SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Job machine. The economy
created a lot of jobs last month, sending stocks to a record. But a near term rate hike may not be a done deal yet.
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Bristol-Myers Squibb
(NYSE:BMY) shares plunged today, wiping out billions in market value as a
high profile cancer drug trial fails.
HERERA: Bright idea. Meet the electrician who started his own business
and is now advising other entrepreneurs to become CEO Warriors.
His story and more tonight on NIGHTLY BUSINESS REPORT for Friday, August
MATHISEN: Good evening, everyone.
The S&P 500 and the NASDAQ closed at all time highs and for that, you can
thank a blowout jobs report that both exceeded expectations and eased fears
of a labor market and economic slowdown.
The Dow Jones Industrial Average soared 191 points to 18,543. Not a
record, but the records were NASDAQ up 54, and S&P 500, which gained 18.
Here are the numbers that sparked the rally. Employers added 255,000 jobs,
much better than the 179,000 economists expected the jobless rate held
steady at 4.9 percent as more Americans looked for work and wages picked
We have two reports tonight. Hampton Pearson on the best two-month stretch
of hiring this year, but we begin Bob Pisani on the record setting day for
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s been a broad
rally. Not just the S&P 500, but even the S&P midcap and S&P small cap
indices are right at historic highs as well. Why is this happening?
Well, the jobs report is the immediate catalyst. But remember, we didn`t
have far to go in the first place. The S&P 500 was never more than about 1
percent from an historic high in the past month. So, in addition to the
rally in the major indices, the market is showing signs of classic
rotation. In the last several weeks, technology and biotech have been big
market leaders. So earnings of big technology names like Microsoft
(NASDAQ:MSFT) have been particularly strong, beating estimates by a much
wider margin than analysts had expected. At the same time, prior market
leaders like utilities and telecom and consumer staples, they`ve been
OK. Why the move up? Today`s job report is the immediate catalyst, as I
mentioned, but the rally didn`t start this morning. First, overall
earnings have been OK and there are fewer downward revisions in the second
half of the year that many feared. Second, crude oil, which gave everyone
a scare a week ago, is showing stability around $41. And third, there`s a
lot more talk of fiscal stimulus, not just monetary stimulus in the U.K.,
Europe and the U.S.
Finally, the Brexit worries have been contained so far.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: For a second
straight month, American employers d blockbuster job growth — 255,000 new
workers added to payrolls in July, with June revised upward to 292,000.
JEFF MADRICK, THE CENTURY FOUNDATION: About the best news we could expect.
It suggests the economy is not stalling. It`s coming back.
PEARSON: More part time workers found full time job in July, good-paying
jobs. Professional and businesses services led overall growth, adding
70,000 new hires, followed closely by the leisure and hospitality industry,
up 45,000 and health care with 43,000 new hires.
ED LAZEAR, FORMER GEORGE W. BUSH ECONOMIC ADVISOR: If you look at all the
numbers and take them at face value, this is a very good jobs report. No
doubt about it.
PEARSON: The only negative sector, mining, losing another 6,000 jobs in
July. The employment falling by 220,000 since the industry peaked nearly
two years ago.
With job growth for the last three months now averaging 190,000 per month,
leading Wall Street economists see the rate hike clouds clearing for the
DAVID KELLY, JP MORGAN CHIEF ECONOMIST: It should be enough, if nothing
goes wrong, it should be enough to tilt the Fed towards actually raising
rates in September and then again in December.
PEARSON: For one month at least, the strong jobs report upsets concerns
about overall weak economic growth and the Brexit fallout on the American
For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson in Washington.
HERERA: And joining us now for more on today`s robust jobs report is
Vincent Reinhart, chief economist for Standish Mellon Asset Management.
Good to see you. Welcome, Vincent. Nice to have you here.
VINCENT REINHART, STANDISH MELLON ASSET MANAGEMENT: Thanks for having me.
And robust is the right word.
REINHART: It was hard to find bad news in that jobs report.
HERERA: And there were also some revisions to the upside as well. So,
were the worries of earlier this year that perhaps, we were headed towards
another economic downturn? Not well founded.
REINHART: After this month`s report, last month`s report and the revisions
in both to earlier months, really looks like May was the aberration. May,
when job creation basically came to a standstill. We got confirmation that
there`s strong forward momentum and activity because jobs were created.
We also found that we`re not pushing as hard on resource slack because more
than 400,000 people came back into the labor market and we got a pick up in
average hourly earnings, so that implies that income`s being created and it
will be spent later in the year.
MATHISEN: You know, there really wasn`t much to nitpick here, Vince, at
all. But the growth in the construction and manufacturing sector was much
smaller than it was in hospitality and other services. This is a political
year. I can well imagine that critics of this report will say we replaced
those good manufacturing jobs with jobs at Hardee`s and Wendy`s.
What do you say to that?
REINHART: Don`t ever challenge an economist to nitpick because they can
certainly do that. And I think you`re right, this is another chance to use
the word rotation. We`re creating jobs. They`re not all good and we have
some real challenges.
Moreover, we`re starting from the low base. The participation rate went up
a tenth, but it`s still 3 percentage lower than just a couple of years
back, and there`s another worrisome thing about this employment report, if
you think about the bigger picture.
Over the last year, we`ve got about 1.7 percent increase in payroll
employment. That`s probably about the pace of real GDP growth. That means
we`ve got no productivity over the last year.
HERERA: What does the Fed do with this report?
REINHART: The Fed breathes a sigh of relief because the gains and payrolls
suggest that there is a base for continued economic growth. It validates
something that Janet Yellen has been talking about for a long time, and
that is, if you run the labor market hot, you can bring people back into
the labor market. That 400,000 increases in participation, and they have a
runway because average hourly earnings were up, but they`re only 2.6
percent year on year.
And some of that cost pressures are offset by lower energy prices. I think
the Fed takes this number and it validates the case for policy in 2016.
REINHART: If they get another number this strong, before the September
meeting, they might tighten, the more likely they`ll go once in December.
HERERA: All right. Vincent, thank you very much. Vince Reinhart with
Standish Mellon Asset Management.
MATHISEN: Bristol-Myers Squibb (NYSE:BMY) made a risky bet and lost. One
of the company`s most promising and best-selling cancer treatments failed
in a trial for patients with the most common form of newly diagnosed lung
cancer. The drug is already on the market for other types of cancers, but
Bristol wanted this immunotherapy to broaden out and be used and use a
risky research strategy. Now, that sent shares plummeting 16 percent,
wiping out about $20 billion of Bristol`s market value.
But as Aditi Roy reports, this setback for Bristol may not be as bad as it
ADITI ROY, NIGHTLY BUSINESS REPORT CORRESPONDENT: The phase three trial
failure is a blow to Bristol-Myers Squibb (NYSE:BMY) and patients. Still,
some analysts say things are aren`t hopeless for Bristol-Myers Squibb
(NYSE:BMY), despite market reaction.
TONY BUTLER: I think Bristol`s down a little much. You would believe that
the story today in lung cancer for this particular drug from Bristol-Myers,
would never again raise its head in lung cancer. That is to say there
would be no hope for Bristol-Myers to be in lung cancer in the future and
my sense is that`s probably incorrect.
ROY: The news was a win for Merck (NYSE:MRK), who`s competing drug
Keytruda recently succeeded in a similar trial. Merck`s share soared on
the news. Bristol-Myers was shooting for a home run, trying to use an
already successful cancer drug to take on lung cancer, one of the highest
unmet needs of all cancers and at least one analysts estimates the market
at $12 billion. It`s also the most common cause of all cancer deaths,
according to the National Cancer Institute.
So, Bristol-Myers went for the broadest trial possible with a bigger risk
BUTLER: I do think they would have had similar outcomes if in fact
Bristol-Myers trial in lung cancer was exactly like Merck`s trial in lung
cancer. The reason for that is simple, the drugs are extraordinarily
similar, almost identical. So, you would, while it is speculative, you
would provide a high probability that Bristol`s success under that scenario
would be possible.
ROY: Some traders urge investors not to give up on the drugmaker so
STEPHANIE LINK, TIAA GLOBAL ASSET MANAGEMENT PORTFOLIO MANAGER: The stock
is totally overreacting short-term, this is still a very impressive growth
story and it`s now on sale, get a nice yield. I think, by the way, you
could own Merck (NYSE:MRK). I think you want to own them both.
ROY: Bristol-Myers Squibb (NYSE:BMY) is still testing Opdivo in
conjunction with its drug Yervoy to treat this lung cancer. Analysts
believe this type of combination therapy could be a powerful weapon in the
future battle against lung cancer.
BUTLER: It`s been our view that combination therapy and lung cancer will
actually be the therapy of the future and we`re not quite there. Those
trials were being run today by Bristol-Byers and there are others,
including AstraZeneca, that have combination therapy. Merck (NYSE:MRK) has
some trials as well, but they`re much earlier in development. My sense is
the market is going to change dramatically in favor of those — that
combination therapy. Bristol seems to be in the lead there.
ROY: For NIGHTLY BUSINESS REPORT, I`m Aditi Roy.
HERERA: The trade deficit rose to a ten-month high in June, driven by a
big rise in imports of oil and Chinese goods. But exports edged up
slightly, just slightly, due to the strong dollar and global weakness.
This marks the third straight month of increases.
MATHISEN: Well, as trade continues to be sensitive political topic this
election cycle, Republican presidential nominee Donald Trump today named
his new economic team.
John Harwood joins us from Washington.
John, what do we know about his new advisers? Who`s in and who, maybe
JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, first of all,
it`s an all male team. So, it`s not diverse. Second of all, it is not the
A-team of Republican presidential economic advisers. But it does share his
concern about trade.
One of the members, for example, Peter Navarro of U.C. Irvine, who is an
economist who`s talked a lot about the problems associated with
international trade deals and our trade deficit with China. You`ve got
people like John Paulson, Harold Hamm, the oil and gas executive, Steve
Moore, the conservative economist, David Malpass, used to work for Bear
And so, they`re trying to work with Donald Trump and have more meat on the
policy bones, which Trump is not yet provided in full detail.
HERERA: Well, what do we know, you know, because he`s going to give this
economic policy speech on Monday. He certainly has talked a lot about
trade and jobs. But what can we expect and do we know anything more about
the positions that he`s going to put forward on the economy?
HARWOOD: Not in detail, Sue. But I think that we can expect he`ll modify
his tax plans. When you look at what Donald Trump rolled out last year, it
was a gargantuan tax cut. Top personal rate of 25 percent, top capital
gains rate of 20 percent, 15 percent rate on business income, a zero
percent elimination of estate tax. It would add a $10 trillion to the
Now, his advisers have acknowledged that needs to shrink and we expect in
the speech that he`s going to narrow it somewhat. So, maybe, Larry Kudlow,
for example, has said, maybe it will be a $3 trillion addition to the
deficit as opposed to 10.
MATHISEN: All right. John, we have to leave it there. John Harwood, in
Washington, we`ll know more on Monday.
HERERA: Still ahead, full time gamers, but don`t just play those video
games, create them, because that`s what could land you a high-paying job.
MATHISEN: The Pokemon Go craze is the latest evidence for the increased
appetite for gaming. That means demand for designers, coders, is more
intense than ever.
Kate Rogers (NYSE:ROG) is in Salt Lake City to show us where the jobs are.
KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Fourteen-year-old
Nabeha Barkatullah isn`t spending her summer playing sports or hitting the
beach. She`s learning to make video games instead.
NABEHA BARKATULLAH, GIRLS MAKE GAMES STUDENT: A lot of the guys at school,
they would be like, “No way, you play games? You`re so weird.” I think
that`s the reason why a lot of girls don`t go into gaming.
ROGERS: Nabeha is part of Girls Make Games, a summer camp that`s trying to
introduce more girls to opportunities in an industry that`s long been
dominated by males. Over the past three summers, the camp has taught more
than 800 girls the fundamentals of programming and design.
BARKATULLAH: At first, I was like no idea how to code. Like what is
coding? But like after attending Girls Make Games, I`m pretty confident in
ROGERS: During the camp, girls get to create team video games, pitch them
to industry experts and get them —
LAILA SHABIR, GIRLS MAKE GAMES FOUNDER: They want more ideas and more
voices. And this is how they`re going to get it.
ROGERS: These girls will be glad they got a head start in an industry
that`s booming. The global gaming industry is poised to hit $90 billion by
the year 2020, according to PWC, and experts within the industry say that
jobs could grow by about 10 percent in the next several years.
That growth is the reason companies like Salt Lake City-based WildWorks are
expanding. Beyond WildWorks, Salt Lake City is home to other big gaming
studios, including Electronic Arts (NASDAQ:ERTS).
JEFF AMIS, WILDWORKS FOUNDER: Right now, we`re looking for engineers or
programmers who have a background in the gaming industry.
ROGERS: With current staff of over 120, Wild Works is also looking for
game designers, artists and community managers.
And since the primary audience for their flagship game Animal Jam is Girl,
they`d like to hire more women.
AMIS: We want to continue to augment our female staff, because they bring
a perspective, a variety, an experience, especially as we make games that
resonate more with girls than with boys.
ROGERS: 3D artist Emily Vincent is new to the industry and feels
optimistic about its outlook.
EMILY VINCENT, WILDWORKS 3D ARTIST: You can definitely still feel a bro
culture kind of going on, but I think women are getting more and more
involved, as they realized that they can and be accepted.
ROGERS: Shabir is excited too.
SHABIR: How their eyes light up when they talk about their games and when
they say things like, I had no idea making a game was this easy, or making
games was this fun, I can`t imagine what they`re going to end up making and
I`m very excited for that.
ROGERS: For NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG), Salt Lake
HERERA: Amazon`s first branded delivery jet makes it debut and that`s
where we begin tonight`s “Market Focus”.
The company unveiled its first of 40 planes that will be used to help speed
up deliveries. In a deal announced back in May, Amazon (NASDAQ:AMZN) will
lease 40 planes from Atlas Air and ATSG over the next two years. Amazon
(NASDAQ:AMZN) shares rose a fraction to $765.98.
American Airlines gives a pay raise to 30,000 employees. The airline said
it reached an agreement with the labor union to give significant pay hikes
to a portion of the company`s ground workers. Depending on their position,
employees can expect to receive a raise of 15 to 55 percent. Shares were
up more than 2 1/2 percent to $34.45.
MATHISEN: Private equity firm Apollo Global Management reportedly in talks
now to buy the cloud computing company, Rackspace. According to “Reuters”,
a possible deal could be worth more than $3.5 billion. Apollo and
Rackspace, no comment. Shares of Rackspace up 10 percent on the news to
Meantime, Berkshire Hathaway (NYSE:BRK.A) saw its profits rise 25 percent.
The results were helped by an improvement in insurance underwriting and the
purchase of Precision Castparts (NYSE:PCP). But operating results at
Warren Buffett`s company did fall short of forecast. Shares barely moved
in afterhours trading. They closed the regular session up about 1.5
percent and no, you`re not wrong. That is $218,010.
HERERA: This week`s market monitor says now is the time to invest in small
cap stocks. Joining us is Barry James, president and portfolio manager
with James Investment Research.
It`s always good to talk to you, Barry. Welcome.
Let`s get right —
BARRY JAMES, JAMES INVESTMENT RESEARCH PRESIDENT: Thank you. Glad to be
HERERA: Let`s get right to your stock picks. Your first one is McDermott.
The symbol is MDR. Why do you like it?
JAMES: Well, first of all, it`s one of the larger offshore drilling
companies and they do it from engineering, all the way to the construction
of the facilities. They`re very, very cheap, trading about 12 times the
earnings, and they`re actually trading less than what the accountants say
they`re worth, which means less than book value, and they have a backlog
that`s bigger than the revenues that they made last year.
So, in spite of the price of oil, they seem to be holding up pretty well.
MATHISEN: Let`s talk about Frontline (NYSE:FRO). They make tankers.
JAMES: They do, the largest tanker — oil tanker company in the world.
And the reason that we like them is that there`s a lot of oil in surplus
today and that`s floating around, actually, in lot of these tankers. But
they restructured themselves back 2012. They have low cost in terms of
tankers. They have good earnings and you`re getting 20 percent yield.
Now, there`s no promise that will stay forever. But for right now, they
can afford to pay you a 20 percent yield while you wait.
HERERA: And, finally, Brandywine Reality Trust. You say they`re
diversified and that`s one of the reasons why you like it.
JAMES: That`s exactly right. They`re not just in commercial or retail
space. They have all of those. And they also have the whole schmear of
things from the planning to the actual management. And they focus on just
a few really, really high-end areas like Washington, D.C. and Austin.
And so, they`re doing a good job there. You`re getting about a 4 percent
yield and their earnings have been coming in pretty well. A well-run
company and we think it has good prospects.
MATHISEN: Quick thought on the future of the market on this day that the
S&P and NASDAQ set records.
JAMES: Well, we still see there`s an upward pattern kind of after the
Brexit setback we had. Stocks had been on the run. A lot of the pundits
are actually a bit nervous about the market at these levels, and we try to
measure risks. We do our own research to measure risky tweak, and we say
it`s only modest.
So, we`d say, they have a modest approach to your equity holdings right
now. Maybe 50, 55 percent in stocks. One of the reasons we like small
stocks is they`ve been ignored for a long time and they can run for quite a
bit of time as well.
HERERA: All right. Have a great weekend, Barry. Nice to see you again.
Barry James with James Investment Research.
MATHISEN: Coming up, want to be b your own boss? An electrician figured
out how to do it and now, he`s teaching others how to run better
businesses. That`s tonight`s bright idea.
HERERA: Here`s a look at what to watch next week.
On Tuesday, Dow component Disney (NYSE:DIS) reports its earnings and
investors will be paying attention to what the company says about cord
cutting. On Thursday, the American consumer will be in focus when Macy`s
(NYSE:M), Kohl`s (NYSE:KSS) and Nordstrom (NYSE:JWN) release their
quarterly results. And on Friday, retail sales and producer prices are due
out. That`s what to watch for next week.
MATHISEN: So, what does an electrician know about running a company?
Well, some know quite a bit. Others, not so much.
That`s why a New Jersey electrician who once said there`s got to be a
better way then figured it out, got the bright idea to share his business
management knowledge for a price of course. The way he sees it, he`s
helping others create more jobs than he could ever create on his own.
UNIDENTIFIED MALE: That`s a big deal.
MATHISEN: Mike Agugliaro can get a charge out of people. And no wonder,
at age 19, he became a full time electrician. Three years later, he and a
partner started gold medal electric contracting in central New Jersey.
They worked long hours. Did everything themselves. But like so many small
business owners, they did little else.
MIKE AGUGLIARO, CEO WARRIOR CO-FOUNDER: We got so burned out that my
partner came to me one morning and he said, Mike, I`m done.
MATHISEN: In 2004, after 11 years, it was either unplug the business or
find a better way. So, they invested heavily to learn how to actually run
a serious business.
AGUGLIARO: We spent over $800,000 on training the very best we could find.
MATHISEN: They started reading. They went to Disney (NYSE:DIS) to learn
about culture. Zappos to become more efficient.
But one thing stuck out —
AGUGLIARO: Everything is marketing and marketing is everything.
MATHISEN: The simplest tweets helped turn their business and their lives
AGUGLIARO: I did some study, and I found out, well, yellow is the first
color the eye sees. So, it`s like, let`s have yellow trucks. Nobody had
yellow trucks out there. And people were telling us, I see you everywhere.
I was like, everywhere? We have three trucks.
I was like, OK, we`re on thumbs and big right now.
MATHISEN: Very big, in a few years, gold medal added plumbing, heating and
cooling services. Now with 145 trucks and 190 employees, gold medal is on
track to hit $32 million in sales this year. He`s only in the office about
two or three times a week now, but he`s still busy because other service
company owners started asking how he did it.
That`s when he realized his knowledge, his experience, might be more
valuable to him even than it is to him.
AGUGLIARO: Nobody`s really stepping in and serving these people, so I said
why don`t we go out there and just change lives for anybody and any type of
MATHISEN: It was the germ of what would become a multimillion dollar idea.
Phone calls and Facebook (NASDAQ:FB) posts grew into a full blown
consulting business in 2013. One year in, another marketing change, a new
name for the consultancy, CEO Warrior. Annual sales, more than $3 million.
Eric Corbett became a warrior three years ago. He was about to buy his
brother out and take over the Maryland plumbing business their father
started in 1960. He signed up for a four-day Warrior event.
ERIC CORBETT, LARRY & SONS OWNER AND PRES.: We were pretty average at that
point. And we said, you know what, we don`t want to be average.
MATHISEN: Five times a year, Agugliaro hosts these events drawing a
hundred or so service oriented companies that pay about $7,500 each.
Corbett later upgraded to the Warrior fast track. That stepped up tier
costs $36,000, but gets you full time access to Agugliaro`s business
improvement. First hand looks inside gold medal, even a taste of martial
arts, a long time Agugliaro passion.
There are about 95 fast trackers like Corbett. In three years, his
business has grown from 22 employees to 30. Revenues up from less than 4
million a year to more than 4.5 million.
CORBETT: We`re really healthy as a company and positioned to have some
great growth here moving forward.
MATHISEN: That`s the kind of rewiring Mike Agugliaro likes.
AGUGLIARO: Why do I exist on this planet and it`s not to be an
electrician. It was never to do that. I knew there was a bigger part in
it and this is why for me — change lives.
MATHISEN: Agugliaro has also written four books. He`s beginning to invest
in commercial real estate, following the advice he found himself giving to
other CEOs, to manage and protect their wealth by diversifying their
A sideline became his passion.
HERERA: Passion, which is fantastic thing. I love bright ideas.
That`s NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera. Thanks for
MATHISEN: And thanks from me as well. Have a great weekend, everybody.
I`m Tyler Mathisen. We`ll see you here on Monday.
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