Nightly Business Report - Thursday June 6 2013

7/28/2019 Nightly Business Report - Thursday June 6 2013

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

(COMMERCIAL AD)

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Not too hot, not to cold.Investors are looking for a jobs number that`s just right. But what happens if they don`t get itand why is this report so important?


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TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Teaming up. Howbig business and Uncle Sam are working together in the name of national security.

GHARIB: And historic summit. What does it say for American businesses as theworld`s two economic superpowers, the U.S. and China, get ready to meet?

We have all that and more tonight on NIGHTLY BUSINESS REPORT for this Thursday,June 6th.

MATHISEN: Good evening, everyone.

The Dow staged its biggest comeback this year, turning a triple-digit loss midday into an80-point gain at session`s end. Trade in the day was driven by a big selloff in the dollar. Butmore than that, by speculation of tomorrow`s monthly jobs report.

Now, the jobs numbers are always key, but the data may take on added importance nowbecause of how they could influence Federal Reserve policy.

And in turn, stock prices and rates on everything, from bonds to mortgages and more. And the

consensus is that the economy added 165,000 new jobs last month.

Steve Liesman has the story.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):

The reason the market is so nervous about the jobs report is that Ben Bernanke recently said theFed could ease back the amount that it`s pumping into the economy if job creation is strong.


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BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: If we see continuedimprovement and we have confidence that that is going to be sustained, then we could -- in thenext few meetings, we could take a step down in our pace of purchases.

LIESMAN: The consensus on Wall Street is that payrolls grew by

169,000 in May after a similar jump in April. The unemployment rate will remain changed at ahigh 7.5 percent. But any number above 200,000 or unexpected jump in the unemployment ratecould spook stock investors into thinking the Fed might act soon.

DARRELL CRONK, WELLS FARGO REGIONAL CHIEF INVESTMENT OFFICER:I think anything less than probably 200,000 jobs, the market actually probably respondsfavorably, right, because it keeps the Fed on the table, which I think is what the market is

looking for. Whether we agree with that, or like it or not, I think that`s the reality of thesituation.

Now, certainly anything down around the 100,000 number one concerning of kind of astalling effect in the economy.

LIESMAN: That`s why investors will scrutinize the jobs report for such details aswhether more people have part-time jobs but want to be working fulltime. Did employers askworkers to go work longer hours during the month, and how much did employees` wages go upduring the month?

Finally, was job growth broad-based across many industries or only in a few?

The Fed insists that just easing back on stimulus still means it`s helping the economy justby less than it was. But given lofty levels of the stock market and the nervousness of bulls, theymay be less inclined to listen to the Fed`s reasoning and more inclined to sell first and askquestions later.

For NIGHTLY BUSINESS REPORT, Steve Liesman.

(END VIDEOTAPE)


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GHARIB: Well, no matter how you analyze that Friday report, the jobs of some bankerscould be in jeopardy. It`s connected with rising interest rates on mortgages. The higher they go,the more likely the bankers could get pink slips.

Kayla Tausche explains.

(BEGIN VIDEOTAPE)

KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-

over):

For the last two years, consumers left and right were rushing to refinance their mortgages.Rising home prices made it easy. Low rates made it attractive. Government programs in somecases made it possible.

(on camera): Jobs followed suit. The mortgage banking industry grew

10 percent in 2012 alone. As refinancing boom slows now, that number is being right size, too.

RICHARD X. BOVE, RAFFERTY CAPITAL VP EQUITY RESEARCH: There was afairly sizable refi boom, and that refi boom is slowing down somewhat, which means you will beletting people go.

TAUSCHE (voice-over): For one example, JPMorgan (NYSE:JPM), the largest U.S.bank by assets, has outlined a round of up to 15,000 layoffs in its mortgage banking unit alone,to be completed by 2014. The bulk of those layoffs will center around the servicing of bad loansas credit gets better. But sources say, now, a fraction will focus on origination too, as rates on a30-year fixed mortgage hit their highest point in a year, applications to refinance fell 15 percent.Applications to purchase down

1.6 percent.


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Still some like Bank of America (NYSE:BAC) are betting on more home purchases,adding loan officers in branches to get that business.

Wells Fargo (NYSE:WFC) taking a similar tack.

JOHN STUMPF, WELLS FARGO CHAIRMAN & CEO: The purchase money businesswill become a bigger part of the business, it might be overall less. If it`s less, we also havefigured out how to adjust our cost structure.

TAUSCHE: Franklin Codel, head of mortgage production at Wells Fargo

(NYSE:WFC) says being flexible is key. Well Fargo`s loan officers are paid on commission andtend to quit when business is slow.

The bank`s interim mortgage processors handle booms, but understand their jobs will becut in a bust. Codel says strong underwriters are always in demand, but even they are vulnerableif the market falls off a cliff. That cliff could yet be ahead.

Mike Fratantoni, vice president at the Mortgage Bankers Association forecasts the

mortgage market will keep shrinking, to $1.1 trillion in 2014 from $1.7 trillion last year.

For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche.

(END VIDEOTAPE)

MATHISEN: As we mentioned at the top of the broadcast, stock trading was driven bytwo things today. A steep selloff in the dollar versus the yen, and discussion about tomorrow sjobs report and what it could mean for Fed policy.


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For much of the day, the Dow seemed destined for its first three-day losing streak of theyear. But when the bell rang, the Dow was up 80 points, the NASDAQ added 22 and the S&P500 was higher by 13.

As for the dollar, it posted the biggest lost against the yen in three years. It fell againstthe euro, too, after the European central bank`s chief said further stimulus measures are beingkept, quote, "on the shelf"

and that he was confident the eurozone would begin recovering later this week.

GHARIB: One of Wall Street`s most respected bankers says investors should preparefore even more volatility in the markets. JPMorgan

(NYSE:JPM) CEO Jamie Dimon told a "Fortune" magazine global forum in China today that aslong as the Federal Reserve tries to orchestrate efforts to keep long-term interest rates fromrising, he expects the markets to be, quote, "scary and volatile until things return to normal."

MATHISEN: And scary is how a lot of people are describing revelations that one of thenation`s best known companies has been involved in what some would say is corporate spying --providing Washington, the government, with telephone records of millions of U.S. customers.

With more on the close relationship Verizon (NYSE:VZ) has forged with thegovernment, Eamon Javers is live in Washington -- Eamon.

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Goodevening, Tyler.

Well, we began the day today with a huge scoop from the London "Guardian" newspaper,

which reported that Verizon (NYSE:VZ) had received a court order from a secret intelligencecourt called a FISA Court, ordering Verizon (NYSE:VZ) to turn over communications recordsfrom Americans, phone calls both here in the United States and overseas. What they were afterwas the so-called metadata, information about that calling.

After that scoop hit the news in Washington, we saw a huge effort by Republicans andDemocrats here in town to rally around the intelligence community and really defend this,


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including from the chairman of the House Intelligence Committee -- importantly here thechairman is a Republican -- defending the Obama administration here. He said this kind of datagathering has helped to save lives.

Take a listen.

(BEGIN VIDEO CLIP)

REP. MIKE ROGERS (R-MI), HOUSE INTELLIGENCE CHAIRMAN: And the reasonthey use this, and I can tell you why this program is important, that within the last few years, thisprogram was used to stop a program -- excuse me, stop a terrorist attack in the United States.

We know that.

It`s important.

(END VIDEO CLIP)

JAVERS: In addition, let me walk you through a couple of bullet points here that asenior administration official gave us this morning, explaining why they thought this was not as

serious a story as at least some of the first impressions were this morning. They said this orderdoesn`t allow the government to listen in on the calls, it just allows them to get information aboutthe calls. It doesn`t include the content of those communications or the names of people who areengaged in them.

And it also says it relates exclusively to the metadata, the phone numbers the callsoriginated from, how long the calls lasted, who called whom, that sort of information.

And, guys, I can tell you that a sort of establishment Washington now has come out verymuch in favor of this program. There have been critical voices in town today, and Verizon(NYSE:VZ) sent a note to its own employees explaining that they couldn`t confirm or denywhether this happened, but if it did, that under the law, they would have had to follow this courtorder, guys.


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GHARIB: Eamon, tell us a little bit more about some of those critical voices, because,certainly, this was a topic everywhere in the country, not just in Washington, you know, at watercoolers in every single office. I mean, what are critics saying?

JAVERS: Yes. What was interesting was how this has kind of reversed things inWashington. You saw Dick Durbin come out. He`s one of the president`s biggest alliestraditionally. He said he thought that this was disturbing today. But then you have Republicanvoices like Rogers

(NYSE:ROG) and others, who came out and said, you know what, we think this is perfectly fine.It`s being handled appropriately and Congress had the right oversight.

So, it sort of flipped Democrats and Republicans, kind of an interesting, strange

bedfellows here in Washington today.

MATHISEN: I want to turn you back to the thing you just said, and it was that no nameswere attached to these data. But then you said that the government was interested in who wascalling whom. What is it then?

JAVERS: Right.

Well, what they`re doing is they`re tracking the phone numbers them selves. And so,then, if they get a particular number that`s of interest, they can go back and reverse-engineerthose under a specific process of going into this database that can go and look at who was callingthat person and the number that person called, then they can go back and reverse-engineer thosenames if they need them.

But officials were at pains today to say that it`s only rarely that they go into the database

and it has to involve a special transparent process for that doing that. It`s not something thatthey`re doing and just trolling to this database on a regular basis.

MATHISEN: Got it. So they use those numbers to sort of describe a web presumably ofcommunications.


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JAVERS: Exactly.

MATHISEN: Eamon Javers -- Eamon, thank you very much.

JAVERS: You bet.

GHARIB: Also from Washington today, some head winds and congressional efforts tooverhaul the nation`s immigration laws. The House so-called "gang of eight" reached a tentativedeal to overhaul immigration rules last night, but the measure is facing a lot of opposition in thefull house.

At issue here, House Republican concerns about enforcing current laws regarding thedeportation of young, illegal immigrants and who is responsible for health care costs forundocumented immigrants?

MATHISEN: Also on Capitol Hill, the Senate failed to pass two measures that wouldprevent the interest rate on student loans from doubling on July 1. The current rate on Staffordloans is slated to jump up from 3.4 percent to 6.8 percent in less than four weeks, unlesslawmakers can agree on a new plan.

GHARIB: And still ahead on the program, the U.S.-China summit, and why the meetingtomorrow between these two superpowers means so much for American business.

But first, let`s look at how the international markets closed today.

(MUSIC)

GHARIB: We begin our "Market Focus" tonight with an earnings surprise. Cienareported a small quarterly profit. Analysts were expecting a loss. Revenues also came in betterthan expected, thanks to telecom spending on switches and other Internet gear. More mobilevideo and data means more business for firms like Siena.


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Investors filed into the stocks, pushing the price up more than 17 percent to $19.50.

Disappointing earnings, though, from Ann Inc. This is the retailer that operates AnnTaylor and LOFT stores. Profits plunged 27 percent from a year ago, saying cold weather hurtsspring sales. It also cut its revenue outlook for the year, but said the company is on track forhigher profitability.

Well, investors were encouraged by that forecast and shares gained about 1.5 percent ontwice normal volume.

A confusing day for investors in SodaStream. The stock surged on the report that it`s intalks to sell the company to Pepsi. But Pepsi`s CEO Indra Nooyi told CNBC today the reportwas untrue.

By the close, the home soda maker was up more than 2.5 percent to $71 and change onheavy volume.

MATHISEN: Thor Industries (NYSE:THO) which makes those iconic airstreams andother RVs and buses, reported 6 percent increase in profit.

That beat estimates and revenues jumped 13 percent on strong RV sales.

Before the report, Thor gained a fraction in choppy trading. It closed at $41.24.

J.M. Smucker (NYSE:SJM) reported a profit gain of 25 percent on stronger volume,helped by lower prices on coffee and peanut butter. But Smucker`s outlook for the currentquarter is in line merely with a year ago, and that outlook led to an almost 4 percent drop inshares on triple the usual volume. Smucker finished the day at $98.38.

GHARIB: And more selling in Turkey`s stock market as investors worry about theimpact of street riots. Over the past week, there have been violent protests in several cities overplans to turn an Istanbul park that`s popular with the city`s secular young residents into ashopping plaza. Today, Turkey`s prime minister said the government won`t be swayed from its


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plan to redevelop that area, and that sent Turkey`s stock exchange down 5 percent. It`s plunged22 percent over the past two weeks.

MATHISEN: Insider trading charges are marring the largest investor ever by a Chineseconcern buying a U.S. company. Wall Street regulators obtained a court order to freeze theassets of a Thailand based trader.

Officials say he reaped more than $3 million in illegal profits by acting on a tip ahead of theannounced $4.7 billion acquisition of the pork producer Smithfield Foods (NYSE:SFD) byChina`s Shuanghui International last week.

And more news about China. Tony Soprano may be headed there. The entertainmentgiant Time Warner (NYSE:TWX) is teaming up with China media capital, looking for

investments and even more media partnerships in the world s most populous nation. For TimeWarner (NYSE:TWX), owner of Hollywood`s Warner Brother Studio and top watched cablechannels like HBO, TBS, TNT, it will open new platforms and markets for content.

GHARIB: While creating closer business and economic ties between the U.S. China willlikely be one of the topics President Obama will discuss with China`s President Xi when theymeet tomorrow in California, our guest tonight says a lot is riding on the two-day meeting andcould make a fresh start in the relationship between the U.S. and China.

She`s Bonnie Glaser, a China expert at the Center for Strategic and International Studiesin Washington.

You know, Bonnie, there has been such a buildup about this meeting of people saying it`sa very crucial meeting for the U.S. and for China. What are the risks, what are opportunities ofthis meeting? What can we expect to come out of it?

BONNIE GLASER, CENTER FOR STRATEGIC AND INTERNATIONAL STUDIES:Well, this is indeed a very important meeting. I think there are real opportunities for the twoleaders to express their concerns directly to each other, their expectations to try and identifysome areas where they can cooperate in ways that they can benefit both of their country`seconomies.


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I think that on the agendas of both the Chinese President Xi Jinping and President Obamawill be issues pertaining to market access for their companies. They are interested in expandingtrade, and President Obama will be particularly concerned to talk about the cybersecurityhacking issues that have cost American companies a great deal in the stealing of intellectualproperty.

MATHISEN: You know, I would say intellectual property and hacking are two issues ofgreat certain to the American side. But the Chinese are very proud and there are things that wedo that get under their skin. From their point of view, what are we doing wrong? What`sbothering them about us?

GLASER: Well, what`s bothering the Chinese is a long list of things.

It begins with the fact that the United States is rebalancing to Asia, strengthening ties with ourallies, increasing our military deployments and missile defenses around China`s periphery. Andin terms of economic issues, the United States is seen as not facilitating the entry of Chineseinvestment into the United States. And we are seen as blocking the transfer of high technologyto China, because we maintain sanctions on China.

GHARIB: Obviously, both sides have things that they want. American businesses arereally keen on solving some of the issues that you were talking about -- opening up our trade,dealing with this whole cyber security. That`s a big problem for American businesses.

But is this meeting going to get granular and deal with some of these things or is thismore of just kind of getting to know each other between Obama and Xi?

GLASER: It`s very unlikely that there will be concrete agreements or deliverables thatcome out of this meeting. The hope is that the two leaders are going to establish some rapport,understanding of each other, lay the groundwork so that they can find ways to move therelationship forward. They might then instruct their bureaucracies to begin to resolve some of

the problems that have been building in the relationship.

And about a month after this meeting, the U.S. and China will hold their annual strategicand economic dialogue. And so, some concrete agreements could be seen coming out of thatmeeting.


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GHARIB: Well, certainly, everybody is going to be watching it very closely. Thank youso much, Bonnie, for a preview.

GLASER: Thank you.

GHARIB: Bonnie Glaser from the Center of Strategic and International Studies.

MATHISEN: And coming up, we will meet Hollywood`s newest start, Google(NASDAQ:GOOG), and find out whether its gamble to play a bigger role on the silver screen

will pay off.

But, first, a look at how commodities, treasuries, currencies fared today.

(MUSIC)

MATHISEN: Chrysler is recalling more than 300,000 Jeep SUVs to fix faulty airbagssoftware and transmission fluid leaks. This recall involved Jeep Patriots and Compasses fromthe years 2010 through 2012 for the airbag problem, and Wranglers from 2012 and 2013 for thetransmission issue.

Now, these vehicles have nothing to do with the older Jeep models that governmentsafety officials want Chrysler to recall for a gas tank issue.

The company is fighting that recall.

GHARIB: Tomorrow is a big day for General Motors (NYSE:GM). The automaker willreturn to the S&P 500 once again four years after emerging from bankruptcy. CEO Dan Akersontold shareholders at GM annual meeting today that the company`s finances are strong enough toconsider paying a dividend or repurchasing additional shares from the government.


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Now, yesterday, we told you that the Treasury Department was getting ready to sell 30million more GM shares. Well, today, those shares were put up for share and the proceeds willbe about $1 billion.

MATHISEN: And Google (NASDAQ:GOOG) is another company that hosted ashareholder meeting today. And not only is the tech company talking to investors, but is alsostarring in a new Hollywood movie that hits screens tomorrow.

This weekend, FOX opens up "The Internship" in 3,000 theaters, jumping on a trendSony (NYSE:SNE) started with "The Social Network", looking to cash in on the growingfascination with powerful Internet companies.

Julia Boorstin takes a look.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Google (NASDAQ:GOOG).

UNIDENTIFIED MALE: You got us a job at Google (NASDAQ:GOOG)?

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):

FOX`s comedy "The Internship" follows Vince Vaughn and Owen Wilson as they navigateinternships at the search giant after they`re fired from their salesman job. Though FOX istapping into a similar fascination with Internet giants as Sony (NYSE:SNE) did with "The SocialNetwork" with Facebook (NASDAQ:FB), the studios and companies took opposite approaches.

"The Social Network" skewered Mark Zuckerberg and Sony (NYSE:SNE) didn`t get anycooperation from Facebook (NASDAQ:FB), which called the film fiction.

FOX and Google (NASDAQ:GOOG) went in the opposite direction. "The Internship"paints the search giant as fun and quirky. Vince Vaughn approached Google (NASDAQ:GOOG)


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with a screenplay and Google (NASDAQ:GOOG) agreed to help out. They allowed FOX toshoot on campus for five days, consulted on accuracy, provided 100 extras, including co-founderSergey Brin, and suggested changes.

(on camera): It sounds like the mother of all product placement, but no money changedhands. Google (NASDAQ:GOOG) said it participated because it wanted to get kids moreexcited about technology. Now, it could benefit from a surge in job and internship applications.

(voice-over): Brand analysis firm Millward Brown Optimor says Google`s image listcomes at a key time as competition for talent heats up with younger companies like Facebook(NASDAQ:FB) and Twitter.

PHILIPPE DUPREELEE, MILLWARD BROWN OPTIMOR: The movie can be a verynew face, a very new way of looking at Google (NASDAQ:GOOG), and to the company thatcould definitely help them, especially in the talents fight that these companies are runningagainst each other.

BOORSTIN: Now a sea of bedding on Google`s brand pays off for FOX, who spent areported $58 million to make the film and more to market it.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.

(END VIDEOTAPE)

GHARIB: Another tech titan is trying something new. Apple

(NASDAQ:AAPL) is said to be planning an iPhone trade-in program for the very first time as ittries to lift slumping sales and keep customers from sampling other smartphones made by rivalslike Samsung, HTC and BlackBerry.

MATHISEN: Finally tonight, how do you honor a billionaire who pledged to give awaynearly all his fortune, while urging others like him to donate at least half of theirs?


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For starters, how about bringing in U2`s Bono to sing?

(BEGIN VIDEOTAPE)

U2`S BONO (singing): Oh give me a home where the dividends roam. And the deergraze on Berkshire Hathaway (NYSE:BRK.A). Where Warren plays bridge, Cherry Cokes inthe fridge. And Munger makes wisecracks all day

(END VIDEO CLIP)

MATHISEN: Maybe not Bono`s best but pretty good nonetheless.

Investor Buffet was given a lifetime achievement award for philanthropy at a privatereception hosted by "Forbes" magazine. That occurred on Wednesday. And Bono creditsBuffett`s advice and encouragement for his own philanthropic efforts.

GHARIB: The only thing missing there was Buffett playing his ukulele.

You know, he plays the ukulele and sing.

MATHISEN: He does. He could have accompanied him there.

(CROSSTALK)

MATHISEN: -- should better watch out.


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And I believe the bidding ends tomorrow on Buffett s lunch. If you want to have lunchwith Buffett, proceeds go to a charity, get in before long. It`s like $2 million, $3 million lunch.

GHARIB: I think it`s up to $1 million. It`s gotten as high as $3.5 million in the past.So, it`s a real power lunch.

MATHISEN: It goes to a good cause. And you get to sit down and have a hamburgerwith Buffett.

GHARIB: That`s it for us on NIGHTLY BUSINESS REPORT. Thanks for watching.And, remember, this is the time of year your public television station asks for your support.

MATHISEN: And thank you for being with us tonight. And on behalf of your publictelevision station, thank for your support. Have a good night, everybody. And we`ll see youback here tomorrow. Big jobs day tomorrow.

END

Nightly Business Report transcripts and video are available on-line post broadcast athttp://nbr.com. The program is transcribed by CQRC Transcriptions, LLC. Updates may beposted at a later date. The views of our guests and commentators are their own and do notnecessarily represent the views of Nightly Business Report, or CNBC, Inc. Informationpresented on Nightly Business Report is not and should not be considered as investment advice.(c) 2013 CNBC, Inc.

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Nightly Business Report - Thursday June 6 2013