Charles Schwab & Co., Inc.

       Morning Market View(TM) for Thursday, October 18, 2001
                       as of 9:30AM EDT
 Information provided by Schwab Center for Investment Research 

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STOCKS DISMISS EARLY APPREHENSIONS

Equity index futures climbed out of their early morning doldrums 
to point to a mixed open for stocks amid a cloudy earnings 
picture and higher-than-expected jobless claims data as the 
markets attempt to shake off the ongoing bioterrorism threat.

Shares of Texas Instruments (TXN,30,f2) were lower in premarket 
activity after the wireless chip titan reported a 3Q pro forma 
loss of $0.03 per share, $0.01 above the First Call consensus as 
global demand for wireless and telecom equipment products 
weakened further. The company estimated a pro forma loss of 
$0.09 per share in 4Q and declined to forecast when it would be 
profitable, but it said it sees a bottom in chip sales in 4Q.

Shares of Siebel Systems (SEBL,17.38,f1&f4) were also lower in 
the premarket session after the software concern reported 3Q 
earnings of $0.07 per share, below the Street's $0.09 mean 
forecast, and the company's CEO said that the post-attack 
environment has been extremely difficult. However, he expects 
business conditions to ripen in the second half of next year and 
said he was comfortable with analysts' 4Q estimates of 
$0.09-$0.14 per share.

Shares of Advanced Micro Devices (AMD,9.66,f2) reported a 3Q 
loss, excluding charges of $0.28 per share, in line with the 
Street's estimate owing to a slower PC sales and price 
competition form rival Intel Corp. (INTC,25,f1&f4).

Pharmaceutical giant Eli Lilly (LLY,75,f2) said 3Q earnings, 
excluding items, fell to $0.66 per share, matching the First 
Call consensus estimate, on a 43% decline in sales of its 
flagship antidepressant drug, Prozac, upon the expiration of its 
patent in August. Lilly warned that it expects growth to slow as 
a result of the faster-than-expected erosion of Prozac sales, 
with single-digit sales growth for fiscal year 2001 and fiscal 
year 2002.

Security systems and electronic conglomerate Tyco International 
(TYC,48,f2) said fiscal 4Q profits, excluding charges and items, 
were $0.86 per share, ahead of the $0.84 per share First Call 
consensus estimate. The company said sales in its electronics 
division waned amid a slowdown in telecommunications, but were 
offset by its fire and security systems and health care business 
units. Tyco reaffirmed its previous 1Q guidance of $0.72 per 
share.

Leading soft drink maker Coca-Cola (KO,44,f2) reported 3Q 
operating earnings of $0.43 per share, ahead of the $0.40 per 
share First Call mean estimate. The Dow component saw its 
benchmark unit case volumes grow in excess of 4% for the 
quarter.

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TREASURY AND ECONOMIC SUMMARY 

Bonds were mixed to slightly higher after this morning's initial 
jobless claims release showed a 6,000 rise to 490,000 for the 
week ended Oct. 13 after an upward revision of 16,000 in the 
prior week, according to the Labor Department. Analysts per Dow 
Jones Newswires had forecast a rise to 472,000. The four-week 
moving average of claims rose to 491,250 and continuing claims 
through the week ended Oct. 6 rose to 3,649,000, the highest 
level in more than 18 years.

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WORLD MARKETS 

Computer-related and telecommunications stocks led most European 
markets lower following last night's bleak earnings news in the 
U.S. The Bloomberg European 500 Index was down 1.2% as of 8:53 
a.m. EDT. SAP AG (SAP, 27) stoked the fire when the software 
giant reported a 3Q loss at the lower range of estimates and cut 
its fiscal year 2001 revenue estimates. The euro was lower 
against the dollar after Germany's finance minister slashed 
growth-rate estimates for the country for both 2001 and 2002. 
Moreover, European Central Bank officials said that they remain 
focused on containing inflation, raising speculation that the 
European Central Bank won't reduce interest rates soon enough.

Asian stocks were also under pressure, led by technology stocks 
on the heels of last night's gloomy earnings reports from Texas 
Instruments and Siebel Systems, driving names like NEC Corp. 
(NEC,9.60) and Hitachi Limited (HIT,75) lower. Japan's 
Nikkei-225 Index closed down 2.6%. The yen advanced against the 
dollar, even as Japan's finance minister said that the country 
must further weaken the Japanese currency and that an economic 
contraction was unavoidable.

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FUTURES WATCH 

In the December Globex futures contract as of 8:53 a.m. EDT, the 
S&P 500 Index was up 4 points (1 point above fair value), while 
the Nasdaq 100 Index was up 15 points (3 points above fair 
value). The December DJIA futures contract was up 40 points (6 
points below fair value), and the November crude oil futures 
traded on the NYMEX were down $0.39 at $21.42/barrel.

William Johnson, Market Analyst

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