Transcripts

Wachovia Adds To Wall Street's Weak Week

SUSIE GHARIB: Stocks on Wall Street tumbled again today on more troubling credit woes - on more troubling credit news from one of the nation's largest banks. This time it was Wachovia. The Dow Industrials dropped 223 points, the NASDAQ fell 68, after the Charlotte-based bank said it expects to take a $1.1 billion pre-tax write-off in the fourth quarter on losses related to its sub-prime debt holdings. Also today, evidence that the sub-prime turmoil is spreading to the credit card industry. Capital One Financial said its loan charge-offs and delinquencies posted a significant increase in October. But things are much more upbeat in the commodities markets. Prices in nearly every raw material group from precious metals to agricultural products to energy are soaring. As Erika Miller explains, analysts expect this bullish trend to continue.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Commodities have been one of the few safe havens from financial market turmoil this year. Precious metals, oil, base metals and agricultural products have all rallied sharply. To give you an idea, gold is at its highest level since 1980. Oil, tin and wheat are also near or at record highs. Many commodity investors are seeking shelter from weakness in the U.S. dollar, because unlike paper securities, raw materials have intrinsic value. As S&P metals analyst Leo Larkin points out, that's especially true of gold.

LEO LARKIN, METALS ANALYST, STANDARD & POOR'S: Gold is still regarded as money. Gold is still kept as part of central bank reserves. It's an alternate currency. And since the United States dollar is de-facto the currency of the world, to the extent that it declines, gold becomes more attractive.

MILLER: HSBC commodities analyst James Steel says strong demand from emerging markets like China is also pushing up prices.

JAMES STEEL, CHIEF COMMODITIES ANALYST, HSBC: You have a growth differentiation between the United States and the emerging world. And if you think the emerging world is going to continue to grow, then you can assume commodities will be well-bid.

MILLER: The bull market for many commodities started in the spring of 2001. The rally picked up steam this summer as investors correctly anticipated that the Federal Reserve would start cutting interest rates. Lower rates and a weak dollar are two factors that typically push up inflation and commodities are traditionally considered hedges against it. Some analysts say it's not too late to get in.

STEEL: I think it's important to understand that we're already at very, very high prices historically. And commodities could actually come down. They could correct substantially and we could still be in a bull market.

MILLER: Analysts see two risks that could cause the commodities rally to fizzle. One would be a global economic slowdown. The other would be a sign the Federal Reserve could start raising interest rates. Erika Miller, NIGHTLY BUSINESS REPORT, New York.