REPO-01
LeBeau, John Harwood, Robert Frank, Diana Olick>
Products>
ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Four in a row. A weak finish for the markets this May, but the blue chip index still managed to do something it hasn`t done since 2014.
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Don`t miss out. From a new house to a new car to maybe even a new job. The economy showing signs of picking up. So, is now a good time to make that big personal financial decision?
HERERA: Hot wheels. The big money behind classic `80s cars.
All that and more tonight on NIGHTLY BUSINESS REPORT for Tuesday, May 31st.
MATHISEN: Good evening, everyone, and welcome.
It was a gain for the month of May. A small one for the Dow. Still, a gain. That makes it four months in a row for the Dow Jones Industrial Average to post a gain and that is something that hasn`t happened in about two years.
And for a while today, it looked like that monthly win streak was going to end at three. But by the close, the blue chip index was off 86 points, down but enough still to be positive for the month. The NASDAQ gained 14. The S&P 500 fell 2.
The big winner for the month of May was the NASDAQ, up more than 3.5 percent. And according to Bob Pisani, the action we`ve seen is indicative of a healthy market.
(BEGIN VIDEOTAPE)
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Sell in May and go away? Not really. It wasn`t a spectacular month but it wasn`t a washout either. What we did see was healthy rotation.
So, for example, tech stocks were lagging going into May, they had a rough April. But tech was a big advancer this month. The sector was up more than 5 percent with double-digit gains in big names like Nvidia, Electronic Arts (NASDAQ:ERTS), Micron, Salesforce.com (NYSE:CRM).
Energy and material stocks performed exactly the opposite manner. They were gainers in April, but both of them were down slightly in May.
So, here`s the bottom line. The S&P 500 eked out a respectable 1.5 percent gain for the month and we are seeing some rotation in stocks at a time when the major indices are less than 2 percent from historic highs. That`s very healthy for the market.
And if you`re bullish, here`s the best news, everyone still hates the rally. Sentiment hasn`t improved that much, even though we`ve rallied almost 10 percent from the February lows. That`s also bullish for the markets.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
(END VIDEOTAPE)
HERERA: Well, it may be a shortened week but it`s a big one for your money. From housing to gas prices to getting a job, over the next few days, we`ll learn more about all of the things important to you. And you, the American consumer, seem to be doing your part keeping the economic engine revving.
Consumer spending which accounts for more than two-thirds of overall activity rose 1 percent last month, recording its biggest increase in more than six years in the month of April.
And if you`re feeling good, that may bode well for other parts of the economy.
Dominic Chu takes a look at what`s on tap the rest of the week.
(BEGIN VIDEOTAPE)
DOMINIC CHU, NIGHTLY BUSINESS REPORT CORRESPONDENT: There is a lot of data coming out this week that`s going to have a real impact on both your wallet and your portfolio. Now, there`s a huge number of things to watch for but, here`s some of the highlights. And let`s take a look at perhaps some of the big key data points coming out this week.
Today`s big data point, the S&P Case Shiller home price index, it`s a mouthful but it gives a gauge about the health of the housing recovery. And we did see prices improve slightly year over year. So, perhaps that housing recovery is still on track. Real estate, of course, a big part of the overall economy in the U.S.
On Wednesday may auto sales come out. Remember, a lot of people are buying cars. We could be at near-record levels for auto sales. It`s going to be an indicator about whether people still feel healthy enough financially to spend on big-ticket items like a new car.
Now, on Thursday, you may have seen gas prices rising at the pump and that`s because they have been over the course of the past few weeks. $2.32 at the average price of unleaded gasoline according to AAA. A year ago, it`s $2.74. So, it`s been coming down over that span, but still.
OPEC, the global oil cartel that controls a lot of the oil market, is going to be meeting on Thursday. Not a lot is expected out of that meeting but still something to watch for sure.
And then on Friday, of course, the granddaddy of them all in terms of economic data. That is the U.S. employment report, the jobs number. And whether or not more Americans are working and whether or not people are actually finding the work that they want to find.
All of that`s going to be key. Remember, these four items in addition to many others are going to be things to watch here as the Fed weighs whether or not in June, it will raise interest rates yet again. So these are going to be key items to watch. Again, impacts on both your wallet and your portfolio.
For NIGHTLY BUSINESS REPORT, I`m Dominic Chu.
(END VIDEOTAPE)
MATHISEN: Well, as these fresh economic numbers roll in, the results seem to suggest slightly that the economy is improving, at least from the first quarter. And that could mean more Americans are ready to make some big financial decisions.
Joining to us talk about this and more is Peter Mallouk. He`s CEO and chief investment officer at Creative Planning.
Peter, welcome. Good to have you with us.
PETER MALLOUK, CREATIVE PLANNING CEO & CIO: It`s great to be back.
MATHISEN: The economy seems to be growing, albeit slowly, inflation is slow, unemployment is down, interest rates are low but maybe starting to move up.
If I`ve got some good ideas about what to do with my money, is there a better time to make moves than right now?
MALLOUK: Well, if you`re talking about personal moves in terms of making a lifetime decision, I really think that there`s a macro element and a micro element. And people get caught up in the macro. But for people making individual decisions, they should be really focused on the micro, which is their own situation.
You know, where do they stand today? Do they have reserves? Do they have a secure job? Sometimes the security of your job is not really tied to the economy, it could be tied more to the industry that you`re in. And you should be making your decisions based on that.
Now, of course, there`s a macro backdrop which is all the things that you`re talking about. And we`re in a low-rate environment. If you`re talking about somebody making a major purchase like a car or a bigger one like a new home, these are things that are very interest rate driven. And as the economy gets stronger, the Fed will raise rates.
And so, someone who`s looking at that sort of decision, the macro element becomes a bigger factor, because if you, say, refinance your home today or buy a new home today, you`re locking in a rate for 15 years, 30 years.
MATHISEN: Right, right.
MALLOUK: As rates go up, you`re at a much better spot. If we call this wrong, rates go down, turns out the economy is getting weaker, you refi.
HERERA: Right. Peter, you know, it also seems to go to having an overall plan. Whether you`re talking, you know, the equity side of things, I mean, hopefully, you have a stock market or investment plan. But from the personal finance side of things, you also have to have that checklist. You also have to have a plan, do you not?
MALLOUK: You always have to have a plan, because otherwise you make decisions that are based on where interest rates are today. Or what`s going on with the terror meter. And decisions like that that you have no control over.
You really have to make decisions based on things you can control. And if you have a plan, it becomes easier to allot capital. How much money should I have invested in securities that are available in the short run to me, regardless of what`s happening with the markets or interest rates?
And you have your long-term money allocated more toward equities, real estate, things that are more volatile but tend to reward you over time.
Now, within those spaces you want to make decisions to match the market or try to do better than the market. The biggest factor is always the allocation of capital and your personal plan should be driving that.
MATHISEN: Peter, wise counsel, we thank you very much. Peter Mallouk with Creative Planning.
MALLOUK: Great to be with you.
HERERA: To deal news now. Two Midwest utilities are merging. Great Plains Energy (NYSE:GXP) is buying West Star Energy for more than $8.5 billion. It`s the largest deal in the U.S. electricity market so far this year. And that deal was driven by falling demand and the need to cut costs. Shares of West Star Energy gained 6 percent. While Great Plains fell.
MATHISEN: Jazz Pharmaceuticals (NASDAQ:JAZZ) has agreed to buy rival Celator for about $1.5 billion. Celator has a promising leukemia drug in its pipeline but no revenue. The company is hoping to submit a new drug application for its treatment to the FDA by the end of the third quarter. Shares of Celator up 71 percent. Jazz down fractionally.
HERERA: Investors got their first chance to respond to Disney`s rough weekend. The company which had been on a hot streak hit some big bumps at the box office. And across the globe, tensions with a rival company in China are escalating. Shares of Disney (NYSE:DIS) fell about 1 percent in trading today.
Julia Boorstin has the details.
(BEGIN VIDEOTAPE)
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: "Alice Through the Looking Glass," a big bet for Disney (NYSE:DIS) with a reported $170 million budget, fell flat at the box office, grossing just $35 million in the U.S. over the holiday weekend, about $25 million short of projections, and far short of "Alice in Wonderland`s" massive hit in 2010.
ERIK DAVIS, FANDANGO: It was right on the heels of Jim Cameron`s "Avatar (NASDAQ:AVTR)," which is still the highest grossing movie of all-time. If any movie took advantage of "Avatar`s," success it was that first "Alice in Wonderland", grossed over a billion worldwide. Six years later, 3D is not what it was then.
BOORSTIN: This is particularly jarring because Disney (NYSE:DIS) has been on a hot streak. It sold nearly one-third of all ticket in the U.S. so far this year, far ahead of Fox with just 18 percent of box office sales.
This has been a record-breaking year for Disney (NYSE:DIS), thanks to "Captain America" and breakout hit "Jungle Book" and "Zootopia."
DAVIS: Don`t feel so bad for Disney (NYSE:DIS). Disney (NYSE:DIS) is already over $4 billion for ticket sales globally, and we`re not even in June yet. At a couple of weeks, they have "Finding Dory" coming out, which I think is going to rival "Captain America" in terms of the biggest movie of the summer. So, they`re okay. They can take a bit of a hit.
BOORSTIN: But Disney (NYSE:DIS) has another headache. Disney (NYSE:DIS) characters spotted at the rival Dalian Wanda Group`s new theme park in China. Disney (NYSE:DIS) issuing a statement saying, quote, "We have a good relationship with Wanda, particularly in the film distribution business, including the United States. We`re perplexed that Wanda`s chairman Mr. Wang would choose to do public battle with us or attempt to undermine our business in any way."
With Disney (NYSE:DIS) preparing to open its shanghai park on June 16th, the battle is on with the Chinese media giant. Tickets to Wanda`s park will cost about half of those to Disney (NYSE:DIS) Shanghai. With Disney (NYSE:DIS) preparing to open its Shanghai park on June 16, the battle is on with the Chinese media giant. Tickets to Wanda`s park will cost about half of those to Disney (NYSE:DIS) Shanghai.
But the fact that Disney (NYSE:DIS) characters are popping up elsewhere speaks to the value of the magic kingdom`s intellectual property.
For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.
(END VIDEOTAPE)
MATHISEN: An update on the saga some call the soap opera at Viacom (NYSE:VIA). Viacom`s board of directors vowing now to fight for control of the company. In a letter to shareholders, Viacom`s lead independent director said the board is preparing a legal battle in the event they are removed. There are reports last week that controlling shareholder Sumner Redstone, 93, and of indeterminate mental health, was considering just such a move. A spokesperson for him said he would act in the best interests of all shareholders.
HERERA: Still ahead, can Cadillac overcome its challenges, become cool again, and keep pace with its rivals?
(MUSIC)
HERERA: Volkswagen is profitable again. The German automaker proved it can still make money despite digging out from the diesel emissions scandal. Results from Audi and Porsche helped offset its flagship VW brand which is most closely associated with the test rigging. The company says it`s well- funded to deal with the costs of the recalls, fines and lawsuits.
MATHISEN: Cadillac may not be the first thing that comes to mind when you think of cool but the brand is trying to change that perception. And attract younger, helper buyers in an effort to keep up with other luxury brands.
Phil LeBeau has more on what Cadillac is doing to overcome its challenge.
(BEGIN VIDEOTAPE)
PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: Here in the Soho district of Manhattan, Cadillac is opening its Cadillac House, the latest extension of the luxury brand from General Motors (NYSE:GM).
What`s the Cadillac House? It`s essentially on the ground floor underneath Cadillac headquarters. They have some Cadillac vehicles that are going to be on display. But this is not about selling Cadillac vehicles. It`s about being a meeting place for people in the art community, fashion designers, people in the tech community here in the New York City where they can come in, have a cup of coffee, see some of the artwork that`s on display, get a sense what Cadillac is trying to achieve here which is a discussion, and perhaps in the process let people know Cadillac is on the cutting edge.
The head of the brand says this is not about selling vehicles directly, it is about giving people a different perspective about what Cadillac is all about.
JOHAN DE NYSSCHEN, CADILLAC PRESIDENT: Cadillac House is about immersing people into the grand experience, creating an environment where innovators, creative thinkers, can meet, can find inspiration from one another, can find space just to relax and contemplate. And to do it in an environment that really is very emblematic of what Cadillac brand stands for.
LEBEAU: Cadillac is in the midst of a multi-year effort to boost its sales not only here in the United States but around the world. And here in the U.S., in terms of market share this year, Cadillac lags the leaders of Mercedes, Lexus, and BMW.
And also remember, we`re seeing this not just with Cadillac but other luxury brands like Mercedes, opening a brand extension gallery/store in Beijing. It`s all about taking those luxury brands beyond the dealership. What we`re seeing with Cadillac here in New York we`ll also see in other locations around the world over the next couple of years. The next location, Shanghai, which opens in 2017.
Phil LeBeau, NIGHTLY BUSINESS REPORT, New York.
(END VIDEOTAPE)
MATHISEN: Under Armour (NYSE:UA) cuts its sales guidance because of Sports Authority`s bankruptcy, and that is where we begin tonight`s "Market Focus".
The sports apparel company will take a write-down and seize its net revenue for the year lower than expected because of Sports Authority`s liquidation. Under Armour (NYSE:UA) says it was only able to collect about one-quarter of the sales it expected from Sports Authority so far this year. Originally, Under Armour (NYSE:UA) didn`t think the bankruptcy would impact it financially. Shares fell more than 2.5 percent following the news after the bell, but ended the regular session down a fraction at $37.70.
One billionaire is bullish on the pharmaceutical giant Allergan (NYSE:AGN). Activist investor Carl Icahn disclosed he has acquired a, quote, "large position" in the maker of Botox. In a statement on his website, Icahn showed support for the company`s CEO. Allergan (NYSE:AGN) has responded to the investment, saying it does not believe the large stake was made to influence the actions of the company`s management. Shares of Allergan (NYSE:AGN) flat on the news at $235.93.
And quarterly sales rose in all four divisions at the medical device maker Medtronic (NYSE:MDT), thanks in part to an increase in surgeries performed. The results were ahead of analyst targets as were profits. But shares fell on a cautious outlook for full-year earnings. Medtronic (NYSE:MDT) down nearly 1.5 percent at $80.48.
HERERA: Fidelity`s contrafund lighten its position in Chipotle by 21 percent in April. Shares of the burrito chain are down about 40 percent since the end of September as it continues to deal with fallout from multiple outbreaks of food-borne illnesses last year. But today, shares didn`t react much to the news. They ended the day down fractionally to $441.96.
Office Depot (NYSE:ODP) is buying back up to $100 million of its shares. Earlier this month, regulators blocked the proposed merger between Office Depot (NYSE:ODP) and its rival Staples (NASDAQ:SPLS). Shares of Office Depot (NYSE:ODP) rose more than 1 percent to $3.58.
And speaking of Staples (NASDAQ:SPLS), the company`s CEO Ron Sargent will resign from his position at the office supplies company by next month. Sargent is expected to stay on the board until January. The company`s president of North American operations will take on the role of interim CEO. Shares rose fractionally following the news after-hours and ended the regular trading day up a tick to $8.80.
MATHISEN: The world`s largest hedge fund secured $22 million of financial assistance from the state of Connecticut. Bridgewater Associates which manages about $150 billion overall is planning to expand its offices in the state and create 750 jobs by the year 2021. The company had made noises about decamping for New York state.
Connecticut Governor Malloy said the agreement with Bridgewater will be a good investment.
HERERA: To politics now. In a contentious news conference, the presumptive Republican presidential nominee, Donald Trump, said that he raised more than $5.5 million for veterans. Meanwhile, Democratic front- runner Hillary Clinton headed to the West Coast to focus on California.
John Harwood is following it all for us.
John, there was a lot of pressure on Mr. Trump from the press to detail those donations. And he did that today. But I heard it was a little testy.
JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: It was extremely testy, sue. Donald Trump read out the names of those organizations that he said he had raised $5.6 million for, said it had taken time to vet those organizations. But he got really hot and went after his critics in the press, said the press were dishonest, bad people, called one reporter, one of our colleagues from ABC, a sleaze.
And he went after Republican critics, too. Whether it was Governor Susana Martinez of New Mexico, who he hit last week. Mitt Romney who he said looks like a fool or Bill Kristol, the conservative publisher, former Bush administration White House aide, who he said was a loser.
MATHISEN: These are strong words. What has the reaction been from either the establishment Republicans or the press?
HARWOOD: Well, to some extent, Tyler this isn`t new. He`s done a lot of this for the campaign. And many Republicans for a long time have gone after what they call the mainstream media and said they`re biased against Republicans.
Of greatest concern to Republicans is continuing the attacks on fellow members of his party now that he`s the presumptive Republican nominee. Many have wanted him to say, OK, now that you`ve got the nomination, behave differently, unite the party. He`s done that at some of the grassroots levels. He`s getting in the high 80s of support among Republicans.
But people like Paul Ryan are not going to be happy to see him continuing to go after Mitt Romney, who Paul Ryan ran with, Susana Martinez, the Latina governor of New Mexico, all of those things are problematic as you try to get a unified ticket.
HERERA: Meantime, on the Democratic side, Hillary Clinton scrapped some East Coast events. She`s headed to California which would lead us to believe that the June 7th primary there is very important to her campaign.
HARWOOD: It is, Sue. Look, whether she wins or loses California, she is going to, from California in New Jersey, get enough delegates next week to become the presumptive Democratic nominee to match Donald Trump.
However, she wants to have a victory in the nation`s largest state to kind of conclusively put an end to Bernie Sanders` challenge. Bernie Sanders hasn`t indicated what he will do after June 7th but Hillary Clinton does not want to mess around with a primary challenge anymore. She wants to get on to the general election.
HERERA: Interesting times to say the least. John Harwood, thank you so much.
MATHISEN: Coming up, why the hottest cars from your childhood may now be some of the hottest cars in the collectible market.
(MUSIC)
HERERA: And here`s a look at what to watch for tomorrow. Auto sales for May are out. Investors want to see how much of a role those incentives played in the numbers. And the Federal Reserve`s Beige Book will provide an anecdotal look at the economy across the nation. And the OECD releases its global economic outlook. That`s what to watch for on Wednesday.
MATHISEN: The market for vintage cars may be slowing but there`s one segment surging -- classics from the `80s and `90s. They`re hotter than ever.
And as Robert Frank reports it may be a sign that generation X is the new force to be reckoned with in the collectible car market.
(BEGIN VIDEOTAPE)
ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: One of the top performers is the Ferrari Testarossa. This is a 1986 version, made famous by Don Johnson who drove a white one in the "Miami Vice" series. Now, they were called the "cheese graters" because of those fins on the door. But they have soared in value. These cars are selling for around $50,000 five years ago, now trading for more than 100 grand. So more than doubling in value.
MCKEEL HAGERTY, HAGERTY GROUP CEO: We`ve been talking about Ferrari values going up for years and years. But what`s quietly happened is the next generation has come along and said, "You know what? These things have been underappreciated. These are the cars that were on the posters on our wall. We want `em."
FRANK: So, the guys like you and I, that were teenagers in the `80s, now have money, some of them do, and they want what they loved as teenagers.
The Lamborghini Countach, was one of the most desired cars of the period, on the posters of every bedroom wall of teenage boys. They had these cool scissor doors, which were revolutionary at the time, made famous by that opening theme of "The Cannonball Run." These cars were selling for around $130,000 five years ago, now trading for up to $1 million. So, more than quintupling in value.
And, finally, the hated yuppie mobile of the 1980s is now cool again. BMW`s M3, which were selling for around $15,000 five years ago, now trading for more than $60,000, $70,000. The engines are great and the collectors for these cars are all in their 20s.
Of course, the downside to `80s cars is that mechanically, they weren`t great. And these cars are very tough to get in and out of. The electrical systems, the AC systems, often didn`t work. But today`s collectors prefer the memories and moments over mechanical greatness. So, it`s worth the price.
For NIGHTLY BUSINESS REPORT, I`m Robert Frank.
(END VIDEOTAPE)
HERERA: So, you want to stay fit? Maybe get into one of those cars.
Well, now you can and stay home and work out when you want as often as you want. It`s all part of the fast-growing on-demand fitness industry and it`s shaking up the gym business as we know it.
Diana Olick has the latest installment of "Sweat Equity."
(BEGIN VIDEOTAPE)
DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: From cardio to core, back to buns, if you can press a button, you can do it anywhere -- workouts on demand, online. There are thousands already, some for free, some for a fee.
All part of a business that is turning the traditional fitness models upside down.
CARL DAIKELER, CEO BEACHBODY: DVDs have worked just fine for over ten years. But now, there`s opportunity to have a two-way dialogue and the ability to support the customer and their results. Provided a meaningful opportunity to expand what we give to customers.
OLICK: At the Santa Monica headquarters of Beachbody, the company that brought cult workouts like P90x and Insanity into millions of basements and garages around the world, on demand is now in demand. Launched just over a year ago, the service has close to 1 million subscribers who pay about $13 a month each.
CEO Carl Daikeler says the service gets 100,000 views a month and 68 percent of users say they want both DVDs and on demand.
DAIKELER: Instead of cannibalizing the business, it`s actually enhancing it.
UNIDENTIFIED FEMALE: She`s shaking because she`s working out!
OLICK: But the money flowing into on demand is fueling competition. Brick and mortar gym chain Crunch, which has 150 locations in the U.S. now, launched on demand classes two years ago. The service is free to most gym members or $9.99 a month on its own.
KEITH WORTS, CEO CRUNCH: Crunch is a powerful brand. We felt like adding an online digital experience helped extend our brand outside the four walls of our gym.
OLICK: Its following is smaller at 20,000 views a month, but the company is growing its library and its reach.
WORTS: We`re not really looking at it as, oh, this is an online digital experience and investment in that world. It`s really an extension of the brand.
DAIKELER: Is there going to be competition? Will all the big guys consider that providing fitness programming to the end user is a value? Of course, there will be. What we do that is actually effective is we test this stuff in a particular sequence so that people get results.
OLICK: Beachbody`s investment didn`t take much. It already had the content.
Beachbody had big brands already but the competition here in America`s basements is only getting hotter. And that means the players need to be more daring, more creative, and most of all, they need to fully embrace the new technology.
