tv Nightly Business Report PBS January 28, 2016 1:00am-1:31am PST
this is "nightly business report" next with tyler mathisen and sue herera. >> heightened concerns. stocks tumble after the federal reserve said it's worried about growth and the global economy. but is the central bank's ability to fix things limited? lying low. boeing doesn't expect to deliver as many jets this year as it did last and that has shareholders nervous. cash advance, no atm card, no problem as long as you have your smartphone. the new way people are accessing their accounts. all that tonight on "nightly business report" for wednesday january 27th. good evening, everyone, and welcome. the fed is on hold. today, the u.s. central bank citing lower economic growth and inflation expectations kept interest rates right where they
are. near historic lows. but it was less what the fed did or didn't do, and more what it said and didn't say that got investors' attention today. it said, among other things, it was monitoring global economic and financial events and watching how they might effect our job market and inflation. and uncharacteristically, it deleted any reference to how it assesses the balance of risks to the u.s. economy, a sign, say some fed watchers, that janet yellen and friends are a little more worried than they were just six weeks ago. those renewed concerns pressured stocks, so did the fact that the fed didn't explicitly take a rate hike off the table for march when it meets next. the dow jones industrial average dropped 222 points to 15,944. the nasdaq fell 99. the s&p 500 lost 20. hampton pearson has more now on what's worrying the central bank. >> reporter: the first federal reserve meeting of 2016 ended
with monetary policymakers keeping interest rates unchanged but pledging to closely monitor the global economy and financial markets. since the mid-december rate hike, major markets and oil prices have declined and china's economy has struggled. the initial market reaction was negative because monetary policymakers gave no hints they plan to slow future rate hikes. >> 2016 levels of global leverage make it very hard in my opinion to emphasize 5% unemployment when oil and commodity prices are deflating by 50% year over year. >> reporter: the fed said while overall economic growth has slowed, labor markets have improved, but the drop in oil prices and stronger dollar finds policymakers no longer reasonably confident the fed can reach its 2% inflation target over the next few years. some analysts say that continued strong job growth leaves the door open for a rate hike in
march. >> i don't think the fed has changed their playbook. labor market conditions are still solid, and if we continue to see improvement, the fed will still consider a rate hike. >> fed has a bit of a credibility problem because they probably waited too long to raise rates in the first place. now they have to stay on course for a while. >> reporter: two weeks from today fed chair janet yellen will have a chance to address those market concerns when she reports to congress on the economy and monetary policy. for "nightly business report," i'm hampton pearson in washington. let's turn to randy for more analysis on the fed and economy. he's a former fed governor and now a professor of economics at the university of chicago's boothe school of business. also a frequent and welcomed guest here on "nbr." randy, good to see you again. >> great to be with you. >> what do you make of what the fed did or perhaps better said did not do today? and the market's response to it? >> so i thought it was very
interesting that they no longer said the risks are balanced on inflation and growth. they took that phrase out suggesting they're a little bit more concerned and so that would suggest to me that unless we see some inflation outbursts which would seem extremely unlikely they're not going to seriously consider a rate hike in march and i can't really see it even being seriously considered before june. >> so that would really mean that really they're on hold for much of the first half of this year. one of the things they did sort of reinsert into their statement was a reference to global economic and market conditions. they had dropped that in december after having it in, as i recall, in september. does this suggest to you that that's a major factor in their decision making? >> i wouldn't say it's a major factor, but they have to be cognizant of it. ha they're going to do is figure out what is diving the markets. they're not just reacting to the
markets because if you react to the narcotmarkets predict ten o last three recessions. have to be careful of responding when the market moves. what they're going to thrry to e is what's behind this, slower growth going forward, or fragility coming from china. they're going to take a pause like in september. they didn't make the move then. they waited until december. they want to see what will be the, you know, whether they can kind of get behind what's moving the markets now. >> you know, randy, i was also interested that although they can't really see inflation in the pipeline, they didn't seem to be all that concerned with the decline that we've seen in crude oil which many people are calling deflationary at this point. i found that curious. >> well, they said they're going to be monitoring the inflation issues very closely as they always say. they did note that inflation expectations, at least market-based measures have come down, have declined recently.
if you look back to the december statement, they said that they remained low, so they were low and now they've come down. so it becomes much more difficult for the fed to say, a-ha, inflation is rising, when market expectations are are coming down and we're not seeing much evidence of that. i think they didn't want to ex-police sex plis explicitly acknowledge the oil but has moved down. >> we have a muddling economy. the hedge fund manager ray dalio said from where he sits he's not quite sure the fed has the weapons it might traditionally deploy to give the economy a jolt if it needs to. do you agree? >> well, you know, the fed brought rates down to zero and still was able to do more through asset purchases and that's why the fed's balance sheet is now over $4 trillion. that said, easing, asset purchases does have a diminishing effect over time,
but monetary policy is not the only game in town. it's a necessary condition to have to avoid both deflation and high inflation, but to get the economy going, you need a lot more than that. you need to have business confidence and given the uncertainty on the fiscal side, uncertainty on the regulatory side, particularly during this political season, that's what you really need to resolve to get growth going. >> all right, randy, we'll leave it there. thank you so much for joining us. randy kroszner with the university of chicago boothe school of business. the fed isn't the only reason stocks fell. weak outlooks to two dow components, apple and boeing. apple is forecasting a decline in revenue in the current quarter and says iphone sales grew at the slowest pace since the device's introduction. and boeing also issued a gloomy earnings forecast for the year. both stocks fell sharply. apple was off 6.5%, while boeing fell nearly 9%. >> and that move in boeing was the worst since 2001.
but what's behind the aerospace company's weak forecast? as phil lebeau reports, a lot of it has to do with the number of commercial airplanes it plans to deliver. >> reporter: despite a record backlog of orders, boeing's delivery of new airplanes is slowing down for the first time in six years. the decline is not huge. dropping from 762 planes last year to between 740 and 745 this year. what's changed? one factor is the transition to a new version of the 737. boeing's most popular plane. the company plans to build 42 737s every month. but with new edgngines and wing featuring winlets on the tip to save on fuel, the 737 max is a different plane. boeing says the first versions of the max will include test planes and about a dozen models that will go into inventory and not be immediately delivered. in addition, boeing will be
shipping fewer of the 747 jumbo jets. but in a year when airbus is increasing deliveries, investors are asking, why isn't boeing doing the same thing? more importantly, is this delivery dip a hiccup or inkidk indicative of a broader slowdown? after pausing this year, delivery and profits will pick up in 2017. >> you'll see deliveries will grow as we execute on the backlog. so just stepping back from a year of transition looking out to 2017, 2018, you'll see revenue growth, you'll see earnings growth. you'll see cash growth. we remain very confident in that story. >> reporter: boeing says demand for commercial airplanes remains strong not only in the near term but looking out over the next 20 years. which is why the company is dramatically increasing 737 production in 2017 and again in 2019. phil lebeau, "nightly business
report," chicago. component united technologies reported a decline in revenue against all for of its divisions. maker of jet engines, oldest elevators said it was hit, but it topped earnings estimate, reaffirmed its forecast for the year and said it will continue cutting costs and sent shares higher albeit by just a little bit on this down market day. oil, of course, has been a headache for the market. you know the pattern. when crude prices fall, stocks follow. and vice versa. but today there was a break in that trend. and on this down market day, oil prices rose on talk of potential production cuts. according to reports, russia hinted at the possibility of cooperation with opec to cut back on supply. and that sent prices more than 2.5% higher to settle above $32 a barrel. the prices are still historically low. while that's bad news for the energy industry, it's good news for a number of states, sectors,
and companies. we take a look at who benefits. >> reporter: if you're filling up these days, these prices look mighty fine. >> it's a blessing. we do more traveling being that the gasoline is a lower price now. >> reporter: most folks haven't seen gas this cheap since around 2008. so why are many people talking about the negative consequences of oil? well, the stock market doesn't like it. >> if more, of course, the oil remains the yeye of the storm. >> reporter: biggest companies are losing as a result. there's upside to low oil as well. >> low oil prices benefit the transportation infrastructure sectors, airports, seaports and toll roads. the key benefit, it increases the propensity to travel for toll roads and reduces the costs for airlines and shipping lines to move goods or people from one location to another. >> reporter: though oil-producing states like alaska, north dakota, texas, and louisiana are the harde esest hy the oil slump, if you're in new
york, florida, illinois, even california and many other states there are a lot of benefits from low oil prices. sectors like transport that includes airlines, trucking companies, fast food companies and lower end retailers, cheap oil and gas is a good thing. states that see tourism and regions with industries dependent on buying fuel for everyday business activities, even farmers are reaping the benefits of low oil. >> companies across the spectrum that are consumer based are benefiting. the autos like gm and ford who had record sales years. the retailers like walmart, macy's, who have seen better results now as consumers finally spend that gas savings. royal cruise lines, carnival cruise lines, and even wall street disney world. as people finally have the money saved and are able to go on vacation and spend these gas savings. i'm in disbelief that this could be considered a negative for the u.s. economy, an economy that's 70% the consumer, a consumer that's saiing $700 million a day
compared to two, three years ago. >> reporter: not everyone agrees. >> we haven't seen the bump i thought or most economists would see, for example, in retail or in restaurants. a lot of those stocks have been doing just as badly with gas down at $2 or under $2 a gallon as before. most people like to whine about gas prices when they go above, let's say, $4 a gallon but doesn't affect how much gas they buy, demand doesn't change that much. >> reporter: tell that to these people. >> i like to travel a lot now. i can save money on gas, why not travel? it's easy to fill up your tanks sometimes. >> reporter: for "nightly business report" next. >> got that right. all right. there's an app for that. coming to a bank or street corner near you. atm machines that use smartphones, not cards, to let you get cash.
there was a rush to buy new homes last month. the commerce department reports that sales rose nearly 11% in december. that's the strongest pace in ten months. sales of new homes accelerated throughout 2015. thanks to steady job growth and low mortgage rates. from the world's largest economy to the second largest. china. secretary of state john kerry was in that country meeting with high-level officials to discuss global and regional issues including north korea.
we report from beijing. >> reporter: secretary of state john kerry ended a two-day visit to beijing. kerry came here with the hopes of securing further commitment from china to pressure north korea from developing nuclear weapons. china is a key ally of the north korean regime which recently claimed to have tested the hydrogen bomb in early january. the two sides agreed on the need of a u.n. resolution, north korea's nuclear tests. however, after hours of discussions with his chinese counterpart, kerry failed to convince china to support additional sanctions on pyongyang. >> we need to reach consensus on a strong u.n. security council resolution, but we have yet to fill out the parameters of exactly what it will do or say. >> reporter: kerry also discussed the need for the u.s. and china to reduce tensions in the south china sea. china claims most of that body of water and has antagonized its water, many who dispute china's
rights. the u.s. believes a settlement over the waters should be handled with diplomacy. separately, the man in charge of china's economic data is under investigation. the communist party's anti-corruption commission said late last night that it is looking into serious violations. the commission did not release any further details. but for years many have questioned the reliability of china's economic data although it is unclear if this robe is related to his current position as head of china's statistics bureau. facebook's quarterly revenue surpasses $5 billion for the first time ever. that's where we begin tonight's "market focus." the social networking company's earnings more than doubled as advertising sales increased more than expected. the company also benefiting from a surge in video views. that sent shares up initially in after-hours trading, the green part of the line, folks. the stock finished the regular session 3% lower. ebay shares, meanwhile, came under pressure late today after the online auction site warned
first-quarter profits will come in below expectations. also reported, its fourth straight quarter of declining year over year sales. shares dropped sharply in after-hours trading. that's the red part of that line. ebay finished the regular session down fractionally at 2642. paypal spun off from ebay posted better than expected results. the payment processer said it added customers and processed more payments. paypal also announced a $2 billion stock buyback program. shares rose sharply in after-hours trading and finished the regular session with a fraction of decline at 3159. biogen beat earnings targets because of strong sales of its oral multiple sclerosis drug. the 2016 outlook was in line with estimates. shares up 5% to 273.26. tupperware cited a weeker global economy and strong dollar for a worse than expected sales drop and an earnings miss.
the maker of household storage products gets more than 70% of its revenue outside the united states. as a result, taupperware battle what it calls economic and political headwinds. shares fell nearly 15% to 4397. health insurer anthem said its profit fell in the quarter, weighed down by costs of the affordable care act plans. the company said it had momentum heading into 2016 with more people enrolling in its medicaid plans and it would be helped by the pending acquisition of cigna. shares of anthem were off about 5%. norfolk southern said that its profit fell 30% on lower freight volumes. coal, in particular. the railroad also said it will shed 1,200 jobs this year. as part of a five-year cost cutting plan. the move comes as norfolk
southern tries to fend off a $28 million takeover bid from its rival, canadian pacific. shares of norfolk today up more than a percent. the federal trade commission is suing the parent company of de-vrie university saying the company deceived students about job prospects after education. in addition the department of education cracking down on for-profit schools recently said it ordered devrie to stop making certain claims about its graduates' employment or risk losing federal student loan money. shares of the education group fell 15% to $20.09. withdrawing cash from your bank account used to mean waiting in line for a teller then it meant using your atm card. now as kayla tells us, jp morgan wants it to be as simple as downloading an app. >> reporter: we've got smartphones, smarthomes, smartwatches and your atm is getting smarter, too.
>> we view this as much broader than a cash dispenser. >> reporter: jpmorgan chase, the country's largest bank, is overhauling its 18,000 atms and soon you won't need a card to use them. at the e-atm launching later this year it won't matter if you left your wallet at home. log into the chase app, find the seven-digit code and type it into any chase atm in your vicinity. it's one of hundreds of features brainstormed at the bank innovation center in columbus, ohio. some ideas like a fingerprint scanner got left on the cutting room floor. others are getting put into practice, the ability to withdraw three times more money and more denominations. customers can take out up to $3,000 in one dollar bills if they like. the end of next year they'll be able to pay mortgage and credit card bills standing at one of these machines, too. >> we do all this because our customers are asking for this. they want to bank where they want, when they want and how they want. this machine is allowing us the flexibility to do so. >> reporter: it's not just chase
customers. bank of america is making its machines mobile friendly and citigroup's atms may soon scan your iris for identification. the upgrades over the years have made the machines more popular among customers than visiting a teller and cheaper for the bank, too. every teller transaction costs the bank 65 cents. that figure drops to 8 cents at an atm and just 3 cents on your mobile device. companies investing in changes say they are worth every penny. for "nightly business report," in new york. straight ahead, the great space race. what boeing is doing that it's never done before with some help from taxpayers.
toyota is the world's bestselling automaker for the fourth straight year. the company sold more than 10 million vehicles globally in 2015. more than number two, volkswagon, and number three, general motors. strong demand in north america helped toyota sales while volkswagon was hurt by its emission-cheating scandal. together, toyota, volkswagon and gm account for roughly a third of all worldwide sales. fiat chrysler issuing a strong sales forecast for its jeep brand. the automaker says sales will nearly double to 2 million worldwide by 2018. the company cites low gas prices for the upbeat outlook and says it believes low prices will be permanent in the u.s. and more customers will gravitate to suvs as a result. as we reported a little
earlier in the program, boeing shares had a tough day following its earnings report but the company is also quietly working on a project like nothing it's ever done before. it is building the world's most powerful rocket. jane wells has the story from new orleans. >> reporter: 2016 is big for space. blue origin, a company owned by billionaire jeff bezos, just landed the same rocket a second time. billionaire elon musk almost succeeded in landing one of his space x rockets on a floating barge in high sea. these private space ventures by men with money are exciting and popular. meantime, boeing is quietly building something completely different. not for its, but for nasa. >> the space launch system is the biggest most powerful rocket that we've ever built. >> three, two, one. >> reporter: the space launch system, or sls, will someday
take humans to mars. if all goes according to plan and taxpayers keep willing to fund it. boeing is building the rocket's core for nasa which will stand 200 feet tall and measure nearly 28 feet wide. >> so 8.5 million pounds of thrust. that's 31 747s at full power. that's going to be the first version of this rocket. >> reporter: the first test flight is slated for 2018 and it could be crewed with humans around 2021. the sls is being welded with a new system which cuts down on weight and it's the first rocket to be pieced together vertically. >> what you're looking at is the largest welding system in the world. >> reporter: it's not cheap. nasa is spending $2 billion this year on sls and the program could cost nine times that. but why does nasa need to own this rocket? why doesn't it just contract out to some private company's rocket, use theirs like it's doing with cargo shipments to the space station? no company is going to invest in building a rocket this big when
nasa is the only customer. there's no commercial market for it yet. >> here in the lab we got the rocket turned upsidedown. >> reporter: tis g incredibly expensive as inexpensively as possible. boeing has decided that means combining new with old. the first sls rockets will use solid rocket boosters and engines from the space shuttle days. >> i would say there's a place for new things. there's also a place for proven, reliable things. and things that we have, if i reinvent the wheel, the wheel works. >> reporter: the americans are currently infatuated with space again. congress has given the space agency more money than it asked for in 2016. whether that support will continue over the next 20 years that it will take to get to mars is too far over the horizon to see. for "nightly business report," i'm jane wells. >> to read more about boeing's most powerful rocket ever made, head to our website, nbr.com. and before we go, let's take another look at the day on wall street. if you dare.
the dow lost 222 points following the release of the fed's statement on the economy. nasdaq was off 99. the s&p 500 down 20. >> by the way, welcome back from chicago. >> thank you. >> from the morningstar conference. >> very pleasant day out there. love chicago. >> it was terrific. great city. all right. that does it for "nightly business report" for tonight. i'm sue herera. thanks for much for joining us. >> i'm tyler mathisen. thanks from me as well. have a great evening, everyone. we'll see you back here tomorrow night.
announcemajor funding for "quest" is provided by... sethi: food... it fuels our bodies, delights our senses, and forms the backbone of family and cultural traditions. but we rarely pause between forkfuls to ponder where the food we eat comes from or where our leftovers are headed. we should, because even as the number of mouths to feed continues to rise in the u.s., roughly 40% of the food produced here goes to waste. globally, food production will have to double by mid-century.