this is "nightly business report" with tyler mathisen and susie gharib. brought to you in part by. >> thestreet.com, featuring herb greenberg who reminds investors that risk is real. with herb greenberg's reality check researching stocks in terms of risks. you can learn more at thestreet.com/reality check. market driver, companies are eating up tens of billions of dollars of their own shares. are the buybacks making the market look healthier than it really is? high ceilings, why the sweet spot in the housing market could be going through the roof. and standard care, the nation's number two insurer says it will pay cancer doctors an incentive fee if they follow its treatment protocol. smart business? smart medicine? neither or both.

all of this and more on "nightly business report" for this may 28th 2014. good evening, everyone, mcdonald's served up a big happy meal for shareholders today. it announce d a $20 billion package of stock buybacks and dividends by the year 2016. now, this new plan could give investors 20% more cash than they received during the last three years. the higher return comes at a time of weak company growth at the fast food company as u.s. sales have continued to be disappointing. but despite the news, shares at mcdonald's still slipped a percentage. mcdonald's and much of corporate america have a big appetite for buybacks and so far this year the stock repurchases are at lofty levels. some wall street pros believe they have propped up the market, is that true and what does it mean for investors? dominic chu reports. >> reporter: according to s&p dow jones industry analyst, the

s&p 500 companies are already reporting $107 billion in purchases during the first quarter of 2013. and the numbers are still coming in, among the companies buying back their own stock, exxon mobile buying back in the first quarter. and ibm bought back $8 million. then there is apple. it set a record for the most stock ever purchased by a company in a single quarter by spending nearly $18 billion on its own shares. many investors look at buybacks as a bullish signal. >> when companies announce buybacks a lot of people say it is an important thing to consider. it is not an important indicator but a good indicator that management believes their stock values are so attractive that it is better than anything else they can do with that portion of their cash which includes

investing in plant and equipment and also buying other companies. >> some take a more cynical review, they say it simply passes a company outstanding in the market and that lets them show growth per earnings per share. but not everybody thinks that share buybacks play a role in the market. >> i think overall they played a role. they have helped. but i think the main thing driving the market is fundamentals. we're in a modest growth, modest inflation environment, and our american companies have figured out how to make money in that market. >> of course, it is propelled by a variety of factors, shares or purchase at this amount will be a help. now will it be enough to keep the bull run going? for "nightly business report" i'm dominic chu. well, all three major indexes were down blake breaking

a winning streak, the nasdaq off two, the s&p off 12. the yields on the ten-year treasury note dropping to 4.4%, the biggest one-day decline since february and touching its lowest level in nearly a year. david leskowitz joins us to talk about the market. david, welcome, good to have you with us. >> thank you. >> let's talk a little bit about the stock buyback issue that dominic just reported on and whether in fact the fact that corporations themselves have been i believe the largest net buyers of equity so far this year. whether that is a sign of strength in the market or a sign that well, we better buy because nobody else particularly wants to? >> i think stock buybacks can have a short-term impact on a company's share price. but i think over the weeks and months, what is more important is the earnings per share. and what that means per earnings per share growth over time. and what the buybacks do is they

do reduce the share count that companies have outstanding and that tends to boost earnings per share growth a little bit, in the market it has a little bit of 1.2% per growth, so that is how i would think about it. it can have a little bit of a short-term impact but in a long-term it is beneficial for the stock market. >> what will drive stocks to go higher? today is a down day, we have milestones recently on the s&p 500, but what will drive the markets and what is your overall take on the markets for 2014. >> i think what is going to drive markets is it always comes down to earnings. and earnings this year we believe will be up about 8.5%, and that will probably be about the type of gains we see for the market over the course of 2014. and so far we're really pretty much on pace for that. we're up including dividends,

we're up about 4% so far this year. annualized you're getting close to that high single digit number that i mentioned for earnings growth. in the first quarter, earnings came in even better than i think many people thought growing 6% and that is with the weather being a significant impact. and i believe as you go forward through the rest of the year you will see a pick-up as the weather becomes less of a factor. in conjunction with valuation which looks relatively normal, i believe that we can look to earnings to be the primary driver of market gains over the balance of the year. >> forgive me, dave, if i'm being a little dense here, but let's talk about earnings growth in the context of large share buybacks, if mcdonald's goes back and pulls out 20 billion out of its share count and then later i see its earnings per share are up x percent, are they really up x percent or are their profits growing?

and am i really reducing profits over which the profits are displayed? >> it is a fair question, tyler, i think the first thing i would point out is that half of the share of the 20 billi$20 billioo to dividend thes. so about half of the $20 billions will go to share re-purchases. so at the end of the day if i'm a shareholder in say the s&p 500 what i want to know is what will be my earnings for each share are that i own in the index. and if the number of shares outstanding are going down because of corporate actions that does tend to boost my earnings growth rate and that is ultimately what i care about as a shareholder. >> david, i want to follow up on something that you put out on a report today talking about select over-soles opportunity. you mention a bunch of stocks, everything from facebook to google to yahoo! to blackstone group saying that many of these stocks have been over-sold recently and these are

opportunities for investors. tell us a little bit more of what your message is here. >> so we put out this report because we were responding to if you recall back a few months ago the big momentum sell-off and people were scratching their heads about what was causing that. and i don't think we even know essenti essentially why stocks really fell during the months of march and april in those kind of high momentum areas of the market. so what we thought it was an interesting place to look given that the market is at an all-time high roughly. and where should people be looking to invest right now? we thought it made sense to look at some of those stocks that may have gotten hit in the momentum sell-off. the fundamentals are quite good. we found 18 stocks where fundamentals are good in the sense that earnings estimates for these companies have actually increased over the last three months. they were sold off in the momentum sell-off. and our analysts like them.

so that is how we came up with this list of 18 stocks. >> are you at all worried about what is going on in the bond market with bonds now at 246 on the ten-year. what does that tell you, what should we infer from the stock prices? >> tyler this is the question that everybody has been talking about. i think there have been a number of factors that have been leading to the decline in bond yields. i think the factor that probably has the greatest weight in my mind is that investors are beginning to price in the fact that the fed is not going to raise rates to the extent that it usually does idoes, in a tigg cycle. what it probably does mean is interest rates -- the fed is not going to raise interest rates as much as we originally thought they were going to. >> all right, david, we have to leave it there. thank you for joining us.

valeant pharmaceuticals has raised their bid for allergan the company that makes botox and other smoothers for wrinkles. the stock could be worth more than get this $49 billion. that smooths a lot of wrinkles, shares of both companies were down in today's session, valeant by 2%, allergan by 5%. >> reporter: valeant raising its bid for allergan by $10 a share to a total of about $166 based on valeant's closing share price yesterday. now that offer also includes what is known as a contingent or a cbr, ceo mike pearson spoke with us after the presentation to investors today here in new york city saying that investors may have been looking for a higher bid and that is why the stock went down today after the presentation. >> we were expecting a much higher offer. and if we had a higher offer

then maybe this deal would have been completed more quickly. but we'll remain financially disciplined and believe this is a great deal for both sets of shareholders, that is what we heard from both sets of shareholders. but my primary responsibility is to valeant shareholders. >> now, they say their business model is unsustainable. and it doesn't know how to manage global brands like allergan's. now valeant drew more attention on the model on how to integrate allergan, now the question comes if they have to raise the bid again. or go back to the shareholders, it could take a while. in new york for "nightly business report" i'm meg terrell. and there could be another deal in the works, this one in the lucrative medical deal. the american rival, striker could make a take-over bid.

they say they're not making an offer and ruled out bidding for six months, the stocks slumped. but it is not over yet. a possible take insist overpossibly happening with well withes fargo. striker rose by nearly 3%. housing is not as hot as it was a year or so ago but the high-end builder toll brothers are doing just fine thank you, their revenues rose 67% during the start of the critical spring season. diana olick has more about the housing in general. >> reporter: for luxury home builder toll brothers it was a banner quarter with the average selling price of 22% the pennsylvania based company said it more than doubled its quarterly profit. >> we love our niche. we love the luxury end, the buyers don't have mortgage problems, 20% are all cash.

those that get a mortgage put 30% down, their decision to buy is more of a discretionary decision. >> reporter: the average selling price of a toll brothers home came in over $700,000, in april, the homes priced under 100,000 fell, while those over that amount rose. the homes up over 5% from a year ago. >> easy to say being rich makes life easier, it gives you flexibility and time that other people just don't have. >> reporter: they looked at the very top of the market, the most pricey, 1% and found sales up 21% this year. while in the rest of the market the 99%, the sales were down nearly 8%. >> we're not depending on the kid coming out of the apartment who can't afford his first house. >> reporter: the wealthiest buyers either pay cash or can

qualify easily for a mortgage, while others struggle to meet debt requirements. witness the mortgage requirements to purchase a home last week down 14% from a year ago. on the bright side, mortgage rates hit their lowest levels in a year. >> and there is no doubt if people think about their longer term obligations being able to meet it obviously having interest rates below 4%, below historically 5 or 6%. >> reporter: if those rates continue in the summer we could see sales heat up again. one thing that is important this recovery market is more sensitive to even the slightest rate move than ever before. i'm diana olick. and insurers want to bring in the cost of drugs. and one of the nation's biggest is bringing its plan right to the doctors. will it work and what does it mean for you?

shares of michael cores waiver between red and green all day despite a strong earnings report. that is where we begin tonight on market focus, the luxury retailer said quarterly profits jumped nearly 6% thanks to an increase in sales across the region, it gave an upbeat outco outlook but warns. michael kors closed at $97 a share. it was a different story for dsw, shares of that stock plunged after the company posted earnings of a missed estimate and cut an earnings forecast. it blamed bad weather and the promotional environment for the miss. the stock plunged to $23.62. and today investors got a

chance to react to a new rating on tesla stock, standard poors labelled it a vulnerable investment and gave it an unsolicited grade, a d-minus, s&p cited the automaker's narrow price focus. shares of tesla closed at $210.24. shareholders of chevron rejected the roles. shareholders voted against a non-binding say on executive compensation and a proposal that would have required chevron to disclose more fracking information. shares of the company fell slightly to $122.52. coke industries taking petra logistics, this will give coke the control of a plant that can convert cheap u.s. shale into a key ingredient in plastics.

shares surged up to $14.30. and shares of vivas, the company's biggest share of aspen investment fund is planning to buy the company for $640 million, aspen reported a 10% stake in the drug maker today and plans añr buyout in june. vivas was up 6% to $495. and a new plan to rein in costs. according to the wall street journal, they will pay the doctors $350 per month for each payment on the insurer's recommended treatment. it is looked at as controversial by some. sam nussbaum is the chief medical doctor. gentlemen, thank you so much for

joining us on this very important issue. dr. nussbaum, let me begin with you because this is a program that you have looked into. everybody wants to cut costs, understand insurers want to do this, hospitals want to do this. but when you you think about somebody's cancer treatments it just doesn't seem like a one size fits all will work, each person is different, why do you think it will work and do you expect pushback on doctors and patients? >> susie i'm pleased to speak with you about something as important as cancer care. we know that cancer can be a devastating illness and yet it can be one that is treated. we took on cancer care because number one we know that about a third of individuals with cancer don't receive state-of-the-art care. we also know there are just breathtaking new targeted therapies that we want patients to have. yet we believe that the current payment model doesn't allow physicians to always prescribe the most cost-effective, the

most clinically effective and the most patient-centered therapies. this program will begin to make a difference. a program where we're paying an enhanced fee for doctors to use, evidence care. and there are 60 different clinical pathways. this is not a one size fits all approach at all. these are specific treatments, developed by the nation's -- one of the nation's leading oncologist that will guarantee care. >> craig, do you buy what was just said? in order the plan to incentivize doctors to follow a certain protocol will actually improve care? >> so i think overall it is good that we're trying to get a handle on what we spend on cancer drugs, we spent about $100 billion a year, and right now we see a sweeping variation

of how they prescribe care, not all of them attached to clinical outcomes. this is only going to be effective to the degree that we have insurers competing with each other to make sure we're providing cost-effective care, not just low-cost care. so we want to have a robust and competitive insurance market that will allow patients if they're not satisfied with the decision their insurer makes to vote with the insurer and make a change to another company. >> and we talked about this new move towards referenced pricing where hospitals and insurers are going to put a cap on what hospitals can charge on various procedures like hip replacement, knee replacement, things like that. and now seeing this with cancer care and from the point of view of the consumer/patient there is this feeling of kind of like price controls coming into the u.s. health care system. what are your thoughts on that? are we moving towards that? >> so it is very true we're not

moving towards price controls, which i sort of see as the government coming in by fiat and saying this is what we're going to pay. so it is good that insurers will push back against pharmaceutical companies and the prices they want to charge. as long as we have a robust set of insurers competing on this this could be the good outcomes. but there are markets in the united states where the insurers have a lot of power. we need to be careful that they're making the best choice for patients and patients are being given the choice. >> doctor, you say the payments for insurers are aimed at getting the best protocols and compensation. we're creating the revenue neutrality so better care can be given. forgive me doctor, but i think that when a lot of people hear that they think it is a big for-profit insurer, selling them a big of goods. specifically that that insurer is concerned more about their earning stream and maybe the

$750 billion payback for the company's ceo than it is about my individualized care. why are they wrong to think that way? >> well, tyler, this is a voluntary program. every oncologist can use the drugs they find most effective for their patients. but today, remember the oncologists make about 70% of their revenue for profit based on 70% of the drugs they prescribe. all we're saying is make it a democracy over pricing, let's give the doctors the path ways developed by their experts the opportunity to make as much money and give the right care for their patient. >> all right, i'm so sorry to cut in but we have to leave it there. very interesting conversation. thank you very much. sam nussbaum with the school of management. up next, a future is in focus as the biggest names in

technology show off their wares in southern california, we'll show you what you need to know. it has been talked about for weeks and now it is official, apple is buying dr. dre's beats. apple will pay $3 billion for the headphone and streaming company most of that in cash. apple is trying to make it stronger, the itunes app as people pay for streaming. and apple a hot topic in california where big names in technology are gathering at the code conference. and as julie borsten tells us there are big plans for our

future. >> hello, everyone, i'm being excited to be here today for the inaugural code conversation. >> reporter: taking a step, jimmy, the chip company's 3-d printed robot set to go on sale for around 1600, the highest version, $16,000. also, the co-founder making big news unveiling a prototype for a fully self-driving car, which has no accelerator or brakes, he says it is easier to get around and to find parking spots. >> we've used automotive suppliers so this is using car parts that are kind of standard. but we've modified them to our needs. >> but how about the whole body? >> yeah, we've worked with partners, auto manufacturing

firms that have helped us with the body. >> there is a lot of excitement about the product that microsoft says will hit the market by the end of this year. skype's realtime translator. the ceo is focused on building platforms and software for productivity. to show case and let people conduct business across languages around the globe. >> what happens if you want to teach english? it learns english, then you teach it mandarin, it teaches it. then becomes better at english, and then you teach it spanish, it gets good at spanish, but gets great at mandarin and english, and quite frankly none of us know why. >> amongmogulch titans here, tw cost more. he says the long-term view on the company is bullish. >> i can't focus or spend my time paying specific attention

to the short-term fluctuations in the stock market. i try to focus on the long-term view of building a really durable business, a lasting business, making sure we include growth. >> at the code conference in california. and one note, cnbc parent universal is an investor and the companies have a content-sharing arrangement. and of course, cnbc produces "nightly business report." and that is "nightly business report" tonight. i'm tyler mathisen, thank you for joining us. and i'm susie gharib, have a great evening. we'll see you tomorrow.

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