<Show: NIGHTLY BUSINESS REPORT> <Date: April 17, 2013> <Time: 18:30:00> <Tran: 041701cb.

118> <Type: SHOW> <Head: NIGHTLY BUSINESS REPORT for April 17, 2013, PBS> <Sect: News; Domestic> <Byline: Susie Gharib, Bill Griffeth, Bob Pisani, Hampton Pearson, Julia Boorstin, Bertha Coombs> <Guest: Saira Malik, Alexandra Lebenthal> <Spec: Business; Economy; Stock Markets; Wall Street; Federal Reserve; Financial Services; Policies; Art; Crime> <Time: 18:30:00>

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

(COMMERCIAL AD)

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Triple digit loss. The Dow falls sharply after yesterday`s big move higher. We`ll look beyond the volatility and get investment strategy for the long term.

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Low rate world. Who wins and loses with interest rates at record-low levels?

GHARIB: And, art gallery bust. Why a high-end art dealer is accused of selling more than just paintings.

We have all of that and more tonight on NIGHTLY BUSINESS REPORT for Wednesday, April 17th.

Good evening, everyone. And thanks for joining us. I`m Susie Gharib.

GRIFFETH: And I`m Bill Griffeth, in for Tyler Mathisen all this week.

And, of course, it`s been a busy week.

GHARIB: Oh, my God, it`s only Wednesday, and we`ve had big rallies and big sell-offs in the stock market. What a week!

GRIFFETH: Well, it was. A busy day again for a third straight day, Susie. The session, we saw triple-digit movement for the Dow.

But, today, stocks were on the losing end of the trade. A round of disappointing earnings reports before the bell, including results from Bank of America (NYSE:BAC) and Bank of New York Mellon (NYSE:BK), combine with

tumbling energy prices, pressured stocks to give up most of Tuesday`s gains. All 10 S&P sectors ended lower with technology, energy and financial seeing the biggest declines.

The Dow was off the lows of the session, but still fell by 138 points, closing the day at 14,618. The S&P 500 was down 22, and the NASDAQ, hardest hit percentage-wise, down by 60 points, dragged lower by shares of Apple (NASDAQ:AAPL) which for a time dipped below $400 a share today before closing at $402. That after one of its top audio chip suppliers, Cirrus Logic (NASDAQ:CRUS), hinted at a slowdown in production of iPhones and iPads.

Meantime, Bank of America (NYSE:BAC) was the biggest drag on the Dow today, falling by nearly 5 percent, followed by a 3 1/2 percent decline for JPMorgan (NYSE:JPM) Chase, with a lot of the other banks following suit.

Bob Pisani has more on today`s action in the markets from the floor of the New York Stock Exchange.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): It was another whipsaw day for the Stock Market that started ugly right off the bat. The problem is that key commodities like copper, aluminum and nickel were again dropping, sitting at essentially 52-week lows, all on

concerns about slowing global growth.

Key commodities stock like Freeport-McMoRan, Cliffs Natural Resources (NYSE:CLF), U.S. Steel, and Peabody Energy (NYSE:BTU), all hit 52-week lows as well.

And while commodity stocks like materials and energy suffered, there were also notable decline in industrials and in financials like Bank of America (NYSE:BAC) which missed earnings estimates.

And in technology stocks, tech bellwether Apple (NASDAQ:AAPL) hit a new 52-week low on concerns whether slowing iPhone and iPad sales.

The market staged a modest comeback midday, likely on word that progress was being made in the Boston marathon bombing investigation, but, again, moved down toward the close.

(on camera): The problem for the stock market right now is a simple one. The market has been in an uptrend all year, until Monday. But now, we`ve had two big down days, two days with selling on heavy volume. And that`s calling into question whether there is still an uptrend in the market. That`s relevant because trend followers are an important part of the market. If they determine there`s no more upside to the market, the uptrend could become a downtrend.

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

(END VIDEOTAPE)

GRIFFETH: And despite some wild swings in the markets lately, the Federal Reserve remains steady and upbeat. The Fed`s so-called "Beige Book", survey of economic condition around the U.S., showed moderate growth in all 12 of its banking regions over the past six weeks with the overall economy getting a big boost from housing and strong auto sales.

The Central Bank also said the economy performed better during March than -- the month`s weak jobs report and the dip in retail sales would indicate.

GHARIB: But that report didn`t do much to boost investor confidence today. And the market`s gyrations have created confusion for investors. Do I stay the course? Sell or is now a good time to buy?

We turn to Saira Malik for guidance. She`s the head of global equity research for TIAA-CREF. It manages half a trillion dollars in retirement assets.

Saira, thanks for coming here. Welcome.

GRIFFETH: Welcome.

SAIRA MALIK, TIAA CREF HEAD OF GLOBAL EQUITY RESEARCH, : Thank you.

GHARIB: I mean, this is a very confusing and nerve-racking time for investors trying to navigate through all of this. How do investors sort through all of this information?

MALIK: Well, we`re dealing with a lot of noise right now. Just this week, we`re dealing with a lot of volatility. Just China GDP came in below expectations this week. We also had to deal with a decline in oil prices and earnings have started out quite rocky.

So what we`re trying to do is look through some of this noise and find stocks that can do well for the long run. An example of that are companies tied to the housing market such as Realogy. Realogy is a company that owns some of the biggest brokerage platforms in the country, such as Coldwell Banker and Century 21. And they`re going to do well as housing prices and transactions continue to do well.

GRIFFETH: So, you -- I mean, you`re always looking for the megatrends. You`re not looking for next week`s opportunities. You`re looking at the long term, overall picture. You feel housing is recovering.

What about energy? Do you think the prices are generally headed

higher or lower from here?

MALIK: Well, commodity prices are suffering right now and a lot of it has to do with some of the problems that China is having. GDP is coming under expectations. And they`re also dealing with inflation bubbling up.

So we`re focusing more now on companies that have their own levers to pull. And one company we like a lot is Time Warner (NYSE:TWX). This company is doing really well because they own great brands, such as HBO, which has "Game of Thrones", which is a great show. And they also have a great movie franchise with "The Hobbit" franchise coming out, the first movie doing over $1 billion at the box office.

GHARIB: I understand you`re not a real fan of technology stocks, although you have some in your portfolios. But when investors see these headlines about tech stocks are really hammered or the news today that Bill was reporting on Apple (NASDAQ:AAPL) that the stock is trading really low now, around the $400 range. There`s this urge to say, this is a bargain. This is value. And should I buy it?

How do you advise investors to examine and digest this information?

MALIK: The technology companies are struggling right now because companies are reluctant to spend on technology because of macro uncertainly. There`s also new structural trends going on technology such

as cloud computing. And we`re looking at companies such as Amazon (NASDAQ:AMZN) that has web services business and also can dominate the retail area.

GRIFFETH: You look globally. Where, besides the U.S., do you like? I mean, Japan has been very aggressive with their monetary policy this year. And they`ve been a stellar performer overall as a market.

I keep hearing about Mexico. A lot of smart money is going to Mexico right now for various reasons.

Where do you like right now?

MALIK: Well, we`re looking for companies that can do well because of their global industry. So, for example, you can go to Europe and look in their global pharmaceutical sector and Novartis is a great company there. Global pharmaceutical companies in general have great pipelines.

Novartis has a great product outlook. Their products are already approved by the FDA. So, that takes away a lot of the risk. And they have a rock solid dividend yield at 4 percent.

GRIFFETH: Do you like them because they`re a European-based industry or just they`re ion a right industry right now?

MALIK: We like them because they`re in the right global industry.

GHARIB: Is there some trend or something you`re seeing out there that investors are missing out on? What should they be paying attention to?

MALIK: We think investors should be paying attention to two powerful trends going on in the equity markets now that should support the markets for the long run. One is that stock correlations are declining. This means we`re moving to a stock picker`s market. You can do your homework. Find the companies that are mispriced relative to their free cash flow. That will do well over the next cycle.

The second is equity inflows have turned positive. This is after five years of fairly negative inflows. And that`s another data point that will support the stock market.

GRIFFETH: And a big guessing game right now is when the Fed will start to gradually pull back on all of the liquidity it`s been adding to this market. When do you think that will be?

MALIK: We`re watching jobs to figure that out. And jobless claims have been a little bit rocky recently. The payroll numbers were also weaker in March. We think, as long as the jobless rate remains up at 7 1/2, 8 percent range, the Fed will continue to implement QE3.

GHARIB: Saira, thanks for coming by. I really appreciate it.

Saira Malik of TIAA-CREF.

GRIFFETH: Well, some of the growth cited in today`s "Beige Book" is being attributed to the Federal Reserve`s low interest rate policy we were just talking about. But while those record-low rates may be beneficial to some, they may be hurting others.

This morning, for example, Bank of America (NYSE:BAC) became the latest company to highlight some of the difficulties of doing business in a low rate environment. Servicing more loans but making less money from them.

Hampton Pearson has a report card for the good and the bad of the Fed`s low rates!

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voiceover): The housing market, especially mortgage borrowers, have been the biggest beneficiary of the Federal Reserve`s near zero short term interest rate policy that began in 2008. Close to 20 million mortgages have been refinanced since then. Mortgage applications and refinancings were up about 5 percent last week and the Mortgage Bankers Association says the

purchase index is at its highest level in two years.

STAN HUMPHRIES, ZILLOW CHIEF ECONOMIST: Essentially, the Federal Reserve is putting all of real estate on sale, where homes are just incredibly affordable because of these very low rates that have been put in place by all of their efforts to push down interest rates.

PEARSON: Low interest rates are also getting consumers into auto showrooms. New car sales could top 15 million this year as buyers replace aging vehicles and negotiate monthly payments that take away much of the new car sticker shock.

Both consumers and businesses are paying off or refinancing debt. Consumer debt in the first quarter is now at its lowest level in a decade, approximately $70,000 per household. Corporate balance sheets are even healthier, with roughly $2 trillion in cash, an all time high.

DIANE SWONK, MESIROW FINANCIAL CHIEF ECONOMIST: We`ve seen corporations clean up their balance sheets even more so. They`ve gotten rid of debt, restructure debt, and taken on a lot of cash to cushion themselves, in case anything bad were to happen going forward.

PEARSON: The biggest downside: savers have been penalized.

SWONK: Many savers, especially the elderly, has found that the

interest that they used to live on is now falling short of paying their expenses.

PEARSON (voice-over): While a policy of keeping interest rates low punishes savers, Fed Chairman Ben Bernanke says that`s the trade-off for a stronger, overall economy.

For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson in Washington.

(END VIDEOTAPE)

GHARIB: What happens next for interest rate is crucial for bond investors. A top regulator from the Securities and Exchange Commission warned that investors holding municipal bonds could see, quote, "Armageddon" if interest rates spike.

The SEC`s Dan Gallagher also said that more high profile bankruptcies like the ones in Stockton and San Bernardino, California, are also adding risks to the muni bond market. He`s concerned that individual bondholders who believe they own risk-free securities could be, quote, "wiped out as rates rise and bonds sell off."

GRIFFETH: Let`s talk more about this. Joining us now to give her perspective on the muni bond market and how you should position your portfolio, Alexandra Lebenthal back with us, president and CEO of Lebenthal

and Company.

Alexandra, always good to see you. Thanks for joining us.

ALEXANDRA LEBENTHAL, LEBENTHAL & CO. PRINCIPAL: It`s good to see you, too, Bill. I realize that you were my first television interview 20 years ago.

GRIFFETH: Yes, back when we were both in middle school. I`m sure.

LEBENTHAL: Yes.

(LAUGHTER)

GRIFFETH: Let me ask you, there are a lot of assumptions in Commissioner Gallagher`s reasoning about this.

LEBENTHAL: Yes, definitely.

GRIFFETH: The one that stuck out to me is we will see a spike in interest rates at some point as the Fed begins to withdraw some its liquidity.

Do you think that`s what`s going to happen?

LEBENTHAL: No, and there are a few things that I do believe have some concerns about that report. I mean, one, the term "Armageddon" gives me great pause.

Second, the idea that muni investors would be wiped also gives me great pause.

And, third, again, as you just said, the idea that investors would see this immediate spike in interest rates. It actually just goes back to Saira, your previous guest, who said that, you know, look, we`re not necessarily going to interest rates and the Fed stop -- they`re easing the policy immediately because we`re still not seeing the activity from jobs, the economy, show that the economy is heating up.

GRIFFETH: Right.

GHARIB: So what should investors do, Alexandra? I mean, on one hand, you always hear you can`t time the market.

LEBENTHAL: Right.

GHARIB: So should investors start unwinding out of these bonds? Or is there still time to hold off?

LEBENTHAL: Well, let`s put your municipal bonds into a few different

categories. First of all, most investors invest in investment grade and, in fact, high-grade municipal bonds. So, those are the bonds that aren`t the bonds that you`ve been hearing about in some of the California cities or some of the Rhode Island cities that have had some issues around them. So I would not be concerned as an investor about significant declines in value because of credit quality.

Then, you have investors who are investing in municipal bonds through mutual funds. Now, that`s where you do want to have some concerns and think about your strategy when interest rates do go up, because what will happen at that point is that individuals will start redeeming their mutual funds. The manager of the mutual fund will start having to sell bonds in order to meet the redemptions. The more redemptions that happen, the more bonds the mutual fund manager will have to sell.

And it sort of becomes the self fulfilling prophesy the snowball that builds up --

GRIFFETH: Right.

LEBENTHAL: -- that would drive bond prices down. And remember that, in mutual funds, you have no maturity.

So, that`s where investors could see their principal value go down precipitously.

GRIFFETH: So are you arguing for investors to hold muni bond funds as opposed to the individual bonds themselves?

LEBETHAL: I would argue for investors to be holding either individual bonds or if they have enough money to be investing in separately managed accounts where they have a portfolio manager that manages their account directly in bonds and buys and sells bonds according to what their needs are. Also, different from mutual funds are ETFs where the fund manager doesn`t have the cash dilemma that a mutual fund manager does.

But one of the things that you want to do with your portfolio if you`re managing it yourself or if you do have a portfolio manager is look to manage it defensively. By that, I mean, either have a ladder portfolio or where your bonds coming due every year, so you can reinvest as rates go up, or, have a short duration where you have --

GHARIB: OK.

LEBENTHAL: -- holds, et cetera to keep your maturity short.

GHARIB: Alexandra, I want to squeeze in a tax question.

LEBENTHAL: Yes.

GHARIB: Any tax implications here, because we hear that the Obama administration may want to put a cap on the tax exemption for some of these bonds. So, is that another reason to clean up your portfolio now rather than wait?

LEBENTHAL: Well, I don`t know that it`s another reason to clean up your portfolio, but it`s certainly something to keep on the radar screen. You know, obviously, with everything that`s going on in Washington, everything is on the table. And with each budget that comes out, there`s a proposal that there would be a 28 percent cap on deductions so that essentially, no investor would be in a lower bracket than the 28 percent tax bracket.

So, that means you couldn`t essentially have all municipal bond income, tax-free income that would put you in no tax bracket. In essence, that would therefore be a tax on municipal bonds.

GRIFFETH: Right.

LEBENTHAL: Mayors and governors are fighting this very, very aggressively. And each time they seem to get it out of the budget proposal and then a new budget proposal comes out and it`s back in.

I do believe that ultimately, state and local governments will be successful in arguing that this will drive the economy right back into the

recession and it actually won`t solve the greater purpose of helping the economy.

GRIFFETH: Always good to see you, Alexandra. You`re a young whippersnapper you.

LEBENTHAL: You, too. Don`t look a day older.

GRIFFETH: Yes. It`s the make-up (ph).

Alexandra Lebenthal of Lebenthal and Company.

GHARIB: And coming up a little later in the program: one media company to watch this earnings season.

But, first, let`s look at how the international markets closed today.

(MUSIC)

GRIFFETH: We begin our "Market Focus" with earnings after the bell tonight.

American Express (NYSE:EXPR) (NYSE:AXP) reported increased earnings per share up 7 percent from a year ago. That was better than analyst estimates. Revenues also gained by 4 percent, but they were below

expectations. Shares had been down before the close, losing 46 cents on the day and then dropped further on the soft revenue results in after-hours trading.

EBay also missed on the revenue while beating expectations on the profit. But eBay`s guidance for the current quarter was below what analysts had been expecting. EBay lost ground during the trading day, down more than 1 1/2 percent, and then declined further on the cautious guidance.

GHARIB: Strong earnings from Mattel (NASDAQ:MAT) today, thanks to increased demand for dolls. Not just Barbie, but American Girl, Monster High and Disney (NYSE:DIS) Princess. Cost cutting and expense controls, thanks to expanded production in Brazil, also helped Mattel (NASDAQ:MAT) report better than expected quarterly profits and revenues. Mattel (NASDAQ:MAT) shares rose almost 2 percent to $43 and change.

Abbott Lab also reported better-than-expected quarterly profits, an increased demand for its nutritional and diagnostic products. Abbott shares gained almost 2 1/2 percent to $37. The stock has jumped more than 18 percent this year.

GRIFFETH: Most of the blue chips were down, but Johnson & Johnson (NYSE:JNJ) gained as a jury found that company not liable for damages from an all metal hip product. More than 10,000 claims have been made against

that device. J & J ended the day up more than half a percent.

GHARIB: Well, as earning season picks up, some big media and entertainment companies report their results next week. And those reports will reveal to Wall Street how Hollywood studios are reaching more consumers, especially in their living rooms.

As we continue our series, "Earnings Spotlight", Julia Boorstin tells us what investors may learn about trends in TV production and about TV watchers from Netflix (NASDAQ:NFLX).

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: One media company to watch this earning season is Netflix (NASDAQ:NFLX). The first quarter was a big one for the stream and video giant. Not only did it launch its first original show, "House of Cards", but its stock price has nearly doubled to $176, though it`s still down from its July 2011 peek of more than $300.

RICH GREENFIELD, BTIG ANALYST: The reality is they`ve made tremendous strides over the last 18 months restoring their brand in pretty short order.

BOORSTIN: The stocks gain come on confidence about "House of Cards",

unveiling the 13 episodes all at once. The $100 million investment in two seasons of shows seems to have paid off with critical acclaim and buzz.

Though some analysts like Wedbush`s Michael Pachter are skeptical, saying the life of "House of Cards" won`t have a long-term impact. Others say it`s a crucial move to secure Netflix`s user base.

GREENFIELD: I think originals is very important for Netflix (NASDAQ:NFLX) to get to that point where people forget about canceling because they feel like there`s always unique and really interesting coming.

BOORSTIN: With the launch of its new original "Hemlock Grove" this Friday and a new season of "Arrested Development" in May, Netflix (NASDAQ:NFLX) has made the shift from being a distributor to being more of a programmer, really competing head-to-head with HBO for customers as well as content.

One of the key components to watch in the earnings report is subscriptions. Netflix (NASDAQ:NFLX) forecast it will add slightly more than the 1.7 million subscribers it added in the year ago quarter. We`ll be watching to see how many people its new content lures and whether it helps revenue grow faster than expected.

Another key area, international expansion. Netflix (NASDAQ:NFLX) is evaluating several new markets. So, Wall Street is eager to hear where it

will launch next.

And with rising competition Amazon (NASDAQ:AMZN), which is investing more in originals and distribution rights, we`ll see if CEO Reed Hastings addresses his rivals. Netflix (NASDAQ:NFLX) reports earnings Monday afternoon, the company has said it expects profits from domestic streaming to, for the first time, surpass that from DVDs.

We`ll see if Netflix (NASDAQ:NFLX) beats expectations as it did last quarter.

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin, in Los Angeles.

(END VIDEOTAPE)

GHARIB: And tomorrow, we focus on retail and the one key earnings report to watch in that sector.

GRIFFETH: Still ahead, though, the story of an art dealer and an FBI raid.

But, first, a look at the day`s most actively traded stock and how commodities, treasuries and currencies also fared.

(MUSIC)

GRIFFETH: An upscale New York City art gallery, a $6 million Trump Tower apartment, the Russian mob and illegal high stakes poker games that allegedly dealt in Hollywood stars like Leonardo DiCaprio and Tobey McGuire, as well as Wall Street titans and pro athletes. What do they all have in common? A $100 million money laundering scheme and 30 arrests.

Bertha Coombs ties it all together for us.

(BEGIN VIDEOTAPE)

BERTHA COOMBS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Helly Nahmad has been making a name for itself in postwar contemporary art. But as FBI agents raided the gallery`s Madison Avenue offices, federal prosecutors painted a very different picture of the high end art dealership.

Federal authorities charged the 34-year-old owner Hillel Nahmad with playing a leading role in a massive international gambling ring catering to celebrities and Wall Street professionals. And a money-laundering conspiracy that stretched from New York to Kiev.

Prosecutors say Nahmad laundered millions in elicit profits through real estate, including a 63rd floor apartment at Trump Tower on Fifth Avenue, which could have to forfeit if convicted.

(on camera): Dealers who spoke only condition of anonymity say they were saddened to see the gallery implicated in criminal activity. But they note that Hillel Nahmad is not a member of the Art Dealers Association of America. One dealer saying that Nahmad is not known for fostering and nurturing artists as many other dealers do.

(voice-over): But rather for building a collection valued at more than $1 billion through active buying and selling at major auctions in London and New York, where last fall, patriarch David Nahmad bought a Warhol portrait of Marlon Brando for more than $23 million.

The gallery was closed today. But with the big money spring auctions season set to begin in May, staffers put a sign in the window saying Helly Nahmad will reopen with an exhibition during the auction.

But, before then, its owner will have to go before a judge for arraignment.

In New York, Bertha Coombs for NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

GHARIB: And, finally, tonight, "Forbes" magazine is out with its annual list of the biggest, most powerful and most valuable publicly held companies in the world.

And topping the list: three banks, two of them are Chinese. The Industrial and Commercial Bank of China is number one, followed by the China Construction Bank. JPMorgan (NYSE:JPM), General Electric (NYSE:GE) and Exxon Mobil (NYSE:XOM) round up the top five. That last one, Exxon, was tops in profits again, netting about $45 billion.

Some other interesting factoids, Walmart, number 15 overall, had the most sales. Mortgage giant Fannie Mae, the most assets. And Apple (NASDAQ:AAPL) tied at number 15 overall, had the highest market value, at least for now.

GRIFFETH: We`ve got a lot of earnings still to come here. And I`ll be interested to see, we`ve had three days consecutively now where we`ve had triple digit moves for the Dow.

GHARIB: What`s your prediction for tomorrow?

GRIFFETH: I mean, if tradition holds, we`ll have an up day tomorrow. But you never know. Those earnings will be a big part of it, because -that`s it for tonight`s NIGHTLY BUSINESS REPORT.

GHARIB: I`m Susie Gharib. Thanks so much for watching.

GRIFFETH: I`m Bill Griffeth. Have a great evening. We will see you

back here tomorrow.

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.

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