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Moneyline News Hour

Dow Falls 62.56 to 10,817.95; Nasdaq Climbs 22.56 to 3,451.58; Jobless Rate Holds Steady, but Wages Surge

Aired November 3, 2000 - 6:30 p.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

WILLOW BAY, CNN ANCHOR: Tonight on MONEYLINE, the Dow down for the third straight session as the latest report on jobs offers little hope for quick relief on rates.

STUART VARNEY, CNN ANCHOR: The third phone giant in 10 days to set off an alarm. An in-depth look at Sprint's bottom line: What's behind the telecom trauma.

BAY: A perilous decline for Priceline and a career come down for a former Wall Street star: the woman who gave it all up to chase a dot.com dream.

VARNEY: And, going into the final weekend of campaigning, we cut through the rhetoric, on taxes. How the decision on November 7th will affect your bill come April 15th.

ANNOUNCER: This is MONEYLINE. Reporting tonight from Los Angeles, Willow Bay. And from New York, Stuart Varney.

BAY: Good evening and welcome to MONEYLINE. I'm Willow Bay.

VARNEY: And I'm Stuart Varney.

Our top story tonight: a disheartening end to a somewhat turbulent week on Wall Street. The Dow fell again, and the Nasdaq rose only slightly after a report on jobs sent out one basic message: do not expect an interest rate cut anytime soon. Market watchers also said pre-election anxiety is keeping investors on edge. Well, the Dow fell more than 62 points, ending just under 10818. For the week, the index was up 227 points, that's more than 2 percent.

The Nasdaq gained more than 22 points today. It closed at 3451. It jumped 173, over 5 percent, on the week. The S&P fell about 1 1/2 points today but it's up nearly 3 1/2 percent over five trading sessions.

Well, the Dow may have posted a solid advance for the week, but that is not the whole story. The index began the week with two triple digit gains, bringing the Dow within 30 points of reclaiming 11000. But the blue chips abruptly shifted into reverse on Wednesday.

Let's go to Terry Keenan at the New York Stock Exchange with more on which stocks drove today's big board action -- Terry. TERRY KEENAN, CNN CORRESPONDENT: Well, Stuart, call it some mixed signals on the economy from this morning's employment report or just jitters over the neck-in-neck race for the White House. Whatever it was, it did send blue chips lower today in rather quiet trading.

In fact, a lot of the focus here wasn't on Tuesday night's results from the polling places, but on Monday night's results. Those of course, from Cisco. Now few people expect many surprises from the networking giant, but they also think that the market isn't going to make much headway until that and the election are out of the way.

Leading the way lower today, some of the financial stocks. J.P. Morgan was the big decliner. It's been a turbulent week for J.P. Morgan, remember that $6 run-up on Tuesday? Today J.P. Morgan down more than 3, as you can see there. Microsoft also giving back some of its recent gains. It's back below $70 a share. Another tough day for GM after some negative comments from analysts yesterday. IBM also weighing on the blue chips, down almost 2.

And Merck, which tends to trade as a proxy for Governor George W. Bush's fortunes, it was a loser today after trading at new highs earlier in the week. As for the market breadth, it did favor the decliners, as you might expect, but it was very narrow, about 100 more issues down than up. And volume was very light. Less than a billion shares traded here and we haven't seen that in quite some time. But look for that for the next couple of days, Stuart, until the election is over.

VARNEY: What is the story on Sprint? I was watching the tape. Saw it go by, I think it was another 52-week low? What's the story?

KEENAN: Well, it's a familiar story. Unfortunately, Sprint joining the list of telecom companies warning of lower-than-expected earnings. The company held an analyst meeting here in New York today and says it will miss earnings estimates both for this year and for next. Now the warning stems from pricing pressures in the long- distance market, no surprise there. It also says it's going to shift its focus to data transmission.

Now Sprint expects revenue in its PCS unit to rise 50 percent in 2001, down significantly from this year's growth rate. It only expects to see growth of 30 percent in 2002. Now with Sprint stock already down 67 percent, the market was pretty kind to that stock, as you can see. As you can see, actually was up more than a dollar. But look at what happened to Sprint PCS. Concerns over that growth rate coming down so sharply, and that stock was truly clobbered, down 8 -- Stuart?

VARNEY: Who would have seen that coming six months ago? Terry Keenan at the big board. Thanks, Terry.

Now later on MONEYLINE, we'll have a special bottom line look at Sprint. Does the company have a better chance than its rivals in staging a comeback?

BAY: The Nasdaq staged its own comeback this week after a big sell-off during the previous week. But getting there wasn't easy. Big swings for the index over the past five sessions, with only a small advance today.

John Metaxas has more from the Nasdaq marketsite -- John.

JOHN METAXAS, CNN CORRESPONDENT: In fact, the week was really more of a story than today was. The Nasdaq up 5 1/4 percent for the week. Today kind of a quiet trading session. Very narrow trading band for the Nasdaq in racking up that 22 point gain at 3451. Volume a little bit less today as well, 1.8 billion shares.

Qualcomm helping to the send the Nasdaq higher today, though. Qualcomm surging 12 percent after beating estimates yesterday by a penny, giving -- telling Wall Street they were comfortable with the guidance for the next quarter as well. Rambus leading the chip stocks higher, up 28 percent on the day. Morgan Stanley Dean Witter reiterating a strong buy rating, though bear in mind this stock trading above 80 for much of September into October.

On the downside, Kulicke & Soffa, the chip equipment maker was reduced outlook for revenues. They blamed deferred customer orders. Also suffered a downgrade from Credit Suisse First Boston, down 21 percent. And Priceline.com down the day on their layoffs, which they say will affect their fourth quarter results. All eyes now turned to Cisco and the election. The Nasdaq hoping to get a direction next week. Back to you.

BAY: John Metaxas at the Nasdaq market site. Thanks John.

Investors today were digesting the latest report on jobs, which showed slower growth. But behind that headline, signs of strength. While payrolls fell short of expectations at 137,000, the jobless rate held steady at 3.9 percent, a 30-year low. And hourly wages spiked in their biggest gain in six months.

Bob Beard reports.

(BEGIN VIDEOTAPE)

ROBERT BEARD, CNN CORRESPONDENT (voice-over): Lower mortgage rates last month helped construction firms to add 34,000 jobs. The huge services sector added 99,000. But growth in manufacturing was unchanged, suggesting sluggish demand for factory labor. That as October payrolls picked up far fewer jobs than expected and September's payroll gains were revised sharply lower. So far this year, the pace of job growth is slowing, averaging 182,000 jobs a month, versus 229,000 for all of last year.

ANTHONY CHAN, BANC ONE INVESTMENT ADVISORS: It shows the top line, or the headline number is weakening. The economy is weakening. But again the persistence of that labor market tightness is still there.

BEARD: One key measure of inflation picked up slightly last month above market expectations. Average hourly earnings now up 3.8 percent year over year. Some economists note that's been the trend for the last few years, and is one of the main reasons the Fed remains on inflation alert despite other signs the economy is cooling. CHAN: I think this number will certainly calm, continue to calm the fears of policy-makers, but I think it will put off that belief that the Fed is going to lower interest rates anytime soon.

BEARD: Meanwhile, the administration couldn't wait to put a positive spin on the nation's unemployment rate, which stayed at a 30- year low.

ALEXIS HERMAN, U.S. LABOR SECRETARY: We have an economy that's in balance. Obviously we continue to see signs of moderation in the economy, but let's remember this is still the longest and strongest economic boom in all of American history.

BEARD (on camera): For now, most economists see a portrait of a moderating economy with few signs of a dramatic slowdown.

Bob Beard, CNN Financial News, Washington.

(END VIDEOTAPE)

VARNEY: And next on MONEYLINE, our Election 2000 coverage. Questions of honesty, and accusations of dirty tricks. The hot talk on the trail today. Much more on that. And we'll continue our special look at the hot button issues that matter to your wallet. Tonight, the big one, taxes.

(COMMERCIAL BREAK)

BAY: With the U.S. elections just four days away, we turn to tonight's special edition of the MONEYLINE "News Digest: Election 2000." We'll check in with Wolf Blitzer on the day's political news at this time each night leading up to next Tuesday's election -- Wolf.

WOLF BLITZER, CNN ANCHOR: Thank you, Willow.

Questions today about whether Governor George W. Bush misled a reporter about an arrest for drunken driving in 1976. The controversy broke late yesterday when the governor confirmed the report by a Portland, Maine. television station about the arrest. Today, a newspaper reporter who interviewed Bush two years ago said he had denied being arrested any time after 1968.

Bush campaign communications director Karen Hughes said Bush did not remember that interview with the "Dallas Morning News." Hughes had her own questions, questions about the timing of the report.

(BEGIN VIDEO CLIP)

KAREN HUGHES, BUSH COMMUNICATIONS DIRECTOR: I think the American people are tired of this kind of gotcha politics. They're tired of this kind of last-minute dirty tricks. And I think the Democrats owe the American people an explanation.

(END VIDEO CLIP)

BLITZER: Vice President Gore, campaigning in Iowa, said he had no comment on the controversy. Gore campaign aides, however, denied having anything to do with the arrest being made public. A Maine lawyer, a Democrat who unsuccessfully ran for governor in 1998, said he gave the story to the local television reporter without the knowledge of the Gore campaign.

Bush, for his part, did not miss a step in his busy schedule, stumping in Michigan today, where he criticized Gore on Social Security, Medicare and for neglecting the military. But Bush did address the controversy, saying in one speech that he had learned from his past mistakes.

(BEGIN VIDEO CLIP)

GOV. GEORGE W. BUSH (R-TX), PRESIDENTIAL CANDIDATE: I have made mistakes in my life. But I'm proud to tell you, I've learned from those mistakes. And that's the role of a leader, is to share wisdom, to share experience with people who are looking for somebody to lead.

(END VIDEO CLIP)

BLITZER: How this incident will affect voters' decisions is, of course, not immediately known. Today's poll numbers are based on interviews taken on Tuesday through Thursday of this week, before Bush admitted he had been arrested. The three-day average of the CNN-"USA Today"-Gallup tracking poll shows Bush winning support from 48 percent of all likely voters compared to 42 percent for Gore. A six-day average gives Bush support from 47 percent of likely voters, and 43 percent for Gore. A look at some of the other polls shows similar numbers separating the two candidates.

And those are some of the day's top political stories. For more coverage, join me tonight for our special report, "COUNTDOWN TO ELECTION 2000." That's at 8:00 p.m. Eastern, 5:00 p.m. Pacific.

Back to you, Stuart.

VARNEY: That's Wolf Blitzer.

Thank you, Wolf.

Now, as the big day approaches on Tuesday, we have been examining the major issues separating the candidates. Tonight, we look at what to do with the billions of dollars projected for the budget surpluses.

Ceci Rodgers looks at what the two plans may mean for taxpayers, the economy and, yes, the markets.

(BEGIN VIDEOTAPE)

CECI RODGERS, CNN CORRESPONDENT (voice-over): It's the first time in more than a generation that presidential candidates have the luxury of arguing about what to do with a budget surplus, especially a surplus estimated to hit a staggering $4.6 trillion over the next 10 years.

AL GORE, VICE PRESIDENT OF THE UNITED STATES: I think we need to safeguard the surplus and use it for everyone. I think we need to balance the budget and pay down the debt, so the debt is eventually paid off in 12 years.

RODGERS: Texas Governor George W. Bush would pay down the debt, too, though it would take a few more years because of his plan for a broad-based tax cut.

BUSH: We don't believe the surplus is the government's money. We know the surplus is the people's money, and we're going to send some of that money back to the people who pay the bills.

RODGERS: Economists say looking beyond the rhetoric, it's clear that with either Bush or Gore, most of the surplus will be spent, whether for tax cuts or new programs.

WILLIAM DUDLEY, GOLDMAN SACHS: Both of them, using their own numbers, would spend most, if not all, of the non-Social Security portion of the surplus.

RODGERS: Bush's plan calls for $1.3 trillion in tax cuts, $474 billion in new spending, much of it on Medicare, almost $200 billion in savings on government reform and $312 billion in interest, so that by the year 2010, all that would be left of the more than $4 trillion surplus, just $265 1/2 billion.

The end result isn't much different under Gore's plan. Targeted tax cuts for retirement savings, reducing the marriage penalty, energy efficiency and child care, among others, would total $480 billion. New spending is expected to reach $1.2 trillion, including nearly half a trillion on Medicare and other health reforms. With offsets and interest, the remaining surplus in 2010: $300 billion. Economists say that compared with Gore's spending plans, the Bush tax cut would encourage faster growth.

PAUL KASRIEL, NORTHERN TRUST CO.: A cut in marginal tax rates would encourage people to save and invest more.

RODGERS: But with either candidate, economists worry the recent era of fiscal restraint may be gone, similar to the end of the post- World War II boom, with Lyndon Johnson's Great Society and the Vietnam War.

DIANE SWONK, BANK ONE: If we went on either one of those routes of tax cuts with either candidate and more spending increases and really spent this surplus, that what we're going to end up with is higher interest rates.

RODGERS (voice-over): That's why there's so much talk in the financial markets that the best outcome of this election would be for one party to control the White House, while the other controls Congress, so that disagreements over tax and spending priorities would help preserve more of the surplus.

Ceci Rodgers, CNN Financial News, Chicago.

(END VIDEOTAPE) BAY: Still to come, Viacom scoops up the leading black-owned media company. BET co-founder Robert Johnson joins us when MONEYLINE continues.

(COMMERCIAL BREAK)

BAY: Viacom today announcing it will buy BET Holdings, the price tag: $2.3 billion in stock plus the assumption of $570 million in debt and $130 million in capital.

Robert Johnson, who will remain BET's chairman and CEO, joins us now from Washington.

Bob, welcome back to MONEYLINE.

ROBERT L. JOHNSON, FOUNDER & CEO, BET: Thanks, Willow.

BAY: Viacom, it's to see what they here. They get a profitable cable network. They instantly increase their access to the African- American market. But what does BET get here?

JOHNSON: Well, BET gets access to all the tremendous resources -- programming resources, distribution resources, marketing resources -- of Viacom and the opportunity to leverage those resources to better serve the African-American market here and indeed on global distribution for a product like "BET on Jazz."

BAY: Now, you're going to stay with BET, as I understand it, but is BET going to stay in Washington or are they going to join the fold, the Viacom fold in New York headquarters?

JOHNSON: Well, that's a great part of this deal. Both Mel and Sumner are committed to BET maintaining its character and its culture and its commitment to serve the African-American market as well as its management.

So Debra Lee, the president and chief operating officer, and I have signed long-term contracts, and we're committed to BET and we're committed to the employees here in Washington, D.C. So we will be a D.C.-based company with all the benefits of a huge media conglomerate and the tremendous brands that Sumner's put together.

BAY: Now, before this deal, your employees there did tell the local paper, which in this case is "The Washington Post," that they were not entirely happy about being sold to a media conglomerate, that they were not happy about losing their identity as a black-owned and - controlled company.

What did you tell them when you announced the deal?

JOHNSON: Well, we did two things. We let them listen in on the analyst meeting that Sumner and Mel had to explain their rationale for the deal, and when they heard how committed Mel and Sumner were to helping BET become, continue to be the pre-eminent brand serving the African-American community, how Mel and Sumner were committed to the management that's in place and committed to making sure that we continue to grow as a company, they were very happy. And they're very excited about it, as Debra Lee and I are, and we are looking forward to what we can do with Viacom.

BAY: You'll personally get some rather liquid assets out of this deal. Will you use that money to help your DC Air, your effort in the airline business.

JOHNSON: I'm going to try to be like Sumner. I'm going to try never to sell one share of Viacom stock. It's a great company.

The airline business has a model that allows for financing against the slots with some limited equity. So, no, this is a good, strategic exit strategy as well as a growth strategy. I've had a chance, my friend John Malone now gets a great exit strategy after having been BET's partner for over 20 years. And the BET employees get a great media conglomerate as their partner. And we look forward to the excitement that Viacom will bring to BET and BET will bring to Viacom and to other brands.

BAY: Bob Johnson, thanks for joining us tonight on MONEYLINE. Good luck with the deal.

JOHNSON: Always. Willow, thank you.

BAY: Stuart.

VARNEY: In tonight's tech watch, Transmeta boosts the price range of its upcoming IPO. Today's move comes despite IBM's decision to pull its order of energy-saving chips made by Transmeta. Investors had been worrying that this would hurt Transmeta's public offering, slated to begin trading early next week.

Transmeta is expected to price 13 million shares between $16 and $18 a share, and that's up from an original $11 to $13 range.

Now, coming up, from Russia with cash: A Moscow oil empire gobbles up a well-known American brand.

(COMMERCIAL BREAK)

VARNEY: History in the making today when the Russian oil giant Lukoil said it would buy Getty Petroleum Marketing, which owns 1,300 gas stations nationwide. The price-tag, $71 million, or $5 a share.

Getty stock jumped nearly a point and a half on that news.

Kitty Pilgrim looks at why the Russians are buying American.

(BEGIN VIDEOTAPE)

KITTY PILGRIM, CNN CORRESPONDENT (voice-over): This Getty gas station will soon belong to a Russian company. Lukoil's $71 million bid for Getty marks the first time a Russian firm has bought a publicly traded U.S. company.

JOHN KILDUFF, FIMAT USA: Lukoil's buying Getty gets them downstream, gets them a foothold in the United States, actually on a pretty cheap basis. They actually paid about $55 thousand per gas station, and to build one of those, obviously, quite much more than that.

PILGRIM: The 1,300 Getty gas stations have a long pedigree. Once part of the John Paul Getty Petroleum Company, they were spun off as Getty Marketing, which trades on the New York Stock Exchange.

Lukoil is Russia's No. 1 oil company, the top company on the Russian stock exchange. In the Russia boom in the late '90s, the stock soared and the company planned on starting or buying U.S. operations. But its stock tanked with the devaluation of the ruble in 1998 and Lukoil put its growth plans on hold.

This year, with an estimated $2 billion in profits, Lukoil is back on-track.

WILLIAM RANDOL, BANC OF AMERICA SECURITIES: Lukoil, given its size and its reserves, figured out that they were not a household name in the United States and wanted to become one, and maybe with an eye to listing the securities and all of these things that fall out of that. And that's why they did this. But you know, a $70 million transaction for them is nothing.

(END VIDEOTAPE)

PILGRIM: Lukoil has the largest oil reserves of any oil company in the world, but it still has a way to go before becoming a global player. It's missed several deadlines to open its books and meet U.S. accounting standards. But it still plans to go public in the United States -- Stuart.

VARNEY: Still spent their money here. Kitty Pilgrim, thanks very much.

All right, still to come on MONEYLINE, more on today's employment report: Mixed signals leave Wall Street wondering about the Fed's next move.

BAY: Another negative call for a phone company. We'll have a "Bottom Line" look at Sprint.

VARNEY: Priceline stock plummets again. We'll profile the high- powered executive who is jumping ship.

BAY: All that coming up in the second half of MONEYLINE.

(COMMERCIAL BREAK)

ANNOUNCER: The MONEYLINE news hour continues. Here again, Willow Bay in Los Angeles and Stuart Varney in New York.

BAY: In tonight's headlines, Wall Street caps off a turbulent week with a split decision -- blue chips slide and techs shine. Investors are probably wishing they could name their own price for Priceline.com stock. We'll take an in-depth look at a company in crisis. Plus, big shakeups at AT&T and WorldCom -- what's the plan for the No. 3 long distance player? We'll have the bottom line on Sprint.

VARNEY: But first, more on tonight's top story: The markets close out the week with an uneven performance as investors dumped blue chips for the third consecutive day and moved some of the money to the Nasdaq. The Dow had a rough ride, losing more than 62 points, closing out at just under 10818. Even so, the Dow had a decent week, up 227 points, that's more than 2 percent. A better day for the Nasdaq, which got a boost from Qualcomm's profit report late yesterday. It ended up more than 22 points at 3451. On the week, the Nasdaq gained more than 5 percent.

Alan Chernoff takes a look at what kept the markets on edge.

(BEGIN VIDEOTAPE)

ALAN CHERNOFF, CNN CORRESPONDENT (voice-over): A celebration of economically sensitive Dow stocks faded as the week progressed, with Nasdaq shares assuming the leadership.

ALAN ACKERMAN, FAHNESTOCK: One of the keys to this market is rotation. People are in and out of sectors and in and out of stocks in milliseconds.

CHERNOFF: Investors moved back into Internet blue chips. America On Line, and DoubleClick and Yahoo! benefiting from the idea that the coming holiday shopping season will boost Internet advertising. Business-to-business Internet names are also regaining luster: Commerce One, up more than nine points on the week, Ariba surging more than 12 points.

GLEN FREY, ORBITEX: The reason why the Internet is starting to do a little bit better is people are starting to find value in some of those particular leaders in the Internet space.

CHERNOFF: With earnings anxiety still weighing on stocks, investors rewarded companies able to provide reassurance on their profit prospects -- ADC Telecom, Xilinx and QLogic all delivering bullish business forecasts.

Quite a different story for long distance companies. Sprint, today, warned of soft earnings ahead and WoldCom's earnings disappointment sent its stock to its lowest point of the year on Thursday. Analysts say the stock market is likely to focus on the presidential election in the coming days.

PHIL DOW, DAIN RAUSCHER WESSELS: It's going to be like Y2K: Once we know who the president is and once we get a handle on the legislature, I think that will cease to be an issue.

CHERNOFF: If so, that will leave Wall Street to focus on the few remaining profit reports due from corporate America.

(END VIDEOTAPE) CHERNOFF: The Nasdaq could be facing some hurdles in the coming weeks. Analysts say that it does appear to be overbought on a short- term basis. Also, today volume declined even as the composite was rising, indicating a drop in conviction and, perhaps most important of all, the Nasdaq Composite is now virtually face-to-face with a 3500 resistance level -- Stuart.

VARNEY: All right; Alan Chernoff reporting, thanks Alan.

Now to check some of the day's other big movers on the Big Board: J.P. Morgan slipped nearly 3 1/2 points today and General Motors was down 2 1/2; but Merrill Lynch and Morgan Stanley both rose more than three. Corning, the biggest mover on the New York Stock Exchange, gained nearly two after announcing a secondary offering.

BAY: Now let's take a look at corporate bonds where spreads on some high-yield bonds are at their widest point since the 1998 global financial crisis. The reason: fears of corporate defaults; and in no industry is this more apparent than in the telecom sector.

Terry Keenan now goes behind the numbers from the New York Stock Exchange -- Terry.

KEENAN: Well, Willow, the incredible drops we've seen in the stocks of AT&T, WorldCom, Sprint and Sprint PCS in recent weeks may be just the tip of the iceberg. As we've been chronicling in recent weeks, the market has become extremely jittery about the debt that these companies and their upstart competitors have been taking on in recent years and the ripple effect it may have on the entire economy.

But the scope of all this rift has been difficult to quantify until now. Today Ravi Suria, the Lehman Brothers analyst who first exposed Amazon.com's debt problems this summer turned his eyes to the telecom sector and the numbers are alarming. Suria shows that, in recent years, blue chip telecom names such as AT&T and dozens of others have piled on more than $200 billion in new debt, about what the U.S. government was borrowing at the height of Uncle Sam's debt spree, and many times the amount of junk bond financing in the late 1980s.

So what does this all mean for investors? Lehman put AT&T under the microscope as an example: In the last two years this company has increased its debt load almost seven fold from just $9 billion in 1998 to $62 billion today. Now that was fine when money was cheap and its long distance business was generating tons of cash to cover the interest; but with its business in trouble, the company has now been put on credit watch and its bonds are plunging on Wall Street, leaving the company, says Lehman, between a rock and a hard place. Any moves to help enhance its stock price would alarm its bond holders. In other words, stock investors will be looking at the balance sheet.

And we saw that with Sprint PCS's 22 percent decline today; and its a situation that's being played out all across the telecom sector and may result in bankruptcies for the lesser-quality credits. Having enjoyed a bull market fueled by lots of leverage, the folks at Lehman Brothers are warning that the unwinding of this telecom borrowing binge will be painful and is far from over -- Willow.

BAY: So Terry, then, the upshot for investors: don't expect a return in the telecom sector -- come back to the telecom sector anytime soon?

KEENAN: Well, at least that's the conclusion that Lehman is coming to because these stocks are not only weighed down, but the businesses are down and they're highly leveraged. There's layers upon layers of leverage; and that was the big concern with PCS. I mean, it's still growing, next year at 50 percent, but with all the debt, investors want a lot more growth.

BAY: Terry Keenan at the New York Stock Exchange, thanks.

Coming up, an MNA roundup; a food deal spoiled -- what stopped Pepsi from buying Quaker Oats? Another deal done. We've got the details on Viacom's bid for Black Entertainment Television. That's next on MONEYLINE. Stay with us.

(COMMERCIAL BREAK)

BAY: Speculation over possible bidders surrounded Quaker Oats today after the company rejected a nearly $14 billion takeover bid from Pepsi. Pepsi was especially interested in Quaker's Gatorade brand, which commands 84 percent of the sports-drink market. Shares of Quaker Oats soared to a new high, up nearly 7 1/2, while Pepsi shed 1 1/4.

VARNEY: On deal that did get the nod today was Viacom's $3 billion bid for privately-held BET Holdings. The deal will give Viacom a stronghold on the fast-growing African American media market.

Greg Clarkin has the details.

(BEGIN VIDEOTAPE)

GREG CLARKIN, CNN CORRESPONDENT (voice-over): With shows such as "106 & Park," Black Entertainment Television is the only cable network targeting African Americans. But after 20 years as an independent, the network's parent company, BET Holdings, is joining the ranks of big-time broadcasters by selling itself to Viacom. The deal is valued at about $3 billion, $2.3 billion in Viacom stock and nearly $600 million of debt and other considerations.

ROBERT JOHNSON, CEO, BET HOLDINGS: We could have gone along, but I think, when you saw the AOL-Time Warner merger, you begin to see the true value of content and the value of brands. So we felt this was a high-water mark for our brand and a good chance to take advantage of it by, as I said, marrying up with another strong brand company.

CLARKIN: Besides the cable network, BET owns Web site BET.com and other media properties such as a cable channel devoted to jazz. Viacom's stable of media assets include CBS and MTV and more than 160 radio stations through its Infinity Broadcasting unit. While BET's properties are attractive -- the cable network reaches 62 million homes -- analysts say there was only so far they could grow as an independent.

CHRIS DIXON, MEDIA ANALYST, PAINEWEBBER: There's no question that the resources represented by Viacom, whether it's things like CBS Plus, which is a sales organization that is now selling advertising across platforms, whether it's to radio platforms, the cable television platforms, the CBS networks and station group, is exactly the kind of resources that BET requires to take the company to the next level.

CLARKIN (voice-over): The deal is a boon to founder Robert Johnson, who owns 63 percent of BET holdings. And there's another financial winner in all this as well. Cable pioneer John Malone was an early investor and through his Liberty Media holds a 35 percent stake in BET.

Greg Clarkin, CNN Financial News, New York.

(END VIDEOTAPE)

VARNEY: And we should tell you about Viacom stock, which today fell more than a dollar. It closed at $57 3/8 on news of that deal.

Now, hurting the overall stock market today, the idea that despite slower job growth last month, the Federal Reserve may not be inclined to cut interest rates any time soon, and here's why: The monthly jobs report showed that businesses added 137,000 jobs to the payrolls in October. That is fewer than expected. Now, that might encourage investors, worried about a tight labor market, but the unemployment rate held steady at 3.9%, and average hourly earnings rose slightly more than expected, 4/10 of a percent to $13.89, raising some fears about inflation.

But my next guest isn't worried inflation and he says the Fed will adopt a neutral stance in interest rates before the end of the year.

Allen Sinai, of Primark Decision Economics, welcome back to MONEYLINE.

ALLEN SINAI, PRIMARK DECISION ECONOMICS: Stuart, how are you?

VARNEY: I'm very well. Now, your scenario is that the Fed changes its stance very, very soon to neutral and then what? Next year, drops rates, do you think?

SINAI: Perhaps, it really depends on how we do on the labor market and how we do on oil and energy inflation. Those are their two main concerns on inflation. Right now, it looks like the economy is slowing significantly. And we will get, over time. softer inflation.

VARNEY: But if the price of oil goes to, say, $40 a barrel, and we have a blip up in inflation, the Fed cannot lower interest rates, can it?

SINAI: No, the Fed would have to wait to make sure that there would be no spillover of higher oil prices into the core inflation rate. So far, we haven't seen it. And the economy is slowing. And that's what was important about the weak jobs growth number today. Despite the unemployment rate, the economy is slowing significantly.

VARNEY: Is it slowing sufficiently significantly to have an impact on stock prices and bring in a bear market?

SINAI: No, I think we've been through the correction scare and we are over that now. We look for a significant year-end rally here and then the market around mid-January will look at the earnings prospect and decide whether we are going up sharply in a bull market or whether we are going to just have an ordinary year.

VARNEY: And what would be your guess about come mid-January?

SINAI: You know, I think it's going to be more of an ordinary year, nine, 10 percent total returns. Two thousand, though, was actually a very bad year for stocks. I think we are going to have a good five to eight percent rally between now and January but that still would leave us net for the year with a pretty puny year in the stock market.

VARNEY: OK, now, in the last, two or three years, it's been really boom time in the final quarter of the year as you head into the holiday season. Consumers have come out in droves and really spent some money.

Is it going to be any different this year?

SINAI: I think so. Retail sales in October were soft. You know, we have a lot of ingredients for slowdown: higher oil and energy costs. That's like an increased tax. And it's going to effect consumers at some point. We also have -- we've had a bad stock market and we are going to see no capital gains realizations next year so consumers will slow down. And the financial system is tightening up a little bit and jobs growth has slowed down. Businesses aren't hiring the way they were. So, I don't think we will see the boom fourth quarter the way we've seen it in previous years. And consumers are going to start to cut back.

VARNEY: Forgive me for asking the question. I know you're an economist and not a stock market analyst, but where would Allen Sinai think is a good place to put your money for the next six months in the market?

SINAI: Bonds, bonds. It might be a little early but I think next year is going to be a good year for the bond market and an ordinary nine or 10 percent total return for the stock market.

VARNEY: Bonds it is.

Alan Sinai, thanks very much for being with us.

SINAI: Thank you.

VARNEY: All right, Willow. BAY: Stuart, next on MONEYLINE, phoning home to Wall Street with some difficult news: the bottom line on Sprint. Yet another telecom in trouble.

(COMMERCIAL BREAK)

BAY: Now, "The Bottom Line," our regular Friday feature inside one company facing a critical challenge. Tonight, Sprint. Sprint shares actually rose today even as the phone company announced that earnings through 2001 will disappoint. But don't let that performance deceive. Sprint stock has fallen over the past 2 weeks along with rivals AT&T and WorldCom announcing gloomy warnings of their own. And Sprint shares have faced intense selling pressures since summer whether the megamerger with WorldCom fell apart over anti-trust objections.

Steve Young has "The Bottom Line" on a telecom at a crossroad.

(BEGIN VIDEOTAPE)

(BEGIN VIDEO CLIP, SPRINT ADVERTISEMENT)

ANNOUNCER: Remember when Sprint's fiber-optic network just meant a great phone call?

(END VIDEO CLIP)

STEVE YOUNG, CNN CORRESPONDENT (voice-over): Even if it's clear as a pin, the profitability of long distance phone service is plunging because of increasing competition and Sprint is tortured like the other telecom giants.

Today in New York, chairman and CEO William Esrey followed the pattern set by competitors. He warned analysts to lower their earnings expectations for this year. And he said the weakness will worsen in 2001.

REX MITCHELL, BB&T CAPITAL MARKETS: I don't think that they have yet reached the point that they have got to shut the doors and turn out the lights. I think they're still a viable company.

YOUNG: But the nation's No. 3 phone company may be less vulnerable than many people realize.

(BEGIN VIDEO CLIP, SPRINT ADVERTISEMENT)

ANNOUNCER: Yes, that was a pin.

(END VIDEO CLIP)

YOUNG: It's perceived as a long distance phone company but Sprint has more shelter from that stormy market than its major competitors. The biggest, AT&T, derives over half it's total revenue from long distance. The second biggest, WorldCom, has even more exposure. Almost two-thirds of its revenue comes from long distance. But Sprint, with about 10 percent of the overall U.S. market, depends on long distance for just 44 percent of its top line. Still, Sprint stock price has been squashed. Today's closing price of $23 7/8 is a long distance from its 52-week, $76 high.

Esrey told Wall Street Sprint is keeping the company together, no break-up like AT&T, no new tracking stocks like AT&T or WorldCom.

ROBERT GENSLER, T. ROWE PRICE: If they broke the Sprint PCS side away from the Sprint FON side, the long distance from the wireless, it would be easier to sell the company.

YOUNG: Sprint says it will play up data and Web hosting and other fast growing services. The Kansas City company is still struggling to regain its footing after betting its future on what would be a doomed take-over bid by WorldCom.

WILLIAM ESREY, CHAIRMAN & CEO, SPRINT: It's an incredible day. You can't help but be caught up by the excitement in this room and also amongst our management teams.

YOUNG: The Justice Department blocked WorldCom's acquisition of Sprint and Esrey has been faulted for not being ready with plan b.

MARC CROSSMAN, J.P. MORGAN: The minute the acquisition was stopped, I mean, it was obvious, investors' reaction, this is a company that can't achieve scale on its own by naturally by building up to it, and so investors fled from the stock. And I think investors reacted appropriately.

YOUNG: But Esrey today scoffed at questions about whether his company now has the size to succeed on its own.

ESREY: Well, you know, that's a fascinating question. People say you're not big enough. And then we look at our competitors are all splitting up and getting smaller. Now you can't have it both ways.

YOUNG: Analysts say Esrey needs to deal with another serious issue. Many of his senior executives left after the WorldCom deal went bust.

JEFFREY KAGAN, PRESIDENT, KAGAN TELECOM ASSOCIATION: They need to fill in the bench strength at the top. They need to fill in a lot of those key slots and they need to recapture that about lightning in a bottle that they've had and that is missing.

(END VIDEOTAPE)

YOUNG: One analyst says Sprint has now taken the telecom road less traveled these days, that's what's good for customers will be good for investors in the long run -- Willow.

BAY: Steve Young, we'll see. Thanks, Steve. When MONEYLINE returns an in-depth look at a dot.com disappointment. She's one of the most powerful women in business, but even Heidi Miller couldn't turn around Priceline. That story in just a moment. Stay with us.

(COMMERCIAL BREAK)

BAY: Tonight, another dot.com stock that has collapsed, Priceline, and today its stock lost even more. It lost 30 percent to end near a 52-week low. Last night, we told you about bombshell news from Priceline. Another profit warning, layoffs and the departure of its high-profile chief financial officer, Heidi Miller. News of her exit could not have come at a worse time for Priceline.

Bruce Francis now on what Miller left behind.

(BEGIN VIDEOTAPE)

BRUCE FRANCIS, CNN CORRESPONDENT (voice-over): Heidi Miller's financial acumen helped the Travelers, now a part of Citigroup, acquire Aetna Property and Casualty. Her solution was an innovative debt and equity package that saved Travelers credit rating. But the smarts that won her the CFO post at Citigroup couldn't save Priceline's dwindling stock price.

A self-described former Trekkie, Miller finally said, beam me up, Scotty, and left the name-your-own-price Web retailer. Miller was full of optimism when she joined in February, calling Priceline the perfect e-commerce business. But less than nine months later, Priceline CEO Daniel Schulman said that Miller resigned in order to pursue other opportunities and apply her talents in a more established business environment.

HOLLY BECKER, LEHMAN BROTHERS: Heidi Miller came to Priceline with a terrific track record and a wonderful reputation and I think we all had a lot more confidence in the Priceline model because she had signed onto it. So the fact that she's left so early is clearly a red flag to investors.

FRANCIS: Executive recruiter Jeffrey Christian fills the top seats at many high tech companies.

JEFFREY CHRISTIAN, CEO, CHRISTIAN & TIMBERS: She didn't take the time to really look at what was going on at Priceline at the time. And I don't think she made that mistake alone. A lot of people jumped into the Internet. They jumped into e-commerce companies way too early without doing their homework.

FRANCIS: If you invested $10,000 in Priceline stock when Miller joined in late February, you more than doubled your money by March 14. But if you still hold that original investment, it's worth just $909 today, and some analysts think it isn't worth even that.

TOM COURTNEY, BANC OF AMERICA SECURITIES: I still think the evaluation even at $4 1/2 today is rich relative to the underlying fundamentals, but they are focusing in on the core business and seems to me to be moving away from the businesses that are on the fringe.

(END VIDEOTAPE) FRANCIS: As to Heidi Miller, her Priceline options may be worthless now, but her career options are holing up well. Pulling out of Priceline will probably help, not hurt, her career. Recruiter Jeffrey Christian says that Miller's background as a high-powered Citigroup executive and a veteran of a troubled dot.com like Priceline will probably make and insure that she gets lots of offers -- Stuart.

VARNEY: All right, Bruce Francis reporting. Thanks, Bruce.

Still to come on MONEYLINE, Myron Kandel talking tonight about the election. Plus, "Ahead of the Curve" some of what you need to know tonight before the markets open again Monday. You're watching MONEYLINE.

(COMMERCIAL BREAK)

BAY: Here's what could make headlines on Wall Street next week. Watch reports on consumer credits and producer prices and earnings continue with reports from Cisco, Dell Computer, BP Amoco and several retailers including the Gap.

VARNEY: Now, the final word this week goes to Myron Kandel. Tonight he's talking about the election. Myron, why is it the incumbent is not out front in this election when we've got a booming economy?

MYRON KANDEL, CNNFN FINANCIAL EDITOR: Well, Stuart you know Bill Clinton was elected eight years ago on the slogan "It's the economy, stupid." This year, it seems to be, it's not the economy, stupid. Now, Republicans are saying it's character and personality. Democrats are saying too many people are taking this election for granted. Not the election, I'm sorry, this economy for granted, and of course there's the Nader factor. So, you know, that's all factored in but keep in mind it ain't over yet.

VARNEY: Should Mr. Gore have said vote for me to keep the economy going?

KANDEL: Probably.

VARNEY: OK, Myron Kandel, thanks very much.

All right, Willow.

BAY: Well, Stuart, that's MONEYLINE for this Friday. I'm Willow Bay in Los Angeles.

VARNEY: And I'm Stuart Varney. Good night from New York. Enjoy that weekend, please. "CROSSFIRE" is next. Here to Mary Matalin.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com

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