xfdce NIGHTLY-BUSINESS-REPO-00

Show: NIGHTLY BUSINESS REPORT>

Date: July 25, 2003>

Time: 18:30:00>

Tran: 072500cb.118>

Type: SHOW>

Head: Nightly Business Report>

Sect: Business>

Byline: Paul Kangas, Linda O`Bryon>

Guest: Jeffrey Everett>

Spec: Business; Economy>

Time: 00:00:00>

(AUDIO GAP)

LINDA O`BRYON, NIGHTLY BUSINESS REPORT ANCHOR: Good evening, everyone.

Some blue chip reports on the economy are welcome news for the blue chip stocks today. The Dow Jones Industrial average gained more than 170 points on growing evidence that the U.S. economy has turned the corner.

First, orders for durable goods in June shot up at the fastest rate in five months, rising 2.1 percent. That blew away economists` forecast of a one percent rise and implies a growing industrial sector.

June sales of new single family homes hit a record, rising 4.7 percent, to more than 1.16 million annual rate. Existing home sales slowed a bit, down 3/10 of a percent in June.

Still, as Stephanie Woods reports, experts predict the housing sector will remain a pillar of support for the economy.

STEPHANIE WOODS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Throughout the recession low interest rates kept home sales, building and refinancing going strong. Now with mortgage rates on the rise, the housing market is still expected to remain strong, but be won`t be such a large economic driver down the road.

DOUG DUNCAN, CHIEF ECONOMIST, MORTGAGE BANKERS ASSOCIATION: It`s been a flag bearer for the last probably three to four years. It`s not going to be the flag bearer in 2004, but it will be a leader.

WOODS: Home builders are still expecting strong sales but don`t anticipate keeping up the record setting pace.

MICHAEL CARLINER, V.P. ECONOMICS, NATIONAL ASSOCIATION OF HOME BUILDERS: By the end of the year we do expect to see things moderate a bit. We have been expecting that for a while. And with the increase in mortgage rates, we do expect to see sales fall off a bit, but still come out with a record year this year and not decline by very much in 2004.

WOODS: With interest rates for a 30 year fixed mortgage leaping from five to six percent in just a month, mortgage bankers expect the refinancing boom to go bust.

DUNCAN: People who are late to the game are jumping in now to make sure they catch the last benefits, but that will quickly dissipate and by the middle of 2004, if you are solely a refinanced lender, you`re going to have a hard time making a living in the industry.

WOODS: Higher mortgage rates could also slow the rapid rise in home prices.

LAWRENCE YUN, SENIOR ECONOMIST, NATIONAL ASSOCIATION OF REALTORS: When the mortgage rate rises, that means that a typical household can now afford to get a slightly lower amount of loans than before. So we may see some moderation in home prices.

WOODS: Economists still expect homes to appreciate in value in the next few years, but instead of increasing at an eight percent clip, it will probably be more like four percent.

Stephanie Woods, NIGHTLY BUSINESS REPORT, Washington.

PAUL KANGAS, NIGHTLY BUSINESS REPORT ANCHOR: Stocks got an early boost from that strong durable goods news, as well as from some bargain hunting after yesterday`s sell-off. Thirty minutes into the trading session the Dow was up 40 points. The NASDAQ Index edged 4 points higher.

Then a mid morning slump, partly on disappointment over that drop in existing home sales. But when the Dow fell to only a 20 point loss, buyers moved in aggressively into the blue chips. So the Dow was sporting a 51 point gain at noon, while the NASDAQ Index was still up 4.

The growing belief that the economy is finally on the mend led to a strong rally across the board this afternoon. The Dow Industrial average came in with a gain of 172 points or 1.9 percent, at 9,284.57. This week the Dow fell twice, rose three times, had a net gain of 96.42 points.

Today the NASDAQ Index gained 29 1/4 points, that`s 1.7 percent, and ending at 1,730.70. This week it also fell twice, rose three times, for an overall advance of 22.20 points.

The Standard & Poor`s 500 Index rose 17 points today, closing at 998.68.

In the debt market, the 10-year note fell 3/32, to 95 19/32, putting the yield up to 4.18 percent.

O`BRYON: This week was one of the busiest for quarterly earnings reports and although strong numbers have been the norm, many companies remain cautious about the future.

Still, as Erika Miller reports, Wall Street remains upbeat.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Corporate America does not seem overly optimistic about a second half recovery. Companies ranging from IBM to G.E. have warned no substantial pick up is in sight.

CHUCK HILL, DIRECTOR OF RESEARCH, THOMSON FINANCIAL/FIRST CALL: What we`re hearing from many of the companies is that, statements like business isn`t getting any better or we`re not seeing any substantive pick up in the growth rate in our business or nothing more than a seasonal pick up.

MILLER: Yet Wall Street analysts have become more bullish in their earnings forecasts. That`s unusual because historically analysts tend to reduce estimates as the year progresses. On July 1, analysts predicted profits for the S&P 500 would be up 12.7 percent in the third quarter and 21.3 percent in the fourth. Now, the expectations are even higher.

Market strategists defend the positive outlook, saying companies are being overly cautious.

TOBIAS LEVKOVICH, CHIEF MARKET ANALYST, SMITH BARNEY: They`re worried about things like Sarbanes-Oxley. They`re worried about the SEC and the scrutiny. But if you look at what they`re doing underneath the patterns, you`re seeing travel improving, ad budgets expanding. Essentially the most discretionary parts of spending are improving, telling you that CEOs think things are getting much better than they`re necessarily saying.

MILLER: Another encouraging sign? Surprisingly strong second quarter earnings. More companies than usual are beating estimates. And of the two thirds of the S&P 500 that have reported so far, profits are running eight percent above last year. But there are troubling signs. First Call says two percent of the eight percent is due to a weaker dollar and profit growth has been far stronger than revenue growth, especially in the tech sector.

HILL: It looks like technology in the second quarter will come in with about 21 percent earnings growth, but only four percent revenue growth. So obviously most of it in the technology sector is coming from cost cutting.

MILLER: Wall Street analysts aren`t the only ones hoping for a strong second half recovery. Stock investors are, too. But if the rebound doesn`t happen, strategists warn disappointment will surely be reflected in stock prices.

Erika miller, NIGHTLY BUSINESS REPORT, New York.

O`BRYON: A former executive of Charter Communications (CHTR) pleaded guilty today to federal counts of conspiracy. David McCall is one of four former Charter executives indicted in St. Louis yesterday. Prosecutors say they defrauded investors by making it look like charter had more subscribers and more revenue than it really did. McCall is scheduled to be sentenced in October. And lawyers for the other three executives say their clients are innocent.

Paul?

KANGAS: Well, Charter`s stock actually gained $0.04 today, Linda. It closed at $4.82.

Now let`s take a look at our stocks in the news tonight.

Topping the active list on the New York Exchange on 29.4 million shares, NorTel Networks (NT), a $0.07 loser today. After the close yesterday the company did report that second quarter was break even versus a $0.20 loss the year before. But that was just in line with estimates.

AOL Time Warner (AOL) edged a $0.01 higher today.

Seagate Technology (STX) dropped $0.04. The company`s parent firm is offering 60 million shares of Seagate at a price of $18.75 each.

General Electric (GE) was up nearly a $1 today.

And then Pfizer (PFE), number five in big board volume, up $0.49, even though Pfizer reported a second quarter loss of $0.48 a share versus earnings of $0.32 the prior year. But excluding the costs of its acquisition of Pharmacia (PHA), it actually would have had earnings of $0.30, and that was a $0.01 above the Wall Street estimate.

AT&T Wireless (AWE) gained $0.06.

Western Digital (WDC) had a rough day, down $1.76. It did report sharply higher fourth quarter earnings, $0.23 versus $0.07, but part of that $0.23 was non-recurring. And there is concern about the company`s planned purchase of some of Read-Rite`s assets. Needham Securities Brokerage downgraded the stock of Western Digital from “buy” to just a “hold.”

Micron Technology (MU) fell $0.20.

Then Hewlett Packard (HPQ) edging up $0.30.

And Avaya (AV), number 10 in big board volume, a big day on the up side. It gained $1.68. Third quarter earnings of $0.02 versus a loss of $0.11 the prior year. And on top of that, Smith Barney Brokerage upgraded it from “in line” to “outperform.”

Cummins Incorporated (CUM), maker of diesel engines, up 19 percent with that gain of over $7. Second quarter earnings of $0.34 versus a loss of $0.86 the year prior. Revenues up a respectable 11 percent and the company sees the third quarter at $0.60 to $0.70 a share.

Cummins` good news helped other truck makers and engine makers. Navistar (NAV) and PACCAR (PCAR), which both had very nice gains overall.

Then looking at the Great Atlantic & Pacific (GAP), down a little over a $1. The company in with a first quarter loss of $0.53, much bigger than the $0.11 gain that they had last year. Standard & Poor`s actually repeated a “sell” recommendation on the stock.

Benchmark Electronics (BHE) moved up $3. Yesterday, second quarter earnings were up 42 percent, to $0.46 a share, and that was $0.02 above the Street estimate.

Harrah`s Entertainment (HET) up $2.02. The company has initiated a quarterly dividend of $0.30 a share. This is the third big casino operator to start a cash dividend recently. The other two Station Casino (STN) and Mandalay (MBG).

Nucor (NUE), the steel company, up $2–down $2.25. Second quarter earnings dropped to $0.11 from $0.76 last year and the Street was looking for $0.22. And the company sees third quarter at only $0.15 to $0.20, when Wall Street was expecting $0.39 in earnings.

Cambrex (CBM) had a bad day, down $5.09. Second quarter earnings about half of what they were last year, $0.31 versus $0.61 then.

Another loser was Noranda Incorporated (NRD), off $1.16. A second quarter loss reported of $0.11 versus earnings of $0.18 last year. And the company also is cutting its quarterly dividend from $0.20 down to $0.12 Canadian.

And Granite Construction (GVA) down $2.65. The company cut its Wall Street estimate of $0.41 a share for the second quarter all the way down to $0.23 to $0.26 a share.

eBay (EBAY) topped the active list on NASDAQ and the stock off $3.50 even though after the close, as we reported yesterday, the company had better than expected earnings and announced a 2 for 1 split. But the profit takers took charge today.

Then came Microsoft (MSFT), up $0.89.

Followed by Intel (INTC), a $0.94 gain.

And look at this gain, IGEN International (IGEN) up $22.05. That`s a mere 59 percent run up. The news, of course, a takeover. Roche is going to acquire the company for $47.25 a share in cash plus one share in a new company.

Cisco Systems (CSCO) gained a $0.50, number five in dollar volume on NASDAQ.

Amgen (AMGN) up $0.41.

SINA.com (SINA), which was up over $7 yesterday on good earnings, edged up another $0.28.

Dell Computer (DELL) an $0.86 rise.

Yahoo! (YHOO) down $0.40.

And then KLA Tencor (KLAC) a $0.31 gain, number 10 in volume.

Pelican Financial (PFI) on the American Exchange, up $1.66. The company plans to split its retail banking and mortgage businesses into two separate publicly traded companies in the belief that the two of them will bring higher market valuation overall.

And then finally, another one on the American Exchange, IVAX (IVX) moved up $1.50. The latest issue of “Business Week” reports a hedge fund manager believes the chairman of IVAX, Phillip Frost, who owns 16 percent, may be ready to sell out, and that would free up the company for a potential takeover.

Those are the stocks in the news tonight.

Linda?

O`BRYON: Well, Paul, the first batch of the government`s child tax credit checks are in the mail today. The Bush administration hopes the flow of dollars back into the pockets of taxpayers will spur more consumer spending and help revive the economy. So how are people planning to spend their new cash? Jeff Yastine asked two families for answers.

JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The money comes just in time for Lourdes Hamilton. She`s a married mom with two kids. Her oldest son is just over the age 17 government limit, but her daughter Gabby is 13. So Lourdes will be getting just one check for $400.

What are you going to do with the money?

LOURDES HAMILTON, ADMINISTRATIVE ASSISTANT: We`re going to go buy uniforms.

YASTINE: And why uniforms? These are school uniforms?

HAMILTON: School uniforms, yes, for my daughter. She starts high school now and it gets really expensive. So that will help to bring down the expense.

YASTINE: That`s the kind of answer the Bush administration wants to hear as the first batch of checks goes into the mail today. Two more sets go out August 1 and August 8. In all, that`s about 25 million checks and $13 billion that economists hope will be spent and not saved to juice up a lackluster economy.

Annie Gomez is also anxious to receive her family`s share of the tax credit money. With three children, that comes to $1,200. She says about half of that will also go towards school stuff, clothes and other supplies. The rest will be spent on a trip to Disneyworld. It may not be practical, but it`s important for her family, hoping to spend some quality time together before the school year begins again.

ANNIE GOMEZ, ADMINISTRATIVE ASSISTANT: We were going to go to Disneyworld anyway. But we had a budget for a few days. Now we can spend an extra day and maybe stay inside the park instead of outside, and just for the kids.

YASTINE: Just for the kids, and, it`s hoped, just what`s needed for the U.S. economy.

Jeff Yastine, NIGHTLY BUSINESS REPORT, Miami.

KANGAS: Monday, an update on the health of Humana (HUM). We sit down with the company`s CEO, Michael McAlister.

O`BRYON: Americans could be one step closer to cheaper prescription drugs. Early today, the House of Representatives passed a measure letting Americans buy and import costly prescription drugs from foreign suppliers at a fraction of the cost. The move faced stiff opposition from the pharmaceutical industry and the White House. Supporters of the bill admit they face an uphill battle, but say the move sends a strong message to drug makers.

KANGAS: The world`s largest retailer is looking to expand further into Latin America by buying parts of a financially strapped rival. Reuters (RTRSY) is reporting Wal-Mart (WMT) is eyeing the Brazilian, Argentine and Peruvian holdings of a Dutch retailer Ahold (AHO). But Wal-Mart isn`t the only one interested in those properties. Brazil`s leading retailer and a French retailer are also bidding on Ahold`s Brazilian stores.

O`BRYON: Here`s a look at what`s happening next week. Our Friday market monitor guest is Thomas Herzfeld, President of Thomas J. Herzfeld Advisors. On the economic calendar, Tuesday, the final July reading on consumer confidence is released by the Conference Board; Wednesday it`s the Fed`s beige book. Thursday, weekly jobless claims and second quarter gross domestic product; and then on Friday we`ll see July`s employment report. More earnings out next week, including American Express (AXP), Disney (DIS), DuPont (DD), Exxon Mobil (XOM), McDonald`s (MCD) and Procter & Gamble (PG).

KANGAS: My guest market monitor this week is Jeffrey Everett, Chief Investment Officer for Templeton Global Advisors.

And, Jeff, welcome.

It`s great to see you again.

JEFFREY EVERETT, CHIEF INVEST. OFFICER, TEMPLETON GLOBAL ADVISORS: Thank you, Paul.

KANGAS: When you were last with us in mid January, you were a lot more upbeat on Wall Street`s prospects than many money managers were. And, indeed, the market has done quite well. But do you think that this run up that we`ve been seeing has created an overpriced market and maybe we`re due for a correction given how slowly the U.S. economy seems to be recovering?

EVERETT: Well, we saw values in January. We still see values today. I think it`s important as it`s ever been to be a stock picker in this market.

KANGAS: All right, now what about these recent signs of coming alive? Do you think they`re for real in the U.S. economy?

EVERETT: Well, the signs are becoming clearer. We have a very substantial boost to liquidity around the world. We have economic job numbers looking better and earnings looking better. So it`s not surprising that people are becoming more confident in the economy.

KANGAS: Well, you`re a global investor. Do you think the U.S. is doing better than Europe or Asia right now? Who is doing the best?

EVERETT: Yes, the U.S. is doing the best. But we`re stock pickers at Templeton and we`re trying to look for values. So just because your economy is doing well doesn`t mean your stock market is fairly priced. We see an awful lot of opportunities in Europe and in Asia. We still do see some in the U.S. But just because the U.S. economy is out in front, doesn`t mean that`s where the most, the majority of our investments are.

KANGAS: Now, the last time you were with us was January 17th of this year. The Dow was around 85, 86. And now we`re almost close to 9,300. And you, as I mentioned earlier, were a little bit on the bullish side. So that worked out well. And you had some recommendations, some of which did rather well. And we can have a look at some of those recommendations right now, Bristol-Myers (BMY), which has edged up higher; Ace Limited (ACE) down a bit, although it has been some higher than it is right now; and then Dow Chemical (DOW) has worked out very nicely. S.K. Telecom (SKM) is down just a touch. And let`s have a look at, I think you had a few other picks in there that have worked out like–well, not Aventis (AVE). That still is stuck in that same pattern. But Checkpoint Software (CKP) has done very well.

Are you still with all of these or have you sold out?

EVERETT: Yes, no, we`re still with all of them. We`re very long-term investors at Templeton and we continue to hold all of those.

KANGAS: Do you have any new recommendations? In other words, just stay with all those. How about some new ideas?

EVERETT: Yes, one area that investors still continue to overlook, in our view, is the emerging markets part of the world. Embraer (ERJ) sticks out right here in our own backyard, Latin America.

KANGAS: Aircraft manufacturer.

EVERETT: Yes, they are. Regional jets. A very profitable company. A very clean balance sheet. In Latin America that`s critical.

KANGAS: And under $20 a share, we see.

EVERETT: A very low valuation, and that`s what drives the Templeton team to like that.

KANGAS: OK, another suggestion?

EVERETT: Well, to follow up on some of the previous recommendations, health care, GlaxoSmithKline (GSK) continues to intrigue us. Again, very profitable despite the fears over patent expirations in the sector. Very cheap. Great dividend yield. We`re getting paid while we wait. Interestingly, we are in most of the recommendations we talked about in January. And, interestingly, they have the chance to sell two of their primary products in Japan later this year or early next year, one for migraines, one for depression. Both drugs badly needed in Japan right now.

KANGAS: And you and the Templeton interest own all of these stocks, do you?

EVERETT: Yes, we do.

KANGAS: You know, there`s one question I`ve been meaning to ask you. You are a global investor. You see a lot of things happening. But why should the gold stocks be rallying along with everything else? Usually that`s kind of an ominous sign, isn`t it?

EVERETT: I was just speaking to the head of the second largest gold company in the world the other night. And, interestingly, it`s a market which can be driven by non-fundamental factors. Central banks still want to sell. In our view, we don`t look at gold per se. But I would be more concerned about oil right now, oil coming down, which would be a significant benefit to many companies and many economies around the world. I`d be more concerned about that than I would about gold at this stage.

KANGAS: But right now you feel the U.S. economy is making the best comeback of the world economies?

EVERETT: The signs are becoming clearer that we are on the verge of a rebound. And, we`re stock pickers, but when you look at the data, the simple data, we have a million and a half more jobs in America now than we did in 1999, more in Canada than we had in 1999. So the signs are making people more confident. That shows up in equity flows. Equity mutual fund flows have been strong this year. And that is in sharp contrast to the “70s, where we had a bear market and we had equity outflows.

KANGAS: I like the picture you`re painting, Jeff.

Thanks very much for being with us again.

EVERETT: Thank you, Paul.

KANGAS: My guest market monitor, Jeffrey Everett, Chief Investment Officer for Templeton Global Advisors.

O`BRYON: And recapping today`s market action, investors snap up stocks on renewed hopes for the economy. The Dow gains 172 points. The NASDAQ climbs 29.

And please be sure to join us at our World Wide Web site, nbr.com.

Finally tonight, it has been a grueling journey, an 11 year voyage that began on the Pacific Ocean, going through thousands of miles of open seas and weathering hundreds of storms. But in the next few weeks it will come to an end. We`re talking, of course, about 29,000 yellow rubber ducks. They`re the survivors of a consignment of bath toys that washed overboard from a container ship in 1992. The flotilla has crossed oceans, drifted through the Arctic and gone past Greenland. And now a breakaway group is heading for Britain and is expected to make landfall there soon. And, by the way, these ducks have a price on their heads. The company that made them is offering a $100 reward to anyone who finds one on the North American coast line.

KANGAS: I wonder if that reward is all it`s quacked up to be? What do you think? If the Donald–if the duck answers to the name Donald, I think so.

O`BRYON: Maybe so.

KANGAS: Yes.

O`BRYON: Then it`s worth it.

KANGAS: Right.

O`BRYON: All right, that`s NIGHTLY BUSINESS REPORT for Friday July 25. I`m Linda O`Bryon. Have a great weekend, everyone. And the same to you, too, Paul.

KANGAS: And you too, Linda. I`m Paul Kangas wishing all of you the best of good buys.

END

Nightly Business Report transcripts are available on-line post broadcast. The program is transcribed by FDCH e-Media, Inc. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Community Television Foundation of South Florida, Inc. Nightly Business Report, or WPBT. Information presented on Nightly Business Report is not and should not be considered as investment advice. c 2003 Community Television Foundation of South Florida, Inc.

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