SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Stocks stalled. Staggering
run higher is quickly losing steam and there are reasons why things could start to get rocky.
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Talk too much. A number
of Fed officials are speaking. Will that bring clarity to investors or
just confuse things more?
HERERA: New promise. An experimental drugs for effective migraine
prevention just took a big step forward.
All that and more tonight on NIGHTLY BUSINESS REPORT for Monday, March
MATHISEN: Good evening, everyone, and welcome.
Well, the recent rally in stocks appears to have stalled. Those double
digit gains since the mid-February lows have taken a bit of a breather and
that shift in the market coincides with the winding down of the first
quarter. It also comes against the backdrop of several major speeches by
Federal Reserve officials this weekend. On Friday, the government`s always
important employment report and, oh, yes, there are still those pesky head
winds bedeviling stocks.
Oil prices, recession worries, political risks and more, as Dominic Chu
reports, the path forward for equities could be rocky.
DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Overall, the stock
markets given people a roller coaster ride for the first few months of the
year. And now, they were trying to close the books on the first quarter,
we have seen a lot of different warning signs coming up.
Remember, markets got off to the worth start in history for the U.S. stock
market and have rebounded a lot since then. So, let`s take a look at why
some traders and some investors are a little bit a bit worried about what`s
going to happen in the coming months. Now, there are way too many to put
on our wall behind us here, but I want to show a few of them that are
getting a will the of attention.
First of all, on the currency side of things, it`s not something we often
talk about, but corporations will be talking about the strength of the U.S.
dollar. That could be a big theme in earning season. Remember, we`re less
than a month away from earning season. So, the strong dollar and remember
the strong dollar is important because for a lot of these multinational
companies, it`s a lot more expensive to bring profits back home when the
dollar is strong. Something to keep an eye on.
Also, with regard to the currency markets, the commodity markets are a big
focus, as well, specifically what`s happening now with the price of oil.
We have seen a sharp move higher off those lows, but now, maybe a little
bit of weakness creeping back in. Oil prices and the energy complex were a
huge drag on earnings and sales for S&P 500 companies in the past year.
We`ll see if that continues, perhaps a warning sign there.
Then, you`ve got the IPO market, initial public offerings have not been
active. There haven`t been a whole bunch of them. Does that signal
there`s not enough risk appetite not enough of an environment can do to
bring your company public. That could be warning sign as well.
Then you talk about the bank, the financial stocks. They`re important
because of they`re the second biggest sector in the S&P 500. And they`ve
been one of the biggest laggards so far I the market. When the banks don`t
perform, there`s a question about whether the whole market can again
without the banks.
And then one last one to consider, transportation stocks. You think
shippers like UPS, FedEx (NYSE:FDX), railroad companies, trucking
companies, they move goods. So, if we have seen a bit of a run there ,and
weakness perhaps settling in for transportation stocks, maybe that could be
a sign for the overall stock market and the economies here. But again,
just warning signs to keep an eye on. Nobody really knows whether the
market are going to head up or down, but they are watching very closely
some of these factors to see if they could lead perhaps to some more
caution down the line.
For NIGHTLY BUSINESS REPORT, I`m Dominic Chu.
HERERA: Well, today, stocks were mostly higher on low volume as investors
sorted through new economic data and awaited comments from Fed policymakers
this week. We`ll have more on that in just a moment.
Traders were also watching chaos at the Capitol building. This afternoon,
police shot and wounded a suspected gunman in the visitors center. The
lockdown was soon lifted and the suspect is in custody.
By the closing bell, the Dow Jones Industrial Average rose 19 points to
17,535. The NASDAQ lost 6. The S&P 500 added 1.
MATHISEN: And more now, Sue, on all that Fed speak this week. There`s
chance it may overshadow the monthly employment report due out Friday.
That`s because several Fed policymakers last week indicated that a rate
hike in April would be appropriate. A view at odds with the guidance given
recently by Fed Chair Janet Yellen, and we`ll hear from her tomorrow, when
she speaks on the economy and takes question in New York City.
Wednesday is Chicago Fed President Charles Evans` turn. Thursday, New York
Fed President Bill Dudley will speak. And on Friday, we`ll hear from
Cleveland`s Loretta Mester.
HERERA: But do Central Bank policymakers speak too much? They do it in
the name of transparency, but does it only cause confusion and make
investing decisions more difficult.
Bill Strazzullo is the chief market strategist for Bell Curve Trading.
Bill, I`ve known you for years. Sorry, I botched your name. Good to see
BILL STRAZZULLO, BELL CURVE TRADING CHIEF MARKET STRATEGIST: That`s OK,
Sue. Good to see you.
HERERA: Let`s start, first of all, I think you would agree that maybe some
of the central bankers are speaking a little bit too much.
STRAZZULLO: Yes, it`s like the pendulum has totally swung here. I know
both Tyler and you remember the days back in `70, `80, early `90s when
sometimes you didn`t know for days whether the fed has eased or tightened.
Now we have gone, the pendulum swung the other way and seem like you can`t
shut the people up.
And so, the question is for an investor or a trader, how do you deal with
that? We advise our clients is really just try focus on the market. That
gives you a much better sense of what`s going to happen down the road. For
instance, if you look at the front end of the U.S. yield curve, two-year
notes, treasury bills, euro-dollar futures, they never priced in all these
tightenings that Fed was talking about a month or two ago. They basically
priced in one or two tightening.
So, if you focus on the market indicators, I think you can block out a lot
of noise and you`re in much better shape.
MATHISEN: So, watch what the market does, not what the Fed governor say.
How much transparency do you think would be ideal? I mean, obviously,
these folks get invited to go to conferences, or do they get invited to
come on television and talk. We love to have them.
But sometimes, a stray comment can be kept to market. How much is the
right sort of goldilocks scenario?
STRAZZULLO: Well, I think it`s a good question, Tyler. I think it`s a mix
not only of how much but who. I mean, I think all these people go out and
speak. You know, every several days is too much. It`s probably around the
time the meeting to have the chairman or chairwoman speak. That`s
And, you know, it`s something, monthly or something like that. I think
when you have all these Fed governors out speaking, you know, sometimes
almost day in and day out and sometimes contradicting each other it`s too
much. The bottom line is that almost always the Fed follows the market.
That`s the important point to keep in mind is that you look at what`s going
on now. The market had no more than one or two priced in. Follow the
market because the Fed follows the market.
HERERA: But is this market that we all should follow going to be
increasingly volatile if indeed we keep getting in some cases contradictory
comments from the Fed`s presidents?
STRAZZULLO: Right. Yes, that`s a good question, Sue. I mean, the Fed, in
my opinion when it comes to volatility, they`re kind of the 800-pound
gorilla in the room, whether it`s that comments, their speeches, or zero
interest policy and quantitative easing. They`re the ones that really kind
of determine what happens there.
Look, you got to kind of, in my mind, you`ve got to do your homework, have
your investment thesis, you know, kind of appropriately map out your risk
and reward and then you`ve got to stick to it. You know, if you`re
reacting to every Fed statement or every press conference, you`re never
going to make any money.
HERERA: All right.
STRAZZULLO: I mean, follow the market and stick to your game plan.
HERERA: On that note, Bill, thanks so much for joining us tonight. We
Bill Strazzullo with Bell Curve Trading.
STRAZZULLO: My pleasure.
MATHISEN: Consumer spending an important part of economic activity, of
course, rose just fractionally in February. It`s according to the Commerce
Department. And it edged up 0.1 percent. It`s the third straight month of
scant gains in personal incomes. Well, they weren`t much stronger either.
They saw a modest 0.2 percent rise last month.
HERERA: But pending home sales were strong. The number of existing homes
that went under contract in February rose by 3.5 percent. That`s the
highest level seen in seven months and better than estimates. Pending
sales offer clues as to upcoming activity and the experts say this report
MATHISEN: Oil prices settled just under $40 a barrel while $40 still
historically low by recent history. It is higher than where prices stood
just a few weeks ago. And the recent rise is pegged on hopes that
something will come of a meeting of oil producers scheduled to be held in
But as Jackie DeAngelis reports, those hopes may be fleeting.
JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Oil prices have
risen 20 percent in the last month on the hope that a producer meeting in
the Middle East on April 17th, will bring an accord about a production
freeze. It`s not an emergency OPEC meeting. In fact, the next meeting of
the cartel will be in June. But it`s a meeting of global producers.
So, who`s coming and will it matter?
UNIDENTIFIED MALE: I don`t think any kind of meeting with OPEC and those
producers will boost prices any further than where they have gone now.
They`ve managed to job on the market a little bit higher, but there`s going
to need to be a production cut. When you have a meeting without the U.S.,
which is the third largest producer of crude oil in the world, I don`t see
how they can achieve their goals.
DEANGELIS: The guest list, some OPEC members have opted out like Libya and
Iran. And with the resignation of the Iraqi oil minister last week, it`s
unclear if that country is going to have a delegate. Of the non-OPEC
producers, Russia and the United States, they`re the largest. The Russians
have been encouraging a freeze, but the United States hasn`t said anything
about sending a representative to this meeting.
With all the parties not coming to the table, the market seems skeptical of
an accord taking place here. It would be easier to achieve consensus if
all the parties got together.
With oil trading under $40 now, it`s possible we can see another leg lower,
but not necessarily as drastic as the $20s. More realistically like in the
For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis.
HERERA: Still ahead, the hotel battle heats up, but could the fight for
Starwood raise the eyebrows of regulators?
MATHISEN: A report late tonight that the White House is expected to
withdraw its California legal action against Apple (NASDAQ:AAPL). That
report, according to “USA Today” which cited a government official. The
government had asked to delay a hearing last week when the FBI said it was
working a third party to gain access to an iPhone used by one of the San
Eamon Javers has been following the story for us for weeks.
Eamon, what do you make of this report? And does it suggest that the FBI,
the Justice Department has cracked into that phone?
EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, it does suggest
that there might be progress here behind the scenes, Tyler. We have been
expecting some update from the Department of Justice on this case by early
April. They said that they had been told by an unnamed third party that
there might be another solution to get into Said Farook, the San Bernardino
shooter`s iPhone without the help of Apple (NASDAQ:AAPL) itself.
They had initially said that was the only way in and they demanded that
Apple (NASDAQ:AAPL) help them. Now they said, last week, they thought
maybe they could do it without Apple`s help. The fact that we are seeing
this news is an indication that maybe the scenes, there is some progress on
getting into that phone or the FBI has figured out another solution
We`ll have to wait and see when the government briefs us in more detail.
But it may be an indication that this tension point between the U.S.
government and Apple (NASDAQ:AAPL), one of the most prominent if not the
most prominent companies in the United States may be easing a little bit
now and they may be able to get back to regular business here. There had
been very personal and very intense conversations between the Department of
Justice and Apple (NASDAQ:AAPL) over the past couple of weeks.
HERERA: Yes. Eamon, stay with us because there`s another story you`ve
been following, and we want to talk to you about.
China`s Anbang raising its offer for Starwood Hotels to about $14 billion.
That acquisition by Anbang would be the largest ever by a Chinese company
in the U.S. and it threatens Marriott`s offer for the hotel chain. Shares
of both Starwood and Marriott rose on the news.
In a statement, Marriott said it is committed to completing its deal with
Starwood, and it also raised the issue of potential regulatory hurdles that
an Anbang deal may need to overcome.
So, Eamon, what do you make of this story and what could those regulatory
JAVERS: I think what they are talking about in that statement there, Sue,
is an entity here in Washington that most people have never heard of called
CFIUS. It`s the Committee on Foreign Investment in the United States.
It`s a multi-jurisdictional committee that reviews large transactions when
overseas entities want to buy American companies. And they look at it
through a national security lens. They want to make sure this is an OK
thing for that foreign entity to buy.
Now, I`ve been talking to some experts on the CFIUS process here in
Washington today about exactly what they might look at in this potential
acquisition of Starwood. They told me a couple of things here will be on
the eyes of regulators.
One is proximity to sensitive locations. That is how close are Starwood
Hotels to sensitive installations in the United States that the government
might want to protect, particularly the W. Hotel on 15th Street Northwest
here in Washington, D.C, which overlooks the White House. That might be
one to pay close attention to.
Also, protection of customer data. How many e-mail addressers and credit
card numbers would the buyer be getting of Americans and people around the
world and how would that data be handled will be something that CFIUS will
want to really understand. And they`re also going to look at the
protection of Wi-Fi and communications networks within the hotel.
They`ll want to know does the U.S. government have perhaps a deal with this
hotel chain in order to have government events there and government
officials staying there. If they are, how will their communications inside
the hotel be connected if it`s being bought by a foreign entity?
All that will be likely in the mix as they review this. But the question
is, whether the government will let it proceed or not, or force them to
divest certain assets, or how they`ll go forward with this all together.
HERERA: All right. Eamon, we have to leave it there. Thank you so much.
JAVERS: You bet.
HERERA: Eamon Javers in Washington.
MATHISEN: Well, the outgoing chief of Valeant pharmaceuticals has been
subpoenaed to testify at a Senate hearing. The committee says Michael
Pearson is among several witnesses scheduled to appear on April 27th. The
panel looks into the impact of drug price increases on the health care
system including patents — excuse me, patients, insurers, and medical
providers. Last week, Pearson said he would step down as Valeant deals
with a number of federal investigations into its accounting practices.
HERERA: Positive news for the millions of Americans who suffer from
migraines. A new injection that presents debilitating headaches met the
main goal of a mid-stage study. Alder Pharmaceuticals which makes the drug
saw its shares soar nearly 50 percent.
As Meg Tirrell reports, Alder is competing with some bigger rivals to get
this new class of drugs to market.
MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s a problem more
than 30 million Americans are all too familiar with. Migraine headaches
are not only painful but can be debilitating. And current options leave a
lot of room for improvement.
RONNY GAL, SANFORD C. BERNSTEIN ANALYST: Well, the problem with migraine
is always that drugs that we had were always pretty mediocre.
TIRRELL: A new group of drugs and development brings hope that may soon
change, called CGRP antibodies. The medicines are aimed to prevent
migraines before they happen. They`re still in testing, but have shown
they may produce better results than current therapies.
They`re in development of drug giants Eli Lilly (NYSE:LLY), Amgen
(NASDAQ:AMGN) and Teva, as well as smaller competitor Alder
Biopharmaceuticals. It was new data today that`s given support to the
whole class, according to analysts. The study results to have shared with
a small Washington state bio tech company up as much as 50 percent.
The drug was tested in patients with chronic migraine, defined as at least
15 days with headaches per month, eight of those considered migraines.
With one intravenous infusion, the medicine reduced migraine days per month
by at least 75 percent for more than a third of patients on the two highest
doses tested, meeting the study`s goals. That compared with just more than
20 percent of patients taking placebo who reported a 75 percent reduction.
The drug was tested for 12 weeks.
It`s now expected to go through another stage of testing before it may hit
the market. Sanford C. Bernstein analyst Ronny Gal says each of the four
drugs in development is essentially neck and neck with potential approval
in 2018. He estimates there are about 11 million patients with chronic or
GAL: The question really is how many will end up on the drug and how much
will the drug costs per patient per year. We are right now running in
numbers with between $5 billion to $6 billion for the market in total.
TIRRELL: That assumes multiple medicines make it to market and priced
around $10,000 a year per patient, Gal said. One thing that my set Alder
apart, its drug can be administered just once every three months versus
potentially once a month for competitors. These drugs are all given by
injection, either through an IV or self-administered shot.
And so far, their safety, according to analysts, looks good. The results
of the larger clinical studies are needed to confirm.
For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell.
MATHISEN: Avon comes calling and had to appease its activists as it does
and that is where we begin tonight`s “Market Focus”.
In an effort to avoid a proxy fight, Avon will allow two activist investor
groups to appoint an independent director to the cosmetic company`s board.
The private equity firm Cerberus Capital, which now owns Avon`s North
American operations will also take part in selecting the nominee. Shares
of Avon up more than 8 percent to $4.64.
Cal-Maine Foods (NASDAQ:CALM) saw its profit climb 26 percent in its latest
quarter, thanks to higher egg prices. That helped its results beat the
street estimates. The fresh egg producer did however miss revenue targets.
Shares were up nearly 9 percent to $54.51.
HERERA: Shares of Pandora fell today on the news that the founder of the
music streaming service is coming home. Tim Westergren will return as the
company`s CEO. He previously held the role from 2002 to 2004. Shares fell
12 percent to $9.60.
A former executive at investment bank PJT Partners has been arrested after
allegedly attempting to swindle $95 million from investors over the
weekend. Andrew Caspersen was charged with securities fraud and wire
fraud. PJT has fired Caspersen for cause and has initiated an internal
investigation. Shares of PJT Partners fell more than 10 percent to $23.66.
MATHISEN: Facebook (NASDAQ:FB) is no longer just about status updates and
likes. Now it`s game on for the social media company which today started
shipping its high end virtual reality headset, which is expected to be a
big player in the fast growing virtual reality device market.
Julia Boorstin has the story.
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Facebook`s Oculus
Rift is on sale for $600, launching with 30 games and hundreds of thousands
of 360 degree movies and photos and other immersive experiences in the
Oculus App Store. Like this far land virtual world that Oculus created to
showcase the creative possibilities. These new types of content expected
to be what drives purchases of the headset.
COLIN SEBASTIAN, R.W. BAIRD: We`re waiting to see what the killer app is
on Oculus, whether it`s Facebook (NASDAQ:FB) app itself or perhaps a game
or experience we haven`t imagined yet.
BOORSTIN: While there already less expensive devices, including Google`s
cardboard and Samsung Gear VR, today kicks off a competitive high end
headset market. HTC`s $800 Vive headset is due out April 5th. Sony`s $400
PlayStation VR was delayed until October and we`ll see what Apple
(NASDAQ:AAPL) launches. It was just last week awarded a patent for a VR
Facebook`s Rift has a head start, but its market is limited by the fact
that most PCs won`t work with or HTC`s headset, unless they are fairly new
and equipped for hardcore gaming.
With this PC gaming market was worth $28 billion last year, according to
DFB intelligence, and digit capital projects the total augmented virtual
reality market will reach $150 billion by the year 2020.
JOHN RICCITIELLO, UNITED TECHNOLOGIES CEO: We shouldn`t get ahead of our
expectations and thinking this will be under every Christmas tree at the
holiday. I don`t think it`s going to be that big that fast. Three to five
years, it`s massive.
BOORSTIN: And Oculus aims to create a new market that goes far beyond
SEBASTIAN: Facebook (NASDAQ:FB) and Mark Zuckerberg`s intention is to make
those social experiences, combining your social network of friends and
family with those experiences, whether it`s game or something else.
BOORSTIN: And analysts seem optimistic that Facebook (NASDAQ:FB) will make
its $2 billion acquisition to pay off. The question is just how much
prices will have to fall before these headsets can really become
For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.
MATHISEN: Coming up, new retirement rules are likely coming soon. They
could affect your savings.
MATHISEN: The governor of Georgia today vetoed a bill that was denounced
by major companies, Hollywood studios, sports leagues. As we reported last
week, the bill would have given faith based organizations in that state
more leeway to deny services to gay, lesbian, bisexual and transgender
people. Disney (NYSE:DIS) and Marvel had threatened to stop film
production in Georgia if the bill was signed into law. Apple
(NASDAQ:AAPL), Comcast (NASDAQ:CMCSA) (NYSE:CCS), Time Warner (NYSE:TWX)
and others also urged the governor to veto the legislation.
HERERA: And a controversial law in North Carolina has prompted a federal
lawsuit. The American Civil Liberties Union and other advocacy groups
filed a suit against the governor and other state officials, alleging a new
law discriminates against lesbian, gay, bisexual and transgender
communities. And as we reported, that legislation was opposed by numerous
companies, including Facebook (NASDAQ:FB) and Microsoft (NASDAQ:MSFT),
Apple (NASDAQ:AAPL), IBM, American Airlines among others.
MATHISEN: A new rule expected to be finalized soon by the Department of
Labor may impact millions of investors with a retirement account. As we`ve
reported, the proposed rule will require financial advisors to put their
client`s interest ahead of their own. The rule will also impact money that
is in a 401k that could be rolled over into an individual retirement
Sharon Epperson is looking into some of these changes.
Sharon, this is a fiduciary standard. It`s a very technical term and very
controversial one. How would this affect IRAs and 401(k).
SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: It is a very
controversial term, but simply put, it is that conflict of interest rule as
you laid out, to put your best interest ahead of making their own profit.
And how it works for a retirement account, that is what the Labor
Department is looking at. Any IRA which includes money that might be
rolled over from a 401k to an IRA could be impacted.
And this is significant because so many people when it comes time to retire
they switch jobs and move that money to an IRA. Many financial
professionals want you to do that, because they want to advise you on that
money and some of them are getting hefty commissions when you do that.
So, if they are following that suitability standard, all they have to do is
recommend something that`s suitable and meet your needs. If they`re not
fiduciary, then that is what the Labor Department says could be a problem
and could result in a conflict of interest that costs you money.
HERERA: And we`re talking about a lot of money. You listed $25 trillion
in retirement in assets out there. Is that a significant portion of that
EPPERSON: Seven-point-three trillion dollars is IRA money.
HERERA: That`s a lot of money.
EPPERSON: That`s a lot of money. And that is more than 401(k) money. It
pales in comparison to those who still fortunate enough to have pensions
out there in their annuities and make up the rest of the pie.
But it is a significant amount of money. But what`s even more significant
is how much the money is growing in terms of baby boomers rolling over
their money from a 401k to an IRA. And we have seen the growth of that for
nearly 60 percent since 2010. We`re now at about $439 billion. That`s
projected amount for 2016, according to (INAUDIBLE)
MATHISEN: Some people take their pension payments as lump sum as well.
They would roll that, put that into an IRA.
MATHISEN: Could this fiduciary standard slow the growth of 401k — excuse
me, of IRA assets?
EPPERSON: Well, it could slow the growth of some of those roll-overs is
the concern of many in the financial industry who are against this rule.
They`re saying that for a small investors, the amount of cost and the
amount of paper work in terms of the regulatory paperwork that they will
have to overcome to do this is gong to make them want to stop doing it for
the small investor.
EPPERSON: If it`s less than $50,000, less than $10,000, why would they
want to bother? But what many are saying who have researched this, like
(INAUDIBLE) Associates, if you`re a big firm, you`ve already dealt with
this and you knew this was coming. So, if they have a big financial
advisor base, they are already prepared for this, and they`re going to
create products that are more fee-based than commission-based.
MATHISEN: All right. Sharon, thanks very much.
MATHISEN: Sharon Epperson reporting.
HERERA: And on that note, that`s it for NIGHTLY BUSINESS REPORT for
tonight. I`m Sue Herera. Thanks for joining us.
MATHISEN: And I`m Tyler Mathisen. Have a great evening, everybody. We`ll
see you tomorrow.
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