tv Nightly Business Report PBS February 11, 2011 1:00am-1:30am PST
>> tom: mortgage rates surge to a ten-month high. >> there is a lot of nervousness in the market because rates went up so quickly. when rates move by a point, people start saying, "i think i'm being squeezed out." >> susie: what the jump in rates means for the housing recovery and you. you're watching "nightly business report" for thursday, february 10.
this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> tom: good evening and thanks for joining us. the door is closing on super cheap mortgage rates. susie, the average rate on a 30- year fixed rate mortgage climbed to its highest level since april of last year. >> susie: tom, it's a dramatic move up. the rate on a 30-year is now above the 5% level, up from 4.81% last week. >> tom: rates are moving up, partly because the economy is doing better. but what do rising rates mean for the housing market? what about home buyers and sellers? erika miller reports. >> reporter: silence is the new reality at mortgage broker
luxury mortgage. loan originator bruce maasbach says refinance activity has all but dried up as a result of the sharp rise in interest rates. >> the phone doesn't ring with people saying, "i need to lock into that great rate because i haven't done something," because people have kind of given up. >> reporter: it's easy to understand why. rates for a traditional 30-year fixed are now averaging 5.2%. back in november, the same loan was nearly a percentage point lower. putting it another way, the payment on a $200,000 loan is has risen by about $100 a month. higher borrowing costs are not just bad news for people seeking mortgages or hoping to refinance. they could be a major headwind for the real estate market heading into the important spring home-buying season. but there is some good news. economist anthony chan is not yet worried higher rates will endanger the nation's economic recovery. >> i think, at this point, if
you see a small increase in mortgage rates, but you see an improvement in labor market conditions and you see further improvement in wages, i think that the economy will be able to afford that small increase in mortgage rates. >> reporter: mortgage rates typically take their cue from the treasury bond market, and those bond yields have been rising on worries about inflation. many economists predict interest rates will continue to rise. >> i think if i saw mortgage rates going up above 6%, then i would be a little bit more nervous. but any number with a 4% or 5% handle i think is manageable. >> reporter: so, what should you do if you need a mortgage or want to refinance? experts say consider "arms"-- adjustable rate loans. >> the seven-year arms right now are at about 4%, and so that is certainly better than a 5% handle, if you are only going to be in the place for the next five to seven years. >> reporter: and if you do decide to take out that 30-year
fixed, don't despair. mortgage rates around 5% are still low by historical standards. erika miller, "nightly business report," new york. >> tom: but will there be a run- of-the-mill 30-year fixed rate mortgage around in the years ahead if uncle sam doesn't guarantee it for lenders? it's been two and a half years since the federal government took over mortgage giants fannie mae and freddie mac. tomorrow, the treasury department will announce its ideas for reducing the role the two play in the mortgage market and the government guarantees that come with them. nine of every ten home mortgages are backed by the government, usually through fannie and freddie. one likely goal of tomorrow's proposal is to cut this amount, leaving it up to the market to fill the void. greg mcbride is a senior financial analyst with bankrate.com. >> the whole reason that borrowers can get a 30-year fixed rate mortgage at 5% is because of the government guarantees offered by, among others, fannie mae and freddie mac. if you take that away, there's just not an investor appetite to
lend money that long at that low of an interest rate. >> tom: according to reuters, another idea that may come tomorrow is to create an insurance fund, like the fdic insurance for bank deposits. it would act like a type of government guarantee for mortgage-backed securities. whatever changes the obama administration proposes and congress okays, mortgage experts predict they'll be phased in over many years to avoid disrupting the mortgage market. >> susie: here are the stories in tonight's nbr newswheel. the blue chip winning streak comes to an end, as the dow closes lower for the first time in nine sessions, off ten points. the nasdaq and s&p rose one point each. trading volume spiked to one billion shares on the big board, and 2.5 billion on the nasdaq. weekly jobless claims hit their lowest level in 2 1/2 years. first time claims fell to 383,000 last week. economists say the weekly rate needs to drop another 8,000 to see a significant drop in unemployment.
and another vacancy at the federal reserve-- kevin warsh is resigning from the bank's board at the end of march. during the financial crisis, warsh played a key role, helping arrange the sale of bear stearns. still ahead, behind the mega- screens at imax. we talk with c.e.o. richard gelfond about the next twist in the entertainment giant's fast- moving story. >> tom: the egyptian people wanted more, but hosni mubarak did not step down today. instead, the embattled president handed over some of his powers to his vice president, and said he'll work toward a smooth transition come september's elections. egyptians have been protesting for 17 days, closing businesses, government services and stock markets. with mubarak's refusal to step down immediately, the demonstrations are expected to continue for the foreseeable future. and max rodenbeck, middle east correspondent for "the economist," says while there are no concrete numbers, the economic impact is huge.
>> we're talking about many billions of dollars lost. certainly, the economic growth rate, which was running at 5% to 6% for many years, seven years or so, is going to take a real knock. and i think egypt may be in for a much lower-- 2... 2% for the foreseeable period. >> tom: another big economic concern in egypt-- normal operations for the suez canal. so far, canal officials say there have been no changes in traffic, and the egyptian army is securing the waterway. >> susie: pepsico today became the latest food company to warn higher commodities prices could hit its bottom line. this week futures prices for corn hit levels not seen in more than two years. and grain prices are unusually high for this time of year. tonight, we begin a two part look at prices. diane eastabrook reports traders think there's only one way for them to go, and that's up. >> reporter: on chicago's streets, it's obviously
february. but inside the chicago mercantile exchange, grain trader scott shellady says it feels more like july. >> this would generally be a time that would be kind of quiet. we got a big crop report coming up in march, so we would not expect to see the activity we're seeing today, or even the last four or five months, because of what's going on globally. >> reporter: this unseasonable trading frenzy is the result of bad weather around the world, scorching demand for food in developing countries, and a weak dollar, which makes u.s. grain cheaper for overseas buyers. this week, corn prices-- already at levels not seen since july of 2008-- rocketed even higher thanks to a government report saying corn stocks are 15% lower than anticipated. farmers could help boost stocks by planting more corn this spring. but that would come at the expense of wheat, soybeans, and even cotton, which are also in short supply. terry roggensack does research on the grain markets for "the hightower report," an ag investing newsletter.
he thinks farmers might plant another three million acres of corn, in addition to the nearly 88 million acres they planted last year. but he doubts that will relieve high corn prices. >> if we end up with a yield like we did last year, we'll be out of corn, even with the three million acres extra. so, we need high yield and we need extra acres of corn. >> reporter: at this point, the futures market is betting prices for corn, soybeans, and wheat will keep heading higher into the summer. with all of this volatility in the ag markets, retail investors are trying to find new ways to capture returns. tomorrow, we'll look at some of the ways they are doing that. diane eastabrook, "nightly business report," chicago.
>> susie: as you just saw on those boards cisco stock down 14% today t was a big track on the markets. >> tom: it was a very big drag on the markets can. really cast a long shadow not only on technology but many other industries as well. susie, let's get everybody updated in tonight's market focus. after spending much of the day in negative territory, the major indices closed mixed, with just fractional moves. holding the dow industrials down-- cisco systems. we detailed its earnings last night with its shrinking margins. it was the worst performing dow
stock today, falling 14%. here are the past 180 sessions. we mentioned the sell-off in november, which came after disappointing guidance. today's selling takes out that low. and on the full year chart, tonight's low sets a new 52 week low. volume was extremely heavy today-- more than 500 million shares. that's more than ten times its usual pace. another drag on the dow-- walmart. this 2% drop was enough to make walmart the second worst performing dow component. ubs cut its opinion to neutral from buy over worries about its fourth quarter performance. those results are out february 22. threatening to pressure the dow tomorrow-- kraft. earnings were no surprise, matching estimates, but down from last year. this is the third full quarter to include candy giant cadbury.
kraft was a little weaker going into these results, and fell as much as 2% after hours. its earnings and revenue growth forecasts were slightly below expectations. a couple of other food stocks: pepsi, the company behind frito- lay snacks, fell almost 2% down to its lowest price since july. higher commodity costs took a toll on its outlook. international flavors and fragrances was down 6% on heavy volume. profits were up but still shy of estimates. overall, the tech sector led the losers. tech services firm akamai technologies shed 15% on huge volume. the drop takes shares back to august prices. earnings rose, but the outlook was disappointing. meantime, communications gear
maker alcatel lucent had an upbeat outlook, and shares jumped more than 25%, easily hitting a new 52 week high. it fuels speculation the long- awaited turnaround maybe gaining some ground. the telecom gear makers got a boost from lucent's optimism. juniper rose almost 8%. jds uniphase continued its rally, up another 3%. and ciena finding buyers, up almost 3%. meantime, look for some more volatility from mobile phone maker nokia tomorrow. shares dropped 7% today. but after the close, they erased today's loss, bouncing up 7%. nokia will talk about its strategy tomorrow, and there is building expectations that it may include reserving its software strategy, and instead of using its own, it may team up with microsoft or google. finally, the best sector today-- energy. the energy select exchange traded fund was up 1%. it is just pennies below its recent high. and that's tonight's "market focus."
>> susie: tomorrow, a new ticker symbol will be trading here at the new york stock exchange: imax. the company known for its giant screen movie theaters will be moving from the nasdaq to the big board. joining us now, ceo richard gelfond. hi, richard, welcome to the new york stock exchange. >> thanks, susie, thanks for the welcome. >> susie: so i know you're going to be ringing the opening bell tomorrow. tell us why you made the switch to the nyse? >> our company has really grown over the last several years into a very global enterprise.
we're in 50 countries. our second largest market after the united states is china followed by russia. and i think the new york stock exchange has a global footprint and the ability to really bring in investors to follow customers around the world. >> susie: now your stock trading on the nasdaq today was its last day has doubled since summertime. was's going to happen now that it's in the nyse what do you expect sm. >> i don't think the exchange itself will affect the stock price. but our company is on a very strong growth trajectoriment our box office 2010 versus '09 doubled from around 300 million to 600 million. we're adding roughly 100 theatres a year around theworld growing at a 20% compound growth rate. our movie slate is very strong this career. it was also very strong in 2010. so there is a lot of wind behind us and a lot of momentum. and i think we're going to have a good year. >> susie: well, let's talk about some of the that growth. because looking on the screen here we'll see that there are, back six years ago there were 266 imax
theatres in the u.s. and worldwide, rather. and you expect to have 600 by the end of this year. so what's driving that growth? is it hollywood or movie-goers? >> it has more to do with technology, actually. we used to be a gill am-based medium. and to show one imax 3-d film was a about the size of a volkswagen and it cost about $40,000. now it's about this big, it's digital and it costs about $175 dollars. and it just dramatically changed our business. that and we changed our business model. we show now instead of five or six films a year, 20 films a year. and our international growth, all of that put together has really changed the complexion of our business in every way. >> susie: and your international growth that you mentioned a moment ago, china being your biggest market outside of the u.s., let's look at these numbers. you have almost 100 movie theatres in china.
russia and europe are a distant by a long shot. so why is it that china is such a big market for you? >> we started in china before many foreign companies did about 12 years ago and we built good relationships with with the government and good relationships with with our partners. the people in china love imax. i think it an affordable luxury. but it is an affordable luxury, you could go to the watercooler. i would say when i go to china our brand is much more kind of revered than is almost anywhere else in the world. at the same time, china's screen count is gone from 6,000 today to 25,000 in five years, to 40,000 in ten years. >> susie: that's amazing. >> when you have that kind of explosive growth and we attach our tof-- ourselves to it, it's not that hard. >> susie: richard, we have a clip of the new pirates of the caribbean movie coming out in may. and i just want to know, i know will be seen on imax. how important is that going to be for your bottom line? >> well, we have 20 films in
a year. so we have the ability if one doesn't perform as well as a portfolio, usually pretty good at put approximating the whole portfolio together. but for my point of view, that's one of the films i anticipate the most this year. johnny depp and penelope cruz, the chemistry is amazing. i think it's going to be a big movie. >> susie: how much are the ticket prices for an imax movie. >> each theatre sets it themselves. each region of the world is a little different. but usually about $30 to 40% more than a typical movie. >> susie: okay, we'll leave it there. good luck to you tomorrow. and being here at the nyse. hope to see you again soon. thank you so much. >> thank you so much, susie. >> susie: we've been speaking with richard gelfond. c.e.o. of imax. >> tom: here's what we're watching for tomorrow: the commerce department is out with december trade balance figures. and we talk with the man behind one of the world's first commodity based etfs about the boom in those funds. also frank cochrane is back as our "market monitor." he'll give us his take on the fed's government bond buying
binge. he's president oinvestment timing consultants. >> susie: verizon wireless began selling apple's iphone 4 today. the debut means consumers can now buy the new model at apple and verizon wireless stores, as well as best buy and some walmarts. it's the first time iphone has been available outside at&t's network. analysts expect the phone will be a big seller for both apple and verizon wireless; 13 million units could be sold this year. >> tom: groupon plans to expand to china. the big discount coupon web site wants to bring its online sales to one of the world's fastest- growing economies. groupon plans to hire about a thousand people in china over the next three months. but it may not be welcomed with open arms. during the super-bowl last weekend, groupon's commercial was widely criticized in china because it seemed to make light of problems in tibet.
>> our seven-year old daughter katie asked me this surprisingly difficult question-- "daddy, what kind of ipad will i have when i grow up?" i thought of that question while reading the hot new book on the market this month, tyler cowen's "the great stagnation." cowen says the u.s. is suffering from an innovation slump. its true that economic growth rates of already industrialized nations like the u.s. are much slower-- say, 2% per year-- than poor but developing countries like china at 10% a year. sorry to splash cold water on my friend's new book, but this innovation slump is a tired story in new clothes. from the soviets in 1950 to japan in 1980, youve heard the false alarm before. cowen knows this, but he shows that modern technology growth is different, and is hollowing out the middle class. facebook may be worth billions of dollars, but only employs 2,000 people. twitter? 300 employees. economists would say we have an innovation boom of consumer surplus, but a bust of producer surplus. or do we?
i say that government efforts to fix the economy are causing the great stagnation. as for my daughter, her ipad in 2020 will be something much more innovative than we can imagine. i just hope its designed in america, and by her. i'm tim kane. >> susie: and finally tonight, if you are planning to buy roses for valentines day, do it early! colombia is a major supplier of roses, and our trade agreement with that country expires sunday. as darren gersh explains, it's part of a trade story as complicated as a lover's quarrel. >> reporter: we'll get to the roses in a minute. first, we have to start with sleeping bags. about ten years ago, harry kazazian decided he could retool a factory in alabama to make sleeping bags for a lower price than his competitors in china. >> we started bringing back our production from china to the united states and hiring more employees and expanding. when everyone else was offshoring, we were re-shoring. >> reporter: but kazazian now claims those chinese competitors
have shifted production to bangladesh to take advantage of a trade preference aimed at supporting poor countries. rising imports of duty-free sleeping bags from bangladesh now threaten to put workers at exxel outdoors, the last sleeping bag factory in the u.s., out of business. so kazazian is asking lawmakers in washington for help. >> really, they're not trying to cause a problem; they're trying to fix a problem and make sure that american workers should never be put at a disadvantage. >> reporter: and this is where the roses come in. we import most of our roses from colombia under the andean trade preference act, which was designed to give colombian farmers a reason to grow something other than cocaine. augusto solano represents rose growers who fear higher tariffs will cost jobs, not only in colombia, but also in miami, where most of the roses are shipped. >> about 90% of the imports, they come through miami, and then they are trucked all across
the u.s., so people are really worried. >> reporter: but an extension of the trade deal with colombia and a similar program for bangladesh and more than 100 other developing nations is now on hold-- in part, because alabama senator jeff sessions and other lawmakers want that extension to include help for the sleeping bag factory in his home state. if this sounds like a mess, that's because it is. and it gets worse. democrats and republicans are also fighting over whether to renew a program called trade adjustment assistance that helps re-train workers who have lost their jobs because of global competition. republicans say trade adjustment assistance is ineffective. without it, democrats won't support trade pacts with countries like colombia. howard rosen supports the training assistance, and says this whole story explains why our trade policy is dysfunctional. >> trade policy is becoming like tax policy in this country, where we have earmarks, where we have lobbyists, and the people
with the largest amount of campaign finance is what determines the outcome. >> reporter: late today, the senate voted against considering a bill to fix all these problems. that means this weekend, tens of thousands of workers will lose their training, the sleeping bag battle goes on, and the price of colombian roses will go up. all of which makes trade policy in this country look like a lovers' triangle that has ended badly. darren gersh, "nightly business report," washington. >> . >> if you can't get the roses the jewelry is always a nice touch. >> tom: i'm luka, tara is allergic to flowers. i guess off every year. >> susie: that's "nightly business report for thursday, february 10th. i'm susie gharib "nightly business report" is made possible by: