ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Bill Griffeth and Sue Herera.
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Big tech comeback. A group closes at a new high, a big move considering it was battered and bruised just a few months ago. Shifting gears. The major automakers are embracing electric vehicles and making green more affordable for drivers.
Sweet idea? Can a company known for its gold box of chocolates find growth by expanding into an ultra competitive industry?
Those stories and more tonight on NIGHTLY BUSINESS REPORT for this Wednesday, April 17th.
And we do bid you a good evening, everybody, and welcome. Sue is off tonight.
Don`t look now, but big tech is making a very big comeback. That sector has been powering higher the past few months, and today, the Nasdaq 100 closed at a record high. That index is a basket of 100 largest and most actively traded companies on the Nasdaq, which is made up mostly of technology stocks. It`s a remarkable turnaround for a group that was beaten down just a few months ago. Bertha Coombs starts us off tonight.
BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Nasdaq 100`s gains today were driven by Apple (NASDAQ:AAPL) and chip technology firm Qualcomm (NASDAQ:QCOM) after the tech giants announced that they had settled their longstanding patent dispute. Large cap tech names dominate on the Nasdaq 100 and it has been their strong recovery in 2019 that has pushed the index to a new record high after what was a brutal year end of 2018.
The semiconductor sector is a prime example. Semis fell 18 percent in the fourth quarter and concerns the U.S.-China trade war would make it difficult for manufacturers to import chips to the U.S. The trade headlines have improved. Chipmakers have seen a strong recovery with new highs today for Qualcomm (NASDAQ:QCOM), Intel (NASDAQ:INTC) and Broadcom (NASDAQ:BRCM), and a new record for the sector.
The biggest contributors to the Nasdaq 100`s gains year to date have been four of the tech heavyweights that suffered big losses in December. Facebook (NASDAQ:FB) is now up 36 percent. Apple (NASDAQ:AAPL) up 28 percent and Amazon (NASDAQ:AMZN) up 24 percent and Microsoft (NASDAQ:MSFT) up 20.
But the next big catalyst for this group is going to be earnings, with all four scheduled to in the next couple of weeks.
For NIGHTLY BUSINESS REPORT, I`m Bertha Coombs at the Nasdaq.
GRIFFETH: Timothy Lesko joins us now to talk more about technology and what`s driving it. He`s principal at Granite Investment Advisers.
Tim, always good to see you. Thanks for joining us tonight.
TIMOTHY LESKO, GRANITE INVESTMENT ADVISORS PRINCIPAL: Thanks for having me, Bill.
GRIFFETH: So, just a few months ago, and as Bertha was pointing out, down so sharply and now we`re back. But does that mean the problems that were plaguing the group, the problems with semiconductors, the slowdown in sales for smartphones, the trade concerns, are those gone now?
LESKO: I wouldn`t say that all of the concerns are gone, but a few have been taken off the table, particularly investors see that the Chinese trade negotiations seem to be going well or better than anybody expected and on top of that a few of the individual stocks had stock-specific news that went their way. So, it was a nice combination of those stock-specific news and market news in general.
GRIFFETH: And what are your expectations for the earnings that she was just mentioning for some of these giants that are reporting soon?
LESKO: Well, the same factors that brought the stocks down heavily in the fourth quarter of last year led to analysts really cutting their estimates. So, these companies don`t need to grow that much to beat the lower expectations that Wall Street had set for them over the next few weeks so we expect a good earnings season out of technology.
GRIFFETH: And what about the semiconductors? I mean, they are a, what, a benchmark for the whole industry right now, and they have suffered greatly. What`s your outlook for some of those companies right now? The Intels and others that are out there?
LESKO: Right. Well, certainly, you have Intel (NASDAQ:INTC), Qualcomm (NASDAQ:QCOM) and Broadcom (NASDAQ:BRCM) which both had mentioned and all three of them had very, very specific reasons why they were struggling against a broader technology that had done well and each of them had solved those problems that we were worried about.
So, in Intel`s case, they are getting out of the 5G chip business which they were really struggling in and investors saw that as a positive light. So, we really have good expectations for all three of the major chipmakers and all of them are trading at a reasonable valuation. So, there`s plenty of room for them.
GRIFFETH: All right. Well, so far so good for that group as it moves higher.
Tim Lesko with Granite Investment Advisers — thanks again for joining us tonight, Tim.
LESKO: Thank you for having me.
GRIFFETH: And it`s not just the tech sector moving higher. Other parts of the U.S. and global markets have also been rallying, just not today. The Dow was down three points, we were at 26,449 at the close; the Nasdaq fell by four; the S&P 500 slipped by six.
Bob Pisani, though, has more on what has been working for investors.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The U.S. bucked the up trend in global markets on disappointing earnings and the continuing weakness in healthcare. But markets in Europe and Asia were up as China reported better first quarter GDP numbers than expected. GDP has been declining for years in China and the anticipation of a bottom there is the main mover of the global stock market in the past couple of months on the heels of the massive stimulus over there and the hopes for a trade deal.
The S&P 500 isn`t the only major index patterned near a new high. Stock exchanges in Russia, in China, in Saudi Arabia, all at 52-week highs. India is at an historic high.
The other main mover s have been earnings and fear of an earnings recession and two or more consecutive quarters of a decline on the S&P 500 are dissipating as China avoids a meltdown and Europe kind of just muddles through. Analysts dramatically cut earnings estimates in December on those fears and they appear to have cut too much.
Just look today at the companies that are beating earnings on very wide margins, including Netflix (NASDAQ:NFLX), Morgan Stanley (NYSE:MS) and Textron (NYSE:TXT), all beating earnings estimates by double digits, that`s far more than the typical earnings beat of about 3 percent. Only IBM with weak earnings growth and negative growth was a major disappointment today.
As a result, many sectors of the S&P are at or near new highs, technology and consumer discretionary, consumer staples and communication services.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
GRIFFETH: More now on those growth numbers out of China overnight which seemed to signal stabilization in the world`s second largest economy, and it comes after that country flooded its economy with stimulus money.
Eunice Yoon reports for us tonight from Beijing.
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Investors have been asking if China`s economy is bottoming out and it appears to be stabilizing. China`s GDP for the first quarter came in at 6.4 percent, slightly beating expectations of a slowdown. Industrial output was its strongest in four and a half years, 8.5 percent, possibly because the U.S. and China have been holding back on tariffs as well as seasonal factors, manufacturers were in full force after the lunar New Year holiday in February.
(INAUDIBLE) said Beijing`s recent policy steps like tax cuts for consumers and local government bond sales showed up in the March data, retail sales jumped, fixed asset investment picked up, construction starts to jump 18.1 percent year on year from 6 percent in the previous month as the authorities loosened real estate curves. Analysts believe that this could mean China`s policymakers would hold up on further stimulus for now.
They also have to worry another factor: rising prices. Pork production fell by 5.2 percent year on year as China attempted to contain an outbreak of African swine fever in its hog population. Prices are expected to rise by more than 70 percent in the second half of the year, putting upward pressure on inflation.
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.
GRIFFETH: Let`s turn to Mark Grant right now for more on the global markets. He is the global market strategist at B. Riley FBR.
Mark, good to see you again. Thanks for joining us tonight.
MARK GRANT, B. RILEY FBR CHIEF GLOBAL MARKET STRATEGIST: Hi, Bill. Good to see you. Always a pleasure.
GRIFFETH: So, the biggest concern, let`s face it, in the global economy has been China. What did you think of these numbers overnight? They were pretty impressive.
GRANT: They were certainly much better, Bill, than most people thought. The issue in my mind with China is the amount of stimulus that the government has been providing and the increased amount of debt and not only the corporate debt, but public debt in China that I think has gone a long way to stimulate their economy, plus their central bank, the People`s Bank of China has been adding quite a bit of money into the economy, and it`s — I think that`s a big cause of the upward move here.
GRIFFETH: So you`re concerned about that part of the equation, but what about the trade talks. We hear that the progress continues and they hope to have something signed by next month.
GRANT: You know, that`s what they say, they`ve indicated this before and I hope they do. I think it would certainly be good for the markets both in China and the United States if this gets accomplished. So, we`re all sitting around on Wall Street with our fingers crossed.
GRIFFETH: Yes, indeed. Are there other parts of the global economy that you like better at this point? That you feel — we had an analyst last night saying the emerging markets are attractive right now. What do you think?
GRANT: I don`t think that`s correct and my favorite market and the global markets right now is the United States because of the stability, because of very low interest rates, because the Fed has changed its course.
My biggest concern, by the way is in China, and it`s Europe. Europe on May 23rd, it has its national elections, or elections across the whole European Union.
GRANT: And it looks to me, like, Bill, that the group that`s controlled the use since its inception which is the German-French alliance, the populist or the nationalists is what I think the better word is, but are going to get either a significant share of the new E.U. parliament or they might get the majority of the new E.U. parliament, and I think the European Union will be a very different place. So I`m very cautious on any investments in Europe right now.
GRIFFETH: And very quickly, all of the central banks around the world except ours right now seem to be loosening their monetary policy and you mentioned China, both elsewhere. But does that bother you at all?
GRANT: Well, I think it`s a positive that interest rates are lower, without any question. The Japanese central bank they have a balance sheet that`s equivalent to the entire GDP of Japan. The ECB has a balance sheet way larger than the Fed at this point, and they`re going to be lending more cheap money to the banks over there.
GRANT: And the Fed has done a back flip, if you will, and has stabilized interest rates. I think that`s been a very positive for both the bond and the equity markets in the United States, and I think that`s going to continue.
GRIFFETH: All right. Mark Grant with B. Riley FBR — again, thanks for joining us tonight.
GRANT: Thank you, Bill. Thank you, sir.
GRIFFETH: You bet.
Speaking about the Federal Reserve, it released its monthly anecdotal look at the U.S. economy today, and it showed moderate growth despite continued trade tensions and the severe flooding that we saw in the Midwest.
Steve Liesman has more on the Fed`s Beige Book.
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Federal Reserve`s April Beige Book finding slightly moderate growth in the 12 districts of the Federal Reserve. It`s a similar report as last time, but some districts did see strengthening, consumer spending was mixed with sluggish sales for general retailers and for autos.
Now, the contexts in many districts reported, quote, trade related uncertainties with about as much concerned mentioned about trade and tariffs in this report as the last one. Employment continues to increase with the majority of districts in high-skilled jobs, and the weight pressure, especially for those high-skilled jobs, and most districts are saying there was modest wage growth.
Prices overall were up modestly with input costs increasing, including higher fuel prices, tariffs, freight costs and rising wages all driving the pricing trend here.
In St. Louis, retailers expected to be able to pass along their higher prices. Oh, by the way, in St. Louis, there was concern about flooding in Minneapolis and Kansas City as well affecting the agriculture industry.
But to the wages, Dallas reported elevated wage pressure. Philly, more than half of fall firms expected higher input costs. And New York City, there was a widening gap between the salary demands and salary offers that left some positions unfilled.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman in Washington.
GRIFFETH: One bit of economy news, our trade deficit with the world fell in February to its lowest levels since June of last year. That was well below what economist had been expecting, and the decline was due in large part to a 28 percent decline in the goods deficit with China, as exports to that country rose. In the meantime, as we mentioned trade negotiations with China are moving along.
According to the Dow Jones, U.S. and China are expecting to reach a deal as soon as May with the two countries setting a tentative time line for the next round of talks that involves Trade Representative Robert Lighthizer going to Beijing the last week of April.
Elsewhere, you take a look at some of today`s “Upgrades and Downgrades”, with Bank of America (NYSE:BAC) being downgraded today to hold from buy at Jefferies. The analyst cited some challenges when it comes to fees, service charges and net income. The price target now $32. That stock was up a fraction today to $30.03.
Paypal was downgraded to neutral from buy at UBS. The analyst says the monetization of its Venmo app is already priced into that stock. Price target now, $120. Shares were up modestly to $108.81.
And ride-hailing company Lyft was initiated with a neutral rating at Susquehanna today. The analysts says that Lyft investors should be concerned with the company`s position as the number two player behind Uber which will debut on its own on Wall Street next month. The price target on Lyft, $57. The stock was up nearly 6 percent today at $59.51.
Still ahead, automakers are plugging in.
(BEGIN VIDEO CLIP)
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: I`m Phil LeBeau at the New York Auto Show, where electric vehicles like this one from Rivian are turning heads like never before. Why are so many people now considering an EV? That story coming up on NIGHTLY BUSINESS REPORT.
(END VIDEO CLIP)
GRIFFETH: Zoom, one of the highly anticipated high tech companies coming public, reportedly has priced its initial public offering at $36 a share. That was above expectations. As we`ve been reporting, Zoom has been profitable, which sets it apart from some of the other tech companies that are coming public. Shares will begin trading tomorrow on the Nasdaq under the ticker symbol, ZM.
Well, one day after Qualcomm (NASDAQ:QCOM) and Apple (NASDAQ:AAPL) ended their long-running legal battle, the CEO of Qualcomm (NASDAQ:QCOM) today said that he is looking forward to working with the iPhone maker.
During an interview, Steve Mollenkopf also said that now is the time for his company to look to the future and focus on new opportunities including 5G.
(BEGIN VIDEO CLIP)
STEVEN MOLLENKOPF, QUALCOMM (NASDAQ:QCOM) CEO: We did put the medal to the metal on 5G. I think it`s a right thing to do for the company. Independent of this relationship, and I`m sure it was important to this relationship as well. It`s a lot — you know, the impact of 5G is just going to be tremendous, not only in the handset space but outside of the handset space.
We think we`re the clear leader and I think that`s going to be a good thing not only for our customers, but for our shareholders.
(END VIDEO CLIP)
GRIFFETH: Qualcomm (NASDAQ:QCOM) rose another 12 percent today, adding to that 20 percent gain we saw yesterday.
Pepsi shares rose to a record high today after the company reported solid quarterly results and said the investment in its snack business is paying off. That sent the stock up more than 3.5 percent to that all-time high.
Sara Eisen has details.
SARA EISEN, NIGHTLY BUSINESS REPORT CORRESPONDENT: PepsiCo is turning up growth a notch, posting its best sales growth in about three years. The key number for PepsiCo, organic revenue, growing 5.2 percent.
What`s behind that kind of growth? Well, snacks for one is doing much better. Growth in Frito-Lay in particular, the core brand fueling the gains, but also North American beverage business has come back lately.
Hugh Johnston, the CFO and the vice chairman of PepsiCo, says the portfolio is just working.
HUGH JOHNSTON, PEPSICO CFO: I think it`s a combination of a few things. Number one, you see continued portfolio strength, whether it`s our U.S. businesses, our international businesses across snacks and beverages, we just continue to see strong broad-based performance. In addition to that, our North American beverage business really has been strengthening over the last couple of quarters as we`ve invested in more advertising, we`ve invested in more execution.
EISEN: PepsiCo is spending a lot more these days on advertising just like Coca-Cola (NYSE:KO) has been doing. It`s also seeing better execution. For instance, when it comes to the sales force on the ground, just placing product in the store, Johnston tells me they`ve seen a lot more efficiencies that lead to higher profits and higher sales. He also says it`s a pretty consumer globally.
JOHNSTON: Within our segment of the economic world, we see a consumer that is capable of spending and is willing to spend on products that they really see is differentiated and adding value, and that`s what`s driving our focus behind putting money behind advertising, putting money behind innovation, because when you deliver something different that the consumer likes, they`re certainly willing to pay for it and buy lots of it.
EISEN: The market has also reflected Pepsi`s new growth prospect. The stock has outperformed Coca-Cola (NYSE:KO) and the rest of the staples so far in 2019, and it`s certainly upped the bar for Coca-Cola (NYSE:KO) reporting earnings next week. It`s been hit a little bit harder by the strength of the U.S. dollar because it has a much bigger international business.
For NIGHTLY BUSINESS REPORT, I`m Sara Eisen.
GRIFFETH: Morgan Stanley (NYSE:MS) topped Wall Street earnings and revenue estimates and that`s where we begin tonight`s “Market Focus”, with the bank citing growth in its wealth management unit, as well as on cost-cuts.
James Gorman, the CEO, said that overall, results were solid despite a slow start to the year. On a call with analyst the outlook remains uncertain.
(BEGIN VIDEO CLIP)
JAMES GORMAN, MORGAN STANLEY CHAIRMAN & CEO: The world remains uncertain. I`d love to think the next three quarters is the last three quarters of last year, but, you know, I`m a betting man and I`m not sure I make that bet right now. The world is uncertain, and until we see more clarity, we`re going to be very disciplined. It`s not a panic, we just, good schematic funds management.
(END VIDEO CLIP)
GRIFFETH: Morgan Stanley (NYSE:MS) shares rose more than 2.5 percent today to $48.26.
U.S. Bancorp (NYSE:USB) reported a rise in commercial and mortgage lending, as well as some of its payments businesses and that helped the company report earnings that were in line with expectations although revenue was slightly below estimates. The CEO said the company was helped by rising interest rates and higher yields on securities, and shares rose a fraction today to $50.67.
American Airlines says it cannot yet forecast the cost of the 737 MAX groundings. The carrier says it`s still too early and too much uncertainty around that issue. Earlier this week, you may remember American canceled all 737 MAX flights at least through mid-August. That stock was up 1 percent today to $34.38.
And U.S. railroad operator Kansas City Southern (NYSE:SO) (NYSE:KSU) topped first quarter earnings estimates, its revenue was up 6 percent from last year, and it was helped by an increase in refined fuel and grain shipments to Mexico. The company gets one-third of its revenue from that country. The stock rose 4 percent today to $122.81.
Abbott Labs also reported a healthy profit and rise in sales, thanks to growth in its heart and diabetes care devices. The CEO said the company`s long term growth drivers are performing well and he`s targeting another year of strong sales. But investors apparently are focusing on regulatory uncertain with that talk in Washington about changes in healthcare insurance programs, and the stock fell 4.5 percent today to $72.88.
After the bell tonight, Las Vegas Sands (NYSE:LVS) reported higher revenue and better than expected profit. The gaming company cited growth in Macau, which is now the world`s largest gambling market, and that sent the stock higher in after-hours trading. It finished the regular session at $67.91.
While auto sales are gradually slowing, automakers believe that America is finally warming to buying an electric vehicle. And that may explain why plug-in models have been grabbing the headlines at this year`s New York Auto Show. That is where we find Phil LeBeau tonight.
LEBEAU: From electric pickups to luxury plug-ins to crossovers like the Jaguar I-PACE, automakers are embracing EVs like never before.
JOE EBERHARDT, JAGUAR LAND ROVER N.A. CEO: The performance is phenomenal. The driving dynamic is unlike any other car. So, customers are starting to really see the benefit of an electric vehicle as an everyday commuting vehicle. It`s part of the conversation.
LEBEAU: The conversation was sparked by Elon Musk and his company Tesla started rolling out luxury electric models six years ago. Now with the Tesla Model 3 starting at $35,000 and the base model Chevy Bolt selling for under $40, going green has become much more affordable.
DAVE HABIGER, JD POWER: The entry-level cars are 30, 40 grand when they used to be 60 and 70. And frankly, those 30 grand, 40 grand cars are going twice as long on battery as the cars two years ago did on 70.
LEBEAU: While traditional automakers like Audi are driving the EV discussion with new plug-ins, there are also start-ups like Rivian, turning heads with an all-electric pickup scheduled to go on sale in 2021.
RJ SCARINGE, RIVIAN CEO: Critical for us to get customers in is the vehicle has to give them a very strong reason to switch from an existing brand whether they`re in a truck or whether they`re in a Land Rover or BMW. It has to give them a really strong reason.
LEBEAU: Buyers maybe more interested in plug-in models, but electric vehicles still make up less than 3 percent of all U.S. auto sales, proof the industry still has a ways to go before it can convert electric vehicle interest into actual sales.
Phil LeBeau, NIGHTLY BUSINESS REPORT, New York.
GRIFFETH: And to read more about the New York Auto Show this year, you can head to our website right now at NBR.com.
When we come back, can Godiva find growth outside their famous gold boxes of chocolate?
GRIFFETH: Companies certainly are always looking for new areas of growth, and today, a company best known for its chocolate is hoping to find the next leg of growth in cafes.
Courtney Reagan is in New York City for us tonight.
COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: When consumers think about Godiva, premium chocolate gifts is likely what comes to mind. After all, that`s the history of the nearly 100-year-old chocolate maker that sells in 105 countries and 800 retail locations globally.
UNIDENTIFIED FEMALE: Have a great day.
REAGAN: Godiva`s CEO has a big plan to grow the business and a big part of that is new Godiva Cafes.
ANNIE YOUNG-SCRIVNER, GODIVA CEO: We feel that that could be a big piece of our growth for the future. In fact, around 40 percent of our revenue in the future can come from these cafes. We believe that we have the opportunity to fivefold our business over the next six years.
REAGAN: This new Godiva cafe opened officially in New York City on Thursday. It`s just one of 2,000 planned around the world. Four hundred ultimately will be in the United States. They sell chocolate, of course, but also different coffee drinks and craffles, which is a cross between a croissant and a waffle.
Young-Scrivner brings food and the beverage experience to Godiva. Before running the chocolate maker, she ran Starbucks (NASDAQ:SBUX) digital and loyalty businesses. And before that, she ran Starbucks (NASDAQ:SBUX) tea brand Teavana.
The food and beverage sector is a crowded space and not without risk. Starbucks (NASDAQ:SBUX) had nearly 400 Teavana stores under Young- Scrivner`s leadership, but ultimately, closed all of them two years ago.
There`s the expense of securing real estate in high-traffic locations, hiring and training employees and convincing consumers throughout treats into their diets.
PARMESH BHASKARAN, ALIXPARTNERS DIR., RESTAURANTS, HOSPITALITY & LEISURE: Before there were only a chocolate, if I may say a store, now, they wanted to go into fresh foods. The supply chain is going to be very different. How well have they thought about the supply chain is also going to be critical in the space.
REAGAN: Godiva hopes the cafes provide a halo effect spurring other purchasing.
YOUNG-SCRIVNER: They have an opportunity to really open up digital where you can order online, pick up in store and that makes it really easy for our customers, as well.
REAGAN: Kind of like the Starbucks (NASDAQ:SBUX)?
YOUNG-SCRIVNER: Or better.
REAGAN: Young-Scrivner is confident in her plans, and so is the taste and experience the Godiva cafe`s offer will be the deciding factor for consumers.
For NIGHTLY BUSINESS REPORT, I`m Courtney Reagan in New York City.
GRIFFETH: And that is NIGHTLY BUSINESS REPORT. I`m Bill Griffeth. Thanks so much for watching. We`ll see you tomorrow.
Nightly Business Report transcripts and video are available on-line post broadcast at http://nbr.com. The program is transcribed by ASC Services II Media, LLC. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Nightly Business Report, or CNBC, Inc. Information presented on Nightly Business Report is not and should not be considered as investment advice. (c) 2019 CNBC, Inc.