TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: No trick but a treat.
October turned out not to be scary at all for investors as stocks logged
their best month in four years. So what does that mean for the rest of
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Mega madness. This
week`s market monitor says you should capitalize on mega trend stocks and
he has three names for you.
MATHISEN: And Madoff rebound. What Bernie Madoff has to do with this
year`s world series.
All that and more for Friday, October 30th.
HERERA: Good evening, everybody, and welcome.
October is usually a month associated with fright and ghouls and
goblins. And the month typically is approached with a wary eye from
investors as well. But this October was anything but scary. In fact,
stocks just logged their best month. Not just October but any month in
four years. The Dow and S&P 500 gaining more than 8 percent for the month,
while the NASDAQ surged nearly 9 1/2 percent.
Investors attributed the big run-up to mostly solid earnings reports
and easy monetary policy from central banks around the world.
As for today, the Dow Jones Industrial Average fell 92 points to
17,663, the NASDAQ fell 20, and the S&P 500 off 10.
MATHISEN: An 8 percent move in the Dow in October is a relatively
rare event, and that begs the question, what now? Does this set up the
market for a run into the rest of 2015 or will the rally turn into a
Dominic Chu takes a look.
DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: It may or may not
be hard to believe but we`re now just two months away from capping off one
of the more eventful years for the stock market in recent memory. And the
up trend, though, could continue. According to market data firm Kensho,
before this year, there`s only been four times since 1980 when the month of
October has gained more than 8 percent. In three of those last four times,
the next two months have returned an average of around 4 percent.
This year, optimists believe that the stage is getting set for another
STEVE AUTH, FEDERATED INVESTORS: We thought the Fed would pretty much
announce a December hike. They did it in December by calling the China
language that they had there. We had a nice M&A deal in the health care
space that we think puts a floor under that sector that`s been a problem
for the S&P. So, we think the outlook into the rest of the year continues
to be pretty positive.
CHU: What has some traders feeling better about the current
environment is the leadership coming from the technology sector. Companies
like Google (NASDAQ:GOOG) parent company Alphabet and social media giant
Facebook (NASDAQ:FB) have been soaring. The tech sector is the largest in
the S&P 500 and some money managers are looking for opportunities there.
MARGARET VITRANO, CLEARBRIDGE INVESTMENTS: I like information
technology right now. You`ve seen a couple of the large cap names in
information technology have really turned the corner. As they move from
that traditional license sales business model to a subscription business
model, the nice thing about that is if you look at a Microsoft
(NASDAQ:MSFT) or an Adobe, they`ve passed their peak point of execution
risk and I still think there`s revenue growth ahead.
CHU: Of course, nothing is ever certain in the markets. There are a
host of reasons why things could get derailed like uncertainty about
interest rates here, as well as a slowing economy and worries about what`s
happening in China. But with the holiday season approaching, many
investors are still putting some stocks on their holiday shopping lists.
For NIGHTLY BUSINESS REPORT, I`m Dominic Chu.
HERERA: Two not so upbeat reads on the consumer today.
First, consumer spending, a look at how much Americans spend on
everything from furniture to cars. Well, it cooled in September. The
Commerce Department reporting a 1 percent uptick. That`s the smallest
gain, though, in eight months.
Income growth also rose but by less than it has in four months.
And a separate report from the University of Michigan showed consumer
sentiment rose in October but not by as much as expected. This as some are
worried about the stock market volatility.
MATHISEN: So, what can we expect from the markets for the rest of the
year and where should you invest now?
Let`s turn to Sandy Lincoln for some answers. He`s chief market
strategist at BMO Asset Management.
Sandy, welcome back. Good as always to see you.
What do you think? Is the market in a healthy place right now through
the year end or what?
SANDY LINCOLN, BMO ASSET MANAGEMENT CHIEF MARKET STRATEGIST: Well,
it`s certainly in a healthier place happen it was in August and September.
MATHISEN: Say that again, for sure.
LINCOLN: That was a pretty rough tour there. And I think a lot of it
was as the intro said, a lot of it was laid at the doorstep of China and
obviously the currency devaluation and that sent markets tumbling.
And then in September when everybody was expecting the Fed to
potentially raise rates, they not only didn`t raise rates but they doubled
down on the China syndrome, mentioning that as a potential drag on the
economy as well, and part of the reason they didn`t raise rates.
So, with the year to date numbers into early October, Tyler, I think
the S&P was off 6 percent or 7 percent in negative territory. Now, we made
all that ground up as your intro set up very nicely and we`re up for the
year with this big return we got in October.
HERERA: So, how much —
LINCOLN: Can it go higher —
HERERA: Sorry, Sandy. Finish your thought.
LINCOLN: Well, I was just going to say I think the backdrop has been
that we overreacted in August and September and I think a lot of what we
saw in October was sort of a reflection of the fact people recognized our
economy isn`t all that tied to China. So, a lot of people I think made a
mistake in reading on the connection between us and China and I think
that`s part of the recovery story in October.
HERERA: So as we go closer to the end of the year, how much do you
think is left in this upside move in the market, Sandy?
LINCOLIN: Well, I wish I had a precise answer for you. That crystal
ball`s a little cracked for everybody right now. But I think in general
there`s a little more up side. You know, you`ve got some additional
tailwind here, some of the debt ceiling deal and a little more government
spending that`s going to come into play. That`s going to be downwind a
little yet but still I think it`s going to be in investors` minds that`s a
You still got consumer sentiment pretty decent. I mean, I heard the
numbers you were talking about, Sue, but I think on balance the consumer`s
pretty confident. More people are played. Maybe we get 3 percent to 4
percent spending in the holiday season. Valuations are reasonable.
So, you`ve got to be very careful on stock selections in here. But I
do think there are opportunities and I think there`s a better than 50-50
chance that the market moves slightly higher by the end of the year.
MATHISEN: So, let`s talk about some of those opportunities. I know
you can pick stocks. I know you can pick sectors. Why don`t you give us
some names or sectors that are on your Santa`s list?
LINCOLN: OK. Well, one of those names is a company called Acuity
Brands (NYSE:AYI). When you think lighting, you think Acuity Brands
(NYSE:AYI). They have a 17 percent or 18 percent share of the lighting
industry here in North America.
And they`ve got all forms of lighting. They manufacture it, they
design it, they distribute it. And they`re very big producers of what we
call LED lighting which is the coming of age form of lighting for both
industrial and residential, actually.
And it`s a real good profit margin business. Costs are coming down.
Sales are going up. This is a double-digit revenue gainer, a double-digit
earnings gainer. Not a cheap stock, Tyler. It`s 25, 26 times forward
earnings. But we think the financial performance really supports the name
HERERA: And Columbia Sportswear (NASDAQ:COLM), something my kids have
a lot of in their closet.
LINCOLN: Yes. I bet. And those total up pretty quickly on the cash
register as well.
HERERA: Yes, they do.
LINCOLN: We almost didn`t use this name because the earnings were
going to come out last night when we sent you the name. We hadn`t seen the
earnings results for the third quarter, but they beat on revenue and beat
And, Sue, that`s one of the real drivers we`re looking for. The
discrimination in the market really is looking for companies that are able
to improve profit margins, sustain growth rate and sales above expectations
and support earnings.
And Columbia`s doing a really nice job of that. They did beat on
earnings, did beat on revenues. Margins are expanding. They`ve got a
really good line.
Now, they can be a choppy stock. Don`t get me wrong there. It can
even be affected by the weather. But we think through it all. It`s a
pretty good name to hold in a consumer-oriented position.
MATHISEN: Sandy, thanks very much. Have a happy Halloween.
LINCOLN: Thanks. Trick or treat to you guys.
MATHISEN: You bet. Sandy Lincoln with BMO Asset Management.
HERERA: Big oil surprising the street today. While sliding energy
prices dealt a blow to both ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX),
their results came in better than expected. That sent shares of both
And as we`ve been telling you, refining has been a bright spot for the
energy sector and that proved true with both companies posting an earnings
increase from that portion of their business. Still, Chevron (NYSE:CVX)
said it will slash 10 percent of its workforce and both firms will reduce
spending. Chevron (NYSE:CVX) saw its revenue fall nearly 40 percent while
Exxon`s was cut almost in half.
MATHISEN: Shares of Valeant pharmaceuticals under pressure today
after the company cut ties with the specialty pharmacy Philidor. It
distributed some of Valeant`s prescriptions. Yesterday, pharmacy benefits
manager CVS (NYSE:CVS) health, Express (NYSE:EXPR) Scripts and a unit of
united health group all ended their relationship with Philidor. Shares of
Valeant down about 16 percent today.
Meg Tirrell has more on the storm swirling around Valeant.
MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was another
rough day for Valeant. The drug maker saying allegations about Philidor`s
activities raise additional questions about the company`s business
practices. It says Philidor will shut down operations as soon as possible.
The specialty pharmacy only accounts for about 6 percent of Valeant`s
revenue, but it`s contributed to an almost 40 percent decline in Valeant`s
stock in the last week and a half. The decision to terminate the
relationship came after several pharmacy benefits managers last night said
they wouldn`t work with Philidor anymore. CVS (NYSE:CVS) Caremark in
particular citing non-compliance with the terms of its agreement.
Specialty pharmacies typically have been used to handle more
complicated drugs such as those that need special storage or dosing. More
recently, some companies including Valeant have used specialty pharmacies
as a way of distributing often higher-priced drugs that insurers want to
dissuade patients from using before trying cheaper alternatives.
Pharmacy benefits manager Express (NYSE:EXPR) Scripts cited the
practice of circumventing cost savings strategies as a reason for
terminating its relationship with Philidor. A four-hour long presentation
by hedge fund titan Bill Ackman, one of Valeant`s largest shareholders,
failed to stop the stock slide.
Ackman came out in defense of the company, saying he still believes in
Valeant and CEO Mike Pearson, but noted he does take issue with a few
things. First, he said it needs to improve its public relations, investor
relations and government relations. He also said Valeant should have
disclosed more about its relationship with the Philidor pharmacy and he
expected communications and disclosures be more robust going forward.
Ackman compared the situation with the that of American express in the
1960s when a young investor named Warren Buffett bought the stock at a
discount after a scandal drove its shares down. Ackman last week increased
his stake in Valeant.
The drugmaker, however, still has several things on its plate —
multiple government inquiries into its drug pricing and patient assistance
programs, plus the threat of another report from short seller Citron
Research. That`s the firm that sparked the Philidor controversy. Citron
coming out on Twitter saying it`s got a new report it will release on
Monday. No hints on what it will contain, but Valeant`s stock slumped as
much 16 percent intraday heading into the weekend.
For NIGHTLY BUSINESS REPORT, I`m Meg Tirrell.
HERERA: Coming up, why rising interest rates may actually be a good
thing for the housing market.
MATHISEN: The Federal Reserve is proposing new rules to help further
prevent taxpayers from being on the hook for another bailout. The
proposal`s goal is to work toward the end of banks being too big to fail.
The rules would require six of the nation`s eight biggest banks to issue a
total of $120 billion of long-term debt to help absorb financial losses.
The banks are JPMorgan (NYSE:JPM) Chase, Citigroup (NYSE:C), Bank of
America (NYSE:BAC), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), Bank
of New York Mellon (NYSE:BK), State Street (NYSE:STT), and Wells Fargo
(NYSE:WFC). The fed did not say which two of the banks were exempt.
HERERA: Richmond Federal Reserve President Jeffrey Lacquer was the
lone dissenter in Wednesday`s decision by the central bank not to raise
interest rates. Today, lacquer said he wanted to raise rates because the
economy is strong enough and labor markets have, quote, “tightened
MATHISEN: And mortgage rates did move higher this week after the
Federal Reserve did signal that rates could rise in December.
Diana Olick now on how home sales could react.
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Home buying
slowed down in September for both existing homes and new construction.
Now, mortgage rates are edging higher and could jump even more if the
Federal Reserve raises rates in December. While it seems like higher rates
would only hurt, the CEO of one of the nation`s largest builders, Pulte
Homes, argues they could actually help.
RICHARD DUGAS, CEO PULTE HOMES: I predict that if they raise them in
small increments, it actually could be a catalyst for the market for people
to get off the fence and jump into housing while rates are still relatively
OLICK: If interest rates on the 30-year fixed mortgage went from 4
percent to 4 1/2 percent next year, that would raise monthly costs by about
$29 for every $100,000 financed. It`s not a ton, but just the fear of
paying more later when you could pay less now could make potential buyers
more eager to get the deal done now. It could also just make them feel
better about buying.
TIM ROOD, COLLINGWOOD GROUP: If you have interest rates that go up,
that generally means that the economic conditions are improving, borrowers
feel more confident about their lot in life and their economic prospects
through job growth and things like that, so they`re more compelled to
OLICK: That thesis is plausible except for the supply issue.
Mortgage rates are not the biggest headwind to housing right now. It`s
lack of homes for sale, lack of construction. And consequently, home
prices rising far more than interest rates.
NELA RICHARDSON, REDFIN CHIEF ECONOMIST: Two years ago, we were
talking about sellers being locked in. They loved their mortgage and hated
their house and decided to stay put. Will this mortgage increase if it
happens, will that make them again hesitant to add to supply? And that`s
supply we desperately need in the housing market right now.
OLICK: In other words, rising rates could impact sellers more than
For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.
HERERA: Shares of Abbvie surge on earnings beat and that is where
tonight we begin tonight`s “Market Focus”.
The drugmaker hiked its outlook for the year as its profit and revenue
easily topped consensus. On top of that, the company increased its
quarterly dividend to 57 cents a share. That will be payable in February.
Shares rose 10 percent to $59.55 making Abbvie the second best performer in
the S&P 500.
But it was the opposite story for CVS (NYSE:CVS). Its profit forecast
for 2016 came in below estimates, which the company is blaming on costs-
related to the purchase of Target`s pharmacies, among other things.
Earnings missed consensus for the first time in six quarters, which it
attributes to another acquisition and generic drugs. Shares were off
nearly 5 percent to $98.78.
An increase in sales of generic drugs helped Mylan (NASDAQ:MYL) post
an earnings beat. Revenue was short of the forecast but the company also
announced it will continue to strongly pursue its bid to buy Perrigo
(NASDAQ:PRGO). Shares were off 3 percent to $44.09.
MATHISEN: Colgate`s earnings were in line with consensus while
revenue missed. Quarterly sales fell as a strong dollar weighed on the
toothpaste maker. It expects full year earnings to be lower than
predicted. Shares fell 4 percent to $66.35.
Anheuser-Busch InBev saw its shares rise despite results that missed
on both the top and bottom lines. Volatile currencies weighed on results.
The company didn`t hike its dividend. Shares were up 1 percent today to
And Phillips 66 saw its earnings rise more than 30 percent helped by
strength in its refining segment and even though revenue came in below
consensus. The stock was up 3 percent, $89.10, the close.
And now to our market monitor who likes stocks he says will be
affected by the global economy for years to come. It is his first time
joining us for the program.
He is Lew Piantedosi, portfolio manager at Eaton (NYSE:ETN) Vance,
where he manages about $13 billion.
Lew, welcome. Nice to have you here.
LEW PIANTEDOSI, EATON VANCE PORTFOLIO MANAGER: Thanks for having me.
MATHISEN: So tell me how you come to the consensus that you want
larger stocks that affect the global economy.
PIANTEDOSI: Yes. I mean, we look at the environment that we`re in.
There`s so many cross-currents when it comes to global economies, what`s
going on in emerging markets, Europe, pretty stagnant growth, and the U.S.
seems to be in an environment where we`re kind of a two steps up, one step
There`s lots of uncertainty with the Fed. So, in that kind of
environment what we want to seek out is companies that are benefiting from
big picture long-term secular trends. We call them mega trends. And they
populate a big part of our focused growth portfolio.
MATHISEN: These are — and the stocks, we`ll get to them in just a
moment, but it feels to me that what you`re calling for here in these stock
picks are stocks that aren`t trading plays but forever stocks — stocks
that would be sort of cornerstones in your portfolio.
PIANTEDOSI: That`s right. We view these companies as long-term
franchises. These are the types of stocks that you don`t want to trade.
That`s correct. They are buy-and-hold, invest, build wealth over time type
You know, really we haven`t seen a strong growth cycle since the
period of the `90s and we think there`s a lot of parallels to what happened
during that period of the `90s to where we are today and that huge mega
trends, transformational trends are taking place and kind of flying under
the radar and investors are missing it because they`re much more involved
in thinking about the macro and trading positions rather than investing in
MATHISEN: So let`s get to the stock picks. And we`ll start off with
It`s trading at about $102 a share. Why do you like it?
PIANTEDOSI: Yes, Facebook (NASDAQ:FB) is a company, and I`ve been
talking about this one for a couple of years now, when I talk about it
today people say I missed the stock.
And my argument is you haven`t missed anything. They`ll likely end
this year with about $17 billion in revenues, which is pretty remarkable
considering the company really wasn`t in existence ten years ago. But as
we look at that revenue base, that`s still less than 3 percent share of the
$700 billion global advertising market.
So, they`re going rapidly, but we still think they have the
opportunity to double and triple that share over the next three, four, five
MATHISEN: Let`s go on to choice number two which is a stock I`ve
heard of. It`s called Amazon (NASDAQ:AMZN).
MATHISEN: Why do you like it?
PIANTEDOSI: Well, again, Amazon (NASDAQ:AMZN), we love Amazon
(NASDAQ:AMZN) because it has a major presence in two huge secular trends.
The first trend, e-commerce. Everyone knows Amazon (NASDAQ:AMZN) is a
retailer. Online retailer, e-commerce is growing five times traditional
retail. And Amazon`s place within that e-commerce space continues to gain
So, we love Amazon (NASDAQ:AMZN) as an e-commerce play but we also
love it through Amazon (NASDAQ:AMZN) web services and the shift to the
cloud. This is a business that they`ve given more clarity to recently and
the growth in that business is remarkable. They`re a leading player, but
it`s still in the very early stages.
MATHISEN: And we`ll finish one Gilead. You say the business is
misunderstood by Wall Street. How so?
PIANTEDOSI: Yes. I think their drug for Hep C has been nothing short
of remarkable. It`s a remarkable drug in that it actually cures the
disease. To date, they`ve cured 600,000 patients in the United States
alone and I think the street thinks that that number has peaked or their
earnings have peaked over time.
But we look at that total addressable market and see 3 million to 4
million patients in the United States, an additional 2.5 million in
continental Europe. And then another million or so in Japan that they`re
just starting to crack the surface on.
So, there`s lots of growth in this company going forward.
MATHISEN: Very quick closing question. Do you think the S&P 500 will
be higher at the end of the year than it is now? And if so, by roughly how
PIANTEDOSI: You know, that`s not my game to call the market. We
focus on companies. And the best growth companies that we can find. The
companies that I mentioned all have earnings growth in excess of the
market. And if they can continue to do what we think they can, those
companies will perform very, very well.
MATHISEN: Good stock pickers answer, Lew.
PIANTEDOSI: A lot of different — thank you.
HERERA: Lew, thanks for joining us. We`ll talk to you soon.
PIANTEDOSI: My pleasure.
HERERA: Lew Piantedosi with Eaton (NYSE:ETN) Vance.
MATHISEN: Up next, and I don`t think Lew would like to be associated
with this. How Ponzi schemer Bernie Madoff`s impact is being felt at this
year`s World Series.
HERERA: I think you`re right about that.
HERERA: Here`s what to watch for next week. Another busy earnings
week. The Dow components reporting include Visa (NYSE:V) and Disney
(NYSE:DIS). The employment report for October is out on Friday. And also
on the data front, motor vehicle sales are out along with a read on
international trade and manufacturing. And that`s what to watch for next
MATHISEN: Tonight is game 3 of the World Series between the New York
Mets and the Kansas City Royals. And with the Royals taking the first two
games, the series shifts to the Big Apple (NASDAQ:AAPL). And the Mets are
going to need a big turnaround to survive this series. But that might pale
compared with the financial squeeze they`ve been under.
Eric Chemi is at Citi Field in Queens, New York, with a look at how
the Mets survived Bernie Madoff.
ERIC CHEMI, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Mets may be
down 0-2 in the World Series, but just being here is a huge win for a team
nobody thought could get this far. The Mets struggled both on and off the
field for the past six years, losing games and money.
A big reason — team ownership`s tie-up with Bernie Madoff. When the
Madoff scandal broke, Mets owner Fred Wilpon realized his assets were worth
a lot more than he thought. He had to borrow hundreds of millions of
dollars to stay afloat and is to this day paying off settlements to the
Behind the less money, meant a leaner and some say smarter approach to
building a team through young talent. Finally, in 2015, it all came
together led by up and coming pitching stars who make just above the
league`s minimum salary.
DARRYL STRAWBERRY, 1986 WORLD CHAMPION METS OUTFIELDER: The pitching
staff is young. They`re going to get better. So that`s the exciting part.
CHEMI: The surprise turnaround has caused an economic stimulus in the
region. Ticket prices are soaring. The average price for tonight`s game
is $1,800. And TiqIQ says this is the most expensive World Series that
they have ever tracked on the secondary market.
Fans are also buying merchandise in numbers bigger than anybody could
MITCH MODELL, MODELL`S SPORTING GOODS CEO: We did more business in
one day when they clinched the pennant than we did all of 2014 in 365 days.
CHEMI: Despite being down 0-2, history is on the side of the
STRAWBERR: We were down 0-2 in `86 and went down to Boston and went
down and won the first two and lost the next one there, but came back and
ended up being the champs.
CHEMI: While the odds of a comeback are slim, the Mets are showing
the world that comebacks are what they do best.
For NIGHTLY BUSINESS REPORT, I`m Eric Chemi at Citi Field in Queens,
HERERA: Game 4 of the series will be tomorrow on Halloween.
And as for Halloween, Americans are expected to spend about $2.5
billion this year on Halloween candy. And for some Bay Area residents who
haven`t bought their treats yet, one San Francisco company hopes to come to
Jane Wells has more.
KID: Trick or treat.
JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Homes across
America are preparing for battle stations Saturday night as hordes of
children invade neighborhoods in search of treats. But here`s the trick.
ANSON TSUI, SPOONROCKETS: From our research, 50 percent of all
households run out of candy on Halloween.
WELLS: The horror. But this is 2015, and naturally, a couple of
young techie entrepreneurs have developed an app to solve this dilemma.
It`s called Spoonrockets — a low-cost meal delivery business started two
years ago in the Bay Area.
TSUI: Spoonrocket is the food button on your phone. Kind of like
Uber is the taxi button on your phone.
WELLS: And this Halloween, it`s offering to deliver bags of candy to
Bay Area residents in 15 minutes if they run out, helping them avoid
turning out the porch light early and incurring the wrath of egg-throwing
teenage ghouls. Spoonrocket has pre-bought a thousand worth of candy and
expects to sell it all. And not just any candy.
TSUI: A lot of times, families just have really terrible candy like
Tootsie Rolls and Dum Dums. So we decided to offer candy that kids really
WELLS: The company says Halloween won`t be about making money but
about marketing the business. And before you laugh that someone would
actually come up with all this as a company, Spoonrocket hopes to expand
its concept of fast food delivery nationwide and has already raised $13
million in funding. That`s a neat trick and a treat.
For NIGHTLY BUSINESS REPORT, I`m Jane Wells.
MATHISEN: Spoonrocket. That`s Tootsie Roll on line 2.
HERERA: Exactly. And Dum Dums.
MATHISEN: And Dum Dums.
That will do it for NIGHTLY BUSINESS REPORT for tonight. Have a great
weekend. Happy Halloween, everybody. I`m Tyler Mathisen. Thanks for
HERERA: And I`m Sue Herera. Have a great weekend. We will see you
back here on Monday.
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