tv Nightly Business Report PBS September 2, 2015 7:00pm-7:31pm PDT
this is "nightly business report" with tyler mathisen and sue herera. >> bounce back. stocks close sharply higher getting back yesterday's steep losses. where can you find value in a market like this. continued expansion. that's what the fed says about the economy. with the economy growing, is this the ground work the fed needs for a rate hike? and off target, they're offered by more than 80% of employers' 401(k) plans. what happens when your target date fund misses the mark? all that and more for wednesday, september 2nd. good evening, everybody. welcome. i'm sue herera. tyler mathisen is off this evening. stocks rebounded solidly from yesterday's sharp sell-off as
investors turn their attention to a rap of mostly economic data. the strongest pace of productivity growth in a year and a half. along with a drop in labor costs. the private adp survey of job growth was steady and that also helped a bit. add to that the feds' view that the economy is growing and you had a recipe for a stock bounce. by the close, the dow jones industrial average rose 293 points. to 16,351. the nasdaq rose 113, and the s&p 500 add 35. bob delves a little deeper into the rally. >> reporter: the markets started up and stayed up. why was there a rally? china was relatively quiet. then oil rallied in the middle of the day which was a surprise. the weekly inventory report showed another bill. the oil rally helped oil names like exxonmobil. the icing on the cake came in the last half-hour when the dow
rallied an additional 100 points. unlike some days in the last couple weeks, there were no orders to sell stocks at the close. in the middle of the day, the fed released the beige book report and the tone was very positive on the u.s. economy. they noted that economic activity continued expanding across most regions. most traders interpreted this to mean a rate hike by the fed in september was definitely not off the table. but the markets seemed to shrug off those kernels. for "nightly business report," at the new york stock exchange. >> that adp private pay roll report is an important precursor to friday's job numbers and it came in shy of expectations but still showed steady job growth. 190,000 positions were created in august. estimates called for 200,000 jobs. the seconders leading the game were trade, transportation, utilities and construction. that continued growth in jobs was baked into the federal reserve's so-called beige book
which gives the snap shot of economic conditions around the country. that tightening labor margaret was no doubt a factor in the fed's determination that the economy continues to expand. something support by the reason look at second quarter gdp which top thi topped 3.5%. >> the latest snap shot of economic conditions around the country found robust housing and auto sales driving an economy that continues to expand. the fed says 11 of the 12 regional banks found their local economies growing at a moderate or modest pe from july through mid-august. following a rebound in overall economic growth in the second quarter, to 3.7%. labor markets are also tightening in many parts of the country. driving up workers' wages, especially in highly skilled jobs, from construction to information technology. and the latest fed beige book will be on the table when when they meet in mid september to
consider raising key short term interest rates for the first time in nearly a decade. leading economists say, part of the fed still mandates is not being met. >> even though the economy is slowly getting better, the inflation numbers are not getting better and we're nowhere near the target ban. >> meanwhile the oil industry in the midwest continues to be hit by the sharp drop in energy prices, and consumers remain cautious when it come to spending the money saved from lower gasoline prices. and the summer rebound in the economy happened before the downturn in china. we don't have a handle on how all of this asian mess will come back and affect u.s. gdp growth. unfortunately, the base growth predates a lot of the turmoil that we've seen coming out of asia. for the fed, friday's all important jobs report could make or break the dead lock over interest rates when policy makers meet in two weeks.
for nightly business report, i'm hampton pearson in washington. mortgage applications spiked last week. up more than 11% after a strong sell-off in the market briefly pushed interest rates lower. diana looks at the drivers behind the numbers. >> we knew this was coming. allegeders said their phones were ringing off the hook. as the stock market plunged, investors headed to the safety of treasuries, pushing their yields down and interest rates followed the yields. even though rates were down barely two days and down barely an i think a of a percentage point, it was enough to push mortgage refinance applications up 11%. also higher but only by 4%. it takes a lot longer for a person to say, okay, now i'm going to buy the house. but interesting also was the big jump in applications to refinance adjustable rate loans or a.r.m.s, bringing their share to the highest in almost a year. they are very popular among
borrowers on pricey houses them get a lot more bang for their refi buck. >> the trans ports which are seen as a barometer for economic health were one of the best performing sectors on wall street today. the group has been battered so far this year. solidly in correction territory. does the sell-off provide an opportunity? morgan brennan looks at some names that some on the streets say could be poised for growth. >> the dow jones transportation average is down 15% for the year. underperforming the broader market. but analysts say the steep sell-off created some longer term buying opportunities for those not being a part. transport stocks poised to grow even as the global economy doesn't. take fedex which is down almost 13% in the past month alone. citigroup added to the list. >> you have strong e-commerce growth.
that is the secular story that is continuing to show growth. the second is the company already has a head start in terms of cost cutting which helped deal with the international slowdown. the third is back to that valuation point, relative to peers and against itself, it is relatively inexpensive. >> there is also opportunity in. swift transportation has shed 23% this one month. according to fact set, analysts say it is 60% higher than its current price. for truckload carriers like swift, werner enterprises and night transportation, not only does it lower operating costs but savings translate into more spending by consumers and more for trucks. railroads may also provide opportunities. union pacific is a name liked for the long term. >> the stock is trading at least a turn below its historical average. we know as it accelerates into 2016, there will be some
realized value. plus union pacific has some interesting balance sheet. so we think the company is in a position for the buyback and give more money for shareholders. >> then the logistics provider has managed to buck the downward trend, up almost 5% in the past month. today it held its first ever since yesterday, saying it is considering acquisitions to boost growth. a big shift for a company that has never done them before. for "nightly business report." >> investors are scaling back on their exposure to stocks amid all the crazy volatility. according to a survey by the american association of individual investors, retail investors cut their equity allocations to a ten-month low of 65%. they're putting more money in cash, withholdings rising nearly 60%. also, bonds rose to more than
16%. the nation's second largest pension fund might be following suit and protecting itself from these market swings. the california state teachers retirement system is considering a significant shift away from some stocks and bonds. that's according to public documents. this would be the most aggressive move by a retirement system. as it could shift as much as $20 billion of its portfolio into treasuries. so where do you find value in this market? our guest tonight is a value investor. he says the big moves have presented selective opportunity. he is chief investor officer and portfolio manager of the large cap value fund at eaton vance. welcome. >> thanks for having me. >> this has been a tough market for a lot of people, because of the fact the markets generally fully valued. are you now starting to find some pockets of opportunity?
>> i wouldn't buy the whole market. i think the market broadly is still around fair value so i think you have to be picky and you have to be selective. some of the areas where others are seeing value, i am not. for example, the energy sector i don't think has washed out yet. i still see further downside in that sector. i do think in parts of the tech sector, in the consumer discretionary sector where you have long term secular mega trends that you can participate in, there are some good values. >> we'll get to your picks in a few minutes. one thing that has been looming large this week is the federal reserve. and we got the beige book out today. what message did you gain from the beige book if anything at all as to how it pertains to what the fed will do? >> i think it was further confirmation of what we've been saying all year. the u.s. economy is in pretty good shape. it is plotting along steadily.
it looks okay. the consumer side of the economy looks particularly good. in our conversations with company executives, we hear similar messages that the u.s. economy is in pretty good shape. some of the dislocations has found a way in asia that may be too early. everything else being equal, today's beige report is another step in the direction of higher rates in a few weeks. >> let's talk about the stocks. you mentioned that you don't think energy has hint bottom yet but one of your picks is objection dentalal petroleum. what makes it different than the others? >> it is neither a major integrative company. it has elements of both businesses so in the downturn will trade with the sector and be unfairly punished. it has a very conservative balance sheet. we're looking for companies that can play offense amidst the
downturn. that can do smart things with conservative offsheets. it has a did i have denied rate of 4.3% so it is a name we like a lot. they can make money at these oil prices. i think the did i have denied is safe. >> let's go on to kroger. a very competitive industry, a grocery store. >> very competitive industry. they're doing a lot of smart things. they've been in a price war with walmart for over a decade but that seems to have come to an end. they're investing in health, natural foods, organic foods. that's driving sales. a very well run company with growth in front of it and yet it is a defensive stock. we've been surprised how much it has pulled back with more cyclical parts of the market. so we think it is a good entry point to be adding to. >> and google is also on the list. do you cite the new cfo there as
one of the reasons why you like the stock. >> do i. i think from morgan stanley, bringing it to google cll they've not had. it has been an engineer led company. now they've got a serious cfo in place who i think will bring some financial discipline. they spend a lot of money in r&d. i think many of those things like driverless cars may bear fruit. so we want them to continue to invest. they have $70 billion on the balance sheet. if you missed that, it is only at 15 time the earnings which is a market that is growing a lot faster than the market. >> thank you. we really appreciate your perspective. eddie perkin. coming up, the stage is set for a legal showdown over uber drivers and the outcome could have a wide ranging impact on the economy.
as mentioned earlier, oil prices resumed their climb today after getting hammered yesterday. domestic crude ending up nearly 2% to $46.25 a barrel. president obama's iran nuclear deal seem to be in the clear after maryland democratic senator barbara mikulski said she would support the plan. 34 senators now support the deal, meaning it will survive any congressional vote. joining us with more from washington, the president, there would be a major foreign policy victory for him. >> it would absolutely. and barbara mikulski said this would be one of the most serious
votes she's taken. she said she spent hours in briefings going over the details of the randle agreement ultimately concluding this is the best way to keep iran from getting the bomb. the key with that 34-vote number the president now has, it is expected republicans will offer a vote of disapproval of this iran deal. if they pass that, which they appear to have the votes to do, president obama is then expected to veto that. but the 34-vote support that he has in the senate means he is likely to sustain that veto. >> a number of our middle eastern trade partners and allies are very upset about this deal. what does it do for relations between the united states and some of those middle eastern countries? >> well, i think you can see it when you look at how this is playing out within the democratic party politically. a lot of democrats are very concerned about taking this vote to democratic senators and said they won't do it because they're concerned it raises the level of
risk for the nation of israel. they say that's just not something they're comfortable doing. we'll have to see how the other ten democrats who haven't indicated yet which way they'll go, will break on this. the concern over the impact on israel is really the animating force of this debate. we have a lot of republicans against this deal. some democrats. we'll see how many democrats ultimately end up opposing it. the president will get his way here. if there are a lot of democrats opposing him, that will be bad for him politically going into the fall. >> we do a lot of business with israel. there are a number of pioneering countries that are listed here in the united states. does this have the potential on disrupt business relationships with individual companies that do business in the united states, and maybe centered in israel or other middle eastern countries? >> it doesn't seem like it will have that effect. one of the big unknowns here is what the if he can of lifting the sanctions on iran will be over time in terms business opportunities for western companies, trying to get into
iran. obviously, when you think of iran, you start to think about oil and other industries. but the question is, what other kinds of companies might be able to move into the iranian sphere and start to do business there. that's one of the big unknowns here. a lot of companies will be approaching that pretty gingerly. >> all right. thank you so much as always. dream works could be splitting from disney. that's where we begin tonight's market focus. according to the hollywood report he, steven spielberg's studio will part ways with the media giant next year. the company is reportedly in talks with universal pictures. shares were up 3.5% cnbc is owned by the parent company. 12th quarterly loss in a row, results suffered from restructuring and warranty costs. separately they said the securities and exchange commission is considering
penalties. this is related to the strategy for complying with the regulations. shares tumbled to 16.62. valleyant announced the eighth acquisition of the year. the pharmaceutical company is buying a surgical device. it makes equipment for ophthalmology companies. did the company surged 16%. it is worth noting that it is a small cap stock. am gen had some date to provide. it said the experimental bone density drug was more effective than the treatment already on the market. separately, a court declined the company's request to block novartis to launch a copycat version of the drug. the stock was up more than 3% to 152.69. lynette saw its shares rise after the close after it noumsed it will buy the generic drug
maker for more than $1 billion. shares surged as much as 20% in after hours trading. by the close, the stock was unchanged. for $47.29. phillip morris's indonesian sarm reportedly gauging demand. the cigarette seller is reportedly in talks with investors and could start taking orders by the end of the month. the stock was 1% higher to 7870. planet fitness posted late perngs beat expectations in its first report as a public company. sales were also better than analysts were expecting. the shares rose before falling back. at the close, the shares were up more than 1% to 18.50. a federal judge in san francisco dealt a blow to uber by granding drivers class action status in an ongoing suit over classification. they want to be deemed as employees, not independent contractors as they are today.
as kate rogers tells us, this is important cynic the independent contractor classification is key to uber. >> uber's will be the one to watch. it stands to greatly impact the economy model which relies heavily on independent contractors. >> recently, we've heard of ship and insta-cart and luke's, changing to an employee model. at some point, someone at uber will likely say, the game is over. it is time to take responsibility for our employees. >> uber, which is now valued at $51 billion, could be on the hook for workers' compensation, unemployment insurance, social security and more if the plaintiffs succeed. it is those who stopped driving before june 2014 or those who started driving after june of
2014, and opted out of the coil's arbitration clause. hose who drive for transportation company and those registered with uber as a corporation cannot be part of the class. this includes one of the plaintiffs. uber said it will likely appeal the decision and in a blog post at the scope of the class is much smaller than originally sought. less than 15,000 drivers. uber told cnbc in a statement, quote, partners use oob order their own terms and there is no typical driver. the key question at issue. at a hearing over class status in august, uber's outside counsel said this could negatively impact the economy. >> could it really interfere with this booming part of the economy which i think everyone agrees is highly beneficial. both to the individuals who are, for example, driving for uber and other competitors. >> potential damages are hard to calculate. drivers in the class would be
able to recoup tips which uber advertises as being included in the fare. according to the plaintiff's attorney, they are not distributed to drivers. more evidence is needed to determine additional reimbursements for gas and maintenance. more than 80% of employers offer target date funds in their 401(k) plans and those funds often become the default options for employees. and the recent swings have taken their toll. what do you do now?
here's a look at what to watch tomorrow. we will get a look at the weekly jobless claims number. the challenger job cut report is out. that will tell us where the layoffs are during. a read on international trade is also out. and that's what we're going to watch for on thursday. recent swings in the markets may have many retirement investors worried as some target date funds missed the mark. it is important since target date funds are popular and often the default option in many 401(k) plans. sharon joins us with more on this. >> they are relatively simple to use. you don't have to think about your allocations because it done for you. it automatically will get more conservative over time and move from stocks to bonds. so those who don't know exactly what funds to pick for their 401(k) plan often opt for this. >> it does the work for you. >> basically it does. you have to pay attention and
mark the volatility at all times but especially now, to the funds that are inside that fund and how much is allocated to equities versus fixed income. we looked at morning star, some of the funds they've looked at for those who are retiring this year in 2015. and you look at a fund like the wells fargo advantage dow jones 2015 fund. that is mostly fixed income. that is done significantly better. >> yeah, look at that. >> compared to the fidelity freedom there for 2020. when you look at those, take a look at what is happening over a three-month period, a five-year period. you have a longer period of time. there you see that they're comparable, more comparable in terms of the gains they're getting. the point is that you need to look inside these funds. >> that was the next question. how many people actually do that? do we have a gauge? because you really kind of check the box. that's what most people do. >> most people don't do anything with their 401(k) them figure
they're contributing to it and some people think, well, my company is offering this and they're going to allocate it for me any way and it is a default option. you need to do your homework and make sure it fits with what risk you want to take. if you want to stomach the volatility we're seeing right now, being allocated, more into equity and equity funds makes sense. >> a lot of people have to feel as though they're behind or they have to work longer. so they might want more equity exposure than their age would normally dictate. >> very important appointment. we're really looking through target date and not to that certain point koufl spend a decade or more in retirement. another thing on consider, when you look inside these funds, make sure that you understand exactly what the different types of investments are. how much is allocated. they're just mutual funds, how
tonight on "quest" -- just how many fish are in the sea? northern california scientists are using underwater robots to figure out if marine protected areas are helping to bring fish populations back from the brink. and humans have been staring at the sun since the dawn of humanity. "quest" gazes at a nasa mission aimed at unlocking the secrets of the earth's neighboring star. major funding for "quest" is provided by -- the national science foundation and the corporation for public broadcasting.