<Show: NIGHTLY BUSINESS REPORT> <Date: June 5, 2013> <Time: 18:30:00> <Tran: 060501cb.

118> <Type: SHOW> <Head: NIGHTLY BUSINESS REPORT for June 5, 2013, PBS> <Sect: News; Domestic> <Byline: Susie Gharib, Tyler Mathisen, Bob Pisani, Diana Olick, Jon Fort, Sharon Epperson> <Guest: Joan Claybrook> <Spec: Business; Economy; Stock Markets; Trade; Amazon (NASDAQ:AMZN); Internet; Retail Industry; Financial Services; Housing; Real Estate> <Time: 18:30:00>

ANNOUNCER: This is NIGHTLY BUSINESS REPORT, brought to you by --


TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: June swoon. Stock slams, the Dow loses more than 200 points as a pair of worries converged. What will the Fed do next and what will Friday`s job`s report say?

SUSIE GHARIB, NIGHTLY BUSINESS REPORT: Food fight. Amazon (NASDAQ:AMZN) wants to bring home the bacon to you. The company takes aim at the grocery business, but finds there`s another heavyweight in the ring.

MATHISEN: And rate spike. The 30-year mortgage breaks 4 percent. We`ll look at what that means for housing and the economy.

All that and more tonight on NIGHTLY BUSINESS REPORT for Wednesday, June 5th.

GHARIB: Good evening, everyone.

A jittery day of trading, more than 200 points sell off and the Dow falling below the 15,000 level. The catalyst? A batch of tepid economic reports. On the jobs front, payroll processor ADP said American businesses added only 135,000 jobs in May.

That was much less than forecast. Many investors are not preparing for a disappointing jobs number on Friday. That`s when the Labor Department releases its May employment report.

Also today, orders at American factories rose only 1 percent in April, also below expectations. And the message from the Federal Reserve`s Beige Book was also disappointing. The survey of regional economic activity described the recovery as modest and moderate.

So, not much to inspire stock buying, the Dow tumbled, the NASDAQ lost almost 44, the S&P 500 was down 22 points.

Here is Bob Pisani with more on today`s market action.


BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Traders are confused, is the job market improving or not. The markets were volatile again today, this time on signs that the jobs market may not be as strong as some hope.

A report on private sector employment by ADP was weaker than expected, as was an employment gauge released as part of the survey of purchasing managers in the services industry. That`s causing some to consider lowering their estimates for Friday`s May job reports.

Oh, this is confusing, because Fed officials have been talking about tapering their purchases of bonds as the job market improves. So, which is it, is it getting better or not?

So, to add to this confusion, we`ve got the Fed`s Beige Book today and Fed officials sounded a bit more optimistic about the economy, noting gains in auto sales and real estate and bank lending, and also noting, hiring,

gains in several districts.

So what do traders do when they are confused? Well, they lighten up on their position and look what happens. The Dow is down. In the last two days, this is the worst two-day losing streak since November.

If that wasn`t enough to worry about, the markets are being held hostage to the dollar/yen trade. After weakening for almost seven straight months, the yen has been strengthening the past two weeks and did so again today, which is a big trade. Many borrowed cheap yen to buy assets elsewhere, like stock in the U.S. But a stronger yen makes that trade more risky. So, some are starting to unwind the deal.

This may be the biggest investment for many traders in years.

For NIGHTLY BUSINESS REPORT, I`m Bob Pisani, at the New York Stock Exchange.


MATHISEN: Well, the Dow has had a triple-digit move in five of the last seven trading sessions. Now, long terms investors want to know whether this volatility is just noise that should be ignored.

Here`s what portfolio manager George Young of the Villere Balanced

Fund has to say.


GEORGE YOUNG: We are long-term holders of stocks. We think it`s very important -- we think it`s very important to make sure that our investors understand that opportunities are now. Don`t get worried about day-to-day volatility. Look for the long term. That`s our credo.


GHARIB: Another thing that had Wall Street buzzing today, the 30-year mortgage rate topping 4 percent for the first time in a year, while at the same time, mortgage applications fell more than 11 percent.

Diana Olick is in Chicago. That`s where some of the nation`s biggest REITs, or real estate investment trusts, are meeting to discuss the challenges of rising rates in the commercial and residential sectors.

Hi, Diana. You know, that 4 percent is a bit of sticker shock now that we`ve all gotten so use to super low rates. How do you think that rising mortgage rates will impact the housing recovery?

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, look, it`s not a good thing, especially when you have rising home prices, prices up

over 12 percent in April from a year ago, according to Core Logic. You don`t want a couple of rising rates and rising home prices, when you still have a fledgling housing recovery.

Of course, we still have to remember, 4 percent is really historically low. I mean, I bought my first apartment at over 8 percent and I was thrilled at that rate. I know that dates me.

But going back to this, what`s going to happen in the near term, is that it may take fence sitters off the fence, thinking, what if rates go higher. Maybe I need to buy now. But in the long-term, again, it is not healthy for the housing recovery.

MATHISEN: My first mortgage, Diana, 12.75 percent, that dates me more.

OLICK: You`re older, see?

MATHISEN: I`m a lot older.

We`ve seen a huge drop in refinancings, by the way. So, what does that say on the potential effects of the broader economy, people do that to lower their monthly payments and free up cash?

OLICK: Exactly. It takes cash out of their pockets. We have seen

the refinances surged a lot over the past several years. They were making up in the high 80 percent of all mortgage applications. Now, they`re down to just 68 percent of mortgage application last week. People had already refi`ed at 3 percent, 3.5 percent rates. So, there aren`t a lot of people left out there who could refi when rates go above 4 percent, especially those who might still be in a negative equity position.

Refinances have really been juicing consumer spending, whether it`d be for home remodeling or for other types of purchases, cars, vacations, etcetera. When you take away those re-fis, you are taking money out of consumers` pockets.

GHARIB: Well, you know that this the spring selling season. So, with the rates going up, do you think people are now going to rush out to buy a home and lock in a mortgage rate before they go even higher? I mean, what`s the trend that you`re seeing?

OLICK: I mean, it could be. As I said, it could get fence sitters off the fence. But, again, we are coming toward the end of the spring season, which was pretty lackluster when it came to sales. There`s such low inventory out there right now that`s pushing prices higher. This is not the sales season that we expected to see, despite the fact that we did see very high rise in prices.

GHARIB: All right. Thanks a lot, Diana. Diana Olick, reporting from


And coming up a little later in the program, another issue for consumers -- a rash of car recalling and what it means for car buyers.

MATHISEN: A big blow more Apple (NASDAQ:AAPL) and a big win for Samsung. The U.S. Trade Commission is banning the important sale of one version of the iPhone and an iPad sold by AT&T (NYSE:T), saying that Apple`s technology violates patents held by top rival Samsung.

Jon Fortt takes a look at what it all means.


JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Apple (NASDAQ:AAPL) iPhones, iPads, Samsung Galaxies, as physical objects, they are mostly glass, metal and plastic, worth no more than a couple bucks. But the design and engineering that makes them work and makes them pretty? That`s worth billions.

(on camera): And that`s why Samsung and Apple (NASDAQ:AAPL), the world`s most successful electronics giants are at each other`s throats in court and with regulators. Yesterday, the U.S. International Trade Commission ruled in favor of Samsung, saying Apple (NASDAQ:AAPL) violated wireless patents with some of its older products.

(voice-over): It`s mostly a moral victory for Samsung, even if Apple (NASDAQ:AAPL) has to pull the AT&T (NYSE:T) versions of the iPhone 4 and two older iPads off the market, it would hit less than 2 percent of Apple`s quarterly revenue.

GENE MUNSTER, RESEARCH ANALYST, PIPER JAFFRAY: In terms of total revenue, it`s $680 million. And they will do somewhere around $35 billion. So, this is a pretty small slice at this. And separately is that it`s kind of a worse case scenario because a lot of people are going to an iPhone 4 and if they can`t get it, they`ll make a 4S or a 5.

FORTT: And it`s really not certain it will come to that. President Obama had 60 days to decide whether to sign off on the ruling. In a separate announcement yesterday, the White House said it wants to limit how patent holders use the ITC to squeeze their targets.

TIM COOK, APPLE CEO: We love giving you a platform.

FORTT: What all this really does is put the focus on what Apple (NASDAQ:AAPL) will do next. On Monday, at its annual worldwide developer conference, we are expecting Apple (NASDAQ:AAPL) to show off the first ever major update to the look and feel of iOS, the software on iPhones, iPads and iPod touches.

(on camera): Those things will affect what people buy in the coming year. And while these patent battles don`t change the marketplace dynamic at all for now, they do suggest that litigation may be riskier than Apple (NASDAQ:AAPL) expected.



GHARIB: Well, forget the iPhone and the Galaxy for just a moment, BlackBerry`s make or break Q10 smartphone, that`s the one with the physical keyboard, is finally here.

The big question though, will people buy it? T-Mobile, the nation`s fourth largest carrier, started selling the devices today. Rivals Verizon (NYSE:VZ) and AT&T (NYSE:T) begin taking pre-orders today for delivery next week.

MATHISEN: Well, like the BlackBerry and other smartphones, Amazon (NASDAQ:AMZN).com has become an integral part of many American`s lives. We buy clothes, books and just about everything else from Amazon (NASDAQ:AMZN).

And now, the world`s biggest online marketplace wants you to buy your groceries there too, even delivering them right to your door. It worked in

Seattle. But will it work in other big cities and will it make money?

Courtney Reagan now with more.


COURTNEY REAGAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voiceover): American spent $565 billion a year on groceries. After all, everybody eats every day, more than once.

Now, Amazon (NASDAQ:AMZN) and Wal-Mart (NYSE:WMT) are escalating the national food fight. Over the last 24 hours, Los Angeles was quietly added as the second delivery area for Amazon`s online grocery deliver service, Amazon (NASDAQ:AMZN) Fresh. The online retailer has been testing Amazon (NASDAQ:AMZN) Fresh in and around its home city of Seattle for at least five years. Reportedly, Amazon (NASDAQ:AMZN) is looking to expand its online grocery business to San Francisco later this year and 40 more areas in 2014.

Amazon (NASDAQ:AMZN) did not return a request for comment and hasn`t confirmed the report of expansion.

JOE FELDMAN, TELSEY ADVISORY GROUP: Somebody can save you time by shopping the aisles for you and then ship it and bring it to your house. That`s pretty compelling.

Now, can Amazon (NASDAQ:AMZN) do it effectively and profitably? Time will tell to see if that can happen.

REAGAN (on camera): Susquehanna analyst Bob Summers says, historically, online grocery hasn`t had a lot of success, disrupting the traditional grocery market, but this is Amazon (NASDAQ:AMZN). It has the logistics and expertise in place. And if it can back it up for quality product, Amazon (NASDAQ:AMZN) is likely to make big waves.

(voice-over): Most analysts agree it would be easier for Amazon (NASDAQ:AMZN) to gain market share in dense urban markets, easier to serve with deliveries in suburban or rural households and who`s residents tend to shop for groceries more traditional groceries than at superstores like WalMart (NYSE:WMT).

Walmart are ready to sell more groceries than any other U.S. supermarket, just $7 billion less than the annual revenues of Kroger (NYSE:KR), Safeway (NYSE:SWY) and Supervalu combined. The discounter have been airing grocery price comparison commercials, working with First Lady Michelle Obama to offer healthier food options and just announced a new produce freshness guarantee program.

Grocery, online or offline, is a low profit business, the real profit would likely come from shoppers adding other nonfood goods to the cart.

Many speculate Amazon (NASDAQ:AMZN) and Wal-Mart`s real goal with grocery is enticing consumers to add a DVD or two on the way to check out.



MATHISEN: And still ahead, Chrysler refuses to recall millions of cars the government says are a safety hazard. Is the automaker putting its reputation at risk?

But first, a look at some of today`s most active stocks.


GHARIB: Two retail reports start off "Market Focus" tonight. Walgreens said May sales increased more than 4 percent and that prescriptions filled at comparable stores increased by 7 percent. Shares of Walgreens rose more than 1 percent, closing at $48.63.

Ascena Retail previously known as Dress Barn reported a 37 percent drop in profits because of higher expenses and acquisition costs and lower full year guidance. CEO David Jaffe says store traffic was lower than expected. Shares of Ascena, which closed down a percent in the regular session dropped more after the report.

Juniper Network CEO Kevin Johnson said demand from its telecom customers was, quote, tracking above historical patterns at the beginning of the quarter. Those carriers buy much of Juniper`s routers and switches. So, shares jumped on Johnson`s comments and held up, closing at $18.54. That`s a 6.5 percent move (INAUDIBLE).

The oil and gas driller Helmerich & Payne (NYSE:HP) more than tripled its dividend today from 15 cents to 50 cents a share. The CEO Hans Helmerich said the company was pleased to deliver a meaningful level of yield, and you can bet that shareholders will be pleased to receive it. Shares jumped for a while and sold off as the market weakened. The company closing at $62.66 off a fraction.

Monsanto (NYSE:MON) chief technical officer called the genetically modified wheat found on an Oregon farm an isolated occurrence, but also said that company is considering whether sabotage might be the possible cause.

Korea and Japan have now halted wheat imports from the U.S., pending for the testing.

Monsanto (NYSE:MON) shares have lost almost 6 percent in a week. It closed today at $98.91.

GHARIB: No knives of any size will be allowed on airplanes. The head of the federal Transportation Security Administration has dropped his controversial effort to allow passengers to carry small knives on planes. This follows months of outrage from relatives of terrorist attack victims, as well as groups representing pilots, flight attendants and other airline workers.

MATHISEN: Susie, Uncle Sam has taken another step away from being in the car business. Four years after bailing out General Motors (NYSE:GM), the Treasury is going to sell another 30 million shares it owns in GM. After the markets close Thursday, another 20 million shares owned by United Auto Workers Retiree Healthcare Trust will also be put up for sale on that time. No information on the price of those shares has been released. G.M., along with the market, down more than 2.5 percent today, but it does remain still above the IPO price of $33 a share.

GHARIB: Well, another automaker is making headlines for a different reason. Toyota (NYSE:TM) is recalling nearly quarter million Prius and Lexus hybrid vehicles to fix faulty brakes that may not work correctly. This follows nearly 100 complaints from drivers who said they needed to step more heavily on the brake pedal than they used to. Toyota (NYSE:TM) says there are no reports of accidents or injuries related to the problem brakes.

MATHISEN: So why do we see -- seem to be seeing so many recalls and

what does it mean for your safety?

Here to discuss the implications is Joan Claybrook, president emeritus at Public Citizen, a national consumer group and former head of the National Highway Traffic Safety Administration.

Ms. Claybrook, welcome. Good to have you with us.


MATHISEN: Let me just begin with the question we just posed. Are we actually seeing more safety recalls on cars made in Japan, made in the United States, or does it just seem that way?

CLAYBROOK: Well, I think it seems that way, they go up and down. But the most important thing is that the National Highway Traffic Safety Administration has been a tough enforcement agent and that`s what they should be.

GHARIB: You know, one of the recalls that`s getting a lot of attention is Chrysler, that they are actually refusing to recall a bunch of their Jeeps, 2.5 million Jeeps for problems with the gas tank. They are saying that there`s incomplete analysis of the underlying data.

What do you think of that?

CLAYBROOK: I completely disagree. I think that this has it`s been a very thorough investigation. It was brought to the government`s attention by consumer group that only crash tested these vehicles, but also evaluated a lot of crashes, and also the design.

What you have here is a design problem. And statistics do not make any difference if you have a design defect. And that`s what this is.

The gas tank is located much too far to the rear. It`s an old technology. Most companies stopped doing this in the 1970s. Chrysler knew that this was a bad design, and yet they continued to do it.

MATHISEN: So, why did it take so long for this recall to occur with these cars, because these were 1993 Jeeps? I own one of these Grand Cherokee (NASDAQ:CHKE) Jeeps, by the way. It was a fine car as far as I knew.

Why did it take so long for the government to come forward with this?

CLAYBROOK: Well, I don`t know all the reasons why. I think it`s most unfortunate. They have certainly known about it, this issue has been brought to the government`s attention for a while. There`s a relatively new administrator in the government now. And he is taking good action here. I am very pleased with what he`s done.

And this is by the way, the initial determination of a defect, Chrysler still has the opportunity to change its mind, which I hope it will, because I think it`s going to destroy the Jeep brand if it keeps on opposing this, and there`s going to be a public hearing and a final decision and then, Chrysler will have to go to court in order to not do the recall.

GHARIB: So, this is going to go on for a while, by the time you go through the process. If you own one of these Jeeps what do you do?

CLAYBROOK: Well, I would get rid of it. Or you could repair it. It`s expensive, these vehicles are old, but you can repair them, they need to have a check valve on the filler neck where you put the gas in. Because they -- it pulls off when the vehicle is hit from the rear and gas spews out. And then also, you need to put some kind of bar or reinforcement at the rear of the vehicle to prevent the gas tank from being broken open, or leaking.

MATHISEN: So, Ms. Claybrook, I heard you say that you think this could ultimately destroy the Jeep brand if they persist in opposing this recall. Explain.

CLAYBROOK: Well, Chrysler bought AMC specifically the Jeep brand. It`s a great brand, and people love the concept of the Jeep and they love


So, if you continue to have a large, large number of your vehicles have a safety defect and you refuse to fix it, people are going to question the safety of the Jeep brand and I think that`s a terrible mistake on Chrysler`s part.

It is expensive to do this recall, but if I were them, I would do it and get it over with immediately.

MATHISEN: Joan Claybrook, thank you very much for being with us this evening. Joan is president emeritus of Public Citizen.

GHARIB: And coming up, a trip to West Point, where we`ll show why the minting of coins is as good as gold.

But, first, let`s get a check on the biggest losers on the S&P today.


GHARIB: Wall Street regulators have OK`d stricter rules for money market mutual funds, a popular investment vehicles that proved to be a major risk during the financial crisis. The Securities and Exchange Commission approved a new 2 percent withdrawal fee on some funds and the ability to let the value of other money market fund float instead of having

a fixed value of $1 share.

MATHISEN: A one day plunge in gold prices back in April sent demand for American eagle gold coins soaring. Demand was so strong the government ran out of them.

But now, Uncle Sam is minting the popular coins again.

Sharon Epperson has more on what goes into minting those investments.


SHARON EPPERSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voiceover): From verifying the quality to stamping, and packaging coins to be shipped. Every aspect of production of gold and silver coins at the U.S. Mint has been ramped up to full speed, to meet at the frenzied demand from investors.

RICHARD PETERSON, U.S. MINT ACTING DIRECTOR: In the smallest denomination is the less expensive for the market and probably more appealing to small investors, the demand for that exceeded our capacity in April of this year. We`ve got plenty of blanks now and we`re back in business on the 1/10 oz gold coin.

EPPERSON: This is where the production process begins. After Fort

Knox, the second largest holdings of gold reserves in the U.S. Treasury are here in West Point, New York.

At today`s prices one 400-ounce bar of gold is worth more than a half million dollars. And this vault alone, there are more than $2 billion worth of gold.

ELLEN MCCULLOM, U.S. MINT: There are high fine gold bars that are sent to the vendors to alloy -- melt down and alloy to produce the blanks that we make the gold coins with.

EPPERSON: Ellen McCullom is the plant manager at the West Point Mint. She said a perfect dye is the perfect key to a perfect coin. It`s the template, with images that are imparted on each side of the blank disc that come back from vendors.

MCCULLOM: Once they come to the building, they are checked for quality and for assay. And this is part of the process.

After they are checked by the lab for quality control and assay, they immediately go into our press, as you can see over here.

EPPERSON: Once stamped and inspected, coins are put in tubes and boxes with equipment that can package up to 120 coins per minute. The production is quite a process and comes at a cost. Accounting in part for

the premium buyers pay for these coins.

For NIGHTLY BUSINESS REPORT, I`m Sharon Epperson, West Point, New York.


GHARIB: And finally tonight, we have a winner. Eighty-four-year-old Gloria Mackenzie of Zephyrhills, Florida, has claimed last month`s record $590 million Powerball drawing.

Mackenzie explained that the delay in coming forward by saying her son, who is an attorney, was helping her with legal and financial matters before opting to take a lump sum payout of $370 million. She also said that the person ahead of her in line, allowed her to cut ahead to buy what turned to be the winning ticket. That person must be kicking themselves.

MATHISEN: That is one of the great stories I think I`ve heard in a long time. Please, go ahead of me -- an 84-year-old lady in Florida. That`s beautiful.

GHARIB: And after taxes, she walks away with $270 million. Still a lot of money.

MATHISEN: Smart move taking the lump sum.

GHARIB: That`s it for us NIGHTLY BUSINESS REPORT for tonight. Thanks so much for watching. And remember, this is the time of year your public television station seeks your support.

MATHISEN: And on behalf of your public television station, we do thank you for your support. Have a good night, everybody, and we`ll see you back here tomorrow night.


Nightly Business Report transcripts and video are available on-line post broadcast at http://nbr.com. The program is transcribed by CQRC Transcriptions, LLC. 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 Nightly Business Report, or CNBC, Inc. Information presented on Nightly Business Report is not and should not be considered as investment advice. (c) 2013 CNBC, Inc.

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