Transcript: Thursday, May 8, 2014

Susie Gharib, brought to you in part by —


rallied into record territories. The Federal Reserve chair offered an
upbeat outlook on the economy, but that soon faded, leaving investors to
wonder what happened.

strategies. Traditional companies are plowing money into cutting edge
ventures to compete with the new guys. And their earnings reports reveal a
lot about the future.

MATHISEN: The friendly skies. Frequent fliers may finally have
something to cheer about — finding better deals on the flights they want.

All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday, May

GHARIB: Good evening, everyone.

Wall Street today went from sizzle to fizzle. You may not know it
from today`s closing numbers but the Dow was up triple digits, even hitting
an all-time intraday high this morning before drifting lower.

And there are good reasons why investors brought up stocks, another
round of solid earnings, first-time jobless claims were down by 26,000, and
more reassuring words from Federal Reserve Chair Janet Yellen on Capitol
Hill. In her second day of testimony to lawmakers, Yellen promised to keep
record low interest rates, quote, “right where they are”, to boost the
economy until both the housing and job market do better.


JANET YELLEN, FEDERAL RESERVE CHAIR: Our objective in monetary policy
is to continue to maintain an accommodative monetary policy for long as
necessary to see recovery of the labor market, to a state. It`s hard to
know exactly how to characterize it quantitatively, but what the Federal
Reserve calls maximum employment or we used to call full employment, for
short. And in many ways, we`re far from that.


GHARIB: Let`s take a look now at how the major averages ended the day
on Wall Street. The Dow rose 32 points, but not enough for a new record
high, and the NASDAQ fell 16, the S&P was lower by two points.

Now, over in the bond market, also a volatile day, with the yield on
the 10-year treasury note up a fraction, but still on a six-month low.

So, what happened today?

Bob Pisani explains.


Stocks started the day strong and ended flat with small caps, again the
losers. The day started out well with several positive developments.
Central bankers like the Fed`s Janet Yellen and the ECB`s Mario Draghi both
implied they would keep the rates low. And several retailers reported very
strong sales for April, including teen retailer Zumiez (NASDAQ:ZUMZ) and L
Brands, that`s the owner of Victoria Secret.

Finally, there was a good open for a tech IPO, Chinese security app
company Cheetah Mobile which priced at the high end of its expected range
that ended up about 1 percent. It was the first tech IPO in a while.

But the problem was, again, with the volatile new tech and Internet
stocks, so companies like Workday, FireEye, Facebook (NASDAQ:FB), and
Amazon (NASDAQ:AMZN) were all positive most of the day, and then they faded
away late in the afternoon. The Russell 2,000 Index, a basket of small cap
stocks went from roughly up 1 percent right after the open, to close down 1
percent. It`s near the lows of the year. So, if no bottom in sight,
traders are expecting the volatility in tech to continue.

For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock


MATHISEN: Chris Gaffney says there are a lot of positives in the
market and he expects the major averages to be up 8 percent or more by the
end of the year. He is senior marketing strategist at EverBank Wealth

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

be here.

MATHISEN: You know, most of our interviews begin with a question, OK,
what is your overall outlook and what do you like in the markets? I`m
going to turn it another way. What`s your overall outlook and what do you
not like as an investment? What do you say avoid in the next 12 months and

GAFFNEY: Right, we believe that the market is on a positive tone and
will continue to strengthen as we go through the year. We certainly had a
rocky start to the markets, but in the second half we do expect it to
continue to recover, and the recovery actually to pick up some steam.

I guess it could be called a little Monday morning quarterbacking.
But we don`t like the tech stocks, still. We don`t like those momentum
stocks. I know a lot of rotation has already occurred out of those stocks
but we still don`t trust that sector.

GHARIB: So, how do you feel when you hear the news about Alibaba for
example going public, and a whole bunch of other tech companies? Are you
feeling to tell your clients to stay away from these?

GAFFNEY: We do. And we typically don`t suggest to clients to go into
the IPOs, they`re very difficult and typically they get over-priced on the
initial offering. So, we do tell people to stay away from the tech stocks.
We think the cyclicals are actually going to start to perform very well as
the economy recovers.

MATHISEN: So, when you say — so, that assumes you have a fairly sort
of optimistic growth outlook for the U.S. economy, number one, when you say
cyclicals, give me some categories, or if you prefer some names of
companies in those categories that you would buy here.

GAFFNEY: Yes, consumer durables are a category, I can`t really share
names, we don`t get stocks specific necessarily. But consumer durables, we
think the consumer sector will come back and that`s one category that we
think will do well.

GHARIB: I understand, Chris, you also like some of the stocks in the
emerging markets, which ones and how much in your portfolio do you advise
clients to have of U.S. and non-U.S. stocks.

GAFFNEY: Well, we are. We do promote at EverBank Wealth Management,
a very diversified portfolio. The sectors — the emerging markets in
particular — Brazil stands out to us. We made a switch into Brazil
earlier in the first quarter and believe it will continue to out-perform
going forward.

It`s got great yield differentials. It`s got some positives
occurrences in election coming up. And also, the World Cup and also the
Olympics, eventually.

MATHISEN: What do you say to investors who really depend on their
portfolios for income and specifically have a lot of bonds in their

GAFFNEY: Well, fixed incomes, we think you should remain allocated in
the fixed income. We do think that interest rates will start to rise.
However, so we shorten the duration in the fixed income sector. But you`ve
got to have the fixed income asset allocation in your portfolio.

I know the utilities were down today. We think the utilities were a
place to get some and also some floating rate notes — some investments
that actually will perform well as interest rates rise.

MATHISEN: All right. Chris Gaffney, thank you very much. Chris is
with EverBank Wealth Management in St. Louis.

GHARIB: Janet Yellen told lawmakers on Capitol Hill today that one of
her biggest concerns is the slow down in the housing market, what is
causing the concern? High prices. And what`s driving those prices?

Diana Olick has the answers.


prices are rising so far so fast that at least one thousand local U.S.
cities have hit new record highs, according to Zillow. That has sellers
positively giddy with potential value.

JEREMY CUNNINGHAM, REDFIN AGENT: Home prices are hot because
conversations in the neighborhoods are that the trends are definitely

OLICK: Forty percent of sellers surveyed by Redfin said they were
planning on pricing their homes above market value when they list in the
next few months. That`s up from 33 percent at the beginning of the year.

The Soricellis were some of those confident sellers in Northern

BRAD SORICELLI, HOME SELLER: My wife and myself, you know, we take a
lot of pride in our house and we did a lot of upgrades. So, we put a lot
of money in it. We had a lot of ownership.

And so, you know, we try to reconcile that with whatever the market is
right now was a little bit of back and forth.

OLICK: Their agent, Jeremy, talked them down to a lower asking price
but it was not easy.

CUNNINGHAM: When you look at the comps, it`s very difficult. The
trends are hard to identify. You can have on any given street, price
variations of $50,000 to $75,000 for the exact same house.

OLICK (on camera): Those variations are partly due to such a high
volume of cash in the housing market today. All cash sales reached a
record 43 percent nationwide in the first part of this year.

(voice-over): In much of Florida and in several other cities across
the nation, more than half of all sales were all cash.

SPENCER RASCOFF, ZILLOW CEO: It is making it harder for an ordinary
single family who is getting a mortgage to compete as a buyer, especially
given how constrained inventory is. And that`s making frustrated buyers in
a lot of these sellers markets.

OLICK: Credit is not easing it at all. So, in markets where there
are fewer investors, sellers need to move accordingly.

The Soricellis took their agent`s advice and their home sold in one

SORICELLI: Not having to go through the waiting and some of the
aggravation of having your house on the market for an extended period of
time is worth a certain amount of money.

OLICK: Especially when they see their neighbor`s house still sitting
after a price drop.

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


MATHISEN: Nice house.

And just when the housing market needed some good news, mortgage rates
actually hit a new low for this year. Freddie Mac says the average
interest rate now for a 30-year fixed conventional loan fell to 4.21
percent and that is the lowest since early November.

GHARIB: Also out today, solid quarterly earnings from Freddie Mac and
Fannie Mae and even better news for the U.S. Treasury. Those strong
earnings will allow the two government-run mortgage giants to pay back
Uncle Sam more than $10 billion in combined dividend.

MATHISEN: Some new legislation in the works that would stop so-called
corporate tax inversions. That`s when a company — a U.S. company that is
— reincorporates overseas to avoid paying the higher U.S. corporate tax

Democratic Senator Carl Levin of Michigan is working with other
senators on a measure that will close a gaping hole in the U.S. tax code
that he says would devastate federal tax receipts. The practice came to
light recently when Pfizer (NYSE:PFE) bid to acquire Britain`s AstraZeneca
and said it intended to redomiciled in the U.K. to take advantage of that
country`s lower corporate tax rate.

GHARIB: Still ahead on NBR, how traditional media companies are
transforming themselves to stay dominant in the industry and fend off
competition from new arrivals. That`s coming up.


MATHISEN: Earnings out after the bell from CBS (NYSE:CBS), the eye
network beat forecasts on earnings per share helped by increased licensing
of its shows and higher payments from cable and satellite operators to
carry its channels. But revenue was a different story and it looks like
advertising sales from its entertainment division was a little light last

GHARIB: Also reporting late today, News Corp (NASDAQ:NWS). Net
income fell last quarter but the publisher of “The Wall Street Journal” and
“The New York Post” still beat Wall Street estimates, as stronger book
publishing revenues offset weakness in its newspaper empire.

MATHISEN: And CBS (NYSE:CBS) and News Corp (NASDAQ:NWS), two old
media companies that have had to adapt to new technologies and viewer
trends to keep customers and shareholders happy. As more media companies
report earnings this week, Morgan Brennan takes a look now at changes
they`re making to stay relevant and profitable.


The media landscape is changing and fast as traditional media giants report
earnings this week, the results and the comments executives are making call
into focus key trends that are re-defining the industry`s players and the
way content reaches consumers.

Starting with over-the-top services, or OTT, web-based streaming
services that bypass cable TV. New media companies like Netflix
(NASDAQ:NFLX), Amazon (NASDAQ:AMZN), and controversial Aereo have fuelled
this trend but now, others are getting involved.

to see services like the one that Dish Network has proposed with Disney
(NYSE:DIS) that will be a meaningfully cheaper price point and is really
targeted at the cord cutter for the first time. You haven`t seen something
like that before. So, it`s something everyone is watching carefully.

BRENNAN: In addition, AT&T (NYSE:T) is partnering with a turning
group to invest in an OTT service. And Verizon (NYSE:VZ) recently acquired
Intel (NASDAQ:INTC)`s Internet TV product OnCue.

MOFFETT: If you start to see these types of models gain some
traction, it almost forces the content providers to embrace them and start
to provide their content. So, it`s a bit like an arms race, right, where
once it gains momentum, the arms dealers have to start to play. And the
arms dealer news this case are the content providers.

BRENNAN (on camera): But content is only one piece. Distribution is
the other. And to compete in video, broadband and wireless, many companies
are looking to consolidate, with Comcast (NASDAQ:CMCSA) (NYSE:CCS) pending
merger with Time Warner (NYSE:TWX) Cable only adding to the sense of
urgency. And that deal still has to clear the federal communications

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan in Los Angeles.


GHARIB: Well, speaking about that Time Warner (NYSE:TWX)/Comcast
(NASDAQ:CMCSA) (NYSE:CCS) deal, in Washington today, there was a hearing
about it. Lawmakers from both parties expressed concerns about potential
negatives in the proposed $45 billion deal, including whether the combined
company would control too much of the company`s cable and broad band
markets, or if smaller programs would ever be able to sell to the merged
cable providers.

Representatives of Comcast (NASDAQ:CMCSA) (NYSE:CCS) argue that the
merger could help consumers by slowing the steady rise in cable TV bills.

Comcast (NASDAQ:CMCSA) (NYSE:CCS) is the parent of CNBC which, of
course, produces this broadcast.

MATHISEN: Also in Washington, more than 100 tech companies, big and
small ones, urged the FCC to scrap its so-called Net Neutrality plan.
Google (NASDAQ:GOOG), Facebook (NASDAQ:FB) and Twitter were among the firms
writing to federal telecom regulators opposing a plan that would regulate
how Internet providers manage and charge for traffic on the web. The FCC`s
proposed plan would let content companies like Netflix (NASDAQ:NFLX) or
Amazon (NASDAQ:AMZN) Prime pay Internet service providers a little extra to
create new high speed broadband lines to send movies or other content more
quickly down the line.

But opponents say it means customers who use them would have to pay
more for Internet service, and that it could potentially shut out new, or
less influential or less affluent web-based companies.

GHARIB: McDonald`s says sales rose in April, and that`s where we
begin tonight`s “Market Focus.”

A sales increase in Asia helped to offset disappointing sales in
Europe and flat sales in the United States. The world`s biggest burger
chain says industry dynamics are still challenging like competition rivals.
Shares were up just a fraction, though, to $101.95.

Now, another fast food company traded lower in today`s session,
Wendy`s. First quarter earnings surged as the company posted gains from
the sale of the company-owned locations. That helped cut operating
expenses, but also pulled down revenues. Still, the results beat analysts`
estimates. Despite that, shares fell slightly to $8.30.

High milk prices soured results at Dean Foods (NYSE:DF). The dairy
company warned it will report a second quarter loss and cut its long-term
profit outlook as it struggles with commodity costs. Dean also blames
severe weather for the forecast, saying it disrupted milk deliveries to
schools. Shares fell more than 5 percent to $14.55.

And Priceline booked more hotels, car rentals and airline tickets,
which help the travel site report an increase in profits. But the
company`s outlook for the current quarter came in light as it`s expecting
bookings to slow down. Still, the CEO says he is hopeful for the summer
travel season.


DARREN HUSTON, PRICELINE CEO: We remain really optimistic about our
growth prospects. Obviously, as we become a larger company, the law of
large numbers is out there. But we like to guide in a conservative manner.
I think it`s a reasonable manner. We have the World Cup coming up, which
always affects bookings.

But we`re actually very optimistic about next quarter and the summer.


GHARIB: Well, meanwhile, shares were down more than 2 percent to

MATHISEN: Barnes and Noble (NYSE:NE) banking on textbooks to up its
profits. That`s according to report from “Reuters.” The bookseller plans
to expand its presence on college campuses.

Now, the chain has about 700 college campus stores. But within the
next five years, the report says it plans to have a thousand campus
locations, and that sent shares up more than 2 percent to $16.04.

Barclays is cutting 19,000 jobs over the next three years. Britain`s
second largest bank by assets will also set up a, quote, “bad bank” to
house much of its investment banking business, and its European retail
operations as it looks to turn itself around and fix its trading slump.
The company CEO explained this shake-up.


ANTHONY JENKINS, BARCLAYS CEO: Basically, we`re dividing the bank
into two, a core group of four strong businesses that are well-positioned
in their markets, with good prospects and good returns. We`re combining
our personal and corporate banking interest in the U.K. into a new


MATHISEN: Investors cheered that move and shares popped more than 7
percent to $17.73.

Toyota (NYSE:TM) posted a record annual profit, and global sales of
more than 10 million vehicles for the first time ever. But the automaker
is expecting a slower year ahead and a drop in profits as momentum from a
weak yen fades away. And shares of Toyota (NYSE:TM) were down slightly,

After the close, Gap (NYSE:GPS) announced its same store sales rose 9
percent in April, driven by gains at its namesake unit, its Banana Republic
business and its Old Navy store. The retailer also guided first quarter
earnings in revenue above the street estimates. Shares spiked after hours.
During the regular session, the stock was up 1 percent to $39.24.

And there you see the spike afterwards.

GHARIB: And General Electric (NYSE:GE) is taking 3D printing to a
whole new level. GE Aviation is working on its first jet engine composed
of parts made from 3D printers.

Melissa Lee got exclusive access to G.E.`s facilities in Cincinnati.


turn this into a jet engine part? Walk us through?

with a very fine powder and we load this material into what we call an
additive metal machine.

LEE: And this is effective, this is very, very fine powder but it`s
extremely heavy.

MORRIS: What this material is capable of doing is resisting high
temperatures. It`s very high strength. So, yes, this is actually metal
material just in powder form versus in a plate or bar form that most people
were used to seeing.

LEE (voice-over): More than 6,000 of G.E.`s next generation jet
engines have been ordered by customers like Boeing (NYSE:BA), Airbus and
Lockheed Martin (NYSE:LMT). By 2016, the new engines will contain a 3D
printed fuel nozzle that is lighter, more efficient and could save
companies big bucks.

MORRIS: The beauty of what we`re doing is we take what would have
been 20 different components that would have been machine braced and welded
together. And now, we`re growing just one.

LEE (on camera): And it`s lighter?

MORRIS: It is lighter. It`s about 25 percent lighter than our
previous generation fuel nozzle and that`s absolutely key in the aerospace
industry. For very pound that you take out of an engine or out of the air
frame, you`re talking about hundreds of thousands of fuel savings over the
light of that product.

LEE: Wow.

(voice-over): GE may be on the brink of a new industrial revolution,
as it makes manufacturing faster and more cost-efficient right here in the

MORRIS: And this is where the magic happens. This is where the laser
beam comes down and hits the surface of the metal powder and consolidates
it into a solid component, precisely.

LEE (on camera): How long does it take for the product to come out?

MORRIS: When you have a very bulky, large, tall part — it could take
up to, say, five or six days to build. It could. But if you have a bunch
of very small parts, then it could be an overnight build.

LEE: I think there are a lot of people out there who are going to
think. I`m on a plane, and there is a jet engine part where the layers are
melted together and they are not really confident that it`s going to stay

MORRIS: Once we weld the material and it`s melted, it`s no different
than say a casting or any other manufacturing process where metal goes from
molten into a solid.

LEE: Within the next decade, the plane you`ll be flying on will
likely have a jet engine containing wholly 3D printed parts. GE says the
increase in the 3D printed parts won`t replace jobs but will actually
create more jobs right here in the U.S.

For NIGHTLY BUSINESS REPORT, I`m Melissa Lee in Cincinnati.


MATHISEN: Fascinating stuff.

All right. Coming up, something frequent fliers don`t hear very often
and it could lead to better deals when you book a flight. That story right
after this.


GHARIB: Activist/investor David Winters is turning up the heat in its
criticism of Coca-Cola (NYSE:KO) for what he called an outsize pay plan for
the company`s executives, that he says takes money away from shareholders.
The CEO of investment firm Wintergreen advisers, which owns more than 2.5
million shares of the beverage giant, sent a new letter to Coke`s board
members, urging that the plan which was approved by shareholders be
scrapped, in the interest of good corporate governance.

Now, he also sent the same letter to Warren Buffet whose Berkshire
Hathaway (NYSE:BRK.A) is Coke`s largest shareholder. Now, Buffet
criticized the pay plan, but he didn`t vote for or against it because
Winter says he didn`t want to embarrass Coke`s top brass.

Well, Coca-Cola (NYSE:KO) declined comment and Warren Buffet is
traveling and couldn`t be reached.

MATHISEN: So, you order something small and it arrives in a great big
box and the extra space is filled with air cushions or a ton of those
infuriating packing peanuts. That may all be about to change.

Starting next year, FedEx (NYSE:FDX) will not only start charging some
shipments by weight, as they do now, but also by the size of the boxes.
Now, that may encourage online retailers to be a lot more careful about how
tightly they pack goods for shipping and delivery to you.

GHARIB: Well, here`s some other good news for you, for those looking
to cash in their frequent flier miles for an upcoming trip. A new study
says there are more flights holding seats for those redeeming reward miles
or points.

Phil LeBeau explains why airlines are becoming more frequent flier-


Cashing in frequent flier miles for a free ticket or a seat upgrade hasn`t
always been easy. Black-out dates and other restrictions make redeeming
miles challenging.

UNIDENTIFIED MALE: I think it`s become more difficult. I think the
number of mileage per flight has increased.

UNIDENTIFIED MALE: It seems to be less available flights and less
direct flights.

UNIDENTIFIED MALE: The seats (INAUDIBLE) they only have extra. They
only open up so many. So, it`s a lot of time that you can`t get the times
you want to go, you really want to go.

LEBEAU: Now, cashing in miles or points is easier. SwitchFly`s
annual survey of frequent flier reward availability found open seats on 72
percent of the flights checked. That`s a slight increase from last year.

Why the improvement? Well, one reason is the popularity of bank-
issued credit cards that offer frequent flier miles. It`s forced airlines
to work harder to free up seats for their own frequent fliers.

JAY SORENSEN: In the U.S. in particular, the frequent flier programs
are becoming more concerned about competition from the bank-issued travel
cards. And so, they want to compete against the travel cards that are
issued by banks. And so, this is one way for them to do that is so make
their programs more attractive.

LEBEAU: Larger airlines like Delta are doing a better job with
frequent flier rewards. Now, almost two-thirds of the large airlines
flights checked have open seats. That still trails low cost carriers where
almost all flights are open for reward travel.

SORENSEN: Their programs are younger so they have less accumulated
points or mileage balance. So, there is less of a reward shortage problem
as in too much demand.

LEBEAU: Southwest and Air Berlin had frequent flier seats open on
every flight checked on the survey, followed by Virgin Australia and
JetBlue as leaders in reward availability.

Despite the airlines now requiring more miles be redeemed for a
particular flight, finding the one that fit your schedule can still be
tough. So, staying flexible is the key to getting where you want to fly.

UNIDENTIFIED FEMALE: I`ve been lucky because I shop way ahead. I
typically check around and try to be flexible with my travel dates.



GHARIB: And to read more about the change in using your frequent
flier miles, go to our Web site,

MATHISEN: And finally, tonight, earlier this week, we told you about
the big kick-off to the big spring art auction season. But so far, it has
been a mixed bag. It`s Sotheby`s last night in New York City, nearly a
third of the 71 impressionists and modern art paintings drawing and
sculptures that were up for sale failed to get minimum bids. But one
notable bright spot, a bidding war for a Picasso piece called “La
Sauvetage” pushed the selling price to more than $31 million, which was
more than double the pre-sale estimate. “La Sauvetage.”

GHARIB: And that goes so well with the balloon dog.

MATHISEN: The balloon dog, yes, I like the balloon dog.

GHARIB: The living room is going to look great.


GHARIB: That`s NIGHTLY BUSINESS REPORT for tonight. I`m Susie
Gharib. Thanks for watching.

MATHISEN: And I`m Tyler Mathisen. Thanks from me as well. Have a
great evening, everybody. We`ll see you back here tomorrow. We`re going
to do balloon dogs.


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