tv Nightly Business Report PBS October 31, 2015 1:00am-1:31am PDT
♪ >> announcer: this is "nightly business report," with tyler mathisen and sue herera. no trick but a treat. october turned out not to be scary at all for investors as stocks logged their best month in four years. so what does that mean for the rest of 2015? mega madness. this week's market monitor says you should capitalize on mega trend stocks and he has three names for you. and madoff rebound. what bernie madoff has to do with this year's world series. all that and more for friday october 30th. good evening, everybody, and welcome. october is usually a month associated with fright and ghouls and goblins. and the month typically is approached with a wary eye from investors as well. but this october was anything but scary.
in fact, stocks just logged their best month. not just october but any month in four years. the dow and s&p 500 gaining more than 8% for the month while the nasdaq surged nearly 9 1/2%. investors attributed the big run-up to mostly solid earnings reports and easy monetary policy from central banks around the world. as for today the dow jones industrial average fell 92 points to 17,663. the nasdaq fell 20, and the s&p 500 off 10. an 8% move in the dow in october is a relatively rare event, and that begs the question what now? does this set up the market for a run into the rest of 2015 or will the rally turn into a pumpkin? dominick chu takes a look. >> reporter: it may or may not be hard to believe but we're now just two months away from capping off one of the more eventful years for the stock market in recent memory. and the up trend, though, could continue. according to market data firm
kensho, before this year there's only been four times since 1980 when the month of october has gained more than 8%. in three of those last four times the next two months have returned an average of around 4%. this year optimus believes the stage is getting set for another rally. >> we thought the fed would pretty much announce in september a hike. they did it by calling the china language that they had tthere. we had a nice m&a deal in the health care space that we think puts a floor under that sector that's been a problem for the s&p. so we think the outlook into the rest of the year continues to be pretty positive. >> reporter: what has some traders feeling better about the current environment is the leadership coming from the technology sector. companies like google parent company alphabet and social media giant facebook have been soaring. the tech sector is the largest in the s&p 500 and some money managers are looking for opportunities there. >> i like information technology right now. you've seen a couple of the large cap names in information technology have really turned
the corner. the traditional license sales to a subscription business model, the nice thing about that is if you look at a microsoft or an adobe they've passed their peak pointkf execution risk and i still think there's revenue growth ahead. >> of course nothing is ever certain in the markets. there are a host of reasons why things could get derailed like uncertainty about interest rates here as well as a slowing economy and worries about what's happening in china. but with the holiday season approaching, many investors are still putting some stocks on their holiday shopping lists. for "nightly business report" i'm dominick chu. two not so upbeat reads on the consumer today. first consumer spending. a look at how much americans spend on everything from furniture to cars. well, it cooled in september. the commerce department reporting a 1% uptick. that's theth smallest gain, though, in eight months. income growth also rose but by less than it has in four months. and a separate report from the university of michigan showed consumer sentiment rose in
october but not by as much as expected. this as some are worried about the stock market volatility. >> so what can we expect from the markets for the rest of the year and where should you invest now? let's turn to sandy lincoln for some answers. he's chief market strategist at vemo asset management. sandy, welcome back. good as always to see you. what do you think? is the market in a healthy place right now through the year end or what? >> well, it's certainly in a healthier place happen it was in august and september. that was a pretty rough tour. and i think a lot of it was as the intro said, a lot of it wa laid at the doorstep of china and obviously the currency devaluation and that sent markets tumbling and then in september when everybody was expecting the fed to potentially raise rates they not only didn't raise rates but they doubled down on the china syndrome mentioning that as a potential drag on the economy as well and part of the reason they didn't raise rates. so with the year to date numbers into early october, tyler i think the s&p was off 6% or 7%
in negative territory. now we made all that ground up as your intro set up very nicely and we're up for the year with this big return we got in october. >> is how much -- >> can it go higher -- >> sorry, sandy. finish your thought. >> i was just going to say i think the backdrop has been that we overreacted in august and september and i think a lot of what we saw in october was sort of a reflection of the fact people recognized our economy isn't all that tied to china. so i think a lot of people made a mistake in reading the connection between us and china and i think that's part of the recovery story in october. >> so as we go closer to the end of the year, how much do you think is left in this upside move in the market, sandy? >> i wish i had a precise answer for you. that crystal ball's a little cracked for everybody right now. but i think in general there's a little more up side. you know, you've got some additional tailwind here, the debt ceiling deal and a little more government spending that's going to come into play. that's going to be downwind a little yet but still i think it's going to be in investors' minds that's a positive.
consumer sentiment pretty decent. i heard the numbers you were talking about, sue, but i think on balance the consumer's pretty confident. more people are played. maybe 3% to 4% spending in the holiday season. valuations are reasonable. so you've got to be very careful on stock selections in here. but i do think there are opportunities and i think there's a better than 50-50 chance that the market moves slightly higher by the end of the year. >> let's talk about some of those opportunities. i know you can pick stocks. i know you can pick sectors. why don't you give us some names of seshlths that are on your santa's list. >> okay. one of those names is a company called acuity brands. when you think lighting you think acuity brands. they have a 17% or 18% share of the lighting industry in north america. and they've got all forms of lighting. they manufacture it, they design, it they distribute it. and they're very big producers of what we call l.e.d. lighting which is the coming of age form of light g for both industrial and residential, actually. and it's a real good profitd margin business. costs coming down. sales are going up. this is a double-digit revenue gainer, a double-digit earnings
gainer. not a cheap stock, tyler. 25, 26 times forward earnings. but we think the financial performance really supports the name for sure. >> and columbia sportswear, something my kids have a lot of in their closet. >> yeah. i bet. and those total up pretty quickly on the cash register as well. >> yes, they do. >> we almost didn't use this name because the earn wrgz going to come out last night when we sent you the name. we hadn't seen the earnings results for the third quarter but they beat on revenue and beat on sales. and sue, that's one of the real drivers we're looking for. the discrimination in the market really is looking for companies that are able to improve profit margins, sustains, growth rate d sales above expectations and support earnings. and columbia's doing a really nice job of that. they did beat on earnings, did beat on revenues. margins are expanding. they've got a really good line. they can be a choppy stock. don't get me wrong there. it can even be affected by the weather. but we think through it all it's a pretty good name to hold in a consumer-or yebted position. >> sandy, thanks very much. have a happy halloween.
>> thanks. trick or treat to you guys. >> sandy lincoln with bemo asset management. big oil surprising the street today while sliding energy prices dealt a blow to both exxon mobil and chevron. their results came in better than expected. that sent shares of both companies higher. and as we've been telling you, refining has been a bright spot for the energy sector and that proved true with both companies posting an earnings increase from that portion of their business. still, chevron said it will slash 10% of its workforce and both firms will reduce spending. chevron saw its revenue fall nearly 40% while exxon's was cut almost in half. shares of valeant pharmaceuticals under pressure today after the company cut ties with the specialty pharmacy philidor. it distributed some of valeant's prescriptions. yesterday pharmacy benefits manager cvs health, express scripts and a unit of united health group all ended their relationship with philidor. shares of valeant down about 16% today. meg tirrell has more on the storm swirling around valeant.
>> reporter: it was another rough day for valeant. the drug maker saying allegations about philidor's activities raise additional questions about the company's business practices. it says philidor will shut down operations as soon as possible. the specialty pharmacy only accounts for about 6% of valeant's revenue, but it's contributed to an almost 40% decline in valeant's stock in the last week and a half. the decision to terminate the relationship came after several pharmacy benefits managers last night said they wouldn't work with thphilidor anymore. cvs caremark in particular citing non-compliance with the terms of its agreement. specialty pharmacies have typically been used to handle more complicated drugs such as those that need special storage or dosing. more recently some companies including valeant have used specialty pharmacies as a way of distributing often higher-priced drugs that insurers want to dissuade patients from using before trying cheaper alternatives. pharmacy benefits manager express scripts cited the practice of circumventing cost savings strategies as a reason
for terminating its relationship with philidor. a four-hour presentation by hedge fund titan bill ackman one of its largest shareholders, failed to set the stock slide. he came out in defense of the company saying he still believes innant and ceo mike pearson saying he still takes issue with a few things. first he said it needs to improve its customer relthss, investor relations and government relations. he also said valeant should have disclosed more about its relationship with with the philidor pharmacy and he expected communications and disclosures be more robust going forward. ackman compared the situation with the that of american express in the 1960s when a young investor named warren buffett bought the stock at a discount after a scandal drove its shares down. ackman last week increased his stake in valeant. the drugmaker, however, still has several things on its plate. multiple government inquiries into its drug pricing and patient assistance programs plus the threat of another report from short zoeller citron research. that's the firm that sparked the
controversy. citron coming out on twitter said saying it's got a new report it will release on monday. no word on what it will contain but valeant's stock slumped 16% intraday heading into the weekend. for "nightly business report" i'm meg tirrell. coming up, why rising interest rates may actually be a good thing for the housing market.et ♪ ♪ ♪ the federal reserve is proposing new rules to help further prevent taxpayers from being on the hook for another bailout. the proposal's goal is to work toward the end of banks being
too big to fail. the rules would require six of the nation's eight biggest banks to issue a total of $120 billion of long-term debt to help absorb financial losses. the banks are jpmorgan chase, citigroup, bank of america, goldman sachs, morgan stanley, bank of new york, mellon, state street, and wells fargo. the fed did not say which two of the banks were exempt. richmond federal reserve president jeffrey lacquer was the lone dissenter in wednesday's decision by the central bank not to raise interest rates. today lacquer said he wanted to raise rates because the economy is strong enough and labor markets have "tightened considerably." and mortgage rates did move higher this week after the federal reserve did signal that rates could rise in december. diana olick now on how home sales could react. >> reporter: home buying slowed down in september for both existing homes and new construction. now mortgage rates are edging
higher and could jump even more if the federal reserve raises rates in december. while it seems like higher rates would only hurt, the ceo of one of the nation's largest builders, pulte homes, argues they could actually help. >> i predict that if they raise them in small increments it actually could be a catalyst for the market for people to get off the fence and jump into housing while rates are still relatively good. >> reporter: if interest rates on the 30-year fixed mortgage went from 4% to 4 1/2% next year, that would raise monthly costs by about $29 for every $100,000 financed. it's not a ton, but just the fear of paying more later when you could pay less now could make potential buyers more eager to get the deal done now. it could also just make them feel better about buying. >> if you have interest rates that go up, that generally means that the economic conditions are improving, borrowers feel more confident about their flot life and their economic prospects through job growth and things like, that so they're more
compelled to purchase. >> reporter: that thesis is plausible except for the supply issue. mortgage rates are not the biggest headwind to housing right now. it's lack of homes for sale. lack of construction. and consequently, home prices rising far more than interest rates. >> two years ago we were talking about sellers being locked in. they loved their mortgage and hated their house and decided to stay put. will this mortgage increase if it happens, will that make them again hesitant to add to supply? and that's supply we desperately need in the housing market right now. >> in other words, rising rates could impact sellers more than buyers. for "nightly business report" i'm diana olick in washington. shares of avi surge on earnings beat and that is where tonight we begin our earnings focus. the drugmaker hiked its outlook for the year as its profit and revenue easily topped consensus. on top of that the company increased its quarterly dividend to 57 cents a share. that will be payable in february. shares rose 10% to 59.55 making
ab vi the second best performer in the s&p 500. but it was the opposite story for cvs. its profit forecast for 2016 came in below estimates, which the company is blaming on costs related to the purchase of target's pharmacies among other things. earnings missed consensus for the first time in six quarters, which it attributes to another acquisition and generic drugs. shares were off nearly 5% to 98.78. an increase in sales of generic drugs helped mylan post an earnings beat. revenue was short of the forecast but the company also announced it will continue to strongly pursue its bid to buy perigo. shares were off 3% to 44.09. colgate's earnings were in line with consensus while revenue missed. a strong dollar weighed on the toothpaste maker. it expects full year earnings to be lower than predicted. shares fell 4% to 66.35. anheuser-busch inbev saw its sayers rise despite results that missed on both the top and
bottom lines. volatile currencies w5ed on results. the company didn't hike its dividend. shares were up 1% to 119.33. and phillips 66 saw its earnings rise more than 30% helped by strength in its refining segment and even though revenue came in below consensus. the stock was up 3%, 89.10 the close. now tower market monitor who likes stocks he says will be affected by the global economy for years to come. it is his first time joining us for the program. he is lou piandiosi, portfolio manager at eaton vance, where he manages about $13 billion. lou, welcome. nice to have you here. >> thanks for having me. >> so tell me how you come to the consensus that you want larger stocks that affect the global economy. >> yeah. we look at the environment that we're np therein. there's so many cross-currents when it comes to global economies, what's going on in emerging markets, europe, pretty stagnant growth and the u.s.
seems to be in an environment where we're kind of a two steps up, one step back environment. there's lots of uncertainty with the fed. in that kind of environment what we want to seek out is companies that are benefiting from beg picture long-term secular trends. we call them mega trends. and they populate a big part of our focused growth portfolio. >> and the stocks, we'll get to them in just a moment, but it feels to me that what you're calling for here in these stock picks are stocks that aren't trading plays but forever stocks. stocks that would be sort of cornerstones in your portfolio. >> that's right. we view these companies as long-term franchises. these are the types of stocks that you don't want to trade. that's correct. they are buy and hold, invest, build wealth over time type of stocks. you know, really we haven't seen a strong growth cycle since the period of the '90s and we think there's a lot of parallels to what happened during that period of the '90s to where we are today and that huge mega trends,
transformational trends are taking place and kind of flying under the radar and investors are missing it because they're much more involved in thinking about the macro and trading positions rather than investing in these companies. >> so let's get to the stock picks. and we'll start off withll facebook. it's trading at about $102 a share. why do you like it? >> facebook is a company, and i've been talking about this one for a couple of years now, when i talk about it today people say i missed the stock. and my argument is you haven't missed anything. they'll likely end this year with about 17 billion in revenues, which is pretty remarkable considering the company really wasn't in existence ten years ago. but as we look at that revenue base that's still less than 3% share of the 700 billion global adveising market. so they're going rapidly but we still think they have the opportunity to double and triple that share over the next three, four, five years. >> let's go on to choice number two which is a stock i've heard
of. it's called amazon. >> mm-hmm. again, amazon, we love amazon because it has a major presence in two huge secular trends. the first trend, e-commerce. everyone knows is a retailer. online retailer, e-commerce is tiowing five times traditional retail. and amazon's place within that e-commerce space continues to gain share. so we love amazon as an e-commerce play but we also love it through amazon web services and the shift to the cloud. this is a business that they've given more clarity to recently and the growth in that business is remarkable. they're a leading player, but it's still in the very early stages. >> and we'll finish one gilead. you say the business is misunderstood by wall street. how so? >> yeah-i think their drug for hep c has been nothing short of remarkable. it's a remarkable drug in that it actually cures the disease. to date they've cured 600,000
patients in the united states alone and i think the street thinks that that number has peaked or their earnings have peaked over time. but we look at that total addressable market and see 3 to 4 million patients in the united states. an additional 2.5 million in continental europe. and then another million or so in japan that they're just starting to crack the surface on. so there's lots of growth in this company going forward. >> very quick closing question. do you think the s&p 500 will be higher at the end of the year than it is now and if so by roughly how much? >> you know, that's not my game to call the market. we focus on companies. and the best growth companies that we can find. the companies i mentioned all have earnings growth in excess of the market. and if they can continue to do what we think they can, those companies will perform very, very well. >> good stock pickers -- >> thank you. >> lew, thanks for joining us. we'll talk to you soon. >> my pleasure. >> lew piantedosi with eaton vance. up next, and i don't think lew would like to be associated
with this, how ponzi schemer bernie madoff's impact is being felt at this year's world series. >> i think you're right about that. ♪ ♪ here's what to watch for next week. another busy earnings week. the dow components reporting include visa and disney. the employment report for october is out on friday and also on the data front motor vehicle sales are out along with a read on international trade and manufacturing. and that's what to watch for next week. tonight is game 3 of the
world series between the new york mets and the kansas city royals. and with the royals taking the first two games the series shifts to the big apple. the mets are going to need a big turnaround to survive this series. but that might pale compared with the financial squeeze they've been under. eric chermi is at citifield in queens, new york with a look at how the mets survived bernie madoff. >> reporter: the mets may be down 0-2 in the world sherz, but just being here is a huge win for a team nobody thought could get this far. the mets struggled both on and off the field for the past six years, losing games and money. a big reason -- team ownership's tie-up with bernie madoff. when the madoff scandal broke mets owner fred wilpon realized his assets were worth a lot more than he thought. he had to borrow hundreds of millions of dollars to stay afloat and is to this day paying off settlements to the court's
trustee. behind the scenes less money meant a leaner and some say smarter approach to building a team through young talent. finally, in 2015 it all came together led by up and coming pitching stars who make just above the league's minimum salary. >> the pitching staff is young. they're going to get better. so that's the exciting part. >> reporter: the surprise turnaround has caused an economic stimulus in the region. ticket prices are soaring. the average price for tonight's game is $1,800. and tick i.q. says this is the most expensive world series that they have ever tracked on the secondary market. fans are also buying merchandise in numbers bigger than anybody could have expected. >> we did more business in one day when they clinched the pennant than we did all of 2014 in 365 days. >> despite being down 0-2 history is on the side of the amazins. >> we were down 0-2 in '86 and went down to boston and went down and won the first two and lost the next one there but came back and ended up being the
champs. >> while the odds of a comeback are slim, the mets are showing the world that comebacks are what they do best. for "nightly business report" i'm eric chemi at citifield in queens, new york. >> game 4 of the series will be tomorrow on halloween. and as for halloween, americans are expected to spend about $2.5 billion this year on halloween candy. and for some bay area residents who haven't bought their treats yet, one san francisco company hopes to come to the rescue. jane wells has more. >> trick or treat. >> reporter: homes across america are preparing for battle stations saturday night as hordes of children invade neighborhoods in search of treats. but here's the trick. >> from our research 50% of all households run out of candy on halloween. [ scream ] >> reporter: the horror. but this is 2015 and naturally a couple of young techie entrepreneurs have developed an app to solve this dilemma. it's called spoon rockets. a low-cost meal delivery
business started two years ago in the bay area. >> spoon rocket is the food button on your phone. kind of like uber is the taxi button on your phone. >> reporter: and this halloween it's offering to deliver bags of candy to bay area residents in 15 minutes if they run out, helping them avoid turning out the porch light early and incurring the wrath of egg-throwing teenage ghouls. spoon rocket has prebought $8,000 worth of candy and expects to sell it all. and not just any candy. >> a lot of times families just have really terrible candy like tootsie rolls and dum dumz. so we decided to offer candy that kids really do want. >> reporter: the company says halloween won't be about making money but about marketing the business. and before you laugh that someone would actually come up with all this as a conditioner spoon rocket hopes to expand its concept of fast food delivery nationwide and has already raised $13 million in funding. that's a neat trick and a treat.
for "nightly business report" i'm jane wells. >> spoon rocket. that's tootsie roll on line 2. >> exactly. >> and dum-dums. >> that'll do it for "nightly business report" for tonight. have a great weekend. happy halloween, everybody. i'm tyler mathisen. thanks for watching. >> and i'm sue herera. have a great weekend. we will see you back here on monday. ♪
gwen: new leadership in the house. new breakthroughs on the campaign trail. but why does the republican party still seem at war with itself? plus boots on the ground in syria. we discuss it all tonight on "washington week." >> i mean, literally, the senate, what is it, a french work week? >> someone convinced you that attacking me is going to help you. >> we can't elect somebody that doesn't know how to do the job. gwen: the republican divide on full display on the debate stage and in the house of representatives. >> the house is broken. we're not solving problems. we're adding to them. we are wiping the slate clean. gwen: but is this the normal drama associated with a change in leadership? >> i am second. it's not like terrible. but i don't like being second. second is terrible to me. gwen: or is it a sign of things