Nightly Business Report - Tuesday, April 16, 2013

7/28/2019 Nightly Business Report - Tuesday, April 16, 2013

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ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and

Susie Gharib, brought to you by --

(COMMERCIAL AD)

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Stocks rebound. The

market bounces back from the worst one-day decline and now our attention

turns to technology, as Intel (NASDAQ:INTC) and Yahoo (NASDAQ:YHOO) both


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report earnings after the bill.

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Strong foundation.

Housing starts jump dramatically. But are red flags being raised on one

part of the recovery.

GRIFFETH: And gold rush. What are individuals doing now with the

precious metal as prices fluctuate sharply?

All that and more coming on the NIGHTLY BUSINESS REPORT for Tuesday,

April 16th.

Good evening, everybody. I`m Bill Griffeth, in for Tyler Mathisen all

this week.

Susie Gharib, another big day for he markets. But now, we have two

numbers out today that probably will set the tone for tomorrow.

GHARIB: And we are talking technology now for a change.

Two tech titan with a tale of two different earnings stories tonight.

Yahoo`s first quarter earnings surged 36 percent but an Intel (NASDAQ:INTC)

profit fell 26 percent. They are the first batch of technology companies

reporting this week and could set the tone for trading in tech stocks

tomorrow.


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First, let`s look at Intel (NASDAQ:INTC). The world`s biggest

computer chip company earned 40 percent a share. It was a penny below

analysts estimate. Revenues fell 2 percent to $12.6 billion, slightly

better than expected. But the company said revenues in the current quarter

will come in higher than forecast, and so, Intel (NASDAQ:INTC) shares

jumped as much as 2 percent after hours trading before pulling back.

Meanwhile, Yahoo (NASDAQ:YHOO) earned a 38 percent a share. That was

14 cents more than analysts expected, but revenues came in below estimates

at $1 billion and the company reported a drop in display advertising,

disappointing investors. Yahoo (NASDAQ:YHOO) shares tumbled more than 4

percent in after hours trading.

GRIFFETH: And on the heels of Intel`s and Yahoo`s mixed results,

there`s another technology giant set to report next week which may reveal

about the shift by consumers to mobile computing and the health of the tech

sector as a whole, than any other company.

In tonight`s installment of our series "Earnings Spotlight," Jon Fortt

tells us what investors are expecting and hoping to hear from Apple

(NASDAQ:AAPL).

(BEGIN VIDEOTAPE)


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JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): If

there`s one tech company to focus on this earnings season, it`s Apple

(NASDAQ:AAPL).

(on camera): It`s an important quarter for the iPhone and iPad maker.

Of course, investors would like an increase to the dividend. Now, it`s at

around 2.5 percent yield. They`d like something closer to 4 percent.

(voice-over): The stock is trading near its lowest level since the

early days of 2012 because of worries that the days of dizzying sales

growth and profitability of the company are over.

COLIN GILLIS, PARTNERS TECH SPOTLIGHT: Expectations for the March

quarter keep ratcheting down, because we are in the middle of a product

refresh vacuum, right? But it`s not only the March quarter that investors

are concerned about. They are concerned about the June quarter which may

show more signs of a slow-down as existing, iPhone 5 and iPad start to show

age and in front of the next launch of those products.

FORTT: Apple (NASDAQ:AAPL) has already poured cold water on Wall

Street`s hopes for surprise up side, saying that sales will be up 5 percent

to 10 percent, to around $42 billion. Margins will be down and unlike in

the past, this time management promises those projections will prove

accurate.


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A key storyline to watch with the stock, PC versus mobile. PCs are

under plenty of pressure with shipments down nearly 14 percent in the first

quarter, according to IDC, as consumers opt for phones and tablets instead.

Just ask people how often they are buying a new home computer.

UNIDENTIFIED FEMALE: Never because I have a Mac. So, as far as my

Mac goes, I mean, I have iPad and a lot of tablet handheld devices. So,

those, I mean, we get new rounds of those every couple years. But no PC

except at work.

UNIDENTIFIED MALE: I think I use my iPad more than I use my computer

to where it`s almost obsolete in a way. I`ve never even touched it. It`s

almost pointless to have one almost at this point.

FORTT (on camera): Bottom line, investors are looking for a reason to

continue believing in the surprising market rally we`ve seen so far this

year. Optimism from Apple (NASDAQ:AAPL) would go a long way.

For NIGHTLY BUSINESS REPORT, I`m Jon Fortt in Cupertino.

(END VIDEOTAPE)

GHARIB: Joining us now to talk more about those earnings from Intel

(NASDAQ:INTC) and Yahoo (NASDAQ:YHOO) and the out look for the technology

sector, Josh Spencer. He`s portfolio manager of the T-Rowe Price Global


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Technology Fund.

You know, Josh, looking at Intel (NASDAQ:INTC) and Yahoo

(NASDAQ:YHOO), the one thing that ties them together, these are about

companies trying to reinvent themselves. So, I have two questions for you.

In the case of Intel (NASDAQ:INTC), does it have what it takes to reinvent

itself, to jumpstart the company? And in the case of Yahoo (NASDAQ:YHOO),

is Marissa Mayer`s turnaround strategy working?

JOSH SPENCER, T. ROWE PRICE GLOBAL TECHNOLOGY FUND: Well, thanksfor

having me on. It`s nice to be with you.

And you hit the nail on the head, both are reinvention stories. In

the case of Intel (NASDAQ:INTC), they start with a strong suit with

manufacturing. They`re actually, you know, a world class manufacturer of

semiconductor chips. However, the segment that they sell into, the PCs, is

under a lot of pressure.

I smiled in the interviews in the Apple (NASDAQ:AAPL) segment leading

into this. People just aren`t using their PCs as much as they did in the

past. So, I think Intel (NASDAQ:INTC) does have what it takes to turn

around eventually but it will be a slow process to establish themselves in

the smartphone and tablet market.

Yahoo (NASDAQ:YHOO) is also going through a turn around and what we


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saw this quarter was not much evidence of a fundamental turn around in

Yahoo`s business with revenues actually down a little bit year on year. So

that one is still on the come as well.

GRIFFETH: Are we really going to get to a time where we do not use

PCs anymore. I mean, I know we`re migrating to these mobile technologies

that we all use. But will we come to day when we don`t use PCs? And who,

in your opinion, is better positioned in that regard, Intel (NASDAQ:INTC)

or Yahoo (NASDAQ:YHOO)?

SPENCER: Well, in that regard, Yahoo (NASDAQ:YHOO) is better

positioned. I think it`s an exaggeration to say we won`t use PCs. But

we`ll use them for a lot narrower applications. So, we might use them at

work for spreadsheets. But at home, we`ll pull out that tablet or that

smartphone if we want to check the Internet, or stay up with video or news.

We just will PCs less and less in our daily life.

Yahoo (NASDAQ:YHOO) has a better chance to make that transition.

Intel (NASDAQ:INTC) is establishing themselves into a whole new realm.

GHARIB: Josh, I want to ask you about Apple (NASDAQ:AAPL). You heard

Jon Fortt`s report on it. Everybody is looking forward to that report,

earnings report next week.

I know that you are a believer in Apple (NASDAQ:AAPL). But make a


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case, why investor who have lost some faith in this company should take a

fresh look at Apple (NASDAQ:AAPL)?

SPENCER: Well, we all love Apple (NASDAQ:AAPL) products. The

customer that you interviewed, that sounds like my house at home. We have

Macs, we have iPads, iPhones. We have a 2-year-old and a 5-year-old who

love using those iPads. So, may be too much.

The products are very intuitive. They have a great software

ecosystem, we have come to expect innovation from Apple (NASDAQ:AAPL) and I

think we will continue to see it in the future.

You know, just because they have gone through a bit of a lull here

let`s not throw the baby out with the bath water. It`s easy to forget that

Apple (NASDAQ:AAPL) has been generating tremendous profits and has over

$130 billion of cash on their balance sheets today.

GRIFFETH: Right. It feels though that the innovation has been more

incremental than transformational, as we saw during the Steve Jobs era.

What do you think the next big thing is from Apple (NASDAQ:AAPL)?

SPENCER: Well, it`s hard to say. I think they`re going to continue

to innovate around the iPhone and iPad products. I think we`ll see thinner

iPads. And I think we`ll see larger screen iPhones and new features like

fingerprint sensors.


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Of course, we`ve all heard the talk about Apple (NASDAQ:AAPL) working

on watches and TVs. I think I would buy an Apple (NASDAQ:AAPL) watch if

one came out. I think there`s a lot of people into fitness who would use

it in the gym or while they`re jogging outside. And, of course, there`s

many people who would buy an Apple (NASDAQ:AAPL) TV to solve the nightmare

problems that we have with our cable box.

GHARIB: OK. Josh, do you any disclosures to make on Apple

(NASDAQ:AAPL), Intel (NASDAQ:INTC), or Yahoo (NASDAQ:YHOO)? Do you own any

of these stocks?

SPENCER: Apple (NASDAQ:AAPL) is the largest position in the fund that

I manage and we do own Apple (NASDAQ:AAPL) personally in our family as

well.

GHARIB: All right. Thanks so much. Josh Spencer, portfolio manager

at T. Rowe Price Global Technology Fund.

Bill?

GRIFFETH: Well, the markets rose sharply today, gaining back more

than half of Monday`s big losses. The Dow was up 157 points when all was

said and done, ending the session at 14,756. NASDAQ up 48, the S&P 500

added 22 points.


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Stocks got a big boost from a round of solid economic data reports and

stronger than expected earnings before the bell from Dow components, Coca-

Cola (NYSE:KO) and Johnson & Johnson (NYSE:JNJ).

As for that data, inflation is still in check. Consumer prices fell

more than expected last month, driven lower by a 4 percent decline in

prices at the gas pump.

Also, helping, industrial production was higher than forecast in

March. With U.S. automakers churning out more new cars and trucks and

utilities generating more heat to combat a nationwide cold snap that we all

suffered from last month.

And there was more good news in housing. Construction of new homes

shot up by 7 percent in March, enough to reach an adjusted annual rate of 1

million housing units for the month, something we have not seen in five

years.

GHARIB: Well, Bill, that jump in new home building that you just

talked about help sent shares of the nation`s biggest home builders higher

today. Pulte Homes rose more than 4 percent. Ryland up 3 1/2 percent.

D.R. Horton (NYSE:DHI), Toll Brother and Hovnanian all seen gains.

Now, much of the surge in construction was not single family homes


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however, but multi-family rental apartments. It`s a sector that`s been

growing rapidly over the past few years and now, there`s concern about a

backlash in all those rental units that are hitting the market all at once.

Diana Olick explains.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):As

the market for single family homes recovers, a curious contradiction wings

overhead, crane high above construction sites of multifamily rental

apartments buildings. Thousands of new units are going up just as demand

for rental apartments could soon be coming down.

Multifamily starts rose 27 percent month to month in March, and are up

82 percent from a year ago, running at an annualized pace of 392,000.

Compare that to the 10-year historical average of 238,000.

DAVID TOTI, CANTOR FITZGERALD: A year from now, we will be seeing

much stronger headwinds for this space potentially. The supply trajectory

clearly is changing, mortgage credit is clearly loosening. If we stay in

the current pathway, I would expect that demand will be diminished

somewhat.

OLICK: The numbers don`t show it yet. Apartment vacancies fell in


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the first quarter of this year to 4.2 percent nationally, from 5 percent a

year ago. That pushed rents higher by 3 percent. Despite sluggish job and

wage growth, renters are still willing to pay these higher rates.

But the question is, for how long? Especially as confidence comes

back to single family?

(on camera): It takes about two to three years to put up an apartment

building. So, with all these new starts over the past couple of years,

we`re about to see a big surge in supply. And just adds to investor fears

already weighing on apartment rent (ph).

TOTI: What we have seen in the multifamily rent space for the last

couple of years, certainly last year and this year, has been relative

underperformance to the rest of the rent market. A big part of that has

been fear around supply. There`s a bigger concern around rental growth as

well. Supply ties to that.

OLICK (voice-over): But real estate is all about location. And

developers in prime, urban areas claim the market is hot but not

overheated.

JOHN TSCHIDERER, FEDERAL REALTY INVESTMENT TRUST: No, we`re not

concerned about any of that. I think the market is ripe for us to take

advantages of the locations we are.


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OLICK: More than 100,000 new apartment units are set to open in a

latter half this year, with an even stronger surge set for 2014.

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.

(END VIDEOTAPE)

GRIFFETH: And that`s how our system works, where there`s one area

that suffers, like the housing market, the rental market is very hot right

now and that`s not lost in these builders.

GHARIB: Remember the whole American dream of owning a home. That

maybe changing, too. Just psychologically, Americans want to rent. It`s

easier.

GRIFFETH: And they are doing it in big droves right now.

Still ahead on the program, the gold rush. Is all the volatility

causing individuals to hoard or unload precious metals?

But, first, let`s take a look at how the international markets closed

today.

(MUSIC)


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GHARIB: As we mentioned earlier in the program, strong earnings from

two Dow components helped to set the table for today`s market rally. Coca-

Cola`s earnings and revenues topped estimates, thanks to strong sales

volume in the U.S. and worldwide.

And Johnson & Johnson (NYSE:JNJ) also reported better than expected

earnings on sales of newer medicines.

Investors bid up Coke more than 5 1/2 percent to $42, and it was

leading the Dow gainers. Johnson & Johnson (NYSE:JNJ) gained more than 2

percent to $83 a share.

GRIFFETH: Meanwhile, two financial services giants, Goldman Sachs

(NYSE:GS) and Blackrock reported strong quarters. Goldman`s profit was up

more than 7 percent, while Blackrock`s was up 10 percent.

Goldman`s chief financial officer said that their clients were more

cautious in March because of Cyprus and other uncertainties. While

Blackrock`s chief executive officer said new business during the quarter

was indicative of positive momentum.

Blackrock gained more than 1 percent, while Goldman Sachs (NYSE:GS)

lost nearly 2 percent.


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GHARIB: Shares at JCPenney jumped 5 1/2 percent today on a report

that the troubled retailer is considering ways to borrow against its real

estate by issuing debt. Besides its retail stores, Penney owns warehouses,

distribution centers and other real estate. JCP closed at $15.19 a share.

GRIFFETH: And Whirlpool (NYSE:WHR) announced a 25 percent dividend

increase, saying that it expects to sustain growth. As housing recovers,

all those new homes, of course, are going to need appliances. Whirlpool

(NYSE:WHR) also sells kitchen-aid and Maytag products.

Whirlpool (NYSE:WHR) shares have gained almost 65 percent of the past

year and they were up better than 3 percent today alone.

GHARIB: And one of the stars of today`s market was WW Grainger. It

sells equipment and supplies to other companies and institutions.

Grainger`s first quarter profit improved by 13 percent and that`s thanks to

strong sales growth in the U.S.

Grainger led the S&P 500, gaining 7 1/2 percent. That works out to

$16 to $241 a share.

And gold prices regained a bit of their glitter today, up $26 an ounce

but that`s coming off the biggest one day drop in prices in 33 years on

Monday, with prices falling $140. So, if you own gold, even some old

jewelry that you are thinking of selling for cash, you may be wondering if


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now is the time to sell.

Jane Wells takes us to a California company, where volatile prices for

gold and silver are creating a rush of customers.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: We have 23 kilos and 165 eagles.

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):It`s

late afternoon at California Numismatic Investments where customers are

furiously buying or selling gold and silver. There`s a line out the door.

KEN EDWARDS, CALIFORNIA NUMISMATIC INVESTMENTS: Volatility brings

them in because they need to act now.

WELLS: Ken Edwards is a partner in the gold dealer, just down the

road from LAX. Business is up as gold and silver prices are down.

EDWARDS: Up until the recent drop, that was the end of last week,

beginning of this week, I would say that we were selling more, especially

silver.

WELLS (on camera): You were selling.


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EDWARDS: We were selling more. OK? Now that`s really balanced out.

We have seen more sellers come in the market in the past couple of days.

WELLS (voice-over): One man who did not want to talk on camera was

selling more than 1,600 ounces of gold while we were there. But most of

the people were buying.

John Garton is buying silver at the moment and is waiting to buy more

gold.

JOHN GARTON, SILVER/GOLD BUYER: Obviously, it will go down another

$100 and then it will start its way back up.

WELLS (on camera): At this facility, they will buy American gold

eagles for about $25 above the market price for gold. They`ll sell them

for about $75 over. As for silver, they buy at $1.25 above the spot

market, and they sell for $3.25 over, but they don`t have much silver to

sell at the moment.

(voice-over): Most of the business here is done through the mail.

About 20 percent is conducted in person. And CNI`s 18 employees are busier

than normal.

EDWARDS: When there`s big moves, lots of volatility, that tends to

get people to act right away. They don`t want to wait until Friday because


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the market might be completely different.

WELLS: And here, no matter what`s happening with the price of gold.

They are making money.

For NIGHTLY BUSINESS REPORT, Jane Wells, Inglewood, California.

(END VIDEOTAPE)

GHARIB: The tricky thing about selling jewelry is that it s just for

its weight not for the design or any special stones, it is a gold rush.

GRIFFETH: That numismatic quality. Exactly. I mean, we definitely

in the midst of the gold rush again. That`s for sure.

All right. Coming up, the business of protecting big events and the

cost to keep you safe.

But, first, more on how the commodities and treasuries and currency

fared today.

(MUSIC)

GHARIB: Brace yourself for even slower growth around the world, 3.3

percent is the new global economic growth number from the International


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Monetary Fund. It lowered its outlook by 0.2 of a percent today, blaming

steep federal spending cuts in the U.S. and the deepening debt crisis in

Europe.

The IMF also trimmed its growth forecast for emerging markets and cut

China`s growth to 8 percent from 8.2 percent.

GRIFFETH: Well, certainly, a slow down in GDP in China got the blame

from Monday`s selloff on Wall Street. But Ford does not see it that way.

The automaker is predicting that 40 percent of its global sales will come

from China by the end of this decade.

The company as a result has doubled its capacity there, scrambling to

keep up with demand in the world`s largest automatic.

Phil LeBeau is in Chongqing with a closer look at Ford`s rapid

expansion there and the challenges it still faces.

(BEGIN VIDEOTAPE)

PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):

Shouguo Li is part of the new wave in China. Car buyers turning the

western part of the country into one of the hottest auto markets in the

world.


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SHOUGUO LIO, BUYER (through translator): In his mind, he feels that

the car, the brand is good. And the service is also excellent. So this is

why he trusts this brand.

LEBEAU (on camera): Here in Chongqing, the gateway to western China,

growth in auto sales is particularly good news for Ford. At this plant, a

new Focus or Cougar rolls off this assembly line every single minute. And

within two years, Ford will be doubling capacity in this area.

XU BINGHUA, CHANGAN FORD PLANT MANAGER: This year, the total volume

of the Ford (INAUDIBLE), we achieved almost 600,000. So it`s a big, big

key (ph).

LEBEAU (voice-over): Growing sales in China have been one of Alan

Mulally`s top goals since he took over Ford in 2006. At the time, Ford had

a small presence in China. While its rival G.M. led the market, thanks to

Chinese buyers loving Buicks.

Mulally immediately began investing billions in China, quickly ramping

production. China now generates 11 percent of Ford`s global sales with the

Focus leading the way.

ALAN MULALLY, FORD MOTOR COMPANY PRESIDENT & CEO: They have theFocus

being announced as the number one selling vehicle in the world, and the

number one selling vehicle in China. What a proof point about the Ford


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strategy.

LEBEAU: While Ford is surging in China, it is still barely a blip in

the rear view mirror of the market leaders.

JAMES CHAO, IHS (NYSE:IHS) AUTOMOTIVE: The dominant players here are,

of course, Volkswagen, General Motors (NYSE:GM). Hyundai is a story as

well in terms of how well they have done. So, Ford is still behind but

coming on strong.

LEBEAU: Running hot in the world`s hottest auto market, where buyers

are embracing the blue oval.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chongqing, China.

(END VIDEOTAPE)

GRIFFETH: In many ways, China is about 50 to 60 years behind us in

that they have this very large growing middle class in their country and it

is a sweet spot for companies like Ford and General Motors (NYSE:GM).

GHARIB: They`re going to turn in their bicycles for cars.

GRIFFETH: Yes, ma`am, they are.


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GHARIB: And a lot of them.

GRIFFETH: Yes.

GHARIB: Our series from China continues tomorrow with a report on

what doing business in inner China is really like for American companies.

GRIFFETH: In the meantime, from expansion on the roads, to trouble in

the skies. American Airlines and its regional carrier American Eagle

grounded all flights today after a computer outage at its reservation

system. About 900 flights were impacted and another 800 were affected by

planes and crews not making their destination.

American now says that its computer problems have been fixed and all

flights will resume this evening. But to expect a lot of delays before

things get back to normal.

GHARIB: And speaking to getting back to normal. Finally, tonight,

after the deadly bombings at the Boston marathon on Monday, many Americans

are worried about enhancing security measures at any public event. At

what`s likely the first high profile gathering since the Boston tragedy,

officials acted quickly to insure the safety of a concerned public despite

the cost.

Eamon Javers has more from Washington.


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(BEGIN VIDEOTAPE)

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):

There were marching bands, colonial pipers, and soldiers on parade instead

of on patrol. It hardly seems like a day after a major terrorist attack,

but the Emancipation Day parade continued as planned right down

Pennsylvania Avenue today.

(on camera): Officials said they were going to maintain a very heavy

security presence here at the Emancipation Day parade in Washington, D.C.

There`s not a lot of visible security, the normal police presence is out

and about here in Washington, but the folks we talked to here today said

this was an important day to come out the and they were not going to be

afraid.

UNIDENTIFIED FEMALE: It`s pretty safe place to be at this point.

JAVERS: How did it feel today?

UNIDENTIFIED FEMALE: I feel pretty safe. I do.

UNIDENTIFIED MALE: A hundred and fifty-first signing of the

Emancipation Proclamation. And times were a lot scarier and tougher back

then and people, you know, stood for what they believed in. I thought it


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was an important gesture to come out here and support this.

JAVERS (voice-over): These spectators were determined to go on with

life in America today, even as the Senate Republican leader warned that

Americans had let security go lax.

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: The complacency that

prevailed prior to September the 11th has actually returned. And so, we

are newly reminded that serious threats to our way of life remain.

JAVERS: But securing the big events that America loves is an

extremely expensive to do, whether it`s in Times Square or New Orleans.

The NFL spent $6 million on security for the Super Bowl this year, and

President Obama`s first inauguration came with a $124 million security

price tag and there`s no guarantee that it will always work.

STEWART BAKER, FORMER HOMELAND SECURITY OFFICIAL: My sense is,for

something like this, you could not possibly have frisked everybody in

Boston before the marathon or looked in every trash can everywhere.

JAVERS: No matter what security officials do, life and the parade

will go on.

For NIGHTLY BUSINESS REPORT, I`m Eamon Javers.


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(END VIDEOTAPE)

GHARIB: And that`s it for us, NIGHTLY BUSINESS REPORT for tonight.

I`m Susie Gharib. Thanks so much.

GRIFFETH: I`m Bill Griffeth. Have a great evening, everybody. We`ll

see you tomorrow.

END

Nightly Business Report transcripts and video are available on-line post

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Transcriptions, LLC. Updates may be posted at a later date. The views of

our guests and commentators are their own and do not necessarily represent

the views of Nightly Business Report, or CNBC, Inc. Information presented

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 - Tuesday, April 16, 2013