SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Market mood. New records are
reached as investors ask why stocks are turning a deaf ear to any bad news.
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Fair price. Good deals may
be hard to find in a rising market. But our market monitor says he found
HERERA: A border mall. Will the developers of a new South Texas shopping
center run into a wall, literally?
Those stories and more tonight on NIGHTLY BUSINESS REPORT for Friday, May
Good evening, everybody. I`m Sue Herera.
GRIFFETH: And I`m Bill Griffeth, in tonight for Tyler Mathisen, coming to
you this evening from the New York Stock Exchange.
Now, if someone had told you that amid choppy economic data, a decline in
oil prices and tumult in Washington, that stocks would be at or near all-
time highs, would you believe them?
Well, that`s exactly where the markets are today. The NASDAQ and S&P 500
pushed further into record territory. And with two trading days remaining
in this month, it appears as if investors decided not to sell in May and go
away after all.
Today, the Dow finished down two points to 21,080. NASDAQ added five,
that`s a record. The S&P is up fractions al ally, and that`s a record.
And for the week, the major indexes all saw solid gains.
Bob Pisani takes a look at now why nothing seems to be rattling this
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Markets are not people,
but they do have moods, and the mood right now is “I don`t want to hear
it.” The Dow dropped 370 points last Wednesday on reports that former FBI
Director James Comey had written a memo alleging that President Trump asked
him to drop an investigation into Michael Flynn.
Concerns about obstruction of justice were raised at that time. But the
next day, the markets acted like it was no big deal. A week later, the S&P
500 and the NASDAQ rose to record highs.
It wasn`t just a few momentum stocks, by the way, like Facebook (NASDAQ:FB)
and Amazon (NASDAQ:AMZN), that moved. Yesterday, roughly 220 stocks hit
new highs on the New York Stock Exchange. We haven`t seen that in a while.
But a few risk factors are still very real. The Trump agenda, for example,
is limping along because the Comey/Russia issues are not going away. Oil
is not cooperating, another big problem. It`s below $50.
And, finally, we`ve had very choppy economic data in the second quarter
after a rocky first quarter. Now, normally, you would think these would be
big problems for the stock market. So, why are the markets clearly turning
a blind eye, at least for the moment?
Dozens of traders tell me it`s just not that bad, Bob. In fact it`s pretty
good. Consider the global macro picture is improving and the dollar has
been trending weaker. Earnings are growing and guidance has been better
than expected, especially for technology stocks.
And jobs are in great shape. The Fed also is on the slow path to raising
rates and to reducing their balance sheet.
And oil? Traders are saying oil is in the same relatively tight trading
range that it`s been in for six months or longer. It`s like I said,
everyone says, “I just don`t want to hear it.”
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
HERERA: But on the flip side, a new report shows that investors pulled
cash from U.S. stock funds for the fourth straight week. According to
Lippert, $10 billion were withdrawn last week, and that`s the second
largest outflow of the year.
So, is there something lurking beneath the rally that we need to be aware
Michael Yoshikami is the founder and CEO of Destination Wealth Management
and he joins us to talk about that.
Good as always to see you, Michael. Welcome back.
MICHAEL YOSHIKAMI, DESTINATION WEALTH MANAGEMENT CEO: Hi, Sue.
HERERA: Let`s start with that fundamental question. You know, Bob really
laid it out perfectly, what the market`s mood is right now. But then you
have juxtaposed to that, that statistic that funds have been flowing out.
What do you make of that?
YOSHIKAMI: Well, here`s what`s interesting, Sue. It sounds like a real
negative, right, that money is flowing out of U.S. equity funds, until you
ask, where did the money actually go? Is it going into cash? Is it going
No. It`s going into more aggressive international and emerging market
funds. So, clearly, the risk appetite is still there. And I believe it`s
going to continue to be there, particularly if rates continue to stay low.
And the latest GDP numbers show very sluggish growth. In my view that`s
not going to cause the Federal Reserve to act any way outside of cautious.
GRIFFETH: You know, Michael, I was always taught that you were supposed to
sell high, and the markets are at record highs, people are selling. You
know, can you blame them for that?
The people I worry about are the ones who have missed this rally and are
waiting for that proverbial correction to hit the market before they get
into this market right now.
YOSHIKAMI: You know what`s interesting, Bill, is we actually hear from
investors that say, listen, I`ve been out since Trump was elected, I`ve
been out for the last year. I`ve been waiting for the correction. And
they are starting to give up.
Now, that is a warning sign that we all need to be aware of, because
typically the last person in is probably the most dangerous investing time,
when the last person moves in. But I think that what you really actually
see is, there`s so much on the sidelines, Bill, what`s happening is any
dip-down in the market like we saw earlier this week, I think it was
earlier this week, when the market went down a significant amount, you have
this buying pressure on the side, just waiting to get back into the market.
And I think that`s really what has continued to keep the market levitating
where it`s at right now.
HERERA: You also like Europe. Why?
YOSHIKAMI: Well, I think Europe is the second best place to invest besides
the United States. I`m not a big fan of emerging markets. Who knows
what`s going to happen in South Korea? Brazil is obviously a disaster, as
well as much of Latin America.
And Europe is getting some sense of stability. The French election
reassured investors, and the Brexit exit looks like it`s not as disastrous
as many predicted. Many European companies are multinational so they do
sell on a global basis. And I think Europe has been oversold for too long.
HERERA: All right. Michael, enjoy the long weekend. Thank you so much
for joining us.
YOSHIKAMI: All right. Thank you.
HERERA: Michael Yoshikami with Destination Wealth Management.
GRIFFETH: Elsewhere, economic growth was revised higher for the first
quarter, according to the Commerce Department. Their second read on GDP,
the economy grew by 1.2 percent during the first three months of the year.
Consumer spending growth was higher than originally thought, while
inventory investment was far smaller than previously reported.
HERERA: Orders for durable goods fell in April for the first time in five
months. A key category in the government report that tracks business
investment was flat for the second straight month. Despite the decline,
American manufacturing has regained some momentum after being hurt by a
strong dollar and weak growth overseas.
GRIFFETH: President Trump attended his first G7 summit today where
tensions hung over some key global issues. Leaders from the world`s
industrialized nations reached an agreement on the need for Internet
companies to crack down on extremist content.
But the group failed to make a breakthrough on climate change. The
president has not yet made a decision on the 2015 deal on reducing
greenhouse gas emissions. And there`s also the issue of trade, which was
actually not officially on the agenda, but which the head of the European
Commission commented on today nonetheless.
(BEGIN VIDEO CLIP)
JEAN-CLAUDE JUNCKER, EUROPEAN COMMISSION PRESIDENT: We`ll stand up here as
we are always doing for our values of freedom, democracy, rule of law, and
respect for human rights. We do believe as Europeans in open societies.
And we are always seeking multilateral solutions. We want to build
bridges, not walls.
(END VIDEO CLIP)
GRIFFETH: Mr. Trump wraps up his first overseas visit tomorrow.
HERERA: While China is not part of the G7, it is trying to make inroads
into the American auto market. Something that`s proven difficult for a
Chinese company to do. And while the automaker hopes its new design will
turn heads, it`s the name of the flagship brand that`s getting all the
Eunice Yoon is in Guangzhou.
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: If the Chinese company
behind this car gets its way, you`ll soon see this SUV on American roads.
State-run GAC Motor believes vehicles like this have all that it takes to
win over U.S. drivers.
But depending on your politics, the brand name could be a problem or a
reason to buy. This car is a Trumpchi.
We called it Trumpchi in 2010, he says. We never imagined that seven years
later, the name would sound so similar to the name of President Trump.
The president of Trumpchi, Yu Jun, says his ambitions for the U.S. are
Trumpchi, which translates to “delivering goodness,” was the fastest
growing Chinese car brand in China last year and won high marks for
quality, giving the automaker the confidence to believe it can beat the
odds and do what no other Chinese car brand has been able to achieve —
conquer the U.S.
American drivers are like Chinese drivers, he says. They both like big
sizes, big spaces and luxury interior.
The plan is to export cars like this one from Trumpchi`s factories in
China. Yu is considering partnering with a U.S. automaker to produce
locally and he sees a potential to build his own factory down the line.
Despite the anti-China rhetoric out of the White House, Yu says Trumpchi is
in it for the win when he starts selling there in 2019.
If we can succeed in the U.S. market, we can succeed anywhere in the world,
Is the Trump name a help or a hindrance?
It`s hard to say, he says. We`re still trying to figure that out.
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Guangzhou.
GRIFFETH: Still ahead, if you build it, will they still come?
(BEGIN VIDEO CLIP)
JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: I`m Jane Wells. I`ve
walked out on the streets of Laredo, where thousands of vehicles pass
through every day here between the border of U.S. and Mexico. Also right
here, two developers have built a mall, hoping no wall will stop Mexican
shoppers seeking American low prices. We have that, next.
(END VIDEO CLIP)
GRIFFETH: UPS has been ordered to pay nearly $250 million in damages and
penalties to New York City and state for illegally shipping untaxed
cigarettes. The shipping company said the fine was excessive considering
that the shipments only generated about $1 million in revenue for the
company. It plans to appeal that decision.
HERERA: President Trump has vowed to build a wall. But developers are
building a mall not too far from the border. And the shopping center is
banking on Mexican shoppers.
Jane Wells reports tonight from Laredo, Texas.
WELLS: Laredo, Texas, is the nation`s largest land port, $200 billion in
goods pass through here annually. But on the streets of Laredo, the local
economy is heavily dependent on shoppers specifically shoppers crossing
over the Rio Grande from Mexico.
MAYOR PETE SAENZ (D), LAREDO, TX: Our local economy is easily 40 percent
or more dependent on the Mexican shopper.
WELLS: With that in mind, developers spend $120 million to build a massive
outlet mall on the river on the U.S. side of the border.
GARY SKOIEN, HORIZON GROUP PROPERTIES CEO: We did it because Mexican
consumers love brands. They aren`t able to buy a lot of the brands that we
have here in Mexico. And when they can, they`re more expensive than here.
They like the labels and they like the prices.
WELLS: The city kicked in millions of dollars in incentives to get this
mall built. It finally opened in March, just as the new administration was
talking tough in Mexico. And owners found themselves potentially running
into a wall — literally.
SKOIEN: The timing was challenging. There`s no two ways about it.
WELLS: But CEO Gary Skoien says, so far, sales have been brisk, $4 million
in two weeks. Outlet malls have outperformed the rest of retail because
they`re seen more as destinations.
Carl Calderon from Mexico is shopping here for the first time and likes
having the new store so close. But sales tax receipts in Texas border
towns are down. Some blame President Trump scaring people away. Some
blame a weak peso.
KENNIA LOPEZ, SHOPPER: There has been lower people from Mexico coming
because of the whole Donald Trump thing. But if they have money, they like
to spend, they`ll come.
WELLS: And the mayor is hopeful a physical wall will not be built in
Laredo. He says the border is right in the middle of the Rio Grande.
SAENZ: We`re welcoming of the Mexican shopper simply because that`s our
nature, but also, it`s good business for our city.
WELLS: He hopes low prices and a welcoming attitude will keep shoppers
coming, even if getting here becomes more complicated.
For NIGHTLY BUSINESS REPORT, Jane Wells, Laredo, Texas
GRIFFETH: Web.com may want to go private, and that`s where we begin
tonight`s “Market Focus”.
“Reuters” says the Internet name domain provider has started early stage
talks with private equity firms after unnamed parties expressed takeover
interest in the website builder. The company`s market cap is just about $1
billion right now. Web.com shares popped nearly 9 percent today, closed at
Chip maker Qualcomm (NASDAQ:QCOM) is going to pay BlackBerry nearly $1
billion to settle a fight over royalty payments that we told you about last
month. Qualcomm (NASDAQ:QCOM) is expected to pay that amount by the end of
this month. Qualcomm (NASDAQ:QCOM) shares fell a fraction to $57.52.
Blackberry was down 1 percent to $11.11.
And Big Lots (NYSE:BIG) has raised its earnings outlook for the year
following a better than expected profit. But the discount retailer did
miss revenue expectations due to a surprise decline in same store sales.
The company also sees profit for the current quarter above estimates. As a
result, shares rose almost 3 percent today to close at $49.79.
HERERA: Bill, Newell Brands is selling its winter sports business to a
private equity firm for $240 million. The consumer goods company says the
deal is part of its ongoing growth strategy to simplify its portfolio. The
shares were up a fraction to $53.19.
Shares of Deckers Outdoor (NASDAQ:DECK) continued to soar today following
the company reporting a surprise profit last night. The maker of Ugg boots
and Teva sandals did see sales fall, but those results still topped street
expectations. Deckers was up just about 19 percent today to $67.21.
And shares of GameStop got hit today despite reporting its first sales
increase in five quarters after the bell yesterday. The video game
retailer said strong demand for the Nintendo Switch gaming console helped
its overall profit and revenue picture. GameStop was down 6 percent to
GRIFFETH: Now to our market monitor. He has names of stocks that he says
are reasonably valued in a market that he says is a little bit on the
expensive side. This is his first time joining us on the program. He is
Ernie Cecilia, chief investment officer at Bryn Mawr Trust.
Ernie, good to see you. Thank you for joining us tonight.
ERNIE CECILIA, BRYN MAWR TRUST CIO: Thank you for having me, Bill.
GRIFFETH: We start with JPMorgan (NYSE:JPM) Chase. Clearly, the banks
have suffered. This is not the environment for them. But why do you pick
that stock right now?
CECILIA: Well, we see the economy expanding at a sufficient pace to
improve loan demand. And loan demand really is the driver of bank stocks
and bank earnings.
So, we see Jamie Dimond as a terrific CEO at the helm of this bank. The
balance sheet is very strong, and therefore very well capitalized. We see
the risk being relatively low here in terms of any problems. And the bank
has made significant investments in technology across its platform for both
consumer banking and for its asset management business which I think is a
little bit under the radar.
So, we see a lot of good value here for long term, looking at the next
three to five years with a nice dividend and strong dividend growth.
HERERA: OK. Let`s go to Skyworks Solutions (NASDAQ:SWKS). You say it`s
well-capitalized and with consolidation in its particular area, it will
either acquire or perhaps be acquired.
CECILIA: Right. Hi, Sue.
Skyworks is not one of your household names, perhaps. It`s, as you say,
it`s a semiconductor company and it`s involved in the integration of
wireless technology, particularly on the mobile side. One of its largest
customers is Apple (NASDAQ:AAPL).
So, think of it this way. It`s another way of playing, if you will, or
participating in iPhone sales but not directly through Apple (NASDAQ:AAPL),
which has performed well. So, this company is growing its top line, its
sales, that is, at about 18 percent a year, and bottom line at 34 percent.
So, this is an attractive way of getting inside, if you will, new
technology, into an $18 billion market cap company.
GRIFFETH: Finally, another bank, this one a regional, though. Union
Bankshares (NASDAQ:UNB) in Virginia. Why this one?
CECILIA: Yes, Bill, unlike the size of JPMorgan (NYSE:JPM), this is a $1.5
billion market capitalization, headquartered in Richmond, Virginia. It`s
the largest bank state in Virginia. We think Virginia has strong
demographics, strong geographics.
Earlier, they announced acquisition — just recently they announced
acquisition of Zenith Bankshares, which gives them an inroad into the
Hampton Roads market. We do think regulatory reform will happen, and it
will disproportionately benefit smaller banks like Union Bankshares
(NASDAQ:UNB). So, we like it long term.
HERERA: You know, you expect some pretty decent returns out of the three
picks that you gave us. But how do you feel about the overall market,
specifically as it pertains to valuation?
CECILIA: Yes. Well, we think the market is a bit expensive, if you will,
on an earnings basis. We see at least a full multiple or one-time P/E
basis, more expensive than history. When we look out over the next five
years or so, sue, we see earnings growth in the 4.5 to 5 percent area. We
see dividends tagging on, if you will, 2 percent.
So, again, this is U.S. So, we see returns in the 7 percent area, which
are certainly lower than the historic returns which might be closer to 9 to
10 percent. Some of the big returns we witnessed more recently. But still
very attractive on a long term basis, and particularly attractive relative
GRIFFETH: Ernie, good job. Good to see you. Thank you for joining us
CECILIA: Thank you, Bill. Thank you, Sue. Happy Memorial Day.
HERERA: You too.
GRIFFETH: And same to you.
HERERA: And on this holiday weekend, coming up, taking the stress out of
CONTESSA BREWER, NIGHTLY BUSINESS REPORT CORRESPONDENT: I`m Contessa
Brewer at DFW airport where the goal is for every traveler to be a happy
traveler. And you won`t believe the amenities they`re offering to try to
make that happen. That`s coming up on NIGHTLY BUSINESS REPORT.
(END VIDEO CLIP)
HERERA: Used car prices are falling. And that is because 3.5 million of
them are expected to come off lease this year, increasing the supply of low
mileage used vehicles. A lot of those vehicles will be sedans, not SUVs,
which are still high in demand. Those cars will be harder to sell. And
that could ripple throughout the auto market, pushing down prices of new
vehicles as well.
GRIFFETH: We told you yesterday that new security measures at some
airports could cause lines to grow this summer. But once you clear those
checkpoints or just find yourself with a little extra time in the terminal,
there are companies making it their business to help you de-stress.
Contessa Brewer reports for us tonight from Dallas.
BREWER: Step off the plane at DFW Airport, and you just might get an
opportunity to pet Max.
UNIDENTIFIED MALE: Good boy. You can pet him, ma`am. He`s used to
BREWER: Max and dozens of other therapy dogs began roaming the terminals
with their human handlers last October.
UNIDENTIFIED MALE: He`s had a hot day.
BREWER: The results are obvious and instantaneous.
STEPHEN BURNS, DOG HANDLER: Very few people walk by without coming to pet
him. It just makes everybody smile. It makes everybody`s happy.
BREWER: You know what else makes a cranky traveler happy? A nap. You can
plop down $42 and for one full hour, you get, oh, 56 square feet of
beautiful peace and privacy. Enough space for two people to stretch out
for a little shut eye without ever leaving the terminal.
COREY FREEZ, MINUTE SUITES CUSTOMER: It`s definitely got enough space and
some privacy. You can relax and catch some satellite television and zone
out for a little bit and forget the fact that I`m at an airport terminal.
BREWER: Pay a little more and you get a shower, a plus for passengers
getting off a long international flight. Along with locations in Atlanta
and Philadelphia, Minute Suites hosts 2,000 guests a month.
DANIEL SOLOMON, MINUTE SUITES CO-FOUNDER: The American airports are
understanding, to compete on the international market, they need to have a
place like this, a place, a respite for travelers, that they can sleep and
BREWER: DFW is the tenth busiest for travelers in the world. To get an
competitive edge against other global hubs, this airport is upping its
KEN BUCHANAN, DFW AIRPORT CUSTOMER EXPERIENCE EVP: In today`s society,
customers and passengers have choices in where they want to connect and
where they want to fly out of. And we think if we can create a better
experience here at DFW International Airport, they`ll choose us over any
BREWER: And it`s working. DFW was just named the best large North
American airport for customer satisfaction. Those customers find mood
lighting and comfy couches at security. A yoga studio to find your inner
Zen. Play space for children. Good food at every price point. Free Wi-
Fi. World class shopping that`s about to premier a first of its kind duty
free mall. Volunteer ambassador to show you around.
But, DFW, you had me at hello doggie.
Good dog. He`s a good doggie dog.
For those who complain air travel has gone to the dogs, at least here
you`re absolutely right.
Contessa brewer, NIGHTLY BUSINESS REPORT, DFW Airport, Texas.
HERERA: From airports to marinas, where boat sales are cruising into the
summer season at a good pace.
Landon Dowdy is at New Smyrna Beach, Florida.
LANDON DOWDY, NIGHTLY BUSINESS REPORT CORRESPONDENT: For boating
enthusiasts, the long Memorial Day weekend is the kickoff to the summer
season. There could be more people heading out on the water now that boat
sales are at their highest level since the recession. And for dealers like
Tom Houliares, the pickup in demand has been keeping him busy.
TOM HOULIARES, MARINE MAX GENERAL MANAGER: It`s up 30 percent. You`ve got
a change in office. You have — the stock market is at an all-time high.
You`ve got good job reports.
DOWDY: Sales of power boats are expected to rise this year and next year.
However, high end manufacturers like Boston Whaler aren`t counting on mega
yachts like these for that growth.
HUW BOWER, BRUNSWICK BOAT GROUP PRESIDENT: Overall demand for the yacht
segment is a little soft. We`ve seen it in industry data over the last
three to four quarters.
DOWDY: The slowdown has been attributed to a stronger dollar, which has
helped European competitors. Add to that, growing concern from potential
buyers that Washington won`t be able to pass the tax cuts that they`re
Boat manufacturers are facing another challenge: not enough workers. At
Boston Whaler`s manufacturing plant in Florida, boats are made by hand and
can take up to four months to complete. The company says it`s having
trouble filling open positions because of a lack of skilled workers and a
wave of retirements.
And while industry experts don`t expect sales to get back to pre-recession
levels, they are optimistic that middle market buyers will keep the
BOWER: I look at their portfolio, we`re seeing strong demand for pontoons,
21 to 25 feet. We`re seeing strong demand for that recreational day boat,
30 to 35 feet without full power.
DOWDY: For NIGHTLY BUSINESS REPORT, I`m Landon Dowdy, New Smyrna Beach,
GRIFFETH: Finally, a celebration of sorts for here at the New York Stock
Exchange. The Dow Jones Industrial Average is 121 years old today, how
time flies. When it was first published, the Dow`s holdings included
companies that represented each sector of the market and the company. It
included names like American Cotton Oil, American Sugar, and one we`re all
still familiar with today, Sue, that would be General Electric (NYSE:GE),
which, by the way, is still the only company that started and it`s still in
the index today.
HERERA: And it`s still here, yes, it is. Terrific.
Bill, thanks so much. You have a great long weekend.
GRIFFETH: You too.
HERERA: That will do it for NIGHTLY BUSINESS REPORT. I`m Sue Herera.
Thanks for watching.
GRIFFETH: I`m Bill Griffeth. Do have a great weekend, everybody. We`ll
see you again back here on Monday for a special Memorial Day edition of
NBR. Good night.
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