tv Nightly Business Report PBS April 20, 2016 1:00am-1:31am PDT
this is "nightly business report" with tyler mathisen and sue herera. inside intel. right now it's not looking so pretty. the company is cutting 12,000 jobs and shaking up its management ranks as it transitions away from its traditional business. one-two punch. first the oil rout, new houston's businesses big and small are tallying the cost of the relentless rain. exchange exit. the biggest health insurer in the u.s. as it plans to drop out of most of the state exchanges by 2017. all that and more tonight on "nightly business report" for tuesday, apr good evening and welcome. the dow and the s&p 500 closed at 2016 highs.
but we begin with big changes at intel. the company is cutting 11% of its workforce. its cfo is moving to a new role. and it's taking a one-time charge of more than $1 billion in the second quarter. this after the dow component reported weaker than expected first-quarter revenue and said the current quarter wouldn't be much better. it was that soft outlook for second quarter revenue that weighed on shares in after-hours trading. intel's current cfo said the changes at the company are all part of its broader strategy. >> what we went to do now is accelerate that transition. and so this restructuring is a tool to do that. and what it allows us to do is it allows us to be more efficient, to be more profita e profitable, and to increase investments in some of these new areas. the data center, the memory, internet of things -- >> dominic chew goes inside intel's results. >> reporter: there's a reason why intel's earnings reports are
of such interest to investors. it's the world's biggest maker of computer chips and it's seen as an indicator of the overall health in the tech industry. this time around the earnings report echoed much of the same slow-down in the personal computer market but the company said it's taking a lot of necessarily steps to transform itself from a company that relies on pcs to one that's focused more on cloud computing and the internet of things. in other words, they want to help businesses more efficiently and effectively deliver web-based solutions to customers, either through their computers or their mobile devices, and they want to help all parts of your life work with each other like your home, your car, your appliances. and they want to create an environment that's connected more to everything else. of course all of this comes at a cost. as a result of a lot of these restructuring-type efforts, the company does expect to cut thousands of jobs by the middle of next for "nightly business report," i'm dominic chew and now to newer tech.
yahoo! reported a decline in revenue as it struggles to grow its online search business. yahoo!'s earnings per share were slightly better than estimates. revenue also beat forecasts. okay, that's nice. but sales were 11% lower than a year ago. and that's not so nice. as for shares, they were volatile in extended trading. yahoo! is also in the process of auctioning off some of its assets. there are reports that verizon is the front-runner for them. other social suitors include the private equity firm tpg and yp holdings. guess who that is, the dij call ad business of what was once yellowpages.com. three of the best-performing dow stocks were the three that reported earnings this morning. goldman sachs, johnson & johnson, and united health care. the largest health insurer in the u.s. said it's making some big changes. an earnings petty and an upbeat
forecast for the rest of the year by united health group. but the biggest u.s. insurer also said it will shrink its presence in the haikt exchanges. right now it's available in 34 state exchanges. by 2017, it says it will only be in a handful. losses from the exchange business are now expected to reach $650 million this year. mostly because the health of many new customers in those exchanges is worse than the company had planned on. also raising guidance for the rest of the year, johnson & johnson. it too beat earnings expectations for the first quarter even as a strong dollar cut into its revenue growth. pharmaceutical sales, j and j's biggest business, grew almost 6% behind a diabetes drug invocana and a blood thinner. j and j says the hunt for growth through acquisitions, buying up smaller companies, is continuing. >> we'll continue to work
through various acquisition proposals that we look at. and we want to do the right deal at the right time with the right partner at the right valuation. so we're obviously looking very closely at the field. >> reporter: and more than a few eyebrows must have arched when goldman sachs reported earnings beat estimates even though they were lower by 60%. revenue fell 40%. much worse than most of the other big banks. chief executive lloyd blank cited challenges "across virtually every one of our businesses." and probably none businesser than in its investing and lending unit. that group accounted for more than one-third of goldman's pretax earnings last year. but revenue within that group dropped a whopping 95%. mostly because the equity securities portion of that division reported no revenue at all. here's a look at how those stocks performed today. all higher by 1.5% or more. as mentioned at the top of the broadcast, the dow and s&p
500 are now at their highs of the year, despite a decline in the tech sector today. and told the dow jones industrial average closed up 49 points at 18,053. nasdaq lost 19 weighed down by results yesterday from ibm and netflix. we told you about that last night. the s&p 500 added about 6. as bob pisani explains, earnings may be the catalyst that pushes stocks to new highs. >> reporter: it's a well-worn piece of wall street mythology, we're in a process recession. s&p 500 has seen four consecutive declines this the quarterly earnings but that might change in the second quarter and could be a motivating factor in the market's march toward historic highs. the banks moved up last would be on modestly positive earnings comment tear. now the industrials' turn, honeywell and caterpillar and illinois tool works and general electric all reports this week. these big industrials are great barometers of the global markets
because they make a lot of things and sell in dozens of countries. if there's any growth or the lack of it they're going to see it. any sort of mildly positive commentary from this group, anything that indicates the growth prospects for the global economy is even a little better than it was a few months ago, could propel the industrials slightly higher and then push the markets into record territory. we're very close. the s&p is less than 2% from an historic high. nobody's expecting too much. modest organic growth, some expression of the global economy better than it was a few months ago. i know it sounds pretty modest and it is. but in a world of 2% to 2.5% gdp growth in the u.s. and flat elsewhere, that's what investments look like. for "nightly business report," i'm bob pisani at the new yor despite the comeback in the market our guest tonight says there are still more downside risks than upside potential for stocks. he is matt mailly, equity strategist at miller tay back.
nice to see you again. let's start with side risks. bob pisani outlined the fact that returns are going to be mod els at best in many sectors. what do you see as is the potential downside risks? >> one of the things we have is on the earnings front. bob is right, if we can get good reports out of some of these industrial names later this week, that will be positive. but one thing is that a lot of people have been talking about, geez, the first week and a half of earnings have been better than expected. but most of those stocks have been in groups where the stocks have been knocked down and therefore lower earnings expectations have been priced into the stocks. a lot of those industrial names have had nice rallies. you look at u.s. steel up 200%. it's not a tech company. i mean, so you wonder how much -- because it's one thing when you come in lower, when you come in down earnings and beat expectations. but if your stock is washed out it can still bounce. some of these stocks have had nice rides.
it's going to be harder for them to pop on just a beat expectations if those earnings are down. >> you say that the upside from here is maybe 2% to 3%, a the downside between may and labor day is 10% to 15%. and one of the risks you cite, i can't believe it, i can't believe we're going to hear this again, is dwreegreece. not greece again. why? >> it seems to be crazy, doesn't it? but this has caused problems in the past. each time it seems -- it's funny because we had obviously the big problem in 2011-2012. and then when it came up again a year ago everybody was saying, it's not a big deal, until it was. and the thing is, we heard again today out of greece that the government is push back on these austerity plans that they agreed to. and so the imf is saying, hey, you don't do this, we're not going to extend the loan again. >> can they sell the naming rights to the parthenon for $300
million or something? it would help, right? >> yeah, it's all coming at the same time when the brexit is going to take place. that can cause volatility there. again, it's probably still going to come down to what happens both in earnings and in the oil markets. what happened in oil recently, it's had a nice bounce obviously, but now what's going to happen with saudi what are they really going to do? are they going to go this far to try to squeeze everybody and give up at the last second before they squeeze the people they want, some of the competition out of so if we get a pullback in oil, it's not just what it means for the economy. it's what it means for the credit markets. those tightened up. it wasn't 2008. >> no. >> that's my concern there. >> on that note, thanks, matt. appreciate it. matt mailly with miller tayback. in washington lawmakers said they hope to reach middle ground
in the standoff between tech companies and law enforcement over digital encryption. in an effort to knock down speculation over apple's relationship with foreign governments the company's top attorney testified that chinese authorities within the last two years asked apple to hand over its source code. the company refused. meantime, google is out with a report detailing the security measures it is taking to protect its android customers. as josh lipton reports the world's most popular mobile operating system may be more secure than ever. >> reporter: android security didn't always get our attention last year for the right reasons. for example, there was stage fright, a bug that could have allowed attackers to inject malicious code into an android device. this morning google published reports showing what it does to protect those $1 billion android devices. last year google performed over 400 million checks of devices per day for security issues, helped find and wipe over 200,000 lost or stolen devices
per day, and checked over 6 billion installed apps per day from malware. android security chief adrian ludwig points out that less than 0.15% of devices running on android installed a potentially harmful app. >> i don't think the threats are getting worse. think the attacks are getting more sophisticated but the defenses are probably moving even faster than the attacks. in the mobile space, at any rate. >> reporter: not everybody is an android fan. critics say that android devices are less secure than iphones because apple controls the hardware, software, and services. by contrast, google allows hardware partners such as sam hung and htc to modify the android system, embedding varying degrees of security. so every manufacturing runs its own version of android with its own security features. but ludwig counters that google's openness is actually an advantage. >> i don't think there's any single team that is the most effective team in the world.
i think in practice, you want to bring in as of people as possible from as many walks of life, if you will. that means having different security teams at different oems in the context of android we have lots of different companies that are investing in security. >> reporter: as a security expert ludwig is right in the middle of that ongoing debate over encryption between silicon valley and the department of justice. but we already know what his boss thinks about that issue. google's ceo says forcing a company to enable hacking compromises user privacy. for "nightly business report," i'm josh lipton the european union meantime is reportedly set to take a tougher stance against google. according to numerous reports the company is expected to be charged with breaking the eu's competition rules by favoring its search engine and maps function on its android smartphones. the move could potentially threaten google's position in the growing mobile ad market. still ahead, tallying the
cost of houston's historic floods. the white house has signaled that the president will veto legislation that would allow victims of terror attacks in the u.s. to sue foreign governments that might have provided tacit or actual financial support to those crimes. the bipartisan bill is not yet on the senate floor. yesterday we told you that saudi arabia has already threatened to sell billions of dollars of u.s. assets if the bill becomes law. momentum in the housing market may be slowing after a report today showed the pace of home building fell last month to its lowest level since october. according to the commerce department, housing starts fell 8.8% from a month earlier.
the decline erases most of february's gains. american express has hit a rough patch. but the ceo has consistently said the company's business model is not broken. investors will find out tomorrow if that's true and whether the worst is over for the financial services firm. kayla taushy tells us what to look for. >> reporter: american express is fond of referencing its successful transition from a freight company more than a century ago. but the payments processor is now facing a modern and very long to do list and investors hope wednesday when it reports earnings it can prove it's making progress. it's time to upend its business model. amex currently gets more than three-quarters of its revenue from merchant transaction fees and annual fees customers pay for its cards. the company wants a bigger share from interest paid on loan balances similar to big banks that issue credit cards. the problem is 20% of the company's lopes outstanding as
part of its partnership with costco and that's ending. the second question is how amex will plug that hole, with partnerships with not only costco but jet blue ending. the company did say in march loans grew by 12% year over year. but the question is how they will plug that hole. third, wooing millennials to the brand. they're either disillusioned because they're rejected for the card, or they want cash back which comes out of amex's pocket. >> we have to figure out what's the right product with the right risk profile to bring millennials in. i do believe that they do want the product. but once we turn them down we're not going to get a second chance at them. >> reporter: and fourth is whether a massive restructuring is beginning to bear fruit. in january the company announced it was reshuffling a bunch of executives, it was cutting a billion dollars in costs by the end of 2017. in recent weeks amex identified which would be cut. a spokesperson said there would
continue to be restructuring changes throughout the year. shares have lagged the most on the dow in the last 12 months, down 18%. much of that coming after its last earnings report in january. with some high-profile investors like value act finally throwing in the towel, we'll see wednesday after the bell whether amex investors have found a reason to get back in. lower costs help earnings climb last quarter at the railroad company kansas city. and that is where we begin tonight's "market focus." despite a drop in freight traffic, including a 22% decline in coal shipments, the company saw nearly 7% jump in profit. the company's ceo called the results solid in spite of flooding that had recently shut down part of the company's lines. shares rose nearly 5% to 96.02. quarterly profit at harley-davidson fell less than expected. the company said sales were up slightly as it plans to increase its marketing toward younger
riders and maintained its shipment forecasts for the year. despite the upbeat outlook the company goes into the ticker symbol hog, those shares fell more than 2% to 45.78. budget airlines spirit said quarterly revenue was off 14% but that was ahead of expectations. the company also upped its operating margin guidance for this quarter. shares of spirit took off, up almost 6% to 52.96. shares of tesla taking a hit following a consumer reports article warning about potential problems with the automaker's model x suv. tells la contends the issues are not widespread and has been working to fix any issues. tesla recently recalled 2,700 model x vehicles to fix a safety issue with third row seating. shares down 2.5% to 247.37. viacom dish network are locked in a carriage dispute that could potentially cause some channels, including mtv, comedy central, vh1, and others,
to go dark for dish subscribers. both companies are blaming each other for the impasse as the current deal expires tomorrow. shares of viacom fell more than 7% to 39.06. dish network rose to 47.32. monday's record rainfall in the houston area caused widespread flooding that pretty much brought the city to a standstill. local businesses from retail stores to restaurants to big oil companies were forced to shut, potentially costing hundreds of millions in lost sales and in repairs. but what will the total economic impact be for that south texas region? evan gold, senior vice president at weather advisory firm planalytics analyzes the economic impact of weather. good to have you with us. what kind of total price tag are you forecasting here? >> tyler, it's a very active and fluid situation. even though the rains have come, calming down, it is still
several days before we'll get a total cost. we're estimating so far about $200 million. a lot of that is simply due to the thing yoults discussed -- lost productivity, travel plans that won't be made up, then the day-to-day activity of people going out to restaurants that won't be made up because you're not going to go out and buy two meals the following day. there's an ongoing cost that's going to be tallied over the coming days. >> might some businesses though reap the benefit of people who need to, unfortunately, clean up after something as historic as what we're seeing play out in houston? the home depots of the world, the lowe's of the world? >> sure, and that's a good point. those businesses, first and foremost, it's important to note they are really there to serve as ambassadors for the community and serve their customers and help them get back on their feet. you know, that being said, the businesses that people go to in these type of events are home centers, mass merchants, gas stations, convenience stores,
those type of places that sell those consumable items, need-based items that customers need right now. everything from pumps and diapers and bottled water to batteries and other items. they just need to get along from day to day. >> so take me into the war room of a home depot headquarters or a walmart. are they at this moment calling out everything they can to get brooms and trash bags and contractor bags and pumps into the stores there? >> yeah, you know, we work with a lot of those guys and i will tell you, they're not doing it now, they've been doing it for days. they've been talking about this event for several days. so they want to be there in advance of the event to meet those customer needs. and then as the roads open up they want to be there to replenish those items as soon as the roads open up and customers get back to the stores. so a lot of businesses have a strategy to deal with and that's the business that we're in, helping them execute those strategies.
so this activity has actually been happening for several days as this rain has been pretty well forecast. >> fascinating. evan, thank you very much, evan gold with planalytics. how the world's biggest biotech company is tackling the newest health care threat facing the gl an update to a story we have been following for you. pherenos is under federal criminal investigation. the startup blood testing company said it is being examined by the s.e.c. and the u.s. attorney's office for the northern district of california. the probes are on top of other ongoing inspections. pherenos was established to provide cheaper, more efficient
blood-related medical tests. a series of reports have called into question its testing methods. we turn now to the fight against the zika virus. we're taking you into the laboratories of pharmaceutical companies working on the disease. last night we focused on vaccines. tonight a look at the potential for a zika drug. meg terrell reports. >> reporter: fill yad sciences became the world's biggest biotechnology company through its work in antiviral medicines. first for hiv. then hepatitis "c." along the way, the company established a library of hundreds of thousands of compounds that never made it to market. but which its scientists hope may hold the key to battling emerging infectious diseases. >> so it's the library, sort of. i think it's the record of the history of gilead as a company. >> reporter: when a new threat emerges for which there are no existing drugs, gilead can rapidly screen its library for any compounds with activity. and a new outbreak quickly arose
to test its capabilities. >> in the middle of 2014 when the outbreak in west africa really was heading out of control, w.h.o., they declared the international public health crisis, so we sat down and then we basically started brainstorming. >> reporter: gilead found a hit for ebola. the drug, gs-5734, is now in the earliest stages of testing on healthy volunteers. it's also been used in two patients with ebola. the first was a nurse in the uk who was treated with 14 doses of the drug. >> ultimately she cleared the virus from the central nervous system and survived and was discharged from the hospital. so that was the very first case that was very exciting. sort of confirmation that this drug might ultimately work against the virus. >> reporter: the second case was a newborn baby in guinea. >> we just recently heard from the doctors without borders that the baby is doing very well. so that was probably the most
satisfying moment in the whole course of the program to see actually the real value of the drug in those critical cases. >> reporter: of course more testing is needed to prove the drug works and it's safe. now gilead is setting sights on the newest threat facing the globe. >> we're at the beginning stages right now of looking at zika virus as a target and trying to develop a plan for testing some of our compounds against that virus. >> reporter: one candidate, gs-5734, the same compound being tested in ebola. so does gilead have a potential moneymaker on its hands? likely not along the lines of billions it's earned for hiv and hepatitis "c." >> i don't think there's expectation, from my perspective, that it's going to be profit. we're doing it for the right reasons. >> reporter: with drug development timelines often spanning a decade, any faster routes would be welcomed by the medical community. for "nightly business report," i'm meg terrell. before we go, here's a look
at the day on wall street. the dow and s&p 500 closed at their highs of the year. the dow up 49 points to 18,053. nasdaq lost 19 weighed down by ibm and netflix. the s&p 500 added 6. >> i am really looking forward to the next installment of meg's report. >> they've been really cool. >> fascinating stuff. so good at that. that does it for "nightly business report." i'm sue herera. thanks for joining us. >> i'm tyler mathisen. thanks everybody, hope to see you right back here tomorrow.
the following kqed production was produced in high definition. this time on "spark" -- first, "spark" follows environmental artist daniel mccormick as he creates temporary sculpture in the creek beds of west marin. >> it's becoming less and less a work of art and becoming more and more of a work that nature is responding to. next, the firebird youth chinese orchestra offers chinese-american kids a chance to play the traditional instruments from their homeland. then, artist jaime guerrero translates imagery from his mexican heritage into blown glass. next on "spark." major suppo