tv Nightly Business Report PBS June 22, 2012 1:00am-1:30am PDT
>> this is n.b.r. >> tom: good evening. i'm tom hudson. stocks plunge as jobs, manufacturing and housing continue slowing down. >> susie: i'm susie gharib. also tumbling: oil prices. but that could mean more money in your pocket. >> tom: with europe's economy in crisis, we look at the differences between the european central bank and the u.s. federal reserve. >> susie: that and more tonight on "n.b.r.!" >> susie: a nasty stock market sell off today, after a batch of weak economic reports signaled the global economy is in trouble. the dow plunged 250 points, the nasdaq tumbled 71, and the s&p 500 lost 30 points. stocks got off to a bad start after the labor department
reported a small drop in the number of people applying for jobless benefits. a key regional manufacturing index showed that business conditions and new orders deteriorated according to the philadelphia federal reserve, the worst showing in about a year. >> susie: also two closely watched manufacturing readings from china and europe were weak, underscoring the slowdown in critical international markets. >> tom: one bright spot: lower oil prices. gas prices tonight are at their lowest level since february. after peaking close to $4 a gallon in april, prices have been falling, putting more money in the pockets of americans. just a few months ago, it was looking to be a long hot summer of climbing gas prices. in february, miami gas station owner lee doucette was getting ready. >> tom: you think you'll have to put $5 up there before the 4th of july? >> i have fives in the box. >> tom: he won't need them. gas prices have followed oil prices, falling dramatically since early may.
crude oil settled below $80 a barrel today for the first time since october. that's down from over $105 just two months ago. helping push prices down has been the highest oil production in the u.s. in more than a decade. but that increase in production may not last if prices stay down. >> we're getting close to levels where the oil industry, oil producers in the newer oil plays, all those newer oil plays that were some exciting, the business models there don't look quite so good at $78 as they did at $105. >> tom: lower energy prices can be a boost to consumers. in may alone, shoppers spent $1 billion less at gasoline stations compared to april, even as demand increased. >> reporter: i'm diane eastabrook in chicago, still ahead on "n.b.r.", i'll tell you how one restaurant chain is helping the hungry in an unique way. "nightly business report" is brought to you by:
captioning sponsored by wpbt >> susie: more discouraging news about the health of the world's biggest banks. after the market close tom, moody's downgraded the debt ratings on 15 global investment banks. >> tom: susie, moody's launched the review back in february, and today it pulled the trigger on those downgrades, lets start with the big u.s. banks first. bank of america, citigroup, j.p. morgan and goldman sachs were all cut by two notches.
credit suisse, and the royal bank of scott land. the moody's bank action. >> tom: the moody's bank action came just after spain announced the results of a an independent analysis of its financial system. it shows banks there could need up to $78 billion in new capital to weather a serious economic downturn. spain is expected to ask for that aid on monday. >> susie: joining us now, keith banks, president of u.s. trust. keith, nice to have you on the program. what was your take on this big selloff today on wall street? >> well, you said a lot of the factors that are driving it, right, we've had nothing but a confluence of negative news that seems to be getting more negative. we have a debt crisis brewing in europe and it's really impacting economic growth there, and more recently the news coming out of the u.s., whether it's labor, manufacturing, housing, all surprising to the down side and people are now worrying about the health of the economy, even the u.s.. >> susie: and they're also beginning to talk about recession in the u.s..
what are your thoughts on that? >> well, we don't see a recession in the u.s.. what we see is a deceleration of growth. so we think for the rest of the year we'll see between 1.5 and 2% of real gdp growth in the u.s., but we think between the impending election in november and the fiscal cliff issue at the end of the year, we think things are going to really begin to slow, and i think that will put pressure on economic growth, on job growth, but not to the point of a recession here in the u.s.. >> susie: will that put pressure on central bank or the federal reserve that they will need to jump in and give some kind of stimulus? yesterday chairman bernanke was talking about they're prepared to act. what do you expect from the federal reserve? >> i think the federal reserve, i think they've gotten ahead of the curve, i think they are being very eventually land and i think they'll do whatever they think they need to do to
provide the liquidity and support so the economy does not in fact weaken too a point where a recession is in fact imminent. >> susie: also today, this bearish forecast came out, telling clients to short the s&p 500, expecting a correction of something like 5%. is this just a correction? or is something more serious going on in the market? >> we think it's a correction. right now fear is ruling the day. and so what happens when you get the extremes, will drive this market beyond a point where fundamentals justify it. our point of view is when you get to 1300 on the s&p or lower, we actually believe if you have a longer trm perfect respect skpif a longer term investment horizon, that's a good time to begin to put money back into the equity market, not to be selling the equity market. >> susie: but you know better than i do, investors have been scared about putting their
money in the markets eve en before all this bad news, now they are even more scared. what are you telling your client on how to hand tell fear issue? >> well, look, it a great question and a lot of it depends on, a, the risk tolerance, and b, their investment horizon. the hardest thing is to make a short-term call on the market. what's going to happen over the next month, two or three. could we see more weakness? absolutely. but we're telling clients that over the long term, we think they should have an exposure to fixed income, they should have an exposure to equities, and if their risk tolerance allows it we think it a good time to begin to build a bigger position vis-a-vis equity. >> susie: is it still okay to keep your money in treasuries or other bonds? >> well, treasuries we think do not represent value. i believe the 10-year treasury bop is around a 1.62% yield. it a safe place for money, it's a feel-good place for money, but it's not a place where you're going to see any
kind of return. some people are just in cash. but fixed income we think is a good part of a broader strategy, and if you're nervous about the markets and nervous about risk, you own shorter term bonds. >> susie: okay, we'll have to leave it there, thanks for all the good advice. keith banks, president of u.s. trust. >> thank you. >> susie: tonight we continue our special series on the federal reserve, with a look at how it compares to its european brother: the e.c.b. the "european central bank" is at the epicenter of the eurozone's financial mess. and, some economic experts are
hoping it will soon do more to help solve the crisis. suzanne pratt reports. >> reporter: this is the european central bank in frankfurt, germany. this is the federal reserve in washington. beyond architectural styles, there are significant differences between the two banks. the fed is about to celebrate its 100th birthday. it also sets monetary policy for one country. established in 1998 the e.c.b. is younger than justin bieber. it sets policy for 17 nations. still, perhaps the most significant difference is the fed has a so-called dual mandate, meaning it must strive for both maximum employment and stable prices when it sets policy. the e.c.b. has a single mandate: focusing only on curbing inflation. that stems from germany's inflation phobia, but some experts believe it's changing. >> the dirty little secret of
central banking is that even central banks that have single mandates, and the e.c.b. isn't the only one with just a single inflation mandate, they often act as if they had a dual mandate. >> reporter: lately, however, the e.c.b., led by mario draghi, has been criticized for failing to step up and doing more to solve europe's economic crisis. european short-term interest rates are at 1%. while that's low, the fed has kept u.s. rates close to zero for nearly four years. on top of that, bernanke and company have enlarged their role: buying bonds and expanding their balance sheet. it's all in an effort to drive- down long-term rates, and jumpstart the fragile recovery. still, with big parts of europe falling back into recession, economists say it's only a matter of time before the e.c.b. copies a page from the fed's playbook. >> the e.c.b. probably in concert with the i.m.f., the e.u. and most importantly
germany will probably work together to provide a monetary backstop to sovereign debt, to provide a firewall and, or blanket bailout for the banks. >> reporter: before any of that is likely to happen, most market pros expect the e.c.b. will at least cut rates this summer, perhaps by as much as 0.5%. suzanne pratt, "n.b.r.," new york. >> susie: tomorrow we'll wrap up our series on the fed's role in rescuing the u.s. economy, and this week's policy actions. we'll talk with greg ip, u.s. economics editor at the economist. >> tom: the nation's commerce secretary has stepped down. john bryson is leaving his post nearly two weeks after being involved in two car crashes. those crashes were blamed on seizures. in a letter to president obama released by the white house today, bryson said, "the seizure i suffered could be a distraction from my performance as secretary, and that our country would be better served
by a change in leadership at the department." >> susie: calling it a no- brainer, president obama today stepped up pressure on lawmakers to stop student loan interest rates from doubling before a july 1 deadline. the president wants congress to keep rates on federal stafford loans from rising, they're set to jump to almost 7%. republicans and democrats agree the rates should stay put, but they're deeply grid-locked over how to pay for it. today, president obama accused congress of "playing chicken" with our economic future. >> this is all about whether or not we are going to have the best trained, best educated work force in the world. that improves our economy. higher education cannot be a luxury reserved for a privileged few. it's an economic necessity for every family and every family should be able to afford it. >> susie: americans now owe more on their student loans than on credit cards, and student debt
is teetering near $1 trillion. but the treasury released a report today showing college still pays. in 2011, people with college degrees earned over 60% more money than those with just a high school diploma. >> susie: more americans could be going to bed hungry. republicans want congress to cut up to $2 billion from the food stamp program in this year's farm bill. food stamp rolls have doubled in the past eight years, to 46 million people as the great recession took its toll. one national restaurant chain is
trying to solve the nation's hunger problem in a unique way. diane eastabrook explains. >> welcome to panera cares. >> reporter: something unusual is happening inside this restaurant. >> we want to make sure everybody can get something to eat whether or not they can afford it. >> reporter: today the panera bread company opened its fourth panera cares cafe-- this one in chicago's lakeview neighborhood. the concept looks like any other panera store with one exception: there are no prices, only suggested donations. financially-strapped customers pay what they can afford and others pay a little more. >> if you would like to donate more i can round up to the nearest dollar. >> reporter: panera founder and co-c.e.o. ron shaich got the idea from a small non profit cafe in denver. >> i remember watching a piece on this on t.v. and i looked at my wife and i said nancy we open a restaurant every 48 hours, we have 68,000 people who work in our restaurants. we could really do this.
>> reporter: this particular store serves a community of mostly professional and working class chicagoans, but the company estimates about 9,000 people or a fifth of the 45,000 people who live in this community are what it considers food insecure. shaich explained to customers what that means. >> this is to get the world talking about the issue. one in four americans are in homes where they don't know where their next meal is coming from. >> reporter: some who stopped by today didn't need an explanation. >> i grew up in a single parent family and my mother was always in need of some extra help. >> reporter: the company estimates the average donation at similar stores in detroit, st. louis, and portland oregon is about 80 cents on the dollar. panera estimates the cafes will serve about a million diners this year. those numbers are gratifying to shaich, but so too are the stories he hears from customers. >> when people walk in and say you know i have been a panera customer for the last decade and i lost my job as a tech writer two months ago and i have my
children with me and i didn't know where we were going to eat tonight, and i'm so pleased this is here. >> reporter: diane eastabrook "n.b.r.," chicago. >> susie: if you had trouble using twitter today, you're not alone. it said its service was down about hour late this morning. so far, the company will only say a bug is to blame. twitter started in 2006, and was known for frequent service interruptions in its early years. but the company has substantially expanded server capacity over the past two years. that's important for twitter fans: about 400 million tweets are sent out each day. >> susie: tom, there were lots of tweets today about the markets. right from the opening bell there was a cast okay of bad news. >> tom: it really was, and that cascaded into a lot of selling, not just in the stock market, it was a broad selloff. stocks and commodities moving lower. let's take a look at tonight's market focus. >> tom: it was among the worst days of the year to hold stocks
with broad-based selling. the s&p 500 was positive for just the first ten minutes of the session, before steady selling hit the market. goldman sachs turned pessimistic with an analyst predicting another 5% drop. today's drop comes after the market rallied from its june low on hopes the federal reserve would do more to help the economy. yesterday's announcement by the central bank it will extend its latest effort is seen as modest help, not a big stimulus. volume increased today. 863 million shares on the big board. almost 1.8 billion on the nasdaq. all ten major stock sectors were down. the energy sector fell four percent. materials dropped 3.3%, and we also saw selling of traditional growth areas, such as technology, down 2.6%. as energy prices fall, concerns about big oil producers cutting
back. that would impact those companies working in the energy fields. such as cameron international, it's 7.6% drop today was the biggest among s&p energy stocks. it takes shares down almost 30% from their high in february. the oil giants of the dow industrial index weren't immune. both chevron and exxon mobil shed about 3.5%. a software maker, and semiconductor company hurt the tech sector. first the chip maker, micron. shares sank 7.8%. the company reported another quarterly loss as it battles weak pricing for its flash memory devices. volume was heavy in today's selling. business software maker red hat saw red, down more than 6%. while the company had a better than expected quarter, it saw a drop in the amount of money it hasn't collected yet from customers. that may seem like good news, but analysts say that deferred revenue helps provide a cushion against possible sales slowdowns.
one of the drags on the market was the slowdown of existing home sales in may. sales fell 1.5% from april to an annual rate over just over 4.5 million units. the median sales price of a home rose to $182,600, but economists say that rise in prices is actually due to a drop in supply of lower-priced or distressed homes. >> home prices have definitely stabilized. we look at asking prices as a leading indicator of where sales prices are going, and asking prices have actually been rising since february, and they stabilized starting last fall. >> tom: signs of stable home prices did not help the stocks of home builders. the exchange traded fund following the industry sold off hard, down 4.6%. the housing report didn't help housewares retailer bed bath and beyond, which has hurt by its own sour outlook.
17% down is how much bed bath and beyond fell, a sharp sell- off on heavy volume. earlier this week the stock hit an all-time high. it reported a stronger than expected quarter but warned with a weaker than expected forecast. a ruling by an f.d.a. panel provided for a big rally for two companies working on a blood cancer treatment. onyx pharmaceuticals shot up 43% after the f.d.a. advisory panel supported its treatment which goes for full f.d.a. okay in the months ahead. ligand jumped more than 13%, as it would get a portion of any revenue if the drug makes it to market. all five of the most actively traded exchange traded funds were lower, by at least 2%. the biggest drop was the emerging market fund, down 3.7%. and that's tonight's "market focus."
>> susie: despite today's worries about a slowdown in the world's global growth engines. tonight's commentator says the u.s. still has a lot going for it. here's eric schurenberg, editor- in-chief of inc. magazine. >> a venture capitalist, bruce gibney, recently stopped at inc. on his return from beijing. actually, inc. was his second stop in the u.s., the first was the city of troy, new york. beijing, troy. what gibney said, to my surprise, was that he'd take troy any day. now, i went to high school near troy, and the place has seen better days. but gibney found an innovative manufacturer there he thought was worth an investment.
he couldn't say the same of beijing, even though beijing has a much faster growing economy. but it doesn't have the american culture of entrepreneurship. gibney says the chinese are simply not focused on innovation. this is no knock on them: its more profitable to absorb technology from the west than to create it. in america, by contrast, there's no choice. to succeed, you have to take risks. it's expected. more important, our culture enables it. korea and germany, other places with lot of smart, hard-working people, have few entrepreneurs, partly out of fear of failure. there, it's a disgrace. here, to quote randy komisar, another v.c., failure is just a ticket to a second try. having an entrepreneurial culture doesn't give us a free pass in global competition. we can't stop investing in education and science, but we should remember what we do have, and preserve it. i'm eric schurenberg. >> susie: no business is recession proof, but there is one that very close: pets, and all the stuff that goes with them.
americans spent over $50 billion on their pets in 2011, the largest chunk of that on food. in tonight's "made in america", mike hegedus takes a look at the fastest growing trend in pet food, and one of the companies leading the way. >> reporter: there are more of them than kids, and we spend more on them than on our husbands and wives, pets, and if the slow food movement is all the rage for humans, then sparky, bucky, cuddles and toots aren't very far behind. >> it was totally inspired by what we were doing with our own food. the things we were buying inspired, we should be applying the same ideas with the pet food. we only eat local and our pet food should be local as well. and we thought that pet owners would like that. >> reporter: and they did, in very large numbers. so large that five year old, san francisco-based, small batch pets is one of the fastest growing companies in the raw slice of the $20 billion pet food industry. >> dogs and cats don't cook.
that's the best way i can put it. they're anatomically made to eat raw food. it's completely bio-available to them, they assimilate it properly. you can see it in their coat, their teeth. >> reporter: nice doggie. this is where all the magic began? small batch pets started in the mission district, one bowl, one blender, giving the food away to folks in the neighborhood. that was then. >> we get in a truck load on wednesday morning and were shipping almost half of it out, that same day. this is now, distribution border to border in california with expansion on track for the entire pacific northwest. that said, how do you keep the small in small batch? >> were gonna grow, that's gonna happen. with a great product, getting it out there. but were still producing it in relative small batches relative to the rest of the industry. as long as we're stringent in our belief and we adapt the same business model in other
regions, source locally, for example we're going to pacific northwest, we're going to produce there, procure our ingredients there and we're only going to ship to that region. >> reporter: buy local, make local, eat local. a slow food mantra, for the animal kingdom. quality ingredients, made locally, what more do you need? ask him. mike hegedus, "n.b.r.," san francisco. >> susie: that's nightly business report for thursday, june 21. have a great evening everyone, you too tom. >> tom: good night everybody, we'll see you online at: www.nbr.com and back here tomorrow night. "nightly business report" is brought to you by: captioning sponsored by wpbt