Market briefing---Matt (slow)
Car beat---Bob (fast)
NYSE---Deb (fast)
Currency report:
Interview: Deutsche Bank---Rosenberg, Michael---Head: Forex Research
>> welcome to “world financial report.” i’m matt nesto. a big day for investors in automotive stocks . not only the press preview underway at the 88th annual north american international auto show, but also detroit-based automakers came out with their december sales figures. bob bowden has been assigned the car beat today and he joins me now to wrap it all up, bob?
>> good afternoon, mr. nesto and happy new year. once again, buyer incentives matter in the auto business, the earth-shattering headline from today. g.m. and ford which cut back on incentives in december saw sales fall, but chrysler, which increased incentives in december, saw sales rise. let’s get to the videotape, as they say. general motors reporting u.s. seasonally adjusted sales down 9.1%, slightly worse than the drop forecast by analysts surveyed by bloomberg. at ford, adjusted december sales fell 7.7%, worse than the analysts’ estimates of 6.8% drop. the flip-side was chrysler, enjoying the best december of the group with sales rising to 2% to 183,000 vehicles after spending more on incentives, compared to a drop of 3% forecast by analysts. for the-year-old, g.m., ford and chrysler lost sales to japanese competitors in the area of passenger cars with american automakers’ combined market share set to fall below 50% in the u.s. for the first time in history. as recently as 1998, the big three held over 60% market share. the strategy of buying market share with factory incentives such as no-interest loans set a record in 2003, reaching 13% of the vehicle price. the dollar value of those 2003 incentives marked a 16% increase from the level of incentives given in 2002. but detroit-based automakers are looking to lower their reliance on incentives. the industry’s overall, as we mentioned g.m. and ford cutting in december and overall the industry’s december incentive spending fell to $3,751 per vehicle, down 5% from november according to c.n.w. marketing research. nick lal sheele, ford’s chief operating officer, says incentives are not as necessary as they used to be.
>> it looks like last year came in a tad under 15 million as an industry sales rate with december coming in at about 18 million on an adjusted rate. we’re looking for about the sim this year. that is a very strong industry. but more importantly, perhaps, we’re looking for that industry to come without some of the incentives that were needed acrossal manufacturers last year to stimulate demand.
>> finbar o’neill, c.e.o. of mitsubishi motors north america, describes an appropriate level of incentives that will spur buying without breaking the bank.
>> i believe in moderate incentives. when you offer incentives that are too high, you’re implicitly saying your product is not worth it and with moderate incentive, we can effectively sell this product on its merits.
>> once again, we saw the december sales fall for g.m. and ford and rise for daimler but look at those stocks , all rising on the day with g.m. up 1.7%, ford up over 3% and daimlerchrysler shares up just about 2.6%. matt nesto?
>> i wish we were out in detroit, but what the heck, at least we’re getting paid. let’s get to those numbers today, g.m. shares among the many driving the dow jones industrial average up 1.3%. s&p also 1.25% higher here today, all finishing their best levels of the day. can’t not mention the fact that the nasdaq is at a two-year high. the volume on the big board today, 1.5 billion shares arbitrationr, a little bit above average. and the nasdaq, 2.3 billion.
>> 2004 off to a strong start or a bang as they say in texas, at least in deb kostroun’s neighborhood. but now she’s at the big board and will bring us up to date with what’s going on there.
>> everybody was back to work, especially wall street after all the holidays and that pushed the stocks to the new highs we saw in today’s session. one of the things that’s really been helping out the sentiment is the economy and earnings. these are the two market pillars of strength and it continues to drive stocks higher today. taking a look at what we saw in today’s session, the s&p and dow closed at those new 20-month highs for the s&p, 21-month high for the dow jones industrial average. and of course, earnings season kicks off later this week with alcoa on thursday. we got a little bit of an indication today that some companies will beat expectations because we heard from siebel and also gravel and sand supplier, volcan materials, both raising their forecasts on higher demand. as for the economy, federal reserve policymakers saying the economy is growing across the board. atlanta fed president jack guynn said earlier today that the economy will grow at a strong 4% this year. also, looking at the movers in the s&p 500 today, we saw tech, energy, and even some of the drug companies. microsoft was upgraded at s.g. cowen. they say a rebound in i.t. spending should flow through microsoft and also into intel, also exxon-mobil churching -- surging on the day. and wal-mart did not take part in the rally today, and neither did many of the retailers. they will report december same-store sales on thursday. >> thanks, deborah, good to hear from you. in new york, the dollar―i’ve been saying this so much lately―the dollar fell to i record low against the euro this past session and fell to the lowest in more than three years versus the yen. the u.s. currency, one of the reasons why it fell was federal reserve governor ben bernanke said the risk of a dollar crisis is quite low. joining us to discuss the currency markets is michael rosenberg, head of currency research at deutsche bank. thanks for joining us. michael, the dollar fell to that record against the euro and also fell against the yen. we’re at a three-year low there. what can the bush administration do to stop the slide or should they do anything?
>> they should not do anything. the big mistake we made in the 19acketss was to -- 19 80’s was to try to stop the dollar was weakening and we had to raise interest rates to do that and that precipitated the 1987 crash. the best thing for the bush administration to do is just let the dollar fall. a weaker dollar makes u.s. industry more cometive and this is good news for the u.s. economy.
>> even treasury secretary snow last week called it orderly. does it seem like an orderly decline to you?
>> it’s been relatively orderly, declining steadily for the last two years. it hasn’t been a freefall or had a calamitous impact on the financial markets. stock markets up sharply the past year or so and u.s. interest rates remaining low and not impacting financial markets negatively whatsoever.
>> would it be orderly for your forecasts to come true, forecasting the euro to hit $1.30 in recent months. and the yen at 109. and two years out, 1.40 to 1.50 for the euro and 90 cents for the yen. is that orderly?
>> i think so, as long as it takes place gradually. the move we’re expecting will put the dollar into undervalued territory on the order of 20% to 25%. we need to do that because we have to correct the overvaluation of the dollar by nearly 30% which we were at about two years ago.
>> just give me an idea in terms of precedent with the bush administration’s outspoken strong dollar policy. is there any white house precedent here?
>> no. i think the clinton administration had a strong dollar policy. the bush administration is basically letting the markets determine where the dollar should go and the markets are saying it should go lower.
>> michael rosenberg, we’re out of time. thank you, folks, the head of currency research at deutsche bank, michael rosenberg. our next guest takes a macro approach to stocks and the economy. john lynch, chief market analyst at evergreen, will tell us why he likes healthcare, why he likes consumer discretionary and thinks they’re going to spend more and financial and industrial stocks , coming up.
