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ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Politics and money. The race for the White House comes into focus. But what a Trump/Clinton contest means for the market remains very foggy.
A new ride. A man, his Tesla, and a new twist on long distance ride- sharing.
And looking for growth. Why the next big battleground for two of the nearest tech companies is half way around the world.
All that and more tonight on NIGHTLY BUSINESS REPORT for Wednesday, May 4th.
Good evening, everyone, and welcome. I`m Tyler Mathisen. Sue Herera is off this evening.
Well, and then there was one. Billionaire businessman Donald Trump is now the probable, even the presumptive Republican nominee for the White House following his win in the Indiana primary. Ohio Governor John Kasich dropped out of the race today, following Senator Ted Cruz`s departure last night.
And with that, the focus is now centered on Trump and Democratic front- runner Hillary Clinton who despite last night`s loss to Bernie Sanders continues to maintain a big delegate lead. And investors are watching all of this very closely and so is John Harwood, who joins us now from Washington.
John, I have to say after how personal it got just yesterday with Mr. Cruz and Mr. Trump, I was a little surprised that he got out last night. Why did he and Kasich decide to leave now?
JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: I was surprised to, Tyler. It hadn`t gotten so vitriolic at the end, I took Ted Cruz at his word that he was going to fight on through California. But that size of that victory in Indiana simply broke the will of Ted Cruz to continue, and the same with John Kasich. John Kasich never rose up despite his appeal as the moderate in the race, never rose up to seriously threatened. Both of them realized in it wasn`t going to work for them, decided to get out now and set up this general election contrast between Trump and Clinton.
MATHISEN: Last night, you said that the general election would likely start today. How are things shaping up as it gets underway?
HARWOOD: As it starts, Hillary Clinton has got a lead. If you look at the average in real clearpolitics.com, she`s got a seven-point lead. In the NBC/"Wall Street Journal" poll, she`s got a larger lead of 11 points. That`s a significant gap and Donald Trump needs to set about reducing some of those unfavorable ratings with women, with Hispanics, with college- educated voters that potentially could be real anchors on his bid in the fall.
MATHISEN: I`m going to dense pack a question here, so I`m warning you. How fractured is the Republican Party and how wounded is Hillary Clinton from the contest she`s had to fight with Mr. Sanders, and could there, will there be a third-party candidate?
HARWOOD: Hillary Clinton is wounded by her campaign against sanders which is exacerbated her negatives. A lot of people don`t trust her, but her problems are not as severe as Donald Trump`s. Donald Trump in that NBC/"Wall Street Journal" poll is only getting 72 percent of Republicans.
And one of the questions now is whether movement conservatives decide to back a third-party candidate. Interestingly, Ted Cruz when he got out last night didn`t say anything about Donald Trump.
There`s talk about a potential third-party candidacy to uphold the banner of true conservatism. A lot of conservatives say that Donald Trump really is kind of a renegade, he`s a party unto himself. That`s going to be one of questions. Ultimately, parties in our system tend to coalesce around each other, but Donald Trump has more of a deficit in that regard than anybody else and he`s vulnerable if somebody wants to run a third-party candidacy to big erosion within his party.
HARWOOD: All right. John, thank you very much. John Harwood reporting from Washington.
Well, speaking of Donald Trump, who has broken all the rules on the campaign trail has also turned campaign finance and spending upside down. Trump has spent just $47 million according to the latest Federal Election Commission fundraising reports that went through the end of March. Cruz meantime spent $70 million, Clinton $158 million, and Sanders, the biggest spender of them all, at $168 million.
So, how will a Trump/Clinton race affect your investments this summer around which candidate might investors prefer?
Here with some insights is John Canally, investment strategist with LPL Financial.
John, good to have you with us. Let`s talk first about how the campaign is going to go. I would guess that the markets on some level are a little bit relieved that it won`t be a brokered convention in Cleveland for the GOP.
JOHN CANALLY, LPL FINANCIAL INVESTMENT STRATEGIST: That is. That`s a short-term relief. There was a lot of fear in the marketplace about that week in Cleveland in July and what would happen after that first ballot. There would have been a lot of traders pausing during their days to see what happened in Cleveland. So, I think that now is off the table.
But there are other risks out there in terms of the third party. Mr. Harwood talked about those. I think that`s a pretty narrow path and that would add to the uncertainty.
I think, Tyler, the lens to view this through in terms of markets is certainty versus uncertainty in general. Mr. Trump is the uncertain candidate. Senator Clinton is sort of the certainty candidate, but there`s a lot of nuisances.
HARWOOD: Yes. You know, historically, the period from May to November is a treading water time of year for equities. Most of the games go from November forward. Do you expect that to be that pattern to hold this year particularly in light of the campaign?
CANALLY: Yes, that`s sell in May and go away is indeed persistent in election years, and also is even a little more negative when you take a look at what happened in the prior six months. So, from November to April, that period is down. You also tend to get a down period from May to November.
So, we did have a down period in the last six months that even August was even more downward momentum for stocks, but not too much. I think ultimately, stocks are driven by earnings, but there`s a lot of noise out there certainly.
HARWOOD: So, let`s fast forward the tape and it is past Election Day. Do investors -- are investors likely to favor one candidate over another? Are they going to fair better under Clinton or under Trump, or do we just not know?
CANALLY: I think there`s one area under which investors don`t know. On the trade front, most -- the last 20 or 30 years has been a period where global trade has burgeoned. Mr. Trump has come out and said that he`s against free trade in general, and although Senator Clinton has generally been pro-trade, she`s lately come out against the President Obama`s TPP, Trans Pacific Partnership, bill. So, that`s a real concern regardless of who wins.
Now, if Mr. Trump wins, what he suggested he would do would be to strengthen the military, cut taxes, cut the deficit and then stop free trade. Those things aren`t along the same axis as most Republican candidates. Most Republican candidates will do things that are not like that. Senator Clinton, though, is pretty much going to play down the middle, that`s more regulation, more government spending and a lot more government oversight into certain industry groups.
HARWOOD: All right. John Canally with LPL Financial, thank you very much.
It was meantime a down day on Wall Street, after a week of unexpected read on private sector job creation. More on that in just a minute.
Concerns about economic growth around the world also making investors skittish today. The Dow Jones Industrial Average dropped nearly 100 points to 17,651, NASDAQ lost 37, the S&P 500 off 12.
More now on that private sector jobs report, which showed a cooling off last month. Private payrolls rose 156,000 in April according to ADP, but that was fewer than expected and that increase is the smallest monthly number since April 2013. The government releases its monthly employment report Friday. It`s expected to show the economy added about 200,000 jobs last month.
Worker productivity fell in the first quarter by 1 percent. Expectations were for a slightly steeper decline but the report signaled some progress on wage growth as hourly compensation increased at a 3 percent annual rate.
Well, positive news in the factory sector to tell you about tonight. It accounts for about 12 percent of the economy. New orders for goods made in factories rose more than expected in March, up a little more than 1 percent. Shipments and inventories also increased after eight straight months of decline. A separate report showed the services sector which makes up the bulk of the economy grew more than expected in April.
In Washington, the Internal Revenue Service is hiring up to 700 employees for tax enforcement. It is the first significant enforcement hiring in more than five years despite all the budget constraints.
Eamon Javers is following the story.
Eamon, isn`t there a hiring freeze at the IRS?
EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Yes, Tyler, they say, as you point out, this is the first time in five years they`ve been able to do what they call significant hiring and they say based on the pace of the retirements and attrition that they have in the workforce, they`ll be down about 17,000 employees from where they were back in 2010. That is a big hit that the IRS has taken and John Koskinen, the IRS commissioner, telling IRS employees in a note yesterday that these 600 to 700 people will help fill some of that gap, and, of course, they`re in enforcement which means they`re going after tax cheats which means this is a bit of bad news if you`re a tax cheat out there.
MATHISEN: If you`re one of these people, I assume the IRS wants you to bring in more than they pay you.
JAVERS: Yes, absolutely. The average IRS employee brings in about $4 for every $1 spent on that person to the U.S. treasury. But for enforcement employees, it`s a much bigger bang for the IRS. In fact, they say they get about $10 for every dollar they spend on enforcement employees.
So, this is the most lucrative thing the IRS can do and they say they`ll have a couple of different waves of hiring this year. They hope they`ll be able to bring in a lot more money to the treasury and then at some point next year, they`ll get a new budget which will enable to hire a lot more people going forward.
MATHISEN: All right. Eamon, thank you very much.
Eamon Javers in Washington tonight.
JAVERS: You bet.
MATHISEN: And still ahead, a new twist on shuttle service for long distance travel in a Tesla.
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MATHISEN: The Takata air bag recall has more than doubled in the U.S. Last night, we told you the announcement would come soon. Today, regulators ordered automakers to recall up to another 40 million potentially faultily air bags. The defect has been linked to 11 death and more than 100 injuries globally. Tens of millions of other Takata air bags have not been recalled yet.
Tesla gave a very optimistic outlook vehicle production as it reported a narrower than expected quarterly loss. The electric carmaker did lose 57 cents a share. Revenue of more than $1.5 billion was 45 percent higher than a year ago. Despite production concerns, Tesla says it is on track to deliver 80,000 to 90,000 vehicles this year, and it will, it says, produce 500,000 by 2018, two years ahead of schedule. Shares rose following the report in initial after hours trading.
Well, as Tesla expands it`s lineup of electric cars and its super charger network of recharging stations a new company is playing off of that to start a long distance ride service. It`s called Tesloop.
Phil LeBeau from Los Angeles.
(BEGIN VIDEOTAPE)
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Sam and Ann Webb, along with their son, are headed from Los Angeles to Palm Springs. They could drive themselves, but instead they`re paying $35 each to be shuttled in a Tesla Model X driven by the company Tesloop.
ANN WEBB, TESLOOP CUSTOMER: I`ve done Tesloop twice now. I recently took a trip to Vegas. I`m in a Model S and I was in love. So, I wanted to drive my family along and to do it again.
LEBEAU: This is the Tesloop, a ride service based here in L.A. that shuttles people to Las Vegas or Palm Springs, in a Tesla.
The company was started last summer by Rahul Sonnad and his son Haydn, who lease a Tesla Model S, believing people traveling between L.A. and Las Vegas would want to make the trip in a luxury electric car for $85, slightly more than what it costs to fly one way L.A. to Vegas.
RAHUL SONNAD, TESLOOP CEO: What surprised me is how much people like the experience. I think it`s a combination of the car and the convenience of driving and getting dropped off really close to where you need to be.
LEBEAU: One key to Tesloop`s business plan is not paying to power its fleet, that`s because Tesloop, like all Tesla owners, can recharge for free at Tesla super charging stations. And as Tesla CEO Elon Musk looks to add more super charger stations around the country, Tesloop plans to expand with it, targeting routes where it can offer one to five hour rides between cities with a steady supply of commuters.
HAYDN SONNAD, TESLOOP CO-FOUNDER: There`s a huge market there. There`s so many people that commute from one city to another, daily or weekly, and all we have to do is get a small fraction of that market in our cars to become profitable.
LEBEAU: Tesloop has yet to turn a profit, but the owners believe discount prices for rides in these electric cars will drive more people to become customers.
UNIDENTIFIED MALE: Well, it`s really nice. You know, it`s a Tesla and that`s a lot fun. I always wanted to ride the Model X and this is my chance to do that.
LEBEAU: A new ride and a new way to look at longer commutes.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Los Angeles.
(END VIDEOTAPE)
MATHISEN: And we reached out to Tesla to see what they think of the service and we haven`t heard back from them.
Well, Priceline warns its growth will slow next quarter, and that is where we begin "Market Focus".
Despite better than expected first quarter results, the online travel booking company says earnings will fall below estimates in the second quarter as an increase in advertising spending and weak demand in some international markets are expected to affect results. Shares of Priceline down 7.5 percent today, still though at a whopping $1,253.04 a share.
Recent acquisitions and strong sales in the U.S. and Europe help Hain Celestial post solid quarterly revenue growth. Earnings were up 9 percent and in line with estimates, shares rose 9 percent to $44.88.
HBO`s "Game of Thrones" and college basketball helped drive Time Warner`s earnings and revenue higher. The media agent saw gains in its Turner unit, thanks in part to its first time coverage of the NCAA men`s basketball championship final game. In addition, Time Warner (NYSE:TWX) reaffirmed earnings forecast for the year, shares up over 1.5 percent to $74.80.
Health insurer Humana (NYSE:HUM) reported a 46 percent drop in profit because of costs associated with the company`s pending Aetna (NYSE:AET) merger and lower membership in its Affordable Care Act exchanges. Humana (NYSE:HUM) says it remains cautious on the public exchanges and anticipates exiting some of those state markets next year, in 2017. Shares finished the day down a fraction at $175.70.
MATHISEN: Apple (NASDAQ:AAPL) and Google`s parent company Alphabet are focusing on the world`s second most populated country, India.
But as Josh Lipton reports, both companies have different strategies to potentially win a bigger slice of this very lucrative market.
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JOSH LIPTON, NIGHTLY BUSINESS REPORT CORRESPONDENT: India is the new battleground for big tech and that`s because China has become a challenge. In its most recent quarter, Apple`s revenue in China slipped due in part to weaker economic growth and Google`s search business is blocked in China.
So, both companies are making moves to win more market share in this fast growing economy. This week, Google (NASDAQ:GOOG) announced that it will allow users in India to access Apps from telephone carriers rather than billing their credit card companies, and that`s a big deal to Indian consumers because credit card use there isn`t as popular as it is there. Less than 5 percent of the population use credit cards, even as smartphone adoption is surging.
India is now the third largest market for smartphones. Last year alone, 102 million smartphones were shipped there and that was a 49 percent jump in the previous year. Google (NASDAQ:GOOG) is making this move just as Apple (NASDAQ:AAPL) is also targeting the Indian consumer more aggressively.
CEO Tim Cook told CNBC why he`s so excited about that market, where iPhone sales are surging, though Apple (NASDAQ:AAPL) right now only does control about 2 percent of the market.
TIM COOK, APPLE CEO: India today has 50 percent of their population at 25 years of age or younger. It`s a very young country. People really want smartphones there, really want smartphones. This year, the first year, LTE begins to roll out.
LIPTON: The two tech titans have very different tactics when it comes to winning in India. For Google (NASDAQ:GOOG), it`s about apps and getting customers to buy them more easily. Apple (NASDAQ:AAPL) is focused on selling devices.
The companies also served different demographics. IPhones can cost more than Android phones. Apple (NASDAQ:AAPL) wants to import and sell pre- owned iPhones to lower the price, but the Indian government hasn`t made an official decision whether to allow that. Apple (NASDAQ:AAPL), like other tech companies, can`t just open a store in India without government approval. The government right now is evaluating Apple`s request.
Still while the strategies might be different, the goal is the same: win over new fans in one of the fastest growing markets in the world.
For NIGHTLY BUSINESS REPORT, I`m Josh Lipton in San Francisco.
(END VIDEOTAPE)
MATHISEN: Coming up, a sneak peek at how the greatest basketball player who ever lived lives.
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MATHISEN: Here`s a look at what to watch tomorrow. Jobless claims are up. Final piece of data on the labor market, ahead of Friday`s big employment report. Dow component Merck (NYSE:MRK) will report its earnings. Sales of its hepatitis C drug and cancer immunotherapy will be the focus there.
And the president of St. Louis Fed, Mr. Bullard, will speak on the economy. And that is what to watch for Thursday.
Adidas wants to sell parts of its golf business, including one of the best known brands in the world, TaylorMade. It is also selling its Adams and Ashworth brands. The German sports wear maker says it plans instead to focus on golf footwear and apparel.
Meantime, the sports apparel maker Under Armor is giving Nike (NYSE:NKE) a run for its money when it comes to endorsement deals. On its rooster are top young athletes like the NBA player Steph Curry, golf pro Jordan Spieth, the NFL`s Cam Newton, and they`ve now signed Bryce Harper, the baseball player, to a ten-year extension that might turn out to be the biggest endorsement deal for the baseball player.
So, how is the upstart Under Armour (NYSE:UA) convincing some of the biggest names in sports to come on board?
John Kell is a senior writer at Fortune Magazine and he`s got some answers.
John, I assume they`re just paying more.
JOHN KELL, FORTUNE SR. WRITER: They are paying more, but they`re also able to kind of sell the story that at Under Armour (NYSE:UA), which is a much smaller athletic apparel company than Nike (NYSE:NKE), that some of these athletes will be viewed as a marquee name in their sport rather than just one out of a huge crowd of athletes that Nike (NYSE:NKE) works with in the NFL or in the NBA for example.
MATHISEN: In other words, Steph Curry is going to stand out more because there`s not going to be a whole stable of other ball players around him?
KELL: The FM (ph) kind of reported about that earlier this year, that that was kind of a selling point that they reported that Nike (NYSE:NKE), when they presented their contract renewal to Steph Curry that the slide actually had the name Kevin Durant, which another NBA player.
MATHISEN: Oops.
KELL: Yes. So, there was the kind of left a bad taste in the mouth of Curry and his family and his representative and so that could be part of the reason why he decided to move to Under Armour (NYSE:UA), where he is the big name. They`re building a really big shoe program around him, kind of like Jordan or LeBron James. He might not have gotten that much attention if he had stayed with Nike (NYSE:NKE).
MATHISEN: And their footwear sales have gone way up and they have sold a pair to my son, by the way, who is crazy for the Steph Curry shoes.
But let`s be clear here, Under Armor is a fraction of -- though fast growing -- a fraction of the size of Nike (NYSE:NKE).
KELL: They are. They`re only $4 billion in revenue business. Nike (NYSE:NKE) is a little over $30 billion and Nike (NYSE:NKE) is still growing fast.
A lot of people forget that when they talk about Under Armour (NYSE:UA) strong growth and it is very strong. They forgot that Nike (NYSE:NKE) is still growing, too. It`s a Dow component that is still growing. Niki is expecting to hit $50 billion in sales in five years. That`s huge.
Under Armour (NYSE:UA) is not going to ever be able to catch -- is not going to ever able to catch up to that in a foreseeable future. But ten years ago, Under Armour (NYSE:UA) did not sell a single pair of shoes, and now, they sell 700 million. So, ten years later, that`s a huge grown business for them.
MATHISEN: Some people would say that Under Armor has the younger, hotter players, but they`ve also got Tom Brady (NYSE:BRC) who is certainly hot to many people`s estimation, but he`s not young.
KELL: You know, they want to have mix. They work with Misty Copeland, she`s a ballerina, but she`s on her 30s. They`re working with the U.S. gymnastics team, the women`s team. That`s a younger kind of play.
They`re really well known for doing an endorsement deal with Friday night lights. That helped them get into the high school, college crowd. They signed a deal with U.C. Berkeley, another way to kind of get into the college crowd. So, they definitely do want to have a mix of younger and older athletes because with younger athletes really kind of a guess as to how successful they will be, will injury play a role and how long they can play.
MATHISEN: All right. John, we`ve got to leave it there, I`m sorry to say. John Kell, with Fortune Magazine.
Meantime, Nike (NYSE:NKE) and Michael Jordan do go hand in hand. He was one of Nike`s highest athletes, still is here. Jordan line set the bar high for basketball sneakers.
Now, the greatest basketball player that ever lived is selling his Chicago home and Robert Frank takes us on a tour inside and out.
(BEGIN VIDEOTAPE)
KOFI NARTEY, REALTOR: So, this is Michael Jordan`s house. I almost don`t need to say that. Numbers 23 behind me on the gate say it all. It`s a number that`s recognized worldwide to symbolize success, championships and this is the estate he built on that success.
ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: The listing price, $14,855,000. If you add each number in the price tag together, it equals 23.
Realtor Kofi Nartey specializes in selling homes for athletes, the Air Jordan`s he`s wearing show how important Michael is to his sales pitch.
NARTEY: This outdoor area is one of Michael`s favorite places to hang out.
FRANK: Everything on the property reflects Jordan`s taste. There`s a round infinity pool designed to look like a ball going into a net. Nearby, the golf-crazed Jordan made room for a spacious putting green, and installed a tennis court suitable for night play.
NARTEY: He wanted to build something that was outside of the city, just as a getaway.
FRANK: A getaway with lots of privacy so the legendary baller and a tight circle of friends could relax in their element out of spotlight. These giant doors came from the Playboy Mansion. Behind them, there`s a billiard room. Jordan also built a wine cellar and an enormous gentleman`s lounge to indulge his fashion for cigars and playing cards.
NARTEY: This is where he spent a lot of time hanging out with his friends, playing cards, epic card battles, and he had a full walk-in humidor where he had his cigar collection, spent lots of times smoking cigar and talking trash.
FRANK: The hoops legend entertained pals in an open bar with TVs to watch games. Put them up in a swank three bedroom guest house and, of course, worked them out on this ultimate regulation size home court. The jump man logo is surrounded by the names of Jordan`s kids and special cushioning under the wood eased the wear and tier on the superstar`s knees.
Next door, MJ designed a full gym for his hardcore workouts and even put in a locker room to accommodate his famous Bulls teammates.
NARTEY: The year before Michael won his first championship, he decided to start inviting a few of his teammates to come workout, practice and train. They would meet here in the morning, eat breakfast with his private chef, and that camaraderie actually led to their very first championship.
FRANK: For NIGHTLY BUSINESS REPORT, I`m Robert Frank.
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MATHISEN: And for more on Michael Jordan`s home, head to our website NBR.com.
And that is NIGHTLY BUSINESS REPORT for tonight. I`m Tyler Mathisen. Thanks for watching. Have a great evening, everybody. We hope to see you back here tomorrow night.
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