Dow Rallies 194.02 to 10,423.17; Nasdaq Soars 73.83 to 1,916.80; Cisco Systems Stands Out on Wall Street
JAN HOPKINS, GUEST HOST: Good evening. In tonight's headlines, a powerful rally on Wall Street: Nearly a quarter trillion dollars in market value created. Triggering the rally: Cisco Systems. The stock soared, along with its rivals, after CEO John Chambers said last night that business had "stabilized." And new home sales surged nearly 5 percent in July. Economists had expected sales to decline. Let's take a look at what our reporters are working on tonight, beginning with Christine Romans -- Christine.</s>CHRISTINE ROMANS, CNN CORRESPONDENT: Jan, a huge rally today on Wall Street. The first winning week of the month for stocks.</s>PETER VILES, CNN CORRESPONDENT: The president today defended his economic forecast, and told Congress to back off on any plans for new spending.</s>JEN ROGERS, CNN CORRESPONDENT: The standout story on Wall Street today: In a word: Cisco.</s>STEVE YOUNG, CNN CORRESPONDENT: Microsoft in a race with regulators, is shipping its crucial Windows XP to manufacturers just as the antitrust case gets shipped to a brand-new judge -- Jan.</s>HOPKINS: Thanks, Steve. Those stories are coming up on MONEYLINE. We begin tonight on Wall Street. Stocks today surged. It was the biggest rally in over a month. Investors were clearly enthusiastic after Cisco last night suggested that business may have hit bottom. That propelled the Nasdaq and the Dow. Gains in the four Dow tech stocks accounted for a third of today's 194 point rally. Let's check in with Christine Romans at the New York Stock Exchange -- Christine.</s>ROMANS: A powerful Friday rally, a friendly Friday, traders were saying on Wall Street, and it really didn't let up. You look at the Dow Jones Industrial Average, it rallied all session and closed not far from the best levels of the day, up 194 points. That is almost 2 percent on the week. Now, driving the Dow Jones Industrial Average Overall were a handful of names that really did well. Big Blue up almost 4 on general tech bullishness tied to Cisco and the idea that if the market turns you are going to want to own Big Blue chip tech names. Microsoft releasing its Windows XP. 3M leading the old economy names, and Home Depot, indicative of what was going on in the retailers today. The idea was there was some anticipation on Wall Street that things were going to get better in the equities markets. You could see that, as folks bought the brokerage stocks. Some of these names have been very close to 52 week lows, and now they rallied very sharply here today. Merrill Lynch, Morgan Stanley Dean Witter, Lehman Brothers, Goldman Sachs all of them doing very, very well here. You had broad-based buying really, only some of the banking stocks faltering here a bit today, Jan. Folks now say the most important thing, of course, is follow-through on Monday.</s>HOPKINS: I guess the brokerage stocks rallied on rally on Wall Street. They liked that increased volume and price movement,right?</s>ROMANS: Yes, a proxy for the idea that things are going have to get better for stock markets.</s>HOPKINS: Thanks, Christine Romans at the New York Stock Exchange. The rally today was broad-based for both the Dow and the Nasdaq. All but seven of the Nasdaq 100 biggest stocks ended the day higher. Jennifer Rogers is at the Nasdaq marketsite -- Jen.</s>ROGERS: Hi, Jan. It was indeed a powerful rally here at the Nasdaq, our best since July 12. If you take a look at the intraday chart, we gaped up at the open a steady rally, closing at our highs for the session, up 73 points. The level, 1,916, up 2.6 percent for the week there, 4 percent for the day. If you look at the stocks that really led the charge, Cisco, definitely the story of the day. Cisco up nicely nearly up $1.50 on volume of about 40 percent above its average. And Cisco, giving legs to many other stocks. We saw Juniper Networks up more than 6 percent bouncing off a 52-week low it hit earlier this week. Extreme Networks up more than 16 percent. We also saw gains among communications chips with exposure to Cisco. They count Cisco among their customers. AMCC up more than 11, and PMC Sierra up nearly 9 percent. The strength really across the board. The sectors, here at the Nasdaq that were winners: hardware was up more than 6 percent. The chips were up more than 6 percent. Software, Microsoft, helping out there, up more than 6 percent, and the networkers getting a boost from Cisco, up more than -- up 6 percent. And finally those Internet names coming in, also helping the Nasdaq here. EBay which was down for the last two days here, getting some big gains here today. It was up nearly 4. And we also saw some strength in the biotech names for the third day here. A little bit of leadership from that very volatile group. It is pretty depressed right now. we have seen some buyers come in here and bump up those levels. But overall, a very strong day here at Nasdaq. As Christine said, we'll see if we can follow it up on Monday -- Jan.</s>HOPKINS: Thanks, Jen Rogers at the Nasdaq. The strong housing report helped fuel today's market rally. But that wasn't the only economic news out today. And President Bush today addressed the economic slowdown as he faces critics who say the surplus has been squandered. Peter Viles has our report.</s>VILES (voice-over): At a news conference in Texas the president used his administration's preferred term for the current slump, a "correction."</s>GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I think our economy has very strong underpinnings. We are certainly going through a correction.</s>VILES: He defended his forecast for a recovery to 3.2 percent growth next year. A Philly Fed survey yesterday found economists predicting only 2.6 percent growth.</s>BUSH: We are right in the middle as I understand. We picked a number that seemed reasonable. Let's just -- but the facts are, our economy has slowed down. We had an anemic 1 percent growth over the last 12 months. There is no question the economy slowed down, and therefore, Congress must adjust its spending attitudes.</s>VILES: And if the administration is wrong, about next year?</s>BUSH: If I'm off by a point or two then Congress can adjust their sights.</s>VILES: And in conclusion...</s>BUSH: We have a very strong economy. Our economic -- let me say we've got a strong economic potential, we could have a very strong economy again.</s>VILES: The president spoke on a day of mixed economic numbers. The housing market continued its remarkable run, new home sales rising 4.9 percent to an annual rate of 950,000, the biggest percentage increase in that reading this year. But orders for durable goods slipped again, down 6/10 of a percent, the third decline in four months.</s>JOHN RYDING, BEAR STEARNS: We have a manufacturing sector that continues to suffer from declining capital spending. Inventory liquidation and both of those things were evident in the July data. So the two forces fight to a standstill and growth is going absolutely nowhere at the start of the third quarter.</s>VILES: Another not so cheerful note today: Bankruptcies. The Federal Court System reported today that personal and business bankruptcies together rose to a record high level in the second quarter, just over 400,000 filed. That is up 9 percent from the first quarter, 25 percent from a year ago -- Jan.</s>HOPKINS: Still mixed readings from the economy.</s>VILES: Very much mixed. It's almost like the stock market in a trading range. The economy in a range. We don't break out to the negative or to the positive.</s>HOPKINS: Thank you, Peter. Gasoline prices have been declining from their springtime highs. But there's some fear that another price spike is dead ahead. Gas futures today soared nearly 5 percent to the highest close since mid- June. Citgo is saying that its Chicago area refinery would be closed for as long as six months after a recent fire. My first guest tonight believes we are seeing a stealth bull market: Stocks performing well outside of the tech sector. There was nothing stealth about today's rally. Joining us now, Prudential analyst Ralph Acampora. Ralph, welcome.</s>RALPH ACAMPORA, PRUDENTIAL SECURITIES: Hi, Jan.</s>HOPKINS: You have been very bullish on the market. Is this the beginning of a move that, you know, really could be something? Or is it another one of these head fakes?</s>ACAMPORA: Are we talking about the Dow moving up? Yes.</s>HOPKINS: And the Nasdaq, both of them moved.</s>ACAMPORA: I think today you had a lot of short covering which started the move. But you notice that after lunch, after the market backed off, it ended at the high of the day. So I don't think it was just short covering. So I think you are going to get some follow- through next week and I think it is going to be a pretty good run, short term.</s>HOPKINS: Short term, can't we have a good run through end of the year and recover some of these losses?</s>ACAMPORA: That is the big question. For me as technical analyst, I have to see the confirmation. For me, a move above 2,350 on the Nasdaq would be very, very good.</s>HOPKINS: We are not there, we are just about 1,900.</s>ACAMPORA: Well, we have about 3-400 points left. So between now and then we have a short term rally. But the longer term sustainable -- to answer your question -- I have to see above the May highs. If I don't then we are back in the trading range.</s>HOPKINS: But you are saying that we are seeing a stealth rally going on outside of the indexes. What do you mean?</s>ACAMPORA: If you remember what happened at the end of June, the first half of the year was in, the report card came in, and the people that were up, the portfolios that did well, were value stocks, small and mid-cap names, this is where it has gone into -- it is the mundane companies. It is not just technology. I tell everybody, you know, get a new life! Look for other names. Barnes & Noble, we have got a lot of stocks that are doing very, very well.</s>HOPKINS: But technology is such a big part of the indexes, and so many people are still in technology. Do you think that they should be getting out or what?</s>ACAMPORA: I think it is too late for most technology stocks. If you haven't sold the Ciscos and the Intels, too late. Play the rallies. They are tradable. But Jan, I don't think they are going to go back to their highs for a long, long time. So they are in their own little trading range. Do you remember when the market was going up in the good new economy days, and we were always complaining that it was just a handful of stocks? Well it is those same handful of stocks that are giving the averagers a hard time this time. It is the majority of stocks that are going up. That is where markets are.</s>HOPKINS: So we need to look at more mundane names?</s>ACAMPORA: Absolutely. Barnes & Noble, Dial Corp.</s>HOPKINS: Makes soap?</s>ACAMPORA: Yes. We are talking about American Standard. They make toilet bowls. These are the kinds of stocks that are doing well.</s>HOPKINS: Johnson & Johnson, on your list, Barnes & Noble, Consolidated Edison, International Paper. These are real old economy stocks.</s>ACAMPORA: Old economy and some of them very large cap like Johnson & Johnson, a utility like Con Edison. It is across the board, Jan. I like it.</s>HOPKINS: You have written a book about the next megabull market. You still believe that people should own stocks. It is just that they need to pick the right ones at this point.</s>ACAMPORA: When I finished literally writing the manuscript of that book was April of last year. If we went back to April of last year it was just after the peak in the Nasdaq. Do you know what the average stock on the New York Stock Exchange was selling at, if you took technology out -- was selling at 12 times earnings. That book came out at the bottom of the market, not the bottom of the Nasdaq, and it says you have to rotate. That's exactly what's happened. I'm happy. But it's not across the board, and the problem is that so many people still own technology, and they're buried, unfortunately.</s>HOPKINS: Ralph Acampora, Prudential Securities, thanks.</s>ACAMPORA: Thanks.</s>HOPKINS: There's been a settlement in the $1 billion lawsuit against Bridgestone/Firestone. The suit was filed by a woman in Texas who was left in a wheelchair after her Ford Explorer overturned. For more on the settlement, we're joined now by Ed Lavendera, who's in McAllen, Texas -- Ed.</s>ED LAVANDERA, CNN CORRESPONDENT: Jan, there have been a lot of people around the country who have been closely watching this trial, because this was supposed to be the first time that a jury would decide whether or not a Firestone Tire, a Wilderness AT tire, to be more specific, was to blame for a Ford Explorer rollover accident March of last year. Forty-year-old Marisa Rodriguez is confined to a wheelchair and she will not be -- she will have to learn to walk again. Her family settled with Firestone today for $7.5 million, that's according to sources at CNN. Her family says that this money will go a long way and will make her financially secure to be able to take care of all medical costs the rest of her life. Now, Firestone attorneys say they were able to reach this settlement because they call it a fair deal, and they say that they will continue throughout this entire trial -- they've attacked the design of the Ford Explorer. They say it was the design of the Ford Explorer that caused this car to roll over and cause the injuries to the Rodriguez family. Firestone says it will not change its strategy as it moves ahead in other cases around the country.</s>KNOX NUNNALLY, BRIDGESTONE/FIRESTONE ATTORNEY: Anyone that would sit through this trial and listen to the evidence that was introduced, and I think it was drawn very persuasively on behalf of Firestone, would not be able to go away without agreeing, that one, the Firestone product, their tire, was not the problem that caused this accident. That it was clearly a problem associated with the vehicle, and that the vehicle had a problem which led to this accident.</s>LAVANDERA: Ford and Firestone were sued in this case, but before this case went to trial, Ford settled with the Rodriguez family. They paid $6 million, so they had no attorneys here, throughout a week and a half of testimony, to defend the Ford Explorer. And attorneys for the Rodriguez family, who have other cases pending against the tire maker and Ford, say that when a case will eventually come to trial and a jury will eventually make its decision on who is to blame in these rollover accidents that have happened all across the country, and they say when that happens, it will be like a nuclear explosion in the courtroom. Ed Lavandera reporting live from McAllen, Texas. Jan, back to you.</s>HOPKINS: So, Ed, question. Do you think that both sides got a little nervous that the jury was taking so long to decide this case?</s>LAVANDERA: Neither side would come out and answer a lot of those questions, specifically. But there are so many cases still pending, and quite honestly, all the observers that we've spoken to in the last two weeks, say that what happened here was really going to be what a lot of people looked at as these other cases. There are still about 200 pending against Firestone and Ford. So there's no question that what this jury would have said, it would have sent a signal throughout the country. And specifically, they would have looked at those punitive damages. And what the jury would have put in that box, had they ruled against Firestone, that would have been something that -- it's hard to say at this point now, given what has happened today, but that is something that attorneys and families across the country have really been looking at.</s>HOPKINS: Thanks, Ed Lavandera, live in McAllen, Texas. As we said, a little bit of news from Cisco last night helped drive the markets a lot higher today. Bruce Francis takes a look at the "Cisco effect."</s>BRUCE FRANCIS, CNN CORRESPONDENT (voice-over): Just 16 days after releasing last quarter's numbers, Cisco says the current quarter is just as predicted. That didn't impress analyst Michael Perica.</s>MICHAEL PERICA, GRUNTAL & CO.: This three-week trend really doesn't give us strong insight and/or confidence that the company is really going to make the quarter.</s>FRANCIS: But it did impress investors around the globe.</s>UNIDENTIFIED MALE: Good news travels fast, and this is what tech believers want to hear.</s>FRANCIS: Cisco helped fuel rallies from Tokyo to London. The faint praise from Chambers rewarded the company's stock as well. Cisco's market cap soared by more than $9 billion. Investors are hungry for good news on technology stocks, and starved for encouragement on Cisco.</s>DAVID BRADY, STEIN ROB FUNDS: Things were getting bad in the March-April time frame, and then they were getting bad at a slower pace in, you know, June, July time frame. And now we're beginning to hear companies say that things are stabilizing, or they understand the demand curve now. So, that absolutely is encouraging.</s>BERNADETTE MURPHY, KIMELMAN & BAIRD: I think it's probably because the tech sector of the market, you don't need me to tell you this, is so oversold. And I think that anyone interested in technology stocks has just been searching and searching for some positive information.</s>FRANCIS: Among the traditional four horseman of the Nasdaq -- Cisco, Microsoft, Dell and Intel -- Cisco is the most badly beaten, down 77 percent from its all-time high. And Cisco was still the most widely-held stock in Merrill Lynch accounts as of the end of June.</s>FRANCIS: So it seems a generation of investors who witnessed the tech boom of the '90s still want to believe that the can-do company, that also lost the most on the Internet bust, can rise again and bring the sector along with it. Or this could be just another sucker's rally -- Jan?</s>HOPKINS: And I think they're hoping that it goes back to the highs, but that might not happen anytime soon.</s>FRANCIS: Not anytime soon. I don't hear any predictions like that.</s>HOPKINS: Thanks, Bruce Francis. Microsoft today released Windows XP, with fanfare, to PC companies for installation on their machines. At nearly the same time, the antitrust case moved back to a lower court. A new judge was appointed to decide what to do about the company, which was found to be a predatory monopolist. Steve Young has the story.</s>BILL GATES, CEO, MICROSOFT: All right. Let's do it.</s>YOUNG (voice-over): Microsoft called the shots and fed them by satellite, spreading the visual word that Windows XP, the company's new operating system, is en route to PC companies for a late October launch. Some said Microsoft is trying to outrun regulators.</s>JASON MAHLER, COMPUTER & COMMUNICATIONS INDUSTRY ASSN.: They are trying to beat the clock of the judicial system, which is working, obviously, toward them making changes in future editions of Windows. And they're trying to get the product out the door, get it into the market, make it more or less a fait accompli.</s>KOOL AND THE GANG (singing): Celebrate good times, come on!</s>YOUNG: There wasn't that much to celebrate. In Washington, the Court of Appeals sent the Microsoft antitrust case back to U.S. District court. A new judge, Colleen Kollar-Kotelly, has been randomly assigned to decide how to control the company.</s>HARVEY SAFERSTEIN, MINTZ LEVIN: It's possible that somebody still makes some type of temporary injunctive action with regard to XP. That might be the judge's first test.</s>HOPKINS: Kollar-Kotelly is described by one Washington lawyer as bright, with views straight down the middle, extremely efficient. And so is Microsoft's marketing machine. One billion dollars is expected to be spent promoting Windows XP while the trial goes on, half from Microsoft, half from its PC partners. The company can easily afford megabuck promotions. Its awash in more than $30 billion cash. It spends a lot on product development, but the PC companies bear the brunt of Microsoft's distribution costs.</s>CHRIS JONES, MICROSOFT: They take that CD and use it. There's also a set of tools that go along with it, that enable them to quickly and easily install the operating system in the way they choose.</s>YOUNG: Microsoft may be more spooked by retail trends than government regulators. As of June, PC sales were off 21 percent, the first down year since the industry's birth -- Jan.</s>HOPKINS: Thanks, Steve. A stellar session for Microsoft today. It soared nearly $3. That translates into nearly $16 billion in market cap. Coming up next on MONEYLINE, drug companies hoping to gain fast approval for new drugs are hitting a major roadblock. We'll tell you why some say the FDA could be part of the problem. The UAW shuts down Mitsubishi's only U.S. plant. We'll tell you what's behind the first U.S. auto strike in nearly four years. And then a piece of pop history goes on the market. We'll tell you what they're asking for Madonna's childhood house. That's when MONEYLINE returns.