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ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.
SHARON EPPERSON, NIGHTLY BUSINESS REPORT ANCHOR: Best week of the year. It took some time but stocks finished the week with solid gains and that could be an important milestone for the market.
BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Getting plowed. The farm economy has been soft. But now, Deere says it may be even weaker than many thought.
EPPERSON: The wealth gap. What some financial advisers are doing to bridge the divide between black and white in the final part of our series - - tonight on NIGHTLY BUSINESS REPORT for Friday, February 19th.
Good evening, everyone. I`m Sharon Epperson, in tonight for Sue Herera.
GRIFFETH: And I`m Bill Griffeth, in tonight for Tyler Mathisen.
What a week we had, huh? The three major averages logged their best gains this year despite a rather uninspiring session today. The Dow gained more than 400 points from last Friday`s close as concerns about China and oil took a back seat, at least for now.
Today, the Dow Industrial Average fell by 21 points, closed at 16,391. The NASDAQ gained 16, had a very good week. The S&P 500 was basically flat. In fact, fun fact, smallest point decline for the S&P since August 2012.
For the week, all the major averages rose 2.5 percent or more.
And as Bob Pisani explains there may be a key milestone for the market.
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BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: This was an important week.
Now, going into Monday, we had a one-day rally going. But the S&P 500 was still down about 9 percent for the year. The trend was down. Just four trading days later, the S&P is up nearly 3 percent for the week. And the short-term trend is, they`ll call it sideways. That`s an important change.
And it`s been notable bounces in the most beaten-up groups. Old school tech names like Hewlett-Packard (NYSE:HPQ) Enterprises and IBM, and Cisco (NASDAQ:CSCO), all had notable bounces this week, and big global industrials like Northrop Grumman (NYSE:NOC) and Textron (NYSE:TXT) and Illinois Tool Works (NYSE:ITW) were up 4 percent, 5 percent for the week, outperforming the overall market.
Most importantly, there`s been a change in the trading pattern. In the last two months, every time we`ve had a two-day rally, it`s been met with heavy selling. But in last two days, the markets have been mostly sideways on lighter volume, no big selling into the rally. That`s great news because it changes the downtrend.
Now, this is all very tentative. We need to see this kind of modest sideways action for a few weeks before anybody is convinced that this isn`t just a temporary bear market bounce. But it is a start. Next week, we`ll hear from a raft of Fed speakers including Stanley Fischer, he`s always important, and the remaining retailers like Macy`s (NYSE:M) and Home Depot (NYSE:HD), they`ll round out the fourth quarter reporting season. Walmart and Nordstrom (NYSE:JWN) unfortunately have not had very good news.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
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EPPERSON: There may be a glimmer of inflation in the economy, consumer prices were unchanged in January, primarily because of cheap gas. But over the past year, prices rose at their fastest clip in more than a year. And core prices, which includes food and energy, rose at their sharpest pace in four and a half years.
GRIFFETH: Certainly, strong inflation is something that the Federal Reserve wants to see and today, Cleveland Fed Bank President Loretta Mester said the fundamentals of our economy right now remain solid and that gradual rate hikes by the Central Bank are likely. She pointed to a strengthening job market and she said she believes that the economy will work through any global market turbulence.
EPPERSON: In China, a top securities regulator reportedly plans to step down. "The Wall Street Journal Report" that the official announcement will come within days and follows a series of policy moves that were widely criticized. Separately, the country central bank reportedly said it would increase the amount of reserve some banks must hold. Experts say China may be making the changes to dispel doubts about the wealth of the world`s second-largest economy.
GRIFFETH: And from China to Europe. There`s late tonight a deal reached between Britain and the European Union on the future of Great Britain`s membership in the bloc. Prime Minister David Cameron set out to loosen his country`s relationship with the E.U., as you know, to appease some members of the opposition at home who are demanding an exit from the E.U.
But it`s not a done deal yet. A referendum in the U.K. will likely be held in June.
Seema Mody has more now on the tenuous talks that took place in Brussels.
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SEEMA MODY, NIGHTLY BUSINESS REPORT CORRESPONDENT: British Prime Minister David Cameron put his best stiff upper lip on display. How else to deal with Britain`s possible exit from the European Union, the so-called Brexit, which could threaten the mere existence of the E.U.
DAVID CAMERON, BRITISH PRIME MINISTER: As I`ve said, I`d only do a deal if we get that Britain needs.
MODY: Late today, there was word of a deal but no details. Cameron had said he needed concessions, the most important being tighter restrictions on welfare benefits to supplement low-paid work, especially to migrant workers, as Europe contends with the ongoing migrant crisis.
With a deal in place, a long-promised British referendum on whether to continue E.U. participation can be held in late June.
MARTIN WOLF, FINANCIAL TIMES: He`s taken a huge gamble. If he was going to have a referendum, he had to justify it by having a change in our relationships. You could argue that he`d simply been put into an impossible position. He`s threading a very, very narrow needle.
MODY: To thread that needle, Cameron argues restrictions would discourage E.U. workers from moving to Britain. Both sides have plenty at stake. Britain is the E.U.`s second-biggest economy, accounting for one-eighth of the E.U.`s population and one-sixth of its GDP and a U.K. exit could invite demands from the other 27 members.
Now, the campaigning can begin. In Britain, both for and against continued participation in the E.U. Short-term, that means increased volatility in the equity and currency markets; longer-term, London`s big banks at the core of Europe`s bond market could leave and relocate to European shores.
WOLF: The really big issue is that if we vote no, what happens next is complete uncertainty. Nobody knows what the new relationship will be. And so, investors will have to cope with very high levels of uncertainty.
MODY: The question becomes, are British voters angry enough to push the country into unfamiliar territory? Sounds familiar, doesn`t it?
Seema Mody, for NIGHTLY BUSINESS REPORT.
(END VIDEOTAPE)
EPPERSON: Certainly does.
From British politics to our own. Republican presidential candidates are campaigning across the state of South Carolina ahead of tomorrow`s primary.
John Harwood is in Charleston covering the tightening race.
South Carolina has been pretty famous for some bitter political fights. How about this one, has it lived up to the hype?
JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Absolutely, Sharon. You know, this is a state where John McCain ran into rumors about, you know, who his children were and that sort of thing, when he ran against George W. Bush in 2000. This year, we`ve got photoshopped mailers, we`ve got robocalls about the Confederate flag, we`ve got charges of "liar, liar" flying all around. It is a scramble for survival in this race.
Six Republicans, Democrats come here next week.
GRIFFETH: You know, John, in Iowa and in New Hampshire the question was not who would win but who would come in second behind Donald Trump? What about now? His lead has pretty much evaporated ahead of this primary, hasn`t it?
HARWOOD: Well, Donald Trump still has an edge. There`s some polls that show it narrowing. I don`t know if those are going to -- if that reflects a true trend or those are outliers. Others show him a double-digit lead.
But most campaigns I talked to expect Donald Trump to finish first but there are very big stakes in who finishes second. If it`s Ted Cruz he`s going to try to go south to the Super Tuesday states and make it a two-man race. Marco Rubio is trying to edge in and make sure he`s a long-term player. And then you`ve got Jeb Bush trying to hang on and John Kasich, the Ohio governor, trying to finish just well enough to get to the Midwest where he can do better.
EPPERSON: John, let`s talk about the Democratic side. Of course, there`s a lot of concern there for some people who are Clinton supporters about how she`s going to fare in the caucuses in Nevada. How much trouble is Hillary Clinton in right now?
HARWOOD: Big trouble. The polls show that this is a neck and neck race. This had been thought to be an advantage for Hillary Clinton because unlike Iowa and New Hampshire, significant number of non-white voters in Nevada. Hispanic voters which Hillary Clinton has counted on as being a strength.
Now, if she loses those caucuses to Bernie Sanders, he`s going to have momentum. Tougher road for him in South Carolina, which their primary is a week later than the Republicans, because African-American voters are stronger for Hillary Clinton. But the Clinton campaign is very nervous about what`s going to happen out in Nevada, not a state she was counting on losing.
EPPERSON: South Carolina and Nevada, we`ll be watching those races very closely, John.
John Harwood in South Carolina, thanks so much.
GRIFFETH: And still ahead, a Deere in the headlights. What the farm equipment maker is saying about the health of America`s heartland.
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EPPERSON: A continuing story we`ve been telling you about. The Department of Justice has filed a motion now to compel Apple (NASDAQ:AAPL) to assist the FBI and comply with a judge`s order. The law enforcement agency is seeking the tech company`s help to unlock an iPhone belonging to one of the San Bernardino shooters which is encrypted. Prosecutors say Apple`s refusal appears to be based on concern for its business model and public brand marketing strategy, rather than a legal basis.
GRIFFETH: Well, there`s apparently trouble on the farm. Commodity prices are falling as you know, incomes are declining, and today, we learn that the farm economy is likely even softer than many thought.
Deere, the world`s largest agricultural equipment maker, cut its fiscal full-year profit and sales forecast sharply, sending shares down more than 4 percent.
And as Morgan Brennan reports for us tonight, the company is placing blame squarely on the downturn in farming.
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MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Deere and Company continues to struggle against a global economic slowdown as crop prices stay low and demand for machinery wanes. The maker of John Deere tractors expects farming and construction equipment sales to slide 10 percent for the full year, compared with an earlier forecast of down 7 percent.
The industrial giant also lowered its earnings outlook to $1.3 billion from $1.4 billion.
KWAME WEBB, MORNINGSTAR: In terms of the United States, looking at probably close to down 20 percent agricultural volumes. Down at least 10 percent of volumes in the construction business or maybe close to 10 percent. Europe should be OK, maybe flat. And then, if we look at a place like Latin America, probably looking at volume declines on the order of at least 10 percent.
BRENNAN: It speaks to the ongoing downturn affecting the farming economy as the dollar strengthens and the market for crops like corn and soybeans has weakened. The Agriculture Department expects U.S. net farm income to total almost $55 billion this year, down more than half from 2013, when corn prices climbed to record highs.
Income levels are on track for a third straight year of declines, the first time since the 1970s. But the pain is being felt worldwide with farm incomes falling in Canada, Europe, and South America as well, making farmers less inclined to purchase new tractors and other equipment. Deere expects industry sales in the U.S. and Canada to remain down as much as 20 percent with the largest agricultural equipment sales falling even more.
But it isn`t just farming.
WEBB: Probably the incremental data point that came out today`s results is that the construction equipment business remains under pressure. A lot of that continues to emanate from a slowdown of building activity, in particularly the oil and gas patch of the United States.
BRENNAN: The results come just days after Warren Buffett`s Berkshire Hathaway (NYSE:BRK.A) disclosed it`s upped its stake in the company, now the largest institutional shareholder with a position valued at nearly $2 billion. But even if the so-called "Oracle (NASDAQ:ORCL) of Omaha" likes the stock, analysts caution it may be best to watch for signs of stabilization and earnings and guidance -- factors that may not materialize until later this year or beyond.
For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.
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GRIFFETH: Well, Yahoo`s board forms a committee to explore strategic alternatives. And that`s where we begin tonight`s "Market Focus."
The technology company said its committee consists of independent directors who will help evaluate the best path for the company`s core business. This announcement comes two days after activist investors` Starboard Value, which owns a stake in the company, said it would take steps toward a potential proxy fight with Yahoo (NASDAQ:YHOO) if necessary. Shares of the tech giant were up 2 percent to $30.04 a share.
Outdoor apparel company VF Corp issued lower than expected earnings for its fourth quarter as an unseasonably warm winter dragged down sales. The owner of the North Face brand says it expects to see continued weakness in its sportswear and contemporary brand business this year. Shares fell as a result, more than 4 percent to $58.55.
And energy explorer Cabot (NYSE:CBT) Oil and Gas reported a narrower than expected earnings loss for its latest quarter. The company sharply missed analysts` estimates on revenue due to the ongoing drop in oil and gas prices. Still, shares gained almost 2 percent today to close at $19.91.
EPPERSON: Bill, medical device company St. Jude Medical (NYSE:STJ) is increasing its quarterly dividend by 7 percent. And that`s up to 31 cents a share. The yield will be 2.3 percent. Shares were up a fraction to $53.41.
The U.S. government has given Boeing (NYSE:BA) the green light to start talking with approved Iranian carriers about buying planes. Boeing (NYSE:BA) will still need a separate license to actually make jetliner sales. Shares fell 2 percent to $115.16.
GRIFFETH: Our market monitor tonight likes big cap names. He says they are amazing brands that are available right now at bargain prices.
This is his first time joining us on the program but he`s no stranger to Wall Street. Chris Cordaro is chief investment officer at RegentAtlantic.
Good evening, Chris. Welcome back.
CHRIS CORDARO, REGENTATLANTIC CIO: Hi, Bill.
GRIFFETH: Nice to see you.
CORDARO: Good to see you.
GRIFFETH: Are you assuming -- are you investing assuming that the economy is stronger than the market would suggest? Or what`s the strategy here?
CORDARO: Well, yes, I think the market and the economy are stronger than sentiment would suggest. I think everybody`s a little fatigued and feeling a little down in the dumps if you actually look at some of the numbers. You shouldn`t feel that bad and I think the three stocks we`re talking about really marquee brand names. All of them are selling below 10 P/E ratio.
GRIFFETH: OK.
EPPERSON: And that`s what you like, you like value stocks. You talk about one big name that we`ve been talking about all week. You like Apple (NASDAQ:AAPL). Why?
CORDARO: I love Apple (NASDAQ:AAPL). Apple (NASDAQ:AAPL) -- if you can buy Apple (NASDAQ:AAPL) that is yielding more than a 10-year treasury with arguably better management -- I mean, I just think that`s a great deal. Everybody`s got Apple (NASDAQ:AAPL) products. Everybody loves their products. They`re -- they`re making money. Even if their growth slows, at this price, it`s a great bargain.
GRIFFETH: You`ve got a money center bank on this list but it`s not usually anybody`s favorite, Bank of America (NYSE:BAC). Why this one?
CORDARO: It`s usually the one people like to kick around a little bit.
GRIFFETH: Exactly.
CORDARO: And I think they`re kicking it a little bit too hard.
Bank of America (NYSE:BAC) was pushed down a lot with other big banks with their energy exposure. I think that`s really overdone. You know, their exposure`s a little more than 2 percent of loans but they`ve taken it on the chin a lot harder than that.
So, you`ve got a great bank. They`ve done a wonderful job at trimming their expenses, which has caused their profit to increase. I think all banks are particularly good, especially when rates start ticking up. They`ll start making a lot of money.
EPPERSON: And a lot of people are loving these low gas prices. And you say that`s good news for big trucks and big truck-makers?
CORDARO: Yes, and who makes really good big trucks? Ford. Right?
EPPERSON: Yes.
CORDARO: So, Ford makes great big vehicles and what we`re seeing is consumers right now are really going after large vehicles because that`s what we like in America. With the gas prices where they are, I think they`ll keep doing that and that should really translate into good business for Ford.
EPPERSON: You like the dividend, too?
CORDARO: Five percent dividend. That`s an awesome yield. And I think certainly sustainable given what their profits are.
GRIFFETH: Does any of this change if and when the Fed starts to raise rates?
CORDARO: Well, I think Bank of America (NYSE:BAC) gets --
GRIFFETH: They would like that.
CORDARO: They get more attractive.
I think -- so the small move in rates will really help Bank of America (NYSE:BAC), won`t really affect Apple (NASDAQ:AAPL) or Ford too much. We need to get at least another 100 basis points increase before you see it pinching them at all.
GRIFFETH: All right. Chris Cordaro of RegentAltantic -- good to see you. Thanks for joining us.
CORDARO: Good to see you.
EPPERSON: Still ahead, "Bridging the Divide." In a final part of our series a look at the efforts to close the wealth gap between blacks and whites.
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GRIFFETH: Quick look at what to watch for next week.
Monday, the world`s biggest mobile event, the Mobile World Congress, gets under way in Barcelona, Spain.
On Tuesday, Home Depot (NYSE:HD) reports earnings, kicking off a big week for retail earnings.
Tuesday also, we`ll hear from a number of Fed officials, including Minneapolis President Neel Kashkari, and Vice Chair Stanley Fischer. That`s what`s to watch for coming up next week.
EPPERSON: We have two updates on stories that we recently reported. Earlier this week, we told you about a small business owner Ken Quran, who had his account seized by the IRS via forfeiture. His lawyer just told him that the IRS will be giving back all of his money, $153,000.
GRIFFETH: And then there`s the story of the specialty pharmaceutical company Insys Therapeutics. The firm has come under fire again after a former employee`s plea agreement revealed how it allegedly used doctors and engaged in illegal business practices in order to grow profits. The two doctors in question and the company were subject of an investigative report that we aired in November.
Well, tonight, Dina Gusovsky has the new developments for us.
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DINA GUSOVSKY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Insys Therapeutics` main revenue-generating drug is a highly addictive opiate, 100 times more potent than morphine, called Subsys Fentanyl. According to the FDA, the drug is only meant to be used for persistent cancer pain. But the company has come under fire for illegal business practices, such as kickback schemes and off-label marketing.
Two Mobile, Alabama-based doctors, Xiulu Ruan and John Couch, partners at a practice, got over $210,000 from Insys in 2013 and 2014. In May, they were arrested on drug and fraud charges. Both pleaded not guilty.
And now, a plea agreement from former Insys sales manager Natalie Reed Perhacs reveals that she was part of a scheme in which the company allegedly paid kickbacks in the form of speaking fees to the two doctors. The government charges that they were involved in a conspiracy. It claims that Insys allegedly hired Perhacs as a favor to Dr. Ruan who allegedly approved his speaker fees and he wrote more prescriptions for Subsys after her hire.
According to the charges, she had financial incentive to do so, despite a base salary of only $40,000 per year, commissions from off label prescribing written by the doctors resulted in her making over $700,000 between April 2013 and May 2015.
Former Insys Sales Representative Shannon Walsh who resigned in October spoke exclusively with CNBC.
SHANNON WALSH, FORMER INSYS SALES REP: Once somebody was a speaker for the company, they were expected to generate a certain number of prescriptions. And if they didn`t, then they would be taken off the speaker list.
GUSOVSKY: Not only did Ruan and Couch co-own and co-direct a pain management clinic with two locations in Alabama, they also owned a pharmacy next to one of the clinics. The charges state that nearly all Subsys prescriptions they wrote were off-label for non-cancer patients. The prescriptions were filled at their pharmacy, which then billed federally funded and private health insurers over half a million dollars.
We reached out to Dr. John Couch but our calls were not returned. Dr. Ruan`s lawyer did talk to us and confirms although Dr. Ruan still has his medical license, he`s no longer actively practicing medicine at this time. The doctor continues to deny allegations of kickback schemes.
As far as where the case stands against the two doctors, they are awaiting jury selection in July. Insys says it`s still reviewing these developments but told us it is a violation of the company`s compliance policies to give items of value to health care providers in order to induce them too write more prescriptions.
Insys stock down about 39 percent year to date.
For NIGHTLY BUSINESS REPORT, I`m Dina Gusovsky.
(END VIDEOTAPE)
GRIFFETH: By the way, separately, a class action lawsuit filed against this company yesterday brought up additional charges that said the company was engaged in the illegal and improper off-label marketing of Subsys and certain employees, including former CEO Michael Babich, were, quote, "complicit in an illegal kickback scheme operated for the purpose of increasing prescriptions of Subsys", end quote.
Insys, by the way, did not respond to a request for comment on this allegation.
EPPERSON: And finally tonight, the gap in retirement security among blacks and whites in America is startling. African-American families on average have about $100,000 less in retirement savings than white families. That`s according to the Urban Institute.
And this racial divide in savings contributes to a widening inequality in overall wealth. In the final part of our series "Bridging the Divide," here`s a look at how some financial adviser groups are working to help close that wealth gap.
(BEGIN VIDEOTAPE)
CYNDI WILLIAMS, NOVALON INFORMATION TECHNOLOY PROJECT MANAGER: Job changes, layoffs, helping kids get through college. You know, life happened.
EPPERSON: Cindi and Ron Williams, both 57, admit they are not as financially secure as they want to be.
RON WILLIAMS, COPPIN STATE UNIVERSITY COLLEGE OF BUSINESS DEAN: The vision that we had 20, 25 years ago, is not the reality that we live now. When you make missteps midway, they become more critical the older you get.
EPPERSON: Ensuring a secure retirement is a struggle for many Americans, but the problem is much more acute for blacks than whites. Sixty-two percent of black working-age households have no assets in a retirement account, compared to just 37 percent of white households. Only 25 percent of black households have more than $10,000 in retirement savings, about half as many as white households.
A significant earnings gap between blacks and whites is partially to blame for the divide. But experts say the wider and growing wealth gap is also due to key disparities in investing. African-Americans have far less money in the stock market.
A recent survey by Ariel Investments found among households with incomes of at least $50,000, only two-thirds of blacks own stocks and mutual funds, compared to 86 percent of whites.
LAZETTA RAINEY BRAXTON, ASSOC. OF AFRICAN AMERICAN FINANCIAL ADVISORS PRESIDENT: For African-Americans, our wealth has been understood with things that are tangible like homes. And so, what we have seen with the housing crisis, it`s been harder for African-Americans to rebound.
EPPERSON: Lazetta Rainey Braxton, a certified financial planner, works with clients including the Williamses, helping them understand how to invest wisely to build wealth.
BRAXTON: When you make strong, clear financial decisions, the momentum really allows your wealth to grow exponentially.
EPPERSON: Braxton is also president of the Association of African-American Financial Advisers, Quad A, a group working with the financial planning association, the largest membership organization for financial advisers to bring more blacks into the profession and bring financial advice to more African-Americans.
BRAXTON: Financial advice certainly will narrow the wealth gap.
EPPERSON: Only 6 percent of U.S. financial advisers are black.
FPA chair Ed Gjertsen says increasing diversity among financial professionals helps more people.
ED GJERTSEN, FINANCIAL PLANNING ASSOCIATION CHAIR: They`re able to take that message back to their communities and help those individuals close that gap.
EPPERSON: The Williamss agree finding a financial adviser who understands their needs has helped them build trust so they can plan together how to increase their wealth and eventually retire.
C. WILLIAMS: A little bit of pain in the beginning but it`s worth it.
(END VIDEOTAPE)
EPPERSON: The Williams were able to step outside of their comfort zone, yet only 14 percent of African-Americans currently work with a financial professional, compared to 31 percent of whites. That`s according to a recent study by Prudential.