tv Nightly Business Report PBS January 7, 2015 7:00pm-7:31pm PST
report" with tyler mathisen and sue herera. bounceback. stocks rally and rally big as investors figure economic woes may push the european central bank into action that could help the market. federal reserve officials potentially hike interest rates later this year. but is the market not the fed, the ultimate ash tor of when rates will arise? >> more first time home buyers into the housing market. question is will it work? all that and more tonight on "nightly business report" for wednesday, january 7th. good evening and welcome. i'm tyler mathisen. a bounceback on wall street today. the major averages saw their best one-day gains in three
weeks or so. they got a boost. upbeat report on jobs the trade deficit narrowed for more than expected in december and anticipation the central bank will move forcefully and soon to stimulate the region's economy. the federal reserve's latest policy meeting confirmed interest rate won't move up soon or fast here. put it all together and stocks broke a five-session losing streak despite news of a terror attack in paris that left 12 dead. the dow surged 212 points. nasdaq up 57. s&p added 23. oil prices closed higher for the first time in five sessions after u.s. crude inventory showed a surprising drop last week even though gasoline stockpiles jumped to record high levels. u.s. crude settled 72 cents higher, finished at $48.65. brent up a nickel at $51.15 a barrel.
the consumer prices fell two tenths of 1% and raising worry about the threat of a japanese style deflation. what could that mean for the european central bank? lee reports. >> reporter: the death of the financial crisis in 2009. that called deflation and it can be a big problem for economy. when prices are falling, consumers put off purchases thinking whatever they want will get cheaper if they wait. that makes the economy shrink which could lead to more deflation. you get the picture. think about japan's last decade in the 1990s. a period in which it endured stagnant growth and high unemployment. keep in mind it still hasn't fully recovered. the pressure is now on mario
droggy to unveil full quantitative easing. some expect draghi to at the council meeting on january 22nd. what likely a drawn out recovery there are some investors bullish on europe. >> we have a positive and comfort with cheap market. >> reporter: another factor to help european corporations a weaker euro. trading at a multiyear low against the u.s. dollar. that's expected to provide a boost to exports and help earnings. in fact morgan stanley forecasting a 10% rise in profitability in 2015. much of that having to do with the weaker currency.
the wild card in all of this is oil and while it may help some european countries that import the commodity, analysts say if prices continue to fall that could push inflation even lower and make mario draghi's job to take out of the downturn. i'm seema modi in london. >> officials are still upbeat about the u.s. economy. steve liesman has more. >> reporter: central bankers focused on overseas weakness and a decline in oil prices. but they largely believe the u.s. economic recovery can withstand the challenges. federal officials saw the price as a positive thinking it would boost consumer spending though they expressed concern about the impact it would have on capital spending as all producers pull
back. and the fed saw it a risk to their 2% inflation goal but many said momentum in the job market and strong economic data suggest growth could end up being better than they forecast. >> looking at the bigger picture, we're still in a situation where the macro context has the united states in particular at above trend growth and essentially 0 interest raits and the expectation that it will stay even as growth goes higher. >> reporter: the current core inflation rate which excludes the volatile food and energy running only 1.4%. the lowest 2% goal. sloongs the fed sees movement towards that goal. the fed sees those rate hikes though at least a couple meetings away and when it does start raising them the fed is saying hikes will only be gradual. >> i still think the fed is on the path of trying to push rates back up to have dry powder for the next time we get into this economically. >> reporter: markets turn their
attention quickly towards the friday jobs report where wall street forecasts 240,000 jobs created in december. that would be the 11th month in a row above the 12,000 mark. the unemployment rate to fall. but could change that. for "nightly business report," i'm steve liesman. >> steven wood joining us to talk about the interest rates and the markets. chief market strategist for russell investments. steven welcome. we saw lloyd blankfine ahead of goldman sachs. asked how much control over interest rates the fed really has. let's listen in and then i want to get your response. >> at some point, doesn't become the fed's decision. it becomes the market's decision. once the fed starts to move they may want to go in a measured slow pace. but if i'm sitting there in the market and i know they're going at a measured slow but
inevitable pace i'm going to get there in five seconds. the market may get there way ahead of the fed. >> what do you think of nah? >> i think he's spot on. >> what does it mean for me? >> it means for you? the overnight rate the shortest interest rate there is and the market sets the rest of the interest rates. so the fed can talk about things try to give guidance the market information, what they're likely to see coming from the fed. ultimately the market is going to set interest rates and what people think about what the fed is doing. all of that is very important. >> where do you think rates are going? the market is going to take them? >> first off, the federal reserve will do what they said they're going to do. the jan yellin and the fed will raise the third quarter from a zero rate to something maybe half a point, quarter of a point in there. more of a symbol that we're no lon longer in the emergency room. discharge the mrch room and interest rates out maybe five or
ten years probably up in the 2.75% range by the end of next year. 3% on the ten year because the economy in the u.s. is improving. labor market is improving. financial markets improving. when some of this oil volatility works its way through -- >> usually, the u.s. economy, steven strong enough to pull the rest of the world, which it sure seems like it's doing to some degree right now, particularly europe and china and japan. or will those economies pull the u.s. economy back? >> and that is one of the great questions for 2015. china, for example, flowing down a lot. right? and the united states this year could actually be growing faster than china depending how the data work out. i don't think the united states is big enough anymore to do what it did in the '70s and '60s because we're such a large percentage of the world but it's bornt for the united states i think, to do very well. i think europe will do better as the european central bank prints a lot of money to ease quantitative. and growth will be a challenge
but the united states go back to 20 years ago when the united states was a strong engine and rest of the world trying to catch up. it's been a while. >> prioritize where you would put money to put to work right now. u.s. sounds like it would be on the top and sounds like you'd follow with europe. >> exactly right. so we like the united states the fundamentals are good but our market has gotten expensive. we're stock picking. multiasset. but a valuation perspective, we look at europe. europe is a lot cheaper than the u.s. but fundamentals don't look nearly as good. if does better than most people think, equity markets should respond in europe and the economy doesn't surprise the upside the european central bank will have to print a lot of money. >> the fed minutes were out today. number one, was there anything in them quickly that stood out to you and number two, are they as important as they used to be because, by golly, we had a 90 minute press conference the last time the fed announced its
decision. >> i think so. nothing was surprising. the fed is on the policy path. i don't think they'll go off of it and i think the federal reserve is very important. ths a central banker's world. european central bank bank of japan, federal reserve very important players. >> steven thank you. russell invest. steven just mentioned the economy, so now to the economy and the good news in the labor market. payroll from abp reports 21,000 private sector jobs added in september, more than economists kped and an encouraging find ahead of kes's jobs report. there was also some good news about november's federal trade deficit. it shrank falling to the lowest level in about a year mostly because the u.s. imported far less oil from overseas. mixed backseat bag of data about mortgage applications over the holidays. mortgage said apps for new loans shot up last week as interest rates lower. that comes as an 18% decline
during the christmas week. a slow time for home sales. the holidays of course are over but it's still january and that's the slowest season for the housing market. but potential home buyers are about to get a much needed boost from the federal government. diana olick explains. >> reporter: president obama heads back to phoenix tomorrow the hard hit market a favorite backdrop to announce new help for housing, as he did two years ago. >> now that we've made it harder for reckless buyers, let's make ittier easier for qualified buyers to buy the homes they can afford. >> reporter: president announces the drop in the annual insurance premium. the government's insurer of down payment loans from 1.35% of the loan to 8%. that will pr vied the borrower a savings of about $80 a month on $195,000 loan according to core
logic. this will help millions of families save billions of dollars in mortgage payments over the years. president said in a statement previewing the details. >> this is a matter of getting the pendulum back to a balance point. not overpromoting, but not barricadeing the doors needlessly to come into the market. >> in order to shore its reserves doubled the premium leaving much out in the cold. faa's insurance fund recently moved back. the change will help borrowers, but it could help the fha itself. fannie mae and freddie mac announced new lowdown payment homes for borrowers. what the fha cannot afford to lose. >> this is great for the fha. they've been losing market share to fannie and freddie.
this allows them to solidify their position in the market to rebuild their finances. and it opens the door for a lot more people to enter the housing market. >> reporter: the president will address new efforts for fha lenders when they will and will not be held responsible for loans that default. i'm diana olick. premiums good news for shares of home builders today, but not for those insurers. shares of builders like kb homes, denard hol ton, up 5%. beezer also seeing solid gains as you see there, but essence group, radian group and mgic came in with substantial losses. well still ahead. shares of ultra meez for schizophrenia, an area of the marketal tough for
some action today in the newly republican controlled congress. the house overwhelmingly approved a bill today that would extend the terrorism risk insurance act until the year 2020. the program expired december 31st but a new bill has been tweaked a bit to change part of the 2010 dodd frank act that would prohibit federal regulators for non-financial users of derivatives. after failing, it's expected to pass. blowout day for
pharmaceutical up 9.5% following encouraging news about breakthrough medications for illnesses affecting the central nervous system. our meg terrelle has the story. >> reporter: drug maker alker meds with drugs for depression and schizophrenia. it's been tough for the drug industry. cns disorders one of the few expected to shrink over the next few years. >> it's difficult for new drug development in the last ten years or so. >> reporter: that's not because the disorders are going away. about 26% of americans have a diagnosable mental disorder, according to research from cowen. $30 billion in 2013 but even as more mental illness is diagnosed, that market is expected to shrink to $21
billion in 2019. expiration cutting sales like eli lilly's cymbalta and lexapro. drug makers backed away from cns disorders in recent years as proved difficult more than other areas. the top drug development, the medicine take more than a yearlonger to develop and half as likely to be approved for drugs than other diseases. why? the disorders are complex and misunderstood. hard to measure. >> in a trial, you could see x-ray and mri. objectively see whether it's growing or shrinking. psychiatry the end point is determining whether the drug works or not is questions about how they feel. >> reporter: stocks soared today to start a late stage trial of schizophrenia drug later this year. helped the weight gain with therapies for the disorder a
side effect to lead patients to stop taking the drugs. a late stage medicine for depression boosted the shares. for "nightly business report," i'm meg terrell. a weak forecast sent shares of eli lily down and that's where we begin market focus. the drug maker struggled because of competition from generics and expecting 2015 earnings and revenue to be shy of wall street's estimates. still, the company is betting on a new pipeline of treatment for illnesses like diabetes and cancer. the shares fell slightly to $69.23. monsanto saw earnings fall. steeper than expected. blamed lower corn seed sales for the slump but managed to beat on the top and bottom lines, that sent shares to $117.21. super value reported better than expected results for third quarter. its profits more than doubled as
the super market posted sales growth in all three business segments segments. shares flat closing at $9.19. >> dr. pepper snapple, make do it yourself soda. keurig expected to come out with a cold carbonated drink maker in the fall and coca-cola is on board. keurig shares popped 4.5% to $123.02. and up to 72.52, excuse me. sirius said it would beat its 2014 revenue forecast as it added more subscribers than forecasted. slightly below the streets but look back. up to 2% to $3.41. dick's sporting goods spiked on a report that it's in early stage talks with private equity firms about going private. sources say there's no formal sales process and the retailers
could decide to go in a different direction. stock surged to $55.01. after the bell reported earnings in revenues that missed estimates. the company that makes household products said sales in europe were hurt by currency exchange rates. shares plunged initially after the bell but before the close, shares about 3% higher. they finished at $85.48. the united states is shedding new light today on the hack attack on sony pictures saying it is quote, confident that the north korean government was responsible for the breach. >> reporter: north korea was behind the devastating attack on sony but has classified information they can't see that proves the north koreans were
involved. he released new information about just how the fbi knows pyongyang was involved saying the north koreans got sloppy and failed to cover cyber tracks. >> either they forgot or had a technical problem. they connected directly. and we could see them. and we could see that the ip addresses being used to post and to send the e-mails were coming from ips that were exclusive used by the north koreas. it was a mistake by them we haven't told you about before. >> reporter: also james claber the director of national intelligence who went to north korea two months ago to obtain the release of two americans. had dinner with kim yonkchul and the man who would have signed off on the sony hack two.
>> he point at the chest with a north korean exercise with a provocation of war. >> reporter: issued a warning. the sony hack may just be the beginning. >> this recent episode shows they can get recognition for their cyber capabilities and that's why we have to push back. they get global recognition with no consequence, they will do it again and keep doing it again until we push back. >> reporter: and that could be bad news for other american companies. for "nightly business report," i'm eamon javers in new york. solid growthchisefranchisees but hurdle for growth. that story next.
look for more auto recalls in 2015. that's what the head of the national traffic safety administrati e after millions of recalls last year with faulty ignition switches and other problems drivers and car owners are much more aware of design flaws and safety issues with their cars. >> and more alert to safety issues concerning their health that apparently thanks to the affordable care act health insurance exchanges and to expanded medicaid coverage. a new gallup poll said the share of americans without health insurance dips below 13% at the end of last year. a steep drop for more than 17% the year before. in the meantime just today, as of january 1, 6.6 million people
selected a health plan through healthcare.gov marketplace. good news about small business hiring. the national federation of independent businesses. picked up in december and new workers. >> another area that's expected to see a lot of growth during the next year is franchising. kate rogers more on the outlook for 2015. >> reporter: for the first year in a row, american franchisees are on a winning streak. it's the solid year of growth despite regulatory hurdles that are hampering the model. the international franchise association, the largest global trade group for the industry said the sector is set to grow by 5% this year. this means cash to be made and jobs created. more than 12,000 franchise locations in the u.s. will
create more than 247,000 jobs. th will also see increased economic output in 2015 to the tune of 889 billion according to steve, the president. >> franchise is growing as a whole, the quick service restaurant industry. and goes for confidence lower energy prices. extra dollars in the pockets of working americans. >> reporter: according to franchise direct the top five franchise models in the u.s. are subway mcdonald's, kfc, burger king and 7/11. >> the report government regulations are standing in the way despite the ifa sunny outlook. minimum wages in 21 cities as of the new year and the affordable care act have franchise owners like matthew patan krk in.
he owns 70 auntie anne's flan franchises. he experienced significant growth since he started. >> the challenges out there right now are a bit daunting and it's not just the increase in the minimum wage and it's not just the affordable care act. it's also, you know department of labor rules on overtime or on sick pay and it's increases in taxes and legislation that impact how franchise operations are run. >> reporter: 85% of membership these have had negative impact on their businesses. fast food in particular had a rough two years thanks to pushback from workers striking for $15 an hour. it remains to be seen if industry can continue growth in 2015 despite these hurdles. for "nightly business report," i'm kate rogers. >> and that is "nightly business
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