tv Nightly Business Report PBS October 23, 2015 7:00pm-7:31pm PDT
♪ >> announcer: this is "nightly business report," with tyler mathisen and sue herera. stars aligned. stocks rally as the worries of the past few months seem to have faded. is the stage set for a rally into year's end? we have both sides of that argument. vote to strike. ups pilots issue a labor threat just as the busy holiday season fast approaches. streaming sports. will yahoo!'s experiment with football this weekend give us a glimpse into the future? all that and more tonight on "nightly business report" for friday, october 23rd. good evening, everyone, and welcome. so glad you could join us. well, well, well. the pieces may be falling into place. stocks have been flying high in october. a reversal from what came just a couple of months before.
august, september. s&p 500 now on track for its best month in four years. it has now turned positive for the year. the nasdaq closed today at a two-month high, back above 5,000. and the dow jones industrial average notched a 2 1/2% gain just this week. it seems like all those big worries that consume the market like china, earnings, and the federal reserve, they don't seem all that big after all. at least for now. today the blue chip index rose 157 points to 17,646. nasdaq gained triple 1s. 111. mostly on those strong tech earnings we told you about last night. and the s&p 500 added a double deuce. 22. as for the week, all of the major indexes saw gains of at least 2%. and today's rally started with a surprise. an announcement from the chinese central bank. eunice yoon has the details from beijing. >> reporter: the chinese central bank cut interest rates by 25
basis points and reduced the reserve requirement ratio at the banks by 50 basis points. on state radio the chinese premier said that the government would continue to make reasonable use of both interest rate cuts and triple r cuts in order to shore up the economy. now, the timing of the move might have surprised the markets, but there's been a lot of speculation here in china the government was going to make some sort of move around this time. there's a big economic planning conference that's coming up next week, and the leadership is expected to set an economic agenda for the next five years. there is a belief that the government wanted to show that the economy is strong. ironically, though, this could have the opposite effect. this could be an indicator that the leadership here is much more concerned about where the economy is than what the numbers tell us. the gdp for the third quarter came in at 6.9%. and there's been increasing doubts that the headline figures aren't reflective of what's actually happening on the ground. and so this was seen as a very
aggressive move of an interest rate cut as well as a triple r cut, could just continue to fuel those concerns among investors that the real economic performance in china is significantly lower than what's being reported. for "nightly business report" i'm eunice yoon in beijing. china earnings and interest rates were big worries for the market. are they still? and if not are stocks set to rise over the next three to six months? bob pavlik says yes, they're headed higher. he's with boston private wealth. jim paulson says no. he's with wells capital management. good to have you with us, gentlemen. welcome. >> thanks, sue. >> i'm going to start, jim, with you. you know, earnings in many cases came in better than expected. we have accommodative central banks around the world. china just cutting interest rates. why does that not underpin the market and forward its ability to continue this rally mode? >> well, it certainly has ended this correction, sue. there's no doubt about that. it feels pretty good.
but i don't think this correction did much to extinguish some of the forces that put it in place in the first case. we were dealing with a market that was fairly highly valued, and tonight we're back at about the same valuation we were at the market top. still pretty highly valued. it hasn't dealt with the need to reset interest rates. we got very close to doing that. the market was starting to deal with the fact that we're headed to higher rates and headed to an exit of the fed, which we have and we've still got that ahead of us. it didn't deal with the aging earnings cycle now in the seventh year of the economic recovery. earnings may grow, but they're likely to grow much slower going forward than they have in the past. and i think in the united states, sue, now that we're closing in on full employment the stock market's got to deal probably with a little higher inflation and some cost push pressures that might challenge profit margins. most of those challenges i think are going to come back again and rechallenge the stock market. >> all right, bob. jim has given you plenty to
respond to. go ahead. >> i think the most recent correction shows you the value of being able to keep an open mind and willing to change the -- sort of the makeup of your portfolio and not be able to sort of stick to the same thing because i think if you continue to stick to the same thing you're going to prove yourself to be wrong. what the market is dealing with right now is a cheap money environment. the market is not looking at economic news. it's not looking at earnings that have beaten very lowered expectations. the market is going back into the risk on assets. and that's what's going to continue to work because we got the federal reserve basically on hold. they can't raise interest rates with the u.s. economy slowing. the ecb is looking like they're going to put more quantitative easing out there. china just did it. and so that fuels a risk on bubble. now, jim is right. there are a number of issues that still have to be addressed. but that's not the market's concern right now. there's issues that main street faces but it's not the market's concern. the market still has at least 8% to 10% left in it.
i think this year. and then we continue to go into next year. i think the economic news continues to remain weak, keeps the federal reserve on hold. the market pays attention to these earnings beats even though they're lowered. and it likes that and it stays fueled invested in stock. >> what kind of market if indeed we aren't going to see this rally mode continue for the market, what type of performance are you looking for from stocks into the end of the year, the beginning of the new year? >> well, i think, sue, that we may go back up and challenge the old highs, which are only about a percent away now at 2123 on the s&p 500, something like that. i just don't know if we have, as i said, a foundation here, a valuation foundation to face the different challenges we face going forward. and i don't know if we'll get a lot higher than that in the united states. one way i deal with this, sue, i would go away from the united states because i think they're in an earlier part of their cycle. they're not worried about policy officials that may pull away and become hostile.
they're all going to push up for the next few years. there are better valuations abroad. that's how i'd deal with this. i'd minimize my exposure here and maximize it offshore. >> let me ask you, bob, to just sort of address what i think is sort of the central argument that jim is making. the s&p 500 right now is basically flat for the year. nasdaq is up a little bit more. those are not big gains, but people are concerned that the earnings levels aren't sufficiently strong and growing fast enough to support prices where they are today. what has to happen with earnings in the fourth quarter and into the first and second quarter of next year for stocks to get a further lift? >> i think the primary thing that this country needs is growth in earnings. we need to see salaries and wages increase. i don't think we get it. i think this market is not trading on fundamentals. it's based on quantitative easing. again, the risk on assets. i think jimmy's spot on as far
as the problems that remain with the overall economies around the world here in the united states. but again, there's this divergence between what's going on in the economy and the overall stock market. investors really want to pay attention to what's happening with the economy and earnings and looking for growth, but it's sort of the secondary to what's really driving the market here right now. the correction wasn't based on a decline in earnings. it was really just a rotation out of the risk on assets heading into september. they surprised us by not raising interest rates. and you know, here we are. i think in order to get this economy moving forward you do need an interest rate hike because that will get banks ready to lend and ready to move the money from their vaults back to the borrowers. >> that's the next thing the market has to deal with, i guess. gentlemen, thank you so much. bob pavlik with boston private wealth. jim paulson with wells capital management. have a great weekend, guys. dow component procter & gamble reported a sharp drop in quarterly sales but earnings were better than expected thanks
to cost cutting. executives at the world's largest consumer products company are optimistic they say about a return to growth in the current quarter. >> there was a big currency impact but sales were a little bit weaker we're expecting them to accelerate, to get back to organic sales growth in q-2 and to strengthen in the back half. >> the maker of tide, crest, and other household products is shedding about 100 brands as part of its turnaround plan. shares rose almost 3%. a couple of food deals are reportedly in the works. according to reuters, treehouse foods is in advance talks to acquire realcor, which is conagra's private label business. the deal will likely be valued at about $2.5 billion. shares of treehouse foods rose while conagra fell. and kellogg is reportedly in advance talks to buy snack food company diamond foods for more than $1.5 billion. diamond foods rose 6 1/2%. kellogg's fell. the union representing ups pilots voted to authorize a strike at the company.
more than 99% of those who voted said yes. it's an overwhelming number according to the union. and as morgan brennan reports, the strike threat comes at a tricky time of the year for the company. when shopping increasingly means shipping. >> reporter: the independent pilots association, which flies cargo planes for ups, has been at odds with the company since 2011 over wages and retirement benefits. >> well, we've been at this for four years. ups has been engaged in stall and delay tactics. and it's really time to settle this. and the ball is really in ups's court. >> reporter: but before you get too worried about shipping those holiday gifts, this is a strike authorization. meaning the union's board can formally request a release from federally mediated negotiations with ups. then the strike itself. >> is that the parking brake? >> reporter: adding pressure the international brotherhood of teamsters, the union covering the quarter million drivers and package sorters at ups, has said
it too will stand by the pilots. and not cross picket lines if a strike does ensue. both sides, ups and pilots, are scheduled to return to the bargaining table early next month. for its part ups says it continues to negotiate "in good faith" for a contract. >> it's important to understand that the vote is purely symbolic. that these are very common in airline contract negotiations. that talks actually continue to progress with negotiation dates scheduled out for several months. and that our customers are in great hands headed into a busy holiday season. >> reporter: ups points out that its pilots are guaranteed at minimum more than $255,000 per year. it maintains the typical ups crew member works roughly ten days per month, flying about half what a typical passenger pilot flies. but the union says it wants better safety practices as relates to fatigue and scheduling. all of this unfolding just as ups is gearing up for peak season, which analysts note needs to go smoothly after two tough ones.
>> two holidays ago ups had serious service issues. they blamed it on weather but it was really a combination of weather and just a huge surge in volume. last year they spent like drunken sailors to try and prevent that service problem but they had two earnings misses in a row as a result. but the bottom line is ups cannot afford to have its customers nervous about service going into the holidays and this needs to get settled. >> reporter: this just as rival fedex has ratified a new contract with its own pilots, meaning if some shippers are nervous about these events they might be tempted to take business elsewhere. for "nightly business report" i'm morgan brennan in new york city. still ahead -- looking for some stocks to add to your portfolio? our market monitor has some names you might want to consider. ♪
a big day for big tech. microsoft, amazon, and google's parent company alphabet all soaring after reporting strong quarterly results last night, as re reported to you. microsoft up 10%. that made it easily the best-performing stock on the dow. alphabet up more than 5%. amazon gained 6. and there are a few things all of these tech companies have in common. josh lipton tells us what they're doing right. >> reporter: amazon's ceo jeff bezos, alphabet's ceo larry page, and microsoft's chief satya nadella might focus on different areas of the tech universe but they have all figured out how to please investors this quarter. one common theme across all these tech giants, a new focus on transparency.
>> investors for some time have been saying they need to understand these businesses better. and they're many, many years beyond their early stage, hyper growth, ipo days. so the companies have become more mature, the investing base has become more mature, and they've met in the middle with greater transparency. >> reporter: amazon, for example, now discloses the performance of amazon web services, its powerful cloud computing division, where revenue just jumped nearly 80%. google reorganized under a new corporate name, alphabet, and will soon provide additional detail for google on the one hand and all the other alphabet businesses on the other hand. on the conference call cfo ruth porat talked about why the company will report in this new way. >> by doing this we expect they'll be better able to understand how we manage the businesses, including the pace and allocation of our investments. as larry said in his ceo letter announcing alphabet, we are
focused on rigorously managing capital allocation and working to make sure each business is executing well. >> reporter: as for microsoft, the software company now breaks out its performance into new divisions, allowing shareholders to better track how effectively the company is executing on its plans to capitalize on a mobile first, cloud first world. a second theme, all three companies are moving as fast as they can to capitalize on the $56 billion cloud services industry, though analysts say it's one company that's leading the charge. >> it's wide open in terms of potential participants in the market. it's not wide open, however, in terms of market leadership. that market leadership has very clearly gone to one company and that's amazon. >> reporter: investors are cheering these recent earnings reports, but some of the biggest winners are the executives themselves. in just the last 24 hours, for example, jeff bezos has enjoyed paper gains of well over $3
billion. for "nightly business report" i'm josh lipton in san francisco. fellow tech company yahoo! is making a major move into the most valuable tv content there is, football, of course. this weekend an nfl game will be streamed for the first time on yahoo! sites and apps. and the nfl is looking to cash in on the new digital revenue. julia boorstin has more on this digital sports experiment. >> reporter: this sunday morning's game between the buffalo bills and the jacksonville jaguars on yahoo! is a milestone. the first time an nfl game has been live-streamed free as its primary distribution. it's just the latest in a slew of nfl digital deals. with snapchat, twitter, and youtube. plus the league is offering more live games on nfl mobile on verizon and more content on its app nfl now. >> we're in the reach business. we're in the aggregation of audiences business. and there's a tremendous amount of audience going on on the internet and connected devices,
and we are focused on capturing that. >> reporter: he says he'll measure the success of sunday's game based on whether the stream is technically smooth, goes off without a hitch all around the world, and whether it delivers viewers to advertisers. and though most of the nfl's rights are locked up through the 202 2020-2021 season, roloff says he's looking for more digital deals to help reach consumers wherever they are. >> television's still the most effective way to distribute our game packages. having said, that we will look at the internet, whether it's with thursday night football or some of these early windows we're doing on sunday, we'll look hard at the internet as a potential distribution platform going forward. >> reporter: sources tell me yahoo! spent nearly $20 million for the rights to air the game and promised a reported 3 1/2 million viewers to advertisers. despite concerns raised by reports that yahoo! had to cut ad prices from $200,000 per 30-second spot to $100,000, the ads did sell out. and sources tell me that's roughly in line with the regular
sunday games, tv ad pricing. >> now all the sports leagues will be closely watching sunday's game to see if day 2 should deliver their valuable games to consumers first via digital. working against the game is 9:30 a.m. eastern which means few folks on the west coast will be watching and the bills and the jags aren't exactly having their best season. for "nightly business report" i'm julia boorstin in los angeles. the appliance giant whirlpool announce better than expected earnings and that is where we begin tonight's market focus. the alliance maker saw its profit rise this past quarter but lowered its full-year guidance slightly. the trouble spots, latin america, demand there, and the strong dollar, which makes u.s. products more expensive overseas. shares of the company down almost 9% on that word to 145.90. and vf corp., owner of popular brands like wrangler, vans, and northface, reporting softer sales -- ale all families with kids do. as it deals with lessening demand for workwear products.
the company saw softer sales in its outdoor brands which have historically performed well for the company. vf lowering its guidance for the year. the news sent shares down nearly o'13% today to 63.75. royal caribbean reporting a better than expected profit citing higher demand, lower fuel cost and more money spent by passengers on board its ships. the world's second largest cruise operator also raising its full year guidance because it expects bookings to improve for the rest of 2015. shares of the cruise line up over 3% to 98.04. a printer maker, lexmark, says it's exploring strategic alternatives as it believes the current share price doesn't reflect the value of the brand. shares getting a boost from the news, up over 7% to 35.26. and our market monitor for friday says there are three stocks you should consider buying right now. kevin caron's stifel private market group strategist. last time kevin was on in march he recommended abbott labs,
emerson dickinson. all of them are down since then. let's start there. do you still like those? would you be comfortable buying them? they holds? they sells? what? >> those have been long-time holdings for us. and i think what the theme is among all of them is that the global economy is relatively soft. this is why you see the europeans and now the chinese looking to cut interest rates disbursing growth and the strong dollars has hurt those companies translating profits to u.s. dollars. >> kevin, i like your stock picks. we start with stuff you wear, stuff you eat, and then stuff you use. let's start first of all with t.j. maxx. stuff you wear. >> t.j. maxx has a tremendous buying clout within the industry. they have a terrific moat around their business. and they're very well positioned i think going forward. i think we can see some margin expansion there. i think that stock can generate some very nice returns going into 2016. we're looking for the stock to trade up into the mid 80s from here. >> home goods, one of their
properties, is to my wife what dick's sporting goods is to me. she goes there all the time. let's move on to general mills, kevin. you've got a price target of 61. >> yeah, sure. general mills, essentially this is a company that is a more conservative kind of name. it has been growing more slowly. consequently, we see maybe a 7% or 8% kind of move in the stock. very healthy dividend yield over 3%. they've been moving more toward healthy foods including some gluten-free alternatives. they're doing very well in their yogurt business. they've recently spun off, in the process of spinning off one of their businesses that should provide a lot of cash flow to them. so the think the business is very well positioned going forward. conservative investors should expect a high single digit type front-runner that name. >> finally, microsoft very good earnings the stock was up about 10% today. you still like it, though. it has more room to the up side? >> yeah, i think this stock can trade into the -- easily into the high 50s from here. it did have a good move. maybe it pulls back a little bit from today but i think it is
positioned very well. i think they're converting their business of revenue streams into a more consistent higher margin kind of business. businesses like the cloud i think are going to be very successful for them. and ultimately see the stock moving higher from here. i think today's move was very generous. but on any bit of a pullback or weakness i think you can buy it. i think it has up side into the high 50s. >> kevin, thanks very much. turn off the lights before you leave there, will you? >> there's nobody -- >> totally empty, man. working late for us. kevin caron. >> enjoy your weekend. >> you too. >> coming up, the fastest growing private companies. meet the entrepreneur who's rung a business with a growth rate of -- is this right? 100,000 percent. ♪ ♪
imagine a company that has a growth rate of -- are you ready? 100,000%. it's a reality for the entrepreneur who landed the top spot on "inc" magazine's list of fastest growing private companies. kate rodgers is at the inc. 5,000 conference in miami and introduces us to some entrepreneurs on that list and shares the secrets to their success. >> reporter: san francisco-based startup tatcha runs a line of luxury cosmetics inspired by the beauty rituals of deja culture. while stayed's start yupz are gaining notoriety on the basis of new technology, cat ja has relied on a brand relying on japanese history. with revenues at $12 million, they ranked 21 on the "inc." magazine's 2015 inc. 5,000 list
of the fastest growth private companies in america. her three-year growth rate was almost 11,000%. >> in the american beauty industries, particularly skin care, we have long believed that the answer's in the future. it's going to be the next peptide, it's going to be the next high complex molecule that is going save our skin. but the fact is that women have wanted to look beautiful and have healthy radiant skin since heaven knows when, since we were hunters and gatherers. we think old school is new school. >> whether it's new school or old tradition, these small businesses are growing fast. collectively the companies on the list generated $203 billion in revenue in 2014 and over the past three years their median growth rate has been more than 135% and they've created more than 600,000 new jobs. single mom melissa keeling based in westlake village, california is on track to do just less than $20 million in sales this year. her lunchboxes have gel-lined walls that can be frozen and can
actually cool food by about 20 degrees in the first hour. she got the idea when her own kids' lunches wouldn't stay cold. now she's selling in bed, bath & beyond, target, whole foods and more. >> i didn't really set out to be determined to be an entrepreneur. i had an idea that i thought was a good idea, it was something i needed in my life. a better way to pack lunches for my kids. and i was so magsate about seeing that idea and that concept go to market because i knew i needed it and thought others would too. >> david glickman's ultra mobile took the top spot this year. a carrier that combines calling cards, free global calls, data and text all rolled into one. the company grew more than 100,000% in the past three years. >> we basically offer a product that gives the store a lot of money for carrying it and selling it as well as giving the consumer tremendous value. we have the thinnest margein and we make it up in huge, huge volumes, which is why growth has
been our objective from day one and without growing we wouldn't be surviving. >> reporter: the success of the businesses at inc. 5,000 proves america's spirit of entrepreneurship is alive, well, and growing fast. for "nightly business report" in orlando, florida i'm kate rodgers. >> i have a packet sitting on my desk. >> what are those things called? >> it keeps things cold. it does. i bring my lunch in it every day. >> good. >> now you know. that'll do it for "nightly business report." i'm sue herera. thanks for joining us. >> and thanks from me as well. i'm tyler mathisen. have a great weekend, everybody. we hope to see you back here on monday. ♪
>> what a difference a week makes! for hillary clinton. for paul ryan. for joe biden. and for donald trump and ben carson. and they're all connected. we explain how, tonight on "washington week." >> i had a pretty long day yesterday. it's been quite a week, hasn't it? >> and she's had a pretty long summer. but the fall is looking brighter. week, joe biden decided not to challenge her. time.elieve we're out of the time necessary to mount a winning campaign for the nomination. >> to lesser known -- two lesser-known challengers dropped out. and clinton emerged undamaged congressionalr hearing on the benghazi tragedy. a single member of this