Nightly Business Report - Thursday May 2 2013

7/30/2019 Nightly Business Report - Thursday May 2 2013

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

(COMMERCIAL AD)

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Shorter lines.

Unemployment claims dropped to the lowest level in more than five years.


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And that lights a fire under stocks, sending the Dow up triple digits.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: And mutualexperience. We`ll talk about the $27 trillion global mutual fund industry with the CEO ofFranklin Templeton.

HERERA: And more green for your groceries. The numbers are in, and you might besurprised what it means for your food bill.

All of that and more on this NIGHTLY BUSINESS REPORT for Thursday, May 2nd,2013.

Good evening, everyone. I`m Sue Herrera. Susie is in Omaha getting ready for theBerkshire Hathaway (NYSE:BRK.A) shareholders` meeting.

MATHISEN: And, Sue, I`m Tyler Mathisen, in Washington, at the big InvestmentCompany Institute. It`s their 55th annual meeting, and we will talk about the $27 trillion globalmutual fund business with Greg Johnson, the CEO of one of the biggest, Franklin Templeton.

But first, Sue, it seems like all of yesterday`s sellers turned around and became buyerstoday.

HERRERA: They sure did, Ty. Sell in May -- well, not today.

Stocks surged higher with traders taking back and making back all of the losses fromyesterday. And that`s after first-time jobless claims fell by 18,000 last week, dropping to a morethan five-year low and on hopes that an interest rate cut by the European Central Bank will helpjump-start the eurozone economy.


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Well, taking a look at how the numbers finished on Wall Street -- the Dow rose 130points, the NASDAQ was up 41 on the strength of technology stocks, and the S&P 500 addednearly 15, just enough to reach another all- time closing high.

MATHISEN: Well, Sue, in addition to the weekly jobless claims numbers, plannedlayoffs in April dipped 23 percent to their lowest levels of the year so far. That, according to themonthly survey from the outplacement firm, Challenger, Gray & Christmas.

So with tomorrow`s jobs report looming on everybody`s mind on Wall Street and MainStreet, let`s talk to John Challenger.

Mr. Challenger, welcome. Good to have you with us.

You know, one of the things that struck me, apart from the individual monthly numbersfor April, which were down in terms of planned layoffs from March, was the fact that this year`snumbers cumulatively, the year so far, almost exactly matched the number of layoffs planned atthis time a year ago.

What does that tell you?

JOHN CHALLENGER, CHALLENGER, GRAY & CHRISTMAS CEO: Well, thelayoffs have been steady this year. They haven`t been heavy, though. These numbers are verylight. These were the lowest numbers we had seen, monthly numbers for layoffs, sinceDecember.

You combine that with these very low weekly jobs claims, and those were expected to go

up.

So, they came down. A big surprise. I think that fueled the market.

But it also fueled hopes that more companies are poised to do some of the hiring that`s beenmissing over the last several years.


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HERERA: We can certainly hope that`s the case, John. But there were certain sectors orareas, if you will, that saw more job cuts than others.

What sectors were those?

CHALLENGER: Well, we saw heavy job cuts, heaviest in retail. Retail has been hithard. Consumer spending has been down. There is real concern that with the payroll tax hikes,that consumers just don`t have as much money in their pockets, consumer confidence is notstrong.

So retail seems to be one of the areas that`s getting hit hard. But there are areas that are

growing, too.

HERERA: Such as?

MATHISEN: Are there any --

CHALLENGER: Health care --

MATHISEN: Oh, go ahead.

CHALLENGER: -Energy, housing, construction. Those are areas that have been seeingjob growth over the first quarter in the economy.

MATHISEN: Are you seeing, John, any indication that the federal spending cuts, so-called sequester is driving anything in a measurable way?

CHALLENGER: We didn`t see it this month in terms of government job cuts or evendefense industry job cuts, but we know that that`s coming.


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Certainly those budgets are being slashed. Those kinds of announcements are going to becertainly ones we have seen in the summer throughout 2013, because they`re just not going to beas much in the budgets to go around.

So we will see more job cuts there going forward.

HERERA: You know, John, I find it interesting health care is on the list. Yet when youtalk to stock analysts, they say that health care is the area in many cases that is starting to grow.

So why would that particular area see a significant number of job cuts?

CHALLENGER: Well, health care -- we saw some job cuts, but it is an area, you know,where we are seeing growth. That`s what I would say.

Health care is -- there is always change going on in everybody`s sector.

But health care has been creating jobs consistently, net new jobs really more than anyother sector in the economy. And with new health care laws coming on board, there`s another 30million, 40 million people who have access to health care services that really didn`t before, at

least not to this degree. So health care is likely to be a net job creator for some time to come.

MATHISEN: John, why did these numbers seem, or correct me if I`m incorrect, why dothey seem so lumpy, so volatile? The February federal jobs report was very good. Then marchturned out not to be good.

Your numbers indicate a similar kind of lumpiness.

CHALLENGER: Well, certainly it depends on sometimes situations that occur month bymonth. The weather affected job creation, seemingly, in the month of March, where just 88,000jobs were created. In the month before, it was almost 250,000 jobs.


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So you have to look at these numbers not on a -- just a week by week basis, and in thecase of the jobless claims, or even on a monthly basis sometimes in the case of theunemployment report. But more by quarter, by what`s happening.

And one of the key issues out here right now is that we are seeing job openings reallynow at a very high level, highest in five years.

MATHISEN: Right.

CHALLENGER: In fact, a real -- tie into the fact that jobless claims, weekly joblessclaims, layoffs, are at a five-year low, job openings that are at a five-year high. You would think

-- unless this economy stalls -- we`re going to see more job growth and the unemployment ratedrop as we move forward into the New Year.

MATHISEN: All right.

CHALLENGER: Into the summer.

MATHISEN: John Challenger -- John Challenger, thank you very much for being withus.

John is with Challenger, Gray & Christmas.

HERERA: Well, Ty, earnings news out of General Motors (NYSE:GM) also helped setthe tone for stocks today. Four years after two of Detroit`s big three were bailed out by thegovernment, the automakers seem to be on a roll again.

Phil LeBeau has more.


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(BEGIN VIDEOTAPE)

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

Things are picking up on America s assembly lines. Just look at Ford`s plant outside KansasCity, where they`re adding 1,000 new jobs and a third shift to keep up with demand for F-seriespickups.

JOE HINRICHS, FORD: Now is the time to add more production, because we`re verybullish on our sales. We have had our F-series sales grow 19 percent so far this year in the U.S.,26 percent in Canada. And now is the time with the auto industry growing.

LEBEAU: F-series sales have steadily improved in recent years. But dealers say they`rereally in demand now, because contractors have the cash to buy a new truck, thanks to thehousing market coming back.

MIKE JACKSON, AUTONATION: I`ve been saying for a long time that when housingkicks in and with the recovery going on in energy that pickup truck sales would be there. Andit`s a very strong year for pickup truck sales.

LEBEAU: America`s auto industry hasn`t been this strong in decades.

Sales are up and so is employment in the industry, with nearly 100,000 jobs added in the last twoyears.

But most importantly, the big three are all profitable. Today, G.M.

said it made almost $1 billion last quarter.

DANIEL AMMANN, GENERAL MOTORS CFO: It was a solid quarter and good startto the year, very much on plan from our point of view. We`re really getting into the heart of allof our launch activity that we`ve been talking about for some time now. You see that starting toshow up in the top line.


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LEBEAU: With pent-up demand driving sales and automakers keeping costs in check,many believe America`s auto industry is at the start of an extended profitable run.

Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.

(END VIDEOTAPE)

HERERA: To "Market Focus" now.

And AIG reporting after today`s close. The big insurer beat earnings estimates withprofits of $2 billion. That was above what the street was expecting, but they did miss onrevenue. AIG shares were up more than 2 percent ahead of the report to $42.13 and added morein after-hours trading.

Also after the close, Gilead Sciences (NASDAQ:GILD) reported increased sales of itsantiviral treatments. But profits and revenues were light.

The company reported its full-year guidance. Shares were up 4 percent at

52.18 before that report.

Ty?

MATHISEN: Well, Sue, LinkedIn`s profit grew in the first quarter on highermembership numbers and premium subscriptions. The company raised its full year guidance,but said its second quarter revenue will be below the estimates of the market.

Now, shares closed 3 1/2 percent higher to $201.67 and dropped sharply on that secondforecast.


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Intel (NASDAQ:INTC) has named an insider as its new CEO. Brian Krzanich, a 30-yearveteran. At Intel (NASDAQ:INTC), Krzanich has been chief operating officer since early lastyear.

Investors didn`t really react sharply to this news. But shares of Intel (NASDAQ:INTC)have been floundering over the past year, off more than

17 percent.

Sue?

HERERA: The U.S. unit of Dutch insurer and retirement planner ING hit the street todayas shares debuted on the New York Stock Exchange. After pricing below the initial range at$19.50 a share, the stock closed up about 7 1/2 percent to $20.97.

And earlier today, I sat down with the company`s CEO, Rodney Martin, and began byasking him about the future of the company.

(BEGIN VIDEOTAPE)

RODNEY MARTIN JR., ING US CEO: ING Group (NYSE:ING), as a result of theEuropean commission agreement, had to divest in the insurance assets from the bank. The IPOof ING West was part of that. The bank will be retaining the name ING, and we planned a veryorderly process.

So we will continue to brand ING through the end of 2014 when ING groupdeconsolidates and the sale down is 25 percent in listing, as we just did, 50 percent -- more than50 percent by the end of 2014. And, Sue, 100 percent by 2016.

So, we are introducing our ticker symbol today. And we will begin commerciallybranding Voya Financials beginning in 2015.


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HERERA: It seems as though it`s aptly named, because it stands for "voyage", basically.You`re trying to help the consumers you serve on their voyage to and through retirement. Is thata correct interpretation?

MARTIN: That`s a perfect interpretation, Sue. And we are now the -- one of the largestpublicly listed retirement focused organizations. Our aspiration is to be viewed as America`sretirement company.

We`ve got 13 million customers, $460 billion of assets and we`re one of the largestplayers in the U.S. serving needs. And it`s one of the biggest problems Americans face today,and that`s preparedness for retirement.

HERERA: Absolutely. And one of the things we found, though, is that after the 08financial crisis, a lot of the baby boomers and others, certainly, backed away from the equitiesmarket, backed away from financial instruments, because they didn`t trust the market. How doyou lure that group back, especially since probably underfunded for their retirement.

MARTIN: Sue, you`re absolutely correct. And it`s really built around our strategy ofretirement readiness. And that`s preparing people both on the asset accumulation side, theprotection side, the "what happens if"

component, and then the distribution side.

So, two -- and as you pointed out, through retirement. And it`s a combination of kind ofslow and steady movements, people have moved back into the market cautiously. Retirement isa long-term plan. And that`s really, again, why we have chosen the abstract of voyage, Voya,because we think retirement is not just a destination, it s preparing and being secure in howeveryou as an individual or I choose to define retirement.

HERERA: It`s a tough environment, on the one hand, because it`s a low or no interestrate environment. So it`s tough for you to invest your clients` money, and get a return, but it salso harder for you to make money with a low interest rate or no interest rate environment.


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MARTIN: It is. But companies like ours, and many other fine companies are, you know,long-term investors. Retirement is a long-term objective, and, you know, we go through cycles.We happen to be in a lower interest rate cycle today, but many other countries face the samething.

So, again, I think a prudent and steady course, both from an investment perspective as anindividual, or frankly, as a company, is a prudent way to go forward.

(END VIDEOTAPE)

HERERA: And a few numbers to think about. In 2012, the retirement segment for ING

accounted for 49 percent of operating earnings. And individual life insurance accounted for 21percent.

Coming up, the mutual fund industry has grown to $27 trillion worldwide. And half ofthat money is right here in the U.S.

Ty is going to talk with the CEO of Franklin Templeton.

But, first, a look at how the international markets fared today.

(MUSIC)

MATHISEN: And some of the world`s top mutual fund CEOs are converging here onWashington, D.C. for the annual meeting, the 55th, of the fund industry`s trade group, theInvestment Company Institute. Its members manage assets of more than $13.6 trillion in theU.S. alone. And the answer to about 90 million shareholders, many of whom are just like you.

Greg Johnson is the current chair of ICI and he`s perhaps best known as the president andCEO of Franklin Templeton.


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Mr. Johnson, welcome. Good to see you again.

GREG JOHNSON, FRANKLIN TEMPLETON INVESTMENTS CEO: Thank you,Tyler.

Good to be with you.

MATHISEN: How is business?

JOHNSON: Business is good.

MATHISEN: Money is coming in.

JOHNSON: Strong first quarter. And we hope we can keep that rolling.

MATHISEN: Are you seeing any change in the mix of fund flows -- more into equities,less into bonds or what?

JOHNSON: Well, I think we`re pleased to see that equities had a positive quarter. Andthat`s been against the trend for active managers here over the last couple years. But fixedincome had another huge quarter.

So it wasn`t one at the expense of the other. I think what we have seen is after the

sequester, more money moving back into the market. Also some tax changes at year-end. So,January was a record month at the expense of some money funds, money that`s been parked andmoved into equities and fixed income.

MATHISEN: Are you having to swallow some of the expenses on money funds as somany other companies are doing?


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JOHNSON: We are, but for us, it`s a very small part.

MATHISEN: It`s a very small part of your mix.

I want to play a sound bite from Lloyd Blankfein from earlier today, because one of thediscussion points this week is the weight of regulation on business generally and most especiallyon the financial services business.

So, let`s listen to Lloyd Blankfein earlier today.

(BEGIN VIDEO CLIP)

LLOYD BLANKFEIN, GOLDMAN SACHS CHAIRMAN AND CEO: There isuncertainty now, but I don`t think spectacularly more than in other periods that I`ve grown intonow. But the recent history is really what`s getting everybody nervous.

(END VIDEO CLIP)

MATHISEN: Mr. Blankfein basically had a Rafael Nadal serve that he could havesmashed and said regulation is worse. But he said, yes, it s there, but we just deal with it. Is thatwhat you see?

JOHNSON: Well, I think, like any CEO, he`s very careful about his words when he`s in

public. And regulation, you know, after the financial crisis, Dodd/Frank and, you know,obviously he`s very involved in many different rules that have to be written. So there`s less newlegislation coming, but there`s lots of new rules being written.

So it`s very active from that perspective, and I think some of the backlog -- we`re alreadythree years past Dodd/Frank coming to light. You know, that backlog has put a real -- a lot of


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pressure on many different regulatory bodies to get the rulemaking out in time. And the goodnews is, I think they`re being very thoughtful about the changes, because there are unintendedconsequences to many of these rules.

MATHISEN: We talked about the Volcker Rule, he basically said that.

He said well-intentioned but the unintended consequences are really the detail here. Anotherthing he talked about was the level of risk aversion in the investment business and in Americanbusiness generally.

Let`s listen to what he said there, and I want to get your reaction to that, as well.

(BEGIN VIDEO CLIP)

BLANKFEIN: People are nervous about taking risks. It`s a huge consequence andfallout with getting things wrong. Nobody agrees on the price of anything. We have a situationwhere debt is very cheap and yet nobody is borrowing to invest in their own businesses.

Given where you can borrow debt, does that mean that people think they can`t get a

return out of their own businesses higher than their cost of funding and their cost of money? Itseems unlikely, but that`s where we are today.

(END VIDEO CLIP)

MATHISEN: I think what he was really driving at in part there was the idea that thefinancial crisis had left such deep scars that the cost of getting something wrong was so intensethat there`s a risk aversion that is lingering even today. Is that how you see it?

JOHNSON: Well, I think that`s true. I mean, the financial crisis had a huge impact, andI think for many companies, when they don`t see growth prospects, they tend to move towardscost-cutting. And even though balance sheets are healthier than ever, if we don`t think thatincremental investment is going to bring growth and a lot of that is based on how you feel aboutthe economy, that money is not going to be spent.


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So you can have liquidity, you can have easy access to loans and a healthy balance sheet.But if you don`t think that dollar is going to earn more than sitting on your balance sheet, youknow, then you`re hesitant to do that.

So, you know, I think it just -- it really comes to how people -- the consumer feels aboutthe direction of the country. And that`s a lot of big issues.

MATHISEN: One of the things I learned about your business today is how global it is.You have offices in 30 countries. You sell in, what,

150 or 180 countries around the world.

Is that where the growth is for you and is that where the growth is going to be for themutual fund business?

JOHNSON: Well, I think for Franklin Templeton, I mean, we have been focused onbuilding our business outside of the United States for 25 years.

And like any business, we knew your household penetration will hit saturation at some point here

in the States.

And that pretty much has happened and it`s a big business and a good business. But wewanted to make sure we were in places where middle classes were emerging.

And I think for Franklin, having Templeton, having the network of offices, the researchand the relationships, we are able to build out distribution, build out local asset managers, inmany of these countries that are just growing much faster. Consumers are being created, middleclasses are growing, and that`s translating to mutual fund investment.

MATHISEN: You said earlier that 30 percent of your assets are out of the U.S., but 50percent of your flows are -- that really sums it up.


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Greg Johnson, thank you for being with us.

JOHNSON: Thank you, Tyler.

MATHISEN: Good to see you again.

JOHNSON: Appreciate it.

Sue?

HERERA: Ty, thanks.

Rising costs were the key for both Kellogg (NYSE:K) and Kraft (NYSE:KFT). Kraft(NYSE:KFT) earnings report beat the street. The company is saying price increases helpedoffset higher commodity costs.

And Kellogg (NYSE:K) basically blamed higher costs for its lower profits. Shares ofboth companies ended the day off about 1 percent.

And if you think you`ve been paying more for groceries, you`re probably right. Pricesare higher for just about everything.

Jane Wells takes us down the grocery aisle.

(BEGIN VIDEOTAPE)

DAVID ARCUDI, FATHER, SHOPPER: That zucchini growing.


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JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):David Arcudi is growing his own food in his backyard in L.A.

ARCUDI: We planted watermelon.

WELLS: This realtor is the parent in charge of grocery shopping for his family of fourand says he is spending about $100 a week more than a year ago.

ARCUDI: Asparagus, $4.99 a pound. It`s like -- why? You know, where is it being

grown, you know? Is it gold?

WELLS: The federal government says overall, food prices will rise about 3 percent thisyear.

But new numbers show how much it costs to provide a healthy diet of groceries for afamily of four. The USDA says that could run anywhere from a little over $127 a week for athrifty shopper to more than $289 for someone who spends liberally, and this doesn`t include

eating out. That`s anywhere from an 18 percent to 39 percent jump in a decade, depending onyour budget.

And in places like New York and New Jersey, it can cost a lot more.

UNIDENTIFIED FEMALE: My groceries usually goes to $500 to $600. This year, itliterally went up $100.

UNIDENTIFIED FEMALE: Probably spend like $700.

UNIDENTIFIED FEMALE: Hopefully they can lower the prices. But if -- I mean, Ican`t change for my children.


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ARCUDI: A gallon of milk at one grocery store might be $4, where another grocerystore, $2.99, 3 bucks.

WELLS: Back in L.A., David Arcudi checks coupons and shops around for the lowestprices.

ARCUDI: I buy chicken and steak, fish, at Costco (NASDAQ:COST).

WELLS: But he realizes part of the reason his grocery bill is going up is because his kids

are growing.

(on camera): The USDA numbers are for family where the kids are 11 years older under.What about teenagers? The government says to feed a teenage boy alone can cost as much as$79 a week. That`s just groceries.

That doesn`t even include fast food.

(voice-over): Arcudi says his 12-year-old son tears into the food as soon as he comesfrom the store. So, he`s fighting food inflation with a new rule.

ARCUDI: My wife and I made a rule that now that he`s a teenager, that his friends werenot allowed to come here after school because they`ll eat us out of house and home.

WELLS: For NIGHTLY BUSINESS REPORT, Jane Wells, Los Angeles.

(END VIDEOTAPE)

HERERA: Coming up, why Disney`s latest super hero flick is flying high at the boxoffice and how it`s helping the company`s $4 billion purchase of a comic book franchise pay off.


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But, first, here s a look at commodities. Oil had its best day so far this year.

(MUSIC)

MATHISEN: The summer blockbuster season gets under way tonight when "Iron Man3" hits U.S. theatres. The movie has already shattered overseas box office records and is payingoff big-time for Disney (NYSE:DIS).

Julia Boorstin looks at how the movie is important not only to Disney`s present but its

future.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Go!

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

Before "Iron Man 3" opens to the U.S. this week, it`s already a global hit, breaking records andgrossing more than $300 million internationally, setting it up to be one of the biggest U.S. filmsof the year in just its first weekend -- kicking off the big summer movie season and turningaround months of declining sales at the box office.

PAUL DERGARABEDIAN, HOLLYWOOD.COM: Disney (NYSE:DIS) is being verysavvy about packaging this in a way, both in terms of the release date, the timing of themerchandising, the partnerships, the tie-ins, everything.

When you make a $4 billion investment in Marvel, you`re not going to blow.

You`re going to capitalize on it. And that`s what they`re doing.


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BOORSTIN (on camera): Perhaps most important for Disney`s global future is thefoothold in securing in China`s fast growing market. "Iron Man 3" grossed $21.5 million in itsfirst day. That`s a record in Chinese box office history.

Disney (NYSE:DIS) is partnering with Beijing-based DMG to co-produce the film inChina, adding extra scenes featuring Chinese stars in Mandarin dialogue. The deal allowing thefilm to show on a record 6,000 screens.

DERGARABEDIAN: When a studio, you know, changes the content or adds content fora particular market, and in this case being China, that`s a big deal and that shows the clout of thatmarketplace.

BOORSTIN: China is the second-largest movie market behind the U.S.

and is growing much faster. So the success of "Iron Man 3" there should pave the way for morepartnerships.

Disney (NYSE:DIS) is not just cashing in on box office sales, but also on productplacement, featuring Audi, Verizon (NYSE:VZ) Fios, Subway and Chinese electronics makerTCL and others. Plus, promotional deals, including Hasbro (NYSE:HAS), Lego and Oracle(NASDAQ:ORCL), providing tens of millions of dollars of advertising that Marvel doesn`t payfor.

The film cost is reported $200 million to produce, plus much more to market. Butworking with brands around the world is one way Disney

(NYSE:DIS) will yield the return on its investment.

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

(END VIDEOTAPE)


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MATHISEN: You know, Sue, I think you may have some of those "Iron Man" actionfigures in your future.

HERERA: I think I do too, and I know you do, as well, Ty. Lots of them all over thefloor, all of the time.

MATHISEN: All over the floor.

HERERA: All right. That will do it for us on NIGHTLY BUSINESS REPORT. I`mSue Herera. Thanks so much for watching.

MATHISEN: And I`m Tyler Mathisen. A reminder that Susie Gharib will be in Omahatomorrow for the Berkshire Hathaway (NYSE:BRK.A) shareholders` meeting.

Have a great evening, everyone. We hope to see you right back here tomorrow night.

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 May 2 2013

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