tv Nightly Business Report PBS August 3, 2012 1:00am-1:30am PDT
>> susie: at today's meeting, the e.c.b. opted to keep benchmark interest rates unchanged at three-quarters of percent. that's after cutting rates in july. draghi indicated that e.c.b. bond buying could start as early as september. but he added that such action was conditional on the region's troubled countries using their bailout funds first. he also hinted germany, led by angela merkel, was not yet on board with the bond-buying program. >> susie: so now what happens? let's get some answers from john manley, chief equity strategist, at wells fargo advantage funds. so john, with no commitment from the fed, and now from the european central bank, what happens to the stock market? >> i think it's on hold for the time being. there's an old saying, we sit and wait. and that's what we're doing right now. >> susie: is it going to take some kind of major emergency to get central bankers and government leaders to take some action? then, do you want to buy stocks under those
circumstances? >> it's a great question. i think it takes a series of minor emergencies. i think it takes little challenges to the environment and europe and here to push politicians in the right direction. the markets have become intolerant of delay. but i think the sharpness and quickness of the move takes the place of the deep move. that's important to know. yes, i do want to buy stocks. it's seldom you get to buy stocks at this kind of valuation. you have to be patient. stocks are cheap for a >> susie: let me go back to the strategy. a lot of people have doubts that even when the europeans take action. it's not going to be something really decisive to fix all the problems. there's doubts about where things go from here. what do you think? >> i think people are wise to have doubts.
it's going to take a lolt of commitment, and census building over a period much time. i think mr. draghi pointed down the road. and they'll get there, but it's going to be little tiny steps along the way as they move along. >> let's talk a little bit about tomorrow's job report. are you expect egg good number, a bad number? what does it mean for the market. >> we expect to create 110,000 jobs net. and the unemployment rate 8.2%. the market is a little worried about these things. my suspicion is it's going to have to be significantly worse to have a negative impact on the market. we know the u.s. isn't creating a lot of jobs now. i don't think the expectations are that high. >> all the policy meetings in europe are over, what's the
next thing thing for investmentors watch? >> watch the progress in europe, and are they moving forward. it's august, not that many people work that hard in august in europe. it used to be that way. things slow down in the world in august. i think we have to keep it around. china has been sort of the wild card in here. i think it's important that we see the growth isn't slowing down too much and they can manage their economy. maybe not forever, but for the time being, i think that's important, and we also want to keep a look at the u.s. consumer? >> suze: we'll be watching both. john manley, chief equity strategist at wells fargo advantage funds. >> reporter: i'm suzanne pratt in east hampton, new york. still ahead, we'll update you on one summer business that's still warming up. >> tom: the wall street firm at the center of the latest electronic trading problem has lost more of its market value than what it lost due to the glitch. adding to the pressure, knight capital group also may be losing business.
>> tom: knight shares are down 70% since it's technology break- down yesterday morning caused huge price swings in almost 150 stocks. the drop has shrunk its market value by more than $700 million. the firm estimates its loss from the trading software problems will be $440 million. knight trading handles billions of dollars of stock trading volume every day, routing buy and sell orders. several customers such as t.d. ameritrade stopped routing trades through knight yesterday after knight asked firms to stop. t.d. ameritrade hasn't returned its business to knight yet. a spokesperson tells n.b.r., "we will make changes once we are certain that there will be no impact on the client experience." >> the director of research at a financial market research firm, and adam, first of all, for knight capital, what's the impact of customers if they continue to route trading away from knight?
>> obviously, it's not good. the prospect of recovery diminishes every day that clients continue to disengage with knight, and there's reasonable reasons why they would disengage. the fact of the matter is that the future of the firm is in question. if gruer expecting payments or goodwill from knight, what is that going to be if they get bought from another firm or go into bankruptcy. >> tom: talk to us broadly. we had the flash crash two years ago, and a problem with the facebook ipo, and now this problem with knight capital. is this another indication of a broken market structure? >> i grew up in electronic trading, and was also supportive of the efficiencies that automated trading brought to the market. but it has gotten to the point where even a person like me is begining to question whether we need to change the market
structure to protect against these kind of events. >> tom: after the flash crash some circuit breakers were put in place for individual stocks for the first time, and the way it works now is if a sto moves 10% or more in a five minute period, the trading is halted or paused for five minutes. what additional safeguards nide to be put into place. >> it's important it doesn't occur at the open which is where the wild gyrations happened yesterday. >> it was a different kind of circuit breaker which would occur at the open. i still think that those measures don't go far enough given the amount of fear that investors have. given the events we've seen in
2012. there's not a silver bullet. but the industry needs to do a better job of protecting the public. >> tom: 20 seconds last left adam, you've been an advot ca of electronic trading. do you trade electronically? >> most of the market does, but the way i invest in the market is just like everybody else. every other individual, through etfs and mutual funds. i don't really trade in an automated fashion. >> and under scrutiny tonight. >> adam sx*us man wit susman wi group. >> susie: a big focus for the markets this week is jobs and if the weekly numbers on new jobless benefit claims are any indication, the july employment report due out tomorrow could disappoint. new claims rose by 8,000 in the past week, to a total of 365,000 claims. the prior week's numbers were also revised higher. the labor department notes weekly claim numbers are often
volatile in july, due to temporary production shut downs at the nation's auto makers. >> susie: super low interest rates are here to stay, that was the message from federal reserve policymakers yesterday. but that's making it tough to make money for regional banks as we continue our look at regional banks, we talk with kelly king, c.e.o. of bb&t. >> welcome to nightly business report, and certainly in the case of your bank, you just reported record quarterly earnings. a lot of lending whether it's
business loans or mortgages. do you think your bank can keep this up. we had a record quarter. and it was our strongest record quarter in our history in terms of o absolute earnings. and we think we can. i will say that the economy is softening. we think we can continue to have a similar kind of performance, as we have unique product offers, and unique initiatives, and frankly because the market is so fragmented and volatile right now. we're ox*pt optimistic for our company. >> susie: you say you're optimistic, ine though the federal reserve came out with a very gloomy forecast for the economy, which means you're going to have super low interest rates. isn't it tough to make profits
when rates are that low for a bank of your size? >> it is, and that's a challenge for the industry. we borrow short and lend long. in a protracted period of very low historically low rates and a relative slashed yield curve, it maiblgs it very difficult for us. so that puts pressure on our basic spread business. between taking in deposits and making loans. but fortunately, we have a number of other businesses that are fee income businesses, and a number of other businesses that are specialized lending businesses. they don't have as much pressure. it's difficult for us as it is for everybody else, but we think relative to the marketplace, we'll be able to do well, and we'll be happier when the marketplace improves. >> susie: we've seen that a lot of regional banks in terms of dealing with this kind of slow growth environment have
been have been buying up or selling banks. just announced an accession of small banks in florida today. do you see to diversify your portfolio of services. >> i do think that diversification through acsigds is an important part of our strategy, and it has been historic and will remain so in the future. we were proud to announce the conclusion as to the banksi of atlantic merger in the greater miami area on tuesday. it's a really good $3 billion depos itd institution, and so we would certainly hope to do more of those kinds of tractions as we go forward. object a lot of mergers. >> susie: regulations coming out of washington. what are you expecting, and what does it mean for your
bank. and we have a half mint. can you give a quick response to that? >> we're struggling to deal with all the rules coming out from dodd-frank. it requires 330 rules and there's only a hundred out so far. no doubt on what we're seing that it will gum up the banking system. it is not going to be good for banking. it's not going to be good for us doing our primary job which is to help create jobs in the community. so we're braced for an onslaught of additional regulations because of dodd-frank. we hope that it can be mitigated at some point in the future, but at the time being it's a constraint on bank lending and growing the economy. >> susie: good luck to you mr. king. kelly king, ceo of bb & t. >> tom: tomorrow our regional banking coverage continues. we focus on credit unions. these financial institutions are seeing a surge in customers, by targeting niche markets that many bigger banks overlook.
>> tom: u.s. stock indices fell for the fourth consecutive session as central banks here and in europe wait and see before taking any new action to help their economies. the s&p 500 sent the entire session in the red, hitting its lowest level just after noon eastern, before paring back the losses at the closing bell. trading volume was 823 million shares on the big board. asdaq.
energy seeing the biggest sector loss, falling 1.7%. oil dropped almost a $1.50 per barrel. materials shed 1.2%, and health care was off 1%. drug maker bristol-myers squibb topped the health care losers after stopping testing on an experimental medicine. the stock fell 8.6% as volume more than quadrupled. the stock hit 52 week high last month but today's selling erases two months of gains. the company halted its study of a hepatitis "c" drug after a patient suffered heart failure. bristol spent $2.5 billion earlier this year to buy the company that developed the treatment. this could be another sign of a slowing economy, less demand for bubble wrap. the company that makes it, sealed air, cut its financial forecast today. shares fell to a three year low, down 16.8%. but after the closing bell today, video game maker
activision raised its profit outlook for the rest of the calendar year. activision makes video games call of duty and skylanders. if you haven't heard of those, ask your kids or grandkids. earnings were stronger than anticipated. one important area is activision's digital game sales. those accounted for a third of total sales, an indication of activision's ability to sell straight to its customers without going through traditional retail stores. >> the more revenueinary able to generate, the better their operating margins become which makes them more profitable. and as long as they can keep doing that and generating those hefty amounts of free cash flow, that makes this an attractive investment going forward. >> tom: moser owns shares, which were down a nickel during the regular session, and fell more than 2% in after hours trading. also after the close, professional networking website linkedin earnings came in as expected. after closing down 2.2%, the
stock jumped 6% from this closing price after the bell. the firm raised its revenue predict for the year. july same store sales came in from several retailers with mixed results from apparel stores. the gap had a much stronger than expected july, and shares popped almost 13%, to a new 52 week high. abercrombie and fitch fell 14.6% and aeropostale lost a third of its value. both cut their outlooks. all five of the most actively traded e.t.f.'s were lower. the emerging markets fund fell the most, down 1.2%. and that's tonight's "market focus."
>> susie: congress is headed for summer recess next week. lawmakers will face a lot of work when they return. one thing they'll have to consider, is how to un-do the sequester, that's the set of harsh federal spending cuts that would slash half a trillion dollars from the defense budget. with u.s. cuts looming, defense makers are looking overseas, and as sylvia hall reports, it turns out, the industry has become quite the exporter. >> reporter: we've all seen the bombs, planes, and tanks that support our military, but did you know troops all over the world count on american made equipment? the u.s. is one of the biggest arms manufacturers in the world. and right now, the defense export business is taking off. >> typically, these kinds of things have gone in waves, but we've really seen an uptick in our international business. >> reporter: chris raymond of boeing says almost a quarter of the company's defense sales went to other countries last year. that's up from 7% about a decade ago, and this year, he expects it to rise.
they deliver equipment like apache helicopters, c-17 fighters, and p-81 aircraft to about 30 countries in the middle east, europe, and asia. india is one of its newest customers. both the navy and the air force just bought boeing planes. >> asia pacific and the middle east i think right now is where you see sort of the biggest growth. i think it's growth in defense budgets, it's growth in their industrial expectations, and also i think maybe regional threats that people see aging equipment and i think they all contribute to that. >> reporter: the uptick in international business is a bright spot for u.s. defense companies. after all, their biggest customer, the u.s. government, is scheduled to slash defense spending on january 1. >> industry and others in the department of defense and congress are actually looking abroad to other countries, allies and partners who may be able to buy more of the weapon systems made by u.s. countries. so what that will do, it will help offset the downturn in u.s. defense spending, at least for
the industrial base, to preserve some capacity in our industrial base and preserve some capabilities that we have. >> reporter: defense analyst todd harrison says it's not just about business. selling u.s. defense equipment to other countries helps firm up relationships with allies, but the strategy comes with some risks. >> one of the risks we always take in exporting is that once that equipment is handed over to another country we don't have control of it, we don't have control of what they do with it or who they show it to. >> reporter: but, the countries buying now might not be able to completely offset u.s. defense cuts. when it comes to military spending, the u.s. spends more than the next ten biggest military spenders combined. sylvia hall, "n.b.r.," washington. >> tom: in the money file tonight: three ways to save money when choosing a financial advisor. here's manisha thakor, co-author of "on my own two feet: a modern girl's guide to personal finance." >> did you know that for each
incremental 1% in fees you pay over a 20 year period, you will see your nest egg shrink by nearly 20%? what's an investor to do? understand the fees you are paying. if you are working with a financial advisor, make sure you understand these three things: "a": what you are paying the advisor for advice, "b": what the average management fee is on any investments recommended by the advisor, and "c": any trading or additional costs like custody that you will incur. personally, i'm a big believer in the value of financial advice, at the right price. to figure out that price, a rule of thumb i like is to aim for the all-in costs of working with an advisor to be less than the average fee on an actively managed equity mutual fund which today is just over 1.3%. always remember, fees matter. i'm manisha thakor.
>> susie: and finally tonight, it may seem like summer is quickly slipping away, but on the east end of new york's long island, there's still time for a slice of paradise. suzanne pratt explains. >> reporter: this is east hampton, new york. it offers retail therapy, tony restaurants, and plenty of beautiful people. it's also home to some of america's most magnificent beaches. relaxation is paramount. even nature wants to tee off in the hamptons. anyone can vacation here. you're best bet is a summer rental. thanks to a weak economy and too much speculative building in the last decade, there are still lots of homes to chose from this summer. >> there's just an incredible amount of inventory out there and not everyone had as much money as they did five years ago. so, they're looking for bargains, they're looking for deals. >> reporter: but, even a good deal will cost you a pretty penny. >> they're still things at the really high end.
that means $300,000 for the month of august. but, then, there's things that are $10,000 for the month of august. and, there's inventory in the entire spectrum still available. >> reporter: for the just reduced price of $35,000 this august rental could be yours. real estate broker david zazula says in other markets, it would've been taken months ago.' >> reporter: what do you get for $35,000 david? >> what i love about this house, you have the big bright open living room with sliders leading out to the deck. the decking is all slate: 20 by 40 heated pool. >> reporter: at this late date, the bottom fishers are out. but, zazula is confident it will
rent, and for a good price. >> it will go. it may not go for the entire month, but it will go for a good portion of it. i would be surprised if it didn't. >> reporter: if you prefer this stunner on the bay, too late. it's already spoken for, renting for close to the $55,000 asking price. and, while some homes will rent in any market, the biggest change this summer, is that full season rentals are a rarity. instead people are looking for snippets of time. >> this summer i have lot more rentals just for august through labor day than i've ever had in the past. >> reporter: there's always the chance that some last minute deal making or price reductions could still make this a decent summer for summer rentals in the hamptons. then again, if that doesn't happen, there's always next summer. suzanne pratt, "n.b.r.," east hampton, new york. >> tom: that's nightly business report for thursday, august 2. good night susie and everyone.
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