<Show: NIGHTLY BUSINESS REPORT> <Date: June 20, 2013> <Time: 18:30:00> <Tran: 062001cb.

118> <Type: SHOW> <Head: Nightly Business Report> <Sect: Business> <Type: SHOW> <Head: NIGHTLY BUSINESS REPORT for June 20, 2013, PBS> <Sect: News; Domestic> <Byline: Tyler Mathisen, Diana Olick, Mary Thompson, Robert Frank> <Guest: Phil Orlando, Karen Mills, Jack Dorsey> <Spec: Economy; Federal Reserve; Stock Markets; Trade; Consumers; Housing; Real Estate; Business; Policies> <Time: 18:30

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Susie Gharib, brought to you by --



bonds commodities, you name it, fear of the Federal Reserve pulling back on the bond buying sends investors to the exits.

The Dow suffers its worst day of the year, plunging more than 350 points.

What should you do now?

On the move. Home sales spike to the highest rate in more than 3 1/2 years. But one set of buyers is on the outside looking in.

And face time. It`s good to be the face of a brand, but what happened to companies if their founders flounder? You may not like the way it looks.

All this and more on NIGHTLY BUSINESS REPORT for Thursday, June 20th, 2013.

Good evening, everyone. Susie Gharib has the night off.

Remember those stock market gains rung up in May, and until yesterday and today in June -- well, they are all gone now. Victims of a two-day slide that began yesterday and only got worse today. In fact, today was the worst day of the year for the Dow and the S&P 500 and saved for a rally on the dollar, there was basically nowhere for investors to hide, not equities, not bonds, not commodities.

Now, the main trigger was the decoration for the Fed that it`s ready to

begin winding down its stimulus program. The losses were compounded especially in commodities by weak data on Chinese manufacturing.

On Wall Street, roughly 20 stocks declined for every one that advanced on the New York Stock Exchange. All 10 S&P sectors were down, declining more than 2 percent each. The two-day drop was the biggest in percentage terms with the Dow and S&P since 2011 and the Dow is now off 5 percent from its all-time high set just a month ago.

At the close, the Dow tumbled 353 points, ending well below 15,000. The NASDAQ lower by 78, the S&P500 down 40.

No matter where your money is, there is almost surely less of it today than there was yesterday.


MATHISEN (voice-over): Virtually no asset, not stocks, not bonds, not commodities was untouched by today`s massive second-day reaction to yesterday`s Fed speech. Words that arguably signal good news in the long run --

BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: The committee believes the downsides risk to the outlook for the economy and the labor have diminished since the fall.

MATHISEN: Instead, investors pulled the rip cord, as Chairman Bernanke put firm dates on the long feared tapering of market-boosting bond purchases.

BERNANKE: The committee currently anticipates that it would be appropriate to moderate the monthly phase of purchases later this year.

MATHISEN: And like Joe Frasier way back in `73, down went stocks, down went bonds, down went oil and gold, and silver. All 30 Dow stocks lost value today, so did 96 percent of the S&P 500. Treasuries tanking, yields on the 10-year note topping 2.4 percent for the first time since August 2011.

Oil down to $95.40 a barrel, lowest in months. Gold off more than 6 percent to its lowest level in almost three years. The drop in silver was the steepest among the precious metals, down more than 8 percent, also cheaper than it`s been in almost four years.

And now what? If anything, higher interest rates might be a good sign for savers, but are your investments at the crossroads? Are the good times of 2013 over? Or is this a chance to take advantage of lower asset prices just as the economy shifts into a higher gear?

BARBARA REINHARD, CREDIT SUISSE: One point we think a lot of investors are missing, though, is that the fiscal drag to the economic growth scenario

for the U.S. next year becomes far more favorable.


MATHISEN: Well, let`s get some prospective from Phil Orlando, chief equity strategist at Federated.

Phil, good as always to see you.

Question number one, is this bull market interrupted or bull market fatally wounded?

PHIL ORLANDO, FEDERATED CHIEF EQUITY STRATEGIST: We`re just interrupted, Tyler. I mean, there is no question the sell-off was a reaction to the Fed announcement. But I think the market is missing it.

The Federal Reserve in our view is going to be making a data dependent decision. For them to be pulling the accommodation, which has been extraordinarily aggressive now for a number of years, they have to believe the economy is ready to grow at its own, at or above trend line, 3 percent or better. And they wouldn`t be pulling the accommodation if they felt the economy was weak. So that`s a positive, not a negative.

MATHISEN: Basically, it seems to me, Phil, that what Chairman Bernanke said yesterday was basically what he`s been saying for months. Now, he did

put some more sharp points on it, but what occurs to me is that the sentiment in the market has changed. A month ago, when there was bad news, the market played by it, played past it. Today, when there are signs of good news in the economy, the market doesn`t take it very well.

Why did sentiment change so abruptly?

ORLANDO: Well, you know, the market since the middle of May, I guess it was about May 22nd when this news first started to break, the market has been down about 6 percent over that period of time. So there has been sort of a shift to negative sentiment and generally around FOMC meetings you do get this volatility.

In our view, this move today was over sold. That`s not to say we`re absolutely at the bottom from a technical prospective you could lose another couple percent but we think this is setting up as much more of a longer-term buying opportunity than a chance to be running for the hills here.

MATHISEN: So, if you agree with your point that this is a buying opportunity, if you think that the economy is actually starting to get into a higher gear, which is certainly what Chairman Bernanke was suggesting there, where are the best opportunities to buy right now?

ORLANDO: What you want to be doing is focusing upon what Bernanke said.

If the economy is improving, what are the economically sensitive sectors of the market that are cheap and poised to do better? We would focus on two areas, financials like banks or insurance companies or diversified companies and consumer discretionary stocks, like housing, autos and media. These areas that are levers to the economy, and if we`re right that the economy starts to pick up in the second half of this year and into next, then those stocks are pretty cheap and they ought to do pretty well.

MATHISEN: How alarmed were you by that Chinese manufacturing number that came out overnight? It certainly kneecapped the commodities space and presumably some of the stocks, as well. Is this what you would see as the beginning of a long-term slowing in emerging markets and in China?

ORLANDO: There is $64,000 question. I mean, we`ve been in the midst of an emerging markets slowdown now over the last several quarters. And the PMI number that we saw in China overnight was just another incremental data point that continues to concern investors.

We would like to see the Chinese government to come out with fiscal and monetary policy initiatives that will sort of re-stimulate growth into the back end of this year, as the start of next. But at this point, it`s like "Waiting for Godot". We`re watching the economy slow down in China where maybe 7 1/2 percent to 8 percent GDP run rate this year. We`d like to see that number sort of stabilize there, maybe move a little bit higher.

But right now, the market`s concern is we`re looking at an emerging market hard landing. And while we don`t think that`s going to happen, it`s very difficult to change that sentiment in the face of data points like we saw this morning.

MATHISEN: Phil Orlando of Federated -- always great to see you.

ORLANDO: Thanks, Tyler.

MATHISEN: You bet.

With everyone focused on today`s sell off, it was easy to overlook some encouraging economic data. The Philadelphia Feds says manufacturing in the mid-Atlantic region was currently at a two-year high. The jobless claims did rise by 18,000 last week, but the moving average is still near multiyear lows. And a read on leading economic indicators edged higher in May to its highest level in five years, with figures for April revised upward, as well.

And there was more good news about housing in May. Existing home sales shot up more than 4 percent from the prior month despite tight supplies reaching the highest sales pace in 3 1/2 years. Meantime, prices on those homes rose 15 percent from a year ago to a median of $208,000. While the housing market appears to be roaring back, there are still some troubling signs.

Diana Olick joins us from Washington with more.

Hi, Diana.

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Hi, Tyler. And as you said, look, home sales are up, but so, too, are prices and mortgage rates. Cash is now king and, unfortunately, first time home buyers are paying the price.


OLICK (voice-over): Newlyweds John and Aubrie Holman are looking to buy their first home. They had planned to buy later in the year but rising mortgage rates have them rushing in now.

AUBRIE HOLMAN, PROSPECTIVE HOME BUYER: Right now, we`re kind of looking at a mortgage that would be comparable to what we`re spending for our apartment, but we could see it go up.

OLICK: The average rate on 30-year fixed mortgage has gone up threequarters of a percentage point since the beginning of last month, when Wall Street begun to worry that the Federal Reserve would begin to rollback its extraordinary monetary measures it had been using to fuel the economy.

That means if John and Aubrie buy a $400,000 home with 20 percent down, their monthly payment goes up 9 percent, or $143 a month.

GREG MCBRIDE, BANKRATE FINANCIAL ANALYST: Of course, the bigger concern for any home buyer is the fact that limited inventories is driving up prices. And that means not only do you have to take a bigger loan, but make a bigger downpayment as well.

OLICK: Prices have been rising by double digits annually for the past six months. Even higher in formerly hard hit markets where investors raked up thousands of distressed properties.

LAWRENCE YUN, NATL. ASSN. OF REALTORS ECONOMIST: Some of the increases can be explained by the fact that it`s recovering from over corrective situation but with people`s income rising at only 1 percent or 2 percent, prices rising double digits, it cannot continue.

OLICK: Part of what`s boosting prices is the fact that a third of all buyers are now using all cash, and that`s just investors. Regular buyers are putting more skin in the game because they are now being forced in bidding wars for what few homes are for sale.

JOHN HOLMAN, PROSPECTIVE HOME BUYER: It`s the cost of doing business here in D.C., and being in the situation we were, we wanted to wait and make sure we were financially secure before we jump into a home.


OLICK: Now, while listings were up slightly in May, they are well below they were a year ago. Sellers are gaining some home equity and moving very slowly back into the market, but not fast enough to meet the rise demand, Tyler.

MATHISEN: So, as Mr. Yun said there, with incomes growing only 1 percent, you can`t sustain the price gain at 15 percent, right?

OLICK: No, he used the word "unsustainable" many times today when they released the report. He said prices up 15 percent or even, you know, when you look at the distress properties and you take that out of it, they`re still just rising far too fast for homeowners to be able to move up in the market.

MATHISEN: Diana Olick in Washington for us tonight, thank you very much.

And another engine of the economy, small business. A little later, we`re going to take look at the challenges facing small business with the head of the SBA, as well as with Twitter co-founder Jack Dorsey.

Well, in Congress today, the House unexpectedly a five-year farm bill that would have cut $2 billion a year from the federal food stamp program. It

would have also let states institute new work requirements for recipients. The problem: many conservatives say the food stamp cuts didn`t go deep enough, while some liberals said they removed too many needy Americans from the program.

A different story in the Senate. Lawmakers there are close to agreeing on a compromised measure over border security, with a final draft of a comprehensive immigration bill a little closer at hand. The new plan would double the size of the federal border patrol and add another 700 miles of fencing and pay for more high tech protections along the Mexican border. It would tack on another $30 billion to the overall cost of the immigration bill.

And more trouble in the Motor City, after tens of millions of dollars in city pension funds are gone. The state appointed manager for Detroit has ordered an investigation into waste, fraud and abuse and corporation in the city`s fund, and all other municipal employee benefit program. A study found Detroit`s general retirement system funds could be under funded by as much as 40 percent and police and fire system by more than 20 percent.

Well, a big switch today from the NASDAQ to NYSE and that leads our "Market Focus" tonight.

Oracle (NASDAQ:ORCL) announced the switch and reported up 10 percent. Oracle (NASDAQ:ORCL) doubling its dividend and it is going to start a $12

billion share buyback plan. But revenues missed expectations. Oracle (NASDAQ:ORCL) now guiding total growth gains of 3 percent to 6 percent in the current quarter.

Now, shares had been down more than 2 1/2 percent at the close, and they dropped further on the sales short fall. Oracle (NASDAQ:ORCL) is up, though, 7 percent over the past year.

Dow component Caterpillar (NYSE:CAT) reports global sales down 7 percent over the past three months because of falling demand for mining equipment and Northern American sales down 16 percent. Cat off more than 4 1/2 percent over the past year and it was down more than 1 percent today in the soggy market. It closed at $83.20.

Kroger (NYSE:KR) has been on the March this year, up more than 26 percent and it reported profits today up more than 9 percent on nifty sales growth. Kroger (NYSE:KR) sees its long-term growth rate between 8 and 11 percent. But Kroger (NYSE:KR) shares got caught in the market down draft, dropping more than 6 percent, more than the market did. It closed at $32.98.

One bright spot today: some of the regional bank holding companies -- they held on to gains despite the sell off. Zions Bank Corporation, Huntington Bank shares and M&T Bank (NYSE:MTB) among the better performer. Zions led this group with a gain of almost 2 percent. Huntington and M&T also positive on the day, and it was a rough day mostly.

And as expected, Facebook (NASDAQ:FB) introduced video on its Instagram app. Users are going to be able to record 15-second video clips putting Facebook (NASDAQ:FB) in direct competition, that is, with Twitters` Vine app, as more and more people stream video to each other. Facebook (NASDAQ:FB) had gained ahead of the news and lost ground in the big sell off, dropping more than 1.5 percent for the day.

Coming up, the co-founder of Twitter tells us how small businesses can get an edge and yesterday men`s warehouse axed its founder and face of the franchise for more than 50 years. How have other companies fared when their creators got canned?

But, first, a look at some of the biggest losers today on Wall Street.


MATHISEN: Yesterday, the founder of Men`s Warehouse was fired after 40 years at the retailer, but building a company from the ground up doesn`t guarantee a founder`s CEO stays in the top spot forever.

Mary Thompson takes a look at the dramatic downfalls and surprising staying power of some other founder CEOs.


MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): It takes a certain type of person to build a business and sometimes a different type of person to run it once it`s built.

GEORGE ZIMMER, MEN`S WEARHOUSE FOUNDER: You`re going to like the way you look, I guarantee it.

THOMPSON: Men`s Wearhouse founder and former chairman George Zimmer did both.

RICHARD JAFFE, STIFEL NICOLAUS ANALYST: I think the entrepreneur founder is very much at one with his company.

THOMPSON: The founder, chairman and spokesman for the chain since 1973, Zimmer ran the company for 20 years before stepping down as CEO in 2011, fired on Wednesday as executive chairman over an undisclosed dispute, Zimmer`s departure a surprise for those who study CEOs.

(on camera): They say performance, not personality is usually the reason for the firing of a founder/CEO, though in the case of Men`s Wearhouse, analyst Richard Jaffe says performance wasn`t the problem.

JAFFE: Men`s Wearhouse has been at least on the last six quarters on an accelerating trend of improved performance. So, it`s hard to look at it

and say, it`s been underperforming. Stock is up 30 percent in the last 12 months. So things aren`t going badly here.

THOMPSON: Things were going badly for online coupon Groupon (NASDAQ:GRPN) earlier this year, when it fired the CEO/founder Andrew Mason. Mason noting the reason in a cheeky resignation letter, citing two quarters of earning misses and a stock price trading at a quarter of its listing price.

Nine years after founding, Apple (NASDAQ:AAPL) disappointing Mac sales took out Steve Jobs, returning 11 years later. His reappointment as CEO in July of `97 marking one, if not the greatest, corporate comebacks ever.

Michael Dell`s return to his firm, less successful. Leaving on his own, he returned and in a fight to control and take the computer maker private.

Others struggle but sour, like Oracle`s Larry Elision. The software`s company founder still successfully steering the firm he founded in 1977.

And while Martha Stewart is still the top chef in her company`s kitchen, it`s stark performance has been lukewarm at best.

Builders all, but for CEO founders, if it`s not built to last, they might be shelved.



MATHISEN: And from the big companies to the smaller ones, this week is small business week, so let`s focus on what they are saying about the economy and challenges they face.

We`re joined by Karen Mills, administrator of the U.S. Small Business Administration, and Jack Dorsey, Twitter co-founder, and CEO of the technology firm Square.

Welcome to both of you.

Let me begin, Ms. Mills, with you. What are small businesses telling you about how they view the economy today?

KAREN MILLS, ADMISTRATOR, U.S. SMALL BUSINESS ADMNISTRATION: Well, this is National Small Business Week and we have just finished crossing the country. We started in Seattle at Microsoft (NASDAQ:MSFT) headquarters with hundreds of small businesses. We went to Dallas, to St. Louis and we talked about everything from technology to manufacturing.

And small business is really on a rising trend across the country, partly because technology is leveling the playing field and we`re finding small businesses that can compete with large ones and also because there is

onshoring. Manufacturing is actually coming back to this country and small businesses in the supply chain are benefitting.

So when we look at the trend today, despite the markets today, the longterm trends for small businesses are accelerating recovery that has really been quite promising in the last year.

MATHISEN: We certainly do see some of that onshoring, the return of manufacturing jobs to the United States, but, Ms. Mills, when I speak to small business owners they are worried about two areas of uncertainty. One is taxes and the other is healthcare under the Affordable Care Act.

What do you tell them to expect there? What are you telling them to get ready for?

MILLS: Well, there is nothing small businesses like better than a tax credit and that`s one of the reasons why we`ve actually passed 16 -actually 18 tax credits over the last several years, to make sure they have more money in their pocket to invest in their businesses. And in the case of Affordable Care Act, there is actually some very interesting positive news coming because one of the things small businesses really care about is access to affordable care, and for small businesses, particularly those under 50, they are now going to be able to go into marketplaces starting the first of next year where they`re going to have insurance companies actually bidding on their business.

You know, small businesses pay 18 percent more than big companies for the same healthcare just because they are small. And now with the marketplaces, they`re going to be able to make apples to apples comparisons and get a better deal.

MATHISEN: Mr. Dorsey, you started small businesses and some of them have become big businesses. I was speaking just yesterday with Niall Ferguson of Harvard and he was decrying how hard he sees it today to start a small business in America.

Do you see it that way? Is it harder than it used to be? Is it too hard?

JACK DORSEY, TWITTER CO-FOUNDER: I think it`s one of the toughest things ever to get going and to start, but technology is enabling people to start faster, and to start with less resources. So we see a trend in people using devices they already know how to use. Their 2-year-olds know how to use. They can buy, you know, anywhere in America and instantly start participating on.

So, we love this, especially at Square, where we enabled a bunch of small businesses not only to accept credit cards with a device they`ve already have, such as their phone or their iPad. But it also, it accounts for their entire business. So, it makes accounting easy.

MATHISEN: He was really pointing I think more towards red tape and permits and things that he had to go through to get his business off the ground.

Let me turn the conversation, Mr. Dorsey, if I might, one other thing that small business people tell me or ask me all the time is I want to use social media to help my business. I want to use technology to do it. I don`t know how and I`m a little afraid of it. What`s the best single piece of advice you can give a single business person about using social media to grow their business?

DORSEY: The simplest thing is to talk about what you love, tweet about what you love, Facebook (NASDAQ:FB) about what you love, take pictures about your craft, about your business. That`s what is engaging to your customers. These are tools to broadcast, to accelerate, to increase participation of people who might be able to see them.

So don`t be overwhelmed by the concept of technology, but just speak as you would to any customer walking into your store.

MATHISEN: Jack Dorsey --

MILLS: And small businesses just love the fact that they can now get on Twitter. They can talk right to customers and technology is really allowing them to do things they couldn`t before, even using Square, food trucks and others can use credit cards. So it`s really opening up, the

innovations that have come from companies like Jack`s are really opening up the playing field for small business.

MATHISEN: Mr. Dorsey, Ms. Mills, thank you vey much for being with us and congratulations on Small Business Week.

MILLS: Thank you.

DORSEY: Thank you.

MATHISEN: All righty. Coming up, as people keep an eye on the first strings when it comes to charity, they open their wallet but maybe not as wide. We`ll explain.

But, first, another look at how commodities, treasuries and currencies fared today.


MATHISEN: A federal appeals court has ruled the trustee for the banks involving the Madoff case cannot sue those banks to recover some of that money. There was fears, also, from that story moving to charities despite the concerns that higher taxes and sluggish economic growth would take a big bite out of charitable give this year, it turns out American generosity is growing.

Robert Frank has more.


ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Americans dug digger into their pockets for charity last year, despite looming tax increases and volatile markets. Charitable giving hit an all time record of $316 billion in 2012, up 3.5 percent from 2011. High profile billionaires like Warren Buffet and Bill Gates grabbed the biggest headlines, and Facebook (NASDAQ:FB) founder Mark Zuckerberg joining the big givers club last year with nearly $500 million in giving.

But philanthropy by the masses helped drive a lot of the 2012 increase. Gifts from individuals rose 3.9 percent to $228 billion. Giving by companies rose even stronger, 12 percent.

(on camera): The U.S. is still the most charitable country in the planet, but not as charitable as we were before the crisis. On an inflationadjusted basis, giving in America is down 8 percent compared to the alltime peak in 2007.

(voice-over): Religion still captures the biggest share of charitable dollars, about a third with $101 billion. Education ranked second with $41 billion.

Education was also among the fastest growing sectors but the strongest growth was in the arts and cultural groups with gifts up 8 percent. That follows three years of weakness in the art sector.

The environment and animals were also popular causes. Human services and health organization were less favored and international giving was basically flat, perhaps due to the lower number of international disasters in 2012.

We`ll see whether higher tax rates and the possible change in deductions will reduce America`s giving in 2013.



MATHISEN: And that`s it for NIGHTLY BUSINESS REPORT tonight. I`m Tyler Mathisen. Thanks for watching. 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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