Transcript: Tuesday, April 29, 2014

NBR ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Susie Gharib, brought to you in part by —

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SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Will April showers give way to May flowers on Wall Street? We have predictions from the market pros.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Twitter tumbles, quarterly results disappoint. Why? And what’s the one key takeaway for investors?

GHARIB: And, safer shopping. The big move Target (NYSE:TGT) is making to secure its payment pipeline in the wake of the massive data breach late last year.

We have all that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, April 29th.

MATHISEN: Good evening, everyone. And welcome.

With just one more trading day left in the month, Wall Street looks to be wrapping up a very volatile April, with a big push to the upside. And it got help from another round of better than expected corporate earnings. Upbeat quarterlies before the bell from companies as diverse as the drugmaker Merck (NYSE:MRK), engine maker Cummins (NYSE:CMI), Ameriprise Financial, and the telecom giant Sprint all helped the major averages climb higher today, with the Dow and S&P now within striking distance of all-time highs.

Today on Wall Street, the Dow was up 86 points, the NASDAQ was higher by 29, and the S&P added nearly nine.

GHARIB: But earnings late today from eBay (NASDAQ:EBAY) and Twitter could set a negative tone tomorrow when the opening bell sounds.

First, eBay (NASDAQ:EBAY). It posted better than expected quarterly profits but it issued a disappointing outlook and shares fell as much as 4 percent in after-hours trading. As for Twitter, profits beat estimates. But when you take out one-time charges, but they weren’t big, less than a penny a share. Quarterly revenue more than double to $250 million and beat analysts estimates.

But Twitters shares sold off in after hours trading, down almost 10 percent. But during the regular session, they were up nearly 5 percent.

Seema Mody has more on the Twitter’s numbers and one big take-away for investors.

(BEGIN VIDEOTAPE)

SEEMA MODY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Investors were hoping for a blowout number when it comes to user growth but that’s not what Twitter essentially delivered — 255 million monthly active users up only 5.8 percent from the previous quarter. Analysts were expecting a higher number.

Now, slowing growth concerns have kept a lid on shares of Twitter, which are down about 40 percent, just this year. The weaker than expected number does come ahead of Twitter’s lock-up expiration of nearly 500 million shares on May 5th when traders are concerned that insiders will sell off shares.

For NIGHTLY BUSINESS REPORT, I’m Seema Mody from the New York Stock Exchange.

(END VIDEOTAPE)

MATHISEN: And as investors look to tomorrow and as the up and down month of April draws to a close, Dominic Chu takes a closer look at whether April showers may give way to brighter days ahead in May and maybe even beyond.

(BEGIN VIDEOTAPE)

DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): For many investors, April will be a month they’ll soon want to forget. A lot of stocks that made investors a lot of money over the past couple of years took the biggest beating this month. Think about social media stocks, like Facebook (NASDAQ:FB) and Twitter or online video streaming company Netflix (NASDAQ:NFLX), even the world’s biggest Internet retailer Amazon (NASDAQ:AMZN).com.

JORDAN POSNER, MATRIX ASSET ADVISORS MANAGING DIRECTOR: We think that some of the high fliers which have come down are still at very lofty valuations and hard to really justify. We contrast that with other kind of old technology dinosaurs like Microsoft (NASDAQ:MSFT), Cisco (NASDAQ:CSCO), Hewlett-Packard (NYSE:HPQ), where their actual results have been quite good and their valuations are very attractive.

CHU: Of course, the big question facing a lot of investors is whether or not the coming summer months will generate more market pain. Traders have an old saying: sell in May and go away. And there is a reason why. According to S&P Capital IQ chief U.S. strategist Sam Stovall, since World War II, the S&P reported the strongest performance between the months of November through April, gains of around 7 percent on average.

Meanwhile, the months of May through October generated gains of just a little over 1 percent. Some experts are saying to expect stock market volatility in the coming months.

DEAN ZAYED: I think we’re in the middle of a transition, I think transitions are clunky. You know, we’re going from a market that’s been driven by monetary policy, into one that’s going to eventually transition into more fundamentals. Of course, earnings always matter. So, volatility is here to stay I think for this year.

CHU (on camera): The bulls will say that stocks still remain near record highs. The bears will say that we’re long due for a significant pullback. Regardless, it may worth keeping your seatbelt buckled even if you don’t think you’ll need it.

For NIGHTLY BUSINESS REPORT, I’m Dominic Chu.

(END VIDEOTAPE)

GHARIB: Our guest tonight is one of those bulls. Nick Colas is chief market strategist at Convergex.

Nick, nice to have you with us.

NICK COLAS, CONVERGEX CHIEF MARKET STRATEGIST: Thanks so much.

GHARIB: Let me just first start by asking you about eBay (NASDAQ:EBAY) and Twitter because their stocks have been down sharply in after-hours trading. What impact did something like this have on trading tomorrow and investor confidence?

COLAS: Well, I tell you over the short-term it can be a bit damaging, because a lot of folks have made very good money in all the momentum names we’ve seen rally, in some cases, the 100 percent and more over the course of the past year. But underlying market fundamentals are more important, so what the entire economy does and what corporate profits do in general thankfully over the medium and long-term is more important.

MATHISEN: Do you think these two companies are healthy? I’m not asking you to recommend the stocks, but is there anything in those reports that leads you to believe that they’re not?

COLAS: No, I tell you, the bottom line with any of these stocks is, investors are drawn to them because they have interesting long-term potential and very good near-term fundamentals. It always comes down to valuation. That’s where it gets very tricky.

You can be very enthusiastic about a company and sell off stock because you think the valuation is too high.

GHARIB: Uh-huh.

You said a moment ago, Nick, that it’s going to be the economy that is the real driver here. But the U.S. economy has been anemic really for a while, this recovery has been sub-par. So, what is going to be the catalyst for the economy that would be the catalyst for the stock market?

COLAS: Yes, it’s a great point.

The bottom line here is that corporate profitability is extremely high, even though it had very lackluster recovery. And if you want to be bullish on stocks, you’ve got to believe that the economy can recover modestly but progressively over the balance of the year, and that will provide incremental profitability to these companies that already have good very cost-structures.

MATHISEN: Nick, as we enter May, beginning later this week, and then the summer time, that is seasonably a time when the market sometimes stumbles, at least over the past few years. Some of our roughest months have been those summer months, what do you expecting over the next three to six months?

COLAS: Over the next few months, I do think you’ll see some volatility. But we’re still probably bullish about equities. It will be important to take the longer view as we get that volatility and really focus on incremental growth in jobs, incremental growth in things like automobile sales that are very indicative of the economy as a whole and, in general, the health of the consumer, as we think about the next half of the year.

GHARIB: All right. So any advice you have for investors on what to do with their portfolios over these next couple of months that could be kind of volatile?

COLAS: Absolutely, the key here is you’ve got to diversify and stay diversified. For example, bonds were really out of favorite (ph) in the beginning of the year, and it actually kept pace with stocks all the way through the end of April, all the way where we are right now, even though people really did not like them very much. So, the key is to keep the focus on the long-term, stay diversified, and use volatilities opportunity perhaps to buy a little bit more, rather than trying to bail on the market and try to time it. Very difficult game to do.

MATHISEN: Do you like bonds here at these levels? If the economy heats up, as some people believe, you would think that interest rates might rise?

COLAS: Yes, I tell you — bonds have been the surprise story of 2014. And they have had an impressive rally. I would say that there is still sufficient concern about things like macro issues, for example, oil prices and the problems with Russia and Ukraine that would keep us still trying to keep a portfolio of bonds just in case.

GHARIB: And we’ve seen utilities doing phenomenally, what do you think about utilities? Is that still a good place to park your money?

COLAS: I tell you — utilities have been amazing this year, up 11 percent. They’ve beaten the pants off of most hedge funds that invest in the U.S. market.

So, utilities are still a good place to be. They might be for the classic widows and orphan’s portfolio, but they’ve had a robust performance and still a winning group.

GHARIB: All right. Nick, thank you so much for coming by and talking with us. Really appreciate it.

COLAS: Thank you.

GHARIB: Nick Colas with Convergex.

MATHISEN: Well, mixed news in housing to tell you about. The Commerce Department says home ownership in the U.S. fell during the first quarter of the year to just 65 percent. That’s the lowest level overall in nearly two decades. Part of the problem: home prices are too high for many would-be buyers, especially for first timers.

Just today, the Case-Shiller home price index for February reported a 12 percent increase in prices in the nation’s biggest cities year over year. But prices barely budge from the prior month.

GHARIB: And people who helped to guide the interest rates on home mortgages, the Federal Reserve policymakers, began a meeting today in Washington. No change is expected in the Fed’s key interest rate, but the central bankers are expected to reduce their bond-buying stimulus plans by another $10 billion a month.

MATHISEN: It looks like General Electric (NYSE:GE) may have a deal. The board of directors at the French engineering group Alstom has reportedly accepted G.E.’s more than $12 billion offer to acquire its energy business. The announcement could come on Wednesday. But before it’s a done deal, industrial giant Siemens says it would make an offer to buy Alstom if it’s given enough time to go over that company’s books.

GHARIB: Apple (NASDAQ:AAPL) returned to the bond market today and investors are eating it up. The tech giant put $12 billion worth of corporate debt up for sale which is higher than the $8 billion to $10 billion expected. Maturities range from three years, all the way to 30 years. And to show how big demand is, investors reportedly put in orders for more than $40 billion in bonds.

MATHISEN: More now on those strong earnings from Merck (NYSE:MRK). Merck (NYSE:MRK), the biggest gainer in the Dow today, rising almost 4 percent after first quarter profit — a jump 7 percent helped by aggressive cost cutting. Sales of Merck’s top sellers, type 2 diabetes pills were higher. But overall, pharmaceutical sales fell 5 percent because of competition from rival generic versions of other drugs.

GHARIB: Target (NYSE:TGT) is going all out to improve data security for its credit users. The discount chain is starting with a new management and more secure type of credit cards.

Mary Thompson explains.

(BEGIN VIDEOTAPE)

MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Red, white and still bruised from last year’s massive data breach, Target (NYSE:TGT) plans to better protect its customers with a new type of card.

DAVID DARST, GUGGENHEIM SECURITIES: Target (NYSE:TGT) has to move quickly to make sure they have the best up-to-date standards and security for their purchaser base.

THOMPSON: Target (NYSE:TGT) plans to adopt MasterCard’s chip and PIN technology for its 23 million member red card portfolio by early 2015. This means all red card debit and credit cards will carry a customer’s information on an imbedded computer chip, rather than on the magnetic stripe found on the back of most credit cards. Known as EMV technology, these chip-enabled cards cut fraud as they’re harder to counterfeit.

Overseeing this effort, outsider Bob Derodes, who’s worked in the Department of Defense, Homeland Security, and Justice. He’s Target’s new chief information officer.

The Minneapolis-based firm is the first major U.S. retailer to adopt EMV technology, a technology payment processers Visa (NYSE:V) and MasterCard (NYSE:MA) want as the standard by October of 2015. At that time, liability for fraudulent transactions for card present transactions, meaning those made in the store, will fall to the weakest link of the payment’s chain. The threat of having to cover the cost of potential fraud expected to spur retailers to buy new chip and PIN terminals that are needed to process the payments on the more secure EMV cards.

(on camera): While its adoption will be a big step in reducing credit card fraud, the analysts Thad Peterson says EMV won’t prevent fraud within the system. That’s prevented by tokenization, which essentially scrambles the customers’ information so it’s harder for a thief to steal.

THAD PETERSON, AITE GROUP: When the information is being transmitted across the system from say the merchant to the card issuer for payment, there is no way for that to be broken.

THOMPSON: Tokenization and chip-enabled cards both key to securing the payment pipeline.

For NIGHTLY BUSINESS REPORT, I’m Mary Thompson.

(END VIDEOTAPE)

MATHISEN: Still ahead, you’re saving more for retirement. That’s the good news. But is it enough? Details of a new Fidelity study and what you can do to make sure the golden years stay golden.

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MATHISEN: Last night, we told you about the growing list of big name advertisers and sponsors suspending or terminating deals with the NBA’s Los Angeles Clippers over racist comments made by the team’s owner, Donald Sterling. Today, it was league officials at the National Basketball Association coming down very hard on Sterling. He has been banned for life from attending any NBA games, practices, or other events, and was fined $2.5 million. NBA Commissioner Adam Silver also is urging other team owners to force Sterling to sell the team.

GHARIB: A big power company from Texas has filed for bankruptcy. Dallas-based Energy Future Holdings, once known as TXU Corp, was facing more than $100 million in debt payments for this week, payments that they will not be able to make.

But filing for bankruptcy protection lets the private equity-owned utility to negotiate with creditors as it restructures its business.

MATHISEN: An update now on a potential deal we told you about, this one in the pharmaceutical industry, where so many deals have been taking place slightly.

Botox-maker Allergan (NYSE:AGN) looks to be trying just about anything to avoid being acquired by hedge fund billionaire Bill Ackman and his partner, the Canadian drugmaker Valeant for $46 billion. Allergan (NYSE:AGN) has reportedly approached Johnston & Johnston, the French drug company Sanofi, the U.K.’s Shire (NASDAQ:SHPGY) PLC, and other firms to gauge their interest in buying the company.

GHARIB: Shares of Coach (NYSE:COH) plunged after the retailer reported quarterly profits and that’s where we begin tonight’s “Market Focus”.

Earnings at the luxury retailer tumbles 20 percent. The handbag and accessories retailers said its North American sales fell due to tough competition. That sharp drop in sales sent the stock down more than 9 percent, to $45.71.

Bristol-Myers Squibb (NYSE:BMY) reported better than expected quarterly earnings helped by cost cuts and lower taxes. But revenues, missed estimates and shares fell on concerns over a possible delay in completing a marketing application for the high-profile cancer drug. Bristol fell 2 percent to $49.32.

MATHISEN: Goodyear Tire reported an earnings miss on the top and bottom lines. The biggest U.S. tire maker was hurt by severe weather in North America and a labor dispute in Venezuela, also took a $132 million charge related to a drop in the value of Venezuela’s currency. Shares tumbled 7 1/2 percent to $25.11.

IBM’s board approved a 16 percent increase in its quarterly dividend which is now $1.10 a share. That will be paid to stockholders in June. This is the 19th year in a row that the company will up the return. Shares of Big Blue up 1 percent to $195.11.

GHARIB: The stock market is doing better since the financial crisis, but it’s taking a bit longer for America’s retirement prospects to get back on track. Fidelity Investment, the nation’s largest provider of retirement plans, revealed today some positive results for millions of Americans in the five years since the market downturn.

But as Sharon Epperson reports, there is still plenty of room for improvement.

(BEGIN VIDEOTAPE)

SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): A surging stock market has helped the recovery of many workers’ retirement plans over the past few years, new data from Fidelity, the nation’s leading 401(k) provider, shows an impressive 92 percent gain in the average 401(k) account balance, since the market low of the economic downturn in 2009.

By the end of the first quarter of this year, the average 401(k) was worth $88,600, up from $46,000 five years ago.

JEANNE THOMPSON, FIDELITY INVESTMENTS VICE PRESIDENT: About 3/4 of the account balance growth has been due to the market and about 25 percent or a quarter was due to, you know, employees putting more money into their 401(k) plan. When we look over a 10-year period what we find is that 50 percent is due to the market growth and 50 percent is due to an employer contribution.

And so, what that really drives home is that it is really important over the long-term not only to put money into your 401(k), but also to make sure that you’re invested appropriately for your age.

EPPERSON (on camera): Despite market gains, most workers still don’t have enough money to retirement. A married couple retiring at 65 may need as much as $360,000 in savings, more than four times the average 401(k) balance today.

(voice-over): But most workers have no idea how much money they will need in retirement.

GREG BURROWS, PRINCIPAL FINANCIAL GROUP VICE PRESIDENT: Only four in 10 workers are using retirement savings calculators and that’s important because that means the majority are still guessing and don’t really understand how much they need to save for retirement.

EPPERSON: They may not be saving at all. Fidelity found out that almost a third of workers who have access to a 401(k) plan are not contributing. And those who are offered a matching contribution from their employer may not take advantage of it.

Fidelity found workers saved about 8 percent of their pay in 401(k) on average, but financial experts say for most workers, that amount is less than what’s needed to ensure a comfortable retirement.

THOMPSON: We really recommend to get to — you know, to replace a good amount of your income in retirement that you save 10 percent to 15 percent, and we understand that. In the beginning, when you’re young and you’re just starting out, you may not be able to start out at 10 percent or 15 percent, so you start out where you can. And then every year, we recommend increasing that annually.

EPPERSON: The first step, no matter what age, is to figure out where you stand right now.

BURROWS: No savings plan is going to be implemented without a really honest assessment and a look at how I’m spending money, where I spend money and more than likely making some changes in how spending patterns occur, in order to free up the capacity for savings.

EPPERSON: The solution is simple, but takes discipline.

For NIGHTLY BUSINESS REPORT, I’m Sharon Epperson.

(END VIDEOTAPE)

GHARIB: To read more about Fidelity’s study and what you can do to keep your retirement on track, go to our Web site, NBR.com.

And still ahead on the program, the most influential businessman of the past 25 years, his vision and the passion transform industries and change consumer buying habits. That’s next.

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MATHISEN: Today, in connection with its 25th anniversary, CNBC, which produces this program, announced its list of the top 25 people who left the greatest marks on business, finance, the markets and consumer culture over the past quarter century.

And here are the top five. Number five: Amazon (NASDAQ:AMZN).com founder Jeff Bezos. At number four, the Google (NASDAQ:GOOG) guys founders Larry Page and Sergey Brin, plus, the CEO who pulled it altogether, Eric Schmidt. Number three, the controversial U.S. central bankers whose actions were, well, central to almost everything, Alan Greenspan and Ben Bernanke. Number two, Bill Gates, the geek who more than anyone, put a computer on every desk. And topping the list, the geek who made computers chic, Apple’s Steve Jobs.

(BEGIN VIDEOTAPE)

MATHISEN (voice-over): Pioneer, innovator, taste maker, genius. Steve Jobs transformed the way we think about technology and the Apple (NASDAQ:AAPL).

Walter Isaacson is Job’s biographer.

WALTER ISAACSON, AUTHOR, “STEVE JOBS”: Steve Jobs is sort of the American creation myth writ large. He started a company in his parent’s garage with the chubby kid from down the street and he turned it into the most valuable company in the history of the world.

MATHISEN: Growing up in Silicon Valley, Jobs became the oddest fusion of California’s engineering and hippy cultures. He wasn’t a programmer so much as a marketer and dreamer whose big idea was to sell his friend Steve Wozniak’s creation.

ISAACSON: He was smart enough to know that he needed Steve Wozniak and others who are much better software engineers or hardware engineers. But what he was able to do is bring everything together into a package and then figure out how to build a business around it.

MATHISEN: And what a business he built. More than anyone, Jobs put the personal into personal computers, creating elegant machines that sometimes looked like a toy and often as not were as admirably easy to use as one.

ISAACSON: Technology was barreling along in the mid-’70s when he starts Apple (NASDAQ:AAPL). But he said let’s make it intuitively, and simple and beautiful. He connects art to technology.

MATHISEN: But his demeanor and managerial style was not as simple.

JON FORTT, CNBC TECHNOLOGY EDITOR: I talked to people about his managerial style — yes, he was passionate. Yes, he could be sharp with people. But he also recognized talent and he passionately believed in the quality of the products that Apple (NASDAQ:AAPL) was going to create.

ISAACSON: The personality of Steve Jobs was somebody who believed that the ordinary rules did not apply to him. He was special. He could distort reality and make things happen.

MATHISEN: Eventually, though, after a 1985 power struggle with his handpicked CEO John Scully, and the Apple (NASDAQ:AAPL) board, Jobs left the company he started.

ISAACSON: After Steve gets ousted from Apple (NASDAQ:AAPL), he formed his own computer company called Next, where he really indulges his passion for perfection. And what he learned is, you have to make some tradeoffs, because it wasn’t very successful in the marketplace.

FORTT: But he’s got this incredible drama of being kicked out of his own company, going off into Pixar, which was a scrappy little animation studio he got from George Lucas, turning into a blockbuster business, and then coming back to Apple (NASDAQ:AAPL), riding in and saving the business.

MATHISEN: The year was 1997.

ISAACSON: He says focus. He cuts out all sorts of product lines and he says, we’re going to simply do a desktop and laptop for the home and for the office.

MATHISEN: But Job’s focus was not just on desktops and laptops. He loved music, Dylan, the Beatles. He wanted to carry them with him. It was 2001.

ISAACSON: He launches something that nobody expects, which was the iPod and it sort of changes the music industry just like he had changed the home computer industry.

MATHISEN: The iPod led to another Job’s innovation.

STEVE JOBS, APPLE FOUNDER: And we are calling it iPhone.

ISAACSON: One of the interesting things about the iPhone is that everybody at Apple (NASDAQ:AAPL) knew it would cannibalize the iPod. The iPod was very successful. But Steve Jobs started worrying about what could go wrong. And he said, well, if the brain-dead people who make cell phones learn to put music on cellphones, that will hurt the iPod. So, we have to cannibalize ourselves before somebody eats our lunch.

MATHISEN: Jobs wasn’t done. If anything, a 2003 diagnosis of pancreatic cancer quickened his restless pace of innovation.

ISAACSON: I think people were puzzled in the years of 2000 to 2010, about why Steve Jobs kept going into different industries. But it totally transforms what our view of the phone is and then he does it again with the tablet. People that made tablets before, nobody expected Apple (NASDAQ:AAPL) suddenly to do it.

MATHISEN: Some called him a retail genius on the par with Sam Walton, the App Store, iTunes, those sleek, stylish, branded outlets.

FORTT: That full 360 degree immersive experience in Apple’s world really caught the consumer’s imagination. And Steve Jobs, at least as far as business is concerned, became larger than life, right around then.

MATHISEN: In August 2011, he stepped down as Apple’s CEO. Six weeks later, he was dead.

ISAACSON: I think a generation from now, in fact a century from now, Steve Jobs is a person we’re going to most remember as being the epitome of the business in the digital age, the personal and home computer industry, the music industry, the digital animation, and retail stores, publishing, tablet computing, over and over again, he’s a disrupter and he’s the one we’re going to remember a long time from now.

(END VIDEOTAPE)

MATHISEN: So, how was the list put together? What was the thinking behind the rankings? What were you thinking?

To get the full list and read more about CNBC’s first 25, head to our Web site at NBR.com.

GHARIB: I don’t think anybody would argue with the Steve Job’s choice, but was there anybody you think that should have been on the list that just didn’t make it?

MATHISEN: I thought Michael Dell (NASDAQ:DELL) should have made the list of 25, because he was an industrial revolutionary who invented the sort of just in time manufacturing for you, for the laptop.

GHARIB: Direct marketing.

MATHISEN: Direct marketing.

GHARIB: All right, great list. Great job, Tyler.

MATHISEN: Thank you.

GHARIB: That’s NIGHTLY BUSINESS REPORT for tonight. I’m Susie Gharib. Thanks for watching.

MATHISEN: And I’m Tyler Mathisen. Thanks from me as well. Have a great evening, everybody. We’ll see you back here tomorrow night.

END

Nightly Business Report transcripts and video are available on-line post broadcast at http://nbr.com. The program is transcribed by CQRC Transcriptions, 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) 2014 CNBC, Inc.

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