Marketplace: News Archives

Tuesday, December 5, 2000

Cuba, MO, Features Index

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It's December 5th. I'm David Brancaccio.

All this week, we're coming to you from America's Heartland - a place called Cuba. This small town in Southeastern Missouri is the nation's population midpoint - the middle of Middle America. And that sound you hear behind me is that of a bustling truckstop. It's our home away from home this week as we test the theory that the global economy is really a local story. We'll meet some of the characters central to this story in a few minutes, but first, Sara Gardner's in Los Angeles with a check of today's news…

A county court judge in Florida and the chairman of the Federal Reserve have something in common. They both moved the stock market today, and the direction was decidedly up. The Dow Jones Industrial Average jumped nearly 3 and a quarter percent, or 338 points, to close at 10,898. But the Nasdaq composite put the Dow to shame. That index soared nearly 10 and a half percent, its biggest percentage gain ever. The point gain was also a record of almost 274. Al Gore's legal defeat in Florida yesterday gave investors the sense the election will be resolved soon. But it was Alan Greenspan's public comments today that had the markets absolutely giddy. Tracy Eichler, an investment strategist at Paine Webber, interpreted Mr. Greenspan this way…

Eichler: "The Fed will probably change their directive that inflation is no longer a problem, and that they are seeing the slowdown ocurring faster that they would have thought, which leads Paine-Webber to believe that we will get an interest rate cut by mid 2001."

Dimsdale: "Economists and politicians have been looking to the Fed for some relief for an economy that may be slowing too much. Consumers are more thrifty. Corporate profits are falling. New statistics today showed that factory orders are weaker than expected.

The Fed chairman said today that he's watching the same trends."

Greenspan: "In an economy that has already lost some momentum, one must remain alert to the possibility that greater caution and weakening asset values in financial markets could signal or precipitate an excessive softening in household and business spending."

Dimsdale: "Stock markets took that to mean the Federal Reserve is ready to reverse its policy of raising interest rates to rein in the booming economy - maybe not at the next meeting, which is in two weeks, but more certainly by early next year.

However, Greenspan tried to put a damper on that kind of speculation. Tensions in the Middle East risk spreading inflationary energy prices throughout the economy, he noted, limiting the Fed's leeway to stimulate growth. The chief economist of BankOne Corporation, Diane Swonk, isn't sure the markets got the whole message."

Swonk: "Right now the Fed is sort of saying 'o.k., we're watching the economy. We're awake at the wheel. We certainly not willing to let this economy...allow a recession at this kind of inflationary levels. But we're not going to necessarily give you a Christmas gift, with a little ease in your Christmas stocking, either.'"

Dimsdale: "Even though some forecasters .. and politicians .. are warning of a recession, the Fed chief said the economy has merely shifted into a more sustainable balance of supply and demand. He, and other Fed Governors, are predicting that strong improvements in worker productivity will continue.

In Washington, I'm John Dimsdale for Marketplace."