NIGHTLY BUSINESS REPORT for March 28, 2016, PBS - Part 1



Javers, Meg Tirrell, Julia Boorstin, Sharon Epperson>

Policies; Health and Medicine; Pharmaceuticals>

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Stocks stalled. Staggering run higher is quickly losing steam and there are reasons why things could start to get rocky.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Talk too much. A number of Fed officials are speaking. Will that bring clarity to investors or just confuse things more?

HERERA: New promise. An experimental drugs for effective migraine prevention just took a big step forward.

All that and more tonight on NIGHTLY BUSINESS REPORT for Monday, March 28th.

MATHISEN: Good evening, everyone, and welcome.

Well, the recent rally in stocks appears to have stalled. Those double digit gains since the mid-February lows have taken a bit of a breather and that shift in the market coincides with the winding down of the first quarter. It also comes against the backdrop of several major speeches by Federal Reserve officials this weekend. On Friday, the government`s always important employment report and, oh, yes, there are still those pesky head winds bedeviling stocks.

Oil prices, recession worries, political risks and more, as Dominic Chu reports, the path forward for equities could be rocky.


DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Overall, the stock markets given people a roller coaster ride for the first few months of the year. And now, they were trying to close the books on the first quarter, we have seen a lot of different warning signs coming up.

Remember, markets got off to the worth start in history for the U.S. stock market and have rebounded a lot since then. So, let`s take a look at why some traders and some investors are a little bit a bit worried about what`s going to happen in the coming months. Now, there are way too many to put on our wall behind us here, but I want to show a few of them that are getting a will the of attention.

First of all, on the currency side of things, it`s not something we often talk about, but corporations will be talking about the strength of the U.S. dollar. That could be a big theme in earning season. Remember, we`re less than a month away from earning season. So, the strong dollar and remember the strong dollar is important because for a lot of these multinational companies, it`s a lot more expensive to bring profits back home when the dollar is strong. Something to keep an eye on.

Also, with regard to the currency markets, the commodity markets are a big focus, as well, specifically what`s happening now with the price of oil. We have seen a sharp move higher off those lows, but now, maybe a little bit of weakness creeping back in. Oil prices and the energy complex were a huge drag on earnings and sales for S&P 500 companies in the past year. We`ll see if that continues, perhaps a warning sign there.

Then, you`ve got the IPO market, initial public offerings have not been active. There haven`t been a whole bunch of them. Does that signal there`s not enough risk appetite not enough of an environment can do to bring your company public. That could be warning sign as well.

Then you talk about the bank, the financial stocks. They`re important because of they`re the second biggest sector in the S&P 500. And they`ve been one of the biggest laggards so far I the market. When the banks don`t perform, there`s a question about whether the whole market can again without the banks.

And then one last one to consider, transportation stocks. You think shippers like UPS, FedEx (NYSE:FDX), railroad companies, trucking companies, they move goods. So, if we have seen a bit of a run there ,and weakness perhaps settling in for transportation stocks, maybe that could be a sign for the overall stock market and the economies here. But again, just warning signs to keep an eye on. Nobody really knows whether the market are going to head up or down, but they are watching very closely some of these factors to see if they could lead perhaps to some more caution down the line.



HERERA: Well, today, stocks were mostly higher on low volume as investors sorted through new economic data and awaited comments from Fed policymakers this week. We`ll have more on that in just a moment.

Traders were also watching chaos at the Capitol building. This afternoon, police shot and wounded a suspected gunman in the visitors center. The lockdown was soon lifted and the suspect is in custody.

By the closing bell, the Dow Jones Industrial Average rose 19 points to 17,535. The NASDAQ lost 6. The S&P 500 added 1.

MATHISEN: And more now, Sue, on all that Fed speak this week. There`s chance it may overshadow the monthly employment report due out Friday. That`s because several Fed policymakers last week indicated that a rate hike in April would be appropriate. A view at odds with the guidance given recently by Fed Chair Janet Yellen, and we`ll hear from her tomorrow, when she speaks on the economy and takes question in New York City.

Wednesday is Chicago Fed President Charles Evans` turn. Thursday, New York Fed President Bill Dudley will speak. And on Friday, we`ll hear from Cleveland`s Loretta Mester.

HERERA: But do Central Bank policymakers speak too much? They do it in the name of transparency, but does it only cause confusion and make investing decisions more difficult.

Bill Strazzullo is the chief market strategist for Bell Curve Trading.

Bill, I`ve known you for years. Sorry, I botched your name. Good to see you.


HERERA: Let`s start, first of all, I think you would agree that maybe some of the central bankers are speaking a little bit too much.

STRAZZULLO: Yes, it`s like the pendulum has totally swung here. I know both Tyler and you remember the days back in `70, `80, early `90s when sometimes you didn`t know for days whether the fed has eased or tightened. Now we have gone, the pendulum swung the other way and seem like you can`t shut the people up.

And so, the question is for an investor or a trader, how do you deal with that? We advise our clients is really just try focus on the market. That gives you a much better sense of what`s going to happen down the road. For instance, if you look at the front end of the U.S. yield curve, two-year notes, treasury bills, euro-dollar futures, they never priced in all these tightenings that Fed was talking about a month or two ago. They basically priced in one or two tightening.

So, if you focus on the market indicators, I think you can block out a lot of noise and you`re in much better shape.

MATHISEN: So, watch what the market does, not what the Fed governor say. How much transparency do you think would be ideal? I mean, obviously, these folks get invited to go to conferences, or do they get invited to come on television and talk. We love to have them.

But sometimes, a stray comment can be kept to market. How much is the right sort of goldilocks scenario?

STRAZZULLO: Well, I think it`s a good question, Tyler. I think it`s a mix not only of how much but who. I mean, I think all these people go out and speak. You know, every several days is too much. It`s probably around the time the meeting to have the chairman or chairwoman speak. That`s appropriate.

And, you know, it`s something, monthly or something like that. I think when you have all these Fed governors out speaking, you know, sometimes almost day in and day out and sometimes contradicting each other it`s too much. The bottom line is that almost always the Fed follows the market. That`s the important point to keep in mind is that you look at what`s going on now. The market had no more than one or two priced in. Follow the market because the Fed follows the market.

HERERA: But is this market that we all should follow going to be increasingly volatile if indeed we keep getting in some cases contradictory comments from the Fed`s presidents?

STRAZZULLO: Right. Yes, that`s a good question, Sue. I mean, the Fed, in my opinion when it comes to volatility, they`re kind of the 800-pound gorilla in the room, whether it`s that comments, their speeches, or zero interest policy and quantitative easing. They`re the ones that really kind of determine what happens there.

Look, you got to kind of, in my mind, you`ve got to do your homework, have your investment thesis, you know, kind of appropriately map out your risk and reward and then you`ve got to stick to it. You know, if you`re reacting to every Fed statement or every press conference, you`re never going to make any money.

HERERA: All right.

STRAZZULLO: I mean, follow the market and stick to your game plan.

HERERA: On that note, Bill, thanks so much for joining us tonight. We appreciate it.

Bill Strazzullo with Bell Curve Trading.

STRAZZULLO: My pleasure.

MATHISEN: Consumer spending an important part of economic activity, of course, rose just fractionally in February. It`s according to the Commerce Department. And it edged up 0.1 percent. It`s the third straight month of scant gains in personal incomes. Well, they weren`t much stronger either. They saw a modest 0.2 percent rise last month.

HERERA: But pending home sales were strong. The number of existing homes that went under contract in February rose by 3.5 percent. That`s the highest level seen in seven months and better than estimates. Pending sales offer clues as to upcoming activity and the experts say this report is encouraging.

MATHISEN: Oil prices settled just under $40 a barrel while $40 still historically low by recent history. It is higher than where prices stood just a few weeks ago. And the recent rise is pegged on hopes that something will come of a meeting of oil producers scheduled to be held in April.

But as Jackie DeAngelis reports, those hopes may be fleeting.


JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Oil prices have risen 20 percent in the last month on the hope that a producer meeting in the Middle East on April 17th, will bring an accord about a production freeze. It`s not an emergency OPEC meeting. In fact, the next meeting of the cartel will be in June. But it`s a meeting of global producers.

So, who`s coming and will it matter?

UNIDENTIFIED MALE: I don`t think any kind of meeting with OPEC and those producers will boost prices any further than where they have gone now. They`ve managed to job on the market a little bit higher, but there`s going to need to be a production cut. When you have a meeting without the U.S., which is the third largest producer of crude oil in the world, I don`t see how they can achieve their goals.

DEANGELIS: The guest list, some OPEC members have opted out like Libya and Iran. And with the resignation of the Iraqi oil minister last week, it`s unclear if that country is going to have a delegate. Of the non-OPEC producers, Russia and the United States, they`re the largest. The Russians have been encouraging a freeze, but the United States hasn`t said anything about sending a representative to this meeting.

With all the parties not coming to the table, the market seems skeptical of an accord taking place here. It would be easier to achieve consensus if all the parties got together.

With oil trading under $40 now, it`s possible we can see another leg lower, but not necessarily as drastic as the $20s. More realistically like in the upper $30s.



HERERA: Still ahead, the hotel battle heats up, but could the fight for Starwood raise the eyebrows of regulators?


MATHISEN: A report late tonight that the White House is expected to withdraw its California legal action against Apple (NASDAQ:AAPL). That report, according to "USA Today" which cited a government official. The government had asked to delay a hearing last week when the FBI said it was working a third party to gain access to an iPhone used by one of the San Bernardino shooters.

Eamon Javers has been following the story for us for weeks.

Eamon, what do you make of this report? And does it suggest that the FBI, the Justice Department has cracked into that phone?

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, it does suggest that there might be progress here behind the scenes, Tyler. We have been expecting some update from the Department of Justice on this case by early April. They said that they had been told by an unnamed third party that there might be another solution to get into Said Farook, the San Bernardino shooter`s iPhone without the help of Apple (NASDAQ:AAPL) itself.

They had initially said that was the only way in and they demanded that Apple (NASDAQ:AAPL) help them. Now they said, last week, they thought maybe they could do it without Apple`s help. The fact that we are seeing this news is an indication that maybe the scenes, there is some progress on getting into that phone or the FBI has figured out another solution entirely.

We`ll have to wait and see when the government briefs us in more detail. But it may be an indication that this tension point between the U.S. government and Apple (NASDAQ:AAPL), one of the most prominent if not the most prominent companies in the United States may be easing a little bit now and they may be able to get back to regular business here. There had been very personal and very intense conversations between the Department of Justice and Apple (NASDAQ:AAPL) over the past couple of weeks.

HERERA: Yes. Eamon, stay with us because there`s another story you`ve been following, and we want to talk to you about.

China`s Anbang raising its offer for Starwood Hotels to about $14 billion. That acquisition by Anbang would be the largest ever by a Chinese company in the U.S. and it threatens Marriott`s offer for the hotel chain. Shares of both Starwood and Marriott rose on the news.

In a statement, Marriott said it is committed to completing its deal with Starwood, and it also raised the issue of potential regulatory hurdles that an Anbang deal may need to overcome.

So, Eamon, what do you make of this story and what could those regulatory concerns be?

JAVERS: I think what they are talking about in that statement there, Sue, is an entity here in Washington that most people have never heard of called CFIUS. It`s the Committee on Foreign Investment in the United States. It`s a multi-jurisdictional committee that reviews large transactions when overseas entities want to buy American companies. And they look at it through a national security lens. They want to make sure this is an OK thing for that foreign entity to buy.

Now, I`ve been talking to some experts on the CFIUS process here in Washington today about exactly what they might look at in this potential acquisition of Starwood. They told me a couple of things here will be on the eyes of regulators.

One is proximity to sensitive locations. That is how close are Starwood Hotels to sensitive installations in the United States that the government might want to protect, particularly the W. Hotel on 15th Street Northwest here in Washington, D.C, which overlooks the White House. That might be one to pay close attention to.

Also, protection of customer data. How many e-mail addressers and credit card numbers would the buyer be getting of Americans and people around the world and how would that data be handled will be something that CFIUS will want to really understand. And they`re also going to look at the protection of Wi-Fi and communications networks within the hotel.

They`ll want to know does the U.S. government have perhaps a deal with this hotel chain in order to have government events there and government officials staying there. If they are, how will their communications inside the hotel be connected if it`s being bought by a foreign entity?

All that will be likely in the mix as they review this. But the question is, whether the government will let it proceed or not, or force them to divest certain assets, or how they`ll go forward with this all together.

HERERA: All right. Eamon, we have to leave it there. Thank you so much.

JAVERS: You bet.

HERERA: Eamon Javers in Washington.

MATHISEN: Well, the outgoing chief of Valeant pharmaceuticals has been subpoenaed to testify at a Senate hearing. The committee says Michael Pearson is among several witnesses scheduled to appear on April 27th. The panel looks into the impact of drug price increases on the health care system including patents -- excuse me, patients, insurers, and medical providers. Last week, Pearson said he would step down as Valeant deals with a number of federal investigations into its accounting practices.

HERERA: Positive news for the millions of Americans who suffer from migraines. A new injection that presents debilitating headaches met the main goal of a mid-stage study. Alder Pharmaceuticals which makes the drug saw its shares soar nearly 50 percent.

As Meg Tirrell reports, Alder is competing with some bigger rivals to get this new class of drugs to market.


MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s a problem more than 30 million Americans are all too familiar with. Migraine headaches are not only painful but can be debilitating. And current options leave a lot of room for improvement.

RONNY GAL, SANFORD C. BERNSTEIN ANALYST: Well, the problem with migraine is always that drugs that we had were always pretty mediocre.

TIRRELL: A new group of drugs and development brings hope that may soon change, called CGRP antibodies. The medicines are aimed to prevent migraines before they happen. They`re still in testing, but have shown they may produce better results than current therapies.

They`re in development of drug giants Eli Lilly (NYSE:LLY), Amgen (NASDAQ:AMGN) and Teva, as well as smaller competitor Alder Biopharmaceuticals. It was new data today that`s given support to the whole class, according to analysts. The study results to have shared with a small Washington state bio tech company up as much as 50 percent.

The drug was tested in patients with chronic migraine, defined as at least 15 days with headaches per month, eight of those considered migraines. With one intravenous infusion, the medicine reduced migraine days per month by at least 75 percent for more than a third of patients on the two highest doses tested, meeting the study`s goals. That compared with just more than 20 percent of patients taking placebo who reported a 75 percent reduction. The drug was tested for 12 weeks.

It`s now expected to go through another stage of testing before it may hit the market. Sanford C. Bernstein analyst Ronny Gal says each of the four drugs in development is essentially neck and neck with potential approval in 2018. He estimates there are about 11 million patients with chronic or episodic migraines.

GAL: The question really is how many will end up on the drug and how much will the drug costs per patient per year. We are right now running in numbers with between $5 billion to $6 billion for the market in total.

TIRRELL: That assumes multiple medicines make it to market and priced around $10,000 a year per patient, Gal said. One thing that my set Alder apart, its drug can be administered just once every three months versus potentially once a month for competitors. These drugs are all given by injection, either through an IV or self-administered shot.

And so far, their safety, according to analysts, looks good. The results of the larger clinical studies are needed to confirm.



MATHISEN: Avon comes calling and had to appease its activists as it does and that is where we begin tonight`s "Market Focus".

In an effort to avoid a proxy fight, Avon will allow two activist investor groups to appoint an independent director to the cosmetic company`s board. The private equity firm Cerberus Capital, which now owns Avon`s North American operations will also take part in selecting the nominee. Shares of Avon up more than 8 percent to $4.64.

Cal-Maine Foods (NASDAQ:CALM) saw its profit climb 26 percent in its latest quarter, thanks to higher egg prices. That helped its results beat the street estimates. The fresh egg producer did however miss revenue targets. Shares were up nearly 9 percent to $54.51.

HERERA: Shares of Pandora fell today on the news that the founder of the music streaming service is coming home. Tim Westergren will return as the company`s CEO. He previously held the role from 2002 to 2004. Shares fell 12 percent to $9.60.

A former executive at investment bank PJT Partners has been arrested after allegedly attempting to swindle $95 million from investors over the weekend. Andrew Caspersen was charged with securities fraud and wire fraud. PJT has fired Caspersen for cause and has initiated an internal investigation. Shares of PJT Partners fell more than 10 percent to $23.66.

MATHISEN: Facebook (NASDAQ:FB) is no longer just about status updates and likes. Now it`s game on for the social media company which today started shipping its high end virtual reality headset, which is expected to be a big player in the fast growing virtual reality device market.

Julia Boorstin has the story.


JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Facebook`s Oculus Rift is on sale for $600, launching with 30 games and hundreds of thousands of 360 degree movies and photos and other immersive experiences in the Oculus App Store. Like this far land virtual world that Oculus created to showcase the creative possibilities. These new types of content expected to be what drives purchases of the headset.

COLIN SEBASTIAN, R.W. BAIRD: We`re waiting to see what the killer app is on Oculus, whether it`s Facebook (NASDAQ:FB) app itself or perhaps a game or experience we haven`t imagined yet.

BOORSTIN: While there already less expensive devices, including Google`s cardboard and Samsung Gear VR, today kicks off a competitive high end headset market. HTC`s $800 Vive headset is due out April 5th. Sony`s $400 PlayStation VR was delayed until October and we`ll see what Apple (NASDAQ:AAPL) launches. It was just last week awarded a patent for a VR headseat.

Facebook`s Rift has a head start, but its market is limited by the fact that most PCs won`t work with or HTC`s headset, unless they are fairly new and equipped for hardcore gaming.

With this PC gaming market was worth $28 billion last year, according to DFB intelligence, and digit capital projects the total augmented virtual reality market will reach $150 billion by the year 2020.

JOHN RICCITIELLO, UNITED TECHNOLOGIES CEO: We shouldn`t get ahead of our expectations and thinking this will be under every Christmas tree at the holiday. I don`t think it`s going to be that big that fast. Three to five years, it`s massive.

BOORSTIN: And Oculus aims to create a new market that goes far beyond gaming.

SEBASTIAN: Facebook (NASDAQ:FB) and Mark Zuckerberg`s intention is to make those social experiences, combining your social network of friends and family with those experiences, whether it`s game or something else.

BOORSTIN: And analysts seem optimistic that Facebook (NASDAQ:FB) will make its $2 billion acquisition to pay off. The question is just how much prices will have to fall before these headsets can really become mainstream?

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.


MATHISEN: Coming up, new retirement rules are likely coming soon. They could affect your savings.


MATHISEN: The governor of Georgia today vetoed a bill that was denounced by major companies, Hollywood studios, sports leagues. As we reported last week, the bill would have given faith based organizations in that state more leeway to deny services to gay, lesbian, bisexual and transgender people. Disney (NYSE:DIS) and Marvel had threatened to stop film production in Georgia if the bill was signed into law. Apple (NASDAQ:AAPL), Comcast (NASDAQ:CMCSA) (NYSE:CCS), Time Warner (NYSE:TWX) and others also urged the governor to veto the legislation.

HERERA: And a controversial law in North Carolina has prompted a federal lawsuit. The American Civil Liberties Union and other advocacy groups filed a suit against the governor and other state officials, alleging a new law discriminates against lesbian, gay, bisexual and transgender communities. And as we reported, that legislation was opposed by numerous companies, including Facebook (NASDAQ:FB) and Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), IBM, American Airlines among others.

MATHISEN: A new rule expected to be finalized soon by the Department of Labor may impact millions of investors with a retirement account. As we`ve reported, the proposed rule will require financial advisors to put their client`s interest ahead of their own. The rule will also impact money that is in a 401k that could be rolled over into an individual retirement account.

Sharon Epperson is looking into some of these changes.

Sharon, this is a fiduciary standard. It`s a very technical term and very controversial one. How would this affect IRAs and 401(k).

SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: It is a very controversial term, but simply put, it is that conflict of interest rule as you laid out, to put your best interest ahead of making their own profit. And how it works for a retirement account, that is what the Labor Department is looking at. Any IRA which includes money that might be rolled over from a 401k to an IRA could be impacted.

And this is significant because so many people when it comes time to retire they switch jobs and move that money to an IRA. Many financial professionals want you to do that, because they want to advise you on that money and some of them are getting hefty commissions when you do that.

So, if they are following that suitability standard, all they have to do is recommend something that`s suitable and meet your needs. If they`re not fiduciary, then that is what the Labor Department says could be a problem and could result in a conflict of interest that costs you money.

HERERA: And we`re talking about a lot of money. You listed $25 trillion in retirement in assets out there. Is that a significant portion of that IRA money?

EPPERSON: Seven-point-three trillion dollars is IRA money.

HERERA: That`s a lot of money.

EPPERSON: That`s a lot of money. And that is more than 401(k) money. It pales in comparison to those who still fortunate enough to have pensions out there in their annuities and make up the rest of the pie.

But it is a significant amount of money. But what`s even more significant is how much the money is growing in terms of baby boomers rolling over their money from a 401k to an IRA. And we have seen the growth of that for nearly 60 percent since 2010. We`re now at about $439 billion. That`s projected amount for 2016, according to (INAUDIBLE)