tv Nightly Business Report PBS December 9, 2011 7:00pm-7:30pm PST
>> susie: european leaders craft a deal to stem the region's growing debt crisis, but british prime minister david cameron says it's without his country. >> if i couldn't get adequate safeguards for britain in a new european treaty, then i wouldn't agree to it. >> tom: u.s. stocks surged on news of the european plan. >> i think there's a willingness on the part of the investors that are in the market to want this market to go higher year- end. and, i think when they get an opportunity to buy stocks and there's a reason to do so, they do. >> tom: it's "nightly business report" for friday, december 9. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
captioning sponsored by wpbt >> susie: good evening everyone. a new day and new deal for europe, but it's still not perfect. european leaders wrapped up a crucial summit agreeing on a plan to resolve the debt crisis. all of the european union countries agreed on the historic treaty. but tom, britain refused to go along. >> tom: susie, britain didn't want to give up economic control to a central european authority, but the agreement would bring other eurozone countries together to coordinate economic polices. here are the highlights of today's deal: it imposes tougher rules on government budgets, such as cracking down on overspending.
there are automatic penalties for countries whose budget deficits are more than 3% of their economies. also, the eurozone countries agreed to contribute nearly $300 billion to a bailout fund to rescue troubled countries. >> susie: wall street liked the plan, but there are concerns that s&p could still downgrade the credit ratings of 15 eurozone countries, and it could happen as early as next week. by the close, the dow surged almost 190 points, the nasdaq jumped 50 and the s&p 500 added 20. suzanne pratt has more on today's market action. >> reporter: stock investors can thank the u.s. consumer as well as europe for today's rally. a widely watched measure of consumer sentiment showed americans are in a suprisingly cheery mood right now, the happiest they've been in six months. on top of that, the eurozone summit resulted in stricter budget rules for the region. it was not the comprehensive deal that the market had hoped to get, but it was good enough for now.
nevertheless, floor broker doreen mogavero says retail investors are still on the sidelines and traders are still skeptical about europe. >> when you talk to traders, i think there's definitely an air of caution. traders are saying, "you know what? this is great. we'll buy them this morning and sell them in the afternoon, but we're not going to really say that this is a turning point in the market or in the european situation." >> reporter: u.s. stocks have been volatile since the summer as european headlines injected uncertainty into world markets, but in the last few weeks, equities have risen in anticipation of a plan to finally solve the debilitiating financial crisis. still, market pros predict europe's problems will dog u.s. investors for months, if not years. >> i think they've moved closer toward a comprehensive approach to the problem, but i don't think they've yet reached a comprehensive solution, which means we're going to continue to have spillover effects. i think we're going to continue to have headline risk in the eurozone, and most importantly i still think the eurozone is
going to fall into recession. >> reporter: ryan thinks investors will selectively scoop up stocks in the last few weeks of this year against a backdrop of choppy trading. and, he's doubtful a year-end rally will continue into 2012. >> what we're simply not going to get is the kind of economic growth that's going to translate into significantly higher corporate earnings, and we still see some of these risk factors, whether its a spillover from the eurozone or rising geopolitical tensions. >> reporter: we'll probably see eurozone spillover again next week, but today, at least, there was some progress to celebrate. suzanne pratt, "nightly business report," new york. >> susie: mohamed el-erian joins us now with more analysis. he's c.e.o. of pimco, the world's largest bond fund. nirs to you have on today to analyze all of this for us. >> thank you. >> susie: well so, what do you think of the deal? you've been talking about europe an you've been very concerned about their strategies. what dow make of this
decision? >> the first sigh of relief that they agreed to something. unfortunately, what they agreed to is neither a quick fix nor is it comprehensive enough. it doesn't cover enough of the issues that need resolution and then as you said in the lead-in, there's a new angle now which is we're starting to see division within the european union, and in particular within the members of the eurozone, the 17 and the other 10 lead by britain. so it just tells you complicated this issue was. and we haven't solved it fully as yet. >> so what's missing out of this so-called comprehensive plan that you want and is it still possible to get there? >> well, time is running out so what's missing. first you have to combine debt containment with growth. and nothing has been done to promote economic growth. secondly, you need to deal with the capital shortfall of the banks. nothing has been done there
that's meaningful as yet. third you need a clear vision of what the eurozone is going to look like in two year's time. and finally you need so-to-have a division between sovereignty cases and liquidity cases. unless you get all this the ecb won't come in, won'ting all in and if the ecb is not all in we are going to go from one volatile situation to another. >> how do you think s&p going to respond to all of this next week. they seem to warn that if there weren't a comprehensive plan coming out of europe that they would downgrade the ratings of 15 eurozone countries. do you expect that to happen, and if does, what does it mean for the united states? >> so first we are not in the business of predicting the rating agencies. in fact it's really hard to do so. our own internal ratings on the basis on which we invest have a number of the european countries at lower ratings than the rating agencies have them so we would not be surprised if they get downgraded. we just don't know when
that's going to happen and who is going to get downgraded. in terms of the u.s., funny enough to use bill gross's analogy, the u.s. is increasingly looking like the cleanest daily shirt so while the u.s. has issues, relative to europe it looks pretty clean. so the u.s. is going to continue to attract a lot of attention because it is the cleanest dirty shirt. >> susie: but you did say there is nothing in this plan about addressing slow growth in europe. so what does that mean for the u.s. in terms of for example export-- exports to europe so everybody is impacted by europe for three reasons. as you say, europe imports a lot. european member is the biggest economic zone in the world f you look at it as one. so we will get impacted by lower demand. second the european banks are interlinked. and they're coming under enormous pressure and they're selling. so there's a lot of assets that are going to hit the markets as they delever and
they will have to delever. and finally risk references and animal spirit. it's like a big cloud. a lot-- including pimco right now is cautious, on the sideline saying you know what, this is an incredibly volatile market. yesterday we were down 200, today we are up 200 this san incredibly volatile market. the right thing to do right now is to wait before you engage your healthy balance sheet. >> we have 30 seconds left. real quickly what is your investment strategy ghooing 2012 and what do you say to invest invest-- individual investors and what they should do. >> so our strategy remains generally defensive and only selectively offensive and i would say if you thought 2011 was volatile, you haven't seen anything yet. 2012 will be equally if not more volatile. >> okay so fasten your seat belts. thank you so much, mohammed, hope you have a good weekend. >> you too. >> susie: we have been making with mohamed el-erian, >> tom: still ahead, toyota cuts
its financial outlook in half. we look at what it will take to get the automaker back on the road. the white house turned down the latest republican proposal to extend payroll tax cuts for working americans today. its the latest move in a growing debate over the tax cuts, which are set to expire at the end of this year. while democrats push the cuts as a way to help the middle class, conservatives argue extending them could take a heavy toll on social security. darren gersh explains what's at stake. >> reporter: in washington, temporary programs have a funny way of becoming permanent, and the heritage foundation's david john fears that is what's happening to the payroll tax cut. >> the odds are very strongly that this will be a permanent tax cut, and i'm not suggesting that we increase taxes again. what i am suggesting is that this needs to be done honestly. >> reporter: john says that means telling people the payroll tax cut means the government will be funding part of social security through income taxes. in effect, social security will be tapping into a huge new pot of money.
>> essentially, there is no urge to fix the social security program. it just becomes a bigger and bigger drain in the future. >> reporter: but the economic policy institute's andrew fieldhouse thinks this is one tax cut that will turn out to be temporary. >> you're not seeing the same grover norquist taxpayer protection pledge ideology set in over the payroll tax cut the way you have for the bush-era tax cuts. >> reporter: fieldhouse would prefer to stimulate the economy with more infrastructure spending, but he says extending the payroll tax cut is the only option on the table now. >> right now you are talking about infusing about $120 billion of disposable income into the u.s. economy. you're not always going to want to do that. right now, in the context of massive underemployment, i think that makes sense. >> reporter: the odds of a payroll tax cut extension next year are looking good now. whether it continues beyond that will depend on the economy and the outcome of the next presidential election. darren gersh, "nightly business report," washington.
>> susie: the missing money still can't be located at m.f. global, but many customers of the bankrupt firm will soon be getting some of their money back. the judge overseeing the firm's bankruptcy today approved the return of $2.2 billion to clients. the move comes one day after former c.e.o. jon corzine told lawmakers he didn't know what happened to millions of dollars in customer money that's still missing.
lots of money ghooing the market, as we said this european bill rallied. >> as he said down 200 points yesterday, up 200 point today, we will wait over the weekend but certainly optimism today. we'll roll with today's market focus. are thanks to some optimism from europe, we some some relief buying of u.s. stocks. stocks were poised for some gains from the opening bell. this is today's activity with the dow jones industrial average-- the dow finishing higher by 1.5%. today's gain helped pull the index positive for the week, the second straight week of gains. the dow was up four sessions, but even with the sell-off yesterday, it's 1.4% higher this week. the nasdaq saw a more muted gain, but a gain nevertheless-- up 0.8% compared to last week. and the s&p 500 is almost 1% higher tonight compared to a week ago, thanks to today's rally. the financial sector again led the market.
with so much focus on europe, financials, energy and industrial sectors each gained at least 2% today. the leading dow stock was caterpillar, a company closely tied to the global economy. cat gained more than 3%. a move over $98 per share would take it to its highest price since the august sell-off. for the fourth time in a year and a half, general electric is giving shareholders a raise. the company increased its dividend to 17 cents per share per quarter. that's still only about half what g.e. shareholders were collecting before the credit crisis. general electric stock was moving up nicely, up more than 2%. that's its highest price since the halloween sell-off. continued weakness in the housing market, coupled with a slowdown in consumer electronics, forced dupont to drop its outlook for the year. it remains positive about its agriculture business, though. shares fell more than 3%. it was the only stock on the dow industrials to fall today. the company may find itself fielding several offers for its business making finishes for cars and trucks.
the deal could fetch dupont $4 billion. other firms that have dialed back their financial forecasts got caught up in the rally. toyota was up more than 1.5%. more on its warnings in a moment. and despite last night's warnings, semiconductor makers texas instruments and altera were higher. oil prices rebounded some thanks to the european news. crude oil closed up more than 1%, ending just shy of $100 per barrel, but another energy source fell hard. natural gas shed more than 3% even as winter weather begins to bear down on parts of the midwest. but a forecast for a mild winter has sent nat gas prices to a new contract low. supplies are plentiful, and the producers are responding. the number of rigs drilling for natural gas is close to a two- year low. still, analysts do not expect a big drop in u.s.-produced natural gas until the second
half of next year. and that's tonight's "market focus." >> susie: bad weather and unfavorable exchange rates are sending toyota's profits in reverse. today the japanese car maker cut its financial forecast in half for the rest of this year. as diane eastabrook reports, the maker of camry and corolla has a game plan to get back on the road to recovery next year. >> reporter: toyota can't seem to get a break these days. it was just getting production back on track from the spring earthquake and tsunami in japan when floods in thailand disrupted parts supplies. now a strong yen is chipping away at sales abroad. as a result, the company said its profits for the year, which ends in march, will come in at about 180 billion yen or $2.3 billion. that's roughly half the amount the company forecast back in august. to offset the currency problem, toyota plans to cut costs, raise prices where it can, build more vehicles abroad and source more parts in the markets where it
manufactures. morningstar auto analyst david whiston says that could be good news for the u.s. >> just this week, you saw that toyota was going to start shipping more u.s.-built camrys into south korea, for example, and there is certainly more of a need to bring more powertrain technology for hyrbids from japan to europe and start making the prius in the united states, for example. >> reporter: whiston thinks the yen problem could continue to dog toyota for the next several months. still, the auto company thinks it can regain its financial footing next year, barring any further disruptions from mother nature. diane eastabrook, "nightly business report," chicago. >> tom: here's what we're watching for next week: our friday "market monitor" guest is rich steinberg of steinberg global asset management. we'll see november consumer prices and retail sales, plus we'll find out out how the holidays are treating best buy and fed-ex-- both are due to report earnings. and monday, kevin mccormally
begins his week of tax tips, answering your tax questions. >> susie: boeing's flying higher now that the national labor relations board has officially dropped a high-profile complaint against the aircraft maker. the n.l.r.b. sued boeing to stop it from opening a plant in south carolina. boeing's machinists union had claimed the move to the non- union state was retaliation for previous strikes against the company. boeing contested those charges. the labor board dropped its suit just days after the union's 31,000 members approved a new four-year contract. >> tom: hewlett-packard today announced it would make its web o.s. system open source, meaning it would be available to anyone to use for free. the move comes after h.p. earlier this year said it would cease making devices using the technology it acquired in its buyout of palm in 2010. earlier this year, h.p. rolled out a tablet with the web o.s. system, but it failed to attract consumer interest and production was halted several months later.
duncan, always niles to see you, welcome back. >> happy holidays, tom. >> tom: so if it isn't holiday shopping y is this season histor anything your estimation? >> well, i think we have to look back and view this as a very historic time. it's amazing the level of fear out there europe has been everything. we were worried from a year ago and people should be more encouraged about the steps taken there we think. >> tom: we should be earn couraged by what we have seen out of europe, just even today. what does that portend for the stock market direction, at least not new year as well as in the new year? >> well, i think the threat of chaos has reduced a bit. there's going to be problems there for years, i think. but that fear has caused people to lose focus on some of the great fundamentals that are going on. especially in the u.s. we see very good positive economic progress and lots of indicators pointing up in the u.s.. >> tom: but clearly it's a global economy. would you still be concerned, though, in europe in this latest effort fails like the others have failed?
>> i think they'll do just enough that politically palpable. i don't know that its long-term solution going to take some time to work out there may be a recession in europe but i think it just slows down. we've been seeing great signs of strength, particularly in the heartland. our analysts have been out there talking to the banks, companies and farmers. and if they didn't pick up the paper they would think business was great. they wouldn't be as fearful as they are in the markets. >> tom: sometimes it pays not to read the headlines. are you looking for some opportunities in traditionally defensive stock areas including health care, xlv is the spider health care exchange traded fund. we're using it to illustrate the sector. what dow expect out of health care and why do you like it? >> one of the reasons we like health care is the dividend opportunity there. they've had tremendous eye level of difficult densd. we think they are very sustainable. the cash flow is there to sustain those dividends and i think the valuations are quite compelling. of course su have the
demographics that are going to drive it but that dividend story is something i think investors are missing, not only in health care but in all the sectors of the market. really across-the-board, not just a traditional utilities and telekom area. >> tom: it's also been a pli in energy, the xle, energy prices rebounded today but they have been held hostage to the european situation, haven't they? >> flring is a bit more volatile source for dividends. i think that that is going to continue to be the case. but we like the long term supply/demand dynamics there and the cash flow characteristics is something that investors should consider. >> tom: all right, you were last sitting here almost about a year ago, december 17th, 2010. back then you liked technology which that sector, etf up about 4%. you also liked the insurance sector in financials down about 12%. and you continue to like technology in this environment. and the share price here has been volatile, to doubt about it. this can't be much of a dividend yield play, is if?
>> actually a surprising amount of dividend activity going on in technology. you've seen a lot of companies that have recognized that that benefit of returning some cash to share holders. technology companies are very cash-rich as apple being a great example. we're waiting for that dividend from apple but you've seen actually across the s&p 500, are you seeing 300 plus dividend increases or initiations this year. that's up 35%. so technology, in many, except the financials. the insurance companies haven't done well year over year but they are probably one of the best financial sectors of the market to have been in. >> tom: real quick, dow own any of the funds we mentioned here tonight. >> none of the etfs but we certainly own plenty of those dividend payers within the sectors. >> tom: happy holidays to duncan richardson with eaton vance management. >> susie: finally tonight >> susie: and finally, a grand expansion for apple's retail footprint. the world's largest apple store opened in new york city's famed grand central station today.
the company says the store added more than 300 workers to its ranks. and tom, apple's making it easy to spend money at this store. just slide your iphone across the bar code of a product, take the item, and you get the receipt by email. >> tom: they make it easier to separate a consume frere their money. very easy. that is nightly business report on this friday, december 9th. thank you for joining us. this is the time of year your public television station seeks your support. >> susie: absolutely, support that makes programs like nightly business report possible. >> tom: i'm tom hudson v a great weekend. you too, susie. >> susie: you too, tom. thank you. everyone have a great weekend. we'll see you all again next week "nightly business report" is made possible by: