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118> <Type: SHOW> <Head: NIGHTLY BUSINESS REPORT for May 23, 2013, PBS> <Sect: News; Domestic> <Byline: Susie Gharib, Tyler Mathisen, Bob Pisani, Kelly Evans, Jon Fortt, Michelle CarusoCabrera, Mary Thompson, Bertha Coombs> <Guest: John Manley, Evan Gold> <Spec: Economy; Stock Markets; Business; Computers; Hewlett-Packard (NYSE:HPQ); Policies; Safety; Storms; Insurance; Health and Medicine; Technology> <Time: 18:30:00>
ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Susie Gharib, brought to you by --
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Nerve-wracking day.
Investors dump stocks and then bought them back. Amid all the volatility, what should you do, if anything?
SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: A bright spot? Shares of Hewlett-Packard (NYSE:HPQ) have their best day since 2001. But you may not want to call it a comeback just yet.
MATHISEN: And hurricane warning. Are businesses prepared for what`s predicted to be another active storm season?
All of that and more tonight on NIGHTLY BUSINESS REPORT for Thursday, May 23.
GHARIB: Well, volatility was the word of the day. Investors were pessimistic right from the opening bell, rattled by a big stock sell-off in Japan, a weak economic report in China and lingering jitters about Federal Reserve policies undermining U.S. markets.
The Dow tumbled triple digits, then rebounded, thanks to encouraging news about housing and the job market. By the closing bell, the Dow lost only 12 points. The NASDAQ slipped about four, and the S&P was down by five points.
Here`s Bob Pisani with a tick-by-tick look at what drove today`s wild swings in the market.
BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): It started out wild and it ended on the quiet side. The Dow dropped as much as 115 points right after the open but rallied in the next two hours and went positive on several occasions before ending fractionally in the red.
With worries about higher interest rates down the road, interest rates sensitive groups like utilities and REITs, real estate investment trusts, were weak again today.
Another problem, weakness in manufacturing in China caused the Japanese stock market to drop 7 percent, its biggest drop since the tsunami two years ago.
China is a critical market for many U.S. multinationals.
One big help for the Dow? Hewlett-Packard (NYSE:HPQ), up 17 percent to 52-week high as the company implied business was stabilizing. They raised guidance.
(on camera): There was heavy volume at the open for the second day in a row. But heavy selling was met with an almost equal amount of buying interest -- a sign that despite worries the Fed may end its bond-buying program, there`s plenty of people who don`t think it will happen anytime soon.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
MATHISEN: As Bob said, one of the fears hanging over stocks is that the Federal Reserve, sensing an improving economy, may slow its bond-buying program. So, the question now is, is good economic news suddenly bad for the markets?
Kelly Evans takes a look.
KELLY EVANS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): The U.S. labor market is improving. New claims for unemployment benefits fell by 23,000 last week. And the total number of Americans on jobless roles is back below 3 million for the first time in five years. Good news, right?
Not so fast. Stock market futures took a hit this morning after that report. New home sales and prices beat expectations, but the market shrugs it off.
These are just the latest examples of what`s become the new normal behavior on Wall Street. Stocks now seem to sell often every time we get better-than-expected reports on the U.S. economy, instead of cheering the news.
So what`s going on? Shouldn`t investors bid up stocks on the prospect of better future earnings than revenue growth?
(on camera): Not right now, because there`s more concern about how the economy will do if the Fed begins to taper its $85 billion a month in support. In fact, markets tumble globally yesterday after Fed chairman Ben Bernanke told Congress the Fed could begin to dial back as soon as this summer if the labor market improves.
BEN BERNANKE, FEDERAL RESERVE BANK CHAIRMAN: We`re trying to make an assessment of whether or not we have seen real and sustainable progress in the labor market outlook. And this is a judgment that the committee will have to make. If we see continued improvement and we have confidence that that is going to be sustained, then we could -- in the next few meetings, we could take a step down in our pace of purchases.
EVANS (voice-over): After those comments, U.S. markets turned negative and it was a sea of red across Asia and Europe as well. For one, investors are worried that the U.S. economy isn`t strong enough on its own to justify stock market prices this high.
For another, the prospect of higher interest rates without the Fed`s bond-buying is spooking concern, as well.
Still, some investors saw the early-selloff Thursday as a buying opportunity, and that helped the Dow rebound from triple-digit early morning losses. Perhaps, it also helped that the gauge (ph) of U.S. manufacturing activities separately fell to an eight-month low.
The message: the U.S. still isn`t strong enough to stand on its own two legs. And that bad news, for now, is seen as good news on Wall Street.
For NIGHTLY BUSINESS REPORT, I`m Kelly Evans from the New York Stock Exchange.
MATHISEN: So, is now the time to change your long-term investment strategy as the day to talk one way and then the other? We`ll chat about that in just a few moments.
GHARIB: Hewlett-Packard (NYSE:HPQ) knows about good and bad. Profits plunged 32 percent last quarter but shares surged 17 percent today. The legendary company has endured management shakeups, restructurings, and financial ups and downs for the past three years. Now, CEO Meg Whitman says HP is right where it`s supposed to be.
Jon Fortt has more.
JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): HP stock today reached 52-week highs after earnings showed a turnaround at the tech giant might be closer that critics thought.
(on camera): So a happy day is here again?
Not so fast. These results are more a testament to CEO Meg Whitman`s skill at managing expectations. Revenue actually missed consensus by half a billion dollars, as PC group sales came in especially week. But, investors are focused on non-GAAP earnings per share, which beat by 5 cents.
(voice-over): Beneath those headline numbers, it was a mixed bag. PC units fell a whopping 21 percent, with laptops faring worst.
In that department, HP made the opposite decision from Dell (NASDAQ:DELL). HP chose to sell fewer low-end PCs in the quarter to boost profit margins. The server business suffered, down 12 percent. Printing, networking and technology services held their own.
MEG WHITMAN, HP CEO: There are huge tectonic plate shifts about the way the technology is consumed, the way it`s bought, the way it`s paid for, the way software is written and delivered, the way end users engage with technology. So, there`s a lot going on in our world. But we are growing businesses that power a new style of IT. We`ve got declining businesses that powered the old style of IT. So, we`re in that, not hole, but one has to get through. But I feel good about -- I feel good about the growth prospects for 2014.
FORTT: And growth is where all of this hinges. PCs and printers now make up less than half of HP revenue for the first time in quite a while.
If Whitman is going to deliver growth next year, she`ll have to either figure out a successful tablet and smartphone strategy or a way to turbo- charge the data center.
ROB CIHRA, EVERCORE PARTNERS ANALYST: I think it`s more likely that they have the upside and the data center because I do think that`s where more of HP strength why at this stage, and, frankly, in the consumer side, they really haven`t shown much to make one expect a lot of upside there any time soon.
FORTT (on camera): So it`s not a turnaround yet. But it is disciplined from HPC Suite when it comes to managing earnings. Given HP`s recent history, discipline alone, it`s worth a little excitement.
For NIGHTLY BUSINESS REPORT, I`m Jon Fortt.
MATHISEN: Retailers earnings, that`s our "Market Focus" tonight.
Let`s begin by minding the Gap (NYSE:GPS).
Gap (NYSE:GPS) stores reporting a 43 percent increase in profits, beating estimates while revenues were in line. The company`s Gap (NYSE:GPS) and Old Navy brands did particularly well. But same-store sales were flat at Banana Republic. So shares did not jump on that profit news.
After trading less than a percent higher during the day, they close at $41.36.
Sears (NASDAQ:SHLD) also reporting after the close today and posting a loss of a buck 29 a share. That`s more than double Wall Street estimates. Declining same-store sales at both Sears (NASDAQ:SHLD) and K-Mart locations right now on cooler spring weather.
Sears (NASDAQ:SHLD) shares have been up on the rebound -- have been on the rebound, up more than 30 percent for the year. But flat today, closing at $58.17, before dropping more than 10 percent later on that earnings news.
GHARIB: Dollar Tree (NASDAQ:DLTR) was the top gaining retailer, reporting a 15 percent jump in profits and raising its earnings outlook for this year. The discount also increased private label products and added frozen foods at some locations. Shares of Dollar Tree (NASDAQ:DLTR) rose almost 4 percent to $50.19.
And Ross Stores (NASDAQ:ROST) reported a 12 percent jump in profits and raised its guidance for the full year. Ahead of the report, this discount apparel and house wares chain announced a dividend of 17 cent. Shares were flat during the regular trading session, closing at $65 and change, but rose about 1 percent in after-hours on that profit news.
MATHISEN: So how should you invest in a market suddenly prone to wild mood swings?
Here with advice is John Manley. He`s chief equity strategist for Wells Fargo (NYSE:WFC) Funds Management.
Great to see you again, John. How are you?
JOHN MANLEY, WELLS FARGO FUNDS MANAGEMENT: Very well. Thank you, Tyler. Good to see you.
Is this what we`re seeing in the last couple of days, the beginning of the widely expected correction that so many have been predicting for so long?
MANLEY: I`d never seen a wildly expected correction actually occur. I think this is a buying opportunity. I can`t give you guarantees about 1 percent or 2 percent.
But there`s still a lot of money waiting to get in. The market still goes down very quickly on minor bad news which says to me people are still itchy.
GHARIB: They are feeling itchy and they`re also very nervous. They don`t like this volatility. So, what should investors do or not do during this phase of volatility?
MANLEY: I think not pay attention to the volatility is the best thing. Decide where you want to be in a year or two years, or how you want to retire? Set your portfolio up so can afford to fund it. I think that`s really important.
Yield is a very, very important commodity going forward.
MATHISEN: One of the things I noticed, John, in your sort of model portfolio is that generally, as a baseline, you think 65 percent in equities is a good place to start, given the growth potential there. But as I understand, as you`ve got 5 percent in cash, and nothing, nothing in bonds with the remaining 30 percent or so in what you describe as alternatives.
Why no bonds? And what do you mean by alternatives?
MANLEY: Well, we`re in the process of moving in that direction. We still have some bonds.
But again, we`re not going to focus on high quality stuff. We`re not going to focus on treasuries, there`s just no value there. We think the spread is very interesting at this point in time. But even that`s not as cheap as it used to be.
I think you need something to offset some of the volatilities and stocks. I think more and more alternative investments do that. And we try to look at funds, for example, that actually do that sort of thing, to try and balance off the volatility equity market (ph) with a non-correlated asset that is not in the bond market.
GHARIB: Like what? Like what, John?
MANLEY: Well, there are a lot of things. You can do long short. I think that`s rather interesting. You can look at some commodities, both long and short again.
There are all sorts of different little strategies that you can look at to try to get a little more than GDP, a little more than CPI (NYSE:CPY) for your return. And you get lower volatile in that part of portfolio, you get lower returns. That allows you to stay more comfortable in the equity market.
MATHISEN: Are there enough alternatives in that alternative space? Susie just asking, like what? You mentioned long short funds and some commodities. Are there enough alternatives out there, either in the form of ETFs or mutual funds that are broadly available to individuals, as opposed to hedge funds that require that people be accredited investors?
MANLEY: They`re out there. They`re out there and they are available to individual investors. I think you have to look a little bit, but they are there. I think one of the things that`s happened has been the democratization of investing to a certain degree.
It doesn`t mean higher volatility. Hedge funds is there to hedge. Hedge funds are there offset volatility, not create it.
GHARIB: John, you said that you`re still a big believer in stock. Tell us a little bit more of where investors should be putting their money, what kinds of stocks, and stocks that can withstand volatility?
MANLEY: I think that -- well, first of all, we`ve been focusing almost exclusively on large cap for the last five or six months, and it`s been recently good. I still focus on large cap, but I would be less strict about it, because I think you`re going to see more M&A activity. That`s going to favor the mid cap. They`ve been passed over to a certain degree.
When it comes to sectors, I still think we`re going to start rotating down towards more cyclical names. We`ll hold onto health care stocks for a while because we think they do have decent value and they do have some growth. But it`s more economically sensitive.
MATHISEN: John, terrific. Thanks for stopping by. We appreciate it.
MANLEY: Great. Great to see you.
MATHISEN: John Manley with Wells Fargo (NYSE:WFC).
GHARIB: And late this evening, NBC is reporting that the IRS`s Lois Lerner, this is the woman who headed the unit at the heart of the scandal and who appeared in front of Congress yesterday, has been placed on administrative leave.
MATHISEN: Coming up, a warning today that this year`s hurricane season could be a quite active one. Are businesses prepared for what may be ahead?
First, though, how the international markets closed today.
MATHISEN: Some of today`s stock selloff was due to weak economic data out of China. The fear of a slowdown there has money coming here.
Despite negative headlines about Chinese investment in the United States revolving around security concerns, investment by Chinese companies in the U.S. is now at a record high and growing.
Michelle Caruso-Cabrera has the story.
MICHELLE CARUSO-CABRERA, NIGHTLY BUSINESS REPORT CORRESPONDENT (voiceover): Vitamins of every shape, size and solubility manufactured at this New Jersey-based company but owned by Chinese investors. Next time you go to the movies, it may be a theater owned by a huge Chinese entertainment company. Driving over this bridge in New York state? It was rehabbed by a Chinese firm.
Chinese companies spent $6 billion buying American last year, a record amount. The biggest investment so far? AMC Theatres. A Beijing firm called Dalian Wanda bought them last year for $2.6 billion.
AMC CEO Gerry Lopez has gone from answering to American owners to answering to Chinese owners.
He says regardless of nationality, the goals are the same.
GERRY LOPEZ, AMC THEATRES CEO: They have expectations. As you would think, of net profit delivery and returns on investment and attendance growth. But those are not unexpected, nor are they frankly different than we would sought on ourselves.
CARUSO-CABRERA: The chairman of Wanda, Jianlin Wang, tells me he`s just getting started. He plans to spend another $7 billion in the U.S. before the end of the decade.
He tells me the U.S. market is his top choice for investing not only because it`s the biggest movie market in the world, but also because the U.S. has the best environment for investors. The legal system here he says is more dependable than in any other parts of the world.
Echoing that statement, Steven Dai, CEO of International Vitamin Corporation in New Jersey, a firm he and several other investors bought in 2010.
STEVE DAI, NATIONAL VITAMIN CORPORATION: So many good things. I encourage people to invest here.
CARUSO-CABRERA: They poured hundreds of millions of dollars into IVC for expanding its IT system, warehouse and nearly doubling the number of employees, all from the U.S. Dai also likes that corruption is nearly nonexistent in the U.S. and he`s never been asked for a bribe.
DAI: You just put down what you are doing and you`re hard work will be rewarded. You don`t have to deal with many other things like connections or relationships. This is a purely business relationship.
CARUSO-CABRERA: Nearly every Chinese executive told us the same thing.
Ning Yuan is the CEO of China Construction America, building roads in New York state and schools in South Carolina.
NING YUAN, CHINA CONSTRUCTION AMERICA CEO: Investment, environment is very good here.
CARUSO-CABRERA: It`s one of the key reasons why Chinese investment in the U.S. is expected to hit another record level this year.
For NIGHTLY BUSINESS REPORT, I`m Michelle Caruso-Cabrera.
GHARIB: And AIG is waiting to hear if it would be allowed to sell its aircraft leasing business to a group of Chinese investors. If so, it would become the largest Chinese acquisition in the U.S.
MATHISEN: Hurricane season starts June 1st. And, today, government forecasters predict a stormy six months ahead. Insurance companies and businesses are already getting prepared and the big question is, are you?
Mary Thompson has more now.
MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voiceover): Batten down the hatches, the National Oceanic and Atmospheric Administration warning that 2013 hurricane season could be a big one.
KATHRYN SULLIVAN, NOAA ACTING ADMINISTRATOR: For the six-month hurricane season which will start June 1st, NOAA predicts an above normal and possibly an extremely active hurricane season.
THOMPSON: Warmer-than-average sea surface temperatures in the tropical Atlantic Ocean and Caribbean Sea, along with near-normal sea temperatures in the Pacific behind that rough forecast.
NOAA is predicting 13 to 20 named storms from June through November. It predicts seven to 11 will be hurricanes, and three to six of those could be a category three or above. This year`s forecast, above the average of 12-named storms and six hurricanes a year.
As for insurers, despite spiking claims expected from the thunderstorms and tornadoes hammering the Midwest over the last week and a half, analyst Randy Binner saying the insurance industry can handle an above-average hurricane season without a big Katrina-like storm.
RANDY BINNER, FBR CAPITAL MARKETS: The capital adequacy of the industry is strong and it`s very well-positioned to absorb -- you know, anything but the very largest event.
So, a few hurricanes this summer really wouldn`t make a lot of difference relative to the overall capital base of the industry.
THOMPSON: As for homeowners, the Insurance Information Institute reminds you to make sure you have adequate insurance for your home, food insurance from the national program as flooding isn`t covered by most homeowners` policies and an inventory of your valuables.
(on camera): Lastly, for your own safety, have an evacuation route in mind if a hurricane is bearing down on your area.
For NIGHTLY BUSINESS REPORT, I`m Mary Thompson.
GHARIB: And for more on the business impact, we turn to Evan Gold. He`s a senior vice president at Planalytic.
Evan, I want to start by asking you that question that Tyler posed. Are we better prepared for this hurricane season -- individuals and businesses?
EVAN GOLD, PLANALYSTICS: Hi, Susie.
Yes. You know, I believe that individuals, as consumers, we are, and there`s a couple reasons for that. First and foremost, certainly, the tragic events earlier this week in Oklahoma are a stark reminder that people need to be prepared for severe weather. And then, certainly, you know, the heels of Sandy last year that hit so many population centers that I`m sure on June 1st, you know, the first day of the hurricane season, it would be a good reminder that folks need to stock up and get prepared.
Next week is National Hurricane Preparedness Week. So hopefully, people will be out there.
From a business perspective, absolutely they`re prepared. They`ve been preparing for a while. And, you know, the clients that we`re working with are constantly prepared, right? These type of events, whether they`re hurricanes, snowstorms, tornadoes, hail, you name it, they`ve come at us fast and furious over the last several years. So volatility is the word of the day.
MATHISEN: We seem to get better forecasts of exactly where and when storms are going to hit and with what force. Comment on that, if you would, and how that helps people prepare better? And, number two, are you expecting the kind of hurricane season, an active one, that NOAA is?
GOLD: Sure, Tyler.
So, from a forecasting perspective -- absolutely, it`s gotten better. Not only better in terms of accuracy, but over a time period, right?
Today, in looking at a three-or-five-day outlook is a lot more reliable than it was just several years ago. So, people have a lot more certainty. That doesn`t mean that you should get complacent at all. People still need to watch this and keep track and tabs of this event because, you know, a little bit of wiggle, so to speak, for a specific track of a storm can mean significant impact of the large population centers.
In terms of the activity this year, you just mention that NOAA is looking up to 20 storms. We`re looking for an above season as well, maybe not that active, but certainly, above normal.
Now, again, on the heels of what happened last year, we only have a couple of major hurricanes. But everybody remembered Sandy, and really, it only takes one of them to have a significant impact.
GHARIB: You`re absolutely right with that. So, go over with some of the mistakes that businesses make. What are some of the dos and don`ts for the companies that maybe are not so prepared?
GOLD: Sure. First and foremost is, absolutely, be prepared, right? You`ve got to have a plan in place long before June 1st, including staging inventory, planning operations, planning logistics, you know, all of those things have to be in place.
I think the other thing to kind of keep in mind, especially from a business perspective, consumers buy on the forecast. Not necessarily what actually happens.
So, if the news is out there saying that, you know, five days in advance, there`s going to be a major event hitting, say, south Florida, right, which is an area that`s always under the gun and is again this year, consumers are going to be out there buying specific products. Whether that storm actually goes there or not, in some respects is immaterial because the consumers are already out there looking for it. And the businesses need to be prepared and service value-added members to those communities.
Thanks so much for all that good advice. Evan Gold of Planalytics.
And still ahead on the program, there`s a hot new job in health care. And it`s one you probably haven`t heard of. Find out who`s in demand and how they`re improving health care for everyone.
But, first, let`s get a check on how commodities, treasuries and currencies fared today.
GHARIB: And, finally tonight, hospitals, health insurance and pharma are looking to harness big data and the growth is pushing the demand for new skills, like data scientists and analysts. One recent study estimates by the year 2018, the U.S. will be short 2 million workers with the required expertise.
In the last installment of our series on the future of health care, Bertha Coombs takes a look at closing that talent gap.
BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voiceover): It may not be long before Explorys outgrows its offices in Cleveland. The healthcare big date firm has doubled its staff to 100 in the last year as its client list has grown more than twofold to 200 hospitals and more than a dozen health systems.
STEPHEN MCHALE, EXPLORYS CEO: We`ve done very well in attracting great talent. I think that our mission and purpose is key. We`ve spent a lot of time really thinking about what matters to us. And, you know, our purpose is to really unlock the power of big data to improve health care for everyone.
COOMBS: But Explorys may be an anomaly. Competition for workers with high tech analytics skills has been explosive. In part, fuelled by new digital billing and patient monitoring requirements for hospitals, doctors and physician groups under the Affordable Care Act.
Employment research firm Burning Glass, found while total online job postings have grown a tepid 6 percent since 2007 and growth in health care postings has actually slowed to 5 percent, healthcare informatics job listings has surged more than 50 percent in the last five years.
But a PWC survey found two-thirds of hospital executives say after building up their IT infrastructure, they`re having trouble filling informatics and data science jobs.
DANIEL GARRETT, PWC HEALTH IT PRACTICE LEADER: Fifty percent, 60 percent of those CEOs are saying they`re concerned, they don`t have the skills required to execute the strategy that they just created. And that`s, to me, a signal that there`s a real issue here.
COOMBS (on camera): But it`s not just hospitals. Pharmaceutical companies, insurers and researchers are all on the hunt for data scientists.
(voice-over): A number of health services firms have resorted to buying the talent they need. In December, McKesson (NYSE:MCK) acquired population helped specialty firm MedVentive for an undisclosed sum. In January, UnitedHealth Groups subsidiary Optum bought clinical benchmarking firm Humedica after having acquired customer analytics powerhouse Connexitions in 2011.
Could Explorys, with its growing network of clients, be next?
Steve McHale doesn`t rule it out. But either way, he`s committed to working with others in the industry to nurture and help develop new talent.
MCHALE: We`re involved in university programs right now that are forming both undergrad and graduate level informatics programs at a rapid rate.
COOMBS: Long term, that`s the only way the industry will be able to fill the talent gap.
For NIGHTLY BUSINESS REPORT, I`m Bertha Coombs.
MATHISEN: You know, Susie in the movie "The Graduate", Dustin Hoffman got the advice, plastics. The advice now is informatics and analytics, right?
GHARIB: A lot of jobs and people looking for job. I hope the ones who are in college will major in things that will prepare them for this.
MATHISEN: And from that data, we may learn new ways of what really works, what the best outcomes are and a way to lower costs in the medical care area.
GHARIB: Let`s hope for that.
That`s NIGHTLY BUSINESS REPORT for tonight. I`m Susie Gharib. Have a great evening.
MATHISEN: And I`m Tyler Mathisen. From me as well, thanks and have a great night. We`ll see you here tomorrow night.
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