SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: April showers. Stocks close out the month with a sharp selloff and some market watchers are not expecting any May flowers.
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Refined earnings.
Oil`s slide hurts Exxon`s profit but the company results beat the forecast thanks to a five fold profit rise in refining.
HERERA: And, patting your nest egg with stocks still at lofty levels.
Is now the right time to take your retirement out of stocks?
All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday, April 30th.
MATHISEN: Good evening, everyone, and welcome. Glad you could join us.
Well, sell in May and go away. That is the old market cliche and today it was as if May started a day early. Stocks began the session lower and just kept on going down extending losses into the late afternoon as some of the big market gainers in recent months like small caps and biotechs lost steam.
By the close, the Dow Jones Industrial Average is off 195 points to 17,840. The NASDAQ was down 82, and the S&P 500 fell about 1 percent or 21 points.
Despite today`s selloff, though, all three major indexes finished the month in the black with the NASDAQ and the S&P up nearly 1 full percent.
Yield on the ten-year treasury note held just above 2 percent. That level watched closely because it`s seen a proxy as the health of the U.S.
Bob Pisani at the New York Stock Exchange has more on today`s weak close to April.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was a poor end to the month as several big trades started to unwind a bit. And remember, there have been three trades that have been big winners for this year.
First, the long dollar. Second, long Germany. And number three, long health care, particularly, biotech.
Now, these are what traders call crowded longs. A lot of traders bought into these trades and are sitting on a lot of profits. All three of those trades have come unwound a bit this week. What happened?
Well, first, weak economic data caused the dollar to weaken. The dollar index down nearly 4 percent just this week. That one long trade that`s not working.
As the dollar is weakened, the euro has strengthened. That`s bad news for the German stock market down 4 percent this week because of a stronger euro makes that country`s exports more expensive. That second long trade that isn`t working.
Finally, some recent disappointments in earnings from several biotech companies, including leader Biogen, has called a pullback in that space.
Biogen down almost 12 percent this week alone. That strike three, all three trades not working anymore.
So, what should you do? Maintain some perspective. It`s true, some of the best performing sectors had a tough weak but all of them remain up for the year.
And the S&P 500, that is the benchmark, after all. It`s only 1.6 percent from its historic closing high. You know when that was? It was just last Friday. Doesn`t that seem like a long time ago?
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
HERERA: Daniel Morris joins us now to talk more about the markets and what lies ahead in May. He`s global strategist at TIAA-CREF Asset Management. They have about $866 billion under management.
Good to see you, Daniel. Welcome.
DANIEL MORRIS, TIAA-CREF ASSET MANAGEMENT: Thank you.
HERERA: I know you feel stretched in terms of valuations, but you`re still looking for pretty decent earnings growth for the rest of the year, correct?
MORRIS: Well, I guess it depends how you define decent in this environment after the really good results we`ve had over the last several years. The bottom of 2009, we`re at a point where you`re looking at perhaps high single digits earnings growth, excluding the energy sector.
So, that`s OK, but certainly much less than we`ve had recently. And I think the big challenge for the market is that we have relatively high valuations and that type of earnings growth — 5 percent, 6 percent, 7 percent — may not be enough to support the multiples that we currently have on the market.
MATHISEN: So, if I`m hearing you currently, Daniel, it sounds like you would not be surprised to see a bit of a selloff sometime over the next few months or at the very least, the market that kind of treads water.
MORRIS: Yes, absolutely. And I think the biggest factor behind that is the fact that we are nonetheless expecting an increase in interest rates by the Fed, looking for September now and if you study stock market history, what the stock market does ahead of hikes, the first hike by the Fed, there`s often a correction around four months give or take before the first hike. So, if we`re looking for September, you can do the math.
Sometime spring or early summer, it wouldn`t surprise us if we did see a sharper selloff.
HERERA: So, if valuations are stretched here at home, globally, where would you deploy cash? Where are the values?
MORRIS: Well, I think the question earnings growth as opposed to valuation. I think what we really see in Europe and in Japan is the opportunity for accelerating earnings growth. And you really are seeing that now in Europe, quite good economic numbers starting to come out.
Analysts increasing their earnings forecasts, for companies particularly in the Eurozone, and that`s going to translate or should translate into stock price appreciation.
We had great returns in the first quarter. We think they`re going to be strong into the second quarter as well.
MATTHEWS: TIAA-CREF is one of the biggest and one of the best asset managers in the country if not the world. I`ll go a little differently here, Daniel, how much of your equity money is indexed as opposed to actively managed and why?
MORRIS: Well, we certainly offer both products. I think it depends on the investor and their own particular situation as to which is appropriate. We have a significant amount of funds that are indexed, but for the most part, we really do believe in the virtues of active management. We invest quite a bit in research and our own analysts to give the recommendations to portfolio managers and I think that`s where we add value.
HERERA: Daniel, very quickly, talk to me about fixed income and bonds and your exposure there, if anything at all.
MORRIS: I think what`s been interesting is this increase in interest rates, the treasury going above 2 percent even as you had the stock market sell off and I think what we`re seeing there is reflection of actually the increase in oil prices, increase in inflation expectations, and we think both of those forces are going to continue to still look for higher interest rates in the months ahead.
HERERA: All right. Daniel, thank you. Daniel Morris with TIAA-CREF.
MATHISEN: Well, Sue, Visa (NYSE:V) out with the results after the bell. They`re closely watched because it reflects the health of consumers worldwide by especially here in the U.S. The Dow components earnings came in at 63 cents a share. That was a penny better than estimates but roughly flat with the same period last year. Revenue of $3.4 billion was better than consensus and higher than last year. Still, shares were lower initially after the close, as you see on that graphic.
Morgan Brennan has the one key takeaway for investors — Morgan.
MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: OK, so as you mentioned, we saw better than expected results but net income still decreased profits. They decreased 3 percent in the quarter, and that was largely due to the stronger dollar and the fact that lower gas prices weighed on the results.
The other thing to keep in mind is the fact operating expenses increase. We`re seeing this company continuing to more into technology, geared towards mobile and other types of digital payments and that`s really, I think, the key here, because CEO Charlie Scharf made a comment in the results tonight. He said, “There`s trillions of dollars of cash to dis-intermediate and our work and digital payments will allow us to capture more than we could have contemplated a few years ago.”
So, the results were better than expected, though we did see the decline in some of the head winds we`ve been seeing in other companies in earnings this quarter. But longer term, they really see a big opportunity here in the mobile payment space.
MATHISEN: That`s where it all seems to be going.
Morgan Brennan, thank you very much.
HERERA: In the meantime, more earnings to tell you about.
ExxonMobil`s first quarter profit was nearly cut in half from a year ago due to that decline in oil prices, but the results were enough to beat lowered earnings expectations pretty much by a mile. Shares of ExxonMobil
(NYSE:XOM) dropped today, but, of course, that was along with the rest of the market.
Jackie DeAngelis has more.
JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
A big beat for ExxonMobil (NYSE:XOM) even if expectations were drastically reduced. Revenues are down more than a third from year ago, almost mirroring the 40 percent drop in oil prices during the last 12 months.
Exxon and other energy companies are all making moves to reserve cash.
CEO Rex Tillerson saying the company doesn`t expect oil prices to rebound quickly despite the roughly 10 percent bounce that we`ve seen so far this year. Oil prices are hovering near their highs for the last year, but traders agree crude could stay near $60 a barrel for some time.
ANTHONY GRISANTI, GRZ ENERGY FOUNDER AND PRESIDENT: I do think oil has found a short-term bottom. Dollar influence is number one. There`s a few other factors that are also supporting prices. If you`re a company and oil producer right now, and you survive the $42, I certainly see a brighter future ahead for you.
DEANGELIS: Investors took notice when mentioned lower prices, improved the profit margin for its refining operation. A 4 cent dividend raise to 73 cents a share also made investors smile.
We`re finding profits are a common theme this week, softening the blow from reduced overall earnings for Royal Dutch Shell, BP, and Total.
Smaller companies that don`t have big refining operations, not heard as well.
ConocoPhillips (NYSE:COP) also beat by a penny. It was one of the first big U.S. oil companies to cut back on explorations spending.
(on camera): Tomorrow, we`ll hear from Chevron (NYSE:CVX). The key to its earnings report, if it will slash its capex even further. The company is looking at 13 percent cut right now to $35 billion. But will those plans change? Exxon is sticking to its capex cuts 12 percent for 2015.
The question investors are asking is, when will these capex cuts start to impact U.S. production?
GRISANTI: I think the capex cuts were announced at the beginning of the year started to take effect already. If you look, there`s not any new rigs being deployed right now. A lot of rigs, 52 percent of them, have shut down. And what we`re seeing as far as supplies go, it`s starting to make a difference.
DEANGELIS (voice-over): Though crude prices are stable for now, the longer term picture is still volatile. And that means exploration spending cuts will likely continue.
For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis.
MATHISEN: To the broader economy where the American job market does continue to show signs of recovering. The number of Americans filing new claims for jobless benefits tumbled to a 15-year low last week. Initial claims fell 34,000 to a seasonally adjusted 262,000. That is the eighth straight week below 300,000.
A separate report showed that wages for private sector employees climbed 0.7 percent in the first quarter. That is the biggest gain in more than six years.
HERERA: Over in Europe, consumer prices stopped falling in April.
And that is easing concerns that Europe was headed for a long bout of deflation. The European Union said consumer prices were unchanged in line with market forecasts.
In the meantime, the European Central Bank said that while its stimulus program was working, the economy still has a ways to go.
MATHISEN: The European Union is still in intense negotiations with Greece over its pile of debt. But small signs of progress are starting to emerge.
Michelle Caruso-Cabrera has more.
MICHELLE CARUSO-CABRERA, NIGHTLY BUSINESS REPORT CORRESPONDENT:
Things just got real between Greece and its creditors. After months after sniping at each other in the press, they`re finally in the middle of negotiations, and you can tell they`re real because both sides have agreed to a news blackout.
The Greek government says it`s willing to make some big concessions like not raising the minimum wage as they had promised their voters they would do. They`ve also agreed to do privatization, which they had told the voters they wouldn`t do.
The Greeks though may be under intense pressure after new polls show the population is growing impatient with the new leadership and that over three quarters of Greeks feel that Athens must strike a deal at any cost to stay in the Euro.
So, the Greek government has sent a bigger team perhaps to dilute the role of controversial finance minister Yanis Varoufakis and the talks are expected to continue to at least Sunday. With Prime Minister Tsipras willing to step in if necessary, That`s according to “Reuters”.
Greece wants an interim deal by next week, hoping that will allow the European Central Bank to ease liquidity restrictions on the country`s bank.
That`s before nearly a billion dollar payment to the IMF falls due on May 12th. Athens has suggested it would struggle to pay that installment.
For NIGHTLY BUSINESS REPORT, Michelle Caruso-Cabrera.
HERERA: Still ahead, where Ford Motors sees the future of the automotive industry, and it`s not in Detroit.
HERERA: Henry Ford may have been the man who made Detroit the motor city, but today, the company bearing his name is looking west for innovation. Specifically, Silicon Valley, where the auto maker opened a technology center.
Phil LeBeau has more from Palo Alto, California, on Ford`s push into the heart of the tech industry.
MARK FIELDS, FORD CEO: It`s a very different environment.
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over: Ford CEO Mark Fields calls this the future of Ford. Far from the nearest assembly plant or a design studio, Ford is working with the latest technology in the Silicon Valley to develop cars and trucks.
FIELDS: The level of intensity this I`m hearing from talking with folks I meet out here, they have never seen the amount of interest in one industry by this community in a very long time.
LEBEAU: Ford and other auto makers are racing to make sure Silicon Valley giants like Google (NASDAQ:GOOG) and Tesla do not take the lead in building connected and autonomous drive vehicles. That means giving consumers tech features they haven`t behind the wheel.
GEORGE KANG, EDMUNDS.COM: They`re coming in and saying, well, I need Bluetooth. I need streaming audio. I need these different technology components that`s going to make my life easier. And so, I think Ford having a presence in Silicon Valley is really going to kind of key them into consumers and to develop products that make sense for consumers.
LEBEAU (on camera): There`s no way of knowing what the next breakthrough in technology will be from Ford but Fields said thanks to technology like this virtual reality headset, the vehicles of the future will be changing rapidly.
FIELDS: Things like, you know, lane keeping, collision alert, adaptive cruise control — you can get that across our line. And you`re going to see us build on that going forward.
LEBEAU (voice-over): The apps are still being written and cars with more technology still in development. But Ford is betting it will be ready as automakers drive further into the Silicon Valley.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Palo, California.
MATHISEN: From Ford to General Motors (NYSE:GM), General Motors
(NYSE:GM) says it will invest nearly $5.5 billion in its U.S. factories over the next three years. The company says the move will create 650 jobs.
The announcement comes just a few months before the automaker begins bargaining the next contract with union workers.
HERERA: Sales of Viacom (NYSE:VIA) sank on weak ratings and that`s where we begin tonight`s market focus.
A decline in domestic ad revenue weighed on the media giant`s top line. Foreign exchange issues and a drop in entertainment sales didn`t help either. The MTV owner`s profit beat for the quarter, but still, shares fell almost 4 percent to $69.47.
Time Warner (NYSE:TWX) Cable missed on both fronts. The cable operator said it did see a record number of subscribers in the quarter. As for the takeover deal with Comcast (NASDAQ:CMCSA) (NYSE:CCS) that fell apart, the CEO said he`s still looking to create value for stockholders.
(BEGIN VIDEO CLIP)
ROBERT MARCUS, TIME WARNER CABLE CEO: We`ve never needed to be larger. We`ve always been guided in our M&A approach by a single principle, which is — we`re going to do whatever maximizes value for our shareholders. That principle still applies.
(END VIDEO CLIP)
MATHISEN: Shares were off by 1.5 percent to $155.39.
Sony (NYSE:SNE) says it will bounce back to profit for the first time in three years, helped by strong sales of camera sensors and cost cuts.
This as the Japanese electronics maker seeks to turn around its loss making mobile phone business. But results came in below average estimates.
Shares fell 1.5 percent to $30.24.
And Beazer Homes announced a loss that was smaller than analysts were expecting. The home builder`s revenue topped forecast as new orders jumped more than 20 percent. Shares were off just a fraction on this down day to close at $17.51.
MATHISEN: Cigna`s quarterlies trumped the street`s estimates and the company upped its full year outlook, this as the insurer added more customers and increased premiums. That always seems to help.
The CEO says that was a sign of the company`s growth strategy at work.
(BEGIN VIDEO CLIP)
DAVID CORDANI, CIGNA (NYSE:CI) CEO: The key for us is growing customers and expanding relationships. So, the meaningful driver for us is our customer base continues to grow. For example, we`ve been executing our strategy for five years now. Five years ago, we had about 60 million customer relationships around the globe. Today, that`s in excess of 85 million customer relationships.
(END VIDEO CLIP)
MATHISEN: Shares though fell more than 1.5 percent on this down day to $124.60.
After the closing bell, AIG said first quarter earnings fell slightly.
This is low interest rates and weaker returns from alternative investments offset improvements in the company`s commercial lending business. The insurer authorized a buyback of $3.5 billion worth of shares. Those shares were higher initially after the close. But before the bell, AIG shares were down a fraction to $56.29.
A weak outlook sent shares of LinkedIn (NYSE:LNKD) plunging after the close. The social network for professionals posted results that topped estimates, but the company slashed full year earnings and revenue projections. Shares down as much as 26 percent. In regular trading, the stock was off $5 to close at $252.15.
Gilead Sciences (NASDAQ:GILD) declared its first quarterly cash dividend, 43 cents a share. That came along with the drug maker`s earning results, which were better than estimates. After the close, the stock popped initially. Before the bell, shares fell along with the market, almost 2 percent to $100.54.
HERERA: Well, biotech stocks may be having a hard time of late, but the same cannot be said about the city where many of them are headquartered. Cambridge, Massachusetts, is not only home to two of the world`s greatest universities, Harvard and MIT, it also home to Kendall Square now known as biotech`s capital city. And as more biotech companies move to that area, big money is following.
Meg Tirrell has the story.
MIKE GILMAN, ENTREPRENEUR: It`s a couple blocks away. Everything is a couple blocks away.
MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Entrepreneur Mike Gilman doesn`t have to go far from his Cambridge, Massachusetts, office for board meetings. He`s smacked in the middle of one of the bio technology industry`s capital cities, in its marquee neighborhood of Kendall Square.
With 130 life sciences companies in 2.5 square miles, the neighborhood surrounding MIT lays claim to the densest concentration of biotechs in the world. And as the industry has boomed in recent years, so has Kendall Square real estate.
PETER ABAIR: In the last two to five years, we`ve really seen this explosion in not only start-up activity, new companies, but traditional large pharmaceutical companies that have, in the past decade or so, embraced by a technology. They he arrived here on the scene in Kendall Square.
TIRRELL (on camera): That squeezed vacancy rates to historic lows, 3 percent in the quarter, according to a real estate firm Transwestern. And as for rents, they doubled in the last decade to $71 per square foot.
(voice-over): That hasn`t stopped biotechs like Alylam from expanding in the neighborhood. The drugmaker just signed a lease to move into
300,000 square feet of new space in Kendall Square, and the option to move into another building now occupied by Genzyme (NASDAQ:GENZ) three years from now.
BARRY GREENE: Where we thought where it would be, we didn`t think twice about Kendall Square to be.
TIRRELL: Biogen has also returned its headquarters to its Kendall Square roots after a stint in the Boston suburbs.
GEORGE SCANGOS, BIOGEN: It`s different being here. Our headquarters out in western were in the suburbs. It`s a lovely building, beautiful grounds. For me, it was a little too much like a country club.
TIRRELL: Big pharmas from Pfizer (NYSE:PFE) to Novartis are also expanding in the neighborhood, all seeking proximity to MIT, Harvard, Mass General Hospital and the other major research centers, not to mention star contribute to their pipelines.
Some worry, though, that the land grab in Kendall Square will squeeze out the little guys.
GELMAN: This area has now becoming sort of gentrified. Also that the rich people are moving, and they`re tearing down and they`re building up these fancy palaces. So, it`s a challenge. I`m hoping we don`t have to go out to the suburbs.
TIRRELL: For this booming industry, it`s all about location, location, location.
For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell in Cambridge`s Kendall Square.
HERERA: And to read more about the Boston biotech real estate boom, head to our web site, NBR.com.
MATHISEN: Still ahead, with the stock market at lofty levels, should retirees or people nearing retirement take their money out of the market.
HERERA: Here`s a look at what to watch tomorrow. The big automakers report their sales figures for April. On the earnings front, expect to hear from Chevron (NYSE:CVX) before the opening bell. Manufacturing data will be released along with the final consumer sentiment read for April.
And that`s what`s on the agenda for Friday.
MATHISEN: And some positive news on the retirement front. The average 401(k) account balance reached a record, and workers are apparently socking away more in their IRAs. This according to Fidelity`s quarterly retirement report. The average 401(k) held $91,800. That`s up about 3.5 percent from a year ago. A record 23 percent of employees in Fidelity plans increased their 401(k) contributions and average IRA balances also hit a record at $94,000.
Much of the gains are due to the rise in the stock market.
HERERA: Despite today`s selloff, stocks are sitting at lofty levels.
So, is now the time for retirees to move some of their money out of stocks?
Sharon Epperson joins us now with a look at what you might want to do with your money.
Sharon, it`s good to see you as always.
SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s great to be here.
HERERA: So far, it`s been a pretty great run. Market had several years of substantial growth with no major corrections. So, should retirees consider cashing in at this time?
EPPERSON: Well, you know, those folks near retirement or already retired, they may be wondering whether or not now is the time to cash in on some of the profits because they want to make sure they have the income to live on so they don`t outlive their money, but there are some careful considerations that need to be made in terms of their risk tolerance and in terms of the returns that they really need long-term because they could be spending decades in retirement.
MATHISEN: So, what about retirees who basically made up their minds they want to lock in some gains? What should they do, and where should they migrate the money?
EPPERSON: Well, the first thing is that they need to review their portfolio and a good rule of thumb. We talked to a number of members of the CNBC Digital Financial Advisers Council and they advised that make sure you have at least a year`s worth of cash in your portfolio, so you`re not forced to liquidate stocks at a time that may not be the best time to do so.
Once you review your portfolio, then it may be time to rebalance, because after all, we have seen this tremendous run in the stock market, U.S. equities in particular. And so, without this correction, you may be overweighted in certain categories in the U.S. equity market. So, you may want to rebalance your portfolio to make sure that you`re more in line with your goals and that would require you to liquidate some of the stocks.
The other thing that you need to do now, though, is to reallocate.
Once you decided that perhaps you`re overweighed in some areas, you may have little or no weight in very important area, and that`s international stocks. Look how well European stocks and other developed international economies have done, and look at what may be coming with quantitative easing.
A lot of advisors say it`s important for retirees/near retirees to consider putting equity exposure into international.
HERERA: For those who want to rebalance, what advice can you give them?
EPPERSON: Well, a lot of folks are saying, I`m retired so I want income. A lot of my money is in fixed income, so how do I rebalance that portion of my portfolio?
And there, as we know, interest rates will likely rise at some point and you want to try to have bonds that are more or less not that sensitive to the interest rate fluctuation. So, you want to look at floating rate loans, look at bonds with higher yields and shorter maturities, and also consider if you`re not one who`s buying individual bonds, look for unconstrained bond fund. That`s something a lot of financial advisors say may be a good one to give some flexibility and delve into different aspects of fixed income that you may not be able to do yourself.
MATHISEN: So, very quick answer here. Right now, people are saying, in bonds, favor those with short maturities, right?
EPPERSON: Yes, shorter maturities, higher yields. That`s where you want to go with the bond market.
HERERA: All right. Sharon, thank you as always.
HERERA: Our expert, Sharon Epperson.
And for more money tips on retiring and retirees, head to our Web site at NBR.com.
And that does it for NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera. Thanks so much for joining us.
MATHISEN: And I`m Tyler Mathisen. Thanks from me as well. Have a great evening, everybody. And we will see you right 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) 2015 CNBC, Inc.