NIGHTLY BUSINESS REPORT for April 20, 2016, PBS - Part 1



Javers, Julia Boorstin, Phil LeBeau, Meg Tirrell, Jane Wells>

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

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Melting up. Stocks keep going up and while that`s a good thing for investors, some say the reason isn`t all that great. But does it matter?

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Sour note. Many Americans don`t love Wall Street. And while the lack of the warm and fuzzies may not be shocking, where the dim view is coming from might surprise you.

HERERA: And bug control, the big money battle to stomp out the latest mosquito-borne virus that has people concerned.

All that and more on NIGHTLY BUSINESS REPORT for Wednesday, April 20th.

MATHISEN: Good evening, everyone, and welcome. We`re glad you`re with us.

Stocks head higher again today, triple digit gain for the Dow as the index sits at its highest level since July. This in the face of some so-so earnings and tepid economic data. So, the question is, why? We`ll get to more on that in just a moment.

But something that might help push stocks even higher is a beat on the top and bottom line surprisingly perhaps by the Dow component American Express (NYSE:EXPR) (NYSE:AXP). AmEx earned $1.45 a share. That was a dime better than expectations. The company pulled in just over $8 billion in revenue for the quarter, also above estimates.

Shares initially rose after-hours following the results and basically all day long.

Kayla Tausche tells us the key thing for investors.


KAYLA TAUSCHE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Shares of American Express (NYSE:EXPR) (NYSE:AXP) gained in after hours trading as the company reported a profit that declined in the first quarter less than analysts had expected. Revenues for the company did rise 2 percent. That was more than analysts had expected. Card member spending was up 6 percent. Expenses were also up as the company incurred restructuring charges and gave more rewards to their customers.

What really sold investors after this report was the fact that the company reaffirmed its guidance for 2016 and 2017 amid changes it is making to its business model and several portfolios that are roiling up. The fact that the company had confidence to reaffirm that guidance was seen as a good sign and that is why shares were up.

For NIGHTLY BUSINESS REPORT, I`m Kayla Tausche in New York.


HERERA: On the flip side Coca-Cola (NYSE:KO) was the biggest looser on the Dow today. As sales of the beverage giant fell for the fourth straight quarter, although they were slightly ahead of consensus estimates. But worldwide case volumes rose, not enough though, missing Wall Street targets. The strong dollar and weak in Europe was blamed for the drop in revenue. Coke shares fell nearly 5 percent on the day.

MATHISEN: Homes sales rebounded last month after slumping in February helped by strong gains in the Northeast and in the Midwest. The National Association of Realtors said sales of existing homes up 5.1 percent in March, adjusted rate 5.3 million units. The median sales price just over $222,000.

Separately, more news in housing as mortgage applications rose more than a percent last week, and the Mortgage Bankers Association says the average 30-year rate rose a tick to 3.83 percent.

HERERA: Stocks kept going higher today, but did come way off of their peek late in the session, way down by a bit in that drop in Coca-Cola (NYSE:KO). The Dow rose 43 points to 18,096. That its highest level since July. NASDAQ added seven and the S&P 500 climbed just a fraction.

Well, U.S. stocks are up about 15 percent from their lows back in February, making this a huge comeback for the market in a short amount of time. So what happens next to send the market from ice cold to red hot?

Mark Lehmann joins us, president of JMP Securities.

Nice to have you here, Mark.


HERERA: So, what do you make of this phenomenon? We`re calling it a melt up because we did get this big move after a really rocky start to the year. What do you think is behind it?

LEHMANN: Well, melt up is not a bad phrase here. I think you have a lot of things happened in the first quarter that had investors worried. At the same time, you had earnings expectations for the first quarter that were very new to the expectations and what`s happened since then is oil stopped going down. I think China`s slowness has become less worrisome. And also, we`ve had first quarter earnings that were at or slightly above expectations.

So, tie that together with better job growth. You had a market that wanted to go higher so it had such a bad first six or eight weeks. And so, it was easy comparisons for investors and this melt up that you described, albeit with thin volume, has been quite impressive.

MATHISEN: And one of the comparisons must be the comparison to what you can make in bonds these days, which isn`t very much.

LEHMANN: No, it`s not. I mean, you look at what the yields are in today, the bonds obviously didn`t do quite well, but the stocks did. You`re still getting 1.8 percent in your 10-year treasury and you look at global yields on bonds, we`re talking yields in the negative territory in Japan and some other markets. So, that is not a great alternative for 10 or 30-year money.

So, when you look at the equity markets I`ve been calling the U.S. market the best market on the top block around the world, and I don`t think that`s changed a lot. We still have job growth. We still have lots of innovation. We`ve had a very tepid ideal market.

But the backdrop is not all that terrible and now we look at the political landscape which looks like we know where we`re going for the next six to nine months and I think investors see that as a positive.

HERERA: What about participation? Have we see -- you mentioned the fact the volume is thin, which begs the question whether the individual investor is getting in this markets or may be getting in this market on the fear they`re missing out on this rebound.

LEHMANN: Yes, I think there is a little bit of -- you know, the FOMO would have been on the downside, the fear of missing out is on the downside. I think if you talked to most investors and they said, where is the next 10 percent going, I think you talk -- even when the market was dropping back in February, people were more worried about downside than upside.

I think even with the market up 15 percent, there aren`t many people who are worried they`re going to miss out on a big rally. And guess? This is climbing the wall of worry and as we see earnings not as bad as people once expected, I think there`s going to be a little bit more capitulation that equities may not be such a terrible place to be, given the rates where they are for the 10-year and 30-year treasury.

MATHISEN: U.S. stocks versus, let`s say global stocks and I`m thinking mostly of developed country stocks, big caps versus small caps. Where are you on that, Mark?

LEHMANN: Yes, I think -- I think the U.S. market still leads the pack in terms of innovation and where we are, and the reasons were multiple basis. I think you`ve seen the dollar obviously weaken and that`s going to help some of our multinational companies with the comparisons year over year.

I`m an emerging growth guy, as it is here. We haven`t seen lots of IPOs and lots of participation from those stocks. I think the bigger names have clearly participated here. I`m a U.S. small mid-cap growth guy going into the fall where we should still see decent numbers, and the have market, the haves that we`ve talked about before -- Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), (NYSE:CRM), I expect those to continue to do well, gain market share and the stocks you want to own.

HERERA: What are the dangers maybe lurking out there for the market that investors should be watching for? A lot of people point out to the upcoming election, that there may be volatile around that. Do you agree with that or is there anything else`s out there that you might earmark as a potential concern?

LEHMANN: The election clearly was more worrisome I think to investors 90 days ago. I think, again, not using New York as a complete bellwether for where we`re headed, but I think, in the eyes of most investors, I think we know where the conventions are headed for the fall and given that it looks like a Trump/Clinton race in the fall, that may not be exactly what the world want, that may not be exactly what investors had seen maybe six or nine months ago, but I think there`s a comfort factor for investors.

So, risks -- I think you also have risks of some unpredicted terror shock, but frankly, I see less of that. ISIS seems to be a little more tame than I think we would have thought six, nine months ago.


LEHMANN: I think some of the risks are going away.

HERERA: All right. On that note, Mark, thank you. Mark Lehmann of JMP Securities.

LEHMANN: Thank you.

MATHISEN: President Obama is in Riyadh, where he met with Saudi King Salman about conflicts in the region and the long standing alliance and partnerships between the U.S. and Saudi Arabia.

The visit, however, comes during a time of increasing tensions between the U.S. and the Saudis. The two nations have lots of differences. They`ve arisen over the shifting landscape in the Middle East, as well as the war on terror.

HERERA: The prolonged slump in oil prices is another key pressure point for the Saudis. Crude is the life blood of that nation and the sharp drop has led to budget cuts. Treasury Secretary Jack Lew told NBC`s Tom Costello the country is learning to adapt.


JACK LEW, U.S. TREASURY SECRETARY: I think that the Saudis like all oil producers are coming to terms with what is a lower price of oil for now. I think one of the things we all know about oil prices is they go up and they go down, and you have to plan on a certain amount of volatility if your economy is based on a commodity like oil that fluctuates in price.


HERERA: Jackie DeAngelis looks at how the kingdom is doing whatever it takes to ease the Saudi squeeze.


JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Financial problems appear to be on the horizon for Saudi Arabia and the evidence is mounting. Over the last year, the kingdom has had to slash its budget as it copes with shrinking GDP. It quietly sold bonds to raise cash and now, it`s taking a $10 billion international loan. It basically recently downgraded the sovereign, and today, seven of its banks as well.

While there`s also been a struggle to keep reserves high enough to maintain the currency peg to the dollar.

In addition, the Saudi Aramco IPO now looks like it could get done next year. The market taking this as a signal that the Saudis need cash.

Selling a 5 percent stake in Aramco was a game-changing move. This is a nation that proudly kept control of its oil and one that isn`t particularly transparent. While the sell wouldn`t include the Saudis oil reserve, it makes a statement to investors that cash is king in a low oil price environment.

ANTHONY GRISANTI, GRZ ENERGY PRESIDENT: Saudi Arabia really is OPEC at this point. It`s kind of an every man for himself attitude where everybody is kind of producing what they want because they need the revenue. I think the meeting in Doha last week kind of singled that because no other nations attended it but Saudi Arabia, as far as OPEC is concerned.

DEANGELIS: The Saudis have long maintained that they`re in a position to withstand low oil prices, and perhaps they are. But with each piece of news, investors are becoming for doubtful.



MATHISEN: Donald Trump and Hillary Clinton scored decisive victories in last night`s New York primary, and while that was not surprising, what was were the exit polls and feelings towards Wall Street in the state where Wall Street resides.

Eamon Javers joins us now from the Washington.

Eamon, the numbers were little eye-opening. Where the opposition to Wall Street comes from?

EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, it came from the financial crisis of 2008 and that`s been playing out this whole year.

Look at these poll numbers. New York state voters were asked in exit polls whether or not they thought that Wall Street helps the U.S. economy or hurts the U.S. economy. Hurts the U.S. economy 64 percent of Democrats said that`s the case, 51 percent of Republicans, traditionally a Wall Street friendly crowd said that was the case. Helps the U.S. economy, 29 percent of Democrats and just 46 percent of Republicans.

So, Wall Street is under water as they say with both Democrats and Republicans. That`s bad news for the industry, especially as you point out in its own home state, Tyler.

HERERA: So, after last night`s primary and the results there, how is this all setting up, Eamon?

JAVERS: Well, you look at the two front-runners and you think they have a much better path toward their party`s nomination. That`s Hillary Clinton and Donald Trump. And if you`re Wall Street, you`re looking at this and you`re scratching your head. You talk to Wall Street bankers, they don`t know what to make of Donald Trump who has said he might replace Janet Yellen as Fed chair and other things that Wall Street would look at as providing some instability or at least uncertainty into the forecast.

With Hillary Clinton, they don`t necessarily agree with all of her policies, but they may feel like with the Clintons, on Wall Street, they know at least what to expect. And that goes a long way for a big bank.

MATHISEN: Yes. So, in terms of the rest of the campaign, do you think the anti-Wall Street sentiment which certainly Bernie Sanders has mined very hard is likely to remain fronts and center or will it recede?

JAVERS: I think it will remain front and center. Donald Trump is no friend of Wall Street necessarily when he`s out there on the campaign trail. You know, he talks about big corporations with the same sort of skeptical tone that you hear from some of the Democrats, including Mr. Sanders. So, I think this is a trend that we`re going to see play out throughout the year, Tyler.

MATHISEN: All right. Eamon, thanks very much. Eamon Javers in Washington.

JAVERS: You bet.

HERERA: And coming up, the hot new sport that`s growing at such a clip that there`s no shortage of companies lining up to cash in. We`ll tell you what it is and who`s in the best position.


MATHISEN: It`s an ends of an era at Microsoft (NASDAQ:MSFT). After being in production for more than 10 years, the company announced today that it will stop making the Xbox 360 console. That`s the one in my basement. The 360 successor, the Xbox One, will continue to be produced, with over 80 million consoles sold. Gamers are still going to be able to buy games and accessories for the 360, as well as continue to play online through the Xbox Live Service.

HERERA: Well, while the Xbox 360 is coming to an end, one area that is booming is competitive video game playing better known as eSports.

Julia Boorstin takes a look at the surprising growth and who is cashing in.


JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Video game competitions are the hot new sport to watch. Revenue projected to top $460 million this year. More than 40 percent jump from last year and the U.S. has the biggest share of that revenue according to a study from News Biz (ph).

PWC reporting that eSports exceeds the top sporting events such as the World Series and the NBA Finals.

DOUG CREUTZ, COWEN & CO. ANALYST: You`ve got events that are showing up 10,000-plus-seat arenas. So, there definitely is a large audience. The question is, always, is how do you monetize that audience, right? I mean, we saw with the Internet, just because you have eyeballs doesn`t mean you have business.

BOORSTIN: And now, a range of companies are trying to build big businesses around eSports, from traditional media players including Turner, airing its first eSports competition next month, to game maker Activision Blizzard (NASDAQ:ATVI), investing in a new eSports division and making a big hire from ESPN to run it.

Activision Blizzard (NASDAQ:ATVI), the biggest video game company, in January bought eSports company Major League Gaming. Just last week, it announced record viewership -- 71 million video views, watching a record breaking 45 million hours of live broadcast.

CREUTZ: Ultimately, the people who own the key games are in the best position. I mean, it would be like, if you owned the rights to football, right? You`d be in a pretty good position to capitalize in the NFL.

BOORSTIN: Of all the game companies, Activision owns the biggest titles of competition, including Call of Duty, Hearthstone and StarCraft.

But a range of other companies are also poised to cash in, including Amazon`s Twitch and YouTube, which both draw millions of viewers to watch game play, as eSports continues to grow in popularity.

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


MATHISEN: There is reportedly a deal being worked on between Volkswagen and the U.S. to avoid a trial this summer over its emissions scandal. "The Associated Press" says VW would pay a million dollars in compensation to owners of diesel vehicles that used sophisticated software to cheat U.S. emission rules.

HERERA: United Continental has reached a deal with several activist investors where the airline will shuffle its board. Two new directors picked by the hedge funds and one mutually agreed upon with the airline will be added to the board. United also announced a beat on its quarterly results after the bell.

Phil LeBeau has a look at the important takeaway from those numbers.


PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: United Airlines posting better-than expected earnings in the first quarter beating estimates by a nickel with revenue matching expectations, but down compared to the first quarter of last year. Why? It`s all about passenger revenue per available seat mileage, but under pressure at United and really for the entire industry for the last six months and that was the case in the first quarter as well, dropping more than 7 percent, United blames that on the strong dollar as well as lower oil costs.

And one other factor that was pressuring revenue in the first quarter, United saw a drop in close in or last-minute business travel bookings around the Easter and spring break holiday. No indication of what was driving that declining close in reservations. But again, United reporting better than expected earnings for the first quarter.


HERERA: And shares of United fell initially following the release of those earnings.

MATHISEN: MGM Growth Properties, a real estate portfolio of MGM Resorts (NYSE:MGM) International, went public on the New York Stock Exchange today and that is where we begin tonight`s "Market Focus".

The company`s shares were priced at 21 bucks apiece and looked to raise over $1 billion in the offering. Shares of the first day trading rose more than 4 percent to $22.1.

Toymaker Matel posted a loss last quarter as it continues to struggle with foreign currency and other issues. Barbie sales were flat. American Girls were down. Despite the results, the company announced a quarterly dividend of 38 cents a share. That will be paid in June. Even Barbie will get some.

Shares of the company down more than 2.5 percent during the regular trading to $33.04 and then they slid further as you see there initially in after hours trading.

The medical device maker Saint Jude Medical raised its full year profits guidance today, as well as delivering earnings that beat analyst expectations. The company cited growth in various segments that helped offset a decline in sales in its main cardiac rhythm segment. Shares of the device maker up just shy of 4 percent to $60.94.

HERERA: Dish Network saw its subscriber count fall in the fast quarter of the year, but it was still able to beat analyst profit expectations. Dish cited a decline in interests expenses as the main driver for its higher profits. Today is also a day that Dish`s carriage deal with Viacom (NYSE:VIA) expires, potentially causing a blackout across Viacom`s family of channels. Shares of the satellite receiver was up fractionally for the day at $47.42.

Tupperware (NYSE:TUP) Brands is reporting better than expected earnings this morning, as the company saw stronger sales in multiple regions. The company saw continued issues with the strong dollar, but also raised its full year earnings guidance. The results were not enough to please investors, though. Shares of the company fell more than 4 percent to $51.91.

Chipmaker Qualcomm (NASDAQ:QCOM) reported its second quarter earnings after the bell today and the results were above analysts` expectations. The company cited stronger revenue from its licensing business, as well as continued strength in its chipset unit. Shares of Qualcomm (NASDAQ:QCOM) up fractionally for the day to $52.09 and initially traded higher in after- hours trading.

MATHISEN: This week, we`ve taken a look at how the pharmaceutical industry has joined efforts to fight the Zika virus, which is carried by mosquitoes. Tonight, in the final piece of our three-part report, Meg Tirrell looks at how to control the bug that spreads Zika.


MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: The mosquito that carries the Zika virus is not a new threat in the United States.

UNIDENTIFIED MALE: Unfortunately, this climate is also ideal for one of man`s worst enemies, the Aedes Aegypti mosquito, carrier of dengue and yellow fever.

TIRRELL: For decades, the Aedes Aegypti has been a known carrier of multiple diseases. It`s a battle public health experts say we can win, but we must start taking more seriously.

DR. ANTHONY FAUCI, NIAID DIRECTOR: Mosquito control has been successful in the past. We can`t be cavalier.

TIRRELL: The best tools: pesticides, vigilance and hard work.

DAN STRICKMAN, BILL AND MELINDA GATES FOUNDATION: It`s technically possible to do a very good job of Aedes Aegypti control. The problem is the logistics and the resources to do that. It gets very complicated, especially in a large city.

TIRRELL: Companies including Bayer, best known as the maker of aspirin, are developing tools for control of mosquitoes that carry disease.

KURT VANDOCK, BAYER PRODUCT DEVELOPMENT MANAGER: We have a couple of thousand of the deadliest animal in the world right here.

TIRRELL: Like its product, Suspend Polyzone, which is spray to create a barrier on surfaces that kills mosquitoes.

VANDOCK: That`s the way we like them, we like them nice and dead.

TIRRELL: But with the difficulty with completely eradicating the mosquito with current tools, as well as the emergence of resistance, experts say new options are needed. And they note innovation for control of the bugs as public health threats has been slow, in part because that market is so much smaller than pesticides for crops.

The Gates Foundation`s Dan Strickman estimates the market is about $2 billion to $3 billion per year. The foundation is partnering with industries to develop new methods of mosquito control through a group called the Innovative Vector Control Consortium. It includes Bayer as well as Sygenta, Du Pont and Dow.

Over the last decade, the consortium has screened more than 4 million chemical compounds to find three to bring into development.

STRICKMAN: In some ways, the chemicals that are easiest to develop have been developed and now we`re getting a smaller and smaller pool of possibilities.

TIRRELL: And dialing new ways of mosquito control are also being worked on, including genetically modifying the bugs to destroy their own kind. Biotech company Intrexon is developing that technology, awaiting the FDA`s go ahead to start testing in the Florida Keys.

But as mosquito borne threats persist, officials say we need to respect the dangers those bugs can pose and make sure we protect ourselves.



HERERA: Coming up, how the growing market for medical marijuana can help your four legged friend


HERERA: Here`s a look at what to watch for tomorrow. Weekly jobs claims always draw interest as they give an ongoing look into the health of the labor market, and then we get a snapshot into the manufacturing sector with the release of the Philadelphia Federal Reserves business outlook for that region.

And more big name earning reports are out, with Dow components Visa (NYSE:V), Travelers and Verizon (NYSE:VZ), and tech giant Alphabet, which is Google`s parent, and Microsoft (NASDAQ:MSFT), which is also a Dow component.

And that`s what to watch for on Thursday.

MATHISEN: Well, today is April 20th or 4/20, a date of significance for the cannabis culture for reasons you have to be high to understand. And as legal marijuana rolls out in more states, entrepreneurs have found a new fast growing segment, medical marijuana for your Fifi and Fido.

Jane Wells explains.


GIGI GRIFFIN (ph), JOY`S OWNER: I`m Gigi Griffin, and this is Joy, Joy Griffin.

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Gigi Griffin is the last person you`d expect to see in a medical marijuana dispensary in Los Angeles. But she didn`t come her for herself, she came for joy.

GRIFFIN: Basically, Joy was diagnosed in January with cancer of the bladder.

WELLS: Radiation and chemo would cost thousands of dollars, but Griffin had a friend who used medical marijuana to recover from cancer surgery and recommended it.

GRIFFIN: I just knew that I wanted to try whatever would help my dog.

WELLS: And that`s how she discovered the hottest new field in cannabis.

DEBRA JANTZ, TYLER`S OWNER: Here we go. I just going to squirt in there.

WELLS: Pot for pets.

JANTZ: That`s a good boy.

WELLS: Debra Jantz has been giving her dog Tyler a cannabis-based product to deal with arthritis.

JANTZ: He started swimming again and running in the park again.

WELLS: Jake Snapinn started giving the same product to Sunshine to stop her seizures. It worked.

JAKE SNAPINN, SUNSHINE`S OWNER: She`s eating her whole meals when generally she`s a picky eater. And so, she`ll finish the whole thing.

WELLS: There isn`t a lot of research of the effect of cannabis on animals, which is one reason why the ASPCA and PETA are withholding supporter. Also, vets cannot legally prescribe it.

So, to get a pet pot product like this you usually have to go somewhere where they can sell it legally to humans and in California, that means you have to have your own medical marijuana card.