tv Nightly Business Report PBS August 18, 2016 7:00pm-7:31pm PDT
>> announcer: this is "nightly business r with tyler attention walmart shoppers. the world's largest retailer surprised investors when it raised profit guidance for the year, as many of its peers continue to struggle. behind bars. the justice department will no longer house inmates in private prisons, sending shares of two for-profit prison companies tumbling. death by another name. is there an fda loophole that is helping medical device companies mask fatalities? those stories and more tonight on "nightly business report" for thur good evening, everyone, and welcome. ringing up sales. seems like it's been quite a while since walmart's been able
to say that. but it rang true in the most recent quarter. the world's largest retailer reported its biggest same-store sales ga in four years and topped both earnings and revenue expectations. it also did something many retailers are struggling to do. it attracted more shoppers to its stores. the company lifted its profit outlook, saying things are looking up for the rest of the year as well. shares rose 2%, making it the best-performing dow stock today. courtney reagan looks at what's going right for walmart. >> reporter: like target, walmart did beat on earnings. but that's where the comparisons end. walmart's comparable sales were the strongest in three years in the seventh straight quarter of growing traffic. target's sales fell for the first time in two years on the lowest traffic level in a year and a half. walmart raises its full you're forecast while target lowers guidance.
what's t reason for the divergence? >> they've got traffic. if you look at the traffic walmart got, it was very impressive. you had consecutive quarters of traffic increases. the outlook is good. frankly, they had good category performance. >> reporter: other pieces of the walmart puzzle are falling into place like the discounter's approved marketing, merchandise, lower prices, and overall better store atmosphere. i spoke to walmart's cfo by phone and he attributes the store's performance to basic things, like clean stores, in-stock inventory and higher morale, higher wages and gas prices. walmart has a significant grocery business, representing more than half its total sales while target's grocery business is just about 20% of its sales. groceries bring foot traffic into stores and it has a halo
effect that helps lift sales of other products as well. walmart has been expanding local and organic food offerings and its pickup program which it says has been well-received by shoppers. the retailer said thursday that it's revisiting its strategy with food. on a meeting call, the ceo says walmart doesn't break out specific numbers from electronics but it feels the performance across all categories is very steady, food or general merchandise. that again is different from target, when said electronic comparable sales fell double digits with a third of the drop due to weak sales of apple products. walmart is feeling pretty good about going into the holidays. "we're in better shape, cleaner and better prepared. "for "nightly business report," m courtney reagan. the quarter however was not as strong for gap. the decline for the year would
come in below analysts' expectations. sales were down at banana republic as well as at the namesake store gap and were unchanged at old navy despite customers' favor value. shares were volatile in after-hours trading. the strong quarter from walmart and rising oil prices were not enough to give stocks a big lift today. so instead, the major indexes just inched higher. dow rose 23 points. the nasdaq added 11. and the s&p 500 was up four. as for oil, prices rose for the sixth straight day to more than $48 a barrel. the head of the new york fed is upbeat on the economy and where the job market is headed. at a briefing with reporters, bill dudley reiterated his stance that job gains remain sturdy and explains why he watches the labor market so closely. >> at the end of the day, i put less emphasis on the gdp than what's happening in the labor
market for a couple of reasons. the market data is i think more reliable. i think we count jobs better than when we add up gdp. number two, we're not targeting gdp growth. we're targeting maximum sustainable employment in the context of price sustainability. >> he says he sees second half economic growth, whatever the reliability of the print, coming in stronger than the annual growth rate in the first six months of the year. the number of americans filing new applications for unemployment benefits declined last week. initial claims for jobless benefits fell 4,000 last week. that report is considered a proxy for layoffs across the country. housing has been one of the economy's bright spots. but there are still substantial pockets of pain. as diana olick reports, a sizable number of borrowers remain underwater on their homes. >> repor it's hard to believe, but five years after the u.s. housing recovery began
with home prices reaching new peaks in some markets, nearly 6 million borrowers still owe more on their mortgages than their homes are worth. the so-called negative equity rate is at 12% of all mortgaged homeowners, according to zillow, down from over 30% at the worst of the crisis, and it does fall every quarter. but the numbers are still high. and equally spread across urban and suburban communities. markets in the west like san francisco, portland, denver, and dallas have the least borrowers in a negative equity position. that's due to strong employment and competitive housing markets. but others, like cleveland and detroit, have more bifurcated markets with negative equity downtown and lower in suburban neighborhoods. detroit's urban rate is twice that of its suburban rate. chicago and las vegas share the dubis honor of carrying the highest number of borrowers carrying more than their homes are worth. next equity is one of the driving factors of high home prices. homeowners in this position are
unlikely to sell at a loss, so they stay, lowering the number of homes available for sale. fewer listings means more competition, which drives prices hire. for "nightly business report," m diana olick in washington. still ahead, was a $400 million cash payment to iran tied to the release of a group of american prisoners? tonight, we have new a new development in the cash payment to iran that we told you about earlier this month. the state department today said that the $400 million was tied to the release of the four american citizens. but it may be a little bit more
complicated than that. we're following the story from washington. amon, the state department did have more to say on the matter. what is the latest? >> reporter: that's right, sue. john kirby, the spokesman for the state department, had this to say today to reporters. he said with concerns that iran may renege on the prisoner release, we of course sought to retain maximum leverage until after american citizens were released. the whole question here is whether or not this was a ransom payment. president obama, speaking back on august 4th, had this to say, that we do not pay ransom for hostages, and that in the course of the this negotiation, the ability to clear accounts on a number of different issues converged right at the same time, sue. >> so when does leverage cross that line and become something else, something that sounds or feels or looks like ransom? >> reporter: boy, it is a real
semantic debate right now. republicans on capitol hill are saying, look, if it looks like a duck a it sounds like a duck, then it's a duck. the obama administration says that it's not ransom for this reason, even though the timing was clearly contingent, they would not pay the money until the prisoners were released, until their plane was out of there, it's not ransom because this was iranian money to begin with. remember, the money here came from the iranian government before the revolution back in 1979, was fresozen in the unite states, and the iranians have been trying to get it back for years. that was a separate negotiation on a separate track, the obama administration says. >> i think we'll hear a lot about that, amon. thank you so much. private prison stocks found themselves in the slammer today after the justice department said it plans to end use of private prisons for federal inmates, because they are less safe and less effective than those run by the government.
that sent shares of corrections corp. of america and geogroup, two of the largest private prison companies, plun. >> reporter: the justice department says it will end its use of private prisons, meaning their contracts for these controversial faci would not be renewed. but why now? >> the research has shown that private, for-profit prisons often cut corners on staffing and other basic services, and that's led to negative impacts on safety. so we see very high rates of assaults in these facilities. the decision today is one we believe is very good and encouraging and is in some ways long overdue. >> reporter:s on the heels of a damaging report released last week by the doj's office of inspecto h found that contract prisons were overall more dangerous and less efficient than comparable bureau of prisons facilities. >> we found in most key areas,
these contract prisons had a higher rate of safety and security incidents. >> reporter: it seems to be a recurring pattern. >> in recent years, disturbances in several contract prisons resulted in extensive damage, bodily injury, and even the death of a corrections officer. >> reporter: he says the bureau of prisons currently uses 14 contract prisons, housing 22,000 federal inmates, costing taxpayers more than $600 million per year. most inmates classified as low security. the justice department calls this the first step in the process of reducing and ultimately ending the use of privately operated prisons. experts we spoke with said they viewed this as part of a larger trend, pivot be away from mass incarceration. e long term impact remains unclear, especially because most prisons in the united states are operated not by federal but by local and state governments, and of course the next president could reverse the decision as well. for nightly business report.
scott cohn has covered the prison system for years and join us now from san jose, scott, always good to have you join us. we saw the severe reaction in the stock market, but what is the real impact likely to be for these companies from your vantage point? >> sue, it m not be as severe as the stock price would suggest. it's a material impact on these companies, make no mistake. corrections corporation of america, cca, says this is about 7% of its revenue, so about $125 million on a $1.8 billion a year company. and the government is not totally getting out of the private prison business overnight, they're phasing these contracts out. there is still business for these companies in a couple of areas. number one, they're operating reentry facilities that are the no going away, basically getting prisoners back into the general population, the public. and also immigration detention, which is under department of home land security, that's not
going away. and the other things that these companies are doing is getting away from prison management and into real estate. you still have to put 2 million prisoners in above the the federal and state systems somewhere. so these companies can own the real estate while the government can manage and operate the prisons. >> and i suspect state contracts with these companies are not affected in this either. as dina mentioned there, scott, a new president could have a different view of this entire matter. what have the candidates said if anything about the use of private prisons and the ultimate outcome depend on the elections? >> again, not as much as people might think. there's been a bipartisan push, tyler, for prison reform. people have realized we've got 2 million people, more than any other nation in the planet, behind bars. the leader in prison reform has been the conservative state of texas, getting people out of prisons and actually deferring building prisons. so there may be some impact, depending on the elections for
sure. but there is very much a bipartisan push to change this system. >> all right, scott. we'll leave it there, thank you. scott cohn in san jose. one of the biggest investment managers in the world is where we begin tonight's market focus. t. rowe price alleges a scheme by valiant to use a secret pharmacy network, deceptive pricing and fictitious accounting methods to artificially inflate profits. valiant shares fell. t. rowe's shares were up a tick. sales continue to fall at caterpillar. the maker of industrial machines and equipment saw retail sales decline 19% year over year for a three-month period that ended in july. things aren't expected to improve anytime soon. last week, caterpillar said low commodity prices will continue to weaken demand for its
machinery. shares today off 1% at 83.38. portola pharmaceuticals said its application for a drug intended to reverse the effect of blood coagulant has been rejected by the food and drug administration. the agency requested that portola send additional information regarding manufacturing. the drug maker said it is committed to working with the fda to secure eventual approval. shares plummeted. gannett isn't giving up on its proposed takeover of tronc. it's upped its bid once again for the newspaper publisher former known as tribune publishing. tron rejected gannett's proposals twice before but is expected to respond to this new offer by the end of the week. shares of gannett up a penny to 12.14. tronc rose 4%.
skippy peanut butter and muscle milk products prompted the food maker to raise its guidance for the year. shares finished up the day 2%, to 37.05. harley-davidson will pay $50 million to the u.s. government to settle claims it sold motorcycle engine devices that violated air pollution standards. the motorcycle maker did not admit to any wrongdoing but said it would buy back and destroy any devices that are still stocked at dealerships. shares fell more than 1.5% on the news to 53.55. when is a death not a death? a joint investigation by cnbc and our partners at nbc new york found that medical companies are classifying thousands of patient fatalities as injuries. and the fda says it's okay. they're referring to death by another name. but critics say it could mask real health problems.
investigative reporter chris glorioso has our s. >> we're still in shock. it's a never-ending nightmare. i'll never forget this as long as i live. he calls me nana. my mama has died. >> reporter: she's a mother convinced this medical device played a role in her daughter's death. it's called the vegas nerve stimulator or vns. back in 2010, oklahoma's shelley willheight thought it was the cure for her epileptic seizures. it's designed to generate small electric shocks that block su seizures but she started feeling ab painful shocks. with vns, you're not supposed to feel anything. >> it shocked here really bad and almost dropped her to her knees. >> reporter: she planned to call the doctor on monday. >> she never made it to monday. >> reporter: her daughter found
her dead on the bathroom floor. her cause of death, cardiac arrest brought on by a suspected seizure. >> i don't think we'll ever get over it. >> reporter: shelley wasn't the only one complaining about the nerve stimulator. by the time she died, the food and drug admin had received thousands of reports of problems with the device. some of those reports had a starting discrepancy. >> i absolutely had to do a double take. there are a lot of reports in there that really made me question the integrity of the reporter. >> reporter: she's hey former fda consultant who now runs a company called device events which offers a simplified way to search fda data. she scoured safety reports going back to 1996 and found 38 patient deaths reported as injuries or malfunctions. they include five patients who developed fatal pneumonia. but the deaths were labeled as four injuries and one malfunction. in another example, a vns battery depleted with zero years
remae patient died. but the event was called an injury. when you saw a report that mentioned a patient's death but was categorized as an injury, what duid you think? >> i was very alarmed. >> reporter: did you find that deceptive? >> yes. >> reporter: medical device makers are supposed to report any event that reasonably suggests a device may have caused or distributed to a death or serious injury. despite that, she says companies sometimes downgrade patient deaths arguing the fatalities are unrelated to the product. she says that can throw regulators off the trail of health hazards. >> the way the fda reviews the reports is in order of importance by the classification that's checked on the form. and so if it's an injury or malfunction, it could take them weeks to months to get to reading them. >> reporter: the company that makes the nerve stimulator said three of those pneumonia deaths
were properly reported. and the other two reports were human errors. but the company also conducted an internal review, finding a total of 108 misclassified deaths, some going back to give. the company told us it never purposely manipulated safety data, and those errors comprise less than 1% of the company's safety reports, concluding there have not been any significant misclassifications. but the vegas nerve stimulator is only one device we found with patient deaths listed as something less serious. we looked at five years of fda safety reports and found more than 4,000 patient fatalities all listed as injuries or simple malfunctions. a knee injection patient developed a septic infection and died but the event was listed as an injury. another patient fell from a safety bed and died on the floor. that was called a simple malfunction. a stent was damaged and stretched. a few hours later, the patient died but it was listed as a malfunction.
we asked the fda about those reports and more. a spokesperson said the reports were likely classified correctly. >> the fda says this is not a problem. what do you say? >> i think that when you have a lot of patients being injured and a lot of deaths occurring, that it's always a problem. >> reporter: the family of shelley willheight sued the company whose parent company is publicly traded. but that company has effective immunity from liability suits because the nerve stimulator was approved through the fda's most stringent process. the fda says they're allowed to classify a parent fatality as an injury if there's not enough evidence to show causality. they say they can spot deaths even if they're not labeled as deaths. >> so chris, who is doing the categorizations here? is it a physician, is it a company individual? >> reporter: that really is one of the major questions here. and the critics would point out,
most of the time it is actually the manufacturer that writes these reports and has the discretion to decide whether a device caused an injury, caused a death, or didn't cause anything. some people say there's a conf of interest. >> did you or your source find any cases where they actually did say it was death? >> reporter: oh, certainly. there are many cases where companies report deaths as deaths. but we found many more -- i should say we found most cases, deaths are reported as deaths. but we found, as you saw, more than4,000 where patients die but those deaths are not reported as deaths. >> all right, chris, thank you very much, good reporting. chris glorioso, we appreciate it. still ahead, shifting gears. is a fleet of self-driving cars co
as we reported yesterday, settlement talks are under way between viacom and controlling shareholders sumner redstone to end a very bitter legal battle. if as part of that deal viacom's ceo leaves, end reportedly be in line for the second biggest cash severance ever of fortune 500 ceos. golden parachutes can include cash and other benefits. if you live in pittsburgh and use uber, you will soon be able to summon, yes, a driverless car. the fast-growing ride-hailing company is partnering with volvo to give it an edge in the race to make autonomous vehicles widely available. kate rodgers has more.
>> reporter: ride hag disrupter uber making an even bigger investment into the driving experience of e future. the company announced thursday a $300 million partnership with volvo to co-develop autonomous suvs. as a part of that, uber will roll off 100 autonomous volvo sport utility vehicles on the road at the end of the year. uber is also launching an autonomous driver program in pittsburgh in the weeks to come. the initial pilot will be free for passengers but it's unclear how it may evolve in the future, and where else the service may become available. the pilot has been in the works for some time. earlier in may, uber announced it would begin testing a self-driving ford fusion on the streets of steel city. autonomous ford fusions will also be in the driverless car pilot mix alongside the volvo xe 90. and human drivers will also be on hand while the cars operate the move signals an urgency on behalf of uber to get in the
driverless car rac big players from gm to google attempt to bring the technology mainstream. >> i think volvo represents safety to a lot of american customers. and it's true, because they back it up with having the research in place. volvo has said it will assume liability for accidents that occur. whether we see this play out as these cars hit the streets, that remains to be seen. but i think that it's a signal that uber is sending that they want to be aligned with a company that's known for safety, and not so much known for taking risks. >> reporter: it's not just self-driving cars the company is interested in. they want to leverage in the delivery space, announcing an acquisition of a san francisco tech startup for self driving tractor trailers. the deal was worth 1% of uber as its current valuation, $68
billion. i'm kate rodgers for "nightly business r" >> i'm not sure i'm ready to get into a driverless uber. >> i'm not either, not yet. i know it's coming, and i know we have to accept the technology. i'm just not sure that i can -- >> that you want to be the first. >> i don't want to be the first. maybe the millionth. >> i'm not there yet. >> i'm not either. that does it for us on "nightly business r i'm sue herera. thanks for joining us. >> i'm tyler mathisen. have a great evening, everybody. i'm going to go get in my driverless car. >> no, you're not. >> see y