NBR Tanscripts - Feb. 4, 2005
Friday, February 04, 2005JEFF YASTINE, NIGHTLY BUSINESS REPORT ANCHOR: The Fed chairman sees an improving U.S. trade gap. That, coupled with a moderate jobs report, helps stocks end the week on a high note. The Dow scores a triple digit gain and the NASDAQ adds 29 points.
LINDA O'BRYON, NIGHTLY BUSINESS REPORT ANCHOR: Then, a big win for big tobacco. An appeals court reverses a $280 billion ruling against the industry, changing the landscape of the Justice Department's landmark tobacco trial.
YASTINE: And tonight's market monitor calls this a stock picker's market. He's also surprisingly bullish on gold. Our guest, Richard Steinberg, of Steinberg Global Asset Management.
O'BRYON: Then, it's February and love is in the air. Tonight we kick off a series of reports on the business of love. We start with wine and how a glut of new brands may make this Valentine's Day easier on your wallet.
YASTINE: I'm Jeff Yastine.
O'BRYON: And I'm Linda O'Bryon. Susie Gharib and Paul Kangas are off tonight. This is NIGHTLY BUSINESS REPORT for Friday, February 4.
Good evening, everyone. Wall Street ended the week on an up note, despite a so-so jobs report. Investors cheered comments from Federal Reserve Chairman Alan Greenspan. Speaking in London this morning, Greenspan said a weaker U.S. dollar and greater fiscal discipline in Washington may finally start to restrain the explosive growth in the U.S. trade deficit. But the Fed chairman also cautions the global economy is in uncharted territory because of the unprecedented level of economic interaction between countries.
Meanwhile, investors were undaunted by today's weaker than expected employment report. The U.S. Labor Department saying 146,000 jobs were created in January, falling well short of Wall Street's prediction. After an initial dip, markets moved higher. Scott Gurvey takes a look inside the report.
SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: The number of jobs added in January was up from the previous month, but not up as much as most economists had expected. Employers added 146,000 workers to their payrolls, up from a revised 133,000 in December. Economists were expecting 200,000. The unemployment rate, which is based on a different sample, fell to 5.2 percent from 5.4 percent. That's a three-year low. Economists had expected it would remain unchanged. The economy has now regained all the jobs lost since the start of the 2001 recession. The pace has been slower than expected, because companies have been unusually cautious in the face of rising costs for energy and raw materials, increased competition, and also an expectation that consumer spending and growth will slow this year.
BRIAN FABBRI, CHIEF ECONOMIST, BNP PARIBAS: It disappointed most of the market participants who were looking for a significantly stronger rise in payrolls. However, at a 146,000 new jobs, it's very consistent with the kind of economic growth that we've been having, 3.5 to 4.5 percent growth. Moreover, it also enough new jobs to keep the unemployment rate falling, and that's exactly what the administration, what the Fed and what everyone else wants to see happen.
GURVEY: The manufacturing work week and average hourly earnings rose slightly in the month. And a report released yesterday says the rate of productivity growth is slowing. These factors, economists say, indicate that factories will have to add workers as the economy grows in the months ahead.
MICKEY LEVY, CHIEF ECONOMIST, BANK OF AMERICA: Businesses top lines are growing. The economy is growing at a healthy pace. Businesses have gained confidence. Profits and cash flows are up. So all the factors that tend to generate the job creation are in place and I expect positive jobs reports in coming months.
GURVEY: Most Fed watchers see nothing in today's report to deter the central bank from following its stated policy of raising interest rates slowly until they reach what it considers to be a neutral level. That's between 3 and 3.5 percent. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.
YASTINE: And today's bad news on job creation was good news for stocks. The blue chips began moving higher almost from the start on hopes the Federal Reserve as you heard Scott say, will be less aggressive in raising rates in light of today's weaker than expected jobs report. The NASDAQ was also strong, especially semiconductor stocks, which moved higher on a brokerage recommendation on Texas Instruments. And the Dow got a further boost from Altria, as tobacco stocks soared on a Federal appeals court ruling. More on that in a moment. The end result was a strong day for stocks, with the Dow closing up 123 points 10,716 and for the week, the Dow rising in four out of five sessions for a net overall gain of almost 289 points. The NASDAQ advanced 29 points today to 2,086 and this week in lockstep with the Dow, falling only once for a net overall gain of 50 points or 2 1/2 percent and finally, the S&P 500 adding 13 points to close at 1203 and a fraction today. Over on the bond market, the 10-year note plummeting or actually rising 22/32 to 101 11/32 with the yield plummeting to 4.08 percent.
O'BRYON: A huge shot in the arm today for big tobacco. An appeals court ruled that the government cannot go after $280 billion in past profits from cigarette makers. The ruling takes some of the steam out of the Justice Department's racketeering case against the tobacco industry. The appeals court says the government can only seek forward-looking remedies in the case. Analysts say the decision lifts the biggest legal uncertainty for the industry:
MARY ARONSON, LITIGATION ANALYST, ARONSON WASHINGTON RESEARCH: I think this basically gives the industry a heck of a lot more power and I don't see where this power is going to be taken away from them any time soon.
O'BRYON: The Justice Department could still appeal the decision to the U.S. Supreme Court. The Justice Department says it is reviewing today's ruling but many analysts say an appeal is unlikely.
YASTINE: President Bush has made reining in class action lawsuits one of his top priorities and lawmakers are willing to oblige. Next week, the Senate takes up a bill that would make it easier to transfer class action suits to Federal courts. Stephanie Woods explains why businesses are so eager to pass this bill.
STEPHANIE WOODS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Daimler Chrysler is fighting dozens of class action lawsuits. In one, consumers complain their engines vibrate too much, in another that their air bags pack too much punch.
STEVE HANTLER, COUNSEL, DAIMLER CHRYSLER: These are not cases where there is any injury or harm to the consumer. They're filed, frankly, just to generate huge legal fees for the plaintiffs' lawyers. WOODS: That's why businesses like Daimler Chrysler support the Senate's class action fairness act. The proposed bill makes it easier to transfer class action lawsuits from more lenient state courts to Federal courts which tend to reject class action. Businesses claim if they're not in court, consumers will benefit.
HANTLER: Hopefully all the costs of these abusive transactions are included in the price of the vehicles that we sell.
WOODS: But plaintiffs' attorneys say overpowered air bags and vibrating engines can cause serious harm and consumers shouldn't have to be injured before companies make repairs. Consumer activists say it will be harder to make corporations responsible if the bill is passed.
JOAN CLAYBROOK, PRESIDENT, PUBLIC CITIZEN: It's a nuclear blast to solve a molehill. The issue that the business guys really wanted to deal with is they don't want to be sued. They don't want accountability. They don't want the consumers to be able to challenge them and force them to behave.
WOODS: Legal experts say lawmakers are late with their solution, since the judicial system is already making progress to curb class action abuses.
HEIDI FELDMAN, PROFESSOR OF LAW, GEORGETOWN UNIVERSITY: Is it perfect the way it is now? No. Is this bill going to make it better? I don't think so. So is there a role for Congress in making it better? Possibly, but I'm not sure it's necessary.
WOODS: Congress has tried for years to pass curbs on class action lawsuits. With the president and Republican leaders in both houses behind the bill, analysts say it has a good chance of becoming law this year. Stephanie Woods, NIGHTLY BUSINESS REPORT, Washington.
YASTINE: And now let's take a look at some stocks in the news tonight.
And Topping our most actives today, Qwest Communications (Q) picking up $0.45. More buying following speculation of a merger of Qwest and MCI.
Lucent Technologies (LU) rising a fraction.
Pfizer (PFE) gaining $0.32.
And Time Warner (TWX) dipping $0.12. The release of its big budget film "Alexander" was a dud, but fourth quarter profits still rose nicely, thanks to a pick up in online advertising and cable revenues.
There's a look at News Corp. (NWS) rising $0.38.
Charles Schwab (SCH) slipping $0.32. The firm is cutting its online trading commissions, but concerns about it losing pre-tax profit margins trying to put the rest (ph). Schwab says its goal (ph) of earnings, 25 percent pre-tax profit margin remains intact.
Here's a look at shares in Texas Instrument (TXN) jumping $1.62. This is what set fire to the chip sector today. Prudential issued an upbeat report on the sector in the belief the industry's troubles are going to bottom here in the first half of the year.
Shares in Altria Group (MO) surging more than $3 and as you heard earlier, the tobacco makers will not be forced to give back nearly $300 billion in profits, owning to a government racketeering lawsuit. And here's a look at some of the other big tobacco makers and how they fared today.
British American Tobacco (BTI) advancing $0.75.
Carolina Group (CG) up from than $1.50.
And Reynolds American (RAI) advancing over $3.50.
ExxonMobil (XOM) rising $0.77 today. Oil remaining firmly above $45 a barrel.
And EMC Corp. (EMC) advancing $0.55.
Boeing (BA) rising $0.58. A pair of big orders for the airline maker. Ethiopian Airlines ordered 10 of its new 787 aircraft and Japan Airlines came in for 30, 737s. Together that's over $3 billion in orders.
Shares in Temple-Inland (TIN) getting a nice boost, rising more than $10. There's a 2 for 1 stock split, an increase in the quarterly dividend and a stock buyback, all announced today. In addition, Carl Icahn has offered to pay $1 billion to own nearly a quarter of the stock. Temple says it hasn't seen the formal offer let.
Landry's Seafood Restaurants (LNY) advancing $3.50. It's going to buy the Golden Nugget casino in Las Vegas for $140 million in cash, plus the assumption of debt.
And Curtiss-Wright (CW) vaulting more than $7. Fourth quarter profits rose by more than 50 percent, excluding charges. Those results were way up from the Street estimate.
Here's a look at a downer, Cardinal Health (CAH) tumbling nearly $2 on disappointing second quarter results. Profits fell 42 percent due to costs of realigning operations. On top of that the CEO is stepping down because of an accounting problem and Cardinal is cutting its 2005 earnings forecast.
And finally, Goodyear Tire & Rubber Company (GT) falling $1.58. That was on a downgrade from Deutsche Bank.
Over on the NASDAQ 100 (QQQQ) the rising $0.60.
Shares in Google (GOOG) down $6.50 on profit taking.
eBay (EBAY) down as well today.
Microsoft (MSFT) though gained $0.14.
Intel (INTC) up $0.62, part of that strong chip sector.
Cisco Systems (CSCO) advancing $0.38. It reports results on Tuesday.
Apple Computer (AAPL) up $1.
Applied Materials (AMAT) also up.
Amazon.com (AMZN) and Yahoo! (YHOO) both down fractionally for the day.
Ask Jeeves (ASKJ) falling $1.55. Analysts think it could come up lacking when compared to Google and they're concerned Ask Jeeves could lose market share in those search engine wars.
Shares in Sapient Corporation (SAPE) tumbling $1.43. The consulting firm missing its previous revenue projections. And Sapient also said it has a material weakness in its internal financial controls.
And finally on the American Exchange, Badger Meter (BMI) tumbling nearly $4 after the company posted a sharp drop in fourth quarter results. Earnings sank to $0.12 a share. That's down from $0.24 and the Bear brokerage downgraded the stock.
And those are our stocks in the news tonight. Linda.
O'BRYON: Well, Jeff, if you're planning on wining and ding your sweetheart this Valentine's Day, you won't necessarily have to spend a lot of money. It's becoming easier to find great tasting inexpensive wine. In the first part of our business of love series, Erika Miller take a look at wine's new buzz.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Sports and beer. It's an American tradition. So, it may seem surprising that more and more customers at this sports bar are ordering wine.
UNIDENTIFIED FEMALE: I really just like the taste of it. And I've kind of become accustomed to it-- that I don't really like beer. And I don't really like hard liquor. So usually wherever I go out I'll have wine.
MILLER: Some sports bars, like the Park Avenue Country Club in New York, estimate wine consumption is up 30 percent in three years. And it's not just women requesting wine.
NILSON ACCIOLI, GENERAL MANAGER, PARK AVENUE COUNTRY CLUB: I think couples, when they come in here, especially women, they will ask for wine and then of course the guy will go for it too. I would go for it too.
MILLER: Wine consumption in the U.S. now stands at an all time high. The average American adult drinks about three gallons or 16 bottles a year. That surpasses the previous record in 1989, which was the height of the wine cooler craze. Experts credit some of wine's rising popularity to creative marketing including fun labels. Plus, some beer and spirits drinkers are switching to red wine for the health benefits. But one of the biggest drivers is the seemingly endless supply of wines which has led to cheaper prices.
MARY EWING-MULLIGAN, PRESIDENT, INTERNATIONAL WINE CENTER: The number of wineries in America is growing. There are over 3,700 wineries in the U.S. now and wine is made in every state. And I think that this helps consumption because I think that when you know that there's a winery in your state, and some cases it's in your backyard, it begins to create a culture of wine.
MILLER: That trend has not gone unnoticed by wine retailers, including Best Cellars. The chain is trying to make wine selection easier and more fun by grouping wines into taste categories like fresh or luscious. It also recommends wines specifically for foods like pizza and sushi. And unlike most liquor stores, Best Cellars sells nearly all of its 100 wines for $15 or less.
JOSHUA WESSON, PRESIDENT, BEST CELLARS: When we created Best Cellars, we wanted to set the price at the level of impulse purchase. So we wanted people to think about wine the way they think about water and beer and lattes and smoothies. We wanted to compete with those beverages. We weren't competing with other bottles of wine. We were competing with alternates.
MILLER: Wesson was once named best sommelier in America and he hopes Best Cellars will eventually become the Starbucks of wine. He says that could happen as more and more Americans start viewing wine as an everyday beverage instead of an occasional indulgence. One his favorite combinations: a Riesling and a big Mac.
WESSON: There is a good reason to suggest that inexpensive wines and inexpensive foods are made for one another. With a big Mac, you find the special sauce is sweet and sour - find a wine that is sweet and sour. It will flatter it, pick it up, and you'll have a magical match.
MILLER: Although wine is enjoying a resurgence in this country, beer and spirits are still far more popular alcoholic beverages. And studies show that 90 percent of wine sold in the U.S. is consumed by just 10 percent of the drinking population. That's why the wine industry is confident that wine drinking will continue to grow in popularity.
MILLER: Although wine consumption is on the rise in the U.S., it's not expected to rival European levels anytime soon. The average Italian r French adult consumes 80 bottles of wine a year, five times the U.S. average. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
YASTINE: Monday, it's thousands of pages long and the administration calls it a starting point. President Bush debuts his latest budget proposal.
O'BRYON: The first case of human mad-cow disease was confirmed in Japan today. The Japanese health ministry says the man died in December and most likely contracted the fatal brain-wasting disease after eating infected beef in Britain in 1989. Today's announcement could complicate already difficult negotiations to lift Japan's ban on American beef imports. Japan shut its market to U.S. beef in 2003 after the first mad-cow case was reported in the United States.
YASTINE: U.S. regulators are giving pharmaceutical company Merck another headache. Food and Drug Administration staff saying today, Merck's painkiller Arcoxia has a marginal advantage in gastro-intestinal safety, but appears worse than other drugs in terms of death and cardio-vascular problems. Merck has positioned Arcoxia as a successor to Vioxx. And of course, it pulled that painkiller from the market in September after Vioxx was linked to heart attacks and strokes.
O'BRYON: And here's a look at what's happening next week. Our Friday market monitor guest is Randall Ely, president of the Edgar Lomax Company. On the economic calendar, Wednesday, December wholesale trade report; Thursday it's weekly jobless claims and the December international trade gap. And then we'll see earnings from two tech giants, Cisco Systems and Dell Computer and insurers Aetna, Cigna and MetLife.
YASTINE: Our market monitor guest tonight says the market may have gotten roughed up in January, but there are still plenty of stocks worth buying. He's Richard Steinberg, president of Steinberg Global Asset Management, a money management firm based in Boca Raton and welcome back to the program, Richard.
RICHARD STEINBERG, PRES., STEINBERG GLOBAL ASSET MANAGEMENT: Good to see you.
YASTINE: First, give us some perspective on the economy. We had a weak employment report that came out today. The market did get roughed up quite a bit in January. What are you looking at these days?
STEINBERG: I think we had a little bit too much too fast in November, December. We gave a little back in January. When you speak to companies, which is the business that we're in, business is good. So what we need to do is we need to separate the noise from where business really is coming out. S&P, it's going to earn $76.40, an 18-month (ph) will get you to low double digit returns for next year. I think this is the time to use your cash to be able to cherry pick names.
YASTINE: Is this a new high, do you think? Will the S&P make a new high? Do you think this is more a stock-pickers market?
STEINBERG: This is definitely a stock-pickers market. I think you're going to see growth over value and large cap over small cap this year.
YASTINE: When you were last with us on May 14 of last year, you had four stocks for us. One of them was GE, which is up nicely since that time. Do you still hold that one?
STEINBERG: We do. I own it personally. The firm owns it. Business is still great.
YASTINE: And what about Alcoa? It's down just a fraction.
STEINBERG: We owned Alcoa. We sold most of it in the mid- to high 30s and now we're just evaluating whether we should be buying it back. YASTINE: And do the assets plays still work? Those were the big story of last year over the last 18 months
STEINBERG: They do. China, even though it may be slow and it's still a real story (INAUDIBLE), we were both down at the industrial conference in Miami where they saw 15 or 16 companies and commodities are not dead. You just had too much hedge fund money floating around and moving these prices around but the core businesses are good businesses.
YASTINE: You gave us two other picks. One of them was Jet Blue, which is down somewhat. Do you still hold that one?
STEINBERG: We do. It's been painful. We kind of overestimated that junk and all these airlines would have the trouble that they're having. But the good news, the silver lining in the story is Jet Blue is taking market share and six sigma companies take market share in tough times.
YASTINE: And what about Intel? They're again down somewhat.
STEINBERG: Yes, Intel, I think is still a core holding. We own all of those names.
YASTINE: Now you have some other picks for us this time around. One of them is Budweiser. Tell us why you like that.
STEINBERG: Well, it's the Super Bowl, so let's start there? In the honor of the Patriots, I had to have Budweiser up there. They're going to earn $2.93 in ‘05. It should be a 20 multiple stock again. Bud has been a little bit out of favor in the short run, still a great global franchise. And also a China play. They own a huge brewery in China.
YASTINE: Now you tell us that you like gold here, which is somewhat unusual.
STEINBERG: It is, especially for us. We're not gold bugs, but the ETF gives you one tenth of the value of gold as opposed to owning a mining stock.
YASTINE: And the EFT just came out in December.
STEINBERG: Correct. And it's a cheap way to own gold and it's a hedge, really. It should be part of a client's portfolio to hedge against macro and geopolitical risk, inflation, as well as I think the dollar can weaken again.
YASTINE: And the other thing you like is Comcast. Back to cable now.
STEINBERG: Back to cable. Cable has been dead for a long time. But Comcast is not your grandmother's cable company. They're going to have $3.60 in free cash flow, 39 percent EBITDA margins and voice over IP will be a big story over the next few years for these cable companies and if they by Adelphia, the scale and the ability that they their infrastructure in place will just be fantastic.
YASTINE: And then there's a fourth and final one you said Leucadia (LUK).
STEINBERG: Leucadia, not a household name, not a blue chip name.
YASTINE: What is it?
STEINBERG: Leucadia is a holding company run by a guy by the name of Ian Cummings and Joe Steinberg -- no relation, by the way. And what they do is they're like a mini Berkshire Hathaway. The difference is Warren Buffett. Things tend not to be for sale. And if these guys are willing to -- if somebody is willing to overpay, they'll sell it. They own WilTel out of bankruptcy which is a huge fiber optics business. So there's a little bit more risk to the name, but if fiber optic comes back, this is a home run.
YASTINE: How about any disclosures on these?
STEINBERG: We own all of these names. Most of them have been core positions for quite some time.
YASTINE: All right, we'll end it there. Our guest, Richard Steinberg, of Steinberg Global Advisors.
O'BRYON: That's right. Sounds like it. We'll be watching. That's NIGHTLY BUSINESS REPORT for Friday, February 4. I'm Linda O'Bryon. Goodnight, everyone and have a good weekend and you too, Jeff.
YASTINE: Goodnight, Linda. I'm Jeff Yastine. We'll see all of you again next week.
