NBR Complete Transcripts: 05-25-2007
Friday, May 25, 2007Stocks Find Strength in Housing's Weakness
SUZANNE PRATT: A boost for stocks today in light trading ahead of the holiday weekend. The Dow jumped 66 points and the NASDAQ gained 19. The move was spurred in part by a weaker than expected April existing home sales report, which as Scott Gurvey reports, once again raised hopes for a Fed rate cut.
SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Although there are still three trading days left in the month, Wall Street pundits who suggested investors follow the well-known adage to sell in May are pretty certain to have egg on their faces when June arrives. Analysts say it is good news on the economy, coming on the heels of an earnings inspired April rally, which has so far pushed the averages up another 3 percent this month. Looking ahead, they see two possible risks to a rosy scenario. The first is the price of gasoline, which is expected to remain at a record high and may already be forcing a change in consumer buying habits.
The second is the housing market. Today, the National Association of Realtors reported existing home sales fell 2.6 percent in April to their lowest level in almost four years. The median price of a home sold fell by .8 of 1 percent and the number of previously owned unsold homes on the market represents a better than eight month supply. Senior market economist Drew Matus of Lehman Brothers says housing weakness puts the Federal Reserve in a tough position.
DREW MATUS, SENIOR MARKET ECONOMIST, LEHMAN BROTHERS: The housing market story is still playing out and there's danger there that the Fed acknowledges. But at the same time, inflation is too high. And so when you're not certain which direction you should move definitively in, you just stay where you're at.
GURVEY: But in the absence of more bad news on the housing or energy fronts or some unpredictable geopolitical event, many agree with equity strategist Scott Wren at AG Edwards, who is positive on the economy and the markets.
SCOTT WREN, SR. EQUITY STRATEGIST, A.G. EDWARDS: Its macro news that's going to be driving the economy. Basically, what we want to see and what we think we are going to see is just further confirmation that inflation is moderating and that growth, economic growth is going to be modest. We're looking for about 2.3 percent, 2.5 percent GDP for the U.S. this year. I think the Fed would be very happy with that. I think the market would be happy with it as well.
GURVEY: The market and the Fed will focus next on the employment report for May. That is scheduled for release one week from today. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.
Get Ready to Board the New Dreamliner
SUZANNE PRATT: When the 787 Dreamliner takes flight in a few months, Boeing says it will be the quietest and most fuel efficient jet in the air. New technologies make the Dreamliner the most innovative airplane Boeing has ever built. And as Diane Eastabrook reports, the 787 could serve as a model for future generations of Boeing aircraft.
DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: In Everett, Washington, Boeing workers build the body of the 787 Dreamliner, while 30 miles south, in Seattle, engineers prepare the guts of the airplane for installation. Boeing calls the 787 an engineering marvel. It is the company's most technologically advanced jet ever. Mike Sinnett, director of 787 systems, says integrating all of that technology requires extensive testing.
MIKE SINNETT, DIRECTOR, 787 SYSTEMS BOEING: Before we fly the airplane, we prove that all the functionality works together and we do that in a number of ways, and most of those ways are at the integration facility at Boeing.
EASTABROOK: Boeing says the 787 is the most electronic jet it has ever built. In the integrated test vehicle, engineers check the Dreamliner's flight system. It will operate on a combination of electric and hydraulic controls; traditional jets rely primarily on hydraulics. Boeing says by using more electric components, it can reduce the weight of the 787 and increase its reliability. The flight deck on the Dreamliner is also designed to be more pilot-friendly. Michael Konicke, chief flight deck engineer for the 787, says Boeing reduced the number of display monitors, but made them bigger and more useful.
MICHAEL KONICKE, CHIEF ENGINEER, 787 FLIGHT DECK: We've got five different multi-function displays, so you will be able to make the airplane accommodate you from an information standpoint as opposed to the other way around.
UNIDENTIFIED MALE: Some handsets will have keyboards on the back for future offerings, such as maybe short messaging. ' EASTABROOK: The 787 will also be more passenger friendly. Separate television monitors for movies and other programs will be on the backs of all seats. Sean Sullivan, senior manager of 787 cabin systems, also points out how larger cabin windows will dim electronically.
SEAN SULLIVAN, SR. MGR. 787 POWER SYSTEMS, BOEING: On an existing window, it's a shade -- it's either all open or all closed. This will allow a grade of different lighting coming through from the outside.
EASTABROOK: The overall ride on the 787 should be more pleasant, as well. The multipurpose engineering simulator tests vertical gust sensors. The sensors will help the plane adjust for turbulence, giving passengers a much smoother ride. Scott Strode, vice president of development and production for the 787, says all of these technologies will be useful to Boeing down the road.
SCOTT STRODE, V.P. 787 DEVELOPMENT & PRODUCTION, BOEING: The new systems are all very, very suitable for either smaller or larger airplanes in the future and we have a strategy within Boeing where we will adopt those technologies into the next airplane when it's ready to go.
EASTABROOK: Boeing won't know if the 787 Dreamliner will eclipse its other jets in performance and popularity until it goes into service next year. But the company says initial research it has done indicates it will. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Seattle, Washington.
"India's Promise"-Outsourcing Stretches Out
SUZANNE PRATT: India's large pool of inexpensive, English-speaking labor has fueled an explosion in business services outsourced to that country. Customer service call centers used to be the emblem of India's outsourcing boom. But these days, the sector is growing in new and surprising directions. Tonight, Darren Gersh wraps up our series, "India's promise" with a look at how India is beginning to challenge the limits of what can be done remotely.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: On a rainy Sunday morning, 17 year old Austin Cohen likes to relax at home by playing his guitar. After that, he might settle in at the computer and get a little help with his homework from halfway around the world.
VEENA KESHAV, MATH TUTOR: Hello, Austin?
GERSH: Ten time zones away from Austin's home in Virginia, Veena Keshav fields math questions from her home in Bangalore.
AUSTIN COHEN, STUDENT: Don't you take out two twos and multiply the other two and then multiply the other two?
KESHAV: This part is right.
GERSH: They use conferencing software to share the same screen over the Internet. But to protect Austin's privacy, there's no video. Tutoring Americans at night allows Veena to spend time during the day with her newborn baby. She's also enjoying learning American slang.
KESHAV: Cool, awesome and all that.
GERSH: And Veena gets to know students in a country she will most likely never be able to visit.
KESHAV: They are very enthusiastic, they are outgoing. They are not, like, shy.
GERSH: Are they good students?
KESHAV: Most of them are.
GERSH: Austin likes working online because he doesn't have to travel to a tutor and it's almost like playing a video game. Kind of cool using the Internet like this?
COHEN: Yeah, I think it's great. It saves me the embarrassment of facing the person if I get the problem wrong, also. I mean, the guy's half a world away.
GERSH: Veena's actually a woman.
COHEN: Oh. In general.
GERSH: Veena works for Tutor Vista. Company founder Krishnan Ganesh was looking for opportunities to start a business providing offshore services in health care or education. Then he saw this cartoon of an American father telling his daughter, "no, you may not outsource your homework to India." So, you were inspired by this? So, almost literally, this company began as a joke.
KRISHNAN GANESH, FOUNDER, TUTORVISTA: As a joke, yeah, yeah.
GERSH: It's not just tutors in India who are using this system. Tutor Vista is hiring people in Mexico to teach Spanish. Tutors in Hong Kong might chat with students in Houston in Mandarin. It's a new global delivery system for education. Economists say this wasn't supposed to happen -- jobs providing face to face services would never be off shored. But as Internet phone calls and video-conferencing get better, Indian entrepreneurs are transforming tutoring from a $60 an hour service to something more like a $99-a-month cable bill. Austin gets unlimited help and never has to leave the house.
COHEN: I get to sit here and drink my coffee while taking tutoring classes. It doesn't get more comfortable than that.
GERSH: And as technology improves and bandwidth expands, Ganesh expects more face-to- face, business-to-consumer services will be provided like this.
GANESH: Counseling, nutrition, dietitian service, anything that you want. You should be able to get it at an affordable cost from somewhere in the world. Somewhere in the world, somebody has got broadband Internet (INAUDIBLE) that service and is willing to provide that service from the comfort of their home.
GERSH: Instead of face-to-face, analysts now say physical presence is the limiting factor when it comes to off shoring. But even that may be changing. At Indian IT giant Infosys, software engineers are experimenting with a tracking technology called radio frequency identification or RFID for short. Using a cheap silicon chip, it's now possible for someone in Bangalore to take inventory for a store in Boston. Infosys CEO Nandan Nilekani says RFID will make corporate supply chains much more efficient.
NANDAN NILEKANI, CEO, INFOSYS: So the fact that you can trace things through the entire life cycle at a very minute, granular level opens up a lot of opportunities, both in optimizing the supply chain while you make it, while you sell it and while it's being used.
GERSH: And Nilekani says the uses of technology are limited only by imagination.
NILEKANI: And it's important to imagine looking at the trends. It's to be able to say, the way technology is moving today, five years from now, this will be so powerful or this will be so cheap or this will be so fast. And, therefore, is there something that we can do five years from now using the power of this which we can't do today?
GERSH: Does this mean more American jobs are headed for places like India? Yes. But Ganesh says new American jobs will also be created.
GANESH: Just as it creates opportunities for people in some other parts of the world, it creates opportunities for people in the U.S. to service other parts of the world.
GERSH: And, oh yes, Tutor Vista and many of the other off shoring shops in India, they're owned by American investors. That is a comforting thought, unless you happen to be a math tutor. Darren Gersh, NIGHTLY BUSINESS REPORT, Bangalore.
KANGAS: Monday, our "India's Promise" coverage continues with an NBR special edition, as the markets are closed for Memorial Day.
"Market Monitor"-Mark Leibovit, Chief Market Strategist for Vrtrader.com.
PAUL KANGAS: My guest "market monitor" this week is Mark Leibovit, chief market strategist for vrtrader.com. Welcome back to NIGHTLY BUSINESS REPORT, Mark.
MARK LEIBOVIT, CHIEF MARKET STRATEGIST, VRTRADER.COM: Thank you, Paul, glad to be back.
KANGAS: You know, I always enjoy it when I can compliment a returning market monitor guest on making some very accurate predictions during his previous appearance and that's certainly the case with you. On your last visit in late October with the Dow at 12,100, you projected the bull market would get to at least 13,600 and sure enough, earlier this week, it got to that very level. A great call, Mark, I compliment you.
LEIBOVIT: Thank you, Paul.
KANGAS: And where do we go from here?
LEIBOVIT: Well, you know, a lot of factors have come into play and some of those factors might be changing here. We've had a carry trade financing out of Japan where you can borrow money at half a percent and a lot of stocks have been purchased around the world, merger and acquisition activity, company buy backs, a week yuan in China which has helped the export for China. But bottom line is right now we have an issue with tariffs. Congress may be looking to impose tariffs on China or they're pressuring China to raise the yuan. Either one of those happens, we could see a setback here in the market and these factors have not been affecting the market up to this point. We've had a stable situation. So as long as these factors don't change, I think there may be a change ahead, but if they don't change right away, then this market will continue higher. My fear is over the next several weeks, you might see a retracement because of talk of these changes.
KANGAS: I see, OK, so we're vulnerable here at this level.
LEIBOVIT: A little vulnerable at this level. I'm not telling you to sell stocks here, but I'd be looking to buy pullbacks.
KANGAS: OK and how vulnerable are we in terms of, let's say, the Dow, 300, 400 points?
LEIBOVIT: 13,160 is one number I come up with and then if it gets there, we'll reevaluate. I'm not saying it's going there tomorrow but it might be there in six weeks, so let's watch it carefully.
KANGAS: For some time now, you've recommended commodities, including oil, the basic metals and especially gold, which you think will get to the $3,000 per ounce level. Anything change in that?
LEIBOVIT: Nothing on the big-picture forecast but short term here with the retracement in stocks, you're starting to see it already in the metals because of that perception there might be tariffs or other things imposed. You're already seeing a little weakness in the metals here, but that's a trading comment not a big-picture comment.
KANGAS: In October you had four buy recommendations for our viewers. We'll see now how they've done since then. Geron Corporation (GERN) up 17.7 percent. Good call there. Still like it?
LEIBOVIT: Yes, still like all the stem cell stocks. It's just another day in the sun.
KANGAS: NGAS Resources (NGAS) up just a half percent. You still with that?
LEIBOVIT: Yes, I like energy. I still think oil and natural gas can move higher here. They're still very depressed.
KANGAS: All right and let's have the other, United States Oil Fund (USO), that's down 8.3 percent, but you still like it apparently?
LEIBOVIT: I still like oil, yes.
KANGAS: And there was another one that you recommended called Euro Zinc Mining, but it was taken over so we don't have a chart and it was taken over at a lower price than you recommended it, but you're not with that, obviously.
LEIBOVIT: We're out because of the merger but it was a copper zinc play and that's why we recommended and those are still good markets going forward.
KANGAS: You have six new recommendations I understand. We only have a minute left so we're going to have to really move through these quickly but start with the first one.
LEIBOVIT: The first one is CAF and this is the ETF, or the Shanghai stock market. I wouldn't be chasing it here, but in a pull back down to the low 30s or high 20s I would be a buyer. The next one is Yum Brands (YUM). I think the stock is headed into the mid-70s, but again, I'd like to buy this on a pullback in the low 60s. The next one is SNP, which is China Petro. This is a China petroleum play. Again, it's a big stock, very expensive. I think it's going $115, but we have to try to buy closer to the $90-$95 area on a retracement. The next is PHO, which is Power Shares Water Resources. It's a play on water. It's an ETF, looking to buy it around $18.50. I think it's headed to about $23. The next is the Dow Diamonds (DIA) themselves, the Dow industrials. If we get a setback to that 13,160 I mentioned before, I would buy it because my next Dow target is 13,8 and then 14,100.
KANGAS: One more.
LEIBOVIT: . to buy that on a pullback. Last one, Apple Computer, headed to $120, $130. Let's see if we can buy it around $100 on a retracement.
KANGAS: OK. So these are on your shopping list but don't go to the market yet.
LEIBOVIT: I wouldn't chase them here, no.
KANGAS: Do you personally own any of these securities?
LEIBOVIT: I do not own them personally. They are listed in my newsletter though.
KANGAS: Our time has run out, Mark, but thanks for being with us once again.
LEIBOVIT: Thanks for having me back.
KANGAS; My guest Mark Leibovit of vrtrader.com.
"Last Word"-SFA 10022
SUZANNE PRATT: And finally tonight, Saks Fifth Avenue is proving there's no such thing as too many shoes. The department store plans to double the size of its shoe department, giving women's shoes the entire eighth floor of its flagship Manhattan store. The shoe department will be so big, it will have its own zip code -- 10022-shoe. The new space will open in September and will be known by its zip code. And Paul, Saks will hold a unique place in postal history as the first floor of a building to get its own zip code. Guess who is going to be there to cover that story?
KANGAS: And it also proves that Saks, when it comes to marketing, is no is no loafer.
Paul Kangas' Stocks in the News
PAUL KANGAS: The generally upbeat view of the economy and more takeover activity fueled a morning rally on Wall Street. By 11:00 a.m., the Dow had a 67-point gain and the NASDAQ Composite was up 17 points. After a mild mid-session fade, stocks came on strong again, bolstered by buyers who were impressed with the market's resilience. That resulted in solid closing gains as the Dow Industrial Average ended up 66.15 points at 13,507.28. It rose only once this week and did have an overall loss of 49.25 points. The NASDAQ Composite was up 19.27 ending at 2,557.19 today. It fell twice, but rose three times this week, still had an overall drop of 1.26 points. The Standard & Poor's 500 Index gained 8.22 ending at 1,515.73 today. In the bond market, the 10-year note fell 4/32 to 97 5/32, putting the yield at 4.86 percent.
The most active New York exchange issue trading 13.3 million shares, Pfizer (PFE) moving up $0.25.
Then General Electric (GE) with an $0.18 gain.
EMC Corp (EMC) rose $0.16.
Motorola (MOT) up $0.13.
ExxonMobil (XOM) on today's higher oil prices, gained $1.23.
Time Warner (TWX) edged up $0.20.
Ford Motor Co (F) lost $0.04.
Micron Tech (MU) up $0.16 on takeover rumors.
And CVS Caremark (CVS) up $0.79. Quarterly earnings from CVS are due out this coming Thursday.
AT&T (T) was up $0.34.
Archstone-Smith (ASN), real estate investment trust that owns high rise and garden communities and reportedly is in talks with Tishman Speyer Properties about its possible sale to Tishman.
Stifel Financial (SF) up $4.53. Reportedly the Foxx-Pitt brokerage began coverage of the stock with an "out perform" rating.
Then we see CDI Corp (CDI) which is an info technology firm getting an upgrade from Goldman Sachs from "neutral" to "buy" and the stock responded nicely.
Cleveland Cliffs (CLF) rising $7.33 on takeover speculation. Some say India's Mittal (ph) Corporation might be a suitor.
Vimpel Communication (VIP), the Russian cell phone company, big earnings, first quarter, up 85 percent from last year to $5.45 a share versus $2.94 a year ago and revenues shot up almost 60 percent.
Brown Shoe Co (BWS) down $4.39. It was up $4.75 yesterday on first quarter earnings that were $0.10 better than the Street expected. Today Susquehanna financial thinks any further gains in the stock might be limited and that certainly didn't help it.
Las Vegas Sands (LVS) down $1.21. That's a little profit taking after recent run ups on takeover speculation in that whole group actually.
BMC Software (BMC) up $1.18. Cowen & Company brokerage upgraded it from "under perform" to "neutral."
NASDAQ's most active, Google (GOOG) up $9.19. Comscore (ph) reports that Google continues to dominate the web search market with 50 percent of it or nearly so in the month of April.
Apple (AAPL) up $2.93.
Research in Motion (RIMM) gained $6.45. Merrill Lynch raised its target to $190 yesterday.
Microsoft (MSFT) up $0.31.
And Cisco Systems (CSCO) a $0.12 gain.
Qualcomm (QCOM) lost $0.24.
Intel (INTC) $0.19 gain there.
Amazon.com (AMZN) lost $0.80.
Amgen (AMGN) down $0.02.
The NASDAQ stock market (NDAQ) off $1.14. NASDAQ is buying Swedish stock exchange operator OMX for nearly $4 billion. The deal gives NASDAQ a foothold in Europe and enables it to better compete with the NYSE which acquired Euronext. Analysts also expect NASDAQ to make another run at the London Stock Exchange.
Verigy (VRGY), this is a semiconductor test systems company, had a turnaround the second quarter, $0.36, versus a loss of $0.22 a year.
And then Sterling Financial (SLFI) tumbling $6.19, huge loss. Company suspends its dividend. It's going to record $165 million charge after discovering a falsified document scheme in one of its units.
And those are the stocks in the news tonight.
