ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Sue Herera and Bill Griffeth.
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Apple`s core. The company beats on earnings and revenue. Its guidance was strong. Its dividend got a boost and investors liked what CEO Tim Cook had to say.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: A new risk. General Electric (NYSE:GE) says the grounding of Boeing (NYSE:BA) 737 MAX is creating some uncertainty, and the ripple effects don`t stop there.
GRIFFETH: Going viral. It can help grow a new business, but for one entrepreneur, it also came at a very big cost.
Those stories and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, April the 30th.
HERERA: Good evening, everyone, and welcome.
The S&P 500 closes at a record, more on that in just a moment. But we begin tonight with Apple (NASDAQ:AAPL) and results from one of the world`s most valuable companies. Apple (NASDAQ:AAPL), which is widely held among investors and mutual funds, retirement accounts and ETFs, reported better than expected earnings and revenue. The guidance was upbeat and investors breathed a sigh of relief, sending the stock higher in initial afterhours trading, pushing back towards that trillion dollar valuation.
Josh Lipton has more from Apple`s headquarters in Cupertino, California.
JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Apple (NASDAQ:AAPL) no longer breaks out iPhone units every quarter, but it does disclose iPhone revenue. And in this quarter, iPhone revenue came in at $31.05 billion and that was down 17 percent, but basically in line with what Wall Street had forecasted. An important market, obviously, for Apple (NASDAQ:AAPL) is China and going into this quarter, some analysts said, in fact, China was a bit of a wild card.
I had a chance to catch up with CEO Tim Cook, talked about the quarter, he said trends are improving in China. Specifically, he talked about the trade relationship between the U.S. and China. He said, I mean, the tone is much better today, Cook saying, than it was in the November-December timeframe. That affects consumer confidence in a positive way.
For NIGHTLY BUSINESS REPORT, I`m Josh Lipton, Cupertino, California.
GRIFFETH: Elsewhere, fellow Dow component McDonald`s (NYSE:MCD) reported better than expected earnings and revenue this morning, thanks to breakfast doughnut sticks and a one-time bacon event. The fast food giant said global sales were up nearly 5.5 percent, marking its 15th consecutive quarter of growth. The company also raised menu prices by 2 percent in an effort to offset rising costs. The stock traded at an all-time high for part of the session today, before settling back and closing up a fraction.
HERERA: Three pharmaceutical companies reported earnings including Dow components Merck (NYSE:MRK) and Pfizer (NYSE:PFE). Merck (NYSE:MRK) reported better than expected earnings on increased demand for vaccines and cancer immunotherapy drug Keytruda. The company raised its 2019 profit and revenue forecast.
Pfizer (NYSE:PFE) also topped forecasts and raised its full-year profit forecast thanks to lower costs and hire sales of its blood thinner.
It was a different story, though, for Eli Lilly (NYSE:LLY) which saw revenue missed estimates in the face of growing generic competition.
Shares of Merck (NYSE:MRK) and Pfizer (NYSE:PFE) rose while Lilly fell.
GRIFFETH: So, today marks the half way point on earnings season and as Bob Pisani reports, investors are noticing some key trends.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The good news, it looks we`re going to avoid an earnings recession. That would be two consecutive quarters of negative earnings growth. With a little more than half of the company`s reporting in the S&P 500, earnings are up 0.7 percent. OK, that`s not a lot, but a big change from a few months ago.
Analysts began cutting estimates in late December on fears of a global slowdown led by China. By the early part of April, earnings were expected to be down 3 percent for the first quarter. But a funny thing happened. Earlier reporters like Adobe and Nike (NYSE:NKE) reported much better than expected earnings.
What changed everybody, wondered? The global growth narrative changed due mostly to Central Bank. First, the bank backed off from any rate hikes in 2019, and then everybody realized that China was stabilizing and not going down. Europe was not as bad as feared and not great, but not as bad as feared and the U.S. economy was still strong. And then everybody concluded, analyst had cut their numbers too much for the first quarter, that`s why companies are beating estimates by far greater amounts than normal.
So, the average earnings surprises for the first quarter is about 7 percent above the consensus and that`s twice of the percentage fees and the companies beat by 3 percent or 4 percent. They had to go back to 2009 to find those kinds of beat rates. So, as of now, 2019 will likely see modest mid-single digit gains than earnings that`s well below 2018 earnings growth that was up by 20 percent but still quite respectable.
The big problem for the markets now is valuation. The stocks are pricey.
The bottom line is a lot of things are going to have to go right in the global economy to justify these kinds of high prices. There`s not a lot of room for error and the risk is more to the downside than the upside.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
HERERA: On Wall Street, the S&P 500 eked out a record close while the Nasdaq retreated from its all-time high. Alphabet dragged down the tech sector after reporting a revenue miss. Something we told you about last night.
When all was said and done, the Dow Jones Industrial Average was up 38 points to 26,592. The Nasdaq fell 66. The S&P 500 added two.
For the month of April, all of the major averages saw solid gains, extending the 2019 market rally, but what happens next?
Mike Santoli takes a look.
MIKE SANTOLI, NIGHTLY BUSINESS REPORT CORRESPONDENT: One third of the way through 2019, the stock market has already had a pretty good year. The S&P 500 has gained 17 percent to reach a fresh record high. Perhaps the easiest call from here is the rally should slow down given that the current pace will take you toward a nearly unprecedented 60 percent annual gain.
But the more pressing issue is whether the potent blend of factors that has allowed the market to recover fully from the ugly fourth quarter 20 percent plunge can continue to support stocks.
The 2019 rally has gained its power from the Federal Reserve, backing away from further interest rate hikes and stubbornly low bond yields and depressed equity valuation after December`s drop and excess of investor pessimism to start the year, resilient to U.S. (ph) economic growth and corporate earnings holding up better than feared. Of those forces, it`s fair to say that market valuation is no longer cheap, given an S&P 500 trading above its five-year average price to earnings multiple, investor sentiment is much more upbeat and not yet getting over excited to where it presents a warning sign of a possible market peak.
Seasonal factors begin to turn less favorable for stocks as April gives way to May, though years when stocks rose in each of the first four months such as this one have tended to fare better after May. The central question swirled around the Fed and how long it will stay with its patient stance given the U.S. economy growing faster than expected and financial markets strikingly calm again.
Is Fed Chair Jerome Powell truly prepared to sit idle under such conditions until inflation picks up more convincingly? Perhaps he will offer some clues after this week`s policy meeting which could help decide the fate of the powerful rally that has started 2019.
For NIGHTLY BUSINESS REPORT, I`m Mike Santoli.
GRIFFETH: Elsewhere, Treasury Secretary Stephen Mnuchin and Trade Representative Robert Lighthizer are back in Beijing tonight for the next round of trade talks and they arrived just as new information was being released on the Chinese economy and its key manufacturing sector.
Eunice Yoon has more for us from Beijing.
EUNICE YOON, NIGHTLY BUSINESS REPORT CORRESPONDENT: China`s factory data for April disappoints. The official manufacturing PMI showed that factory activity expanded at a slower price. The private Caixin PMI which gauges small and medium side manufacturers, indicated a similar trend, and the services PMI also missed though the industry still grew. Any number bigger than 50 is an expansion.
The main concern is that new orders are weak. Export orders improved, thanks to rising expectations of a trade deal, but they still contracted, meaning that global demand is fragile.
Despite a weaker April, some analysts aren`t so concerned because seasonal factors were at play and they expect Beijing policymakers to wait until the middle of the year before considering more stimulus.
The numbers come as the latest round of trade talks begins in Beijing. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are here to meet with China`s Vice Premier Liu He. Secretary Mnuchin said that he hopes that the next two weeks results in substantial progress.
For NIGHTLY BUSINESS REPORT, I`m Eunice Yoon in Beijing.
HERERA: General Electric (NYSE:GE) reported stronger than expected earnings and confirmed its full-year guidance. The company burned through more than $1 billion in the first quarter which was less than what Wall Street were estimating.
CEO Larry Culp (NYSE:CFI) says this is one quarter in what will be a multi- year transformation and investors liked the report sending the stock up 4.5 percent. Culp (NYSE:CFI) also warned about the grounding of Boeing (NYSE:BA) 737 MAX, calling it a new risk to G.E.`s earnings forecast. G.E. delivered more than 400 engines to Boeing (NYSE:BA) in the first quarter for installation on that aircraft. The company also owns several of the planes for its leasing business.
GRIFFETH: And G.E. is only one company affected by the grounding in the 737 MAX fleet. The longer these jets remain on the ground, the bigger the impact will be on other companies, on other industries, and in fact, on the whole economy.
And joining us to talk about that impact, Sheila Kahyaoglu is the aerospace and defense analyst at Jefferies.
Sheila, thanks for joining us tonight.
SHEILA KAHYAOGLU, JEFFERIES AEROSPACE & DEFENSE ANALYST: Thank you for having me.
GRIFFETH: I mean, you covered Boeing (NYSE:BA), but you have to be mindful of the suppliers, of the consumers and the companies that buy the jets that also were affected by the grounding of the 737. How much of an impact is that going to have, do you think?
KAHYAOGLU: Sure. There is the whole ecosystem. There`s the manufacturers which were the suppliers which we cover, but also the airlines are being impacted, and we`re seeing that from United and American Airlines as they`re cutting capacity back.
But we have to keep in mind that the MAX at the time of the grounding was about 350 aircraft or so, so it`s only 1.8 percent of the total global fleet of aircraft out there, granted it was expected to increase at a arrest 52 a month and in terms of production. So, it`s still fairly small.
KAHYAOGLU: But for some of the American Airlines, it is impacting their profitability.
On the supply chain as G.E. mentioned, it`s somewhat of a timing issue in terms of free cash flow and when they might get their receivables.
HERERA: So, will we see this in the bottom line economic reports that we get like GDP and the like?
KAHYAOGLU: So, our Jefferies economist predicts that it could be a 0.2 to 0.3 percent impact to April production, but it will simply be a shift on production timing than a long-term impact. So, let`s bear in mind that Boeing (NYSE:BA) is keeping its workforce employed as well as the supply chain at 42 a month. So, they`re not stopping production although deliveries have halted.
GRIFFETH: But how long are you anticipating or assuming that the jets will be grounded? And does the impact grow as that grounding last longer?
KAHYAOGLU: So, I think we`re carefully manufacturing what their customer based is saying. And we`ve seen some cutbacks in capacity up until August. And so, our model assumes delivery halt until August and then we have deliveries resuming at a rate of 52 a month, after that. So, we have it steadily climbing up. So, we have about a six-month halt in total.
But we`re starting to see some signs of the FAA reviews and the modification in late May, and potentially, we`re leaving some buffer for the international regulators to approve the fix.
GRIFFETH: Got it. Interesting.
Sheila Kahyaoglu from Jefferies — thanks again for joining us tonight.
KAHYAOGLU: Thank you.
HERERA: It is time to take a look at some of today`s “Upgrades and Downgrades”.
Google`s parent Alphabet was downgraded to hold from buy at Stifel Nicolaus. The analyst cites Alphabet`s revenue growth following its earnings growth which we mentioned earlier in our program. The price target is $1,287. The stock closed down 7.5 percent. That is its worst day in six years.
GRIFFETH: Alaska Air was upgraded to overweight from neutral at J.P. Morgan. The analyst cited the stock`s underperformance so far this year. So, the price target is now $72. Shares rose 2 percent to $61.90.
HERERA: Still ahead, Facebook (NASDAQ:FB) CEO announces some changes and the start of a new era.
HERERA: The uprising in Venezuela has turned violent. Supporters of opposition leader Juan Guaido clashed with Venezuelan security forces in Caracas today. Guaido has called for a military uprising to oust President Nicolas Maduro. These latest developments sent oil prices higher, but then when the state-owned oil company said that operations had not been disrupted by the protesters those gains were pared. Domestic crude settled above $63 a barrel.
GRIFFETH: Warren Buffett just threw another curveball in the push to acquire Anadarko Petroleum (NYSE:APC), Berkshire Hathaway (NYSE:BRK.A) which he runs will make a $10 billion investment in Occidental which then offered 38 billion for Anadarko. Chevron (NYSE:CVX) had offered $33 billion for the company. The backing gives Occidental more leverage to fight Chevron (NYSE:CVX) which is much larger.
Anadarko has assets in West Texas and New Mexico which is what both Occidental and Chevron (NYSE:CVX) want. Shares of Anadarko and Occidental fell today while Chevron (NYSE:CVX) and Berkshire were trading higher.
HERERA: President Trump and Democratic leaders today agreed to spend trillions on fixing our nation`s crumbling infrastructure. House Speaker Nancy Pelosi said their meeting at the White House was productive and Senate Minority Leader Chuck Schumer said both parties want to get something done.
(BEGIN VIDEO CLIP)
SEN. CHUCK SCHUMER (D-NY), MINORITY LEADER: We agreed that for 25 years, this kind of big, bold bill that we could pass would make America a better place and not just the one year or two year. We agreed on a number which was very, very good, $2 trillion for infrastructure. Originally, we`d started a little lower and even the president was eager to push it up to $2 trillion and that is a very good thing.
(END VIDEO CLIP)
HERERA: Although few details were offered, Schumer did say that another meeting will take place in just a few weeks to talk about how to pay for the plant.
GRIFFETH: Now to housing. A new batch of data today giving us insight into how the spring selling market is starting to shape up.
Diana Olick has those details.
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: The new housing numbers proved just how sensitive consumers are to interest rates today. Pending home sales which represent signed contracts so people out shopping during the month and inking deals jumped more than expected, nearly 4 percent in March compared with February. Buyers had added incentive in March as mortgage rates plummeted in over a year. The 30-year fixed topped 5 percent at the start of last November but then began falling and took a sharp dip in March to just around 4 percent.
Pending home sales were still lower than a year ago, thanks to higher home prices. But those price gains are shrinking. Home prices are up 4 percent in February, compared to a year ago, according to S&P Case Shiller, smaller than the gain in January.
And in one major other market, San Francisco, prices went slightly negative in March for the first time since 2012 according to Core Logic. That`s because prices overheated and the supply of homes for sale is rising. And there is more supply in the market overall, but much of that is just because houses listed already are sitting longer. Mortgage rates are slightly higher and they`re cooling to a point where buyers may finally be able to make a move.
For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.
HERERA: Amgen`s arthritis drug helps the company top expectations and that`s where we begin tonight`s “Market Focus”.
After the bell, the biotech reported better-than-expected results, thanks to strong sales of its blockbuster treatment Enbrel. Overall, revenue at Amgen (NASDAQ:AMGN) was flat, but enough to beat estimates. The company is also raising the lower end of its full-year guidance. The stock was volatile in initial after-hours trading, but it closed regular session down 1 percent to $179.32.
General Motors (NYSE:GM) reported better than expected earnings due to decreased cost and higher sales of more expensive trucks, SUVs and crossover vehicles. But the automaker missed revenue estimates due to falling overall vehicle sales and sliding market share. CEO Mary Barra says that her company is staying focused on the future.
(BEGIN VIDEO CLIP)
MARY BARR, GENERAL MOTORS CHAIRMAN & CEO: GM has an industry-leading truck franchise and industry-leading electrification capability. I assure you, we will not cede our leadership on either front. We intend to create an all-electric future that includes a complete range of EV, including full- size pickups, and we will share additional information when competitively appropriate.
(END VIDEO CLIP)
HERERA: Shares fell more than 2.5 percent to $38.95.
A rise in online transactions helped lift results at MasterCard (NYSE:MA). The CEO says the company will continue to focus new products and services with the likes of Apple (NASDAQ:AAPL) and Goldman Sachs (NYSE:GS). Shares of MasterCard (NYSE:MA) rose nearly 3 percent to $254.24.
GRIFFETH: IBM has raised its dividend by a nickel to $1.62 a share. That new dividend will be payable in June to shareholders of record as of May 10th and the yield will be topping 4.5 percent, making it the second highest yielding Dow component. It`s also the 24th straight year that Big Blue has increased its dividend. And today, the stock was up a fraction to $140.27.
Health care services company HCA topped estimates, thanks to the sale of one of its facilities and the pair of acquisitions. The company raised its full-year guidance. HCA rose nearly 1.5 percent in today`s trade to $127.23.
HERERA: Facebook (NASDAQ:FB) is holding its big developers` conference which is called F8. But this year, CEO Mark Zuckerberg is using the event to outline the company`s new vision, one that puts privacy front and center.
Julia Boorstin is in San Jose tonight.
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Mark Zuckerberg says the future is private, explaining what he says is a major shift to Facebook (NASDAQ:FB) and its family of apps. Facebook (NASDAQ:FB) will focus less on the public town square that is newsfeed and more on letting users communicate directly with each other, with an emphasis on groups and encrypted messaging.
MARK ZUCKERBERG, FACEBOOK CEO: I get a lot of people aren`t sure that we`re serious about this. I know that we don`t exactly have the strongest reputation on privacy right now, to put it lightly, but I`m committed to doing this well.
BOORSTIN: Launching a redesigned Facebook (NASDAQ:FB) app FB5, putting the focus on sharing to groups and stories rather than the newsfeed, and updating Messenger to make it the hub of communication across apps and information from close friends.
ZUCKERBERG: We`re launching a friend`s app in messenger, and overtime, you`re going to be able to see what your friends are sharing with you across the different apps. So, if you follow someone on Instagram, you`ll be able to see their stories. If you`re friends with someone on Facebook (NASDAQ:FB), you`ll able to see their posts and their stories. It`s going to be all the private updates from friends, no public content.
BOORSTIN: While ads in Facebook`s newsfeed have been the biggest part of Facebook`s revenue, Zuckerberg already reassured investors that these moves wouldn`t dramatically impact the bottom line.
Across Facebook`s apps, the company is introducing more tools for businesses and laying the groundwork for e-commerce. WhatsApp is rolling out ways for businesses to show their products to consumers. Instagram is making it easy for users to shop directly from the app without ever leaving, and on Messenger, companies can use new ads to start conversations with consumers.
Facebook (NASDAQ:FB) also expanding its dating tools, including a new way to share if you have a crush. And with every one of these announcements, the company wants consumers to know that their interactions will be encrypted and private.
IME ARCHIBONG, FACEBOOK VP OF PARTNERSHIPS: Messenger is right there with WhatsApp which really led the way on this, it`s just going to become more private and more secure and end-to-end encrypted. But arguably, you want these things to be your fastest, most reliable kind of private center of your social experience.
BOORSTIN: Facebook (NASDAQ:FB) also showcasing new augmented and virtual reality tools which it says will help people connect even around the world.
For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in San Jose, California.
GRIFFETH: And coming up, entrepreneurs want their products to go viral on social media, but for one, and there was a big downside.
GRIFFETH: Getting viral-like attention on social media certainly can be a dream for most companies, but for one firm, it turned into a nightmare. FinalStraw, which we introduced you to last night, went viral online, but the company soon found many posts were actually directing followers to buy knockoffs. And it cost them millions.
Andrea Day has part two of her report.
UNIDENTIFIED FEMALE: This is FinalStraw, the world`s first collapsible, reusable, totally badass straw.
ANDREA DAY, NIGHTLY BUSINESS REPORT CORRESPONDENT: The straw designed to save the planet and set to make millions. While attorneys worked to secure patents and trademarks for the invention, Emma Cohen and co-founder Miles Pepper launched their idea on crowdfunding site Kickstarter, and backers chipped in nearly $2 million in funding.
EMMA COHEN, FINALSTRAW CEO & CO-FOUNDER: Not in my wildest dreams could I have ever thought that we would have done anything like that.
DAY: But across the planet, factories here in China were ready to rip off their big idea.
AMEDEO FERRARO, INTELLECTUAL PROPERTY ATTORNEY: There are hundreds of people that are copying the very exact product, the same straw.
DAY: Amedeo Ferraro was one of the attorneys now fighting to keep FinalStraw afloat.
How brazen are some of these imposters?
FERRARO: Absolutely brazen. They have complete disregard for all rules. I believe that they`re going to do whatever they want to do and ask for forgiveness later.
DAY: The Chinese copycats began selling on phony Websites and e-commerce sites.
FERRARO: Today, we`ve successfully taken down over 150 knock off products off of the Amazon (NASDAQ:AMZN) platform alone. And the straw spread on wildfire on social media with hundreds of ads for copycats, but using Cohen`s images.
COHEN: It was a photo of me with the straw and, you know, I was furious.
DAY: And followers directed to buy knockoffs for less than half the price.
COHEN: Social media is a weapon for these imposters. They can use it at their discretion, however they want and there`s no body out there that`s really enforcing it.
DAY: We tracked down an influencer who got paid to post ad on her meme account. A meme account typically posts funny images or videos and the person behind is not always revealed. The woman who runs this one has more than a million followers. She agreed to talk only by phone and said she had no idea she posted for a knockoff until we reached out.
INSTAGRAM INFLUENCER: I guess if I would — were to have googled it or something, I could have seen that, hey, this isn`t the actual company, but, you know, it is so hard to only do so much digging and figuring out this answers.
DAY: Joey Hickson is an Instagram influencer, and this is his manager, Justin Keller. He has 17 million followers across three accounts, including a meme page.
Is it tough to evaluate every post before it goes out?
JOEY HICKSON, INSTAGRAM INFLUENCER: Yes, it is, and there`s a lot of work into it, and I think if you have the time and you`re willing to do it between myself, and my team. Then that`s what separates us from other people.
DAY: But they admit, it`s tough to be totally sure what you`re posting is the real deal.
HICKSON: So many times in so many different products and it`s all about who can get there quicker and who can make it cheaper, who can have the higher margins. It`s just a game.
JUSTIN KELLER, JOEY HICKSON`S MANAGER: That`s the industry like playing in pictures and living that lifestyle. It`s a lot of it`s fake, it`s the Wild West. It`s a gold rush.
DAY: And they say meme accounts especially can be loaded with fraud.
HICKSON: I`ve been turning down more business now than ever because most of the business I get has phony products.
DAY: We reached out to Instagram for comment. The social media giant tells us in part, we review every IP report we receive and take action to protect rights holders when someone has used their IP without permission. And regarding influencer posts, when it comes to partnering with brands, we encourage creators to act responsibly and with integrity.
For NIGHTLY BUSINESS REPORT, I`m Andrea Day.
HERERA: Here`s a look at the final day numbers on Wall Street. The Dow was up 38 points, the Nasdaq fell 66, S&P 500 added two. For the month of April, they saw some solid gains there.
That is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera. Thanks for joining us.
GRIFFETH: I`m Bill Griffeth. Have a great evening. 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.