Nightly Business Report

Published: November 4, 2004

PAUL KANGAS, NIGHTLY BUSINESS REPORT ANCHOR: Investors burn rubber on Wall Street as falling oil prices grease (ph) a huge gain for the blue chips. The Dow closes up 177 points and the NASDAQ gains 19 as crude prices slid more than $2 a barrel to their lowest level since late September.

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: President Bush wastes no time in getting down to business today with a framework for his second term in office. He lays out the priorities for his economic agenda, and we`ll have the details.

KANGAS: It`s beginning to look a lot like a solid holiday of sales for the nation`s retailers, for some of them at least. We`ll tell you who the experts say could soar and who could sink this season.

GHARIB: Then, food and tobacco giant Altria says breaking up may be the best thing to do, but the first thing to do is resolve a slew of pending lawsuits.

KANGAS: I`m Paul Kangas.

GHARIB: And I`m Susie Gharib. This is NIGHTLY BUSINESS REPORT for Thursday, November 4.

Good evening, everyone. On Wall Street, election euphoria continued, as stocks rallied for the second straight day. The Dow posted another triple digit gain, surging 177 points; the NASDAQ rose 19. In Washington, President Bush laid out plans for the economic agenda in his second term. In his first post-election news conference, the president said his top priorities are simplifying the tax code and revamping Social Security. Here`s Stephanie Woods with details.

STEPHANIE WOODS, NIGHTLY BUSINESS REPORT CORRESPONDENT: A clearly jubilant President Bush pledged to turn his election victory into legislative results.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I earned capital in the campaign, political capital, and now I intend to spend it.

WOODS: A lot of that capital will be spent on Social Security reform and tax code simplification. The president has also promised to cut the $413 billion budget deficit in half in the next four years. He says a tax simplification bill won`t add to the deficit and won`t raise taxes.

BUSH: The main thing is that it be viewed as fair, that it would be a fair system, that it wouldn`t be complicated, that loopholes wouldn`t be there for special interests.

WOODS: The president made it clear that two popular loopholes, deductions for home mortgages and charitable giving, will be protected. However, tax experts say closing loopholes means taking away popular deductions like the one for state and local taxes.

CLINT STRETCH, DIR. TAX POLICY, DELOITTE TAX: We`ve been closing loopholes for so long that now all of the easy-to-find loopholes are long gone. You have to start tearing out the ceiling tiles to find any more loopholes.

WOODS: The second big issue, Social Security won`t be any easier.

BUSH: Reforming the Social Security system for generations to come is a difficult issue. Otherwise it would have already been done.

WOODS: The problem is that the Social Security will soon start to pay out more than it takes in. But some economists are skeptical of the president`s proposed reforms.

BILL GALE, ECONOMIST, BROOKINGS INSTITUTION: When reformers talk about Social Security reform, they mean fixing the long-term imbalance. When President Bush talks about it, he means creating individual accounts. But individual accounts not only don`t solve the long-term issue, they could actually make it worse.

WOODS: Some estimate the tab for adding individual accounts at $2 trillion over 10 years. Asked today about how to pay for that, the president answered that the cost of doing nothing would be much higher. Stephanie Woods, NIGHTLY BUSINESS REPORT, Washington.

KANGAS: At least one indicator of the economy is doing well, retail sales. Cooler weather helped the nation`s largest retails rack up some same store sales gains of just over 4 percent last month. That`s a big rebound from September`s lackluster performance. But will the trend continue into the holiday shopping season? Suzanne Pratt reports.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Today`s retail data shifted the focus away from presidential politics and back to the U.S. economy. October chain store sales were a mixed bag, with teen apparel retailers and high-end department stores outpacing many discounters. Retailers watch October sales closely to gauge the upcoming holiday season. And even though all are dreaming of a green Christmas, some retail experts are worried. The biggest concerns are rising energy costs and sluggish job growth, which are already affecting consumer sentiment numbers. And some experts say that could crimp holiday spending this year. But others say continued low interest rates should mean a jolly season for retailers.

LINDA KRISTIANSEN, RETAIL ANALYST, UBS: Most of the factors that I look at that drive consumer spending are very interest-rate sensitive. So the fact that we`re not seeing a big upturn in rates and in fact we`ve seen actually some declining rates, really means the consumer is going to hold up OK.

PRATT: The International Council of Shopping Centers is forecasting a three to four percent gain in retail sales for the 2004 holiday shopping season. That compares to an average increase of 4 percent last year.

MIKE NIEMERA, CHIEF ECONOMIST, INTL. COUNCIL OF SHOPPING CTRS.: We think the holiday season will be relatively upbeat, pretty good relative to past years, and relatively good compared to last year.

PRATT: Still, many retail experts predict 2004 will be another season of haves and have-nots. The expectation is that luxury retailers will be the biggest winners. Discounters, which get much of their traffic from low- income Americans, could have more trouble, mostly because those customers feel a greater pinch from higher prices at the gas pump.

KRISTIANSEN: There`s not going to be any impact on the upper end or none to speak of. But when you start to get down to a little more moderate income customer, there`s certainly an impact.

PRATT: Experts also say no matter what the consumer sentiment numbers show now, Americans often step up and spend in the last days of the holiday shopping season. They deal with paying the bills after new years. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.

KANGAS: This morning saw a continuation of yesterday`s blue chip rally, but weak semiconductor stocks pushed the NASDAQ market lower. Early on, the Dow was up 20 points,the NASDAQ index down 10. Then came a sizable drop in oil prices at midday and it gave stocks a big lift amid growing post election bullish sentiment. As several major indices pushed easily above resistance levels, the rally gathered momentum and the market ended at its best levels. The Dow industrial average gained 177 3/4 points to 10,314.76. NASDAQ Composite up 19.30 at 2023.63. Standard & Poor`s 500 up 18 1/2 to 1161.67. Treasuries ended mixed today. The 10-year note edge up 1/32. The yield now stands at 4.08 percent.

GHARIB: Back now to our top story: President Bush`s economic agenda for his second term. Joining us now with his thoughts is Josh Feinman, chief economist at Deutsche Asset Management. Hi Josh.

JOSHUA FEINMAN, CHIEF ECONOMIST, DEUTSCHE ASSET MGMT: Hi. How are you?

GHARIB: I`m fine thank you. As you heard at the top of our program, the president held a news conference and outlined his priorities for Social Security reform and making those tax cuts permanent. Let`s first talk about the tax cuts. How realistic is it that he`ll get any of this through?

FEINMAN: I think the tax cuts are probably going to be the top priority, extending them, making them permanent instead of having them expire the way they`re slated to do and also probably fixing the alternative minimum tax which is starting to bite more and more Americans. I think that`s probably going to be top priority and probably will get done. More fundamental tax reform though I think is going to be a tougher sell.

GHARIB: In terms of some of the specifics within the tax policy like capital gains taxes, dividend tax cuts and all of that, do you think that those he`ll be able to keep those permanent?

FEINMAN: Yes, I do. I think it will be - make that a top priority and will be able to secure that with the Republican Congress. But think the really key issue is not on the tax side, it`s on the spending side because if we don`t get some significant restraint on the spending, something that was notably absent in the last four years, then these tax cuts or any tax cuts are simply not going to be sustainable especially when we look out to the next decade when the entitlement program, Social Security and especially Medicare, come under severe pressure.

GHARIB: President Bush said today that the budget deficit will be cut in half in five years, mainly because the U.S. economy will be growing. Do you think that we can grow our way out of the deficit?

FEINMAN: I think there is a pretty good chance that we can at least in the near term see shrinking deficits over the next few years from a stronger economy. But as I said, the real issue is next decade, when the entitlement program Social Security and Medicare come under intense pressure from the retirement of the baby boomers. Our current tax structure is simply incompatible with the liabilities associated with those entitlements and we need fundamental reform.

GHARIB: Speaking of Social Security reform, that was a very contentious issue during the election campaign. How successful might the president be in making any progress on Social Security reform?

FEINMAN: It`s going to be a tough sell. First of all Social Security is a politically sacrosanct issue and second, the president`s proposal namely to allow people to divert some portion of their payroll taxes to private accounts. While it might have merit on its own, it`s going to in the near term, widen the deficit because currently people`s payroll`s taxes are used to finance current retirement benefits for current seniors so if part of those payroll taxes are diverted to private accounts, that short fall is going to have to be made up somewhere.

GHARIB: The president was also asked about the cost of the U.S.`s continued presence in Iraq. When you work the numbers, how might the Iraq situation impact the president`s ability to push through his economic agenda?

FEINMAN: I think could impact it in two ways, first, just simply monetarily. It is a burden at least in the short-term. Figures vary but somewhere $50 to $100 billion a year. But I think even more important, it could if the Iraq situation doesn`t get better, it could start to erode some of the political capital that the president mentioned today that he has built up from this election and that he intends to spend. If he ends up spending it on Iraq, he`ll have less of it spend advancing his domestic agenda.

GHARIB: We just have a few seconds left. I want to ask you about the Federal Reserve replacing Alan Greenspan. Any thoughts on who the president might put into that spot when the Fed chairman retires in 2006?

FEINMAN: I think there`s a fairly short list of people. Martin Feldstein from Harvard, John Taylor who`s currently in the administration now and two possibilities within the Fed itself. I think the Fed governor Ben Bernanke and Fed Governor Donald Cohen.

GHARIB: OK, those are some names for us to think about. Thank you Josh, appreciate it.

FEINMAN: Thank you Susie.

GHARIB: We have been speaking with Josh Feinman, chief economist at Deutsche Asset Management.

KANGAS: Heads are continuing to roll in the wake of New York Attorney General Eliot Spitzer`s investigation of the insurance industry. At least six employees have been fired from broker Marsh & McLennan and insurer Ace Limited. Ace said today it dismissed two employees and suspended three others for improper business practices. Among those let go from Marsh is William Gilman, the marketing director of its global broking unit, who was named in Spitzer`slawsuit against the firm. Both Marsh and Ace are cooperating with Spitzer`s investigation.

GHARIB: But the insurance industry isn`t alone in coming under the microscope. Stung by mutual fund and other scandals, the securities industry said today, more focus is needed on developing what it calls a culture of clarity. Jeff Yastine was in Boca Raton, Florida, today, for the start of the trade group`s annual meeting.

JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: There have been a host of market-based scandals in recent years. And as the heavyweights of the brokerage industry gather in Boca Raton, leaders are hoping to steer a path free of similar problems in the future. The idea is a renewed focus on transparency to customers and regulators in everything the industry does.

RICHARD THORNBURGH, VICE-CHAIRMAN, CREDIT SUISSE FIRST BOSTON: Disclosure is a term that`s often been used. It was even used by Stephen Cutler. Disclosure solves all ills (ph). We don`t think so. We think understanding of what`s disclosed is very important. So when you step back and look at our commitment to clarity, it`s around the understanding of what`s communicated and lays down principals about what items should be communicated.

YASTINE: With that in mind, the Securities Industry Association is promoting a handful of ideas to its member broker/dealers, among them: a bill of rights for investors. It would laying out what brokerage customers should expect from the firms they deal with. It would also include more disclosure on mutual fund fees and costs and there would be more disclosure of so-called soft-dollar arrangements. Those are essentially an exchange of research for trading commissions from fund advisors. Executives say while those soft-dollar deals should be disclosed, the arrangements serve a specific purpose.

MARC LACKRITZ, PRESIDENT, SECURITIES INDUSTRY ASSOCIATION: They`re research dollars that are being spent by funds on research that they couldn`t otherwise get from a number of independent small research providers. And as a result, it increases the amount of research in the marketplace. It helps investment managers make better decisions on behalf of their mutual fund investors.

YASTINE: Industry executives don`t expect these ideas to be adopted immediately, but they hope their efforts will help Wall Street firms to focus on best practices, that is running a brokerage business in the most ethical, customer-friendly way possible. If it all sounds vaguely familiar, it is. The securities industry has talked about the need for transparency before. But as the mutual fund scandals have shown, creating a culture of ethics and responsibility is a lot easier to talk about and much harder to achieve. Jeff Yastine, NIGHTLY BUSINESS REPORT, Boca Raton, Florida.

GHARIB: Shares of Pfizer ran into trouble today, after a Canadian newspaper report linked the company`s arthritis drug Celebrex to 14 deaths. The "National Post" newspaper says there were 100 so-called adverse reaction reports on Celebrex filed with the Canadian health authorities over the past five years. The Canadian government said there hasn`t been a positive link established between the drug and the deaths and Pfizer disputed the story as well, saying it was misleading and not supported by clinical studies. Celebrex has been touted as a safer alternative to Vioxx and Paul, as you know, that`s a drug that Merck pulled off from the market after studies showed it caused heart attacks and strokes.

KANGAS: The news made Pfizer`s stock the most actively traded big board issue today, Susie. We`ll see it in just a moment as we take a look at our stocks in the news tonight.

And there it is, Pfizer (PFE) on 56.9 million shares, topped the active list and it was down $0.39 on the close, but the low of the day was $27.60.

Altria Group (MO) moving up $4.23. That gain boosted the Dow by about 30 points. Altria is looking to maximize shareholder value by possibly splitting up into two or three separate companies. It`s believed its tobacco assets are significantly undervalued.

Merck & Company (MRK) down $0.85.

General Electric (GE) moved up $0.76.

Motorola (MOT) $0.35 gain there, fifth in big board volume.

Nokia (NOK) gained $0.33.

Similar rise in Calpine (CPN). Calpine today reported third quarter earnings of $0.05, way down from $0.51 last year, but last year was enhanced by a $0.23 non-recurring gain. Actually revenues fell 4 percent but the stock still managed to rise.

Time Warner (TWX) up $0.35.

Wal-Mart Stores (WMT) up $1.78. That helped the Dow. October same store sales at Wal-Mart up 2.8 percent. That was below the 3 percent street estimate, but the company still sees third quarter earnings at the high end of its previous estimate of $0.52 to $0.54 per share.

NorTel Networks (NT) was down $0.13. That was tenth in volume.

The Gap (GPS) up $1.90, nice move there. October same store sales up 3 percent. The Street was looking for only 1.7 percent rise. The company sees third quarter earnings at $0.27 to $0.28 a share. That`s better than $0.26 Wall Street estimate.

Federated Department Stores (FD) up $2.76. October same store sales a better than expected rise of 4 percent.

J.C. Penney Company (JCP) did well, up $2.82. Its October same store sales were up 2.1 percent and the company boosted its third quarter earnings outlook, good news for Penney.

Christopher & Banks (CBK) Corporation, a nice move. The women`s specialty apparel retailer had October same store sales rising 7 percent.

And Abercrombie & Fitch (ANF) up $3. This October same store sales up 11 percent. The Street was expecting only a 2.3 percent rise, so much better than expected.

Argosy Gaming (AGY) jumping $4.57. Penn National Gaming will acquire this company for $47 a share in cash and Penn National Stock jumped $10.78 itself to close at $52.22 a share.

Keithley Instruments (KEI) rose $1.40. Fourth quarter turnaround, earnings of $0.27, $0.08 above the Street expectation and that`s versus a $0.05 per share loss last year.

Alcan (AL), the aluminum company, up $1.93. Third quarter earnings nicely higher, $0.45 versus only $0.26 a year ago.

And then brewing company Boston Beer Company (SAM) down $2.20. Third quarter earnings lower, $0.21 versus last year`s $0.28 and revenues fell 1 1/2 percent.

Google (GOOG) topped the active list on NASDAQ tumbling nearly $7. More profit taking there.

Microsoft (MSFT) a $0.53 gain.

Research In Motion (RIMM) up $3.56. One analyst made some very positive comments about the company`s Blackberry device.

QUALCOMM (QCOM) down $1.80. The company issued a revenue and earnings warning for the current quarter.

Intel (INTC) with a $0.21 gain.

eBay (EBAY) $1.62 to the plus side column.

Cisco Systems (CSCO) $0.24 rise.

Apple Computer (AAPL) $0.86 drop.

TASER International (TASR) up $5.47. The company declared another two for one stock split. That`s the third two for one split announced this year.

And finally Yahoo! (YHOO), tenth in volume was down $0.31 a share.

Those are the stocks in the news tonight, Susie.

GHARIB: Paul, first it was the music industry; now the movie industry is taking on online file swappers. The Motion Picture Association of America is going to sue people who are illegally copying movies on the web. Those suits are expected to be filed November 16 and they`ll ask for damages of up to $30,000 per film. The trade group says as technology has improved, so has the ability to pirate movies over the web. The group represents the major Hollywood movie studios and says it loses $3 billion a year to film piracy.

KANGAS: Tomorrow, our Friday market monitor guest is Doug Jimerson, president of National Investment Advisors.

GHARIB: Outgoing Fed Governor Robert McTeer has been named chancellor at Texas A&M University. In his 13 years heading the Federal Reserve Bank of Dallas, McTeer was one of the most plain-spoken central bank officials, known for delivering economic views using his own poetry. His main contribution was early support of the controversial new economy concept, that technology and productivity let the U.S. economy grow without inflation.

KANGAS: Tourists visiting the house of the mouse could soon be crossing a picket line. Next week, the leaders of Walt Disney world`s largest union will ask the member to authorize a strike, if the union and the company can`t reach a new contract. A main sticking point: Disney wants to hike the number of hours that part-time employees can work. Disney shares today rose $0.68 to close at $26.32.

GHARIB: Here`s a look at what`s happening tomorrow. The October employment report comes out. Also tomorrow, the September reading on consumer credit.

Tonight`s commentator says events outside America`s borders are about to pose big challenges for the U.S. Here`s Lionel Barber, U.S. managing editor for the "Financial Times."

LIONEL BARBER, U.S. MANAGING EDITOR, "FINANCIAL TIMES": While the world has been transfixed by the U.S. presidential election, a small earthquake has erupted in Europe. To the consternation of governments in Berlin, Brussels, London and Paris, the European parliament has refused to endorse the slate of new European commissioners led by Jose Manuel Barroso (ph) of Portugal.

The result is a power vacuum at the European Commission, the executive branch responsible for anti-trust trade negotiations and many other issues crucially important to business. Mr. Barroso will now be forced to reshuffle his team, in particular Rocco Buttiglione (ph) of Italy, whose conservative remarks on homosexuality and a woman`s place being in the home offended parliamentarians in the first place. This spat involves more than political correctness. The outcome will determine whether Mr. Barroso can pursue his liberal economic agenda effectively.

More broadly, it is part of an unfolding struggle to establish legitimacy in the institutions of the European Union and it signals that the 732 strong European parliament -- once dismissed as the let`s pretend parliament-- is increasingly a force to be reckoned with. Business should take note. Europe is not a sideshow. The newly enlarged EU of 25 nation states is coming of age. I`m Lionel Barber.

KANGAS: Recapping today`s market action, a second day of triple digit gains for the blue chips. The Dow closes up 177 points, while the NASDAQ Composite ends 19 points higher. To learn more about the stories in tonight`s broadcast, go to nbr.com.

GHARIB: And finally tonight, it looks like Babe Ruth may have the last word when it comes to the curse of the bambino. You`ll recall that infamous curse: the Boston Red Sox hadn`t won a World Series championship since trading Ruth to the Yankees back in 1918. They finally won last month. Now the original sales contract sending Ruth to New York is up for sale. Its owner bought it back in 1993 for $90,000. He put it up for sale on eBay last week, with an opening bid of $50,000 and tonight as far as we know, the bidding is over a million, and Babe Ruth may have the last laugh as well, Paul, because all the proceeds from the sale will be donated to charity.

KANGAS: Sounds to me like the real winner of the World Series is charity Susie.

GHARIB: I`m still brooding over the Yankees loss so I can`t be too charitable tonight.

KANGAS: I understand.

GHARIB: That`s NIGHTLY BUSINESS REPORT for Thursday, November 4. I`m Susie Gharib. Good night, everyone. Good night to you, Paul.

KANGAS: Good night, Susie. I`m Paul Kangas wishing all of you the best of good buys.

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 2004 Community Television Foundation of South Florida, Inc.