tv Nightly Business Report PBS October 14, 2016 1:00am-1:31am PDT
with tyler mathisen ausi zigzag day. stocks dropp and climbed. now some investors wan to know if the mix of earnings, the election gro concerns, and the fed will lead to more volatili. regaining trust. will the ceo change at wells fa be enough to soothe the outrage in washington and on main street? milli dollar gamble. in today's housing market, the potentia profit from a house flip is much bigger and much more risky. those stories and more tonight on "nightly busi for thursday. good evening, everyone. welcome. look now, but volatility may be starting to make an appearan. stoc began the day with a steep drop of more than 180
points, as investors ran from equiti and towards the safety of government bonds and gold. a weak reading on trade out of china reawakened concerns that slower globa growth may be at hand. just as the federal reser consids an interest rate hike later this year. there is also the issue of earnings which as we reported, did not get off to a great start yesterda t then midday, oil moved higher, and investors shook off growth, interest rate, and profit concerns. and just like that, the losses repaired. the y finished with the dow jo losing 45 points to 18,098. the nasdaq was off 25. and the s&p fell six. let's turn to david leibovz to talk more about the market and whether we can expect more volatility. he's global strategist at jpmorg asset management. david, welcome, good to have you with us. is this a time between now and
let's say the election, now and year end, when we should be o i t investors should prepared for a little more volatili. obviously the next couple of weeks, if the political polls begin to show that the race is a bit closer, that could drive some volatility in the market. our expectation is that the fed will hike rates in december. and so we may begin to see some jitters as that meeting approach. e one thi say about the fed, however, is i think they've been priming the pump for a december hike for some time now. i think that the hawkish rhetor which started towards the end of the summer and into the early fall was all in an ef to get investors comfore wit december hike.k the big risk from a volatili standpoint is the electi or deterioration in the market data. i think the market is comfore with the fed hiking rates at point. >> what about earnings? as we reported yesterday, alcoa did not have a good report. we still have the banks coming tomorrow. what if we don't see an improvt in earnings? >> our view is that on a year
over year basis, earnings growth will still be in negative territor e risk, the upside is that they w be flat on a year over year basis. but i think that what matters much more are expectations. in 2016 earnings estimates have come down fairly significantly over the past couple of months, essent makin the hurdle which companies need to get over that much more doable. my view is that companies will be abl beat earnings, and it's really that best thing of expectat that tends to the level of earnings ather growth. >> do you see 2017 as a pretty good year for corporate profits? or sort of what we've been seeing? >> so i think 2017 will be a better year for corporate profits. if look at consensus estimate rignow, analysts are looking for about 14% earnin growt next year. i think that that's a little bit too optimistic. but i think think earnings growth between 3 to 5% is very achievab two things that have held back earnings, the stronger dollar and lower energy prices, are continu to abate. my guess is that 2017 is going
a year where less dollar strength, l weakness in energy prices allows revenues to pick up. if companies can keep margins into didn't eve asset uld growth. >> david, thank you very much. a fel r official today said he prefers to see a rate hike soon rather than l but says the central bank might want to wait until after the presid recollection. patrick harper, who was in favor of a hike in september, said the fed's november meeting comes at an uncertain political time. harker is not currently a voting member. but he will be next year. a new era at wells fargo. today was tim sloan's first day as ceo, following the departure of john stumpf who retired in the wake of a scandal.
what's next for the embattled bank? wilfred frost reports. >> repor it's been applauded by the community as a necessar conditn for the bank to be ableo move past its recent scandal. is welcomed is the fact that there is a new ceo who, yes, is an insider, but not from the embattled retail part of the bank. also a new board setup that includes independent chairman and independent vice chairman. though pressure remains from lawmaker most notably senator elizabet warren who said, quote, if mr. stumpf is leaving with all of his ill-gotten millions, that's still not real accounta. in an exclusive interview with me last night, the new ceo, tim sloan, confirmed there had been additi request from congre for information. of his own will go more smoothly. >> we disappointed that the
hearin turne into a situation where there were more speeches given than questio asked. we felt like there was more answers that we could have t those hearis are over with and we're moving on. >> repor we' see tomorrow morning if there's been any financl impact. the other outstanding question what is morale like amongst the troops? i asked sloan whether this had been a proud or sad moment for him as he took over. >> it's a sad moment, because john stumpf is retiring in a situatn tha i think he would have never imagined. and he has done such a g job in managing this company, notwithsg some things that i think he wished he would have done differently. that's what it sad. having said that, i feel a great responsi, and i'm looking forward to being the ceo of this company. ep for "nightly " i'm wilfred frost in new york. >> wilfred just mentioned the
reacti from senator elizabeth warren, one o bank's most vocal criti in congress. but will wells fargo's change of leadersh do anything to calm washingt? amon, that's question, how is congress likely to take these changes? sue, i love the adequate from the new ceo there in wilfred's piece who said they were disapp at wells fargo that the congressional hearings turned more into a thing about member congress making speech instead o asking question obviously not been to a lot of congressional hearings. that's what they are. if you're cynical about this from wells fargo's perspective, wh you wan to do is hope that the ceo change is going to take the st for the time being. headline are what attracts congress attention. congress d have all that much attention to give because as you may have noticed, there a major national election going right n and serious infigh on capitol hill. so all of that has congress distract e not that many days left on the calendar, either before or after the election,
for congress to hold any wells hearings. so they may just in terms of runnin out the clock here, they may be lucky in a cynical and sort o strateg approach to this. >> so the likelihood of additi hearings, it sounds it's a questionable propos given the calendar. do you t members of congress are pleased that the new guy is an old guy, he's part of the old guard at wells fargo, he's been there 26, 27 years. >> yeah, that's an interesting question we still don't know in all ofhi just exactly what did the "c" suite at wells fargo about all this and what did they do to stop it. one of the que that eliz warren will continue to hav is, who are this new cast of characters coming in, and what was their role in all of that. whether tha extends more broadly outside of elizabeth warren who views it very much as her mission to stay on top of this kind of thing, that's the big questio for wells fargo,
whether it attracts more broad congrel interest. the likelihood of that, between now and the election, is zero. after the election, it' probably pretty minimal. >> amon, thank you. what about wells fargo's customer the change at the top help regain their trust? aditi ro. >> repor wells fargo is trying t win back customer confiden. this after many customers say they feel disenchanted with the bank amid its sales tactics scandal. >> i'm the kind of person who doesn't monitor my bank t i w grieved to hear that highly powerful bankers were being opportunistic. >> repor hours before ceo john stumpf's resignation was announce wells fargo sent out an e-mail to its customers outlinin the steps the bank is taking to regain the trust of its clients. in the e-mail, wells says it has refunded customers given unauthor fak accounts and are working to find other customers the bank might missed.
the bank has already doled out refunds each averaging $25 to 100,000 customers to reimburse them for unauthorized fees and has set aside $5 million for payouts. e bank also assured customers that from now on, it will send them a confirmation any time an account is opened. but for some customers, it may be too little, too late. >> i'm not thrilled. i think it's shameful. and, you they talk about bu where you should be compensad for what you do. and not only giving back the money, but really, i think you shoulde prosecuted. >> repor earlier this week "the wall street journal" report it reviewed a recording of a conference call between stumpf and 500 of the bank's top e paper says during the call, the bank projected new business would likely be down as a result of the scandal.
timothy slo added that the bank is opening more accounts than closing them, but seeing slower growth in new checking accoun from a few months ago. regaining cr trust will be an uphill climb. for wells fargo to regain trust, a group of bank workers and co advocates say the company nee to do more. wells fao took out an ad in newspa across country. its title, "moving forward to make things right." san francisco.ghtly busi >> wells fargo is one of a handful of banks to report earnin tomorrow, at an interest tim for the industry bob pisa takes a look at what's on tap. >> repor fou big banks, jpmorgan citigroup, pnc, and wells report earnings tomorrow and there's lot riding on these reports. banks that had a notable runup in the second half of a year,
some, like bank of america, up double digit since july. higher interest rates are a factor. term interest rates are higher, which means banks can charge highe interes rates for loans. an issue is consumer loan growth, which is still strong and will likely grow 2% compared to the secon quarter. but commercia loan growth seems to have sta out. and it's not clear why. but it may be due to slower capita expenditure like corporat which reduces the need for loans. now, another big issue is bank regulati this is a huge wild card. the wells far debacle has brought this back on the front burner. ban investors hav been jittery about the very small chance that the house could g direct m which would increase congress scrutiny of banks. it's reay hard for banks to make money when rates are so low.
given the price run-up, prudence seems to be the order of day. for "nightly busi" i'm bob pisani at the new york exchange. ahead, why isn't the tech industry creatg the number of jobs many thou the number of americans filing for unemployment benefits held at a 43-year low last week, accordin the labor departme initial jobless claims, viewed as a proxy for layoffs nationwi, w unchanged at 246,000. the report suggests employers are holding on to workers as the labor market tightens. the technology industry has brought us google search and
facebo friends. but according to is in the wall stre journal," the one thing techno has not given us is enough jobs, even as it's become an integral part of the economy. our guest is the chief economist at ihs market and joins us to talk a why tech isn't creati the number of jobs many thought it would. you, welcome. tech is such a large part of the economy and growing every day. why is it not generating job growth? >> well, this is a classic example of an industry that's very mh sort knowledg and because it's technolo, the radio of jobs, if you will, to revenues or jobs to profits is not that high. i mean, this is the kind of indust now that a handful of people can create, you kn, a new app, you know, a new company. it doe take hundreds or thousas of workers. so in that sense, this is not necessy a new phenomenon.
it is very much a part and parcel, if you will, of the knowledgd industries which require fewer and fewer workers, in a sense. that's t tecy revolution that we're in the middle of. of a good news/bad news story. go technology but not as many jobs. >> when instagram was bought for $1 billion for a couple of years ago by facebook, they had 12 or 14 employees, that's all they had. but it's true, isn't it, that a lot of technology manufacturing jobs have gone away. ibm used to make computers up in new york. cisco used to make routers and switching equipment. intel used to make many more of its semi conductors here in the united stat. now, not so much. >> it is true. and i think it's a little hard to disentangle two phenomena here. first is what you're saying,
which is offshoring manufact so happene not just in tech but in a lot of othe industries. the other is the technology sort of revolution that we've been talkinabout, where new compan are being formed that just don't take as many employee the other thi that's happening is, just looking at this particul article focused on ipos as a measure of activity, if youwill, t lot of stuff that's happening that's being picke up there. for example, a lot of app develo around apple or smartpho the people don't go out and ask for an ipo or float some stock. doing all the stuff, they'r getting the income. so there's a lot of activity going in tech that's just not being picke up. if you look at the overall jobs by company, which is what this article did, there's a lot of stuff that' getting lost in the shuffle, as it were. and we're really picking that up when you look at the employment
numbers, for example, in the u.s. economy, that have bee que strong. >> we have to leave it there, yahoo!'s data breach may give verizon an out from its potent dea to buy the company. the wireless carrier said yahoo!'s recent breach could have, quote, a material impact on the nearly $5 billion acquisit pot allo veriz to call it quits. c ao be a bargaining chip, since just last week verizon reportey asked for a billio dollar discount due to the data breach. shares of yahoo! were off nearly 2% at $41.62. verizon off a penny at $50.29. xerox's largest individual sharehol darwin deson is suing the company, alleging the company's plan to split into two companies violates a deal it struck with him to buy his
company for $6 billion. the company responded saying the lawsuit merit and it will move forward with its plans. xerox's sha fell to $9.55. devry university has settled over allegat that it used decepte job placement ads to recruit students. it requires the organization to provide a $68 million letter of credit that would allow it to keep its access to federal funding. s shares are up 1% at $23.34. delta airlines posted better than expected profit despite taking a $150 million hit from a computer outage back in august. the company's ceo said the airline has been operating in the weakest pricing environment for some time, causing it to cut back on a key metric. >> we've been looking for the
bottom for some time. when y look at what the drivers are in terms of t challeng, c the capacity, environment, growth in access of demand is one of the challeng that we're facing. we're announcing today that we're going to reducing our growth rate to 1% in the fourth quar and keeping that throug 2017. >> shares of delta up nearly 2% at $40.01. winnebago posted a better than expected profit thanks for an influx of orders for its trailers. revenue rise beat expectations. winnebago' shares were off a fracti to $27.84. > bolta salon lifted its profit. the cosmetics retailer said it plans to open more stores than previous announced. shares rose more than 11% to $266.14. bad weather hit results at golf and country club operator club corps. the company saw a rise in revenue but it wasn enough to
top street expectations. and also profit came in light. investors were hoping for a mulligan, as club corps shares fell 12% to $12.32. sony joins the virtual reality rac with a new headset for its playstation 4 gaming console. but virtual reality and augmen reality isn't just for gaming. part of a wave of new techno that's being used to transfor the advertising industry julia bo has our story. >>te forget about the 30-secon spot. the futu skippable. futurist technologie from augmente and virtual reality to artifici intelligence are alread making marketing more compel and useful than ever. take north face, which is using artifi intel from ibm's watson to recommend a jacket for travelers based on what trip they've just booked. is just the beginning of how ai and even facial recognit can figure out what message is right for you.
>> we're going to see ads and brands and even, you know, stadiums, if you will, identify me and automatically tailor to me proactively. >> rep brands are tapping into the immersive power of virtual and augmented reality. take aol, inking a seven-figure deal for american insurance. parte wave of $12 billion projecd spending on virtual and augmented reality ads by 2020, driven in large part by augmend reality, which can work on any smartphone. augmente reali ads are already popping up in pokemon go, and advertisers pay millions of dollars for snapchat's sponsore filters. l'oreal's app allows consumers to experiment with makeup colors. this just the beginning of augmend and virtual realities' disrupti poten for brand that are
really experience driven and really want to allow people to try out that experience and elicit that emotional response, that's where vr is going to absolut vodka wants to earn that high tech halo with consumer audi will let consumers test drive any audi model, bringing tradito live. for "nightly busi re i'm julia boorstin in los angele coming up, high risk, high reward.e s
here's a look at what to watch for tomorrow. wells fargo, jp morgan chase, and citigroup release quarterly results. janet yellen delivers remarks on the economy. investors wl look for any clues on the timing of a potentl rat hike. retail sales will shed more light on the strength of the what to watch for on friday. mortgage interest rates inching higher in antic a feder. the 30-year fixed rate average rose to 3.47%, hardly high but a rise, following a yield in the ten-year treasury which mortgage rates track closely. house flipping is the hottest it's been in nearly two decade. as home prices heat up, high end flipping is also gaining steam. it is not, however, for the faint of heart. the rewards can be high. but so are the risks.
diana olk has been following one investors for four months and gives you a peek inside the anatomy of a million-ar. >> 30 inches off the toilet. okay. >> repor last june real es age dana rice was in the throes of remodelling this home in bethesda, maryland. she bought it for $600,000, intendg to flip it for a hefty profit. >> absolutely not as easy as it looks. >> four months and $400,000 in construction costs later, she just put the house on the marke for $1.469 million. >> for this particular area, this particu house, i'm very cold front. i feel as though the product we delivere we really sweated the details, and i'm already getting great response from people looking fixtures, colors, textures and things like that. and it's not what they see in a genera renovation flip. >> repor fli is coming
back with a vengeance, despite the fact that there are far fewer distressed properties for investor to buy on the cheap. getting in costs more today. but the potential profit is bigger. there we more than 51,000 flips in the second three months of this year. a flip is defined as buying and selling a home in the same 12-month period. that is highest level in six years, according to adam dad solution average return on investment rising to nearly 49%, thanks to tight supply and fast rising home prices. and rising prices are key. today's homebuyers are already cash-str and don't want any additional renovation costs when th move in. that means they're willing to pay a premium for a turnkey property family was the first to arrive at rice's open house. >> i think for us, having had someboe do all the work is e a lot of houses around here that are old and ready to turn over, need an update. >> repor so far, no offers on the house yet.
but rice says she's not concerne and is betting on location quality, and high end amenits to turn her million- inves into a high end profit. for "nightly busim diana olick maryland. >> to read more about high end house flipping, head it our websit at nbr.com. >> we'll find what she gets for that house. she staged it beautifully. gorgeous. and expensive. that's "nightly busine for . i'm sue herera. thanks fus. >> and thanks from me as well. i'm tyler mathise have a great evening, everyone. see you back here tomorrow