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tv   Nightly Business Report  PBS  July 1, 2016 1:00am-1:31am PDT

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this is "nightly business report" with tyler mathisen and sue herera. >> halfway mark, a turbulent first half ends with big gains for stocks, but as companies prepare to report earnings in coming weeks, there's a new issue to figure out. >> new scrutiny. auto safety regulators investigating tesla's autopilot feature as the move towards driverless cars gains traction. >> candyland. hershey rejects an offer from mondelez in who would have been one of the biggest deals of the year. those stories and more tonight on "nightly business report" for thursday, june 30th. good evening, everyone and welcome. a big finish to a turbulent month. a blustery quarter and a wild first half. stocks logged their third straight day of gains as
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investors continue to believe that the fallout from the brexit vote will be limited and today's buying picked up steam after britain's central bank said new stimulus was likely this summer. more on that in just a moment. all of the major inddeese rose more han 1% today. the dow jones industrial average gained 235 points to 17,929. the nasdaq added 63. the s&p 500 was up 28. for the first half, the dow and the s&p 500 posted gains. the nasdaq fell, but the final numbers for the first six months of 2016 don't tell the whole story and what a story it was. january 2016, it was the worst start of the year for stocks ever. in just ten trading days the s&p 500 erased nearly $1.5 trillion in market value. february 2016 the selling intensified. the major stock indices hit multi-year lows. oil prices cratered and gold prices took off.
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by march things start to turn. global uncertainty seemed to fade. stocks rose along with the price of oil and the market hit new highs for the year. that climb continued through april and may. then came june. the federal reserve, which had been on track to rays interest rates did not because of the risk of a possible vote by the uk to leave the eu, which it did to the surprise of many, and global stocks were rocked, losing a record $3 trillion over just a two-day period, but now in just the past three days the market has once again stabilized, ending the quarter not far from where it started. >> those gains for the dow could bode well for the second half of the year. only three times since 1950 hassles r the dow finished the year with a loss after being higher during the first six months of the year, but with the quarter now in the book, the next test for the market will be earnings, and one big question is what impact, if any, the
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brexit will have on the earnings of u.s. companies. bob pisani has more. >> reporter: we don't know if the brexit will have a long-term impact on the economy. the global economy in particular, like china's currency devaluation in august, remember that, or like the big drop in oil prices earlier this year? the worry is that it may torpedo any chance of a return to positive earnings growth for the s&p 500 for the year. you know, we've already had five straight quarters of negative earnings growth for u.s. stocks. you could call it an earnings recession, and although the street was expecting earnings to turn positive in the third and fourth quarters of this year, this brexit thing could throw a monkey wrench into all those calculations. there's two problems. first, there's the threat of a stronger dollar. that's really bad news for material stocks, for energy stocks and technology stocks. they all do a lot of business overseas. second is the whole issue of lower rates for longer. you've heard that phrase before. that's really bad news for big banks. the banks were expected to have
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higher earnings later this year, partly on higher rates and partly on an improving global economy. this brexit makes that more unlikely. the markets have been rising in the last few days and some have been speculating on the impact on the u.s. and that the impact in the brexit would be limited and once earnings season starts in a couple of weeks you'll certainly hear more about the macro fallout from this brexit. for "nightly business report," i'm bob pisani at the new york stock exchange. >> so, let's turn to anastasia amoroso for more on this market, global market strategist at jp morgan funds and is bullish on the markets. good to see you. welcome back. >> thank you, sue. >> let's start, first of all, i was kind of impressed with the way 9 market rallied back this week given the way it looked sunday night going into monday morning. is that one of the reasons that you feel as though there's more room for stocks to run? >> actually that is exactly not the reason why i feel that way because i -- the way i feel about brexit i think what's playing out in the markets right
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now is a relief rally, and it's the initial relief from the shock that we got last week which was the vote to exit the european union. however, i do think that as we progress through the second half of the year, the reality, the brexit reality may set in, and the reality may be that they will start to see incrementally slower data, so it's not that the market is shaking off brexit. that's the reason i feel bullish, but i do feel bullish for two reasons. the first one of them is south korea that you alluded to, and that is earnings are set to rebound and we'll get news on that in the next few weeks, and the second point is the fed by delaying rate increases may actually be doing this economy and, therefore, this market a great service. >> so anastasia, you think that the earnings, i guess what i'm hearing you say, is that the comparisons year over year are going to get better, that's number one. and number two, that the actual performance is going to get better and that maybe we hit the
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trough in earnings last quarter? >> yes, that's right, so if you look at year over year estimates we think that the second quarter is going to be much better than the first, and the first quarter that we now have in the rear view mirror has marked the the trough in earnings. the other reason that i look to earns is as you move through the year, we've got to start paying more and more attention not to each quarter but the full 17-year earnings estimate and if you look at 2017 earnings estimates they are actually quite optimistic. they are forecasting a rise of about 14%. now, having said that, that probably is too optimistic of a number, but if we get something even modestly close to that, that's good news for stocks. >> so where do you put money to work in this market if indeed your thesis about where we're headed is correct? >> yeah. i do have to say that even though the u.s. is a safer place than some of the other places around the world, i do think that investors need to be quite selective in the stock market because you've alluded to
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financials having a hard time. we may have mentioned in emerging markets they have been moving with the u.s. dollar so it's very easy for investors to get whipsawed in the range bound and trending higher market so what i would do is quite simple. i would look for stable income, and the good news for investors is that this does not just mean in u.s. stocks. it could mean in uk stocks that have been beaten up but they do actually offer a dividend, but the thing that i would look to most is corporate bonds. corporate bonds, if the fed is now going to raise rates, and if we get a no recession economy, corporate bonds could very well be a sweet spot in this market. >> okay. anastasia thank you so much, anastasia amoroso with jpmorgan funds. >> as we reported earlier, stocks did move higher after the governor of the bank of england said that an interest rate cut is likely over the summer, and while the stock markets stabilize here the situation in the uk is anything but stable.
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wilfred frost reports on the twists and turns from lo >> reporter: a week is a long time in politics. just six days ago former london mayor boris johnson oversaw an extraordinary victory as the leave camp won the brexit referendum. many people thought that would sweep him to power and make him the next uk prime minister. however, this morning he surprised everyone. speaking on the topic of who could be the next prime minister, he had this to say. >> my friends, you who have waited faithfully for the punch line of this speech, that having consulted colleagues and in view of the circumstances in parliament, i have concluded that person cannot be me. >> reporter: so boris johnson not a contender, but there are five candidates now to be the leader of the conservative party, and with it the next uk
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prime minister. the favorite is the home secretary theresa may. she had this to say. >> brexit means brexit. the campaign was fought. the vote was held. turnout was high, and the public gave their verdict. there must be no attempts to remain inside the eu. no attempts to rejoin it through the back door and no second referendum. there should be no general election until 2020. >> reporter: an important message from someone who had campaigned for remain. it seem inevitable now that the uk is on its path to a brexit. the other news in london comes from the bank of england. the governor suggesting there may be need for further cut in interest rates in response to the brexit outcome. >> in my view, and i'm not pre-judging the views of other independent members of the mpc. the economic outlook has deteriorated, and some monetary policy easing will likely be
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required over the summer. >> reporter: in response to those comments, the pound fell over 1%. for "nightly business report" outside of the bank of england in london, i'm wilfred frost. >> back here at home the president of the st. louis fed is expecting lower economic growth but not a recession. he was actually giving a speech in london, but james bullard reiterated comments that his long-term projection for the u.s. economy is uncertain despite low unemployment and inflation. >> and to it the economy we go now. the number of americans filing unemployment bef claims rose last week by 10,000 to a seasonally adjusted 268,000. despite the rise, jobless claims remain well below the level associated with a faltering labor market. lionsgate entertainment has agreed to acquire the premium cable network starz for more than $4 billion. the deal had been speculated about for months and strengthens
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lionsgate control which is the studio behind "the hunger games" and netflix tv series "orange is the new black." media mogul john malone has interest in both companies. the move is part of his plan to consolidate small entertainment companies. shares of starz rose while shares of lionsgate fell. >> speaking of hunger, hershey rejects a takeover offer from the maker of oreos. mondelez proposed a tie-up that would bring together popular candy brands to create the world's largest confectioner. shares of both companies soared on the initial report of the bid and they stayed higher after hershey's rejection. david faber tells us what might happen next. >> reporter: enough to make you want to have some hersheys kisses, a day filled with ups and downs. mondelez making a $107 share cash and stock bid for hershey and being soundly rejected later in the day. the hershey board saying it doesn't even see the reason for further discussions given at least that price.
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this following months of discussions as we reported between the two companies culminating in that offer made last week to hershey's directors by mondelez. what now? well, mondelez thought or at least hoped it would get to the board of directors, perhaps even get their approval and then move on to the all-important hershey trust which controls 80% of the voting shares of hershey. in fact, they made allowances for just that, hoping that by saying we would call the company hershey. we would headquarter our global chocolates business hershey, pennsylvania and not eliminate manufacturing jobs they would get the approval of the trust and so far they have gotten the approval of nothing. the board soundly rejecting that offer and we will see where the mondelez chooses to come back with another offer at this point or whether another suitor for hershey will appear on the verizon. david faber, "nbr." >> tesla and the movement
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towards driverless cars more broadly ne rental car company hertz is now offering special rental rights to uber and lyft drivers. the move is designed to give traditional rental car company a bigger presence in the ride-sharing industry. hertz is also hoping it can derive more revenue from its older vehicles which are located in cities throughout the country. that agreement sent shares of hertz higher in today's trading session. >> highly unusual warning from the secretary of transportation for owners of older honda vehicles. anthony fox tells more than 300,000 owners to stop driving their cars immediately because of a much higher risk of their
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takata air bags rupturing during a crash. he called the following vehicles unsafe and in need of immediate repair. do not drive. the 2001 and '02 civic and accord, 2002 and '03 acura tl. the 2002 honda cr-v and odyssey and the 2003 acura cl and honda pilot. bmw is reportedly set to announce an alliance with two tech. according to "wall street journal" the automaker will team up with computer chip-maker intel and collision detection specialist mobile eye. the goal is to give driverless cars better reflexes without driver input. >> as automakers in silicon valley move towards those driverless cars, today safety regulators opened a preliminary investigation into 25,000 tesla model "s" cars, this after a fatal crash involving the, quote, autopilot mode. phil lebeau is following the story for us. phil, what are the details of
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this investigation? what happened? >> reporter: well, it's focused on the autopilot system and whether or not it failed to do its job in an accident that happened on may 7th on a highway in florida. let me set the scene for you. the tesla model "s" which was in autopilot mode was going down the highway. a perpendicular highway had a truck on it, a tractor trailer that then turned in front of the model "s." the tractor trailer turned in front. the model "s" ran into it. that's when the driver of the model "s" was killed and, again, the probe is focusing on the design and the performance of the autopilot system. basically the radar, the cameras, the sensors in the vehicle that are supposed to alert you if you need to slow down, if you're going to hit an object, if you can't lane shane because another vehicle is there. tesla released a statement saying nei autopilot nor the driver noticed the white side of the tractor trailer against the brightly lit sky so the brake was not applied. so what happens next?
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investigators will take a look at the black box, if you will, the data recorder within the vehicle. they will see if they can get a better sense of what exactly happened in this accident, and was this a failure of the autopilot system or were there unique circumstances here? we're a long ways from knowing exactly what happened. >> absolutely. there's also a new survey that kind of dovetails with this, phil, that shows more americans want tech companies to build the driverless cars as opposed to automakers. how do you think this tesla investigation might or might not change that perception? >> reporter: depends on what they find. if they find a system that completely failed, that might make people think twice about this type of technology. if they come back and say, look, unique circumstances here, the system did not fail. it did its job but there was -- the car was going too fast, whatever it might be, that would have a completely different spin with the public. make no mistake, sue. survey after survey after survey shows the public overwhelmingly wants self-driving cars and we knew this day was coming when
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there would be a type of accident, fatality involving one of the systems. the question now is does it dampen the enthusiasm the public has for self-driving cars? >> going to be a fascinating story over the next four or five or ten years. phil lebeau in chicago, thank you very much. >> darden restaurant sees its proves rise and outlook worries wall street. that's where we begin tonight's market focus. the owner of olive garden said the uncertainties in the food industry caused them to hike the dividend to 50 cents a share and shares fell nearly 2% to 63.34. memorial day beer sales and recent acquisitions helped lift results at constellation brands. the owner of corona and modella beer reported better than expected results with revenue and profits rising and they revised its earnings guidance for the year. shares were up 3.5% to 165.35.
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conagra foods saw its results fall 40% but results were good enough to meet street estimates. overall revenue didn't fare as well. the company reported worse than expected sales as higher prices on some frozen products weakened demand. the shares were up just a tick to 47.81. >> and profits jump 11% at mccormack and results were better than expected thanks to recent acquisitions ant cost-cutting. took a pinch out here and there. target shares spiced innearly 4%, hi to, to 106.67. a u.s. appeals court has overturned a more than $7 billion antitrust settlement that credit card companies visa and mastercard had reached with retailers regarding high credit card fees. today the court ruled that the merchants involved in the settlement were, quote, inadequately represented. both visa and mastercard now reviewing the decision. shares of visa down 3% on this up day at 74.17. mastercard off 4% at 88.06.
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and mike micron, which makes memory chips, reported a nearly 25% decline in quarterly revenue as low demand for personal computers weighed on results. the company also forecast a loss for the current quarter. analysts were anticipating a profit of three cents. in addition, micron says it's going to slash jobs worldwide as it tries to cut costs. shares of micron down nearly 9% after the bell, but they finished the regular session up 4% to 13.76. watch them tomorrow. as the markets try and recover from the post-brexit selloff, there is one sector that investors may want to consider. susan lee shines the sector spotlight on industrials. >> reporter: transport, construction, heavy machinery-makers and aerospace, some of the businesses that make up the industrial sector widely regarded as a proxy to the u.s. economy given the wide use of the goods and services the
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companies provide. how do they perform when there's a global market shot like the one we just experienced with the uk brexit vote. historically when there's been volatility in the global markets like in the 2008 u.s. global financial cries or the 2010 greek debt crisis, industrials, while still down, not down as much as the overall markets, and a few names even managed to make money for shareholders. ge, quanta services and a waste management company continued to trade higher 100% of the time. >> post brexit i guess i would say we didn't need another sort of shock on the system, but we still feel like we have relatively easy comparables as we go into the second half of the year and generally speaking we do see some growth in the greater industrial space. >> reporter: will the upcoming u.s. presidential election bring more uncertainty to the financial system and the industrials in particular? not necessarily. history shows us that in the five months leading up to
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election day execs concluding 2008 when the u.s. stock market was in turmoil, the s&p 500 was up 2.5%, but the industrial sector was up by over 6%, far outperforming the overall market. the top industrial stocks were kansas city rail, general dynamics, raytheon, union pacific, fedex and citi recommends sticking with larger cap companies. >> we like things like ge, honeywell, 3m, and we like these names because their diversification should help in a relatively slow-growth world with a good amount of uncertainty. >> reporte and with all this uncertainty, the federal reserve looks to be holding on interest rates for the rest of 2016 which, again, is a boost for industrial shares. for "nightly business report," i'm susan lee. coming up, investing in the red hot rental market. there's a new way for some to do it regardless of your income.
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here's a look at what the to watch for tomorrow. the big ault-makers will release their sales figures for the month of june. we'll get a new read on the struggling manufacturing sector as well as construction spending more may. the puerto rico's $2 billion debt payment is due. the commonwealth is expected to default on a large portion of it, and that is what to watch for for friday. >> a three-year low, freddie mac says the average rate now on a 30-year fixed is, believe it or not, 3.48%. down from the prior week. benchmark treasury yields tumbled in response to britain's vote to leave the european union and mortgage rates followed.
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what if i told you could get a mortgage or even several mortgages without even having a job? well, if you're an investor, it's now possible. a new loan product from one of the nation's largest private equity firms is betting on the red hot rental market and doling out cash to investors regardless of income. diana olick explains how it works. >> reporter: during the housing crash, this florida home was headed for foreclosure but investor brian russo put down the cash and turned it into a profitable rental. now, it's worth nearly twice its former value, but russo couldn't capitalize on that. >> there weren't a lot of opportunities for us to pull that cash out of these properties and using leverage to get into additional properties. >> reporter: until now. b2r, a plaquestone-owned company, recently launched a new mortgage product for investors based largely on the rental income of the property. up to $750,000 per property. here's how it works.
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you need a minimum 20% equity in the home for purchase or 25% on a refi. then, the rent on that home has to be 33% higher than your costs which include principal payments, interest, insurance and taxes. you also need a minimum 680 fico credit score. mortgage broker matt weaver says it's just that simple. >> it goes solely off the rental income of the property and not the actual borrower's income which if you think about it it's as an investor it's common sense lending. >> reporter: this is a 30-year fixed product, and there are pre-payment penalties, so it's more for those who buy and hold like russo did with these homes, not really for flippers. the interest rate will be about 6% to 8%, depending on the loan, but commercial investor loans today can be twice that and far more restrict i ever. >> this product right here really fills a void for the real estate investor. it's going to allow them to
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purchase more property. >> reporter: weaver says there has been strong demand. the vast majority from investors who already own several homes they bought with cash. >> looking at my portfolio with approximately $6 million in value between myself and my partners, if we were to refinance all of those properties using the b2r product, we potentially could be sitting on $4 million in equity that could be reinvested in another product. >> reporte russo says he thinks he can turn his $6 million rental portfolio into a $20 million one. as for risk, should rents suddenly fall, that's what the 33% cushion is for. for "nightly business report," i'm diana olick in washington. and to read more about loans for investors in rental homes, head to our website, nbr.com. and finally tonight, talk about bad timing. the world's largest uncut diamond was put up for auction in london just days after the uk voted to leave the eu which marked a sharp decline in the
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value of the british pound and sort of lack of confidence as well. guess what happened? the diamond failed to sell. the highest bid for the 1,100 carat stone was 61 million. that was below the minimum reserve price. sotheby's thought the diamond would sell for 70 million. >> yeah, that is bad timing. >> size of a tennis ball, they say. >> it is. i took a good look. that's "nightly business report" for tonight. i'm sue herera. thanks for watching. >> i'm tyler mathisen. have a great eve
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>> the following kqed production was produced in high definition. [ ♪music ] >> it's all about licking your plate. >> the food was just fabulous. >> i should be in psychoanalysis for the amount of money i spend in restaurants. >> i had a horrible experience. >> i don't even think we were in the same restauran

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