Marketplace: News Archives

Friday, December 15, 2000

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It's Friday, the 15th of December. I'm David Brancaccio.

Even the world's biggest software company can't inocculate itself from a slowing economy. Microsoft says it won't meet its profit projects for this quarter, and its shares closed down more than 11 percent to 49 dollars. This is lower even than during those dark days when a federal judge ordered the breakup of the company to remedy its monopoly, the lowest in about two years. Marketplace's Michelle Brier has more from New York.

Brier: "Companies have been admitting they'll miss their earnings estimates at such a fast and furious pace, that wall street has hardly been surprised when even the best known brand names joined the crowd. But there were some companies believed to be immune to the warning blues - and Microsoft was one of them. Until now."

Rhodes: "Everybody is suffering from slower sales growth."

Brier: "Bill Rhodes, Chief Investment Strategist at Williams Capital, says the economic slowdown is so broad-based that no one - not even Microsoft - can escape..."

Rhodes: "Any company, no matter how large and no matter how deeply ingrained in the Economy they might be, is going to have some difficulty right now growing Earnings at the same pace they were growing them before."

Brier: "There are three big reasons why the Microsoft warning really rattled investors: first, Microsoft has only issued a profit warning once before in its 14-year history as a publicly-traded company. Second, it is the industry bellweather. And third, the warning said Microsoft will miss the mark on earnings not only because consumers are spending less on computers, but because businesses are doing the same. And that raises worries of an even darker economic picture ahead. In New York, I'm Michelle Brier for Marketplace."

The economy isn't so slow that inflation is dead. The consumer price index for November rose two tenths of a percent. The hipsters like to ignore volatile food and energy prices and tease out what is called the "core" rate of inflation at the retail level: that's up 0.3 percent. Was that enough scare the Federal Reserve away from its general view that things are turning down? The bond market didn't think so. The 30-year treasury went up, with its yield down to 5.42 percent.

President-elect George Bush held his first impromptu press conference today, following a lunch meeting in Austin with Louisiana's John Breaux, who is a leading moderate among Senate Democrats. As Marketplace's John Dimsdale reports, the President-elect expressed concern about the direction of the U.S. economy.

Dimsdale: "Echoing warnings by Vice President-elect Dick Cheney about the slowing economy, George Bush said he is worried about sluggish growth in U.S. manufacturing, particularly the auto industry. Rising energy prices, especially on the west coast, are contributing to the weakness he said. He is especially concerned about the ability of the economy to continue attracting foreign capital to grow."

Bush: "Yes, I think Vice President-elect Cheney was right in echoing concerns, my concerns, about a possible slowdown. That's one of the reasons I feel so strongly about the need to reduce the marginal rates in our tax code."

Dimsdale: "Republicans and Democrats in Washington have warned the President-elect that he'll have an uphill battle getting approval for his campaign promise of large, across-the-board tax cuts. Meanwhile, the lame-duck Congress is finally close to finishing up the budget for the year that is already nearly one-fifth over. They're grappling today with a last-minute snag over protections for sea-lions in Alaska. And the Federal Reserve Board's Open Market Committee is getting ready to meet Tuesday to consider interest rates. Given the slowing economy President-elect Bush talked about, there's a growing call for a cut in rates. But interviews with Fed Governors by the Washington Post indicate there won't be an actual reduction. Although, the committee will adjust it's "bias" toward future rates from higher to neutral. In Washington, I'm John Dimsdale for Marketplace."