NBR Complete Transcript: 12-28-2006
Thursday, December 28, 2006Consumer Confidence Climbs
SUSIE GHARIB: New economic reports today showed surprising strength in consumer spending and the housing market. That weighed down stocks, as investors became concerned that the Federal Reserve will not cut interest rates early on in the New Year. The Conference Board said today its consumer confidence index rose much higher than expected to 109 in December. That's up almost four points from November's reading and the highest level since April. The numbers are based on a survey of 5,000 U.S. households and they're closely watched because consumer confidence often predicts spending trends.
Meanwhile, sales of existing homes also rose more than economists had expected, up 0.6 percent in November. That follows a half a percentage increase in October and marks the first back-to-back monthly sales gains in almost two years. But while sales are going up, prices are coming down. The numbers from the National Association of Realtors also showed the median price for an existing home fell to $218,000 last month. That's down more than 3 percent from the same month a year ago. Economist Beth Ann Bovino of Standard & Poor's says that trend to lower prices should help boost existing home sales next year.
BETH ANN BOVINO, SENIOR ECONOMIST, STANDARD & POOR'S: What we think will be driving the increase in home sales is going to be lower prices. Homeowners are going to have to capitulate in what they expect their homes are worth, lower it somewhat, and that will actually drive the home sales through.
GHARIB: Bovino says she believes that the worst of the housing slump is over. But she says the housing market will not rebound until inventories of unsold homes fall sharply.
Will Oil Prices Remain Unpredicable in 2007
JEFF YASTINE: And oil prices headed higher on the New York Mercantile Exchange today. Light sweet crude for February delivery rose $0.19 to $60.53 a barrel, as new figures showed U.S. crude stockpiles fell sharply last week. The Energy Information Administration says commercial crude oil inventories dropped by a whopping 8.1 million barrels in the week ending last Friday. This marks the fifth week in a row that crude inventories have shrunk. But analysts admit things were made worse by weather-related delays in offloading imported oil at ports along the Gulf coast. Experts say there should be a big reversal for crude in next week's numbers, since those delays are now clearing up.
Meanwhile, a bigger question for the energy markets tonight does not involve next week; it involves next year. Experts are split over just where oil prices will be heading in 2007. As Erika Miller reports, there are a lot of factors that could figure into the equation.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: For many motorists, the pain of $3 a gallon gasoline has not been forgotten. Now some experts are warning of an even higher tab next year, on the back of record crude prices. Goldman Sachs and others predict crude will average at least $72 a barrel in 2007. The reason: strong global demand for oil, particularly from China. The bulls also think OPEC will be successful at cutting output to prop up prices. The cartel plans to take 500,000 barrels a day off the market starting in February and there's the possibility of more cuts beyond that. But other industry experts, like oil trader Bill Wallace of Man financial, think crude prices will fall next year.
WILLIAM WALLACE, ENERGY TRADER, MAN FINANCIAL: I see us closer to the high 50's, low 60's, than I would back up to those highs in the high 70's.
MILLER: Analyst Mike Rothman of ISI agrees. He predicts the price of retail gasoline could average below $2 a gallon nationwide next year. Unless there's a major supply shock, he expects more crude will be on the market.
MIKE ROTHMAN, HEAD OF INTEGRATED OIL RESEARCH, ISI: We are going to see next year get back to something more normal, where spare capacity problems should dissipate, where growth in both OPEC and non-OPEC supply capacity will create a larger cushion and help these concerns about availability dissipate.
MILLER: Rothman isn't worried about OPEC's production cuts. The cartel's member countries notoriously cheat, so it's not clear how much oil will actually come off the market. But nearly everyone agrees there are a few wildcards which make predicting the price of oil difficult.
ROTHMAN: If you look at '07, the big concern, number-one concern certainly we have is Iraq. Iraq is exporting about 1.6 million barrels a day. If that number goes to zero, you're back in the same foot race of having adequate spare capacity.
MILLER: To a lesser degree, analysts are also worried about potential supply disruptions from Nigeria and Venezuela. Another wildcard is weather. Will it be brutally cold in the northern hemisphere this winter, sapping energy supplies? And come hurricane season, will there be another devastating storm like Katrina which damages Gulf coast oil facilities. The price of oil could be a significant factor shaping the economy in 2007. Lower energy prices typically stimulate economic growth, while a return to record highs likely would revive fears of inflation, perhaps even recession. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
Clones Are Coming To A Grocery Store Near You
SUSIE GHARIB: Some food for thought today from the Food and Drug Administration. The agency declared food derived from cloned animals to be safe. And the FDA is moving towards letting cloned animal products be sold on store shelves without any kind of special labeling. As Stephanie Dhue explains, it's a controversial decision that both consumers and the food industry are weighing in on.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Food and Drug Administration says meat and milk from cattle, pigs and goat clones are safe to eat. So the agency says it's unlikely it will require foods from cloned animals to be specifically labeled. But that decision is still pending. Critics of cloning, including Margaret Mellon of the Union of Concerned Scientists, say the FDA should require further studies.
MARGARET MELLON, UNION OF CONCERNED SCIENTISTS: While I do think that there are unlikely to be direct food safety implications from the consumption of the products of cloned animals and their progeny, I'm not as sure as I'd like to be.
DHUE: There are very few cloned animals in the U.S. now. Out a herd of nine million cows, only 150 are cloned. The biotechnology industry says cloning is a tool to make copies of the best animals, like the fattest pig or the best producing milk cow. Barbara Glenn of Bio says labeling isn't necessary since there is no health or safety issue from cloning.
BARBARA GLENN, MANAGING DIRECTOR OF ANIMAL BIOTECHNOLOGY, BIOTECHNOLOGY INDUSTRY ORGANIZATION: We're not changing any genes or moving or deleting or inhibiting any genes in these animals. We're simply creating a genetic twin. And therefore they're not what we would call biotech animals. They're not genetically engineered. They're not transgenic animals.
DHUE: Surveys show nearly two-thirds of Americans are uncomfortable with the idea of cloning animals for food and milk and that's a key concern for companies that sell meat and dairy products. The dairy industry worries that sales of milk and cheese could dip by 15 percent if products from cloned animals are allowed onto the market. Susan Ruland represents the diary foods association.
SUSAN RULAND, VP COMMUNICATIONS, INTERNATIONAL DAIRY ASSN.: We are watching very carefully what consumers are saying about this, what dairy farmers are saying about this, whether or not the pros and cons measure out that you would want to pursue this technology.
DHUE: Cloned foods won't be hitting the store shelves right away. The public has 90 days to comment on the FDA decision, but Mellon predicts consumers will bypass the FDA and go right to food suppliers.
MELLON: They are going to go to the producers of meat and milk in this country and ask them to take steps to make sure that the progeny of cloned animals are not in the food supply or that if they are they are labeled.
DHUE: Cloning an animal can cost more than $20,000. With those economics, experts predict only a select few will be cloned. But once those animals enter the food supply, it will be difficult to identify them from the rest. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
"Bill of Health"-Infection Connection
JEFF YASTINE: Most Americans check into hospitals in order to recover from an illness or injury. But a disturbing trend is emerging from the nation's hospitals that could hamper those recoveries: a growing number of staph and other infections. Staph is a killer and it's tough to stop, especially once it's picked up by hospital patients. In tonight's bill of health report, we look at why infections present a problem and an opportunity for administrators and entrepreneurs alike.
It's a problem that's all too common for anyone who enters a hospital for treatment -- the danger of infection during your stay. The Centers for Disease Control says roughly one in 10 hospitalized patients will acquire an infection after being admitted. That's about 1.7 million incidents annually resulting in the deaths of roughly 99,000 patients each year. Dr. Allan Hartstein is an epidemiologist and professor of clinical medicine at the University of Miami's Miller School of Medicine.
DR. ALAN HARTSTEIN, PROFESSOR OF CLINICAL MEDICINE, UNIV. OF MIAMI MILLER SCHOOL OF MEDICINE: My impression is that it is an increasing concern among the public as well as among providers. Infections do occur. Approximately five percent of all patients who enter a hospital uninfected develop infections during their stay. And most importantly, it's now felt that a large proportion, not all, but a large proportion can potentially be prevented.
YASTINE: Prevented, say experts through increased hand washing or use of alcohol-based hand rubs by doctors, nurses and technicians in the course of seeing patients. Some firms have even promoted the use of applied anti- bacterial sprays like these on floors and other surfaces as yet another way to kill bacteria on contact and reduce the chance of infection during hospital stays. One study conducted among Pennsylvania's hospitals, showed just how high medical cost rise because of infections. Dr. Asif Ali is president of AMG Scientific.
DR. ASIF ALI, PRESIDENT, AMG SCIENTIFIC: They showed just tracking 300 hospitals that the impact in that state alone was over $2 billion. And the reason is, in the same study that I'm speaking of, in patients who did not have nosocomial (ph) infections, the average hospital cost was around $8,000. Once a patient did have a nosocomial infection in the hospital, that went up fivefold.
YASTINE: Another problem is finding accurate and timely data on infection trends. The CDC maintains a database using information voluntarily reported by hospitals. But in 2005, Pennsylvania and Florida became the first states to begin requiring hospitals to report infection data.
Epidemiologists say these databases help show where hospitals can improve, but they also caution that the information by itself can be misleading. The size and mission of the hospital and the health of the community it serves, all have an impact on the data.
"Commentary"-Organization Vs. Chaos
SUSIE GHARIB: When it comes to investing, for most people it pays to be organized -- for most people, but not necessarily for tonight's commentator. Here's Myron Kandel, president of the New Hampshire Initiative for Corporate Responsibility and Investor Protection.
MYRON KANDEL, PRESIDENT, NEW HAMPSHIRE INITIATIVE FOR CORPORATE RESPONSIBILITY: This is the time when many people make resolutions for the new year. I've decided to tackle an important business issue facing everyone who works behind a desk: the cluttered desk syndrome. There are no census figures, but there must be millions of Americans whose desks are filled with piles of papers, reports, documents and other detritus of the modern business scene.
I must admit that my own desk is a mess. For most of my 25 years at CNN, it was so cluttered that it became a legendary stop on any tour of the studio. But my colleagues did marvel at how I could dig through a seemingly disorganized pile and find just what I needed. One estimate says office and home organizing products amount to a $6 billion U.S. industry. I know the arguments. A clean desk reflects an orderly mind and good work habits. It saves time and space, etcetera, etcetera. And in those rare moments -- very rare -- when I can't find something I need right away, I may even envy the neatness freaks.
But although I respect their right to exist, that feeling quickly passes. I buy the theory that cluttered desks reflect creative minds and individualized thinking. And if we have emotional ties to what we save, that's OK, too. So I say, let us be -- as long as we don't spill over to your desk. May clutter and neatness co-exist in a productive new year for all of us. I'm Myron Kandel.
"Last Word"-Big Business for the Big Apple
SUSIE GHARIB: And finally tonight, the big apple has racked up a big year for tourists. The city received a record 44 million visitors this year. The majority of them, about 37 million, came from other places in the U.S. But the falling dollar brought a slew of foreign tourists, seven million of them, with travelers from Britain leading the way. In fact, more than a million foreigners are visiting New York this week alone. The money spent by tourists supported nearly 350,000 jobs in the city and pumped $24 billion into its economy. And Jeff, New York isn't stopping there. The city has set a target of attracting 50 million tourists every year in the next nine years. So I invite you to come and visit.
YASTINE: Absolutely. They don't call it the greatest city in the world for nothing.
Paul Kangas' Stocks In The News
YASTINE: Little movement in the stock market today, as traders began making an early exit for the New Year holiday. The Dow edged lower through the first half of the session, after a spike in interest rates took the wind out of the financial stocks. At midday, the Dow was off about 30 points. That brought out some buying interest and helped push stocks off their lows. The Dow briefly set a new intraday record high, but then ended down a little over 9 points, 9.05 at 12501.52. The NASDAQ losing 5.65 points to 2425.57 and the S&P 500 closing down 2.11 to end at 1424.73. And bond prices fell sharply as that generally stronger economic data quashed any last hopes for an early 2007 rate cut by the Federal Reserve, the 10- year note falling 8/32 to 99 17/32 and the yield at 4.69 percent.
But first starting things off, Ford Motor (F) losing $0.08. It topped the actives with 11.6 million shares changing hands.
And then Pfizer (PFE) losing $0.08. That's despite a Chinese court ruling that upheld Pfizer's patents on its anti-impotence drug Viagra. The court also imposed fines on two Chinese drug makers selling Viagra knock offs.
EMC Corp (EMC) losing a dime.
Citigroup (C) losing $0.53 as bond prices rose sharply and interest rates - excuse me, bond prices fell sharply and interest rates rose as today's stronger than expected economic reports rattled the bond markets a bit.
Then we have GE (GE) losing $0.31.
ExxonMobil (XOM) rising $0.37. Investors there shrugging off the latest oil inventory data.
AT&T (T) gaining $0.08.
Time Warner (TWX) off a dime.
Valero Energy (VLO) losing $0.40.
Verizon Communications (VZ) gaining $0.18.
JCPenney (JCP) shares falling $0.76. The company fired its chief operating officer Catherine West. Penney's gave no reason for the move, but said CEO Mike Ullman will assume West's duties.
And then we have Giant Industries (G) down $0.80. The company says a fire has temporarily shut down its New Mexico diesel fuel refinery.
Shares of L-3 Communications (LLL) rising $0.36. The company's contesting the loss of a potential $4.6 billion U.S. Army linguistics contract. A Goldman Sachs analyst doubts L-3 lost the contract on cost and says it was more likely due to past performance. The brokerage does not expect the Army to reverse its decision.
Then Greenbrier Co (GBX) shares adding $1.21. This is a maker of railroad freight cars and it rebounded after an early earnings warning last week.
Then Nabors Industries (NBR) falling $0.30. The company has ended its efforts to buy Moncla companies, but the oil and gas driller says the companies may work together in the future.
Star Gas Partners (SGU) down $0.18. The home heating oil distributor says it will restate earnings going back two years because of accounting errors.
And then shares of ABN Amro Holdings (ABN) falling $0.09, with the bank holding company cuttings its North American work force by 5 percent year. That's about 900 jobs.
Then NASDAQ Apple Computer (AAPL), there's that reaction, down $0.65. As you heard a moment ago, investors reacting still somewhat negatively to those published reports about Apple CEO Steve Jobs and allegations receiving unauthorized stock options.
Google (GOOG) shares falling a little over $5. The stock under profit taking pressure after several days on the upside.
Cisco Systems (CSCO) was a $0.12 gain.
Microsoft (MSFT) down a fraction.
Research in Motion (RIMM) up $0.19.
Then Intel (INTC) up two pennies.
Qualcomm (QCOM) up a bit.
And so is Amgen (AMGN).
Oracle (ORCL) gaining a dime.
Yahoo! (YHOO) though losing $0.39.
Benihana Class "A" (BNHNA) shares rising $3.38. The Sanders Morris brokerage upgrading the restaurant chain from "buy" to "strong buy," citing good same store sales growth and good balance sheet leverage.
Then Asiainfo Holdings (ASIA) rising $1.25, 19 percent. The company in a deal to upgrade China telecoms business support systems.
And finally Champion Industries (CHMP) rising $1.86. Late yesterday the commercial printer and maker of office supplies reported fourth quarter earnings of $0.20 a share. That was well up from $0.06 in the year ago period.
