<Show: NIGHTLY BUSINESS REPORT> <Date: March 5, 2013> <Time: 18:30:00> <Tran: 030501cb.

118> <Type: SHOW> <Head: NIGHTLY BUSINESS REPORT for March 5, 2013, PBS> <Sect: News; International> <Byline: Tyler Mathisen, Bob Pisani, Michelle Caruso-Cabrera, Sue Herrera, Diana Olick> <Guest: Jim McCaughan, Mark Zandi> <Spec: Dow Jones Industrial Average; Economy; Stock Markets; Business; Housing> <Time: 18:30:00>

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Susie Gharib. TYLER MATHISEN, NBR ANCHOR: Uncharted story. The Dow Industrials closed at an all time high, breaking the previous record set nearly 5 1/2 years ago. The question now: where do stocks go from here and what should you do to be ready, whichever way they turn? And laying a foundation. As stocks hit new highs, the housing market shows strength of its own. In tonight`s in focus: housing`s rebound and risks. And good evening, everyone, and welcome to our public television viewers. I`m Tyler Mathisen. Susie Gharib is off tonight, and that is because we are proud to say, she is receiving the Elliott V. Bell Award from the New York Financial Writers Association for her lifetime contributions to financial journalism. It`s a great night for her and NBR and we congratulate her. Our top story aside from that, of course, is the Dow. It surged to a record high close today, rolling past the previous highs setback in October of 2007. Now, for its part the broader S&P 500 closed at a fresh 5 1/2 year high, and the NASDAQ finished the session at get this a 12year high, reached just before the tech bubble burst back in the year 2000. All in all, a day for the record books. The Dow more than doubling since its bear market low almost exactly four years ago. But the question is: why? Why so high? And why now?

(BEGIN VIDEOTAPE) MATHISEN (voice-over): So why is the Dow so high when the economy is so cool, gas prices so high, and consumers still smarting from tighter take home pay? Well, one reason is this man, Ben Bernanke. The Fed chairman has been pumping money into the system for years and he`s not stopping any time soon. BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: In the short term, I would believe that we ought to maintain a reasonable degree of fiscal support, stimulus for the economy. MATHISEN: But is it all Bernanke? CATHERINE KEATING, JPMORGAN INV. MGMT. AMERICA`S HEAD: It`s not just Bernanke. MATHISEN: Catherine Keating oversees nearly a trillion dollars of investments for JPMorgan (NYSE:JPM). KEATING: Balance sheets are strong. They are more liquid than in decades. Profits have already surpassed pre-crisis highs a couple of quarters ago. MATHISEN: In fact, since the market`s 2009 low, corporate profits have risen faster than at any time since the tech boom of the 1990s. And Dow profits are forecast to rise 9.2 percent this year and 9 percent in 2014. Helping too is that the Dow isn`t the same measure it was back in `07. Gone from the index are bailed out AIG, Citi and G.M. In are Cisco (NASDAQ:CSCO) Systems, Travelers and United Health. A different Dow for a different time. (END VIDEOTAPE) MATHISEN: Be sure not every stock is up since the market bottomed back in `08. Hewlett-Packard (NYSE:HPQ) alone among the Dow components has lost money off 22 percent. But let`s say you had perfect timing and you put $1,000 into the following Dow companies when the bull started to run back in March of `09. And Caterpillar (NYSE:CAT), which is up 286 percent, you`d be looking at $28,060 today. Home Depot (NYSE:HD), $2,910. And American Express (NYSE:EXPR) (NYSE:AXP), up 513 percent, you would have a stash worth more than $500. Might we all be so lucky.

Well, with the Dow already up nearly 9 percent this year, even after it gained all of last year, when the Dow surges so smartly, investors naturally want to know where the heck are we? Near the beginning, middle or end of a bull market? Bob Pisani now with a history lesson on how the markets reacted following previous record high closings. (BEGIN VIDEOTAPE) BOB PISANI, NBR CORRESPONDENT (voice-over): So, we finally made it, historic highs on the Dow industrials. But now what? Stock bulls are saying that this could be the start of a sustainable bull market that could last for several years. Their main arguments: first, the Fed is back stopping the economy through low rates. Second, the economy is slowly improving. Third, earnings are at record highs. Fourth, there`s record cash on the sidelines both from individuals and from corporate America. And, finally, with rates so low, there`s just no other place to put money right now. But there are plenty of headwinds that could prevent another bull market from developing. Bears point to sub 2 percent GDP growth that is constraining job creation, anemic revenue growth for corporations, and the threat that the Fed may remove its stimulus program well before there is robust economic growth. (on camera): The biggest threat to the market`s advance is also its biggest hope, and that`s Washington -- a bigger deal on tax reform and entitlement, as well as an extension on the debt ceiling would go a long way towards boosting business confidence, spending and hiring would likely increase and conversely, the failure to do anything in Washington will also weigh on the markets. For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange. (END VIDEOTAPE) MATHISEN: Here to give his take on what`s next for stocks is Jim McCaughan, CEO of Principal Global Investors. It has $281 billion in assets under management. Welcome. Good to have you with us, Mr. McCaughan. JIM MCCAUGHAN, PRINCIPAL GLOBAL INVESTORS CEO: Good to be here, Tyler. MATHISEN: You know, the last time the Dow was as high as it is today, the multiple, the price earnings ratio on stocks was much higher than it is today. Does that give you any comfort that equities can move up from even these lofty levels?

MCCAUGHAN: Yes, I feel the market, that equities will move higher between now and the year end. I think it`s not just the multiples because, you know, multiples give you some comfort. Valuations give some comfort. But valuation doesn`t drive markets. You need the sentiment, too. But it`s when you get modest valuation and improving sentiment and improving fundamentals that I think the market can do pretty well. And I would point to a number of real positives for the U.S. right now. We have the cheapest and most plentiful energy in the world. We have a record of innovation and productivity in business. And lastly, but not least, the house market at last is recovering and will be a positive contributor to business growth and economic growth in 2013. If you add this all up with the money on the sidelines, I think that all though it could be bumpy, the market will most likely end the year higher than it stands right now. MATHISEN: You know, you can`t really separate, I suppose, the monetary stimulus that`s been injected into the system from the idea that corporate profits are moving higher. Do you worry at all about two things getting taken out of the system? One would be some of the federal spending cuts that may come on stream here over the next few months. And number two, the idea that maybe at some point, the Federal Reserve pulls back on the aggressive bond-buying program that`s helped raise asset prices. MCCAUGHAN: Yes. No, there`s no question those two are among the negatives. You know, if there`s a negative for the market and if there`s a buying opportunity between now and year end, it will come either from Washington or from Europe with the European debt crisis, the Italian election was a negative for the market, very briefly last week. But if I look at Washington and the specific points you mentioned, Tyler, I think the Federal Reserve is gearing up for a situation where they will reduce the bond-buying at the point where the unemployment rate is more normal, 6.5 percent they talked about as being the main review point. I think there`s a good chance they get there. And I think at that point, the Fed will be declaring victory. So, I don`t think the Fed will suddenly put the economy and market in reverse. MATHISEN: Very quickly. You know, I was speaking earlier to a market analyst who pointed out that among the 10 S&P 500 sectors, only four are actually higher than they were back in the fall of 2007. And he suggested there`s plenty of value in some of the sectors that aren`t higher. Do you agree with that idea?

MCCAUGHAN: If you`re selective about it, Tyler, I certainly do -- you know, I point, for example to technology which is certainly not back to the highs. You could look at the winners there, including a Google (NASDAQ:GOOG) or an IBM, against some of the losers, notably Hewlett- Packard (NYSE:HPQ). I think, selectively, in technology, you`re going to do quite well. I think, though, that banks are not back to the previous peaks. I think you got to be weary there because the profitability of banks will be adversely impacted by Dodd-Frank and the increased financial regulation. So, valuations -- yes, they are modest and, you know, they are not back to the heady peaks of the previous peak. But I think you got to be selective and professional management is something every investor should be going after. MATHISEN: All right. Jim McCaughan, be choosy is the basic bottom line there. We appreciate it. Jim is the CEO of Principal Global Investors -- thanks for joining us. A little bit later, we will take a look at the confidence of the individual investor and just how much they are fueling this rise. Venezuelan President Hugo Chavez lost a two-year battle with cancer today. Michelle Caruso-Cabrera joins us now with a look at what his death means to Venezuela and to the crude oil market, which accounts for a quarter of that nation`s economy. Michelle, you have actually sat down with Mr. Chavez -- his passing long expected given his poor health. MICHELLE CARUSO-CABRERA, NBR CORRESPONDENT: Yes. Absolutely. He was 58 years old when he died today, and we have been watching for weeks to see when exactly this would happen. And the reason we`re so interested is because we want to see what happens with the country`s oil production. They produce 2.8 million barrels of oil per day in Venezuela. It used to be higher. When Chavez took over, oil production was higher. But he hasn`t invested very much in the country`s oil company, which used to be one of the best in the world. And as consumers of oil in the United States, we`d like to see them invest more in order to increase production.

MATHISEN: The infrastructure internally in Venezuela has not been supported by commensurate investment, to keep it where it needed to be. CARUSO-CABRERA: No. And, in fact, he pushed out a lot of the foreign oil companies or taxed them so heavily that they decided to leave. MATHISEN: What happens next in Venezuela? CARUSO-CABRERA: That`s a good question. He has named an heir apparent, Nicolas Maduro. That guy may try to take over. The opposition is going to say they want snap elections. They`re going to say the constitution says there should be an election within 30 days. We don`t know what`s going to happen. It could be really messy. MATHISEN: All right. Michelle Caruso-Cabrera, thank you very much for that report. Well, coming up, the market may be at new highs. The individual investor is not going along for the ride, at least not so much. We`ll tell you why. But, first, a big day here, but let`s take a look at how the markets overseas fared today. (MUSIC) MATHISEN: Well, with the Dow hitting record highs today, here is some viewer reaction. On the record setting day, so many big movers on the big board, let`s take a quick look at some of the stocks that hit multiyear or all time highs. There are some of them. Walt Disney (NYSE:DIS), Johnson & Johnson (NYSE:JNJ), 3M (NYSE:MMM), and Travelers. Well, sometimes, a cent can go a long way. Retail gas prices fell by a penny overnight to national average of $3.74 a gallon. That is down 3 cents from a year ago. And energy analysts say the slide in prices could continue over the next month. Talk about drug prices. Overall spending on drugs to treat common diseases like high cholesterol and diabetes actually declined in 2012 for the first time in 20 years. The reason? Cheaper generic drug which help bring down costs to insurers. That`s according to the prescription processor, Express (NYSE:EXPR) Scripts. Let`s take a look at how some of the largest generic drug makers performed in the stock market today. Teva and Actavis, higher. But Mylan (NASDAQ:MYL) Pharmaceuticals is down 4 cents.

Martha Stewart took the stand today in the court battle pitting Macy`s against rival J.C. Penney over the exclusive rights to sell her line of goods with the kitchen, the bath and the bedroom. Stewart said she did nothing wrong when she agreed to open shops inside J.C. Penney stores, despite having a long standing contract with Macy`s (NYSE:M). Stewart said she did it because Macy`s (NYSE:M) failed to maximize sales of her items. Let`s take a look at how shares of both of those big retailers did today. One year ago, J.C. Penney sold for $42 a pop. Now a little under $15. Well, two weeks after Yahoo (NASDAQ:YHOO)!`s CEO and new mom Marissa Mayer caused an uproar by telling any employee who works from home to head back to the office, struggling retailer Best Buy (NYSE:BBY) has put an end to flexible hours as well. Employees at its corporate headquarters outside Minneapolis no longer allowed to set their own work schedules or decide how often they show up at the company`s Richfield, Minnesota headquarters. Shares of Best Buy (NYSE:BBY) ended a little bit higher today at $18.40. Well, this is the "rising tide lifts all boats" edition of "Market Focus". First up, let`s tell you about Google (NASDAQ:GOOG), which set another all time high for the second day in a row today -- $838.60 a share, $17.10 higher. Other widely held stocks in different parts of the economy -- Apple (NASDAQ:AAPL), Caterpillar (NYSE:CAT), G.E., Kraft (NYSE:KFT) Foods, Exxon Mobil (NYSE:XOM) -- all advanced as well today. Qualcomm (NASDAQ:QCOM) is raising its quarterly dividend by 40 percent and beginning a new $5 billion stock repurchase plan. Investors responded to that dividend news. The stock up 2 percent on the day. Qualcomm (NASDAQ:QCOM) benefiting, of course, as well from strong demand from consumers for those cell phones whose chips they power. Sears (NASDAQ:SHLD) Holding chief Edward Lampert bought 1.2 million shares in his company. According to a filing, Lampert paid $44.36 a share. Sears (NASDAQ:SHLD) reported higher-than-expected earnings last week helped by cost cuts, and the stock was up sharply today better by better than 5 percent, to $46.63. The asset management firm Legg Mason (NYSE:LM) fighting back from a holiday quarter loss. It says it will trim the number of funds it offers and reduce office space to save money. Investors responded favorably. The stock up almost 3 percent on the session today. And Citigroup (NYSE:C) CEO Mike Corbat told investors at a conference in Boston that the bank has identified at least 21 markets where it`s got to make improvements or just get out. He also set profit targets for 2015 of at least 10 percent on tangible common equity, compared with just 7.9 percent earned last year.

Investors reacted very positively to Mr. Corbat`s goals. Shares gaining about 1.5 percent to $43.60 apiece. Well, today`s record close for the Dow made a lot of institutional investors happy, but what about individual stock buyers? Are investors like you still putting money into equities? Sue Herera takes a look. (BEGIN VIDEOTAPE) UNIDENTIFIED MALE: There are obviously people out there that believe things are in good shape. SUE HERERA, NBR CORRESPONDENT (voice-over): A new high for the Dow. UNIDENTIFIED FEMALE: I think it`s sign much confidence. I`m not sure whether it`s a sign that everything is backing that up. HERERA: But how are you doing? Stock mutual fund and ETF inflows also hit a twomonth record, more than $55 billion. But that money is not coming from the every day investor. Main Street has not been going along for the ride. NICOLAS COLAS, BNY CONVERGEX: We haven`t seen the retail investor play in this market despite this long grinding move higher. HERERA (on camera): In the past, new market highs in the past have been a warning shot to investors that the party might be ready to end. So, what do you do now? Well, that`s the question that`s been hovering over this market since it began climbing in March of 2009. (voice-over): Shrinking incomes are a likely suspect. By 2011, real income adjusted for inflation was down 8 percent since the 2007 stock market highs. Another factor: home prices, still 25 percent less than they were in 2007. But the good news is values have been climbing for four years. ROBERT NARDELLI, XLR-8 FOUNDER: We`re seeing a return in house. We`re seeing housing prices go up, mortgage issues going down. Those are all very encouraging. HERERA: Investment advisors I talked with are recommending their clients wait for a little bit for a fallback in prices before putting more money to work.

So, while the market climbs, ultimately, it`s still confidence and cash that will determine what the individual investor does. For NIGHTLY BUSINESS REPORT, Sue Herrera, New York. (END VIDEOTAPE) MATHISEN: Housing is considered one of the pillars of the economy, of course, and lately, that pillar seems to be getting stronger. Tonight`s edition of "In Focus: The American Recovery," a look at the health of the housing market. But, first, we take a look at treasuries and currencies of the day. (MUSIC) MATHISEN: Along with the Dow hitting an all-time high, shares of home builders have also been on a tear lately. And today, we learn home prices jumped nearly 10 percent in January from year ago levels. That`s the biggest annual leap in nearly seven years. And home builder sentiment is sitting near multiyear highs, and encouraging signs ahead of the spring home-selling season. Tonight in our series on the American recovery, Diana Olick from the epicenter of the housing crisis, Las Vegas, on how far housing has come and the road blocks. (BEGIN VIDEOTAPE) DIANA OLICK, NBR CORRESPONDENT (voice-over): Chris and Kathy Rodgers (ph) wanted to move to a bigger house. With Las Vegas homes costing half of what they did during the housing boom, they figured it was the perfect time, except there was nothing to buy. CHRIS RODGERS, RECENT HOME BUYER: We looked at a lot of the existing homes and some were bank-owned and they were in pretty bad shape. OLICK: So, the Rodgers turned to new construction, which is suddenly sprouting up all around the city, with national and local builders alike coming back to what was until very recently a ghost town of unfinished lots. As for the Rodgers` old home, rather than sell it at a loss, they rented it out. RODGERS: With the rental income, that reduces it by about 40 percent. OLICK: The Rodgers are a big part of why supplies of homes across the nation are so low. Few want to sell at the bottom while millions of others are still under water.

KLIF ANDREWS, NEVADA PRESIDENT, PARDEE HOMES: The overall economy has gotten better. The buyers understand now that these low interest rates are a real dramatic opportunity for them. And most of all, the resale inventories dried up. OLICK: And not just in Las Vegas. Nationally, the number of homes for sale today is down 25 percent from a year ago, according to the National Association of Realtors. Even as the spring market begins potential move up buyers are not putting their homes on the market. NOAH HERRERA, GREATER LAS VEGAS ASSOCIATION OF REALTORS: What`s holding people back from buying a property is the fear of selling their property and not being able to find one. That`s what the problem is. OLICK: Lack of homes for sale coupled with huge demand from all cash investors for distressed properties are a boon to the builders. They are still producing about half the homes they would normally, but they are seeing big jumps in new orders. Housing is finally helping, not hurting the economy. MIKE BRUNSON, REAL ESTATE DAMAGE ANALYTICS APPRAISER: The only thing that concerns me is we have been here before, and the market itself is not what`s driving the price increase. OLICK: Appraiser Mike Brunson saw the very worst of the Vegas housing boom when speculators and builders pushed prices beyond rational levels until it all came crumbling down, something he says is missing from this recovery. BRUNSON: It`s not that we have new employers coming in and creating tens of thousands of new jobs that are leading to people buying new houses. It`s Las Vegas is on sale and investors are buying up everything they can in the used market. OLICK (on camera): Those he argues are not healthy fundamentals. Houses and prices are going up again, but the recovery is still not on solid ground. For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Las Vegas. (END VIDEOTAPE) MATHISEN: And here to weigh in on the jump on home prices and what it means for the housing market as we near the critical spring selling season, Mark Zandi, chief economist at Moody`s Analytics. Mark, welcome. Good to have you with us. Are you surprised that house prices are jumping as high as they are?

MARK ZANDI, MOODY`S ANALYTICS CHIEF ECONOMIST: Yes, I am. I wouldn`t have thought this a year ago. Things were turning around a year ago. I expected price times to improve but not near double digits, not the kind of price gains we`re getting. Now, part of that is related to the decline of distress sales, the foreclosure sales, short sales, and they sell at big discounts. So, for fewer of those, that helps to support pricing. So, that`s part of it. But I`ve been surprised by the strength of the markets. It`s coming back faster, at least in terms of pricing than I would have thought. MATHISEN: So, if the internals of the market party explain that, it is also -- isn`t relatively tight inventory? You point out that we actually probably should be producing or adding new homes on the order of more than nearly 2 million and we`re really only adding about a million and I guess some people are holding back on putting their house on the market, thinking prices are going to go higher still. ZANDI: Yes, to be precise -- and I won`t dwell on the statistics -- but right now, we`re producing about 900,000 homes, that`s single family, multifamily, manufactured housing. That`s on a per annum basis. In a normal economy, not even a very good one, just a normal one we should be producing 1.8 million homes. So, housing construction is going to double over the course of the next couple three years. And because builders are having a hard time ramping it up, you know, it`s hard to get infrastructure for building back up and running again. We had this very tight inventory and that`s allowing builders and sellers to push up prices and thus these price gains. MATHISEN: There`s tight inventory. There`s also a very low cost of money, and I guess creditors are loosening their standards a little over where they were in `08 and `09. ZANDI: A little bit. I mean, obviously, mortgage rates are at record lows. I mean, you can get a 30-year fixed at somewhere at 3.5 percent and 4 percent. So, that`s just an amazing interest rate. And credit -- mortgage credit is not easy to get, but it`s much easier than was a year ago, Tyler, or two years ago. And things continue a year from now, they will be even easier to get mortgage credit. Obviously, that goes well for future housing demand in the market. MATHISEN: Give us a quick forecast. We won`t hold you to it, Mark. What do you think for house prices -ZANDI: I`m always held to my forecast, Tyler. So, go ahead. MATHISEN: What do you think for the rest the year? How much are they going to gain?

ZANDI: The house prices? MATHISEN: Yes. ZANDI: Yes, I think mid-single digits. You know, it should be another really good year, and about the same next year, and a lot more construction. And here`s a really positive thing. This means a lot more jobs and that`s really what we need for a better economy. MATHISEN: Mark Zandi, thank you very much. Appreciate you being with us. ZANDI: Thank you. MATHISEN: Tomorrow on NIGHTLY BUSINESS REPORT, the American recovery will focus on energy. Despite the surge in U.S. oil and gas development, we will examine the forces that are pushing oil prices higher and we`ll be joined by BP CEO Bob Dudley. And finally, tonight, the stock market may be the greatest story ever sold, but the greatest story ever told -- the Bible -- remains number one. On Sunday night, the History Channel scripted mini-series "The Bible", from reality show producer Mark Burnett of "Survivor" fame, drew 13.1 million total viewers. That made it by far the top entertainment show on cable television this year. For the week, it was the fourth highest rated show overall, throw in a couple of "NCIS" episodes and "American Idol". Now there`s go to be a joke about false idols in there somewhere. And, oh, yes, "The Bible" did well. Last year`s "Hatfields & McCoys" did even better for the History Channel. Before we go, we want to point out that NBR.com has a new field. When you type it in NBR.com, you`re going tot see our Facebook (NASDAQ:FB) page where you`re still going to be able to view full programs and post your comments. Again, don`t worry, it is still NBR.com, and you don`t need a logon to do it. That`s NIGHTLY BUSINESS REPORT for Tuesday, March 5th. We want to remind you, it is the time of year when public television seeks your support. We hope you will donate generously. Thanks for being with us. See you back here tomorrow night. Susie Gharib will rejoin me. END 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. <Copy: Content and programming copyright 2013 CNBC, Inc. Copyright 2013 CQ- Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of CQ-Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content.>

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