ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Sue Herera and Bill Griffeth.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Record finish. The S&P 500 and the Nasdaq closed at all-time highs as the job market shows its resilience.
Good fit? Google (NASDAQ:GOOG) buys Fitbit for more than $2 billion, extending Google`s reach into consumer electronics.
Second chances. Used clothing is big business. Tonight, we meet the entrepreneurs who had the bright idea to focus on men and their growing love of fashion.
Those stories and more tonight on NIGHTLY BUSINESS REPORT for Friday, November 1st.
Good evening, everyone, and welcome. Bill Griffeth has the evening off.
Wall Street ended the week in rally mode. The S&P 500 and the Nasdaq closed at records, thanks to both a much stronger than expected jobs report and progress on trade negotiations between the U.S. and China. That reassured investors about the health of the economy, and it sent stocks higher.
Here are the closing numbers for you. The Dow Jones Industrial Average rose 301 points to close at 27,347. The Nasdaq was up 94. And the S&P 500 added 29. And it was the fourth straight week of gains for all of the major averages.
Bob Pisani has more from the New York Stock Exchange.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Stocks were back in rally mode on the first day of November, both S&P and Nasdaq, record highs today. We had a notable shift in the market narrative. We`ve gone from fears of a recession in 2020 — remember that a few months ago, to a belief that the global economy will be slowing but still growing.
But today`s data is taking the edge off of even that slowdown narrative. October jobs, better than expected. And we had strong revisions from prior months.
Elsewhere, the U.S. manufacturing was still weak, but it was better than feared. And new orders did not slip. That`s a critical component. It looks ahead the new orders.
Overseas, even China manufacturing was better than expected. And trade sentiment is lifting for the moment.
So as a result, we`ve got some breakouts, not just the S&P 500 but even on a global scale, European indexes hitting new highs today. Japanese indexes hitting new highs as well.
Here in the U.S., new highs in the Nasdaq 100, in materials names, health care names and semiconductors as well.
So, what`s missing here? What would move the markets up more, say another 10 percent?
So, three things would really move the needle. First, higher bond yields would move money out of bonds and into stocks. That`s a help.
Second, trade. We need to take the December 15th tariffs that are supposed to come on off the table.
And finally, this is probably important, is earnings. This slow growth narrative has believed that 2020 earnings would be flat to up mid-single digits. But if we get better economic data across the board, that`s going to force traders to rethink those estimates for 2020 and that means rethinking them up.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
HERERA: And now to the employment report which as we mentioned was surprisingly strong despite a cooling economy.
Steve Liesman takes a closer look at the state of the American labor market.
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Even while the government reported that job growth slowed in October, Wall Street still saw the report as on the strong side and likely to help keep moderate U.S. growth humming along. The government said the unemployment rate ticked up 0.1 to 3.6 percent and that 128,000 jobs were added. Now, that is the lowest in five months.
But job growth bass better than the meager 75,000 that Wall Street had forecast, and lackluster job growth from the prior two months were revised upwards by a combined 95,000 jobs. Finally, the number was depressed by striking GM workers who have now gone back to work.
JAN HATZUS, GOLDMAN SACHS: If you look at the jobs number now you are not seeing that much slowdown. It`s a little bit surprising, because other indicators do show a slowdown over the last year. But the job market is just chugging along for now.
LIESMAN: There was strong growth in leisure and hospital, up by 61,000. Education and health services up by nearly 41,000. Wholesale trade up nearly 11,000.
But government down 3,000 because census workers let go and manufacturing was down by 36,000. But those manufacturing job losses should turn into gains this month when striking GM workers return to work. And that leads to more upbeat news on the economy.
JASON FURMAN, PETERSON INSTITUTE FOR INTERNATIONAL AFFAIRS: I don`t think any one number on jobs should change our view of the economy. This one changes mine a bit more than the average month does. You have the pace of job growth in the last three months exceeding the pace of job growth we had in the first seven months of this year. That`s something that is surprising given all the increase in uncertainty we have seen.
LIESMAN: What`s so important about the report is that global economic weakness and trade war have plunged the U.S. manufacturing sector into what some are already calling a recession but better job growth should mean strong consumer spending that can help growth continue at the recent modest pace of around 2 percent.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.
HERERA: Let`s turn now to Ethan Harris (NYSE:HRS) to talk more about the stronger than expected jobs report and the economy as a whole. He is the head of global economic research at Bank of America (NYSE:BAC) Merrill Lynch.
Ethan, welcome back. Nice to see you tonight.
ETHAN HARRIS, BANK OF AMERICA MERRILL LYNCH: Thank you.
HERERA: Let`s start, first of all, with your reaction to the report and why you think basically these reports and the previous revisions mean the labor market is so strong.
HARRIS: Well, I agree with the other people commenting before me. I mean, this is a very strong report, if you take out the distortions due to the strike and laying off of temporary census workers. It`s like 185,000 or something like that gain. So, it`s a very strong gain.
I think we need to put it in a broader context. It is true that the labor market has held up a lot better than expected. But if you look across the economy, you do see tremendous weakness in the manufacturing sector. You see it in business investment.
And so, while the job numbers look great and the service side of the economy producing most of the jobs look great, the manufacturing side of the economy does not look so great. So, it`s still a mixed picture out there, even with this good data.
HERERA: You make the point, as I look at my notes, that`s what`s happening is you say the companies have responded to things like the trade war by cutting investment rather than jobs. Why do that?
HARRIS: Well, think about it from a corporate perspective. You have no idea where tariffs are going to be two years from now. And so, if you`re going to make a commitment to new investment, to buy new plant and equipment, that`s something you can`t give back. You know, you have to put that money in.
So, you`re not doing capital investment until you have some clarity around what your future cost structure is going to look like. On the other hand, you`ll hire. If you have business and you have demand for products, you need to produce products. So you will add workers.
If it turns out the trade war is really bad and you need to lower the employment at one of your the outlets, you do it. But you can`t return a factory whereas you can lay off a worker. So, the factories and the investment side is much weaker than the labor side.
HERERA: The New York Fed and the Atlanta Fed both downgraded forecasts of economic growth. Are you at all worried about economic growth overall in the economy, separate from labor?
HARRIS: Well, I mean, the economy is slowing down. I mean, away from this report and the recent reports in general have been a little bit better on payrolls. There is a broad slowdown going on. We think that growth will slow to about 1.3 percent in the fourth quarter down from 1.9 this quarter. So, it`s a little bit further weakening.
I`m not worried about a recession or a deeper downturn as long as we do get a trade deal, because with the trade deal, that intense uncertainty in the business world will abate a bit. And the economy should start to stabilize and improve. We also have a Fed that is working ready hard to support growth.
So, as long as the trade war is under control, growth should pick up early next year.
HERERA: Ethan Harris (NYSE:HRS) with Bank of America (NYSE:BAC), Merrill Lynch — Ethan, thank you so much.
HARRIS: Thank you.
HERERA: And as we just discussed, one of the biggest issues for the market is indeed trade. President Trump today said a deal with China is coming along well.
Kayla Tausche takes a look at the progress being made.
KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Top negotiators from the U.S. and China continued talks over a principals-level phone call today with differing views of what was achieved on trade. China`s Ministry of Commerce says a consensus on principles was reached. The U.S. trade representative said the call was constructive and that the two sides made progress in a variety of areas and are in the process of resolving outstanding issues.
As discussions continue, so does the search for a venue for President Trump and President Xi to sign the phase one of the broader deal after Chile cancelled the APEC summit later this month. Trump yesterday tweeted the new location would be announced soon.
For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche in Washington.
HERERA: The vice chair of the Federal Reserve says monetary policy is in a good place. Richard Clarida pointed to the central bank`s three interest rate cuts this year and said the full effects are yet to be felt. Economists interpreted the remarks as an indication the Fed is likely to remain on hold at least for now.
And now to earnings from big oil. ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) posted sharply lower profits despite increases in production. The two companies cited drops in energy prices. Exxon profit was nearly cut in half though it did beat analyst estimates coming in at 75 cents per share. Chevron (NYSE:CVX) earnings fell 36 percent to 1.36 per share, missing estimates of $1.45. In trading, shares of Exxon rose 3 percent. Chevron (NYSE:CVX) was up a fraction.
And now to merger news. Google`s parent Alphabet is buying Fitbit for more than $2 billion. On the surface, the get-together may seem odd since Fitbit once dominated the wearables market, but no longer does. But that doesn`t stop investors from sending shares of both stocks higher, with Fitbit rising 15 percent.
Josh Lipton has more.
JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Google (NASDAQ:GOOG) CEO Sundar Pichai has been moving hard into hardware, dedicating time, money and effort into building out his portfolio, which includes everything from smartphones to smart speakers.
Now, Pichai is pushing into wearables with its purchase of smart watch maker Fitbit. That company struggled competing with big rivals like Apple (NASDAQ:AAPL). Its stock is down nearly 90 percent from its all-time high. But Google (NASDAQ:GOOG) clearly thinks its talent and technology are valuable.
In a statement, Google`s hardware chief saying: By looking closely with Fitbit`s team of experts and bringing together the best AI, software and hardware, we can help spur innovation in wearables and build products to benefit even more people around the world.
Google (NASDAQ:GOOG) has a long history of making moves in hardware through acquisitions from Motorola Mobility, to Dropcam to Nest. Though some argue the acquisitions haven`t always yielded benefits.
JOANNA STERN, WALL STREET JOURNAL: You got fit bit here that probably no better company — maybe Garmin (NASDAQ:GRMN), maybe some of the running companies doing a little bit of a better job in the fitness, workout pace. But Fitbit is the one to have.
The issue with Google (NASDAQ:GOOG) is they bought other fitness companies and wearable companies before. They bought Fossil (NASDAQ:FOSL) — some tech from Fossil (NASDAQ:FOSL) before. They bought Misfit, a start-up in the fitness and wearable space. Nothing came of it.
LIPTON: And as Google (NASDAQ:GOOG) pushes into wearables, it faces plenty of competition from the likes of Apple (NASDAQ:AAPL). The iPhone maker doesn`t break out how many watches it sells. But analyst estimate that Tim Cook`s company has now sold 76 million.
This is a relatively small deal for Google (NASDAQ:GOOG). But analyst say it will likely attract scrutiny in Washington too, given that Google (NASDAQ:GOOG) like other big tech companies is now clearly on the radar of regulators.
For NIGHTLY BUSINESS REPORT, I`m Josh Lipton in San Francisco.
HERERA: It`s time to look at some of today`s “Upgrades and Downgrades”.
Pinterest was upgraded to buy from neutral at D.A. Davidson, following its disappointing quarterly results and its weak guidance. But the analyst cites Pinterest`s year over year sales growth as an encouraging sign. The price target is $28. But the stock was down 17 percent to $20.86.
And booking holdings formally known as Priceline was downgraded to neutral from buy at Bank of America (NYSE:BAC) Merrill Lynch. The analyst cites macro concerns from the online travel industry. The price target is $2,160. The stock fell a fraction to $2,032.02.
Still ahead on this jobs day, the challenges that some companies are facing when it comes to finding workers to protect against hacks.
HERERA: It was a rough week for Boeing (NYSE:BA) and it`s not ending any better. Some flight attendants are questioning the safety of the troubled 737 MAX. Following testimony this we can from Boeing (NYSE:BA) CEO, the Flight Attendants Union representing American Airlines is questioning whether the FAA has the resources necessary for oversight moving forward. American`s 28,000 flight attendants say they will, quote, refuse to walk onto a plane that may not be safe, end quote.
Senator Elizabeth Warren released a new outline of her Medicare-for-All plan. The single payer program would cost just under $52 trillion over a decade, which her campaign says is roughly the same as what the current system costs. The Democratic presidential hopeful said it would give every American full health coverage and coverage for long-term care.
She says her plan would be paid for by corporations and the ultra rich. Senator Warren added that middle class Americans would not foot the bill.
In survey after survey, companies say cyber-attacks are one of the biggest risks to business. That`s why demand is strong for those who have the know-thousand to protect networks against hacks but finding those employees isn`t always easy.
Kate Rogers (NYSE:ROG) is in Washington with the next installment of “Help Wanted”.
KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: As cyber-attacks grow in frequency and severity around the globe, workers like Mandi Ingersoll are in high demand. Ingersoll is an analyst at TDI, a cybersecurity firm in Washington, D.C., helping clients ensure their networks are safe.
She began her career in the cyberworld in the Navy, some 20 years ago, and decided to stick with it after retiring.
MANDI INGERSOLL, TDI CYBERSECURITY ANALYST: It`s interesting because it`s always something new. You`re never looking at the same thing. And it`s important because this is — I mean, this is not only critical to, you know, commercial and private sector sites, but also federal government and military.
ROGERS: The firm employed some 70 people in the U.S. and Europe, assessing and protecting companies, non-governmental organizations and government agencies from cyber risks. It`s looking to bring on 15 more workers, a tall order given the changing cyber workforce.
Employees are aging out while others simply want to work on shorter term basis.
CEO Paul Innella says he has seen a new phenomenon given the low supply of skilled workers relative to demand
PAUL INNELLA, TDI CEO: I learned the term ghosting but we have — we are finding that folks will quite genuinely not show up and never return your call again. Now, we have found some folks who we have hired who just didn`t show up and we never heard from them again. So I do believe there are some unique challenges that we have never seen before.
ROGERS: TDI offers competitive pay and benefits, tuition and certification stipends, as well as bonuses, but the fight for tech talent is ramping up particularly here in D.C. as Amazon (NASDAQ:AMZN) moves into the second headquarters.
Workers are needed beyond just TDI. Right now, more than 2.5 million people are working in cybersecurity jobs around the globe. Some 4 million workers are needed close the skills gap and half a million of those workers are in demand here in the U.S. to properly defend organizations.
DAVID SHEARER, ISC2 CEO: We need skilled people right now that can do the work but we also need to be building that cadre of the next wave of people coming in to replace those that will be retiring in the not-too-distant future.
ROGERS: And the work has never been more important.
SHEARER: The volume of attacks and the sophistication of attacks from around the world just continue to increase, yet the workforce is constrained. The demand for qualified people continues to go up, the sophistication of the attacks going up.
ROGERS: For NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG) in Washington.
HERERA: Mixed results for AIG. And that`s where we begin tonight`s “Market Focus”.
The company missed earnings estimates due to sluggish demand in the insurer`s life and retirement businesses. But AIG did report better than expected revenue and narrowed its loss from last year on smaller catastrophe losses. Shares were up about 1.5 percent to $53.76.
Colgate-Palmolive (NYSE:CL) saw an increase in organic sales, thanks to volume increases and higher prices. But the consumer products maker was also hurt by lower sales in Europe. And this led to a slight miss on revenue but Colgate was able to top Wall Street`s earning expectations. Shares fell more than 2.5 percent to $66.81.
Strong demand for its cancer drug Imbruvica and a smaller than expected drop in sales of its blockbuster drug Humira helped AbbVie beat estimates. The company also raised the lower end of its outlook and it raised its dividend 10 percent. Shares rose nearly 3 percent to $81.75.
It is time now for our weekly market monitor who has a list of stocks he says you should be buying right now. He is Mark Lehmann, and he is president of JMP Securities.
Mark, welcome. Nice to have you here.
MARK LEHMANN, JMP SECURITIES PRESIDENT: Thanks, Sue. Appreciate it.
HERERA: Let`s get right to your picks.
Lyft is one of them. You say they put up a buying quarter. Why else do you like the stock?
LEHMANN: Well, they did put up a good quarter, the second in a row. Obviously, it`s controversial like a lot of unicorns but they are gaining market share. They`re growing revenue faster than people expected and the contribution margin means meaning the profit to the bottom line is accelerating. I think that bodes well the next couple years.
They`re putting a good top line. And I think they`re going to get the profitability a lot sooner than people thought. And when that happens, I expect the stock to take off.
HERERA: All right. Do you have a projection on how much you expect it to increase?
LEHMANN: They`re going to grow revenues — I think they`re going to continue to grow revenues close to 40 percent to 50 percent, and they beat the profit, the bottom line number by 5 percent sequentially in the quarter. That`s much bigger than people expected.
Again, I think this will accelerate faster than people wanted in the models. And if that happens by 2022, I think this thing will be very profitable and you`re going to find the stock taking off.
HERERA: All right. Next on the list is Anaplan and it`s a planning tool for large organizations.
LEHMANN: It is. It`s a planning software company based in the cloud. They are replacing legacy vendors. That too is growing north of 30, 35 percent.
It`s a rich stock. This is not a company that`s unfounded. Meaning the street paid attention to it. It`s down about 20 percent of off the all- time high.
But this is for big organizations to do big planning collaboration. Companies like Amazon (NASDAQ:AMZN), big, chunky organizations. And they`re the best at it.
And I like the fact that we are replacing legacy systems and they`re in the cloud. And we see that growing 35 percent for the next couple, three years and if that happens, the stock will be a lot a lot higher.
HERERA: You mentioned Amazon (NASDAQ:AMZN), and that is your third pick. You really like that one.
LEHMANN: I do. I mean, they have an interesting quarter and they have an interesting ten days. They put up less than stellar quarter at least on the bottom line recently. They lost a very large contract from the federal government that went to Microsoft (NASDAQ:MSFT).
But the growth in the cloud is continuing to accelerate. What they are doing obviously in the businesses that every consumer knows continues to accelerate. They`re gaining market share. And at the same time, they`re also investing in the future in the cloud and data storage businesses that are continuing to accelerate to the cloud.
That hasn`t even begun to take over from the legacy systems. That`s why we like Amazon (NASDAQ:AMZN), and that`s why we will continue to see the stock ascend over the next few years.
And when you have the chance to buy in dips like this weekend, pay attention and you should do that.
HERERA: All right. Mark, we`ll leave it there. Thank you.
Mark Lehmann with JMP Securities.
Coming up, secondhand shopping, it`s not a new idea. But selling used, hard to find items for men is. And now, it`s a big business that started out as a “Bright Idea”.
HERERA: There are reports tonight that Comcast (NASDAQ:CMCSA) (NYSE:CCS) NBC is leaning towards making its Peacock streaming service free to everyone. According to CNBC, the free service would be the ad-supported version. It would be the first free streaming on demand video service from a major U.S. media provider.
The report comes on the same day as the launch of Apple`s streaming service, Apple (NASDAQ:AAPL) TV. As you may know, Comcast (NASDAQ:CMCSA) (NYSE:CCS) is the parent company of CNBC which also produces this program.
Well, legend has it that the term metro sexual first appeared in a British newspaper 25 years ago this month. Ever since, it seems, men have been talking fashion. Not business suits so much but street wear. Women may spend more but the men`s market is growing quickly.
And that`s why a team of New York City entrepreneurs got the “Bright Idea” to create an online marketplace focused on men`s clothing.
HERERA: Arun Gupta found a taste for fashion while he was in college at Yale, but there was one problem.
ARUN GUPTA, GRAILED CEO AND CO-FOUNDER: I couldn`t afford any of it, because it`s pretty expensive.
HERERA: Gupta found that guys, yes, guys, were talking fashion online occasionally, making deals on used, hard to find items. Holy Grails to some.
GUPTA: It`s like, oh, like this pair of boots came out three years ago, like I missed it when they came out and now, they`re like impossible to find anywhere. So, that`s my grail basically.
HERERA: By 2013, sites were selling used cars, furniture, even women`s fashion. Men`s fashion was fashionably late to the game.
GUPTA: I was like, look, this secondary market thing will be huge. I want to get in on this situation.
HERERA: So, Gupta built a rudimentary site and began convincing folks in the chat rooms to use it.
GUPTA: Oh, that is sick.
HERERA: By 2014, Julian Connor, a software specialist, along with Jake Metzger who has since moved on teamed with Gupta to cofound Grailed. It now boasts some of 4 million users per month.
Connor used early versions of the site and still shops there today.
JULIAN CONNOR, GRAILED CTO AND CO-FOUNDER: I really like avant-garde fashion and so the jacket and shirt are both from an American-born designer that now lives in Paris. His name is Rick Owens.
GUPTA: I love that.
HERERA: Grailed collects a 6 percent fee on each transaction, 1.2 million of them in 2018, at an average price of about $150 per unit. High-end items can get the rare art treatment, selling for tens of thousands of dollars.
GUPTA: These cool Prada dress shoes for $123.
HERERA: Sometimes their vintage goods provide a surprise.
GUPTA: This is a rolling stone shirt from the `94, `95 tour. Super steal. I got it for 50 bucks. It was awesome.
HERERA: Meticulous curation dictated by customer demand has built a mystique.
GUPTA: It`s like Margiela piece, like Margiela, the super iconic designer, and the red sleeve is the whole thing. If you saw the latest first “Star Wars” movie, “The Force Awakens”, the C-3PO has a red arm, which like may or may not be of influence by this jacket.
HERERA: Some rare items are sold. Others get archived.
GUPTA: This is an Issey Miyaki jacket. You remember Steve Jobs` iconic, like black turtle necks. He`s the guy who designed all his turtle necks, basically.
HERERA: Celebrities will sometimes borrow items to shoot magazine covers. And musicians have worn their pieces on stage.
GUPTA: That is Raf Simons but it`s based off of the New Order album art cover for “Power, Corruption & Lies”, where all these details are hand- painted.
CAM WOLF, GQ STYLE AND FEATURES WRITER: I think it`s really interesting to see how fashion now is just as much a hobby for guys as is, you know, sports or anything else.
HERERA: “GQ” writer Cam Wolf.
WOLF: You have to be well-versed in sort of these archive pieces. And I think Grailed has really helped to educate that and serve that consumer.
GUPTA: This is another piece.
HERERA: And increasingly stylish consumer looking for a deal on high-end, second-hand stuff.
CONNOR: The value proposition that we provide is so salient to many. I don`t think we`ve had this same sort of growth challenges that other businesses have had.
GUPTA: It all starts with talking to the consumer and understanding what it is they want.
HERERA: Grailed is constantly expanding its reach. What started with about 100 items now has almost 2 million pieces listed for sale from around the world. And two years ago, it launched the sister site which focuses on women`s clothing.
Before we go, here`s another look at the day`s final numbers on Wall Street. The Dow rose 301 points. The Nasdaq and S&P 500 both finished at a record. And it was the fourth straight week of gains for all of the major averages.
And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera. Thanks for joining us. Have a great weekend, everybody. And we`ll see you back here Monday.
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