SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Gaining steam. Stocks hit new
highs for the year and for that, you can thank this year`s worst performing sector.
Disrupting cancer. A tech billionaire who changed the music industry and
was at the forefront of social media wants to reinvent the way research is
done and he has a plan and the money to do it.
(BEGIN VIDEO CLIP)
PROTESTERS: What`s disgusting?
(END VIDEO CLIP)
HERERA: Forty thousand Verizon (NYSE:VZ) workers walk off the job and the
strike is leading to a war of words between a presidential candidate and
the company`s CEO.
All that and more tonight on NIGHTLY BUSINESS REPORT for Wednesday, April
Good evening, everyone. I`m Sue Herera. Tyler Mathisen is off tonight.
The major benchmarks are at their highs of the year and the two things that
helped get them there are the same two things that held the broader market
back for so long, China and the financials.
Data out of China overnight put investors in a buying mood. Chinese
exports expanded in March for the first time in nine months, but it was
earnings from JPMorgan (NYSE:JPM) that sparked rally in the beleaguered
banking sector, helping stocks across the board.
By the closing bell, all of the indexes gained more than 1 percent. The
Dow Jones Industrial Average rose 187 points to 17,908. The NASDAQ added
75. The S&P 500 was up 20.
Bob Pisani has more on today`s rally in the year`s worst performing sector.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: JPMorgan (NYSE:JPM)
kicked off earnings season for the big banks and markets and the news was
positive, positive because they beat expectations and CEO Jamie Dimond was
modestly upbeat, noting that the U.S. economy continues to chug along.
Now, if that doesn`t sound like much, remember that most bank stocks are
down more than 10 percent this year, including JPMorgan (NYSE:JPM).
They`ve been like zombies wandering around aimlessly because the
combination of low interest rates, heavy regulation and slow growth in the
U.S. economy has made investors downright hostile to owning them. But
there`s been so much negative sentiment in the group that even a little
good news was bound to lift them up. And that`s exactly what happened
today with most of the big banks up 4 percent, 5 percent.
Now, we`ll hear from Bank of America (NYSE:BAC) tomorrow and Citigroup
(NYSE:C) and Regents financial on Friday.
Now, there`s still risk out there. Some banks do have exposure to loans to
oil companies so expect some banks to increase their reserves for possible
loan losses. But remember, oil has been rallying recently and that
decreases the chance that banks will have to take big losses on those
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
HERERA: But just as there are risks to the financial sector, there are
also risks to the broader market. Several measures of investor anxiety are
flashing extreme readings despite the recent rally.
Mike Santoli explains why.
MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Stocks have rebounded
to within a few percent of their all-time highs, so why are investors still
While the panic of the winter market drop has faded, several measures of
investor move show a bit more anxiety than one would expect, after a 14
percent rally over two months. Fund managers have built up a bigger cash
cushion than usual. Retail investors have been pulling money from stock
funds and short term traders are willing to pay up to protect against the
steep market decline, but not to bet on the rally carrying much higher.
The nasty declines of last summer and again early this year remain fresh in
many minds. The market is also stalled in a sideways trend for nearly a
year and a half. Some investors are conditioned to think it`s now bumping
against a ceiling.
And, of course, stocks have rallied in part for unsatisfying reasons.
Economic growth has again proved disappointing. This has led the Federal
Reserve to hold off on plans to lift interest rates. One side of investor
caution, many of the stocks leading the market higher are conservative blue
chips with steady dividends such as Coca-Cola (NYSE:KO) and McDonald`s
(NYSE:MCD), rather than aggressive growth place.
Now, this public sobriety could ultimately be vindicated if the market
undergoes another recession scare or shock from abroad. If there`s an old
saying that rising markets always climb a wall of worry, and such a wall
surely remains in place for now.
For NIGHTLY BUSINESS REPORT, I`m Mike Santoli.
HERERA: With stocks sitting near their all-time highs, the big questions
investors are asking is, which parts of the market are still cheap and
which are too expensive?
Dominic Chu did some digging and has the break down.
DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: The stock market
appears to be showing positive short-term signs of momentum as we head
towards the heart of corporate innings season. Major stock indices sit
right now just a few percentage points away from record highs, but the
market`s march back towards those levels have left some investors wondering
if things have gone a little too far too fast.
One of the hottest sectors of 2016 in S&P 500 has been utilities. The
sector overall gained 12 percent year to date and a big reason behind it
has been the hunt for dividend-paying stocks. As a result, the sector is
more expensive than it`s been on average over the past 15 years.
BRAD MCMILLAN, COMMONWEALTH FINANCIAL NETWORK: If you look at utilities,
for example, on a historical basis, that`s very overvalued but the same
would apply to the bond market. If you`re certain you`re going to get
these returns based on the dividends and based on the yield and rates go up
which they`re likely to do, that valuation becomes much more in question.
CHU: Some experts are looking to other parts of the market with more,
perhaps, attractive valuations that have been beaten up as of late. Energy
stocks seem to fit the bill for some of those brave enough to weather oil
MCMILLAN: Right now, no growth at all essentially is priced in, and we are
going to see that probably towards the back end of the year, but certainly
in the out years. So, that`s an area that on an absolute basis also works
with respect to future opportunities.
CHU: One of the big bullish arguments for the rest of the year hinges on
whether we can see some more strength in corporate profits. They`re not
expected to look good for the first quarter of this year.
BRUCE MCCAIN, KEY PRIVATE BANK: The expectations are so negative, positive
surprises seem more likely than negative surprises. But I think the real
issue is what does the rest of the year map out for and if we get a better
than expected season, and they start to raise estimates, that could help
the progress of the year a lot.
CHU: The S&P 500 is a little more expensive now than it has been on
average for the past 15 years. So, theirs will point to a more stretched
valuation. Now, it comes down to whether earnings season can provide a
positive catalyst for the markets.
For NIGHTLY BUSINESS REPORT, I`m Dominic Chu.
HERERA: Stocks rose today despite downbeat economic data which showed
Americans didn`t spend as much in March as many thought they would. Sales
at retail stores and restaurants dropped 0.3 percent from the prior month.
The latest date that is a sign of consumer caution. A big reason for the
decline was a drop in auto sales, which was a major driver of spending last
year. In a separate report on inflation, it shows the prices that U.S.
firms receive for their goods and services fell 0.1 percent, the second
straight month of declines for the producer price index.
The economy expanded throughout much of the country. That according to the
Federal Reserve`s beige book, an anecdotal look at different sectors of the
economy. And there was positive news on wage growth. Pay increased in all
but one of the Fed`s 12 regional bank districts. Consumer spending,
however, increased only modestly and expectations for growth and
manufacturing were mixed.
The Federal Reserve and other regulators rejected plans from five of the
nation`s biggest banks on how they would handle a potential bankruptcy and
avoid a taxpayer bailout.
Kayla Tausche explains why these banks were given failing grades and the
changes regulators want them to make.
KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Every other year,
the country`s biggest banks have to create living wills, imagining and
planning what would happen if they were to fail so taxpayers don`t have to
bail them out. This time around, the Federal Reserve and FDIC rejecting
the majority of the plans, suggesting they`re ramping up their scrutiny of
the crop of firms criticized as being too big to fail.
Bank of America (NYSE:BAC), Bank of New York Mellon (NYSE:BK), JPMorgan
(NYSE:JPM) Chase, State Street (NYSE:STT), and Wells Fargo (NYSE:WFC) all
coming up short on items ranging from derivatives exposure to operational
issues, to liquidity.
JPMorgan`s CEO Jamie Dimon addressed the bank`s living will on a call
scheduled for the banks` earnings.
JAMIE DIMON, JPMORGAN CEO: Liquidity of the company is extraordinary. We
have $400 billion in central banks around the world. $300 billion of AA
plus short duration securities. Just about $300 billion in very short term
— really top quality repo, type of stuff like that. The trading book is
$300 billion, which is mostly very liquid kind of stuff. So, it`s — the
liquidity is extraordinary.
TAUSCHE: The banks have until October 1st to address the flaws highlighted
by regulators. Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS) which
did have issues but not enough to get rejected will just have to provide a
progress report, as well Citigroup (NYSE:C), which was the only big bank to
receive no objections from the Fed and the FDIC.
Analysts at FDR said if Citi, which has seen its share of regulatory
hiccups, could meet the standards, other banks should be able to, too.
Piper Jaffray says it highlights the regulatory costs on the biggest banks
and advantage the regional banks might have and Guggenheim suggests the
widespread deficiencies shouldn`t have an effect on capital payouts which
are determined by the stress test.
And nearly all banks pass the stress test which happen annually, whether
six years after Dodd/Frank, regulators are moving the goal post to tighten
regulation even further. A report from the government accountability
office released just hours before the regulators put out their own results
said the living will process needed to be shortened and more transparent.
For NIGHTLY BUSINESS REPORT, New York.
HERERA: The nation`s biggest coal company has filed for Chapter 11
bankruptcy protection. Peabody Energy (NYSE:BTU) had warned in March that
low coal prices had put it on the edge of insolvency. Peabody also
suffered from exposure to the bankruptcy of former subsidiary Patriot Coal
(NYSE:PCX). The entire industry, of course, is feeling the pressure of low
natural gas prices. A slowing Chinese economy and increased regulation.
Coal production this year is expected to fall 25 percent from 2014.
Nearly 40,000 Verizon (NYSE:VZ) workers walked off the job today as nine
months of contract talks between the unions and the telecom company failed
to produce a new agreement. Some say the strike reflects the anger we`re
seeing in this primary season as many in the working class believe they`re
being asked to sacrifice their financial future for the sake of corporate
Mary Thompson has our story from New York.
MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Verizon (NYSE:VZ)
workers taking to the picket line in the nation`s biggest strike since
UNIDENTIFIED MALE: We are officially on strike!
THOMPSON: Over 36,000 union workers from Massachusetts to Virginia walking
off the job at 6:00 a.m. on Wednesday. Union rep Dennis Trainor saying the
intent is to reserve good jobs in the firm`s shrinking landline business
and to make sure workers get their fair share.
DENNIS TRAINOR, COMMUNICATIONS WORKERS OF AMERICA: This company made $1.5
billion a month last year in profits. This year, they`re making $1.8
billion in profits. It`s time to share that with these workers.
THOMPSON: The key sticking points in the talks, pensions and jobs.
Verizon (NYSE:VZ) wants to freeze pensions after 30 years of service while
unions want promises, call center jobs in the Northeast and mid-Atlantic
won`t be moved overseas.
Promises Verizon`s Bob Mudge says will make it tougher to do business.
BOB MUDGE, VERIZON EXECUTIVE VP OF NETWORK OPERATIONS: We have rules from
decades ago and we want to amend some of those rules so that we can be more
THOMPSON: With contract talks off the table, a war of words broke out
between Democratic presidential hopeful Bernie Sanders and Verizon
(NYSE:VZ) CEO Lowell McAdam.
SEN. BERNIE SANDERS (I-VT), DEMOCRATIC PRESIDENTIAL CANDIDATE: This is
just another major American corporation trying to destroy the lives of
THOMPSON: Endorsed by one of the striking unions, Sanders was greeted with
cheers from picketing workers in Brooklyn.
Verizon (NYSE:VZ) greeting his words with derision. In a statement, McAdam
is calling Sanders` view on the telecom giant uninformed and contemptible,
following the senator`s claims Verizon (NYSE:VZ) doesn`t pay its fair share
of taxes and doesn`t reinvest profits in America.
PROTESTERS: When do we want it?
THOMPSON: Sanders` rival Hillary Clinton getting into the mix as well,
stating her support for the unions. She also criticized Verizon (NYSE:VZ)
for wanting to outsource call center jobs, something Verizon (NYSE:VZ)
denies it will do. Clinton urging Verizon (NYSE:VZ) to return to the
bargaining table and Verizon (NYSE:VZ) says it`s ready and willing when the
unions say yes.
In New York City, I`m Mary Thompson for NIGHTLY BUSINESS REPORT.
HERERA: Still ahead, real estate risk. As home prices heat up, there`s a
new way to protect your equity if things start to cool.
HERERA: A twist in Pulte Home`s boardroom drama. Independent board member
James Grosfeld resigned from the board of the country`s third largest home
builder. Grosfeld had joined the company`s founder in calling for chairman
and CEO Richard Dugas to step down.
In an interview today, he explained why his departure is effective
(BEGIN VIDEO CLIP)
JAMES GROSFELD, FMR. PULTEGROUP DIRECTOR: I`m calling for Richard Dugas`
resignation. I think that I`m the only board member and that`s not an easy
situation to be in. And additional reason is that certain board meetings
have gone on without my attendance, which I think it`s improper.
So, under the circumstances, it didn`t make any sense for me to remain on
(END VIDEO CLIP)
HERERA: Grosfeld served as CEO of the company from 1974 to 1990. Shares
of Pulte Home rose 2.5 percent.
Near record low mortgage rates may be pushing more home buyers into the
spring housing market. According to the Mortgage Bankers Association,
total mortgage applications volume rose 10 percent last week from the week
prior. New purchase applications along with refinancings were higher and
it was the second highest levels for purchase applications in nearly six
Well, you pay to insure your home, right? So, why not insure the cash you
put into your home? Specifically the down payment.
Diana Olick tells us about a new kind of protection plan.
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: If you`re worried
about today`s overheating home prices turning into another housing bust,
you might consider this. Starting today, Dallas-based ValueInsured is
offering insurance on your down payment if your home value falls.
JOE MELENDEZ, CEO, VALUEINSURED: Nobody has a crystal ball and if we look
at what`s going on in the housing market today, if you`re in the community
that was affected by the declining oil prices or GE moving out of
Connecticut or the overbuilding that`s going on in Miami, we actually do
have home prices that are volatile.
OLICK: Here`s how it works: say you`re buying a $200,000 home and you put
10 percent down. That`s $20,000. To protect that down payment, you pay
ValueInsured about $1,200 and they insure you for 7 years.
Three years later, you decide to sell but the value of your home has fallen
by $30,000. ValueInsured will pay you the amount of the loss up to that
$20,000 down payment. In other words, whatever skin you put in the game is
You only get the payout if you move and you must be an owner occupant, so
no investor properties. The product comes seven years after the worst of
the housing crisis, when home prices fell so far that more than a quarter
of all homes with a mortgage were under water in negative equity. Millions
of those homes were then lost to foreclosure. Perhaps we needed this then,
but do we need it now.
BARRY ZIGAS, ZIGAS & ASSOCIATES: I think a lot of consumers are naturally
suffering from a PSTD that makes them wary of getting back into the home
market. But I think consumers should understand that broadly speaking for
a long period of time, house prices have been stable.
OLICK: While there`s unlikely to be another national real estate crash,
there will always be pockets where home prices fall. All real estate is
local, and so, too, is the risk.
For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.
HERERA: Analysts are bullish on Fitbit and that is where we begin
tonight`s “Market Focus.”
Strong sales of the fitness company`s latest devices prompted Citigroup
(NYSE:C) to increase its earnings and revenue estimates and reiterate its
buy rating on the stock with a $30 price target. Similarly, Pacific Quest
raised its unit estimates for the current and for the second quarter.
Shares of Fitbit soared over 12 percent to $17.01.
Shares of GoPro surged on a report that the company hired an industrial
designer from Apple (NASDAQ:AAPL). The longtime Apple (NASDAQ:AAPL)
employee is expected to create a new hardware design group at GoPro. That
report sent GoPro shares up 19 percent to $13.92.
Valeant pharmaceutical`s outgoing CEO Michael Pearson agreed to give a
deposition to a Senate committee investigating the company`s controversial
drug price increases. Previously, Pearson had declined to cooperate with
the subpoena issued by the committee. The deposition is set to take place
on Monday. Valeant shares were up 3 percent to $33.10.
Clovis oncology saw its shares fall after the pharmaceutical company failed
to secure approval from the FDA for its lung cancer drug. The FDA cited
insufficient data from an ongoing clinical trial. Clovis said it will work
with the federal agency to evaluate the best path forward for that drug.
Shares of Clovis fell 5 percent to $13.49.
Federal regulators have reportedly proposed banning the founder of Theranos
from the blood testing business for at least two years. Regulators say the
company`s founder Elizabeth Holmes failed to fix major problems at its
As first reported by “The Wall Street Journal”, the Centers for Medicare
and Medicaid Services says it plans to revoke Theranos` California lab
license. Theranos has responded to regulators. Its arguments against the
proposed sanctions are under review. Theranos became well-known for a
fast, accurate and affordable blood test, but has come under scrutiny
recently after some questioned the accuracy of its proprietary testing
Well, he disrupted the music industry and shook up social media and now he
has his sights set on cancer research. Tech billionaire Sean Parker is
giving $250 million to six cancer centers nationwide in a first of its kind
collaboration. That funding is designed to accelerate the development of
cancer immunotherapies which enhances the body`s immune system to kill
cancer cells. It`s considered one of the most promising fronts in the
battle against cancer, and this is the largest cash infusion ever for this
type of research.
(BEGIN VIDEO CLIP)
SEAN PARKER, ENTREPRENEUR & PHILANTHROPIST: Over the last 40 years, even
though we made some pretty good progress in treating about half of all
cancers using conventional therapies like chemotherapy, radiation, and
surgery, you know, we haven`t been that successful in bringing new
therapies to market to actually treat patients more recently.
Immunotherapy is the outlier, incredible new technology platform managing
to treat otherwise untreatable cancers.
(END VIDEO CLIP)
HERERA: Is this new initiative a game changer when it comes to funding
cancer research? Dr. Stan Gerson, director of the UH Seidman Cancer Center
joins us to talk about that.
Doctor, welcome. A pleasure to have you here.
STAN GERSON, MD, UH SEIDMAN CANCER CENTER DIRECTOR: Thank you for having
HERERA: Mr. Parker says that he`s hopeful that he`s going to bridge these
two worlds, the entrepreneurial world and the academic world so that
funding doesn`t take as long and collaboration becomes more available.
Do you agree with that? Do you think that would be a game changer as some
are calling it?
GERSON: I think it absolutely is a game-changer. It`s transformative and
the combination of bringing multiple cancer centers and bringing fresh
money into the mix is incredibly important.
HERERA: It seems as though it would also speed things up a little bit
because you don`t have scientists and researchers and doctors competing for
grant money that sometimes takes an awfully long time to be distributors.
If they can bypass — road block isn`t quite the right word, but in some
cases, it does act as a road block, correct?
GERSON: I think by bringing the best scientists in the country together
through the six institutions, I hope they would broaden out because there
are certainly many other folks of equivalent stature around the country
that can bring it to the table. Just by bringing folks together to talk
about this, we`ll advance the science effort much more than an individual
HERERA: How do you feel about the immunotherapeutic approach to cancer at
this point? Is it as promising as we`re led to believe?
GERSON: We have seen very difficult to treat cancers melt away with
immunotherapy. The biggest issues are only a portion of patients respond.
Patients are rarely cured. So, we have a huge amount to learn, but it
tells us we can start to harness the immune system against cancer.
HERERA: Do you think that this type of donation, and there have been other
very large donations directed at other parts of cancer research, but this
seems unusual in that it seems to be trying to change the business model,
if you will, of medicine and of research. Do you think that it might
trigger more philanthropic donations along these lines?
GERSON: I would certainly hope so. We all want to make the right
investment. This is a good investment. This will be transformational. I
would hope it brings out of the woodwork many, many more. It will take
multiples of this to really change cancer.
HERERA: One of the interesting things to me is the collaboration that will
have to occur between medical institutions and medicine is incredibly
competitive. Everybody is fighting for funding. Is it going to be easy
for some of these researchers to collaborate with, in essence, people who
are their competitors at other institutions?
GERSON: They`re only competitors because they`re bright and smart, have
creative ideas but you put them in a room together and you have them work
out a problem together and common solutions that are better than they can
individually find are bound to occur.
HERERA: Well, let`s hope that is, indeed, the case. Thanks so much for
spending time with us, Doctor. Appreciate it.
GERSON: Thank you, Sue.
HERERA: Dr. Stan Gerson with UH Seidman Cancer Center.
Coming up tonight —
(BEGIN VIDEO CLIP)
JEFF BEZOS, AMAZON CEO: I want to go into space but I want to do it in
Blue Origin vehicles.
(END VIDEO CLIP)
HERERA: The other billionaire and visionary who wants to lead the next
wave of space exploration.
HERERA: Applications for skilled worker visas hit a record. The
government received 236,000 applications easily surpassing the 85,000 limit
for the entire year set by Congress. The visas will be distributed by a
lottery. Historically, a majority of the demand for those visas comes from
the IT services industry.
Jeff Bezos, founder of Amazon (NASDAQ:AMZN), of course, billionaire, and
now a space cowboy. He`s one of a handful of wealthy businessmen investing
a lot of money to explore the final frontier.
Jane Wells has more on the man shaking up the space race.
JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: The space symposium in
Colorado Springs is usually a state affair, but the business of space is
changing and the new players are not state.
BEZOS: I`ve been obsessed over rockets, rocket engines and space flights
since I was 5 years old.
WELLS: Amazon (NASDAQ:AMZN) CEO Jeff Bezos was the star of the show this
year. Up until now, the quietest billionaire funding a space venture.
Blue Origin, a rocket company Bezos founded recently launched a rocket sent
to the edge of space and safely landed it three times.
Bezos thinks rocket reusability is crucial to bringing down the costs of
space and that lower costs are necessary to unleash the sort of
entrepreneurial explosion the Internet has seen.
BEZOS: I want to go into space, but I want to do if in Blue Origin
vehicles — and even though I do want to go into space, you know, as a kind
of personal thing I`d like to do that, it`s not what`s important to me.
What`s important to me is lowering the cost of access to space.
WELLS: How low can costs go?
BEZOS: Just a few thousand dollars of refurbishment. We never took the
engine out of the vehicle.
WELLS: Jeff Bezos says the other hurdle to growth in space is the lack of
practice. He thinks space tourism ventures like the one he hopes to have
up and running by 2018 will provide lots of practice.
BEZOS: If you need to have surgery, find somebody who does the operation
20 to 25 times a week.
WELLS: He has the deep pockets to keep practicing, like other wealthy
competitors Elon Musk or Richard Branson. Like those men, Jeff Bezos wants
space launches to become common, not just to help humans leave earth but in
his opinion to help us save it.
For NIGHTLY BUSINESS REPORT, Jane Wells, Colorado Springs.
HERERA: And to read more about the private sector space race, head to our
Before we go, here`s another look at the day on Wall Street. Stocks at
highs for the year. The Dow rose 187 points. The NASDAQ added 75. The
S&P 500 was up 20.
And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera. Thanks
for joining us. Have a great evening. We`ll see you here tomorrow.