NBR Complete Transcripts: 10-23-2007
Tuesday, October 23, 2007The Tech Sector Proves Fruitful & Stocks Multiply
SUZANNE PRATT: The momentum was behind the technology sector on Wall Street today. Investor reaction to Apple's earnings blowout sent its shares surging 7 percent and far outweighed concerns about Wal-Mart scaling back plans to open new stores. Tech stocks have been star performers lately and as Erika Miller explains, analysts say now is still a good time to buy into the sector.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: The recent stock market sell-off has claimed many victims, but technology stocks have emerged virtually unscathed. According to Standard & Poor's, technology has been the second best performing sector after consumer staples in the past week, as well as in the past 13 weeks. Analyst Scott Kessler says turmoil in the credit markets is prompting investors to seek alternatives to financial stocks.
SCOTT KESSLER, DIR. OF INFORMATION TECHNOLOGY EQUITY RESEARCH, S&P: People right now are concerned about this credit crunch and they're concerned about companies that are substantial lenders of or borrowers of capital. Tech, obviously, is kind of a safe haven there.
MILLER: Anthony Conroy, head equity trader at BNY Convergex Group, says investors are also being lured by the sector's strong profit growth.
ANTHONY CONROY, HEAD TRADER, BNY CONVERGEX GROUP: Just the recent earnings have been just tremendous -- from Google, from Apple, from Intel. These companies' growth rates are so strong that people -- they're driving towards it. All the innovation that we're seeing in technology, people are jumping on the bandwagon. They want to be involved in it.
MILLER: The weaker dollar is another tailwind behind tech, spurring demand for U.S. technology products abroad. Those foreign revenues get an additional boost when they are converted back into dollars. According to S&P, the Federal Reserve's rate cuts this year are also driving interest in tech stocks. Since 1945, technology has been the best performing sector in the six months after the Fed starts cutting interest rates. The sector has posted an average gain of 21 percent in that period, double the increase of the overall market. Seasonally speaking, many analysts say now is a good time to own tech stocks.
KESSLER: The fourth quarter is by far the most important quarter for technology companies, from a fundamental perspective. And they also tend to outperform the broader market during that period.
MILLER: But there are risks to investing in the sector. A big one is a sharp slowdown in global economic growth, which could prompt consumers and businesses to cut spending. The technology sector is on track to outperform the broader stock market this year for the first time in four years. It's a trend that most analysts expect to continue well into 2008. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
Forced 401(k)
PAUL KANGAS: If you want someone to do something, make it automatic. That's what the Department of Labor did with the new 401(k) plan rules that it issued today. By making the sign-up procedures for 401(k) plans automatic, the government says 5 million more Americans will take part in company retirement plans. Darren Gersh reports.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Think about all the decisions a new employee has to make. Should I enroll in the company 401(k) plan? How much should I put in? Where should I invest my money? Faced with so many questions, one out of three workers simply decide to pass. Now, Assistant Secretary of Labor Bradford Campbell says his department is issuing new rules to simplify the decision-making by helping employers automatically sign up employees.
BRADFORD CAMPBELL, ASSISTANT SECRETARY OF LABOR: It makes it easier for the employees. Employees are able to look at an option that has been selected and by essentially agreeing with it by not objecting to it, employees are able to be invested in options that are appropriate for retirement savings.
GERSH: Congress decided to encourage auto-enrollment when it passed the pension protection act last year. The law shelters companies from being sued if a worker later loses money on an investment. But to get that protection, the Labor Department says employers must put an automatically- enrolled employee's cash into either a life cycle fund, a balanced fund or a professionally managed account. The insurance industry had lobbied hard to include in that list so-called stable-value funds, which carry lower returns but offer protection against losses. In the end, the Labor Department disagreed, deciding for a mix of stocks and bonds. Paul Stevens represents mutual fund companies in Washington. He says there's no question which investments are better for retirement accounts.
PAUL STEVENS, PRESIDENT, INVESTMENT COMPANY INSTITUTE: The real issue is how do you provide American workers the opportunity to grow their retirement balances over time and what labor said is implementing what Congress intended you get a mix of different assets in the account and that is what these regulations provide.
GERSH: AARP's David Certner supports the new rules and says the next step will be to get workers who are auto-enrolled in a 401(k) to get serious about preparing for retirement.
DAVID CERTNER, LEGISLATIVE COUNSEL, AARP: We would suggest to people to not only look at their different investment options in the plan, but to also consider contributing more money than they might be having under automatic enrollment.
GERSH: The new rules take effect just before the end of the year. The Department of Labor estimates in another 25 years, auto-enrollment will increase retirement savings in the country by $130 billion. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.
"Energy Options: Coal" - Coal and Communities (Part 2)
SUZANNE PRATT: The outlook for coal has brightened, with plans to develop as many as 150 new coal-fired power plants in the U.S. over the next 25 years. But concerns about global warming and restrictions on carbon emissions have already put the brakes on dozens of those plants. In tonight's "Energy Options: Coal," Stephanie Dhue heads to a tiny Nevada town where plans to build a plant promise to transform the region.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: What happens in places like this will help determine coal's future. Eastern Nevada is the proposed site of three new coal-fired power plants. Sierra Pacific Resources, a Nevada utility, has proposed building a 2,500-megawatt facility. The company spent the past year and a half working to permit the plant. David Sims is the project's manager. He says the Ely energy center will be a key to providing energy throughout Nevada.
DAVID SIMS, COAL-FIRED POWER PLANT PROJECT MANAGER: This project is really more than just a coal project. It's an anchor for a transmission system to link our north and south for the first time in Nevada, to be energy independent.
DHUE: Sierra Pacific Resources wants to build the Ely energy center here, about 250 miles from the neon lights of Las Vegas. The power plant would burn about 8 million tons of coal each year and generate enough electricity to supply 1.5 million people. The nearby town of Ely largely supports the proposal. Ely fell on hard times when a copper mine closed in 1978. The mine has since reopened, but on a smaller scale. Mayor Jon Hickman says the power projects will boost the local economy.
MAYOR JON HICKMAN, ELY, NEVADA: Ely is a town of around 5,000 people. We've had upwards of 10,000 in the past, so we're just trying to get back even.
DHUE: On the drawing board: 2,000 temporary construction jobs, 300 permanent workers to staff the finished plant and millions of utility dollars to be spent to refurbish the town-owned railroad. But even before the plant is OKed, things in Ely are powering ahead.
HICKMAN: You can already see the growth in work permits. There's housing development that has started. We have a new Holiday Inn express that's just going in out here. They've all come up here because they're seeing the future for our area.
DHUE: Still, not everyone likes the idea.
OSKAR ATKINSON, PRESIDENT, BRISTLECONE ALLIANCE: If nobody speaks up, then nothing can change and the impression here would be everybody is in favor, which clearly is not true.
DHUE: Oskar Atkinson is the president of the Bristlecone Alliance. It's a small group of local residents who say they treasure the area for its open spaces, clean air and pristine views.
CURT LEET, BRISTLECONE ALLIANCE: I don't want to see us be the tailpipe for Las Vegas.
SUSAN POTTS, BRISTLECONE ALLIANCE: This area does need some economic development, but there are so many other options that aren't going to pollute.
DHUE: And that's a big concern. Sierra Pacific's parent company, Nevada Power, recently agreed to pay $90 million to settle air quality violations from its 40-year-old Reid Gardner coal-fired power plant outside Las Vegas. Ely resident Jennifer Brickey worries the company won't live up to its promises.
JENNIFER BRICKEY, BRISTLECONE ALLIANCE: If they were willing to try and sidestep those standards where their customers are located, what are they going to do to a community like ours where they have no obligation. We are not customers. We are not shareholders.
DHUE: Nevada Power says the Ely energy center will let it shut down Reid Gartner's older stacks. The company promises to put in carbon capture technology in the Ely plant as soon as economically feasible. Sierra Pacific CEO Michael Yackira says coal is critical to its energy mix.
MICHAEL YACKIRA, PRESIDENT & CEO, SIERRA PACIFIC RESOURCES: When the sun's not shining and the wind's not blowing, our customers need to have power and that's why having only renewable energy is insufficient for our legal responsibility to provide reliable power to our customers 24 hours a day, seven days a week.
DHUE: The plant's opponents have a powerful ally in Nevada senator and Majority Leader Harry Reid. Reid has pledged to do everything he can to keep the coal plants from being built. He wants the state to focus on conservation and renewable forms of energy and he scoffs at the industry's argument that coal is a necessary part of the mix.
SEN. HARRY REID, (D) NEVADA/SENATE MAJORITY LEADER: You don't need a balanced portfolio. We produce lots of electricity with natural gas. The reason they are going to coal it's cheaper. There is no balance in polluting the air and the water with coal, no balance, until we come up with clean coal technology, which we don't have yet. We don't need energy created by more . We have global warming; it's here.
DHUE: Sierra Pacific Resources wants to begin construction next year. But with growing concerns about global warming, those plans could be derailed. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Ely, Nevada.
"Commentary"-What's Behind the Tax Gap
SUZANNE PRATT: Tonight's commentator says now is the time to close the tax gap. Here's Irving R. Levine, dean emeritus of international studies at Lynn University and former chief economics correspondent at NBC News.
IRVING R. LEVINE, DEAN EMERITUS, INT'L. STUDIES, LYNN UNIVERSITY: The presidential candidates have had a lot to say in their TV debates about cutting taxes or raising them. But there's another tax issue the candidates should be debating -- the issue of how to close the tax gap. The tax gap is the dollar difference between what taxpayers owe and what they actually pay to the U.S. Treasury. The government estimates the tax gap at $244 billion, a sum that would more than cover last year's Federal budget deficit.
The gap is created by taxpayers who cheat on their taxes or simply don't file. One reason for taxpayer delinquency may be the complexity of the 66,000 pages of tax rules. The best way to simplify taxes would be to replace the present income tax system with a national sales tax. A national sales tax would make it difficult to cheat, because every time a person bought just about anything, he or she would be paying the sales tax. A national sales tax would have to be set high, at around 23 percent, to even match current revenue. But a national sales tax would virtually eliminate time-consuming tax forms and tax audits. And it should help to close the costly tax gap. I am Irving R. Levine.
"Last Word"-Elvis Vs. The Beatles
SUZANNE PRATT: And finally tonight, it seems all you need is love. Two neighboring shop owners in London settled their dispute and avoided a trial today. The stores "Elvisly Yours" and "The London Beatle Shop" were all shook up over a rental agreement. The Elvis store wanted to use the basement that both properties share to host karaoke bus tours. But the Beatles store owner said no. The manager of the Elvis shop said his neighbor ain't nothin' but a hound dog then filed a lawsuit. And Paul, eventually, both sides were able to work it out without going to court, but the deal contained a confidentiality clause, so we may never know how they were able to come together.
KANGAS: Well Suzanne, as Elvis would have said, it's all right.
PRATT: You know what, I'm wearing my blue suede shoes tonight.
KANGAS: Very good.
Paul Kangas' Stocks in the News
PAUL KANGAS: Wall Street posted strong early gains as bullish confidence was buoyed by yesterday's market rebound and solid earnings we told you about from Apple and American Express. An hour into trading this morning, the Dow was up 65 points. The NASDAQ rose 23 points. The blue chips slumped during mid-session after cautious comments by Wal-Mart about its outlook, but a firm tech sector and falling oil prices revived the rally and the major indices all closed nicely higher. Dow Jones Industrial Average up 109.26 points at 13,676.23. The NASDAQ Composite jumped 45.33 to 2,799.26. Standard & Poor's 500 Index rose 13.26 ending at to 1,519.59. Over in the bond market, the 10-year note held steady at 102 21/32, leaving the yield at 4.41 percent.
Big board volume leader today on 23.8 million shares was Texas Instruments (TXN) dropping $2.84. After the close yesterday as we reported, third quarter earnings were $0.54, $0.04 above the Street estimate, but the company's fourth quarter guidance was quite cautious. That hurt the stock today.
Wal-Mart Stores (WMT) losing $1.32, told analysts in its fiscal year 2008 it'll open fewer than 170 new stores, way down from 270 originally planned, so it's cutting back on expansion.
EMC Corp (EMC) $0.77 gain.
Then Citigroup (C) down $0.17.
Pfizer (PFE) a $0.03 rise.
General Electric (GE) was up $0.31.
And so was Ford Motor (F).
AT&T (T) $0.85 gainer there. AT&T in with third quarter earnings excluding the cost of acquiring Bell South, $0.71 a share in the third quarter, up from $0.63 last year and of course Apple's iPhone business accounted for a big boost in revenues for AT&T.
Schering-Plough (SGP) up $1.12, rebounding from over a $4 loss yesterday when the company reported higher earnings, but lower than the Street expected.
And then Coach (COH) down $4.87. First quarter earnings, $0.41 up from last year's $0.34, but the company notes its U.S. store traffic recently has been weak. The company sees second quarter earnings at $0.68, $0.02 below the Wall Street estimate.
New issue came to market today, CVR Energy (CVI), this is a refining company. Twenty million shares offered at $19. The stock opened at $21.05, the high, $21.28, backed off a little, but still had a positive debut.
American Express (AXP) up $1.79. After the close yesterday as we reported, third quarter earnings $0.90, up from $0.79, a nickel better than the Street expected. The stock reacted positively.
Merck & Co (MRK) up $1.72. Yesterday we reported third quarter earnings of $0.75, $0.06 above the Street estimate. Today, Goldman Sachs boosted its price target on Merck from $56 to $59 a share. Citigroup boosted its price target from $61 to $63 a share.
Burlington Northern Santa Fe (BNI), the big rail company, up $3.54. Third quarter earnings, $1.48, well above the $1.33 a year ago. Revenues up 2 1/2 percent. Those earnings $0.11 better than the Street was expecting.
Whirlpool (WHR) down $4.25. Third quarter operating earnings nicely higher, $2.20, up from $1.68 but the company's sales were flat. Standard & Poor's today cut its price target by $9 down to $106 a share.
Waters (WAT) up $6.08. Third quarter earnings jumped to $0.62 from $0.50 a year ago, 17 percent rise in sales. Standard & Poor's repeated a "buy" recommendation on that stock.
CNH Global NV (CNH), this is a construction equipment company, up $6.24. Third quarter earnings almost double to $0.51 from $0.26 last year. Revenues shot up 31 percent. The company boosted its full year estimate on top of all that.
PFF Bancorp (PFB), this is a California financial services company, dropping $2.49. Third quarter loss of $0.33 a share, versus earnings of $0.56 a year ago.
Lexmark Intl (LXK), which makes printers of course, down $3.14. Lower third quarter earnings $0.48 versus $0.85 a year ago. Revenues dropped 3 percent. Standard & Poor's downgraded the stock from "hold" to a "sell."
And then Unisys (UIS) dropping $1.33, big percentage loss. Third quarter loss of $0.09, not as bad as last year's loss of $0.23 a share, but still a loss and worse than expected.
NASDAQ's most active, Apple (AAPL) hitting another record high, up $11.80.
And Research in Motion (RIMM) up $11.15. I believe that's a regular or new record high. The company of course is launching its Blackberry product in China.
Google (GOOG) up $25, look at that stock go.
And then Amazon.com (AMZN) up $9.53. Third quarter earnings after the close, Amazon $0.19, up from $0.05 a year ago on a 41 percent jump in revenues, but in after hours trading, the stock actually plunged about $9 a share from that price.
Baidu.com (BIDU) was up $33.64.
Some big moves here, Intel (INTC) up $0.16.
Bea Systems (BEAS), there you see it, down $0.72, rejecting Oracle's buyout bid.
Cisco Systems (CSCO) $0.17 rise.
Microsoft (MSFT) $0.39 gain.
And then Yahoo! (YHOO) was up $0.79.
Elsewhere, Level 3 Communications (LVLT) dropped $1.04. Third quarter loss of $0.11 reported today, almost as bad as the loss of $0.12 a year ago.
And those are the stocks in the news tonight.
