Nightly Business Report - Monday April 29 2013

7/30/2019 Nightly Business Report - Monday April 29 2013

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ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and

Susie Gharib, brought to you by --

(COMMERCIA AD)

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: The resilient consumer.

Americans keep spending. Is the consumer and the economy stronger than


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many think?

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Golden opportunity.

Is gold still the precious metal to own despite all that recent volatility?

GHARIB: And restore the shores. Six months after superstorm Sandy

slammed into the Jersey coasts, will the terror destination be ready for

summer?

We have all that and more tonight on NIGHTLY BUSINESS REPORT for

Monday, April 29th.

Good evening, everyone.

Well, Tyler, we got a nice start to the week for investors. Stocks

opened up and they just kept on going.

MATHISEN: Yes, a little bit of a surprise I suppose in many ways.

But it was one of those days. It has been a few weeks indeed since we said

this, but it was another record-setting day on Wall Street, with stocks

getting a big boost from some strong economic reports.

Pending home sales, contracts that assigned, but not yet closed, rose

1.5 percent in March, just enough to reach a three-year high, despite a

dearth of available homes on the market.


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And personal income and consumer spending rose two-tenths of 1 percent

each in March.

And if you add it all up, the Wall Street liked what it saw. The Dow

rose 106 points days. The NASDAQ higher by 27, that was good for a 12 1/2-

year high. And yes, we do have a new record close for the S&P 500. It

closed 11 points higher, ending the session at 1,593.61, tenths of a point

above the old record close.

And things may just be warming up. On Wednesday, we`ll get the latest

read on how much homes are selling for when we get the Case-Shiller Home

Price Index. And Federal Reserve policymakers will wrap up a two-day

meeting on interest rates and those billions in monthly asset purchases.

And then on Friday, the big economic report of the week and the month,

the April employment report from the Labor Department.

For more on the rise in the markets and what may come next, we get

more now from Bob Pisani on the floor of the New York Stock Exchange.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):

Stocks powered again today, with the S&P 500 closing at an historic high.


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It`s been quite a run with the S&P posting gains for six straight months,

its longest monthly win streak since 2009.

What`s powering stocks? The two pillars of the rally remains.

Central banks are back-stopping the world and there is nowhere else to put

money that generates significant returns. It certainly isn`t global

growth-powering stocks. Europe is still mired in recession. China is

fragile. And the U.S., with subpar growth of a little more than 2 percent,

is the best of the lot, hardly the stuff of record high stocks.

That anemic global growth is showing up in corporate revenues. While

many companies are beating on earnings, more than 40 percent are missing

revenue targets. Take Eaton (NYSE:ETN), for example, which makes

electrical and automotive components all over the world. Today reported

earnings that beat the revenues that were light, with European auto parts a

particular drag.

(on camera): Like most industrials, Eaton (NYSE:ETN) reaffirmed their

earnings guidance for 2013, but revenue growth will be very hard to come

by, perhaps only 2 percent. That 2 percent has become the new normal for

both GDP and for revenue growth.

For NIGHTLY BUSINESS REPORT, I`m Bob Pisani on the floor of the New

York Stock Exchange.


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(END VIDEOTAPE)

MATHISEN: As we mentioned a moment ago, stocks got an unexpected lift

from consumer spending in March, up two tenths of 1 percent last month,

following a jump of seven-tenths of a percent in February.

We get more now on the power and resilience of the U.S. consumer from

Hampton Pearson.

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):

Consumers aren`t exactly lining up the cash registers, but predictions,

shrinking paychecks, due to higher Social Security taxes at the beginning

of the year would curb consumer spending are not backed up by first quarter

economic data. It turns out spending in the first quarter was 3.2 percent

higher than the fourth quarter of 2012, according to the Commerce

Department. And the biggest jump in two years.

People like Ann Knabe who counts herself among those more optimistic

about where the economy is heading.

ANN KNABE, SHOPPER: Personally, I think the economy is starting to

rebound and I think modest growth and I think there`s a sense of optimism

among American citizens.


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PEARSON: On the short list of what is improving household balance

sheets, higher home prices, less debt, record stock market prices.

And on Main Street, cheaper gasoline prices, all blunting the impact

of tax increases.

MARGE LLOYD, SHOPPER: We`re not buying as much, but we are buying --

probably a little more than we did last year.

PEARSON: But the jobs picture remains the biggest uncertainty. Only

88,000 new jobs in March after averaging 188,000 the previous six months,

leading wealth managers see a resilient but cost conscious consumer.

MICHAEL YOSHIKAMI, DESTINATION WEALTH MGMT: I disagree with those

that say the consumer is going away. They`re not going away. They`re here

to stay, but they`re going to be more cost conscious when they make

purchase decisions.

PEARSON (on camera): Consumer spending in the first quarter may up,

but the latest polls on consumer sentiment show it`s at a virtual

standstill.

For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson in Washington.


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(END VIDEOTAPE)

GHARIB: A short while ago, I talked with the chief economist of

Vanguard. That`s the giant mutual fund company. Joe Davis says there is

a, quote, "striking disconnect" between how the economy is doing and those

new record highs in the stock market.

(BEGIN VIDEOTAPE)

JOE DAVIS, VANGUARD CHIEF ECONOMIST: There is clearly a disconnect

between where jobs are today and where the stock market is. And I would

ascribe some of that disconnect both to the effectiveness, quite frankly,

of monetary policy in helping to estimate investor risk-taking. At the

same time, I think there`s also a disconnect that the U.S. economy could be

stronger in its recovery, and part of that is due to an uncertainty tax, if

you will.

GHARIB: What we saw in the "Wall Street Journal" today, that Vanguard

CEO wrote this op-ed piece, with this very provocative headline, saying

that uncertainty is the enemy of the recovery.

So, let`s flip it around. If we didn`t have uncertainty, how much

growth, how much better off would we be?

DAVIS: Sure, we actually tried to estimate that very question, the


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answer to that question, Susie. What we found is that just since the early

part of 2011, over the past two years, had policy uncertainty not risen

strongly through the debt ceiling crisis as well as through the fiscal

cliff concerns, that the U.S. economy would be over $260 billion higher in

a GDP perspective.

To put that in every person`s terms, that`s around $800 per person in

the United States. So, it`s had a palpable effect. I think the U.S.

economy would have grown 3 percent per year over the past two years rather

than 2 percent, if the level of policy uncertainty had not been so strong

and so high.

GHARIB: You talk about policy uncertainty, and we know that the

Federal Reserve is meeting tomorrow, this week. To what extent is the

Federal Reserve policy impacting this uncertainty? Is all of the stimulus

that they`re putting into the economy helping or holding back growth?

DAVIS: Well, I think it is helping. It`s tough to argue otherwise

when you look at the fact that the U.S. economy has expanded at an albeit

modest pace, despite the elevated level of policy uncertainty.

So I think the Federal Reserve should receive some credit for trying

to stimulate the economy. That said, I think importantly, they are

starting to point out that there are costs to their strategy. Savers at

home and in very low interest rate paying investments I think are clearly


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feeling the negative ramifications of some of the extraordinary stimulus of

the Federal Reserve.

GHARIB: One thing that we hear a lot from all the CEOs that we

interview is that because of all this uncertainty, they`re holding back on

hiring. And we`re going to get more jobs numbers on Friday.

Do you think that we will see any progress on the hiring front?

DAVIS: I think we`ll see modest progress, but I still think we have

to brace for some disappointments in economic data through the summer. I

mean, the fiscal sequestration, some of those impacts are just starting to

hit. By our estimate, job growth should be approximately 45,000 jobs more

strong -- stronger per month if we didn`t have this uncertainty tax.

GHARIB: Joe, you come in contact with a lot of individual investors

at Vanguard. What`s your read on how they feel about spending money and

investing it?

DAVIS: Well, I think broadly speaking, we are seeing investors -- and

we do have millions of clients and shareholders, continuing to execute on a

long-term plan. Many remain fully vested in the market. That said, there

is a level of concern both with respect to the low level of interest rates,

as well as open any questions such as, is the recent recovery net market,

is this sustainable?


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So I think they`re legitimate questions, but at the end of the day, we

continue to see very strong demand from investors and they continue to

place faith in the financial market.

(END VIDEOTAPE)

GHARIB: And there`s more encouraging news about the economy, and

something we haven`t seen since President Obama took office -- the U.S.

government will pay down debt instead of adding to it. And that`s thanks

to higher tax revenues, lower costs and some upbeat economic forecast that

the U.S. Treasury announced today, that it plans to pay down $35 billion in

debt during the current quarter.

But those good times won`t last for long. For the third quarter of

the year, the Treasury`s already predicting it will have to borrow more

than $220 billion.

MATHISEN: Gold prices are making a bit of a comeback. The precious

metal up nearly $14 a day to $14.67 an ounce. And in that level, it is

almost back to where it was before the big sell-off.

Our next guest expects that that upward trend will continue. He`s

Jason Toussaint, CEO of World Gold Trust Services.


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Mr. Toussaint, welcome.

You know, gold had been on a very powerful bull market run for about a

decade, well into 2011. But since then, it has been in -- I think

charitably, I would say -- a bit of a bear market.

What do you think will turn that around and get gold moving up again?

Why?

JASON TOUSSAINT, WORLD GOLD TRUST SERVICES: Sure. I think there was

a little bit of a shift in demand. We look at the first quarter, a lot of

investors were caught off-guard with the voracity and upward trend in

domestic U.S. stock markets. So there was a bit of a rebalancing going on.

However, what we have seen, as a result of this price pullback, is

perhaps surprising to some of -- a voracious appetite for physical gold

investors around the world, taking advantage of that and seeing it as a

buying opportunity.

So if we look at the reasons why investors here and abroad have turned

to gold, as you mentioned, a decade ago, they are as valid today as they

were when they put those transactions on back then. So, gold, definitely,

has a role in today`s portfolio construction.

MATHISEN: In mid-April, as we mentioned, gold took a very sharp sell-


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off, and there was a lot of money throwing out of ETFs, including the one

that you`re most associated with, the GLD. Who was doing that selling and

why?

TOUSSAINT: We think that the, without having perfect information, the

markets are telling us that the selling that went on in the futures markets

in the U.S. and some transactions out of the ETFs, including spider gold

shares, were more short-term focus, more trading focused, traders in the

marketplace, not necessarily long-term investors.

And I think what we`re seeing here is a little bit of a disconnect

between what`s happening in the U.S. market, led by as I mentioned, short-

term trading, and the fundamental demand for gold around the world. We

always point to India and China. They account for over half of gold demand

now, and they are driven by economic expansion, albeit maybe not at the 8

percent, and revised down to 7.7 percent, but the reasons for buying gold

are varied around the world. And that, you know, we see as a short-term

price pullback.

MATHISEN: The two economies that you just mentioned, China and India;

India has the wedding season coming up, I suppose. And so, there will be

more buying associated with that. But both of those economies are not as

sort of thriving right now as they had been. How important will it be for

the price of gold for those economies to get kick-started again and that

driving buyers back into the metal?


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TOUSSAINT: Sure. I think it`s important to understand that gold

purchases in India and China, in addition to the wedding season and

festivals, you know, it is a fundamental asset to them. So it`s not

necessarily a fashion purchase or a luxury item. It is something that they

buy that they understand and have for generations that gold is the

foundation of long-term wealth creation.

So, despite the fact that they are slowing down somewhat, we need to

understand that there is a long-term wealth creation engine here, which is

creating increasing discretionary incomes and frankly, a vastly expanding

middle class. They`re affinity for gold, combine with the discretionary

income increase means more demand for gold for those two countries going

forward.

MATHISEN: Jason, thank you very much for being with us. Jason

Toussaint is CEO of World Gold Trust Services.

And to "Market Focus" now, with widespread stock market gains, some

new all-time highs were set today, including the Dow component Disney

(NYSE:DIS). UBS upgraded Disney (NYSE:DIS) to buy from neutral, saying the

parks division should be more profitable than the market expects. UBS

boosted its price target for Disney (NYSE:DIS) to 72 a share, after picking

early at $63.25 a share. Disney (NYSE:DIS) closed at $63 even, up almost 2

percent.


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GHARIB: Shares of both Moody s Investor Services and McGraw-Hill,

parent of Standard & Poor`s, jumped today after the companies announced a

settlement late on Friday of lawsuits charging that they had misled

investors about the safety of risky debt vehicles. Moody`s led the S&P 500

today, closing more than 8 percent higher, while McGraw-Hill gained almost

3 percent.

Express (NYSE:EXPR) Scripts, the pharmacy benefit manager, reported

profits and revenues above expectations and lifted profit guidance for the

rest of the year. The stock was up roughly 1 percent of the regular

session and then moved higher in after hours trading.

MATHISEN: Live by the wing, die by the wing. Or maybe it`s a wing a

prayer. Buffalo Wild Wings (NASDAQ:BWLD) posted profits of 87 cents a

share. That was below what Wall Street had looked for. But the company

did say full year profits will be higher as costs for chicken wings trend

downward.

Sales for the current quarter are up more than 5 percent. Shares,

though, of the company were down ahead of the report and then moved a

little bit higher after the close.

GHARIB: Also after the market close. Herbalife (NYSE:HLF) reported

profits above expectations with revenues in line with its estimates, but it


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reduced guidance for the current quarter. The direct marketing nutrition

company said that defending its business model from attacks cost it 7 cents

a share in profits. Herbalife (NYSE:HLF) was publicly slammed by activist

investors earlier this year.

The shares gained more than 1 percent before the close, and then the

shares oscillated up and down as investors analyzed the report.

And coming up a little later in the program, a big drug company is

accused of using dinners, fishing trips and outings to hooters to influence

doctors. We have details coming up.

But, first, a look at how the international market finished today.

(MUSIC)

MATHISEN: Shares of some big hospital operators got a lifeline today.

Take a look at the gains in some of the biggest players in the sector in

today`s session.

Tenet Healthcare (NYSE:THC) shares up 6.5 percent. LifePoint

Hospitals (NASDAQ:LPNT) and HCA Holdings, both up more than 5 percent.

Community Health Systems (NYSE:CYH) up 3.5 percent and Universal (NYSE:UVV)

Health Services up 1 percent. That`s after analysts upgraded several

hospital operators after the federal government`s projection that in-


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patient payment rates looked slightly better than expected for the upcoming

fiscal year.

GHARIB: Two pharmaceutical giants are teaming up to take on Type 2

diabetes. Pfizer (NYSE:PFE) and Merck (NYSE:MRK) have joined forces to

develop and sell a new experimental drug from Pfizer (NYSE:PFE). That`s

expected to move into late stage testing sometime this year. They`ll also

study combining that new pill with Merck`s top selling diabetes drug. The

two companies will split revenues from the new product.

Pfizer (NYSE:PFE) shares rose more than 1 percent today while Merck

(NYSE:MRK) ended a fraction lower.

MATHISEN: Another big pharmaceutical company has apparently teamed up

with a very different partner. The Justice Department filed a civil fraud

lawsuit against the Swiss drug maker Novartis, accusing it of paying

kickbacks and lavishly spending on doctors, including taking some out to

hooters in exchange for prescribing its drugs.

Andrea Day joins us now with more on the latest lawsuit.

Andrea, what was this company thinking?

ANDREA DAY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, Tylerand

Susie, it`s actually been a very tough road for them. Just last week, the


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government accused Novartis of giving kickbacks to pharmacies for switching

kidney patients over to its drugs. And now, comes this --

(BEGIN VIDEOTAPE)

DAY (voice-over): We`ve all heard stories like this before: doctors

handing out pills and getting major kickbacks from the drug companies. But

in this case, Novartis was accused of wining and dining doctors in places

like hooters. It is legit for companies to pay doctors to do educational

speeches.

But the Justice Department is accusing Novartis of hosting doctors in

settings like fishing trips off the coast of Florida, and fancy dinners at

sushi hot spots Nobu.

According to a lawsuit filed by the U.S. attorney`s office, it was all

to increase sales of the company`s drugs. This is the second wave of

charges against Novartis in just one week. Authorities now are saying that

for a decade, the Swiss drugmaker paid millions to doctors in exchange for

steering patients towards its drugs.

According to prosecutors, not much education was going on.

Here`s what the U.S. attorney has to say about the whole thing:

"Novartis corrupted the prescription drug dispensing process with


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multimillion dollar incentive programs that targeted doctors who, in

exchange for illegal kickbacks, steered patients towards its drugs."

Novartis in its statement disagrees with the way the government has

characterized their conduct in both cases and stands behind their

compliance programs.

(END VIDEOTAPE)

DAY: All right. We should note the discount and rebates by

pharmaceutical companies are customary. The question tonight is, what

would stop companies from doing this. Well, if being find is the only

punishment, not much, because we all know that marketing budgets are very

large and these kind of things can make or break moments for drugmakers who

are really banking on the success out there.

And, guys, right now we`re just talking about civil charges.

GHARIB: All right. So, taking doctors out to dinner, that seems like

pretty innocent and tame. What was wrong here?

DAY: Well, you know, it`s perfectly fine to take doctors out to

dinner. But in this case, there are strict guidelines that must be

followed. And in this case, the government is saying, look, those weren`t

followed. They did things beyond that and you must stick within these


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guidelines.

MATHISEN: All right. Andrea Day, thank you very much.

DAY: Sure. Thank you.

MATHISEN: And still ahead, six months after Sandy, will the New

Jersey shore be ready for summer?

But, first, a look at how commodities, treasuries and currencies fared

today.

(MUSIC)

GHARIB: Three Japanese automakers each announcing recalls in the U.S.

and Canada today.

Nissan involves the most -- 120,000 brand new Altimas are being

recalled to check their spare tires for over or under inflation.

Honda needs to fix a faulty electronic stability control system on

46,000 late model Fit sport cars, saying that the car can tilt too far

before it applies the brakes to prevent a crash.

And then, Subaru is calling back 10,000 2014 Forester wagons. The


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problem here, the driver side floor mat could interfere with the gas or

break pedal.

MATHISEN: It was six months ago today exactly that superstorm Sandy

hit, devastating communities all along the Eastern Seaboard. But no place

felt the impact of the storm like the Jersey Shore. And even today,

residents are struggling to rebuild their homes and businesses and they`re

racing now to be open in time for summer, just a few weeks away.

Mary Thompson takes a look now at New Jersey`s $22 billion tourism

industry as it pushes to recover from Sandy half a year later.

(BEGIN VIDEOTAPE)

MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-

over):

From the deck of one of his Seaside Park rentals, Eric Birchler sees

Sandy`s lasting impact on the Jersey shore.

ERIC BIRCHLER, BIRCHLR REALTORS OWNERS: Every week you look south, it

looks different. There`s another board walk amusement that s gone.

THOMPSON: The pace of rebuilding the damage varies from town to town,

and for rental agents like Birchler, the patchwork recovery hurts business.

BIRCHLER: The demand is down and we`re doing our best to advertise a


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little more and try to, you know, spur the demand and get the word out that

there`s towns like Seaside Park that are really nice.

THOMPSON: But drive two miles north to Ortley Beach and houses lie in

ruins. Only 10 of Birchler s 100 rentals in the are ready and available

for summer.

(on camera): Sandy damaged over 18,000 rental units in the Garden

State, thousands of those along the shore. If the rental units, hotels and

businesses aren`t set for the summer, that s the $22 billion the shore

contributes to New Jersey`s $38 billion tourism industry at risk.

(voice-over): Uncertain of the state of the shore, vacationers are

looking elsewhere. The Web site weneedavacation.com says Cape Cod rentals

by New Jersey residents up 6 percent from last year. Inquiries are leading

indicator of rentals and reservations at a seven-year high on Martha`s

Vineyard. And up in Dewey Beach, Delaware, and Lake George.

So, for die hard shore fans, Seaside Heights` director of community

improvement Michael Loundy promises his town will be open for business.

MICHAEL LOUNDY, SEASIDE HEIGHTS DIRECTOR OF COMMUNITYIMPROVEMENT:

We`re going to be ready. We`ve really done two years worth of work in

about six months.


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THOMPSON: Six months of progress after Sandy, but a full recovery

still months or maybe years away.

In Seaside Heights, New Jersey, I`m Mary Thompson.

(END VIDEOTAPE)

GHARIB: And finally tonight, billionaire Richard Branson`s Virgin

Galactic craft designed to carry tourists to the final frontier made its

first rocket powered flight today, moving one step closer to commercial

flights into space.

Spaceship 2 rocketed a pair of test pilots over California`s Mojave

Desert, sending them nine miles above the earth, faster than the speed of

sound, and into the edge of space. Five hundred would-be space travelers

who would pay $200,000 each are waiting for a ride.

More test flights are expected. And Branson is hoping for the initial

flight next year.

MATHISEN: I`m a big fan of the Jersey shore, to go back to Mary`s

story there. And I`m looking forward to going down there this year. It

was such a capricious storm, because there were parts of Long Beach Island,

which is the area that I go to, that were really badly hit and other parts

just blocks away up that got through it mostly unscathed.


23/23

GHARIB: Looking at some of those pictures, Tyler, it looks like the

storm happened yesterday.

MATHISEN: It certainly does.

GHARIB: There`s a lot of people who are still homeless.

MATHISEN: There`s a lot of work still to do, but they`ll get it done.

GHARIB: Yes, they will.

MATHISEN: Looking forward to this summer.

All right. That`ll do it for tonight`s edition of NIGHTLY BUSINESS

REPORT. I`m Tyler Mathisen. Thanks for watching.

GHARIB: And I m Susie Gharib. Have a great evening, everyone. Tyler

and I will see you right back here tomorrow.

END

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Nightly Business Report - Monday April 29 2013

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