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Stock Markets Plunge; Senate Close to FAA Deal?; Severe Famine Continues in Somalia; Congress May Have Deal on FAA Funding; Stock Market Plummets
Aired August 04, 2011 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BROOKE BALDWIN, CNN ANCHOR: So, you have been listening to a guy who has had a his job as defense secretary for all of a month. This is actually the first time we have seen him as part of a news conference, Secretary of Defense Leon Panetta, also sitting alongside Joint Chiefs Chairman Mike Mullen, and they have been talking about cuts and essentially what's handed to them because of this debt ceiling deal that was reached earlier this week.
Initially they know they have to cut the $350 billion which more or less they say they are OK with and won't necessarily sacrifice our national security, but where the big question mark comes is if that committee can not decide on how they will make those additional cuts to equal around about $1.2 trillion, they will have to cut hundreds of billions, potentially $500 billion, $600 billion, $700 billion just to defense.
And to quote, I want to get this precise for you, the defense secretary says that those cuts would be completely unacceptable.
We're all over this story of course with our correspondent at the Pentagon, Barbara Starr and also retired General Honore coming up here in just a minute.
But let's begin this hour staying with the money theme, I suppose. We're watching this very closely. It has not been a day for investors with weak stomachs. Stock markets all around the world have been racking up some huge, huge losses, and U.S. markets have lost their gains for the year.
One Wall Streeter explained today's plunge in this country as total fear, his quote, total fear, gripping the markets right now. Take a look at just how brutal it is. Let's take a big shot of the board. Let me sneak a look down, 370 points, plunging here, as we are an hour away from the closing bell, like I said, not a day for anyone with a weak stomach.
Let's bring in Alison Kosik. She's at the New York Stock Exchange. She's actually on the phone. And also CNN's senior business correspondent, Ali Velshi, for me in New York.
Ali, stand by.
I want to begin on the floor of the New York Stock Exchange with Alison.
And, Alison, talk to me about some of the numbers we're seeing. Put it in perspective for me. And how are traders explaining this late-day sell-off?
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Yes, you know, you talk about the traders and you walk around the exchange here, Brooke, and I will tell you what, it's one of those somber days. They are usually a happy bunch but I'm seeing a lot of long faces here at the New York Stock Exchange.
I think what you're seeing is investors have had a diversion for a few months with the whole debt ceiling debacle and dilemma. And now that that dust has kind of settled, you're seeing investors really taking a broader look at the economy here in the U.S. and just globally, and they don't like what they see, and that's have why we're seeing this massive sell-off, as you see the Dow down 361 points.
It's actually come back a bit. We saw it as far down as 411 points, but it has been really testing those correction levels. The S&P 500, that's what our 401(k)s mirror, that's already in correction territory. We're seeing investors pulling out of stocks, and they are looking for somewhere safe to put their money.
What's interesting is a lot of these investors are looking to not even get into gold or commodities. They are keeping -- they want to keep their money in cash because cash is king because there's such uncertainty in the market right now. There are a lot of worries about the U.S. economy and globally about what's going on in Europe -- Brooke.
BALDWIN: I want to touch on some that with Ali Velshi.
Ali, I know you and I have been e-mailing back and forth, so we're looking at some of these numbers and what really jumped out at me on your e-mail is you say the late day sell-off is alarming. You have been looking at all of this. Why? Why is this happening?
ALI VELSHI, CNN CHIEF BUSINESS CORRESPONDENT: Well, I will tell you, first of all, Brooke, boy, it takes a lot for me to get you and I to be on TV at the same time, given our hours.
(CROSSTALK)
BALDWIN: Nice to see you, sir.
VELSHI: I like to watch this in the last hour that we're in now because what we want to see is whether it accelerates or whether buyers start to get in and say this is overdone.
There's no particular reason why this should be happening, but that doesn't mean there isn't a reason why people are selling stocks. A couple of things are going on. In Japan and in Italy, the Central Bank in Europe and the Central Bank in Japan both did things to intervene to prop up their currencies today. That's supposed to calm everybody down and say, hey, the big guns are here. It had the opposite effect of causing people to get panicky and say, well, you know what, there isn't enough money for these central banks to come in and save Italy and Spain and countries like that. So they got nervous.
And as Alison described very, very well, basically you're just getting people taking their money out and saying, I want to wait and see where it should go. It's coming out of gold, it's coming out of oil, it's coming out of out of stocks.
That is not to say that it's not going to be deployed somewhere. But normally you see an automatic shifting between assets, right, Brooke? You see it coming out of here and something else gaining. Today you're not seeing that. If you look at the Nasdaq 100, almost every stock on the Nasdaq 100 is down, except Costco, which makes sense, because, in tough times, people go to places like Costco.
Almost every stock -- in fact, I think every stock on the Dow is down, so you're not seeing movement between stocks, you're not seeing movements between asset classes. You're evening people cash out and hold on to their money.
I suspect at some point you will see them put it back in. There are a lot of people I have been talking to today to say it's the steal of the century because companies are reporting strong profits. There's no reason to sell those stocks. This is kind of a panicky momentum kind of thing. We will have to see what happens in the next hour and we will talk again at the top of 4:00 to find out.
BALDWIN: Yes, we will talk once again. So ultimately though that would be my question, because I know a lot of people were tweeting you and I both because they have questions and they want to know about, what about me? What do I do with all the money I have in stocks? Do I pull out and do I panic with the rest of them?
VELSHI: Right.
BALDWIN: Or do I just hang tight? What's your advice?
VELSHI: Our friend Leigh Gallagher from "Fortune" said it beautifully a couple of hours ago, said if you make a decision to sell your long-term investments on a day like today, you had better be right twice. You had better right that you have sold at the -- that it's going to go lower than this because otherwise you will have sold at a loss, and you better be right about when to get back in, which typically the average investor doesn't do. They wait for a big run-up and then they say, ah, things are safe. Let me get in.
You know, this is not -- this is not a market for amateurs right now. I don't think that there's a brilliant play other than the fact that there's really good investments out there today. This looks like a short-term play from nervous investors around the world.
BALDWIN: Ali, I was also reading some articles from our good folks at Money.com and they're writing a lot about the VIX, the so- called fear index.
(CROSSTALK)
VELSHI: That's the volatility index.
BALDWIN: Apparently -- and I want you to explain this -- apparently 30 is considered more or less the tipping point of fear.
(CROSSTALK)
VELSHI: And we're in the 20s right now.
BALDWIN: And today is 28.42.
VELSHI: Yes.
BALDWIN: So what's the read here?
VELSHI: Well, remember that volatility is the thing that we all aim to not have in our portfolios. Unless you're a day trader, you love volatility. If you're a day trader, this is a fantastic market. It's going up and down, but if you're a regular person you would like to get a certain amount of return on your money relatively smoothly, so volatility is good for some people. It's bad for others.
Again, if you're a long-term investor, if your investment horizon is five years or more, don't pay too much attention to this, but this is a -- it's a good sign of how nervous the market is, how worried they are and how much money is moving behind between asset classes. I just want to clarify that term.
Normally money moves -- most people sell this stock by that stock, sell this industry by that industry. This is asset classes. Bonds is an asset class and cash is an asset clash. Precious metals are an asset class, commodities.
It's very -- it's atypical for money to be coming out of everything at once, and that's what you're seeing today. But it's atypical which means it's probably not sustainable.
BALDWIN: Ali Velshi, stand by, because I want to go back to Alison Kosik.
Alison, I know you're in the thick of things and unfortunately we can't see you, so because we can't see you, I want you to do me a favor and just paint a picture. You're on the floor of the exchange. Are you seeing a mad dash among investors -- traders, rather? What's the mood been like? Has it been sort of a roller-coaster day?
KOSIK: You know what, I did see a lot of long faces.
The trading here that is done here at the New York Stock Exchange is electronic so you're not seeing any mad rush with paper going on, but you do see a lot of long faces. You know, it's clear what's going on here today, and it looks like there was a lot of money lost today.
BALDWIN: Ali Velshi, final thoughts before you and I chat during the closing bell.
VELSHI: Well, my thoughts are going to be watching this and seeing -- I'm looking for two things. I'm looking for how much volume and velocity there is in the next hour, and I'm looking to see whether that trend starts to weaken and people start to get in. If that happens, that will be a better story in an hour. If it doesn't happen and this market closes, then I start watching what happens at 8:00, when Asian markets open to see if there's a follow-through, so it will be a busy 40 minutes.
BALDWIN: Ali Velshi, AKA the man who never sleeps, I thank you so much. Alison Kosik, thank you as well. We will talk to you all through these two hours, as of course this is a developing story. We're all watching the numbers.
Meanwhile, let me get you caught up on this story out of Virginia Tech today, if you have been following this here. On the Virginia Tech campus they have now officially lifted that alert. They lifted it just a couple of minutes ago. We're also expecting a news conference from there, from the campus in Blacksburg, Virginia, right around 3:15 Eastern time, so just about five minutes from now.
Police had urged everyone to stay indoors for the majority of the day after a group of kids at a camp on campus reported seeing a man with what might have been a gun. Take a look at this picture. This is a composite sketch the university has recently released based upon the kids' description. The report of a man possibly, possibly carrying a gun immediately put the campus on edge.
We all remember, I was there covering it back in April of 2007, a gunman killed 32 people on the Virginia Tech campus -- his name, Seung-Hui Cho -- before turning the gun on himself. The tragedy prompted an overhaul of the Virginia Tech campus alert system.
Again, quick reminder, just about five minutes from now, we're expecting a live news conference from Virginia Tech. Of course, we will bring that to you live.
Also, we will get right back to this story. In his very first news conference as secretary of defense, Leon Panetta just warned the room that defense cuts that would kick in under the debt ceiling triggers would be completely unacceptable. We're going to talk about those cuts here in just a moment. Stay with us.
(COMMERCIAL BREAK)
BALDWIN: Want to bring you up to speed now on this vexing political standoff that has sidelined thousands of workers and is costing the federal government some $30 million a day in uncollected taxes.
If you may have guessed already, I'm talking about the FAA employees and the thousands of private workers idled now by the failure of Congress to fund the Federal Aviation Administration, the FAA. Today the White House is saying that President Obama has phoned House Speaker John Boehner to try to get this thing resolved, even as Congress is now officially on vacation, their delayed summer vacation, I should note.
And now we're hearing there may be some movement.
Joining me now from Washington, Gloria Borger with some news.
Gloria, what's the news you're hearing?
GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, I just got off the phone with a Senate Democratic leadership aide who sounded quite optimistic, and in fact he said that that they are very optimistic that a deal can be reached to put people on the job by the end of the week. There's a pro forma session of the Senate tomorrow. They hope to get it done then.
I am told there is not an official deal at this particular moment, but it really seems to me, Brooke, like they are making an awful lot of progress in being able to get this done, at least in the short term, so that people don't lose their jobs and then perhaps in the fall negotiating out their real differences, but nobody wants people to be furloughed while Congress is on its break.
BALDWIN: Of course. Here's my question. This is a procedural question.
BORGER: So they are optimistic.
BALDWIN: Procedural, though. You mentioned a pro forma session. This isn't the kind of thing where every single member of the House and every single member of the Senate has to come back to Washington to vote. Explain the mechanics of how this would work.
BORGER: Exactly. Well, exactly. They are hoping that essentially you can maybe do something in this session by unanimous consent or whatever the procedural hurdles will be.
They certainly seem to believe that they can overcome them. I mean, what has been eluding them is any kind of larger agreement on what to do about the issues of collective bargaining or these rural airports. But I think at this particular moment, what they would like to do is find a way to bypass those sticky issues in the short term, let get people back to work and then deal with the sticky stuff when they get back.
BALDWIN: OK.
(CROSSTALK)
BALDWIN: We don't know what will happen.
BORGER: We don't know when a deal would be, but would the president call John Boehner?
(CROSSTALK)
BALDWIN: That's a big deal. That's a big deal. That's some news. BORGER: And maybe that helps turn the tide.
BALDWIN: Yes. I know the president earlier this week said, look, I would like to get this done by the end of the week.
We will be watching for it. Gloria Borger breaking the news for us here on the show, Gloria, thank you so much.
Let's stay in Washington. Let me take tout Pentagon now because new Defense Secretary Leon Panetta, alongside Joint Chiefs Chairman Mike Mullen, Admiral Mike Mullen, they are briefing reporters, still briefing reporters, in fact.
And, folks, Leon Panetta is pushing back hard against potentially massive cuts to the military. We talked about this just yesterday. The Pentagon could face a half-trillion dollars in additional budget cuts should Congress and that committee -- remember, it's a 12-seated super committee -- not agree to this deficit plan. Those cuts would take place automatically.
Let's take a listen to Defense Secretary Panetta. This is moments ago.
(BEGIN VIDEO CLIP)
LEON PANETTA, U.S. SECRETARY OF DEFENSE: But if it happened -- and God willing that would be not the case -- but if it did happen, it would result in a further round of very dangerous cuts across the board, defense cuts that I believe would do real damage to our security, our troops and their families and our military's ability to protect the nation.
It is an outcome that would be completely unacceptable to me as secretary of defense, to the president, and I believe to our nation's leaders.
(END VIDEO CLIP)
BALDWIN: Once again, Defense Secretary Leon Panetta is concerned about the potential of automatic spending cuts that could total more than $500 billion over the course of 10 years. We have heard the cuts could actually be in the ballpark of $750 billion.
And I want to quote. This is from a letter that Secretary Panetta sent out to the military. This was just yesterday. He says he considers those automatic cuts to be -- quote, unquote -- "unacceptable, unacceptable," says Panetta, "to me as secretary of defense."
Joining me now from Baton Rouge, Louisiana, CNN contributor Lieutenant Governor Russel Honore, General Honore with U.S. Army, retired, of course.
General Honore, you have heard from Secretary Panetta. Are his concerns justified?
LIEUTENANT GENERAL RUSSEL HONORE (RET.), CNN CONTRIBUTOR: We need to be concerned, Brooke, because we have been there, done that.
We went into a post-9/11 conflict as a hollow Army. Our concern in the future is to go into the future war being an unready Army based on this prescription of defense cuts. We have got issues with equipment modernization. We are facing the potential troop cuts, meaning troops coming back from war and being released from service.
And the bottom line, the covenant with the American people is a review in the Department of Defense looking at retention and troop compensation for retirees. Those four issues will shape the future of our Army, whether we will be a hollow Army in the future or an unready Army, because the last time we played this song was the post-Cold War, post-Desert Storm, where we cut the Army to a point where we had to hire contractors to bring our fuel to the field when we went into Baghdad.
BALDWIN: I know people are fearful about the future. But let's look to the past, because I don't think a lot of folks actually realize that Panetta's predecessor, Robert Gates, he made some cuts and the debt reduction agreement, this debt ceiling bill that the president signed, it already cuts $350 billion and that's just off the top, though.
So where will those cuts come from, do you think?
HONORE: They will come from deferring operation and maintenance, Brooke.
We will take a tank from running it 2,000 miles -- or 2,000 hours and we will say stretch it. We will stretch the -- we will lower the readiness ratings of the units. That's what we did in the last drawdown. We reduced our readiness. We reduced the personnel and manpower in the units and we cut strength from our Army and our logistics capacity to support our Army on the battlefield.
We have played this song before, and it will get ugly. When you hear the chairman of the Joint Chiefs of Staff said the future of the military is to mitigate threats, as oppose to fighting war, they are being driven by defense cuts, not by future threats.
BALDWIN: It seems that when you listen to them, they are more fearful for those potential additional cuts if those trigger mechanisms are hit. And that's not necessarily the initial $350 billion, but from what I'm hearing from you, the initial $350 billion would put us in a bad spot.
HONORE: Absolutely. We need new fuelers to refuel our fighter aircraft. We need new ground combat equipment and we need new and modern ships, and we need to maintain the supports.
And don't forget, Brooke, a lot of the soldiers we got coming, the sailors, airmen, and Marines coming back from the war have medical issues.
BALDWIN: Right. HONORE: They will require long-term medical issues. The last time we drew down the force, we got rid of troops who had profiles, meaning they were not fully mission-ready. We cannot afford to do this, this time. Many of our troops are going to have to require to stay on active duty so that they can get the proper medical care before they are handed off (INAUDIBLE)
BALDWIN: I know Panetta also used the example of the post- Vietnam era, when the Pentagon was forced to absorb across-the-board cuts. He said it left the military undersized. I suppose, sir, you remember those days as well.
HONORE: Absolutely. Brooke, in the late 1980, we were driving golf carts around Fort Riley and Fort Hood, Texas, acting like we were driving tanks. We cannot go back to that. These young warriors we have got today who have been given every resource they need to fight a war with will not accept that. And that young leadership will walk, just like they did in the late 1980s.
(CROSSTALK)
BALDWIN: All right, General Honore, forgive me for interrupting. I appreciate you calling up.
I need to go to straight, though, to Virginia Tech. We have been talking about how they have lifted this ban because of fears of a gunman on campus. Let's listen.
(BEGIN LIVE COVERAGE)
LARRY HINCKER, VIRGINIA TECH UNIVERSITY: You ready to go?
OK.
My name is Larry Hincker. I'm associate vice president for university relations at Virginia Tech. In just a second, the chief is going to deliver a statement. I will also have a copy of that delivered here in just a few minutes in hard copy for you all. The statement will also be posted online.
After the chief is through, we're here to take comments for you as long as you would like.
WENDELL FLINCHUM, VIRGINIA TECH CAMPUS POLICE: Thank you, Larry.
Good afternoon. I'm Chief Wendell Flinchum with Virginia Tech Police department. As you know, this morning, we received a report from three young people approximately about 14 years of age who reported seeing a person near Dietrick dining hall with a possible handgun.
They gave us a good description. Based on this information and lacking any information to disprove that, we felt that it was the best course of action to issue the campus alert, which is what we did.
They described this person as a white male, about six feet tall, light brown hair. They said the weapon was possibly covered by a cloth or some type of covering. He was walking fast towards the volleyball courts in the area wearing a blue and striped shirt, gray shorts, brown sandals, no facial hair or glasses.
Officers responded to the area and found no one matching that description. We have not encountered anyone else matching that description or found that person. We have not received any other sightings of this person or any other information concerning this person.
We were assisted by numerous law enforcement agencies. We will have a full listing for you, more than I can name at this point. We kept the campus on alert throughout the afternoon as we continued to search the campus, develop leads, try to find out more information. And we have interviewed several persons in regards to this. However, again, we have not developed any information about who the identity of this person may be.
We will continue to have a large police presence on campus this evening. We will maintain an active presence as we always do on campus, and this will be done through patrols of marked and unmarked vehicles. We will also continue walking through the buildings this evening and looking around the campus.
As we noted earlier, the three people who reported this were attending a summer camp here at conference. They were from a group called Higher Achievement from the District of Columbia. And they arrived on campus Tuesday and they are leaving today.
So -- and I will be happy to entertain any questions you may have.
QUESTION: I'm just curious. These teenagers, you might hear sometimes that teenagers might I would say have an imagination. But how do we -- is there a way that you guys deemed it credible, the information they gave you?
FLINCHUM: Yes, I wasn't insinuating they weren't credible. The officers interviewed them. The information they gave was very detailed, concerning the description and what they saw. The officers believed them. And so we deemed it credible at that point.
QUESTION: (OFF-MIKE) about what's going on as far as what you guys (OFF-MIKE)
HINCKER: We have been posting blast e-mails to the university community. It's going on the university's Twitter account, went on the Facebook account, went on our home page. We have had a live broadcast from here. Based on what I have seen on the media, I don't think there's anybody in the nation that didn't know about this.
QUESTION: Did you search the whole campus?
(END LIVE COVERAGE)
BALDWIN: That was initially Virginia Tech Police Chief Wendell Flinchum, who was actually chief back in 2007. Of course, you remember what happened back on April 16, frightening, frightening when that shooter and student Seung-Hui Cho took his own life, not before killing 32 others.
Essentially, the news coming out of that is that they have lifted that alert, so students and others in and around the Virginia Tech campus there in Blacksburg can get out and about. There were fears that there was this alleged gunman around. They have yet to locate this individual. Sounds to me like they are still searching but still allowing now students to get out and about. We're going to follow that and if anything changes we will certainly pass that along.
Also there's still much more to come. In a couple of minutes, we will update you on the efforts to address the famine in Somalia with a live report from the capital of Mogadishu.
And we will stay on the markets. Keep a close eye with me. Take a look now, down 407, 407, massive plunge in late-day sell-offs. And it's 3:25, so that final bell in just about 35 minutes from now. We are back. You're watching CNN NEWSROOM.
(COMMERCIAL BREAK)
BALDWIN: Quickly here, alarming numbers on the Dow, 409 points down now. Keep a close eye. Of course, we will keep the numbers on part of the screen. You can also take a look at the numbers this late in the day. Go to CNNMoney.com. We're all over that story, as that is certainly evolving.
Also the pictures are heartbreaking. The situation is dire. The entire Horn of Africa covering more than three-quarters of a million square miles is in the grips of a horrific drought. It is so bad in Somalia that the United Nations says more than a million children need help immediately to save their lives, but famine is spreading in Somalia, and rebels affiliated with al Qaeda are stealing food from these people, these children who need it the most.
CNN's Nima Elbagir is in Somalia's capital of Mogadishu. Take a look at her piece and we will talk on the other side.
(BEGIN VIDEOTAPE)
NIMA ELBAGIR, CNN INTERNATIONAL CORRESPONDENT (voice-over): The humanitarian crisis in Somali is deepening. And aid agencies are trying to use every means necessary in their fight against hunger and starvation. The World Food Program, through its local partners, is supporting so-called wet feeding programs where food is precooked before distribution.
(on camera): Wet feeding only happens in the direst of humanitarian situations. The last time aid agencies rolled out a wet feeding campaign was in Haiti. For those people that you see queuing here, this is the only guaranteed meal that they have.
(voice-over): And wet feeding is especially necessary in Somali. Increasingly here, the hungry and vulnerable are being targeted for the little aid they are receiving.
CAPT. JACKIE AMONO, A.U. CIVILIAN LIAISON (through translator): It was their suggestion to move my (INAUDIBLE) that their food should be cooked, and everybody benefits. It's better that way, other than they lead us taking away their food.
ELBAGIR: But it's not just corruption that worries them. One woman who was too scared to speak on camera said her son was killed by members of the al Qaeda-affiliated Al Shabaab group for accepting Western aid. For these desperate communities it's a seeming endless struggle. They must protect even what little they have.
(END VIDEOTAPE)
BALDWIN: Let's go to Nima live for me in Mogadishu. Nima, honestly, I don't think desperate covers it. It's beyond a desperate situation where you are. How is the world stepping up and helping?
ELBAGIR: Well, Brooke, it's really a vortex of horror. These people are surrounded from all sides. Even through who manage to flee the areas where the militant groups are operating who are banning aid groups from coming in and are now being failed after they reach the capital. The United Nations has said that Mogadishu, the capital itself, where aid groups can operate, Brooke, is now a famine zone.
BALDWIN: I know you were --
ELBAGIR: So the issue really is now about the issue in response to the international community as it is from the pressures these groups are feeling from the militant groups. The African Union was meant to have a pledging conference at the end of the week, actually. That's now been pushed back to the end of the month. They are refusing to say the reasons for this, but our understanding from speaking to some contacts is the worry was not enough countries were willing or able at this point to pledge money.
And it's not just the African nations that aren't stepping up. The U.N. says that they need $1 billion to meet the needs here. They have just a little hover $40 percent of that at the moment, Brooke.
BALDWIN: We're seeing also just heartbreaking pictures coming out of Somalia, parents carrying their emaciated children. And I heard a staggering number today. That number was 29,000 children have died in Somalia in the last month alone. Nima, how much worse could this get?
ELBAGIR: Well, unless that aid comes in quicker, if we're still dealing with the aids distribution system as it is at the moment, for the U.N. -- we had the U.N.'s undersecretary general on CNN International a little earlier, and she said that there may be up to 600,000 children that could die if this situation isn't resolved, if they don't find some way to get that aid in a better way to these people who need it so badly, Brooke.
BALDWIN: I know part of the issue with the Islamic militang group Al Shabaab, affiliated with Al Qaeda. They are there. There are fears that if and when this aid and this food drops in that it fall in their hands. Have you seen that happening? And what's the impact of the Ramadan offensive?
ELBAGIR: Well, this was one of the reasons that the U.S. treasury actually, after putting sanctions on Al Shabaab, it became very difficult for aid groups to operate in their areas because they were worried that the U.S. treasury might sanction them for allowing this aid to falling into the hands of Al Shabaab. And also Al Shabaab often demands tax, if you can imagine that. They're trying to tax the aid that's reaching these people and tax the aid organizations that are trying to help. The U.S. has not suspended the sanctions, but the worry that that's created hasn't enabled work groups to work effectively in Al Shabaab area.
The Ramadan offensive also is having a huge impact, again creating a lot of concern that it's going to affect those aid corridors. And a lot of people are saying why isn't coming in quickly, because people are worried that will spend all the money, fly the aid all the way here, and it's not going to be affected.
But that really not what we're seeing, Brooke. Here in the capital when the aid does reach, when people put those resources in, aid is reaching vulnerable people. So really now it's about the international community doing its part. Brooke?
BALDWIN: Nima, we appreciate you just being there and sharing these stories with our audience. Please continue to do though. Nima, thank you very much.
And for those of you watching thinking how can I help, you can. A list of aid groups from our website from the great folks at "Impact your World." Just go to CNN.com/impact.
And as we go to break, let's pull up the big board. Once again take a look at this continuing to take this massive plunge, down 438 points at this late hour in the trading day. Keep in mind that closing bell in half an hour. We're hearing words like "alarming," "panic," "devastating." We're all over this story. You can always check the number at CNNMoney.com. We're back in just a moment.
(COMMERCIAL BREAK)
BALDWIN: Welcome back to CNN NEWSROOM. Two vying breaking news stories. Left-hand side of the screen, the Capitol dome. Members of Congress, they are out on vacation here for four, five weeks. We are getting some breaking news with regard to that FAA impasse. We heard from Gloria Borger just a minute ago. We'll get to her in just a moment as there could be some news. There could perhaps be some sort of deal or vote brokered. Stand by for that.
Also, right-hand side of your screen, take a look at the numbers. The Dow continuing to pluck in negative territory, flirting with that negative 400 mark off and on. We're all over that. We have Alison Kosik is standing by in the thick of things all over the floor of the New York Stock Exchange. But Gloria Borger, I want to go to you first. You broke some news already that House Speaker John Boehner and the president of the United States have had some sort of conversation regarding this FAA impasse and this possible pro forma procedure what. What are you learning on the Senate side?
GLORIA BORGER, CNN SENIOR POLITICAL ANALYST: Well, actually we were -- we were saying that they were very optimistic, and just moments ago Senator Reid actually released a statement saying that they have been able to broker a bipartisan compromise between the House and the Senate to keep those people from getting furloughed.
It's interesting though, Brooke. In the statement it says "This agreement does not resolve the important differences that still remain. But I believe we should keep Americans working while Congress settles its differences, and this agreement will do exactly that."
So as we suspected earlier, they haven't resolved the larger issues of collective bargaining for airline workers or the question of the funding for those rural airports, but in the short term, probably because they all look terrible in this, I think you'll probably agree, they have decided to pass something to get them through the summer so that when they come back they can actually deal with the substance of what they disagree on.
BALDWIN: Just so I'm clear, the thousands of -- the thousands of FAA inspectors and all those different construction projects, right, those tens of thousands of workers, they will now be paid. Is what that I'm hearing?
BORGER: Well, the Senate will be meeting in a session tomorrow. It's called a pro forma session, which means that the senators don't actually have to be there, but they are open for business. And it seems it me that you'll probably get some kind of unanimous consent request to get this temporary patch through so that people don't -- can get back to work.
BALDWIN: So it is quite simply an up or down vote, correct?
BORGER: Hopefully, yes.
BALDWIN: OK. I'm also learning that we're hearing from our White House team, who have been busy on this one as well. We're hearing we'll get some sort of paper statement from the president on this particular people that sounds to me is brokered. Gloria Borger, perhaps we'll discuss that later.
Meantime, let's go to the other story, that being the markets. The numbers at the New York Stock Exchange, and my colleague Alison Kosik has been watching these numbers continue to plunge deeper in the red. Alison Kosik, tell me what you're seeing.
ALISON KOSIK, CNN BUSINESS ANCHOR: You're seeing the typical volatility that you would expect to see on a day like this. We've got 20 minutes left in this trading day and we are seeing the selling pick up a bit, but it is bouncing back and forth. The Dow as you see is down 422 point.
What you're seeing is investors are scared. This is all about fear and uncertainty. You're seeing investors get out of stocks, and they are looking for somewhere safe to put their money. And they are not even buying the safe havens like gold. They are just -- take their cash out and kind of putting it end the mattress at this because at this point cash is king in the environment we're in.
I'm watching the fear index. It sort of gages the fear in the market place and the volatility in the market place. That's speaking 27 percent, close to that dipping point mark of 30. Brooke, you know what, it's about feet and the U.S. economy and worries about and uncertainty about where it's going, and also worries about what's happening in Europe. We forgot about the whole Greek debt issue because our focus is on our own debt ceiling problem.
But those European economic troubles, they are still there. And now the latest worry is Italy. Italy is the world's eighth biggest economy, and the big worry is that that country could default on its own debt. So what you're seeing is this cycle of fear that's really rattling the markets. Brooke?
BALDWIN: Excellent point, because this is not just a domestic U.S. story. This is very much so a global story, global jitters, global economic slowdown, and fears of a possible, dare I say, another recession. We have Ali Velshi standing by and also Poppy Harlow, our best team when it comes to economics and crunching numbers. Let's get a quick break in. More on the breaking news here on the market right after this.
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BALDWIN: Back on the breaking news, back on the Dow. It continues to plummet, now down 460, 457. It continues to change, of course, as we are 15 minutes away, 15 minutes away from the end of trading here on the New York Stock Exchange. I've got the best team standing by for me. I have Alison Kosik on the floor of the New York Stock Exchange. On the phone I have Ali Velshi standing by in New York and Poppy Jarlow of CNNmoney.com. Ali, let me begin with you here. There's 15 minutes to go, what do you think of this?
VELSHI: More about the sausage being made than most people care to know. The Dow, what you're looking at right now is very representative of a portfolio that you might have in diversified stocks. The other things that your stock may mimic is the S&P 500. The S&P 500 is doing worse than the Dow. So what you're looking at is 3.8 percent off on the Dow. That's not the low, believe it or not. It's been lower.
And what you're seeing now in the last 15 minutes is a real struggle. You've got people selling and other people buying who think that this doesn't make sense. This is based on fear of central banks that have intervened in markets in Japan and in Europe having to do with Italy, as Alison was saying before the break. It didn't work. It panicked some people. On a day like today when there's this much trading and volatility, normally that bell rings at 4:00 and you get an idea of what's going on. This will probably take 15 or 20 minutes to settle down. It's a real struggle between buyers and sellers right now, but we won't make up a lot of the ground. There's a possibility we're making some of it up there.
BALDWIN: Ali, stand by. I want to ask about contextual questions. But I do want to get Poppy Harlow here into the mix. And Poppy, talk to me about blue chip stocks. How are they faring.
HARLOW: Yes. Talk about big stocks -- General Electric, big oil companies, things that you very likely are invested in even if you don't know it. This is why you care al of the Dow blue chip stocks are down today and the selling is accelerated right on the screen into the close.
Brooke, I want to give people perspective. The Dow Industrial is down 481 points now. As Ali said the S&P 500 performing just as bad, and the NASDAQ -- the S&P performing even worse than that, down 4.5 percent.
To give you some perspective, down 475 points. The worst day we've had so far this year, up until today, Brooke, with the Dow closing down 279 points. So we're close to two times as bad as the worst day this year.
Also, it hasn't been since November, 2008 that the Dow has closed below 400. We are very likely going to below 400 unless we see a major relief rally into the close. We are 14 minutes away from the closing bell on Wall Street.
Across the board, technology, health care stocks, manufacturing companies, they are all doing poorly, and I think as one analyst on Wall Street said it best to me today. The market hates uncertainty. All they have right now sun certainty. Yes, we have a debt ceiling deal but what we don't know is where the trillion dollars plus in cuts is going to come from, what companies that will hurt. What we also don't know where the jobs will come from. We need a growth plan from Washington and we don't have that right now.
Brooke, let's not forget the timing.
BALDWIN: Jobs numbers.
POPPY HARLOW, CNNMONEY.COM: We're hours away from the jobs numbers at 8:30 in the morning. This is a very bad sign. This shows absolutely no confidence heading into the jobs report tomorrow morning. At best economists think we'll see between 70,000 and 80,000 jobs added. That is nowhere near the amount we need to bring this unemployment rate down. No good signs right now. And it's not good that this sell-off is getting worse heading into the close.
BALDWIN: You mentioned the much anticipated July jobs report coming out tomorrow morning. We were already getting the weekly jobless claims. Today first time unemployment claims totaled 400,000. That was last week. Apparently that was a milder number than expected but obviously still shows some weakness there on the markets.
Alison Kosik, are you in the mix, if I may, you know, down on the floor of the New York Stock Exchange. Paint a picture for me. You saw a lot of long faces and the story is still the same.
KOSIK: It is the same and we'll see a lot of relief when we hear the closing bell. I spoke with one trader and one thing to keep this mind. What you kind of see is what they call a re-pricing here of stocks with the realities of what's going on in the economy. You know, a lot of the time many people say, look, the major averages are doing so well and look at doing so well, and look at the economy it's doing so poorly, and people talk about that disconnect.
But what we are seeing, one trader tells me, is kind of a re- pricing with the realities of how the economy is. You have to remember that the stock market is a forward-looking indicator, and because right now there are these fears about a possible recession around the corner and, you know, the economy really just slowing down, that's also why we're seeing stocks really take a hit, because there's a re-pricing going on to match what is going on in the economy, Brooke.
BALDWIN: Alison, Ali, Poppy, thank you all. Stand by.
We're also going to get some White House reaction to with regard to the much anticipated jobs report, as Poppy mentioned, coming out hours from now. We've got to get a break in. Stay with us. Back in a moment.
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BALDWIN: A quick reminder, as we continue to watch the Dow plunging, nearing that negative 500 territory here, as we are less than ten minutes away from the end of the day here, a day of trading. We have Ali Velshi, Poppy Harlow, Alison Kosik, and also now Dan Llothian standing by for me from the White House.
Alison, just quickly if you can, just help me reset the numbers, and tell me again the last time we saw the Dow down this low. Alison, are you with me? OK. Not there. Ali, last time we saw the numbers this low, what, 2008?
VELSHI: Yes, and it's not just that. It's the percentage loss you're looking at on the right side of the screen. This is accelerating. Often you see a turnaround in the moments leading off to the sell-off --
BALDWIN: It crossed the 500 mark, Alil.
VELSHI: We're down more than 500, 4.25 percent. And the worst is S&P 500, which has more to do with your portfolio is down more than the Dow is on a percentage basis. Pretty much every stock on the NASDAQ 100, save for one, is down, every single stock on the Dow -- these indexes are combinations, accumulations of different stocks. They're baskets, basically. So that's what you're seeing. This was triggered by a panic overseas based on the intervention of two central banks, the Japanese central bank into the yen and the European central trying to deal with Italy. Those two things created a panic.
I've been speaking on phone all afternoon, Brooke. American companies have been reporting earnings for the last two weeks. Many of them have been very strong, doing well, selling things in China, India, places where they're not having growth problems. But panic has overtaken today.
You've been see investors trying to get in on the market all day. You've been see the ups and downs, people have been trying to buy in, thinking it's oversold. People have been trying to buy in, thinking this is oversold. You can still see them struggling, but in the end the downward momentum is overtaking this market.
The worrisome part now Brooke, is usually when you see it level out is it's done. When you see strong selling at the end like you do now, we'll have to turn our attention to 8:00 p.m. eastern when Japan and Australia open to see whether investors globally are still trying to get out of stocks.
Remember, these markets are not national the way they used to be. What you're seeing is a global reaction right now. That's worrisome, 520 points, 4.35 percent lower on the Dow, and more on the S&P 500.
BALDWIN: It's very much a global story. Ali, stand by. I have Teddy Weisberg on the phone, a seasoned trader. Sir, how long have you trading there?
TEDDY WEISBERG, WALL STREET TRADER (via telephone): Almost 43 years on the floor of the exchange.
BALDWIN: Almost 43 years. Put this into perspective, looking at the Dow plummeting as it is. What's the reaction there on the floor? When's the last time you saw it this bad?
WEISBERG: Well, you know, this is -- it's a combination of a lot of things. Nobody ever likes it when it goes down like this. The screens are all red. There's no green anywhere. You know, basically folks have just kind of thrown the towel in. It's a combination of reasons that got them to this point. So much of the stock market is based on psychology and clarity, and right now the psychology is very negative and there is no clarity.
The economic message out of Washington is flawed at best. The whole debt ceiling process was toxic, and I think it sends a negative message to the rest of the world that we had negative numbers and now all the problems out of the euro zone. The bottom line is, as Ali pointed out, the second quarter earnings have actually been very good, if not excellent, but it's just not enough to overcome the negative psychology as a result of the economic problems both in the U.S. and internationally.
BALDWIN: Ali, hop in. VELSHI: Teddy, good to talk with you, my friend. You can see what's happening is still a struggle right into the last minute. There are still people buying things. Do you think the point will sit out for a day or two and figure out there's a big sale on the market right now?
WEISBERG: Ali, it's the only business in the world that when they hold a fire sale, nobody comes. The fact is that people are just throwing stocks away. On the other hand, a lot of stock trading, as you all know, is driven by computers, high-frequency traders. It has nothing to do with fundamentals. It's all about momentum.
Unfortunately this is the volatile world that we all now have to live in the stock market. And that's the topic for another time. But I would have to think that logic would dictate you need to zig when the whole world is zagging. There's some pretty compelling values here, and I think clearly the market is oversold. Unfortunately they're not going to tell us where the bottoms are just like they don't tell us where the tops are.
BALDWIN: So Teddy, we regard with the zigging and the sagging, because I can't help but think of the viewers who are watching these numbers with their hearts in their throats, thinking of their investments, stocks, worrying what next? You say hang tight?
WEISBERG: Listen, if you own good stocks and they're good companies, and as Ali pointed out, the vast balance of U.S. corporations are doing just fine. At the end of the day it is all about corporate earnings and corporate fundamentals. So one has to just think that, number one it's not a zero-sum game, stocks are not going to zero. If you own good securities, I think you hang on to them. If you have some money sitting on the sidelines, perhaps there's a good opportunity here to put some money to work.
BALDWIN: As we look, we are less than three minutes from the closing bell. Teddy, 43 years there trading on the floor of the New York Stock Exchange. Let's look ahead in our crystal ball to tomorrow. Ali mentioned 8:00 p.m. eastern when we start watching Japan and Australia, but tomorrow, the New York Stock Exchange, could it bounce back? Could it get worse? We just don't know?
WEISBERG: Well, it could. But we have a pretty big number tomorrow, coming tomorrow. We've got an employment number coming tomorrow. And let's hope we get lucky because that's what we need right now is we need a little positive luck. But we've had negative GDP number, a negative ISN number. It doesn't necessarily mean we're going to get a negative employment number, but a lot of people will be watching that number tomorrow.
BALDWIN: Teddy, we are 90 seconds away, 90 seconds just about here from the closing bell. We're going to take that live. Ali Velshi, I think you made a great point earlier, and Teddy made the point about looking at Washington, and people are vexed at what happened, this back-and-forth bickering. Even though the debt deal was done, it's sort of the hangover from that, the European central, Japan, all of this coming into play. VELSHI: It's frustration all around with an economy that isn't moving as quickly as we'd like it to do. But the U.S. did itself no favors and did the world no favors with this protracted debt negotiations. We can't pin it all on that, but the fact is it had something to do with it because we went from a very troubled situation in Greece we were covering for a few weeks right into our debt negotiations, right out of that into a big problem in Italy. There's been no respite, no sense that things are getting better somewhere in the world.
Again, I have to tell you, and teddy makes this point, there are companies doing very well, selling in India and China, those economies are good. Even Africa is growing at four percent or five percent, so there are things going well. But we focus on the industrialized economies, because that's where many of the companies are, and that's what you're seeing play out here.
Italy is a big economy, Spain, Japan, the United States, and they're not firing on all cylinders, and you're seeing frustration here. But I have to tell you, Brooke, there are some companies in America doing very well, and I think there are some people who are going to buy stocks right now or just finished buying them who will be very happy that they did that.
BALDWIN: Ali, let's listen, 15 seconds away. Let's go live.
VELSHI: They're ringing now.
(RINGING)
