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118> <Type: SHOW> <Head: NIGHTLY BUSINESS REPORT for July 5, 2013, PBS> <Sect: News; Domestic> <Byline: Tyler Mathisen, Sue Herera, Eamon Javers, Jon Fortt, Hampton Pearson, Steve Liesman > <Guest: Wayne Kaufman> <Spec: Economy; Employment and Unemployment; Labor; Stock Markets; Samsung; Electronics; Technology; Business; Gaynor Minden; Products> <Time: 18:30>
ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Susie Gharib, brought to you by --
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Good news on jobs. Surprisingly strong employment reports sent stocks sharply higher and bond yields, too, as investors ponder the end of the Federal Reserve stimulus program.
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Smartphone slow down? Tech giant Samsung sends a warning to investors and across the entire industry. The market may have reached a saturation point.
HERERA: Leaps and bounds. From the agony of the defeat to a profitable business, by building a better ballet shoe.
All of that and more tonight on NIGHTLY BUSINESS REPORT for Friday, July 5th.
MATHISEN: Good evening, everyone. I`m Tyler Mathisen, along with Sue Herera. Susie Gharib has the night off.
The monthly jobs report from the Labor Department is arguably the best and clearest indicator of the economic state of the Union, and today`s numbers suggest the Union is reasonably strong and possibly getting stronger.
Employers added 195,000 new jobs in June, far more than forecast, and the numbers for April and May were revised sharply higher. But because so many more Americans jump back into the market to look for a job, the nation`s unemployment rate held steady at 7.6 percent.
Eamon Javers now with more on the good news about jobs in June and what it might mean for the economy.
EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Seth Shapiro, the owner of Silver Sport in Washington, D.C., is doing something this month that thousands of business owners across the country are also doing, hiring new workers.
SETH SHAPIRO, SILVER SPORT OWNER: A qualified person for me is someone who`s happy, naturally, someone who`s active, someone who`s reliable and trustworthy and customer focus understands what the customer is looking for.
JAVERS: Signs that the hiring surge in store fronts and shopping malls provide testament to the government numbers. A lot of new jobs came in traditional summertime industries: 52,000 hired in food services and drinking places and 19,000 in amusements, gambling and recreation, according to the Department of Labor. But private sector employment surged by 202,000, even as government employment declined. And that means more people like Kevin Carter who are facing unemployment have reason to be optimistic.
KEVIN CARTER, UNEMPLOYED: I feel pretty good. I`m pretty confident that I will be employed again. So, I don`t have a dire outlook on my future.
JAVERS: To the experts, the new data gives similar hope.
KEVIN HASSETT, AEI SENIOR FELLOW: Now, the unemployment rate is still high, there is a lot of room to improve, but it`s really heading in the right direction now in a sustainable and convincing way, much more so that it has since President Obama was elected.
JAVERS: But some think there could be still threats to the U.S. economy looming.
MARK ZANDI, MOODY`S ANALYTICS CHIEF ECONOMIST: I mean, we`re doing really much better here in the United States but in Europe, they are still in recession and the emerging world has been very disappointing. Growth has slowed quite a bit in places like China and India, Russia, and Brazil.
So that`s doing some damage to our expert growth with those (ph) manufacturers.
JAVERS (on camera): For Wall Street, the news presents a conundrum, does all the new hiring mean the Fed is more likely to ease off of its liquidity injections? For now, anyway, the market seems ready to celebrate the good news.
For NIGHTLY BUSINESS REPORT, I`m Eamon Javers in Washington.
MATHISEN: And still ahead in the program, as college graduates enter the job market with increasing debt loads, many are asking whether their degrees are worth it. We`ll explore that coming up.
HERERA: On Wall Street, stocks rallied wrapping up the second straight week of gains on that strong jobs data, but the session had plenty of drama. The major averages began the day sharply higher on that jobs report but investors sold stocks mid-morning, even turning the major indices negative for a time on concerns that the good news about jobs could drive the Federal Reserve to begin pulling back on its asset buying stimulus measures a little bit sooner perhaps than expected.
But then cooler heads prevailed and stocks closed to the upside after an up and down day, the blue chips surged 147 points higher, the NASDAQ was up 35 and the S&P 500 added 16. And as investors bought equities, they sold bonds. The yield on the 10-year Treasury note jumped to more than 2.7 percent, closing in on a two-year high.
As for gold, it lost more of its luster falling another 3 percent on a stronger U.S. dollar.
MATHISEN: The political crisis continues over in Egypt. Deadly clashes broke out as thousands of protesters took to Cairo`s Tahrir Square on Friday evening. But this time, they were mostly supporters of the ousted President Mohamed Morsy and his Muslim Brotherhood party, battling the police and military forces.
Meantime, a state of emergency in the Suez Canal region ramped up concerns about oil supplies coming out of the Middle East, sending oil prices sharply higher. Crude shot up nearly $2 today, closing north of $103 a barrel and that is a fresh 14-month high.
HERERA: Federal officials have approved a three-day deal in which Japan Softbank acquires a majority of Sprint Nextel (NYSE:S). And Sprint buys the rest of broadband provider Clearwire (NASDAQ:CLWR) that it doesn`t already own. The FCC`s actions are the final step before a 78 percent stake of Sprint, the third largest U.S. wireless carrier, becomes the biggest ever Japanese acquisition of a U.S. company in a deal that`s worth some $21.6 billion.
MATHISEN: Shares of Samsung took a hit today in South Korea where they trade on concerns over sales of Samsung`s flagship phone, the Galaxy S4. And that has some concerned that the company`s rapid growth in the high-end cell phone market may be slowing, and whether the smartphone market itself is saturated.
Our Jon Fortt has more.
JON FORTT, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Every great run must come to an end and it`s beginning to look that way for meteoric growth in the smartphone market. Samsung, the Korean electronics powerhouse and Apple`s chief rival, today projected that it`s operating profit for the second quarter would fall short of analysts` expectations. Samsung says to expect $8.3 billion in operating profit, versus the $8.9 billion observers were hoping for.
(on camera): It`s like a replay of what happened to Apple (NASDAQ:AAPL) stock within the past nine months. Samsung stock has taken a dive in the past month to levels it hasn`t seen since last September when Apple (NASDAQ:AAPL) stock woes began.
(voice-over): The culprit smartphones are a huge market but there doesn`t seem to be a lot of room for growth at the high end. Roughly 60 percent of U.S. adults have one already.
BRIAN MARSHALL, ISI SR. MANAGING DIRECTOR: For Samsung, their best days could be behind them. Frankly, Apple`s best days are behind them, as well. And so, it just becomes more of a question of law of large numbers and an maturation and penetration of the market opportunity.
FORTT: The same thing happened to the iPod five years ago. After being hugely popular for four years, profitability began to wane from the line of music players. The difference this time, smartphone sales are so enormous that they turned Apple (NASDAQ:AAPL) into one of the most valuable companies on the planet, a run the late Apple (NASDAQ:AAPL) cofounder and CEO started with a modest prediction.
STEVE JOBS, APPLE CO-FOUNDER: And we think what we`ve done is to reinvent the phone, and completely change what your expectations are going to be from what you can carry in your pocket.
FORTT (on camera): So, what`s next when the PC market is saturated, we got iTunes and the iPod, when the music player market saturated, we got a new generation of smartphones. If history is any guide, the next wave of profit will come from devices and services that connect to all those phones.
For NIGHTLY BUSINESS REPORT, I`m Jon Fortt in San Jose.
HERERA: In the meantime, rival smartphone maker HTC reported dismal earnings with the latest quarter with profits tumbling 83 percent. The Taiwan-based electronic giant actually reported strong sales for its flagship HTC 1 phone over the past three months, but analysts predict that future sales are likely to be eclipsed by new products from the bigger rivals Apple (NASDAQ:AAPL) and Samsung.
MATHISEN: Another tech giant Dell (NASDAQ:DELL) is in a kind of fight for its life, at least its life as a public company. The company founder Michael Dell (NASDAQ:DELL) has apparently indicated he won`t sweeten his and Silver Lake partner`s $24.4 billion bid to take the company private. He`s evidently willing for now to take his chances that his bid will win the favor of shareholders and the proxy firms that advice institutions on how to vote their shares. A rival bid from activist investor Carl Icahn carries a higher per share price. That offer for a portion of the company would leave a chunk of Dell (NASDAQ:DELL) still trading on the public markets.
Investors didn`t like the news today and Dell (NASDAQ:DELL) shares closed 2 percent lower today.
HERERA: Amazon (NASDAQ:AMZN).com, the world`s largest online bookseller, is also making news and a lot of book authors and publishers are not happy about it. After years of lowering prices on books to under cut the brick and mortar competitors, Amazon (NASDAQ:AMZN) has become so dominant in the marketplace that it`s now offering smaller discounts on some books, or in the case of many older or slower selling titles, no discounts at all.
MATHISEN: And still ahead, as college costs skyrocket and wages remain stagnant, jobs sometimes hard to come by, many recent grads are wondering, are their degrees worth it?
But, first, how the international markets closed today.
HERERA: With worries about 1 trillion in outstanding student loan debt, a lot of people are wondering if college is right for everyone, or if for some, a college education is worth the money at all.
Hampton Pearson has more.
HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voiceover): When Brandon Anderson graduates Georgetown University next spring with a sociology degree, he`ll leave college with $25,000 in student loan debt for a job with a $26,000 a year salary. But the former high school drop out who turned his life around with a stint in the military says a college diploma is worth it.
BRANDON ANDERSON, COLLEGE STUDENT: If we ever want to make something of ourselves in this day and age or if we want to become happy, we want to -- if we want a better job, if we want to be able to take care of our families the way the American dream promises, education is certainly worth it.
PEARSON: For Devan Sutherland, it`s a different story. It`s been more than a decade since she graduated from the University of Maryland. Now, she`s a medical office coordinator at the Johns Hopkins Medical Center in Baltimore. Her second thoughts about the value of her college education go far beyond the $5,000 she still owes on student loans.
DEVAN SUTHERLAND, COLEGE GRADUATE: It seems like your bachelors degree is like a high school diploma. It doesn`t open any magical doors. It doesn`t give you, you know, a free pass to gain employment at some of the biggest companies on the state or across the country, really. It`s just -- it`s just another piece of paper.
PEARSON: At just under a trillion dollars, student loan debt is higher than auto loans and credit card debt. The 2007 recession was the game changer, accelerating loan defaults and unemployment rates for college graduates fueled by skyrocketing college costs and fewer jobs with stagnant wages in the workplace.
Anthony Carnevale has advised both Republican and Democratic presidents on education and unemployment policy.
ANTHONY CARNEVALE, GEORGETOWN UNIVERSITY: The reason you go to college is that so you can live more fully in your time but you`re not going to live more fully in your time if you`re living in your parents` basement or under a bridge out of a shopping cart.
So, college is so expensive now, it has to be treated like an investment. It`s really the first big investment that young people make their lives.
PEARSON (on camera): The cost of college goes far beyond the current impasse over the doubling of interest rates for some student loans. Some economists see a vicious cycle, rising college cost, the debt burden and an anemic job market creating a generation of college graduates struggling to get into the economic mainstream.
For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson in Washington.
MATHISEN: The rising yield on the 10-year Treasury created winners and losers today and that is where we begin our market focus tonight. Investors took a second look at the regional banks today and Zions Bank upgraded to buy from neutral by Citigroup (NYSE:C), was one of several winners. Citigroup (NYSE:C) raised 2014 and 2015 estimates on several other regionals. Zions touched a new high today, before closing at $30.97, up more than 4 percent on higher than usual volume.
Now, the other end of the market dial, Lennar (NYSE:LEN) led a number of the home builders lower as investors became concerned that rising Treasury yields would impact the affordability of new homes. Lennar (NYSE:LEN) lost more than 4 percent, to close at $33.93.
HERERA: Lululemon shares fell as it announced that founder Dennis Wilson plans to sell up to 3.4 million shares. Wilson held more than 10 million shares, about 9 percent of the company, according to filings.
Shares of Lululemon lost nearly 1 1/2 percent, closing at $63.55, but the shares are down more than 16 percent year to date after the yoga pants fiasco and the CEO`s departure.
Buffalo Wild Wings (NASDAQ:BWLD) touched a new high as Miller Tabak upgraded that stock to buy from hold. The analyst raising the price target to $117 a share. Why you ask? Well, lower corn prices and record supplies of wings.
Buffalo Wild Wings (NASDAQ:BWLD) closed at $101.24, up almost 2 percent.
MATHISEN: Well, this week`s market monitor says today`s jobs report increases the odds that the Fed will pull back on its stimulus this fall. He also says the keyword for the financial markets is visibility. He`s Wayne Kaufman, chief analyst with Rockwell Securities.
Mr. Kaufman, welcome. Good to have you with us.
WAYNE KAUFMAN, ROCKWELL SECURITIES CHIEF MARKET ANALYST: Nice to be here.
MATHISEN: So, you know, in recent days, as worry about the cessation or the dialing back of stimulus trickled through the markets, stocks generally went down, but today, on the good jobs news, they went up. Why?
KAUFMAN: Well, you know, it was great to see. But, first of all, let`s keep in mind this has been a low-volume week and today was a low volume day. So, the effect was probably exaggerated by the low value.
But this is the big daddy of economic reports. The economy is 70 percent consumer oriented and the consumer has to have jobs. So when we see the job picture improving, maybe it`s too soft for some but it is improving, well, that`s an important thing and gives people confidence and consumers will have money in their pockets with which to buy things.
HERERA: Let`s take questions that have been written into us from viewers and Howie L. wrote in about G.E. He says, "The stock seems to be stuck in the mud. I cannot understand how a company so diversified and productive seems to have lost favor with investors."
What do you think?
KAUFMAN: You know, I think he hit the nail on the head with the question. I`m neutral on G.E. There`s just nothing exciting going on there. They don`t have much revenue growth. They do have a nice dividend. They probably just will trade with the market.
So, I`m neutral on the name.
MATHISEN: All right. Let`s move on to Dr. Rosy G in Portland wants to know about Hewlett-Packard (NYSE:HPQ). She`s retired and wants you to discuss the future of HewlettPackard (NYSE:HPQ) stock.
KAUFMAN: I`m a fan of Hewlett-Packard (NYSE:HPQ). They surpassed analyst estimates for the last two quarters, which is something I always look for. The chart is bullish, which means the stock is going higher. And the test on Hewlett-Packard (NYSE:HPQ) will be, should the stock go up to the $30 area? Right now, it`s a little over $25.
Should it go to $30? There is some resistance there. If it breaks there, then that`s going to be great for the chart. But I think people are expecting that the P.C. business, which has been soft, everybody knows, it`s going to make a nice recovery in the second half of the year, and they have been beating estimates in spite of weak PC business. So I think that speaks very well for them.
HERERA: On to Tom who wants to know about Ford stock and where it`s headed. They have had great truck sales and good car sales, too.
KAUFMAN: I`m a fan of Ford. The stock recently broke out nicely making new highs. So, it, too, has a bullish chart. Ford, like Hewlett- Packard (NYSE:HPQ) has been beating estimates but they`ve done it for five quarters in a row. That`s very good.
I think everybody heard the news that domestic auto sales were terrific. Ford is also doing very well in China. So they are really hitting on all cylinders and I think there is more upside for the stock.
MATHISEN: Let`s go to Margaret in Redwood City, California. She`s interested in 3D printing. I don`t know what it is, but there`s a lot of talk about it. She says, quote, "I work at Stanford and I`m surrounded by people innovating, including 3D imaging for healthcare."
What do you think of this?
KAUFMAN: Well, there is no doubt the 3D group has been one of the most exciting things to come along in technology or in the economy. There -- it`s just potentially a game changer and like all groups that catch the imagination of the public, it becomes highly valued.
So, I view all of these stocks -- there`s three others along with DDD. There is XONE, PRLB and SSYS -- I view them all as trading stocks until this becomes a more mature industry where we can see a little further down the road. But it`s definitely a very exciting space to be in.
MATHISEN: Wayne, do you have any disclosures to tell you about, whether you own any of these or your funds do?
KAUFMAN: No, I do not. And, no, Rockwell does not own any, either.
MATHISEN: All right. Wayne Kaufman, thank you very much. Wayne is chief analyst with Rockwell Securities.
HERERA: Well, I`m betting this is something you`ve probably never given much thought to. Is a fish worth more dead or alive? And why should you really care?
Well, that is the debate between commercial and recreational fishermen. But also at the heart of it, an economic question.
Steve Liesman gives us a lesson in opportunity versus cost.
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voiceover): An estimated 12 million people in the United States fish recreationally, including me. To keep our hobby from going belly up, we need healthy fisheries like this one here in Pine Island, Florida.
To tackle the problem, marine biologists like Aaron Adams who weren`t getting through the policymakers finally got their attention by turning to the economics of fishing.
UNIDENTIFIED MALE: Nice fish.
LIESMAN (on camera): Fishing generates an estimated $30 billion of economic activity in America every year. In some places like California, Texas and right here in the Sunshine State, it`s big business.
AARON ADAMS, BONEFISH & TARPON TRUSH: Recreational fishing in Florida, fresh and salt water, is worth about the same or more than the citrus industry.
LIESMAN (voice-over): Nationally, recreational fishing provides the same number of jobs that Ford or General Motors (NYSE:GM) does. It`s worth more than American Express (NYSE:EXPR) (NYSE:AXP) and retail sales and adds up to more tax revenue than the total tax revenue for 11 states combined.
But no one really knew that. What people knew is what commercial fishermen told them, that reducing harvest would cut jobs and revenue. They could quantify it. The recreational fishermen couldn`t.
Then the biologists got smart. They hired economists to do studies and gauge the economic impact of healthy fisheries.
(on camera): Bottom line is the economist is found fish are worth more alive than they are dead. If you save the fishery and save the habitat, it could mean more jobs, more growth and more tax revenue.
(voice-over): But due to past practices, Florida has already lost close to 50 percent of their mangrove shorelines, home to many species that are worth billions of dollars. So, the way it works is, a guy travels to Florida to fish for a big 6-foot tarpon, but the existence begins with the decision not to destroy a mangrove.
Aaron Adams says the decision is an easy one.
ADAMS: You don`t have to pay to build roads, pay to have a big police force, run sewer and all that kind of stuff, as long as the habitats are healthy, it`s basically free.
LIESMAN: For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.
HERERA: Coming up, meet the woman who put a modern twist on an age- old shoe and turned it into a very successful business.
But, first, how treasuries, commodities and currencies fared today.
MATHISEN: Good news this evening for commuters in San Francisco. Rail service is scheduled to resume in time for this evening`s rush hour after striking unions agreed with the Bay Area Rapid Transit Agency, known as BART, to extend a labor contract for 30 more days while both sides continue to meet at the bargaining table.
HERERA: Well, you may want to take BART tonight if you`re driving a 2013 Chrysler mini van. The automaker is recalling 282,000 of them to fix the software in the side airbags which can make them deploy on the wrong side of the car in a crash. Affected models are the Dodge caravan, the Chrysler Town and Country, and the Ram cargo van.
MATHISEN: Well, there`ll likely be no recall, so to speak, for hedge fund manager Steven A. Cohen by federal prosecutors. "The Wall Street Journal" reports the government doesn`t have enough evidence to bring charges against Cohen in its insider trading investigation of the $15 billion hedge fund company he runs, SAC Capital Advisors.
The paper says this month`s deadline to bring charges tied to a five- year statute of limitations on filing criminal counts will likely pass without any action. No comment today from SAC Capital.
And, finally tonight, a New York City entrepreneur, is proving there`s no business like shoe business. In this week`s "Bright Ideas" segment, a woman determined to build a better ballet shoe.
MATHISEN: For years, ballerinas have suffered the agony of the defeat.
UNIDENTIFIED FEMALE: There`s, I guess, the initial burning, blisters, and then just kind of throbs.
MATHISEN: Dancer Eliza Gaynor Minden remembers pirouetting in pain, as well.
ELIZA GAYNOR, GAYNOR MINDEN INC. OWNER: Coming down from a jump and all of a sudden, having it hurt and hearing a loud clamping noise really changed the experience of class for me.
MATHISEN: Minden was also shocked to see ballet companies spend thousands of dollars on shoes that wore out after just one performance. So, Minden, who comes from dancers and inventors, decided to take matters into her own hands.
MINDEN: I bought a pair of every brand of point shoes that was available, and cut them all open with the bandsaw, and I couldn`t believe what I found inside. One of them had modern materials, and one of them even had a toe box made out of newspaper.
I was really outraged that dancers who are serious athletes were expected to perform in such antiquated equipment.
MATHISEN: Minton spent eight years developing a patented, high tech point shoe. She and husband John launched Gaynor Minden Footwear in 1993. But despite the shoe`s comfort and durability, they were not an instant success.
MINDEN: Ballet is a very traditional art. There was a scandal the first time a ballerina wore a tutu on stage.
So, while some dancers embraced Gaynor Mindens right from the beginning, others needed to be convinced.
MATHISEN: Minden stuck to it and the shoes began to win over the hearts and the soles of prima ballerinas, like Julianne Murphy of the American Ballet Theatre, and Svetlana Zakharova of the Bolshoi. Soon, other ballerinas came calling.
Claire Davison is an apprentice at the American Ballet Theatre.
CLAIRE DAVISON, AMERICAN BALLET THEATRE APPRENTICE: They are comfortable, consistent and they look really nice. I feel like they compliment my work and point work and feel really good in them.
MATHISEN: The shoes retail for $115 a pair. While some dancers still favor traditional brands like Capezio, ABT soloist Kristi Boone has been wearing Gaynor Mindens since she was 15.
KRISTI BOONE, AMERICAN BALLET THEATRE SOLOIST: You have a lot of choreography to remember on stage, and the last thing you want to worry about is your shoe going to break? Does it fit right? Does it look right? Is it going to last throughout the entire ballet?
So, to have that peace of mind for me has always been key.
MATHISEN: The shoes are made in a solar powered factory in Lawrence, Massachusetts. Most of Minden sales staff is in New York City.
MINDEN: Almost everybody who works here is a former or current dancer. So we know how to speak to our customers and dance teachers in their own terms and their own language.
MATHISEN: Today, the shoes are shipped to 82 countries and 200 major dance companies and sales are growing by leaps and bounds, up double digits every year two. Decades after launching her company, Eliza measures her success, not just in dollars but in feet.
MATHISEN: When you see these stories about entrepreneurs who do this, most of them take years to reach success. It`s not get rich quick scheme. She started 20 years ago.
HERERA: I know. But what a terrific story, that art and that sport blended together with those shoes. I mean, it`s fantastic.
MATHISEN: Yes, it really is. My feet hurt just watching.
HERERA: I know. Needless to say, mine do, too.
All right. That does it for NIGHTLY BUSINESS REPORT tonight. I`m Sue Herera. But Susie is back on Monday. Thanks for joining us.
MATHISEN: And I`m Tyler Mathisen. Thanks from me as well. Have a great weekend, everybody. We hope to see you back here on the evening.
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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