Federated Investors --- Grefenstette, Jim---Sr. Portfolio Manager
>> welcome back. you can call it a shake-up from the federal reserve. roger ferguson announced he will resign. after more than years at the central bank. the move comes less than a month after he succeeded alan greenspan. released by the fed in washington, furgusson wrote “it is now time for me to pursue other opportunities. “. he did not elaborate on why he decided to quit. he joined in 1997 and became vice chairman in 1999. we will get analysis from bloomberg fed columnist john berry in the next half hour. today’s market move, the tocks rose, hitting a four-year high. so far the dow is up about 4% and the s&p up about 3.5%. our next guest is a senior manager whose fund is up more than 7% this year. he manages 771 million in mid-calves at federated investors and the fund is up more than 20% in the last year. he joins us from pittsburgh.
>> good afternoon.
>> good afternoon to you. you had so much success, yet the spotlight is on to large cap names these days. are you altering your strategy?
>> mid-calf looks attractive. you get stronger growth and given the valuation. we think that’s where they will prefer to be. the large cap land with different territory and large cap let it out in the late 90’s. then you had a 20% grower in tech and retail and pharmaceuticals. hard to find that kind of growth in large caps. investors will prefer where they have been which is more mid-caps.
>> do you think there is still room to grow?
>> i think so. things have changed from five years ago and maybe preferred the consumer area, but you find a lot of attractive investment opportunities more on the industrial production side and the back ended economies, but names can grow 15-20% and they are good stocks to buy.
>> can i get you to give me other industries?
>> industrials are broadly based. we like industries within there and telecommunications. more on wireless service continue to grow strong and subscribers continue to grow and people are spending more wireless minutes and a lot of applications are denser and suck up more band width. the cellular businesses are strong as well as the tower stocks. we like them quite a bit another is energy. we still think there is a lot of strong earnings that come over the next two to three years as we simply are not replacing the oil and natural gas. there is a lot of strong opportunity in energy as well.
>> would you say―what would you say is a common theme between these industries you are talking about?
>> we will try to find areas with bottlenecks where demand is out shipping supply. when you have that scenario, you have strong revenue growth. strong margins and it brings you strong earnings growth. you are looking for areas where there is a strong supply and demand relationship going on.
>> let me ask you about a broader picture. the january cpi report showed inflation and what else drove stocks gains today?
>> i think there is a belief that the economy is reasonably healthy and we will see d double-digit growth. the market looks reasonably priced with multiples given interest rates at reasonable levels and now instphraeugz not going to be the big issue to ruin the party. people are looking at inflation because it’s going to dictate the fed’s hand over the next couple of quarters. with a benign core cpi number, that definitely makes people a little more receptive to taking on equity risk.
>> the market is pricing in several more increases. huh resilient do you expect the stock market to be. far it’s just a couple more, investors will look for the time towards the second half of the year. if inflation comes back and the feds are likely to be aggressive, for sure there is questions of maybe hard times and head winds for stocks. i think the bet is that we are probably going to get a towel more rate hikes. going forward, inflation won’t be a problem and the fed will be accommodative.
>> you mentioned the earnings forecast being about double-digit growth. du change your outlook at all as the earnings are winding down?
>> the numbers we have seen have supported that. we had companies come out over talking about the third and 4th quarter giving views into 06. i definitely support double-digit if not mid-teens growth rates for a lot of the areas. we are not backing off an optimistic view on our earnings growth in 06 and 07.
>> thank you very much. once again this is our senior portfolio manager. much more coming up on tonight’s edition of bloomberg after the bell. stay with us.
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Listen Market briefing --- Lori (slow)
NYSE --- Julie (slow)
Nasdaq --- Robert (slow)
world headquarters in new york city. i’m lori rothman and this is after the bell. viacom reports results since separate for example cbs and 4th quarter results partially represent the old viacom. they expect the quarter to contain right down related to the separation and other items such as severance cost. analysts expect profits to total about 47 cents per share and sales about 2.6 billion. checking viacom at the close down 90 cents, 41.90, a loss of over 2%. we will have the numbers as soon as they across our terminal. you can see all three indeces closing close to session highs. it came out core readings showing tame inflation and stocks put in a steady climb since the release of that report this morning. by the closing bell, the dow up 68 and 11,137. procter & gamble the leading gainer on the industrial average. the s&p gains 9.5 and the nasdaq up 20 points at 22.83. some of your strongest indeces, banks, computers and pharmaceutical. the latest details in a flap over the sale of six major u.s. port facilities to a dubai company, telling the media how he learned of the sale.
>> i learned of this transaction probably the same way members of the senate did. reading about it in the newspaper.
>> the committee in the united states routinely examines the sale ofus-based assets for potential security risks. the department shares the panel.
>> part usual process was followed and i have great confidence in the process. therefore i’m confident that the security interest of the united states have been appropriately addressed through this process. i think we need to explain to the congress and the public more about what this process is. as someone on the inside of this process who watched it for years, i have every confidence that this process works and defends the security interest of the united states.
>> meantime president bush said he did not know the sale until the deal was agreed to and federal approval was granted. back to the markets , financials contributed about half the gain of the s&p 500. julie has more and a wrap up of all the action. julie? >> thanks. what we tend to see the financials as the most vulnerable or sensitive as we have and rate concerns. the fact that the interest rate concerns were alleviated by the cpi report helped the financials and we saw a lot of gains in the group. we saw many records among the groups and subgroups of the financials. the s&p 500 closing at a record. the kbw index set a record and the a.m. exset a record as well. the financials with the individual movers, you saw different types of groups represented. countrywide among the lenders. 50er among the regional banks and met life doing very well and northern trust doing well in today’s session. i talked to robert brennan, a banking trader. he saw a lot of short covering in today’s session. a lost short interest in stocks like this for example. after that report came out, a lost people covering their shorts. he said it’s not an effect that he expects to be sustained throughout the week or the next couple of weeks because of head winds facing this banking group. including falling rates of loans. i want to look at fannie may. it’s expected that the rudman report comes out that had a probe into the sponsored enterprises. that and fredy mac. they hope once the report is out of the way, the stocks will go higher. on the earnings, we had sprint and nextel and this is a stock that was down in an up market . the 4th quarter profit was down 55% because of the cost to merge. excluding the costs, the company missed estimates and the shares were under performing in the market today. back to you.
>> we have the after the bell earnings results coming from the 4th quarter. before viacom split off. twenty-nine cents and the estimate was 47 cents a share. as far as the revenue, 2.72 billion for viacom. thompson was looking for 2.6 billion in revenue. in terms of the forward outlook, viacom calling for double-digit revenue growth for all of 2006 and for 2006 earnings, it will be 1.70 on a continuing operational basis excluding items. wanting to stick with the media scene, news corp also in the headlines. they are rolling out a new telephone network called my network. the president plans to air the prime time network on 10 stations in september. they were forced to find content after time-warner and cbs announced they would combine the upn and wb networks. they will air 12 hours of programming including desire about two brothers on the run from the mafia. secrets is about the fashion industry. banks and semis led higher today. let’s check in with robert grey for mora what was behind the gains.
>> the director of nasdaq trading really sum together up saying it was a combination of lower energy prices like natural gas as well as consumer price index helping to boost the market and lay equity investor fears of how high the reserve will continue to raise rates. that will play out in sensitive groups including the two that you named leading the market higher. look at the nasdaq index up about 1.5%. near the highest close since august. zion bank based in salt lake city traeuzing on the nasdaq rising to a record. a similar picture from the financials. look at the nasdaq index up 1.4%, at a record today. charles shwaub that moved back from november rising to the highest level since 2002, up 2.2%. transport index up 13 points of the record close, up nearly 1% helped by the decline in energy prices. expediters are rising to a record up 2.5%. sepl conductors up 1.3% and marvel technology, the bet testinology. they report earnings tomorrow after the close. a note saying marvel will beat their own forecast and analyst forecasts as well. he is concerned about the amount of supplies he sees. growth rates and pricing power and earnings peaking for marvel. that report will be tomorrow after the close and intel shares down 2.2 downgraded to a cell. i spoke with the analyst and he said this quarter could be a disaster for intel. their price is at $16 and inventories have not built up. with no mid-quarter update, they ended that practice and we will not know how the quarter is shaping up until they report in april. that’s a look at the nasdaq. back to you.
>> thank you, robert. in economic news, prices paid by u.s. consumers rose in january by the most in one year. economists say higher prices at the consumer level are a sign companies are having more success passing rising costs to customers. the 7/10 of a percent increase followed a 1/10% decline in december. if you back out food and energy, core prices rose 2/10 of 1%. checking treasuries in reaction, rewith treasuries rallying. yield pushing down to 4.53%. on the shorter end of the curve, the two-year was higher with a yield at 4.67%. the dollar was weaker versus the yen, but stronger against the euro. we want to bring you up to date on viacom. the headlines continuing to pass. thirty-seven-cents on a continuing operational basis. this is the proforma numbers. 37 cents cents versus the 47-cent estimate. revenue came in at 2.7 billion total versus 2.6 billion analyst forecast, breaking down the segments and some of the business divisions and viacom’s cable unit up 16% to 1.99 billion, but entertainment was down 5% to 787.$6 million ack in a moment.
