tv Nightly Business Report PBS August 12, 2011 1:00am-1:30am PDT
>> susie: wall street's wild ride continues with another big upswing. but... >> if it wasn't for the fear that is out there, stocks would be much higher. >> susie: we take a closer look at those market fears and what can be done to fix the u.s. economy. it's "nightly business report" for thursday, august 11. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening, everyone. my colleague, tom hudson, is off tonight. it was up, up, and away here on wall street today-- the dow rebounded 400 points, and all of the major stock averages surged 4% or more. so, what changed? a positive report on the job market. a surprising fall in jobless claims gave investors some new hope about the u.s. economy. filings for unemployment benefits fell by 7,000 in the past week to 395,000, the fewest claims since april. that news triggered buying right from the opening bell:
the dow surged 423 points, the nasdaq jumped 111 points, and the s&p gained 52. as for volume, another day of heavy trading: almost two billion shares on the big board; over three billion on the nasdaq. but despite the upbeat mood, investors still have a list of worries, from the possibility of a recession to political squabbling in washington. another big worry-- problems with european banks. and as erika miller reports, that could pressure american markets for quite a while. >> reporter: most american's don't give much thought to french banks. after all, they're not on u.s. street corners offering retail banking. but as international strategist paul christopher explains, problems in france would quickly have ripple effects here. >> it's a series of dominoes, really. if the french banks get in trouble, and lets say the french government is downgraded and its borrowing costs go up, then it's more expensive for the french government to support the french
banks. >> reporter: that's just the beginning. assuming france cannot fix its own problems, it would likely ask the european union for a bailout. that, in turn, could lead to consumer confidence, weakening declines in business and consumer confidence, weakening the european economy. and a slowdown there would hurt u.s. corporate profits. market strategist wayne kaufman believes europe is the biggest fear holding back stocks. >> united states companies, at this point in time, get over 50% of their profits internationally, overseas. so slowdowns there would have a negative effect on our companies' profitability. >> reporter: unfortunately, most wall street pros do not see a quick fix to europe's banking woes. some think it would take a european version of tarp to put concerns to rest. >> we need the european leaders to come to a final decision and quickly push through measures so their existing bailout fund can be used to support not just governments but banks. >> reporter: but there is some good news-- europe is just one
of many factors influencing the market's direction. some strategists think stocks can move higher, as long as the european situation doesn't get worse. >> if it wasn't for the fear that is out there, stocks would be much higher. even taking into account a certain amount of an economic slowdown, stocks are very undervalued at these levels. >> reporter: that may be true, but even he doesn't expect a major stock market rally soon. kaufman predicts the market will retest its lows before investors become convinced it's time to buy. erika miller, "nightly business report," new york. >> susie: late today, a european market regulator announced a ban on short selling of financial stocks in several countries. effective tomorrow, short selling is banned in france, belgium, italy and spain. back in 2008, u.s. and european officials coordinated temporary bans on shorting financial stocks. as we said, stocks soared on that encouraging report about the outlook for jobs. can we expect to see the economy
improve now that the federal reserve plans to keep interest rates super-low for the next two years? darren gersh reports. >> reporter: let's start with small business. a poll released today by the new york federal reserve found one in four small businesses would like to have more credit, but they are too discouraged to apply for a new loan. and for good reason-- these businesses reported poor credit scores, no collateral, or falling sales. and that's something low interest rates won't fix, says chad moutray. moutray was director of economic research for the small business administration. >> interest rates are already low. they've been low since october 2008. so, low interest rates by themselves are not going to be enough to help them in this particular situation. >> reporter: moutray is now with the national association of manufacturers, and he says, for businesses that make things, low interest rates are a mixed blessing. lower rates in the u.s. help keep the dollar down, and that has helped exports rise this
year, though the last two months have seen exports fall. on the other hand, manufacturers are worried about the rising cost of raw materials. >> to the extent that this policy, which is now going to be years,- a long time... to the in place for the next two years,- which is a long time... to the extent that that helps creep inflation into the picture, i think that's not a good thing for manufacturers. >> reporter: low rates may do more for homeowners. mortgage rates are near record lows and that is feeding a mini- boom in refinancing. but that may not boost home sales. there are still relatively few buyers who can qualify for mortgages. the problem is not high interest rates, it is the high credit scores that lenders now demand. >> even with small changes in mortgage rates, that is not a game changer. the game changer will be returning to more normal underwriting standards, and it's uncertain when that will happen. >> reporter: for consumers who have jobs, they'll find it a bit easier to buy a car or find a better credit card. >> for consumers that have very good credit, now is the time to
be shopping around for lower rates offers. there are a number of 0% balance transfer offers out there, and even many purchase rates that are in the single digits. but you have to have good credit. fortunately, those offers are going to be around for a while. >> reporter: lower interest rates make it easier to expand a business or buy a house. but it takes confidence to make a big decision like that, and that's been in short supply lately. darren gersh, "nightly business report," washington. >> susie: still ahead, we head to one of the nation's hardest hit housing markets-- phoenix, arizona-- where sales are starting to pick up. president obama vowed today to put out new proposals every week to boost economic growth and job creation. he also called on congress to complete work on a deficit- reduction plan. but speaking to workers at a battery plant in michigan, the president said the country's financial house must be put in order in a responsible way. >> so what i want to say to you, johnson controls, is there is
nothing wrong with our country. there is something wrong with our politics. we know there are things we have to do to erase a legacy of debt that hangs over the economy. >> susie: so how do we get the u.s. economy back on track? joining us with some ideas, robert brusca, chief economist of fact and opinion economics. hi, bob. >> hi, susie. >> susie: so, is the president right, that it's really not the economy that's broken? it's the political system. >> i think a lots of things are broken. i think it's true that we have basicry a bad economy because you don't have a good economy in war economy. and right now we have a civil war between democrats and republicans. they're fighting battles with partisan agendas and the nation, i think, has been left out. it's become collateral damage. >> susie: so what should the president do? >> i think options are limited to some extent. one of the problems is that we've leaned on the fed so much and with the sports season coming, we know in football if
you run the ball and run the ball and run the ball, eventually they stop that. the way you're successful is mixing your strategy. republicans are redlining any kind of fiscal policy move and i don't think we should take anything off the move. with 9% unemployment the most risky thing that could happen is not to get control of our budget but the slide into recession and i think everybody should be focused on that. i think the president needs to call congress back into session. they need to take a look at the weak economy and pay some attention to it. >> susie: earlier this week, the c.e.o. of pimco came on the program and said the way to get the economy growing and create jobs is we have to make structural reforms. that's not a short-term fix. that's a long-term thing. do you agree with that? >> >> well i think there are probably structural problem pron economy. you cut down the auto industry and you have people migrating, for example, out of michigan where the president was just speaking. you have the mayor in detroit trying to shrink the size of the city for which he's got to provide services. those are clear examples of
structural change but i think you also need to provide incentives and i think there's something to the argument businesses are too burdened with various kinds of regulations and i think we need to figure out what we can do to make business more attractive. i also think the bankers have tighten their conditions way too much. i think they're partly responsible. you read about the low interest rates. pool can't get to them. they're like kids in the candy store looking through the window and don't have money. the credit scores you need for re-ifies are so incredible very few are qualifying. >> susie: you talked about business and some of the burdens on business because they do complain about tax burdens and regulatory burdens. do you think if those were lifted that businesses would hire more, that they would invest and expand? >> well, the problem is they might over time but we've got a problem now that needs some kind of an instant start. and, you know, the markets are turbulent. this is wrecking confidence. the thing that happened today that really disturbed me, we had this big rally because people like jobless claimses. that's a fickle weekly number.
the trade deficit got bigger and we're losing our export growth, a big driver of g.b.p. we really need to get our trade in gear and that really is a problem because the rest of the world has started to slow down. and so we're really running an uphill race here. i think we need to have a sense of more urgency. i don't think the president nor conscience congresshas any sense of urge ensy. ic they're planning for the elections. i don't want them planning for the elections. i want them planning for this month. >> susie: the fed, did the fed have any urgency? it said this week it would use a range of policy tools. are they any good for fixing the economy? >> i don't think the fed has quite the right tools. i think ben bernanke has been create and i have andy applaud him. i think interest rates too low and a fed balance shoot too big scares people more than didt does good. i'm very concerned about that.
>> susie: this is a big problem and we'll come back to you for more ideas another time around. >> we have been speaking with robert brusca, fact and opinion economics. >> susie: it's not easy to go public in a tough market, but that's just what carbonite did today, and the gamble paid off. shares of the online file- storage and back-up service jumped 23% in their first day of trading on the nasdaq. the boston-based company has 1.1 million subscribers in more than 100 countries. and its in the process of moving its customer call center from india to maine. there were ten i.p.o.s planned this week, but carbonite's the only one that actually made it to market. c.e.o. david friend says the decision to go today came down to the wire. >> fortunately, some very large thought-leading funds were able to look past the volatility of the market of the last few weeks and decide that carbonite's very
predictable growth and business model was something that would continue to produce for them in good times and bad. >> susie: today was one of those "good times". all 30 of the dow's components were up, and so were all ten of the sectors on the s&p. let's take a closer look in tonight's "market focus." today's trading continued the pattern we've seen all week-- wild swings of gains and losses. this time it was triple-digit gains. as you can see in this intra-day chart of the dow, it was another dizzying ride. the dow was up as much as 500 points in the last ten minutes of trading, and then pulled back but still posted a gain of 423 points. cisco was the dow's standout and the nasdaq's most actively traded stock. shares jumped 16% to almost $16. investors bought up the stock a
day after cisco reported better than expected quarterly results, and c.e.o. john chambers made upbeat comments about his commitment to a turn around. but even with today's surge, cisco is down 21% so far this year. bank of america was the most heavily traded stock on the big board. shares in the battered banking giant finding support just above the $7 level. reuters reports bank of america is exploring a sale of its $17 billion stake in china's construction bank. exxon mobil got off to a bumpy start today-- shares were halted mid-morning after a bad trade tripped its circuit breaker. trading resumed shortly after with exxon shares rising over 5% to close at $71.58 a share. after the closing bell today, a lot of interest in nvidia. the reason-- strong second quarter profits for the graphics chip maker and an improved sales outlook for the current quarter. the stock ending the regular
session up 9% at $13.41; in after-hours, it jumped 18%, trading near $16 a share. today's stock rally sent highflying treasury prices in reverse. the price on the ten-year treasury note was down sharply, with its yield rising to 2.34% that yield got as low as 2.14% yesterday. analysts at goldman sachs predict the yield on the ten year will get to 3% by the end of this year. another reason for the selloff in treasuries-- a disappointing government auction for 30-year bonds. and that's tonight's "market focus."
>> susie: foreclosures filings dropped again last month, falling 4% to their lowest level since the end of 2007. arizona has struggled with a glut of foreclosures since the housing market peaked in 2006. tonight, we launch a new partnership with pbs 8 in phoenix. reporter david major explains home sales are picking up, as the housing market works through its backlog of bank-owned properties. >> now, i'm going to be showing you a four-bedroom, three-bath in the main house with a one bedroom, one bath casita. at the peak of the market this would go for 450 and 500. we had it listed for 235 before we got a contract on the short sale. >> reporter: kirsten myers, a realtor in the north phoenix community of anthem is seeing multiple offers on homes in the area. >> yeah, i've had them recently with 4, 5 and 6 offers.
and it can be a challenge because most of these offers are coming in above list price. bulk of the inventory right now seems to be short sales and bank owned properties. back when the market first started to go down, our inventory went up over 800 homes. we are now down under 140 homes active on the market right now. >> reporter: lori blaine is trying to buy this house in anthem. were trying to upgrade a little. we filled up our house very quickly. >> reporter: her family's current home is underwater. so instead of selling and losing money, she hopes to rent it and move into a bigger place. it makes me really nervous to do this but you know you really, or i really want to make sure im getting what i'm paying for and that the markets not going to drop an lower because its kind of a scary time financially as far as the real estate. >> reporter: the metro phoenix real estate market is scary for a lot of people. real estate analyst elliott pollack says economic uncertainties make even highly- qualified buyers a little leery. >> there's uncertainty in the
job market, they probably saw their 401k hit, they see either the house they had or their parents owned decimated in terms of value, and they're nervous. >> reporter: real estate professor jay butler agrees. >> there's a group out there who believe that the bottom has not been reached yet and they don't want to make that commitment. i'm convinced were close to the bottom, if not at the bottom. >> if you take a look at this green line, which once again is housing prices, went way up and then came way down, housing prices have been flat for the past four to six months, which to me says were probably at the bottom. >> reporter: investors must think were pretty close. >> about 40% of homes are being purchased by investors. they're really providing a need. >> reporter: in some cases, they rent them out to victims of foreclosure or people who had to short sell their homes. >> allowing people to stay in same neighborhood, same school district, kids keep same friends. you know, stable people caught in a bad situation.
>> reporter: a bad situation that will get better. and while the american dream has been bloodied and bruised, it's far from being down for the count. david majure, "nightly business report," phoenix. >> susie: here's what we're watching for tomorrow: jason pride is our "market monitor" guest. he's director of investment strategy at glenmede. we'll also get an updated snapshot on consumer activity from last month's retail sales report, and consumer sentiment numbers from this month. also tomorrow, j.c. penney's quarterly results. regional airline american eagle may take off from its parent company amr. american eagle would become an independent company serving american airlines and other carriers, according to today's regulatory filing. if it's spun off, amr stockholders will hold all the shares of eagle common stock, and amr would retain all of eagle's debt. amr also said an outright sale of the regional carrier is possible but not likely.
leaders in jefferson county, alabama, are working to avoid the largest municipal bankruptcy filing in u.s. history. tomorrow, county politicians would decide to move ahead with that filing or announce a settlement with its creditors, which include j.p. morgan chase. creditors today made a new offer to settle the county's $3 billion debt, but jefferson is still demanding a reduction in the total amount of debt outstanding.
tough money times often lead to tough personal conversations among families. tonight's "kids & cash" has some tips on including your kids in those conversations. here's janet bodnar. she's president at kiplinger's personal finance. >> the stock market's falling. you're concerned about keeping your job or paying for the kids college. what if your children pick up on your money worries? and they inevitably will. how do you talk to them about tough money times? first, stay calm. ask your kids what they've been hearing at school or on tv. that's a good way to correct any misconceptions or start a discussion. and don't be glued to market reports on tv or your computer screen. second, be reassuring. the kids don't want a rundown on
your stock portfolio; they just want to know that everything is okay. if you are facing a financial crisis, share the information in an age-appropriate way. if you've lost a job or fear that you might, tell them your plan "b". for example, that you'll be working part-time or collecting unemployment while you look for a new job. tell them you may have to cut back on spending. if college is around the corner, tell them to focus on less expensive public schools rather than pricey private colleges. they'll rise to the occasion. remember, kids look to you toe the adult. and that will help you stay calm, too. i'm janet bodnar. >> susie: just a reminder: you catch us online at nbronpbs.org. there you can comment on our blog or watch any programs that you may have missed. or you can follow us on twitter and facebook. our handle on both is b-i-z-r-p-t. my personal feed is s-gharib underscore nbr.
finally tonight, a rare encounter for two space shuttles right here on earth. "discovery" and "endeavour" met nose to nose outside a hangar today at the kennedy space center in florida. both shuttles are being prepared for their future homes. "discovery" heads to virginia next spring. it will be housed in a hangar belonging to the smithsonian. "endeavor" goes to the california science center in los angeles. that's "nightly business report" for thursday, august 11. we want to remind you this is the time of year your public television station seeks your support, support that makes programs like "nightly business report" possible. thanks for joining us. i'm susie gharib. we'll hope to see all of you again tomorrow evening. "nightly business report" is made possible by:
this program was made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> more information about investing is available in: to order this dvd, call 1-800- play-pbs or visit online at shoppbs.org. >>