tv Nightly Business Report PBS August 24, 2011 1:00am-1:30am PDT
captioning sponsored by wpbt >> tom: from washington to wall street, the east coast is rocked by an earthquake. >> we were sitting at a meeting, and the ground just started shaking. >> it felt a little, like, unnerving, and your floor's swaying and you're on the 21st floor. >> we grabbed out things and got out of the building. >> susie: still, stocks stand strong, marking another triple- digit gain on the dow. it's "nightly business report" for tuesday, august 23. 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. >> tom: good evening, and thanks for joining us. a powerful stock market rally today despite an earthquake that rocked the east coast, sending tremors from the nation's capital to wall street. susie, it was a 5.8 magnitude quake. thankfully, there were no injuries and no major damages. >> susie: tom, it lasted only 20 or 30 seconds, but people felt the shock waves up and down the coast, even here at the new york stock exchange.
now, the earthquake was centered near mineral, virginia, just south of washington, d.c., around 2:00 p.m. eastern time. rumbles were reported as far west as milwaukee and pittsburgh and up to martha's vineyard, where president obama is vacationing. homes shook along the east coast. the pentagon, the capitol and many government buildings were evacuated. flights were grounded in new york city as well as washington d.c. so equipment could be inspected. cell phone service was spotty as networks were jammed with people calling friends and family. >> tom: on wall street, stocks rolled to their best gains in eight sessions. by the closing bell, the dow was up 322 points, back above the 11,000 mark. the nasdaq jumped 100 and the s&p rose 38. trading volume on the big board was just under 1.25 billion shares. almost 2.2 billion shares traded on the nasdaq. the day's gains for the dow built steadily through the
session. just after 2:00 p.m. eastern is when the earthquake struck, stalling the rally before prices rebounded and ended at the highs of the day. >> susie: joining us to talk about today's market action and the outlook ahead: michael farr, president of his own investment firm, farr, miller washington; and author of a new book, "the arrogance cycle." hi, michael, nice to have you with us today. i know you were dealing with a lot of shakiness near your office. >> the floor underneath he was shaking but certainly it didn't seem to bother the stock market too much, today, susie. it was a pretty strong rally with pretty good breadth. >> susie: what was that all about? the economic news of the the same. we got disappointing numbers on housing. we know manufacturing an manufae job market is not good. with kwe trust this rally? is the rally for real?
>> i don't trust the rally because i believe the longer term fundamentals will prevail in most environments. i was talking to a friend, another strategist, and we said, look, everybody's making a big bet on a bernanke put here in the markets coming out on friday from the jackson hole conference, more quantitative easing and more government money coming into the market and i think the fact that it was pretty much oversold-- stocks seemed pretty cheap. so the buying was kind of a bounce-back from some pretty miserable weeks all came together and coalesced into a 300-point day. >> susie: let's talk a little bit more about ben bernanke. a lot of people are hoping the fed chief will come out with some kind of rescue plan to fix the economy. what do you think he's going to say on friday from jackson hole? >> i tend to actually think that he will disappoint. i think that-- i don't think that he will come out and suggest any kind of qa3. he may suggest amendments to current plans. he may suggest the fed
maintaining its current portfolio-- which, of course, is over $2 trillion now will reinvest the principle on the lower end of the curve. he's going to try to sound helpful. he's going to try to sound supportive. he's a great student of the depression of 1929 and the 30s, stock market crash in and the following depression. he does not want that as his legacy and he's going to do whatever he can to keep that from happening. the problem is, you get enough government money in this thing and, you know, we've seen what happens when it goes away, as it did in june. the markets start to fall and they come in with more money. it's like musical chairs and will you have a chair when the music stops? i think you have to own ood solid balance sheets in this kind of a market. >> susie: if bernanke follows the script you are talking about investors might be disappointed. does that mean we're in fair massive sell-off on friday? >> could be. i hope he'll be delicate enough not to cause anything too
massive, but certainly, we could see a sell-off. it could happen over the next weeks, you know, a lot of what he has to say and what else comes from the conference out there becomes to justify the markets. i think that it's probably unrealistic to expect that the level of volatility that we've experienced so far in the market is going to come to a screeching halt given what's going on politically in the u.s., in europe, in asia. there are just too many moving pieces to expect things are going to settle down and everything is going to be sunny. >> susie: that's what you've been telling your investors. you said to me you're telling them to play defense. what does that mean? and & what kind of stocks are you suggesting that they buy? >> i think it's no time to be aggressive. i think health care, consumer staples, some of the industrials, some technology, good, strong balance sheets, multinational companies that are doing business across dinner economies, in different currencies with good dividends are good places to ride out the storm. you know, again, there is too
much uncertainty around the world and i think there are opportunities out there. there are things you can buy for the long term. playing these rallies ask these shifts up and down, i don't know how to do it and i think you can do a lot of money getting too cute. >> susie: all right. any one or two stocks you want to mention quickly? we have 15 seconds. >> certainly. i like stryker in the medical space, i think it's a very good company. they make pieces and parts for knee replacementes, hip replaments. i think the numbers are good. i like med tronnic, too. the thought the earnings were good today and the optimism from the c.e.o. i thought were pretty good. there are two. and i think the health care is as defensive area will prove to be a safe place for investors. >> susie: michael do, you own any of them? >> i do, i own them, i own them in my portfolio and my family owns them as well. >> susie: thank you for coming to talk to us on this important day. >> thank you for having me.
>> susie: we've been speaking with michael farr of farr, miller, washington. >> reporter: i'm diane eastabrook in chicago. still ahead, i'll tell you how the windy city is dealing with its foreclosure problem. >> tom: back-to-school season is in full swing. the national retail federation estimates families with children in kindergarten-12th grade will spend on average more than $600 on clothing, school supplies and electronics this year. erika miller looks at this year's winners and losers. >> reporter: they may not have jobs or credit cards, but stores are bending over backwards to cater to their youngest customers. retailers know that children often have a big say in what their parent's buy this time of year. we found six-year-old makayla bolton loading up the shopping bag at j.c. penney today, eager to show us her picks. >> it's my favorite one because it's all colorful and it has all the decorations. >> reporter: like many adults, her father jim is worried about the weak economy, but he still plans to spend about $2,000 on back-to-school items for his four kids. that's slightly more than last year. >> there's a certain amount that
we try to stick by, but, you know, i'm a dad and they're girls, and they pretty much get what they want. >> reporter: the good news for j.c. penney and other department stores is that they are expected to be big winners this back-to- school season. the national retail federation estimates that more than half of all back-to-school shoppers will shop at department stores. that's the highest percentage in at least eight years. j.c. penney says promotions are still key to bringing in customers, but store manager joe cardamone has noticed a shift in shopper priorities away from price. >> the fashion part of it is playing more of an importance. and i have kids, too; that's what they're looking at first-- how fashionable is the item that i'm going to buy? >> reporter: unfortunately for customers, another new trend is higher prices. s&p's jason asaeda says overall clothing costs about 10% more. >> retailers and also the vendors are facing cost increases. so, this is not only in the raw materials like cotton, but it's also their labor costs in terms of manufacturing. also freight costs have been
going up. >> reporter: low prices is one reason why wal-mart is his top pick among back to school chains. overall, sales expectations this back-to-school season are fairly modest. the national retail federation and the international council of shopping centers are both forecasting low single-digit gains. back-to-school is the second most important sales period of the year for retailers after the winter holidays. it can also be a good predictor of fashion trends. a quick note to the parents of 11-year-old ashley nunez: she's yearning for a graphic tee. >> i like the styles. it's pretty good. well, i like the clothes, the short sleeves. >> reporter: erika miller, "nightly business report," new york >> tom: a little later in the program, some back-to-school stock plays with tonight's word on the street: "tech." >> susie: another grim report on housing. the commerce department said new home sales fell 1% in july. that's the fourth monthly decline in a row. the mammoth number of foreclosures is a big reason the
housing market is still struggling. as we continue our series "how to fix the economy," diane eastabrook tells us how chicago is trying to fix its foreclosure problem neighborhood by neighborhood. >> reporter: in chicago, there are thousands of boarded up homes in distressed neighborhoods like this. last year alone they cost the city close to $30 million to maintain. chicago is trying to get a foothold on foreclosures with nearly $200 million in public and private grants. in the past year, the city has acquired more than 600 abandoned properties, rehabbed close to 250 and sold 20 of them. katie ludwig is the assistant commissioner of housing and economic development. she admits the process has been slow, but she thinks it will be effective. >> it is time-consuming to acquire properties, to get them into rehab, and once they're done with the rehab depending on the type of building you're either getting them sold, and that's not an easy process in today's market. it is a long process.
we didn't get to where we are today overnight, and i think it's going to take some time to really stabilize these areas. >> reporter: chicago began seeing foreclosures in neighborhoods like this one about a decade ago, so, at that time, it started developing programs to either keep homes like this occupied or renovate them. with a blueprint in place, the city then targeted about a dozen neighborhoods that have high numbers of foreclosures but are still viable communities. in some cases, the city is completely overhauling properties. in others, it's offering financial assistance to potential buyers. ludwig says the city hopes to eventually turn around nearly 2,500 units. that seems like a drop in the bucket for a city that had 10,000 foreclosures alone just last year, but geoffrey smith, from depaul university's institute for housing studies, thinks chicago is on the right track. >> the bottom line in many of these communities there might be interest. affordability is quite high at this point.
i think it's just a matter of deploying resources effectively based on the conditions of each individual community to try to leverage what's happening there and moving forward. >> reporter: the city hopes saving some properties will save entire neighborhoods and save chicago a lot of money in the long run. diane eastabrook, "nightly business report," chicago. >> tom: remember these images? a deadly explosion leading to a burning oil rig, sinking into the ocean. then, fishermen out of work and tourist areas shut down. today, b.p. updated what it has spent so far to fix last year's oil spill in the gulf of mexico, and its far less than the $20 billion the company set aside. the fund established to compensate victims has paid out $5 billion to individuals and businesses. separately, b.p. has spent an additional $1.7 billion on cleanup costs. >> susie: you know, tom, today we've been talking a lot about this earthquake and the impact down here on wall street. and, you know, one stop that
felt the tremors before the earthquake, during, and after was bank of america. it's the only one of the dow 30 stocks that was in the red today. >> tom: yeah, it just could not find buyers despite a broad-based rally here, susie. let's get everybody updated with what happened on tonight's market focus. it was strong, broad-based buying as all ten major s&p stock sectors clocked in with gains, led by energy. exxonmobil led the dow industrials, jumping 5%. volume was strong on the buying today. as oil prices have fallen from their highs in may, exxon shares had been trending lower before the sharp market sell-off this
month. much the same at chevron-texaco. c-v-x shares gained more than 4%, making them the second best dow stock today. here's their main business: oil. this is the past 180 sessions. prices are up $4.50 in the past three sessions. the market hopes for federal reserve chairman ben bernanke to announce a new stimulus strategy has led to some energy buying. the thinking is if the fed indicates a new strategy, energy demand may pick up. coal miner alpha natural resources wasn't left behind in the energy stock buying. shares jumped more than 9%. the company okayed a new stock buyback plan. refiner tesoro and energy services firm halliburton were up about 8% each. the only losing stock among the dow was bank of america. i suppose the best thing to be said for shareholders today was
the stock did not see the volatility like it has since early august. still, volume was huge; more than a half billion shares traded with the stock dropping to a new low. technology stocks were very strong, especially semiconductor makers. dutch firm arm holdings shot up 9.5%. volume doubled as market speculation picked up regarding a possible buy-out by a big u.s. tech firm. arm is commonly rumored to be a take-out target, and technology merger rumors have gotten new life since last week's hewlett- packard buyout of u.k. company autonomy. it sparked some bottom feeding in other chip makers. nvidia was at a year-to-date low last week. today, it closed higher by almost 11%. advanced micro devices saw heavier volume on its 7.5% rally. intel was at its lowest price of the year late last week. today, it was up almost 2%. sprint-nextel popped 10%.
it may join a.t.&t. and verizon in offering an iphone to customers. according to the "wall street journal," sprint will sell the iphone 5 in mid-october. sprint has a ways to go to catch up with verizon and a.t.&t. wireless subscriber numbers. sprint is a distant third, with about half of the customers as the other two. >> while there was not a big reaction to the earthquake, watch trading the dominion resources tomorrow. shares fell more than a dollar right after the earthquake before recovering on the close gaining about 1.76%. it did confirm after the closing bell it shut down one of its nuclear power plants in virginia after losing external power. it has been opering on back-up generators and the stock was lower in after-hours trading. and that's tonight's "market focus."
>> the days of back-to-school supplies limited to pencils are long anyone. it's now wifis and flash drives. james rogers is a reporter at the street.com. always nice to see you. how important is the school shopping season to consumer technology companies? well, tom, typically this is a big time of year for companies that supply things like p.c.s and laptops, but i don't think that's going to be the case this year. we're seeing a lot of weakness in consumer spending, uncertainty around things like
p.c.s. but that said, i do think there are certain technology stocks out there that can reap the benefits of the back-to-school spending. >> tom: back-to-school is second only to the holiday shopping season for technology? >> it's significant. it really is. education is becoming a lot more high-tech and as a result school kids and students need a lot more gear. >> tom: the first one you brought along is amazon.com, amzn. how does this fit into back-to-school technology? >> well, you know, we all know back to school means books and while a lot of the traditional book sellers have been having problems, amazon seems to be going from strength to strength. consumers are looking for competitive pricing, comparison shopping, things key to amazon's business model. >> tom: playing that core role, the online retailer, regardless of whether it's holiday or back to school, right? >> completely, completely. and they're pushing hard into new technology areas, things like e-books. they're selling more e-books
than physical books and they may be launching a tablet in the coming months. i think with amazon, one of the key things for moving forward is this is typically such a strong quarter for them. it was last year and i think the back-to-school season will be big for them as well. >> tom: you also have been talking about at&t, wireless carriers. is this a play on its relationship with apexpelt iphone? >> yes, very much so. the other thing, though, is the parents really love, at&t, according to some of the brand awareness saturday that we've seen, and that bodies well for them at this time of year. if smart phones and ipods are on the back-to-school list, at&t could be the big beneficiary. there is one things investors should look out for. on the financial side, at&t pays a stable dividend, around 6%. in a time of market volatility, that's a big thing. >> tom: tough to find a tech stock that pays a dividend, let alone 6%. give us 30 seconds on scan d.s.k., flash memory. we know how important memory is
but the stock dove recently? >> i think this is unappreciated, particularly if you look at its recent stock performance. it typically sells a lot of usb drives and flash memory for smart phones and other mobile devices. i think it's a company you should be look out for and its valuation is very, very cheap. >> tom: do you own any of these shares? >> no, none whatsoever. >> tom: james' article is on the street.com. the word on the street with james rogers. >> susie: here's what we're watching for tomorrow: the latest report on durable goods orders; the weekly stats on crude oil and gasoline inventories; and earnings from toll brothers and american eagle outfitters. also tomorrow, we'll have an update on hurricane irene. she's headed towards the u.s. east coast. will it be another economic blow for the nation? dominique strauss-kahn is a free man tonight. a new york state judge today dropped all charges against the former head of the international monetary fund.
the sexual assault case against strauss-kahn fell apart amid cracks in the accuser's story. the hotel housekeeper's attorney called for the judge to appoint a special prosecutor, a motion that was denied. >> tom: some big changes to train safety could equal big savings. the white house today proposing an overhaul of safety rules that could save the rail sector $1 billion over the next 20 years. instead of installing anti- collision technology on all tracks, hazardous cargo loads will be routed on tracks that already have those devices. it's part of a broader effort by the obama administration to cut costs for business by cutting red tape at federal agencies.
>> susie: tonight's commentator weighs in on fixing the economy and boosting jobs. he's glenn hubbard, dean of columbia's graduate school of business and former economic adviser to president george w. bush. >> the economy's sputtering performance has brought forth calls for more stimulus. a more potent and longer-lasting tonic lies elsewhere: tax reform. fundamental tax reform-- broadening the tax base and lowering tax rates to encourage saving, investment and job creation-- can add between .5%
and 1% to growth each year over a decade. it will also reduce uncertainty over tax policy, hindering business investment in equipment and people. these benefits can help bring unemployment back to pre- financial-crisis levels over several years. growth is the medicine the economy needs, and tax reform is washington's best tool. and a reformed tax system would make tax increases for deficit reduction less costly to the economy. economists have long championed tax reform. the bowles-simpson commission teed up an option to consider with a broad base and low rates. and benefits for job creation should be front and center. why not now? i'm glenn hubbard. >> tom: just a reminder, you can catch us online at n.b.r. on pbs.org. there you'll find all the market data from the program, and you can watch any programs you may have missed. you can also follow us on twitter, @bizrpt, or my personal
feed, @hudsonnbr. if tweeting isn't your thing, friend us on facebook at bizrpt. >> susie: our facebook friends have been busy, posting their ideas for fixing the economy. joy says it's simple; we need "new infrastructure projects like road, bridges and tunnels." eloisa, also keeping it simple, says, "fire all members of congress." sergio thinks we need a top-to- bottom overhaul of the tax code. and lee says its all about boosting confidence and thinks, "the economy will be all right again when people feel good about their jobs, their homes and the wellbeing of our nation." you can join our conversation by friending us at www.facebook.com/bizrpt. that's "nightly business report" for tuesday, august 23. i'm susie gharib. good night, everyone. and good night to you, too, tom. >> tom: good night, susie. i'm tom hudson. good night, and thanks for joining us. we hope to see all of you again tomorrow night.