01/27/06: Slow Economic Growth Doesn't Slow A Wall Street Rally
SUSIE GHARIB: Stocks on Wall Street posted solid
gains for the second straight day, led by strong earnings from Dow
component Procter & Gamble. The Dow jumped 97 points and the NASDAQ rose
21. Both indexes were up more than 2 percent this week. Today`s rally
came despite a report indicating that the U.S. economy grew at a much
slower-than-expected pace in the final quarter of 2005. Erika Miller has
details.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: The steep drop
in economic growth at the end of last year came as a shock to Wall Street.
The economy limped along at a 1.1 percent annual growth rate in the fourth
quarter, below the almost 3 percent analysts expected. The gain was also a
far cry from the 4.1 percent increase in the third quarter and it was
clearly the weakest period of the year. Consumer spending -- which fuels
two-thirds of economic growth -- dropped to a 1.1 percent rate, the weakest
increase since 2001. Analysts say shoppers reined in their spending as a
result of high fuel prices. But experts also place much of the blame on an
expected pullback in auto sales after dealers trimmed incentives. A bigger
surprise in the report was a sharp drop in defense spending.
STEVEN WIETING, SR. ECONOMIST, CITIGROUP: Defense spending down 13
percent in the quarter is not a fundamental story. In fact, it looks like
the late signing of the defense bill had something to do with it.
MILLER: Business spending was also surprisingly weak, up just 2.8
percent. Economists say hurricanes Katrina and Rita may also be partly to
blame, because they shut down many Gulf coast oil facilities and pushed up
unemployment in the region. There were also signs of increased price
pressures within the report. The core personal consumption price index --
which excludes volatile food and energy costs -- rose 2.2 percent after a
1.4 percent gain in the third quarter. To fend off inflation, the Federal
Reserve is widely expected to boost interest rates next Tuesday by a
quarter percentage point. Some economists speculate that could be the end
of the central bank`s two-year rate hike campaign. But others disagree.
JOHN RYDING, SR. ECONOMIST, BEAR STEARNS: We`re staying with our view
that, after the rate increase of 4 1/2 percent next week, there will be at
least another two rate hikes and that by the middle of the year, we`ll be
looking at a 5 percent Fed funds rate target.
MILLER: Most economists believe the slowdown in the fourth quarter is
only a temporary setback. Some predict growth in the first quarter could
rebound sharply to about 4 percent. Erika Miller, NIGHTLY BUSINESS REPORT,
New York.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright
(c) 2005 Community Television Foundation of South Florida,
Inc. ALL RIGHTS RESERVED. Terms of use.
01/27/06: One On One With Allan Hubbard, Director of the National Economic Council
JEFF YASTINE: One item sure to be on the agenda when Fed policymakers meet
next week is that weaker-than-expected GDP report. The Bush administration
is encouraging the public to look beyond the headline number. Washington
bureau chief Darren Gersh spoke with White House economic adviser Allan
Hubbard about the report and asked him if U.S. economic growth is stalling
out.
ALLAN HUBBARD, DIRECTOR, NATIONAL ECONOMIC COUNCIL: There`s no
question today`s number is a surprise if you don`t look behind the number.
You know, we`ve been growing at a -- I think for the last year we grew at
3.5 percent. The prior year we grew at 4 percent. As you know, the fourth
quarter -- the first cut on the first quarter is -- I mean the fourth
quarter is 1.1 percent. There`s three primary reasons for that. Auto
sales contributed to the reduction by about 1/2 percent because they were
lower than norm. Government spending for whatever reason was --
contributed to a reduction by about 1/2 percent and imports contributed to
a reduction by about 0.6 percent. So you put those three numbers together
and we`re in the high 2s, which is what the consensus was that we would
have. The consensus forecast for the first quarter is 3.6 percent. We
continue to believe this economy is very strong. It`s very much on a
sustainable path.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: But if you look
also at some of the other numbers out there, oil`s around $68 a barrel.
Corporate earnings have been mixed. You also see housing prices are flat
to down and people look like they`re taking less money out of their house.
So you add all that up and the 1.1 number we got on GDP, isn`t the threat
of a recession now a real threat?
HUBBARD: Oh, absolutely not. You know, again, look behind the
numbers. And again, there`s a consensus forecast that we`re going to
continue to grow at over 3 percent. The unemployment claims really tell
you what`s happening in the marketplace, and they`re very -- they`re only
one week old when we get them and we got them yesterday and they`re 270,000
claims which is whenever it`s below 350,000, that means we`re creating more
jobs and job entrants which means the unemployment rate is going to
continue to drift down. So again, all the statistics suggest that this
economy is going to keep going. That`s not to say we don`t have some head
winds and obviously $68 oil is not good. It`s much higher than the
president wants it to be. That`s why he was so in favor of the energy bill
that finally got passed last summer. That`s why he`s going to be talking
about energy and the importance of energy, new technology and developing
alternative energy supplies in his state of the union speech and this
president`s committed to working to get energy prices down. But it`s not
going to happen overnight.
GERSH: But if housing looks like it`s not going to power the economy
forward, you also -- people thought that business investment was going to
be the good news in the economy in 2006. And this report shows that it
dipped off and that spending on equipment and software was just 3.5 percent
versus 10 percent through much of the year. So what`s going to power this
economy forward?
HUBBARD: Well, again, you know, what`s important is looking at trends
and business investment continues to be strong. All the surveys of
businesses suggest that `06 there`s going to be significant investment by
business. The consumer is going to continue to be -- spending is going to
continue to be strong because the balance sheets of consumers is still very
good. They`re not overleveraged. And we expect...
GERSH: We have record debt though. Household debt is at a record.
HUBBARD: Well, in terms of their -- household debt may be at a record,
but household net worth is at a record, $51 trillion. It`s grown by 22
percent since the president`s been in office. And as a result of that, the
American people are in good shape and they will continue to spend money.
Businesses will continue to spend money and what`s most important is
productivity growth which is really the best indicator, the strongest
indicator, direct indicator of our future standard of living was around 3.5
percent last year. That`s almost a record level for the period of time
that the president`s been in office. It`s averaged around 3.5 percent and
again, that`s a signal that this economy is going to continue to be strong.
GERSH: Quick question about health care in the state of the union
address.
HUBBARD: Yes, sir.
GERSH: The president, it`s reported, is concerned about the way the
tax code treats health care expenses. Is he going to talk about that in
the state of the union address? And why is that a concern?
HUBBARD: Well, the president`s concerned about the escalating costs of
health care. It`s having a negative impact on the Federal budget, but more
importantly, it`s having a negative impact on the budgets of the American
people. First off, you know, the American people don`t know what the
prices are they`re paying or the quality of the services they`re paying.
The president is going to talk about the fact that there`s not this
information. But at the same time, where people who get their insurance through
their employer get it on a pre-tax basis, they don`t pay taxes on the money
they use for insurance from their employer, if their employer doesn`t
provide insurance and they buy it themselves, they have to purchase it on
an after-tax basis which means they`re paying 30 to 50 percent more than
they would if their employer provided it. That`s not fair and the
president is very concerned about that.
Another concern the president has that if you decide to leave your
job, say go out and start your own business, say you were to go out and
start another network, you`re not able to keep your insurance. And if
someone in your family is ill and particularly has a chronic illness, then
you`re going to be very concerned about leaving a job and whether you can
get insurance. And that`s not fair, either. You should be able to leave
your job, take your insurance with you and know that your family`s taken
care of. So those are the big issues that the president is concerned about
and he`ll be talking about.
GERSH: Al Hubbard, thank you very much.
HUBBARD: Thank you, sir.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
1/27/06: "Market Monitor"-Eugene
Peroni, Jr., Sr. Managing Director of Claymore Advisors
JEFF YASTINE: Our "market monitor" guest this week sees an improving
picture for stock market gains in 2006. He`s Gene Peroni, senior managing
director at Claymore Advisors. Gene, welcome back to NIGHTLY BUSINESS
REPORT.
EUGENE PERONI, JR., SR. MANAGING DIRECTOR, CLAYMORE ADVISORS:
Nice to be here, Jeff, thank you.
YASTINE: A week ago we all sat at our computers. We watched the Dow
fall by more than 200 points in a day. The NASDAQ fell by more than 50 and
here it is a week later, we`ve made back all those gains and a little bit
more. What`s going on?
PERONI: Well, I think since the start of this year, there have been a
number of cross currents, a lot of headline news whether it`s with respect
to Iran or concern about what the Fed might do next or certainly crude oil
prices. All of these things have been short-term factors and caused this
volatility. But I think to really understand and appreciate the market, we
have to go back to the bottom in 2002 and what happened immediately
following that bottom. And what we have had is a very broad-based advance
in terms of very good sector participation, in fact, the broadest that I
have seen in more than 30 years, very sustained strength in a number of
different categories, diverse categories. So what we have had so far this
year I think, is more of a manifestation from the averages reflecting more
what`s been going on in the underlying market for more than three years
now.
YASTINE: You sound like somebody who`s fairly bullish. What do you
think the market`s going to do this year?
PERONI: Well, I am bullish. In fact, I had been calling for the
market to appreciate about 8 to 10 percent, right in line with consensus.
But given what we`ve seen in the last few weeks, especially this week, I
believe that I`m probably being a bit too conservative. So we`re raising
our target into the mid to upper teens. I believe that the market this
year and the Dow this year could return somewhere in the order of 14 to 18
percent.
YASTINE: Wow. Let`s briefly go through what the stock picks that you
gave us and gave Paul Kangas back in June of last year and there were four
of them. The first two were Chubb, the commercial insurer and Fortune
Brands, Chubb up about 11 percent, Fortune Brands down just a bit as well.
PERONI: Yes. I like them both, especially Chubb. Fortune at these
levels I think looks quite attractive for the long term.
YASTINE: Then IT Industries and Sunoco and of those two, Sunoco doing
quite well, up more than 50 percent.
PERONI: Yes and those two I continue to like very much. I like ITT
here for their defense business but also for their business in the water-
related sector.
YASTINE: Now, against this bullish background that you`ve given us,
what sort of stocks are you recommending for people these days? What kind
of stock picks do you have?
PERONI: Well, it`s pretty broad-based. We`re looking at a number of
different categories. One that we like very much is Cleveland Cliffs.
They make iron pellets that they sell to the steel business. We like
Intuitive Surgical which is a specialized medical technology company. And
we also like in the retail group JW Nordstrom, symbol JWN. We like that
specialty retailers here going forward and finally, we like Monsanto in the
agricultural chemical business.
YASTINE: Let`s take Nordstrom for a second. You know, we see a little
bit like we had fourth quarter GDP come out today. That was bit weak. Some
people think that points to the consumer position weakening perhaps. But
obviously with Nordstrom you think that that`s a good position to be
holding in retail.
PERONI: I do. I think the specialty retailer group looks very good
here. I don`t think that the consumer is going to be absent from the
economy in 2006 and beyond, but I think it`s going to be a bit more of a
business-led focus as I see it based on the sectors that are doing so well
in this environment.
YASTINE: Let me pick out one another you gave us, Intuitive Surgical,
ISRG is the symbol on that one. That company makes a robotic surgical
system, as I recall.
PERONI: That`s correct. And the stock has had a very good run as you
can see in the charts surely. I think that there is speculation, perhaps
conjecture and maybe anticipation that this kind of technology can be used
in areas other than just medical alone.
YASTINE: Gene, are there any conflicts, anything else to disclose
regarding your firm and your ownership, if there is any, of these four
stock picks.
PERONI: I don`t own any of these stocks personally, but they are in
several of the funds that I manage.
YASTINE: Gene, it`s fascinating to talk to you and thank you very much
for giving us these stock picks. We look forward to chatting with you
again.
PERONI: My pleasure, thank you, Jeff.
YASTINE: Our guest, Gene Peroni, Jr., senior manager investor of
Claymore Advisors.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
1/27/06: "Last Word"-Did Ireland Gum Up A Lucrative Tax Plan?
JEFF YASTINE: And finally tonight, Ireland has resolved a potentially sticky
situation. The government there has agreed to drop a planned tax on
chewing gum sales, but it took a deal with chewing gum makers to make that
tax go away. The chewing gum makers have agreed to contribute six million
euros to an anti-litter advertising campaign and spend another million euro
on developing gum that`s easier to clean up. U.S. based Wrigley has nearly
90 percent of the Irish market. And Jeff, apparently Wrigley lobbied
heavily to get rid of that 10 percent tax on gum sales.
YASTINE: Well, it`s not a syntax but it`s nonetheless a tax that --
who would want to pay a tax on gum, anyway?
GHARIB: And it`s irritating when gum sticks on the bottom of your
shoes, too.
YASTINE: Ten percent more.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
1/27/06: "The Week Ahead"
SUSIE GHARIB: Here`s a look at what`s happening next week. Our Friday
"market monitor" guest is John Hughes. He`s president of Quantum Capital
Management. On the economic calendar: Monday, December personal income and
spending numbers come out. Tuesday, Alan Greenspan presides over his last
Fed meeting and President Bush gives his state of the union address;
Wednesday, December construction spending and January auto sales; Thursday,
January chain store sales and fourth quarter productivity; and then on
Friday, the January employment report comes out.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
1/27/06: "Paul Kangas' Stocks In The News"
JEFF YASTINE: And the latest report on new home sales shows there`s still
some sizzle in the housing market despite recent signs of a cooling. The
Commerce Department says sales of new single family homes climbed 2.9
percent in December to a seasonally adjusted rate of 1.27 million units.
Now, for 2005 overall, it was another record year for new home sales; 1.28
million new homes changed hands in 2005 and that`s a 6.6 percent increase
over the previous year.
And then we have median price of a new home also jumping to a new
record last year, $237,300. The new homes sales data was icing on the cake
for today`s market gains. Earnings reports from Microsoft last night, plus
Proctor & Gamble this morning, helping give the Dow an opening boost. By
midday, the index was nearly 120 points higher and the NASDAQ soared more
than 30 points as a few chip makers like Broadcom, posting large gains. So
the Dow finishing out the day up 97 3/4 points to 10,907.
And this week, it advanced in four out of five sessions for a net
overall gain of nearly 240 points or 2 1/4 percent. And the NASDAQ
participating as well, rising 21 1/4 points today to 2,304 and a fraction
and the composite index also having a good week, rising 56 1/2 points or
2.5 percent. And then the S&P 500 gaining almost 10 today to 1,283 and
then we look to the bond market, where the 10-year note rising 3/32 to 99
28/32 and the yield at 4.52 percent.
First we`ll take a look at Pfizer (PFE) which rose $0.94. The
company`s inhalable diabetes treatment Exubera getting clearance to be
marketed in Europe and then very late today, we`ve learned that Pfizer has
also received approval from the FDA for marketing and selling Exubera here
in the United States.
Then we have Lucent Technology (LU) rising $0.13.
General Electric (GE) falling a fraction.
Boston Scientific (BSX) down a little over $1.50 and a nearly three-
year low for the stock, that in reaction to the FDA`s warnings issued last
night about the company`s manufacturing plants where it found some serious
regulatory problems. To make things worse, Boston Scientific`s merger
partner Guidant posting a 31-percent drop today in its fourth quarter
profits.
Ford Motor Co (F) losing a fraction.
And then we see Time Warner (TWX) edging up $0.18.
ExxonMobil (XOM) gaining $1.34, benefiting from a spike in oil prices
which briefly touched $68 a barrel today.
And then there`s Chevron (CVX) which rose $0.16. As you heard, it
missed quarterly profits by a fraction due to the Gulf coast hurricanes.
Motorola (MOT) losing $0.45.
Texas Instruments (TWN) gaining a dime.
Then we see Procter & Gamble (PG) which jumped $0.92, really helped
the Dow off today. Fiscal second quarter profits jumping by nearly 30
percent at P&G. They closed the merger with Gillette back in October.
Shares in Mittal Steel Co (MT) soaring nearly $2. The company`s
offering to buy a rival steel firm Arcelor for $23 billion.
Then we have another steel maker, Nucor (NUE) which also helped the
sector today. Profits $0.30 above street estimates and here`s a look at how
some of the other stocks did today, all doing very nicely on takeover
speculation.
AK Steel (AKS), Oregon Steel (OS), US Steel (X) all doing nicely.
In other news, Affiliated Computer (ACS) rising more than 10 percent.
The computer outsourcing firm raking in profits that were 11 percent over
year ago levels. They also started a buyback program for about 55 million
shares of stock.
Emulex (ELX) down nearly 2 1/2. It missed its estimates by a penny and
guided revenues lower and down went the stock.
Eastman Chemical (EMN) off nearly $4. Eastman said it was spending
$100 million more this year compared to last for raw materials and energy.
First quarter profits at the low end or guiding to the low end of previous
estimates.
Now let`s take a look at the NASDAQ where Microsoft (MSFT) gained over
$1. Investors appearing to like the company`s earnings that came out last
night.
Google (GOOG) falling a fraction.
Broadcom (BCOM) gaining more than $11. The maker of communications
microprocessors seeing an 18 percent sequential gain in sales. They also
boosted sales guidance here in the first quarter of the year.
Apple Computer (AAPL) dipping $0.30.
Sandisk (SNDK) dropping over $7. It`s cutting sharply its prices on
flash memory products.
Then we looked at Intel (INTC) rising $0.18.
Amgen (AMGN) down nearly $0.60.
Cisco Systems (CSCO) gaining for the day.
Yahoo! (YHOO) off a fraction.
Marvell Tech Group (MRVL) up a little over 4 1/2.
Take Two Interactive (TTWO) losing more than 2. The game developer
makes the Grand Theft Auto software, reporting declines in quarterly income
and revenues. Net income for the year was also lower.
And then finally we see Avid Technology (AVID), which slipped nearly 5
1/2. The maker of digital video editing gear missing estimates. That`s why
its fourth quarter profits dropped by 18 percent, totally $0.43 a share,
about $18 million. Sales though jumped 40 percent.
And those are our stocks in the news tonight.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
01/27/06:
Market Stats
NET PERCENT
CLOSE CHANGE CHANGE
DOW CLOSE 10907.21 +97.74 + .9
HIGH 10932.34
LOW 10804.75
NASDAQ COMP. 2304.23 +21.23 +.9
HIGH 2314.36
LOW 2289.47
VOLUME 1,945.7
PREVIOUS 2,075.1
UP VOLUME 1,257.1
DOWN VOLUME 661.3
DOW TRANSPORTS 4309.71 +3.18 + .1
DOW UTILITIES 416.07 +1.30 + .3
CLOSING TICK +893
S&P 500 1283.72 +9.89 + .8
S&P 100 580.80 +4.73 + .8
MIDCAP 400 775.27 +3.52 + .5
REUTERS/CRB 346.96 +3.50 + 1.0
NYSE COMPOSITE 8096.14 +52.14 + .7
VALUE LINE 435.68 +2.03 + .5
RUSSELL 2000 732.22 +3.74 + .5
DJW 5000 12963.41 +89.18 + .7
U.S. TREASURIES
5-YEAR NOTE 4.25%
Jan. 15,2011 99 4/32 -1/32 4.45
10-YEAR NOTE 4.50%
Nov. 15,2015 99 28/32 +2/32 4.52
30-YEAR NOTE 5.375%
Feb. 15, 2031 109 30/32 +6/32 4.70
LEHMAN BROS.
LONG BOND INDEX 1752.43 + .11
DOW CLOSE 10907.21 +97.74 + .9
ADVANCES 2158
DECLINES 1161
NEW HIGHS 470
NEW LOWS 30
NET PERCENT
NYSE MOST ACTIVES 4PM CLOSE CHANGE CHANGE
PFE Pfizer 25.99 +.94 +3.8
LU Lucent Tech 2.75 +.13 +5.0
GE General Electric 32.95 -.06 -.2
BSX Boston Scientific 21.63 -1.52 -6.6
F Ford Motor Co 8.65 -.02 -.2
TWX Time Warner 17.29 +.18 +1.1
XOM Exxon Mobil 61.29 +1.34 +2.2
CVX Chevron 60.38 +.16 +.3
MOT Motorola 22.50 -.45 -2.0
TXN Texas Instrument 30.23 +.10 +.3
NASDAQ CLOSE 2304.23 + 21.23 + .9
VOLUME 2,382.2
PREVIOUS 2,487.2
ADVANCES 1757
DECLINES 1239
NASDAQ ACTIVES
MSFT Microsoft 27.79 +1.29 +4.9
GOOG Google 433.49 -.78 -.2
BRCM Broadcom 69.87 +11.15 +19.0
AAPL Apple Computer 72.03 -.30 -.4
SNDK SanDisk 63.38 -7.30 -10.3
INTC Intel 21.67 +.18 +.8
AMGN Amgen 71.31 -.59 -.8
CSCO Cisco Systems 18.78 +.20 +1.1
YHOO Yahoo! 35.09 -.08 -.2
MRVL Marvell Tech Gp 70.64 +4.54 +6.9
AMEX CLOSE 1824.29 - 2.22 - .1
INDEX SHARES
DIA DIAMONDS TRUST 109.13 +1.12 +1.0
QQQ NASDAQ 100 42.11 +.56 +1.4
SPY S&P DEP.RECEIPTS 128.54 +1.15 +.9
STOCKS IN THE NEWS
PG Procter & Gamble 59.74 +.92 +1.6
MT Mittal Steel 34.26 +1.96 +6.1
NUE Nucor 85.50 +5.08 +6.3
AKS AK Steel Holdings 11.16 +.80 +7.7
OS Oregon Steel 39.93 +1.47 +3.8
X US Steel 58.73 +2.46 +4.4
ACS Affiliated Comp 63.27 +6.10 +10.7
ELX Emulex 18.50 -2.41 -11.5
EMN Eastman Chemical 48.45 -3.87 -7.4
TTWO Take Two Interact 14.69 -2.34 -13.7
AVID Avid Tech 48.40 -5.43 -10.1
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