Nightly Business Report - Friday June 28 2013

7/28/2019 Nightly Business Report - Friday June 28 2013

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ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen andSusie Gharib, brought to you by --

(COMMERCIAL AD)

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Blue chip bonanza. TheDow sees its best first half since 1999. But can the gains continue? And where should youinvest now? Our market monitor guest answers your stock questions tonight.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Down on the farm.


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Are you paying more at the grocery store? A new government report suggests relief may be onthe way.

GHARIB: And, open enrollment. It`s just 100 days away. And for those looking to buyhealth insurance on the newly formed exchanges, the options and cost are going to vary widely.

We have all that and more tonight on NIGHTLY BUSINESS REPORT for this Friday,June 28th.

MATHISEN: Good evening, everyone. If the stock market had a coach this evening`shalf time speech would probably go something like this -- good first half, good second quarter,

but you started to mess up there at the end. At today`s midway point of the trading year, theDow`s nearly 14 percent return was its best half part performance in 14 years, for the S&P 500,up more than 12 percent. It was the best since 1998.

NASDAQ has gained nearly 13 percent this year. Now, the numbers for the secondquarter were pretty nice, too with gains for all three of those barometers. NASDAQ led the wayup 4.1 percent.

But June, June was another matter. Dow, NASDAQ and the S&P all were negative forthe month, breaking monthly win streaks at six for the Dow and seven for the NASDAQ andS&P.

Now, the indexes spooked by talk the Fed may cut back its stimulus and by sharply risinginterest rates are all off more than 3 percent from their closing highs about a month ago. Stocksdid log gains of roughly 1 percent for the week just ended but today`s trading on the secondheaviest volume of the year was mixed. The Dow closing near session lows fell about 115points. The NASDAQ was able to squeeze out a one-point gain and the S&P

500 closed down a little bit, about seven points at 1,606.

Now, gold did recover some of it`s luster today. It rose $12 an ounce, but it had its worstquarter on record and is down 27 percent for the year so far.


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MATHISEN: Tyler, our other big story today, BlackBerry. Its stock was one of thebiggest decliners. Shares plunged nearly 28 percent.

Investors dumped the stock after the company posted a surprising quarterly loss and a big drop insubscribers.

And things don`t look so good for the future. The company warned of more losses.BlackBerry lost 13 cents a share in its fiscal first quarter and revenues were lower than expected.

So, what`s next for BlackBerry? And can it ever wow consumers again?

Seema Mody get some answers.

(BEGIN VIDEOTAPE)

SEEMA MODY, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):Wall Street is losing confidence in BlackBerry after it reported earnings today.

Shares are down 93 percent from its record high hit back in 2008. Back then, BlackBerry was

considered a high tech giant with a sophisticated cutting edge smartphone on the market. But ascompetition ramped up from the likes of Apple (NASDAQ:AAPL) and Google(NASDAQ:GOOG), BlackBerry looked the other way refusing to admit it would lose marketshare.

But that`s exactly what happened. Since the iPhone came out on June 29th, 2007, sharesare down more than 80 percent, which equates to a market cap loss of $31.5 billion. BlackBerryfinally realized it has to innovate and provide its customers a touch screen device with fun apps,a high tech camera, and all the features that the iPhone and Android-run phones were offering.

The new BlackBerry Z10 and Q10 phones came out this year, it seems to be too late.

ANIL DORADLA, WILLIAM BLAIRD CO. ANALYST: Currently, BlackBerry hasless than 5 percent of the market share. But at its peak, it was well north of 35 percent to 40


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percent. They did dominate the North American landscape and globally they were doing prettywell.

So, as you can see, the company has declined substantially since it`s peak. Peoplethought this was the end of the beginning, but now it appears that this is the beginning of the endfor the company.

MODY (on camera): And while analysts were excited about the launch, consumers stillseem to be obsessed with their Android-run phones and Apple

(NASDAQ:AAPL) iPhones.

UNIDENTIFIED MALE: I got pretty used to the iPhone. So, I don`t -- I haven`t missedmy BlackBerry at all.

UNIDENTIFIED MALE: I don`t like the keyboards on the BlackBerry. I`m using mythumb. On my Android is like I swipe with it.

UNIDENTIFIED MALE: I don`t like the QWERTY that much. I like the usual touch

and type.

UNIDENTIFIED FEMALE: My husband had a Droid. He suggested I try the iPhone.My son has all Apple (NASDAQ:AAPL) equipment. So, we figured so we stay in our family,the Apple (NASDAQ:AAPL) family.

MODY: CEO Thorsten Heins still confident that the company can make a come back,saying that BlackBerry is still in the turnaround period and that transitions take time.

For NIGHTLY BUSINESS REPORT, I`m Seema Mody.

(END VIDEOTAPE)


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MATHISEN: A very different story at Noodles and Company today. The Colorado-based casual dining chain began selling shares for the first time today and the stock soared.

CEO Kevin Reddy, a former executive at rival eatery Chipotle Mexican Grill(NYSE:CMG) is confident about the pasta-based restaurant`s feature as it plans to expandnationally.

(BEGIN VIDEO CLIP)

KEVIN REDDY, NOODLES & CO. CEO: We`ve been one of the best performingrestaurant brands in the five years. We`ve already been delivering double digit unit growth. Wecan plan to continue that path and take globally inspired dishes to many more neighborhoods inthe years ahead.

(END VIDEO CLIP)

MATHISEN: Opened today, closed today, up 104 percent, easily becoming the best

performing IPO this year.

GHARIB: Well, turning to the bond market, investors had been bailing out of bondsduring the quarter and in the municipal bond market, investors withdrew a record $4.5 billionfrom muni funds for the week ended June 26th. For the month of June, they pulled out nearly$10 billion. That`s according to Lipper.

So, how should investors position portfolios?

Joining us now to give her perspective on the muni bond markets, Natalie Cohen.

NATALIE COHEN, WELLS FARGO SECURITIES: Hi.


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You can`t just say, well, I lost. I got to get out because you don`t know what`s going to happennext week, next month and so on.

So, yes, we all believe that interest rates are going to be rising at some point in the future.They have risen in the last two weeks, and have steadily. So, you know, you need to positionyourself with diversity in terms of length of time, shorter medium term and so on.

GHARIB: You know, Natalie, you`ve been talking about fundamentals of investing inmuni bonds. So, I want to ask you this. As investors see headlines, some of the headlines aresaying states have more surpluses.

That`s good news. But you also see the headlines of some cities that are having financialproblems like Detroit.

What is the most important tip that you can give investors as they navigate looking for aMuni investment besides just the yield?

COHEN: Right. I think it`s important to separate the credit issues from the market.Those are different and they tend to get blurred together often times in the headlines. Stategeneral obligation bonds are very strong, including for example, the state of Illinois, which has init`s constitution that it has to pay the general obligation bonds. If you`re a more adventurousinvestor and want to go down the credit scale, what we see as stronger are what are calledrevenue bonds or dedicated taxes. Those are tend -- they tend to be outside of bankruptcy. Theyare not affected by any kind of a bankruptcy.

GHARIB: Well, thank you so much for giving us some insight in these complicatedmarkets.

COHEN: Thanks for your interest.

GHARIB: Natalie Cohen is head of municipal research at Wells Fargo

(NYSE:WFC) Securities.


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COHEN: Great. Thank you.

MATHISEN: The Securities and Exchange Commission is reviewing how the Institutefor Supply Management releases its monthly manufacturing data over concerns that someinvestors might receive potentially market moving information from the ISM before it`s releasedto the public.

GHARIB: And there is another government investigation we want to tell you about, thisone from the Justice Department over the merger of American airlines and U.S. airways. Thesticking point here: anti-trust issues.

So, the DOJ wants to know whether the combined airline, which would be the world`slargest carrier, will agree to sell plane slots, take off and landing rights or reduce their dominanceof flights at Washington`s Reagan National Airport. If the deal is approved as-is, the new airlinewould have more slots than Delta and United.

MATHISEN: Ford Motors is recalling 1,300 new cars and SUVs to repair child locks onrear doors that might not properly work on some Explorers, Tauruses, Lincoln MKS vehicles aswell.

GHARIB: And Google (NASDAQ:GOOG) was going into gaming. The search giant istaking direct aim at Microsoft (NASDAQ:MSFT) Xbox and Nintendo`s Wii by announcingplans to launch a videogame console for your living room, one that could also potentially replaceyour cable box.

Google (NASDAQ:GOOG) also unveiled plans to make a wristwatch like device thatwould run its Android operating system.

Sound familiar? Well, it`s a device that Apple (NASDAQ:AAPL) has been rumored tohave it in the works, as well.

MATHISEN: And still ahead, how the cold and wet Midwest spring may impact theprice you pay for goods at the grocery store.


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But, first, a look at the best performing sectors in this first half of 2013.

(MUSIC)

MATHISEN: It is hot. Very, very hot. Most of the nation`s southwest is in a record-breaking heat wave.

Excessive heat warnings have been issued for most of Arizona, Nevada, California andparts of Utah and will be in effect through Monday. Look at that, 109 in Las Vegas.

Daytime temperatures throughout the region are expected to reach triple digits of coursetoday, over the weekend, all time record of 117 degrees in Las Vegas could be broken Saturday.

Now, despite the heat, there was some good news today from the Agriculture Departmentabout the nation`s corn crop. Despite a severe drought last year and a very wet spring this year,corn is doing a lot better than expected right now.

Jane Wells has more.

(BEGIN VIDEOTAPE)

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):For months, Americans have been noticing higher prices for all kinds of groceries.

UNIDENTIFIED FEMALE: I probably spend like $700.

UNIDENTIFIED FEMALE: Asparagus, $7.99 a pound.


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WELLS: Some relief maybe on the way.

JERRY GULKE: I think we have a record crop going in northern Illinois, for sure, andmaybe in eastern Corn Belt.

WELLS: Jerry Gulke grows corn and soybeans outside Chicago. What a difference ayear makes. Last year, he was facing disaster.

GULKE: This plant here is way behind. And you can`t -- there`s a silk in here and you

can`t find evidence of an ear coming anywhere.

WELLS: An epic drought hit the Corn Belt. This year, the problem for some has beentoo much rain. Still, the USDA predicts farmers will plant more than 97 million acres of cornthis year, the most since 1936. They are estimating nearly 78 million acres of soybeans, a recordand even more wheat is going.

(on camera): Most of the corn and soybeans grown in this country goes to feed livestock,

which is one reason why meat prices have been so high, especially the beef in your burger. Sothese large planting numbers from the government really surprise the futures market. All theprices of grains in the futures market went down especially corn because more corn means lowerprices.

(voice-over): After hitting $8 a bushel last fall, Gulke says corn prices this year couldfall to half that, back to what used to be normal.

GULKE: At the last minute I converted about 10 percent to 15 percent from soybeans tocorn. I got trapped mostly in that idea and I heard how wet it was in Iowa and Minnesota and Ithought, well, I`ve got perfect growing conditions. So I planted the corn. And we`ll just see howmany other people think like I do.


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WELLS: It appears a lot of other people thought like he did. And if the weather holds,by fall, America may see a bumper crop of amber waves of grain.

For NIGHTLY BUSINESS REPORT, I`m Jane Wells.

(END VIDEOTAPE)

MATHISEN: OK. So, contagion leads our market focus tonight. IBM sandbagged theDow today, largely in reaction to Accenture`s poor sales and outlook. Accenture and IBMcompete in IT consulting. And Accenture`s guidance for the current quarter and the yeardropped and that sparked concern that the consulting business is slowing.

For it part, Accenture dropped more than 10 percent on 10 times normal volume and IBMwas off 2.3 percent.

At the other end of the Dow chart, Intel (NASDAQ:INTC) was a gainer as the newleadership team told reporters its tiny atom chip is going to be a star in smartphones and tablets.But CEO Brian was lesser about how to capitalize on Intel`s set top box for Internet videodelivery.

Investor did react positively, though, on the down market day. Intel

(NASDAQ:INTC) gained less than a percent. It closed at $24.23.

GHARIB: Home Depot (NYSE:HD) was the best performing Dow stock today.

In a week of three-digit pops and drops in the Dow, Home Depot (NYSE:HD) was a steadygainer. Thanks to positive news on housing. For the week, HD was up almost 5 percent, closingtoday at $77.47.

Hospira (NYSE:HSP) Pharmaceutical was a top S&P 500 gainer. Its anti- inflammatorytreatment for several conditions was recommended for use in Europe. Shares jumped 6 percenton triple the normal volume to close at $38.31.


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And JetBlue founder David Neeleman is reportedly putting together an investment fundto buy back his old company and merge it with the Brazilian startup airline. Neeleman said thereport in a newspaper is true. Still, JetBlue shares gained nearly 3.5 percent on heavy volume toclose at $6.29.

A weekly market monitor guess tonight says the good news for investors is that the stockmarket has gone through its correction. That`s one reason why he is positive on the outlook forstocks for the rest of the year.

Welcome back, Howard Ward, chief investment officer of growth and equities at theGabelli Funds.

Howard, always good to see you.

HOWARD WARD, GABELLI FUNDS CHIEF INVESTMENT OFFICER: Nice to behere, Tyler. Thank you.

MATHISEN: Terrific, make your argument as to why the second half of the year, maybenot as good as the first half with double digit gains for the Dow, S&P and NASDAQ, butnevertheless a good one.

WARD: Well, a positive earning surprise in the first quarter this year, with earnings up 5percent. We think more is in store for the second quarter and this particular quarter will be theweakest quarter of the year, but we still think we`ll see upside earning surprises and anacceleration of growth for the balance of the year. So, really, it`s going to be positive earningsurprises driving stocks to new highs this summer and perhaps to $17.40 or higher by year end.

GHARIB: Howard, we`re going to do something different tonight. As you know, weasked viewers to give us your stock questions and we got lots of them. And we got a lot of themon Micron Technology (NASDAQ:MU). Wayne from Texas sort of asked the drift of it.


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"As a former employee and Micron Technology (NASDAQ:MU) loyalist, I`m interestedin why MU has a six-month run-up from the $6 range to $13."

What`s driving the stock?

WARD: Well, you know, this is one of the leading domestic producers of memory chips,which is very much a commodity-like business, but there`s some -- some suppliers have fallenout of that business in recent years.

Business is good. Micron reported a very good quarter, a little over a week ago. Goodtop line, good bottom line, good margins. So, that`s the good news.

The bad news is, this stock more than doubled so far this year. It`s a notoriously volatilebusiness. I would really take my cue here from the insiders and the insiders I m afraid have beenselling. There was a flurry of selling around $10 a share in April, another flurry of selling inearly June, that $12 and $13 a share. Stocks now $14 a share.

I`d rather be a seller and take my chips off the table here.

MATHISEN: Very interesting analysis, Howard. That`s great.

Nick in California wants to know about true luxury stock. He doesn`t want to knowabout the false ones. He wants to know about true ones like Tiffany (NYSE:TIF). Stocks withgross margins in the 60 to 70 percent range, net profits in the 20 percent range, that don`tdiscount their good.

What good, what do you think of luxury like Tiffany (NYSE:TIF)?

WARD: Well, Tiffany (NYSE:TIF) really is one of the true jewels, so to speak, in luxuryretailing business and consumer net worth has recovered to pre-recession levels, and the high-


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end consumer is back, both here as well as in Japan. We saw that in the first quarter numbers forTiffany (NYSE:TIF), which were very good.

I have an $82 price target, which would be about 12 times earnings.

I`m a long-time owner of Tiffany (NYSE:TIF). I think it`s a great long- term investment forpeople.

GHARIB: All right. Let`s see if we can squeeze in this one from Brian. He`d like tohear about a stock that`s related to a positive area of the economy housing. USG (NYSE:USG),this is the old United States Gypsum.

What do you think, Howard?

WARD: Well, as you said, they make Gypsum wall board and other housing materialsfor building. This company has actually been through bankruptcy twice in the last 25 years. It`shad a lot of litigation associated with it in the past. That gives me a reason to hesitate torecommend it.

But and this is a big but. Berkshire Hathaway (NYSE:BRK.A) owns 15 percent of thiscompany. They made that investment in 2000. I don`t know if they`re going to buy anymore ornot. But that`s a pretty good endorsement for some pretty savvy investors. They undoubtedlyknow this company better than I do. There are cleaner ways to play housing however.

Homebuilder stocks like Lennar (NYSE:LEN) or KB or Toll Brothers (NYSE:TOL), might bemore appropriate for some. People.

MATHISEN: Let`s get a 15-second comment on Priceline, another one of your favorites,

not one that necessarily was on the viewers` minds. The stock was trading at about $813 sharewhen you mentioned it in May. Now, it`s $825. Do you still like it?

WARD: Yes, convection for price line has grown greater as consumer confidencecontinues to rise now to a five-year high. So, this company could sell at 25 times earnings by theend of the year. That will give you a stock price around $1,000.


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So, mid 20 percent growth and 25 times earnings would be quite appropriate. I think it sfull steam ahead for Priceline.

MATHISEN: Howard, thanks for answering our viewers` questions this week and thanksto the viewers for sending them in. We`ll see you again soon.

WARD: Thank you very much.

MATHISEN: All right. Howard Ward is chief investment officer at Gabelli Funds.

GHARIB: Terrific segment.

Well, coming up on the program, the new health care exchanges are just

100 days from being rolled out. But the options for individuals and small businesses could bevery different.

But, first, let`s take a look at the stop performing Dow stocks of the second quarter.

(MUSIC)

MATHISEN: New York City`s Empire State Building must be a popular structure. Theowners of the skyscraper just received their third unsolicited offer to buy the landmark building.

The latest of more than

$2.1 billion-dollar offer from Thor Equities. That`s a local real estate consortium.

GHARIB: Meanwhile, Paula Deen not so popular these days. More companies arecutting ties with the celebrity chef after she admitted using some racially charged language in the


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past. Just today, Sears (NASDAQ:SHLD), its K-Mart division, Walgreens and JCPenney allannounced that they are ending their relationship with Deen and that follows similar plans byWalmart, Target (NYSE:TGT) and Home Depot (NYSE:HD) and other sponsors to stop sellingDeen branded food cookware and products for the home.

MATHISEN: Susie, the White House is employing a select group of workers to educateand enroll an expected 7 million Americans about healthcare coverage under the new Obamacarelaws, and who are those workers? The nation`s librarians.

Since public libraries already have computers, upwards of 17,000 librarians will betrained to help uninsured individuals navigate the Web sites that outline the new health caremarketplaces set up by Washington and individual states.

GHARIB: And it is the one-year anniversary since the U.S. Supreme Court upheld theAffordable Care Act. Now, one of the requirements of this historic bill: American adults need toget health insurance. For individuals of small businesses, the options and cost will vary greatlydepending on your age and where you live.

Bertha Coombs has more.

(BEGIN VIDEOTAPE)

DAVID FERREIRA, FERREIRA STRATEGIEST PRINCIPAL: I have to make surethat I take time off when I feel a little bit off.

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-

over):

David Ferreira is going without health insurance this year after launching a solo consultingpractice in Washington. Due to preexisting conditions, he was denied coverage by all but oneplan, which cost $1,500 a month.

Starting next year, he can`t be denied coverage under the Affordable Care Act, but Ferreira willalso have to buy insurance or pay a fine. And because he earns more than $45,000 a year, hewon`t qualify for tax credits to make it more affordable.


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FERREIRA: Nobody is entirely sure how much it`s going to cost but the big benefit thatcomes for the fact that I`ll finally be able to get health care.

COOMBS: Ferreira could soon breathe easier. Washington`s health exchange justpublished proposed 2014 rates. Estimates for individuals range from about $170 to $330 amonth for a man his age, and $300 to $600 a month for those in their 50s. Estimates for smallbusiness plans start at about $120 a month for a 20-something worker, to nearly $600 a monthfor a baby boomer.

Analysts say exchanges in Washington and the states that are building their own healthinsurance marketplaces will likely see the widest plan options.

(on camera): For the self-employed and small businesses here in New Jersey and morethan two dozen other states that have opted for federally built exchanges, it could be a differentstory. The Obama administration still hasn`t published rates and plan offering and a number ofanalysts say the options are likely to be limited.

KEVIN KUHLMAN, NFIB LEGISLATIVE AFFAIRS: The small business exchangeisn`t going to be able to provide as many options as originally intended.

In fact, small business owners are only able to enroll all of their employees into one exchangeplan, which is really no different than the status quo.

COOMBS: Some may be tempted to renew the plans they already have but the self-employed and small businesses take a risk by buying insurance off the exchanges.

KRISTIE ARSLAN, NASE CEO & PRESIDENT: All of the premium assistance, all ofthe help for paying for coverage will be in the exchanges.

COOMBS: David Ferreira, for one, can`t wait for ACA open enrollment to beginOctober 1st.


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FERREIRA: I love the idea that I will not be able to be denied because I`m plus sizedand because I had childhood asthma.

COOMBS: In the meantime, he`s trying to stay healthy.

For NIGHTLY BUSINESS REPORT, I`m Bertha Coombs.

(END VIDEOTAPE)

MATHISEN: Finally tonight, this was a pretty good year to be the queen of England.Records released by Buckingham Palace show that Queen Elizabeth II had a 5 percent gain in theportfolio this year on a profit of

$380 million. Most of that gain is from the increased value of the so- called crown estate --property holdings that include much of London`s tony Regent Street, as well as Windsor GreatPark and other real estate. And her horse won at Ascot just a week ago.

GHARIB: It`s a good year.

MATHISEN: Good year to be queen.

GHARIB: Well, that`s it for us, NIGHTLY BUSINESS REPORT. It`s a good year andgot night for us.

Thanks for watching. We`ll see you next week.

MATHISEN: And we`ll see you in the second half of the year. I`m Tyler Mathisen.Have a great weekend, everybody. We`ll see you Monday.


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Nightly Business Report - Friday June 28 2013