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Karachi Attacks

KITTY PILGRIM: Up next on MONEYLINE, the market recovers from a steep sell-off haunted by the attack near the U.S. consulate in Karachi. Lakshman Achuthan, Chris Wolfe, Greg Clarkin, Christine Romans, all on our Wall Street panel. Martha Stewart Living Omnimedia is downgraded by Merrill Lynch. We'll tell you what happened to the company's stock. And why increasing numbers of workers are prepared to go on strike to protect their health benefits. All that and more when MONEYLINE returns. (COMMERCIAL BREAK)

PILGRIM: Here are the top stories we're following tonight. Judge Melinda Harman answers the Andersen jury's question with a ruling that favors the government. Andersen's attorneys immediately call a mistrial. That call was rejected by Judge Harman and the jury was dismissed for the night. At least 10 people are killed when a car bomb explodes outside the U.S. consulate in Karachi, Pakistan. No Americans are killed but a U.S. Marine Guard was slightly wounded. President Bush says the bombing demonstrates the evil of America's enemies. He said the people who carried out the attack are -- quote -- "radical killers." A dramatic turnaround on Wall Street today, but the markets still closed lower for the fourth straight week. The Dow fell 1.2 percent, the Nasdaq, S&P 500, tumbled 2 percent. And joining me now, Chris Wolfe of JP Morgan Private Bank, economist Lakshman Achuthan and our very own Christine Romans and Bruce Francis. Thanks very much for joining us. Chris, let's talk about the market. We really had a little glimmer of hope on several occasions this week. And yet, it's like a car that will not start.

CHRIS WOLFE, JP MORGAN PRIVATE BANK: We continue to struggle in the face of really what's been some difficult economic data, in very a short-term perspective. I think the market's really telling us two things. The first is that the revenue growth picture that we're really looking for this year, which is the link between the economy and the stock market, is likely to be weak. The first quarter was difficult. And when we look at the retail sales numbers, industrial numbers that came out today, it doesn't suggest that we're going to see a strong second quarter. The trick here is, second quarter is supposed to be strong. Seasonally, it is. So I think when you look at the market from this perspective, we still need to do some adjustments. And it's our view that we'll continue to struggle throughout the year.

PILGRIM: And profits, absolutely key?

WOLFE: Absolutely. You give companies credit for the cost- cutting, but that story is going to run out of fuel. So we really need to see that revenue grow. It doesn't mean there aren't opportunities. There are plenty of companies doing restructuring -- companies like MetLife, CVS and others. But I think, when we get down to it, the broad market's continued to be weighed on by technology and telecom.

PILGRIM: Lakshman, you look at this economy with a microscope on a daily basis, and we have had some economic numbers. So they're reasonably helpful. Where do we stand now?

LAKSHMAN ACHUTHAN, ECONOMIST: Well, I think, despite a lot of the jitters in the market perspective, the recovery is very much on track. We are in a subpar. It's not the best. It's not a perfect recovery, but we are in a business cycle recovery. And it's sustainable, and I think that's the key. It's not about to fall apart here. And it's a lot less vulnerable than we were just a couple of quarters ago. We could take some shocks here and still keep going forward.

PILGRIM: So we're that healthy, that we can take some shocks?

ACHUTHAN: We're in a cyclical recovery, and that's something that doesn't turn around in a dime.

PILGRIM: All right, let me turn to Bruce Francis, who follows tech. And tech seems to be one of the keys to this market.

BRUCE FRANCIS, CNN FINANCIAL CORRESPONDENT: Well, it looks like tech is still sitting out this recovery that Lakshman was talking about. We continue to get bad news out of tech. Just look at the news we got out of the wireless sector today, from Sprint PCS. Lucent earlier this week. There's a lot of overcapacity in tech. It's not just in telecom. It's quite broad. Watch this week when Oracle -- or rather, coming up next week, when Oracle reports their results. That's going to be another key indicator about where we are. And if Oracle disappoints us in any way -- and let's face it, the odds are -- taking all the other news that we've had, it's not going to be something that investors are going to like. That could be another bar the door session for tech, and the market in general.

PILGRIM: In terms of capital spending, that must come into this market, in terms of tech.

FRANCIS: Absolutely. In WorldCom today, it just said, OK, we've got to stay liquid. We've got to shore up our liquidity situation. One of the things we're going to do, is we're going to cut capital spending by $1 billion. That's not good news for Lucent, for Cisco, for all of the other suppliers out there who think they've had all the bad news they can get out of telecom. And that's plainly not over.

PILGRIM: Well, Christine has been following this blow by blow all week. And, Christine, in terms of this week, we've seen the damage. What do we see next week?

CHRISTINE ROMANS, CNN FINANCIAL NEWS: Well, the interesting thing is the traders, the analysts, the strategists, are saying we start next week exactly where we started this week. We didn't cover any ground. We chopped through here and the market's down 2 percent. And it's emotion that's driving the market. We can talk about earnings, we can talk about the economy. But emotion is the E that people are really focusing in on. Brokers are going to start rolling out their earnings next week. We'll start to get some financial results and we'll watch to see if that gives any kind of signal. But traders are telling me that still, the mode of operation is sell first, ask questions later.

PILGRIM: And in terms, gentlemen, of the raft of bad news we've seen in corporate America, including all sorts of developments that are not positive, do you think that bad news will continue to put a lid on this market?

WOLFE: I think it would be our view that bad news, at least, is emblematic of what's going on, with respect to the accounting issues and management credibility in this environment. So, at the very best, it keeps a lid on the price earnings multiple you should be willing to pay.

PILGRIM: All right, a little test. Well, we will see what happens next week. And thank you all for wrapping it up. Lakshman Achuthan, Chris Wolfe, Bruce Francis and Christine Romans, thank you very much.