Transcript: Friday, June 6, 2014

NBR ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and
Susie Gharib.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Back to even.
The economy finally regains all the jobs lost during the recession helping stocks extend their record rise.

Stars and shareholders. Wal-Mart`s annual meeting was part pep rally and strategy session. But the focus was on the new CEO`s plan to stem sagging sales.

Market monitor. Our guests tonight names three stocks he says will produce double-digit returns over the next year.

All that and more tonight on NIGHTLY BUSINESS REPORT for Friday, June 6th.

Good evening, everyone, and welcome. Susie Gharib is off tonight.

Well, the Dow, the Dow Transports and the S&P 500 closed at fresh record highs today, and with good reason. Another strong jobs report for the month of May, 217,000 jobs were added to the economy last month. That was about what the experts were looking for. But the nation`s unemployment rate held steady at 6.3 percent.

Over the past three months, job growth has averaged a solid 234,000 new jobs a month.

On Wall Street, investors reacted by buying up stocks sending the major averages higher.

The Dow up 88 points, and is now on watch for Dow 17,000, a record close there. NASDAQ up 25, and the S&P, those are the new record high, up nine.

Hampton Pearson has more on today`s May jobs report and a closer look
at where all those new jobs are coming from.

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
There was a post-recession milestone in the otherwise steady as she goes May jobs report. Since February 2010, payroll employment has increased by
8.8 million jobs, that`s 100,000 more than the economy lost in just two years at the beginning of the recession. But leading economists say there
is still a long way to go.

JAN HATZIUS, ECONOMIST: We are back in neutral arms but of course the population has grown in the meantime. So, the share of the population has
dropped is still far below where it was in 2007.

PEARSON: From the Obama White House, a more optimistic response.

JASON FURMAN, COUNCIL OF ECONOMIC ADVISERS: We now have 51 straight months of job growth, 9.4 million jobs added by our private sector. We saw wages rise this past month. There is definitely a lot more we need to do
but this is the type of progress we would like to be seeing in the economy.

PEARSON: Private job sector growth was an upside surprise, employers adding 217,000 workers with more than half the gain coming from professional and business services and the health care sectors. Other engines of job growth, food services, transportation and warehousing, adding nearly 50,000 workers to payroll in May. Blue Apron, a New York- based start-up that ships over 600,000 pre-packaged meals per week to home
chefs across the country is a perfect example.

MATT ZALBERG, BLUE APRON FOUNDER AND CEO: Our concept is we want to help you learn in the kitchen. But they`re all meant to be healthy, seasonal fresh produce, whole grains and meant to be the kind of food you`d want to cook on your own but you just wouldn`t normally do or know how and
we help make that accessible to people.

PEARSON: In less than two years, it has doubled its workforce, including going west to San Francisco. This brand-new facility in the Bay
Area is in the process of hiring 400 workers for all kinds of jobs.

ZALBERG: We need more people who can help us manage the logistics of that work in our kitchen, working with different kinds of interesting ingredients, helping assemble our kits with great care and quality that our customers need and working in the shipping and receiving side of what we do also.

PEARSON (on camera): There are lots of new jobs serving folks who still like to eat out. Bars and restaurants added 30,000 new employees last month, 300,000 in the last year.

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

(END VIDEOTAPE)

MATHISEN: Russ Koesterich says the markets have largely already baked in this week`s good economic news. He is the global chief investment strategist at Blackrock.

Russ, welcome back.

If the markets have done as you suggest, in many segments of the market at least, and already baked in the good news, what does it imply for what investors should do now?

RUSS KOESTERICH, BLACKROCK GLOBAL CHIEF INVESTMENT STRATEGIST: Well, right now, markets are benefitting from the environment. And you`ve growth accelerating. You`ve got low inflation, rates are low. And that`s the good news.

The problem is that is the parts of the equity market already reflect that good news. In other words, they`re pricing.

So, we still think investors should stick with stocks, they are still cheaper than bonds, cash yields nothing, but really as a matter of picking your spots and finding those part of the equity markets that are still relatively cheap. And they`ve got a little bit of concern or there is pessimism in the price that gives you some wiggle room if things turn to
the downside.

MATHISEN: And where do you find those places where there`s pessimism in the price?

KOESTERICH: I think there are a couple of places that still look to us to be cheap on a relative basis, again nothing is really cheap on an absolute basis, but compared to the broader market in the U.S. large and mega cap companies look to be cheaper than small cap companies.

Many cyclical parts of the market, energy, technology companies also look reasonably priced. And then our large recommendation is for investors to cast a wider net. And if you have mostly been investing in the U.S., look at markets in Japan, look at markets in Europe, that are much cheaper
than U.S. stocks.

MATHISEN: Do you think Europe can turn around based in part on what Mr. Draghi did earlier this week? So, you I guess would be putting money there.

KOESTERICH: Certainly what Mr. Draghi did is going to help. You know, Europe has got significant headwinds, but again, going back to my comment before about what`s being priced in, the things you remember about Europe is Europe is much cheaper than the United States. So, while growth is going to be lower, what we`re likely to see lower profitability from European companies, those facts already reflect in the price.

Another market we looked at Japan. This is a market trading about 1.2 times book value. It`s less than half the U.S. And, again, Japan has got a long list of issues people could point to, but we would say is that a lot of those issues reflect in the price. And Japan is also likely to get a tail wind from its central bank that`s going to keep easing long after the feds start to tighten.

MATHISEN: How is the U.S. economy doing, Russ?

KOESTERICH: The economy is doing better, I say better sort of with a little bit of a sarcasm because it`s not great. We have seen improvement in the labor market, were we back to where we were in late 2013? The U.S.
economy is fronting (ph) about 100,000 jobs per month, that`s an improvement from the winter. But it`s not what you would expect for a robust recovery.

And I think the key is, while we are improving, there are still the large structural head winds that are acting to hold back the economy. And it includes the fact that wages are slow for a lot of middle income families and we still have a lot of people that are dropped out of the labor market.

And over the long-term, if they don`t come back in, that is another
long drag on growth over the long term.

MATHISEN: Russ, fantastic to see you. Thanks very much.

KOESTERICH: Thanks, Tyler.

MATHISEN: Russ Koesterich with Blackrock.

And some good news for Uncle Sam`s credit rating. After being downgraded a few years ago, ratings agency S&P now says it could lift the nation`s credit rating from a double A-plus to a pristine AAA rating, only if the company sees more evidence of bipartisan efforts in Washington and a
lower national debt.

U.S. consumers borrowed a lot more money during April, with credit card debt rising at the fastest pace in more than a dozen years. Overall credit card — overall credit, I should say, rose by nearly $27 billion that month, according to the Federal Reserve, mostly due to car and student loans, along with footing nearly $9 billion more of purchases on plastic.

Well, it looks like Bank of America (NYSE:BAC) may be paying a heavy debt, $12 billion, to settle probes by the Justice Department and a number of the bank`s handling of the mortgage loans that went bad. Thus far, according to “The Wall Street Journal”, large banks have agreed to pay almost $100 billion to settle cases related to the 2008 financial crisis.
There is a rundown of some of them.

Eamon Javers joins us now from Washington, with more on the proposed settlement.

Twelve billion dollars, Eamon, by anyone`s stretch is a lot of money, where would the money go? Would it go back to the victims of the problem or into a government fund? Where?

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, that`s one of the many questions about all of this, Tyler, the $12 billion figure is media reporting and speculation that`s been out there, but you`ve got to really follow the bouncing ball on this because the number could end up being significantly lower than 12 billion or significant higher, or maybe not much significantly higher than $12 billion.

But still a lot of negotiation`s going on behind the scenes here.
What we don`t know is where this thing is going to land and when the settlement is going to come out.

Once it does, though, your question is a good one. Typically what`s they do in these cases is they end up finding some of the money into a pool of finances that go back to some of the people who were hurt by the original mortgage processes. And then after that, the rest of it just goes to the United States Treasury as part of the settlement into the general fund.

So, it`s usually divided up into a series of trounces, where that goes is all part of this behind the scenes negotiations that`s going on right now, Tyler.

MATHISEN: Bank of America (NYSE:BAC) has already paid really tens of millions to settle claims arising from mortgage problems and others. Are we now likely to see other banks settling investigations stemming from the housing problems?

JAVERS: We are. It`s clear that the Department of Justice is trying to go back and sort of claw back as much of the losses as they can in order to get some of that money back to the people who are hurt in the housing crisis and to demonstrate that it`s able to do something, even though we`re now years after the fact.

There is definitely a concerted effort here in Washington going on.

MATHISEN: Eamon, thank you very much. Eamon Javers, have a great
weekend.

JAVERS: You bet. You, too.

MATHISEN: On this job`s Friday, the nation`s biggest employer Wal- Mart (NYSE:WMT) held its annual meeting. But despite the star power and the festive atmosphere, Wal-Mart (NYSE:WMT) has a lot of work to do following five straight quarters of sales declines here in the United States. Investors sent shares the world`s biggest retailer a fraction lower today.

Sara Eisen was on hand at today`s shareholder meeting in Fayetteville, Arkansas, and what changes executives are planning to turn things around.

(BEGIN VIDEOTAPE)

SARA EISEN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Harry Connick, Jr., Pharrell, Robin Thicke, not the Grammy`s but Wal-Mart`s annual shareholder meeting where employees and investors, 14,000 of them, come every year to hear executives speak, vote on board membership and shareholder proposals and, of course, enjoy the all-star performances.

(on camera): It is a festive event, no question about it. But if you`re a Wal-Mart (NYSE:WMT) shareholder, recent performance has been disappointing. In fact, in the last few years, you would have missed out on half of the S&P 500`s rally. That`s Wal-Mart (NYSE:WMT) executives are kicking it into high gear, introducing all sorts of interesting strategies.

DOUG MCMILLON, WAL-MART CEO: We need to be at the forefront of innovation and technology. We will lead with urgency to get ahead of
change.

EISEN (voice-over): McMillon, who is only 100 days into the job as CEO, talked a lot about innovation, like 3D printing, and getting Wal-Mart
(NYSE:WMT) more involved in hot tech trends. On the retail front, it`s focused on neighborhood markets. Unlike supercenters, they are smaller stores which carry pharmaceuticals and groceries.

Wal-Mart (NYSE:WMT) is set to open hundreds of them this year. Wal- Mart (NYSE:WMT) is also testing convenience stores like 7-Eleven which plan to offer everyday low prices all in an effort to adapt to changing consumer habits and slowing sales.

But today, shareholders were in celebration mode.

UNIDENTIFIED FEMALE: They`re going to be glad there`s now (ph) different statistics, new programs that are going to be coming out, things
we can looking forward to.

UNDENTIFIED MALE: The atmosphere here, everybody is cheerful. It`s
just amazing.

UNIDENTIFIED FEMALE: We love our Wal-Mart (NYSE:WMT).

EISEN: For NIGHTLY BUSINESS REPORT, Sara Eisen, Fayetteville, Arkansas.

(END VIDEOTAPE)

MATHISEN: And still ahead, looking for stocks that will do well as the economy improves, our “Market Monitor” likes some companies you surely know. They will tell us which ones and why.

(MUSIC)

MATHISEN: More recalls at General Motors (NYSE:GM), the automaker announcing four more today for another 90,000 vehicles for air bag-related issues in late model Chevy Silverado trucks, GMC Sierras, Chevy Tahoes, Buick Veranos, Camaros and other makes. These latest recalls make a total
of nearly 14 million G.M. cars and trucks called in so far this year.

Well, if you don`t own a car, you may be familiar with Uber, the app- based car service that competes traditional taxi cabs and black cars in a lot of cities. Uber says it just completed another run of investor financing, secured $1.2 billion in funding, giving the company a market value — this is a taxi service basically — a market value of more than
$18 billion.

Concerns about accounting issues pressured shares of Hertz, and that`s where we begin tonight`s “Market Focus.”

The car rental company is reinstating its 2011 financial results and reviewing its records for 2012 and `13, according to regulatory filing.
Hertz also expected first quarter results to be below estimates because of costs related to that review. Shares down 9 percent, $27.73 was the close.

UPS named a company veteran as its next CEO. The package delivery giant`s chief operating officer David Abney will take the top job September first, the company`s current chief, Scott Davis, will become non-executive
chairman. Abney spoke today about the company`s future.

(BEGIN VIDEO CLIP)

DAVID ABNEY, UPS INCOMING CEO: The biggest challenge I think is that we`re going to continue to grow our international business. Emerging markets are growing quickly. We have responded and we`re going to continue
to respond accordingly.

(END VIDEO CLIP)

MATHISEN: Shares were off just a fraction at $103.59.

Nuts to you, or maybe not. Shares of Diamond Foods (NASDAQ:DMND) plummeted today after the company posted disappointing results. Earnings came in well below expectations which the food company blamed on weakness in its nut business. Diamond did say it was pleased with its snack unit which includes Pop Secret popcorn. Still, shares were down almost 11
percent to $29.74. That`s a lot of almonds.

A report that Sears (NASDAQ:SHLD) CEO Eddie Lampert met with outgoing Ford CEO Alan Mulally grow shares of Sears (NASDAQ:SHLD) higher today. The two reportedly discuss how to turn around the struggling retailers business. The stock was up almost 2 percent to $40.80.

After the close, billionaire investor Carl Icahn disclosed a 9 percent stake in Family Dollar. Icahn says he believes Family Dollar shares were undervalued and he plans to discuss strategies with the company`s board, which may include strategic alternatives. Shares spiked after the news reported. During the regular session, the stock was up a fraction, to $60.53.

Our market monitor tonight is expecting a 5 percent to 10 percent correction in the markets this summer and he views it as healthy. He says investors should buy stocks when and if it happens.

He is Phil Orlando, chief equity strategist at Federated Investors (NYSE:FII).

Phil, welcome. Good to have you with us.

We`re certainly due for a correction. What could trigger it?

PHIL ORLANDO, FEDERATED INVESTORS CHIEF EQUITY STRATEGIST: Well, Tyler you have treasury yields and stock prices that are both overbought here. The VIX, you talked about that before, is sitting down here at a cycle low. So you`re certainly poised for any bad news and if that were to happen, certainly we could see a modest summer hiccup. But, again, if that happened were to happen, we would use that as buying opportunity.

MATHISEN: There were reports earlier this week that the Fed was concerned about complacency in the market. The low VIX would suggest that people are a little bit complacent. There is not a lot of hedging going on or whatever.

Are you concerned that investors have grown complacent, that the glide path has been a little smooth after last year`s big run-up?

ORLANDO: Certainly, there are a lot of fundamental concerns in the marketplace from an economic standpoint as to whether or not, the second half bounce is going to be as good as the second quarter. You`ve got a lot of geo-political risks in the Middle East, and, certainly concerns about the Fed, how they transition monetary policy in the wake of going from Ben to Yellen.

So, there are certainly a number of things that could pop up over the course of the summer.

MATHISEN: Well, let`s go to your buy list of that correction does eventuate. It`s led by Alaska Air. Why do you like it?

ORLANDO: Well, the airline companies have found religion. They have rationalized pricing and capacity. This company is very well-managed. It has a differentiated root structure. Stocks have done well, but we think we could do another 10 percent or so, 15 percent or so in the next year or
so.

MATHISEN: And Boeing (NYSE:BA) which is obviously related to the airlines but in a different way. Do you like it?

ORLANDO: Well, you`ve got about a four-year back log on that new 787 plane which is extraordinarily fuel efficient. So, as the airlines continue to make money and look to upgrade their fleet with better technology, better fuel efficiency, this plane is getting a
disproportionate amount of interest.

And as I said, they`ve got a four-year backlog on orders.

MATHISEN: We started with an A. We went to a B. Now, we`re going to go to an H, Home Depot (NYSE:HD). That sounds like a play on the consumer and housing economy.

ORLANDO: Well, the consumer is back. Christmas — it was the worst Christmas since 2009, but Easter was pretty good. The weather is rebounding, so you`re going to get some better lawn and garden sales, and we do think that housing is going to make a modest recovery here. We do not think that the housing market is dead.

The depot has been going sideways for the last year or so. We think the stock will work higher as those trends begin to materialize.

MATHISEN: What about interest rates, Phil. You know, the Fed is probably going to end up — end its buying of bonds sometime later this year. Interest rates might start to move up. Is that a threat to the market?

ORLANDO: Not at all. Because the normalization of the Fed funds rate, which we will start in the middle of next year, the end of the taper which we think will happen by the end of this year, the market should embrace that as a positive. The Fed would not embrace the monetary policy unless they were completely comfortable that the economy is sufficient to be able to operate without this extraordinary support of monetary policy.

MATHISEN: I would think they were going to wait and see on interest rates and be very data-driven about that. There`s no obligation that they have to raise interest rates, is there?

ORLANDO: And that`s exactly the right term — data dependency. The Fed is going to evaluate the data. It`s probably going to be a year before they take this step and if the data over the next course of the next year does not support it, by that I mean we`re looking at better trend line GDP growth, you know that 3 percent to 3.5 percent level. We want to see job creation continue at this 200,000 plus pace over the next year, consumer spending strong, manufacturing strong. If those components are now there we don`t expect the Fed is going to commence a tightening of monetary
policy.

MATHISEN: Phil, any disclosures on Alaska, Boeing (NYSE:BA) or Home Depot (NYSE:HD)?

ORLANDO: We own all of those stocks in the Federated Global
Allocation Fund.

MATHISEN: All right. Phil, thank you very much. Always good to see you.

ORLANDO: Thanks for having me.

MATHISEN: Phil Orlando with Federated.

Well, today is D-Day. And President Obama and Russia`s Vladimir Putin were among the world leaders in Normandy today, commemorating the 70th anniversary of he Allied invasion, an event that helped turn the tide in World War II. President Obama spoke at the Normandy American Cemetery and Memorial where nearly 10,000 U.S. soldiers are buried there.

We`ll be right back.

(MUSIC)

MATHISEN: Finally on this jobs Friday, if a summer blockbuster is on your entertainment menu, it could include a superhero or two, and superheroes are the thought behind our latest “Bright Idea”.

One enterprising Michigan woman became a mother of invention when her boy`s birthday party presented her with a necessary. She needed a superhero. She needed capes. So she caped, she saw, she conquered.

(BEGIN VIDEOTAPE)

MATHISEN: Holly (NYSE:HOC) Bartman — mom, superhero, businesswoman,
sort of.

HOLLY BARTMAN, SUPERFLY KIDS CO-CEO: I didn`t know anything about
business. It was a hunch.

MATHISEN: Back in 2006, her son, Owen, about to turn 4, requested a superhero birthday party. Holly (NYSE:HOC) made capes and the party was
just supper.

BARTMAN: They started to run around our backyard, we didn`t have to
do any entertaining.

MATHISEN: One of the moms at the party noticed.

BARTMAN: And she said you need to make these. And I said, you know,
well, we`ll see.

MATHISEN: Bartman decided to give it a try a few weeks later. She bought 100 bucks worth of material, spent a few hours sewing capes and got
some help putting up a Web site.

BARTMAN: I would make a few, sell them, use that money to buy more
fabric and it kept snowballing.

MATHISEN: By 2009, Bartman was taking in three times what she made as a school teacher but her life was consumed by the work.

Her house engulfed in materials. So, she moved to a nearby office.
That`s where he met Justin Draplin.

JUSTIN DRAPLIN, SUPERFLY KIDS CO-CEO: I was like, what are you doing?
And she explained that she`s making super hero capes and I`m scratching my
head thinking there`s no way anybody is going to make any money doing this.

MATHISEN: So, he did a little research.

DRAPLIN: Capes are cool, and there`s 20-something million kids in the U.S. So, I came to Holly (NYSE:HOC) and said, you know, I think I can sell
these for you.

BARTMAN: He would bring me stacks of orders. I was so overwhelmed.
And you know, he teases me. That every time I walked into your office, you
looked like you were going to cry.

MATHISEN: The tears are long gone now. With Draplin`s help, Holly
(NYSE:HOC) Bartman`s hobby became a business.

Superfly Kids, outside Detroit, 17 employees, make capes, arm blasters, even customized tutus.

Wholesale orders from Zulily and Old Navy helped to take them to
another level. 2013 revenues, $2.3 million.

BARTMAN: People have asked me why don`t you have this made overseas.
And my attitude has been, there are plenty of people to do it here. You know, as far as being able to customize, that`s not something you can do
overseas. And that`s what we`re about.

UNIDENTIFIED MALE: Up, up and away!

MATHISEN: Super heroes, though, are about giving back. In April, Superfly Kids put on Detroit`s first super run.

Capes were encouraged but not required. They raised thousands of
dollars for local charities.

DRAPLIN: We have our attributes that we can provide for the greater good. And the super hero theme is a pretty unanimous, non-confrontational,
all inclusive way to do that.

MATHISEN: Even when cash was tight, Holly (NYSE:HOC) Bartman donated capes to schools and charities, bringing dreams to life. After all, aren`t moms all superheroes?

BARTMAN: I think so. We just all hide our capes.

MATHISEN: And maybe, just maybe, it turns out being a good mom can be
good business, too.

BARTMAN: Imagine that they need to do that. That`s part of
childhood. So, we`re helping them do it.

(END VIDEOTAPE)

MATHISEN: And there is my cape. Holly (NYSE:HOC) sent us a cape, this one doesn`t look half bad, does it folks? With great business news comes great responsibility.

Well, it`s not just the business growing out there in Michigan.
They`re hoping to take this super run now into 30 cities during the next year, coast to coast. The next one happens to be tomorrow morning in Frankenmuth, Michigan, at 8:30 a.m. They sent a mask but producer said don`t wear.

That will do it for business report for tonight. I`m Tyler Mathisen.
We got to go. We`ll see you Monday.

END

Nightly Business Report transcripts and video are available on-line post broadcast at http://nbr.com. The program is transcribed by CQRC 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) 2014 CNBC, Inc.

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