Charles Schwab & Co., Inc.
Email Alert

Morning Market View(TM) 
for Thursday, October 25, 2001
as of 9:30AM EDT
Information provided by Schwab Center for Investment Research


ECONOMIC DATA DAMPEN OUTLOOK AT OPEN

Equity index futures fell and bonds rose following this 
morning's release of a flurry of economic data. While most of 
the data was generally in line with expectations, durable goods 
orders dropped sharply, lending further support to the notion of 
a contraction in 3Q.

Against the backdrop of the tame inflation and steady jobless 
picture reflected in this morning's data, durable goods orders 
for the month of September plunged, owing to weakness in 
transportation orders, particularly aircraft. The 8.5% drop in 
durable good orders was much worse than forecast.

In equities news, Electronic Data Systems (EDS,62,f2) posted 3Q 
earnings, excluding items, of $0.69 per share, $0.01 ahead of 
the Street's mean estimate. The CFO said he expects the computer 
systems consultant to continue to grow earnings in the 
double-digit range, and the company remains comfortable with the 
Street's 4Q consensus earnings forecast of $0.78 per share.

Long-distance and data services company WorldCom Group 
(WCOM,12.45,f1) reported a 41% decline in 3Q profits to $0.16 
per share, matching the First Call consensus forecast. Revenues 
rose 12%, boosted by growth in the company's data and Internet 
services segments. The company's CEO said he expects WorldCom's 
growth segments to gain market share, despite the current 
economic malaise.

Dow Chemical Co. (DOW,35,f2), the largest U.S. chemical maker, 
reported a 3Q profit, excluding restructuring costs, of $0.16 
per share, in line with the Street's mean estimate. Dow said it 
sees 4Q profits of $0.10-$0.20 per share, compared to the 
Street's consensus of $0.17 per share.

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TREASURY AND ECONOMIC SUMMARY 

Bonds rose across the curve following the release of a slew of 
economic data this morning. Durable goods orders for September 
fell 8.5% according to the Commerce Department, much worse than 
the expected 1.3% decline per Dow Jones Newswires, suggestive of 
a potential 3Q economic contraction. Excluding transportation, 
orders fell 5.5% as aircraft orders plummeted 29%. Orders for 
communications equipment and electronic products fell, while 
semiconductor and defense capital goods orders rose.

Initial jobless claims rose by 8,000 to 504,000 for the week 
ended Oct. 20, according to the Labor Department. Analysts per 
Dow Jones Newswires were looking for an increase to 500,000. The 
four-week moving average of claims rose to 505,000, a 10-year 
high, and continuing claims for the week ended Oct. 13 increased 
to 3,654,000, an 18-year high.

The 3Q employment cost index rose 1.0%, slightly above the Dow 
Jones Newswires forecast of a 0.9% increase. Most of the 
increase was attributed to a 1.6% rise in benefits costs for the 
quarter, while wages and salaries rose 0.8% versus 2Q's 1.0% 
rise. The government said the data was not distorted by the 
Sept. 11 attacks.

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WORLD MARKETS 

European markets were under pressure following the European 
Central Bank's decision to leave the benchmark lending rate 
unchanged at 3.75%. Pharmaceutical, telecom and auto stocks 
contributed to the declines in European markets, with the 
Bloomberg European 500 Index down 1.86% as of 8:55 a.m. EDT. The 
euro fell against the U.S. dollar in the absence of a rate cut 
but recouped all of those losses following the bleak U.S. 
economic data.

Asian markets closed higher with Japan's Nikkei-225 Index up 
0.72%, paced by strength in banking and drug stocks. In equities 
news, Sony Corp. (SNE,41) reported a first-half operating loss 
in line with expectations due to weakness in its core 
electronics division. The dollar was down against the yen 
following this morning's dismal U.S. economic data, despite 
earlier comments by financial diplomat Haruhiko Kuroda, which 
intimated more FOREX intervention to weaken the Japanese 
currency as necessary.

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FUTURES WATCH 

In the December Globex futures contract as of 8:55 a.m. EDT, the 
S&P 500 Index was down 10 points (11 points below fair value), 
while the Nasdaq 100 index was down 28 points (35 points below 
fair value). The December DJIA futures contract was down 85 
points (99 points below fair value), and the December crude oil 
futures traded on the NYMEX were down $0.11 at $22.22/barrel.

William Johnson, Market Analyst

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