking about gas prices, crude oil up $1.28, $66.35, leading oil refiners and integrated oil stocks higher on the day. the natural gas index at a record high and many of the natural gas stocks higher, as well. the higher energy costs impacting retail. retail, the biggest laggard of the 24 industry groups. retailers falling as oil prices gain spurring concerns that higher fuel costs may crimp consumer spending. we saw jet fuel prices coming in at a record. didn’t have an impact on many of the transports. transports, the biggest gainer in the s&p 500 as a group and in fact what you did see, railroad stocks performing the best. shares of fannie mae fell to an eight-year low after dow jones saying that investigators found new and pervasive accounting violations. shares down 39% this year. and n.r.g. rose after a report that the company is in talks to acquire the power company that supplies houston. i’m deborah kostroun at the new york stock exchange for bloomberg news.

>> michael dell, chairman of the world’s number one personal computer maker, was in new york today launching a rash of new consumer products, all part of the company’s strategy to boost sales from $49 billion to $80 billion within four years. greg miles was there and joins us with the latest.

>> the share price down 19% thus far this year. they need a boost. delegates only 15% of revenues from consumer products, getting the vast majority of its sales by selling to corporate america. having missed its sales goals in the latest quarter and it will also in the current quarter. michael dell introduced a new line of high-margin product including large cap tops, desktop p.c.’s and high-definition tv’s. michael dell talked to us about his new digital music player which costs only $99 and weighs 1.29 ounces. he said the music player can gain market share from apple’s ipod.

>> they’ve done very well and i think it will be hard for them to maintain that share particularly with the number of new competitors in the market but also, again, for customers who want a more open platform where the music they purchase can work on a variety of devices.

>> dell also stressed that the new high-end customers will get deluxe service to help them put together the systems that connect the p.c., tv set and latest software and imaging. dell said the company was taking action to improve its basic customer service which received the lowest ratings in seven years in a recent survey, but he said nonetheless the service quality remained high.

>> we weren’t happy about that.

>> do you acknowledge there are problems?

>> i think you could find a number of surveys that would show―and actually that survey, as well, showed that dell was in the lead position among peak competitors, although our score dropped, we were ahead of our p.c. competitors. there are plenty of surveys that show dell with a commanding lead in terms of support.

>> mr. dell said the story in oil prices are having no noticeable impact on demand for the company’s products and remained optimistic about sales of personal computers even though demand for desktop p.c.’s have slowed. th main reason, sales of laptop p.c.’s are soaring, filling the gap.

>> research in motion, maker of blackberry, said second-quarter profit rose 67% but subscriber additions missed analysts’ estimates. shares down over 2% in extended trade. shares of delphi closed lower today. the auto parts maker asking for aid to avoid bankruptcy. june grasso will have details.
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Listen Market briefing -- Ellen (slow)
Energy --- Brett (slow)
Interview: House majority leader

hurricanes could develop in a season that is already curbing energy production in the gulf of mexico. here’s natural gas at the end of trade. this is the current trade, 7.5%. it was up as much as 15%, ended the day up about 10%, the biggest fluctuation of any commodity around the world today. crude oil up 2%, $66.35, the latest trade. among other energy movers today, unleaded gasoline up 8%, heating oil up 3.5% and natural gas currently up 7.5%. in the stock market today, the dow ending higher, .2%. s&p up .1%. energy and computer shares giving a boost there. the nasdaq ending the day essentially unchanged. let’s take a closer ok at the energy trade today with brett gehrig.

>> this is already a very active hurricane season for the u.s. but it was a sobering reminder that the season isn’t over yet. the national hurricane center reported a storm system near jamaica in the caribbean sea was getting better organized and still has the potential to become a tropical depression by tomorrow. that was enough to spark a rally in all energy products of the you’re looking at the closing price for natural gas. at one point, gas surged 15% to $14.60 per million british thermal units.

>> markets are sending us a simple meanwhile. we have a supply problem. obviously, the double whammy with two months in the gulf knocking out significant supply and damaging infrastructure is going to have an impact in the short term.

>> the natural gas industry is still assessing damage to pipelines and processing facilities caused by hurricanes katrina and rita. most offshore production in the gulf of mexico remains shut. gasoline, crude and heating oil rose on speculation supplies will decline heading into the winter heating season.

>> inventories are a little bit above normal and heating oil stocks, as well, are in good shape, but if we have a cold november and december period and cold overall winter season, then we could be looking at higher prices as the season wears on. >> as of today, 11 refineries in louisiana and texas are closed because of rita and katrina. all offshore oil output in the gulf remains shut, as well. crude and distillate supplies in the u.s. fell last week according to the department of energy. gasoline stocks unexpectedly rose by nearly 4.5 million barrels. there is evidence of relief coming for high gasoline prices. near-term gasoline contracts are more expensive than those for delivery farther out. traders appear to be speculating that refineries will be up and running in the winter months as gasoline demand falls.

>> thanks so much. house majority leader tom delay calling his indictment on a conspiracy charge “a sham.” mark crumpton has more on that story. mark?

>> saying he has truth on his side, congressman delay is insisting he did nothing wrong. a grand jury in texas today charged delay in two political associates with conspiracy in an alleged campaign finance scheme. delay calls the indictment an act of blatant political partisanship by travis county, texas, district attorney, ronnie earle, a democrat.

>> district attorney ronnie earle told reporters that our job is to prosecute abuses of power. joining us are democratic congressman harold ford from tennessee and reserve bank of newlican tom tancredo. what is your reaction to the indictment of majority leader delay.

>> i have been in the past quite critical of majority leader delay and i have focused on a lot of things, i think decisions he made incorrectly. but i must tell you, in this one, something doesn’t smell good about this. especially this d.a.’s history where, 1994, he goes after kay bailey hutchison, indicts her, strings it out as long as he can and day after the court throws it out, he’s gone through six grand juries as i understand to get to this one never before getting any grand jury to go along with him. he goes to a democratic fundraiser not too long ago soliciting money on the basis that he’s going to get tom delay. something about this doesn’t smell right to me.

>> so, congressman tancredo, no question this is a political witch hunt in your opinion?

>> it certainly does appear that way to me. the issue will be played out in the courts i’m sure but right now, i got to tell you, there is something about this isout that does not smell right to me.

>> congressman ford, do you believe this is politics or there is merit to the conspiracy charge?

>> all i know are the facts. leader delay has been indicted by a grand jury out of texas dealing with campaign finance irregularities and abuses. he’s innocent until proven guilty. i pray for him and his family. he will go before a jury of his peers. in the meantime, we have work to do here, not focus and my inclination is to get back to work this afternoon and tomorrow and finish up a new energy bill, the budget work we have to do, figuring out how to pay for the katrina rebuilding effort and do everything we possibly can to keep taxes as low as possibl so we have a lot of work to do here and mr. delay stepped down and a new leader has been appointed by the republicans. mr. delay will have a chance to answer the charges.

>> if your opinion, now is not the time for the democrats to be gleeful about what’s going on concerning the congressman?

>> this has hurt the institution. any time a member of congress is indicted, it shines poorly on the entire congress and naturally republicans, although republicans may have a brighter negative shine, but the institution itself is affected and again, it this is innocent until proven guilty. i would hope my colleagues would refrain from saying there are politics. right now, leader delay faces a serious charge, a felony charge. and our job now is to get back to work and let him answer those questions.

>> congressman tancredo, talk to me about the republicans. mr. delay said today after his meeting with the republican leadership on the hill that they were united. do you get that sense?

>> it certainly seems so. the conference which was held about half an hour ago is one in which there was a great deal of support shown for the leader and for―here’s what is seems to me, anyway, here’s what the greatest amount of support was xind for―exhibited for and that was to go ahead on the agenda. i agree with my colleague that that is our task here. we have a lot of things to do. there are pressing issues, both of us are interested in getting things done. we, as republicans, have an agenda. it is imperative that we focus on that and move toward the accomplishment of those goals. that is the one thing that i did see everybody in that conference come together on so in that respect we see it the same way.

>> congressman ford, how important is it for the democrats --

>> not the same goals, but toward a direction of goals.

>> congressman ford, how important is it for the democrats not to seem that they’re going after blood in the water, not getting sidetracked by this?

>> i don’t think the burden is on democrats to show that. there was a development today and a serious one and for the life of me, i can’t understand why democrats are being asked how we’re going to react. tom delay was indicted. the congress will move o.he will have an opportunity to present his side and convince a jury that he did nothing wrong or hope that the state can’t convince the jury that he did anything wrong. he said the facts are on his side. we’ll find out. my job is what it was at 9:00 a.m. this morning and 9:00 a.m. yesterday was which to come to work and do the best i can for the citizens of tennessee and i can assure you that’s what every democrat in congress wants to do and i would imagine every republican, we all want to do what’s in the best interests of the country and we’ll have a robust debate about what’s best for markets , taxpayers and our future. tom delay’s stepped aside, he’s followed the rules and congress can return to work.

>> congressman harold ford of tennessee, a democrat, and congressman tom tancredo of colorado, a republican, thank you very much for your time this afternoon. ellen, that’s the latest.

>> mark, thank you. we’ll take a quick break. we’ll have news after the bell from fannie mae.

Money and Sports

>> oil prices finish the day earlier after a suggestion that world oil supply would be adequate to meet deplanned. let’s get more opbts energy story. we are joined by bob bowdon.

>> big day because of the conference in johannesburg. the saudi oil minister said today’s high crude price rts result of infrastructure constraints and bottlenecks, not shrinking world supply.

>> we believe that spare crude oil production capacity will grow in the next three to four years to restore some margin of safety to all of the crude market .

>> he said saudi reserves might even double. from the same podium in johannesburg, we had the exxon president giving comforting estimates for world oil supply.

>> two trillion barrels of conventional oil remains to be recovered. twice what has already been produced in all of human history. beyond that, more than a trillion barrels of frontier resources like oil sands and oil shale are expected to be recovered over time.

>> crude oil prices closed at the floor trading at $65.07 a barrel. down about 1%. natural gas, however, rose as middle east supplies have no bearing on it. up 1.75%. i want to show you this which is over my left shoulder. a six-month chart of crude oil prices. on the right side you see this green line here is the 50-day moving average. what we have if we can zoom in on the right side is we have circled the place―there’s the zoom. we have circled a place where we dropped a touch. on the other hand, another chart of natural gas prices for the last six months. it bears no similar relationship to its 50-day moving average. this is a six-month chart of natural gas. the green line here, the 50-day moving average, down to $10 per million b.t.u. not close to the $12.64 trading in electronic trading for natural gas. i want to check oil stocks quickly before we run out of time with exxonmobil on the day up―call it little changed. concophilips the only mover, down .6%. that’s all my time. back to you.

>> thank you so much, bob. what we’ll do is talk about golf. competitive golfers will soon be able to use lasers and satellite technology to measure distances. they’ll let players use what are called range finders starting next year a.closer look at this with our bloomberg news reporter. let’s talk about how the systems work.

>> similar to what we see in cars where you have a g.p.s. system that tells you where you are going, where you may be going, how to get there. gives you every tidbit along the way. how far from a specific spot to the next shot. if you are near a sprinkler head how far from there. they’ll give an overview of the shape of the hole or the course itself. it can tell you everything. you can even order lunch with this item.

>> i like that aspect. lunch or a drink.

>> warn you if a storm cloud is coming. every piece of information. a big help for the weekend player. equivalent of having an extra utility club in your bag.

>> weekend player more than professionals who stand to gain from this?

>> generally because professionals have caddies and all kinds of analysis. they have played the course several times and know every nook and cranny. this is to help weekend players to speed up play.

>> what companies stand to gain?

>> there’s a company in british columbia that make this system. it costs clubs $88,000 to implement. if you want a hand held version, $500 or $600. this is up to the club itself to ok, whether they’ll allow its use. it remains to be seen how foregone that will be. if it works, it could speed up play for all weekend golfers.

>> allan kreda. we take a break. when we come back, get you caught up on the world’s national news headlines. also the “world’s biggest mover” segment today, the russian stock market .
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Listen Market briefing -- Ellen (slow)
Interview: Former Fed Governor Ben Bernanke

we joined by michael mckee and with him from washington, former fed governor ben bernanke who now heads the white house council of economic advisors. mike?

>> thank you very much, ellen. thank you very much, chairman bernanke. alan greenspan speaking today says he worries about asset prices falling because we have been in a long period of stability and perceived low risk. do you have the same concern about what he calls euphoria in financial markets ?

>> i don’t want to make a judgment about asset prices in general. he talked, for example, about house prices which have gone up quite a bit. i think to take that as an example, i think house prices are primarily reflecting strong economic fundamentals, low rates high economic growth. but looking forward, i think it’s also true that house prices can’t continue to rise at double digit rates forever. they’ll flatten out at some point. in that respect i think i’m consistent with the chairman.

>> i think his basic point no matter what the investment that investors at this point aren’t pricing in enough risk. do you think that is the case, that people have gotten a little sanguine about how good the economy has been for a tphrpl of years?

>> hard to generalize. you look at stock market , risk premiums there seem quite normal. p/e ratios seem quite normal. the economy has done well. it’s looking strong. i think that we’ll get over this  the effects of the terrible disaster notice gulf coast and i think by next year we’ll see stronger growth in the economy. i think the economy is doing quite well.

>> you mentioned chairman greenspan’s comments on the housing market yesterday. he said that while there is some maybe froth in the housing market , froth in the mortgage markets , americans are generally well capitalized and could withstand an economic downturn and slowing in price increases. do you agree with that? >> people have a lot of equity. the other fundamentals are good. job creation and income. i don’t expect to see any really sharp breaks in the consumer spending. i think we’ll see continued growth in consumer spending.

>> i know you won’t talk if you are a candidate for fed chairman. hypothetically, would you want to take over a fed short two members? it’s a clever way to ask when will you fill the empty seats on the fed.

>> i don’t know when they’ll fill those seats. i don’t have the information. i’m not a part of that process.

>> yesterday energy secretary bodman said expect gasoline shortages given the refinery outages in the gulf region. could see many of the refineries down for a month. what are you expecting and what, if anything, account administration do to mitigate that?

>> well, rita did not appear to do lasting damage to refineries which is good news. we have four refineries damaged by katrina. it will take some months to come back. the government has been constructive in trying to improve the gasoline situation. we released crude oil from the strategic petroleum reserve. we worked to bring in more gasoline imports from abroad. we have done appropriate regulatory waivers where necessary. i think the actions together with the recovery of the private sector will bring the gasoline situation under control. i expect to see gas prices continue to fall. i think within a few months they’ll be back where they were before katrina hit.

>> what about prices for winter heating? gasoline futures are up since last year. that could hit hard in the cold months, couldn’t it?

>> natural gas prices are up. it reflects not so much lack of raw material but the fact that some processing plants that convert the natural gas into usable gas have been damaged by the hurricanes and it will take time to repair. there will be increase. there has been increase in those prices and they’ll increase burdens this winter.

>> anything the administration is looking at to try to help with that?

>> we’re consulting with the private sector. we are talking with our trading partners to do everything we can to find solutions. i think we’ll have to ask people to conserve and try not to waste energy where possible.

>> we have seen all kinds of estimates for what the federal government might spend in reconstruction of the gulf region. the working figure seems to be $200 billion. that was something that bill frist just tossed out there. are you accepting that as the figure or is there some other number that the administration is working with?

>> no. we don’t have a number. we have looked at the costs of some of the near term aid to see srabgees. bigger costs, important costs are in the repair of the infrastructure. we’re looking at that. it will be some time before we have reliable estimates on what those costs will be.

>> a lot of people are concerned about effects on inflation of all this additional federal spending we’re talking about. do you anticipate that we’d see spending of an amount that would boost inflation?

>> again, i don’t know what the spending number will be. i’m not that concerned about inflation other than the fact that energy prices are having a direct effect on headline inflation and overall inflation. i think core inflation is under good control. it’s about 2% over the last year. inflation expectations seem to be well managed, well controlled. as long as the fed stays vigilant which i’m confident they will, inflation will stay under control.

>> we did see a big drop in part because of the rise in fuel prices and consumer confidence. do you think there’s any connection to the way people are going to be spending going forward?

>> well, consumers got hit with a double whammy. they saw images of the disasters on television or were in the gulf themselves and gasoline spiked up after katrina. i think both of those things will pass. obviously we’ll get recovery and stablization in the gulf. gasoline prices will come down. the other fundamentals are pretty strong. income, jobs, house prices and other asset values. i don’t think we’ll see any significant break in consumer spending. i think they’ll remain vibrant as we go forward.

>> thank you very much. white house economic advisor ben bernanke. thank you for joining us. back to you, ellen.

>> thanks to you and to ben bernanke. we take a quick break and come back and look at how the currency market viewed alan greenspan’s kphpbts today. we find out what may lie ahead for the dollar. we’ll speak with greg anderson, foreign exchange strategist at a.b.n. amro.

Interview: Analyst at National City

>> existing home sales unexpectedly surged in august running counter to some hints the housing market may be peaking. still, according to a survey by the national association of homebuilders, optimism among the group fell for a third straight month in september. let’s take a closer look at housing with dan poole, an analyst at national city. nice to have you on.

>> great to be here, ellen.

>> dan, were you surprised by the home resell numbers that came?

>> not terribly. some of the home builders we have talked to and surveys we have seen, many in the investment community like to say things are slowing. yes, they’re slowing but we’re hearing adjectives from frantic to really strong. the fact that the numbers were good is not a surprise. existing home sales is a much truer number of what is going on in housing because unlike government estimates, it’s a real life number that the realtors put out once a month and we put a little more confidence in it. we weren’t really surprised.

>> we have the new home sales figures due tomorrow. give us a look ahead at what you anticipate.

>> the home builders we have been speaking with continue to say that business is very good. we really don’t see that there’s going to be a dramatic falloff. i think last week between katrina and rita there was some real concern that the consumer was going away. the housing markets haven’t shown it. we think we get a fine number tomorrow as well.

>> put it in the context of having comments again today from fed chairman alan greenspan about the housing market saying speculation is having a greater role in u.s. home prices. he has been out there for several months now talking about the housing boom. what is your perspective when you hear comments like this?

>> well, clearly there is speculation out there. any time you have taxi drivers and others outside of the market speculating, talking about great investments, there’s some froth. but in the big picture, if you take new household formation, second homes, depletion of the existing home stock, there isn’t that much out there to a confidence. there is some speculation out there. underlying fund amountals of this market are really healthy. you have to go back to 1999 to find a time period―this is back in the days when home builders did not outperform of rest of discretionary. this is a strong, solid market . some speculation, absolutely. but the underlying market is pretty good, too.

>> let’s talk about the investments then. when you look at home builders, they have come off highs. what are you currently recommending to investors in terms of whether it makes sense to pare back on investments?

>> we have pared back for a while. we have overweight to the home builders. still think that the underlying fundamentals are attractive. we’re also in some other areas related to hougs, some building materials companies are well positioned. but we still do have a position in the homebuilders. one of the names we happen to like most lately is lennar. they were out on the tape last week taking numbers up, looking at earnings from the company tomorrow, we think underlying fundamentals are solid. compared to other homebuilders, the stock has not done as well this year. we think it’s attract actively valued here.

>> it’s interesting because phret o pretty much unchanged, up less than 1%. do you personally own lennar?

>> do i not.

>> any of the home builders that you think will come out and lower forecasts? we have heard from i believe one company so far that has talked about problems. any others that you think are out there?

>> probably not. any time a company―a homebuilder does that, they’re inevitably one of two situations. either it’s market specific and they don’t have a diversified geographic space or two, legal issues or other things have cut their development count down. those are usually short lived. the underlying fundamentals of this market we still think are pretty good.

>> in terms of building materials plays, give us the one thaw think is the best pick right now.

>> we have been interested in mohawk. ticker m.h.a. pulled back a bit. they announced an acquisition. we were in front of that. that did really well. there is concern of petroleum costs. they’re in the heart of soft surface flooring industry. oil and components make up a big portion of the cost of goods sold, on the soft goods side.

>> dan, let me ask you, that stock is down 15% so far this year. what are you seeing that other investors are not seeing?

>> two things. first, attractive valuation. this is most important. this company has historically had very―they pass along their prices. price increases usually stick. we think price increases will continue to stick. there will be noise along the way, particularly when oil prices are up where they are, but at end we think price increases go through, they stick and earnings should be there.

>> dan, real briefly, do you own that?

>> i do not.

>> dan poole, thank you for joining us. dan poole of national city. we take a quick break. we come back and have more on the markets . we’ll have world and national news update. keep it here. “after the bell” will continue in two minutes’ time.
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Listen Market briefing -- Ellen (slow)
Interview: PNC Financial

>> welcome back to “after the bell.” i’m ellen braitman. let’s recan’t day on wall street. the dow jones industrial average and nasdaq ending the day higher. s&p little changed. stocks rebounding from the worst week in three months. that’s what we saw last week. gains today led by energy shares as refinery shutdowns following hurricane rita lifted oil prices. also, insurers gained after damage from the storm was less than originally forecast. well, today we heard from two federal reserve governors and they say the economy likely to remain strong even after the two hurricanes have pummeled the gulf coast. federal reserve bank of chicago president michael moskow spoke to reporters after a speech to the national association of business economists. this is what he said.

>> financial markets and the public do not seem bothered by the lack of an explicit number for future inflationary expectations. and at present time, inflationary expectations are well anchored.

>> in the meantime, fed governor susan bies said this from washington, d.c..

>> the longer the prices stay higher, the more likely an impact on prices in general. but at this point, we’re still seeing an underlying core resilience in the economy. it was strong before the hurricanes hit. and all of the rebuilding that will be required is clearly going to also show up in strong economic numbers once we get through the immediate impact.

>> these comments by two of the voting members of the federal open market committee suggest that the fed’s policy of raising interest rates at what it called a measured pace to prevent a surge in inflation remains in tact. well, is that the case? let’s ask stuart hoffman of p.n.c. financial. he joins us right now from chicago from that meeting of the national association of business economists. he is the president of the group. he joins us from there. stuart, nice to talk to you.

>> nice to talk to you. glad to be able to join you.

>> what is the tone of the conference?

>> well, the tone of the conference is there’s a lot of concern about energy prices. seems to be the number one concern. maybe more natural gas than crude oil. looking ahead they seem to agree with earlier comments made by the two fed policymakers that certainly katrina will knock down and now rita economic growth this quarter and into the remainder of the year. but our group feels that that is likely a temporary setback and u.s. economy’s growth will be at least on trend if not a bit higher in 2006.

>> stuart, what is interesting, the most recent survey you did of this group, of the economists shows that katrina slowed growth by less than half a percentage point. were you surprised by the modesty of that number given that we have had the federal government give numbers up to one percentage point of a drag on the economy?

>> i mean the survey was taken in the immediate aftermath and we have learned more. i’m not all that surprised. what wasn’t reflected in the survey is how much of a rebuilding and how much that could add to economic growth in 2006. speaking for myself personally, i think economic growth in this half of the year will be knocked down by about .5%. but likewise i think the add to economic growth in 2006 from all the rebuilding, reconstruction, federal moneys as well as private insurance moneys could continue to support economic expansion in our group. we still think that economic growth next year could almost be 3.5% which we’d view as sort of on trend. so it’s not an above trend performance but it’s an economy that is continuing to grow on trend. the other thing that came out in the survey and that i worry about personally is that inflation is going to be higher. particularly headline inflation but some of those higher energy prices could show up in core inflation as we go forward not oepblt next couple of months but into 2006.

>> what kind of concern. one thing that interested me and surprised me when i looked at the numbers from your survey it seemed like inflation according to the consensus of economists was not as big of a problem.

>> the core number, the group came out that core inflation would be about the same next year as this year. about 2.3% or 2.4%. that is not a high number but as president moskow said, the fed has never announced a target range for inflation. the presumption is that for a 1% to 2%. as you get above 2%, you sort of get to the top of the comfort range. so fortunately our survey doesn’t see core inflation accelerating up to 3%. even if it’s a steady drumbeat at around 2.25% to 2.5%, that may be a bit higher than the federal reserve would want to tolerate beyond the next couple of quarters.

>> and let’s talk a little more about oil. what are you hearing from your colleagues about why it’s not having more of a drag on consumer spending?

>> there are offsets. employment growth is certainly up. housing activities remain strong. we also hear some concern that i would share that the home heating oil season, for at least half the country that has winter weather, that actually the average homeowner has about a 50% higher home heating bill than they have a summer gasoline bill. there is concern that as higher natural gas prices persist into the winter and that’s passed onto consumers, even’ weather is normal, that will take a bite out of consumer spending. if you look into next year, while we and myself would think that consumer spending will be slower, maybe business investment and housing, there is an equal offset in people’s expectation of government spending, particularly federal government spending could add as much to the economy as the private sector slowdown might take away. less from consumers and businesses, more from the federal government to get the kind of economic growth expected.

>> stuart hoffman.

>> thank you.

>> stuart mentioned housing. we take a break and look at housing market straight ahead.

Interview: Alcoa

>> merrill lynch is giving more responsibility to five of its 11 regional sales directors and has offered less senior jobs to the other six, all according to an internal memo. merrill named the five to new roles as divisional directors, according it a memo sent to employees this week by senior vice president dan sontag. merrill did employ more than 14,000 brokers as of july 1 and robert mccann replaced james gorman as head of the business in june. gorman was hired by morgan stanley in august to revamp its brokerage business and the firm plans to expand its number of regions to 30 from 11. merrill, note, is a passive minority owner of bloomberg l.p., parent of bloomberg news. the securities and exchange commission investigating senator majority leader bill frist’s order to sell all of his shares of h.c.a. frist’s office confirmed the probe is underway. frist instructed trustees managing his assets to sell shares of h.c.a. in june and a month later, the company missed earnings estimates and the share price tumbled 15%. h.c.a. says the u.s. attorney’s office in manhattan has subpoenaed documents the company says are related to the frist stock sale. h.c.a. is the biggest u.s. hospital chain, founded in 1968 by thomas frist, the senator’s father, along with the senator’s brother. alcoa says third-quarter earnings will fall below analysts’ estimates because of lower prices and higher energy costs, joining other companies that in the past week or so have named the same reasons as they reduce profit forecasts. for more on the story, we bring in june grasso.

>> ellen, alcoa has meanty of company―plenty of company, avon products, u.s. steel and estee lauder. the world’s biggest aluminum maker is one of the companies blaming higher energy costs and hurricane katrina for eroding earnings. alcoa says profit from continuing operations may fall as low as 27 cents a share, far below the 44-cent analysts’ estimates due to significantly higher energy prices. natural gas rose to a record this week as hurricane rita headed toward production rigs in the gulf of mexico.

>> natural gas started up in june and you could see it coming. these companies use a lot of energy. we’ve had three steel companies preannounce, same reason. there’s going to be a few more.

>> joining alcoa, u.s. steel said third-quarter profits will fall below analysts’ estimates because the cost of natural gas and scrap prices are both increasing. leggett and platt, maker of mattress springs and furniture parts blamed higher raw materials and energy costs. brunswick, world’s largest builder of recreational boats said falling confidence, high fuel prices and hurricanes may hurt sales. estee lauder cut its profit forecast. on tuesday, avon products, world’s largest director seller of cosmetics, said profits this year will miss its earlier forecasts because of hurricane katrina, higher fuel costs and weaker-than-expected sales outside the u.s. some analysts say higher prices at the gas pump and for winter heating fuel may further limit consumer spending. bartowf america cut earnings estimates on dozens of consumer companies because of the likelihood higher energy prices will hurt the amount of money for discretionary purchases.

>> thanks so much. time for a world and national news update. three million people have been evacuated in texas and louisiana as hurricane rita approaches. mark crumpton joins us with details.

>> with rita forecast to come ashore near beaumont and port arthur, texas, saturday, residents in the path heeded warnings from emergency management officials. in houston, many were stuck for hours in bumper-to-bumper traffic. some cars ran out of gas. houston mayor bill white had this advice for people stranded.

>> if a person is on the side of the road, all of our emergency response capabilities and metro is mobilized to get people off the roads to a safe place.

>> although the storm did lose strength on friday afternoon, officials in galveston are concerned that a storm surge could penetrate the city’s 17-foot high sea wall built in
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“after the bell.” i’m ellen braitman, 30 after the hour. let’s recap the day on wall street where stocks ended little changed, erasing earlier declines as hurricane katrina was downgraded to category three and oil prices ended lower. the dow losing two ponents, s&p―two points, s&p essentially unchanged -- ank as we continue our coverage of rita moving toward the gulf coast, there are new estimates of the potential insured damages. insurance stocks rallied as the storm lost strength and veered from the direct hit earlier anticipated on galveston and houston. allan dodds frank joins us with this part of the story.

>> even as normal tides from hurricane rita caused levee breaching in new orleans, insurance stocks gained on the notion that rita may not be as bad as katrina was. the s&p property and casualty index rose almost 3% on the day although falling 1% for the week. the initial estimate from eqecat for potential damage from hurricane rita is from $9 to $18 billion, representing totals for just potential wind damage from which the hurricane, some forecasters will say, will hit as a category three storm with waves surging 15 feet or more. by comparison, eqecat estimates hurricane katrina did $15 to $24 billion in wind damage when it came ashore august 29.

>> if rita takes its worst track, it is likely to cause very high insured damages but probably not as high total economic losses as katrina because you’re not likely to see the amount of flooding, certainly, that we saw from katrina.

>> still, the potential of a rita-katrina double whammy underscores the difficulties in understanding storm damage losses and understanding how the industry will handle them.

>> as we look forward and look at the cash available to make the claim payments over the next 12 to 18 months, if you have a rise in interest rates, there’s a like load hood a number of these insurance companies would have to sell assets into a rising interest rate environment and the impact to assets could be greater from the losses from hurricane katrina and could be exacerbated by hurricane rita.

>> insurance offices inc. estimates combined claims of as much as $78 billion from the storms will deplete 19% of the $402 billion in surplus or cushion that u.s. property and casualty insurers have for unexpectedly high claims.

>> thanks so much. as we switch gears, record profits on wall street mean more jobs. merrill lynch, goldman sachs, bear stearns hiring the most bankers and traders in at least five years. let’s get more on the story right now, joined by bloomberg news reporter adrian cox. let’s start off with why are they looking to hire so many people?

>> the reason is because they’ve been having very good profits this year and much better profits than they were expecting. one of the big reasons for this has been that the third quarter which tends to be a generally slow time during august actually turned out really rather well and a lot of bankers found they weren’t going on vacations as they expected but instead were in the office or troubling their families by tapping away on blackberries the whole time so as a result you saw third-quarter earnings at bear, the best third quarter it had ever had and lehman and goldman sachs had the best quarter they’d ever had which is upbelievable―unbelievable for a quarter that tends to be the slowest for the year so going forward it looks as though it will be a record year for all the brokers, as well.

>> let’s talk about the areas of strength that the companies had that boosted sales and profits to records and where specifically recruiting is happening.

>> recruiting is happening in the lower levels, in the associates, analysts, people straight out of business school so we’re expecting to see something like a 5% gain in hiring on those big brokers in those kind of areas but when you actually look at business areas that the hiring is occurring, principally it will be in those areas where the increase in the economic activity is helping out things like banking and then also because of the great rise of oil prices over the last couple of years and things like commodity trading, as well.

>> so, reflecting essentially when you―what you see in profit and earnings reports?

>> absolutely. it will be a time when people who can be in the areas where there are particularly quantitative areas like equity derivatives and credit default swaps and so on, people with ph.d.’s in path or―math or economics or engineering, those people are very much in demand and headhunters are seeing a 10% gain in the recruiting they’ve been doing this year and that has an impact on compensation.

>> let’s talk about that compensation. i saw in the story that common coming―someone coming out of columbia with an mba making $95,000 as a starting salary.

>> we were speaking with the head of recruiting at one of the business schools in paris who was saying that this has been within of the first times they’ve seen a lot of the wall street firms recruiting there because they are desperate to get new people in and as any business school graduate knows, if the demand is increasing and the supply is about the same, then the price will go up.

>> thanks so much, adrian. adrian cox from bloomberg news who covers the financial sector for us here. rita, as we’ve been talking about, coming less than a month after hurricane katrina struck the gulf coast. when we return, we’ll look at how the world’s largest home improvement retailer is preparing. carl liebert joins us straight ahead.

Interview: Chief equity strategist with AG Edwards

>> stocks suffered their steepest weekly declines in three months and with the outlook for oil and impact of hurricane katrina and rita still to be tallied, what kind of gains, if any, could we see in the stock market ? let’s take a closer look with stuart freeman, chief equity strategist with a.g. edwards and sons of the thanks so much for joining us. want to start off with the weekly declines we saw. we had that post-katrina rally, oil prices, however, turned around and started to go higher this week and stocks with a steep weekly decline. what do you make of that?

>> the market ‘s looking at rita and the possibility of oil prices moving higher and having the kind of impact katrina had on consumer confidence. which was negative on the level of jobless claims which have been rising. in a lot of ways, we’ve seen the economy slow down dramatically over the last four or five weeks from what we were looking at three quarters ago and i think that’s what the bond market was―bond market ‘s responding to, also, a tough bond market today had something to do with i think the oil prize continuing to show some ability to be strong.

>> do you think for stock investors oil becomes the dominant theme in coming weeks?

>> the stock market has done incredibly well given the moves of oil and gas prices in the last number of weeks and i think it will continue to keep a real close eye on this storm, rita, that’s coming in here. it will be the short-term answer. although, it’s interesting, earnings expectations on the street have been rising for the last three or four weeks so i think as analysts are looking at the economy itself, they think things are going to get a little better.

>> how is that realistic, though, given the higher prices that companies themselves have, higher costs they have because of energy, and given the fact that consumer confidence has taken a hit from the storms?

>> well, i think analysts estimates were a little bit too low to begin with. our estimate coming into the year, not taking portion storms was $75. the street was looking at $72 earlier in the year and it’s crept up to $74. even though it’s rising it’s not going to rise to the level it would have as a result of the storms so i think the analysts are playing a little bit of catch-up with the strength of the economy, underlying strength of the economy. we figure the storm probably took for the third quarter could tike .5% a―take .5% away from growth in g.d.p. and more than that in the fourth quarter.

>> we’ve had a number of companies lower profit forecasts, including alcoa, traditionally kicking off earnings season. how many announcements would you need to hear like that to change your positive view about corporate earnings?

>> i’m looking at these storms as a short-term phenomenon generally and i think as we move ahead what happens on the other side of them is rebuilding and that actually is a boost to the economy, again, and we’ll be seeing that in the first quarter and second quarter of next year, in my opinion. so, because it is short term, we would expect earnings to do a little better again on the other side of this and i think the markets are responding to that. the markets still very attractive if you compare it to the long bond right now, where interest rates are and that hasn’t changed a bit and i think that as we get through this pocket of worry about oil and gas prices that equities will move higher again.

>> i know a few months back you were positive on energy stocks, thought they would continue to move higher as they have continued to move higher. does that remain your position or are all those gains played out at this point?

>> there’s a lot of expectation in the stock prices at this point. we have been overweight energy for three years because the stocks were cheap and because the energy prices were low. about, it was early july, we went to an even weight in our ranking of the energy sector which means about a 10% position, maybe enough for most portfolios at this point. that’s about an even weight in the s&p. we think that as we move ahead as soon as we get to the other side of this storm, that’s a good chance we see drifting downwards in oil prices again and a chance for investors to buy them cheaper.

>> consumer stocks have been some of the worst performers since katrina. is it time to go defensive to get into names like healthcare?

>> i think it’s a little late. but i do think it’s time. we’ve earlier this year we had gone to an underweight in consumer cyclical stocks based upon the valuations and expectation for slowdown in growth anyway in the economy and we’ve been underweight consumer cyclicals all year. we’ve been underweight basic industries and overweight healthcare and consumer staples, some of the defensive areas. so i think we’re in that part of the cycle where you see a slowing growth rate in earnings year over year and some stocks that are actually have been beaten up pretty good in healthcare and in consumer staples, some of those areas where investors just don’t know when the economy is very, very strong.

>> stuart, thanks so much for joining us.

>> thank you.

>> thanks so much, stuart freeman of a.g. edwards. we’ll come back and take a closer ok at earnings.
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storm, sending oil prices lower. the dow ending the day percentage-wise unchanged, as did the s&p. the nasdaq gaining six points, a gain of .3%. on the week, indexes lower. higher oil prices and the threat of rita raised concern economic growth would slow. stocks erased earlier gains as rita weakened by near the close, you basically saw stocks losing steam. for more on the friday trading action, here’s deborah kostroun.

>> we saw a rebound in stocks after rita was downgraded to a category three storm but the markets couldn’t hold on to the gains going into the close and going into a weekend when rita would make landfall on the texas gulf coast. that downgrade of the storm did have an impact on some stocks and reversal, especially in insurance stocks. take a look at the gainers in the s&p 500. healthcare, insurance, also commercial services. many of those insurers were higher, seeing that turnaround. especially allstate. allstate has the most to lose with rita because they cover an estimated $740 billion of property in hurricane rita’s path, twice as much as the $330 billion from insured losses they had in louisiana, mississippi and alabama from katrina, according to storm modeler a.i.r. worldwide. reinsurers lifted, as well, even montpelier, down 30% since the end of july. this week, of course, they said they would have losses anywhere from $460 to $675 million from katrina. medicare today approving wellpoint, united healthcare and eight other companies contracts to offer new drug benefits in the biggest expansion of medicare in its 40-year history. laggards in the s&p 500, probably not too surprising we saw this turnaround in oil as well as rita was downgraded, you saw energy stocks going lower. natural gas, oil service and integrated oil stocks. if you look at the commodities this week, it’s been a pretty tumultuous weak, mainly because at one point rita was a category five storm but crude oil up 2% for the week, gasoline up 17% and natural gas up 11%. alcoa, biggest laggard in the dow jones industrial average after saying third-quarter profit will be less than expected because of lower prices and higher energy costs. i’m deborah kostroun.

>> and one of the big questions for investors in that they have been asking is how will hurricane rita affect the gulf coast in terms of the oil and gas industry. let’s bring in bob bowden for a closer look.

>> thank you. perhaps the single most important way we can explain friday’s dropping in oil prices is as follows. yesterday, or thursday, the hurricane rita was clocked at 170 mile-per-hour winds, fearsome category five storm. by friday, close of trading on friday, rita was category three with maximum sustained winds of 125 miles an hour, 45 miles an hour slower so we saw reaction in crude oil prices, down on the day, crude oil finishing down 3.5%. the threat to refineries had driven up gasoline on thursday to over $210 per 100 gallon but on friday, a 2.5% drop for gasoline. natural gas prices on thursday reached $13.42 per million b.t.u. on friday, down to $12.32. it was a hurricane sentiment change - friday that rita may not be as catastrophic as may have been thought. first, we have reaction with the energy analyst with rbc dain rauscher.

>> by market reaction, a lot of the experts think the energy infrastructure will escape the storm relatively unscathed. if we have supply disruptions, it appears they will be relatively short term. the storm is yet to hit and we’ll have the full weekend to assess the situation.

>> more reaction from the analyst with man financial who says it’s very possible the storm could cause less damage than the market has priced in?

>> i think if we get a glancing blow from the hurricane, a nuisance in area where refineries have totally up their damages and start operations again, i think oil markets will definitely sell off. i think there’s a good amount of the fear factor built into these prices.

>> with oil prices down and natural gas prices down, stocks fell, as well, beginning with integrated oil stocks, exxon-mobil down almost 2%. conocophillips and marathon down more than 2%. drillers fell today like devon energy, 2.68%. apache down 2.5%. anadarko down more than 2.5%. wanted to show you the s&p 500 supercomposite energy index with 79 members of the index, 74 of the 79 were down on friday. this is the one-week chart. you see what happened, the biggest rise here is the beginning of trade on wednesday and the begin of trade on thursday as the storm approached but as the day progressed thursday we saw the storm weaken, the energy stocks fell. on friday, a similar action, the energy stocks fell even more. follow me as i show you how the oil service stocks did, falling, as well, on friday with schlumberger down 1.5%. names like baker hughes, smith international, down over 2%, as well as enterprise group holdings down over 2% on the day. so there’s no question about it, while the most of the market wasn’t changed in terms of the s&p 500, little changed on the day, oil stocks were down. ellen, back to you.

>> in fact, bob, that was the only group among the 10 broad economic groups that make up the s&p that had declined today. thanks so much. u.s. food and drug administration commissioner lester crawford who was permanent head of the agency last july announced he is resigning. peter cook is in the washington bureau and joins us with the update. peter?

>> the news was confirmed by the food and drug administration late friday afternoon. the agency saying crawford’s resignation has been accepted and a memo crawford sent to employees was released. in the memo, crawford says “after 3 1/2 years as deputy commissioner, acting commissioner and as commissioner, it is time to step aside. i am doing so with deep gratitude to the president and both secretaries of health and human services for whom i have been privileged to serve. crawford won confirmation as permanent chief in july. the senate vote was delayed by two members of the chamber for the f.d.a. to make a decision regarding the sale of barr pharmaceutical’s birth control. an analyst with washington analysis wrote in a note today that von eshen bach of the national cancer institutes would be the likely candidate to replace crawford. crawford’s confirmation was delayed for an investigation into allegations that crawford had had an affair with an employee and promoted her on that basis. health and human services departments office of the inspector general released a letter saying the probe found no evidence into the affair or alleged favorism. we have no reaction from the white house to crawford’s announcement, to his resignation and no word specifically or specifically as to who might replace him as head of the food and drug administration.

>> thanks for that update. in meantime, today, china’s widened the yuan’s trading band against the euro and yen and said it is resticking how much the currency is allowed to nukuate against the dollar. in friday trading, the dollar stronger against the euro. here’s what we saw in the treasury market . prices fell as hurricane rita shifted course and weakened, triggering the slump in fuel prices, easing concern about economic growth. prices fell as the move by china bolstered bets the dollar range would be next. china has bought u.s. treasuries to keep its currency from rising against the dollar. stocks, as we saw, erased earlier losses and still the indexes ending lower. coming up, we’ll have more on the markets .

Interview: ETF

>> for the year, the benchmark stock index had been bouncing between gains and losses with only the s&p 500 higher right now year to date. where can investors put their money? one alternative might be exchange-traded fund. greg ehret is co-head of advisers, strategists at state street global adviser, joining me from washington with a closely look at e.t.f.’s. welcome to the program. for many investors, an e.t.f. is no different from an index fund except for the fact it trades throughout the day, right? what would be the difference, to someone that isn’t day trading these things, why is the difference important?

>> i think it offers a number of different things for the end investor. you mentioned the flexibility, buying and selling it throughout the day. the flexibility of going short an e.t.f. to hedge your exposures whether to a stock or industry. finally, the tax advantages and cost efficiency of the vehicles is something that makes them stand out against traditional indexed mutual funds.

>> cuquantify that, the cost advantage?

>> the cost advantage, sure. i’ll give you an example. the spider’s at 10 basis points and has had 16 cents of capital gains distribution since its inception in 1993.

>> are there any e.t.f.’s that are actively managed the same way mutual funds can be divied into index funds that aren’t actively managed and more actively managed funds. are there e.t.f.’s that are more likely the actively managed funds?

>> not yet. the transparency that e.t.f.’s provide the investor, investors know exactly what’s in each one of these e.t.f.’s and most fund managerss of active portfolios are reluctant to provide portfolio holdings on a day-by-day basis.

>> one of the nascent industries is options on e.t.f.’s. people buying puts and calls. why does that make sense?

>> it’s another way to hedge exposure, whether on the s&p 500 or some other benchmark index. you can really hedge your risk by using an options strategy. >> one of the such e.t.f.’s is ticker symbol x.l.e. on the bloomberg terminal right now, a one-year chart of that drawn. talk about this, an energy e.t.f., right?

>> that’s right, it’s made up of the energy stocks in the s&p 500. it’s a cost-effective way of gaining exposure to these different energy stocks, the total expense ratio is 25 basis points and it has a lot of liquidity. in particular, with the sector e.t.f.’s, we see a considerable amount of liquidity driven by the news and with the hurricanes and oil prices where they are, x.l.e. obviously has significant volume.

>> let’s talk about the e.t.f. industry. isn’t it true that barclays is really leading this industry with the ishares product?

>> barclays is definitely a formidable competitor. there are a number of very good service providers. what we do at state street global is try to add value to the end user by providing the tools financial advisers can use to effectively implement strategies, using e.t.f.’s alongside actively managed portfolios.

>> what does that mean, you say you’re better because you provide tools?

>> from a value perspective, we want to make sure that on our website, for example, advisers.ssg.com, we allow individuals to build portfolios using active and passive techniques. we believe e.t.f.’s are a complementary strategy to active management.

>> one of the techniques is to hedge and to be more specific, i know you’ve alluded to this, but if you think one stock will outperform a group, you may buy that stock but short the e.t.f. associated with the group in a way that if the whole group moves, you’re protected, right?

>> that’s a hedge fund strategy we see more and more often utilized by hedge funds and individuals, a pair strategy where you might like a long stock, exxon-mobil, for example, but not happy with the energy sector. there’s also a number of different reasons why you would want a hedge exposure with e.t.f.’s. you may be a wealthy individual with a concentrated stock position and to hedge that exposure, you may choose to take a sector bet on the short side with a highly correlated sector. >> you mentioned the puts and calls in e.t.f.’s. that volume can’t be too big, though, it must be thinly traded, right?

>> no, actually, the larger options, actually, two of the three largest actively traded options contracts today are e.t.f.’s. those would be the options on the q.q.q. as well as on the spider.

>> tell us about state street’s growth in e.t.f.’s. what are the growth rates you’ve seen in in-flows?

>> we’ve started the business in 1993 with the advent of the spider and have seen our assets climb from $100 million to $80 billion. much of that growth happened in the bear market of 2000’s where we’ve seen growth over 30% per anum through those years.

>> our thanks to greg. we’ll look at crude on the rise. also, where the international monetary fund says prices are headed for crude oil.
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crude oil prices touched the highest level in the last 12 sessions, now at $66.80 in the electronic trading. but the bigger impact might be in natural gas prices, rising to another all-time record. you see there, $12.59 per million b.t.u. and 13% move in the last week. moving on, the effect on stocks evident, large cap oil stocks all up, exxon, chevron, conoco, hitting all-time highs today. drillers reacting more. x.t.o., chesapeake, devon energy and petroquest, all of those stocks hitting all-time highs. oil field services stocks, particularly those with offshore, specialty or refinery specialty, rallied, like ocean gating. reaction even in coal stocks as coal competes with natural gas to generate electricity in the u.s. so if we have natural gas supply impacted by the hurricane, that could drive up demand for coal and the three biggest cap coal stocks, peabody, consol and arch coal all hitting all-time highs this week. recapping the day on wall street, the dow jones industrial average on the day for the third session in a row down, down to the tune of 1% for the dow. s&p 500 down .9%, both finishing at the lows of the session and nasdaq also near or at the lows of the session, the worst three of those performers, down 1.2%. christopher cox, new chairman of the securities and exchange commission, presided over his first s.e.c. meeting today. cox, a former republican congressman, says the commission may write new rules for executive pay. allan dodds frank has the latest on that story.

>> the new chairman of the securities and exchange commission says he is willing to examine whether more disclosure of executives’ multi-million dollar pay packages is needed.

>> if there are concerns about disparities or levels of executive compensation, i have every confidence that the market can sort that out and that shareholders can act in their best interests but they have to have the best information in order to do that. so in the very near future, i think the s.e.c. will put out additional guidance and perhaps rules on this subject.

>> in his interview with bloomberg television, cox talked about new regulations on hedge funds and the ongoing revelations about fraud at the bayou fund.

>> as a first step to getting a grip on the regulatory interest in this area, that will provide census information, as it were, about the scope of the matters that we might concern ourselves with. whether or not this kind of information would have been enough to tip us off in advance to what was going on at bayou is a fair question.

>> the chairman cautioned that the new hedge fund rules will strain the s.e.c. resources. he said before more measures are implemented, “we want to make sure we can bite off and chew what is already on the menu.” in the first meeting presided over by cox, the commission votedum amly today to delay until 2007 the deadline for small companies to file enhanced financial reports under the sarbanes-oxley act. small businesses complained that meeting the original deadline would have been too expensive.

>> thank you. billionaire investor kirk kerkorian’s tracinda corp. said it may ask for representation on the g.m. board. tracinda, in a filing today with the s.e.c., tuesday intends to raise its stake in the automaker to as much as 9.9% from 9.53% now. tracinda has a total of 53.8 million g.m. shares and bets the automaker will recover from a $1.4 billion loss in the first half. after a 13-year ban because of safety concerns, inamed corp. received notice from regulators its silicone breast implants may be approved for cosmetic use. the food and drug administration issued an approvable letter outlining conditions to be met. here’s a look at inamed shares at the close, gaining almost 9% in a day where the market was down, finishing at $77.froompt government advisers voted in april against recommending approval because of questions about the implant’s safety. when we return, all three u.s. stock benchmarks dropped for the third consecutive day. we’ll look at investing in exchange-traded funds.

Interview: PIMCO, world's largest bond fund manager

>> fed policymakers raised interest rates for the 11th time, already traders talking about the next meeting that comes our way november 1. let’s get perspective from bill gross, chief investment officer at pimco, world’s largest bond fund manager. he’s joining us right now from his office in newport beach, california. good to see you.

>> thank you. nice to be here.

>> traders already boosting their bets for additional rate hikes. do you think that’s the right call?

>> i think as additional evidence on the economy, it probably is. the fed kept the key words “measured” and “accommodative” within the text of their statement and to that extent, took us back to pre-katrina types of levels in which the market was assuming the fed marched upwards until something happened. i still think it’s important and i think the fed will continue to think it’s important that what happens over the next few weeks and months in terms of economic growth is critical to whether or not they continue to march upwards and it’s there, i guess, that i differ from many market participants and suggest that the fed stops at 4 as opposed to moving higher.

>> you’ve been at that forecast, i believe, since july. what would it take for you to change that forecast that the fed will end the year at 4%?

>> well, it would take―a pretty decent snap-back in terms of confidence, economic growth, slightly higher inflation numbers from the standpoint of the core and obviously recognition through statements and speeches on the part of fed governors and perhaps greenspan himself that this was the expectation into 2006. i think the fed is really searching for this neutral interest rate. they’re not searching for a rate that’s restrictive. they don’t want to shut the economy down. they recognize it’s highly levered and dependent to a considerable extent on the housing wealth so they’re searching for the magic bean like jack and the beanstalk and that’s why they’ve moved in 25-point steps the last 11 times. that’s the critical determinant, is 4% enough or do we have to go to 4.25 to slow things down magically? i think it’s 4%.

>> tell us what you did today?

>> not much today. as a matter of fact, anticipating the statement and the hike, you know, i myself portfolio sold five-year’s but it ended the day where i sold them. i would expect over the next few days and weeks, dependent, of course, upon where the economy shakes out and confidence numbers and how quickly consumers can adapt to this $3-a-gallon level, that the curve in terms of the short rate relative to longer dated treasuries, 5’s and 10’s, would continue to steepen slightly and so that’s where my bet continues to be on the front end as opposed to the back end of the curve.

>> digging in a little bit more, you had been buying the two-year to five-year treasuries and today you said you sold that billion of the five-year so where specifically is the best place to be if the fed will raise to 4%?

>> i think, strangely enough, that’s where it is. sometimes we―portfolio managers have this sense that we can do a quick trade. that’s typically not pimco’s style. but it was an important day and in a sense that this is probably what would transpire so there was a sale of some five-year’s but i expect to be back into those five-year’s and in a billion, five-year’s, short of a billion five-year’s, not to sound egotistical, it’s a drop in the bucket so it was a minor glitch in terms of our overall strategy which continues to recommend two’s, three’s and five’s.

>> what’s the effect for your strategy of the katrina stimulus coming down the pike?

>> we’ll have to wait and see. i’d be the first to admit that not everything falls neatly in line with “your strategy” or “my strategy” and to the extent that katrina promotes $200 billion in additional spending, that promotes inflation higher than it would have been otherwise so we’re mindful of that. we want to see some measured spending, admitting that that area needs lots of money but we don’t want the federal golf simply write a blank check. having said that, it’s important to monitor its progress and to i guess most of all monitor its impact in terms of inflation going forward.

>> and very briefly, we just have 30 seconds here, you have said you want ben bernanke to be alan greenspan’s replacement. why is that?

>> well, i think he’s a highly respected, in some ways politically savvy individual that has proved during the periods of time such as our deflationary scare of a few years ago, that he can respond both with intellect and with deed. if the response is required. it’s not that i don’t like any other candidates it’s just that this one provides some very visible evidence that he can do the job going forward.

>> bill, thanks so much. bill gross of pimco. after the break, we’ll return.
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Listen Market briefing -- Ellen (slow)
Fed --- Allan (slow)
Goldman Sachs --- Bob (fast)
NYSE -- Deb (fast)

3.75%, signaling they may continue to raise rates. the fed says the u.s. economy faces a near-term setback in employment, spending and production after hurricane katrina. allan dodds frank will join us in a moment for details. first, let’s check market reaction today. stocks down across the board -- there was concern among investors that higher rates and near record energy prices will restrain consumer spending. the 10-year treasury ending little changed, sending yields up. on the shorter end of the yield curve, that’s where the focus will be and yields moving up on the shorter end of the curve as the fed reiterated rates will likely continue to move up at a measured pace because of the threat of inflation. you had yields on futures contracts surging in a sign traders expect more increases than previously anticipated. as for currencies, not changed right now but in trading today, the dollar up against the yen and euro after that fed announcement. as for gold today -- we’ll get reaction to the fed rate decision from bill gross, chief investment officer at pimco. david seiders is chief economist with the national association of homebuilders of the. tom keene as “chart of the day” and bloomberg contributor gene sperling, speaking with them about what to expect from the fed in coming months. stocks and treasuries falling after the fed raised rates that quarter point. it was the first meeting since katrina. the fed’s action comes even though there is little hard data about that hurricane’s effect on the economy. let’s get more, now, from allan dodds frank.

>> raising the fed funds rate a quarter point, the federal reserve said it can stay on the measured path to keep inflation in check. fed chairman alan greenspan and colleagues said that while hurricane katrina hurt the economy in the short term, the impact does not pose a long-term threat.

>> i think what’s significant is that the fed felt the u.s. economy was in good enough shape that it could tolerate yet another increase in short-term interest rates and i would go beyond that. this is a federal reserve that has also been paying keen attention not just to the u.s. domestic economy but to the global economy and what we’ve seen over the last few months has been an improvement.

>> cohen predicts the fed will continue to raise interest rates. the fed called the widespread devastation in the gulf region and boost in energy prices unfortunate developments which it says has increased uncertainty about near-term economic performance. the committee continued it is their view they do not pose a more persistent threat. the 9-1 vote to raise rates comforted some.

>> treasury markets feared the fed would do nothing. inflation continues to be the demon that affects the bond market . as long as the fed is active fighting inflation, there is calm there.

>> i think we’ve all been saying for the last week or two that this is probably the first meeting in a year where there’s been this much room for dissent and it would actually be surprising if that many highly opinionated and inform people did all agree and come out in the same place.

>> the fed, acknowledging trouble spots, tried to add comfort to the longer range forecast. higher energy and other costs have the potential, the committee said, to add inflation pressures, however, core inflation has been relatively low in recent months and longer term expectations are contained. abby joseph cohen says as the fed continues to raise interest rates, stocks will do better than bonds since the outlook for corporate profits is so good.

>> speaking of corporate profits, let’s talk about a record number reported today, that was goldman sachs. profit up 84% from the same period last year. again, it was a record. bob bowden joins us now with all the details. bob?

>> thank you. goldman sachs managed to deliver blowout numbers, the headline figure powered the stock to a five-year high intraday before know finishing lower. the headline earnings were nearly double the $1.74 from last year’s fiscal third quarter and the $3.25 easily beat analysts’ estimates. for comparisons, goldman’s 84% increase in fiscal third-quarter profits larger than lehman’s 74% profit increase and bear stearns’s 34%. breaking down revenue by unit, financial advisory revenue up 24%, underwriting up 4% led by investment grade debt issuance, equity trading revenue up 75% because of “strong customer driven activity and generally higher equity prices.” fixed income currency and commodities trading up 41% and asset management revenue rose 23%. steve rukous of mate rick asset advisers says the fixed income market is heavy.

>> the fixed income market continues to stay booming for everyone. the market has doubled within the last six years and that is one of the things people feared, as interest rates went up, they couldn’t make money but the size of the market has gone to $24 trillion.

>> you see the intraday chart, goldman sachs shares hit the five-year intraday high. before falling lower, down 23% by the close of trading, down .2%. other investment bank stocks, mixed picture with merrill lynch up 1% and bear stearns down .8%. merrill lynch reports october 11. morgan stanley reports earnings tomorrow. and one other note, the 12-member amex broker/dealer index hit an all-time high, you see there, there’s the index there, up 34% in the last five years but intraday, 12-member index hitting an all-time high.

>> and as bob mentioned, goldman sachs up much of the day, ending lower. really echoing what we saw in the broader market with indexes higher after the fed meetings, the index turned around and closed near the lows of the day. we’ll get details from deborah kostroun.

>> stocks saw a major turnaround after the fed raising interest rates once again. some of the things the fed said that many traders are talking about, that, that higher energy and other costs have potential to add to inflation pressures and also the fact that the fed signaling that more interest rate increases are down the road. what we did see for the dow, biggest two-day slide since june 24. and consumer discretionary stocks hit the hardest. if you look at the bloomberg home building index over the past week, we have seen this index lower. what we saw even after that decision today, homebuilders, once again, sharply lower, erasing earlier gains that we did see. also, retail stocks. they actually saw some pretty big declines as a lot of concern about what near-record energy prices will do and could restrain consumer spending. federated, a different story there. they said they will sell their david’s bridal stores and convert 62 marshall field’s locations into macy’s and cut as many as 6,200 jobs after buying may department stores. oil-related stocks, exxon-mobil hit a record high and retreating. some of the energy stocks lower, some higher on the day even though crude oil actually lower. delphi falling to a record low amid concerns the company will not receive financial aid from former parent, general motors. that company may have to file for bankruptcy. delphi stock has been climbing in recent months as investors speculated g.m. would bailout the company in the same way ford agreed to help its former parts unit, visteon. steel stocks, they were sharply lower for the most part. that after u.s. steel saying their third-quarter profit will be less than average analyst estimates. maybe because of increasing natural gas costs which surged after hurricane katrina. i’m deborah kostroun at the new york stock exchange for bloomberg news.

>> david radler, former chief operating officer of hollinger international pleaded guilty to a federal fraud charge today, agreeing to cooperate with a probe of conrad black. prosecutors will recommend radler serve 29 months in jail and pay a fine of $250,000 for his role in the $32 million fraud. he will be free on bond until all proceedings in the case are concluded. in the meantime, glaxosmithkline paid more than $150 million to settle u.s. allegations it overcharged government health programs. the company had been accused of inflating prices for two cancer drugs. the case was the first brought at the whistleblower suit by a florida pharmacy. when we return, we’ll focus on the meeting of the federal reserve, what it means for the bond market and speak with bill gross, chief investment officer at pimco. keep it here.

Interview: Managing director of energy technology research at Ardour Capital Partners

>> crude oil rose 7% in the session. let’s get more on the story. walter nasdeo joins us, managing director of energy technology research at ardour capital partners, joining us to look closer at crude. it’s not just crude, but across the board. i want to start our conversation, given the rally today in natural gas, gasoline, crude oil, do you think those numbers are justified?

>> no, i think they’re ahead of themselves but, again, the environment has gotten so fractious that it’s difficult for these prices to get to a comfortable level so what we’re seeinggating is as katrina settled down and we looked at the damage, all of a sudden rita comes in and we don’t know where that will lead to and there’s uncertainty as far as the distribution of the oil economy.

>> what are you hearing from traders and clients that give us a better indication of why there was a surge today when the forecast for rita is not the same as the forecast there was for katrina.

>> that’s true. we do have other things going on around this with the interest rates. we don’t know where that’s heading right now. also, with opec meeting and uncertainty around exactly what it is they’re going to do as far as supply goes so―and then everything comes back around to what is the level of refining that’s available both in the opec space but also over here. katrina did significant damage to our refining assets and that’s something that we don’t have a complete handle on when they’ll get back on line.

>> what are you telling clients in terms of where prices are headed in the next few weeks?

>> we hope everything settles back down and gets into a comfort level and we expect that comfort level to be $60 and $65. that’s not to say that if another storm comes in or another environmental issue pops up, that it can’t pop over $70 but we certainly would expect it to settle back down into the $60 to $65 range.

>> no surprise today that energy stocks were the only pocket of strength in the s&p 500. energy stocks now more than 10% of the s&p 500. we haven’t seen that in over a decade. your universe of coverage is more the electric company and power cell companies.

>> true.

>> not―these stocks surged for a while but many of them are down substantially year to date. why is that?

>> well, again, it comes back around to an issue of execution. a lot of these companies are developmental. and what happens in these situations is that the spotlight is pushed over to these alternative energy and producing type companies because of what’s going on with the pricing of our traditional energy sources so we see pockets of solar, which is getting a lot of exposure right now. some of the superconducting companies, power companies and things like that are getting people looking at them right now because of the uncertainty and other aspects of the energy grid.

>> are you anticipating that the stocks will start rising? you do have a buy pretty much across the board for many of these names and we’ll get into picks. so are you anticipating stocks will rise?

>> we certainly do. simply because there’s a need for it right now. and the markets are getting better defined than they have been in the past. as that happens and these companies understand the markets that they are well suited to go into, the whole business and business models start to make more sense and these companies seem to have better reception from the investing public.

>> what’s your top pick in this area?

>> we like a small company called thatcon, a power electronic company that makes inverter and power electronics that go into solar cells and fuel cells and things like that so it feeds into the market itself. it’s not a power producer. we also like --

>> before you talk about another one, what’s the biggest risk for satkahn?

>> that the other markets go forward. there’s a lot of exposure there. they sell into the hybrid automobile market . they sell uninterruptible power supply so they go into a lot of areas so the major risk is execution at the company level and also that the markets continue to develop as they’re projected to develop now.

>> do you personally own that?

>> we do. we --

>> the company owns?

>> indeed.

>> we have 30 seconds and give us another name.

>> i like quantum, we do not own it. it’s a company that plays in the fuel cell and hydrogen market but work with general motors. they don’t make the fuel cell but a lot of the fuel lines and systems that go into the automotive, hybrid automotive.

>> walter, thanks so much for joining us. walter nasdeo, managing director of energy technology research at ardour capital partners. after the break, we’ll look at nike. shares with their biggest gain in two years. bob bowden is following the trading activity and the reason behind the surge.
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has called for a voluntary evacuation. the storm, forecast to strengthen into a hurricane today or tomorrow and could reach the texas coast by saturday. crude up throughout the trading session, in response, ending 7% higher. double-digit gains across the board for other energy morphs today, natural gas climbing to a record high, one of the biggest moves among commodities around the world. oil playing out in stocks today with declines across the board for the major indexes. let’s get the story. the latest potential hurricane to threaten oil production in the gulf of mexico. su keenan joins us with details.

>> this is the 17th storm of what has been a very active hurricane season. rita formed in the bahamas over the weekend and is now, as you said, aimed at the florida keys. with winds gusting above 60 miles an hour, it’s expected to reach hurricane strength by late tonight. early predictions from the national hurricane center take rita on a track to the central or north texas gulf coast by late this week. refco’s marshall steeves says that could threaten more refineries and after katrina’s grand jury to the gulf, estimates show it will take until the end of the year for the area’s oil and natural gas supplies to approach normal levels. steeves says this, combined with the approaching winter weather, made natural gas futures one of the biggest commodity movers in the world today.

>> that’s the concern here, namely, that we’ll have cold weather particularly in the early going in the november to december period and that will really whittle down that supply in storage that we have and i think that frankly depending on how much damage rita does, we could be looking at nat gas prices above $10.

>> mark waggoners even -- saysine though opec is meeting to discuss quotas, concern about rita dominates trading.

>> opec more of a gesture than anything else.

>> everything will focus on the hurricane and will it get stronger? where tell hit? will is hit where other refineries are?

>> several companies such as shell and chevron evacuating workers from the gulf. opec members agreed to maintain current production quotas. the cartel’s president says they’ll decide tomorrow whether to pump an additional two million barrels a day.

>> our extra capacity, we are putting it in the market , without changing, there will be more to the market .

>> additional barrels will have to come from saudi arabia which does not pump the kind of oil most refiners need.

>> news, as well, katrina-related news after the bell today. procter & gamble reaffirmed its first-quarter profit forecast saying sales growth will outweigh the impact of katrina. katrina costing the company one to two cents a share. it says profit will be in the range of 75 to 76 cents a share. former tyco chief executive dennis kozlowski and former chief financial officer, mark swartz, sentenced to 81/3 to 25 years in prison. the judge ordering them to pay restitution and fines. allan dodds frank was in the courtroom and joins us now.

>> 58-year-old dennis kozlowski and 45-year-old mark swartz asked for leniency but neither admitted guilt or showed remorse before being sentenced to a minimum of 8 1/3 years to prison in the biggest corporate looting case in history. they were sentenced on 22 counts involving multi-million dollar thefts from tyco, led away in handcuffs. the judge, in addition to giving them prison time up to 25 years, ordered shareholder restitution more than $134 million and imposed heavy fines. for kozlowski, the fine is $70 million and for swartz, whose pay was approximately half of kozlowski’s, the fine is $30 million. outside of court, kozlowski’s attorney was asked if he was upset about the judge’s decision to remand the men to prison immediately.

>> obviously, and we’ll apply for bail but i don’t want to comment further than that.

>> what happened to your client right now, is he in custody?

>> yes, he is.

>> where will he be won’t?

>> that’s up to the bureau of prisons.

>> will he be ok?

>> he’s a courageous person but it’s adverse.

>> assistant manhattan district attorney owen heimer said the defendants had stolen more than $150 million in hidden bonuses and cost tyco shareholders another $450 million by trading stocks illegally. kozlowski slipped by cameras on the way to the hearing beginning with the prosecutor saying the men deserve stiff sentences. the prosecutor called the former tyco chief the “worldwide symbol of cleptrocity by management.” during the hearing, it was disclosed that the securities and exchange commission may file a multi-million dollar accounting fraud case against tyco for actions that occurred while kozlowski was in charge from 1996 to 2002. the company said the charges did not involve its current financial reporting and will not require restatements. both kozlowski and swartz are expected to serve time in maximum security prisons.

>> thanks so much. a long road to today covering the story.

>> three years.

>> talking about the oil effect today, how it played out in the stock market . deborah kostroun followed that trading activity and files this report.

>> the dow jones industrial average saw its biggest loss in a month as tropical storm rita may disrupt energy markets and hurt corporate profits and many of the energy markets still reeling from katrina. those companies most affected by rising energy lower today -- retail, autos and transports lower. energy stocks, the best performers. we have the fed meeting tomorrow with the latest check on interest rates. most traders believe that interest rates will rise by quarter percentage point. what we did see, crude oil, up 7% on the day. year to date, it’s up 55%. gasoline up 14%. it is up 88% so far this year. and natural gas, another big gainer, 14%, just in today’s session. it is up a whopping 106% so far this year. you saw with that 7% increase in crude oil having an impact on many of those oil stocks, exxon and chevron coming in at record highs. oil services and refiners, all higher. the natural gas index coming in at a record on the day. remember, the gulf of mexico produces 1/3 of the nation’s oil and 1/5 of natural gas. alternative energy stocks like coal coming in at record highs in the session. consol energy closing lower. gold, the commodity, once again hitting a 17-year high. we saw the index trailing off a little bit but the surge in energy costs renews concern about the pace of inflation. that gold index at one point at its highest since january of 2004. gold stocks, however, getting a little bit lower. industries most affected by fuel costs, the worst performers in the s&p 500 so far this year and once again, worst performers on the day. retail and many of the transports all lower. i’m deborah kostroun at the new york stock exchange, for bloomberg news.

>> bloomberg has learned that comcast is bidding for susquehanna pfaltzgraff cable tv business. people familiar with the matter would not say how much comcast is offering but say the business could be worth as much as $800 million. buying it would boost comcast’s operations in pennsylvania and eastern states. comcast is competing with a bid from a management-led group. susquehanna is a family-owned firm and began as a pottery maker 200 years ago and sold the pfaltzgraff business to lifetime brands two months ago. the federal communications committee says it may use excess phone company fees to pay for the planned $211 million in katrina relief funds. telephone carriers may be the ones helping to pay the bill, according to the f.c.c. commissioner jonathan adelstein.

>> we do have to pay for what we put out there and one of the ideas is to maintain the current level of contributions, actually scheduled to go down a little bit. we’re talking about keeping it level so that we have money for this unanticipated problem.

>> the fees are currently at 10.2% and were suppose to drop to 9.9% of long-distance revenue. the telecommunications agency does not expect push-back from phone companies. there may be a vote on the issue as early as this week. after the break, we’ll talk oil.

Interview: David Joy with Ameriprise Financial

>> the s&p and dow recorded their first weekly declines in three weeks coming ahead of next week’s meeting of the federal reserve. economists forecasting that the fed will raise the benchmark rate an 11th straight time by quarter of a point. we’ll speak with david joy with ameriprise financial, joining us from boston. nice to see you.

>> thank you.

>> given that we had the post-katrina rally, the stall in the rally this week, stocks declining, what do you anticipate we could see next week when the fed meets?

>> all eyes will be on the fed and what they say. i think it’s a foregone conclusion, by and large that they will raise rates. but i think the fed has been on guard recently for any signs that this is starting to creep into core inflation, that is, higher energy prices. and it will be interesting to see what they say about that. there has been anecdotal information from individual companies that they’re seeing higher prices and they’ll try to pass them along so i think that’s what the market will focus on.

>> how will that play out specifically? i know you come from the position thinking it will be difficult for stocks to gain while the fed continues to raise interest rates.

>> yes, i think that the market will struggle as long as the fed is raising short-term rates and a companion issue to that is whether or not the longer end of the yield curve starts to rise. we still think that it will. we think the 10-year should trend towards 4.75% or 5% by year end or thereabouts so if you have a situation where both of those are occurring at the same time along with higher energy prices, i think that will make things more difficult for the stock market than some think.

>> what kind of yield on the 10-year would investors need to see to be attracted away from stocks, towards bonds?

>> well, i think once you get up to the 4.75 level and it depends on whether or not we plateau there or see what kind of momentum we have, i think that’s going to create some competition for stocks. there’s an outside chance if we start to see core inflation rising that the 10-year could rise further than that. i would guess, in terms of the timing of this, maybe in the first quarter, second quarter of next year, stocks will be faced with real competition from the bond market in my view.

>> i made an easy comparison of the s&p 500 and the russell 2000, the russell, the small cap index, the top line in orange, the white line, the s&p 500. clear outperformance of the small caps. david, last time we spoke, united states you thought the large caps would outperform. it hasn’t happened yet. why is that?

>> it did start to happen around the june, julyiary and then it stalled out and once we got the post-katrina rally, it was the higher beta sectors of the market that took off, including the russell 2000. as well as the nasdaq, for that matter. i think it related to the whole question of what is the underlying strength of the economy and whether or not the fed is going to pause. if they do, you could see reacceleration of economic activity, reacceleration of, in essence, animal spirits focused on higher beta sectors of the market of the i don’t expect that will persist but i think that drove the outperformance in the last few weeks. we’ll see what happens, if the fed continues to raise rates.

>> your team meets next i believe on tuesday to discuss asset allocation. what will the discussion be? making the case for remaining overweight in equities or changing the allocation?

>> that’s the big issue we’re always confront with. we’ve been overweighted equities for the better part of the last several years. we took a little bit of that off the table at the beginning of the year but kept it in place by and large. so that will be the bigger issue. i suspect we’ll keep it in place. i think as much as the equity market is faced with issues, i think the bond market is overvalueda at these levels but another issue facing us is did we keep our overweight in international markets in place on the equity side and that has served us well. we got a nice boost from the political arena in japan last sunday. we have an election coming up in germany on sunday. if the opposition happens to win or even receive a mandate for reform, we could see another leg up in performance coming out of the european markets , germany in particular. that’s something else we’ll watch carefully.

>> why the overweight in domestic equities if i think you have said that you think that the indexes will end the year lower from current levels?

>> i think that’s a possibility that they can. our forecast, our capital markets committee expectation, is that equities will have a positive return. i’m a little bit of an outlier among that membership. i think there’s a chance we could be down modestly. but our overall point of view, the consensus point of view from the committee is we will end up modestly higher rment. overall, i think modest returns are the order of the day going forward.

>> david, thanks so much.

>> you’re welcome.

>> and coming up, a look at “money & sports.” major league baseball reaching a deal with espn. what does it mean for disney?
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>> welcome back to “after the bell,” i’m ellen braitman. 30 after the hour. let’s recap the day on wall street where stocks advanced as lower oil prices and president bush’s pledge to rebuild the gulf coast after katrina brightened the outlook for the economy and corporate profits of the dow higher by 83 points, s&p up 10 and nasdaq down 14. each of the benchmark indexes had their first loss in several weeks -- it was those comments from the president that did boost the stock market today, specifically building and material stocks rising. let’s get the details from deborah kostroun.

>> thanks a lot, ellen. also the fact that we saw lower crude oil prices helping things out but of course president bush last night pledging to rebuild the gulf coast after katrina, really brightening the outlook for the economy and also corporate profits and a lot of companies, like louisiana pacific, they stand to benefit from all the reconstruction, helping to lead the market . louisiana pacific, it was upgraded by prudential, saying―this is the largest maker of oriented strand board, will benefit from robust demand amid katrina rebuilding and the price of wood will remain strong and rebuilding after katrina will increase that demand. also potlatch, upgraded by bank of america so many of the material stocks performing well. for the week, what we did see, we saw the dow, it was down .4%. the s&p down, also the nasdaq, that should be down .7% so we did see all the major averages snapping the two-week advance. what we did see, retail, that was the biggest loser. also, however, on the other end of the spectrum, insurance and financials, the biggest gainers. lehman out with good earnings this week. also, looking at some of the -- some other stocks like owens illinois, the maker of plastics and glass packaging products, expecting full-year profit to be less than forecast mainly because of higher costs for raw material. packing material and also a temporary capacity reduction, so that stock lower. we have the fed meeting next week and talk that the fed will be increasing interest rates. you saw shares of many of the homebuilders declining on the day on expectations that the fed may be raising the benchmark lending rate, of course, by quarter of a pipe to 3.75% and of course higher interest rates make mortgage payments for homeowners more costly. back to you, ellen.

>> thanks so much. have a wonderful weekend. another story we followed today, gold touching a 17-year high. citigroup analysts say it is a good time for the commodity, they are looking for prices to climb as high as $500 an ounce. “chart of the day” has a long-term look at gold and joining us is editor-at-large, tom keene, visiting our boston bureau today and joining us from there, hi, tom.

>> hi. this is a great story, gold coming up, touching a 17-year high, well above $450 the ounce. to put it in perspective and to see how poor an investment it’s been versus the glory days of the 1970’s and 1980’s, i thought we would take a long-term look at gold adjusted for inflation. on the chart, you see gold, from 1960 to 2005, you see this big spike. on an inflation-adjusted basis, in today’s dollars, gold, back in 1980, $1600 an ounce, $1,600 an ounce of the and we come down into this protracted low inflation environment but just now in the last year or two, sneaking up and breaking through to new highs today, near $450 the ounce.

>> break it down for us in terms of what the specialists are saying, whether it’s a reflection of inflation, a reflection of the dollar? how much, for example, does demand for jewelry play into this?

>> that’s a very important question because usually when you talk to me about it, it’s about inflation, it’s about economics, it’s about fed policy but there’s much more going on here. jewelry is a big deal in gold. there’s a limited supply of gold. what john hill and brian yew are saying at citigroup is that jewelry affects the price much more at lower prices, $250 an ounce but when you get to the new record highs, $450 an ounce, it becomes much more those ideas of inflation and of monetary economics. gold, though, playing an important part in jewelry, not only at the braitman household but in china and india, as well.

>> love the gold jewelry. the fed meets next week, we know everyone is focused on what the fed will say about inflation, how closely do we know the fed looks at gold? >> it’s a great question because we really don’t know. they rarely, rarely talk about it because the fed talks about behavioral economics. they want caution and conservatism and to many people, gold about fear. gene sperling said something interesting on the show today, he said in jackson hole at recent meetings of the kansas city fed, many people he saw there were talking about gold not up on the podium, not in front of the cameras, but out in the woods trout fishing or whatever they do out there in the free time.

>> let’s talk about the central bank aspect, central bank sales of gold, what has that meant for price?

>> it’s a big issue for gold bugs, people looking for high gold activity. they are selling gold into this rally, particularly the european nations and their central banks and when you look at that, it’s selling as they do, it’s even more remarkable says john hill of citigroup, that gold continues to move up.

>> tom, thanks so much. tom and i mentioning the fed meeting, how the fed may be looking at gold and looking at inflation. what does it mean for the stock market ? we’ll ask that question of david joy of ameriprise financial services, ask him his thoughts on the fed and the stock market in coming weeks. keep it here.
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Interview: Co-chief investment officer at Oppenheimer & Company

>> treasury secretary john snow says federal spending to repair the damage caused by hurricane katrina will not have a significant effect on inflation. snow was in atlanta. the visit comes a day after president bush promised “one of the largest reconstruction efforts the world has ever seen.” bloomberg news asked treasury secretary john snow whether investors should worry about inflation.

>> i don’t think we’ll see inflation as a major problem growing out of this. there was the price spike immediately after katrina in energy prices. fortunately, i think in part due to the good actions, the prudent actions the government took, opening the s.p.r.o. and bringing in supplies from abroad and changing boutique rules, energy supplies adjusted and prices came back down. the overall environment, core inflation, remains well in check in the united states today.

>> snow says there will be elevated federal spending because of katrina primarily concentrated in 2006. let’s now continue to look at the bond market , reaction to what we’ve seen on the inflation front on the economic front in general. and what we can expect from treasuries as the federal reserve meets next week in order to decide on interest rates of the we’ll welcome in gregory hahn, co-chief investment officer at oppenheimer & company joining us in indianapolis. good afternoon.

>> hi, ellen.

>> these comments from the treasury secretary saying inflation will not be a major concern, certainly in terms of the bond market reaction this week, not necessarily read the same way. what is your take?

>> well, inflation is a concern and one of the reasons inflation is a concern is not because of katrina but because of the low level of interest rates that we’re coming from and the moves that the fed has made to increase interest rates. we’re making up for lost ground and that’s really why the fed’s backed itself into a corner with respect to the need to increase short-term interest rates.

>> what do you make of the bond market reaction that we’ve seen this week, specifically on the friday trade, given that you had those concerns about inflation trumping that slump in consumer confidence?

>> the move doesn’t surprise us. when you look at the long 30-year yield, has been tremendously resilient as short-term interest rates have increased. what we’re seeing right now is a corelary move in long-term interest rates with the expectation the fed will continue to increase short-term interest rates so we expect to see the yield curve continue to flatten but the last two weeks, steepening between 30’s and 2’s.

>> what does that tell you in terms of moves to anticipate in coming days if the fed moves and raises rates next week?

>> more of the same. the bond market is priced to perfection. interest rates have been too low for too long given the economic cycle and it’s the amount of foreign capital in the market sustaining the low levels of interest rates and helping subsidize our way of life, our standard of living and financial markets .

>> you mentioned the 30-year, i want to dwell there for a moment because you closely watch the 30-year. what is it telling you right now and what do you think the yields should be on the 30-year?

>> when you look at the 30-year yield right now, when you look at inflation running, core inflation running at 3.6% and layer on a risk premium, the 10-year yield at 4.25 should probably be closer to 5% to 5.10 at today’s rates and add 25 to 30 to that, and the yield on the 30-year should be around where it’s at. i expect to see the yield on the 10-year actually increase here.

>> given that, what are you buying or selling?

>> as an investor investing in securities, we’re not short, we’re long investors. and we’re looking actually in short-dated securities and securities that have resets on coupons so variable rate demand notes, floating rate securities that reprice off of a libor that resets. very much focused in the short end and trying to remain neutral in the 30-year and 10-year areas.

>> when you say “short,” are you talking two-year or different maturity? >> two years and in, the pivot point in the yield curve around the five-year area so trying to stay inside that five-year with really the focus on two-year and in. >> how important are inflation protected securities, t.i.p.s.?

>> we still like the t.i.p. sector. it’s one that we actually were looking at earlier this year and considering reducing exposure. we’ve kept it on, we’re very happy with the performance and will probably keep it ongoing into the fourth quarter. in the short end, also, looking at more in terms of high-quality bank type paper or variable rate demand notes.

>> briefly, with those t.i.p.s., what maturity are you looking at? >> both five’s and 10’s, but most in the five-year.

>> greg, thank you for joining us.

>> thank you, ellen.

>> have a good weekend. gregory hahn, co-chief investment officer at oppenheimer. opec will decide whether to raise production quotes next week. bob bowden has a preview coming up.
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after consumer confidence fell to the lowest since 1992. the university of michigan’s preliminary index of consumer sentiment fell to 76.9. it had been 89.1 in august. with the federal reserve meeting on tuesday, we asked former treasury secretary robert rubin for his thoughts on the economy. he was at the clinton global initiative meeting in new york city.

>> we are at a critical juncture. we have great strength but also enormous challenges we’re not meeting, immense fiscal deficits, entitlements that accelerate rapidly middle of the next decade, large current account and trade deficits, hoe personal savings rate, competitive from china and india.

>> more on the economy coming up. but before that, settling numbers on the friday trading session -- even with today’s gains, the indexes ended the week lower. the dow and s&p losing .3%. the nasdaq down .7%. more on stocks in a few minutes’ time but first up, a closer look at the economy. consumer confidence plunged to the lowest in 13 years after hurricane katrina devastated the gulf coast and pushed gas prices to record highs. june grasso has more on the report that is raising concern about consumer spending.

>> the drop in the university of michigan’s preliminary index of consumer sentiment surpasses the decline following the 9/11 terror attacks. it’s the biggest decline since december of 1980. consumer sentiment fell to 76.9 this month from 89.1 in august. this is one of the first releases that takes into account the aftermath of katrina and with the relentlessly negative coverage from the press and the media, i can’t really say i’m too surprised that that number came out. i’m a little surprised, frankly, that the market ‘s reaction to it has been as muted as it has been.

>> the survey reinforced concerns that record gasoline prices and katrina’s wake may slow consumer spending and hurt sales at retailers like wal-mart and best buy. government reports yesterday showed the hurricane pushed up consumer prices in august, drove manufacturers’ costs higher this month and prompted the biggest weekly jump in jobless claims in nine years.

>> with katrina, i believe people began to really embed in their thinking a much higher level of energy prices going forward for a longer period of time. and so therefore consumers feel as if they may not have made as much progress in terms of their personal income or personal wealth situation in the last couple of years.

>> economists say the index is responding to the shock of katrina and policymakers are likely to view the decline as just temporary. the fed is forecast to raise its benchmark interest rate next week for the 11th straight time to 3.75. kevin harris, chief economist of informa global markets , says once upon a time fed officials routinely spoke of confidence. you don’t hear that right now. back to you.

>> thanks so much. confidence down, but treasuries lower, as well. pushing yields higher. with today’s move, the 10-year recorded its biggest weekly decline since march. su keenan was following that action and joins us now.

>> a combination of factors weighing on treasuries, concern about rising inflation and growing budget deficit and as we’ve just heard, hurricane katrina clearly playing a role. lawmakers expect cleanup from the storm to cost $200 billion and that will boost the supply of government debt to pay for it. this helped push 10-year yields to the highest in four weeks and those yields are likely to move even higher after next week’s fed meeting, the view of lord abbett’s zane brown, managing more than $30 billion in bond investment.

>> i certainly expect the fed to increase rates, not only at this meeting and september 20 but probably again before the end of the year and we expect that will adjust yields on the 10-year treasury higher than where they are now and push prices lower.

>> american century investment’s dave macewan echoes that view and predicts we’ll see the fed funds rate at 4.25% at year’s end.

>> bond investors need to be cautious and they’re really going to be looking towards the federal reserve to make sure that the fed is protecting the economy from the ravages of inflation and higher interest rates. so i think we’ll see the fed tighten next week. as a result of that, also, i think they’ll tighten each of the next three meetings for the year.

>> when it comes to tightening, you get a different view on the fed from the m.i.c. school of management, saying the post-katrina inflationary measures are temporary.

>> i think the odds of their staying on hold have gone up.

>> it’s worth noting that goldman sachs, which previously forecast a pause in the fed’s tightening trend because of katrina, has changed its view. goldman sachs’ latest note to clients said the fed will will likely raise the funds rate to 3.75% next week.

>> we want to move from bonds to stocks because talks of a promising economy and rebuilding in the gulf boosted stocks today. we’ll get more from deborah kostroun.

>> it was the busiest day of trading so far this year at the new york stock exchange. we saw that above-average volume with the expiration of futures and options and the final stage of the s&p 500 shift to a new calculation method. with all of those changes today, it’s hard to pin point if the market is more focused on that or the fact that the economic outlook and corporate profits positive with the rebuilding of the gulf coast as president bush talked about in his speech last night. we also saw the drop in oil prices would certainly help. inflation, a word coming up a lot right now and when there are concerns about inflation, that means gold goes up and gold rose to a 17-year high as it is seen as a safe haven and also a safe haven as we’re talking about surging consumer prices and energy costs for consumers. many of the gold stocks performing quite well. those concerns about and talk about inflation and also talk about rebuilding, raising concerns about the increase of the supply of government debt to pay for the cleanup, that led the 10-year treasury yield to its highest in four weeks. crude oil on the day, it was down $1.75, closing at $63 a barrel. oil down to a one-month low but since katrina, the friday before katrina, we saw crude oil, it was down 4.7%. gasoline, it is actually also down 3.7% since the friday before katrina. natural gas, however, is up, almost 14% and the s&p energy index also performing quite well in that time period. exxon-mobil upgraded by deutsche bank on the day and stocks like halliburton, that stock has jumped 13% since the storm hit on august 29 because katrina has created even more demand for oil field services and work as they’re trying to get on the damaged offshore rigs. coal stocks on the day hitting 52-week highs. i’m deborah kostroun at the new york stock exchange for bloomberg news.

>> israel’s foreign minister says his country will not allow palestinians to vote in parliamentary elections in the west bank if hamas is on the ballot. in an exclusive united states interview with bloomberg, silvan shalom says since israel controls the west bank, it will block voting there in january. he says palestinian leader mahmoud abbas is not doing enough to suppress extremists.

>> it looks like he doesn’t have the will to implement the commitment and fight extremists and we have said to president bush, very clear, that israel will not enable hamas to participate in the election because they are calling for the destruction of the state of israel.

>> mr. shalom did not elaborate on how israel would block hamas’s participation and said he was referring to elections in the west bank, not gaza, where israel recently withdrew forces and demolished israeli settlements. shalom said israel was improving relations with muslim nations including turkey, jordan. he said those strengthened ties would help the peace process with the palestinians. when we return, gregory hahn of oppenheimer will talk to us about the bond market . keep it here.