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ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Sell-off on the street. The Dow drops 300 points, oil slides 3 percent, and bond investors fret about a mutual fund that blocks withdrawals as it liquidates.
SHARON EPPERSON, NIGHTLY BUSINESS REPORT ANCHOR: Long-term buys. Despite crude`s plunge, our market monitor says you should own two well- known big energy names for years to come.
MATHISEN: Genome journey. Want to know if you`re at risk for a disease? Our Meg Tirrell did. She mapped her DNA. She`ll tell you what she found in the second part of our series "Unlocking Your Health", tonight on NIGHTLY BUSINESS REPORT for Friday, December 11th.
EPPERSON: Good evening, everyone. I`m Sharon Epperson, in tonight for Sue Herera.
MATHISEN: And I`m Tyler Mathisen. Welcome, everybody.
Baby, it`s not cold outside -- not at all for December across most of the country. But inside trading rooms and portfolio offices from Boston to Berkeley, from Minneapolis to Miami, it sure felt frigid this week. Stocks logged their biggest weekly decline since the summer months, August.
Send the children out of the room, folks. Here are the numbers and they`re ugly. The Dow industrial averages tumbled 309 points to 17,265, NASDAQ off more than 2 percent down triple digits, 111 points. And the S&P 500 gave back 39. For the week, all three indexes were more than 3 percent lower.
One of the main reasons for the decline, of course, oil. Domestic crude off another 3 percent today to $35.62, a seven-year low, after the International Energy Agency warned of a continuing supply glut. For the week, prices were down 11 percent. That`s oil`s worst week of the year.
And as if that wasn`t enough, investors learned today that a junk bond mutual fund is barring investor withdrawals while it liquidates, sending a chill through the credit markets.
Dominic Chu reports.
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DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: There`s a new kid on the street to worry about. Less than a week out from the Fed`s expected rate hike as markets eye continuing global political tensions and a downward spiral in commodity prices, Third Avenue Management announced a block on withdrawals from its sagging focused credit fund, which is down about 13 percent in the last month and about 27 percent for the year.
The fund has already seen redemptions of nearly a billion dollars this year, but now the remaining assets could be frozen for months or even longer. For now, some assets have been frozen, placed in a trust to prevent mass redemptions while the fund figures out how to sell them off.
Third Avenue CEO David Barse wrote in a statement, "Investor requests for redemption in addition to the general reduction of liquidity in the fixed income markets have made it impracticable to create sufficient cash to pay anticipated redemptions without resorting to sales at prices that would unfairly disadvantage the remaining shareholders."
Hedge funds sometimes freeze assets like this, but this is a mutual fund and the mutual fund industry thrives because it gives investors the right to cash out at any time. It also comes after regulators have raised concerns that some mutual funds have been investing in assets that could be difficult to sell if markets turned sour. In fact, Carl Icahn is one investor who warned about it months ago and did so again today.
CARL ICAHN, ICAHN ENTERPRISES CHAIRMAN: The high-yield market is just a keg of dynamite that sooner or later will blow up. There`s no liquidity behind these ETFs. The average person that goes into this should basically be warned.
CHU: So, now, the big question is, who`s next?
JIM STEWART, THE NEW YORK TIMES: We all knew with these prolonged low interest rates, there were going to be pockets of excessive risk. And, you know, the question was, where were they? Now we`re going to start to see.
CHU: And if there are other pockets of trouble out there, just how widespread is the problem? Could junk bonds possibly be the equivalent of mortgage-backed securities like back in 2007 before the financial crisis?
STEWART: It`s a good question. It`s a huge market. I mean, again, my gut feeling is no because it`s much more visible. You know, it`s a known commodity here. You know, it`s much more publicly traded than all that stuff. But, you know, nobody knows for sure. I think people are jittery.
CHU: Those jitters now include fears of a credit crisis, a new plank in the market`s wall of worry.
For NIGHTLY BUSINESS REPORT, I`m Dominic Chu.
(END VIDEOTAPE)
MATHISEN: And late today, the hedge fund Stone Lion Capital, which focuses on distressed debt, said it has suspended redemptions in its oldest fund after many investors asked for their money back.
EPPERSON: So, how will all of these factors influence the U.S. stock market and your investments?
Mark Luschini is chief investment strategist at Janney Montgomery Scott. He joins us now.
Mark, let me start by asking you about a market that I covered for eight years and that is the oil market. The International Energy Agency saying that the oil glut that we`re seeing right now could last well into next year. Could we see oil prices here in the U.S. below $35, $30 a barrel? And what impact is that going to have on the stock market?
MARK LUSCHINI, JANNEY MONTGOMERY SCOTT CHIEF INVESTMENT STRATEGIST: Well, I think legitimately we could. It wasn`t that many years ago, you only have to go back to 2000, 2001 to see $20 a barrel. In fact, that looks from a technical standpoint that perhaps a reasonable level of support for oil prices. And the reason is going to be what we`ve seen now for some time and keeps getting compounded by these reports that continue to come out which say the market is oversupplied, there`s an abundance of oil inventory sloshing around the world, filling up containers and insufficient demand to absorb any of it. And the consequence is going to put further pressure on oil prices as well as obviously the impact of the strength of the U.S. dollar.
So I think the market is taking its cue from oil prices. I do challenge the signal oil is providing because I think it`s much more of a supply issue than a demand issue. But that said, it seems as though when you get any kind of relief in this downdraft in oil prices, read a rally in prices, the stock market tends to respond positively to it.
MATHISEN: Do you think on balance that these lower oil prices and the prospect of even lower oil prices is good for the U.S. economy? We hear the conventional wisdom that it means people have more money in their pockets to spend. But we sure don`t see that showing up in retail sales numbers.
LUSCHINI: Tyler, I do. I think this is good for Main Street. Not necessarily quite as good for Wall Street.
But the fact of the matter is, it`s estimated every one penny decline at the pump translates into a billion-dollar benefit to the consumer and we`re down about a dollar and a half according to AAA on a national average in the last 12 months alone. That`s $150 billion off of an $18 trillion economy. That`s an enormous windfall. Granted, a good portion of that`s been saved so far but some of that is starting to percolate its way into the economy.
EPPERSON: What do you think all this means for the Fed when they`re looking at oil prices, they`re looking at the risk in the high-yield bond market? Are they paying attention to this and will this change what many expect them to do next Wednesday?
LUSCHINI: I think this is not being lost on them at all but at the same time I think the green light came a Friday ago that showed the kind of gains that obviously led to unemployment to be at a level the Fed defines as maximum employment. So, I think they`re eager to get off the zero bound but I can`t help but think it`s going to influence the character of the commentary that`s going to accompany the announcement by Janet Yellen which is I think going to be very dovish with regard to the subsequent trace of interest rate increases in this cycle.
EPPERSON: That`s what we`re all waiting to see on Wednesday. Thank you so much, Mark Luschini with Janney Montgomery.
LUSCHINI: Thank you, Sharon.
MATHISEN: Well, the megadeal is official. DuPont and Dow Chemical (NYSE:DOW) will merge. The combined company will be worth about $130 billion in total market value and could potentially alter the chemical and agriculture industries.
David Faber spoke with both CEOs today and discovered the tie-up was one of the first things Edward Breen considered when he took the top job at DuPont just two months ago.
(BEGIN VIDEO CLIP)
EDWARD BREEN, DUPONT CHAIRMAN & CEO: It was my first day at DuPont. Andrew called me up and we literally met that Sunday and spent the afternoon --
DAVID FABER, CNBC: Day one. You didn`t wait. I know there`s an anecdote. You didn`t even have time to know where the bathroom was and you`re on --
BREEN: That was my joke to him.
ANDREW LIVERIS, DOW CHEMICAL CHAIRMAN & CEO: And exactly the way I remembered it. And Ed responded very quickly. To his point, the DuPont board had obviously been considering the moment in time was arriving. The ag business needed a partnership. And remember, this is a game changer for ag and what we`re creating in ag.
So, I think the DuPont board was heavily an Ag-oriented. 60 percent was ag. We`ve had an ag property that would be hand and glove. Our board had been looking at this for 10 years. And so, the multiple approaches, we need the moment in time, and the person and the person to arrive and say, you know what, there`s a lot of value to be done here and the board saw this (INAUDIBLE).
(END VIDEO CLIP)
MATHISEN: Shares of the Dow component DuPont were off 5 percent today. Dow chemical -- well, Dow chemical dropped nearly 3 percent.
EPPERSON: In economic news, producer prices unexpectedly rose in November, driven by a gain in services. The producer price index which measures the price companies receive for goods and services increased 0.3 percent last month. This was their fastest pace on wholesale inflation since June, but over the past 12 months, prices are still about 1 percent lower.
MATHISEN: Consumers did increase their spending last month. Maybe those oil dividends are beginning to pay off. The Commerce Department reported that retail sales rose but just by 0.2 percent in November. That is, however, the largest increase since July, which shows you how slow retail sales have been rising. Slightly below expectations, though.
Separate reports showed a rise in consumer confidence to the highest level in four months. The increase is due in part to that cheap gas and better employment prospects.
EPPERSON: In the wake of the San Bernardino attacks, have American attitudes changed when it comes to terror concerns and the way the government monitors communications?
Steve Liesman has the results of his latest All-America Survey and what the results may mean for the economy.
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STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The mass shootings in San Bernardino have awakened American fears of a major terror attack on U.S. soil and they`re bolstering public support for increased government monitoring of terrorists right here in the states.
The CNBC All America Economic Survey found 34 percent of respondents very worried about a major terror attack here at home, up from 26 percent before the massacre. Eight hundred Americans were surveyed for the data before the attacks and 347 were called back to gauge sentiment after the tragedy.
The survey found that Americans` new fears could have some real economic impact, 42 percent say they`re concerned about flying internationally, 29 percent offer they`re concerned about even getting on an airplane. And 16 percent report being worried about visiting shopping malls.
More than half of Americans, the highest level since 9/11, now fear the government will not go far enough in monitoring the activities and communications of potential terrorists living in the country.
In a separate NBC/"Wall Street Journal" poll in January, Americans were split 46 percent to 47 percent. Nearly half of Democrats are now afraid the government will not go far enough. That`s a significant shift from just before the December 2nd attacks in San Bernardino.
In a survey question asked only before the San Bernardino attack, 53 percent said technology companies should continue to sell software and devices with encryption coding because it protects consumers from criminals and the government. Only 36 percent thought the company should not sell the software because it allows criminals and terrorists to communicate secretly.
But presidential candidate and Senator Lindsey Graham said this has to change.
SEN. LINDSEY GRAHAM (R-SC), PRESIDENTIAL CANDIDATE: Here`s my advice to our friends at Silicon Valley: if you can`t find an agreement with the FBI director soon as to how we, the government, with a court order can find out what`s going on with terrorist communications, Congress will do this for you.
LIESMAN: The data show that so far, the issue hasn`t become political. Democrats and Republicans have nearly identical views. But that could change if Washington begins to focus on encryption.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.
(END VIDEOTAPE)
MATHISN: Still ahead, would you buy shares of a major energy company with oil prices at $35? Our market monitor guest says yes and has a list of names.
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EPPERSON: High drama in fantasy sports. A court ruled that DraftKings and FanDuel must cease operations in New York. It`s been a decision that we`ve been telling you may be coming. The companies then filed an emergency appeal and late this afternoon were granted an interim stay, allowing them to continue doing business in the state.
Last month, New York`s attorney general sued the company saying daily fantasy sports games are illegal games of chance, not lawful games of skill.
Comcast (NASDAQ:CMCSA) (NYSE:CCS) Ventures and NBC Sports Ventures have stakes in FanDuel. Comcast (NASDAQ:CMCSA) (NYSE:CCS) is a parent company of CNBC, which produces this program.
MATHISEN: And now to our market monitor, who likes large cap stocks he says will rise 15 percent to 20 percent over the next year and a half, including energy names he says you should own for years to come, core holdings. He`s Steven Dudash, president and investment strategist at IHT Wealth Management.
He was on a year ago and last time he was here he recommended Wells Fargo (NYSE:WFC). It is down 4 percent. JPMorgan (NYSE:JPM) is up 1 percent. And CDW is up 21 percent. Nice return there, Steve.
Welcome.
Let`s just clean up the path there. Do you still like those three or what is your position on them?
STEVE DUDASH, IHT WEALTH MANAGEMENT INVESTMENT STRATEGIST: Yes, I still like those three. And you know what? If you average 7 percent between those three in the last year and outperform the market by about 9 percent, I think most people would be pretty happy with those kind of returns.
The financials that we have there, a lot of people thought rates would be a little higher by now. And, you know, they haven`t panned out. They will hopefully next week. And you`ll start seeing financials go up.
EPPERSON: Let`s talk about energy for a moment because with oil around $35 a barrel, many people may be thinking the last thing I want to own is an energy company. But you say think twice about that, buy one, a big one.
DUDASH: I think they`re completely oversold right now. Listen, oil`s at $30 whatever dollars a barrel. It is not staying there. There`s no chance the producers can keep pumping out oil at that price. You`re going to start seeing supply dry up a little bit.
This is completely a supply issue right now. That starts drying up. Oil prices will start going back up a little bit. Maybe not to $100 a barrel but get you back into the $50s or $60s and make some of these bigger companies profitable.
EPPERSON: And BP and ExxonMobil (NYSE:XOM) are the ones you say to buy now?
DUDASH: Yes, I want to work with the big boys right now. Some of the smaller players out there are going to have some problems. They`re going to have dividend cuts likely. They`re going to have problems getting credit like you guys were just talking about in the high-yield space. Give me the big companies, the ones I know are going to be here for the next five or ten years. I`m going to buy them real cheap right now and really be happy down the road.
MATHISEN: Let`s switch to your third pick, which is a company that sells basically everything except oil and gasoline. And that`s Amazon (NASDAQ:AMZN). And they may sell that for all I know.
DUDASH: Yes. So that`s kind of the exact opposite of Exxon and BP. It is pricey right now. But they have cornered the market. It`s a huge barrier to come in there and try to compete against them.
It has gotten so easy for someone on their phone or on their computer, a tablet, to buy. It`s gotten safer. It`s gotten more convenient. It`s only growing.
But one warning with this one -- buy it now but keep your eye on it. If you make 20 percent, pat yourself on the back whenever that day is and sell it because it is expensive, very expensive right now.
EPPERSON: You know, a lot of our viewers may already own all three of these because they`re in so much of the large cap mutual funds in your 401(k). But it`s always good know what`s inside and the ones you think are good ones.
DUDASH: Yes yeah. Those -- I mean, you`re right. A lot of people with mutual funds have this exposure right now. But if you`re looking for individual stock plays, you`re looking to outperform the market in the next year or two, this is some strong sectors.
MATHISEN: Steve, thanks very much. Have a great holiday season -- Steve Dudash with IHT Wealth Management.
EPPERSON: Disappointing data weighs on Puma Biotech, and that`s where we begin tonight`s "Market Focus".
The company presented disappointing data from a trial of its breast cancer treatment back in June similar results also disappointed. Shares tumbled nearly 6 percent today to $67.94.
Genesee and Wyoming lowered its earnings outlook after railroad traffic fell more than expected. A sideline in commodity shipments has weighed on the company. Shares were almost 6 percent lower to 51.21.
MATHISEN: Alibaba which trades with my favorite ticker symbol, BABA, is buying "The South China Morning Post", the largest English language newspaper over in Hong Kong. Financial terms of the deal not disclosed. The e-commerce giant says the purchase was fueled by a desire to improve China`s image in the western media. Shares were almost 5 1/2 percent lower today at $79.74.
AstraZeneca in advanced talks to buy a company named Acerta Pharma for more than $5 billion. That`s according to "The Wall Street Journal." Acerta doesn`t have any drugs on the market but its cancer compound has shown promise in trial. Shares were off a fraction to $33.25.
EPPERSON: It`s been a particularly difficult stretch for the trucking industry, in part because they`re not shipping as much fracking equipment to shale regions. But the sector is also suffering from a shortage of truck drivers.
And as Morgan Brennan reports, some companies are finding new recruits to fill those jobs.
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MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Tiffany (NYSE:TIF) Deering doesn`t fit the stereotype of a truck driver and she knows it. For the past year as a team driver with her husband, she`s traveled across the country delivering freight for Warner Enterprises, spending three weeks at a time on the road. When she parks her big rig at a truck stop, people do a double take.
TIFFANY DEERING, WERNER TEAM DRIVER: "Oh, wait, you drive too?" And they kind of step back for a second. They`re like, "Oh. Oh, really?" And I`m like, "Yes, I drive."
BRENNAN: Deering is part of a growing population of women drivers being recruited by trucking companies, battling a severe driver drought. The truck industry faces a shortage of 150,000 to 200,000 drivers over the next three to five years. As baby boomers retire and the recovering economy means more demand for more trucks hauling goods. Fleet operators like Werner, Swift Transportation, Covenant Transportation, and Schneider have turned to a previously untapped labor pool. Women like Tiffany (NYSE:TIF), offering incentives including 401(k)s, tuition reimbursement and starting salaries in the $50,000 to $60,000 range.
And it`s working. Women now comprise about 6 percent of the overall U.S. truck driver population. Still a modest fraction. But up from 4 1/2 percent five years ago.
DEERING: It`s definitely kind of a man`s world still, a little bit. But it`s getting away from that. I mean, I`m amazed every time I go into a truck stop at how many female drivers that I`m seeing.
BRENNAN: Part of the appeal, modified trucks with easier to drive automatic transmission and driver cabs with ergonomic changes to better accommodate women`s bodies. Plus, the ability for female drivers to earn the same pay as their male counterparts.
ELLEN VOIE, WOMEN IN TRUCKING PRESIDENT & CEO: When you work in a male-dominated profession, you make typically more money than when you work in a female-dominated profession. So, as a truck driver, you make the same amount of money as your male peers because you`re either paid by the mile or the load or the percentage.
BRENNAN: Werner Enterprises (NASDAQ:WERN), whose driver fleet consists of 9 percent women, higher than the industry average, reports female drivers are actually outperforming men.
DEREK LEATHERS, WERNER ENTERPRISES PRESIDENT & COO: Our female drivers as an example have about a 25 percent lower accident cost, but they`re having smaller accidents. They`re not having the big ones, if you will, where maybe 9 attention to detail`s a little better, maybe the focus or maybe just the concern is something they bring to the party that makes them better drivers.
BRENNAN: And recruiting is starting young. The Women in Trucking Association has even created a Girl Scout badge to educate young women about potential careers in transportation. And companies say all of this is only the beginning.
DEERING: I think the trucking industry could use a few more women.
BRENNAN: For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.
(END VIDEOTAPE)
EPPERSON: Coming up, how much do you want to know about your body? Meg Tirrell shares what she learned when she had her DNA mapped in the second and final part of our series, "Unlocking Your Health."
(MUSIC)
EPPERSON: Here`s what to watch next week:
It`s the day we`ve been waiting for. Wednesday, the Federal Reserve will announce a rate hike decision.
Also a big week for data. The consumer price index is out, and the read on real estate with housing starts numbers.
And that`s what to watch next week.
MATHISEN: Your medical future. If you are at risk for a disease, would you want to know? The technology exists. It`s called genome sequencing. It`s basically a blueprint of who you are.
Our Meg Tirrell had her DNA mapped, and she takes us on her journey in the second part of our series, "Unlocking Your Health."
(BEGIN VIDEOTAPE)
DR. ROBERT GREEN, HARVARD MEDICAL SCHOOL GENETICIST: OK, Ms. Tirrell, thanks for coming today. We`re here because you`re interested in getting yourself sequenced --
MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: Earlier this year, I made a controversial medical decision.
GREEN: There`s no medical recommendations that support this. And in fact, the American College of Medical Genetics and Genomics in its only statements to date have been a little bit resistant to suggesting that people do this.
TIRRELL: I had my genome sequenced. For $2,900, sequencing company Illumina (NASDAQ:ILMN) provided me a personal guide to my own DNA. It`s controversial because it`s not totally clear how useful sequencing healthy people is. I wasn`t seeking any medical answers. I was simply curious.
It turns out getting your genome sequenced is a lot like any other medical test. With Illumina`s program, you go to a doctor`s office, give a family history, get a physical exam and get blood drawn.
Where it`s different is in what we can learn from the results.
My biggest concern is that I discover I carried a risk for a disease that I really couldn`t do anything about like early onset Alzheimer`s, for example.
My geneticist, Harvard Medical School`s Dr. Robert Green, made sure I was prepared for that possibility. But his main concern was different.
GREEN: One of the real things you have to be prepared to deal with in sequencing is that some of the information that you may find out is very difficult for us to understand or interpret. And that`s one of the things that gives people real pause about sequencing healthy people.
TIRRELL: So what did I find out? Illumina (NASDAQ:ILMN) returned the results through Dr. Green. It also delivers them on a sleek iPad app so I can explore them myself.
I didn`t turn out to be any of the things I dreaded so much. But I do have something to think about. It`s called Factor V Leiden and it means my blood clots slightly faster than other people`s.