Interview: Vantagepoint Funds --- Wicker, Wayne ---Chief Investment Officer
>> what a rough week for the oil bulls. prices fell for the fourth time in five days today. investors betting there’s enough supply in the u.s. to make up for any problems in nigeria, where production is down by about 400,000 barrels per day because of rebel attacks. opec has kept production at 20-year highs. crude oil futures settled at 59.696. gasoline down nearly 2%, heating oil down 2%. natural gas futures coming up just by over a half a percent today. stocks rose as oil fell in u.s. companies added more workers than expected in february. wayne wicker helps on oversea more than $2 billion at van page point funds. he joins us now to take a look at the market . wayne, welcome.
>> thank you, lori.
>> let me ask you about today’s session. what pushed stocks higher today, falling oil prices or better than expected job growth?
>> clearly it was the job growth number that really sparked equity markets today. we saw what we thought was a solid number. and it’s obviously good for equity, not so good for fixed income.
>> what does today’s jobs report tell you about the pace of economic growth?
>> in a word, i think it was solid. you saw that the hourly labor at .3% coming up to an annualized number at 3.5% is what you might want to expect for a solid recovery the way we’ve been seeing it over the past couple of years. equity players look at that and fell comfortable it was not too hot, not too cold.
>> if the jobs report signaled the fed to continue raising interest rates, why did equities rise. if we continue to in an environment where we continue to see interest rates increase.
>> this is a signal that the economy is strengthening. that’s good for corporate america. with higher business activity, revenues are going to grow, it gives u.s. businesses the opportunity to grow their earnings at a faster pace.
>> ok. your firm recently reduced holdings in nonu.s. holdings to 10% from 35%. pretty significant shift. we’ve been following declines in meerging markets . does it have to do with that or something else your strategy?
>> when we initially had 35% exposure back in 2002, you saw wide disparities versus forbes markets and the u.s. market . the foreign index has outperformed the u.s. index, that valuation has changed. we think it’s fair value, we think it’s time to look at opportunities in the u.s.
>> what fundamentals did you see at play?
>> well what we have seen is the fact that as those revenues have become to parity with the united states, prices have risen dramatically overseas. the fundamentals that we see today would say that it’s more on a level playing field with domestic equities. today you can buy the best u.s. companies at market multiples, that’s what was attractive to us.
>> within u.s. markets , you do favor large cap growth over large company. s&p 600 small cap is holding up. have you reduced significantly exposure in small and mid-cap names.
>> we do favor large-cap growth area, again, looking at a five-year period of time, small stocks have done wonderful, versus the large-cap brethren, cazz a result, the disparity in valuations has, again, narrowed significantly, so we maintain that large company growth orientation, and feel very comfortable with high-quality names names.
>> microsoft and ebay are among top five holdings. vantage point. 25% invested in technology. what makes these companies important to you.
>> certainly in the case of a company like microsoft with some of the new products that are coming out, as we saw with oragami this week, a new operating system in the next 12 months, is a company that not only is the cornerstone of technology software, but is a company that is growing their earnings and revenues at a very reasonable rate, at multiple that is not much more than the market . in the case of ebay, 50% of their revenues are coming from outside the united states, and they seem to be growing both revenues and free cash flow by 30% per year. so we think looking into the future, both these companies have a bright future.
>> i want to ask you, recent separate of bad news out of semiconductor industry. does that spark any concerns for you about broader tech in the future?
>> with regard to the semiconductor area, we have seen that they have had fits and starts, there is dislocation among a couple of the larger players, but we think that technology in general bodes well into the future, especially given the strong growth numbers that we seem to be say seeing over the last year or so.
>> wayne, we have to leave it there. thank you for joining us.
>> thank you.
>> once again, our thanks to wayne wicker, chief investment officer at vantage point funds. president bush has taken his licksory the ports deal, both from democrats and his own party. where does the president go from here? we’ll talk about the impact on other middle eastern counts countries when “after the bell” returns.
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Listen Market briefing --- Lori (slow)
Job report --- Kathleen (slow)
Nasdaq --- Robert (slow)
NYSE --- Bob (fast)
employers added 243,000 workers to the payroll last month, the biggest increase in three months. january’s numbers were revised lower. the unemployment rose to 4.ly% as more americans were were trying to. job. jobs are easier to find. and it’s a trend that may continue for a while
>> we have been averaging over 200 since the hurricanes, and i think we’ll continue to see job growth in that range, going forward. the underlying labor markets are very strong, expect to see real wages continue to go up.
>> well, time will tell. coming up a bit later in the show, we’ll talk to another member of the bush administration, as in commerce secretary carlos gutierrez. the subject? trade. make sure you stick around for that. in the mean time, let’s turn to commerks and bond reporter kathleen hayes joins us with more.
>> great to be here. an interesting report, even though we didn’t get a rock them sock them reaction. the jobs report led to one conclusion. the federal reserve will keep raising rates. despite obvious signs of strength, the debate is ra raging over how much high ter will go. let’s look at numbers on jobs. for one thing, a gain in payroll of 243,000, while bigger than forecast, not above the highest forecast. traders had been talking about an increase of as much as 30 on,000. a lot of strength in services were about 80% of u.s. jobs are. up 198,000, double january. manufacturing fell by 1,000, breaking a four-month string of increases, a lot of due to autos. construction up 41,000. that may be due to hurricanes economists say. in fact, we’re predicting these gains will not last.
>> they show a 41,000 increase in construction jobs? that will reverse itself so soon. all of the forward indicators of the construction industry for residential real estate are down. these are unsustainable numbers, especially since we had the runup in interest rates. i think the next two monthly payrolls will be a lot softer than this one.
>> now, as for unemployment rate, it fell it’s true. but even there a mixed signal. the jobless rate at 4.8%, but the labor force grew. this could be people who are more confident about seeking a job coming back to look. ironically this could push the unemployment rate higher. for the fed it may boil down to one number. average hourly earnings. that’s basic ail proxy for wages, it rose faster in february. average monthly earnings up to 3.5% annual rate. the fastest september since 2001 and double the rate of 20 two years ago this is the number that will lead toward a rate increase, possibly in may too if the job signals don’t suddenly weaken. that’s what economists are saying now
>> kathleen, we survived this report. what’s next?
>> in terms of the bond market , lori. one of the questions is the yield curve itself. it was yielded, inverted, it got flat. big reports next year. so many retail sales, consumer prices, housing starts. beige book, a lot of numbers. for now markets to look at and say is the economy strong and getting stronger, or are there more mixed signals that might hold the fed back more than before
>> keep a close eye on the treasury market . speaking of which, let’s go ahead and have a look where we wrapped up. treasuries fell on the heel of jobs reports since since the growth and number of jobs created raised concerns. the fed may raise interest rates two more times, maybe three. checking the 10-year down 7/32. the yield up to 4.76 pest. the 10-year note may be down three weeks in a row now. the you’ll curve is 4.73%. positive yield curve, down 1/32. the other big story, the nasdaq has offered to buy the london stock exchange for more than $9 billion. that is an 8% premium to the l.s.e.’s closing price today, but the l.s.e. says nasdaq’s offer is not good enough, saying it undervalues the company. nasdaq, for its part, says they are willing to make concessions by offering dual listings in london and new york. they could have its own board with independent directors. the nasdaq will go right to the l.s. ement’s board if the nasdaq is successful, it will be in a period of time position to compete with the nyse, by compete ailing board that trades some of the largest companies in europe. it may force nyse chief exec to make a bid. nyse just completed its purchase of ar i can spella go holdings. there is a look, the market up 10%. new york stock exchange down 2%, but for the nyse, that’s after a significant run this week. perhaps the nasdaq was due and rose for the first time in seven sessions. financials and transports led the way. we have more with the nasdaq maskside trading.
>> the nasdaq snapped the largest decline. we should note that six years ago today the nasdaq composite peaking at 51.32, down 66% since then. back to today’s action, yes, clearly, we had crude down $60 per barrel, traders found everything for everyone in today’s jobs report. larry perusi of the boston company saying it looked like a good combination of growth, but not inflation. you can see we had bank stocks moving higher. some of the more sensitive stocks to the economy and to interest rates as well. and the financials up almost 2% on the session, and the nasdaq stack market stock in that group. that 10.5% gain helping the group move higher. we didn’t see a lot of the riskier stocks move higher. semiconductors moving higher. google shares down 1.5% on the day. google at its lowest levels since october. announcing yet another click through fraud suit, a class action suit this after they settled one in arkansas for 90 million, this week, of course, inadvertently releasing details about a price target, revenue tarkt target, and analysts criticizing the company. also concern about even more click-through fraud suits. apple shares moving lower as well as google. back to you in the studio
>> robert, thank you. steel stocks managed to turn around today. that is one story from the nyse. bob joins us live with details.
>> an up day, but a down week. 407 of s&p 50 stocks up today. steel stocks up new corp boosted from the low end of the range from $2.20 from 1.90, making you in corp up 5.5%. other followed suit, reliance steel and a.k. stealing. international paper settled a patent dispute and saw its shares upgraded. shares up almost 3%. other paper stocks also rallied. what you see there on your screen. gold stocks have fallen hard earlier in the week saw bounce backs. newmont mining down 9% this week, even though it was up almost 2% today. better than expected jobs report was good for staffing companies. a admin staff up 2% and robert half you up 1%. aeropastale shares raleed. as did ann taylor shares. up to 40% analyst estimate.
>> thank you, bob. stocks rebounded from a few days of selling of the s&p 500 up ¾%. we’ll find fought this momentum can last through next week. keep it here.
