TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Sell strategy.
Stocks meander in a market searching for clues. But maybe Mr. Market is giving you a chance to rethink what you own. Tips tonight on how, when, and why to sell stocks or funds in your portfolio.
SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Bumper crop. Global food prices are falling and the government predicts record harvests. But have those prices made their way to your corner grocery store?
MATHISEN: Third time`s a charm? The FDA approves its third diet drug since 2012. So, why did shares of the drug maker sink?
All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday, September 11th.
GHARIB: Good evening, everyone.
“Caution” was the watch word of the day on Wall Street today.
Investors focused their attention on President Obama`s plan to combat Islamic terrorists in the Middle East, some tougher new sanctions against Russia and the timing of the Federal Reserve`s next move on interest rates ahead of next week`s policy meeting. The major stocks averages began the day lower but closed at the high of the session, getting a boost from rising oil prices. By the closing bell, the Dow lost 19 points, the NASDAQ was up by five, and the S&P added one point.
Well, despite investor caution and uncertainty, there`s been one consistent trend in recent week, every time the major averages pull back from their recent highs, many investors have stepped back in to buy.
Dominic Chu looks at the recent market activity, what may happen next, and what some professionals are buying right now.
DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Stocks go up and stocks go down. But with the overall market still near record highs, many investors are wondering if now is the time to sell and take some of those profits off the table.
Certain stocks are getting hit worst than others, so far in September, the broader S&P 500 has lost about half a percent, but energy stocks have taken up bigger hits. As a sector, it`s lost around 4 percent during the same time. One big reason is the price of oil. It`s been on a steady drop since June and that`s helped drag down oil-related stocks.
But not everyone is as worried about oil.
JOE TERRANOVA, VIRTUS INVESTMENT PARTNER: Main Street should not look at the price of oil in determining what their investments should be. They should be picking solid energy companies with the focus on the growth in U.S. oil production, which is at 45-year highs, who are the winners, who`s got the proven assets, invest in those businesses.
CHU: Among Terranova`s top picks are the oil and gas exploration and production companies like EOG Resources (NYSE:EOG), Pioneer Natural Resources (NYSE:PXD) and Marathon Oil (NYSE:MRO). So far in 2014, there have been three notable pull backs in the stock market, but none have been more than 6 percent and each bound has led to fresh highs. Some experts believe that the trend could continue.
DARIN RICHARDS, AKT WEALTH ADVISORS CIO: Consumer sentiment is as high as it`s been since before the recession, auto sales have spiked, manufacturing is picking up. We`re seeing the information out there, yet the market is kind of plodding along right now. So, I think a lot of the optimism has been priced in. Nonetheless, the economic backdrop looks good. So, I think we`re going to see stocks continue to move higher but I wouldn`t expect anything dramatic.
CHU: Of course, geopolitical and economic risks still abound and some market pessimists still maintain that we`re long overdue for significant stock market correction.
For NIGHTLY BUSINESS REPORT, I`m Dominic Chu.
MATHISEN: So far, September has been a bit of a languid month for stocks. They eased down a bit and as Dom said, they wondered a little bit higher. Nothing in their behavior this month has screamed buy or sell, even money manager Mike Holland sounded tentative when he told us yesterday what he`s been doing with his portfolio.
(BEGIN VIDEO CLIP)
MIKE HOLLAND, HOLLAND & COMPANY CHAIRMAN: I still got a very full equity portfolio. But I`m taking some tips off the table and in 2008 when things were very ugly, as Warren Buffet said, that`s when you buy some things. So, right now, I`m actually paring back. I`m not selling willy- nilly, but in fact, I`ve taken a few things off the table just in the last several days.
(END VIDEO CLIP)
MATHISEN: So, how does an individual investor know when it`s time to do what Mike Holland is doing, judiciously selling shares?
For some sign posts, we turn to Mitch Goldberg, president of his own investment firm Client First Strategy.
Mitch, welcome. Good to have you with us.
MITCHELL GOLDBERG, CLIENT FIRST STRATEGY: Thank you for having me.
MATHISEN: You know, we in financial news on television, we are very partial to telling people exactly what to buy. Tell me what to buy. And I get it. We`re probably less good at telling people what and when to sell.
What`s your best advice for them?
GOLDBERG: My best advice is investors need more discipline, because you`re right, people are always focusing on what to buy, research is buy- driven, but as investors we need to take chips off the table. As they say don`t count your chickens until the eggs hatch, don`t count your profits until you take something off the table.
My feeling is with the discipline strategy I like to use strategies like stop orders, trailing stop orders. But, basically, I want it pre- programmed so what when my stocks go off a certain amount, let`s say you have a thousand shares of stock it`s up 25 percent, I want to take 25 percent of my shares off the table and re-invest.
MATHISEN: So you take the emotion out of it?
GOLDBERG: As much as possible.
GHARIB: And, you know, you have some tips, we have them upon our screen. So, let`s go over some of them. You say hesitation is the most costliest enemy for investors. Is that the emotion thing that Tyler was just talked about or something else?
GOLDBERG: No, it goes directly to the heart of what Tyler is talking about. When you have hesitation basically it is a symptom of a lack of a disciplined strategy. So, what we want to do is we want to bring in the discipline to avoid having to let`s say be in a stock that`s up. You ride it up, you ride down, you ride up, and then, at the end of the day, you really haven`t made anything on your —
GHARIB: Are you saying the day I buy the stock, I pay $20 for a stock and that day I should say, when it hits 40 or 50, whatever it is, I`m going to sell it? Is that the discipline?
GOLDBERG: It`s so much so. There is a little bit of feel to this also.
GOLDBERG: It depends on industry, volatility, different stocks, different news coming up. But typically, if I`m up 25 percent in a stock or so, that`s when I look to put a stock just below the level.
MATHISEN: So, you say don`t sell all at once, that`s the other point here. In other words, if the stock has gone up 25 percent, you might not dump 100 percent, you want to dump 25 percent or 50 percent. Similarly, let`s say I bought a stock for argument sake on ETF at $100 a share, I ought to have in my head the point at which I am going to start aggressively selling on the downside, right?
MATHISEN: Is it only price-driven here or do I want to watch developments in the news if I hear that — that an earnings number isn`t good, or that there is some sea change in an industry? Or are those kind of day-to-day news facts probably going to mislead you as much as they`re going to help you?
GOLDBERG: I would say they will mislead you as much if not more, because then what`s happening is you become so hyper-focused on the day-to- day news, you start buying, you start selling, but you`re not really making any progress.
You know, there is something called buying and giving investments some time and being patience. So, if you`re going to, let`s say, buy a stock for example, I`m not necessarily going to buy it all at once. I might even put a, even dare I say a market order for 25 percent of any position and put an order in for the same stock, you know, if it goes down 3 percent, I`ll double up. If it goes down 6 percent, I`ll buy a little bit more —
MATHISEN: Buy a limited order?
GOLDBERG: It`s an open order that basically says that you`re willing to pay a specific price at a certain price or lower.
GHARIB: Mitch, I was really interested on this last tip that you have for our viewers. You say raising cash is not a long-term strategy. How do you know how much cash you should have in your portfolio?
GOLDBERG: It`s a good question. I think — generally, it speaks to people`s risk tolerance, their time horizon, their financial goals. But if somebody is let`s say 70-plus retired, I`m actually looking to be maybe 40 percent or 50 percent cash and fixed income, I am. Things can change a little bit but right now off the bat at this level of the market, that`s where I`m comfortable for my clients. Again, everybody`s situation is different, somebody in their 40s, or 50s, we`re probably talking 10 percent to 15 percent cash.
MATHISEN: So — I think we begin — very quickly, we begin by saying you`re taking a few chips off the table. Where? What kinds of stocks?
And what are the characteristics of the ones you`re selling?
GOLDBERG: Well, the characteristics of the ones that I`m mostly selling are actually my winners. And they are across the gamut from industrials, to consumer discretion, consumer staples, health care, energy
MATHISEN: I`m glad to hear you have winners across the gamut, that`s the thing.
GOLDBERG: Well, you know —
MATHISEN: In your business.
GOLDBERG: Thank you very much. Yes, we have our share of bruises, also.
MATHISEN: All right. So, you`re selling the winners, not the losers.
GOLDBERG: Right, but it`s a gradual process of coming out of old positions, gradually on the way up and taking on new positions on the way down. So, it`s always a see/saw between cash and equity.
MATHISEN: Mitch, thank you very much. Mitch Goldberg of Client First Strategy, thanks again.
GHARIB: And looking to Washington, some good news to tell you about today. The federal government reported a budget deficit of $129 billion in August. That is much lower than it was a year ago, with one month to go and the current fiscal year, the U.S. is on track for the lowest annual budget shortfall since 2008.
MATHISEN: And today came news also from Washington that more Americans sought unemployment benefits last week, first time claims spiked by 11,000. That is the most since late June, but it is still lower than it was a year ago.
GHARIB: An update on a story we reported earlier this week. We told you about some economic indicators you might not be aware of, but they`re closely watched by the Federal Reserve. Well, today, we know what the reports say. And now, just days away from the Fed`s next policy meeting on the interest rates, and its monetary easing policies, Steve Liesman takes a look at exactly what those central bankers are looking at in that data.
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): A new labor market indicator from the Kansas City Feds show strength in the nation`s job market, but a long way to go until it can be considered healthy. And yet it could mean somewhat faster Fed rate hikes than Wall Street now anticipates.
The labor market conditions index, which Fed Chair Janet Yellen said she is now following brings together 24 separate indicators into a single place. It rose 0.08 in August, minus -0.52. That`s the new post-recession high, but it`s still below the worse levels of the 2001 recession and still below average.
But the momentum indicators suggest good job growth in the months ahead.
MICHAEL GAPEN, BARCLAYS CHIEF U.S. ECONOMIST: The pace of improvement continues at the rate that it`s been since the QE3 started. I would estimate we hit the zero mark or the average level of conditions next March. And historically the Fed has started to move rates higher, roughly around that time.
LIESMAN: Meanwhile, it looks like second quarter growth already reported to be strong is even better than first thought. A relatively new government survey that measures the big U.S. service sector shows health care spending was much healthier than first estimated. In fact, it surged along with better business investments.
(on camera): The result? Growth in the overall economy in the second quarter now looks to be running somewhere around 4.7 percent, a half point better than originally reported and maybe the best growth quarter since 2005. It`s certainly a big snap back from the weather related negative number in the first quarter.
It`s unclear if the strength will motivate Wall Street to upgrade their view on the third quarter, which is running a pretty healthy 3.1 percent.
One more piece of data this week, watch for an important read on consumer spending at 8:30 a.m. with the August retail sales report.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.
MATHISEN: At least one new forecast has the Federal Reserve raising its bench mark interest rates starting in March. Today, economists at UCLA`s Anderson School of Management predicted that the federal funds rate, which has been at/or near zero since late 2008 will be raised in the next six months, and will continue to gradually increase through at least the end of 2016, when UCLA thinks it will stand at 3 percent.
GHARIB: Fed policy makers will also be analyzing the gyrations in oil prices. Just today, the International Energy Agency lowered its forecast for oil demand. This is the third month in a row that the group did so, calling the drop in worldwide oil demand, quote, “nothing short of remarkable”. The main drivers: economic weakness in Europe and China. But worries about conflicts in the Middle East caused oil prices to spike hiker at least for today. The price of domestic West Texas Intermediate shot up by more than a dollar, closing just below $93 a barrel. Brent Crude prices bounced off a two-year low, ending five straight losing sessions.
MATHISEN: Tougher new sanctions against Russia were announced today by the White House and the European Union. The new actions upped the pressure on Moscow for its rule in aiding separatists in Ukraine. The sanctions will take effect tomorrow when more specific details will be announced. But they are expected to target Russia`s energy, defense and financial industries.
GHARIB: In one week, residents of Scotland will vote on whether to become an independent nation, ending a 300-year union with United Kingdom.
And today, with opinion polls showing Scots evenly split on separating, Lloyds Bank and the Royal Bank of Scotland, both based in Scotland and both partly owned by the British government said, they would move their main offices to London if voters decided to break away from the U.K. The reasons include currency issues, debt repayments the banks have to make, and their regulatory relationships with the Central Bank of England.
MATHISEN: Still ahead, more trouble at RadioShack. We warned you about the possibility of a bankruptcy last night. Today, we have more information.
GHARIB: More trouble at RadioShack. The retailer posted its tenth straight money-losing quarter — losses that were twice as big as Wall Street expected. As we reported last night, the struggling electronics chain now confirms it`s in talks to shore up the finances but warned that it could run out of cash and declared bankruptcy if no deals are reached to restructure its debt.
Shares closed higher today up by 9 cents as executives tried to raise money and turn things around.
MATHISEN: Well, a different problem at Verizon (NYSE:VZ) Wireless.
The telecom giant`s CEO said the company is seeing a surge in wireless customers in the current quarter, up a staggering 40 percent from a just a year ago period. But because of cheaper plans at rival carriers and the heavy costs to subsidize the must-have smartphones that customers want, margins are getting squeezed.
GHARIB: A new diet pill got the OK from the Food and Drug Administration. It`s called Contrave. Now, you would think shares of its maker Orexigen would get a big lift on that news. But shares actually declined by 10 1/2 percent today. So, what`s making investors hold back on what looks like a solid investment?
Meg Tirrell reports.
MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): It was supposed to be good news. Orexigen Therapeutics (NASDAQ:OREX) got word after a long battle that its obesity drug was approved by the FDA.
But today, its stocks sank. It seems counterintuitive. Obesity is a potentially huge market, including more than a third of U.S. adults. But the drug, Contrave is the third new diet pill to be cleared in the last two years, and investors maybe wary after recent experiences.
JASON BUTLER, JMP SECURITIES: There have been no real new obesity drugs for many years. And all of a sudden, there are new drugs coming together. So, there was a lot of investor and physician excitement in the space. What we`ve seen commercially since two of these drugs have been launched is somewhat disappointing that the adoption really hasn`t been there.
TIRRELL: Orexigen maybe suffering from investors` disappointment with the previous drugs. Qsymia from drug maker Vivus (NASDAQ:VVUS) and Belviq from Arena. They were both approved in 2012 and initially sales have missed expectations.
There are still safety concerns about obesity drugs after several, including fen-phen were pulled from shelves over side effects.
Another issue is cost. It`s been an uphill battle getting insurers to reimburse for the drugs, though the company say that`s changing.
And finally, analysts say, having enough resources to mount a successful drug launch has been difficult for these smaller companies.
(on camera): Orexigen has partnered with Japanese drug maker Takeda to sell Contrave in the U.S. CEO Mike Narachi said he`s confident Takeda`s army of 900 sales reps give the drug a chance of being a blockbuster. And though analysts from JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) recommend Orexigen stocks, investors clearly are still skeptical.
For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell.
MATHISEN: It looks like Lululemon is getting back into shape, and that is where we begin tonight`s “Market Focus”. The yoga apparel maker`s earnings beat Wall Street estimates on the top and bottom lines. It also raised its outlook for the year. The company said higher than expected online sales helped to lift its results. The stocks surged about 14 percent, to $43.73.
Kroger (NYSE:KR) also out with strong results. The grocery store chain`s quarterly was better than anticipated and it hiked its profit and sales outlook for the year. The company attributed growing consumer confidence for the good performance. Shares were only up a fraction to $52.17.
Investors bought up shares of Taminco after Eastman Chemical
(NYSE:EMN) Company announced it would buy the specialty chemical company in a deal valued at almost $3 billion. Eastman says the acquisition will strengthen its presence in the food, feed and agriculture markets.
Taminco popped almost 10 percent to $26.21 was its close. Shares of Eastman were off a percent to $82.34.
Alcoa (NYSE:AA) has signed a long-term contract to supply Boeing
(NYSE:BA) with aluminum sheet and plate that`s worth more than $1 billion.
This new contract is the largest ever signed between the two companies.
Despite that shares of Alcoa (NYSE:AA) were down today nearly 2 percent to $16.90. Boeing (NYSE:BA) also off a bit at $127.64.
GHARIB: Here`s another partnership that was announced today. Gogo, known for its Wi-Fi service on planes, is partnering up with T-Mobile to provide free in-flight texting and other services beginning on September 17th. Shares of Gogo rose about 9.5 percent on the news to $18.58. T- Mobile fell slightly to $30.45.
Pandora scored a licensing partnership with BMG, that`s the world`s fourth largest music publisher. BMG`s roster includes songwriters who have written hits for a wide-range of performance, everyone from Frank Sinatra to Beyonce. Pandora shares jumped 3 percent to $26.94.
Ulta Salon popped after-hours, right after the company reported better than expected second quarter earnings and revenue. The cosmetics retailer also gave an upbeat outlook for the full year. The stock was higher after the bell. In the regular session, shares were up a fraction to $97.48.
And Hertz has reached a deal with activist investor Carl Icahn. It`s agreed to add three of his representatives to the Hertz board. In return, Icahn agreed not to launch a proxy contest at the car-rental company.
These new board members will be involved in the search for a new CEO. The company announced its chief stepped down on Monday.
Shares soared initially after-hours. During the regular session the stock was up slightly at $27.75.
MATHISEN: And an auto recall you should know about. Toyota (NYSE:TM) will recall 140,000 Tundra pickups because of an issue with the installation of air bags. That could prevent the air bag from deploying properly. Thankfully, no crashes or injuries have been reported in connection with that default.
GHARIB: And food prices are heading lower. The United Nations global food index shows that worldwide, food prices hit a four-year low last month with the largest price declines in dairy and grains. That`s thanks to strong supplies and weak demands for imports in many countries.
MATHISEN: Prices on some major grains may be heading lower right here at home and that`s just because today, the government reported a bumper crop of corn, soy beans and wheat. With so much products coming out of U.S. farms, prices on those major crops all drifted lower in trading today.
So, world-record setting crop yields translate into lower prices for you the grocery store.
Jane Wells reports.
JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Everyone knew it was going to be a record crop this year after a summer of near perfect weather in the Midwest, but the government now predicts even more corn and soy beans than expected, a lot more.
SCOTT SHELLADY, TJM INVESTMENTS: Boy oh boy, when you kind of take the report to the side of the road and look under the hood the bean pod counts and ear counts on the corn and beans really kind of make you think what the traders say down here, big crops get bigger.
WELLS: Farmers are now expected to produce almost $14.5 billion bushels of corn, a record, and nearly 4 billion bushels of soybeans, another record. Corn, which peaked at eight bucks a bushel two years ago, is now under $3.50. Soybeans are now under $9.80. The trader Scott Shellady thinks they could fall into the 7s. Even wheat fell as the government reported prices rising faster than demand.
Even so, these lower prices haven`t really made their way to the grocery store yet to consumers, which is kind of funny because these commodities have been falling for most of the year. And Scott Shellady that`s something to watch. They`re actually what he calls the canary and the coal mine, that if this downward trend continues for the next few months —
SHELLADY: But this is going to play in the bigger picture. And mark my words: we`re not going to be talking about inflation. We`re going to be talking about deflation and what we can do to stimulate the economy.
WELLS: Most of the corn and soybean grown in the country goes to feeding livestock, so at some point, meat prices should fall. They haven`t really done that yet. The government said beef is down and more beef will be imported because high steak prices haven`t scared off consumers.
But there`s plenty of poultry and even turkey production is a little higher than before. Good news if it means that Thanksgiving drumstick won`t cost an arm and a leg.
For NIGHTLY BUSINESS REPORT, Jane Wells, Los Angeles.
GHARIB: Still ahead, Wall Street remembers and gives back, as it honors those who were lost 13 years ago today when tragedy struck. That`s coming up.
MATHISEN: It was a day of remembrance as the nation marked the 13th anniversary of the September 11th attacks. President and Mrs. Obama observed a moment of silence outside the White House before attending a
9/11 memorial service at the Pentagon.
At the site of the World Trade Center in New York City, family and friends read the names of the nearly 3,000 people who died there.
And on Wall Street, a moment of silence on the floor of the New York Stock Exchange to honor those who were lost.
GHARIB: Cantor Fitzgerald lost three-quarters of its New York employees when those twin towers fell. Today, the trading firm remembers that day and the people it lost with a singular act of charity.
Mary Thompson has more.
MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): No firm lost more on 9/11. Now, Cantor Fitzgerald commemorates that loss by giving back.
HOWARD LUTNICK, CANTOR FITZGERALD CEO: It helps us turn the toughest day into something that is beautiful.
THOMPSON: CEO Howard Lutnick lost 658 employees on the day the towers fell, including his brother and his best friend. So, 13 years on, he and the employees of the firm he rebuilt donate the day`s trading profits and their salaries for a day to hundreds of charities, with a little help from A-list group of stars like actor Ben Stiller.
BEN STILLER, ACTOR: Yes, they`re all saying, they all give me a thumbs up, go higher, go higher. I wanted 14.5, but I said no, no.
THOMPSON: Cantor`s clients get to talk to stars while sports starts like New York Rangers goalie Henrik Lundqvist get to raise for their charities.
HENRIK LUNDQVIST, NEW YORK RANGERS GOALIE: I am starting my own foundation, Henrik Lundqvist Foundation, and focuses health and education for children pretty much all over the world.
THOMPSON: Super model Christy Turlington raising money for Every Mother Counts also sees it as a way to honor the city she calls home.
CHRISTY TURLINGTON, MODEL: It`s wonderful to find a way to participate on this day. I think we all want to do something and we don`t always have the ability to do that.
THOMPSONS (on camera): Over the years, Cantor`s charity day has raised over $100 million.
(voice-over): And while bringing in rock stars like Jon Bon Jovi for a day can be a thrill, Lutnick takes greater pride in another legacy he`s building.
LUTNICK: You got 41 children of guys who got killed 13 years ago.
Imagine their kids work in Cantor Fitzgerald. I mean, that`s extraordinary.
THOMPSON: One of those employees is Lauren Grazioso, who lost her dad on 9/11.
LAUREN GRAZIOSO, CANTOR FITZGERALD: We kind of see the whole situation together and it made us very fond of the firm and especially Howard. So, it`s a great opportunity and I`m very honored to work here.
THOMPSON: Words that would make any father proud.
For NIGHTLY BUSINESS REPORT, I`m Mary Thompson in New York City.
GHARIB: So much good coming out of so much bad. A lot of these kids who lost their parents, they were maybe teens and now they`re grown adults and working at the firm.
MATHISEN: Yes, and Howard Lutnick did an amazing job rebuilding that company, more than 600 of his colleague and friends taken on that day.
Well, that is NIGHTLY BUSINESS REPORT for tonight. I`m Susie Gharib.
Thanks for joining us.
MATHISEN: And I`m Tyler Mathisen, thanks from me as well. Have a great evening, everybody. And we`ll see you back here tomorrow night.
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.