tv Nightly Business Report PBS April 10, 2012 7:00pm-7:30pm PDT
>> tom: stocks see their biggest one-day drop this year. fresh worries about europe fuel the fall. >> in recent weeks, the data suggest that the recession in europe may be a little bit longer and a little bit stronger than previously the europeans had thought. >> susie: but europe didn't hurt alcoa's earnings. the aluminum giant kicked off earnings season with much stronger than expected results. we'll talk exclusively with c.e.o. klaus kleinfeld. it's "nightly business report" for tuesday, april 10. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
captioning sponsored by wpbt >> tom: good evening. u.s. stocks continued falling today, marking their biggest point and percentage losses this year. susie, today's decline also marks the longest losing streak this year, down five straight sessions >> susie: tom, fear was back in the market today on fresh worries about the global economy, europe's financial problems, and concerns about slowing growth in china. the dow fell almost 214 points, the nasdaq lost 55, the s&p down 23. the losses come at a nervous time for investors-- the start of earnings season. alcoa kicked things off after the close today.
we'll detail its earnings beat and talk with c.e.o. klaus kleinfeld a little later in the program. >> tom: scott minerd is the chief investment officer at guggenheim partners, which has $125 billion under management. scott, last spring, we saw the economy slow down. we saw the stock market slow down. how would you describe the stocks selling in over the past five sessions? >> well, you know, the selloff that we're getting i think is to be expected. we have had a major rally coming out of october. you know, the market has gotten a bit over extended and it's probably time for us to consolidate some of the gains that we have made over the last few months. >> so, the sense is very similar, perhaps, tone to the market here this april, like we saw last april when we saw the market hit a high and fall off into the summer. >> that's right, and if you recall, we hit a high and we fell o and we went back and tested the highs and got very close to the highs again later, you know, a few months later, and then we went into the correction we had in the summer.
so, but i think things are a little different this time than last year. >> what's different about this spring compared to last spring? >> well, if you look at interest rate, the 10-year note was yielding 3.5% last spring, a year ago, and today it's below 2%. so, rates are much more supportive of the economy, and also helping the housing sector, which is a vital part to the recovery for the u.s. >> scott, we did see that today, a lot of safe haven buying in government ious. when you look at a chart of that yield of the 10-year benchmark, certainly it popped up in march, an awful year to be an investor. but so far this month, pretty good. what is the message to bond investors, hold on? >> i think for bond investors using strength as an opportunity to sell is a good idea. you know, we are coming into the toth year of a bull market, in bonds, you know, has been a generational run and with rates as low as they are, the up-side
is pretty tapped out at this point and i think at some point, when the fed begins to raise rates we're going to see a major correction in bonds. >> earnings season just underway. we'll talk to the ceo of alcoa coming up in a few moment, what do you expect? >> i think we're going to have a pretty good earnings season. it's not going to blow your socks off, but it's going to be enough to support the market. i this i that is going to be a pleasant surprise and probably give the market a lift here in the next few sessions. >> we'll be listening and watching closely. scott minerd with us tonight. he's with guggenheim partners >> susie: as we mentioned, europe was the catalyst for today's market sell-off, and weakness there is a big reason s&p 500 firms are expected to post their weakest earnings growth since 2009. erika miller has a closer look at why trouble across the pond is having such a big impact on u.s. corporate profits. >> reporter: earnings season has barely begun, but already, it's clear weakness in europe will have a serious impact on many big companies' bottom lines.
mcdonald's gets a super-sized 40% of revenues from europe. for philip morris, it's a smoking 65%. and g.e. and 3m get about 20% of sales from the region. analysts say firms that will be hardest hit have heavy exposure to southern europe. >> portugal, italy, greece and spain is really where they're seeing most of the weakness, which is to be expected because those are the countries that are certainly in or falling into recession. some of the northern counties-- germany-- they're still seeing strength in. >> reporter: roughly 14% of all s&p 500 company revenues come from europe, and an even bigger percentage of profits. with the european economy shrinking, a big issue for many u.s. firms is weakening demand. >> so far this year, the economic data paint a picture of a recession that's going to be a little bit longer and a little bit deeper than was forecast at the end of last year, and that's what's hurt markets and earnings. >> reporter: in addition, many u.s. companies, including nike
and merck, are being hurt by less favorable exchange rates. >> our goods are more expensive for european countries to buy. when we bring back those profits and translate them into dollars, we're actually getting less fall down to the bottom line. >> reporter: some analysts warn there will likely be additional political and economic setbacks this year and next, like countries failing to meet deficit targets or dragging their feet on reforms. >> you could see the spaniards have to ask the europeans for permission to run a larger than expected deficit. that would be a disappointment to markets. you might even see the spaniards, or perhaps the portuguese in 2013, ask for a bailout. >> reporter: the good news is the economy seems to be improving in the u.s., by far the biggest market for s&p 500 firms. if the momentum continues, some analysts see a bottom line boost in the second half of the year. erika miller, "nightly business report," new york. >> susie: alcoa is another company that does a lot of business in europe, but the aluminum giant still managed to
surprise investors by announcing a solid quarterly profit after the market close today. alcoa earned ten cents a share; analysts were expecting a loss of four cents. revenues also came in better than expected, up 9% to $6 billion. alcoa stock surged more than 5.5% in after-hours trading. it was down 2.5% in the regular session. joining us now, klaus kleinfeld, c.e.o. of alcoa. and klaus, to nice to you have back on "nightly business report. >> likewise, susie, very good to be with you. >> susie: it was quite unexpected, people were expecting a loftry report and a profit. where is the demand coming from? >> it's more than demand. we have always said that we project and we confirmed that today, a demand to increase of 7% for aluminum demand worldwide and we continue to see that picture happening. we see that this is also driven
by very, very good performance on the side of productivity. we have record performance in what we call our mid-stream business where we roll the material, the alum num and produce the material for the automotive industry as well as the aerospace industry and extremely good profitability for the downstream business where we have other things rather than alua aluminum for instance on an a 380 we have a million fasteners that go in an a-380 plane. there's a whole host of things if you want to break it counsel into industries. certainly the strong industries, aerospace continues to be very, very strong. in fact, even stronger than what we saw before and before it was very, very good. automotive, north america, a really good story. continuing to be very, very nice. continuing to be very nice, too, the whole thing of commercial transportation. the only market we either continues to be down is the building and construction market here in the u.s. as well as in europe. >> susie: let's talk a little
bit about europe and some of the other geographies. you heard our report about the slowing in europe and also the slowing going on in china. what kind of global growth you are expecting? is it going to be strong or so-so? and is the u.s. the strongest market out there right now? >> no. the u.s. is not the strongest market, but it's nice that the u.s. is growing. we actually project global growth rate of around 2.5% global gdp growth this year. the u.s. is probably going to be around 2% to 2.5% which is actually pretty good compared to where we were coming from. china, even though there's a lot of talk about a slowdown in china, but let's be realistic -- even those people that are kind of taking a negative verbal view on china, when you ask them what is your projection, i rarely have seen people that come out below 7.5%. i think that 8% growth rate in china is probably realistically going to happen. and the focus, obviously, very strongly is on europe. europe, we project to be in the
negative to probably around half percentage point of reduction, but then again please remember that europe is a combination of 27 different country, and there's very different situations in each one of the countries. >> susie: right. you know, wu have either closed or reduced production at a number of your smelters in the u.s. and in europe. do you see demand picking up maybe by the end of the year, that you will bring back some of that production and what would any of that mean for additional jobs at ail he would with a? >> well, the closure of the facilities was really not that much driven by the demand picture, but more driven by our strategic strategy, and that is to be more competitive also in what we call our upstream business where we make the metal, where we refine the boxite and turn it into alumina. and there we are coming down on the cost curve which make us more competitive and more sound to also withstand volatility, whatever the market would bring there. we have been shutting down 530
town tons of smelting capacity and last week we announced we're doing the same thing on the refining side. 330 tons. this is one of the reactions how we're going to get more competitive. there's also something on the positive side. we're increasing our volumes on those facilities where we are highly cost competitive. that's the name of the game here op our upstream side. >> susie: i just want to squeeze in one question. we have a few seconds left. >> sure. >> susie: your stock responded very nicely in after hours. it is still substantially down from a year ago or previous. what is it going to take to get this stock to move higher and if you could just give us a quick response to that? >> i think deeper understanding of the earnings power that we have, which is very, very strong. i believe this quarter has again shown we have a great strategy. we deliver. we do what we say, and usually we go the extra mile. second thing a little uplift on the general economic discussion.
a lot of worries are occurring in there. people are concerned. europe is the name of the game, but europe is not the name of the game everywhere around the world. there's a lot of very, very strong markets, and they will continue to be strong. >> susie: klaus, you always give us a lot to think about. thank you so much for come on the program. we appreciate it. >> always good to be with you, susie. talk to you. >> susie: we have been speaking with klaus kleinfeld, the ceo of ail he would with a. >> tom: still ahead-- south carolina is on a roll. why tire maker michelin is adding hundreds of new manufacturing jobs in the palmetto state. >> susie: uncle sam wants to end the runaround when it comes to dealing with mortgage servicers. the consumer financial protection bureau laid out a plan today to make mortgage servicers more accountable to borrowers. sylvia hall reports. >> reporter: many homeowners struggling to pay their mortgages share a common complaint. >> i assumed that the mortgage company was working in my
interest to help keep me in the house, and the response was "no, we really don't care, we just want your money." >> reporter: the consumer financial protection bureau says it's time to stop the runaround. >> we envision a world where homeowners can expect fair and reasonable treatment when they fall behind on their payments, and genuine efforts are made to help them stay in their homes. simply put, we intend to require mortgage servicers to put the "service" back in "servicing." >> reporter: richard cordray promises new rules for the industry. he wants both bank and non-bank mortgage servicers to get on board. the changes are simple: requiring clear, easy to understand mortgage statements every month; warning borrowers when interest rates are going to change; and helping more borrowers avoid foreclosure. ideas that make sense to housing counselors like marian siegel. >> some people would say it's too little, too late, but the reality is that these abuses have been going on for years. the need for rules and
regulations have been there, but under cover for all of this time. >> reporter: cordray says, in years past, mortgage servicers just haven't had the incentive to have a relationship with their customers. he hopes that these rules, enforced by the federal government, will give them a reason to step it up. >> it is significant that our rulemaking jurisdiction is comprehensive over the entire mortgage servicing market, including both banks and their non-bank competitors. we will also be able to back up any new rules we write with sharp teeth. >> reporter: but the mortgage bankers association is warning regulators to tread carefully when they write the rules. president and c.e.o. david stevens said in a statement: "it is important that the final rules don't give preference to one business type over any other, nor should they inhibit innovation or discourage new companies from entering the marketplace." the proposed rules are expected this summer, and will likely be final by early next year. sylvia hall, "nightly business report," washington.
>> tom: you are going to be hearing warren buffett's name a lot between now and november. not because of his investments. you'll be hearing warren buffett's name because president obama today made it clear the buffett rule is a centerpiece of his re-election. in a visit to south florida, the president laid out his plan to raise taxes on top-earning americans. it's called the "buffett rule" because it insures that millionaires and billionaires do not pay a lower tax rate than their secretaries, as is the case with buffett. >> do we want to keep giving those tax breaks to folks like me who don't need them; or to give them to warren buffett-- he definitely doesn't need them; or to bill gates-- he's already said "i don't need them. " or do we want to keep investing in those things that will grow our economy and keep us secure? that's the choice. ( applause ) >> tom: on the republican presidential trail, rick santorum suspended his campaign today, a move that clears the way for front-runner mitt romney to claim the nomination.
>> susie: a big shakeup in the management ranks at best buy. the changes come just weeks after the big box retailer announced a turnaround strategy. brian dunn, the company's c.e.o. who worked his way up from store manager over the past 28 years, is resigning. dunn's departure comes as best buy looks for ways to fight increasing competition from internet retailers like amazon. >> investors have been frustrated with the c.e.o. at best buy for some time. the company has always had a growth-oriented c.e.o. in that role. best buy has hit that point in its life cycle where it needs a strong operating c.e.o. >> susie: best buy board member mike mikan will serve as interim c.e.o. shares fell sharply in today's session.
the stock dropped $1.33, or almost 6%, to close at $21.32 a share. there's a technical analysis of best buy shares on our web site. just go to nbr.com. you'll find it under the "blogs" tab. >> we have been talking a lot about the rough day in the markets, and you know, one way that you can always tell, i always check, how did the dow components do and 29 of the 30 were in the red. the only one in the green was hewlett-packard and it was up by only 13 cents. it was a rough day today. >> it was a rough day. hpq was the worst dow stock last year and perhaps value buyers moving into the market and lots
of profit-taking going on in the broad market in the market focus. the major indices suffered their worst single day of the year, extending the slide over the past week. early on today, it looked like we may see stocks stabilize, but that lasted only the first hour of trading. then, sellers took over again with the index shrinking into the close. as an indication of the selling pressure, on the new york stock exchange, only 450 stocks traded higher while more than 2,500 fell. on the nasdaq, there were 445 gainers, but almost 2,100 losers. today's drop has cut the s&p 500's gains this year to 8% with the index down to a one-month low after putting in its best first quarter in more than a decade. the selling was broad-based with all ten major stock sectors falling, led by consumer stocks. the consumer discretionary sector, industrial stocks, and the financial sector each fell by more than 2%.
in the consumer sector, homebuilding stocks have been rallying for the better part of a year. but today, they were among those moving lower. lennar fell more than 7% as volume almost doubled. this highlights some of the strongest gainers over the past several months have suffered some of the worst selling. not all consumer-focused stocks were hit. supermarket operator super-valu lived up to its name today. shares popped more than 15% as volume jumped five-fold. this stock highlight's just the opposite of the homebuilders-- while it has been falling in price over the past year, today, it found buyers. today's action followed the company reporting stronger than expected earnings and forecast for the rest of the year. the sell-off today was not restricted to stocks. energy prices also suffered losses. natural gas continued tumbling. some good news for drivers, maybe-- gasoline futures cooled off, as did oil, falling close to $101 per barrel
looking specifically at oil, prices have fallen almost $10 a barrel since the beginning of march, and right around $100 per barrel seems about right for larry shover, chief investment office at commodity mutual fund s.f.g. alternatives. >> we're seeing oil where it needs to be, and it's actually where saudi arabia projected west texas to be, about $100 a barrel over a 12 month period. everything we've seen before that has just been based on notion, based on rumor, based on nothing other than that. $100 a barrel, although that's still too expensive, that seems to be right going forward. >> tom: we did see a little gold buying, but not a big swing up in prices. gold settled up about 1%, $1,661 an ounce. and that's tonight's "market focus."
>> susie: the manufacturing sector will be tallying up even more new jobs. michelin north america breaks ground next week on a new tire plant in south carolina. that facility and the expansion of another michelin plant nearby will add 500 new jobs to the state's economy. factories have been adding about 30,000 new jobs a month since the first of the year. as diane eastabrook reports, that's good, but not exactly great. >> reporter: michelin says robust demand for big earth movers used in everything from mining to construction are behind its expansion binge in south carolina. michelin north america's chairman and president pete selleck said most of the tires produced at a new plant will go overseas. >> there is a tremendous amount of demand, and it's being
driven, on the one hand, by developing economies and growth of mature economies, but on the other hand, by the desire of construction and mining companies to improve their productivity. when they use this tire on large vehicles, they can replace smaller vehicles and become much more productive. >> reporter: manufacturing has turned into one of the bright spots in a still dull economy. the sector was among the hardest hit in the great recession, shedding nearly 2.5 million jobs. since then, american factories have added back about a half million positions. j.p. morgan chase chief economist bruce kasman says that's certainly an improvement, but he doubts the sector will quickly return to pre-recession levels. >> i think what's preventing that, to a large degree, in effect, is the significant components of u.s. demand in goods-producing industries such as housing are just so far from where they were in the previous peak that the manufacturing sector demand is going to be limited in terms of the recovery. >> reporter: what is helping u.s. manufacturing is growth in
agriculture, technology, and mining. on top of that, many of the new manufacturing jobs require higher skilled workers. selleck says michelin could have built the new plant anywhere in the world, but liked what it's seen in south carolina. >> this will be the ninth plant that we've opened in south carolina, so we have a lot of experience in attracting and training the workforce here. >> reporter: selleck thinks demand for big earthmoving equipment could continue for at least the next decade, keeping demand for michelin tires on a roll. and that could mean job security for the 500 new workers the company will soon start hiring. diane eastabrook, "nightly business report." >> tom: while michelin is adding u.s. jobs, tonight's commentator is worried the slowdown in hiring last month will have uncle sam itching to spend again. here's simon constable, columnist at "the wall street journal." >> friday's disappointing jobs numbers should have the white house and the congressional democrats panicked. the problem is that our leaders are likely to do exactly the wrong thing to fix things.
they'll probably want to spend more government money. the problem everyone sees is that the 120,000 jobs created in the u.s. during march is just woefully inadequate to keep up with population growth, let alone make a dent in the backlog of the millions of long-term unemployed. the solution the government opted for in the depths of the financial crisis was massive government stimulus and bailouts of near-dead companies. it was at a cost of hundreds of billions of dollars. but new research shows that this sort of mass spending does little to help. a paper published in this month from the mercatus center at george mason university states: "the data exhibit no evidence of stimulus spending having any effect on economic growth." in fact, the authors go even further. they say the effect of stimulus, looking over a variety of time horizons, "is always statistically zero." or put another way, that's hundreds of billions of dollars wasted. i hope sense prevails enough in
congress to keep the check book closed, but i fear not. i'm simon constable. >> susie: here's what we're watching for tomorrow: with mitt romney now looking like the republican candidate, we'll look at how the money behind the presidential race is stacking up and where its coming from. >> susie: that's "nightly business report" for tuesday, april 10. i'm susie gharib. good night, everyone, and good night to you, too, tom. >> tom: good night, susie. i'm tom hudson. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org