SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Massive rebound. American
businesses ramped up hiring, alleviating fears the economy is sagging and sending the S&P 500 just shy of a record close.
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Goldilocks market? Job
growth is back. Fed is on hold. Volatility collapsing. Is this the
perfect scenario for investor?
HERERA: The results are in. And tonight, you`ll meet the entrepreneurs
who are using social media to spur political discussions, a different kind
of bright idea, tonight on NIGHTLY BUSINESS REPORT for Friday, July 8th.
MATHISEN: Good evening, everyone, and welcome.
Stocks touch all time highs and for that, you can thank a blowout jobs
report. The employment numbers for June came in much stronger than
expected, showing that one of the best performing part of the economy is
still humming along after sputtering earlier this year in the spring, and
the buyers came out in force today.
The Dow Jones Industrial Average up 250 points to 18,146. NASDAQ climbed
79 and the S&P 500 added 32 to close just shy of a record. But the index
did nip above its all time closing high during the session today.
And the rally was sparked by the creation of 287,000 new jobs in June, big
increase over the revised gains of just 11,000 in May. The rate did edge
up to 4.9 percent. Average hourly earnings rose modestly.
Hampton Pearson has more on the job market rebound and what it may mean for
Wall Street and Main Street and the Fed.
HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: The June jobs
surge showed employers recovering from two months of hiring, with the job
growth on a roller coaster, adding just 11,000 new workers to payrolls in
May, compared to today`s blockbuster of 287,000.
THOMAS PEREZ, DEPARTMENT OF LABOR SECRETARY: It`s really important when
you have a lower than expected month as we had last month not to — you
know, jump to conclusion.
PEARSON: The leisure and hospitality sectors led the way in June adding
59,000 new hires. With health care close behind, hiring 58,000 new
But the unemployment rose to 4.9 percent, with little growth in wages. And
the three-month average is just 147,000 per month.
JAN HATZIUS, GOLDMAN SACHS CHIEF ECONOMIST: The story from the economy is
pretty, we`re moving towards full employment. We`re probably very close
and we are starting to see some clearer signs of stronger wage growth.
PEARSON: Data for that June jobs report was collected before Great Britain
voted to leave the European Union last month. So economists don`t have a
gauge of the impact on the American job market, but they point to the 2.6
percent year over year gain in wages as the sign of an economy moving
closer to full employment. Reasons enough economists say for the Federal
Reserve to stay on the sidelines when it comes to interest rate policy.
ANASTASIA AMOROSO, J.P. MORGAN GLOBAL STRATEGIST: This is a really
important for the Fed. This the exact number the Fed wants to see, right?
They want to see us recover and this really supports the notion that Janet
Yellen had last week or last month that this is an aberration.
PEARSON: Wall Street Fed watchers say the combination of the slowdown in
job growth plus the economic uncertainty from the Brexit vote are
increasing the odds of no Fed rate hike this year.
For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson in Washington.
HERERA: Now to Bob Pisani at the New York Stock Exchange.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: What happened? Two
days ago, we were talking about a trading range for the S&P 500 between the
old high of 2,130 and the February lows of roughly 1,800 or so. We came
very close to those historic highs today, closing just shy of the 2,130
level. Regardless, it`s been a remarkable rally.
All right. So, what happened? The bulls are arguing that the strong June
jobs report had created a Goldilocks scenario, but the Fed is still on
hold. The bears are insisting this has nothing to do with fundamentals or
even with the idea that there are some dramatic improvement they say the
rally the is due to unusually heavy demand for both U.S. stocks and bond,
partly due to foreign demand and partly because investors are forced into
U.S. stocks because of a lack of alternative investments, and because
Europe and China stocks are problematic right now.
You know what`s amazing? Either interpretation means stocks rally.
They`re both could be right and it was a broad-based rally. Nine stocks
advancing for every one declining and new highs kept expanding throughout
the day. So, we had industrial names like General Electric (NYSE:GE) and
UPS suddenly on the new high list.
All right. Where do we go from here? We go to earnings, which start on
Monday with Alcoa (NYSE:AA) and we find out how much this whole Brexit
thing might impact the second half of the year.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani.
HERERA: So, we got a robust jobs report for June that has stocked touching
new highs. But what are the numbers telling us about the health of the
Let`s turn to Josh Feinman, global chief economist with Deutsche Asset
Management, and Stephen Wood, chief market strategist with Russell
Investments, for more analysis on today`s jobs report.
Josh, I`ll start with you. I mean, it looked good on the surface. When
you dug deeper, were you equally as satisfied with the report?
JOSHUA FEINMAN, DEUTSCHE ASSET MANAGEMENT GLOBAL CHIEF ECONOMIST: Yes. I
mean, I think the report was reassuring. It certainly helped to allay some
of the fears we got from the previous reports.
You had to smooth through the volatility, though. And we do — you see job
growth running about 150,000 over the last three, four months. That`s a
healthy clip. It`s enough to continue gradual progress and healing labor
markets and edging back towards full employment, but it`s not as strong as
we were seeing, you know, the past couple of years.
MATHISEN: Josh, why did May lay such an egg?
FEINMAN: You know, the numbers bounce around from month to month. This is
why you never hang your hat on anyone particular month. You got to smooth
And look at the, you know, the broader picture. As I said, that broader
picture suggests that labor market is healthy, it is improving. I don`t
think that`s quite back to full payment. I think there`s still residual
pool of folks who could be drawn back in. Some folks working part time who
would like to work fulltime.
So, I don`t think we`re all the way back, but we made a lot of progress.
We are starting to see wages pick up a little bit, but still not terribly –
HERERA: Stephen, weigh in on what impressed you and what did not about
this report. And what position does it put the Fed in?
STEPHEN WOOD, RUSSELL INVESTMENT CHIEF MARKET STRATEGIST: I think what
impressed me most is there`s not radical information that`s going to
deviate the Fed`s course. So, the numbers as smooth as Josh mentioned in
that 150 clip, which means the Fed is not going to deviate from their
policy. We think that they`re going to be one and done in December.
That`s predominantly because of international events, Brexit, what`s
happening in Europe.
I think the Federal Reserve is inclined to raise rates. They want to be in
what they consider a normal policy environment. But the economy is doing
OK. Earnings starting next week look to be improving into the end of the
So don`t think it`s going to be an okay economy. It`s going to be an okay
environment for the Federal Reserve. I don`t think they`re very, very
We just think that the valuations in U.S. equities are getting very rich.
So, perhaps, globally, we want to have a multi-asset strategy where we can
underweight valuations that are expensive and look at areas where
valuations are a little bit more attractive.
MATHISEN: You know, Steve, a couple of weeks ago, maybe even more recently
than that, an awful lot of guys who are market strategists like you, and
stop picking, do stock picking, said, oh, I see the S&P 500 ending the year
maybe getting back right around 2,100. That`s my number, 2,100. Well,
now, we`re now at 2,130 or thereabouts.
So, what`s the rest of the year look like from where you sit?
WOOD: I think there`s going to be chopped — I think it`s going to be
bookended. Kind of flat-ish. We think it will be a positive number, U.S.
equities for 2016, but it`s looking a lot like 2015 as well. A lot of
volatility, flat-ish, a slight upward bias in U.S. equities.
But we would be inclined to look at valuations getting rich and richer.
Trim that position. You don`t want to do anything dramatic but trim that
position so that you can fund overweight, the European cycle which is
beginning. The European Central Bank is going to get very aggressive as
our Fed is kind of stable in their policy path. So, just be a very — I
think tactically lean into it. Stay on your toes and be actively managed.
HERERA: Josh, why don`t you follow on that, because one of the things that
Tyler and I were talking about right before the show is, you have stocks
rallying, but you also have bonds rallying, and you have gold rallying.
You know, a lot of the normal relationships in the stock markets are not
gelling at this point.
So, how do you see things playing out, along with the fact that we have an
election that`s coming up in November?
FEINMAN: Yes, I think they are sending somewhat confusing signals. I
think one way to maybe reconcile them is to stock market and risk assets,
you`re saying, hey, the economy is looking okay, not great, but it`s
looking okay. Interest rate markets are saying maybe it`s looking okay,
but monetary policy is going to be an easing mode. Other parts of the
world in a big way and Fed certainly been pushed out, so that`s what`s
helping to hold interest rates down.
So, it`s a little bit of the best of both worlds. But I do think if the
economy, you know, continues on a pretty good track, we get a sense the
Brexit situation is not impeding activity meaningfully in the U.S., then I
think the Fed will be back maybe by the end of the year.
HERERA: Thank you, gentlemen. Have a great weekend.
FEINMAN: You too.
WOOD: Thank you.
HERERA: Josh Feinman with Deutsche Asset Management, Stephen Wood with
MATHISEN: Potential risk for the market we`ve been following is the
fallout from the U.K.`s vote to leave the European Union, but a new survey
of chief financial officers shows only a small portion of those business
executives think the vote to leave will have a negative impact on the U.S.
economy. The bigger impact, according to the CNBC survey, will be, as you
might expect, on the U.K. and E.U. economy.
HERERA: That vote in the United Kingdom, along with global security, were
just some of the topics discussed at the NATO summit where President Obama,
along with British Prime Minister David Cameron, were in attendance.
Hadley Gamble reports tonight from Warsaw.
HADLEY GAMBLE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Strength and unity,
that`s what NATO secretary general says this organization is going to have
to continue to project even as fears mount over the European Union as well
as governments here trying to decide what Vladimir Putin`s next move.
JENS STOLTENBERG, NATO SECRETARY GENERAL: We will continue the seek
constructive and meaningful dialogue with Russia, to make our intentions
clear, to dispel any misunderstanding, and to reduce the risk of military
incidents or accidents spiraling out of control.
GAMBLE: As the largest NATO Summit in history got underway today in
Warsaw, questions continue to be raised over just how far NATO should beef
Eastern Europe`s security. A 4,000-strong multinational force will be
deployed in four battalions, ranging from Poland to the Baltic State.
Several smaller NATO outposts will be created, as well as the rapid
response force that can be deployed if needed.
Now, while the troop buildup is aimed at deterring Russia from further
aggression along NATO`s eastern plank, officials here are working a fine
line between antagonizing the Kremlin and reassuring ex-Soviet member
states concern that they can be Mr. Putin`s next target.
STOLTENBERG: We have tripled the size of the NATO response force. We have
established new headquarters in the east, and the further developed key
capabilities like ballistic missile defense against threats from outside
the Euro Atlantic area.
GAMBLE: Another potential game changer for NATO is just how much Brexit
could impact the North Atlantic alliance. The U.K. was a major force
behind E.U. sanctions on Russia. And despite mounting pressure from other
E.U. nations to roll them back has held firm. They were also a major
contributor to overall NATO spending and with Washington keen to see more
commitment from E.U. countries, it remains to be seen just how ready Europe
is to foot the bill for their own security.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The vote in the United
Kingdom to leave the E.U. has created uncertainty about the future of
European integration. And, unfortunately, this has led some to suggest
that the entire edifice of European security and prosperity is crumbling.
For those who have been questioning what does this mean for the
transatlantic relationship, let me just say it is often the case in moments
of change, that this kinds of hyperbole is misplaced.
GAMBLE: For NIGHTLY BUSINESS REPORT in Warsaw, Poland, I`m Hadley Gamble.
MATHISEN: At the New York Stock Exchange this morning, the moment of
silence was observed for the victims of the Dallas sniper attack which
occurred overnight, following a peaceful rally. The moment of silence took
place just before today`s opening bell.
Still ahead, looking for double digit returns, how about 40 percent
returns? Our market monitor tonight has some names she says will deliver.
MATHISEN: A major setback for the blood-testing startup Theranos. Its
founder and CEO has been banned from owning or running a medical lab for
two years. The move comes after a months-long investigation where
inspectors found a number of violations of federal testing standards.
Theranos founder, Elizabeth Holmes, says she`s disappointed by the
decision. The company was founded as a way to deliver cheaper blood test
and was valued at $9 billion just two years ago.
HERERA: Twitter reportedly wants to stream more live events. As first
reported by Re/code, the company is in talks with the NBA, Major League
Soccer and turner broadcasting to buy the digital streaming rights. The
move is seen as a way for Twitter to attract users and that helped send the
MATHISEN: Twitter CEO Jack Dorsey is in Sun Valley along with many of the
big names in technology and media, and as Julia Boorstin reports, there`s
growing concern about Silicon Valley`s sky high stock valuations.
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: From Warren Buffett
to Marc Andreessen, a range of big name investors here in Sun Valley,
meeting with media and tech CEOs at the Allen & Co. Conference. With the
stock market still trading near all time highs, there are big questions
about whether companies like Pinterest, the CEO Ben Silbermann is here,
will be able to hold on to their sky-high valuations. Airbnb is now around
But Kleiner Perkins partner Bing Gordon says going public isn`t top of mind
for many of these companies.
BING GORDON, KLEINER PERKINS PARTNER: It`s curious on IPOs. This
generation of founders, they think IPOs kind of a bucket list, a thing to
check off to put on their mantle. Sense the late `90s and some of the new
regulatory regime, the IPOs are put off until companies are extremely
healthy and extremely established.
BOORSTIN: Those successful startups Gordon is talking about maybe staying
private, but they`re raising more capital than ever. Unicorn, a private
company, is valued at $1 billion or more, raised nearly 40 percent of all
venture capital in the first quarter. Nearly $9 billion according to a new
report from Pitch Book.
But as more cash comes pouring in, former Twitter CEO Dick Costolo says the
sky high valuations for big tech companies could be at risk.
DICK COSTOLO, TWITTER CEO: I think there is a sense that the valuations of
the public companies and the valuations of public tech companies are still
pretty high and likely to come down.
BOORSTIN: And valuations coming down may make some of these companies more
attractive as acquisition targets as LinkedIn (NYSE:LNKD) was to Microsoft
(NASDAQ:MSFT), which last month, snapped up the public business network for
For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Sun Valley, Idaho.
HERERA: Polycom (NASDAQ:PLCM) walks away from one deal, but strikes
another. And that`s where we begin tonight`s “Market Focus”.
Polycom (NASDAQ:PLCM) ended its merger agreement with my tech company Mitel
networks. The video conferencing technology maker will now be bought by
private equity firm Sirius Capital for about $2 billion, an offer that
Polycom (NASDAQ:PLCM) says is superior to Mitel. Polycom (NASDAQ:PLCM) is
expected to pay Mitel a $60 million termination fee.
Shares of Polycom (NASDAQ:PLCM) up nearly 13 percent to $12.27. Meanwhile,
Mitel shares surged more than 19 percent to $7.21.
McDonald says it will take a $235 million charge in the second quarter
because of refranchising thousands of restaurants and relocating company
headquarters to Chicago. The change is expected to lower profit by 20
cents a share. Shares were up fractionally to $121.31.
MATHISEN: Gap (NYSE:GPS) sees same story sales rise for the first time
since early last year. The retailer said the better than expected results
were driven by strong sales in the company`s Old Navy brand. Investors
seemingly please with the news, Gap (NYSE:GPS) shares up nearly 5 percent
Meantime, shares of Barracuda Networks took off today after the provider of
cloud security products reported a rise in both profit and revenue. The
results were sharply ahead of analyst estimates. Shares of Barracuda up
more than 18 1/2 percent. They finished at $18.43.
HERERA: Our market monitor guest likes growth stocks she says could see
double digit gains over the next 12 months. The last time she was on more
than a year ago, she recommended Cray (NASDAQ:CRAY), which is up 8 percent,
Priceline, which is up 17 percent, and Sysco (NYSE:SYY) Foods, which is
also up 35 percent.
She is Mariann Montagne, senior investment analyst with Gradient
Welcome back Mariann. Nice to have you here.
MARIANN MONTAGNE, GRADIENT INVESTMENTS SR. INVESTMENT ANALYST: Thank you,
Sue. Thank you.
HERERA: Let`s start with your pick, because I know people are anxious to
hear you did well with the last time you were here.
Air Lease is currently on the top of the list tonight. Why?
MONTAGNE: Right. Well, Air Lease is specialty financing company. And
their specialty is leasing airplanes to the carriers. They just match up
the orders with the manufacturers and these airlines who prefer to lease
and they make a spread. They make a small spread on every deal. But they
sign these deals for about seven years and they have a high level of
recurring revenue. It plays of the long term trend of more people around
the globe having access to air travel.
And people have been very concerned about rising interest rates. But
they`ve shown over and over again, that they can weather through that. We
think the valuation is extremely cheap. They had about a 35 percent
discount from the P/E versus the growth rate into the mid-teens.
HERERA: You`re looking for a potential 40 percent upside.
MONTAGNE: Right. We think that this should trade in a premium to the
market. It is really a growth stock. And as we`ve seen year to date, the
growth stocks, you know, as shown by the NASDAQ, are down slightly, while
the rest of the market is up 4 percent or better.
MATHISEN: Your second one is another one, whose P/E ratio is below its
growth rate, always a good sign. And that`s Adobe Systems (NASDAQ:ADBE).
MONTAGNE: Adobe Systems (NASDAQ:ADBE). So, we all use the PDFs most every
day, but they`re very much involved in digital marketing and cloud
cooperating software. They have 80 percent of their revenues recurring, so
this isn`t the type of thing that`s going to go up and down in terms of
revenues and earnings, and yet, you know, people really haven`t latched on
to the software names this year. And so, it`s selling at probably a 20
percent discount from where we think fair value is.
HERERA: And Skyworks is your last pick. It`s currently in the low 60s, 30
to 40 percent potential upside. We have about a minute left.
MONTAGNE: OK. Skyworks is a component manufacturer for companies like
Apple (NASDAQ:AAPL). But also many other companies like General Motors
(NYSE:GM) and Ford. So, as we have the Internet of things, we need more
components, they`re putting together more systems so they can be a one-stop
shop for those manufacturers and again, you know, discounted at 35 percent
versus its growth rate, so we think that`s very attractive.
HERERA: All right. Mariann, thank you so much. Have a great weekend.
MONTAGNE: Thank you.
HERERA: Mariann Montagne with Gradient Investments.
MATHISEN: Coming up, a different kind of bright idea, one that hopes to
disrupt our political system and change American democracy for the better.
MATHISEN: Most of the time, our bright ideas stories are about companies
with real revenues and profits. Tonight, though, a different take. A look
at a company still in an early stage. Not bringing any money in just yet,
but, of course, hopes to one day. It`s a company that`s trying to tap into
this country`s current fascination, interest in politics. It`s run by a
pair of San Francisco entrepreneurs, who got what they hope will be the
bright idea to start an online forum for real people having constructed
UNIDENTIFIED MALE: Here`s one on whether or not the president should use
the term radical Islam.
MATHISEN: Matt Mahan and James Windon call their site Brigade. They also
say it`s the world`s first network for voters. Users share opinions and
discuss hot button issues like the presidential race, funding education or
In a little more than a year, users have shared more than six million
opinions. Those users come from all 50 states. The hope is that
discussions can help people to find out that Holy Grail, common ground,
from which to develop real solutions to pressing problems.
JAMES WINDON, BRIGADE CO-FOUNDER AND PRESIDENT: What this is about is
trying to enable people to self-organize, leverage relationships and get
MATHISEN: Signing up is free. You merely provide your home address to
help brigade verify you. Users can see how their views stack up nationally
MATT MAHAN, BRIGADE CO-FOUNDER AND CEO: I just felt like if anything was
going to make our politics work better, it would be social media.
MATHISEN: Mahan first got the idea as a student at Harvard back in 2004.
He lived down the hall from Mark Zuckerberg. Yes, that Mark Zuckerberg.
Mahan used the Facebook (NASDAQ:FB) still in its infancy to find other
students likely to join a protest aimed at ending Harvard`s investments
into Chinese oil companies operating in Sudan during a genocide there.
In April 2005, Harvard divested.
MAHAN: So, Facebook (NASDAQ:FB) became a very efficient tool for figuring
out who was best connected, who was likely aligned with me, and then as a
tool to mobilize them to get behind a campaign.
MATHISEN: In 2007, Mahan went to work for a company called Causes, a
Facebook (NASDAQ:FB) app that helped people connect with non-profits.
That`s where he met Windon. At Causes, they saw 186 million people raise
$48 million for various organizations. Windon was sold on the power of the
WINDON: When we saw that compare sort of impact you could have through
technology in a matter of months or years, that`s changed my perspective.
MATHISEN: By 2013, though, Facebook (NASDAQ:FB) was moving away from third
party apps. Determined to make another go of it, Mahan and Windon teamed
with tech investors, big ones. Shawn Parker, Ron Conway and Mark Benioff
in 2014, betting Brigade could be both useful and profitable, but how?
Paul Rieckhoff runs the non-profit site Iraq and Afghanistan Veterans of
America. The IAVA test-partnered with Brigade last year. He thinks non-
profits will pay Brigade some day the same way recruiters pay to find
prospective employees on LinkedIn (NYSE:LNKD).
PAUL RIECKHOFF, IAVA CO-FOUNDER AND CEO: Brigade gives us an opportunity
to connect with someone who might be interested in gun rights or they might
be interested in immigration, or they might be interested in baseball. And
if we can inject veterans issues into that conversation, then we can expand
MATHISEN: For now, though, Brigade focuses on individual users like
Stephan Nicoleau, an infrastructure investor. Nicoleau thinks Brigade
might make money selling its data.
STEPHAN NICOLEAU, LAGUARDIA DEVELOPMENT PARTNERS: There stands to be an
opportunity to package that and make it available to folks who would have
an interest in using that data. So, think campaigns, think pundits, think
MATHISEN: Profit isn`t the driver just yet. Mahan and Windon believe
though that that path to the profit will become clear if they just stay on
WINDON: At the core of politics, at the core of social change our
relationships and the technology layer that we`re seeking to build here is
simply meant to allow individuals to leverage those relationships more
efficiently, more effectively and ultimately, create more rapid change.
MATHISEN: You know, for years, investors fretted over just how Facebook
(NASDAQ:FB) could make money. It sure does now and just a few weeks, of
course, LinkedIn (NYSE:LNKD) sold for about $26 billion.
So, with these guys, who knows? And they have some very, very substantial
investors behind them.
HERERA: Yes, and a lot of advice.
MATHISEN: A lot of advice, and nice offices.
HERERA: Yes, exactly.
That does it for NIGHTLY BUSINESS REPORT tonight. I`m Sue Herera. Thanks
MATHISEN: And thanks from me as well. I`m Tyler Mathisen. Have a great
weekend, everybody, and we`ll see you back here on Monday night.
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