Charles Schwab & Co., Inc.

       Morning Market View(TM) for Friday, October 19, 2001
                       as of 9:30AM EDT
 Information provided by Schwab Center for Investment Research 

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SOFT OPEN FOR MARKETS AMID CAUTIOUS GUIDANCE

Markets are poised to open lower, despite largely positive 
earnings results, as many corporations offered cautious guidance 
going into the holiday season. This morning's consumer price 
index data were generally in line with expectations.

In equities news, software giant Microsoft (MSFT,57,f1) reported 
a fiscal 1Q profit, excluding charges of $0.43 per share, 
beating the First Call consensus of $0.39 per share as sales 
rose 6% to $6.13 billion. Including the charge for investment 
writedowns, net income actually fell to $0.23 per share. Going 
forward, Microsoft said it sees profits for the current quarter 
at $0.49-$0.50 per share, a penny or two shy of the First Call 
consensus estimate of $0.51 per share, on sales of $7.1-$7.3 
billion. Despite upcoming shipments of its Windows XP operating 
system software and Xbox video game units, the company forecast 
sluggish PC sales in 2Q as a result of September's terrorist 
attacks.

Network computer maker Sun Microsystems Inc. (SUNW,8.88,f1) said 
it incurred a fiscal 1Q loss of $0.05 per share, excluding 
items, $0.01 better than the First Call consensus estimate. The 
company said sales were sluggish already in the midst of a 
slowing economy, but last month's terrorist attacks exacerbated 
the slowdown. Sun gave no outlook for the current quarter, 
saying it will discuss expectations at its regular mid-quarter 
conference call during the first week of December.

Fiber optic cable giant Corning (GLW,8.02,f2) reported 3Q 
profits, excluding charges, of $0.09 per share, triple the $0.03 
per share First Call consensus estimate, but sales declined 21%. 
Corning said demand for its telecommunications products waned 
and that it will likely miss the 4Q First Call consensus 
estimate of $0.06 per share, saying it now expects to incur a 
loss of between $0.20-$0.25 per share.

Internet auction vendor eBay Inc. (EBAY,59,f1&f4) posted 3Q 
earnings, excluding costs, of $0.12 per share, $0.01 ahead of 
the Street's mean forecast as revenues rose 71%. The company 
raised its 4Q revenue estimate by roughly $5 million and 
increased its earnings forecast by $0.02 per share, but eBay 
expressed concern about the potentially sluggish upcoming 
holiday season.

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TREASURY AND ECONOMIC SUMMARY 

Bonds were higher but had a fairly subdued reaction to the 
release of this morning's September Consumer Price Index, which 
rose 0.4%, according to the Labor Department. The core index, 
which excludes food and energy, rose 0.2%. Analysts per Dow 
Jones Newswires were expecting 0.3% and 0.2% increases 
respectively. The rise in the overall CPI was mainly attributed 
to a 2.6% rise in energy costs as gasoline prices spiked higher 
during the month. However, energy prices have since declined 
substantially and the relatively benign inflation backdrop 
remains conducive to further monetary easing.

In other economic news, the August U.S. trade deficit shrank 
more than expected, coming in at $27.11 billion, as exports grew 
1%, while imports declined 1.1% as business and consumer 
spending waned, according to the Commerce Department. Analysts 
per Dow Jones Newswires were expecting the trade gap to rise to 
$29 billion.

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WORLD MARKETS 

European markets retreated following the release of this 
morning's German IFO business sentiment index for September, 
which dropped to its lowest level in almost eight years. The IFO 
index fell to 85 from August's 89.5, below economist's 
expectations, and the future prospects component fell to 90.6 
from August's 95.9. The dismal report pressured the euro, which 
dropped against the dollar, and stoked speculation of further 
interest rate cuts by the European Central Bank, amid a 
deteriorating economic landscape. An upbeat earnings report from 
Nokia Corp. (NOK,18.78,f2) offered little in the way of a 
reprieve, even though the company posted a smaller-than-expected 
3Q loss and forecast a recovery for wireless handset sales in 
4Q. The Bloomberg European 500 Index was down 1.58% as of 8:54 
a.m. EDT.

Asian markets were mixed, with Japan's Nikkei-225 Index closing 
up 0.6% on strength in technology and pharmaceutical stocks. The 
yen was virtually flat against the dollar, even as the Japanese 
government put together a supplementary budget of 3 trillion yen 
to address the waning economy and lingering unemployment. Crude 
oil advanced modestly off its fresh two-year lows reached 
yesterday, but OPEC substantially reduced its estimate of global 
demand for crude for 4Q and fiscal year 2001.

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FUTURES WATCH 

In the December Globex futures contract as of 8:54 a.m. EDT, the 
S&P 500 Index was down 5 points (2 points below fair value), 
while the Nasdaq 100 Index was down 14.5 points (6 points below 
fair value). The December DJIA futures contract was down 33 
points (15 points below fair value), and the November crude oil 
futures traded on the NYMEX were down $0.20 at $21.51/barrel.

William Johnson, Market Analyst

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